There are instances in commercial transactions when we pledge our property to secure a debt. In some cases, we sign agreements that indicate that if we default to pay an installment, ownership of our property will automatically pass to the creditor to settle the debt. This is called pactum commissorium at law (see Upper Class Enterprises (Pvt) Ltd v Oceaner (Pvt) Ltd and Ors,[1]). The question that arises is whether such an arrangement is permissible at law.

At law, a pactum commissorium is illegal and therefore not enforceable at law.[2] Whilst South African Courts have allowed exceptions like fair price to the rule that a pactum commissorium is not enforceable, there are no authorities to suggest that such exceptions are part of our law in Zimbabwe.[3]

Oceaner (Pvt) and Anor v Upperclass Enterprises (Pvt) and Anor,[4] established that Zimbabwean Courts have always been reluctant to enforce such agreements, because it can happen that things of the greatest value are surrendered in payment of a trifling debt, the debtor having agreed to onerous conditions in the hope of avoiding the rigours of the agreement before the day of reckoning came. Such agreements amount to a disproportionate penalty in a contract proscribed by section 4 of the Contractual Penalties Act.[5]

For this reason, Kufandirori v Chipuriro and Ors[6] held emphatically that a creditor cannot simply transfer ownership when the pledger defaults on the debt. The pledger retains ownership of the pledged property until the creditor takes court action for redress.

[1] 2002 (2) ZLR 603 (S).
[2] See Upper Class Enterprises (Pvt) Ltd v Oceaner (Pvt) Ltd and Ors 2002 (2) ZLR 603 (S); Oceaner (Pvt) and Anor v Upperclass Enterprises (Pvt) and Anor 2001 (2) ZLR 130 (H) and Kufandirori v Chipuriro and Ors 2004 (1) ZLR 74 (H).
[3] A pactum commissorium is different from a paratie executie in that in a paratie executie the actual liability is agreed by the parties. For a discussion of the paratie executie see Mandala v Glens Removals & Storage (Zimbabwe) (Pvt) Ltd HH-78-13.
[4] 2001 (2) ZLR 130 (H).
[5] [Chapter 8:04].
[6] 2004 (1) ZLR 74 (H).

This is an Except from a leading Zimbabwean text entitled ‘The Law of contract in Zimbabwe’ by Dr Innocent Maja. You can order your copy for US$50 at innocent@majasque.com or +2634776306 or http://www.majasque.com
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