Introduction
When the Constitutional Court rules on the interpretation of contracts, it's best to take note. When it starts with a poem – even more so!
The introduction begins as follows:
"I make bold to say that it is not just for the sake of poetry that the old adage, context is everything, holds true. In so many scenarios, words alone ring hollow. Context gives life and meaning to what is said or written. Is a court of law then entitled, or required, to take cognisance of context when interpreting a contract? That is the question that this Court is called upon to answer."
University of Johannesburg v Auckland Park Theological Seminary and Another
Facts
- The University of Johannesburg ("UJ") leased property to Auckland Park Theological Seminary ("ATS") for 30 years to establish a theological college
- ATS ceded its lease rights to Wamjay Holdings Investments without UJ's consent
- UJ claimed the lease was personal to ATS and could not be ceded, leading to a legal dispute
- The High Court found in favour of UJ
- ATS appealed to the Full Court, which dismissed the appeal
- ATS then appealed to the Supreme Court of Appeal (SCA), which upheld the appeal and found in favour of ATS
- The basis for the SCA's decision was that there was nothing in the lease that indicated that ATS's rights were not intended to be ceded, and the contextual evidence was inadmissible
Court findings
- The Constitutional Court ruled that the lease rights were personal to ATS (delectus personae) and could not be ceded without UJ's consent
- The Court found that the context and purpose of the lease agreement indicated that the rights were intended to be personal, even though no explicit wording in this regard was included in the agreement
- ATS's cession of rights to Wamjay was deemed a repudiation of the lease, allowing UJ to cancel the agreement
Implications from an IP perspective
- This ruling highlights the risks of not clearly and unambiguously recording both the rights and limitations of the parties to an agreement
- Context must be considered when interpreting a contract, but cannot be used to vary, contradict or add to the terms of an agreement
- If any important factors form the basis of the agreement, these should be included in the agreement itself
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
