Law of Contract

1. Historical Overview:

 Influenced by the Praetor

 Key factors of RDL as well as English law
 Contract as an institution in Western affairs
 Common law subject with RDL base of 15th and 16the centuries
 Zimmerman and Visser: “Southern Cross” of SA Private law

Eng

RDL

Roman Law:
 Did not recognise a general theory of contract
- There were a whole host of contract theories
- The form of the contract was seen as more important than the substance
- The terms of the contract NOT so NB, formalities surrounding it were
- They were more concerned about the way in which the agreement was
reached than in the actual content of the agreement
- So if an agreement didn’t comply with the formalities there is no contract
- Ex nudo pacto oritur NON actio
- = No action arises out of a bare agreement

Middle Ages:
 14th to 17th centuries
 All agreements were seriously and deliberately entered into are legally enforceable
 Action CAN arise out of a bare agreement
 Ex nudo pacto oritur action
 Pacta sunt servanda – promises must be honoured

1
  By the time Voet and Grotius etc. came along there were hard and fast rules of
contract
 “It is understood that contracts which proceed from any reasonable cause are
enforceable by action” – Redelike oorzaak / iusta causa

What was the iusta causa????

 Not given a definition by writers
 Today’s definition: “There are reasonable social economic grounds for recognising
that a binding legal obligation exits…”
 More particularly:

i) Agreement entered into seriously and deliberately?

ii) Agreement not illegal, immoral or impossible
iii) The arrangement may be unilateral (only one party has to perform) or bilateral
(both have to) eg sale

Problems:
 The English only scrapped the law of a colonised country if it was backward
 So what was the iusta causa back in the early 19th Century
 De Villiers tried to equate iusta causa with the early English Doctrine of
CONSIDERATION

Consideration:
 Requires the element of reciprocity = quid pro quo
 Contracts have to be reciprocal (or bilateral)
 English contract theory enforces action between people (bilateral)
 So conflict occurred within the 4 independent provinces of SA because some courts
didn’t accept De Villiers’ definition
 1910: where did the law of contract go after the union?
 RDL or English law?
 Resolution in Conradie v Rossouw
- De Villiers was wrong
- Consideration is not the same as iusta causa
- In SA we don’t refer to Consideration in the law of contract
- Our law is RDL-based and simple

2. Contract Defined:

 An agreement entered into with the intention of creating legal obligations

 An agreement does NOT always = a contract
 Employment contracts, leases, contracts of sale etc.
 HOWEVER there are certain instances where you may think you have a contract, but
you actually don’t (depends on the subjective intentions)

2
 Essential Elements
- Capacity
- Consensus
- Legality
- Performance Possibility
- Formalities
- The above create the iusta causa for a valid contract

CAPACITY:
 Everyone has the capacity to bear rights but not everyone has the capacity to acquire
rights and duties (to alter their state of affairs)

 Capacity is presumed unless…

 Limited capacity
- Children over 7 years

 No CC
- Insane people (Uys v Uys)
- Children less than 7 yrs old
- Insolvent people
- Intoxicated people

 Theron v AA Life Assurance

- Appellant = beneficiary under a life policy issued by the respondent (AA)
on the life of F, who died in a car accident
- Respondent said he didn’t have to pay the R200 000 because
 The proposal contained misrepresentations
 There was never any mention of F’s being mentally retarded
 F lacked therefore the mental capacity to enter into a valid contract
of insurance

- Onus on respondent to prove third point

- Court used the test in Qilingele v SA Mutual Life Assurance to determine
if the policy was invalid due to incorrect representations ie that F did ont
pass st 8 (only 2), which he claimed to have done in the risk assessment

- TEST: would a reasonable person have thought that such info should be
conveyed to AA so that it could decide on risk and therefore a premium
rate??

- Court found that this was entirely irrelevant

3
Judgement:
- Williams: F could read her advert for lodging, indicating he could lead an
independent life
- Suggested murder conspiracy rejected by the court
- Adams: lived opposite Williams and went to school with F
- Adams said that he couldn’t read properly or understand things
- This was disregarded by the court
- Richter said that he saw F pay competently for the policy
- Whiting: sold F the policy and said that it was obvious that he understood
the terms
- The trial judge didn’t accept what Whiting said:
 That he had never met the appellant
 That the policy was an investment
 Both were rejected by the judge
- F = mild retardation
- Dr. Fenster said that it was obvious he was uneducable and that since he
had not progressed beyond sub B by 18 he was unlikely to do so
 Court said this was incorrect
 The respondent didn’t show that F was uneducable
- This confirmed by psychologist Loebenstein
 Said that F was only mild
 This must be examined in context: he had a BAD home enviro
 Said there had been no advancement between the ages of 18 and 24

- IMPORTANT PARAGRAPHS: 374E – 375A

 Onus of proving lack of CC on the respondent
 Test for CC laid out in Prinsloo’s Curators Bonis v Crafford and
Prinsloo
 Was the person concerned of sufficiently sound mind and
understanding to realise the nature of the obligations into
which he was entering, and to appreciate the duties and
responsibilities created by that contract

- Certain misrepresentations were present (see case 375I-J)

- BUT the insurer couldn’t repudiate because of s 63(3) of the Insurance Act
 That a policy cant be invalidated on account of any representation
made to the insurer unless the incorrectness is of such nature that it
would have materially affected the risk assessment
 Need to look at assessment with INcorrect and then correct facts
 If there is a significant disparity then materiality part of s 63(3)
applies

- Defense said that F didn’t disclose his mental health status

 Severe mental retard. not proven

4
  Reasonable man would NOT have expected him to tell the insurer
he was in a special class at school

- Judgement in favour of appellant

- SHULTZ: disagrees
 Ito whether the respondent discharged the onus of proving mental
incapacity
 By the end of 1976 his intellect had not improved
 Teachers didn’t think he could have coped with things like life
policies
 Tragic home background didn’t help
 Disagreed with Loebenstein
 Said it was suspicious that the appellant didn’t give evidence
 Thinks that CC is proven to be absent

OFFER:

 An offer is a statement of intention in which the offerer sets out to the person to
whom the offer is made, what performance and what terms he is prepared to bind him
to. The proposal is made with the intention that by its mere acceptance, without
more, a contract should be formed.
- Replica of English structure
- Offers can be conveyed expressly through words / written documents
(sometimes an offer may be implied e.g. vending machine)

 Requirements:
- Addressed to a defined person or the whole world – Carlill v Carbolic
 Focused = to one person
 AD incorporated Carlill v Carbolic into our law, hence it’s
becoming precedent

- Animus Contrahendi
 Serious intentions to create legal obligations
 Certain proposals are NOT made in animus contrahendi
 Offers made in jest / anger
 Mere social arrangements (squash meet eg)
 Domestic arrangements (within the home)

- Definite and complete

 Efroiken; Harvey; Pitout
 Does NOT include:
 Invitations to negotiate (“I’m thinking of perhaps selling
my farm”)

5
  Requests to offer (Efroiken) – telegram was NOT definite
and complete; it was more of a request
 Statements of information (Harvey) – did not mean by
stating the lowest price that that was the amount he’d sell
for.
 Provisional proposals (Pitout) – court found that it was
NOT a true offer for 7 reasons (NB exam)

- Communicated to the offeree

CASES DEALING WITH OFFER:

1) Carlill v Carbolic Smoke Ball Company1893 (1) QB 256

 Offer by advertisement in Pall Mall Gazette (1891)

 Company (Carbolic) said they’d pay £100 to anyone who contracted flu after using
their smoke balls for a certain time period in a certain way.
 Plaintiff did but got the flu: is she entitled to the money????

 Defendents:
- No valid contract existed
- The plaintiff could not establish a claim unless she performed a certain
act. This act, namely getting flu, was not something she had control over.
- Advert too vague to = contract: no time limit, no means to check the use of
the ball (anyone who had flu could claim they used the ball)

 Plaintiff:
- Clearly an offer
- Published that it might be read
- There needs to be communication of acceptance, but this may be tacit in
that the plaintiff did the act required to accept the offer (used a ball) –
especially if it is an offer to the world
- What if the words applied only to people who bought directly from the
defendants? Not a proper import of the words – no reason for such a
limitation.
- What about the non-existent time limit?
 After a fortnight you will be safe so long as you continue to use it
 A fortnight’s use will make you safe for a reasonable time

 Finlay Q.C: there is NO binding contract

- Advert is merely an expression of intention to pay a person who fulfils 2
conditions:
 Has used the ball for a fortnight
 Gets flu

6
 - No service of the defendants was necessary: they didn’t care if the balls
were used, as long as they were sold
- The defendants could not have meant there to be no time limit
- 3 limits have been suggested:
 “During the time of epidemic”: not admissible because the ad
applies to flu as well as colds
 “During use”: excluded by the language “after having used”
 “within a reasonable time”: can’t really be deduced from the words

So no legal contract!

 Lindley L.J: looked at 2 points

- The ‘contract’ is a policy: not possible
- That it is a bet: no. it has nothing whatsoever in common with a bet
- Thus we are dealing with an express promise to pay £100 in certain events
 “£100 reward will be paid by Carbolic Smoke Ball Co. to any
person who contracts the flu after having used the ball three times
daily for two weeks according to the directions supplied with each
ball”

- Was it just a random comment? NO. They also said they had deposited
£1000 in an Alliance Bank account to show their sincerity
- There IS a promise to pay
- Is it then not binding?
 It is an offer to the world at large: in particular, anyone who fulfils
the requirements, and anyone who does accepts the offer
 No need to notify acceptance: by carrying out the acts necessary to
fulfil requirements, the offer is accepted (getting the flu)

- Advert vague? Especially considering time period

- BUT it is unlikely the company intended to mean that if you used the balls
3 times a day fro 2 weeks you’d be protected for the rest of your life

- Therefore it may:
 Be limited to persons contracting the ‘increasing epidemic’
 You are protected for two weeks after using it
 (Preferred interp.) reward offered to person who contracts the
disease within a reasonable time after using the balls

- What’s a reasonable time? For a germ to develop

- Consideration:
 Use of the ball is no benefit to defendants, only the sale thereof
 This can be consideration
 Inconvenience to person who actually uses the ball

7
  Therefore there is AMPLE CONSIDERATION for the promise

Defendants MUST perform their promise and pay up

 Bowen L.J:
- Vague: ito time and to whom the offer is extended
- Was a contract therefore actually extended?
- Intention = to promote circulation of smoke balls

- Time of protection?
 To last during the epidemic (and it was this time the plaintiff got
flu)
 Could be protected forever after using it – not really feasible
 Adopted meaning – immunity lasts while using the ball

- Co. intended to make extravagant promise because it pays to do so

- This judge thinks it was intended to be understood by the public as an
offer to be acted upon
- It is not a CONTRACT made with all the world, but an OFFER made to
the world = anyone can come forward and accept

- No notification of acceptance: so 2 minds may come together

 Performance of the condition is sufficient
 This can be deduced from the nature of the offer
 Dog example (you don’t need to write & tell the person you’ll look
for it, you just do!)

- Was this a nudum pactum? (no consideration?)

 There is a request to use involved in the offer
 NB: definition of CONSIDERATION:
 “Any act of the plaintiff from which the defendant derives a
benefit or advantage, or any labour, detriment, or inconvenience
sustained by the plaintiff, provided such an act is performed or
such inconvenience suffered by the plaintiff with the consent either
express or implied from the defendant”

 Thus it is inconvenience that the plaintiff took the trouble to use

the ball = CONSIDERATION

 A.L Smith L.J:

- Was it an offer in the gazette
- How can it be said this offer was simply a statement of confidence?
- In his opinion, its an offer

- No time limit?

8
  Not a problem: reasonable time can be construed from the advert

- Performance sufficient to indicate acceptance

- There is consideration
 In short look at
i) the question of time frame
ii) consideration present?
iii) What constitutes acceptance
iv) Was it an offer or just a statement of confidence about the product?

2) Efroiken v Simon 1921 CPD 367

 Telegraph: “Have seller 3000 oats each January, June, 11s. local export if taken
export any difference in railage be charged to buyers instructions ninth.”

 Communication NOT an offer

 For plaintiff:
- Defendant appointed Metter to sell oats
- Verbal contract binds parties

 Plaintiff sues for damages for breach of contract

 Simon met his broker, Metter, and gave him the sale of 3000 bags of oats over 6
months
 Metter sent telegram to Cape Town
 Efroiken was present when it was received and agreed to buy the oats upon the terms
in the telegram
 IS this a contract???
 Another telegram sent to Smith “Sold 3000 oats monthly, Jan-Jun as offered,
Efroiken”
 Simon said that Efroiken must provide a letter of credit or he’ll sell elsewhere.
Efroiken said he’d arrange a bank guarantee of 6d to 5s per bag BUT he did fix the
credit letter
 Efroiken then asked for the oats to be railed to him in Belville, so Simon asked
Machanick (from whom he had purchased the oats) to do so
 It is argued that by doing this Simon accepted Efroiken’s offer
 BUT Efroiken had only established a letter of credit for the first month’s railing
 He did not increase the letter to £6600 as requested by Simon, only the 1st month’s
railing
 So Simon would not deliver until the full £6600 established, and Efroiken would not
do this and OATS WERE NOT DELIVERED

 Principle point = telegraph meaning:

- Smith = broker
- Simon authorised the despatch of the telegram to Smith

9
 - Was this a “firm” offer?
- Firm offer = “an offer upon which business can result at once, and that, as
soon as it is accepted, there is a binding contract” (SA Mining Co. v
Doherty)
- Judge said that “Have seller 3000 oats” = “I have a seller, can you find a
buyer?”
 Delivery over 6 months
 Thus payment not to be in cash against delivery, or cash before
delivery, but at 30 days sight draft
 A man MUST part with his goods before he binds himself to a
future contract for deliveries over 6 months

- Judge held that the seller could not have intended that mere acceptance
and nothing further constitutes a contract

- Looked at Harvey v Facey

“The mere statement of the lowest price at which the vendor would sell
contains no implied contract to sell at that price to the persons making the
enquiry”

- Simply stating “I have a seller, if you can find a buyer, then we can do
business” is not an offer from which mere acceptance = a contract

- This is a request to other people to make him an offer to buy at his price
- It is NOT a firm offer

- NO CONTRACT EXISTED

3) Harvey v Facey 1893 AC 552 (PC)

 Telegraph from appellants: “will you sell us B.H.P? telegraph lowest price”
 Telegraph from respondent: “lowest price for B.H.P £900”
 Telegraph reply: “we agree to buy B.H.P for £900 as asked by you. Please send your
title deed in order that we may get early possession”
 No reply received
 Respondents deny contract, appellants say there is a valid one (offer and acceptance)
 The telegrams on the face of them did NOT constitute a binding contract
 Bumper Hall Pen
 A quo said no valid contract
 On appeal this decision reversed
 Now heard before privy council

10
 The reply by the appellants CANNOT be seen to be acceptance because they merely
treated the statement of lowest price as an offer, which it was not.
 It was simply a statement of fact
 The appellants reply is actually the offer to purchase the farm, a term that Facey then
needed to accept
 It cannot be read in that Facey’s reply to the price question be construed as meaning
“yes you can buy the farm”

 “The mere statement of the lowest price at which the vendor would sell contains no
implied contract to sell at that price to the persons making the enquiry”

 NO VALID CONTRACT

4) Pitout v North Cape Livestock Co-op Ltd 1977 (4) SA 842

 Whether an undertaking between the parties was actually an offer made animo
contrahendi which upon the acceptance of it would give rise to a binding contract, or
was it merely a proposal made while feeling their way towards more definite terms?

 Need to ascertain if they were intent on sticking to the terms, irrespective of the
course the negotiations took
 Accountant has testified a certain value of the cattle this had not been challenged by
the other party
 Appellant unable to perform the contract – respondent compelled to rely on a claim
for damages because the agreement had related to cattle that had not existed at the
time of trial
 Onus on respondent to prove the value of the cattle in order to claim damages
 A quo said he had discharged the onus when he actually hadn’t

 Appellant: married in community of property

 Joint estate = 4 farms each hired by a son
 The “black sheep” (John) tried to buy goats and ran up huge debts
 Havenga the accountant went to the farm to attempt to recover the owed amounts
 He failed, and Botha (of the respondent firm) then went to the farm where
discussions with the appellant (the mother et al) took place
- She told them there were about 144 cattle on his farm
- She guaranteed the proceeds of 72 head of cattle to the respondent
- She also said that she would sell some of the goats and the proceeds would
go to the respondent but did NOT guarantee that
- John rocked up and alleged that he had paid R2000 into the bank account
of Botha
- Bank had no knowledge of this

11
 So now they want the money she guaranteed, but she said it was only oral agreement,
besides that she hadn’t even sold the cattle yet
 Later in the trial it became apparent that she no longer had the cattle because John
had disposed of them prior to his sequestration
 It is evident that
- The discussions were meant to reach a satisfactory settlement
- That the negotiations regarding the cattle were meant to be only a stage in
the negotiations re. John’s liquidation
- That once the negotiations were complete a contract would be drawn up

 Were these undertaking an offer made animo contrahendi?

 This must be decided in light of circumstances (Prof. Corbin)
 If so, it must be certain that the promisor intended the bargain to be on those specific
terms, and that no additional material terms were intended to be agreed upon
 Now in this case the promisor says she never undertook the promise
 Onus on the respondent to prove contract:
 HE DIDN’T DO THIS

- This was largely due to Havenga’s incompetence as a person to estimate

market value of the cattle

 The agreement was not tacit either

 APPEAL SUCCEEDS

 How offers terminate: Christie 47 –

 Specific Issues:
- Adverts and tickets: are NOT offers, they are a notice of intention to do
business. The buyer makes the offer NOT the seller (Crawley)

- Tenders: eg Rhodes needs a tender to paint eden grove

 the tender makes the offer to the university to do the job, Rhodes
then accepts one

5) Crawley v Rex 1909 TS 1105

 Shopkeeper advertised tobacco at a cheap price

 C came into the shop to buy some
 Later came again to get more

12
 For some reason, maybe because stock was low, the shopkeeper didn’t give him
more
 He refused to leave, even when a constable came, contravening s9 of Ordinance 26 of
1904 that makes it a criminal offence to remain on premises unlawfully and
wrongfully after being requested by the occupier to leave
 The court dismissed the appeal saying that a mere advertisement was simply a notice
of intention to do business, NOT an offer

 Had it been an offer, whenever a shop ran out of stock they would have hundreds of
ppl suing them for breach of contract
 Just an announcement of the price at which he intends to sell
 When the person enters the shop, HE makes the offer to purchase the goods

 To be an offer, the statement must be such that the mere acceptance of it will bring
about a contract – adverts DO NOT fulfil this requirement
 Some adverts ARE however meant to be offers (Bloom v American Swiss)

 NO VALID CONTRACT
 He was sentenced as well to 1 day in prison for contravening Ordinance 26

13
ACCEPTANCE:

 Definition (also LAWSA): “an acceptance is a statement of intention in which the

offeree signifies his assent to the proposal embodied in the offer”

 Requirements:
- Can only be made by done by the person to whom the offer is made
- Must be in response to the offer (Bloom)
- Must be unequivocal / unconditional and COMMUNICATED
(Boerne v Harris)
- Communicated to the offeror
- In the prescribed manner (Driftwood v McLean; Laws v Rutherfurd)

CASES DEALING WITH ACCEPTANCE:

1) Bloom v American Swiss Watch Company 1915 AD 100

 Jewellery stolen from ASW valued at £5000

 They promised a reward of £500 to anyone who could give info that could help arrest
the thieves (reward in proportion to stuff gotten back from info)
 Bloom gave info BEFORE he was aware of the reward.
 He subsequently found out and sought the reward, but because the info was not in
response to the notice, he did not accept it.
 NO CONTRACT so no basis to claim reward

 Need to determine what the legal effect of the published offer was
 Offer to all the world
 Would only constitute a contract when accepted
 Ordinary circumstances: direct communication needed to establish acceptance
 Its up to the offerer to communicate any special way in shich it wants acceptance
communicated
 It did this by stating info of a certain kind must be given to the C.I.D

 Ito RDL and English law there must be consensus for a contract
- Both parties must be aware of their agreement
- Must be coinciding intentions
- Mere acceptance does not = valid contract
- Only when the offerer is NOTIFIED of that acceptance
- Hence in this case there were no coinciding intentions as the plaintiff was
not even aware of the offer!!!!!!!!
- Sometimes, however, the requirement that parties must be aware of their
agreement is dispensed with (Cape Explosive Works v SA Oil and Fats
Industry)

14
 Without knowledge of the offer there can be no acceptance and hence no contract
 There would be no animus contrahendi on the part of the person giving the info
 The attorney-general stated that he was sure the plaintiff had had NO knowledge of
the reward when he gave the info

 NO VALID CONTRACT
 Appeal dismissed

2) Boerne v Harris 1949 (1) SA 793 (A)

 Concerned the lease of a hotel

 15 April 1942 – 15 April 1947
 Renewal clause in the contract which stipulated that should the lessee want to renew
it, they should give notice of this at least 6 months before the
 But the landlord HAD to be told within 6 months if a renewal was wanted i.e by 15
October 1946
 The lessee had sent a letter of renewal, which was never acknowledged, then a
second one
 A contract, even if be ambiguous, is generally binding BUT the acceptance of
the offer must be…

 UNEQUIVOCAL, UNAMBIGUOUS

 there could not be a valid exercise of the option unless there had been unequivocal
acceptance of the offer

 Greenberg JA:
- The respondent applied to the HC to declare whether a lease entered into
on 15th April 1942 had terminated by effluxion of time on the 14th April
1947
- Hotel in Somerset West
- “this lease shall be for a period of 5 years…”
- “the lessee shall have the option to renew the lease upon the same terms
provided that notice is given 6 months prior to the expiration of the 1st
period of 5 years”
- Must be done in writing
- Renewal letter sent but not acknowledged
- When parties have by signature indicated their assent to contractual
provisions, it is clear that they have intended to bind themselves
- The letter must be read along with the lease
- It may be contradictory in that it purports to renew for a period other than
that covered by the right of renewal
- There are a number of explanations as to the mistake:
 Layman’s misconception of the lease terms
 Misunderstanding between appellant and his attorneys
 Typing error

15
  Deliberate departure from the terms of the lease by the attorneys

- The appellant had the right to exercise that option in unequivocal terms
which would make it clear to the respondent whether it was being
exercised.
- Perhaps the words “in terms thereof” in the renewal letter were
misconstrued NOT to refer to the right of renewal

- “…and have to advise that our client intends to renew the lease for a
further period of 5 years from the 15th October, 1946, in terms thereof”

- Notice was in fact given by the 15th of October 1946, as required

- He intended to extend the lease from the following April, even though it
said October.

