Glowing Rooms (Pty) Ltd v Levin N O & Others

Glowing Rooms (Pty) Ltd (the appellant) leased premises at the Gallery, Milnerton, from the Woodlands Trust (the Trust), whose trustees are the respondents. The first lease commenced on 1 September 2016 for three years. A second lease commenced on 1 September 2019 and terminated on 31 August 2022. The parties negotiated a potential third lease in July-August 2022, but the Trust contended no agreement was reached. The Trust then leased the premises to a third party, Ms Umera, commencing 1 September 2022, with vacant occupation required by 1 January 2023. Glowing Rooms refused to vacate, claiming a new lease had been concluded. The Trust's first eviction application was dismissed by Kusevitsky J on the basis that a lease agreement had been concluded. On 28 October 2022, immediately after this ruling, the Trust sent notice terminating the lease in terms of clause 2.1, which provided for termination on one month's notice. Glowing Rooms again refused to vacate. The Trust instituted a second eviction application relying on clause 2.1. The high court (Savage J) granted the eviction order with a varied date. Glowing Rooms appealed.

• Whether the respondents had repudiated the lease agreement by initially denying its existence in the first eviction application
• Whether the notice of termination in terms of clause 2.1 was valid and unequivocal
• Whether the proper interpretation of clause 2.1 in light of the entire agreement permitted the Trust to terminate the lease on one month's notice without specified grounds
• Whether clause 2.1 was contrary to public policy or constitutional values
• Whether the common law should be developed to impose a duty to negotiate in good faith before exercising a unilateral right to terminate a commercial lease
• Whether the eviction order was properly granted

The appeal was dismissed with costs, save for variation of the eviction date. The order of the high court was substituted to require Glowing Rooms and its employees, agents, assigns and any other occupants to vacate the premises on or before 30 June 2024, with the sheriff authorized to evict on 1 July 2024 or as soon thereafter as possible if voluntary vacation did not occur. Glowing Rooms was ordered to pay costs on the attorney and client scale.

The binding legal principles established are: (1) A party's previous denial of a contract's existence does not constitute repudiation where a court subsequently finds the contract exists and the party then acts in accordance with its terms. Repudiation requires clear and unequivocal conduct assessed objectively, indicating a deliberate intention not to be bound. (2) A notice of termination exercising a contractual right is valid if it is clear and unambiguous; references to an 'alleged' agreement do not invalidate a notice where the contractual basis for termination is clearly stated. (3) In commercial leases between parties with equal bargaining power, a clause permitting unilateral termination on notice (clause 2.1) will be enforced according to its terms. The existence of other termination clauses providing longer notice periods does not restrict the operation of such a clause. (4) Pacta sunt servanda remains a central principle of South African contract law, giving effect to constitutional values of freedom and dignity. Courts will not refuse to enforce contractual provisions in purely commercial contexts on grounds of unfairness, unreasonableness or harshness unless the term is so unfair, unreasonable or unjust as to be contrary to public policy. (5) The common law will only be developed where it is deficient in light of constitutional values. In purely commercial disputes between parties with equal bargaining power where no fundamental rights are at stake, courts will not impose general duties to negotiate in good faith absent a contractual obligation to negotiate.

The Court made several non-binding observations. It noted that where there is a contractual obligation to negotiate, constitutional values would require negotiations be conducted in good faith, but distinguished this from commercial disputes where no such obligation exists (following Everfresh). The Court observed that notions of good faith, fairness and reasonableness play an important role in assessing terms and enforcement of contracts, but have not been elevated to substantive rules of contract and do not provide a free-standing basis for court intervention. The Court also noted that to coerce a lessor to conclude a lease with a party it no longer wants as tenant would be contrary to public policy, citing Rozaar. The Court commented that parties seeking to invoke s 39(2) constitutional development of the common law must properly plead their case in the court of first instance, including any dire consequences, unequal bargaining power, or vulnerability. The Court exercised its discretion to extend the eviction date, observing that three months' notice was not unreasonable to enable relocation, particularly where the tenant had been in occupation for many years, though this concession was not opposed by the respondents.

This case reinforces fundamental principles of South African contract law in the constitutional era. It confirms that the principle of pacta sunt servanda remains central to contract law, giving effect to constitutional values of freedom and dignity. The judgment clarifies that courts will not interfere in commercial contracts freely entered into by parties with equal bargaining power, even where terms allow unilateral termination. It distinguishes between commercial disputes and cases involving fundamental rights or vulnerable parties. The case also provides guidance on the test for repudiation (requiring clear, unequivocal conduct assessed objectively) and the validity of termination notices (must be clear and unambiguous, not conditional or contradictory). Significantly, it reaffirms that South African courts will not develop the common law to impose general duties of good faith negotiation in purely commercial contexts absent a contractual obligation, following Everfresh. The case demonstrates the limited circumstances in which courts will develop common law - only where it is deficient in light of constitutional values and fundamental rights are implicated.