The impact of the Coronavirus on contracts in South Africa

The impact of the Coronavirus on contracts in South Africa

Arisha Rajaram

In light of the recent Coronavirus (also known as COVID-19) case being confirmed in South Africa, there are certain legal implications that this global virus would have should the Coronavirus spread.

Performance in terms of the contract

One of the main issues that companies and/or persons would be faced with, is whether such company and/or person would be able to perform in terms of their contract as a result of either party being infected by the Coronavirus, or directly impacted by the Coronavirus in some way.

Performance can take the form of either not being able to do a particular act or failing to fulfil an act to the best of that party’s ability.

Force Majeure

In terms of most contracts, there is a provision for a party not being able to fulfil their contractual obligations in terms of the contract as a result of an unforeseeable circumstance, beyond their reasonable control. This provision or clause in the contract, is referred to as a ‘Force Majeure’.

All parties should ensure that their contracts make provision for Force Majeure clauses, and that the Coronavirus outbreak is to form part of that clause and be protected under it. Parties need to also consider whether their current contracts make provision for a Force Majeure event, and whether the Coronavirus outbreak falls within the protection offered by the relevant clause.

Being able to rely on a non-performance of the contract as a result of a Force Majeure event, is not recognized as a standalone principle. Such event must be specifically dealt with in the relevant contract, and the protection afforded by the clause will depend on the precise wording of the clause.

It should be noted that not all contracts will have Force Majeure provisions. Contracts which do not have a Force Majeure clause may require further consideration as to the nature of the impact of the Coronavirus outbreak on the contract, as well as the effect that this might have on the contracting parties.

Force Majeure in South Africa

Under South African law, where contractual terms dealing with an event are absent, a debtor is released and excused from performing in terms of an agreement if performance is prevented by vis major or casus fortuitous.

In the case of Peters Flamman & Co Appellants v Kokstad Municipality Respondents [1919] AD 427, it defined the meaning of vis major as “some force, power or agency which cannot be resisted or controlled by the ordinary individual and includes not only acts of God but also acts of man”. This case further defined the meaning of casus fortuitous as “a species of vis major which imports something exceptional and unforeseen and which human foresight cannot be expected to anticipate, or, if it can be foreseen, it cannot be avoided by the exercise of reasonable care or caution.”

The case of Bischofberger v Vaneyk [1981] 4 All SA 54 found that the rule stating that if performance of a contract becomes impossible then the parties’ obligations will be extinguished, and is dependent on the nature of the contract; relationship of the parties; circumstances of the case; and nature of the impossibility.

Risk management

As a way to ensure that all contracts are legally sound when dealing with the Coronavirus outbreak, companies, people who are a party to a contract, contract drafters and even compliance officers, need to consider the risks, as well as ways to mitigate against the risks. The following should be taken into account:

  • the effect on the company’s ability to meet existing contractual obligations;
  • the impact of the contract on suppliers and customers;
  • inserting relevant clauses relating to infection and disease;
  • possible breach of the contract, and policies in place to deal with such breach;
  • termination clauses within existing contracts, and whether the time periods to terminate are reasonable; and
  • analysing the terms of the existing contract and inclusion of the Coronavirus outbreak under the Force Majeure clause.

For more information on the Coronavirus and South African Contracts, contact Rajaram Mvulane Attorneys at info@rajarammvulane.co.za

Article Disclaimer

This article is not intended to provide legal advice. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

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