South African Forestry Company Limited v York Timbers Limited

Two long-term contracts concluded in the late 1960s between the South African Government and a private sawmilling company obliged the Government to supply York Timbers Ltd with softwood saw logs from state plantations for an indefinite duration, subject to periodic price revisions. The contracts contained mechanisms for price revision (clause 3.2), continuation and termination (clauses 4.2–4.4), including a role for the responsible Minister in resolving deadlocks. York later took over the purchaser’s rights, and in 1993 the Government transferred its rights and obligations to Safcol under the Management of State Forests Act 128 of 1992. After 1991 York repeatedly refused to agree to price increases that were accepted by all other contractors, paying substantially lower prices and gaining a competitive advantage. Safcol attempted to invoke the contractual and statutory mechanisms for resolving price disputes, but York resisted at every stage, and ultimately the Minister declined to express the opinions contemplated in clause 3.2. Safcol sought a declaratory order that the contracts had terminated, relying on supervening impossibility or, alternatively, York’s breach and repudiation.

The appeal succeeded. The Court upheld Safcol’s cancellation of the contracts on the basis of York’s breach and repudiation, though not on the ground of supervening impossibility.

The case is an important authority on supervening impossibility in South African contract law, particularly the principle that self-created impossibility, including impossibility arising from legislation enacted by a contracting government, does not terminate a contract. It also affirms the role of good faith and reasonableness in the performance of long-term commercial contracts and clarifies that deliberate obstruction of contractual mechanisms may constitute repudiation.