Advocate Louis Nel’s niche is the travel and tourism industry. He says one of the biggest questions he is dealing with at the moment is from service providers who are concerned about how they should respond to the coronavirus disease – and especially with respect to the legal implications of cancelled travel bookings.
Adv. Nel says, “The question providers are faced with is what to do about it, and what are their legal rights and obligations?”
He advises businesses to first look at their contractual obligations with their suppliers and clients (or travellers). A contract can be either a specific written agreement between the two parties, or standard terms and conditions which are agreed to. If there is no contract, then common law will apply.
Generally, the clause that you will be looking at closely in this context is the force majeure clause. Force majeure’ is French for ‘superior force’, and which Contract Standards defines as: “a contract provision that allows a party to suspend or terminate the performance of its obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.”
“Courts generally speaking interpret such clauses narrowly,” says Adv. Nel. “The common law principle applicable is that of impossibility or frustration of performance. Again, the courts interpret such clauses narrowly and scrutinize the application of the duty of care principle. Clearly a common law situation is the worst case scenario for the service provider.”
“The test applied by the French legal system is: was it foreseeable, external and irresistible?”
He continues; “The test applied by the French legal system is: was it foreseeable, external and irresistible? The International Chamber of Commerce has extended impossibility to include events that make performance unreasonably burdensome.”
If the courts accept that an event meets the requirements of being a force majeure, then both parties are released from their contractual obligations.
However, Adv. Nel adds that there are a few things to bear in mind:
- The parties are still under an obligation to mitigate the impact of the force majeure, including removing or overcoming the causes;
- This entails using due diligence and best endeavours;
- You will need to keep detailed records; and
- You will need to work closely with your insurer to protect yourself from incurring any avoidable costs.
Please note that at the time of writing this, the World Health Organization had not declared COVID-19 a pandemic and our government had not restricted travel to and from South Africa as per the announcement last night. Therefore Adv. Nel is busy with a follow up article which we will share with you shortly.
This article is not intended as legal advice. Each situation must be interpreted on its merits and in each case independent legal advice must be obtained.
