Mythri Jonnala & Akash Kumar
Associate(s), Tatva Legal, Hyderabad
The outbreak and spread of COVID-19 has impacted the world in all aspects and has inevitably hit the economy. How does one factor in a pandemic while drafting and negotiation contracts? What can the parties to contracts do in the event of a pandemic, to protect themselves from a legal perspective? How do you determine in COVID-19 is a force majeure event? What if your force majeure clause does not contemplate the happening of a pandemic? The Indian Contract Act, 1872, through Section 56 and Section 32 accounts for these scenarios. In this article, the author analyses Section 56 of the Indian Contract Act, 1872 in the background of the current COVID-19 outbreak. Author also refer to (i) a memorandum issued by the Ministry of Finance setting out the classification of the outbreak and spread of COVID-19 as natural calamity, thus constituting a force majeure event; and (ii) case laws which set out the current position of Section 56 of the Indian Contract Act, 1872. A part of our job as lawyer is to account for various of scenarios and ensure that we protect our clients. The outbreak and spread of COVID-19 is an example of how, while drafting force majeure clauses, we must cover all types of eventualities and situations, which may evolve and exist at that point in time.
Keywords: COVID-19, Section 56, Force majeure, Indian contract act, Impossibility