FROM: MUTAMANGIRA AND ASSOCIATES

BY: SHALMANESER MASEVO

RE: THE FUNDAMENTAL BREACH DOCTRINE
DATE: 27/06/23

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LEGAL REPORT
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Fundamental Breach Doctrine
 1. INTRODUCTION

In the 1950s, the substantive doctrine of fundamental breach was created in England to
prevent abuse of the doctrines of freedom and sanctity of contracts. The doctrine was created
at a time when monopolies were extremely powerful and there were no laws protecting weak
contracting parties.
A fundamental breach of contract occurs when one of the parties to a legal contract, whether
it be verbal or written, does not fulfil their contractual obligations. The non-compliance must
go to the heart of the contract for it to constitute a fundamental breach. Parties to a contact are
entitled to a complete performance of the terms of agreement by the other party.
Consequently the failure by one of the parties to the contract to comply wholly with the terms
of a contract may constitute a fundamental breach of the contract.

2. QUESTIONS TO BE PRESENTED (QUESTIONS OF LAW)

a. What is the fundamental breach doctrine?

b. What constitutes a fundamental breach of a contract?

c. What legal recourses are available to the innocent party in the instance of a
fundamental breach of contract?

3. SCOPE OF OPINION

The Legal Opinion will extensively expound on the Fundamental Breach doctrine and
the legal remedies available for the innocent party in such a circumstance. The
opinion is guided by the principles of common law and as such heavily relies on case
law and scholarly authority from both the local jurisdiction and other common law
practising jurisdictions.

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Fundamental Breach Doctrine
 4. APPLICABLE LEGAL PRINCIPLES

a. Fundamental Breach Doctrine

i. Definition

The fundamental breach doctrine is a legal doctrine that refers to the failure of
one of the parties to an agreement to keep their end of their contractual
obligations. The failure to perform should be that of a contractual term that is
essential to the agreement and goes to the root of the contract. Resulting in
another party not being able to complete their own contractual responsibilities
in the contract or suffering loss as a result of the breach. There is non-
performance whenever a party does not perform any of the obligations under
the contract. The non-performance may arise as defective performance or as
failure to perform within the time the performance is due, be it a performance
which is effected too early, too late or never.
There are a number of factors that must be taken into account to determine if a
breach affects the core of the contract. Chief among them being the intention
of the defaulted to completely refuse to perform their contractual obligations
and the intention to deny the innocent party the full or substantial benefit that
they should receive from the continued performance of the contract.

b. Types of Fundamental Breach of Contract

i. Positive Malperformance

When a party is obligated to do one thing but actually does another,

that is considered defective performance 1. The results of such a
breach frequently differ from those of an outright refusal or failure to
perform. But it's important to note that in cases where the defect in

1
Basic Principles Of English Contract Law, Allen And Overy
….(b) Defective performance – where a person promises to do one thing but does another, which differs, for
example, in time, quantity or quality, this amounts to a breach……

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 performance is particularly severe, the breach may actually amount to
non-performance rather than defective performance.
Any defect in the performance must be at least sufficiently serious
before the injured party is allowed to terminate. It is key that the
breach goes to the root of the contract or deprives a party of what
they agreed on, for it to be deemed to be substantial performance
failure. For less serious breaches or breaches that do not go to the
heart of the contract one is entitled to damages but not a right to
terminate .

ii. Untimely Performance

If the contract specifies a timeframe for meeting contractual

obligations, that timeframe must be met. Failure to perform the
obligation by that time given will be a breach of contract and the
innocent party will have the right to terminate the contract. This is
usually applicable in contracts that are time sensitive, such as contracts
for supply of goods or delivery of service. In the case of Zimbabwe
Electricity Transmission And Distribution Company Versus Tecpal
Creative International (Private) Limited, the court held it that the
delay by the respondent to deliver the diaries constituted a material
breach that went to the root of the contract 2. Therefore giving the
applicant the right to cancel the contract. The concept of delayed
performance also applies to loan, mortgage and other agreement to pay
contracts3. These contracts may be fundamentally breached in one or
2
Zimbabwe Electricity Transmission And Distribution Company Versus Tecpal Creative International
(Private) Limited HC 4295/10
In casu, the respondent admits that there was delay in the delivery of the diaries. The applicant has averred
that there were numerous attempts made to follow up with the respondent the delay in the delivery of the
diaries. This is admitted by the respondent,… I find that there is breach on the part of the respondent, the only
question being whether or not the breach is such as would justify cancellation on the part of the applicant. In
my view the failure to deliver the diaries for use in 2010 especially after the respondent had been placed in
mora constituted breach of a vital term. In my view the delay in delivery was breach going to the root of the
contract. It cannot be gainsaid that the respondent failed to deliver the diaries for use in 2010 and that
therefore time was of the essence in this contract. The breach is in my view sufficiently serious to warrant
cancellation of the contract.
3
Nel v Cloete 1972 (2) SA 150 (AD) at 160
A debtor can in fact commit a breach of contract by delaying or retarding performance of his duties under the
contract, in which case the debtor is held to be in breach at the expiry of the time fixed for the rendering of the

