Wafai and Others v SA Casual Dining Concepts (Pty) Ltd and Another (7609/2023) [2023] ZAWCHC 333 (6 December 2023)

The case involves a dispute between the Applicants, Amir Wafai, Myrell Wafai, and Arianogen (Pty) Ltd, and the Respondents, SA Casual Dining Concepts (Pty) Ltd and Stelio Nathanael. The Wafais, a married couple, decided to purchase a Chicking franchise in 2022. They partnered with Mr. Nathanael, who was also the director of Casual Dining, to acquire the franchise. Arianogen was formed as the company to own the franchise, with Casual Dining holding 51% and the Wafais holding 49%.

A deposit of R250,000 was paid to Casual Dining, and the agreement stipulated that Arianogen would pay R901,600 for the franchise. Disagreement arose when Mr. Wafai made changes to the standard franchise agreement provided by Casual Dining. He added a clause requiring Casual Dining to provide a turnkey operation, including a point of sale system, which was not in the original agreement.

Casual Dining claimed that the changes were not brought to their attention and terminated the agreement, accusing the Wafais of inserting the clause discreetly. The Wafais denied this and sought to proceed with the agreement. However, the parties failed to reach a new agreement, leading to the Wafais demanding the return of the R901,000 paid to Casual Dining.

The Applicants pursued a claim for the return of the R901,000 in summary judgment proceedings. Casual Dining opposed the claim, arguing that there was no consensus for a contract due to misrepresentation by the Wafais. They contended that the agreement was voidable and had been rightfully canceled by them.

The key issue in the case was whether a valid contract existed between the parties. The Applicants claimed restitution based on the existence of the contract, while Casual Dining argued that misrepresentation invalidated the agreement. The court found that if there was no contract due to fundamental misrepresentation, the claim for cancellation and restitution would fail.

Ultimately, the court dismissed the application for summary judgment, ruling in favor of Casual Dining and ordering the Applicants to pay the Respondent's costs.

The core legal principle underlying the decision is that if a party misrepresents the content of a contract to the extent that there is no meeting of the minds between the parties, resulting in a fundamental mistake, then there is no valid contract. In such cases, the party who was misled into entering the contract has the option to either stand by the contract or claim rescission. This fundamental principle was crucial in determining that the claim for cancellation and restitution by the Applicants would fail if there was no valid contract due to misrepresentation.

The court referenced the case of Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA) in its reasoning process. This case law was cited to support the principle that if a party misleads the signatory of a contract, whether intentionally or not, and the misrepresentation is material to the agreement, the signatory can rescind the contract based on the misrepresentation. The court relied on this case to emphasize the importance of fundamental mistakes in contracts and the consequences they may have on the validity of the agreement.