Knowingly or unknowingly, we enter into contracts on a daily basis and in almost every transaction we do from paying a parking ticket, to going to the store for groceries, and even in having accepted a job offer. It therefore becomes important for parties entering a contract to be able to rely on the each other to fulfil their obligations in good faith – but what happens when a party fails, or alternatively refuses, to uphold the contract or clauses of the contract? What remedies are generally available to the prejudiced party?
In South Africa, when a party fails to perform its contractual obligations, that conduct will be either will be a breach of contract that falls into one of the four following categories:
- Mora – this occurs when performance of the
obligation is not made, or is not made on time;
- Positive malperformance – this occurs when
performance of the obligation is made, but it is defective. It is
ordinarily the case that this type of breach must be significant or
it must relate to a material clause of the contract to be
malperformance;
- Repudiation – this is an anticipatory type of
breach that happens before performance is due. It is any indication
from the behaviours of a party that seem to suggest that that party
will not perform or that performance will be defective;
- Prevention of performance – this is the least common type of an anticipatory breach. It is a breach caused by an event that makes it impossible for a party to perform. This type of breach normally excludes the element of fault on behalf of the defaulting party (unless a guarantee of performance is given). We have seen more of this type of breach during lockdown when parties were prevented from rendering certain services.
So what remedies are available to the prejudiced party? Depending on the type of breach, the prejudiced party will have the following remedies available:
- Cancelation of the contract – The prejudiced party may
cancel the contract when the breach is of a serious nature (a
material breach).
- Claiming specific performance from the defaulting party –
the prejudiced party can claim specific performance unless
performance is made impossible or is prevented. This means that the
prejudiced party can demand that the defaulting party either
performs immedieately (where the breach is one of Mora or
repudiation), or that the defaulting party performs properly (when
the breach is one of a serious positive malperformance).
- Claiming damages from the defaulting party or the party who renders performance of an obligation impossible – the prejudiced party can claim compensation for damages suffered. Damages are normally claimed alongside cancellation and specific performance.
Conclusion
Deciding on the most suitable and profitable type of remedy to a breach of contract is an exercise that is dependent on the type of breach in question. It may be the case that, in some instance, a breach is not so material to warrant a cancellation, but serious enough to cause damages. In such a situation, it would be suitable to retain what you have received and merely claim damages. Luckily, most contracts are upheld and are capable of being easily remedied.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.