Jay Gajbhiye and Ankesh, both 2nd year Law students of National Law University Odisha, describes the concept of Act of God and it’s repercussions on the performance of contractual obligations amid Covid-19 pandemic.

INTRODUCTION

The term Force majeure, which is a common clause mentioned in many contracts nowadays, basically excuses the companies or any other party to the particular contract from meeting the requirements on their part of the contract if certain situations like, “natural disasters, war, unforeseen government actions and sometimes also includes pandemics and epidemics” occurs which is beyond their control and interferes with the party’s part of performance of the contractual terms.[1] If these clauses are invoked, then they can relieve the parties out of the performance of the contractual terms. It can be defined as an occurrence not reasonably predictable or manageable, which occurs from “natural causes” and could not be avoided by immediate precautions.[2]  

This is a “paradox” that we can designate Coronavirus as “Act of God” in legal words. If the agreed provisions (terms of the contract) cannot be carried out, not because of the party’s negligence but because of anything outside its reach, it is not legally and practically appropriate to enforce liabilities.

The recent happenings of the outbreak of the Coronavirus globally have risen a question as to whether we can put this following pandemic under the Act of God as COVID-19 was neither predicted nor could be avoided.

EFFECT ON CONTRACTS OF TRADE AND AGREEMENTS

The term “Act of God” appears regularly within contracts, but it is not a concept defined by statute. Despite this, its significance is relevant, as an Act of God can activate a party’s right to postpone results, cancel obligations, or even terminate a contract. Given the epidemic of COVID-19, several parties wonder that the epidemic itself is a “work of Nature.[3]” Now the virus has been a concern for all segments of the society, and we have seen how the Public healthcare system has failed to contain it. Businesses also seem to be affected by this crisis, the possibility of no physical contacts have adversely affected these businesses. It’s been almost seven months since the virus has been around and the situation doesn’t seem to change. Workers are unable to attend work, shipment delays, or canceling big events, the virus is having significant consequences in many industries.[4] How the force majeure clause would be used is to be seen.

The courts are going to decide what will constitute force majeure depending upon the facts of the particular case, and it should also be noted that there is no need, the clause should be mentioned in the contract. The approach of the court is also going to be interesting to see while deciding a case on these matters. Now, we have seen that the Chinese government issued “force majeure certificates” to Chinese companies[5], but globally what will decided is yet to be seen. As with the majority of situations, the presumption of proof is with the party applying, and thus, if a party is going to have to rely on a force majeure provision, all relevant evidence should be gathered.[6] It seems likely that the outbreak itself will be deemed an Act of God[7] by applying the Court’s advice to the COVID-19 outbreak.[8]

However, considering the proximity of the COVID-19 outbreak itself and the constraints of the government, an alternative view can be taken that the connection between the Act of God and non-performance is not severed. Since this issue is not resolved, if a party wishes to rely on a contractual clause relating to an Act of God in the sense of the COVID-19 outbreak, their stance must be clear as to whether the related non-performance occurred as a result of the pandemic itself or as a reaction to it by humans. The other events mentioned as force majeure could be a hint for clarification in the contract setting: several courts interpreting force majeure clauses will look at concrete examples of force majeure events to justify the definition in broader terms, such as God’s act.[9] Determining whether a pandemic or virus epidemic would be an Act of God may also depend on what other misfortunes the parties thought would justify obligations under the contract.

EFFECT OF CORONAVIRUS ON MEDICAL INSURANCES

Buying a health insurance plan is, from an individual’s point of view, one of some ways he/she can mitigate the consequences of health-related demands. Health-related issues may have various impacts on an individual. Besides getting the individual physically and mentally drained, compensating for medical treatment, hospitalization and medication may be a huge strain on a person and his/her relatives. Right now, a life-care kit arrives at the rescue. Typically, a normal health insurance plan compensates for the diagnosis and hospitalization expenses associated with a medical disease. For a fact, companies do market the regular policy to some individuals, who may incur extra charges involved with severe diseases, insurance in case of significant medical bills, etc. This can be invaluable in the moment of need.[10]

Also, if an expert’s advice is to be taken, if the person who is having existing health insurance is diagnosed with the disease, then the cost which would be incurred in the treatment of the disease is to be included in the policy itself. The main reason given by them is that since the symptoms of Coronavirus are just normal flu-like, hence, be included in the policy itself. But if medical insurance is taken after this global outbreak of the Coronavirus, then the person might not be entitled to the treatment of Coronavirus included in the policy. In regards to the global outbreak of the Coronavirus pandemic, the Insurance Regulatory and Development Authority (IRDA) has given the names of 29 insurers who will be allowed to sell an indemnity health insurance product which will cover the hospitalization costs for the treatment of the Coronavirus.[11] The life care premium would have compensation between INR 1 lakh and INR 5 lakh.[12] The regulator has explained that COVID-19 hospitalization will include all new Mediclaim programs in India. In addition to being concerned about the epidemic, this comes as a consolation. Citizens were still worrying about the financial consequences of the same in a sluggish economic climate.

