Force Majeure

Dr. Yuvraj Dilip Patil

Associate Professor
NICMAR Pune

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 Introduction

• Standard clause found in construction and supply contracts,

it exempts the contracting parties from fulfilling their
contractual obligations for causes that could not be
anticipated and/or are beyond their control.

• These causes usually include act of God, act of man, act of

parliament, and other impersonal events or occurrences.

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 Meaning
Force Majeure-

• It is latin term means- "superior force“

• unforeseeable circumstances that prevent someone from

fulfilling a contract.

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 Indian Law

• Section 56 of the Indian Contract Act, 1872 stipulates:

"Agreement to do impossible act:

An agreement to do an act impossible in itself is void.”

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 Case Law

McNair, J. in British Industries v. Patley Pressings,

[1920] 2 K.B. 714.

There, the expression used was "subject to force majeure conditions

". The learned Judge held that by conditions " was meant. clauses and

not contingencies or circumstances, and that there being a variety

of force majeure clauses in the trade.

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 Conclusion

• The purpose behind inserting such clauses is to save the performing

party from the consequences of anything over which the party has
no control.

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 Contract of Indemnity
• Introduction
As a legal concept, it has a more specific meaning.

For instance, compensation connotes merely a sum paid to make good

the loss of another without regard to the payer's identity, or their reasons
for doing so.

Indemnity clauses are debated deeply and focused upon during negotia
tion of commercial contracts.

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 Indian Laws
• Sec 124 of the Indian Contract Act
1. A Contract of indemnity is a contract
2. One party promises the other
3. Promise relate to save the other party from the loss caused to him
4. Loss caused may be by the-
a) Conduct of the promisor himself
b) Conduct of any other person

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 Conclusion
• Indemnity is a legal exemption from the penalties or liabilities

incurred by any course of action.

• An insurance payout is often called an in indemnity, or it can be in

surance to avoid any expenses in case of a lawsuit. Indemnification

is a promise, usually as contract provision, protecting one party

from financial loss.

• This is something stated as a requirement that one party hold harml

ess the other. @Dr. Yuvraj Dilip Patil

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Damages

• Damages, in simple terms, refer to a form of compensation due

to a breach, loss or injury.

• Damages have gained much significance especially among

commercial transactions. And as punitive measures for violation
of rights concerned persons.

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Indian Law • Section 73 of the Contract Act is lays down the provision relating
to damages. It provides that the party, who breaches a contract, is
liable to compensate the injured party for any loss or damage caused,
due to the breach of contract. For compensation to be payable, Two
things should be taken into consideration

(i) The loss or damage should have arisen as a natural consequence of

the breach, or

(ii) It should have been something the parties could have reasonably
expected to arise from a breach of the contract.

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Case Laws

• In Sitaram Bindraban vs. Chiranjanlal Brijlalit was held

that the parties to a contract can create, for themselves,
special rights and obligations such as providing for
themselves the measure of damages for breach.

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Liquidated Damages
• liquidated damages are a genuine, covenanted pre-estimate of damages as seen

• Section 74 of the Indian Contract Act reads as follows:-

• “When a contract has been broken, if a sum is named in the contract as the
amount to be paid in case of such breach, or if the contract contains any other
stipulation by way of penalty, the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have been caused thereby,
to receive from the party who has broken the contract reasonable compensation
not exceeding the amount so named or, as the case may be, the penalty stipulated
for.”

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Conclusion

• The purpose of such clauses is to promote certainty, especially

in commercial contracts.

• Parties to a contract would fix such a sum in advance at the

time of making the contract because it facilitates calculation of
risks; it reduces the difficulty and expense of proving actual
damage or loss and facilitates recovery of damages.

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