2 July 2009

Good faith in contract: has the last word been spoken?

Last year the Constitutional Court was called upon to develop our common law by re-introducing the defence of reasonableness and fairness (exceptio doli generalis) as a defence in the law of contract on the basis that this remedy was in line with constitutional values. In the case in question, Crown Restaurant CC v Gold Reef City Theme Park (Pty) Ltd 2008 (4) SA 16(CC), the Constitutional Court declined to entertain the application.

However, the expectation grows that if the courts are faced with the right set of facts, they will develop our common law to use good faith as an abstract value to intervene in contractual relationships when the terms of a contract are seen to be unfair to a particular party. Until now, public policy has been used to justify judicial intervention and protection of parties in contracts. Our courts have been unwilling to recognise good faith as a general basis for intervening in contracts. The Supreme Court of Appeal made this very clear in the case of Brisley v Drotski 2002 (4) SA 1 (SCA), reported in 2002. Accordingly, if parties to a contract have bound themselves to particular clauses and terms, those terms will be enforced even if same are unreasonable and/or unfair.

In the preface to the fourth edition of the book The Law of Contract in South Africa, the author R H Christie expressed the hope that our courts would develop the concepts of good faith and public policy. In the preface to the fifth edition of his book, he notes that such development has taken place but not in the way he had expected.

He refers to the Brisley case and concludes that: "... it will be a mistake to regard the door as forever closed, and to isolate ourselves from the many other legal systems in which good faith plays a prominent part".

The judiciary's attitude towards good faith is clearly that legal certainty prevails unless overridden by public policy. Unless there are instances of fraud or duress in the conclusion of the contract, our courts have declined to rescue litigants who claim that the enforcement of a contract against them in specific circumstances is unfair.

Some academics, however, take the view that the current approach of our courts is not cast in stone. In the book Contract: General Principles (third edition) by van der Merwe, van Huyssteen, Ryneke & Lubbe, the authors make the observation that "the Appeal Court has, on more than one occasion, made reference to good faith as an operative factor in respect of contracts - and has done so in terms going wider than a mere reference to public policy".

They regard the current approach by our courts as 'impracticable and untenable'. The question is: why should the fact that contracts are based on consensus between the parties necessarily exclude good faith as part of the basis of specific requirements for a valid and enforceable contract?

It seems that the last word has not yet been spoken on this topic. In conclusion, however, it is apparent that our academic writers seem to agree that recognition of good faith by our courts, perhaps as an independent general rule of the law of contract, could (and should) be part of our law in future.

Willem Janse van Rensburg

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