ARMAMENTS CORPORATION OF SOUTH AFRICA
LIMITED
Appellant
and
SOLAS PRODUCTS (PROPRIETARY) LIMITED
Respondent
Case No
IN
THE
SUPREME
COURT
APPELLATE
OF
SOUTH
167/88 - mp
AFRICA
DIVISION
In the matter between:
ARMAMENTS CORPORATION OF SOUTH AFRICA
LIMITED
Appellant
and
SOLAS PRODUCTS (PROPRIETARY) LIMITED
CORAM:
HOEXTER, E M GROSSKOPF,
et NIENABER, AJA
HEARD:
DELIVERED:
VIVIER,
Respondent
KUMLEBEN, JJA
26 February 1990
16 March 1990
J U D G M E N T
HOEXTER, JA...
2
HOEXTER, JA
In
respondent
damages
the
Transvaal
company
against
Provincial
("Solas")
instituted
appellant
company
the
Division
an
action
the
for
("Armscor").
The
cause of action was an alleged breach of contract.
The
only issue at the trial was whether or not on 11 June 1984,
or
alternatively
parties
had
certain
goods
during
entered
by
into
Solas
the
period
a
contract
to Armscor.
May/June
for
the
Solas
Armscor disputed the existence of the contract.
came before
ROUX, J.
Having
heard
Judge on 3 September 1986 ruled
declared
parties
that
on
11
a contract
June
1984
argument
of
parties.
the
supply
of
alleged
had
been
and
he
concluded
ordered
and
The trial
the
learned
in favour of Solas.
certain costs in regard to the proceedings.
matter
1984,
between
Armscor
to
He
the
pay
Thereafter the
the quantum of damages was agreed
between
the
On 18 April 1988, and by consent, the learned
3
Judge granted
judgment
in favour of Solas
in the sum of
R80 000 with costs.
With leave of the trial Court Armscor
appeals
f inding
against
the
of
the
Court
a quo
that
a
contract had been concluded between the parties.
Solas carries on the business of an importer and
exporter.
Its principal place of business is in Sandton
but its head office is at Hout Bay;
in Cape Town.
and its attorneys are
Armscor has its head office in Pretoria.
It carries on business, inter alia, as a supplier of arms
and
equipment
contract
supply
to the
alleged
and
to
South
have
commissioning
African
been
of
an
Defence
concluded
expensive
Force.
related
battery.
The
to
the
The
relevant—negotiations between the parties were largely, but
not
exclusively,
conducted
by
the
use
of
telex
communications between Armscor in Pretoria on the one hand,
and on the other hand Solas (in Hout Bay) or its attorneys
(in Cape Town).
4
At the trial, and with the approval of ROUX J,
the parties invoked the provisions of Rule 33(4).
There
was placed before the trial Court a "Statement of Admitted
Facts" in which reference was made to various telexes and
letters
exchanged
May/June 1984.
reproduced
in
between
the
parties
during
the
period
The telexes and letters in question were
a
bundle
of
documents
which
was
likewise
placed before the trial Court.
The parties requested the
Court
issue
a
quo
to
determine
the
(whether
or
not
a
contract had been concluded) by reference to the documents
contained in the bundle.
In what follows reference to individual documents
in the bundle will
be made by
indicating
both
the date
thereof and the alphabetic symbol assigned thereto in the
Court below.
I proceed to consider the sequence and main
content of the negotiations between the parties.
(1)
On 2 May 1984 and by way of a "Request
5
for Offer"("A") Armscor
invited
offers
for
the
supply of the battery.
(2)
By letter dated 2 May 1984 addressed to
Armscor ("B")
Solas undertook to act as
an importer of the battery on behalf of
Armscor at a total price of R973 000
(3)
In response to this offer Armscor on 16
May 1984 sent a telex message ("C")
to
the attorneys of Solas.
The message stated:"OFFER E13/84/419 DATED
1984-05-02 SOLAS PRODUCTS .
