Written by Martina Mutasa - Candidate Attorney and
Tshegofatso Monnana - Associate and
Sereeka Ananmalay - Associate
INTRODUCTION
The national lockdown in South Africa has, as with many other countries, resulted in several companies being unable to operate ‘business-as-usual’, causing the performance of certain contractual obligations to be affected. As a result, contracting parties are wanting to know what their rights are in instances where they are unable or inhibited from performing their contractual obligations.
FORCE MAJEURE CLAUSE
Force majeure is a contractual principle which exists to protect parties to an agreement should an event that is beyond the control of those parties occur, preventing them from performing their obligations in terms of the agreement for a specified period of time.[1]
Force majeure clauses allow a contracting party to escape the usual consequences of non-performance or delayed performance, if such performance is rendered impossible due to an unforeseeable and unavoidable event such as natural disasters, wars, insurrection, sabotage, and public riots.[2] However, each force majeure clause is drafted differently and whether or not failure to perform as a result of the Covid-19 pandemic and the ensuing government restrictions on movement falls within the ambit of such a clause, needs to be established on a case-by-case basis. In simple terms, the force majeure provision would need to expressly cover non-performance or delayed performance due to, for example, a “pandemic” or “government restrictions”.
South African courts are strict in their application and enforcement of the force majeure principle - it does not excuse non-performance of contractual obligations in all cases.[3] In the case of Glencore Grain Africa (Pty) Ltd v Du Plessis NO & Others[4], the court held that the general rule that impossibility of performance excuses a party from its obligation does not apply in all instances, the impossibility must be assessed in relation to the circumstances of each case.[5]
COMMON LAW DOCTRINE OF SUPERVENING IMPOSSIBILITY
Where an agreement, however, does not have a force majeure clause, it may be possible to rely on the common law principle of supervening impossibility of performance. In this regard, the courts have determined that if a party is prevented from performing their obligations due to irresistible force [vis major] or unforeseeable accident [casus fortuitous], it may be discharged from liability.[6] Therefore, for supervening impossibility of performance to apply, the event in question must be unforeseeable with reasonable foresight, or unavoidable with reasonable care.[7] Furthermore, the event, which needs to be no fault of the parties themselves, would need to render performance objectively impossible.[8] Objective impossibility would require a party to prove that it would have been impossible for any person in his/her position to perform the contractual obligation under the circumstances in question.
CONCLUSION
It is important to note that the Covid-19 pandemic itself may not render the performance of all contractual obligations impossible because, for example, certain businesses remain operational and may still be in a position to perform their contractual obligations. However, parties may be able to invoke a force majeure clause or the common law principle of supervening impossibility where certain conditions, as set out above, have been met. We therefore advise that you approach us for further legal advice should you wish to rely on the doctrine of supervening impossibility or a force majeure clause in a specific contract in an attempt to escape the natural consequences of non-performance or delayed performance of a contractual obligation.
[1]In Joint Venture Between Aveng (Africa) Pty Ltd and Strabag International GmbH v South African National Roads Agency SOC Ltd and another [2019] JOL 41800 (GP).
[2] Ibid.
[3] Glencore Grain Africa (Pty) Ltd v Du Plessis NO & Others (2007) JOL 21043 (O).
[4]Ibid.
[5]Ibid.
[6] In the case of FAWU obo Meyer / Rainbow Chickens [2003] 2 BALR 140 (CCMA), the commissioner held that incapacity could arise from supervening impossibility of performance.
[7] Owner of the MV "Snow Crystal" v Transnet Ltd t/a National Ports Authority [2006] JOL 18697 (C) at page 28-29. The plaintiff in this case alleged that it had entered into an agreement with the defendant, in terms of which the latter agreed to make a dry dock available for the purpose of repairing plaintiff’s ship. Alleging that the defendant had breached the agreement, the plaintiff sued for damages. The defendant denied the existence of the contract, and in the alternative pleaded that should the contract be found to exist, then the performance thereof was rendered impossible by certain circumstances set out in the plea. The court held that the first question to decide was whether a binding agreement had come about between the parties. The court found that, despite the defendant’s submissions to the contrary, it had. It then turned to consider the defence of supervening impossibility of performance. The facts satisfied the court that there were no insurmountable obstacles to the performance of the defendant’s contractual obligation.
[8] Unibank Savings and Loans Ltd (formerly Community Bank) v Absa Bank Ltd 2000 (4) SA 191 (W) at 198,