Research and Articles

• War or conflict does not automatically excuse contractual performance under Indian law and the relief depends on contract terms or strict impossibility under Sections 32 and 56 of the Indian Contract Act.

• Force majeure clauses govern risk allocation and exclude Section 56, while mere commercial hardship or price rise would be insufficient.

• Invocation requires unforeseeability, direct causation, impossibility, and compliance with notice and mitigation.

• Only contracts directly affected by disruptions may qualify, while indirect economic impact may not meet the legal threshold.

A. Introduction

The ongoing Gulf conflict has disrupted energy supplies, shipping routes, and payment systems affecting Indian businesses. However, under Indian law, war does not automatically excuse performance. A valid force majeure claim depends on the contractual wording, a clear causal link to non-performance, and compliance with notice and mitigation requirements.

Force majeure is governed by the Indian Contract Act, 1872 (“ICA”). Where based on a contractual clause, it is treated as a contingent event under Section 32, and its consequences are determined by the contract. The presence of such a clause generally excludes Section 56. In the absence of a clause, relief lies under Section 56, which renders a contract void if a supervening event makes performance impossible or unlawful. “Impossibility” includes practical impossibility where performance becomes futile in light of the contract’s purpose.

B. Landmark cases

In the landmark case of Satyabrata Ghose v. Mugneeram Bangur & Co.¹, the Supreme Court held that requisition of land during wartime did not frustrate a sale agreement because the delay in development did not fundamentally change the nature of the obligation and the war situation had been within the parties’ contemplation. The Court established that impracticability must go to the root of the contract and not merely render it more onerous or expensive.

In the significant case of Energy Watchdog & Ors. v. Central Electricity Regulatory Commission & Ors.², the Supreme Court considered whether steep increases in Indonesian coal prices, following regulatory changes, constituted a force majeure event under long-term power purchase agreements. The Court held that detailed force majeure provisions expressly excluded fuel price increases and economic hardship from the scope of force majeure, and therefore Section 56 could not be invoked to circumvent the agreed allocation of risk. Energy Watchdog established three critical principles: (1) where a contract contains a force majeure clause, Section 56 has “no application”; (2) mere commercial hardship is not force majeure; and (3) alternative modes of performance, even if more expensive, can defeat an impossibility claim.³

Although “force majeure” is not defined in the ICA, it is widely understood in Indian commercial practice, drawing from civil law and common law formulations as well as international model clauses. Typical Indian force majeure clauses list events such as war, blockade, embargo, governmental action, natural disasters, epidemics, strikes and other events beyond the reasonable control of the affected party.

C. Distinguishing Force Majeure from Hardship

Indian law does not recognise hardship as a standalone doctrine separate from frustration or force majeure. In Energy Watchdog, the Supreme Court held that mere commercial unviability does not amount to frustration, particularly where the contract excludes such contingencies.

Hardship in Indian contracts is therefore a matter of express drafting, typically addressed through price reset, change-in-law, or renegotiation clauses, rather than an implied doctrine. Force majeure clauses address legal or physical impossibility, while hardship provisions deal with severe but not impossible burdens.

Section 56 is exhaustive of the law in India. “Impossibility” is not confined to literal or physical impossibility; performance may be impracticable or purposeless in light of the contract’s object. If a supervening event fundamentally alters the basis of the agreement, performance may be treated as impossible. Where the contract itself provides for discharge on specified contingencies, Section 32 applies. Where frustration arises outside the contract, it is governed by Section 56.

D. Essential conditions for invoking force majeure

Indian courts construe force majeure clauses narrowly as exceptions to the ordinary rule of absolute contractual liability, focusing on specific language used and the overall allocation of risk. Broadly speaking, a typical force majeure invocation would cover the following aspects:

1. Event beyond control: The event must be beyond the parties’ reasonable control and not caused by fault of the invoking party.

2. Foreseeability: The event must be unforeseeable or not reasonably contemplated at the time of contracting.

3. Direct causal link: There must be a direct causal connection between the supervening event and the inability to perform.

4. Impossibility, not hardship: Performance must be impossible or illegal, not merely more difficult or expensive.

5. Compliance with contractual conditions: The invoking party must comply with all procedural requirements, including notice, mitigation and documentation.

E. Formal requirements for relying on force majeure under Indian Law

1. Contractual Requirements

The primary formal requirements for using force majeure defense under Indian law are those stipulated in the contract itself.

2. Section 56 Requirements

Section 56 itself does not prescribe any formal notification requirement for invoking frustration. However, in practice parties seeking to rely on frustration would be required to:

1. promptly assert their position that the contract has been frustrated;

2. avoid conduct inconsistent with treating the contract as discharged;

3. be prepared to prove supervening impossibility or destruction of contractual basis; and

4. address settlement of benefits received before frustration under Section 65.

