KTR 211 CH 12 - BREACH

pacta sunt servanda

parties to a congtract are bound to respect their agreement and perform all obligations that it imposes on them

how can a contract be terminated

normal termination (by performance, operation of law/agreement), termination due to breach of contract

breach of contract

parties who concluded an agreement intend to achieve a result of some kind —> if by act/omssion of one of the parties of the contract, the intended result is not achieved, this amounts to a breach of contract/default by party in q unless circumstances are present that revoke the liability of the party in q

Steps to follow in terms of a breach of contract

first, determine the type of breach, then determine the seriousness of the breach then if the innocent party is still financially worse off after the remedy

Why must we determine the type of breach

the consequences of a breach of contract depend on its form —> specifically, in cicrumstances where contract may be rescinded

seriousness of the breach: where the breach of contract is suffifcintly serious to merit recission, the innocent party may: (1)

uphold the contract —> insist on fulfillment by claiming specific performance/ in appropriate cases, financial equivalent of such performance

seriousness of the breach: where the breach of contract is suffifcintly serious to merit recission, the innocent party may: (2)

rescind the contract , tender return of the other party’s performance, claim restitution for any performance they might have already made themselves

determine if innoncent party is still financially worse off after the remedy

whether they rescind/uphold the contract, they are entitled to compensation in the form of damages for breach of contracg

does breach of contract auto cancel the contract

no, it is only where the other party violates the terms of the agreement and the violation is serious enough (not always evident)to justify cancellation that the law allows innocent party to take drastic measures

forms of breach of contract

time, content, conduct, intention

Overlapping of breach forms

some can never overlap —>mora and positive malperformance while some can overlap —> repudiation + failure to perform / failure to cooperate and prevention of performance

what do we do when many forms of breach overlap

the innocent party is entitled to remedies available in respect of either form of breach

mora debitoris

unjustifiable failure by a debtor to make timeous performance of a psoitive obligation that is due and enforecable and still capable of performance in spite of failure

req for mora debitoris

debt must be due and enforceable, time for performance must have been fixed in contract/ a demand for such must have occurred to which debtor did not perform timeously, such failure to perform timeously must be w/o legal justification

debt must be due and enforceable

if no suspensive condition/time clause, perf due on date agreed upon/reasonable notice of demand

debt must be due and enforceable (general rule)

perf must be made simultaneously or creditors’ claim can be defeated by exceptio non adimpleti contractus (defenses raised against breach)

failure to perform timeously

presupposes certainty as to time of performance —> debtor liable to perform as soon as perf due but debtor cant be in mora unless a definite time has been set/ demand has been made —> such time passed without perf

mora ex re

happens automatically —> specific time has been set for perf —> due date auto places debtor in mora (no need for demand)

mora ex re req

due date must be certain to arrive and certain when it will arrive

when is the time for performance fixed by implication

clear from contract/ from admissible evidence on surrounding circumstances —> so situation with suspensive does not give rise w/o sub demand for perf

mora ex persona

happens upon demand —> cannot auto fall into mora, even tho perf is due + delay unreasonable

req for mora ex persona

creditor must 1st demand perf at a certain and reasonable time to place debtor in mora

when can the creditor make a demand for mora ex persona

at any time after the contract has been entered into

req for demand for mora persona

must stipulate a time and date that allows for reasonable period to perform

when does mora ex persona arise

only when period has exp w/o compliance by the debtor

Reasonableness in mora ex persona

rests on the debtor to show it is unreasonable unless demand coupled with a notice of recisssion + what is reasonable depends on each case’s circumstances

such failure to perform on time must be w/o legal justification

fault not req for mora debitoris

Scoin Trading v Bernstein (when is the debtor in mora)

fault is not a default

when are courts prepared to excuse the debtor

only if there is some legal justification for failure to perform on time (beyond debtor’s control or due to creditor)

impossibility of performance

excusing factor (excusatio a mora) —> provided that it is temporary and not due to the fault of the debtor

who must show that there was some legal justification for the delay

the onus is on the debtor

Demand to perform

Address —> Date ————> Dear X , RE:….. —> Id contract, id performance due, set time for perf (reasonable), warn that failure will result in breach of contract

