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[1990] ZASCA 17
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Armaments Corporation of South Africa Ltd. v Solas Products (Pty) Ltd. (167/88) [1990] ZASCA 17 (16 March 1990)
ARMAMENTS CORPORATION OF SOUTH
AFRICA
LIMITED
Appellant
and
SOLAS PRODUCTS
(PROPRIETARY) LIMITED
Respondent
Case No 167/88 - mp
IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE
DIVISION
In the matter between:
ARMAMENTS CORPORATION OF SOUTH
AFRICA
LIMITED
Appellant
and
SOLAS PRODUCTS (PROPRIETARY)
LIMITED
Respondent
CORAM:
HOEXTER, E M GROSSKOPF, VIVIER, KUMLEBEN, JJA et NIENABER,
AJA
HEARD:
26 February 1990
DELIVERED:
16 March 1990
JUDGMENT
HOEXTER, JA...
2
HOEXTER, JA
In the Transvaal Provincial Division the respondent
company ("Solas") instituted an action for damages against the appellant company
("Armscor"). The cause of action was an alleged breach of contract. The only
issue at the trial was whether or not on 11 June 1984,
or alternatively during
the period May/June 1984, the parties had entered into a contract for the supply
of certain goods by Solas
to Armscor. Solas alleged and Armscor disputed the
existence of the contract. The trial came before ROUX, J. Having heard argument
the learned Judge on 3 September 1986 ruled in favour of Solas. He declared that
a contract had been concluded between the parties
on 11 June 1984 and he ordered
Armscor to pay certain costs in regard to the proceedings. Thereafter the matter
of the quantum of
damages was agreed between the parties. On 18 April 1988, and
by consent, the learned
3
Judge granted judgment in favour of Solas in the sum of R80 000 with costs.
With leave of the trial Court Armscor appeals against
the f inding of the Court
a quo that a contract had been concluded between the parties.
Solas carries
on the business of an importer and exporter. Its principal place of business is
in Sandton but its head office is at
Hout Bay; and its attorneys are in Cape
Town. Armscor has its head office in Pretoria. It carries on business, inter
alia, as a supplier
of arms and equipment to the South African Defence Force.
The contract alleged to have been concluded related to the supply and
commissioning
of an expensive battery. The relevant—negotiations between
the parties were largely, but not exclusively, conducted by the
use of telex
communications between Armscor in Pretoria on the one hand, and on the other
hand Solas (in Hout Bay) or its attorneys
(in Cape Town).
4
At the trial, and with the approval of ROUX J, the parties invoked the
provisions of Rule 33(4). There was placed before the trial
Court a "Statement
of Admitted Facts" in which reference was made to various telexes and letters
exchanged between the parties during
the period May/June 1984. The telexes and
letters in question were reproduced in a bundle of documents which was likewise
placed
before the trial Court. The parties requested the Court a quo to
determine the issue (whether or not a contract had been concluded)
by reference
to the documents contained in the bundle.
In what follows reference to individual documents in the bundle will be made
by indicating both the date thereof and the alphabetic
symbol assigned thereto
in the Court below. I proceed to consider the sequence and main content of the
negotiations between the parties.
(1) On 2 May 1984 and by way of a
"Request
5
for Offer"("A") Armscor invited offers for the
supply of the battery. (2)
By letter dated 2 May 1984 addressed to Armscor ("B") Solas undertook to act as
an importer of the battery
on behalf of Armscor at a total price of R973 000
(3) In response to this offer Armscor on 16
May 1984 sent a telex message ("C") to
the attorneys of Solas.
The message stated:-
"OFFER E13/84/419 DATED 1984-05-02 SOLAS PRODUCTS . ACCEPTED SUBJECT SOLAS
CONDITIONS WITH AMENDMENTS BY ARMSCOR AS WELL AS ARMSCOR
ADDITIONAL CONDITIONS.
TOTAL VALUE R973 000,00".
On the same date Armscor wrote a letter ("D") to Solas in which the following
was recorded:
6
"Your proposal dated 1984-05-02, for the supply of the equipment as specified in
annexure 'A', has been accepted. Enclosed is order
KP 165078 (DP) which is
subject to the conditions as detailed in annexure
'A'."
