Invocation of Force Majeure in Indian law

Invocation of Force Majeure in Indian law

What is the legal provision of claims for Force Majeure in Indian law?

The provision of force majeure is provided under Section 56 of the Indian Contract Act, 1872 (‘the Act’). The relevant portion of the Section 56 is reproduced as under:

Section 56. Agreement to do impossible act.—An agreement to do an act impossible in itself is void.

Contract to do act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.”

Invocation of force majeure in India

The sine qua non for invocation of Section 56 is as below:

1.an existence of a valid contract between the parties;

2.the contract is yet to be performed; and

3.the contract after it is entered into becomes impossible to perform due to fact or law.

It is imperative to note that force majeure is present in common law as the doctrine of contract. In other words, Doctrine of Frustration is an inbuilt factor in Section 56 of the Act. However, it can neither be invoked in case of commercial hardship nor can be used as a device to avoid a bad bargain. 

In Ganga Saran v. Ram Charan [1952] S.C.R. 36 at 52, where Fazl Ali J speaking for the three member bench of Supreme Court held that;

It seems necessary for us to emphasise that so far as the courts in this country are concerned, they must look primarily to the law as embodied in sections 32 and 56 of the Indian Contract Act, 1872.”

The heart to the Doctrine of frustration travels through Section 32 and hence it should be read together for the purpose of Section 56.

Analysis of Section 56 & Impossible vs Frustration

In Satyabrata Ghose Vs. Mugneeram Bangur and Co. and anr. AIR 1954 SC 44, Mukherjee J., a Single bench of Supreme Court illustrated the doctrine of frustration and also dealt with Section 56 at length as under:

On Section 56

“The first paragraph of the section lays down the law in the same way as in England. It speaks of something which is impossible inherently or by its very nature, and no one can obviously be directed to perform such an act. The second paragraph enunciates the law relating to discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. The wording of this paragraph is quite general, and though the illustrations attached to it are not at all happy, they cannot derogate from the general words used in the enactment. This much is clear that the word ‘impossible’ has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor found it impossible to do the act which he promised to do.

Sec. 56 laid down a rule of positive law and did not leave the matter to be determined according to the intention of the parties. Since under the Contract Act a promise may be expressed or implied, in cases where the court gathers as a matter of construction that the con- tract itself contains impliedly or expressly a term according to which it would stand discharged on the, happening of certain circumstances the dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of sec.”

Impossible & frustration

Although various theories have been propounded by the Judges and jurists in England regarding the juridical basis of the doctrine of frustration, yet the essential idea upon which the doctrine is based is that of impossibility of performance of the contract; in fact impossibility and frustration are often used as interchangeable expressions. The changed circumstances, it is said, make the performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility. The parties shall be excused, as Lord Loreburn says, Tamplin Steamship Co. Ltd. v. Anglo-Mexican Petroleum Products Co. Ltd. [1916] 2 A.C. 397, 403,if substantially the whole contract becomes impossible of performance or in other words impracticable by some cause for which neither was responsible.’”

We hold, therefore, that the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It would be incorrect to say that Section 56 of the Contract Act applies only to cases of physical impossibility and that where this section is not applicable, recourse can be had to the principles of English law on the subject of frustration. It must be held also that to the extent that the Indian Contract Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law dehors these statutory provisions. The decisions of the English courts possess only a persuasive value and may be helpful in showing how the courts in England have decided cases under circumstances similar to those which have come before our courts.”

According to Chitty-

Frustration is so much concerned with the change in circumstances that it cancels the base of the contract as a whole or in case of performance makes it different with that which was in consideration by the parties in the beginning and is concluded by the legal order.”

We at AMLEGALS anticipate that improper invocation of force majeure in India will lead to Covid-19 litigation in India. 

To know more on force majeure in India during Covid-19 or for any feedback please connect with us on info@amlegals.com.