POSSIBILITY OF PERFORMANCE:

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Contents
Possibility of Performance ...................................................................................................................... 4
Breach of contract ............................................................................................................................... 4
Types of Breach .................................................................................................................................. 4
repudiation ...................................................................................................................................... 5
mora debitoris ................................................................................................................................. 5
mora creditoris ................................................................................................................................ 6
positive malperformance ................................................................................................................. 7
prevention of performance .............................................................................................................. 8
Breach and Remedies .......................................................................................................................... 8
breach of contract ............................................................................................................................ 8
specific performance ....................................................................................................................... 9
cancellation ................................................................................................................................... 11
damages......................................................................................................................................... 12
interdict ......................................................................................................................................... 13
declaratory order ........................................................................................................................... 14
penalty clause ................................................................................................................................ 15
Multiple Choice Question Bank on Contract Law ................................................................................ 16
Termination ....................................................................................................................................... 20
termination of contract .................................................................................................................. 20
performance or payment ............................................................................................................... 20
terminating a contract: notice ........................................................................................................ 20
release ........................................................................................................................................... 21
novation......................................................................................................................................... 21
merger ........................................................................................................................................... 22
impossibility of performance ........................................................................................................ 22
set-off (compensatio) .................................................................................................................... 22
prescription ................................................................................................................................... 23
death .............................................................................................................................................. 24
rouwgeld clause ............................................................................................................................ 24
cooling-off provisions ................................................................................................................... 25
Multiple Choice Questions: .................................................................................................................. 25

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Possibility of Performance
Breach of contract

1. Definition of Breach of Contract: When a party involved in a contract fails or refuses to

perform their obligations as agreed upon in the contract, it constitutes a breach of the contract.
A breach occurs when there is no valid defense for the failure to perform.

2. Nature of Breach: Breach of contract essentially involves malperformance, which means a

failure to perform in accordance with the terms of the contract. This failure can extend to any
conduct that conflicts with either the express or implied obligations of the parties.

3. Breach by Both Parties: It's important to note that both the debtor (party who owes a
performance, like payment) and the creditor (party expecting performance, like delivery) can
commit a breach of contract. In other words, breaches can occur on either side of the
contractual relationship.

4. Examples of Breach: Breach can manifest in various ways. For instance, the debtor might
fail to make a payment they were obligated to make, or the creditor might fail to deliver the
property that was supposed to be provided under the contract.

5. Determination of Breach: In each case, whether the debtor or creditor breached the contract
will depend on the specific facts and circumstances surrounding the contract. It's essential to
consider the context and the actual performance or non-performance in order to determine
which party is in breach.

Types of Breach
1. Repudiation: Repudiation occurs when one party clearly and unequivocally indicates that
they do not intend to perform their contractual obligations. This can be through words or
actions that demonstrate a refusal to fulfill their part of the contract.

2. Mora Debitoris: Mora debitoris, also known as default on the part of the debtor, refers to a
situation where the party who owes performance (usually payment) does not fulfill their
obligation on time.

3. Mora Creditoris: Mora creditoris, or default on the part of the creditor, occurs when the
party expecting performance (e.g., delivery) impedes or prevents the other party from
fulfilling their obligation.

4. Positive Malperformance: Positive malperformance refers to a situation where a party

actively and intentionally performs their obligations in a manner that is contrary to the terms
of the contract. In other words, they perform incorrectly or inadequately.

5. Prevention of Performance: This happens when one party actively prevents the other party
from performing their contractual obligations. For example, if a buyer refuses to accept
delivery of goods they agreed to purchase, it prevents the seller from fulfilling their part of the
contract.

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REPUDIATION
• Definition: Repudiation in contract law occurs when one party indicates, through words or
conduct, that they have no intention to fulfil their contractual obligations. This involves an
active intention not to be bound by the contract.

• Parties Involved: Repudiation can be initiated by either the debtor (the party owing
performance) or the creditor (the party expecting performance).

• Test for Repudiation: To determine if repudiation has occurred, a key test is whether a
reasonable person, considering the circumstances, would conclude that proper performance
would not be forthcoming from the repudiating party.

• Example: Imagine Sam tears up a written agreement of sale and purchase for a house and
loudly shouts that the deal is off. In this case, Sam has repudiated the sale of the property
through both his conduct (tearing up the agreement) and his words (shouting that the deal is
off).

Simple Explanation of Repudiation:

Repudiation is a situation in contract law where one party clearly shows, through their words or
actions, that they don't want to follow the contract anymore. This means they actively intend not to do
what they originally agreed to do in the contract. Repudiation can happen whether you owe something
(like payment) or expect something (like delivery) from the other party. To decide if repudiation has
occurred, we ask if a reasonable person, looking at the situation, would think that the party who's not
willing to follow the contract won't do what they promised. For instance, if someone tears up a
contract and shouts that it's cancelled, that's a clear example of repudiation.

MORA DEBITORIS
• Definition: Mora debitoris in contract law refers to a wrongful failure by a debtor to perform
their contractual obligation on time or within the specified timeframe.

