Force majeure and its impact on contracts

Force majeure and its impact on contracts

A force majeure. is an act of God or man that is unforeseen and unforeseeable and out of the reasonable control of one or both of the parties to a contract, and which makes it objectively impossible for one or both of the parties to perform their obligations under the contract.

As impossible as it may sound, the law attempts to make provision for such circumstances, where a force majeure causes a contract to become impossible to perform.

These may include but are not limited to:

  • Acts of God
  • Natural Disasters
  • Epidemics or Pandemics
  • War

What is the objective of such a clause?

The principal objective of a force majeure clause in a contract is to allow certain terms of an otherwise legally binding agreement to be ignored because of unavoidable circumstances.

When does this clause apply?

There must be an evident link between the force majeure and the non-performance of contractual obligations by either party to the contract.

An event is categorised as force majeure if it has the following elements:

  • unforeseeable at the time of entering into the contract;
  • inevitable in terms of occurrence or impact; and
  • impossible to overcome.

How to invoke this clause

How to invoke this clause
1
To invoke a force majeure event, one must look at the clause wording in the contract.
2
The definition is broad, but some clauses are worded very specifically.
3
Some clauses contain a notice requirement, preventing relief if the relevant notice is not given during the necessary time period stipulated in the contract.
4
Other provisions in certain contracts require the affected party to show that it has taken all reasonable actions to avoid or prevent the event and its effects.

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Consequences of invoking a force majeure

Depending on the specific contract, but generally:

1
suspension of contractual obligations;
2
non-liability;
3
extensions regarding fulfilling contractual obligations;
4
obligation to mitigate losses; and
5
possible contract termination
Consequences of invoking a force majeure

What if my contract does not have such a clause?

South African law includes common law which provides for such cases. This could also apply where the intention is not clear from the way a clause is drafted. The common law principle is called the principle of ‘supervening impossibility of performance’ and it suspends the obligations under the contract, if it has become objectively impossible for the performance of such obligations.

This can only apply, subject to certain conditions:

1
the impossibility must occur after the conclusion of the contract;
2
the events must be unavoidable and make proper performance of the contract impossible; and
3
objective impossibility includes instances of actual physical impossibility and where performance remains physically possible but cannot reasonably be expected to be performed

How can we help?

  • We can assess current contracts and advise on the applicability of force majeure
  • We can draft comprehensive clauses in future contracts
  • We can draft a notice of invocation of such a clause
  • We can interpret current agreements (for this clause and others)
  • We can advise on a course of action if such a clause is invoked

Contact us at info@bizarmour.co.za

010 140 6251

Disclaimer
The information shared on this article/blog/vlog should be read and understood within the current legal framework of South Africa. It is meant purely for educational discussion and does not amount to legal advice. For specific legal advice, please consult a legal practitioner prior to application.

Posted in Contractual.