Hugo, Kirsten & Kirsten (Pty) Ltd v Collotype Labels (Pty) Ltd (323/2019) [2020] ZASCA 21 (25 March 2020)

Hugo, Kirsten & Kirsten (Pty) Ltd v Collotype Labels (Pty) Ltd (323/2019) [2020] ZASCA 21 (25 March 2020)

Clause 3 of the lease agreement is void and unenforceable because it merely provides for the negotiation of a new lease and does not constitute a binding option. Its vagueness and lack of a deadlock-breaking mechanism render it unenforceable. However, clause 3 is not a material term upon which the validity of the lease depends. The principal purpose of the agreement was to establish a lease for a fixed period, and clause 3 was incidental to that purpose. The parties would have entered into the lease even without clause 3, as evidenced by their conduct and the contextual background. Therefore, the invalidity of clause 3 does not affect the enforceability of the remainder of the lease.

Citation
[2020] ZASCA 21
Parties
Appellant: Hugo, Kirsten & Kirsten (Pty) Ltd; Respondent: Collotype Labels (Pty) Ltd
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
25 March 2020
Case Number
323/2019
Procedural Posture
Civil Appeal / Appeal From Western Cape Division of the High Court, Cape Town
Outcome
Appeal upheld; order of the court below set aside; questions on clause 3 answered in favour of the appellant.
Judges
Cachalia, Zondi, Plasket, Dlodlo, Mbatha
Legal Topics
Lease Agreement, Option to Renew, Severability of Contract, Void for Vagueness
Land and Property Commercial and Corporate Lease Agreement Option to Renew Severability of Contract Void for Vagueness

Case Brief

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Parties

Hugo, Kirsten & Kirsten (Pty) Ltd

Appellant

Collotype Labels (Pty) Ltd

Respondent

Procedural Posture

Civil Appeal / Appeal From Western Cape Division of the High Court, Cape Town

Legal Issues

  1. 1 Is clause 3 of the lease agreement void and unenforceable due to vagueness?
  2. 2 Does the invalidity of clause 3 render the entire lease agreement unenforceable?

Ratio Decidendi

Clause 3 of the lease agreement is void and unenforceable because it merely provides for the negotiation of a new lease and does not constitute a binding option. Its vagueness and lack of a deadlock-breaking mechanism render it unenforceable. However, clause 3 is not a material term upon which the validity of the lease depends. The principal purpose of the agreement was to establish a lease for a fixed period, and clause 3 was incidental to that purpose. The parties would have entered into the lease even without clause 3, as evidenced by their conduct and the contextual background. Therefore, the invalidity of clause 3 does not affect the enforceability of the remainder of the lease.

Court Disposition

Appeal upheld; order of the court below set aside; questions on clause 3 answered in favour of the appellant.

Orders

  • The appeal succeeds with costs, including the costs of two counsel.
  • The order of the court below is set aside and replaced with the following order: (a) The questions formulated as the separated issues in terms of rule 33(4) of the Uniform Rules of Court are answered as follows: (i) clause 3 of the lease agreement is void and unenforceable; (ii) the invalidity of clause 3 does not...