Authored by Patrick Bracher.
In August 2025 the High Court refused to allow a municipality to resile from an agreement of settlement entered into with a company that had performed event management services for it based on post-settlement information obtained.
The municipality alleged that the company had been overpaid and sought to recover over R6 million. A settlement agreement had been reached in which the municipality conceded it was indebted to the company for an amount of about R5.5 million. A settlement agreement was signed. The municipality sought to rescind the settlement agreement alleging that a subsequent investigation revealed that a total amount of about R3.37 million was for services not rendered. The municipality claimed a justifiable error in entering into the settlement.
A compromise agreement cannot be set aside on the basis of a mistake initiated by the person attempting to set it aside. A unilateral mistake is not an error justifying recission of a compromise agreement. However material the mistake, the mistaken party will not be able to escape from the settlement contract if the mistake was due to its own fault, including in not carrying out the reasonably necessary investigations before committing to a settlement.
It was the duty of the municipality to investigate all the issues prior to committing itself for payment in the deed of settlement. It was not allowed by the court to resile from the deed on issues that it discovered after the fact that could have been discovered before the settlement.
This is an important principle of the law of compromise. Settlements are not easily resiled from.