Will the Use of Disclaimers/Indemnities Against COVID-19 Assist Institutions?

As most sectors and businesses are reopening and the number of cases are exponentially increasing, the owners/heads of institutions have every reason to be concerned about legal implications should any external person test positive and can link contracting the virus to the negligence on the part of their business. The greatest challenge with this particular virus is the manner in which it can move from one person to another – it is extremely difficult to contain it.

The measures, as per the World Health Organization, are not absolute but only serve to minimize the possibility of transmission. In the absence of “absolute prevention” of contraction of the virus in any institution/business, the best that can be done by the relevant personnel is to implement the relevant reasonable measures as prescribed and ensure adherence thereto. In fear of any legal liability, it will not be surprising to see more and more institutions using disclaimers/indemnities in an attempt to escape possible legal claims.

There already have been reports that in the Western Cape, some schools have been requesting parents to sign such indemnities. The legal value of disclaimers in South Africa triggers some electrifying debates as the legal position on this subject has birthed diverging views and diverging courts’ decisions. The interesting debates have been made more interesting by the promulgation of the Consumer Protection Act Act 68 of 2008 (“CPA” hereinafter). The outbreak of the novel coronavirus may very well fuel the interesting debates in this regard. In view thereof, it is necessary to zoom into some of the most prominent cases around this topic; the CPA Act and thereafter postulate what might be the value (if any) of the indemnities during this period.

The Case Law

Despite the fact that it was decided pre-CPA Act, it is impossible to discuss the legal position relating to the disclaimers without mentioning Afrox Healthcare Bpk v Strydom. In this case, Strydom signed a disclaimer upon admission to the hospital wherein he was to undergo surgery and, also, get post-operation medical treatment, as a matter of course. Whilst in hospital, the nurse over-tightened a bandage on Mr. Strydom and, as a consequence, the blood flow to a certain part of his body was cut.

Livid by this, Mr. Strydom instituted action against Afrox Healthcare arguing that the institution has been negligent. The hospital relied on the disclaimer which he had signed, to argue against liability. Mr. Strydom successfully challenged the validity of the disclaimer in the High Court. Dissatisfied by the High Court ruling, the hospital took the matter to the Supreme Court of Appeal and it succeeded. The SCA in reaching this decision, it held that – such disclaimers have become a norm, rather than an exception and to say that the hospital clerk should have pointed same to Mr. Strydom is unjustified; the terms of the disclaimer are not unconstitutional, as the Constitution itself guarantees and protects contractual freedom. Whilst it acknowledged that the principle of good faith is one of the cornerstones of the law of contract, it held that it is not a rule of law on which the disclaimer and/or its terms can be set aside.

The case of Barkhuizen v Napier, which was decided on in 2007, is regarded by many as a “game – changer” insofar as the role of public policy in contract is concerned. The special mention of public policy is critical because, had the court in Afrox viewed and gave the same weight to public policy as was the case in Barkhuizen, the outcome could have been different.

In Barkhuizen, the court first acknowledged that public policy is an inextricable characteristic of any contract. It then said that the question of public policy is no longer problematic as it used to be. It stated that public policy reflects the convictions of the community – values which are dearly held by the society. The court held that since the advent of our constitutional democracy, the public policy is now rooted in our Constitution and the values that underlie it. The court went onto spell out some of these values being – rule of law; human dignity; equality; etc. and held that any contractual term which militates against the values of our Constitution is contrary to the public policy and therefore unenforceable.

The Barkhuizen case was significant in this area of law as it sets out a solid approach/guide to the application of public policy to contracts. It is therefore not surprising that the High Court in Naidoo v Birchwood Hotel applied the legal principles set out in Barkhuizen to reach the conclusion that the disclaimer was not legally enforceable. This case was decided on in 2012. Briefly, in the Naidoo case: Mr. Naidoo was a guest at the hotel. When he drove towards the gate, the gate did not open, and he waited briefly for a security guard to open for him. Realizing that the security was not coming to open, he climbed off his car and walked towards the gate to open it himself. As he was approaching, the gate fell on him and, as a result, sustained serious injuries. He proceeded to institute the action against the hotel and, as one would predict, the hotel denied liability and relied on the disclaimer which was on the reverse side of the hotel’s registration card.