In para 2.1 of Annexure "A" to letter ("D") it
was stated that the order was subject to the provisions of Armscor's "General
Conditions
of Contract". Para 2.2 of Annexure "A" to the letter further set
forth seven "Supplementary Conditions." Para 2.2.2 contained the
following
supplementary condition:-
"2.2.2 As the price basis is delivered into store, any costs incurred by Armscor
as a result of clearing the goods will be recovered
from the Contractor (except
thát
7
these amounts will not cause the amount of R22 000,00 as specified in the
guotation to be exceeded)."
(4) On 23 May 1984 Solas sent to Armscor an
invoice ("E") reflecting, inter
alia:-
"To total net amount due -payment to be
effected as detailed in your order R973 000".
(5) On 29 May 1984 the attorneys for Solas
sent a telex message ("F") to
Armscor
referring to the latter's letter dated
16 May 1984 ("D") and a
meeting held at
the offices of Armscor on 25 May
1984.
The relevant portions of telex
("F")
read:-
"YOUR CONDITIONS RELATING TO THE ABOVE ORDER
ARE ACCEPTABLE TO OUR CLIENT, SAVE FOR THOSE CLAUSES, WHICH
8
OUR CLIENT REQUIRES TO BE AMENDED AS FOLLOWS:-
One of the clauses which in its telex Solas required to be amended was
supplementary condition 2.2.2.
(6) Solas proposed to
import the battery
from a supplier in Portugal ("Tudor").
On 5 June 1984 Solas sent a telex
message ("G") to Armscor informing
it
that in the meanwhile another party
had
confirmed a like order with Tudor and
that Solas had been advised by
the
latter:-
"THAT UNLESS THE DOWNPAYMENT AND THE LC"
(letter of credit) "WILL BE AT HAND WITHIN 48 HOURS THE PRICE AS WELL AS THE
DELIVERY TIME
WILL HAVE TO BE REVISED."
(7) In response to telex "G" Armscor on 6
9
June 1984 sent a lengthy telex message
("H") to Solas informing it that:-
"2. PAYMENT WITHIN 48 HOURS NOT POSSIBLE DUE TO THE FOLLOWING REASONS."
One of the reasons mentioned was:-
"2.4 NO CONSENSUS HAS BEEN REACHED BETWEEN THE PARTIES IN RESPECT OF
SUB-CLAUSE 2.2.2 OF ARMSCOR'S CURRENT COUNTER OFFER."
In para 4 of the telex ("H") Armscor
"...PROPOSED THAT THE EXISTING SUB-CLAUSE 2.2.2 AS CONTAINED IN ARMSCORS
CURRENT COUNTER OFFER BE ACCEPTED."
Para 5 of telex "H" was typographically
marred by the omission of
certain
words. How Armscor had intended para
5 to read may be seen from the
10
undermentioned quotation from para 5 in
which the words accidentally
omitted in telex "H" are underlined:-
"5. SHOULD YOU
AGREE TO ACCEPT THE CONDITIONS AS STATED IN SUB-CLAUSE 2.2.2, IT IS PROPOSED
THAT IN ORDER TO EXPEDITE THE EVENTUAL
PAYMENT
THE REQUIRED INVOICE BE
SUBMITTED TO ARMSCOR
AS SOON AS POSSIBLE".
(8) It is common cause that on the same day
(6 June 1984) Armscor advised Solas by
telephone of the above omission in
telex "H"; and that on 7 June 1984 and
by way of a further telex message to
Solas ("J") Armscor repeated telex "H"
but reworded par 5 so as to include the
words which on the previous day had
been inadvertently omitted from telex
"H". That these facts are
common
11
cause appears from para 10 of the
"Admitted Facts", which is
in the
following terms -
"10. On 7th June 1984 at 08h24,
Defendant sent a telex to Plaintiff and Plaintiff's attorneys (Annexure 'J'
hereto), being a correction
of Annexure 'H' of which Plaintiff was
telephonically advised on 6th June 1984."
(9) Solas responded to telex "H" by way of
a telex message to Armscor ("I")
transmitted during the evening of 6
June 1984. Ex facie telex "I" it was
sent at 19h53. It will be remembered
that prior to telex "G" on 5 June
1984
(in which Solas had stated that
failing
a down-payment and a letter of credit
within 48 hours the price and
delivery
time would have to be
revised) the
12
parties had negotiated on a firm total
price of R973 000. In telex "I",
however, Solas stated:-
"DUE TO ESCALATION
OVERSEAS
WE HAVE TO INPORM YOU THAT
OUR OFFER FOR THE ABOVE
AMENDS AS
FOLLOWS: "
whereafter various components of a new
price totalling R1 006 420 were set
forth. In telex "I" Solas went on to
say: -
"SUB CLAUSE 2.2.2 IS ACCEPTED, PROVIDED OUR
LIABILITY DOES NOT EXCEED R20 000,00."
