As a general principle, courts seek to enforce contracts, irrespective of its content. The applicable Latin phrase pacta sunt servanda literally means “agreements must be kept”. However, this does not mean that the courts will enforce unfair contracts.
In some instances, contractual unfairness derives from inequality in the bargaining power of the respective parties. This may be demonstrated, for example, by a situation where a contract is entered into for the recovery of a vehicle at night. In all probability, a helplessly stranded and somewhat apprehensive customer may accept almost any terms offered at that particular time in order to procure safe transportation. Although perhaps not quite forced, the customer may feel compelled under the circumstances to accept onerous terms, such as undertaking to pay a recovery fee exponentially higher than the current market-related tariff and at an exorbitant interest rate. Thus, the recovery contract is hastily signed, merely not to be left alone in the dark. In the event, the terms imposed by the recovery company may be found to be unconscionable or oppressive and may cause a court to grant an order that the customer will not be bound to the obligation of paying the unreasonable price and interest rate.
When faced with unconscionable or oppressive terms, a court will only interfere in a contract if it concludes that enforcement thereof will be against public policy. When making such determination, the court will take into consideration the circumstances at the time enforcement of the contract is sought.
A contract may also be found to be unfair when it is sought to be enforced under circumstances which were not envisaged at the time the contract was entered into or when a contract was entered into under duress or as a result of undue influence. When a contract is found to contain irreconcilably ambiguous material, the court may construct the contract contra proferentum. This is to say that, if the wording of the contract is incurably ambiguous, it will be interpreted in favour of the non-authoring party. The reasoning being, that the author is considered to have been in a more favourable position to make his meaning clear at the time of drafting. Further remedies to unfair contracts can also be found in recent consumer law such as the National Credit Act and Consumer Protection Act.
As confirmed by RMI4Law’s statistics, these legal intricacies unfortunately adversely affect business owners on a daily basis, as the interpretive tendencies applicable to standard business contracts seem to favour the consumer. It may therefore be advisable to have such contracts reviewed by a specialist attorney in order to limit exposure to disputes as a result of an unfair contract.
RMI4law members enjoy the benefit of legal advice from an attorney 24 hours a day. If you wish to join RMI4law, call 0861 668 677.
Andries Stander is an attorney at Barnard Incorporated in Centurion.