1. What do you understand by the doctrine of ‘Force Majeure’?
The Merriam Webster dictionary defines the word force majeure as ‘an event or effect that cannot be reasonably anticipated or controlled’, that it has been derived from a French word namely ‘vis major’ which means a superior force which is out of control or unforeseeable circumstances.
It refers to a common clause that is included in the legal contracts to remove liability for natural and unavoidable circumstances such as war, strikes, riot, epidemic or an event better described as an “Act of God” that interrupt the expected course of events and prevent the participants from fulfilling obligations.
However, in practical life, most of the force majeure clauses do not excuse a party’s non-performance wholly; only suspend it for the time period of force majeure. In India, the force majeure in any given situation is controlled by the law governing the Contract Act 1872 rather than general concepts of force majeure. It is generally used in time-sensitive contracts to limit the shield of this clause where a party doesn’t take steps to prevent or limit the effects of outside interference either when they become likely or when they actually occur.
2. What is not covered by the “Force Majeure”?
Force majeure is generally intended to include occurrences beyond the reasonable control of the party and therefore doesn’t cover-
i. Any result of the negligence or malfeasance of the party having an adverse impact on the ability of the party to perform its obligations.
ii. Any result of the usual and natural consequences of the external forces.
iii. Any circumstances that are specifically contemplated in the contract for instance if the contract for the outdoor event specifically permits cancellation in the event of rain.
3. What is the use of the clause of “Force majeure” in rental agreements or commercial lease contracts?
The government of India requested owners to not to ask for rents or extend the time for payment for rent payments for the tenants. But, is it legally acceptable? We need to analyze it deeply from the legal point of view-
Generally, in the case of a commercial lease, the provisions of this clause provide a mechanism to either postpone or suspend the performance of a duty under a lease due to unforeseeable circumstances which are beyond the control of any party. A clause of force majeure will provide means to allocate the risk among the parties involved in the commercial lease.
On the other hand, if a commercial lease doesn’t contain the provision, the party suffering a loss due to such out of control events will have no claim against such delay or non-performance; however, an equitable claim may arise for them under the doctrine of frustration or impossibility.
If a contract contains a clause providing some sort of waiver or suspension of rent, only then the tenant can claim suspension.
Doctrine of Frustration under Contract Act 1872-
Section 56 states” An agreement to do an act impossible in itself is void”. Contact to an act afterward becoming impossible or unlawful by reason of some event which the promisor could not prevent becomes void when the act itself becomes impossible or unlawful.
Elements for invoking the force majeure are –
i. There must be a valid contract in existence between parties;
ii. The contact is yet to be performed by the parties; and
iii. The contract after entered into became impossible to perform thereafter;
Application of the doctrine of Frustration in commercial & lease agreements was widely debated in case Cricklewood Property and Investment Trust Ltd. vs. Leighton’s Investment Trust Ltd. (1945) the House of Lords decided that a ninety-nine years old lease would not be frustrated and the lessee would not be discharged from his obligation merely because of temporary disability in utilizing the property. In many such similar questions, the courts in England have stated that a mere disability in holding the possessory rights shall not end up in frustrating the contract or lease from the obligation of payment of the lessee.
a. Dhanrajamal Gobindaram vs. Shamji Kalidas & Co. AIR 1961 Sc1285
The expression has given an account of what is meant by “force majeure” is not merely the French term “vis major” but wider than that in meaning. Various judges have accepted that where a reference is made to “force majeure”, the intention of the party is to save the performing parties from the consequences of anything over which he has no control.
b. Energy Watchdog vs. Central Electricity Regulatory (2016)
Holding that the clause of “force majeure is governed by the Indian contract Act 1872, the Supreme Court stated “ So far as a force majeure event occurs dehors the contract, it deals with the positive law provided under section 56 of the Indian Contract Act 1872.
Similarly, in Raja Dhruv Dev Chand vs. Raja Harmohinder Singh (1968) 3 SCR 339 observed that generally, Indian Courts were of the view that section 56 of the Contract Act 1872 is not applicable when the rights and obligations of the parties are under a transfer of property. It was held that the doctrine of Frustration would not apply to a contract of the lease when the transfer of property by way of the lease under the Indian law, owing to the transfer of right to enjoy the land as well.
Also, if the material or any part of the property was destroyed wholly or substantially rendered unfit for the purpose for which it was let out, it was held that the lessee had the option of avoiding the lease under section 108 (e) of the Transfer of Property Act 1882.
Mullah on Transfer of Property Act (2013) orated that as there is not much scope for the doctrine of frustration when it comes to rights & obligations of parties under a lease and such cases are settled subject to provisions of 108(e). However, the lessees can seek protection under section 108(e) in appropriate circumstances.
4. Does the clause of “Force Majeure” gives a waiver or suspension of payment under a rent agreement or lease?
- In Contrast to the provisions of section 56 which result in the dissolution of the agreement on the happening of a frustrating event discharge under section 108 (e) may happen only when the lessee elects to void the lease.
- The burden to prove the occurrence of the either falls on the lessee who must establish that either a material part of the property is destroyed or has substantially unfit for the use by the lessee.
- If a lessee is able to show that the conditions provided in 108(e) are fulfilled, then mere refusal to pay rent shall not be sufficient for the lessee to avoid the payment obligations. He must notify the lessor of his intent to invoke his option to void the lease in terms of 108(e). Thus, if the lessee fails to hand over the property, he will be liable to pay rent.
- In Alanduraiappar Koli Chithakkadu vs. T.S.A. Hamid (1962) SCC Mad 102, where the tenant claimed suspension of rent on the account of two cyclones which has severely affected his business, the Madras High court rejected his contention stating that a temporary suspension of business due to cyclones could not frustrate a 5-year lease agreement.
- Accordingly, it can be said that though the pandemic has caused tremendous financial stress among various sections of the society neither the global pandemic nor the lockdown has destroyed the property not it has made anyone unfit for use in business, thus nowhere it can be assumed as a suspension of the lease agreement and unless the lease agreement by itself provides for a discharge of obligations for payment obligations, it may not be possible for a tenant to refuse payment of a commercial lease.
- Secondly, the rent agreement being a matter of Contract Act 1872 the tenants may seek for waivers or referrals in payment from the landlords but only through negotiation or mutual consent and in the same way a tenant can be discharged from his liability without forcing the tenant to shut the shop forcefully.
- Under the Delhi Rent Control Act 1958– In Phul rani vs. Nawbat Rai Ahluwalia (1973) 1 SCC 688 it was held that under the section 14 (1) (e) of the Act, the eviction of the tenant is permitted if the landlord requires the property for “occupation as a residence for himself or any member of his family dependent on him.
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