THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number:  656/02
In the matter between:
SOUTH AFRICAN FORESTRY
COMPANY LIMITED
APPELLANT
and
YORK TIMBERS LIMITED
RESPONDENT
CORAM:
STREICHER, CAMERON, BRAND JJA,
JAFTA et PATEL AJJA
HEARD:
20 AUGUSTS 2004
DELIVERED:
9 SEPTEMBER 2004
Summary:  Where contractual provisions became unworkable through
statutory amendment while government still a party to contracts – appellant as
successor to government's right and obligations cannot rely on supervening
impossibility – role of good faith in contract – importation of implied terms that
contracting party will act reasonably and in good faith – frustration of rights
conferred upon other contracting party – amounting to breach in the form of
both malperformance and repudiation.
_____________________________________________________
JUDGMENT
BRAND JA/

BRAND JA:
[1] The outcome of this appeal will determine the fate of two
contracts between the parties that were entered into more than 30
years ago. For present purposes, the terms of the two contracts
were identical. In each case the South African Government, as the
one contracting party, undertook to sell to the other contracting
party softwood saw logs obtained from two government plantations
in the Mpumalanga province. The contracts were referred to as the
'Witklip agreement' and the 'Swartfontein agreement' after the
plantations from which the saw logs derived. In 1982 the
respondent ('York') took over all the rights and obligations of the
other party in terms of both contracts. With effect from 1 April 1993
the government, in turn, transferred all its rights and obligations
under the contracts to the appellant ('Safcol') pursuant to the
provisions of s 4 of the Management of State Forests Act 128 of
1992.
[2] In 1999 Safcol instituted action in the Pretoria High Court for
an order declaring that the two contracts had been terminated. The
court a quo (De Vos J) found that Safcol had failed to make out a
case for an order to that effect. This appeal is with the leave of the
court a quo.

[3] The two contracts were entered into at a time when the
South African Government decided, as a matter of policy, to
encourage investment by the private sector in the sawmilling
industry. One of the ways of giving effect to that policy was to enter
into long term agreements with sawmills to supply them with
softwood logs from government plantations so as to provide
investors with some security of tenure in a capital intensive
industry. In the contracts the government is described as the seller
and the other contracting party as the purchaser.  The intention on
the part of the seller to provide the purchaser with security of
tenure was specifically recorded in clause 4.1 of the contracts. In
the same vein clause 4.2 went on to provide that the contract
would, subject to certain terms and conditions, operate for an
indefinite period. Safcol's first contention as to why the unlimited
duration of the two contracts had come to an end, was that the
contracts had lapsed through supervening impossibility, in that
certain of their material provisions had become unworkable. In the
alternative Safcol contended that the contracts had been validly
cancelled by it on 10 November 1998 as a result of York's breach,
either through repudiation of or through non-compliance with its
obligations in terms of clauses 3.2 and 4.4. Since the provisions of
these two clauses also underlie Safcol's contentions based on

supervening impossibility, it is necessary to refer to their contents
and context in some detail.
RELEVANT PROVISIONS OF THE CONTRACTS
[4] Clause 3.2 was substituted in the two contracts during 1979
and 1982, respectively. It is to be read in conjunction with clause
3.1 which listed the prices of saw logs in the various classes at the
inception of the agreements. It was obviously foreseen by the
parties, however, that these prices would not remain static for the
indefinite contract period. Consequently, clause 3.2 from the outset
provided a mechanism for future price revisions. Under the original
clause 3.2 a deadlock in price negotiations would lead to advice
being sought from the Board of Trade and Industries and the
automatic termination of the contracts in the event that agreement
could still not be reached on the basis of such advice. The import
of the subsequent amendment of clause 3.2 was to change the
mechanism for price revision. In its amended form, the relevant
part of the clause reads as follows:
'Log prices shall be subject to revision provided that changes of price shall not
take place more often than once every twelve months and provided further
that:
(i)
The Seller and the Purchaser shall both agree to new prices;

