The recent judgment by the Supreme Court of Appeal in Twenty-Third Century Systems (Pty) Ltd and Another v SAP [2025] has clarified a frequently contested issue in contractual law: whether a party that repudiates or terminates an agreement can still rely on its terms, particularly clauses excluding liability, imposing time bars, or prescribing dispute resolution mechanisms.

At the heart of the matter lies the distinction between primary and secondary contractual obligations.

The Facts and the Legal Dispute

In this case, the respondent had repudiated the agreement and then sought to invoke the contract’s exclusion of damages and time bar clauses to shield itself from liability. The appellants, in turn, argued that it was fundamentally unjust for the respondent to rely on the very agreement it had breached to avoid liability, a principle known as the doctrine of approbation and reprobation (one cannot both accept and reject the same legal instrument).

The SCA’s Approach: Primary vs Secondary Obligations

The Supreme Court of Appeal held that not all contractual obligations are extinguished upon termination. When repudiation occurs and is accepted by the innocent party, the contract is brought to an end in respect of primary obligations, such as the duty to deliver goods or render services. However, secondary obligations, such as dispute resolution clauses, time bars, and exclusions of liability, may remain enforceable.

These secondary terms serve a different purpose. Rather than relating to the performance of the contract, they provide a framework for dealing with the aftermath of its failure, such as mechanisms for resolving disputes or limiting liability in the event of breach. Importantly, these clauses are not inconsistent with the termination of the contract; in fact, they are designed precisely for such scenarios.

Repudiation and the Consequences of Acceptance

The Court reaffirmed the principle that repudiation is not the automatic end of a contract. It is the acceptance of the repudiation by the innocent party that brings the contract to an end. This act of acceptance signifies a choice: the innocent party may either affirm the contract and insist on performance or accept the repudiation and bring the contract to a close.

However, this termination applies only to those obligations which were central to the performance of the contract (i.e., primary obligations). The secondary obligations survive precisely because they are designed to operate even in the event of such a breakdown.

Implications of the Judgment

The ruling has significant implications for commercial contracting:

1. Parties must be cautious before assuming that all contract terms fall away upon termination or repudiation. Secondary obligations may still be enforceable even by a party who has repudiated the agreement.
2. Exclusion and time bar clauses should be carefully drafted, as courts may uphold them despite the termination of the underlying contract.
3. The principle of approbation and reprobation is not absolute; it does not necessarily prevent a party from relying on certain contractual terms post-repudiation, particularly where those terms are intended to survive termination.

Conclusion

The Twenty-Third Century Systems case underscores that a contract’s demise does not always spell the end of its legal consequences. Clauses designed to regulate disputes and limit liability do not necessarily perish with the agreement itself. For contracting parties, this is a powerful reminder to treat such clauses not as peripheral boilerplate but as core risk-management tools, ones that could continue to govern the parties’ relationship even after things fall apart.