The outbreak of COVID-19 (a.k.a. the corona virus) is having a global impact and in some instances, is resulting in a tragic loss of life. In addition to the impact on everyday life, it is also having an knock-on effect on business operations both locally and international.
The question that we are being asked in practice is does the current outbreak constitute a Force Majeure event? In order to answer this question, one has to understand what constitutes Force Majeure (“FM”).
Force Majeure translates literally from French as superior force and describes uncontrollable events or “acts of God” that are not the fault of any party and that make it difficult or impossible to carry out normal business.
A force majeure clause is often inserted into a contract to absolve parties from liability in the event that a party or the parties cannot fulfil the terms of a contract (or if attempting to do so will result in loss or damage of goods) for reasons which are beyond their control.
In order to establish whether the Corona Virus constitutes a FM Event, the following factors need to be considered:
is there a contract between the parties and if so, does the contract have a FM clause or is reliance being placed on South African common law remedy of supervening impossibility of performance;
where contracts do contain a FM clause, it will be necessary to consider the precise terms of any given clause to determine whether the Corona Virus is contemplated in the FM clause; and
typically, a party will have to show that: (1) an FM event has occurred and that it is beyond its control; (2) it has prevented, hindered or delayed its performance of the contract; and (3) it has taken all reasonable steps to avoid or mitigate the event or its consequences.
FM clauses typically contain very clear notice provisions that need to be followed in order to trigger an FM Event and as a result, one must ensure that correct and timeous notice is given in compliance with the contract.
An FM Event does not necessarily mean the end of the contract, but may provide for the suspension of performance for a period of time, rather than conferring an immediate entitlement to terminate.
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