THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 183/17

In the matter between:

MOHAMED’S LEISURE HOLDINGS (PTY) LTD
APPELLANT

and

SOUTHERN SUN HOTEL INTERESTS (PTY) LTD
RESPONDENT

Neutral Citation:
Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun
Hotel Interests (Pty) Ltd (183/17) [2017] ZASCA 176
(1 December 2017)
Coram:
Shongwe AP, Willis and Mathopo JJA and Meyer and
Ploos van Amstel AJJA
Heard:
21 November 2017
Delivered:
1 December 2017
Summary:
Contract law – cancellation clause not unfair or
unreasonable – doctrine of pacta sunt servanda to be enforced and applied –
impermissible to infuse principles of ubuntu and good faith in the
circumstances.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from:  Gauteng Local Division, Johannesburg (Van Oosten J,
sitting as court of first instance):
1 The appeal is upheld with costs, such costs to include the costs of two
counsel.
2 The order of the high court is set aside and substituted with the following:
„2.1 The respondent, together with all those persons who occupy the
property fully described as Remaining Extent of Erf 13164 Cape Town
(hereinafter referred to as „the Property‟) by virtue of the respondent's
occupation thereof are to vacate the property, on or before 31 March 2018.
2.2 Should the respondent or any persons occupying the property through
or under it fail to comply with the order granted in accordance with the
order in par 2.1 above, that the sheriff of the above Honourable Court or his
lawful deputy is authorised forthwith to evict the respondent and all
persons/entities occupying the property through/under it.‟
______________________________________________________________

JUDGMENT
______________________________________________________________

Mathopo JA (Shongwe AP, Willis JA and Meyer and Ploos van Amstel
AJJA concurring):

[1] This is an appeal against the judgment of the Gauteng Local Division of
the High Court, Johannesburg (Van Oosten J) (the high court). It arises from
an application in which the appellant, Mohamed‟s Leisure Holdings (Pty) Ltd,
the owner and lessor in terms of a written lease agreement (the agreement) of
immovable property known as Remaining Extent of Erf 13164, sought an
order for the eviction of the respondent, Southern Sun Hotel Interests (Pty)
Ltd. The eviction was sought on the basis that the respondent had breached
clause 20 of the agreement by failing to make payment of the rental on due
date. Although the high court accepted that the respondent had breached the

agreement, it declined to grant an order for eviction. It reasoned that the
implementation of the cancellation clause would be manifestly unreasonable,
unfair and offend public policy. In doing so it concluded that the common law
principle, pacta servanda sunt, should be developed by importing or infusing
the principles of ubuntu and fairness in the law of contract. The appeal against
its order is with the leave of the high court.

[2] I pause to state that the high court in arriving at its decision was aware
of the decision of this court in Venter v Venter 1949 (1) SA 768 (A), which
dealt with the principle of pacta sunt servanda. The high court held that the
judicial precedent set in Venter is no longer good law and cannot be applied in
the new Constitutional era. More about this aspect will follow later in the
judgment.

[3] At this stage it is necessary to set out in the paragraphs that follow the
relevant factual background underpinning the respondent‟s defence.

[4] The original lease agreement between the parties was concluded in
1982 between the parties‟ predecessors namely, Cape Town Holiday Inn (Pty)
Ltd, as the lessor and Rennies Hotel and Liquor Holdings Ltd, as the lessee.
The agreement was varied by the parties over the years. There were about
four subsequent written agreements entered into, varying the identities of the
parties, duration of the agreement and the amount of rental payable. On 18
July 1996 the appellant purchased the property and it became the registered
owner of the premises. On or about 1 November 2001, the appellant
concluded a written lease agreement with the respondent as the lessee in
respect of the property. The new period of the agreement commenced on 1
January 2002 until 31 December 2011, with an option to renew the agreement
for a further period of 10 years, 1 January 2012 to 31 December 2021, which
option had been exercised. The rental payable was in the amount of
R566 988.38 (inc VAT), being the rental payable during December 2011 and
subsequently escalated at the rate of 7% per annum, compounded, with effect
from 1 January 2012 and thereafter on 1 January of each successive year of
the new option period.

