|On 15 February 2013, the Appellant and the Respondent concluded a contract of purchase for the Appellant’s business, Yorkers Superette. The agreed purchase price was R850,000.00 which would be paid by the Respondent to the Appellant on the following terms:
(1) R500,000.00 would be paid as a deposit within 5 days of acceptance.
(2) The balance of R350,000.00 would then be paid in four equal consecutive payments on the 15th day of each month, beginning in April and ending on July 2013.
The deposit was duly paid. Subsequent to the conclusion of the contract and on 25 February 2013, the parties signed an addendum to the contract wherein the balance of the purchase price was reduced from R350,000.00 to an amount of R302,209.33. The payment of this amount remained on the same terms as originally agreed to by the parties.
The Respondent made payments totalling in R50,000.00 in April 2013, thereby leaving a balance of R252,209.33. A dispute then arose between the parties as to whether this balance was payable. On 4 May 2013, the Respondent offered to settle the dispute by tendering payment of R150,000.00 in full and final settlement to be made in three equal monthly payments. The Appellant made a counter offer accepting this amount, however, requiring that the Respondent make one lump sum payment of this amount by 10 May 2013.
The Respondent failed to make the said payment and instead, Mr Hossain on behalf of the Respondent, on 11 May 2013, offered to make payment of R150,000.00 in two instalments of R50,000.00 on 15 May 2013 and R100,000.00 on 05 June 2013. The Appellant rejected this offer stating that it would proceed with legal action to recover the balance of R252,209.33. Despite rejection of the offer and election to sue, the Respondent proceeded to make payments to the Appellant, between May and June 2013, in terms of the above-mentioned settlement proposal (that is, an amount of R150,000.00), leaving a balance of R102,209.33.
On 5 June 2013, the Respondent then indicated that it would make no further payments and the Appellant viewed this as a repudiation of the contract. Accordingly, the Appellant instituted proceedings against the Respondent for the payment of the outstanding balance. The question of law to be determined by the court was whether there was a compromise between the parties. This was successfully raised by the Respondent as a special plea in the Magistrates’ Court and confirmed in the High Court and the Appellant sought to have the decision in both courts overturned.
|A compromise is a form of novation that involves the waiver of existing rights. As such, the party alleging that a compromise has been made bears the onus of proof thereof, which must be discharged clearly and without any ambiguity.
A compromise must be accepted by the other party contracting party. As was held in JRM Furniture Holdings v Cowlin 1983 (4) SA 541this acceptance must be absolute, unconditional and identical with the offer. Should the acceptance fall short of this, then the court is bound to hold that there was no consensus. This means that no contract of any form came into existence.
The acceptance should mirror the offer in order to constitute a valid agreement. Thus, the acceptance may not look to include, subtract or alter any of the terms contained in the offer. In essence, a counter proposal would mean that there is another offer. In view of these principles and the Respondent’s offer of 4 May 2013, it is common cause that insofar as the offer was concerned, the Appellant required complete performance by a specific date, thereby constituting a counter-offer which was contrary to the Respondent’s offer of performance over time. Therefore, no compromise was reached between the parties. The Respondent contended that the Appellant’s acceptance of the payments made in terms of the proposal on 14 May 2013 constituted a legitimate acceptance to compromise. In response to this, the court held that the first offer of settlement unaccompanied by any payment, brought about a counter-offer which was not accepted. The contested payments were made after the attempts to compromise had been unsuccessful and as such, the Appellant was entitled to appropriate the payments. The appeal was thus upheld.
In order for a compromise to be valid, there must be consensus between the parties regarding the new terms set out. Further to this, the new offer must be accepted without any conditions or amendments.
Written by Lindokuhle Mashilo and supervised by Musa Mathebula