Case Notes: Unfair enforcement of a contract: A step in the right direction? Botha v Rich and Combined Developers v Arun Holdings
| Jurisdiction | South Africa |
| Author | Robert Sharrock |
| Pages | 174-190 |
| Published date | 25 May 2019 |
| Citation | (2015) 27 SA Merc JL 174 |
| Date | 25 May 2019 |
UNFAIR ENFORCEMENT OF A CONTRACT:
A STEP IN THE RIGHT DIRECTION? BOTHA
v RICH AND COMBINED
DEVELOPERS V ARUN HOLDINGS
ROBERT SHARROCK
Professor, School of Law, University of KwaZulu-Natal
I INTRODUCTION
It is well-established that a contractual provision that is not, per se,
illegal will not be enforced if the enforcement would be contrary to
public policy (see e.g. Nyandeni Local Municipality v Hlazo 2010 (4) SA
261 (ECM) paras 81–4; Bredenkamp v Standard Bank of South Africa Ltd
2010 (4) SA 468 (SCA) para 47; GFvSH2011 (3) SA 25 (GNP) paras
18–22). In applying this principle, the Supreme Court of Appeal has
adopted the somewhat dogmatic position that merely because enforce-
ment of a contractual provision would produce an unfair or unreason-
able result does not make the enforcement offensive to public policy (see
e.g. Bredenkamp v Standard Bank of South Africa Ltd 2010 (4) SA 468
(SCA) paras 50–52 ; Maphango v Aengus Lifestyle Properties (Pty) Ltd
(SCA) paras 31–34; cf also Brisley v Drotsky 2002 (4) SA 1 (SCA) paras
11–12). In Botha v Rich 2014 (4) SA 124 (CC), the Constitutional Court
effectively rejected this approach by accepting that, on the facts of that
case, unfairness or unreasonableness was, in itself, a sufficient ground
for declining to enforce a contractual provision. The judgment in
Botha’s case is unsatisfactory in certain respects (not least of which its
failure to mention, let alone consider, the appeal court cases referred to
above) but, being a judgment of the Constitutional Court, it may well be
regarded as marking the beginning of a new judicial attitude to unfair
enforcement of contractual terms.
This note examines the Botha judgment critically and, on the assump-
tion that it impliedly overrules the earlier appeal court cases, suggests
some general principles that may be applied when dealing with unfair
contract enforcement. The note also considers, briefly, the decision in
Combined Developers v Arun Holdings [2014] JOL 30897 (WCC), which
provides a clear example of a claim for contractual enforcement that was
grossly unreasonable or unfair. The confusing reasoning in this case
underscores the need for the courts both to recognise that unfair
174
(2015) 27 SA Merc LJ 174
© Juta and Company (Pty) Ltd
enforcement may, in exceptional cases, offend against public policy and
to adopt a principled approach when dealing with this issue.
II BOTHA v RICH
(a) The factual background
The relevant contractual provision was a cancellation and forfeiture
clause in a sale of land — on instalments. The issue to be decided,
according to Nkabinde J (who delivered the judgment of the court), was
the ‘constitutionality’ of enforcing the clause where the buyer had paid
more than half of the purchase price. The buyer’s contention was that
upholding the clause would be contrary to public policy (para 2).
The first applicant (Botha) was the sole member of the second
applicant, a close corporation (‘the CC’). The CC operated a laundry
service on immovable property owned by a trust (‘the trust’), of which
the three respondents were the trustees (‘the trustees’). Botha bought the
property from the trust for R240 000, payable in monthly instalments of
R4 000. The sale agreement required Botha to pay any amounts levied in
respect of municipal rates, taxes and service fees. It provided that if she
failed to make any payment on the due date she would be liable for
interest on the arrears calculated according to the prescribed rate. The
cancellation and forfeiture clause (clause 13) stated that if Botha
breached the agreement, the trust would be entitled to cancel it, in which
event Botha would forfeit to the trust all payments she had made in
terms of the agreement.
Botha took occupation of the property in terms of the agreement in
November 2003 and paid instalments until October 2007. At this stage,
she had paid approximately R180 000, more than half the purchase
price. She did not pay any further instalments (save for one in January
2009). Her default prompted the trustees to obtain an order in the
magistrate’s court cancelling the agreement and evicting her and the CC
from the property. Botha noted an appeal against this decision and
obtained an interdict in the high court enabling her to resume occupa-
tion of the premises pending finalisation of the appeal. For reasons that
are not explained, the trust abandoned the magistrate’s court judgment
before the appeal was heard.
Botha subsequently sent a letter to the trust demanding transfer of the
property against registration of a first mortgage bond over the property
in favour of the trust securing payment of the balance of the price with
interest. Botha relied on s 27(1) of the Alienation of Land Act 68 of 1981
(‘the Act’) which provides:
UNFAIR ENFORCEMENT OF A CONTRACT 175
© Juta and Company (Pty) Ltd
To continue reading
Request your trial