No legal topic generated more urgent commercial questions during the pandemic than force majeure. When nationwide lockdowns shut construction sites, disrupted supply chains, and made commercial premises inaccessible, businesses across India asked whether their contracts were excused, suspended, or simply enforceable as written. The answers that Indian courts gave — and continue to give — reveal something important about the structure of Indian contract law that any party drafting or negotiating a commercial agreement must understand.
The Statutory Framework: Section 56 of the Indian Contract Act 1872
India's approach to supervening impossibility is founded on Section 56 of the Indian Contract Act 1872. The section provides that an agreement to do an act which after the contract is made becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, shall become void when the act becomes impossible or unlawful. This is the doctrine of frustration in Indian statutory form.
The critical feature of Section 56 is that it operates as a rule of positive law imposed by statute, not merely as the courts' interpretation of what the parties intended. English contract law treats frustration as an implied term of the contract — the parties are taken to have intended that their agreement would discharge in specified circumstances. Indian courts have consistently rejected this implication-based approach. Section 56 applies regardless of what the contract says; it is not a gap-filling device but a supervening rule that the parties cannot contract out of.
Contractual Force Majeure Clauses: A Separate Analysis
Many commercial contracts contain their own force majeure clauses — provisions that identify specific triggering events, set out consequences such as suspension or termination, and specify notice and mitigation obligations. A common drafting error is to assume that because such a clause exists, Section 56 is irrelevant. That assumption is wrong under Indian law.
Indian courts treat a contractual force majeure clause as governing the parties' obligations under the contract, while Section 56 operates as a threshold question of whether the contract exists at all. Where a contract has a detailed force majeure clause, courts will apply that clause to determine the parties' entitlements — whether notice was given, whether the obligation is suspended or terminated, whether damages are available. But if the clause does not anticipate the event, or if the event renders the contract commercially radically different from what was undertaken, Section 56 may discharge the contract entirely, overriding whatever the parties wrote.
COVID-19 Evaluations in Indian Courts
Indian courts have taken a consistently restrained approach to COVID-19 as a force majeure event. The threshold for frustration under Section 56 is genuinely high: the supervening event must render performance impossible in the legal sense — not merely more difficult, more expensive, or commercially less attractive than anticipated. Several patterns emerged from post-2020 litigation:
In construction contracts, contractors argued that lockdown orders preventing access to sites frustrated obligations to complete by specified dates. Courts generally distinguished temporary impossibility — where performance could recommence after restriction lifted — from permanent impossibility. Extension of time was often considered a more proportionate remedy than discharge. Blanket claims that COVID-19 excused all obligations under a construction contract were rejected.
In commercial lease disputes, tenants sought to suspend rent obligations on the basis that lockdowns prevented use of premises. Courts were split, but the weight of decision-making held that a lease is primarily a grant of a property right, not merely a service obligation, and that the landlord's obligation to give possession was not made impossible simply because the tenant could not profitably occupy. Rent abatement was granted in some cases on specific facts where the lease expressly addressed the point, but the general principle of frustration was not applied to commercial leases merely because they became uneconomic to the tenant.
Supply contracts saw more varied outcomes. Where government notifications specifically identified a category of goods or supply operations as prohibited, courts were more willing to find that a contract was frustrated for the duration of the prohibition. Where the claim was simply that sourcing had become difficult or costly, it failed.
What Makes a Force Majeure Clause Effective
The pandemic revealed that many standard force majeure clauses were too vague to be operationally useful. An effective clause should specify the following elements:
- A defined list of triggering events — including epidemic, pandemic, government order, and regulatory restriction — combined with a general sweep clause for analogous events
- A prompt notice obligation on the party seeking relief, typically within a specified number of days of the event becoming known, failing which relief may be lost
- A clear statement of the consequence — whether the affected party's obligation is suspended for the duration, whether the other party may terminate after a specified period of non-performance, or whether the contract is discharged outright
- An obligation to mitigate — the affected party must take reasonable steps to overcome or minimise the effect of the event
- A time limit — if the force majeure event persists beyond a specified period, either party should have the right to terminate rather than being kept in contractual limbo indefinitely
Material Adverse Change Clauses in M&A
In the M&A context, the analogous provision is the material adverse change or material adverse effect clause (MAC/MAE). These clauses allow a buyer to walk away from a signed transaction if a material adverse change in the target's business occurs between signing and closing. COVID-19 led to disputes about whether a general deterioration in business performance constituted a MAC triggering event, or whether the clause required something more specific. Indian M&A documentation varies widely in how MAC clauses are drafted, and the pandemic demonstrated the commercial consequence of leaving them ambiguous.
Drafting Recommendations for Post-COVID Contracts
Parties drafting commercial contracts now have the benefit of knowing what arguments were tested in litigation and where clauses failed. The recommendations are straightforward: define force majeure events with precision, include public health emergencies explicitly, require prompt and detailed notice, specify the consequence of invocation, impose a continuing duty to mitigate, and set an outer time limit after which either party can terminate with clean hands. Where the contract is for construction, include a mechanism for extension of time that sits alongside the force majeure clause and prevents double-counting. Our corporate and commercial practice assists clients in reviewing and redrafting commercial contracts to address these risks.
Can a party contract out of Section 56 of the Indian Contract Act?
No. Section 56 is a positive rule of law in India, not a default rule that parties may modify by agreement. A contractual force majeure clause and Section 56 operate in parallel: the clause governs the parties' mutual obligations, while Section 56 determines whether the contract subsists at all. Courts will apply Section 56 independently of what the parties wrote, though a well-drafted contractual clause may pre-empt many of the factual disputes that might otherwise lead to a Section 56 argument.
Does difficulty in performance qualify as force majeure under Indian law?
No. Commercial hardship — where performance has become more expensive, less profitable, or operationally harder — does not qualify as frustration under Section 56 or as a force majeure event in most contracts. The supervening event must render performance impossible in the legal sense or, in the case of a contractual clause, fall within the clause's specific enumerated triggers. Parties who anticipated the general risk of performing their contract have no force majeure defence simply because that risk materialised at a worse level than expected.
What notice obligations apply when invoking force majeure?
Notice requirements are entirely governed by the contract. Where a clause requires written notice within a specified period — commonly between seven and thirty days of the triggering event becoming known — failure to give that notice on time can disentitle the affected party from the relief the clause provides. Courts have enforced notice conditions as conditions precedent to relief in commercial contracts. A party that discovers a potential force majeure event should immediately review the contract's notice provision and comply strictly.
How did Indian courts treat commercial lease disputes during COVID-19?
The dominant judicial view was that a commercial lease grants a property right — the right to possession — and that this right was not rendered impossible by lockdown orders that restricted the tenant's use of the property. The landlord's obligation to give possession was unaffected. Rent obligations accordingly remained enforceable in most cases, save where the lease itself contained an express abatement or suspension clause. Tenants who sought frustration of lease obligations on the ground that they could not use the premises for their business generally did not succeed.