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Repudiation

South African law regards repudiation of a contract as a form of breach.

What is repudiation and what are its consequences?

In Van Rooyen v Minister van Openbare Werke en Gemeenskapsbou 1978 (2) 835 (A) the Court held that repudiation occurs when 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.

As a remedy, the aggrieved party can choose either to enforce specific performance of the contract, or to accept the repudiation and to cancel the contract and claim damages.

Generally, the rule is that once the aggrieved party has made an election, that election is binding. However, the question arises what happens when you have elected to enforce specific performance of the contract, but the repudiating party makes it impossible for you to act in accordance with this election? Can you change your election and cancel the contract and claim damages instead?

This question came up in Primat Construction CC v Nelson Mandela Bay Metropolitan Municipality 2017 (5) SA 420 (SCA).

Briefly stated, the facts are as follows:

During March 2010 Primat contracted with the Nelson Mandela Bay Metropolitan Municipality to upgrade roads in Port Elizabeth and to supply all the necessary materials. There were various delays in completing the work, which delays were, according to Primat, outside of their control and included non-payment from the Municipality and heavy rainstorms damaging the work already completed.

The Municipality prematurely cancelled the contract without notifying Primat of any alleged breach or providing a notice period to remedy any alleged breach.

This cancellation constituted repudiation.

Primat sought access to the construction site, but was barred on various occasions. Letters were exchanged, among which Primat informed the Municipality that it did not accept its repudiation and continued to seek access to the construction site, but was barred every time. Finally, Primat’s attorneys addressed a letter to the Municipality which recorded Primat had persisted with its intention to enforce the contract, but that the Municipality’s appointment of four other contractors to complete the construction work constituted further repudiation. The contract was then cancelled by Primat, followed by an action in the Eastern Cape Local Division for damages.

The Court decided that the Municipality made specific performance of the contract by Primat impossible and confirmed that the Municipality’s premature cancellation constituted repudiation. The Court also decided that Primat was entitled to cancel the contract and to claim damages.

The Municipality appealed to a Full Bench and argued that once a party has made an election, it cannot seek redress against the defaulting party with remedies which are inconsistent with the election initially made. Primat argued that it was entitled to change its election and cancel the contract if the defaulting party persists in its repudiation after the election was made (Sandown Travel (Pty) Ltd v Cricket South Africa 2013 (2) SA 502 (GSJ)). The Full Bench held that an aggrieved party would only be entitled to cancel the contract, after initially electing to reject repudiation, if a new and positive act of repudiation occurred. The appeal, accordingly, succeeded.

Primat then appealed to the Supreme Court of Appeal and argued that to insist on specific performance whilst the defaulting party continues to repudiate is “as fruitless as insisting on specific performance of a future repudiation”.

The SCA held that, if there is a repudiation of a contract by a contracting party, the aggrieved party may elect to claim specific performance. But, should the repudiating party continue to show an unequivocal intention not to be bound by the contract, the aggrieved party may cancel the contract and claim damages.