The Coronavirus pandemic has no doubt disrupted delivery of goods and services which could affect contracts across the country. Among the contracts that have so far been affected include contractual obligations to deliver goods and services especially those that had timelines and deliverables after the 21st of March. With a large number of business in non-essential services having halted operations, there have also been concerns on the fate of employees considering that the firms are not generating revenue and will not be till the lockdown is lifted. The 2018 Rwanda Labour Law provides guidelines on how to handle termination and suspension of employment in the event of economic or technical difficulties. Article 18 of the law Labour Law paragraph 3 provides that the suspension of employment contract can occur on “suspension of the enterprise’s activities as a result of economic or technical difficulties” and “suspension of the enterprise’s activities due to force majeure.” Force Majeure clause is a contract provision that allows a party to suspend or terminate the performance of its obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible. Lawyers and legal experts say that employers whose enterprises have been affected by the lockdown economically and are not able maintain employees can evoke the provisions. However, Athanase Rutabingwa a partner at MRB Attorneys told The New Times that provision only allows suspension and not immediate termination. By suspension, Rutabingwa explained that both parties; employer and employee halt their obligations to each other but not complete termination. The suspension of an employment contract cannot be longer than a period of more than 90 days in the course of one year. In the event that the situation that even when the lockdown is lifted a business has challenges ‘getting back up’, the employer and employee can decide to terminate the contract and issue termination benefits (to employee). “Upon expiry of the period provided for under Paragraph One of this Article, the employee is considered dismissed, and receives terminal benefits provided for by this Law,” the law notes. The same law provides that a worker dismissed for economic or technical reasons and whose dismissal does not last more than six (6) months is entitled to be reinstated in employment without competition when he meets the profile required for the position to which the employer seeks to fill. This applies in the event a company has suspended employment of employees and within 6 months manages to ‘get back on its feet’. John Bosco Bugingo the founding partner of Fountain Advocates said that employers should not rush to terminate their employees’ contracts before reviewing applicable provisions. Bugingo noted that the lockdown and Coronavirus containment period is also set to affect the contractual obligations such as delivery of goods and services especially of non-essential goods. In this regard, he said that Force Majeure clause in contracts which removes liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations. The COVID19 epidemic is one of the natural and unavoidable catastrophes. However, he said that evoking the Force Majeure clause ought to be in good faith and fair dealing and not with intention to abscond obligations. Bugingo said it’s important to note that there is no generic definition of Force Majeure in common law noting that it is a matter of contractual interpretation in each case. The defaulting party must prove that one of the events referred to in the force majeure clause has occurred consequently preventing, hindering or delaying from performance. “Consider whether COVID-19 has made performance actually impossible/radically different or just less convenient and/or more expensive. For example, if the contract requires delivery of payment/goods on a specific date that is now made impossible due to local lockdown measures that may well be a force majeure event,” he said. However, lawyers said that Force Majeure cannot be evoked in instances where one would have been in position to perform said tasks or deliver certain products. For instance, if the services could be delivered remotely then the clause cannot be evoked or if the said goods are essential services (whose movement is allowed even during the lockdown). Other than Force Majeure, there are other clauses such as Article 92 of the Rwandan Contract law which extinguishing of obligations due to impossibility of performance. “Where a party’s performance is made impossible for reasons beyond her/his control including the absence of the object matter of the contract or another case of force majeure, his/her obligation of performance shall be extinguished, unless the circumstances indicate otherwise,” the article reads. Other considerations can be established on grounds of temporary, method of performance impossible, failure of a specific source, illegality. Bugingo explained that parties will have options of refunds or postponing the delivery agreements. Rutabingwa advised employers, companies and individuals to seek legal interpretation prior to making decisions around contracts to avoid unnecessary legal tussles. That said, there are likely to be a few legal tussles in court post COVID-19.
