UNFAIR ENFORCEMENT OF A CONTRACT AND THE CONSTITUTIONAL NORM OF UBUNTU: Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd 2017 (4) SA 243 (GJ)

Abstract

The courts have accepted that a contractual term not per se illegal will not be enforced if, in the circumstances, enforcement would be contrary to public policy as where, for example, it would unjustifiably infringe a constitutional value or other community value or norm. Good examples of clauses that are often not enforced for these reasons are restraint of trade clauses and time-bar clauses. However, the principle of unlawful enforcement extends to any kind of contractual term. In Bredenkamp’s case, Harms DP referred, by way of example, to a clause in a lease which states that the tenant may not sublet without the consent of the landlord. This sort of term is prima facie innocent, but should the landlord attempt to use it to prevent the property from being sublet in circumstances amounting to discrimination under the equality clause, the court will not enforce the term. In Nyandeni Local Municipality v Hlazo (2010 (4) SA 261 (ECM) par 124–126), the court applied the principle of unlawful enforcement to an “entrenchment” (“non-variation” clause) in an employment contract. The court refused to uphold the clause because to do so would infringe the employer’s right to due process of law under section 34 of the Constitution. See also GF v SH (2011 (3) SA 25 (GNP) par 18–22) where it was held that enforcement of a “non-variation” clause in divorce settlement would be contrary to public policy if it operated against the best interests of the minor children or negated the fundamental duties and powers of the parents.
The Supreme Court of Appeal has adopted the dogmatic stance that the mere fact that enforcement of a contractual provision would produce a result, which is unfair or unreasonable, is not enough to make the enforcement contrary to public policy. The basic proposition adopted by the appeal court is that fairness and reasonableness are not freestanding requirements for the exercise of a contractual right and, therefore, a court cannot refuse to give effect to the implementation of a contractual provision simply because it would be unfair or unreasonable to do so. Whether the Constitutional Court will follow this approach, remains to be seen. Nkabinde J’s judgment in Botha v Rich (2014 (4) SA 124 (CC)) seems to imply that a court may refuse enforcement of a contractual provision purely on the ground of unfairness, but it is unclear whether the courts will interpret the judgment in this way or regard it as authoritative. A glaring omission from Nkabinde’s judgment is her failure to even mention, let alone consider, the appeal court decisions dealing with unfair enforcement and the substantial body of legal writing on unfair contracts and the unfair enforcement of contracts. This failure substantially undermines the authoritative status of the judgment. As Waglay J pointed out in his minority judgment in Bosch v Commissioner, South African Revenue Service (2013 (5) SA 130 (WCC) par 103), “[b]efore one is bound to a precedent-setting judgment and is obliged to follow it, the judgment must be clear and unequivocal, it must be plain, unmistakable and explicit in its rejection of previous judgments, which it seeks to reverse” and it must provide reasons why those judgments are no longer good law. The appeal court, in the cases mentioned above, has adopted a clear position on unfair enforcement of a contract: that unfairness does not or cannot render the enforcement offensive to public policy. The least that could have been expected from Constitutional Court was a review of the appeal court cases, a rejection of the view adopted in those cases, and a clear explanation of why the view is no longer good law.
Another major shortcoming in Nkabinde J’s judgment is that it does not indicate what principles are to be applied to identify the cases in which unfair enforcement is offensive to public policy. This lacuna in her reasoning effectively leaves the door open for judges to decide issues of unfair enforcement according to their own ideas of what is unreasonable or unfair.