1 February 2016 by and Dispute Resolution Matters

Non-compliance with prescribed mode of acceptance

It is trite law that, as a general rule, no special formalities are required for the conclusion of an enforceable agreement save for those required by law or imposed by the contracting parties. The courts are increasingly faced with disputes on whether an agreement exists in circumstances where the parties fail to comply with a prescribed mode of acceptance. (See Lepogo Construction (Pty) Ltd v The Govan Mbeki Municipality [2015] 1 All SA 153 (SCA) and Bosch Munitech (Pty) Limited v Govan Mbeki Municipality [2015] 4 All SA 674 (GP).

In the Bosch case, the ultimate question was whether the formalities for the acceptance of the offer were complied with in a manner resulting in a binding agreement between the parties in accordance with the prescripts of the tender process and the tender documents. The tender documents required the respondent to indicate acceptance of the offer by signing the acceptance part of the form and returning one copy of the document to the applicant before the end of the period of validity stated in the tender data, “whereupon the tenderer becomes the party named as the contractor in terms of the conditions of contract identified in the contract data”. The respondent, however, did not sign the acceptance part of the form nor did it return a copy thereof, duly signed to the applicant before the end of the period of validity.

The provisions of the tender documents were clear and unambiguous in that an offer had to be made and accepted in accordance with its formalities, and notice of acceptance had to be given within the specified validity period. Any deviations had to be recorded in the schedule of deviations, failing which they would be invalid. Moreover, the tender documentation expressly provided that the contract would only come into effect “on the date when the tenderer receives one fully completed original copy of this document, including the schedule of deviations”. The applicant deviated from the proper tender process and did so at its own peril.

The court held that where the mode of acceptance in a proposed contract is stipulated, it is that mode that must be followed before a contract is concluded. Non-compliance with formalities imposed by one of the parties results in the nullity of the contract. Where a contract is not concluded between the parties because of non-compliance with the prescribed mode of acceptance, no contractual civil obligation (vinculum juris) exists and the parties may not assert the contractual remedies available under the flawed agreement. Performance rendered in terms of a formally defective agreement is regarded as having been made without legal ground (sine causa), and such performance is recoverable by means of an enrichment action and not by contractual remedies.

Non-compliance with prescribed formalities, whether imposed by the parties or by statute, results in the nullity of the transaction.

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