You might, in future, find yourself in a situation where you will want to cancel a contract. This article sets out the requirements for cancelling a contract and gives basic guidance on what to do.

A contract can be cancelled by agreement between the parties or as a result of a material (serious) breach by one of the parties. Breach of contract is when one party refuses or fails to perform its obligations under a contract.

The law regards breach of a contract as a wrongful act in itself which allows the innocent party to cancel the contract. It is important to remember that cancelling a contract is only an option where there is a cancellation clause or where the breach of contract is material or serious. If the contract is silent on cancellation, the innocent party may still cancel the contract provided that the said breach is material or serious in nature.

When a person wants to cancel a contract, the cancelling party (innocent party) will have a choice to either cancel the contract or to enforce it. This article refers to the ‘innocent party’ and the ‘party in breach’. However, remember that fault it not a requirement for breach of contract.

The point of departure when cancelling a contract is to determine what the exact terms of the contract are, i.e. if the contract has a cancellation clause or not and whether there is a date of performance or not.

If the contract has a cancellation clause, the innocent party will be able to cancel the contract in the event of a breach of a term thereto. The innocent party must however take care not to cancel the contract incorrectly, otherwise the party in breach may interpret the cancellation as a repudiation of the contract, in which case the party in breach will also have the right to cancel the contract.

In the event where the contract does not have a cancellation clause, the innocent party will only be able to cancel the contract if the breach is material in nature. What constitutes a material breach depends on the terms of the contract. According to South African case law, a material breach is one which goes to the root of the contract and constitutes a breach of a vital term thereto.

Depending on the type of breach, the innocent party might have to give the party in breach notice. This will be the case where there is no date of performance specified in the contract. The innocent party must then demand performance by giving the party in breach reasonable notice to perform before he will be able to cancel the contract.

On the flip side, if a date of performance is specified in the contract, and a party does not perform in time and as stipulated, that party will be in breach, otherwise referred to as being in mora. It does however not automatically give rise to the right to cancel the contract. The only instance where there will be an automatic right to cancel a contract is if there is a cancellation clause or a suspensive condition in the contract.

A contract containing a suspensive condition will terminate automatically unless the suspensive condition is fulfilled or waived. If there is not a cancellation clause in the contract and no date of performance, the innocent party must give notice to the party in breach that time is of the essence and give him a reasonable time to perform.

In summary, the requirements for cancelling a contract vary according to the terms of the contract, the type of contract and the circumstances. There are no formalities for cancelling a contract unless the parties otherwise agree and/or a statute (i.e. Alienation of Land Act and the National Credit Act) prescribes such a cancellation.

Other requirements include that the innocent party must give reasonable notice to the party in breach that they are cancelling the contract, which cancellation becomes effective from the time the cancellation comes to the attention of the party in breach.

The consequences of cancelling a contract are that the obligations to perform terminate and the parties are obligated to return what has been performed. If both parties agree to the cancellation, the preferred route would be to enter into a cancellation agreement, setting out what needs to be returned, claims for damages etc.

Considering that each contract and circumstances differ and will be judged and interpreted accordingly, readers are advised to obtain legal advice before cancelling a contract.

For more information regarding contracts, please contact:

• “Contract: General Principles” by Van Der Merwe, Van Huyssteen, Reinecke & Lubbe 2004 (Juta Law)

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

I have divorced my husband and I am now the primary caregiver of our minor child. I received a job offer in another country and I would really like to accept it. My ex-husband and father of my minor child won’t consent to the relocation of our minor child. Will I get permission from the court to relocate?

In the event that parents separate, the minor children will be placed in the primary care of one parent and the other parent will have rights and responsibilities in respect of the minor child but does not necessarily have to live with the child.

The issue that arises in situations as outlined above is where the primary caregiver wants to relocate to another country and the other parent won’t give consent (hereafter “the opposing party”).

