In Municipality of Mhlontlo v TDH Tsolo Junction (1086/2019) [2021] ZASCA 3 (7 January 2021), the Supreme Court of Appeal dealt with a contractual dispute about whether parties were bound by the conditions in a preliminary letter of appointment.

The Municipality had invited proposals for the development of property in Tsolo. It then appointed the company for the project in question.

In its letter of appointment, the Municipality stipulated that the company was required to submit a list of documents before the appointment took effect. These included proof of insurance, proof of suretyship, a programme of work, etc. The company accepted the appointment and the parties entered into a supply and delivery agreement.

Subsequently, the company sued the Municipality for breach of the agreement and claimed damages in the amount of R 48 million. In its defence, the Municipality argued that the company had failed to submit any of the stipulated documents listed in the letter of appointment. Accordingly, the agreement had never come into existence.

The High Court rejected the Municipality’s argument.

On appeal, the SCA held that the agreement contained a ‘sole memorial’ clause. This indicated that the terms and conditions stated in the document constituted the entire agreement between the parties. No amendment or variation would be binding unless it was placed in writing and signed by the parties.

Accordingly, the agreement was not subject to the requirements in the letter of appointment. The appeal was dismissed with costs.