The Pleading and Proof of Tacit Contracts

Published on January 19, 2023

Tacit contracts or clauses form part of our law of contract. Lawyers are familiar with allegations in pleadings that the parties have entered into express, alternatively tacit agreements or clauses. To establish if and when a tacit agreement had been entered into in particular circumstances is not always evident.

The following examples illustrate the difficulty in establishing tacit agreements:

• If a man walks into a shop and says that he wants to buy a certain product and the assistant immediately charges him a price, a tacit agreement came into being. However, if the assistant response to his offer by handling the goods across the counter but demands a price higher than that which the client had expected, no tacit agreement had been entered into. The client who retains the goods without comment on the higher price however tacitly accepts the offer and an agreement is concluded.
• Is the contract between a passenger and a bus operator to carry public at a usual fare concluded when the passenger enters the bus or when the bus operator receives the fare? The operator in all fairness should have an opportunity to consider the passenger's offer. (For instance, if the passenger is drunk, the operator may refuse the offer). On the other hand, the possibility still remains that even after considering the passenger's offer and after acceptance of the fare, the passenger still decides not to accept the conditions of transport, only reading it after payment of the fare and once he sat down. In this instance no agreement had been reached.
• If a student walks into a bar and orders a drink, the barman tacitly accepts the offer by furnishing the drink and demanding the usual price charged to patrons. The student cannot drink and/or accept the drink and then demands to pay a lesser price. An agreement had already been entered into.

These examples illustrate that each matter depends upon its own facts, circumstances and context. A party, relying on a tacit contract or clause is thus required to set out the facts or circumstances from which the tacit contract/clause is to be inferred, in its pleadings.

The Appeal Court (as it was) initially applied seemingly conflicting tests for inferring the existence of tacit contracts.

The no other reasonable interpretation test was stated in Standard Bank of South Africa Ltd. vs. Ocean Commodities Inc. 1983 (1) S.A. 276 (A) as follows:-

In order to establish a tacit contract, it is necessary to show by a preponderance of probabilities, unequivocal conduct which is capable of no other reasonable interpretation than that the parties intended to, and did in fact, contract on the terms alleged. It must be proved that there was in fact consensus ad idem.

In Joel Melamed and Hurwitz vs. Cleveland Estates 1984 (3) S.A. 155 (a) reference was made to the preponderance of probability test:

In this connection it is stated that a Court may hold that a tacit contract has been established whereby a process of inference, it concludes that that the most plausible probable conclusion from all the relevant proved facts and circumstances is that a contract came into existence

Since both tests rely on reasoning by inference, the general rules for such reasoning ought to be applied:

• In reasoning by inference there are two cardinal rules of logic which cannot be ignored:

(i)(1) the inference sought to be drawn must be consistent with all the proved facts if it is not, the inference cannot be drawn;

(i)(2) the proved facts should be such that they exclude every reasonable inference from them save the one sought to be drawn. If they do not exclude other reasonable inferences, then there must be doubt whether the inference sought to be drawn is correct.

(ii) every offer and every acceptance must be unequivocal, i.e. positive and unambiguous.

the test for finding a tacit contract should not differ materially

from the test for finding a tacit terms in contract. The question in each case is whether agreement can be inferred from the proved facts and circumstances.

Christie (The Law of Contract) argues that it is not necessary to abandon either test entirely and argues for a synthesis which incorporates the best of both tests. The best approach to a synthesis involves three states:

The first stage is to decide on the preponderance of probabilities,

what facts have been established.

The second stage is to decide how the proved facts, that is, the

conduct of each party and the surrounding circumstances, “must” have been interpreted by the other.

The third stage is to decide also on a preponderance of probabilities,

what conclusion consistent with those facts is most likely to be correct.

The Supreme Court of Appeal in 2019 in Buffalo City vs. Nurcha Developments 2019 (3) SA 379 (SCA) put to rest the apparent conflicting test by relying on what was said in Butters v. Mncora 2012 (4)S.A. (1)(SCA):

This appeal is about an alleged tacit agreement. As in all cases the court searches the evidence for manifestations of conduct by the parties that are unequivocally consistent with consensus on the issue that is the crux of agreement and, per contras, any indication which cannot be reconciled with it. At the end of the exercise, if the party placing reliance on such an agreement is to succeed, the court must be satisfied, on a conspectus of all the evidence that it is more probable than not that the parties were in agreement, and that a contract between them came into being in consequence of their agreement.

A party thus relying on a tacit contract/term even as an alternative to an express contract, must plead that the contract/term is tacit. At trail, a party must produce evidence of the parties' conduct that justifies a reasonable inference that the parties intended to and did indeed contract on the terms alleged - in other words that there was in fact consensus ad idem amongst the parties.

C.M. Weiss
Practicing Consultant