A contract places certain obligations on its parties, when each of the parties execute his/her obligations under the contract, he/she is said to be discharged from any further obligations. Where a party fails to carry out his/her obligation under a contract, that party is said to have breached the contract. Sometimes, the breach may occur because of the wilful failure of the person to do what the contract stipulates. At other times, the breach could be because of the occurrence of a supervening event, beyond the control of the parties. Where non-performance of a contract occurs because of a supervening event, beyond the control of the parties, even though a breach has occurred, independent of the intention of the party in default, he may not be liable for the non-performance of the contract.
Corona Virus prompted a number of varied national responses, aimed at curbing its spread and improving survival chances. Examples of some of the measures taken by the government are the prohibition on large gatherings and inter-state movement. Business establishments closed their physical offices and opted for remote working. Weddings were cancelled and some postponed indefinitely, some funerals were postponed and others hastily done with few guests, in compliance with social distancing imperatives. Government policies made in response to the pandemic might have made it impossible to perform contractual obligations, inevitably leading to an unintended breach of contract. The law anticipated events of this nature and made provisions for it under two legal principles: frustration and force majeure. These two legal principles are similar, but there are a few subtle distinctions between them.
Force majeure is an unexpected and unforeseen happening, which makes nonsense of the real situation envisaged by parties at the time of negotiation or entering into the contract. Natural acts, human acts, acts of a political nature or new laws may all constitute force majeure. Covid-19 (especially the government directive restricting movement) may act as force majeure.
Many modern contracts have a force majeure clause. A standard force majeure clause in a contract defines force majeure and lists a number of events which may constitute force majeure such as riot, war, flood, earthquakes etc. It then goes on to state that where the performance of the contract is impossible because of force majeure, the non-performing party will not be deemed to have breached the contract. Some contracts stipulate that non-performance or reliance on the force majeure clause should be communicated to the other party by the party relying on it within a certain timeframe.
The implication of invoking a force majeure clause lies in the fact that it absolves the person relying on it from all legal liability that may ordinarily have accrued from his failure to perform his obligations under the contract. This is because the law, excuses his non-performance due to the supervening event. Where a formal contract was not executed between the parties, or where the contract made no provision for a force majeure clause, a party may rely on the legal defence of frustration. When a party pleads frustration, he is simply saying that the performance of the contract is no longer possible because of events that occurred after the contract was concluded, making performance impossible or impracticable.
Whether the defence of force majeure or frustration will avail a party is dependent on the facts of each case. The law exists to do justice between all parties, the law will therefore not compel the doing of an impossible act or serve as an instrument of injustice.