THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case no: 1318/2018
In the matter between:

SHEPHERD REAL ESTATE INVESTMENTS (PTY) LTD
APPELLANT

and

ROUX LE ROUX MOTORS CC
RESPONDENT

Neutral citation:  Shepherd Real Estate Investments (Pty) Ltd v Roux Le Roux Motors CC
(1318/2018) [2019] ZASCA 178 (2 December 2019)

Bench:
Ponnan, Leach and Nicholls JJA and Weiner and Dolamo AJJA

Heard:
21 November 2019

Delivered:
2 December 2019

Summary:
Contract – validity of – agreement that the rental and costs shall be mutually
agreed upon in writing between the landlord and the tenant when the right of renewal in
a lease is exercised – void for vagueness.

______________________________________________________________________

ORDER
______________________________________________________________________

On appeal from: Western Cape Division of the High Court, Cape Town (Davis J sitting
as court of first instance):

The appeal is upheld with costs, including those of two counsel.
The order of the court below is set aside and replaced with the following:
‘(a)
The application succeeds with costs, including those of two counsel.
(b)
The respondent and all those holding title under it, if any, are ordered to vacate the
property described as Erf 562, Mbekweni, Paarl, Western Cape Province, situated on the
corner of Jan van Riebeeck Drive and Wamkelekile Street, Mbekweni, Paarl, Western
Cape Province, held by the applicant under title deed number T065358/10 (the property),
within 14 (fourteen) calendar days of the date of this order.
(c)
In the event of the respondent failing to comply with paragraph (b) hereof, the
Sheriff or his/her lawful deputy for the area in which the property is situated is directed to
eject the respondent and all persons and/or entities found to be in occupation of the
property.’
______________________________________________________________________

JUDGMENT
______________________________________________________________________

Ponnan JA (Leach and Nicholls JJA and Weiner and Dolamo AJJA concurring):

[1] To borrow from Kirby P in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd:1
‘The problem presented by this case is not by any means unique. Courts and lawyers may expect
the agreements of business people to be clear and complete. Unfortunately, in the market place,
agreements often fall short of these lawyerly desires.’

1 Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 19.

Kirby P’s observations are particularly apposite to this matter, which concerns the
interpretation of a clause in a written agreement of lease (the agreement) that reads:
‘Such renewal for the second lease renewal period, shall be on terms and conditions in
compliance with the Landlord’s then standard letting policy, except that there shall be no right of
further renewal and that the rental and costs shall be mutually agreed upon in writing between
the Landlord and the Tenant when the right of renewal is exercised. The provisions of this clause
will only apply if the Tenant shall at all times have faithfully and punctually performed all its
obligations under this Lease.’ (The relevant clause)

[2] The agreement was concluded on 7 November 2007 between Shepherd Industrial
Commercial Real Estate CC (Shepherd Industrial) and the respondent, Roux Le Roux
Motors CC, pursuant to which, the former let to the latter, a commercial property situated
at the corner of Jan van Riebeek Drive and Wamkelekile Street, Paarl (the property) for
the purpose of conducting the business of a petrol station. The commencement date of
the lease was 1 December 2007. It was to endure for an initial term of five years, with a
renewal period of ‘5 plus 5 years’. The rental at commencement was R 18 000 per month,
escalating at 8 per cent per annum over the initial term.

[3] Clause 6 of the lease agreement, headed ‘Renewal Period’, provided:
‘The Tenant shall have the option to renew this Lease of the Premises for a further period as set
out in the Terms of Lease subject to the following:
6.1
The strict adherence & compliance to all terms and conditions of this agreement by the
Tenant and all moneys due being paid by him;
6.3
The Tenant requesting such renewal in writing from the Landlord no later than 6 (Six)
months prior to the expiry of the lease period. The Landlord will remind the Tenant to exercise the
option 8 (Eight) months prior to the expiry of the lease period.
Such first renewal period shall be on terms and conditions in compliance with this agreement and
the rental payable by the Tenant to the Landlord during the option period shall be increased on
each anniversary of the commencement date by 8% of the monthly rental, which was payable
during the year proceeding the option period.’
This was followed by the relevant clause.

[4] The respondent validly exercised the option in terms of clause 6 during the initial
term and the agreement came to be renewed for ‘the first renewal period’, namely a
second five-year term. The second five-year term was due to end on 30 November 2017.
Prior thereto, on 11 October 2017, Shepherd Industrial ceded its rights and delegated its
obligations under the agreement to the appellant, Shepherd Real Estate Investments
(Pty) Ltd.

