Contract B Notes:

Classification of Terms:

Traditional classification:
a. Essentialia : terms essential for the classification of the contract as a particular kind
of contract.
e.g. contract of sale = a thing being bought for a price; lease = subject, rental, time
period; etc.
b. Naturalia: terms that are attached by operation of law (ex lege) to each contract of a
particular kind.
These terms simple attach by operation of law (natural obligations of fairness and
public policy etc.), not in the document itself.
Can be excluded expressly by the parties.
e.g. one cannot sell something with a defect; a landlord cannot disturb the tenant
inappropriately; ***Exception – Voetstoots clause (sell as is/ defects do not matter).
c. Incidentalia/ Accidentalia:
Terms the parties have agreed upon between themselves in excess of the above two
categories.
Approach by SA Courts:
Distinction between:
A. Express terms
B. Implied terms
Modern Classification:
A. Express terms: things expressly agreed upon between the parties.
B. Implied terms: divided into two distinct types of implied terms –
- Terms implied by law
- Unexpressed terms “implied” between the parties (or “Tacit” terms).
Case: Corbett AJA in Alfred McAlpine v. Transvaal Provincial Administration
(1974), pg’s 531-533 dissenting judgment;
CORBETT, WN. A.R.: The salient facts of this appeal are set A forth in the judgment of
the ACTING CHIEF JUSTICE. Accordingly, I shall refrain from repeating them except in so
far as it may be necessary to do so in order to give completeness to my reasoning. As
regards appellant's main claim and alternative claims B, C, D, E and F, I respectfully
concur in the dismissal of the appeal, for the reasons stated by B RUMPFF, A.C.J. As far
as alternative claim A is concerned, I have come to the conclusion, for the reasons which
follow, that the appeal should be allowed and that an appropriate declaratory order
should be made.

In dealing with claim A I propose to consider, firstly, whether any term as to the timeous
delivery of drawings and giving of C instructions by the engineer is to be implied in the
contract between the parties and, if so, what that term is; secondly, if such a terms is to
be implied, whether, having regard to the formulation of claim A in appellant's
particulars of claim, as amended, the appellant is entitled to the relief which it claims;
and, thirdly, the general effect and relevance of D clause 51 of the general conditions of
contract.

In legal parlance the expression "implied term" is an ambiguous one in that it is often
used, without discrimination, to denote two, possibly three, distinct concepts. In the first
place, it is used to describe an unexpressed provision of the contract which the law
imports therein, generally as a matter of course, E without reference to the actual
intention of the parties. The intention of the parties is not totally ignored. Such a term is
not normally implied if it is in conflict with the express provisions of the contract. On the
other hand, it does not originate in the contractual consensus: it is imposed by the law
from without. Indeed, terms are often implied by law in F cases where it is by no means
clear that the parties would have agreed to incorporate them in their contract. Ready
examples of such terms implied by law are to be found in the law of sale, e.g. the seller's
implied guarantee or warranty against defects; in the law of lease the similar implied
undertakings by the lessor as to quiet enjoyment and absence of defects; and in the law
of negotiable instruments the G engagements of drawer, acceptor and endorser, as
imported by secs. 52 and 53 of the Bills of Exchange Act, 34 of 1964. Such implied
terms may derive from the common law, trade usage or custom, or from statute. In a
sense "implied term" is, in this context, a misnomer in that in content it simply
represents a legal duty (giving rise to a correlative right) imposed by law, H unless
excluded by the parties, in the case of certain classes of contracts. It is a naturalium of
the contract in question.

In the second place, "implied term" is used to denote an unexpressed provision of the
contract which derives from the common intention of the parties, as inferred by the
Court from the express terms of the contract and the surrounding circumstances. In
supplying such an implied term the Court, in truth, declares the whole contract entered
into by the parties. In this connection the concept, common intention of the parties,
comprehends, it would seem, not only the actual intention but also an imputed intention.
In other words, the Court implies not only terms which the parties must actually have
had in mind but did not trouble to express but A also terms which the parties, whether or
not they actually had them in mind, would have expressed if the question, or the
situation requiring the term, had been drawn to their attention.

The distinction between terms implied by law and implied terms based upon the actual
or imputed intention of the parties to the contract was emphasized in Minister van
Landbou-Tegniese Dienste v Scholtz , 1971 (3) SA 188 (AD) at p. 197, and D reference
was there made to Salmond and Williams, Contracts , 2nd ed., pp. 24, 36 and 37, in
which the expression "implied term" is used to denote the former and the expression
"tacit term" to describe the latter. It is not a matter of great moment what terminology
is adopted but in the interests of continuity I shall use the expressions "implied term"
and "tacit term", as defined by Salmond and Williams .

The significance of this distinction is not merely academic. The implied term (in the
above-defined sense) is essentially a standardised one, amounting to a rule of law which
the Court will apply unless validly excluded by the contract itself. While it may have
originated partly in the contractual intention, often other factors, such as legal policy,
will have contributed to its creation. The tacit term, on the other hand, is a provision
which must be found, if it is to be found at all, in the unexpressed intention of the
parties. Factors which might fail to exclude an implied term might nevertheless negative
the inference of a tacit term. (See Treital , p. 166). The Court does not readily import a
tacit term. It cannot make contracts for people; nor can it supplement the agreement of
the parties merely because it might be reasonable to do so. Before it can imply a tacit
term the Court must be satisfied, upon a consideration in a reasonable and businesslike
manner of the terms of the contract and the admissible evidence of surrounding
circumstances, that an implication necessarily arises that the parties intended to contract
on the basis of the suggested term. The A practical test to be applied - and one which has
been consistently approved and adopted in this Court - is that formulated by SCRUTTON,
L.J., in the well-known case of Reigate v Union Manufacturing Co. , 118 L.T. 479 at p.
483:
"You must only imply a term if it is necessary in the business sense to give efficacy to the contract; that is, if it
is such a term that you can be confident that if at the time the contract was being negotiated someone had
said to the parties: 'What will happen in such a case?' they would have both replied: 'Of course, so-and-so. We
did not trouble to say that; it is too clear.'"
This is often referred to as the "bystander test".

Terms implied by law:

- “Naturalia” (terms attached by operation of law e.g. sale/ lease etc.).
- Tend to be legal duties (no defects etc.).
- Derive from common law, legislation, trade usage or custom.
- NB: Parties can vary/exclude by an express term.

Custom: (territory/area specific)

“A custom is a particular rule which has existed either actually or presumptively from time
immemorial in a particular locality and has obtained the force of law in that locality,
although technically being contrary to the general law of the land” – Halsbury’s Laws of
England Vol. 12 (1) Para 601.
e.g. Old Transvaal – stove went with house.

Trade Usage: (Particular trade) See Christie pg’s 161-167.

Requirements for trade usage (as per Golden Cape Fruits v. Fotoplate):
- Universally observed.
- Long-established.
- Notorious (within particular trade).
- Reasonable (should be reasonably expected to know).
- Certain (in terms of its content).
- Does not conflict with existing positive law.
- Does not conflict with an express term of the contract.
Case: Golden Cape Fruits v. Fotoplate (1973).
Facts: decided to have a new brochure printed by photolithographic process. Appellant
ordered direct from a specialist photolithographer, the respondent, certain
photolithographic plates which appellant then passed on to the printer who printed the
required number of copies. Owing to an error in the plates the copies could not be used and
appellant had claimed from respondent the cost of the printing of them either on the basis
of respondent's breach of contract or on the ground of respondent's negligence.
Respondent's defence was that the contract was subject to a trade usage which in the
circumstances absolved it from liability, this alleged usage being to the effect that
respondent would exhibit to appellant 'rough proofs' of the plates (positives) for approval,
amendment or rejection and that, if the rough proofs were approved by appellant, as they
had been, then respondent's obligations under the agreement would be fulfilled by
completing and delivering the positives in accordance with the proofs. The evidence
disclosed that the mistake would not be obvious even to an expert, that checking by an
expert would take considerable time, and that neither the respondent's employees nor
those of the printer had detected the error until after the copies had been printed.
Issue: was it up to the client to check the plates before buying or using them.
Law: Requirements for trade usage: see above
Held: Respondent failed to discharge onus on proving trade usage and establish;(1) that a
trade usage in regard to the consequences of the customer's approval of proofs existed; (2)
that, if there was such usage, it applied to photolithographic positives and related, without
qualification, to all errors, including those occurring in aspects not clearly conveyed to the
customer; and (3) that, if the application to photolithographic positives were accepted
subject to qualification, the error in the present case was in regard to a matter clearly
conveyed to the customer.
Held: Judgment granted to the appellant, with costs.

Case: Coutts v. Jacobs (1927):

Facts: Plaintiff sent wool to defendants, brokers of East London, for sale, with the request
that they should "do the best for me." Defendant sold odd bales, but eventually plaintiff
caused the remainder of the wool to be removed from defendants and handed to other
brokers for sale, paying a sum claimed by defendants as brokerage on the unsold portion
subject to plaintiff's right to recover same. Defendants claimed the brokerage in virtue of a
custom or trade usage, whereby if wool is removed from one broker to another by the
owner the first broker is entitled to a charge on the transfer equal to the amount of
commission which would be earned on the price offered or reserved. It was shown that the
custom had been observed in East London and other ports for many years, but that recently
one broker had not made the charge for eighteen months, but it was not shown that
plaintiff knew of the custom.
Issue: If wool is moved from one broker to another by the owner, is the original broker
entitled to commission by way of custom?
Held: that the custom or trade usage in question was certain and reasonable, and thus
existed.
Held: that in the circumstances plaintiff, in sending his wool to be disposed of by defendant,
must be taken to have bound himself to have entrusted the wool to be dealt with by
defendant in accordance with the usage of brokers at East London.
Held: that the fact that one broker had not observed the custom did not destroy the validity
of the custom

Terms implies between parties (Tacit terms):

Terms which the parties must have had in mind, but were so obvious that they never
articulated them expressly.
Derive from common intention of parties (express terms plus surrounding circumstances).

TEST: Hypothetical Bystander Test (aka officious bystander or bystander test).

Case: Reigate v. Union Manufacturing Co. (1918):
"You must only imply a term if it is necessary in the business sense to give efficacy to the
contract; that is, if it is such a term that you can be confident that if at the time the contract
was being negotiated someone had said to the parties: 'What will happen in such a case?'
they would have both replied: 'Of course, so-and-so. We did not trouble to say that; it is too
clear.” Scrutton J.
Case: Shirlaw v. Southern Foundries (1939):
“Prima facie that which in any contract is left to be implied and need not be expressed is
something so obvious that it goes without saying; so that, if, while the parties were making
their bargain, an officious bystander were to suggest some express provision for it in their
agreement, they would testily suppress him with a common ‘oh, of course!’”.
- Cannot be vague (must be clear and concise).
- Cannot be contrary to an express term.

Kerr’s Classification: (Not supported by the Courts)

1. Invariable terms: ones required for that form of contract (i.e. essentialia), as well as
terms required by law/ statute (absolutely).
2. Express terms: ones beyond invariable terms
3. Implied terms: (Kerr thinks is the same as “Tacit” terms)
Terms implied between parties (bystander test).
 4. Residual terms: (= terms implied by law). Terms that apply in the absence of any
express or implied terms.

Interpretation of a Contract:
Contracts are created by words; words are ambiguous and not binary, thus requiring
interpretation.

Case: Joubert v Enslin (1910) AD:

“The Golden rule applicable to the interpretation of all contracts is to ascertain and to
follow the intention of the parties.”

But, in fact, it is a more objective approach:

Case: Hansen & Schrader v. De Gasperi (1903):

“Now it is not for this Court to speculate as to what the intentions of the parties were when
they entered into the contact. That must be gathered from their language, and it is the duty
of the Court as far as possible to give to the language used by the parties its ordinary
grammatical meaning.”

Parol Evidence Rule:

Concerns written documents; it limits evidence to be used in interpretation.
Case: Union Government v. Vianini Ferro-Concrete Pipes (1941):
“Now this Court has accepted the rule that when a contract has been reduced to writing,
the writing is, in general, regarded as the exclusive memorial of the transaction and in a suit
between the parties no evidence to prove its terms may be given save the document of
secondary evidence of its contents, nor may the contents of such document be
contradicted, altered, added to or varied by parol evidence.”

Case: Corbett JA in Johnston v. Leal (1980):

“The aim is to prevent a party who has entered into a contract, from seeking to contradict
or modify the contract by extrinsic means”.
Exceptions to the rule:
1. Where there is a foundational question regarding the validity of the contract
(mistake, duress etc.) i.e. where the document itself is questioned.
2. Where one seeks to have the document rectified, by a process of rectification (see
below).

The Rules of Interpretation:

The Court seeks to attain the common intention of the parties by looking at the language
used in the document.
Case: Coopers & Lybrant v. Bryant (1995):
“According to the 'golden rule' of interpretation the language in the document is to be given
its grammatical and ordinary meaning, unless this would result in some absurdity, or some
repugnancy or inconsistency with the rest of the instrument...The mode of construction
should never be to interpret the particular word or phrase in isolation ( in vacuo ) by
itself...The correct approach to the application of the 'golden rule' of interpretation after
having ascertained the literal meaning of the word or phrase in question is, broadly
speaking, to have regard:
(1) to the context in which the word or phrase is used with its interrelation to the contract
as a whole, including the nature and purpose of the contract
(2) to the background circumstances which explain the genesis and purpose of the
contract, ie to matters probably present to the minds of the parties when they contracted.
(3) to apply extrinsic evidence regarding the surrounding circumstances when the
language of the document is on the face of it ambiguous, by considering previous
negotiations and correspondence between the parties, subsequent conduct of the parties
showing the sense in which they acted on the document, save direct evidence of their own
intentions.”
(4 steps: grammatical and ordinary meaning; context; background circumstances;
surrounding circumstances).

