1. What is the importance of contractual relations in a pandemic like Covid-19?
Ans. In a situation of a pandemic, commercial activities usually come to a standstill. Considering the case of Covid-19 and the subsequent lockdown instructions enforced by the authorities, there has been a loop in the supply chain. The performance of various obligations as detailed the contract between parties come to a standstill or atleast delayed. The performance of contract becomes unlawful and impossible. Entering into contractual relations prevents business and enterprises from hefty liabilities which may arise due to non performance of a contract even when the non performance is attributed to a supervening impossibility.
2. What is the importance of Force Majeure clause in a contract?
Ans. As per Indian Contract Act, 1872 and various applicable rules, regulations and advisory notifications, it can be said that Force Majeure clause in a contract frees the parties in the contract from performing and exercising the rights and obligations as incorporated the in the contract on happening of events that are beyond the control of the parties. Force Majeure clause is wider than “act of god” and includes pandemics. This clause will prevent the parties from imposing sizeable liabilities on each other when obligations cant be performed in prevelance of a pandemic.
3. Why is it important to get your contract drafted by a professional?
Ans. The importance of a written contract has been emphasised time and again. However, one often underestimates the value of a well drafted contract by the professional. Following are the various reasons that it is advisable to get the contract drafted by a professional:
* The professionals have the overall knowledge of the industry and the ability to acknowledge its dynamic nature. They therefore incorporates such terms and conditions in the contract that work for the benefit of the parties
*They save the parties from the danger of an inadequate contract by incorporating suitable clauses like arbitration clause, indemnity clause etc
*help in accurate interpretation of scheming contractual terms and intention of parties.
*provide an understanding of the terms in the agreement to the clients before the agreement becomes binding into a contract.
*minimize risk by providing an overall outline to the client at an early stage of contract drafting.
4.What are the procedural requirements to invoke the force majeure clause in the contract?
Ans. The parties shall invoke the Force Majeure class after satisfying the procedural requirements as mentioned in the clause. For instance the clause may provide that the party suffering from the Force Majeure event shall inform about the same to the other party giving all necessary details without any delay. The clause can also provide for a specific “x” day notice period from one party to another. If the
clause in the contract is silent about the requirement about providing a notice, the affected party may still provide a notice as and when it comes to the notice of the affected party that it shall not be able to perform its obligations due to a supervening impossibility.
5. What are the essential ingredients of a force Majeure clause in a contract?
Ans. Following are the essential ingredients:
• An unexpected/unforeseen intervening event occurred;
• The parties to the agreement assumed that such an event will not occur;
• Such an event has made the performance of the obligations under the contract impossible or impracticable;
• The parties have taken all such measures to perform the obligations under the agreement or at least to mitigate the damage; and
• The affected party claiming relief under force majeure, will have the burden of proof to show that the force majeure event has affected such party’s performance of the contract.
It is very important to note that a force majeure clause operates not at the instance of the parties but on happening of a Supervening impossibility.
6.Can the pandemic Covid-19 be identitied as a situation to invoke the Force Majeure clause in the contract?
Ans. Vide Office Memoramdum O.M. No. 18/4/2020-PPD3 the Government of India has tried to define the scope and effect of lockdown on commercial activities and supply chain. However, the O. Ms are limited in scope and do not answer the question of invoking Force Majeure clause in the contract. The same shall depend on the language of the FM clause in the contract (whether it includes a pandemic as a condition or not), performance chances of the involved transaction and by further detailed guidelines by the authorities.