INTRODUCTION
The World Health Organisation (WHO) has declared the Novel Coronavirus 2019 (COVID-19) to be a global pandemic. Thus, the ongoing global outbreak and spread of the pandemic has legal implication in business across the globe including Tanzania. In view of these implications, FIN & LAW highlights some key legal aspects likely to affect any business operating in Tanzania. It is, however, relevant to note that this legal guidance is not exhaustive and does not cover all necessary aspects of the business.
The global outbreak and widespread of COVID-19 has brought about the remarkable impact of global proportions, with far-reaching implications in commerce, business and employment – both domestic and international. This article, therefore, highlights the legal implications of the COVID-19 for Contract law, Employment law as well as implication on Immigration law in Tanzania which are the principal business aspects that, the COVID-19 outbreak has had a significant impact.
The spread of COVID-19 affects several legal obligations under various types of contracts. This is particularly true with respect to agreements entered into before the outbreak of the virus, whose performance has been disrupted or frustrated as a result of the various restrictions imposed by the Government that affects business and employment.
In relation to Contract law, the main challenges are likely to arise with respect to agreements entered before the outbreak of the virus, whose performance has been disrupted or frustrated in the current circumstances. On the other hand, on the aspect of employment law, the emphasized social isolation (quarantine) but also the caring of the sick and death has a major impact on the Employment law. For Expatriate and foreign Employees as well as foreigners entering and leaving the country, necessary legal precautions must be taken that may affect their stay or leaving the country.
In Tanzania, the Law of Contract Act, Cap 345 as well as the Labour and Employment Relations Act Cap. 366 provides for several aspects in dealing with such situations.
THE CONTRACT LAW ASPECTS AND IMPLICATIONS
Frustration doctrine
The doctrine of frustration provides that, a party to a Contract is relieved of any liability in the event of a breach of contract where it is prevented from, or unable to, perform his/her obligations under the agreement, due to some event which occurs, which was outside of their sphere. The doctrine of frustration is meant to address situations where external circumstances make the performance of such a contract impossible or materially different from the parties’ original agreement. That is, the principle applies when the performance of the contract becomes fundamentally different from the parties’ original agreement. However, the party that seeks to apply the doctrine of frustration must prove that the contractual obligations become impossible, or have radically changed the party’s principal purpose for entering into the contract.
The unprecedented COVID-19 outbreak is likely to give rise to applications of the doctrine of frustration. This is because a contract may be discharged on the ground of frustration when something occurs after the formation of the contract which renders it physically or commercially impossible to fulfill the contract or transforms the obligation to perform into a radically different obligation from that undertaken at the moment of the entry into the contract. This could be as the result of the forced cancellation of events, activities or arrangements because of the Government instructions or directives. In that regard, the frustration doctrine may protect a non-performing party against claims for enforcement or performance damages.
It should be clear that, under the doctrine of frustration, a party breaching a contract may have a defence against claims for performance damages or specific enforcement only if circumstances arise that were unknown or unforeseeable to the breaching party when it entered into the contract and could not have been prevented, making the performance of the contract impossible or materially different from what was originally agreed. The doctrine of frustration may lead to termination of a contract, rather than to its change. The doctrine deals with circumstances under which the contract cannot be fulfilled and enforced.
It is important to note that, the doctrine of frustration does not protect the breaching party from other contractual claims, such as:-
- restitution of goods (retuning of goods taken) or
- refunding the payment that has been received, or
- reliance damages (expenses incurred in order to fulfill the contract).
Force majeure clauses
A force majeure event refers to the occurrence of an event which is outside the reasonable control of a party and which prevents that party from performing its obligations under a contract. Force majeure clauses in a contract are contractual clauses which alter parties’ obligations and/or liabilities under a contract when an extraordinary event or circumstance beyond their control prevents one or all of them from fulfilling those contractual obligations. Force majeure clauses in contracts generally address circumstances beyond the contracting parties’ control, which may render performance under a contract substantially difficult or impossible.
Force majeure events are typically, circumstances such as natural disasters, war, terrorism, earthquakes, hurricanes, floods, acts of government or plagues. When such events occur, the parties subject to the force majeure are released (either temporarily or permanently) from their obligations under the contract or the contract as a whole could expire without imposing obligations on the parties. It is thus important to note that, force majeure is a creature of contract and not of the general common law. That means, the agreement must expressly provide for the events upon which the performance of the contract can invoke force majeure.
