The Fulfilment of Contractual Obligations in the Context of #Covid19 – Unpacking impossibility and Force Majeure

The Corona Virus pandemic has had a significant impact on business, although in South Africa, we have not yet realized the exact impact. What is for sure is that the “old” remedy of force majeure and impossibility of performance will become a very topical issue.

In a prior article we looked at the definition of Force Majeure, specifically in light of the Joint Venture between Aveng (Africa) (Pty) Ltd and Strabag International GmbH v South African National Roads Agency SOC Ltd and another[1] (the “SANRAL” case). In this matter, the court had to determine whether on the facts, and having regard to the definition of what constitutes force majeure , the applicant would succeed in the intended dispute resolution forum to prove that indeed there was a state of “force majeure”.

From this, it is therefore commonly accepted that a Force Majeure event (the "event") is an event that is:

(1) unforeseeable (at the time of entering into the Contract),

(2) unavoidable in terms of occurrence or impact and

(3) impossible to overcome.

Force Majeure does not apply:

(1) where the Contract is entered into after the event,

(2) to non-performance of monetary payment obligations; or

(3) if the event occurs after the affected party delays performance.

In the absence of a force majeure clause or an insufficient clause in a contract, the common law principle of impossibility of performance may apply. The generally recongnised precedent on this is Transnet Ltd t/a National Ports Authority v Owner of mv Snow Crystal[2] the court stated that:

“As a general rule impossibility of performance brought about by vis major or casus fortuitus will excuse performance of a contract. But it will not always do so. In each case it is necessary to:

1. look to the nature of the contract,
2. the relation of the parties,
3. the circumstances of the case, and
4. 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.”

Importantly the impossibility must not be self-created or due to his or her fault.

Application to different scenarios

In Peters Flamman and Co v Kokstad Municipality[3] “A contract is void if at the time of its inception its performance is impossible: impossibilium nulla obligatio. So, also where a contract has become impossible of performance after it had been entered into the general rule was that the position is then the same as if it had been impossible from the beginning.”

In Mountstephens & Collins v Ohlssohn's Cape Breweries[4] the tenant claimed remission of rent because the defendants by vis major or casus fortuitus were prevented from enjoying occupation of the property for the purpose for which it had been leased.

The court said: "… 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 fortuitus, provided always that the loss of enjoyment of the property is the direct and immediate result of the vis major or casus fortuitus, and is not merely indirectly or remotely connected therewith." [5]

Conclusion

Whether or not suppliers or tenants are exempt from liability would depend on a case by case basis. Contact an expert at SchoemanLaw, for advice and to ensure that you mitigate foreseeable risks to survive Covid 19.