• Examples: Common examples of mora debitoris include situations where the seller fails to
deliver stock on the agreed-upon date or when a builder doesn't hand over completed
premises as per the agreed schedule.

• Nature of Mora Debitoris: Mora debitoris arises from an omission, meaning the debtor should
have done something but did not. It's important to distinguish mora debitoris from
repudiation, which is based on commission (doing something they shouldn't have done).

• Conditions for Mora Debitoris: To establish mora debitoris, several conditions must be met:

• Performance must be due and possible (the obligation to perform must exist and be
feasible).

• The creditor must have a valid right to claim performance (a legitimate expectation of
performance).

• The debtor must have no valid defense for the failure to perform.

Simple Explanation of Mora Debitoris:

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Mora debitoris is a concept in contract law that means when someone who owes a duty in a contract
doesn't do what they're supposed to do on time. For instance, if a seller doesn't deliver goods when
they should or a builder doesn't finish a construction project on the agreed date, it's mora debitoris.

It's different from repudiation because it's about not doing something you were supposed to do. To say
there's mora debitoris, a few things must be true: the job must be due and possible to do, the person
expecting it must have a good reason to expect it, and the person not doing it can't have a valid excuse
for not doing it.

1. Mora Ex Persona (Mora as a result of the act of a person):

• This type of mora occurs when the contract doesn't specify a definite time for
performance.

• To establish mora ex persona, the creditor must make a demand on the debtor, calling
upon them to perform within a specified time, which should be reasonable in the
circumstances.

• If the debtor fails to perform within the specified reasonable time after the creditor's
demand, mora ex persona arises.

2. Mora Ex Re (Mora as a result of the contract):

• Mora ex re occurs when the contract either requires immediate performance or fixes a
particular time or period for performance.

• If the contract explicitly or implicitly sets a certain time for performance, the debtor
falls into mora automatically by failing to perform at that specified time.

• In this case, the creditor does not need to make a separate demand for performance;
the failure to perform at the agreed-upon time is enough to establish mora ex re.

Simple Explanation of Mora Ex Persona and Mora Ex Re:

• Mora Ex Persona: This happens when a contract doesn't have a clear deadline for when
something should be done. To make the other person responsible, the one who's supposed to
get something done has to be told by the other person to do it within a reasonable time. If they
don't do it in that time after being asked, it's mora ex persona.

• Mora Ex Re: This is when the contract itself says when something should be done. It could be
right away or at a specific time in the future. If the person doesn't do it when the contract says
they should, the other person doesn't have to ask again; it's automatically considered mora ex
re.

MORA CREDITORIS
• Definition: Mora creditoris, in contract law, occurs when the creditor refuses or delays the
assistance required by the debtor, and this obstruction prevents the debtor from performing
their contractual obligations.

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 • Cooperation Necessity: In many cases, the debtor requires the cooperation of the creditor to
fulfill their obligations on time. This cooperation is necessary for the debtor to perform as per
the contract.

• Creditor's Duty to Cooperate: The creditor has a duty to cooperate and provide the
necessary assistance to allow the debtor to perform their obligations within the agreed-upon
timeframe.

• Failure to Cooperate: If the creditor fails to cooperate, hindering the debtor from performing
their obligations, the creditor can be considered to be in mora creditoris.

• Example: An example of mora creditoris is when a seller fails to answer the door when the
buyer wants to tender payment of the price. In this case, the seller's failure to cooperate
obstructs the buyer from performing their payment obligation.

Simple Explanation of Mora Creditoris:

Mora creditoris is a situation in contract law where the person who's supposed to receive something in
a contract doesn't cooperate, and this stops the other person from doing what they should. Many
times, the person who owes something in the contract needs the help of the person expecting
something to be able to do it on time. If the person expecting something doesn't help and this stops the
other person from doing what they're supposed to do, it's mora creditoris. For instance, if a buyer
wants to pay for something, but the seller doesn't open the door to receive the payment, that's an
example of mora creditoris.

POSITIVE MALPERFORMANCE

• Definition: Positive malperformance, in the context of contract law, refers to defective or

incomplete performance of contractual obligations. It occurs when the debtor engages in
conduct that does not align with their express or implied contractual duties.

• Examples: Positive malperformance can take various forms, such as a seller not delivering
the correct quantity of goods as agreed, a builder using inferior materials or deviating from
the construction plan, and similar instances where the performance falls short of contractual
expectations.

• Two Categories of Positive Malperformance:

1. Defective or Incomplete Performance: In this category, one party's performance is

flawed or unfinished. They may not meet the quality standards or deliver the full
quantity as required by the contract.

2. Committing an Agreed-Upon Forbidden Act: This category involves one party

doing something that they explicitly agreed not to do in the contract. This action
breaches the contract terms and constitutes positive malperformance.

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Simple Explanation of Positive Malperformance:

Positive malperformance happens when someone doesn't do their part in a contract correctly or
completely. It's like when you buy something, but it's not the right amount, or when a builder doesn't
use the right materials or doesn't follow the construction plan. There are two main types of positive
malperformance: one is when the job is done wrong or not finished as agreed, and the other is when
someone does something they promised not to do in the contract. Both types can cause problems in a
contract.

