31 March 2022

Contract Law in a Changing World

Submitted by SchoemanLaw Inc

We all contract on a daily basis. We conclude contracts of sale when buying groceries, service contracts when we get our homes cleaned, and IT contracts when we click accept on our computers before using software. These contracts rely on a mostly unchanging context.

However, as the world around us changes, so do the contracts that keep that world running.

The World Health Organisation declared Covid-19 a pandemic in 2020. Similarly, President Cyril Ramaphosa declared a state of emergency in South Africa on 25 March 2020. The effects thereof continued to affect contracts in 2021 and 2022.

Developments

In the Insurance industry, business interruption claims were activated and South Africa saw a Supreme Court of Appeal decision in Guardrisk Insurance Company Limited v Café Chameleon CC (Case no 632/20) [2020] ZASCA 173 (17 December 2020). Here the court decided that the insurer should pay out to a restaurant for their losses caused by the national lockdown. Many courts followed this decision and insurers responded in the new year by removing similar business interruption clauses from their policies. Insurers also learned to place more value on re-insurance in light of such far reaching events as a pandemic that could be cause for an insurer’s closure or liquidation.

In building and construction, many sites had to close down in the early pandemic as they couldn’t meet the stringent essential services requirements at that time. Later, when allowed to operate, building could still suffer interruption due to infections on site. This resulted in building delay costs and the possibility of damages claims. Here contractors were advised to give notice of site delays as soon as possible to avoid penalties outlined in their engineering and construction contracts.

Additionally, force majeure clauses were generally used and were invoked by contractual parties where they could not perform in terms of a contract. The key to these clauses is that the circumstance couldn’t reasonably be foreseen, avoided and overcome. While we couldn’t reasonably be expected to foresee the far reaching effects of the pandemic, as time went on it became clear that many business could operate with the appropriate health and safety practices in place. Here, adapting business models was key to overcoming the social distance requirements imposed by government. As these practices developed, becoming commonplace, parties could no longer rely on covid-19 as grounds for a force majeure clause to escape their duty to perform.

Employment law has also experienced a number of changes both globally and locally. Notably, during the first year of the pandemic, the Labour Appeal Court in Skinner v Nampac found that an employer may unilaterally alter the conditions of an employment contract, a decision that went on to affect the outcome of many CCMA matters.

Conclusion: What can we do?

Workplace culture, commerce and the expectations we hold of one another have all clearly been affected by this worldwide event. In contract law, the changes have been unique to each industry but significant across the board. By keeping abreast of these developments, you can negotiate the best possible position for yourself in the next business cycle of your agreements, and it would be prudent to seek legal assistance when making the calls for change.

Contact an attorney at SchoemanLaw Inc https://www.schoemanlaw.co.za/  for your contractual needs!

SchoemanLaw Inc

SchoemanLaw Inc Attorneys, Conveyancers and Notaries Public is a boutique law firm offering its clients access to high quality online legal documents and agreements, together with a wide range of legal services. The firm has an innovative and entrepreneurial mindset that distinguishes it from other law firms. We apply our first-hand understanding of the challenges facing entrepreneurs (regardless of their business size) to develop proven, practical solutions incorporating legal compliance, risk aversion and business sense. We achieve this by offering clients tailored, yet holistic support comprising of legal gap analysis, the design of tailored legal solutions and the practical implementation thereof through training and automation. With your personal interests in mind, our ultimate aim is to implement measures that protect the results of your hard work as effectively as possible.