[5] When the respondent attempted to exercise the second option to renew for a third
five-year term, the appellant adopted the stance that it was amenable to the proposed
renewal at an agreed rental of R150 000 per month, plus VAT. In response, the
respondent contended that a fair rental was an 8 per cent per annum escalation on the
then prevailing rental. That, however, was not acceptable to the appellant. Nor was the
suggestion that the dispute be referred to arbitration in terms of clause 34, which provided:
‘34.
Arbitration
34.1
In the event of any dispute arising between the parties as to the true intent and meaning
of this agreement or the implementation thereof, such dispute shall be determined by an arbitrator
who shall be an advocate of at least five years standing agreed upon by the parties and failing
agreement appointed by the President from the time being of the Cape Bar Council.
34.2
The decision of such arbitrator shall be final and binding on the parties and the award and
awards interim or final of such arbitrator may be made an order of any competent Court in South
Africa on the application of any party.’

[6] The ensuing exchange of correspondence proved fruitless and eventually, the
appellant, contending that inasmuch as there had been no renewal and the lease
agreement had expired by effluxion of time, applied to the Western Cape Division of the
High Court, Cape Town inter alia for the ejectment of the respondent.2  In support of the
application it was stated on behalf of the appellant:

2 The appellant sought an order in these terms:
‘1.  confirming that the lease agreement concluded between the respondent and Shepherd Industrial &
Commercial Real Estate CC (registration number 1996/044978/23) on 7 November 2007 (“the lease
agreement”) (including the terms of lease, the conditions of lease, all the annexures thereto, addendums /
written variations and deeds of suretyship in respect thereof) ceded to the applicant on 11 October 2017,
having been already renewed for a further five year term, lapsed / expired at the end of 30 November 2017
by the effluxion of time;
2.  confirming that the respondent and all those holding title under it, if any, are in unlawful occupation of
the property, being occupied for commercial purposes, described as Erf 562, Mbekweni, Paarl, Western

‘13. First, the applicant does not have a “standard letting policy” (I am advised that this is
something that the applicant can unilaterally determine). Secondly, and most importantly, the
rental amount in respect of any possible further / extended 5 year period is neither determined
nor determinable. The applicant and the respondent are required to agree on the rental amount
payable in respect of the property before the lease can again be extended for a third 5 year period.
They have not done so (I will elaborate on this later). I am advised that the above quoted portion
of clause 6 of the conditions of lease is, as such, nothing more than an agreement to agree and
is void for vagueness. It is also worth mentioning at this juncture that clause 28 of the conditions
of lease provides that the lease agreement “constitutes the whole agreement between the parties
and no warranties or representations whether express or implied shall be binding on the parties
other than as recorded [in the lease agreement]”.
14.
I am advised that the second submission made in the aforegoing paragraph is an
established principle that has been determined and settled by the Supreme Court of Appeal in
the judgment of Roazar CC v The Falls Supermarket CC [2017] JOL 39326 (SCA). There is
undoubtedly no obligation on either the applicant or the respondent to negotiate in good faith or
to reach an agreement on a rental amount that is objectively reasonable. The respondent is also
not entitled to ask this court or any third party to create an agreement of lease by determining the
rental amount. In other words, if no agreement is reached in respect of the rental amount then no
rental agreement comes into existence.

. . .

Cape Province, situated on the corner of Jan van Riebeeck Drive and Wamkelekile Street, Mbekweni, Paarl,
Western Cape Province, held by the applicant under title deed number T065358/10 (“the property”);
3.  directing that the respondent and all those holding title under it vacate the property within 14 (fourteen)
calendar days from the granting of the requested order in this application;
4.  directing that the respondent complies with its obligations in terms of clause 17.18 of the conditions of
lease (attached to the lease agreement) by doing all things reasonably necessary to ensure that the
property is fit for occupation by a new tenant on the first business day following the date the property is
vacated, including the repair of any damage that may have been caused to the property during the
subsistence of the lease period (the period from 1 December 2007 to 30 November 2017) and the holding-
over period;
5.  failing such departure, directing the Sheriff of this Honourable Court or his/her lawful deputy for the area
in which the property is situated to eject the respondent and all persons and/or entities found to be in
occupation of the property;
6.  authorising and directing the Sheriff of this Honourable Court to do all things necessary in order to give
effect to prayers 4 and 5 above;
7.  confirming that in terms of clause 9.2 of the conditions of lease (attached to the lease agreement), the
respondent is liable for the reasonable costs that may be incurred, at the applicant’s sole discretion, in
respect of cleaning, clearing and restoring the property to its original condition at the time when the
respondent took occupation thereof, fair wear and tear excepted;
8.  the respondent be ordered to pay the reasonable costs to be incurred by the applicant in respect of
cleaning, clearing and restoring the property to its original condition at the time when the respondent took
occupation thereof, fair wear and tear excepted’.

