Relying on vis major clause in a contract in times of COVID-19

Vis major clauses

Many businesses will seek to rely on the enforcement of vis major clauses to relieve their performance of certain obligations resulting from the COVID-19 outbreak. The term vis major refers to an event or occurrence, which renders contractual performance impossible.
These clauses allow a contracting party to escape the normal consequences of non-performance or late performance of contractual obligations because of an unavoidable and unforeseeable event. These may include acts of God, acts of government, natural disasters, epidemics, pandemics and even war and terrorism. These clauses will suspend a party’s obligation to fulfil their performance for the duration of the event occurrence.

COVID-19 and vis major clauses

In Bischofberger v Vaneyk it was stated that the general rule in South African law is that if contractual performance becomes impossible at no fault of the debtor, the contractual performance will be extinguished. However, this rule is not absolute, and consideration will still be given to the particular contract between the parties, the nature of the contract, relationship of the parties, circumstances of the case, as well as the nature of the impossibility. In addition, the possibility of parties relying on the COVID-19 outbreak as a means to suspend their contractual obligations will depend on the interpretation of the contract concerned.

A vis major clause may include a closed list of specific events or cover a broad criterion of events, in that, having a catch-all provision to include those unusual events not specifically listed. If the term pandemic and/or epidemic is expressly incorporated in the vis major clause of a contract, any delay or failure to perform resulting from COVID-19 may excuse the contracting party from their liability.
Moreover, the term ‘act of government’ in these clauses could be applied where the government has closed its borders, imposed quarantine or isolation, banned or restricted travel and/or announced a lockdown.

However, where the term ‘epidemic’ or ‘pandemic’ is not expressly listed, parties will have to interpret the contract to determine whether the parties intended for COVID-19 to be covered by the clause. This involves considering whether the list of events agreed to was intended to be exhaustive or not and whether the pandemic is to be included in any broad catch-all provision. Where a contract incorporates a term such as ‘or any other causes beyond the control of the party’, dependant on the words used, such clause could be interpreted broadly as opposed to being restricted to the scope of events listed.

In the instance where contracts do not have vis major clauses, the common law principle of supervening impossibility of performance will apply. As explained in Dale Hutchison and Chris-James Pretorius (eds) in The Law of Contract in South Africa 2ed (Oxford University Press 2012), this principle requires a party to prove that its contractual performance is objectively impossible.

It is recommended that parties include a sufficiently detailed vis major clause to regulate certain occurrences should such event occur. Vis major clauses should be carefully drafted, considered and reviewed so that the clause can be successfully enforced. The lack of such clause in a contract or the vagueness thereof may result in further damages at the expense of an unforeseeable event that fell beyond the scope of a contracting party’s control. In our current circumstances, courts will most probably be cognisant of the impact thereof and be accommodating in interpreting clauses when faced with a contractual dispute on this basis.

Reference List:

• Interpreting contracts: Determining if COVID-19 is covered by force majeure – De Rebus, Archive, May 2020.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)