IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

REPORTABLE
CASE NO 724/99

In the matter between

ABSA BANK LIMITED

Appellant

and

MARTHA MARIA VAN DE VYVER N.O.

Respondent

_____________________________________________________________

CORAM:
HOWIE, ZULMAN et NAVSA JJA

_____________________________________________________________

Date heard:
25 February 2002

Delivered:
22 March 2002

Offers of payment in full settlement.
_____________________________________________________________

J U D G M E N T
_____________________________________________________________

HOWIE JA

HOWIE JA
[1] This case is about an amount paid by cheque, professedly in full and
final settlement.   The respondent is executrix of her deceased husband's
estate.   The appellant is the successor in title of the erstwhile Trust Bank
Limited, having acquired its assets and assumed its liabilities.   When the
deceased died in October 1996 his debts included the respective sums owing
on two overdrawn current accounts at Trust Bank, Grahamstown.   To secure
those debts (and other amounts he owed Trust Bank) the deceased had
caused several mortgage bonds to be registered over landed property he
owned at Port Alfred.
[2] To recover what was owing on the current accounts the respondent
sued the appellant in the High Court at Grahamstown.   In her defence the
respondent pleaded that the claim for payment of the accounts had been

settled by the appellant's acceptance of an offer of compromise.   The
appellant replicated that there had been no existing dispute susceptible of
settlement, that it had disclaimed having accepted the cheque in question in
settlement and that the alleged settlement was in conflict with a non-
variation clause in the mortgage bonds.
[3] The learned trial Judge (Froneman J) concluded that a pre-existing
dispute was not an essential requirement for settlement and that the alleged
settlement, which was not contrary to the terms of the bonds, had been
effected as alleged.  The claim was therefore dismissed.   The appeal is with
the trial Court's leave.
[4] In presenting his case counsel for the appellant, realistically, did not
persist in the contention that there had been no pre-existing dispute.   The
evidence reveals that the deceased ceded an insurance policy on his own life
to Trust Bank as security in respect of all his indebtedness to it, including the

two overdrawn accounts.   Payment of the premiums and, with them the
policy, had been allowed to lapse.   The respondent blamed the appellant for
this state of affairs and the appellant, posthumously, blamed the deceased.
What is plain is that receipt by the appellant of the policy's proceeds would
have reduced the combined indebtedness on the two accounts considerably.
If nothing else, the quantum of that indebtedness was very much a matter in
dispute when, under cover of a letter dated 16 July 1997, the respondent's
attorney sent the appellant the cheque.
[5] The letter reads as follows:
"i/s:
BOEDEL WYLE JH VAN DE VYVER

REKENINGNOMMER:  04049441385
EN
REKENINGNOMMER:  04049231381
Ons verwys na bogenoemde twee bankrekeninge gehou by u instansie.
'n Metropolitan Lewenspolis, Sertifikaatnommer TL 26714 uitgeneem oor die
lewe van Wyle JH Van de Vyver is aan u bankinstansie gesedeer as sekuriteit ten
opsigte van sy oortrokke fasiliteite by u instansie.   Uitbetaling van hierdie polis is
geweier as gevolg van die feit dat die premies nie tot datum van dood van die
oorledene betaal is nie.   Wyle Mnr JH Van de Vyver het 'n debietorder by u

instansie onderteken ten opsigte van die betaling van die betrokke premies.   Die
onus was op u bankinstansie om toe te sien dat sodanige premies betaal word.

In die lig van bogenoemde word 'n bedrag van R180 000-00 (EEN HONDERD
EN TAGTIG DUISEND RAND) in volle en finale vereffening ten opsigte van
rekeningnommer 04049231381 en rekeningnommer  04049441385 aangebied.

Ons sluit dan hierby ons tjek ten bedrae van R180 000,00 (EEN HONDERD EN
TAGTIG DUISEND RAND) in en sien uit om van u te verneem."

[6] The appellant answered as follows by letter dated 8 August 1997:
"Ondersoek is ingestel om welke rede premies op Metropolitan Polis nie tot
datum van dood betaal is nie.

Pencor Wholesalers CC, rekeningnommer 01-01481115-6 is gedebiteer met
betaling van premies.   Eerste premie ten bedrag van R240-00 is op 1 Maart 1990
gemaak, waarna maandelikse premies ten bedrag van R120-00 gemaak is tot
September 1991 toe rekening in opdrag van oorledene gesluit is.

