Smith v Van den Heever NO and Others

Agrichicks (Pty) Ltd, under judicial management and later liquidation, concluded a written innominate contract with Mr F J Smith, a contract farmer, in terms of which Agrichicks supplied day-old chickens, feed, medication and vaccination while retaining ownership, and Smith reared the chickens for slaughter in cyclical production periods. Each cycle was accounted for individually, with profits credited and losses carried forward subject to specific contractual rules. During the last two cycles (May and August 2002), Agrichicks suffered financial collapse and, during the August cycle, failed to supply feed and medication and abandoned the chickens, instructing Smith that he could destroy or dispose of them. Smith sold the chickens to mitigate his losses. The liquidators sued Smith for an alleged debit balance under the contract, relying on an auditor’s certificate. Smith raised the exceptio non adimpleti contractus and counterclaimed for damages arising from Agrichicks’ breaches, including failure to supply proper feed and poor-quality day-old chickens.

The appeal was upheld with costs. The order of the Full Court was set aside and replaced with an order that both the liquidators’ claim and Smith’s counterclaim were dismissed with costs.

The case is a leading Supreme Court of Appeal authority on the application of the exceptio non adimpleti contractus in complex, cyclical reciprocal contracts. It clarifies that a party in breach cannot enforce payment merely because partial performance occurred, and emphasises strict compliance with contractual mechanisms such as auditor’s certificates. The judgment also illustrates the approach to damages and the requirement of proof of actual loss despite proven breach.