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What is a natural remedy for a breach of contract?
A claim for non-patrimonial loss must be framed as a delictual claim.
True
Name one type of remedy aimed at cancellation due to breach of contract.
Cancellation
An example of patrimonial loss caused by a breach of contract is a reduction in someone's __________.
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Match the following remedies with their type:
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What is the primary feature of the 'exceptio non adimpleti contractus' in a reciprocal contract?
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A delictual claim based on pre-contractual misrepresentation can also be classified as a breach of contract.
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What do the Latin terms 'pacta sunt servanda' signify in contract law?
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The principle that requires parties to warrant their obligations in a reciprocal contract is known as the principle of ______.
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Match the following terms with their correct descriptions:
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Which type of damage must be caused by the breach?
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Factual causation is determined through the 'but-for' test.
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What is the main aim of legal causation?
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Damages that arise due to special circumstances of the case are called ______.
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Match the terms with their definitions:
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Under what circumstance will a court refuse to order specific performance?
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What should be considered when determining the market value of defective goods?
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A clear and unequivocal notice of cancellation takes effect from the time it is communicated.
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General damages can include loss of profit due to delay in completing a construction project.
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What are two conditions under which a party may still be liable for special damages?
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What must a cancellation notice embody to be effective?
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The courts have discretion in refusing specific performance due to _____ hardships.
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Match the cases with their significance:
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Which of the following statements is true regarding specific performance?
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The Labour Court cannot make an order for specific performance.
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What happens to the right to cancel a contract if a party elects to uphold it?
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A party cancelling a contract cannot declare it cancelled from a _____ date.
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What is necessary for a plaintiff to succeed in specific performance?
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What is the term used to compare the position after a damaging event with the position had the event not occurred?
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Positive interest is associated with pre-contractual breaches.
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What is the primary interest served by reliance interest?
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The two forms of contractual damages are __________ interest and __________ interest.
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Match the types of interest with their corresponding definitions:
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Which of the following best describes expectation interest?
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Negative interest is considered forward-looking.
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What must happen if a contract is cancelled in relation to restitution interest?
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Study Notes
Remedies for Breach of Contract
- Full performance is the natural termination of a contract.
- Breach of contract can disrupt the natural lifespan of a contract, resulting in early termination.
- The injured party has the option to uphold the contract by forcing compliance or cancel the contract if the breach is serious.
- Upholding the contract through a claim for performance is considered the natural remedy.
- Cancellation is considered an extraordinary remedy.
- Parties can regulate the consequences of breach through:
- Lex commissoria
- Penalty clause
- Acceleration clause
- Interest clause
- Restitution clause
Types of Remedies
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Remedies aimed at upholding the contract:
- Exceptio non adimpleti contractus
- Specific performance
- Interdict
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Remedies aimed at cancellation:
- Cancellation
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Remedies aimed at compensation:
- Damages (contractual or delictual)
- Interest
- These remedies can be mutually exclusive (only one can be claimed) or a party can claim them in the alternative.
Contract or Delict
- A breach of contract involves the unlawful infringement of a party's rights that arise from the contract.
- Conduct constituting breach may also constitute a delict, infringing on a party's rights that exist independently of the contract.
Question 1: Injured Party's Choice of Remedies for Patrimonial Loss
- A claim for damages based on breach of contract is limited to patrimonial loss.
- Any claim for non-patrimonial loss (e.g., pain and suffering) caused by breach must be framed as a separate delictual claim.
- Conduct constituting breach can form the basis of two claims:
- Patrimonial loss: Contract
- Non-patrimonial loss: Delict
Distinguish between delictual claims based on breach and pre-contractual misrepresentation
- Pre-contractual misrepresentation can be a delict on its own but is not a breach.
- A pre-contractual misrepresentation cannot found a contractual claim unless incorporated into the contract as a warranty.
Remedies Aimed at Upholding the Contract
- Contracts must be honored, adhering to the principle of pacta sunt servanda.
- Remedies to enforce contracts include:
- Specific performance (and interdict)
- Exceptio non adimpleti contractus
Exceptio non adimpleti contractus
- This is a defense raised against a claim for performance in a reciprocal contract.
- It allows a party to withhold their own performance and ward off a claim for performance until the other party has performed or tendered proper performance
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Requirements:
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Reciprocity of performance:
- Reciprocal obligations: obligations created in exchange for one another (BK Tooling case).
- Reciprocal contract aimed at accomplishing an exchange of obligations.
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Sequence of Performance:
- General rule: Parties must perform pari passu (at the same time), unless parties agree otherwise or naturalia dictates (e.g., restraint of trade).
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Reciprocity of performance:
Discretion of the Courts
- The point of departure is that a plaintiff is always entitled to specific performance.
