Breach of contract

Question 1

Definition of breach of contract

Answer 1

conduct which infringes a contractual obligation, contrary to the law of contract

Question 2

Types of breach

Answer 2

1. Positive malperformance
   ● The debtor does perform, but in a defective or incomplete manner.
2. Mora debitoris
   ● The debtor culpably fails to make timeous performance of their obligations
3. Prevention of performance
   ● Where either party renders performance of the contract impossible.
4. Repudiation
   ● Where either party indicates an unequivocal or clear intention not to honour the agreement
5. Mora creditoris
   ● The creditor culpably fails to cooperate timeously with the debtor so that the latter may perform their obligations, i.e. there is a culpable delay or failure on their part in receiving the performance.

Question 3

Positive malperformance: breach of positive and negative duty

Answer 3

1. Breach of positive duty
   ■ Where there is a duty to do something, positive malperformance occurs where the debtor duly performs but in an incomplete or defective manner.
2. Breach of negative duty
   ■ When a debtor has a duty to refrain from doing something but performs the act anyway

Question 4

Requirements to claim positive malperformance

Answer 4

1. Act of performance
   ■ The act may take place before, on or after the date for performance.
2. Performance must be defective
   ■ To determine whether performance is not in accordance with a contract, dual investigation is required.
   ● First, it needs to be determined what the contract requires through interpretation - what is the performance the parties agreed on?
   ● Second, it needs to be determined whether the performance made complies with this requirement.
3. Fault
   ■ It is unclear whether or not fault is an element of positive malperformance. By their silence on the point, most cases and writers create the impression that fault is not required, but this tacit assumption of strict liability has been challenged (it has been pointed out that a debtor can merely avoid liability by showing that the malperformance was caused by factors beyond their control and for which they are not to blame).

■ Warranty is an exception to this uncertainty though - where performance is warranted or the quality of the performance is warranted, the debtor will be liable for non-performance or poor performance regardless of whether fault is present.

Question 5

Remedies for PM: Specific performance

Answer 5

1. The creditor may accept the defective or incomplete performance as partial performance of the contractual obligation, and claim as fulfilment of the contract damages that are the difference in value between proper performance and the performance actually rendered
2. The creditor may reject the performance and demand either specific performance (performance de novo) or damages in lieu of performance.

Question 6

Remedies for PM: Cancellation

Answer 6

1. If there is a cancellation clause (lex commissoria) in the contract entitling the creditor to cancel for the particular type of malperformance that has occurred, they may do so, even if the breach is not a serious or material one. But have to give notice first
2. If there is no cancellation clause, the breach must be material (i.e. sufficiently serious) under the common law

Test for materiality: the creditor may rescind only if the breach is so serious that one cannot reasonably expect them to abide by the contract and be satisfied with damages alone

Question 7

Sweet v Ragerguhara

Answer 7

■ Ito the agreement, the applicant bought from the respondents certain immovable property. The agreement stipulated that possession of the property and vacant occupation would be given to the purchaser on 1 January 1977. When that time came, however, there were still people living on the property

○ The court found that the failure of the respondent to give the applicant vacant occupation of the property was in breach of their agreement.

■ The court found that oral evidence needed to be presented for materiality to be established; the information put before the court was insufficient.

Question 8

Remedies for PM: Surrogate Damages

Answer 8

● Damages that are awarded in lieu of or to complete the performance are known as surrogate damages.
● If the aggrieved party decides to uphold the contract, damages are calculated by taking the actual value of the performance (i.e. what it should have been) and subtracting from this the performance rendered (i.e. defective performance).
● Alternatively, the aggrieved party can reject the defective performance and ask for damages for the whole amount

Question 9

Remedies for PM: Consequential damages

Answer 9

● Damages that are awarded in respect of extrinsic losses arising out of the breach are known as consequential damages, which the creditor can claim whether they elect to rescind or affirm the contract.
● E.g. If A contracts with B to install new floors in her restaurant but he performs defectively in putting down the wrong tiles, A can decide to affirm or cancel the contract and can claim additional damages for having to delay the opening of her restaurant

Question 10

Definition of mora debitoris

Answer 10

Mora debitoris is the failure of a debtor, without lawful excuse, to make timeous performance of a positive obligation that is due and enforceable and still capable of performance in spite of such failure.

○ Since mora consists essentially of an omission (failure to perform on time), it can occur only in respect of a positive obligation (e.g. deliver something, perform a service, give occupation of a property).
○ A debtor who acts in breach of a negative obligation, or makes a performance that is incomplete or defective, is guilty of positive malperformance

Question 11

Requirements for mora debtoris

Answer 11

1. Performance must be due and enforceable
2. Failure to perform timeously
3. Fault of the debtor

Question 12

Specific date determined: Mora ex re

Answer 12

○ Where parties have expressly or impliedly stipulated a time for performance in their contract, a culpable failure by the debtor to perform on or before the due date automatically placed them in mora, without the need for intervention by the creditor.

○ Note that the fulfilment of a suspensive condition or arrival of an uncertain day which was certain to arrive may render the debt due but requires subsequent demand by the creditor in order to give rise to mora.

Question 13

Meaning of dies interpellat pro domine

Answer 13

the date makes the demand on behalf of the person.

