COVID-19 FORCE MAJEURE AND FRUSTRATION OF CONTRACTS

Author- ISHIKA CHATTOPADHYAY

Volume 1 Issue 2 (2020)

The spread of the corona virus and the consequent restrictions imposed by the government have taken its toll on the economy and that has an ample number of legal implications as well, one of which was the delay or failure in performance of contractual obligations. This undoubtedly gives rise to varied legal questions as contractual parties try to find a way out of performing their responsibilities while their counterparts seek the safeguarding of their own interests.

This paper discusses these issues that may arise with commercial contracts due to the impediments caused by the spread of the covid-19 pandemic or due to the government orders with respect to the same, such as the nationwide lockdown or the compulsory payment of wages to workers. Thereafter, it delves into the various reliefs that the parties to a contract may avail if they find themselves unable to perform their obligations under the contract, the most common amongst them being the invocation of force majeure clause and the frustration of contract. It also goes into other reliefs like a variation or the change in law clauses along with their scope of application with relation to each other. This paper also examines the ambit of each such relief and the statutory framework as well as the relevant judicial interpretation pertaining to each. Further, it goes into the specific effects of this pandemic on some key sectors like banking and finance, insurance, real estate and power, and the legal and commercial issues that they might face in the near future. Finally, the precautions to be taken for the drafting as well as negotiation of contracts in the light of the current scenario have also been discussed briefly.

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