Indien 'n rekening gesluit word, rus die onus op die kliënt indien daar debietorders
op die rekening deurgaan om alternatiewe reëlings te tref vir betaling van
premies.

Die tjek ten bedrae van R180 000-00 kan dus nie as volle en finale vereffening
beskou word nie aangesien die uitstaande bedrag baie meer beloop.

Ons bevoordeel ons regte deur die tjek op rekeningnommer 04-04944138-5 met
die grootste uitstaande balans in te betaal.

Ons vertrou dat u dit in orde sal vind."

[7] The evidence reveals that the appellant deposited the cheque on
8 August 1997 and applied the proceeds in reduction of what was owing on
the larger of the two overdraft debts.   In short, it appropriated the money.
The record does not establish when the appellant's letter was posted.
Accordingly one cannot conclude that posting preceded deposit.   And there
was at no stage any offer to return the cheque.
[8] In this regard the appellant's counsel made the concession, both at the
trial and in this Court, that if the respondent's attorney's letter of 16 July
1997 amounted to an offer of compromise then the deposit of the cheque and
the appropriation of its proceeds constituted acceptance of the offer.
[9] The elements of effective acceptance may constitute a question of law
but the question whether those elements have been proved is one of fact.
(Burt, N.O. v National Bank of SA, Ltd. 1921 AD 59 at 62 and Paterson

Exhibitions CC v Knights Advertising and Marketing CC, 1991 (3) SA 523
(A) at 529 C-D.)   Of significance here is that on a material number of
occasions it has been held that where a creditor receives payment offered in
full settlement and keeps the money, such retention is enough to constitute
acceptance and bar proceedings for any balance of the claim notwithstanding
the creditor's efforts to qualify the acceptance.   See Andy's Electrical v
Laurie Sykes (Pty) Ltd 1979 (3) SA 341 (N) and the cases quoted at 343 B-
C.   In Paterson Exhibitions at 529 B-C the correctness of those cases was
not questioned but at 529 C-D, with reference to Burt's case, it was stressed
that although acceptance may usually be inferred from the creditor's
retention of the money, acceptance must always be a question of fact
depending on all the circumstances.   In the latter case, the debtor proposed
settlement by offering one current cheque and five post-dated cheques.   The
creditor accepted the current cheque but not the offer of the others.   The

Court held (at 528 D-F) that there could only have been acceptance if the
offer had been accepted in its entirety.   The creditor's response was
therefore a rejection despite retention of the proceeds of the current cheque.
In the present case, by contrast, there was a simple offer of one cheque the
proceeds of which were retained.  Nothing took the matter outside the ambit
of cases such as Andy's Electrical.   Counsel's concession that acceptance
occurred was, therefore, correctly made.
[10] Turning to the crucial question whether the letter of 16 July 1997 was
an offer of compromise, it is appropriate to begin by observing that
compromise is the settlement of disputed obligations by agreement:
Christie, the Law of Contract in South Africa, 4th edition, 529.   The case law
of particular relevance to payment offered "in full settlement" or "full and
final settlement" begins with, and is mainly centred upon, what was said in
Odendaal v Du Plessis  1918 AD 470 and Harris v Pieters 1920 AD 644.

In Odendaal the defendant's plea in a damages action tendered an amount
"in settlement" of the claim.   The trial court awarded the plaintiff no more
than was tendered and he was ordered to pay costs incurred after the date of
tender.   The question for decision by this Court was whether the tender
afforded the defendant effective protection against an adverse costs order.
Put the other way, did it subject the plaintiff to the risk of such an order?
This entailed examination of the law concerning a tender "in settlement" or
"in full settlement".   After consideration of English and Roman-Dutch
sources it was held that to afford such protection (or carry such risk) a tender
had to be unconditional in the sense that it embodied no condition to which
the creditor could legally object.   The expression "in full settlement" in a
tender inevitably imported the condition that if the creditor accepted the
tender and balance of the claim would be abandoned.   However, this was

not a condition to which the creditor could in law object.   Therefore the
operative effect of the tender was not destroyed by the quoted words.
[11] What is clear is that Odendaal had solely to do with tender as a
procedural question in the context of litigation.   The issue was not whether
or to what extent a tender was an offer which, on acceptance, would give
rise to a compromise, but whether non-acceptance of a tender impacted upon
the matter of costs.   Tender in the procedural sense is distinct from tender or
offer as the necessary precursor to a contract of compromise.   As De
Villiers JA remarked in Harris at 654, with possibly unintended
understatement, the use of the word "tender" in a double sense "is apt to lead
to confusion".   It has.   The extent of the confusion and way to its
eradication have been shown by Professor D Zeffert, "Payments 'In Full
Settlement' ", (1972) 89 SALJ 35 and Professor RH Christie in his quoted

