Inside of the building and engineering market time-barring provisions usually are included in the regular conditions in building legal agreements. These conditions are likely to demand "strict" compliance with time periods and hold substantial sanction which could impact detrimentally on claims along with other entitlements under such contracts. Contracting parties often query the justness and reasonableness of these provisions when they face the effects of being time-barred.
Our Courts have solved the legal position in accordance of clauses from this nature in the matter of Barkhuizen v Napier. The brief facts from the case are:
1. Two years after Napier refused Barkhuizen's claim, Barkhuizen issued a summons for settlement in respect of what he considered "an insured event";
2. Napier stated in its defense that it was not accountable as Barkhuizen had failed to issue the summons in time. Napier argued the fact that the agreement contained a specific provision that required Barkhuizen to issue a summons inside of 90 days from the date on which Napier rejected Barkhuizen's insurance claim knowing that his failing to do so successfully time-barred him from implementing any thought of entitlements;
3. Barkhuizen's counter discussion could be that the time-barring clause was unconstitutional and unenforceable because it disregarded his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Judge.
Preliminary Judgment
The High Court initially upheld Barkhuizen's contention and reported the time-limitation clause to be contradictory along with the Constitution and sacked the Napier's defence.
Court of Appeal
Nonetheless, the Supreme Court of Appeal ruled that Section 34 of the Constitution failed to prevent time-limitation provisions in agreements that have been applied for openly. While it discovered that, on the evidence, it could not determine whether the clause under consideration ended up being entered openly and voluntarily, 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 contrary to the decision of the Supreme Court of Appeal. In reaction, Napier's arguments included that the provisions of Section 34 of the Constitution couldn't be applied to constitutional conflicts launched against agreed contractual terms.
The Constitutional Court held that public policy concerns should be examined to determine whether a contractual term which goes against the Constitution and, as a result, is contrary to public policy and for that reason unenforceable. The Court held that the proper approach to constitutional challenges of this nature would have been to determine if the term itself was contrary to public policy and South Africa's constitutional beliefs, specifically, those found in the Bill of Rights. The Court held that Section 34 not only reflected the fundamental values that underlie the constitutional order, but that it also constituted a manifestation of public policy. The ideal approach to the current matter was therefore to ascertain if the time-limitation clause violated Section 34 from the Constitution and was thus in contrast to public policy.
The Court held that, as a matter of public policy (governed by conditions of reasonableness and fairness) time-limitation clauses in agreements are indeed constitutionally allowable. The Court held further the fact that the right to seek judicial redress (as guaranteed by Section 34) may be limited in conditions where:
1. It is allowed by a law of general application; and
2. This kind of limitation would be reasonable and sensible.
Reasonableness
The examination for reasonableness, the Court found, was whether or not the clause afforded the claimant an adequate and fair chance to seek judicial redress. If a contractual condition provides, by way of example, for an impossibly small amount of time for a argument to be referred to forum where it may be resolved, it may be in contrast to public policy and unenforceable.
Justness
The Court laid out a two-pronged test to be applied in order to gauge such provisions in respect of justness. The first was whether or not the clause itself was irrational. This involves a weighing-up of the principle of pacta sunt servanda and the legal right of all persons to seek out judicial redress. In case the clause was found to not be unreasonable, then the further prerequisite is looked at.
The 2nd demand was whether the situations that averted compliance provided the defaulting party with a validated excuse for the non-compliance with the time-barring provision. Satisfaction of this prerequisite demands proof from the defaulting party that it has good reason for its 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 can be a relevant consideration.
In Barkhuizen's case, the Court found that the ninety-day time restriction wasn't manifestly unreasonable. That it was also held to not be manifestly unfair. There is no evidence that the agreement was not concluded freely between parties in matched bargaining positions. There was also no evidence that the clause had not been drawn to the applicant's interest. Inside the circumstances, enforcement of the clause would not be contrary to public policy.
One of many specific requirements that Barkhuizen decided not to address (which the Court regarded as inexcusable) was his inability to describe and motivate his non-compliance with the requirements on the time-limitation clause. His failure to do so placed the Court in a situation where it couldn't evaluate whether the use of the clause is going to be unfair and, consequently contrary to public policy.
Whilst the Constitutional Court, in this specific instance, learned that the time-limiting clause was not incompatible with public policy concerns and therefore it was vital to recognise the doctrine of pacta sunt servanda, the Court acknowledged that it may reject the enforcement of the time-limitation clause if its usage would bring about unfairness or is going to be unreasonable for being contrary to public policy.
