Welcome to the start of 2nd Semester

Unit 17: Remedies

Specific Performance, Cancellation and Damages

T: +27 51 401 9111 | E: [email protected] | www.ufs.ac.za

 What to expect from 2nd Semester?

1. What have you covered in the module content thus far?

✓ Units 1-16 (The last learning unit was the Principle of Reciprocity)
✓ You will not be reassessed on the units covered in 1 st Semester BUT it is assumed in 2nd
Semester that you have the knowledge because you studied the content in 1 st Semester
2. What will be covered in 2nd Semester?
✓ Units 17-19. The focus is less theory and more application and drafting
✓ Unit 17: Remedies
✓ Unit 18: Sale contracts
✓ Unit 19: Drafting
3. What can you expect from 2nd Semester Assessments?
✓ Online Test 4 – MCQs only (Scope is Units 17 & 18) includes unit in module study guide
✓ Assignment 1: Draft clauses (Scope Unit 17 & 19) includes unit in module study guide
✓ Assignment 2: Legal opinion or Letter of Demand (Scope Unit 19) includes unit in module study
guide
 Unit 17: Remedies
Learning unit outcomes

1. Identify, analyze, and critically discuss the remedy of specific performance.

2. Identify, analyze, and critically discuss the remedy of cancellation.

3. Analyze and discuss the claim for damages and what it entails, with specific
reference to the case of Holmdene Brickworks (Pty) Ltd v Roberts
Construction Co Ltd 1977 (3) SA 670 (A).
HELP, THEY BROKE THEIR CONRACTED PROMISES…WHAT DO I DO NOW??

Part 1

CONTRACTUAL REMEDIES
 What are remedies?
• The value of remedies lies in their – purpose
➢ Specific performance – Get the debtor to perform/comply
It is a primary remedy – not based on the breach, but on the contract
itself.
Quick question: why do we say this?
➢ Cancellation – Only in exceptional circumstances.
Quick question: why only in exceptional circumstances?
• Damages – available irrespective of whether the contract is upheld
or cancelled. Based on quantifiable loss.
 Remedies continued
• Common law remedies: SP; Damages; Cancellation or Rescission;
Interdict.
• Contractants/parties may agree to exclude common law remedies.
• Contractants/parties may agree on remedies for breach of contract:
– Penalty clauses
– Acceleration clauses
– Cancellation clauses
• These remedies intend to supplement/amend the common law
remedies.
 What is the “Once and for all rule”?
➢ A person can only approach the court once on the same cause of action.
➢ If one institutes litigation, the plaintiff must claim everything and all amounts
simultaneously.
What is the Mitigation Rule?
➢ Plaintiff must prevent the accumulation of his damages.
➢ Plaintiff cannot recover damages caused by him/herself.
➢ Plaintiff must take preventative steps against further damages.
➢ These steps should not be laborious, arduous, or expensive (reasonable)

“Time is of the essence?”

➢ Sometimes particular circumstances makes a delay material – and then there is an
implied right to rescind the contract.
➢ The parties agrees upon a time for performance but something more is required – a
special feature in the contract that makes time of the essence.
➢ For example, maybe in a commercial transaction, delivery of goods are subject to
price fluctuations, so the creditor requires that the delivery be made on a particular
day.
Part 2

DAMAGES
 Damages

When on party to a contract commits a breach of the contract,

the other party is entitled to claim damages calculated according
to his positive interest.

In other words, they may claim the amount of money necessary

to put her, as far as money can do so, in the position they would
have occupied had the breach not occurred.
 Requirements for damages claim
Plaintiff must prove:

1. Breach of contract by other party

2. Patrimonial loss

3. Causal connection between the breach and the loss (factual causation)

4. That the loss is not too remote (legal causation) – general v special
(Remember duty to mitigate losses)
 Nature or type of damages

• Damnum emergens: loss actually incurred = actual damages

• Lucrum cessans: loss of future profits = prospective damages

 Example

X is a builder who buys bricks from Y for a particular building job. X and
Y agree that Y will deliver the bricks on 1 July to the building site.
However, Y fails to deliver the bricks on the agreed date. X needs
bricks urgently to continue with the building job and the delay costs him
a loss of R1000 a day.
X can ask for an order of specific performance against Y to deliver the
bricks and claim damages for his loss of R1000 a day until delivery is
made.
Quick question: what is the nature of the damages here?
 Example

X sells a donkey to Y for R10 000. Y pays the purchase price and X
delivers the donkey. A few days later, Y discovers that the donkey has
an infectious disease. One of Y’s horses catches the disease from the
donkey. Y therefore cancels the contract and returns the donkey. Y will
claim return of his R10 000, and damages for the future cost of
treatment of his horse for the disease.

Quick question: what is the nature of the damages here?

