18 May 2021 by , and Dispute Resolution Alert

A reflection on the mirror-image rule by the Supreme Court of Appeal

In terms of the law of contract, in order to be recognised as a valid and binding contract, an agreement must satisfy various requirements, including consensus or a meeting of the minds between the parties on all material aspects of the agreement. In other words, there must be a firm, complete and clear offer, or proposal to contract. The assent to the proposal must consequently be unequivocal and unqualified and essentially a ‘mirror image’ of the offer. This concept was deliberated by the Supreme Court of Appeal (SCA) in the case of Millennium Waste Management v Sol Plaatje Municipality (99/2019) [2021] ZASCA 35 (7 April 2021).

In this case, the Municipal Manager of the Sol Plaatje Municipality (the Municipality) issued an invitation for proposals to operate the Kimberley and Ritchie Waste Disposal Site (the Site). On 20 February 2006, Millennium Waste Management (Millennium Waste) submitted a tender, in response to the invitation. It must be noted that the invitation by the Municipality to the public to submit a tender for work to be done was not an offer that was open to acceptance by the highest tenderer. At most, it was an invitation to potential tenderers, in this case Millennium Waste, to make an offer that would be evaluated by the Municipality in accordance with the public procurement prescripts. In order for a valid contract to come into effect, the Municipality would have to, in its acceptance, mirror the offer made by Millennium Waste, unequivocally and unconditionally and this process would have had to be preceded by a proper evaluation in compliance with section 217 of the Constitution.

On 25 July 2007, the Municipality addressed a letter to Millennium Waste, stating that the offer had been accepted subject to further logistical arrangements between the parties for purposes of executing the contract. The discussions between the Municipality and Millennium Waste would conclude with a review of a draft form of the contract.

Notwithstanding the fact that these further logistical arrangements did not take place, Millennium Waste took possession of the Site on 1 October 2007, rendered services, and invoiced the Municipality for these services. When the Municipality declined to pay, Millennium Waste issued summons against the Municipality.

Therefore, the issue for determination before the SCA was whether payments were due to Millennium Waste Management under a contract, which Millennium Waste alleged had come into being when it was advised by the Municipality that its tender had been accepted.

Judgment of the Supreme Court of Appeal

The court stated that the mere notification that the tender had been accepted did not, without more, result in a contract, as the letter of 25 July 2007 made it clear that “arrangements for the execution of the contract” still needed to be made. In particular, the invitation contained an express clause to the effect that conclusion of the contract included, inter alia, a discussion to reach agreement including the content of the proposal, proposed work plan, and budget staffing. The clause made clear that only after this discussion had occurred would the agreed final terms of reference and work plan be determined, and further expressly stated that the discussions would conclude with a review of a draft form of the contact. If the parties failed to reach an agreement, the Municipality would invite the firm that received the second highest score to enter into the said discussions.

Millennium Waste further contended that the provisions in the clause did not apply to it, as it argued that it tendered only for the “Operations” portion of the tender. The court correctly held that there was no merit in this submission, as the tender document was submitted as ‘one composite document’ to be read as such, and in any event, that this submission conflicted with its entire case. The court thus reinforced the principle that a litigant cannot approbate and reprobate.

Accordingly, as the clause in the written proposal envisaged further discussions and the signing in due course of a contract, and it was common cause that this did not happen, the court held that Millennium Waste’s claim rested on an unenforceable agreement to agree. Ultimately, the appeal was struck off the roll with costs.

Conclusion

The Millennium Waste decision demonstrates that in the case of a conditional acceptance of a tender resulting in a mere agreement to agree, without more, such an agreement to agree does not culminate in an enforceable contract. At best, the consequence is merely an inchoate contract. As such, the courts will not readily grant relief where a party renders services merely on the basis of such an inchoate agreement, which expressly envisions the conclusion of a contract which has not subsequently been entered into.

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