A Comparative Analysis of Cancellation, Discharge
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A COMPARATIVE ANALYSIS OF CANCELLATION, DISCHARGE AND AVOIDANCE AS A REMEDY FOR BREACH OF CONTRACT IN SOUTH AFRICAN LAW, ENGLISH LAW AND THE CONVENTION FOR INTERNATIONAL SALE OF GOODS (CISG). By BEAUTY VAMBE submitted in accordance with the requirements for the degree of MASTER OF LAWS at the UNIVERSITY OF SOUTH AFRICA SUPERVISOR: PROFESSOR SIEG EISELEN FEBRUARY 2016 ABSTRACT The aim of the thesis was to critically compare termination of contracts in South Africa, England and the CISG. It was found out that South Africa prefers to use the term cancellation because it is a remedy of last resort. The problem with cancellation is that is a drastic step of bringing the transaction to an abrupt and premature end, which is only used when a material breach occurs. English law uses the term discharge as it refers to the ending of the obligations under the contract when a breach occurred and represents the point at which one party is no longer bound by its’ contractual obligations and claims damages. Chapter 3 argued that though discharge goes beyond cancellation it does not cater for diverse domestic rules which need uniform international laws. Chapter 4 discussed and argued that avoidance is a term that was chosen by the CISG to end a contract when a fundamental breach occurs. There were problems on interpretation of terms and use of diverse domestic rules. The advantage of the term avoidance is that it is a technical term adopted and given a uniform meaning in the CISG where interpretation of terms and diverse domestic rules did not apply. Avoidance furthermore comprised concepts of rescission and termination. From the above it was argued that South Africa needs to develop new terms for termination of a contract and create new laws along the lines of the CISG. i DEDICATION To My Parents ii ACKNOWLEDGEMENTS I am greatly honored and privileged in expressing my sincere gratitude to UNISA, which gave me the opportunity to study at the institution. I am also grateful for the bursary from UNISA which enabled me to complete my studies. My supervisor, Professor Sieg Eiselen, whose academic competence, guidance and patience enabled me to stay focused and complete my studies. He is a leading publisher and scholar who gave me a platform to nature and sharpen my critical analysis, language and presentation of work. I am truly humbled and honored with the guidance Professor Eiselen gave me. I want to express my heartfelt gratitude to the UNISA library, a first class leading library which enabled me to use its books and internet facilities to carry out and complete my studies. I wish to express my gratitude to Mr Tsepo Constable, the most advanced librarian in the world for his patience and unwavering support in advanced research skills, much needed at the LLM level. I thank you. To my husband, Professor Maurice Taonezvi Vambe, I am grateful for he has been a great pillar of strength and great motivator in my scholarly life. He inspired and stood by me through the tough times. My sons, Takunda, Tanatswa and Tafadzwa, who gave me courage and hope for a better tomorrow, I am indebted to you. My acknowledgements also go to my parents, Mr and Mrs Chawatama, for giving me a sound primary and high school education. To my sisters: Jessica (late), Queen, Precious, Patience (late) and brother, Farai for their uncompromising support and prayers. I am sincerely grateful for they encouraged me to persevere until the end. Last but not least, I want to express my sincere gratitude to all friends, relatives and colleagues who contributed to the completion of my studies. iii KEY WORDS Termination Cancellation South Africa Discharge English law Avoidance CISG Breach Remedy Notice Rescission iv TABLE OF CONTENTS CHAPTER 1 1 1.0 Background to the study 1 1.1 Statement of the problem 2 1.2 Aim of the study 4 1.3 Objectives of the study 4 1.4 Research questions of the study 5 1.5 Chapter organization 5 CHAPTER 2: Cancellation under South African Law 8 2.1 Introduction 8 2.2 Terms for termination in South Africa 8 2.2.1 Introduction 8 2.2.2 Repudiation 9 2.2.3 Rescission 9 2.2.4 Cancellation 10 2.2.5 Conclusion 10 2.3 Requirements for Cancellation 11 2.3.1 Introduction 11 2.3.2 Materiality of Breach 11 2.3.2.1 Introduction 11 2.3.2.2 Mora debitoris as a breach 13 2.3.2.2.1 Introduction 13 2.3.2.2.2 Requirements for mora debitoris 13 2.3.2.2.3 Conclusion to mora debitoris 18 2.3.3 Mora creditoris as a breach 18 2.3.3.1 Introduction 18 2.3.3.2 Requirements for mora creditoris 19 2.3.3.3 Conclusion to mora creditoris 22 2.3.4 