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During the pandemic, many businesses have failed to meet their contractual obligations, whether through new regulations that restrict certain business activities or employees having to recover from the virus. The biggest fear of online businesses during this Covid-19 pandemic is the ensnared liability resulting from delayed performance or non-performance- also known as contractual ‘mora‘. It is crucial that a business more so, online businesses explore contractual amendments that maybe be incorporated into the online terms and conditions to prevent liability and ensnaring considerable costs that may lead to liquidation. The case of Bischofberger v Vaneyk[1] stated that the general rule in South African law is that if contractual performance becomes impossible due to no fault of the debtor, the contractual performance will be extinguished. However, it is not absolute. Going further back to the coronation cases that dealt with the doctrine of frustration, the law has been flexibly developed to protect merchants that fail to perform due to “the acts of God”.
The rationale for a Force Majeure clause?
Force majeure clauses usually make leeway for a temporary suspension of the parties’ respective contractual obligations upon the occurrence of a precisely defined event or set of events that prevent a party from performing its obligations. The other party to the agreement is usually prohibited, for the duration of the force majeure event, from instituting a damages claim due to the first party’s non-performance. It should be noted that force majeure clauses often stipulate that the force majeure event will not operate to suspend the obligation of a party to make a payment if it becomes due and payable under the agreement. A force majeure clause does not automatically apply to a given set of circumstances that prevent performance. It is only in circumstances where the event causing non-performance is defined explicitly in the contract as constituting a force majeure event that a party to a commercial agreement may rely on the event to excuse its failure perform its contractual obligations.
The use of a Force Majeure Clause as a safety net for online businesses
Online businesses could use a force majeure clause that is specifically drafted to limit their liability for covid-19 related logistical troubles. However, parties seeking to invoke the provisions of a force majeure clause in an agreement should carefully analyse the wording in their contracts to be certain that such circumstances fall within the contractual definition of force majeure.
Consequences of lack of a Majeure Clause
In the recent case of Mhlonipheni v Mezepoli Melrose Arch (Pty) Ltd[2] , the court held that if the provision to limit contractual liability 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. If a contract is silent on issues of force majeure, the common law proposes the concepts of supervening impossibility of performance or undue hardship, which may be relied upon as a defence when there is a claim for specific performance in terms of an agreement, provided certain factual circumstances are present.
Due to the principle of functional equivalence, the same contractual principles may be transposed and applicable to online businesses. It would be in the best interest of online businesses to amend their websites to incorporate a specific force majeure clause which prevents parties from claiming breach of contract when performance is delayed or not possible. This clause needs to be incorporated by way of a clickwrap agreement. It has been argued that the clickwrap agreements are of probative value when there are issues of contractual enforcement, especially in court.[3]. For more legal advice in regard to e-commerce, law contact SchoemanLaw today.
[1] [1981] 4 All SA 54 (W).
[2] Mhlonipheni v Mezepoli Melrose Arch (Pty) Ltd and another and related matters [2020] JOL 47359 (GJ).
[3] Pistorius. T. (2004) ‘Click-Wrap and Web-Wrap Agreements’, South African Mercantile Law Journal, 16, 568–576.