Related People Rita Lotfi, Trainee Solicitor
A health and economic crisis of exceptional magnitude is affecting Africa as a result of the Covid-19 pandemic and the World Bank now anticipates the first recession in Sub-Saharan Africa over the past 25 years.
Although the consequences of this outbreak are yet to be determined, African governments and international organizations (including African regional organizations) are taking actions to minimize social disruption and the economic consequences of the Covid-19 outbreak in the continent.
A key question for projects implemented in the continent is the impact of the Covid-19 on the performance of contracts, and in particular the ability of contractors to claim that a force majeure event has occurred. This article focuses on Francophone Africa and in particular the law which applies to the 17 member countries of the Organization for the Harmonization of Corporate Law in Africa (OHADA).
Is the concept of force majeure recognized in Francophone Africa?
Force majeure is a civil law concept which originates from the French Napoleonic Code.
Under French law, article 1218 of the French Civil Code provides that force majeure occurs "where an event beyond the control of the debtor, which could not reasonably have been foreseen at the time of the conclusion of the contract and whose effects could not be avoided by appropriate measures, prevents performance of its obligation by the debtor".
OHADA regulations contain only few references to the concept of force majeure, which is not surprising as OHADA does not specifically cover civil and contract law within its scope (although a draft OHADA proposal on contract law is under discussion but has yet to be adopted).
However, a definition of force majeure can be found in the OHADA Uniform Act on General Commercial Law (article 294), which defines force majeure as "any impediment beyond the control [of the relevant party] whose causes and consequences could not reasonably be anticipated". The definition applies specifically to sale of goods so in most cases the parties will have to turn to the civil codes of the relevant Francophone African country (or failing any definition, to the French Civil Code and French case law).
For instance, the Guinean Civil Code states that "a force majeure event […] means, an external, insurmountable event which could not have been foreseen". A similar definition is for example found in the Civil and Commercial Obligations Code of Senegal, while the Civil Code of Benin does not contain any specific definition of force majeure.
If the parties have agreed on a specific definition of force majeure (which may include any "epidemic" or "pandemic"), it will bind the parties and often prevail over any applicable legal definition. This is because the legal definition of force majeure is generally not considered as a public policy rule.
Would Covid-19 be generally considered as a force majeure event in Francophone African jurisdictions?
To what extent can the pandemic, the lockdown measures and the economic difficulties it causes constitute unforeseen circumstances and be qualified as force majeure?
The Covid-19 outbreak and its consequences seem to meet the criteria of a force majeure event as defined in most Francophone jurisdictions, that is an external, insurmountable and unpredictable event.
The pandemic was obviously unpredictable if the contract was entered into before the outbreak in December 2019, as an event of this nature could hardly have been anticipated by the parties. The pandemic and the public measures imposed by the authorities are also without any doubt beyond the control of the parties. The pandemic is also arguably in many cases insurmountable as the lockdown and other restrictions prevent most activities to be performed (e.g. a number of mines in Francophone Africa have halted operations due to the disruption of supply chains and to prevent the spread of the Covid-19).
However, Covid-19 cannot per se be considered as a force majeure event. In any case, the determination of whether Covid-19 can be validly recognized as a force majeure event will depend on the date the relevant contract was entered into and the existence of specific contractual provisions relating to force majeure (if any). A party seeking relief from a force majeure event would always have to demonstrate that (i) the current crisis does fall within the existing contractual or legal framework and (ii) there is a direct link between the event and the non-performance of the contractual obligation.
What would generally be the consequences of a force majeure for private contracts?
Broadly, in the event of force majeure, the party that is prevented from performing its obligation is released from liability for non-performance (e.g. OHADA Uniform Act on General Commercial Law mentioned above).
If a party is temporarily prevented from performing on a temporary basis, performance is suspended (unless the resulting delay would justify termination) and if the performance is permanently impossible, the contract is terminated.
Civil codes may also allow for (i) the right to suspend the performance of the contract, (ii) an extension of the contract term, or (iii) the right of either party to terminate it.
Again, the analysis will be contract and jurisdiction specific and contractual provisions will typically take priority over the provisions of the relevant civil codes.
Does force majeure release the borrower from its obligation to repay a loan?
Courts generally hold that a force majeure event does not prevent a payment to be made (unless the borrower can demonstrate that it is practically impossible to make a payment by any means whatsoever, which is unlikely due to the absence of disruption in the payment systems).
This position applies regardless of whether the relevant payment obligation arise from a domestic or foreign law contract (facility agreement…), which would typically not include force majeure as an excuse to fail to make a payment.
However, several initiatives in Francophone Africa have been initiated with the objective of alleviating repayment obligations of borrowers during the COVID-19 outbreak. For instance, the Central Bank of the West African Economic and Monetary Union has requested that banks grant a 3-month payment deferral without interest and penalties and put in place a specific monitoring and facilitation instrument for that purpose.
Can hardship (imprévision) be claimed if the conditions of force majeure are not met?
The doctrine of hardship (imprévision) as applied in civil law jurisdictions allows a party to request the adjustment of the terms of an agreement if circumstances result in economic conditions of a contract becoming significantly unbalanced, causing its performance to be excessively burdensome (but not impossible, contrary to a force majeure event).
However, contrary to the concept of force majeure, the concept of hardship is currently rarely recognized by law for private contracts in Francophone Africa (but may be found in certain public/PPP legislation). This position could change in the future as hardship has been introduced in the French Civil Code in 2016.
While the pandemic may serve as a test for existing force majeure and hardship provisions in Francophone Africa, a negotiation of changes in existing contracts fitting these extraordinary circumstances would in most cases benefit all parties involved.