cancellation of contract

Written by BATSHO NTHOI

WEDNESDAY, 03 MARCH 2010 00:00

When one party to a contract breaches the terms thereof or repudiates the contract, the innocent party may insist on his or her rights under the contract or accept the breach or repudiation and cancel the contract. The innocent party may simply send a notice to the other party declaring the contract between the parties cancelled or may further proceed to court and obtain an order of cancellation. What is apparent is that the innocent party at the point of a breach or repudiation is presented with a choice, either to cancel and claim damages or keep the contract and enforce it. It is important that the innocent party makes the election as to which remedy he or she intends to pursue. This is because if the innocent party behaves in any particular manner to the defaulting party, an impression maybe created. For example, the defaulting party may claim that it has been made to believe that the breach has been condoned. In this instance, the innocent party may find himself contending with a defence of estoppel, that is not being allowed to pursue a particular remedy because the other party would be claiming they have been led to believe that the innocent party has abandoned the claim due to condonation (or forgiveness). However, the onus is on the defaulting party to prove that the innocent party has waived his/her rights somehow. It is important that the election be exercised in a reasonable time, lest the defaulting party takes certain action which may make the exercise of a particular election, by the innocent party difficult to enforce. When an innocent party has chosen to cancel the contract, this will be followed by a claim for damages. It is apt to note that the damages that are claimed under a breach of contract are limited to damages caused by the breach. So it must be shown that the alleged breach was the cause of the loss. A claim for damages is not to enrich the innocent party, but rather to place him/her in the position he/she would have been in, if the contract had been properly performed, so far as that can be done by the payment of money, and without undue hardship to the defaulting party. So, the law does not permit that one should recover expenditure against the defaulting party, that he would not have recovered even if the contract had been performed. Christie, in his book: The Law of Contract in South Africa does state that “when normal contractual damages are claimed, in endeavouring to place the plaintiff in the position he/she would have occupied had the contract been performed, the courts are concerned exclusively with his/her financial position and take no account of his injured feelings or, to put it another way, he is entitled to damages for patrimonial but not sentimental loss”. In a claim for damages the innocent party has the responsibility of proving the amount of damages he or she has suffered as a result of the breach. The law does not however grant a blank cheque to the innocent party to just wait for the other party to pay for damages. The innocent party must mitigate any losses, nothing extraordinary is expected, but rather, to take appropriate steps to avoid the loss escalating. Further the law also investigates to see whether the claim for other damages is not too remote – that is, are far-fetched and do not arise naturally from the breach. If they are, there are not claimable.