Contracts-Breach & Remedies B Com Business Law Contracts-Breach & Remedies

Breach of Contract Default by the debtor Default by the creditor Positive malperformance Repudiation Prevention of performance

Default by Debtor Mora Debitoris ◦When the debtor fails to perform at the agreed time Two Requirements ◦Performance must be delayed ◦Delay must be the debtors fault

Failure to Perform on Time Mora ex re – where a time for performance has been set and debtor fails to perform, he is automatically in mora Mora ex persona – where no time for performance has been set & creditor then demands performance within a reasonable time & debtor fails to perform

Delay due to fault of Debtor The delay must be due to the debtors fault Can be intentional or negligent

Default by the Creditor Mora Creditoris When the Creditor causes the debtor’s performance to be delayed

Requirements of mora creditoris Performance must be dischargeable Debtor must tender performance Creditor must fail to co-operate & thereby delay performance Default must be due to the fault of the creditor

Consequences of Default Default by Debtor Default by Creditor Creditor entitled to remedies for breach of contract Debtor’s duty of care is reduced Debtor entitled to any counter performance due by creditor

Positive Malperformance When debtor performs contrary to the agreement Debtor tenders defective or improper performance, or; Debtors does something not allowed in terms of the agreement

Repudiation Behaviour by a party which indicates that they do not intend to honour their agreement Eg, where party denies the existence of the agreement or acts as if agreement does not exist

Prevention of Performance Debtor does something to prevent his own performance Creditor does something to prevent the debtor’s performance

Remedies – Types & Availability Specific Performance Cancellation Interdict Damages

Specific performance Generally not granted Where impossible for debtor to perform Where damages would be adequate remedy Where it would be unfair to defendant Where performance would involve personal relationship

Cancellation If breach material – may cancel and claim damages Where breach not material – damages only, no cancellation Measure of damages the same in both cases – put plaintiff in position he would have been if contract had been properly performed

Proving damages Loss must have been a natural & direct consequence of the breach Liability limited to loss that would have reasonably been forseen Loss must be measurable in money Loss incurred or gain not made Plaintiff must prove his damages

Duty to mitigate The injured party has a duty to mitigate their damages

Contract for benefit of 3rd party General rule – persons can only bind themselves 3rd party can only acquire an obligation if contract may for the benefit of the 3rd party Stipulatio alteri 3rd party can also acquire obligations under a contract through cession, assignment or delegation

Stipulatio Alteri Contract for the benefit of a third party

Cession, Assignment, Delegation Cession – substitutes third party in place of creditor Assignment – substitution of third party as both debtor & creditor Delegation – substitutes third party in place of debtor

Cession The transfer of rights from one party (Cedent) to another (Cessionary) No formalities required except agreement between Cedent & Cessionary Sometimes it is necessary to obtain debtor’s consent Eg: employment Certain rights may not be ceded (see pg 41) Debtor has same defences against cessionary as were available against cedent

Cession Example: A opens an account at Woolworths Woolworths cedes his account to Absa Effect: A owes the money to Absa Woolworths does not need his permission

Assignment Substitutes a third (new) party as both debtor and creditor Consent of all (3) parties needed New contract comes into being

Assignment Example: A enters into an agreement with B to lease B’s house A assigns the lease to C A, B & C must agree C moves into the house (creditor) and must pay the rent (debtor)

Delegation Third party takes over as debtor Consent of all (3) parties needed New contract comes into being Called a Novation

Delegation Example: A enters into an agreement with B to lease B’s house A delegates the duty to pay the rent to C A, B & C must agree to this New agreement comes into place between A, B & C

Termination of a contract Performance Prescription Set-Off Merger Agreement Waiver Novation Insolvency Death Impossibility of Performance – Vis Major or causus fortuitis

Prescription Debts become unenforceable after passing of time Prescription Act 68 of 1969 Normal debt – 3 years Negotiable instrument – 6 years Tax, judgment debts, mortgage bonds – 30 years Prescription begins to run as soon as debt due Prescription interrupted by acknowledgement of debt or summons Prescription suspended in certain cases (see pg 47-48)

Payment General rule – payment in cash Legal tender – notes & coins R50 where coins of the denomination of one rand or higher are so tendered; R5 where coin of denominations of ten cents up to and including fifty cents are so tendered; 50c, where coin of the denomination of five cents or less are so tendered Cheque acceptable Limits imposed by Reserve Bank – R500 000 EFT acceptable He who alleges payment must prove Can insist upon receipt if cash