ARMAMENTS CORPORATION OF SOUTH AFRICA
LIMITED Appellant
and
SOLAS PRODUCTS (PROPRIETARY) LIMITED Respondent
Case No 167/88 - mp
IN THE SUPREME COURT OF SOUTH AFRICA
APPELLATE DIVISION
In the matter between:
ARMAMENTS CORPORATION OF SOUTH AFRICA
LIMITED Appellant
and
SOLAS PRODUCTS (PROPRIETARY) LIMITED Respondent
CORAM: HOEXTER, E M GROSSKOPF, VIVIER, KUMLEBEN, JJA et NIENABER, AJA
HEARD: 26 February 1990
DELIVERED: 16 March 1990
J U D G M E N T
HOEXTER, JA...
2
HOEXTER, JA
In the Transvaal Provincial Division the
respondent company ("Solas") instituted an action for
damages against the appellant company ("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 during the period May/June 1984, the
parties had entered into a contract for the supply of
certain goods by Solas to Armscor. Solas alleged and
Armscor disputed the existence of the contract. The trial
came before ROUX, J. Having heard argument the learned
Judge on 3 September 1986 ruled in favour of Solas. He
declared that a contract had been concluded between the
parties on 11 June 1984 and he ordered Armscor to pay
certain costs in regard to the proceedings. Thereafter the
matter of the quantum of damages was agreed between the
parties. 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 against the f inding 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; and its attorneys are
in Cape Town. Armscor has its head office in Pretoria.
It carries on business, inter alia, as a supplier of arms
and equipment to the South African Defence Force. The
contract alleged to have been concluded related to the
supply and commissioning of an expensive battery. 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 between the parties during the period
May/June 1984. The telexes and letters in question were
reproduced in a bundle of documents which was likewise
placed before the trial Court. The parties requested the
Court a quo to determine the issue (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". Para
2.2 of Annexure "A" to the letter
further set forth seven "Supplementary
Conditions." 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 REQUIRES TO BE
AMENDED AS 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 battery
from a supplier in Portugal ("Tudor").
On 5 June 1984 Solas sent a telex
message ("G") to Armscor 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 SUB-
CLAUSE 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 by the omission of certain
words. How Armscor had intended para
5 to read may be seen from the
10
undermentioned quotation from para 5 in
which the words accidentally
omitted in telex "H" are underlined:-
"5. 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".
(8) It is common cause that on the same day
(6 June 1984) Armscor advised Solas by
telephone of the above omission in
telex "H"; and that on 7 June 1984 and
by way of a further telex message to
Solas ("J") Armscor repeated telex "H"
but reworded par 5 so as to include the
words which on the previous day had
been inadvertently omitted from telex
"H". That these facts are common
11
cause appears from para 10 of the
"Admitted Facts", which 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 R1 006 420 were set
forth. 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 transmitted a
telex message ("J") to Solas. It has
already been mentioned that "J" is
simply a corrected version of "H" in
which the words missing from 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 identical with that of
telex "H". It is clear, furthermore,
that telex "J" was a response to telex
"G" transmitted by Solas on 5 June
1984. Para 1 of telex " j " explicitly
states:-
"1. YOUR TELEX DATED 05/06/84
REFERS."
(11) Early in the morning (at 07h07) of 11
June 1984 Solas sent a further telex
message ("K") to Armscor. The first
three paragraphs of telex "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.
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)".
(12) 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:-
"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."
(13) On 12 June 1984 representatives of the
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parties held discussions at the offices
of Armscor. On behalf of Armscor the
view was expressed that no valid
agreement existed; 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 message ("N") to Armscor in
which, inter alia, the following 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 IMPLICA-
TION.
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. On 2 May 1984 Solas
made an offer ("B") to which reference may conveniently be
made as "the 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". By its telex
("I") sent in the early evening of 6 June 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 negotiations had been ad idem as to the total
price (R973 000) for the battery, in telex "I" Solas
elected to stipulate for a higher price (R1 006 240). The
resultant legal position is that telex "I" constituted a
counter-offer ("the Solas counter-offer") which operated as
a refusal by Solas of the Armscor counter-offer.
Accordingly the Armscor counter-offer was thereby
extinguished; and thereupon no offer remained open for
Solas to accept. 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 himself able to advance in support of the
conclusion reached by the Court a quo was 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 the parties were facing each other across a
table. 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 Armscor
counter-offer which telex "I" had extinguished. In this
connection counsel for Solas sought to place some reliance
upon the case of Entores, Ltd v Miles Far East Corporation
(1955) 2 ALL ER 493 (CA) in which the English Court of
Appeal decided that communications by telex should be
classified with instantaneous communications. 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 in which
the parties negotiate. Here reference may usefully be,
made to the following remarks of Lord Wilberforce in the
course of his speech in the House of Lords decision in
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesells-
schaft 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 counter-
offer. 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 a construction
would be a strained and artificial one. It would, I think,
have been quite unbusinesslike for Solas so to interpret
telex "J". 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. The appeal
succeeds with costs, including 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 with
costs."
E M GROSSKOPF JA )
VIVIER JA ) G G HOEXTER, JA KUMLEBEN JA ) Concur NIENABER AJA )
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