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[1986] ZASCA 10
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Westinghouse Brake and Another v Bilger Engineering (Pty) Ltd. (12/86) [1986] ZASCA 10 (6 March 1986)
I
N THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE DIVISION
)
In the matter between:
WESTINGHOUSE BRAKE AND
EQUIPMENT (PROPRIETARY) LIMITED
----- Appellant
and
BILGER ENGINEERING (PROPRIETARY)
LIMITED
Respondent
Coram
: RABIE CJ, JANSEN, CORBETT, TRENCOVE et HOEXTER, JJA.
Date of hearing
: 2 1 November 1985
Date of judgment
: 6 March 1986
J U D G M E N T
CORBETT
J
A:
In this matter Westinghouse Brake and Equipment (Pty) Ltd, whom I shall call
" the appellant", sued res-
/ pondent,
2
pondent, Bilger Engineering (Pty) Ltd, in the
Trans-vaal Provincial Division for damages lor breach of con-tract. The qnantum
of damages
was agreed between the parties in the sum R15 000. At the conclusion
of the trial the trial Judge (MYBURCH AJ) held that appel-lant
had failed to
establish the contract sued on and ordered absolution From the instance with
costs. Appli-cation was made for leave
bo appeal. MYBURGH AJ granted the
application and directed that the appeal should be heard by the Full Court of
the Transvaal Provincial
Divi-sion.
The decision of the trial Court was based on a finding that the parties
failed ever to reach
consensus
in regard to the contract they were
negotiating. On appeal, the full Court (
per
VAN DUKIIOKST J, L£
GRANGE J and BLISS AJ concurring) disagreed with this finding hut held for
another reason that appellant
had not proved
/ that
3
that a contract; came into ex i stance hcLwcen the parties. This reason was
that, in the view of the Full Court, it was the common
intention of; the parties
that unless the full contract was in writing there was to he no contract; and
that on the facts relied
upon by the appellant the full contract was not in
writing.
Thereafter appellant petitioned the Chief Justice for leave to appeal to this
Court. Acting in terms of sec 21(3) of the Supreme Court
Act 59 of 1959, as
amended in particular by Act 105 of 1982, three Judges of this Division
made the following order on the application:
"In this matter it is ordered that the application for leave to appeal be
referred to the Appellate Division for argument in terms
of s 2l(3)(c)(ii) of
the Supreme Court Act 59 of 1959, as a-mended. Counsel appearing for the parties
at the hearing before the Appel-late
Division should be prepared to pre-
/ sent
4
sent argument in respect of the following matters:
(a) the merits of the application and
in particular the following
question:
whether, assuming that the evidence before
the Trial Judge
established that the parties
had concluded a contract on the has is
that
the 'escalation clause' contained in clause
3 of the 'General Conditions of Tender or of Sale' appearing the reverse side
of the applicant's quotation dated 29 June 198l (see
pp 75-6 of the record)
formed part of the contract, such escalation clause did not result in the
contactprice not. being in a fixed
or ascertainable sum of money; and whether in
the circumstances the agreement of the parties resulted in a valid and
enforceable
contract of sale;
(b) whether in granting the 'special
leave' required in terms of s
20(4)(a) of
the Supreme Court Act 59 of 1959. this
Court should consider only whether reason-
able prospects of success exist or whether,
in addition, other criteria should be con
sidered; and
( c ) the merits of the appeal, in the event of leave being granted."
At the hearing before us both the application
for
leave to appeal and the merits of the appeal were
/ argued
5
argued. The merits are of course relevant to the
appli-cation for leave, but the matter proceeded on the basis that if the Court
should
decide to grant leave it would imme-diately proceed to deal with the
appeal itsell. Judg-ment was reserved on both the application
tor leave to
ap-peal and the appeal.
I shall deal first with the question raised in par. (b) of the above-quoted
order.
The Appeals Amendment Act 105 of 1982 came into operation on 1 April 1983.
Judgment in this matter was delivered by MYBURGH AJ on
27 May 1983 and leave to
appeal to the Full Court was granted on 1 August 1983. There-after the appeal
was duly noted and the appeal
was heard by the Pull Court in February 1984.
Having regard to sec 26 of Act 105 of 1982, it Is clear that the appellate
pro-cedure
in this matter is governed by secs 20 and 21 of the Supreme Court
Act, as amended by Act 105 of 1982.
/ Sec 7
6
Sec 7
of Act 105 of 1982 introduced into Act 59 of 1959 a completely
reformulated sec 20; and sec 8 of Act 105 of 1982 substantially amended
sec 21.
A com-parison of sec 20, as it was immediately prior to Act 105 of 1982 coming
into effect ("the old sec 20"), with the new
sec 20, as substituted by Act 105
of 1982 ("the new sec 20"), read together with the amendments to sec 21, reveals
the following
main Innovations. (And in this connection ignore for present
purposes the provisions relating to appeals from the South-West Africa
Division.)
Under the old sec 20, read together with sec 21 (prior to its amendment in
1982), a litigant in civil pro-ceedings originating in
a provincial or local
division of the Supreme Court had in general (ie subject to the ex-ceptions to
he mentioned) an automatic right
of appeal a-gainst a judgment or order of that
court. In the case of a judgment or order given or made by a single judge of
/ any
7
any division on application by way of:' motion or
petition or on summons for provisional sentence or in a trial case in which the
defendant was in default or as to costs on-ly which by law were left to the
discretion of the court, the appeal lay to the full court
of the division
con-cerned or, in the case of a local division, to the provin-cial division
exercising concurrent jurisdiction (sec
20 (l)(a) ). In all other cases the
appeal lay to the Appel-late Division (sec 20 ( l ) (b ) ) . In the former
classes of case, however,
the appeal could come directly to the Appellate
Division, without any intermediate appeal to the provincial division, where the
parties
lodged with the registrar their consent thereto in writing (sec 20(3) ).
The exceptional instances where there was no automatic right
of appeal and where
leave to appeal was required (to be given by the court which gave the judgment
or made the order) were judgments
or orders given or made
/ by
8
by consent, judgments or orders as to costs only
which were left by law to the discretion of the court and interlocutory orders
(sec
20(2)(b)). In addition, leave to appeal was required where the appeal was
to the Appellate Division against a decision of any division
"on appeal to it"
(sec 21(2)(a) ). The words quoted would include an appeal to the provincial
division from the decision of an inferior
court and also an appeal to the full
court from the decision of a single judge in the matters (listed above) in
respect of which
such an appeal lay. The leave required was that of the court
against whose decision the appeal was to be made; or, where such court
had
refused leave, the leave of the Appellate Division (sec 20(2)(a) ).
The new sec 20, read together with the amended sec 21, has introduced an
entirely new dispensation regarding appeals from a judgment
or order of a
provincial or local division in civil proceedings. The first main
/ innovation
9
innovation is that henceforth leave to appeal is
required in all cases. And the second main innovation is that in the case of all
types of judgment or order given by a court constituted before a single judge
the court granting leave to appeal —
" shall, if it is satisfied that the
questions of law and of fact and the other considerations involved in the
appeal are of such a nature that the appeal does not require
the attention of
the appellate division, direct that the appeal he heard by a full court." (Sec
20(2)(a), as amended.)
