Implications of Covid-19 Pandemic on the Contractual Obligations in India

Abstract

COVID-19 pandemic has caused unprecedented disruptions to business operations and the commercial contracts worldwide. Countries around the world have imposed mass travel bans, temporary lockdowns and extremely restricted human movement thereby bringing an unparalleled halt to domestic and international trade. The measures imposed by the Governments of the respective countries, significantly reduced the capacity of businesses to move goods and services within and across the national borders. It has caused disruption to production and also to supply chain, thereby interrupted the trade across the world. All these developments greatly affected the performance of the contracts of the parties to the eontract and thereby reduced their ability to perform their obligations. While some of the contracts could not be performed due to the pandemic situation, some others could be performed at the option of the other party to accept the delayed performance. In such circumstances, the parties claim the common defence of Force Majeure or frustration of contract to avoid the financial liability for breaching the contract. This situation gives rise to several questions: whether this pandemic can be treated as a ground for non-performance under act of God or Force Majeure clauses, to excuse a party for non-performance of contract. If so, what are the consequences of such defence? and what is the role of Courts in such cases of non-performance? In this background, the researcher analyses the provisions of Indian Contract law and its applicability as a defence for non-performance of the contract in India. The paper also focuses on the relevant Indian judicial decision on the same.