C&A Friedlander Attorneys

Written by Daniel Marcus

As South Africa moves out of its 3rd Covid-19 wave and lockdown regulations remain in force, questions continue to be raised by individuals as to the enforceability of their contractual obligations.

Our common law recognizes the doctrine of supervening impossibility of performance which establishes that if, through no fault of either party, the performance of contractual obligations is no longer possible then obligations under the contract are extinguished.

The doctrine and its principles was recently tested in the context of commercial lease agreements and the Covid-19 pandemic, specifically whether the pandemic constitutes a vis major or casus fortuitus. Lessors and lessees utilise this doctrine as a defence to having to perform their contractual obligations.

This doctrine was discussed in the recent case of Nogoduka-Ngumbela Consortium (Pty) Ltd v Rage Distribution (Pty) Ltd t/a Rage 2021 JDR 2622 (GJ).

Rage, the lessee, entered into a three-year fixed term commercial lease agreement with Consortium which commenced on 1 May 2018 and would terminate on 30 April 2021. Owing to non-payment of rental, the Consortium launched proceedings for, inter alia, payment of arrear rental and the ejectment of Rage from the leased premises. Rage raised the defense of supervening impossibility of performance and argued that the alert level lockdown from the period of 27 March to 17 August 2020 amounted to a vis major event which excused Rage from performing in terms of the lease.

The court then considered the application of the doctrine of supervening impossibility and reaffirmed its principles:

  • Legal impossibility of performance arises where performance in terms of an existing obligation is prohibited by legislation, provided that the impossibility arose after the obligation arose;
  • Impossibility of performance extinguishes an obligation only if the impossibility is absolute or objective;
  • The common law position enables a party to a lease agreement to be released and excused from its obligations if performance is prevented by vis major or casus fortuitus, even if such non-performance would otherwise amount to a breach;
  • Where partial impossibility of performance exists or performance is temporarily impossible the obligation is not extinguished and partial performance must be made;
  • Performance is only excused if the lessee is deprived wholly or partly of its use and enjoyment of the property as the direct and immediate result of the vis major event; and
  • The doctrine of supervening impossibility of performance is not absolute and may be contractually modified.

Using the principles described above the court held that during the hard-lockdown period (27 March 2021 – 30 April 2021) Rage was wholly deprived of its use and enjoyment of the property as a result of the vis major. Rage’s performance was therefore suspended. However, the court went on to say that ‘supervening impossibility that makes it uneconomical or no longer commercially attractive for a party to carry out its payment obligations cannot constitute a basis to be excused from performance’. The Consortium was entitled to cancel the lease agreement and Rage was ejected.

We thus see that whilst Covid-19 may constitute a defence to performance of contractual obligations, such defence is not absolute. Only where performance is objectively impossible will performance be terminated or suspended.

Parties may opt to make express provision in their commercial lease agreements for future vis major events, such as the Covid-19 pandemic, as a defence mechanism to limit the enforceability of their contractual obligations.

However, as pointed out by the court in Nogoduka-Ngumbela such clauses will be interpreted restrictively and considered on a case-by-case basis. It is therefore advisable for parties to err on the side of caution and duly perform their contractual obligations – unless it is objectively impossible for them to do so –  rather than placing reliance on the doctrine of supervening impossibility as a means to avoid these obligations.

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).