• Force majeure

I am a director at a company and I have an office which is rented. My question Is covid-19 comes under force majeure law where either parties can terminate the contract without any hassle and the tenant can vacant the place peacefully? It's mentioned in the clause due to any reason including any act of God,natural calamity,order of the government of India or any state Government, either party may terminate the agreement. Civid-19 lockdown was ordered by government and for that my business is affected so I want to take all the furniture and computers from my office and vacant the place. Can I terminate the contract based on the clause mentioned in the force majeure?If I can then what's the actual procedure? How long it takes ?
Asked 9 days ago in Business Law from Kolkata, West Bengal

You can on basis of force majeure clause terminate the contract 

 

2) on account of pandemic lock down has been imposed by govt 

 

3) inform landlord by email of termination of contract and that you would be vacating premises on expiry of lock down 

Ajay Sethi
Advocate, Mumbai
74527 Answers
4458 Consultations

5.0 on 5.0

No, entry cannot be denied by the landlord.

You are eligible for force majeure 

Rahul Jatain
Advocate, Rohtak
2411 Answers
4 Consultations

4.9 on 5.0

Landlord can not deny tenant to enter leases premises.

 

rest queries answered as under.


APPLICABILITY OF “FORCE MAJEURE” VIS-A-VIS “COVID-19 PANDEMIC”

As the number of cases of COVID-19 outside China increased thirteen folds, and the number of affected countries tripled, on 11th March 2020, World Health Organisation made the assessment that COVID-19 can be characterized as a “Pandemic”.

Following the COVID-19 outbreak, Government of India (GoI), has also taken various measures for controlling the spread of the disease, one of the major step being complete lockdown of the whole of the nation, for next 21 days, starting from 25th March 2020, including closing of all commercial and private establishments. This complete lockdown was applicable on every activity/movement, except on the movement of the essential commodities, medicines, etc. This decision of the GoI has brought the economy to a standstill, as the performance of all the contracts has become impossible as not only movement of goods and services has been stopped, but the movement of masses has also been halted.

The present radical measure of locking down the nation by the GoI, aimed at preventing the spread of highly contagious novel coronavirus has been made under a century old colonial-era law, the Epidemic Disease Act, 1897. This law essentially allows a State Government to take extraordinary measures when it is “threatened with the outbreak of any dangerous epidemic disease”. This legislation was drafted by the British administration in 1897, in order to control and break the spread of Bubonic Plague in India, which also originated from China and claimed around four millions lives alone in India. Even, the then British administration did not take a huge step, as taken by present day Government of locking down the whole of nation.

Meaning of “Force Majeure” and when the same can be invoked

Force Majeure, a French civil law concept, literally means “superior force”. According to Black’s Law Dictionary, force majeure is defined as “an event or effect that can be neither be anticipated nor controlled.”

Force Majeure clauses are generally incorporated in long term commercial contracts besides in some, one-time transaction contracts, which necessitate its insertion. Inclusion of the above provision paves the way for the parties to take a break in their performance obligations or to terminate the contract in extreme circumstances, typically a natural disaster, war or “act of God”, which would legitimately excuse their performance of the contract. Unless and until, a force majeure provision is negotiated and specifically agreed 

in a contract, the parties to the contract cannot take shelter of the same under the Indian Contract Act, 1872. Moreso, determining as to which types of circumstances will be covered by the clause is essential, as only the events listed and events similar to those listed will be covered.

Usually, force majeure clauses covers natural disasters like hurricanes, floods, earthquakes, and weather disturbances, which are sometimes referred to as "acts of God." Other cover events, which may include war, terrorism or threats of terrorism, civil disorder, labour strikes or disruptions, fire, and curtailment of transportation facilities, change in law. Therefore, the circumstances in which a party can rely on force majeure will be dependent on the express provision in the contract itself and it will be imperative that the event in question falls within the scope of the force majeure clause of the contract.

