West Asia crisis: Govt invokes Force Majeure for delayed contracts

The Finance Ministry has said that contractors executing government contracts disrupted by the West Asia situation will be given additional time and not face penalties, as such delays will be treated under the 'Force Majeure' clause.

The Ministry of Finance has said that contractors and suppliers executing contracts with government entities will be given additional time and will not face penalties if their work has been disrupted due to the ongoing West Asia situation, according to an official memorandum.

Understanding the 'Force Majeure' Invocation

In the Office Memorandum issued by the Department of Expenditure, the government clarified that delays caused due to such disruptions will be treated under the "Force Majeure" clause, which allows relief in extraordinary circumstances beyond human control.

"A Force Majeure (FM) means extraordinary events or circumstances beyond human control... such as a war...," the ministry said, adding that such a clause "frees both parties from contractual liability" when obligations cannot be fulfilled due to such events.

The ministry further stated that in cases where contracts have been impacted due to the prevailing West Asia situation, "the procuring entities may invoke Force Majeure."

Scope and Conditions of the Relief

The relief applies to contracts with government agencies across goods, services and works, the memorandum indicated, covering suppliers, consultants and contractors engaged in public procurement. It added that contractors will not face penalties for such delays.

"The supplier would not be liable for imposition of any such sanction so long as the delay... is the result of an event covered in the FM clause," the memorandum said.

The government also provided clarity on timelines, stating that deadlines for completion of contracts due on or after February 28, 2026, "may be extended for a period of not less than two months and not more than four months without imposition of any cost or penalty."

According to the memorandum, such extensions will be decided on a case-by-case basis after examining the validity of claims under the Force Majeure provisions.

The ministry emphasised that this relief will apply only where parties were not already in default before the disruptions. "Invocation of Force Majeure shall be considered valid only where the parties to the contract were not in default... as on 27th February 2026," it said.

It also clarified that the clause does not completely waive obligations. "Invocation of Force Majeure does not absolve all non-performances... but only such non-performances as are directly attributable to disruptions," the memorandum noted, adding that "all contractual obligations shall revive upon completion of the period."

The move is aimed at providing relief to businesses and contractors impacted by geopolitical disruptions, while ensuring that contractual commitments resume once the situation stabilises. (ANI)

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