(ii)
New prices shall become effective on a date to be agreed upon by the
Seller and the Purchaser, or, if no agreement in regard to such date can be
reached within 30 days of the date on which new prices were agreed to, on 26
March of the year in which negotiations between the Seller and the
Purchaser, concerning such prices, commenced;
(ii)
Should no agreement be reached by the parties as to whether new
prices are to be introduced or the existing prices retained, within 120 days
from the date on which negotiations concerning new prices were first initiated,
the matter shall be referred to the Minister of Environmental Affairs and if the
Minister is of the opinion that no such agreement can be reached the matter
shall be referred to arbitration.
…'
[5] Both clauses 3.2 and 4.4 are to be read in their contextual
relationship with clauses 4.2 and 4.3. These two clauses provide
that:
'4.2
The contract shall operate for an unspecified period but shall in any
event and subject to clauses 3.2(c), 4.3, 4.4, 28.1 and 28.2 [clause 28 deals
with breach of contract on the part of York] remain in force for an initial period
of five years commencing on [1 April 1968 and 1 April 1970, respectively] and
shall remain in operation at the conclusion of the said initial period of five
years for further successive periods of five years, provided that the parties
shall have agreed mutually in advance as to the terms which shall apply
during each successive period of five years. In the event of no agreement
having been reached regarding the terms which are to apply in regard to any

period of five years, the matter shall be referred to the Minister of Forestry for
a decision, and should his decision be acceptable to both parties, the contract
shall continue for such period of five years on the terms and conditions of this
contract as modified by the Minister. Should however the Minister's decision
not be acceptable to the Purchaser, the contract shall nevertheless continue
for such a five year period on the same terms and conditions as laid down in
this contract but it shall, unless otherwise agreed by the parties, terminate at
the end of the five year period concerned.
4.3
Notwithstanding the provisions contained in clause 4.2 the Purchaser
shall at any time have the right to cancel the contract by giving to the Seller
one year's written notice of his intention so to do.'
[6] Clause 4.4 provides:
'4.4
Should it at any stage, in the opinion of the Minister of Forestry, be in
the interest of the wood industry or the country as a whole to terminate this
contract, then the Seller shall be entitled to cancel the contract on giving the
Purchaser written notice of at least five years. In the event of the contract
being cancelled in terms of this clause, the payment of compensation subject
to Treasury and if necessary Parliamentary authority, will be considered by
the Seller.'
FACTUAL BACKGROUND
[7] A proper understanding of the contentions advanced by
Safcol on the basis of these clauses requires a somewhat more
detailed exposition of the background facts. I start with the history

of price revisions pursuant to the provisions of clause 3.2. While
the government was still administering the contracts, it sought an
upward revision of prices practically every twelve months. After
Safcol stepped into the shoes of the government in 1993, it did the
same. The way in which negotiations for the increases sought
were initiated, was by means of a letter from the government and,
subsequently, Safcol, setting out its motivation for the price
increases sought as well as the new price structures proposed.
The letter was sent to every individual sawmill that was a party to a
long term supply contract with the government in the same terms
as the ones involved in this case. At all relevant times, there were
about sixteen of them. These sawmill owners, including York,
organised themselves into an informal association called the South
African Lumber Millers Association or Salma. Although clause 3.2
of the respective contracts required an agreement to be reached
with each individual contractor separately, negotiations were
conducted between the government (later Safcol) and Salma.
[8] It was accepted by everybody concerned, albeit on an
informal basis, that the price increases agreed upon between the
government and Salma would be regarded as a newly established
ruling price which would not be deviated from unless a particular

contractor could persuade the government that there was good
reason why it should pay less than the ruling price. Despite this
common understanding that, as a matter of course, individual
contractors would agree to the increases indicated by the new
ruling price, York refused to do so in respect of the price increases
agreed upon in 1991, 1992 and 1993. When Safcol took over the
administration of the two contracts from the government with effect
from 1 April 1993, it therefore inherited a price dispute with York
for three different periods. In the meantime, Safcol was obliged to
supply York with saw logs at 1990 prices while all other long term
contractors were paying the increased prices. This obviously gave
York a substantial edge on its competitors in the marketplace.
[9] Safcol saw the solution to its problem in the reference to
arbitration provided for in clause 3.2. In order to do so, however, it
required an expression of opinion by the Minister of Environmental
Affairs, or whoever was the Minister responsible for the
Department of Forestry at the time ('the Minister'), that no
agreement on the new prices could be reached by the parties.
Consequently, Safcol approached the Minister with a motivated
request to express an opinion to that effect. York's response in its
letter to the Minister was that such opinion would be unwarranted