Case: Delmas Milling Co. v. Du Plessis (1955):

There appear to be three broad classes of evidence that are usable in different kinds of
cases. Where although there is difficulty, perhaps serious difficulty, in interpretation but it
can nevertheless be cleared up by linguistic treatment, this must be done. The only
permissible additional evidence in such cases is of an identificatory nature; such evidence is
really not used for interpretation but only to apply the contract to the facts. Such
application may, of course, be itself the cause of the difficulty, giving rise to what is
sometimes called a latent ambiguity. If the difficulty cannot be cleared up with sufficient
certainty by studying the language, recourse may be had to 'surrounding circumstances' i.e.
matters that were probably present to the minds of the parties when they contracted (but
not actual negotiations and similar statements). It is commonly said that the Court is
entitled to be informed of all such circumstances in all cases. But this does not mean that if
sufficient certainty as to the meaning can be gathered from the language alone it is
nevertheless permissible to reach a different result by drawing inferences from the
surrounding circumstances. Whether there is sufficient certainty in the language of even
very badly drafted contracts to make it unnecessary and therefore wrong to draw inferences
from the surrounding circumstances is a matter of individual judicial opinion on each case.
Cases of this class, though they are generally spoken of as cases of ambiguity, might
conveniently be given some such name as 'cases of uncertainty' to distinguish them from
the third class of case where even the use of surrounding circumstances does not provide
'sufficient certainty'. These are cases of ambiguity in the narrow sense, where after the
surrounding circumstances have been considered there is still no substantial balance in
favour of one meaning rather than another. The usual examples of such true ambiguity
come from testamentary documents, but examples are conceivable in the case of contract.
In these cases, which will naturally be much rarer than those of uncertainty, recourse may
be had to what passed between the parties on the subject of the contract. One must use
outside evidence as conservatively as possible but one must use it if it is necessary to reach
what seems to be a sufficient degree of certainty as to the right meaning.

Facts: In June, 1953, a document was signed on behalf of appellant company, and by
respondent in confirmation, as follows: 'We beg to confirm the purchase of 2,750/3,250
bags new season kidney beans as inspected on farm S; Price 80/ - per bag of; Terms 200 lbs.
nett delivered . Delivered in good order and condition at Delmas Milling Co. Mills at Delmas.
For delivery up to the 10/7/53. Failing delivery within the prescribed time the above price is
subject to adjustment. All deliveries must be in accordance with grades specified above.
Please note that all conditions mentioned herein must be strictly adhered to. Payment on
delivery at mill.' The portion italicised was in writing: the remainder of the document was
printed. In a declaration claiming damages arising from an alleged breach of the contract on
the part of the respondent, appellant company had alleged that, at the respondent's
request, it had extended the date of delivery to 20th July, 1953, that the respondent had
duly delivered 1,000 bags of beans and that he had refused to deliver any further bags of
beans. Appellant claimed damages in respect of the respondent's failure to deliver the
balance of 1,750 bags of beans. Respondent had pleaded that, having delivered 1,000 bags
before the stipulated date, he was obliged to deliver any balance due under the contract
only upon an adjustment of the contract price being arrived at by mutual agreement and
that despite demand appellant had refused to agree upon a mutual adjustment of the price.
Appellant had excepted to this plea and applied to strike out certain portions thereof. The
disputed clause was the sentence beginning 'Failing delivery'.
Held: that the effect of the disputed clause was to make the contract an option to sell.
Held: if the contract was to be construed as a contract of purchase and sale, that the clause
was inserted for the benefit of the respondent and in those circumstances he could not be
said to be taking advantage of his own wrong, in failing to deliver by the stipulated date,
when he relied on the clause.
Held: as there was no ambiguity as regards the meaning to be placed on the disputed
clause, that evidence of surrounding circumstances could not affect its plain meaning.
Held: regard being had to the word 'purchase' being inconsistent with a mere option to sell,
that when there was a serious difficulty in interpreting a contract and the Court was not
obliged to decide the matter on exception, it should not do so.
Held: that the exception to the plea was rightly dismissed on the ground that the contract
was capable of being construed as a mere option to sell and not on the ground that it was
incapable of any other meaning.

3 Steps of Interpretation (from the cases):

1. Golden rule: if the words are clear and unambiguous, they must be given their
ordinary grammatical meaning. The court will not look further or accept any other
evidence. Thus one needs to give the language in its ordinary grammatical meaning.
Acceptable methods of doing so:
a. Narrow context (rest of document):
 “it is an unrewarding exercise to seize on one word and its meaning, and then
interpreting the entire document in light of that one word. Context is all
important”. Case: List v. Jungers.
b. Wider context (the purpose – purposive approach is always admissible).
c. Background circumstances: explaining the genesis/purpose of the contract –
always admissible to explain ordinary grammatical meaning.
d. Evidence of an identificatory nature:
Case: Holmedene Brickworks v. Roberts Construction (1977):
There was an interpretation issue, and expert evidence was given to distinguish between
face-brick and semi face-brick, because of the technical nature of the terms.
Case: Le Riche v. Hamman (1946) AD:
Facts: The plaintiff claimed transfer of a piece of land alleging that the defendant had
purchased from him another piece of land and that in error both pieces of land had been
transferred to the defendant. The defendant pleaded that both pieces of land had been
purchased by him and that in any event he was unable to transfer the former piece as it had
since been sold and transferred to a third party
Issue: Which property was being sold, and what evidence is permissible?
Held: The evidence identifying the property described in the broker's note, showed that the
first three pieces of land mentioned in transfer No. 8981 formed one block of land, which
could properly be described as a farm situated on the main road from Cape Town to Kuils
River opposite the pens of Messrs. Maree & Bosman, whereas Victory Hill, the fourth piece
of land mentioned in that transfer, was situated on the main road from Cape Town to Paarl,
over two miles away by road from the other three and could, by no stretch of imagination,
be described as constituting one farm with the other three pieces or as situated on the main
road of Kuils River opposite the pens of Messrs. Maree & Bosman. Not only was the land
clearly identified by this description, but there is a reference in the broker's note to the rent
for the year ending 29th March, 1942, which is of some assistance in the identification.
Plaintiff relied on oral evidence which was contrary to the broker’s note, thus parol evidence
rule excluded such evidence. Look at ordinary meaning – description of land did not refer to
Victory Hill. Contract clear and unambiguous. Hamman (defendant) won.

Case: see Delmas Milling Co. V. Du Plessis (1955) above.

NB: where there is serious difficulty, as in Le Riche v. Hamman and Delmas Milling Co. v. Du
Plessis, and it can be dealt with linguistically, then it should be done. The Courts will try to
find a solution from the words of the contract, if possible.

2. If there is still uncertainty:

- Can have recourse to “surrounding circumstances” if there is ambiguity. To
ascertain the matters probably prominent in the minds of the parties at the time
of contracting.
3. If surrounding circumstance do not help:
Can refer to what passed between the parties on the subject of the contract. Or the
negotiations; the way in which the parties acted in carrying out the contract.
BUT: still not allowed to hear evidence as to what the parties subjectively thought the
term meant.

Problems with these rules:

1. With a literal approach to language is not precise and there is no one single meaning.
Ambiguity etc. is a part of language itself.
2. The hierarchical nature of the exercise is very rigid. “interpretation” is holistic, but
Delmas approach is very rigid.
3. There can be terminological confusion:
a. Background circumstances (always admissible) vs.
b. Surrounding circumstances (admissible only when linguistic meaning is not
attainable)
c. Surrounding circumstances were defined as “matters probably prominent in
the minds of parties when they contract” BUT later background
circumstances were given the same definition.
4. Interpretation is based on each judge’s own opinion
5. Law of interpretation of contracts is confusing and somewhat arbitrary.
Critics:
Case: Jansen JA in Cinema City v. Morgenstern Family Estates (1980):
Suggested that it would be consistent with modern thinking to allow evidence of
surrounding circumstances in all cases as an aid to interpretation, without requiring the
“open sesame” of uncertainty.
Christie: if the present limitation on allowing evidence of surrounding circumstances is to be
reconsidered the most cogent reason is the difficulty of distinguishing between (admissible)
background circumstances and (inadmissible) surrounding circumstances.

Case: Van der Westhuizen v Arnold (2002):

The respondent had signed an agreement of sale for a motor vehicle which provided that
'no warranty whatsoever has been or is given to me by the seller or his agent (s) '. The
agreement had been drawn up by the appellant, the seller. The respondent had been aware
when he purchased the vehicle that it was in need of repair. The discussions between the
appellant and the respondent, prior to the conclusion of the contract, had related to the
condition of the vehicle. However, subsequent to his taking possession of the vehicle, a bank
claimed ownership of the vehicle. To avoid the bank's claim, he paid the bank the amount
outstanding to it. He then claimed that amount from the appellant, basing his claim on the
implied warranty against eviction. The appellant raised the exclusion clause in defence of
the claim.

Held: (per Lewis AJA), that the surrounding circumstances - what passed between the
parties, their negotiations and their conduct - did not show that the words 'no warranty
whatsoever' had included the implied warranty against eviction. Although the phrase had to
be regarded at first blush as a complete catch-all, saving the seller from any liability that
might have arisen by operation of law, or by virtue of representations or warranties, it could
not, given its generality, and the absence of any evidence that the question of title had been
considered or in contemplation, have excluded the most fundamental obligation of the
seller - to give undisturbed possession of the merx to the buyer. The only inference to be
drawn from the circumstances was that the respondent had not intended or even
contemplated that he might be deprived of possession by the true owner, and yet have no
recourse to the appellant. The evidence did not show H that the appellant had any such
liability in mind either.
Held: that, in the circumstances, the provision in the document that the appellant had given
no warranties whatsoever did not exclude his liability for breach of the warranty against
eviction. This did not mean that the words at issue were superfluous: they referred also to
express warranties which would have related to the condition of the car.
Held: that there did not appear to be any clear authority for a general principle that
exemption clauses should be construed differently from other provisions in a contract. But
that did not mean that courts were not, or should not be, wary of contractual exclusions,
since they deprived parties of rights that they would otherwise have had at common law. In
the absence of legislation regulating unfair contract terms, and where a provision did not
offend public policy or considerations of good faith, a careful construction of the contract
itself should ensure the protection of the party whose rights had been limited, but also give
effect to the principle that the other party should be able to protect herself or himself
against liability insofar as it was legally permissible. The very fact, however, that an
exclusion clause limited or ousted common law rights should make a court consider with
great care the meaning of the clause, especially if it was very general in its application. This
required a consideration of the background circumstances and a resort to surrounding
circumstances if there was any doubt as to the application of the exclusion.
Held: (per Marais JA), that the words 'no warranty whatsoever has been or is given to me by
the seller or his agent (s) ' were of the widest connotation, but of critical importance were
the words 'has been or is given to me by the seller or his agent (s) '. Their ordinary meaning
was that the appellant (or his agent) neither gave nor had given any guarantees or
warranties whatsoever. They were certainly apt to have excluded all expressly given
warranties whatever their content. Although the word 'whatsoever' would have covered
both expressly given and tacitly given warranties, a warranty which arose ex lege and owed
nothing to the consensus of the parties was another matter altogether. It was not a
warranty which was given (either expressly or tacitly) by the seller or his agent (s). The
chosen words were not apt to exclude such a warranty. Plainer language than that which
appellant had chosen would have been necessary to exclude effectively such a warranty.
NB Paragraph:
Heher AJA: Given that '(t) he intention of the parties must be gathered from their language
not from what either of them may have had in mind', the additional contribution which may
be made by reference to the background circumstances in which the contract was
concluded so as to enable the court to put itself in the position of the parties at the time,
and thereby to understand the broad context in which the words to be interpreted were
used Coopers & Lybrand and Others v Bryant, must perforce be limited, albeit that it is
admissible to that end. Although we are in no position to resolve the conflicts left open by
the magistrate - only selected portions of the evidence have been made part of the appeal I
record - it nevertheless seems clear that those elements of the appellant's case, which, if
they had been known to the respondent at the time of contracting, might have influenced
the interpretation of the document (e.g. the appellant had never been in possession of the
vehicle, the beneficial owner and sole user was Swart, an unrehabilitated insolvent whose
wife was employed by the appellant, the vehicle had been registered in the appellant's
name as security for a loan, etc) were never brought to the respondent's attention and
could not, therefore, be used against him. (I understand Schreiner JA in Delmas Milling Co
Ltd v Du Plessis 1955 (3) SA 447 (A) at 454G and Joubert JA in Coopers & Lybrand v Bryant (
supra at 768B), to have used the description 'matters probably present to the minds of the
parties when they contracted' in the limited sense of matters of which both parties were
aware.) I can find no admissible (or other) evidence within the category of background
circumstances which justifies the narrow interpretation which the respondent's counsel
attempted to support before us.

Thus (extra summary notes):

Exclusion of warranty against eviction:
Person claims to be the owner but he actually isn’t. The seller is responsible for compensating the
buyer. This is a warranty against eviction and is always implied.
The translation of the Afrikaans term of the contract: “I acknowledge that I have purchased the
vehicle voetstoots, and that no warranties have been given to me.”
The seller raised the warranty clause as a defence.

The response of the judges:

Heher AJA: the ordinary meaning and the background meaning meant that the clause was
unambiguous and clear. The appellant was thus exempt.
Lewis AJA: the ordinary meaning does not exclude the warranty and the background circumstances
suggest the warranty against eviction was NOT included. Only defects to do with the vehicle were
related to the exemption clause. An exemption clause must be interpreted narrowly.
Marais JA: Agreed with Lewis – ambiguous and must be interpreted contra proferens.

