Legal Implications Of Force Majeure In Real Estate
Author: LawSphereX
Category: Property & Real Estate
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LEGAL IMPLICATIONS OF FORCE MAJEURE IN REAL
ESTATE
Saurav Kolte, Symbiosis Law School, Pune
ABSTRACT
This article examines the doctrine of force majeure within the Indian real estate sector, tracing its origin from Roman law’s vis major to its modern application under the Indian Contract Act, 1872, and the Real Estate (Regulation and Development) Act, 2016. It analyses various judicial interpretations of statutory provisions, notably Sections 32 and 56 of the Indian Contract Act and Section 6 of RERA, which have shaped the scope of the doctrine. The article also assesses the impact of COVID-19, showcasing how regulatory extensions and judicial scrutiny strive to achieve balance between developers’ relief and homebuyers’ protection.
INTRODUCTION
In the real estate sector, where contracts bind parties to strict adherence of obligations, the doctrine of force majeure stands as a shield against unforeseeable events. Originating from civil law principles, this clause excuses performance when extraordinary, unforeseeable events like natural calamities, pandemics, or government restrictions makes performance impossible. While the features of the doctrine are often overlapped with doctrine of frustration and doctrine of impossibility, the key difference among them is that Force Majure is typically in form of a clause mentioned in a contract, & Impossibility and Frustration are directly mentioned under S. 56 of Indian Contract law as a provision.
In India, the doctrine of force majeure has major implications in the Real Estate Sector, with its provisions mentioned in the Indian Contract Act, 1872, and the Real Estate (Regulation and Development) Act, 2016 (RERA). The judiciary has long played a key role in defining the scope of force majeure in Contracts and Real Estate, & global events, such as the COVID-19 pandemic, has brought it into focus, challenging its limitations and interpretations Origination of Force Majure The term "force majeure" originates from French civil law, meaning "superior force" . Although the term originated in the Napoleonic Code of 1804, its conceptual lineage can be traced back to Roman law’s Doctrine of ‘vis major’’ 1, which quite like Force majure excuses parties from liability in cases of natural disasters beyond human control.
Force Majeure started more generally in contracts per se, and over time statutes involving real estate transactions for lease, sale, construction contracts were introduced. The application of the Force Majeure Clause in Real Estate can be seen as early in 1863, in the case of Taylor v. Caldwell2. It involved a rental of a music hall, this case established the principle of impossibility of performance due to destruction of the subject matter. In India, the Apex Court, in the case of Satyabrata Ghose v. Mugneeram Bangur & Co. (1954)3, significantly shaped the doctrine of force majeure in Indian contract law. The dispute arose when Mugneeram cancelled a land sale contract, citing government requisition as a reason for the impossibility. The Court held that the requisition did not render the contract impossible under Section 56 of the Indian Contract Act.
The Court clarified that force majeure requires absolute impossibility, not mere inconvenience, thus upholding the contract’s enforceability. APPLICAPLE STATUTES
1. Section 6 of RERA
“The registration granted under section 5 may be extended by the Authority on an application made by the promoter, due to force majeure, in such form and on payment of such fee as may be .’’ “Provided that the Authority may in reasonable circumstances,... extend the registration granted to a project for such time as it considers necessary, which shall, in aggregate, not exceed a period of one year’’4
1 Code Civil [French Civil Code], 1804 (Fr.).
2 Taylor v. Caldwell, 122 Eng. Rep. 309 (Q.B. 1863).
3 Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44 (India).
