Theme 3 :
Remedies for Breach of
Contract
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By operation of Law
◦ Specific performance
 Natural remedy... Leads to fulfilment of the contract.
◦ Cancellation
 Drastic remedy... Nullifies the original contract.
◦ Damages
 Combination remedy... Applied in combination with above remedies.
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Agreed remedies
◦ Remedies by operation of law have to meet certain requirements
and implementation could be problematic.
◦ Parties agree on remedies directed at bypassing the practical
problems strict legal requirements of remedies by operation of Law.
◦ Eg. Acceleration clause; lex commissoria (cancellation clause);
penalty clause.
◦ Agreed remedies usually exclude common law remedies unless the
contract provides for it.
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Interdict
◦ An order of court which restrains the party from performing the
forbidden act.
◦ Requirements:
 A clear right must exist.
 Infringement upon right.
 No other remedy available.
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Specific performance
◦ Force performance as agreed, unless it appears to be an impractical
solution eg. Impossibility of performance.
◦ Debtor can resist an order for specific performance by raising the
exceptio non adempleti contractus.
 Where parties have to perform simultaneously. Cannot claim
performance is own performance is still due.
 Eg. Cash sale vs Credit sale.
 Delivery of partial performance? Divisible performance vs Indivisible
performance.
◦ Divisible performance
 Withhold own performance in respect of performance still
outstanding .
◦ Indivisible performance
 Reject delivered performance and claim specific performance –
no counter performance until performance by plaintiff is proper.
 Cancel if malperformance is substantial enough.
 If malperformance is not substantial enough:
 Should counter-performance be delivered?
 BK Tooling v Scope Precision, 1979
 Is defendant utilising the incomplete performance.
 Circumstances exist in favour of plaintiff.
 Reduced contract price.
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Acceleration clause
◦ If debtor falls in arrears – full outstanding becomes due and
payable.
◦ Whether to invoke is the choice of the creditor.
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Lex commissoria
◦ Circumstances are set out when a contract may be cancelled.
Often contains specifications and requirements to be met
before cancellation can take place.
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Mora debitoris
◦ Time is of the essence.
 In mora ex re and time is of the essence.
◦ Creditor acquires the right to cancel.
 Time is not of the essence, in mora ex re – performance must be
demanded and state than failure to perform will result in
cancellation.
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Mora creditoris
◦ Time is of the essence.
◦ Debtor acquires right to cancellation.
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Positive Malperformance
◦ Malperformance must be substantial – cannot reasonably be
expected to keep the performance.
◦ Malperformance not substantial – retain defective
performance and claim damages.
◦ A right to cancellation cannot be acquired as above.
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Repudiation
◦ May be ignored and contract upheld.
◦ Acceptance of repudiation cancels the contract.
◦ Repudiation must be substantial enough to allow cancellation
eg. No perfromance vs partial performance.
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Performance is prevented
◦ Specific performance not possible. (Divisible and indivisible
performance)
◦ Only option cancellation and damages.
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Right to cancel my be kept in reserve and exercised within
a reasonable time.
Right to cancelation my be waived by choosing to uphold
the contract, claim specific performance, etc.
No formalities are required for cancellation other than
communication of cancellation to the other party.
After cancellation restitution has to take place. Debts due
and payable are not affected by cancellation.
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Combination remedy combined with other remedies.
Party placed in the position he would have been in had breach of contract not
taken place.
Principles in the absence of a penalty clause:
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Loss due to breach of contrcat has to be proven by the plaintiff.
Only patrimonial loss can be recovered.
Extent of damages must be proven.
“Once and for all - rule”.
Beneficial side effects must be taken into account.
Plaintiff must mitigate his losses.
Causal link between breach and damages must be proven.
Damages calculated depends on the nature of the interest that the innocent party wishes
to recoup:
 Expectation interest : Compare position due to breach with position
he would have been in.
 Restitutionary interest: Contract cancelled and complete restitution
claimed.
