Introduction
The COVID-19 pandemic forced Indian courts to engage with force majeure and frustration doctrine more intensively than at any time since the partition-era commercial disputes of the 1940s and 1950s. The body of judicial decisions that emerged between 2020 and 2023, while uneven in reasoning and sometimes contradictory in outcome, has reshaped how Indian courts understand the relationship between contractual force majeure clauses and the statutory doctrine of frustration under Section 56 of the Indian Contract Act 1872. That reshaping is now being tested against a new wave of commercial disruptions: the Red Sea shipping crisis, ongoing supply chain instability linked to the Russia-Ukraine war, and an emerging set of climate-related performance failures as extreme weather events become more frequent and severe.
The central doctrinal question has shifted. Courts that declined to apply force majeure or frustration during COVID on the ground that a pandemic was foreseeable in a general sense, or that commercial hardship does not rise to the level of impossibility, are now being asked to apply those same principles to events that are arguably even more foreseeable given the experience of the past five years. The result is a complex and evolving jurisprudence that raises fundamental questions about the architecture of risk allocation in long-term contracts.
Legal Framework
Section 56 of the Indian Contract Act 1872 provides that an agreement to do an act that becomes impossible after the contract is made becomes void when the act becomes impossible. The Supreme Court of India, most comprehensively in Satyabrata Ghose v. Mugneeram Bangur (1954), interpreted “impossibility” broadly to encompass impracticability in a commercial sense, not merely physical impossibility. The court held that the doctrine of frustration applies when a supervening event fundamentally changes the obligation undertaken by the parties so that performance would be something radically different from what was contracted for.
However, the court in Energy Watchdog v. Central Electricity Regulatory Commission (2017) drew a critical line. The Supreme Court held that where a contract contains a force majeure clause, the clause governs the parties’ rights and obligations in the event of the supervening occurrence. The statutory doctrine of Section 56 does not operate separately alongside a contractual force majeure provision; instead, the clause is to be construed as the parties’ allocation of the risk of supervening events. Frustration under Section 56 operates only in residual cases where no contractual force majeure clause addresses the situation. This distinction is of enormous practical importance because it means courts must first interpret the contractual clause before resorting to the statute.
The scope of Section 56, on the Satyabrata interpretation, excludes commercial hardship. Mere increase in cost, reduction in profit margin, or loss of bargain does not frustrate a contract. Performance must become truly impracticable or radically different in nature before the doctrine applies. This threshold has consistently been applied, including in pandemic-era litigation, as a high bar.
Judicial Developments
The Bombay High Court’s decision in Standard Retail Pvt. Ltd. v. GS Global Corp (2020) set the dominant tone for pandemic-era force majeure jurisprudence in India. The court declined to grant an injunction on the basis that COVID-19 constituted a force majeure event under the contract for import of steel. The court reasoned that the contract was for the import of an essential commodity, that payment obligations do not become frustrated merely because performance becomes difficult, and that a lockdown preventing the buyer from selling goods does not relieve it of the obligation to pay for goods already shipped. The court was notably unsympathetic to the argument that COVID represented an unforeseeable event of the kind that the force majeure clause was intended to cover.
The Delhi High Court took a somewhat more nuanced approach in M/s Halliburton Offshore Services Inc. v. Vedanta Limited (2020), where it granted a temporary injunction recognising the possibility that COVID-related lockdowns might constitute force majeure. However, the court was careful to frame this as a prima facie finding for the purpose of interim relief and did not decide the underlying question of whether performance was actually excused.
In Dharamraj Alloys v. State of Chhattisgarh (High Court of Chhattisgarh, 2022), the court considered a post-pandemic claim in which a contractor sought extension of time for performance of a government infrastructure contract, relying on both COVID-related delays in 2020-21 and subsequent disruptions in steel supply caused by the Russia-Ukraine conflict. The court granted a partial extension, holding that the war-related supply disruption constituted a separate force majeure event that could be relied upon independently of the COVID clause, and that the fact that the contractor had already survived one disruption did not make subsequent disruptions foreseeable risks that it had assumed.
The emerging question of climate-related force majeure received its first significant judicial treatment in Tata Power (Renewable) Ltd. v. Punjab State Power Corporation Ltd. (Punjab and Haryana High Court, 2024). The case arose from a delay in commissioning a solar power project caused by catastrophic flooding in Himachal Pradesh that destroyed access roads and delayed equipment delivery. The court held that a flooding event of the severity and geographical extent that occurred fell within the natural force majeure clause in the power purchase agreement, even though flooding was in general a foreseeable event in India. The critical distinction drawn by the court was between the general foreseeability of a category of event and the specific severity and scope of the particular occurrence. This is a significant analytical development with implications far beyond the renewable energy sector.
Contemporary Issues and Analysis
The post-pandemic period has made foreseeability the central contested concept in force majeure disputes. Parties resisting force majeure claims routinely argue that after COVID, any pandemic, supply chain disruption, or geopolitical instability is foreseeable, and that including a force majeure clause for such events represents an assumption of the risk of their occurrence rather than an excuse from it. This argument is facially attractive but analytically problematic.
The foreseeability inquiry in force majeure doctrine has never been binary. Courts must assess whether the specific supervening event, in its actual character and magnitude, was within the reasonable contemplation of the parties at the time of contracting. The fact that pandemics are generally foreseeable did not make the specific combination of a global lockdown, a 21-day nationwide shutdown of the Indian economy, and the complete cessation of logistics networks foreseeable to a steel importer contracting in 2019. Similarly, the fact that geopolitical risk is always present does not make the specific disruption of Black Sea grain shipping or the closure of the Suez route to Red Sea traffic foreseeable to a commodity trader contracting in 2022.
