FREQUENTLY ASKED QUESTIONS

Impact of Covid-19 (coronavirus) on Contractual Obligations and invocation of “Force Majeure”

Frequently Asked Questions

The global financial breakdown due to the outbreak of coronavirus (COVID 19) is unprecedented, to say the least. Most countries have by now adopted strict lockdown measures to prevent the spread of this virus. This deliberate government shutdown has interfered with businesses and is threatening the global economy.

 

Factories, shops, gyms, bars, schools, colleges and restaurants are all closed, resulting in severe economic and financial crisis the world over. The Chinese exchange rate is in fact one of the least affected which has led to many countries scapegoating and blaming China.

 

Given the extraordinary nature of the pandemic-induced crisis, we at Peritia Law Chambers, along with Court Kutchehry, have put together this FAQ on force majeure to help you navigate through these troubled waters. It is likely that performances under many contracts will be delayed, interrupted, or even cancelled. We have explained in this FAQ when force majeure may be invoked, whether doctrine frustration can be invoked and what are the consequences thereof.

 

Please  contact  us  on

office@peritia.in

sanam@peritia.in

dheeraj@peritia.in

in case of any queries or questions.

Q.1      What is “Force Majeure”?

A.1      "Force Majeure" clause is a contractual provision that discharges the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance impossible, inadvisable, commercially impracticable or illegal. Following events may constitute “Force Majeure”:

            a. Act of God i.e. hurricanefloodearthquakevolcanic eruption, etc.;  

            b. Act of man i.e. war, strikeriot, crime, change in legislation making the

               performance illegal;

            c. Other events i.e.  plague or virus, endemics, pandemics.

 

Q.2      When can “Force Majeure” be invoked?

A.2.     The following conditions precedent allow the “affected party” to invoke the force majeure clause:

           a. The event should be unforeseeable, beyond the control of parties and should not

               have arisen due to the act of the contracting parties;

           b. should have arisen either during the performance of the obligation or prior to the

              committed date of performance;

           c. Affected party should have taken all possible steps to mitigate the loss or to avoid

              the force majeure event;

           d. The party invoking the force majeure clause should be ready and willing to

              perform its obligation; and

           e. the force majeure event should be the sole factor restricting the party’s performance

              of obligation.

 

Q.3      Which party can / should invoke the “Force Majeure” clause?

A.3      A party which is otherwise ready and willing to perform its obligation under the contract but owing to the “Force Majeure” event is prevented from performing its obligation under the contract (“affected party”).

 

Q.4      Can financial difficulty in performance of an obligation owing to unforeseeable events entitle the party to invoke “Force Majeure”?

A.4      No. The financial inability to perform the contract shall not excuse the party from performing its obligation and be not covered under force majeure clauses. Changes in the cost or availability of materials, components, resources/services, or changes in market conditions will be specifically excluded from the definition of ‘force majeure event’.

 

Q.5      What steps should the affected party take to invoke the “Force Majeure” clause?

A.5      The affected party must notify the other party at the earliest possible opportunity of the force majeure event and how it is preventing the performance or follow the procedure stipulated in the Contract.

 

Q.6      What are the consequences of invoking the “Force Majeure” clause?

A.6      Invocation of “Force Majeure” clause may result in either of the following:

              a. neither party is liable for a failure to perform its contractual obligations where

                 that failure is caused by the force majeure event i.e. the parties shall be

                 discharged from performing their mutual obligations.

             b. The performance of the obligation by the affected party maybe delayed until

                 the force majeure event is over.

             c. Parties may be required to take steps to mitigate losses arising out of the force

                majeure event.

 

The consequences listed above will depend on the wording and drafting of the contract in each case. Therefore, the affected party or party invoking force majeure clause must understand the consequences of invoking the force majeure clause prior to invoking it.

 

Q.7      Does the “Force Majeure” event specifically need to be mentioned in the Contract?

A.7      Yes. Specific force majeure events have to be explicitly mentioned in the contract for the clause to be invoked.

           

Q.8      What if there is no “Force Majeure” clause in the Agreement or the “Force Majeure” clause in the Contract does not specifically mention the event?

A.8      The absence of a “force majeure” clause in a contract leaves the parties to other legal doctrines such as the “doctrine of frustration” which is far restricted in application in contrast to “force majeure”. The “doctrine of frustration” is governed by Section 56 of the Indian Contract Act.

Q.9      What is the affected party expected to prove in case the other party initiates litigation even after the affected party invokes the “Force Majeure” clause?

A.9      The affected party would be required to prove the following:

              a. the “Force Majeure” event is covered by the “Force Majeure” clause in the

                 Contract;

              b. there should be a causal link between the “Force Majeure” event and the non

                 performance i.e. the affected party was otherwise ready and willing to perform

                 its obligation;

             c. affected party took all necessary steps to mitigate the losses and to avoid “Force

                Majeure” event;

             d. the performance of the obligation was not only financially onerous but

                impossible.

Q.10    What is “Frustration” of Contract?

A.10    A contract is frustrated when, subsequent to its formation, and without fault of either party, the performance of the party becomes impossible or the performance of the contract itself is incapable of being performed due to an unforeseen event (or events), resulting in the obligations under the contract being radically different from those contemplated by the parties to the contract. Frustration of contract results in involuntary extinction of the contractual obligations of both parties and consequently, the parties are relieved from their rights and liabilities.

@@@@@@@@@@@@@@@@@@@@@@@@@@@@

Is a lawyer really necessary?

It is always a personal choice whether to get the assistance of a lawyer or to handle the case on your own. This is a personal choice that only you can make. You should consider the seriousness of the case  and whether you can successfully handle the case. We are here to help, so email us at peritia@peritia.in and get a free consultation to see if you need our assistance.

