In light of the recent
Coronavirus (also known as COVID-19) case being confirmed in South Africa,
there are certain legal implications that this global virus would have should
the Coronavirus spread.

Performance in terms of the
contract

One of the main issues that
companies and/or persons would be faced with, is whether such company and/or
person would be able to perform in terms of their contract as a result of
either party being infected by the Coronavirus, or directly impacted by the
Coronavirus in some way.

Performance can take the form of
either not being able to do a particular act or failing to fulfil an act to the
best of that party’s ability.

Force Majeure

In terms of most contracts, there
is a provision for a party not being able to fulfil their contractual
obligations in terms of the contract as a result of an unforeseeable
circumstance, beyond their reasonable control. This provision or clause in the
contract, is referred to as a ‘Force Majeure’.

All parties should ensure that
their contracts make provision for Force Majeure clauses, and that the
Coronavirus outbreak is to form part of that clause and be protected under it.
Parties need to also consider whether their current contracts make provision
for a Force Majeure event, and whether the Coronavirus outbreak falls within
the protection offered by the relevant clause.

Being able to rely on a
non-performance of the contract as a result of a Force Majeure event, is not
recognized as a standalone principle. Such event must be specifically dealt
with in the relevant contract, and the protection afforded by the clause will
depend on the precise wording of the clause.

It should be noted that not all
contracts will have Force Majeure provisions. Contracts which do not have a
Force Majeure clause may require further consideration as to the nature of the
impact of the Coronavirus outbreak on the contract, as well as the effect that
this might have on the contracting parties.

Force Majeure in South Africa

Under South African law, where
contractual terms dealing with an event are absent, a debtor is released and
excused from performing in terms of an agreement if performance is prevented by
vis major or casus fortuitous.

In the case of Peters Flamman
& Co Appellants v Kokstad Municipality Respondents [1919] AD 427, it
defined the meaning of vis major as “some force, power or agency which cannot
be resisted or controlled by the ordinary individual and includes not only acts
of God but also acts of man”. This case further defined the meaning of casus
fortuitous as “a species of vis major which imports something exceptional and
unforeseen and which human foresight cannot be expected to anticipate, or, if
it can be foreseen, it cannot be avoided by the exercise of reasonable care or
caution.”

The case of Bischofberger v
Vaneyk [1981] 4 All SA 54 found that the rule stating that if performance of a
contract becomes impossible then the parties’ obligations will be extinguished,
and is dependent on the nature of the contract; relationship of the parties;
circumstances of the case; and nature of the impossibility.

Risk management

As a way to ensure that all
contracts are legally sound when dealing with the Coronavirus outbreak,
companies, people who are a party to a contract, contract drafters and even
compliance officers, need to consider the risks, as well as ways to mitigate
against the risks. The following should be taken into account:

  • the effect on the company’s ability to meet
    existing contractual obligations;
  • the impact of the contract on suppliers and
    customers;
  • inserting relevant clauses relating to infection
    and disease;
  • possible breach of the contract, and policies in
    place to deal with such breach;
  • termination clauses within existing contracts,
    and whether the time periods to terminate are reasonable; and
  • analysing the terms of the existing contract and
    inclusion of the Coronavirus outbreak under the Force Majeure clause.

For more information on the
Coronavirus and South African Contracts, contact Rajaram Mvulane Attorneys at info@rajarammvulane.co.za

Article Disclaimer

This article is not intended to
provide legal advice. This article is a general information sheet and should
not be used or relied on as legal or other professional advice. No liability
can be accepted for any errors or omissions nor for any loss or damage arising
from reliance upon any information herein. Always contact your legal adviser
for specific and detailed advice. Errors and omissions excepted (E&OE).

GUEST AUTHOR BIO

Arisha Rajaram

Arisha Rajaram

Attorney

Rajaram Mvulane Attorneys

Arisha Rajaram is a hardworking, dedicated and diligent worker. She obtained her LLB from the University of Kwa-Zulu Natal in 2013. Arisha is an effective researcher who has been awarded the Penny Andrews Award during her studies. She was admitted as an attorney of the High Court on 12th October 2015. Arisha has further obtained an advanced course in Business Rescue from the Law Society of South Africa (LEAD) and UNISA and has completed short courses on the Forms of Business Enterprises (Law Society of South Africa – LEAD), Sectional Title Practices (Paddocks) and Insolvency Law (Law Society of South Africa – LEAD).