Botha (Now Griessel) and Another v Finanscredit (Pty) Ltd

• Jurisdiction: South Africa

Botha (Now Griessel) and Another v Finanscredit (Pty) Ltd
1989 (3) SA 773 (A)

1989 (3) SA p773

Citation	1989 (3) SA 773 (A)
Court	Appellate Division
Judge	Hoexter JA, Nestadt JA, Milne JA, Grosskopf AJA, Nicholas AJA
Heard	March 13, 1989
Judgment	May 19, 1989

Flynote : Sleutelwoorde B

Contract — Legality — Contract contrary to public policy — In investigating whether a contract is contrary to public policy, it should be borne in mind (a) that, while public policy generally favours the utmost freedom of contract, it nevertheless takes into account C the necessity for doing simple justice between man and man, and (b) that a court's power to declare a contract contrary to public policy should be exercised sparingly and only where impropriety and the element of public harm are manifest — Court holding that clause in a deed of suretyship providing that the suretyship 'shall not be cancelled save D with the written consent of the creditor' not contrary to public policy.

Waiver — What constitutes — Communication of waiver to party released — Semble: Even in the absence of communication to the party released, waiver may in an appropriate case be established by proof of E an overt act or acts clearly evincing the creditor's intention to surrender his right against the debtor — Waiver in instant case not established as act relied upon as a waiver (a resolution of a committee of the creditor company) held not to amount to a waiver of the creditor's rights against the debtor.

Penalty — Enforceability of — Section 2(1) of Conventional F Penalties Act 15 of 1962 — Section providing that creditor not entitled to recover, in respect of an act or omission which is the subject of the penalty stipulation, damages in lieu of the penalty, except where the contract expressly so provides — Agreements providing that, on breach by purchaser/lessee, the seller/lessor would G be entitled to a penalty and to claim any damages which it might have sustained — Contractual right to claim damages in addition to the penalty includes the lesser right of claiming damages in lieu of the penalty — Court holding that in such circumstances s 2(1) of the Act complied with and damages in view of the penalty claimable.

Headnote : Kopnota

In an investigation into the question whether a contract or a H provision of a contract is unenforceable on the grounds of public policy, there must be borne in mind: (a) that, while public policy generally favours the utmost freedom of contract, it nevertheless properly takes into account the necessity for doing simple justice between man and man; and (b) that a court's power to declare contracts contrary to public policy should be exercised sparingly and only in cases in which the impropriety of the transaction and the element of public harm are manifest.

I The Court rejected a contention that a clause in a deed of suretyship which provided that the deed of suretyship 'shall not be cancelled save with the written consent of a creditor' was contrary to public policy. The sureties had bound themselves as sureties in order to obtain essential credit facilities for a certain company and the Court held that the proposition that the accessory liability of the sureties should have subsisted for so long as the debtor owed money to the creditor was not only commercially sound but also both legally and J morally unexceptionable.

1989 (3) SA p774

A Semble: Even in the absence of communication of a waiver by a creditor to the party released, waiver or release may, in an appropriate case, be established by proof of an overt act or acts clearly evincing the creditor's intention to surrender his right against the debtor.

The Court held, however, that the debtor, a surety, had not established that the waiver relied upon (a resolution by the management committee of the creditor company) had been established. The Court found that it B had not been shown on a balance of probabilities that the resolution in question constituted a waiver by the creditor which released the sureties from their suretyships.

The creditor (the plaintiff) had claimed against the defendants (sureties for the principal debtor) amounts which constituted damages for the breach of certain leases and hire-purchase agreements, computed as the difference between what the creditor had actually received and what it would have received had the principal debtor duly performed C its contractual obligations. The leases and the hire-purchase agreements conferred upon the creditor the right to claim certain penalties and also the right to claim damages. Relying on s 2(1) of the Conventional Penalties Act 15 of 1962, which provides that 'a creditor shall not be entitled to recover in respect of an act or omission which is the subject of a penalty stipulation..., except where the relevant contract so provides,... damages in lieu of the penalty', the sureties D contended that the lease agreements and hire-purchase agreements did not expressly provide that the creditor could recover damages in lieu of the penalty and that the claim had to fail. The Court held that, if the contracts in question gave to the creditor, as they did, the right to claim damages in addition to the penalty, that would include the lesser right of claiming damages in lieu of the penalty and that there was accordingly no merit in the contention of the sureties.

De Lange v Deeb 1970 (1) SA 561 (O) approved and applied.

The decision in the Transvaal Provincial Division in Finanscredit E (Pty) Ltd v Botha and Another confirmed.

Case Information

Appeal from a decision in the Transvaal Provincial Division (Human AJ). The facts appear from the judgment of Hoexter JA.