ACCEPTED
SUBJECT
SOLAS
CONDITIONS WITH AMENDMENTS BY
ARMSCOR AS WELL AS ARMSCOR
ADDITIONAL CONDITIONS. TOTAL
VALUE R973 000,00".
On the same date Armscor wrote a letter
("D")
to Solas in which the following
was recorded:
6
"Your proposal dated
1984-05-02, for the supply of
the equipment as specified in
annexure
'A',
has
been
accepted.
Enclosed is order
KP
165078
(DP) which
is
subject to the conditions as
detailed in annexure 'A'."
In para 2.1 of Annexure "A" to letter
("D")
it was stated that the order was
subject to the provisions of Armscor's
"General Conditions of Contract".
2.2
of
Annexure
"A"
further set forth seven
Conditions."
to
the
Para
letter
"Supplementary
Para 2.2.2 contained the
following supplementary condition:-
"2.2.2
As
the
price
basis
is
delivered
into
store, any
costs incurred by Armscor as
a result of clearing
the
goods will be recovered from
the Contractor (except thát
7
these amounts will not cause
the amount of R22 000,00 as
specified in the guotation to
be exceeded)."
(4)
On 23 May 1984 Solas sent to Armscor an
invoice ("E")
reflecting, inter alia:-
"To total net amount due payment to be effected as
detailed
in
your
order
R973 000".
(5)
On 29 May 1984 the attorneys for Solas
sent a telex message
("F")
to Armscor
referring to the latter's letter dated
16 May 1984 ("D")
and a meeting held at
the offices of Armscor on 25 May 1984.
The relevant
portions of telex
("F")
read:"YOUR CONDITIONS RELATING TO
THE
ABOVE
ORDER
ARE
ACCEPTABLE
TO OUR
CLIENT,
SAVE FOR THOSE CLAUSES, WHICH
8
OUR
CLIENT
AMENDED
REQUIRES
AS
TO
BE
FOLLOWS:-
One of the clauses which in its telex
Solas
required
to
be
amended
was
supplementary condition 2.2.2.
(6)
Solas
proposed
to
import
the
from a supplier in Portugal
On
5
June
message
1984
("G")
Solas
to Armscor
battery
("Tudor").
sent
a
telex
informing it
that in the meanwhile another party had
confirmed a like order with Tudor and
that
Solas
had
been
advised
by
the
latter:"THAT UNLESS THE DOWNPAYMENT
AND
THE
LC"
(letter
of
credit)
"WILL BE AT HAND
WITHIN 48 HOURS THE PRICE AS
WELL AS THE DELIVERY TIME
WILL HAVE TO BE REVISED."
(7)
In response to telex "G" Armscor on 6
9
June 1984 sent a lengthy telex message
("H")
to Solas informing it that:"2.
PAYMENT WITHIN 48
HOURS NOT POSSIBLE
DUE
TO
THE
FOLLOWING REASONS."
One of the reasons mentioned was:"2.4
NO
CONSENSUS
HAS
BEEN
REACHED
BETWEEN THE PARTIES
IN RESPECT OF SUBCLAUSE
2.2.2
OF
ARMSCOR'S
CURRENT
COUNTER OFFER."
In para 4 of the
telex ("H")
Armscor
"...PROPOSED
THAT
THE
EXISTING SUB-CLAUSE 2.2.2 AS
CONTAINED IN ARMSCORS CURRENT
COUNTER OFFER BE ACCEPTED."
Para 5 of telex "H" was typographically
marred
words.
5
to
by
the
omission
of
certain
How Armscor had intended para
read
may
be
seen
from
the
10
undermentioned quotation from para 5 in
which the words accidentally
omitted in telex "H" are underlined:"5.
