BK Tooling v Scope Precision Engineering
Encyclopedia
BK Tooling Bpk v Scope Precision Engineering (Edms) Bpk, a leading case in South African contract law
, was heard and decided in the Appellate Division on September 16, 1977
and September 15, 1978
respectively. The case delt with remedies for the breach
of a reciprocal contract
in cases where the creditor
has been prevented from performing fully his obligations by the failure of the other party's necessary co-operation. The court held that the creditor may in such circumstances claim performance, but that his claim will be subject to a reduction by the costs he saves in not having fully to make his counterperformance.
The court also discussed the principles applicable to the exceptio non adimpleti contractus and held that, where there has been incomplete performance by the creditor (in this case the plaintiff), the debtor
(defendant) is entitled to claim compensation
. Where there has been no resiling, the creditor may institute a claim for a reduced contract price. A court, in the exercise of its discretion, may permit a relaxation of the strict principle of reciprocity where the other party has utilised the partial performance.
by the failure of the other party's necessary co-operation, he may, despite his own incomplete performance, claim performance by the other party. This, however, will be subject (basically as also in other legal systems) to reduction of the performance claimed by the costs saved by the creditor in not having to perform fully his own obligation.
The court considered a few aspects of the principle of reciprocity and its application by means of the exceptio non adimpleti contractus:
The court found that it was clear from the decisions in Hauman v Nortje, Breslin v Hichens and Van Rensburg v Straughan that the judges had proceeded on the common assumption that, on the ground of general principles, the employer had a right of withholding in regard to his own performance until the contractor had strictly and fully made his counterperformance: "a potent weapon to ensure that the contract is specifically performed." There was also agreement in the decisions that, on the ground of considerations of fairness, a contractor should sometimes, despite the principle of reciprocity, be permitted still to claim compensation for an incomplete performance.
As this could amount to the employer's right to strict compliance being ended, it was extremely important to determine when the employer, by way of exception, is no longer entitled to his right of withholding. In the three cases above, there were to be found at least three points of view, divergent in principle. The point of view of CG Maasdorp JA, in Van Rensburg, belongs more to cases in which there has been a resiling, while those in Hauman of Lord De Villiers CJ and Innes JA apply to cases where there has been no resiling.
The court found that the whole basis of the relaxation of the principle of reciprocity and the recognition of the possibility of instituting a claim for a reduced contract price rests on considerations of fairness
, and that, clearly, these considerations may in particular circumstances prescribe that the contractor should still be compensated, even if he knows that he has not fully complied with his obligations. As an equitable solution, the point of view of De Villiers was found to be too narrow. It was determined that that of Innes—that the court, in the exercise of its discretion, allows a relaxation of the strict principle of reciprocity where the other party has utilised the partial performance—provides a far more supple and satisfactory solution. As such, the court held that the latter must henceforth be accepted and applied.
The court emphasised that, according to Innes, the coming into being of the discretionary power of relaxing the principle of reciprocity has no connection whatever with the degree of shortcoming of the incomplete performance. The decisive fact for coming into being is the utillisation of the incomplete performance by the employer, be the shortcoming big or small. The extent of the shortcoming is, at the most, one of the circumstances which may be weighed up in considering the question of fairness which is involved in the exercise of the discretion.
It would be desirable in the future simply to talk of a contractual claim for a reduced contract price, and to avoid names such as quantum meruit
and the language of enrichment liability
. It would lead to less confusion and greater clarity, and would also fit in, in the normal case, with the amount whereby the contract price is reduced being equivalent, as De Villiers put it, to "such sum as would enable the employer to complete the work in exact accordance with the contract." or, as Innes put it, "the cost of remedying the defects."
If the contractor does not succeed in convincing the Court that he has fully complied with his side of the contract, and he wishes then to claim a reduced contract price, he will have to prove
In regard to possible consequential damages caused by the shortcoming already suffered, and possible damages as the result of the mora of the contractor, the onus of proof will, on the grounds of general principles, still rest on the employer. The employer will probably have to institute a counter-claim.
The decision in the Transvaal
Provincial Division in Scope Precision Engineering (Edms) Bpk v BK Tooling (Edms) Bpk was thus varied.
South African contract law
South African contract law is "essentially a modernised version of the Roman-Dutch law of contract," which is itself rooted in Roman law. In the broadest definition, a contract is an agreement entered into by two or more parties with the serious intention of creating a legal obligation...
, was heard and decided in the Appellate Division on September 16, 1977
1977 in South Africa
-February:*1 February - The Bantustan of KwaZulu is granted self-governance*24 February - A bomb explodes at the Daveyton Police Station, causing only superficial damage-April:...
and September 15, 1978
1978 in South Africa
-January:* Former African National Congress member, Steve Mtshali who turned state witness in various trials is shot and wounded-February:* An unexploded bomb "capable of destroying a 22 storey building" is found in a Johannesburg office block and defused...
respectively. The case delt with remedies for the breach
Breach of contract
Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance....
of a reciprocal contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
in cases where the creditor
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...
has been prevented from performing fully his obligations by the failure of the other party's necessary co-operation. The court held that the creditor may in such circumstances claim performance, but that his claim will be subject to a reduction by the costs he saves in not having fully to make his counterperformance.
