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How to cite this thesis

Surname, Initial(s). (2012) Title of the thesis or dissertation. PhD. (Chemistry)/ M.Sc. (Physics)/ M.A. (Philosophy)/M.Com. (Finance) etc. [Unpublished]: University of Johannesburg. Retrieved from: https://ujdigispace.uj.ac.za (Accessed: Date).

The Localisation of Breach of Contract in the Context of Jurisdiction - A Comparative Study of English and South African Law with Specific Reference to the Incoterms of

the International Chamber of Commerce

By

Rudie Kok

A dissertation submitted in partial fulfilment for the Degree

of

Magister Legum

In

International Commercial Law

Faculty of Law

University of Johannesburg

Supervisor: Prof. Jan Lambert Neels

2014

Table of Contents Page Chapter 1 Introduction 1

Chapter 2 Jurisdiction 2

2.1 Definition of Jurisdiction 2

2.2 Contextualisation: When the English Traditional Rules are Applicable and Brussels I

is Not Applicable 3

2.2.1 The Role of the Brussels Regulation to Determine Jurisdiction of an English Court 3

2.2.2 The Traditional English Rules of Jurisdiction 4

2.3 Rules of Jurisdiction in South Africa 6

2.3.1 Breach of Contract as a Ratio Jurisdictionis 6

2.3.2 Rules of Jurisdiction in General 8

2.4 Conclusion 9

Chapter 3 The Law of Breach of Contract in England and South Africa 10

3.1 Introduction 10

3.2 English Law of Breach of Contract 11

3.3 South African Law of Breach of Contract 12

3.3.1 Mora Debitoris 12

3.3.2 Mora Creditoris 12

3.3.3 Positive Malperformance 13

3.3.4 Breach of Contract in anticipando 13

3.3.5 Prevention of Performance 14

3.4 Conclusion 14

Chapter 4 Incoterms 15

4.1 Introduction 15

4.2 C-terms 16

4.2.1 CIF (Cost, Insurance, Freight) 16

4.2.1.1 Shipment of the Goods 17

4.2.1.2 Compile Proper Shipping Documents 21

4.2.1.3 Tendering of Shipping Documents to the Buyer 22

4.3 D-terms 23

4.3.1 DAP (Delivered at Place) 24

4.4 E-terms 25

4.4.1 Ex Works 25

4.5 F-terms 27

4.5.1 FOB (Free on Board) 27

Chapter 5 Conclusion 30

Bibliography 32

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CHAPTER 1

INTRODUCTION

The main exploration of this paper is whether a breach of contract as a ground for jurisdiction

is sufficient for a court in England or South Africa to exercise jurisdiction.

This question seems straightforward in England, but not so much in South Africa. England

enacted their Civil Procedure Rules to make provision for a court to exercise jurisdiction when

a plaintiff who is in England wants to sue a foreign defendant in England.1 The breach of

contract must occur in the jurisdiction before an English court will permit service out of the

jurisdiction.

South Africa’s laws on jurisdiction are derived from Roman law.2 A foreign peregrinus may

sue in South Africa either where the incola is domiciled or resident or where the cause of action

arises. Breach of contract is allowed in this circumstance. It is necessary for an incola plaintiff

to attach property of a foreign peregrinus defendant when he wants to sue the foreign

peregrinus in a South African court. This may be done where the attachment founds jurisdiction

of the court, ie where the incola sues in the area where he is domiciled or resides, or where the

attachment confirms the jurisdiction of the court, ie where the cause of action arises. The cause

of action in relation to contracts includes the conclusion of the contract or the performance of

the contract in the jurisdiction if the plaintiff sues where the cause of action arises and not

where the plaintiff is domiciled or resident. The matter of whether a breach of contract can be

regarded as a ratio jurisdictionis is seldom approached by South African courts. In Natal, courts

allowed attachment of the defendant’s properties where there were no rationes jurisdictionis.

A breach of contract is therefore not formally regarded as a ratio jurisdictionis, but courts in

future may well recognise this as a ground, especially when one considers the fact that the

Natal courts could found jurisdiction where no other link to the court existed.

It will be assumed throughout the discussion that a South African court can exercise jurisdiction

on a breach of contract as a ratio jurisdictionis when an incola wants to sue out of the

jurisdiction.

1 The Civil Procedure Rules, 2011 are applicable in both England and Wales - http://en.wikipedia.org/wiki/Civil_Procedure_Rules (last accessed 09/11/2013). For sake of brevity reference will only be made to England but it will include a reference to Wales as well. 2 Forsyth Private International Law The Modern Roman-Dutch Law including the Jurisdiction of the High Courts (2012) 169.

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Courts determine the place of a breach of contract using their own laws on breach of contract.

The reason for this is that a breach of contract for jurisdiction purposes is a jurisdictional

connecting factor. Questions on jurisdiction is a procedural issue and all matters of procedure

are governed by the lex fori.3 The laws on breach of contract in England and South Africa

respectively will determine whether a breach takes place in that jurisdiction.

The next part of the exploration is where a breach of contract takes place when the parties

incorporates an Incoterm in their contract. I will focus on Ex Works; Delivered at Place; Cost,

Insurance, Freight; and Free on Board. These Incoterms represent the four categories, namely

E-terms, D-terms, C-terms and F-terms. EXW is the only E-term. DAP was chosen because

this entails the greatest responsibility for the seller. CIF and FOB are the most common

standard trade terms and are discussed in all International Trade Law textbooks separately.

CHAPTER 2

JURISDICTION

2.1 Definition of Jurisdiction

Jurisdiction is defined in Ewing McDonald & Co Ltd v M & M Products Co4 as “the power

vested in a court by law to adjudicate upon, determine and dispose of a matter.”5 Jurisdiction

must exist at the time when proceedings are initiated and continue throughout proceedings

notwithstanding that the court may not have jurisdiction any more at the end of the

proceedings.6 Such power is purely territorial and it does not extend beyond the boundaries of,

or over subjects or subject-matter not associated with, the Court’s ordained territory.”7 In

international cases jurisdiction will involve foreign elements.8 A ground for jurisdiction was

defined by Pollak as “the act of the defendant which gives the plaintiff his cause of complaint.”9

3 See Forsyth (n 2) 23 and the authority there cited. See also Lord Collins of Mapesbury Dicey, Morris and Collins on The Conflict of Laws (2012) Volume 1 Chapter 7. 4 1991 (1) SA 252 (A); Forsyth (n2) 169. 5 Ewing McDonald (n 4) 256. 6 Thermo Radiant Oven Sales Ltd v Nelspruit Bakeries 1969 2 SA 295 (A) 301C-F. This is when the ground for jurisdiction is lost after the court takes jurisdiction. 7 Ewing McDonald (n 4) 256. See also Graaff-Reinet Municipality v Van Ryneveld’s Pass Irrigation Board 1950 (2) A 420 (AD) at 424. 8 Forsyth (n 2) 169. “Foreign element” in this context means that the parties are from different countries or where the performance is to be carried out in different countries. 9 Pistorius Pollak on Jurisdiction (1993) 80.

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English law defines jurisdiction as “the question whether an English court will hear and

determine an issue upon which its decision is sought”.10

2.2 Contextualisation: When the English Traditional Rules are Applicable and Brussels I is

Not Applicable

In this section I will explore the rules of jurisdiction of the Brussels Regulation and also when

those rules are not applicable.11 Brussels I does not make provision for a breach of contract as

a ground for jurisdiction. It is therefore necessary to determine when a member state’s internal

rules are applicable and ultimately under which circumstances a court will be able to exercise

jurisdiction as a result of a contract being breached within its jurisdiction. I will then determine

the rules of jurisdiction in England in relation to a breach of contract.

2.2.1 The Role of the Brussels Regulation to Determine Jurisdiction of an English Court

The starting point when proceedings are brought before a court in any of the European Union

countries, including the United Kingdom,12 is the impact of Brussels I.13 If a foreign company

wants to sue a company that has its registered office or was incorporated in England, that

company can found its jurisdiction either in terms of Brussels I or the internal jurisdiction rules

of England.14 Article 2 of Brussels I states that a person which has its domicile in a member

state shall be sued in the courts of that member state.15 Domicile is therefore the principle

connecting factor for jurisdiction in terms of Brussels I.16 A legal person is domiciled in a

member state if it has its statutory seat, central administration or principle place of business in

10 Fourie v Le Roux 2007 UKHL 1 at par 25; Fawcett, Harris and Bridge International Sale of Goods in the Conflict of Laws (2005) par 2.01. But see the authority that Lord Scott referred to. An English court must have the power to deal with and decide the dispute. 11 Council Regulation (EC) No 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters [2001] OJ L12/1, (hereafter “Brussels I”). Article 293 of the EC Treaty established a basis for the reciprocal recognition and enforcement of judgements in the European Union. The result was the Brussels Convention and thereafter the Regulation. European legislation is enacted by an “ordinary legislative procedure” and by “special legislative procedure” for specific types of legislation. See http://www.europarl.europa.eu/aboutparliament/en/0081f4b3c7/Law-making-procedures-in-detail.html (accessed 24/07/2013) for the process which legislation is passed. Brussels I (Recast) will replace the Regulation in 2015. 12 The United Kingdom consists of England, Scotland, Wales and Northern Ireland. 13 Briggs and Rees Civil Jurisdiction and Judgments (2002) par 2.01. 14 See the discussion below on the internal jurisdiction rules of England. 15 It will be assumed that article 5 is not applicable as the company which has its domicile in England is not sued in another member state. 16 Briggs and Rees (n 13) par 2.211.

