Coronavirus was first reported in December 2019 in China’s Hubei province of Wuhan. Because of this situation, WHO declared COVID-19 a pandemic and public health emergency. Coronavirus spreading throughout the world started from China. And began affecting people at greater scale. Until now, the deadly coronavirus has caused the deaths of more than 5 lakh people worldwide. And this is increasing every day.
This encourages people to maintain social exclusion and separate themselves. People are only living on the basic goods. The issue that each country is currently facing is the economic crisis. Many believe that this crisis would be worse than the Great Economic Depression of 1930. Because of these unforeseeable and uncontrollable circumstances, people have lost their jobs. And all this has led to the burden on the economy as a whole. The Indian Government had issued an order pursuant to Section 6(2)(i). And set out guidelines pursuant to Section 10(2)(1) of the 2005 Disaster Management Act.
COVID-19 comes under the Ambit of Force Majeure or not?
What is Force Majeure?
Force Majeure is as an occurrence that a person can not expect. It is a common provision in the legal contract. It lets parties make exceptions and to meet their contractual obligation. The basic ingredients are that it should be unpredictable, and uncontrollable. In the sense of contract validity, the party failed to fulfil its obligation. This could be due to the unpredictability of COVID-19. Then the party is not responsible in that case for failure to fulfil its obligation. And if there is no force majeure clause in the contract, then parties may refer to Section 56 of the Indian Contract Act, 1872. It talks about the ‘Doctrine of Frustration’.
Relevant Case Laws
In the case of Matsoukis vs. Priestman and Co., 1915, the concept of ‘Force Majeure’ was then proposed. It means causes for which you cannot avoid and for which you are not liable. In M / s Halliburton Offshore Service Inc. v. Vedanta Ltd., 2020, the Delhi Hon’ble High Court had said that COVID-19 outbreak comes under force majeure. Vedanta Ltd was then barred by the Delhi High Court from invoking eight bank guarantees provided by Halliburton Offshore Services.
The above mentioned was in connection with a construction contract for certain Rajasthan blocks, a contract executed throughout the world before this coronavirus outbreak. Parties involved in this contract had no knowledge of this coronavirus outbreak. And in the absence of knowledge of COVID-19, party to the contract can not be further held responsible for failure to meet contractual obligations. Hence, the principle of force majeure can be then seen in this case.
In the case of Energy Watchdog vs. CERC, 2017 the Supreme Court of India ‘s Justice R.F. Nariman has clearly stated about “Force Majeure”. It is under Chapter III which addresses the contingent contract. It also claimed that the Force Majeure case dehors the contract. Moreover, under Section 56 of the contract, it’s dealt with by a rule of positive law.
In the case of Dhanrajamal Gobindram v. Shamji Kalidas & Co., 1961, it is a force majeure occurrence that makes it impossible to execute a contract. And not difficulty in executing the performance of the contract. Hence, budgetary problems won’t be subject to coverage. With Edmund Bendit and Anr. Vs. Edgar Raphael Prudhomme, 1925 definition of Force Majeure was then stated. According to the definition, these are the causes which you cannot avoid and are not liable for.
Economy is almost dead
The COVID-19 outbreak has led to the closure of commercial and all other activities. That has put a lot of burden on the economy. Many countries have lost their people, while many people still suffer from it. Countries have to spend a huge amount on treating sick people, kits and carrying out work to develop vaccines to cure COVID-19 patients.
Heavy investment in all these things affects the economic condition of many countries which is further affected by COVID-19. Many countries have been devastated and have brought the economy into recession. According to the UN Conference on Trade and Development, this outbreak will cause a loss of around $1-2 trillion to the global economy in the year 2020. The Indian economy was already in the state of recession. And this recession is worse after spreading and closing of all trade activities and offices. With the spread of this coronavirus pandemic, its impact on the financial market is also visible.
The Impact of Covid-19 on the Legal Industry
When we look from the legal viewpoint, the question arises on how supply chains managed the Pandemic disruption. We also addressed earlier how force majeure plays an important role in contracts. But there are other ways used to fix the legal industry’s situation.
All court proceedings are now conducted in online mode so that social distancing can be then maintained. Many businesses and organizations prefer the Alternative Dispute or say Electronic Dispute Resolution. It gives people the possibility of settling their conflict without going to any courtroom. Even if the legal industry experiences. some adverse effects, it still has some positive outcomes. A new age in the legal industry has come as the courtrooms will conduct the proceedings digitally.
The Tech Industry
It is the area where COVID-19 has both a positive and negative effect. The positive impact of this COVID-19 on this industry is that industry is boosting its demand with the help of remote work facilities. It is increasing their working capacity from remote facilities. Its negative impact is the misuse of data by the wrong person. While its positive effect is that many businesses or applications like- Zoom, Skype and other devices make it much easier for people to work. And also for students to attend classes and for businesses to arrange meetings.
Of all sectors, the industry is the most affected sector. Several countries have imposed a ban on the movement of people from one country to another. And this complete ban leads to a decrease in this industry’s revenues. If we look at the CII report, it is projected that approximately 28 million Indians moved outside India in the year 2019. Airlines suspended the services that has put a heavy burden on the economy.
The Tourism Industry
Most affected countries have this sector’s worst revenue generation. The tourism sector contributes 10 per cent to the overall GDP. According to the World Travel and Tourism Organization, COVID-19 has cut about 50 million jobs in the travel and tourism industry around the world.
Real Estate Industry
Because of the ban on foreign trade and investment, Real Estate has been largely affected. All Foreign Direct Investments have been further stopped and postponed that has raised the Real Estate value. Real estate faces many consequences during coronavirus outbreak and lockdown. Real estate advertisers are unable to meet the venture time constraints. Consequently, this affects this real estate industry in large measure. Each nation earns a huge amount during the festive session. The festive season in the year 2020 may not be quite fruitful as all land purchases have been further stopped.
This pandemic has a very serious ill effect on everything from life to property. The economies and social structures in many countries are completely ruined. For a temporary period, all commercial activities have stopped. Many countries stated their intention to give more priority to save a life than to conduct commercial activities.
The supply chain break is pushing the economy into recession. The COVID-19 is at a peak from the medical point of view, and impact on the economy will lead to a recession soon. It is further observed from the last few years that India’s corporate sector has a lower financial capacity to absorb losses incurred. And, as a result of COVID-19, the losses incurred this time are huge.
The corporate sector’s inability to absorb losses that lead to economic recession. The Asian Development Bank reported that the lockdown would have an impact on the GDP. It would result in a loss of 2.3 per cent. From the beginning of the lockdown, all the major companies temporarily shut down. It will be a new world after the pandemic.
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