Good Faith is not Dead: It still Lives after Beadica 231 CC v Trustees, Oregon Trust

• Author: van Eck, M.
• DOI: https://doi.org/10.47348/SAMLJ/v34/i1a2
• Published date: 24 October 2022
• Date: 24 October 2022
• Citation: (2022) 34 SA Merc LJ 29
• Pages: 29-51

GOOD FAITH IS NOT DEAD: IT STILL LIVES

AFTER BEADICA 231 CC v TRUSTEES,

OREGON TRUST

MICHELE VAN ECK*

Senior Lecturer, Department of Private Law, University of Johannesburg

Abstract

In Beadica 231 CC v Trustees, Oregon Trust, the Constitutional

Court provided much-needed clarity on the role of equity principles

(fairness, reasonableness and good faith) in contracts, in that the

abstract principles found in equity principles will not apply directly to

contractual engagements but will apply indirectly by means of public

policy considerations. This article illustrates that this default position,

as articulated by the Constitutional Court, does not completely exclude

good faith in contractual engagements. In fact, good faith is infused in

the entire contract lifecycle, starting from negotiation and presenting

itself even in certain remedial action. In addition, there are a number

of exceptions to the default position in that equity principles can be

established by means of express incidentalia (in the form of good faith

clauses), and could even be imported ex lege in consumer contracts by

means of the Consumer Protection Act 68 of 2008. It can therefore be

said that the operation of equity principles, such as good faith, in South

African contractual engagements is neither dead nor obsolete. Rather,

good faith has survived the Constitutional Court’s decision and

continues to manifest itself in different ways in contracts reaffirming

the place of good faith as a cornerstone principle in the operation of the

law of contract.

Keywords: fairness; reasonableness; good faith; equity principles; drafting of

good faith clause; pacta sunt servanda

IINTRODUCTION

The exact role of fairness, reasonableness and good faith (collectively

referred to as ‘the equity principles’) in private contractual engagements

*BCom (Law) (RAU), LLB (UJ), LLM (UJ), PG Dip Interpretation & Drafting of Contracts

(UJ), Dip Corporate Law, LLD (UP), BTh (SATS). This contribution was partly inspired by

the class discussions and engagements regarding the issue of good faith in the postgraduate

Drafting of Contracts module presented at the University of Johannesburg in 2021.

29 https://doi.org/10.47348/SAMLJ/v34/i1a2

(2022) 34 SA Merc LJ 29

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has been a matter of academic debate in South Africa for many years.

1

At the centre of this debate is the question of the exact role played by the

Constitution of the Republic of South Africa, 1996 (‘the Constitution’)

and the equity principles in contracts. This was seemingly settled in 2020

with the Constitutional Court’s decision in Beadica 231 CC v Trustees,

Oregon Trust.

2

For many, this signalled the end of the matter in that

abstract values embedded in the equity principles are not freestanding

principles directly employed in the enforcement of contracts, but rather

that such equity principles should apply indirectly to contractual

engagements through the principle of public policy.

3

It is not the

intention of this article to analyse the correctness of the Constitutional

Court’s position regarding the application of the equity principles in

contracts or to consider the viability of such arguments.

4

Rather, this

article considers whether the default position related to the application

of equity principles in contracts, as conf‌irmed by Beadica, can be

1

See, for example, some of this debate found in Barnard-Naudé, ‘‘‘Oh what a tangled web

we weave ...’’ Hegemony, freedom of contract, good faith and transformation — Towards a

politics of friendship in the politics of contract’ (2008) 1(1) Constitutional Court Review 155;

Barnard-Naudé, ‘Of Dorothy’s dog, ‘‘poststructural’’ fairy tales ... and the real: Power, poverty

and the general principles of the South African law of contract’ (2013) 29(3) SAJHR 467;

Bhana, ‘Contract law and the Constitution: Bredenkamp v Standard Bank of South Africa Ltd

(SCA)’ (2014) 29(2) SAPL 508; Bhana, ‘The Constitutional Court as the apex court for the

common law of contract: Middle ground between the approaches of the Constitutional Court

and the Supreme Court of Appeal’ (2018) 34(1) SAJHR 8; Bhana & Meerkotter, ‘The impact

of the Constitution on the common law of contract: Botha v Rich NO (CC)’ (2015) 132(3)

SALJ 494; Brand, ‘The role of good faith, equity and fairness in the South African law of

contract: A further instalment’ (2016) 27(2) Stell LR 238; Du Plessis, ‘Harmonising legal

values and ubuntu: The quest for social justice in the South African common law of contract’

(2019) 22(1) PER/PELJ 1; Du Plessis, ‘Legal pluralism, ubuntu and the use of open norms in

the South African common law of contract’ (2019) 22(1) PER/PELJ 1; Glover, ‘Lazarus in the

Constitutional Court: An exhumation of the exceptio doli generalis?’ (2007) 124(3) SALJ 449;

Hawthorne, ‘The end of bona f‌ides’ (2003) 15(2) SA Merc LJ 271; Hutchison, ‘Good faith in

contract: A uniquely South African perspective’ (2019) 1(1) Journal of Commonwealth Law

227; Hutchison, ‘From bona f‌ides to ubuntu: The quest for fairness in the South African law of

contract’ (2019) 1 Acta Juridica 99; Kerr, ‘The defence of unfair conduct on the part of the

plaintiff at the time action is brought: The exceptio doli generalis and the replicatio doli in

modern law’ (2008) 125(2) SALJ 241; Louw, ‘Yet another call for a greater role for good faith

in the South African law of contract: Can we banish the law of the jungle, while avoiding the

elephant in the room?’ (2013) 16(5) PER/PELJ 44/614; Sharrock, ‘Unfair enforcement of a

contract: A step in the right direction? Botha v Rich and Combined Developers v Arun Holdings’

(2015) 27(1) SA Merc LJ 174; Siliquini-Cinelli & Hutchison, ‘Constitutionalism, good faith

and the doctrine of specif‌ic performance: Rights, duties and equitable discretion’ (2016)

133(1) SALJ 73.

2

2020 (5) SA 247 (CC).

3

See further discussions on this matter in Thompson, ‘Beadica 231 CC: An end to the

trilogy?’ (2020) 137(4) SALJ 641; Rautenbach, ‘Constitution and contract: Indirect and direct

application of the Bill of Rights on the same day and the meaning of ‘‘in terms of law’’’ (2021)

TSAR 379.

4

Any such discussion would conceivably have to consider the position of debate, referred

to in note 1 above.

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