Publication

DE REBUS

Page

52-53

Date

Fri 01 Dec 2017

AVE (ZAR)

31239.42

ByVuyokaziNdamse

hat is repudiation? Re-pudiation is definedin Van Rooyen v Min-ister van Openbar eWerke en Gemeenska-psbou 1978 (2) 835

(A) at 845 as a situation where one partyto a contract, without lawful grounds,indicates to the other party in words orby conduct a deliberate and unequivo-cal intention to no longer be bound bythe contract. Repudiation is, therefore, aform of a breach of contract. Once a con-tract has been repudiated, the aggrievedparty may either elect to enforce specificperformance or accept the repudiationand proceed to cancel the contract andclaim damages.

It is entrenched in our law that oncean election is made, it is binding. How-ever, what happens when the other partymakes it impossible for you to act inaccordance with your election? Can aparty, who previously elected to enforcespecific performance change its election,thereafter proceed to nevertheless can-cel the contract and claim damages?

This question was recently consider edby the Supreme Court of Appeal (SCA) inthe matter of Primat Construction CC vNelson Mandela Bay Metropolitan Munici-pality 2017 (5) SA 420 (SCA).

During or about March 2010, Primatentered into a contract with the munici-pality to upgrade the roads in Mother-well, Port Elizabeth, as well as to supplyall materials required for the construc-tion works (the works). The project wasmanaged by Iliso Construction (Pty) Ltd(a firm of engineers) and the works com-menced on 12 April 2010. There werevarious delays in the execution of theworks, which according to Primat, weremainly attributed to non-payment, al-ternatively delays in payment by themunicipality . The project was extended,and, during the extension period, heavyrain storms damaged the works, whichat that time, were almost completed.During this period, Primat was unable tocomplete the works, but, indicated to themunicipality that it would do so when itwas able to.

On 17 January 2012, the municipalityprematurely cancelled the contract with-out affording Primat notice to remedybreach. This constituted a repudiation

Repudiation and therepentance principle

Primat Construction CC v Nelson Mandela BayMetropolitan Municipality 2017 (5) SA 420 (SCA).

on the part of the municipality. On thesame day, Primat sought access to theconstruction site but was barred fromentering the site by the municipality . On19 Januar y 2012, Primat wrote a letterto the municipality and recorded that itregarded the municipality 's cancellationletter as procedurally incorrect and thatit intended to 'remain servicing the con-tract until the matter is finalised'. In re-sponse, the municipality wrote to Primaton 24 January 2012 further emphasisingits decision to terminate the contract andrequested Primat to vacate the construc-tion site. On 26 Januar y 2012, Primatagain sought access to the constructionsite, but was barred by the municipal-ity. On 27 Januar y 2012, Primat wrotea letter to the municipality demandingaccess to the construction site and re-corded that it had been denied accesson the previous day. In this letter, Primatfurther recorded that the conduct by themunicipality constituted a breach of theprovisions of the contract. On 30 Janu-ary 2012, the municipality sent a letterto Primat advising that it was entitled toexpel Primat from the construction siteand arrange for the completion of theworks via other contractors. On 3 Febru-ary 2012, Primat wrote a further letter tothe municipality and recorded that themunicipality 's cancellation was bad inlaw, and that this purported cancellationalso constituted a repudiation, which re-pudiation it did not accept.

On 9 February 2012, Primat's attor-neys addressed a letter to the munici-pality in which Primat referred to thecorrespondence exchanged between theparties from 17 January 2012 to 3 Feb-ruary 2012. In the letter it was recordedthat Primat had persisted with its inten-tion to proceed with the contract, andthe fact that the municipality's appoint-ment of four other contractors to com-plete the works constituted a further re-pudiation. In this letter, the contract wascancelled by Primat.

Pursuant thereto, Primat brought anaction against the Municipality in theEastern Cape Local Division of the HighCourt, Port Elizabeth for damages suf-fered as result of the cancellation.

Revelas J, held that the municipalityhad made specific performance by Pri-mat impossible. The court further held

that the Municipality had acted overhastily in cancelling the contract when itdid and that its premature cancellationconstituted a repudiation. She furtherdescribed this repudiation as an une-quivocal intention to no longer be boundto the contract with immediate effect.

This is much evident from the factthat the premature cancellation by themunicipality was effected shortly be-fore the builder 's holiday commencedin December 2011, especially in circum-stances whereby the municipality hadpreviously granted Primat an extensionto complete the work.

Revelas J then ordered that Primat wasentitled to cancel the contract and fur-ther that it is entitled to damages.

The municipality brought an appealagainst the decision by Revelas J beforea Full Bench in the Eastern Cape Divisionof the High Court, Grahamstown. Coun-sel for the municipality argued that oncean election had been made, the innocentparty is not at liberty to seek redressagainst the defaulting party by way ofremedies that are inconsistent with theelection made.

Primat argued that it was entitled tochange its election, it having been heldby Wepener J in Sandown Travel (Pty) Ltdv Cricket South Africa 2013 (2) SA 502(GS)) that a party, which had once elect-ed to reject a repudiation, may thereaf-ter, if the other party persists in the re-pudiation, change its election and cancelthe contract.

The municipality further argued thatthe application of the repentance princi-ple is only limited to cases of anticipato-ry breach, as it was held in the Sandowncase. Primat argued that this was incor-rect and submitted that Wepener J didnot hold that in other cases of repudia-tion, the repentance principle does notapply, and that there is, in principle, nodistinction between the repudiation of apast, present or future obligation.

The Full Bench held that Primat wouldonly have been entitled to cancel thecontract if a new, positive act of repudia-tion occurred, and the appeal succeeded.

Pursuant thereto, Primat petitioned tothe SCA, and was granted special leaveto appeal against the decision of the FullBench. Primat argued that 'persistence inrepudiation ' is not only limited to cases

of 'a new or separate act of repudiation'and to insist on specific performancein the face of a continuing repudiation,whether past or present, is 'as fruitlessas insisting on specific performanceof a future repudiation'. It was furtherargued that where a contracting partyrepudiates a contract by prematurelycancelling same, that party specificallyindicates its intention of no longer beinga party to the contract.

The municipality repeated its previousarguments in the court a guo and theFull Bench persisted that once the inno-cent party is put to an election, it cannotboth 'approbate and reprobate'. Primatfurther argued that it was precludedfrom pursuing a claim for damages ona purported cancellation as this remedywas no longer available to Primat in lightof its earlier election to claim specificperformance.

The SCA then held that if a contract-ing party repudiates a contract, the ag-grieved party may elect to claim specificperformance. However, should the repu-diating party persist with its repudiationafter this election is made, and shows anunequivocal intention not to be boundby the contract, the aggrieved party maychange its election and cancel the con-tract and claim damages.

The SCA further held that the require-ment for a fresh act of repudiation by themunicipality before Primat could changeits election and proceed to cancel thecontract and claim damages made littleor no sense, and that Primat was reason-able in perceiving that the municipalitywould not repent of its consistent repu-diation of the contract.

The appeal was upheld with costs oftwo counsel.

Where a party repudiates a contractand shows no intention to abide by thecontract, it is, therefore, superfluousto expect the party to, at some stage oranother, change its intention. Where thedefaulting party makes it clear that it nolonger intends to be bound in terms of acontract, the innocent party is permittedto change its election to claim specificperformance, proceed to cancel the con-tract and claim damages.

* Adams and Adams appeared for theappellant.

Vuyokazi Ndamse LLB (Fort Hare) isan attorney at Adams & Adams inPretoria.

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