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[2001] ZASCA 36
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Seeff Commercial and Industrial Properties (Pty) Ltd v Silberman (304 / 98) [2001] ZASCA 36; [2001] 3 All SA 133 (A); 2001 (3) SA 952 (SCA) (26 March 2001)
REPORTABLE
Case Number : 304 / 98
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
In the matter between
SEEFF COMMERCIAL AND INDUSTRIAL
PROPERTIES (PTY)
LIMITED
Appellant
and
COLIN
SILBERMAN Respondent
Composition of the Court
:
OLIVIER and
ZULMAN JJA; NUGENT AJA
Date of hearing
:
16 FEBRUARY
2001
Date of delivery
:
26 MARCH
2001
SUMMARY
Tacit acceptance of counter-offer. Terms of such
acceptance.
J U D G M E N T
OLIVIER JA
[1]
This appeal illustrates the truth of the statement by Lord
Cairns LC in
Brogden v Metropolitan Railway Co
(1877) 2 App Cas 666
at 672 that
‘ ... there are no cases upon which difference of opinion may more readily
be entertained, or which are always more embarrassing
to dispose of, than the
cases where the Court has to decide whether or not, having regard to letters and
documents which have not
assumed the complete and formal shape of executed and
solemn agreements, a contract has really been constituted between the
partners.’
[2]
Add to this the nearly insoluble problems caused in the present
appeal by awkward pleadings; a pre-trial conference which
failed to clarify the issues to be decided; an exception which was not
taken at
the proper stage and two unwarranted and obfuscating orders in terms of Rule 33
(4) - one given at the commencement of
the trial and one halfway through it.
[3]
The respondent was the plaintiff in the court
a quo
, and will
be
referred to as such. He was the owner of a business plot
with a building on it in Gezina, Pretoria. During 1994 he wished to redevelop
the property by having the existing building demolished and a new one erected.
However, he was at that time living in Australia.
He therefore sought a project
manager in Pretoria to supervise the envisaged undertaking on his behalf. He
was introduced to the
defendant, represented by one Braudé. Eventually,
through the input of Braudé, the old building was demolished and
a new
one erected on the property.
[4]
The plaintiff was not satisfied with the quality of the new
structure.
He also complained that it was delivered months too
late; that there were serious defects which had to be rectified at considerable
cost and that there was a serious overrun with respect to costs.
[5]
The plaintiff’s case is that the defendant, the present
appellant, is
liable to compensate him for the damages he
suffered as a consequence of the aforesaid alleged facts. The basis of his
case is that
a contract was concluded between him and the defendant in terms of
which the defendant would act as project manager; find the necessary
tradesmen;
oversee the project; and see to it that the building was delivered in time,
that it was free of defects, and that the
builders and tradesmen adhered to the
original price quoted by the defendant for the project, except in so far as
variations were
agreed upon between the plaintiff and the defendant. He
alleged that the defendant breached the terms of the contract in not fulfilling
its obligations as project manager, giving rise to the above mentioned
complaints; and he averred that he had suffered damage in
an amount of
approximately R 2 m. He instituted action in the Transvaal Provincial Division
of the High Court for the recovery of
this amount. The matter was defended, and
a counterclaim for payment of commission was launched.
[6]
After the close of pleadings, an unhelpful and ineffective pre-trial
conference was held, attended
inter alia
by senior
counsel who appeared throughout for the parties. It was agreed that a
separation of issues would be sought at the commencement
of the trial : the
court would be asked to determine firstly the terms of the agreement reached
between the parties during or about
September 1994 and secondly whether the
later changes in design (which were admitted to have taken place) had been
agreed upon between
the parties.
[7]
At the commencement of the trial the agreed order for the separation
of issues was sought and granted and the trial proceeded. In
the course of the trial the plaintiff sought a further order in terms
of the
said Rule to the effect that only the issue of the terms of the alleged contract
between the parties during or about September
1994 would be adjudicated upon.
This application was unsuccessfully opposed. The effect of these orders was
that the question
whether agreement had been reached between the parties in
respect of design changes - and, if so, what effect it would have on
the
agreed maximum contract price - was not considered. This brought about that an
order was made at the end of the truncated trial
on a part or phase of the
whole contract,
i e
only on the initial conclusion, excluding later
agreements as to design changes and consequent
sequelae
as to price and
completion date. The dilemma created by this piecemeal approach will be
highlighted hereafter.
