Inside of the construction and engineering marketplace time-barring provisions are often included within the conventional conditions in construction legal agreements. These provisions are likely to need "strict" conformity with time intervals and carry substantial sanction which might impact badly on claims and other entitlements under such contracts. Contracting parties often query the justness and reasonableness of these provisions when they face the results of being time-barred.
Our Courts have addressed the legal position in accordance of clauses from this nature regarding Barkhuizen v Napier. The brief facts in the case are:
1. Two years after Napier turned down Barkhuizen's claim, Barkhuizen issued a summons for settlement in respect of the items he thought to be "an insured event";
2. Napier stated in its defence that it was not liable as Barkhuizen had neglected to issue the summons timeously. Napier argued that the contract included a certain provision that required Barkhuizen to issue a summons inside of 90 days from the date where Napier rejected Barkhuizen's claim knowing that his failure to take action effectively time-barred him from enforcing any thought of entitlements;
3. Barkhuizen's counter argument was that the time-barring clause had been unconstitutional and unenforceable given it disregarded his right beneath the Constitution of the Republic of South Africa to have the matter determined by a Court.
First Ruling
The High Court initially upheld Barkhuizen's contention and announced the time-limitation clause to be inconsistent 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 did not prevent time-limitation provisions in contracts that were entered into freely. While it found that, within the data, it could not determine if the clause under consideration had been entered openly and voluntarily, the Court nonetheless upheld Napier's argument and let off the insurer from all liability.
Constitutional Court
Barkhuizen then contacted the Constitutional Court for leave to appeal against the choice of the Supreme Court of Appeal. In reaction, Napier's arguments included that the provisions of Section 34 of the Constitution couldn't apply to constitutional conflicts introduced against agreed upon contractual terms.
The Constitutional Court held that public policy considerations should be looked at to determine whether or not a contractual term which goes against the Constitution and, as a result, is in contrast to public policy and therefore 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 principles, in particular, 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 best approach to the present matter was therefore to ascertain whether 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 (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 a law of general application; and
2. This type of limitation would be realistic 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 term provides, as an example, for an impossibly limited time for a dispute to be referred to forum where it might be resolved, it might be in contrast to public policy and unenforceable.
Justness
The Court put down a two-pronged test to be used in order to be sure of such provisions in accordance of fairness. The first was whether the clause itself was unreasonable. This requires a weighing-up of the theory of pacta sunt servanda and the right of the persons to seek judicial redress. If the clause was found to not be unreasonable, then the additional requirement is looked at.
The second condition was whether or not the situations that stopped compliance provided the defaulting party with a warranted excuse for its non-compliance with the time-barring provision. Fulfillment of this requirement demands proof by the defaulting party that it has justified reason for its failure to see the requirements of 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 learned that the ninety-day time limitation wasn't manifestly not reasonable. It was also held not to be manifestly unfair. There was no evidence that the contract was not concluded freely between parties in equal negotiating positions. There were also no evidence that the clause was not drawn to the applicant's particular attention. Within the circumstances, enforcement of a clause would not be in contrast to public policy.
One of several specific requirements that Barkhuizen decided not to address (which the Court thought to be inexcusable) was his failure to describe and support his non-compliance with the requirements for the time-limitation clause. His failure to do this placed the Court in a situation where it couldn't evaluate the way in which implementation of the clause is going to be unfair and, for that reason in contrast to public policy.
While the Constitutional Court, in this specific instance, learned that the time-limiting clause has not been incompatible with public policy conditions and therefore it was vital to recognise the doctrine of pacta sunt servanda, the Court accepted it may reject the enforcement of the time-limitation clause regardless of whether usage would bring about unfairness or would be unreasonable for being contrary to public policy.
Our Courts have addressed the legal position in accordance of clauses from this nature regarding Barkhuizen v Napier. The brief facts in the case are:
1. Two years after Napier turned down Barkhuizen's claim, Barkhuizen issued a summons for settlement in respect of the items he thought to be "an insured event";
2. Napier stated in its defence that it was not liable as Barkhuizen had neglected to issue the summons timeously. Napier argued that the contract included a certain provision that required Barkhuizen to issue a summons inside of 90 days from the date where Napier rejected Barkhuizen's claim knowing that his failure to take action effectively time-barred him from enforcing any thought of entitlements;
3. Barkhuizen's counter argument was that the time-barring clause had been unconstitutional and unenforceable given it disregarded his right beneath the Constitution of the Republic of South Africa to have the matter determined by a Court.
First Ruling
The High Court initially upheld Barkhuizen's contention and announced the time-limitation clause to be inconsistent 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 did not prevent time-limitation provisions in contracts that were entered into freely. While it found that, within the data, it could not determine if the clause under consideration had been entered openly and voluntarily, the Court nonetheless upheld Napier's argument and let off the insurer from all liability.
Constitutional Court
Barkhuizen then contacted the Constitutional Court for leave to appeal against the choice of the Supreme Court of Appeal. In reaction, Napier's arguments included that the provisions of Section 34 of the Constitution couldn't apply to constitutional conflicts introduced against agreed upon contractual terms.
The Constitutional Court held that public policy considerations should be looked at to determine whether or not a contractual term which goes against the Constitution and, as a result, is in contrast to public policy and therefore 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 principles, in particular, 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 best approach to the present matter was therefore to ascertain whether 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 (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 a law of general application; and
2. This type of limitation would be realistic 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 term provides, as an example, for an impossibly limited time for a dispute to be referred to forum where it might be resolved, it might be in contrast to public policy and unenforceable.
Justness
The Court put down a two-pronged test to be used in order to be sure of such provisions in accordance of fairness. The first was whether the clause itself was unreasonable. This requires a weighing-up of the theory of pacta sunt servanda and the right of the persons to seek judicial redress. If the clause was found to not be unreasonable, then the additional requirement is looked at.
The second condition was whether or not the situations that stopped compliance provided the defaulting party with a warranted excuse for its non-compliance with the time-barring provision. Fulfillment of this requirement demands proof by the defaulting party that it has justified reason for its failure to see the requirements of 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 learned that the ninety-day time limitation wasn't manifestly not reasonable. It was also held not to be manifestly unfair. There was no evidence that the contract was not concluded freely between parties in equal negotiating positions. There were also no evidence that the clause was not drawn to the applicant's particular attention. Within the circumstances, enforcement of a clause would not be in contrast to public policy.
One of several specific requirements that Barkhuizen decided not to address (which the Court thought to be inexcusable) was his failure to describe and support his non-compliance with the requirements for the time-limitation clause. His failure to do this placed the Court in a situation where it couldn't evaluate the way in which implementation of the clause is going to be unfair and, for that reason in contrast to public policy.
While the Constitutional Court, in this specific instance, learned that the time-limiting clause has not been incompatible with public policy conditions and therefore it was vital to recognise the doctrine of pacta sunt servanda, the Court accepted it may reject the enforcement of the time-limitation clause regardless of whether usage would bring about unfairness or would be unreasonable for being contrary to public policy.
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