3. Notice as mandatory procedural requirement

Force majeure clauses often require prompt written notice of the purported force majeure event as a condition for relief. Standard formulations require the affected party to notify the counterparty within a specified timeframe (often within a few days or weeks) after becoming aware of the event.

The notice must typically include, nature and description of the force majeure event, obligations affected by the event, anticipated duration of impact, mitigating measures being adopted, if any, supporting documentation and evidence, if required.

In Rashmi Cement Ltd. v. World Metals & Alloys⁴, the Delhi High Court clarified that failure to comply with contractual notice requirements either by not issuing notice at all or by issuing it late may disentitle a party from relying on the clause, even if the underlying event would otherwise qualify as force majeure.

4. Best endeavours or a duty to mitigate

A force majeure clause rarely operates as a complete and unconditional shield. Most clauses impose on the affected party an active duty to mitigate the effect of the event on its contractual performance. This duty may be expressed as an obligation to ‘use best endeavours’, ‘all reasonable efforts’, or to ‘remedy the situation with all possible dispatch’. Courts and arbitral tribunals assess compliance with this obligation rigorously.

The mitigating party is not, however, required to take steps that are commercially unreasonable or disproportionately expensive. The standard is reasonableness, not perfection. For instance, a party may not be required to source LNG on the spot market at twice the contract rate simply to avoid triggering force majeure but it could be expected to explore whether economically viable alternatives existed.

5. Is acceptance of Notice mandatory?

Force majeure clauses generally do not require the counterparty’s consent; they require notice and supporting particulars. If disputed, the issue becomes a contractual dispute under the agreed mechanism. The affected party may suspend performance at its own risk, but an invalid invocation can lead to liability for wrongful non-performance.

Typical consequences include suspension of affected obligations, extension of time, relief from delay damages, preservation of the contract, and continuing duties to mitigate and keep the counterparty informed. If the event exceeds a contractual long-stop period, termination without fault is often permitted, with each party bearing its own losses subject to settlement of accrued rights.

Absent a contractual clause, if Section 56 applies, the contract becomes void prospectively from the point of frustration. Future performance is discharged, while accrued rights remain, subject to restitution under Section 65.

F. Termination Clause and Force Majeure clause, how do they function together?

Commercial contracts frequently contain several interconnected provisions relevant to supervening events: force majeure clause, ordinary termination clause, price-adjustment or hardship mechanisms, and material adverse change provisions.

Indian commentary emphasizes that a force majeure clause must be read harmoniously with other provisions, preserving the contractual risk allocation rather than allowing force majeure to override more specific arrangements. Energy Watchdog illustrates this principle, where express exclusion of fuel price changes from force majeure was upheld.

Where a contract contains a general termination clause that does not specifically mention force majeure, but a separate force majeure clause lists termination as a consequence after prolonged events, the clauses should typically be read cumulatively.

When a contract contains both (a) a termination clause that does not include force majeure, and (b) a separate force majeure clause as an exception, these should be interpreted as allocating different types of risks. The force majeure exception creates a special regime for supervening impossibility, while the termination clause addresses ordinary contractual breaches and voluntary exit.

G. Gulf War as Force Majeure: Assessment of Impact

Armed conflict in the Gulf affects Indian-related contracts through multiple channels including but not limited to closure or militarization of key shipping lanes (Strait of Hormuz), attacks on energy infrastructure and production facilities, export restrictions and government-imposed supply limitations, international sanctions and payment system restrictions, insurance unavailability or prohibitive premiums, heightened security risks and operational constraints.

For instance, Qatar has halted LNG production and declared force majeure after recent attacks, leading to gas supply disruptions expected to last 2-3 weeks or longer.⁵ India has declared force majeure to redirect gas supplies from non-priority sectors to essential users due to disruptions in LNG shipments through the Strait of Hormuz.⁶

Despite these disruptions, the mere existence of war in the Middle East does not automatically trigger force majeure in contracts governed by Indian law. Courts require a clear and proximate causal link between the specific conflict-related event and the affected party’s inability to perform.

Contracts that depend on Gulf routes or supplies such as crude oil, LNG, petrochemicals, fertilizers or shipping services are more likely to support valid force majeure claims. By contrast, contracts with remote connections to the region may not meet the threshold even if the conflict indirectly worsens market conditions or increases costs.

The first step in assessing the legal impact of such an event is to examine whether the agreement contains an express force majeure clause and its exact wording. Things to consider while interpreting the clause may include but are not limited to whether “war”, “armed conflict”, “blockade”, “embargo”, “hostilities”, “sanctions”, “governmental restrictions” or “acts of state” are expressly listed; whether generic language such as “events beyond reasonable control” is included; whether supply chain disruptions or transport route closures are mentioned; whether the clause is drafted as suspension, termination, or hybrid mechanism; duration thresholds for conversion from suspension to termination.