Case: KPMG Chartered Accountants v. Securefin (2009) SCA:

Facts not NB – Most blatant attack by SCA on Delmas/Coopers rules.
NB Para 39: Harms JA: “First, the parol evidence rule remains part of our law. However, it is
frequently ignored by practitioners and seldom enforced by trial courts. If a document was
intended to provide a complete memorial of a jural act, extrinsic evidence may not
contradict, add to or modify its meaning (Johnson v Leal 1980 (3) SA 927 (A) at 943B).
Second, interpretation is a matter of law and not of fact and, accordingly, interpretation is a
matter for the court and not for witnesses (or, as said in common law jurisprudence, it is not
a jury question). Third, the rules about admissibility of evidence in this regard do not
depend on the nature of the document, whether statute, contract or patent. Fourth, to the
extent that evidence may be admissible to contextualise the document (since ‘context is
everything’) to establish its factual matrix or purpose or for purposes of identification, ‘one
must use it as conservatively as possible’ (Delmas Milling Co Ltd v du Plessis 1955 (3) SA 447
(A) at 455BC). The time has arrived for us to accept that there is no merit in trying to
distinguish between ‘background circumstances’ and ‘surrounding circumstances’. The
distinction is artificial and, in addition, both terms are vague and confusing. Consequently,
everything tends to be admitted. The terms ‘context’ or ‘factual matrix’ ought to suffice.
(See Van der Westhuizen v Arnold 2002 (6) SA 453 (SCA) paras 22-23)”.

***Harms JA argues that evidence that is contextual or assists in explaining the “factual
matrix” should be admissible. Courts simply ignore the Delmas approach, and are
increasingly prepared to consider evidence outside the document. Interpretation is a holistic
process, and each case should operate on its own merits; there needs to be a more flexible
approach. However, despite all this criticism, it was Obiter to the case, and no judgment has
yet overruled the Delmas/Coopers approach.***

Common Law rules for interpretation:

1. Equitable interpretation
− The unambiguous wording of a contract must not be departed from on equitable
grounds
− When the wording is ambiguous the Court will lean to that interpretation which will put
an equitable construction upon the contract and not give one of the parties an unfair or
unreasonable advantage

2. Avoidance of inconvenience
− Favours the construction which will lead to less inconvenience, and avoid difficulty,
uncertainty and delay probably involving expense

3. Ut res magis valeat quam pereat

− Interpretation which makes the clause healthy
− When a stipulation is capable of 2 meanings, it should rather to construed in the sense in
which it can have some operation rather than the sense in which it cannot have any
− Applies to both oral and written contracts
 − Must not be brought into operation by straining the language of the contract in order to
create an ambiguity that does not really exist

4. Presumption against tautology/ superfluity

− One who reads a legal document should not be prompt to suppose that every word
intended to have some effect or be of some use
− Care should be exercised so that a distorted meaning is not assigned to specific or
general provisions
− Concerns giving some rather than no effect to the words chosen

5. Change of language
− A deliberate change of expression is prima facie taken to import a change in intention
− Rule must be applied with discretion, keeping in mind the person may not appreciate
the notion

6. Eiusdem generis/ exclusion alterius

− The expression only includes the matters in respect of which it appears that the
contracting parties intended to contract, and not those they did not contract
− Used in cases where the conclusion is drawn from the wider, more abstract context such
as the nature and background of the contract

7. Expressio unius est exclusion alterius

− Prevents the implication of a term when an express term already covers the ground
− Points to the conclusion that the express mention of one item indicates an intention to treat
differently items of a similar nature which have not been mentioned

8. Specialia generalibus non derogant

− Greater weight is given to special provisions than to general provisions

9. Contra proferentem / contra stipulatorem rule

− Interpret contract against the person who made/ was responsible for the contract
− Not concerned with ascertaining the common intention of the parties
− Only to be applied as a last resort
− Proferens – party to the contract who is the author of the wording of the contract
 − If the wording is incurably ambiguous, its author should be the one to suffer because he had
it in his power to make his meaning plain
− Stipulator – frames the question and the promissory replies, meaning that any ambiguity
could be attributed to the stipulator

FINALLY:
If there is still no way of giving the term a meaningful interpretation it must be declared void for
vagueness

Interpretation in action – Exemption Clauses:

Exempting one of the parties from some kind of liability, thus are the object of suspicion,
usually imposed in standard form contracts (e.g. banks/hospitals).
They exempt the person from forms of liability that would ordinarily apply under the
common law.
They effect the equity between the parties, thus Courts are generally suspicious (esp. banks)
because of the hierarchy.

Thus, Courts keep a tight leash on exemption clauses:

1. By constraining them in accordance with certain factors of public policy; and
2. By interpreting such clauses strictly, or narrowly, particularly if they are unclear.

1. Public Policy:
General – Case: Affrox Healthcare v. Strydom (2002) SCA:
Facts: The appellant was the owner of a private hospital. The respondent had been admitted
to the hospital for an operation and post-operative medical treatment. Upon admission, an
agreement was concluded between the parties. According to the respondent, it was a tacit
term of this agreement that the appellant's nursing staff would treat him in a professional
manner and with reasonable care. After the operation, certain negligent conduct by a nurse
led to complications setting in, which caused the respondent to suffer damages. The
respondent argued that the negligent conduct of the nurse had constituted a breach of
contract by the appellant and instituted an action holding appellant responsible for the
damages suffered. The admission document signed by the respondent during his admission
to the hospital contained an exemption clause, providing that the respondent 'absolved the
hospital and/or its employees and/or agents from all liability...for damages or loss of
whatever nature...flowing directly or indirectly from any injury (including fatal injury)
suffered by or damage caused to the patient or any illness (including terminal illness)
contracted by the patient whatever the cause/causes are, except only with the exclusion of
intentional omission by the hospital, its employees or agents'.
Held: that it is not contrary to public policy for a private hospital to exempt itself from
liability for negligence.

a. Fraud:
Case: Wells v. SA Alumenite (1927):
Exemption from liability for fraud is prohibited.
Innes CJ: “on grounds of public policy the law will not recognise an undertaking
which one of the contracting parties binds himself to condone and submit to the
fraudulent conduct of the other. The Courts will not lend themselves to the
enforcement of such a stipulation; for to do so would be to protect and
encourage fraud.”

b. Gross Negligence:
Case: Govt. RSA v. Fibrespinners (1978):
Appellate Division gave effect to a clause exempting an employer from liability
for theft by its employees.
Case: First National Bank v. Rosenblum (2001) SCA:
Facts: the plaintiff had taken out a safety deposit box, which was then stolen
from the bank. Plaintiff wanted to sue for damages for breach on contractual
obligations. FNB contented that it is exempt, given the clause “'will exercise
every reasonable care, it is not liable for any loss or damage caused to any article
lodged with it for safe custody whether by theft, rain, flow of storm water, wind,
hail, lightning, fire, explosion, action of the elements or as a result of any cause
whatsoever, including war or riot damage and whether the loss or damage is due
to the bank's negligence or not'”.
 Plaintiff argued that the “banks negligence” did not also cover for individual
employees. This is absurd as the employees are the bank. The plaintiff further
argued that according to the “ius generis” rule, the words “rain, wind, hail,
lightning, fire” etc. meant that the exemption was about things not within the
bank’s control.
Issue: whether bank was indeed exempt from theft/negligence?
Held: there is no “genus” or kind of things in the clause. Rather, the context and
circumstances of the case was the exact kind of situation the exemption was
designed to cover. Thus exemption granted.

Thus the cases indicate that if it is clearly done, it is possible to exempt from
gross negligence. (However, this will change once s 51 of the Consumer
Protection Act comes into being).]

c. Negligence:
See Affrox Healthcare v. Strydom above.
Usual Kruger v. Coetzee test applies – however it is possible to exempt from
liability of negligence.

d. Theft:
See Govt. RSA v. Fibrespinners and FNB v. Rosenblum above.
No problem with exemption from theft.

e. Wilful Default:
Your own wilful default? – exempting yourself from your own actions?

***Public policy does not play a big role in exemptions, only provides guidelines.***

2. Interpretation:
Rules articulated in Case: Scott JA Durban’s Water Wonderland v. Botha (1999) SCA:
 1. If the clause is clear and unambiguous in its meaning, give it that meaning. (thus
usual Delmas test applies; especially the “golden rule”).
2. If ambiguous, interpret it narrowly, and “contra preferens” (interpret the clause
narrowly against the party who put it in the contract/ preferred it as part of their
offer). Thus restricts/narrows meaning.
Case: Durban’s Water Wonderland v. Botha (1999) SCA:
Facts: the respondent and child went flying out of a ride at an amusement park, the cause of
which was improper maintenance of the ride. The respondent thus sued in delict for
damages on the basis of negligence for wrongful conduct. The appellant contended that the
ticket contract has an exemption clause exempting him from any liability. The clause was
posted on the window of the ticket office and reads as follows: “management . . . must
stipulate that they are absolutely unable to accept liability or responsibility for injury or
damage of any nature whatsoever”.
Issue: (i) whether a disclaimer contained in a notice painted on the windows of the ticket
offices in the amusement park had been incorporated into the contract governing the use of
the park's amenities, (ii) whether on a proper construction of the notice the appellant was
exempted from liability for negligence and (iii) whether the appellant had been negligent.
Held: The SCA found against the plaintiff on all three issues.
(i) the usual requirements for “ticket cases” applies.
(ii) the use of words such as 'do not accept liability' or 'unable to accept liability'
meant that liability would not be incurred. In the context in which they were
used they meant that the appellant would not be liable for injury or damage
suffered by anyone using its amenities, whether such injury or damage I arose
from negligence or otherwise.
(iii) The ground of negligence relied upon clearly related to the design or
construction of the ride and it followed that the respondents' cause of action was
one that fell within the ambit of the disclaimer. Thus there was negligence.
Thus the exemption clause is clear, and applies.

However, the plaintiff did not argue for “gross negligence”, which may have yielded a
different result.
 General Guidelines for Narrow Interpretation:
1. The interpretation must be one to which the language is fairly susceptible; must
not be fanciful or remote.
2. Look at the nature or the type of the contract, its content and the nature of the
dealings between the parties.

Case: Weinberg v. Olivier (1943) AD:

Facts: a garage keeper contracted to garage a car subject to the exemption clause “cars
garaged at owner’s risk”. An employee of the garage keeper wrongfully drove the car to his
own home and damaged it on the way back to the garage. Referring to the exemption
clause Watermeyer JA said at 188: “in my opinion it means that the plaintiff took upon
himself certain risks of damage occurring while it was in the garage. Clearly, while the car
was in the garage it was exposed to risks arising from ordinary activities carried on in the
garage...I do not propose, however, to attempt the task of defining accurately the type of
risk which the plaintiff took upon himself, because the only risk which he undertook to bear
were risks to which the car might become exposed, if in breach of the contract between the
parties it was taken out of the garage into the public streets.”
Held: exemption does not apply, as the plaintiff did not undertake to bear such additional
risks. The very nature of the contract, and the dealing between the parties, was for the car
to remain in the garage.

Case: Drifter’s Adventure Tours v. Hircock (2007) SCA:

Facts: the plaintiff was picked up by the adventure company at the airport, and then driven
in a 20-seater bus, on the way through Gabarone, to the destination of the “adventure
tour”. On the way, the bus had an accident in which Hircock was injured. The plaintiff sued
for damages, and the company claimed that it was exempted from such liability, given the
clause in the indemnity for Hircock had signed before embarking on the tour. The front of
the form had a wide indemnity clause and a statement that the conditions on the reverse of
the form had been read, fully understood and accepted. The reverse conditions contained a
more limited clause that exempted the appellant from liability arising from, inter alia , 'the
nature of hiking, camping, touring, driving'.
Issue: does this exemption clause cover the trip from the airport to meet others for the
tour?
Held: “Driving” is the key word for exempting negligent driving. The Court found that there
was ambiguity in the term “driving” and thus applied the contra preferens rule, whereby it
restricted the meaning to the words around it.
Held: “Driving”, given the other words in the clause “hiking, camping, touring”, meant
adventure driving on the tour and not the trip from the airport.
Held: The clause did not exempt from liability.

NB: Crux of Drifter’s Adventure Tours v. Hircock case = what did the exemption clause say.

Rectification: (Parol Evidence Rule does not apply)

What if you realise after the contract was recorded, that it was done incorrectly, giving a
wrong meaning?
- If both parties accept that is the case, then they may rectify it.
- Problem arises where there is a dispute as to the rectification.
If the contract itself is being questioned, then the parol evidence rule does not apply.

The purpose of such litigation is to contradict the document, thus makes for very difficult
litigation as oral evidence becomes very important.
SA’s law on rectification is not as strict as English law etc. as one can rectify both
written/unwritten documents; a memo of a written contract. In English law, one cannot
rectify a contract that is written as required by law.

Case: Meyer v. Merchant’s Trust (1942) AD:

Facts: Action for rectification; there was an agreement that one party would stand surety for
another’s loan. If defaulted, then the surety would bear the debt. The relevant clause,
however, was “I do hereby bind myself as surety … for the payment of all monies which may
be owing by Gabbe and Meyer to their creditors … provided that the total amount
recoverable from me not withstanding the amount that be owing by Gabbe and Meyer
shall not exceed 250 pounds”.
 However, the typist admittedly left out the bold words. Thus the different in meaning was
that if the debtor spends more than 250 pounds, there would no longer be surety as the
upper limit would be 250 pounds. Merchant’s Trust sued for the surety, but the surety
contented that it was absolved from liability given the above. The bank claimed it was a
mistake by the typist, and sought rectification, as the common intention of the partied was
different.
Held: it is possible to claim rectification provided you can bring in clear evidence to prove
the parties’ intention was different from what they are now claiming
Held: Given the arguments, rectification granted.
Thus an enquiry into the common intention was necessary. Thus the contract stands as is,
only the document needs to be changed to accurately reflect the contract.

