In 1995, the respondent (Arnold), a man in his seventies, purchased a used Mercedes-Benz motor vehicle from the appellant (Van der Westhuizen), a conveyancing attorney, for R15,000. The vehicle was sold through an intermediary named Swart. At the time of sale, a written document ("koopbrief") was prepared by the appellant stating that the vehicle was sold "voetstoots" (as is) and that "geen waarborge hoegenaamd aan my gegee is of word deur gemelde verkoper of sy agent(e) nie" (no warranties whatsoever are or have been given to me by the said seller or his agent(s)). The respondent knew the vehicle was in poor condition and accepted responsibility for obtaining a roadworthy certificate. In August 1995, a sheriff arrived with a writ from a bank claiming ownership of the vehicle. To avoid eviction, the respondent paid R14,474.69 to the bank. The vehicle had been registered in the appellant's name as security for a debt owed by Swart. The appellant had never possessed or used the vehicle and believed himself to be the owner, though the bank held superior title.
The appeal was dismissed with costs. The respondent succeeded in his claim for damages based on breach of the implied warranty against eviction.
Where a contract of sale contains an exclusion clause using general language such as "no warranties whatsoever given by the seller", this language does not, without more, exclude liability for breach of the warranty against eviction which arises ex lege (by operation of law). The words "given by the seller" are not apt to exclude a warranty that arises by operation of law and owes nothing to the consensus of the parties. To exclude the implied warranty against eviction, which is a fundamental obligation of the seller to give undisturbed possession, plain and unambiguous language is required that specifically addresses this warranty.
Lewis AJA made observations about the interpretation of contracts generally, noting that the formalistic approach precluding recourse to extrinsic evidence in the absence of ambiguity has been criticized by the courts, and questioning whether the principle is justifiable. She emphasized that background circumstances (matters probably present to the minds of parties when they contracted) should be considered even where wording seems plain, and that surrounding circumstances may be considered where there is uncertainty. She also observed that while South African law does not recognize a doctrine of fundamental breach, courts should be wary of contractual exclusions that deprive parties of common law rights and should construe them carefully, especially if very general in application. Heher AJA (in dissent) addressed the question raised by the Court as to whether grave injustice would result and whether the claim could be treated as one for substitute performance (repayment of purchase price). He concluded that the respondent's claim was properly characterized as damages, not repayment of the price, and that it would be inappropriate for the court to make a case for the parties where they had defined the scope of issues themselves. He noted that while flexibility in applying good faith principles has support in academic writing, the law as stated in Brisley v Drotsky must be applied, and good faith does not exclude consideration of other contractual values such as sanctity of contract.
This case is significant in South African contract law for establishing principles regarding the interpretation of exclusion clauses, particularly those purporting to exclude the implied warranty against eviction in contracts of sale. It confirms that where a seller wishes to exclude liability for breach of the warranty against eviction (which arises ex lege), plain and unambiguous language is required. The case demonstrates the importance of distinguishing between warranties "given" by parties (expressly or tacitly) and warranties that arise by operation of law. It also illustrates different judicial approaches to contractual interpretation: a more literal approach versus one that considers background and surrounding circumstances, and the importance of construing exclusion clauses carefully, especially where they purport to deprive parties of fundamental common law rights. The case provides guidance on when extrinsic evidence may be considered in interpreting contracts, particularly where wording is general or uncertain.