[5] It was a material term of the agreement that should the respondent fail
to pay the rental on due date, then the appellant would be entitled to cancel
the lease and retake possession of the property. It is common cause that the
respondent and its predecessors have been occupying the premises for
purposes of operating commercially as a hotel since 1982. This business has
been functioning for an uninterrupted period of approximately 35 years. The
respondent‟s hotel is operated and managed as part of eighteen Garden
Court branded hotels in what is known as „the hospitality industry‟ and it forms
part of the greater Tsogo Sun Hotel Group brand of hotels. The nature of the
business of the respondent is hotel accommodation across all market
segments, namely corporate, government, leisure, standard tour operators,
aircrew, conferencing and food and beverage services.

[6] Clause 4.5 of the agreement which deals with the respondent‟s
obligation to pay rent provides:
„4.5 The LESSEE shall make monthly provisional rent payments to the LESSOR by
not later than the seventh day of each month…‟
The appellant‟s right to terminate the agreement and take possession of the
property is set out in clause 20 of the agreement headed „Breach‟ and it
provides:
20.1
Should the LESSEE
20.1.1 fail to pay the rent on due date; or
20.1.2 contravene or permit the contravention of any one or more of the conditions of
this agreement and fail to remedy such breach within 30 (THIRTY) days after receipt
by it of notice in writing calling upon it to remedy such breach; or
20.1.3 allow a judgment against it to remain unsatisfied or unopposed for a period of
seven days:
Then the LESSOR shall be entitled to terminate this lease and to take possession of
the property.‟

[7] During the period of the lease the respondent maintained regular and
prompt payment of the rental in terms of the agreement. However, in June
2014 the respondent failed to make payment on the 7th, as stipulated in the

agreement. On 20 June 2014 when payment was not forthcoming, the
appellant wrote a letter to the respondent and afforded it a period of five days
within which to remedy the breach. In that letter the appellant pertinently
warned the respondent that should it fail to pay rent on due date in the future,
no notice to remedy the breach would be given and the agreement will be
cancelled forthwith and the respondent will be required to vacate the premises
with immediate effect. On 23 June 2014 the respondent‟s bankers, Nedbank,
admitted that it was at fault in not transmitting the payment to the appellant on
due date. The letter stated as follows:
„We wish to confirm that non-payment of the rental amount stated herein was caused
as a result of a change in Nedbank processes which impacted the payment run for
01 June 2014 and by no omission of the client.‟

[8] According to the respondent, as a result of this error, during the next
period of three months ie July to September 2014, it monitored its bank
statements by ensuring that future payments were debited from its account
promptly by the 7th of each month. During the month of October, the rental
was debited from the respondent‟s account on 6 October 2014. However, on
7 October 2014, through no fault of the respondent, Nedbank again omitted to
transfer the rental amount due to the appellant. The explanation given by
Nedbank was that the funds were credited into a wrong account instead of the
appellant‟s account. As a result of this breach, the appellant's attorneys
invoked the provisions of clause 20 of the agreement and addressed a notice
of cancellation of the lease agreement to the respondent on 20 October 2014
and afforded it until 31 October 2014 to vacate the premises. Once again, as
in the month of June, Nedbank accepted responsibility for the delay and
stated that due to a „processing error‟, it transferred the money from the
respondent's account, not to the appellant's account but to an incorrect bank
account. The rent was eventually paid on 21 October 2014. In an attempt to
demonstrate its bona fides the respondent transferred an amount of
R3 844.65 representing interest to the appellant's account. In response to the
cancellation of the lease and the threatened eviction, the respondent‟s
attorney informed the appellant's attorneys that cancellation of the lease was
unreasonable because the breach occurred as a result of its banker‟s error

and contended that the purported cancellation was contrary to the concepts of
ubuntu, good faith and reasonableness as enshrined in the Constitution.

[9] It is against this background that I now turn to construe the relevant
implications of clause 20 with a view to determine whether the respondent's
contention has merit or not. The high court correctly found that the appellant
was entitled in terms of clause 20 to cancel the agreement on the ground of
non-payment of the October rental on due date and that in itself triggered the
right to be restored into possession of the leased property. The high court
further found that no hardship is caused by the impugned clause and that the
respondent agreed to the specified time for the payment of monthly rentals,
which the respondent complied with easily. The high court characterised the
issue to be whether in the circumstances of this case, the implementation of
the cancellation clause contained in the agreement will be manifestly
unreasonable and offend against public policy.