16.
I am further advised that the only possible way to have cured the vagueness and invalidity
of clause 6 of the conditions of lease (as quoted above) would have been the inclusion of an
express deadlock-breaking mechanism (e.g. a formula or the appointment of an expert to make
a binding determination – see for instance Southernport Developments (Pty) Ltd v Transnet Ltd
2005 (2) SA 202 (SCA) and Makate v Vodacom Ltd 2016 (4) SA 121 (CC)). There is no deadlock-
breaking mechanism contained in the lease agreement. In particular, the general arbitration
clause requiring certain disputes relating to the interpretation and enforcement of the lease
agreement is not a deadlock-breaking mechanism (it is a means of resolving a dispute relating to
an existing contract and not the determination of an essential term of prospective contract). Given
the provisions of the lease agreement in this matter a court (or arbitrator) will be tasked to create
an agreement on behalf of the parties. I am advised that this would undermine the principles set
out by the Supreme Court of Appeal and the Constitutional Court in the cases cited in this
paragraph 16. Written and oral arguments shall be presented to this Honourable Court on this
point, if necessary.’

[7] The response from Mr Dupre le Roux, the controlling mind of the respondent, was:
‘Subject to the content of paragraph 4.1 to 4.14 and 11 above, it is denied that the rental amount
cannot be determined or is not determinable. That occurred already when the first 5 year renewal
was implemented from 1 December 2012. I also deny that the lease is an agreement to agree
and is void for vagueness.’
The relevant portions of paragraphs 4.1 to 4.14 and 11 read:
‘4.2
The parties to the lease voluntarily agreed to arbitration, with no right to appeal, in respect
of disputes arising from the true intent and meaning of the lease or the implementation thereof;
. . .
4.5
. . . There are, however, a number of provisions in clause 6 that were never discussed,
negotiated or agreed to during negotiations (“the negotiations”) between myself, acting on behalf
of the CC and Mr Shepherd, representing the cedent, whose rights and obligation now vest in
Applicant, when the lease was agreed to verbally between myself and Mr Shepherd, acting as
said, including when our continuing common intention came into existence (“the common
intention”) prior to and existing during the signing of the lease on 7 November 2007;
. . .
4.8
during the negotiations between Mr Shepherd and I, it was specifically verbally agreed,
constituting a part of the common intention, that the lease period and renewal period, added
together, would endure for at least 15 years, at the negotiated reasonable rental and the

reasonable escalation of 8% in the rental per annum, as confirmed in the terms and the conditions,
having regard to clause 6, but excluding the last paragraph thereof;
4.9
the content of the last paragraph of clause 6, heavily relied upon by Applicant and Mr
Shepherd for the allegations contained in par 12, 13, 14 and 16 of the affidavit was never
discussed or referred to during the negotiations. It was never agreed to and did not become part
of the common intention. Moreover, Mr Shepherd, who was responsible for the drafting of the
lease, apparently used the cedent’s standard form of contact, but did not bring the last paragraph
of clause 6 to my attention. I did not notice or expect that provision as part of the lease, having
regard to clauses 6, 10, 15 and 16 of the terms and clause 6, excluding the last paragraph thereof
(“the final paragraph”). I also had no reason for believing that it would, being contrary to our
common intention. Clause 15 of the terms, after all, provides expressly for a renewal period of 5
+ 5 years and clause 10 of the terms fixed the escalation rate at 8%. The presence of the final
paragraph as part of clause 6 is the result of a bona fide mistake or the intentional act of Mr
Shepherd, and does not reflect the common intention. That provision is contrary to the terms and
the common intention. It was never envisaged or agreed that we would have to renegotiate any
renewal or the terms thereof, as is suggested by Mr Shepherd;
4.10
accordingly, the CC would be entitled to rectification of the lease by deleting the whole of
the final paragraph of clause 6 of the lease, and also the phrase “such first renewal period” in the
penultimate paragraph of clause 6, substituting therefor the words “the renewal periods as set out
in clause 15 of the terms of lease” in order to give effect to the common intention;
. . .
4.12
alternatively, (apart from the fact that the 8% escalation in rental and the rental were
agreed in terms of the lease as reasonable), if rectification were to be refused, I submit that it was
a tacit term of the lease that the escalated rental, in respect of the last 5 year renewal would be a
reasonable rental, and should be determined by Mr Shepherd and I, both acting arbitrio boni viri,
which could be established and determined objectively, moreover, that we would be obliged to
establish such reasonable rental in that manner, i.e. reasonable rental as the yardstick. That tacit
term derives from the common intention, inferred from the express terms of the lease referred to
and the applicable surrounding circumstances alluded to above;
. . .
11.
Only the express provisions of the lease (excluding the final paragraph of clause 6) are
admitted, as contained in annexure “SS2”, subject to the content of paragraphs 4.1 to 4.14 above.’

