Case: Twenty-Third Century Systems v SAP Africa Region

The Supreme Court of Appeal recently considered whether a company that repudiates a contract can still rely on that contract’s limitation clauses to avoid liability.

Background:

Twenty-Third Century Systems sued SAP for loss of profits after SAP terminated their agreement. SAP argued it was protected by two key clauses in their contract:

An exclusion of damages clause that barred claims for loss of profit.

A time-bar clause requiring claims to be instituted within one year.

The Legal Question:

If a party breaches (repudiates) a contract, does it lose the right to enforce clauses within it, or do some rights and obligations survive?

What The Court Held:

When repudiation is accepted, it ends primary obligations under the contract (e.g. duties to perform services or payments).

However, secondary obligations, such as clauses excluding liability or imposing time limits for claims, remain enforceable.

This means SAP, despite breaching the contract, could still rely on these clauses to defend itself.

Why This Matters:

This judgment confirms that repudiation is a breach – not a total termination of the contract’s legal framework. Contracting parties need to understand which terms survive a breach, as they may continue to protect or bind them even after relationships break down.