Implications of a Force Majeure Clause

Are you worried about force majeure events impacting your contract in India?

It’s crucial to understand the force majeure clause’s meaning and its legal definition. A force majeure clause in contract explicitly sets out the terms that excuses a party from performing its contractual obligations under certain force majeure conditions or events.

The recent COVID-19 pandemic has forced organizations to revisit their force majeure clauses, and it is essential to have a sample force majeure clause in your contract to avoid breaching the contract.

It is important to read the force majeure clause carefully, determine the force majeure event’s legal definition, and evaluate payment obligations under the clause. For instance, some contracts may have carve-outs for payment obligations, which may not be covered even if the force majeure event delays the performance of the contract.

In India, the government has declared the current situation of COVID-19 as a force majeure event, making it necessary for organizations to include a force majeure clause in their contracts to protect themselves during these uncertain times.

To give you a better force majeure clause example, suppose your business is bound by a contract to deliver goods to a customer, but a natural calamity occurs, resulting in the transportation means being shut down. In this case, the force majeure clause in your contract can protect you from breaching the contract due to non-performance.

In summary, understanding the force majeure clause meaning and having a sample force majeure clause in your contract is essential to protect your business during unprecedented events like the current COVID-19 pandemic.

Are you wondering how force majeure events like COVID-19 are affecting contractual obligations in India? 

As per the force majeure legal definition, the Force Majeure (FM) clause in contract allows parties to be excused from the contractual obligations in case of events beyond their control, such as pandemics, natural disasters, and government orders.

Due to the outbreak of COVID-19, labor shortages and shutdown of services have affected the physical and legal performance of contractual obligations in India. Parties that are unable to perform are taking help of FM clauses to avoid any contractual remedies for non-performance.

However, some FM clauses do not include pandemics, which can lead to possible disputes and even breach of contract. Hence, to avoid any discrepancies, it is essential to have a well-drafted sample force majeure clause that clearly defines force majeure events. A well-drafted FM clause can make both parties aware of which events are force majeure events and which are not, making it simpler and more effective to deal with force majeure conditions.

In summary, it is crucial to understand the force majeure clause meaning and have a strong FM clause in your contract, which includes pandemics, to avoid any disputes or breach of contract during force majeure events like COVID-19. So, make sure to evaluate payment obligations and seek good counsel while drafting a force majeure clause to protect yourself and your business during such uncertain times.

FAQs

Q: How to write the force majeure clause in a contract?

A: A force majeure clause is an essential section of any contract that outlines the terms that excuse a party from fulfilling its contractual obligations in certain force majeure events. Writing a force majeure clause in a contract involves a few key steps:

1. Identify Force Majeure Events: You need to identify the force majeure events that would be covered under the clause. These events may include natural disasters, wars, pandemics, government orders, and other similar situations.
2. Be Specific: The language of the clause should be specific and unambiguous. It should identify the events that would excuse the parties from fulfilling their obligations
3. Evaluation of Payments: It is important to evaluate the payment obligations under the clause, as some contracts may have carve-outs for payment obligations, which may not be excused even if the force majeure event delays the performance of the contract.
4. Review Applicable Laws: You also need to review applicable laws and regulations to ensure that the language in the clause is legally enforceable.
5. Notice of Force Majeure: The clause should also include a notice of force majeure provision that requires the parties to inform each other when a force majeure event will delay or prevent performance of contractual obligations.

In summary, drafting a force majeure clause requires a careful and detailed approach. It is essential to identify force majeure events, be specific in the language, evaluate payment obligations, review applicable laws, and include a notice of force majeure provision. An experienced lawyer can help draft a comprehensive force majeure clause that protects your interests in case of a force majeure event.

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Koustubh Athavale

Senior Associate | Legal | [email protected]

Provides expertise in commercial contracts, dispute resolution, and data privacy. Leverages extensive experience in the startup ecosystem to deliver tailored legal solutions for diverse business needs.