Force majeure could be the way out from coronavirus fallout

The whole world is currently in a war against the novel coronavirus, a potential threat to a stable and growing economy. The havoc wreaked by the virus has pushed people to go into quarantine and contact by and large with the outside world is at standstill.  Many people are without work and the country has experienced a closure of offices, businesses and development work for nearly three months. This essay on force majeure is intended to identify the ways in how to get out of this crisis by quickly cleaning up the stains and repairing damages to our economy and life. Before we deal with it, it is better to determine the primary domain of this essay.

Here we will address questions like: what is force majeure and why is this provision necessary in an agreement? Can force majeure be applied even if it is not mentioned in an agreement? Can we provide immunity to parties to the causes arising out of an ongoing pandemic? Can the parties, irrespective of their origin, be treated on the basis of equality? Can we attempt to find an acceptable solution for quick resumption of stalled work or supply of goods and services creating win-win situation for parties concerned? As opposed to the idea of supervening impossibilities, will the provisions of the Contract Act, 1872 help resolve force majeure during this difficult time of pandemic? We will attempt to answer these questions and more in the following paragraphs.

To being with, the roles, responsibilities and obligations of the parties which are clearly mentioned in a contract are determined through numerous discussions and negotiations. But force majeure takes its place in an agreement in general terms as a separate provision because it broadly means an 'Act of God' such as flood, hurricane, tornado, earthquake or any other events or incidents not limited but including natural calamities which are beyond the control of human beings. These are uncertain, not foreseeable and irresistible within the might of human capacity. Therefore, force majeure makes its room in an agreement to provide relief and recourse to parties to the agreement.

In order to avoid the uncertainties involved in finding a resolution, parties to agreements often prefer to provide a specific reason for force majeure along with a definition of which events shall qualify for special treatment within its purview. As the provision excuses a party from carrying out its obligations, it needs to be thought through and customised for the project in question. Care should be taken to ensure that force majeure events only relieve obligations to the extent that they prevent the party from performing them.

Force majeure as outlined above may assist the parties who are aware of it, they may take initiatives to resolve the stalemate by invoking the provision of force majeure, enjoying immunities for non-performance.

Parties to the agreement may resolve it by their conscience as the resolution of any unforeseen situation which stands on the way of fulfilment of the responsibilities of the parties, because reaching to the finality following lawful means is the first option as it can provide benefits to the parties minimising the damages. It provides the scope of application of the principle of force majeure even if it is not mentioned in an agreement.

The situation which has arisen out of this pandemic was never thought of by any human being; therefore, the parties to an agreement have no role in its aggressive presence or to its unknown disappearance if it happens by miracle. In this context, the parties for their failure of performance during the presence of current pandemic, without cavil be treated as immune and keeping this in mind, the parties, mediators if appointed by the parties must not spend time as to the causes but to look forward as to resolution providing relief to the parties irrespective of their origin i.e. foreign or national, contractor or subcontractor, etc.

Because a party to an agreement cannot enjoy an edge unless the other party knowingly agrees to it. Therefore, the standard is set to govern the provisions of an agreement reflecting equity and reciprocity, providing opportunities proportionate to the role and responsibilities of parties. The principle of equity shall be adhered to and damages caused will be shared between parties.

The pandemic has caused disruption and suspension of almost all work putting parties to the side lines and they have no other choice but to play the role of onlookers in most cases.

A committee at the national level with proper people and terms of reference can be formed so that it can find out generally acceptable terms and conditions for quick resumption of stalled performances irrespective of nature and volume of the work. The committee may work out recommendations sharing the issues with different stakeholders. Once the committee finishes its task, the government may act on it and finalise the recommendations into decisions. This shall help to set out a common feature and standard as to quick amicable resolution and resumption of works.

The Contract Act, 1872 provides how the parties may reach to an agreement and contract, finalising a deal on any subject but it does not contain any provision on force majeure.

It is interesting to read some of the pieces on force majeure being published in esteemed newspapers these days where the theory of supervening impossibility as enumerated in section 56 of the Contract Act is mixed up. Perhaps, appreciation of both the ideas are not done applying legal mind. If we read section 56 of the Act carefully, it transpires that if parties agree to do something which is impossible, it is void. Secondly, performance becomes uncertain in future also falls within the sphere of this section.

The differences between force majeure and theory of frustration or supervening impossibility are simple.  Frustration or supervening impossibility discharges all parties from any further performance of their obligations under an agreement but force majeure provides recourse and relief as soon as the grounds of disruption of works are over and force majeure is flexible but frustration or supervening impossibilities are not. The flexibility of force majeure needs to be further explained by an example so that parties to the agreements may find some way out of the situation created by the pandemic Covid-19. For example, suspension of Metro Rail project work at present may resume anytime as soon as either the restrictions are relaxed or normalcy of life returns. Therefore, force majeure remains outside the purview of section 56 of the Contract Act, 1872.

The stalemate that has been created by the pandemic is all pervasive and it has shaken life and livelihood, both. As of today, in absence of any vaccine to prevent the spread of the virus, precautions to reduce the threat to life and ensuring livelihoods especially of the marginalised segments of society are of paramount importance. In this backdrop, we should be careful to find out amicable settlement in between parties applying common formula to be worked out by the aforesaid committee or otherwise. With the easing of lockdown, relaxing of restrictions to movement within Bangladesh and beyond, both public and private entrepreneurs should start the process of negotiation finding amicable settlement to ensure resumption of work without further delay to mitigate the losses caused by the pandemic.

The writers are Former Senior Secretary of Legislative & Parliamentary Affairs Division, Ministry of Law, Justice and Parliamentary Affairs, and Former Principal Coordinator (SDGs) & Former Principal Secretary to the Prime Minister, respectively.