Non-variation clauses: the freedom to contract or caged by the Shif(w)ren principle?

18 April 2024


Getting one’s ducks in a row

Non-variation clauses play a crucial role in contractual agreements. In essence, these limit any variation of a contractual agreement to writing, being agreed to and signed by all parties. Since its creation, the ‘Shifren Principle’ has been subject to much controversy. On the one hand, some commentators argue that its application is too harsh, calling it the “Shifren straightjacket”. On the other hand, what’s good for the goose is good for the gander – it is necessary to protect the interests of both parties to a contract.

What is the Shifren Principle, a golden goose or an ugly duckling?

What is the Shifren Principle, a golden goose or an ugly duckling?

The Shifren Principle, formulated in SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren of 1964 (‘Shifren’) concerned the variation of the lease agreement and the verbal cession of rights. The lease agreement concerned contained a clause stating that any variation of the lease agreement could only be done ‘in writing’. A subsequent verbal agreement was concluded in terms of which cession of rights (i.e. to sublet) was agreed to between the original lessee and a third party. In this case, the Court confirmed that the existence of a non-variation clause remains enforceable, and any verbal variation of the original agreement was null and void, emphasising the principle of pacta sunt servanda. Ultimately, giving rise to the so-called ‘Shifren Principle’ as it is known today, which was also later confirmed in the Constitutional Court case Barkhuizen v Napier in 2007.

Application of the Shifren principle and its importance

In almost all agreements, especially commercial agreements, one will encounter the presence of non-variation clauses. Such clauses ensure that parties do not unilaterally amend/alter agreements verbally, permitting legal certainty on which parties can rely on at a later stage. In light of this, one can consider the following issues that may arise:

    1. Permitting verbal variation of an agreement creates a greater evidentiary burden on the parties as they are more compelling and easier to prove since mere presentation suffices. Verbal amendments clip one’s wings by being almost impossible to prove. Written and signed documents thus hold greater evidentiary muster.

2. Non-variation clauses provide legal and commercial certainty. By limiting amendments to a strict process, one ensures greater legal certainty. The fact that both parties have the necessary animus ensures that the obligations remain clearly defined in terms of the agreement. Moreover, this limits any disputes based on any obligations not contained within the agreement.

3. The freedom of verbal variation could lead to an increase of ‘unilateral amendments’ and, in some cases, heighten instances of fraud.

In addition to the above, the overarching principle acting as the gatekeeper towards any of these provisions is public policy. It is trite law, that any contractual provisions in contravention of public policy will be null and void. Crucially, however, this consideration must be taken holistically, i.e. considering the non-variation clause within the agreement as a whole. From the outset, non-variations clauses will always be enforceable unless these come into conflict with the principle of public policy.

Shifren and the advancement of technology

Considering the above and the advancement of technology, the next question that arises is to what extent the Shifrin principle may be applicable when written amendments are electronic. The passing of the Electronic Communications and Transactions Act (ECTA) has created certainty as to the validity of such amendments – as is clear from the discussion above, an amendment need only be ‘in writing’. Section 12 of ECTA confirms this. Importantly, for an amendment to be legally valid, section 13 of ECTA specifically refers to the inclusion of an ‘advanced electronic signature’.

In the case of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash & Another 2014, the SCA provided some clarity as to what falls within this category. The Court held that even the use of an email signature fulfils the requirement of ‘signature’ in terms of section 13(3) of ECTA. If it sufficiently identifies the contractual parties, this will be sufficient. Therefore, parties are also advised to contractually agree on the type of electronic signatures that will be accepted.

In addition to the above, in the case of K2021765242 (South Africa) (Pty) Ltd v Thibault Investments (Pty) Ltd and Another, the Court had to consider whether a demand for the return of ‘all fees, deposits and transfer costs’ in an email, could be considered repudiation. The Court emphasised that accepting transfer when it is offered is also part of a party’s performance and that by making such a threat, one could conclude that this entailed the repudiation of a sale agreement. Thus, even written electronic communications will impact the variation of a contractual agreement, even if these are considered to be outside of the actual contractual agreement between the parties.

Conclusion: Not just water off a duck’s back

As it stands, the Shifren Principle remains valid and enforceable under South African law. Importantly, the application thereof must conform with the notion of public policy. Due regard must be taken when drafting contractual agreements as, although parties to an agreement may contract freely, there will always be some form of limitation in respect of their contractual relationship.

Celine Bakker, Author.

Find out more about Celine Bakker,
an Associate at SL Law.

Celine is an associate specialising in Tech and Artificial Intelligence Law.  She graduated from Stellenbosch University with a BA (law) majoring in German and completed her LLB degree at the Vrije Universiteit of Amsterdam, focussing on Tech and Artificial Intelligence Law.

Alexander Bouwer, Author.
Bachelor of Laws (LLB), Master of Laws (LLM)
Candidate Legal Practitioner

 Alexander is a candidate attorney with a keen interest transnational commercial law. 

His main focus is Company Law and Company Restructuring, Commercial Law, EU Competition Law, Intellectual Property Law, International Corporate Governance, and the International Carriage of Goods.


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