The impact of public policy on the validity of a contract

Abstract

Freedom of contract is understood as the freedom of parties to enter into contracts and choose the terms of their contract

While public policy has always been the yardstick in the common law on whether a contractual term could be enforced or not, history has shown that the question of what constitutes public policy has not come without any difficulty especially in a developing country such as South Africa.

The lack of established statutes, rules and policies on what constitutes public policy a has led to much uncertainty of when a contract will be enforced and the terms upheld in the light of public policy.

Against this backdrop, this dissertation will investigate the impact of public policy on freedom of contract.

This paper will confirm that freedom of contract is not absolute in South Africa and that our courts, due to absence of clear statutes and legislation, now bear the brunt to determine whether a contract is enforceable in the public interest.

This dissertation will seek to find the principle of public policy as problematic due to its ever-changing content, unclear definition and lack of uniformity for determining what constitutes public interest in each particular case. The dissertation will further show how the courts have used the rights and values entrenched in our Constitution to protect the elusive doctrine of public policy.

In summary, this thesis will find that our courts have found that a careful balancing exercise is required to determine whether enforcement of the contractual terms would be contrary to public policy.