Contract law: non-variation clauses in contracts not always enforceable
19/10/2010

As long ago as 1964 the Supreme Court of Appeal laid down a principle which has consistently been applied in our law of contract. The so-called Shifren principle provides that a contractual non-variation clause is valid and effectively entrenches both itself and all other terms of the contract against an oral variation thereof. Simply put, where such a non-variation clause appears in a contract, no variation or amendment thereof will be valid or binding between the parties unless they have reduced such variation or amendment to writing. In most instances, non-variation clauses also require that the variation/amendment so reduced to writing must be signed by both parties and/or their representatives.

The Eastern Cape High Court has recently held in an appeal to a full bench of that court that on the facts of the particular matter before it, public policy favoured the rule of law as a foundational cornerstone of the Constitution of the Republic of South Africa (“the Constitution”).

Briefly, in the matter before the Appeal court referred to as Nyandeni Local Municipality versus Hlazo, a dispute arose between the Municipality and one of its employees regarding his misconduct. Following the Shifren principle the court of first instance found that the municipality was not entitled to rely on any variation of an agreement between it and the employee, unless it was in writing and signed by both parties, as contemplated by the particular clause in the employee’s contract of employment.

On appeal a full bench of the Eastern Cape High Court held that the question is whether it will be in the public interest, on the particular facts of each case, that the Shifren principle be enforced. In following the so-called “merits of each case to be decisive” approach which is generally followed by our courts, the court held that a balancing exercise should be undertaken between the age-old Roman Dutch Law principle that agreements should be honoured (“pacta sunt servanda”) as expressed in the Shifren case on the one hand, against the right to engage the due process of law under Section 34 of the Constitution, on the other hand.

The court held that in the present case it was warranted to depart from the Shifren principle and the appeal was allowed with costs.

Although this matter has not progressed further than the full bench of the particular division of the High Court, (and is therefore not binding on High Courts in other divisions in South Africa) it is certainly instructive to note that the High Court is prepared to adopt a fresh approach and take into account the rights of individuals or entities as entrenched in the Constitution (such as equality and fairness) when adjudicating on contractual principles which have formed part of our law of contract for many years.
Leander Opperman
Partner
leander-o@adamsadams.co.za