22Application of contractual retention(1)

A party to a contract (“PA”) may temporarily withhold or suspend performance of an obligation that is due to be performed under the contract (“contractual retention”)—

(a)

following a breach of a counterpart obligation by the other party to the contract (“PB”),

(b)

in anticipation of a breach of a counterpart obligation by PB (an “anticipatory breach”), or

(c)

in relation to an obligation subsisting when the contract is ended by PA as a result of PB’s breach or an anticipatory breach.

(2)

For the purposes of subsection (1)—

(a)

the contractual obligations of each party are presumed to be counterparts unless it can be shown that the parties do not intend the obligations to be counterparts,

(b)

counterpart obligations may be contained in separate contracts as long as the contracts form part of the same transaction.

(3)

The breach or anticipatory breach referred to in subsection (1)—

(a)

must be a material breach in the case of an anticipatory breach,

(b)

need not be a material breach in any other case.

(4)

The effect of the contractual retention must not be clearly disproportionate to the effects of the breach or anticipatory breach referred to in subsection (1).

(5)

PA may contractually retain part of an obligation in order that the contractual retention is not clearly disproportionate in terms of subsection (4).

(6)

PA may exercise contractual retention until PB has performed the obligation referred to in subsection (1) or has paid damages in lieu of performance.