[8]
Before us, therefore, is the question whether the judge
a quo
was
correct in his determination of the existence of and the
terms of the contract between the parties during or about September 1994.
[9]
During the trial it emerged that the defendant intended to rely, as
far
as this part of the proceedings are concerned, on two
defences. The first issue was whether a contract was concluded between the
parties at all. The defendant averred that after the plaintiff had set out
some proposed terms of a contract, the defendant had
made a counter-offer, the
acceptance of which was never communicated to it. Secondly, it was disputed
that it agreed to act as plaintiff’s
project manager, and denied that it
was obliged to supervise the project at all. The defendant averred that its
only obligation
was to introduce to the plaintiff the sub-contractors and
various tradesmen who would then undertake and complete the project, as
the
plaintiff’s agents and employees, the defendant itself disappearing from
the scene.
[10]
At the end of the trial of these issues, the judge
a quo
held
that the
plaintiff had proved the conclusion of a contract
between the parties during or about September 1994 on the terms alleged by it.
The learned judge disbelieved the defendant’s witnesses, rejected its
version of the contract and in effect dismissed the
counterclaim.
[11]
There is no appeal by the defendant against the dismissal of its
counterclaim. The appeal solely turns on the question whether
a contract was concluded at all in September 1994 and if so, the terms
thereof.
In particular, the issue raised by the defendant is as follows:
(a) The
plaintiff expressly pleaded that the terms of the contract, entered into during
or about September 1994, were reduced to writing
in a series of letters, annexed
to the pleadings as Annexures A1 to A5.
(b) There are in fact only two relevant letters, A1 and A5. A1 is a letter
dated 12 September 1994 and was written to the defendant by the
plaintiff’s attorney, on his instructions. It reads as follows:
‘Dear Sir
RE : PROPOSED DEVELOPMENT - CORNER VOORTREKKERS
ROAD AND MICHAEL BRINK STREET, GEZINA, PRETORIA
Our client, Colin Silberman, has requested us to acknowledge receipt of your
letter dated the 9
th
September 1994 together with costing of the
proposed development on the abovementioned premises. A copy of the aforesaid
letter,
costing and drawings are annexed hereto and initialed by our client for
identification purposes.
Our client has further instructed us to record the following, which our client
requires you to acknowledge receipt and to confirm
your acceptance thereof per
return facsimile.
1 The building to be erected on the said premises will be erected at a maximum
cost of R 1 616 500,00. You will however endeavour
to wherever possible reduce
the final cost of the building. However, our client, under no circumstance
whatsoever will still be
liable for any further costs over and above the
aforesaid maximum costing.
2 The demolition of the said premises shall commence on the 16
th
October 1994.
3 The Management Fee for the “Turn Key Project” is a fixed fee of R
220 000,00. There shall be no further costs in
respect hereof to our
client.
4 Diagonally across the Reception area in
the shop (in Michael Brink Street) a staircase for customers of approximately
one metre
in width must be provided, as per drawings attached.
5 A goods
staircase of not less than two metres wide must be erected in the south east
corner of the Building. The loading bay must
be truck height.
6 A steel
door must be provided at the entrance and security door at the top of the
staircase.
7 Each separate unit is to have its own electricity and water
meters.
8 No hoist is to be installed.
9 The roof on the first floor is to
be suitably insulated.
Should it be necessary ceiling fans are to be provided. The cost of the fans
must be acceptable to our client.
10 Occupation has been granted to our client’s tenants in the building to
be erected on 1
st
June 1995. It is therefore specifically agreed
that the building will be totally completed for occupation and trading by no
later
than 15
th
May 1995.
We await your acknowledgement and confirmation of the above per
return.
Yours faithfully
(Sgd.??)
JACOBSON & LEVY inc’
(c) Annexure A5, dated 13 September 1994, is written by one Max
Braudé on behalf of the defendant, and is addressed to
the plaintiff’s attorneys. It is the defendant’s response
to
annexure A1, and reads as follows:
‘
Attention Mr Levy
RE: Proposed Development Gezina
Dear Sirs,
We acknowledge receipt of your fax of the 12
th
instant and accept the
contents in principle. There are one or two comments that are needed which we
are sure will be acceptable
to all the parties.
Ad paragraph 1.