[10] The parties were ad idem that this was a proper characterisation of the
issues. The appellant contended before the high court that, on a proper
construction of clause 20, once it is established that the lessee had committed
a material breach entitling it to cancel the agreement, the high court was
obliged to enforce the cancellation of the agreement and grant an order for
the eviction of the respondent from its premises.

[11] In this court, the case advanced for the appellant is that the respondent
committed a material breach of the agreement when it defaulted in paying
rental on due date and it was thus entitled to cancel the agreement, as set out
in clause 20. It was further emphasised that the appellant did not, after the
first breach in June, cancel the agreement. Furthermore the appellant
pertinently cautioned the respondent that a further breach would result in the
cancellation of the agreement. Counsel for the appellant also submitted that,
although the appellant was entitled to cancel the agreement forthwith when
the respondent defaulted in its payment, the appellant did not cancel nor
communicate its intention to cancel immediately. Instead it waited for a period
of 12 days to lapse before cancelling the agreement. It was submitted that if

courts were to embark on the course of action, claimed by the respondent, it
would be imposing its own sense of fairness and make contracts for the
parties.

[12] Counsel for the respondent contended that even though it accepts that
the payment was late, it disputed the appellant's entitlement to cancel the
agreement on the ground of non-payment of the October rental on due date
and seek an eviction order. The impugned clause, it was submitted, should be
interpreted to mean that parties to a contract ought to act in good faith. This
construction, according to the respondent, rendered the clause flexible to
accommodate the circumstances where a party is prevented by factors
beyond his control from complying with the requirements of the clause. First, it
was argued that its implementation is so manifestly unreasonable that it
offends public policy and secondly, the clause is unreasonable because it
insists on compliance with its provisions regardless of the circumstances
which prevented compliance thereof. It was urged upon us that public policy is
informed by the concept of good faith, ubuntu, fairness and simple justice
between individuals. The respondent contended that we are obliged, in
construing the impugned clause, to promote the spirit, purport and objects of
the Bill of Rights as contemplated in s 39(2) of the Constitution. In other words
we must interpret it through the prism of the Bill of Rights. In essence, the
case advanced for the respondent is that the principle of pacta sunt servanda
is not a sacred cow that should trump all other considerations.

[13] The main thrust of the respondent's argument is that having regard to
the duration of the lease, the circumstances leading to the alleged breach and
the timeous efforts by the respondent to purge the default, it cannot be said
that it adopted a supine attitude. It was argued that because the respondent
relied on Nedbank to transfer the rental amount to the appellant on due date,
it was impossible for the respondent to comply with the impugned clause
given the fact that it had no control over the Nedbank‟s internal system. It was
submitted that by reason of the fact that in the past three months preceding
the second breach, the respondent regularly monitored and checked its bank
statements to ensure that payments were made on time to avoid the breach

that occurred in June. Thus, it was contended, the implementation of the
impugned clause in the circumstances of this case is not only objectively
unreasonable but it is also unfair and contrary to public policy.

[14] The respondent relied essentially on the judgment of the Constitutional
Court in Barkhuizen v Napier1 where Ngcobo J writing for the majority, said
the following:
„The second question involves an inquiry into the circumstances that prevented
compliance with the clause. It was unreasonable to insist on compliance with the
clause or impossible for the person to comply with the time limitation clause.
Naturally, the onus is upon the party seeking to avoid the enforcement of the time
limitation clause. What this means in practical terms is that once it is accepted that
the clause does not violate public policy and non-compliance with it is established,
the claimant is required to show that, in the circumstances of the case there was a
good reason why there was a failure to comply.‟

[15] Barkhuizen shed light on the manner in which the question of
substantive fairness of a contract (or a contractual clause) is to be
approached in its application of the contractual doctrine of the public policy
test. The Constitutional Court introduced a second (subjective) stage to the
public policy test in terms of which a contract (or contractual clause) must not
only be objectively reasonable in order for it to be valid but its effect must also
be subjectively reasonable in the particular circumstances in order for it to be
enforceable. This approach facilitates a more purposive adjudication and a
substantively fair outcome for contracting parties.