work at 531-533.   Their respective analyses and exposition are clear and
compelling.
[12] It was in the very case of Harris, in the judgment of Innes CJ, that the
confusion originated.   The distinction between the procedural and
contractual meanings of "tender", if I may say so with due deference, was
not entirely clearly maintained.
[13] In Harris two debts were in contention.   One was admitted in full but
liability for the other was denied.   The debtor sent a cheque "in full
settlement" of the first.   When payment was sought in respect of the second,
the debtor denied liability on the strength of his payment having been in full
settlement of all indebtedness.   The trial Judge upheld the debtor's
contention.   Innes CJ, considering that the trial Judge had failed to
distinguish payment from tender (tender being an offer of payment)
proceeded to explain (at 648) the decision in Odendaal as to what tender "in

full settlement" involved.   He then pointed out (at 649) that the words "in
full settlement" might sometimes be used, not to import the condition that
acceptance would do away with the balance of the claim, but rather to
emphasise the tenderer's view as to the extent of his liability.   In the latter
situation the words concerned would, for practical purposes, be meaningless
and any balance of the claim could be claimed despite retention of the
payment.   It also made no difference, said the learned Chief Justice, whether
the tenderer admitted any liability, adding that where all liability was denied
the offer was in essence one of compromise and the position was clearer
still.
[14] Turning from tender in full settlement (obviously in the sense meant
in Odendaal) Innes CJ then discussed (at 649-650) the case where (quite
outside the sphere of litigation) money was sent in full settlement with an
admission of liability as to the extent of the remittance.   Here there were

two possibilities.   It was a question of fact whether the money was sent to
accompany the tender and to be retained if the tender was accepted, or, on
the other hand, whether it was sent in payment of an admitted liability, but
purportedly subject to the condition inherent in the expression "in full
settlement".   In the former situation the principles in Odendaal applied.   In
the latter, additional considerations arose.   Payment (as opposed to tender)
had to be in the exact terms and to the exact extent of the obligation.   The
debtor could not vary the amount of the payment or impose a condition not
in the parties' contract or implied by law.   In the case of payment (i e of an
admitted liability) "in full settlement" the creditor was entitled to ignore
those words.   He therefore had the right to reject the condition they imply,
to keep the payment and to sue for any balance.

[15] There can be little doubt, in my respectful view, that in discussing a
tender in the context of money sent in full settlement the learned Chief
Justice was essentially, if not intentionally, referring to an offer of
compromise.   True, he had earlier in the judgment appeared to confine
compromise to the case where an alleged debtor denied all liability but
nothing suggests that he there intended to formulate a statement of universal
application.   There is, logically, no reason why compromise cannot be
offered and attained even where the debtor has no defence.   In other words
even if the entire alleged indebtedness is owing why can there not be
settlement at a lesser figure?   Moreover the learned Chief Justice concluded
the discussion (at 650) with the observation that whether one was dealing
with a tender or with payment coupled to a non-binding condition, was a
question of the parties' intention as shown by their statements and conduct.
Little, if anything, further was needed, one would think, to convey that the

question envisaged was contractual.   These views on the meaning of the
relevant passages in the judgment of Innes CJ are supported, I consider, by
the case of Paterson Exhibitions.   There, liability was not denied;  some
liability was admitted;  and the amount tendered equated to the full extent of
the alleged debt.   It was held (at 528 B-D) that an offer of compromise had
been made.   And at 529 B-C tender and offer of compromise were referred
to as though they were one and the same thing.
[16] What the judgment of Innes CJ in Harris at 649-650 does serve to
show clearly, in my view, is that the expression "in full settlement" is not in
itself ambiguous but that its effect differs depending on the context in which
it is used: Karson v Minister of Public Works (1996 (1) SA 887 (E) at 895 F-
G.   It is not inherently ambiguous because it always serves to do no more,
legally speaking, than import the condition that on acceptance the creditor
has no further claim to any balance of the debt.   But, as a matter of

language, and with regard to the two different situations in which it is
employed, it is a question of fact whether the payment made is intended to
effect a compromise or to pay an admitted liability.   In the former situation
the condition is binding if the offer is accepted.   If the offer is rejected the
money should be returned.   In the case of a payment of an admitted liability
the condition is not binding.   The creditor may keep the money and sue for
the balance.
[17] To sum up:   the term "tender" should be confined to the procedural
context discussed and explained in Odendaal.   Outside that sphere one is
squarely in the realm of contract and I endorse, with respect, the suggestion
of the learned Judge in the Court below - expressed not in this matter but in
Kei Brick and Tile Co (Pty) v AM Construction 1996 (1) 150 (E) at 159 D-E
- that one is then simply concerned with the principles of offer and
acceptance.

