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Reportable
CASE NO: 414/2000
In the matter between:
GIDEON ANDRIES VAN DER WESTHUIZEN Appellant
and
JOHAN HEINRICH ARNOLD Respondent
Before: MARAIS JA, HEHER et LEWIS AJJA
Delivered: 29 AUGUST 2002
___________________________________________________________________
LEWIS AJA/
LEWIS AJA:
[1] I have read the judgment of Heher AJA and regret that I cannot agree with his conclusion as to the interpretation of the exclusion clause in the ‘koopbrief’, and therefore also with the decision reached by him. There are, with respect, two important aspects of contractual interpretation that have not been accorded sufficient weight. First, in interpreting any provision of an agreement, the court should have regard to background circumstances regardless of whether it considers the wording ambiguous or uncertain. It is my view, in any event, that the words ‘geen waarborge hoegenaamd’ in the context of this sale are neither clear nor certain. Secondly, exclusion clauses should be construed bearing in mind that that they seek to limit or oust a party’s common-law rights.
General principles applicable to interpretation
[2] In interpreting a contract a court must determine the intention of the parties as reflected by the terms of the contract. Where there is some uncertainty as to the meaning, or an ambiguity such that different meanings are possible on the literal wording of the contract, a court may have regard to surrounding circumstances. In the absence of uncertainty or ambiguity, evidence as to surrounding circumstances is inadmissible. Whether this should be the approach adopted is a question that does not, in my view, arise in this matter since the meaning of the words ‘geen waarborge hoegenaamd aan my gegee is’ is not clear to me. Accordingly extrinsic evidence should in my view be admissible to ascertain what guarantees were being referred to by the parties.
[3] Suffice it to say, for the purpose of this judgment, that the formalistic approach to the interpretation of contracts, one that precludes recourse to extrinsic evidence on what the parties intended in the absence of ambiguity or uncertainty, has been criticised by this Court, which has recently questioned whether the principle is justifiable. (See Pangbourne Properties Ltd v Gill & Ramsden (Pty) Ltd 1996 (1) SA 1182 (A) at 1187E—F) and Sun Packaging (Pty) Ltd v Vreulink 1996 (4) SA 176 (A) at 184A—E; see also the judgments of Jansen JA referred to in (1991) 108 SALJ 249 at 259ff and particularly that in Cinema City (Pty) Ltd v Morgenstern Family Estates (Pty) Ltd 1980 (1) SA 796 (A) at 805—6. For a general discussion of the interpretation of contracts see R H Christie The Law of Contract 4 ed 217ff and C H Lewis ‘Interpretation of Contracts’ in Reinhard Zimmermann and Daniel Visser ‘Southern Cross: Civil Law and Common Law in South Africa’ 195ff.)
[4] On the other hand, it is trite that even where the wording of a provision is such that its meaning seems plain to a court, evidence of ‘background circumstances’ is admissible for the purpose of construing its meaning. In Coopers & Lybrand v Bryant 1995 (3) SA 761 (A) Joubert JA said (at 768A—E):
‘The correct approach to the application of the “golden rule” of interpretation after having ascertained the literal meaning of the word or phrase in question is, broadly speaking to have regard:
to the context in which the word or phrase is used with its interrelation to the contract as a whole, including the nature and purpose of the contract, . . .
to the background circumstances which explain the genesis and purpose of the contract, ie to matters probably present to the minds of the parties when they contracted. Delmas Milling Co Ltd v Du Plessis 1955 (3) SA 447 (A) at 454G—H; Van Rensburg en andere v Taute en andere 1975 (1) SA 279 (A) at 305C—E . . . . (my emphasis)
to apply extrinsic evidence regarding the surrounding circumstances where the language of the document is on the face of it ambiguous, by considering previous negotiations and correspondence between the parties, subsequent conduct of the parties showing the sense in which they acted on the document, save direct evidence of their own intentions. . . .’
It is not apparent to me quite where to draw the line between background and surrounding circumstances. Perhaps it is a distinction without a difference. But it is clear that in construing the ambit of the exemption clause between the parties in this matter regard should be had at least to the ‘matters probably present to the minds of the parties when they contracted’ – the ‘background circumstances’.
