Force Majeure and COVID-19: An Indian Law Perspective
#India
Case Study: Hindu Auto, a manufacturer of auto parts in India entered into a supply contract with Cino Motors, an auto manufacturing company in China, and under such supply contract, Hindu Auto provides a monthly supply of auto parts to Cino Motors. Up until the month of March, Hindu Auto had fulfilled its contractual obligations, however, in the months of April and May, on account of COVID-19, Hindu Auto failed to supply auto parts to Cino Motors which considerably hampered the manufacturing of Cino Motors. Cino Motors subsequently sued Hindu Auto for breach of contract and damages, however, the supply contract between Hindu Motors and Cino Motors provides for a clause on “force majeure” with the governing law of the supply contract the laws of India.
Can Hindu Motors invoke “force majeure” on account of COVID-19 to justify the temporary inability to meet its contractual obligations?
Yes, Hindu Motors should be able to invoke “force majeure” on account of COVID-19 as a “force majeure” provision which has been specifically included in its supply contract. However, Hindu Motors will have to provide sufficient evidence that: (i) it had timely notified Cino Motors about its inability to meet its contractual obligations; (ii) established the manner in which COVID-19 has hindered Hindu Motors ability to perform the contract; and (iii) Hindu Motors has taken all reasonable steps necessary to ensure that the impact of such an event on the business of Cino Motors is limited.
Legal Basis
The Law of Force Majeure in India
Unlike in China, where the force majeure exemption is encapsulated within the law itself, in India, a force majeure exception has not been statutorily provided. The Indian courts have held that a force majeure exception must be specifically included within the contract, and have relied on Section 32 of the Indian Contract Act, 1872 (Contract Act), to enforce this exception. Section 32 recognizes a force majeure event as a contingency to discharge the performance of a contractual obligation.
The force majeure clause included in any contract will have to be analyzed on a stand-alone basis to ascertain the extent of the exemption available. The applicability of force majeure to a particular event is a matter of factual determination.
Doctrine of Frustration
In the event a force majeure provision has not been included in a contract, parties may rely on the doctrine of frustration under Section 56 of the Indian Contract Act, 1872. Section 56 provides that a contract is frustrated when the act to be performed by a party becomes impossible or illegal due to the occurrence of an event which could not be prevented.
COVID-19 in India has led to the closing of establishments in India and restricted the movement of individuals and parties may seek to rely on Section 56. Previously, The Indian courts have permitted parties to rely on Section 56 only when the performance of the contract becomes impossible and not temporarily hindered. Therefore, whether parties shall be able to succeed claiming relief under Section 56 is something which will have to be tested.
Introduction Uttar Pradesh is located in the north-central part of India, it is one of the most populated states of India. It is divided into 75 districts and it is the 4th largest state in India in terms of landmass. Uttar Pradesh is a landlocked state with Lucknow being the capital city, the current population
Introduction The Companies Act of 2013 (hereinafter referred to as “the Companies Act”) has made provision for various types of companies. In the Companies Act, among others, a company may be termed as a separate legal entity and is further categorized in various manners, such as, for example, a private company, a public company, a
Introduction The Ministry of Corporate Affairs (hereinafter referred to as “MCA”) has recently circulated a draft policy called as “Draft Policy for Pre-Legislative consultation and comprehensive review of existing Rules and Regulations” (hereinafter referred to as “the Draft Policy”) which has come into effect from 1st January, 2024. The draft policy aims to conduct public
#India
Manage Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.