Force Majeure Clauses in Indian Law: Their Relationship with Section 32 and Section 56 of the Indian Contract Act, 1872, Drafting and Construction, and Force Majeure Compared with Frustration

Force majeure is not a doctrine of Indian law. It is a contractual term, and its effect depends entirely on what the clause says and on how the court construes it. That is the single most important thing about the subject, because it determines the order in which the questions must be asked. A court faced with a claim that an event has excused performance first construes the clause; only if the clause does not cover the event does it turn to Section 56. Where the clause does cover it, the contract is a contingent contract under Section 32 and the general law of frustration never enters the case.

Construe the clause first; Section 56 applies only where no clause does

1. What a Force Majeure Clause Is

A force majeure clause is a provision by which the parties themselves allocate the risk of specified events that may interfere with performance. It ordinarily has four components, and each is negotiated.

The trigger. A definition of the qualifying events, either by an exhaustive list, by a general formula, or by a list followed by a sweeping-up phrase such as any other event beyond the reasonable control of the parties.
The causal requirement. Words describing the required connection between the event and the failure, ranging from prevented through hindered to delayed, each of which sets a different threshold.
The procedural conditions. Requirements of notice within a stated period, of evidence, and of mitigation, which are frequently made conditions of relief.
The consequence. Suspension of obligations for the duration, extension of time, an allocation of cost, or a right to terminate if the event continues beyond a stated period.

2. The Statutory Setting

Sections 32 and 56, Indian Contract Act, 1872, in substance

32. Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.

56, second paragraph. A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, becomes unlawful, becomes void when the act becomes impossible or unlawful.

A force majeure clause makes the parties' obligations depend on an event collateral to the contract, which is the definition of a contingent contract in Section 31. The consequences the clause prescribes therefore operate as the parties agreed, under Section 32, and the court's task is one of construction rather than of applying a general doctrine.

3. The Order of Inquiry

📖 Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80

Facts: Generators supplying power under long-term power purchase agreements at tariffs fixed by competitive bidding faced a steep increase in the price of imported Indonesian coal following a change in Indonesian law. They sought relief under the force majeure clauses in the agreements and, in the alternative, under Section 56. Clause 12.4 of the agreements expressly provided that a rise in fuel cost would not constitute force majeure.

Held: The Supreme Court refused relief and laid down the order of inquiry. Where a contract contains a force majeure clause which, on its true construction, applies to the event, the matter is governed by that clause and Section 56 has no application, the case being one of a contingent contract under Section 32. Where the clause does not apply, the general law in Section 56 may be invoked. On the facts the clause expressly excluded a rise in fuel cost, the parties having allocated that risk, and in any event an alternative mode of performance remained available albeit a more expensive one, so there was no frustration.

Ratio: The force majeure clause is construed first. If it covers the event, it governs and Section 56 is not reached. Commercial hardship is not frustration, and an express exclusion in the clause allocates the risk conclusively.

4. Construction of the Clause

Because everything depends on the words, the construction of force majeure clauses has produced a body of recurring principles.

The clause is construed strictly, and the party relying on it bears the burden of bringing himself within it.
A sweeping-up phrase is read ejusdem generis with the listed events where the list discloses a genus, so that a general phrase following specific instances is confined to events of the same kind.
The causal word matters. A clause requiring performance to be prevented sets a higher threshold than one requiring it to be hindered or delayed, and a party whose performance has merely become more expensive has not been prevented.
Notice provisions are frequently conditions precedent to relief, and a failure to give notice within the stated period may defeat an otherwise good claim.
An express exclusion is conclusive. Where the clause says that a particular event, such as a change in price, shall not constitute force majeure, the parties have allocated that risk and the court will not redistribute it.
The clause must be read with the contract as a whole, including price variation, change in law and indemnity provisions, which may show where the parties intended a particular risk to fall.

📖 South East Asia Marine Engineering and Constructions Ltd. v. Oil India Ltd., (2020) 5 SCC 164

Facts: A contractor engaged in well drilling operations claimed reimbursement of the increased cost of high speed diesel, an essential input, following a price increase effected by a Government circular. It relied on a change in law clause providing for reimbursement where a change in, or enactment of, any law or interpretation of existing law resulted in additional cost. An arbitral tribunal held by majority that the circular had the force of law and allowed the claim; the High Court set the award aside.

Held: The Supreme Court upheld the setting aside of the award. The interpretation placed on the clause by the tribunal was not a possible one on a reading of the contract as a whole. The Court observed that the consequences of a force majeure event are, under Indian law, provided for in Section 56 where the parties have made no provision, and that the effect of frustration is to discharge the parties from future obligations. Here the parties had, in their commercial wisdom, chosen to mitigate certain risks through the clause, and that clause on its terms did not extend to a price increase, so the risk remained where it fell.

