Online Reporter
Trust Maanda
Legal Position
A CONTRACT between parties must be performed in accordance with its terms.
It is a fundamental premise of every contract that both parties will duly carry out their respective obligations.
A breach of contract can lead to its cancellation by the innocent party.
While a contract may be terminated by reason of breach, this is not automatic. The innocent party has the right to terminate, but must choose to do so.
This right arises when a breach is a material breach in that it should be sufficiently serious or when the contract itself specifies cancellation as a remedy for specific breaches.
A breach of contract occurs when one party fails to fulfil their obligations as outlined in the agreement.
This can include not performing an action, not paying on time, or delivering goods that are defective.
A contract may contain a forfeiture clause expressly stating that if one of the parties fails to perform a particular obligation by a certain date or period the other party will be entitled to cancel the contract.
Where a contract does not contain the forfeiture becomes pertinent to determine whether the breach is of such a nature as to entitle the other party to the contract to cancel the contract.
In order to succeed in its claim for cancellation of the contract based on alleged breach of a material term, the innocent party has to establish that the breach is of a vital term without which he would not have entered into the agreement in the first place.
A material breach is where the breach is so significant that it defeats the purpose of the contract or deprives the other party of substantially the whole benefit they were meant to receive justifies cancellation.
A serious breach of a ‘sufficiently’ important term of the contract will justify cancellation at the instance of the wronged party without the need to prove an intention to repudiate the contract on the part of the defaulter.
The breach of a material term of the contract, or a breach that goes to the root of the contract, or a fundamental breach, or breach of a vital or essential term of the contract justifies cancellation.
In Oatorian Properties (Pty) Ltd v Maroun 1973 (3) SA 799 POTGIETER JA enunciated the principle justifying cancellation based on breach in the following terms: “According to the well-known principles there enunciated, rescission of a contract is only permissible if a breach occurred of a term which goes to the root of the contract and the materiality of the breach is according to those authorities also a relevant factor in the determination of whether rescission should be ordered or not (c.f. Spies v Lombard 1950 (3) SA 469 (A.D) at p 488.”
There is also what is known as repudiatory breach.
If one party clearly indicates by words or conduct that they will not fulfil their contractual obligations, this is a repudiatory breach and entitles the other party to cancel the contract.
Where a party to a contract is in repudiatory breach, the innocent party is excused from any steps that he must take in preparation for his own performance.
In these circumstances, if the innocent party is the purchaser, he or she will not fall into breach by failing to tender performance . . . as long as he or she signifies his or her willingness to perform.
In Chinyerere v Fraser N.O. 1994 (2) ZLR 234 (H) at 250, observed as follows in Ross T. Smyth & Co. Ltd v T.D. Bailey, Son & Co. [1940] 3 All ER 60 (HL) at 73: “I do not say that it is necessary to show that the party alleged to have repudiated should have an actual intention not to fulfil the contract. He may intend in fact to fulfil it but may be determined to do so only in a manner substantially inconsistent with his obligations, and in no other way.”
Depending on what the contract provides, generally, the innocent party should inform the breaching party of their decision to cancel the contract.
This notice should clearly state the breach, the intention to cancel, and the effective date of cancellation.
Cancellation terminates the contractual obligations of both parties. When a cancellation happens, the parties are put back in their pre-contractual positions.
In the case of a sale agreement, in the event of non-delivery of the goods sold under a contract, the right of the aggrieved party to claim restitution from the defaulting party is ordinarily available and unassailable.
The injured party is entitled to claim to be placed back in the same position as he would have been in had it not been for the defendant’s wrongful act.
Trust Maanda is a legal practitioner and a partner at Maunga Maanda And Associates. He writes in his personal capacity. He can be contacted on +263 772432646.
