KTR 211 CHAPTER 13 REMEDIES FOR BREACH

what are natural ways for a contract to terminate

full perf from both sides + in line w prov regulating life of agreement

lifespan of contracts

relatively short life span, longer but determined lifespan, seemingly have an indefinite lifespan

A relatively short life of contracts

once-off contracts where each party owes distinct performance —> natural end

do all provisions of a contracts with a short life end with contract

no, some may remain alive for a period afterwards but eventually terminate after a specific period of time

longerbvut determined lifespan

lease of 10 years

seemingly have indefinite lifespan examples

contract of employment/ monthly lease with no termination date

seemingly have an indefinite lifespan (long-term relations)

for long-term relational contracts, contracts usually make provision for contract to run specified time period / have mechanism for either party to bring contract to end

what kind of clauses may be included in a contract to regulate consequences of a breach

cancellation,penalty, acceleration, interest, restitution

penalty

avoid practical problems when proving damages

acceleration

outstanding debt made immediately due

interest

regulates amount/rate of interest payable if the debtor defaults

restitution

regulates what has to be restored upon cancellation of the contract

Remedies aimed to keep the contract alive

exceptio non adimpleti contractus, specific performance, interdict

remedies aimed at cancelling the contract

in some cases, the innocent party is entitled to cancel terminating the contract

remedies aimed at compensating an innocent party for loss caused by the breach

claim for contractual/delictual damages + claim for interest on amounts owing

can a party rely on both remedies for enforcement and remedies for termination

no, they are mutually exclusive —> an innocent party can only rely on one or the other but one can plead remedies in the alternative

remedies in the alternative

party wants to cancel agreement but not sure if entitled to do so, may claim cancellation of agreement with specific performance in the alternative if not entitled to cancel

can damages and interest be added to remedies

yes they are cumulative to other remedies where the IP can prove they have suffered damages/ entitled to interest

What does it mean for damages and interest to be cumulative to other remedies (1)

a party can claim cancellation + damages + interest on amount owed (including interest on the damages)

What does it mean for damages and interest to be cumulative to other remedies (2)

a party can claim specific performance + damages + interest

what is it referred to when a party claims cancellation + damages + interest/ claim cancellation of contract + damages + interest

combination remedy

Breach of contract

breach constitutes an unlawful infringment of the other party’s rights that arise from the contract —> one party fails to fulfill their obli as specified in a contract —> violating the contract (benefits/performances expects)

breach of contract as delict

can simultaneously constite a delict if the breaching party’s actions infringe on rights existing independently of the contract

Delict from breach of contract vs one arising from pre-contractual misstatements

pre-contractual misrepresentations can constitute a delict if they involve deceit/ fraudulent misrepresentation

when do pre-contractual fraudulent misrepresentations amount to breach of contract

do not amount to a breach of contract itself unless statements were explicitly warranted (guaranteed as truth) in the contract

Where there is both a breach of contract and a delictual act, the innocent party may

sue as a delict if it causes harm, independent of contractual obligations/ sue based on breach of contract if misrepresentation was guaranteed as part of the contract terms

What is the nature of a claim for damages for breach of contract

default remedy, typically limited to patrimonial loss (financial losses incurred as a direct result of the breach)

how would one make a claim for non-patrimonial losses resulting from the same set of facts that constituted the breach

e.g., pain and suffering; they would frame the claim as a separate delictual claim bc contract law does not provide remedies for such losses unless expressly included in the terms of the contract

What req does a delictual claim have to meet

conduct, wrongfulness, fault, causation, damages

Can patrimonial losses due to breach be claimed under delict law

complex —> GR —> the IP has a choice of remedies where loss flows from injury to person/property but claim generally confined to contract law where loss is purely economic and does not involve personal injury/property damage

Lilicrap, Wassenaar and Partners - the court held:

it was not a desirable as a matter of policy to extend the aquilian action to a breach of contractual duty to perform professional work w due diligence where breach caused pure economic loss

Trustees, Two Oceans Aquarium Trust

SCA confirmed Lillicrap elaborating on underlying principle —> the existence of a contractual relationship enables parties to regulate their relationship themselves including provisions as to respective remdies

