COVID-19 and Contractual Obligations

The COVID-19 pandemic has had for reaching effects. It has changed the world. Social life, travel tourism, trade and commerce have all been disrupted. The performance of some contracts have been delayed whilst some contracts cannot be performed as a result of the effects of the pandemic. Is the pandemic a justifiable reason for breaching a contract? Can the party in breach be held liable for the breach? The answer to these questions depends on the terms of the contract.

Force majeure or vis Major

Most commercial contracts contain a force majeure or vis major clause. Force Majeure refers to a superior force, event or circumstance beyond the control of the contracting parties and as a result of which contractual performance is made impossible.In Wendall Parson v Matipedza Karase and Nu-Aero (Pty) Ltd t/a Fresh Air; Mafusire J stated that: Vis Majeure or its variants, Vis Major or force Majeure or casus fortuitous or “an act of God” situation, determines a contract. If performance becomes objectively impossible the party in default is relieved of his obligation.The supervening impossiblity must not be due to his fault. It must be the result of an external factor beyond control.

Force Majeure events

These are events which could not have reasonably been foreseen, avoided, protected against or overcome. They are not attributable to any party’s acts or omissions.Examples of force Majeure events include but are not limited to the following:

1. 1. Epidemics
2. 2. Pandemics
3. 3. Quarantines
4. 4. Strikes, lockdowns or riots
5. 5. Natural catastrophes such as hurricane, typhoon, earthquake or volcanic activity.
6. 6. War, hostilities, invasion, act of foreign enemies
7. 7. Road closures or lack of access to roads.

Vis major clauses

A good commercial contract should contain a vis major clause. The Clause should expressly suspend a party’s obligations under the contract until the vis major event ceases. The vis major clause suspends the ordinary consequences of breach of contract such as specific performance, payment of damages and or penalties or termination of contract. Such a clause protects the parties in the event of a vis major event.The following is an example of such a clause.

Neither party will be liable for, or will be considered to be in breach of or in default under this agreement on account of, any delay or failure to perform as required by this Agreement as a result of any causes or conditions that are beyond such party’s reasonable control and that such party is unable to overcome through the exercise of commercially reasonable diligence. If any force majeure event occurs, the affected party will give prompt written notice to the other party and will use commercially reasonable efforts to minimize the impact of the event.

The legal position vis-à-vis force majeure events

In Beitbridge- Bulawayo/ Railway (Pvt) Ltd v Commercial Union Insurance Company of Zimbabwe Ltd the court stated that:“The general rule in our law is that if as a result of vis major or other supervening physical or legal act performance of a contract has become impossible through no fault of the debtor, the obligations under the contract are extinguished.”The court in the aforesaid matter went on to refer to the remarks by Boshoff JP in Bischofberger v Van Eyke that:

This general rule is not absolute so as to override the terms or the implications of the contract… It follows from this that, when the court has to decide on the effect of impossibility of performance on a contract, the court should first have regard to the general rule that impossibility of performance does in general excuse the performance of a contract but does not do so in all cases and must then look to the nature of the contract, the relation of the parties, the circumstances of the case and the nature of the impossibility to see whether the general rule ought, in the particular circumstance to be applied. In this connection regard must be had not only to the nature of the contract, but also to the causes of the impossibility. If the causes were in the contemplation of the parties they are generally speaking bound by the contract. If on the contrary, they were such as no human foresight could have foreseen, the obligations under the contract are extinguished.

Please read our newsletter on Payment of rent & Mortgage payments in Zimbabwe As we continue to look into Covid-19 And Contractual Obligations.