Authored By: Sibongile Tshabalala
Introduction
The principle of pacta sunt servanda, which states that freely entered into agreements must be honored, has long been regarded as the foundation of South African contractual law. It promotes legal certainty, commercial stability, and respect for party autonomy by making contractual obligations generally enforceable.[1] However, the adoption of the Republic of South Africa’s Constitution in 1996 transformed the legal landscape by requiring common law, including contract law, to develop in accordance with constitutional values such as dignity, equality, and freedom.[2] Contractual terms must now align with public policy as outlined in the Constitution, rather than just traditional common-law principles.[3]
This constitutional development has created a long-standing tension between contractual certainty and substantive fairness, particularly in consumer contracts, where unequal bargaining power frequently results in harsh or oppressive terms. Although the Constitutional Court has acknowledged that public policy is founded on constitutional values, it has been hesitant to use fairness, ubuntu, or good faith as independent grounds for refusing to enforce contractual provisions.[4] This has resulted in varying judicial approaches to determining whether unfair contractual terms should be enforced.
This article contends that South African courts should take a more consistent approach to the application of constitutional values when determining whether harsh contractual terms violate public policy. It first examines the constitutional framework governing contract enforcement before delving into the leading Constitutional Court decisions and assessing the inconsistent application of ubuntu and good faith in protecting vulnerable contracting parties.
The constitutional framework governing contact enforcement.
The principle of pacta sunt servanda has long served as the foundation of South African contract law. It is based on common law and requires parties to honour contractual obligations that they have voluntarily entered into, promoting legal certainty, commercial stability, and contractual freedom.[5] However, the constitutional dispensation has qualified this principle by acknowledging that contractual autonomy cannot operate in isolation from the values enshrined in the Constitution.[6] As a result, courts must strike a balance between contract enforcement and the constitutional imperatives of fairness and justice.
The Constitution does not expressly regulate contracts, but section 39(2) requires courts to develop common law in a way that promotes the spirit, purpose, and objects of the Bill of Rights.[7]Previously based on common-law principles, public policy now prioritizes constitutional values like dignity, equality, and freedom.[8] As a result, contractual provisions that contradict these values may be declared against public policy and rendered unenforceable.
In Barkhuizen v Napier, the Constitutional Court articulated this principle, holding that the enforceability of contractual terms is determined by their consistency with public policy as informed by constitutional values.[9] The Court acknowledged that fairness is part of public policy, but cautioned that it is not a free-standing ground for judges to invalidate contracts simply because the outcome is harsh.[10] Instead, courts must conduct a contextual inquiry to balance the importance of contract enforcement with the need to protect constitutional rights and values.[11]
Legislative developments have reinforced the constitutional approach. The Consumer Protection Act 68 of 2008 (CPA) aims to protect consumers from unfair, unreasonable, and unjust contractual terms by encouraging fair business practices and addressing disparities in bargaining power. [12]Sections 48-52 allow courts to review consumer agreements that are unfair or overly one-sided. [13]Although the CPA only applies to transactions within its jurisdiction, it reflects the larger constitutional commitment to fairness in private contractual relationships.
Despite these constitutional and legislative safeguards, it is unclear what role ubuntu and good faith play in determining whether a contractual term violates public policy. While courts consistently recognize these values as fundamental to South Africa’s constitutional order, they apply them inconsistently in practice. This inconsistency has raised questions about the extent to which constitutional fairness can justify judicial intervention in otherwise valid agreements, especially where vulnerable consumers are involved.[14]
Judicial Application of Constitutional Fairness: An Inconsistent Approach
The Constitutional Court has repeatedly stated that South African contract law must reflect constitutional values while adhering to the principle of pacta sunt servanda. However, its jurisprudence shows an evolving and, at times, contradictory approach to the role of fairness, ubuntu, and good faith in determining whether contractual terms violate public policy. Three Constitutional Court decisions in Barkhuizen v Napier, Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd, and Beadica 231 CC v Trustees for the Time Being of the Oregon Trust to show both the progress made and the uncertainty that still exists.
The Constitutional Court addressed this constitutional tension directly in Barkhuizen v Napier. The dispute centered on a time-limitation clause in an insurance contract that required the insured to file a lawsuit within 90 days of a claim being rejected.[15] The Court determined that contractual terms are only enforceable if they are consistent with public policy, which is informed by the values enshrined in the constitution.[16]This represented a significant departure from the traditional common-law approach, which emphasised contractual autonomy with minimal judicial intervention.