Otherwise, ie where the court is constituted before two or more judges or
where no such direction is given, the appeal lies to the
Appellate Division. A
direction so given by the court of a provincial or local division may be set
aside by the Appellate Division
on application made to it by any interested
party (sec 20(2)(b) ).
/ Sec 20(4),
10
Sec 20(4)
, containing the new provisions in
regard
to the granting of leave to appeal, reads as Follows:
"4) No appeal shall lie against a judgment or order of the court of a
pro-vincial or local division in any civil proceedings or against
any judgment
or order of that court given on appeal to it except —
(a)
in the case of a judgment
or order given in any civil proceedings by the full court such a division on
appeal to it in terms of subsec-tion
(3), with the special leave of the
appellate division:
(b)
in any other case,
with the leave of the court against whose judgment or order the appeal is to be
made or, where such leave has been
re-fused, with the leave of the appel-late
division."
Sub-sec (3) referred to herein, deals
with appeals heard
by a full court in terms of a direction given in
terms
of sec 20(2)(a) and not set aside under sec 20(2)(h).
For
convenience I shall refer to this as "a full court
appeal".
/ Sec 20(4)
11
Sec 20(4)
thus draws a clear distinction between an appeal against a
judgment or order given by a pro-vincial or local division in a Lull court
appeal, which can proceed only with the "special leave" or" the Appellate
Division (the full court itself has no power to grant such
leave, it is to be
noted), and an appeal against a judg-ment or order given by the provincial or
local division in any other case,
including those given in the exercise of the
court's original jurisdiction and those given on ap-peal to it (other than full
court,
appeals, which can pro-ceed either with the "leave" of the court against
whose judgment or order the appeal is to be made or, where
such leave has been
refused, with the "leave" of the Appellate Division. Here the contrast between
the "special leave" required under
sec 20(4)(a) and the "leave" required under
sec 20(4)(b) is an important textual consideration.
/In
12
In applications for leave to appeal properly brought before the appropriate
court in terms of the old sec 20, read with sec 21 as
it then was, the only
rele-vant criteria were whether the applicant had reasonable prospects of
success on appeal and whether or
not the case was of substantial importance to
the applicant or to both him and the respondent (
Odendaal v Loggerenberg en
Andere
NNO (2)
1961 (1) SA 724
(0) at p 727 C;
Attorney-General,
Transvaal v Nokwe and Others
1962 (3) SA 803
(T), at p 807 A ) This was so
irrespective of whether the appeal lay to the full court or to the Appellate
Division.
Whether in terms of the new sec 20, particularly having regard to the
provisions of sub-section 6(a) thereof, the requirement of substantial
importance still obtains need not be decided in this case. Clear]y this case is
of substantial importance to the parties and, therefore,
nothing turns on
whether this is still a requirement or not. I shall accordingly not make any
further reference thereto. What was
argued, however, by counsel for both parties
was
/ that
13
that in terms of the new sec 20 all that an applicant for special leave had
to show was a reasonable prospect of success on appeal
and that there were no
additional criteria. I proceed to consider this argument.
The first point to
note is one already stressed, viz. the distinction drawn in the new sec 20(4)
between, on the one hand, an application
for leave to appeal against the
decision of a full court given in a full court appeal to it, wherein the
"special leave" of the Appellate
Division (and only the Appellate Division) is
required, and, on the other hand, an application for leave to appeal against the
decision
of a provincial or local division in all other cases, wherein the
"leave" of the court concerned, or in the event of refusal, that
of the
Appellate Division suffices. I have no doubt that the terms "special leave" and
"leave" were chosen with deliberation by the
lawgiver and that they were
intended to denote different concepts. It may be accepted that the normal
criterion of reasonable prospects
of success
/ applies
14
applies to both the "special leave" of sec 20(4)(a) and the "leave" of
sec 20(4)(a) and the "leave" of sec 20 4(b) (and in this connection
I agree with
ELOFF J, when he held, in the case of
Van Heerden v Cronwright and Others
1985 (2) SA 342
(T), that the criterion of appealability adopted in
Magnum National Life Assurance Co Ltd v South African Bank of Athens Ltd
1985 (4) SA 365
(W) was clearly wrong). In my view, however, the word "special"
in the for-mer sub-section denotes that some additional factor or
cri-terion was
to play a part in the granting of special leave. The contrary view would give no
content to the word "special" and
would thus run counter to the general rule in
the construction of statutes —
" that, if possible, a statutory
provision must be construed in such a way that effect is given to every word
or phrase in it.... The reason is, of course, that the
lawgiver, it must be
supposed, will choose its words carefully in order to express its intention
correctly,
/ and .
15
and will therefore not use any words
that are
superfluous, 'meaningless or other
wise otiose "(per TROLLIP JA in
5
v
Weinberg
1979 (3) SA 89
(A), at p 98 E - F).
The contrary view would not accord with another canon of construction, viz.
that —
"It is a general rule in the construction of statutes that a deliberate
change of expression is
prima facie
taken to import a change of
intention. (See
Barrett, N .0
.
v Macquet
,
1947 (2) SA 1001
(AD) at
p 1012;
Port Elizabeth Municipal Council v Port Elizabeth Electric Tramway Co
Ltd
1947 (2) SA 1269
(AD) at p 1279.) That principle should operate
particularly clearly where, as here, Parliament was dealing with two parts of a
single
provision and cannot be supposed to have lost sight of the one when
dealing with the other."
(
per
SCHREINER JA in
R v Sisilane
1959 (2) SA 448
(A)
at p
453 F - G; see also
Administrateur, Transvaal v
/
Carletonville
16
Carletonville Estates Ltd
1959 (3) SA 150
(A), at p 155 H).
The second point of importance to note is the now
system of appeal introduced by secs 7 and 8 of Act, 105 of
1982. The object of this new system was, in my opinion,
to introduce what
is in effect an intermediate court of
appeal, viz. the full court, and to
cause appeals from the
decision of a single judge in a certain class, or
certain
classes, of case to be heard by the full court; the others
to be
heard by the Appellate Division. The type of appeal
to be heard by the full
court is one in which, in the view
of the court granting leave —
"the questions of law and of fact and the other considerations involved in
the appeal are of such a nature that the appeal does not
require the attention
of the appellate division".
