Cgee Alsthom Equipments et Enterprises Electriques, South African Division v GKN Sankey (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Corbett JA, Viljoen JA, Botha JA, Nicholas AJA and Nestadt AJA
• Judgment Date: 25 September 1986
• Court: Appellate Division

Cgee Alsthom Equipments et Enterprises Electriques, South African Division v GKN Sankey (Pty) Ltd
1987 (1) SA 81 (A)

1987 (1) SA p81

Citation	1987 (1) SA 81 (A)
Court	Appellate Division
Judge	Corbett JA, Viljoen JA, Botha JA, Nicholas AJA and Nestadt AJA
Heard	August 25, 1986; August 26, 1986
Judgment	September 25, 1986

Flynote : Sleutelwoorde

Contract — Formation of — Offer and acceptance — Subcontractor tendering to perform certain work — Advised by telex that 'the order has been awarded to yourselves' — At C that stage, several matters on which agreement had not been reached — Negotiations continuing, then breaking down and subcontract awarded elsewhere — Subcontractor claiming damages for repudiation of contract — Tender was an offer made animo contrahendi — Words in telex susceptible only of meaning that tender accepted — Whether the initial agreement D acquired contractual force or not depends on intention of parties, to be assessed from their conduct, the terms of the agreement and the surrounding circumstances — Prior to breakdown in negotiations, parties conducting themselves as if contract had been concluded — As a matter of probability, telex constituted unqualified acceptance of tender and, despite E outstanding matters, the agreement had been intended by both parties to constitute a binding contact — Subcontractor entitled to damages for repudiation.

Headnote : Kopnota

The appellant was a member of the consortium which had F contracted to build a nuclear power station for Escom. It was responsible for the supply and installation of all the electrical equipment for the power station, including the supply and installation of an extensive electrical cable network and a support system for the cables. It decided to employ a subcontractor to manufacture and supply the support system. It approached the respondent in November 1978 for a quotation. After the respondent had submitted a preliminary quotation, protracted negotiations followed. Because of the circumstances peculiar to the power station, the appellant and G respondent conducted numerous tests, resuIting in the revision of the specifications, drawings and quality assurance and quality control programmes. Eventually, on 15 June 1979, the respondent submitted its tender. After a meeting between the parties on 19/20 June, an addendum to the tender was submitted on 20 June. At the meeting on 19/20 June, one of the appellant's representatives, who had the authority to contract on its behalf, indicated to the respondent that he could see no H reason why the respondent's tender should not be accepted. On 25 June the respondent was requested by the appellant to place an immediate order with its steel suppliers to enable the respondent to meet the appellant's prescribed delivery schedule. The respondent would not place the order (which was a substantial one) without written confirmation that it had indeed been awarded the contract. The appellant accordingly addressed a telex to the respondent in which it stated, inter alia, that '... we have pleasure in informing you that the I order... has been awarded to yourselves'. On 26 June the respondent placed the order for steel and advised the appellant that it had done so. At that stage there were several matters on which the parties had not yet reached finality. Among other things, these concerned quality assurance and quality control, finish and packing specifications, the general administrative conditions relating to the operation of the contract and the specifications for certain components of the support system. The parties continued meeting and negotiating about these J matters and with a view to settling the terms of

1987 (1) SA p82

A a formal contract. Negotiations broke down in mid-August 1979 and, on 22 August, the appellant informed the respondent that the contract for the fabrication and supply of the cable support system had been awarded to another company. But prior to the breakdown in negotiations, a meeting at Escom to discuss the appellant's revised specifications for the cable support system was attended by representatives of the respondent, who were there by invitation from the appellant. On 20 July, at a meeting between the parties, it was decided that the respondent B should change the grade of steel it would use and that it would conduct tests with reference to the new grade of steel. Furthermore, on 2 August, the appellant sent Escom a quality control programme in which the respondent was referred to as 'the supplier'.

The respondent sued the appellant for damages for repudiation of contract. The respondent's case was that its tender and the addendum thereto had been an offer which the appellant had C accepted in its telex of 25 June 1979 and that there was thus a binding contract between the parties. It also pointed to the conduct of the parties subsequent thereto as evidence that a binding contract had been concluded. The appellant, on the other hand, submitted that the telex had not resuIted in the conclusion of a contract because, at that stage, there had been a number of matters vital to the contract on which agreement had not been reached. The respondent was awarded damages in a Local Division. In an appeal,

Held, that the tender of 15 June, together with the addendum on D 20 June 1979, constituted an offer made animo contrahendi by the respondent.

