Many South Africans are wondering how COVID-19 will affect their contractual obligations. Therefore, many companies and private individuals are reviewing their contracts and whether they can plead “force majeure”.
When translated, force majeure means “superior force” or “unavoidable accident”. It refers to a common clause in contracts that aims to alter parties’ contractual obligations when circumstances beyond their control hinders one or all of the parties from fulfilling their obligations.
Generally speaking, force majeure clauses will adopt one of the following approaches when defining the type of event which may relieve a party from its contractual obligations:
These events may include:
When referring to an act of government, this is where a government body has put into place quarantines, travel restrictions, trade embargoes, or has closed borders, buildings and businesses.
However, when it comes to force majeure, the important difference lies in whether the government simply makes a recommendation or uses its power to make strict orders.
It’s important to consider the impact on the affected party’s ability to perform its contractual obligations.
It’s quite common for a force majeure clause to specify the impact that a circumstance or event must have in order for the clause to be put into effect.
Reference may be made to the event having hindered, delayed or prevented a party’s ability to perform its obligations.
Also referred to as impaired, impeded or interfered with. This is a lesser standard and, in appropriate circumstances, may be triggered by performance being made extremely difficult due to circumstances out of their control.
In such cases, it’s not necessary for parties to prove that obligations have been prevented for a period of time, or impossible to perform.
Instead, parties must be able to show that complying with obligations as quickly as required under the contract is substantially more difficult.
This means that it has become legally or physically impossible for a party to fulfil its obligations. It is relatively difficult to prove this, as it does not refer to performance being more difficult, less profitable or more expensive.
In previous cases, the courts have interpreted the force majeure clause as only applicable where performance is absolutely impossible on the occurrence of events beyond their control.
The following should also be shown when relying on force majeure to relieve contractual obligations:
The following steps should be followed by any party who wishes to rely on a force majeure clause:
Consider carefully what event or circumstance you claim constitutes the force majeure event, taking into account the wording of the clause and the timescales required for service of notice.
For example, was it the outbreak of COVID-19 itself, or subsequent government restrictions put in place?
If you would like more information regarding force majeure and how COVID-19 may affect your ability to fulfil your contractual obligations, please feel free to contact our attorneys.
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