[18] Sending one's creditor a cheque "in full settlement" coupled with a
denial of liability would almost certainly signify an offer of compromise.
But there may be an offer of compromise if there is simply no admission of
liability accompanying the payment.   And one may have to do with an offer
of compromise even if there is an admission of liability.   In the latter
instance the line between an offer of compromise and payment of an
admitted liability would naturally be finer than in the other two cases.   In
Paterson Exhibitions, for example, the admission was, in effect, no more
than that something was owing, but without admitting how much or that the
payment offered represented the admitted indebtedness.
[19] The caveat that requires mention, of course, is that debtors who
express themselves inadequately in their intentions to achieve a compromise
run the risk of having their words interpreted against them:  Christie 533.
There is therefore much to commend in the ways suggested by the learned

author at 533-534 and by Professor Zeffert at 48 of the Law Journal article,
in which clarity can be promoted when offers of compromise are formulated.
[20] Having reached these conclusions there is no point, for present
purposes, in referring to further case law.   The question is whether the
respondent's attorney's letter of 16 July 1997 was an offer of compromise.
[21] The evidence failed to establish what the overall indebtedness on the
two overdrawn accounts was on that date.   All that is on record is that
counsel for the parties, who also appeared in this Court, were agreed that the
total sum, taking the two accounts together (and presumably meaning all
capital and interest) was in the region of about R370 000 or R380 000.
(This was apparently the position during June 1997.)   As mentioned
already, the quantum was in dispute at the time of the letter because the
respondent was of the view, it would seem, that it was the appellant's fault
that it had lost the security of the insurance policy and that it should not look

to the estate for payment of the entire indebtedness.   The proceeds of the
policy, had it been maintained, would have been R150 000 but how soon
after the deceased's death in October 1996 the appellant would have received
payment one cannot determine.   All one can say is that the proceeds would
no doubt have been applied first to the interest and then the capital of the
larger of the two debts and after that, until July 1997, interest (then at 22,25
per cent) would have accrued on a substantially smaller overall total than
was in fact the case.   No evidence and no calculations serve to show,
however, that the sum of R180 000 offered by the respondent in the letter in
issue corresponded closely, or even as a rough approximation, to what the
overall indebtedness on the two accounts would have been had the appellant
employed the insurance proceeds to best advantage.   In other words,
inference from the proved facts cannot demonstrate that R180 000 was the
extent of the estate's undeniable liability at the relevant time.

[22] In addition, not only is there nothing to show that the respondent ever
admitted liability in any specific sum, whether before the letter was written
(or later, if that could be relevant) but the letter itself certainly contains no
admission.   Conceivably it implies that some amount is owing but what it
plainly does not say, is that liability in the sum of R180 000 is admitted or
that this represents the limit of the estate's indebtedness.   The offered sum is
expressed as a round figure and, instead of a culminating sentence indicative
of the debtor's assertion of her own contention, one sees that the writer
awaits the creditor's response.
[23] One is mindful of the comment in Harris (at 649) that where money
accompanies an offer "in full settlement" it is more likely that one has to do
with payment of an admitted liability than with an offer of settlement but,
with respect, adding ready money to the offer could just as well be construed