because the possibility of an agreement could not be excluded. On
this occasion, as on all other subsequent occasions relevant in this
matter, York was represented by its chief executive officer, Mr
Solly Tucker, who is an admitted but non-practising advocate.
Despite Tucker's assertions to the contrary, the Minister agreed
with Safcol that in all the circumstances an agreement between the
parties was not a real possibility. This gave rise to a review
application by York in the Pretoria High Court for the Minister's
decision to be set aside. The ensuing litigation was eventually
settled in April 1994. In terms of the settlement York undertook to
pay the increased prices claimed by Safcol with effect from April
1991 without interest, by way of a surcharge on future deliveries of
saw logs by Safcol. It is common cause that the outcome of the
litigation and the eventual settlement was to the substantial benefit
of York.
[10] In terms of the settlement York also agreed to the new price
increases, with effect from 1 April 1994, that had in the meantime
been agreed upon by Salma and all the other long term
contractors. As will soon transpire, that was the last time that York
actually agreed to an increase in price.

[11] Towards the end of 1994 Safcol decided to negotiate an
amendment of the terms of all the long term supply agreements in
accordance with the provisions of clause 4.2. Safcol initiated these
negotiations by way of a standard letter to all its long term
contractors, including York. One of the amendments proposed was
that the contract period stipulated in clause 4.2 be reduced from
five years to three years and that the terms of the contract should
therefore be revised at three year instead of five year intervals.
Eventually, most of the long term contractors agreed, after
extended negotiations, to an amendment of the agreements, more
or less in accordance with Safcol's proposals. York's response, on
the other hand, was that Safcol's proposal to shorten the contract
period was in breach of the Constitution in that it would amount to
an
expropriation
without
appropriate
compensation.
Its
counterproposal was that the contract period be extended to 20
years. At a later stage it even suggested a contract period of 50
years.  In November 1995 York went one step further. It sought an
order in the Pretoria High Court declaring, inter alia, that it was not
obliged in terms of the provisions of clause 4.2
'to negotiate in regard to the indefinite duration of the contract … or the fact
that it is to be comprised of successive five year periods and that, should he

be called upon to do so, it is not open to the Minister of Forestry to impose
terms and conditions which impinge upon the aforesaid two matters …'
[12] In these circumstances, Safcol concluded that an agreement
with York regarding the variation of the terms of the contracts
under clause 4.2, was highly unlikely. Consequently, it redirected
its efforts to obtain York's consent to the price increases for 1995.
In a letter to York, dated 1 December 1995, it therefore proposed
price increases and pointed out that these increases had already
been agreed upon by the other long term contractors and had in
fact been paid by them since 1 August 1995. York's reaction was
not to make a counterproposal about price, but to revert to the
pending litigation about the proposed amendments to the terms of
the contract and to other issues between the parties. In order to
avoid entanglement in disputes that were the subject of pending
court proceedings, Safcol decided to suspend the price
negotiations until the litigation had been resolved.
[13] In September 1996 the court case was settled. As a
consequence, Safcol attempted to resume the suspended
negotiations regarding 1995 prices which had in the meantime
been overtaken by another price increase for 1996. Again Tucker's
reaction on behalf of York was not to make any counterproposal

about price, but to revert to the issues concerning either the
amendment or the implementation of the contracts. From then
onwards, this became Tucker's repeated tactic and strategy. Every
endeavour on the part of Safcol to negotiate an increase in price
was deflected by Tucker's insistence on discussing issues of a
different kind.
[14] At the beginning of 1997, Safcol decided that the parties had
reached deadlock in their price negotiations and that arbitration
was the only way out. It therefore resolved to obtain the Minister's
opinion that the parties were unable to reach agreement, as
contemplated in clause 3.2. York denied that the reference to the
Minister was warranted. As a result, Safcol sought an order in the
Pretoria High Court confirming the propriety of its approach. This
application was opposed by York. One of the defences raised by
Tucker was that, on a proper interpretation of clause 3.2, a
reference to the Minister could occur only if the parties were
unable to agree that there should be any price variation at all. This
argument would entail that if the seller was seeking a price
increase while the purchaser suggested a downward variation in
price, that would exclude any approach to the Minister and,
consequently, any reference to price arbitration. Another defence

raised by Tucker was that Safcol was too pessimistic in that, given
time, the parties would eventually be able to reach agreement. The
court was not impressed by Tucker's arguments. In the result, the
declaratory order sought was granted. York lodged an appeal to
the full court. That appeal was dismissed on 7 September 1998.
[15] The effect of the full court's judgment was that the first
stumbling block in Safcol's way to refer the 1995 price increases to
arbitration was eventually removed. In the meantime, however, the
train had moved on. Price increases were agreed upon and were
in fact being paid by virtually all the other long term contractors, in
respect of 1996, 1997 and 1998 while York was still paying 1994
prices. On average it was paying 58,6 per cent less for saw logs
than its competitors. As a consequence, it was able to undercut
prices and extend its market share without sacrificing any profit.
Safcol realised that in these circumstances it would not be able to
win approval for further price increases with Salma until its
problems with York had been resolved. To avoid further delay,
Safcol therefore proposed, after York's appeal had been dismissed
by the full court, that the reference to the Minister be abandoned
and that they proceed directly to arbitration on all four suggested
price increases between 1995 and 1998.

