LAW OF CONTRACT UNIT 14 REPUDIATION

LEARNING OUTCOMES: Analyse the origin and nature of repudiation. The analysis should include a discussion of the historical nature of repudiation as well as the change brought about by the case of Tuckers Land and Development v Hovis and any opposition towards this “new approach” to repudiation. List and discuss the requirements for repudiation with reference to the case of Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA). Distinguish between repudiation and other forms of breach of contract in general. Discuss the specific consequences of repudiation. Discuss cancellation on the grounds of repudiation.

STUDY: Tuckers Land and Development v Hovis 1980 (1) SA 645 (A)   Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA).

STUDY: Hutchison et al Chapter 12 pp. 309-312.

Origin and nature of repudiation: Term was known in Roman-Dutch law. Form of breach is derived from English law. “Any conduct of a contractant from which a reasonable person in the position of the innocent contractant would conclude that the first contractant does not intend to comply with his duties.” Example: Contractant erroneously denies validity of the contract. Conduct constituting repudiation may endure over a period of time.

Traditionally: Amounted to an “offer” by a contractant to cancel the contract, and breach is only present once the “offer” has been accepted. If “offer” was accepted, the contract immediately came to an end. If repudiation was ignored, the contract continued as normal, because no breach was present. Troskie en ‘n Ander v Van der Walt.

Tuckers land and development v hovis: Respondent had bought two properties from appellant (developer). Contract of sale was suspensive: subject to the successful demarcation of the township. Respondent had made certain payments already, but became aware later that the appellant had run into some difficulty proclaiming the said township. Because of the above fact, the appellant drew up a new plan for the township.

The two properties purchased by the respondent did not appear on the new plan. Respondent viewed this omission as an act of repudiation, and cancelled the contract. Question: Would the appellant’s action have lead a reasonable person to believe that the appellant did not intend to honour the contract?

Court decided that the appellant had committed repudiation. Respondent was allowed to rescind from the contract and claim compensation. Jansen JA refrained from using the terms “offer” and “acceptance”, but said that repudiation was a choice.

Jansen JA’s decision was viewed as a “new approach” to repudiation. Repudiation occurs at the place where the innocent party is notified of it and not at the place where the repudiating party is informed of the acceptance of the repudiation. Reason: Otherwise it would come down to the principles of offer and acceptance.

OPPOSITION TO THE “NEW APPROACH” HMBMP Properties (Pty) Ltd v King: If acceptance is required to complete repudiation as breach of contract, prescription cannot commence before repudiation takes place. If acceptance is not required, prescription will commence as soon as repudiation takes place.

Court in the abovementioned case held that repudiation becomes breach of contract only if it is accepted. Furthermore: Prescription commences on dat of acceptance of repudiation. Culverwell v Brown: Repudiation merely affords the injured party an election to terminate the agreement y accepting the repudiation…

Datacolor international (pty) ltd V INTAMARKET (PTY) LTD Traditional approach was finally rejected in favour of the new approach. Repudiation is breach of contract because the objectionable conduct is wrongful, not because it is turned into breach of contract by offer and acceptance. Acceptance of repudiation is not required to complete repudiation as form of breach.

Requirements for repudiation: A. Defendant must have displayed conduct indicatory of an intention of future non-compliance with the contract. Test: Did the defendant exhibit a deliberate and unequivocal intention no longer to be bound to the contract.

B. Plaintiff must have accepted this conduct as breach. Highveld 7 Properties v Bailes. Question that had to be answered was whether a deliberate and unequivocal intention no longer to be bound constituted repudiation.

C. The plaintiff must have given notice to the defendant that he has accepted the conduct as breach of contract.

Distinction between repudiation and other forms of breach: Differs from: Negative malperformance: Delay per se does not justify a reasonable conclusion that performance is being refused or that defective performance will be rendered.

Positive malperformance: Repudiation occurs before actual performance, although repudiation may well anticipate positive malperformance.

Sometimes: Conduct can constitute repudiation as well as positive malperformance: Message is conveyed that the defaulter’s intention is not to comply with the particular obligation in future.

Prevention of performance: Repudiation anticipates eventual performance with relative and not absolute certainty.

Specific consequences of repudiation: Does not advance date of performance. Does not give rise to mora debitoris where no date for performance has been fixed. If contractant repudiates his duty to perform, such repudiatation affects the other party’s outstanding corresponding duty to perform.

Cancellation on the ground of repudiation: Creditor is only able to resile if the anticipated malperformance would justify cancellation. If mora is thus anticipated, the creditor can resile on the ground of repudiation if the contract conteined a lex commissoria or if “time is of the essence”.