#Covid19 delaying or making the fulfilment of contractual obligations impossible a Force Majeure?

Force majeure translates literally from French as a superior force. The so-called “act of God”. It describes those uncontrollable events (such as war, strikes, or extreme weather) that are not the fault of any party. And that makes it difficult or impossible to carry out regular business.

 

These clauses are included in contracts to absolve itself from liability in the event it cannot fulfil the terms of an agreement (or if attempting to do so will result in loss or damage of goods), for reasons beyond its control.

 

The effect of the outbreak on suppliers is perhaps most apparent. With emergency measures impacting on goods, workers and logistics, many suppliers appear unable to fulfil their contracts within the prescribed time or at all.

 

Requirements

 

In Joint Venture Between Aveng (Africa) Pty Ltd and Strabag International GmbH v South African National Roads Agency Soc Ltd and Another,[1] works were delayed, and the agreement subsequently cancelled as a result of unrests that the Applicant maintained made the Contract impossible to perform. The Applicant contended that the circumstances leading up to the delays and termination were a Force Majeure event. The court held that looking at the definition of ‘Force Majeure’ the following must be overcome:

 

“(a) whether the protests or unrests could not reasonably have been avoided or overcome;

(b) whether these incidents are not substantially attributable to SANRAL and

(c) whether the alleged  ‘Force Majeure’ affected a substantial part of the works….

In this case, SANRAL repeatedly asked the ASJV to attend community meetings to resolve the dissatisfaction that was causing the unrests. From day one, the ASJV adopted a stance that the events constituted ‘Force Majeure’ that entitled it certain rights in terms of the Contract. The Contract obliges the parties to make efforts to resolve the problems.

… Indeed, no efforts were made by the ASJV to at least be party to the problem solving, which, in my view, could reasonably have been anticipated and planned for. “

 

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.

 

Accordingly, 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.

 

Claim and mitigation

 

From the above it is clear that the party alleging force majeure must notify the other (ie counterparty) of the event promptly. Where such prompt or timely notice is not given the party concerned may become liable for losses suffered by the counterparty.

 

The affected party’s obligation to mitigate the effects of the event has been expressed as a “best efforts” obligation. If the affected party fails to utilise its best efforts to overcome the impact of the event on its non-performance it may not invoke Force Majeure.

 

Conclusion

 

Whether or not suppliers 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.

[1] (8331/19) [2019] ZAGPPHC 97; [2019] 3 All SA 186 (GP) (22 March 2019)

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