CONCLUSION

In conclusion, we can say that whether Coronavirus can be regarded as an act of God is not clear. This depends on the language. Contracts containing clauses for force majeure appear to set out eligible incidents, sometimes citing natural hazards, conflict, and unexpected government decisions. These can also contain pandemics, epidemics, and the specific “catch-all” term for incidents outside the reach of a group. Also, we can understand that the act of Coronavirus was started by a person itself, so there is a possible chance that this cannot be regarded as an act of God, but if the clause is not invoked, it could be leading to various uneventful situations regarding the performance of the contractual obligations. Outbreaks and epidemics are often classified as force majeure incidents, though courts have no expertise in determining if a specific disease meets the bill, and when we see it with respect to COVID, the expertise of courts may not be critical. The suspensions and other unforeseen disturbances that followed the spread of the virus carry “all the hallmarks of force majeure” is close to those of a hurricane or other large-scale natural catastrophe, considering the impact of the epidemic on companies.


Jay Gajbhiye and Ankesh are second year Law student from National Law University Odisha.


[1] Ellen Gilmer, Coronavirus as an Act of God: Force Majeure Clauses Explained, BLOOMBERG LAW (Mar 27, 2020), https://news.bloomberglaw.com/environment-and-energy/coronavirus-as-an-act-of-god-force-majeure-clauses-explained

[2] Andrew Schwartz, Breaking contracts over coronavirus: Can you argue it’s an

‘act of God’?, THE CONVERSATION (Mar 31, 2020), https://theconversation.com/breaking-contracts-over-coronavirus-can-you-argue-its-an-act-of-god-134791

[3]Kristen Anderson, The Proximal Origin of SARS Covid- 19, NATURE MEDICINE (March 17, 2020), https://www.nature.com/articles/s41591-020-0820-9

[4] Nick Ashcroft, Coronavirus – an act of God?, ADDLESHAW GODDARD (Feb. 2020), https://www.addleshawgoddard.com/en/insights/insights-briefings/2020/general/coronavirus-an-act-of-god/

[5]Sun Yu, China issues record number of force majeure certificates, FINANCIAL TIMES (Feb. 2020), https://www.ft.com/content/bca84ad8-5860-11ea-a528-dd0f971febbc

[6] Nick Ashcroft, Coronavirus – an act of God?, ADDLESHAW GODDARD (Feb. 2020), https://www.addleshawgoddard.com/en/insights/insights-briefings/2020/general/coronavirus-an-act-of-god/

[7] Gordon Kaufman, On the meaning of act of God, Cambridge University (Apr. 1968), https://www.cambridge.org/core/journals/harvard-theological-review/article/on-the-meaning-of-act-of-god/035E1B248A520B3C6F8698A303942FD0

[8]Isabelle Ord, DLA Piper, When is an outbreak an act of God? Mitigating commercial and operational risks during the COVID-19 crisis, DLA Piper (May 4, 2020), https://www.dlapiper.com/en/uk/insights/publications/2020/02/when-is-an-outbreak-an-act-of-god-mitigating-commercial-and-operational-risks/

[9]FEMA Emergency Management Institute, Introductory Session – Four Theories of Disaster, (Nov. 7, 2002), http://training.fema.gov/EMIWeb/edu/docs/hazdem/Session%205%20–%20The%20Four%20Theories%20of%20Disaster.doc

[10]Moneytips, CBS News, Insurance: What exactly constitutes an “Act of God”? (July 30,2015),

https://www.cbsnews.com/media/insurance-what-exactly-constitutes-an-act-of-god/

[11]Guidelines on introduction of short term health insurance policies providing coverage for COVID-19 disease (June 23, 2020), https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4159&flag=1

[12]Financial Express, Can a health insurance policy protect you from Coronavirus impact?(April 7, 2020), https://www.financialexpress.com/money/insurance/explained-can-a-health-insurance-policy-protect-me-from-coronavirus-impact/1920945/.

IMPORTANT – Opinions expressed in this article are the sole responsibility of the author and do not necessarily reflect the views of IJOSLCA.

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