Our Courts have solved the legal position in accordance of clauses from this nature in the matter of Barkhuizen v Napier. The brief facts from the case are:
1. Two years after Napier refused Barkhuizen's claim, Barkhuizen issued a summons for settlement in respect of what he considered "an insured event";
2. Napier stated in its defense that it was not accountable as Barkhuizen had failed to issue the summons in time. Napier argued the fact that the agreement contained a specific provision that required Barkhuizen to issue a summons inside of 90 days from the date on which Napier rejected Barkhuizen's insurance claim knowing that his failing to do so successfully time-barred him from implementing any thought of entitlements;
3. Barkhuizen's counter discussion could be that the time-barring clause was unconstitutional and unenforceable because it disregarded his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Judge.
Preliminary Judgment
The High Court initially upheld Barkhuizen's contention and reported the time-limitation clause to be contradictory along with the Constitution and sacked the Napier's defence.
Court of Appeal
Nonetheless, the Supreme Court of Appeal ruled that Section 34 of the Constitution failed to prevent time-limitation provisions in agreements that have been applied for openly. While it discovered that, on the evidence, it could not determine whether the clause under consideration ended up being entered openly and voluntarily, 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 contrary to the decision of the Supreme Court of Appeal. In reaction, Napier's arguments included that the provisions of Section 34 of the Constitution couldn't be applied to constitutional conflicts launched against agreed contractual terms.
The Constitutional Court held that public policy concerns should be examined to determine whether a contractual term which goes against the Constitution and, as a result, is contrary to public policy and for that reason unenforceable. The Court held that the proper approach to constitutional challenges of this nature would have been to determine if the term itself was contrary to public policy and South Africa's constitutional beliefs, specifically, those found in the Bill of Rights. The Court held that Section 34 not only reflected the fundamental values that underlie the constitutional order, but that it also constituted a manifestation of public policy. The ideal approach to the current matter was therefore to ascertain if the time-limitation clause violated Section 34 from the Constitution and was thus in contrast to public policy.
The Court held that, as a matter of public policy (governed by conditions of reasonableness and fairness) time-limitation clauses in agreements are indeed constitutionally allowable. The Court held further the fact that the right to seek judicial redress (as guaranteed by Section 34) may be limited in conditions where:
1. It is allowed by a law of general application; and
2. This kind of limitation would be reasonable and sensible.
Reasonableness
The examination for reasonableness, the Court found, was whether or not the clause afforded the claimant an adequate and fair chance to seek judicial redress. If a contractual condition provides, by way of example, for an impossibly small amount of time for a argument to be referred to forum where it may be resolved, it may be in contrast to public policy and unenforceable.
Justness
The Court laid out a two-pronged test to be applied in order to gauge such provisions in respect of justness. The first was whether or not the clause itself was irrational. This involves a weighing-up of the principle of pacta sunt servanda and the legal right of all persons to seek out judicial redress. In case the clause was found to not be unreasonable, then the further prerequisite is looked at.
The 2nd demand was whether the situations that averted compliance provided the defaulting party with a validated excuse for the non-compliance with the time-barring provision. Satisfaction of this prerequisite demands proof from the defaulting party that it has good reason for its 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 can be a relevant consideration.
In Barkhuizen's case, the Court found that the ninety-day time restriction wasn't manifestly unreasonable. That it was also held to not be manifestly unfair. There is no evidence that the agreement was not concluded freely between parties in matched bargaining positions. There was also no evidence that the clause had not been drawn to the applicant's interest. Inside the circumstances, enforcement of the clause would not be contrary to public policy.
One of many specific requirements that Barkhuizen decided not to address (which the Court regarded as inexcusable) was his inability to describe and motivate his non-compliance with the requirements on the time-limitation clause. His failure to do so placed the Court in a situation where it couldn't evaluate whether the use of the clause is going to be unfair and, consequently contrary to public policy.
Whilst the Constitutional Court, in this specific instance, learned that the time-limiting clause was not incompatible with public policy concerns and therefore it was vital to recognise the doctrine of pacta sunt servanda, the Court acknowledged that it may reject the enforcement of the time-limitation clause if its usage would bring about unfairness or is going to be unreasonable for being contrary to public policy.
About the Author:
Learn from the best construction lawyer. Stop by Dirk Markhen's website where you can get more information on construction law and construction attorneys.
No comments:
Post a Comment