We have erred slightly on the high side with our costings for the structure and
must state that any changes to the design or any
unforeseen price rises in, for
example steel or bricks, are not catered for. We do not expect this to happen,
but will, if need
be, add BIFSA increases should these occur and budgets
change.
Ad paragraph 2.
We were under the impression that demolition would commence on October 1. The
sooner that everything starts the better and the
more the chance that price
hikes will be avoided.
Ad paragraph 3.
We confirm the price of R 220 000 for the project fee. Portion of this, will
however attract VAT and suitable invoices will be
provided to your client to
ensure the these amounts are claimed back by the owners of the
property.
All other items in your fax are hereby
confirmed.
We thank your client for entrusting this project to us and look
forward
to creating a successful investment for you client.
Yours
faithfully
Seeff Commercial Properties
(Sgd.)
Max
Braudé
’
(d) Defendant’s case is that A1 constituted an offer by the plaintiff
which
called for acceptance and that, failing acceptance, no
contract would or could have come into being.
(e) Defendant then avers that
A5 is not an unequivocal acceptance of A1, but was a counter offer made by it
to the plaintiff.
(f) However, so the defendant argues, plaintiff’s
pleadings do not allege that the terms of A5 were accepted by him, nor that
acceptance, if any, was communicated to the defendant.
(g) Consequently,
there are insufficient allegations in the pleadings to support the conclusion
that a written agreement was concluded
and that Annexures A1 - A5 constitute
such agreement.
[12]
A basic procedural problem is that the defendant failed to note an
exception against the plaintiff’s particulars of claim.
However, at the commencement of the trial, and before any evidence
was led, the
defendant orally sought to raise an exception on the basis set out above. When
faced with this belated and unusual
step, counsel for the plaintiff surprisingly
did not deem it necessary to seek an amendment of the pleadings to aver a tacit
or an
oral acceptance, but convinced the learned judge
a quo
that
evidence could cure the obvious defect in his pleadings. An order to that
effect was made, and the trial proceeded on that
basis.
[13]
It is not disputed that the plaintiff thereafter failed to adduce
any
evidence of expressly communicating acceptance of A5 to the
defendant. But the trial court, correctly in my view, found as a fact
that the
plaintiff had tacitly accepted the terms of A5. There is also no doubt that
Braudé, on behalf of the defendant,
assumed that the plaintiff had
tacitly accepted the terms of A5, and on that basis proceeded with the
project.
[14]
That being the situation at the end of the trial, it cannot be said
that
the parties had not concluded a contract. If one construes A5 as a counter
offer made by the defendant, the ordinary rules of offer and
acceptance
ought to be applied. A basic rule is that
‘an acceptance of an offer made ought to be notified to the person who
makes the offer, in order that the two minds may come
together.’
(per Bowen LJ in
Carlill v Carbolic Smoke
Ball Company
[1893] 1 Q B 256
(CA) at 268. See also
R v Nel
1921 AD
339
at 344;
Reid Bros (South
Africa) Ltd v Fischer Bearings Co
Ltd
1943 AD 232
at 241).
[15]
But there is a gloss to this rule, formulated in
Carlill v
Carbolic
Smoke Ball Company
,
supra
, at
269, as follows
‘that as notification of acceptance is required for the benefit of the
person who makes the offer, the person who makes the
offer may dispense with
notice to himself if he thinks it desirable to do so ... and if the person
making the offer, expressly or
impliedly intimates in his offer that it will be
sufficient to act on the proposal without communicating acceptance of it to
himself,
performance of the condition is a sufficient acceptance without
notification.’
(see also
R v Dembovsky
1918 CPD
230
at 241, approving the said gloss;
R v Nel
1921 AD 339
at 344 and
354;
McKenzie v Farmers’ Co-operative Meat Industries Ltd
1922 AD
16
at 22).
[16]
The next logical question was formulated in
Carlill v Carbolic
Smoke Ball Company
,
supra
, at 270 as follows:
‘Now, if that is the law, how are we to find out whether the person who
makes the offer does intimate that notification of
acceptance will not be
necessary in order to constitute a binding
bargain?’
Bowen LJ answered the question as follows
:
‘In many cases you look to the offer itself. In many cases you extract
from the character of the transaction that notification
is not required, and in
the advertisement cases it seems to me to follow as an inference to be drawn
from the transaction itself
that a person is not to notify his acceptance of the
offer before he performs the condition, but that if he performs the condition
notification is dispensed with.’
