TT Talk - Legal eagle: Incorporated contract upheld

TT Talk - Legal eagle: Incorporated contract upheld

Effective incorporation of standard trading conditions remains a fundamental business practice. Seeing them interpreted robustly by the courts in South Africa adds confidence.

The Facts

Fujitsu imported a consignment of laptops valued at over US$500,000 from Germany, which were held in a South African Airways warehouse in Johannesburg after customs clearance. Fujitsu instructed Schenker to collect the goods and deliver them by road to Fujitsu's premises. Schenker entrusted this task to an employee, who collected the consignment over a weekend in an unmarked hired truck, using a security pass and documentation issued for the purpose by Schenker, and disappeared with the goods.

Schenker rendered its services to Fujitsu subject to a contract that incorporated the South African Association of Freight Forwarders (SAAFF) standard trading conditions. These significantly limited liability, and in particular provided that Schenker could not be held liable where Fujitsu caused it to "handle or deal with" valuable cargoes without "special arrangements [being] previously made in writing" (the "exemption clause").

Fujitsu claimed common law damages in delict (tort) from Schenker for theft by an employee. Schenker denied its liability on the basis of the exemption clause.

The Judgment

The Gauteng Division of the High Court, in upholding Fujitsu's claim, decided that the exemption clause was not effective, because the employee had not been executing the contract and had been acting outside its terms, when he went to the warehouse and stole the goods. For this result to have been avoided, the contract would have had to contain an appropriate clear agreement. Schenker appealed this finding.

The Supreme Court of Appeal dismissed the High Court's judgement and ultimately determined that, on the normal meaning of the words, Schenker had been "handling or dealing" with the cargo at the time of the theft, as contemplated by the exemption clause, and was therefore executing the contract. The Supreme Court then found that the wording of the contract provisions taken as a whole, when applied to the facts of the loss, was express and unambiguous. As the cargo was valuable, Fujitsu was obliged to make prior special arrangements, which it had failed to do.

The commercial rationale behind this clause, which was recognised by the Supreme Court, was that Schenker, if it had been informed that the cargo was valuable, could have reduced the risk, for example by employing security guards or taking out fidelity insurance. Schenker's appeal was therefore allowed. It is understood that leave to appeal to the Constitutional Court is being sought by Fujitsu.

Comment

This case underlines the importance of careful drafting of contractual terms, particularly in view of current freight crime (not limited to South Africa) and the difficulty in obtaining convictions and recovery of stolen goods. The case is especially poignant because the SAAFF provisions incorporated into the contract are widely, if not almost universally, used throughout the clearing and forwarding industry in South Africa.

FUJITSU SERVICES CORE (PTY) LTD v SCHENKER SOUTH AFRICA (PTY) LTD [2022] ZASCA 7

TT Club would like to acknowledge Prinsloo Inc. Attorneys, who represent Schenker and on occasion the TT Club's other members, for their contribution towards this edition of Legal Eagle. Prinsloo Inc Attorneys is a boutique law firm with offices in Umhlanga, Durban and Melrose Arch, Johannesburg and specialise in international trade, mining and transport law.



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Peregrine Storrs-Fox

Risk Management Director

Date05/04/2022