Positive mal-performance 23 2.3.4.1 Introduction 23 2.3.4.2 Requirements for positive mal-performance 23 2.3.4.3 Defective conduct in conflict with a contractual obligation 24 2.3.4.4 Conclusion 24 2.3.5 Prevention of performance as a breach 24 2.3.5.1 Introduction 24 2.3.5.2 Requirements of prevention of performance 25 2.3.5.3 Conclusion to prevention of performance 27 2.4 Repudiation as breach 28 2.4.1 Introduction 28 2.4.2 Requirements for Repudiation 29 v 2.4.3 Conclusion to Repudiation 32 2.5 Notice of cancellation 33 2.5.1 Introduction 33 2.5.2 Requirements for notice of cancellation 33 2.5.3 Conclusion on notice of cancellation 37 2.6 Restitution 37 2.6.1 Introduction 37 2.6.2 Requirements for restitution 38 2.6.3 Conclusion for Restitution 40 2.7 Conclusion to the chapter 41 CHAPTER 3: Discharge under English law 45 3.1 Introduction 45 3.2 Terms to define termination under English law 45 3.2.1 Introduction 45 3.2.2 Repudiation 46 3.2.3 Rescission 47 3.2.4 Discharge 47 3.2.5 Conclusion 48 3.3 Requirements for discharge 48 3.3.1 Introduction 48 3.3.2 Forms of breach and discharge 49 3.3.2.1 Introduction 49 3.3.2.2 Breach of condition 49 3.3.2.3 Breach of warranty 50 3.3.3 Conclusion 51 3.4 Fundamental breach 52 3.4.1 Introduction 52 3.4.2 Forms of fundamental breach 52 3.4.2.1 Definition of terms 52 3.4.3 Breach of Condition 55 3.4.4 Non- performance and discharge 56 3.4.5 Repudiatory Breach 58 3.4.6 Conclusion 60 3.4.7 Late performance 62 3.4.7.1 Introduction 62 3.4.7.2 Time is of essence 62 3.4.7.3 Election 65 3.4.7.4 Conclusion 67 3.4.7.5 The notice procedure 67 3.5 Restitution 69 3.5.1 Introduction 69 3.5.2 Requirements for restitution 69 3.5.3 Conclusion 72 vi 3.6 Conclusion to the chapter 73 4.0 CHAPTER 4: Avoidance as a Remedy for Breach of Contract under the CISG 77 4.1 Introduction 77 4.2 Definition of terms 79 4.2.1 Introduction 79 4.2.2 Rescission 79 4.2.3 Repudiation 80 4.2.4 Avoidance 81 4.2.5 Conclusion 82 4.3 Seller’s right to avoidance 83 4.3.1 Buyer’s right to avoidance 84 4.4 Requirements of avoidance 85 4.4.1 Introduction 85 4.4.2 Fundamental breach 85 4.4.2.1 Introduction 85 4.4.2.2 Elements relating to the aggrieved party: "substantial detriment" and "contractual expectation" 86 4.4.2.3 Elements concerning the party in breach: "foreseeability" and the "reasonable person of the same kind" standard 87 4.4.3 Conclusion 88 4.5 Forms of breach of contract 90 4.5.1 Introduction 90 4.5.2 Non-performance 90 4.5.3 Requirements 90 4.5.4 Article 49(1)(b) Nachfrist 91 4.5.5 Failure to establish a letter of credit by buyer 92 4.5.6 Refusal to take delivery by buyer 92 4.5.7 Conclusion 93 4.6 Non-conformity 93 4.6.1 Conclusion 98 4.7 Late Delivery 98 4.7.1 Introduction 98 4.7.2 Requirements 99 4.7.3 Conclusion 100 4.8 Anticipatory Breach 100 4.8.1 Introduction 100 4.8.2 Requirements 100 4.8.3 Conclusion 103 4.9 Notice to Avoid 103 4.9.1 Introduction 104 4.9.2 Requirements 104 4.9.3 Conclusion 106 4.10 Restitution 106 vii 4.10.1 Introduction 106 4.10.2 Requirements 107 4.10.3 Conclusion 108 4.11 Conclusion to the chapter 109 5.0 CHAPTER 5: Critical Comparison of the Concept of Termination in South Africa, England and the CISG 114 5.1 Introduction 114 5.2 Terms for termination under South Africa, England and the CISG 115 5.2.1 Introduction 115 5.2.2 South Africa: Cancellation 115 5.2.3 English Law: Discharge 115 5.2.4 CISG: Avoidance 116 5.2.5 Conclusion on terms 116 5.3 Requirements for cancellation, discharge and avoidance 118 5.3.1 Introduction 118 5.3.2. Requirements for cancellation 118 5.3.3 Requirements for discharge 120 5.3.4 Requirements for avoidance 122 5.4 Conclusion to requirements for cancellation, discharge and avoidance 123 5.5 Consequences of cancellation, discharge and avoidance 126 5.5.1 Introduction 126 5.5.2 Consequences of cancellation under South African law 126 5.5.3 Consequences of discharge under English law 127 5.5.4 Consequences of avoidance under the CISG 127 5.5.5 Conclusion on consequences of Cancellation, Discharge, and avoidance 128 5.6 Evaluation of cancellation, discharge and avoidance as a remedy for Breach 128 5.6.1 Introduction 128 5.6.2 Critical evaluation of cancellation, Discharge and avoidance 129 5.6.3 Conclusion to evaluations of cancellation, discharge and avoidance 131 5.7 Conclusion to the Chapter 131 Abbreviations 136 Acts 136 Bibliography 137 Books 137 Chapters in Books 141 Articles in Journals 144 Internet Source 147 Cases 148 viii Chapter 1 1.0 Background to the Study This study analyses the concepts of cancellation, discharge and avoidance as remedies for breach of contract in South Africa, England and the CISG respectively1.