[8] The application failed before Davis J, who dismissed it with costs, but granted
leave to the appellant to appeal to this court. In dismissing the application, the learned
judge reasoned:
‘Given the way in which the provision in respect of which the option for the second renewal was
framed, Mr la Grange, who appeared together with Mr van Loggerenberg on behalf of the
applicant, referred to the Constitutional Court’s decision in Makate v Vodacom Ltd 2016 (4) SA
121 (CC) at para 97 where the court held:
“Currently the position in our common law is that an agreement which was negotiated in good
faith is enforceable if it provides for a deadlock breaking mechanism in the event of the negotiating
parties not reaching consensus.”
In other words, the invalidity of an option to renew a lease agreement that requires the parties to
agree on the rental amount payable during the contemplated renewal period is cured only if there
is a requisite deadlock breaking mechanism contained in the option.
In this connection the decision in Southern Port Developments (Pty) Ltd v Transnet Ltd 2005 (2)
SA 202 (SCA) assumes importance. In Southern Port Developments, supra, the option to renew
a lease agreement contained the following express provision:
“Should the parties be unable to agree on any of the terms and conditions of either the definitive
agreement or of the alternative agreement within 30 days of the date of any notice given by either
such parties to the other of them requiring such agreement then the dispute shall be referred for
decision to an arbitrator agreed on by the parties.”
At para 17 Ponnan JA held:
“The express undertaking to negotiate in good faith in this case is not an isolated edifice. It is
linked to a provision that the parties, in the event of their failing to reach agreement, will refer such
dispute to an arbitrator whose decision will be final and binding. The final and binding nature of
the arbitrator’s decision renders certain and enforceable what would otherwise have been an
unenforceable preliminary agreement.”’

[9] Davis J concluded:
‘On the basis of the law as analysed in this judgment, this dispute is not a case of an agreement
such as that which vexed the Court in Roazar, supra, but rather one that falls within the scope of
a lease which contains a deadlock breaking mechanism. Once it is held that the lease exists and
that the parties needed to employ the contractually created deadlock breaking mechanism, in
respect of implementation it stands to reason that the very basis upon which the applicant’s relief
is predicated is fundamentally flawed. There is no need to exercise a discretion to stay the

proceedings in that the arbitration mechanism needs to be employed. It is the indicated and
intended deadlock breaking mechanism. If the outcome of any arbitration fails to satisfy one of
the parties then an application for review, is of course always open to that party.
Given the approach that I have adopted, there is no need for me to deal with the further defences,
namely of rectification of the contract nor of the existence of the tacit term. In short, there is a
mechanism to resolve the impasse between the parties. It should have been employed.’

[10] In arriving at the conclusion that the application had to fail, Davis J placed much
reliance on Southernport Developments (Pty) Ltd v Transnet Ltd.3 Given the juristic
debate that Southernport appears to have provoked,4 it may be useful to retrace our steps
and revisit some essential propositions. In Hillas & Co Limited v Arcos Limited,5 Lord
Wright expressed the view that:
‘There is then no bargain except to negotiate, and negotiations may be fruitless and end without
any contract ensuing; yet even then, in strict theory, there is a contract (if there is good
consideration) to negotiate . . . .’
That, however, was rejected in Courtney and Fairbairn Limited v Tolaini Brothers (Hotels)
Ltd.6  According to Lord Denning MR:
‘That tentative opinion by Lord Wright does not seem to me to be well founded. If the law does
not recognise a contract to enter into a contract (when there is a fundamental term yet to be
agreed) it seems to me that it cannot recognise a contract to negotiate.’7
Lord Diplock added:
‘I agree and would only add my agreement that the dictum – for it is no more – of Lord Wright . .
. to which Lord Denning MR has referred, though an attractive theory, should in my view be
regarded as bad law.’8