Parol evidence rule: “when a contract has been reduced to writing, the written document is
regarded as the exclusive memorial of the transaction between the parties. No extrinsic
evidence may be brought to prove its terms, nor to contradict, alter, or amend the
document.”

• Subjective approach: parties cannot be held bound to a document which does not reflect
their true agreement
• Rectification: a correction of a contractual document by a judicial decree to express the true
common intention of the parties
• Not based on the parol evidence rule, it is a logical consequence of the principle that a
contract binds because of actual consensus or a reasonable reliance on consensus
• Does not amount to a variation of the contract
• Party must establish:
 That due to error or mistake the document does not reflect the common intention of
the parties
 How the document should be reformed to express that intention
• Document must be rectified before the question of compliance with formal requirements,
or other requirements for validity, can be considered.

Warrantees:
The contracting of party assumes absolute or strict liability for performance.

Case: Schmidt v. Dwyer(1959):

Facts: A written deed of sale of a farm, after describing the property and its approximate
extent, added 'the property includes approximately 120,000 vines planted thereon'. Another
clause provided 'the property is sold as it stands and the seller shall not be held responsible
for any defects therein whether patent or latent'. In fact there were only 67,000 vines
planted on the farm. The purchaser claimed damages (a) for breach of warranty or
alternatively (b) by reason of the misrepresentation. Thus involved a warranty regarding the
number of grape vines that were planted. This was breached, and a contractual claim arose.
There was an exception to the claim – voetstoots (sell as is).
Issue: was there a valid warrantee in the contract, and did it apply to the circumstances?
Held: that ex facie the deed of sale the statement therein regarding the number of vines on
the property amounted to a warranty. Thus voetstoots did not apply – exception to claim
rejected.

Conditions:
Qualify the operation of a contract with reference to an uncertain future event (something
that might/ might not happen).
e.g. “I will give you R30 000 IF you climb Mt. Everest”.

1. Confusion with what “conditions” means; in English law = terms/obligations.

NB – in SA law “conditions” are a special type of term that operates in a specific way.
(Roman-Dutch approach).
2. Generic use of the term “condition” causes confusion, and is used sloppily often. Do
not assume that “condition” = condition.
e.g. I will lease you ‘x’ on condition it ends on 30th Nov. (NOT a condition = a dies).

3 Classifications of Conditions; according to –

1. The effect of the fulfilment of the condition on the obligation.
2. The nature of the event attached to the condition
3. Who has the power to fulfil the condition
 1. Most NB form of classification.
Can either be “suspensive” or “resolutive”:
- Suspensive: suspends obligations until the condition is realised. Cannot claim
until then.
e.g. Bursary in matric for university, given that one passes with exemption and is
accepted into Rhodes.
e.g. Buying a house – contract is suspended until one has a bond etc.

Case: ABSA Bank v. Sweet (1993):

Law: While the mutual rights of the parties to a contract subject to a suspensive
condition relate back to the date of the contract where the suspensive condition is
fulfilled, the rights of third parties which they may have acquired in good faith pending
the fulfilment of the suspensive condition are not prejudiced by such retroactive
operation of the contract.

***There is usually a time limit on a suspensive contract, e.g. R30 000 if you climb Mt.
Everest could last indefinitely if no express time limit.

- Resolutive: works opposite to “suspensive”. Obligations imposed immediately,

but if the uncertain future even occurs, the contract comes to an end.
e.g. Bursary for University, provided one does not fail at the end of the year.

2. Nature of the event attached to the condition:

In this sense, the condition can either be;
- Positive (must do something to fulfil the condition); or
- Negative (the failure to do something will fulfil the condition – commonly
resolutive).

3. Power to fulfil the condition:

Can be either;
 - Causal (and event outside of the control of the parties, e.g. in the event of a flood
etc.).
- Potestative (depends on one of the parties for its fulfilment, e.g. IF you climb Mt.
Everest).
- Mixed (depends on both of the above; action by one of the parties and event
outside of the parties’ control, e.g. If you marry someone).

NB: Conditions, like other terms, must met the normal requirements for a valid contract
(public policy; possibility of performance; legal etc.).

Fictional Fulfilment:
A contracting party is under a duty NOT to obstruct the fulfilment of a condition.
Thus, if the party deliberately prevents the condition from being fulfilled, then the condition
will be deemed to have been fulfilled. Thus a “legal fiction” comes into effect (a punitive
measure to deter such behaviour).

Case: Macduff & Co. v. Johannesburg Consolidated Investments (1924) AD:

Facts: JCI is a big corporation, which had a minority shareholding in Macduff, and had similar
business interests. Contractual agreement, that Macduff would voluntarily dissolve/close
down, then transfer all its assets to a new company, founded by JCI – there were
commercial interests for this agreement. Subject to a suspensive condition, none of this
could happen unless the shareholders of Macduff vote to do this at their next AGM. The
market conditions changed, and JCI discovered that their proposed move would have
negative consequences for them, and no longer wanted it to happen. Thus JCI went to all
the shareholders and bought up other the other shares until they were the majority
shareholder. Thus JCI voted against liquidation and thus obstructed the condition from
being fulfilled.
Held: a classic example of obstruction, thus found against JCI. Held: fictional fulfilment
applies. However, parties could still choose not to effect liquidation if they so wished. Then
the fiction would not work.
Assumptions/Suppositions:
Make the contract/obligation depend on the truth of an assumption the parties have made
about a past or present fact. NB – distinguished from a “Condition”.

Case: Fourie v. CDMO Homes (1982):

Facts: CDMO sold land to Fourie, the land was next to a river. Relevant clause read “subject
to the ‘condition’ that there are pump rights to water from the stream. (NB – NOT a
condition, the term is misleading here).

Cession:
A transfer agreement, or act of transfer, whereby one creditor transfers his claim against a
debtor to another person i.e. the substitution of one creditor for another (the opposite of
delegation).
Terminology:
 The original creditor who is ceding the rights is the cedent.
 The new creditor who is acquiring rights is the cessionary.
Requirements:
1. The cedent must have a primary claim against the debtor.
2. An obligationary agreement must exist between the cedent and cessionary (causa).
3. Both must have contractual capacity (plus the other elements of a valid contract).
4. The object must be capable of cession.
General rule – all claims are capable of cession.
Exceptions:
a. Claims of a personal nature – a personal claim that is inextricably connected
between X and Y, thus incapable of cession.
b. Pacta de non cedendo – where the right to cession is expressly excluded in the
primary contract.
c. Where cession is prohibited by law – statutory prohibitions (copyrights/trade rights).
Cession of a future right is possible (see FNB v. Lynn).
5. The cession must be lawful (public policy – Sasfin v. Beukes).
6. The cession must not prejudice the debtor (see Blaikie v. Lancashire). The cedent
cannot split the claim (create two or more creditors from one).
 7. Formalities – statutory formalities e.g. cession of a mortgage bond must be
registered in the Deeds Registry. A cession is incorporeal, thus usually in writing.
Q: Is it necessary to deliver the document to effect the cession?
A: rule in Jacobson’s Trustee v. Standard Bank (1899) SC applies –
 If the document is merely evidence of the right, then NO.
 If the document is the right, then YES (e.g. share certificates; cheques etc.)
This was confirmed in Botha v. Fick 1995 (2) SA 750 (A).

Case: Blaikie & Co Ltd v. Lanchashire (1951) at 576:

“The intended effect of the cession was therefore to split the cause of action and to vest this
to the extent of 1500 pounds in the cessionary, leaving it vested as to the balance in the
cedent. This result would impose upon the debtor and additional burden or obligation in the
respect that he would be called upon to make more than one payment and possibly to face
more than one action, and it is because of this consideration that the cession effected
without his consent must be regarded as invalid. While the law permits a cession of the
whole cause of action without the prior consent of the debtor, it does so because, by such
cession, the debtor’s position is not altered nor is any additional duty or burden imposed
upon him. Where, however, the form of the purported cession is such as to impose, if it
were given effect to, an additional duty or burden on the debtor, the law does not recognise
its validity unless the debtor has previously given his consent.”

Case: Botha v. Carapax Shadeports (1992) AD at 215:

“For the purpose of deciding whether a debtor’s consent is required to a cession of the
creditor’s right against him, regard must be had to the debtor’s obligation which is the
counterpart of the right in question, in order to assess whether it would make a difference
to the debtor if the right is enforced against him by the cessionary, in place of the cedent.”

Case: Johnson v. General Insurances (1983) AD at 331: to enable the transfer of a

right to claim (translatio juris) to take place. It is accomplished by means of an agreement of
transfer ("oordragsooreenkoms") between the cedent and the cessionary arising out of a
justa causa from which the intention of the cedent to transfer the right to claim to the
cessionary (animus transferendi) and the intention of the cessionary to become the holder
of the right to claim (animus acquirendi) appears or can be inferred.

Case: FNB v. Lynn (1996):

Cession is a particular method of transferring rights in a movable incorporeal thing in the
same manner in which delivery (traditio) transfers rights in a movable corporeal thing. It is
in substance an act of transfer by means of which the transfer of a right from the cedent to
the cessionary is achieved. The transfer is accomplished by means of an agreement of
transfer the cedent and the cessionary arising out of a justa causa from which the former's
intention to transfer the right (animus transferendi) and the latter's intention to become the
holder of the right (animus acquirendi) appears or can be inferred. It is an agreement to
divest the cedent of the right and to vest it in the cessionary. Logically speaking, a non-
existent right of action or a non-existent debt cannot be transferred as the subject-matter of
a cession. The parties may agree in the obligatory agreement to cede and transfer to the
cessionary a future or contingent right of action or a future or conditional debt (debitum
conditionale, debitum futurum ) as and when it comes into existence and accrues or
becomes due and payable, whereupon it will be transferred to the cessionary. If it never
comes into existence it will amount to a non-existent right of action or a non-existent debt
which cannot qualify as the subject-matter of a cession.

Case: Sasfin v. Beukes (1989):

Facts: Beukes is an anaesthetist who approached Sasfin (financing company) for a loan in
order to start his practise. Sasfin needed security for the loan, however Beukes did not have
sufficient fixed assets or property, so the parties entered into a financing agreement which
included a deed of cession. According to the contract, if Beukes defaulted in paying back the
loan, Sasfin would gain rights to his business. Sasfin then later claimed that Beukes had
breached his payment responsibilities, and as a result of the established contract, Sasfin
could control Beukes’ business and take his earnings by claiming the money owed by his
creditors. There was no clause for cancellation or a clause to end the contract once Sasfin
had recovered its funds – Beukes was effectively a slave for Sasfin.
Issue: was this an acceptable contract?
Held: Our common law does not recognise agreements that are contrary to public policy. As
to the question of what is meant by public policy and when can it be said that an agreement
is contrary to public policy, the interests of the community or the public are of paramount
importance. Agreements which are clearly inimical to the interests of the community,
whether they are contrary to law or morality, or run counter to social or economic
expedience, will accordingly, on the grounds of public policy, not be enforced.
No court should shrink from the duty of declaring a contract contrary to public policy when
the occasion so demands. The power to declare contracts contrary to public policy should,
however, be exercised sparingly and only in the clearest of cases, lest uncertainty as to the
validity of contracts result from an arbitrary and indiscriminate use of the power. One must
be careful not to conclude that a contract is contrary to public policy merely because its
terms (or some of them) offend one's individual sense of propriety and fairness. In grappling
with this often difficult problem it must be borne in mind that public policy generally favours
the utmost freedom of contract, and requires that commercial transactions should not be
unduly trammelled by restrictions on that freedom. A further relevant, and not
unimportant, consideration is that 'public policy should properly take into account the doing
of simple justice between man and man'.
Held: The Court accordingly held that a deed of cession executed by the respondent (a
doctor) in favour of the appellant (a finance company) was contrary to public policy and
therefore unenforceable.

Effect of cession:
 If the debtor does not know, he can discharge his debt to the cedent, and the
cessionary loses his claim.
 The cedent is divested of his rights and falls out of the picture
 The claim now vests in the cessionary’s estate
 However, the debtor can raise any defence against the cessionary that he had
against the cedent.
Security cession: designed to secure a debt (often a loan/ over-draft).
 Cedent does not fall out of the picture completely; he retains a revisionary interest in
that once the debt is paid off the right reverts to the cedent.
Case: Bank of Lisbon v. The Master (1987) AD at 284:
See case excerpt in Contract B folder.

Termination by performance: obligations are concluded by performance.

By whom the performance must be made:
 Usually the person upon whom the obligation is imposed, esp. if delectus personae
(your person/skills are required).
 Performance can also be by:
- An agent who is delegated to perform on a specific person’s behalf.
- A surety.
- 3rd party can satisfy the debt on behalf of the principal debtor.
To whom performance must be made:
 To the creditor
 To the creditor’s agent.
 Some 3rd party the creditor indicates.
 A 3rd party that the two parties agree will be entitled to receive performance.
Place and time: always look to the contract (is there an express agreement in this regard?)
Time: If no express provision, then within a reasonable period (depends on the
circumstances of the case).
Case: Concrete Products v. Natal Leather Industries (1946):
Facts: the plaintiff agreed to sell the defendant a large number of steel corners for suitcases
in different sizes, the agreement providing that several thousand of each size were to be
delivered every week, and that the order for small corners was to be regarded as urgent. No
time for the commencement of delivery was fixed. Plaintiff failed to deliver small corners
despite defendant's insistence that the contract be carried out. He did, however, despatch
medium corners which were accepted by defendant in terms of the contract. As a result of
the non-delivery of the small corners defendant, about three weeks after the date of the
contract, notified plaintiff of its cancellation. Plaintiff then sued for breach of contract.
Held: Plaintiff’s claim dismissed. The contract was a commercial one, thus time was of the
essence and in the absence of an agreed date for the commencement of delivery, delivery
must occur within a reasonable period.
Held: the defendant had not waived his right to cancel the contract given his acceptance of
the medium-sized corners. He was entitled to a reasonable time in which to decide whether
to cancel the contract or not, and was entitled to do so when he did.
Place: If no express term, statue or law, then; any residual terms will determine the place –
e.g. in the law of sale there can be a residual term that the buyer must collect the thing from
the seller/ law of lease – payment must be made at the landlord’s property.

What constitutes performance?

 Strict compliance with the contract (creditor entitled to refuse otherwise).
 No instalments (unless previously agreed upon).
 No election to pay damages in lieu of performance.
 No substitution
- Unless creditor accepts datio in solutum (transfer of something in lieu of
payment)
- If datio in solutum it constitutes a conditional performance – if defective then the
original performance resuscitates (e.g. if you agree to get paid in fish but the fish
are rotten, then the monetary debt resuscitates).
Case: BK Tooling Bpk v. Scope Precision Engineering (1979) AD at 433:
“All that the law requires therefore is a substantial performance of the contract - such a
performance as commercial men could have reasonably expected when they entered into
the contract...When unascertained goods of a certain description are sold as here, it is the
duty of the seller to select the goods answering the description and to tender delivery to the
buyer. He must tender the exact quality and quantity in terms of the contract.”

Payment:
 s 14, s 15 and s 17 of the South African Reserve Bank Act 90 of 1989 (regulates if you
have to pay in legal tender).
 Principle of nominalism – pay that which is in the contract i.e. R1000 in 1980 is
R1000 today (will not award interest unless the contract stipulated so).
 Monetary policy (cannot pay R1000 in 5c coins).
  Foreign exchange – the “no difference” principle – if the contract is in $ the court will
order $.
 Payment by cheque – only once it is honoured (i.e. doesn’t “bounce”).

Payments “in full settlement”: depends on the facts.

Case: Harris v. Pieters (1920) AD at 655:

“Now the phrase "in full settlement" is ambiguous and may mean one of two things:
1. A debtor, in offering a sum in full settlement may intend to tender the amount
unconditionally, only adding the words "in full settlement" by way of emphasising his
contention that the amount tendered covers the whole of his liability. In that case
the offer is made animo solvendi i.e. he asserts his view of the extent of his liability/
still liable for all.
2. Or he may intend to offer the amount on condition that the creditor by accepting it
should forego his claim for the balance. In the latter case the offer is made for the
purpose of entering into a new contract with the creditor, animo contrahendi
therefore.
If this is clear from the terms of the offer and the creditor accepts the offer on those terms
he cannot, of course, proceed. But I agree with the view that in case of doubt the
construction should be against the debtor, for he had it in his power to make his meaning
clear.”
Facts: the defendant had two accounts outstanding with the plaintiff, one of about £12 and
the other of £125 6s. 7d for goods bought from the plaintiff including some tins of
asparagus. The defendant sent plaintiff a letter enclosing a cheque of £125 6s. 7d, and
stating: "Enclosed please find cheque amounting to £125 6s. 7d in full settlement of your
account. Let us know what to do with the four cases of asparagus we hold on your account."
The plaintiff then cashed the cheque and is now suing for the other £12.
Held: there are two claims; one was made in full settlement, the other was the offer to
return the asparagus which was a tender which was refused. Two claims kept separate
therefore found in favour of the plaintiff.
Case: Andy’s Electrical v. Laurie Sykes (1979):
Facts: When appellant claimed an amount for work done for the respondent, the
respondent had sent a letter severely criticising the account and drawing up a reconstructed
account for a much lesser amount. The final sentence read as follows: "Please find our
cheque for this lesser amount in full settlement of your account". The appellant
acknowledged the receipt of the amount "without prejudice to further rights". It deposited
the cheque, which was met, and kept the money. In an action for a further amount a
magistrate had found that the letter contained an offer by the respondent to compromise
the appellant's entire claim by the payment of the amount of the cheque. On appeal –
Held: A payment's description as one "in full settlement" is not necessarily decisive. The
circumstances may show that, despite the description, the payment is intended to satisfy
nothing more than an admitted debt
Held: the concluding sentence of the letter was an offer of compromise, the deposit of the
cheque and its appropriation of the proceeds to itself by appellant being its acceptance
thereof. Appeal dismissed.

Modern cases: facts NB – what is the nature of the offer? Courts will rather apply the
principles of “offer and acceptance” than the language of “tenders and conditions”.
Case: Paterson Exhibitions CC v. Knight’s Advertising (1991) AD:
Facts: The appellant had been sued by the respondent for payment of certain moneys
allegedly due to the respondent. While conceding that money was indeed due by it to the
respondent, the appellant denied that the amount claimed was what was due. In an attempt
to settle the matter amicably, the appellant on 10 June 1988 wrote to the respondent
offering, 'in full and final settlement of your alleged claims', a cheque for R7 482,10 together
with five post-dated cheques, dated for the 10th day of each of the succeeding five months,
of R8 000 each. The aforesaid cheques accompanied the letter. On 17 June 1988 the
respondent, through its attorney, wrote that it would accept 'on account of the
indebtedness the current cheque but would not accept, as a basis for settlement, the tender
of post-dated cheques'. It proceeded to proffer a different basis for settlement 'entirely
without prejudice to its rights to continue the proceedings already instituted'. All the
cheques were retained by the respondent. The respondent sought and obtained provisional
sentence against the appellant in a Local Division for payment of each of the five post-dated
cheques which the respondent had presented for payment after due date and which had
been dishonoured by non-payment. On appeal –
Held: when the appellant had sent the letter of and the accompanying cheques it had made
an offer of compromise and had at the same time tendered performance of the offer, if
accepted. It had been open to the respondent either to accept or reject the offer of
compromise and, in so doing, it would have been obliged to deal with the offer in its
entirety: it could not (as it had done) accept the terms which had involved the immediate
payment of R7 482,10 and reject the balance of the offer. Once it rejected the offer, the
respondent was obliged to return the cheques, and could not reject the offer but keep the
payment as part of the offer.
Held: Since the appellant had been entitled to demand the return of the cheques, it clearly
had been entitled to stop payment of them. The appeal was accordingly allowed.

Case: ABSA Bank v. Van Der Vyver (2002) SCA:

Facts: appellant sued respondent (the executrix of her deceased husband’s estate) to
recover what was owing on two overdrawn current accounts of the deceased. The
respondent contended that the claim for payment of the accounts had been settled by the
appellant's acceptance of a cheque acting an offer of compromise. Appellant contended
that it had not accepted cheque. The Court a quo dismissed the appellant's claim as the
evidence revealed that the appellant had deposited the cheque and applied the proceeds in
reduction of what was owing on the larger of the two overdraft debts. The cheque had been
accompanied by a letter from the respondent's attorney stating that the cheque was in 'full
and final settlement' of the amounts owing on the overdrawn accounts. Counsel for the
appellant conceded that, if the letter amounted to an offer of compromise, then the deposit
of the cheque and the appropriation of the proceeds amounted to acceptance of the offer.
Held: It is clear that the letter and cheque were an offer of compromise and thus depositing
the cheque amounted to the acceptance of that offer.
Termination by notice: can be terminated in two ways –
 Expressly (especially in lease contracts – “after 12 months or with 2 months notice”).
 Impliedly (sometimes there is no endpoint to the contract, esp. when parties have a
long relationship, thus can allow termination on reasonable notice).
- Determined from the facts and circumstances of each case and by using the
hypothetical bystander test.

Termination by law: see handout for this section. There are a number of situations
where contracts or contractual obligations are terminated by law.
1. Supervening Impossibility of Performance: an event that supervenes and renders a
contract absolutely impossible of performance means the contract is terminated.
Case: Peters Flamman v. Kokstad Municipality (1919) AD:
Facts: over a 20-year contract the municipality agreed with the appellant company to light
the street lights every night. This was duly performed for about 9 years until in 1915 during
WWI, it was declared that all German citizens are enemies of the state and must be
imprisoned. Furthermore, the Treasury annexed all German business and wound them up.
Kokstad municipality then sued for breach of contract. The appellant’s defence was
supervening impossibility.
Held: Casus Fortuitous – thus no longer a legitimate contract; declared void and thus no
claim as neither party was to blame.
2. Insolvency/Liquidation
3. Death
4. Merger/Confusio:
Case: Grootchwaing Salt Works Ltd V. Van Tonder (1920) AD at 497:
Merger is defined as “the concurrence of two qualities or capacities in the same person,
which mutually destroy one another” – e.g. one cannot be his own creditor and debtor. Any
arrangement as such vitiates the original obligation.
In this case a confusio occurred as the tenant of a property became the owner. Held – one
cannot continue being a tenant in such a circumstance. Confusio does not destroy an
obligation; it merely renders it impossible to enforce it; but it never operates beyond the
limits of such impossibility; if it affects a main contract it also affects such accessory
agreements as cannot stand without it; but not collateral agreements which can exist
separately. The rights in dispute can also exist; they do not depend upon the continuance of
the lease and therefore they are not affected by the change of ownership.

See handout for s 10, 12, and 15 of the Prescription Act 68 of 1969.

Case: Gericke v. Sack (1978) AD:

Facts: on 13 February 1971 a motor boat crashed into the jetty on Loch Vaal and injured the
appellant. Three years later on 14 February 1974 a summons was served on the respondent
claiming damages for the injuries which the appellant had sustained. The sole question in
dispute at the trial was whether or not the claim had become prescribed by lapse of time.
The appellant alleged that the collision was due to the respondent’s sole negligence and
Gericke (owner of jetty) accordingly claimed the sum of R217,13 in respect of damage
caused to the jetty, while Mrs. Gericke, the appellant who was seated on the jetty at the
time, claimed the sum of R23 307,80 in respect of medical and hospital expenses and as
compensation for shock and the injuries she had suffered. Technically under s11(d) 3 years
had passed, thus the claim had prescribed. However, ito s12(3) the appellant only found out
identity of driver a while after the accident and contended that the prescription should run
from then.
Held: The appellants could have found out the identity of the driver on the day the accident
occurred by exercising reasonable care. On the 13 February 1974 the claim fell due and the
summons was issued one day out of time, thus no claim. Appeal dismissed.

Case: Jacobs v. Adonis (1996):

Jacobs was the passenger and Adonis the driver. In August 1988 they had a car accident.
Jacobs was injured, suffered memory loss and couldn’t remember anything from the
accident. Adonis said accident was caused by another driver striking their car from behind
(hit and run). Jacobs sued Multilateral Motor Vehicle Accidents Fund, went to court and it
turned out that Adonis had lied; no 3rd party causing the accident, it was his own negligence.
MMVAF case failed, Jacobs sues Adonis – claim prescribed in 1991 now 1993. Jacobs had
no true knowledge about the identity and facts of the accident therefore prescription only
began to run once Jacobs found out it was Adonis – s12(3) Prescription Act.
Breach of Contract: forms of Breach –
1. Ordinary breach; or positive malperformance/ defective performance.
2. Repudiation and anticipatory breach.
3. Mora (delay); or negative malperformance (failure to perform on time).
4. Prevention of performance (rare/can fit into other categories).

1. Ordinary breach:
Kerr 601: “If without lawful excuse a party fails to do what he has contracted to do, or
does what he has contracted not to do, an ordinary breach of contract is said to have
occurred.” I.e. a breach of a term (express/tacit/implied by law).
Requirements:
1) The debtor must have performed
2) The performance rendered must be defective
Case: Holmdene Brickworks v. Roberts Construction Co Ltd (1977) AD:
Facts: during June and July 1971 it purchased from appellant some, most of which were of
the variety known as “fair face” and the remainder being what are known as “stock” bricks,
for use in the erection of certain factory buildings at Standerton for Nestlé (S.A.) Ltd. These
bricks were delivered to respondent at the construction site in a number of loads over the
period 1 July to 30 November 1971 and were in fact used in the erection of the factory
buildings. In January 1972, after the completion of all the brickwork, it was found that a
substantial proportion of the bricks so used were defective in that they manifested a
condition known as “efflorescence” and were beginning to crumble and decompose. In
order to remedy the position respondent demolished the walls containing the defective
bricks and rebuilt them with other bricks obtained from a different source (the cost of such
demolition and reinstatement being assessed by the trial Court at R27 086,24). The
respondent contended that appellant, as the manufacturer and seller of bricks containing a
latent defect, was bound to compensate respondent for the consequential loss suffered in
the aforementioned sum of R27 086,24.
Held: The appellant had sold bricks with a latent defect and the tearing down of walls was a
foreseeable consequence, thus the respondent had acted reasonably. Appeal Dismissed.
Fault is irrelevant; the law of contract is a strict liability issue. Basic idea: have not done
what you said, thus liable – no onus to prove fault.
NB: if there is a situation with defective performance, the contract does not simply end, it
stays in existence. One of four remedies if there is breach:
 Demand proper performance.
 Cancellation.
 Damages.
 Interdict to prevent performance.

2. Repudiation and anticipatory breach: repudiation consists in words or

positive conduct indicating an unequivocal intention on the part of either party not
to be bound by the terms of the contract.
e.g. denying the existence of the contract.
e.g. notifying the other party that they simply cannot perform (bad debt etc).
e.g. attempting to resile from the contract on unlawful grounds.
Anticipatory Breach: where the person repudiates the contract before the time for
performance comes (repudiation in advance).

