THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable

Case no: 1086/2019

In the matter between:

MUNICIPALITY OF MHLONTLO
APPELLANT

and

TDH TSOLO JUNCTION (PTY) LTD
RESPONDENT

Neutral citation: Municipality of Mhlontlo v TDH Tsolo Junction (1086/2019) [2021]
ZASCA 3 (7 January 2021)

Coram:
VAN DER MERWE, MOCUMIE and PLASKET JJA and LEDWABA
and MATOJANE AJJA

Heard:
09 November 2020

Delivered: This judgment was handed down electronically by circulation to the
parties' representatives via email, publication on the Supreme Court of Appeal
website and release to SAFLII. The date and time for hand-down is deemed to be
09h45 on 7 January 2021.

Summary: Contract–conditions in preliminary letter of appointment not
incorporated in main contract for development–main contract sole memorial of
agreement between parties and not subject to suspensive condition based on letter of
appointment.

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ORDER
__________________________________________________________________

On appeal from: Eastern Cape Division of the High Court, Mthatha (Nhlangulela
DJP, sitting as court of first instance):

The appeal is dismissed with costs, including those of two counsel.
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JUDGMENT
__________________________________________________________________
Ledwaba AJA (Van der Merwe, Mocumie and Plasket JJA and Matojane AJA
concurring)

[1] This is an appeal against an order of the Eastern Cape Division of the High
Court, Mthatha (Nhlangulela DJP), dismissing the special pleas raised by the
appellant, the Municipality of Mhlontlo, in respect of the claim for damages for
breach of contract that the respondent, TDH Tsolo Junction (Pty) Ltd, had instituted
against it. The only issue for determination in the appeal is whether the contract
relied upon by the respondent had been rendered unenforceable by the
nonfulfillment of a suspensive condition emanating from the letter of appointment
referred to below. The factual matrix within which the issue arises is set out
hereunder.

[2] In July 2008 the appellant invited proposals for the development of property
of the appellant referred to as Tsolo Junction (the property) in Tsolo, a town within
the jurisdiction of the appellant. The respondent was one of the bidders. In December
2008, the appellant issued a letter of appointment, signed by the municipal manager,

to the respondent with respect to the development of the property. The letter read as
follows:
‘APPOINTMENT OF A SUPPLIER FOR THE TSOLO JUNCTION DEVELOPMENT.
It gives us great pleasure to inform you that the Council of Mhlontlo Municipality hereby appoints
you for the Tsolo Junction Development as per your proposal. A meeting between you and the
Mhlonto Local Municipality is arranged for Thursday, the 4th of December 2008. The terms of
reference will be discussed in that meeting with regard to standards, which should be maintained
to keep up with the housing standards and NHBRC regulations. In addition, you will be required
to table a detailed project plan with specific timeframes as well as signing of a Contract, which
will outline the conditions of the contract.

Kindly note that your appointment shall only be effective when you have satisfied all the
requirements, submitted all the documents outlined below and, you have signed the contract
outlining the Conditions of Contract.
•
Proof of Insurance
•
Surety letter from the guarantor
•
Letter of acceptance
•
Program of work
•
Occupational Health and Safety Plan [and names of personnel to implement it]

Kindly respond in writing to confirm acceptance of this appointment within seven (7) working
days of receiving this letter.

We look forward to working with you.
Yours faithfully’

[3] The respondent accepted the appointment in writing. After negotiations
between the parties, they signed a Supply and Development Agreement (the
agreement) on 18 March 2009. The agreement stipulated the terms and conditions
applicable to the development of the property by the respondent.

[4] On 25 February 2011, as I have said, the respondent issued summons against
the appellant based on the appellant’s breach of the agreement. In its particulars of
claim, the respondent claimed damages in an amount of R48 340 059.00. The
appellant filed numerous special pleas, to which the respondent replicated. By
agreement between the parties, the court a quo determined the special pleas in a
separate hearing. It dismissed all of them and granted leave to the appellant to appeal
to this court only with regard to the special plea based on alleged nonfulfillment of
the suspensive condition in the letter of appointment.