3 Southernport Developments (Pty) Ltd v Transnet Ltd 2005 (2) SA 202 (SCA); [2005] 2 All SA 16 (SCA).
4 In Indwe Aviation v Petroleum Oil and Gas Corporation of SA 2012 (6) SA 96 (WCC) para 23, Blignaut J
stated: ‘The question of the validity of an agreement to negotiate a further agreement has received much
attention in the case law. The former general approach in our law was that an agreement to negotiate a
further agreement is too vague to be enforceable. The judgment of Ponnan AJA in Southernport . . .,
however, is indicative of a more flexible approach.’ See also P Schoeman Agreements to agree in South
African Law – a balancing act between certainty and fairness LLM Dissertation University of the
Witwatersrand (2014); H Schultz ‘What is a lease without rent’ 13(2) Juta’s Business Law 51; C Lewis ‘The
uneven journey to certainty in contract’ (2013) 76 THRHR 80; L T C Harms ‘The Puisne Judge, The chaos
theory and the common law’ (2014) 131 SALJ 3.
5 Hillas & Co Limited v Arcos Limited [1932] All ER 494 at 505-507.
6 Courtney and Fairbairn Limited v Tolaini Brothers (Hotels) Ltd [1975] 1 All ER 716.
7 Ibid at 720.
8 Ibid.

Lawton LJ agreed with both Lord Denning MR and Lord Diplock.

[11] In Walford v Miles,9 the House of Lords affirmed the correctness of Courtney v
Fairbairn. Lord Ackner took the view that:
‘The reason why an agreement to negotiate, like an agreement to agree, is unenforceable is
simply because it lacks the necessary certainty.’

[12] That position obtained in other jurisdictions, such as Canada, New Zealand and
until Coal Cliff, in Australia as well.  In Coal Cliff, Kirby P discussed the principles relating
to contract formation and agreements to negotiate. He recognised that courts will not
enforce an agreement to agree, but observed, after considering the American literature
on the subject, ‘. . . I do not share the opinion of the English Court of Appeal that no
promise to negotiate in good faith would ever be enforced by a court’.10

[13] In United Group Rail Services Limited v Rail Corporation New South Wales,11
Allsop P expressed the view that:
‘[Kirby P], if I may respectfully put it this way, was cautiously, but decidedly, putting the view that
an agreement to negotiate in good faith might be enforceable, depending on its terms and context.
Kirby P was dealing with, if I may say so, the blunt uncompromising and generally expressed
views of Lord Denning and Lord Diplock in Courtney. His Honour was not stating an all
encompassing generalised test or formula.’

[14] In Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd,12 the Court of Appeal
made the point that uncertainty and incompleteness were distinct concepts. Samuels JA
said:
‘However, as I have observed [the] argument on appeal was not that the contract was uncertain,
but, I infer, that it was incomplete, and a contract that is incomplete is one that requires further
agreement; or, in the present case, subsequent negotiation.’

9 Walford v Miles [1992] 2 AC 128; [1992] 1 All ER 453 at 460.
10 Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 24.
11 United Group Rail Services Limited v Rail Corporation New South Wales [2009] NSWCA 177 para 43.
12 Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 343.

Later, he cited with approval the following from Booker Industries Pty Ltd v Wilson Parking
(Qld) Pty Ltd:13
‘It is established by authority, both ancient and modern, that the court will not lend their aid to the
enforcement of an incomplete agreement, being no more than an agreement of the parties to
agree at some time in the future. Consequently, if the lease provided for a renewal “at a rental to
be agreed” there would clearly be no enforceable agreement.’

[15] Allsop P drew on this important distinction in United Group Rail Services Limited.14
He stated:
‘In Trawl, Samuels JA made the valuable point (by reference to the learned authors, Greig and
Davis in their text The Law of Contract) that uncertainty and incompleteness were different
concepts. I agree. Samuels JA also considered that Booker may not be consistent with Kirby P’s
views in Coal Cliff. I disagree. Booker concerned incompleteness; Coal Cliff concerned
uncertainty.’
Allsop P added:
‘Whilst this necessarily incomplete review of authorities reveals that the law in Australia is not
settled as to the place of good faith in the law of contracts, this Court should work from the position
that it has said on at least three occasions . . . that good faith in some degree or to some extent,
is part of the law of performance of contracts.
. . .
‘In relation to Courtney, the reasoning of Lord Denning MR equated an agreement to negotiate
with an agreement to agree. The latter is, of course, not enforceable. . . . It does not follow,
however, that an agreement to undertake negotiations in good faith fails for the same reason. An
agreement to agree to another agreement may be incomplete if it lacks essential terms of the
future bargain. An agreement to negotiate, if viewed as an agreement to behave in a particular
way may be uncertain, but is not incomplete.’15

[16] Thus, although the position in relation to ‘agreements to negotiate in good faith’
remains a complex one in Australia in the light of Coal Cliff Collieries,16 courts there, like

