CONTRACTS AND CRISES

Covid 19 pandemic has affected all aspects of live, be it families, work and businesses. Companies have adopted new working measures such as working from home and countries effected lockdowns which have in turn affected trade between countries. Resultantly the execution of contracts across different fields has been affected due to Covid 19. A contract is generally defined as an agreement which is legally enforceable or legally recognised as creating a duty. It is well established that unless the law requires otherwise a contract may be in writing or oral, Zunda vs. Mkulmadzi Farm Bakeries Ltd (1995)2 MLR. A contract contains the terms and conditions that bind the parties including consideration for performance of the contract, termination clauses and force majeure clauses which is the subject-matter of this article. The article will discuss the operation of force majeure clauses during the Covid 19 pandemic as provided for in contracts.

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Broadly a force majeure?literally means a ‘superior force’ that prevents the performance of a contractual obligation due to causes which are outside the control of the parties and could not be avoided by exercise of due care (Allan Hans Muhome). An example of a force majeure clause in a commercial contract is as below:

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No failure or omission by either Party to carry out or observe any of the terms? of? this? Agreement? shall,? except? in? relation? to? obligations? to make payment? hereunder,? give? rise? to? any? claim? against? the? Party? in? question? or deemed? a? breach? of? this? Agreement,? if? such? failure? or? omission? arises from any cause reasonably beyond the control of that Party, including but not limited to, acts of God, acts of war, fire, insurrection, strikes, lock – outs, riots, earthquakes, floods, explosions or other acts of nature.

In the event that the interruption of the excused Party’s obligations continues for a period in excess of ninety (90) calendar days, either Party shall have the right to terminate this Agreement upon 30 days’ prior written notice to the other Party.

The issues that have arisen in the area of contractual law have been whether the failure for performance of a contract due to the pandemic is in tandem with the understanding of force majeure as articulated above. Across the globe there has been acceptance that Covid 19 pandemic falls within the ambit of force majeure thus excluding a party from performance of a contract (Volterra). However, each and every contract would have to be examined to determine that the failure and indeed the omission to carry out terms of the contract are beyond the control of the party as a result of Covid 19. Further, the clause above does not refer to pandemic as a reason for triggering the operation of force majeure. It would therefore be for a court of law to interpret the provision to include Covid 19 as a reason triggering operation of force majeure as the clause has been qualified to include but not limited to those circumstances specified or indeed to be interpreted as an act of God. The emergence of Covid 19 has necessitated contract drafters to specifically include statements such as “pandemics such as Covid 19” to the force majeure clauses.

When parties agree that Covid 19 is a force majeure reason that has affected performance of a contract, other contractual obligations such as payment for the services or products rendered prior to the effects brought about by Covid 19, would still have to be fulfilled albeit on a pro rata basis. Parties would also be in a position to adapt or mitigate the effects of the pandemic toward the performance of the contracts. A force majeure event such as Covid 19 will result in suspension of a contract and where there are no prospects of the contract being performed, termination of the contract, without liability to the party that has failed to perform the contract. ?