During December 2012, the high court ordered Cricket South Africa (CSA) to pay R1.64 million to Sandown Travel (Pty) Limited, a travel agency which previously rendered services to CSA.
The judgment holds a couple of important lessons for contracting parties. If an agreement requires a specific notice by a given date any other notice will not bring the contract to an end. Secondly if an innocent party in the face of repudiation of a contract initially keeps the contract alive but allows the other party the opportunity to repent, the innocent party may subsequently cancel the contract and claim damages.
CSA and Sandown Travel concluded an agreement during 2009, which took effect on 1 October 2009. The agreement provided that it would endure for a period of two years and that CSA or Sandown Travel could provide written notice of termination at least six months before the end of the contract date. If no such notice was provided before the end of the contract date, the contract was automatically renewed for another year on the same terms and conditions, subject to the same six months notice process applying for the new period.
Neither party gave notice by 30 March 2011 (which was the six month period prior to the end of the initial two year term), but on 6 April 2011, CSA purported to give notice of termination and contended that that notice was effective on 30 September 2011. Sandown Travel disputed that the agreement terminated on 30 September 2011. It contended that since neither party gave notice by 30 March 2011, the agreement was automatically renewed for another year and could only terminate at the earliest on 30 September 2012.
CSA persisted with the version that the agreement would not extend beyond 30 September 2011.
After September 2011, CSA refused to allow Sandown Travel to continue rendering travel services to CSA. For a while, Sandown Travel remained steadfast in the attitude that the agreement was to endure until 30 September 2012. Eventually on 10 October 2011, Sandown Travel’s attorneys wrote to CSA and said that since CSA was no longer utilising Sandown Travel’s services and was utilising the services of Rennies Travel, that constituted a repudiation of the agreement. Sandown travel accepted the repudiation, cancelled the agreement and claimed damages.
CSA contended that since Sandown Travel had initially elected to keep the contract alive after the repudiation letter dated 6 April 2011, Sandown Travel was precluded from subsequently cancelling the agreement and claiming damages.
The court held that whilst there is plenty of authority which supports the view that once a party makes an election whether to cancel in the face of the breach or not, that party is bound by the decision, there are cases in which despite an election to keep a contract alive, an innocent party can give the repudiating party an opportunity to repent and reconsider its position.
The court found that the doctrine of repentance forms part of our law. In terms of this principle, an innocent party may, when the other party commits a breach, initially elect to ignore the breach and keep the contract alive but allow the defaulting party to repent its decision to repudiate. If the defaulting party fails to do so, the innocent party can change its mind, cancel the agreement and claim damages.
This is an important judgment because there has been some doubt as to whether the repentance principle forms part of our law. Hopefully this judgment will put paid to that debate. If the principle is not part of our law, it will operate unduly harshly against innocent parties.
Written by Aslam Moosajee, Director at Norton Rose