Nonetheless, the Court declined to accept fairness as a separate legal basis for refusing to enforce a contractual term. Instead, Ngcobo J ruled that courts must conduct a contextual inquiry, first determining whether the contractual clause is objectively reasonable and then whether its enforcement would be unfair in the circumstances of the case.[17] Although this framework incorporated constitutional values into contract law, it also allowed for significant judicial discretion in determining what constitutes unfairness. As a result, Barkhuizen established the constitutional significance of public policy without providing specific guidance on when harsh contractual terms are unconstitutional.
The Constitutional Court revisited these principles in the case of Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd. The dispute centered on enforcing a contractual obligation to negotiate commercial lease renewals in good faith.[18] Although the Court ultimately dismissed the appeal on procedural grounds, it stated that the common law should evolve in accordance with constitutional values, particularly ubuntu and good faith.[19]Yacoob J argued that these values are constitutional principles that can shape the future of contract law.[20]
Everfresh was widely regarded as ushering in a more transformative approach to contract law. However, because the Court decided the case without substantively developing the common law, the legal status of ubuntu and good faith remained unclear. The decision encouraged constitutional development but did not recognise either principle as an independent basis for limiting contractual enforcement. As a result, lower courts received little practical guidance on how to apply these values in disputes involving unfair contract terms.
The Constitutional Court addressed this ambiguity in Beadica 231 CC v Trustees for the Time Being of the Oregon Trust. The applicants sought relief after failing to exercise the renewal options provided in franchise agreements within the contractual period.[21] They claimed that strict enforcement of the contractual provisions would be contrary to constitutional values and public policy.
The majority reaffirmed pacta sunt servanda as a fundamental constitutional principle because contractual certainty promotes dignity, autonomy, and the rule of law.The Court ruled that fairness and reasonableness are not sufficient grounds to refuse to enforce contractual obligations.[22] Rather, constitutional values have an impact on contract law solely through the doctrine of public policy.[23] While acknowledging the importance of ubuntu, the Court argued that judicial intervention should be limited in order to preserve commercial certainty.[24]
Although Beadica clarified some aspects of Barkhuizen, it also heightened the uncertainty about constitutional fairness. The Court acknowledged the constitutional importance of ubuntu and good faith, but did not specify when those values should take precedence over contractual certainty. As a result, vulnerable consumers and contracting parties remain uncertain about whether oppressive contractual terms will be enforced. This uncertainty is especially pronounced in standard-form consumer agreements, where bargaining power is frequently unequal and contractual terms are rarely discussed.
When taken together, these three judgments reveal an important pattern. The Constitutional Court consistently acknowledges that constitutional values influence South African contract law, but it is wary of allowing those values to undermine the certainty provided by pacta sunt servanda. The result is jurisprudence that recognizes fairness in principle but applies it with caution in practice. This cautious approach has resulted in inconsistent outcomes and has left open the central question of when constitutional fairness should justify judicial refusal to enforce harsh contractual terms.
Critical Analysis: Towards a More Coherent Public Policy Standard
The Constitutional Court has attempted to strike a balance between pacta sunt servanda and constitutional fairness, but its application of ubuntu and good faith is inconsistent. Barkhuizen, Everfresh, and Beadica acknowledge that constitutional values influence public policy, but they do not establish a clear standard for determining when harsh contractual terms should be unenforceable. This uncertainty is especially problematic in consumer contracts, where unequal bargaining power often forces consumers to accept unfair terms.
Contractual certainty is still necessary for commercial stability, and pacta sunt servanda should continue to be the general rule.[25] However, constitutional values require courts to ensure that contractual freedom is not exploited to perpetuate injustice. This is especially important in standard-form contracts, where consumers rarely negotiate terms and often have unequal bargaining power.[26]
The Consumer Protection Act 68 of 2008 protects against unfair contractual terms[27], but many disputes still rely on the common-law doctrine of public policy. Courts should therefore adopt a more consistent framework for applying ubuntu and good faith when determining contractual fairness. This assessment should take into account factors such as bargaining power, transparency, meaningful consent, and the impact of enforcement.