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that member state.17 For the United Kingdom and Ireland “statutory seat” means a registered

office, or where there is no such place, the place of incorporation, or where there is no such

place, the place where formation took place.18 Article 5 states that a person may be sued in the

court of a member state other than in which the defendant is domiciled in cases where the place

of performance of the contract was in that member state.

Article 4 states that if a defendant is not domiciled in a member state the jurisdiction of the

court of each member state shall be determined by the law of that member state, subject to

articles 22 and 23.19 The law which is used to determine jurisdiction in this situation is the

national law of the state. Brussels I leaves the question of jurisdiction to the national law of the

state to confer jurisdiction on a court.20 Articles 5, 22 and 23 are extra grounds of jurisdiction

with domicile. If these articles are not relevant then the internal law is applicable, in casu the

national law of England. This paper will only concentrate on the event that jurisdiction has to

be determined by using the internal rules of jurisdiction of England.

2.2.2 The Traditional English Rules of Jurisdiction

In the previous section I discussed the role of Brussels I in determining jurisdiction of a member

state. I explained that Article 2 is relevant in the event that a party wants to sue another party

to an international sales contract who is domiciled in the United Kingdom. Jurisdiction is then

determined in accordance with Brussels I or the internal jurisdiction rules of the member state.

Article 4 becomes relevant when the party that is being sued is a non-domiciliary of a member

state of Brussels I. In such a case jurisdiction must be determined by the internal rules of that

member state. In this section I will discuss the English traditional rules of jurisdiction for the

event that the party that is being sued is not a domiciliary of the United Kingdom and where

articles 5, 22 and 23 of Brussels I are not relevant or where Brussels I is not applicable.

17 Brussels I article 60(1). In international commerce most of the parties will be corporations or legal persons and I will therefore only consider article 60 and not article 59 that relates to individuals. 18 Brussels I article 60(2). 19 Brussels I article 22: Exclusive jurisdiction regardless of domicile. In this discussion none of these scenarios are present. Brussels I article 23: Prorogation of jurisdiction. This is not relevant as it will be assumed that the parties did not submit to jurisdiction. Article 4 is constrained by the operation of other provisions in Brussels I. For example, lis alibi pendens and the discretionary refusal to exercise jurisdiction. See Briggs and Rees (n 13) in general par 2.178-2.181 and 2.207-2.222 for a discussion of the doctrine of forum non convenience in relation to Brussels I. 20 Briggs and Rees (n 13) par 4.01.

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When the plaintiff wants to serve a claim form out of the jurisdiction, the plaintiff needs the

permission of the court to serve out of the jurisdiction and must first prove that one of the

grounds listed in Practice Direction 6B to Part 6 of the Civil Procedure Rules is present.21 The

grounds for permission for serving out of the jurisdiction for claims relating to contract are the

following: where a claim is made in respect of contract where the contract was made within

the jurisdiction; the contract was made by or through an agent trading or residing within the

jurisdiction; the contract is governed by English law; or the contract contains a term to the

effect that the court shall have jurisdiction to determine any claim in respect of the contract.22

If the contract was breached within the jurisdiction the court may permit service out of the

jurisdiction.23 Paragraph (8) states that if a claim is made for a declaration that no contract

exists where, if the contract was found to exist, it would comply with the conditions set out in

paragraph (6). I will henceforth focus on the ground of breach of contract.

For the purpose of the latter jurisdictional ground, the plaintiff must establish a good arguable

case that there was a breach of contract and also that the place of breach of contract occurred

in England.24

Although breach was indeed committed in the jurisdiction, a court in England may still decline

to exercise jurisdiction on the basis of forum non conveniens.25 For example, if the reason the

court exercises jurisdiction is where the only jurisdictional connecting factor is the breach of

contract and no other connection with the court exists. Jurisdiction may be exercised even if

the contract is not the closest connection to England. England must be “the proper place in

which to bring the claim”.26 My discussion will focus on the event that an English court is the

forum conveniens.

21 Civil Procedure Rules 2011, Practice Direction 6B (hereafter PD). The Civil Procedure Rules, or CPR, was the outcome of the Woolf Reports of 1995 and 1996 that came into force on 26 April 1999. For the full Woolf Report go to http://webarchive.nationalarchives.gov.uk/+/http://www.dca.gov.uk/civil/final/contents.htm (accessed 23/07/2013). For information on the outcomes of the Woolf Reforms go to http://www.law.cf.ac.uk/research/pubs/repository/557.pdf (accessed 23/07/2013). The latest update, the 66th Update, came into force on 1 October 2013. Section 1 of the Civil Procedure Act, 1997 states that there must be rules of court which govern the practice and procedure that is to be followed in the Civil Division of the Court of Appeal, the High Court, and the County courts. The Civil Procedure Act, 1997 was enacted on 27 February 1997. 22 Practice Direction 6B subsection 3.1 (6)-(8). 23 Practice Direction 6B subsection 3.1 (7). 24 Fawcett, Harris and Bridge (n 10) par 4.54. 25 Amin Rasheed Shipping Corp v Kuwait Insurance Co 1984 AC 50; Spiliada Maritime Corp v Cansulex Ltd 1987 AC 460; Dicey, Morris and Collins (n 3) 569. 26 CPR, r.6.37(3). See in general Dicey, Morris and Collins (n 3) 568.

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2.3 Rules of Jurisdiction in South Africa

2.3.1 Breach of Contract as a Ratio Jurisdictionis

Before a South African court will assume jurisdiction some ratio jurisdictionis is necessary.27

A ratio jurisdictionis, or jurisdictional connecting factor, is the link between the territory of the

court and the facts out of which a dispute arises between the parties.28 Jurisdictional connecting

factors may include domicile, residence, creation of the contract, place of performance of the

contract, breach of contract, et cetera.29

Where a foreign peregrinus wants to sue an incola of South Africa he can base jurisdiction on

the maxim actor sequitur forum rei or he can sue in the jurisdiction where the cause of action

arises. A breach of contract in the latter instance is sufficient as a cause of action in this

scenario.30

Is a breach of contract as cause of action regarded as a ratio jurisdictionis when the incola

plaintiff wants to sue a foreign peregrinus?

Forsyth explains that a breach of contract is unlikely to be a ground of jurisdiction in South

Africa.31 He states that a court will be unlikely to exercise jurisdiction where a contract is

concluded and performed outside the Republic but is breached within the Republic.32 He refers

to Pollak’s suggestion that a “ground for jurisdiction is the act which gives the plaintiff his

cause of complaint”.33 Forsyth states that where the contract is concluded or is to be performed

outside the jurisdiction, a court will not exercise jurisdiction even if the contract was breached

within the jurisdiction.34 The place where the contract was made or was to be performed will

be a valid ratio jurisdictionis.35 Forsyth refers to the doctrine of causa continentia to

accommodate a breach of contract, but says that this doctrine will be useless if it is limited to

27 Forsyth (n 2) 213. 28 Schulze On Jurisdiction and the Recognition and Enforcement of Foreign Money Judgments (2005) 1. Hoexter JA in Bisonboard Ltd v K. Braun Woodworking Machinery (Pty) Ltd 1991 1 SA 482 (AD) at 484 said that a state is territorially conceived in public international law and the authority of the courts is derived from the sovereign power of the state and is limited to a state’s territorial boundaries. 29 Forsyth (n 2) 169; Schulze (n 28) 1. 30 Kelbrick Civil Procedure in South Africa (2012) 42. 31 Forsyth (n 2) 215. 32 Forsyth (n 2) 215. 33 Forsyth (n 2) 215. 34 Forsyth (n 2) 215. 35 Forsyth (n 2) 213.

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matters arising in the same jurisdiction.36 He then states that considerations of convenience

may have a role to play.37

Schulze cites the Ewing-case but does not say whether a breach of contract is allowed when an

incola wants to sue a foreign peregrinus.38 Kelbrick also doesn’t refer to any specific cause of

action.39 When Cilliers et al explain the doctrine of attachment for claims in contract against a

peregrine defendant, attachment is necessary if the contract was concluded or is to be

performed within the jurisdiction of the court.40

In Veneta Mineraria Spa v Carolina Collieries (Pty) Ltd41 the court said that a breach in

anticipando occurring outside the locus contractus does not confer jurisdiction on the court

concerned.42 The court then stated that the place of the cause of action ordinarily arises where

the contract was concluded or is to be performed.43 The judge later remarked obiter that, for

jurisdiction purposes, it must be shown that the repudiation took place in the court’s

jurisdiction.44 The court therefore considered the possibility of a breach of contract as a ground

for jurisdiction.