Therefore, Force majeure clauses sometimes are subject of disputes over their interpretation. For example, Force majeure clauses specifically define or list the specific event which may, depending on its impact, relieve a party from contractual liability. In such circumstance where epidemic or pandemic have not included among the relevant circumstances, a party to the contract may claim that such a situation is not force majeure if it is not specifically provided in the list of events.
EMPLOYMENT ISSUES
Naturally, the most impacted part of the business as the result of the COVID-19 are the employees. In Tanzania the Employment and Labour Relations Act, Cap. 366 provides for the measures as well as avenues to mitigate the impact but also ensure appropriate measures are applied by both employer and employee.
- Sick Leave: Specifically, the law provides for 126 days for sick leave within a leave cycle (36 months) of which 63 days are with full pay and another 63 days are with half pay. In this regard, an employee who has contracted the Corona Virus will have assured 126 sick days leave days.
- Annual Leave: Employers may wish to grant the annual paid leave to employees amidst the crisis. The annual leave is 28 days.
- Break and Rest periods: The law allows Employer and Employee to agree on the suitable break and rest periods. Due to the effect of the COVID-19, where appropriate the employer and employee may agree for suitable working hours that provide for necessary break and rest.
- No discrimination: Employers should be mindful not to discriminate against another person because of their race, place of origin, colour or ethnic or national origins. All policies and procedures implemented by an employer as a result of COVID-19 should treat everyone equally across the board, regardless of their status.
- Working from home: The law in Tanzania does not specifically require confining the employees in a specific area. However, other considerations such as place of employment, repatriation and other occupational considerations are important aspects to be looked upon. Therefore, the employer may opt for this measure to require employees to work from home depending on the nature, tasks and operational requirements for the performance of the duties. This measure puts into question other legal aspects such as performance, conducts, compatibility and capacity.
IMMIGRATION ISSUES
On 23rd March 2020 the Minister for Health, Community Development, Gender, Elderly and Children announced specific additional measures relating to Immigration to limit the spread of the COVID-19 that has been imposed on all travelers to Tanzania. Such measures include:-
- All travelers whether foreigners or returning residents arriving from COVID-19 most affected countries will be subjected to mandatory isolation for 14 days at their own cost at designated facilities identified by the Government.
- Passengers should fill in Health Surveillance Form in the plane, or any other transport means and submit them to Port Health authorities upon arrival.
- All travelers arriving will be subjected to an intensive screening and where necessary COVID-19 rapid testing.
- All travelers will then be informed of the designated isolation facilities, costs and arrangements in place and access to those facilities.
- After 14 days of quarantine, passengers who have not developed symptoms of COVID-19 may leave the designated quarantine facilities and will be required to register personal information for future possible tracking purposes.
- All people residing in Tanzania are advised to avoid non-essential travels to COVID-19 affected countries.
IMPORTANT CONSIDERATIONS AND WAY FORWARD
- Monitoring situation: The COVID-19 situation is dynamic and evolving rapidly. Therefore, it is important for the business to ensure that information comes from the approved and reliable source from their organization in order to respond appropriately to the situation.
- Business Continuity: Employers should ensure suitable business and organization continuity measures are adhered at least focusing on the matter such as:-
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- management to take suitable actions including issuing appropriate communication to employees so as to ensure that the business has appropriate regard to health and safety issues at all times. The management must also be able to make decisions about counterparties and other third parties;
- HR should step up to ensure that there is appropriate access to relevant employee information as well as data protection to deal with any privacy issues;
- legal team to advise on the legal risks where liability may be of concern in relation to non-performance of contracts or where there are staff health and safety or welfare concerns; and
- occupational health to provide guidance on communicable diseases, where applicable.
- Supply chain and third parties: A serious outbreak of COVID-19 may interrupt the supply of goods and services to businesses and make it more difficult to provide goods and services to customers and clients. Reviewing contracts now and developing a plan to deal with such issues may be very useful.
- Regulatory Compliance: Regulated sectors such as Banking, Insurance, and Telecoms should fall back to their business continuity and other contingency plans if disruption to the business is likely. These should be carefully reviewed and now put into practical tests in case of the serious outbreak. In addition, necessary business compliance requirements should at least be met such as timely filing, documentation, returns, statutory payments, etc;
- Insurances: Employers should ensure that they understand their insurance position, both from a business perspective and for employees such as health insurance.
Finally, we at FIN & LAW hope you all remain safe and alerted during this time. Our Offices shall continue to be opened but carefully monitoring the situation and following government directives.
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