Anoushka Dey, Amity Law School, Amity University, Noida
Abstract
In this era of globalisation, privatization and liberalization, the global economy always seems to be booming. Increased industrial production and effective supply chains have drastically increased business and trade all over the world. People everywhere are entering into contracts for various purposes. These contracts provide for the ideal business transactions. They specify terms and conditions according to which both parties are obliged to perform and have legal consequences in case of breach of contract. Nobody wants to tarnish their business reputation and hence, maintain firm due diligence to fulfill their contractual obligations. But execution of such contracts is not always plain sailing. Such contractual obligations may get hindered due to several unseen circumstances beyond the control of the parties. In such situations, it is necessary to pay heed to two principles of a contract – Pacta Sunt Servanda and Rebus Sic Stantibus. Both these principles talk about how it is necessary to stick to the terms and conditions of a contract and how once the basic aim of such a contract is destroyed owing to uncertain future events, the better option is discharge of such contract. These principles are fundamental in understanding the application of force majeure and Frustration of contract. Courts have further claimed that the word "impossible" under Section 56 does not mean literal impossibility. It rather extends to mean that the contract has now become impractical and useless from the parties’ point of view.
Keywords: Force majeure, inability, contractual obligations, unpredictable circumstances, impossibility, Indian contract law, performance.
