THOUGHT OF THE WEEK The Coronavirus – contractual escape clause?
Updated: Mar 31, 2020
Most contracts make provision for the termination of an agreement in the event of unforeseeable circumstances that prevent someone from fulfilling his obligations under a contract. This is also frequently referred to as an act of God or a force majeure (vis maior). With the spreading COVID-19 virus, the pressing question for many people is the possible termination of an agreement in the event that one of the parties cannot fulfill their obligations due to this virus. The force majeure clauses are dealt with by South African Courts through the prism of the contractual principle known as supervening impossibility. This principle stipulates that if performance becomes objectively impossible after the contract was concluded without any fault on the part of the parties thereto and as a result of unforeseen and unavoidable events, the obligation to perform and the reciprocal right to performance are extinguished. The threshold requirements for supervening impossibility which relieves the debtor of its duties, are briefly that performance of an obligation by the debtor (e.g. the repayment of a loan, payment of rent, rendering tertiary education) becomes physically or legally impossible, after the contract was concluded, and not merely difficult, more burdensome or economically onerous. This excludes instances where the impossibility was due to the debtor’s own fault. For instance, if a house is let and it is destroyed by fire without the fault of the tenant (e.g. by lightning) the lease is at an end and the tenant’s obligation to pay rent falls away; where however the fire is caused as a result of the negligence of the tenant, the lease obligations will continue. This will similarly apply where, for example, an event booking cannot proceed because a prohibition was placed on gatherings of more than 100 persons in light of a hazardous virus, as we are experiencing at present worldwide. It is considered that the effect of the prohibitions being put into place in respect of the spread of the Corona virus, may render certain obligations in agreements impossible to perform, and may, depending on the specific circumstances, relieve the parties from compliance with some or all of their agreements. Consult with an attorney if you have any concerns in this regard.
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