Can Force Majeure Be Argued Without a Specific Clause?

Question from Nik, Can Force Majeure Be Argued Without a Specific Clause?

Answer from AI:

In the dispute between Oasis Pharmaceuticals Private Limited (“Oasis”) and Modern Life Saving Pharmaceuticals (“MLSP”), the concept of force majeure may play a crucial role, especially given the impact of the COVID-19 pandemic on business operations. Understanding whether force majeure can be invoked without a specific clause in the contract is essential for both parties.

Understanding Force Majeure

Force majeure refers to unforeseeable circumstances that prevent someone from fulfilling a contract. Typically, contracts include a force majeure clause that specifies which events qualify and how they affect contractual obligations. However, if a contract lacks such a clause, parties may still argue force majeure based on general legal principles or applicable laws.

Arguments for Oasis

• Implied Force Majeure: Oasis might argue that the principles of force majeure are implicitly included in every contract under the doctrine of implied terms, especially in jurisdictions where such provisions are standard in commercial contracts.
• Doctrine of Frustration: In the absence of a force majeure clause, Oasis could rely on the doctrine of frustration. This legal principle can terminate a contract when an unforeseen event renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract.
• Adjustment of Targets: Oasis could argue that the pandemic was an unforeseeable event that justifiably prevented them from meeting the exact EBITDA targets, thus necessitating an adjustment of contractual expectations.

Arguments for MLSP

• Strict Compliance: MLSP can argue that the contract should be adhered to as written, emphasizing that the absence of a force majeure clause indicates that both parties did not intend to allow deviations from the agreed terms due to unforeseen events.
• Non-fulfillment of Conditions: MLSP might contend that since the specific EBITDA targets were not met, they are not obligated to proceed with the investment as per the original agreement.
• Legal Precedence: MLSP could reference cases where courts have declined to imply a force majeure condition in the absence of a specific clause, arguing that the burden of unforeseen circumstances should not automatically shift contractual risks.

Legal Advice and Further Actions

Both parties should consult with legal professionals who can provide personalized advice based on the specifics of the contract and the jurisdiction’s laws. Legal counsel can offer guidance on:

1. The likelihood of successfully arguing force majeure or frustration of purpose in court.
2. Potential for renegotiating contract terms to reflect the changed circumstances due to the pandemic.
3. Strategic considerations for litigation or arbitration, as appropriate.

Conclusion

While the absence of a force majeure clause complicates the situation, both Oasis and MLSP have potential arguments based on general legal principles and the specific circumstances of their case. It is crucial for both parties to seek legal guidance to navigate this complex issue effectively. For more detailed information on force majeure, you can refer to resources like the Cornell Law School’s Legal Information Institute.

Note: This information is not legal advice but is intended to provide a general understanding of the principle in question. Always consult a qualified attorney for specific legal guidance.