The term ‘Force Majeure’ is a French term that means ‘Superior Force’ in English. It relieves the parties in a contract to perform their contractual obligations under certain circumstances beyond their control. By ‘Certain circumstances’ we refer to situations where making performance as per the contract becomes inadvisable, commercially impracticable, illegal, or impossible. Understanding the Force Majeure clause in general and in the context of a contract is crucial for both the parties.
Define Force Majeure in Contract
Force majeure is a provision in a contract that liberates both the parties from obligation if an extraordinary event directly prevents one or both parties from performing. Extraordinary event means something beyond the reasonable control of the parties involved in the contract.
Example of Force Majeure Event in a Contract
Natural calamities like Tsunami, Earthquake, Cyclone etc., often referred to as “Act of God”, are prominent triggers of Force Majeure clause. This also includes manmade things like riots, Government decisions, emergency situations in a country or state, war, terrorist attacks, etc. We can classify the above events as ‘Force Majeure Event’.
Force Majeure Clause Meaning
In legal terms, Force Majeure in a contract refers to unforeseeable circumstances that prevents a party from fulfilling their contractual obligations. These circumstances are often beyond the control of the involved parties and could include natural disasters, war, strikes, or pandemics. For example, consider that a party agrees to deliver a project within a certain date.
Due to a natural calamity like cyclone and its after-effect, the work comes to a halt for one month. For this one month, the contract relives the parties from their contractual obligations on account of Force Majeure. Apparently, they can get time extension for this one month.
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Force Majeure Clause Sample Conditions
Different contracts describe the Force Majeure clause differently. In the context of construction contract, we are providing below some examples of the Force Majeure clause.
Sample Clause of Force Majeure in Contract (1): Neither party will be liable for inadequate performance to the extent caused by conditions beyond the reasonable control of either party (for example, natural disaster, act of war or terrorism, riot, labor condition, governmental action, and Internet disturbance).Sample Clause of Force Majeure in Contract (2): “Force majeure” means any unforeseeable circumstance which is beyond the control of a Party, or any unavoidable event, even if foreseeable, as a result of which such Party is unable to perform its obligations, in whole or in part, under this Agreement. Such circumstances include, but are not limited to, any strike, factory closure, explosion, maritime peril, natural disaster, act by a public enemy, fire, flood, accident, war, riot, insurgence or any other similar event beyond the effective control of either party.
Sample Clause of Force Majeure in Contract (3) : The Party affected by Force Majeure shall not assume any liability under this Agreement. However, subject to the Party affected by Force Majeure having taken its reasonable and practicable efforts to perform this Agreement, the Party claiming for exemption of the liabilities may only be exempted from performing such liability as within limitation of the part performance delayed or prevented by Force Majeure. Once causes for such exemption of liabilities are rectified and remedied, each Party agrees to resume performance of this Agreement with best efforts.
Sample Clause of Force Majeure in Contract (4) : In the event of a force majeure event, including but not limited to acts of God, war, strikes, or government regulations, either party shall be excused from performing its obligations under this contract for the duration of the force majeure event. However, the party affected by the force majeure event shall promptly notify the other party in writing and make reasonable efforts to mitigate the impact of the event.
For more examples of Force Majeure Clause you may visit to this blog post
COVID-19 as a Force Majeure Event
COVID-19 is a classic example of a Force Majeure event. For the lockdown imposed by COVID outbreak since January 2020 lockdowns were declared in multiple phases across the world. Not only the lockdown but the subsequent demobilization of the workmen from site and disruptions in the supply chain management massively hampered the entire construction industry. This is a major event of Force Majeure event in the construction industry where the either parties are relieved to fulfill their individual contractual obligations. That is, the contractor is not liable to complete the work for the lockdown period and any subsequent period (based on the locations) they could establish as the ‘affected’ period. The client also not liable to fulfill their deliverables within the same period.
As a result of the lockdown (a Force Majeure event), the contractors would get the additional cost of stay at the project site, and client would get their product at a later date, thereby losing earning from the product. There is no compensation in the same situation. Hence, although there is a time relief in the same, it is not favorable for either of the parties.
Conclusion
In conclusion, understanding the force majeure provision is essential for Contract Managers in the construction industry in India. It serves as a safety net in uncertain times and provides clarity and protection for both parties in a contract. Moreover, it’s crucial to draft and negotiate the terms of the force majeure clause carefully to mitigate any potential dispute.
For further reading on this topic, we recommend studying the Indian Contract Act, 1872. You may refer to the specific case laws related to force majeure in construction contracts in India.