The Importance of Full Contracts | Commercial Attorneys in Randburg and Sandton Modern-day contracts have received a lot of attention both from the legal side and from social media.

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The Importance of Full Contracts

Modern-day contracts have received a lot of attention both from the legal side and from social media. The complaints vary from too lengthy, too verbose, too complicated, one-sided, and lacking substance. All this being said, compared to the daunting feeling one gets when the contract is open-ended, vague, unintelligible or even incomplete, dealing with the former is a fair price to pay. Where the rash cream is not enough to assist with a burn is where you, as a businessman, believe there to be a crucial term of the agreement which was not included. Do you have any recourse?

At the first instance, it is important to understand that an express agreement is always preferable to a verbal one. An express agreement is that which is reduced to writing. Essentially, an express agreement normally takes the form of a documented agreement which ought to record all rights and responsibilities between the parties in the way of performance and breach. Can you, after it has been concluded, import a new specific clause into the agreement through tacit reading-in thereof?

On 28 May 2018, in the matter of Ritz Plaza (Pty) Limited “Plaza” v Ritz Hotel Management Company (Pty) Ltd “MC”, the Western Cape High Court delivered a judgment and considered the law around this conundrum. It involved a landlord-tenant relationship and an eviction application brought by Plaza against MC. Plaza sought to evict MC by virtue of non-payment of rental and MC’s defence was that the Plaza had not complied with a tacit term of the agreement which also prevented MC from paying its rent. Thus, the Court had to consider inter alia this defence in light of whether or not this tacit term could be read into the agreement despite the lease having been reduced to writing.

The first problem experienced by MC in relying on this defence is the ever-present “Entire Agreement” clause. This clause prevents the importation of implied or tacit terms to be read into an agreement because the parties have specifically elected to record all rights and obligations between them into one single document. In other words, the agreement is the start and end of all matters regarding their contractual relationship. By including this clause into their agreement, MC was legally unable to rely on an implied or tacit term that was not included in the express agreement. For MC, therefore, it was an incomplete contract. Had it not been for the “Entire Agreement” clause at the first hurdle, MC may have been able to reach the second stage of the test to import a tacit term to an express agreement.

But for the “Entire Agreement” clause, in proving a tacit term, however, MC would then have to plead the peculiar surrounding facts and circumstances. The Court set the criteria on when a tacit term can be imported:

A proposed tacit term can only be imported into a contract if the Court is satisfied that the parties would necessarily have agreed upon such a term if it had been suggested to them at the time… If the inference is that the response by one of the parties to the bystander’s question might have been that he would first like to discuss and consider the suggested term, the importation of the term would not be justified.[1]

In other interpretations of the above, this means that there can be no room for doubt on the interpretation and the applicability this tacit term, in its context, form, agreeability and suitability to the parties and facts at hand. It is a strict test because the Courts are being asked to read-in rights and obligations which thus deviate from some rules of evidence.

In conclusion, before signing your contracts, it is absolutely vital to ensure that your negotiations are full, frank, honest, and that all parties (for want of a better expression) are on the same page with respect to the rights and obligations. Reading in after it is concluded is a difficult task, and virtually impossible with an “Entire Agreement” clause.

 

Aleisha Oliver

Practising Attorney



[1] Paragraph 51, page 27