In the development and engineering sector time-barring provisions tend to be included within the standard terms in construction contracts. These provisions are likely to require "strict" compliance with time periods and keep substantial sanction which could impact detrimentally on claims or other entitlements under such contracts. Contracting parties often query the fairness and reasonableness of such provisions once they face the implications of being time-barred.
Our Courts have solved the legal position in respect of clauses of this nature regarding Barkhuizen v Napier. The simple facts of the case are:
1. 2 years after Napier denied Barkhuizen's claim, Barkhuizen issued a summons for settlement in respect of the items he thought to be "an insured event";
2. Napier stated in its defence that it hadn't been accountable as Barkhuizen had neglected to issue the summons timeously. Napier argued that the contract contained a certain provision that required Barkhuizen to issue a summons inside of Ninety days from the date on which Napier rejected Barkhuizen's claim and that his failure to take action successfully time-barred him from implementing any perceived entitlements;
3. Barkhuizen's counter argument could be that the time-barring clause had been unconstitutional and unenforceable since it disregarded his right under the Constitution of the Republic of South Africa to have the matter determined by a Courtroom.
Preliminary Ruling
The High Court at first upheld Barkhuizen's contention and declared the time-limitation clause to be inconsistent along with the Constitution and sacked the Napier's defence.
Court of Appeal
Having said that, the Supreme Court of Appeal ruled that Section 34 of the Constitution did not prevent time-limitation provisions in agreements that have been applied for openly. While it found that, within the data, it could not determine whether the clause under consideration has been entered freely and of their own accord, the Court nevertheless upheld Napier's argument and let off the insurer from all legal responsibility.
Constitutional Court
Barkhuizen then got into contact with the Constitutional Court for leave to appeal against the decision of the Supreme Court of Appeal. In response, Napier's arguments included that the provisions of Section 34 of the Constitution could not be applied to constitutional difficulties introduced against agreed contractual conditions.
The Constitutional Court held that public policy concerns should be looked at to determine whether a contractual term which goes against the Constitution and, as a result, is contrary to public policy and therefore unenforceable. The Court held the fact that the proper procedure for constitutional challenges of this nature was to determine whether the term itself was contrary to public policy and South Africa's constitutional principles, particularly, those in the Bill of Rights. The Court held that Section 34 not only reflected the basic values that underlie the constitutional order, but that it also constituted a representation of public policy. The ideal approach to the present matter was therefore to determine whether or not the time-limitation clause violated Section 34 from the Constitution and was thus contrary to public policy.
The Court held that, as a matter of public policy (subject to considerations of reasonableness and fairness) time-limitation clauses in contracts are indeed constitutionally allowable. The Court held further that the right to seek judicial redress (as guaranteed by Section 34) might be limited in instances where:
1. It's allowable by way of a law of general application; and
2. Such a limitation would be realistic and sensible.
Reasonableness
The examination for reasonableness, the Court found, was the way in which clause afforded the claimant an adequate and fair opportunity to seek judicial redress. In case a contractual condition provides, for example, for an impossibly small amount of time for a dispute to be referred to forum where it may be resolved, it might be contrary to public policy and unenforceable.
Justness
The Court set out a two-pronged test that needs to be applied in order to gauge such provisions in respect of fairness. The first was whether or not the clause itself was unreasonable. This requires a weighing-up of the theory of pacta sunt servanda and also the legal right of the persons to seek judicial redress. In case the clause was discovered not to be irrational, then the further requirement is looked at.
The next requirement was if the conditions that averted compliance provided the defaulting party with a justified excuse for its non-compliance with the time-barring provision. Fulfillment of this requirement requires proof from the defaulting party that it has valid 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 is a relevant consideration.
In Barkhuizen's case, the Court learned that the ninety-day time restriction wasn't manifestly not reasonable. That it was also held not to be manifestly unfair. There was clearly no evidence that the contract was not concluded freely between parties in matched negotiating positions. There is also no evidence that the clause was not drawn to the applicant's attention. Inside the circumstances, enforcement of a clause wouldn't be in contrast to public policy.
One of many specific requirements that Barkhuizen failed to address (which the Court regarded as inexcusable) was his lack of ability to clarify and support his non-compliance with the requirements of the time-limitation clause. His failure to do this placed the Court in a situation where it could not evaluate whether or not the use of the clause is going to be unfair and, consequently in contrast to public policy.
Whilst the Constitutional Court, within this specific instance, found that the time-limiting clause hasn't been incompatible with public policy conditions and that it was vital to recognise the doctrine of pacta sunt servanda, the Court acknowledged that it could not allow the enforcement of the time-limitation clause regardless of whether usage would bring about unfairness or would be not reasonable as being in contrast to public policy.
