Frustrating A Tenancy Agreement
Section 56 of the ICA provides for two forms of impossibility of the performance of contractual obligations – (a) an agreement on an impossible act is, on the face of it, not axable; (b) an agreement of deed, if the act becomes impossible after the conclusion of the contract because of the intervention of an event which the promise holder could not prevent, it becomes invalid at the stage of the occurrence of such an event. In India, several governments and the central government have imposed travel restrictions, imposed quarantine measures and/or closed borders and trade activities to contain/restrict new epidemics. In addition, the recent announcement made by the Indian Prime Minister on 24.03.2020, the three-week national ban from midnight of 24.03.2020, and the subsequent order of 24.03.2020 empty.40-3/2020-Dm-I (A) adopted by the Indian government, the Ministry of the Interior has led to questions on which FMC can be invoked in the context of several leases. A rental of his property in B for a period of 3 years, and B paid AS. 70,000 as rent for accommodation each month. The lease agreement contained no clause stipulating the purpose for which B could occupy the premises, except that it could only be used for commercial purposes. There were no restrictive covenants in the agreement indicating that A retained control of the property. All care and maintenance services of the property had to be paid for and facilitated by B. This conveys the intention to create a lease agreement and, as is the main determinant, it will be considered a leasing creation. Another ingredient, often confused as a determinant of a lease, is a long-term/permanent ingredient. As is clear in Section 105, the duration of a lease may be permanent for a specified period or even permanent. A long-term necessity does not necessarily mean the creation of a lease; it can, however, help cement the finding of a lease agreement.
If an agreement does grant a tenancy agreement, the tenant cannot terminate the contract by indicating the cause of the pandemic. On the other hand, if the agreement grants a license that depends only on how the agreement is drafted, the tenant has two options to terminate the contract – a broad force majeure clause (the “government authority file” or “epidemic” as defined as events of force majeure), or if the tenant can prove a total frustration of the contract because of the seemingly endless deadlock. In the case of the “doctrine of frustration,” the lease is frustrated when, without the fault of the parties, the obligations arising from the agreement can no longer be met due to unforeseen circumstances, as originally intended. Sometimes landlords and tenants do not agree that the event has outsmarted the lease. These situations can be particularly difficult – for example, when a fire damages a unit, but the tenant refuses to leave the unit and maintain the restoration process. Given the current pandemic, it is highly unlikely that rental space will be “essentially and permanently unfit or destroyed” as a result of the closure. The reasons that one may have as a tenant to terminate the lease could range from the inability to open the premises to businesses to considerable losses due to the blockage, making the tenant unable to pay the rent.