However, the mere attachment of property was sufficient in Wrens (Pty) Ltd v S & W Fine

Foods Inc.45 In American Cotton Products v Felt & Tweeds Ltd46 the court also allowed

attachment of property even though there was no other ratio jurisdictionis.47

If it can be accepted that a mere attachment is sufficient for jurisdiction, one can also allow

attachment where a breach of contract takes place when an incola wants to sue a foreign

peregrinus out of the jurisdiction. The same conclusion can also be reached when the causa

continentia doctrine is sufficiently defined to enable courts to exercise jurisdiction on a breach

of contract even where the contract is concluded and is performed outside of the Republic. This

36 Forsyth (n 2) 215. The causa continentia doctrine is uncertain as to its contents and its limits in South Africa. See Forsyth 193-195. 37 Forsyth (n 2) 215. 38 Schulze (n 27) 11. 39 Kelbrick (n 30) 43. 40 Cilliers et al Herbstein & Van Winsen The Civil Practice of the High Courts of South Africa Volume 1 (2009) 105. 41 1985 3 SA 633 (D). 42 Veneta (D) (n 41) 643D-643E. 43 Veneta (D) (n 41) 643H. At 644A the judge said that repudiation at a particular place is not sufficient if all other respects of the contract is unrelated to that place. 44 Veneta (D) (n 41) 645A. 45 1941 NPD 343. 46 1953 2 SA 753 (N). 47 American Cotton Products (n 46) 755F-H.

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will enable certain parties to sue in South Africa where there is no other link to the court, save

for the breach of contract in that jurisdiction.

The discussion that follows is on the premise that a breach of contract is allowed as a valid

ratio jurisdictionis, even where there are no other links to the court’s jurisdiction.

2.3.2 Rules of Jurisdiction in General

In the previous section I explained that a breach of contract is not yet regarded as a ratio

jurisdictionis and I explained that this may well be regarded as a ground for jurisdiction. In the

following section I will explain the general rules of jurisdiction in South Africa.

Section 19(1)(a) of the Supreme Court Act48 reads:

“A provincial or local division shall have jurisdiction over all persons residing or being in and in

relation to all causes arising and all offences triable within its area of jurisdiction and all other

matters of which it may according to law take cognizance.”49

An incola defendant may be sued in a South African court based on the maxim actor sequitur

forum rei and domicile50 or residence51 will serve as the jurisdictional connecting factors.52 An

incola may be sued in a division of the High Court other than in which he is domiciled or

resident if the cause of action takes place in that jurisdiction. Breach of contract is a sufficient

cause of action in this scenario.53 When a peregrinus plaintiff wants to sue an incola defendant

in South Africa, the defendant may be served by summons in the ordinary manner.

Where the defendant is a peregrinus and the cause of action (ie a ratio jurisdictionis other than

domicile or residence)54 arises within the court’s area of jurisdiction, attachment confirmandam

jurisdictionem55 is necessary. Where the cause of action arose outside the area of the court’s

jurisdiction, attachment fundandum jurisdictionem56 of the defendant’s goods is necessary.57

This is the case where the incola sues where he is domiciled or resident and the cause of action,

48 Act 59 of 1959. 49 The courts interpret this section in the light that the common law determines jurisdiction of the High Court; Forsyth (n 2) 178. 50 Einwald v German West African Co (1887) 5 SC 86 91; Forsyth (n 2) 221. 51 Mackay v Philip (1830) 1 Menz 455 460; Forsyth (n 2) 222. 52 Forsyth (n 2) 221. 53 Kelbrick (n 30) 42. 54 Forsyth (n 2) 214. 55 Jurisdiction is strengthened; Forsyth (n 2) 223. 56 This founds the jurisdiction of the court; Forsyth (n 2) 224. 57 See Forsyth (n 2) 196 for the requirements of attachment.

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eg the breach of contract, takes place in another division’s jurisdiction. Courts allow an incola

to pursue his claim in South Africa even though the cause of action arises outside the court’s

area of jurisdiction so that he can pursue his claim at his most convenient forum.58 When a

plaintiff wants to serve a peregrinus outside of the jurisdiction, he will need the leave of the

courts. Because summons cannot be served by way of ordinary summons it must be served

edictally.59 Rule 5 sets out the rules when proceedings may be instituted outside the Republic.60

The plaintiff must set out the nature of the claim and the grounds upon which it is based and

also the grounds upon which the court will be able to exercise jurisdiction.61 The plaintiff must

also prove the requirements for attachment. The plaintiff must show where the cause of action

arose, that the defendant is a peregrinus, and that the plaintiff has a prima facie case.62

Where both the plaintiff and defendant are peregrini of South Africa, attachment of the

defendant’s goods is necessary and the cause of action has to arise within the court’s area.63

Another issue to consider briefly is the doctrine of forum non conveniens. The question whether

a court in the Republic of South Africa can stay proceedings in favour of a court in other

jurisdictions remains to be finally resolved by the courts.64 Forsyth points out that the adding

of an additional ground of jurisdiction in Bid Industrial Holdings v Strang and Others,65 ie the

service on a defendant who is present within the jurisdiction at the time of service together with

an adequate connection between the suit and the area of jurisdiction, may open the doorway to

recognise such a doctrine and the court in this instance has also recognised this issue.66

2.4 Conclusion

England’s rules of jurisdiction regarding the breach of contract are much clearer than in South

Africa. England enacted the CPR to make provision for a breach of contract when the plaintiff

58 Schulze (n 28) 11. 59 Van Zyl The Theory of the Judicial Practice of South Africa Volume 1 (1924) 174. 60 Rules Regulating the Conduct of the Proceedings of the Several Provincial and Local Divisions of the High Court of South Africa, Rule 5(1). In terms of section 43(2)(a) of the Supreme Court Act 59 of 1959, the Chief Justice can, after consultation with the Judges President of the different divisions of the High Court and with the approval of the State President, make rules regulating the conduct of proceedings. The latest amendment was on 22 June 2012 in the Government Gazette No. 35450. 61 Uniform Rules of the Court, Rule 5(2). 62 See Forsyth (n 2) 198-202 in general. 63 Forsyth (n 2) 224. In this discussion it is assumed that one of the parties is domiciled or resident in South Africa and the other party is domiciled or resident in a foreign jurisdiction. 64 Forsyth (n 2) 185. 65 2008 3 SA 355 (SCA). 66 See Forsyth (n 2) 184-188 in general.

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wants to sue out of the jurisdiction. In South Africa, the place where the contract is concluded

and the place where the contract is to be performed are valid rationes jurisdictionis in the event

where a foreign defendant’s goods needs to be attached. A breach of contract is not yet regarded

as a valid ratio jurisdictionis. Courts in Kwazulu-Natal (Natal as it was previously known)

accepted an attachment of property without the cause of action arising within the jurisdiction.

Therefore, the gate is open to courts to accept a breach of contract when attaching a foreign

defendant’s goods when exercising jurisdiction.

In England, the claimant only has to make a good arguable case whereas in South Africa

attachment ad confirmandum jurisdictionem or ad fundandum jurisdictionem is necessary

when an incola wants to bring a case against a foreign peregrinus.

CHAPTER 3

THE LAW OF BREACH OF CONTRACT IN ENGLAND AND SOUTH AFRICA

3.1 Introduction

In Chapter 2 it was explained that England already has a provision for a breach of contract as

a ground for jurisdiction and that South Africa still has to formally recognise a breach of

contract as a ground. Because breach of contract is determined in relation to jurisdiction, it is

regarded as a procedural issue. Each country has to follow its own rules on breach of contract

to determine whether there was a breach in that jurisdiction. In this chapter the law on breach

of contract in England and South Africa are explained. Breach of contract is the act of a party

to a contract of not honouring his obligations in terms of the contract. Breach of contract also

occurs where one party expressly or impliedly repudiates a contract or when there was a non-

performance or defective performance.67

67 Dicey, Morris and Collins (n 3) 447.

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3.2 English Law of Breach of Contract

In English law breach of contract occurs in one of three ways, ie by express repudiation, implied

repudiation and non-performance.68

Express repudiation occurs when a party informs the other party by word or act that he intends

not to honour one or more of his obligations in terms of the contract.69

Express repudiation occurs where the party actually expressed his intention to repudiate the

contract. For instance, a breach is not committed in England if X, who is abroad, sends a letter

repudiating the contract to A in England.70 If X repudiates the contract through an agent who

is in England then the repudiatory act is committed in England.71

An implied repudiation is an act by a party which is inconsistent with his performance of the

contract. There is no authority on this point in English law but breach will presumably occur

where the inconsistent act is done and is normally where the contractual obligation is an

omission.72

A repudiation can be accepted by the aggrieved party and will then amount to an anticipatory

breach.73 A repudiation that is not accepted means that the aggrieved party waits until the time

of performance of the contract. Failure then to perform amounts to a non-performance.74 Where

the contract was repudiated the place of performance is irrelevant because the breach by

repudiation occurs at the place where the intention to repudiate occurs and this may be a

different place where performance is to be effected.75

A non-performance (or performance which is not in conformity with the contract)76 occurs

where a party does not perform one or more of his obligations under the contract. The court

therefore has to look at the obligations of the parties.77 The contract does not have to be

performed in its totality in the jurisdiction.78 A breach of only one performance of the contract

68 Dicey, Morris and Collins (n 3) 447. See also in general Fawcett, Harris and Bridge (n 10) par 4.51-4.89. 69 Dicey, Morris and Collins (n 3) 447. 70 Cherry v Thompson 1872 L.R. 7 Q.B. 573 579. This position was confirmed in Martin v Stout 1925 AC 359 368-369; Dicey, Morris and Collins (n 3) 447. 71 Mutzenbecher v La Aseguradora Espanola 1906 1 KB 254 (CA); Dicey, Morris and Collins (n 3) 447. 72 Dicey, Morris and Collins (n 3) 447. 73 Fawcett, Harris and Bridge (n 10) par 4.59. 74 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft GmbH 1983 2 AC 34; Fawcett, Harris and Bridge (n 10) par 4.60. 75 Dicey, Morris and Collins (n 3) 448. 76 Fawcett, Harris and Bridge (n 10) par 4.77. 77 Fawcett, Harris and Bridge (n 10) par 4.63. 78 Fawcett, Harris and Bridge (n 10) par 4.66.

