Breach of Contract and Remedies

1
Breach of Contract and Remedies

• Basic Principles
• pp107 - 119

2
Breach of contract

• Breach of contract may take 5 forms
• Mora debitoris
• Mora creditoris
• Repudiation
• Positive malperformance
• Prevention of performance

3
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
• Performance due and possible
• Date for performance stipulated in contract
  (gives rise to mora ex re)

4
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.
• Obligation must be enforceable
• Creditor must have valid right to performance and
  debtor must have no defence for non-performance.

5
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
• Performance is due
• If no time for performance has been agreed upon,
  the creditor must be given reasonable notice to
  accept performance.

6
Mora creditoris contd

• 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.

7
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)

8
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

9
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.

10
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.

11
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.

12
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)

13
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.

14
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.

15
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

16
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)

17
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.

18
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)

19
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)

20
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.).

21
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)

22
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.

23
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)

24
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

25
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

26
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)

27
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.

28
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

29
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.

30
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.