Authored By: Nolwazi Mdhluli
University of South Africa
Coram: Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Van der Westhuizen J, Wallis AJ and Zondo J
Bench type: Constitutional Court full bench
Date of Judgement: 26 April 2026
Parties: Kenneth Nkosana Makate (Applicant) and; Vodacom (Pty) Ltd (Respondent)
Facts of the Case
Introduction
In this case the applicant claims for the enforcement of a contract entered into with the respondent, the applicant’s idea generated billions for the respondent, but failed to compensate the applicant for creating a lucrative product.1 The respondent disputes the claim, relying on the defence that the agent lacked authority to enter into a binding agreement and that the claim had prescribed.
Background
The applicant, Mr Kenneth Nkosana Makate, a former employee of Vodacom (Pty) Ltd came up with a lucrative idea in November 2000 while still employed under Vodacom as a trainee accountant. The applicant came up with an idea that would allow a user with no airtime to send a call request to the other user with airtime, this was called the “Please Call Me”.2 The applicant then consulted his mentor Mr Lazarus Muchenje about selling the idea to Vodacom and its competitors, where he was advised to speak with the Product Development and Management Director of Vodacom Mr Philip Geisseler. The applicant and Mr Geissler entered into an oral agreement that Vodacom would use the idea to develop a new product and be put to trial for commercial success and if the product was successful the applicant would be compensated for his idea, without having agreed to an amount. The applicant alluded to wanting 15% of the revenues generated by the product, however it was agreed that if the applicant and Mr Geissler failed to reach consensus on the amount to be paid, Vodacom’s Chief Executive Officer (CEO) Mr Alan Knott-Craig would determine the amount to be paid. The product was launched late January 2001 and has been a success till this day; it has generated Vodacom over billions of rands. Mr Makate on the other hand has not received a penny from his innovative idea. Two years after the launch the applicant left Vodacom. The applicant instituted action with the High Court to enforce Vodacom on their agreement in 2008.3 The trial court ruled in favour of the respondent; the applicant was denied leave to appeal in the High Court and Supreme Court of Appeal thus the applicant instituted actions in the Constitutional Court.4
Issues raised
- Whether Vodacom represented that Mr Geissler had authority to conclude a binding agreement with Mr Makate.
- Whether Mr Makate’s claim had prescribed in terms of the Prescription Act 68 of 1969. • Whether Vodacom was liable to compensate Mr Makate for his idea.
Arguments
Applicant’s argument
The applicant argued that he had a binding agreement with Mr Giessler, the agreement being, should the “Please Call Me” idea be commercially viable there would be discussions on reasonable compensation payable to the applicant. Further arguing that Geissler had ostensible authority to negotiate and conclude the agreement on behalf of the respondent, and that the company was bound by Geissler’s actions as the contract was enforceable and the respondent is obligated to negotiate with the applicant in good faith. The applicant contends that the claim has not prescribed as per the Prescription Act 68 of 1969, the applicant argued that it was not a claim for compensation in terms of section 10(1) read with section 11(d),12(1) and 12(3) of the act, but rather an agreement to negotiate compensation in good faith.5 The applicant sought for the development of section 39(2) of the Constitution of South Africa 1996 infusing it with the constitutional principles of ubuntu and good faith.
Respondent’s argument
The respondent disputed the applicants claims by arguing that Mr Geissler did not have the authority to bind Vodacom to an agreement with Mr Makate, the respondent further alleged the “debt” as per section 11(d) the prescription act to has prescribed as the applicant instituted the claim four years after the debt arose, Vodacom argued that the debt arose in November 2000 and summons were served to them on 14 July 2005.6
Ratio decidendi
In this case a unanimous decision was reached through two judgements, a main judgement and minority judgement. Which although converging on the outcome and sharing common view on prescription, diverged in their approach to determining the issue of ostensible authority in the context of the applicant’s claim against Vodacom.
Ostensible authority
Jafta J addressed the issue of ostensible authority by clarifying its distinction with estoppel, noting that many courts have erred by combining the two concepts. Jafta J defined ostensible authority to be established when a principal’s conduct creates an appearance that the agent has the power to act on their behalf.7In contrast, estoppel is the rule that prevents a principal from denying an agent’s authority when the principal’s conduct has misled a third party into believing the agent had authority.8 Further highlighting the elements of estoppel, which include a representation made by words or conduct, reasonable expectation of misleading the representee, representation made by the principal to the person raising estoppel, and prejudice to the representee.9Jafta J criticized courts for confusing ostensible authority with estoppel and suggesting that courts developed this conflated concepts from the case of NBS Bank Ltd v Cape Produce Company (Pty) Ltd and others [2001], therefore giving rise to the application of the wrong criteria of estoppel in defining ostensible authority.10 Applying the correct principles, Jafta J found that Mr Geissler had ostensible authority to bind Vodacom.
