Brief Summary

Contract — Repudiation — Survival of contract terms after repudiation — Appellants claimed damages for loss of profit following the respondent's repudiation of a service agreement — High Court upheld respondent's special pleas, finding that exclusion of damages and time bar clauses survived termination of the agreement — Legal issue centered on whether a party can rely on contract terms post-repudiation — Court held that the exclusion of damages and time bar clauses are secondary obligations that survive termination, allowing the respondent to invoke them as a defense against the appellants' claims.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the Supreme Court of Appeal of South Africa against an order of the Gauteng Division of the High Court, Johannesburg. The High Court had upheld two special pleas raised by the respondent and, on that basis, dismissed the contractual damages claims advanced by the appellants.

The appellants were Twenty-Third Century Systems (Pty) Ltd (the first appellant, a Zimbabwean company) and Twenty-Third Century Systems Global (Pty) Ltd (the second appellant, a Botswanan company wholly owned by the first appellant). The respondent was SAP Africa Region (Pty) Ltd, a South African company providing information technology services.

The procedural history was that the appellants (as plaintiffs) issued summons in the High Court claiming substantial damages (a combined sum exceeding US $68 million) said to arise from SAP’s alleged repudiation of a suite of agreements. SAP delivered a plea that included two special pleas founded on contractual provisions, namely an exclusion of damages clause (precluding loss of profits claims) and a one-year time bar clause. The High Court upheld both special pleas and dismissed the claims. The appellants appealed with leave of the Supreme Court of Appeal.

The general subject-matter of the dispute concerned the post-termination enforceability of particular contractual provisions—specifically whether SAP could rely on the limitation of liability (including an exclusion of loss of profits) and time bar clauses after the agreement had come to an end following repudiation and acceptance, and whether reliance on those clauses amounted to impermissible approbation and reprobation.

2. Material Facts

SAP and the appellants’ corporate group had an established relationship in terms of which Systems acted as a service provider of SAP products in territories in Sub-Saharan Africa outside South Africa. The appeal, however, concerned a particular suite of three written agreements concluded simultaneously on 30 May 2016 between Global and SAP. For purposes of the appeal, those three agreements were treated as a single agreement.

The agreement included a component termed SAP PartnerEdge, structured into definitions and interpretation, Part 1 (general terms with 17 articles), and Part 2 (country-specific terms with 12 articles). Of particular significance were the following provisions in Part 2, Article 1: a clause excluding liability for (among other things) loss of profits, and a clause requiring claims to be instituted within one year from when the partner knew or should have known (after reasonable investigation) of the facts giving rise to the claim.

Between 1 and 22 July 2019, the parties exchanged correspondence about termination. On 1 July 2019, SAP informed Global that it was terminating the agreements “for good cause”. Global’s attorneys responded on 15 July 2019 asserting that SAP’s conduct amounted to repudiation, which Global accepted. It was common cause that the agreement had ended, although the parties disputed who was in breach (SAP contending good-cause termination and the appellants alleging SAP repudiation).

The appellants instituted action on 30 November 2020 claiming damages for loss of profit arising from SAP’s repudiation. Although Systems was the claimant seeking relief, Global was cited as a second plaintiff (and became the second appellant), on the pleaded basis that Global acted as Systems’ agent to SAP’s knowledge.

It was undisputed (and accepted for purposes of the appeal) that the agreement contained (i) an exclusion precluding damages for loss of profits, and (ii) a one-year time bar applicable to any claims arising out of or relating to any part of the agreement and its subject matter.

In their replication, the appellants denied that SAP could rely on these clauses after repudiating the agreement. They contended that SAP’s reliance on the clauses would amount to approbation and reprobation, because SAP would be seeking to both disavow the agreement (by repudiation) and benefit from it (by invoking its protections). They also denied that the time bar had been triggered more than a year prior to summons.

For purposes of the appeal, the parties agreed that the special pleas were to be assessed on the assumption that SAP had repudiated the agreement (and that the repudiation had been accepted), so the key question became whether the clauses relied upon nevertheless remained operative.

3. Legal Issues

The central legal questions were whether, after repudiation and acceptance (bringing the agreement to an end in the relevant sense), SAP could still rely on:

the exclusion of damages / limitation of liability clause precluding loss of profits claims; and

the one-year time bar clause.

A further issue was whether SAP’s reliance on those clauses, despite being assumed to have repudiated, was barred by the doctrine of approbation and reprobation (i.e., whether SAP was impermissibly taking inconsistent positions by both repudiating and relying on the contract).

The dispute primarily concerned the application of legal principles to largely common-cause contractual facts, together with an issue of contractual interpretation (notably the scope and effect of the survival clause and related termination provisions). The appeal did not turn on resolving factual disputes about who was in breach, because it proceeded on the assumption that SAP repudiated.

4. Court’s Reasoning

The court approached the matter by identifying the applicable contractual principles relating to the effect of repudiation and acceptance, and the distinction between different categories of contractual terms that may or may not persist after termination. It considered authority addressing whether a party who has repudiated may nonetheless rely on certain contractual provisions (such as arbitration clauses), and then applied those principles to limitation and time bar provisions, particularly where the contract contains an express survival clause.

The court noted that in Johannesburg Municipal Council v D Stewart & Co (1902) Ltd and Others Lord Shaw expressed the view that it did not appear sound to permit a person to repudiate a contract and then rely on a term in that contract. However, the court emphasised that later authority—particularly Heyman and Another v Darwins Limited—drew an important distinction between repudiation and termination, and between obligations directed to performance and provisions that govern the consequences of breach and dispute resolution.