13 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604.
14 United Group Rail Services Limited v Rail Corporation New South Wales [2009] NSWCA 177 para 50.
15 Ibid para 61 and 64.
16 J Carr-Gregg ‘Coal Cliff Collieries v Sijehama’ 1992 AMPLA Yearbook 629. See also Con Kallergis Pty
Ltd (t/a Sunlighting Australasia Pty Ltd) v Calshonie Pty Ltd (Formerly C.W. Norris Pty Ltd), unreported
judgment of the Court of Appeal, Supreme Court of Victoria, 25 March 1997; (1997) 14 BCL 201 (Vic CT
App) at 24 which stated: ‘Some of the writing in this area seeks to suggest that there can be only one

other comparable jurisdictions, will not enforce ‘an agreement to agree’. That accords as
well with the position in our law. As Schutz JA made plain in Premier, Free State, and
Others v Firechem Free State (Pty) Ltd:17
‘An agreement that the parties will negotiate to conclude another agreement is not enforceable,
because of the absolute discretion vested in the parties to agree or disagree . . . . Such a discretion
was vested in the parties as they were to sign “a contract” the precise terms of which were not
fixed in the letter of acceptance, which, unlike the Action Committee’s recommendation, did not
refer to annexure B. As the Tender Board neither awarded a contract for the whole of the Free
State nor exactly followed that Committee’s recommendations as to demarcation, the elusive
annexure B, whatever it did contain, could not have served as the contract to be signed. There
was, accordingly, room for a breakdown in negotiations before a contract was concluded. The
position is similar to that described in Namibian Minerals Corporation Ltd v Benguela Concessions
Ltd 1997 (2) SA 548 (A) at 567A-C:
“Since this provision was couched as a suspensive condition, it cannot, in my judgment, be said
that the parties could have intended to have had a binding agreement simply upon the exercise
of the option. They had expressly agreed that only a fuller arrangement would have bound them
to the joint venture. Fulfilment of the condition was necessary and the condition required
consensus of the parties. It is thus not a case where the exercise of the option would have given
rise to a contract and that other terms would merely have been left for later negotiation and
agreement. I therefore am of the view that the exercise of the option could not have given rise to
a contract with certain or ascertainable terms and that on this ground the “farm-in” clause is void
for vagueness.”’

[17] The proper approach in an enquiry such as the present depends upon the
construction of the particular agreement. Accordingly, it becomes necessary to analyse
the relevant paragraph to decide whether its proper characterisation is merely an
agreement to agree or whether it contained legally enforceable obligations. This was not

answer to the general question whether an agreement to negotiate is enforceable. The discussion by the
members of the courts who decided Coal Cliff and Trawl Industries, as well as the discussion by Giles, J.
of the problems he had to consider in Hooper Bailie and in Elizabeth Bay show that the question may be
more complex than the simple statement of it may suggest and that the answer to the problem may vary
according to the precise terms of the agreement. They suggest that it is only when all of the circumstances
are known that it can be seen whether the obligations of the parties (described as “to negotiate”) can be
identified with certainty.’
17 Premier, Free State, and Others v Firechem Free State (Pty) Ltd 2000 (4) SA 413 (SCA); [2000] 3 All SA
247 (A) para 35.

a case where an external arbitrator was nominated to resolve certain outstanding
differences. An arbitrator would have been ill-equipped to fill in the blanks or resolve the
questions that the parties could not. An arbitrator certainly could not give effect to
arrangements that the parties themselves had not concluded and then require the party,
who is resisting, to continue with the ongoing relationship. Nor, for that matter could the
arbitrator simply invoke certain vague, ill-defined objective standards. But, there is a
further insurmountable difficulty in the path of the respondent in this case. It is this: the
arbitration clause did not survive the agreement. Thus, once the agreement terminated
by effluxion of time, the respondent could no longer invoke the arbitration clause.

[18] In Southernport (para 16), reference was made to the three situations adverted to
by Kirby P in Coal Cliff, namely:
(i)
‘In many contracts it will be plain that the promise to negotiate is intended to be a binding
legal obligation to which the parties should be held. The clearest illustration of this class will be
cases where an identified third party has been given the power to settle ambiguities and
uncertainties. . . . But even in such cases, the court may regard the failure to reach agreement on
a particular term as such that the agreement should be classed as illusory or unacceptably
uncertain. . . . In that event the court will not enforce the agreement’;
(ii)
‘In a small number of cases, by reference to a readily ascertainable external standard, the
court may be able to add flesh to a provision which is otherwise unacceptably vague or uncertain
or apparently illusory. . . ’; and
(iii)
‘Finally, in many cases, the promise to negotiate in good faith will occur in the context of
an “arrangement” (to use a neutral term) which by its nature, purpose, context, other provisions
or otherwise makes it clear that the promise is too illusory or too vague and uncertain to be
enforceable’.

