Law of Contract

1. Law of Contract Unit 13 Positive Malperformance

2. 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.

3. Cases: • Holmdene Brickworks v Roberts Construction. • Shatz Investments (Pty) Ltd v Kalovyrnas. • BK Tooling v Scope Precision Engineering.

4. Study: • Hutchison et al. Chapter 12.

5. Nature and Forms: • Relates to manner in which an obligation is executed. • Two forms: • Defective performance, • Conduct contrary to contractual prohibition.

6. 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.

7. Conduct contrary to a contractual prohibition: • Shatz Investments (Pty) Ltd v Kalovyrnas: • Lease agreement contained the following two clauses:

8. 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.

9. 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.

10. 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.

11. 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.

12. 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: moracreditoris. • If defective performance was delivered, the creditor need not return such performance to be rectified.

13. 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.

14. 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 vismaior or circumstances beyond the control of the debtor.

15. 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.

16. 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.

17. A tender of defective performance can thus amount to repudiation. • Prevention of performance also occurs before performance.

18. 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?

19. 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.

20. 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.

21. 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?

22. - 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.

23. If performance is divisible, innocent party may resilepro 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.