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Fundamental Breach Doctrine
 more of the following circumstances. When a debtor's performance is
reliant on the cooperation of a creditor and that cooperation is withheld
(Mora Creditoris) or when the debtor fails to fulfil their obligations on
time (Mora Debitoris).
Where the contract bases the performance of obligations to a specific
time frame the failure by the other party to perform their end of the
deal within that time can be considered a material breach of the
contract.

iii. Complete Non-Performance

In English law, outright non-performance occurs when one party to a

contract fails to carry out their contractual obligation. However, simply
failing to live up to one’s contractual obligations does not necessarily
constitute a breach of contract, though it may lead to one. That is, if the
failure to perform is not excused, it constitutes a fundamental breach of
contract but if excused then it falls short of being a fundamental
breach.
Outright non-performance can occur in one of two ways, firstly when
the defaulting party fails to take action to satisfy the terms of the
agreement, or when the defaulting party declares non-performance. In
both instances the innocent party has the right to terminate the contract
or seek other appropriate remedies.

c. Legal Recourses Available for Fundamental Breach of a Contract.

i. Rescission

Rescission entails the cancelling a contract and treating it as if it never

existed by ensuring that all of its consequences are removed. That is if

performance. When the time for performance arrives and the debtor has neither performed nor tendered
performance, then he is said to be in mora….

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 they were any exchanges, such as money, they must be returned in
order to return all parties to their pre-contractual positions. Rescinding
a contract may be an option if there is proof of a material error in the
contract. Contracts can also be rescinded if there is evidence of fraud,
mutual error, lack of legal or mental capacity, duress and undue
influence, or if one party fails to fulfil its obligations
In the instance of a fundamental breach the innocent party can cancel
the contract. The cancellation can be done by the innocent party
unilaterally without the need to prove the intention of the defaulting
party’s intention to repudiate the contract 4. Under common law a court
order is not necessary for the cancellation of a contract as a result of a
material breach5. It is also worth noting that a recission of a contract is
not the same as a termination of a contract. A contract can be
terminated or rescinded, but a terminated contract loses its
enforceability as of the date of termination, whereas a rescinded
contract is treated as if it never existed at all.

Effects of Rescinding a Contract:

Rescission is used to restore the parties to how they were was prior to
the contract's signing, or to the status quo ante. For instance revocation
of a contract that transfers title to property typically results in the
transferor regaining ownership of any property that was previously
transferred.
4
Zimbabwe Electricity Transmission And Distribution Company Versus Tecpal Creative International
(Private) Limited HC 4295/10
It is generally accepted that the serious breach of a ‘sufficiently’ important term of the contract will justify
cancellation at the instance of the wronged party without the need to prove an intention to repudiate the contract
on the part of the defaulter. It is therefore trite that the breach of a material term of the contract, or a breach that
goes to the root of the contract, or a fundamental breach, or breach of a vital or essential term of the contract
justifies cancellation.
Spies v Lombard 1950 (3) SA 469 (A.D)
“According to the well-known principles there enunciated rescission of a contract is only permissible if a breach
occurred of a term which goes to the root of the contract and the materiality of the breach is according to those
authorities also a relevant factor in the determination of whether rescission should be ordered or not
5
Remedies for Breach of Contract, Solene Rowan, Oxford University Press, 2012
Whilst many breaches of contract do not entitle the injured promise to terminate, English law nonetheless allows
him to exit the contract in a number of ways.
Contracting parties are given significant freedom to decide in advance which breaches should give rise to a right
to terminate. It is open to the injured promise in certain circumstances to put an end to the contract even before
the time for performance has come. Also, the court has no involvement in the termination process.

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Fundamental Breach Doctrine
 Each party is required to as far as is reasonably possible to return to the
other any benefits received under the contract as a result of the
cancellation from the outset, which treats the contract as never having
existed.

ii. Compensatory Damages.

The fundamental and most widely accepted tenet of the law governing
contract damages is that the party that has been wronged should be put
back in the same situation it would have been in, to the extent that
financial restitution can make that possible. Had it not been the
fundamental breach of the contract by the other party 6. When a party
experiences economic harm as a result of the breach, they are entitled
to compensation7. It key to note that the damages will be given without
overcompensating or putting the innocent party at an advantage
compared to where they were before the contract was established8.

