Matter over mind – The advisability of concluding agreements in writing re-emphasised

In a recent ruling relating to the well-known “Please Call Me” (PCM) case, the Gauteng Provincial Division of the High Court, in Pretoria, has ordered the defendant to go back to the drawing board and recalculate the amount of compensation that it believes should be paid to the plaintiff, being a former employee who has now been accepted by the courts as originally having conceived PCM, at least in the extent to which it was exploited by the defendant.

The case has been ongoing in various local courts for over 20 years, having culminated in a ruling by the Constitutional Court that a contractual relationship did come into existence between the plaintiff and the defendant when the defendant’s CEO orally agreed that the plaintiff would be compensated for the exploitation of PCM, and that the plaintiff is therefore entitled to such compensation, which should be agreed between the parties independently since it was not agreed beforehand in terms of the oral agreement.

While it does so in the extreme, the course that this case has taken again emphasises the advisability of reducing agreements to writing, and doing so comprehensively, before any performance in terms of an agreement takes place.  The onus to prove both the existence of an agreement and its terms when an oral agreement is breached is challenging to say the least, and is compounded by oral agreements usually falling far short on comprehensiveness.

Furthermore, the commencement of performance in terms of an oral agreement often leads to unintended or unforeseen legal consequences arising between the parties.  Had a written agreement been concluded, the potential for such consequences may have been identified, and therefore may have been avoided or at least managed.

Therefore, although an oral agreement is binding in South African law, it would serve the parties to such an agreement well to reduce the agreement to writing, and preferably to do so before commencing their performance under the agreement.

What the case also emphasises is the advisability for employers clearly to contract with their employees around not only ownership of, but also in relation to expectations for compensation to be paid in respect of, intellectual creations originating from its employees.

It is, finally, worth mentioning again that, as previously reported by our firm, the rights that the plaintiff asserted the case under consideration are not intellectual property (IP) rights.  Intellectual property rights rarely come into existence through the conception of ideas, and most often the only rights that do come into existence in such a case are rights to pursue intellectual property rights.

In this case, the plaintiff did not, and in all likelihood could not, pin his hopes to an assertion of objective intellectual property ownership.  When considering the case one should therefore not incorrectly draw a conclusion that there is objective ownership in ideas and that the basis for the findings against the defendant arise from an infringement on intellectual property ownership.  The basis for the plaintiff’s case lies in the law of contract.

There is therefore merit in concluding that no deal should be done until the paperwork is done.