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  INTERPRETATION OF CONTRACTS NAME: TSHOGOFATSO ELISA DHLAMINI STUDENT NUMBER: 215036169 DUE DATE: 08 JUNE 2019  EXEMPTION CLAUSES IN GOVERNMENT CONTRACTS 1. INTRODUCTION Exemption clauses are used in contracts to exclude liability which arises from contracts under normal circumstances. Exemption clauses are normally included by the service provider to the detriment of the other party to the contract. 1  Exemption clauses which are contrary to public policy are invalid and unenforceable. The Consumer Protection Act (“ CPA ”) 2   and the National Credit Act (“ NCA ”) 3  have exemption clauses in certain instances to achieve fairness between the parties. However, these two pieces of legislation are not relevant for this particular discussion. Exemption clauses form part of a contract and their main function is to exclude an obligation or liability which the law normally attaches to a contracting party. 4  The use of exemption is often frowned upon because they are one sided and they are often unfair to the other contracting party. Essentially, exemption clauses are only enforceable if they have been agreed on by both parties. 5  However, just like any other clause in a contract, an exemption clause can be struck down by a court if is against public policy. 6  Exemption clauses concern any agreed deviation from the naturalia concerning contractual or delictual liability that affects rights, obligations, duties and procedural remedies normally emanating from a specific contract. 7  This essay will deal with exemption clauses under the common law, exemption clauses under the constitution, validity and enforcement of exemption clauses, and lastly, exemption clauses in Canadian Law. 2. INTERPRETATION OF EXEMPTION CLAUSES 1   Chimuka “TheCurrent Status of Exemption Clauses in the South African law of Contract” 2014 Mediterranean  Journal of Social Sciences 163. 2  Act No.68 of 2008. 3  Act No. 34 of 2005. 4  Van der Merwe Contract: General Principles (3 rd  edition). 5   Ibid p164. 6    Afrox Healthcare Bpk v Strydom 2002 6 21 (SCA). 7   Stoop “The Current Status of the Enforceability of Contractual Exemption Clauses for the Exclusion of Liability in the South African Law of Contract” 2008 20 South African Mercantile Law Journal 496.  2.1. Public Policy Exemption clauses are legal and enforceable, however, their enforcement in certain circumstances has led to unfair and harsh results. 8  The court considers the principle of public policy when determining whether or not an exemption clause is permissible. In Morriosn v Angelo Deep Gold Mines Ltd  , 9   Innes CJ held that “it’s a general principle that a man contracting without duress, without fraud, and understanding what he does, may freely waive any of his rights. There are certain exceptions to that rule, and certainly the law will not recognise any arrangement which is contrary to public policy.” In Brisley v Drotsky  10    Cameron JA held that in its modern guise, “public policy  is now rooted in our Constitution and the fundamental values it enshrines. These include human dignity, the achievement of equality and the advancement of human rights and freedoms, non-racism and non-sexism. 11   2.2. Restrictive Interpretation The most popular method used by courts is to confine exemption clauses within reasonable bounds. 12  The clause can also be interpreted narrowly if the language used is not ambiguous. 13  In First National Bank of South Africa v Rosenblum and Another  14   the court held that where a party wishes to be exempted he needs to make his intention clear. Marais JA hel d that “in matters of contract the parties are taken to have intended their legal rights and obligations to be governed by the common law unless they have plainly and unambiguously indicated the contrary. Where one of the parties wishes to be absolved either wholly or partially from an obligation or liability which would or could arise at common law under a contract of the kind which the parties intended to conclude, it is for that party to ensure that the extent to which he/she/it is to be absolved is plainly spelt 8   Durban’s Water Wonderland (Pty) Ltd v Botha 1991 1 SA 982 (A). 9  1906 TS 775. 10  2002 4 SA 1 (SCA). 11   Ibid para 91. 12    Johannesburg Country Club v Stott 2004 5 SA 511 (SCA). 13    Anglo-Saxo Petroleum Co Ltd v Adamastas Shipping Co Ltd 1957 2 QB 233 (CA) 269. 14  2001 4 SA 189 (SCA).  out. 15  This principle only applies in circumstances where the clause is ambiguous, if not, the court is bound to enforce such a clause. 