6
Columbia Law Review, Vol. 63, No. 8 (December 1963)
On the one hand, it is universally accepted as a basic principle of contract law that contracts are binding (pacta
sunt servanda), which means, among other things, that if one party fails to perform his contractual obligations,
he is liable to compensate the other party for losses thereby incurred. The mere fact that performance has
become disadvantageous or difficult does not discharge a contractual obligation.
Evans & Plows v Willis & Co. 1923 CPD 496
It is trite that an aggrieved contractant is entitled to claim damages arising from his co-contractant’s breach of
contract, including any breach of warranty
7
Nissan Zimbabwe (Pvt) Ltd v Hopitt (Pvt) Ltd 1997 (1) ZLR 569 (S)
Whether the wrongful act arises out of contract or tort, where there has been actual pecuniary loss which is
capable of precise quantification, the rule which the law adopts is restitutio in integrum – the injured party is
entitled to claim to be placed back in the same position as he would have been in had it not been for the
defendant’s wrongful act.”
8
Temporal Element of Contract Law: An Economic Inquiry into Contract Damages in Cases of
Prospective Non-performance, Thomas H. Jackson, Stanford Law Review Vol. 31, No. 1 (November 1978)
The basic, and perhaps most widely accepted, principle underlying the law of contract damages is that the
aggrieved party should be placed, insofar as money can do it, in the same position it would have been in but for
the breach by the other party.' Compensating the aggrieved party for its entire expectation loss, without
overcompensating it, is an economically sound principle in that it facilitates the movement of goods and services
to their highest value user.
Johnson v Agnew [1980] AC 367
The general principle for the assessment of damages is compensatory, ie that the innocent party is to be place, so
far as money can do so, in the same position as if the contract had been performed. Where the contract is one of
sale, this principle normally leads to assessment of damages as at the date of the breach, a principle recognised
and embodied in s 51 of the Sale of Goods Act 1893.

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 iii. Specific Performance

When no other remedy can fairly compensate the innocent party, the
courts will turn to the specialized remedy known as specific
performance. The goal of the specific performance remedy is to restore
the injured party to the standing they would have had if the contract
had been fully carried out. The courts have a great deal of latitude in
deciding whether to issue a specific performance order. This condition
is intended to ensure that the other innocent has fulfilled its obligations
under the contract, or will fulfil them 9. The right to discretion must be
used legally and is not constrained by strict rules. Each case is decided
by the court based on its unique facts and circumstances. The innocent
party has the choice of asking for specific performance from the
defendant or compensation for contract breach. The defaulter does not
enjoy any choice in this matter. Typically, in contract of
services specific performance is not awarded.
One must show they have upheld their end of the bargain or are
prepared to do so in order to make a claim against another for specific
performance of a contractual obligation10.

iv. Waiver

9
Chiarelli v Bouna Inv. (Pvt) Ltd (2015) ZWHHC 678
“Specific performance is an extraordinary equitable remedy that compels a party to execute a contract in terms
of the precise terms agreed upon. It is an order which grants the applicant what he bargained for in the contract.
A valid contract must exist between the parties and the party seeking specific performance must have
substantially fulfilled his obligations in terms of the contract. A party may also be granted the relief if he has
offered to do or is ready and willing to do all acts that were required of him to execute the contract according to
its terms.”
10
Mwerenga v City of Harare Department of Housing (HH 262-21, HC 565/20) [2021] ZWHHC 2
A party who has performed his own side of the contract has every right to claim specific performance from the
other. A purchaser who has paid full purchase price for the property which he purchased does not waste his
time. He, for instance, does not move the court to declare him the owner of what he purchased and paid for. He
knows that declaring him the owner when the circumstances show otherwise will not weigh in his favour

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 A waiver may be given by the innocent party either orally, in writing,
or through the innocent party's actions 11. By mutual agreement, parties
to a contract may decide to waiver the breach . After the breach takes
place, the party who committed the breach and the party who was
wronged may agree in writing that no claim will result from the
breach.
A waiver may be given impliedly by the innocent party by failing to
notify the other party of a breach within a reasonable amount of time.
However, for the rights to be waived, the innocent party would have
had to accept the other party's performance while fully aware that it
was in breach of the agreement.
5. Conclusion
In conclusion, a fundamental breach of contract is a serious breach that entitles the
innocent party to terminate the contract and seek damages. The courts will consider a
number of factors in determining whether a breach is fundamental, including the
nature of the term that was breached, the importance of the term to the contract, and
the extent to which the breach has deprived the innocent party of the benefit of the
contract.

11
Societa Per Azioni v Davidsons (Manchester) Ltd [1952]
The principle of waiver is simply this, if one party, by his conduct, leads another to believe that the strict rights
arising under the contract will not be insisted on, intending that the other should act on that belief, and he does
act on it. Then the first party will not afterwards be allowed to insist on the strict legal rights when it would be
inequitable for him to do so

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Legal Report
Fundamental Breach Doctrine