15. Force Majeure | When an Extraordinary Event Excuses Performance

This is the 15th and final post in Unit V — the earlier posts covered remedies, construction contracts and mediation; this post covers the clause that decides who bears the loss when an extraordinary event makes performance impossible.

The Problem This Topic Solves

Floods, wars, strikes, government bans and pandemics can stop a party from performing, through no fault of its own. If the contract says nothing, the party may be sued for breach. Parties therefore often write a clause to say what happens in such cases. Courts then have to decide whether the event fits the clause, and what the clause does when the event happens.

What Force Majeure Means

Force majeure (a French term meaning "superior force") is a contract clause that excuses or suspends performance when an extraordinary event, outside the parties' control, prevents it. The Indian Contract Act, 1872 does not define it. Its meaning depends on the words of the contract. The clause usually lists events, such as natural disasters, war, riots, strikes, epidemics and government orders, followed by general words like "or any other event beyond the reasonable control of the party".

The Supreme Court in Dhanrajamal Gobindram v. Shamji Kalidas & Co. (1961) noted that force majeure is wider than vis major (an act of God): it includes both natural events and human events such as war or strikes.

Legal Basis: Section 32 and Section 56

In Energy Watchdog v. Central Electricity Regulatory Commission, the Supreme Court explained two routes:

• Force majeure inside the contract — where the contract has an express or implied term that performance is discharged in certain events, the matter is governed by Chapter III of the Contract Act, on contingent contracts, and particularly Section 32 (a contract to do something if an uncertain future event happens becomes void if the event becomes impossible).
• Force majeure outside the contract — where there is no clause, an event that makes performance impossible is dealt with under Section 56 (the rule of supervening impossibility, also called frustration). Section 56 rests on the principle in Taylor v. Caldwell, and the Supreme Court in Satyabrata Ghose v. Mugneeram Bangur & Co. read "impossible" in a practical, not literal, sense.

What Must Be Shown

A party relying on a force majeure clause must usually show:

1. The event fits the clause — it is one of the listed events or falls within the general words.
2. Beyond reasonable control — the party could not have prevented or avoided it.
3. Causal link — the event actually prevented performance; it must not merely make performance harder or costlier.
4. Notice and mitigation — the party gave any notice the clause requires and took reasonable steps to reduce the effect.

In Energy Watchdog, a sharp rise in the price of imported coal was held to be commercial hardship, not force majeure or frustration. A contract is not discharged merely because it has become more expensive to perform.

Effects of a Force Majeure Event

The effect depends on the clause. Common effects are:

• performance is suspended for the duration of the event;
• the time for performance is extended;
• if the event continues for a long period, either party may terminate;
• the affected party is not liable for damages for the delay caused by the event.

Payment obligations that are not affected by the event usually continue.

Force Majeure and Frustration Compared

During the Covid-19 pandemic, courts did not accept the pandemic as an automatic excuse. In Standard Retail Pvt. Ltd. v. G.S. Global Corp. (Bombay High Court, 2020), the court examined whether performance was actually prevented. In Halliburton Offshore Services v. Vedanta Ltd. (Delhi High Court, 2020), an ad-interim order was later vacated. These are covered in the Covid-19 note.

• Force majeure is a contract clause excusing or suspending performance on an extraordinary event outside the parties' control; the Contract Act does not define it.
• Clause-based force majeure falls under Section 32 (Chapter III); force majeure without a clause falls under Section 56 (frustration) — Energy Watchdog (2017).
• Increase in cost or commercial hardship is not force majeure or frustration (Energy Watchdog).
• The party must show that the event fits the clause, was beyond its control, actually prevented performance, and that it gave notice and mitigated.

• Force majeure is wider than vis major, which covers only natural events (Dhanrajamal Gobindram).
• General words in the clause are usually read in the light of the listed events.
• Exam trap: do not treat force majeure and frustration as the same thing; the first depends on the contract, the second on Section 56.

A Practical Example

A supplier agrees to deliver cement to a construction site by 30 June. The contract's force majeure clause lists floods, war and government orders. A flood washes out the only road to the site in June. The supplier gives prompt notice and delivers once the road reopens. The delay is excused and no damages are payable. If, instead, the supplier simply found cement more expensive in June, that is commercial hardship, and the clause does not apply.

Quick Revision Points

• Force majeure: clause excusing or suspending performance on an extraordinary event beyond control; not defined in the Contract Act.
• Route 1: clause in the contract, Section 32; Route 2: no clause, Section 56 (Energy Watchdog).
• Hardship or higher cost is not enough (Energy Watchdog).
• Elements: event fits clause, beyond control, causal link, notice, mitigation.
• Wider than vis major (Dhanrajamal Gobindram); Section 56 impossibility read practically (Satyabrata Ghose); origin in Taylor v. Caldwell.