In the development and engineering market time-barring provisions usually are included in the standard terms and conditions in building contracts. These conditions often demand "strict" compliance with time periods and hold substantial sanction which could impact badly on claims or other entitlements under such agreements. Contracting parties often query the justness and reasonableness of these provisions when they face the consequences of being time-barred.
Our Courts have cleared up the legal position in respect of clauses of this nature in the matter of Barkhuizen v Napier. The brief facts in the case are:
1. 2 years after Napier rejected Barkhuizen's claim, Barkhuizen issued a summons for repayment in respect of the items he considered "an insured event";
2. Napier stated in its defense that it hadn't been liable as Barkhuizen had failed to issue the summons in time. Napier argued the fact that the agreement contained a particular provision that required Barkhuizen to issue a summons inside of 90 days from the date on which Napier rejected Barkhuizen's insurance claim knowing that his failure to do so successfully time-barred him from enforcing any thought of entitlements;
3. Barkhuizen's counter discussion was that the time-barring clause was unconstitutional and unenforceable given it violated his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Court.
Original Judgment
The High Court at first upheld Barkhuizen's contention and announced the time-limitation clause to be inconsistent along with the Constitution and dismissed the Napier's defense.
Court of Appeal
However, the Supreme Court of Appeal ruled that Section 34 of the Constitution did not prevent time-limitation provisions in contracts that have been entered into openly. Though it found that, on the data, it couldn't determine if the clause under consideration had been entered into openly and voluntarily, the Court nevertheless upheld Napier's argument and excused the insurer of all liability.
Constitutional Court
Barkhuizen then approached the Constitutional Court for leave to appeal contrary to the choice of the Supreme Court of Appeal. In reply, Napier's arguments included the fact that the provisions of Section 34 of the Constitution could not be applied to constitutional conflicts introduced against predetermined contractual terms.
The Constitutional Court held that public policy concerns needs to be looked at to decide whether a contractual term which goes against the Constitution and, as a result, is in contrast to public policy and thus unenforceable. The Court held that the proper procedure for constitutional challenges of this nature would have been to determine if the term itself was in contrast to public policy and South Africa's constitutional values, specifically, those found in the Bill of Rights. The Court held that Section 34 not only reflected the fundamental values that underlie the constitutional order, but that it also constituted a representation of public policy. The correct approach to the current matter was therefore to discover whether the time-limitation clause violated Section 34 of the Constitution and was thus in contrast to public policy.
The Court held that, as a matter of public policy (subject to conditions of reasonableness and fairness) time-limitation clauses in contracts truly are constitutionally allowable. The Court held further the fact that the right to seek judicial redress (as guaranteed by Section 34) may be limited in occasions where:
1. It's permitted by way of a law of general application; and
2. This type of limitation will be realistic and sensible.
Reasonableness
The examination for reasonableness, the Court found, was the way in which clause afforded the claimant a sufficient and fair possibility to seek judicial redress. In case a contractual condition provides, for example, for an impossibly short period of time for a dispute to be referred to forum where it may possibly be resolved, it can be in contrast to public policy and unenforceable.
Justness
The Court set out a two-pronged test to be applied in order to evaluate such provisions in respect of justness. The first was if the clause itself was unreasonable. This involves a weighing-up of the principle of pacta sunt servanda and also the right of all persons to find judicial redress. In case the clause was found not to be irrational, then the further prerequisite is examined.
The 2nd condition was if the circumstances that held back compliance provided the defaulting party with a validated excuse for the non-compliance with the time-barring provision. Satisfaction of this prerequisite calls for proof from the defaulting party that it has good reason for the failure to see the requirements from the time-limitation clause. In that regard, the relative equality or inequality of the negotiating positions of the parties can be a relevant consideration.
In Barkhuizen's case, the Court discovered that the ninety-day time restriction wasn't manifestly irrational. It was also held not to be manifestly unjust. There was clearly no evidence that the contract was not worked out freely between parties in matched bargaining positions. There was also no evidence that the clause had not been drawn to the applicant's consideration. Inside the circumstances, enforcement of the clause wouldn't be in contrast to public policy.
One of many specific requirements that Barkhuizen did not address (which the Court regarded as inexcusable) was his inability to explain and support his non-compliance with the requirements on the time-limitation clause. His failure to take action placed the Court in a situation where it could not evaluate whether the use of the clause will be unfair and, consequently in contrast to public policy.
Whilst the Constitutional Court, in this specific instance, found that the time-limiting clause has not been incompatible with public policy concerns and therefore it was necessary to recognise the doctrine of pacta sunt servanda, the Court acknowledged that it could decline the enforcement of a time-limitation clause if its execution would lead to unfairness or is going to be not reasonable for being contrary to public policy.