W G Muller SC (with him J N de Vos ) for the appellants referred to F the following authorities: Adams v SA Motor Industry Employers Federation 1981 (3) SA 1189 (A); Smit v Rondalia Versekeringskorporasie van Suid-Afrika Bpk 1964 (3) SA 338 (A); Strauss v De Villiers en 'n Ander 1983 (1) SA 1 (A); Tuckers Land and Development Corporation (Pty) Ltd v Kruger 1973 (4) SA 741 (A); Swart en 'n Ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A); Christie Law of Contract in SA at 382 G re severability; J O Markowitz & Son Trust Co (Pty) Ltd v Bassous 1966 (2) PH A65 (C); Levin v Drieprok Properties (Pty) Ltd 1975 (2) SA 397 (A); Fourlamel (Pty) Ltd v Maddison 1977 (1) SA 333 (A); Compaan v Dorbyl Structural Engineering (Pty) Ltd 1983 (4) SA 107 (T); Visser v Theodore Sassen & Son (Pty) Ltd 1982 (2) SA 320 (C); SA General Electric H Co (Pty) Ltd v Sharfman and Others NNO 1981 (1) SA 592 (W); Patel v Patel 1968 (4) SA 51 (D); Webb v Shell Zimbabwe (Pvt) Ltd 1982 (2) SA 763 (ZS); Robb NO v Standard Bank Ltd and Another 1979 (2) SA 420 (R); Norex Industrial Properties (Pty) Ltd v Monarch SA Insurance Co Ltd 1987 (1) SA 827 (A); Sapirstein and Others v Anglo African Shipping Co (SA) Ltd 1978 (4) SA 1 (A); Du Toit en 'n Ander v Barclays Nasionale Bank I Bpk 1985 (1) SA 563 (A); Trust Bank of Africa Ltd v Frysch 1977 (3) SA 562 (A); Johnston v Leal 1980 (3) SA 927 (A); Traub v Barclays National Bank Ltd; Kalk v Barclays National Bank Ltd 1983 (3) SA 619 (A); Neon and Cold Cathode Illuminations (Pty) Ltd v Ephron 1978 (1) SA 463 (A); Moti & Co v Cassim's Trustee 1924 AD 720; French v Stirling Finance Corporation (Pty) Ltd 1961 (4) SA 732 (A); Pizani and Another v J First Consolidated Holdings (Pty) Ltd 1979 (1) SA 69 (A);

1989 (3) SA p775

A LTA Engineering Co Ltd v Seacat Investments (Pty) Ltd 1974 (1) SA 747 (A); Johnson v Incorporated General Insurances Ltd 1983 (1) SA 318 (A); Berman v Teiman 1975 (1) SA 756 (W); Van Achterberg v Walters 1950 (3) SA 734 (T); Floral Displays (Pty) Ltd v Bassa Land & Estate Co (Pty) Ltd 1965 (4) SA 99 (D); Labuschagne v Denny 1963 (3) SA 538 (A); Hillock and B Another v Hilsage Investments (Pty) Ltd 1975 (1) SA 508 (A); JPS Nominees (Pty) Ltd v Kruger 1976 (1) SA 89 (W); Federated Timbers (Pretoria) (Pty) Ltd v Fourie 1978 (1) SA 292 (T); SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA 760 (A); Impala Distributors v Taunus Chemical Manufacturing Co (Pty) Ltd 1975 (3) SA 273 (T); Clemans v Russon Bros (Pty) Ltd 1970 (3) SA 686 (E); Hepner v Roodepoort-Maraisburg Town Council 1962 (4) SA 772 (A); Borstlap C v Spangenberg en Andere 1974 (3) SA 695 (A); Weinerlein v Goch Buildings Ltd 1925 AD 282; Zuurbekom Ltd v Union Corporation Ltd 1947 (1) SA 514 (A); Novick and Another v Comair Holdings Ltd and Others 1979 (2) SA 116 (W); Rand Bank Ltd v Rubenstein 1981 (2) SA 207 (W); Neuhoff v York Timbers Ltd 1981 (4) SA 666 (T); Edwards v Tuckers Land and D Development Corporation (Pty) Ltd 1983 (1) SA 617 (W); Aris Enterprises (Finances) (Pty) Ltd v Waterberg Koelkamers (Pty) Ltd 1977 (2) SA 425 (A); Arprint Ltd v Gerber Goldschmidt Group South Africa (Pty) Ltd 1983 (1) SA 254 (A); Robin v Guarantee Life Assurance Co Ltd 1984 (4) SA 558 (A); Victoria Falls & Transvaal Power Co Ltd v Consolidated Langlaagte Mines Ltd 1915 AD 1; Sommer v Wilding 1984 (3) SA 647 (A); Versfeld v E SA Citrus Farms Ltd 1930 AD 452; F J Hawkes & Co Ltd v Nagel 1957 (3) SA 126 (W); Jayber (Pty) Ltd v Miller and Others 1981 (2) SA 403 (W); Moreriane v Trans-Oranje Finansierings- en Ontwikkelingskorporasie Bpk 1965 (1) SA 767 (T); Sydney Road Holdings (Pty) Ltd v Simon 1981 (3) SA 104 (D); Da Mata v Otto NO 1972 (3) SA 858 (A); De Pinto and Another F v Rensea Investments (Pty) Ltd 1977 (2) SA 1000 (A); Tamarillo (Pty) Ltd v B N Aitken (Pty) Ltd 1982 (1) SA 398 (A); Parekh v Shah Jehan Cinemas (Pty) Ltd and Others 1982 (3) SA 618 (D); Claude Neon Lights (SA) Ltd v Schlemmer 1974 (1) SA 143 (N); Custom Credit Corporation (Pty) Ltd v Shembe 1972 (3) SA 462 (A); Labuschagne v Northmead Investments Ltd 1966 (4) SA 120 (W) G ; De Lange v Deeb 1970 (1) SA 561 (O); Tierfontein Boerdery (Edms) Bpk v...