[16] This proposal was rejected by York. Whereas it had
previously resisted any reference to the Minister, it now proclaimed
his involvement indispensable in that he could facilitate a
settlement between the parties. Moreover, Tucker found support
for York's cause in the injunction against more than one price
increase during any twelve month period provided for in clause
3.2. In the light of York's attitude, Safcol had to approach the
Minister. It did so in October 1998. York, however, again opposed
any expression by the Minister of an opinion that agreement could
not be reached. Apart from the recurring argument that, despite
the odds, the parties could still come to an agreement, Tucker
raised the objection that Safcol had approached the wrong
Minister. The fact that this objection was in direct conflict with a
pertinent admission by him in earlier court proceedings, obviously
did not perturb him. A further argument raised by Tucker was that
the Minister could not consider the matter until the parties had
agreed on his terms of reference. Finally he suggested that the
Minister should recuse himself on grounds of perceived bias in the
light of pending litigation between York and the Minister's
department on matters of a similar kind. This suggestion was
difficult to reconcile with Tucker's earlier insistence that the
Minister should remain involved.

[17] If Tucker's objections were aimed at persuading the Minister
to distance himself from the matter, he was successful. On 31
December 1998 the Minister responded:
'I decline to form an opinion as to whether an agreement on log prices can be
reached between SAFCOL and Yorkcor. I therefore cannot accept the
referral.'
[18] At more or less the same time, Safcol approached the
Minister to take a decision under clause 4.4. It will be remembered
that while York had the right to cancel the contract by giving one
year's written notice to that effect in terms of clause 4.3, the
contracts afforded Safcol no such opportunity. Clause 4.4 provides
in the absence of a breach of contract by York that Safcol can only
cancel the contract on five years' written notice and only if the
Minister of Forestry is of the opinion that it would 'be in the
interests of the wood industry or the country as a whole to
terminate this contract'. Safcol's request to the Minister to express
the opinion contemplated in 4.4 was also opposed by York, inter
alia on the basis that the Minister was biased. This time the
Minister did not decline to become involved but he refused to
express the opinion sought by York.

SUPERVENING IMPOSSIBILITY
[19] Safcol's case that the contracts had lapsed through
supervening impossibility is primarily based on the Minister's
alleged refusal to perform his assigned functions in terms of
clauses 3.2 and 4.4. With regard to the latter clause Safcol has
failed to establish that the Minister had actually refused to perform
the function allocated to him. For that reason alone Safcol's case,
insofar as it is based on clause 4.4, cannot be sustained. As to
clause 3.2, the Minister had clearly refused to become involved.
Given this, Safcol contended that the Minister's involvement was
an integral cog in the mechanism for price revisions created by
clause 3.2, while this mechanism in turn formed an essential part
of the contracts as a whole. Consequently, Safcol's argument
went, the Minister's refusal to perform his allocated function made
price revisions impossible and these contracts of inordinate
duration unworkable. For its contention that the contracts had thus
been terminated through supervening impossibility, Safcol sought
authority in the decision of this court in Kudu Granite Operations
(Pty) Ltd v Caterna Ltd 2003 (5) SA 193 (SCA). The contract in
that case contemplated that the parties should reach agreement
on the amount of what was referred to as the 'CAG loan account'.
Failing such agreement the amount of the loan was to be

