Contractual discretionary powers and the essentialia of price and rental in the South African law of sale and lease – a jurisprudential and comparative analysis

Abstract

This thesis concerns the tension that exists between the principles of certainty and freedom of contract (which includes the notion of contractual discretionary powers) and how this tension impacts on the requirement that agreement must be reached on the price and rental in contracts of sale and lease, respectively. The matter at issue is whether South African law should recognise the validity of contracts of sale at a reasonable price and lease and rental respectively, and/or at a unilaterally determined price or rental as suggested in an obiter dictum of the Supreme Court of Appeal in NBS Boland Bank v One Berg River Drive and Others; Deeb and Another v ABSA Bank Ltd; Friedman v Standard Bank of South Africa Ltd 1999 (4) SA 928 (SCA) and in an obiter dictum of the then Appellate Division in Genac Properties JHB (Pty) Ltd v NBC Administrators CC 1992 (1) SA 566 (AD). Currently, the law requires that the price (in the case of sale) or the rental (in the case of lease) must be certain, in the sense that it is either ascertained or objectively ascertainable. The price is ascertainable if there is agreement between the contractants on an external standard in light of which the price may be ascertained objectively without further reference to the contractants: Westinghouse Brake & Equipment (Pty) Ltd v Bilger Engineering (Pty) Ltd 1986 (2) SA 555 (A). The obiter dicta in the One Berg River and Genac cases suggest that an agreement to a reasonable price or rental or to unilaterally determined price or rental meets this requirement. The basis for both obiter dicta can be found in the principles of freedom and sanctity of contract that form the cornerstones of the South African law of contract. The conceptual framework of public policy forms the outer limits of both freedom and sanctity of contract. The thesis considers whether a development in South African law that recognises the validity of a contract of sale or lease at a price or rental determined unilaterally by a contractant or at a reasonable price or rental, respectively, is contrary to public policy as informed by the values embodied in the Constitution of the Republic of South Africa 1996 iv and whether it would promote consensus and certainty, which are foundational principles of South African law of contract. Consideration is also be given to the question whether such a development is defensible in law, and desirable as a matter of policy and practice.