Real Estate Investor Magazine South Africa May/ June 2020 | Page 48

LEGAL
An unforeseeable
act of God
Force-majeure during Lockdown
VERONICA VURGARELLIS & MUSA ZIMU
W
hat if your office building is no longer accessible?
Do you still have an obligation to pay rent? You
have paid for a venue for an event, but the event
cannot proceed. Can you get your payment back?
Force Majeure explained
The position of contracting parties with the foresight to
include a force majeure clause in their contract will be
regulated by that clause. A force majeure – or vis major – is a
superior force or event or circumstance beyond the control
of contracting parties and as a result of which contractual
performance is impossible. It is an act of God or man that
is unforeseen or unforeseeable to either contracting party.
Force majeure normally terminates contractual obligations,
but the specific legal position between contracting parties
will depend on their intention expressed in the force majeure
clause in their contract.
Force Majeure clauses
Parties wishing to protect their interests and regulate their
legal position often include a force majeure clause in their
contract which can set out:
1.
What constitutes a force majeure;
2. The effect of the force majeure on contractual
obligations – whether termination or temporary
suspension of either party’s obligations;
3. The procedure for invoking the clause to limit liability
for inability to perform in terms of the agreement;
4. An agreed period during which non-performance
will be acceptable and the consequences of the
lapsing of that period;
An example of a force majeure clause is:
“In the event of force majeure, the contract will be suspended
for the entire period during which the force majeure occurrence
continues. Should the occurrence exceed 6 (six) months, either
party becomes entitled to terminate the contract by giving
written notice of termination to the other party.”
In keeping with the doctrine of freedom of contact, parties
are free to customise the clause to suit their needs and
specific industry. A well-constructed force majeure clause can
eliminate a lot of the uncertainty that may arise in the event
of the occurrence of a force majeure. Parties should be as
detailed as possible in the construction of the clause. Vague
The announcement by President Cyril Ramaphosa for South
Africa to enter into a lockdown has certainly disrupted our
economy. Parties to contracts whose obligations are now
difficult or impossible to meet because of the lockdown are
asking whether they are excused from their contractual
obligations.
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MAY/JUNE 2020 SA Real Estate Investor Magazine
Typical occurrences that are classified as force
majeure events are:
Strikes, lockouts or riots;
Acts of god, fire, storm, earthquakes;
Acts of State
Breakdown, malfunction, or damage to plant,
machinery, equipment or facilities;
Epidemics or quarantines;
Delay, shortage, lack of, or interruptions to supplies,
electricity, gas, water, equipment, fuel and other
materials;
Road closures or lack of access to roads; and
Inability to obtain or renew the required permits or
licenses
force majeure clauses are subject to the rules of interpretation,
which may have an unintended result for one or both parties
or frustrate relief altogether.
In the absence of a force majeure clause, the position is
regulated by the common law principle of “supervening
impossibility of performance”. An impossibility that arises
after the conclusion of a contract is called supervening
impossibility of performance, which means that performance
has become objectively impossible without the fault of the
debtor as a result of an unavoidable and unforeseen event.
The effect of supervening impossibility of
performance
Supervening impossibility of performance affects both the
obligation that has become impossible as well as any counter-
obligations. If the impossibility is permanent, it generally
excuses the creditor from rendering any counter-performance
and obligations are extinguished on both sides. If the seller
objectively through no fault on their part cannot deliver, the
purchaser does not have to make payment. If the service
provider cannot deliver the service, the client is not liable to
make payment. Restitution of whatever was performed under
the contract must take place, which can be enforced by an
enrichment action.
If the impossibility is either temporary or partially
impossible the circumstances of the case will determine
the effect on contractual obligations. It is possible that a
performance is divisible, in which case the debtor will only
be released from those parts of the obligation which have
become impossible to perform.
Requirements:
Two requirements must be met before supervening
impossibility of performance can terminate a contract:
The performance must be objectively impossible;
and
The impossibility must be unavoidable by a
reasonable person.
Objective impossibility means it must be impossible for
anyone to perform under the contract; it is not enough
that it is impossible for the specific contracting party to
perform. Neither is it enough that performance has become
difficult or expensive. The second requirement means that
the impossibility cannot be due to any of the contracting
parties – it must be attributable to any unavoidable act of
nature or human beings. These include acts of State such as a
government declared lockdown.
Conclusion
We suggest any contracting party wishing to rely on a force
majeure clause or supervening impossibility of performance
to seek legal advice before coming to any conclusions and to
avoid actions based on breach of contract. Your legal adviser
will advise you on your legal position based on your specific
circumstances and the provisions of your contract.
SOURCE Lawtons Africa
SA Real Estate Investor Magazine MAY/JUNE 2020
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