30 March 2020 by Cliffe Dekker Hofmeyr Dispute Resolution Alert

Can you cancel a contract because of COVID-19?

Yes you can if it is objectively impossible to perform your contractual obligations and even in the absence of a force majeure clause in the contract. Importantly, each situation will depend on its own facts and the wording of the contract

Also, in the COVID-19 crisis specifically, developments must be considered carefully before concluding that there is an impossibility of performance or the triggering of a force majeure clause. Claiming impossibility or force majeure incorrectly could be a breach of contract and could give rise to a damages claim against you. In particular any impossibility of performance must be absolute and it is any event, including COVID-19 and its consequences, that could bring about an impossibility or force majeure provided it is unforeseeable with reasonable foresight, unavoidable with reasonable care and not the fault of either party.

A force majeure clause in a contract will take precedence over the common law and care must be taken to comply with any agreed time limits or process requirements set out in the contract.

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