An area of difficulty that often confronts the courts is that of contractual disputes – particularly in respect of the enforcement or non-enforcement of contracts/contractual terms.
The general rule is that courts judge contractual disputes based on the notion of pacta sunt servanda, meaning that parties should honour their obligations made in terms of agreements, irrespective of whether such obligations are onerous or biased toward one party. However, the courts are not rigid in their approach and consider the merits of each case.
The Supreme Court of Appeal in the case of Brisley v Drotsky 2002 4 (SA) 1 (SCA) provided some guidance and expressed that the notion of pacta sunt servanda is not “written in stone” and may therefore be altered to provide that, only contracts that are entered into voluntarily by parties and which are reasonable, must be enforceable. Therefore, in exceptional cases, the Courts consider the values of fairness, reasonableness and good faith for the purposes of making judgments on contractual disputes.
In the case of Botha and Another v Rich NO and Others  ZACC, the Constitutional Court proposed that to determine whether a clause would be unenforceable as a result of being contrary to the public policy one would have to consider whether the relevant clause was not in good faith or reasonable or fair in the circumstances.
But how do we determine ‘reasonableness'? What constitutes unreasonable conduct? There are a few cases that dealt with this question.
In Beadica 231 CC and Others v Trustees for the time being of the Oregon Trust and Others  ZACC 13, the court considered the language of the contractual terms to determine whether to set aside a contract (or certain of the unfair contractual terms) and to refuse to enforce contractual terms based on public policy grounds (e.g. unreasonableness).
The court held that contractual terms that the applicants wished to rely on as unreasonable to enforce, were “in simple, uncomplicated language, which an ordinary person could reasonably be expected to understand”. Therefore, the applicants failed to prove how the enforcement of the clauses would be contrary to public policy (in essence, the values of fairness, reasonableness and good faith).
Then, in the matter of Botha and Another v Rich NO and Others  ZACC the Court held that good faith and freedom of contract is understood using the “principle of reciprocity”. This means that for a contract not to fail the test of “contrary to public policy” (good faith, reasonableness and fairness), it must be mutually beneficial to the contracting parties or must have reciprocating rights and obligations.
In the case of Mohamed's Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd (183/17)  ZASCA 176 the court considered whether the enforcement of a contractual clause would be so clearly unreasonable or unfair to the extent that it would be contrary to public policy, by considering the objective terms of the contract, whilst also considering the circumstances of the parties.
Therefore, in our opinion, the court analysed the wording of the clause(s), as was done in the aforementioned Beadica case.
The court in Mohamed's Leisure Holdings (Pty) Ltd further held that: “The fact that a term in a contract is unfair or may operate harshly does not by itself lead to the conclusion that it offends the values of the Constitution or is against public policy.”
Having considered the above, it is not clear cut what ‘reasonableness' means or what constitutes unreasonable conduct; but it can be inferred that reasonableness is determined on a case-by-case basis and therefore various factors – such as the social factors applicable to parties and bargaining powers of each party – are considered. In light of this, the courts engage in a weighing up of the notion of pacta sunt servanda and the values of public policy in determining whether to enforce or not to enforce contracts/contractual terms.
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.