[16] Reverting to the circumstances leading to the breach of the agreement
as well as Nedbank‟s admission that it was remiss, the argument for the
respondent was that on the authority of the quoted passage in Barkhuizen,
once it is established that there were circumstances which prevented
compliance with the contractual provisions, insisting on compliance thereof
would be unfair and unreasonable. The spirit of good faith, ubuntu and

1 Barkhuizen v Napier [2007] ZACC 5; 2007 (5) SA 323 (CC) at para 58.

fairness require that parties should take a step back, reconsider their position
and not snatch at a bargain at the slightest contravention.

[17] In support of its argument it called to aid the decision of the
Constitutional Court in Everfresh Market Virginia (Pty) Ltd v Shoprite
Checkers (Pty) Ltd [2011] ZACC 30; 2012 (1) SA 256 (CC), where Yacoob J
writing for the minority, said the following:
„Good faith is a matter of considerable importance in our contract law and the extent
to which our courts enforce the good faith requirement in contract law is a matter of
considerable public and constitutional importance. The question whether the spirit,
purport and objects of the Constitution require courts to encourage good faith in
contractual dealings and whether our Constitution insists that good faith requirements
are enforceable should be determined sooner rather than later. Many people enter
into contracts daily and every contract has the potential not to be performed in good
faith. The issue of good faith in contract touches the lives of many ordinary people in
our country.
The values embraced by an appropriate appreciation of ubuntu are also relevant in
the process of determining the spirit, purport and objects of the Constitution. The
development of our economy and contract law has thus far predominantly been
shaped by colonial legal tradition represented by English law, Roman law and
Roman Dutch law. The common law of contract regulates the environment within
which trade and commerce take place. Its development should take cognisance of
the values of the vast majority of people who are now able to take part without
hindrance in trade and commerce. And it may well be that the approach of the
majority of people in our country place a higher value on negotiating in good faith
than would otherwise have been the case. Contract law cannot confine itself to
colonial legal tradition alone.‟

[18] In contrast to the minority, the majority judgment of Moseneke DCJ
declined to deal with the issue of good faith because Everfresh failed to raise
this constitutional argument before the high court and this court. The majority
was rightly concerned that if the Constitutional Court were to grant leave, it
would be in the undesirable position of sitting as a court of first and last
instance. Moreover, it would not have had the benefit of the arguments before
the high court and in this court. Consequently it dismissed the application.

[19] Finally, it was submitted that the prejudice that the respondent will
suffer by the cancellation is far greater than that of the appellant. The upshot
of the respondent‟s argument is that the conduct of the appellant ignores the
reality that the respondent and its predecessors have been occupying the
premises since 1982 and the respondent employs 91 permanent employees,
plus casual staff. It also provides indirect employment to secondary staff and
service providers such as Bidvest and other companies. In essence, it was
contended that evicting the respondent would not only affect its reputation in
the hospitality industry, but it would also lead to job losses. Consequently, it
was submitted that the principle of pacta sunt servanda should be relaxed and
clause 20 should not be enforced.

[20] It was furthermore submitted that if the appellant was bona fide, it
would have notified the respondent of the breach and required the respondent
to rectify the non-payment within a short space of time (which the respondent
did in any event) instead of summarily cancelling the agreement. The
submission made is that the respondent would have made payment and the
implementation of clause 20 would have been ameliorated without any
hardship to the parties.

[21] What must be decided in this case is whether the implementation of
clause 20 is manifestly unreasonable or unfair to the extent that it is contrary
to public policy. To answer that question the enquiry must be directed at the
objective terms of the agreement, in the light of the relative situation of the
parties. This, without doubt, calls for a balancing and weighing-up of two
considerations, namely the principle of pacta sunt servanda and the
considerations of public policy, including of course constitutional imperatives.