In some of the contracts, where the events listed to be termed as force majeure, are accompanied by certain other conditions, satisfaction of such conditions allows for the possibility of other non-listed events qualifying as force majeure for example, that the event is beyond the claiming party's reasonable control and could not reasonably have been avoided by the claiming party. Such qualification of the non-listed event as force majeure is subject to the wording and interpretation of the clause and the conditions contained therein.

In examining a contract where the listed events are part of a common category or class, the courts may hold that non-listed events only fall within the scope of the clause, if they are of the same category or class as the listed events. Whereas on the other hand, where the list is exclusive, a claiming non-listed event must fit within the scope of one of the listed items. For example, the COVID-19 outbreak in China would seem to fall squarely within the scope of the term "epidemic," but would not necessarily fit within the scope of the term "famine or plague."

Another defense that can be taken by a party claiming for inclusion of a non-listed event, is that the same was an unforeseen event and could not have been predicted or anticipated, like the spread of present COVID-19 pandemic could not have been forseen, as the last disease that was declared pandemic was hundred years ago i.e. in 1918-1920, which was “Spanish Influenza”, which affected almost one third population of the world and killed almost one to two crores Indian people.

In the absence of Force Majeure clause or invocation of Section 56 of Indian Contract Act, 1972 (Frustration of Contract)

Where there is an express or implied term of contract on force majeure, the same is covered under Section 31 of the Indian Contract Act, 1872, which deals with the 

contingent contracts, but where there is no such clause, force majeure events in general are governed by Section 56 of the Act.

The doctrine of frustration states that, if a contract becomes impossible to perform through no fault of either of the parties it may be automatically terminated. Application of the frustration doctrine requires an overall approach of the event and some of the factors that are to be considered are the contract itself, the context, the parties’ knowledge, expectations, assumptions and contemplations, especially as regards risk at the time of contracting which the parties could reasonably foresee.

Establishing “Pandemic COVID-19” as a “Force Majeure” event

For buyers and sellers of goods and services, the COVID-19 pandemic is causing increasing disruption to supply chains on a local, national and international level. Factories have been shut down, workforces have been downsized, flights have been cancelled and restrictions have been imposed at ports of entry as well as on the movements of the masses. There are delays and cancellations in the production and distribution of materials and supplies, as vendors and suppliers struggle to fill orders and perform contractual duties owed to their customers.

As explained above, if the wording of the force majeure clause itself does not covers the pandemic being one of the listed events, then the other conditions contained in the clause or the class of listed events are to be used to interpret the spread of COVID-19 as a force majeure event. Similarly, on the other hand where the contracts also does not impliedly or expressly includes a force majeure provision, then the claiming party has to establish that Section 56 of the Indian Contract Act, 1872 has been attracted and hence, the performance of the obligation has become impossible despite endeavour by the claiming party to perform its obligation.

In both the situation, the parties have to prove that it was because of the COVID-19 or the steps taken by the GoI (lockdown) in the wake of prevention of spread of COVID-19, and not some other factor, that has caused the party unable to fulfill its obligations. A force majeure clause also generally requires the party invoking the clause to use reasonable endeavours to avoid the effects of force majeure to the extent possible. The claiming party has to show that the force majeure event or circumstance must be causative to the contractual breach. Further, a party could not be relieved from its contractual obligations on the grounds of force majeure merely because the contract had become more expensive, or less profitable, to perform.

The GoI, through Ministry of Finance, vide its notification, dated 19.02.2020, has already invoked the force majeure clause, contained in all its contracts with the procurement entities/agents from whom goods are procured by the Central Government. This notification clarifies that the force majeure clause, contained in the supply contracts of 

which the Central Government is a party, includes the term “natural calamity” as one of the class of events, and the spread of COVID-19 in China or any other country, shall be covered under the same. This notification allows the Central Government as well as the other parties who have entered in contract with Central Government for supply of goods, to take benefit of the said clause in the wake of spread of COVID-19 and the same suspends the obligations of the parties for at least 90 days, beyond which the parties have the right to terminate the contract, if the similar circumstances continues due of the pandemic.

