Is a Restraint of Trade Enforceable in South Africa If You Never Signed One?

 

Written by Roy Bregman, admitted attorney with over 51 years’ experience in employment and commercial law.

Last updated: 21 July 2026

Key Takeaways •      A restraint of trade is only enforceable if the employer can first prove that a restraint agreement actually came into existence. Without that, the question of reasonableness never even arises. •      A clause in an appointment letter saying an employee "will be required to sign a restraint of trade" is not a restraint. It is only an agreement to conclude an agreement later, which our courts call a pactum de contrahendo. •      In Generator and Plant Hire SA (Pty) Ltd v Hall (Northern Cape High Court, 17 July 2026) the court refused to enforce a restraint that was never signed, even though the employee had worked for the company for almost ten years and had joined a direct competitor. •      Employers should have every key employee sign a written restraint, with clear terms on duration, area and activities, at the start of employment, and should audit their contracts regularly.

 

Restraints of trade are among the most litigated clauses in South African employment law. They are also among the most misunderstood. Employers often assume that because a restraint was mentioned at the start of the relationship, it binds the employee forever. Employees often assume that restraints are unconstitutional and can simply be ignored. Both assumptions are wrong.

A judgment delivered by the Northern Cape High Court on 17 July 2026, Generator and Plant Hire SA (Pty) Ltd v Hall, deals with a scenario that arises far more often than employers care to admit. The appointment letter promised that a restraint would be signed. It never was. Ten years later, the employee resigned and joined a competitor. Could the employer still enforce the restraint? The court said no, and its reasoning is a masterclass in why paperwork matters.

This article explains the legal principles in plain English, unpacks the Hall judgment and two other 2026 restraint cases that went the other way, and sets out practical steps for both employers and employees.

What is a restraint of trade agreement?

A restraint of trade is a contractual promise by an employee (or the seller of a business) not to compete with the employer for a defined period and within a defined area after the relationship ends. Typical restraints prevent the former employee from working for a competitor, soliciting the employer’s clients, or poaching its staff.

Since the Appellate Division’s decision in Magna Alloys and Research (SA) (Pty) Ltd v Ellis in 1984, the position in our law has been that restraints are valid and enforceable unless the person resisting the restraint proves that enforcing it would be unreasonable and contrary to public policy. The Supreme Court of Appeal confirmed this in Reddy v Siemens Telecommunications (Pty) Ltd, where it balanced two competing values: people should honour their contracts, and people should be free to work and earn a living, a freedom protected by section 22 of the Constitution.

The High Court in Experian South Africa (Pty) Ltd v Haynes summarised who must prove what. The employer only needs to invoke the restraint agreement and prove a breach. The employee then carries the burden (in legal language, the onus) of showing that the restraint is unreasonable. But there is an obvious first step hidden in that formula: the employer must be able to point to a restraint agreement in the first place. That is precisely where the employer in the Hall case came unstuck.

Can a restraint of trade exist without a signed agreement?

Only in rare and exceptional cases. A contract does not always need to be in writing, so in theory a restraint can arise without a signature. In practice, however, courts are openly reluctant to read a restraint into an employment relationship where the parties never recorded one, because a restraint limits a person’s constitutional right to choose and practise their trade.

An employer trying to enforce an unsigned restraint must squeeze its case into one of three legal doctrines. Each doctrine has a demanding test, and each is explained in everyday language in the table below.

Legal route	What it means in plain English	What the employer must prove
Tacit (implied) term	The restraint was an unspoken term of the existing employment contract, one so obvious that both parties clearly intended it.	The "bystander test": if someone had asked both parties at the time of contracting whether the restraint applied, both would have answered "of course". The term must be necessary to make the contract work, not merely convenient for the employer.
Tacit contract	A separate restraint agreement arose from the parties’ conduct, without anything being said or written.	Unequivocal conduct by both parties that is capable of no other reasonable interpretation than that they intended to contract on those exact terms. Silence and passivity are not enough.
Quasi-mutual consent	Also called the "reliance theory". Even if the employee never actually agreed, the employee behaved in a way that made the employer reasonably believe there was agreement, so the employee cannot now deny it.	Conduct by the employee that would make a reasonable person believe the employee was assenting to specific, known terms. An employee cannot "assent" to terms that were never disclosed to them.