In other words, it was the intention of the legislature
to draw a
distinction between appeals which merited the
/ attention
17
attention of the Appellate Division, and would conse-quently go to the
Appellate division, and those which did not, and would be heard
by the full
court. And the general aim, in my view, was to place a kind of qualitative
limitation on the cases coming on appeal to
the Appellate division and thereby
to reduce to some extent the workload of the Appellate Division. If there be any
real doubt on
this score, then I would refer to the Third Interim Report of the
Commission of Enquiry into the Structure and Functioning of the
Courts, of which
Mr Justice G G Hoexter was the chairman and which is commonly called the Hoexter
Commission. This report was tabled
in Parliament on 6 October 198l. It is
notorious that Act 105 of 1982 was enacted in consequence of the recommendations
contained
in this interim report. In my view it is permissible, in
/ construing
18
construing Act 105 of 1982, to have regard to" what is stated in the Third
Interim Report as to the mischief aimed at. In England
it has been
authoratatively held that in construing a statute where the words are not clear
and unambiguous the court may have regard
to the report of a Royal Commission or
committee appointed by the Government which shortly preceded the passing of the
statute in
order to ascertain the mischief aimed at and the statute in order to
ascertain the mischief aimed at and the state of the law as
it was then
understood to be, but not to determine the meaning attached by the commission or
committee to any draft bill recommended
in the report which formed the basis of
the statute passed by Parliament (see
Black-Clawson International Ltd v
Papierwerke Waldhof Aschaffenburg A.
G.
/ [1975]
19
[1975] UKHL 2
;
[1975] AC 591
(ML);
Keg v Bloxham
[1983]1
AC 109 (111), at p 115; see also
Eastman Photographic Materials Co Ltd v
Comptroller General of Patents, Designs and Trademarks [
1898] AC 571
(HL);
Assam Railways and Trading Co Ltd v Inland Revenue Com
missioners
[1935]
AC 445
(HL
); Halsbury
4 ed, vol 44, par 901). In Hle
ka v Johannesburg
City Council
,
1949 (1) SA 842
(A) at p 852, this Court, having referred to
Eastman
's case,
supra
, and the
Assam Railways
case,
supra
, left the point open, but in
S v Mpetha
1985 (3) SA 702
(A),
at pp 712 H - 713 E,GALGUT AJA, delivering a minority judgment (the majority
judgement
not consider the point), held that it was permissible for this
Court in construing the Internal Security Act 74 of 1982, to have regard
to the
report of the Commission of Enquiry into Security Legislation in order to
ascer-tain the mischiefs aimed at. The
B1ack-Clawson
case,
supra
,
has been followed in Zimbabwe (
Hewlett v Minister
/of
20
of Finance and Another
1982 (l) SA 490 (ZSC), at p 496-7 and in Canada
(R
e Urman
(198l)
128 DLR (3rd) 33
, at pp 37-8). In my opinion, our courts
too arc entitled, when construing the words of a statute which are not clear and
unambiguous,
to refer to the report of a Judicial commission of enquiry whose
investigations shortly preceded the passing of the statute in order
to ascertain
the mischief aimed at, provided that there is a clear connection between, on the
one hand, the subject-matter of the
enquiry and recommen-dations of the report
and on the other hand, the statutory provisions in question.
In the present
case the mischief aimed at is to be found in par 2.1 and 2.2 of the report, the
relevant portions of which read:
"Die werklas van die Appèlafdeling is tans glad te swaar vir die huidige
getalsterkte van veertien appèlregters.
Die oorheersende werklikheid
is dat ons appèlregters toegegooi word onder sleurwerk wat juridics
onbedui-dend maar desnietomin tydrowend is. Die Appelafdeling
aan 'n
menigte
/ appèlle
21
appèlle (sowel siviele as strafappèlle) wat wesentlik oor
Feitevrae gaan en van 'n soort is wat hoegenaamd nie in 'n
land se hoogste hof
tuis hoort nie. Dit beteken 'n onoordeelkundige en onekonomiese aanwending van
skaars mannekrag. Verder doen
dit afbreuk aan die status en waar-digheid van die
Appèlafdeling."
If
it was the intention of the Legislature, when
enacting Act 105 of 1982, to reduce the workload of the
Appellate Division
and to place a qualitative limitation
on the kind of appeals heard by this
Court by diverting
to the Full court appeals which, because of "the
questions
of law and of fact and the other considerations involved",
did
not merit the attention of the Appellate Division,
then it seems to me that
it would be contrary to that
general intention to permit a further appeal
from the
decision of the full court to the Appellate Division (in
terms of
sec 20(4)(a) ) merely on the ground that there
were reasonable prospects of
success on appeal. This
consideration reinforces the view that the concept
of
"Special leave" in sec 20(4)(a) imports criteria additio-
/ nal to
22
nal to those inherent in the concept of "leave"
in sec 20(4)(b).
In arguing that no stricter test should be applied to the grant of "special
leave" than in the case of "leave", counsel referred to
the fact that, prior to
its amendment by sec 8 of Act 105 of 1982, the English text of sec 21(3) (a)
referred to "special leave",
without any particular significance being attached
to the word "special" , and in this connection he cited the case of
Rex v
Baloi
1949 (1) SA 523
(A).
It may well be that the use of the word "special"
in
the unamended sec 21(3)(a) was redundant and of no
particular significance.
There are textual indications
to this effect. Sec 2l ( 3 ) ( a ) read as
follows:
An application to the appellate divi-sion under sub-section (2) shall be
submitted by petition addressed to the
/ Chief Justice
23
CHIEF JUSTICE within twenty-one days, or such
longer period as may on good cause be allowed, after the special leave of the
court
against whose decision the relevant appeal is to be made was refused."
The "special" leave here referred to was that of the court against whose
decision the relevant appeal was to he made. Sec 21(2)(a),
which dealt generally
with the need in certain cases to obtain leave to appeal, spoke of —
".... the
leave
of" the court against whose decision the appeal is to
be made" (my italics)
and went on to provide that in the event of this court refusing "such leave",
the Appellate Division might grant "such leave". Thus
"special leave" and
"leave" were used in different subsections to describe the same concept.
Moreover, the Afrikaans text of sec
21(3)(a) contained no word corresponding to
special: it spoke merely of "verlof".
/ But
24
But the fact that "special" might have been redundant in sec 21(3)(a) prior
to its amendment does not, in my opinion, carry any weight
in the present
enquiry. In the new sec 20 there"are no such internal indications of redundancy
(the Afrikaans text of sec 20(4)(a)
speaks of "spesiale verlof"); there is the
very significant juxtaposition of "special leave" and "Leave" in sec 20(2)(a)
and sec
20(4)(b); and there is the other factor discussed above, viz. the
mischief aimed at by sees 7 and 8 of Act 105 of 1982.
Nor do I think that R
ex v Ba
loi,
supra
, is of any real
relevance in this case. Sec 105 of the South Africa Act, which dealt primarily
with appeals from inferior courts
to the provincial divisions of the Supreme
Court, enacted that there should be no further appeal except to the Appellate
Division
and then only with "special leave"
/to
25
to appeal.
Baloi
's case was concerned with
the grounds upon which "leave to appeal" should be granted by a superior court
in a criminal case in terms
of sec 369 of the Criminal Procedure and Evidence
Act 31 of 1917, as substituted by sec. 7 of Act 37 of 1948. Giving judgment,
CENTLIVRES
JA stated (at p 524):
"In applications for special leave to appeal under sec 105 of the South
Africa Act and sec 1 of Act 1 of 1911, this Court has laid
down the rule that
leave to appeal should not be granted unless the applicant will have a
reasonable prospect of success on appeal.
