When to Consider Cancelling your Contractual Obligations

WHEN TO CONSIDER CANCELLING YOUR CONTRACTUAL OBLIGATIONS


Tjaart de Beer

When entering into a contract, albeit verbal or written, we assume that the parties involved reached consensus and that they are happy with the obligations each of them have committed to and will have to perform. However, life happens and, in some instances, not performing in terms of the contract may have dire consequences for the non-performing party.

One might think that cancelling a valid contract is as easy, but being able to do so will only be allowed in special circumstances. Cancelling a contract is in fact considered to be a special remedy available to the so-called innocent party, the one not in breach of performing in terms of the contract.

The contract, if written properly, will contain provisions according to which the parties thereto may cancel or terminate the contract. As mentioned, it is only under special circumstances that a contract to be cancelled, thus, the breach must be material or sufficiently serious. However, before cancelling the contract, those provisions of the Breach-clause must be strictly followed to afford the defaulting party a chance to rectify his or her breach, in failing to do so, and no other remedy will suffice, cancellation of the contract can be proceeded with. The provisions of the Breach-clause can be ignored only where the defaulting party repudiated the contract, unless otherwise determined by the contract.

As mentioned above the breach needs to be material of sufficiently serious, otherwise, cancellation will not be justified, then the innocent party will only be able to move for specific performance. This is a remedy by which the defaulting party is compelled to honour the contract and his or her obligations towards the innocent party.

Under normal circumstances, such as residential lease agreements and cell phone contracts, only to name the more familiar day-to-day contracts, where the consumer wishes to cancel the contract, the Consumer Protection Act 68 of 2008 (“the CPA”) has given the consumer, as defined and qualified in terms of the CPA, the opportunity to cancel fixed term contracts. Those contracts which are 12 months and longer.

In these instances, the consumer may provide the landlord or supplier 20 business days written notice of its intention to cancel the contract, BUT it must be borne in mind that the supplier is allowed to charge a “reasonable cancellation penalty”.

Section 14 of the CPA regulates the cancellation of fixed term contracts. The only point of contention is what will be considered as a reasonable cancellation penalty? Well, in most cases, in the specific industry the common practices determine what such penalties may be, but also, there is legislation, the Conventional Penalties Act which provides for the reduction of penalties by the court only if it emerges that penalties raised against a defaulting party is out of proportion; so, section 3 of this Act provides.

The Law of Contract can be tricky and it will always serve you best to consult with an attorney whom specialises in this field prior to making any drastic decisions.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

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