15 September 2011 by

Read what you sign

Many of us sign documents without reading them. Often, this doesn't create a problem but what if you were to discover afterwards that you have signed something with which you are very unhappy. This is what happened in the case of Slipknot Investments 777(Pty) Ltd vs Du Toit (176/2010)[2011] ZASCA 34 (28 March 2011), where Du Toit signed a document but later discovered that he had also bound himself personally for the debts of a trust. He claimed that he was not bound to the terms of the document as he was unaware of the nature of the document that he had signed.

Du Toit, his brother and his nephew were all trustees of a trust. They signed documents to enable the trust to borrow R6 million from Slipknot. The trust did not pay the loan and Slipknot issued summons against both the trust and the three trustees on the basis of the suretyships that they had signed. Du Toit complained that his brother and nephew did not draw to his attention that he was also signing a deed of suretyship and said he was not bound as he did not intend to enter into a suretyship. That mistake was a unilateral mistake and the Supreme Court of Appeals (SCA) considered in this regard the decision in National and Overseas Distributors Corporation (Pty) Ltd v Potato Board 1958(2)SA 473 A). In that case, the then Appellate Division of the Supreme Court said in the context of a unilateral mistake that:

"our law allows a party to set up his own mistake in certain circumstances in order to escape liability under a contract into which he has entered. But where the other party has not made a misrepresentation and has not appreciated at the time of acceptance that his offer was being accepted under a misrepresentation the scope for a defence of unilateral mistake is very narrow, if it exists at all. At least the mistake (error) would have to be reasonable (justus) and it would have to be pleaded."

To determine if the mistake was reasonable the SCA considered whether Slipknot was culpable in the mistake. Here it relied on Du Toit's submission that Slipknot was blameless as the misrepresentation as to the nature of the document came from his brother and his nephew. The SCA then considered if there was a duty on Slipknot to inform Du Toit of the terms relating to the suretyship terms and found that "even a cursory glance" at the documents would have alerted Du Toit that he was signing a suretyship. The SCA also considered the submission that Du Toit was a farmer and found it irrelevant as he was a trustee with trusts of his own and that Slipknot was entitled to rely on his signature as a surety just as it was entitled to rely in his signature as a trustee.

The SCA therefore found that Du Toit's mistake was not reasonable and there was no basis to suggest that Slipknot knew or ought, as a reasonable person, to have known Du Toit's mistake.

The message here is clear and simple: read what you sign.

Tim Fletcher and Mbali Kubeka

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