Contract Breach

1. Introduction Breach of contract is when one or both parties, who came to a mutual agreement, do not fulfil their contractual agreement i. e. interfering in the other party’s performance or non-performance by one or both parties. These are only two of the possible five forms of Breach of Contract. The five types of Breach of Contract will now be discussed in detail. 2. There are five different forms in which Breach of Contract can take place: a. Default of the debtor (mora debitoris) i. Explanation Mora Debitoris means that a debtor has failed to adhere to the contractual agreement in a certain time frame.

Be it not making a payment or violating agreed conditions of the signed contract. There are two forms of this form of breach of contract that can be distinguished: Mora Ex Re: This occurs when a specific date is set on which the debtor must perform. If the debtor knowingly or unknowingly do not perform on the contractually agreed date, the debtor is in mora and therefore commits breach of contract. Mora Ex Persona: This occurs when the creditor submitted a notice to the debtor and the debtor still failed to perform.

This is normally the case when there is no fixed date in the agreement and the debtor is required to perform in a ‘reasonable timeframe’. It is difficult to determine a reasonable timeframe. Therefore, the debtor is only in mora once the creditor has submitted a notice stipulating a specific timeframe, which is reasonable and the date must be calculated from the date of the notice. Should the debtor then fail to perform on the stipulated date as per the notice, the debtor is in mora and therefore commits breach of contract. ii. Example: The debtor undertake to buy a car from Suzuki for R50 000.

This is a Contractual term and imposes an obligation on the debtor to pay an amount of R 2 500,00, to the creditor, on the 1st of each month, starting on 1 March 2012. Breach of Contract takes place when the creditor fails to make payment as contractually agreed. iii. Legal Remedies with assistance of the court: In the case of Mora Debitoris, there are the following legal remedies: – The creditor is in a position to demand that the contractual agreement be executed, in other words that the fulfilment of the contract. – If the circumstances allow it (as will be discussed later in the essay), the creditor may cancel the contract.

– Should the creditor suffer any damage due to the non-fulfilment of the contract, the creditor may claim for damages suffered. b. Default of the creditor (mora creditoris) i. Explanation : Mora creditoris is when a creditors actions is the cause of the delay in the debtors performance. Taking into account that breach of contract can only occur where the creditor’s co-operation is required for the debtor to be able to render performance. ii. Example: The creditor acquires the service of Pest Control for his house. The Creditor (Pest Control) can only fulfil their contractual obligation if the creditor allows Pest Control to access his house.

iii. Legal Remedies with assistance of the court: In the case of Mora creditoris, the legal remedies are the same as in the case of Mora debitoris. – The debtor is in a position to demand that the contractual agreement be executed, in other words the fulfilment of the contract. – If the circumstances allow it, the debtor may cancel the contract. – Should the debtor suffer any damage due to the non-fulfilment of the contract, the debtor may claim for damages suffered because of the creditor’s refusal to accept performance. c. Positive malperformance i. Explanation :

There are two types of positive malperformance: – Where the debtor supplies faulty or defective merx to the creditor and the merx therefore do not satisfy the creditors needs. – Where the debtor does something that is not permitable in terms of the agreement in the contract. ii. Example: Where a debtor is to build a house and on completion of the house it is found that the finishes of the house is inferior to what was contractually agreed OR Where a debtor conducts business with competition of his/her former employer in violation of a Contractual term (restraint of trade) prohibiting such conduct.

iii. Legal Remedies with assistance of the court: – The creditor may retain the defective performance and claim for damages suffered. – The creditor may decline the defective performance and claim that the contractual agreement be fulfilled as was mutually agreed. – The creditor is allowed to cancel the contract subject to the creditor reserving himself the right of cancellation (Lex commissoria). If the performance is so bad that it is not practical to uphold the contract. d. Repudiation i. Explanation : This is when one or both parties intend not to honour their obligations under the contract.

