'...[T]ransformative constitutionalism is certainly not an event. It is a process that all wielders of public and private power are duty?bound to advance. Over time, courts will increasingly give effect to the ideals of our Constitution and hopefully to the benefit of all concerned.' ? Moseneke, D "Transformative Constitutionalism: its implications for the Law of Contract" (2009) Stellenbosch Law Review Volume 20, p.12. With reference to the abovementioned extract, discuss the impact of the Constitution on the law of contract. In your answer, you must refer to the impact of transformative Constitutionalism on the cornerstones of the law of contract

in deciding whether or not to enforce the term against the consumer. Will give rise to the legal uncertainty and chaos so feared by the Supreme Court of Appeal in Brisley v Drotsky?138 Will the level of uncertainty be any greater than that flowing from the decision of the Constitutional Court in Barkhuizen v Napier? 139 In light of the courts' traditional reluctance to enforce exemption clauses, at least to their full extent, suppliers might have good grounds for fearing that in future such clauses will afford them little protection against liability for negligence. It may be in their own best interests simply to insure against liability, and to pass the costs of this insurance on to consumers. 1.10 The impact of the Constitution We consider first the question whether the Constitution applies directly to a contractual dispute between private parties, and thereafter the possible ways in which the Constitution may impact upon the law of contract. When the interim constitution " was first enacted, there was much debate as to whether the Bill of Rights applied only vertically (that is, to relationships between the State and the individual) or also horizontally (that is, to relationships between private persons, as in most contractual situations). And if the Bill of Rights did have horizontal application to purely private relationships, the further question arose: did it apply directly, or merely indirectly? By direct application was meant that a litigant could directly invoke a provision of the Bill of Rights to establish a cause of action, or a defence to a claim. For example, if a term of a contract violated one of the fundamental rights protected by the Constitution, direct application would entail that a party could attack the term simply on that ground, and without reference to any rule of the common law. On the other hand, if the Bill of Rights applied only indirectly on the horizontal plane, then any impact that it might have upon a contractual dispute would have to be achieved through an influence exerted upon the common law of contract. In the example given above, the litigant who attacked the contractual term might argue that because it violated a fundamental constitutional right, the term was contrary to public policy and was thus illegal under the common law. In Du Plessis u De Klerk,"" the Constitutional Court finally ruled that the interim constitution did apply to relations between private persons on the horizontal plane, but that in general it did so only indirectly, and not directly. In the result, a litigant could directly invoke a provision of the Bill of Rights against an organ of state, but not against a private person or entity (unless the dispute concerned the validity of legislation or of an executive act, because that would introduce a vertical element to the dispute). The position under the final constitution 42 is in some respects less clear. The supremacy clause (s 2), provides: 'The Constitution is the supreme law of the Republic; law or conduct inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.' This leaves no room for doubt that all law, including the common law of contract, is subject to 138 2002 (4) SA 1 (SCA). 139 2007 (5) SA 323 (CC). 140 Constitution of the Republic of South Africa Act 200 of 1993 (repealed). 141 1996 (3) SA 850 (CC). 142 The Constitution of the Republic of South Africa, 1996.HD 1080 THE LAW OF CONTRACT IN SOUTH AFRICA 38 constitutional control, a position now confirmed by the Constitutional Court. "The validin of all law thus depends on its consistency with the provisions of the Constitution and the Equally clearly, s 39(2) of the Constitution makes provision for indirect horizontal values that underlie it. 144 application of the Bill of Rights: 'When interpreting any legislation, and when developing the common law or customary law, every court, tribunal or forum must promote the spirit purport and objects of the Bill of Rights'. The purpose of s 39(2), the Constitutional Court has said, is to ensure that our common law is infused with the values of the Constitution 145 It imposes an obligation on courts to be alert to the normative framework of the Constitution and to ensure that the rules of the common law conform to the requirements of the Constitution, not only when some startling new development of the common law is in issue but in all cases where the incremental development of a common-law rule is in issue. 146 The common law of contract is shot through with open-ended concepts such as good faith, public policy and reasonableness. These malleable standards afford a ready and convenient means of infusing the law of contract with the spirit and values of the Constitution. PAUSE FOR Developing the common law of contract in line with the Constitution REFLECTION The obligation of the courts to develop the common law of contract where it is deficient in promoting the s 39(2) objectives is a general one, and not purely discretionary. 147 Some commentators appear to believe that the 'broader constitutional project' requires a radical transformation or restructuring of the law of contract. 