See
Rex v Nxumalo
(1939, A.D.
580
at p 58l) and
Rex v Ngubane and Others
(1945,A.D. 185
at p 187). The
statutes considered in those cases use the words '
special
leave to
appeal', while the section under which this appeal is brought,uses the words
'leave to appeal', but it will be found that
in none of the cases in which this
Court considered an
/ application
26
application for special leave to appeal was any stress laid on the word
'special'. We are therefore of opinion that the test to be
applied in
considering an application for leave to appeal under sec 369 of Act 31 of 1917
is the test given in
Rex v Ngubane
(
supra
).
Again the factors
mentioned above, viz. the juxtaposition of "special leave" and "leave" in sec
20(4) and the mischief aimed at by
secs 7 and 8 of Act 105 of 1982, did not
apply in the case of sec 105 of the South Africa Act.
For these reasons 1 conclude that it is not sufficient for an applicant for
"special leave" in terms of the new sec 20(4)(a) merely
to show that there is a
reasonable prospect of success on appeal. He must in addition show something
else; and my next task is to
endeavour to delineate this "something else".
I am of the opinion that the Legislature intended
/ to
27
bo leave it to this Court to determine what the requisites are for the grant
of special leave. In this connection I do not think that
it is either necessary
or desirable for this Court to endeavour to indicate with precision what these
requisites are. It is sufficient,
in my view, to lay down the general principle
and to illustrate its application by a few (but by no means exhaustive)
examples.
The general principle is that an applicant for special leave to appeal must
show, in addition to the ordinary requairement of reasonable
prospects of
suceess, that there are special circumstances which merit a further appeal to
the Appellate Division. This Court will
be the arbiter as to whether such
special circumstances exist. By way of illustration — and I stress again
that these illustrations
are not exhaustive of the concept of special
circumstances — I would cite the following types of case as constituting
special
circumstances:
/ (1) Where,
28
(1) Where, in the opinion of this Court, the
appeal raises a substantial
point of law.
Often, probably ordinarily, such a case would
not have been
referred to the full court
in the first place, but would have been direc-ted to the Appellate Division.
Nevertheless, the court making the reference might, despite
the point of law,
have considered the case as one not meriting the attention of the AppeL-late
Division; or the point of law might
have arisen as a new development after leave
to ap-peal to the full court had been granted.
(2) Where the matter, though depending mainly on
factual issues, is of
very great importance
to the parties or of great public
importance.
Various concrete examples of this can be
visualized.
/ (3) Where
29
(3) Where the matter turns mainly on factual.
issues and lacks the qualities referred to in (1) and (2) above, but the
prospects of success are so strong that the refusal of leave
to appeal would
probably result in a mani-fest denial of justice. In this regard it must be
appreciated that the concept "reasonable
pros-pects of success" covers a fairly
wide spec-trum, ranging from minimum needed to establish reasonable prospects to
virtual certainty
of success. This is particularly so in factual matters
involving the eva-luation of (often conflicting) evidence. Thus, while the
minimum prospects in a pure-ly factual matter might not justify the grant-ing of
special leave, very strong prospects might. While
it might seem inequitable to
deny an appeal where prospects of success (though
/ minimum
30
minimum) do exist, it must be remembered that there has already been one appeal
and the granting of a further right to appeal will
mean that this Division will
be the third court to consider the matter.
Interest rei publicae ut sit finis
litium
.
Adopting this general
approach, I now proceed to consider the present application. The facts of the
case, as they emerge from the
evidence led at the trial, are as follows.
The appellant company carries on business principally as a distributor of air
brake equipment for heavy duty vehicles. It does not
itself manufacture the
components for such brakes, but buys them from overseas or local suppliers and
puts them together, in a box,
in the form of a "kit".
/ During
31
During April 1981 Mr L D Merchant, at the time appellant's senior sales
engineer, heard that the Armaments Corporation of South Africa
Limited
("Armscor") was calling for tenders for the manufacture and supply of a number
of 5-ton trailers and 10-ton trailers. Merchant
submitted quotations for the
trailer braking systems to certain trailer manufacturers, all potential
contractors in re-spect of the
Armscor contract, but initially not to the
respondent (whom he had not heard of before). Some months later Merchant heard
that respondent
had also submitted a tender. He thereupon telephoned respondent
and spoke to Mr A C Smith, respondent's production controller. He
asked Smith
whether appellant could submit to respondent a tender for the braking systems
and Smith agreed. On 29 June 1981 Merchant
delivered to Smith a written
quotation, addressed to respondent and signed by himself, the body of which read
as follows:
/ "5 - 10 TON
32
"
5 - 10 TON TRAILERS ARMSCOR CONTRACT NO:
KA166-69-3
We have pleasure in quoting for the supply of air pressure brake equipment to
Arms-cor specification for the above contract
number, as follows:-
5 ton Trailer brake equipment R270,00 nett per kit.
10 „ „
„ „ R249,00
The first installation would be done free of charge.
Price excludes general sales tax.
Terms: 30 days nett.
The prices quoted are based on ex works costs, transport charges, customs
duty and currency rates, applicable as at today's date and
are subject to
escalation."
This quotation is typed on a printed letterhead at the bottom of which is
printed in both English and Afrikaans a notification to
the effect that all.
offers are subject to conditions of tender or of sale "printed overleaf"; and
that the tender is made subject
to the terms and con-ditions of tender printed
"on the back hereof". On the reverse side of this document there are 19 clauses
con-
/stituting
33
stituting the general conditions of tender or of
sale.
Two of these read as follows:
"(1) The acceptance of our offer and
conditions musk be in writing and accompanied by sufficient informa-tion to
enable us to proceed with the order. Acceptance does not
constitute a contract
unless con-firmed by us in writing.
(3) This tender is based on the rates of exchange, freight, insurance, landing
and clearing charges, la-bour, materials, duties and
railway rates ruling on the
date of tender. Any alteration to these before the delivery of the goods will be
for the account of the
purchaser, not with-standing our confirmation of prices
in terms of Clause 1 above. "
On 1 July 198l respondent was
notified by Armscor that it
had been awarded the contract to manufacture and supply the
trailers.
On 21 July 198l Merchant, accompanied by Mr H J Hart, appellant's managing
director, paid what was described
/in
34
in evidence as "a public relations visit" bo
respondent's place of business, where they met and spoke to Smith and Mr J
Gutmayer,
a director of respondent. There is a dispute as to what was discussed
at this meeting. On 27 July 198l Hart again visited respondent's
premises and
spoke to Smith and a Mr A E Kestell, the works manager. (Gutmayer had three days
before gone away on a short holi-day.)
The interview took place at Hart's
request and was for the purpose of obtaining an order for the brake kits from
respondent. Various
matters relating to appellant's quotation were discussed:
inter alia
the prices quoted, the escalation clause, respondent's
delivery requirements and the deletion of certain clauses in the general
con-ditions.
