What does it do?

The point of an entire agreement clause is for it to be clear that the agreement does not include any terms not written down that might have been discussed during negotiations or that may have been included in past agreements between the parties or any subsequent representations made between them.

Real life example:

Abby purchases a car from a second hand lot cash.  She asks all the questions she wants answers to and then agrees on a price and fills out the necessary paper work, including a sales agreement.  Having signed the agreement she asks the sales representative whether the vehicle has a service plan included.  The sales person says that it does. This representation is made after the conclusion of the agreement and is not recorded in writing between the parties.  If the agreement has an entire agreement clause Abby will not likely succeed in trying to enforce the inclusion of a service plan.

Kleva Contract sample wording:

This Agreement is the whole agreement between the Parties. No terms or conditions not contained in this Agreement can be relied on.

What does this clause do?

It is not always possible for parties to be together when signing an agreement or to sign the same copy of an agreement. If a contract has a counter parts clause the parties can sign different copies which can be treated as original copies of the agreement.

Kleva contracts sample wording:

This Agreement may be signed by the Parties separately (i.e. each Party may sign their own copy of this Agreement) and each separate part will, when they are put together, be deemed to be one and the same Agreement signed on the date on which the last Party to sign does so.

 

 

 

 

What does it do?

The Waiver clause allows a party to strictly enforce its rights in terms of an agreement even if it has been lenient in the past, in other words, it confirms that leniency does not result in a waiver of its rights.  This is because a party may not always want to enforce all its rights under an agreement at a point in time but do not want to lose the right to do so later.

Real life example:

Llewellyn rents an apartment to his friend Tim. Their rental agreement states that the rental must be paid on or before the 25th of the month.  Tim pays late occasionally, usually around the 1st or 2nd of the month.  Llewellyn overlooks this and does not mention it.  Having a waiver clause in the agreement means that because Llewellyn has been lenient does not mean he cannot strictly enforce his right to payment on or before the 25th in the future or use any of the remedies in the agreement as a result of this breach by Tim.

Kleva Contracts sample wording:

WAIVER 

No waiver will constitute a waiver of rights in respect of any later breach of the same or any other provision

 

What does it do?

A governing law clause is where parties will decide which law will apply to their relationship. It is not unusual for contracts to be between parties from different countries.  You will usually insert a clause which chooses which countries laws will apply.

This is different from the Jurisdiction Clause which decides which court and in which country the case will be heard.

Our Kleva Contracts are drafted in line with South African law but you can decide that the law of a different country will apply. Bear in mind that this might change the legal effect of the contract and should only be considered with expert advice as to the effect.

Real life example:

You are importing goods from Germany.  You know that the EU legislation on product liability favours the purchaser more than South African laws. You can choose that the laws of the EU govern the agreement between you, even if you sue out of South Africa.

Kleva contract sample wording:

The Laws of the Republic of South Africa shall govern this agreement

 

What is arbitration?

In arbitration the two parties agree to appoint a third person (arbitrator) to resolve the dispute. The arbitrator listens to the sides of both parties and hands down a decision. It is like a private court proceeding where the parties (or someone on their behalf) choses the \’judge\’ (arbitrator) and the parties carry the costs of the arbitrators fees and the venue and other costs of the proceedings.

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When do you use it?

Arbitration is a good idea when the parties want quick resolution to their dispute and don\’t want to leave the identity of the adjudicator up to chance.   In South Africa legal proceedings in court can go on for years without resolution and you don\’t get a say in who will decide the matter. Although arbitration can be expensive in the short term (because you are paying the arbitrator and for the costs of a venue and running the arbitration) it usually works out more affordably in the long term because arbitrations are usually resolved quicker than court cases.  Many arbitration clauses will provide that the arbitration must be resolved within a certain number of days.

You might also want to use it to have greater certainty that a person with the right experience level decides the case.  For example you can decide to use an accountant to decide the matter if it is an accounting or financial matter or  a different subject matter expert.  The arbitrator`usually also has greater flexibility than the courts in deciding what the correct procedure is.  The parties usually have the opportunity to suggest an arbitrator and if they are in agreement they can appoint that person.  If they don\’t agree standard arbitration clauses provide for a mechanism to chose an arbitrator.  Usually this mechanism is to appoint a person to chose the arbitrator, like the chairperson of the Arbitration Foundation of South Africa (AFSA) or the head of the Law Society.

To start arbitration proceedings parties are required to give the other party written notice.

