Ruth Eunice Sechoaro v Patience Kgwadi (Case No: 896/2021) [2023] ZASCA 46 (4 April 2023)

Contract law through the cases #4: Unilateral error.

Author

Ross Shepstone
February 09, 2024

Patience Kgwadi (respondent) and her ex-husband, Israel Kgwadi, divorced on 25 October 1991. Their marriage was in community of property, and they jointly owned an immovable property in Boksburg. The divorce settlement did not address the division of this property, but they verbally agreed that each would be entitled to half its value. Israel Kgwadi never paid the respondent her share.

Israel Kgwadi remarried Ruth Eunice Sechoaro (applicant) on 25 September 2010. He made a will bequeathing 50% of his estate to the applicant, provided certain conditions were met.

On 18 July 2012, while the respondent was hospitalized due to a serious motor vehicle accident, she was presented with a document titled 'variation agreement' by a messenger from a law firm. Believing it pertained to the previously agreed terms with her ex-husband, she signed the document without reading it. This document, however, awarded the entire property solely to Israel Kgwadi.

Israel Kgwadi passed away on 29 September 2014. The Master of the High Court appointed an executor for his estate. In 2017, the respondent, as a seller, signed an offer to purchase the property for R550,000.

In January 2018, the respondent was informed by the transferring attorneys that she was not entitled to 50% of the sale proceeds due to the 2012 agreement stating that the property was awarded solely to the deceased.

The respondent challenged the enforceability of the 2012 agreement in the High Court on the grounds that it was signed under a misapprehension and without the intention to be legally bound by its terms, given her medical condition and the lack of explanation of the document's contents at the time of signing.

The High Court found in favor of the respondent, declaring the 2012 agreement unenforceable and ordering that she be paid 50% of the property's sale proceeds. The applicant sought leave to appeal this decision, which was the subject of the Supreme Court of Appeal judgment.

A unilateral mistake (error) in signing a contract can be reasonable (justus) and excusable, allowing a party to repudiate their apparent assent to a contractual term if they were misled into signing the contract under a misapprehension, particularly when the other party has caused the mistake either deliberately or with intent to deceive.

In this case, the respondent signed the 2012 agreement under the belief that it reflected the verbal agreement she had with her ex-husband regarding their joint property. However, the agreement she signed actually awarded the entire property to her ex-husband without any compensation to her, which was wholly inconsistent with their prior agreement. The court found that the respondent's mistake was reasonable given her medical condition at the time of signing and the lack of explanation provided about the document's contents. Furthermore, the ex-husband's actions in presenting the agreement for signature while the respondent was hospitalized and vulnerable were found to be deceptive.

The court held that the respondent did not mislead the ex-husband into believing she intended to be bound by the terms of the 2012 agreement, and therefore, she was not bound by it. The court affirmed that the respondent's unilateral mistake was reasonable and excusable, and as such, the agreement was not enforceable against her. This principle protects parties from being unfairly bound by contracts entered into under mistaken beliefs that were induced by the other contracting party.

"[20] Mr Kgwadi knew, or must have known, contrary to what is stated in the agreement presented to the respondent for signature, that she had not consented to amend their prior agreement that he would pay her 50 % of the value of the property; that he was not entitled to sole ownership of the property; and that there was no basis for depriving the respondent of her share of the property. Consequently, when he received the agreement after the respondent had signed it, Mr Kgwadi knew of her mistake as he was the cause of it. In these circumstances, it cannot be suggested that by signing the agreement, the respondent misled Mr Kgwadi, as a reasonable person, to believe that she was binding herself to its terms and that he was solely entitled to the property, for no value."

This quote encapsulates the court's reasoning that the respondent's mistake in signing the agreement was induced by the actions of Mr. Kgwadi, who presented the agreement under false pretenses. It highlights the court's view that the respondent could not have misled Mr. Kgwadi into believing she intended to be bound by the terms of the agreement, as it was Mr. Kgwadi who orchestrated the situation that led to her mistake. This reasoning is central to the court's decision that the agreement was not enforceable against the respondent.

In its reasoning process, the Supreme Court of Appeal of South Africa referred to the following case law:

1. George v Fairmead (Pty) Ltd [1958] 3 All SA 1 (A); 1958 (2) SA 465 (A). In this case, the court established the principle that a person's unilateral mistake can be justus (reasonable) for the purpose of allowing them to repudiate their apparent assent to a contractual term. The court considered whether the mistaken party, by their conduct, led the other party, as a reasonable person, to believe that they were binding themselves to the contract. If the mistake was due to a misrepresentation by the other party, whether innocent or fraudulent, then the mistaken party is not bound.

2. National and Overseas Distributors Corporation (Pty) Ltd v Potato Board [1958] 3 All SA 13 (A); 1958 (2) SA 473 (A) In this case, Schreiner JA discussed the narrow scope for a defense of unilateral mistake in contract law, particularly when the other party has not made any misrepresentation and was not aware at the time of acceptance that the offer was being accepted under a misapprehension. The mistake must be reasonable (justus) and must be pleaded.