Force majeure has become a fairly common ground to avoid the performance of contractual obligations in a post-COVD-19 world. At a time when lawyers and parties seek to examine their force majeure clauses and reassess their contractual arrangements, we have published a report studying how courts have treated force majeure claims.
Our report performs an empirical analysis of the force majeure claims decided in India by the Supreme Court and six High Courts - the Delhi High Court, the Bombay High Court, the Madras High Court, the Karnataka High Court, the Allahabad High Court and the 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 give a clearer understanding into the nature of force majeure claims that have been allowed. These heads are:
(i) Orders by the government (15 cases i.e. 21.12%)
(ii) Permission and regulatory clearance (13 cases, i.e. 18.30%)
(iii) Change in law (12 cases, i.e. 16.90%)
(iv) Court order (7 cases, i.e. 9.85%)
(v) Act of God (6 cases, i.e. 8.45%)
(vi) Foreign Events (2 cases, i.e. 2.81%)
(vii) A residuary category of Disturbances in Contract (16 cases, i.e. 22.53%)
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 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 appendixes to the report.
The 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 the orders by the government saw the highest number of force majeure claims being allowed.
Of the 27 Supreme Court cases reviewed in the report, 11 allowed a force majeure claim (i.e. 40.74%) and 16 cases rejected the force majeure claim (i.e. 59.25%).
For the Delhi High Court, of the 43 cases reviewed, 22 allowed a force majeure claim (i.e. 51.16%) and 21 cases rejected a force majeure claim.
Of the 20 cases decided by the Bombay High Court, 4 allowed a force majeure claim (i.e. 20%) and 16 cases rejected a force majeure claim (i.e. 80%).
The lockdown measures imposed in India to contain the spread of COVID-19 have had a naturally disruptive effect on the performance of contracts. With government and regulatory bodies already invoking force majeure clauses and extending the timelines for performance of contracts, there is an increasing trend of force majeure claims being made.
The authors feel that upon a close examination how the courts have handled such claims since the announcement of lockdown measures, there might be an increase in the grant of interim protection. However, this might not necessarily impact the ultimate decision of the court on the merits of a force majeure claim. In any case, this is no doubt an interesting time for the development of the law on force majeure in India.
Read the full report here.
Smaran Shetty is a Senior Associate and Pranav Budihal is an Associate at Keystone Partners.