(10) On 7 June 1984 Armscor transmitted a
telex message ("J") to Solas. It has
already been mentioned that "J" is
simply a corrected version of "H" in
which the words missing from para
5
13
of "H" were supplied. Save f or this
emendation the body of telex "J", which
contains no less than seven paragraphs,
is in terms identical with that of
telex "H". It is clear, furthermore,
that telex "J" was a response to telex
"G" transmitted by Solas on 5 June
1984. Para 1 of telex "j" explicitly
states:-
"1. YOUR TELEX DATED 05/06/84
REFERS."
(11) Early in the morning (at 07h07) of 11
June 1984 Solas sent a further telex
message ("K") to Armscor. The first
three paragraphs of telex "K" read
thus:-
"1. OUR PARIS OFFICE HAS ADVISED THAT AFTER
FURTHER NEGOTIATIONS WITH THE
14
SUPPLIER LATE ON FRIDAY THE 8TH OF JUNE AN AGREEMENT HAS BEEN REACHED WITH
TUDOR WHEREBY ALL PRICES AND CONDITIONS REMAIN VALID AS
PER OUR PROPOSAL
1984-05-02. IN RETURN SOLAS HAD TO PLACE THIS ORDER WITH TUDOR THEN.
2.
WE CONFIRM THAT WE HEREBY
ACCEPT YOUR ORDER AS SUBMITTED TO US INCLUDING SUB-CLAUSE 2.2.2. THEREFORE THIS
ORDER HAS BECOME VALID NOW.
3.
HOWEVER I
BELIEVE THAT IN TODAYS MEETING YOU WILL BE ABLE TO AMEND CERTAIN OTHER POINTS AS
DISCUSSED AND BASICALLY AND PROVISIONALLY
AGREED UPON (TELEX 29-5-84 -10-26 FROM
S BRASG)".
(12) In the late afternoon (at 16h42) of
11
June 1984 Armscor sent a telex message
("L") to Solas. Telex "L" beglns
thus:-
"YOUR TELEX DATED 5 JUNE 1984 ARMSCOR'S
RESPONSE THERETO PER TELEX DATED 5 JUNE 1984 AND YOUR TELEX DATED 6 JUNE
15
1984 REFERS." The above reference related to telex messages "G", "H" and "I"
respectively. Following upon the introductory reference
quoted above paras 1 and
2 of telex "L" proceeded to state:-
"1. CONDITIONS
RELATING TO YOUR REVISED OFFER AS EMBODIED IN YOUR ABOVE TELEXES NOT ACCEPTABLE
TO ARMSCOR.
2. REGARDING YOUR TELEX DATED 11 JUNE 1984, WE WISH TO ADVISE THAT AS A
RESULT OF YOUR COUNTER PROPOSAL TO ARMSCOR AS EMBODIED IN
THE TELEX OF ABE,
DINNER, DINNER AND BRASG AND RECEIVED BY ARMSCOR'S L29 MAY 1984, ARMSCORS
COUNTER PROPOSAL AS SET FORTH IN ARMSCORS
LETTER OF ACCEPTANCE DATED 16 MAY 1984
HAS BEEN NULLIFIED, THEREFORE NO VALID ACCEPTANCE BY SOLAS PRODUCTS IN TERMS
THEREOF NOW POSSIBLE."
(13) On 12 June 1984 representatives of the
16
parties held discussions at the offices
of Armscor. On behalf of Armscor
the
view was expressed that no valid
agreement existed; and this view
was
confirmed by a telex message ("M") sent
by Armscor to Solas at 14h39
on 12 June
1984. At 16h57 on the same day the
attorneys of Solas responded thereto
by
a telex message ("N") to Armscor in
which, inter alia, the following
was
said:-
"WE CONFIRM THAT IT IS OUR CLIENT'S CONTENTION THAT YOUR COUNTER OFFER
CONTAINED IN YOUR ORDER OF 16 MAY 1984, WAS ACCEPTED ORALLY
AND/OR BY CONDUCT
AND/OR BY IMPLICA-TION.
