The article highlights implications on contract with force majeure clause or without force majeure clause, reporting as per corporate governance and brief on employer employee relationship contract.
The outbreak and rapid spread of the corona virus disease (COVID-19) has roiled the markets whether domestic or international leading to disruptions. It has impacted contracts, supply chains, demand-supply, governance and employer-employee matters etc.
1. IMPLICATIONS ON CONTRACT
On account ofdisruptions in supply chain, shift in demand supply curve, inability to fulfil obligations etc. Parties to contract are not able to perform their contractual obligation and there is delay, liability for non-performance or termination of contracts. Sometimes contractual performance does not come on mark to their customer’s agreement. This is due to COVID-19 that suppliers have not been able to perform their contractual obligations.
In this context, it will be considered as a‘force majeure’ event.
Force Majeure– The law relating to Force Majeure is a French phrase means a ‘superior force’. It mentioned under sections 32 and 56 of contract Act,1872. Force majeure generally includes events like Act of God, natural disasters, war, labour unrest, strikes and epidemics etc.
Force Majeure is an exception to what would otherwise amount to breach of contract. This clause in a contract frees both the parties from contractual liability or obligation when prevented by such events from fulfilling their obligation under the contract. This clause does not excuse a party’s non- performance entirely but suspends it for the duration of Force Majeure. COVID-19 outbreak is covered by Force Majeure clause.
Force Majeure is part of a contract – included in the contract
The general concept means that events or conditions beyond the reasonable control of one party should not cause them to be held liable.Generally, such clauses are part of contract. However, the language used in most contracts vary widely so it important to read the clause carefully.
Some contracts can be on hold or might keep limitations of time or either party may cancel the contract or otherwise require the contract to remain in effect until force majeure event is resolved.
As the Covid-19 situation is critical and invocation of force Majeure clause could be subjective, there can be issues around the said clause. Burden of proof lies on person invoking the said clause. Copies of critical correspondence and other communications should be maintained when dispute arises.
Force Majeure is not part of a contract –not included in the contract
If the contract does not include the force majeure clause the affected party could be resort to section 56 of the Indian contract Act, 1872.
2. CORPORATE GOVERNANCE DISCLOSURES:
Generally, there is need of disclosures under financing documents. Company would need to assess the need to change or re- negotiate terms with lenders. If the company is unable to meet any financial covenants under the borrowing documents, the same needs to be intimated.
3. WORKPLACE ISSUES
The COVID- 19 outbreak has severe affect on economy the employment at workplace is disturbed in totality and hence the issues relating to travel, health and safety concern is must. Below is an overview of an issues related at workplace.
Employers obligation- The employers should ensure that the working condition of an employee is safe and provide healthy working environment. A failure to do this not only risk legal claims but also impact adversely on future relations of employer and employee. It is advisable that the employers do not suspend/remove any employee on the ground of he/ she being a COVID-19 patient or suspected patient.
Thus, the impact of COVID-19 is uncertain as to how long it will last, what could be it’s exact impact and time when the business will be normalized over the period in time.This is an issue which is becoming severe and critical requiring utmost attention from financial and legal side for every company and businessman.