 What did the court decide in Generator and Plant Hire SA v Hall?

The court dismissed the application and refused to enforce the restraint, with costs against the employer. The judgment is the clearest recent statement of the principle that an unsigned restraint will almost never be rescued after the fact.

The facts

Mr Hall was appointed as a sales and marketing representative in May 2016. His appointment letter stated that he "will be required to sign a restraint of trade due to the nature of the position" and that a detailed employment contract would follow. Three months later he signed a written employment agreement. That agreement contained a confidentiality clause, but no restraint of trade, and no restraint was ever signed in the almost ten years that followed.

Mr Hall rose to branch manager and then regional manager of the Upington branch, gaining intimate knowledge of the company’s pricing, customers and strategy in the Northern Cape. He resigned on 1 September 2025. Only then did the employer inform him that his employment was "subject to a restraint", and only on 30 September 2025 did it spell out the terms for the first time: a 24 month restraint covering the entire Northern Cape Province. The employer’s investigation suggested that Mr Hall was involved with a direct competitor and had forwarded quotations and pricing schedules to his email address at that competitor.

The court’s reasoning

The employer argued all three doctrines described above. Stanton J rejected each one.

On the implied term argument, the court stressed that a court does not make contracts for people and will not read a term into a contract merely because it would have been reasonable. Applying the bystander test, it was impossible to infer that Mr Hall would have agreed, by necessary implication, to restraint terms that were formulated for the first time in a letter sent after his resignation.

On the tacit contract argument, the court held that the employer had to prove unequivocal conduct capable of no other reasonable interpretation than that both parties had agreed to the alleged terms. Working loyally for ten years without ever raising the topic simply did not meet that standard.

On quasi-mutual consent, the court found the argument self-defeating. The employer only made the terms of the restraint known after the resignation and took no steps over a decade to negotiate and conclude a restraint. Mr Hall could not have created a reasonable impression of agreeing to terms he had never seen. The appointment letter’s promise of a future restraint was, at best, a pactum de contrahendo, that is, an agreement to conclude an agreement in the future, which is not itself a restraint.

How does this compare with recent cases where restraints were enforced?

The contrast with two other 2026 judgments shows that the deciding factor was not judicial hostility to restraints, but the absence of a signed document.

In Citadel Holdings (RF) (Pty) Limited v Stratfold (Western Cape High Court, 30 June 2026), the respondent had signed restraint, confidentiality and non-solicitation undertakings when she sold her shareholding and continued working in the group. The court enforced the restraint across South Africa until May 2028, holding that she had failed to discharge the onus of proving the restraint unreasonable.

In Allens Meshco (Pty) Ltd v Krige (Western Cape High Court, 12 March 2026), a restraint that was freely and voluntarily signed to bolster the employee’s employment conditions was enforced after the employee resigned shortly before a disciplinary hearing. And in Reddy v Siemens, the Supreme Court of Appeal enforced a signed 12 month restraint even without proof that the employee had actually misused confidential information; the risk of disclosure was enough.

The pattern is unmistakable. Where a proper written restraint exists, employees carry a heavy burden to escape it. Where no restraint was ever concluded, even compelling evidence of competition, as in the Hall case, will not save the employer.

What should employers do now?

Fix the paperwork before you need it. In our experience, the following steps close the gap that sank the employer in the Hall case:

1.     Audit every employment contract for senior, sales and client-facing staff. Confirm that a signed restraint actually exists in each file, not merely a letter promising one.

2.     Sign the restraint at or before commencement of employment, as part of the offer, with the duration, geographical area and restricted activities spelled out in full.

3.     Never rely on a clause that says a restraint "will be signed in due course". As the Hall case shows, that is an agreement to agree, not a restraint.

4.     For existing employees without a restraint, conclude one at the next promotion or salary increase, so that the employee receives something of value in exchange for signing.

5.     Do not treat a confidentiality clause as a substitute. It protects information, but it does not stop the employee from joining a competitor.

6.     Keep the restraint reasonable. A restraint covering an entire province for 24 months, when the business operates within a 300 kilometre radius, invites a public policy challenge.

7.     Act quickly on breach. Restraint applications are urgent by nature, and delay undermines both the case and the relief.

What should employees know?

