Ubuntu vs Constitutional Values: Should good faith be a factor in commercial contracts

Posted on:
12 Mar 2018
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Commercial, Property
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PBM_Admin
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“My business has been renting from the same landlord for over five years without missing a payment. We lost a big contract last year, so cashflow has been a bit tight, and caused us to be late on a rental payment. Our landlord immediately threatened that he would evict us if it happened again. Last month, unfortunately, we again slipped a payment and the landlord has now started eviction proceedings. Despite that our contract allows him to do that, I feel this is unfair as we have been a good tenant for a long time. Surely he can’t just kick us out because of two late payments.”

By: Anneri Moolman
In a recent eviction case involving a commercial lease agreement, a landlord applied to the court to evict a tenant that had failed to pay its monthly rental on time. The High Court held that the landlord was entitled to cancel the lease agreement, but the court refused to grant an eviction order, as it was found that it would be manifestly unreasonable, unfair and offend public policy. The court thereby in effect imported or infused the spirit of Ubuntu and good faith with our law of contract.

However, on appeal, the Supreme Court of Appeal found the High Court decision to be wrong and held that it was impermissible for the High Court to have developed the common law of contract by infusing the spirit of Ubuntu and good faith so as to nullify the enforceability of the eviction clause in the rental contract.

As it now stands, it appears that principles of Ubuntu have no place in the interpretation of a commercial contract. But, as this relates to constitutional aspects, our Constitutional Court will probably have the final say on this matter, particularly as the above eviction matter has been referred to the Constitutional Court.

If one looks at previous decisions of the Constitutional Court, it has been held by the Constitutional Court, albeit in a criminal matter, that Ubuntu has become an integral part of our constitutional values and that Ubuntu regulates the exercise of rights through the emphasis it lays on sharing the co-responsibility and the mutual enjoyment of rights by all. But, how far our courts will go in developing the common law to allow for the mutual enjoyment of rights is yet to be seen. It is a well established understanding in our law that even though a contract or some of its terms may offend one’s individual sense of propriety and fairness, it does not automatically make that contract contrary to public policy. Our courts have also always been of the firm view that courts should be careful in developing the common law, as it could lead to uncertainty in private commercial contracts.

Our Constitutional Court has had occasion to consider whether the common law should be developed to include Ubuntu. Although, the Constitutional Court avoided having to finally decide on the matter as it was decided that the constitutional issues were incorrectly raised, it is interesting to note a minority judgement by Judge Yacoob which makes mention that our common law has been infused with constitutional values and these values include Ubuntu, which requires that people should deal with each other in good faith. Whether this is an indication of the direction the Constitutional Court will go in deciding on the place of Ubuntu in commercial contracts, we will have to wait and see.

For the moment, the position of our Supreme Court of Appeal is that Ubuntu cannot be applied in commercial contracts and that parties should not place reliance on this when reviewing their commercial contracts. It also means that, until the Constitutional Court possibly rules to allow such arguments, if your landlord is acting in accordance with the rental contract, you cannot prevent him from doing so by raising an argument of unfairness or contrary to Ubuntu.

Our advice is to seek the help of an attorney to advise whether your landlord is entitled to immediately evict and whether there are any provisions in the contract which may mitigate such eviction.

This article was first published in Phatshoane Henney Attorneys’  February 2018 newsletter.

 info@probonomatters.co.za

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