THE INTERPRETATION OF NON-VARIATION CLAUSES

In a recent appeal before the Supreme Court the court was asked to rule on the admissibility of evidence to contradict an express term of a contract and the importation of a tacit term which contradicts an express term.

A, an estate agency, employed B in terms of a written employment contract in terms of which A would pay B 50% of the total commission earned A from property sales “effected by B”.

The contract contained a standard non-variation clause stating that all amendments to the contract would only be binding if in writing and signed by the parties, and a standard whole agreement clause stating that the contract as it was stated in the written document was the whole agreement between them and there were no other agreements or representations not contained in the written document.

B introduced a client to A. The client bought one property and sold another which earned A commission on both transactions.

When B claimed 50% of the commission earned, A resisted the claim by asserting firstly that B was not the sole effective cause and was therefore only entitled to a portion of the commission (commonly known as a commission split) the extent of which would be determined by a tacit term and that A and B had reached a verbal arrangement after the contract was consummated that A would only pay half the amount due to B.

The SCA found in favour of B that –

1. on a plain reading of the contract there is no ambiguity;
2. commission was due to B on all transactions “effected by her”, not only on transactions in relation to which she was the sole cause;
3. in any case, a tacit term dealing with reduced commission where B was not the sole cause cannot be read into the contract because there is an express term dealing with the same outcomes;
4. no evidence of an oral agreement can be led where there is a non-variation clause unless a party want to rectify it.

Care should therefore be taken in drafting principal agreements to ensure that the parties’ intentions are finely and decisively recorded.