- from the letter, read together with the lease, a reasonable person could
conclude that the appellant had made a mistake in the wording of the
letter;
- he could not have interpreted the lease as giving him anything other than a
right to renew fro 5 years from April 1947
- court held that the respondent was unreasonable in not reading the letter
- Boerne = lessee
- Harris = lessor
- He held that he does NOT believe the exercise of the option to be
unequivocal
- APPEAL DISMISSED

 Schreiner JA
- The lessee’s attorneys sent the letter on the 5th October 1946 (in time)
- Was the letter clear and unequivocal acceptance of the standing offer?
- Not every mistake leads to uncertainty in a document
- The lessor must OBVIOUSLY have understood the terms of the lease, so
it can be assumed that the reasonable person in the lessor’s position must
have understood the letter to have meant the renewal from the April as
stipulated in the lease
- APPEAL ALLOWED

 Was the offer of renewal accepted? Correct date? Unequivocal? NO!!

 Any acceptance must leave NO room for need of interpretation, or doubt
 No “puzzle solving”

 At 801 - “it seems to me to follow that the letter, in order to be effective as an

exercise of the right of renewal, must unequivocally convey to the recipient, using
ordinary reason and knowledge, that it is intended to be such an exericise…”

16
 “Thus if the appellant had chosen to write the letter in Chinese, or to convey his
acceptance in the form of a cross-word puzzle…I think that the respondent would
have been entitled to refuse to attempt to translate, or to solve the puzzle contained
in it, the letter and to disregard it.”

 At all phases the court is VERY strict re. contracts

 Acceptance MUST exactly correspond to the offer

3) Driftwood Properties v McLean 1971 (3) SA 591 (A)

 Situation where both parties must have signed the contract by a specific date, but the
document had not been received by the seller
 Purchase of immovable property belonging to the respondent
 Offer to purchase: “that this offer is open and binding upon both parties until
signature by both parties on or before 17th May 1969, failing which it shall lapse if
only signed by one party
 The applicant (Aswegen acting as trustee for the company Driftwood soon to be
established) posted the document once he had signed it on 17th BUT the respondent
never got it

 Appeal to refuse the appellants application for an order compelling the respondent to
cause certain fixed property registered in his name to be transferred to the appellant.
 Ito farm 314
 Van Aswegen (Parys) drafted the document and the respondent signed it on the 30th
April
 Held that no contract could have existed until Van Aswegen had communicated his
acceptance of the respondent’s offer to sell
 The document was not actually an offer as it did not comply with requirements ito s 1
of the General Law Amendment Act, 1957
 The court a quo had said that there was no contract just because Aswegen had signed
the document
 It seems that on proper construction of the document that the 2 had orally agreed on
the terms of the contract and that these would be incorporated into the document
 But it is not enough that Van Aswegen signed the document, he should also have
communicated his acceptance to the respondent

 But the respondent had signed the document in good faith that Van Aswegen would
do so to, thus manifesting his intention to be bound by Van Aswegen’s signature on
the 17th
 But the document stipulates that the offer will lapse if only one of the parties had
signed (this was badly phrased)
 So only a signature by Van Aswegen would be needed to make the contract binding.
 Appeal upheld (McLean to sell property

17
 4) Laws v Rutherfurd 1924 AD 261

 Respondent gave the appellant 3 months to enter into a contract to cut wood on
respondent’s farm (Scandinavia)
 Option expire on 26th July
 Acceptance / refusal MUST be communicated by letter
 Appellant did not do so within specified time, so respondent asked him to remove an
erected plant from the property
 Appellant notified acceptance by REGISTERED letter on 28th and telegram on 29th
 He said the respondent must have known because of the preparations on the farm

 No notification = no contract
 Wants to make a rule nisi to interdict appellant from trespassing
 Appellant had spent £300 on the plant, hired ‘natives’, made a road to the plant
 Respondent knew all of this
 BUT she had the right to demand written notice AND the appellant had had 3 months
to do this
 She claimed relief in the form of an interdict prohibiting his entering the premises.

 Appellant did not give acceptance in time

 NO VALID CONTRACT

6) Cape Explosive Works Ltd v SA Oil and Fats Industries Ltd 1921 CPD 244

 CEW = glycerine manufacturer

 They accepted two offers to buy glycerine one from a Tvl company and one from a
Natal one
 Offer & acceptance made by letter
 Needed to establish geographic jurisdiction
 Concluded that the contracts had been concluded where the letters of acceptance
were posted, NOT where they were read = CPD

 When is a contract made by letters considered t have been completed??

- Was it from Somerset West from where CEW operated
- Or in Tvl and Natal respectively, where the letters were received and read?

 There are 4 theories in respect of jurisdiction:

- An offer sent in the post becomes a contract as soon as it is accepted by

the offeree, in the absence of anything to indicate the contrary

- An offer made by letter through the post must not only be accepted by the
offeree, but the acceptance must be duly posted in order to constitute a
binding contract between the parties = Expedition Theory

18
 - The posting of the letter is not enough. It MUST reach the place of
domicil before it can be said there is a contract between him and acceptor
= Information Theory

- It is not enough that the letter reaches its destination: the acceptance must
have come to the knowledge of the offeror ie, he MUST be conscious of
the acceptance before it can be said there’s a concursus animorum (union
of the wills of contracting parties)

 Most modern jurists have discarded 1 and 4 and dispute 2 and 3.

 Which has practical convenience?
 Kotze thinks we should adopt the second one.
 NB: Thus the offer becomes a contract on the posting of the letter of acceptance
 Thus the contract was concluded in Somerset West, Western Cape
 SEARLE J:
- The words “awaiting your reply” clearly indicate that acceptance is to be
done through the post
- BUT this cannot be construed as meaning that the contract only comes
into existence when the reply physically reaches the offeror

 Postal contracts (by letter or telegram) are the most common instance where there is a
departure from the common instance that the offeror must be notified that his offer
has been accepted before a contract comes into being.

7) Seeff Commercial and Industrial Properties (Pty) Ltd v Silberman 2001 (3) SA
952 (SCA)

 Acceptance of offer
 Not always needed to be expressly stated
 May be tacit: where the mere performance of the terms of the offer is sufficient to
express acceptance (silent acceptance)
 If the offeror expressly or impliedly intimates in his offer that it will be sufficient for
the offeree to act on the offer without communicating acceptance, performance of the
terms is sufficient acceptance without notification
 How does one determine if offeror meant that acceptance notification is necessary or
not?
- Sometimes gleaned from the character of the transaction
- Failure to reject = acceptance
- Silence = consent

 The plaintiff (respondent now) had a property in PTA he wanted to develop by

bashing down the existing one & rebuilding.
 However, he was living in Australia

19
  The defendant, Braude, did the work
 Plaintiff not satisfied with quality & said that it had occurred months too late
 There were serious defects that had to be expensively rectified and there was already
a serious overrun in costs
 Plaintiff:
- Defendant liable to compensate R2 million
- Said there was a contract where defendant = project manager to see that
none of the above happened
- Said defendant had breached contract by not fulfilling obligations

 Was decided to deal separately with

- The terms of agreement: was there a contract?
- Whether the design changes had been agreed upon

 As to the first:
- Through letters, Silberman had indicated what he wanted exactly and a
max cost of R1 616 500
- Braude had replied saying that unforeseen changes are not catered for, but
they didn’t expect these

 Defendant said that the 1st letter constituted an offer

 Defendant said that the next letter was not unequivocal acceptance but a counter-
offer
 The court a quo found that Silberman had tacitly accepted, Braude at least assumed
this which is why he proceeded with the building
 If one construes the second letter as a counter-offer, then the ordinary rules of offer
and acceptance apply
 In Carlill v Carbolic, it may be sufficient to act = acceptance
 The judge held that Braude’s letter contained a clear indication that express
acceptance was NOT required to = binding contract
 There was duty on the plaintiff to object should he wish to do so. His silence and
conduct in proceeding with the project constituted acceptance of the said proposal

 There WAS A VALID CONTRACT

- In relation to material prices
- No agreement on design changes
- APPEAL DISMISSED

Acceptance - Special Issues:

i) Silence as a mode of acceptance?

- NO
- Only if there is a specific duty to speak out and reject

20
- Seeff: only where the offeror has indicated that it is not necessary to
expressly state acceptance.
- They need to be ad idem = the offeror and offeree both agree to the terms
and that they have been accepted

ii) Contracts where the parties are apart from each other
- Need to ascertain the jurisdiction

 Postal contracts
o Cape Explosive Works
o Kerguelen Sealing and Whaling Co Ltd v
Commissioner for Inland Revenue
o Offer is accepted on the postage of the letter of
acceptance
o Doesn’t work if the postal service is not working
o Also, what if you decide to cancel the acceptance
after the letter has been sent?

o EXPEDITION THEORY
o What about telegrams? Are quicker but may be
garbled…
o …thus a contract is not concluded until the telegram
is read

 Electronic Contracts
o Ito Electronic Communications and Transactions
Act 25 of 2002, s22 and 23 (see p 78-79 of
Christie)
o Emails, faxes, etc.
o Cos they are assumed to be in the same place, for
convenience of law, the contract is concluded when
acceptance of it is communicated to and received by
offeror

o RECEPTION THEORY

 Telephone contracts:
o Information Theory
o INFORMATION THEORY

 Tacit contracts:
o Offer by conduct / implied offer: where there is no
express offer, but one made by conduct

21
 o Acceptance can also be tacit = shown through
conduct

 Kergeulen Sealing and Whaling Co. Ltd v Commissioner for Inland Revenue 1939
AD at 503-505:

- Whether contracts signed in Cape Town but posted back to London were
contracts made in CT
- Headnote of Cape Explosive Works:
 “When a written offer is made by letter through the post the offer
becomes a contract in the absence of a different intention by the
offeror on the posting of the letter of acceptance”

- Anson wrote:

 “In the case of a contract made between 2 parties, some of whom

are resident in England and some abroad, the contract has been
held to be made in the country in which the signature of the last
necessary party is affixed”

- Signing different copies makes no difference

- Law is practical more than philosophical

OPTIONS:

 Examples:
- A offers to sell his car to B for R20 000 and B has until October 15th to
accept

- A leases a property to B for 5 yrs and gives B the option of renewing it for
a further period of 5 yrs before the end of the 1st lease

 One is bound to keep an offer open for a certain period of time

 Boerne v Harris

 Analysis of options: Boyd v Nel 1922 AD 414 = good example

- There is firstly the offer to enter into the main contract
- A separate subsidiary contract / agreement (the underlined bits) = pactum
de contrahendo = the option

 Relationships or potential ongoing relationships

 Sometimes for reasons of good faith
 Must be remembered that the option is in itself an offer

22
  An option to purchase where there is no element of delectus personae can be ceded
by the option holder to anyone he wishes, unless the wording of the option contract
indicates to the contrary (NB cede = to give up one’s rights to something)

 Part 2 MUST be adhered to or = breach of contract for which one may get remedies
in the following
- Interdict – to prevent the conduct that would result in the breach or to get
the offeror to do what he said he would
- Damages = financial compensation

RIGHTS OF PRE-EMPTION:

 Owsianick v African Consolidated Theatres 1967 (3) SA 310 (A) at 316 C-D

- “upon the exercise of the option to purchase by the holder of the option,
the granter of the option is obliged to sell. The granter of a right to pre-
emption CANNOT be compelled to sell the subject of the right. Should he,
however, decide to do so, he is obliged, before executing his decision to
sell, to offer the property to the grantee of the right of pre-emption upon
the terms reflected in the contract creating that right”

 Also called the FIRST REFUSAL

 Normally contains a term implied by law that the price or terms shall be the same as
the seller or giver of the right is prepared to accept from a third party
 Called a right to pre-emption often in sale
 A right of pre-emption is exercisable within a reasonable time after the happening of
the specified event, which will normally be the notification by the grantor of a receipt
to buy from a third party
 Right of pre-emption is CONDITIONAL, whereas an option in NOT.

Eg. if my land lady puts onto the contract that there I may extend my lease to 2 years if I
wish, this is a subsidiary contract (option)
If someone says that IF they decide to sell their bike, I will be their first offeree, this is a
pre-emption. The land lady HAS to let me extend my lease; the other person doesn’t have
to sell me the bike, only if they do decide to sell it should I be first in line

23
CONSENSUS:

 No Consensus:
- Theories of contract
- Where one or both parties are labouring under some form of mistake
- State of mind which is not in accord with the apparent facts
- One or both of the parties think they have a contract, but somewhere along
the line the true facts emerge and it is contended

- Rule: no defence of mistake unless its legally significant

 Negligence or laziness are not an excuse for mistake

 How does one determine if a mistake is legally significant?

A) MISTAKE:

 Destroys consensus = dis-census

 No meeting of the minds
 Was the mistake made

- Essential (not minor or indifferent)

- Justifiable at law to say there is no contract

 Need a broad examination of the theories of contract formation

 Thus follow the theories of contract formation…

a) Subjective / will theory:

 The minds of the parties have to meet all the elements of the
contract: meet in a perfect, subjective sense
 Coincidence of wills: each must know EXACTLY what the other
is thinking / doing
 If there is no ad idem there is NO contract
 Unworkable in a modern society: far too easy for one party to
allege they were confused in order to get out of the contract

b) Objective / Declaration Theory:

 SAR&H case
 Only true indication is what the people say to one another
 Concerned with the parties’ outward clarification

24
  Takes no notice of the actual intent of the parties
 Would be impossible to escape anything that resembles an
agreement, even if there was confusion
 Would be very harsh on the parties

8) SAR&H v National Bank of SA Ltd 1924

- “the law does not concern itself with the workings of the minds of the
parties to a contract, but with the external manifestation of their minds.”
- Ie even if they may not have met philosophically, if it looks like they have
according to their actions, the law says they have.
- As long as there is no fraud

 There is the need for a compromise:

9) Saambou-Nasionale Bouvereniging v Friedman

- Said the Will Theory should be the starting point in understanding

contract: the need to look at the minds of the parties because
- Consensus = “die saamval van wat elke party werklik (psigologies) wil”
- Common law = the outcome of consenting minds: consensus ad idem

- Objective theory:
 Based on the illusion that words have a ‘meaning’ independent of
the persons who use them
 Person may be bound in accordance with his expressions as
understood by the other party, even though his own meaning and
intentions were different

- Remarks of Corbin:
 That there may be a valid contract even if there is no actual
meeting of the minds, but for such a result there must be agreement
in expression, interpreted in accordance with the understanding of
one of the parties, an understanding the other had reason to know
 “reason to know” indicated the fault-element (negligence if the
party had reason to know but didn’t)
 A person may thus be bound by the interpretation of his actions by
another person

- Friedman had thus willed the agreement

 RDL (historical reason) took an essentially subjective standpoint

 In most contractual circumstances there is a subjective meeting of
minds
 Parties often don’t dispute the existence of a contract, but the terms
thereof

25
  Jansen held that there MUST be some appeal to objectivity

NEED TO BALANCE SUBJECTIVE AND OBJECTIVE

- Possible approaches dealt with by Jansen

i) Doctrine of Estoppel (unsuitable)

ii) Doctrine of culpa in contrahendo = more Germanic approach
iii) Doctrine of quasi-mutual assent = Reliance Theory
iv) Doctrine of iustus error

Ultimately (iii) was adopted

NB: a mistake is not = iustus error

c) Reliance Theory:

 No subjective agreement but a contract is recognised if

 One party has by his outward act, created in the mind of the
other party the belief / reliance that an agreement has been
reached
 The party wanting to rely on the alleged agreement can
show his belief / reliance was reasonable

(Where only one party wants the contract)

 If either of the above questions is answered NO then there is no

contract
 One party claims to have been mistaken
 Need to look at the declarations of the person who claims the
mistake
 Look at how the other party could reasonably have reacted to those
declarations (reliance on these declarations)

10) Smith v Hughes = most famous comment on reliance theory

 “If, whatever a man’s real intention may be, he conducts

himself that a reasonable man would believe that he was
assenting to the terms proposed by the other party, and
that the other party upon that belief enters into the contract
with him, the man thus conducting himself would be
equally bound as if he had intended to agree to that other
party’s terms”

26
 11) Hodgsen Brothers v SA Railways 1928 CPD 257:
 Concerned the negotiations around the purchase of a truck
 The brothers, plaintiffs, had been invited to do business:
buy a truck from the government, defendants, for £500
 There were issues discussed in the course of proceedings,
initiated by a letter, but the price was never one of them
 The govt sent a letter of offer to them
 They accepted and did so by sending a letter in the post
(expedition theory)
 5 days later the govt sent another letter saying they had
forgot to mention that the truck was to be sold for £300,
were not aware of the previously discussed price of £500,
as he had not seen the earlier correspondence dealt with by
another dept.
 the effect of this however was to induce the plaintiffs to
believe that defendant was prepared to purchase the lorry
for £500.
 So in actual fact a fundamental element was confused, as
the defendant induced the erroneous belief in the minds of
the plaintiff.
 A binding contract was completed, despite there being no
subjective agreement
 Was there belief / reliance that there was an agreement =
YES
 Was it reasonable to believe this? = YES
 “If whatever a man’s real intention may be, he so conducts
himself that a reasonable man would believe that he was
assenting to the terms proposed by the other party, and that
other party upon that belief enters into the contract with
him, the man thus conducting himself would be equally
bound as if he intended to agree to the other party’s terms”.
 Defendant bound by contract to take the lorry for £500, and
committed a breach by refusal to do so.
 Cross check with the dictum of Smith v Hughes

 Signed Documents:

- Careat subscriptor rule = let the signatory beware

- The basis is the principle of quasi-mutual assent / reliance theory
- If you sign something, you have signified that you consent to those terms)
- Only if you can show that there was a mistake, or that the terms are
contrary to public policy can you escape, but this is very rare.

27
  Burger v SAR
 Appellant sent a clerk, Meyer, with books to Jhb station; he
filled in and signed a consignment note in duplicate. He
didn’t read the note, nor was his attention drawn to the
words printed on it
 Railway officer requested the value of the books for the
purpose of filling up a bill of export. Meyer informed him,
and formally placed books in charge of the railway dept
 Brought away the signed copy of the note which read: ‘in
accordance with the Goods Traffic Regulations in force, I
hereby agree such regulations to applicable to this
consignment, as though they were fully stated thereon’.
 Appellant noticed that his books had been consigned to be
carried subject to the regulations, but didn’t know what
those regulations were. However, did nothing to stop books
from being transported
 Package went forward and was lost. One of the regulations
stated the refund rate on packages lost – less than value of
package
 Had the regulations alluded to in the consignment note
been annexed to ito r printed upon it, there could surely
have been no doubt as to the signatory being bound. The
fact that though referred to in the contract they weren’t
actually printed as part of it, cannot alter the legal position
of the consignor. He could easily have acquainted himself
with the regulations

 Unsigned Documents:

- Ticket cases
- Music concerts, internet, sport events etc.
- Can’t expect thousands of signatures! Not feasible.
- Follows the 3-fold English Legal Test in Richardson Spence & Co v
Rowntree 1894 AC 217
- Absorbed into South African law in…

- SAR v McLaren 1903 TS 727:

 The respondent delivered to and left with the clerk in charge of the
cloak room at Pretoria station a package containing certain articles to
be safely kept and redelivered to him at his request
 When requested to do so – failed to deliver the package (lost/stolen)
 Received a ticket, which he thought was only for the purpose of
identification of his things on release of them. When handed over,

28
 nothing was said about any special conditions. No notice was posted
in the cloak room with re to conditions on the ticket, and in issuing
them the attention of the parties was not specially directed the
conditions contained on the tickets
 Railway dept defence: not liable as articles deposited were worth
more than £5 and the cloak room ticket issued contains printed
diagonally on it a condition to the effect that the dept wont be held
liable for any article exceeding the value of £5. Yet he was never
called upon to sign this condition
 The depositary must show clearly that even though the depositor
may not have read all that is upon the ticket, yet that everything
reasonably possible has been done to draw his attention to the
liability, so that the depositary is entitled to be considered as having
put the contract in writing, such contract being contained in the
ticket handed to the depositor
 Dept in this case didn’t do what was reasonably necessary, according
to the test:

- The Test:
 1) whether the person who received the ticket knew that there was
writing / printing on it; and

 2) whether such person knew that the writing / printing referred to

contained the terms or preferences elating to the terms of the
contract

- If the answer to both is YES, then the terms are binding

- If the answer is NO, then a third question is asked…

 3) did the party issuing the ticket take all the steps which were
reasonably necessary in the circumstances to bring the terms and
references to the attention of the other party?

- If YES then the terms bind

- If NO, then the terms do NOT apply to the contract

- “not understanding” the language is seldom an accepted excuse

- Assessing question 3 is a question of fact – there are no hard / fast rules

- Best decision that illustrates this…

12) Bok Clothing v Lady Land Ltd 1982 (2) SA 565 (C) at 569 E-G
- “The nature of the document is relevant to the steps required of a party in
order to bring the contractual provisions to the other party’s attention. The
more contractually obscure or incidental the doc, the less likely it is to
expect it to contain contractual provisions and the more specific and

29
 positive must the steps be which are taken to bring this to the attention of
the other party.

Per contra in the case of carriage tickets and bills of lading, where long
established usage has created a situation where a contracting party even an
ordinary member of the public, will be taken to be aware of the existence
of such provisions on the relevant doc, or at least of a reference thereto,
and to have knowledge thereof.”

 So how do we actually go about proving a mistake that is reasonably

recognisable?

- P= party claiming that there IS a contract

- Q = Party saying there is NO contract (it’s a mistake) – reliance theory
1. The party alleging the contract (P) MUST prove prima facie agreement (need to
prove that there is at first glance a contract. This is obviously relatively evident
else the court wouldn’t hear the matter in the first place.

a. A declaration of intention on his part; and

b. A corresponding declaration on Qs part

2. if P is successful, the onus passes to Q: Q will be bound, unless he can prove a

mistake recognised by law, so he must prove:

a. confusion in a material sense (a lesser question of fact, its about 20% of

what the courts care about
b. the reliance of P is unreasonable (the key test of law – reliance)

- if Q can show those two things, then there is NO consensus and

consequently NO contract
- this is difficult because if there’s a declaration and apparent consensus,
the court is likely to be on the side of the guy claiming there IS a contract.

