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Settlement agreements - Part 2

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From a contract law perspective

In part two of dealing with settlement agreements we set out some basic elements of contract law that remain relevant in labor contracts and specifically settlement agreements.

1. The party relying on the agreement bears the onus to show the Court that:-
i) an agreement is in existence,
ii) it was made voluntary,
iii) and that it was made with full knowledge of its terms and implications.

GOLIN t/a GOLIN ENGINEERING v CLOETE (1996) 17 ILJ 930 (LCN)

2. For an agreement to be in existence there needs to be consensus between the parties to the agreement. Actual agreement (consensus ad idem) is the primary basis of a contract and this approach is known as the intention theory or consensual theory.

SAAMBOU-NASIONALE BOUVERENIGING V FRIEDMAN 1979 (3) SA 078 (A)

3. Consensus is absent when there is an error or mistake. It is trite law that any error that excludes consensus is material. Where a party is mistaken as to the contents of the obligations that the parties wish to create, any mistake arising there from is material.

GEORGE V FAIRMEAD (PTY)LTD 1958 (2) SA 465 (A)
DU TOIT V ATKINSONíS MOTORS BPK 1985 (2) SA 889 (A)

4. A contract does not come into existence when there is an absence of intention to be legally bound (animo contrahendi).

MONDORP EINDOMSAGENTSKAP (EDMS) BPK V KEMP EN DE BEER 1979 (4) SA 74 (A)

5. A party escapes contractual liability, on the basis of the reliance theory, where they laboured under a mistake that is material and their mistake is reasonable. A mistake is reasonable when induced or caused by misrepresentation and such representation is either legally unacceptable or contra bonos mores.

6. A mistake is also deemed reasonable where the other party fails to remove an incorrect impression. A duty to speak arises where the misrepresentor knows, or reasonably ought to know that the other party labours under a mistake.

SONAP PETROLEUM (SA)(PTY) LTD V PAPPADOGIANIS 1992 (3) SA 234 (A)

7. Where the misrepresentor, before the conclusion of the contract, creates an impression that is in direct conflict with the agreement he seeks to enforce, a duty to speak arises. If the misrepresentor had no good reason to believe that the other party would have assented to the contract had he known of the discrepancy, he would have a legal duty to point out the discrepancy.

DU TOIT V ATKINSONíS MOTORS BPK 1985 (2) SA 889 (A)

8. The contents of the agreement are an imperative indicator of whether an agreement was entered into freely and if it truly constitutes a settlement agreement and if it is indeed in full and final settlement.

FIRST NATIONAL BANK LTD (WESBANK DIVISION) V MOOI NO & OTHERS (2009) 30 ILJ 336 (LC)

9. The mere wording within a contract, saying in Full and Final settlement does not in itself, constitute a waiver of rights.

MOFOKENG AND KSB PUMPS (2003) 24 ILJ 1756 (BCA)

10. For the elements of duress required in setting aside or rescinding a contract, one or more of five elements must be present.
i) Actual violence or reasonable fear.
ii) The fear must be caused by the threat of some considerable evil to the party or his family.
iii) It must be a threat of an imminent or inevitable evil.
iv) The threat or intimidation must be contra bonos mores.
v) The moral pressure used must have caused damage

BROODRYK V SMUTS NO 1942 TPD 47

11. In the alternative to duress, undue influence might have been exercised over the person. Undue influence is an accepted doctrine in South African law.

If a party proves undue influence was exerted the contract must be set aside. The demonstration of undue influence is ascertained if one of the following factors exist:

i) the other party exercised influence over him
ii) that this influence weakened his powers of resistance and made his will pliable
iii) that the other party exercised his influence in an unscrupulous manner in order to induce him to consent to a transaction which firstly was to his detriment and secondly which he with normal free will would not have concluded.

PRELLER AND OTHERS V JORDAAN 1956 (1) SA 483 9A)
PATEL V GROBBELAAR 1974 (1) SA 532 (A)

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