Tag: Contracts

FORCE MAJEURE: THE HELL OR WATER HIGH CLAUSE

  • Old wives’ tales have it that in the event Hell falls or water rises, you must do you job, no matter what. If you are a party to a contract where the performance of which was interrupted because of the outbreak of the virus— you ought to pull that contract out and look for that section of your contract that talks about whether you can be excused for not doing your work during the lockdown . Although not headed as such, the fancy name the legal industry is asking you to take a peak is the clause of ‘force majeure’.

How do you recognise a force majeure clause?

  • History states that the phrase was conceived to mean: an unforeseen or foreseen but inevitable or irresistible event external to the obligor which makes it impossible for him to perform the obligation concerned. In other words, if you cannot perform the contract because of a war, epidemic or harsh storm, then you cannot be held responsible for not doing your part. This will vary slightly depending on the area you’re staying, do check up with the local rules that are applicable in your state, but broadly, if the following parameters are satisfied, then force majeure may apply:

    • If the event is beyond the control either of the parties; is not self-induced;

    • The nature of the event must be unforeseen or foreseen but inevitable or irresistible;

    • The event must make it impossible for the performance of the obligation

  • Here, the underlying principle is that possibility is the limit of all obligations (ad impossibilia nemo tenetu). That is to say, you are not expected to perform the impossible. As such, you must be in a position to show that because of the occurrence or non-occurrence of the event, you could not discharge your duties under the contract. Here, it is pertinent to take note of the fact that impossibility of discharging your obligations is synonymous to impracticality of discharging them. Moreover, the partially paralysing event should not just be external, but should not be attributable to either of the parties. To gauge a general idea of the type of events that usually render a contract non-feasible, see: https://ppp.worldbank.org/public-private-partnership/ppp-overview/practical-tools/checklists-and-risk-matrices/force-majeure-checklist/sample-clauses.

Law 101

  • The phrase force majeure owes its roots to the Civil Law System. Insofar as judicial interpretation is concerned, the axiom is that the clause must be construed with each case with a close attention to the words precede and follow it, and in regards to the nature and general terms of the contract. This means that obligors are exonerated only on a case to case basis. For all those who think you can hold those slackers who’ve refused to work during the lockdown, be wary of the fact that The Court will oscillate in the direction of saving the performing party from consequences he has no control of.
  • As far as case precedent on this aspect is concerned, the popularly referenced case is Taylor v Cadwell.[1] In 1861, the claimant hired a music hall in Surrey for holding four grand concerts. However, a week before the first concert was due to take place, the music hall was destroyed by an accidental fire. Consequentially, the claimant bought an action for breach of contract for failing to provide the hall; sought damages for the expenses incurred. On the 6th of May 1863, The Court held that in contracts where the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance. In this regard, The Court observed that this contract merely contemplates the performance of the obligation and not the excuse of performance in case of destruction of the person or the thing; here it is pertinent to note that the excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the Music Hall.
  • Thus, having ceased to exist, without fault of either party, both parties were excused I.e. the plaintiffs from taking the gardens and paying the money; the defendants from performing their promise to give the use of the Hall and Gardens and other things. It is interesting to note that prior to this case, the position of the law was that a contract must be honoured whether water rises or hell falls. As far as the Indian Contract law is concerned, the relevant provisions you need to take note of is Section 29, 31,32 and Section 56 of The Indian Contract Act,1872.

Is ‘force majeure’ the same as ‘Vis Major’?

  • No. Just because they maybe related does not mean they are the same. The difference in definition lies in the scope and degree of the occurrence or non occurrence of the event. Events such as strikes, breakdown of machinery may qualify to fall within force majeure and not vis major or Act of God. In other words, force majeure is interpreted as a phrase that invites a larger meaning than Act of God. In this regard, let’s say because the pandemic, the government enforces embargos; therefore you were impacted to the extent that your duties were rendered as impossible. Will this constitute as a force majeure? As per Lebeaupin v Richard Crispin and Company[2], it will fall within force majeure. Is ‘force majeure’ the same as ‘frustration of contract’?

Is ‘force majeure’ the same as ‘frustration of contract’?

  • It’s mumbo jumbo like this that pays my bills. The interpretation of the letter of the law states that a contract is frustrated (and terminated automatically) when an event occurs that makes the contract simply impossible to perform, or the obligations become fundamentally or radically different to those originally undertaken. Sounds similar to force majeure right? If you’re one that has an eye for details, you’ll recognize that in order for a contract to be frustrated, the event should destroy the purpose of the contract.The crucial factor in trying to establish whether this doctrine applies to a contract is to identify the parties’ contractual obligations at the date of the contract, and how the particular event in question alters them.

  • This means that delayed performance, as opposed to events that materially alter contractual obligations generally do not amount to the frustration of a contract. If the delay is particularly long, or has a serious effect on contractual obligations (such as missing an event), the impact on the obligations might be sufficient to amount to frustration.

