General Issues

FORCE MAJEURE (VIS MAJOR) AND COVID-19

By 08/04/2020 No Comments

Force Majeure, a French term meaning “greater force” is an act of God or man that is unforeseen or an unforeseeable event that prevents someone from fulfilling a contract. While Force Majeure is not legislatively defined in our law, it is often included in the terms of our contracts to define an unforeseeable event and to provide the mechanisms as agreed on by the parties on the consequences thereof to the contract.

However, should a contract not contain a Force Majeure provision, South Africa’s common law principle of ‘Supervening Impossibility’ may become applicable provided that the requirements are met, which may result in the parties being able to suspend their obligations under the contract. These said requirements dictate that the proper performance of the contract must be actually and absolutely impossible directly due to the unforeseen and unavoidable event and not merely burdensome or costly.

An example of an old case where the common law principle is illustrated for purposes of remission of rental, Mountstephens & Collins v Ohlssohn’s Cape Breweries 1907 TH 56, the Court stated “that a lessee is entitled to remission of rent wholly or in part where he has been prevented wholly or to a considerable extent in making use of the property for the purposes for which it was let, by some vis major or casus fortuitous, provided always that the loss of enjoyment of the property is the direct and immediateresult of the vis major or casus fortuitous, and is not merely indirectly or remotely connected therewith.”

As per Transnet Ltd t/a National Ports Authority v Owner of MV Snow Crystal [2008] 3 All SA 255 (SCA) when applying the defence of ‘supervening impossibility’, in each case it is necessary to “look to the nature of the contract, the relation of the parties, the circumstances of each case, and the nature of the impossibility invoked by the defendant, to see whether the general rule, ought, in the particular circumstances of the case, to be applied.” The Court further set out that “the rule will not avail a defendant if the impossibility is self-created, nor will it avail the defendant if the impossibility is due to his or her fault.”

In Ex Parte Lebowa Development Corporation LTD [1989] 4 All SA 492 (T) the order sets out that “In the law of contract, if vis major etc. should render performance of a contractual obligation impossible then, unless the contract provides otherwise, the contract will be discharged to the extent of its impossibility and the loss will lie where it falls.”

Bearing all the above in mind, it is not so simple to merely apply these terms to your contracts given the state of Covid19. It is important to take note of the terms of the contract, the ‘material adverse change’ as may be defined in your contract as well as the principle of pacta sunt servanda, which is a legal principle of contracts to which parties must be bound.

It is therefore necessary and imperative that your contracts first be reviewed by your attorney to assess the extent to which reliance can be placed on any force majeure provisions, material adverse change or the principle of supervening impossibility because of the issues relating to the covid19 outbreak. These provisions or principles incorrectly relied upon may result in breach of contract which may expose you to contractual damages claims.

Lastly, and as a side note, it may be necessary to engage with the other parties to the contract to agree to a solution to the performance of obligations during this uncertain time and further to reduce these variations in writing.

McLarens Attorneys is able to assist you in reviewing your contracts, advising you accordingly and attending to any negotiations, amendments or cancellations.