Pursuant to these discussions and a further telephone conversation
between Hart and Kestell on 28 July 198l, Smith acting on behalf
of respondent
sent to appel-lant a telex dated 29 July 198l, in which an order was
/ placed
35
placed for "280 OFF 5 TON BRAKE KITS AT R270,00
NETT EACH" and "184 OFF 10 TON BRAKE KITS AT R242,00 NETT EACH". The telexed
order
gives details of the delivery times required and concludes with the
following note:
"NOTE:
A. ABOVE DELIVERY DATES ARE OUR LATEST
REQUIRED DATE DELIVERED TO OUR
WORKS,
MEYERTON.
B. TRANSPORT COSTS TO BE
INCLUDED.
C. ORDERS ARE SUBJECT TO RELEVANT ARMSCOR
INSPECTION, QUALITY REQUIREMENTS
AND
GENERAL CONTRACT
CONDITIONS.
WE TRUST THAT THIS MEETS YOUR MANUFACTURING CAPACITY AND WORK LOADING AS
DELIVERY OF TRAILERS TO OUR CLIENT IS OF UTMOST IMPORTANCE.
YOUR CONFIRMATION AND RECEIPT OF ABOVE WILL BE APPRECIATED.
P.S.
YOUR GENERAL CONDITIONS OF SALE
: TO BE AMENDED AS
FOLLOWS:
CLAUSE 5: DRAWING MUST BE
INCLUDED. CLAUSE 8, 11 AND 12 TO BE DELETED.
P.P.S.
PIPES
: ALL PIPES WILL BE BENT BY BILGER
ENGINEERING."
In response to the
request contained in the note appellant on 30 July 198l sent to respondent a
telex, the material portion of which
reads:
/ 1) THNK YOU
36
"1) THNK YOU FOR YR TLX RECD TODAY
2) FURTHER TO TELECON MR A C SMITH AND THE WRITER TODAY WE ACKNOWLEDG WITH THNKS
YR ORDERS AT PRICES NOTED SUBJECT A) TO OUR APPROVAL
OF ITEMS NOTED UNDER YR
PARA C. AND B) PRICES QUOTED ABOVE ARE SUBJECT TO ESCALATION FROM DATE OF OUR
QUOTATION 29TH JUNE 198l.
3) WE CONFIRM:
A) WE CAN MEET DELIVERY DATES NOTED AND WOULD SUGGEST YOU ACCEPT E DELIVERY
APPROXIMATELY ONE WEEK IN ADVANCE OF REQUIRED DATE.
D) TRANSPORT COSTS TO YR MEYEKTON STORES INCLUDED IN PRICE.
C) GENERAL CONDITIONS OF SALE AMENDED
AS FOLLOWS:
CLAUSE 5 - DRAWINGS WILL BE INCLUDED CLAUSES 8, 11 and 12 WILL BE DELETED
D) WE NOTE ALL PIPES WILL BE BENT BY
BILGER ENGINEERING
E) PRICES EXCLUDE GENERAL SALES TAX
F) OUR PRICE INCLUDES FOR
INDIVIDUALLY
BOXED KITS WITH FITTINGS INSERTED
INTO VALVES.
G) SETTLEMENT TERMS:
60 DAYS NETT FOR THE MONTHS SEPTEMBER,
OCTOBER, NOVEMBER
NETT 30 DAYS FOR DECEMBER AND MONTHS THEREAFTER".
/ This
37
This telex thus dealt with all the matters raised
in the note contained in respondent's order, but left open appel-lant's approval
of the items in par C of the note, viz. the orders being subject to relevant
Armscor inspection, quality requirements and general
contract conditions. (For
the sake of brevity I shall refer to these matters as "the Armscor
conditions".)
On 3 August 198l and apparently in pursuance of a prior arrangement Hart sent
by hand a short note to Smith asking the latter to hand
the bearer the "relevant
documents which may affect us in respect of the Armscor contract". This was done
and Hart received a copy
of the standard conditions of Armscor contracts, which
inciden-tally also include, in clause 40, provision for price es-calation.
According to Hart, who gave evidence on behalf of appellant, he thereafter
telephoned Gutmayer and told him that appellant accepted
the Armscor conditions.
It
/ would
38
would seem that, according to Hart, this
conversation took place on 7 August 19Sl. In his evidence for respon-dent
Gutmayer denied
this and contended that appellant at no time signified its
acceptance of the Armscor conditions. This became a vital issue in the
case, as
I shall show.
On 7 August 1981, after this telephone conversation according to Hart, Hart
and Merchant visited respon-dent's premises. On their
arrival Gutmayer excused
him-self on account of being busy and their discussions were with Smith alone.
Of the matters discussed
the only one of relevance for present purposes is that
Smith asked what the price per kit was as at Friday 7 August 198l and Hart
said
that he would advise on the Monday (i.e. 10 August 198l) what the increase was
under escalation. True to his word Hart telephoned
Smith on 10 August 198l and
advised him that the price increases, due to escalation, since appellant's
original quotation of 29 June
198l
/ were
39
were as follows:
Original Price Increase Total
10 ton brake R242,00 R17,01 R259,01
5 ton brake R270,00 15,61 285,61
Smith was further told that these increases were the result of certain
official price increases in labour, the cost of steel and overheads
notified by
one of appellant's suppliers. Smith informed appellant that all work on the
order was to be suspended pending further
discussions between "the army" and
respondent. On the following day (11 August 198l) Hart sent a telex to Smith
confirming the content
of this telephone conversation.
On 13 August 1981 Smith telexed Hart as follows:
"WE
REGRET TO ADVISE THAT OUR ORDERS NO 24561/A3051 ARE HEREWITH
CANCELLED
Hart sent a telex in reply on 14 August 198l stating:
"AS THERE IS A BINDING AGREEMENT BETWEEN US WE REGRET WE DO NOT ACCEPT YOUR
PURPORTED CANCELLATION."
/To ...
40
To this Gutmayer telexed a reply to the effect
that the cancellation of the order was confirmed "as no agreement, could be
reached".
Thereafter appellant's attorneys took over and on 17 August 1981 sent
a telex to respon-dent, stating
inter alia
that respondent's purported
can-cellation of the agreement amounted to an unlawful re-pudiation thereof and
that appellant intended
to claim damages for breach of contract. Respondent's
attorneys replied, denying liability. On 4 November 198l appel-lant issued
summons.
The reason for respondent's sudden
volte face
in the form of the
cancellation of the order is not far to seek. On 10 August respondent received
another quo-tation from a company
called M A G Brakes (Pty) Ltd. The prices
quoted by M A G Brakes were lower than appellant's revised prices (to include
escalation)
and the quotation contained no escalation clause. Respondent later
con-
/ cluded
41
cluded a contract for the supply of the required
braking systems with M A G Brakes.
