The Constitutional Court recently considered the meaning of the word ‘debt’ in relation to the Prescription Act and found that the word must be given a meaning that is least intrusive on the constitutional right to access to courts.
In Makate v Vodacom (Pty) Ltd the applicant instituted action against Vodacom to compel them to negotiate his compensation for the use of his idea in developing the ‘please call me’ product. He alleged that Vodacom entered into an agreement to agree with him in terms of which he would be remunerated an agreed amount for the use of his idea. The parties agreed to defer for later negotiations the amount of remuneration Makate would be entitled to. Makate instituted action 4 years after the ‘please call me’ product was launched.
Vodacom alleged that the claim to pay a share of the revenue and the obligation to negotiate reasonable compensation for the use of Makate’s idea, constituted a debt for the purposes of the Prescription Act and that his claim had prescribed because he instituted action more than 3 years after the debt arose.
The agreement created the right to a good faith negotiation of the debt.
The Constitutional Court found that no debt arose until the parties had negotiated the remuneration Makate was entitled to. Only once agreement was reached would a debt for the purposes of the Prescription Act run.
The terms of the agreement reached between Makate and Vodacom were unusual and the court noted that they would not often be encountered in practice. The agreement created a small category of rights, namely the right to a good faith negotiation of the debt (agreement to agree), that did not alone constitute a debt for the purposes of the Prescription Act.
The court overruled a previous appeal court decision that a debt is every obligation to do something or refrain from doing something, but did not determine the exact meaning of the word ‘debt’ for all circumstances.