India - Chapter 5 - Force Majeure and Hardship in the Asia-Pacific Region
Aditya Vikram Bhat is a Senior Partner with AZB & Partners;
Prerak Ved is a Partner with AZB & Partners.
Originally from Force Majeure and Hardship in the Asia-Pacific Region
I. Force majeure
A. Background and definition of force majeure in India
1. Does India recognize force majeure or any other legal concept similar to force majeure such as frustration, etc. (in the following: “force majeure”)? Are there any statutory provisions or is there any case law setting forth the definition of force majeure?
(i) Yes, India recognises the concept of force majeure, as a part of its contract law (primarily set forth in the Indian Contract Act, 1872, the “Contract Act”). While there is no definition of the phrase force majeure, the provisions of Section 56 of the Contract Act primarily set out the law governing force majeure in contracts – although Section 32 of the Contract Act (relating to contingent contracts) also deals with the same, in context of provisions in contingent contracts. The legal provisions focus on an act becoming either impossible or unlawful – and in that sense do not provide a more comprehensive guide to understanding the principles involved. This gap has been filled by several decisions in cases which have defined and elucidated on the concept of force majeure or frustration (which have, in India, largely been used interchangeably) based on the legal principles set forth in the contract. We have, in the succeeding paragraphs, outlined the legal provisions and relevant observations and principles from key cases that define and elucidate the legal principles set forth in the Contract Act. Extracts of provisions of Section 32 and Section 56 are set forth below.
Section 56 of the Contract Act provides that an agreement to do an impossible act is void.
It reads as below (it may be noted that illustrations are a part of the section):
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
Compensation for loss through non-performance of act known to be impossible or unlawful.-
Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.