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Act-of-God-like situation

  • Posted By
  • Categories
    Polity & Governance
  • Published
    8th Sep, 2020
  • This week, attributing the shortfall in GST collections to disruptions due to Covid-19, Finance Minister Nirmala Sitharaman said the economy is facing an Act-of-God-like situation.
  • The Finance Ministry had also said that this pandemic “should be considered a case of natural calamity and Force majeure clause (FMC) may be invoked, wherever considered appropriate.
  • The force majeure or “Act of God” clause has its origins in the Napoleonic Code.
  • FMC is a clause that is present in most commercial contracts and is a carefully drafted legal arrangement in the event of a crisis.
  • ggWhen the clause is triered, parties can decide to break from their obligations temporarily or permanently without necessarily breaching the contract.
  • Force majeure clause (FMC) is mentioned in the 2017 Manual for Procurement of Goods issued by the Department of Expenditure.
    • Besides, some reference can also be found in Section 32 of the Indian Contract Act, 1872 (the “Contract Act”).
  • Generally, an “Act of God” is understood to include only natural unforeseen circumstances, whereas force majeure is wider in its ambit and includes both naturally occurring events and events that occur due to human intervention.
  • War, riots, natural disasters or acts of God, strikes, introduction of new government policy imposing an embargo, boycotts, outbreak of epidemics and such situations are generally listed.

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