Inside of the building and engineering marketplace time-barring provisions tend to be included in the conventional terms in building agreements. These conditions in many cases need "strict" compliance with time intervals and hold significant sanction which might impact detrimentally on claims or other entitlements under such agreements. Contracting parties often query the fairness and reasonableness of such provisions every time they face the consequences of being time-barred.
Our Courts have cleared up the legal position in respect of clauses of this nature in the matter of Barkhuizen v Napier. The quick facts in the case are:
1. 2 years after Napier denied Barkhuizen's insurance claim, Barkhuizen issued a summons for settlement in respect of the items he thought to be "an insured event";
2. Napier stated in its protection that it hadn't been liable as Barkhuizen had neglected to issue the summons timeously. Napier argued that the agreement included a certain provision that required Barkhuizen to issue a summons inside of Ninety days from the date on which Napier rejected Barkhuizen's claim knowing that his failure to do so successfully time-barred him from implementing any thought of entitlements;
3. Barkhuizen's counter argument was that the time-barring clause was unconstitutional and unenforceable given it disregarded his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Court.
Initial Judgment
The High Court to begin with upheld Barkhuizen's argument and announced the time-limitation clause to be inconsistent along with the Constitution and sacked the Napier's defense.
Court of Appeal
Having said that, 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 readily. While it discovered that, within the evidence, it couldn't see whether the clause under consideration has been entered freely and voluntarily, the Court however upheld Napier's argument and excused the insurer from all liability.
Constitutional Court
Barkhuizen then approached the Constitutional Court for leave to appeal against the decision of the Supreme Court of Appeal. In reply, 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 really should be examined to determine whether a contractual term which violates the Constitution and, as such, is contrary to public policy and therefore unenforceable. The Court held that the correct procedure for constitutional challenges of this nature was to see whether the term itself was contrary to public policy and South Africa's constitutional beliefs, particularly, those 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 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 conditions of reasonableness and fairness) time-limitation clauses in contracts are indeed constitutionally allowable. The Court held further the fact that the right to seek judicial redress (as guaranteed by Section 34) might be limited in situations where:
1. It is allowed by way of a law of general application; and
2. This type of limitation would be reasonable and sensible.
Reasonableness
The test for reasonableness, the Court found, was whether or not the clause afforded the claimant an adequate and fair probability to seek judicial redress. If a contractual condition provides, for example, for an impossibly short time for a dispute to be referred to forum where it may be resolved, it can be contrary to public policy and unenforceable.
Justness
The Court laid out a two-pronged test to always be applied in order to gauge such provisions in respect of fairness. The first was whether or not the clause itself was unreasonable. This involves a weighing-up of the principle of pacta sunt servanda and the legal right of the persons to seek judicial redress. If the clause was discovered to not be irrational, then the additional requirement is examined.
The 2nd condition was whether the conditions that stopped compliance provided the defaulting party with a warranted defense for the non-compliance with the time-barring provision. Fulfillment of this prerequisite demands proof by the defaulting party that it has valid reason for its failure to see the requirements from the time-limitation clause. In that way, 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 limitation wasn't manifestly not reasonable. It was also held not to be manifestly unjust. There was no evidence that the agreement was not concluded freely between parties in equal bargaining positions. There were also no evidence that the clause wasn't drawn to the applicant's particular attention. Within the circumstances, enforcement of the clause would not be contrary to public policy.
One of the specific requirements that Barkhuizen could not address (that the Court considered inexcusable) was his inability to clarify and support his non-compliance with the requirements for the time-limitation clause. His failure to take action placed the Court in a situation where it couldn't evaluate whether the use of the clause is going to be unfair and, as a result in contrast to public policy.
While the Constitutional Court, in this specific instance, discovered that the time-limiting clause has not been incompatible with public policy conditions and therefore it was necessary to recognise the doctrine of pacta sunt servanda, the Court accepted it may reject the enforcement of the time-limitation clause regardless of whether implementation would result in unfairness or would be unreasonable for being in contrast to public policy.
Our Courts have cleared up the legal position in respect of clauses of this nature in the matter of Barkhuizen v Napier. The quick facts in the case are:
1. 2 years after Napier denied Barkhuizen's insurance claim, Barkhuizen issued a summons for settlement in respect of the items he thought to be "an insured event";
2. Napier stated in its protection that it hadn't been liable as Barkhuizen had neglected to issue the summons timeously. Napier argued that the agreement included a certain provision that required Barkhuizen to issue a summons inside of Ninety days from the date on which Napier rejected Barkhuizen's claim knowing that his failure to do so successfully time-barred him from implementing any thought of entitlements;
3. Barkhuizen's counter argument was that the time-barring clause was unconstitutional and unenforceable given it disregarded his right beneath the Constitution of the Republic of South Africa to get the matter determined by a Court.
Initial Judgment
The High Court to begin with upheld Barkhuizen's argument and announced the time-limitation clause to be inconsistent along with the Constitution and sacked the Napier's defense.
Court of Appeal
Having said that, 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 readily. While it discovered that, within the evidence, it couldn't see whether the clause under consideration has been entered freely and voluntarily, the Court however upheld Napier's argument and excused the insurer from all liability.
Constitutional Court
Barkhuizen then approached the Constitutional Court for leave to appeal against the decision of the Supreme Court of Appeal. In reply, 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 really should be examined to determine whether a contractual term which violates the Constitution and, as such, is contrary to public policy and therefore unenforceable. The Court held that the correct procedure for constitutional challenges of this nature was to see whether the term itself was contrary to public policy and South Africa's constitutional beliefs, particularly, those 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 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 conditions of reasonableness and fairness) time-limitation clauses in contracts are indeed constitutionally allowable. The Court held further the fact that the right to seek judicial redress (as guaranteed by Section 34) might be limited in situations where:
1. It is allowed by way of a law of general application; and
2. This type of limitation would be reasonable and sensible.
Reasonableness
The test for reasonableness, the Court found, was whether or not the clause afforded the claimant an adequate and fair probability to seek judicial redress. If a contractual condition provides, for example, for an impossibly short time for a dispute to be referred to forum where it may be resolved, it can be contrary to public policy and unenforceable.
Justness
The Court laid out a two-pronged test to always be applied in order to gauge such provisions in respect of fairness. The first was whether or not the clause itself was unreasonable. This involves a weighing-up of the principle of pacta sunt servanda and the legal right of the persons to seek judicial redress. If the clause was discovered to not be irrational, then the additional requirement is examined.
The 2nd condition was whether the conditions that stopped compliance provided the defaulting party with a warranted defense for the non-compliance with the time-barring provision. Fulfillment of this prerequisite demands proof by the defaulting party that it has valid reason for its failure to see the requirements from the time-limitation clause. In that way, 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 limitation wasn't manifestly not reasonable. It was also held not to be manifestly unjust. There was no evidence that the agreement was not concluded freely between parties in equal bargaining positions. There were also no evidence that the clause wasn't drawn to the applicant's particular attention. Within the circumstances, enforcement of the clause would not be contrary to public policy.
One of the specific requirements that Barkhuizen could not address (that the Court considered inexcusable) was his inability to clarify and support his non-compliance with the requirements for the time-limitation clause. His failure to take action placed the Court in a situation where it couldn't evaluate whether the use of the clause is going to be unfair and, as a result in contrast to public policy.
While the Constitutional Court, in this specific instance, discovered that the time-limiting clause has not been incompatible with public policy conditions and therefore it was necessary to recognise the doctrine of pacta sunt servanda, the Court accepted it may reject the enforcement of the time-limitation clause regardless of whether implementation would result in unfairness or would be unreasonable for being in contrast to public policy.
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