The first and second appellants were private companies that hired premises from Old Mutual (the respondent) in Riverside Mall, Nelspruit to operate restaurants. The third and fourth appellants (Messrs Vosloo and Steyn) stood surety for the companies' lease obligations. During negotiations with Colliers RMS (Old Mutual's letting agent), Mr Dukes informed Steyn that Old Mutual's policy was that no Spur Restaurant would operate in the Mall. Steyn signed the offers to hire on 12 December 1997 on behalf of the companies. Old Mutual accepted the offers on 8-9 January 1998. However, on 11 February 1998, Old Mutual decided in principle to allow a Spur restaurant in the Mall. The next day, when Steyn asked Dukes about rumours of a Spur, Dukes categorically denied it. Based on this assurance, Vosloo and Steyn signed the lease agreements. Old Mutual only signed the leases in December 1998 through Mr Stuart-Finlay, who had no intention of granting exclusive trading rights or excluding a Spur. A Spur restaurant did operate in the Mall during the entire lease period. The leases contained clause 5.1 acknowledging no exclusive trading rights. Old Mutual sued for arrear rentals, while the companies counterclaimed for damages and sought rectification of the leases to exclude Spur restaurants.
The appeal was dismissed with costs. The court upheld the Pretoria High Court's refusal to grant rectification of the lease agreements.
For rectification of a written contract to be granted, it must be established that the written instrument did not correctly express what the parties intended to set out in that written document. There is a critical distinction between authorizing an agent to convey a principal's current policy (where the principal retains the right to change its mind) and authorizing an agent to agree to contractual terms (where the principal becomes bound). An agent's communication of a principal's policy, without authority to agree to contractual terms, cannot constitute an agreement by the principal or create a representation binding on the principal that entitles the other party to rectification of a subsequently executed contract, even where the principal's policy changes between the communication and execution of the contract, and even where the agent fraudulently misrepresents that the policy remains unchanged.
The court noted that proof of an antecedent agreement may be the best proof of common intention that parties intended to express in their written contract, and in many cases would be the only proof available, but there is no reason in principle why that common intention should not be proved in some other manner, provided such proof is clear and convincing (citing Meyer v Merchants' Trust Ltd 1942 AD 244 at 253). The court also applied the principle from Ravene Plantations Ltd v Estate Abrey 1928 AD 143 at 154 regarding fraudulent misrepresentation by agents without authority, though the specific application was part of the ratio rather than obiter.
This case is significant in South African contract law for clarifying the requirements for rectification of written contracts. It establishes important principles regarding the law of agency, particularly the distinction between an agent's authority to communicate a principal's current policy versus authority to bind the principal contractually to that policy. The case reinforces that rectification requires proof that the written document failed to express what both parties intended to incorporate in the written instrument at the time of contracting. It demonstrates that statements by agents without contractual authority, even if fraudulent, cannot form the basis for rectification of a contract subsequently signed by the principal with different intentions. The judgment is important for commercial leasing arrangements and the 'tenant mix' policies commonly employed in shopping centres.