Ratio: A force majeure or change in law clause is construed on the contract as a whole, and a strained interpretation that the words cannot bear will not be upheld. Where the parties have expressly allocated some risks and the clause does not cover the event, the risk lies where the contract leaves it.

5. Force Majeure and Frustration Compared

Point of difference	Force majeure	Frustration under Section 56
Source	The contract. It is a term the parties chose to include	The statute. It applies by operation of law whether or not the parties addressed the event
Which events are covered	Those the clause describes, and only those	Any event that makes performance impossible or unlawful and destroys the foundation of the contract
Threshold	As the clause fixes it: prevented, hindered or delayed	The foundation of the bargain must be destroyed; impracticability in that sense, not mere difficulty
Effect	As the clause provides: suspension, extension of time, cost allocation, or a right to terminate	The contract becomes void and both parties are discharged from future obligations
Partial or temporary relief	Available if the clause so provides, and suspension for the duration is the usual consequence	Not available. Section 56 operates on the whole contract and produces voidness, not suspension
Procedural conditions	Notice, evidence and mitigation requirements may be conditions of relief	None. The discharge operates automatically
Consequences for money already paid	As the clause provides	Section 65 requires restoration of any advantage received
Order of application	Considered first	Reached only if the clause does not cover the event

⚠ A force majeure clause can be narrower as well as wider than Section 56

It is natural to assume that a force majeure clause always improves a party's position, and it often does not. The clause may be wider than the general law, covering delay and hindrance that would never amount to frustration, and giving suspension rather than discharge. But it may equally be narrower: where the parties have listed the qualifying events and the event that occurs is outside the list, the inference in Energy Watchdog and SEAMEC is that they allocated that risk deliberately, and the party affected cannot fall back on Section 56 to escape the allocation he agreed to. A badly drafted clause can therefore leave a party worse off than no clause at all.

6. Practical Points

Identify the clause first and plead it first. A claim framed under Section 56 where a force majeure clause exists invites the answer that the clause governs.
Check the causal threshold. Prevented, hindered and delayed are different words with different consequences, and the pleading must match the word used.
Comply with the notice requirement exactly, and within the period stated, since it is commonly a condition of relief.
Establish causation. The event must have caused the failure. A party who would have failed anyway cannot rely on the clause.
Show mitigation. Most clauses require reasonable steps to overcome or minimise the effect, and the closing paragraph of Section 73 points the same way for damages.
Consider whether an alternative mode of performance remained available, since Energy Watchdog treats the availability of a more expensive alternative as fatal to a plea of frustration.
Distinguish price and cost risk from performance risk. Clauses dealing with change in law, price variation and escalation allocate cost, and a party cannot convert a cost problem into a force majeure event.

7. The Position Stated Shortly

Force majeure is a contractual term and not a doctrine of Indian law; its effect depends on construction.
Where a clause covers the event, the contract operates as a contingent contract under Section 32 and Section 56 has no application.
Energy Watchdog lays down the order of inquiry: construe the clause first, and turn to Section 56 only if it does not apply.
An express exclusion in the clause allocates the risk conclusively, as the exclusion of fuel price rises did in Energy Watchdog.
SEAMEC: a change in law clause is construed on the contract as a whole, and a strained interpretation the words cannot bear will not stand.
The clause is construed strictly, a sweeping-up phrase is read ejusdem generis, and the causal word fixes the threshold.
Notice requirements are frequently conditions precedent to relief.
Force majeure may give suspension, extension or termination; frustration gives only voidness and discharge, with restitution under Section 65.
A narrow clause can leave a party worse off than the general law, because the events left out are taken to have been allocated deliberately.

8. Related Topics and Provisions

Topic or provision	Connection
Doctrine of Frustration under Section 56	The general law that applies where no clause does
Contingent Contracts under Sections 31 to 36	The provisions under which a force majeure clause operates
Contingent Contract vs Absolute Contract	Risk allocation and why parties draft such clauses
Principle of Sanctity of Contract	Why the parties' own allocation of risk is enforced as made
Section 32, Indian Contract Act	Enforcement of contingent contracts
Section 56, Indian Contract Act	Supervening impossibility and unlawfulness
Section 65, Indian Contract Act	Restoration where a contract becomes void
Section 73, Indian Contract Act	Mitigation and the measure of compensation
Section 34, Arbitration and Conciliation Act, 1996	Setting aside an award based on an impossible construction of the clause