Contractual fairness: Conflict resolved

• Pages: 321-342
• Published date: 23 August 2021
• Date: 23 August 2021
• Author: Price, A.
• Citation: 2021 Acta Juridica 321
• DOI: https://doi.org/10.47348/ACTA/2021/a12

321

https://doi.org/10.47348/ACTA/2021/a12

Contractual fairness: Conict resolved?*

ALISTAIR PRICE†

In 2019 Dale Hutchison ca lled upon the Constitutional Court

to resolve the apparent conict between certain of it s judgments

and those of the Supreme Court of Appeal relating to the mo st

burning issue in South A frican cont ract law, namely, the extent to

which a judge can refuse to enforce a n otherwise valid contract on

the grounds that it would be unduly harsh, un fair or un reasonable

to do so. Two of the Constitutiona l Court’s judgment s handed

down simult aneously in 2020 – Beadica 231 CC v Oregon Trust and

AB v Pridwin P reparatory School – a nswered Dale’s cal l. In Beadica,

the notion that ab stract values such as fair ness, reasonableness and

good faith serve as directly applicable st andards t hat courts m ay

use to control contractual content and enforcement was rejected.

The established Barkhuizen test for public policy should be employed

instead , it was held. Nonetheless Pridwin prov ides fresh impetu s to the

horizonta l application of constitutional rights to cont racting pa rties

in terms of s 8(2) of the Constitution. The courts will have to use the

latter tool ca refully and incrementa lly, particularly in the context of

commercia l contracting, if the caref ul balance between contract ual

fairness and certainty achieved in Beadica is to be preserved.

I INTRODUCTION

In 2019 Dale Hutchison threw down the gauntlet to the Consti-

tutional Court. In a characteristically perceptive and elegant study

of the quest for fair ness in contract law, he explained that

the most burn ing issue in t he modern South African law of cont ract

is the extent to wh ich a judge can refuse to e nforce an otherwi se valid

contract ter m on the grounds that, in t he particular circumstances of

the case, he or she considers that it would be unduly harsh, unfair or

unreasonable to do so.1

* T his work is bas ed on research supp orted by the Nat ional Resear ch

Foundatio n of South Afr ica.

† B BusSci LLB (Cape Town) BCL (Oxon) PhD (Cant ab); Adjunct Asso ciate

Professor, L aw Faculty, Univer sity of Cape Town; member of t he Cape Bar,

advocate of the H igh Court of South Af rica.

1 D Hut chison ‘From bona des to ubuntu: The ques t for fairness in t he South

Afric an law of contract’ (2019) Acta Juridica 99.

2021 Acta Juridica 321

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322 THE FU TURE OF THE LAW OF CONT RACT

https://doi.org/10.47348/ACTA/2021/a12

He pointed to the apparent dierence in approach to this issue

adopted by the Supreme Court of Appeal and the Constitutional

Court, and the resulting legal uncertainty as judges in the High

Court chose which approach to fol low. This has generated

‘a considerable amount of controversy in recent times’.2 For that

reason, Dale underlined ‘the urgent need for strong leadership and

a denitive ruling on the matter by the Constitutional Court’.3

The court has since taken up the gauntlet. On 17 June 2020,

it handed down two judg ments – Beadica 231 CC v Oregon Trust

(‘Beadica’)4 and AB v Pridwin P reparatory School (‘Pridwin’)5 – which

squarely addressed the issue. Indeed, the Beadica judgment cites

the abovementioned study in its rst footnote and may fairly be

read as a self-conscious attempt to rise to Dale’s challenge and

to address the controversy. This contribution therefore considers

these judgments. How have they dealt with the perceived conict

between the appellate courts?

II THE APPARENT CONFLICT

The underlying problem is well known. South A frica, like al l legal

systems, must resolve the inevitable tension between the need for

contracts to be both reasonably predicable and reasonably fair.

If contracts cannot be relied upon, then contracting par ties cannot

plan their aairs, i nvestment is disincentivised, commercial

dealings are undermined, and the formal values of the rule of

law are defeated. But if unconscionable contracts are upheld or if

contracts are enforced in particularly inequitable circumstances,

the legitimacy of contract law is eroded. The conict is intractable

and, at best, must be m anaged. The law does so by employing a

range of doct rinal stand ards of greater or lesser abst raction, rangi ng

from ‘rules’ to ‘principles’ as well as underlying ‘values’. These

doctri nes confer on judges a greater or lesser deg ree of discretion in

their application. The appropriate toolkit of doctrines is inevitably

contested and evolves over time in response to contemporaneous

social conditions and law-making attitudes.

2 Hut chison (n 1) 99.

3 Hut chison (n 1) 101.

4 B eadica 231 CC and Others v Trustees for the time b eing of the Oregon Trust and

Others 2020 (5) SA 2 47 (CC).

5 A B and Another v Pridw in Preparatory Schoo l and Others 2020 (5) SA 327 (CC ).

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