The force majeure clause is the most negotiated and least carefully drafted provision in Indian commercial contracts. The standard formulation, “acts of God, war, natural disasters, strikes, lockouts, and any other event beyond the reasonable control of the party affected,” has been the working template for decades. The Supreme Court has, over the past decade, made clear that this template is no longer enough. The leading authority is Energy Watchdog v. Central Electricity Regulatory Commission, decided in 2017 and reported as (2017) 14 SCC 80. The COVID-era decisions of the High Courts and the Supreme Court applied and refined the framework. The cumulative position in 2026 is that a generic force majeure clause is unlikely to provide the relief the drafter intended.
This article addresses what the Energy Watchdog framework requires, how Indian courts have applied it through and beyond the COVID-19 period, and what specific drafting choices counsel should make to give the clause operational force.
The Energy Watchdog Framework
In Energy Watchdog, the Court addressed the question whether an increase in the cost of imported coal, caused by a change in Indonesian export regulations, constituted force majeure under power purchase agreements between Tata Power, Adani Power, and the discoms. The Court held that it did not. The reasoning has three strands.
One. Force majeure under Indian law is governed by Section 32 of the Indian Contract Act 1872 (frustration of contract by an event making performance impossible) and Section 56 (impossibility of performance), supplemented by the parties’ express contractual provision. Where the contract has an express force majeure clause, the clause governs and Section 56 is largely displaced.
Two. The express force majeure clause is interpreted strictly. The event invoked must fall within the categories enumerated in the clause. A general residual “any other event beyond reasonable control” is interpreted ejusdem generis with the specific events listed. An increase in cost, however severe, is not, on this reading, in the same genus as natural disasters or war.
Three. The relief available under the clause is what the clause provides. The clause may provide for suspension of performance, extension of timelines, or termination. Where the clause does not provide for price adjustment, the parties cannot use force majeure to re-price the contract.
The COVID-Era Applications
The COVID-19 pandemic produced the largest single wave of force majeure litigation in Indian history. The pattern was substantially uniform. Tenants invoked force majeure to suspend rent. Service providers invoked it to suspend delivery. Borrowers invoked it to defer payment.
The Delhi High Court in Halliburton Offshore Services Inc. v. Vedanta Ltd. declined to grant interim relief against the encashment of bank guarantees on a force majeure plea, on the ground that the contract did not specifically cover the type of disruption involved. The Bombay High Court in Standard Retail Pvt. Ltd. v. M/s. G.S. Global Corp. declined to suspend payment on a steel supply contract on the ground that the importer was still able to receive the goods and the alleged disruption was upstream. The Madras High Court took broadly the same approach in commercial lease cases, distinguishing between rent suspension claims and termination claims.
The Supreme Court, addressing related questions in Energy Watchdog‘s shadow, reinforced the framework. The clause is interpreted strictly. Generalised hardship is not force majeure. The contracting party that wanted price adjustment, suspension, or termination should have negotiated for it in the clause.
What the 2026 Clause Should Say
The drafting prescription that follows from Energy Watchdog and its successors is straightforward.
First, the clause should enumerate specifically the events that count as force majeure. Generic categories should be supplemented by named specific events that the parties consider material to their commercial context. For a power purchase agreement, this means naming changes in fuel import regulation. For a real estate construction contract, this means naming labour disputes, material shortages, and statutory clearances. For a SaaS contract with overseas suppliers, this means naming sanctions, export control restrictions, and platform termination by upstream providers.
Second, the clause should specify the relief available. Suspension of performance, extension of timelines, price adjustment, partial termination, and full termination should each be addressed. Where price adjustment is intended, the formula must be in the clause. Courts will not supply a formula by interpretation.
Third, the clause should set out the notice and proof requirements. The affected party should notify the other within a defined period and produce documentary evidence of the event. Where notice is not given, the right to invoke force majeure is forfeited.
Fourth, the clause should address the duration. If the event continues for longer than a specified period, the parties should have the right to terminate. Without a termination right, the parties may be locked into an indefinite suspension that is commercially worse than termination.
Fifth, the clause should address the financial consequences of suspension. Who bears the cost of mobilisation and demobilisation? Are advance payments refundable on termination? Are deposits and bank guarantees released?
Post-COVID Trends
Three trends visible in commercial contracts drafted since 2022 are worth noting.
One. The use of separate “Material Adverse Change” or “Change in Law” clauses alongside force majeure. A Change in Law clause addresses regulatory changes that affect the contract’s economic basis, with a defined price-adjustment mechanism. This is now standard in power purchase agreements, infrastructure concessions, and long-term commodity supply contracts.
Two. The use of insurance to cover the residual exposure. Where the force majeure clause does not provide for price relief, the party may insure against the underlying risk separately. Business interruption insurance, political risk insurance, and credit insurance fill gaps that the clause cannot.
Three. The greater use of arbitration with experienced commercial arbitrators rather than litigation. Where the clause requires interpretation in a commercial context, an arbitral tribunal that understands the industry is better positioned than a court.
Practical Checklist for Drafting
- Have you enumerated specific events, not only generic categories?
- Have you addressed the events that are most relevant to your industry and counterparty?
- Have you specified the relief? Suspension, extension, price adjustment, termination?
- If price adjustment is intended, is the formula in the clause?
- Have you set out notice and proof requirements?
- Have you addressed duration and the termination trigger?
- Have you addressed financial consequences of suspension and termination?
- Is there a separate Change in Law or MAC clause to cover regulatory and economic-basis changes?
- Have you considered insurance for residual exposure?
Conclusion
The force majeure clause cannot be the template paragraph it once was. The Supreme Court’s framework in Energy Watchdog, reinforced through the COVID-era decisions, requires specificity in the events enumerated, in the relief available, and in the procedural conditions. Counsel who draft generic clauses are committing the same error that produced the COVID-era litigation. The work to do is in the specific facts of the deal, with named events and stated remedies.
Endnotes
1. Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80 : 2017 SCC OnLine SC 378.
2. Indian Contract Act 1872, Sections 32 and 56.
3. Halliburton Offshore Services Inc. v. Vedanta Ltd., Delhi HC, 2020.
4. Standard Retail Pvt. Ltd. v. M/s. G.S. Global Corp., Bombay HC, 2020.