Gridmark CC v Razia Trading CC

The appellant sold its business, Yorkers Superette, to the respondent on 15 February 2013 for R850 000.00. Payment was to be made with R500 000.00 within 5 days and the balance in four equal monthly instalments. An addendum on 25 February 2013 reduced the balance to R302 209.33. The respondent paid the R500 000.00 but failed to pay the balance in the agreed manner, making only three partial payments totalling R50 000.00 in April 2013, leaving R252 209.33 outstanding. On 4 May 2013, the respondent offered to settle by paying R150 000.00 in three instalments. On 6 May 2013, the appellant counter-offered to accept R150 000.00 if paid by 10 May 2013. The respondent failed to pay by this deadline. Instead, on 11 May 2013, the respondent offered to pay R150 000.00 in two instalments, which the appellant rejected. Despite this rejection, the respondent made three further payments totalling R150 000.00 between 15 May and 4 June 2013, and then refused to pay the remaining balance of R102 209.33. The appellant sued for R100 000.00 (abandoning R2 209.33 to stay within magistrates' court jurisdiction). The respondent raised a special plea alleging a compromise had been effected.

• Whether a valid compromise was effected through the correspondence exchanged between the parties
• Whether acceptance of payments constituted acceptance of an offer to compromise
• Whether the requirements for a valid compromise were met, including absolute, unconditional and identical acceptance of an offer

1. The appeal was upheld with costs. 2. The order of the Western Cape Division of the High Court was set aside and replaced with an order that: (a) the appeal is upheld with costs; (b) the order of the magistrates' court is set aside and replaced with an order dismissing the special plea with costs.

A compromise, being a form of novation, must be clearly and unambiguously proved. For a valid compromise to be effected, the acceptance must be absolute, unconditional and identical with the offer. If the acceptance seeks to add, subtract or modify any terms contained in the offer, it constitutes a counter-offer rather than acceptance, and no consensus is reached. A counter-proposal regarding performance obligations, such as altering the timing or manner of payment, is a material variation that prevents formation of a compromise agreement. The onus of proving that a compromise has been effected rests on the party alleging its existence. Acceptance of payments made after rejection of settlement offers does not constitute acceptance of those offers; in the absence of a valid compromise, the creditor is entitled to appropriate such payments against the original debt.

The court made observations distinguishing the present case from Absa Bank Ltd v Van der Vyver NO 2002 (4) SA 397 (SCA), noting that in that case the cheque was offered in full and final settlement contemporaneously with the settlement offer and was then deposited, creating the impression of acceptance. The court also observed that the argument that payments received from the respondent should have been returned in the absence of a compromise was without merit, given that under the original agreement the appellant was still owed money towards the purchase price.

This case is significant in South African contract law as it clarifies the strict requirements for a valid compromise agreement. It reinforces the principle that acceptance of an offer to compromise must be a mirror image of the offer, and that any variation or counter-proposal constitutes a counter-offer rather than acceptance. The judgment emphasizes that compromise, being a form of novation involving waiver of existing rights, must be clearly and unambiguously proved. It also provides guidance on the distinction between acceptance of payments and acceptance of a settlement offer, clarifying that acceptance of payments in the absence of a valid compromise agreement does not create a binding compromise. The case serves as an important reminder that parties seeking to establish a compromise must show absolute, unconditional and identical acceptance of the offer.