Inside the development and engineering marketplace time-barring provisions are generally included contained in the conventional conditions in building legal agreements. These provisions in many cases demand "strict" conformity with time periods and carry substantial sanction which could impact badly on claims and other entitlements under such contracts. Contracting parties often query the fairness and reasonableness of such provisions once they face the results of being time-barred.
Our Courts have cleared up the legal position in respect of clauses of this nature with regards to Barkhuizen v Napier. The immediate facts of the case are:
1. 2 years after Napier denied Barkhuizen's insurance claim, Barkhuizen issued a summons for settlement in respect of what he regarded as "an insured event";
2. Napier stated in its protection that it hadn't been responsible as Barkhuizen had failed to issue the summons timeously. Napier argued that the agreement contained a specific provision that required Barkhuizen to issue a summons within Ninety days from the date on which Napier rejected Barkhuizen's claim and that his failure to do this effectively time-barred him from implementing any thought of entitlements;
3. Barkhuizen's counter discussion was that the time-barring clause had been unconstitutional and unenforceable given it violated his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Courtroom.
Preliminary Judgment
The High Court to begin with upheld Barkhuizen's contention and announced the time-limitation clause to be contradictory with the Constitution and sacked the Napier's defense.
Court of Appeal
Nonetheless, the Supreme Court of Appeal ruled that Section 34 of the Constitution didn't prevent time-limitation provisions in agreements that have been applied for readily. Although it discovered that, within the evidence, it could not determine if the clause under consideration has been entered freely and voluntarily, the Court nonetheless upheld Napier's argument and excused the insurer from all liability.
Constitutional Court
Barkhuizen then got into contact with the Constitutional Court for leave to appeal contrary to the choice of the Supreme Court of Appeal. In reply, Napier's arguments included the fact that the provisions of Section 34 of the Constitution can't be applied to constitutional challenges launched against agreed upon contractual conditions.
The Constitutional Court held that public policy concerns ought to be assessed to determine whether or not a contractual term which goes against the Constitution and, as a result, is contrary to public policy and thus unenforceable. The Court held the fact that the correct approach to constitutional challenges of this nature would have been to evaluate if the term itself was in contrast to public policy and South Africa's constitutional principles, particularly, 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 representation of public policy. The ideal approach to the current matter was therefore to find out whether or not the time-limitation clause violated Section 34 of the Constitution and was thus contrary to public policy.
The Court held that, as a matter of public policy (subject to conditions 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) could be limited in conditions where:
1. It's allowed by way of a law of general application; and
2. This type of limitation may be reasonable and justifiable.
Reasonableness
The test for reasonableness, the Court found, was whether or not the clause afforded the claimant a satisfactory and fair opportunity to seek judicial redress. If a contractual condition provides, as an example, for an impossibly short time for a disagreement to be referred to forum where it may possibly be resolved, it might be contrary to public policy and unenforceable.
Justness
The Court laid out a two-pronged test to always be used in order to judge such provisions in accordance of justness. The first was whether or not the clause itself was unreasonable. This involves a weighing-up of the principle of pacta sunt servanda and also the legal right of the persons to seek judicial redress. In case the clause was discovered to not be irrational, then the further prerequisite is looked at.
The second requirement was whether or not the circumstances that prevented compliance provided the defaulting party with a justified excuse for its non-compliance with the time-barring provision. Fulfillment of this prerequisite requires proof by the defaulting party that it has justified reason for its failure to see the requirements from the time-limitation clause. In that regard, the relative equality or inequality of the bargaining 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. It was also held to not be manifestly unjust. There was clearly no evidence that the contract had not been concluded freely between parties in matched bargaining positions. There is also no evidence that the clause wasn't drawn to the applicant's interest. Within the circumstances, enforcement of the clause wouldn't be contrary to public policy.
One of several specific requirements that Barkhuizen did not address (which the Court thought to be inexcusable) was his inability to clarify and support his non-compliance with the requirements of the time-limitation clause. His failure to take action placed the Court in a situation where it could not evaluate whether the implementation of the clause will be unfair and, consequently contrary to public policy.
Whilst the Constitutional Court, in this specific instance, discovered that the time-limiting clause was not in conflict with public policy concerns and therefore it had become necessary to recognise the doctrine of pacta sunt servanda, the Court accepted that it could decline the enforcement of the time-limitation clause if its execution would lead to unfairness or is going to be unreasonable for being in contrast to public policy.