The pleadings in this matter are quite straight-forward. Appellant alleged
the conclusion of a contract for the sale of the brake
kits at the prices
quoted, sub-ject to escalation, and respondent's wrongful repudiation of the
contract. Respondent pleaded that
no contract had been concluded. In
substantiation of this respon-dent referred to (i) appellant's quotation of 29
June 1981, which
was subject to escalation; (ii) subsequent verbal discussions,
whereafter respondent placed the order dated 27 July 1981, which according
to
the plea was not subject to escalation, but was for a fixed price; (iii)
appellant's telex of 30 July 1981, described by respondent
as "a
counter-offer...which offer was again subject to escalation"; and (iv)
respondent's cancellation of the order "because of the
fact that the
(appellant's)
Counter-offer was unacceptable".
/ At
42
At the trial Hart and Merchant gave evidence on
behalf of appellant and Gutmayer on behalf of respondent. Smith, who was
apparently
available to give evidence, was not called by the respondent and no
explanation for this was given.
In his judgment the trial Judge analysed the exchanges between the parties
and came to the conclusion that (1) the quotation of 29
June 198l was no more
than an invitation to trade; (2) that respondent's order of 29 July 1981
constituted a contractual offer, incorporating
"two contradictory escalation
clauses", viz. clause 3 of appellant's general conditions of tender and clause
40 of the Armscor general
conditions of contract; (3) that appellant's telex of
30 July 1981 was not "a clear and unequivocal or unambiguous acceptance" of
respondent's offer, but was in fact a counter-offer; and (4) that this
counter-offer was not accepted by the respondent.
/With
43
With reference to the question of escalation the
learned Judge pointed out that neither clause 3 of the appel-lant's general
conditions
of tender nor clause 40 of the Armscor general conditions of contract
provided a for-mula which could lead to a mathematical calculation
of escalation
increases because there was no clarity as to what
proportion of the cost price of the brake kits represented; say, the cost of
labour or the cost of materials, so that a cost increase
to appellant in respect
of these items could objectively be converted into an escalated price for the
brake kits. MYBURGH AJ also
found that from the begin-ing Gutmayer wanted a
definite formula for calculating the escalated prices and was not prepared to
leave
it to appel-lant to determine the method of calculation; and he re-jected
Hart's evidence that this question of a formula was never
discussed between
Gutmayer and himself.
/ The
44
The trial Court appears to have come to the
con-clusion that no
consensus
was reached by the parties on two grounds:
(a) that there was to the end a dispute about the question of a fixed formula
for the
calculation of escalation; and (b) that there was no acceptance of the
Armscor conditions by the appellant. With reference to (b)
the Court held that
—
"The alleged verbal acceptance of the Armscor conditions was clearly after
the
dispute had a risen and the acceptance was no longer possible in law."
I agree that the appellant's quotation of 29 June 198l constituted an
invitation to treat or do business and respondent's order of
29 July 1981 a
contractual of-fer. I agree too that the offer incorporates clause 3 of
appellant's general conditions of tender,
as also the provision concerning
escalation in the body of appellant's quotation. This was conceded by Gutmayer
in evidence, despite
the denial, thereof in respondent's plea.
/ I do
45
I do not think, however, that it is correct to
say that respondent's offer also incorporated clause 40 of the Arms-cor
conditions
of contract. The offer speaks of "relevant Armscor.... general
contract conditions" and, in my view, clause 40 which was intended
to regulate
the price of the trailers as between respondent and Armscor, would not be
relevant to the contract between appellant
and res-pondent for the supply of
brake kits. And this was the view of Gutmayer himself.
The trial Judge's characterization of appellant's telex of 30 July 198l as a
counter-offer is, with respect, incorrect. In this telex
appellant did not
introduce any new terms or in any way modify the terms of the offer. It accepted
all the terms proposed in the
offer, save that it reserved its approval of the
Armscor con-ditions. It was certainly an incomplete acceptance, in the respect
that
I have indicated, and as such did not bring
/ about
46
about a concluded contract, but it did not
constitute a counter-offer necessitating a further acceptance by the respondent.
Once appellant
notified respondent of its approval of the Armscor conditions,
then, provided that the offer had not in the meanwhile lapsed or been
withdrawn,
the acceptance would be complete and a contract concluded.
This analysis and the finding (supported by Gut-mayer's admission) that
respondent's offer incorporated the escalation provisions
contained in
appellant's quotation completely disposed of the defence pleaded by respondent:
but it is evident that as the trial
progressed the real, decisive issue which
arose was whether or not appellant had notified respondent of its acceptance the
Armscor
conditions while the offer was still open. It is to this issue that I
now turn.
It will be recalled that shortly after the parties had exchanged the telex of
29 July 1981 (respondent's offer)
/ and
47
and the telex of 30 July 1981 ( appellant's partial acceptance
thereof) and on 3 August 1981 (a week-end having intervened) Hart sent
for and
received a copy of." the Armscor conditions of contract. This fact is undisputed
and there is documentary confirmation of
it. Obviously Hart sent for the
conditions of contract in order to study them with a view to deciding whether or
not to accept them
and so complete the agreement between the parties. As I have
indicated, Hart stated in evidence that he telephoned Gut-mayer on 7
August 198l
and notified him of appellant's acceptance of the Armscor conditions. He stated
further that he also told Gutmayer in
the course of the same telephone
conversation that "we would like to come and discuss the matter of delivery with
them"; and that
a meeting was arranged for the same afternoon. It is common
cause that this meeting did take place, though Gutmayer was too busy
to be
present and left matters to Smith. Hart, who
/ was
48
was able to refresh his memory in regard to this
telephone call and the meeting from a contemporary memorandum, stated further
that
one of the matters discussed at the meeting was the extent to which the
price had escalated by that date; and that he gave this information
to Smith on
the telephone on 10 August 198l. Here again he was able to refresh his memory
from a contemporary note; and, of course,
there was the confirmatory telex on 11
August 198l. Smith was not called and so there could he no contradiction of this
evidence
regarding the meeting of 7 August and the telephone call of 10 August.
Gutmayer did, however, deny that Hart notified him of the
approval of the
Armscor conditions.
It is not clear to me what the trial Judge's finding on this issue was, save
that the alleged acceptance or the Armscor conditions
was after the dispute had
a risen and was no longer possible in law. I have no doubt that
/ on
49
on this issue, ie whether Hart told Gutmayer of
appellant's acceptance of the Armscor conditions, the trial Judge ought to have
preferred
the evidence of Hart. In the first place, failure to reach
consensus
on the ground that appellant, never notified respondent of its
acceptance of the Arms-cor conditions was never pleaded by respondent.
Secondly,
Gutmayer's evidence on the issue is not clear. When he was asked in
examination-in-chief whether any approval was conveyed
to him, he said "No" and
he also denied that Hart had telephonically informed him of appellant's
approval. Under cross-examination
on the same point his evidence reads:
"You see, Mr Gutmayer. I want to put it to you that what happened was that
there was a telephone call before 7 August, but it was
Mr Hart's telephone call
to tell you that he accepted the stipulation with regard to the Armscor
contract, that is all that happened
in that telephone conversation?-- During
that telepone
/ conversation
50
conversation I made it clear to Mr Hart he cannot
have my escalation formula with Armscor because this does not make sense, and I
would, in view of this pending para-graph 3 which specifies his escalation, I
want to have a written thing which clear-ly stipulates
what it means, and on
this basis we can go ahead."