 Reliance interest: Position party would have been in had he not
incurred expenses with the view of successfully executing the
contract.
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General damages
◦ Damages and losses that flow naturally and generally from breach
of contract.
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Special damages
◦ Damages and losses that flow naturally and generally from direct
damages caused by breach of contract.
◦ Can only be claimed if parties agreed to it.
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Penalty clauses
◦ Party acting contrary to contractual obligations are liable to pay the
penalty.
◦ Contains a trigger, stating when penalty will become due and
enforceable.
◦ Penalty must also be described clear and certain. The amount could
exceed the real damage and need not be proven.
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Performance
Contract
Set-off
Merger
Impossibility of performance
Rehabilitation after sequestration
Prescription
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Performance
◦ Debtor / representative must perform to the creditor, unless it is
required in terms of the contract that the debtor performs
personally.
◦ Complete, non-defective performance must be delivered as agreed
upon in the contract. Partial performance does not extinguish his
obligations.
◦ Place an time of performance can be specified by the parties. Day =
until 24h00; During office hours = 17h00; pay within 14 days =
first day excluded; etc.
◦ Allocation of payments:
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Interest before capital
Enforceable debts before unenforceable debts
Certain debts before uncertain debts
More onerous debt before less onerous debt
Older debt before newer debt
Equal debts = proportionally
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Contract - New contract terminates the old contract.
◦ Release:
 Bilateral act between parties. Creditor offers to release debtor of his
contractual duties.
◦ Compromise or settlement
 Settlement of an existing dispute between the parties.
 Contract is terminated and substituted by the new settlement contract.
Original contract does not have to be valid.
◦ Novation
 A second valid contract is concluded with the intention of terminating and
substituting the existing contract. Original contract must be valid.
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Set-off
◦ Requirements:
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Debts of the same nature and equal in size.
Debts due and payable.
Liquidated (amount certain) debts.
Debts between same persons in same capacities.
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Merger
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Impossibility of performance
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Rehabilitation after sequestration
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Prescription
◦ The same person becomes the debtor and creditor of the same debt.
◦ Impossibility without fault of the parties.
◦ Assuming the risk of supervening impossibility will not relieve contractual
duties.
◦ Discharges all debts which has arisen before sequestration, but does not release
a surety from his obligations.
◦ Extinctive prescriptions – legal obligations are extinguished through lapse of
time.
◦ Acquisitive – ownership acquired after 30 years.
◦ Weak prescription – debts become unenforceable after time but can still form
the basis of sett-off or suretyship, but cannot be ceded.
◦ Strong prescription – debt is extinguished after lapse of time. Sett-off,
novation, cession, etc. becomes impossible.
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Periods of prescription:
◦ 30 years
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Debt secured by a mortage bond.
Judgement debt.
Tax debt.
Debt owed to the state regarding prospecting and mining of minerals,
etc.
◦ 15 years
 Debt to the state for money loan and sale/lease of land.
◦ 6 years
 Debt arising from a bill of exchange / negotiable instrument.
 Debt arising from notarial contract.
◦ 3 years
 All other debt, unless otherwise provided.
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Prescription commences on the day the debt becomes due or the creditor
becomes aware of it.
Liablility acknowlegded
◦ If debtor acknowledges his liability towards the creditor, prescription is interrupted and
starts to run anew from the day of acknowledgement.
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Service of process
◦ Prescription interrupted when creditor serves process upon the debtor. Prescription runs
from date of acknowledgement or judgement becomes executable.
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Delay of prescription (par. 9.148)
◦ Circumstances or impediments can delay prescription:
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Minor, etc.
Debtor outside the Republic
Debtor and creditor are partners and debt arose from partner relationship
Creditor is a juristic person and debtor member of it’s governing body
Debt subject to dispute subjected to arbitration
Debt claimed from deceased estate
Debtor or creditor deceased and executor not appointed.