The COVID-19 pandemic generated more force majeure litigation in India than any event in recent commercial history. Several years on, a clearer picture has emerged of how Indian courts interpret these clauses, and the picture is not what many contracting parties had hoped for.
This article examines the legal framework, how courts have applied it, and what lessons can be drawn for drafting and negotiating commercial contracts in India today.
The Legal Framework
Force majeure is not a standalone doctrine in Indian contract law. It is governed by Section 32 and Section 56 of the Indian Contract Act, 1872. Section 32 deals with contingent contracts, and Section 56 deals with frustration of contract. The Supreme Court in Satyabrata Ghose v. Mugneeram Bangur (1954) clarified that Section 56 in India is narrower than the English doctrine of frustration, and applies only where performance becomes impossible, not merely more difficult or more expensive.
Contractual force majeure clauses are therefore important precisely because they allow parties to define the circumstances in which performance is excused, rather than relying on the limited statutory doctrine.
What Indian Courts Said About COVID-19
The courts largely declined to treat COVID-19 as a force majeure event in isolation. In Standard Retail Pvt. Ltd. v. M/S G.S. Global Corp (2020), the Bombay High Court held that the pandemic and the resulting lockdown did not excuse a buyer from performing a contract for import of steel, because the goods had already been shipped and the buyer's obligation to open a letter of credit was a payment obligation, not a performance obligation dependent on physical access.
Similarly, in Energy Watchdog v. Central Electricity Regulatory Commission (2017), a case decided before the pandemic but frequently cited in COVID-related disputes, the Supreme Court held that a rise in coal prices did not frustrate a power purchase agreement, because difficulty of performance is not impossibility.
Indian courts have consistently refused to excuse contractual performance simply because it became more expensive or commercially inconvenient. The threshold for force majeure relief is genuinely high, and parties who drafted their clauses loosely have found themselves without a remedy.
Where Force Majeure Arguments Succeeded
Force majeure arguments did succeed in some cases, typically where the clause was drafted broadly and specifically referenced government action or epidemic as a triggering event. Where contracts included explicit references to pandemic, epidemic, government order, or lockdown as force majeure events, courts were more willing to apply them.
The lesson is straightforward. The drafting of the clause determines its utility. A clause that lists specific events and is clear about the consequences of a force majeure event will provide more reliable protection than a generic clause.
Key Drafting Considerations
Based on the post-COVID jurisprudence, there are several things parties should address when drafting or reviewing force majeure clauses in Indian commercial contracts.
First, the list of triggering events should be specific and should include epidemic, pandemic, government action, and regulatory restriction as named events, in addition to the traditional natural disasters and war. A general sweep-up provision alone is often insufficient.
Second, the clause should clearly state the consequences. Does a force majeure event suspend performance, excuse performance permanently, or give either party the right to terminate? Ambiguity here creates disputes.
Third, notice requirements must be carefully considered. Most force majeure clauses require the party claiming relief to give notice within a specified period. Missing the notice deadline can result in the loss of the force majeure protection entirely.
Fourth, the clause should address what happens to payments already due. A force majeure event typically excuses future performance but does not extinguish obligations that had already accrued before the event occurred.
The Practical Position Today
India's commercial courts are not sympathetic to parties seeking to escape contractual obligations on flimsy grounds. Force majeure is a genuine legal mechanism, but it requires a genuine triggering event and a direct causal connection between that event and the inability to perform.
Businesses entering into long-term contracts in India today should treat force majeure clause drafting as a substantive exercise, not a formality. The pandemic demonstrated clearly that the difference between a well-drafted clause and a poorly-drafted one can be the difference between a valid legal defence and an unenforceable claim.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. It does not create a lawyer-client relationship. For advice specific to your situation, please consult a qualified legal professional. LawCite Advocates is a law firm registered in India.