November 08, 2016

Breaking News

Act of God and Vis Major

U Mya Thein. BA; B.L 

Under section 56 of the Contract Act (Indian Act IX of 1872) an agreement to do an act impossible in itself is void.
A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which promisee sustains through the non-performance of the promise.
The Indian Contract Act by Sanjiva Row1959 Edition.
Page 758.
The section and its scope.
Agreement may be classified into —
(1) Agreements to do an unlawful act;
(2) Agreements to do an impossible act;
(3) Agreements to do an act which is both possible and legal, but which after the contract is made, becomes impossible;
(4) Agreements to do an act which is both possible and legal, but which after the contract is made, by reason of some event, which the promisor could not prevent, become unlawful.
The Rangoon Telephone Company; Limited was operating telephone and telegraph undertakings in Rangoon and Moulmein before war under a licence. Under clause 8 of the lisence Government could buy the Company out, if the right was exercised at the end of 40th year, and by the letter dated 4th March 1940 Government exercised the option to purchase as on 31st March 1943. War broke out and part of property was demolished under the denial scheme. The remaining properties were taken over on 1st January 1946. The Company claimed Rs. 24,93,490-2-6 as the value under contract or as damages. Government contended that they were liable what was taken over. HELD: frustration is the premature determination of an agreement lawfully entered into between parties owing to circumstances so fundamental as to be regarded by the law both as striking at the root of that agreement as entirely beyond what was contemplated by the parties when they entered into the agreement. This principle is embodied in section 56 of the Contract act. The contract of purchase in this case was frustrated on account of the war.
Rangoon Telephone Company Limited v. the Union of Myanmar.
1948 B.L.R. 527
In the law of Contract, an act of God may be put forward as an implied defense under the rule of impossibility or impracticability. If so, the promise is discharged because of unforeseen occurrences, which were unavoidable.
An example scenario could assume that an opera singer and a concert hall have a contract. The singer promises to appear and perform at a certain time on a certain date. The hall promises to have the stage and audio equipment ready for her. However, a tornado destroys the hall a month before the concert is to take place. Of course, the hall is not responsible for the tornado. It may be impossible for the hall to rebuild in time to keep its promise. On the other hand, it may be possible but extraordinarily expensive to reconstruct on such short notice. The hall would argue that the tornado was an act of God and excuses its nonperformance via impossibility or impracticability.
Water pressure in dams releasing a geological fault, earthquake in China, Geothermal injections of water provoking earthquakes in Basel, Switzerland, 2003 and Drilling provoking mud volcano in Java are the good examples. Such events are possibly threatening the legal status of acts of God and may establish liabilities where none existed until now.
Force majeure or vis major (Latin) — meaning “superior force”, fortuit (French) “chance occurrence, unavoidable accident”, is a common in contracts that essentially free both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract.
Under international law, it refers to as an irresistible force or unforeseen event beyond the control of a state making it materially impossible to fulfill an international obligation, and is related to the concept of a state of emergency.
In Military, force majeure refers to an event, either external or internal, that happens to a vessel or aircraft that allows it to enter normally restricted areas without penalty. An example would b a Chinese military airbase after a collision with a Chinese fighter in April 2001. Under the principle of force majeure, the aircraft must be allowed to land without interference.
Because of the different interpretations of force majeure across legal systems, it is common for contracts to include specific definitions of force majeure, particularly at the international level. Some systems limit force majeure to an Act of God (such as floods, earthquakes, hurricanes, etc.) It is advisable in drafting of contract distinction is to be made between act of God and force majeure.
In Dharnrajmal Gobindram v. Shamji Kalidas [All India Reporter 1961 Supreme Court of India 1285] it was held that “An analysis of ruling on the subject shows that reference to the expression is made where the intention is to save the defaulting party from the consequences of anything over which he had no control”.
A party is not liable for failure to perform the party’s obligations if such failure is as a result of Acts of God (including fire, flood, earthquake, storm, hurricane or other natural disaster), war, invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalisation, government sanction, blockage, embargo, labor dispute, strike, lockout or interruption or failure of electricity or telephone service.

Comments

Related posts

Translate »