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will constitute non-performance in terms of the breach ground, even though the other

obligations in the contract are performed without any breach.79 The non-performance must be

serious enough to constitute a breach of contract.80 In most cases a breach which is complained

about is the failure of the buyer to make payment.81 If the parties didn’t expressly or impliedly

consent on the place where payment is to be made then the general rule is that the debtor must

seek out his creditor.82 Payment in a specific currency may imply that payment is to be made

in a certain jurisdiction.83

3.3 South African Law of Breach of Contract

In South African law there are five forms of breach of contract. They are mora debitoris, mora

creditoris, positive malperformance, breach of contract in anticipando and prevention of

performance.

3.3.1 Mora Debitoris

Negative malperformance by the debtor is the wrongful failure to perform timeously.84 The

breach of contract is not yet committed. The debtor must first be in mora. He will be in mora

if performance is still possible; the debtor fails to perform timeously; performance is due and

enforceable; and the delay is due to the debtor’s fault.85

3.3.2 Mora Creditoris

Mora creditoris occurs when the creditor fails to accept the proper performance by the debtor

or fails to co-operate with the debtor.86 The creditor has not yet breached the contract and

certain requirements need to be met. The performance must still be possible, the creditor delays

79 Dicey, Morris and Collins (n 3) 448. 80 See Chapter 4 below when non-performance will be serious as to constitute a breach of contract. 81 Dicey, Morris and Collins (n 3) 448. 82 Deutsche Ruckversicherung AG v La Fondaria Assicurazioni SpA 2001 2 Lloyd’s Rep. 621; Dicey, Morris and Collins (n 3) 448. 83 Fry & Co v Raggio 1891 40 W.R. 120; Dicey, Morris and Collins (n 3) 448. 84 Nagel et al Commercial Law (2006) par 9.06. 85 Nagel (n 84) par 9.07-9.13. It will be assumed that the requirements for mora debitoris are met. 86 Nagel (n 84) par 9.14. It will be assumed that the requirements for mora creditoris are met.

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the performance, the performance is due and enforceable, the debtor offers proper performance,

and the delay is due to the creditor’s fault.87

3.3.3 Positive Malperformance

Here the debtor effected performance, but the malperformance relates to the content or

quality.88 There are two forms: 1) where the debtor had to perform but he performed in an

incomplete or defective manner; and 2) where he does an act which he was refrained from

doing.89

3.3.4 Breach of Contract in Anticipando

Anticipatory breach is committed when a party, by word or act and without a lawful

justification, suggests to the other party his unequivocal intention of not fulfilling his

contractual obligations.90 There are two requirements: the act (either expressly or tacitly) and

the intention. The repudiatory party already commits a breach of contract when he expresses

his intention. The aggrieved party may accept the repudiation and elect to cancel the contract

or he can wait until the date of performance of the contract.91 In the discussion of breach of

contract in anticipando, I will for the sake of brevity refer to a “repudiation” in the discussion

that follows. Also, it will be assumed for this discussion that the repudiatory party’s intention

is to no longer be bound by the contract.

In the Veneta Mineraria-case92 it was remarked obiter that an express renunciation of the duty

to perform must be conveyed to the innocent party as part of the act of renunciation.93 The

entire set of facts must be taken into account to establish the cause of action.94 Therefore, when

a telex message is sent from Durban to Milan the repudiatory act is committed in Milan because

the innocent party was fully informed in Milan of the other party’s intention not to perform.95

87 Nagel (n 84) par 9.15-9.20. 88 Nagel (n 84) par 9.26. 89 Nagel (n 84) par 9.26-9.28. Fault on the part of the debtor is generally not regarded as a requirement. 90 Nagel (n 84) par 9.31. 91 Nagel (n 84) par 9.35-9.36. 92 Veneta (D) (n 41) 644D. 93 Veneta (D) (n 41) 645A. See also HMBMP Properties (Pty) Ltd v King 1981 1 SA 906 (N) on the point that the aggrieved party must be fully informed for a complete repudiation in terms of South African law. 94 Veneta (D) (n 41) 645B. 95 Veneta (D) (n 41) 645C. A more modern form of communication is an e-mail. The breach takes place where the e-mail is received and the aggrieved party is fully informed of the other party’s intention to repudiate.

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The full set of facts means that the innocent party is informed of the repudiatory party’s

intention.96 English authority is against this view. To treat the place where the aggrieved party

is informed of the repudiation will be against the very nature of repudiation, ie a breach occurs

by repudiation at the place where the party expresses his intention to repudiate the contract.97

Even if the party repudiates the contract over a telephonic conversation, the breach occurrs at

the place where the party expresses his intention to repudiate as that is the place where the overt

act takes place.98

3.3.5 Prevention of Performance

This is the case where a party intentionally or negligently prevents performance by rendering

it impossible.99

3.4 Conclusion

The only real difference between English and South African law is the place where a

repudiation takes place. In English law the place of the act of repudiation is where the party

expresses his intention. In South African law the place of breach of contract by repudiation is

the place where the innocent party is informed of the intention. Also, South African law has

two different types of breaches with regard to the time of the contract, mora debitoris, and with

the content of the performance, ie positive malperformance. In English law both of the breaches

constitutes a non-performance of the contract.

96 Veneta (D) (n 41) 645B. 97 Fawcett, Harris and Bridge (n 10) par 4.69. 98 Fawcett, Harris and Bridge (n 10) par 4.69. 99 Nagel (n 84) par 9.40.

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CHAPTER 4

INCOTERMS

4.1 Introduction

The ICC chairman, Rajat Gupta, explains the importance of basic and understandable

international trade terms to facilitate global trade.100 There is a global market where goods are

sold in large quantities and in great variety everyday around the clock. Thus, to reduce

uncertainty as to what the obligations of buyers and sellers are, such as when and where

delivery has to take place, the Incoterms were introduced in 1936 and updated regularly to keep

in line with the advances in international trade.

Incoterms are standard trade terms that reflect the obligations of the buyer and seller in a sales

contract.101 These terms were first standardised in 1936 by the International Chamber of

Commerce.102 The latest revision of the terms is called the INCOTERMS©2010. The reason

for the terms’ existence is to have certainty on what is expected of the buyer and the seller and

to obtain a fair balance of rights and interests of the parties. The main purpose of these terms

is to reflect international commercial practice.103 The 2010 revision was necessary because the

2000 version was somewhat unclear on how they should be used in practice.104 Apart from the

obligations of the buyer and the seller the Incoterms set out when risk passes and who bears

the costs and for what. The trade terms are grouped in E-, F-, C-, and D-terms, which also

reflect the different nature of the terms. The Incoterms become binding between the parties

when it is expressly or tacitly incorporated into the contract.105 These terms have no binding

force in South Africa except when they are incorporated expressly or tacitly into the contract.106

The Incoterms have to be specifically incorporated in the contract to be binding in England.107

100 International Chamber of Commerce Incoterms 2010: Rules for the Use of Domestic and International Trade Terms (2010) 4. 101 Incoterms do not give a complete sales contract. It only deals with the obligation in relation to deliver the goods and the passing of risk and costs thereto, and the buyer’s obligation to pay. Transfer of ownership and method of payment, for example, must be agreed on separately. 102 These terms were updated six times in 1957, 1967, 1976, 1980, 1990, and 2000. The terms are revised when there are major developments in commercial practice. The new terms came into force on 1 January 2011. 103 Ramberg ICC Guide to Incoterms 2010: Understanding and Practical Use (2011) 8. 104 Ramberg (n 103) 9. For example in the 2000 terms the delivery in cif and fob contracts was effected when the goods passed the ship’s rail. Difficulties arose in practice because the precise moment was often difficult to pinpoint. In the 2010 terms the delivery is very clear. The goods must now be loaded on board the ship to effect a good delivery of the goods. 105 Van Niekerk and Schulze The South African Law of International Trade: Selected Topics (2011) 73. 106 Van Niekerk and Schulze (n 105) 73. 107 Carr International Trade Law (2010) 5.

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If it is not expressly incorporated in the contract then the law of the proper law of the contract

will determine the legal issues between the parties.

The terms that I have chosen for discussion are Ex Works; Delivery At Place; Cost, Insurance

and Freight; and Free on Board. The first two contain, respectively, the least and the most

responsibility and expense for the seller and cif and fob are chosen as these are terms discussed

separately in international trade textbooks.

