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Property News Flash No 05/2020 - Force Majeure vs. COVID-19 vs. Breach of Contract

Posted 14 April 2020

Force Majeure is a situation which allows for parties to agreements to be freed from all obligations and liabilities when an extraordinary event, beyond the control of either of the parties, prevent one or both of them from fulfilling their contractual obligations. Also known as an act of God, it does not justify non-performance nor the instant unilateral cancellation of a contract in all cases.

Certain criteria must be met for someone to invoke force majeure:

  • Impossibilitiy to perform. This is not a subjective test but rather the "average man on the street" - test.
  • It must be unqualified and definite, not just a probability of not being able to perform.
  • If it can, in general, be done but the other party seeks to escape liability he will be held liable.
  • If the impossibility to perform can be avoided by a reasonable person he should do so.
  • It must not be the fault of any of the parties.
  • Will one be able to continue and honor his contractual obligations once he is able to do so? Differently put: is it possible to extend compliance deadlines or delay performance for the moment?

 Once these criteria have been considered force majeure may be invoked and  the aggrieved party will (probably) not be able to sue for damages as there is no breach of contract.

Thus: Does Covid-19 and resulting national lockdown automatically justify someone not having to fulfill his contractual obligations? Most definitely not.

Parties must strictly comply with all relevant force majeure (vis-major) clauses in their contracts and follow the processes set out therein.

Should there be no such clauses the common law principles will apply, as referred to supra.

It will, obviously, not be possible for conveyancers to have answer to all the above. It is therefor of the utmost importance that clients be informed of the risks and of being in breach of contract, regardless of what, prima facie, seems like "the end of the world as we know it.....".

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