The above notification only talks about the contracts for supply of goods, entered into by the Central Government with its procurement entities/agents. This notification does not invokes force majeure in other contracts, irrespective of the parties to the contract, but an analogy can be drawn from the above notification for use of it in other contracts as the procurement entities/agents of the Central Government, must also be using the above notification for the contracts entered by it with other private parties, for fulfilling its obligations under the contracts with the Central Government. Moreso, lockdown by the GoI has altogether affected every limb of the trade and business and hence, has prevented performance of contracts of all the natures.

Judicial Precedents by Hon’ble Supreme Court concerning Force Majeure

In the case of Energy Watchdog v Central Electricity Regulatory Commission cited at (2017) 14 SCC 80, the Hon’ble Supreme Court of India has held that the impossibility of performance is very essential to establish and the increased costs or difficulty of performance is not the same as impossibility.

Hon’ble Supreme Court has further held in the judgement of Satyabrata Ghose v. Mugneeram Bangur cited at 1954 SCR 310, that under Section 56 of the Indian Contract Act, 1872, impossibility is not simply physical or literal impossibility but means impracticability and futility in performance from the perspective of object and purpose of the parties.

Conclusion

Aside from the tragic human impact of the virus, the consequences are being seen throughout the business and legal world and there are expectations that force majeure clauses in contracts be invoked. The wording of the clause also determines the remedies available to the parties, as the consequences of a force majeure event will differ between contracts, depending on what has been negotiated. Some allow for a temporary suspension of the parties’ obligations, possibly including a set time period after which the contract may be terminated for a long-term force majeure event. Some will allow for termination of the contract because of the force majeure event from the outset. Others will 

only allow for certain obligations to be suspended or partly preventing performance, so payment obligations may still continue in a force majeure event. What all the force majeure clauses will have in common will be a process to invoke it. For example, the party claiming exemption from their obligations may have to issue a notice and provide evidence of the force majeure event and the same cannot be ignored at any cost. Accordingly, while the judiciary’s approach remains to be seen and would only have visibility on the same in times to come, it would be imperative for the Government to take proactive steps in this respect, by enacting legislation that would absolve parties of consequences for breach of their obligations to the extent arising on account of COVID-19 outbreak.

Arihant Nahar
Advocate, Indore
117 Answers

4.7 on 5.0

You can terminate but you need to honour the contract. You need to pay all the outstanding dues and terms of contract including notice period. You are not excused from abiding the terms of contract in covid. Only relaxation is given by some govt to extend the payment of rent in such period. But landlord is entitled to full rent

Prashant Nayak
Advocate, Mumbai
18628 Answers
34 Consultations

4.6 on 5.0

FM dose not apply on tenancy but your agreement is duly executed to meet with such conditions.

You can rightly terminate the tenancy without any repercussion.

Yogendra Singh Rajawat
Advocate, Jaipur
18502 Answers
22 Consultations

4.6 on 5.0

- As per law, if a tenant wanted to vacate the tenanted premises before expiry of the rent/lease agreement , he should give a notice according to the terms of the agreement. 

- Further , the tenant and owner are legally bound with the clauses mentioned in the agreement /contract.

- Further, if the notice period for termination is mentioned is one month , then the tenant has to inform one months prior about the termination.

- Further, if the tenant doesn't want to pass/over the notice period , then he should pay rent for the notice period.

- Further , the landlord should refund the deposited amount to the tenant if any , after making sure that there is no dues towards the tenant . 

- No , only due to covid- 19 , you cannot be allowed to terminate the contract with the landlord .

- But , if there is clause for termination , then legally you are allowed to terminate the contract , and to vacate the tenanted premises. 

- Further , if the contract is silent for the notice period , then just inform the landlord for the same, with the reasons. 

