Everfresh Market Virginia v Shoprite Checkers

The Constitutional Court held that a landlord's constitutional duty to act in good faith during lease renewal negotiations required it to disclose material information about a competitor's plans that would affect the tenant's business decision. The Court recognized that constitutional values, particularly the duty of good faith, inform and permeate the law of contract in South Africa.

Everfresh, a supermarket tenant, negotiated lease renewal with its landlord while Shoprite, a major competitor, was simultaneously negotiating to open a store in the same shopping centre. The landlord failed to disclose Shoprite's plans to Everfresh during renewal negotiations. After Everfresh renewed its lease at a higher rent, it discovered Shoprite's imminent entry and suffered significant business losses.

Whether the landlord owed a constitutional duty to negotiate in good faith and disclose material information during lease renewal negotiations.

The Constitutional Court held that the landlord breached its constitutional duty to negotiate in good faith by failing to disclose Shoprite's plans during lease renewal negotiations. The duty of good faith, grounded in constitutional values, required disclosure of information material to the tenant's decision whether to renew.

Constitutional values, particularly good faith and ubuntu, impose a duty on contracting parties in ongoing relationships to disclose material information during negotiations that would significantly affect the other party's decision-making, even absent fraud or misrepresentation.

The Court emphasized that constitutional values permeate all areas of law, including contract. In the context of an ongoing landlord-tenant relationship and renewal negotiations, the duty of good faith required the landlord to act with transparency and fairness. The landlord's failure to disclose information that was clearly material to Everfresh's commercial decision constituted a breach of this constitutional duty, as the information would have fundamentally affected whether Everfresh renewed and on what terms.

The Court discussed the evolution of contract law in South Africa from rigid pacta sunt servanda principles toward recognition of good faith as a foundational constitutional value, signaling potential broader application of good faith duties across various contractual contexts.

This landmark case demonstrates the constitutionalization of private law in South Africa, particularly the infusion of ubuntu and good faith into contract law. It is essential for understanding how constitutional values affect commercial relationships and the duties parties owe each other beyond traditional contractual terms.

Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC)