A costly cancellation: When contractual missteps derail a project

Construction projects thrive on clarity and coordination. When those break down, even a promising project can collapse. Botsang-Ledile Construction & Projects CC v Minister of Public Works illustrates how uncertainty about a Principal Agent’s appointment led to a failed project, disputed cancellation, and ultimately, loss for the contractor.

Timeline of trouble: Delays, liquidation, and contract clash

In October 2011, the Department of Public Works (Employer) appointed Botsang-Ledile Construction & Projects CC (Contractor) to construct the Dube Police Station and residential quarters under a JBCC Principal Building Agreement. GM Architects and Project Managers, the original Principal Agent, entered liquidation in October 2013 and ceased acting as the Principal Agent from 1 November 2013, with no immediate replacement. Although the contract began on 13 October 2011 and the original completion date was 21 October 2013, at the time the Principal Agent ceased their role, various extensions of time moved the completion date to 4 February 2014. On 12 March 2014, the Contractor issued a notice of intention to cancel the contract, followed by a formal cancellation on 28 March 2014, citing the Employer’s failure to appoint a new Principal Agent within the contractually required 10 days. The Employer disputed this, asserting that it had appointed Gosiame Development Consultants (GDC) as the new Principal Agent on 9 March 2014, prior to the Contractor’s cancellation notice.

Issues before the court

The High Court was asked to decide three key questions:

1. Had the Employer breached the contract by failing to appoint a new Principal Agent within 10 business days.
2. Did the Contractor validly cancel the contract under clause 38 of the JBCC Agreement?
3. Did the Employer owe any money to the Contractor after the termination?

The employer’s position

The Employer argued that they appointed GDC as Principal Agent on 9 March 2014 and introduced them to stakeholders at a site meeting on 12 March 2014, which the Contractor attended, confirming the Contractor’s awareness of the appointment. The Contractor then issued a cancellation notice on the same day, which the Employer argued was premature and made in bad faith. The Employer pointed out that the Contractor had completed only 58.31% of the work and had materially breached the contract, making it ineligible to cancel the contract under clause 38 of the JBCC. Furthermore, the Employer rejected the Contractor’s claim for profit and loss, stating that its expert relied on an unauthorised and incorrect payment certificate.

The contractor’s position

The Contractor argued that:

• the Employer breached the contract by failing to appoint a Principal Agent promptly after GM Architects’ liquidation, which halted certified payments and stalled the project.
• clause 38 entitled it to cancel the contract due to the Employer’s failure to fulfil this key obligation. Acting lawfully and in good faith, the Contractor issued a notice of intention to cancel on 12 March 2014 and formally cancelled on 28 March 2014.
•  the Employer never properly communicated GDC’s appointment as required by the contract, and that this failure caused project delays and financial losses, entitling the Contractor to damages and the release of retention monies.

The Court’s ruling

The Court applied the principle from Natal Joint Municipal Pension Fund v Endumeni Municipality, which requires interpreting contracts by considering their language, context, and commercial purpose, and favouring a sensible meaning. It found that the parties had actively discussed appointing GDC, and the Employer appointed and introduced the new Principal Agent before the Contractor attempted to cancel the contract. The Contractor’s representative attended the introduction meeting, showing clear awareness, and should have objected under clause 5.4 instead of cancelling.

Since the contractor claimed over 70% completion but provided no supporting documentation, and the defendant’s quantity surveyor presented unchallenged evidence showing only 58.31% completion using a standard valuation formula, the court found the contractor in material breach and held that it was not entitled to cancel the contract under clause 38 of the JBCC agreement, rendering the termination invalid. The Employer did not breach the contract, and the Contractor could not use its own non-performance to justify termination. As a result, the Court dismissed the Contractor’s claims.

Practical takeaways

• Appointment delays carry risk: Employers must act promptly to replace a Principal Agent as required under clause 38.1.1 of the JBCC, which allows only ten working days for the appointment.
• Contractors should verify and record any communication of such an appointment, even if informal, in line with the contract’s communication clause, before taking drastic steps.
• Substantive notice of events triumphs even a lack of compliance with formal procedures for notification.
• Cancellation requires care: A party in material breach cannot rely on its own default to cancel the contract or claim damages. Clause 38.6 reinforces this by restricting cancellation where the cancelling party is itself non-compliant.
• Commercial interpretation: Courts apply the Endumeni approach to interpret clauses sensibly and in a businesslike manner, favouring practical intent over rigid technicality.

Contact Nikita Lalla, Ricardo Pillay, Danielle Giannico, or Msizi Zungu to mitigate risks and minimise disputes when planning, negotiating, or delivering infrastructure projects.