The ‘background circumstances’
[5] On the assumption, for the sake of argument, that evidence of surrounding circumstances is inadmissible because the wording is on the face of it clear, evidence of the parties’ negotiations and their subsequent conduct cannot be taken into account. And on any basis, direct evidence as to what they intended is inadmissible. But the evidence adduced in the trial court described not only what passed between the parties but also the background circumstances.
[6] As Heher AJA has pointed out, the evidence led at the trial (in both stages) was limited. It seems to me, however, that such evidence as there was of background circumstances indicated clearly that the only matter of interest to the parties was the physical and mechanical condition of the car. The seller (the appellant) knew very little about the car. It was registered in his name, and there was no doubt (although at some stage this was raised as an issue) that he thought he was the owner. But he had no interest in the car other than as security for what Mr Swart, owed him. Swart had dealt with the buyer (the respondent), and had discussed with him the condition of the car and the repairs required to be effected. Swart had introduced the respondent to the appellant, and the former had then requested (although again this was the subject of some conflict) the ‘koopbrief’. It was not disputed that the document in question was written by the appellant without any careful thought or preparation. It did not reflect the whole agreement between the parties, since certain aspects had been agreed orally previously by Swart and the respondent. The document was no more than a confirmation of various terms of the sale. It did not, for example, reflect the purchase price. The question whether it was the contract itself, or simply a written confirmation of the fact of the sale is not, however, before this Court.
[7] The parties had not met before the respondent went to the appellant’s office to pay for the car. The matters discussed related to the condition of the car. The respondent knew that it required extensive repair. The appellant had not ever used or even seen the car (it is not clear, however, that the respondent knew this). Swart had had possession and had negotiated the sale to the respondent. He had bought the car from the previous ‘owner’.
[8] The evidence of background circumstances, limited as it is, shows in my view that the parties did not put their minds to the question of the implied warranty against eviction, nor therefore to the exclusion of the respondent’s liability for breach. Indeed, it is unlikely that the respondent, a layman, knew of its existence. While the appellant was an attorney, his field of expertise was conveyancing.
[9] The principle that liability for breach of the warranty against eviction can be excluded is clear. But where the parties have not expressly excluded the obligation to perform a material obligation imposed on one of them, and where the background circumstances do not show that it was a matter present to the mind of either, can the phrase ‘geen waarborge hoegenaamd’, which is so general in its ambit, be taken to exclude specifically liability for the non-performance of the primary obligation of one of them? In my view, having regard to the background circumstances and to the general nature of the ‘koopbrief’ (which, as I have mentioned, did not embody the entire contract and was no more than a confirmation of the fact of the sale and of certain terms) the provision in the ‘koopbrief’ could have been intended to mean no more than that no express guarantees about the condition of the car would render the seller liable.
[10] Furthermore, as already indicated, I do not agree with the view of Heher AJA that the words are of such breadth that they are plainly to be construed as expressly excluding all liability for breach of warranties on the part of the appellant arising from the contract of sale, including liability for the breach of the implied warranty against eviction. On the contrary, I consider the phrase ‘geen waarborge hoegenaamd’ to be uncertain in its import. The learned judge in fact refers to the words as being of ‘indiscriminate breadth’. That suggests to me that they are vague rather than that they encompass an exclusion of absolutely every liability of the seller that may exist, irrespective of whether the parties are aware of it. Accordingly, there should be a consideration of surrounding circumstances in order to determine what precisely was being referred to.
The surrounding circumstances
[11] The whole tenor of the respondent’s evidence was that he believed that he was acquiring ownership of the car from the appellant as seller. He did not expect any guarantees in respect of the vehicle because he knew that it needed extensive repairs. He knew that it was defective. What was foremost in his mind when the car was sold to him was that he was taking responsibility for the requisite repairs.
[12] The appellant’s evidence was to the effect that he had known nothing about the car. As indicated, he had not possessed it but had had it registered in his name, believing that he was acquiring some sort of security for a debt owed to him by Swart. The appellant stated, when explaining the wording of the ‘koopbrief’:
‘Die idée daarvan was net om bevestig of om ‘n skriftelike bevestiging te kry van mnr. Arnold dat hy hierdie kar voetstoots verkoop (sic), dat hy met ander woorde nie agterna terugkom na ons en sê maar hier was allerhande foute aan die kar nie, en in die tweede plek dat daar nie vir hom enige waarborge van watter aard ook al gegee is nie. . . . [D]ie bedoeling op daardie stadium was eenvoudig dat dit ‘n bevestiging was van sy kant op skrif, op watter basis hy die kar koop.’