This may occur before, during or after the fixed date as contractually agreed. The behaviour of the guilty party must clearly indicate that they do not intend to honour the agreement. ii. Example: A party may deny the existence of the agreement OR A party may try to withdraw from a contract without justification. OR A party may give notice that they cannot or will not perform. iii. Legal Remedies with assistance of the court: – The innocent party may choose to ignore the repudiation. – The innocent party may claim fulfilment of the contract. – The innocent party may cancel the contract.

– The innocent party may claim for damages suffered. e. Prevention of performance (rendering performance impossible) i. Explanation : Two situations may be distinguished: Absolute or objective prevention of performance: This is when the performance is permanently prohibited and can never be completed. Relative or subjective prevention of performance: This is when performance becomes difficult or impossible for the debtor (very much like repudiation) Prevention of the performance must be the fault of the party who renders the performance impossible.

If the prevention of performance is due to forces of nature, war, government, death or sickness, the party may not be held liable. ii. Example: CNA has to develop a film for a client, but negligently exposes the film to light. The film can therefore not be developed and thus the performance has been made impossible. iii. Legal Remedies with assistance of the court: – The contract can obviously not be fulfilled. – The innocent party may cancel the contract. – The innocent party may claim for damages suffered. 3. Legal Remedies for Breach of Contract

As discussed above, there are various legal remedies for breach of contract. This will now be discussed in detail. i. Fulfilment: When opting to claim for fulfilment of the contract, there are two basic remedies: – Specific performance: This means that the contract must carry on as it was originally agreed. The innocent party may claim specific performance. The court may refuse to grant such an order on the following grounds: – When specific performance is impossible – Where the court cannot control specific performance. – Where the defendants hardship will be more than the plaintiffs advantage.

– Where the plaintiff cannot fulfil their own obligations. – Where one may be deprived form one’s own freedom. – Reduced performance: In some cases, the court may order the guilty party to render a reduced performance to the innocent party. This may happen if the party has rendered performance, but the performance is defective/incomplete, but the innocent party nevertheless benefited from that performance. The incomplete performance of one party can entitle the other party to refuse to render his/her counter performance. ii. Cancellation:

The innocent party may either claim cancellation or performance. A Contract may only be cancelled, ‘lex commissoria’, on the following: – A clause was agreed in the contract that the creditor has the right to cancel the contract should the debtor commit breach of contract. – Should the above clause not be stipulated in the contract, the creditor has the right to submit a notice of rescission or cancellation stating that should the debtor not perform in a certain timeframe from date of notice, the creditor has the right to cancel the contract.

– If a Contract does not allow the creditor to submit a notice of rescission to the debtor, the contractor may automatically cancel the contract. For example the creditor requires printed staff shirts for a specific event. Should the creditor fail to deliver the shirts on the agreed date, the contract may be cancelled as the shirts are useless beyond the agreed date. The innocent party’s right of cancellation lapses once the party has decided either in words or deeds that they chose not to cancel the contract .

Should the innocent party decide to exercise their right to cancel the contract, the cancellation comes into play once the notice of cancellation reaches the guilty party. Once the contract has been cancelled, both parties must return whatever they received from one another, but the guilty party is still liable for damages. Should the innocent party not be able to return what they received from the guilty party, due to the innocent party’s own fault, the innocent party loses the right to claim cancellation.

iii. Damages Damages may be claimed in addition to cancellation or fulfilment. There are six main principles of a claim for damages: -The innocent party need to prove that they suffered patrimonial loss due to the breach of contract. -Patrimonial loss may also be that the assets might have grown if breach of contract was not committed. -It needs to be determined whether the innocent party would’ve suffered damages in the event that the debtor fulfilled their contractual obligations. If so, there is no claim.

-It is the duty of the innocent party to limit or mitigate damages. -The amount of damages is normally calculated at the amount it would take to get someone else to get the job done. iv. Penalty Clause The Penalty Clause is a clause that both parties agree at the commencement of the contract. This clause determines the penalty a party would have to pay should they commit breach of contract. In other words, the parties determine the damages that may occur at the start of the contract.