as an endeavour to make the proposition more attractive and to persuade the
creditor to accept.
[24] Counsel for the appellant contended that the letter was ambiguous in
the light of the contents of a letter of 14 August 1997 in response to the
appellant's letter of 8 August.   The letter of 14 August reads as follows:
"I/S:
BOEDEL WYLE JH VAN DE VYVER: REKENINGNOMMERS 04-
04944138-5 & 04-04923138-1.
Ons verwys na bogenoemde aangeleentheid en u skrywe van 8 Augustus 1997 en
wens as volg te berig.
Die genoemde Metropolitan Polis is aan u bankinstansie gesedeer,   Die feit dat
wyle Mnr JH van de Vyver die betrokke rekening gesluit het waarop die
maandelikse premies per debietorder moes deurgaan is nie 'n kriteria wat in die
geval in aanmerking geneem moet word nie.
Metropolitan lewens sou u bankinstansie verwittig het met betrekking tot die
betaling van die premies aangesien die betrokke polis aan u gesedeer wat toe die
oorledene die rekening in 1991 gesluit het.
Die onus het dus op u bankinstansie gerus om wyle Mnr van de Vyvyer van die
situasie in kennis te stel.
Indien die polis nie aan u bankinstansie gesedeer was nie dan stem ons wel toe dat
die onus op die kliënt gerus het om alternatiewe reëlings te tref vir die betaling
van die premies.
Indien die uitkeer bedrag van die polis in die bedrag van R150 000,00
(EENHONDERD EN VYFTIG DUISEND RAND) aan u bankinstansie uitbetaal
is gedurende November 1996 sou die rente betaalbaar tot op datum gevolglik nie

R7 000,00 tot R8 000,00 per maand beloop het nie.   Die rente betaalbaar op die
uitstaande balans van ongeveer R130 000,00 (EEN HONDERD EN DERTIG
DUISEND RAND) sou dus in die omgewing van R2 300,00 (TWEE DUISEND
DRIE HONDERD RAND) per maand beloop het.
Die bedrag van R180 000,00 (EENHONDERD EN TAGTIG DUISEND RAND)
aan u aangebied in volle en finale vereffening ten opsigte van rekeningnommers
04-04944138-5 en 04-04923138-1 is dus 'n baie realistiese aanbod in die
omstandighede.
Ons het dus geen keuse om die bedrag van R150 000,00 (EEN HONDERD EN
VYFTIG DUISEND RAND) plus die bedrag van R42 300,00 (TWEE EN
VERTIG DUISEND DRIE HONDERD RAND) vir skadevergoeding as gevolg
van rente betaalbaar aan u van u te eis.
Indien ons nie die bedrag van R192 3000,00 (EEN HONDERD TWEE EN
NEGENTIG DUISEND DRIE HONDERD RAND) voor of op die 31ste
Augustus 1997 ontvang nie sal ons sonder verdere kennisgewing dagvaarding
teen u bankinstansie uitreik.”

[25] Nothing in that letter shows, in my view, that the sum of R180 000
represented, either on 14 August or 16 July, the respondent's view of the
estate's indebtedness or that indebtedness in that amount or any other sum
was admitted.   It therefore does not detract from what is said in the letter of
16 July.   If anything it asserts that the respondent's attorney's earlier letter
indeed contained an offer of compromise.

[26] Appellant's counsel suggested that it was uncertain from the letter of
14 August, and particularly the threatened damages claim, whether the
respondent intended to persist with the contention that the overall debt
should be reduced by the extent which the appellant would have benefited
by the insurance proceeds.   However, I think that the respondent's counsel
was correct in submitting that the threatened claim for damages was in the
nature of a conditional counterclaim in the event that the appellant refused to
regard the overdraft indebtedness as finally settled.
[27] In my judgment, it is clear that the respondent's offer of 16 July 1997
was not an offer of payment of an admitted liability.   On the contrary, its
terms, read in the light of the relevant background circumstances, lead to
only one proper construction and that is that it was an offer of compromise.
[28] Finally, there is the contention on behalf of the appellant that if there
was a compromise it was ineffective because what it entailed was an

impermissible variation of the mortgage bonds, all of which stipulated that
no variation of their terms would be valid without the written consent of the
appellant.
[29] Each of the bonds provided security in respect of any sum owing at
any time by the deceased to the appellant.   It was submitted that
compromise, in reducing the amount of the overdraft indebtedness (and thus
reducing the total indebtedness covered by the bonds), varied the bonds by
varying the amount secured and thereby the appellant's entitlement to claim
the latter amount.
[30] There is no substance in this argument.   In the first place the
compromise left the terms of the bonds quite unaltered.   They continued to
apply in the exact same way to any sum owing at any time.   Therefore they
continued to apply to the balance after deduction of the compromise amount.
It is extraordinary that a creditor should complain that the security it holds

has become less necessary than it was before.   Secondly, payment of the
secured indebtedness would also vary the amount secured.   Were the
argument right, payment, remarkably enough, would also be ineffective.
[31] In the result the appeal is dismissed with costs.

__________________
CT HOWIE
JUDGE OF APPEAL

CONCURRED:

ZULMAN  JA
NAVSA    JA