PREVENTION OF PERFORMANCE

• Definition: Prevention of performance, also known as frustration of performance, is a form of

contract breach that occurs when one party takes actions that effectively prevent themselves
or the other party from fulfilling their contractual obligations. This breach can result from
either intentional or negligent conduct.

• Nature of Breach: In this type of breach, the contract becomes impossible to perform due to
the actions of one party, and it can no longer be fulfilled as originally agreed.

• Example: Consider a situation where John agrees to sell his car to Cathy. However, before he
hands over the car to Cathy, he sells it to Winston and gives the car to Winston instead. This
action by John prevents him from delivering the car (performing) to Cathy, as he has already
handed it over to someone else. This constitutes a prevention of performance.

Simple Explanation of Prevention of Performance:

Prevention of performance happens when someone does something that makes it impossible for
themselves or the other person to do what they promised in a contract. It can be because of something
they did on purpose or by accident. For instance, if someone agrees to sell a car but then sells it to
someone else before giving it to the person they made the deal with, they've prevented the
performance, and that's a breach of the contract.

Breach and Remedies

Breach of contract
1. No Escape from Contractual Obligations: Courts generally do not allow a party to escape
their obligations under a contract simply by breaking it. A party remains responsible for their
contractual commitments.

2. Cancellation of Contract - Material Breach: The aggrieved party may cancel the contract,
but this is typically allowed only when the breach is considered material or substantial.

3. Options for the Aggrieved Party in Case of Material Breach:

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 • Uphold the Contract and Claim Specific Performance: The aggrieved party can
choose to uphold the contract and request that the breaching party fulfill their
obligations as specified in the contract.

• Uphold the Contract, Claim Specific Performance, and Damages: In addition to

requesting specific performance, the aggrieved party can also claim damages as
compensation for any losses suffered due to the breach.

• Cancel the Contract and Claim Damages: The aggrieved party may decide to
cancel the contract entirely and seek damages to recover any losses incurred as a
result of the breach.

• Claim Damages Alone: It's also an option for the aggrieved party to solely claim
damages without canceling the contract.

4. Exceptio Non Adimpleti Contractus Defense: If a person sues for breach of a contract but
has not fully performed their own obligations under the contract, they may encounter the
defense of "exceptio non adimpleti contractus." This means that they must fulfill their own
obligations under the contract before they can compel the other party to perform.

Simple Explanation of Remedies for Breach of Contract:

When someone breaks a contract, they can't just get away with it. The person harmed by the breach
has some options:

• If the breach is really bad, they can cancel the contract.

• If they still want the contract to be fulfilled, they can ask the breaching party to do exactly
what the contract says.

• They can also ask for money to make up for any losses they suffered because of the breach.

• If they didn't do everything they were supposed to in the contract, they might have to do their
part before making the other person do their part. This is called "exceptio non adimpleti
contractus."

It all depends on how bad the breach is and what the person wants to do about it.

Specific Performance
• Demand for Similar Performance: If one party is ready and willing to fulfill their
obligations as per the contract, they can demand that the other party also performs their
contractual duties in a similar manner.

• Specific Performance: Specific performance refers to a legal remedy where a party asks the
court to order the debtor (the party who owes a performance) to carry out exactly what was
agreed upon in the contract. It's often sought when monetary damages are insufficient to
remedy the harm caused by a breach.

• Contempt of Court: If the debtor fails to perform as per the court order for specific
performance, they can be found in contempt of court. This means they are not complying with
a court order, which can lead to legal consequences.

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 • Alternative Damages: When a party requests specific performance, it's common to also
request damages as an alternative remedy. This is because the court may not always grant
specific performance, or it might not have the jurisdiction to do so. Therefore, damages serve
as a fallback option to compensate for any losses suffered due to the breach.

Simple Explanation of Specific Performance:

If one person in a contract is ready to do their part, they can ask the court to make the other person do
exactly what they promised in the contract. This is called "specific performance." If the person who's
supposed to do it doesn't follow the court's order, they can get in trouble with the court. But
sometimes, the court might not be able to order specific performance, or it might not be the right place
to do it. In those cases, the person asking for it can also ask for money to make up for any losses they
had because of the breach. That way, they have another option if specific performance isn't possible.

Summary of Situations Where Specific Performance Will Not Be Granted:

Specific performance, which is the legal remedy of forcing a party to fulfill their contractual
obligations, may not be granted in certain situations due to legal and equitable considerations. Here
are the circumstances where specific performance is typically not granted:

1. Impossibility of Performance: If it is impossible for the debtor (the party owing

performance) to fulfill their contractual obligations for reasons beyond their control, such as
physical impossibility or the destruction of the subject matter of the contract, specific
performance will not be granted.

2. Adequacy of Damages: When monetary damages would adequately compensate the

aggrieved party for the losses suffered as a result of the breach, the court may prefer to award
damages instead of specific performance.

3. Inequity or Unfairness: If enforcing specific performance would be unfair or inequitable to

either the breaching party (defendant) or a third party, the court may decline to grant this
remedy.

4. Personal Relationships: In cases where the contractual performance involves a highly

personal relationship, such as an employment contract, and the court determines that specific
performance would not be appropriate or practical, it may not be granted.

