By Sharne Zimri and Kelsey Jayes
We all know that lengthy contracts with banks, car dealerships and service providers (to name a few) can be, firstly, extremely boring to read and, secondly, confusing. However, it is of utmost importance for consumers to read and understand the contents of the contracts they are signing, to be fully aware of what they are getting themselves into. There are various legal and contractual principles applicable in this regard, which principles determine the validity of the contract being signed. This article deals with the validity of an agreement where a consumer signed it without reading or appreciating important terms contained therein.
The Principle of Caveat Subscriptor
The validity of a bilateral contract requires that there is consensus between the parties entering into the contract, i.e. a “meeting of the minds”. Where it is found that a contract has been entered into without such consensus, the contract may be found to be invalid under certain circumstances.
It must be noted at the outset that the principle of caveat subscriptor applies in South African contractual law. This principle states that once a person signs a contract, the law accepts, unless proven otherwise, that such person has read the contents of the contract and consents to be bound by the terms thereof. Accordingly, the onus of proof will rest on the party who signs the contract without consensus to prove the lack thereof.
The Principle of Justus Error
In order to escape liability when incorrectly signing a contract, such party must be able to prove that it signed the contract erroneously and that such error was both material and reasonable/justifiable (known as a justus error) . The error must be material in that it played a material role in the decision of the mistaken party to enter into the contract and the mistaken party would not have contracted had it not been for the error. The error must be reasonable in that the party attempting to escape the contract did not lead the other party, as a reasonable person, to believe it was binding itself. In other words, the party seeking to enforce the contract must have known, or ought reasonably to have known, that the mistaken party did not intend to be bound by the terms.
An error occasioned by misrepresentation, fraud, duress, illegality, or undue influence would be regarded as reasonable. The court in the case of Brink v Humphries (Pty) Ltd explains the rationale behind this principle:
“In this way the law gives effect to the sound principle that a person, in signing a document, is taken to be bound by the ordinary meaning and effect of the words which appear over his/her signature, while at the same time protecting such a person if he/she is under a justifiable misapprehension, caused by the other party who requires such signature, as to the effect of the document.”
Take the simple example of a contract of sale between a buyer and a seller for a specific cell phone. The buyer is under the belief that he was purchasing a Huawei Mate 10 Pro cell phone from the seller as this is the cell phone which was on display. However, the seller is, in actual fact, selling a Huawei P20 cell phone, which is reflected in the contract of sale. The buyer, without having due regard to the contents of the contract, signs the contract and pays the purchase price for the cell phone. Only once the cell phone is delivered to the buyer, does the buyer realise that the cell phone purchased was not the cell phone which was on display.
What remedies are available to the buyer under these circumstances?
To answer this question, it must be determined whether the mistaken belief by the buyer was material and secondly, whether the buyer’s error in signing the contract was reasonable. The mistake in the above example relates to the object which the buyer intended to purchase (i.e. an error in corpore) and is in the circumstances a material error. The error will only be reasonable if facts exist, demonstrating that the seller knew or ought to have known that the buyer intended to buy a Huawei Mate 10 Pro cell phone. For example, where the purchaser made several references to the wrong cell phone when the contract is signed.
A common cause of an error in corpore is a misrepresentation made by one of the parties. A misrepresentation is a false fact that induces a party to enter into an agreement. According to the case of George v Fairmead (Pty) Ltd, if the mistake was fundamental and was due to a misrepresentation by the other party (in this case, the seller), then the misrepresenting party will be at fault and the contract will be void.
Accordingly, where the buyer in our example can prove that the seller misrepresented the cell phone which was being sold, and that the buyer would not have signed the contract had the true position been known by the buyer, then the contract may be void. Expanding on the example above, if the seller told the purchaser that he was buying a Huawei Mate 10 Pro cell phone or pointed out the incorrect cell phone, the contract would be void.
There are alternative remedies which may be available to the person who signed the contract erroneously. These alternative remedies lie in the application of certain consumer-related legislation, including the Consumer Protection Act and the National Credit Act.
It is prudent to consult an attorney before signing a contract, specifically where the transaction is large and/or risky. An attorney will review the terms and conditions extensively and make you aware of the potential risks involved before signing. If the contract has already been signed, then an attorney with experience in these matters should be consulted to ensure that the best remedy is sought and achieved, having regard to the factual reality of the error and the various legal principles applied in South African contractual law.
This article is intended to give general information. It is not intended to constitute legal advice or replace the need to seek legal advice. It also does not contain all the information relevant to the subject matter. Each situation is different and must be evaluated on its own merits. For advice on the interpretation or enforcement of a contract, you may contact us.