Consequences of mora debitoris

perpetuation obligationis —> one can claim usual remedies —> specific performances, damages in limited cases, right to rescind the contract

supervening impossibility of performance that cannot be attributed to either party’s fault

eliminates the contract

Perpetuatio obligationis and mora

if the debtor was in mora and there is supervising impossibility, the contract still stands unless debtor can show that even if he had performed timeoulsy, same fate would have occurred if performance was in the hands of the creditor

perfecta

GR - risk passes to purchaser when contract concluded and sale perfecta —> good determined, price determinable, no suspensive condition

specific performance

right to claim arises as soon as performance is due and enforcable (does not depend on mora)

Damages

creditor obliged to receive damages for any loss incurred throughout time of delay of perf

Damages where perf is monetary

debtor is liable for tempore mora (mora interest) + any other damages suffered

Do courts req proof of actual damages sustained with damages for mora?

no, act on assumption that the capital sum would have been producively employed had payment been made

when is the obl to pay a liquidated sum of money payable

as from the date of mora

what is the rate of mora interest

unless stated othewrise, rate presc by Minister of Justice ito S1 of the Prescribed Rate of Interest Act

Recision/Cancellation

returns parties to pre-contractual state —> effectively nuliifies agreement and relieves parties to continuing obl under the contract

when is rescission of a contract allowed

drastic, generally only allowed under tightly controlled conditions as has sign impact on rights and obl of parties incl

when does a debtor falling into mora give rise to the option of cancellation

when a clause in the contract states such/time is the essence of the contract

when is time of the essence(1)

parties expressly (express lex commissoria) agree that, in the event of the debtor failing to perform timeously, the creditor will be entitled to rescind the contract

when is time of the essence(2)

parties tacitly come to such agreemnt

when is time of the essence(3)

in absence of such an agreement, creditor has made time of the essence by sending the debtor a notice of rescission

express lex commissoria

clause specifically included in a contract that stipulates conditions under which a contract may be cancelled

express lex commissoria req

clause must clearly define what constitutes a breach significant enough to trigger cancellation, if not fixed, must first place debtor in mora ex persona

tacit lex commissoria

implies a right of cancellation due to nature of contract/circumstances surrounding its formation even if not explicitly stated

how do we infer tacit lex commissoria

importance of timely perf/ specific characteristics for what contracted for

notice of rescission

involves one party notifying the other that they intend to rescind the contract based on breach

req for notice of rescission

must typically be clear and unequivocal giving breaching party a final opportunity to remedy the breach within reasonable period, if applicable

notice of demand —> warning 4 cancellation

Date —> Address ———→ Dear X —→RE:—> id contract, id the performance, id breach, set time of remediation of perf (must be reasonable for remediation), warn that failure will result in right to cancelled/ contract will be seen as cancelled

notice of demand cancellation

Date,Address—→ Dear X —> RE: —> id contract —> id performance that was due —> state breach that occurred —> id source of right of cancellation —> inform that contract has been/is now cancelled

mora creditoris

culpable failure of a creditor to cooperate timeously with the debtor to enable debtor to perform

req for mora creditoris

ddebtor obliged to perform, creditor obliged to cooperate, debtor must tender perf to creditor, delay by creditor, fault

debtor obliged to perform

clear obligation on part of debtor to perform under terms of the contract —> active obligation but debt not due and enforceable

creditor obliged to co-operate

contract must involve some form of cooperation from the creditor to enable debtor to fulfill contractual obligation -→ creditor’s coop must be integral to debtor’s ability to perform obl effectively

where the negative obl/positive obligation can be discharged without cooperation of the creditor

there can be no mora creditoris

debtor must tender proper performance to the creditor

debtor must have attempted to perform their part of the perf in the manner req by contract terms

how must the debtor render performances

complete + conform to contractual specifications

Delay by creditor

delay/refusasl to accept performance when tendered by the debtor —> presupposes that time for performance has been fixed

examples of delay for mora creditoris

not being present at a designated place to receive goods/services , not providing necessary access, outright refusal w/o just cause

if time of performance is fixed in a contract → mora creditoris

arises automatically on default of creditor

if no time of acceptance is fixed in a contract/ debtor wishes to discharge debt before time stipulated for performance

debtor must notify creditor of the time when they wish to perform giving creditor reasonable opportunity to prep to receive performanve

