Know how regarding cancellation of agreements and claims

02 January 2020 ,  Marié Combrink 1123

After a busy December holiday season and schools starting in the new year, a lot of people contact our office regarding legal advice for contracts entered into before obtaining proper legal advice due to the fact that they were pressed for time or was in urgent need of goods, services or money.

New rental agreements signed, purchasing a property or vehicle on credit agreements, entering into loan agreements for money much needed for January or purchasing that big television set you so badly wanted in December on a credit agreement without making sure you understand the terms and conditions, charges, interest and your rights and responsibilities can cause a lot of financial stress and a legal process instituted for monies owed.  You will find yourself in a situation where you will want to terminate a contract.

The aim of this article is to inform individual and juristic persons of the requirements for terminating a contract and to give basic guidance BUT also to indicate as to what and how to claim if a contract is breached or not cancelled in the correct manner.

You can find yourself in either one of the following situations:

  • Being the innocent party and suffering damage due to the other party’s breach
  • Being the party in breach

When either party as referred to above want to cancel an agreement you will have a choice to cancel the agreement or to enforce it.  It is always important to remember that cancelling an agreement is an extreme remedy and only available in certain circumstances, for example where there is a cancellation clause or where the breach of contract that transpired is material to the agreement or serious.  We have had clients providing us with contracts that did not provide for cancellation but can the innocent party due to the breach being of material nature to the agreement still cancel the agreement.  Always confirm that the correct procedure is followed when an agreement is cancelled and in accordance with the specific agreement’s terms and conditions.  If not done correctly the other party may have a legal remedy to cancel or to claim damages.

When cancelling an agreement the date of performance according to the contract, and if there is any, is taken into serious consideration. If no date of performance is specified in the contract the innocent party will have to demand performance by giving the party in breach reasonable and proper notice, preferably in writing to perform before a certain date and indicate if no performance by this date the innocent party will cancel the contract. 

On the other hand, if there is a performance date specified in the agreement and there is no performance in time and as specified, the party in breach will be in breach of the contract. 

I referred to material breach of a term and or condition of an agreement.  You may ask what constitutes a material breach?  According to South African case law, a material breach is one which goes to the root if the contract and constitutes a breach of a vital term to give effect to the agreement.

If a contract contains a suspensive condition and this condition is not fulfilled or waived, for instance a bond acquired by a certain date when purchasing a property, then in this circumstance the agreement will automatically be terminated.

Taking the above into consideration the requirements for cancellation of an agreement vary according to the terms, type and the specific circumstances of an agreement.  The best scenario is where all parties agree to the cancellation and a cancellation agreement is drawn and signed by all parties concerned.

We advise you to obtain legal advice from one of our legal practitioners before cancelling an agreement but it will also be advisable to talk to us before entering into an agreement.

Contact us for any amounts due or outstanding regarding any agreement to assist.

References :     National Credit Act 34/2005

                        Alienation of Land Act  68/1981

Tags: Contract
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