5. Against Public Policy: Specific performance will not be granted if enforcing the contract
would violate public policy or go against established legal principles.

These considerations help the court decide whether specific performance is the appropriate remedy in
a given case or if other remedies, such as damages, should be awarded instead.

Simple Explanation of When Specific Performance Is Not Granted:

Specific performance, which means making someone do what they promised in a contract, might not
be allowed in certain situations:

• When it's impossible for the person to do what they promised.

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 • When giving money to make up for losses is enough to fix the problem.

• When making someone do it would be unfair to them or someone else.

• When the contract is about a very personal relationship, like a job.

• When making someone do it would break important rules or go against what's right for
society.

In these cases, the court might choose other ways to solve the problem instead of making someone
perform the contract.

Cancellation
Summary of Cancelling a Contract Due to Repudiation or Material Breach:

When one party clearly repudiates a contract or breaches an essential (material) term of the contract,
the aggrieved party has the option to cancel the contract or cancel and claim damages. Here are some
key points to understand:

• Cancellation Rights: If one party commits a serious breach, such as repudiation or a breach
of an essential term, the other party has the right to cancel the contract. This means they can
terminate the contract.

• Importance of Election to Cancel: It's important to note that a breach by itself, no matter
how serious, doesn't automatically terminate the contract. The contract only ends when the
innocent party (the aggrieved party) decides to exercise their right to cancel, which is known
as making an "election" to cancel.

• Liability for Performances: If the aggrieved party doesn't choose to cancel the contract after
a breach, both parties remain responsible for their contractual obligations, even though a
breach has occurred.

• Breach of Essential Term: An essential term of the contract is one that is so crucial that
without it, the other party would not have entered into the contract. Breaching an essential
term is a serious matter that can give rise to cancellation.

• Alternative: Claiming Damages: If the breach is not of an essential term, the aggrieved
party may not have the right to cancel the contract but may still be entitled to claim damages
to compensate for the losses suffered due to the breach.

Simple Explanation of Cancelling a Contract Due to Repudiation or Material Breach:

If someone in a contract clearly breaks the rules or does something very important in the contract, the
other person can decide to end the contract. This doesn't happen automatically; the person who was
hurt by the breach has to choose to end it. If they don't end it, both people still have to do what they
promised in the contract, even if there was a breach.

The contract can be canceled if the broken rule was really important – so important that the other
person wouldn't have agreed to the contract without it. If the rule wasn't that important, the person
hurt by the breach might not be able to end the contract but can still ask for money to make up for any
losses caused by the breach.

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Damages
In contract law, there are two main types of damages that an aggrieved party can claim when there is a
breach of contract, depending on the nature of the breach:

1. Compensatory Damages: Compensatory damages are designed to compensate the aggrieved

party for the losses they have suffered due to the breach. There are two subcategories of
compensatory damages:

• General Damages: General damages cover the loss directly and necessarily incurred
by the breach of contract. These are the most common type of damages awarded for
breaches of contract and are meant to reimburse the aggrieved party for their actual
losses.

• Special Damages (Consequential Damages): Special damages, also known as

consequential damages, cover any loss incurred by the breach of contract because of
special circumstances or conditions that are not ordinarily predictable. They
compensate for specific, foreseeable losses that result from the breach.

2. Punitive Damages: Punitive damages are rarely applied in contract law. They are intended to
punish the party in breach for their wrongful conduct rather than to compensate the aggrieved
party. Typically, punitive damages are awarded in cases of extreme misconduct or fraud, and
they are more commonly associated with tort law (e.g., personal injury cases).

Purpose of Damages in Contract: It's essential to note that damages in contract law are not meant to
provide a windfall to the aggrieved party but to put them in the position they would have been in if the
contract had been properly performed. In other words, the goal is to compensate for actual losses, not
to provide additional gains.

Simple Explanation of Types of Damages in Contract Law:

When someone breaks a contract, the other person can ask for money to make up for the losses they
had because of the breach. There are two main types of this money:

• General Damages: This covers the usual losses directly caused by the breach, like the cost of
getting something fixed.

• Special Damages: These cover special, specific losses that happened because of the breach.
They are only paid if they were predictable and related to the breach.

Determining Damages in Contract Law:

Sometimes, in very rare cases, the person who broke the contract might have to pay extra money as a
punishment. This doesn't happen often and is mostly for really bad behavior, not to compensate for
losses.

The main goal is to make sure the person who kept their end of the deal is in the same position they
would have been if the contract had been done right.

In contract law, when a breach occurs, and the aggrieved party seeks damages, several requirements
must be met, similar to those in a delict (tort) claim:

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 1. Causation: The plaintiff (aggrieved party) must demonstrate that the breach of contract
caused actual loss or damage. In other words, there should be a direct link between the breach
and the losses suffered.

2. Natural and Direct Consequence: The loss or damage claimed by the plaintiff should be a
natural and direct consequence of the breach. It must be a foreseeable result of the breach.

3. Financial Loss Only: In contract law, the plaintiff can only claim damages for financial loss.
Emotional harm, psychological harm, and other non-financial losses are generally not
recoverable in contract cases.