 MATERIAL CONFUSION (OF THE FACTS)

1. Is there confusion as to the nature of the contract or key
term of the contract (Dobbs; Horty; Sonap; George)
a. Can argue both
b. Confusion of
i. Term in the contract
ii. Contract itself

2. confusion as to the thing that is the subject matter of the

contract (Maritz; Allen)

3. Confusion as to the person with whom you are contracting

(Potato Board)

30
 BUT NOT

4. Problems with regard to the quality of the things that is the

subject matter of the contract (this is dealt with NOT in
mistake, but MISREPRESENTATION)

5. Errant motive (I thought that…)

 UNREASONABLE RELIANCE:

- Focus on the party saying there IS a contract

- Are they being reasonable??
- Potato Board 479G-H
- George v F 471B-D
- Sonap 239I – 240B

- There will be unreasonable reliance (no matter what the other party did)
IF:
- The party alleging the contract exists:
 Subjectively knew of the material confusion, but kept silent
(Sonap); OR
 Ought reasonably to have known of the material confusion, but did
not clarify the position (Horty) – despite Horty having been
careless, the case went against Interior Accoustics
 If the party alleging a contract actually caused the confusion in the
first place by creating an impression, prior to contracting, which is
contrary to the document upon which he now relies (Allen;
Spindrifter)
 The clause in dispute is a “trap for the unwary” and ought
reasonably to have been pointed out and clarified (Compusource)

Final Comments:
- If both aspects (confusion in a material sense and unreasonable reliance);
you have, in a general sense, a mistake (“iustus error”), or, in a particular
sense, an
 Error in negotio
 Error in copore
 Error in persona

- No contract ever existed. The purported agreement (or the agreement you
thought you had) is void ab initio (from the outset).

 If you can’t prove the requirements there will be no mistake and the contract will
stand

31
 George; Hodgson; Potato Board

 Example: Spindrifter v Lester Donovan 1986 SA 303 (A)

- Appellant, L, owns a clothing business
- In January he gets a visit from Mrs Katz – agent of respondent
- She tries to persuade him to take a stand at a fashion exhibition 24 – 27
July to which L expresses mild interest
- In Feb he checks out the site and she tries to tell him it’s in his ‘best
interest’
- He eventually agrees, and hastily signed the contract saying that it would
be good to work before his trip in early August
- He didn’t read the contract properly and missed clause 13 (which was in
green script, tiny at the back of the contract and could only be read by
straining one’s eyes, as part of the General Conditions) = if, for whatever
reason, the dates of the exhibition are changed, he will still be charged for
the stand, even if he doesn’t come.
- The date changes to 1 – 5 August
 Party alleging contract = respondent – exhibition organiser
(declaration of intention = signed contract)
 Party claiming mistake = L
 If respondent is successful, L is bound unless he can prove mistake
 Material confusion?
 Clause 13
 The dates

 Unreasonable reliance?
 L claims that Mrs Katz was unreasonable
o She subjectively knew of the confusion
o She ought reasonably to have known that L needed
to know that important info, and failed to inform
him
o She caused the confusion, creating a particular
impression in his mind
o “Trap for the unwary” that should have been
pointed out

 whereas the respondent intended to accept the appellant’s

application to exhibit on the basis that the resulting contract would
incorporate the General Conditions listed on the reverse, the
appellant on the other hand intended to make an offer not subject
to such General Conditions
 consequently the parties failed to achieve consensus ad idem and
there was no enforceable agreement on which the respondent could
base its claims

32
  furthermore, dates on which the exhibition was to be held
represented the very substratum on which the negotiations btwn
appellant & respondent’s agent were conducted. Mrs Katz had no
reason to believe that L would have been prepared to sign the form
had he known that he was incurring such a liability
 her plain duty to direct the attention of L to the existence of clause
13 – her silence would involve a misrepresentation as to the
existence of a fundamental provision wholly at variance with and
repugnant to the tenor of their negotiations up to that very moment
 YES there was a mistake: error in negotio
Horty Investments (pty) Ltd v Interior Acoustics (Pty) Ltd 1984 (3) SA 537 (W)
 Plaintiff, H, sought a declaration that a lease was null and void
 Ito clause 1, the lease would commence “on 1 May 1981 and would
continue for a period of two years until 30 April 1983”. Thereafter the
lease would continue on a monthly tenancy…”but under no circumstances
shall notice commence to run before 1 May 1993”.
 Date 1993 was a typing error undetected, should have read 1983
 Neither H nor his secretary noticed the error, but the defendant believed
that 1993 was the duration of the agreement.
 H meant to give a lease for only two years in line with his general letting
policy. The typed lease was an exact copy of one with the previous tenant,
only the 3 material dates were changed. Not noticing the mistake is quite
human; it happens to all of us.
 Defendants also honest people, and perfectly possible that they didn’t
detect the incongruities in the first two clauses of the lease.
 The unilateral mistake in casu was an error in negotio which can avail the
plaintiff if it was a iustus error.
 “when can an error be said to be Justus for the purpose of entitling a man
to repudiate his apparent consent to a contractual term? Our courts, in
applying the test, have taken into account the fact that there is another party
involved and have considered his position. They have, in effect, said: has
the first party – the one who is trying to resile – been to blame in the
sense that by his conduct he has led the other party, as a reasonable man, to
believe that he was binding himself? If his mistake is due to a
misrepresentation, whether innocent or fraudulent, by the other party, then,
of course, it is the second party who is to blame and the first party is
not bound”.
 The mistaken party will therefore not be able to rely on the lack of true
consensus if his mistake was due to his own fault. The other party is then
entitled to rely on the doctrine of quasi-mutual assent which renders the
contract binding and enforceable despite the dissensus.
 The fault principle similarly applies to the second party who seeks to hold
the mistaken one to the contract. He must be blameless. If he is also to
blame then the first party is not bound.

33
  One such reason exists when, although the other party did not know of the
mistake, he ought, as a reasonable man, to have known of it. Only a person
in the position of a reasonable man can rely on the doctrine of quasi-mutual
assent, and a person who has not acquired the knowledge a reasonable man
would have acquired is not in that position.
 H was clearly careless in not reading his typist’s product properly before
assenting to the contract. For that reason his error does not avail him,
unless defendant was also at fault in that he ought to have known ‘1993’
was a typing error – a reasonable person would realise that it made no
sense at all. Therefore defendant could not rely on doctrine of quasi-mutual
assent.
 The agreement between the parties is null and void.

Dobbs v Verran 1923 EDL 177

 Appellant, a doctor, has been conveyed at his request in respondent’s
(manager of a firm) motor car, a private one, but nothing had been said
about payment therefore
 Five months after, appellant sued respondent for medical fees. Respondent
admitted owing the amount, but counter-claimed for a fee for transporting
appellant in his car
 Respondent states that he agreed to convey appellant at his verbal request,
and appellant pleads that he was invited to travel purely as a guest, and
that he is not liable for such a charge for transportation fee.
 In the court a quo, the onus of proving the agreement relied upon by the
defendant (respondent in this case) did not rest upon the plaintiff
(appellant in this case), but upon himself
 Defendant (Verran) relies only on an express verbal contract, and admits
that nothing was ever said about payment for the transportation
 Even if respondent had been under the honest impression that he was to be
paid for his services, if appellant honestly believed that he was travelling
as a guest, and had good grounds for believing so, no charge could be
made against him. This is so as the parties were never ad idem, the one
party understanding one thing and the other, on reasonable grounds,
understanding another.
 Appeal allowed.

Maritz v Pratley (1894) 11 SC 345

 Certain goods were sold by an auctioneer under certain conditions of sale
 Two lots were placed one on top of the other, each lot being numbered and
catalogued. These were a mirror and a mantelpiece
 Lower lot, mantelpiece, was put up and a purchaser, respondent, bid for it, and
was bought by him. On the auctioneer putting up the upper lot, the mirror, the
respondent said he had bought it, thinking the two lots were one. Thus he
refused to take the lower lot without the upper

34
  If the alleged purchaser wants to buy something else than that which the
alleged seller wants to sell, there is no sale
 There must be clear and definite proof of a mistake, and in this case there was
a bona fide mistake
 There had been no sale, the parties never having been ad idem as to the thing
purchased
 Policy shift:
- There is a greater onus on banks, insurance Co’s etc regarding explaining
contracts
- Watering down of the caveat subscriptor rule?

Cape Group Construction v Government of the United Kingdom 2003 (5) SA 180
(SCA)
 Appellant – Cape Group Construction
 Respondent – Govt of UK
 Whether appellant successful in its attempt to introduce its standard terms into a
contract concluded with respondent
 Roof of house developed a leak – appellant called in, and they telefaxed a
quotation to Mrs Woolley (W from now on) working for the UK govt
 Fax was sent claiming at the bottom of the first page that one must ‘see terms and
conditions overleaf’. However, only that one page was sent; there was no
‘overleaf’. W didn’t notice the concluding words, and as the repair was urgent,
she accepted the quotation telephonically. Thus, the contract was concluded at
this point
 Few days later the original quotation, which did contain certain ‘standard terms
and conditions’ overleaf, was posted. In this, clause 8 excludes liability for loss-
damage caused
 W was on leave and didn’t see the original posted quotation until after the roof of
the house had caught fire as a consequence of the negligence of one of appellant’s
workmen
 Thus, defendant in court a quo, this being UK govt accepted onus of proving the
terms of the contract on which it relied, that is that the appellants standard terms
didn’t form part of it.
 The question: whether on a proper construction of the fax it purported to
incorporate appellant’s standard terms and conditions…
 ‘See terms and conditions overleaf’ doesn’t convey that there are standard terms,
which would be available for inspection if the addressee wished to see them. The
natural meaning is that if no additional terms or conditions are transmitted, there
are none applicable to this particular contract
 “It need hardly be stated that the rule can have no application if, on a proper
construction of the agreement, the terms which it is suggested bind the signatory
have not been incorporated therein’.
 For purposes of the present argument (a construction) – W is to be treated as if
she had read the words at the foot of the fax. The test is objective, and
accordingly, applying the primary rules of construction, the respondent has

35
 established that the non-attendant terms and conditions dint form part of the
contract
 Appellant concedes that as W didn’t read the section at the foot of the fax there
could be no actual consensus to include it; actual in the sense of a meeting of
minds on terms the content of which both parties were aware
 W was entitled to assume the contractual terms were set out in the body of the
quotation above the signature. To make reference to further terms whilst at the
same time not transmitting them is to set a trap, whether consciously or
unconsciously
 Appeal is dismissed

B) MISREPRESENTATION:

 The effect of a mistake means that no contract exists. So if for example there is a
clause in the contract that says that “no claim for misrepresentation will invalidate
this contract,” if there’s a mistake then obviously this clause has no effect.

 Issues regarding the quality or attributes of a thing are NOT dealt with in mistake, but
misrepresentation

1) The Schematic Position

“It is notorious that statements made by parties when negotiating a contract may
conceivably take the status of either (i) mere puffery or commendation, or (ii) of
representations, or (iii) of undertakings, commonly referred to as warranties”
- Petit v Abramason 1946 NPD at 679

- PUFF: general / broad statement of praise or commendation BUT that is

not supposed to be taken literally – sales talk: not usually of legal
significance

- TERM: something which is incorporated into the contract as agreed upon

at the time of contracting
 If someone fails to comply with a term there is breach of contract
and the defaulting party is liable

- REPRESENTATION: a statement made by one party to another party

before or during the contracting regarding the quality / attributes of the
subject matter of the contract
 Goes beyond mere puffery as it actually induces the contracting
 Is NOT a term

Definition:

36
A representation, whether by statement, conduct or silence, which is false, either
innocently, negligently or fraudulently and which induces a party to contract, whether at
all, or on particular terms.

 FRAUDULENT MISREP:

- There are certain elements that must be present:

1) False representation was made

- Generally speaking, should be a statement of fact eg. “it’s a 2002 model”
when it’s 1999
- Dishonestly held opinion Feinstein v Niggli
- How does it occur?
- Words (written / oral) Scheepers v Handley; Bill Harvey’s Investment
Trust v Oranjegezicht Citrus Estates
- Conduct (eg Roman with the fishermen)
- Words and conduct Trotman and Another v Edwick

Scheepers v Handley

- Purchaser suing for reduction of land cost because it’s not as big as he was
led to believe
- For appellant: Did the appellant make the representation knowing it was
false? Said the respondent did not discharge the onus (balance of
probabilities)
- For respondent: there was a duty on the appellant to exercise care when
making representations
- The sale was a public auction: sale of the farm Lansdowne (formerly
Klipheuwel)
- Said it was 767.9859 morgen as per deed of transfer dated 28th December
1935: “property sold in every respect as it now stands – voetstoots + 229
morgen = 997
- Damages claimed = £3696 (and also the transfer duty and certain survey
expenses)
- Appellant said that these were false representations as the farm was only
766 morgen
- The respondent claimed that if not fraudulently made, representations
were negligent
- The reps had been made verbally
- The appellant claimed that the respondent had known the rep was false
- Trial court awarded £2310 damages
- The deficiency of the property was only discovered in 1958 when trying to
sub-divide

- Facts not disputed: there is substantially less than 997 morgen

37
 - The trial judge was impressed by Handley but not Scheepers: said he was
a “very bad witness”
- Court held that the representation was NOT FRAUDULENT (and
therefore not negligent)

- Cross-appeal: the appellant claimed £3696 in respect of shortfall in area

- The judge a quo held that the shortfall was in respect of grazing veld as
the appellant had inspected the homestead and buildings before the
auction, so he awarded £2310
- Now the question is whether this sum was in fact inadequate
- In the trial court, no evidence was led to establish the true value of the
land
- The respondent had said £16 per morgen
- The farm was worth quite a bit, nice house and windmills etc
- In Trotman: the measure of damages = the difference between the price
paid and the fair value at the time of purchase of the land actually
delivered
- In this case the respondent led no evidence as to establishing the value of
the missing morgen
- Even if Trotman’s could be applied, the respondent had still not given
evidence necessary
- The court needs to consider the nature of the land, ie what it’s used for
(grazing? Cultivation?)
- Different land use = different value (Pothier; On Sale)
- How much money has the appellant been deprived of?
- Judge couldn’t accept the respondent’s claim of £16 per morgen, because
improvements were made to the farm (initially increased from £15) thus
the court held the shortfall was veld and not the land improved, so the
damages were WAY inflated
- Since the homestead etc. were worth £7000, minus this from the price paid
of £16 010 and it works out at less than £10 per morgen
- So the trial judge was correct and the appellant can’t claim more damages
(£16)
- Cross-appeal fails

Trotman and Another v Edwick

- Contract induced by fraudulent misrep

- Claim for damages: difference between the price paid and fair valuation of
the property
- Part of the property purchased belonged to the municipality
- A path, which was actually on municipal ground, was on the ground the
defendants were selling
- The pleadings stated that the defendants were fully aware of this, but sold
the property nonetheless at good profit

38
 - Had the plaintiff known, he would not have bought as it would have meant
he’d have to spend lots on alternative access to the flats
- There was reliance on the “no warranty” clause = standard in Cape sales
- Mr Kellaway contended that the plaintiff bought the place because his
wife told him to and his daughter was sick so the sale was induced by
factors other than the representation…court REJECTED this claim
- Damages = difference between price paid and the fair value at the time of
purchase

- The plaintiff had already made plans to improve the property, and had
tried buying the path from the municipality but they wouldn’t sell
- However, the property of the municipality NEVER belonged to the
plaintiff: he never benefited from it nor therefore suffered its loss, so the
value of it is irrelevant in calculating damages so court said:
 Value of the property = £8930 but £11 212 was paid, so the loss
suffered is the difference

- In Caxton Printing Works v TVL Advertising Contractors: the judge held

that the damages of fraudulent misrepresentation are dealt with in delict
(tort)
- Some instances may arise where there are other factors that influence the
damages amount
- Plaintiffs will NEED to prove there’s a causal link between the fraudulent
misrep and the patrimonial loss

- APPEAL DISMISSED with costs.

Feinstein v Niggli and Another 1981 (2)

- Fraudulent misrep
- The representation MUST relate to a matter of present or past fact, thus
the question arises as to whether claims made about the future earnings of
the company constitute representations
- Court held a person’s statement of opinion or forecast of future success etc
must = rep
- The appellant contended that the misrepresentations had not been proved;
that the respondent with full knowledge of the fraud had abided by the
contract; that the respondents couldn’t comply with the rule restitution in
integrum

- For appellant (plaintiff): they need to prove that the appellant made
representations of fact that were false but relied upon by the respondents
in concluding the contract

39
  Appellant made claim, but was not shake on this projection under
cross-exam
 Unfair to say it was fraudulent (perhaps just highly enthusiastic)
 The purpose of restitution is to restore the parties to the same
position they were in before the contract was concluded
 The right of the innocent party to rescind the contract is lost when
restitution in integrum is not possible (same place as before rule)
 Appellant held this was impossible so they can’t claim restitution
 What the defendants tendered back to the plaintiff in the plea and
claim-in-reconvention was substantially different from what they
had received from him (much depreciated loans and shares)
 Party also can’t seek rescission if he has elected to abide by the
contract
 Onus on plaintiff to prove that an act proved affirmation of the
contract, then onus on defendants to prove misrepresentation
 Thus even if the defendants proved fraud, they still can’t seek
rescission because they elected to abide by the contract

- For the respondents (defendants): claimed misrep re. the profitability of

the business
 The seller could not genuinely have believed the projection of
profits: that should the business maintain its current turnover, the
defendants would be able to pay back the quarterly instalments out
of the profits
 This was opinion dishonestly held
 Was there election to abide by the contract?
 He loses his right to repudiate if with knowledge of the fraud he
does an act that is seen as affirmation of the contract or fails to
repudiate in a reasonable time
 On the evidence there is NO proof that there was election to abide
by the contract
 In restitution, the party alleging fraudulent misrep has to return
what he got out of the contract so both parties are in their original
position. The plaintiff is claiming that since the loans and shares
had depreciated, there can be no restitution in integrum because he
would be getting back less than he previously owned. Now the
respondents says that there CAN be restitution because the
depreciation was NOT due to any fault on their part

- The parties concluded a written contract transferring ownership of loans

(R12 000) and shares in September 1975 (The Copper Kettle – R27 000)
- Purchase price payable in instalments: first one R10 000 and the next,
quarterly instalments of R3000, R1500 of the first one paid in January
1976
- In February, the defendants repudiated
- Claim that there had been fraudulent misrep

40
- Court held that Feinstein’s claim that he had not made any comment about
the business’s profitability at the meeting is highly unlikely: obviously
Mrs Niggli would have wanted to know this!
- The representation that the business was making substantial profits was
false as was the representation that the instalments could be paid out of the
profits
- Even if it is statement about the future earnings of a business, it still
amounts to a representation of the person’s current state of mind
- What about the contention that Feinstein must reasonably have believed
these projections because he was risking not getting his instalments if they
were false…court found that he was actually just relying on the well-off
Mrs Niggli’s ex-husband and her soon-to-inherit-big partner Mr Dunky.

- HOWEVER, Feinstein raised special defences:

- Alleged affirmation of the contract

 Did the respondents abide by the contract, therefore losing their
right to rescission?
 Plaintiffs said yes because they had paid the R1500 of the initial
instalment and had already tried to get Buchinsky to try sell the
business in January
 Had the failed to discharge the onus?
 Onus = (i) the duty on a litigant to satisfy the court (overall onus)
or (ii) the duty on a litigant to combat a prima facie claim made by
his opponent
 In this case it is NOT the overall onus referred to, but just that to
rebut the evidence (ii)
 A waiver only requires the party to have knowledge of the right
 Does an election require knowledge of the fact and the right on the
part of the representee? YES. Because one can only elect between
rights if one knows the nature of both and what they are.
 The mere suspicions of the defendants about the reliability of
Feinstein’s claims (arose in January after even the Nov/Dec busy
period had not improved profits) do not mean that they had full
knowledge of the fraud. They only had this in February
 The defence not established
- Restitutio in integrum
 Feinstein alleged they didn’t comply with this (see above for
reasons)
 The depreciation was not the respondents’ fault
 Defence also failed

- Cross appeal
 Cross appeal in respect of interest in tempore morae on the amount
of R11 500 should be awarded to the respondents

41
 - Order:
 Appeal dismissed
 Cross-appeal succeeds: payment of interest on R10 500 and the
remaining R1000 to the respondents

Bill Harvey’s Investment Trust (Pty) Ltd v Oranjegezicht Citrus Estates 1957

 MALAN JA
- Fraudulent misrep as to the number of trees on a farm and how big it was
- The plaintiff purchased from the respondent a piece of land that he said
had 5750 trees and was 35 morgen
- It was actually only 25 morgen with only 4892 trees
- In the trial court, the plaintiff was awarded £4724 in damages so the
defendant appealed, admitting all the allegations (said that he may not
have been cautious enough in his assessment of the value of the land)
except that he contended that
 There was a causal connection between the reps and the damages
 That the damages amounted to the difference between the purchase
price and the fair market value at the date of sale
 That any damages were sustained

- For the appellant (defendant = Harveys)

 Fraudulent misrep recoverable through damages
 Like in Trotman, the damages = the difference between the market
value and the price paid
 BUT this is not applicable in the present case as there has been no
question of consequential loss in this case (eg loss of profit)
 The only issue is how much the plaintiff paid in excess by being
induced to buy the property short of 10 morgen and the trees
 So court must decide value of 10 morgen and trees
 The respondent was even allowed 47 years to pay, which would
obviously induce him to pay more than in a cash sale

- For the respondent (plaintiff = Oranjegezicht)

 The damages like in Trotman = the difference between the market
value and price paid
 Measure of damages is not the amount to make good the misrep,
with the result that if the purchase price is less than the true value,
there will be no damages as a result of misrep

- Farm purchased for £55 500

- Had the defendants known of the less land and trees, they would not have
bought the farm at that price
- The farm was evaluated by breaking it into parts of different value (due to
cultivation, wind breaks and age of the trees!!

