Raeesa Ebrahim Atkinson

Category: Contract Law

As a legal professional, it's habitual to advise clients that they should read the terms of their contract carefully to ensure a proper understanding of the obligations and rights that apply to them. This act is further supported by clarifying a client's questions relating to the document, making necessary amendments and any other task required to ensure that the client is comfortable signing the agreement. 

However, once signatures have been affixed, it is often left to the parties of the contract to perform, enforce and/or implement the contractual terms. Unfortunately, this is often when a party's misalignment with the contractual terms is truly discovered. 

Datacentrix (Pty) Ltd v O-Line (Pty) Ltd (891/2021) [2022] ZASCA 162 (25 November 20221) [hereafter "Datacentrix Case"]- Facts 

In the Datacentrix case the Supreme Court of Appeal was called upon to determine whether one of the parties properly cancelled the contract. 

The Appellant in the matter appealed a High Court decision from the Gauteng division finding in favour of the Respondent who sought the return of the monies paid to the Appellant in the amount of R1 936 815,00 plus interest for breach of contract. 

In the High Court, the Respondent based its claim on an agreement between itself and the Appellant whereby the Appellant was to implement and configure a software program that the Respondent would use for financial record keeping and accounting, among others. 

The Respondent claimed that the Appellant breached the agreement by failing to implement and configure the software and furthermore, by not providing suitably trained staff to provide the support services under the agreement. 

The Court's Findings 

The SCA’s decision on whether or not to uphold the appeal against the decision by the High Court favouring the Respondent, appeared reliant on the interpretation of two clauses in the agreement. 

Clause 17 dealt with service level failures and allowed for the innocent party to give notice to the offending party requiring such party to prepare a rectification plan when service level breaches are alleged.  

The second clause was clause 18 which dealt with material breach. Clause 18 allowed for an innocent party alleging material breach to give notice of such breach to the offending party and require that the breach be remedied failing which, the innocent party would be entitled to, amongst others, cancel the contract. 

The Respondent originally relied on clause 17 as the basis for its cancellation of the contract but later changed its position to clause 18. 

Be that as it may, the court upon analysing the correspondence to the appellant regarding the purported breach, found that the “notices” combined both the Clause 17 and Clause 18 approaches.  

In its correspondence to the Appellant the Respondent had in fact asked the Appellant to come up with a plan to remedy its breach. 

In doing so, the court held, that the Respondent failed to make a clear enough distinction regarding which process the Respondent was following. The Respondent would not have been entitled to cancel the contract in terms of Clause 17 and therefore needed to follow the process in Clause 18 strictly in order to cancel the contract under the circumstances. 

The appeal was therefore upheld with costs. 

Conclusion 

It is clear from the above that it is not only important for parties to a contract to be aware of the rights and obligations that apply to it but also to be aware of any process-driven mechanisms therein. 

Whether it be notice, termination or simply a process which is followed in the fulfilment of a reporting mandate under a contract, it is important for parties to be aware of and cater for the infrastructure required to fulfil these processes- strictly. 

In addition, contractual drafters should be wary of creating parallel mechanisms which may create ambiguity in the mind of those meant to implement them. 

Contact an attorney at SchoemanLaw inc for your legal needs by visiting our website at www.schoemanlaw.co.za.

Raeesa Ebrahim Atkinson | SchoemanLaw Inc
Specialist Attorney Civil Dispute Resolution 
www.schoemanlaw.co.za