- Since there is already clauses for force majeure , hence legally you can terminate the contract based on the clause mentioned in the force majeure.

- Further , as per law, when you will remove the items lying in the tenanted premises, and give possession to the landlord , then the relation of landlord & tenant will come to an end, 

 

Good luck and dont forget to rating Positively. 

Mohammed Shahzad
Advocate, Delhi
2540 Answers
35 Consultations

5.0 on 5.0

Well covid-19 does not come under natural calamity though it can be covered if the word pandemic is used.

The government order doesn't cover your situation either even if the premises is for commercial premises since the present lockdown is temporary in nature. 

No landlord has right of resistance tk his tenant to enter into the premises even if rent for many months is due.

However you can send letter of termination which can always be accepted by your landlord. 

Devajyoti Barman
Advocate, Kolkata
19578 Answers
278 Consultations

5.0 on 5.0

If you want to vacate the rented premises then you can do it as per the conditions of the rental agreement.

However please note that fore majeure  clause will not be operative for the tenant-landlord relationship.

Nothing prevents you from vacating the premises by giving notice as per the conditions of the rental agreement.

 

T Kalaiselvan
Advocate, Vellore
64506 Answers
835 Consultations

5.0 on 5.0

So long the tenant is paying the rent and remains in possession of the rented premise, the landlord cannot stop the tenant from entering into the rented property.

 

T Kalaiselvan
Advocate, Vellore
64506 Answers
835 Consultations

5.0 on 5.0

Some force majeure clauses allow termination of the contract if the intervening event continues for a specified period of time. . 

you may terminate the contract by notice in writing. 

Mohammed Mujeeb
Advocate, Hyderabad
15553 Answers
7 Consultations

4.5 on 5.0

landlord cannot unreasonably deny a tenant entry into rented property. 

Mohammed Mujeeb
Advocate, Hyderabad
15553 Answers
7 Consultations

4.5 on 5.0

1. Force majeure does not allow termination of contract if the period for the performance of contract can be extended.

2. Yesterday in a case the Delhi High Court refused to accept the contention of a tenant that lockdown being a force majeure his rent should be waived. The court allowed him to delay the payment of rent, but refused to waive off the rent.

3. Hence, if you vacate the premises the penalty/liquidated damages prescribed in the rent agreement will have to be paid by you to the landlord, albeit the payment can be delayed due to lockdown.

Ashish Davessar
Advocate, Jaipur
28656 Answers
835 Consultations

5.0 on 5.0

Force majeure clause does not allow termination of contract but only deferrnent of scheduled contractual periods up-to a reasonable period. 

If your contract contain termination provisions on force majeure condition you can do so amid covid-19 which is declared as a force majeure condition. 

Inform the landlord by written communication and vacate the premises accordingly. 

Landlord can not deny tenants from taking his things from the rented premises. Complain to police if such thing happens. 

Kallol Majumdar
Advocate, Kolkata
2527 Answers
4 Consultations

5.0 on 5.0

1. Tenant is entitled to terminate Lease /Rent agreement irrespective of the lock down period, PROVIDED there is no lock-in clause in the rent agreement.

2. IT would be illegal for the landlord to restrict /restrain /stop the tenant from using premises, irrespective of the fact whether rent is paid or not paid.  IF rent is not paid then landlord has to go to court for his grievance but cannot take law in his own hands.

Hemant Agarwal
Advocate, Mumbai
4338 Answers
23 Consultations

5.0 on 5.0

1. No COVID 19 is not a Force Majure for the rented property. The delhi high court has also passed an order in relation to same so as of now the legal position is clear that you cannot invoke force majure clause for the lease or rented property in.Covid 19.

2. You have to terminate the lease as per the termination clause by giving notice.

Shubham Jhajharia
Advocate, Ahmedabad
24319 Answers
96 Consultations

5.0 on 5.0

1. Till the time agreement is not terminated or possession is not hand over legally owner cannot stop tenant. 

Shubham Jhajharia
Advocate, Ahmedabad
24319 Answers
96 Consultations

5.0 on 5.0

You can send the notice for terminating the tenancy by invoking force majeure. The landlord cannot deny your entry in the property, so long as you are tenant.

