Plaaskem (Pty) Ltd v Nippon Africa Chemicals (Pty) Ltd

The parties concluded a written cooperation agreement on 25 February 2005 under which Nippon Africa Chemicals (the respondent) would facilitate access to imported agricultural chemical products, while Plaaskem (the appellant) would distribute the products locally and pay the respondent 15% of its gross profit on sales attributable to the respondent’s efforts. The contract was silent on its duration. In May 2010 Plaaskem gave written notice purporting to terminate the agreement with effect from 30 June 2010. Nippon Africa Chemicals disputed the validity of the termination, contending that the contract was not terminable on notice and that Plaaskem remained obliged to account for sales after June 2010. The High Court held that the contract was not terminable on reasonable notice. Plaaskem appealed to the Supreme Court of Appeal.

The appeal succeeded with costs. The High Court order was set aside and replaced with a declaration that the agreement contained a tacit term allowing termination by either party on reasonable written notice, and the respondent was ordered to pay the costs relating to the determination of that issue.

The case confirms and consolidates South African law on contracts of unspecified duration, particularly in commercial relationships requiring mutual trust and cooperation. It affirms that such contracts are generally terminable on reasonable notice unless a clear intention to be bound indefinitely can be shown, and provides guidance on the role of commercial efficacy and surrounding circumstances in implying tacit terms.