What does the Coronavirus lockdown mean for your Offer to Purchase?
Category Contractual Matters
We are experiencing unchartered territory with the current lockdown due to the Coronavirus and while it is impossible to predict what the future holds or have immediate answers to what this might mean for each property related scenario, we can offer some advice to those who have signed an Offer to Purchase prior to or during the lockdown in South Africa.
Buying and selling property during the Coronavirus pandemic
The current lockdown situation we find ourselves in with Covid-19 relates to a force majeure (otherwise known as an Act of God). A force majeure typically refers to events outside the control of any party to a contract, such as a war, plague, hurricane, flood, earthquake, volcanic eruption or other natural disaster.
In terms of the common law, such events can free both parties from liability under the contract. However, in practice, most force majeure clauses included in contracts do not excuse a party's non-performance entirely. Instead, it will typically suspend it for the duration of the force majeure.
Events of force majeure can be permanent or temporary in nature. In cases where it is temporary, performance may only be suspended, meaning that there may be no justification for non-performance or the unilateral cancellation of a contract.
South African (common) law is quite strict in the sense that it does not excuse the performance of a contract in all cases of force majeure. One of the criteria that must be met for someone to invoke force majeure will be the objective impossibility to perform. If this impossibility in itself implies permanent impossibility or the impossibility due to such a long duration of time rendering the objective of the agreement "impossible", then it can be argued that the temporary lockdown we are currently experiencing may suspend certain contractual obligations but will not entirely release parties from their contractual obligations.
We therefore urge everyone party to Offers to Purchase to communicate with the property professional and conveyancing attorneys involved in the matter regarding any challenges caused by the Covid-19 lockdown. If necessary, an addendum that addresses the situation can be drawn up and signed. In addition, if there are any specific force majeure clauses contained in the contract, these must be strictly complied with.
We understand that it is not business as usual. However, we can note with certainty that the freedom to contract and the responsibility to uphold contractual obligations remains paramount, and the consequences of a breach of contract remain unchanged.
Author: Snymans Inc. Attorneys