If you never signed a restraint, do not assume you are bound by one raised for the first time when you resign. Equally, do not assume you are free of all obligations. A confidentiality clause survives termination, and forwarding your employer’s quotations, pricing schedules or client lists to a competitor can expose you to an interdict (a court order stopping specified conduct) and a damages claim under the law of unlawful competition, even where no restraint exists. Take advice before you move.

Conclusion

Generator and Plant Hire SA v Hall is not a case about whether restraints of trade are enforceable in South Africa. They plainly are, as the Citadel and Allens Meshco judgments confirm. It is a case about the first hurdle that every employer must clear: proving that a restraint agreement actually came into existence. A promise to sign a restraint, followed by ten years of silence, clears nothing. The lesson for employers is simple and inexpensive: reduce the restraint to writing, on clear terms, and have it signed on day one.

Frequently Asked Questions

Is a verbal restraint of trade valid in South Africa?

In theory, yes, because South African law does not require a restraint to be in writing. In practice, an unwritten restraint is extremely difficult to enforce. The employer must prove clear agreement on specific terms, and courts will not readily read a restraint into an employment relationship, so a signed written restraint remains essential.

Who must prove that a restraint of trade exists?

The employer. The employer must first prove that a restraint agreement came into existence and that the employee breached it. Only then does the burden shift to the employee to prove, on a balance of probabilities, that enforcing the restraint would be unreasonable and contrary to public policy.

Can my employer add a restraint of trade after I resign?

No, not without your agreement. A restraint is a contract, and contracts need consent from both sides. In Generator and Plant Hire SA v Hall the Northern Cape High Court refused to enforce restraint terms that were communicated to the employee for the first time only after he had already resigned.

Does a confidentiality clause stop me from working for a competitor?

No. A confidentiality clause protects the employer’s confidential information and usually survives termination, but it does not prevent you from taking up employment with a competitor. Only a valid restraint of trade can do that. Misusing confidential information at a competitor can, however, still be interdicted separately.

How long can a restraint of trade last in South Africa?

There is no fixed statutory limit. Courts assess reasonableness case by case, weighing the employer’s protectable interests against the employee’s right to work. Restraints of six to twenty-four months are common, and courts can enforce a restraint partially, for example by reducing an unreasonably wide area or period.

Speak to us before the restraint becomes a dispute

Whether you are an employer who needs watertight restraint and confidentiality agreements, or an employee who has been threatened with a restraint you never signed, we can help. Bregman Moodley Attorneys has been taking the sting out of legal problems since 1974.

Call us on +27 (0)11 646 0335, email roy@bmalaw.co.za or visit www.bregmans.co.za to book a consultation. We respond to every email with a phone call within 24 working hours.

 

Can a Property Sale Be Cancelled If the Seller Does Not Own the Property?

 

Written by Roy Bregman, admitted attorney with over 51 years' experience in property and conveyancing law. View Roy's profile.

Last updated: 15 July 2026

Key Takeaways •      A sale of land is valid only if it is in writing and signed by the true owner, or by someone with the owner's written authority. If it is not, the sale is void from the very beginning. •      You cannot sell what you do not own. A person who is not the registered owner cannot pass ownership, whatever the sale agreement says. •      A court order for transfer, obtained against the wrong person, does not bind the real owner and does not cure a void sale. The 2026 Hoosen judgment confirmed this. •      Before you pay anything, confirm the seller is the registered owner through a deeds office search, and let a conveyancer tie your payment to registration.

Yes, a property sale can be cancelled, and in many cases, it is void without a court even needing to cancel it, if the person who sold the property was not the true owner or did not sign as the law requires. In South Africa, land can only be sold in a specific way, and when those rules are not followed, the sale has no legal force at all.

This is not a mere technicality. In June 2026, the KwaZulu-Natal High Court set aside two Durban property sales because the seller did not own the properties. The real owner had never signed anything, and the buyers were left with nothing, even though one of them had already obtained a court order directing that the properties be transferred.

This article explains, what makes a property sale valid, what happens when a non-owner sells, what the courts have recently decided, and the practical steps that protect you as a buyer.

What does the law require for a valid property sale in South Africa?

The law requires that every sale of land be in writing and signed by the seller and the buyer, or by agents acting on their written authority. This rule appears in section 2(1) of the Alienation of Land Act 68 of 1981. The word alienation simply means the transfer or disposal of land, usually by a sale.