Thus, in my view, the evidence shows that the origin and genesis of the ‘contract’ was the respondent’s request for confirmation that the car had been sold to him, and that the appellant’s primary concern was to ensure that the respondent would not look to him for the cost of repairs. There is no suggestion that he was excluding all common law rights available to a buyer against a seller. The appellant claimed that he wanted only to ensure that no guarantees had been given about the car. Does that indicate an intention to exclude the implied warranty against eviction?
[13] Evidence of negotiations and discussions was that when the respondent had asked for confirmation that the owner had sold the car to him, the appellant, being ignorant about the car, asked Swart what had been said to the respondent about it. The appellant was told that the purchase price was low because extensive repairs were needed to make the car roadworthy. Swart assured him that there was nothing in writing: the appellant told Swart that he was anxious to ensure that the car was sold ‘voetstoots’ (excluding liability for defects) and that no guarantees had been given to the respondent, who had not himself negotiated the sale. Both parties were thus concerned about the mechanical state of the vehicle. The respondent assumed that the appellant was the owner of the car. He knew that it was registered in the appellant’s name.
[14] The appellant did not regard himself as the owner, but acknowledged that the car was registered in his name. He testified that he had no expertise in the law relating to the sale of goods and had not wanted ‘come backs’. The appellant did, however, say that he wanted to ensure that the respondent knew that no guarantees had been given to the respondent. That evidence must be considered in the light of what the parties knew: what they were concerned about. And it appears from their testimony that what had been considered by them was the condition of the car alone.
[15] Do the surrounding circumstances – what passed between the parties, their negotiations and their conduct – accordingly show that the words ‘geen waarborge hoegenaamd’ included the implied warranty against eviction? In my view, the answer must be ‘No’. Although the phrase might be regarded at first blush as a complete catch-all, saving the seller from any liability that might arise by operation of law, or by virtue of representations or warranties, it cannot, given its generality, and the absence of any evidence that the question of title was considered or in contemplation, exclude the most fundamental obligation of the seller – to give undisturbed possession of the merx to the buyer.
[16] The only inference to be drawn from the circumstances is that the respondent did not intend or even contemplate that he might be deprived of possession by the true owner, and yet have no recourse to the appellant. If he had no such intention, how could there have been agreement on this aspect of the contract? The evidence does not show that the appellant had any such liability in mind either. He was concerned only to protect himself against any claim in respect of defects in the car, and against any representations or warranties that Swart may have made. He said as much. That does not mean that he intended to exclude liability for breach of a warranty implied by law. It is not a probable inference to be drawn from the evidence of either party.
[17] In the circumstances, I consider that the provision in the document that the appellant had given no warranties whatsoever does not exclude his liability for breach of the warranty against eviction. This does not mean that the words at issue are superfluous: they refer also to express warranties which, having regard to the evidence of the parties, would have related to the condition of the car. I should at this point state that I agree with the reasoning of Heher AJA in respect of the grammatical construction of the provision, and that a distinction should be drawn between the voetstoots protection and the exclusion of liability for warranties.
The construction of exclusion clauses
[18] In view of the conclusion to which I have come on the interpretation of the particular provision in issue, I do not consider it necessary to traverse in any depth the principles established over the years as to the interpretation of clauses in contract that limit the liability of one or more of the parties. See in this regard Christie op cit 209ff. The author states (at 214—15) in particular that courts ‘endeavour to confine exemption clauses within reasonable bounds . . . by interpreting them narrowly. The method is particularly applicable to clauses which do not specifically set out the legal grounds for liability from which exemption is granted.’ Christie refers in this regard, inter alia, to Essa v Divaris 1947 (1) SA 753 (A), and a number of cases that deal with the exclusion of negligence as a ground of liability. This principle is discussed also in Government of the Republic of South Africa v Fibre Spinners & Weavers (Pty) Ltd 1978 (2) SA 794 (A), where the Court held, however, that the construction of the particular clause at issue did effectively exclude liability for negligence.
