Chapter 13 PT 3 Flashcards
(20 cards)
Specific performance orders will not be granted:
1) Specific performance i.t.o. restraints of trade.
→ Enforcement of an unreasonable restraint of trade is regarded as contrary to
public policy.
2) Performance has become impossible.
→ Will not order something that can’t be done, even if impossibility is subjective.
3) The party in breach is insolvent.
→ All concurrent creditors of an insolvent estate must be treated equally.
Discretion of the courts:
1) The courts have a general equitable discretion to refuse specific performance in
appropriate cases.
2) The discretion must be exercised judicially.
3) The courts follow certain guidelines when deciding whether or not to order
specific performances.
4) This has resulted in recognising several exceptional circumstances where specific
performance is likely to be refused
Circumstances affecting courts’ discretion:
1. Undue hardship:
1) Courts will refuse to order specific performance where to do so would cause undue hardship to the defaulting party or third parties.
2) Haynes v Kingwilliamstown Municipality
→ Haynes’ claim for specific performance was refused because to have ordered it
‘would have worked great hardship not only to the respondent but to the citizens
of Kingwilliamstown to whom the respondent owed a public duty to render an
adequate supply of water’.
Personal services:
1) It was often said that courts would not enforce an agreement to render personal
services or employment.
2) National Union of Textile Workers v Stag Packings (Pty) Ltd
3) Rejected this point of departure: held that there was no reason for a departure in
such cases from the general rule that a party is entitled to enforcement of his or
her contract, subject to the court’s discretion. The reasoning that enforcement
would be problematic is derived from English law and is not consonant with
South African law.
Execution of orders for specific performance
1) 1. If a debtor fails to comply with an order of specific performance:
→ There are various ways of enforcing the order.
- Where the order is to pay a sum of money:
→ It can be enforced by issuing a writ of execution, followed by the attachment
and sale of the debtor’s property. - Where the order is to perform an act or to refrain:
→ A deliberate failure to comply with the order constitutes the offence of contempt of court, for which the debtor can be imprisoned. - In appropriate cases, and without prejudice to its power to commit contempt:
→ The court may directly enforce the order by instructing a third party (usually an
official) to perform a performance for the creditor
Three types of remedy available to an innocent party after a breach:
1)Remedies aimed at keeping the contract alive.
2) Remedies aimed at cancelling the contract.
3) Remedies aimed at compensating innocent party for loss caused by breach.
CANCELLATION:
1) An extraordinary remedy available to the innocent party in exceptional circumstances.
2) It entails the drastic step of abruptly and prematurely ending the transaction—contrary to the parties’ intention.
Lex commissoria (cancellation clause):
1) Regulates the right to cancel.
2) In the absence of a provision in the contract regulating the matter, a party will be entitled to cancel for breach if the breach is sufficiently serious or material.
The materiality of the breach:
1) The circumstances will determine whether the materiality or seriousness of the breach justifies the cancellation
The act of cancellation:
1) Once a breach that justifies cancellation has occurred, The innocent party is faced with an election: either to affirm or to cancel the contract.
2) Election is final once made:
→ It is also irrevocable unless both parties consent to its reversal.
What must happen?
1) If the innocent party elects to cancel the contract, they must notify the other party of
their cancellation by using a notice of cancellation.
1.2) The notice must be clear and unequivocal.
2) Cancellation only occurs when it has been communicated to the party in breach and
cannot be worded to take effect on a future date
No formalities for cancellation:
1) Simple written/oral notice unless the contract or law states otherwise.
Loss of the right to cancel – election or waiver:
1) An election to affirm the contract entails the loss of the right to cancel.
If innocent party expressly or tacitly manifests intention to abide by a contract,
despite the breach then, the innocent party waives the right to cancel due to breach.
Tacit election may be inferred from the conduct of the innocent party.
1) Even if innocent party had no intention to waive their right to cancel but gave the
other party a reasonable impression that they elect to affirm the contract, the
innocent party must be estopped from asserting the right to cancel.
2) A reasonable delay in exercising the right to cancel does not automatically result in the loss of that right, but it may justify an interference that the innocent party has tacitly elected to cancel
Legal effect of the cancellation :
1) When the contract is cancelled, the obligations of the parties are extinguished
2.1) If the obligation to performance is indivisible → then it is extinguished in its entirety.
2.2) If the obligation is divisible → only parts of the obligation that still need to be
performed are terminated and the rest of the contract remains intact
Certain ancillary agreements remain in force despite the termination of the agreement such as :
1) Penalty clauses;
2) Exclusion clauses; and
3) The obligation to pay damages.
Restitution:
1) Parties must restore whatever performances have already been received due to restitutio in integrum - place both parties in their position previous to the contract.
2) The general rule is that a party may not cancel unless restitution is given/tendered (in the notice of cancellation).
Except in instances of impossibility:
1) The courts will relax this rule if the impossibility of restitution is caused by
1) An inherent defect or where there is no fault of the parties, such as force majeure.
2) Where the goods have been destroyed or rendered valueless through use in the
manner contemplated by the parties.
3) Where restitution has become partly impossible but this can be made up by a
monetary substitute
DAMAGES:
1) Whether or not a party elects to claim specific performance or cancel the contract, they can claim damages for financial loss (patrimonial damages) suffered as a result of the breach
Loss suffered (penalty clause):
1) Subject to certain limitations → parties to the contract can include a penalty clause, which provides for payment of a fixed sum of money in the event of a breach.
2) Penalty will then be paid in lieu of the damages.
3) If the penalty is disproportionate to the prejudice suffered, the court may reduce the amount of the penalty