My aim in the following discussion is where a breach of contract takes place for purposes of

jurisdiction. I will first determine the most important obligations of each party. After each

obligation I will explain where a breach of such obligation takes place using the different types

of breaches. I will first examine this in relation to English law and thereafter South African

law. The scenarios where a breach occurs outside the jurisdiction are not considered.

Jurisdiction in those cases will not be on the breach ground at all.

I am not taking into account when a contract cannot be carried out because of some intervening

event that causes impossibility to ship, where the goods were destroyed by such event, when

such performance becomes illegal or where there was a breakdown in diplomatic channels, et

cetera. For all purposes it will be assumed that such an event did not occur. Also, the method

of payment is assumed to be by cash.

4.2 C-terms

4.2.1 CIF (Cost, Insurance, Freight)

A cif contract is a contract for the sale of goods which includes the cost of the goods, insurance

costs and freight costs.108 The seller must also pay export licenses or any other official

authorisation and also any customs formalities necessary to export the goods.109 The seller’s

performance is to deliver the goods to the carrier which is in accordance with the description

of the contract and also to deliver the shipping documents that he had to compile, ie the bill of

lading, insurance documents, the invoice and other documents, to the buyer at the port of

destination.110 The seller has to conclude a contract with the carrier to ship the goods to the

108 CIF A3; Lord Mackay of Clashfern (ed) Halsbury’s Laws of England Volume 91 (2012) par 335; Hackwill Mackeurtan’s Sale of Goods In South Africa (1984) 256. 109 CIF A2. 110 CIF A8; Halsbury’s (n 108) par 351; Van Niekerk and Schulze (n 105) 77. In both English and South African common law the place for tendering documents is the buyer’s place of business but the intention of the parties is delivery in terms of CIF A8.

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agreed port of destination.111 By delivering the goods to the carrier on the ship, the seller has

performed his end of the contract in relation to the goods. The contract does not specify the

port of shipment, but only the port of destination. The contract will have to contain a specified

port of shipment if the buyer wishes that the goods must be shipped from a particular port.112

Upon presentation of the shipping documents, the buyer has to pay the agreed price.113 Any

damage or loss to the goods after shipment will be suffered by the buyer as risk passes to the

buyer after the seller has loaded the goods onto the vessel.114

There are four general obligations of the seller namely to ship the goods, to compile shipping

documents, to tender the documents to the buyer, and duties with respect to delivery.

4.2.1.1 Shipment of the Goods

The seller has to deliver the goods by loading the goods onto the vessel that is bound for the

agreed destination.115 Because the delivery of a cif contract is not the delivery of the goods, but

a delivery of shipping documents, a non-delivery of the goods will not amount to a non-

performance of the contract. The reason for this is that the transfer of shipping documents,

which represents the goods, constitutes delivery and there is no obligation on the seller to

deliver the goods themselves.116 He can base jurisdiction on the non-delivery of the shipping

documents.

Van Niekerk and Schulze make this useful statement:

“[I]n determining the place of performance of a cif contract for purposes of private international

law as well as for jurisdictional purposes, the place where the shipping documents are to be

delivered…rather than the place where the goods are to be delivered, will be decisive.”117

This is because the documents are the symbolic equivalent of the goods.118

I will therefore only consider the position where the seller failed to deliver the shipping

documents and not where the seller failed to ship the goods.

111 CIF A3; Halsbury’s (n 108) par 335; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 77. 112 CIF guidance note. 113 CIF B1; Halsbury’s (n 108) par 337; Mackeurtan’s (n 108) 257. 114 CIF B5. 115 CIF A4; Halsbury’s (n 108) par 335; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 77. 116 Halsburies (n 108) par 336; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 77. 117 Chattanooga Tufters Supply Co Chenille Corp of South Africa (Pty) Ltd 1974 2 SA 10 (E); Van Niekerk and Schulze (n 105) 78. 118 Halsbury’s (n 108) par 336; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 78.

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If the seller repudiates the contract by expressing to the buyer that he will not deliver the goods,

or not load the goods on the vessel, the buyer can accept or not accept the repudiatory act.

When the buyer does not accept the repudiation he can wait until the time when the shipping

documents had to be delivered. England: If the buyer accepts the repudiation, the breach will

take place in the seller’s country. Breach then occurs in England because this is where the

seller’s overt act takes place. The buyer can base jurisdiction on Brussels I or on the fact that

the seller is in England. South Africa: Breach will take place in South Africa if the buyer is

fully informed there of the seller’s intention to repudiate. Jurisdiction is based on the breach of

contract as a ratio jurisdictionis.

The seller has to contract with the carrier at the place of shipment. This contract must be in

usual terms and provide for the usual route in a vessel of the type normally used for the

shipment of the types of goods sold.119 The goods must be shipped on a vessel stipulated in the

contract, or if no vessel is nominated, a vessel customary for the trade and the vessel must be

bound for the destination agreed upon.120 England: There is no case law in England on any of

these terms regarding the effect of section 15A of the Sale of Goods Act, 1979.121 If the seller

breaches any of these terms or conditions the buyer will have the right to treat the contract as

repudiated.122 If the buyer accepts the act then the breach is committed in the seller’s country.

The buyer will base jurisdiction on Brussels I or on the fact that the seller is in England. South

Africa: I could not find any authority where the seller concluded a contract of affreightment

which was not in the usual terms or which did not provide for the usual route in a vessel of the

type normally used for the shipment of the types of goods sold. If it is accepted that, as is the

case in England, that the buyer has the right to treat the contract as repudiated, the breach takes

place in South Africa because the buyer is fully informed there of the repudiation. The buyer

will base jurisdiction on the breach of contract as a ratio jurisdictionis.

The position would be the same when the seller expressly states that he is unable to make the

appropriate terms for such a contract.

If the seller did not contract at all then the goods will not be delivered and, consequently, the

bill of lading will not be delivered to the buyer. The seller will then breach the contract for non-

delivery of the documents.

119 CIF A3; Halsbury’s (n 108); Mackeurtan’s (n 108) 257. 120 CIF A3; Halsbury’s (n 108) par 342; Mackeurtan’s (n 108) 257. 121 Halsbury’s (n 108) par 342 fn 9. 122 Ashmore & Sons v CS Cox & Co 1899 1 QB 436 441; Halsbury’s (n 108) par 342.

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The goods must be in strict accordance with the description in the contract when the contract

took place by description.123 Terms relating to the packaging of the goods form part of the

description.124 Time also forms part of the description of the contract as time plays an important

role in international commercial contracts.125 If no time limit is agreed upon, the goods must

be shipped within a reasonable time.126 The effect is that the seller will not be able to tender

the shipping documents in time. I will first consider when a time provision is breached and

thereafter a breach of a description of a contract other than a time condition. England: A breach

of a time condition in the contract will not be regarded as a slight breach and will therefore be

a breach of condition.127 The buyer has the right to treat the contract as repudiated. If the seller

expressly states that he will not make the time, he commits an express repudiation. Breach

occurs where the overt act takes place. In both scenarios the buyer will base jurisdiction on

Brussels I or on the fact that the seller is in England. South Africa: The time of shipment is

normally of the essence of the contract.128 If the seller does not deliver the goods in time, the

effect is that the shipping documents will not be tendered in the time agreed upon. Non-delivery

and late delivery of the shipping documents are discussed below.

Breach of the description of the contract other than a time condition. England: It is an implied

condition that goods correspond to the description in the contract.129 This is subject to section

15A of the Sale of Goods Act, 1979, ie the breach must not be a slight breach. If the seller

breaches any of these conditions then the seller breaches contract for non-delivery. The breach

takes place where the goods are delivered. The goods are delivered at the port of destination.

This is where the buyer first becomes aware that the goods do not correspond to the contract

description. The non-conformity of the goods takes place in the buyer’s country. The buyer can

base jurisdiction on the breach ground. South Africa: The buyer may reject delivery of goods

which are patently defective on one of two grounds, namely, it does not comply with the

description in the contract and thus it is not what was sold, or it is unfit for its purpose.130 If the

buyer has the right to not accept the goods the buyer can institute action for a breach of contract

123 Halsbury’s (n 108) par 341. 124 Manbre Saccharine Co v Corn Products 1919 1 KB 189; Carr (107) 12. 125 Bowes v Shand 1877 2 AC 433; Carr (n 107) 13. In South African law time is of the essence only when the parties agreed on a specified date. Berman & Berzack v Finlay Holt & Co Ltd 1932 TPD 142; Van Niekerk and Schulze (n 105) 77. 126 Halsbury’s (n 108) par 342. 127 Carr (n 107) 13; Halsbury’s (n 108) par 341. 128 Mackeurtan’s (n 108) 259. 129 Sale of Goods Act, 1979 section 13 130 Joubert and Faris (eds) The Law of South Africa (2000) Volume 24 81.

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on the basis of a positive malperformance.131 The place where the buyer rejects the goods is at

the port of destination where the goods are delivered. The buyer can base jurisdiction in a

breach of contract as a ratio jurisdictionis. If the seller expresses to the buyer that the goods

will not be of the contract description he commits a breach by express repudiation. England:

The breach occurs where the overt takes place. The seller breaches contract in England and the

buyer can base jurisdiction on Brussels I or on the fact that the seller is in England. South

Africa: Breach of contract occurs where the buyer is fully informed of the seller’s intention to

repudiate. The buyer is informed in South Africa of the intention. The buyer can then base

jurisdiction on a breach of contract as a ratio jurisdictionis.

