The Covid-19 epidemic that has swept across the world has exposed many cracks along its way and in a South African context, none more so than its economical flaws, which probably was more of a crevasse to begin with. None the less, many South Africans and South African businesses have felt the strangling grip of financial uncertainty caused by the nationwide lockdown imposed by our president, Cyril Ramaphosa, in terms of the Disaster Management Act no. 57 of 2002 and this article aims at addressing lease agreements and their enforcement during this historic time.
Lease agreements, whether they be commercial or residential, when stripped down to its bones comes down to one party agreeing to pay a monthly amount to another party in exchange for the use and enjoyment of a building or premises, whether it be for residential or commercial purposes. The crucial factors to take into account is the rights, obligations and resultant performance of the parties involved, which forms the crux of the agreement. The most important obligation for the lessee is to perform in terms of paying the monthly rent and that of the lessor is to provide undisturbed possession to the lessee for the use and enjoyment thereof and for the purpose which the parties have so agreed. What happens when either the lessee cannot perform in making said payment or the lessor can’t provide undisturbed possession of the leased property? In either of the aforementioned scenario’s the contract will determine the procedure the parties are to follow regarding its enforcement, but our law of contract provides that either of the mentioned actions by the lessor or lessee constitutes repudiation of the contract which would in the normal course of events enable the performing party to cancel the agreement, subject to the terms. The latter being the normal course of events, the question arises, taking the consequences of lockdown into regard, what happens when either of the parties cannot perform in terms of their obligations due to some external force, event or occurrence weighing in on their agreement and which is out of their control?
As stated earlier, the nationwide lockdown has had significant financial repercussions to the vast majority of South Africans in one way or another and as a consequence it has led to numerous cases of tenants being unable to pay their rent or lessors being unable to provide their tenants with undisturbed possession and use and enjoyment of the property. It is important to note that Covid-19 has had the unique effect of creating circumstances which fall under the legal term of force majeure, also known as vis maior. The latter terms entail an event or occurrence which renders performance impossible, as eluded to above. Force majeure or vis maior clauses are often found in commercial contracts and allows a party to a contract to avoid the consequences of non-performance for the duration that the impossibility of performance endures, where such impossibility is not owing to the fault of the parties, but some inescapable circumstance such as war, acts of government or natural disasters for example. It is important to note at this stage however that such clauses are not absolute and the possibility of performance will have to be weighed on the facts of the matter, the nature of the contract and the nature of the impossibility.
So, what happens in the event where no provision was made for force majeure or vis maior in the contractual agreement? The answer is to be found in our common law as ‘supervening impossibility of performance’ which requires a party to a contract to prove that the event or occurrence which has rendered contractual performance impossible, was unforeseeable at the time of entering into the contract and further that such impossibility is objectively impossible in that no person in the shoes of the party who is unable to perform, could do so.
Covid-19 and the resultant nation-wide lockdown undoubtedly constitutes an event which would seriously effect performance with regard to contractual agreements and would fit into the definition of force majeure or supervening impossibility, based on the terms and nature of the relevant contract. As stated earlier, there are factors one has to take into consideration when determining impossibility of performance and these factors will be impacted differently as we move from level 5 lockdown downwards. To then conclude; should you as a debtor in terms of your performance regulated by the contract, be unable to perform in terms thereof due to an occurrence not owing to the fault of any of the parties and which renders such performance impossible, the other party to the contract will not be able to enforce your performance or hold you liable for your failure to perform, only for so long as such impossibility persists and circumstances as mentioned so allows.
- Liam Connan