Page 103 - Q&A

How far can Covid-19 be used to avoid
meeting contractual obligations?

May 2020
“With the outbreak of the coronavirus and the resulting lockdown I have found
that many of the service providers to my business are using the coronavirus as
an excuse to not meet their contractual obligations. We have all been affected
by this, but at some point, the virus cannot be a blanket excuse for not meeting
your obligations. To what extent is the virus a valid excuse?”
It is indeed unprecedented times affecting many businesses. These times also
call for patience and accommodation that sometimes goes beyond the letter
of the contract. But the coronavirus has not invalidated our law or given rise
to a new set of legal rules overnight. The law of contract still applies and is still
relevant to your existing contracts and the obligations thereunder.

What the virus may have triggered in terms of a contract is what our law tends
to call a force majeure event, with the coronavirus potentially falling into the
category of events that qualifies as a force majeure event. Typically, such events
will allow a party to claim a postponement-amendment or absolution of their
obligations in terms of the contract due to the event occurring.
Reliance on force majeure is, however, not automatic and a contract must
make provision for such events and define what could be construed as such an
event as well as the consequences that would follow if such an event did occur.
Assuming though that a contract does provide for such an event, it would then
allow the other party to claim such relief as afforded to the aggrieved party
by the contract. If any of your service providers are claiming reliance on a
force majeure clause, it will be important to review your contracts with them to
establish if such reliance is correct and provided for.
Another justification which parties could use for not meeting their contractual
obligations is the common law defence of a supervening impossibility of
performance. This defence can be used where an event like the coronavirus
makes it partially or temporarily impossible for a party to perform in terms of
an agreement. Each set of facts will have to be evaluated on their own merits Litigation
to determine whether such a defence is valid and whether it would apply to
all obligations or only certain obligations under the contract. Where there is a
valid impossibility to perform, the party’s obligation to render performance is
then usually suspended until the impossibility disappears, and the obligation
then again becomes due. However, if the impossibility becomes unreasonable,
too lengthy or even permanent, the party awaiting performance may elect to
cancel the contract.

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