Topic: Drafting tips

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Interpretation of exclusions

Traditionally, ambiguous exclusion clauses provide little or no protection because they will be interpreted narrowly and against the person who tried to exclude their liability (in Latin the contra proferentem rule). In the light of modern methods of interpretation it is doubtful that this principle of interpretation can be used in every case for anything … Continue reading

Does the principle of pay now, argue later apply to an adjudicator’s decision given out of time?

When adjudication is incorporated into contracts, often construction contracts, as a means of dispute resolution it is usually included with other mechanisms such as mediation, arbitration and possibly even an approach to a court so that a party dissatisfied with an adjudicator’s award can attempt to rectify what is considered wrong with it in a … Continue reading

Public holidays are not bank holidays

The definition of ‘business day’ in South African agreements often includes phrases like ‘any day on which banks are open for business in South Africa’. These words are confusing and it is sufficient to refer to a day other than a Saturday, Sunday or official public holiday. The words have crept in from English law … Continue reading

Legislation cannot always be incorporated into an agreement

You can incorporate legislation into a contract but you cannot attempt to bind non-consenting third parties, like the state or its regulators, by incorporating legislation. Obligations cannot be imposed on private third parties without their consent. For example, the parties in Firstrand Bank v Clear Creek Trading concluded a contract to which the National Credit … Continue reading

Interpretation of contracts – guarantees

In resolving the question whether a guarantee was a call guarantee or a conditional guarantee the Supreme Court of Appeal in Mutual & Federal v KNS Construction restated what has been said before about interpreting documents. The interpretative process is one of ascertaining the intention of the parties – what they meant to achieve. And … Continue reading

Acceleration clauses are not all equal

An acceleration clause that allows a creditor to call in a full debt payable by instalments can be drafted to operate automatically on default by a debtor, or it can allow the creditor an election to accelerate the debt. The distinction between automatic and elective acceleration clauses is important because it affects when prescription on … Continue reading

Don’t forget the Interpretation Act

The Interpretation Act 1957 applies to the interpretation of all laws, so it is a useful act to know. The act was last amended to incorporate the 1993 Interim Constitution. While there are some archaic and strange provisions, like the mention of the former colonies and the Royal Letters Patent of His Majesty King William … Continue reading

Arbitrator cannot fix scope of arbitration

An arbitrator has no power to fix the scope of the arbitrator’s jurisdiction. Jurisdiction must be fixed by the terms of reference of the arbitration. Its scope must be objectively ascertainable in advance of the arbitration. An arbitrator cannot make a decision conferring jurisdiction on the arbitrator that is not possessed in law. That is … Continue reading

Interpreting messy contracts

A commercial agreement should not lightly be determined unenforceable simply because the parties set out the terms in an unclear manner. The Supreme Court of Appeal, in Novartis v Maphil, dealt with whether a pharmaceutical drug manufacturer and a medical device supplier had concluded a contract. The court had to consider written documents, oral agreements … Continue reading

What does mutatis mutandis mean?

When you import the provisions of one document or statute into another it is common to do so “mutatis mutandis”. The Supreme Court of Appeal in Mayo No v De Montlehu reminded us that there is an imperative nuance when you use that Latin expression. The words mean “subject to the necessary alterations” not the … Continue reading

Interpret statutes according to the purpose

In a recent decision the Constitutional Court reminded us that where there is a constitutional issue there is a new approach to interpreting statutes. The courts must seek an interpretation that promotes the spirit, purport and objects of the Bill of Rights. The courts will apply a generous construction over a merely textual or legalistic … Continue reading

Headings will be taken seriously

Where a suretyship was headed “Deed of Suretyship – Tuning Fork (Pty) Limited t/a After Market Products” it was held that the surety only owed money for the debts incurred by the After Market Products division of the company even though that division was not a separate legal person. The court in Ian Kilburn v … Continue reading

Contracting with a trust

Ideally, when you contract with a trust, the agreement should be in the name of the trustee or trustees acting on behalf of the named trust. But where the trust is named as a party to the contract that does not render the contract invalid. This is the welcomed finding by the Supreme Court of … Continue reading

Interpretation of contracts: you may not get a judgment if you do not set out the factual matrix

The factual matrix may have to be set out and proved in a case involving the interpretation of an ambiguous contract. We have previously written about the method of interpreting a contract in our posts Golden rule of interpretation – Good riddance and Interpret contracts according to words, purpose and context. The Supreme Court of … Continue reading

Ambiguity in contracts

In recent blogs we have made the point that the background and context of an agreement will be taken into account in the interpretation of an ambiguous provision. Here are two quotes from US cases which have a neat approach to ambiguity: “It is well settled that ‘[a] contract is unambiguous if the language it … Continue reading

Unspecified interest is simple, not compound interest

A contract specifying that interest must be “calculated daily” does not mean compounded daily or capitalised daily. Simple interest therefore applies. In Euro Blitz 21 (Pty) Ltd and Another v Secena Aircraft Investments CC the appeal court found that the words “calculated daily” in a written lease agreement and consequent court order did not mean … Continue reading

General words followed by specific words

A recent tax case has a nice illustration of the ejusdem generis rule that where general words follow specific words, the general words must be confined to things of the same kind as those specified. The words in question are in the Eighth schedule of the Income Tax Act where section 35(3)(c) provides that the proceeds … Continue reading