Browsing by Author "Naude, Tjakie"

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    The legal nature of preference contracts
    (Stellenbosch : Stellenbosch University, 2003-04) Naude, Tjakie; Lubbe, G. F.; Stellenbosch University. Faculty of Law. Department of Private Law.
    ENGLISH ABSTRACT: The various constructions of rights of pre-emption encountered in South African case law all have some merit. This is confirmed by the multiplicity of types of preference contracts encountered in German law especially. The tendency of South African courts and writers to portray one approach as the only correct one to the exclusion of all other views, results in tension and confusion, all the more because of the failure to investigate the relevant policy considerations comprehensively. The confusion is compounded by what amounts to a breakdown of the system of precedents with judgments being based on incorrect interpretations of previous decisions and with scant regard for contrary decisions. No certainty exists regarding the construction of the contractual right of pre-emption in Roman and Roman-Dutch law, nor is it clear what figure or figures were received into South African law. The Germanic concept of tiered ownership that forms the historical basis for the Oryx remedy, does not form part of our law. This accounts for the difficulty that courts and writers have in explaining this remedy in terms of Romanist terminology, and the resort to the language of fiction. German law and English law, relied upon in South African case law, do not support a uniform construction of all rights of pre-emption as creating an enforceable duty to make an offer upon manifestation of a desire to sell. The almost unanimous support of US courts for a remedy by which the holder can ultimately obtain performance of the main contract upon conclusion of a contract with a third party, challenges the hypothesis suggested by German law that the default construction of preference contracts should be the bare preference contract which only creates a negative obligation. The very cryptic way in which rights of pre-emption are normally drafted, makes it difficult to even identify the main purpose of the parties. It is therefore not easy to classify preference contracts into the different types identified in this study as notional possibilities. A default regime is therefore highly desirable in the interest of legal certainty. The choice of a default regime should be made on the basis of recognised policy considerations, particularly on the basis of an equitable balancing of typical parties' interests and in view of communal interests balanced against the demand for legal certainty. The choice of default regime cannot be based merely on historical authority or precedent (which is in any event unclear in the present context) or unsubstantiated claims that one model is more logical or commercially useful than another. When rules are chosen as the default regime, these rules must, as far as possible, be reconciled with the existing conceptual structure of our law to prevent contradictions and inconsistencies. A policy analysis reveals that three default types of preference contract should be recognised, each with a clearly delineated field of application. Firstly, where the agreement allows the grantor to contract with a third party, the holder has the right to contract with the grantor at the terms agreed with the third party. Such a preference contract can therefore be regarded as an option conditional upon conclusion of a contract with a third party. Such contracts are rare in South Africa. In other cases, the default rule should be that the grantor must first give the holder an opportunity to contract before he contracts with a third party. The default construction of this latter type of preference contracts depends on whether the preference contract itself predetermines the main contract price. If so, the holder has a right or option to contract at that price upon any manifestation of a desire to conclude the relevant type of contract. However, where the preference contract does not predetermine the price, or refers to a price that the grantor would accept from third parties, any manifestation of a desire to sell should not be sufficient to trigger the holder's right. The grantor and society have an interest in having her freedom to negotiate with third parties to obtain the best possible price curtailed as little as possible. In such cases, the default rule should be that the holder is only entitled to conclusion of the main contract upon breach in the form of a contract with or offer to a third party. The default rule should also be that such preference contracts - which will be treated as ordinary preference contracts - only terminate upon the grantor actually contracting with and performing to a third party within a reasonable time after the holder declined the opportunity to match those terms, and provided the identity of the third party was disclosed to the holder on request. The holder therefore cannot lose his preferential right by a rejection of an outrageously high offer by the grantor. Options and preference contracts are closely related and overlapping concepts. The type of preference contract that grants a conditional right to contract can often be understood as a conditional option (or at least as a conditional option subject to a resolutive condition that the grantor does not want to contract anymore). The traditional distinction between options and rights of first refusal can only be maintained in respect of some types of preference contracts. These are negative or bare preference contracts which only give rise to remedies aimed at restoring the status quo ante the breach, as well as those preference contracts creating conditional rights to contract which courts refuse to treat as conditional options because their wording implies a duty to make or accept an offer, or because the requirement of certainty precludes them from being options.
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    Unfair contract terms legislation: the implications of why we need it for its formulation and application
    (Juta Law Publishing, 2006) Naude, Tjakie
    INTRODUCTION: Legislative control over unfair contract terms is regarded in many countries as an essential tool in the law’s response to the abuses attendant upon the use of non-negotiated or standard contract terms. Some countries go further and extend statutory fairness control to negotiated terms. The need for unfair contract terms legislation has also repeatedly been pointed out in South Africa, including by a few judges and the Law Commission in their 1998 Report on Unreasonable Stipulations of Contracts and the Rectification of Contracts.
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    The use of black and grey lists in unfair contract terms legislation : a comparative perspective
    (Juta Law, 2007-01) Naude, Tjakie
    This contribution considers the mechanism of lists of prohibited and suspect terms ('black lists' and 'grey lists') in unfair contract terms legislation from a comparative perspective. It sets out the arguments in favour of the use of black and grey lists and considers and rejects criticism against their use. A comparative study leads to identification of general principles relevant to the drafting of lists. Some of the questions discussed are whether lists should be confined to consumer contracts and non-negotiated terms and whether and how a grey list should affect the burden of proof, on both of which international practice diverges. Finally, fourteen categories of terms which are commonly listed in various countries' legislation are identified and discussed.
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    Which transactions trigger a right of first refusal or preferential right to contract
    (Juta Law, 2006-01) Naude, Tjakie
    This contribution considers the delineation of the transactions that breach or 'trigger' a right of first refusal, thereby giving its holder the right to exercise his right and to enforce the main contract. Examples of questions on which there is either scant, conflicting or unpersuasive South African authority in this area include the effect of an involuntary sale on a right of pre-emption, of non-arm's length transactions between commercially related parties, and of an undertaking by the third party to render some unique performance which the holder cannot match. A comparative study of German and American law leads to proposals for residual rules on these and other contentious issues, including the effect of a 'package deal', that is, where the grantor of a right of pre-emption purports to sell the pre-emption property to a third party as part of a larger package. The article also seeks to encourage drafters of first refusal agreements to consider the appropriateness and cost-effectiveness of initiating negotiations on the areas of uncertainty and of drafting accordingly.