The court also discussed the principles applicable to the exceptio non adimpleti contractus and held that, where there has been incomplete performance by the creditor (in this case the plaintiff), the debtor
Debtor
A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...
(defendant) is entitled to claim compensation
Compensation
Compensation can refer to:*Financial compensation, various meanings*Compensation , various advantages a player has in exchange for a disadvantage*Compensation *Compensation , by Ralph Waldo Emerson...
. Where there has been no resiling, the creditor may institute a claim for a reduced contract price. A court, in the exercise of its discretion, may permit a relaxation of the strict principle of reciprocity where the other party has utilised the partial performance.
Judgment
The court accepted that, when a creditor in a reciprocal contract is prevented from making fully his own counter-performancePerformance
A performance, in performing arts, generally comprises an event in which a performer or group of performers behave in a particular way for another group of people, the audience. Choral music and ballet are examples. Usually the performers participate in rehearsals beforehand. Afterwards audience...
by the failure of the other party's necessary co-operation, he may, despite his own incomplete performance, claim performance by the other party. This, however, will be subject (basically as also in other legal systems) to reduction of the performance claimed by the costs saved by the creditor in not having to perform fully his own obligation.
The court considered a few aspects of the principle of reciprocity and its application by means of the exceptio non adimpleti contractus:
- In contracts whereby reciprocal obligations are created, the question of whether the obligations are so closely linked that the principle of reciprocity applies is basically a matter of interpretationInterpretation-Language:* Language interpretation, the facilitation of dialogue between parties using different languages* Interpretation of tongues, a supernatural ability to understand unknown languages* Semantics, assignment of meanings to symbols-Philosophy:...
. If, however, no other intention appears, the principle applies by operation of law to certain well-known contracts, such as, for example, the contract of saleContract of saleA contract of sale is a legal contract an exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value in money paid or the promise to pay same...
and locatio conductio operis. - The sequence of performance and counter-performance also depends on the contractual provisions. If, however, another intention does not appear, the contractor, in locatio conductio operis for example, must first perform.
- On the ground that withholding the thing sold was regarded already in the Corpus JurisCorpus JurisThe legal term Corpus Juris means "body of law".It was originally used by the Romans for several of their collections of all the laws in a certain field; see Corpus Juris Civilis....
as analogous to the holding of a pledgePledge-Promises:* A promise similar to an oath* A promise to donate funds, as in a pledge drive* Taxpayer Protection Pledge, a promise by politicians to oppose tax increases** The Pledge , a similar promise first used in New Hampshire...
, one would expect that the exceptio would only apply as a defence until performance was actually made. The right of withholding (the converse of the exceptio) is therefore essentially a means of enforcing the counter-performance. It can fulfil a function similar to retentionRetentionRetention may refer to:* Retention, in learning, the ability to retain facts and figures in memory ** Selective retention* Cultural retention* Customer retention...
moneys in a buildingBuildingIn architecture, construction, engineering, real estate development and technology the word building may refer to one of the following:...
contract. On the other hand, it follows that, as long as performance remains possible and the contract is not cancelled, the other party can still perform. Indeed, this possibility should be related to the doctrine of moraMora-People:* Alberto J. Mora , General Counsel of the United States Navy * Alfonso Mora , Venezuelan former tennis player* Bruno Mora , Italian football player and coach* Cristian Mora , Ecuadorian football goalkeeper...
and purgatio morae. - If the right of withholding is seen as analogous to the holding of a pledge, this would entail that a party's own performance could be withheld until the counter-performance is fully rendered. In the case of locatio conductio operis, it is all the more the case that the contractor must fully perform before he is entitled to the contract price.
- According to Voet, the onusBurden of proofThe burden of proof is the obligation to shift the accepted conclusion away from an oppositional opinion to one's own position.The burden of proof is often associated with the Latin maxim semper necessitas probandi incumbit ei qui agit, the best translation of which seems to be: "the necessity of...
is on the plaintiff, when the exceptio is raised against him, to prove that he has in fact performed his side of the contract. Since then, this has apparently never been doubted as far as South African law is concerned.
The court found that it was clear from the decisions in Hauman v Nortje, Breslin v Hichens and Van Rensburg v Straughan that the judges had proceeded on the common assumption that, on the ground of general principles, the employer had a right of withholding in regard to his own performance until the contractor had strictly and fully made his counterperformance: "a potent weapon to ensure that the contract is specifically performed." There was also agreement in the decisions that, on the ground of considerations of fairness, a contractor should sometimes, despite the principle of reciprocity, be permitted still to claim compensation for an incomplete performance.
