1.

TOP VEG IS EXEMPTED OF ITS CONTRACTUAL OBLIGATIONS DUE TO

THE COVID-19 PANDEMIC.

It is humbly submitted that given the supply chain disruption caused by the COVID-19
pandemic, it is likely that performances under many contracts will be delayed, interrupted, or
even cancelled. Suppliers to such contracts may seek to delay and/or avoid performance (or
non-performance liability) of their contractual obligations because COVID-19 has legitimately
prevented them from performing their contractual obligations, or because they are seeking to
use it as an excuse to extricate themselves from an unfavourable deal.

In light of the same, companies may not be able to perform their obligations under their
customer agreements because of their suppliers’ non-performance and may in turn seek to delay
and/or avoid performance (or liability for non-performance) of their contractual obligations. In
this context, it is important to determine if COVID-19 will be considered as a ‘force majeure’
event.

1.1. The failure to deliver meals to OLDIES’ HAVEN is not a breach of its contractual
obligations.

The law relating to Force Majeure is embodied under Sections 32 and 56 of the Indian Contract
Act, 1872.1 It is a contractual provision agreed upon between parties. The occurrence of a force
majeure event protects a party from liability for its failure to perform a contractual obligation.
Typically, force majeure events include an Act of God or natural disasters, war or war-like
situations, labour unrest or strikes, epidemics, pandemics, etc. The intention of a force majeure
clause is to save the performing party from consequences of something over which it has no
control. Force Majeure is an exception to what would otherwise amount to a breach of contract.
Whether a contractual obligation can be avoided on the grounds of force majeure is a factual
determination based on the specific terms of the contract. The courts would examine, whether
in each case, impact of COVID-19 pandemic prevented the party from performing its
contractual obligation. Indian courts have generally recognised this concept and have enforced
it where appropriate.2 The law in India has been laid down in the seminal decision of the
Supreme Court in the case of.

1
Indian Contract Act, 1872.
2
Satyabrata Ghose vs Mugneeram Bangur & Co. (AIR 1954 SC 44).
Force majeure related language used in most contracts vary widely and, therefore, it is
important to review these clauses carefully. Some contracts list specific examples of force
majeure events that automatically meet the standard upon the happening of such event, while
others rely on generic language usually included in such force majeure clauses.3

1.1.1. Force Majeure clause can be successfully invoked in light of COVID-19 being
declared as a pandemic.

A COVID-19 pandemic could make it more difficult for parties to perform their contractual
obligations. There are two possible instances, which may suggest that a force majeure clause
covers a pandemic: (a) if the contractual definition of a force majeure event expressly includes
a pandemic. Inclusion of pandemic to the list of force majeure events will provide clarity as to
whether COVID-19 outbreak would trigger a force majeure clause in a contract; or (b) if the
force majeure clause covers extraordinary events or circumstances beyond the reasonable
control of the parties. Such general, catch-all wording may be invoked if it is determined that
the factual circumstances caused by the pandemic are beyond reasonable control of the affected
party. Having said that, whether a party can be excused from a contract on account of COVID-
19 being declared a pandemic is a fact-specific determination that will depend on the nature of
the party’s obligations and the specific terms of the contract.

In India, the Department of Expenditure, Procurement Policy Division, Ministry of Finance

issued an Office Memorandum on February 19, 2020, in relation to the Government’s ‘Manual
for Procurement of Goods, 2017’, which serves as a guideline for procurement by the
Government. The Office Memorandum effectively states that the COVID-19 outbreak could
be covered by a force majeure clause on the basis that it is a ‘natural calamity’, caveating that
‘due procedure’ should be followed by any Government department seeking to invoke it.

1.2. Arguendo the contract does not have a force majeure clause TOP VEG cannot be
legally held liable.

If the contract does not include a force majeure clause, the affected party could claim relief
under the doctrine of frustration under Section 56 of the Indian Contract Act, 1872. However,
in order to claim that the contract is frustrated, it must be established that the performance of
the contractual obligations has become impossible by reason of some event which the claiming

3
Justice R.F. Nariman, Energy Watchdog vs CERC (2017) 14 SCC 80
party could not prevent and that the impossibility is not self-induced by the claiming party or
due to his negligence.

1.3. TOP VEG does not have the duty to mitigate.

The party claiming force majeure is usually under a duty to show that it has taken all reasonable
endeavours to avoid or mitigate the event and its effects. This is a subjective standard and will
be interpreted on a case-to-case basis. The force majeure event or circumstance must be
causative to the contractual breach and a party claiming force majeure is typically required to
establish that it was the force majeure event (and not some other factor) that caused the party
to be unable to fulfil its contractual obligations.