42
 - The cement furrows were calculated at £1400, but none of the other
improvements were considered
- It was concluded that an irrigable morgen = £540 (but this was actually
pointless)
- The judge a quo calculated damages as £4724
- Action for damages in fraudulent misrep is the actual patrimonial loss
suffered by the purchaser as a result
- But the question then arises as to how much more had the plaintiff been
induced to pay as a result of the misrep?
- Need to ascertain whether the misrep affected the property as a whole or
only parts of it
- The plaintiff relied very heavily on Trotman and believed he only had to
prove the market value of the property, but in Trotman the representation
affected the property as a whole and he could not be placed in a position
he was in before the purchase so there was a causal connection between
the misrep and the damages

- But unlike Trotman, this case dealt with a portion of the property, not it as
a whole
- ALSO there was a causal connection between the misrep and damages in
Trotman, while in this case the plaintiff is trying to claim £11 405
damages for the difference between market and purchase price as well as
£1491 for the missing trees, but this isn’t possible as there is no causal
connection between the damages and the misrep

- Should he be awarded for the missing 10 morgen? (£1400) - £140 per

morgen to include the improvements to be made
- Land that is cultivated worth more than that which is bush
- It must be assumed, since 25 morgen were planted, that the remaining 10
had not been cultivated and improved (with windbreaks etc.)
- The trial judge erred in his finding of damages in 4 respects (including
mature trees in respect of which there was no misrep; mis-valuing the 2
and 3 yr old trees; basing his valuation on the total of trees not taking
different groups into account; considering the cement furrows)
- The proper method is to take the value of the shortfall of trees,
considering the different groups = £1491
- APPEAL ALLOWED

 HALL AJA
- The claim that the value of the farm has been significantly diminished
because of the misrep is untenable because it ignores the necessity for
causal connection between misrep and damages claimed
- The only way the plaintiff can claim is in respect of the missing trees
- The actual discrepancy of the size of the land did not cause the plaintiff
any loss (there were 10 non-existent morgen, not like 10 ready for being
planted on)

43
 - Hall AJA doesn’t even think that he should get the £1400 for the land,
and that the plaintiffs are entitled to nothing more than the £1491 for
shortfall of trees
- APPEAL ALLOWED

2) Wrongfully made:

- Any misrep that is positively made – wrongfulness assumed

- Problem: non-disclosure: someone doesn’t say something that they should
have said or omit a particular detail that they should have told about
- If there’s a duty to speak
- Full disclosure in certain contracts is essential
 Eg contracts re. insurance – where it is critical to determine the
meaning of all terms (full and frank)
 Must divulge everything
 It is a heavy and onerous duty
 Relationships of trust
 Contracts of agency / mandate: they have certain duties

3) Made fraudulently:

- Derry v Peak – Lord Herschel adopted a test in 1889 for Fraud where the
representation was made KNOWING:
 It was false
 Without any belief in its truth
 Recklessly, careless as to whether it was true or false

4) Inducement:

- Must be able to show a causal link between the person making the misrep
and your being induced into entering the contract
- Misrep must have been MATERIAL
- Misrep may not necessarily be the only inducing factor

5) Must be made by the other party to the contract:

- Not valid if Z made the misrep when X and Y entered into the contract – Z
only liable ito delict)

 REMEDIES:

1) Rescission and Restitution:

- Feinstein v Niggli

44
 - Form of an election (choice) – as the aggrieved person, one can choose to
call the contract off or not
- You are NOT obliged to rescind
- Court doesn’t make the choice (as it does with mistake)
- Here the difference between VOID and VOIDABLE is NB:
 Void: law of mistake; there was never a contract in the first place
(ab initio)
 Voidable: contract that has been induced by misrep. It exists until
such time as you decide to rescind it (it’s voidable if you want it to
be)

- Test for Materiality is NB

 De Vos: if misrep induces the contract, the rep must have been
material to the contract, because if you didn’t know about it, the
contract would have been different or not at all

 Kerr: 1964 Acta Juridica distinguishes

 Dolus dans causum contractui

o Is the only time that you can call off the contract
o If you’d known the truth, you’d NEVER have
entered into the contract in the 1st place

 Dolus incidens in contractum

o If you concede that you would have entered into the
contract on different terms
o STILL a contract (no rescission)
o Only potential claim = damages

- NO definite answer as to who is correct

- Election of whether to rescind or not MUST be made within a reasonable
time
- Once made the choice is binding
- The choice should be expressly made (notify the other party) – if you
don’t, the courts can only look to your conduct as an indication of your
choice (RISKY!)

2) Restitution

- Restitutio in integrum
- To restore parties to their original position (where some performance has
already occurred)
- Only applies when you rescind the contract
- You can elect to rescind

45
 - The point is that there must not be unjustified enrichment (if one party
benefits from the commencement of the performance of the contract and
the other doesn’t)
- There must be reciprocal restitution on both sides
 One tenders performance, the other tenders $
 Courts say that in certain circumstances where you CAN’T return
the property that restitution must still occur:

 Destroyed because of fraud (eg. bad eggs)

 Destroyed by and act of God (eg. hurricane at seas
destroying refrigeration unit)
 Has depreciated due to fair wear and tear
o Can’t always get back exactly what you had given
away
o Can’t expect perfect restitution

3) Damages

- Because fraud is a wrongful act, it is treated (for purpose of claim for

damages) as a delict
- Positive interesse = delictual measure
- Negative interesse = contractual measure (for breach)
- What’s the difference??
 The delictual measure seeks damages to put you in as good a
position $ as you would have been in had the fraud not occurred –
claim patrimonial loss.
 Contractual breach = claim to be put in the position you would
have been in had the contract been concluded

 Trotman v Edwick:
 449C
 “a litigant who sues on contract sues to have his bargain or
its equivalent in $...the litigant who sues in delict sues to
recover the loss which he has sustained because of
wrongful conduct of another.”

 Ranger v Wykerd:
 Removes ALL confusion as to calculation of damages
 Bring the best evidence you can about the damages you
have suffered

 NEGLIGENT MISREP

46
 - Elements:
 A false representation
 Wrongfully made
 Made negligently (Kruger v Coetzee test)
 Would a reasonable person have foreseen the problem?
 Would they have taken reasonable steps to prevent such
harm

 Inducement
 By the party to the contract

 REMEDIES

- Exactly the same as those for fraudulent misrep

- Rescission and restitution
- Damages
 Romans: did not allow claims 4 damages re. negligence ONLY for
fraud
 This was negated in Beyers v Frost

 INNOCENT MISREP

- No FAULT
- The only remedy is rescission and restitution
- NO damages.

4) Both rescission and damages

47
Ranger v Wykerd & Another 1977

 Fraudulent misrep: calculation of damages

 Plaintiff purchased a home for R22 000
 He believed there to be a swimming pool “structurally sound and in good condition”
 Plaintiff had claimed that had he known the true position concerning the pool he
would not have paid more than R20 750 for the property
 In April 1971 the pool was found to be leaking
 There had been an oral representation as to the state of the pool
 The court a quo had absolved both respondents from the instance on the basis that the
appellant had failed to prove the market value of the property and thus damages (the
difference between market value and purchasing price) could not be determined.

 Held:
- Claim founded on delict
- The agreed price of R22 000 was its market value
- The reasonable cost of repairs was R1000 and this should be awarded as
damages for patrimonial loss

 For the appellant:

- The damages = the difference between what the appellant paid and what
he WOULD have paid but for the fraud
- A quo was unduly strict ito the probability that the price would have been
more favourable to the appellant in the absence of fraud
- Formalistic approach to calculating damages should be avoided as it
should be done on the facts specific to a case
- The fair market value of the property should be established as being
R22,000 less the cost of repair to the pool

 For the respondent:

- The representation must be shown that the respondent intended it to be
acted upon in that false sense for it to be fraud
- The representee has no claim for damages if he chooses to retain the
purchased thing and he did not pay more for it than it was worth; ie he
must prove that he would not have paid more than the actual value but for
the representation
- There is no presumption or rule that the purchase price approximates the
market value (as relied upon by appellant)

 Jansen JA:
- There was damage to the pool
- Hartogh had been employed by appellant to fix it for R1000
- He testified that he had in fact done temporary repairs to the pool on the
respondent’s instruction, thus they obviously knew the pool was defective
- It was established that the 1st respondent made no representation regarding
the pool, only the 2nd respondent did

48
 - Appellant was told the pool would be in “100% working condition when
he took occupation”
- The appellant relied on the claim that but for the fraudulent misrep, he
would not have been prepared to pay more than R20 750 for the property
(the damages of R1250 being the difference between the price paid and the
price that would have been paid)
- Claims against the 1st respondent for fraudulent concealment and 2nd for
fraudulent misrep
- As to the determination of the current market value of the property, the
respondent contended it was more than R22 000 (their initial asking price
was R26 500 but they accepted R21 000 because they had to move to JHB
and needed to sell asap) and the appellant said that it was less: court a quo
found that the agreed upon price of R22 000 was evidence of its market
value (agreed by Jansen)

- respondent however also held that the appellant cannot claim to be placed
in the same position he would have been in but for the fraud ; he is
claiming compensatory damages based on deducing the market value by
deducting the cost of repair from the R22 000 paid
- but this raises questions as to the difference between a claim for contract
and a claim in delict:
 “A litigant who claims on contract sues to have his bargain or its
equivalent in money or in kind. The litigant who sues on delict
sues to recover the loss which he has sustained because of the
wrongful conduct of another.”

- Damnum is determined by the difference between the price paid and the
price that but for the fraudulent misrep would have been offered by the
purchaser and accepted by the seller (like in Trotman v Edwick)
- But if it is the price paid minus the price offered but for the misrep, this
isn’t like Trotman
- In this case, damages may be recovered by making good the
representation, which = at least R1000 (in effect applied a contractual
measure)

- Order:
 1st respondent: absolution
 2nd respondent: damages at least R1000

 Trollip JA:
- The second respondent (wife) owned half the property (married out of
community)
- Since the 1st respondent was not party to the contract, he could ONLY
claim in delict

49
 - Quantification of damages: swings and roundabouts principle – is loss
on the swing (the cost of repair) compensable by his gain on the
roundabouts (the gain accruing to him from the whole contract)
- At 1st blush it seems obvious that the cost to the applicant of fixing the
pool = patrimonial loss suffered
- In this case the fraud must not be considered in isolation, but in the
context of the whole transaction such that whatever the appellant lost on
the swings, he gained on the roundabouts (the excess in value of the
property over what he paid for it)
 Since there was no proof that such loss existed, the appellant failed
to prove that he had suffered any patrimonial loss
 BUT this cant be applied as the pool was such a prominent part of
the purchase that is must be considered as a distinctive feature and
having special significance to the appellant

- It can be inferred that the agreed price of R22 000 was its actual market
value
- Thus the actual value less the damaged pool is less than R22 000 and the
shortfall can be held to be R1000
- Was the damage contractual
 Trollip says no: just because the damages make good the
representation it doesn’t make it contractual

- Held that the essence of the appellants claim for damages was the cost of
repairing the swimming pool (the amount by which the plaintiff was out
of pocket because of the respondent’s fraud
- Appeal should succeed.
- BOTH respondents were fraudulent

Bayer South Africa Pty (Ltd) v Frost 1991 (4)

 Negligent misrep causing pure economic loss

 Delictual claim that negligent misstatement induced Frost to enter into a contract
 To avert danger of limitless liability and to keep the cause of action within reasonable
bounds, the court has a duty to
- Decide whether on the facts the defendant had a legal duty not to make the
misstatement and to take reasonable care to assure the correctness of the
statement; and
- Give proper attention to the nature of the misstatement and interpretation
thereof

 A delictual claim for damages is available to a plaintiff who can establish that
- The defendant made a misstatement
- In making it he acted negligently and unlawfully
- The misstatement caused the plaintiff to suffer loss

50
 - The damages claimed are compensation for that loss

 Corbett JA
- Frost was the lessee of 3 farms
- Jasonskloof was one of them
- Had vineyards and ‘other crops’ (wheat, onions etc)
- La Grange managed the farm
- He attended a farmer’s meeting to find out about Sting, a product for
spraying weeds
- He ended up using Sting which resulted in damage of R55 000
- The respondent claimed negligent misstatement that induced the contract
that had been concluded in terms of which:
 Appellant sold him the herbicide
 Appellant made arrangements to order and apply herbicide
 Appellant undertook to take control and supervise so that the Sting
was mixed well and didn’t damage the other crops in its
application
 Respondent accepted the costs of purchasing Sting (account
debited)
- Du Toit on behalf of the appellant had made representations by:
 Saying that Sting was best applied by helicopter
 That there was a 3-5m cut-off line that prevented other crops being
damaged
 Saying the appellant would arrange everything
 Failing to indicate risk of damage to adjacent crops that could arise
by its being sprayed by helicopter

- Held that these representations were unlawful and negligent

- The appellant pleaded total denial, or in the alternative, that they had NO
liability to compensate for the loss

- Delictual action based on negligent misstatement (there is nothing in our

law that stipulates the principles according to which an action falls under
contract

- Based on 5 questions:
- Whether the appellant’s reps made the statements attributed to them?
 Du Toit spoke about the effectiveness of Sting
 Demonstrated its application on photographic slides and how it
would not damage other crops because of the cut-off line
 Said the appellants had done tests to see how accurately it could be
sprayed
 All the farmer had to do was provide their workers with flags to act
as guidelines for the helicopter
 It was a fine, still day when they sprayed

51
  Appellants had said they would “alles reel” and that there was
nothing to worry about
 A quo found that there were representations made by appellants
 They ostensibly had the know-how and experience to do the job

- Are the statements materially false?

 YES. There was evidence to show that they were false and this can
be deduced from
 Actual damage
o Yellow wheat
o Deformed onions

 Evidence that the pilot performed satisfactorily

o He appeared to be doing his job well

 Evidence of ‘drift’
o There is always slight air movement no matter how
still the day

 Concessions made by Findlay (herbicide expert)

o Drift could have been the reason for the damage
o He only made a calculated guess as to the % of the
farm that ought not to be sprayed by helicopter

- Was there a duty on the appellants to ensure that the statements were
correct (iro unlawfulness)
 The material representation had induced the respondent to contract
 It must have been obvious to the appellant that the respondent was
placing great reliance on what he told him
 The appellant failed to take reasonable steps to ensure the accuracy
of the statements would = being unlawful

- Did they fail to carry out their legal duty? (negligence and causation)

 Negligence:
 They claimed that they had done tests to see if the herbicide
could be accurately applied but this was untrue
 Negligence!

 Causation:
 Yes obviously
 Had the respondent known his crops would be damaged, he
would never have entered into the contract in the 1st place

- If they did negligently fail in carrying out the duty, does this failure =
loss?

52
  Yes (see above) and the failure = loss

 Kumleben JA
- Agrees the appeal should be dismissed but NOT because of negligent
misstatement
- Held that De Wet and Du Toit had agreed to take full supervision of
operations so that there was nothing sprayed outside of 3-5m of the cut-off
- Obviously they would never have tried doing it in windy conditions
- Thus it appears to be shown that in favourable weather, and correct
supervision, the spray cannot be contained (need to look elsewhere than
negligent misrep to claim damages) could be due to extraneous factors:
 Bad weather
 Poor piloting
 Incorrect nozzle adjustment

- So the success of application depends on the knowledge and judgment of

the supervisors
- There was not even any direct evidence to prove that Sting had in fact the
propensity to ‘drift’
 The damage can’t be due to the properties of the product, as drift
could have been caused by any of the above extraneous factors
 Appeared that the pilot was efficient
 Myburgh testified as to the possibility that there is always air
movement and that the drift could have been caused by this – this
evidence should NOT be relied upon
 Findlay had not carried out sufficient investigation to comment
accurately on the suitability of applying Sting on Jasonskloof – he
had not really applied his mind as t the parts of the farm that
shouldn’t be sprayed – so his evidence doesn’t prove false
representation
 (the damage to the cash crops was very erratic and thus perhaps not
just due to drift but one of the extraneous factors mentioned)

- Unable to conclude that the factual basis has been laid for false
representation
- BREACH OF CONTRACT?
- Le Grange had entered into an oral contract in which appellant undertook
to buy sting, the appellant would apply the it to the vineyard and exercise
the necessary supervision
- Thus a warranty was relied upon that:
 The appellant would supervise and control preventing damage
 This duty was agreed tacitly, if not expressly
 The appellant had said he ‘would do anything’
 “ek sal alles reel”
 The appellant warranted that Sting was a herbicide suited for aerial
distribution by helicopter

53
  Was proven

- In sum, the damage could not have been the result of:
 Sting being unsuitable for aerial spraying
 Pilot error
 Badly adjusted nozzles
 Unsuitability of the farm or portions of it for being sprayed aerially
 It was not the responsibility of the respondent to prove which one
caused the damage
 Breach of contact

 Hefer JA:
- Agrees with Kumleben
- The cumulative effect of the representations was that the Sting could be
applied to a vineyard by means of helicopter within the cut-off line
- The respondent needed to prove that it was physically impossible to
contain the spray within the confined area; two ways to prove this:
 Expert evidence that it can’t be controlled
 Lay foundation of fact to give sufficient evidence that the
representations were false

- Serious questions about the way in which the pilot performed his duties
- There’s also always some movement in the atmosphere
- The evidence was not enough to prove that the representations were false

C) DURESS:

For the most part, have followed RL, although adopted the English term
 Physical force:
- vis absoluta (someone ties you to a chair and forces you to contract)
- no consent obviously, therefore no contract
- void ab initio

 Threats:
- vis compulsive
- a compelled contract of some kind
- threat of harm designed to put you in a situation of stress which induces you to
enter the contract
- thus there is consent (in fact, one wld think about things even more carefully). Is
a choice scenario, so you choose to concede
- BUT it is wrongfully obtained
- voidable

54
What requirements need to be proved for duress?
 Set of elements never really been set up throughout RL and RDL
 Wessels in 1920s and 1930s was the 1st to really establish the requirements of duress
– 5 elements. These still constitute a test for duress
 Broodryk v Smuts:

1. Actual / reasonable fear of violence

a. Actual violence specifically - technically shouldn’t be on the list as it
constitutes physical violence and results in the contract being void ab
initio, not voidable
b. reasonable fear of violence is a threat
c. Must consider who is administering the threat, and who the threat is
against (position, age etc)

2. Fear caused by threat of some considerable evil to the party / family

a. why should the threat only be towards oneself or family?
b. What about girl/boyfriend / just a close friend
c. Too restricting
d. If tested in the courts, wld be widened. Hasn’t yet been brought up tho
e. Threat to property? If someone says they’ll burn your house
- Have long recognised that it wld suffice in our law (under duress
of goods)
- There is a 6th element to prove tho
- You need to articulate that you put up some kind of protest, ie. that
you fought against concluding the contract
- This is ridiculous & unfair tho, very difficult to prove &
unnecessary
- If someone is threatening you, the last thing you want to do is
antagonise them by objecting
f. Hendriks v Barnetts
i. Protest an additional element = stupid one
ii. The owner of a farm protested so he lost the case
iii. If someone was threatening you, firstly how would you prove it,
and secondly you wouldn’t want to aggravate the person
threatening you.

g. Medscheme v Banjee
i. If someone threatens your bank balance, it doesn’t count

3. Threat of imminent / inevitable evil

a. you can’t just ignore the threat; the match has been hypothetically struck
b. “decision has to be taken in the agony of the moment”

4. Threat is contra bonos mores (unlawful)

a. threat must be unlawful
b. any threat = crime / delict (if it were to be carried out)

55
 c. some are NOT unlawful and can be made legitimately
i. threats to dismiss useless employment
ii. threats to civil procedure for a remedy (if you don’t do X, I’ll sue
you)
iii. threat of criminal prosecution (grey area – moot point, undecided
if unlawful/not)

5. Moral pressure must have caused the damage

a. the difference between making a substantive case
i. but damages is a remedy, how can you use this to prove your case
ii. not really essential
iii. but obviously if damage is suffered you can THEN claim for it

Medscheme Holdings (Pty) Ltd v Bhamjee 2005

 Principle of economic duress not yet accepted in our law?

 No principle why threat of economic ruin should not, in appropriate cases, be
recognised as duress

 Facts:
- He joined a medical practice and later took it over
- His patients were mainly Sasol workers, not affluent (Oilmed = used to be
black workers, now oilmed and sasolmed joined)
- He was twice indebted to Medscheme and agreed to pay back a portion of
the money to them
- Part of the debt was paid back by deducting it from what Medscheme
owed him, the rest paid off in instalments
- Soon after second acknowledgement of debt was signed, Medscheme
decided that they would no longer accept claims made by Bhamjee
- He would be required to recover charges from the members themselves,
most didn’t want to do this so they went to other doctors who could still
claim from the schemes
- Bhamjee’s practice soon collapsed and he sued them

 Judgment: Nugent JA
- In general terms: contract concluded under unconscionable threat =
voidable
- Scheme has the discretion to choose which service providers thay want to
accept claims from
- The avoidance of excessive claims will depend on the integrity of the
service provider
- Discretion also affords considerable bargaining power to the scheme

- ‘managed health care’ = process that the scheme uses to check that service
providers (doctors) are not being fraudulent in their claims: tey make a

56
 comparison of the cost profiles of doctors in similar fields to see if there
are material discrepancies
- Bhamjee’s was:
 A very large number of patients per day
 Frequency of repeat consultations
 Cost-per-patient higher
- 1st acknowledgment of debt accepted and repaid
- 2nd one: told that if Bhamjee consulted an attorney direct payments would
be immediately cancelled
- Mr Moodley (worked for Medscheme) was held not to have the
demeanour of a credible witness in the court a quo and his evidence was
rejected

- Bhamjee signed the 2nd acknowledgment in the belief that if he didn’t his
practice would go under so threatened harm was imminent BUT
- Court a quo erred in 2 regards:
 It held that the situation was not one in which Bhamjee gained
anything from conceding to the threats – False: if he agreed to pay
the money, he could continue his practice
 It held that he was simply claiming what was his in the 1st place –
False: he was not entitled to insist the schemes support his practice
by accepting direct claims, it was in their discretion to do so or not
- English and American law both accept economic pressure as ground for
duress
- No reason why SA law shouldn’t accept it BUT such cases would be rare
because it is not generally unlawful to cause economic harm or ruin to
another
- Hard bargaining is NOT = duress: something else (lacking in the present
case) would be needed
- Bhamjee had no right to demand payment, he could simply make a trade-
off: pay the debt so he could continue his practice

- Investigation: this was lead by Ms Van Zyl because there were suspicions
that he was being fraudulent (this was also submitted by an informant who
later retracted the allegations)
- Found that:
 Medicines more frequently prescribed than usual (Bhamjee said he
got deals, bought generic medicines, was using the estate of
deceased uncle to pay)
 More than 100 patients a day would have to be seen (said he
worked very long hours)
 He had no patient files

- Just too many discrepancies

- Van Zyl said he must pay up the amount that she deemed him to have
overcharged by = R588 000

57
 - Bhamjee was adamant that the result of the meeting was that the schemes
would refuse to continue accepting his claims if he didn’t pay that amount
- The threat in the meeting was implicit, so he signed the acknowledgment
of debt
- It is quite apparent that Van Zyl believed that he had been cheating the
schemes

 Order:
- What resulted from this was a settlement in the parties respective
contentions and NOT duress
- Medscheme was never obliged to pay Bhamjee – they had discretion to do
so or not
- APPEAL SUCCEEDS with costs.