 Damages
Categories Note:
• Penalty clause:
General/intrinsic Is used to fix the amount of
damages claimable in the contract
(Conventional Penalties Act)
Special/extrinsic
• Quantification of damages:
Is not part of this module. This is
Constitutional usually done by an expert which
damages – delict law depends on the nature of
damages that occur.
Conventional Penalties Act – student to read on own please
• The Act provides that any penalty stipulations in a contract shall be enforceable, in the event of breach of the
contract, in any competent court.
• A penalty may take the form of a sum of money or delivery or performance of a thing. Liquidated damages also
amount to a penalty.
• The Act provides the creditor is not entitled to recover BOTH damages and the penalty, which may be payable in a
specific instance or to recover damages in lieu of the penalty, unless the contract expressly so provides.
• A creditor who accepts or is obliged to accept defective or non-timeous performance shall not be entitled to
recover a penalty in respect of the defect or delay as well, unless this penalty was expressly provided for in the
contract.
• The Act also provides for a reduction of a penalty by a court if it appears to the court that the penalty is out of
proportion to the prejudice suffered by the creditor.
• The Act also provides, where one party to a contract withdraws from the contract (in circumstances provided
therefore) and the other party thereto shall forfeit the right to claim performance or restitution, such forfeiture by
the latter party shall have the same effect as if it were a penalty stipulation in terms of the Act.
SPECIAL DAMAGES GENERAL DAMAGES
• Definition: damages that • Definition: those
are ordinarily regarded by damages that flow
the law as too remote to naturally and generally
be recoverable (as from the kind of breach in
opposed to general question and which the
damages). law presumes the parties
contemplated as a
probable result of the
breach.
Examples: General vs special - student to read on own
• The loss of value of an architect’s time and effort in preparing plans flow
naturally from a failure to transport those plans safely, but not the loss of the
chance of winning a prize by entering the plans in a competition.
• The cost of demolishing and reconstructing a building flows naturally from a
failure to deliver bricks and cement of the required quality but not a loss of
profit resulting from a delay in completing the building.
• The cost of repairing or replacing defective goods flows naturally from a
breach of a contract for the delivery of new goods, but not a loss of
production caused by the defect where it was not apparent that the goods
would be used for manufacturing purposes.
• Loss of interest flows naturally from the failure to pay a money debt
timeously.
 General rule

General rule is that the party in breach cannot be held responsible for
special damages.

However, by way of exception, the innocent party can recover special

damages, the following is proven:
2. The parties contracted on the basis of their
1. The damages were actually foreseen or knowledge of the special circumstances, and
reasonably foreseeable at the time of entry thus can be taken to have agreed, expressly
into the contract (the contemplation principle); or tacitly, that there would be liability for
and damages arising from such special
circumstances (the convention principle).
Specific Performance
Part 3
Specific Performance

Specific performance of a contractual obligation is performance, by the

person obliged, in the very terms agreed upon by the parties or implied
by the law.

Where one of the parties has refused or failed to make performance,

the chief remedy of the other party is to obtain from the court an order
for specific performance of his obligation by the defaulting party.
 Example

Y sells his dental practice to X. The contract of sale includes a restraint

of trade agreement in terms of which Y undertakes not to practice as a
dentist in Johannesburg for two years. If Y then attempt to breach the
restraint, X would ask the court for an prohibitory interdict to stop Y
from breaching the restraint.

It can take various forms depending on the contract obligations. It is an

application requesting the court to order the debtor to omit or commit to
doing something or not doing something in order to comply with his/her
obligation.
The right to specific performance

When is a claim
for specific When would
performance the court refuse
enforceable? specific
performance?
 Specific Performance considerations:

➢ The ability of plaintiff to make performance?

➢ Is it an absolute and qualified order for specific performance?

➢ Damages in addition to specific performance being claimed?

➢ Damages as a surrogate of specific performance claimed?

➢ The right to specific performance?

 Example of damages as surrogate for performance

X and Y agree that Y will bake a wedding cake for X which will be
decorated with roses made from icing. Y bakes the cake but does not
decorate it with the roses (positive malperformance by Y).
X decided to uphold the contract.
However, instead of claiming an order that Y must decorate the cake
with roses, Y claims the monetary equivalent of the roses (i.e. what it
would cost to buy the roses from someone else)
 Specific performance and other remedies

• If you are entitled to specific performance, you are not restricted to

only that remedy.
• May even claim damages instead.
• Divisble performance
• If you decide on the route of a specific performance application and
the court order is granted. Such orders are usually enforced by
Organs of state (Sheriffs or Registrar of Deeds)
Cancellation
Part 4
 Cancellation

Cancellation of a contract is an extraordinary remedy that is

available only in limited circumstances.

