Force Majeure, Frustration and Impossibility: A Qualitative Empirical Analysis

[Smaran Shetty is a Senior Associate with Keystone Partners and Pranav Budihal is an LLM Candidate at the National University of Singapore]

Force majeure has become a fairly common ground to avoid the performance of contractual obligations in a post Covid-19 world. In a time when lawyers and parties seek to examine their force majeure clause and reassess their contractual arrangements, we have published a report studying how Indian courts have treated force majeure claims. The original report may be accessed here.

Doctrinal Issues Relating to Force Majeure

Part I of the report first sets out the doctrinal basis of force majeure in India and examines some of the landmark cases that shaped the doctrine in India. A close reading of Satyabrata Ghosh v. Muneergam Bangur, Alopi Parshad & Sons v. Union of India and Energy Watchdog v. CERC would reveal that courts have consistently interpreted section 56 and contractual clauses to a fairly high threshold to set out a successful force majeure claim. We also survey important precedent from the High Courts that have  applied the principles laid down by the Supreme Court and made important advancements in the force majeure doctrine.

We also consider important allied issues in making and defending a force majeure claim. Importantly, we consider pleading requirements, notice of force majeure events, evidentiary burdens, and the appropriate fora before which a force majeure claim is to be brought. We note that in many cases these allied issues have had an important impact on the final determination of the force majeure claim.

Empirical Analysis of Force Majeure Cases in India

Our report then performs an empirical analysis of the force majeure claims decided in India by the Supreme Court and six High Courts, i.e. Delhi High Court, Bombay High Court, Madras High Court, Karnataka High Court, Allahabad High Court and Calcutta High Court. After examining a total of 690 cases, a qualitative set of 177 cases were extracted to form the core data set for the report.

The report categorizes force majeure claims that have been allowed into broad descriptive heads, to provide a clearer understanding into the nature of force majeure claims that have been allowed. These heads are (i) orders by the government, (ii) permission and regulatory clearance, (iii) change in law, (iv) court order, (v) act of God, (vi) foreign events and (vii) a residuary category of disturbances in contract. While the report is in no way exhaustive to all the force majeure cases in India since 1951, it is a useful starting point for any practitioner handling force majeure claims in India in a post Covid-19 India. Keeping in mind the objective to make this report a form of a practitioner’s guide to force majeure cases in India, we have published the entire list of 177 cases in the appendices to the report.

Our report finds that of the 177 cases, a force majeure claim was allowed in 68 cases – i.e. 38.4% of the cases we surveyed. Accordingly, a force majeure claim was rejected in the remaining 109 cases – i.e., 61.5% of the cases we surveyed. Amongst the broad heads of force majeure, the report finds that orders by the government saw the highest number of force majeure claims being allowed.

The lockdown measures in India to contain Covid-19 have had a naturally disruptive effect on the performance of contracts. With government and regulatory bodies already invoking the force majeure clauses and extending the timelines for the performance of the contract, there is an increasing trend of force majeure claims being asserted. We conclude our report by offering certain speculations about the impact the Covid-19 pandemic might have on force majeure doctrine. We note that it is most certainly true that the frequency with which force majeure claims are made will increase in the coming years. One big question we recognize is whether a post Covid-19 world will witness the alteration of the doctrinal limits of force majeure to make the law more accommodative of these claims. It is still early days to offer a definitive answer, but we speculate that the pandemic may assist in securing interim relief on force majeure grounds, but may not ultimately alter the settled position of impossibility and force majeure under section 56. In any case, this is no doubt an interesting time for the development of the law on force majeure in India.

Smaran Shetty & Pranav Budihal

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