The dispute arose under a settlement agreement in obliging the defendants to deliver 100 000 cubic metres of “clean sand (top soil excluded)” which was “stockpiled”. It was not clean sand nor properly stockpiled and yielded only two thirds of the amount of clean sand, leading to a large damages claim. The Supreme Court of Appeal held that evidence could be lead regarding negotiations preceding the settlement provided that it is not intended to, nor had the effect of, modifying or disputing the contents of the settlement agreement.
Interpreting a contract entails attributing meaning to the words used by the parties as they would be understood in the context by a reasonable person. Where the parties have decided their contract should be recorded in writing and that the contract is the sole, complete record of their agreement that decision must be respected and evidence seeking to contradict, add to or modify the written agreement is not admissible evidence. Evidence from an expert that the terms “building sand” and “plaster sand” were generally used in the building industry was irrelevant. The parties chose the term “clean sand” and that had to be interpreted within the context of mine rehabilitation and the requirements of the construction industry. The material delivered was not suitable for construction and was therefore not “clean sand”.
The order to pay R15 million in damages was upheld because damages in breach of contract are intended to place the claimant in the same position they would have been if the contract had been properly performed.
The line between what is and isn’t admissible evidence of the meaning of a contract is not easily drawn.