Fault

failure on part of creditor must be due to their fault —> negligence, willful inaction, any improper behaviour on part of creditor that hinders performance

proving fault in mora creditoris

must be shown that creditor’s actions were direct cause of non-performance , if not, mora creditoris excluded

consequences of mora creditoris

cancellation, damages, specific performance, counter-performance, care of article and supervening impossibility of perf

cancellation for mora creditoris

debtor may be entitled to cancel the contract where the creditor’s failure to accept perf goes to the essence of the contract

damages for mora creditoris

if debtor suffers lossses due to the creditor’s delay/non-coopertaion, entitled to claim damages regardless of whether they decide to cancel/uphold the contract —> loss directly and foreseeablly caused by creator’s breach

specific performance

debtor can seek court order for specific performance compelling the creditor to fulfill contractual obligations —> accepting delivery of goods and services

when is specific performance relevant with mora creditoris

where damages are inadequate to compensate for breach

counter performance for mora creditoris

if contract involves reciprocal obl, debtor may institute a claim for counter performance

if the debtor has been prevented from fully performing their side of the contract by faillure of creditor’s necessary cooperation

debtor’s right to claim counter-perf is subject to a reduction by amount saved in not having to fully per obl

care of article and supervening impossibility of perf

if debtor is holding goods to be transferred to the creditor, must take reasonable care of these items during the delay

what is the debtor’s responsibility limited to during the delay

dolus (intent) and culpa lata (gross negligence)

if during this delay period (mora), performance becomes impossible due to no fault of the debtor

debtor may be discharged from obl to perf —> creditor remains liable to make counter-perf unless (supervening impossibility present)

effect of security and mora creditoris

if creditor’s delay affects security related to contract (i.e.security in goods to be delivered) debtor may be relieved from certain responsibilities linked to security

effect of security and mora creditoris

e.g., if value of secured items reduces due to creditor’s delay in acceptance, debtor can seek to adjust liability based on this

discharge of debt and mora creditoris

in extreme cases where the creditor perpetually refuses to accept perf/ non-cooperation renders perf substantially useless, debtor may be discharged from debt/obligation entirely —> usually only considered where all other remedies impractical/insufficient

positive malperformance

substandard perf by one of the parties

ways of positive malperformance (1)

duty to act: positive malperformance occurs when debtor performs in an incomplete defective manner

ways of positive malperformance (2)

obligatio non facendi —> postive malperformance where debtor does act they were bound to refrain from doing

general idea for remedies aimed at positive malperformance

aimed at rescission/ fulfillment of the contract

where there is a breach of negative duty

creditor may apply for an interdict to restrain debtor from performing forbidden act/ an order directing debtor to undo what they have done in contravention of the duty put on them

remedies aimed at rescission for positive malperformance (lex comissoria)

if there is lex commissoria, creditor may cancel the contract regardless of if malperformance was material/not —> only done once notice has been given + debtor has not corrected the malperformance by time when set time has passed

remedies aimed at rescission for positive malperformance (no cancellation clause)

creditor may only cancel the contract if breach is so serious one cannot reasonably expect him to abide by contract + be satisfied by damages alone —> objective test done fairly and reasonably

De Wet & Van Wyk —> level of seriousness (1)

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

De Wet & Van Wyk —> level of seriousness (2)

test is objective —> court exercising value judgement —> balancing competing interests of parties in a way that is fair and reasonable in the circumstances

where malperformance relates only to a part of a divisible contract

creditor may only cancel the part of the contract that has been improperly performed

where malperformance relates to an instalment contract

entire contract may be cancelled if all instalments made to date have been defective, reasonable to assume that future instalments will alsoo be defective

If the creditor abides by the contract bc breach not srs enough to warrant rescission/ prefers not to rescind the contract, the creditor may (1):

accept defective/incomplete performance as partial perf of contract obligation + claim surrogate damages to fulfill the contract

surrogate damages

difference in value between proper performance + performance actually rendered

If the creditor abides by the contract bc breach not srs enough to warrant rescission/ prefers not to rescind the contract, the creditor may (2):

reject defective performance and demand specific performance/damages in lieu of performance

repudiation

breach when by words/conduct without lawful excuse, a party manifests an unequivocal intention to not be bound by the contract/perf any obl forming part of the contract

should a delay in making/receiving perf be construed as repudiation of a contract

no, some positive conduct is required —> conduct leads to reasonable belief of non-performance

How do we test the intention to repudiate

judged objectively —> party accused has acted in such a mannner to lead a reasonable person to believe that they do not intend to fulfill/completely fulfill their part of the contract

Is intention to cancel the contract req for repudiation

intention to cancel contract, mala fide actions/fault —> not req —> one can innocently repudiate a contract