(8)
SHOULD YOU AGREE TO ACCEPT
THE CONDITIONS AS STATED IN
SUB-CLAUSE
2.2.2,
IT
IS
PROPOSED THAT IN ORDER TO
EXPEDITE THE EVENTUAL PAYMENT
THE
REQUIRED
INVOICE
BE
SUBMITTED TO ARMSCOR AS SOON
AS POSSIBLE".
It is common cause that on the same day
(6 June 1984) Armscor advised Solas by
telephone
of
telex "H";
the
above
omission
and that on 7 June 1984 and
by way of a further telex message
Solas
("J")
in
to
Armscor repeated telex "H"
but reworded par 5 so as to include the
words
been
"H".
which
on
the
inadvertently
That
these
previous
omitted
facts
day
from
are
had
telex
common
11
cause
appears
"Admitted
from
Facts",
para
which
10
of
the
is
in
the
following terms "10.
On 7th June 1984 at 08h24,
Defendant sent a telex to
Plaintiff
and
Plaintiff's
attorneys
(Annexure
'J'
hereto), being a correction
of Annexure
'H' of which
Plaintiff was telephonically
advised on 6th June 1984."
(9)
Solas responded to telex "H" by way of
a telex message to Armscor
("I")
transmitted during the evening of 6
June 1984.
Ex facie telex " I " it was
sent at 19h53.
It will be remembered
that prior to telex "G" on 5 June 1984
(in which Solas had stated that failing
a down-payment and a letter of credit
within 48 hours the price and delivery
time
would
have
to
be
revised)
the
12
parties had negotiated on a firm total
price
of
R973
000.
In
telex " I " ,
however, Solas stated:"DUE TO ESCALATION OVERSEAS
WE HAVE TO INPORM YOU THAT
OUR
OFFER
FOR
THE
ABOVE
AMENDS AS FOLLOWS:
"
whereafter various components of a new
price
totalling
forth.
R1
006
420
were
set
In telex " I " Solas went on to
say: "SUB
CLAUSE
2.2.2
IS
ACCEPTED,
PROVIDED
OUR
LIABILITY DOES NOT EXCEED
R20 000,00."
(10)
On
7 June
1984 Armscor
telex message ("J")
already
simply
been
to Solas.
mentioned
a corrected
transmitted
that
version of
which the words missing
from
a
It has
"J"
is
"H" in
para 5
13
of "H" were supplied.
Save f or this
emendation the body of telex "J", which
contains no less than seven paragraphs,
is
in
terms
telex "H".
identical
with
that
of
It is clear, furthermore,
that telex "J" was a response to telex
"G"
transmitted
1984.
by
Solas
on
5
June
Para 1 of telex " j " explicitly
states:"1. YOUR TELEX DATED 05/06/84
REFERS."
(11)
Early in the morning
June
1984 Solas
message
three
("K")
(at 07h07) of 11
sent a further
to Armscor.
paragraphs
of
telex
telex
The first
"K"
read
thus:"1.
OUR PARIS OFFICE HAS ADVISED
THAT
AFTER
FURTHER
NEGOTIATIONS
WITH
THE
14
SUPPLIER LATE ON FRIDAY THE
8TH OF JUNE AN AGREEMENT HAS
BEEN
REACHED
WITH
TUDOR
WHEREBY
ALL
PRICES
AND
CONDITIONS REMAIN VALID AS
PER OUR PROPOSAL 1984-05-02.
IN RETURN SOLAS HAD TO PLACE
THIS ORDER WITH TUDOR THEN.
(12)
2.
WE CONFIRM THAT WE HEREBY
ACCEPT
YOUR
ORDER
AS
SUBMITTED
TO US
INCLUDING
SUB-CLAUSE 2.2.2.
THEREFORE
THIS
ORDER
HAS
BECOME VALID NOW.
3.
HOWEVER I BELIEVE THAT IN
TODAYS MEETING YOU WILL BE
ABLE TO AMEND CERTAIN OTHER
POINTS
AS
DISCUSSED
AND
BASICALLY AND PROVISIONALLY
AGREED UPON
(TELEX 29-5-84
-10-26 FROM S BRASG)".