In the case of relocation disputes where the primary caregiver wants to relocate, there are certain factors the court considers before granting the relocation, called the “best interests of the child standard”. These factors are listed in Section 7 of the Children’s Act and include:

• the nature of the personal relationship between the child and the parent (both primary caregiver and opposing party);
• the attitude of the parent (opposing party) towards the child and the exercise of parental responsibilities and rights in respect of the child;
• the capacity of the primary caregiver to provide for the needs of the child, including emotional and intellectual needs;
• the likely effect on the child of any change in the child’s circumstances, including the likely effect on the child of any separation from the other parent or any brother or sister or other child with whom the child has been living;
• the practical difficulty and expense of a child having contact with the other parent, and whether that difficulty or expense will substantially affect the child’s right to maintain personal relations and direct contact with that parent, on a regular basis;
• the child’s physical and emotional security and his or her intellectual, emotional, social and cultural development; and
• any disability that the child may have, or any chronic illness from which a child may suffer.

The difficult part of disputes relating to relocation is that there are numerous competing rights. The Children’s Act regulates and makes provision for those rights.

The rights in dispute would include:

• the primary caregiver’s right to freedom of movement and association;
• the right of the opposing parent to be in contact with the minor child; and
• the rights of the minor child, i.e. the right of the child to maintain personal relations and direct contact with both his or her parents.

Where the dispute cannot be resolved between the parties through negotiation, the parties would rather opt for mediation than litigation because of the nature of the dispute (a family matter involving a minor child). Litigation can be expensive, harsh and traumatic for everyone involved.

Where the court is tasked with making a ruling in a relocation dispute, the court will consider the following:

• the best interests of the child (factors contained in Section 7 of the Children’s Act);
• whether a court order prohibiting the removal of the child from the court’s jurisdiction exists, in the case that the parents are divorced;
• the opposing party’s right to contact with the minor child and the meaning of the word “contact” as used in the Children’s Act (including communications via laptop and/or cell phone);
• the reason for relocation (in the best interests of the child or not);
• the stability in the child’s life (is the child happy where he or she is now and does he or she have family members nearby they visit often); and
• the relationship the child has with his or her parents. If the opposing parent has a great relationship with the minor child and sees the child very often and will now only be able to email the child, the court will have to consider this and the possible influence the absence of the opposing party would have on the minor child, if relocation is granted.

The court will keep the best interest of the child in mind, whilst considering the abovementioned factors. The court in the A.C. v K.C. case also applied the “reasonable person’s test” and the court held that “one must think oneself into the shoes of the proverbial bonus paterfamilias or the reasonable man”. Even though the reasonable person test was used in A.C. v K.C., the best interest of the child is the most important factor.

Kobus Pieterse | Partner

E: k.pieterse@bissets.com

Areas of Expertise: Litigation | Family Law | Curatorship Applications

• Children’s Act 38 of 2005
• A.C. v K.C. (A 389/08) [2008] ZAGPHC 369
• Jackson v Jackson (18/2001) [2001] ZASCA 139

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

You might, at some point in your life, have lent money to a friend, family member or business associate. It is also quite common for a business to obtain or grant loans in the course of its trade.

In South Africa, in terms of the Prescription Act of 1969 (the “Act”), a debt prescribes (falls away) after a period of three years, unless prescription is interrupted (something happens to stop it temporarily).

The Constitutional Court recently considered the matter of Trinity Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd where a company lent funds to another company on the condition that the loan would be repayable on demand.

In terms of a loan agreement entered into in 2007, Trinity and Grindstone agreed that Trinity would lend just over R3 million to Grindstone (the “loan”). In terms of the loan agreement, the loan would be due and payable to Trinity within thirty days of Trinity’s written demand for payment. About six years after the loan was advanced to Grindstone, Trinity demanded repayment of about R4.6 million (the capital amount plus interest). Grindstone denied that they owed Trinity anything.

In 2014 Trinity approached the Western Cape High Court, seeking the provisional liquidation of Grindstone on the basis that Grindstone was not able to repay the loan. Grindstone opposed the application. One of Grindstone’s defences was that the loan in question had prescribed. They argued that, in the absence of the contract providing otherwise, a loan that is “repayable on demand” will become due and payable immediately when the loan is given, and not specifically when demanded by the creditor. Since more than three years had passed after the loan was originally given, and Trinity had failed to take steps to recover the loan within those three years, the loan prescribed.

Trinity, on the other hand, argued that it was not the intention of the parties that the loan would immediately become due and repayable upon the advance of the loan.

The High Court agreed with Grindstone’s argument that the claim (loan amount) had prescribed.

