SU11: Breach of contract 2 Flashcards
Repudiation
An anticipatory breach that occurs when, by words or conduct and without lawful excuse, there manifests unequivocal intention no longer to be bound by the contract or by any obligation forming part of the contract
Intention test
Whether a reasonable person would be led to believe that the other party does not intend to fulfil their part of the contract
Case law: Datacolor International (Pty) Ltd v Intamarket
R: Requirements
No intention to terminate required
No mala fides or fault required
Even if a party disputes the contents in good faith, it will amount to repudiation if the test is satisfied
Case law: Steward Wrightson v Thorpe
Being requested to leave immediately when an employment contract requires 6 months notice
Case law: SA Forestries Co Ltd v York Timbers
All contracts governed by good faith – if one party frustrates the right of the other party - conduct can be tantamount to repudiation
Effect of Repudiation
- Rescission
- Affirmation of contract
1, Rescission- accept repudiation
➢ The innocent party can decide whether to abide or rescind the contract and
claim damages.
➢ Repudiation of the whole contract will always allow for rescission/
cancellation.
➢ Where there is a divisible contract, the repudiated part can be rescinded.
➢ Mere acceptance of repudiation by the innocent party will end the contract,
therefore no notice of cancelation is required.
➢ Nature of repudiation must be sufficiently serious enough.
Consequences of accepting repudiation
- Performance must be restored
- Damages from the day of the acceptance of the repudiation or the
date of performance. - Prescription begins to run when the innocent party communicates
its acceptance and decides to cancel the agreement.
Mora (debitoris/creditoris) vs Repudiation
A mere delay should not be construed as repudiation, but where the delay is accompanied by words or conduct evidencing an intention not to honour the obligation
Test: time of essence? Delay or no performance expected?
Positive malperformance vs Repudiation
Breach in the form of positive malperformance happens where performance already took place. Repudiation can arise before or after performance is due
Test: Is the breach so serious that one cannot reasonably expect the creditor to abide by the contract and be satisfied with damages alone?
Unibank Savings & loans Ltd v Absa Bank Ltd
Is the innocent party is obliged to cancel where it may lead to ‘wasteful performance’?
- Affirmation of contract- rejection of repudiation
Innocent party chooses to abide by the contract
Effect of rejecting repudiation
➢Must notify repudiating party of willingness to perform.
➢ Performance is suspended
➢ May claim specific performance, but only after the performance is due.
Different ways this form of breach may manifest itself :
*In the form of a statement by the dishonouring party;
*An offer to perform substantially less than the due performance;
*A refusal by a buyer to pay the full purchase price;
*Acting in a way that is contrary to the intention to perform
Prevention of performance
An anticipatory breach, due to fault of either party, where the performance in a contract becomes impossible after the conclusion of the contract
Effect of prevention of performance
*Contract is NOT terminated- Party who rendered performance impossible is guilty of prevention of performance
Requirements of Prevention of performance
- Nature of the performance
- Fault
PP: 1. Nature of the performance
Impossibility: Subjective vs Objective
*Subjective: A sells a car to B. A then sells and delivers the same car to C, a third party. A prevented the delivery of the car to B.
*Objective: A sets car on fire and destroys which renders delivery impossible’
N.B!! Subjective is sufficient to prove prevention of performance
PP: 2. Fault
*Impossibility without fault will terminate a contract
*Standard of fault where there is a duty to of care, it should be that which can be expected from a reasonable person in those circumstances
*Onus: Debtor proves that inability to perform is not due to his/her fault
*Guarantee: Absence of fault is not an excuse
Subjective prevention vs repudiation
Subjective prevention- negligent
Repudiation- expressed objective intention to dishonor obligations of the contract
Impossibility by creditor vs mora creditoris
Impossibility by creditor:
When performance cannot be rendered at a later stage any temporary/partial impossibility can result in prevention of performance because late performance is worthless. E.g service contracts. Paid to perform at a wedding. Negligently electrocute yourself and must be hospitalised, just before you begin = delay that is tantamount to non-performance
Mora creditor: delay of cooperation that does not render the performance impossible to complete
Remedies for Prevention of performance
*All except specific performance
*Total impossibility can cancel immediately
*Partial impossibility: Is it a material breach? (test: same as positive malperformance)
*Test for seriousness is an objective test: Is the breach so serious that one cannot reasonably expect the debtor/creditor to abide by the contract and be satisfied with damages alone?