Requirements: (Datacolour International v. Intamarket (2001) SCA) –

1. Intention not to be bound must be communicated.
- When the obligation is owing; or
- Prior to the obligation coming into force (anticipatory).
2. By words or conduct or both.
3. Test is objective (Reasonable person test ito Datacolour – perception rather than
subjective intention).
Nienaber JA at 294: “Repudiation is accordingly not a matter of intention, it is a matter
of perception. The perception is that of a reasonable person placed in the position of the
aggrieved party. The test is whether such notional reasonable person would conclude
that proper performance will not be forthcoming.”
4. Must be a major breach i.e. a material part of the contract.
Case: Stewart Wrightson v. Thorpe (1977) AD:
Facts: The appellant, an insurance broking company, had sued the respondent for damages
alleging that, while in its employ, and in breach of his contract of employment, he had
canvassed for and had obtained insurance business from appellant's clients and had induced
them to transfer their business to the company of which he was a director. Respondent in
his plea had averred and the Court found that the appellant had wrongfully repudiated the
agreement of employment on 29 May 1971 and that the respondent had elected to regard
the agreement as terminated. The respondent had been a director of the company and a
managing director of another of the appellant's companies. When these companies had
merged with another company the respondent had submitted a letter of resignation, giving
the required period of six months' notice. Mr. McHardy, a director of the merging firm, had
instructed the respondent to leave subject to the payment of salary and commanded him to
absent himself from the business. Thus the appellant was claiming that the respondent had
breached the employment contract, and thus tried to fire the respondent (thus a form of
repudiation).
Held: The appellant, through Mr. McHardy, had committed a fundamental breach of the
service contract. Such fundamental breach of the service contract did not per se end the
contract, but served only to vest the respondent with an election either to stand by the
contract or to terminate it. The respondent had effectively elected to terminate the
contract.

Case: Tucker’s Land and Development Corporation v. Hovis (1980) AD:

Facts: The appellant advertised property developments purely on its plan – there was no
permission granted yet. Hovis entered into a written contract of sale with the appellant for
two erven in the proposed township. After paying a considerable sum in terms of the
contract, Hovis became aware that the appellant, who was also the township developer,
had failed to get his plan approved by the relevant Administration and had thus prepared a
new plan on which Hovis's erven had disappeared, being superseded by a school site. Thus
even if the new plan was approved, the appellant would not have been able to perform by
delivering the relevant erven. Hovis successfully sued the appellant in a Local Division for
the repayment of the money he had paid in terms of the contract given the anticipatory
breach of contract. On appeal –
Held: with regards to the question as to whether appellant had committed an anticipatory
breach of the contract, the inquiry was whether appellant had repudiated the contract. The
test was whether the appellant had acted in such a way as to lead a ‘reasonable person’ to
the conclusion that he did not intend to fulfil his part of the contract. It would have been
obvious to such a person that, in an attempt to obtain proclamation of the township by
submitting the new plan for approval, the appellant was sacrificing the respondent's rights
to transfer of the erven. Held: it followed that appellant did commit an anticipatory breach
of the contract; as such the breach related to the whole of the contract, and the respondent
was entitled to rescind and to claim back what he had paid. Appeal dismissed.

Theory: the principle of repudiation and anticipatory breach was accepted into our law in
this case. It comes from English Law, but has theoretical justification in the Roman-Dutch
Law principle of “good faith”. However this is not developed yet – thus English Law.

Case: Datacolour International v. Intamarket (2001) SCA:

Facts: A distribution agreement between the parties contained a clause that the agreement
could be terminated on 12 months' notice to the other party. The appellant had written two
letters to the respondent, informing it that the agreement was being terminated, with one
of the letters inviting the respondent to agree upon a 'mutually convenient date in the near
future and come to some arrangement regarding the stocks' the respondent held. The
respondent, inter alia, entered into a new distribution agreement with a competitor of the
appellant and sent a document, entitled 'Important agency announcement', to its
customers, in which it announced that it has a new agent. This document was sent to the
appellant by a third party, and there was no direct communication with the appellant, until
after the appellant's attorneys had informed the respondent that it had repudiated the
agreement. The respondent contended that the appellant had repudiated the agreement by
sending it the letters, which it averred cancelled the agreement without giving the requisite
12-month notice period. The trial Court had held that the respondent had not
communicated its acceptance of the repudiation to the appellant and therefore could not
rely on it. The respondent appealed and a Local Division had held in its favour. In a further
appeal –
Held: The two letters would have conveyed to the reasonable person looking at the matter
from the perspective of the respondent that the termination of the distribution agreement
had occurred, and that no notice in terms of the agreement would be forthcoming,
regardless of how the respondent responded to the invitation contained in the letters. Thus
they conveyed that the respondent would not have enjoyed at least a further 12 months
before the agency agreement with the appellant was brought to a conclusion, and thus
constituted a clear and unequivocal repudiation of the agreement. Appeal Dismissed.

NB: Law from Datacolour International v. Intamarket:

“Where one party to a contract, without lawful grounds, indicates to the other party in words or by
conduct a deliberate and unequivocal intention no longer to be bound by the contract, he is said to
'repudiate' the contract. Where that happens, the other party to the contract may elect to accept
the repudiation and rescind the contract. If he does so, the contract comes to an end upon
communication of his acceptance of repudiation and rescission to the party who has repudiated. The
test for repudiation is not subjective but objective. The emphasis is not on the repudiating party's
state of mind, on what he subjectively intended, but on what someone in the position of the
innocent party would think he intended to do; repudiation is accordingly not a matter of intention, it
is a matter of perception. The perception is that of a reasonable person placed in the position of the
aggrieved party. The test is whether such a notional reasonable person would conclude that proper
performance (in accordance with a true interpretation of the agreement) will not be forthcoming.
The inferred intention accordingly serves as the criterion for determining the nature of the
threatened actual breach. A repudiatory breach may be typified as an intimation by or on behalf of
the repudiating party, by word or conduct and without lawful excuse, that all or some of the
obligations arising from the agreement will not be performed according to their true tenor. Whether
the innocent party will be entitled to resile from the agreement will ultimately depend on the nature
and the degree of the impending non- or malperformance. The conduct from which the inference of
impending non- or malperformance is to be drawn must be clearcut and unequivocal, ie not equally
consistent with any other feasible hypothesis. Repudiation is 'a serious matter', requiring anxious
consideration and - because parties must be assumed to be predisposed to respect rather than to
disregard their contractual commitments - not lightly to be presumed.”
Case: Culverwell v. Brown (1990) AD:
Facts: this case concerned the sale of a property in Knysna, which was a house with a tea-
room attached. Brown contracted to sell the house to Culverwell, and before the
registration of the transfer to the appellant, Brown re-negotiated and extended the lease of
the tea-room owner. Culverwell then took ownership and was upset to learn that the
property was encumbered, as he did not wish to be forced into a business relationship. He
then chose to cancel the contract given Brown’s repudiation of a material term. Brown,
however, denied that there were any justified grounds for such cancellation and that in fact
Culverwell had repudiated the contract. Brown has chosen to accept this repudiation and
resold the property for a lower price and then claimed damages for the amount that he lost
given the drop in the market value and purchase price of his property. The Court-a-quo
awarded such damages, and dismissed Culverwell’s claim in reconvention. On appeal to AD:
Held: Appeal dismissed. There was no repudiation on the part of Brown as it was not a
major breach of the terms of the contract, and Culverwell had bought the property in the
capacity of Culverwell Knysna Properties (Pty) Ltd for investment, and not to live there.

3. Negative Malperformance (Mora): “In the law of contract, mora means delay,
without lawful excuse, of the performance if a contractual duty; or a wrongful failure
to perform timeously” – GA Mulligan “Mora” (1952) 69 SALJ 276.
2 types of Mora:
1. Mora Creditoris (rare):
- The debt must have been capable of being fulfilled.
- The debtor must have tendered proper performance.
- The creditor must have wrongfully failed to receive performance.
- The delay must be the fault of the creditor.
e.g. the landlord is not available for you to pay your monthly rent at his house.
2. Mora Debitoris:
- The debt must be due, enforceable and possible of performance.
- The performance must have not occurred.
- The delay must be wrongful (if no legitimate excuse, is assumed).
- The delay must be the fault of the debtor (if no legitimate excuse, is assumed).
The time of the breach depends on whether it is a case of “mora ex re” or “mora ex
persona”:
“Mora ex re”: (delay determined out of the contract) Breach occurs at express/implied time.
1. The time is expressly fixed; or
2. The time is fixed my necessary implication (e.g. ticket for an event=date of event); or
3. Where it can be implied that performance must occur “immediately”
Corbett JA in Alfred McAlpine & Son v. Transvaal Provincial Administration: “Those
contracts where there is a tacit immediacy”.
Case: Broderick Properties v. Rood (1962) at 453: Roberts AJ gives examples –
 A contract with a garage to tow a car that has broken down.
 A contract with a fire brigade to put out a fire in a house.
 A contract with a plumber to repair a broken tap that is flooding the premises.

“Mora ex persona”: requires an interpellatio to “fix” the date of performance.

Case: Alfred McAlpine & Son v. Transvaal Provincial Administration (1977)
Trengove J at 348: “in our law, the general principle is that, in the case of a contract in which
no time for performance has been fixed, the debtor must be placed in mora by interpellatio
before damages can be claimed on the grounds of such debtor's non-timeous performance.
A mere failure to perform or mere non-performance in the absence of a fixed time for a
performance, although it may constitute a ground for a defence of exceptio non adimpleti
contractus , cannot give rise to a claim for damages because it can never be a breach.”
1. Verbal or written.
2. Time within which performance must occur must be reasonable.
Case: Willowdene Landowners v. St Martin’s Trust (1971): what is a “reasonable
time” depends on the facts of each case. Guidelines laid down by Colman J in Court-a-quo:
“(a) As the problem, namely, whether or not a reasonable time for performance has been
allowed, arises out of contract, it is to be resolved in the light of the intention of the parties,
as expressed by them, or as properly inferred by the Court from the language of the
contract and the surrounding circumstances.
(b) In deciding what would have been a reasonable time the Court must have regard to
the nature of the performance which was due by the party who is alleged to have been in
default, and to the difficulties, obstacles and delays attendant upon such performance.
 (c) The difficulties, obstacles and delays to be taken into account are, however, only such
as were within the contemplation of the parties [or would have been within the reasonable
contemplation of a reasonable man] at the time of the contract.
(d) In taking account of the nature of the required performance, with the relevant
difficulties, obstacles and delays attendant thereon, the Court should postulate reasonably
prompt and appropriate action and due diligence on the part of the party obliged to
perform.
(e) In deciding upon the promptitude and diligence which was to be expected of the party
obliged to perform, the Court must have regard to the commercial and other interests of
[both parties] to the contract. Although in a particular case it may prove impossible for one
of the parties to complete performance until after the lapse of a very long time indeed, it
does not necessarily follow that that very long period constitutes a reasonable time which
must elapse before cancellation is justified. The period necessary for performance may be
so unreasonably long in the light of the other party's interest that cancellation may be
justified before that period has expired.
(f) In deciding whether or not the purported cancellation was valid the Court must have
regard, not only to the further period specified in the mora notice, but also to the elapsed
period, namely the period between the conclusion of the contract and the giving of the
notice. The party obliged is not entitled to remain inactive, after the conclusion of the
contract, on the assumption that if and when he receives the notice putting him in mora he
will thereafter still have the benefit of the full period which was reasonable for
performance, whatever period that may be.”

Remedies: are aimed at either; performance or cancellation; plus damages.

A. Specific performance.
B. Cancellation
C. Damages
NB: one is not restricted to claiming one remedy – depending on the circumstances one can
claim one remedy as the primary claim and the other in the alternative.

A. Specific performance:
- Basic remedy (first port of call).
- Upholds what your expectation interest (what you expected from the contract).
- Contrary to English law (damages is basic remedy/specific performance difficult
to get).
- But it is not absolute (courts do not necessarily give you the order).
NB: Where a court will not order specific performance:
1. Relative impossibility (impossible for defendant to perform for personal/specific
reasons) e.g. debtor cannot pay; sportsman is injured; singer loses voice.
2. Insolvency (insolvent is divested of control of his estate and financial affairs).
3. Where the court exercises its discretion not to on ground of public policy/facts.
Guidelines: listed in Haynes v. King William’s Town and Benson v. SA Mutual Life Assurance:
1. Performance is personal (Santos v. Igesund).
2. Difficult for court to enforce its decree (if order is likely to result in more litigation).
3. Cost exceeds benefit.
4. Performance would severely prejudice 3rd parties (Haynes v. KWT Municipality).
 5. Damages would adequately compensate the plaintiff (rejected in Benson).

Case: Haynes v. King William’s Town (1951) AD:

Facts: in the early 1911 a dam was built on the Buffalo River which is the main water supply
of King William’s Town. Those next to the river had a protectable right to use the water
downstream, thus there was an agreement between the Municipality and these farmers
downstream that 250 000 gallons would be released downstream per day. This agreement
was honoured for 38 years until a major brought hit the region and the Municipality was
forced to shut the dam gates and only release 1500-200 gallons per day. The Municipality
was then sued for breach of contract, with the elected remedy of specific performance.
Held: On appeal, an order of specific performance would result not only in great hardship
but in positive danger to the health of the community to whom respondent owed a public
duty to render an adequate supply of water, whereas there was no indication that appellant
had suffered any damage from respondent's refusal to do so. Thus the prejudice to 3rd
parties was too great to order specific performance. Appeal dismissed.