In the absence of an agreement to the contrary, the right to

cancel for breach depends on the materiality of the breach, and
the particular form that it takes.
 Cancellation requirements

1 2 3
A right to cancel Ability to restore Exercise of the right to
(sufficient performances received cancel – notification of
justification/lex (must return cancellation.
commisoria – breach performance already
provided for in received).
cancellation clause)
 Breach of a cancellation clause

• Cancellation clause: specifically sets out what gives rise to grounds

for cancellation and how it is to take place
• It usually provides 7-14 days to fix the breach (reasonable time)
• Its content can differ depending on various factors: in whose favour,
fairness, parties intentions, nature of the contract etc
• Election – usually innocent party (can be drafted to be either party)
• Premature cancellation
• Restitution
 Effect (or consequences) of cancellation

➢ The effect of cancellation is to put an end not to the entire

contractual relationship between the parties, but to the primary
obligations under the contract (i.e. to the performances due in terms
of the contract).

➢ Secondary obligations to pay damages for the breach and make

restitution are applicable still due to the breach and are binding on
the parties despite the cancellation of the contract.
 Example
A sells his stud bull to B for R10 000 to mate with B’s cows. The parties ahree
that A will deliver the stud bull to B on payment of a R5000 deposit. They agree
that B will pay the remainder of the purchase price in monthly instalments of
R1000 over the next five months.
B pays the R5000 deposit and A delivers the bull.
However, the stud bull turns out to be impotent. A therefore commits a breach
of positive malperformance. B then elects to cancel the contract.
Effect of cancellation:
- It creates a duty to restore all the performances already made. B is
therefore obliged to return the bull to A and A is obliged to return the R5000
to B.
- All future obligations are terminated. B will not have to pay the future
monthly installments.
A few technical points to consider for self-study

TAKE NOTE
 Termination
Q: Is ‘cancellation’ and ‘termination’ the same thing? No, it is not always so.
– Obligations are terminated by a jurstic act or operation of law.
– Juristic act: contractant exercises unilateral power of termination; discharge of
obligation by performance; termination by agreement of release, novation or
compromise; time clause; condition.
– Operation of law: supervening impossibility of performance, extinctive
prescription, merger.
– Whereas, contract is cancelled as a result of a breach and is based on the
breach of contract and is a contractual remedy.
– Whereas, you can lose the right to cancel by abiding or lapse of reasonable time

• Cancellation of a contract on the ground of a breach of contract could also terminate

the contractual relationship between the parties.
• You can lose the right to cancel by abiding or lapse of reasonable time
 Can I claim cancellation and specific performance?

➢ A party cannot simultaneously ask for specific performance and

cancellation because these are inconsistent remedies.

➢ What happens is that: The plaintiff claims specific performance and,

in the same action, asks the court that, in the event of the
defendant’s non-compliance with this order within a stipulated time,
the contract be cancelled and damages be granted.
What if the breach hasn’t happened yet, but your client
anticipates that it will definitely happen?
➢ Aggrieved party can obtain an interdict to prevent the breach.
HOLMDENE BRICKWORKS (PTY) LTD V ROBERTS
CONSTRUCTION CO LTD 1977 (3) SA 670 (A)

To be dealt with in tutorials

 Facts
The respondent, a building and engineering company in need of bricks for certain walls of
a building it was constructing, entered into a supply contract with the appellant. Shortly
after construction was completed, Holmdene's bricks "were beginning to crumble and
decompose, manifesting a condition known as "efflorescence," which threatened the
stability of the entire edifice. The affected walls were perforce demolished, and Roberts
sued for consequential damages arising from the breach of the contract.

On July 2, 1975, in the Transvaal Provincial Division, judgment was granted in Roberts's
favour. No interest had been claimed, and naturally none was awarded. When Holmdene
appealed, however, Roberts applied, by way of amendment, for
• interest at six per cent from the date of judgment by the court a quo; and
• interest at eleven per cent from date of judgment in the Appeal Court in terms of the
Prescribed Rate of Interest Act.
Only the first of these was opposed.
 Issues

1. Among the questions, then, was whether or not Holmdene

was liable for consequential damages?
2. whether or not efflorescence constitutes a latent defect and
how to determine this?; and
3. whether liability for the damages was founded on breach of
contract or delict?
 Special damages
To ensure that undue hardship is not imposed on the defaulting
party [...] the defaulting party's liability is limited in terms of broad
principles of causation and remoteness, to (a) those damages
that flow naturally and generally from the kind of breach of
contract in question and which the law presumes the parties
contemplated as a probable result of the breach, and (b) those
damages that, although caused by the breach of contract, are
ordinarily regarded in law as being too remote to be recoverable
unless, in the special circumstances attending the conclusion of
the contract, the parties actually or presumptively contemplated
that they would probably result from its breach.
TABLES TO ASSIST YOUR UNDERSTANDING
THE END