In South Africa’s dynamic commercial landscape, the precision with which contracts are drafted can make or break a business relationship. Unclear terms or omissions often become the seeds of costly litigation, as evidenced by the Supreme Court of Appeal’s decision in G Phadziri & Sons (Pty) Ltd v Do Light Transport (Pty) Ltd and Another [2023] ZASCA 16.

What Went Wrong?

The dispute centred on a commercial contract that lacked clarity regarding its duration should a specific event not occur. When the anticipated event failed to materialise, a disagreement ensued. The appellant argued that the agreement should be interpreted as including a tacit term, that is, an unwritten provision implying that the contract would continue for a “reasonable period” in such a scenario.

However, the Supreme Court of Appeal was not persuaded.

The Court’s Position on Tacit Terms

The Court reiterated a long-standing legal principle: South African courts are hesitant to imply tacit terms, especially when those terms relate to core contractual elements such as timeframes, pricing, or performance obligations. Courts are particularly unwilling to do so when the proposed term might conflict with the contract’s express wording or where there is no objective evidence that both parties had intended such a provision to apply.

In the Phadziri case, the Court found no indication that the parties had agreed, either explicitly or by implication, that an alternative term of engagement would apply if the event didn’t happen. The appellant’s attempt to insert such an assumption post hoc failed, and the Court dismissed the appeal, ordering the appellant to pay the respondent’s legal costs.

Why This Case Matters

These ruling underscores a vital point for businesses: every essential term must be clearly documented in writing. Where parties leave room for interpretation, they risk creating legal uncertainty that could lead to disputes, strained relationships, and expensive litigation.

In particular, contract duration, contingencies, termination rights, and performance triggers must be clearly and unambiguously set out. Courts will not come to the rescue when these elements are left vague or open to inference, especially where doing so could alter the nature of the agreement.

Best Practices: Safeguard Your Contracts

To avoid the pitfalls seen in this case, businesses should:

• Define key terms explicitly, including timelines, conditions precedent, renewal options, and termination clauses.
• Avoid relying on oral understandings or industry norms unless they are incorporated into the contract.
• Review contracts thoroughly before signature, especially where future events or contingencies are concerned.
• Seek advice from experienced legal professionals who can tailor contract terms to the specific deal and industry.

Final Thought

The Phadziri judgment offers a compelling lesson: even the best business intentions can unravel if the contract underpinning them is vague or incomplete. Taking the time to ensure every term is clearly defined and agreed upon will save significant legal and financial strain in the future.

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