​Can I ask for specific performance of a contract during lockdown?


The party I am in a contract with is unable to fulfil its contractual obligations due to lockdown. Can I ask for specific performance of the contract under these circumstances.

Answers (4)


125 votes

The drastic domino effect of the ongoing COVID-19 pandemic is being felt by industries across sectors around the world. Governments across the globe have ordered nation-wide lockdowns, restricted foreign travel and have sealed their international borders. As a result, economic activities have taken a hit, and companies are under enormous financial burden coupled with an impending uncertainty, over the performance of their existing commercial contracts.

The exact impact of the COVID-19 pandemic on parties' liabilities under commercial contracts is far from clear. Given the highly diverse nature of resources and services required to perform contractual obligations, there is a danger that many contracting parties may be unwilling or unable to continue with their obligations.
 

Contractual Obligations during COVID-19

In many cases events such as 'epidemic' 'lockdown' 'outbreak of disease' or 'pandemic', may be listed as triggering event in the Force Majeure clause. In such cases, it is likely that the COVID-19 pandemic shall be deemed to be a Force Majeure event. On the other hand, where no relevant event is specifically mentioned, the intention of parties will have to be looked at. This involves considering whether the list of events included was intended to be exhaustive or non-exhaustive. In most cases, it will be difficult to argue that the list is non-exhaustive and establish that even though the clause did not mention an 'epidemic' or 'pandemic' as Force Majeure events, the parties nonetheless, intended to cover the same.

In the past, many similar events such as SARS and Ebola have occurred, but interestingly the law in relation to pandemic/ epidemic and Force Majeure is still not settled. There is hardly any case law that may be considered even indicative or purposive for the same. However, in a few cases, Executive Orders to stop production, supply or manufacturing have been deemed to be Force Majeure events. Similarly, travel restrictions, lockdowns, suspension of free movement, can be argued for claiming Force Majeure.

Force Majeure is a contractual right and not a general rule of law. If the contract does not contain a Force Majeure clause, the distressed party shall have to rely upon other contractual clauses for any potential aid. If the same is not possible, then the only remedy available is to plead frustration of contract and/or impossibility of performance of contractual obligations.

The common law has developed the doctrine of frustration to deal with three types of cases that concern excuses for non-performance because of a fundamental change in circumstances: these are i) impossibility; ii) frustration of purpose; and, iii) temporary impossibility. The first type of case is that where the frustrating event has rendered performance impossible. In this respect, impossibility in the common law is a sub-set of the broader doctrine of frustration. In addition, the term "impossibility" must be differentiated from "frustration" even though these words are sometimes used interchangeably.
 
At the end, it will still be open to parties to contend that despite the contract not specifically contemplating the events such as the COVID-19 pandemic as a Force Majeure event, the performance of its obligations is adversely affected by it and is rendered impossible during the said period.
 

Can a party seek specific performance of a contract that has run into difficulties as a result of COVID-19?

An order of specific performance requires a party to a contract to carry out its legal obligations under that contract. It is an equitable remedy which may be granted where damages would not be an adequate remedy for breach of contract.

The remedy is often associated with contracts for the sale of land. It is less likely to be granted for other types of property such as goods. An award of damages will usually suffice here as the goods can be purchased elsewhere. However, there may be circumstances where this is not true if the item in question is rare, unique or otherwise unavailable. Specific performance may be granted of contracts for particular services, including building contracts, provided certain criteria are satisfied.

It is a discretionary remedy and may be refused on a number of grounds such as:

  • Delay;

  • Illegality;

  • Where the plaintiff is guilty of inequitable conduct;

  • Where the plaintiff is in breach of its obligations under the contract;

  • Where the order would result in hardship for the defendant or a third party;

  • Where the contract was induced by misrepresentation or mistake;

  • Where a contract would require ongoing supervision by the court;

  • Where specific performance would be unavailable to the defendant against the plaintiff. This is described as a “want of mutuality”.

  • In addition, the court will not grant specific performance where performance of the contract is impossible. However, if an event has simply made performance of the contract more onerous, the order may be granted if it is in fact still possible to perform the contract.
     

How can a lawyer help?

Looking at the complexity of the issue, it is highly impossible for a layman to understand the technicalities involved in the issue. Interpretation of terms of a contract in accordance with the law is in itself a very technical task and beyond the scope of expertise of a layman. This is why it is imperative in times like these to have a corporate lawyer by your side who can help you understand the technicalities involved and can formulate the right strategies to ensure a desired result in a contract-related litigation.

334 votes

if the. obligations can not b performed during lockdown den the contract has become unenforceable due to unknown calamities or act of God or govt policies. in that case you can only wait for conditions. bcm normall or you can ask the other party to make contract afresh.


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225 votes

As per Indian contract act the parties are guided by the contracts executed between them. Yes specific performance of contracts can be sought even during the lockdown period. However certain stipulations has to be considered before the same can be proceeded with. Therefore a detailed look at the contract will enable me to better assist you

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221 votes

I need to see the contract documents after that only I can clearly advise you about the remedies which are available for you. You can contact me via email or you can call me so that we can discuss further

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