- Post Lockdown/COVID-19

FORCE MAJEURE: By definition it is an unprecedented or unforeseen event. It can be a natural disaster or a man made event.

Do all unprecedented or unforeseen events automatically entitle one to seek relieve from the obligations of a contract – this is governed by the provisions in the contract. Some contracts are very specific about what can amount to a force majeure as opposed to some contracts which claim to have a blanket cover. The challenge usually arises in the interpretation of such blanket provisions

What are natural disasters – they are disaster that occur due to natural forces such as floods, earthquakes, typhoons and the like.

What are manmade disasters – internal issues at the management such as strikes at workplace, external such as strikes by transport regimes i.e. trains buses and as such the inability of people to get to work and thus perform and complete their contracts, government imposed such as banning certain activities i.e. import of some goods or export therefore. The scarcity of onions in our local markets even before Covid set in was rumored to be premised on the sanctions placed by some onion exporting countries who stopped exports to supply their local markets. Of course before we forget we have something like COVID-19.

One would say that Covid-19 certainly falls squarely within the definition of a natural disaster, that is further enhanced by the fact that there are government imposed sanctions namely the Movement Control Order (MCO) that limits the parties’ ability to fulfill the obligations under the contract.

The question then is – what if there is no force majeure clause in the contract.

There are several factors that can render a contract incapable of performance pursuant to the law of contract especially so when contracts cannot be performed due to reasons beyond the control of the parties which occur after the execution of the contract. It is called “frustration”. There is an overlap between frustration and force majeure. Both are defined as events beyond the control of the contracting parties save except to say that

“Frustration is where the performance of a contract becomes impossible by reason of subsequent events. It applies as a matter of law to all countries. Force Majeure is a specific contract clause. It only applies where the parties have elected to include it within the contract.”

The real challenge will be in contracts which do not have a provision for “force majeure” and since there has been no such provision can frustration automatically apply.

Megalai Raman & Nachammai Kumarappan
Advocate & Solicitor
Mediation Trainer, Coach & Assessor

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