If a sale does not meet this requirement, it is void ab initio. That Latin phrase means void from the very beginning, as though the agreement never existed. No rights flow from it, and neither party can enforce it.

The writing requirement is strict. All of the material terms, meaning the important terms such as the parties, the property, and the price, must be captured in the signed document. A handshake, a WhatsApp message, or a verbal promise is not enough to sell a house.

Why must the true owner sign?

The true owner must sign because you cannot give someone more than you have. Our law captures this through an old principle, nemo plus iuris, which is shorthand for the idea that a person cannot transfer greater rights than they themselves hold. A seller who is not the owner holds no right of ownership to pass on.

So even a perfectly worded, signed agreement is worthless if the person signing as seller is not the registered owner and has no authority to act for the owner. The buyer receives a piece of paper, but no ownership.

What happens if someone sells a property they do not own?

If someone sells a property they do not own, the sale is void and ownership does not pass to the buyer. The true owner can approach a court to have the sale set aside and to stop any transfer going through at the deeds office. The buyer is usually left to claim back whatever money was paid, which can be very difficult if the seller has disappeared or spent it.

The table below sets out the common scenarios and their effect.

Scenario	Is the sale valid?	What the buyer can recover
Sale in writing, signed by the registered owner	Valid and enforceable	Full ownership once transfer is registered
Sale signed by an agent with the owner's written authority	Valid and enforceable	Full ownership once transfer is registered
Sale by a person who is not the owner and has no authority	Void from the start	Only a money claim to recover what was paid
Sale with a forged owner's signature	Void from the start	A money claim, plus possible criminal charges against the fraudster
Verbal or informal sale, not properly signed	Void from the start	Only a money claim to recover what was paid

 

Notice the pattern. When the sale is void, the buyer never gets the property. At best, the buyer has a claim for money back, and that claim is only as good as the seller's ability to pay.

What did the court decide in the 2026 Hoosen case?

In MEC for Human Settlements KZN v Hoosen and Others (2026), the court set aside two property sales because the seller was not the owner, and it stopped the deeds office from registering transfer. The properties in Durban were registered in the name of the provincial housing department. A close corporation that did not own the properties sold them to two buyers in 2017.

The buyers had gone further than most. They obtained a default judgment, meaning a judgment granted because the other side did not defend the case, ordering the seller to transfer the properties. The problem was that the true owner, the department, was never a party to that earlier case and knew nothing about it.

When the department found out, it asked the High Court to set the sales aside. The court agreed. It held that the sales did not comply with section 2(1), because the owner had not signed, so they were void. The court also rejected the buyers' arguments that the earlier judgment had settled the matter. Those arguments relied on res judicata, which means a matter that has already been finally decided, and on estoppel, which prevents a person from going back on an earlier position. Both failed, because the true owner had never been part of the earlier case and so could not be bound by it.

The buyers' counterclaim, which asked the court to force the department to sign the transfer, was dismissed. There was simply no legal basis to make an owner sign away property it had never agreed to sell.

The Supreme Court's rule in Cooper v Curro Heights

The Supreme Court of Appeal confirmed in 2023 that non-compliance with section 2(1) makes a land sale void from the start, and that such a sale cannot create any right to sue. In Cooper NO and Another v Curro Heights Properties (Pty) Ltd, the court dealt with a sale where an important term had not been properly reduced to writing and signed. The result was that the whole agreement was null and void.

The lesson from the Supreme Court is clear. The written and signed requirement is not a formality to be smoothed over later. If it is missing, there is no sale.

Why registration is not a guarantee: Legator McKenna

Registration in the deeds office does not automatically prove that a sale was valid. In the leading case of Legator McKenna Inc v Shea, the Supreme Court of Appeal explained how ownership passes under what lawyers call the abstract theory of transfer. In plain terms, ownership passes when the property is registered and when both sides genuinely intend ownership to change hands under a valid arrangement.

The practical point for buyers is this. Registration is powerful, but it is not magic. Where there is a real defect, ownership may not pass despite the entry in the deeds office, and a court can step in to put things right.

How can you protect yourself when buying property?

The best protection is to confirm ownership and follow the correct process before you part with any money. The steps below reduce your risk considerably.

First, obtain a deeds office search on the property. This confirms who the registered owner is, and whether a bank or anyone else has a bond or other interest registered against it.