4 The Real Estate (RegulatiOn and Development) Act, 2016, No. 16, § 6, Acts of Parliament, 2016 (India).
2. Section 32 of Indian Contract Act, 1872
“Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.”5
3. Section 56 of Indian Contract Act, 1872
“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, becomes unlawful, becomes void when the act becomes impossible or unlawful.”6
ANALYSIS
What qualifies as Force Majeure? As widely recognized in contract law, for an event to qualify as force majeure, it must arise from circumstances beyond the reasonable control of the contracting parties, and such circumstances must have a direct and substantial impact on the ability of one or both parties to fulfil their contractual obligations. In such cases, and subject to the specific language of the contract, the force majeure clause operates to relieve the affected party from liability for nonperformance. In essence, the force majeure clause reflects the contractual incorporation of well-established common law defences such as impossibility of performance, commercial impracticability, and frustration of purpose7.
These principles have traditionally shielded parties from breach of contract claims where unforeseen and uncontrollable events render performance impossible, unduly impractical, or defeat the very object of the agreement. IN RERA Prior to the enactment and implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA), the invocation of force majeure in real estate transactions in India was
5 The Indian Contract Act, 1872, No. 9, § 32, Acts of Parliament, 1872 (India).
6 The Indian Contract Act, 1872, No. 9, § 56, Acts of Parliament, 1872 (India).
7 King Stubb & Kasiva, Legal principles in invoking Force Majeure Clauses - Case Law Analysis, Lexology (Apr. 23, 2020), https://www. lexology. com/library/detail. aspx? g=27195bef-c753-4544-b315-d5ce65c1faaf. largely promoter centric. The contracts between promoters and buyers typically incorporated a wider scope of meaning when reading force majeure clauses, encompassing events such as "acts of God," or broadly framed events of "unforeseen circumstances. " Consequently, the Courts, had to read every clause of Force Majure in the contract to interpret the impossibility of performance. Moreover the aggrieved homebuyers, were compelled to seek redressal through civil courts or consumer forum, which in itself is a tedious and an expensive process for the buyers.
Such lack of regulation in the sale or lease of real estate agreements gave promoters an unfair advantage over buyers, allowing them to justify delays in project completion and handover of possession, often without substantive accountability. The introduction of the act & the formal recognition of force majeure, under Section 6 of RERA, provided a more efficient and codified framework for the Judiciary, while interpreting the non-performance clause. In Dlf Home Developers Ltd & Anr. V. Capital Greens Flat Buyers Association (2020)8, where the plaintiff cites delays in building plan approvals and ‘stop-work orders’ due to safety violations as force majeure events, the Court held that a force majeure claim must strictly conform to statutory criteria, emphasizing that, “the builder must demonstrate that the event was unforeseeable, unavoidable, and the sole cause of the delay.
” and rejected the plaintiffs claim, upholding compensation for buyers as the delays were foreseeable and partly selfinflicted. The Apex Court in Energy Watchdog v. CERC (2017) 9, outlined several key guidelines, stating that only delays meeting all the following conditions could be considered force majeure: • Unforeseeability: The event must not have been anticipated at the time of contract formation. • Unavoidability: The builder must have been unable to take reasonable steps to mitigate the delay. • Direct Causation: There must be a clear causal link between the event and the delay in
8 DLF Home Developers Ltd. v. Capital Greens Flat Buyers Ass’n, (2021) 5 SCC 53 (India)
9 Energy Watchdog v. Cent. Elec. Regulatory Comm’n, 2017 SCC OnLine SC 378 (India).
project completion. • Burden of proof rests with the party relying on the defence of force majeure The Court further observed that, regulatory impediments or procedural lapses, unless extraordinarily prolonged and exceptional, do not suffice to invoke force majeure. This decision clarified that relief under Section 6 is not inherent and requires compelling evidence that the delay was beyond the promoter’s control. By implementing these provisions with a narrow scope, the Supreme Court aimed to prevent abuse of the force majeure provision while ensuring that genuine claims receive appropriate relief. IN CONTRACT LAW Force majeure provisions assume significant relevance within real estate contracts, primarily in two domains: commercial leases and real estate development agreements.