Trinity took the matter on appeal to the Supreme Court of Appeal (SCA) and the SCA agreed with the High Court’s view on the basis that, on the reading of the contract, it did not appear that the parties intended to postpone the repayment of the loan, and accordingly the loan became payable the moment it was advanced to Grindstone.

Trinity took the matter before the Constitutional Court, where the majority held that in considering the wording of the contract, it did not reasonably appear that the parties intended to delay the repayment of the debt nor did the contract specify when the running of prescription would commence.

Accordingly, Trinity’s appeal was dismissed on the basis that prescription had begun to run on the initial advance of the loan and, by the time formal demand was made for repayment, the loan had prescribed.

The Constitutional Court’s ruling is important since similar clauses dealing with the repayment of a loan “on demand” are often found in loan agreements. Your money could be at risk if provision is not specifically made in the loan agreement for when prescription is deemed to start running, or when, specifically, the loan will become due and payable.

It is therefore important to ensure that your loan agreements, or any commercial agreements, are prepared by legal professionals.

Henning Pieterse | Partner

E: h.pieterse@bissets.com

Areas of Expertise: Corporate & Commercial Law

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

From time to time a body corporate may be required to raise a special levy on its members.  Such a levy would be in addition to the normal monthly levies for which members are customarily responsible.  As the use of the word “special” suggests, these levies would be required to off-set unexpected but urgent expenditure which was not foreseen at the AGM of the Body Corporate and may include re-painting of the common property, repair to the lift or enhanced security.

Under the Sectional Titles Act of 1986 there was no provision whereby these special levies would be pro-rated between a seller and a purchaser of a unit.  In the absence of an agreement to apportion the special levy between the parties to a sale agreement the seller was liable for payment of the entire special levy.  This could be unfortunate for the seller where the special levy has been declared shortly before the sale, resulting in the seller paying for the additional amount when the purchaser would benefit from the improvement.

Happily the Sectional Titles Schemes Management Act, 2011 does shed some light on the issue.  Section 3(3) provides that where a body corporate has raised a special levy the levy can be recovered from the owners of units at the time the resolution to raise the special levy was taken. However, in the case of a change of ownership of a unit the successor in title becomes liable for pro rata payment of such special levy from the date of change of such ownership.  A case can therefore be made that a special levy be apportioned between the parties to a deed of alienation with effect from date of transfer. Nevertheless the parties to a deed of alienation could agree that one of them be exclusively liable for the full amount of the special levy.

Prospective purchasers should therefore always enquire from the seller, the estate agent or even the body corporate whether any special levies are payable and, if so, what amount is outstanding.  The amount could be considerable and have a very real impact on whether the purchaser can afford to purchase the unit.

What if a special levy has been raised and a seller fails to disclose this fact to the purchaser?  Would an uninformed purchaser who has not included such an amount in his estimate of costs for the purchase be able to cancel the contract?  It could be argued that based on the maxim caveat emptor (the buyer beware!) the purchaser should have made enquiry regarding the existence of a special levy or not.  The counter argument, especially where the purchaser is not represented by an attorney (as is most often the case), is that failure by the seller to disclose the existence of a special levy would constitute bad faith.  Were the special levy amount to be reasonably substantial, there may be grounds for an aggrieved purchaser to withdraw from the sale agreement.

For more information regarding property and sectional title schemes, please contact:

Robert Ferrandi  |  Managing Partner

E: r.ferrandi@bissets.com

Areas of Expertise: Property Law & Conveyancing

This article deals with the questions of who can institute litigation on behalf of a trust, as well as with the question of how jurisdiction is determined with regards to trusts.

Who can institute a claim?

A trust is not a legal person and cannot litigate in its own name. The trustees play a vital role in any litigation in which a trust might be involved. There are three overriding principles regarding trust administration:

1. The trustees are obliged to give effect to the provisions of the trust deed.
2. The trustees must perform their duties with the necessary “care, diligence and skill which can be expected of a person who manages the affairs of another”.
3. Any person acting as a trustee must exercise discretion, where allowed, with the necessary objectivity and independence.