determined by a firm of auditors, KPMG. The parties could not
reach agreement on the amount of the loan account and KPMG
was either unwilling or unable to resolve their dispute. Because of
this, so it was held, the contract had failed. The reason for this
finding appears from the following statement by Navsa JA and
Heher AJA (at 201H-I):
'Caterna's case was one of a lawful agreement which afterwards failed without
fault because its terms could not be implemented. The intention of the parties
was frustrated. The situation in which the parties found themselves was
analogous to impossibility of performance since they had made the fate of
their contract dependent upon the conduct of a third party (KPMG) who was
unable or unwilling to perform. In such circumstances the legal consequence
is the extinction of the contractual nexus: …'
[20] Though I agree that in the present case it can also be said
that the intention of the parties became frustrated when the
Minister refused to become involved, there is one feature which, in
my view, renders the Kudu Granite case distinguishable on the
facts. In the latter case KPMG could not be compelled to perform
its allocated function. That was not the Minister's position at the
time when clause 3.2 was introduced by way of an amendment to
the two contracts under consideration in 1979 and 1982,
respectively. At that time the Minister was under a statutory duty to

exercise the discretion conferred upon him by clause 3.2 when
requested to do so. This statutory duty originated from the
provisions of s 30(2) of the Forest Act 72 of 1968 which read as
follows:
'Whenever on revision of prices of forest produce derived from State forests
and in respect of which contracts of sale for a period of 5 years or longer have
been concluded, a dispute arises on which, in the opinion of the Minister,
agreement cannot be reached, such dispute shall be submitted to arbitration.'
[21] Section 30(2) was introduced by s 9 of the Forest
Amendment Act 87 of 1978. It was tailor-made for long term
contracts of the present kind and it was obviously intended to
provide the statutory substructure for the Minister's involvement
contemplated in the new clause 3.2 proposed at the time. Soon
thereafter clause 3.2 was grafted upon all these contracts.
Succinctly stated, the new s 30(2) was aimed at creating a specific
statutory power and duty for the Minister to exercise the discretion
conferred upon him by clause 3.2 of the contracts.
[22] When the 1968 Forest Act was replaced by the Forest Act
122 of 1984 with effect from 27 March 1986, the essential
provisions of s 30(2) were re-enacted in s 17(4) of the latter Act. A
fundamental change was brought about, however, with the passing

of the Management of State Forests Act 128 of 1992 ('the
Management Act'), which came into operation on 1 August 1992.
Section 4(3)(c) of Management Act provided in effect that, once
the State's rights and obligations in terms of a particular long term
contract had been assigned to Safcol, as envisaged by the
provisions of the Act, s 17(4) of the 1984 Forest Act would no
longer apply to that contract. Consequent upon the enactment of s
4(3)(c) of the Management Act, the position was that although the
Minister still had the power to perform the role allocated to him in
clause 3.2, he was no longer under an express statutory duty to do
so and his involvement could thus no longer be compelled on this
basis.
[23] In this light, York's answer to this part of Safcol's case was
that the impossibility relied upon amounted to self created
impossibility in that it was brought about by the South African
Government, while it was still a party to the contracts, through the
enactment of s 4(3)(c) of the Management Act. As a matter of law,
so York's argument proceeded, self created impossibility does not
discharge the contract, but leaves the party whose conduct
created the impossibility liable for the consequences (see eg
Christie, The Law of Contract in South Africa 4th ed 552 and the

authorities there cited). Accordingly, York contended, Safcol's
reliance on supervening impossibility cannot be sustained. Safcol's
counterargument was twofold. Firstly, that it (Safcol) cannot be
held responsible for the passing of legislation by its predecessor.
Secondly,
that,
in
any
event,
legislation
which
renders
performance of a government contract impossible can be
described as self created impossibility in the contractual sense
only where the legislation had been employed by the government
as a stratagem to avoid its obligations in terms of the contract. If
the legislation was intended to bring about change on a much
wider front, so the argument went, it cannot be regarded as an
instance of self created impossibility of a particular contract. Safcol
sought authority for this line of argument in Gordon v
Pietermaritzburg-Msunduzi Transitional Local Government and
Another 2001 (4) SA 972 (N) 978B-C.
[24] I find Safcol's counterargument unpersuasive in both its
constituent parts. It is true that Safcol is not the government and
that it cannot be held responsible directly for the enactments of
Parliament. However, when s 4(3)(c) of the Management Act came
into existence, the government was still one of the contracting
parties. Indeed s 4(3)(c) formed part of the very same legislation

