In the law governing contracts, the term “Force majeure” excuses the lack of fulfillment of a contract due to natural and man-made disasters or events like floods, war, earthquakes etc. (e.g. Covid-19), which makes it impossible for the party to fulfil its obligations.
The interpretation of the Force Majeure clause by Courts depends on the way it is drafted. To invoke this force majeure clause, it has to be expressly given in the contract.
In this regard, recently the Ministry of Finance on 13th May, 2020 through an office memorandum also directed all State agencies as affected parties in contracts having Force Majeure clause, to invoke the Force Majeure clause in their respective contracts excusing the performance of its obligations for the duration of the lockdown. This directive of the Ministry of Finance has restricted its operation to only specific contracts like:
- Supply contracts
- Construction work/contracts
- Goods and services contracts and
- PPP(Public-Private partnership) contracts.