Minister of Justice and Constitutional Development v C J C Myburgh and Others

The respondents (employees) claimed payment of R318,537.54 pursuant to a collective agreement allegedly incorporated in their employment contracts. After the statement of claim was served, the State Attorney representing the appellant (employer) and the employees' attorney attended a meeting on 28 March 2011. Following this meeting, on 8 April 2011, the State Attorney sent a settlement proposal in the form of a written settlement agreement to the employees' attorney, requesting signed agreements indicating acceptance. The agreement contained provisions requiring signatures for and on behalf of the employer and included clauses that no variation would be effective unless reduced to writing and signed. The employees did not sign the agreement but made a counter-offer, which the State Attorney rejected, advising that the original proposal remained open for acceptance until 12 August 2011, after which it would lapse. On 19 August 2011, after the deadline had passed, the employees accepted the original proposal. The employer disputed entering into the settlement, asserting that the State Attorney lacked authority to negotiate on its behalf and that without the employer's signature there was no binding agreement. The Labour Court made the settlement agreement an order of court.

• Whether a counter-offer destroys the original offer in contract law
• Whether acceptance after the lapse of an offer can constitute a binding contract
• Whether the State Attorney had ostensible or actual authority to bind the employer to a settlement agreement
• Whether the parties intended the contract to be binding only once reduced to writing and signed by both parties
• Whether the Labour Court correctly applied the principles of offer and acceptance
• Whether the Labour Court erred in making the settlement agreement an order of court

The appeal was upheld with costs. The order of the Labour Court was set aside and substituted with an order dismissing the application with costs.

A counter-offer incorporates a rejection and destroys the original offer. Where an offer is repeated after rejection of a counter-offer, it constitutes a new offer. Acceptance after an offer has lapsed constitutes a new offer requiring acceptance by the other party. Once parties have decided that they will reduce their contract to writing and that they will be bound by their written contract (but not by any earlier informal contract), the contract comes into existence when, and only when, the written document containing the terms has been signed by both parties. In determining whether parties intended a contract to be binding only once reduced to writing, the court must examine the objective facts, including the terms of the written agreement, the conduct of the parties, and whether there was evidence of a prior oral agreement. A written settlement agreement prepared by the State Attorney containing signature requirements, non-variation clauses, and terms indicating that writing is essential to validity demonstrates an intention that the contract would only be binding once signed.

The Court observed that the presumption that writing is merely to afford facility of proof of a verbal agreement can be rebutted on the facts of the case in accordance with relevant authorities. The Court noted that the proper analysis of the process of signing a written bipartite contract is that the first party to sign makes an offer and the other by signature accepts. The Court also observed that there was nothing objectively showing that the State Attorney had ostensible or actual authority to conclude the settlement agreement, and that the fact that the State Attorney prepared an agreement for the employer's consideration and signature demonstrated this was a case where no agreement could be concluded until signed.

This case clarifies important principles in South African contract law regarding offer and acceptance, particularly in the context of settlement agreements. It reinforces the principle that a counter-offer destroys the original offer and that acceptance after an offer has lapsed does not create a binding contract. It also confirms that parties are free to agree that their contract will only be binding once reduced to writing and signed, and that the court must examine the objective facts to determine the parties' intention. The case is significant in the labour law context as it establishes that Labour Courts cannot make settlement agreements orders of court where no valid contract has been concluded, and it clarifies the limits of the State Attorney's ostensible authority. The judgment emphasizes the importance of proper authorization in public sector contracting, particularly where departmental budgets are implicated.