SU11: Breach of contract 2

Question 1

Repudiation

Answer 1

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

Question 2

Intention test

Answer 2

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

Question 3

R: Requirements

Answer 3

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

Question 4

Case law: Steward Wrightson v Thorpe

Answer 4

Being requested to leave immediately when an employment contract requires 6 months notice

Question 5

Case law: SA Forestries Co Ltd v York Timbers

Answer 5

All contracts governed by good faith – if one party frustrates the right of the other party - conduct can be tantamount to repudiation

Question 6

Effect of Repudiation

Answer 6

1. Rescission
2. Affirmation of contract

Question 7

1, Rescission- accept repudiation

Answer 7

➢ 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➢ Where there is a divisible contract, the repudiated part can be rescinded.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.

Question 8

Consequences of accepting repudiation

Answer 8

1. Performance must be restored
2. Damages from the day of the acceptance of the repudiation or the
   date of performance.
3. Prescription begins to run when the innocent party communicates
   its acceptance and decides to cancel the agreement.

Question 9

Mora (debitoris/creditoris) vs Repudiation

Answer 9

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?

Question 10

Positive malperformance vs Repudiation

Answer 10

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?

Question 11

Unibank Savings & loans Ltd v Absa Bank Ltd

Answer 11

Is the innocent party is obliged to cancel where it may lead to ‘wasteful performance’?

Question 12

2. Affirmation of contract- rejection of repudiation

Answer 12

Innocent party chooses to abide by the contract

Question 13

Effect of rejecting repudiation

Answer 13

➢Must notify repudiating party of willingness to perform.
➢ Performance is suspended
➢ May claim specific performance, but only after the performance is due.

Question 14

Different ways this form of breach may manifest itself :

Answer 14

*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

Question 15

Prevention of performance

Answer 15

An anticipatory breach, due to fault of either party, where the performance in a contract becomes impossible after the conclusion of the contract

Question 16

Effect of prevention of performance

Answer 16

*Contract is NOT terminated- Party who rendered performance impossible is guilty of prevention of performance

Question 17

Requirements of Prevention of performance

Answer 17

1. Nature of the performance
2. Fault

Question 18

PP: 1. Nature of the performance

Answer 18

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

Question 19

PP: 2. Fault

Answer 19

*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

Question 20

Subjective prevention vs repudiation

Answer 20

Subjective prevention- negligent
Repudiation- expressed objective intention to dishonor obligations of the contract

Question 21

Impossibility by creditor vs mora creditoris

Answer 21

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

Question 22

Remedies for Prevention of performance

Answer 22

*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.

Question 23

Case law: Bob’s Shoe Centre v Heneways Freight Services

Answer 23

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.

Question 24

Case law: Grobbelaar v Bosch

Answer 24

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

Question 25

PP: Consequences

Answer 25

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

Question 25

PP: Consequences

Answer 25

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

Question 26

Remedies for breach

Answer 26

1. 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
2. Damage

Question 27

Requirements of exceptio non adimpleti contractus

Answer 27

1. The parties’ obligations must be reciprocal (simultaneous)
2. The parties must be required to perform simultaneously, or the plaintiff must be required to tender performance first
   -BK Tooling case
3. This defence can only succeed where the Plaintiff has failed to perform properly or refuses to tender proper performance

Question 28

BK Tooling v Scope Precision

Answer 28

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.

Question 29

Requirements for damages as a remedy for breach

Answer 29

1. Breach by the defendant
2. Loss suffered by the plaintiff
3. Factual causation (link between the breach and the loss: apply ‘but for’, condition sine qua non test)
4. Legal causation (must be sufficiently close)
   Special Damages: ShatzInvestments(Pty) Ltd v Kalovyrnas 1976 (2) SA 545 (A)
   *Once-and-for-all-rule

Question 30

Shatz Investments v Kalovyrnas

Answer 30

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