With the government battling to fight coronavirus pandemic on every front, the decision of Union Finance Ministry issuing an office memorandum on February 19, 2020 could prove too handy. It is clarified in this about Force Majeure Clause in the government procurement process of goods through different ministries, agencies and departments in the light of a potential breach of contracts arising out of the spread of COVID-19. In the Manual of Procurement of Goods 2017, para 9.7.7 makes it very clear that circumstances included Under Force Majeure Clause contain an act of God or incidence such as war, strikes, riot, crimes and natural calamity, etc. In such a situation the two contracting parties get free from contractual obligations subject to necessary legal formalities. It clearly includes COVID-19 into the definition of Force Majeure Clause as a natural calamity and this could be invoked wherever it is considered appropriate. It also clarifies that the existence of Force Majeure Clause in the contract does not give excuse to parties non-performance entirely but only suspends for the duration of the existence of the Force Majeure Clause. The firm has to give notice of Force Majeure Clause as soon as it occurs and it cannot be claimed ex post facto that is after happening of the event. It also makes it clear that if performance in whole or in part or any obligation under this contract is prevented or delayed by any reason for a period exceeding 90 days weather party may have the option to terminate the contract without any financial repercussion on either party. Force Majeure Clause in standard form does not include pandemic like coronavirus which is new for the purpose of the contract or any legal obligation. In the prevailing circumstances where there has not been any precedence of the spread of coronavirus, the government clarification will be an added advantage to interpret Force Majeure Clause in terms of government clarification and in terms of the basis of parity it should be made applicable. (By M K Pandey, Advocate, Supreme Court)
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COVID-19: Force Majeure clause likely to prove handy
By IndianMandarins - 2020-04-09 00:10:00
With the government battling to fight coronavirus pandemic on every front, the decision of Union Finance Ministry issuing an office memorandum on February 19, 2020 could prove too handy. It is clarified in this about Force Majeure Clause in the government procurement process of goods through different ministries, agencies and departments in the light of a potential breach of contracts arising out of the spread of COVID-19.
In the Manual of Procurement of Goods 2017, para 9.7.7 makes it very clear that circumstances included Under Force Majeure Clause contain an act of God or incidence such as war, strikes, riot, crimes and natural calamity, etc. In such a situation the two contracting parties get free from contractual obligations subject to necessary legal formalities.
It clearly includes COVID-19 into the definition of Force Majeure Clause as a natural calamity and this could be invoked wherever it is considered appropriate. It also clarifies that the existence of Force Majeure Clause in the contract does not give excuse to parties non-performance entirely but only suspends for the duration of the existence of the Force Majeure Clause. The firm has to give notice of Force Majeure Clause as soon as it occurs and it cannot be claimed ex post facto that is after happening of the event.
It also makes it clear that if performance in whole or in part or any obligation under this contract is prevented or delayed by any reason for a period exceeding 90 days weather party may have the option to terminate the contract without any financial repercussion on either party.
Force Majeure Clause in standard form does not include pandemic like coronavirus which is new for the purpose of the contract or any legal obligation. In the prevailing circumstances where there has not been any precedence of the spread of coronavirus, the government clarification will be an added advantage to interpret Force Majeure Clause in terms of government clarification and in terms of the basis of parity it should be made applicable.
(By M K Pandey, Advocate, Supreme Court)
