This blog is co-authored by Daniel Kariithi, candidate attorney.
An August 2025 judgment from the Johannesburg High Court reinforces the principle that the interpretation of a settlement agreement must be purposive, textual and contextual.
On 21 January 2016, the applicant and the first respondent concluded an agreement for the procurement of medical equipment from the applicant by the first respondent. The agreement included a dispute resolution provision which stated that any unresolved dispute arising out of the agreement would be referred to arbitration under the auspices of the Arbitration Foundation of Southern Africa (AFSA).
During 2021, a dispute regarding an outstanding payment to the applicant from the first respondent arose. The dispute was referred to arbitration in terms of the agreement. In April 2022, the parties began settlement negotiations. On 24 April 2022, the parties reached an agreement on a settlement amount of R48 million plus VAT. The agreement was reduced to writing and made an arbitration award on 11 July 2022. The applicant then sought to make the settlement an order of court. The first respondent opposed the application.
The issue before the court concerned the interpretation of the agreement. The settlement amount was ambiguous as it stated R48 million plus VAT in numbers, and R32 million in wording. The first respondent brought a counterapplication to rectify the agreement to reflect an amount of R32 million, opposed to R48 million. They argued that the award did not preclude the applicant from pursuing further remedies and was not final and binding. The first respondent argued that the applicant retained the option to enforce the settlement agreement by seeking a court order for specific performance or resuming the arbitration proceedings to claim the full amount.
On a purposive, textual and contextual interpretation of the wording and conduct of the parties, the court held that the typographical error did not detract from the parties’ intention to agree a settlement amount of R48 million. The court emphasised the importance of considering the factual matrix in interpretation. The first respondent’s argument was said to be nonsensical and without merit. The court stated that the existence of alternative remedies does not detract from the validity of a settlement agreement that is in accordance with AFSA rules and the Arbitration Act. Section 31(1) of the Act empowers a court to make an arbitration award an order of court. The applicant’s application was upheld, with the first respondent’s counter-application being dismissed.
This case reinforces the principle that courts must interpret agreements contextually, purposively and with a regard for the factual matrix surrounding the agreement. Further, it reaffirms that an arbitration award, can be made an order of court in terms of section 31(1) of the Arbitration Act.