4. Burden of Proof: The plaintiff is responsible for proving their damages. They must provide
evidence to support their claim. Courts do not accept speculation or assumptions.

5. Monetary/Pecuniary Loss: The plaintiff can only seek damages for actual monetary or
pecuniary losses that have already been incurred or will be suffered in the future.

6. Mitigation of Loss: The plaintiff is required to make reasonable efforts to reduce the losses
they suffer as a result of the defendant's breach. Failure to mitigate damages may limit the
amount of compensation awarded.

Simple Explanation of Determining Damages in Contract Law:

In contract cases, if someone wants to get money because the other person broke the contract, they
have to show a few things:

• They have to prove that the breach (the breaking of the contract) actually caused them to lose
money or suffer some kind of damage.

• The loss or damage they claim has to be a result that makes sense from the breach. It can't be
something totally unexpected.

• They can only ask for money to make up for financial losses, like the cost of fixing something
that was supposed to be done in the contract. They can't ask for money for feeling upset or
other non-financial problems.

• They need to provide evidence to prove how much money they lost. The court won't accept
guesses or just saying they lost money without showing how.

• They can only ask for money they've already lost or money they will lose in the future
because of the breach.

• They have to try to do things to stop the losses from getting worse. If they don't, the court
might not give them as much money.

Interdict
In contract law, an interdict refers to an official instruction or court order that prohibits someone from
doing a specific action. Parties in a contract can approach the court if they anticipate a breach or
potential breach of the contract and request an interdict to prevent it. Here are some key points to
understand:

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 • Purpose of an Interdict: An interdict is sought to prevent a party from violating or
potentially violating the terms of a contract. It serves as a legal tool to enforce the contract
and protect the rights of the aggrieved party.

• Requirements for Granting an Interdict: Before a court will grant an interdict, the
applicant (the party seeking the interdict) must establish three key elements:

1. Clear Right: The applicant must demonstrate that they have a clear legal right that is
being threatened or violated by the other party's actions. This means showing that the
action being prohibited is contrary to the terms of the contract.

2. Injury (Damage) or Reasonable Apprehension: The applicant must prove that they
have suffered actual harm or damage due to the other party's actions or that such harm
is reasonably anticipated if the actions continue.

3. Absence of Similar Protection or Other Remedy: The court will typically grant an
interdict when there is no other adequate protection or remedy available to address
the breach or potential breach of the contract.

An interdict can be a powerful legal tool to prevent breaches of contract and protect the rights and
interests of the parties involved.

Simple Explanation of Interdict in Contract Law:

In contract law, when one person is worried that the other person might break the contract, they can
ask the court for an official order to stop them from doing that. This order is called an "interdict." To
get an interdict, the person asking for it has to show three things:

• They have a clear right, meaning they are supposed to get something according to the
contract.

• They have been hurt or will be hurt if the other person goes against the contract.

• There is no other way to protect them or fix the problem, like getting money for the harm. If
there is no other good way to stop the problem, the court can give the interdict to prevent it
from happening.

DECLARATORY ORDER
In contract law, a declaratory order is a flexible legal remedy that helps clarify issues of law quickly
and efficiently. Here are key points to understand:

• Purpose of a Declaratory Order: A declaratory order is sought when a party is uncertain

about their rights and obligations in a contract dispute. It is a legal mechanism to obtain a
clear and formal statement from the court about the legal status or interpretation of the
contract.

• Requirement of a Pre-existing Interest: The party seeking a declaratory order must have a
pre-existing, direct, and substantial interest in obtaining the declaratory relief. This means
they must be directly affected by the issue being clarified.

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 • Purely a Question of Law: Declaratory orders are typically used when the issue at hand
involves purely a question of law. They are not intended for resolving factual disputes or
disputes over the performance of contractual obligations but rather for determining the
existence or absence of a legal right or obligation.

A declaratory order provides a clear legal ruling on the interpretation or legal status of a contract,
helping parties understand their rights and responsibilities under the contract.

Simple Explanation of Declaratory Order in Contract Law:

Sometimes in contract disputes, people are not sure about their legal rights and what the contract
means. In such cases, they can ask the court for something called a "declaratory order." This is like
asking the court to explain what the contract says and what the law means in their situation.

To get a declaratory order, the person asking for it must be directly involved in the dispute, and the
issue must be a legal question, not a factual one. It's a way to quickly and clearly understand the legal
side of a contract problem.

PENALTY CLAUSE
In contract law, parties may include a "penalty clause" in their contract to provide a remedy in case of
a breach. Here are the key points to understand about penalty clauses:

• Purpose of Penalty Clauses: Penalty clauses are included in contracts to avoid the
complexities of proving damages in a court action if a breach occurs. They serve as a
predetermined way to address breaches and their consequences.

• Nature of Penalty Clauses: A penalty clause typically obligates the defaulting party to pay a
fixed sum of money, return property, forfeit installments already paid or due, or take some
other specified action in the event of a breach. The penalty can apply for a particular specified
breach or even any breach of the contract.