Broodryk v Smuts

Exception to the plaintiff’s claim

 Facts:
o The plaintiff had entered into a contract of voluntary enlistment into the
army and had taken the prescribed oath
o Fear that if he didn’t he would be imprisoned or interned for not wanting
to support the government, or that he would be dismissed from his work
o He was a tractor-driver enrolled in the 27th Road Company of the SA
Defence Force
o Action brought against Jan Smuts in his capacity as minister of defence
and Prime Minister
o The plaintiff is opposed to the war policy of the Gov and has a wife and
minor child dependent on him
o Two officials forced him to sign and make “Red-oath”
o He claims to have the contract set aside on the basis of fraud and duress;
consequently if he succeeds in this he will succeed in his second claim =
not to be sent to North Africa

 Judgment:
o In order to have the contract declared void he would need to prove the 5
elements of duress were present
 Actual violence or reasonable fear (yes: threat to his family’s
livelihood – he would be discharged from work and not be able to
get employment elsewhere)
 Fear must be caused by the threat of some considerable evil to the
party or his family (Yes it is)
 It must be the threat of an imminent or inevitable evil (The evil
must be so near that the victim of the threat cannot protect himself
against it – Yes this element is fulfilled)

58
  Threat must be contra bonos mores (yes it is – to threaten to
exercise the power one has because he is unwilling to go to the
army is contra)
 The moral pressure used must have caused damage (Yes – he has
become the subject of obligations that he would not otherwise have
been burdened with)

o A contract entered into under duress or induced by fraudulent misrep is

VOIDABLE
o “the principal who has authorised his agent to negotiate or enter into
contracts on his behalf will not be entitled to hold the other party to the
contract which was obtained by the duress of agent”

o Misrepresentation: 4 points were raied in this regard

 Contended there was no misrep of fact:
 Not good point
 “hy nie sou opgeroep word vir militere diens nie” =
statement of fact: statement of intention of the military

 The misrep was not an inducing factor to contract

 False: it cannot be argued that no reasonable man would
have disregarded the statement…it could easily have
induced the plaintiff

 Argued the reasonable man would be considered by the common

law to have trusted his own judgment (plaintiff should have made
enquiries as to intention of defendent), ie. Would have known that
there was no way he could be compelled into the army like that
 Even if the defendant wants to claim this, this is a matter
for defence and not exception

 Argued that there was no allegation that the plaintiff had been
prejudiced
 There is no express allegation, but he did enter into the
contract to do military service with all its obligations,
therefore he was prejudiced

o Alternative to the exception:

 Portions of the declaration to be struck down
 Rejected

 Order:
o Application to strike out the paragraphs of the declaration dismissed
o Exception dismissed
o (so the plaintiff succeeds)

59
Hendricks v Barnett 1974

 Distinction between cases where threats are to the person and those where the
threats are to goods
 Action for a provisional sentence

 Facts:
o Defendant (63) = owner of a stud farm which he wishes to sell and then
pay the plaintiff a bonus
o The plaintiff is an excellent agricultural expert and a breeder of horses –
he knew all of the ones on the farm individually
o Success of the farm was largely dependent on the plaintiff
o The defendant upon decision to sell the farm (sold for R345 000 excluding
bloodstock), said that the plaintiff could remain there for 3 months after
the sale and he would receive a bonus enough to retire
o Plaintiff called the defendant and said that unless the defendant tell him
the exact amount of his bonus he would leave the farm, just before the
very NB auction of the horses
o He met Mrs Larson and Mr L on the farm with his niece and the plaintiff
where he offered R100, then R4000.
o R10 000 paid in 2 cheques was the decision
o The first cheque was paid, but the defendant stopped payment of the
second claiming he thought R5000 to be reasonable in the circumstances
o He says the plaintiff had him under duress (threat to leave the farm)

 Judgment:
o Plaintiff believed that he would be acting within his rights if he left the
farm
o The counsel for the defendant (Mc Call) said that this was an incorrect
conclusion of law since there was a specific agreement that the plaintiff
remained in the defendant’s employment until the auction and if he left he
would commit breach
o Defendant also alleged that he was entitled to resist paying the cheque on
the ground of duress
o The defendant further claimed that the situation was similar to that of
involuntary payment: where what was withheld was not the delivery of
goods but the delivery of a rights, in the sense of non-performance of a
contractual obligation (where goods are illegally retained and where
payment for them is rendered but you’re actually just paying for
something that is actually yours)

o NB: The distinction between threats to person or goods depends on

Protest or unequivocal statement of objection

60
 o Did the party protest to the payment? In this case it was contended NO:
 Protest is more than just an unexpressed mental reservation
 He contended in his reluctance to up the amount payable that this
was protest
 The court was not convinced it was

o Alternative argument:
 McCall suggested that proving protest is not necessary in a case
where no money had been passed but the defendant was seeking
merely to resist the enforcement of a contract that was entered into
under duress of goods

o Apart from this the court held that

 He certainly had enough money – he got R117 000 for the stock
 Plaintiff had been an excellent worker for 14 years

 Order:
o The provisional sentence must succeed (plaintiff succeeds)

DAMAGES:

 same as all those for misrepresentation

 rescission & restitution and/or damages

 Revised test according to Glover:

- The proposal enquiry
 Was a threat made?
 Was the threat illegit?

- Choice enquiry
 did the threat induce the contract?
 Was the victim justified in consenting? Did he have any reasonable
alternatives to succumbing to the threat?

D) UNDUE INFLUENCE

 Definition: refers to a situation where one person has acquired an influence over
another, which he uses in an improper / illegitimate manner to induce another to
conclude a contract that he otherwise would not have entered into of his own free
will

 Principle was incorporated into SA law in Preller v Jordaan (doctor and the farmer)
- Preller (doctor) convinced Jordaan (his dying patient) to hand over all his
land to him to ‘look after’ with absolutely no payment

61
 - Effectively a donation contract
- Jordaan recovered – sued for rescission of contract, saying Preller abused
doctor/patient relationship. Induced by undue influence
- Went to court on the basis of exception:
 In civil proceedings
 The plaintiff initiates a case with summons and particulars of
claim: this can be defended by issuing a plea; or
 You can take EXCEPTION:
 “I believe your case is bad in law – you have no legal
claim”
 Attacks the legal basis
 Preliminary proceedings used to determine if there is a
legal basis for the claim (application proceedings)
 Preller claimed that SA law didn’t recognise undue
influence

 The case established elements:

1) That the other contractant obtained undue influence over him

2) That this influence weakened his powers of resistance and made his will pliable;
3) That the other contractant used this influence in an unconscionable manner to
persuade him to agree to a transaction which
a. Was to his detriment
b. He would not usually have concluded of his own free will

 Everything concerning the doctrine of undue influence came straight from English
Law
 At the time of Preller (about 1958)
- There was a backlash against any colonial English influence
- Prior to this there had been a BIG influence of English law
- Court recognised Jordaan had a strong moral case
- Undue influence was obviously the best legal remedy but dogmatically
they did NOT want to introduce English law principles
- Problem: moral case, but English remedy
- RDL did not recognise undue influence doctrine
- So they “dressed up” the doctrine as a fact of RDL to find any possible
reference to undue influence to try make it part of the law
- Picked out isolated, rather oblique sentences which cld perhaps mean that
they recognised undue influence, just o it cld be RDL authority
- Found it in a very wide interpretation of the concept of dolus
- Problem: all other writings showed that this was contrived: 98% of
writings said no undue influence, blatant statements stating RD against
undue influence
- Van der Heever was the only one out of the 4 who said NO (purist)

62
 - Decided however, that on the grounds of equity & fairness, the precedent
shld be followed, and disregard the academic debate

- Later cases were more pragmatic: said that there was precedent. AD
recognised it, doesn’t matter how
- Upheld in Patel v Grobbelaar

Preller v Jordaan 1956

 Undue influence
 Held that the grounds for restitution in integrum in RDL were wide enough to
include undue influence: where one party obtains it over another which weakens
their power of resistance and makes his will pliable
 In determining whether a transaction induced by fraud is void or voidable: test =
whether the person seeking to have it set aside entered into the transaction
knowingly, with the intention to bring about the legal consequences which it
entailed, or not.
o If yes, then it is a valid transaction until declared invalid (although it may
be voidable at his instance on the ground that he was induced to enter it in
an unlawful manner
o If no, then the transaction has no legal consequences
 Elderly farmer (old and sick and thought he would never recover, but he did)gave
4 farms to his doctor, who then transferred one farm to his son and 2 to his
daughter
 He now wants to claim the farms back saying that he would never have
transferred ownership had he been healthy and not so mentally and spiritually
exhausted
 Against the doctor he claims:
o An order declaring that the doctor had no authority to transfer the farms to
his son and daughter
o That the doctor should return the farm he kept for himself

 All 4 judges agreed to with Fagan JA in the majority, but Van den Heever JA
gave a dissenting judgment: said there was no basis for undue influence in
RDL

 Judgment:
o Voet: that there is sometimes the opportunity for blackmail in a
relationship such as that of doctor and patient, or situations where the
patient makes grand promises to the doctor in attempt to procure recovery
(restoration of health however, does not depend on the art of the doctor)
o No person should benefit from his improper conduct
o The court tried to find instances where undue influence could be used ito
RDL

63
 o “from the RDL authorities it appears that the grounds for restitution in
integrum in RDL are wide enough to include the instance where one party
obtains an influence over another whose resistance is weakened and whose
will is pliable, and where this influence is used in a manner to the
detriment of the party and he agrees to something that he would not have
agreed to had he had normal free will.
o He is at pains to point out that the though words like “improper influence”
are used, that it does NOT mean he is basing the cause of action on
English law
o He’s just saying that such legal principles must be elastic

 Order:
o The appeal of the first applicant (Dr Preller) fails with costs
o Appeal of 2nd and 3rd applicants succeeds

- Patel v Grobbelaar:
 Now because of Preller they just used undue influence
 Not get caught up in purist / pollutionist debate
 SALJ 1974 (309)
 Undue influence
 That the party alleging undue influence and consequently asks for the contract to be
set aside, must prove
- The other party had influence over him
- This influence weakened his powers of resistance and made his will
pliable
- That the other party exercised this influence in an unscrupulous manner in
order to induce him to consent to a transaction that was
 To his detriment
 That he would not, with normal free will, have concluded

 Patel had exercised undue influence over Grobbelaar

 The latter had believed Patel to have supernatural powers (Grobbelaar was a simple
man, not very well educated and not that bright)
 Grobbelaar took out a second verband (mortgage?) on the property - section 99 of the
farm Waterval Nr. 237, Pretoria
 A sum of R40 000 in respect of money lent to Patel
 The requirements for undue influence in light of the judgment in Preller v Jordaan
were met, as Grobbelaar would never have done that had he had free will
 Money was never owed to Patel in the first place
 Also, Patel never actually appeared as a witness
 Appeal dismissed

REMEDIES:

64
  Rescission and restitution
 Damages? Can be, but it has not, as of yet, been claimed for undue influence in SA
law

LEGALITY:

 Contravention of a rule / principle of law which renders the contract void and
unenforceable (to be valid & binding, contract must be legal)
 Not a frequent issue
 Sometime one term or the whole contract
 There was never a contract or there’s an issue of unenforceability of that term (can be
struck from the contract)

 ILLEGALITY
- Statutory:
 Christie: almost impossible task to draw up a list of things that
constitute statutory illegality
 Christie has a list of statutes that govern illegality
 Basic rule – sometimes have been times when Parliament have
struck down contracts acc to statutes. Some statutes may not affect
only contract, but also have criminal sanctions

 Issues:
 Selling narcotics – contract can’t be enforced in court, is
illegal [breach of statute]
 s 60 of Medical Health Act 31 of 2003 – prohibits the sale
of human tissue. Allowed to donate tho

The focus is more on common law illegality:

- Under the common law:

 Contracts injurius to date – have a negative effect on the state
 Eg. bribery – to destroy a DUI docket for payment: not
enforceable
 Contracts injurius to the administration of justice
 Terms ousting the jurisdiction of the courts (if anything in a
contract goes wrong the court can’t adjudicate on it –
popular in Apartheid)
 Contracts encouraging delicts / crimes (eg contract to kill)
 Contracts injurius to the institution of marriage (eg polygymous)
 Wills – injurius to contracts of succession. cant be compelled in
any way when drawing up a will
 Wagering and gambling

- How do courts generally deal with the principle of legality?

65
  NB concept – public policy
 Basic rule of CL – any agreement or clause considered illegal if it
is contrary to public policy or good morals (contra bonos mores)

- NB Eastwood v Shepstone
 “now a court has the power to treat as void and to refuse in anyway
to recognise contracts which are against public policy or good
morals. It is not a power to be hastily or rashly exercised; but once
it is clear that any arrangement is against public policy the court
would be wanting in its duty if it hesitated to declare such an
agreement void.”

- What is public policy???

 Modern case that establishes it is Sasfin v Beukes
 A specialist anaesthetist and a financial corporation
 Cession to secure a debt
 Quote “the interests of the community or the public are therefore
of paramount importance in relation to the concept of PP.
agreements which are clerly inimical to the interests of the
community, whether they are contrary to law, or morality, or run
counter to social and economic expedience, will accordingly, on
ground of public policy, not be enforced.”
 Describes public policy as a “vague and nebulous” principle

 History:
- Last 200 – 300 years = philosophical principle
- INDIVIDUALIST / FORMALIST approach has 2 elements
- Provide the boundaries within which ppl interact economically

The freedom of the contract

 Contract law = to govern how people interact economically
 Matter of private law between parties
 Party = best judge of what is in their private best interest
 Contract = an attempt to further personal interests
 You have the liberty to arrange your affairs in the manner that is in your best
interests

The sanctity of the promise (pacta sunt servanda – promises must be honoured)
 Once you have a contract, you must respect the terms of that agreement
 Laisser faire economic approach
 Adam Smith

- As a result, issues of fairness / reasonableness have not really been

considered relevant to terms of the contract (value-free)
- Content of the contract not considered NB

66
- Courts don’t really care about the fairness of the contract to a party (you
can’t sign then suddenly realise that you think the terms are unfair to you)
- Public policy back then – had the freedom to object, but now you must
honour your promise

- Bank of Lisbon – high water mark of individualist / formalist approach

 The exceptio doli generalis = Roman equitable remedy developed
by the praetors
 Softer approach to the individualist: Romans say that contracts are
NB, but if the enforcement of the contract is manifestly unjust, the
court will come to the aid of the injured party
 The question was whether this had been accepted into RDL and
consequently into SA law
 In this case it was held NO: the judge held that it had died in
Roman times: Joubert JA “a superfluous, defunct anachronism”
- Dissenting judgment of Jansen JA NB:
 Whether the exception has any role to play in our modern law is a
matter of debate
 It is seen by many merely as a label for a defence that the plaintiff
has no cause of a action
 It is said that the recognition of the exception doli in this sense wld
be an infraction of the freedom of contract and of the principle that
pacta servanda sunt – that it wld lead to legal uncertainty.
Freedom of contract, the principles of pacta servanda sunt and
certainty are not however absolute values.
 Not only contracts against PP or public interest are subject to
control by the court, but also those offending the boni mores. In
this field reference must be made to the sense of justice of the
community
 In our law, the requisite of good faith has not as yet absorbed the
principles of the exception doli nor has the concept of contra
bonos mores as yet been specifically applied in this field. To deny
the exception right of place wld leave a vacuum
 The exception doli generalis constitutes a substantive defence,
based on the sense of justice of the community. As such it is
closely related to the defences based on public policy (interest) or
bonis mores. To enforce a grossly unreasonable contract may in
appropriate circumstances be considered as against PP or bonis
mores. However, each case must be judged on its own facts in the
light of the sense of justice of the community

- Debate: had the exceptio become part of of RDL and then SAL?
- Bank of Lisbon said it never had, inapplicable
- Legality and public policy are reassessed in the case of Sasfin

67
 - New approach – the world has changed, ppl not on level bargaining terms
anymore. Courts need to deal in a more modern way: level up fairness &
reasonableness with freedom & honour
- The role of the courts in assessing contracts was reassessed: seen like
scales = a balance between the individualist / formalist approach on one
side and fairness on the other

- What has happened since Bank of Lisbon?

 Law sought to protect people as a matter of policy
 Parliament said that courts weren’t doing it so they did

- Statutory developments:
 The National Credit Act 34 of 2005
 Consumer Protection Act? Is being drafted (deals with contractual
fairness)
 Will codify many of the common law principles of the law
of contract

POSITION OF THE COMMON LAW AND THE COURTS

The focus has been on developing the concept of public policy and how it can be used
more effectively to avoid the harsh effects of pacta sunt servanda.

Two situations arise:

1) where a contract or term thereof is contrary to public policy (PP) [subjective]
2) where the term is valid, but in the particular circumstances of the case, the
enforcement of the clause is unreasonable or unfair. [objective]

1) Guidelines (Christie 344 – 345) (tries to balance the approach of the courts)

- Courts favour the freedom of contract. The values of freedom & sanctity
remain very NB
- Counter-vailing aspect that PP requires the courts to be just & fair: takes
into account the necessity to do justice, by ensuring fairness
- Taking the above 2, courts will only interfere with the contract on grounds
of PP sparingly and in very clear cases.
- Courts will, though, exercise their power to interfere if there is ANY
indication that the contract/clause is oppressive, unduly harsh or socially
and economically inexpedient

 Courts always adopt the interpretation that complies with public policy: if the
interpretation of the clause is in dispute.
 An interpretation so that the clause can stand
 Only clauses that cannot comply with PP (if it only has one interpretation) = struck
down.

68
  Impact of the Constitution:

- Indirect NOT direct application

 Barkhuizen (CC) para 23-30
 Majority of CC
 When the Const is relevant to the contract, it is not direct only
indirect
 Contracts are NOT law of general application
 S24 / 9 / 36 therefore cannot apply
 Only valid in terms of indirect analysis

- PP enquiry informed by Constitutional values

 Brisley 34 – 35; Napier (SCA) para 6-16; Barkhuizen (CC) para
28FF.
 Even though it’s hard to give broad, vague values like dignity and
equality, content.