The court found against the hotel saying that the security guard failed to take reasonable steps to guard against the occurrence of the incident. In addition, the court held that the hotel failed to ensure proper maintenance of the gate. Further, it was held that the hotel could have placed a warning sign to alert the public of the potential danger.

On the question of whether the exemption clause was binding and if it was not against the public policy, the court adopted the two-staged enquiry as per the Barkhuizen case. Firstly, whether the contractual term is reasonable, objectively viewed. Secondly, if it is, whether it should be enforced in the particular circumstances. The court went onto hold that any exemption clause which seeks to debar guests from suing the hotel as a result of bodily harm suffered at the hotel ultimately denies guests the judicial redress. This, the court added, offends the notions of justice and fairness.

In addition to Naidoo, there have been cases declaring disclaimers unenforceable such as that of Mercurius Motors v Lopez which was heard by the SCA in 2008. Since Barkhuizen and thereafter the introduction of the CPA, most decisions have been against the enforceability of the disclaimers.

The Consumer Protection Act

Various provisions of the CPA Act seek to regulate the enforceability of the indemnities and this is unsurprising given the fact that the purpose of this legislation is to protect the consumers. Among others, Sections 48; 49; 51 and 52 are more relevant in this regard. Section 48 disallows unfair, unreasonable and unjust contractual terms and prohibits agreement that requires a consumer to waive any rights, assume any obligations or waive any liability of a supplier on terms that are unfair, unreasonable or unjust or if such terms are imposed as a condition of entering into an agreement.

The said provision spells out the criteria which is to be used in determining whether a contractual term is unjust, unfair or unreasonable. Section 48(2) of the Act requires that, if the agreement is subject to a term, condition or notice that may be unfair, unreasonable, unjust or unconscionable in terms of the criteria under section 48, the fact, nature and effect of that term, condition or notice must specifically be drawn to the attention of the consumer in a manner and form that satisfies the formal requirements set out by the Act.

Failure to comply with this provision will lead to the Court may setting aside the specific terms and conditions that were not drawn to the attention of the consumer. Section 49(1) sets out specific kind of contractual terms that must be pointed out to the consumer if they are part of the contract. These include – terms which in any way limit the risk/liability of the supplier; constitute assumption of the risk/liability by the consumer; impose an obligation on the consumer to indemnify the supplier; etc. These are but some of the relevant dictations of the CPA Act which make the legal value of the disclaimers interesting.

Conclusion

Although, to date, there has been no indemnity case that has turned on the CPA Act, this legislation has provided some clarity on the subject. From the aforesaid, it would appear as though the disclaimers will not greatly assist institutions who may try to rely on indemnities in order to escape legal liability. With that said, where public policy dictates and where there has been compliance with the CPA Act, there is some value in the use of disclaimers because – 1) the disclaimers are permitted in law (provided they comply); 2) they provide an additional layer of protection for the businesses/institutions – as thin a layer as it is. Also, the (un)lawfulness and thus (un)enforceability will be determined on a case-to-case basis.

Further, the extent of negligence of each institution will be relevant – if the institution has been grossly negligent, then it cannot rely on the indemnity. Whilst it may protect some institutions, it will not protect others. For example, where same is used at schools to protect schools against legal liability should the child/children contract covid-19 due to the negligence on the part of the school, there is a slim chance (if any) that this will stand in law because, on the face value, it evidently flies in the face of the Constitution and its core values.

Mthokozisi_Maphumulo
Mtho Maphumulo
Associate | Litigation Attorney