As this could amount to the employer's right to strict compliance being ended, it was extremely important to determine when the employer, by way of exception, is no longer entitled to his right of withholding. In the three cases above, there were to be found at least three points of view, divergent in principle. The point of view of CG Maasdorp JA, in Van Rensburg, belongs more to cases in which there has been a resiling, while those in Hauman of Lord De Villiers CJ and Innes JA apply to cases where there has been no resiling.
The court found that the whole basis of the relaxation of the principle of reciprocity and the recognition of the possibility of instituting a claim for a reduced contract price rests on considerations of fairness
Fairness
Fairness or being fair may refer to:* Equity , a legal principle allowing for the use of discretion and fairness when applying justice* Social justice, equality and solidarity in a society...
, and that, clearly, these considerations may in particular circumstances prescribe that the contractor should still be compensated, even if he knows that he has not fully complied with his obligations. As an equitable solution, the point of view of De Villiers was found to be too narrow. It was determined that that of Innes—that the court, in the exercise of its discretion, allows a relaxation of the strict principle of reciprocity where the other party has utilised the partial performance—provides a far more supple and satisfactory solution. As such, the court held that the latter must henceforth be accepted and applied.
The court emphasised that, according to Innes, the coming into being of the discretionary power of relaxing the principle of reciprocity has no connection whatever with the degree of shortcoming of the incomplete performance. The decisive fact for coming into being is the utillisation of the incomplete performance by the employer, be the shortcoming big or small. The extent of the shortcoming is, at the most, one of the circumstances which may be weighed up in considering the question of fairness which is involved in the exercise of the discretion.
It would be desirable in the future simply to talk of a contractual claim for a reduced contract price, and to avoid names such as quantum meruit
Quantum meruit
Quantum meruit is a Latin phrase meaning "what one has earned". In the context of contract law, it means something along the lines of "reasonable value of services".In the United States, the elements of quantum meruit are determined by state common law...
and the language of enrichment liability
Unjust enrichment
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.Definition:...
. It would lead to less confusion and greater clarity, and would also fit in, in the normal case, with the amount whereby the contract price is reduced being equivalent, as De Villiers put it, to "such sum as would enable the employer to complete the work in exact accordance with the contract." or, as Innes put it, "the cost of remedying the defects."
If the contractor does not succeed in convincing the Court that he has fully complied with his side of the contract, and he wishes then to claim a reduced contract price, he will have to prove
- that the employer is utilising the incomplete performance;
- that circumstances exist which make it equitable for the court to exercise its discretion in his favour; and
- what the reduced contract price should be: that is, what it will cost to bring his performance in order for the purpose of determining by how much the contract price should be reduced.
In regard to possible consequential damages caused by the shortcoming already suffered, and possible damages as the result of the mora of the contractor, the onus of proof will, on the grounds of general principles, still rest on the employer. The employer will probably have to institute a counter-claim.
The decision in the Transvaal
Transvaal
The Transvaal is the name of an area of northern South Africa. The land originally comprised most of the independent Boer South African Republic, which had existed since 1856, despite two previous attempts by the British of varying success to establish supremacy...
Provincial Division in Scope Precision Engineering (Edms) Bpk v BK Tooling (Edms) Bpk was thus varied.
See also
- ContractContractA contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
- South African contract lawSouth African contract lawSouth African contract law is "essentially a modernised version of the Roman-Dutch law of contract," which is itself rooted in Roman law. In the broadest definition, a contract is an agreement entered into by two or more parties with the serious intention of creating a legal obligation...
- Breach of contractBreach of contractBreach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance....
- Principle of reciprocity
- Exceptio non adimpleti contractus
Books
- Du Plessis, Jacques, et al. The Law of Contract in South Africa. Edited by Dale Hutchison, Chris-James Pretorius, Mark Townsend and Helena Janisch. Cape TownCape TownCape Town is the second-most populous city in South Africa, and the provincial capital and primate city of the Western Cape. As the seat of the National Parliament, it is also the legislative capital of the country. It forms part of the City of Cape Town metropolitan municipality...
, Western CapeWestern CapeThe Western Cape is a province in the south west of South Africa. The capital is Cape Town. Prior to 1994, the region that now forms the Western Cape was part of the much larger Cape Province...
: Oxford University PressOxford University PressOxford University Press is the largest university press in the world. It is a department of the University of Oxford and is governed by a group of 15 academics appointed by the Vice-Chancellor known as the Delegates of the Press. They are headed by the Secretary to the Delegates, who serves as...
, 20102010 in literatureThe year 2010 in literature involved some significant events and new books.-Events:*February - The Wheeler Centre, Australia's "literary hub", officially opened.*April 3 - First release of the Apple iPad, electronic book reading device....
.
Cases
- BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A).
- Breslin v Hichens 1914 AD 312.
- Hauman v Nortje 1914 AD 293.
- Van Rensburg v Straughan 1914 AD 317.