Rajinder Goyal
Advocate, Chandigarh
67 Answers

5.0 on 5.0

Dear Sir,

You are suggested to serve a notice to the landlord stating that the conditions has gone worse and your business operations are also stopped and hence you are not able to make the payments and also you wish to vacate the premises terminating the rent agreement. Then, you may vacate the premises, taking all the items. 

Ganesh Singh
Advocate, NEW DELHI
4431 Answers
9 Consultations

4.5 on 5.0

Dear querist, 

Yes, Recently, the Honourable High court of Delhi has pronounced a judgment in your favor which is Ramanand & Ors vs Dr Girish Soni & Anr. in which the court has expressly mentioned that if there is a force majure clause in the agreement or lease deed , then on the issue of pandemic you can invoke the force majure clause in your agreement and can terminate the agreement. the excerpts of the judgment is mentioned for your reference as " The fundamental principle would be that if the contract contains a clause providing for some sort of waiver or suspension of rent, only then the tenant could claim the same,” the High Court said, adding, “However, if the tenant wishes to retain the premises and there is no clause giving any respite to the tenant, the rent or the monthly charges would be payable.”

 

I would recommend you to terminate the deed by invoking the force majure by sending a legal notice to that effect to the landlord. 

 

Regards, 

 

 

Yuganshu Sharma
Advocate, New Delhi
342 Answers
1 Consultation

5.0 on 5.0

Yes, on the basis of the said Force Majeure Clause, you can terminate the contract due to Lock Down imposed by Government.

You need to keep your Land Lord informed in writing (Letter, E-mail, WhatsApp) about termination of contract and your intention to vacate and handover the premises after the lifting of lock down by Government.

The  time required cannot be  specified / quantified, but going by latest developments, it could be some where by end of June, 2020 / early July, 2020.

 

S Srinivasa Prasad
Advocate, Hyderabad
1901 Answers
7 Consultations

5.0 on 5.0

In response to your second query:

No, your Land Lord cannot deny your entry into the property if all the dues and rent are paid.

Even otherwise, till handing over physical possession of property under your use and occupation, he cannot stop you from entering. 

Unless, it s unauthorized.

 

S Srinivasa Prasad
Advocate, Hyderabad
1901 Answers
7 Consultations

5.0 on 5.0

1. The lock down has been declared as reason to apply the provision of Force Majeure.

 

2. So, you can vacate the rented premises terminating the contract applying the clause of Force Majeure.

 

3. Vacate the place and then isue a letter to the land lord terminating the contract based on the clasue Force Majeure.

Krishna Kishore Ganguly
Advocate, Kolkata
24041 Answers
659 Consultations

5.0 on 5.0

1. Ordinarily no unless there is a Govt. restriction based on Covid 19.

 

2. Even if payment of rent is pending, the landlord can not restrain the tenant in entering his tenanted premises without Court order.

Krishna Kishore Ganguly
Advocate, Kolkata
24041 Answers
659 Consultations

5.0 on 5.0

1. Yes you can terminate the contract on Ground of forced Majeure clause.

2. You can send him a notice that you are terminating the contract by way of forced Majeure clause due to lockdown imposed by Govt of India and you are ready to clear the dues and vacate the premises as soon as possible.

3. Yes once the contract is cancelled and you have taken all your belongings then landlord can stop you from entering his premises. 

Mohit Kapoor
Advocate, Rohtak
7952 Answers
2 Consultations

5.0 on 5.0

Landlord cannot deny tenant entry if all  rentals  are paid And there is no breach of terms of rental agreement 

Ajay Sethi
Advocate, Mumbai
74527 Answers
4458 Consultations

5.0 on 5.0

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