Stretching the limits of keeping our agreements

21 Feb 2023

Introduction

Pacta sunt servanda, Latin for agreements must be kept, is a brocard and a fundamental principle of law. According to Hans Wehberg, “few rules for the ordering of society have such a deep moral and religious influence” as this principle.

It is the cornerstone of my point that we really cannot “hope for the best” when signing agreements, nor can we avoid having to properly consider what we agree to and put to paper.

In Slabbert N O & 3 Others v Ma-Afrika Hotels t/a Rivierbos Guest House (772/2021) [2022] ZASCA 152 (04 November 2022), the Supreme Court of Appeal considered whether a clause can be removed by court and thereby alter the agreement.

Facts of the case

On 8 October 2018, the parties concluded a sale and leaseback agreement where the Trust purchased a certain erf in Stellenbosch (the property) for R15 500 000. The property was then leased back to the Respondent to enable it to conduct the business of a guesthouse.

It is common cause that on 15 March 2020, the advent of the Covid-19 pandemic caused the South African government to declare a National State of Disaster and promulgate regulations in terms of the Disaster Management Act on 18 March 2020. Accordingly, a five-level COVID-19 alert system was introduced to manage the gradual easing of the lockdown. Consequently, the following alert levels were declared:

• Alert level 5 from 26 March 2020 to 30 April 2020;
• Alert level 4 from 1 May 2020 to 31 May 2020;
• Alert level 3 from 1 June 2020 to 17 August 2020;
• Alert level 2 from 18 August 2020 to 20 September 2020; and
• Alert level 1 from 21 September 2020 to 7 December 2020.

The operation of guest houses was permitted under alert level 2.

On 22 February 2021, the landlord launched an urgent application that essentially sought an order of ejectment and costs. In addition, the landlord claimed arrear rental, interest thereon and costs. The landlord alleged that the Respondent failed to pay the rent. Further, as of 31 December 2020, it was in arrears with its rental payments of R872 266.

The court confirmed the indebtedness but found that it was not competent to evict the Respondent from the premises.

The legal provisions

Under the exceptio non adimpleti contractus, where a lessee is deprived of or disturbed in the use or enjoyment of leased property, it can, in appropriate circumstances, be relieved of the obligation to pay rent, either in whole or in part.

In Baynes Fashions (Pty) Ltd t/a Gerani v Hyprop Investments (Pty) Ltd 2005 JDR1382 (SCA) and Tudor Hotel and Brasserie and Bar (Pty) Limited v Hence Trade 15(Pty) Limited [2017] JOL 38843 (SCA); [2017] ZASCA 111 the court acknowledged that the common law principle of reciprocity, which imposes reciprocal duties on the part of the lessor and lessee, and which underpins the exceptio non adimpleti contractus, would ordinarily entitle the lessee to claim a reduction of rent from the lessor for the deprivation of or interference with the former’s beneficial occupation. It found, however, that a contrary intention appeared clearly from two clauses of that lease.

In the judgment of Hansen, Schrader & Co v Kopelowitz 1903 TS 707, the court recognised an entitlement to remission of rent in the face of a supervening impossibility of performance.

The court in Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd [2017] ZASCA 176; 2018 (2) SA 314 (SCA) had to deal with a dispute regarding the interpretation of a similar clause. As is the case in this matter, it was a material lease term concluded by the parties that should the lessee fail to pay the rental on the due date, the lessor would be entitled to cancel the lease agreement and retake possession of the property.

It was argued, among other things, that the common law should be developed by interpreting the impugned clause through the prism of the spirit of the Constitution, and the interpretation of that clause should be infused with good faith, ubuntu, and fairness, amongst others. There was no evidence that the lessee’s constitutional rights to dignity and equality were infringed.

Conclusion

In the present case, it was impermissible for the High Court to develop the common law by infusing the spirit of ubuntu and good faith to invalidate the term or clause in question. It follows that agreements must be considered before they are signed, as the courts may be likely to enforce them as they stand. Only in limited circumstances would a deviation be possible.

Contact an expert at SchoemanLaw for assistance.

See also:

• The ripple effects of supervening impossibility and potential compromises on Commercial Lease Agreements
• COVID-19 and commercial lease agreements – Relief measures announced
• There is no such thing as a standard lease!
• Eviction order
• Limiting the Pacta Sunt Servanda?

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)