• Enforcement Challenges: Penalty clauses can be challenging to enforce because they are
often seen as punitive rather than compensatory. Courts may view them with skepticism if
they appear to be overly harsh or disproportionate to the actual harm suffered.

• Court Discretion: Courts have the authority to reduce the penalty imposed by a penalty
clause if they consider it to be unfair or unreasonable in the specific circumstances of the
case. The goal is to ensure that the remedy provided by the penalty clause is equitable and
proportionate to the breach.

Penalty clauses are a way for parties to contractually agree on the consequences of a breach, but they
should be carefully drafted to withstand scrutiny and potential court intervention.

Simple Explanation of Penalty Clauses in Contract Law:

In contracts, people can include something called a "penalty clause." This clause says what will
happen if someone breaks the contract. It could make the person who breaks the contract pay a certain
amount of money or do something specific.

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But there's a catch: these penalty clauses can be tricky. If the penalty is too harsh or unfair, the court
might not enforce it as written. The court can decide to make the penalty smaller if it thinks that's
fairer. So, while penalty clauses can be useful, they need to be reasonable and fair to be effective.

Multiple Choice Question Bank on Contract Law

Question 1: What is the primary purpose of a declaratory order in contract law?

A. To enforce contract terms

B. To clarify legal issues expeditiously

C. To award monetary damages

D. To terminate the contract

Answer: B. To clarify legal issues expeditiously

Question 2: In contract law, when is a party allowed to sue for punitive damages?

A. When any breach of contract occurs

B. When the breach causes emotional harm

C. When the breach involves extreme misconduct

D. When the breach results in financial loss

Answer: C. When the breach involves extreme misconduct

Scenario for Questions 3 and 4: John and Sarah enter into a contract where John agrees to sell his
car to Sarah for $5,000. Sarah pays the amount, but John refuses to hand over the car.

Question 3: What type of breach has occurred in this scenario?

A. Repudiation

B. Mora debitoris

C. Positive malperformance

D. Prevention of performance

Answer: B. Mora debitoris

Question 4: If Sarah wants the court to order John to fulfill the contract and hand over the car, what
legal remedy should she seek?

A. Specific performance

B. General damages

C. Compensatory damages

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D. Punitive damages

Answer: A. Specific performance

Question 5: Which type of damages in contract law compensates for losses directly and necessarily
incurred by the breach?

A. General damages

B. Special damages

C. Consequential damages

D. Punitive damages

Answer: A. General damages

Question 6: A clause in a contract that imposes an overly harsh penalty on the breaching party is:

A. Unenforceable

B. A punitive clause

C. A penalty clause

D. A liquidated damages clause

Answer: A. Unenforceable

Scenario for Questions 7 and 8: Tom signs a contract with XYZ Construction to build a house. The
contract specifies that the construction must be completed within 12 months.

Question 7: If XYZ Construction fails to complete the construction within the stipulated 12 months,
what type of breach is this?

A. Anticipatory breach

B. Material breach

C. Immaterial breach

D. Repudiation

Answer: B. Material breach

Question 8: Which remedy would Tom likely seek for XYZ Construction's failure to complete the
construction on time?

A. Specific performance

B. Compensatory damages

C. Punitive damages

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D. Declaratory order

Answer: A. Specific performance

Question 9: In contract law, what is the key requirement for granting an interdict?

A. Existence of a clear right

B. Existence of monetary damages

C. Existence of emotional distress

D. Existence of special circumstances

Answer: A. Existence of a clear right

Question 10: A contract clause that restricts a party from engaging in a certain activity after the
contract ends is a:

A. Penalty clause

B. Restitution clause

C. Restrictive covenant

D. Exculpatory clause

Answer: C. Restrictive covenant

Question 11: In contract law, when will a court typically grant a declaratory order?

A. When the issue is a factual dispute

B. When the issue involves purely a question of law

C. When the issue is related to emotional harm

D. When the issue is not addressed in the contract

Answer: B. When the issue involves purely a question of law

Scenario for Questions 12 and 13: Alice agrees to sell her antique piano to Bob for $3,000. Before
the sale, Alice sells the piano to Cathy without informing Bob.

Question 12: What type of breach has Alice committed in this scenario?

A. Repudiation

B. Mora creditoris

C. Prevention of performance

D. Positive malperformance

Answer: C. Prevention of performance

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Question 13: What remedy can Bob seek due to Alice's breach in the scenario?

A. Specific performance B. General damages C. Special damages D. Liquidated damages

Answer: A. Specific performance

Question 14: In contract law, what is the purpose of a penalty clause?

A. To facilitate damages assessment

B. To provide a fixed remedy for a breach

C. To terminate the contract immediately

D. To create uncertainty in contract terms

Answer: B. To provide a fixed remedy for a breach

Question 15: In a contract, a clause that specifies the amount a breaching party must pay as
compensation for a breach is called:

A. A penalty clause

B. A liquidated damages clause

C. A compensatory clause

D. A punitive damages clause

Answer: B. A liquidated damages clause

Question 16: A contract clause that restricts a party from disclosing certain information is a:

A. Nondisclosure clause

B. Confidential

C. Exclusion clause D. Restitution clause

Answer: B. Confidentiality clause

Question 17: What is the main purpose of compensatory damages in contract law?