Our Courts have solved the legal position in respect of clauses of this nature regarding Barkhuizen v Napier. The simple facts of the case are:
1. 2 years after Napier denied Barkhuizen's claim, Barkhuizen issued a summons for settlement in respect of the items he thought to be "an insured event";
2. Napier stated in its defence that it hadn't been accountable as Barkhuizen had neglected to issue the summons timeously. Napier argued that the contract contained a certain provision that required Barkhuizen to issue a summons inside of Ninety days from the date on which Napier rejected Barkhuizen's claim and that his failure to take action successfully time-barred him from implementing any perceived entitlements;
3. Barkhuizen's counter argument could be that the time-barring clause had been unconstitutional and unenforceable since it disregarded his right under the Constitution of the Republic of South Africa to have the matter determined by a Courtroom.
Preliminary Ruling
The High Court at first upheld Barkhuizen's contention and declared the time-limitation clause to be inconsistent along with the Constitution and sacked the Napier's defence.
Court of Appeal
Having said that, the Supreme Court of Appeal ruled that Section 34 of the Constitution did not prevent time-limitation provisions in agreements that have been applied for openly. While it found that, within the data, it could not determine whether the clause under consideration has been entered freely and of their own accord, the Court nevertheless upheld Napier's argument and let off the insurer from all legal responsibility.
Constitutional Court
Barkhuizen then got into contact with the Constitutional Court for leave to appeal against the decision of the Supreme Court of Appeal. In response, Napier's arguments included that the provisions of Section 34 of the Constitution could not be applied to constitutional difficulties introduced against agreed contractual conditions.
The Constitutional Court held that public policy concerns should be looked at to determine whether a contractual term which goes against the Constitution and, as a result, is contrary to public policy and therefore unenforceable. The Court held the fact that the proper procedure for constitutional challenges of this nature was to determine whether the term itself was contrary to public policy and South Africa's constitutional principles, particularly, those in the Bill of Rights. The Court held that Section 34 not only reflected the basic values that underlie the constitutional order, but that it also constituted a representation of public policy. The ideal approach to the present matter was therefore to determine whether or not the time-limitation clause violated Section 34 from the Constitution and was thus contrary to public policy.
The Court held that, as a matter of public policy (subject to considerations of reasonableness and fairness) time-limitation clauses in contracts are indeed constitutionally allowable. The Court held further that the right to seek judicial redress (as guaranteed by Section 34) might be limited in instances where:
1. It's allowable by way of a law of general application; and
2. Such a limitation would be realistic and sensible.
Reasonableness
The examination for reasonableness, the Court found, was the way in which clause afforded the claimant an adequate and fair opportunity to seek judicial redress. In case a contractual condition provides, for example, for an impossibly small amount of time for a dispute to be referred to forum where it may be resolved, it might be contrary to public policy and unenforceable.
Justness
The Court set out a two-pronged test that needs to be applied in order to gauge such provisions in respect of fairness. The first was whether or not the clause itself was unreasonable. This requires a weighing-up of the theory of pacta sunt servanda and also the legal right of the persons to seek judicial redress. In case the clause was discovered not to be irrational, then the further requirement is looked at.
The next requirement was if the conditions that averted compliance provided the defaulting party with a justified excuse for its non-compliance with the time-barring provision. Fulfillment of this requirement requires proof from the defaulting party that it has valid 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 is a relevant consideration.
In Barkhuizen's case, the Court learned that the ninety-day time restriction wasn't manifestly not reasonable. That it was also held not to be manifestly unfair. There was clearly no evidence that the contract was not concluded freely between parties in matched negotiating positions. There is also no evidence that the clause was not drawn to the applicant's attention. Inside the circumstances, enforcement of a clause wouldn't be in contrast to public policy.
One of many specific requirements that Barkhuizen failed to address (which the Court regarded as inexcusable) was his lack of ability to clarify and support his non-compliance with the requirements of the time-limitation clause. His failure to do this placed the Court in a situation where it could not evaluate whether or not the use of the clause is going to be unfair and, consequently in contrast to public policy.
Whilst the Constitutional Court, within this specific instance, found that the time-limiting clause hasn't been incompatible with public policy conditions and that it was vital to recognise the doctrine of pacta sunt servanda, the Court acknowledged that it could not allow the enforcement of the time-limitation clause regardless of whether usage would bring about unfairness or would be not reasonable as being in contrast to public policy.
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