In the late afternoon (at 16h42) of 11
June 1984 Armscor sent a telex message
("L")
to
Solas.
Telex
"L"
beglns
thus:"YOUR TELEX DATED 5 JUNE 1984
ARMSCOR'S
RESPONSE
THERETO
PER TELEX DATED 5 JUNE 1984
AND YOUR TELEX DATED 6 JUNE
15
1984 REFERS."
The
above
reference
related
to
telex
messages "G", "H" and " I " respectively.
Following
upon
the
introductory
reference quoted above paras 1 and 2 of
telex "L" proceeded to state:-
(13)
"1.
CONDITIONS RELATING TO YOUR
REVISED OFFER AS EMBODIED IN
YOUR
ABOVE
TELEXES
NOT
ACCEPTABLE TO ARMSCOR.
2.
REGARDING YOUR TELEX DATED 11
JUNE 1984, WE WISH TO ADVISE
THAT AS A RESULT OF YOUR
COUNTER PROPOSAL TO ARMSCOR
AS EMBODIED IN THE TELEX OF
ABE, DINNER, DINNER AND BRASG
AND RECEIVED BY ARMSCOR'S L29
MAY 1984, ARMSCORS COUNTER
PROPOSAL AS SET FORTH
IN
ARMSCORS LETTER OF ACCEPTANCE
DATED 16 MAY 1984 HAS BEEN
NULLIFIED, THEREFORE NO VALID
ACCEPTANCE BY SOLAS PRODUCTS
IN
TERMS
THEREOF
NOW
POSSIBLE."
On 12 June 1984 representatives of the
16
parties held discussions at the offices
of Armscor.
view
was
On behalf of Armscor the
expressed
agreement existed;
that
no
valid
and this view was
confirmed by a telex message ("M")
sent
by Armscor to Solas at 14h39 on 12 June
1984.
At
16h57 on the same day
the
attorneys of Solas responded thereto by
a
telex
which,
message
inter
("N")
alia, the
to Armscor
following
in
was
said:"WE CONFIRM THAT IT IS OUR
CLIENT'S CONTENTION THAT YOUR
COUNTER OFFER CONTAINED IN
YOUR ORDER OF 16 MAY 1984,
WAS ACCEPTED ORALLY AND/OR BY
CONDUCT AND/OR BY IMPLICATION.
IN THE LIGHT OF YOUR TELEX OF
7
JUNE
1984
WHEREIN
YOU
CONTENDED THAT THERE HAD NOT
BEEN AN ACCEPTANCE OF YOUR
ORDER, OUR CLIENT DEEMED IT
17
PRUDENT TO FORMALLY RECORD
ITS ACCEPTANCE IN WRITING AS
PER ITS TELEX OP 11 JUNE
1984."
(14)
In answer
to telex
"N" Armscor on 19
June 1984 sent a telex message ("O")
to
Solas, of which para 2 reads:-
"2.
EVEN IF YOU ARE CORRECT IN
YOUR
CONTENTION
THAT
OUR
ORIGINAL OFFER WAS REOPENED
FOR ACCEPTANCE IN OUR TELEX
OF 6 JUNE 1984, CORRECTED
COPY OF WHICH WAS TELEXED TO
YOU ON 7 JUNE 1984 (WHICH
CONTENTION WE DO NOT ADMIT)
OUR POSITION STILL REMAINS
THAT YOUR TELEX RECEIVED BY
US ON 7 JUNE 1984 CONSTITUTED
A MATERIAL COUNTER PROPOSAL
WHEREBY
ANY
OFFER
OF
OURSELVES WAS INVALIDATED."
Dealing with the telex messages exchanged between
the parties the learned trial Judge remarked in the course
of his judgment:"It
remains
unresolved
on
the
papers
what
the
18
defendant's reaction to Item 'I' was.