[5] It is common cause that the respondent did not submit any of the documents
that had been listed in the letter of appointment. This formed the foundation of the
appellant’s argument before us. The appellant contended that the agreement was
subject to the suspensive condition that the respondent had to submit the said
documents. The appellant argued that the agreement did not come into existence and
that, therefore, the claim for damages was not sustainable. For the reasons that
follow, this argument is devoid of any merit.

[6] In its terms, the letter of appointment was a preliminary document. It expressly
provided that the development of the property would be governed by a written
contract which would “outline the conditions of the contract”. The undisputed
evidence was that during the negotiations between the parties that preceded the
conclusion of the agreement, the representatives of the respondent had explained
why the documents in question were not applicable to the project and that this was
accepted by the appellant’s representatives.

[7] Thus, the parties in fact agreed to exclude the requirement that these
documents be submitted, from the agreement. The agreement contained no reference

to the letter of appointment and, importantly, clause 15 thereof provided that it
constituted the sole memorial of their agreement:

‘WHOLE AGREEMENT
The terms and conditions set out herein constitute the entire agreement between the parties. No
amendment or variation of whatsoever nature of the terms hereof and no consensual cancellation
of this agreement shall be binding unless reduced to writing and signed by both parties.’

Accordingly, the agreement was clearly not subject to the alleged suspensive
condition in the letter of appointment as submitted by the appellant.

[8] It follows that the appeal must fail. The appellant accepted that the
employment of two counsel was justified, in the light of the amount involved and
the importance of the matter to the respondent.

[9] The following order is issued:
The appeal is dismissed with costs, including those of two counsel.

____________________
A P Ledwaba
Acting Judge of Appeal

APPEARANCES

For Appellant:

V S Notshe SC (with him P Mnqandi)

Instructed by:

Potelwa & Co Attorneys, Mthatha

Ponoane Attorneys, Bloemfontein

For Respondent:

A Beyleveld SC (with him I Bands)

Instructed by:

Friedman Scheckter, Port Elizabeth

Symington De Kok, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED

MUNICIPALITY OF MHLONTLO v TDH TSOLO JUNCTION (PTY) LTD
(Case no 1086/2019) [2021] ZASCA 3 (7 January 2021)
From:
The Registrar, Supreme Court of Appeal
Date:
07 January 2021
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does
not form part of the judgments of the Supreme Court of Appeal

Today the Supreme Court of Appeal (SCA) handed down judgment in an appeal against an
order of the Eastern Cape Division of the High Court, Mthatha (Nhlangulela DJP), which
turned mainly on the enforceability of a contract prior to, or without, the fulfilment of a
suspensive condition in the letter of appointment (the letter). The appeal was dismissed with
costs.

The respondent received the letter signed by the municipal manager which noted inter alia that
the respondent’s appointment would be effective if the respondent satisfied the requirements
in it. The parties signed a Supply and Development Agreement (the agreement) after they held
negotiations as required by the letter. The agreement did not incorporate the suspensive
conditions in the letter.

On 25 February 2011, the respondent issued summons against the appellant for breach of the
agreement and claimed damages in the amount of R48 340 059.00. The appellant filed
numerous special pleas, all of which were dismissed, including one based on the failure to

submit documents as required in the letter. This special plea was based on the appellant’s
contention that the agreement was subject to a suspensive condition – that the respondent had
to submit to it the documents listed in the letter of appointment – and that, as a result of it not
doing so, the agreement had not come into existence. For this reason, so the argument went,
the claim for damages was not sustainable.

The SCA rejected the appellant’s argument. It held that the letter was a preliminary document,
which explicitly stated that the development of the property would be governed by a written
contract that would ‘outline the conditions of contract’. The undisputed evidence was that,
during the negotiations between the parties that preceded the conclusion of the agreement, the
representatives of the respondent had explained why the documents in question were not
applicable to the project and that this was accepted by the appellant’s representatives. In any
event, the agreement contained a non-variation clause and was thus clearly not subject to the
alleged suspensive condition in the letter, as submitted by the appellant.

In the result, the appeal was dismissed with costs, including the costs of two counsel.
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