[22] Before these arguments are considered, it is necessary to place the
issue in its proper perspective with regard to the legal principles governing
contractual obligations. This court in Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1
(AD) said:

„The power to declare contracts contrary to public policy should, however, be
exercised sparingly and only in the clearest of cases, lest uncertainty as to the
validity of contracts result from an arbitrary and indiscriminate use of the power. One
must be careful not to conclude that a contract is contrary to public policy merely
because its terms (or some of them) offend one‟s individual sense of propriety and
fairness.‟

[23] The privity and sanctity of contract entails that contractual obligations
must be honoured when the parties have entered into the contractual
agreement freely and voluntarily. The notion of the privity and sanctity of
contracts goes hand in hand with the freedom to contract. Taking into
considerations the requirements of a valid contract, freedom to contract
denotes that parties are free to enter into contracts and decide on the terms of
the contract. This court in Wells v South African Alumenite Company 1927 AD
69 at 73 held as follows:
„If there is one thing which, more than another, public policy requires, it is that men of
full age and competent understanding shall have the utmost liberty of contracting,
and that their contracts, when entered into freely and voluntarily, shall be held sacred
and enforced by the courts of justice.‟

[24] Parties enter into contractual agreements in order for a certain result to
materialise. The fact that parties enter into an agreement gives effect to their
constitutional right of freedom to contract, however, the carrying out of the
obligations in terms of that contractual agreement relates to the principle of
pacta sunt servanda. In Brisley v Drotsky [2002] ZASCA 35, 2002 (4) SA 1
(SCA) Cameron JA held that judges must exercise „perceptive restraint‟ lest
contract law becomes unacceptably uncertain. Cameron JA noted that the
judicial enforcement of terms, as agreed to, is underpinned by „weighty
considerations of commercial reliance and social certainty‟. In the majority
judgment in Barkhuizen, Ngcobo J endorsed Cameron JA‟s broader
conception of the law of contract as reflected in Brisley and affirmed that the
Constitution requires parties to honour contractual obligations that were freely
and voluntarily undertaken. The court further went on to say:

„While it is necessary to recognise the doctrine of pacta sunt servanda, courts should
be able to decline the enforcement of … a clause if it would result in unfairness or
would be unreasonable.‟

[25] In Bredenkamp & others v Standard Bank of South Africa Ltd, [2010]
ZASCA 75; 2010 (4) SA 468 (SCA) Harms DP interpreted Ngcobo J‟s
reference to public policy importing notions of „fairness, justice and
reasonableness‟ as not extending these notions beyond instances in which
public policy considerations found in the Constitution or elsewhere would be
implicated:
„This all means that, as I understand the judgment, if a contract is prima facie
contrary to constitutional values questions of enforcement would not arise. However,
enforcement of a prima facie innocent contract may implicate an identified
constitutional value. If the value is unjustifiably affected, the term will not be enforced.
An example would be where a lease provides for the right to sublease with the
consent of the landlord. Such a term is prima facie innocent. Should the landlord
attempt to use it to prevent the property being sublet in circumstances amounting to
discrimination under the equality clause, the term will not be enforced.‟
Harms DP went on to say:
„With all due respect, I do not believe that the judgment held or purported to
hold that the enforcement of a valid contractual term must be fair and
reasonable even if no public policy consideration found in the Constitution or
elsewhere is implicated. Had it been otherwise I do not believe that Ngcobo J
would have said this (para 57):
“Self-autonomy, or the ability to regulate one‟s own affairs, even to one‟s own
detriment, is the very essence of freedom and a vital part of dignity. The
extent to which the contract was freely and voluntarily concluded is clearly a
vital factor as it will determine the weight that should be afforded to the values
of freedom and dignity. The other consideration is that all persons have a right
to seek judicial redress.”‟

[26] Davis J made a similar point in Mozart Ice Cream Franchises (Pty) Ltd
v Davidoff & another [2008] ZAWCHC 118; 2009 (3) SA 78 (C) at 85A, when
he held that „[m]anifestly, without this principle, the law of contract would be

subject to gross uncertainty, judicial whim and an absence of integrity
between the contracting parties‟. And in the same vein Brand JA remarked in
Fourways Haulage SA (Pty) Ltd v SA National Roads Agency Ltd 2009 (2) SA
150 (SCA) at 158E-F that „[a] legal system in which the outcome of litigation
cannot be predicted with some measure of certainty would fail in its purpose‟.

