Essence

Drafting reasonable restraint provisions is intended to secure the best protection for clients in the future and this ability is limited

Decision

Den Braven S.A. (Pty) Ltd v Pillay

(2899/2008) [2008] ZAKZHC 22; 2008 (6) SA 229 (D); [2008] 3 All SA 518 (D) (27 March 2008). 

Reasonable restraint of 8 months imposed.

Judges

MJD Wallis AJ (as he then was)

Significance

Important judgment showing considerable appreciation for the difficulty practitioners have in drafting agreements containing provisions and trying to anticipate issues that may arise in the future concerning unlawful competition.
Discussion by GilesFiles

Excerpt

from Bredenkamp and Others v Standard Bank of SA Ltd 2010 (9) BCLR 892 (SCA) per LTC Harms DP.

First principles

[36]   It is unfortunately necessary to say something about the much maligned principle that contracts have to be respected. Davis J, for instance, took issue with “contractual autonomy” because it reflects in his view a libertarian view of the world which is in conflict with the spirit of the Constitution read as a whole.25 This led to a counter by Wallis J26 and a riposte by Davis J.27

[37]   Much has been said about pactum sunt servandum as a holy cow. It may have been one during Germanic and early Roman times when the law “laboured under the tyranny of the word and the rule of formalism”.28 It has not been a holy cow nor has contractual autonomy existed since the time of Justinian. The maxim was derived from Codex 2.3.7 where in a particular context two Emperors had said that “pacti conventionisque fides servanda est”.29 Codex 2.3.6, stated that it is a self-evident principle that contracts (pacta) concluded contrary to laws, imperial constitutions,30 or the boni mores are of no force or effect. See also Codex 2.3.29.31

[38]   This Court in Sasfin32 consequently restated the obvious, namely that our common law does not recognise agreements that are contrary to public policy. Our courts have always been fully prepared to reassess public policy and declare contracts invalid on that ground.33 Determining whether or not an agreement was contrary to public policy requires a balancing of competing values. That contractual promises should be kept is but one of the values. Reasonable people, irrespective of any philosophical or political bent, might disagree whether any particular value judgment was “correct”, ie, more acceptable.34 Didcott J, for one, believed in relation to restraint of trade cases that the sanctity of contract trumped freedom of trade whereas AS Botha J (a former member of this Court who also died recently) together with Spoelstra AJ, thought otherwise while Vermooten J agreed with Didcott J.35

The view of Didcott J was eventually adopted by this Court in Magna Alloys.36 The disagreement in Sasfin (supra) between the majority and the minority did not affect the principle but its application to particular clauses and severability. Public policy considerations are also not static and their weight may change as circumstances change.

[39]   Others have spoken more eloquently about the interaction between the Constitution and the common law, more particularly the law of contract, but I shall attempt to state the basics that have become trite but may not always have been observed. The common law derives its force from the Constitution and is only “valid” to the extent that it complies or is congruent with the Constitution. Every rule has to pass constitutional muster.

Public policy and the boni mores are now deeply rooted in the Constitution and its underlying values. This does not mean that public policy values cannot be found elsewhere. A constitutional principle that tends to be overlooked when generalised resort to constitutional values is made is the principle of legality. Making rules of law discretionary or subject to value judgments may be destructive of the rule of law.”

Note: Footnotes omitted.

Quotations from judgment

Note: Footnotes omitted and emphasis added