that enabled the government to transfer its rights and obligations
under the contracts to Safcol without the cooperation of York. If,
before the actual transfer of the contracts to Safcol, the
government were to rely on the impossibility of performance
created by its own legislation, it would clearly be open to York to
raise the argument that the impossibility was a self created one. If
that response was valid against the government, it could not be
avoided by the subsequent transfer of the contracts to Safcol. After
all, the notion that Safcol can be in a better position than the party
from whom it obtained its contractual rights, appears to be
untenable, particularly where York had no say in the assignment of
the government's obligations to Safcol.
[25] The second leg of Safcol's counterargument is based on the
supposition that the government can be denied reliance on
impossibility created by its own legislation only if the legislation in
question amounted to a legal stratagem by the government to
avoid its contractual obligations. In my view the supposition is
invalid. Why should the government be allowed to rely on its own
legislative enactments to avoid its contractual obligations where
the legislation was due, say, to legislative mistake? After all, as a
matter of law, the sanction against reliance on self created

impossibility is not limited to situations where the act causing the
impossibility could somehow be described as wrongful or
reprehensible (see Christie op cit). Of course, the position could be
quite different if the legislative enactment under consideration
relates to matters of general public interest (see eg Gordon v
Pietermaritzburg-Msunduzi Transitional Council, supra 978B-D).
That, however, does not appear to be the position in this case.
Here we have the rather peculiar situation that s 17(4) of the 1984
Act was enacted solely to facilitate the contracts of the present
kind. As a consequence, neither s 17(4) nor its revocation in terms
of s 4(3) of the Management Act could be said to affect the
interests of anyone but the parties to these contracts. Though we
do not know why it was thought necessary that s 17(4) of the 1984
Forest Act should be rescinded, the most likely reason appears to
be legislative mistake. After all, I can think of no reason why
Parliament would have intended that Safcol should be saddled
with an unworkable contract (cf also s 74(5) of the National Forest
Act 84 of 1998). For these reasons Safcol's case based on
supervening impossibility cannot be sustained.

BREACH OF CONTRACT BY YORK
[26] This brings me to that part of Safcol's case which is based
on York's breach of contract. The particular breach relied upon
was that York, by its conduct over an extended period of time, had
acted in breach of an implied term of the contracts, alternatively
that York repudiated its obligations arising from the same term.
This implied term, as formulated by Safcol, was said to have
imposed an obligation on York to act in accordance with the
dictates of reasonableness, fairness and good faith when Safcol
exercised its rights in terms of clauses 3.2 and 4.4 of the contracts.
[27] York's answer to these contentions, which found favour with
the court a quo, was that they were in conflict with the judgments
of this court in Brisley v Drotsky 2002 (4) SA 1 (SCA) paras 21-25
and 93-95 and Afrox Healthcare Beperk v Strydom 2002 (6) SA 21
(SCA) paras 31-32. In these cases it was held by this court that,
although abstract values such as good faith, reasonableness and
fairness are fundamental to our law of contract, they do not
constitute independent substantive rules that courts can employ to
intervene in contractual relationships. These abstract values
perform creative, informative and controlling functions through
established rules of the law of contract. They cannot be acted

upon by the courts directly. Acceptance of the notion that judges
can refuse to enforce a contractual provision merely because it
offends their personal sense of fairness and equity, will give rise to
legal and commercial uncertainty. After all, it has been said that
fairness and justice, like beauty, often lie in the eye of the
beholder. In addition, it was held in Brisley and Afrox Healthcare
that – within the protective limits of public policy that the courts
have carefully developed, and consequent judicial control of
contractual performance and enforcement – constitutional values
such as dignity, equality and freedom require that courts approach
their task of striking down or declining to enforce contracts that
parties have freely concluded, with perceptive restraint.
[28] Safcol's argument is, however, that its case is not directly
based on the abstract notions of fairness and good faith, but on a
term implied by law under the informative influence of good faith.
Thus understood, Safcol's argument went, its case amounts to an
application and not a negation of the judgments in Brisley and
Afrox Healthcare. This argument is not without appeal in logic,
particularly in the light of established principles regarding implied
terms. Unlike tacit terms which are based on the inferred intention
of the parties, implied terms are imported into contracts by law

from without. Although a number of implied terms have evolved in
the course of development of our contract law, there is no numerus
clausus of implied terms and the courts have the inherent power to
develop new implied terms. Our courts' approach in deciding
whether a particular term should be implied provides an illustration
of the creative and informative function performed by abstract
values such as good faith and fairness in our law of contract.
Indeed, our courts have recognised explicitly that their powers of
complementing or restricting the obligations of parties to a contract
by implying terms should be exercised in accordance with the
requirements of justice, reasonableness, fairness and good faith
(see eg Tuckers Land and Development Corporation (Pty) Ltd v
Hovis 1980 (1) SA 645 (A) 651C-652G; A Becker & Co (Pty) Ltd v
Becker and Others 1981 (3) SA 406 (A) 417F-420A; Ex Parte
Sapan Trading (Pty) Ltd 1995 (1) SA 218 (W) 226I-227G). Once
an implied term has been recognised, however, it is incorporated
into all contracts, if it is of general application, or into contracts of a
specific class, unless it is specifically excluded by the parties (see
eg Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration 1974 (3) SA 506 (A) 531D-H). It follows, in my view,
that a term cannot be implied merely because it is reasonable or to
promote fairness and justice between the parties in a particular