Atlas Organic Fertilizers

where an outside 3rd party wrongfully interferes in a contractual relationship btween other parties, this will amount to a delict provided that the req are met

exceptio non adimpleti contractus

self-help remedy when performance/contract is reciprocal —> an IP is entitled to refuse to perform until breaching party has performed in full —> remedy + defence aimed at forcing other party to perform

reciprocal (include in def of exceptio)

performances due on either side are promised in exchange for one another

why is exceptio non adimpleti contractus considered a defence

permits party to withold their perf to ward off a claim for such per until other party has either perf/ tendered proper perf of their obl under the contract

can proper perf be refused when tendered late

no, proper performance cannot be refused when tendered late

why is exceptio non adimpleti contractus considered a remedy

it is a way to claim specific performance

Req of exceptio non adimpleti contractus

reciprocity obl + sequence of perf + incomplete perf

reciprocal obligations

two performances must be reciprocal to each other —> one perf given/promised in exchange of another

how do we determine if an obligation is reciprocal/not

express/tacit intention of parties must be determined by interpreting the agreement

BK Tooling Bpk v Scope Precision Engineering

AD —> reciprocal obl are obl that have been created in exchange for each other

sequence of performance

other party must be obl to perf first/at least simultaneously (unless parties agreed otherwise/ naturalia of contract suggest otherwise) with the party raising the exceptio

is the sequence of per as determined by the naturalia fixed

no, parties are free to change this based on intention of parties first then by naturalia if there is no specific agreement

incomplete perf

exceptio may also be used where a party has performed incompletely/ improperly

does the defective/incomplete perf need to be serious as to justify cancellation

No, IP can withold perf and raise the excpetio even where the defect of perf is relatively minor but not too trivial

factors affectinng application of the exception

acceptance of part perf + defective perf and cancellation due to material breach

acceptance of part-perf

IP received part/defective performance and has started using the perf even though aware of defective perf —> strongly indicates party elected to keep the contract

can a party cancel the contract after acceptance of part perf

no, unless there is a further material breach of contract

which remedies can a party who has accepted part-perfomance

restricted to relying on remedies aimed at fulfillment + damages —> can raise the exceptio as a defence

where there is defective perf + cancellation due to material breach

claim for perf will be resisted not w excpetio but w defence that contract has been terminated + performance no longer owed

why can a party not rely on exceptio w deefctive perf + cancellation due to material breach

obl to perform are terminated + both parties must return perf received

what happens where a party cannot return perf received

IP becomes liable to party in breach on grounds of unjustified enrichment

specific performance

used by IP, court order to compel the other contracting party to comply with their contractual obligations (fulfill very perf they agreed to in contract)

when does specific performance become applicable

can be claimed when the obl is due and enforceable and not necessary for debtor to have already fallen into mora

Benson v SA Mutual Life Assurance Society

contracting partes have a right to specific perf subject only to court’s overriding discretion to refuse the order in appropriate cases

which forms can specific perf take

a claim for the payment of a sum of money + claim for performance of some positive act other than the payment of money + negative obligation

a claim to enforce a negative obligation

that other party should refrain from doing something

how does the court decide whether or not to issue an order of specific perf

subject to discretion + applicant entitled to order without having to satisfy all usual req for an interdict

req for specific perf (only 2)

plaintiff must have perf/be ready to carry out their obligations + defendant must be in a position to perform (must be subjectively and objectively possible)

req for specific perf (Farmers’ Cooperative Society v Berry)

order for specific perf must not be against public policy

when will specific perf orders not be granted

specific perf ito restraints of trade + per has become impossible + party in breach is insolvent

specific perf ito restraints of trade

enforcement of an unreasonable restraint of trade is contrary to public policy

perf has become impossible

will not order something that can’t be done even if impossibility is subjective

party in breach is insolvent

all concurrent creditors of an insolvent estate must be treated equally

Discretion of courts for specific perf

general equitable discretion to refuse specific perf in aappropriate cases with courts following certain guidelines to decide whether or not to order specific performances —> recognising several exceptional circumstances where specific perf is likely to be refused

how must discretion of courts for specific perf be exercised

judicially

circumstances affecting courts’ discretion

undue hardship + personal services

Undue hardship

courts will refuse to order specific performance where doing so would cause undue hardship to the defaulting party/ 3rd parties