148 The Constitutional Court, recognising the need for legal certainty ('essential for the rule of law - a constitutional value'), and that our common law principles contain much of lasting value (Age is not necessarily a reason to change. Some of the lessons gained from human experience over the ages are timeless and have passed the logical and moral tests of time!), has recently advocated a much more cautious approach: 'Before a court proceeds to develop the common law, it must (a) determine exactly what the common- law position is; (b) then consider the underlying reasons for it; and (c) enquire whether the rule offends the spirit, purport and object of the Bill of Rights and thus requires development. Furthermore, it must (d) consider precisely how the common law coul be amended; and (e) take into account the wider consequences of the change on that area of law:149 Moreover, said the Court, re separation of powers requires tvalidity CHAPTER 1 THE NATURE AND BASIS OF CONTRACT n and the orizontal What remains still somewhat unclear is to what extent the Bill of Rights finds direct horizontal veloping application. The answer to that question depends upon the interpretation of the application e spirit clause - that is, s 8 - which provides as follows: al Court 1) The Bill of Rights applies to all law, and binds the legislature, the executive, the tion. 45 judiciary and all organs of state. 2) A provision of the Bill of Rights binds a natural or a juristic person if, and to the tution, extent that, it is applicable, taking into account the nature of the right and the of the nature of any duty imposed by the right. issue, When applying a provision of the Bill of Rights to a natural or juristic person in 46 The terms of subsection (2), a court - faith, (a) in order to give effect to a right in the Bill, must apply, or if necessary ment develop, the common law to the extent that legislation does not give effect to that right; and (b) may develop rules of the common law to limit the right, provided that the limitation is in accordance with section 36 ( 1 ). It seems to be generally agreed among the commentators that these provisions permit some degree of direct horizontal application but the extent of that application is uncertain for two reasons. First, s 8(2) makes it clear that not all fundamental rights bind persons in the private sphere: a particular right will apply to them only if and to the extent that it is applicable. Most socio-economic rights, such as the rights to housing and health care, are probably intended to apply only against the State. Secondly, it would seem to be clear from the wording of s 8(3) that when a particular right in the Bill of Rights does find application in the private sphere, it does so through the common law, rather than directly: the court, in giving effect to the right, must apply and if necessary develop the common law. As Cockrell points out, s 8(3): serves to implement a compromise between 'direct' and 'indirect' application of the Bill of Rights, since even if a constitutional right has been found to apply directly against a private person in terms of section 8(2) it is the common law which must be applied or developed in order to give effect to that conclusion. This directive amounts to a claw-back from a position of full-scale direct horizontality, for it instructs that the direct application of constitutional rights against private agencies must be mediated by the intervention of the common law. 151 In Barkhuizen v Napier, 152 a majority in the Constitutional Court expressed grave doubts about the appropriateness of testing the constitutionality of a contractual term directly against a provision in the Bill of Rights. Any attempt to do so, said Ngcobo J, would encounter serious difficulties. If the contractual term limited a right in the Bill of Rights (such as the s 34 right of access to courts in that case), the court would have to enquire whether the limitation could be justified under s 36 of the Constitution. However, s 36 stipulates that a right in the Bill of Rights may be limited only 'in terms of a law of general application', and a term in a contract is self-evidently not such a law. Also presenting difficulties in so far as direct application of the Constitution is concerned, s 172(1)(a) of the Constitution requires a court to declare invalid 'any law or conduct' that is inconsistent with the Constitution, but a contractual term is neither law nor conduct. 151 A Cockrell 'Private law and the Bill of Rights: A threshold issue of horizontality' in Y Mokgoro & P Tlakula (eds) Bill of Rights Compendium (1998) at 3A17. 152 Supra, at pars [23]-[30] of the case. See the discussion of this case in $ 1.8.4 above.THE LAW OF CONTRACT IN SOUTH AFRICA In light of these difficulties, the majority preferred an indirect application of h Constitution to the contractual dispute before them, apparently under s 39(2). The pro Botha v Ri approach to constitutional challenges to contractual terms, said Ngcobo ), is to determet cancellati whether the term challenged is contrary to public policy; and what constitutes public polite would be must today be discerned with reference to the fundamental values embodied in Alread Constitution, and in particular in the Bill of Rights. 153 contract. Only Langa CJ expressed any doubts in this regard. 