Force Majeure -An analysis of what Force Majeure is

Force majeure – an analysis of what force majeure is, mitigating its risks, remedies available to parties in the event of a force majeure, and whether COVID-19 is an event of force majeure.

Written by Lydia le Roux, Legal Advisor, for LexisNexis South Africa.

[Durban, 07 April 2020]

What does force majeure mean?
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, plague, or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure¹.

Where a contract is silent on force majeure or no written contract is in place, we need to follow the principles of the common law. South African law is, however, quite strict in the sense that it does not excuse the performance of a contract in all cases of force majeure. There are certain conditions that must be fulfilled in order for a force majeure to trigger impossibility to perform. These are:

• the impossibility must be objectively impossible;
• it must be absolute as opposed to probable;
• it must be absolute as opposed to relative, in other words if it relates to something that can in general be done, but the one party seeking to escape liability cannot personally perform, such party remains liable in contract;
• the impossibility must be unavoidable by a reasonable person;
• it must not be the fault of either party; and
• the mere fact that a disaster or event was foreseeable, does not necessarily mean that it ought to have been foreseeable or that it is avoidable by a reasonable person².

You may wonder whether you are protected during this period by appropriate contractual rights, particularly in relation to force majeure, as businesses will start to receive notices in terms of force majeure and might also require such notices to be sent out.

A company must prove that the force majeure event was not within its reasonable control. There must usually be a link between the force majeure event and the failure to perform. The important question remains: is it actually impossible for a party to fulfil its obligations under the contract?

While a party may be excused from its obligations under the contract while the force majeure continues, there is usually an obligation to use all commercially reasonable efforts to alleviate and mitigate the cause and effect of the force majeure event and resume performance of its obligations once it is able to do so.

Remedies available to parties in the event of a force majeure
The general effect of a force majeure is that parties are excused from their obligations. This means that a party who validly fails to perform as a result of a force majeure cannot be sued for any damages suffered by the other party as a result of the non-performance of the other.

Steps to take to mitigate risks
It is important for companies to take proactive steps to ensure that they can fulfil their contractual obligations and that the parties they are contracting with are doing the same in order to prevent the need for invoking a force majeure clause. It is also recommended that you review your insurance policies potentially covering an event such as COVID-19.

Is COVID-19 an event of force majeure?
In the event where a complete lock-down has been communicated and, as a result, contractual performance is rendered impossible, contracting parties would then be able to rely on a force majeure clause or rely on the principles of the common law.

As an introduction to and an aid to legal practitioners in understanding the legal nature, scope and implications of force majeure in practice, LexisNexis asked Advocate Chris Rodel of the KwaZulu-Natal Bar to compile a compilation of relevant citations and extracts from the Lexis Library using the Advanced Search and Legal Citator. Click here to download the document.

Conclusion
Parties to commercial agreements need to carefully consider what constitutes force majeure in order to determine if COVID-19 outbreak could be interpreted as force majeure.

Procedures which may be provided in commercial agreements in respect of the sending out of a force majeure notice to the other party would need to be adhered to fully. Companies should, further, take reasonable steps to mitigate force majeure events, where permissible. Failing which, companies may not be successful in relying on force majeure as a mechanism to be excused from its obligations³.

[1] Amazon.com: International Business Law and Its Environment, Eighth Edition (South-Western Legal Studies in Business Academic Series) (9780538473613): Richard Schaffer, Filiberto Agusti, Lucien J. Dhooge, Beverley Earle: Books. amazon.com.

[2] Glencore Grain Africa (Pty) Ltd v Du Plessis NO & others [2007] JOL 21043 (O).

[3]The convergence of COVID-19 and force majeure, Thato Mashishi https://www.lexisnexis.co.za/news-and-insights/covid-19-resource-centre/practice-areas/contract-law/the-convergence-of-covid-19-and-force-majeure

Lydia le Roux

Legal Practitioner – Legal Practice Council (non-practising attorney)

Affiliate Member of the Compliance Institute Southern Africa