[19] Southernport added: ‘[t]he principles enunciated in Coal Cliff Collieries accord with
our law. The first and third situations alluded to by Kirby P are covered, respectively, by
Letaba Sawmills (supra) and Firechem (supra).’ The agreement in Southernport fell into
the first category. This agreement, like Booker,18 is concerned with incompleteness. It
accordingly falls into the third.19

18 Supra fn 13.
19 See also Roazar CC v The Falls Supermarket CC [2017] ZASCA 166; [2018] 1 All SA 438 (SCA); 2018

[20] It follows that the high court misconceived the enquiry and that its conclusion on
this leg cannot be supported.

[21] Turning to the respondent’s rectification defence: The defence was not raised, as
one would have supposed, right at the outset of the dispute. The respondent only took
issue with the relevant paragraph. For the rest, the agreement would appear to be a true
reflection of the common intention of the parties. Even then, the explanation advanced
for the presence of the relevant paragraph is that it was as a result of a ‘bona fide mistake
or [an] intentional act . . . and does not represent the common intention of the parties’. A
party is entitled to rectification of a written agreement which, through common mistake
incorrectly records the agreement which the parties intended to express in the written
agreement. Here, on Mr Le Roux’s own version, there is no common mistake. Relying on
Gralio (Pty) Ltd v D E Claassen (Pty) Ltd,20 the respondent contended that as the
appellant had not sought a referral to oral evidence, it was entitled on the application of
the Plascon-Evans Rule21 to have the court adjudicate the rectification defence in its
favour.

(3) SA 76 (SCA) para 13, where Tshiqi JA reiterated that ‘As a general rule an agreement that the parties
will negotiate to conclude another agreement is not enforceable because of the absolute discretion vested
in the parties to agree or disagree’.
20 Gralio (Pty) Ltd v D E Claassen (Pty) Ltd [1980] 1 All SA 423 (A); 1980 (1) SA 816 (A) at 824A-C, held:
‘Indeed (leaving aside cases in which the contract is by law required to be in writing), a defendant who
raises the defence that the contract sued upon does not correctly reflect the common intention of the parties,
need not even claim formal rectification of the contract; it is sufficient if he pleads the facts necessary to
entitle him to rectification and asks the Court to adjudicate upon the basis of the written contract relied upon
by plaintiff as it stands to be corrected.’
21 The rule was expressed as follows in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984]
2 All SA 366 (A); 1984 (3) SA 623 (A) at 634-635: ‘. . . where in proceedings on notice of motion disputes
of fact have arisen on the affidavits, a final order, whether it be an interdict or some other form of relief, may
be granted if those facts averred in the applicant's affidavits which have been admitted by the respondent,
together with the facts alleged by the respondent, justify such an order. The power of the Court to give such
final relief on the papers before it is, however, not confined to such a situation. In certain instances the
denial by respondent of a fact alleged by the applicant may not be such as to raise a real, genuine or bona
fide dispute of fact. . . . If in such a case the respondent has not availed himself of his right to apply for the
deponents concerned to be called for cross-examination under Rule 6 (5) (g) of the Uniform Rules of Court
. . . and the Court is satisfied as to the inherent credibility of the applicant's factual averment, it may proceed
on the basis of the correctness thereof and include this fact among those upon which it determines whether
the applicant is entitled to the final relief which he seeks. . . . Moreover, there may be exceptions to this
general rule, as, for example, where the allegations or denials of the respondent are so far-fetched or clearly
untenable that the Court is justified in rejecting them merely on the papers. . . ’.

[22] The fallacy of the respondent’s argument is this; as Streicher JA pointed out in
Boundary Financing v Protea Property:22
‘Rectification of an agreement does not alter the rights and obligations of the parties in terms of
the agreement to be rectified: their rights and obligations are no different after rectification.
Rectification therefore does not create a new contract; it merely serves to correct the written
memorial of the agreement. It is a declaration of what the parties to the agreement to be rectified
agreed. For this reason a defendant who contends that an agreement sued upon does not
correctly reflect the agreement between the parties may raise that contention as a defence without
the need to counterclaim for rectification of the agreement (see Gralio (Pty) Ltd v D E Claassen
(Pty) Ltd 1980 (1) SA 816 (A) at 824A-C).’