Held, further, that the words in the telex '... we have pleasure in informing you that the order... has been awarded to yourselves' were susceptible only of the meaning that the respondent's tender had been accepted.

Held, further, that, where in the course of negotiating a contract the parties reach an agreement by offer and acceptance, the fact that there were still a number of outstanding matters material to the contract upon which the E parties had not yet agreed might well prevent the agreement from having contractual force.

Held, further, that whether in a particular case the initial agreement acquired contractual force or not depended upon the intention of the parties, which was to be gathered from their conduct, the terms of the agreement and the surrounding circumstances.

Held, further, that despite the fact that the strong importance attached by the appellant to the outstanding matters F constituted a strong pointer in the direction that no binding contract had resuIted, there were very cogent factors pointing in the opposite direction.

Held, further, that the wording of the telex dated 25 June, the circumstances under which it had been sent and the subsequent conduct of the parties supported the view that they had both regarded the contract as having been awarded to the respondent.

Held, further, that, as a matter of probability, the telex constituted an unqualified acceptance of the respondent's G tender and that, despite the existence of outstanding matters, that agreement had been intended by the parties to constitute a binding contract.

Held, accordingly, that the appellant had repudiated the contract and that the respondent was entitled to damages.

The decision in the Witwatersrand Local Division in GKN Sankey (Pty) Ltd v CGEE Alsthom Equipments et Enterprises Electriques, South African Division confirmed. H

Case Information

Appeal from a decision in the Witwatersrand Local Division (Margo J). The facts appear from the judgment of Corbett JA.

D J B Osborn SC (with him L R G Serrurier) for the appellant referred to the following authorities: Margate Estates Ltd v Moore 1943 TPD at 58 - 9; O K Bazaars v Bloch 1929 WLD 37; I Blundell v Blom 1950 (2) SA at 632; Pitout v North Cape Livestock Co-operative Ltd 1977 (4) SA at 850C - 851D; and further on the facts.

W H R Schreiner SC (with him C M Eloff) for the respondent referred to the following authorities: Electric Process Engraving & Stereo Company v Irwin 1940 AD 220; Belmore v J Minister of Finance 1948 (2) SA 852; Novick and Another v Comair Holdings Ltd and Others 1979 (2) SA at 133G - 134B;

1987 (1) SA p83

Hillas & Co Ltd v Arcos Ltd [1932] 147 LT 503; Pitout v North A Cape Livestock Co-operative Ltd 1977 (4) SA 842; Otto v Heymans 1971 (4) SA at 156E - G; Gralio (Pty) Ltd v D E Claassen 1980 (1) SA 816; Sandler v Wholesale Coal Supplies Ltd 1941 AD 194; Esso Standard SA (Pty) Ltd v Katz 1981 (1) SA 964; Mkwanazi v Van der Merwe and Another 1970 (1) SA 609; and B further on the facts.

Cur adv vult.

Postea (September 25).

Judgment

Corbett JA:

The respondent in this matter sued appellant in the Witwatersrand Local Division for damages for breach of contract C in the sum of R113 947,05. After a long and tortuous trial the trial Judge (Margo J) gave judgment for the respondent in an amount of R86 687,60, together with costs of suit (save for the costs incurred in a certain interlocutory proceeding). With the leave of the Court a quo appellant appeals to this Court against the whole of the judgment and order of the trial Court, D apart from the order as to the costs of the aforementioned interlocutory proceeding.

In broad outline the facts are as follows. The appellant is a company incorporated in France, which carries on business in South Africa. The contract in issue is connected with the construction of the Koeberg nuclear power station near Cape E Town. The main contract for the construction of the entire power station was awarded by the Electricity Supply Commission ('Escom') to a consortium of four French companies. Each member of the consortium undertook responsibility for a particular aspect of the work. The company responsible for the supply of, inter alia, the electrical equipment was Alsthom Atlantique, which is a major shareholder in the appellant. By arrangement F between them (apparently by way of a sub-contract) the appellant undertook to carry out the electrical work which was the responsibility...