It has long been held that although values such as good faith, reasonableness and fairness are fundamental to our law of contract, they do not constitute independent rules that courts can employ to intervene in contractual relationships (South African Forestry Co Ltd v York Timbers Ltd). The fact that a term of a contract is unfair or may operate harshly does not by itself lead to the conclusion that it offends the values of the Constitution or is against public policy. In some instances, however, the constitutional values of equality and dignity may prove to be decisive where the parties’ relative power is an issue.
In Liberty Group Ltd v Mall Space Management CC t/a Mall Space Management the court was again called upon to decide whether termination of a contract of mandate must be in line with the constitutional values of ubuntu and fairness. This issue was decided against the following factual background. Liberty Group is the owner of a number of shopping centres. For a number of years Mall Space Management CC (Mall Space) acted as an agent for Liberty Group in facilitating the conclusion of contracts with exhibitors for the rental of mall space or exhibition courts for Liberty Group’s shopping centres, for a commission. The parties never signed a written agreement to regulate their contractual relationship.
Due to Mall Space’s failure to properly account to Liberty Group for rental income it received from the tenants, and it being indebted to Liberty Group in respect of the rental, Liberty Group decided to terminate Mall Space’s mandate. Liberty Group delivered a letter to Mall Space with a notice of termination of mandate within 5 days of receipt of the letter. Mall Space approached the court for an order interdicting Liberty Group from terminating the contract, contending that the constitutional values of ubuntu and fairness required Liberty Group to grant it six months’ notice of termination of mandate.
The Supreme Court of Appeal found that the concepts of good faith, justice and fairness are not self-standing rules which courts can employ to intervene in contractual relationships; they are underlying values that are given expression through existing law. It is impermissible for the court to develop the common law of contract by infusing the spirit of ubuntu and good faith.
The court pointed out that at common law, Liberty Group, as the principal, was entitled to revoke the mandate of agency at any time on giving notice to that effect to Mall Space. The question of length of notice did not arise, and Liberty Group was not obliged to give six months’ notice if they wanted to terminate. It would be against public policy to coerce Liberty Group into retaining Mall Space as its agent when it no longer wished to. The court was further of the view that Liberty Group terminated Mall Space’s mandate for a good reason, as Mall Space had failed to properly account to Liberty Group for the rental income it received from tenants.
Therefore the court should not deviate from the common law principle that the contract of mandate is terminable at the will of the principal.
Reviewed by Patrick Bracher.