________________________________________________________________
Sasfin v Beukes

 Appellant – ‘Sasfin’, a company carrying on a business as a financier

 Resp – ‘Beukes’, a specialist anaesthetist
 1985 parties entered into a discounting agreement. In terms thereof, Beukes ceded to
the creditors “all claims, rights of actions & receivables which are now/may become
due from any cause of indebtedness as continuing covering security for the due &
proper performance of all obligations which I may have in the past owed/incurred or
may at present or in the future owe/incur”
 A dispute arose btwn the parties
 The contract concluded was as a result of a loan that Beukes had taken from Sasfin.
Beukes intended on setting up his own anaesthetist practice, but lacked the capital to
do so. Furthermore, he lacked sufficient collateral in order to take out a loan from a
bank. Thus he drew up the present agreement with Sasfin, according to which he
promised to pay back the loan through the earnings he made from his business.
 The manner in which the terms were set out in the contract, however, rendered the
contract unenforceable
 A consideration of whether there are provisions in the deed of cession which offend
against public policy, and if so, whether they are severable from the remainder of the
deed of cession
 Our CL doesn’t recognise agreements that are contrary to public policy. This
immediately raises the question what is meant by public policy, and when can it be
said that an agreement is contrary to public policy
 What the requirements of public policy are must needs often be a difficult and
contentious matter
 An act which is contrary to the interests of the community is said to be an act contrary
to public policy (PP). Such acts may also be regarded as contrary to the CL, and in
some cases contrary to the moral sense of the community

69
 Aquilius: a contract against PP as one stipulating performance which is not per se
illegal/immoral but which the courts, on grounds of expedience, will not enforce,
because performance will detrimentally affect the interests of the community
 Agreements which are clearly inimical to the interests of the community whether they
are contrary to law or morality, or run counter to social or economic expedience, will
accordingly, on the grounds of public policy, not be enforced
 In a sense, all illegalities may be said to be immoral and all immorality and illegality
contrary to PP
 It must nevertheless be left to the courts to determine, in any given case (apart from
matters dealt with by statute) whether a contract is contrary to PP
 No court therefore shrink from the duty of declaring a contract contrary to PP when
the occasion so demands. The power to declare contracts contrary to PP shld,
however, be exercised sparingly and only in the clearest of cases, lest uncertainty as
to the validity of contracts result from an arbitrary and indiscriminate use of the
power
 Public policy generally favours the utmost freedom of contract, and requires that
commercial transactions shldnt be unduly trammeled by restrictions on that freedom
 PP shld properly take into account the doing of simple justice btwn man and man
 The contract concluded btwn the parties’ purpose was not merely to provide security
for Beukes indebtedness to Sasfin – it sought to ensure maximum protection of
Sasfin’s rights while at the same time subjecting Beukes to the most stringent burdens
and restrictions
 The terms entitle Sasfin, for as long as it pleases, to collect and keep all Beukes’
income, irrespective of the absence of any principle indebtedness
 As a result Beukes cld effectively be deprived of his income and means of support for
himself and his family. He wld, to that extent, virtually be relegated to the position of
a slave, working for the benefit of Sasfin. This situation cld have, in terms of a certain
clause, continued indefinitely at the pleasure of Sasfin; Beukes was powerless to
bring it to an end
 An agreement having this effect is clearly unconscionable & incompatible with the
public interest & therefore contrary to PP
 It is the tendency of the proposed transaction, not its actually proved result, which
determines whether it is contrary to PP
 If those provisions in the deed of cession which have been found to be contrary to PP
cannot be severed from the remaining provisions, it is common cause that the deed of
cession is invalid & unenforceable
 Sasfin & Beukes cldnt have contemplated severance resulting in an agreement
significantly different from that which they originally contemplated
 Most, if not all, of the clauses which offend against PP are fundamental to the nature
& scope of the security which Sasfin obviously required. They contain provisions
which are material, important and essential to achieve Sasfin’s ends; they go to the
principle purpose of the contract, and aren’t merely subsidiary or collateral thereto
 Accordingly conclude that the offending provisions are not severable
_____________________________________________________________________

70
Napier v Barkhuizen 2006 (SCA)

 Development of general principles of contract in accordance with the Constitution

 Courts are obliged to take Const values into account when developing the law of
contract
 Const prizes dignity and autonomy in concluding contracts (one’s affairs)
 Unequal bargaining power may lead to invalidation of contractual terms due to
infringement of the weaker party’s

 Headnote:
- HC upheld the claim on the basis that the clause was unfair and infringed
on the plaintiff’s right of access to courts
- Court reasoned
 s34 applied horizontally
 time-bar clause to the statutory provision of 3 years not reasonable
and justifiable
 without the clause the plaintiff would have had 3 years to institute
his action
 s34 means that the other party must not obstruct the one’s access to
court

 Facts:
- The respondent (plaintiff – Barkhuizen) had ensured his BMW with the
appellant Napier for R181 000
- He had an accident and wanted to claim
- Napier acted according to a term in the contract that stipulated:
 If we reject liability for any claim under this policy we will be
released from liability unless summons is served…within 90 days
of repudiation”
- They rejected liability: they repudiated the claim on the basis that the car
had been used for business purposes, contrary to the undertaking that it
was only to be used for private purposes
- B only instituted claim more than 2 years later
- B relied on the time bar clause – that this was contrary to PP as it was an
unreasonably short period of time after repudiation; that it was a drastic
provision that infringed his rights to invoke the courts; breach of s34;
deprived the insured of his right to judiciable dispute
- s34 – “everyone has the right to have any dispute that can be resolved by
the application of law decided in a fair public hearing before a court…”
- does apply horizontall (s34)

 Judgment: Cameron JA
- The judge in the court a quo incorrectly held that without the time-bar
limit, B would have had 3 years under statute to institute claim

71
 - Constitutional supervision of the creation and enforcement of
contractual rights:
 Brisley v Droskey
 Courts are obliged to take fundamental Const values (dignity;
equality; freedom) into account when developing common law of
contract
 Courts will invalidate clauses contrary to PP BUT are reluctant to
do this (interfere with the freedom of individual contracting
parties)
 Inequality of bargaining power could be a factor that makes the
situation contrary to PP
 This judge held that the insurer had the right to know within a
reasonable time if someone was going to summon him!!
 ‘Reasonable’ and ‘fair’ depend upon a number of things relating to
the number of claims, resources the company has to investigate,
the amount of premium it exacts etc
 Therefore because there was LITTLE EVIDENCE that made this
clear, the court could not assess if (1) 90 days was in fact
adequate AND (2) whether B had weaker bargaining power
 Courts balance: dignity & freedom v unacceptable excesses of
“freedom of contract”
 Without access to the evidence, the court can’t even rule on the
constitutionality of the case

- What does the right of access to courts protect?

 Usually cases like Moise deal with time-bars placed on existing
statutory provisions ie. That the plaintiff had an existing right in
statute that the time-bar was infringing (a pre-existing right to legal
redress)
 B did not have an existing right to compensation: his agreement
was VOLUNTARY (need to recognise how rights differ ito origin)
 B did NOT have a pre-existing
 Order:
- Plaintiff entered into contract freely
- Appeal SUCCEEDS (insurer wins) with costs
___________________________________________________________________

Barkhuizen v Napier 2007 (CC)

 Facts:
o See above the case in the SCA – facts are the same

 Judgment: Ngobo J

72
o The fundamental question is thus: was the applicant in effect forced to
enter a contract on terms that infringed his fundamental Const rights to
dignity and equality?
o SCA said that pacta sunt servanda = sacred cow that trumps all other
considerations – this court doesn’t agree
o ALL law is (s8) subject to Const control

o Arguments of the parties:

 The appellant claims that his right to seek judicial redress (s34) has
been limited
 The appellant also claims that his s34 right has been violated -
argument therefore relies on s34 as a reflection of PP
 The respondent contended that s34 has no application to const
challenges of contractual terms

o Horizontality?
 If it is found that the contractual clause limits s34, it cannot be
subjected to justification under s36 because it is NOT a law of
general application
 The HC overcame this by applying the common law principle
pacta sunt servanda to the contractual term and saying that
because the term embodied common law principles, it was
therefore a law of general application
 The HC then said that s36 CAN apply to the situation, applied it,
and concluded that the limitation on s34 was not justified
 The clause was ultimately ‘elevated’ to a law
 This did not sufficiently deal with the problem

o Public policy (PP) = values that a society holds most dear

o Nowadays PP must be determined with reference to Const values
o s34 = right of access to courts: everyone has this right (emphasises the
importance of fair resolution of conflict
o thus s34 not only reflects the founding values of society, but also
constitutes PP
o also, when developing the common law (in this case the common law of
contract) courts are required to do so in a manner that promotes the spirit,
purport and objects of the BoR

o NB: Thus the proper approach to this case is to determine IF clause

5.2.5 is inimical to the values that underlie our Const democracy, as given
expression in s34, and thus contrary to PP

o Should the applicant be permitted to rely on PP argument?

 The PP argument was in effect run together with the argument base
on infringement of s34

73
  The applicant alleges the time limitation clause is contrary to PP
because it
 Allows unreasonably short time for summons
 Violates common-law right to approach court for redress
 Time limit does not pursue any legit purpose
 Takes away the right of the claimant to approach the court
for redress if the commons is not issued in 90 days

 As to the final point

 It does not DENY the applicant the ability to seek
redress!!!! It simply puts a time limit on this
 The clauses do limit the right to seek redress (though they
do not eliminate this right)
 But the person to whom the summons will be served also
has the right to know if they are going to be summoned
within a reasonable time! (Can’t wait forever!)

o Court applied the test in Mohlomi – whether a provision affords the

claimant adequate time to seek redress: if this were too short, PP would be
violated
o In Van Wyk v Geldenhuys
 In this case the court held that the time limit does not unfairly
restrict the claimant’s right (it does not deprive him of this right,
merely limits it)

o Determination of fairness??
 Two questions to be asked
 Weighing up of public policy (as informed by the Const)
and the duty to comply with contractual obligations that
have been freely entered into (pacta sunt servanda)
o Look at the objective terms of the contract
o Are they contrary to PP?
o Look at whether a situation of unequal bargaining
power arises (there is no evidence that there was
any in this case)
o 90 days is not manifestly unreasonable (its not like
he was given 24 hrs or anything!)
o Court held that 90 days is NOT unreasonable

 Involves inquiry into WHY the clause wasn’t complied

with
o Tried to argue that the clause was inflexible: not
really – it would not have been enforced if non-
compliance was the fault of the company

74
 o Cannot argue that it is impossible to perform this
term – he was given 90 days – it is possible
o Need to look at common law principles of good
faith

o He waited 2 years before he issued summons

o He had lodged the claim quickly when the accident happened
o There is no reason given why he didn’t comply
o Thus the clause is NOT unjust or unfair to the applicant

 Order:
o Appeal DISMISSED
o NB: it is important to note that in this case (and the one heard before the
SCA) the appellant wasn’t unsuccessful because the court did not think
taking Constitutional Values into account was important enough; the case
failed on FACT: the applicant had not furnished reasons for his non-
compliance with the 90-day time limitation clause and without these the
courts could not rule in his favour.

o Sachs J DISSENTED (Looked at issues of bargaining power, standard

form contracts, actual and implied consensus, significance of the small
print in written contracts.

 Judgment: Moseneke J
o Agrees with Sachs – would UPHOLD the appeal
o He sees Ngcobo’s point, but says he doesn’t agree with the way he frames
the enquiry into whether the term offends PP
o He emphasises that the majority judgment implies the necessity of
regarding the enquiry with reference to the circumstances of the applicant
 Is he poor / illiterate?
 Is he unaware of his rights?
 Did he have access to advice?
 Was he financially etc. impeded?
 He is affluent middle class

o The appropriate test as to whether the term is contrary to PP has

NOTHING to do with the individual circumstances of the applicant
o Proper approach is to look at the time-bar stipulation itself within the
context of the agreement and assess whether it would unreasonably
deprive the claimant right to redress
o A clause may be contrary to PP if it has a tendency to deprive a party of
the right to approach the court, rather than proved results that it does
o Contractual terms should not be tested for their consistency by observing
the particular circumstances of the parties

75
 o To defeat a complaint that a term offends PP by holding that the
complainant has not shown individual unfairness is in effect to extol the
laissez-faire notions of freedom of contract
o Courts need to therefore look at objective factors

o Sachs J looks at the fact that it’s a standard term contract

 He concludes that the time bar unreasonably limits the right of
access to seek redress
 Why?
 Mohlomi (2 part test) – (1) is the time too short (yes): has
to, in that time, give notice and sue. (2) is it flexible? NO

 Is there a legitimate purpose served by this time limit? NO

 Time bar is not reciprocal – there is no time limit on the
insurer’s right of action against the insured

o Respondent relied on good faith and the fact that the law will not demand
the impossible of someone
o The clause on its face, however, is unreasonable and unjust
o Appeal UPHELD (not majority judgment)

___________________________________________________________________

 SEVERABILITY
- Test of notional severance:
- If you get rid of the term that is contrary to PP, what is the effect on the
contract as a whole (Sasfin) – seldom the whole contract

 If without the clause the contract can still exist and make sense,
then it stands
 But if the expunged clause renders the whole contract meaningless,
then it is void.

2) Valid but in particular circumstances etc.

 This was the old province of the exceptio doli generalis

 In Brisley; Afrox – attempts were made to argue that we in SA should recognise a
normative method of good faith in contractual dealing, and where a person attempts
to enforce a contract in bad faith, the contract should not be enforced by the courts
 (because the person who’s trying to enforce it is acting in bad faith)

GOOD FAITH:
 Applies to both situations (1 and 2)

76
  Promotes the importance society places on parties conducting themselves in a decent,
reasonable and fair manner.

 “whilst the principle of good faith is still uncertain in contract it at least requires,
apart from honesty, that a contracting party should show a minimum level of respect
for the interest that the other party seeks to advance by means of the contract. It
follows that the unreasonable and one-sided promotion of one’s own interest at the
expense of another might, in extreme cases, infringe the principle of good faith so as
to outweigh the public interest in the strict enforcement of contracts.”

 Meskin: “it is now accepted that all contracts are bona fidei…this involves good
faith (bona fides) as a criterion in interpreting a contract and in evaluating the
conduct of the parties both in respect of its performance and its antecedent
negotiation. Where a contract is concluded the law expressly invokes the dictates of
good faith, and conduct inconsistent with those dictates may in appropriate
circumstances be considered to be fraud. Good faith, as an objective standard, must
rest largely upon an ethical basis”.

 Hutchinson, “good faith in SA law of Contract” in Brownsward et al Good Faith in

Contract: concept and context (225)

 Held in Brisley / Afrox – NO

- You may not come to court and claim that the contract should not be
enforced because the plaintiff is acting “in bad faith”
- Lack of good faith is NOT an independent cause of action for setting the
contract aside: operates through more precise rules and doctrines
- Have to say acting in bad faith bcos of a violation of a rule or doctrine of
contract that exists
- Confirmed in Barkhuizen (CC)
 You can’t just say that the other party acted in bad faith
 Have to say they acted in bad faith because of violation of rule /
doctrine

 BUT Barkhuizen (CC):

- it will now be possible to argue that the enforcement of a clause in
particular circumstances; will be unreasonable and contrary to PP
- (para 56 and 69FF)
 In effect the court brings exceptio doli back into our law
 Oridinarily the clause is a valid one, but if in your particular
circumstances it is unfair – will be contra boni mores
 Eg. if you have a 3 yr gym contract, and half way through you
contract asthma – you can stop paying membership and even if the
gym claim, they won’t succeed.
 What does this mean tho??? Far-reaching consequnces
________________________________________________________________

77
Brisley v Drotsky

 Facts:
o Concerned a non-variation clause in a standard-form lease
o According to this, alterations or variations would only be valid if recorded
in writing and signed by the parties (no variation without writing clause)
o The lessor attempted to cancel the lease agreement and eject a lessee
(Brisley) from the leased property on the basis of her repeated breach of
the contract for her failure to pay monthly rent on time
o The contract contained a lex commissoria (cancellation clause) which
entitled the lessor to do this
o The lessee attempted to rely on an oral variation of their contract to the
effect that the lessor would accept late rent from her
o The lessor then turned to rely on the Shifren principle
 Oral variation would be invalid in the face of a non-variation
clause
 So that the lessee commits a breach by not adhering to the
contracts written terms

o The lessee then argued that the Shifren principle should not be applied in
the matter because its application would yield unreasonable and unfair
results in conflict with the principles of bona fides and with the values of
the Const, given the discrepancies between her and the lessor in
bargaining power.
o Also attempted to use 26(3) of the Constitution – no one may be evicted
from their home without an order of court.
o Section 26(3) requires that all relevant circumstances should be considered
but does not itself provide that any circumstances will be relevant. For that
the generally applicable law should be looked to. Circumstances can be
relevant only if they are legally relevant.

 Judgment: Harms, Streicher and Brand JJA

o Said that overturning the Shrifen principle would create great uncertainty
in the law of contract
o It held that non-variation clauses were freely negotiated and in principle
protected both the ‘stronger’ and ‘weaker’ parties, ie, that discrepancies of
bargaining power did not arise in the context of non-variation clauses
o Court looked at notions of good faith and decided that is could NOT be an
independent basis for setting aside or not enforcing contractual provisions

o NB: most important: to this case

 Although abstract values such as good faith, reasonableness and
fairness are fundamental to our law of contract, they do not

78
 constitute independent substantive rules that courts can apply to
intervene with contractual relationships
 They have creative, informative and controlling functions
THROUGH established rules of law.
 Courts cannot act upon them directly (cannot declare a term invalid
because it is against good faith)
 Aside: in Sasfin Smalberger held that it serves no purpose to
distinguish between contracts contrary to common law, those
against public policy and those contra bonos mores

 Cameron JA
o He appeared to situate the reasoning of the majority within the framework
of s39(2) – that the common law, like any other law, derives its legitimacy
from the Const and that the values of the Const are ‘modern’ concepts of
public policy
o He said, however, that courts must be wary not to make overhasty
judgments to incorporate the boni mores, that they shouldn’t conclude
terms to be contrary to PP simply because they conflict with their own
notions of fairness and good faith
o The legal convictions of the community – a concept open to
misinterpretation and misapplication – is better replaced, as the
Constitutional Court itself suggested, by the ‘appropriate norms of the
objective value system embodied in the Const’

 Order:
o Appeal DISMISSED (Brisley = lessee)
__________________________________________________________________

Afrox Healthcare v Strydom

 Facts:
o Respondent was admitted into a private hospital owned by the applicant
o He signed an agreement containing an exemption clause absolving the
applicant from liability flowing from virtually all negligent conduct of its
employees
o Strydom suffered post-op damages due to a nurse’s negligence: he now
claims that the clause (which he had not actually read) should be set aside
for being in conflict with principles of good faith, public policy and the
spirit, purport and objects of the BoR

 Judgment:
o The court affirmed that contractual provisions that are in conflict with
public policy are unenforceable
o BUT it rejected the respondent’s contention that it was against PP, there
were inequalities of bargaining power and that it contradicted s27(1)(a) of
the Const - “everyone has the right to have access to health services”

79
 o Court stated that there was no evidence that the respondent was in a
weaker bargaining power position
o Court also held that the claim that the clause was contrary to PP (although
the court DID acknowledge the NB of PP in invalidating terms contrary to
it) was irrelevant because the respondent did not allege that the damage
was due to the nurse’s negligence

 Strauss Doctor, Patient and the Law 3de uitg op 305, direkte
steun te vinde is vir die betoog, dat die vrywaring van 'n
hospitaal teen die growwe nalatigheid van sy verpleegpersoneel
met die openbare belang strydig sal wees, moet by die
beoordeling van die onderhawige grond van beswaar in gedagte
gehou word dat die respondent hom nie in sy pleitstukke op
growwe nalatigheid aan die kant van die appellant F se
verpleegpersoneel beroep nie. Hy steun op nalatigheid sonder
meer. Die vraag, of die kontraktuele uitsluiting van 'n hospitaal
se aanspreeklikheid vir skade wat deur die growwe nalatigheid
van sy verpleegpersoneel veroorsaak is, met die openbare
belang in stryd sal wees, kom dus nie in hierdie saak ter sprake
nie

o Court accepted the notion of PP and its dictates had to be informed by the
Const values, and thus while it was prepared to accept that the values
represented by s27(1)(a) were relevant to the Question whether the clause
conformed to the dictates of PP; the court was doubtful as to whether the
clause did fall foul of s27
o Brand JA commented on Cameron J’s dictum on the interrelationship
between const values of freedom and dignity and contractual autonomy
o He then concluded that freedom of contract (being freedom) WAS in fact
a const value, which in turn encompasses pacta sunt servanda

o Importantly: the court reaffirmed its conclusion in Brisley that bona fides
(good faith) are free-floating ground for setting aside terms – they are
ABSTRACT rules rather than legal rules and courts cannot apply such
values instead of crystallising legal rules

 Order:
o Appeal UPHELD (Strydom loses)

____________________________________________________________________

 RESTRAINT OF TRADE:

- Eg. the employee agrees that for a period of 2 years following the
termination of his contract for any reason whatsoever, and within the
industrial area of the Witwatersrand, he will not engage in any business,

80
 whether directly or indirectly, in competition with the current employer.
[Magna Alloys]
- Clearly a conflict of interests involved
- History: case of Roffey
- SA adopted English law of RoT

- English Law:
 Restraint of trade is PRIMA FACIE invalid
 Only way to succeed is if the employer can show that RoT was
reasonable…
 Employer bears the onus of showing why it is valid
 But will still be struck down if it impacts negatively on free trade

- Employer bears a difficult onus

- But why, since we have predominantly RDL, does English apply – in
RDL, RoT is not viewed with contempt [Didcott J in Roffey]
- Balance interest:
 Freedom of contract and interests of the employer
 Vs
 Employees interests and desire to find work he can

CA adopted RD approach

 Magna Alloys:
- RoT clauses are prima facie valid and enforceable unless the restraint is
unreasonable, in that it is contrary to public policy (balancing the interests
involved)
- Onus of proof on the party attempting to escape clause (employee has to
show clause is unreasonable)
- Unreasonableness assessed at the time the clause is being enforced, not
when the contract was entered into
- Court may find only part of the RoT to be unreasonable

 Sibex:
A clause will be declared contrary to PP if it violates fair competition, and is not designed
to protect a valid proprietary interest
- General skills
- Trade connections
- Goodwill
- Trade secrets

 GENERAL SKILLS:
- An employer does not have a proprietary interest in an employees general skills:
 May / ought not to be relinquished
- Can’t be the subject of a restraint clause

81
 - Other 3 CAN be a valid proprietary interest and acceptable restraint.

 TRADE CONNECTIONS:
- The relationship that employers build up with the customers of the business (eg
a car salesman – connect the face with the brand)
- Danger of employee leaving and taking all his clients therefore can restrain,
provided it’s REASONABLE
- Rawlins v Caravantruck (and Roffey and Magna Alloys)
- Can ruin your business if not restrained
- [Focus tends to be on salespeople, eg not so much on connections made with
clients on the golf course etc.]

 GOODWILL:
- Difficult to define: the regard or image that a business has in the public eye – do
people consider it to be good / worthwhile?
- When assessing capital, goodwill actually has a monetary value
- Again, the image of the business is attached to the people in the business
- Can prevent the original owner from selling up, taking all the money, opening
the exact same business next door and taking all the customers
- Botha v Carapax

 TRADE SECRETS:
- Marketing and pricing structures (can be commercially significant), franchising
into formulae
- These are protectable, but MUST be secret / privileged info
 Do not confuse with general skills
 Must be the property of the business not the personal idea of the
employee
- Must be a proprietary interest worth protecting
- Sibex
- Also, the employee must have been privy to such secrets
- If there is a validly protectable proprietary interest – you can plead that the
clause is too wide, and should be amended ito space and time
 Amend it so that it is reasonable

- Factor to take into account:

 The nature of the business protected
 International? Local? Does it provide a regular / unique service?
 The area from which the clients / customers are drawn
 The area into which the business might reasonably be expected to expand
in the future

 Courts generally resist country-wide restraint – too unreasonable, will not condone it,
against public policy
 Courts have used this power to amend very rarely. This is because courts feel that
they are interfering with the parties and their contracts

82
  Usually prepared to recast when they are only small alterations to be made. If not,
scratch the clause entirely so if not possible to make minor amendments (ie if the
clause requires ‘major plastic surgery’) generally get rid of the whole clause.

