We all know that when entering into a contract both parties are awarded certain rights and tasked with obligations. What’s your remedy should a party to the agreement fail to perform reciprocally?

We all know that when entering into a contract both parties are awarded certain rights and tasked with obligations. What’s your remedy should a party to the agreement fail to perform reciprocally?

In Cradle City (Pty) Ltd vs Lindley Farm 2018 (3) SA 65 (SCA) the Supreme Court of Appeal had to decide whether a party can indeed refuse to perform where the other party failed to do so.

The seller, Lindley Farm, brought the purchaser, Cradle City (Pty) Ltd, before court after the purchaser failed to perform in terms of the contract. The purchaser was expected to pay the remaining purchase price to the seller for the purchase and undisturbed use of land. At the time of entering into the contract, the land was occupied by a large number of unlawful occupiers.

The purchaser refused to effect payment to the seller upon transfer after the property, as it became clear that the seller was unable to successfully evict the unlawful occupiers from the land. The purchaser argued that since the parties’ obligations were reciprocal, he was not obliged to pay the remaining purchase price in the light of the seller’s failure to perform his obligation in terms of the eviction.

The court stated that neither party should be entitled to enforce the contract unless he or she has performed or is ready to perform his or her own obligations. In this matter it was expected that the seller would perform before the purchaser. The eviction therefore had to take place before payment of the full purchase price.

It was found that the purchaser should nonetheless provide the seller with reasonable opportunity to perform his obligations or to correct his defective performance in terms of the contract. It was clear that the purchaser was desirous to enforce the contract as performance by the seller was not completely unachievable.

The court found that while the agreement between the parties did indeed create bilateral obligations, dismissal of the eviction application was, in the light of the purchaser’s choice to proceed with the agreement, not a suitable remedy.

The court therefore decided to grant judgment in favour of the seller, on the condition that the seller firstly attend to the successful eviction of the occupiers.

Therefore, where a party has been given reasonable opportunity to the other to reciprocally perform in accordance with the contract, has nonetheless failed to do so and it becomes clear that performance is unachievable, a party should opt for the cancellation and or termination of the contract rather than the mere withholding of performance.

Elmari Richter, Van Velden-Duffey Inc.