De Swardt v The House of Trucks (Edms) Bpk

The appellant, Mrs Daleen de Swardt, operated a business called Leeukop Boerdery and required fuel tankers for a petrol business. Her husband, acting on her behalf, contacted the respondent (The House of Trucks) on 5 February 2001 to enquire about acquiring Interlink tankers. On 8 February 2001, an oral contract was concluded telephonically between Mr de Swardt and Mr Louis van den Berg of the respondent for the manufacture of two sets of fuel tankers at a price of R512 000 plus VAT. Van den Berg undertook that the tankers would be guaranteed for one year and promised delivery of the first set on 12 March and the second set a week later. The contract was subsequently amended to include meter and hydraulic pump systems. A written quotation dated 28 February 2001 was sent which excluded liability for consequential loss. The tankers were financed through Planet Finance, which purchased the tankers from the respondent and leased them to the appellant. The first set was delivered on 7 April 2001 and the second on 19 April 2001. The tankers manifested defects immediately upon delivery and did not conform to SABS specifications. Despite numerous repair attempts, the tankers remained unfit for use. The appellant cancelled both the contract with the respondent and the lease agreement with Planet Finance, and returned the tankers.

• Whether an oral contract had been concluded between the parties for the manufacture of fuel tankers
• Whether the contract included a one-year guarantee for the tankers
• Whether the respondent was liable for consequential damages resulting from breach of the guarantee
• Whether the written quotation's exclusion clause for consequential loss applied to the contract

The appeal was upheld with costs. The order of the court below (the full court of the Free State High Court) was set aside and replaced with the following declaratory order: 'It is declared that there was a contract between the parties in terms of which the defendant would manufacture for the plaintiff two sets of fuel tankers, which would be under guarantee for a year. The plaintiff is entitled to claim any damages that flow from the breach of the guarantee.'

Where an oral contract for the manufacture of goods includes a guarantee for a specified period, that guarantee entitles the innocent party to claim all damages flowing directly from breach of the guarantee, including loss of profits, without the need to prove that such damages were specially foreseeable or in the contemplation of the parties. The guarantee covers any loss caused by the breach, not merely repair obligations. Ordinary damages include loss of profits flowing from breach of contract. Once a guarantee is proved by the party relying on it, that party is entitled to claim any damages that can be proved to have resulted from breach of the guarantee.

The court noted that although the appellant argued there was also an agreement for consequential damages because the respondent knew the tankers were needed to fulfil existing fuel transport contracts, it was not necessary to determine this issue given the court's finding on the scope of the guarantee. The court also observed that the appellant's pleadings did not make entirely clear the financing arrangement involving Planet Finance, although the inference could be drawn from the evidence that the respondent sold the tankers to Planet Finance, which in turn leased them to the appellant. The court did not address the issues of whether the tankers were actually defective or whether cancellation was justified, as these matters had been separated by the trial court for later determination.

This case is significant in South African contract law for several reasons: (1) It affirms the enforceability of oral contracts and demonstrates that conduct (such as commencing manufacture) can confirm the existence of a binding agreement. (2) It clarifies the scope of guarantees in manufacturing contracts, distinguishing between mere repair obligations and broader liability for losses. (3) It provides guidance on the recoverability of damages for breach of guarantee, holding that ordinary damages (including loss of profits) flowing directly from breach of a guarantee are recoverable without needing to prove special foreseeability. (4) It demonstrates that subsequent written quotations do not necessarily supersede or modify earlier oral agreements unless there is evidence of such intention. (5) The case illustrates the importance of calling evidence to controvert factual allegations, as the respondent's failure to testify resulted in the appellant's evidence being accepted.