Does your contract make provision for extraordinary events or circumstances beyond the control of the parties?
Parties to an agreement are permitted to include provisions to protect them in circumstances beyond their control or force majeure events.
What classifies as a force majeure event between contractual parties?
It is an event beyond the control of the contracting parties which makes it impossible for the parties to fulfil their contractual obligations. It is recommendable to specify the possible force majeure events in an agreement. It is important to stipulate a timeframe for how long the force majeure event may be effective. In other words, allowing the parties legally not to perform obligations.
What is the purpose of the force majeure clause in an agreement?
It caters for the suspension of a party’s obligation during the force majeure event until the event comes to an end. Thus, by including the correct provisions in your contract, the ordinary effects of breach of contract, which do not apply due to the impossibility of performance, including specific performance, penalties, damages and/or termination of the agreement, will be suspended. As such, if a party fails to perform due to a force majeure event, that party cannot be sued by the other party for damages suffered.
How do we establish whether the impossibility to perform in terms of a contractual obligation, is due to a force majeure event?
- The impossibility must be objectively impossible. If one party cannot perform, such a party cannot be held liable, unless it relates to something that can overall be done.
- The impossibility must be unavoidable by a reasonable person. As such, it must not be the fault of either party.
In conclusion, if a force majeure clause is included in a contract, the contracting parties will rely on the provisions stipulated in the contract, alternatively, the common law principles would apply.
Contact us today to review the provisions of your agreement, if you are looking for a well-drafted force majeure clause, or you require advice as to whether force majeure can be relied upon and/or whether the current COVID-19 event is catered for in your agreement.