In Indian contract law, few distinctions carry greater practical consequence than the one between a contractual force majeure clause and the common law doctrine of frustration. When parties expressly allocate risk for supervening events and prescribe the consequences, the Supreme Court has made it unequivocally clear that Section 32 of the Indian Contract Act, 1872 governs exclusively. Section 56 (frustration) steps in only as a residual doctrine — and only when the event lies outside the contractual framework and renders performance impossible or radically different.
This doctrinal clarity, sharpened by post-2020 jurisprudence and COVID-19 disputes, provides contracting parties and their advisors with a predictable roadmap while cautioning against attempts to rewrite bargains through expansive readings of frustration.
For every arbitration lawyer in Delhi and every commercial dispute lawyer in Delhi, these principles have become increasingly important in modern contract enforcement and dispute resolution.
Statutory Framework
Section 32 deals with contingent contracts. It provides that a contract becomes void if the contemplated uncertain future event becomes impossible. When parties include a force majeure clause, they are effectively creating a contingent mechanism: the occurrence of specified events (war, pandemic, government prohibition, natural calamity, etc.) triggers pre-agreed consequences — suspension, extension of time, or termination — without the need to invoke general principles of frustration.
Section 56, on the other hand, renders agreements to do impossible acts void and provides that a contract becomes void when performance becomes impossible or unlawful after formation due to a supervening event. The Supreme Court has repeatedly held that Section 56 embodies the doctrine of frustration and applies the stringent test of whether the supervening event has made performance “radically different” from what was undertaken — not merely more onerous or commercially unviable.
Section 65 supplies the restitutionary consequence when a contract becomes void under either Section 32 or Section 56: parties must restore advantages received.
Damages and liquidated damages continue to be governed by Sections 73 and 74, subject to principles of remoteness, mitigation, and reasonable compensation.
The Supreme Court’s Clear Divide
The leading authority is National Agricultural Coop. Mktg. Federation of India Ltd. v. Alimenta S.A., (2020) 19 SCC 260. The Court held that where the contract itself provided that a governmental prohibition would excuse performance, Section 32 applied. Upon occurrence of the contingent event, the contract became void in accordance with its terms. Section 56 was not attracted because the parties had already allocated the risk. Once the contract stood discharged under the contractual mechanism, claims for damages also failed.
This principle was reinforced in PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, (2023) 15 SCC 781. The Supreme Court stressed that force majeure and change-in-law clauses must be construed strictly according to their text. Courts and arbitral tribunals cannot rewrite or expand the contractual regime in the guise of doing justice. Relief must remain confined to what the parties themselves negotiated.
The Court has consistently rejected attempts to invoke Section 56 for mere commercial hardship or increased costs. The test remains one of true impossibility or a radical transformation in the nature of the obligation.
COVID-19: Recognition Without Blanket Excuses
The Supreme Court’s suo motu orders in Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10, acknowledged the practical impossibility created by the pandemic and lockdowns by extending limitation periods. This reflected judicial recognition that COVID-19 could constitute a force majeure event for procedural compliance.
However, commercial consequences remain strictly contract- and fact-specific. In Isherdas Sahni & Bros. v. Impresario Entertainment & Hospitality (P) Ltd. (Delhi High Court, 2024), the Court applied Section 32 to grant waiver of rent only for periods of complete impossibility during lockdown, while denying relief where partial performance remained feasible. Temporary disruption or hardship, without impossibility, does not suffice.
Similarly, the Appellate Tribunal for Electricity in H-Energy (P) Ltd. v. Petroleum and Natural Gas Regulatory Board (2023) held that COVID-19 warranted extension of time for the affected period but did not excuse pre-existing delays or justify wholesale discharge. Contractual notice requirements had to be strictly complied with.
Remedies When Supervening Events Occur
The available remedies flow logically from the governing provision:
- Where Section 32 applies (contractual force majeure clause exists): Suspension or extension of time as per the clause; discharge/voidness of obligations if the clause so provides; restitution under Section 65.
- Where Section 56 applies (no clause or event dehors the contract): Contract becomes void upon impossibility or supervening illegality; restitution under Section 65. Mere economic hardship or onerousness is insufficient.
- Damages and Liquidated Damages: Sections 73 and 74 continue to apply where force majeure is not established or does not cover the breach. Claimants must prove causation, mitigation, and (for liquidated damages) reasonableness.
- Where a valid force majeure event excuses performance, levy of liquidated damages for the excused period is impermissible.
- Sectoral Mechanisms: In the electricity sector, CERC Regulation 11 and JERC regulations provide additional avenues for in-principle approvals or relaxation of performance standards during force majeure, without necessarily triggering discharge.
Practical Takeaways for Practitioners
1. Classify First: Determine whether the contract contains a force majeure or change-in-law clause. If it does and the event falls within its scope, proceed exclusively under Section 32. Do not default to Section 56.
2. Strict Construction: Both clauses and the governing statutory provision must be read strictly. Courts will not rewrite the bargain (PSA Sical).
3. Notice and Evidence: Timely notice and documentary evidence of the event, its impact, causation, and mitigation efforts are critical. Failure on these fronts can defeat even meritorious claims.
4. COVID-19 Claims: Useful for extensions or targeted waivers during periods of actual impossibility, but weak for excusing pure payment defaults or pre-existing delays.
5. Restitution and LD Exposure: When a contract becomes void, prepare or defend restitution claims under Section 65. Contest liquidated damages where force majeure or frustration applies or where loss remains unproven.
6. Arbitration Strategy: Anchor relief strictly within the contractual framework. Awards that ignore the clause or rewrite the contract risk being set aside on grounds of patent illegality.This is particularly important for every arbitration lawyer in Delhi handling force majeure disputes arising from infrastructure, construction, energy, and commercial contracts.
7. Sectoral Nuance: In regulated sectors (power, infrastructure), explore parallel regulatory remedies alongside contractual ones.
Conclusion
The Supreme Court has drawn a firm and commercially sensible line: where parties have spoken through a force majeure clause, the contract governs under Section 32. Section 56 operates as a safety valve for truly unforeseen and radical supervening events that fall outside the parties’ allocation of risk. This approach respects contractual autonomy while preventing opportunistic invocation of frustration to escape hard bargains.
For every commercial dispute lawyer in Delhi, the message is clear: draft force majeure clauses with precision, document invocation meticulously, and litigate or arbitrate within the four corners of the contract. Attempts to bypass express provisions through expansive frustration arguments are unlikely to succeed.
The law, as it stands today, firmly favours the contract when the contract itself has provided for the contingency.