154 While he agreed that indirect doctrines application under s 39(2) might ordinarily be the best way of addressing the problem, he to be see was not convinced 'that s 8 does not allow for the possibility that certain rights may apply Will t directly to contractual terms or the common law that underlies them'. Ultimately, it made compelle little difference which approach one adopted because in his view the 'distinction between example direct and indirect application would seldom be outcome determinative'. and ther As is evident from the discussion above, the first and most obvious way that the discrim Constitution may have an impact on a contract, whether directly or indirectly, is by rendering this wro unenforceable the contract itself, or some of its provisions. the con Another way in which the Constitution may affect a contract is by rendering invalid the with C exercise of a contractual power by a contracting party (for example, the power to terminate the Cor a contract by giving the other party the requisite notice, or the power to withhold one's applica consent to a sub-letting or to the cession of rights derived from the contract). Traditionally, of his the courts have been reluctant to second-guess the exercise of contractual powers by ordered questioning the substantive manner in which the power has been exercised. For example, if a contract gives a party a power to terminate a contract in certain circumstances, and that power has been exercised, the courts have in the past not concerned themselves too deeply . Bill with the party's reasons for exercising the power; nor have they asked whether the party . Col acted in bad faith, or unreasonably, or immorally, or for some improper purpose in exercising the power. Under the influence of the Constitution, that reluctance seems now to be dissipating, at least to some extent. Way back in 1997, Cockrell predicted 155 that the courts would in future be prepared to intervene if a party to a contract exercised a contractual power in a manner that failed to respect the constitutional rights of the other party, in particular the right not to be discriminated against unfairly (for example, where a landlord terminates an indefinite lease by giving the required period of notice, motivated by the discovery that the tenant is gay; or Figure if he or she withholds permission for the premises to be sub-let because he or she objects to the race or religion of the prospective sub-tenant). That prediction has now been fulfilled. In Bredenkamp v Standard Bank of South Africa Ltd, 156 the Supreme Court of Appeal stated that a prima facie innocent term in a contract would not be enforced if its enforcement would 'unjustifiably affect' an identified constitutional value, and gave the example of a landlord refusing consent to a sub-letting in circumstances amounting to unfair discrimination. Even where no constitutional value was implicated, the court suggested, the exercise of a right to terminate a contract 'for any reason' might be qualified by considerations of good faith: if the right were exercised for 'bad' reasons, this might amount to an abuse of rights. 157 And in 154 Barkhuizen v Napier at par [186]. 153 At pars [29], [30). See also Den Braven SA (Pty) Ltd v Pillay 2008 (6) SA 229 (D) at par [30], where Wallis AJ for similar applies only indirectly to natural or juristic persons in the context of contractual relationships. reasons held that the right embodied in s 22 of the Constitution (freedom to choose a trade, occupation or profession 156 2010 (4) SA 468 (SCA) at par [47]. 157 At par (24] n. 10. See also par (31] n. 11. 155 A Cockrell 'Second-guessing the exercise of contractual power on rationality grounds' (1997) Acto Juridica 26THE NATURE AND BASIS Botha v Rich, 158 as noted earlier, the Constitutional Court went so far as to disallow an act of cancellation for material breach, on the grounds that the consequences of such cancellation would be an unfair and disproportionate penalty for the breach. 159 Already, it will be seen, the Constitution is exerting a strong impact upon the law of contract. How far the courts will be prepared to go in reshaping established principles and doctrines of contract law to conform to the perceived demands of the Constitution remains to be seen. Will the principle of freedom of contract be undermined to the extent that a party is compelled to contract with another, on constitutional grounds? Consider the following example: A refuses B's cash offer to buy her house because she objects to B's race or religion, and then sells the house on identical terms to C. Clearly A's conduct amounts to unfair discrimination in violation of B's right to equality guaranteed by s 9 of the Constitution. For this wrong, B would surely be entitled to damages, if necessary by extending the ambit of the common-law actio iniuriarum. But would a court be prepared to set aside A's contract with C and compel A to sell the house to B? One might think not. However, the decision of the Constitutional Court in Hoffmann v South African Airways 160 suggests otherwise. H's application for employment as a cabin attendant was turned down by SAA on the grounds of his HIV-positive status. The court held that this amounted to unfair discrimination and ordered SAA to make him an offer of employment. CONSTITUTION COMMON LAW CONTRACT . Bill of Rights . Rules and doctrines . Contract provision(s) . Constitutional values shaped by the declared invalid Constitution . Court refuses to enforce Especially through contractual provision concepts like public . Exercise of contractual policy, good faith and power set aside reasonableness . Party compelled to contract with another (?) Figure 1.1 Indirect application of the Constitution to contract COUNTER The decolonisation of South African contract law? POINT Some argue that post-apartheid South African law uses liberal human rights theory to mask continuing hegemonies in society. Critical theorists have drawn attention to the fact that inequality, poverty and social class have a strong racial element in South Africa. 161 Radical black politics has become prominent as a result, including calls for the 'decolonisation of law and legal education'. South Africa's previously revered blend of civil and common law, the product of centuries of development by white jurists, faces new questions as to the role of African law, politics and philosophy in the transformation of law and legal culture, including in contract. Chanock argues convincingly that in the formative early twentieth century, the laws for black and white South Africans were segregated, resulting in (official)