Limiting The Pacta Sunt Servanda?

• Published date: 08 December 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Contracts and Commercial Law, Arbitration & Dispute Resolution
• Law Firm: Schoemanlaw Inc.
• Author: Ms Thandi Makasi

When two parties conclude a contract, the terms and conditions of the contract are the rules that will govern the relationship between the parties. Once the contract is signed, rights and duties are created, and the parties will remain liable thereto until the contract is terminated. In this article, I will be exploring the principle of the Pacta Sunt Servanda (sanctity of a contract), which indicates that contracts freely entered into must be kept and the role of good faith in the law of contract.

Pacta Sunt Servanda

Pacta Sunt Servanda is one of the cornerstones of the law of contract. According to Pacta Sunt Servanda, parties to a contract have the freedom to choose with whom they wish to conclude a contract and the terms and conditions of that contract¹. The effect of this principle is that when parties conclude a contract legally and voluntarily, the contract must be strictly enforceable on the parties with as minimal judicial interference as possible.

In giving effect to this principle, the courts are required to recognize the sanctity of a contract and therefore, they must strictly rely on the provisions of the contract when determining the enforceability of the contract². Thus, if a dispute were to arise regarding the contract, a court may not rely on its judicial discretion when reaching a decision (subject to certain exceptions).

Public Policy and Good Faith

Although the parties to a contract are given the freedom to decide the terms and conditions of a contract independently, those terms and conditions may not interfere with public policy. If the terms and conditions of the contract are deemed to be grossly exploitive of one of the parties or unconscionable, then those terms will have violated public policy.³

Additionally, Good faith is a principle used to acknowledge the opinions of the general public when determining what is fair, reasonable and just. Good faith is based on the idea that the parties to a contract should behave in a manner that is honest and fair when executing their duties towards each other. The court in Eerste Nasionale Bank van Suid Afrika Bpk v Saayman, stated that the function of...