No longer saved by the fine print
No longer saved by the fine print
In the recent case of UPS SCS South Africa (Pty) Ltd v Hendrik Cornelis van Wyk t/a Skydive Mossel Bay the Supreme Court of Appeal (SCA) was called upon to determine an appeal against a claim for damages arising from a plane engine, a trailer fire and some fine print, or, more plainly, an alleged breach of contract.
At a glance
- The case involved a dispute between UPS and Mr. van Wyk over the transport of an airplane engine, where the engine was destroyed in a fire during transit.
- The terms and conditions limiting UPS' liability, found in a credit application, were at the center of the dispute.
- The Supreme Court of Appeal ruled in favor of van Wyk, finding that the terms and conditions did not form part of the agreement as they were not properly communicated and understood by van Wyk. The court emphasized the importance of explicit agreement between parties in including terms in contracts.
The appellant, UPS, had been approached by the respondent, Mr van Wyk, to transport an airplane engine from the United States (US). Van Wyk, who runs a skydiving business, had sent the engine to the US for repairs and overhaul. Although no formal contract had been signed between UPS and Van Wyk, an exchange of emails between the parties made it clear that a contract came into existence. The terms of the contract were simple – UPS would transport the engine from the US and deliver it to Van Wyk in South Africa via sea, in exchange for payment of a transport fee. UPS informed Van Wyk that he needed to have an account with it in order for the shipment to take place. Van Wyk signed a credit application in order to open the required account. The credit application contained certain terms and conditions, many of which limited UPS’ liability, in very small print, which was difficult to read and not found on the front page of the credit application.
After concluding the agreement, Van Wyk informed UPS that the delivery of the engine had become rather urgent as the current engine used in one of his planes was approaching the 1,500-hour limit. As a result, UPS confirmed that it would send the engine via air freight, as opposed to via sea. Unfortunately, the engine did not leave the US by air or by sea. In a bizarre turn of events, the truck and trailer carrying the engine caught fire and the engine was completely destroyed. UPS then sent Van Wyk an insurance claim form, as well as a request for the estimated value of the engine. Three months later, UPS informed him that the shipment had in fact not been insured. Additionally, UPS claimed that in accordance with the terms and conditions set out in the credit application, it was only liable for an amount of US$500 per shipment (roughly R5,000 at the time). The cost to replace the destroyed engine was R386,140.30 and Van Wyk accordingly instituted action in the Western Cape High Court for the replacement value of the engine together with a claim for interest and costs.
High Court finding
Van Wyk alleged that (i) a written agreement had come into place based on the email exchanges between the parties; (ii) UPS had failed to deliver in terms of the agreement; and (iii) pre-empting a reliance by UPS on the terms of the credit application, that these terms, especially those limiting liability, contravened certain provisions of the Consumer Protection Act 68 of 2008 (CPA). Specifically, Van Wyk alleged that his attention had not been drawn to these conditions as required by sections 49(3) to 49(5) of the CPA, and as such they were subject to being severed from the credit application in terms of section 52(4)(a)(ii) of the CPA and not enforceable against him. UPS conceded that an agreement had come into place but insisted that the terms were written in plain language and were sufficiently noticeable. In response, Van Wyk alleged that the terms and conditions were in fact not applicable to the agreement, as the agreement had been concluded prior to him signing the credit application as a formality.
The High Court found in Van Wyk’s favour on the basis that the relevant terms and conditions contained in the credit application were invalidated by the provisions of the CPA. This is because those terms were not brought to the consumer’s attention, nor explained to him, as is required for terms that aim to limit liability or provide indemnity. Therefore, those terms were severed from the agreement. UPS was ordered to pay an amount of damages equal to the replacement cost of the engine. UPS subsequently took the matter on appeal to the SCA.
On appeal before the SCA, Van Wyk once again walked away victorious. Interestingly, however, the SCA disagreed with the approach adopted by the High Court. Specifically, it held that the High Court erred in finding that the terms and conditions contained in the credit application formed part of the agreement between the parties. The SCA held that Van Wyk only signed the credit application in order to be allocated an account with UPS, and that his understanding was simply that the application enabled UPS to capture his information and allocate an account number. Additionally, the terms were never explained to Van Wyk, nor were they attached to the initial credit application that was sent to him. As a result, it did not form part of the agreement between the parties and Van Wyk was not bound to the terms thereof. In essence, the SCA found it unnecessary to invoke the provisions of the CPA and simply found the entire terms and conditions contained in the credit application to be inapplicable.
This judgment makes it clear that the days of “buyer beware” are behind us and that the courts will not lightly import terms into an agreement that were not explicitly understood and agreed to between parties.
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