Hayne v Kingwilliamstown Municipality

Haynes’ claim for specific perf refused bc to have order it would have caused great hardship to respondent + citizens of Kingwilliamstown to whom respondent owed public duty to render adequate supply of water

personal services

often said that courts would not enforce an agreement to render personal services/agreement

National Union of Textile Workers v Stag Packings (1)

rejected POD (on personal services) —> no reason for departure in such cases from GR that party entitled to enforcement of their contract subject to court’s discretion

National Union of Textile Workers v Stag Packings (2)

reasoning that enforcement would be problematic —> derived from English law and not in line w SA law

Execution of orders for SP —> if a debtor fails to comply w an order for spec perf where order is to pay a sum of money

can be enforced by issuing a writ of execution followed by attachment and sale of debtor’s property

Execution of orders for SP —> if a debtor fails to comply w an order for spec perf where order is to perform an act/refraine

a deliberate failure to comply w order constitutes offence of contempt of court —> debtor can be imprisoned

how may courts enforce an order for SP

in approrpiate cases + w/o prejudice to its power to commit for contempt, the court may directly enforce the order by instructing a 3rd party (usually off to make perf to creditor)

how can an interdict be used to compel the BP to render performance

formal court order for specific performance

How can an interdict prevent breach of contract

the IP asks the court for a order to prevent breach of contract that has not occurred but is threatening/imminent

cancellation

extraordinary remedy available to IP in exceptional circumstances —> entails drastic —> abruptly + prematurely ending a transaction —> contrary to party intentions

Without a cancellation clause regulating the matter, a party is:

entitled to cancel for breach if the breach is sufficiently serious/material

how do we determine the materiality of the breach

the circumstances if the materiality/seriousness of the breach justifies the cancellation

Once a breach that justifies cancellation has occurred, the innocent party may elect to

either affirm/cancel the contract

is the election reversal

it is irrevoacble and final unless both parties consent to its reversal

what must be done by the IP if they elect to cancel the contract

must notify other party of cancel using a notice of cancellation —> notice must be clear and unequivocal

When does cancellation occur

only when it ahs been communicated to the party in breach + cannot be worded to take effect on a future effect

are there any formalities for cancellation

simple written/oral unless contract/law states otherwise

Loss of right to cancel —> election to affirm contract

if IP expressly/tacitly manifest intention to abide by contract despite breach, IP waives right to cancel due to breach

Tacit election

can be inferred from the conduct of the IP —> even if IP had no intention to waive right to cancel but gave other party a resonable impression that they elect to affirm the contract, IP must be estopped from asserting right to cancel

can a reasonable delay in exercising the right to cancel auto result in loss of rigt

no but may justify an inference that the IP has tacitly elected to cancel

What is the legal effect of cancellation

obligations of parties are extinguished

What is the legal effect of cancellation if the obl to perfomance is indivisible

extinguished in its entirety

What is the legal effect of cancellation if the obl is divisible

only parts of obl that still need to be perf are terminated + rest of contract remains intact

does cancellation extinguish all clauses

no certain anciallary agreements remain in force despite termination e.g., penalty, exclusion, obl to pay damages

restitutio in integrum

due to this, parties must restore whatever perf already received placing both parties in pos prev to contract

GR on Restitutio In Integrum

a party may not cancel unless restitution is given/tendered in notice of cancellation

Exceptions to GR on Restitutio In Integrum: court will relax rule if impossibility is caused by (1)

inherent defect/where there is no fault of parties e.g., force majeure

Exceptions to GR on Restitutio In Integrum: court will relax rule if impossibility is where (2)

goods have been destroyed/rendered valueless through use in manner contemplated by parties

Exceptions to GR on Restitutio In Integrum: court will relax rule if impossibility is where (3)

restitution is partly impossible but can be made up by a monetary subsitute

Loss suffered (penalty clause)

subject to certain limitations, parties can include this to provide for payment of a fixed sum money in event of a breach

how will the penalty will be paid

in lieu of the damages