WHAT EXACTLY DOES THE TERM “CONTRACTUAL FREEDOM” MEAN?
The law of contract in South African affords parties the freedom to enter into a contract and who they wish to enter with. The general requirements for a legally enforceable contract are consent, good faith, and the sanctity of contract. The contractual freedom of parties also offers them freedom to choose the terms of their contract.
In summary thus, a person is free to enter into any contract and the parties may choose the terms thereof as they wish. This freedom naturally has its limitations. This article will focus on what the limitations are to contractual freedom.
LIMITATIONS TO CONTRACTUAL FREEDOM AND ENFORCABILITY OF AGREEMENTS
It is important to note that certain agreements have limitations that are prescribed by legislation. This usually takes the form of prescriptive measures in the drafting or content of such agreements. A surety agreement, as example, should be in writing and signed by or on behalf of the surety. The sale of immovable property is also regulated by legislation and the agreements for such sale must comply with same in order to be legally binding and enforceable.
It is an underlying principle of the law of contract that agreements that are concluded should be enforced, but agreements that are in contrast to the interests of the community as a whole cannot be enforced. This may be because they are unlawful or immoral. Such agreements are illegal on the grounds of public policy. Such agreements are regarded as either as void and therefore unenforceable; or as valid but unenforceable.
Public policy has no specific meaning as it represents the public opinion of a certain community at a certain time. Considerations of public policy are to be found in legislation, the common law, good morals or the public interest. Most of the case law about performance against public policy involves immoral or sexually reprehensible conduct. The legislator sometimes expressly or impliedly prohibits the conclusion of certain contracts. Since 1994, public policy in South Africa has been primarily dictated by the values enshrined in the Constitution.
The Court is empowered to strike a contract as being against good morals, but such power is very limited and may only be exercised in very clear contraventions of such good morals. The agreement in entirety must be contrary to public policy. The Courts would in most circumstances honour the agreement on the basis of contractual freedom and the duty to prove that an agreement should be voided for reasons of public policy is on the person or entity pleading same. Courts will however of own volition take note of illegalities in an agreement, ruling it void and unenforceable.
Unfair or unreasonable agreements can be against public policy and void if the issue of public interest is involved is more than just injustice between the parties.
An illegal contract that is void cannot be enforced, however the illegal portion of an otherwise legal agreement can be severed from the rest of the agreement should the intention of the parties not have been to include an illegal term.
As a general rule, contracting parties cannot agree to obligations that are impossible to perform. Impossibility of performance is gauged objectively or absolute. This means that no person should be able to perform the contractual duty that is agreed upon, making performance in terms of the agreement impossible to any person. In some instances, performance becomes impossible after conclusion of the agreement the agreement shall also terminate. Impossibility does not extend to circumstances in which either party makes performance of the agreement impossible. Such action is a breach of the agreement.
When entering into agreements parties should take care to ensure that they take note of the principles of the law of contract and ensure that the agreement that they are concluding is in fact what they wish to enter into and will be enforceable. The enforcement of an agreement usually is not simple in that it becomes an issue only when a dispute arises, and the enforcement will then be done by Court interference. It is highly advisable to obtain legal advice prior to concluding an agreement to best ensure that your rights in this regard is protected.