Legal certainty vs public policy considerations in contract law
20 Jun 2019
The Court in Oregon Trust v BEADICA 231 CC (74/2018) [2019] ZASCA 29 was faced with the issue of whether the enforcement of terms of lease agreements concluded between the parties, leading to their termination and the resultant eviction of the Tenants, was contrary to public policy as being unconscionable. The Court reached the conclusion that it was not against public policy nor unconscionable to do so in this particular case.
The Landlords in this case were appealing against an order made by the High Court to the effect that the Tenants were not to be evicted and be permitted to remain in occupation of premises leased to them, pending the determination of whether the options to renew the leases had been validly exercised.
On the facts it transpired that the Tenants purported to exercise their options but did not do so in the terms prescribed by the leases prior to expiry of the agreements. They subsequently argued that the termination of the leases was not favoured by public policy because it would result in the collapse of franchised businesses and that would derail an empowerment initiative for previously disadvantaged individuals; further, that they were not in breach of any terms of the leases and had duly paid their rental to the Landlord
With the advent of the 1996 Constitution, contract law has seen an evolution where considerations of Ubuntu and proportionality have taken centre stage in some contractual disputes. This is in addition to the Common Law principle that is akin to these, ie the Exceptio Doli, which is a defence that can be raised to the effect that the plaintiff failed to act in good faith and considerations of public policy. On the other end of the spectrum is the competing need for legal certainty which is encapsulated in the maxim Pactum Sunt Servanda. Of legal certainty, the court cited Davis J in Barkhuizen v Napier [2007] where he described legal certainty as a “shibboleth” being a custom/ belief/principle that is regarded as being no longer important or is outdated. This is because as Davis J contended, “The Constitution demands an audit of all law and that demand cannot be defended by the idea that legal certainty will be compromised.”
The court in Oregon Trust had to balance all these competing interests and was circumspect in its approach by holding that the courts must not interfere with parties’ ability to regulate their own affairs, even if it is to one party’s detriment. The Court went on further to state that “No consideration of public policy permits the making of contracts for parties by a court.”
The Court held that public policy considerations, although relevant considerations, were irrelevant in this particular case because the Tenants had failed to advance reasons to the Court as to why they had failed to give notice of renewal of the leases in the manner required in the agreements. Had reasons for the breach been provided then policy considerations would have kicked in and the Court may conceivably have reached a different conclusion in their favour.
From the Court’s rationale and previous decisions that it took into consideration, contractual disputes must now be approached holistically by taking into account all the above competing considerations and assessing each case on its own facts.
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(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.)