In the minority judgement, Wallis AJ took a different approach on defining ostensible authority, he held that it is an integral part of estoppel by representation. According to Wallis AJ, ostensible authority arises when a principal makes a representation, through words or conduct, that an agent has authority to act on their behalf.11 In this case, Wallis AJ found that Mr Geissler was an agent through whom Mr Knott-Craig used to communicate with Mr Makate making it highly unlikely for Mr Knott-Craig to not be aware of the agreement on remuneration.12 It was therefore concluded that the chain of communication between Mr Geissler, Mr Knott-Craig, and the board established ostensible authority, thereby establishing estoppel.13 Furthermore, Wallis AJ implied that the requirement of a representation being made directly by the principal to the person raising estoppel, as interpreted by Jafta and the trial court, was too narrow, as it excluded representations made through agents or indirect conduct. Given the findings, Wallis AJ held that Vodacom could not refuse to compensate Mr Makate for his idea, generated outside the scope of his employment. Since Mr Geissler had ostensible authority and estoppel was established, the agreement to negotiate remuneration was binding on Vodacom, entitling Mr Makate to compensation.
Prescription
The Gauteng Local Division of the High Court Johannesburg, ruled in favour of the respondent. It ruled that the applicant’s claim had prescribed under the Prescription Act, relying on a broad interpretation of the word “debt” as encompassing compensation, described in the case of Desai NO v Desai [1995] ZASCA 113. However, Jafta J questioned whether this pre-constitutional interpretation remained just, applying a constitutional approach under section 39(2) of the Constitution.14 Jafta J found that section 10(1) and 12 of the Prescription Act limited the right to access courts under section 34 of the Constitution.15 Consequently, Jafta J concluded that the term “debt” in section 10 did not apply to the applicant’s claim, which had therefore not prescribed. In the concurring judgement, Wallis AJ added that prescription begins when a debt is due, which in this case would be after negotiations on Mr Makate’s compensation are concluded.16 Since no such negotiations occurred, no debt arose, and prescription could not be established.17
Judgement
Ultimately leave to appeal was granted and the appeal was upheld. The Constitutional Court set aside the order of the High Court and held that Vodacom was obligated to engage in good faith negotiations with Mr Makate to determine reasonable compensation for the “Please Call Me” service concept. The court declared that Vodacom was bound by the agreement concluded between Mr Makate and Mr Geissler.
Conclusion
The Constitutional Court’s decision underscored the importance of the principle of good faith in contractual relationships. By ordering Vodacom to negotiate with Mr Makate in good faith, the court emphasized that parties must act fairly, honestly and responsibly in their dealings with each other. The judgement highlighted the need to protect the rights of innovators like Mr Makate, who contribute valuable ideas and concepts to their employers or contracting parties.
The case has set an important precedent in South African law, specifically law of contract, influencing future disputes involving contractual relationships, intellectual property rights, and the principle of good faith.
In line with the court’s orders Vodacom determined compensation of R47 million for Mr Makate’s idea. However, Mr Makate rejected this determination, and the matter remains contentious.
Bibliography
Cases
Desai NO v Desai [1995] ZASCA 113; 1996 (1) SA 141 (A)
Makate v Vodacom (Pty) Ltd [2016] ZACC 13
NBS Bank Ltd v Cape Produce Company (Pty) Ltd and others [2001] ZASCA 107; 2002 (1) SA 396 (SCA) (NBS Bank)
Legislation
The Constitution of the Republic of South Africa, 1996
Prescription Act 68 of 1969
1 Makate v Vodacom (Pty) Ltd [2016] ZACC 13
2 Makate v Vodacom (Pty) Ltd para;6
3 Makate v Vodacom (Pty) Ltd [2016] para; 14
4 Makate v Vodacom (Pty) Ltd [2016] para;1
5 Makate v Vodacom para; 81
6 Makate v Vodacom para; 26
7 Makate v Vodacom para; 49
8 Makate v Vodacom para; 45
9 Note 7 above
10 Makate v Vodacom para; 50
11 Makate v Vodacom para;134
12 Makate v Vodacom papa; 178
13 Makate v Vodacom para; 181
14 Makate v Vodacom; para 84
15 Makate v Vodacom para; 90
16 Makate v Vodacom para; 188
17 Makate v Vodacom para;194