 Constitutionality??
o Relevant sections
 s 22 (freedom of trade, occupation, profession)
 s 21 (freedom of movement)
 s 13 (slavery, servitude, forced labour
 s 10 (dignity)

o Key issues: onus

 Early cases (IC) – fine (said Magna Alloys is const sound and
should be endorsed)
 BUT
 Canon KZN v Booth – change is needed
 Kondile J: Magna Alloys = const unacceptable – RoT
clauses = limitation of fundamental rights therefore the case
was rejected because it no longer embodies public policy
principles
 Magna no longer appropriate
 The onus shld be on the employer to show that he restraint
is reasonable & valid

o Subsequent to that:
 Aqua D’or v Camara – cites Kondile in para 35 “suffices to say…”
doesn’t follow Canon, agrees with Magna nonetheless
 Rectron v Govender – also didn’t follow Canon
 Automotive Tooling v Wilkens – SCA also applied Magna! Simply
ignored the debate entirely
 Reddy v Siemens – issue forcefully put before them, but they also
didn’t deal with the issue of whether Magna was right / not. On the
facts, doesn’t matter on whom the onus falls, outcome is the same

________________________________________________________________

Botha and Another v Carapax

 Facts:
o The 2 appellants were working for the respondent since August 1986 and
June 1987 respectively in the sales division of Carapax Shadeports CC
o Carapax manufactures and markets shadeports and hailnet steel structures
o Their contracts contained a RoT clause that said they were not to trade in
competition with the business within a certain area (PWV) for one year
after termination of their employment

83
 o The company was then sold to Alnet in September 1988, a trustee for a
business that would be formed soon
o In November 1988 it was and thus ratified the sale of Sept
o Part of the sales deal – of the business and its GOODWILL – was that the
contracts of employees would remain the same even when the company
was sold
o When this happened, however, the new company Carapax Shadeports
(Pty) Ltd sought to change their terms of contract
o They did not like this and decided to leave
o The second respondent was told to leave 1st, and when he said that he was
going to take his customer quotations with him, there was a dispute
o This ended when he signed an agreement that “existing quoted clients
cannot be approached by himself for a period ending 30/6/89” – he then
left
o First respondent also left after signing a similar agreement
o The 2 then started up their own business in direct competition with the
respondent
o The respondent asked for a RoT agreement to be enforced

o Main issue: did the benefit of the RoT clause get transmitted from
Carapax CC to the respondent?
o Appellants: challenged this on 3 bases:
 (1) That the benefit could not have been transferred
 (2) That there was no cession to the respondent of the right of
Carapax CC to enforce the restraints
 (3) That even if there was a cession, it was invalid as the consent
of the appellants had not been obtained

 Judgment: Botha JA

o Looking at issues 1 and 2 of the appellants first:

 The court looked at 2 SA cases and English ones in order to
determine circumstances under which the goodwill would form
part of what was transferred if a business was sole – if the benefit
of a RoT clause could be transferred
 In the SA cases, it had NOT been transferred
 In the English cases: “that on the sale of a business with a
goodwill, although nothing more is said, the benefit of the
restrictive covenant passes with the business, because it is not for
the benefit of the individual, but is for the benefit of the
business.

 Goodwill is comprised of a number of elements:

 In Jacobs v Minister of Agriculture:

84
  “Goodwill is an intangible asset pertaining to an established and
profitable business, for which a purchaser of the business may be
expected to pay, because it is an asset which generates, or helps to
generate, turnover and consequently profits.”

 The seller of a business who does not put himself under RoT may
not solicit customers of the old business, but is free to trade in
competition with it
 The seller that undertakes not to enter competition enhances the
value of the business
 Therefore it follows logically that the RoT should be regarded as
part of the goodwill
 Thus it should pass to the new owner if the business is sold – what
comprises the goodwill is a matter of fact not law
 Eg. a matter may confer a purely personal benefit on the
owner and not to the business as a whole – this does not
constitute part of the goodwill and will not pass to the
purchaser

 Transfer of a contractual right takes place by means of cession

 Cession ahs 2 elements:
 Agreement of transfer: constituted by delivery
 Obligatory agreement: the sale of the goodwill

 Thus the benefits of the restraint did pass from Carapax CC to the
new company

o As to issue (3)
 Not relevant to the issues of contract – has to do with needing
consent for cession to occur
 The submission that consent was needed was rejected

 Order:
o Court retained the judgment in Magna
o Appeal DISMISSED

______________________________________________________________

Sibex Engineering Services (Pty) Ltd v Van Wyk and Another 1991

 Facts:

85
 1. The question whether a covenant in RoT is contrary to PP is a FACTUAL
issue.
2. There are no prior rules which decree that certain clauses are per se
unenforceable
3. In general, however = contrary to PP to enforce a RoT that is unreasonable
restriction on the person’s freedom to trade such as
 If the restraint serves no interest of the party seeking to enforce it

 The 1st respondent was a specialist technician employed by the

appellant to service 2 for its clients namely Sasol II and III
 He had stopped working for the appellant and started working for
the second respondent
They were both companies that specialised in on-line maintenance
leak-sealing
 He signed a contract that contained a RoT term which stated that
he was not permitted to engage in direct or indirect competition
with the company in relation to any of the activities that they do
 This was for a period of 24 months after termination of the contract
and within the RSA

4. He ended up in the same sort of job that he had held at Sibex and he had
dealt with Sasol II and II as clients
5. The onus was on the respondent to show that the RoT should not be
enforced as it would be contrary to PP
6. Need to ascertain if the restraint served any interest, andif so, what was the
extent

 Judgment: Harms J
1. The 1st respondent conformed all of the above facts but alleges that he cant
be bound by the agreement
 Because he had signed it without reading the RoT clause
 The clause should not be enforced as it is against PP
2. According to Magna, a clause is contrary to PP if it is unreasonable: puts
an unreasonable restriction on a person’s freedom of trade: the party
seeking to enforce the clause must have an interest it wants to protect
3. In this case the appellant said that the 1st respondent had been privy to
confidential info and trade secrets
4. However, it is common cause on the papers before the court that the
respondent was never placed in a position to have access to chemical
formulae or customer lists
5. Further, the fact that he knew that Sasol was a main client is not
confidential info
6. As to the pricing structure, the respondent admits that it is confidential, but
further says that he never had access to it
7. He also never saw the 1983 manual

86
 8. The ratio of the restraint clause was the fact that the respondent would
come into contact with specialised knowledge or trade secrets in his
capacity as a technician
9. Because he never had access to such info, the RoT was unreasonable

10. Appeal DISMISSED (Spoelstra concurred)

 Judgment: Stegmann J
1. Appellants:
 sought an interim interdict restraining the 1st respondent from
working for the 2nd respondent
 They said that all the requirements for the interdict had been met
2. Respondents
 Say the RoT clause is contrary to PP but the factors that must be
taken into account when considering this are
1. The interest protected by the restraint (most NB)
2. The conduct prohibited by the restraint
3. The extent of the prohibition as regards to time and area
4. The relationship between the parties when the contractual
restraint was agreed upon

 He claims that the training and skills received as a workman are his
alone and that an attempt to prevent his using them is an attempt to
prevent him competing fairly and lawfully in the market place
 The appellant believed that they were entitled to hold the
respondent to the restraint because they had trained him =
investment
 Also the know how that they alleged he had was NOT a trade
secret, it was public knowledge

 The law applied: (mainly decision in Thorpe Timber v CJ Griffen)

 There remains a great deal of uncertainty as to how to

determine whether someone must be bound by an undertaking,
or whether he has discharged the onus of proving that this
would be unreasonable on grounds of public policy
 The central point in the Magna case is that, incorrectly taken
from English law, the principle that all contractual RoT clauses
are prima facie contrary to PP and thus unenforceable (this was
never the case in RDL)
 All contract are enforceable unless contrary to PP
 The effect of Magna may be summed up as follows
 Pacta sunt servanda principle is more NB than unenforceability
of RoT

87
  Now the party seeking to declare the RoT unenforceable, and
not the party relying on it, bears the onus of establishing its
unreasonableness
 In the past, relevant circumstances were those at the time the
contract was concluded; now it is those at the time the RoT is
sought to be enforced
 Before magna, RoT only enforceable in totality; now parts of
the clause only can be enforced

o Any agreement contrary to PP cannot be enforced (Magna) – those

that harm the public interest
o Court looked at a number of things
 The legitimately protectable interests of the former employer
 The rule that was previously supposed was that RoT would
be invalid if it only sought to curtail competition from the
former employee
 Proprietary interests that could be protected were “trade
connections” (relationships with customers etc.) and
confidential info (“trade secrets”)
 The previous rule provided that the employer need prove
nothing more than that the RoT was reasonably necessary
to protect those interests (supplanted by principles in
Magna)
 Now the rule after Magna is: a contractual restraint
curtailing the freedom of a former employee to do the work
for which he is qualified will e held to be unreasonable,
contrary to PP and unenforceable if the ex-employee proves
that at the time the RoT is sought, it is purely for the
purposes of restricting competition and that it is therefore
not necessary at all for the protection of proprietary
interests (goodwill, trade secrets etc)

 Trade connection
 Only in certain instances can knowledge of customers
sensibly be regarded as confidential info
 Even if it is an open market, it may be possible to build up
proprietary rights in the form of trade connections, trade
secrets of a combo of both

 Whether the law recognises an employer to have a protectable

interest other than trade connection and goodwill
 In order to prove the enforcement of the RoT, by which the
party has curtailed his freedom to work, would be
unreasonable and contrary to PP, a former employee has to
do nothing more than prove that his former employer in
trying to enforce the RoT, has no trade connections or

88
 secrets to protect, or if he has that the restraint would not
serve to protect him – alternatively can be shown that the
RoT is wider than is reasonably necessary to protect trade
connections / secrets

 There are 5 disputes raised:

1. Had the appellants shown the existence of the contract on which they
relied
o He said that he had signed without reading it
o Court held that he must have known what was in the contract
o It therefore existed

2. Is the training given by the appellants a protectable investment?

o The appellant said that the training had to take about 12 – 18 months
and that this was an investment: but court held that length of time is
irrelevant
o Respondent said that he had only been given a short demo
o The skills of a workman become his own and (Magna) he cannot be
restrained from using them
o Argument that there should anyway be a large pool of workmen in this
field – true but the evidence did not establish this
o If seeking to protect his ‘investment’ is the only reason for enforcing
the RoT, the respondent will have discharged the onus – it would be
contrary to PP
o PP anyway encourages free competition
o At the time the former employee seeks to enforce the RoT, he had no
proprietary interest to protect

3. Confidential information
o If the employer has valid trade secrets or connections to protect, he can
validly enforce the RoT
o Confidential info = chemical formulae, know-how; secret manual with
such procedures; pricing lists; customer lists: respondent says that as to
the first 3 he had no access to such knowledge and as to the last,
everyone knew
o The procedures as to leak-sealing that the appellant claims are
confidential are actually common knowledge to the industry
o It appears they have no trade secrets
o (court held that this dispute of fact cant just be decided in a motion
proceeding for an interim interdict)

4. Trade connection
o Sasol I, II and II

89
 o But it is not valid to say that these are trade connections with the
appellant, because they ceased to work on a tender system and now
work on a 1st come, 1st served basis
o HOWEVER
o The respondent had had dealings with the engigneers in the past, and
thus when it came to the time when Sasol needed a technician, the
appellant said that it was likely to be the respondent and his company:
also he lived closer to Sasol II
o The respondent could not escape his enforcement NOT to work for a
competitor unless he showed the appellants had no trade connections
to protect
o Thus the respondent did NOT discharge the onus of proving the above

5. The respondent’s proximity to Sasol II

o See above

o Restraint ito area: RSA is too big a restraint

 Should just be the Sasol areas
o Restraint ito time: no defensible basis for a 2 year RoT
 Anything more than 1 year = unreasonable

 Order:
o The appellant’s case was sufficient to warrant the granting of interim
relief
Appeal ALLOWED

________________________________________________________________

Roffey v Catterall, Edwards and Gourde

 Facts:
o Public policy in SA does not generally condemn covenants on RoT and,
accordingly, they are not prima facie void
o In this case the appellant sought to rely on the fact that there was
inequality of bargaining power between him and his ex-employee
o Nowadays with trade unions and legislation this is not a valid argument

o The respondent is an estate agent who hired the appellant

o Upon hiring him, they signed a RoT agreement whereby on termination of
his contract the appellant would not work within a 7mile radius of one of
te branches of the agency (they had 3, one in Westville, Montclair and
Durban) for a year

90
 o Should he move office during the course of his employment, as he did do
– moved to Westville – the restraint applied to a 7 mile radius of that
office
o he resigned and then started work as an estate agent in Pinetown, well
within a 7 mile radius of Westville
o the respondent s were well-acquainted with the property world, but when
the appellant started work for them he wasn’t, so they taught him
everything he knew about property trading
o he also had access to registers with names and addresses etc of potential
clients, lists of properties on the market, prices etc and was actually
encouraged to absorb this info to be a good agent

 Judgment:
o There is no reason to believe the applicant thought the RoT to be
unreasonable at the time that he signed the contract

o Bargaining power:
 As previously stated, the argument to bargaining power of the
appellant was not valid
 Questions of bargaining power are not law, but are always a
question of fact pertaining to a particular case

o Trade Connections:
 The appellant was well acquainted with the prospective buyers and
sellers of property – he had to be
 It is clear why the respondent would want to have such info
protected by restraint as the appellant would otherwise be in a
good position to lure clients away

o Time restraint:
 Court is satisfied that the time is adequate

o Area restraint:
 Court could not reach a definite conclusion about the
reasonableness of the area of restraint
 The covenant was not severable, so the respondent’s failure to
prove its reasonableness throughout the area of restraint was fatal
to its enforceability anywhere in that area

o The various laws dealing with reasonableness and RoT:

 ENGLISH
 Covenants on RoT are generally considered contrary to PP
 An exception to this was where it could be proved that the
clause was reasonable inter partes

91
  ROMAN-DUTCH
 There is no aversion to RoT BUT they will not be enforced
if they are contrary to PP
 It is not contrary to PP that RoT are prima facie unlawful
 However, it seems that the onus lies upon the party seeking
to resist the RoT to prove that it is unreasonable

 SOUTH AFRICA
 Contract in SA are prima facie valid
 They will be enforceable unless they are unreasonable
 The onus is on the person resisting the restraint to prove
that it is unreasonable
 Another tenet of PP is pacta sunt servanda: promises must
be honoured
 There is thus a collision between the freedom to trade and
the sanctity of the contract and SA law tends to prefer the
latter – commerce needs loyalty to contracts just as much as
it needs freedom of trade
 Thus RoT in contracts is not prima facie void
 Contracts are only void if they are proven to be
unreasonable – but the AD has never decided on the issue
 Order:
o Appeal DISMISSED

______________________________________________________________
Magna Alloys and Research v Ellis 1984

 Facts:
o Ellis had been employed by Magna as a commission agent
o His contract contained a clause which stipulated that upon termination of
the employment, he would be prohibited from doing any business in
competition with Magna in a defined area for 2 years
o He breached this clause by starting to work for the Welding Advisory
Services in competition with M
o He subsequently claimed outstanding commission from Magna, who
counterclaimed for damages on the grounds of breaching RoT
o This was dismissed in the court a quo but succeeded on appeal
o The AD said that the ROT clause was unenforceable if contrary to Public
policy and the onus of proving that this is the case is on the party who
alleges he is not bound by it
o When a court is asked to adjudicate on a matter concerning RoT it will
have to consider the circumstances at the time the enforcement is
requested
o A court is also not limited to a finding regarding the restriction in its
entirety; it may declare only parts enforceable / not: even though it may be

92
 contended that by only declaring a part of the restraint of trade clause
enforceable / not is meddling with the independent parties’ rights to freely
conclude a contract
o E did NOT succeed in proving that the restraint was contrary to PP

 Main points:
o A RoT clause is valid and enforceable. However, it is unenforceable (but
not void) should it be contrary to the public interest: the onus to prove its
in conflict with Public interest is on the party who opposes the
enforcement.

o A party will discharge the onus if he can prove the restraint to be

unreasonable – this unreasonableness would be a strong indication of
conflict with PP. However, the formulation allows for a restraint which is
unreasonable between the parties but is nevertheless not in conflict with
PP

o When court decides if its contrary to public interest, regard must be had to
the circumstances which apply when enforcement of the restraint is asked
for and not to those which existed at the time of conclusion of the contract

o A court is not limited to a finding that a restraint clause is wholly

enforceable / unenforceable. It may also find that a part of a restraint is
enforceable / unenforceable

_________________________________________________________________
Canon Kwazulu-Natal (pty) Ltd v Booth 2005

 Facts:
o Applicant is the supplier and distributor of office equipment
o It also leases and rents out such equipment: including paper, cartridges,
printers computers, etc.
o In June 1998 the 1st respondent joined the company as branch manager but
he later resigned as branch manager to become a sales rep in the same
branch
o For this he concluded a new contract with a RoT clause: “…and not
disclose any trade secrets or confidential information of Canon or any
information concerning the organisation, functions and transactions or
affairs of Canon and shall not use such info in a manner which may injure
or cause loss either directly or indirectly to Canon”

o He may not work in any form in competition with Canon or in any way
that will be detrimental to Canon for 3 years
o He gave 24hours notice of resignation and took up employment with the
second respondent in November 1999 (which business is in competition
with Canon)

93
 o So the applicant sought to enforce the RoT clause in the contract

 Judgment: Kondile J
o He looked at the judgment in Magna Alloys which said that the onus is on
the party wishing to show that the restraint should NOT be enforced (ie
Booth in this case) – this is because there is the belief that public policy
requires people to be bound by their contracts
o Prior to the Constitution, Magna was the leading case
o But now there is s22 which states:

 Freedom of trade, occupation and profession: every citizen has the

right to choose their trade, occupation and profession freely. The
practice of trade, occupation and profession may be regulated by
law.

o The RoT clause therefore limits this right thus it is inconsistent with the
Const to impose the onus of proving const protection on the 1st respondent
o The applicant should have to prove that the 1st respondent forfeited his
right to constitutional protection: it appears that the applicant should have
to do more than to invoke the provisions and prove the breach
o According to s36, he will also have to show that the limitation of the s22
right is reasonable and justifiable in an open and democratic society based
on human dignity, equality and freedom

o the common law approach to RoT is that restraints are onl7y enforceable if
they are not in conflict with public policy:
 this would be the case if they the enforcement is contrary to public
interest
 it would be contrary to public interest if it were unreasonable
 it would be unreasonable if it and to the extent that it does not seek
to protect the legitimate interest of one of the parties; or if it does
purport to protect an interest, such interest is eclipsed by the
interest of the other party so restrained.

o RoT unreasonable? Consider:

 Is there any interest of one party deserving of protecting upon
termination of the contract?
 Is such interest being prejudiced by the other party?
 If so, does it weigh up qualitatively and quantitatively against the
interest of the other party that the latter should not be economically
inactive and unproductive?
 Is there another facet of public policy having nothing to do with
the relationship between the parties which requires that the
restraint should either be maintained or rejected?

94
 o The applicant claims that confidential info concerning the details of
customers and potential customers would be leaked
o For info to be confidential it must
 Be capable of application in the industry (be useful)
 Must NOT be public knowledge
 Must be of economic value
o Cant just be that the applicant decides to call it ‘highly confidential’

o The 1st respondent also denied that he received special training from the
applicant
 he had been working in the industry for 13 years, even before he
worked for Canon
 the applicant claims that the use of computers is unique to Canon,
but this is a stupid argument because if the use was unique then no
other company would do it the same, thus there would be no
‘special’ info for the respondent to pass on
o the bargaining power of the respondent was less than that of the applicant

 Order:
o Respondent has proved on a preponderance of probabilities that in the
circumstances of this particular case the applicant’s interest is eclipsed by
the respondent’s interest not to be restrained
o It would be unjust and contrary to public interest to enforce the restraint
o Application DISMISSED
_________________________________________________________________

Rawlins v Caravantruck (Pty) Ltd

 Facts:
o The respondent carried on business from a premises in East London as a
distributor of decorative automobile and industrial paint
o He engaged the 1st appellant as a sales rep who started work for him in
November 1989
o In his contract there was a restraint of trade clause that prohibited him
from working in the East London, Border, Transkei or Ciskei area for a
period of 2 years after the termination of his employment
o About 15 months after his employment commenced he left and started
working for the second appellant: a company who sells the same brand of
paint as the respondent and he began calling on and selling to people who
he had previously sold to when he worked for the respondent.
o The respondent contended that this formed part of customer goodwill and
was therefore at least in part, his asset

95
 o He sought to enforce the RoT clause which placed the onus on the
appellant to prove that it was unreasonable to enforce it

 Judgment: Nestadt J
o Rawlins seeks to show that the restraint was unreasonably long and that
the owner of the respondent company had no proprietary interest which
required protection
o The judge assumed in favour of Rawlins that he discharged the onus of
proving that no info confidential to the respondent was disclosed to him
during his employment (trade secrets)
o So what about trade connections?
o Rawlins said that the customers he served were his that he had established
before he came to work for the respondent, that he had only been
introduced to a few by the respondent and that the rest were obtained
through the yellow pages. On the contrary, he was actually involved in
finding clients
 Did he have ‘such personal knowledge and influence over the
customers of his employer…as would enable him, if competition
were allowed, to take advantage of the employer’s trade
connection?’
 Need to look at:
 The duties of the employee
 His personality
 The frequency and duration of contact between him and the
customers
 What knowledge he gains of their requirements and
business
 How competitive the rival businesses are
 Type of product being sold
 Whether there is evidence that customers were lost after he
left

 Court held that even though they may have been his customers,
his involvement with them was no doubt enhanced through his
employment with the respondent (consolidate and strengthen prior
rapport)
 He may during the time in which he works with the customers
develop an influence over them and thus take them away from the
respondent (even though he argued that because they sold the same
things they were likely to have common ‘trade connections’

o was the time of the restraint unreasonably long?