16  In restrictive interpretation, courts also use the contra proferentem rule. In Drifters  Adventure Tours v Hirock  17    the court held that indemnity provisions should be interpreted restrictively, and in cases of doubt, where there is more than one meaning, the interpretation which is the least biased and favourable against the maker should be followed. In Durban’s  Water Wonderland (Pty) Ltd v Botha 18    the court stated that “if the language of the disclaimer or exemption clause is such that it exempts the  proferens from liability in express and unambiguous terms effect must be given to the meaning. If there is ambiguity the language must be construed against the  proferens . 3. JUDICIAL LIMITATION IN DEALING WITH EXEMPTION CLAUSES UNDER COMMON LAW The law of contract in South Africa assesses contractual validity by looking at legality and contractual interpretation. 19  In Sasfin (Pty) Ltd v Beukes 20    Smallberger JA held that contractual values and principles have prevailed over the need to achieve fairness between the parties. In the Morrison case 21  the court reflected on how public policy had not been able to effectively deal with unfair exemption clauses. “To succeed on the ground of public policy it must be shown that the arrangement contravenes or tends to induce contravention of some fundamental principle of justice or of general statutory law, or that it is necessarily to the prejudice of the interest of public policy.” 22  The principle of  pacta sunt servanda has been the primary underlying principle in interpreting contractual terms and the principle that a party is under no obligation to inform the other party about the content of the proposed contract meant that documents contain 15   Ibid para 195. 16  Chimuka (n 1 above) 167. 17  2007 2 SA 83 (SCA). 18  n 8 above. 19   Wells v South African Alumite Co 1927 (AD) 69 at 72. 20  1989 1 SA 1 (A) 9B-F. 21  n 9 above. 22   Ibid .  unfair exemption clauses continued to operate against the other party to the contract with impunity. 23  The bargaining power of the parties is considered material. 24  Freedom of contract meant that courts were reluctant to interfere with contracts which were concluded validly between the parties. 25  In Burger v Central South African Railways 26    the court held that our law does not recognise the right of a court to release a contracting party from the consequences of an agreement duly entered into by him/her/it merely because that agreement appears to be unreasonable. It is a requirement of a valid contract that consensus should be reached. However, in standard contracts, consensus is seldom reached as these contracts are concluded on a take-it-or-leave-it basis. 27  The consequence is that, the party in a weaker bargaining position will be exploited by the other party in a stronger bargaining position. 28  Non-interference by the court led to the development of a rigid set of rules being applied by the courts. 29  It was considered inappropriate for judges to review and police contracts validly entered into for compliance with considerations of substantive fairness. 30  This approach provided certainty as courts were more concerned with validity rather than the substance of the contract, however, this approach could not find application in a modern and liberate society. A further ideal which underlies contracts in South Africa is good faith, it is a presumption of the law of contract that all contracts are concluded in good faith. 31  The common law contract does not coincide with modern society as it assumes that parties always have real freedom to choose with whom and on what terms do they want to contract. 32  Common law also assumes that parties have equal bargaining power and are able to negotiate the terms of a contract. 33  A strict adherence to the common law 23  n 6 above para 34 and 35. 24   Grinaker Construction v Transvaal Provincial Administration 1982 1 SA 312 (A). 25   Chimuka (n 1 above) 169. 26  1903 TS 571. 27   Chimuka (n 1 above) 169. 28  Stoop (n 7 above) 497. 29 Bhana and Pieterse “Towards a reconciliation of contract law and Constitutional Values: Brisley and  Afrox revisited” 2005 122 SALJ 867. 30   Cockrell “Substance and Form in the South African law of Contract” 1991 SALJ 59. 31  Hutchison et al The Law of Contract in South Africa (2009) 23. 32  Bhana and Piertse (n 29 above) 883. 33  Hutchison (n 31 above) 25.

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Oct 13, 2019
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