Signing Twice On The Dotted Line (Caveat Subscriptor, Quasi-Mutual Assent And Credit Applications Incorporating Suretyships)

• Published date: 10 December 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Trials & Appeals & Compensation
• Law Firm: Bentley Attorneys
• Author: Mr Brett Bentley

A copy of Brett Bentley's article appearing in the October 2005 SA Attorneys Journal De Rebus:

Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA)

The caveat subscriptor doctrine has come under increasing pressure in recent years in favour of purportedly public policy criteria. This doctrine can be traced back in our law to the case of Burger v Central South African Railways 1903 TS 571 in which Innes CJ held that '[i]t is a sound principle of law that a man, when he signs a contract, is taken to be bound by the ordinary meaning and effect of the words which appear over his signature'.

Exceptions to this doctrine have been found in justifiable circumstances and the defence of iustus error in particular under the case in consideration.

In George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A) at 471A-D the application of iustus error was explained as follows:

'When can an error be said to be justus for the purpose of entitling a man to repudiate his apparent assent to a contractual term? As I read the decisions, our Courts, in applying the test, have taken into account the fact that there is another party involved and have considered his position. They have, in effect, said: Has the first party - the one who is trying to resile - been to blame in the sense that by his conduct he has led the other party, as a reasonable man, to believe that he was binding himself? ... If his mistake is due to a misrepresentation, whether innocent or fraudulent, by the other party, then, of course, it is the second party who is to blame and the first party is not bound.'

Coupled to this one must take cognisance of the doctrine of quasi-mutual assent which underlies the doctrine of caveat subscriptor. In Smith v Hughes (1871) LR 6 QB 597 at 607 the doctrine was defined as follows:

'If, whatever a man's real intention may be, he conducts himself in such a way that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms.'

In the recent Supreme Court of Appeal case of Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA) the defence raised by the surety was one of mistake - iustus error. The surety argued that he was unaware that the credit application which he signed incorporated a suretyship. This defence was successfully upheld by the court.

The facts of the case were briefly that Brink, a director of Guzto Log Homes (Pty) Ltd, had signed...