- Courts have a general equitable discretion to refuse SP, following certain guidelines:
- Undue hardship to the debtor or a third party (Haynes v KWT Municipality).
- Personal Services:
- English law: Courts will not enforce agreements for personal services or employment (Benson v SA Mutual Life Assurance Society).
- Rejected in Nat Union of Textile Workers v Stag Packings.
- There is no reason to deviate from the general rule of ordering specific performance even in cases of personal services, subject to the court's discretion.
Execution of Orders for SP
- Ordinary rules of procedure apply.
- Sum of money: Writ of execution, attachment and sale.
- Perform an act/refrain from acting: Contempt of court.
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Enforce by ordering a third party to make performance:
- Registrar to sign documents.
- Sheriff to remove property and hand to creditor, etc.
Cancellation
- An extra-ordinary remedy.
- Unless lex commissoria (a clause that allows cancellation), cancellation is only possible if the breach is material.
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Act of cancellation:
- Material breach: The injured party has the choice to uphold or cancel the contract.
- Within a reasonable time.
- Once exercised, the choice is final (unless by consent).
- When electing to cancel, the party must notify the other party.
- Notice of cancellation must be clear and unequivocal.
- Takes effect from the time it is communicated (Swart v Vosloo).
- Cannot be worded to take effect from a future date (ex nunc) (Ganief v Hoosen).
- No formalities are required (oral or written notice will suffice).
Electing to Uphold the Contract
- The right to cancel is lost if the injured party elects to uphold the contract.
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Expression of intention:
- Express or tacit manifestation of intention to abide by the contract despite the breach (waiver).
- Tacit election not to cancel is inferred from the injured party's conduct.
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Estoppel:
- Even if there's no intention to waive the right, creating a reasonable impression in the mind of the other party that the right has been affirmed can estop the injured party from asserting the right to cancel.
Damages
- In the event of a breach, damage is calculated by comparing the value of the asset/obligation had it been properly performed with the actual value after the breach (focus on the specific asset/right).
- Mechanisms like the market value approach and cost of completion can be used to calculate damages.
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Causation:
- The damage must be caused by the breach.
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Enquiry Stages:
- Factual causation: Did the breach, as a matter of fact, causally contribute to the loss? (conditio sine qua non or "but-for" test).
- Legal causation: Is the breach and loss sufficiently close that the party in breach should be held responsible (remoteness)?
General Damages
- Damages that flow naturally from the particular breach, not too remote and recoverable.
- Foreseeable to a reasonable person in the ordinary course of events.
- Liable for such damages.
- Example: Holmdene Brickworks v Roberts Construction: Damages for the cost of demolishing and reconstructing a building due to poor quality bricks, but not for loss of profit due to delay in completion.
Special Damages
- Damages that would not normally be expected to follow from this type of breach but arise due to special circumstances.
- General rule: Not (usually) liable for these damages.
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Exceptions:
- Damages were actually foreseeable at the time of the contract (contemplation principle).
- The injured party must be given the benefit of the bargain they contracted for.
Difference Theory
- Used in delict and contract.
- Compares the position after the damage-causing event with the position had the event not occurred.
Distinguishing between Positive and Negative Interest
- There's a distinction between pre-contractual wrong (misrepresentation or duress) and post-contractual breach.
- Pre-contractual wrong: The difference theory places the victim in the position they would be in had they not concluded the contract (e.g., but for the duress, the contract would not have been made).
- Post-contractual breach: The difference theory places the victim in the position they would have been in had the contract been fully performed.
Application of Interest
- Negative Interest: Associated with delict and out-of-pocket loss (usually pre-contractual damages).
- Positive Interest: Associated with contract and loss of profit (usually post-contractual breach).
Interests Served by Contractual Damages
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Restitution interest:
- Contract cancelled: Parties must make restitution (contractual remedy).
- Contract not cancelled: Restitution interest (financial equivalent of restitution, i.e., the difference in value of performance made and counter-performance received) will be part of both positive and negative interest damages.
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Reliance Interest:
- Expenses incurred in relying on the contract.
- Aim is to place the victim in the position as if the contract had not been concluded (same as negative interest).
- Includes consequential loss if not too remote.
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Expectation Interest (Gross):
- Entails being placed in the position as if the breach had not happened (positive interest).
- Includes loss of profit (net expectation interest).
Example
- A buys a stud racehorse from B, who assures there is no disease, for R100k. This is a bargain as A has already on-sold the horse to C for R150k, with delivery at some future date after the stud has done its job for A.
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Description
This quiz explores the various remedies available for breach of contract, including options for upholding or canceling contracts. Understand the differences between full performance, specific performance, and damages, as well as various clauses that can be included in contracts. Test your knowledge on how parties can regulate the consequences of breaches.
