Government measures in key jurisdictions 2nd edition final pages - Flipbook - Page 85
South Africa
5
Property
•
MAC clauses are contractual and are not regulated by the common law. The
contract will define the circumstances in which a material change will be deemed
to occur and each contract should be carefully considered with the relevant facts to
determine if circumstances exist to invoke a MAC. The burden of proof is similarly on
the party alleging the MAC.
•
The impact of Covid-19 is severe and there will undoubtedly be parties who seek
to avoid their contractual obligations. Whether or not they can be saved by a MAC
clause will ultimately depend on the precise wording of the MAC clause and the
allocation of risks. It will also depend on the facts and the effect of the pandemic on
the business in question.
•
When circumstances occur which renders performance under a contract impossible,
the principle of supervening impossibility of performance in terms of the common
law may also excuse parties from performance. Supervening impossibility of
performance occurs when performance was possible on conclusion of the contract,
but subsequently has become impossible through no fault of the parties. This could
be the result of a vis major or casus fortuitous.
•
The test for performance is that it must be objectively impossible. Where a party
can perform, albeit at a higher cost or with economic hardship, the RSA courts are
unlikely to consider this supervening impossibility. On the other hand, the courts
have also been clear that it is not complete factual impossibility that is required but
rather that performance has become so difficult and onerous that it can, under no
circumstances, be reasonably expected that a party must comply.
•
If supervening impossibility can be proven, the obligations of the parties under
the contract will be discharged and the contract will be terminated. This differs
from force majeure, which often allows for a suspension of performance and only
provides for termination in the event that the force majeure is not resolved within a
stated period of time.
•
Under the lockdown legislation promulgated by the Government of the RSA, many
businesses are prohibited from opening and are forced to remain closed during the
lockdown period. Notwithstanding this, obligations in respect of commercial leases
continue. Landlords have however been encouraged to negotiate with tenants in
respect of rental and other obligations, and in practice certain retail tenants have, in
terms of the common law, refused to pay rental and have been granted discounts or
rental free months by landlords.
•
This however does not absolve landlords from attending to their monthly instalments
in respect of their bonds if a bond was registered against the property as security.
•
The banks and financial institutions have provided relief to certain individuals and
entities. This is however not a blanket exclusion in respect of payment holidays to
every person and entity. Banks may, for example, either grant a one month or three
month payment holiday, depending on the financial position of the individual or
entity and provided the individual or entity was not in default with payments when
the lockdown started.
Have any changes
been made to
the laws around
property, rent and
enforcement?
Government measures in key jurisdictions
85