case. It can be implied only if it is considered to be good law in
general. The particular parties and set of facts can serve only as
catalysts in the process of legal development.
[29] Conceptually, Safcol's argument is therefore well founded in
the principle that a term can be implied if it is dictated by fairness
and good faith. The further progression of the argument is,
however, flawed by misconception. It confuses the rationale for
implying a term with the contents of the term to be implied. To say
that terms can be implied if dictated by fairness and good faith
does not mean that these abstract values themselves will be
imposed as terms of the contract.
[30] The acceptance of the new implied term contended for by
Safcol will mean that it becomes a term of every contract that the
parties must not only perform their obligations in compliance with
the provisions of the contract, but that they must do so in
accordance with the dictates of fairness and good faith. This is in
conflict with the established principles of our law. The question
whether parties have complied with their contractual obligations
depends on the terms of the contract as determined by proper
interpretation. The court has no power to deviate from the intention
of the parties, as determined through the interpretation of the

contract, because it may be regarded as unfair to one of them (see
eg Scottish Union & National Insurance Co Ltd v Native Recruiting
Corporation Ltd 1934 AD 458 at 465-466; Robin v Guarantee Life
Assurance Co Ltd 1984 (4) SA 558 (A) 566 H-I). Once it is
established that a party has complied with his or her obligations as
properly determined by the terms of the contract that is the end of
the inquiry.
[31] Moreover, acceptance of Safcol's contentions will result in
negation of the considerations and reasoning underlying the
decisions in Brisley and Afrox Healthcare. To say that contractual
stipulations cannot be avoided on the basis of abstract notions
such as fairness and good faith, but that the same result can be
attained when a party's conduct is said to offend these same
abstract notions, because they have been imported by means of
an implied term, amounts to a distinction without a difference. The
outcome will again depend on the individual judge's perception of
what is just and fair. I therefore find myself in agreement with the
finding by the court a quo that Safcol's argument based on an
implied term demanding reasonableness and good faith on the
part of York, is in conflict with the decisions of this court.

[32] Unlike the court a quo, I do not believe, however, that this is
the end of the matter. The pivotal question remains whether York
has complied with its obligations in terms of clauses 3.2 and 4.4 of
the contracts. This will depend on a proper interpretation of these
two clauses. In the interpretation process, the notions of fairness
and good faith that underlie the law of contract again have a role to
play. While a court is not entitled to superimpose on the clearly
expressed intention of the parties its notion of fairness, the position
is different when a contract is ambiguous. In such a case the
principle that all contracts are governed by good faith is applied
and the intention of the parties is determined on the basis that they
negotiated with one another in good faith (see eg Trustee, Estate
Cresswell & Durbach v Coetzee 1916 AD 14 at 19: Dharumpal
Transport (Pty) Ltd v Dharumpal 1956 (1) SA 700 (A) 706-707;
Mittermeier v Skema Engineering (Pty) Ltd 1984 (1) SA 121 (A)
128A-C; Joosub Investments (Pty) Ltd v Maritime & General
Insurance Co Ltd 1990 (3) SA 373 (C) 383E-F. See also Farlam
and Hathaway, Law of Contract, 3 ed (by Lubbe and Murray) 468,
para 6).
[33] Having regard to the provisions of clause 3.2 it is clear that it
confers the right upon a party (in this instance, Safcol) who found it

impossible to come to an agreement on revision of price, firstly, to
approach the Minister as a preliminary step to arbitration and,
secondly, to refer the matter to arbitration if the Minister should
express the opinion that no agreement could be reached. Although
the clause does not expressly impose any duty or obligation on the
other party (York) the corollary of the rights conferred upon Safcol
is an obligation or duty on the part of York not to frustrate Safcol in
the exercise of these rights. This follows logically from the
structure of the rights and duties the parties themselves created.
[34] However, had there been any interpretative ambiguity as to
the existence of such a duty or obligation on the part of York, it is
removed by considerations of reasonableness, fairness and good
faith. In other words, even where the logical consequences of the
rights and duties may not necessitate such an inference, the
underlying principles of good faith requires its importation.
[35] The next question is whether it can be said that York failed to
comply with its obligation not to frustrate or delay Safcol in the
exercise of its rights under clause 3.2. I believe that the answer to
this question must be in the affirmative. From the background facts
it is clear, in my view, that York had no intention of agreeing
revised prices with Safcol. It therefore knew all along that no

