Force majeure and impossibility of performance
In the scenario where an employer’s operations are placed under severe financial stress as a result of restrictions implemented when the Covid-19 pandemic enfolded, to what extent can an employer rely on force majeure? To what extent does the principle of impossibility of performance apply during the above time period?
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In Matshazi v Mezepoli Melrose Arch (Pty) Ltd and Others (2021) 32 SALLR 5 (GJ); (2021) 42 ILJ 600 (GJ), the high court formulated the following approach:
- if provision is not made contractually by way of a force majeure clause, a party will only be able to rely on the very stringent provisions of the common law doctrine of supervening impossibility of performance, for which objective impossibility is a requirement. Performance is not excused in all cases of force majeure (Glencore Grain Africa (Pty) Ltd v Du Plessis NO and Others (4621/99) [2002] ZAFSHC 2 (28 March 2002); [2007] JOL 21043 (O), at [10]
- in Transnet Ltd t/a National Ports Authority v Owner of MV Snow Crystal 2008 (4) SA 111 (SCA), paragraph [28], the supreme court of appeal (per Scott JA) said as follows:
‘As a general rule impossibility of performance brought about by vis major or casus fortuitus will excuse performance of a contract. But it will not always do so. In each case it is necessary to “look to the nature of the contract, the relation of the parties, the circumstances of the case, and the nature of the impossibility invoked by the defendant, to see whether the general rule ought, in the particular circumstances of the case, to be applied”. The rule will not avail a defendant if the impossibility is self-created; nor will it avail the defendant if the impossibility is due to his or her fault. Save possibly in circumstances where a plaintiff seeks specific performance, the onus of proving the impossibility will lie upon the defendant.’
- in Unlocked Properties 4 (Pty) Limited v A Commercial Properties CC (18549/2015) [2016] ZAGPJHC 373 (29 July 2016), paragraph [7], the court, citing Unibank Savings & Loans Ltd (formerly Community Bank) v Absa Bank Ltd 2000 (4) SA 191 (W), stated as follows:
‘The impossibility must be absolute or objective as opposed to relative or subjective. Subjective impossibility to receive or to make performance does not terminate the contract or extinguish the obligation.’
- in Unibank, the court stated as follows, per 198D:
‘A contract is … terminated only by objective impossibility (which always or normally has to be total). Subjective impossibility to receive or make performance at most justifies the other party in exercising an election to cancel the contract.’
- in Unibank it was further held that:
‘Impossibility is furthermore not implicit in a change of financial strength or in commercial circumstances which cause compliance with the contractual obligations to be difficult, expensive or unaffordable.’
- the obligation which the trust companies owed to their employees to pay them their salaries was always capable of performance and was at no time rendered impossible. It is trite that the duty to pay, and the commensurate right to remuneration, arises not from the actual performance of work, but from the tendering of service (Johannesburg Municipality v O’Sullivan 1923 AD 201)
- the regulations, which were in force during level 5 of the national lockdown, made it clear that employers were not excused from their obligation to pay their employees’ salaries, because it included in the list as an essential service the ‘Implementation of payroll systems to the extent that such arrangement has not been made for the lockdown, to ensure timeous payments to workers’ (as per the regulations published in terms of s27(2) the Disaster Management Act 57 of 2002: GN 318 of 2020 in GG No 43107 (18 March 2020), as amended by s6(e) of GN R419 in GG No 43168 (26 March 2020), annexure B, paragraph 32)
- in the high court’s view, force majeure could not be relied upon by the respondent companies as a defence to their obligations owed to their employees. In any event, the applicants were clearly ‘affected persons’ as set out in s131 and s128(1)(a) of the Act, who were entitled to bring these proceedings and participate therein. Thus, they had the necessary locus standi required for these applications
