Authored by Jakop Mphofu.
In a judgment delivered in March 2026, the high court held that a pricing email exchanged during commercial negotiations did not constitute a binding profit-sharing agreement, even where both parties subsequently acted on its terms. The court confirmed that the conduct of parties who anticipate concluding a deal is often indistinguishable from the conduct of parties who have already concluded one, but the law requires the distinction to be drawn.
A metal-fittings manufacturer approached a technology company in 2016 to source LED tubes for a retail client. The technology company saw this as an opportunity for a broader collaboration and prepared a series of draft cooperation agreements between August 2016 and October 2017. None was signed. In March 2017, the technology company sent a detailed pricing email proposing a 60:40 profit split in the manufacturer's favour. The manufacturer later claimed that this email, together with a meeting at an airport restaurant, constituted a binding agreement.
The court applied the recognised test which requires a step-by-step analysis of negotiations to determine whether a communication was made with the genuine intention to be immediately bound on acceptance (with the intention to create a binding agreement- animus contrahendi) or was merely a step in the negotiating process.
Several factors weighed against a concluded agreement. The manufacturer himself described the arrangement as a "proposed agreement" in an email sent on the same day the pricing was circulated. Draft cooperation agreements continued to circulate for months after the alleged conclusion date, with the retail client still listed as an open opportunity. No written confirmation of a concluded agreement was ever sent, despite the technology company's established practice of recording agreements in correspondence. Material terms including warranties, insurance, and product liability were never discussed.
The court found the alleged arrangement commercially improbable. The 60:40 split had been designed for a jointly manufactured product where the manufacturer would perform metalwork, assembly, and testing. In practice, the technology company designed, manufactured, and delivered the product alone. A 60% entitlement for no more than an introduction to the retail client was, the court found, commercially extraordinary.
The court held that outstanding material terms constitute a strong pointer against a binding contract unless displaced by cogent factors pointing clearly the other way. No such factors were found. The claim was dismissed with costs.
The judgment is a pointed reminder that joint commercial activity, shared costs, and even language such as "our agreed structure" do not, without more, establish a binding contract. Parties who wish to be bound must ensure the essentials are agreed and recorded. Those who press ahead on the assumption that a deal will be formalised do so at their own risk.
Pabar (Pty) Ltd v Azoteq (Pty) Ltd (18777/18) [2026] ZAWCHC (18 March 2026)