Why Using Foreign Contract Templates in South Africa Can Backfire
It has never been easier to download a contract template online. A quick search brings up countless employment agreements, shareholder agreements, or service contracts, often drafted in the UK, US, or Europe. At first glance, it looks like a great way to save time and money.
But here’s the problem: a contract written for a foreign legal system can cause more trouble than it solves in South Africa.
Different Legal DNA
One of the biggest differences lies in the idea of consideration.
In the UK, a contract usually isn’t enforceable unless each party gives “something of value” in return. This is why UK contracts are full of wording like “in consideration of the mutual promises contained herein…”. Without it, the contract may fail.
In South Africa, consideration is not part of our law at all. What matters is whether there was agreement, lawful cause, and an intention to be bound. A contract can be valid even if only one side is receiving a benefit.
That means many UK-style clauses are either meaningless here, or they create confusion about whether the contract is binding.
Other Pitfalls of Using Foreign Templates
Jurisdiction Clauses
Many overseas templates automatically say disputes must be resolved in London, New York, or another foreign court. As discussed in an earlier article, under South African law, those clauses are not always enforceable, especially in employment and consumer matters.Employment Contracts
UK employment agreements are built around British law. They don’t reflect South Africa’s Labour Relations Act or Basic Conditions of Employment Act, which apply no matter what the document says.Terminology Gaps
Words like “warranty”, “best efforts”, or “indemnity” carry different meanings under South African law than in foreign case law. That can leave important rights uncertain.
The Practical Consequences
A contract might end up unenforceable in our courts.
Businesses can spend thousands litigating over clauses that simply don’t make sense in South African law.
Employees or contractors may succeed in CCMA disputes even where a foreign-style contract says otherwise.
A Safer Approach
Foreign templates can be a useful starting point, but they should never be used wholesale. At a minimum, they need to be reviewed and adapted to South African requirements. The safest option is to have contracts drafted locally, tailored to your business.
Final Word
What looks like a quick win, using a free or foreign template, often costs more in the long run. South African law has its own requirements and quirks. Ignoring them risks leaving your contract worthless at the very moment you need it.
At Salitan Attorneys, we review, adapt, and draft contracts so that they work under South African law. Whether you’re setting up employment agreements, shareholder arrangements, or service contracts, we’ll make sure your contracts do what they’re supposed to: protect you.
📩 Contact us today for advice on your contracts.
The Hidden Dangers of Misclassifying Employees and Using Foreign Jurisdiction Clauses
Salitan Attorneys – Practical, strategic advice in South African labour and commercial law
South Africa’s workplace landscape is changing quickly. Remote work, overseas parent companies, and flexible hiring are all becoming more common. In that environment, it can be tempting for an employer to do two things:
1. Call someone an “independent contractor” rather than an employee.
2. Insert a clause in the contract saying that disputes must be resolved in another country under foreign law.
On paper, these ideas might sound clever. In practice, they often collapse at the first sign of trouble. Our law looks beyond the label and focuses on what’s really happening. And when the CCMA or Labour Court looks under the hood, employers can find themselves in a much tougher position than expected.
Misclassifying Employees: More Than Just Semantics
Why does it matter if someone is called a contractor instead of an employee? Because employees enjoy protections under the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA), including rights regarding dismissal, leave, and benefits. Contractors, generally, do not.
But the law doesn’t simply take an employer’s word for it. The “dominant impression” test asks questions like:
Who really controls how and when the work is done?
Does the person provide a personal service, or can they send a substitute?
Is the worker woven into the fabric of the business?
Do they rely financially on that income?
In SABC v McKenzie [1999] 1 BLLR 1 (LAC), the Labour Appeal Court put it clearly: the contract’s wording alone doesn’t decide the matter; the reality of the relationship does.
High Pay Doesn’t Mean Independence
A common argument raised by employers is: “But we pay them really well! Surely that proves they’re a contractor, not an employee?”
However, South African law doesn’t see it that way. Section 200A of the LRA creates a presumption of employment for those under a certain earnings threshold. But even above that threshold, the courts still apply the dominant impression test.
The Labour Court in Nape v INTCS Corporate Solutions (Pty) Ltd [2010] 31 ILJ 2120 (LC) stressed that a generous salary doesn’t cancel statutory rights. A person can earn a substantial income and still be treated as an employee if the hallmarks of employment are present.
So, paying someone “above market” is not a legal shield.
Foreign Jurisdiction Clauses: A Dead End
Some employers, especially those tied to foreign parent companies, include clauses stating that the agreement is subject to another country’s law and courts. The hope is to keep disputes away from the CCMA or Labour Court.
But when the work is performed here, and the worker lives here, South African labour law usually applies. Public policy, and the Constitution, steps in. Section 23 of the Constitution guarantees the right to fair labour practices, and our courts have been clear that these rights can’t be signed away in advance. As the saying goes: “one cannot contract outside of the law”.
In Chirwa v Transnet Ltd 2008 (4) SA 367 (CC), the Constitutional Court reinforced that employment disputes go to the heart of constitutional protections. Contract clauses that attempt to sidestep that are unlikely to survive scrutiny.
Can You Exclude the CCMA?
Short answer: no.
Even if a contract says disputes must go to arbitration overseas or that the CCMA is excluded, the CCMA will normally still accept jurisdiction. Its authority comes from statute, not from private agreement. Employees don’t need “permission” to bring a case.
Practical Guidance for Employers
If you’re employing people in South Africa, whether directly, through a branch, or remotely, it pays to get the fundamentals right:
Don’t lift contracts wholesale from other jurisdictions.
Assess carefully whether the worker is a contractor or an employee.
Get local legal input before signing agreements.
Make sure contracts reflect the true relationship, not a wishful one.
Final Thoughts
Misclassifying employees or leaning on foreign jurisdiction clauses may look like a clever way to cut red tape, but it often backfires. Employers who take shortcuts risk CCMA referrals, compliance penalties, and brand damage.
At Salitan Attorneys, we guide both employers and employees through the complexities of South African labour law. Whether you need contracts reviewed, advice on structuring a workforce, or representation in a CCMA dispute, we’re here to help.
Get in touch today to discuss your situation.