Government Contracts in South Africa: Constructing the Framework

• Jurisdiction: South Africa
• Citation: (2016) 27 Stell LR 88
• Published date: 27 May 2019
• Date: 27 May 2019
• Pages: 88-111

GOVERNMENT CONTRACTS IN SOUTH

AFRICA: CONSTRUCTING THE FRAMEWORK*

Raisa Cachalia

BA LLB LLM (Current)

Researcher, South African Institute for Advanced Constitutional, Public, Human Rights

and International Law, A Centre of the University of Johannesburg

1 Introduction

While South Afr ican courts gener ally accept that there is somet hing

different about government cont racts some of the time, there h as been a

tendency to xate on t he bright-line divide between public and private law to

justify subjecti ng the state to either different or t he same treatment as private

parties. A recent exa mple is Trencon Construction (Pty) Ltd v Indus trial

Development Corpora tion of South Africa Ltd, where the Constitutional

Court rema rked that:

“Although there may be an interplay between public and private law, the distinction must not be

collapsed. Ordinarily, an issue like contract price adjustment that is subject to negotiation after the

procurement process has taken place, ought to fall squarely within the domain of private law. It is

subject to ordinary contractual negotiations between enterprising parties.”1

This preoccupation with classication has resulted in a failure to give proper

attention to the fact th at the state is always different, albeit to var ying degrees.

It has also frust rated the development of substantive legal rules s uitable to

the unique context of government cont racting by preventing a full and proper

theorising of the substa ntive reasons why we should treat the state d ifferently

in a particula r case.2 In this article, I argue that it is the st ate’s distinctiveness

as a contracting par ty, rather than the classicat ion of its activities as being

subject to public or private law, that should inform our approa ch to regulation.

The foundations of this approa ch can be found in some of the positive features

of foreign jurisdictions such as Franc e and Germany, both of which recognise

the uniqueness of the stat e in the rules and pr inciples that are applied.3 Most

* This art icle is based on the resea rch report I submit ted in partial f ulfilment of the deg ree of LLM at the

University of the W itwatersrand. I am dee ply indebted to Cora Hoexter for h er attentiveness, ongoin g

support an d excellent supervi sion. I am also gratef ul to Leo Boonzaie r for being my sounding b oard and

to Annabel R aw and Meghan Finn for t heir valuable sugges tions and advice.

1 Trencon Constr uction (Pty) Ltd v I ndustrial De velopment Cor poration of Sou th Africa Ltd 2015 5 SA 245

(CC) para 75. See fur ther Cape Metropolita n Council v Metro Inspect ion Services (Wester n Cape) CC

2001 3 SA 1013 (SCA) 1023H-1024B; Steenkamp v Pr ovincial Tender Board of th e Eastern Cape 200 6 3

SA 151 (SCA) 158C-E.

2 See in genera l C Hoexter “Contr acts in Admi nistrative Law: Li fe After Forma lism” (2004) 121 SALJ 595.

See furthe r G Quinot State Commercial Activity: A Legal Framework (2009) 52-128 where he argues,

relying on Hoext er, that this obse ssion with classif ication has heig htened uncer tainty as t o what the

applicable legal r ules are (since it dep ends on the relat ive weight attached t o particula r factors), has

been badly in consistent (even “schi zophrenic”) and is genera lly formalist ic in its preoccup ation with

pigeonholing s tate conduct into on e or other category.

3 See C Turpin “Publ ic Contracts” in A Von Meh ren (ed) Internation al Encyclopedia of C omparative Law

(1982) 27 and 32.

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(2016) 27 Stell LR 88

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crucially, they may be found in the development of the dictu m in Logbro

Properties CC v Bedde rson (“Logbro”) that the pri nciples of administrative

justice “f ramed the parties’ contra ctual relationship, and conti nued … to

govern the [exercise] of the rights [derived] from the contract.”4

This notion of “fram ing” is pivotal to developing an understa nding of the

relationship, and inevitable tension, bet ween those contract ual obligations of

the state that are volunta rily assumed and those that a re imposed by the broader

constitutional context. I n effect, once we accept that the stat e is a different

kind of contracti ng party with u nique features and ver y particular goals, we

can begin to under stand why administrative law will “f rame” the contractual

relationship and more part icularly, why contractual ter ms may be moulded

by, and in some cases be expected to yield to, this bro ader context.5 That

is not to say that contract ual underta kings are ir relevant.6 In fact Cameron

JA af rmed their continued signicance sinc e, for exa mple, t hey might be

brought to bear “on the exa ct ambit of the ever-exible duty to act fairly” 7 on

the part of the state. But it is to ack nowledge that there will be cir cumstances

in which existing contr actual obligations may be overridden by broader public

duties and considerations of policy.8

To contextualise this arg ument, I begin by stipulating a worki ng denition

of “government contracts” in sect ion 2 1. The purpose of which is to high light

those kinds of con tract s in which cl assic ation, a nd the ten dency to e quate th e

state with an ordinar y commercial player, have been most inuential. This, in

turn, infor ms my critique of the current preference for classication in section

2 2. Next, in section 3, I describe t hose features that make t he state unique in

the contractu al setting. These spe cial characterist ics, I argue, ought to guide

the development of a distinctive body of rules (combining bot h contractual

and admini strative elements) that will apply to government cont racts. More

particularly, in section 4, I propose three areas in which specic rules would

be des irable:

4 1 in developing an u nderstanding of the rea sons why, and the extent to

which, a public authority’s decision to terminat e a contract should attract

procedural fair ness;

4 2 i n striki ng a balance between government effec tiveness and the public

interest in the no-fett ering rule; and

4 3 in recognising a claim for comp ensation arising from t he unlawful, and

at times lawful, a cts of the administration in cer tain circumstances.

Finally, in section 5 I make concluding remark s.

4 Logbro Proper ties CC v Bedderso n 2003 2 SA 460 (SCA) 467A (emphasis added).

5 466A-G where the c ourt said that the c onsequence of this i s that “some of its contr actual rights – s uch as

the entitleme nt to give no reasons – wou ld necessari ly yield before its public d uties under the C onstitution

and any applicabl e legislation.”

6 See dictum of Cameron J i n KwaZulu-Natal Joint Lia ison Committee v MEC, D epartment of Edu cation,

KwaZulu-Natal 2013 4 SA 262 (CC) para 35 in relation to the e nforceability of co ntractual te rms:

“Government often co ntracts, of course, a nd the courts give effe ct to the obligations it unde rtakes in

doin g so.”

7 Logbro Proper ties CC v Bedderso n 2003 2 SA 460 (SCA) 466H-467A.

8 See Hoexter (2004) SALJ 6 05.

GOVERNMENT CONTRACTS IN SOUTH AFRICA 89

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