IN THE LIGHT OF YOUR TELEX OF 7 JUNE 1984 WHEREIN YOU CONTENDED THAT THERE
HAD NOT BEEN AN ACCEPTANCE OF YOUR ORDER, OUR CLIENT DEEMED
IT
17
PRUDENT TO FORMALLY RECORD ITS ACCEPTANCE IN WRITING AS PER ITS TELEX OP 11
JUNE 1984."
(14) In answer to telex "N" Armscor on 19
June 1984
sent a telex message ("O") to
Solas, of which para 2 reads:-
"2. EVEN IF YOU ARE CORRECT IN YOUR CONTENTION THAT OUR ORIGINAL OFFER WAS
REOPENED FOR ACCEPTANCE IN OUR TELEX OF 6 JUNE 1984, CORRECTED
COPY OF WHICH WAS
TELEXED TO YOU ON 7 JUNE 1984 (WHICH
CONTENTION WE DO NOT ADMIT)
OUR POSITION STILL REMAINS THAT YOUR TELEX RECEIVED BY US ON 7 JUNE 1984
CONSTITUTED A MATERIAL COUNTER PROPOSAL WHEREBY ANY OFFER
OF OURSELVES WAS
INVALIDATED."
Dealing with the telex messages exchanged between the parties the learned
trial Judge remarked in the course of his judgment:-
"It remains unresolved on the papers what
the
18
defendant's reaction to Item 'I' was. On the following day the 7th June, 1984
the defendant per Item 'J' again suggested to plaintiff
that the ' current
counter-offer' ( i e Item ' D' ) be accepted. I must conclude Item 'I' was
ignored by the defendant. In any event
the overseas suppliers of the plaintiff
did not insist on a higher price so the problem posed in Item 'I' was resolved
and became
academic.
On the 11th June, 1984 the plaintiff accepted the defendant's 'counter-offer'
mentioned in both
Items 'H' and 'J'
The acceptance ref erred to in Item 'K' is an acceptance of Item 'D'. The terms
of Item 'D' are those which the defendant urged the
plaintiff to accept as per
Items 'H' and 'J'.
I find that a valid agreement was concluded
between the parties on the receipt by defendant
of the telex message Item 'K'."
It will be remembered that in telex "I", dated
6
June 1984, Armscor was informed that Solas had
amended its
initial offer by increasing the total price from R973 000
to R1 006 420. Dealing with the passage from the trial
Court's judgment
quoted above, I must differ, with respect,
from the learned Judge's finding that the reaction of
19
Armscor to telex "I" does not emerge from the papers. In
the first place
it is clear that in telex "L" dated 11 June
1984 Afmscor made specific
reference to three prior
telexes, one of which was -
"Your telex dated 6 June"
and then proceeded to state (in para 1 of "L")
that
"conditions relating to your revised offer as embodied in
your above
telexes not acceptable to Armscor." In the
second place it is to be noted that in telex "O", dated 19
June 1984,
Armscor contended that:-
"....your telex received by us on 7 June 1984 constituted a material counter
proposal whereby any offer of ourselves was invalidated."
It is common cause that in telex "O" the words "your telex
received by us on 7 June 1984" constituted a reference to
telex "I" transmitted by Solas on 6 June 1984 at 19h53.
In concluding that telex "I" was simply ignored by Armscor
the learned Judge therefore erred. In resolving the issue
20
between the parties telex "I" cannot be overlooked.
Against the contextual
setting of the negotiations between the parties before 6 June 1984 it is
necessary next to consider the legal
effect of telex "I" sent by Solas to
Armscor on that date. On 2 May 1984 Solas made an offer ("B") to which reference
may conveniently
be made as "the original offer". Armscor's letter ("D") dated
16 May 1984 constituted a counter-offer ("the Armscor counter-offer")
which was
the legal equivalent of a refusal of the original offer. Despite the lapse of
the original offer a contract would have
resulted if Solas had accepted the
Armscor counter-offer embodied in "D". By its telex ("I") sent in the early
evening of 6 June
1984, Solas intimated its acceptance of sub-clause 2.2.2,
which was a vital term of the Armscor counter-offer in regard to which
the
parties had hitherto not reached agreement. But whereas prior to the
transmission of telex "I" the parties
21
in their negotiations had been ad idem as to the total price (R973 000) for
the battery, in telex "I" Solas elected to stipulate for
a higher price (R1 006
240). The resultant legal position is that telex "I" constituted a counter-offer
("the Solas counter-offer")
which operated as a refusal by Solas of the Armscor
counter-offer. Accordingly the Armscor counter-offer was thereby extinguished;
and thereupon no offer remained open for Solas to accept. In' the course of his
argument before us counsel for Solas was constrained
to concede that this was
the legal position.
