Election not to repudiate a contract may be changed for persistent default

Where one party repudiates a contract, the innocent party who elects to enforce performance can change that election and cancel the contract if the defaulting party persists in the breach by continuing to show an unequivocal intention not to remedy the breach or perform the contract.

The plaintiff construction company in Primat Construction v Nelson Mandela Bay Metropolitan Municipality was upgrading roads in terms of a contract with the defendant’s municipality. There were delays, including delays caused by non-payment by the municipality against monthly payment certificates, and the completion date was extended.

Consequent on the delays, the municipality purportedly terminated the contract with immediate effect in terms of various clauses of the contract but the letter did not constitute proper termination and therefore amounted to a wrongful repudiation by the municipality.

The plaintiff rejected the termination and sought to proceed with the contract but the municipality denied it access to the site despite intervention by the plaintiff’s credit insurers Coface. The plaintiff persisted in trying to do the work on site to complete the job but was denied the opportunity of doing so. The plaintiff then changed its stance, accepted the termination as a repudiation, cancelled the contract and sued for damages.

The initial election not to repudiate can be changed and the contract can be cancelled.

The court resolved a controversial issue in our law and held that where the defaulting party persists in its repudiation and shows that it will not comply with its obligations and will not allow the other party to perform, it does not need a further act of repudiation to give the innocent party, who unsuccessfully tried to uphold the contract, a right of cancellation. It makes no sense to say that the innocent party has to wait to change its election until the other party commits another act of repudiation when it is persisting in the initial wrongful conduct. Once it is clear that the breach will not be repented of, the initial election not to repudiate can be changed and the contract can be cancelled.