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Community Business Directory, Event Listings, News and Views from Gqeberha, Nelson Mandela Bay

Can Landlord Dictate Where Tenant Must Buy Stock?

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This week a reader who is leasing a retail shop asks the Property Poser panel whether his landlord can compel him to buy the majority of his stock from the latter’s wholesale distribution business.

Because it forms part of his rental agreement, the reader would like to know whether such a clause could be challenged.

There are two main issues to be considered here, says Rian du Toit from DTS Attorneys in Port Elizabeth.

“Firstly, whether such a clause is valid in our law and, secondly, whether the tenant can challenge such a provision in his rental agreement.”

Du Toit says South African law subscribes to the principle that people are free to enter into any lawful contract they wish.

“Conversely, any unlawful term cannot be a valid clause of a contract and, as a general principle, agreements that are contrary to public policy will not be enforced.”

When it comes to public policy, the interests and considerations of the public are of paramount importance, says Du Toit.

“The doctrine of freedom of contract is based on the premise that both parties hold a position of equal bargaining strength and that they are free to accept or reject any terms.”

Therefore, says Du Toit, the courts will not interfere lightly with the contractual provisions agreed to, however harsh they may be.

“This means that our reader may now have difficulty in convincing a court that he must be excused from his responsibilities in terms of the contract he concluded with his landlord.”

That being said, if the lease was concluded on or after April 1 last year, the Consumer Protection Act may affect the decision regarding the inclusion of the clause, says Du Toit.

The aim of this act is, among other things, to promote fair business practices and protect consumers from unfair, unreasonable, unjust or improper trade practices, says Charlotte Vermaak from Chas Everitt in PE.

However, says Vermaak, the reader was certainly not forced to enter into the agreement.

“He could have elected to contract with another landlord or he could have negotiated other, possibly more favourable, terms to the agreement.”

According to Vermaak, this becomes clear if one considers the reverse of his current situation. “What if the supply of stock was beneficial to him in that he acquired the goods at below cost prices?

“What if the landlord wanted to renege from this agreement since it was no longer beneficial to him? Surely the reader would then have liked to keep him bound to the terms of the contract.”

An aspect for the reader to consider is whether he knowingly agreed to the provision or whether he was labouring under some misunderstanding or misinterpretation, says Vermaak.

“Because this provision carries such importance, it could be argued that it is a material term of the contract and that consensus by the two parties is absolutely necessary.”

Although it seems irrelevant in this instance, Vermaak says the reader could also seek legal advice on the circumstances under which a contract could be void.

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Fullstop

Full Stop Communications is a public relations consultancy in Port Elizabeth in the Eastern Cape of South Africa focusing on media relations and copywriting. We drive regional and national media campaigns in a number of fields, most notably in the property, legal and sports arenas. We also specialise in media monitoring, ghostwriting, editing, translation and advertising. See more articles by Full Stop.