Transcript Law of Contract - Learning

Law of Contract
Unit 13
Positive
Malperformance
Learning outcomes:
• Analyze and discuss the nature and forms of
positive malperformance.
• List and critically discuss each of the
requirements for positive malperformance.
• Distinguish between positive
malperformance and other forms of breach
of contract.
• Discuss the special consequences of positive
malperformance.
• Discuss the possibility of cancellation of a
contract on the ground of positive
malperformance.
Cases:
• Holmdene Brickworks v Roberts
Construction.
• Shatz Investments (Pty) Ltd v
Kalovyrnas.
• BK Tooling v Scope Precision
Engineering.
Study:
• Hutchison et al. Chapter 12.
Nature and Forms:
• Relates to manner in which an obligation
is executed.
• Two forms:
• Defective performance,
• Conduct contrary to contractual
prohibition.
Defective performance:
• Does the performance comply with the
terms of the contract?
• Refers not only to the consensual terms
but also to the naturalia of the contract.
• Performance can be defective whether
made before, on or after the date of
performance.
Conduct contrary to a contractual
prohibition:
• Shatz Investments (Pty) Ltd v
Kalovyrnas:
• Lease agreement contained the following
two clauses:
• The lessee (respondent in the case under
discussion) shall be entitled to use the leased
premises for the purpose of carrying on the
business of a restaurant, take-away-foods and
general dealer, and for no other purpose
whatsoever, save with the consent of the lessor,
which consent shall not unreasonably be
withheld.
• The lessor (appellant in the case under
discussion) agrees to give full protection to the
lessee by not letting any of the existing other
shops, and those still to be erected in the same
building, for the same nature of business or
allied business, as that of the lessee, i.e. coffee
bar, fish and chips, tea room, take-away foods,
steak house etc., and such like, other than
bakery and allied lines produced on the
premises.
• Negotiation phase: Appellant wanted to use
one of the other stores in the building as a
bakery.
• Respondent agreed thereto, on the condition
that the bakery did not sell take-away food
like kosher and other Jewish foods.
• While the respondent was preparing to open
his business, an advertisements appeared
stating that the bakery would be selling
confectionary and take-away foods.
• When the bakery opened, it had an
immediate and substantial effect on the
business of the Miami Restaurant.
• Court decided correctly that the appellant
had committed breach of contract in the
form of positive malperformance.
Requirements for positive
malperformance:
• 1. Debtor must have performed:
• Debtor must tender performance.
• Creditor must accept performance.
• If correct performance is tendered
timeously and refused by creditor: mora
creditoris.
• If defective performance was delivered,
the creditor need not return such
performance to be rectified.
• BK TOOLING V SCOPE PRECISION
ENGINEERING:
• A creditor who has not cancelled the
contract is obliged to return the defective
performance in order to enable the
debtor to rectify mistakes.
• Positive malperformance: Debtor must be
given 2nd chance to rectify any defects.
• 2. The rendered performance must be defective.
• Question of defectiveness depends on whether it
conforms to the provisions of the contract.
• If the performance does not conform to the
contractual standard: prima facie unlawful.
• Unless: Shortcoming was caused by vis maior or
circumstances beyond the control of the debtor.
• Is fault a requirement for positive
malperformance?
• Distinguish between warranties and
other types of terms.
• Van der Merwe et al: Fault should not be
a requirement for positive
malperformance.
Distinction between positive
malperformance and other forms of
breach of contract:
• Positive conduct as opposed to negative
malperformance: failure to perform.
• Differs from repudiation: Breach in the
form of positive malperformance can
only occur if performance has already
been rendered. Repudiation occurs
before performance.
• A tender of defective performance can
thus amount to repudiation.
• Prevention of performance also occurs
before performance.
Consequences:
• Normal remedies for breach of contract
are available.
• Creditor could retain performance and
demand rectification of defects.
• May a creditor, however, reject defective
performance, in order to obtain proper
performance?
• BK Tooling-case: Creditor who had not
yet performed may retain his
performance until the debtor has
performed precisely and completely.
• Above: Principle of reciprocity.
• Condition: Defect must not be minute,
and performance must remain possible.
• If performance is no longer possible:
creditor can claim an amount of money as
surrogate.
• If performance is not substantially defective,
the creditor will have to retain defective
performance and be satisfied with damages.
• Rejection of performance does not lead to
cancellation, but is in fact a way of enforcing
the contract.
Cancellation on the ground of
positive malperformance:
• Lex commissoria: (cancellation clause):
is a requirement for cancellation.
• A right to rescind cannot be obtained
merely by a notice of rescission.
• How does one determine the seriousness
of breach of contract?
• - Breach must go to the root/basis of the
contract.
• - Breach must affect a vital part of the
contract.
• - Breach must be so serious that it would
not be reasonable tot expect that the
creditor should retain the defective
performance.
• If performance is divisible, innocent
party may resile pro tante.
• Creditor can resile immediately.
• If the creditor does not cancel the
contract but claims damages for breach,
the debtor cannot insist on making
proper performance instead of paying
damages.