HARIHARAN KRISHNAMURTHY (SR MANAGER Accounts & commercial) 06 May 2010

Force Majeure

The below mentioned clause is stated in one of the contracts . After signing the contract, there was a strike in one of the subsupplier's factory to whom the order was placed by the main contractor. Can the Main contractor invoke this clause and claim for extension of time. Force Majeure clause : If at any time, during the continuance of this contract, the performance in whole or in part by either party or any obligation under this contract shall be prevented or delayed by reason of any war, or hostility, acts of the public enemy, civil commotion, sabotage, fires, floods, explosions, epidemics, quarantine restriction, strikes, lockouts or act of God (hereinafter referred to as events) provided notice of happenings of any such eventuality is given by either party to the other within 21 days from the date of occurrence thereof, neither party shall by reason of such event be entitled to terminate this contract nor shall either party have any such claim for damages against the other in respect of such nonperformance or delay in performance, and deliveries under the contract shall be resumed as soon as practicable after such event may come to an end or cease to exist and the decision of the purchaser as to whether the deliveries have been so resumed or not shall be final and conclusive provided further that if the performance in whole or part of any obligation under this contract is prevented or delayed by reason of any such event for a period exceeding 60 days either party may at his option, terminate the contract provided also that if the contract is terminated under this clause, the Purchaser shall be at liberty to take over from the Successful tenderer at a price to be fixed by the purchaser with mutual consent which shall be final. All unused, undamaged and acceptable materials bought out components and stores in course of manufacture in possession of the Successful tenderer at the time of such termination of such portions thereof as the purchaser may deem fit excepting such materials bought out components and goods as the Successful tenderer may with the concurrence of the Purchaser select to retain.

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10 Replies

R.R. KRISHNAA (Legal Manager) 06 May 2010

Yes. Strike is covered under the force majure clause and hence the main contractor can invoke the clause and seek extension of time.

HARIHARAN KRISHNAMURTHY (SR MANAGER Accounts & commercial) 06 May 2010

Dear Krishna,

Thanks for the quick response. Since the Subcontractor is not specifically covered, I had a doubt whether the main contractor can claim. Kindly throw some light on this..

R.R. KRISHNAA (Legal Manager) 06 May 2010

If your supply contract with the main contractor has any clause restricting the main contractor from engaging any sub contractor then in such case the main contractor has no right to take shelter under the force majure clause.

But in the absence of any clause forbidding the main contractor to engage a sub contractor the main contractor is entitled to invoke the force majure clause.

It is always not necessary that there should be a specific mention about the sub contractor in the force majure clause. Force majure clauses have to be interpreted liberally in contracts.

If it had been agreed by your company that main contractor can engage sub contractor (either express or implied) the main contractor can invoke the force majure clause in situations of this kind.

R.R. KRISHNAA (Legal Manager) 06 May 2010

The requirements of Force-Majeure are:

(a) It must proceed from a cause not brought about by the defaulting party’s default.
(b) The cause must be inevitable and unforeseeable.
(c) The cause must make execution of the contract wholly impossible.

If your main contractor satisfies the above three ingredients then he is entitled to invoke force majeure clause.

HARIHARAN KRISHNAMURTHY (SR MANAGER Accounts & commercial) 06 May 2010

Thanks for elaborating on that.

1. Are these 3 requirements stated in any law or in any judgement pronounced by any court ?

Also in case if you are having some case laws for this , please refer the same.

Thanks .

Chanchal Nag Chowdhury (Advocate) 10 May 2010

Force Majeure does not apply in this case. The contractor could've changed the supplier. this is no ground to avoid obligations under the contract unless it specified that supply had to be from that particular supplier or that the supplier was the only person manufacturing such goods.

HARIHARAN KRISHNAMURTHY (SR MANAGER Accounts & commercial) 11 May 2010

Dear MR. Chanchal Nag,

Thanks for logging in & posting a reply. Kindly also clarify on the following :

1. The Force majeure clause have to be intrepretted liberally in contracts.

2. Also in case if you have some case laws , kindly provide the links / URL .

Aman (Manager) 01 February 2012

hi,

Does Force Majeure applies when main company fails to pay to Vendor and in absence of sufficient funds its not possible to run operations?

Thanks

Ajay Kumar (Administration) 20 February 2012

Strike in force majeure clause does not include the strike in the premises of the Contractor. It includes only those happenings which are not in the control of Contractor. Since the working in plant is under the direct control of the contractor, Strike can not be covered under this clause.

(Guest)

Dear Hariharan,

You are concerned only with the strike at the contractor's premises by workers, BUT NOT with the strike at sub-cobtractor's premises, unless your contract agreement specifically allows sub-contract by the contractor.