Second, match the seller to the owner. Compare the seller's identity document to the name of the registered owner on the title deed. If they do not match exactly, stop and ask why.

Third, check authority where someone signs for the owner. If an agent, a company representative, an executor, or a curator signs, insist on seeing the written authority, such as a power of attorney, a company resolution, or letters of executorship.

Fourth, put everything in writing. Make sure the signed agreement records all of the material terms, including the parties, the full property description, the price, and the conditions of sale.

Fifth, use a conveyancer and tie payment to registration. A conveyancer is an attorney who specialises in transferring property. Structure the deal so that the purchase price is only released once transfer is safely registered in your name.

Sixth, watch for red flags. A price that is well below market value, pressure to pay quickly, a seller who is not named on the papers, or a bank still recorded as titleholder are all warning signs that deserve a closer look.

The bottom line

A property sale can be cancelled, and is often void from the outset, where the seller is not the true owner or the owner has not signed as the law requires. The 2026 Hoosen judgment is a sharp reminder that even a court order for transfer will not save a buyer if it was obtained against the wrong person. The Supreme Court in Cooper v Curro Heights made the same point about the written and signed requirement.

The good news is that these losses are avoidable. A deeds office search, a careful check of identity and authority, a properly drafted agreement, and payment tied to registration will protect you. When large sums and your family home are at stake, a few hours of an attorney's time is a small price for peace of mind.

Frequently asked questions

Can a property sale be cancelled if the seller does not own the property?

Yes. If the seller is not the registered owner and has no written authority to act for the owner, the sale is void from the start. Ownership cannot pass, a court can set the sale aside, and the buyer is usually left with only a claim to recover the money that was paid.

Is a verbal agreement to sell a house valid in South Africa?

No. Section 2(1) of the Alienation of Land Act requires every sale of land to be in writing and signed by the parties or their authorised agents. A verbal deal, a handshake, or a text message cannot validly sell property, and any such agreement has no legal force whatsoever.

What does void ab initio mean for a property buyer?

Void ab initio means void from the very beginning, as if the agreement never existed. For a buyer, no rights arise from the sale, no ownership passes, and the agreement cannot be enforced. The buyer's remedy is generally limited to reclaiming the money that was paid to the seller.

Does a court order for transfer protect me if the seller was not the owner?

Not necessarily. If the order was obtained against someone who was not the true owner, and the real owner took no part in that case, the order does not bind the owner. As the 2026 Hoosen judgment showed, such an order can be ignored and the underlying sale can still be set aside.

How do I check who really owns a property before I buy?

Ask a conveyancer to run a deeds office search. It confirms the registered owner, the property description, and any bonds or interests registered against it. Then compare the owner's details to the seller's identity document before you sign anything or pay any money.

Speak to us before you sign or pay

Buying property is one of the largest financial decisions most people ever make, and a single missed check can cost you everything you pay. At Bregman Moodley Attorneys, we help buyers and sellers confirm ownership, draft watertight sale agreements, and structure payment so that your money is safe until transfer is registered.

Get in touch before you commit. Call us on +27 (0)11 646 0335, email roy@bmalaw.co.za, or visit bregmans.co.za. We will take the sting out of your property transaction.

 

Vicarious Liability in South Africa: When Is an Employer Responsible for an Employee's Actions?

 

Written by Roy Bregman, an admitted attorney with over 51 years' experience in employment law and civil litigation.

Last updated: 4 July 2026 | Bregman Moodley Attorneys, Johannesburg

Key Takeaways •     Your business can be held liable for harm caused by an employee, even if you did nothing wrong yourself and even if the employee's conduct was forbidden or criminal. •     Courts now ask whether there is a sufficiently close link between the employee's wrongful act and your business, including whether your business created or increased the risk of the harm. •     Recent judgments, including Stallion Security and Fujitsu v Schenker, confirm that liability can extend to murder and theft committed by employees purely for their own gain. •     Careful hiring, sensible limits on employee powers, well-drafted contracts and adequate insurance are an employer's best protection.

 

What does vicarious liability mean in South African law?

Vicarious liability means that an employer is held legally responsible for a civil wrong committed by an employee, even though the employer itself did nothing wrong. Lawyers call this civil wrong a delict, which is simply an act, whether negligent or deliberate, that unlawfully causes harm or financial loss to someone else. It is a form of strict liability, sometimes described as no-fault liability, because the injured person does not have to prove that the employer was careless in any way.