agreement would be reached in this regard. It also knew that in
these circumstances Safcol was entitled to refer the matter to the
Minister and to obtain the Minister's opinion that agreement could
not be reached so as to enable it to proceed to arbitration.
Nevertheless, York did its utmost over a period of several years to
prevent or delay Safcol from obtaining such an opinion with the
obvious intent to avoid arbitration. It did so by pretending that it
was prepared to negotiate; by contending that it was possible to
reach agreement whereas obviously it was not; by contending,
contrary to the whole scheme of the agreements revealed by
clauses 3.2 and 4.2, that revised prices could not be negotiated
before the terms of the long term contracts had been settled; by
raising contentions which can only be described as absurd, as for
example, that a reference to the Minister was inappropriate where
the parties were in agreement on the principle that there should be
price revision, thus creating an obvious deadlock; by insisting upon
the Minister's involvement only to raise the objection subsequently
that Safcol had approached the wrong Minister and that the
Minister should recuse himself on grounds of bias.
[36] Essentially the same considerations apply, in my view, with
reference to clause 4.4. This clause confers the right on Safcol to

approach the Minister to express the opinion contemplated as a
preliminary step to cancellation of the contract by York. Again, the
corollary of this right is an obligation on the part of York not to
frustrate this right. Again York acted in breach of this obligation by
seeking to inhibit or intimidate the Minister through thinly veiled
threats of court proceedings if the Minister should decide to get
involved.
[37] York's further contention was that even if it is found to have
failed to comply with its contractual obligations, Safcol was not
entitled to resort to cancellation on the basis of breach, because
Safcol failed to comply with the procedural requirements for
cancellation. These procedural requirements are stipulated in
clause 28.1 of the contract. It required of Safcol, before it was
entitled to terminate the contract on the grounds of breach by York,
to give written notice to York to remedy such breach as well as a
reasonable opportunity to do so. It is common cause that no such
notice was given to York prior to Safcol's letter of cancellation. The
answer to York's argument is in my view to be found in those
cases where it was held that the requirement of notice prior to
cancellation contemplated in clause 28.1 of the contracts does not
apply where the breach of contract complained of was in the form

of anticipatory breach or repudiation (see eg Taggart v Green 1991
(4) SA 121 (W) 124D-126I; Metalmil (Pty) Ltd v AECI Explosives
and Chemicals Limited 1994 (3) SA 673 (A) 683G-I).
[38] Repudiation occurs where one party, without lawful grounds,
indicates to the other party, by word or conduct, a deliberate and
unequivocal intention that all or some of the obligations arising
from the contract will not be performed in accordance with its true
tenor (see eg Datacolor International (Pty) Ltd v Intamarket (Pty)
Ltd 2001 (2) SA 284 (SCA) 294H-I; Metalmil (Pty) Ltd v AECI
Explosives and Chemicals Ltd supra at 684-685B). It is clear, I
think, that in particular circumstances conduct of a contracting
party can constitute both a breach of contract in the form of
malperformance and a repudiation. A fair example of this is to be
found in the present case. York's conduct amounted to breach in
the form of failure to comply with his obligations in terms of clause
3.2 and 4.4. However, at the same time it also amounted to a
repudiation in that York conveyed the clear indication to Safcol of
its intention not to comply with those obligations in the future
either. In these circumstances, the contracts were in my view duly
terminated when Safcol accepted York's repudiation in its letter of
10 November 1998.

[39] For these reasons, the appeal is upheld with costs, including
the costs of two counsel, and the following order is substituted for
that of the court a quo:
'(a)
An order is issued declaring that the plaintiff validly cancelled
the two contracts between the parties, referred to as the
Swartfontein agreement and the Witklip agreement, on 10
November 1998.
(b)
The defendant is ordered to pay the plaintiff's costs,
including the costs of two counsel.'
……………….
F D J BRAND
JUDGE OF APPEAL
Concur:
Streicher JA
Cameron JA
Jafta AJA
Patel AJA