March 3, 2017

Can an oral agreement carry as much weight as a written agreement?

FRANK SETATI

According to the long-standing Shifren principle, an oral variation of a written agreement (made an order of the court) is rendered invalid if the written agreement includes a non-variation clause. The principle was established and entrenched in the Appellate decision of Shifren and Others v SA Sentrale Ko-op Graanmaatskappy Bpk 163 (2) SA 343 (O).

The principle is premised on the notion that any attempt by any party to the agreement to vary it will be without legal force unless it is written and signed by all parties, except for instances where variation is made by a court order. A non-variation clause in an agreement not only entrenches all the terms of the contract, therefore rendering them non-variable by oral means, but also entrenches itself. Any variation to the clause itself must also be in writing.

In terms of this principle, “contracting parties may validly agree in writing to an enumeration of their rights, duties and powers in relation to the subject-matter of a contract, which they may alter only by again resorting to writing”. Admittedly, there are instances where this principle may lead to inequitable results and therefore against public policy, for example when it throttles parties’ abilities to change their minds (for example, when circumstances change) and vary contracts once they are signed. The paradox here is that the principle is itself a brew and an expression of public policy and indeed a manifestation of the parties’ contractual freedom in that those parties signify by their election when incorporating such non-variation clause their need to bring about certainty in their contractual affairs and hence minimise any future disputes between the parties.

The Shifren principle is often tested by the courts, and came under scrutiny once again in the Supreme Court of Appeals decision of GF v SH, where the two parties married each other on 21 March 1992 and had two minor children. Their marriage was dissolved by means of a High Court order which incorporated a settlement agreement which was made an order of the court. In terms of this agreement, custody was awarded to the mother, subject to the father’s right of reasonable access to his children. Clauses 4 and 6 of the agreement provided for maintenance of the children and payments relating to their medical needs. Clause 9, a non-variation clause, provided that “save for the above, the provisions of this agreement shall not be capable of being varied (save by a court of competent jurisdiction), amended, added to, supplemented, novated, or cancelled unless this is contained in writing and signed by both parties.

After some time, the former couple, having consulted a mediator, orally agreed on 11 August 2008 to vary the maintenance order. The details of their oral agreement were set out in a letter from the mediator. The father would no longer pay maintenance directly to the mother, but instead pay or provide for the children’s needs directly, either to them or their service providers, as the children now lived with their father, and not their mother as initially provided for in the settlement agreement.

In this appeal from a High Court decision, it was found that public policy (in this case, the interests of the minor children) dictated that the proverbial Shifren shackle should be relaxed in instances where it leads to inequitable results.

While the Shifren Principle is undoubtedly entrenched in our law, the principle is itself a manifestation and reflection of public policy in that it brings about certainty in agreements. It will, therefore, be relaxed in appropriate circumstances when public policy demands.

If parties wish to vary their agreements, they are advised to do so in writing to avoid the cumbersome and onerous eventuality of having to resort to courts to vindicate their rights when a written agreement was varied by oral means.

If you require assistance in varying an agreement you are party to, contact our offices today.

Robin Twaddle & Associates ©2017, All rights reserved. - Disclaimer