Theme 2: Remedies for

Breach
Learning Unit 5: Breach of Contract and Remedies for Breach of Contract
PM: Chapter 13
Learning Outcomes
1. Apply the different remedies
available to the innocent party
commenting on the
effectiveness of each of the
remedies and their implications
for both the breaching party and
the innocent party;
2. Explain that damages and
interest are cumulative
remedies;
3. Discuss penalty clauses as a
remedy for breach of contract;
4. Apply the exceptio non adimpleti
contractus to a set of facts.
Different Types of Remedy
Aimed at keeping Aimed at Aimed at
the contract alive cancellation compensation
Exceptio non adempleti Cancellation, agreement Damages – contractual or
contractus – innocent terminates immediately delictual
party can withhold Interest on amounts
performance, until owed
breaching party performs
Specific performance
Interdict

• Damages and interest are cumulative and can be claimed along with either specific performance or
cancellation:
• Specific Performance + Damages + Interest
• Cancellation + Damages + Interest
• Specific Performance and Cancellation are mutually exclusive
Contract or
Delict
• Contractual damages only for
patrimonial losses
• Delict for non-patrimonial losses,
such as pain and suffering
• Can claim both separately where a
breach is also a delict leading to
non-patrimonial loss
• Where patrimonial loss is caused
by delict, innocent party must
choose
• Where patrimonial loss is purely
economic, cannot claim in delict –
Lillycrap case
 Exceptio Non Adempleti Contractus
Court’s
Requirements Application equitable Scope
discretion
Reciprocity: Acceptance of part- Where innocent party’s use of
partial performance, makes
• Only available if parties both performance: full performance difficult or Breaching party decides how
have obligations that are due • Innocent party uses the impossible, breaching party to remedy the breach
part performance, limited to can claim a reduced payment –
remedies aimed at BK Tooling
fulfilment
• Cancellation not allowed,
Sequence: but exceptio Where contract cancelled
• Can only use if breaching and unjustified enrichment CPA exception, consumer
party is supposed to perform is claimed = subjective value decides
first, or simultaneously of the enrichment
• Naturalia can have effect Defective performance
and cancellation:
• Exceptio irrelevant after
Incomplete performance: cancellation Exceptio cannot be raised in
• Can use if performance is • Prior performance must be cases where the innocent
Burden of proof with
defective returned party is the cause of failure or
breaching party where breaching party is
• Even for relatively minor • Restitution impossible,
defects unjustified enrichment excused by law
Specific
Performance Scope
• Three forms:
Requirements
• Plaintiff must
Discretion
• Undue Hardship
Execution
• Writ of
• Payment of have performed • Where execution
money (some or indicated enforcement • Contempt of
times treated willingness to would be court
as damages) perform unfair to the • Direct
• Claim to do • Performance defaulting enforcement
something must be party or 3rd through
• Claim not to possible parties instruction
do something • Cannot be • Personal
(usually in the against public Services
form of policy • Are exceptions
interdict, but • Will not be that would
not necessary granted where: lead to these
to comply with • Performance contracts
all the normal impossible being enforced
requirements) • Debtor – Igesund case
insolvent
 Cancellation Act of Loss of Right to
Materiality Effect Restitution
Clause Cancellation Cancel
• Whether serious • Lex Commissoria • Innocent party • Choosing to • Obligations • Both parties
enough depends • Describes how can choose to enforce contract come to an end must return
on the facts. to cancel cancel, but once means right to • In divisible what they
• Can cancel even picked final an cancel is waive contracts it is received
for minor breach irrevocable • Can be done possible to • Must tender
• Must give notice tacitly by giving cancel only a restitution in
in prescribed the other party part pleadings
manner the reasonable • Cancelling will • Innocent party
impression that not stop parties does not have to
they accept from enforcing make restitution
• Unclear if it can rights that have where it is
be lost through already accrued impossible due
prescription to inherent
defect or 3rd
party
interference or
performance
was destroyed or
rendered
valueless
• Must return,
Cancellation even where
damages exceed
value, cannot set
off.
 Nature and Purpose Requirements for claim Penalty Clauses
• Difference theory: • Burden: • Forfeiture Clauses
• Contract = positive/ expectation interest • Breach • Pre-estimation of Damages
• Delict = negative/ reliance interest • Loss • Penalty Clauses
• Misconception that only expectation loss can • Causal link • Conventional Penalties Act:
be claimed in contract and only reliance for • Cause not too far removed • Scope:
delict • Financial loss: • In respect of a breach of contract
• SCA must give clarity • Actual loss, even if it can’t be precisely • Must create obligation or provide for
calculated forfeiture
• Financial or patrimonial loss, non- • Must operate as liquidated damages or
patrimonial not allowed penalty
• Once and for all rule, must claim all losses at • Reduction of penalty:
once • Only if penalty is out of proportion to
• Difference rule/concrete approach/market prejudice suffered.
value test • Prejudice includes patrimonial loss as well
• Financial benefits arising from the breach as any other prejudice
can be taken into account when calculating • Burden on debtor, but court can reduce of
damages own accord if disproportion is apparent
• Causation (2steps) • Specific Performance:
• Factual Causation, “but for” test • Either penalty or specific performance,
• Legal causation = dichotomous orthodox unless otherwise stated in contract
approach • Damages
• Only general damages (which normally flow
• Either damages or penalty, unless contract
from breach)
• Sometimes special damages= contemplation says different

Damages principle (reasonably foreseeable) and • Even where damage is much bigger than
convention principle (agreed to liability) penalty
• Apportionment: • Defects or delay
• Breaching party liable for full damages • Cannot claim penalty, unless in contract
• Apportionment of Damages Act does not apply
 Interest

• Prescribed Rate of Interest Act:

• Whether interest is payable depends on
contract
• If contract is silent, common law
regarding mora will apply
• Unliquidated debts can also carry
interest, from date of demand or
summons, calculated on amount
Other Remedies
Interdict
• To prevent breach or threatened breach
• Test (Setlogelo v Setlogelo)
• Clear right must exist
• Injury must be shown
• No other remedy that will protect with the same effect
Declaration of Rights
• Where a party is not sure of their rights,
court can give an order to clarify
• As courts don’t give legal advice, a
dispute should exists