Force Majeure & COVID19

The world at large is in a state of flux and COVID-19 has thrown the proverbial spanner in the works.  This act of God is having a massive impact on the way businesses around the world are conducting their businesses with varying consequences.

An act of God, in legal terms, is called a force majeure event which is derived from two Latin terms being (1) vis maior = a superior power or force that cannot be resisted or controlled; and (2) casus fortuitus = an exceptional or extraordinary occurrence not reasonably foreseeable.

In order for an event to constitute force majeure, such event must have been uncontrollable, not reasonably foreseeable and not due to the conduct of any of the relevant and/or contracting parties. In the context of contractual obligations, it is important to note however, that force majeure does not excuse the performance of a contracting party in all cases and each case has to be carefully assessed. In order for a contracting party’s obligations to be suspended and/or terminated the following determinations and/or criteria have to be met, namely:

• Does the contract contain a force majeure clause?

• If no contractual clause exist, reliance may be placed on South Africa’s common law principle, namely supervening impossibility.

When assessing whether an event constitutes a force majeure event the following conditions have to be met:

• the impossibility is objectively impossible;

• it must be absolute as opposed to probable;

• it must be absolute as opposed to relative, in other words if it relates to something that can in general be done, but the one party seeking to escape liability cannot personally perform, such party remains liable in contract;

• the impossibility must be unavoidable by a reasonable person;

• it must not be the fault of either party; and

• the mere fact that a disaster or event was foreseeable, does not necessarily mean that it ought to have been foreseeable or that it is avoidable by a reasonable person

• the impossibility must be objectively impossible and absolute (i.e. performance is not possible)

• it must not be the fault of either party.

Parties should be cautioned that before invoking the provisions of a force majeure clause or the principle of supervening impossibility, careful consideration needs to be given to whether they are entitled to do so. The remedies available due to a force majeure event are also varied and depend on various factors (e.g. wording of force majeure clause, nature of contract, etc.).

In the context of lease agreements, where a lessee who leases a premise is unable, due to force majeure, to enjoy beneficial occupation of same, the onus of proving this rests on the lessee (as he who alleges must prove). To be entitled to remission of rent, the loss of beneficial occupation must be directly due to and an immediate result of the force majeure event and not merely indirectly or remotely connected thereto.

A lessee who has paid rent in advance and is then deprived of beneficial occupation due to a force majeure event, is entitled to a remission of rent proportionate to the period of their loss of occupation. In addition to a force majeure clause and/or the common law, tenants may also possibly rely upon the Consumer Protection Act which provides, inter alia:

Section 54(1)(b) of the CPA provides that “[w]hen a supplier undertakes to perform any services for or on behalf of a consumer, the consumer has a right to the performance of the services in a manner and quality that persons are generally entitled to expect”.

Section 54(2)(b) of the CPA further states that “If a supplier fails to perform a service to the standards contemplated in subsection (1), the consumer may require the supplier to refund to the consumer a reasonable portion of the price paid for the services performed and goods supplied, having regard to the extent of the failure.”

As a result of the provisions in the CPA, if same applies to a tenant, such tenant  will have a remedy available outside of their common law remedy for a reduction of rent payable to the extent that the tenant’s use and enjoyment of the property is diminished due to COVID-19 during the national lockdown.

If you would like more information regarding the above, please contact our offices for a consultation.