Force Majeure and Coronavirus (COVID-19)
The Virus is significantly affecting the everyday lives of people and the business world.
It is essential to react appropriately to possible supply and delivery restrictions.
- Performance, delivery, and COVID-19
Amongst others, there have been announcements from various Governments to suspend and control travel and exchange of goods between countries. This consequently adversely affects the delivery or performance of parties in terms of certain agreements.
Most agreements in commercial relationships provide for events such as these which ordinarily are arranged in provisions called the “Force Majeure clause”.
A contracting party is required to ensure that the correct procedures are followed during events that are beyond its control. Specifically, certain communications and notices may be prescribed in order for a party to rely on those events to escape liability due to its non-performance.
- Force Majeure Clause
Force Majeure provides for an event that is beyond the reasonable control of one or more parties and it may be particularly drafted in different details, depending on the applicable agreement.
The outbreak of COVID-19 may not ordinarily qualify as an automatic Force Majeure event. Careful consideration should be given to evaluate whether it does prohibit or restrict performance. Notionally, the COVID-19 will be the cause of such an event.
Each agreement and its provisions relating to Force Majeure must be carefully evaluated against the prevailing circumstances before simply relying on the provisions of this clause.
- Can you enforce delivery or performance?
Once a claim is made that delivery or performance is not possible or will be disrupted due to an alleged Force Majeure event, the merits must be assessed. Non-performing parties – which would otherwise simply have been in breach should the alleged Force Majeure event not have been present – cannot simply escape their liabilities.
On the other hand, performance cannot be contractually enforced by another contracting party in circumstances where the alleged Force Majeure event factually prevents or restricts the same.
- What are the steps that need to be taken?
- Evaluate the circumstances against the contractual rights and obligations.
- Ensure that the prescribing contractual procedure is followed.
- If in doubt, seek legal advice.
- How to approach new agreements?
There are various mechanisms that may be introduced to mitigate the liabilities of parties by drafting contractual provisions tailored for specific circumstances pertaining to the industry, geographical locations or other applicable aspects concerning the contractual arrangement between parties.
Consequently, contracting parties may appropriately prepare for unforeseeable disruptions whilst protecting their business relationships.
For any information in this regard, contact: Izak Viljoen, a director at Barnard Inc., Centurion.
Barnard Incorporated supports the directions given by the Government in this Disaster Period in assisting creating awareness of COVID – 19 by making use of technology as provided for in Government Notice Vol 657 No 43164. Please see the following site for further information: https://sacoronavirus.co.za/