It is common practice between retailers and wholesalers of petroleum products to continue their lease agreements on a month-to-month basis when the original agreement terminates through the lapse of the contract period. Monthly leases can be terminated on the agreed or implied notice period. However, the correct calculation of the notice period is essential to ensure the validity of the termination notice.

This March 2024 judgment of the Gauteng high court involved a decision on whether the wholesaler had validly terminated the  lease which it had concluded with a retailer.

When the wholesaler sought to terminate the lease, the lease continued indefinitely and was terminable on six months’ notice.  The lease agreement defined a month as meaning a calendar month and “in reference to a number of months from a specific date, a calendar month commencing on that date or the same date of any subsequent month”. 

On 11 June 2021 the wholesaler delivered a notice of intention to terminate which was to be effective on 10 December 2021. The court found that the wholesaler’s termination notice was ineffective because of the way in it had calculated the notice period. The court explained its finding as follows:

  • The wholesaler regarded the lease as operating on a month-to-month basis.
  • The lease agreement between the parties thus commenced at the beginning of a month and expired at the end of another month.
  • According to the court’s interpretation of the definition of “month” in the agreement, the “specific date” by which six calendar months’ notice was to be given was the first day of the month.

For these reasons, the court concluded that the calculation of the notice period given by the wholesaler on 11 June 2021 should have started on 1 July 2021, with an effective date of 31 December 2021 and not 10 December 2021. The court concluded that the wholesaler’s termination notice was ineffective as it required the retailer to vacate the site too early. The court said that it did not matter that the retailer had continued to remain in occupation beyond 31 December 2021 given that the termination notice was invalid.

This judgment highlights the importance of carefully calculating the termination notice period so as to not render the termination notice ineffective and prevent any consequent eviction. In circumstances where the correct calculation is open to a degree of interpretation, it will usually be prudent to adopt a cautious approach and give the longer notice period.

[BP Southern Africa v Bayafsa CC ta BP Kensington [2024] ZAGPJHC 209]