 

What types of cases does your firm work on?

Please see the Practice Area Section.

 

Do I have to start litigation immediately?
Statistically, a lot of our cases do not go to trial. Most cases can be settled prior to litigation. However, we prepare every case as though we are going to litigate, which allows us to protect your interests while at the same time maximizing the recovery possible.


How much does your law firm cost?

Our fees vary on a case-by-case basis and depend on a variety of factors, including the type of case, and whether strategic litigation is required. 

If you have any more questions please contact Peritia Law Chambers today. We can provide you with correct, credible and insightful information. Peritia Law Chambers offers free consultations and case evaluations during which you will receive specific information regarding your matter. Please contact us today to find out how we can help you by email at peritia@peritia.in.

 

How will I know which lawyer in Peritia Law Chambers is best for me?

Our leadership team at Peritia Law Chambers will determine which lawyer can best represent you in handling your case. It may not be possible, or advantageous, to have one lawyer handle all of your legal matters. One lawyer will be responsible for the overall progress of the case, but from time to time, another may perform certain duties within the case itself. Please do not be concerned if your case is handled by a different lawyer within our firm, as ‘your lawyer’ will still be Peritia Law Chambers. This is merely another sign to you that we are doing our best to handle your case as professionally and efficiently as possible.

 

How will I be kept informed of my case?

We understand the importance of communication and transparency between attorney and client.  Although we would like to talk to you weekly by telephone, that would be neither practical nor productive.  Legal matters have a way of stretching out over long periods of time.  To you, it may often seem like ages have gone by without activity, however, in fact, much behind-the-scenes work is being completed so that on the day your matter is ready, nothing will be overlooked.  In order to keep the cost of legal services down while maximizing communications, we will strive to keep you informed when anything important happens and to respond to your questions in a reasonable time. In addition, we will inform you when your presence is required, either in our office or in court.

What do I get for the fee?

Simply stated, you will receive superior service through careful consideration, confident counsel and unprecedented knowledge that is both efficient and effective.

What do I do when I have a question?

We are interested in your questions and we want you to ask them. Sometimes we are required to be out of the office, even for days at a time. When in the office, we meet with clients, complete research, review documents, prepare contracts, briefs and pleadings. For the most efficient and quickest response please email peritia@peritia.in and we will reply or call you back as soon as possible. In case you need to get in touch via telephone our Legal assistant will call you back. Our legal assistant has a working knowledge of all aspects of your case. If he/she cannot answer your question, every attempt will be made get the answer for you, or arrange to have your lawyer contact you as quickly as possible. Above all, drop us a mail so we know your concern in advance. If you do that, we will always try to get an answer back to you even if your lawyer is out of the office when you call.

 

 

What will the legal service cost?

You are entitled to know, to the extent that we can reasonably inform you at your first visit, what your fee will be.  We encourage a frank, open discussion about our fees with each client at the time of the first interview.

Lawyers are paid under various fee arrangements.

Hourly fee:
On an hourly fee basis, fees are based on an hourly rate for services rendered.  A detailed, itemized bill will be given to you showing all work done on your case.  This explanation may come monthly or at the end of your case, whichever way you choose to be billed.  Unless otherwise agreed, the hourly fee basis will be the presumed fee arrangement.

Flat fee:
On a flat fee basis, your legal fee is a stated sum for agreed upon services.  

Other potential fees:
An advance payment will often be required in order to begin to process your matter and you will be kept advised as to how that advance is being used.  Bills will be sent to you periodically showing your charges and payments.

 

Certain cases may have a minimum fee.  This means that no hourly accounting will be made unless excess time is expended.

 

We try to keep legal fees as reasonable as possible.  The amount of services required, however, is not fully within our control.  We discuss with our client options for services and the benefits of services.  Sometimes, however, services are directly related to an opposing party’s action or inaction.  Please feel free to discuss fees with your lawyer.

 

What about litigation costs or out-of-pocket expenses?

In addition to legal fees, there are various expenses that must be paid to others in order to prepare your legal matter. For example, payments must be made to obtain necessary reports or copies of necessary documents, to get certified copies of documents from Courts, to obtain licenses or permits from governmental authorities, to file suits in courts of law, in addition to other outside entities that are necessary to help your cause. Generally, the amounts of these charges will be in direct proportion to the complexity of the matter involved. The easier your matter is to solve, the less these costs will ordinarily be.

At the start of your legal matter, we will try to estimate for you the amount of out-of-pocket expenses which may be incurred on your behalf. We will discuss with you whether or when you will be required to reimburse us for these expenditures which are made on your behalf to further your legal cause.

 

What do I do if I have a legal question on a different matter than any pending case?

A phone call to our office will direct you to the person who can best answer your question. Remember, no questions as to your rights, duties or obligations should go unanswered because you did not know which lawyer to call. Fees for these different matters will be charged in accordance with our regular practice. 

What are your office hours?

All office visits are by appointment only. We encourage each of our clients to schedule meetings with us during regular business hours. From time to time you may request that we meet you in the evening if the matter cannot wait. While we do not encourage these “special visits,” we may arrange them where necessary. If we must meet with you in the evening, we must reserve the right to add a surcharge to our regular fee for the appointment. You will be advised, in advance, of the decision concerning the surcharge. Since “special visits” may be expensive, please avoid them wherever possible. 

 

What information do you need from me in order to get started?

It is best to file a lawsuit as quickly as possible, so please bring all records, bills, email information and any other relevant documents regarding your case to your initial consultation.