Status as on- 23/04/2022
The ongoing Covid-19 Pandemic has brought the concept of force majeure to the forefront and the same has gained prominence amongst the real estate companies to hide their guilt of delays in the project. As the pandemic subsists and lengthens, these real estate companies with obligations under the builder buyer agreements have made it a point to claim the delay in the construction of their projects under the garb of Covid-19 as Force Majeure to waive off any delay penalty on themselves.
But first, let us understand what exactly is Force Majeure?
WHAT IS FORCE MAJEURE?
The term ‘Force Majeure has been defined by various law dictionaries and the Indian Contract Act 1972 as follows:
|Black’s Law Dictionary
|Indian Contract Act, 1872
|an event or effect that can be neither anticipated nor controlled. It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.’
|While force majeure has neither been defined nor specifically dealt with, in Indian statutes, some reference can be found in Section 32 of the Act, which envisages that if a contract is contingent on the happening of an event which event becomes impossible, then the contract becomes void.
|as an “irresistible force or compulsions such as will excuse a party from performing his or her part of a contract“.
|an unexpected event such as war, crime or an earthquake which prevents someone from doing something that is written in a legal agreement”
In conclusion to the above definitions, it is summed up that force majeure means any natural event, calamity, or act of God on account of which the parties can’t adhere or honor to the obligations as per any legal agreement for the specified period of that event/calamity.
PERIOD OF FORCE MAJEURE:
That as per various case laws and observations as made by various Courts, the period of force majeure shall be counted only till its existence or till the time the government defines its period.
DECISION OF VARIOUS COURTS ON TAKING COVID-19 AS FORCE MAJEURE
CASE LAW: Halliburton offshore services v. Vedanta Limited
DECISION: Adopting Halliburton’s (Appellants) submissions, the Court held that, in addition to fraud, Indian law allowed a bond call to be restrained if “special equities” could be shown. Treating the lockdown due to COVID-19 as “unprecedented, and .. incapable of having been predicted” by either party, the court seemed to be of the view that “special equities” had been established in the present case.
CASE LAW: R. Narayanan vs. The Government of Tamil Nadu & Others (W.P(MD) No. 19596 of 2020 dated 01.02.2021)
DECISION: The bench observed that although the license agreement did not have an express ‘force Majeure clause, the COVID-19 pandemic has to be treated as a ‘force Majeure event. Since the local body itself directed the shutting down of the bus stand and the shops, it cannot demand a license fee during the period when the shop remained closed.
In conclusion, we can say that these various case laws have decided that Covid-19 being a natural calamity and not having been caused due to actions of any party under a legal contract/agreement shall be treated as Force Majeure for a specific period or till the prevalence of lockdown, as and when the same shall be imposed by the Government.
Disclaimer- The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us.