The Supreme Court of Appeal has reaffirmed the principle that where a party alleges that a compromise (settlement) has been effected in an exchange of correspondence it must be proved that the offer of compromise was accepted. The acceptance must be absolute, unconditional and identical with the offer. Otherwise there is no consensus and no settlement.

A settlement agreement is a form of contract and must comply with all general contractual requirements as regards consensus, certainty, legality and possibility of performance. The acceptance must be a mirror image of the offer in order to constitute such a contract.

If the acceptance seeks to add or subtract or modify any of the terms contained in the offer no settlement is reached. A conditional acceptance is a counter-offer which would have to be accepted by the original offeror.

In the matter of Gridmark CC v Razia Trading CC there was a dispute over payment of the purchase price for a business. The creditor agreed to accept payment of R150 000 by a specific date. No payment was made by that date. A day later the debtor’s attorney offered to pay the amount in two instalments which the creditor rejected. In those circumstances there was no settlement agreement between the parties and therefore no compromise, and judgment was given for the creditor.

Extraordinarily the counter-offer agreed to pay the amount by about a month after the original date on which payment was demanded. That date was in 2013. The parties litigated through two courts over R100 000 and got their final decision in March 2019. They must each have spent more on the litigation than the amount at stake.