Arbitration is usually final and binding on the parties. This means there is no appeal but it can be reviewed by the court in limited circumstances like if there is an allegation that the arbitrator was biased.

If you chose not to include an arbitration clause in your agreement any dispute that arises will have to be decided by the court that has jurisdiction.

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NB: If your agreement provides for an arbitration you may not sue out of court except for urgent relief like interdicts.

Real world example:

Patricia buys a hair salon as a going concern from Masechaba.  They agree on a purchase price of R 1000 000.00.  Patricia pays the deposit of R200 000.00 but fails to make any further payments as she has run into financial problems. Despite sending out a letter of demand Masechaba has not been paid.  Their sale of business agreement provides for arbitration. Instead of issuing summons out of court to sue Patricia, Masechaba must send an arbitration notice. If she sues out of court it is likely to be thrown out and she will waste costs.

If Masechaba hears that Patricia is about to sell the stock and furniture in the salon to raise money Masechaba can still approach the courts for an urgent interdict to prevent her from doing so.

Kleva contract sample wording:

ARBITRATION

1 Unless provided for elsewhere in this agreement any dispute between the Parties relating to the interpretation of or the carrying out of; or any other matter arising directly or indirectly out of, this agreement, shall be submitted to and decided by arbitration.

2 The arbitration will be informal and in terms of Arbitration Federation of South Africa’s (AFSA) rules. The arbitration shall be, as far as possible, held and concluded within 90 days after it has been demanded.  All parties are entitled to be represented at the arbitration.

2.1 The arbitrator shall be, if the issue is: 

2.1.1 primarily an accounting matter, an independent chartered accountant of not less than 15 years standing, agreed upon between all the parties;  

2.1.2 primarily a legal matter, a practising attorney of not less than 15 years standing, agreed upon between all the parties;  

2.1.3 any other matter, an independent person agreed upon between all the parties.  

2.1.4 If the parties can’t agree whether any matter in dispute is an accounting, legal or other matter within 7 days, then that dispute shall be deemed to be a legal dispute. 

2.1.5 If the parties agree to the nature of the dispute but fail to agree on the appointment of an arbitrator, the decision will be referred to the most senior executive officer of the professional body representing that profession and in the case of “other matters” to the President for the time being of the South African Society of Chartered Accountants, for the appointment of an arbitrator.  

2.2 The decision of the arbitrator is final and binding and shall be made an order of any competent Court, including any decision as to costs. 

2.3 This clause will not prevent any Party from seeking urgent or interlocutory relief from any competent court.

What does this clause do:

One of the first questions a person entering into a contract must ask themselves is: “what happens if the other person doesn’t perform or breaks their promises?”, for example by not paying or not delivering the goods.

The parties must decide what happens if they don’t perform or perform incorrectly and set out those requirements in writing. Usually the innocent party can ask for a remedy, such as termination of the agreement, damages and so forth, or choose not to carry out their part of the agreement.

To ensure fairness, a breach clause usually includes a requirement that notice must be given to the party who is in breach and that they must be given a period of time to perform, although the parties can also agree to immediate termination if there is a breach.

A breach clause also ordinarily lists some remedies for breach like “specific performance” or a claim for damages.

Real life example:

You order 20 bags of cement from a shop, ABC Hardware, which agrees to deliver to your home. You sign their terms and conditions and agree that the deal will be cash on delivery.  They deliver 20 bags and you pay them cash. After they leave you realise they have dropped off 20 bags of fertilizer instead. You read the terms and conditions and write them a letter requesting that they remedy the improper fulfilment of the agreement within seven days, failing which you are entitled to cancel the agreement and request your money back.

Kleva sample wording:

1 If any party (the “defaulting party”) fails to comply with any provision of this Agreement on time, the other party (the “innocent party”) may notify the defaulting party in writing of such failure and demand compliance by the defaulting party of the relevant provision of this Agreement within 10 (ten) days of being notified. 

2 The failure to comply with any provision of this Agreement, on time,  is deemed to be a material breach of this Agreement.  If the defaulting party does not remedy the breach within 10 days of being called upon to do so then the innocent party can, without prejudice to its other rights: 

2.1 enforce specific performance of the defaulting parties obligations in terms of this Agreement;

2.2 claim any damages it has suffered as a result of the breach by the defaulting party or, 

2.3 To cancel this Agreement without prejudice to any claim it may have for damages as a result of the breach by the defaulting party”

 

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