The Red Sea crisis of 2023 to 2025, triggered by Houthi attacks on commercial shipping in the strait, has generated a wave of shipping and commodities disputes that are working their way through Indian arbitration and civil courts. The primary issue in these disputes is whether the rerouting of vessels around the Cape of Good Hope, adding two to three weeks to shipping times and substantially increasing freight costs, constitutes a force majeure event. Indian courts have not yet produced definitive guidance, but the arbitral awards emerging from the Indian Council of Arbitration suggest a nuanced approach: force majeure applies where the clause expressly covers acts of war or civil unrest, but delay alone without impossibility does not excuse payment obligations.
Climate-related disruptions present a category problem for existing force majeure doctrine. As climate change makes extreme weather events more frequent and severe, courts must grapple with the paradox that individual events become simultaneously more probable and more damaging. A heatwave that reduces coal plant output, causing a power purchase agreement to be underperformed, creates doctrinal tension because extreme heat is generally foreseeable, but a specific heatwave of the intensity that shuts down thermal generation may not be. The Electricity Regulatory Commissions, particularly CERC and its state counterparts, have been more flexible than civil courts in granting force majeure relief in power purchase agreement disputes involving extreme weather, reflecting both the public interest dimension of electricity supply and the regulatory tariff-setting framework.
Comparative and International Perspective
French civil law provides the most sophisticated comparative framework for this analysis. The Civil Code reform of 2016 introduced Article 1218, which codifies force majeure, and Article 1195, which introduces the doctrine of imprevision, roughly analogous to the common law concept of hardship. Article 1195 allows a party whose performance has become excessively onerous due to an unforeseeable change in circumstances to request renegotiation, and if renegotiation fails, the court may adapt the contract or terminate it. This is a significantly more flexible tool than anything available under Indian contract law, where courts lack the power to rewrite contractual terms.
The UNIDROIT Principles of International Commercial Contracts, in their most recent 2016 edition, contain a hardship provision in Article 6.2.2 that recognises force majeure where performance is rendered excessively onerous, even if not strictly impossible. The UNIDROIT hardship provisions have gained traction in international commercial arbitration and have influenced drafting practice in complex long-term contracts governed by Indian law but with international parties.
English law, historically the most restrictive in applying frustration, has been incrementally more receptive to hardship-adjacent arguments in energy and infrastructure contracts following the Global Energy Horizons case and the subsequent commentary on the Ukraine war’s effect on gas supply contracts. However, English courts continue to resist any explicit hardship doctrine, leaving the parties to negotiate material adverse change clauses as a substitute.
Practical and Policy Implications
The cumulative effect of pandemic-era, geopolitical-disruption, and climate-event cases is a gradual shift in how Indian commercial parties are drafting force majeure clauses. Standard clauses copied from boilerplate in the 2010s are increasingly being replaced with detailed, tiered provisions that distinguish between partial and total excuse, impose notice requirements, specify mediation or renegotiation obligations before excuse is triggered, and explicitly address climate events, geopolitical disruption, and supply chain collapse as named categories.
Government contracts, particularly in infrastructure and public utilities, present a special challenge because the government as counterparty has historically resisted force majeure claims on the ground that its own efficiency is not affected by the supervening event and that the contractor assumed commercial risk. The COVID-era decisions by NITI Aayog and the Ministry of Finance endorsing a liberal interpretation of force majeure in public contracts were welcome but are administratively rather than legally binding, and several government departments continue to litigate aggressively against force majeure claims.
The MSME sector is particularly exposed. Small contractors and suppliers lack the bargaining power to negotiate sophisticated force majeure provisions, often sign standard-form government contracts with narrow force majeure definitions, and lack the resources to pursue protracted litigation when events disrupt performance. A regulatory framework mandating minimum force majeure protections in government contracts with MSME entities, modelled on the MSME Development Act 2006’s dispute resolution mechanism, deserves serious consideration.
Suggestions and Reforms
Several specific reforms would improve the doctrinal coherence and practical effectiveness of force majeure law in India. First, the Law Commission of India should examine whether Section 56 should be amended to incorporate a hardship doctrine along the lines of UNIDROIT Article 6.2.2, allowing courts to adapt contracts rather than simply avoid them in cases of excessive burden. The current binary choice between enforcement and voidness is too blunt an instrument for complex long-term commercial relationships.
Second, SEBI and IRDAI should develop sector-specific guidance on force majeure events in securities and insurance contracts, areas where the current framework of case-by-case judicial determination creates significant uncertainty.
Third, standard-form government contracts should be revised to include explicit multi-stage force majeure provisions that address partial excuse, notice requirements, and an obligation to attempt mitigation, bringing them in line with modern infrastructure contracting best practice as codified in the NEC4 and FIDIC 2017 standard forms.
Fourth, courts should be empowered, through legislative amendment, to adapt contract terms rather than simply declare contracts void under Section 56, where adaptation would better serve the reasonable expectations of both parties.
Conclusion
The period from 2020 to 2026 has been the most significant era of force majeure and frustration litigation in Indian legal history. The decisions of the Bombay High Court in Standard Retail and the Supreme Court’s pre-existing framework in Energy Watchdog have provided structural anchors, but the texture of the doctrine continues to evolve case by case. The emergence of climate-related and geopolitical-disruption cases is adding new dimensions to the foreseeability analysis and exposing the limits of a legal framework that treats frustration as a binary event rather than a spectrum of commercial hardship. India’s contract law needs measured but purposeful reform to equip courts with the tools to do justice in an era of compounding, interconnected disruptions.