A. To punish the breaching party

B. To restore the non-breaching party to the position they would have been in if the contract was
properly performed

C. To prevent the breaching party from future breaches

D. To compensate for emotional distress

Answer: B. To restore the non-breaching party to the position they would have been in if the contract
was properly performed

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Question 18: A contract clause that absolves a party from liability for certain acts or negligence is:

A. An exclusion clause

B. A force majeure clause

C. A penalty clause

D. A restitution clause

Answer: A. An exclusion clause

Question 19: In contract law, what is the consequence of a repudiation of the contract by a party?

A. The contract is terminated immediately

B. The non-repudiating party must pay a penalty

C. The repudiating party must pay compensatory damages D. The parties renegotiate the contract
terms

Answer: A. The contract is terminated immediately

Question 20: Which type of damages in contract law compensate for losses that are a direct
consequence of the breach but are not easily measurable? A. General damages B. Special damages C.
Consequential damages D. Punitive damages

Answer: C. Consequential damages

Termination
Termination of contract
1. Terminating a Contract: The main ways to end a contract are by doing what was agreed
(performance) or canceling it due to delays or breaches.

2. Cancellation for Mora or Breach: If one party delays or breaks the agreement, the other can
cancel the contract.

3. Other Ways to End a Contract: Besides performance and cancellation, there are other
reasons a contract might end. Some are due to how the parties behave or decide, while others
are based on legal rules (operation of law).

PERFORMANCE OR PAYMENT
1. Post-Performance Termination: When both parties fulfil their contract obligations, the
rights and duties from the contract are fulfilled or satisfied.

2. No Formalities Needed: After fulfilling the contract, no specific formal actions are necessary
to terminate it because it ends automatically according to the law.

TERMINATING A CONTRACT: NOTICE

1. Unilateral Termination:

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 • A party can end a contract on their own with notice, as permitted by statute, common
law, or the contract terms.

• This is common in contracts like employment agreements.

2. Notice Period:

• The contract may outline a notice period for termination.

• If not specified, termination requires "reasonable notice," which varies based on the
specific circumstances of each case.

3. Reasonable Notice:

• "Reasonable" is flexible and depends on the unique facts and situation for each
contract termination.

RELEASE
1. Definition and Names:

• Release, also called waiver, discharge by agreement, or renunciation, involves giving

up rights or obligations in a contract.

2. Waiving Rights:

• Parties can choose to waive their rights or obligations outlined in the contract.

• This essentially means letting go of certain entitlements or duties in the contract.

3. Communication and Formalities:

• Waiver requires communication to the other party to be effective.

• No formal procedures are needed unless specified in the contract for the waiver to be
valid.

NOVATION
1. Definition:

• Novation is the process of replacing an existing obligation in a contract with a new

one, effectively discharging the original obligation.

2. Not a Payment:

• Novation is not a form of payment; it's about replacing an obligation with a new one.

3. Substituting Agreements:

• A valid and new agreement takes the place of the original agreement in a novation.

4. Key Requirement:

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 • Intention to novate is essential; both parties must intend to replace the original
obligation.

5. Agreement and Discharge:

• Parties must agree to novate, and once agreed, the initial obligation is discharged, and
a new obligation takes its position.

MERGER
1. ebtor Becomes Creditor:

• When a person owes a debt (debtor) to themselves (creditor), it results in a unique

situation.

2. Debt Discharge:

• If the debt and credit are within the same person, the debt is considered discharged or
cleared.

3. Example:

• For instance, if a tenant who owes rent purchases the property they were leasing, their
debt as a tenant is cleared automatically, and they become the property owner.

IMPOSSIBILITY OF PERFORMANCE
1. Impossibility as Discharge:

• Impossibility is a way a contract ends automatically by law.

2. Initial Impossibility:

• If a contract is initially impossible to perform, it's considered void.

3. Supervening Impossibility:

• If performance becomes impossible due to unforeseen circumstances, the contract

becomes voidable.

4. Prevented Performance:

• If a person can't fulfill the contract due to extraordinary events like acts of nature or
government actions (vis major or causus fortuitus), they're released from liability.

5. Effects of Impossibility:

• In cases of impossibility, all rights and duties between the parties are removed, and
there's no breach or obligation for damages.

SET-OFF (compensatio)
1. Debt Balancing:

• If both parties in a contract owe each other money, their debts can offset each other.

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 2. Set Off Definition:

• Set off involves balancing debts against each other:

• Lesser debt is cleared, and the larger debt is reduced by the smaller debt's amount if
the debts are unequal.

• If the debts are equal, both are cleared.

3. Set Off as 'Payment':

• Set off can be seen as a form of 'payment' in a contract.

4. Contractual Exclusion:

• Parties can explicitly exclude set off in their contract if they wish to do so.

PRESCRIPTION
1. Lapsing Due to Time Passing:

• Rights or obligations in a contract can disappear when a certain amount of time

passes.

2. Prescription Effect:

• Prescription, governed by the Prescription Act 68 of 1969, extinguishes both the debt
and any associated interest.

