South African Law: When Can You Terminate A Contract?

South African law of contract is essentially a modernised version of the Roman-Dutch law of contract, as well as English law which is itself rooted in canon and Roman laws. In the broader sense, a contract is an agreement two or more parties enter into with the serious intention of creating a legal obligation. Contract law provides a legal framework within which persons can conduct business and exchange resources, secure in the knowledge that the law will uphold their agreements and, if necessary, enforce them. The law of contract supports private enterprise in South Africa and regulates it in the interest of fair dealing.

A contract in South Africa is labelled as an obligatory agreement—it creates enforceable obligations—and ought therefore to be distinguished from absolving agreements (whereby obligations are settled or extinguished; e.g. release, novation), real or transfer agreements (whereby rights are transferred; e.g. cession), and change-in-status agreements. All businessmen conclude contracts, whether in terms of a formal written contract or a "gentleman's handshake". Businessmen often also wish to cancel contracts when the other party acts in breach of its contractual obligations.

Termination Clause
Where a written contract exists, one should first consider the termination clause. This clause will indicate whether or not the contract can be terminated within a specific time period, such as on one month's notice.

If the termination clause specifies that the contract must be terminated on written notice, ensure that written correspondence is sent to the defaulting party notifying it of the intention to terminate the contract after the specified time period.

Verbal Agreements
Where the contract is verbal, it can be terminated on reasonable notice to the defaulting party. The length of time that constitutes "reasonable notice" depends on the circumstances. A fixed term contract, that is a contract concluded for a specified time period such as one year, cannot be terminated on notice.

Where a party breaches a contract, the contract can be cancelled. However, the terms regarding the termination of a contract must be adhered to strictly. These terms usually envisage the aggrieved party informing the defaulting party in writing of the breach and demanding that the defaulting party remedy the breach within a specified time period. If the defaulting party fails to remedy the breach within that time period, the contract can be terminated. The contract can also be terminated with immediate effect if the breach is so serious that it goes to the core of the contract.

In either event, the aggrieved party must give clear notice of termination to the defaulting party. It is recommended that this notice be given in writing. The right to cancel must be exercised within the period stipulated in the contract or within a reasonable time period, if no period is stipulated. Once the aggrieved party has terminated the contract, the termination cannot be reversed. The aggrieved party can claim damages against the defaulting party for any loss they have suffered as a result of the breach of the contract.

Brian Blignant Attorneys is a boutique law firm dedicated to professional legal services of the highest calibre. It is not a matter of being more gifted than others but rather the goal-oriented solution seeking attitude of our staff that allows our clients to entrust us with any obstacle. Brian Blignant Attorneys provides and drafts any form of contracts and agreements. Our team also assists with review of existing contracts to ensure legislative compliance. BBA facilitate optimal implementation of agreements to the best interests of clients.

Back to Articles

Our Services