Friday, February 01, 2008

One of the foundational values of our constitutional order is our right to have any dispute, which can be resolved by the application of law, decided in a fair public hearing before a court or other independent and impartial forum.  Put simply, a person cannot be denied the right to have a dispute settled by ordinary processes of law.  For example, if the terms in a contract deny a party the right to seek the assistance of a court, those terms would be unconstitutional unless an alternative form of dispute resolution, such as mediation, is provided for in the contract. However, contracts seldom, if ever, remove this right completely; but many contracts which we sign on a regular basis often limit the right – even those that we enter into freely and on a relatively equal footing.  Is this permissible?    
In general terms, should a person wish to claim for a debt he has the right to do so through the law.  However, a person does not have an indefinite period within which to bring his claim.  The process must commence within a period of time fixed by statute, which is usually three years from the date the debt became due.  This time limitation is known as “prescription” and starts to run as soon as the debt is due.  For practical purposes this means when the creditor has knowledge of the debtor, and the creditor is aware of the facts giving rise to the debt.  Once the legal process has started, the prescription “clock” is stopped.  The legal process generally starts when a summons or notice of motion is served on the debtor. 
Prescription is a vital part of the South African legal system.  The legislature has limited a claimant’s right in seeking judicial redress so as to strike a delicate compromise between legal certainty and a reasonable time within which to enforce rights. 
However, what if the right is further limited by a contract?  For instance, a person agrees in a contract to limit his time period for obtaining judicial redress from 3 years to 3 months.  Is this fair?  Does it infringe his rights under the Constitution?  What about the competing principle of freedom of contract, which allows individuals the autonomy and dignity of regulating their own lives?  Surely it cannot be unconstitutional to voluntarily choose to limit your rights?
These issues came before the Constitutional Court in 2007 in the case of Barkhuizen v Napier.  This case dealt with limiting prescription in relation to a contract of insurance.  Common to most insurance contracts, this case dealt with a clause which released the insurance company from liability unless summons was served within 90 days of the company repudiating the claim.   The insured challenged this clause as being unconstitutional on the grounds that it infringed his right of access to courts. 
The court was accordingly confronted with two competing interests:  On the one hand, parties should be made to comply with contractual obligations that have been freely and voluntarily undertaken.  Supporting this idea are the constitutional values of dignity and freedom.  Competing with these is the right of access to court.  If a clause does not allow a contracting party an adequate and fair opportunity to have a dispute resolved by a court it takes away a constitutional right.
In striving to meet this balance, Moseneke DCJ held that freedom of contract should be given less weight if the contentious contractual term (the one that limits the right) is so unreasonable as to offend public policy. 
Based on this judgment, it would seem that there would be nothing to prevent time-bar clauses in any type of contract.  However, if these clauses are to be used, they must be drafted in such a way as to ensure that both contracting parties are given an adequate and fair opportunity to approach a court if the need arises. 
Taryn Sefton is a Candidate Attorney