Our Courts have cleared up the legal position in respect of clauses of this nature with regards to Barkhuizen v Napier. The immediate facts of the case are:
1. 2 years after Napier denied Barkhuizen's insurance claim, Barkhuizen issued a summons for settlement in respect of what he regarded as "an insured event";
2. Napier stated in its protection that it hadn't been responsible as Barkhuizen had failed to issue the summons timeously. Napier argued that the agreement contained a specific provision that required Barkhuizen to issue a summons within Ninety days from the date on which Napier rejected Barkhuizen's claim and that his failure to do this effectively time-barred him from implementing any thought of entitlements;
3. Barkhuizen's counter discussion was that the time-barring clause had been unconstitutional and unenforceable given it violated his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Courtroom.
Preliminary Judgment
The High Court to begin with upheld Barkhuizen's contention and announced the time-limitation clause to be contradictory with the Constitution and sacked the Napier's defense.
Court of Appeal
Nonetheless, the Supreme Court of Appeal ruled that Section 34 of the Constitution didn't prevent time-limitation provisions in agreements that have been applied for readily. Although it discovered that, within the evidence, it could not determine if the clause under consideration has been entered freely and voluntarily, the Court nonetheless upheld Napier's argument and excused the insurer from all liability.
Constitutional Court
Barkhuizen then got into contact with the Constitutional Court for leave to appeal contrary to the choice of the Supreme Court of Appeal. In reply, Napier's arguments included the fact that the provisions of Section 34 of the Constitution can't be applied to constitutional challenges launched against agreed upon contractual conditions.
The Constitutional Court held that public policy concerns ought to be assessed to determine whether or not a contractual term which goes against the Constitution and, as a result, is contrary to public policy and thus unenforceable. The Court held the fact that the correct approach to constitutional challenges of this nature would have been to evaluate if the term itself was in contrast to public policy and South Africa's constitutional principles, particularly, 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 representation of public policy. The ideal approach to the current matter was therefore to find out whether or not the time-limitation clause violated Section 34 of the Constitution and was thus contrary to public policy.
The Court held that, as a matter of public policy (subject to conditions 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) could be limited in conditions where:
1. It's allowed by way of a law of general application; and
2. This type of limitation may be reasonable and justifiable.
Reasonableness
The test for reasonableness, the Court found, was whether or not the clause afforded the claimant a satisfactory and fair opportunity to seek judicial redress. If a contractual condition provides, as an example, for an impossibly short time for a disagreement to be referred to forum where it may possibly be resolved, it might be contrary to public policy and unenforceable.
Justness
The Court laid out a two-pronged test to always be used in order to judge such provisions in accordance of justness. The first was whether or not the clause itself was unreasonable. This involves a weighing-up of the principle of pacta sunt servanda and also the legal right of the persons to seek judicial redress. In case the clause was discovered to not be irrational, then the further prerequisite is looked at.
The second requirement was whether or not the circumstances that prevented compliance provided the defaulting party with a justified excuse for its non-compliance with the time-barring provision. Fulfillment of this prerequisite requires proof by the defaulting party that it has justified reason for its failure to see the requirements from the time-limitation clause. In that regard, the relative equality or inequality of the bargaining 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. It was also held to not be manifestly unjust. There was clearly no evidence that the contract had not been concluded freely between parties in matched bargaining positions. There is also no evidence that the clause wasn't drawn to the applicant's interest. Within the circumstances, enforcement of the clause wouldn't be contrary to public policy.
One of several specific requirements that Barkhuizen did not address (which the Court thought to be inexcusable) was his inability to clarify and support his non-compliance with the requirements of the time-limitation clause. His failure to take action placed the Court in a situation where it could not evaluate whether the implementation of the clause will be unfair and, consequently contrary to public policy.
Whilst the Constitutional Court, in this specific instance, discovered that the time-limiting clause was not in conflict with public policy concerns and therefore it had become necessary to recognise the doctrine of pacta sunt servanda, the Court accepted that it could decline the enforcement of the time-limitation clause if its execution would lead to unfairness or is going to be unreasonable for being in contrast to public policy.
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