On the
following day the 7th June, 1984 the defendant
per Item 'J' again suggested to plaintiff that
the ' current counter-offer'
( i e Item ' D' ) be
accepted.
I must conclude Item 'I' was ignored
by the defendant.
In any event the overseas
suppliers of the plaintiff did not insist on a
higher price so the problem posed in Item 'I' was
resolved and became academic.
On the 11th June, 1984 the plaintiff accepted the
defendant's
'counter-offer' mentioned in both
Items 'H' and 'J'
The acceptance ref erred to in Item 'K' is an
acceptance of Item 'D'.
The terms of Item 'D'
are those which the defendant urged the plaintiff
to accept as per Items 'H' and 'J'.
I
find
that
a
valid
agreement
was
concluded
between the parties on the receipt by defendant
of the telex message Item 'K'."
It will be remembered that in telex " I " , dated 6
June 1984, Armscor was informed that Solas had amended its
initial offer by increasing the total price from R973 000
to R1 006 420.
Dealing with the passage from the trial
Court's judgment quoted above, I must differ, with respect,
from
the
learned
Judge's
finding
that
the
reaction
of
19
Armscor to telex "I" does not emerge from the papers.
In
the first place it is clear that in telex "L" dated 11 June
1984
Afmscor
made
specific
reference
to
three
prior
telexes, one of which was "Your telex dated 6 June"
and
then
proceeded
to
state
(in
para
1
of
"L")
that
"conditions relating to your revised offer as embodied in
your
above
telexes
not acceptable
to Armscor."
In
the
second place it is to be noted that in telex "O", dated 19
June 1984, Armscor contended that:"....your telex received by us on 7 June 1984
constituted a material counter proposal whereby
any offer of ourselves was invalidated."
It is common cause that in telex "O" the words "your telex
received by us on 7 June 1984" constituted a reference to
telex
"I" transmitted
by Solas on 6 June
1984 at 19h53.
In concluding that telex " I " was simply ignored by Armscor
the learned Judge therefore erred.
In resolving the issue
20
between the parties telex " I " cannot be overlooked.
Against
the
contextual
setting
of
the
negotiations between the parties before 6 June 1984 it is
necessary next to consider the legal effect of telex " I "
sent by Solas to Armscor on that date.
made an offer ("B")
made
as
"the
On 2 May 1984 Solas
to which reference may conveniently be
original
offer".
Armscor's
letter
("D")
dated 16 May 1984 constituted a counter-offer ("the Armscor
counter-offer") which was the legal equivalent of a refusal
of the original offer.
Despite the lapse of the original
offer a contract would have resulted if Solas had accepted
the Armscor counter-offer embodied in "D".
("I")
sent
in the early
evening
of
6 June
By its telex
1984, Solas
intimated its acceptance of sub-clause 2.2.2, which was a
vital term of the Armscor counter-offer in regard to which
the
parties
had
hitherto
not
reached
agreement.
But
whereas prior to the transmission of telex "I" the parties
21
in their
price
negotiations
(R973
000)
had
for
been
the
ad
idem
battery,
as
in
to the
telex
total
"I" Solas
elected to stipulate for a higher price (R1 006 240).
resultant
legal position
is that telex
The
" I " constituted a
counter-offer ("the Solas counter-offer") which operated as
a
refusal
by
Accordingly
Solas
the
extinguished;
the
Armscor
and
Solas to accept.
of
Armscor
counter-offer.
counter-offer
thereupon
no
offer
was
remained
thereby
open
for
In' the course of his argument before us
counsel for Solas was constrained to concede that this was
the legal position.
The only submission which in the end counsel for
Solas
found
conclusion
himself
reached
able
by
to
the
advance
Court
in
a
support
quo
was
of
the
that,
notwithstanding the legal effect of telex " I " , Armscor had
revived or renewed the Armscor counter-offer when it sent
telex
"J"
to
Solas
on
7 June
1984, thus
enabling
its
22
acceptance by Soias on 11 June 1984.