The only submission which in the end counsel for Solas found himself able to
advance in support of the conclusion reached by the Court
a quo was that,
notwithstanding the legal effect of telex "I", Armscor had revived or renewed
the Armscor counter-offer when it sent
telex "J" to Solas on 7 June 1984, thus
enabling its
22
acceptance by Soias on 11 June 1984.
It was urged upon us that inasmuch as
the parties had elected to negotiate with each other by way of telex messages
the issue should
be approached as if during the negotiations the parties were
facing each other across a table. On this approach, so the argument
proceeded,
it should be inferred that when Armscor despatched telex "J" on 7 June 1984, it
had already received and digested telex
"I"; and it should therefore further be
inferred that by sending telex "J" on 7 June 1984 Armscor intended - and was
understood by
Solas to intend - to revive the Armscor counter-offer which telex
"I" had extinguished. In this connection counsel for Solas sought
to place some
reliance upon the case of Entores, Ltd v Miles Far East Corporation
[1955] EWCA Civ 3
;
(1955) 2 ALL
ER 493
(CA) in which the English Court of Appeal decided that communications by
telex should be classified with instantaneous communications.
This is a
23
general rule, but it is by no means a universal one; and
its application
necessarily must hinge upon the particular
facts of the case and the precise
circumstances in which
the parties negotiate. Here reference may usefully
be,
made to the following remarks of Lord Wilberforce in the
course of his
speech in the House of Lords decision in
Brinkibon Ltd v Stahag Stahl und
Stahlwarenhandelsgesells-
schaft mbH
(1982) 1 ALL ER 293
(HL), at 296 C/D:-
"Since 1955 the use of telex communication has been greatly expanded, and there
are many variants on it. The senders and recipients
may not be the principals to
the contemplated contract. They may be servants or agents with limited
authority. The message may not
reach, or be intended to reach, the designated
recipient immediately: messages may be sent out of office hours, or at night,
with
the intention, or on the assumption, that they will be read at a later
time. There may be some error or default at the recipient's
end which prevents
receipt at the time contemplated and believed in by the sender. The message may
have been sent and/or received
through machines operated by third persons. And
many other variations may occur. No universal rule can cover all such cases;
they
must be resolved by reference to the intentions of
the
24
parties, by sound business practice and in some cases by a judgment where the
risks should lie: see Household Fire and Carriage Accident
Insurance Co Ltd v
Grant
(1879) 4 Ex D 216
at 227 per Baggallay, LJ and Henthorn v Fraser
(1892) 2
CH 27
,
(1891-4) ALL ER Rep 908
per Lord Herschell."
Turning to the facts of the instant case it
appears
to me that there is no room for the application of
the general rule. Even
without recourse to the "Admitted
Facts" it is difficult to believe that in
sending telex "J"
Armscor could have intended to revive the Armscor
counter-
offer. It is no less difficult to credit that Solas
would so have
construed telex "J", which makes not even a
fleeting reference to telex "I". Such a construction
would be a strained
and artificial one. It would, I think,
have been quite unbusinesslike for Solas so to interpret
telex "J". It is unnecessary to say anything more in this
regard, however, for the simple reason that in the light of
what is said in para 10 of the "Admitted Facts" (to whose
25
terms no reference is made in the judgment of the Court below) it is obvious
both what the true intention behind telex "J" was and
that such intention was
fully known to Solas. In the light of para 10 of the "Admitted Facts" the
argument that telex "J"constituted
a revival of the Armscor counter-offer is
thoroughly untenable.
For the aforegoing reasons it follows that the trial
Court wrongly ruled in favour of Solas. The appeal succeeds with costs,
including
the costs of two counsel. Orders 1 and 2 granted by the trial Court on
3 September 1986 (as reflected on page 140 of the record on
appeal) are set
aside. The trial Court's judgment given on 18 April 1988 (as reflected on page
142 of the record on appeal) is altered
to read:-
"Absolution from the instance is granted with
costs."
E M GROSSKOPF
JA )
VIVIER JA )
G G HOEXTER, JA
KUMLEBEN JA ) Concur
NIENABER
AJA )