Why does our law do this? The reasoning is practical and fair. The employer profits from the employee's work, so it should also carry the risks that go with that work. The employer is usually in a better financial position to compensate the victim, and it can spread that cost through insurance or pricing. For business owners, this is not an academic idea. It is a real financial risk that has grown steadily as our courts have widened the doctrine.

What must be proved before an employer is held liable?

A person claiming against an employer must prove three things: a true employment relationship, a wrongful act by the employee, and a sufficient connection between that act and the employee's job.

1. A true employment relationship

The wrongdoer must be an employee, not an independent contractor. Courts look at the substance of the relationship, not the label on the contract, using what is known as the dominant impression test. Key factors include the employer's right to control how the work is done, who provides the tools and equipment, and how integrated the person is into the business.

2. A wrongful act by the employee

The employee must have committed a delict. Their conduct must have been unlawful, committed with fault (either deliberately or negligently), and it must have caused harm or loss to someone. If the employee is not liable, the employer cannot be liable either.

3. The act happened within the course and scope of employment

This is the battleground in most cases. The classic example is easy: a delivery driver who negligently causes an accident while making a delivery is clearly doing his job, and his employer is liable. The hard cases arise where the employee strays from his duties.

Is an employer liable if the employee was pursuing his own interests?

Often, yes. The law traditionally distinguished between a detour and a frolic. A detour is a minor deviation, for example a driver who takes a slightly longer route to stop at a shop. The employer usually remains liable. A frolic is a complete abandonment of the employer's business, for example a driver who leaves his route entirely to visit a friend across town. Traditionally, the employer was not liable for a frolic.

That neat distinction broke down when employees committed deliberate crimes, such as assault, rape or theft, which served no possible business purpose. Our highest courts responded by developing a more flexible test.

How have the courts expanded employer liability? The close connection test

The modern test asks whether there is a sufficiently close link between the employee's wrongful act and the employer's business. It works in two stages. First, the court asks whether the employee acted purely for his own purposes (a factual question about his state of mind). If he did, the court then asks an objective question: is the act nonetheless closely enough connected to the business to make it fair to hold the employer liable? A crucial factor is whether the employer created or increased the risk of the very harm that occurred, for example by giving the employee authority, access, a uniform or trust that he then abused. The leading cases show how far this reaches.

K v Minister of Safety and Security [2005] ZACC 8

A young woman, stranded late at night, accepted a lift home from three uniformed, on-duty policemen. They raped her. The Constitutional Court held the Minister vicariously liable. Although the policemen acted entirely for their own purposes, they were simultaneously failing in their duty to protect her, and she had trusted them precisely because they were police. The connection between their crime and their employment was sufficiently close.

F v Minister of Safety and Security [2011] ZACC 37

A 13-year-old girl was raped by a policeman who was on standby duty, out of uniform and driving an unmarked police vehicle. The Constitutional Court still held the State liable. The girl had identified him as a policeman from the police radio and dockets in the car and trusted him for that reason. His employment gave him the means and the trust that made the crime possible.

Stallion Security (Pty) Ltd v Van Staden [2019] ZASCA 127

Stallion's site manager at a client's premises used his position, his security clearances and an override key to enter the client's offices after hours. He robbed the client's financial manager at gunpoint, forced him to transfer R35 000, and then murdered him. The crime was committed entirely for the manager's own gain, yet the Supreme Court of Appeal held Stallion liable. The court formally developed our law to recognise that an employer's creation of risk is a relevant consideration. Stallion had given its employee far more than a mere opportunity: it gave him unsupervised access and control over the very premises it was paid to protect.

Schenker v Fujitsu [2022] ZASCA 7 and Fujitsu v Schenker [2023] ZACC 20

A clearing clerk employed by the logistics company Schenker used his employer-issued security clearance and paperwork to collect a consignment of Fujitsu laptops worth over R9 million from an airport cargo warehouse, and stole them. It was accepted in the litigation that Schenker was vicariously liable for the theft. Schenker nevertheless escaped payment because its contract with Fujitsu contained an exemption clause: valuable goods had to be declared under special written arrangements, and Fujitsu had made none. In 2023 the majority of the Constitutional Court upheld that clause and dismissed Fujitsu's claim. The lesson cuts both ways: vicarious liability reaches even calculated theft by an employee, but a carefully drafted contract can lawfully limit the fallout.

