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Thread: Legal question on clause in contract

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    Legal question on clause in contract

    Good Day Peoples,

    This is an actual clause in a mortgage contract:

    13.3 The nature and amount of the mortgager's indebtedness to the bank in terms of this agreement, as well as the annual finance charge

    rate payable in respect thereof, will at any time be determined and proved by a written certificate purporting to have been signed by a

    Manager or Accountant for the time being of any branch or the Head Office of the bank, whose capacity or authority it will not be necessary to prove,

    which certificate will upon the mere production thereof be binding on the mortgager and be prima facie proof of the contents of such certificate

    and the fact that such amount is due and payable in any legal proceedings against the mortgager, and will be valid as a liquid document against

    the mortgager in any competent court.



    2. In the loan agreement there is a clause which is referred to as a conclusive proof clause. The Supreme Court of Appeal ruled against such clauses in 1995. The loan agreement is dated 1997. The case law is Ex Parte Minister of Justice in Re: Nedbank Ltd v Abstein Distributors (Pty) Ltd and Others AND Donelly v Barclays National Bank Ltd. March 1995.

    In this case the ruling is clear and unambiguous; the author of a certificate of balance as proof cannot be the creditor.

    "The interpretation of the Court in Nedbank Ltd v Abstein Distributors (Pty) Ltd and Others 1989 (3) SA 750 (T) of the decision of the Appellate Division of the Supreme Court of South Africa in the matter of Sasfin (Pty) Ltd v Beukes 1989(1) SA 1 (A) relating to the validity of a so-called "conclusive proof clause" in favour of a creditor in an agreement in terms whereof the creditor is to be the author of the certificate of balance issued under such a clause, correctly reflects the law, namely, that such a clause is in itself contra bonos mores and therefore void regardless of the context of the agreement in which it finds itself."

    Why is there an illegal clause in the loan agreement? To my knowledge this ruling is unchallenged.

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    Site Caretaker Dave A's Avatar
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    Inertia, probably.

    There's probably also a clause in there that if any part of the agreement is found to be unlawful, it shall be seperated from the rest of the agreement and not affect the effects of the remainder.
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member sterne.law@gmail.com's Avatar
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    Why?
    Many institutes failed/did not bother/ to change contracts not only where a court rules but also in terms of CPA. Probable reason being while I can get away with it great. if someone raises it in legal action say sorry and carry on, not being in any worse position, especially seeing as there is no penalty.
    If a clause is invalid, it is merely severed and the rest of the contract continues, unless in the absence of that specific clause the contract becomes absurd.
    Anthony Sterne

    www.acumenholdings.co.za
    DISCLAIMER The above is merely a comment in discussion form and an open public arena. It does not constitute a legal opinion or professional advice in any manner or form.

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    Quote Originally Posted by sterne.law@gmail.com View Post
    Why?
    Many institutes failed/did not bother/ to change contracts not only where a court rules but also in terms of CPA. Probable reason being while I can get away with it great. if someone raises it in legal action say sorry and carry on, not being in any worse position, especially seeing as there is no penalty.
    If a clause is invalid, it is merely severed and the rest of the contract continues, unless in the absence of that specific clause the contract becomes absurd.
    There is no clause in there about unlawful clauses in the contract.
    I am a layperson so have patience with me. Is my understanding correct that a contract is void if there are illegal terms in it?
    How can they plead ignorance if they are legal representatives? And how can there be no penalty for doing it?

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    Platinum Member sterne.law@gmail.com's Avatar
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    The contract doe snot become void, only the relevant clause/s will be struck out.
    Anthony Sterne

    www.acumenholdings.co.za
    DISCLAIMER The above is merely a comment in discussion form and an open public arena. It does not constitute a legal opinion or professional advice in any manner or form.

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    Diamond Member Vanash Naick's Avatar
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    Yes, Dave is right, the conclusion, performance and object of a contract must be lawful, so any clause which is not lawful and/or applicable due to any new caselaw development will be void. Sometimes those clauses are correct at the time of going to print..
    “The philosophers have only interpreted the world, in various ways. The point, however, is to change it.” Karl Marx
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    Diamond Member Vanash Naick's Avatar
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    Just a small note on void and voidable(they don’t have the same legal implications)
    I use the illustration of a marriage.
    A void marriage never comes into existence as it is void ab initio(the position is exactly as it would have been had the marriage never been concluded) whereas a voidable marriage remains in force until it is dissolved by a court order.
    Now,, with the law of contract, it will defend on how you argue, the plaintiff will always argue differently from the defendant.
    A void contract never comes into existence whereas a voidable contract remains in force until it is dissolved by a court.
    From the way I perceive this, that one clause is void ab initio and therefore does not come into existence. Now, remember, in law we have the “audi alteram partem rule” which means that there are two sides to a story. So both sides will equal vigour will argue their case on how they perceive it But the court is the final decision maker, if that makes any sense.

    So, in the final analysis with the law of contract you may argue that it’s not void , I may argue that it’s void, but it’s the court that will finally decide whether it’s enforceable or not. A lot people enter into contracts such as lease agreements, thinking that this mere act is sufficient protection, but then, when either party breaches it, the only way that it can be enforced or the only way that you can sue for breach of contract is to actually go to court!
    “The philosophers have only interpreted the world, in various ways. The point, however, is to change it.” Karl Marx
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    Site Caretaker Dave A's Avatar
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    What I find interesting in this "severance of invalid clause" discussion is years ago you needed to have a severability clause in the contract, otherwise a problematic clause could (and sometimes did) invalidate the entire contract! From Anthony's posts I gather that severability is applicable to any contract pretty much by default nowadays (which certainly makes a lot of sense and is an improvement i.m.o).
    The trouble with opportunity is it normally comes dressed up as work.

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