The Law and Economics of Force Majeure Litigation- The Case of COVID 19

– Ram Singh

In the aftermath of the Covid-19, the world is witnessing a flurry of disputes over contractual performances and compensation claims for injuries with India being no exception. The pandemic has forced companies and firms to suspend their promised supply of goods or services, triggering legal demands of compensation from the counterparties in the contract. Many employers have held back on the promised wages, debtors have suspended servicing their debts, and insurance companies have refused to compensate claimants for the business income losses. In many of the disputes triggered by Covid-19, one or the other contracting party has invoked the pandemic as ‘force-majeure’, or an event that has frustrated the contact. In many other disputes, the suppliers have argued that the disease has made contractual performance an economic impossibility. That is, the pandemic has increased the cost of contractual performance to a level that they cannot afford.

This increased both litigation as well as the number corresponding out of court settlements. To read more about how and why this occurred, read here.