Topic 9
Termination of contracts by law
Ways in which you can pass, vary
and end rights and duties
6/
1 2 3 4 5 7
Proper Prescriptio Impossibilit Merger Set off Death/
Performanc n y of Insolvency
e Performanc
e
2
Ways in which you can pass, vary and end
rights and duties
• Reciprocal performances
• If BOTH parties have done what was
required of them in terms of the
contract
1
• The contract AUTOMATICALLY comes
to an end.
Proper
Performanc • Parties MUST comply with ALL the
prescribed requirements (full and
e proper performance)
• Performance must not be defective
3
Ways in which you can pass, vary
and end rights and duties
• The law provides for contractual
obligations to come to end
2 AUTOMATICALLY after a certain period.
• We say obligations have PRESCRIBED
Prescription • Regulated by the Prescription Act 68 of 1969
• SECTION 11 of the Prescription Act 68 of
1969 sets out the periods of prescription
4
Ways in which you can pass, vary
and end rights and duties
• 30 YEARS:
• Debt secured by MORTGAGE BOND
2
• JUDGEMENT debt
Prescription • Debt of any TAX IMPOSED/LEVY under
any law
• Debt OWED to the STATE
• Share of the profits
• Royalties
• Any similar consideration payable in mine
minerals or other substances 5
Ways in which you can pass, vary
and end rights and duties
• 15 YEARS:
• Debt OWED to the STATE
2 • Advance or loan of money
• Sale or lease of land e Share of the profits
Prescription • 06 YEARS:
• Debt from a BILL OF
EXCHANGE/NOTARIAL DEBT
• 03 YEARS:
• Any OTHER DEBT, except where an Act
provides otherwise 6
Ways in which you can pass, vary
and end rights and duties
• Runs from the day the debt is DUE
2 • CREDITOR has knowledge of the debtor's
IDENTITY and FACTS OF THE DEBT =
obtained through REASONABLE STEPS
Prescription
• Interrupted prescription =
Acknowledgement of liability
• set to ZERO and begins again.
• Serving summons
7
Ways in which you can pass, vary
and end rights and duties
• Postponement of Prescription –
Section 13(1) of the Prescription Act.
2
• Postponed due to an IMPEDIMENT
Prescription
• It STOPS for 1 year and afterwards
continues
8
Ways in which you can pass, vary
and end rights and duties
3
What can you remember
about impossibility as a
Impossibility
of requirement?
Performance
9
Ways in which you can pass, vary
and end rights and duties
• SUPERVENING IMPOSSIBILITY arises
when, after the conclusion of a valid
contract, performance becomes
3 OBJECTIVELY impossible for one or more
parties to the contract
Impossibility
of • The contract terminates
Performance AUTOMATICALLY
• Right and obligations end and NO breach
of contracts
10
Ways in which you can pass, vary
and end rights and duties
4 • Joining or coming together of
two or more things
Merger
• Debtor and creditor merge into
one regarding the same debt
11
Ways in which you can pass, vary
and end rights and duties
• The debts that two people owe each other
may be set-off against each other
5 • Happens automatically if the following
requirements are met:
• Acting in the same CAPACITY
Set-off • Same kind of NATURE
• Due and enforceable
• Liquidated AT TIME of set-off
• NO formalities and NO prior agreement,
UNLESS the parties explicitly AGREE to 12this
Ways in which you can pass, vary
and end rights and duties
• Depending on the type of performance,
contracts will not automatically terminate.
6
• Objective Impossibility
• Performance is of a personal nature and can
Death ONLY be performed by/from the decease and
cannot be transferred to the deceased estate
= TERMINATE
•
• Performance is NOT of a personal nature
and can be transferred to deceased’s
estate = VALID 13
Ways in which you can pass, vary
and end rights and duties
• Upon sequestration, a trustee is appointed
• The trustee takes control over the insolvent estate,
7 by STEPPING INTO THE SHOES of the insolvent
• If contracts were entered into before insolvency
Insolvency TRUSTEE will decide whether to uphold/terminate
these contracts
• Decision is final and made in the BEST INTEREST
OF THE CREDITORS
• Needs to make decision within a REASONABLE
TIME 14