[17]
If, in a particular instance, it is found that the offeror has
indicated
that express notification of acceptance is not necessary in order to
constitute a binding contract, it follows that the
offeree’s quiescence will
amount to acquiescence, i e that the
offeree’s failure to object to and reject
the offer will justify an
inference that the offer has been accepted (see
Mcwilliams v First Consolidated Holdings (Pty) Ltd
1982 (2) SA 1
(A) at
10;
Collen v Rietfontein Engineering Works
1948
(1) SA 413
A at 429 –
430;
Commaille v Steyn
1914 CPD
1100
at 1103 :‘Silence is equivalent to
consent when it is one’s duty to speak.’)
[18]
In my view, A5 contains a clear indication that express acceptance
of the terms thereof was not required in order to constitute a binding
contract in terms of A1 read with A5.
(a) A5 accepts the proposals in A1 ‘ in principle’, subject to
‘one or two
comments’ which ‘we are sure will
be acceptable to all the parties.’
(b) A5 then comments on three paragraphs in A1, stating that
all
the other items in A5 are confirmed.
(c) It then concludes : ‘We thank your client [the plaintiff] for
entrusting this project to us and look forward to creating a
successful investment for your client.’
(d) The comment in A5 on paragraph 2 of A1, dealing with the date
of commencement of the demolition, is not a counter offer which
needs acceptance, but in fact an acceptance of the date proposed in
A1, and
requires no response.
(e) The comment on paragraph 3 of A1, dealing with the payment
of VAT on the commission payable by the plaintiff, is also not a
counter offer, but a reminder of the legal position relating to VAT,
and
requires no response.
(f) The comment on paragraph 1 of A1 dealt with two separate
issues. First, it was pointed out that no provision had been
made in A1 for design changes. Apart from pointing that out, no proposals
were
made to fill the lacuna. Secondly, it was pointed out that no provision was
made for price rises of materials. In that respect
it went further and
proposed that, if need be, BIFSA increases should apply.
[19]
In my view, the defendant did not require or expect acceptance
of its proposal as regards paragraph 1 of A1. The comment,
however, clearly placed a duty on the plaintiff to object to the proposal
if he
did not agree to it. The plaintiff’s silence and his conduct in
proceeding with the project constituted acceptance
of the said proposal and it
was so understood by the defendant. The evidence in this case brings the
matter squarely within the
principle discussed above and expressed as follows by
Miller JA in
McWilliams v First Consolidated Holdings
,
supra
, at
10 E :
‘I accept that “quiescence is not necessarily acquiescence”
[see
Collen v Rietfontein Engineering Works
1948 1 SA 413
(A) at 422]
and that a party’s failure to reply to a letter asserting the
existence of an obligation owed by such party to the writer does
not always
justify an inference that the assertion was accepted as the truth. But in
general, when according to ordinary commercial
practice and human expectation
firm repudiation of such an assertion would be the norm
if it was not
accepted as correct, such party’s silence and inaction, unless
satisfactorily explained, may be taken to constitute
an admission by him of the
truth of the assertion, or at least will be an important factor telling against
him in the assessment
of the probabilities and in the final determination of the
dispute.’
[20]
The learned judge should
,
therefore, have held that a contract was concluded between the parties during
September 1994 on the terms set out in Annexure A1
as amended by paragraph 1 of
A5 (insofar as it relates to increases in the price of materials). In other
words, no agreement was
reached at that stage as to what would occur if there
were changes to the design. No doubt further agreement was indeed reached
in
that regard, either expressly or tacitly, as and when design changes occurred
and were incorporated in the building, but the terms
of such further agreements
are matters that fall outside the present appeal. I need only add that the
learned judge appears to
have misconstrued the amendment made by paragraph 1 and
in that respect his order falls to be amended.
[21]
In the result, the appeal is dismissed with costs, including the
costs of two counsel. Paragraphs 1,2, and 5 of the order made
by the court
a quo
are confirmed subject to the following amendments : In
the term referred to in paragraph 2 the words ‘changes in design or’
are deleted. The words ‘including the costs of two counsel’ are
added at the end of paragraph 5.
P J J OLIVIER JA
CONCURRING :
ZULMAN JA
NUGENT
AJA