The witness appears not to answer the question directly,
but he does
concede apparently that a telephone conversation
took place on that date. All
in all, Gutmayer's denial
is not very convincing.
Moreover, in my opinion, the probabilities support Hart's version. Hart
emerges from the evidence as an experienced, careful and methodical
man of
business, pos-sibly as one who drives a hard bargain. Hart realized after 30
July 1981 that all that stood between appellant
and a clinching of the deal was
appellant's approval of the Armscor conditions. He sent for the conditions
/in
51
in order to peruse them and he was happy to
accept them. He was obviously anxious to obtain the contract. He tele-phoned
Gutmayer
on 7 August 198l. In the circumstances it seems very likely that he
would then have conveyed his acceptance of the Armscor conditions.
Furthermore
at the meeting of 7 August 1981 and thereafter, until the cancellation on 13
August, the parties seem to have acted on
the basis that a contract had been
finally concluded.
As to the general credibility of the witnesses involved, the trial Judge
appears to have formed a preference for Gutmayer. Conscious
as I am of the
advantages to be derived from hearing and seeing a witness in the witness-box
and of the disadvantages suffered by
a court of appeal which has before it only
the inanimate record of the pro-ceedings, I nevertheless feel constrained to
differ from
the learned trial Judge in his assessment of Gutmayer's credibility.
The respondent's plea, which must have
/ been
52
been drafted on instructions given by Gutmayer,
denies that respondent's offer was subject to escalation, yet in court Gutmayer
admitted
that clause 3 was incorpora-ted. Moreover, throughout his evidence
Gutmayer empha-sized his dislike of an escalation clause without
what he termed
a "formula" and he claimed to have told Hart on three occasions, viz during the
course of a telephone call after he
had received appellant's quotation, at the
meeting of 21 July 198l and in the course of a telephone call on 3 August 1981,
that clause
3 was "unacceptable" to him. It is strange, if this evidence be true
(and it is denied by Hart and, as to the meeting of 21 July
198l, by Merchant as
well), that there is no indication whatsoever of this sentiment on Gutmayer's
part in any of the documents before
the Court. It is strange too that appellant
should have taken no steps to meet respon-dent in regard to this objection. And
what
is even stranger is that respondent did not exclude clause 3 when
/ formulating
53
formulating its order of 29 July 1981. It did
after all exclude certain other general conditions. Gutmayer was cross-examined
about
this. He, of course, was away over the period 24 July to 3 August 198l and
the order was drafted by Smith. But, according to him,
before going away he
discussed the order with Smith and gave him instructions as to how it should be
drawn up. He agreed that the
one thing Smith had to do in his negotiation with
appellant in his (Gutmayer's) absence was to exclude clause 3 and he was unable
to explain why this had not been done. He agreed that it was "inexplicable".
And, of course, Smith himself was not called to explain
the inexplicable. I find
this evidence improbable and I note that when giving it Gutmayer tended to be
evasive at times.
Gutmayer claimed that on his return from holiday on 3 August 198l and on
learning what Smith had done in his absence lie was very
unhappy because of the
non-exclusion
/of
54
of clause 3 from the order. Yet he conceded that
the only written record of his unhappiness was the telex of cancellation on 13
August
19Sl. Moreover, despite his alleged unpreparedness to accept clause 3, he
gave the following answers under cross-examination:
"And yet Mr Smith calls for an up to date price on 7 August on Mr Hart's
formulation, is that correct?-- Yes.
But that is a senseless exercise because you will not accept his
formulation?--As said I was still prepared up to 11 August to accept
his quote
because we had gone such a long way it was just not true.
The price was called for because you were prepared even to accept his
escala-tion formula, is that correct?-- Yes."
It is common cause that on 7 August 1981 Hart and Merchant visited
respondent's place of business. Gutmayer conceded in evidence that
what he
wanted to achieve at this meeting was to "get out of the contract" that had
/ been
55
been made in his absence. In the circumstances I
find it strange (a) that, in spite of being busy, Gutmayer did not find time to
speak
to Hart and convey to the latter his feelings about the contract, and (b)
that Smith should apparently have given Hart no inkling
of Gutmayer's
dis-satisfaction with the contract: that, on the contrary Smith should have
asked for revised prices in terms of the
escalation clause.
Hart's evidence that Smith told him on 10 August 198l to suspend work on the
order ponding further dis-cussions between "the army"
and respondent was given
after he had refreshed his memory from a contemporary note. The evidence was of
course not contradicted
by Smith; and, in my view, it should be accepted that
this happened. There was evidently no basis for alleging that further
discussions
between the army and respondent were taking place or were about to
take place. The pro-
/bability
56
bability is that this statement was a subterfuge to induce appellant to
suspend work while respondent weighed the respective merits
of appellant's
contract and the offer by M A G Brakes. Gutmayer was cross-examined about this.
He denied all knowledge of Smith's
statement and stated that he did not inspire
it. I find this improbable, particularly as, according to Gutmayer, he told
Smith on
his return on 3 August that he (Gutmayer) would personally be handling
the case. In the circumstances, it seems unlikely that Smith
would have made
this statement entirely on his own responsibility.
For these reasons I am of the view that the trial Judge ought to have found
that Hart did communicate appellant's acceptance of the
Armscor conditions
during the course of a telephone conversation with Gutmayer on 7 August 198l. It
would follow from this that there
was then a complete acceptance by appellant of
respondent's
/ offer
57
offer. The trial Judge's comment that by then
"the dispute had arisen and the acceptance was no longer possible in law" is not
understood.
At that stage there was no dispute. The meeting on the afternoon of
7 August was non-contentious and Smith even asked for updated
prices. The
cancellation of the order took place nearly a week later. There is nothing in
the evidence to show that on 7 August 198l
the respondent's offer was not still
open for acceptance. In my, judgment one parties did reach
consensus
. And
furthermore there is no valid basis for finding that a dispute about a fixed
formula prevented the parties from concluding an
agreement.
The next question is whether the agreement reached by the parties brought
about a valid enforceable contract. This raises two points:
the point on which
the case was decided in the Court a
quo
and the point raised in par. (a)
of this Court's order (see above).
/ Briefly
58
briefly stated, the point on which the Court a quo non-suited
the appellant (which incidentally was not specifically pleaded by respondent)
was to the fol-lowing effect:-
(1)
Respondent's order of 29
July 1981 incorporated appellant's general conditions of sale, apart from those
specifically excluded.
(2)
In terms of clause
1 of these general conditions (quoted above and which was not excluded), read
mutatis mutandis
, it was the intention that the whole agreement between
the parties should be in writing and that unless the full contract was in
writing there was to be no contract.
(3)
Since
appellant's approval of the Armscor con-ditions formed part of its acceptance of
the offer and was not in writing, no contract
came into
existence.
