When should a court interfere in a contractual relationship?

[Latin: pacts must be respected]

Agreements are to be kept 

Sanctity of contract

As agreements between parties are concluded every day and where it is often heard that verbal agreements are extremely difficult to rely on, it is commonly accepted that agreements should be reduced to writing but where they are often not.

The predominant reason for not reducing the agreements to writing is due to the reason that its confusing, tedious, time consuming and even perhaps costly to acquire.

However, should the day come where there is a dispute between parties, either of them may be quick to rely on the “contract” between them, albeit it be a verbal one.

Literally translated the principle of  pacta sunt servanda can be translated as “agreements must be kept” and forms the basis of the common law of contracts. When two parties willingly and knowingly enter into a contract, the terms of that contract should be upheld by both parties.

Case law has shown in the matter of Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd (183/17) [2017] ZASCA 176 (1 December 2017) that public policy needed to be weighed against the common law principal of pacta sunt servanda.

Thus the question was begging… must the common law rule of pacta sunt servanda be strictly enforced or, has public policy developed to the extent that the common law may be relaxed in the enforcement of a contract.

The Appeal court considered its decision in the above case through that, parties could conclude contracts freely and where they were able to negotiate the terms of agreement and consequences of a breach, among themselves prior to concluding the final contract. The opportunity for rectifying a breach had also been available and thus the reliance of the common law rule for strict enforcement of the contract, was not unreasonable. The court in this instance, saw no reason to develop the common law rule and thus refused the relaxation thereof.

In consideration of this ruling, it may be accepted that the court will not likely interfere with the parties rights and freedom on what parties intend to contract and thus the party who claims prejudice after agreeing to a contract, must endure whatever consequence comes its way by means of that contract.

The flip-side to this story would possibly be that, should it be proven that the party enforcing the contract, had acted unreasonable or contrary to the norm practiced in society by not allowing reasonable time to correct the breach, public policy may favour such a party based on what the boni mores believes to be reasonable.

Contributing Advisors