Van Reenen Steel (Pty) Ltd v Smith NO and Another (97/2001) [2002] ZASCA 12; 2002 (4) SA 264 (SCA) (25 March 2002)

Van Reenen Steel (Pty) Ltd v Smith NO and Another (97/2001) [2002] ZASCA 12; 2002 (4) SA 264 (SCA) (25 March 2002)

The Supreme Court of Appeal held that a contract is not vitiated by the failure of a common assumption relating to an existing or past fact unless the parties have expressly or tacitly agreed that the validity of the contract is conditional upon the existence of that state of affairs. In this case, the contract between the parties contained express provisions limiting warranties and indemnities to those set out in the agreement and the 1997 audited financial statements. The balance sheet of 31 March 1998 was not incorporated as a warranty or condition. The appellants undertook their own due diligence and assumed the risk regarding the viability of the business. The doctrine of error in...

Citation
[2002] ZASCA 12
Parties
Appellant: Van Reenen Steel (Pty) Limited; Respondent: Errol John Barnes Smith NO; Respondent: Richard Rosso
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
25 March 2002
Case Number
97/2001
Procedural Posture
Civil Appeal / Appeal From High Court Judgment
Outcome
Appeal dismissed with costs.
Judges
Harms, Mpati, Brand, Nugent, Lewis
Legal Topics
Mistake in Contract, Common Assumption, Contractual Warranties, Error in Substantia
Commercial and Corporate Mistake in Contract Common Assumption Contractual Warranties Error in Substantia

Case Brief

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Parties

Van Reenen Steel (Pty) Limited

Appellant

Errol John Barnes Smith NO

Respondent

Richard Rosso

Respondent

Procedural Posture

Civil Appeal / Appeal From High Court Judgment

Legal Issues

  1. 1 Whether a contract is vitiated by the failure of a common assumption relating to an existing or past fact when such assumption is not elevated to a term or condition of the contract.
  2. 2 Whether the absence of warranties or indemnities beyond those contained in the audited financial statements affects the validity of the contract.
  3. 3 Whether the doctrine of error in substantia applies to vitiate the contract.

Ratio Decidendi

The Supreme Court of Appeal held that a contract is not vitiated by the failure of a common assumption relating to an existing or past fact unless the parties have expressly or tacitly agreed that the validity of the contract is conditional upon the existence of that state of affairs. In this case, the contract between the parties contained express provisions limiting warranties and indemnities to those set out in the agreement and the 1997 audited financial statements. The balance sheet of 31 March 1998 was not incorporated as a warranty or condition. The appellants undertook their own due diligence and assumed the risk regarding the viability of the business. The doctrine of error in...

Court Disposition

Appeal dismissed with costs.

Orders

  • The appeal is dismissed with costs.
  • The agreement between the parties is declared to be of full force and effect.