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Force majeure in the time of COVID-19 – A Contract law perspective on the matter

The outbreak of COVID-19 has had a significant impact on both the health care system and the economy. The lockdown enforced by the South African government has, furthermore, prevented many South African businesses from operating. This article briefly examines the impact of force majeure/vis major on contractual performance within the context of the COVID-19 pandemic. It must be emphasised that the pandemic has caused significant uncertainty and that this article outlines the general rules that are applicable. The application of the rules will always depend on the terms of the contract and the specific facts of the case.

It is necessary to differentiate between the terms force majeure and vis major. Force majeure is a clause that is sometimes found in a contract. Vis major, on the other hand, is a South African common law principle. A vis major refers to an extraordinary event or an irresistible force beyond the control of the parties, including what is often referred to as an “act of God”. Within a contract, the force majeure clause sets out the procedure to be followed if one or both of the parties are unable to perform in terms of the contract due to an unforeseen and irresistible event. The COVID-19 pandemic has been recognised as an example of a vis major.

While the government has introduced a number of regulations relating to managing the spread of COVID-19, none of these measures automatically render legal contracts void. This is in accordance with one of the foundational principles of South African contract law, pacta sunt servanda (the sanctity of contracts). This principle provides that all legal contracts which are freely and fairly concluded should be upheld and enforced. The starting point for any legal analysis should therefore, remain grounded in the specific terms of the contract. If the contract includes a force majeure clause, then this clause will determine the procedure to be followed. Parties will however, have to examine the wording of their contract very closely to ensure that it covers COVID-19 (a pandemic). If the agreement does not expressly contain a clause governing force majeure, a party that cannot perform due to COVID-19 can attempt to rely on the common law rules pertaining to supervening impossibility. The courts have strict requirements in this regard however, including that the impossibility must be objectively impossible and not simply difficult. While legal contracts are not rendered void by COVID-19, many of the timelines within contracts (such as those relating to suspensive conditions) will also need to be scrutinised in the light of delays caused by the pandemic.

The need for legal certainty (sanctity of contract) will furthermore, need to be balanced with public policy considerations and the need for parties to negotiate with one another in good faith. Section 8(2) of the South African Constitution further confirms that the Constitution’s commitment to founding a society based on “human dignity, equality and human rights and freedoms” extends to private relations. Any contractual disputes that proceed to litigation may therefore be scrutinised to determine whether the parties attempted to negotiate in good faith and in accordance with the principle of ubuntu during this difficult time. The meaning of ubuntu was further defined by Justice Sachs (as he then was) in the 2005 case Port Elizabeth Municipality v Various Occupiers, para 37:

“[The spirit of ubuntu] combines individual rights with a communitarian philosophy. It is a unifying motif of the Bill of Rights, which is nothing if not a structural, institutionalised and operational declaration in our evolving new society of the need for human interdependence, respect and concern.”

As further emphasised by the FSCA in their Communication 12 of 2020: “Regulated entities should bear in mind the current circumstances and assist their customers with even more empathy, flexibility and understanding during these difficult times.”

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