KNOW YOUR RIGHTS – CANCELLATIONS AND COVID-19

20 March 2020 ,  Ian van Zyl 1249

INTRODUCTION

Amid all the hysteria surrounding the Covid-19 virus, we as suppliers of goods and services and the consumers thereof have to take cognisance of the far-reaching effects of the virus on life as we know it. As the virus continues to spread across the globe at an exponential rate, travel bans are imposed or limited travel is encouraged, borders are closed and cancellations of meetings and events have become  necessary within reason or even peremptory, all in an attempt to contain the Covid-19 virus and prevent it from mushrooming. As a result, the questions on the minds of many suppliers and consumers are:  what about flights, trips and events already booked and paid for? Is the supplier, on the one hand, obliged to refund deposits/advance payments in respect of goods which were to be supplied or services which were to be rendered, and on the other hand, is it possible from a  consumer’s perspective to recoup deposits or payments already made in full for goods that would have been supplied or services which would have been rendered?

Unless specific contractual terms and conditions were contained in the contract in question between the supplier and the consumer, had we been confronted with such a situation affecting our rights 10 years ago, we would have had nothing but the South African common law to rely on.

CONTRACTUAL POSITION

Most contracts contain a vis maior clause (which deals with acts of God in general), but whether a particular vis maior clause also covers epidemics and pandemics depends on the wording of the specific clause in the contract. Assuming that a vis maior clause is included in the contract (and on the wording thereof it could be construed to cover Covid-19) a party may be excused from its performance under the contract throughout the duration for which the vis maior continues, unless the contract furthermore specifically provides that under such circumstances after a specified lapse of time the contract can be cancelled at the preference of, usually, either one of the parties to the contract.

If performance during the period for which the vis maior continues is suspended without a right to cancel, then upon the vis maior event ceasing the contract continues and performance under the contract is resumed and also restored to the extent to which is possible.

If a right to cancel is also contained in the contract, it is usually coupled with a provision that the cancellation is without liability. If performance at a later date is practically not feasible and the contract is, by necessity, terminated, the relevant clause in the contract would ideally also stipulate whether deposits are refundable under such circumstances or not, and the supplier and consumer would have to proceed on that basis.

COMMON LAW POSITION

Should the contract not contain a vis maior clause, the general principles of the common law and in particular the principle of supervening impossibility of performance becomes relevant. It could be argued that the breakout of the Covid-19 virus is an event that was not reasonably foreseeable at the time of conclusion of the contract, making performance objectively not possible, in which case the reciprocal obligations of the supplier and the consumer would be discharged. Where a desposit or an advance payment in full has been made by the consumer, but actual performance by the supplier under the contract has not yet occurred, and such performance at a later date is actually not possible or not tendered by the supplier, the consumer will have a claim for repayment of the deposit or advance payment made.

Certainly the situation created by the the breakout of the Covid-19 virus cannot be attributed to the fault of either the supplier or the consumer, but it does not necessarily follow that performance is objectively impossible. The mere fact that performance might be difficult or inconvenient for either one of the parties from the subjective viewpoint of the party concerned, is not sufficient reason to rely on the doctrine of impossibility of performance.

However, to determine whether performance is objectively not possible is also a matter of degree which necessitates the taking into account of all current circumstances. Although performance in theory may still be possible, it might well be argued that in the extraneous circumstances surrounding Covid-19 it would simply be unreasonable to insist that the reciprocal obligations of the supplier and the consumer be honoured. For instance, where the booking for a venue is cancelled (less than 100 people), it could be argued that it is actually not only difficult for anyone or both of the parties to perform, but objectively not possible in these circumstances. 

Where performance is simply not possible by reason of a prohibition imposed by a Governmental Authority (for instance an event where more than 100 people would be present), such a prohibition would be regarded as a case where performance is objectively not possible and the reciprocal obligations of the supplier and the consumer would consequently be discharged.

WHAT ABOUT THE CONSUMER PROTECTION ACT (“CPA”)?

Since 31 March 2011 consumers (i.e. any natural person and juristic persons falling within the confines of the CPA) can now rely on the provisions of the CPA for recourse, in addition to the common law. The ambit of section 17 of the CPA is wider than the common law insofar it provides for the consumer’s right to cancel an advance reservation, booking or order for the supply of any goods or services, irrespective of the existence of a vis maior event. In other words, the remedy set out in this section 17 would be available to a consumer even in circumstances where it could be problematic for a consumer to rely on the common law doctrine of impossibility of performance explained above.

Under section 17, a supplier who has undertaken to supply goods or services at a later date may require payment of a “reasonable deposit in advance” and may also “impose a reasonable charge for cancellation”. A charge would be unreasonable if it exceeds a fair amount in the circumstances, having regard to the aspects stipulated in this section 17.

An interpretation of section 17 of the CPA reveals that the section is aimed at the situation where the consumer has made a booking or reservation and the consumer has subsequently cancelled it, whether by reason of a vis maior event or otherwise. For instance, if the consumer had booked a flight or made a reservation and cancelled it of his own accord due to Covid-19, we would be operating within the ambit of section 17.  Section 17 further states that a supplier may not impose any cancellation fee in respect of a booking, reservation or order if the consumer is unable to honour same due to death or hospitalisation. This is highly relevant in the present context, as if the consumer is forced to cancel the booking due to contraction of the Covid-19 virus and subsequent hospitalisation; the supplier will not be able to charge any cancellation fee and will have to refund the deposit or advance payment in full. In the event of a cancellation by the consumer in the context of section 17 of the CPA due to the threat in general of Covid-19, a cancellation fee in principle might be justified unless it could be argued, for instance, that it is not the general practice of the relevant industry – it will be necessary to establish this objectively on the basis of the actual facts.

However, section 17 of the CPA does not cater for the situation where the consumer booked a flight or made a reservation and the supplier took the decision to cancel it and notify the consumer accordingly. As such, there is no basis in section 17 of the CPA upon which the consumer may in such event rely on this section 17 to recoup a deposit or advance payment in light of Covid-19 where the supplier has cancelled the booking or reservation.

Be that as it may, even if section 17 of the CPA does not apply to the case in point and/or reliance on the terms and conditions of the contract or the common law is not possible or advisable in such a case, it could be argued that the general provisions of the CPA should find application in the context of the rights of a consumerto fair and honest dealing and the right to fair, just and reasonable terms and conditions.

CONCLUSION

From the above, it appears that the terms and conditions of the contract in question will provide the most clarity in event of refunding deposits/advance payments for cancellations due to Covid-19, and will hopefully assist in ascertaining whether such amounts are refundable or not.

In the event that the contract offers no guidance in this regard, reliance on the common law regarding the reciprocal rights and obligations of the supplier and the consumer would be necessary.

Moreover, the CPA will afford a consumer the right in general  to recover deposits/payments lost in light of cancellations effected by the consumer resulting from Covid-19, subject to a cancellation fee that might be applicable.

 

Yesterday the South Gauteng High Court (located in Johannesburg) stressed the urgency of containing the coronavirus in a judgment delivered by Judge Sharise Weiner in the following statements, “Not only SA, but the world, is caught in a maelstrom unprecedented in most of our lifetimes,” adding, “The containment of Covid-19 is a matter of significant national importance”.

Therefore, despite what the law says, from a strategic point of view suppliers will benefit from refunding consumers’ deposits and advance payments, or at least arranging alternative time slots for performance – just as some suppliers have already undertaken to do – with a view to maintaining future relationships with their customers and facilitating customer loyalty.
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