[23] Here, acceptance of the respondent’s contention will result not in rectification, but
the creation of a new contract for the parties. Moreover, the respondent relied on the
relevant paragraph in support of its main defence. But, relying on the provision for the
purposes of its main defence and seeking to escape it for the purposes of its alternative
defence is mutually incompatible. ‘No person can be allowed to take up two positions
inconsistent with one another, or as is commonly expressed to blow hot and cold, to
approbate and reprobate’.23 What is more, the defence raised is plainly contrived. To
borrow from Plascon-Evans, the allegations of the respondent are so far-fetched or clearly
untenable that a court would be justified in rejecting them merely on the papers. After all
‘a person who signs a contractual document thereby signifies assent to the contents of
the document, and if these subsequently turn out unfavourably there is no one to blame
but him- or herself’.24

[24] There remains the further alternative defence, namely that ‘it was a tacit term that
the rental, in respect of the last five-year renewal would be a reasonable rental and should
be determined . . .  arbitro boni viri’.  First, this defence is incompatible with the previous
defences. Second, a tacit term, explained Corbett JA,

22 Boundary Financing Limited v Protea Property Holdings (Pty) Limited [2008] ZASCA 139; 2009 (3) SA
447 (SCA); [2009] 2 All SA 7 (SCA) para 13.
23 Hlatswayo v Mare and Deas 1912 AD 242 at 259.
24 G B Bradfield Christie’s Law of Contract in South Africa 7 ed (2016) at 205.

‘. . . is a provision which must be found, if it is to be found at all, in the unexpressed intention of
the parties . . . The Court does not readily import a tacit term. It cannot make contracts for people;
nor can it supplement the agreement of the parties merely because it might be reasonable to do
so. Before it can imply a tacit term the Court must be satisfied, upon a consideration in a
reasonable and businesslike manner of the terms of the contract and the admissible evidence of
surrounding circumstances, that an implication necessarily arises that the parties intended to
contract on the basis of the suggested term.'25
Third, and this flows from the second, no such necessary implication can possibly arise,
because, given the express terms of the agreement there plainly can be no room for
importing the alleged tacit term asserted by the respondent. Indeed, as it was put it
in Robin v Guarantee Life Assurance Ltd:26
‘A tacit term cannot be imported into a contract in respect of any matter to which the parties have
applied their minds and for which they have made express provision in the contract. As was said
by Van Winsen JA in SA Mutual Aid Society v Cape Town Chamber of Commerce 1962 (1) SA
598 (A) at 615D:
“A term is sought to be implied [a tacit term in the terminology of Alfred McAlpine] in an agreement
for the very reason that the parties failed to agree expressly thereon. Where the parties have
expressly agreed upon a term and given expression to that agreement in the written contract in
unambiguous terms, no reference can be had to surrounding circumstances in order to subvert
the meaning to be derived from a consideration of the language of the agreement only. . . .”’
It follows that the further alternative defence must also fail.

[25] In the result:
The appeal is upheld with costs, including those of two counsel.
The order of the court below is set aside and replaced with the following:
‘(a)
The application succeeds with costs, including those of two counsel.
(b)
The respondent and all those holding title under it, if any, are ordered to vacate the
property described as Erf 562, Mbekweni, Paarl, Western Cape Province, situated on the
corner of Jan van Riebeeck Drive and Wamkelekile Street, Mbekweni, Paarl, Western

25 Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration [1974] 3 All SA 497 (A); 1974 (3)
SA 506 (A) at 532G-533A.
26 Robin v Guarantee Life Assurance Co Ltd [1984] 2 All SA 422 (A); 1984 (4) SA 558 (A) at 567C-D. See
also Pan American World Airways Incorporated v SA Fire and Accident Insurance Company Ltd [1965] 3
All SA 24 (A); 1965 (3) SA 150 (A) at 175C.

Cape Province, held by the applicant under title deed number T065358/10 (the property),
within 14 (fourteen) calendar days of the date of this order.
(c)
In the event of the respondent failing to comply with paragraph (b) hereof, the
Sheriff or his/her lawful deputy for the area in which the property is situated is directed to
eject the respondent and all persons and/or entities found to be in occupation of the
property.’

_________________
V M Ponnan
Judge of Appeal

APPEARANCES:

For Appellant:

M H van Heerden SC (with him N J A van Loggerenberg)

Instructed by:

Karel Brink & Associates, Strand

Rosendorff Reitz Barry Attorneys, Bloemfontein

For First to Third Respondents:
J W Olivier SC

Instructed by:

Werksmans Attorneys, Cape Town

McIntyre van der Post, Bloemfontein