Lec 17-Exceptio Non adimpleti Contractus PDF

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Exceptio Non adimpleti Contractus A remedy or defence? Introduction:        

The exceptio is not a direct remedy available to the innocent party. Instead, it is technically a defence. Reciprocal contracts The innocent party is entitled to withhold counter-performance and ward off any claim for performance until the other party performs. It is aimed in other words at securing specific performance from the other party. Where obligations are reciprocal to one another: BK Tooling case – a party will not be obliged to perform until the other party has performed. If sued for performance, a defendant has a right to exceptio to defend himself. The innocent party indirectly forces the other party to render complete a proper performance.

Principle of Reciprocity:        

Reciprocal contract – performance of one obligation is conditional upon the performance of the other. Both obligations must be performed simultaneously or Complete performance of the one obligation is a condition precedent – other The contract may require parties to make an exchange of performance either simultaneously or consecutively. As to whether it applies to a contract – matter of interpretation – applies ex lege. Gives rise to a right to withhold one’s own performance until the other party has tendered performance – hence exceptio defence. The reciprocity principle can be relaxed by the court for fairness considerations. The moment the principle has been relaxed it means you will be obliged to tender in your own performance because the principle cannot be raised.

Requirements for use of Exceptio: 1. Performance must be reciprocal (reciprocity of obligations)  BK Tooling v Scope Precision 1979 (1) SA 391 (A). 2. Sequence of performance: intention of the parties vis-à-vis naturalia of a contract. 3. Incomplete performance: Defendant can rely on exception Reciprocity of Obligations:   

In order to determine whether an obligation is reciprocal or not, the intention of the parties must be ascertained: how? Question that is asked is whether the parties intended to create the obligations in exchange for each other? Reciprocal contracts are subject to the principle of reciprocity

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Parties are free to change the sequence of performance: Determine by the intention of the parties.

Sequence of performance:   

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General rule: parties must perform pari pasu (simultaneously). Exceptions: (i) Unless parties agreed otherwise or (ii) the naturalia of the contract determines the sequence of performance Lease agreement, Employment contract or building contract: Who must perform first? In practice it is the lessee who must perform first, the employee must perform first, the contractor must perform first. The sequence of performance is important because it determines the party that can raise the defence of exceptio. The sequence of performance is important because it determines the party that can raise the defence of exceptio.

When can exceptio non adimpleti contractus be raised? 1. Plaintiff has no performance at all. 2. The defective/incomplete performance must not be serious as to justify cancellation of the contract.  The innocent party is permitted to withhold his own performance and to raise the exceptio – minor but – where the defect or shortfall is not trivial as to fall within de minimus non curet lex: see Thompson v scholtz 1999 (1) SA 232. Factors affecting the application of the exceptio: A. Acceptance of part performance.  Exceptio is meant at ensuing B. Defective performance and cancellation of the agreement BK Tooling caase.  AD stated that one must carefully distinguish between circumstances where the contract is cancelled due to breach and situations where the contract is kept alive  NB: Where the contract is cancelled for material breach: exceptio cannot be raised  Obligations to perform are terminated – both parties will be obliged to return performance received.  Where performance received cannot be returned – the party becomes liable in breach on the grounds of unjustified enrichment.  Enrichment arises because the transfer of value is without legal cause after the contract is cancelled. Court’s equitable discretion:  

Where the other party only performed part of its obligations or rendered defective performance – Court may relax the principle of reciprocity. Where part performance has been accepted and is being utilized – Court may order that such party pay a reduced amount to the party in breach ie price reduction.

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The reduced amount is determined by deducting from the contract price, the cost of remedying the defect/shortfall for the performance.

Scope of Exceptio:    

The right to withhold performance in terms of reciprocity is a temporary defence. What is its aim? Party relying on exception need to afford the other party a chance to remedy the defect ie positive malperformance. Once proper performance is completed, the right to withhold performance is extinguished. Exception cannot be raised in cases where the failure of a party to perform properly is excused by law.

Assessment Question: 1. What are the instances in which a defendant may raise exception. Where performance has not been made or where part performance has been made. 2. Explain the principle of reciprocity. Both parties must perform simultaneously or consecutively. 3. Discuss the requirements for exception. Missed slides Cancellation: 

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If a party elects to cancel the contract, he must notify the defaulting party – election once made is final. o In some circumstances, conduct may be The aggrieved party must cancel within a reasonable period of time. It may be argued that he has waived the right to cancel.

When does cancellatiomn take effect: 

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Once it has been communicated o Swart v Vosloo – once decision to cancel is made - a 3rd party can communicate. If no notice has been given – service of summons or notice of motion. No formalities are required for the act of cancellation – oral or written unless otherwise. No need for court order generally. Effect of cancellation o Contract ceases to exist (indivisible – obligations entirely end) o Restitution must occur (to extent possible). What happens when the innocent party chooses to affirm the contract? Innocent party loses his right to cancel until the party commits another breach of contract.

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Can a party be estopped where he has created n impression that he elected to affirm the contract? Yes, where the other party has made or created that he is affirming the contract then he can be estopped from cancelling the contract based on the reasonable impression which he has created.

Restitution:         

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Both parties must be able to restore performance received. Ability to restore – usually regarded as a requirement for – right to terminate. What happens where it has become impossible to restore performance on the innocent party and it isn’t his fault? He will be entitled to cancel. Excused from making restitution. Innocent party also excused where goods have been rendered valueless – through contemplated use. Eg: Florist is supplied with wrong chemicals and mistake is discovered after the chemicals have been applied. Innocent party can still cancel and be excused from restitution. Where it is partly impossible – restitution to take place due to innocent party’s fault: o Shortfall can be made – payment of money (monetary value). o Restore the substantial performance received. See page 322 in textbook – diagram. See page 71 in textbook for offer and acceptance – said this in passing. Three requirements for cancellation: o Breach must be material o Notice of intention of cancellation o Restitution. Must communicate the decision within a reasonable time to cancel the contract....