The recent Supreme Court of Appeal case of Cape Group Construction (Pty) Ltd t/a Forbes Waterproofing v Govt of the United Kingdom 2003 (5) SA 182 (SCA) has once again highlighted the challenge of ensuring that your standard terms and conditions of trade form part of your contract with your clients.

Before looking at the specifics of the case let us take a general look at the basics of the conclusion of a contract, and the application of standard terms and conditions of trade to this.

One of the basic principles of the law of contract is the doctrine of offer and acceptance. So let us say I am a widget dealer and you come to me and want to buy 10 widgets. You take a look at my widgets and ask the price of my widget and I advise you they are R10.00 a piece. You say, “Fine, I will take 10 widgets please”, to which I say “O.K.”. A contract has been concluded - the goods, or merx, have been established (the widgets in this case), the price agreed (R10.00 per widget) and an offer to purchase has been made by you and accepted by me.

But taking the example a little further, being a widget dealer with an astute credit manager I am advised to allow payment terms, charge interest on overdue accounts, allow for the recovery of legal costs in debt recovery and the numerous other things that a good credit manager would suggest be incorporated in any sale. In addition, my legal adviser is telling me of the perils of not limiting my liability in contracting and other legal requirements that he/she feels I should also incorporate into my sale agreement. So now I can either agree all the terms with each customer each and every time they purchase widgets from me, which could prove very cumbersome, or, alternatively, I can choose to have all these terms and conditions incorporated into my standard terms and conditions of trade with my clients. In other words, these are the terms and conditions I want incorporated into any and every sale I conclude with any of my clients.

But going back to the basics of the law of contract, I need the purchaser to agree these terms and conditions prior to the conclusion of any particular contract of sale, I cannot just unilaterally impose them, particularly not after the conclusion of the agreement.

So the surest and safest way to ensure that your terms and conditions are applicable to every contract of sale or service is to reduce them to writing and have your customer sign their acceptance of them. Obviously it is impractical to have this done each and every time you supply your customer, so the common practice has developed of incorporating the standard terms and conditions into the seller/service provider’s credit application form. The legal reality is that, if properly executed, this is an agreement that all future agreements between the parties will be subject to these standard terms and conditions.

A common mistake made by sellers or service providers is the attempted unilateral imposition of standard terms and conditions after the conclusion of the contract. Again, using our example of the widget sale above, let us say after what happened above, that you paid R100.00 and I gave you the 10 widgets and issued you with an invoice which had my standard terms and conditions of trade contained therein. In that case my standard terms and conditions would not be applicable to the contract of sale because they were not agreed upon when the contract was concluded but were only provided to you after the conclusion of the contract.

This brings us to the so-called “ticket” cases. In certain instances of every day life such as mass transport, sport events, dry cleaning and the like, the use of a written agreement would be cumbersome if not practically impossible. As a result, a series of cases dealing with the incorporation of various conditions into an agreement without the parties reducing the agreement to writing has developed in our law. The current South African authority on the “ticket cases” is the case of Durban’s Water Wonderland (Pty) Ltd v Botha and Another 1999 (1) SA 982 (SCA) which held that there is a 3-leg investigation to ascertain whether or not standard terms and conditions of trade are applicable. To explain these legs of investigation we will revert to our belaboured widget example. If at my widget point of sale I have a big notice board with my standard terms and conditions of trade then the 3 questions are:

1. Was there actual consensus?
   
   In other words, if you looked up and read my standard terms and conditions of trade and accepted them and proceeded with the sale, then the terms and conditions are part of the sale.

2. Was there acceptance of the terms without actually taking cognisance of all the terms and conditions?
   
   In this case you would look up at the notice but think it is too much bother to read all those terms and conditions, but you enter into the sale agreement anyway, knowing, or tacitly accepting, that the terms are part of the agreement.

3. If there were no actual consensus was there quasi-mutual assent?
   
   Quasi who? No, we are not dealing with the story of the reclusive hunchback bell-ringer of Notre Dame. Quasi-mutual assent is a doctrine in our law of contract which holds that “If, whatever a man’s real intention may be, he conducts himself in such a way that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.”

Taking our widget example, as interpreted with the aid of the court decision in the Durban Water Wonderland case, the crisp question would be “Did I take reasonably sufficient steps to give you notice of my terms and conditions of trade, i.e. was my sign sufficiently well placed and visible to ensure that the reasonable customer would have seen it? If the answer to this question is yes then you are bound by my terms and conditions whether or not you actually saw or read them.”

So, now after Bentley’s tour of the basics of the conclusion of a contract and its application to standard terms and conditions of trade we eventually get to the case of Cape Group Construction (Pty) Ltd t/a Forbes Waterproofing v Govt of the United Kingdom 2003 (5) SA 182 (SCA).

The facts of this case very briefly were that the U.K. High Commission in Cape Town required repairs to its roof and one of its employees contacted Forbes, requesting a quote on the repair. Forbes then duly quoted on the repair and conveyed their quote to the High Commission by fax. Forbes quote was addressed to the High Commission, described the scope of the work, the price and then had the words, “ SEE TERMS AND CONDITIONS OVERLEAF” in a print font smaller than the majority of the quote. Further the reverse side of the quotation was not faxed through. The repairs were urgent and accepted telephonically by an employee of the High Commission. During the repairs the negligence of one of Forbes’ employees resulted in a fire and damage to the High Commission’s house. As a result the Government of the United Kingdom sued Forbes, who tried to raise a defence based on the exclusion of liability clause, which they had in their standard terms and conditions of trade.

Without going into details to all the intricacies of the courts legal reasoning it held that Forbes standard terms and conditions of trade were not incorporated into the agreement. The court made this decision on the basis that the words “SEE TERMS AND CONDITIONS OVERLEAF” on an unsigned form did not denote acceptance of these unknown terms and by applying the 3-leg test set out in the Durban Water Wonderland case there was no actual consensus, tacit acceptance or quasi mutual assent to the terms and conditions.

In another case where the terms and conditions page was not faxed but the more committing words: “All purchases will be made in terms of and subject to the conditions of trade of Helios Power (Pty) Ltd, as printed on the reverse hereof, which by signing this, I acknowledge having read, understood and accepted “
In this case the court did not have to directly decide whether or not the terms and conditions were applicable on the question of the way the agreement was structured, but the minority judges did seem to indicate they would have held that the standard terms and conditions were applicable.

Obviously uncertainty is not something you want on the question of whether your terms and conditions are applicable to your contracts with your clients.

Therefore the following is a suggested format and procedure you follow to ensure that your standard terms and conditions of trade are applicable to your transactions with your clients:

1. Incorporate your standard terms and conditions of trade into your credit application form or quotation.

2. Ensure that there is clear acknowledgement at the point of signature and that the signatory has read the standard terms and conditions of trade and accepts them - some creditors even go so far as to put another acceptance on the reverse page containing the standard terms and conditions.

3. That you as far as possible have the original agreement returned to you. In today’s commercial environment the use of faxes is common and this is not ideal (even if you collect the original later and accept a fax in the interim). However if the client does fax back the agreement, ask them to initial the terms and conditions (if you do not have a signature point on the reverse page) and ensure they do fax it back.

4. If you are faxing them the agreement, remember to fax the standard terms and conditions page to the client.

Brett Bentley
Bentley Attorneys, Durban