Contract - claim for payment

13 Apr 2021 12:00 am by Merilyn Kader

Astral Operations Ltd t/a Early Bird Farm - the proper interpretation of the terms of the contract between the parties with specific reference to Astral’s allegation that it charged its ‘usual prices’ to Nambitha at the time of dispatch of the goods. The second issue was whether the prices charged by Astral for the goods sold were the usual prices in the sense contended for by Nambitha (ie, not favouring any other wholesale customer). And if lower, whether the contract was breached.

By Merilyn Rowena Kader LLB (Unisa), Legal Editor at LexisNexis South Africa.

Contract – claim for payment: In Astral Operations Ltd t/a Early Bird Farm v O’Farrell NO [2021] 1 All SA 350 (KZD) the plaintiff (Astral) produced chicken in large quantities for ultimate sale to the consumer market. Most were sold directly to major supermarket chains, while smaller outlets were generally serviced by wholesalers who bought from Astral. One such wholesaler was a trust (Nambitha) in which the defendants were trustees. Nambitha was a competitor of another wholesaler (Dawoods). In 2011, Nambitha found itself out-traded by Dawoods and its business of selling Astral products collapsed, leaving an unpaid balance owing to Astral.

In its claim against Astral, Nambitha averred that the debt arose from its purchase of the product from Astral. Nambitha contended that it was entitled to lower prices for the product in question, and that a debatement of Astral’s account of its claim against Nambitha would reveal a lesser debt. In a claim-in-reconvention, Nambitha contended that throughout 2011 it was entitled to lower prices than those which were actually charged, and that it should be compensated for loss of profits, as well as the collapse of its business as it was out-traded by Dawoods because Astral afforded Dawoods better prices. Nambitha argued that it was entitled to the same prices.

The first issue in Astral Operations Ltd t/a Early Bird Farm was the proper interpretation of the terms of the contract between the parties with specific reference to Astral’s allegation that it charged its ‘usual prices’ to Nambitha at the time of dispatch of the goods. The second issue was whether the prices charged by Astral for the goods sold were the usual prices in the sense contended for by Nambitha (ie, not favouring any other wholesale customer). That led to the question of whether Astral breached the contract in supplying other wholesalers at lower prices than those allowed to Nambitha.

Regarding the first issue, it had to be determined whether ‘the usual price’ referred to in the contract between Astral and Nambitha meant the best wholesale price not undermined by the grant to any other wholesale customer of rebates or discounts or advertising allowances more advantageous than those afforded to Nambitha. Reliance was placed on an enforceable trade usage or trade practice, or the importation of a tacit term into the agreement. The difficulty was that what Nambitha contended for was not clear or certain, and contradicted the express terms of the contract. That conclusion answered the first question against Nambitha and rendered the second issue irrelevant. It also addressed the third issue, in that it could not be found that Astral breached the contract by charging Dawoods more favourable prices than Nambitha.

A fourth issue raised by Nambitha’s was that it had been induced to buy the goods, which it would not otherwise have purchased, through false representations by Astral. The evidence, however, revealed no misrepresentations. There was no inducement to buy the goods underlying Astral’s claim.

Judgment was granted in Astral’s favour, and Nambitha’s counter-claim was dismissed.

Merilyn Rowena Kader
Legal Editor at LexisNexis