Life Insurance Council: “Force Majeure” does not apply for COVID-19 cases

On April 6, 2020, the Life Insurance council announced that the “Force Majeure” clause will apply to COVID-19 deaths. Apart from the council, Kolkata Port Trust has also invoked force majeure.

What is force Majeure?

Force Majeure clause was introduced for unforeseen circumstances. This includes natural disasters, accidents, epidemics, pandemics.

Legislation

Force Majeure is a French phrase. It is embodied under Indian Contract Act, 1972 under Sections 32 and Sections 56.

What is the issue?

A force majeure in a contract can now be used to argue that the contract cannot be completed in time due to the spread of COVID-19. This will give rise to financial losses as projects will be delayed legally, some projects might end up in disputes. Bottom line, if a contractor has used the force majeure clause, he might use the clause in his favour citing COVID-19 an excuse. This will end up financial losses.

On the other hand, if the contract does not have a Force Majeure clause, the affected party may claim relief under Section 56 of Indian Contract Act. Therefore, many companies are cancelling Force Majeure in COVID-19 cases.

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