[27] In Barkhuizen, Ngcobo J said:
„If it is found that the objective terms [of the contract] are not inconsistent with public
policy on their face, the further question will then arise which is whether the terms are
contrary to public policy in the light of the relative situation of the contracting
parties.‟2 He goes on to say that where the enforcement of a time-limitation
clause on the basis that non-compliance with it was caused by factors beyond
his or her control, it is inconceivable that a court would hold the claimant to
such a clause.3 Ngcobo J considered the principle of lex non cogit ad
impossibilia to be relevant in this regard.4

[28] The following facts are critically relevant in the present case in applying
the judgment of the Constitutional Court in Barkhuizen: (a) the terms of the
contract are not, on their face, inconsistent with public policy; (b) the relative
position of the parties was one of bargaining equality; the parties could have
negotiated a clause in terms of which the respondent was given notice to
remedy a breach before the contract was cancelled; and (c) the performance
on time was not impossible because the respondent could have diarised well
ahead of time to monitor this important monthly payment and it could have
effected other means of payment such as an electronic funds transfer. Against
this background, it cannot be against public policy to apply the principle of
pacta sunt servanda in this case.

[29] In this case there is no complaint that the impugned clause is
objectively unconscionable. No allegation is made that the lease agreement
was not concluded freely. There is also no evidence or contention advanced

2 Barkhuizen v Napier (supra) para 59.
3 Para 73.
4 Para 75.

by either of the parties that there was an unequal bargaining power between
them. On the contrary, there is ample evidence that the parties contracted
with each other on the same equal footing. In other words it cannot and
neither was the respondent's case that there was an injustice which may have
been caused by the inequality of bargaining power. Evidently the respondent
was at all material times aware or must have been aware of the implications
of the cancellation clause. When the respondent committed the first breach in
June 2014, its attention was drawn to the fact that in the event of a further
breach in the future, the appellant will invoke the provisions of clause 20 and
cancel the agreement and evict them from the premises. It is disingenuous on
the part of the respondent to now contend that by cancelling the agreement
and not affording them an opportunity to remedy the breach, the appellant
wanted to snatch at a bargain. The facts demonstrate that the appellant did
not cancel the agreement or communicate its intention to do so immediately
upon non-payment of the October rental. It waited for a period of 12 days to
lapse before it cancelled the agreement.

[30] The fact that a term in a contract is unfair or may operate harshly does
not by itself lead to the conclusion that it offends the values of the Constitution
or is against public policy. In some instances the constitutional values of
equality and dignity may prove to be decisive where the issue of the party‟s
relative power is an issue. There is no evidence that the respondent‟s
constitutional rights to dignity and equality were infringed. It was
impermissible for the high court to develop the common law of contract by
infusing the spirit of ubuntu and good faith so as to invalidate the term or
clause in question.

[31] Nedbank acted as the respondent's agent to implement the mandate
conferred upon it by transferring the money on due date to the appellant.
Before the appellant could cancel the lease, there was no obligation on its
part to either issue a demand/ultimatum requiring the respondent to make
payment. It was also not the appellant's duty to inform the respondent of its
default. I do not think that such a duty can be imposed on the appellant. The
terms of the agreement made it clear that the appellant was entitled to enforce

clause 20 in the event that the respondent fails to pay the rent on due date. A
person who promised to pay rental on a certain date and upon failure to do
so, faces the possibility of an eviction, cannot be heard to say he was not
warned; he should remember his obligation. In this case the respondent was
forewarned in June that any default in payment would result in the
cancellation of the lease and possible eviction. This notwithstanding it failed to
comply with its obligation.

[32] The result may well be unpalatable to the respondent. It must therefore
bear the consequences of its agent‟s (bank) failure in paying the October
rental on due date. Its defence was clearly to restrict the lawful reach of the
contract and to limit what can be regulated by way of a contractual agreement
between parties, in circumstances where the terms of the contract were clear
and unambiguous. In this case the parties freely and with the requisite animus
contrahendi agreed to negotiate in good faith and to conclude further
substantive agreements which were renewed over a period of time. It would
be untenable to relax the maxim pacta sunt servanda in this case because
that would be tantamount to the court then making the agreement for the
parties.

[33] In all the circumstances of this matter, it would be appropriate for the
court to include in its order a notice period of three months in which to vacate
the property. In order to avoid any confusion and taking into account the time
of year when this judgment will be handed down, it seems best to fix the date
upon which the respondent is to vacate the property as 31 March 2018.

[34] For these reasons it is ordered that:
1 The appeal is upheld with costs, such costs to include the costs of two
counsel.
2 The order of the high court is set aside and substituted with the following:
„2.1 The respondent, together with all those persons who occupy the
property fully described as Remaining Extent of Erf 13164 Cape Town
(hereinafter referred to as „the Property‟) by virtue of the respondent's
occupation thereof are to vacate the property, on or before 31 March 2018.