Case: Benson v. SA Mutual Life Assurance Society (1986) AD:

Facts: The respondent bought 171 500 shares from Benson. Benson delivered 107 900
shares but not the remaining 63 000. Thus the respondent claimed delivery and damages.
Benson contended that since the shares readily available from other sources too, damages
would adequately compensate the respondent and specific performance should not be
enforced.
Held: The respondent has the right of election, and the court has judicial discretion to refuse
an order for specific performance. However the present case was not a fit case for such
refusal.
Held: The granting of an order of specific performance is entirely a matter of the discretion
of the Court in which the claim is made and, no rules should be prescribed to regulate such
discretion - such rules would inevitably curtail the Court's discretion and would negate or
erode the plaintiff's right to select his remedy. Thus the guideline that such an order should
not be enforced if “damages would adequately compensate the plaintiff” was rejected.
Held: Appeal dismissed – granting of an order for specific performance in an action for the
delivery of shares that are freely obtainable on the Stock Exchange, confirmed.
Case: Santos Professional Football Club v. Igesund (2003):
Facts: the appeal concerned the right of the Court to order specific performance of a
contract for personal services. The first respondent, a football coach, had entered into a
coaching contract with the appellant club. The contract provided that a breach by either of
the parties entitled the other either to cancel the contract and claim damages or to claim
specific performance. Igesund had brought Santos to the 1 st division and won the league,
thus before the expiry of his contract, the first respondent was made a more lucrative offer
by Ajax Cape Town which he accepted and proceeded to give the appellant notice of
termination. The appellant elected to enforce the contract and sought: (1) a declarator that
the contract was binding on the parties; (2) an order compelling the first respondent to F
continue serving as head coach of the appellant's football team; and (3) an order restraining
the second respondent from taking any action designed to induce the first respondent to
breach the contract. Court-a-quo dismissed claim for specific performance due to the highly
personal nature of the contractual obligations.
Held: Clear repudiation – the intention was to secure a more lucrative contract. While the
courts do not usually order specific performance for employment contracts, Igesund had
resiled from the contract and thus such an order would not cause undue hardship or be
unjust. Public policy required that courts should enforce contracts rather than strike them
down (Brisley v. Drotsky). The Court ordered specific performance as it held that people
cannot simply rely on the “personal” aspect of performance to escape contractual
obligations being enforced. It was not for the defendant to choose the plaintiff’s remedy,
but visa versa. Appeal successful.
Held: in the circumstances, ordering specific performance will probably not force Igesund to
coach Santos against his will, but rather it will stop him from coaching Ajax Cape Town.

Reciprocity and the exceptio non adimpleti contractus:

 In reciprocal (synallagmatic) contracts, one party agrees to perform something in
exchange for counter-performance by another.
 Thus ito the principle of reciprocity, Y cannot demand specific performance from X
until Y has performed/tendered his own performance.
  The exceptio non adimpleti contractus is X’s defense to a claim for specific
performace by Y, if Y has not himself performed.
Examples of reciprocal contracts – sale; lease; building contracts; insurance contracts etc.
NB: How do the parties proceed? – performance.
1. The default party will have to go back and arrange for specific performance; or
2. The contract could possibly be cancelled, in which case restitution of the part of
performance would have to occur.
NB: what happens if performance cannot be put back?
- Relaxing the exceptio: cases of incomplete performance cannot be returned.
- Question: what are the creditor’s rights if he wishes to uphold the contract? (E.g.
debtor delivers 80 not 100?)
 Reject performance (say take 80 back and bring 100); OR
 Retain it (keep the 80 and it is a contract where you cannot reject
performance e.g. house – can’t send it back)
If you pick the second option, can the debtor claim some counter performance in return?
Case: BK Tooling v. Scope Precision Engineering (1979) AD – discretion of court;
NB – Requirements: a court can order reduced counter-performance if;
1. Creditor “utilised” the incomplete performance.
2. Special equitable circumstances exist.
3. Debtor must prove what the reduced fee should be (usual test = full fee – cost of
rectifying the problem).
Case: BK Tooling v. Scope Precision Engineering (1979) AD:
Facts: The appellant is a tooling company which makes cogs etc for machinery. The
respondent ordered 32 steel moulds for rubber mounting for cars, the total cost was R4800;
the fee for the first portion was R2400 and the second portion R2400. The first portion was
fine but the second portion was defective, and the cost of rectifying the second portion was
R720 (done by a 3rd party) and then used them. The appellant company then sent an invoice
for the money for the mould, however the respondent raised the exceptio non adimpleti
contractus.
Held: The claim could be split in two;
1. The first set of 16 was fine and the appellant could claim for the cost of these.
2. The second set were slightly defective and thus the appellant could only claim for the
amount offset against the cost of fixing the defects (R2400 – R720 = R1680).

Therefore you are entitled to treat partial performance as if no performance occurred at all
(e.g. pay them nothing) and if they claim against you for this money then you can claim the
exceptio non adimpleti contractus.
Courts applied a relaxed exceptio non adimpleti contractus in this case.
In reciprocal contracts a contractant has the right to insist on specific performance.
Inadequate performance is not due performance. Partial performance is not performance.

Case: Thompson v. Scholtz (1999) SCA:

Facts: The appellant had sold a farm, on which there was a farmhouse, to the respondent.
The appellant vacated the farm on the due date, but not the farmhouse. The respondent
nevertheless took over the stock and all the farming operations for his own account and was
compelled to reside at a nearby farm where he also farmed. The appellant vacated the
farmhouse after transfer of the farm into the respondent's name had been effected and the
purchase price paid, but breached his obligation to allow the purchaser to occupy the
property pending payment and registration of transfer. In terms of the deed of sale the
appellant had claimed from the respondent occupational interest for the period during
which the respondent had been in occupation of the farm, although not the farmhouse. The
respondent refused to pay, having raised the exceptio non adempleti contractus as a
defence as the seller was meant to vacate the property on the 1 May but only did so on 10
October. The appellant sued for and was awarded his claim for occupational rental which
was reduced by the amount which the respondent had spent on travelling from a nearby
farm to the farm in question while the appellant was still in occupation of the farmhouse.
On appeal by the respondent to a Full Bench of the Provincial Division this order was set
aside as the Court found that the appellant had not proved the amount by which his claim
should be reduced due to his breach of the contract. On appeal to SCA –
Held: BK Tooling requirements were designed to cater for defective performance in a
contract such as a building contract, where a breach is quantifiable and can be fully
restored. The breach in this instance, unlike in BK Tooling , could not be retroactively
restored or cured. A monetary payment could have functioned as compensation for the
purchaser's consequential loss, but could never serve as a substitute for the loss of
occupation suffered by the defendant during the period he had been deprived of the
occupation of the farmhouse.
Held: what the appellant had to provide was the farm, including the farmhouse.
Performance had been indivisible, as the use of the farmhouse could not be separated from
the use of the farm as a whole in order to accord it a separate commercial value, as it was
not a separate entity. Also, the value of the farm was irrelevant because what was to be
determined was not the value of the farmhouse but the value of its use.
Held: The BK Tooling method (full fee – cost of rectifying the problem) was not applicable
where there is a continuing breach of contract, as there is difficulty in proving what the
reduced fee should be. By analogy with a continuing breach of a landlord, where a remission
of rent must be claimed, the Court awarded a diminished occupational interest (75%) to the
appellant. If the BK Tooling requirements can be met, it can be applied to any contract. The
Court took a broad approach and made an order that it deemed fair and equitable.

B. Cancellation: an election to terminate the consequences of a valid contract.

NB: An extraordinary remedy that can only be claimed –
1. Where there is a cancellation clause (aka forfeiture clause).
2. Where the breach is major only.

1. Forfeiture clauses: “Lex Commissoria” – it does not matter whether the breach is
minor or major, only whether it falls within the clause.
Case: Oatorian Properties v. Maroun (1973) AD:
Facts: the parties owned adjoining properties, and Oatorian Properties was building a
shopping centre and needed parking space, so it contracted to lease Maroun’s property for
parking space. Clause 4 of the contract stated that “the lessee shall have the right to utilise
the area leased for the purpose only of parking of motor cars, cycles, motor cycles... and for
no other purpose whatever”. Clause 11 allowed for cancellation of the contract if there is a
breach of any clause. During construction there was no space for building materials, so the
appellant decided to store them on Maroun’s property. Maroun then cancelled the contract
on the grounds of breach. The appellant contended that it was a minor misnomer, not
worthy of cancellation, and refused to vacate the leased plot. The respondent applied for
and obtained an order of ejectment which was confirmed on appeal. On appeal to AD –
Held: the contract is clear and the option to cancel is valid. Whether or not the breach is
major is irrelevant, as it fell within the clause. Thus the contract was lawfully cancelled.

2. The nature of the breach (major or minor):

Case: Swart & Son v. Wolmaransstad Town Counci (1960) at 4: “The test is
therefore the common law one for which various expressions have been used, such as
whether the breach 'goes to the root of the contract', or affects a 'vital part' of the
obligations or means that there is no 'substantial performance'. It amounts to saying that
the breach must be so serious that it cannot reasonably be expected of the other party that
he should continue with the contract and content himself with an eventual claim for
damages”.
Requirements: test of the severity of the breach (facts need to be assessed/interpreted).
- The breach must go to the heart/root of the contract (effect on rest of contract).
- There must be no substantial performance.
- The breach must be so serious that the other party cannot reasonably be
expected to continue with the contract.
NB: He who alleges a major breach must prove.
Case examples:
Case: Aucamp v. Morton (1949) AD: minor breach –
Facts: In may 1947 the respondent, and owner of a forest, contracted with the appellant
regarding the felling of his trees for timber. In June 1947 the respondent had cancelled the
contract and refused to allow appellant access to the forest. Appellant then instituted an
action to enforce the contract. In his plea respondent contended that the appellant had
broken the contract and that he had therefore been justified in denying appellant access to
the forest, and thus asked for an order cancelling the contract and for damages. The Court-
a-quo granted that order cancelling the contract because the appellant had failed to remove
all of the felled timber fast enough and allowed some of it to rot, and the felled trees were a
year or two too young. Thus he did not meet the contractual requirements. On appeal AD –
Held: there are only minor breaches, and the amount of timber left to rot was not of a large
quantity, thus the breach not sufficient to justify terminating contract as it did not go to the
root of the contract.

Case: Strachan v. Prinsloo (1925): major breach –

Facts: An agreement between plaintiff and defendant imposed on plaintiff (Prinsloo) the
duty of managing defendant's farm so as to relieve defendant of all duties of supervision.
Prinsloo, in spite of warnings persistently and continuously failed to attend early in the
morning and late in the evening when important duties of supervising had to be done, with
the result that such duties had to be performed by the defendant. Finally, Prinsloo on three
successive days did not appear on the farm at all, whereupon Strachan then cancelled the
agreement. Prinsloo contended that it was not a major breach.
Held: Prinsloo had in fact failed to perform a vital term, thus the defendant was entitled to
cancel the contract.

RE: Cancellation generally:

Case: Nash v. Golden Dumps (1985) AD at 22: “Where one party to a contract,
without lawful grounds, indicates to the other party in words or by conduct a deliberate and
unequivocal intention no longer to be bound by the contract, he is said to "repudiate" the
contract. Where that happens, the other party to the contract may elect to accept the
repudiation and rescind the contract. If he does so, the contract comes to an end upon
communication of his acceptance of repudiation and rescission to the party who has
repudiated”.

Thus, cancellation is an election:

Case: Segal v. Mazzur (1974) at 644: “Now, when an event occurs which entitles one
party to a contract to refuse to carry out his part of the contract, that party has the choice of
two courses. He can either elect to take advantage of the event or he can elect not to do so.
He is entitled to a reasonable time in which to make up his mind, but when once he has
made his election he is bound by that election and cannot afterwards change his mind.
Whether he has made an election one way or the other is a question of fact to be decided
by the evidence. If, with knowledge of the breach, he does an unequivocal act which
necessarily implies that he has made his election one way, he will be held to have made his
election that way; this is, however, not a rule of law, but a necessary inference of fact from
his conduct see”.

Requirements for election to cancel:

1. Made by the aggrieved party.
2. Within a reasonable time.
3. Once the decision is made, it is final.
4. Must be expressly communicated to the other party.
5. Whether the election occurred is a question of fact. Either it is cancelled, or the
other party has a defence of waiver/estoppels.
NB: when does the cancellation take place?
- When the other party is informed of the cancellation (“E Nunc” – from now). It is
not a rescission (which applies to voidable contracts “E Tunc” – from then” thus
is void right at the beginning).
Consequences of cancellation:
1. Unexecuted obligation disappear (e.g. lease).
2. Accrued rights continue to be enforceable (from before then – e.g. if lease is
cancelled due to non-payment of rent, the previous rent is still payable).
3. If performance has occurred, restitution will have to flow if it is relevant. If relevant,
it must be reciprocal (e.g. return of goods of sale).
Case: Bonne Fortune Beleggings v. Kalahari Salt Works (1974):
Facts: the respondent sought an order for the appellant to vacate property it owns and
redeliver movable property owned by them. Default judgment given, now on appeal. The
respondent had cancelled the agreement, and the appellant does not deny this was because
he failed to make payments on property. The respondent now claims damages of R153 465
(the damages less the payments made by the appellant). The appellant claims that he is not
requirement to return property until payments he made are returned to him, and also
claims he made improvements and holds a right of retention and damages not correct.
Held: the respondent should have offered to return the payments made by the appellant,
but instead they set it off against the damages. However, the claim is unliquidated, thus it is
not right to set-off claim. The respondent must have its property restored, and they must
return the payments made by the appellant as there must be a reciprocal return of
performance.

