On 17 October 2006, the parties entered into an agreement of sale whereby the respondent sold an undivided share in land known as land share number 13 of stand number 195 Monavale Cluster Homes (Subdivision A, Portion of Mayfield Estate) to the applicants for $4,928,000.00 (old Zimbabwean currency). The applicants fully paid the purchase price by 31 January 2007. However, construction works at the site came to a halt due to an order from the Environmental Management Authority pending production of an Environmental Impact Assessment Report. On 27 February 2008, the respondent's legal practitioners wrote to the applicants seeking either: (1) variation of the agreement requiring an additional payment of $36 billion to complete servicing works, citing that inflation had eroded the value of amounts paid; or (2) cancellation of the agreement with a refund of only 60% of the current market value minus administrative expenses. When the applicants declined and sought clarifications, the respondent purported to unilaterally cancel the agreement on 8 July 2008. The applicants then filed an application to set aside the cancellation.
1. The purported cancellation of the agreement of sale dated 17 October 2006 between the applicants and the respondent was declared null and void. 2. The respondent was ordered to pay costs of suit.
A party to a contract who has received full performance from the other party cannot unilaterally cancel the agreement on grounds of supervening impossibility (such as economic hardship or inflation) without obtaining court confirmation or following the contractual variation procedures. Any variation of a contract must comply with the variation clause in the agreement, and where such clause requires written consent of both parties, unilateral variation is invalid. Economic hardships and inflation cannot be used as automatic weapons to defeat contracts where one party has fully performed their obligations. The sanctity of contractual relationships must be preserved by courts, and parties in breach cannot escape specific performance through unilateral cancellation.
The court noted, with approval, the observations from International Trading (Pvt) Ltd 1993 (1) ZLR 21 (H) that businessmen must beware that if they fail to honour their contracts, courts will not simply award damages (whose value may have fallen due to inflation) but will order specific performance, no matter how costly that may be for the party in breach. While these observations were made in the context of specific performance, they applied equally to the principle that parties cannot unilaterally escape their contractual obligations. The court also observed that the best course of action for the respondent would have been to seek a legal route for confirmation of its inability to perform due to intervening impossibility, though this was not done.
This case is significant in Zimbabwean contract law (applicable to South African jurisprudence given the shared common law heritage) for establishing that parties cannot unilaterally cancel contracts on grounds of economic hardship or supervening impossibility without court intervention, particularly where the other party has fully performed their obligations. The case reinforces the sanctity of contracts and the principle that economic difficulties, including hyperinflation, do not automatically justify breach of contract. It emphasizes that contractual variation clauses must be strictly complied with and that parties seeking to escape contractual obligations due to impossibility must seek proper legal remedies rather than taking unilateral action. The case also demonstrates the courts' willingness to protect parties who have performed their contractual obligations from opportunistic cancellation by the other party.