Remedies to a breach of a settlement agreement
In the previous article in this series, we explored the legal nature of settlement agreements with reference to their status and enforceability in our law.
What happens where a party breaches the settlement agreement?
A settlement agreement constitutes a legally enforceable contract, which in turn would mean that all the normal rules and principles of the law of contract will apply to them. It then follows that the remedies available to parties will flow from the general principles of the law of contract. Remedies can be summarized as:
Cancellation of the agreement;
Claiming specific performance
Apply for an interdict;
Damages; or
A declaration of rights.
Remedies can further be split into categories based on what they aim to achieve, namely, to terminate the agreement, to keep the contract alive, or to compensate the innocent party. Each of these remedies is summarized below:
Cancellation: This remedy will be available to the innocent party to a breach where they do not intend on keeping the contract alive. Further to this relief, they may be entitled to claim damages and interest from the breaching party;
Specific performance: This is where the innocent party asks for a court order enforcing the agreement and forcing the breaching party to render his or her performance. This remedy aims to keep the contract alive and can occur where the specific performance will be enforcing a payment obligation;
Interdict: An innocent party in certain instances may approach a court for an interdict, in terms of which a breach which has not yet happened is prevented from occurring. This interdict may be sought against the potential breaching party or as well as against third parties who may be interfering unlawfully in the contractual relationship or threatening to do so;
Damages, interest and penalties: Where the innocent party wishes to bring a claim for compensation, then the specific claims will be for damages where the party has suffered an actual patrimonial loss, for interest where it is stipulated in the agreement, and for penalties where the breach invokes a penalty clause in the agreement; and
A declaration of rights: Where a material dispute exists between the parties, they may approach a court for a declaration of their rights and obligations in terms of the agreement.
In the context of settlement agreements, all remedies may apply. However, the most suitable relief for a breach of a settlement agreement would be specific performance as well as damages where a patrimonial loss has been suffered.
Additionally, where a settlement agreement has been made an order of court, the breaching party can be held in contempt of court.
Settlement agreements have become attractive to parties wishing to avoid litigating. The above must be borne in mind at all times when entering into these agreements so a party will be able to exercise their rights in the event of a breach.
For more information relating to settlement agreements and any remedies available where such a breach may occur, please email us on info@hjw.co.za.
Written by Cameron Phillips – Candidate Attorney
This article is provided for informational purposes only and should not be substituted for legal advice on any specific matter. Any opinions expressed herein are subject to the law as at the time of writing and will change in accordance with any change in the law. We recommend that you contact HJW Attorneys at info@hjw.co.za directly for advice applicable to your specific matter.