Subjective impossibility of performance does not prevent the creation of an obligation.178 If the debtor eventually does not perform, he may be liable for breach of contract.
Objective impossibility of performance at the time of conclusion of the agreement, will lead to the situation where no obligation is created in respect of that performance.
Furthermore, no obligation is created in such a case with reference to any agreed counter-performance.
Performance may be warranted (guaranteed) to be possible. The party who gives the warranty will be bound by the contract and will be liable for breach of warranty if he fails to perform correctly, and even if the performance turns out to be objectively impossible.179
Blou Bul Boorkontrakteurs
The plaintiff and defendant had entered into a written settlement agreement in the Magistrates’ Court wherein it was agreed that the plaintiff would clean a drilling hole to a depth of 132 metres, at R18 per meter drilled. He would also install the necessary material up to that depth, also at R18 per meter. After drilling had started, steel poles and waste were found in the drilling hole, which made further drilling objectively impossible.
The following exclamation by Eloff, JP is relevant to this unit (freely translated from the Afrikaans text):
Where impossibility is raised, it is no longer about the question of the presence of consensus. What is then applicable is that one of the ways in which an obligation had arisen, can be eliminated.
177 Van der Merwe et al 2007: 189 178 Van der Merwe et al 2007: 189 179 Van der Merwe et al 2007: 190
It ought to be mentioned that the appellant’s claim to impossibility can only succeed if the impossibility is (objectively speaking) absolute. Also, the claim can only succeed if the plaintiff had not guaranteed performance in any way.180
The more recent case of South African Forestry Co Ltd v York Timbers Ltd 2005 (3) SA 323 (SCA), presents a somewhat more complex set of facts.
Two contracting parties had entered into a contract more than thirty years before the case in question. In each case, the South African Government had been the “seller” of softwood logs obtained from two government plantations in the Mpumalanga Province.
The parties had agreed that should any disagreement arise between the parties regarding the terms of the contract, the Minister of Forestry would be approached to settle the disagreement. Failure by the Minister to do so would result in arbitration-proceedings. In 1982, the respondent (York) took over all the rights and obligations of the other party in terms of both contracts. With effect from 1 April 1993, the government transferred all its rights and obligations under the said contracts to the appellant (South African Forestry Company Ltd), pursuant to the provisions of Section 4 of the Management of State Forests Act 128 of 1992.
It eventually happened that the appellant approached the Minister to take a decision regarding a certain disagreement that had occurred between the parties. The Minister did not decline to become involved (as he had done some time earlier), but refused to express the opinion sought by the appellant. The appellant’s case was based on the fact that the contracts had lapsed through intervening impossibility, because of the Minister’s refusal to perform his assigned functions in terms of the contracts. The appellant subsequently cancelled the two agreements.
Brand, JA held that
…an order is issued declaring that the plaintiff validly cancelled the two contracts between the parties, referred to as the Swartfontein agreement and the Witklip agreement, on 10 November 1998.
180 On p. 286
Unit 9 Legality Learning outcomes:
After completion of this unit, the student should be able to:
1. Explain what is meant by the concept “illegality”.
2. Briefly explain how concepts such as “public interest” and “good morals”
determine the legality or illegality of agreements.
3. Describe in detail how illegality is determined, with specific reference to the case of Sasfin v Beukes.
4. Analyze the par delictum rule as an element of the consequences of illegality.
5. Explain what is meant by agreements “in restraint of trade”.
6. Discuss the case of Magna Alloys v Ellis, with specific reference to the way in which South African courts have dealt with restraint of trade clauses in the past, and how this case has changed the position.
7. Interpret the term “public interest” in the context of the legality/illegality of restraint of trade-clauses in contracts.
8. Analyze the problem/s identified in the case of Coetzee v Comitis with regard to restraint of trade-clauses in sport contracts.
Study:
1. Van der Merwe et al.
Contract. General Principles. Third Edition. Chapter 7.
2. From List of cases:
Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A)
Mort NO v Henry Shields-Chiat 2001 (1) SA 464 (C) Klokow v Sullivan 2006 (1) SA 259 (SCA)
Magna Alloys v Ellis 1984 (4) SA 874 (SCA)
Coetzee v Comitis and Others 2001 (1) SA 1254 (C) Alternative study:
3. Christie.
The Law of Contract in South Africa. 2006. Chapter 10
1. Introduction
1.1. The concept “legality”
An agreement must be legal to constitute a contract, with the consequence that an illegal agreement will not create obligations. The reason why legality is a requirement for a valid contract rests on the interests or convictions of a society pertaining to the recognition of transactions between individuals, namely that it is generally desirable which are entered into seriously and properly should be enforced.181 However, agreements which are not necessarily in conflict with the interests and convictions of society ought not to be enforced. Contracts that are “unconstitutional” are said to be unenforceable, especially where “strong public policy considerations” are involved.182 Agreements are illegal if they conflict with statutory law or common law. Illegality occurs where the conclusion of an agreement or the agreed performance or the purpose for which the agreement is concluded is contrary to the law.183 A statutory or common-law rule may clearly express that certain agreements will be illegal. This is however, not always the case.184
1.2. Public interest and good morals
Agreements will be illegal if they are contra bonos mores (contrary to the good morals) or against public interest or policy. Remember that the law does not enforce morals simply because they are morals, but it does to a certain extent absorb moral content into legal doctrine and even specific rules.185 The reason for this absorption of morals is of course for the sake of expediency and justice, to the extent that the latter-mentioned concepts form part of the purpose and function of the law.186 The distinction between boni mores on the one side and public interest and policy on the other hand is not clear. In practice, the term boni mores with regard to illegality applies to agreements relating to the everyday morals or conduct set by a specific society. Examples would be the norms governing sexual morals and honest and proper conduct.187 The following agreements are said to be contrary to public interest and policy:
Agreements which are to the detriment of the state;
Agreements which obstruct or defeat the administration of justice;
Agreements which restrict someone’s freedom to act or to be economically active.
Agreements which are in accordance with public policy and in the public interest would include those which are in accordance with good morals.
2. Determining illegality