A clearer public policy standard would improve constitutional fairness and legal certainty. It would increase protection for vulnerable consumers while keeping contracts enforceable unless they clearly violate constitutional values. Such an approach would better reflect South Africa’s commitment to dignity, equality, and justice while maintaining the principle that agreements should generally be followed.[28]
Conclusion
The tension between pacta sunt servanda and constitutional fairness continues to influence South African contract law. While contractual certainty is still necessary, the Constitution requires that contracts reflect public policy informed by values such as dignity, equality, and justice. The Constitutional Court’s decisions in Barkhuizen, Everfresh, and Beadica show that, while ubuntu and good faith are recognised as constitutional values, their application is inconsistent.
This uncertainty is especially evident in consumer contracts with unequal bargaining power. To promote fairness and legal certainty, courts should establish more specific guidelines for applying constitutional values when determining whether contractual terms violate public policy. Such an approach would uphold the principle that agreements should be generally honored while also ensuring that contract law is consistent with South Africa’s constitutional commitment to substantive justice.
Reference(S):
Table of Cases
Barkhuizen v Napier 2007 (5) SA 323 (CC).
Beadica 231 CC and Others v Trustees for the Time Being of the Oregon Trust and Others 2020 (5) SA 247 (CC).
Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC).
Table of Legislation
Constitution of the Republic of South Africa, 1996.
Consumer Protection Act 68 of 2008.
Secondary Sources
Hutchison D and Pretorius CJ (eds), The Law of Contract in South Africa (3rd edn, Oxford University Press Southern Africa 2017).
Kerr AJ, The Principles of the Law of Contract (7th edn, LexisNexis 2018).
Louw AM, ‘Yet Another Call for a Greater Role for Good Faith in the South African Law of Contract: Can We Banish the Law of the Jungle, While Avoiding the Elephant in the Room?’ (2013) 16 Potchefstroom Electronic Law Journal 43–120.
[1] AJ Kerr, The Principles of the Law of Contract (7th edn, LexisNexis 2018) 3–5.
[2] Constitution of the Republic of South Africa, 1996 s 39(2)
[3] Barkhuizen v Napier 2007 (5) SA 323 (CC) paras 28–30.
[4] Beadica 231 CC and Others v Trustees for the Time Being of the Oregon Trust and Others 2020 (5) SA 247 (CC) paras 79–86.
[5] AJ Kerr, The Principles of the Law of Contract (7th edn, LexisNexis 2018) 3–7.
[6] Dale Hutchison and Chris-James Pretorius (eds), The Law of Contract in South Africa (3rd edn, Oxford University Press Southern Africa 2017) 20–24.
[7] Constitution of the Republic of South Africa, 1996 s 39(2).
[8] Barkhuizen v Napier 2007 (5) SA 323 (CC) paras 28–30.
[9] Barkhuizen v Napier 2007 (5) SA 323 (CC) paras 51–57.
[10] ibid paras 80–82.
[11] ibid paras 56–58.
[12] Consumer Protection Act 68 of 2008, Preamble and s 3.
[13] Consumer Protection Act 68 of 2008 ss 48–52.
[14] Beadica 231 CC and Others v Trustees for the Time Being of the Oregon Trust and Others 2020 (5) SA 247 (CC) paras 79–87.
[15] Barkhuizen v Napier 2007 (5) SA 323 (CC) paras 5–12.
[16] ibid paras 28–30, 51–57.
[17] ibid paras 56–58, 80–82.
[18] Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC) paras 1–9.
[19] ibid paras 23–24.
[20] ibid paras 71–72.
[21] Beadica 231 CC and Others v Trustees for the Time Being of the Oregon Trust and Others 2020 (5) SA 247 (CC) paras 1–15
[22] ibid paras 79–82.
[23] ibid paras 73–78.
[24] ibid paras 87–90.
[25] Beadica 231 CC and Others v Trustees for the Time Being of the Oregon Trust and Others 2020 (5) SA 247 (CC) paras 79–82.
[26] Dale Hutchison and Chris-James Pretorius (eds), The Law of Contract in South Africa (3rd edn, Oxford University Press Southern Africa 2017) 312–318.
[27] Consumer Protection Act 68 of 2008 ss 48–52.
[28] Constitution of the Republic of South Africa, 1996 ss 1(a), 39(2); Barkhuizen v Napier 2007 (5) SA 323 (CC) paras 28–30
