Martin Harris & Seuns OVS (Edms) Bpk v Die Qwa Qwa Regeringsdiens

The appellant (plaintiff/contractor) entered into a written construction contract with the respondent (defendant/Qwa Qwa Government Service) in 1977-1978 to construct a new hospital at Phuthaditjhaba. The contract price was R8,955,500 with a completion period of six years. The completed project was handed over in June 1987, 41 months beyond the permitted extensions of time. Disputes arose between the parties. The contractor instituted action claiming: (1) damages for delay and additional overhead costs; (2) damages for disruption and loss of production and profit; and (3) payment for certain extra work (karwei-werk). The respondent defended on merits and raised prescription (verjaring). The parties agreed the trial court should decide preliminary issues based on pleadings alone: whether the plaintiff established a cause of action for claims 1 and 2, and whether claim 3 had prescribed.

• Whether the plaintiff's pleadings disclosed a cause of action for damages for delays caused by the defendant or its agents (architect and engineer) in claims 1 and 2
• Whether implied terms alleged by the plaintiff were inconsistent with express terms of the written contract
• Whether mora creditoris was established on the pleadings
• Whether the contractual remedies (time extensions and price adjustments) excluded claims for damages
• Whether the claim for payment for extra work (claim 3) had prescribed under the Prescription Act 68 of 1969
• When does prescription begin to run in construction contracts with progress payment certificates

1. In case number 674/92, the appellant's (plaintiff's) appeal was dismissed. 2. In case number 676/92, the appellant's (defendant's) appeal was dismissed. 3. In both appeals, each party was liable for one half of the costs relating to preparation of the appeal record; otherwise each party bears its own costs.

1. Implied terms alleged in pleadings must not be inconsistent or irreconcilable with express terms of a written contract. 2. For mora creditoris (creditor default) to constitute breach of contract, the debtor (contractor) must plead that he called upon the creditor (employer) to provide the necessary cooperation to enable performance, unless the contract itself or the creditor prescribed a time for performance. 3. Where a construction contract provides specific remedies for delays caused by the employer (such as time extensions and price adjustments linked to index fluctuations), and such remedies have been granted, those contractual remedies may exclude additional claims for damages for the same delays. 4. In construction contracts providing for interim payment certificates, prescription in respect of claims for work not included in any certificate begins to run only upon final completion of the entire works, not upon completion of individual segments of work. Interim payment certificates are a contractual financing mechanism, and the contractor's right to payment before final completion is dependent on certification.

The court noted (paragraph 18) that it was unnecessary to decide whether, for mora creditoris, the debtor must formally place the creditor in default (mora) or merely give reasonable time and opportunity for cooperation, distinguishing between cases where the creditor must merely receive performance versus cases where the creditor must actively perform a cooperative act. The court also indicated (paragraph 24) that it was unnecessary to express an opinion on whether remedies other than the contractual remedies (such as damages) would be available if the missing allegations regarding calling upon the defendant for cooperation had been pleaded. The court observed (paragraph 6) that it was regrettable that a matter originating from a 1978 contract completed in 1987, with summons issued in January 1990 and preliminary ruling in August 1992, only reached the Supreme Court of Appeal in 2000. The court noted that neither party raised the issue of lack of legal standing, despite the plaintiff being liquidated and the defendant no longer existing in its original form.

This case is significant in South African construction law for: (1) Clarifying the doctrine of mora creditoris (creditor default) in construction contracts - establishing that a contractor must call upon the employer/architect to provide necessary cooperation before mora creditoris arises; (2) Interpreting the relationship between contractual remedies (time extensions and price adjustments) and common law damages in construction contracts - suggesting that where specific contractual mechanisms exist, they may exclude additional damages claims; (3) Establishing when prescription begins to run in construction contracts with interim payment certificates - holding that prescription for work not covered by interim certificates only begins upon final completion of the entire works, not upon completion of individual work segments; (4) Demonstrating the importance of pleading essential elements of a cause of action, particularly in contract cases involving alleged implied terms that must be reconcilable with express terms.