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Theme 3 : Remedies for Breach of Contract.  By operation of Law ◦ Specific performance  Natural remedy... Leads to fulfilment of the contract. ◦ Cancellation.

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Presentation on theme: "Theme 3 : Remedies for Breach of Contract.  By operation of Law ◦ Specific performance  Natural remedy... Leads to fulfilment of the contract. ◦ Cancellation."— Presentation transcript:

1 Theme 3 : Remedies for Breach of Contract

2  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.  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.

3  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.  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.

4 ◦ 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.  Acceleration clause ◦ If debtor falls in arrears – full outstanding becomes due and payable. ◦ Whether to invoke is the choice of the creditor.

5  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.  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.  Mora creditoris ◦ Time is of the essence. ◦ Debtor acquires right to cancellation.

6  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.  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.  Performance is prevented ◦ Specific performance not possible. (Divisible and indivisible performance) ◦ Only option cancellation and damages.

7  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.

8  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: ◦ 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.

9  General damages ◦ Damages and losses that flow naturally and generally from breach of contract.  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.  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.

10  Performance  Contract  Set-off  Merger  Impossibility of performance  Rehabilitation after sequestration  Prescription

11  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:  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

12  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.  Set-off ◦ Requirements:  Debts of the same nature and equal in size.  Debts due and payable.  Liquidated (amount certain) debts.  Debts between same persons in same capacities.

13  Merger ◦ The same person becomes the debtor and creditor of the same debt.  Impossibility of performance ◦ Impossibility without fault of the parties. ◦ Assuming the risk of supervening impossibility will not relieve contractual duties.  Rehabilitation after sequestration ◦ Discharges all debts which has arisen before sequestration, but does not release a surety from his obligations.  Prescription ◦ 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.

14  Periods of prescription: ◦ 30 years  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.

15  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.  Service of process ◦ Prescription interrupted when creditor serves process upon the debtor. Prescription runs from date of acknowledgement or judgement becomes executable.  Delay of prescription (par ) ◦ Circumstances or impediments can delay prescription:  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.

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