Author : Millers Attorneys
Just how enforceable is an Agreement?
When two or more parties agree about something, they must respect the agreement, irrespective of what happens. This is encapsulated in the latin term, pacta sunt servanda. The premise of this maxim is that parties to a contract can negotiate freely and therefore it is only fair that they must be held to the result of their negotiations.
In the last few decades however, the principle of the maxim has been modified substantially by our courts. The basis of the modification originates from before 1994, when some courts declined to enforce contractual terms that were in conflict with “public policy” or because there was unequal bargaining power between the parties or that a party`s attention was not drawn to an important clause in a standard contract, for example.
In 2007 the Constitutional Court found that the principle of pacta sunt servanda is subject to constitutional control, even if the agreement is concluded between private entities, where the state has no involvement. The importance of this is that the meaning of “public policy” is to be determined by reference to the values that underlie our constitutional democracy as given expression to, by the provisions of the Bill of Rights.
It is important to note that the Constitutional Court found that pacta sunt servanda gives effect to the central constitutional values of freedom and dignity. Self-autonomy, or the ability to regulate one`s own affairs, even to one`s own detriment, is the very essence of freedom and a vital part of dignity. The extent to which the contract was freely and voluntarily concluded is the vital factor, as it will determine the weight that should be afforded to the values of freedom and dignity.
Does this now mean that I can freely enter into an agreement whereby I sell my house that is worth R1 million for R50 000.00 against my own better judgment and then escape from the agreement on the basis that the contract is not enforceable due to it`s unreasonableness to me? This must be weighed up against the circumstances of the case and whether the contract was freely concluded, with equal bargaining power between the parties and whether any important terms of the contract had to be brought to the contracting party`s attention by the other party.
One of the results of pacta sunt servanda can be seen in property law. When two owners of adjacent pieces of land agree to register a right of way over the one piece of land in favour of the other piece of land and this right of way servitude is registered in the deeds office, then the parties and all their successors in title are bound by the original agreement. In February 2008, in a case before the Supreme Court of Appeal, the owner of the servient tenement (i.e. the land over which the right of way ran across) offered a relocation of the existing defined servitude of right of way to his neighbour, who at the time, enjoyed the use of the right of way.
He proposed to his neighbour that the right of way be relocated to an alternative location on his land, because the existing right of way, if it stayed where it was, would materially inconvenience him in the use of the property. He offered to pay all costs resulting from the relocation and it was clear that the owner of the dominant tenement, (i.e. who had the right of way) would not be prejudiced by the relocation.
Following the conservative approach, and on the basis of pacta sunt servanda the lower courts found that the request of the owner of the servient tenement could not be enforced by the courts. The Supreme Court of Appeal however recently held that the Constitution requires the courts to develop the common law in accordance with the Bill of Rights and that the specific circumstances lent itself to such development, and ordered the relocation of the right of way on the basis offered by the owner of the servient tenement. After all, the neighbour would still have a right of way, and in a case such as that, reasonableness overrides pacta sunt servanda.