In wake of Wuhan Virus Government of India notified following Office Memorandum.

No. F. 18/4/2020-PPD
Government of India
Ministry of Finance
Department of Expenditure
Procurement Policy Division
Subject: Force Majeure Clause (FMC)

Attention is invited to para 9.7.7 of the “Manual for Procurement of Goods, 2017” issued by this Department, which is reproduced as under:

A Force Majeure (FM) means extraordinary events or circumstance beyond human control such as an event described as an act of God (like a natural calamity) or events such as a war, strike, riots, crimes (but not including negligence or wrong-doing, predictable/ seasonal rain and any other events specifically excluded in the clause). An FM clause in the contract frees both parties from contractual liability or obligation when prevented by such events from fulfilling their obligations under the contract. An FM clause does not excuse a party’s non-performance entirely, but only suspends it for the duration of the FM. The firm has to give notice of FM as soon as it occurs and it cannot be claimed ex-post facto. There may be a FM situation affecting the purchase organisation only. In such a situation, the purchase organisation is to communicate with the supplier along similar lines as above for further necessary action. If the performance in whole or in part or any obligation under this contract is prevented or delayed by any reason of FM for a period exceeding 90 (Ninety) days, either patty may at its option terminate the contract without any financial repercussion on either side.

  1. A doubt has arisen if the disruption of the supply chains due to spread of corona virus in China or any other country will be covered in the Force Majeure Clause (FMC). In this regard it is clarified that it should be considered as a case of natural calamity and FMC may be invoked, wherever considered appropriate, following the due procedure as above.
(Kotluru Narayan eddy)
Deputy Secretary to the Govt. of India

ANALYSIS OF CLAUSE IN THE ABOVE MEMORANDUM AND COMMENTARY:

Above Memorandum came in wake of Lockdown of country due to COVID19. Which is known as Chinese Virus.

Above Notification is unique in nature includes natural calamity and war , but not include negligence or wrong doing.

Law- Contract Act,1872

  1. Agreement to do impossible act.—An agreement to do an act impossible in itself is void.

Contract to do an act afterwards becoming impossible or unlawful.—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, unlawful, becomes void when the act becomes impossible or unlawful.  Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

WHAT IS FORCE MAJURE

       FORCE MAJURE During the pendency of the contract/ purchase order if the performance in whole/ part by either party or any obligation thereunder is prevented/delayed by causes arising out of any war, hostility, Civil Commotion, act of the public enemy, sabotage, fire floods, explosions epidemics or non-availability of Govt. Controlled raw material under orders/ instructions of Central/State Government regulations, strikes, lockout embargo, acts of Civil/Military Authorities of any other causes beyond their reasonable control, neither of the two parties shall be made liable of losses or damages due to delay or failure to perform the contract during the currency of Force Majeure conditions, provided that the happening is notified in writing with documentary proof within 30 days from the date of the occurrence.

Cause of Action: Wuhan Virus – COVID19

The first report of a previously-unknown virus came into light in Wuhan, a city in Eastern China with a population of over 11 million in December 2019. It has affected only one city Wuhan and rest of China is unaffected by Virus. This Virus has created threat to existence of mankind especially Western World of globe. Economic slump down will follow. WHO has now named this Virus as #COVID19

Today world is facing Lock Down situation in wake of #COVID19 Virus. Lakhs are affected and died of Virus infection. People are worried of their existence. Its situation of World War-3

Now above clause is doubtful that it would help international contracts. Because as claimed by China its not War and it also pleads there is no negligence.

The Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on their Destruction entered into force on 26 March 1975, after its ratification by twenty-two Governments, including the three depository Governments, pursuant to its article XIV.

China is one of the signatory to this convention which is dated 15th November,1984.

Now it is matter of evidence and discussion at UNSC on this issue whether it is Bio-Warfare and China has violated above Treaty, or it was accidental. China has blocked discussion using VETO power discussion on this issue of #COVID19

In view of this situation the above clause needs addendum by inserting word Quarantine, epidemic, diseases, Bio-war, or accidental release of virus. Otherwise above Memorandum will not serve its purpose.

Shruti Desai

29th March,2020

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