Tender induced by fraudPublic Procurement


In Namasthethu Electrical (Pty) Ltd v City of Cape Town and Another (Case No. 201/19) [2020] ZASCA 74 (29 June 2020), the Supreme Court of Appeal considered the termination of a contract that had been induced by fraud.

The City advertised a tender for the supply and installation of lighting at the Cape Town Civic Centre. It awarded the tender to Namasthethu Electrical (Pty) Ltd in the amount of R29,263,402. Subsequently, an unsuccessful bidder complained to the City that the company and its directors had been convicted of fraud and corruption.

A forensic investigation carried out by the City revealed that this was indeed so. The company had not disclosed the convictions when called upon to do so at the time that it had submitted its bid. Moreover, the company had provided a false business address. Consequently, the City cancelled its contract with the company.

The company disputed the City’s cancellation and insisted that the matter be referred to adjudication, as provided for in the contract itself.

The Western Cape High Court held that a dispute resolution clause did not survive termination of the contract for fraud.


On appeal, the SCA observed that fraud vitiated every transaction known to the law. Fraud unravelled everything. Once a contract had been rescinded by an innocent party, no adjudication clause survived. This position could change where the parties had specifically made provision in the contract for a dispute such as in the present circumstances to be referred to adjudication. But that was not the case here.

The appeal was dismissed with costs.

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