2.2 Should the respondent or any persons occupying the property through
or under it fail to comply with the order granted in accordance with the
order in par 2.1 above, that the sheriff of the above Honourable Court or his
lawful deputy is authorised forthwith to evict the respondent and all
persons/entities occupying the property through/under it.‟

________________________
R S Mathopo
Judge of Appeal

APPEARANCES:

For appellant:
N A Cassim SC

S Freese

Instructed by:

Dockrat Inc., Johannesburg

Honey Attorneys Inc., Bloemfontein

For respondent:
M C Erasmus SC

W T B Rigard

Instructed by:

Fourie van Pletzen Inc., Constantia Kloof

Symington & De Kok, Bloemfontein
SUPREME COURT OF APPEAL SOUTH AFRICA

MEDIA SUMMARY - JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

FROM
The Registrar, Supreme Court of Appeal

DATE
1 December 2017

STATUS
Immediate

Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd
(183/17) [2017] ZASCA 176

Please note that the media summary is for the benefit of the media and does not form part of
the judgment of the Supreme Court of Appeal.

Today, the Supreme Court of Appeal upheld an appeal brought by the appellant, Mohamed’s Leisure
Holdings (Pty) Ltd, against the judgment of the Gauteng Local Division, Johannesburg (Van Oosten J)
(court a quo). The issue at the centre of the appeal concerned the question whether the common law
maxim pacta sunt servanda should be developed to infuse the law of contract with the Constitutional
values of ubuntu, fairness and good faith.

The appeal stemmed from the following factual background. On or about 1 November 2001, the
appellant concluded a written lease agreement with the respondent, Southern Sun Hotel Interests
(Pty) Ltd, as the lessee in respect of immovable property known as Remaining Extent of Erf 13164. In
terms of the lease agreement, the respondent shall make monthly provisional rent payments to the
appellant by not later than the 7th day of each month. During the period of the lease, the respondent
maintained regular and prompt payment of the rental in terms of the agreement. However, in June
2014 the respondent failed to make payment on the 7th, as stipulated in the agreement. On 20 June
2014 when payment was not forthcoming, the appellant wrote a letter to the respondent and afforded
it a period of five days within which to remedy the breach. In that letter the appellant pertinently
warned the respondent that should it fail to pay rent on due date in the future, no notice to remedy the
breach would be given and the agreement will be cancelled forthwith and the respondent will be
required to vacate the premises with immediate effect. Thereafter, the breach was remedied by the
respondent.

During the month of October, the rental was debited from the respondent’s account on 6 October
2014. However, on 7 October 2014, the respondent’s bank omitted to transfer the rental amount due
to the appellant. As a result of this breach, the appellant's attorneys addressed a notice of
cancellation of the lease agreement to the respondent on 20 October 2014 and afforded it until 31

October 2014 to vacate the premises. As a result, the appellant approached the court a quo seeking
an eviction order on the basis that the respondent was in breach of the lease agreement by failing to
make rental payment on due date.

In the court a quo, it was held that the appellant was entitled to cancel the lease agreement on the
ground of non-payment of the October rental on due date and that in itself triggered the right to be
restored into possession of the leased property. However, it declined to grant an order for eviction. It
reasoned that the implementation of the cancellation clause would be manifestly unreasonable, unfair
and offend public policy. In doing so it concluded that the common law principle, pacta servanda sunt,
should be developed by importing or infusing the principles of ubuntu and fairness in the law of
contract.

On appeal, the SCA held that the fact that a term in a contract is unfair or may operate harshly does
not by itself lead to the conclusion that it offends the values of the Constitution or is against public
policy. In some instances the constitutional values of equality and dignity may prove to be decisive
where the issue of the party’s relative power is an issue. There is no evidence that the respondent’s
constitutional rights to dignity and equality were infringed. It was therefore impermissible for the court
a quo to develop the common law of contract by infusing the spirit of ubuntu and good faith so as to
invalidate the term or clause in question. It further reasoned that it would be untenable to relax the
maxim pacta sunt servanda in this case because that would be tantamount to the court then making
the agreement for the parties.

As a result, the appeal was upheld with costs.