breach of contract

Contract Repudiation as a Form of Breach of Contract

Introduction

In this article, we explore a form of breach of contract namely repudiation, the requirements that must be satisfied to prove a party committed breach by way of repudiation and the remedies available to the aggrieved party, with specific reference to a few leading court cases (case law). 

Definition of breach of contract by way of repudiation

In South African Forestry Co Ltd v York Timbers Ltd, the Supreme Court of Appeal defined repudiation as: –

Repudiation occurs where one party to a contract, without lawful grounds, indicate to the other party, by word or conduct, a deliberate or unequivocal intention that all or some of the obligations arising from the contract will not be performed in accordance with its true tenor[1].

Repudiation is often referred to as Anticipatory Breach, the difference being that an anticipatory breach of contract is a repudiation of a contractual obligation that occurs before the time has fallen due for performance of that obligation[2]

In Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd, the Supreme Court of Appeal held that the test for repudiation is objective and not subjective, judged whether a notional reasonable person would conclude (based on the conduct of the repudiating party) that performance in accordance with the true interpretation of the agreement will not be forthcoming[3].

Requirements for repudiation

The repudiating party must have: (a) by words or conduct (b) caused the aggrieved party to believe (c) that he no longer intends to be bound by the contract or obligations forming part of the contract.

Mere delay in performing an obligation should not be construed as a repudiation, unless the delay is accompanied by words or conduct evidencing an intention not to be bound to the obligation or contract[4].

In South African Forestry Company (Ltd) supra the court held that the conduct of a contracting party can constitute both breach of contract in the form of malperformance and a repudiation.  In this case, York’s conduct amounted to breach in the form of failure to comply with its obligations under clauses 3.2 and 4.4 and at the same time it (York) conveyed the clear indication to Safcol (South African Forestry Company (Ltd)) of its intention not to comply with those obligations in the future.

Remedies available to the aggrieved party

Where one party commits breach of contract by way of repudiation, the other (aggrieved) party has the option of either accepting the repudiation and thereby terminating the contract or rejecting the repudiation and enforce performance.  In both instances the aggrieved party may claim damages.

Where the aggrieved party enforces performance, it allows the defaulting party opportunity to repent the breach and to perform (repentance principle).

The question as to whether an aggrieved party who elected to reject repudiation and enforce performance may on the face of persistent and unequivocal intention of the other party, change its stance and cancel the contract was dealt with in Primat Construction CC v Nelson Mandela Bay Metropolitan Municipality.[1] The Supreme Court of Appeal held that “if the defaulting party continues to refuse or fail to perform, the aggrieved party should then be entitled to change its election, and cancel and claim damages.”  No further or new act of repudiation is necessary.  It is sufficient if there is reasonable perception that the defaulting party would not repent of its breach, despite opportunities given to it to do so.

The election to terminate the contract should only be exercised if the breach of repudiation is material.

The aggrieved party is also not obliged to follow the contractual procedures for terminating the contract where the defaulting party is in breach by way of anticipatory breach or repudiation[2].

[1] 2005 (3) SA 323 (SCA)
[1] Par 9.19, page 767, Bailey J, Construction Law Volume II, 2nd edition; Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FACFC 49 at [54]
[1] 2001 (2) SA 284 (SCA)
[1] Par 12.2.1, page 279, Hutchison D, Pretorius C J, Du Plessis J, Eiselen S, Floyd T, Hawthorne L, Kuschke B, Maxwell C, Naudé T, The Law of Contract in South Africa, Oxford

The contents of this article are for information purposes only and should not and does not constitute any legal advice. Every case is different and should be determined based on its own merits with proper legal advice.

By Zanda Roloff – August 2019