Tuesday, 17th March 2020
As the pandemic of the novel COVID-19 spreads at a significant rate across the globe, the instances of infection and preventative quarantines have escalated exponentially both in South Africa and throughout the world. Given the seriousness of the current situation, it is important to discuss the effect that either contracting the virus, or being placed in quarantine, will have on the performance of obligations under a contract, with particular attention given to contracts of employment.
There are circumstances when a party to a contract is unable to perform in terms of the contract for reasons that are unforeseen and out of the control of the party concerned. Under certain instances, these unforeseen and unexpected events are referred to as a force majeure (vis maior) or, in English, an act of God.
A simple definition of a force majeure (an act of God) is as follows:
“unforeseeable circumstances that prevent someone from fulfilling a contract.”
It is commonplace to find what is referred to as a force majeure clause in a contract. Such a clause is a provision in a contract that excuses a party from not performing its contractual obligations that becomes impossible or impractical, due to an event or effect that the parties could not have anticipated or controlled.
A party’s ability to claim relief for a force majeure event therefore depends upon the terms of the contract, and the force majeure provision in particular. Force majeure are express terms and will not ordinarily be implied into contracts governed by South African law.
A party affected by such an event of force majeure will typically be relieved from performing the obligation affected for the duration and to the extent affected. As with all matters dependent upon the terms of the contract, each force majeure provision must necessarily be considered on its precise terms and in its specific context. In South African law, the force majeure clauses are addressed and dealt with through the contractual principle known as supervening impossibility.
The above-mentioned principle sets out that if performance becomes objectively impossible after the contract was concluded without any fault on the part of the parties thereto and as a result of the unforeseen events, the obligation to perform and the reciprocal right to demand performance are extinguished. Importantly, the requirements that need to be met in order for the obligations under a contract to be extinguished include that the performance of an obligation becomes physically or legally impossible and not merely difficult or inconvenient.
By way of an example and in the context of the recent restrictions placed on mass gatherings: where there is a wedding, music festival or any other event that will inevitably attract crowds of larger than 100 people and such an event cannot take place due to the corona-enforced restrictions, it is arguable that an event of force majeure will have occurred and a force majeure clause will necessarily be triggered. It is not unreasonable to assume that the novel ‘corona virus’ is going to cause significant contractual disputes. It seems likely that the effect of the ‘corona virus’ may render certain obligations in agreements, in certain circumstances and depending on the context, impossible to perform and may relieve the parties from performing in terms of the agreements.
Many contractual provisions set out a specific list of force majeure events which are deemed to be events of force majeure beyond the control of the parties, such as “pandemics” or “diseases.” A specific reference to a “pandemic” will make it easier to bring a force majeure claim but will still require the other criteria for a force majeure test to be satisfied.
However, if the provision does not include language to that effect, then it will be necessary to consider whether the ‘corona virus’, or its impact on a business or employment relationship, is captured by a different concept, such as an “act of God,” or a catch-all provision. Most force majeure provisions contain catch-all language in respect of events which are “outside the reasonable control of the party affected”. It seems clear that a pandemic such as the corona virus would qualify as force majeure under such a provision.
Contact our offices at Rubensteins Attorneys should you be involved in any such disputes or have any queries, and one of our team members will gladly assist.