Page 36 - Q&A

Is the Covid-19 lockdown automatic grounds
for breach of contract?

April 2020
“Our business scheduled a launch function for a new product in April. A function
venue was booked for the event. With the Covid-19 lockdown we cannot hold the
function anymore and informed the venue that we want to cancel the contract.
Commercial probably still do the launch later, but don’t want to be bound to this venue as we
They however replied that they will accommodate us after the lockdown. We will
may have to adapt the format of the function after the lockdown. The contract
only provides for breach of contract. Can we cancel the contract for breach as
the venue was unable to hold the function?”

To answer your question, one must first differentiate between breach of contract
and impossibility to perform under a contract.

Breach of contract typically occurs where one party fails to deliver or perform in
accordance with the agreed terms of the contract. It must be noted that with
a breach, the failure is due to circumstances which are within the control of
the party from whom performance is due. Such breach, if not remedied, entitles
the aggrieved party to, amongst other remedies, cancel the agreement.

Impossibility to perform, on the other hand, occurs where a party is unable to
perform or deliver completely or absolutely due to a change in circumstance
which prevents the party from delivering or performing in terms of the contract.
Such impossibility only occurs where the circumstances are out of the control
of the party from whom the performance is due. In such a case, the obligation
of the party from which the performance is due may be suspended for the
period during which the impossibility continues.

Our courts have held that although a breach of contract can entitle an
innocent party to cancel a contract, the presence of a temporary impossibility
only suspends the obligations of a party for the period of which the impossibility
continues. Temporary impossibility therefore neither brings an end to an
obligation nor does it generate a right to terminate an obligation.
In your situation, assuming the contract is silent on provisions which deal with
a situation such as the Covid-19 lockdown, the function venue could raise the
defence of a temporary impossibility to perform.

In your case, the national lockdown in response to the Covid-19 pandemic
gave rise to a supervening impossibility to perform by the function venue. The
national lockdown was not within the control of the function venue. Consequently,
the function venue’s failure to perform does not give rise to a breach of the
agreement, but rather a temporary impossibility to perform on their side.
Their willingness to avail the function venue after the lockdown confirms their
view that they will still be able to perform once the lockdown has passed.

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