Most entities make use of “standard terms and conditions” of contract. It is however frequently the case that such terms and conditions are not specifically included in quotations, letters of appointment and contractual documents, even though they are intended to, and often do, form part thereof. In many instances they are merely referred to.
The question then is: when are “standard terms and conditions” of contract incorporated into a contract?
The Supreme Court of Appeal (“SCA”) dealt with this issue extensively in the decision of Cape Group Construction (Pty) Ltd t/a Forbes Waterproofing v Government of the United Kingdom 2003 JOL 11056 SCA.
The facts are briefly as follows:
The UK Government owned a house in Cape Town. The roof of the house developed a leak. Cape Construction was called in to fix the leak. They faxed their quotation to the UK Government on their standard company letterhead. At the foot of the quotation appeared the words: “SEE TERMS AND CONDITIONS OVERLEAF”. The quotation was accepted. The page containing the said terms and conditions was however not transmitted with the fax. The said terms and conditions of contract limited Cape Construction’s liability for loss and damage to the UK Government’s property. During the exercise of the contract the roof of the property caught fire due to the negligence of one of Cape Construction’s employees. The UK Government sued Cape Construction which action was met with a defence in accordance with the exclusion of liability clause contained in the standard terms and conditions of contract.
The question which therefore arose was whether the standard terms and conditions of contract formed part of the contract concluded between the parties.
The Court held that the injunction ““SEE TERMS AND CONDITIONS OVERLEAF” did not convey that there were standard terms and conditions available for inspection if the UK Government wished to see them and that if no additional terms or conditions were transmitted then there were none applicable to the particular contract.
The SCA relied on the decision of Home Fires Transvaal CC v Van Wyk and another 2002 (2) SA 375 W which similarly dealt with an order which was delivered by fax incorporating the words: “see reverse side for further conditions”. The reverse side was not transmitted. The Court in this case held that by omitting to send the reverse side of the order to van Wyk, Home Fires must be held to not to have intended to conclude a contract on the basis of the terms and conditions in question.
A distinction can be drawn when a recipient signs acknowledgement that he has read and understood the standard terms and conditions of contract, regardless of whether he has in fact read them or not. This position was followed in the minority decision of Africa Solar (Pty) Ltd v Divwatt (Pty) Ltd 2002 (4) SA 681, which decision was upheld by Schutz JA in the Cape Group Construction case.
In the Cape Construction case Schutz JA held further that the UK Government was entitled to assume that the entire contractual terms were set out in the body of the quotation especially as the body of the quotation made no reference to any further conditions. Interestingly, Schutz JA noted that a party seeking to incorporate terms into an agreement may succeed in doing so on the basis of quasi-mutual assent if that party demonstrates that he took steps reasonably sufficient to give notice of the relevant terms to the other contracting party. One such example suggested by Schutz JA would be to make the existence of the standard terms and conditions of contract more prominent by expressly making reference to them in the body of the particular contractual documentation at hand and not merely the fine print thereof. It would be advisable to go further and refer the other contracting party to where such standard terms and conditions of contract could be viewed.
It therefore appears that one cannot simply state that one’s standard terms of contract apply “full stop”. A positive step in providing the said standard terms and conditions, explaining where same may be located, and / or obtaining a contracting party’s acknowledgment that they have read and understood the applicable standard terms of contract is required.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).