Section 6(1) of the Trust Property Control Act (the Act) determines the following: “any person whose appointment as trustee in terms of a trust instrument, section 7 or a court order comes into force after the commencement of the Act, shall act in that capacity only if authorised in writing by the Master”. In Watt v Sea Plant Products Bpk, Judge Conradie interpreted this section to mean that a trustee may not, prior to authorisation, acquire rights for, or contractually incur liabilities on behalf of the trust”. Thus, a trustee can only contract and institute legal proceedings in his/her capacity as trustee once a letter of authority has been issued by the Master of the High Court.

In Nieuwoudt v Vrystaat Mielies (Edms) Bpk), an agreement was held to be invalid and unenforceable because the trustees had not acted jointly nor reached a unanimous decision. The conclusion to be drawn from this is that trustees must act jointly when entering into contracts or when instituting litigation.

A trustee has a duty to vindicate trust property and to collect due debts. This duty goes hand in hand with the duty to conserve trust property and ensures that the trustee is in control of the property which forms part of the trust fund. A trustee further has locus standi to defend actions instituted against the trustee to ensure that the trust property is conserved.

Should all the trustees be joined in an action to enforce a right of the trust?

Judge Cameron held in the Goolam Ally Family Trust case that all the trustees must be joined in suing and all must be sued. Therefore, all the trustees will be joined in their official capacity when instituting legal proceedings.

In Khabola NO v Ralithabo NO, the court quoted the general rule regarding locus standi as follows: Any person who has a direct or substantial interest in the matter has the required locus standi to institute legal proceedings. The learned judge found that the underlying contractual relationship between trustees could be equated to a partnership.

Jurisdiction:

For jurisdictional purposes, a partnership “resides” at the place where its principal place of business is situated, and if the principle set out in abovementioned case is followed – a trust also “resides” where its principal place of business is situated.

In Bonugli v The Standard Bank of South Africa Limited, the court referred to section 5 of the Act  which determines that a person whose appointment as trustee comes into effect after the commencement of this act, shall furnish the Master with an address for the service upon him of notices and process and shall, in case of change of address, within 14 days notify the Master by registered post of the new address. The cause of action arose in Johannesburg, and one of the defendants (a trustee in his representative capacity) was resident in Australia. The address which was used in the summons was the address given to the Master in terms of section 5 of the Act. A special plea with regards to lack of jurisdiction was raised, but the Cape Town High Court found that it had the necessary jurisdiction to hear the matter.

There are considerable differences between a partnership and a trust, but with regards to jurisdiction the general principles applicable to a partnership can also be applied to a trust – namely considerations of convenience and common sense for its conclusion to entertain a claim. The Cape Town High Court had jurisdiction to hear the Bonugli matter because the first defendant was resident within its jurisdiction, and because the address listed in terms of section 5 of the Act was within the jurisdiction. Considerations of common sense and convenience also required that the court should adjudicate the issue between the plaintiff and all the defendants.  It would have been impractical to institute a claim based on the same set of facts in two different courts, because the trustees were resident in different courts’ jurisdictions.

There remains some uncertainty regarding which court should have jurisdiction to hear a claim instituted by a trust or a claim against a trust. There appears to be three possibilities in this regard: Firstly, if the Bonugli judgment was followed, the residency of one trustee should be sufficient to establish jurisdiction. Secondly, the address provided in terms of Section 5 of the Act could be used to establish jurisdiction. Thirdly, the court where the trust’s principle place of business is situated could have jurisdiction. Hopefully the position regarding which court has jurisdiction to hear claims instituted by a trust or against a trust will be properly aired in the courts soon, to provide more certainty regarding this aspect.

Reference List:

Books:

• Lexisnexis Trust Law and Practice, P A Olivier, S Strydom, GPJ van den Berg, October 2017
• Civil Procedure: A Practical Guide, Petè, Hulme, Du Plessis, Palmer, Sibanda, Oxford University Press.

Acts:

• Trust Property Control Act 57 of 1988

Cases:

• Watt v Sea Plant Products Bpk (1998) 4 All SA 109 (C)
• Nieuwoudt v Vrystaat Mielies (Edms) Bpk)
• Goolam Ally Family Trust t/a Textile, Curtaining and Trimming v Textile, Curtaining and Trimming (Pty) Ltd 1989 (4) SA 985 (C) at 988D-E
• Khabola NO v Ralithabo NO (5512/2010) (2011) ZAFSHC 62 (24 March 2011)
• Bonugli v The Standard Bank of South Africa Limited 266/2011) (2012) ZASCA 48 (30 March 2012)

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Over the past few months, we have seen videos being posted on social media of physical altercations, poor service delivery and racial slurs, but the victims of the videos and audible recordings are usually unaware that they are being recorded. The recordings are conducted without their permission and then shared. But is someone allowed to record you without being granted permission and the share those recordings?

