Updater – Covid 19-contracts and employment

As you are aware, Covid19 is now a pandemic and has affected many areas of our lives including the labour market and performance of contracts. In this short updater, we seek to highlight the legal implications of Covid 19 on labour laws and contract performance. Covid 19 has affected performance of contracts in various ways including:(a)Compulsory closure of offices, businesses and operations; (b)Key employees being admitted in hospital,undergoing quarantine or death; (c)Inability to performthe contract due to financial constraints, lack of raw materialsetc.In whatever manner Covid 19 may have prevented a party from performing its obligations under a contract, the relevant party must notify the other party of its inability to perform the contract and seek to suspend or terminate the contract until the situation improves.How the parties will deal with such a situation will largely dependon the wording of the contract. A party may declare a force majeure if the wording of the contract allows or implies that a pandemic amounts to a force majeure event.Contracts tend to have different definitions of what amounts to a ‘force majeure event’but standard definition would read as follows: ‘any event or circumstance or combinationof events or circumstances beyond the reasonable control of a party occurring before or during the implementationof the contract that materially and adversely affects the performance bysuch affected party of its obligations under or pursuant to the contract providedthat such material and adverse effect could not have beenprevented, overcame or remedied by the affected party through the exercise ofdiligence and reasonable care.’There is a renowned judgment by a Tanzaniancourt that, a party cannot claim force majeure simply because the said event has made performance of the contract ‘harder’or ‘more expensive’rather the party claiming force majeure must prove how the force majeure event has made it impossible for the affected party to fully or partiallydischarge its contractual obligations. Covid 19 is not a blanket cover for acontractual party to fail to discharge its contractual obligations. Each situation and each contract will be assessed on its own meritto determine to what extent Covid 19 has fully or partially prevented a party from satisfying its contractual obligations. Some contracts lack a force majeure clause and in such instances, it will be necessary to look at court precedents and rules of practise to determine whether or not a force majeure event can be called.