Legal Principles impacting Contractual Damages
The well-known principle in the legal profession providing that contracts freely entered by parties with the capacity to do so are to be enforced (Pacta Sunt Servanda) has an influence on the determination of contractual damages in that the damages are intended to restore a plaintiff’s financial position to that which would have existed had the defendant performed its duties in full. This is known as the plaintiff’s positive or expectation interest.
What must a plaintiff prove in a claim for Contractual Damages?
In South African courts, if you wish to claim contractual damages, you are to prove:
- the contract;
- breach or repudiation;
- damages suffered by the party alleging the same and instituting the legal action;
- causal link between the damages and the breach;
- that the loss was not too remote.
A plaintiff is only entitled to recover such loss as he or she can prove. The plaintiff cannot use the legal proceedings as a fact-finding mission to substantiate a claim for contractual damages.
Nature of Contractual Damages
With limited exceptions, about damages for the inconvenience which flows directly from the breach of the contract and breaches which are also delicts, contractual damages are not compensatory. Accordingly one cannot for instance recover damages for pain and suffering (non-patrimonial loss).
General and Special Damages
Ordinarily, a breach of a contract will establish the basis of recovering general damages i.e. those that flow naturally from the breach of contract and which are not remote. For example, for the late payment of sums owing to a plaintiff, he or she can claim interest on the sum owing.
Special Damages which do not flow naturally from the breach can only be claimed in contractual damages claims where the plaintiff can prove that there were circumstances after the contract which establish that it was within the contemplation of the parties that these damages would be recoverable.
Date when damages are ascertained from
Damages are ordinarily assessed at the time of the breach or in the case of repudiation at the date of repudiation where there is a date set for performance or if no fixed date for performance then the acceptance of repudiation.
Limitation on rights to recover contractual damages
It is quite common for a contract to regulate what type of damages are recoverable with special damages often being excluded in part or in full.
Further, the parties may include exemption clauses in respect of damages flowing from specific types of events and conduct.
However, in certain respects, these exemption clauses may be tested against legislation such as certain provisions of the Consumer Protection Act 68 of 2008 which seek to enforce rights to fair, just, and reasonable contract terms for consumers protected by that Act.
South African courts overtime have held that exemption clauses :
- cannot exempt a party from damages for intentional non-performance of its duties in terms of a contract;
- can exempt a party for damages by unintentionally delivering goods of an incorrect description;
- may if sufficiently clear exempt a party from liability in respect of a fundamental breach of a contract;
- exempt a party from liability of his or her negligence conduct;
- may not exempt a party’s liability from his or her fraudulent conduct
- seeking to enforce conduct that is against public policy will not be upheld.
Plaintiff’s Duty to Mitigate Damages
The plaintiff must mitigate its damages however the plaintiff need not allege that it has taken steps to limit its damages. It is for the defendant to allege that the plaintiff has failed to mitigate its damages to the extent that the plaintiff has failed to do what a reasonable man would have done in the circumstances.
Conclusion
Different types of contracts can give rise to different types of recourse in the event of a breach. The contract may also regulate what types of damages are recoverable and set out if any limitations apply to the damages claimable.
At the time of investigation of the breach and in determining whether to cancel the contract based on a breach or to maintain the contract in place and claim specific performance it is important to consider the law of damages about contracts, the contractual terms, and the client’s best interests, expectations and particular set of circumstances.
Should you require assistance in these and other matters in the field of Contract Law Boogaard Attorneys can service Clients throughout South Africa remotely and can accommodate on-site visits at our practice in Fourways or attend to clients in various areas in Johannesburg North including Bryanston, Dainfern, Morningside, Midrand, Rivonia and Sandton to name a few.