Audio recording

Audio recording includes the recording of conversations conducted over the phone, recording someone speaking to a room full of people, and recording a direct conversation, without the other party’s permission. Recording without consent is against the law, unless

• You are party to the communication;
• You have written permission of one of the parties to the conversation;
• The recording is in connection with the carrying on of business.

Direct video recording

This is the recording of a person with whom you are having a face-to-face conversation. The video taping of someone without their consent is permissible because you are party to the conversation, much like audio recordings. Recording an altercation between you and someone else, or recording an altercation at an airport is legal due to where the conversation is occurring – a public place.

Section 4 of the Regulation of Interception of Communications and Provision of Communication-Related Information Act 70 of 2002 (RICA) defines that a person is party to the conversation if they are in audible presence of the conversation. If you are in an altercation in a vicinity where other people can hear you, they are permitted to film because they are party to the altercation, therefore in direct communication with you.

Indirect video recording

Indirect communication is a much wider category, which includes data, speech and moving images. Skype conversations, although they appear to be face-to-face, are included as indirect communication because it is communication through an online telecommunications service. Thus, you would need to either be one of the parties in the engagement, or have been given consent from one of the parties to record the video/messages.

When is it illegal?

• If the recording is through an interceptive method such as “bugging” or a “tapping” a device;
• Hiding to spy on one of the parties for recording purposes, due to the parties being unaware of your presence;
• When you are in no way party to the conversation. Being party to the conversation is if you are the sender, the recipient, or any person included in the communication.

Exception: RICA permits recordings carried out by law enforcement personnel in certain circumstances.

References:

Kevin Illes, A. (2017). Legal implications of secret recording. [online] Moneyweb. Available at: https://www.moneyweb.co.za/archive/legal-implications-of-secret-recording/ [Accessed 15 Jun. 2017].

Writer, S. and Writer, S. (2017). When you can – and can’t – legally record someone in South Africa. [online] Businesstech.co.za. Available at: https://businesstech.co.za/news/general/167107/__trashed-65/ [Accessed 15 Jun. 2017].

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Couples who are interested in an antenuptial contract often make the decision to get one before they are married. That is the ideal scenario. However, some couples may have already gotten married in community of property, and later decide to change to another form of marriage contract.

Can it be done?

The Matrimonial Property Act allows a husband and wife to apply jointly to court for leave to change the matrimonial property system which applies to their marriage.

• According to South African law, the parties who wish to become married out of community of property must enter into an antenuptial contract prior to the marriage ceremony being concluded.
• If they fail to do so then they are automatically married in community of property. Of course, many people are unaware of this provision and should be able to satisfy the court that it should change their matrimonial property system if it was their express intention that they intended to be married out of community of property.

What are the requirements?

In order for the parties to change their matrimonial property system, the act mentions the following requirements:

• There must be sound reasonsfor the proposed change.
• The Act requires that notice of the parties’ intention to change their matrimonial property regime must be given to the Registrar of Deeds, must be published in the Government Gazette and two local newspapers at least two weeks prior to the date on which the application will be heard and must be given by certified post to all the known creditors of the spouses.
• The court must be satisfied that no other person will be prejudicedby the proposed change. The court must be satisfied that the rights of creditors of the parties must be preserved in the proposed contract so the application must contain sufficient information about the parties’ assets and liabilities to enable the court to ascertain whether or not there are sound reasons for the proposed change and whether or not any particular person will be prejudiced by the change.

What is the downside?

The downside is that the application is expensive because you and your spouse have to apply to the High Court on notice to the Registrar of Deeds and all known creditors, to be granted leave to sign a Notarial Contract having the effect of a postnuptial contract. You must also have solid grounds for wanting to switch to an antenuptial contract. Therefore, it’s not something you can do on a whim.

References:

The Matrimonial Property Act 88 OF 1984

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)