As attorneys, we often deal with matters where one party to an agreement fails to perform in terms of the contract. The innocent party is often left with options ranging from cancelling the contract and claiming damages or demanding performance. Both require the intervention of an attorney and often result in litigation.
What is more, certain types of contracts such as defaulting lessees do not allow the landlord to evict the tenant without a court order. This is often costly and challenging.
The same situation persists in the case of unpaid utilities, for example, where the service cannot only be disconnected as a result of non-payment.
What can you do if the other party defaults?
These issues came before the Supreme Court of Appeal in Smith v van den Heever 2011 (3) SA 140 (SCA). The facts of the case were as follows:
- In this case, Agrichicks (Pty) Ltd, a company that supplied day-old chicks and chicken feed, entered into a contract with Smith, a contracted chicken farmer.
- This process would operate in cycles. Each cycle would commence with Agrichicks’ delivery of day-old chicks to Smith and end with the delivery to Smith of the next batch of chicks 56 days later.
- In the eleven days that intervened between Agrichicks collecting the chicks after 45 days and supplying a new batch after 56 days, Smith would prepare his chicken hatches for the next batch.
- The contract provided that if there was a debit amount owing by Smith at the end of a particular cycle, that debt would be carried forward for two more cycles, and would then become payable by Smith.
The contract between Agrichicks and Smith commenced on 15 June 1999 and was to continue for a period of five years. Unfortunately, Agrichicks almost immediately experienced financial difficulties and the company was eventually liquidated on 14 August 2002. Agrichicks became unable to perform its obligations.
In short, Agrichicks’ failure to fully perform its contractual obligations precluded it from demanding any counter-performance from Smith.
Get professional advice
A contract involving reciprocal obligations is a double-edged sword for both parties. If one party does not perform his obligations or does not perform them properly, the other party is entitled to withhold his performance.
This, however, does not apply to all agreements and should therefore only be utilised with professional advice.