Which test applies when? A quick comparison

Situation	Test the court applies	Typical outcome
Employee doing his job negligently	Standard test: was he acting in the course and scope of his employment?	Employer almost always liable.
Minor personal deviation (detour)	Standard test, applied generously.	Employer usually still liable.
Deliberate wrong for the employee's own purposes	Close connection test: is the act sufficiently linked to the business, including risk created by the employer?	Employer liable where its business created or increased the risk (uniform, keys, authority, trust).
Business merely gave the opportunity	Close connection test, strictly applied.	Mere opportunity is not enough; employer generally not liable.

 

What practical steps should employers take?

Employers cannot contract out of the doctrine itself, but they can dramatically reduce both the risk of an incident and the financial consequences. We recommend the following steps:

1.     Vet before you hire. Verify qualifications, references and, where lawful, criminal records, especially for positions involving trust, authority, keys, firearms or access to vulnerable people.

2.     Limit powers to what the job requires. Master keys, security clearances, firearms and financial authority should be given sparingly, recorded, and reviewed regularly. The more power you confer, the more risk you create.

3.     Put clear written policies in place. Codes of conduct, anti-harassment policies and job descriptions matter, but remember that forbidding an act does not, on its own, protect you if the act is closely linked to the employee's duties.

4.     Train and supervise. Training must be real, not a tick-box exercise, and supervision must match the risk profile of the role, particularly for employees working alone, off-site or after hours.

5.     Review your contracts. The Fujitsu case shows that well-drafted exemption and limitation clauses in your terms of business can lawfully limit your exposure. Have them professionally drafted and reviewed.

6.     Check your insurance. Make sure your public liability and fidelity cover extends to deliberate and criminal acts by employees and read the exclusions carefully.

7.     Remember your right of recourse. An employer held vicariously liable may claim the money back from the guilty employee, although in practice the employee often cannot pay.

Conclusion: what does this mean for your business?

South African courts have decisively moved towards holding employers accountable not only for what they authorise, but for the risks their business creates. You can no longer assume that a criminal act by an employee is automatically "his problem". If your business gave him the uniform, the keys, the authority or the trust that made the wrong possible, you may well be paying for it. The good news is that the risk is manageable, through diligent hiring, sensible limits on power, sound contracts and proper insurance. That is where timely legal advice earns its keep.

Frequently asked questions about vicarious liability

Can my business be liable even if I forbade the employee's conduct?

Yes. A prohibition in a policy or contract is a relevant factor, but it is not decisive. If the forbidden act is closely connected to the duties, powers or access you gave the employee, a South African court can still hold your business vicariously liable for the harm caused.

Is an employer liable for crimes committed by an employee, such as theft or assault?

It can be. In Stallion Security the employer was held liable for a murder, and in Fujitsu v Schenker vicarious liability for an employee's theft of laptops was accepted. The question is whether the employment created or increased the risk of the crime, not whether the employer approved of it.

Is a business liable for the actions of an independent contractor?

Generally, no. Vicarious liability requires a true employment relationship. Courts apply the dominant impression test, looking at control, tools and integration into the business, rather than the label used in the contract. A business can, however, be directly liable for its own negligence in selecting or supervising a contractor.

Can an employer claim the money back from the employee?

Yes. An employer that has been held vicariously liable has a common law right of recourse against the employee who committed the wrong. In practice this right is often of limited value because the employee cannot afford to pay, which is why insurance remains essential for employers.

Can a contract exclude liability for an employee's wrongdoing?

Sometimes. In Fujitsu v Schenker (2023) the Constitutional Court enforced an exemption clause that protected the employer from a claim arising from its employee's theft, because the customer had not made the required special arrangements for valuable goods. Clear, professionally drafted clauses can lawfully limit exposure between contracting parties.

Speak to an attorney before the risk becomes a claim

Whether you are an employer wanting to close the gaps, or you have suffered loss at the hands of someone else's employee, we can help. Bregman Moodley Attorneys has advised Johannesburg businesses and families for over 50 years, and a director personally handles your matter and returns your call promptly.

Call us on +27 (0)11 646 0335, email roy@bmalaw.co.za or visit bregmans.co.za to arrange a consultation.