Breach of Contract and Remedies

Basic Principles: pp107 - 119

Breach of contract
Breach of contract may take 5 forms: Mora debitoris Mora creditoris

Repudiation
Positive malperformance Prevention of performance

Mora debitoris
Occurs when performance is possible but debtor, who is aware that performance is required, fails to perform on time. Requirements for a debtor to be in mora: 1. Performance due and possible
Date for performance stipulated in contract (gives rise to mora ex re)

Mora debitoris contd

No date stipulated: demand made by creditor (interpellatio) gives rise to mora ex persona Demand made by creditor must give debtor a reasonable time to perform.

2. Obligation must be enforceable

Creditor must have valid right to performance and debtor must have no defence for non-performance.

Mora creditoris
Occurs when creditor delays in giving assistance to debtor where this is required for him to perform. A creditor who obstructs performance is in mora if: 1. Performance is due
If no time for performance has been agreed upon, the creditor must be given reasonable notice to accept performance.

Mora creditoris contd

2. The debtor tenders proper performance
Debtor must tender performance in terms of contract to creditor, who must be given opportunity to accept it.

The creditors mora does not excuse the debtor from performing
When the creditor is in mora, she cannot argue that debtors failure to perform was breach of contract.

Positive malperformance
Occurs when debtor performs, but performance is defective or contrary to terms of the contract. 2 forms of positive malperformance exist:
Debtors performance is incomplete or defective. (Positive obligation) Debtor does something which contract prohibits him from doing. (Negative obligation)

Repudiation
Occurs when a party, who has no lawful excuse not to perform, indicates an intention not to perform some/ all duties under a contract. Under certain circs, a party may lawfully repudiate.
Eg. misrepresentation, duress, material breach by other party.

Repudiation which occurs before due date for performance = anticipatory breach

Repudiation contd
For repudiation the debtor must notify the creditor that he will not be performing under the contract.
The debtors intention may be inferred from the facts.

Where repudiation is anticipatory, the creditor may seek remedies for breach immediately, or wait for performance date.

Prevention of performance
Occurs when there is an inability to perform as a result of the actions of one of the parties. May result from the actions of the creditor or the debtor.

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Remedies for breach of contract

The major remedies for breach of contract are:
Specific performance Cancellation

Damages

In addition a party may ask for a declaration of rights.

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Declaration of rights
Where there is confusion about a right or obligation in a contract, either party may apply to the High Court for an interpretation of that right or obligation. A party who seeks an interdict or specific performance will often seek a declaration of rights in addition.
Santos Professional Football Club (Pty) Ltd v Igesund 2003 (5) SA 73 (C)

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Specific performance
An order of specific performance compels the defaulting party to perform as promised under the contract. May be obtained via an interdict, which prevents a breach/ threatened breach of contract. Interdict may be:
Mandatory: requires a party to perform a particular act Prohibitory: prevents a party from performing a particular act.
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Specific performance contd

Interdicts:
Eg. Situation of successive sales.

Court has discretion whether or not to grant an interdict. Applicant must show:
A clear right
An injury, well founded fear of injury No other remedy exists

For our purposes an interdict will be regarded as a form of specific performance.

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General principles of specific performance

Generally there is a right to specific performance. The court has a discretion whether to award S.P., however, and may refuse. Particularly where:
Performance is inappropriate (debtor is insolvent) Performance is contrary to public good

It would be unduly harsh to expect the debtor to perform

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General principles contd

S.P. may also be refused where cost of compliance to defendant is out of proportion to benefit to plaintiff. Cases where S.P. was refused:
Haynes v King Williams Town Municipality 1951 (2) SA 371 (A) York Timbers v Minister of Water Affairs and Forestry 2003 (4) SA 477 (T)

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General principles contd

In South Africa courts may enforce S.P. on a contract of personal service.
Santos Professional Football Club v Igesund

If a court refuses to award S.P., the aggrieved party may still seek damages.

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Specific performance and reciprocal obligations

In a reciprocal contract, a plaintiff may only claim S.P. where he is prepared to perform his own obligation. Where a plaintiff has not performed his reciprocal obligation and tries to claim S.P., the defendant may raise the defence of the exceptio non adimpleti contractus.
Motor Racing Enterprises (Pty) Ltd v NPS (Electronics) Ltd 1996 (4) SA 950 (A)

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The exceptio non adimpleti contractus

If plaintiff claiming S.P. has performed his reciprocal obligation, but the performance is defective and the defendant raises the exceptio defence, the courts may grant the plaintiff a reduced S.P.
BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A)

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Cancellation
Parties may at any time agree to cancel a contract. Here we deal with unilateral cancellation. This may only be done:
For material breach In terms of a cancellation clause

Aggrieved party has election whether to cancel contract or uphold it (and claim S.P.).

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Cancellation contd
If a party elects to cancel the contract, he must notify the defaulting party.
In some circumstances conduct may be sufficient notification of cancellation.

Effect of cancellation:
Contract ceases to exist Restitution must occur (to extent possible)

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Cancellation contd
Cancellation may occur where:
There has been a material breach There is a cancellation clause

If on breach, the aggrieved party does not cancel within a reasonable period of time, in the circumstances of the contract it may be argued that he has waived the right to cancel.

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Damages
Object of contractual damages is to put the aggrieved party in the (financial) position he would have been in had the contract been properly performed. Contractual v delictual damages:
Contract damages aim at making the contractual bargain available (positive) Delictual damages aim to compensate for loss suffered as a result of the wrongful conduct of another (negative)

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Contractual v delictual damages

A contractual claim is limited to financial loss. A delictual claim extends beyond this to non-financial loss, such as injured feelings or pain and suffering. Under certain circumstances a party may have a claim under contract or delict.
Van Wyk v Lewis 1924 AD 438

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Quantifying damages for breach of contract

Court must determine what the financial position of the plaintiff would have been had there been no breach. Court will take into account loss which was foreseen by the parties:
Gains not made Loss actually suffered

Eg. Sale of a painting guaranteed to be a Picasso

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Quantifying damages contd

In a claim for breach of contract one may not claim non-patrimonial (eg. emotional) loss.
Jockie v Meyer 1945 AD 354 Administrator, Natal v Edouard 1990 (3) SA 581 (A)

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Quantifying damages contd

Two important principles limit the amount recoverable by a plaintiff for breach of contract:
Damages must be reasonably foreseeable as likely to flow from the type of breach in question. (General damages) Damages which are usually regarded as too remote may be claimable if parties (in the circumstances of the contract) actually contemplated that type of harm occurring. (Special damages)

The relevant time for determining whether a party foresaw or contemplated loss is the time of conclusion of the contract.
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Quantifying damages contd

Example cited by Kerr (Basic Principles, p 117) Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 1 All ER 997
English case illustrating the contemplation principle

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Quantifying damages contd

The innocent party must attempt to mitigate the loss.
She must take reasonable steps to minimise her loss.

Onus is on defaulting party to prove innocent party failed to mitigate her loss.

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Damages and penalty clauses

Parties may agree on a penalty to be paid in the event of a breach of contract. Governed by Conventional Penalties Act 15 of 1962.

However, in terms of the Act, damages may not be claimed in addition to the stipulated amount.
Parties may agree to vary this rule by contract

A court may reduce a penalty which is out of proportion to loss suffered.

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