Termination of Contracts Chapter 13

Study Notes

Contracts can be terminated through various means, including proper performance, prescription, impossibility of performance, merger, set-off, death, and insolvency.

A contract is terminated when both parties perform their obligations completely in accordance with the requirements of the contract.
Performance must be in accordance with the time, place, and manner of performance specified in the contract.

Regulated by the Prescription Act 68 of 1969, which sets out the time periods for the extinguishing of obligations.
Prescription periods vary depending on the type of debt, including:
- 30 years: debt secured by mortgage bond, judgment debt, etc.
- 15 years: debt owed to the State for advance or loan of money, etc.
- 6 years: negotiable instrument
- 3 years: normal contractual/delictual debts
Prescription begins to run from the day the debt becomes due, including the first day, excluding the last day.
Prescription can be interrupted by acknowledgement of the debt or serving a summons on the debtor.
In certain cases, prescription may be delayed, such as when the creditor is a minor or insane, the debtor is overseas, or the parties are married to each other.

If performance by a party to a contract becomes impossible through no fault of either party, both parties are excused by law from performing in terms of the contract.
Supervening impossibility refers to when performance becomes impossible after entering into the contract, e.g., an act of God.
For impossibility to succeed, the impossibility must not be due to the fault of any of the parties, and neither party must have taken the risk of such an event on themselves.

Refers to the situation where the creditor and debtor become the same person or entity.
Can automatically bring a contract to an end.

Where two parties owe each other a debt, the debts cancel each other out.
Conditions for valid set-off include:
- Debts must be between the same two persons in the same capacities.
- Debts must be of the same nature.
- Debts must be due and payable.

Death will not automatically bring a contract to an end, unless the contract was of such a personal nature that the rights and duties of the deceased person cannot be transferred to the deceased estate.

Insolvent's trustee has to decide whether to meet the rights and obligations of the contract.
If the trustee decides to meet any of the contracts, they take the place of the insolvent with respect to those contracts.
Therefore, contracts do not terminate automatically.