SU13- Termination of Obligations

Question 1

Contracts can be terminated by

Answer 1

1. Performance
2. Agreement
3. Operation of the law

Question 2

Termination of obligations

Answer 2

Specifically refers to the scenario where there is no breach of contract and the contract is not voidable

Question 3

1. Termination by performance

Answer 3

Fulfilment: Both parties perform in terms of the contract. Contractual
obligations are terminated

Question 4

P: Requirements

Answer 4

A. Full and proper performance as agreed is required. Creditor may accept a different performance (datio in solutum)
B. Performance to the creditor or an authorised third party.
C. When: expressly or tacitly agreed upon by parties. Where there is no agreement performance must take place immediately or within a reasonable amount of time.
D. Bilateral act by the debtor and the creditor-Cooperation must take place.
E. Performance by a third party
-Generally, performance must take place by the party who
agreed to perform.

Question 5

Performance by a third party case law: Brayton Carlswald v Brews 2017

Answer 5

Brews was the third party and he paid amounts that Brayton owed the bank. The bank ceded its rights to the third party (Brews).
Brews applied to be substituted for the bank in the execution process against Brayton.
*However, the cession effected the underlying obligation (The payment to the bank)
//In basic terms, once the obligation is extinguished, there can take place no transfer of personal rights. The obligations towards the bank were fulfilled and because of that, there could
be no cession of rights and obligations that were already fulfilled.

Question 6

2. Termination by agreement

Answer 6

a. Release and waiver
b. Novation
c. Compromise
d. Effluxion of time
e. Notice
f. By operation of a condition in the contract

Question 7

a. Release and waiver

Answer 7

A and B conclude a lease contract and A must pay a deposit. If, at the end of the term of the lease, A decides not to claim back the deposit, then it will be a waiver.

Question 8

Release and waiver case law: Alfred Mcalpine v Transvaal Provincial Administration 1977

Answer 8

Case concerned a contract (1966) to build a portion of a national road. Transvaal required a lot of alterations that rendered a new contract by conduct meaning Alfred was entitled to more remunerations, interest, etc. The court held that there was no new agreement in terms of which the contractor was entitled to reasonable remuneration instead of the contract price, and there was no implied term stipulating that the owner must introduce the variations “at reasonable times.”

Question 9

Novation

Answer 9

→ Agreement to extinguish and replace one or more obligations with a new
obligation
→ Novation of the original obligation replaces the accessory obligation.
→ Where the original obligation is void, the novation is void, but if the novation is void, the original obligation continues to exist

Question 10

Compromise

Answer 10

➢ Agreement where the parties settle a dispute between themselves
➢ Payment in full and final settlement, even when it is not the full amount.

Question 11

Compromise case law: Benefeld v West

Answer 11

Facts: The parties became engaged in 1984 while the man was still married to someone else. Since the engagement was premised on the idea that the man would divorce his wife, the engagement was contra bonos mores for undermining the institution of marriage. In the event, the man never divorced his wife, but lived together with his ‘fiance’ and their two children for several years. When their relationship came to an end, she instituted legal proceedings against him for breach of promise (an action based on breach of an engagement contract). The parties came to an agreement and concluded a compromise agreement to the effect that he would pay her R1,5 million. The man later disputed the compromise, arguing that because it was based on an illegal engagement contract, the compromise was also tainted by illegality.
Court held: Although a compromise agreement could be illegal, it was an entirely new contract which would not necessarily be invalidated by the illegality of the original agreement. In this case, for instance, the compromise did not require the man to divorce his wife, and it was not based solely on the breach of promise but was also intended to compensate the woman for caring for the man and their children for many years.

Question 12

Effluxion of time

Answer 12

*Specifically, when there is a provision that there is an automatic termination
at the end of a stipulated period.
*Section 14(2) of the Consumer protection Act (CPA)- Applies to
fixed term consumer contracts.
*May not exceed the maximum amount of time determined by the minister
*Only natural persons
*The consumer may cancel the agreement at any time before the end of the
agreement.

Question 13

s14(2) of CPA

Answer 13

Consumer’s right to cancel

Question 14

Notice

Answer 14

➢ Contract that ends on a notice.
➢ Where there is no specific provision in a contract, then the notice must be
in a reasonable time period.

Question 15

Termination by operation of law

Answer 15

SMIPID
a. Set-off
b. Merger
c. Impossibility
d. Prescription
e. Insolvency
f. Death

Question 16

a. Set-off

Answer 16

You owe me R100, I owe you R100
- The debt cancel each other out
*Debts exist between the same two persons in the same capacities
*Debts of the same kind or nature
*Debts due and enforceable
-The debts must therefore not be subject to suspensive conditions or time clauses, or be subject to the exceptio non adimpleti contractus
*Debts liquidated
-Be ‘capable of easy and speedy proof’ (fixed or readily ascertainable by simple arithmetical calculation)

Question 17

Automatic set-off

Answer 17

Standard Bank of South Africa Ltd v Echo Petroleum : set-off operates automatically as soon as the above requirements are met but in order for set-off to operate retrospectively, the debtor has to rely on it

Question 18

b. Merger

Answer 18

Lessee buys a house from lessor and becomes owner. The capacity of lessee and owner merger and become one

Question 19

c. Impossibility

Answer 19

(1)Performance of an existing obligation (after conclusion of a contract) becomes objectively impossible (2)without the fault of the debtor (3)as a result of an unavoidable and unforeseen event

Question 20

Impossibility Requirements:

Answer 20

1. Performance must be objectively impossible: No one can tender
   the agreed performance
   → Difficulty or expense is not impossibility
   → Something that is illegal is also impossible
2. Impossibility must be unavoidable by the reasonable person- It
   does not matter if the cause of the impossibility was
   foreseeable.

Question 21

d. Prescription

Answer 21

Extinction of debts/obligations by lapse of time
*A Party’s obligation to negotiate the terms of an agreement is not a debt that can prescribe (Makate v Vodacom

Question 22

e. Insolvent

Answer 22

Where a person is insolvent creditors may apply to have the estate sequestrated

Question 23

f. Death

Answer 23

General rule: transmission to heirs
The contractual rights and duties of a party are transmitted to his or her estate upon death

Question 24

Prescription case law: Makate v Vodacom

Answer 24

The court held that V’s obligation to negotiate with M was not a ‘debt’ as contemplated by s 11(d). The word ‘debt’ in that section only applied to an ‘obligation to pay money, deliver goods, or render services’. An obligation to do something else, such as to commence negotiations, did not fall under the meaning of debt’ in this section of the Act.