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RECTIFCATION OF CONTRACTS AND PRESCIPTION

Visitors to this site, and readers of these articles, will no doubt observe, that we never fail to use the opportunity of conveying the importance of reading your contracts through very carefully before signing them and you'll always urged to seek legal advice prior to concluding your contracts in the event that there are issues in the documents presented to you which are causing you concerned and which you may not fully understand or appreciate. We make no apology whatsoever for adopting this stance as the conclusion of contracts for whatever purpose occur on a daily basis, and the ramifications are irreversible once you have signed on the dotted line.

It is possible that the terms and conditions of a signed agreement can be rectified in certain circumstances recognised by the Courts and by our Law.

The issue of rectification has come up for decision by our Courts on numerous occasions. It came up for consideration by the Supreme Court of Appeal recently in the case of

Jointwo Holdings (Pty) Ltd v Old Mutual Life Assurance Company (South Africa) Ltd [2007] SCA 5 (RSA)

 

The headnote to this case, encapsulates the finding of Cloete JA (with whom Scott and Lewis JJA concurred) in defining circumstances under which the court will order a rectification of the terms and conditions of contract, and in this case it was held that "the prior common intention of the Parties must have been intended to be incorporated in the written document". Although it is not stated in the headnote, it is trite that the court must go further and find that the intention relied upon was omitted from the contract as a result of a common mistake made by the Parties.

I would hasten to state that this was put far more eloquently than I can, by the Supreme Court of Appeal in the case of

Boundary Financing v Protea Property (597/07) [2008] ZASCA 139

 

Streicher JA at numbered paragraph 7 of the Judgment defined the test to be applied when he said:- "A party is entitled to rectification of a written agreement which, through common mistake incorrectly records the agreement which they intended to express in the written agreement"

For the sake of clarity, rectification was allowed in this case when it was clear to the Court that the incorrect property was described in the agreement. Thus the party wanting rectification must prove what the intention of the parties was and that the mistake in not describing it properly in the contract was made.

In the above case however, the rectification was opposed on another ground, namely that the party seeking rectification does not apply to court for such an order within three years of the conclusion of the contract and therefore the right to claim rectification had prescribed in terms of the provisions of the Prescription Act No 68 of 1969. In support of this contention, relying was placed on section 11 (d) of the Act which stipulates that where an Act of Parliament does not provide the time in which the debt will prescribe, prescription of the debt will occur after the expiration of three years from the date upon which the debt was incurred.

Streicher JA makes the point that nowhere in the Prescription Act if the term "debt" defined. He held that the right to claim rectification is not a debt. He stated at numbered paragraph 13 of his Judgment:-

"A claim for rectification does not have as a correlative a debt within the ordinary meaning of the word. Rectification of an agreement does not alter the rights and obligations of the parties in terms of the agreement to
be rectified: their rights and obligations are no different after rectification. Rectification therefore does not create a new contract; it merely serves to correct the written memorial of the agreement. It is a declaration of what
the parties to the agreement to be rectified agreed." when

It follows therefore that The Learned Judge of Appeal ruled that the provisions of the prescription Act to not apply to a rectification.

It must be pointed out that in the case of Jointwo Holdings (Pty) Ltd v Old Mutual Life Assurance Company (South Africa) Ltd [2007] SCA 5 (RSA) I quoted above, the proposed rectification was not allowed because the manner in which the rectification was sought was not agreed to by the other contracting party and therefore the Court could not find that there was a common mistake whist in the latter case a common mistake was established.

In both cases the legal costs were extensive and expensive and had the mistake been discovered prior to affixing signatures to the contract, a tremendous amount of time and expense could have been saved. The importance, therefore, of obtaining proper legal advice prior to signing the contract can never be over emphasised. To rectify a mistake in contact if not always guaranteed to be successful and even if it is, it could be costly, time consuming and confrontational. The reader of this article is therefore urged to act with prudence. Take legal advice it is the prudent course to follow and it is the right thing to do.

DATED AT JOHANNESBURG ON THIS 19TH DECEMBER 2008

……………………………………………….
VICKY BOVE AND LESLIE KOBRIN
BOVE ATTORNEYS
Attorneys, Notaries and Conveyancers
Principal: Vittoria Bove BA LLB (Wits); Associate: Leslie Martin Kobrin Dip Juris (Wits) Bus Man (Dam) Notary Public & Conveyancer
South Wing  Suite 1110
11th Floor Schreiner Chambers  |  94 Pritchard Street  |  Johannesburg
Phone: (011)-336-9581/2/3  |  Facsimile: (011) 336-9571
E Mail: lesk@boveattorneys.co.za

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