The goods must be of the reasonable quality and quantity. The buyer can reject the goods if the

goods are not of a satisfactory quality.132 England: The buyer does not have the right to reject

the goods if the breach was a slight breach.133 Where the non-conformity is so slight then the

buyer can not treat it as breach of condition, but rather as breach of warranty under section 15A

of the Sale of Goods Act, 1979. Breach of these conditions occur at the port of destination.134

The implied repudiation occurs where the inconsistent act is done, ie at the place where the

buyer can inspect the goods which is at the port of destination, ie in the buyer’s country. The

buyer inspects the goods and rejects them in England. The buyer can then base jurisdiction on

the breach ground. South Africa: If the goods are not of a reasonable merchantable quality the

buyer can reject the goods and cancel the contract. The basis for the breach is a positive

malperformance. The non-acceptance of the goods takes place in the buyer’s country.

Jurisdiction is based on a breach of contract as a ratio jurisdictionis. The same applies where

the contract provides for a certain quality and the goods are not of the quality contracted for. If

the seller in this scenario expresses to the buyer that the goods will not meet the contract quality,

the seller commits a breach of contract. England: The breach occurs where the overt act takes

place, ie in the seller’s country. The seller repudiates in England. The buyer can base

jurisdiction on Brussels I or on the fact that the seller is in England. South Africa: The buyer

must be fully informed of the seller’s intention. The buyer is fully informed in South Africa.

The buyer can base jurisdiction on the breach of contract as a ratio jurisdictionis.

131 Joubert and Faris (n 130) 81. 132 Halsbury’s (n 108) par 358; Joubert and Faris (n 130) 83. 133 Section 15A. 134 Halsbury’s (n 108) par 358.

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4.2.1.2 Compile Proper Shipping Documents

The seller must prepare proper shipping documents. Unless otherwise agreed the seller only

has to procure the bill of lading, invoice and insurance policies.135 The bill of lading has three

functions, namely it is a receipt of the goods shipped; it serves as evidence of the terms of the

contract of carriage between the carrier and the consignor; and it is a document of title to the

goods.136 The seller must make sure that the bill of lading is transferrable and that it is a shipped

bill of lading and not merely a “received for shipment” bill of lading.137 Delivery in cif contracts

is symbolic as the tendering of documents is the contractual performance of the contract.138

The legal nature of the documents puts the buyer in as good a position as if he had the goods.139

In cif contracts it is said that it is not as much a sale of goods, but more appropriately a sale of

the documents.140

The buyer may reject the documents if the documents are not in conformity with the contract.141

The rejection occurs in the buyer’s country where the documents are tendered, ie at the port of

destination.142 England: The editors of Halsbury’s Laws of England submit that section 15A of

the Sale of Goods Act, 1979 does not affect the buyer’s right to reject the documents even

though the breach is a slight breach.143 I hold the same view the reason being that the buyer

uses these documents to conclude other sales contracts and has to tender proper shipping

documents to his buyers.144 When the buyer expresses to the seller that he will not accept a

tender of the documents the buyer commits breach of contract by express repudiation. Express

repudiation occurs where the overt act takes place. The buyer repudiates in England and the

seller will then base jurisdiction on Brussels I or on the fact that the seller is in England. If the

buyer does not have the right to reject the documents, the seller may treat the act as a

repudiation. An implied repudiation occurs where the inconsistent act is done. The buyer rejects

in England and the seller can base jurisdiction in Brussels I or on the fact that the buyer is in

England. South Africa: The buyer is entitled to refuse to accept the documents if some of the

135 Halsbury’s (n 108) par 335; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 78. 136 Van Niekerk and Schulze (n 105) 147. 137 Diamond Alkali v Bourgeois 1921 3 KB 443; Halsbury’s (n 108) par 344. CIF A8 states that the documents must enable the buyer to claim the goods from the carrier at the port of destination or the documents must enable the buyer to sell the goods in transit by the transfer of the documents to a subsequent buyer. 138 Halsbury’s (n 108) par 336; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 78. 139 Halsbury’s (n 108) par 336; Van Niekerk and Schulze (n 105) 77. 140 Halsbury’s (n 108) par 335; Mackeurtan’s (n 108) 257 fn 5; Van Niekerk and Schulze (n 105) 77. 141 Halsbury’s (n 108) par 358; Van Niekerk and Schulze (n 105) 77. 142 CIF A8. 143 Halsbury’s (n 108) par 351 fn 14. 144 Halsbury’s (n 108) par 336; Van Niekerk and Schulze (n 105) 79. The buyer is in as good a position with the documents as he would have been if he had the goods.

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documents are missing from the set,145 the documents are not shipping documents,146 the

documents are not of the nature agreed upon,147 a greater quantity of goods is covered than

what is agreed upon,148 or there is a material difference in the description of the goods than in

the contract of sale.149 Breach by express repudiation occurs where the seller is fully informed

of the buyer’s intention to repudiate. Breach occurs in South Africa and the seller can base

jurisdiction on a breach of contract as a ratio jurisdictionis. Where the buyer does not have the

right to refuse to accept the documents the buyer commits a breach by mora creditoris in the

buyer’s country. The seller can base jurisdiction on the maxim actor sequitur forum rei or

action can be initiated where the cause of action takes place.

4.2.1.3 Tendering of Shipping Documents to the Buyer

See the section above where the documents are tendered and the buyer’s right to reject the

tendered documents. In this section I am discussing the scenario where the documents are not

tendered and the place of payment upon tendering of proper shipping documents.

The place where the documents must be tendered is at the port of destination.150 Trade usage

or the course of business between the parties may rebut this presumption.151 The documents

must be tendered at the time stipulated in the contract or if no such stipulation, within a

reasonable time.152 The buyer is entitled to reject the documents if the documents are not

tendered within the time allowed.153 Breach is committed in the buyer’s country where non-

delivery of the documents occurred. England: The breach that is committed is a non-

performance of the contract at the place of destination. The buyer can base jurisdiction on the

breach ground. South Africa: The seller commits a breach of contract by mora debitoris. The

buyer can base jurisdiction on a breach of contract as a ratio jurisdictionis.

145 Pantin v Turner 1899 20 NLR 125; Van Niekerk and Schulze (n 105) 78. 146 Yamomoto v Rand Canvas Co 1919 WLD 100; Van Niekerk and Schulze (n 105) 78. 147 Standard Bank of South Africa Ltd v Efroiken & Newman 1924 AD 171; Van Niekerk and Schulze (n 105) 78. 148 MA Motala Ltd v Mengyo Co 1936 NPD 52; Van Niekerk and Schulze (n 105) 78. 149 Savage & Lovemore Mining (Pty) Ltd v International Shipping Co (Pty) Ltd 1987 2 SA 149 (W); Van Niekerk and Schulze (n 105) 78. 150 CIF A8; Halsbury’s (n 108) par 351; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 77. 151 Halsbury’s (n 108) par 351; Van Niekerk and Schulze (n 105) 77. 152 Halsbury’s (n 108) par 351; Mackeurtan’s (n 108) 257; Van Niekerk and Schulze (n 105) 77. 153 Time for tendering of the documents can be provided for in the contract. If no provision is made for the time of tender of the documents, the documents must be tendered within a reasonable time. Halsbury’s (n 108) par 340; Mackeurtan’s (n 108) 257.

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When the bill of lading is not defective the buyer cannot reject them and has to pay the agreed

price upon presentation of the documents or within a reasonable time after the tender of the

documents.154 The contract may stipulate another date of payment from the date of the

tendering of the documents.155 England: The buyer commits a breach by non-performance of

his obligation to pay the price. The buyer must pay upon presentation of the document, ie at

the port of destination. The buyer breaches contract in England and the seller can base

jurisdiction on Brussels I or on the fact that the buyer is in England. South Africa: The buyer

has to pay the price where the thing which is contracted for is handed over.156 In cif sales the

documents are handed over at the port of destination. The buyer breaches contract by mora

debitoris if he fails to pay the purchase price, or where the buyer pays a different amount from

that provided for in the contract, the buyer commits a breach by positive malperformance. The

seller can base jurisdiction on the maxim actor sequitur forum rei or action can be initiated

where the cause of action takes place.

When the buyer expressly states that he will not pay the purchase price or where he expresses

that the price will be different from that in the contract, the buyer commits a breach of contract

by express repudiation. England: Breach by express repudiation occurs where the buyer’s overt

act takes place. The buyer repudiates in England and the seller can base jurisdiction on Brussels

I or on the fact that the buyer is in England. South Africa: The seller must be fully informed of

the buyer’s intention to repudiate. The seller is fully informed in South Africa. The seller can

base jurisdiction on a breach of contract as a ratio jurisdictionis.

4.3 D-terms

The D-terms entail the greatest cost and responsibility for the seller.157 The seller has to deliver

the goods in the country of destination, ie usually the buyer’s country. This Incoterm can be

used for any mode of transport and also with more than one mode of transport. The main

difference in relation to delivery is that with D-terms the seller delivers the goods themselves

and not the shipping documents as with cif and in certain circumstances, fob contracts.158

154 CIF B1; Halsbury’s (n 108) par 353; Joubert and Faris (n 130) 87-88; Mackeurtan’s (n 108) 257. 155 Halsbury’s (n 108) par 353. 156 Joubert and Faris (n 130) 88. 157 Van Niekerk and Schulze (n 105) 80. 158 Van Niekerk and Schulze (n 105) 80.

