Under South African law, if it becomes impossible for a party to comply with a contract, due to “vis major” (being a direct act of nature which could not reasonably have been foreseen or guarded against), or “casus fortuitus” (being an event having occurred by chance), the contract will terminate by operation of law.
Often, the concept of impossibility of performance is raised as a defence to a claim for damages, but it may also be raised against a claim for specific performance.
In the leading case under South African law, a seller agreed to deliver a fixed quantity of sorghum to a buyer at a date sometime in the future. Because of excessive rains in the area there was a severe shortage of sorghum. The seller sought to rely on this shortage to prove that it was impossible for him to have supplied the agreed quantity.
The court held that the shortage did not discharge the seller’s obligation, because the seller had not looked outside of the immediate area for sorghum to make up shortfalls, and the impossibility was not absolute or objective, it was rather more difficult and expensive for the seller to perform.
To succeed with the defense, a defendant must first prove that the impossibility is absolute and objective.
To be absolute, the whole performance must be impossible. Where parts of the performance are still possible the contract must be enforced, no matter how unjust for the affected party.
To be objective it should affect all debtors, not just the defendant. Therefore, if the effect is relative it is also not objective.
The focus of the test, on whether the defense should succeed, is on the afflicted party’s objective ability to perform, not on his intention when he concluded the agreement (her commercial rationale), nor the hardship which would be brought to bear on him if he were held to his promise.
If the test is passed, courts will still look at the nature of the contract, the relationship of the parties, the surrounding circumstances, and the nature of the impossibility invoked by the defendant, to see whether the defense ought to, in the particular circumstances of the case, be allowed.
A change in laws limited by time which prevents a tenant from using premises leased, would likely not absolve the tenant from his obligation to pay rent. This is because, (1) for so long it is possible for all debtors to transact on their accounts and pay their debts, it is objectively possible for tenants to pay their rent, the objective test fails, and (2), the impossibility will likely end at some point, therefore it is not absolute.
If the banks were to close, and it became impossible for tenants to transact on their accounts, an objective impossibility would have arisen.
Therefore the defense will seldom, if ever succeed, when raised as a defense against a claim for payment. It is therefore, in practical terms, best utilized by a party who is prevented from supplying goods or services.
The doctrine of impossibility of performance under South African law is similar in several respects to the doctrine of frustration of contract purpose in English law. The doctrine of frustration of purpose focuses on the parties’ purposes for concluding the contract (the contract’s common commercial rationale ).
In a case well known as Krell v Henry, which was decided in England in 1902, a tenant had hired a landlord’s flat for a day, because it was located along the route scheduled to be followed by Edward VII’s coronation procession. When the procession was cancelled, the tenant claimed that, because the whole purpose of the contract had been frustrated by the change in circumstances, his obligation to pay rent also ended. The court found in tenant’s favour (the defense of supervening impossibility would not absolve the tenant in this case, because the tenant could still objectively pay rent, incidentally he could also have demanded access to the flat on the day agreed albeit without the planned entertainment).
The Krell defence is also only be available where the purpose which is frustrated is common to both parties. If a traveller bought a bus ticket for a trip to Wanderers Cricket Stadium to spectate at a cricket event, the event’s subsequent cancellation would not entitle the traveller to a refund (on cancellation of the contract of carriage by operation of law) because the bus operator’s purpose (being entirely different to the traveller) is only to transport ticket holders from one point to another.
The English law concept of frustration of purpose covers (1) changes in law, such as a case where performance under a contract for the sale of timber became frustrated when war time regulations were promulgated which restricted trade in timber; and (2) changes in circumstances, such as where a declaration of war on a foreign country prevented trade with that country.
The English doctrine of frustration of contract purpose is therefore substantially wider than the Roman Dutch doctrine of supervening impossibility.
In several cases heard before the South African courts, judges have referred to the doctrine of frustration, but there does not appear to be sufficient support for it to have been adopted into South African law.
There is however little doubt that the South African courts will be called upon to consider broadening the defense of supervening impossibility to cover situations where there is a frustration of contract purpose, but until then objective and absolute impossibly is the only basis on which a defendant may be excused from performance under a contract.