In adopting the approach from Heyman, as applied in South African law, the court reiterated that repudiation constitutes a breach but does not, by itself, terminate the contract. Termination occurs when the innocent party accepts the repudiation, thereby ending the parties’ primary obligations to perform. That step does not erase the contract for all purposes; rather, the contract may “survive” for purposes such as measuring and resolving claims arising from the breach, and certain provisions may remain operative.

The court relied on South African authority applying these principles, including Scriven Bros v Rhodesian Hides & Produce Co Ltd and Others and Atteridgeville Town Council and Another v Livanos t/a Livanos Brothers Electrical, which recognised that certain provisions—classically, arbitration clauses—can survive repudiation and acceptance because they are directed at the resolution of disputes or the consequences of breach rather than the reciprocal performance obligations. The court further referred to the distinction between primary and secondary obligations as articulated in Photo Production Ltd v Securicor Transport Ltd, and the characterisation of repudiation as a breach and acceptance as the exercise of a right to cancel in Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd.

Applying these principles, the court treated the exclusion of damages clause and the time bar clause as secondary in nature: they were not “purposes” of the agreement in the sense of performance objectives, but provisions regulating liability and the enforcement of claims following a dispute or breach. On the court’s analysis, acceptance of repudiation ends primary performance duties but activates secondary consequences; clauses governing liability and claim enforcement are consistent with that secondary framework.

The court then considered the agreement’s express wording on survival. It held that Article 17(13) expressly provided that several provisions would “survive any termination of any part of this Agreement,” including Part 2 – Article 1 (Limitation of Liability), which encompassed the clauses on which SAP relied. The court interpreted “any termination” to include termination resulting from acceptance of repudiation. It reasoned that this was the sensible interpretation of the word “any” in context, and that if the parties intended to exclude termination arising from repudiation, they would have said so.

The court rejected the appellants’ contention that the survival clause applied only to termination “for good cause” under Article 10(2). It examined Articles 10 and 11, observing that Article 11 dealt with the effects of termination in broad terms, including scenarios where the PartnerEdge model is “terminated, rescinded or ended in any other way.” The court construed these provisions as indicating that the contract contemplated multiple modes by which the agreement could come to an end, and that post-termination consequences (including restrictions on use of intellectual property and obligations such as payment of fees) were intended to apply irrespective of how termination occurred. The court further reasoned that adopting the restrictive interpretation advanced by the appellants would undermine the function of Articles 10, 11, and 17(13), and would produce unbusinesslike results inconsistent with the contract’s evident structure.

On the appellants’ reliance on approbation and reprobation, the court accepted SAP’s characterisation that it was not seeking to take inconsistent positions, but to invoke obligations that (on the proper construction and application of contractual principles) survived termination. Once the court concluded that the clauses survived, SAP’s reliance on them operated as reliance on surviving contractual terms rather than as a disallowed attempt to both repudiate and benefit from performance provisions.

On that basis, the court held that SAP was entitled to rely on both the exclusion of damages clause and the time bar clause as defences. It followed that the special pleas were properly upheld and that the appeal could not succeed.

5. Outcome and Relief

The Supreme Court of Appeal dismissed the appeal.

The effect was that the High Court’s order upholding SAP’s two special pleas stood, with the result that the appellants’ claims against SAP were dismissed.

The court ordered that the first appellant pay SAP’s costs of appeal, including the costs of two counsel where employed, finding such employment reasonable given the amount claimed and the issues raised.

Cases Cited

Johannesburg Municipal Council v D Stewart & Co (1902) Ltd and Others [1909] UKHL 20 (06 July 1909); 47 ScotLR 20, [1909] UKHL 20.

Heyman and Another v Darwins Limited [1942] 1 All ER 337 (HL).

Scriven Bros v Rhodesian Hides & Produce Co Ltd and Others 1943 AD 393.

Atteridgeville Town Council and Another v Livanos t/a Livanos Brothers Electrical 1992 (1) SA 296 (A); [1992] 1 All SA 274 (A).

Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556; [1980] AC 827; [1980] UKHL 2.

Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA); [2001] 1 All SA 581 (A).

Hlatshwayo v Mare and Deas 1912 AD 242.

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that, on the assumption that SAP repudiated the agreement and the repudiation was accepted, the acceptance brought the parties’ primary performance obligations to an end but did not negate the operation of secondary contractual provisions dealing with liability and enforcement.

It held that the exclusion of damages / limitation of liability clause (precluding loss of profits) and the one-year time bar clause were secondary in nature and, in any event, were expressly preserved by the agreement’s survival clause (Article 17(13)), which applied to “any termination,” including termination resulting from repudiation and acceptance.

It further held that SAP was therefore entitled to rely on these clauses as defences, and the appeal against the upholding of the special pleas was dismissed with costs.

LEGAL PRINCIPLES

Repudiation constitutes a breach of contract; it does not itself terminate the contract. Termination occurs when the innocent party accepts the repudiation, thereby electing to cancel and bringing primary obligations of performance to an end.

A distinction is drawn between primary obligations (reciprocal performance duties) and secondary obligations (consequences and mechanisms that arise upon breach or termination, including provisions regulating liability, remedies, dispute resolution, and enforcement).

Upon acceptance of repudiation, the contract may remain operative for purposes including the measurement and settlement of claims arising from breach, and secondary provisions may continue to apply.

Contractual provisions may expressly be preserved post-termination through a survival clause. Where a contract provides that specified terms survive “any termination,” that language is interpreted to include termination resulting from repudiation and acceptance, unless the contract clearly indicates otherwise.

Clauses such as an exclusion of damages (including loss of profits) and a time bar for instituting claims can operate as post-termination defences where they are properly construed as surviving termination, whether by their nature as secondary provisions or by express survival wording.

Twenty-Third Century Systems (Pty) Ltd and Another v SAP Africa Region (Pty) Ltd (172/2023) [2025] ZASCA 51 (30 April 2025)