These are unprecedented times – most business owners will feel the pinch, particularly those in the events, wedding, tourism, restaurant and entertainment industry.
Holistically, be proactive with any legal obligations; and as hard as it may be, try to stay calm and focused on keeping your business afloat. Like any disaster or pandemic, it will pass.
Can I get any financial support? Yes. The Minister of Small Business Development, Khumbudzo Ntshavheni has announced support for small businesses. The department has created a website for SMME’s to register – www.smmesa.gov.za. The site goes live tomorrow, Tuesday 24 March 2020. Businesses will have to show a ‘direct link of the impact or potential impact of COVID-19 on the business operations…’
In addition, that department has other measures in place, and small business owners should carefully explore applicable options. For example, see the Department’s website at: http://www.dsbd.gov.za. And also other initiatives (which are designed for “normal” times): http://www.sefa.org.za and http://www.seda.org.za.
Also, some banks (and all should follow suit), led by Standard Bank, have created debt payment holidays for accounts in good standing. In addition, contact other service providers and landlords, try to negotiate extensions or new terms to get you some breathing space. If you can, take care of your staff – importantly, remember that how you respond to consumers and other stakeholders in this disaster may well shape your business in the future.
In general, if you are a service provider, or even if you are a consumer, consider the terms of any applicable contracts carefully. Does the contract contain a force majeure clause? What is that? Briefly, a clause which deals with exceptional events where performance becomes objectively impossible, and which is not caused by either of the parties – like a natural disaster, violent riot, or a pandemic. Basically, situations that are outside of the control of the parties.
Performance must be objectively impossible though, and not just inconvenient or costly. Each situation will be different, and the terms of every contract differ. But, as an overarching principle, a force majeure clause will excuse non-performance. As with anything in law, the facts change the outcome – one must consider the nature of the services, the wording of the contract, the amount paid by the parties, and the date that the services were due to be rendered.
What happens if there is no force majeure clause? South African law recognises the principle of supervening impossibility of performance. What is this? Basically, in a similar vein to a force majeure clause, it is a legal principle that is applicable to contracts where performance cannot be rendered due to circumstances outside of the reasonable control of the parties concerned. Several factors need to be considered: what is the nature of the contract? What are the unique considerations of the case in question – i.e.: when / how / where / what was the service to be delivered? Is the performance impossible? How much was paid?
Do you have to provide full refunds? It depends… The Consumer Protection Act technically does permit full refunds for events cancelled due to death or hospitalisaiton, or in certain other circumstances beyond the control of the parties (see sections 17 and 47). However, as pointed out by the Consumer Goods and Services Ombudsman, parties must work together to find a fair and reasonable solution. Further, as pointed out by seasoned consumer journalist Wendy Knowler, “it’s not fair to expect either party – consumer or supplier – to take the full knock.” We are in unchartered waters; so be proactive with legal obligations, and act reasonably and fairly in all circumstances.
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