It may frequently happen that parties to a contract conclude a written agreement only to find later that there is an error in the agreement, and what has been stated in the agreement is not what either or both parties intended. The legal question is whether such an error is reasonable (iustus) and therefore excusable, or whether the party who made the error is bound to his mistake.
The legal question was considered in NUMSA and Others v Transalloys. In this particular case, the employer placed an internal advertisement for three positions of lab analysts. It was common cause that the position and the salary attached to it was discussed with the employees during the interview process. They were informed that the successful candidates would be paid at a salary level of 5C (being approximately R24,000 per month). An offer was made to the employees. However, the salary reflected in the employment offer was on a level 5A (being approximately R28,000 per month). The employees commenced as lab analysts, and they were remunerated on the salary scale level 5A.
It was common cause that all the employer’s lab analysts were remunerated at salary level 5C. Evidence showed that the applicant’s duties and responsibilities were the same as all other lab analysts employed by the employer and earning level 5C.
The Respondent later became aware of the error in the salaries and corrected it with immediate effect. Following this, the union referred a dispute to the Labour Court. The Court was asked to decide whether the employer was in breach of contract by unilaterally reducing the applicant’s salaries from that of 5A to 5C.
The Respondent’s case was that it was a bona fide error as lab analysts are employed on salary level 5C and not level 5A.
In coming to its decision, the Labour Court relied on Sonap Petroleum SA (Pty) Ltd v Pappadogianis, where it was held:
“In my view, therefore, the decisive question in a case like the present is this: did the party whose actual intention did not conform to the common intention expressed, leave the other party, as a reasonable man, to believe that his declared intention represented his actual intention?
…to answer this question, a three-fold inquiry is usually necessary, namely, firstly that there was a misrepresentation as to one party’s intention, secondly who made that representation and thirdly, was the other party misled thereby. The last question postulates two possibilities: was he actually misled, and would a reasonable man have been misled?
Suppose the mistaken party has conducted himself as to give the other party reasonable belief that he was contracting with him on certain terms. In that case, he is bound by those terms unless there is some special reason for clarifying the mistake as an iustus error (excusable mistake).
A mistake will be treated as an iustus error if the other party ought, as a reasonable person, to have known of it and where the other offer made is snapped up when the person purporting to accept the offer knows or ought to know that there was no intention to make the offer as it appears from the wording of the contract. This was also confirmed and accepted in the Sonap case.
The Court concluded that the employees knew that they applied for a position of lab analysts on salary level 5C, and in the Court’s view, they could not have expected anything but an offer of employment on salary level 5C. Therefore, the Court concluded that it was a bona fide error on the part of the employer and that the correction of the employee salaries to level 5C did not constitute a breach in the contract but rather a rectification.
When drawing up a contract, for example, a contract of employment, it is essential to ensure that its contents reflect the party’s intention. Notwithstanding the above decision, the circumstances under which an error will be excused are very limited.
Article by: Stephen Kirsten
Provincial Manager – Cape Town