Term: ACT OF GOD

A completely unpredictable event or “black swan” (see The Black Swan” by Nasssim Talbert) event, usually but not always occurring as a result of some natural phenomenon such as a hurricane, flood or earthquake. In law, this is called a “force majeure” and is usually taken into account in a clause in every contract. For example, a company may undertake to deliver a certain quantity of wheat of a certain quality on a certain date – provided that there is no force majeure which is outside of their control that would prevent them from fulfilling their obligation. In essence, an act of God is one which investors cannot anticipate and therefore cannot be discounted in any way. Another example: Kumba declared a force majeure on 14th March 2018 because it had four train derailments on the line between its mines in the Northern Cape and the port at Saldanha which prevented it from meeting its contractual commitments to foreign buyers. By declaring a force majeure, Kumba bought itself some time to comply with the contracts.

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