10The necessity of incorporating a meticulously drafted force majeure clause in real estate contracts has become more pronounced. Parties must carefully delineate which forms of non-performance are to be exempted. The Bombay High Court in Westin Developers Pvt. Ltd. v. Raymond Alexis Nune (2020)11, where the developer delayed possession due to delayed municipal approvals and invoked force majeure for extension held that general reliance on force majeure is insufficient without specific reasoning and contractual backing. MahaRERA's initial acceptance of the extension was overturned by the Court, and the developer was directed to pay interest for the delay. A Contract should expressly specify:
The events that will constitute force majeure. • The rights and remedies available upon the occurrence of such events. • The contractual obligations subject to postponement or discharge due to force majeure. Failing to do so may expose parties to judicial determinations that extend or restrict the scope 10 Nicholas, Barry. “Force Majeure and Frustration.” The American Journal of Comparative Law 27, no. 2/3 (1979): 231–45. https://doi.org/10.2307/840030.
11 Westin Developers Pvt. Ltd. v. Nune, 2020 SCC OnLine Bom 3912 (India).
of force majeure contrary to their original intent where courts may either recognise events as force majeure that the parties did not contemplate or exclude events the parties presumed would be covered under general terms. Illustratively, the model agreement annexed as Annexure 'A' to the Maharashtra Rules provides guidance on the construction of clauses relating to delays in possession12. The relevant proviso stipulates that the promoter shall be entitled to a reasonable extension of time for completion and handover of the apartment where delays arise from, inter alia, any notice, order, rule, or notification issued by governmental authorities or competent forums, including courts. THE COVID -19 EFFECT The COVID-19 pandemic significantly disrupted the Indian real estate sector, halting construction activities, straining supply chains, and impacting labour availability.
Recognising these challenges, the Government and judiciary extended relief under the force majeure clause13, particularly through the Real Estate (Regulation and Development) Act, 2016 (RERA). Both Central and State Governments issued directives treating COVID-19 as a force majeure event. For example, Maharashtra RERA (MahaRERA) issued an order extending project completion timelines by six months, recognising the pandemic’s impact14. • Section 6 of RERA specifies force majeure events as war, flood, drought, fire, cyclone, earthquake, or “any other calamity caused by nature affecting the regular development of the real estate project. ” Although epidemics and pandemics are not expressly mentioned, they fall under the ambit of “calamity caused by nature,” as affirmed during the pandemic. 15 The Delhi High court in the case of MEP Infrastructure Developers Ltd vs.
South Delhi Municipal Corporation and Ors (2023)16, explained the continuous nature of the force majeure, and ruled that lockdown relaxations by the central and state governments do not mark 12 Model Form of Agreement, Annexure A, Maharashtra Real Estate (Regul. & Dev. ) (Reg. of Real Est. Projects, Reg. of Real Est. Agents, Rates of Interest & Disclosures on Website) Rules, 2017 (India). 13 Kaustuv Chunder, Force Majeure: Evolution of Jurisprudence in India Post COVID-19, Fox Mandal Advocated & Solicitors. (Aug. 3, 2021), https://www. foxmandal. in/force-majeure-evolution-post-covid-19-2/. 14 Maharashtra Real Estate Regulatory Authority, Order No. 14/2020, Extension of Project Registration and Statutory Compliance Timelines Due to COVID-19 Pandemic (May 18, 2020) (India).
15 Ed Cite 4
16 MEP Infrastructure Developers Ltd. v. S. Delhi Mun. Corp. & Ors., W.P.(C) 2241/2020
an end for major contracts like road construction projects. The court’s undermined the need to recognize ‘continued disruption’ caused by a force majeure event, ensuring its implications on infrastructure agreements remain intact, despite government measures to ease restrictions. In M/s. Halliburton Offshore Services Inc. v. Vedanta Ltd. (2020),17 the Delhi HC addressed a petition to restrain the invocation of bank guarantees due to non-performance caused by the COVID-19 lockdown. The court recognized the lockdown as prima facie a force majeure event but stressed that the party invoking force majeure must demonstrate a direct link between the pandemic and the inability to perform. The court noted that “It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly.
Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. ” “It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations” Although courts and regulatory authorities extended broad reliefs to developers during the pandemic, in recognition of the extraordinary circumstances, the Judiciary still maintained a narrow interpretation of force majeure, placing the onus of proof on developers to provide credible evidence proving a direct link between the clause and the non-performance.
CONCLUSION
The doctrine of force majeure has served as a critical mechanism in the Indian real estate, providing relief from non-performance caused by extraordinary, unforeseeable events. In order to invoke this clause, contracts must incorporate clear force majeure clauses, specifying covered events and remedies. Its application in India, through statutes in Contract Law & RERA and judicial cases reflects a delicate balance between contractual obligations and 17 Halliburton Offshore Services Inc. v. Vedanta Ltd. O. M. P (I) (COMM. ) No. 88/2020 & I. As. 3696-3697/2020 equitable relief. Judicial precedents, such as Satyabrata Ghose and Energy Watchdog , has provided guidelines for a strict interpretation of Force Majure i. e. un-foreseeability, unavoidability, and direct causation.
The COVID-19 pandemic highlighted its practical significance, with RERA authorities granting extensions under S, 6 of RERA, yet the courts, as seen in Halliburton case maintained a narrow interpretation, requiring concrete evidence of impossibility. This approach protects homebuyers from arbitrary delays while ensuring genuine claims get relief.
REFERENCES
1. Code Civil [French Civil Code], 1804 (Fr.).
2. Taylor v. Caldwell, 122 Eng. Rep. 309 (Q.B. 1863).
3. Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44 (India).
4. The Real Estate (RegulatiOn and Development) Act, 2016, No. 16, § 6, Acts of
Parliament, 2016 (India).
5. The Indian Contract Act, 1872, No. 9, § 32, Acts of Parliament, 1872 (India).
6. The Indian Contract Act, 1872, No. 9, § 56, Acts of Parliament, 1872 (India).
7. King Stubb & Kasiva, Legal principles in invoking Force Majeure Clauses - Case Law
Analysis, Lexology (Apr. 23, 2020), https://www.lexology.com/library/detail.aspx?g=27195bef-c753-4544-b315d5ce65c1faaf.
8. DLF Home Developers Ltd. v. Capital Greens Flat Buyers Ass’n, (2021) 5 SCC 53
(India)
9. Energy Watchdog v. Cent. Elec. Regulatory Comm’n, 2017 SCC OnLine SC 378
(India).
10. Nicholas, Barry. “Force Majeure and Frustration.” The American Journal of
Comparative Law 27, no. 2/3 (1979): 231–45. https://doi.org/10.2307/840030.
11. Westin Developers Pvt. Ltd. v. Nune, 2020 SCC OnLine Bom 3912 (India).
12. Model Form of Agreement, Annexure A, Maharashtra Real Estate (Regul. & Dev.)
(Reg. of Real Est. Projects, Reg. of Real Est. Agents, Rates of Interest & Disclosures on Website) Rules, 2017 (India).
13 Kaustuv Chunder, Force Majeure
Evolution of Jurisprudence in India Post COVID- 19, Fox Mandal Advocated & Solicitors. (Aug. 3, 2021), https://www.foxmandal.in/force-majeure-evolution-post-covid-19-2/.
14. Maharashtra Real Estate Regulatory Authority, Order No. 14/2020, Extension of Project
Registration and Statutory Compliance Timelines Due to COVID-19 Pandemic (May 18, 2020) (India).
15. Ed Cite 4
16. MEP Infrastructure Developers Ltd. v. S. Delhi Mun. Corp. & Ors., W.P.(C) 2241/2020
17. Halliburton Offshore Services Inc. v. Vedanta Ltd. O.M.P (I) (COMM.) No. 88/2020 &
I.As. 3696-3697/2020