In this appeal the Supreme Court of Appeal found that a party to a contract could, to avoid liability, rely on the exclusion of damages clause and time-bar clause despite their repudiation of the agreement having resulted in cancellation.
It was undisputed that the contract precluded a claim for damages for loss of profit and it limited the period within which to institute a claim to one year where such a claim arises out of or relates to any part of the agreement. It was accepted for purposes of the appeal that the defendant repudiation of had led to the cancellation of the agreement.
The claimants alleged that, by repudiating the agreement, the defendant was precluded from relying on the limitation of liability and time-bar clauses on the basis that it could not breach the agreement and thereafter rely on the very same breached agreement to draw benefit from it.
The court on reviewing the relevant authorities said:
“… the established law is that, when a party repudiates a contract, he breaches that contract. The repudiation of the contract does not terminate the contract. The innocent party has a choice of keeping the contract alive and enforcing it, or of cancelling it by accepting the repudiation. If he accepts the repudiation, he manifests an intention neither to accept further performance under the contract from the party who repudiated the contract, nor to further perform his own obligations under the contract, thereby resiling from it. By accepting the repudiation, the innocent party brings to an end the duty of the parties to perform their primary obligations under the contract. The effect of bringing an end to the primary obligations is the activation of certain secondary obligations.”
The court held that the exclusion of damages clause and the time-bar clause are not primary purposes of the agreement but secondary obligations of the agreement and as such, survived the termination of the agreement.
The court was assisted in its conclusions by the existence of survival clauses in the contract which expressly indicated that those relevant clauses survived termination of the agreement. The survival clauses could only sensibly be interpreted to refer to all types of termination including termination as a result of repudiation.
This decision emphasizes the importance of survival clauses.
Twenty-Third Century Systems (Pty) Ltd and Another v SAP Africa Region (Pty) Ltd (172/2023) [2025] ZASCA 51 (30 April 2025)