Force Majeure in Indian Contracts: What Every Business Owner Should Know

What is a Force Majeure Clause?

A force majeure clause is a contractual provision that excuses one or both parties from performance when an extraordinary event prevents fulfillment. Common triggering events include the following.

• Natural disasters such as floods or earthquakes

• War, terrorism, or civil unrest

• Government actions including lockdowns and embargoes

• Pandemics and epidemics

The 2020 lockdown brought this clause into sharp focus across nearly every commercial agreement in India.

How Indian Courts Have Ruled

Indian jurisprudence on force majeure draws heavily from Section 56 of the Indian Contract Act, 1872, which deals with frustration of contract. In Energy Watchdog v. Central Electricity Regulatory Commission (2017), the Supreme Court clarified the following.

A mere rise in the cost or expense of performing the contract does not amount to force majeure, unless the contract itself specifies otherwise.

This means parties cannot use the clause simply because performance becomes more difficult or expensive.

Three things courts examine

1. Whether the event was truly unforeseeable at the time of contracting

2. Whether the affected party took reasonable steps to mitigate the impact

3. Whether the event made performance impossible, not merely impractical

Drafting Recommendations

A well-drafted clause should do four things.

• Specify exactly which events qualify

• Require timely written notice to the other party

• Provide a clear suspension and termination framework

• Address payment obligations during the suspension period

For deeper guidance on contract drafting standards, see the Bar Council of India's resources.