Arbitration and Mediation counsel, New Delhi

Gujarat National Law University, Gandhinagar

Exclusion or No-Damages-For-Delay clauses are infamous clauses found in construction contracts. They intend to exempt, wholly or partially, the employer’s liability for the happening of certain events, including the employer’s breaches. So, while the contractor is entitled to an extension of time, he is deprived of any compensation – left high and dry. India is no stranger to such clauses, but their enforceability is blurred for the lack of a proper analysis of the precedents on this issue. The uncertainty especially weighs heavily on contractors, who often enter into such imbalanced arrangements, relying on the school of thought that suggests that exclusion clauses are not enforceable. Unfortunately, this is no more than false hope for the contractors; proper analysis busts this myth wide open and reveals that exclusion clauses are indeed enforceable under Indian law. Contractors are, therefore, cautioned to be attentive and thorough. But there are ways out, some specific to Indian law (unlike others in the brief survey of jurisdictions). Contractors may find some latitude when dealing with the grave implications of exclusion clauses.

Contractors in India generally enter into contracts through a competitive bidding process initiated by the employers. There is often no scope for negotiation in such bidding processes (particularly those initiated by the government employers). It is generally the case that bids have to fully comply with the terms and conditions of the invitation to tender or the notice invited tender; thus, expecting a zero deviation from the bidding terms. Otherwise, it would become a ground for rejection of the bid.