[19] It is also suggested fairly regularly (see in this regard Christie op cit 255—7) that exemption clauses should be construed contra proferentem – against the person for whose benefit the exemption is included, and at whose behest it is drafted. In this case, the entire ‘koopbrief’ was drafted by the appellant, and on the basis of the contra proferentem maxim, any doubt as to its meaning should be resolved in favour of the respondent. It is important to bear in mind, however, that the guides to interpretation, such as contra proferentem, should be resorted to only where the application of the general principles of interpretation fails to yield a clear meaning.
[20] Further, South African law does not recognise a doctrine of fundamental breach (as English law did at one stage), so that a party may exclude liability for failure to perform a material obligation under a contract: Elgin Brown & Hamer (Pty) Ltd v Industrial Machinery Suppliers (Pty) Ltd 1993 (3) SA 424 (A) at 429—31 in which Hoexter JA discussed also the brief life of the doctrine in English law. It is noteworthy, however, that in the United Kingdom the Unfair Contract Terms Act 1977 would render the exemption of liability for the equivalent of the breach of a warranty against eviction ineffective: see Michael Furmston Cheshire, Fifoot & Furmston’s Law of Contract 14 ed p 200.
[21] There does not, therefore, appear to be any clear authority for a general principle that exemption clauses should be construed differently from other provisions in a contract. But that does not mean that courts are not, or should not be, wary of contractual exclusions since they do deprive parties of rights that they would otherwise have had at common law. In the absence of legislation regulating unfair contract terms, and where a provision does not offend public policy or considerations of good faith, a careful construction of the contract itself should ensure the protection of the party whose rights have been limited, but also give effect to the principle that the other party should be able to protect himself or herself against liability in so far as it is legally permissible. The very fact, however, that an exclusion clause limits or ousts common law rights should make a court consider with great care the meaning of the clause, especially if it is very general in its application. This requires a consideration of the background circumstances, as described in Coopers & Lybrand v Bryant (above), and a resort to surrounding circumstances if there be any doubt as to the application of the exclusion.
[22] I find, therefore, on a construction of the provision in question, having regard to evidence as to background and surrounding circumstances, that the appellant was indeed liable for breach of the warranty against eviction and I would dismiss the appeal with costs.
_____________________
Reportable
CASE NO: 414/2000
In the matter between :
and
JOHAN HEINRICH ARNOLD Respondent
___________________________________________________________________________
Coram: MARAIS JA HEHER et LEWIS AJJA
Delivered:
___________________________________________________________________________
_____________________________________________________________________
MARAIS JA/
MARAIS JA: [1] I have had the advantage of reading the judgments of Heher AJA and Lewis AJA. I agree with the conclusion reached by Lewis AJA but prefer to rest it upon a narrower and perhaps less controversial ground. If appellant wished to exclude liability for a breach of the warranty against eviction which warranty arose ex lege and existed whether or not the parties turned their minds to it, it behoved him to say so plainly and unambiguously. Having initially thought otherwise, maturer reflection has led me to conclude that the language he chose failed to achieve that purpose (if that was indeed his purpose).
[2] The words “en dat geen waarborge hoegenaamd aan my gegee is of word deur gemelde verkoper of sy agent(e) nie” are of the widest connotation but of critical importance, in my view, are the words “gegee is of word deur gemelde verkoper of sy agent(e)”. Their ordinary meaning is that the appellant (or his agent(s)) neither gives nor has given any guarantees or warranties whatsoever. They are, in my opinion, certainly apt to exclude all expressly given warranties whatever their content. I grant too that the word “hoegenaamd” would cover both expressly given and tacitly given warranties. By tacit I mean: to be inferred as having been the unspoken but yet clearly intended consensus of the parties. But a warranty which arises ex lege and owes nothing to the consensus of the parties is another matter altogether. It is not a warranty which is given (either expressly or tacitly) by the seller or his agent(s). Are the chosen words apt to exclude such a warranty? I think not. In my judgment, plainer language than that which appellant chose would have been necessary to exclude effectively such a warranty.
[3] This conclusion makes it unnecessary for me to express any opinion on the question which the court raised and upon which counsel addressed further submissions. The appeal is dismissed with costs.
______________________
R M MARAIS
JUDGE OF APPEAL
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.RTF of original document