Agreeing to disagree: An analysis of what constitutes termination of a project in respect of a fixed-term contract where such contract’s end date is silent

A contract forms the basis of enforceable legal obligations and corresponding rights between two or more contracting parties. Contractual obligations are easier to enforce where a written contract exists.

8 Aug 2022 2 min read Employment Alert Law Article

At a glance

  • A written contract is crucial for enforceable legal obligations and rights between parties, but material terms are often omitted, particularly in fixed-term contracts.
  • In a case involving a fixed-term contract termination, the Labour Court clarified that the interpretation of contract clauses should consider surrounding circumstances and contractual context.
  • Employers should ensure clarity in fixed-term contracts, particularly regarding termination, to avoid leaving interpretation to the court and risking misrepresentation of the parties' true intentions.

Although such a contract is required to record all material terms, this often does not happen, especially in fixed-term contracts. This was the case in the matter of Solidarity obo Swart v Kusile Civil Works Joint Venture (KCWJV) and Others (JR1351/19) [2022] ZALCJHB 183 (7 July 2022). Mr Swart was employed on a fixed-term contract to work on a main civil works project which KCWJV was contracted for by Eskom. At the end of the project, the contract was terminated.

Aggrieved by his termination, Solidarity, acting on behalf of Swart, referred an unfair dismissal claim in terms of section 186(1)(e) of the Labour Relations Act 66 of 1996, as amended (LRA) to the bargaining council, which found that his employment contract terminated ex contractu and as such he was not dismissed as contemplated in terms of section 186(1)(a) of the LRA. Dissatisfied with the arbitration award, Swart brought a review application before the Labour Court on a number of grounds, one of which was that the bargaining council Commissioner misconstrued the applicable legal principles pertaining to contractual interpretation.

It is worth noting that Swart’s contract was not drafted with clarity as to the date or event that would lead to its termination. In terms of clause 1.3.7 of the contract, the “end date” was defined as “the date of automatic expiration of the appointment referred to in item 10 in Annexure A”. Item 10 of Annexure A of the contract referred to the end date as the “KCWJV Completion”.

The matter thus turned on the interpretation of these clauses, the role of the surrounding circumstances, and the nature of the evidence that could be considered in arriving at a decision. The court held that there was no merit in Solidarity’s contention that the Commissioner misconstrued the applicable legal principles pertaining to contractual interpretation. The court relied on a number of cases in support of its decision, wherein it was held that the parole evidence rule does not prevent evidence on contractual context and purpose from being adduced.

The court further held that having considered the evidence that was before the Commissioner, it was clear that the terms of the main civil contract between Eskom and KCWJV did lend context to clause 1.3.7 of Swart’s contract of employment, read with item 10 of Annexure A thereto, which was to link the end date with the completion of the main civil works. To hold otherwise would be inconsistent with the purpose to which Swart’s contract was concluded; and, in turn, contrary to sound commercial notion.

Employers are cautioned to be explicitly clear about material terms of a fixed-term contract, especially when the contract is to terminate, in order to avoid leaving the interpretation to the court, which may fail to record the true intention of the contract by the parties.

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