3. Statutory Basis:

• The process of prescription is primarily guided by the Prescription Act, but if the Act
doesn't cover a specific scenario, common law principles apply.

TYPES OF PRESCRIPTION
Extinctive Prescription
1. Definition:

• Extinctive prescription refers to the debt becoming void over time.

2. Time Periods:

• The time it takes for a debt to become void varies based on the type of debt:

• Thirty years for specific debts like those secured by a mortgage bond, judgment debt,
or certain payments to the state.

• Fifteen years for debts owed to the state resulting from loans or land transactions.

• Six years for debts from bills of exchange, negotiable instruments, or notarial
contracts.

• Three years for any other type of debt.

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 3. Running Period:

• The prescription period generally starts from the due date when the debt becomes
enforceable.

4. Legal Action Requirement:

• Creditors must initiate legal proceedings within the specified time or risk losing their
rights to enforce the debt.

Acquisitive prescription
1. Definition:

• Acquisitive prescription is a legal principle where possession of an item, with the

intention of ownership, for an uninterrupted 30-year period, grants the possessor the
right of ownership.

2. Ownership Transformation:

• Possession with the intent to own over 30 years transforms possession into full
ownership.

3. Applicability:

• This principle applies to both movable and immovable physical properties.

DEATH
1. Executor's Liability:

• The executor of a deceased person's estate is responsible, in a representative capacity,

for contracts the deceased would have been liable for during their lifetime.

• The liability is limited to the assets within the deceased person's estate.

2. Claiming Fulfilment:

• The executor has the authority to request others to fulfill contracts that were in place
with the deceased person.

ROUWGELD CLAUSE
1. Contractual Provision for Termination:

• A contract may include a clause that permits a party to exit the contract by paying a
specific sum of money.

2. Example Scenario:

• For instance, Mary rents Lucy's house and pays a deposit.

• If Mary decides to cancel the lease, she forfeits the deposit as outlined in the
"Rouwgeld" clause.

3. Non-Breach Termination:

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 • Even though Mary withdraws from the contract by paying the specified sum, she is
not considered to be in breach of the contract.

COOLING-OFF PROVISIONS
1. Protecting Inexperienced Buyers:

• To safeguard inexperienced buyers from pressure, certain contracts allow termination

within a set period after the agreement is made.

2. Eligible Contracts for Termination:

• This provision applies to contracts such as lease or instalment agreements and the sale
of land.

3. Termination Period:

• The contract allows one of the parties to terminate within a period of five (5) days
from the agreement date.

Multiple Choice Questions:

Question:

What is novation in contract law?

A. Replacing an existing obligation with a new one

B. Extending the contract duration

C. Cancelling a contract

D. Modifying the contract terms

Answer: A. Replacing an existing obligation with a new one

Question:

Acquisitive prescription is applicable to which type of property?

A. Intellectual property

B. Movable property

C. Real property

D. Personal property

Answer: C. Real property

Question:

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In which situation can set off be excluded from a contract?

A. Both parties owe equal amounts

B. Debts are of different types

C. Parties have expressly excluded it

D. Parties are family members

Answer: C. Parties have expressly excluded it

Question:

Extinctive prescription applies to:

A. Gaining ownership through possession

B. Balancing debts between parties

C. Lapsing of a debt over time

D. Disputes between contracting parties

Answer: C. Lapsing of a debt over time

Question:

What is the purpose of a clause allowing termination with a specified payment in a contract?

A. To pressure parties into the contract

B. To cancel the contract without consequences

C. To provide an exit option by paying a designated amount

D. To prolong the contract duration

Answer: C. To provide an exit option by paying a designated amount

Question:

In which type of contract does acquisitive prescription typically apply?

A. Employment contracts

B. Loan agreements

C. Lease agreements

D. Service contracts

Answer: C. Lease agreements

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Question:

Extinctive prescription for a debt arising from a Bill of Exchange or notarial contract occurs after how
many years?

A. 3 years

B. 6 years

C. 15 years

D. 30 years

Answer: B. 6 years

Question:

The right of possession can transform into the right of ownership through:

A. Novation

B. Acquisitive prescription

C. Extinctive prescription

D. Set off

Answer: B. Acquisitive prescription

Question:

A contract clause allowing termination with a specified payment is primarily intended to:

A. Encourage contract breaches

B. Prevent contract termination

C. Provide a legal way to exit the contract

D. Mandate additional payments

Answer: C. Provide a legal way to exit the contract

Question:

What does set off involve in a contract?

A. Balancing debts between parties

B. Setting a fixed contract price

C. Extending the contract duration

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D. Increasing contract obligations

Answer: A. Balancing debts between parties

Question:

The time period for extinctive prescription for debts secured by a mortgage bond or judgment debt is:

A. 15 years

B. 30 years

C. 3 years

D. 6 years

Answer: B. 30 years

Question:

When can novation occur in a contract?

A. When the original agreement is breached

B. When both parties agree to replace the initial obligation

C. When one party refuses to perform their duties

D. When there's a minor modification to the contract terms

Answer: B. When both parties agree to replace the initial obligation

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