What is Force Majeure?

 

About Force Majeure

 

• Force majeure is a French term that literally means “greater force.”
• The concept of force majeure refers to an extraordinary event rendering the legal obligations between two or more contractually bound parties impossible to fulfill.
• It is related to the concept of an act of God, an event for which no party can be held accountable. This type of event must be entirely beyond the parties' reasonable control.
• As a precautionary measure against breach of contract, many commercial agreements contain force majeure contract clauses enumerating a list of major events that could result in non-performance of contractual duties.
• Notable events include war, riots, criminal activity, epidemics, pandemics, and other unforeseeable events.
• For force majeure to apply, these hindering circumstances must be beyond a party's reasonable control. 
• The contracting parties must also prove their reasonable efforts to mitigate the circumstances that have rendered the fulfillment of their duties impracticable.
• Such events may result in the parties delaying their obligations for a period of time, revising the contract terms, or agreeing on the contract’s cancellation.
• While force majeure has neither been defined nor specifically dealt with, in Indian statutes, some reference can be found in Section 32 of the Indian Contract Act, 1872 (the "Contract Act") envisages that if a contract is contingent on the happening of an event which event becomes impossible, then the contract becomes void.
• Force majeure conflicts with the concept of “pacta sunt servanda,” a principle in international law that agreements must be kept and not wriggled out of.

 

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Q1) What is a contract under the Indian Contract Act, 1872?

Section 2(h) of the Indian Contract Act, 1872[2] defines a contract as "An agreement enforceable by law". The word 'agreement' has been defined in Section 2(e) of the Act as ‘every promise and every set of promises, forming consideration for each other’

Source: Indian Oil Corporation and Engineers India Ltd mulls liquefied natural gas terminal in Iraq