 Judge’s 1st impression was yes
 But its not like the enforcement will prevent Rawlins from earning
a living at all

96
  Thus its not unfair

 Order:
o “Sanctity of the contract must prevail”
o Appeal DISMISSED

__________________________________________________________________

Aqua D’Or Mineral Water v Camara and Another

 Facts:
o Camara worked for the appellant: a manufacturer, wholesaler and
distributor of non-alcoholic beverages, in particular, mineral water
o His contract of employment contained a term that stated that should he
leave the appellant, he would not be able to – for a period of two years –
be directly or indirectly involved in any company that was in the beverage
industry (Cape area)
o He joined Constantia Valley after leaving the appellant: it is a
manufacturer and distributor of mineral water
o The respondent had developed a substantial client base while working
with the appellant, which is a very profitable company
o The appellant claims that he breached the RoT clause and consequently
seeks an interdict preventing him from working for Constantia Valley

 Judgment: Dlodlo J
o Onus on the respondent to prove that the RoT was unreasonable
o Founding affidavit:
 Mr Howsley on behalf of the appellant
 Said that it had never been the intention of the appellant to deprive
the respondent of chance to work in the beverage industry
 He said that the appellant had trained the respondent who, before
working for them, had known nothing about the mineral water
industry
 He had therefore
 Had training (specific)
 Access to the client base
 He said that the respondent would use this knowledge and that
about price structures, customers and business structures to
compete unfairly and unlawfully with the respondent
 Said that the RoT was not so onerous that they are unreasonable

o Answering affidavit:
 Mr Camara said that he had little knowledge of the pricing
structures and business structures, that as a sales rep he had only
been exposed to retail prices of the beverages he was to sell

97
  He claims never to have been privy to information such as the
‘refinement’ of pricing structures, the mark-ups of drinks, their
distribution costs etc.
 He claimed that in doing business it appeared to him that Red Bull
was in fact the drink that was sold the most and not mineral water,
thus the companies were in fact different
 As to the customers, he said that he only had access to a flip file of
over 200 names, where no large businesses such as chain stores
were listed
 He was concerned about clause 30 – The RoT – but when he
queried it he was reassured that ‘we would never do that to you’
and then pressured into signing: he was concerned that the
stipulation of the clause would prevent him working in the industry
in which he had chosen to make a living
 He denied that he had undergone any serious training, said that he
had just got a brochure containing the names of the softdrink
products the company supplied
 He admitted that he did develop relationships with some of the
clients, but this is not why he was approached
 He claims that the restraint is unreasonable and that it is preventing
him earning a living

o Replying affidavit:
 Denied that the core business was Red Bull: figures indicate that it
is clearly mineral water
 He said that the respondent had been enticing customers, eg
Picardi Rebel
 Both businesses worked in the co-consumption sector
 There are similarities between the businesses (ito area, market and
involvement in the mineral water industry
 He said that as to the claim that he had no knowledge, this was
improbable, as being a sales rep he would have to know that kind
of thing re prices and customers
 He basically denied everything that was in the answering affidavit

o Issues and submissions

 Looked at Magna – respondent bears the onus to show that a
restraint is unenforceable by virtue of its being contrary to public
policy
 Thus he must show that the time is unreasonable
 Looked at the 4 factors listed in Canon from the Basson v Chilwan
judgment (see above)

 Also looked at Rawlins:

 The need of an employer to protect trade connections arises
where the employee is in a position to build up a particular

98
 relationship with the client and where the customers could
follow him
 Again look at
o The duties of the employee
o His personality
o The frequency and duration of contact between him
and the customers
o What knowledge he gains of their requirements and
business
o How competitive the rival businesses are
o Type of product being sold
o Whether there is evidence that customers were lost
after he left

 In order for the appellant to show the extent to which its pricing
structures constitute proprietary info, it must show the extent to
which they important in the sense that they are confidential and
valuable to a former employee
 Is it possible that the RoT is too wide and therefore unnecessary?
 The appellant now seeks to enforce only part of the clause: to
eliminate the “oppressive parts” “neatly and conveniently”
 As stated in Rawlins one can draw a distinction between 2 types of
proprietary interests
 The respondent bears the onus of proving that no
protectable customer connection existed. The customer
connection is capable of being established with a limited
customer base

 Did acknowledge Canon’s judgment

 That it is necessary to develop the common law in a
manner that reflects the spirit, purport and object of the Bill
of Rights, BUT
 Court still found itself bound by the decision of Magna

 Held that the respondent, being new in the business, must have
received training
 The first respondent’s term of employment was short but was
reasonably long enough to have enabled him to gain influence over
the client base
 The court held that the trade secrets in the nature of the pricing
structure and customer connections are important enough to justify
restraint
 Order:
o The first respondent is interdicted from working or having any business
with the second respondent (Constantia Valley)

99
 o From working or trading or owning any business in the mineral water
industry, or engaged in the manufacture of mineral water for 2 years in a
100km radius

______________________________________________________________________

Rectron v Govender

 Appl – Rectron
 First def – Govender
 Second def – Axiz
 Mclaren J briefly considered the Canon judgment, which stated that the onus is on the
party wanting to enforce the restraint to show that it is reasonable and justifiable.
Held that he is bound by that judgment unless he is satisfied that it is wrong –
satisfied so by referring to many other dicta supporting the fact that the onus rests on
the party challenging the restraint.
 Govender was employed as a salesperson by Rectron. During the course of her
employment she signed 4 agreements with Rectron; the first 2 contained provisions
relating to ‘confidential info’ and a ‘restraint’
 Govender resigned from Rectron, and subsequently commenced employment with
Axiz. However, Rectron carries on business in direct competition to Axiz
 Rectron is thus claiming relief against Govender; it appears that Govender’s
employment with Axiz is in breach of the restraint. The onus is on Govender to show
why the restraint shldnt be enforced
 The alleged proprietary interests of Rectron seeks to protect by means of the restraint
are its confidential info & its trade connections
Trade connections
 Court found there is nothing to suggest that Govenders relationship with any one of
her customers was of a personal nature, as opposed to a cordial business relationship.
The distinct impression which Mclaren J gained from the evidence is that the business
environment in which Rectron & Axiz operated is not one in which a customer is
likely to ‘follow’ a salesperson from one distributor to another bcos of a close &
personal relationship existing btwn them
 Govender proved that Rectron had no trade connection with its customers thru
Govender
Confidential info
 The relevant enquiry shld be directed at establishing whether the reasonable
possibility exists, objectively speaking, that one might disclose trade secrets to the
new employer
 There is no reasonable possibility of a misuse of Rectrons confidential info
 The court also found that the respective bargaining positions of the parties to the
restraint agreement were such that Govenders right to be economically active had to
be given greater weight
 The restraint clause went further than it was necessary to protect Rectrons rights, thus
its enforceability cant be confirmed

100
 Application dismissed
_____________________________________________________________________

Automotive Tooling Systems v Wilkens

 This appeal concerns the enforceability of restraint of trade & confidentiality clauses
in a agreements entered into btwn the first & second resp’s & the appellant
 The appellants business is in a specialised technological field relating to the design,
manufacture and/or customisation of special purpose machines & tooling
 The resp’s had been employed in the business as tradesmen for several yrs; they are
skilled toolmakers
 Some yrs into their employment (and at the appellants insistence) they entered into
‘independent contractor agreements’ (service agreements) with the appellant. These
contained 2 clauses relevant to the dispute: a restraint of trade covenant & a
confidentiality clause. However, the outcome of the appeal depends on the
enforceability of the restraint clause, thus will only deal with this
 Resp’s resigned to take up employment with ‘AMS Manufacturing (third resp).
According to appellant, the nature of their employment with AMS is in breach of the
restraint clause.
 The resp’s will do the same work for AMS that they did for the appellant, and
appellant avers that they wld use technological know-how which is confidential &
that was learnt during their employment with him. Thus, appellant contends that he
has a proprietary interest in such know-how & consequently is entitled to interdictory
relief
 Its generally accepted that a restraint will be considered to be unreasonable, and thus
contrary to PP, and therefore unreasonable, if it doesn’t protect some legally
recognisable interest of the employer, but merely seeks to exclude/eliminate
competition
 Whether there is an interest of the one party (in this case the appellant) which
deserves protection once the contract comes to an end is relevant. Thus, the question
is whether the interest that is relied upon – the skill, expertise & know-how that the
employees undoubtedly acquired in the techniques for manufacturing these machines
– was one that accrued to the employer or to the employees themselves
 The mere fact that the resp’s have taken up employment with AMS doesn’t in itself
entitle the appellant to any relief if all they will be doing is applying their skills &
knowledge acquired while in the employ of the appellant
 Only if the restriction on their activities serves to protect a proprietary interest relied
on by the appellant that they wld be in breach of their contractual obligations. The
interest sought to be protected is the special knowledge of how the components of the
appellants machines are put together. Appellant has a proprietary interest in the
know-how that was acquired by the employees
 There is no evidence that the processes & methods were treated as a confidential by
the appellant. It appears that all employees, clients & sub-contractors freely had
access to the processes & methods; it wasn’t restricted to a limited class of employees
on a confidential basis to render it protectable

101
 The facts establish that the know-how for which the appellant seeks protection is
nothing other than skills in manufacturing machines; these have been acquired by the
resp’s in the course of developing their trade & don’t belong to the appellant – they
don’t constitute a proprietary interest vesting in the employer but accrue to the resp’s
as part of their general stock of skill & knowledge which they may not be prevented
from exploiting
 The restraint is therefore inimical to PP and unenforceable. The appeal must fail
____________________________________________________________________

Reddy v Siemens

 A written restraint agreement btwn appellant (Reddy) and resp (Siemens) interdicting
& restraining Reddy from being employed by Ericsson in Gauteng for 12 months
 The restraint was aimed at preventing a person with knowledge of confidential
technologies as a result of his employment from utilising them to the detriment of the
employer
 Reddy was skilled in ,and in possession of, current knowledge of Siemens’ processes,
methodologies and systems architecture
 Agreements in RoT were valid & enforceable unless they are unreasonable and thus
contrary to PP, which necessarily as a consequence of their CL validity has the effect
that a party who challenges the enforceability of the agreement bears the burden of
alleging & proving that its unreasonable
 All agreements are subject to const rights obliging courts to consider fundamental
const values when applying & developing the law of contract in accordance with the
Const
 It was submitted on behalf of the appellant (Reddy) that the rule laid down in Magna
– which has the effect of casting onus on the party seeking to avoid the restraint to
allege & prove that it is unreasonable – is in conflict with s22 of the Const, which
guarantees every citizen the right to choose his/her trade, occupation or profession
freely. The effect of that provision was that a restraint limits that right, and is
enforceable only if it is alleged & proved by the person seeking to enforce it that the
limitation is reasonable
 The assessment of the reasonableness of the restraint required a value judgment, and
the incidence of onus plays no role in that assessment. Also, that value judgment
comprehended the considerations referred to in s36(1) of the Const since it
necessarily required determining whether the restraint was ‘reasonable & justifiable
in an open & democratic society based on human dignity, equality & freedom’.
 Reddy is restrained only in the choice of his employer for a limited period, not in his
being economically active at all. Restraining him from being employed by Ericsson
doesn’t affect his employment elsewhere or his ability to engage in the employment
he was trained for. The nature & extent of the limitation is therefore restricted
 Reddy is in possession of confidential info iro which the risk of disclosure by his
employment with a competitor, assessed objectively, is obvious. Its not that the mere
possession of knowledge is sufficient; his loyalty will be to his new employers and
the opportunity to disclose confidential info at his disposal, whether deliberately or
not, will exist

102
 Public policy requires contracts to be enforced. This is consistent with const values of
dignity & autonomy. The restraint agreement in this matter is not against PP and shld
be enforced; its terms are reasonable. What Reddy is required to do is to honour the
agreement he entered into voluntarily and in the exercise of his own freedom of
contract
 Appeal is dismissed
_____________________________________________________________________

IMPOSSIBILITY:

If at the time the contract was entered into or at a later point the performance becomes
impossible, it is invalid

Impossibilium nulla obligatio est

 No obligation arises if the performance is impossible
1. Initial impossibility (at the time contract entered into) OR
2. Supervening impossibility (at any point during the performance. Theoretically
possible but then event later renders performance impossible)
Impossibility can be claimed & contract declared null & void

4 requirements for impossibility:

1. Impossibility absolute as opposed to merely being probable

 Performance must, objectively speaking, be TOTALLY impossible
 If it is in the realms of possibility, there will be risk but the contract is
still valid
 Probable if the things don’t yet exists but has the potential to exist (eg. a
promise to sell all apples grown for the next 5 years)
 Eg. sale of putative things (something that doesn’t exist)

2. Impossibility absolute as opposed to relative

 Ie not subjective problem with the performance. If it is – breach, not
impossibility
 Personal circumstances = you can’t perform? NOT a valid argument.
Contract will still be upheld

3. Must NOT be the fault of either of the parties

 If it is = BREACH
 A party who has caused the impossibility cannot then use it to their
advantage and claim that they are no longer liable
 Eg if you sell your house then decide you don’t want to so you burn it
down and claim that perf. Is impossible – this is a ridiculous argument
 Only things that provide valid argument (out of control of the parties)
i. Vis major – acts of God

103
 ii. Casus fortuitous – acts of Parliament

 READ CHRISTIE

4. Can be overridden by the contrary intention of the parties

 Don’t contract to things that you cant perform

Leading case on supervening impossibility = Peters Flamman & Co v Kokstad

Municipality

Leading case on temporary supervening impossibility = World Leisure Holidays v

Georges
________________________________________________________________________

Peters, Flamman & Co v Kokstad Municipality

 Prior to the outbreak of WW1 In 1914, the appellant had contracted with the resp to
light the streets of Kokstad for a period of 20yrs
 Due to the outbreak of the war (and the therms of a certain Act), the appellant cldnt
fulfil their terms of the contract. The resp then sued for damages for breach of
contract
 It is clear that by virtue of the Act of state it became impossible for Peters etc to
perform their obligations under the contract
 A contract is void if at the time of its inception its performance is impossible. So also
where a contract has become impossible of performance after it had been entered into,
the general rule was that the position is then the same as if it has been impossible
from the beginning
 The AD stated the ordinary rule of law to be that when the law creates a duty and the
party is disabled from performing it without any default of his own by the Act of God
or the King’s enemies, the law will excuse him
 But where a party by his own contract creates a duty he is bound to make it good
notwithstanding an accident by inevitable necessity
 Thus the contract was extinguished so soon as it became impossible for Peters etc to
carry it on owing to the actions of the state. And if the contract had come to an end,
there cld be no further breach of it, and consequently no action wld lie for damages
for breach of contract
 In the case of supervening impossibility of performance which occurs without fault
on the part of the debtor & without his bearing the risk of the impossibility, the
position in our law is the same as it was in RL. This is that obligations which arose at
the time of contracting are extinguished as soon as performance becomes impossible
and the debtor is consequently discharged from his duty to perform
 The appeal is allowed

 If performance becomes objectively impossible after conclusion of the contract

without fault on the part of the debtor and without his bearing the risk of

104
 impossibility, the obligation which arose at the conclusion of the contract is
terminated, and the debtor is discharged from his duty to perform
 Both parties are therefore discharged from their duties to perform although
performance by the one may still be possible
_____________________________________________________________________

World Leisure Holidays v Georges

 Appellant – a tour operator which offers ‘package’ tours to Mauritius

 Resp – thru his travel agent, booked such a holiday & paid the full cost in advance
 The holiday didn’t take place as a cyclone had hit the island the night before the
resp’s plane was due to depart. SAA thus had no option but to cancel all flights, but
passengers were accommodated on a special flight 2 days later. The resp had
however, in the mean time, instructed his travel agent to cancel his trip
 Resp’s main claim is based on breach of contract. In the alternative, alleged that
performance by the appellant of its obligations became impossible & that in
consequence the agreement btwn them ‘ceased to exist’
 Resp wasn’t transported to Maurtius on the day he wanted to, but the resp wasn’t, in
consequence, entitled to cancel the agreement as the cyclone altogether precluded any
flight from taking place on that day
 Temporary impossibility of performance doesn’t in itself bring a contract to an
immediate end. A creditor is entitled to treat a contract at being at an end whilst
performance is temp impossible only
- where the foundation of the contract has been destroyed
- where all performance is already, or wld inevitably become, impossible
- where part of the performance has become, or inevitably wld be,
impossible & he isn’t bound to accept the remaining performance
 A value judgment, based on objective criteria, will be required to establish whether it
is just that the bargain shld, to the extent still possible, be upheld and the obligations
of the parties adjusted
 It cannot be said that all performance under the contract had become impossible
 The appeal is upheld
__________________________________________________________________
FORMALITIES:
 General rule: no formalities are required at all for a contract to be concluded
 Goldblatt v Fremantle 1920 AD 123 at 128
o “subject to certain exceptions, mostly statutory, any contract may be
verbally entered into. Writing is not essential to contractual validity.”

 But what happens if something goes wrong with an informal, verbal contract?
 How do you prove that the contract exists?
 Why written contracts are better:
o Gives the parties time to consider the contract

105
 o To avoid dispute of facts: there is less room for disagreement

 Reality: although no formalities are required, the parties / some other will create
formalities so that neither is trapped if something goes wrong.

 2 types:
o Formalities imposed by statute (parliament)
 Parliament as a matter of policy has decided certain types of
contracts need to be formalised in statute (those that occur
frequently)
 Examples:
 Alienation of Land Act 68 of 1981: sale of land must be
written & under certain terms
 National Credit Act 34 of 2005: imposes formalities on
credit agreements, eg. a car/clothes
 Suretyship – GLAA 50 of 1956: particularly re signature
 Electronic Communications and Transactions Act 25 of
2002
 Consumer Protection Act ? of 2008 (tabled in Parliament
02/05)

o Those imposed by the parties themselves

 In the absence of legislation, formalities aren’t required but
sometimes it’s common cause to impose them

 WRITING: for evidential purposes

 Where the written contract it is a memorandum of one’s
already concluded oral contract; OR
 Can also agree there will be NO final agreement until the
document is written up
Can choose either, depending on circumstances

 SIGNATURE
 Useful, prudent formality. Displays you’re acquainted with
the terms set out in the written contract
 Witnesses

 NO VARIATION WITHOUT WRITING CLAUSES

 Possible to change the terms of a written contract orally
 Eg is: “no term in this contract may be altered or varied
unless it is reduced to writing and signed by both parties.”

 Validity and enforceability of these clauses?

106
 o Some say its binding
 Can only vary the contract with writing

o Others say (because in the common law one doesn’t

have to write down a contract) that if one is entitled
to amend the contract verbally, one may as well
expunge the clause

o Brisley: the Shifren Position

 Endorsed the findings in Shifren (SCA)
 No variation without writing clause = enforceable

SA Sentrale Ko-op… v Shifren

 SA Sentrale – the lessee (appellant)

 Shifren – lessors (resp)
 Appellant entered into a contract of lease with resp which contained a clause
prohibiting the appellant from subletting the property or ceding its rights without the
written consent of the resp
 A further clause required any variation of the terms of the lease to be in writing (‘non-
variation clause’)
 When the appellant later ceded its rights to a third party without the resp’s written
consent, the resp’s cancelled the contract & sued for ejectment of the appellant
 In defence against the resp’s claim, the appellant alleged that there had been an oral
variation of the non-variation clause to the effect that an oral consent by the resp’s to
a cession by the appellant wld be sufficient, and that the resp’s had given such
consent
 AD held that where a contract contains a clause entrenching it against oral variation
& the non-variation clause is, as in the present case, itself entrenched against oral
variation, the parties are bound by the non-variation clause. Thus any subsequent
attempt at an oral variation is of no effect
 The appellant were consequently entitled to disregard their oral consent to the cession
& to cancel the contract

 Note that it is made clear that a non-variation clause will effectively protect a contract
against oral variation only if the non-variation clause is itself entrenched against oral
variations
 The effect of so entrenching a clause is that it can then only be amended by a written
agreement btwn the parties

107
Cases for the ex turpi causa; in pari delicto rules

Jajhbay v Cassim

 J and C entered into an illegal sublease of a residential stand

 C (the sublessee) was carrying out the terms of the illegal contract when J applied for
an order ejecting C from the premises which he was illegally occupying
 The order was refused on the maxim in pari delicto potior est conditio defendentis

 Stratford CJ considered the importance of the 2 legal maxims taken from RL

108
 Ex turpi causa non oritur actio (from a disgraceful/dishonourable cause no action
arises). This prohibits the enforcement of immoral/illegal contracts
 The ex turpi causa is self-explanatory & requires no clarification. It is complete &
unquestioned in our courts
 In pari delicto potior est conditio defendentis – is designed to supplement the
deficiencies of the first iro to deterring illegality. This maxim applies in the present
case as the appellant (J) is not seeking enforcement of the illegal contract but seeks
release from its operation
 The maxim has not, in modern systems of law, been rigidly & universally invoked to
defeat every claim by one of the 2 delinquents to recover what has been delivered
under such a contract [a restitutio in integrum (the right of recovery of something
delivered under an illegal contract) has been applied]
 The in pari delicto maxim is not one that can or ought to be applied in all cases; that
it is subject to exceptions which in each case must be found to exist only by regard to
the principle of public policy
 Courts are free to reject or grant a prayer for restoration of something given under an
illegal contract, being guided in each case by the principle which underlies and
inspired the maxim
 In cases where public policy is not foreseeably affected by a grant or a refusal of the
relief claimed, a court might well decide in favour of doing justice btwn the
individuals concerned & so prevent unjust enrichment

 In the present case the lease is invalid, and the parties are both offenders. Thus there
appears to be no considerations of public policy operative in favour of granting the
appellants (J) prayer
 Appeal is dismissed

 The importance of this decision lies in the fact that the AD now took the view that the
in pari delicto rule doesn’t apply without qualification, but that a court has the
discretion to relax the rule in order to do justice btwn the parties (simple justice btwn
man and man) provided that such a relaxation will not be contrary to public policy
 This means that a party may sometimes be allowed to reclaim his performance even
where he was in delicto when he rendered his performance

________________________________________________________________________

Padayachey v Lebese

 Resp (Lebese) was instructed by Ismail to dispose of some 25 cases of condensed

milk & did so to the appellant (Padayachey)
 All 3 parties were well aware that the milk was stolen property
 Resp delivered the goods to the appellant, and received the purchase price of £24
 The next day the appellant ascertained that the cases contained not condensed milk,
but bricks. The probability is that neither resp or Ismail was responsible for this
substitution

109
 Ground of defence given: the original transaction under which the milk was given
was illegal & criminal
 The seller of the stolen property (resp) had failed to deliver to the buyer (appellant)
the property sold; the buyer who had paid the purchase price claimed its refund solely
on the ground of the sellers failure to deliver
 The present cases is not one where the appellant is claiming payment of the purchase
price of property known by him to have been stolen, and therefore directly
endeavouring to enforce an immoral/illegal contract. If it were, relief wld
immediately be refused him on the maxim ex turpi causa non oritur actio
 The present case is one which brings into question the maxim in pari delicto potior
est conditio defendentis – curtails the right if the delinquents to avoid the
consequences of their performance or part performance of such illegal/immoral
contracts
 The question: whether a purchaser of stolen property shld be permitted to enforce the
sellers subsequent agreement to refund the purchase price of such property, which
was sold but not delivered, with the original unlawful transaction having been treated
as at an end in consequence of such non-delivery
 It is against ordinary justice that persons in the position of the resp & Ismail shld be
enriched by permitting them to retain, as against the appellant, moneys for which they
have in fact given no value. In other words, unjust to allow the resp to keep the
money which appellant gave him, when he has not received the goods which he paid
for
 Thus the defence that the resp gets to keep the money on the basis that the entire
contract was illegal and criminal fails

110