South Africa: Force Majeure - Hardship in relation to Conflict and Sanctions

No, South African law has no specific legislation addressing the legal consequences of war or related sanctions on commercial contracts. Furthermore, there are no statutory concepts, which could be commercially relevant under such circumstances. 

The cornerstone legislation of South Africa is the Constitution of the Republic of South Africa, 1996 ("Constitution") from which all legislation is premised. This Constitution was drafted with the view of South Africa as a peacemaking state and not a nation embarked on a policy of war, given the nation's delicate history on human rights. 

It is worth noting, however, that the Constitution does address the possibility of war and the deployment of troops, albeit in limited detail. 

N/A

South African statutory law does not address the issue as to whether war and/or sanctions could constitute force majeure. 

However, South African common law has over the years developed the principle of supervening impossibility. In terms of the principle of supervening impossibility, if a situation arises, without any act or fault of either of the parties to the agreement, rendering the performance of a contractual obligation by one of the parties impossible, such party would be excused from the failure to perform. In order for an event to meet the requirements for impossibility of performance, the event in question must, on an objective assessment, be impossible. The objectivity is assessed on a case-by-case basis taking into account the nature of the contract, the relation of the parties, the circumstances of the case, and the nature of the impossibility invoked by a party. 

A party seeking to rely on this principle must show that the performance is objectively impossible and not just cumbersome or economically onerous. Events such as war and/or sanctions would therefore qualify as circumstances and/or events constituting supervening impossibilities. 

Parties to an agreement are at liberty to draft provisions in their contracts to address the issue of supervening impossibilities by including in their agreements the force majeure clause. Absent such provisions, the principle of supervening impossibilities will prevail, leaving the interpretation of whether an event or circumstance meets the criteria for the principle of supervening impossibility to the courts.

In order to circumvent the need to prove a supervening impossibility, which may be burdensome given the threshold of proof required, our recommendation is for parties to incorporate a specific force majeure clause in their agreements, which specifically note war, state of defence, invasion, war sanctions, etc. as events constituting force majeure events excusing performance from the parties’ contractual obligations.

In applying the principle of supervening impossibility, South African courts explore whether the events constituting supervening impossibilities were reasonably foreseeable by the party seeking to invoke this principle. 

The courts have interpreted “unforeseen circumstances” to mean that a party did not have factual foresight or reasonable foreseeability of the event causing an impossibility. The test is not focused on the consequence of the event. As such, parties cannot have had reasonable foresight of the event causing impossibility at the time the contract was concluded. 

If the law of a foreign country is declared applicable (e.g. jurisdiction is founded in a foreign territory where the parties to the agreement agreed that the laws of the foreign territory would be applicable), in general the decision whether imposed sanctions must be followed or may be ignored would lie with the foreign court, in accordance with its local laws. 

Where South African law is the applicable law: if the sanction imposed is pursuant to an international agreement that is binding upon South Africa, then the imposed sanction must be followed.

The question whether a South African party can be sued by the sanctioned or warring counterparty because the South African party fails to deliver will depend on the law applicable to the agreement governing the arrangements between the parties and the sanctions that have been applied.

If South African law is applicable, and in the event that the agreement contained a force majeure clause that covered the relevant subject matter, the foreign party is unlikely to be able to bring a successful claim against the South African party for failure of delivery.

The risk associated with circumstances out of the parties' control and/or unforeseen circumstances is regulated in South Africa through the principle of supervening impossibility. Due to the burden of proof required when seeking to rely on such a principle, it would be prudent for parties to ensure that their agreements contain force majeure clauses. 
It is worth noting that the probabilities of a foreign party successfully suing a South African counterparty for payment of warranties, damages or compensation for non-delivery as a result of a supervening impossibility are slim if the matter is considered from a South African law perspective. 

Regarding existing agreements, it is critical for parties to revisit their agreements to determine the implications of wars and related sanctions to their agreements, and to amend them to include force majeure-related provisions.