Nonetheless, the affected party must take reasonable steps to avoid or overcome the effects of the event, such as sourcing alternative supplies, using different shipping routes, adjusting schedules or procuring legal waivers. The invoking party must act in good faith by keeping the counterparty informed of the event, its impact on performance, mitigation steps and expected duration. When the impediment ceases, the party must notify the counterparty and resume performance within a specified or reasonable time; failure to do so could expose it to claims of improper extension of the force majeure period.

H. Contracts not linked to War

Contracts with no geographic, commercial or operational connection to the Gulf conflict may find it difficult to invoke force majeure based on the war alone. Indian courts require specific proof that the war event directly caused inability to perform the particular contract, not merely that the war exists somewhere in the world.

From a business perspective, the Gulf War scenario underscores the need for Indian companies to map their exposure to Middle East supply chains, logistics and payment systems, and to align contractual force majeure and hardship provisions with that risk profile.

I. Does complete termination happen after Notice?

Complete termination following force majeure is not automatic.⁷ It usually occurs only where, the clause expressly provides for termination after prolonged force majeure (e.g., 90 or 180 days), or in absence of a clause, frustration under Section 56 destroys the contract’s basis, rendering it void for the future⁸.

J. Practical Guidance for Indian Businesses

1. Contract review: Examine force majeure clauses to identify covered events, performance thresholds (“prevents” v. “hinders”), procedural conditions (notice, evidence, mitigation), and termination triggers.

2. Proactive communication: Issue timely force majeure notices with comprehensive supporting documentation; maintain regular updates to counterparties.

3. Mitigation efforts: Actively pursue alternative supply sources, routes or methods to demonstrate good faith and preserve relationships.

4. Hardship v. impossibility: Distinguish situations of true impossibility from commercial hardship, and consider negotiated solutions for the latter.

5. Terminate or Not to Terminate: Terminating for force majeure is a significant and often irreversible step. The following can be taken into consideration to take a decision:

   1. Duration of the Event: Distinguish between temporary and prolonged events. Short disruptions may justify suspension, not termination. Many contracts use a 90-day threshold.

   2. Contractual Terms: Check if the contract permits termination after a specified period and follow the prescribed procedure to avoid wrongful termination claims.

   3. Commercial Impact: Termination ends obligations but may harm long-term relationships and trigger penalties, lender rights, or loss of security.

   4. Risk of Dispute: Challenging a force majeure claim preserves rights but may lead to arbitration; accepting it may waive claims.

   5. Renegotiation: Where feasible, renegotiation (e.g., revised timelines or pricing) may be preferable to termination.

K. Key precautions in contract drafting with respect to force majeure clauses:

1. Define events clearly: Specify events such as pandemics, sanctions, port closures, and armed conflict, with inclusive wording.

2. Set trigger thresholds: Clarify whether events must “prevent”, “hinder”, or “delay” performance.

3. Structured notice: Prescribe timing, form, and required details of notices.

4. Mitigation duty: Require reasonable or best efforts, with ongoing updates.

5. Clear consequences: Specify suspension, extension, or termination, and cost allocation.

6. Termination threshold: Define duration (often 90 days) and process.

7. Payment carve-out: State if payment obligations continue.

8. Hardship mechanisms: Include price adjustment or renegotiation clauses.

9. Insurance alignment: Ensure consistency with risk and delay coverage.

10. Dispute resolution: Provide efficient mechanisms, preferably arbitration for major and complicated contracts.

Chitransh Vijayvergia and Viral Mehta
You can direct your queries or comments to the authors.

¹Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44.

²Energy Watchdog & Ors. v. Central Electricity Regulatory Commission & Ors., (2017) 14 SCC 80.

³Energy Watchdog (supra), per Nariman J. at para. 42: “an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took”.

⁴Rashmi Cement Ltd. v. World Metals & Alloys, 2020 SCC OnLine Del 2411.

⁵https://www.qatarenergy.qa/en/MediaCenter/Pages/newsdetails.aspx?ItemId=3894

⁶https://static.pib.gov.in/WriteReadData/specificdocs/documents/2026/mar/doc2026310819601.pdf

⁷M/s Halliburton Offshore Services Inc. v. Vedanta Limited & Anr., OMP (I) (COMM.) No. 88/2020 & IAs 3696-3697/2020, at paras. 62 and 63.

⁸Bangalore Electricity Supply Company Ltd. v. Hirehalli Solar Power Project LLP and Ors., (2025) 1 SCC 435 at para. 31.