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Impact of Epidemic on Obligations: A Critical Study

Authors: Simran Khurana and Rashi Choudhary, Students, Amity Law School, Amity University, Uttar Pradesh, India

Abstract

The massive outbreak of COVID – 19 has escalated into a worldwide public health catastrophe. Countries across the globe have enforced mass travel bans and strict lockdowns, circumscribing contact between people, owing to which the domestic and transboundary commerce has come to an unaccustomed deadlock. Along with an unprecedented global humanitarian challenge, the crisis has triggered a deep economic depression, resulting in supply chain disruptions, financial pressure, labor shortage and unintentional delay in performance of contractual obligations. Due to the adverse effects of protracted economic restrictions, parties to commercial agreements and legal advisors, both at the national and international levels are reconsidering and evaluating complex contractual arrangements and the applicable statutory and equitable principles of law for seeking suitable rights and obligations, constituting a counter against the fundamental rule of pacta sunt servanda (latin for "agreements must be kept"). The threshold to ascertain the defense of non-performance of contracts successfully is very high, witnessing varied interpretation of clauses, terms, and parameters for discharging the commercial arrangement under the unforeseen circumstances. While appeals pertaining to the law of frustration and invocation of force majeure clauses under the commercial contracts are likely to escalate, such measures will reinforce confidence and protect the interest of parties in times of adversity. Through this Article, the Author attempts to discuss the extent to which contractual performance can either be excused without liability or obligated with the force of law in the context of COVID – 19 break out. The topic is drawn upon doctrinal study by carrying out the analysis of primary and secondary source of data whereby diverse and nuanced approaches for contracts in disputes involving unforeseen events is corroborated along with the enforceability of force majeure provision and the boundaries of the theory of frustration in the light of Indian Contract Act, 1872. It becomes imperative to overview all existing contractual arrangements so that breaches and damages can be administered in time when wheels of production are clogged.


Keywords: Contract, Force majeure, Obligations, Frustration, Non-performance.

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