Appraising the scope and application of the market-price rule in upheld contracts

• Jurisdiction: South Africa
• Date: 06 April 2021
• Published date: 06 April 2021
• DOI: https://doi.org/10.47348/SAMLJ/v32/i2a4
• Pages: 253-276
• Author: Nkoane, P.

(2020) 32 SA Merc LJ 253

© Juta and Company (Pty) Ltd

largely because the market-price rule was deemed to be suitable only for

assessing damages where the contract is terminated. Of course, there are

various breaches of contract and some of which may not justify the

termination of the contract.

1

As a result, one wonders which measure

can be applied to determine the degree of damages in continuing

contracts. Put differently, which measure is competent to compensate

the aggrieved party while, at the same time, is fair to the defaulter?

It is stated elsewhere that —

‘while the actual purchase price is fairly easily determined, the market

value of the (defective) thing sold is not so clear-cut. The concept

‘‘market’’ usually invokes an imagination of willing buyers and willing

sellers trading items that are intact, rather than defective. The sale of

defective items is the exception rather than the rule.’

2

As a result, it is claimed, ‘market value can be described as the price

which the defective item would reasonable have attained at the time and

place when the actual sale was concluded, where a willing seller and

willing buyer who was aware of the defects, entered into a putative

contract of purchase and sale in respect of the defective thing’.

3

Then

again, what if the reasonable buyer, by lack of expertise, cannot draw an

inference that the purchase price is the market value of the item? Would

this be a proper criterion for assessing the value of a defective perfor-

mance?

4

What about the kind of defect — should the determination

consider the type of defect? Should any difference be drawn between a

malfunction defect and a defect in quality?

This article assesses the consequences of breach of contract where the

contract remains enforceable, and illustrates the methods that can be

applied to determine damages. Similarly, the article analyses how the

market-price rule can be connected to various methods that determine

the value of property where defective machinery and over- or under-

valued businesses are rendered. This analysis is intended to illustrate

how the market-price rule can be connected to the determination of the

value of various properties, and how it can be used to balance the

equities between the defaulter and aggrieved party. It will appear that

applying a blanket approach to assess damages for breach of contract for

different commodities in upheld contracts may lead to diff‌iculties and

unfairness.

1

Culverwell v Brown 1990 (1) SA 7 (A) at 15.

2

Cornelius, ‘Banda v Van der Spuy 2013 4 SA 77 (SCA). Quantifying a Claim with the

actio quanti minoris’ (2013) 46(3) De Jure 868 at 872.

3

Idem at 874.

4

Labuschagne Broers v Spring Farm (Pty) Ltd 1976 (2) SA 824 (T).

https://doi.org/10.47348/SAMLJ/v32/i2a4

(2020) 32 SA MERC LJ

254

© Juta and Company (Pty) Ltd