This blog is co-authored by Danita Mungaroo, a candidate attorney.
In April 2025, the Supreme Court of Appeal decided that a contracting party who repudiated the contract can rely on the terms of an agreement after cancellation of the agreement.
The respondent, an international provider of information technology services concluded agreements with the appellants in terms of which the appellants were appointed as service providers of the respondent. The parties exchanged letters regarding the termination of the agreements. The respondent informed the appellants that it was terminating the agreement and advising its customers that the appellants were not accredited to sell their products. The appellants’ attorneys informed the respondent that the respondent had repudiated the agreements which the appellants had accepted and cancelled the agreements.
The appellants instituted proceedings, seeking damages for loss of profits resulting from the respondent’s repudiation of the agreements. The respondent raised two special pleas being that (i) the agreements expressly excluded claims for loss of profits (exclusion clause) and (ii) the claim was instituted out of time as the agreements required that a party recover losses within one year, and therefore the claim had prescribed (time-bar clause). The appellants contended that, due to the respondent’s repudiation of the agreements, it could not rely on the exclusion clause or time-bar clause in defence of the appellants’ claim and the ordinary principle that obligations may survive termination of an agreement did not apply.
The key issue on appeal was whether the respondent, having repudiated the agreements, could nevertheless rely on the exclusion clause and the time-bar clause in the agreements as a defence to the appellants’ claim. The court found that it is important to differentiate between primary and secondary obligations as this distinction plays a key role in determining whether a party, after accepting a repudiation, can still rely on certain contractual provisions. The court demonstrated that primary obligations in the case of a sale would be the obligation of the seller to deliver the service and the purchaser to pay for the service. The secondary obligations, such as the clauses in issue, on the other hand would be activated when the primary obligations are not performed.
The court explained that accepting a repudiation does not itself complete the breach of contract. The contract is terminated by the innocent party exercising their right to cancel the agreement. The acceptance of a repudiation therefore brings an end to the primary obligations of both parties to perform under the agreement and activates the secondary obligations. The respondent could therefore rely on the exclusion clause and the time-bar clause. These clauses, the court held, did not constitute primary obligations as they were not central to the purpose of the agreements. Instead, they served to limit or restrict the remedies available to the parties following the termination of the agreement.
The court found that since the exclusion clause and time-bar clause survived the termination of the agreements, the respondent was entitled to rely on them as a defence against the appellants’ claims for loss of profits. The appeal was therefore dismissed with costs.