The Role of Good Faith In Contract Law
Submitted by: SchoemanLaw Inc
Annelise Petzer | SchoemanLaw Inc
Category: Contract Law | Contract Drafting
Introduction
The role of good faith in South African contract law is significant, as it is an underlying value that is given expression through existing rules of contract law1https://www.journalofcommonwealthlaw.org/article/7441-good-faith-in-contract-a-uniquely-south-african-perspective. Good faith has evolved in the South African courts, and its application has influenced the interpretation of contracts2. In this article, we will explore the origins of good faith in South African contract law, its functional equivalents, enforcement, cases, and future development.
Key Aspects of the Role of Good Faith in South African Contract Law
Origins of Good Faith:
The concept of good faith has its roots in Roman law, where it was a defence against fraud under verbal formulary contracts of classical Roman law. Over time, good faith has become an essential principle in South African contract law, reflecting the country's commitment to fairness, reasonableness, and equity3. The principle of good faith is enshrined in Section 34 of the Constitution of South Africa, which provides that "every person has the right to fair, reasonable, and just contractual terms"4.
Functional Equivalents of Good Faith:
South African courts have developed principles such as ubuntu to promote substantive equality in private relationships. While good faith and ubuntu share some similarities, they serve different purposes in contract law. Good faith is concerned with promoting fairness, reasonableness, and equity in contractual relationships, while ubuntu focuses on promoting substantive equality5. The principle of ubuntu is based on the idea that individuals are interconnected and that their well-being is dependent on the well-being of others. It is a principle that is deeply rooted in African culture and has been recognized by the South African courts as a guiding principle in the interpretation of contracts.
Enforcement of Good Faith:
Courts have developed principles governing the enforcement of contracts through the application of good faith. The principle of good faith informs the substantive law of contract by controlling and legitimating functions. However, the Supreme Court of Appeal emphasizes that good faith does not form an independent or freestanding basis on which a court may refuse to enforce a contract6. In the case of Brisley v Drotsky7, the court held that "good faith is not a principle that can be used to undermine the terms of a contract or to create new obligations that are not contained in the contract itself."
Case Law:
South African case law on good faith in contract law is typically briefer and vaguer than that of other jurisdictions, such as England and Wales8. Despite this, several cases have explored the application of good faith in contract law, such as Sasfin (Pty) Ltd v Beukes9 and Afrox Healthcare v Strydom10. In Sasfin, the court held that "good faith requires that a party to a contract must not act in a manner that is inconsistent with the reasonable expectations of the other party." In Afrox Healthcare, the court held that "good faith requires that a party to a contract must not act in a manner that is inconsistent with the requirements of honesty and fairness."
Future Developments
Some scholars argue that good faith has a more active role to play in the law of contract, and there is a need for further development and clarification in this area11. This could involve examining the potential for good faith to form an independent basis for refusing to enforce a contract, as well as exploring its relationship with other principles, such as ubuntu12.
In the case of Barkhuizen v Napier13, the Constitutional Court held that "good faith requires that the parties to a contract must deal with each other honestly, fairly, and in a reasonable manner." The court went on to state that "good faith is an essential element of the law of contract and is required in the performance, enforcement, and termination of contracts."
Conclusion
In conclusion, good faith plays a crucial role in South African contract law, promoting fairness, reasonableness, and equity in contractual relationships. Its development and application in South African courts demonstrate the country's commitment to fostering a more equitable and reasonable contractual environment. While good faith is not an independent or freestanding basis on which a court may refuse to enforce a contract, it is an essential element of the law of contract. It is required in the performance, enforcement, and termination of contracts. The future development of good faith in South African contract law will likely involve further examination of its potential as an independent basis for refusing to enforce a contract, as well as its relationship with other principles, such as ubuntu.
Annelise Petzer | SchoemanLaw Inc
Attorney
SchoemanLaw Inc Attorneys, Conveyancers and Notaries Public is a boutique law firm offering its clients access to high quality online legal documents and agreements, together with a wide range of legal services. The firm has an innovative and entrepreneurial mindset that distinguishes it from other law firms. We apply our first-hand understanding of the challenges facing entrepreneurs (regardless of their business size) to develop proven, practical solutions incorporating legal compliance, risk aversion and business sense. We achieve this by offering clients tailored, yet holistic support comprising of legal gap analysis, the design of tailored legal solutions and the practical implementation thereof through training and automation. With your personal interests in mind, our ultimate aim is to implement measures that protect the results of your hard work as effectively as possible.
