WK8 BREACH OF CONTRACT: SELF-HELP
Thursday, 27 August 2020
13:43
Express + implied terms in every contract; if one not fulfilled, contract broken so there is "breach of
contract"
Ways breach can occur:
Total or partial failure to perform e.g. non-delivery of goods, delivery of less than
contractual quantity, (or refusal to perform
Defective performance- performance rendered but unsatisfactory eg goods unfit
for purpose
Failure to perform on time set by contract contract, late delivery
Variety of remedies for breach available to innocent party:
May be classed as SELF-HELP exercisable without assistance or sanction of court to preserve or
enforce rights under the contract (retention, rescission) or JUDICIAL to compel payment or
performance (implement, interdict, damages).
The remedies are cumulative – more than one can be used by innocent party, so long as they are not
inconsistent with each other.
May be possible to cumulate judicial remedies
A. SELF-HELP: (1) MUTUALITY AND THE REMEDY OF RETENTION
Unity of concept of breach: 1) self-help remedies require materiality in relation to the breach 2) a
party's refusal to reform only breaches contract when other party accepts refusal
The principle of mutuality of contract-
Contract performances required under contract are given in exchange for each other; if one party
doesn’t perform, other party need not perform AND a party which has not performed or is not willing to
perform its obligation cannot compel others to perform
Breach of one party prevents him suing other party
Before consequences of mutuality come into play, must be shown obligations are independent or are
the cause of one another: cannot be withholding of performance under one contract for claims arising
under non-contractual relationships between the parties.
Said to be presumption that contract whole and all stipulations on either side
interdependent for purpose of mutuality; not necessary in complex cases.
Typically mutuality applies within confines of single contract, it may also do so where
two or more contracts form part of a single transaction between the parties, with the
obligations in each being inter-related as a result.
LJC Moncrieff's rules…
1. Retention- with-holding or suspending ones performance upon breach of other party;
brings pressure to bear on other side to perform
Breach of one party prevents him suing other party
o Justifies non-performance not mis-performance:
o Claims on either side must be "contemporaneous" or "reciprocal"-
Breach must be material before this can be exercised
Materiality of breach:
Materiality in relation to retention: only requires breach is more than trivial
Hazards of self-help:
Obvious danger using remedy and stopping performance turns out to be unjustified
because no breach or immaterial breach; non-performance intended to be remedy for
breach turns out to itself be a breach.
The party who wishes to invoke remedies of retention or, more especially, rescission
can seek some protecting by obtaining a judicial declaration of entitlement to act
, Retention (suspension or with-holding of performance)
Retention could not be used to compel performance of reciprocal obligations that were
no longer extant by virtue of the valid termination of the contract
Retention, involving aggrieved party in retaining some item of property otherwise due to
be delivered to the contract-breaker, usually known as lien.
Special lien: right to withhold property against other contracting party only existing in
respect of correlative obligation arising under the contract by which the aggrieved party
gained possession of the property; may not be possible to exercise it against a third-
party claim to subjects
General lien: possession of property may be retained for all debts due by other party
under this and other transactions
o Not clear extent to which power of sale applied to special liens; general
lien aggrieved party
Lien is child of possession; if possession is lost, so is right of lien
Remedy of diligence on the dependence; right of retaining party; its exercise may be
preventer only where inequitable in circumstances
Closely related concepts "counter claims", "set off" and "compensation"
Retention can also be defence to an action by the other party for performance
If damages paid, breach is made good and retention no longer justified
Each party has obligation to pay the other
'compensation' is means of discharging contractual obligations
Retention can only be exercised in respect of performance otherwise due under
contract which has been broken by other party
Where party claiming payment of liquid dept is bankrupt, defender may use a presently
illiquid claim to off-set his liability. Where claim not made liquid, an estimate of its value
must be undertaken.
B. SELF-HELP: (2) RESCISSION (TERMINATION)
2. Recission (Termination)-
Both innocent and guilty party liable to perform
innocent party can respond to breach by other party with non performance which may
terminate contract; contract is brought to an end
Dismissal (termination of employment) is example of termination
Sale of goods, primary right for breach is "rejection" of goods
Contract is not "at an end" after termination; accrued rights survive as may certain
clauses dealing with breach
Recission entails restitution but does not affect accrued rights (rights to remedies prior
to termination)
Voidable: contract unwound and parties returned to original position; restitutio in integrum
Void: no contract ever existed; claim under Unjustified Enrichment
All remedies optional so far as available
Parties may contract that certain stipulations are material (eg delivery or payment by
certain date- time is of the essence). Avoids uncertainty. Note eg irritancies in lease
Irritancy clause: clause entitling one party to terminate contract in event of specified
breaches or misconduct of other party. Such clauses are common in leases.
Common in leases; Landlords right to terminate for failure to pay rent (or other
payment) now subject to issuing notice to tenant
Ultimatum procedure; (common in house sales transactions where buyer doesn’t pay
price on time) may convert non material breach into material breach (eg enable seller to
rescind/terminate)
(1) material breach of contract
Party wishing to rescind contract for breach must show that breach is material
English divisions of contract terms into conditions (important terms breach of which, will
entitle the aggrieved party to rescind) and warranties (less important terms for breach of
which the aggrieved party can only recover damages, no matter how serious the
breach)
(2) Refusal to perform (repudiation)
Material breach of contract is when party indicates that it is not going to perform its
obligations under the contract and this is accepted by the other party.
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