It was urged upon us that inasmuch as the parties
had elected to negotiate with each other by way of telex
messages the issue should be approached as if during the
negotiations
table.
the parties were facing each other across a
On this approach, so the argument proceeded, it
should be inferred that when Armscor despatched telex "J"
on 7 June 1984, it had already received and digested telex
"I";
and it should therefore further be inferred that by
sending telex "J" on 7 June 1984 Armscor intended - and was
understood
by
Solas
to
intend
-
to
revive
the
counter-offer which telex " I " had extinguished.
Armscor
In this
connection counsel for Solas sought to place some reliance
upon the case of Entores, Ltd v Miles Far East Corporation
(1955) 2
Appeal
ALL ER 493
decided
that
(CA) in which the English Court of
communications
by
telex
classified with instantaneous communications.
should
be
This is a
23
general rule, but it is by no means a universal one;
and
its application necessarily must hinge upon the particular
facts of the case and the precise circumstances
the
parties
negotiate.
Here
reference
may
in which
usefully be,
made to the following remarks of Lord Wilberforce
course
of his
speech
in the House of Lords
in the
decision
in
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellsschaft
mbH (1982) 1 ALL ER 293 (HL), at 296 C/D:"Since 1955 the use of telex communication has
been
greatly
expanded,
and
there
are
many
variants on it.
The senders and recipients may
not be
the principals
to
the
contemplated
contract.
They may be servants or agents with
limited authority.
The message may not reach,
or be intended to reach, the designated recipient
immediately: messages may be sent out of office
hours, or at night, with the intention, or on the
assumption, that they will be read at a later
time.
There may be some error or default at the
recipient's end which prevents receipt at the
time contemplated and believed in by the sender.
The message may have been sent and/or received
through machines operated by third persons.
And
many other variations may occur.
No universal
rule can cover all such cases;
they must be
resolved
by
reference
to the intentions
of
the
24
parties, by sound business practice and in some
cases by a judgment where the risks should lie:
see
Household
Fire
and
Carriage
Accident
Insurance Co Ltd v Grant (1879) 4 Ex D 216 at 227
per Baggallay, LJ and Henthorn v Fraser (1892) 2
CH 27, (1891-4) ALL ER Rep
908 per
Lord
Herschell."
Turning
to
the
facts
of
the
instant
case
it
appears to me that there is no room for the application of
the general rule.
Even without recourse to the "Admitted
Facts" it is difficult to believe that in sending telex "J"
Armscor could have intended to revive the Armscor counteroffer.
It
is no
less
difficult
to credit
that
Solas
would so have construed telex "J", which makes not even a
fleeting
reference
to
telex
"I".
Such
would be a strained and artificial one.
have been quite unbusinesslike
telex "J".
a
construction
It would, I think,
for Solas so to interpret
It is unnecessary to say anything more in this
regard, however, for the simple reason that in the light of
what is said in para 10 of the "Admitted Facts" (to whose
25
terms no reference
is made in the judgment of the Court
below) it is obvious both what the true intention behind
telex "J" was and that such intention was fully known to
Solas.
In the light of para 10 of the "Admitted Facts"
the argument
that
telex
"J"constituted
a revival
of
the
Armscor counter-offer is thoroughly untenable.
For
the aforegoing
reasons it follows that the
trial Court wrongly ruled in favour of Solas.
succeeds with costs, including
The appeal
the costs of two counsel.
Orders 1 and 2 granted by the trial Court on 3 September
1986 (as reflected on page 140 of the record on appeal) are
set aside.
The trial Court's judgment given on 18 April
1988 (as reflected on page 142 of the record on appeal) is
altered to read:"Absolution
from
the
instance
is
granted
costs."
E M GROSSKOPF JA
VIVIER
JA
KUMLEBEN
JA
NIENABER
AJA
)
)
)
)
G G
Concur
HOEXTER,
JA
with