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A contractual non-variation clause means just that

02 November 2023 Patrick Bracher, Norton Rose Fulbright
Patrick Bracher, Norton Rose Fulbright

Patrick Bracher, Norton Rose Fulbright

The Supreme Court of Appeal has reaffirmed that if a written contract provides that any variation of its terms must be in writing, any purported variation by the parties which is not in writing will be void. Trying to get around the non-variation clause by relying on estoppel was not successful.

A motor dealer franchise subleased premises to a used-car dealership. When a dispute over a failure to pay rent arose, the sublessee alleged that the sublease no longer subsisted and that it had been cancelled in terms of an oral agreement concluded between the parties. The non-variation clause read: “No agreement varying, adding to, deleting from or cancelling this sublease (including this clause) and no waiver of any right under this sublease will be effective unless in writing and signed by or on behalf of the parties”. There was also a no-relaxation clause by which rights could not be waived unless in writing. The sublessee who had moved out of the premises relied on an alleged assurance by the sublessor that the sublease would be cancelled in terms of the oral agreement when the sublessee vacated the premises and moved on.

In reasserting the principle, the court said that in addition to fraud, there may be circumstances in which an agreement, unobjectionable in itself, will not be enforced because the object it seeks to achieve is contrary to public policy. No such a defence was relied on in this case nor was fraud or deceit alleged, nor was it alleged that there was an agreement not to sue, which may stand alongside a non-variation clause. If the estoppel defence was allowed it would sanction non-compliance with the provisions of the non-variation clause in the agreement and negate the very purpose and effect of the non-variation clause. In addition, on the facts, a reasonable person in the position of the sublessee would, having knowledge of the facts, not have believed that they would be released from the agreement to occupy new premises where the sublessor would no longer receive any rental income. The defence failed.

A minority of two judges held that the sublessor should not have been granted summary judgment and that the sublessee should have been given an opportunity to present their defence fully at a trial, suggesting that in their view a defence of estoppel might succeed in the face of a non-variation clause, depending on the evidence.

[Ba-Gat Motors CC v Kempster Sedgwick (Pty) Ltd [2023] ZASCA 137 (25 October 2023)]

First published by: Financial Institutions Legal Snapshot

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