NB: Where reciprocal performance will not be required –

1. The thing is destroyed by “vis maior” or “casus fortuitous”. (Hall-Thermotank).
2. Destroyed because of the breach (Marks v. Laughton).
3. Fair wear and tear (Feinstein v. Niggli).

Case: Hall-Thermotank v. Hardman (1968):

Facts: Hall-Thermotank is a refrigeration and air-conditioner business that is claiming
payment for services rendered to Hardman. The plaintiff supplied and erected a
refrigeration plant in a fishing vessel belonging to Hardman and insulated the hold.
Hardman avers that the refrigeration plant would not function at all; and that by reason of
the breach, he was entitled to cancel the contract, which he did. He explains that he would
return everything to the plaintiff, however some materials were lost when the vessel sunk at
sea, and it being common cause that the sinking of the vessel was a casus fortuitous.
Held: the inability of the defendant to make full restitution was no bar to his right to rescind
the contract and to claim a refund of what he had paid, and the defendant was not under
any obligation to compensate the plaintiff for what had been lost.

Case: Marks v. Laughton (1920) AD:

Facts: Plaintiff purchased from defendant a large quantity of eggs and in terms of a written
document undertook all responsibility for their condition from the time of purchase and
accepted them as they stood. Plaintiff, on attempting to dispose of the eggs discovered after
expert tests had been made that the bulk of them were unfit for human consumption and
thereupon consented to their destruction by the Local Authority. Plaintiff claimed rescission
and damages on ground of fraudulent misrepresentation by the defendant which induced
contract.
Held: The court in favour of the plaintiff but damages were awarded reduced by amount of
3 cases of eggs used/disposed of by the plaintiff, as they could not be returned because the
breach caused them to be destroyed.
Case: Feinstein v. Niggli (1981) AD:
Facts: the appellant (Feinstein) sold the respondents his 200 shares of R1 each in Copy
Kettle (Pty) Ltd – a restaurant under the supervision of Feinstein since 1966. The
respondents were to pay in instalments, and after the first instalment they repudiated the
contracted due to certain fraudulent misrepresentations made my Niggli as to the
profitability of the business. On appeal to the Appellate Division the appellant contended
that restitution of the shares and loan account was impossible since they had depreciated in
value while held by the respondents and that that was due to the way in which they had
conducted the business, and thus reciprocal restitution was not possible.
Held: no question arose of respondents compensating the appellant for any depreciation in
value of the loan account and shares as there was no clear evidence that they would have
depreciated any less in the care of Feinstein. Thus restitution as is must occur.

Cancellation in cases of “Mora”:

1. Where the contract contains such a forfeiture clause.
Otherwise the general principles of cancellation apply – only where there is a significant
breach in terms of time.
2. Where time is of the essence.
Failure to perform on time will justify immediate cancellation (question of fact – court will
consider whether time is of the essence). E.g. mercantile transactions (price fluctuations).
3. Where time is not of the essence. It is possible to cancel (usually “mora ex persona”):
Give a “notice of the right to cancel”, thus making time of the essence (NB: this is not the
same as an interpellatio, which puts a person to terms/puts the debtor in breach). A notice
of right to cancel may follow an interpellatio, or be combined in the same document, but are
separate legal entities.
NB: Cancellation in cases of repudiation and anticipatory breach – all cases must involve a
major breach. Option – one can wait for the breach to occur, or act immediately.
 C. Damages:
Basic Requirements:
1. A breach of contract.
2. Loss/damage must have been suffered.’
3. A factual causal connection between breach and the loss/damage.
4. Legal causation – damage must have been reasonably foreseeable/not too remote.
NB: the onus of proof is on he who alleges or wants damages.
1. Breach – see above section
2. Loss
Case: Victoria Falls & Transvaal Power Co v. Consolidated Langlaagte Mines
(1915) AD at 22: “The sufferer by such a breach should be placed in the position he
would have occupied had the contract been performed, so far as that can be done by the
payment of money, and without undue hardship to the defaulting party... It follows that
damages for loss of profits can only be awarded when such loss is the direct, natural or
contemplated result of non-performance... the loss of the profit which would have accrued
to the plaintiff from the new operations would seem to flow directly from the breach, and
must be taken to have been in the contemplation of the contracting parties at the time”.

Claims for contractual damages concern patrimonial (out-of-pocket) loss only. Can claim;
- Actual damages “damnum energens”.
- Potential future losses (must be quantifiable) “lucrum cessans”.
Traditional test: the different between the hypothetical (your position had the contract
been properly performed) and the actual (the actual value of your patrimony).
- Positive “interesse” (as opposed to negative “interesse” in delict):
Case: Trotman v. Edwick (1951) AD at 449B: “A litigant who sues on contract sues to
have his bargain or its equivalent in money in money and kind. The litigant who sues in
delict sues to recover the loss which he has sustained because of the wrongful conduct of
another, in other words that the amount by which his patrimony has been diminished by
such conduct should be restored to him”.
Case: Holmdene Brickworks v. Roberts Construction (1977) AD: (see facts in
above note). In this case, if the contract had been properly performed then the appellant
would have been paid the full amount for the bricks in terms of the contract. However,
given that the appellant supplied defective bricks, the respondent had to remedy the defect
by demolishing the walls and re-building them with new bricks – thus the loss suffered was a
consequence of the breach, which amounted to R27 086,24. The difference between the
hypothetical and the actual was that had the contract been properly performed, the
respondent would not have suffered the loss which was a consequence of the breach, of
R27 086,24. Thus the appellant is liable to restore the respondent to the position he would
have been in had the contract been properly performed.

NB: Traditional Test – you can claim your expectation interest.

However, this does not always work, and is sometimes applied rigidly.
e.g. if the hypothetical and actual are the same – if you paid to go an see a concert, you still
would have paid for accommodation and travel expenses had the contract been properly
performed.
Thus, the courts will allow you to claim your reliance interest (to allow you to claim the loss
caused by your reliance on the contract being properly performed). Thus some flexibility.
- Bring your best evidence of loss, and let the court decide.

3. Factual causation: the “sine qua non” or “but for” test – but for the breach, would
the contract have been fulfilled? Was the financial loss caused by the breach?

4. Legal causation: was the damage reasonably foreseeable/not too remote?

NB: were the damages reasonably foreseeable had the contract been breached? Or; are the
damages too remote or lack causation?
Case: Holmdene Brickworks v. Roberts Construction (1977) AD:
Corbett JA: “To ensure that undue hardship is not imposed on the defaulting party the sufferer is
obliged to take reasonable steps to mitigate his loss or damage and, in addition, 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 (Shatz Investments (Pty.) Ltd . v Kalovyrnas , 1976 (2) SA 545 (AD) at p. 550)”.
Principles:
A. General damages – can claim if they flow naturally from the breach.
B. Special damages – usually too remote, unless the parties “actually or presumptively
contemplated them”.
Case: Lavery v. Jungheinrich (1931) AD:
Facts: The plaintiff claimed damages for loss of business reputation arising out of a supply by
the defendant, a manufacturer, of certain defective steel shafts resold by the plaintiff to its
customers. The plaintiff’s customers also would not pay for the steel shafts unless they were
replaced and were not lost to the plaintiff. The issue was whether the plaintiff is entitled to
such damages, or whether they are too remote.
Held: The question whether damage claimed in an action for breach of contract is or is not
too remote depends on whether, at the time when the contract was made, such damage
can fairly be said to have been in the contemplation of the parties or may reasonably be
supposed to have been in their contemplation as a probable consequence of a breach of the
contract. Though loss of trade (as distinct from loss of profit on resale) or injury to business
reputation is not usually in the contemplation of the parties as the probable consequence of
a breach of a contract it may be possible to lay facts before a Court to show that such
probable consequence was or may reasonably be supposed to have been within the
contemplation of the parties at the time of making the contract.
Held: the manufacturer of faulty steel shafts would not reasonably have contemplated that
the person he sold them to would have such unreasonable customers that they would never
return to him. He could only be liable if he had contracted to pay damages if the shafts were
defective, which he had not. Appeal upheld.
Thus, 3 things need to be proved for special damages: (test).
1. These damages were in the contemplation of the parties.
2. The contract was entered into “on the basis of” or “in the view of” these special
circumstances.
 3. The defendant must be shown to have contracted (impliedly) to pay such special
damages if a breach occurred. [2 + 3 = the convention principle].
Problems: according to the above test (esp. the convention principle) the parties have to be
contemplating breach, and a special kind of loss, at the time of contracting. One does not
ordinarily think of such things, thus is an almost impossible test to meet.
NB: commentators are of the view that the convention principle is ridiculous, and that only
(1) should be needed to be proved.
Case: Shatz Investments v. Kalovrynas (1976) AD Trollip JA: “the convention
principle is at best problematic; even impossible”. The court attacked the convention
principle in this case; however, all 3 requirements were unusually met in this case and were
thus not struck down. The Court suggested that the rule should be changed to one in which
the decisive time is the time when the breach occurred – when the parties are more likely to
be contemplating such damages. However it made no ruling on the matter. As a result, the
Courts have basically jettisoned the convention principle and ignored the Lavery v.
Jungheinrich test and only enquire as to whether there was contemplation of such damages
(1) and whether the damages are too remote.

Ancillary matters:
1. Time when calculated? At the date when the breach occurred.
2. Only one action is allowed – damages must not cause undue harm to the defendant,
thus the plaintiff cannot bring more than one action against the defendant.
3. Mitigation of loss – the aggrieved party cannot sit and let the damages mount. The
plaintiff has a duty to limit the damages as far as is reasonably possible. If not, the
extra damage will be subtracted from his claim. Thus the plaintiff can either wait for
all the loss to occur and then sue for damages, or try to claim for prospective loss.
E.g. Holmdene case; the plaintiff was not expected to mitigate loss to an unusual degree.
4. Concurrent causes – where more than one event/persons cause damage. Who gets
sued? Either or both (B or C, or BC as co-defendants). All this is necessary is that their
breach was a cause of the loss. The parties are jointly a severally liable (can get any
portion from each party).
NB: What if the plaintiff and the defendant have contributed causally to the loss?
Rule – the defendant will be completely responsible for the loss if he/she was in breach; the
law of contract takes an all or nothing approach.
Case: Thoroughbred Breeders’ Association of SA v. Price Waterhouse (2001)
SCA: regarding the application of the Apportionment of Damages Act.
Facts: In 1991 TBA (appellant) appointed one John Mitchell as its financial manager. During his three
months probationary period it was discovered that he had been convicted in 1985 of theft and
sentenced to a period of imprisonment of eight years of which he served approximately 18 months.
Even though he withheld this information from TBA when applying for the position (and indeed
supplied false information to it about his employment during the period of his incarceration) it was
nevertheless resolved by TBA's council (a) to confirm his employment, (b) to monitor his activities in
future, (c) not to disclose his past history to other members of the staff, and accordingly (d) not to
minute the discussion and the resolution. When he was closely supervised his conduct was
satisfactory, however after about 18 months, supervision was relaxed and he stole and/or
embezzled “vast sums of money”. In 1993 the appellant contracted with the respondent to audit the
appellant’s books for its financial year ending in 1993. The contract required that the respondent
would conduct its audit “in accordance with generally accepted auditing standards”...and “with due
professional care required of an auditor in public practise and would not act negligently”. The
respondent had failed to pick up the missing funds that Mr. Mitchell had stolen, which allowed him
to go on to steal even much more the following year. Thus TBA's case against the respondent is that
there were a series of discrepancies in TBA's books of account which ought to have alerted the
auditing team, but did not, that something was amiss; that, if these matters had been pursued as
they should have been, Mitchell's misdemeanours would have been discovered in January 1994; and
that the thefts he committed thereafter with the consequent losses to TBA would have been
averted. The respondent pleaded that TBA's claim was liable to be reduced because TBA was itself
negligent, which was a contributory cause of its loss and thus the Apportionment of Damages Act
was applicable to its cause of action. On appeal to the SCA:
Held: the Apportionment of Damages Act applies to cases on delict, and is not applicable in contract
because fault is not a requirement for a breach of contract, or of a claim for contractual damages. In
contract, whenever a plaintiff can prove that the defendant caused a significant portion of the loss,
then irrespective of whether there are other contributing factor (even if they plaintiff also partly
caused the loss), the defendant is liable for 100% of the loss. Thus, the respondent was ordered to
pay 100% of the loss which amounted to over R1 300 000.

Thus new legislation was introduced as a result of this case: Auditing Profession Act of 2005.
Statutory Damages:
Penalty Stipulations and Conventional Penalties Act 15 of 1962: it is often difficult to
determine a quantam of damages claim.
NB: Can one stipulate damages in the terms of the contract? (e.g. a formula).
In terms of the Act, penalty clauses are valid in our law, and are now common in contracts.
Advantages of penalty clauses:
- Incentive not breach the contract as there are clear consequences.
- Easy for the creditor to enforce (no need to prove all the elements of damages).
- The debtor’s liability is certain (risk management).
Some features of the Act:
1. Reinstatement of penalty clauses in our law. Such clauses are only allowed for
damages for breach of contract.
2. One cannot claim both penalties and contractual damages. The clause also cannot be
waived; if there is a penalty clause, the parties are stuck with it.
3. Reasonableness requirement: courts can reduce the penalty to an equitable amount
if it is unreasonable, but it is unlikely. The penalty can only be decreased, not
increased.

Interdict: a court order by force of law, prohibiting a party from doing something (usually
negatively framed). E.g. enforcing a restraint of trade clause.
- If an interdict is breached, it constitutes the criminal offence of contempt of
court.
- An interdict can only be granted where someone’s contractual rights are being
infringed. Thus the court questions whether there is a breach.