On Constitutive Formalities, Estoppel and Breaking the Rules

• Jurisdiction: South Africa
• Date: 27 May 2019
• Author: Franziska Myburgh
• Citation: (2016) 27 Stell LR 254
• Published date: 27 May 2019
• Pages: 254-272

ON CONSTITUTIVE FORMALITIES, ESTOPPEL

AND BREAKING THE RULES

Franziska Myburgh

BA LLB LLD

Senior Lecturer in Private Law, Stellenbosch University

1 Introduction

This article focuses on the general rule in South African law that a

successful reliance on estoppel should not result in the enforcement of an

agreement prohibited by law.1 More particularly, it considers the application

of the rule in the context of formally defective sales of land and suretyships,

where section 2(1) of the A lienation of Land Act 68 of 1981 and se ction 6 of

General Law Amendme nt Act 50 of 1956 respectively prescribe nullity in the

event of formal non-compliance.2 The content ion is that the blanket exclusion

of estoppel here should be reconsidered.

As we shall see, certain civilian and common-law jurisdictions recog nise

that there are circu mstances which just ify the award of a remedy which

gives effect to a party’s reliance or expectation interest, even where formal

requirements dict ate that the contract is void or unenforceable due to non-

compliance. For example, English courts have considered the applicability of

estoppel and Germa n courts may award a remedy based on paragraph 242 of

the Bürgerliches Gesetzbuch (“BGB”), or in ter ms of the doctrine of culpa in

contrahendo. These alternative approaches are discussed below, in order to

determine whether they are in any sense u seful and usable within the South

African context.

At this point, the reader m ay be forgiven for wondering what the topic has to

do with Gerhard Lubbe, to whom th is special edition of the Stellenbosch Law

Review is ded icated. This article ultimately arg ues that sometimes it would be

in the public interest to allow estoppel to operate so that, indirectly, effect is

given to a formally invalid agreement. This is based on Lubbe’s proposition

that public policy, and indeed private law in general, is based on competing

1 See eg City of Tshwan e Metropolitan Municip ality v RPM Bricks (P ty) Ltd 2008 3 SA 1 (SCA) para 13;

Nyandeni Loc al Municipality v Hla zo 2010 4 SA 261 (ECM) para 49; JC Sonnekus Ra bie and Sonnekus

The Law of Esto ppel 3 ed (2012) 291; PJ Visser & JM Potgiet er Estoppel: Ca ses and Materials (199 4)

307; S van der Merwe, LF va n Huyssteen, MF B Reinecke & GF Lubbe Contract: General Principles 4 ed

(2012) 29.

2 The decision to foc us only upon sales of l and and suret yships is deliber ate. Determ ining whethe r estoppel

should succee d in the context of co nstitutive fo rmalitie s depends, in ter alia, upon th e purpose of a

particula r formal requirement (see 4 below). It is beyond the sc ope of this article to conside r this issue in

relation to all t he different typ es of agreements subje ct to formalities wh ich result in nullit y in the event

of formal non-c ompliance. The h ope is that the li mited focus of th is discussion m ight neverthele ss suggest

a general appr oach to the use of estopp el in this area of the la w.

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(2016) 27 Stell LR 254

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values or principles which must be weighed against each other in order to

reach a fair outcome in a par ticular situation.3 Thus, he has state d that

“’n [b]eskouing van die privaatreg toon onomwonde dat die outonomiebeginsel nie die enigste

tersake beginsel is nie. Ons reg erken meerdere, kompeterende beginsels en beleidsfaktore wat

benewens die outonomiebeginsel fungeer as determinante van regsreëls en -instellings. Alhoewel

meerdere relevante oorwegings in ’n bepaalde geval op dieselfde regsgevolg mag dui, sal dit dikwels

gebeur dat hulle in botsing staan met mekaar en uiteenlopende regsgevolge voorskryf … Botsende

of kompeterende beginsels moet relativerend in ag geneem word by die daarstel van regsreëls en

-instellings. Regters moet gewigte toeken aan mededingende beginsels en oorwegings en reëls en

begrippe ontwikkel wat uitdrukking gee aan hierdie waarde-ordening.”4

Although this view was expr essed as a prelude to explaining why fault may

sometimes be required for a successful reliance on the defence, it is broad

enough also to suggest an appr oach to dealing with the other requireme nts for

the operation of estoppel,5 includi ng the rule that estoppel should not succeed

where this would be contrar y to public policy. Accordingly, the next section

of this article will examine the competing policy considerations underlying

constitutive formalities, before proceeding to a discu ssion of the ways in

which different legal systems provide judges w ith the means to navigate

between these competi ng considerations.

2 The functions and dysfunctions6 of form

The notion that formalities full certain functions is not novel.7 They may

promote certainty, in that compliance with the relevant provisions forces

parties to reduce t heir agreement to w riting, with the docu ment serving as

evidence of that agreement. The reduction of the agreement to writing can

also draw a part y’s attention to the fact that he may be assu ming a potentially

onerous obligation and that he should exercise caution before doing so. Finally,

writing can signal the end of the negotiation phase, and ser ve as a means to

distinguish between enforceable and unenforceable transactions. Lon Fuller

referred to these advantages as the evidentiar y, cautionary and channelling

functions of formal re quirements.8

The fact that formalities full these functions can make them a useful tool to

prevent fraudulent claims in t ransactions like the sale of land and suret yships

3 See eg GF Lubbe “Bona Fides, Billik heid en die Openbare B elang in die Suid-Af rikaanse Kont raktereg”

(1990) 1 Stell LR 7 16 and GF Lu bbe “Estoppel, Vertrouen sbeskerming en die St ruktuur van d ie Suid-

Afrika anse Privaat reg” (1991) TSAR 1 14.

4 Lubbe (1991) TSAR 14 (footnotes omitted).

5 18, where the possibi lity of a broader applic ation of these ideas wa s raised, but not add ressed.

6 This label is us ed by J Perillo “The Stat ute of Frauds in the Light of the Fu nctions and Dysfu nctions of

Form” (1973-1974) 43 Fordham LR 39 to describe the disadva ntages of formalit ies.

7 See eg Grotius D e Jure Belli ac Pacis Libri Tres II tr F W Kel sey (1925) 331-332; J Austin “Fra gments

– On Contr acts” in R Camb ell (ed) Lectures o n Jurisprudenc e or the Philosophy of Positiv e Law II 5 ed

(1911) 907; R Von Jhering L’Esprit du Droit Ro main dans les Dive rses Phases de Son Dé veloppement III

2 ed tr O de Meulenaere (1877) 177-183. An Englis h translat ion of the original German version, Geist

des römische n Recht auf den verschiede nen Stufen seiner Entw icklung (1865) can be found in AT von

Mehren & JR Gor dley The Civil Law System: An Int roduction to the Compara tive Study of Law 2 ed

(1977) 898-900.

8 L Fuller “Consid eration and Form” (1941) 41 Colum LR 799 800-801.

CONSTITUTIVE FORMALITIES AND ESTOPPEL 255

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