C. Why do you need to know this?

  • Whether you’re a judge, a lawyer or a law student, once this lockdown is lifted you need to be prepared to tackle the massive legal storm that is going to flutter your desk. The purpose of this entry was to introduce you to the terms that your lawyer might discuss with you. If you are interested in learning more on the fate of commercial business, I suggest you hit your history books and refresh your memory when it comes to business post World Wars and epidemics.
  • If you know you cannot afford a lawyer for something like this, don’t worry, the internet can be your professor. All you have to do is spend time learning how to navigate through online legal database systems and look for cases that have dealt with delivery of shipments and cargos in the context of failure of delivery or delay of delivery. I suggest this bracket of case laws since delivery of shipments have historically been subjected to some form of contingency I.e. in the form of wacky weather or failure of shipping equipment etc.
  • Plus, in the long run, with a basic understanding of this basic law, you will not sell yourself short. In the sense, you shouldn’t be picked on or bullied into something that is fundamentally exploitative and downgrades your value. I understand the economy is sinking right now, but trust the age old wisdom that states that knowledge is power. Presuming that your work was suspended because of the pandemic, with this information, believe it or not, you’ll level the bargaining playing field and make sure nobody holds you liable for something you could not do.

[1][1863]EWHCQBJ1122 ER 309;3 B. & S. 826.

[2] [1920] 2 K.B. 714.

Part I: Exploitative Contracts: Understanding the Symptoms of the disease

  1. More often than not, as a freelance writer, you are instantly turned-off when you encounter legal jargons that forms the scheme of your contract. Trust me when I say this—lawyers are too.In my noob experience, let me tell you this, the writers I have dealt with usually never end up reading their contract. Especially, If you are an Indian writer trying to make it big, numerous times I have seen how you people usually almost never read your own contract. As a writer I assume you will attempt to give it a read, at the least. I get it, the big bad legal world scares you, but that shouldn’t stop you from trying to read it. To begin with, I’ll help you figure out the symptoms of an exploitative contract. And through my subsequent entries I’ll tell you what law states so that you can explore options. For starters, you may want to with hold your signature on the contract if it shows the following symptoms:

  2. It looks like a template : Note this: Lawyers, Secretaries and other professionals in the Legal Industry are usually busy. In other words, you are another little brick in the wall of their world; they do not have the time and day to create a special contract just for you. They end up giving you a template of a contract with a few changes made to it. Your Job is this:read the contract very carefully.One of a lawyer’s oldest trick in the book is to complicate simple sentences, especially if they know that you cannot afford a lawyer or don’t care to seek a lawyer’s opinion. Don’t let the colonial words persuade you into giving up understanding it. Thus, if it looks like a general template, be ultra-careful.
  3. Overdosing on Legal Jargons:  Overdosing on anything is not okay, especially on words. If you cannot understand anything even after spending minimal time on it, high chances are it’s them and not you. As cliched as it sounds, read it again. Convoluting sentences for reasons that ceases to find roots in common sense is a common practice among lawyers. My advice: try googling the meaning and making a comment adjacent to the word, so that when you read it as a whole—you’ll be able to substitute the meanings.
    • Get Paid!: Remember this: every major publisher/ production house usually looks to save up on money, so more than anything make sure you are able to understand the terms of your payment. I had to deal with numerous cases where writers have submitted scripts to these large production houses and at the end of it— they did not receive a penny. Why you ask? Those ninnys signed the contract even when it said “ You accept that payment will be rendered upon the employer’s satisfaction of your work”. Translation: You get paid only if your employer is happy with your work. Ding- Dong! YOUR EMPLOYER WILL NEVER BE SATISFIED WITH YOUR WORK! Any 10 year old can recognize this. Moral of the story— at least understand the terms and conditions of the payment you are about to receive.
    • Do not agree to cover for your employer’s losses: In other words, if you come across the clause “Indemnity”  which  reads as something on the lines that if your employer undergoes any losses, you’ll agree to compensate for the  losses. Why should you be responsible for your employer’s loses? Exactly! you shouldn’t, you never should! What does this ‘indemnity’ even mean? Indemnity is like your insurance. For example, take life insurance, in case your life is insured, then on your death— your near and dear ones( depending on the terms of the contract) will receive a monetary sum that is estimated to be the value of your life( Only according to the world of money)
  4. What are you entitled to as a Writer? How do you know what you are entitled to by the fact that you are writer? To understand this, you’ll have to understand your “Rights”. This is important so that you can prevent a large corporation from profiting off what you do not know—that is your rights. If your fellow writer friend tells you, it doesn’t matter as long as you are paid. Those pearls of wisdom are in direct contradiction to common sense; do not listen to them. If you do not know your rights, find out. If you cannot understand it, I think I may be able simplify information to the extent that it might help you and will put out another post on the it. In the meantime, set your inner wild child  free and exploit the internet!