Claudelle Pretorius, Partner in the Construction, Engineering and Infrastructure Law team at Cox Yeats, highlights a significant contractual risk that contractors, employers and project teams should be aware of when administering construction projects.
Most standard form construction contracts contain comprehensive default and termination clauses. However, not all default and termination clauses allow a party to terminate the contract due to the other party’s repudiation thereof. A question which often arises is: where parties have the right to terminate for very specific reasons under a contract, does the common law right to terminate due to a party’s repudiation of the contract still survive?
Repudiation frequently arises where a party demonstrates, through words or conduct, an unequivocal intention to no longer be bound by the contract.
The JBCC (Joint Building Contracts Committee), NEC (New Engineering Contract), GCC (General Conditions of Contract) and FIDIC (International Federation of Consulting Engineers) suite of contracts all contain default and termination clauses. Those clauses contain exhaustive lists of circumstances entitling the parties to terminate the contracts.
The GCC is the only standard form contract which allows a contractor to terminate the contract due to the employer’s repudiation. The other contracts do not list repudiation as a reason for termination.
It is often argued, albeit unsuccessfully, that the default and termination provisions in the JBCC, NEC and FIDIC suite of contracts comprehensively and solely regulate cancellation. Our Constitutional Court has held otherwise.
The judgement by Marais J in First National Bank of Southern Africa Ltd v Rosenblum [2001] ZASCA 77 provides guidance on the broader relationship between contractual rights and the common law. It was stated that:
“In matters of contract the parties are taken to have intended their legal rights and obligations to be governed by the common law unless they have plainly and unambiguously indicated the contrary. Where one of the parties wishes to be absolved either wholly or partially from an obligation or liability which would or could arise at common law under a contract of the kind which the parties intend to conclude, it is for that party to ensure that the extent to which he, she or it is to be absolved is plainly spelt out”.
This principle was quoted with approval by Mathopo J in his minority judgement in Fujitsu Services Core (Pty) Limited v Schenker South Africa (Pty) Limited (CCT 32/22) [2023] ZACC 20.
The practical consequence is that the termination clause may not be the whole story. Even where a standard-form contract lists specific termination events and does not expressly mention repudiation, the common law right to terminate for repudiation may still survive unless the contract clearly and unambiguously excludes it. For parties administering live projects, this means that the wording of the contract must be tested before termination: does the common law right survive, and what contractual termination procedure must still be followed?
For contract drafters, the message is equally important. If the intention is for the contractual termination regime to be exclusive, that intention should be stated plainly rather than left to implication. Parties should therefore consider the contractual wording and the common law together, rather than assuming that one automatically displaces the other.