Our Courts have cleared up the legal position in respect of clauses of this nature in the matter of Barkhuizen v Napier. The brief facts in the case are:
1. 2 years after Napier rejected Barkhuizen's claim, Barkhuizen issued a summons for repayment in respect of the items he considered "an insured event";
2. Napier stated in its defense that it hadn't been liable as Barkhuizen had failed to issue the summons in time. Napier argued the fact that the agreement contained a particular provision that required Barkhuizen to issue a summons inside of 90 days from the date on which Napier rejected Barkhuizen's insurance claim knowing that his failure to do so successfully time-barred him from enforcing any thought of entitlements;
3. Barkhuizen's counter discussion was that the time-barring clause was unconstitutional and unenforceable given it violated his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Court.
Original Judgment
The High Court at first upheld Barkhuizen's contention and announced the time-limitation clause to be inconsistent along with the Constitution and dismissed the Napier's defense.
Court of Appeal
However, the Supreme Court of Appeal ruled that Section 34 of the Constitution did not prevent time-limitation provisions in contracts that have been entered into openly. Though it found that, on the data, it couldn't determine if the clause under consideration had been entered into openly and voluntarily, the Court nevertheless upheld Napier's argument and excused the insurer of all liability.
Constitutional Court
Barkhuizen then approached the Constitutional Court for leave to appeal contrary to the choice of the Supreme Court of Appeal. In reply, Napier's arguments included the fact that the provisions of Section 34 of the Constitution could not be applied to constitutional conflicts introduced against predetermined contractual terms.
The Constitutional Court held that public policy concerns needs to be looked at to decide whether a contractual term which goes against the Constitution and, as a result, is in contrast to public policy and thus unenforceable. The Court held that the proper procedure for constitutional challenges of this nature would have been to determine if the term itself was in contrast to public policy and South Africa's constitutional values, specifically, those found in the Bill of Rights. The Court held that Section 34 not only reflected the fundamental values that underlie the constitutional order, but that it also constituted a representation of public policy. The correct approach to the current matter was therefore to discover whether the time-limitation clause violated Section 34 of the Constitution and was thus in contrast to public policy.
The Court held that, as a matter of public policy (subject to conditions of reasonableness and fairness) time-limitation clauses in contracts truly are constitutionally allowable. The Court held further the fact that the right to seek judicial redress (as guaranteed by Section 34) may be limited in occasions where:
1. It's permitted by way of a law of general application; and
2. This type of limitation will be realistic and sensible.
Reasonableness
The examination for reasonableness, the Court found, was the way in which clause afforded the claimant a sufficient and fair possibility to seek judicial redress. In case a contractual condition provides, for example, for an impossibly short period of time for a dispute to be referred to forum where it may possibly be resolved, it can be in contrast to public policy and unenforceable.
Justness
The Court set out a two-pronged test to be applied in order to evaluate such provisions in respect of justness. The first was if the clause itself was unreasonable. This involves a weighing-up of the principle of pacta sunt servanda and also the right of all persons to find judicial redress. In case the clause was found not to be irrational, then the further prerequisite is examined.
The 2nd condition was if the circumstances that held back compliance provided the defaulting party with a validated excuse for the non-compliance with the time-barring provision. Satisfaction of this prerequisite calls for proof from the defaulting party that it has good reason for the failure to see the requirements from the time-limitation clause. In that regard, the relative equality or inequality of the negotiating positions of the parties can be a relevant consideration.
In Barkhuizen's case, the Court discovered that the ninety-day time restriction wasn't manifestly irrational. It was also held not to be manifestly unjust. There was clearly no evidence that the contract was not worked out freely between parties in matched bargaining positions. There was also no evidence that the clause had not been drawn to the applicant's consideration. Inside the circumstances, enforcement of the clause wouldn't be in contrast to public policy.
One of many specific requirements that Barkhuizen did not address (which the Court regarded as inexcusable) was his inability to explain and support his non-compliance with the requirements on the time-limitation clause. His failure to take action placed the Court in a situation where it could not evaluate whether the use of the clause will be unfair and, consequently in contrast to public policy.
Whilst the Constitutional Court, in this specific instance, found that the time-limiting clause has not been incompatible with public policy concerns and therefore it was necessary to recognise the doctrine of pacta sunt servanda, the Court acknowledged that it could decline the enforcement of a time-limitation clause if its execution would lead to unfairness or is going to be not reasonable for being contrary to public policy.
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