The Covid-19 pandemic has given us all ample time and opportunity for contemplation. Many have, at some point or other in early stages, considered their current predicament, analysed what could have led to it, attempted to conjure ways to survive it and imagined what they would do and where they would be when we (collectively) succeed to extricate ourselves from its terrible and mortal stranglehold. This may have led some of us to consider how to deal with and manage the unforeseen event or chain of events that throws us and everything around us off kilter. How indeed? What can we do when the impossible happens?
Undoubtedly our very existence depends on the inter-relationships that we create between us, which are very often based on mutual contractual undertakings. And contracts are not only handmaidens of law, but between their parties they are indeed law themselves!
The law categorically negates from inception the contractual validity of undertakings that relate to things which are by their very nature impossible. Such undertakings are seen to lack one of the fundamental elements essential to the existence and validity of a contract: its very soul, its subject-matter! For very much the same reasons the law recognizes that in all contractual relationships when certain supervening events occur after a contract has come into existence they may have the effect of extinguishing the related contractual undertakings and of releasing the party or parties bound to the performance of the corresponding obligations from the need to fulfil the same, albeit temporarily until such supervening events subsist.
However not all supervening events will give rise to these consequences. Indeed, the law is primarily interested in creating a framework within which parties to a contract are held to their original promise and made to fulfil their contractual obligations. Nevertheless if non-performance or delay in the performance of an obligation is due to an extraneous cause that is not imputable and that may not be imputed to a party, then there is no reason at law why that party ought to be held to his or her undertakings as reflected in the original promise made through the contract. The supervening event must be fortuitous or be of an irresistible nature and must have the effect of preventing the party or parties concerned from performing his or their contracted obligation or obligations (to do, not to do, to give, not to give etc). A clear example of such an event would be an order or imposition made by a higher authority that has the effect of preventing, temporarily or otherwise, the performance of an obligation.
In any such case the party bound by the obligation will not be liable for its performance and would not be liable in damages to the other party as a result of such non-performance or delayed performance. These are general principles of law that, unless expressly excluded in a contract, would be automatically implied into its terms.
It is not enough to allege that performance has become more difficult or onerous as a direct consequence of the supervening event. The law is clear and categoric in this regard: there must be an objective impossibility of performance that results from the supervening event extraneous to the party bound to perform the obligation in question and which event must be fortuitous in nature (cas fortuit) or which otherwise arises from a force majeure and is therefore irresistible.
It is generally accepted that the ‘impossibility’ would not always apply to generic obligations: say the obligation to sell and deliver a given quantity of apples. If the apples I had prepared for delivery perish as a result of a fortuitous event for which I am not responsible, say through theft or as a consequence of an earthquake, I would probably still be bound to deliver an equal quantity of the same kind of apples sourced elsewhere. It would however almost always find application in relation to more specific obligations. If I lease premises to you for use as a school and the Government orders the closure of all schools, then I am unable to perform my obligation towards you and you are released from your obligation to pay the rent agreed upon for the duration of the order or imposition in question. If part of the same premises were leased to be used as a school and a separate part leased to the same lessee to be used as a warehouse or for storage purpose, the supervening event created by the Government orders would in all likelihood only affect the part of the lease relating to the use of the premises as a school.
If the ‘impossibility’ is temporary the obligations that may not be performed are merely suspended until such time that the root cause thereof remains in place. In any such case the parties concerned would not be liable for any resulting ‘delay’ in performance. However, if the supervening event in question persists long enough to prevent performance within the time for performance contractually agreed upon, or within a reasonable time, the party or parties bound to the performance would be discharged. If, on the other hand, the event is permanent in nature, the parties are immediately fully released from their obligations of performance.
It is implicit that the party claiming ‘impossibility’ of performance as a result of a cas fortuit or force majeure must prove the existence of the supervening event giving rise thereto.
According to decided cases in our courts the following conditions must all subsist for a cas fortuit or force majeure defence to be sustained:
- the supervening fortuitous event or irresistible force must make the performance of the obligation or obligations in question ‘impossible’;
- the supervening event must be unpredictable or unforeseeable;
- the supervening event must be extraneous to the party or parties bound to perform the obligation or obligations in question;
- the party or parties bound to perform the obligation or obligations in question should not be at fault; in other words, the supervening event must be inevitable and the said party or parties should not have contributed in any way to the occurrence thereof. The test of inevitability applied in these cases is based on what a reasonable person (the bonus paterfamilias) should have foreseen when exercising the standard of diligence and conduct expected from such a person in ordinary circumstances (therefore, both an objective and a subjective test).
As mentioned earlier, even where a contract is silent on the matter, ‘impossibility’ of performance may be relied upon by a party to the contract, provided such ‘impossibility’ is adequately proved. Where express provision for such circumstances is made in a contract, the parties’ mutual rights and obligations will be governed by the provisions contemplating the same.
In conclusion, not all is lost when the impossible happens, at least in the realm of contract. It all boils down to what the contract has to say, or has failed to say, about the matter.
ABOUT THE AUTHOR
Ivan Vella is a Legal Director at Credence.
You can get in touch with Ivan via email.