The July 2021 Supreme Court of Appeal judgment in Capitec Bank Holdings Limited v Coral Lagoon Investments 194 (Pty) Ltd and Others (10530/2020) [2021] ZAWCHC 65, deferred to the Constitutional Court in Beadica 231 CC and Others v Trustees, Oregon Trust and Others [2020] ZACC 13; 2020 (5) SA 247 (CC) which authoratively dealt with the application of good faith in our law of contract.

Beadica affirmed: The principle that contracts freely and voluntarily entered into must be honoured, and remains central to the law of contract;

That principle, captioned under the phrase freedom of contract, recognises that persons through voluntary exchange may freely take responsibility for the promises they make and to have their contracts enforced.

At common law, now infused with the values with the Constitution, there are principles that determine how freedom of contract is exercised and contracts are enforced.

One such doctrine concerns the refusal by the courts to enforce contract terms that offend against public policy.

Both the scope of public policy and its application to invalidate contract terms should be used with circumspection, but without timidity in upholding fundamental constitutional values.

While good faith underlies the law of contract and informs its rules, good faith and fairness are not substantive, free-standing principles to which direct recourse may be had so as to interfere with contractual bargains or decline to enforce contracts.

Beadica is an authorative interpretation of both Supreme Court of Appeal and Constitutional Court cases that explain the role good faith plays in the law of contract.

The rules of contract are part of our common law and good faith is one of a number of principles that informs the substantive rules that make up the rules of contract.

Good faith is not an abstract, self-standing duty that may be imposed upon a party as a matter of the law of contract so as to determine the terms upon which the parties to a contract will be taken to have agreed.

The principle of good faith between contracting parties is a value that may figure in a court’s consideration of what public policy demands when a court is asked to determine whether the terms of a contract offend against public policy.  That is a supervisory power the court enjoys under the law of contract to ensure that freedom of contract is not used as a private mechanism that vacates fundamental public values.

The fact that parties to a contract are taken to act in good faith is a norm of trust that informs many rules of the law of contract.  And may be relevant as to how courts interpret what the parties agreed.  It is not a norm that can be utilised to decide what the parties should be taken to have agreed and how they should act in the interests of justice or fairness.

Good faith or justice does not permit a court to impose an agreement that the parties did not make.

On the facts of the case under review the court said that it was not permissible to use the concept of good faith to re-engineer the particular agreement so as to impose terms not agreed.