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4.3.1 DAP (Delivered at Place)

The seller delivers the goods of a DAP contract when he places the goods at the disposal of the

buyer.159 The goods must still be on the arriving means of transport and ready for unloading at

the named place of destination.160 The seller bears the risk and costs of transportation from his

place to the place of destination.161 The seller has no obligation to clear the goods for

importation or pay import duties or carry out import customs formalities, but bears cost relating

to exporting the goods from his country.162 The seller must conclude a contract of carriage and

give notice to the buyer to take over the goods.163

If the seller does not deliver the goods at the agreed place of destination, the breach takes place

at the place of destination, ie usually in the buyer’s country.164 England: Breach of contract

takes place in England where the place of destination is, ie usually in the buyer’s country.165

The buyer can base jurisdiction on the breach ground. South Africa: The seller is in mora

debitoris if he fails to perform or commits a breach by positive malperformance if the goods

are defective. Breach then takes place in South Africa if the place of destination is in South

Africa. The buyer can base jurisdiction on breach of contract as a ratio jurisdictionis.

If the seller suggests to the buyer that he does not intend to carry out his obligations in terms

of the contract, the seller commits an express repudiation. If the buyer does not accept the

repudiation he can wait until the time for performance. Breach is then a non-performance of

the contract. If the buyer accepts the repudiation the breach occurs in the seller’s country and

the buyer is informed of the repudiation in the buyer’s country. England: The overt act occurs

in England where the seller is. The buyer can base jurisdiction on Brussels I or on the fact that

the seller is in England. South Africa: Breach occurs where the buyer is fully informed of the

seller’s intention to repudiate. The buyer is fully informed in South Africa of the intention. The

buyer can base jurisdiction on breach of contract as a ratio jurisdictionis.

The buyer must pay for the goods when the goods are delivered. If the buyer doesn’t pay, or

pays a price different from that provided in the contract, breach of contract is committed in the

buyer’s country. England: Payment is to be affected at the stage where property in the goods

159 DAP A4. 160 DAP A4. 161 DAP A5 and A6. 162 DAP A2 and B2. 163 DAP A3 and A7. 164 Halsbury’s (n 108) par 163; Joubert and Faris (n 130) 62. 165 If the goods are not in conformity with the contract the buyer can reject the goods if the buyer had a right to do so according to section 15A of the Sale of Goods Act, 1979.

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passes to the buyer. This may be with passing of possession of the goods.166 Breach by non-

performance occurs in the buyer’s country where the goods are delivered. The seller can base

jurisdiction on Brussels I or on the fact that the buyer is in England. South Africa: The duties

of transfer of the goods and payment of the goods are reciprocal. Payment is therefore due

when the goods are delivered.167 The buyer is in mora debitoris if the buyer fails to pay the

price, or where the buyer pays another price as provided in the contract, the breach is a positive

malperformance. The seller can base jurisdiction on the maxim actor sequitur forum rei or

action can be initiated where the cause of action takes place.

The buyer breaches contract if he informs the seller that he has no intention of making payment

in respect of the contract, or that the buyer will pay a different price from that stipulated in the

contract. England: Breach of contract occurs in England where the buyer makes the overt act.

The seller can base jurisdiction on Brussels I or on the fact that the buyer is in England. South

Africa: The seller must be fully informed of the intention of the buyer to repudiate the contract.

The seller is fully informed in South Africa and can base jurisdiction on breach of contract as

a ratio jurisdictionis.

4.4 E-terms

4.4.1 Ex Works

The most convenient trade term for the seller is Ex Works. This trade term entails the least

costs and responsibility for the seller. This term can be used for any mode of transport. The

goods themselves are handed over to the buyer in the seller’s country. The seller must deliver

the goods by placing the goods at the disposal of the buyer at the seller’s premises or at a named

place of delivery.168 The seller is under an obligation to make the goods available for collection

by the buyer, but the goods must not be on a collection vehicle.169 The goods must be ready on

the agreed date or within an agreed period.170 The seller has to give the required notice to the

buyer that is needed for the buyer to collect the goods.171 The seller must have a commercial

invoice ready so that the buyer can infer from that document that the goods are in conformity

166 Halsbury’s (n 108) par 205. 167 Joubert and Faris (n 130) 87. 168 EXW A4. In this discussion it will be assumed that the place of delivery is in the seller’s country. 169 EXW A4. 170 EXW A4. 171 EXW A7.

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with the contract.172 The seller has to pack the goods at own expense that is required for the

particular transport type by the buyer.173 This obligation is only necessary to the extent that the

transport particulars have been made known to the seller and where the particular trade is not

usually made available unpacked.174

The seller breaches contract if he does not make available the goods or where the goods are

different from the contract when the buyer has to collect the goods. England: Breach for non-

delivery takes place in the seller’s country which is England.175 The buyer in this scenario must

have the right to reject the goods in terms of section 15A of the Sale of Goods Act, 1979 and

will base jurisdiction on Brussels I or on the fact that the seller is present in England. South

Africa: The seller will be in mora debitoris, breach of which takes place in South Africa.176

Breach also takes place in South Africa by positive malperformance if the goods are not the

same as that in the contract. Jurisdiction is based on the maxim actor sequitur forum rei or

action can be initiated where the cause of action takes place.177

If the seller notifies the buyer that the seller is not intending to make the goods available for

collection, or that the goods are defective, then the buyer may treat the contract as repudiated.

England: The buyer can then not accept and wait until time of performance by the seller, breach

then committed is a non-performance. If the buyer accepts the repudiation then the repudiatory

act takes place in the seller’s country because this is where the overt act takes place. Jurisdiction

can be based on Brussels I or the fact that the seller is present in England. South Africa: The

buyer can accept the repudiation or wait for the time of performance. If the buyer accepts the

repudiation the breach takes place where the buyer is informed of the intention. The buyer is

informed in South Africa. The buyer can base jurisdiction on breach of contract as a ratio

jurisdictionis.

The buyer must pay the price of the goods provided in the contract.178 Payment is made where

delivery takes place.179 England: The breach by non-performance occurs in England if payment

is effected there. The seller can base jurisdiction on the breach ground. South Africa: The buyer

172 EXW A1. 173 EXW A9. 174 EXW A9. 175 Halsbury’s (n 108) par 163. 176 Joubert and Faris (n 130) 62. 177 See cif on English and South African law with regards to defective goods. Here it suffices merely to determine where the breach takes place. 178 EXW B1. 179 Halsbury’s (n 108) par 205; Joubert and Faris (n 130) 87.

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will be in mora debitoris if the buyer fails to make payment for the goods. If the wrong amount

is paid then the buyer will breach by positive malperformance. The seller will base jurisdiction

on breach of contract as a ratio jurisdictionis.

If the buyer expresses to the seller that the buyer will not collect the goods, the seller can accept

or not accept the repudiation. England: If the seller does not accept the repudiation, breach is

committed by non-performance by the buyer. If the seller accepts the repudiation then the

repudiatory act takes place in the buyer’s country as this is where the overt act takes place.

Breach is committed in England where the buyer’s overt act takes place. South Africa: The

aggrieved party must be fully informed of the act. Therefore, the breach occurs in the seller’s

country. If the seller is informed in South Africa then breach is committed in South Africa. The

seller can base jurisdiction on breach of contract as a ratio jurisdictionis.

4.5 F-terms

4.5.1 FOB (Free on Board)

The seller in an fob contract must at its own expense load the goods on board the vessel at the

port of shipment.180 The buyer must arrange at own expense and risk a contract of carriage in

time for the seller to deliver the goods on board the vessel.181 Once the goods are loaded on the

ship the seller bears no expenses onwards.

The general duties of the seller is to load the goods on board the vessel which is nominated by

the buyer. Where the seller merely delivers the goods to the carrier will not be delivery in fob

contracts. The seller is in breach if he does not load the goods on board the ship. The place of

delivery is the place where the seller loads the goods on board the ship, ie the port of

shipment.182 If the seller does not deliver the goods he commits a breach in his country, ie at

the port of shipment. A breach will also be committed at the port of shipment if the goods are

defective.183 England: The seller breaches contract for non-delivery of the goods. The buyer

will base jurisdiction on Brussels I or on the fact that the seller is in England. South Africa:

When the seller fails to deliver the goods the seller is in mora debitoris which is committed in

180 FOB A4; Halsbury’s (n 108) par 362; Van Niekerk and Schulze (n 105) 75. 181 FOB B3; Halsbury’s (n 108) par 362; Van Niekerk and Schulze (n 105) 75. 182 FOB A4. 183 The reason for this is that delivery to the carrier is delivery to the buyer as the carrier is the representative for the buyer. Time of shipment have been explained under cif above and the same is relevant with regards to fob contracts.

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the seller’s country where the port of shipment is. The buyer will base jurisdiction on the maxim

actor sequitur forum rei or action can be initiated where the cause of action takes place.