/ The
59
The "general conditions of tender or of sale"
appearing on the reverse side of appellant's written quotation are prefaced by
the words
—
"The acceptance of this tender and any part thereof or extension thereto
shall be subject to the following terms and conditions:-"
Clause 1 presupposes that the appellant's tender constitutes a contractual
offer, acceptance of which would normally constitute a
contract. What the clause
does is (a) to stipulate the manner of acceptance, ie it must be in writing and
accompanied by sufficient
information etc., and (b) to provide that such
acceptance does not constitute a contract unless confirmed by appellant in
writing.
An offeror may always prescribe the mode of acceptance of his offer in
order that a
vinculum juris
should be created (see
Driftwood
Properties (Pty) Ltd v McLean
1971 (3) SA 591
(A) ). In (a) above clause 1
does
/ merely
60
merely this. In (b) above, the clause goes further in stipulating when a
contract comes into existence, a written acceptance having
already been received
by the offeror. This may be seen as a term of the offer which the offeror
accepts when he submits his offer.
I have great difficulty in seeing how this clause can be applied to the facts
of the present case, even mutatis mutandis. It is common
cause that the
quotation submitted by appellant was not an offer but merely an invi-tation to
treat. It was respondent who submitted
the offer. And consequently it was
appellant who was required in law to accept the offer. To apply clause 1 to the
facts of this
case one would have to reverse roles and substitute respondent for
appellant,"your" for "our" in the first sentence and, presumably,
"you" for "us"
in the second sentence. On the other hand, "us" in the first sentence would
continue to refer to appellant. In the
result the second
/ sentence
61
sentence would mean that after appellant had
communicated its acceptance of respondent's order in writing there would still
be no
contract unless there was confirmation by respondent in writing.
I know of no authority justifying the rewriting of a contractual provision in
this manner. It, seems to me it would bring about a
situation never contemplated
by the contracting parties, certainly not the appellant. It is a clear inference
that the provisions
of clause 1 are stipulated for by appellant largely for its
own protection in business deals. How a provision whereby no contract
was
concluded until confirmation by the other party would fit in with this general
intent it is difficult to see.
I hold, therefore, that clause 1 is not capable of being applied to the facts
of this case and that the ground upon which the Court
quo non-suited the
appellant
/ is
62
is not well-founded.
Finally, I turn to the point raised in par (a) of this Court's order. It is a
general rule of our law that there can be no valid contract
of sale unless the
parties have agreed, expressly or by implication, upon a purchase price. They
may do so by fixing the amount of
the price in their contract or they may agree
upon some external standard by the application whereof it will be possible to
determine
the price without further reference to them. There can be no valid
contract of sale if the parties have agreed that the price is
to be fixed in the
future by one of them. (See generally
Burroughs Machines Ltd v Chenille
Corporation of SA (Pty) Ltd
.
1964 (1) SA 669
(W), at p 670 C-F;
Aris
Enterprises (Finance) (Pty) Ltd v Waterberg Koelkamers (Pty) Ltd
.
1977 (2)
SA 425
(A), at p 434 E;
Reymond v Abdulnabi and Others
1985 (3) SA 348
(W), at p 349 G-J.) This is part of the
/ wider
63
wider general principle that contractual
obligations must be defined or ascertainable, not vague and uncertain.(see De
Wet & Yeats
Kontraktereg en Handelsreg
, 4 ed, pp 834, 279).
I have already alluded to the difficulties pointed out by the trial Judge in
applying clause 3 of the tender conditions. This was
one of the major points
made by Gutmayer in his evidence. Hart in his evidence referred to what he had
told Smith and Kestell about
the operation of the escalation clause at the
meeting of 27 July 1981. He explained that the "base price" would be fixed as
the price
at which appellant could purchase the components of the brake kits on
29 June 198l, ie, the date of the quotation. These prices would
be lodged with
their auditors. Thereafter all increases beyond those base prices would be for
the customer's account. In the case
of overseas goods this would include an
increase in
/ ex-works
64
ex-works cost, in Freight rates, customs duties,
harbour clearance charges, railage charges, that is "all costs into our stores".
Under cross-examination Hart con-ceded that there was no specific formula For
the calcu-lation of the increase per unit sold, but
said that 98% of its
customers accepted escalation clauses of this na-ture and were prepared to
accept appellant's figure of increased
costs.
Prima facie
it seems to me that the uncertainties surrounding the
ascertainment of new prices in terms of the escalation clause might well vitiate
a contract of sale such as this in that the determination of the amount of
escalation might in the last resort be left to the decision
of appellant itself.
But this point was never pleaded by respondent; nor do I think that it was fully
canvassed by both sides in
the sense that the trial court was expected to
pronounce upon it as an issue (see
/
Director
65
Director of Hospital Services v Mistry
1979 (1) SA 626
(A), at p 636 C-D). Appellant's counsel submitted that had this point been
pleaded or otherwise raised as a triable issue the appellant
would have had the
opportu-nity to lead evidence to show that an escalation clause in the form of
clause 3 was capable of commercial
appli-cation and would give rise to a
determinable price. In my view, this is a valid argument and consequently I do
not think that
appellant should be non-suited because of the possible
uncertainty of clause 3.
The conclusion to which I therefore come on the merits of the case is that
the appellant not only has a reasonable, prospect of success
on appeal, but also
that the appeal should be allowed. Consequently, had we been concerned merely
with an application for special
leave to appeal, I would hold that leave should
be grant-ed on the grounds that the appeal involved a substantial
/ point
66
point of law raised for the first time by the
Court a
quo
, viz. that in terms of clause 1 of the tender conditions the
whole of the contract had to be in writing, and also that the prospects
of
success were so strong that justice demanded that leave be granted.
Appellant's counsel asked that in the event of the appeal succeeding
appellant should be granted, in addition to damages in the sum
of R15 000 and
costs, the following orders:
(a) interest on the capital amount of R15000 at
the rate of 11%
per
annum
from 27 May 1983
(the date of the judgment of MYBURGH AJ)
to 7 February 1985 and at 20%
per annum
from 8 February 1985 to date of payment; and
(b) interest on costs at the rate of 20%
per annum
from date of
taxation to date of payment.
/In
67
In view of the provisions of
sec. 2
of the
Prescribed Rate of Interest Act 55
of 1975
I do not think that orders (a) and (b) are necessary, but inasmuch as
respondent's counsel did not raise any specific objection to
their inclusion, I
make orders to that effect.
It is accordingly ordered as follows:
(1) The application for leave to appeal to this Court is granted with costs.
(2) The appeal is allowed with costs and the order of the Court a quo is altered
to read:
"The appeal is allowed with
costs and
the order of the trial Court is altered
to read:
'(1) Judgment for plaintiff in the sum of
R15 000, together with costs of suit.
/ (2) Interest....
68
(2) Interest on the aforesaid amount
of R15 000 at the rate of
11%
per annum
as from 27 May 1983
to 7 February 1985 and 20%
per annum
from 8 February 1985 to date of
payment.
(3) Interest on costs at the rate of
20% per annum from date of
taxa-
tion to date of payment.'
M.M. C0RBETT
RABIE, CJ) H0EXTER, JA)