*Performance in/divisible? Pro-rata reduction where possible.
Case law: Bob’s Shoe Centre v Heneways Freight Services
Paid for Portuguese shoes that was imported. Concluded a contract with an agent that would go to Portugal, fly it to SA, pay the customs fee and then take it to the shop.
→ Shoes got stolen
→ Agent had massive expenses and claimed it back from Bob - Succeeded, but Bob appealed.
→ Legal question: Is Bob liable for the agent’s expenses?
→ Was performance divisible?
→ Bob Should reimburse the agent? - The agent was not at fault!
→ In basic terms, Bob need not reimburse the agent.
Case law: Grobbelaar v Bosch
G and B were business partners who agreed that if one of the partners died, the surviving partner would receive all assets of the partnership. In return, the estate of the deceased partner would proceeds from the life policy. B died first and the proceeds were not issued out because he had submitted fraudulent information. The executor of B’s estate argued that the agreement about the distribution of assets had become impossible since the insurance did not pay out and B’s estate should receive the assets from the partnership.
Court held: The argument was rejected due the fact that B’s behaviour was the one that caused the impossibility. G paid nominal value of B’s policy pay out from the assets.
//Counter performance
PP: Consequences
Specific Dams Can Counteract Rain
1. A party cannot rely on own breach to escape contract
2. Where performances are reciprocal, the impossibility of one set of obligations does not extinguish the need to render counter performance
PP: Consequences
Specific Dams Can Counteract Rain
1. A party cannot rely on own breach to escape contract
2. Where performances are reciprocal, the impossibility of one set of obligations does not extinguish the need to render counter performance, unless contract is canceled validly
Remedies for breach
- Exceptio non adimpleti contractus
A defence that can be raised in the case of reciprocal contract that permits a party to withhold his or her own performance and to ward off a claim for performance until such time as the other party has either performed or tendered proper performance of obligations under the contract - Damage
Requirements of exceptio non adimpleti contractus
- The parties’ obligations must be reciprocal (simultaneous)
- The parties must be required to perform simultaneously, or the plaintiff must be required to tender performance first
-BK Tooling case - This defence can only succeed where the Plaintiff has failed to perform properly or refuses to tender proper performance
BK Tooling v Scope Precision
Facts:
BK needed blocks to make casings for Ford motor company. The contracted with scope to make some of the casings. Scope made delivered the casings which BK accepted and utilised it. Casings did not comply with the contractual specifications.
BK raised Exceptio non adimpleti contractus and refused to pay the full contract price.
Scope sued for the full price. SCA case.
Issue: Can a party (BK) refuse to perform their contractual obligations on the basis that the other party(Scope) has not performed properly?
Held: Defence of exceptio non adimpleti contractus was not successful – Scope performed substantially but the court said it does not have to just award damages to the defendant it can also reduce the cost.
If successful – To be successful Scope must have not performed or performed substantially defectively. BK would not have to pay Scope.
Requirements for damages as a remedy for breach
- Breach by the defendant
- Loss suffered by the plaintiff
- Factual causation (link between the breach and the loss: apply ‘but for’, condition sine qua non test)
- Legal causation (must be sufficiently close)
Special Damages: ShatzInvestments(Pty) Ltd v Kalovyrnas 1976 (2) SA 545 (A)
*Once-and-for-all-rule
Shatz Investments v Kalovyrnas
Special damages: “Court favoured the contemplation principle but felt obliged to follow Lavery, and held that the convention principle is entrenched in our law.” Goodwill loss = tacit term of the contract
