Many of us are far too quick to enter into agreements without paying close enough attention to their terms. The folly of this laissez faire approach becomes all too clear when things go wrong and we are surprised to find ourselves at the wrong end of the bargain.
It is at this point that we are reminded of the principle of South African law to the effect that a contracting party is bound by the terms of any contract which has been concluded by him/her. The correct time to complain about a contractual term is before the conclusion of the deal, and not later when the effects of this term are felt.
Our courts recognize that people’s right to freedom of contract should be respected and that this entails giving effect to the terms of agreements reached between the parties, even if these terms are onerous or prejudicial to the interests of one of the parties. We are free to agree to any terms, as long as these are not unlawful. Having agreed to a set of terms, we must be held to this bargain. Our law has also always recognised that, notwithstanding the aforesaid principle, effect ought not to be given to contractual terms which are contrary to public policy. The effect of the new Constitution of South Africa has been, inter alia, to flesh out the meaning of “public policy”. In short if a clause constitutes an unwarranted infringement of a right guaranteed in terms of the Bill of Rights, that clause may be susceptible to attack on the basis that it is contrary to public policy.
The approach of our courts is to conduct an enquiry where the first question is: Is the contractual clause in question per se contrary to public policy? If the answer is in the affirmative then the enquiry need not go any further - the clause is invalid. A contractual term may appear innocuous but its effect in particular circumstances may well offend public interest. Therefore, even if the first question is answered in the negative, the enquiry is not necessarily complete and a further question is posed, namely - Does the operation of the clause in the prevailing circumstances render it contrary to public policy?
In order to answer the questions relating to public policy regard must be taken of our Bill of Rights. One of the rights enshrined in the Bill of Rights is the right of access to our courts, which reads: “Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.” This right is directed against a tendency for parties to take the law into their own hands.
Our courts are constantly working through a massive backlog of civil cases and legal process can drag on for years before any result is achieved. It is not surprising, therefore, that attempts are made to obviate the need to refer issues to the courts. For example, a company which repairs a motor vehicle or electronic equipment may seek the power to sell off the car or tv if the repair costs are not paid on time. A trucking company wants the right to sell off goods which it has transported, if its charges are not paid when due. Do contractual clauses which are aimed at allowing the repairer or transporter to auction goods without obtaining a court order, fall foul of public policy because they amount to an abuse of the right to access to our courts?
This argument was made in the case Juglal NO and Another v Shopright Checkers (Pty) Ltd t/a OK Franchise Division1 where the court analysed the contractual clause in question and concluded that it regulated the rights of the parties vis-á-vis each other but said nothing about ousting the authority of the courts or restricting the parties’ access to the courts or making a court application unnecessary before action could be taken to perfect the security contemplated in the clause. However, the court did say “That the respondent subjected the terms of the contract and its implementation to the intervention and oversight of the court takes much of the sting out of the appellant’s complaint about the arbitrary, unreasonable and oppressive nature of the contractual powers conferred on it.”
In other words, when considering the second leg of the test discussed above, the court was positively influenced by the fact that the appellant had sought the authority of the court before proceeding to sell the goods which represented his security, even though the clause did not necessarily compel the appellant to do so.
A clause which seeks to oust the jurisdiction of the court would be unconstitutional. If the clause does not prohibit an approach to the court or expressly make an application to court unnecessary, it is probably not, per se, contrary to public policy.
However, an attempt to sell the goods without first seeking court authorisation would often be found to be an infringement of the right of access to court which is enshrined in the Constitution. In other words it may be found to be contrary to public policy in its effect, especially where the debt is in dispute. It is in respect of the second leg of the test highlighted above, concerning the implementation of the clause in these circumstances, where such a clause may fail the test imposed by our new Constitution.