Question 14

Mora if no date is determined: mora ex persona

Answer 14

○ Where no time for performance has been stipulated in the contract, expressly or by implication, mere delay by the debtor in performing cannot automatically result in the debtor falling into mora. The creditor must place the debtor in mora by demand

Question 15

Is demand necessary if the debtor knows that performance is urgent?

Answer 15

● It has been held in a series of cases, commencing with Federal Tobacco Works v Barron that if time is of the essence of the contract, the debtor will automatically fall into mora if they fail to perform within a reasonable time, even though no definite time for performance was fixed in the contract or by subsequent demand.
● In Broderick Properties v Rood the court found similarly to Federal Tobacco; if time is of the essence, even if no date has been given, the debtor is automatically in mora, i.e. have breached the contract.

Question 16

impossibility of performance re mora debtoris

Answer 16

● Where it is impossible to perform (e.g. due to a flood) and there is nothing they could have done about it, the debtor will be excused if the impossibility is a) temporary and b) not due to their own fault

Question 17

Consequences of mora debitoris

Answer 17

1. Perpetuation of obligations:
   ■ Usually, supervening impossibility of performance that cannot be attributed to the fault of either party terminates the contract.
   ■ If, however, the debtor was in mora when performance became impossible, their obligation to perform is not discharged
   ■ The debtor can avoid liability by showing (in the case of a duty to deliver a thing) that, even if they had made timeous performance, the thing would have suffered the same fate in the hands of the creditor
2. Specific performance
   ■ The right to claim specific performance arises as soon as the debt is due and enforceable and is not dependent on proof of mora
3. Damages
   ■ Whether or not they eventually perform, the debtor is obliged to compensate the creditor in damages for any losses that the latter suffers in consequence of the delay.
   ■ In the case of an obligation to pay a liquidated sum of money, interest is payable as from the date of mora (usually 11%)
4. Cancellation
   ■ There is no automatic right to cancel, but a creditor can rescind the contract if the debtor is in more and “time is of the essence”
   ○ The Broderick & Tobacco cases tried to employ this concept at the earlier stage of determining whether a breach of contract took place. Instead, it must only be employed once it has been established that there is a breach and the court is trying to determine if cancellation is possible as a remedy

Question 18

Difference between a notice of recession and a letter of demand for performance

Answer 18

Notice of recession:
gives the creditor a right of rescission where the debtor is in mora but time is not of the essence.

Notice of demand for performance:
serves to fix a definite time for performance when the contract fails to do so in order to place the debtor in mora.

Question 19

Federal Tobacco works v Barron

Answer 19

● The appellants (Federal Tobacco) ordered 70 000 bags through the local agent of the respondents (Barron), who carried on business in Ireland.
● The bags were delivered six months later, however, once Barron had tendered the delivery, Federal Tobacco refused to accept delivery of the bags. Barron sued the appellants for the purchase price.
● The appellants alleged that the order was not executed within a reasonable time and, due to the fact that the order was urgent to the knowledge of their agent, this delay precluded Barron from recovering the amount
● On consideration of the evidence, the court found that the order was clearly urgent because the order was marked as “urgent” in a letter to the respondents. Thus, it was the respondents’ duty to execute the order within a reasonable time.
● A lot of the emphasis was on the fact that Barron’s agent had largely been responsible for the miscommunication
● The court found that since the order was urgent, which was clearly communicated to Barron, the delay of six months was unreasonable under the circumstances.
● Thus, the principle was established that failure to deliver within a reasonable time can grant a creditor the right of rescission even though -
○ a) no specific date was stipulated in the contract (mora ex re); and
○ b) the debtor was not placed in mora (mora ex persona

Question 20

Broderick Properties v Rood

Answer 20

● The plaintiff entered into an agreement with a bank in 1959 in terms of which they undertook to lend the plaintiff R220 000 for a mortgage. The plaintiff instructed the defendant to register the bond over the property. It was a term of the contract that the R220 000 would only be made available by the bank on the date of registration. Another term held that the interest would run from November 1959.
● The defendant knew about these terms and received his instructions more than two weeks before interest would begin to run. However, the defendant only caused the bond to be registered in February of the following year, so that the plaintiff was paying interest for three months without having the use of the money
● The defendant argued that there had been no agreed time for performance and no subsequent demand made for performance, thus no mora ex re or mora ex persona on which the plaintiff could rescind the contract.

○ The judge held that it would be absurd to place a debtor in mora at any time where there isn’t an express time clause, but failed to recognise the role of tacit time clauses where it is obvious from the situation that performance is due straight away (it would have been possible for the court to have found a tacit time clause in this case).
■ Thus, the court found that the plaintiff had the right to cancel the contract without placing the debtor in mora.

Question 21

Mora debitoris and the CPA

Answer 21

○ S 19(2): Unless otherwise provided, it is an implied condition of every transaction for the supply of goods and services that the supplier must perform upon the agreed date or within a reasonable time; thus, no demand required from the consumer.

○ S 19(6)(c): If the supplier tenders performance on the wrong date, the consumer can choose to accept the delivery at the wrong time or request delivery at the right time, or can exercise their automatic right of cancellation.

○ S 14(2)(b): Dealing with the expiry and renewal of fixed term agreements (usually lease) -
■ The supplier may only cancel an agreement 20 business days after giving notice to the consumer of their material failure, unless the consumer rectifies the failure within this time.
■ Thus, for example, if a lessee breaches their rental agreement by paying rent late, they have an automatic opportunity to cure the breach.