Where the seller expressly states that he will not deliver the goods he commits breach by

repudiation. The buyer can then not accept the repudiatory act and wait for time of delivery, a

breach committed by non-delivery. The buyer can also accept the repudiatory act. England:

The breach is committed where the overt act takes place, ie in the seller’s country. The buyer

can base jurisdiction on Brussels I or on the fact that the seller is in England. South Africa: The

breach occurs where the buyer is fully informed of the seller’s intention to repudiate. If the

buyer is fully informed in South Africa, he can base jurisdiction on a breach of contract as a

ratio jurisdictionis. The seller only has to deliver the goods on board the vessel.

It is quite common for the seller to obtain shipping documents, including the bill of lading.184

Breach relating to shipping documents has been explained under cif contracts and the same is

applicable to fob contracts.

The law with regards to the condition in which the goods has to be delivered, the description

of the goods and the quality of the goods in English and South African law have been explained

under cif above.185 It will in this discussion be sufficient to determine only the place of breach

of contract when such conditions are breached. England: There is no law in England that the

buyer has to inspect the goods at the port of shipment.186 If he does inspect at the port of

shipment before the goods are placed on board the vessel and the buyer finds the goods to be

non-conforming, a breach of contract is committed in the seller’s country. If the buyer inspects

the goods in England, breach is committed there. The buyer can base jurisdiction on Brussels

I or on the fact that the seller is in England.187 The normal place for inspection of the goods is

in the buyer’s country where the goods are delivered at the port of destination. The breach for

non-conforming goods occurs in England and the buyer can base jurisdiction on the breach

ground. South Africa: The place for inspection of the goods is at the port of shipment in the

seller’s country where the goods are delivered.188 If the buyer finds the goods to be non-

conforming which constitutes a breach, a breach by positive malperformance is committed by

the seller in South Africa. The buyer can base jurisdiction in the maxim actor sequitur forum

184 Halsbury’s (n 108) par 365. 185 See FOB A9. 186 Halsbury’s (n 108) par 370. 187 The buyer will normally have an agent that inspects the goods for the buyer while the buyer is in his own country. 188 Joubert and Faris (n 130) 84.

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rei or action can be initiated where the cause of action takes place. If the buyer is allowed to

inspect the goods when they are delivered in the buyer’s country, the breach for positive

malperformance is committed in South Africa and the buyer can base jurisdiction on a breach

of contract as a ratio jurisdictionis.

The buyer must give shipping instructions in the time allowed in the contract, or in a reasonable

time, which are effective, as regards where the seller must deliver the goods.189 The buyer must

nominate an effective ship if there is no agreement to the contrary. He can merely state a ships

name or he can state that the seller must load the goods on a vessel designated for a specific

port or country.190 England: If no instructions are given or when the instructions are not

effective or lawful, the seller can treat it as a breach of condition.191 The breach presumably

occurs at the port of shipment as this is where the goods are delivered. Breach is committed in

England and the seller can base jurisdiction on the breach ground.

When the buyer expressly states that he will not nominate a designation, the seller can treat this

as a repudiatory act. England: Breach by express repudiation occurs where the overt act takes

place. The buyer repudiates in England and the seller can base jurisdiction on Brussels I or the

fact that the buyer is in England. South Africa: The seller has to be fully informed of the buyer’s

intention to repudiate in South Africa. The seller can base jurisdiction in a breach of contract

as a ratio jurisdictionis.

The duty of the buyer is to pay the price of the goods when the goods are delivered on board

the ship or in the time agreed upon.192 Place of payment is where the goods are delivered on

board the ship, ie the seller’s country. England: the buyer’s breach is a non-performance of the

contract. The buyer breaches contract in England where the price has to be paid against delivery

of the goods. The seller can base jurisdiction in the breach ground. South Africa: Failure to pay

for the goods against delivery in the seller’s country puts the buyer in mora debitoris. The

breach occurs in South Africa where the buyer has to pay for the goods against delivery of the

goods. The seller can base jurisdiction on a breach of contract as a ratio jurisdictionis.

Where the buyer expressly states that he will not pay the purchase price, the buyer commits a

breach by repudiation. England: The breach occurs where the overt act takes place. The buyer

expresses his intention in England. The seller can base jurisdiction on Brussels I or on the fact

189 Halsbury’s (n 108) par 362. 190 Halsbury’s (n 108) par 367, Joubert and Faris (n 130) 90. 191 Halsbury’s (n 108) par 362. 192 FOB B1; Halsbury’s (n 108) par 369; Joubert and Faris (n 130) 87.

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that the buyer is in England. South Africa: The seller must be fully informed of the buyer’s

intention to repudiate. The seller is fully informed in South Africa and can base jurisdiction on

a breach of contract as a ratio jurisdictionis.

When the seller procures a bill of lading the place of payment is where the documents are

tendered. The place of breach for non-payment against tender of shipping documents is

analogous to cif contracts.193

CHAPTER 5

CONCLUSION

It was determined in this paper that a breach of contract is relevant in English law in the context

of jurisdiction when Brussels I is not applicable and jurisdiction needs to be determined using

the internal laws of England. A breach of contract as a ratio jurisdictionis is not as much

relevant in South African law yet. Courts in Natal did allow attachment of the defendant’s

goods where no other ground for jurisdiction existed. It is submitted that a breach of contract

may be regarded as a ratio jurisdictionis when attaching a foreign defendant’s goods as this is

the cause of which the plaintiff complains. If a court can exercise jurisdiction by mere

attachment, a court can also exercise jurisdiction on a breach of contract occurring in its

jurisdiction along with attachment.

I have explored the types of breaches of contract and came to the conclusion that the only real

difference is where an express repudiation takes place. In England breach occurs where the

overt act takes place. In South African law the aggrieved party must first be fully informed of

the repudiatory party’s intention to repudiate.

I then applied these principles to four of the Incoterms. It came to light that a breach of an

Incoterms contract as a ground for jurisdiction will more often than less be called upon to

confer jurisdiction on a court in England and South Africa. This is most noticeable in South

Africa. It is in every case where there is an express repudiation that the breach takes place in

South Africa because this is where the aggrieved party is informed of the repudiation. A breach

of contract as a ratio jurisdictionis can also be called upon in other situations as well. It is

therefore suggested that courts should allow a breach of contract as a ratio jurisdictionis when

193 Above par 4.2.1.3.

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attaching a foreign defendant’s goods in South Africa where there is no other link to the court’s

jurisdiction. This will enable aggrieved incolae of South Africa to institute action at his most

convenient forum, ie in South Africa.

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BIBLIOGRAPHY

1. South African Case Law

American Cotton Products v Felt & Tweeds Ltd 1953 2 SA 753 (N)

Berman & Berzack v Finlay Holt & Co Ltd 1932 TPD 142

Bid Industrial Holdings v Strang and Others 2008 3 SA 355 (SCA)

Bisonboard Ltd v K. Braun Woodworking Machinery (Pty) Ltd 1991 (1) SA 482 (AD)

Chattanooga Tufters Supply Co Chenille Corp of South Africa (Pty) Ltd 1974 2 SA 10 (E)

Einwald v German West African Co (1887) 5 SC 86

Ewing McDonald & Co Ltd. v M. & M. Products Co 1991 (1) SA 252 (A)

Graaff-Reinet Municipality v Van Ryneveld’s Pass Irrigation Board 1950 (2) A 420 (AD)

HMBMP Properties (Pty) Ltd v King 1981 1 SA 906 (N)

Mackay v Philip (1830) 1 Menz 455

MA Motala Ltd v Mengyo Co 1936 NPD 52

Pantin v Turner 1899 20 NLR 125

Savage & Lovemore Mining (Pty) Ltd v International Shipping Co (Pty) Ltd 1987 2 SA 149

(W)

Standard Bank of South Africa Ltd v Efroiken & Newman 1924 AD 171

Thermo Radiant Oven Sales Ltd v Nelspruit Bakeries 1969 2 SA 295 (A)

Veneta Mineraria Spa v Carolina Collieries (Pty) Ltd 1985 3 SA 633 (D)

Wrens (Pty) Ltd v S & W Fine Foods Inc. 1941 NPD 343

Yamomoto v Rand Canvas Co 1919 WLD 100

2. South African Legislation

Rules Regulating the Conduct of the Proceedings of the Several Provincial and Local Divisions of the

High Court of South Africa

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Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft GmbH 1983 2 AC 34

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Bowes v Shand 1877 2 AC 433

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Deutsche Ruckversicherung AG v La Fondaria Assicurazioni SpA 2001 2 Lloyd’s Rep. 621

Diamond Alkali v Bourgeois 1921 3 K.B. 443

Fourie v Le Roux 2007 UKHL 1

Fry & Co v Raggio 1891 40 W.R. 120

Manbre Saccharine Co v Corn Products 1919 1 K.B. 189

Martin v Stout 1925 AC 359

Mutzenbecher v La Aseguradora Espanola 1906 1 KB 254 (CA).

Spiliada Maritime Corp v Cansulex Ltd 1987 A.C. 460

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Civil Procedure Act, 1997

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8. International Books

Ramberg J ICC Guide to Incoterms 2010: Understanding and Practical Use ICC Services

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International Chamber of Commerce Incoterms 2010: Rules for the Use of Domestic and

International Trade Terms (2010)