Business Law
CML1001F
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1. What is law?
Law is a body of rules governing human behaviour which is recognised and enforced by the state
When a rule of law is disobeyed, the state will punish the offender or provide a remedy
The state = government
It is divided into three areas:
 The legislature – makes the law = parliament
 The executive – enforces law = president, ministers, civil service (e.g. the police force)
 The judiciary – applies and interprets the law = courts, i.e. judges and magistrates
2. The South African legal system
COURT STRUCTURE
Constitutional Court (CC)
Supreme Court of Appeal (SCA)
Before 1994 known as Appellate Division (AD)
High Court
Local Divisions of High Court
Provincial Divisions of High Court
Magistrates Court (cannot be an
appeal court)
Regional Magistrates Court
District Magistrates Court
 Definition of appeal:
Taking a case from an inferior court to a superior court, in the hope of getting a different judgement
In other words, it is used as a mechanism for getting a second opinion on the judgement of an
inferior court
If found guilty in a magistrates court – does not affect decision in high court (provided that a valid
appeal is made, e.g. with the provision of new concrete evidence…)
 Definition of jurisdiction:
Can have 2 meanings:
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o The powers which a court has… e.g. a court with a criminal jurisdiction has the power to
hear only criminal matters
o The geographical areas over which the court has power… e.g. The Cape Provincial Division
of the High Court has jurisdiction over the Western Cape. This means that is has the power to
hear matters only arising in the Western Cape
2.1) Constitutional Court (CC) – can use abbreviations in tests & exams
 We now have a written constitution in South Africa since 1996 (not present in England)
 It is an act of parliament
 It is divided into various chapters (book)
 It protects human rights (e.g. the right to the freedom of speech, right to privacy and the right to life
etc.)
 Matters that deal with the protection of human rights and how the country must be governed, are
known as constitutional matters
 The constitutional court only has jurisdiction to hear constitutional matters
 Only deals with constitutional matters (matters that affect human rights etc.)
 In most cases, matters are brought on appeal to the constitutional court (mainly used as an appeal
court)
 It can, however, also be a court of first instance or a trial court (this means that the case first starts
in that court)
 This court building sits in Braamfontein, Johannesburg and has jurisdiction over the whole country
(all constitutional matters in all areas of South Africa are dealt with here)
 It has 11 judges, of which at least 8 judges must be on the bench or sitting to hear a case
 An abortion case usually has 10 / 11 judges
 All 11 judges is a full bench (this means that it is a very serious matter)
 If there is a tie – the judge president has the last say or the casting vote
2.2) The Supreme Court of Appeal (SCA)
 Prior to 1994, known as Appellate Division (AD)
 This is purely an appeal court (as the name suggests)
 Never ever a court of first instance or trial court
 Final court of appeal in all matters that are not constitutional
 E.g. You have a thief found guilty in the Magistrates Court. He appeals to the High Court and is also
found guilty there; this causes him to appeal again to the Supreme Court of Appeal. He is also found
guilty at the SCA and is sent straight to jail. This is because he cannot appeal to the Constitutional
Court, because this is a criminal matter and not a constitutional matter… HOWEVER, if he is given
the death sentence, he can appeal to the CC but ONLY about the death sentence, NOT AGAINST
THE VERDICT
 There are 20 SCA judges
 But you only need 3-5 judges on the bench to hear a case
 The court sits in Bloemfontein and also has jurisdiction over the whole country
2.3) High Court
2.3.1 Provincial Divisions (each division only has jurisdiction over their geographical area)
i.
Cape Provincial Division (C) (of the High Court) – Court sits in Queen Victoria Street of Cape
Town
ii.
Eastern Cape Provincial Division (E) – Grahamstown
iii. Northern Cape Provincial Division (NC) – Sits in Kimberly and has jurisdiction over the entire
Northern Cape region
iv.
Transvaal Provincial Division (T) – sits in Pretoria and has Jurisdiction over the Gauteng region
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v.
vi.
vii.
viii.
ix.
x.
Natal Provincial Division (N) – sits in Pietermaritzburg
Orange Free State Provincial Division (O) – sits in Bloemfontein
Bophuthatswana High Court (B) – sits in Mmabatho and has jurisdiction over the North West
province
Ciskei High Court (Ck) – sits in Bisho and has jurisdiction over part of the Eastern Cape
Transkei High Court (Tk) – sits in Umtata and has jurisdiction over a part of the Eastern Cape
Venda High Court (V) – sits in Thohoyandou and has jurisdiction over part of the Limpopo
Province
2.3.2 Local Divisions (of the High Court) – have the same status as the Provincial Divisions
- Created for convenience (cover a smaller geographical area)
i.
Witwatersrand Local Division (W) – court sits in Johannesburg and covers or has jurisdiction
over the Witwatersrand area (Johannesburg, Midrand etc) (The Transvaal Provisional Division
(T) also has jurisdiction over the same area, but they are based in Pretoria; so it’s once again a
matter of convenience)
ii.
Durban and Coast Local Division (D) – court sits in Durban
iii. South Eastern Cape Local Division (SE) – sits in Port Elizabeth
2.3.3 Powers of Provincial and Local Divisions

Only have the power to hear cases that fall in their geographical area jurisdiction

They can hear all kinds of matters – civil (commercial law, including divorce etc), criminal and
constitutional matters

The provincial and local divisions can be courts of first instance (or trial courts)
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When sitting as a court of first instance, normally only one judge on the bench

In criminal cases, however, there will be 1 judge and 2 assessors

Assessors are not judges (but they are rather there to aid in the decisions made by the judges)

The provincial divisions can also be appeal courts

Local divisions cannot be appeal courts, except for W (Witwatersrand Local Division), due to
the fact that Gauteng has far too many cases to deal with all the time and this actually assists in
overcoming the backlog

In an appeal from an inferior court, i.e. Magistrates Court, at least 2 judges must reside on the
bench

The provincial divisions (but not the W) can also hear appeals from a single judge, in the same
division or a local division in its geographical area

In these appeals, there must be 3 judges on the bench (in this case, this is a full bench, meaning
that this is the maximum number of judges that can sit in the high court)
2.4) Magistrates Court
2.4.1 Types of Magistrates Courts
 South Africa is divided into various magisterial districts (same as Zimbabwe and England etc)
 Each magisterial district actually encompasses about 4 to 5 suburbs
 E.g. Wynberg Magisterial District – Wynberg, Rondebosch, Newlands, Claremont, Kenilworth
 Each magisterial district, has district magistrates courts
 Some magisterial districts also have a regional magistrates court
 Each magistrates court has jurisdiction over their area
 E.g. if you crash your own car in Rondebosch main road, you must go to the Wynberg not the
Cape Town magistrates court
2.4.2 Powers of District Magistrates Courts
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In criminal cases, they cannot hear murder, rape or treason (treason is any crime against the state,
be it terrorism, planning to overthrow the government etc). This means that they deal with
robbery, assault etc.
In cases that are not criminal, they cannot hear a case where the value of the claim is more than
R100 000
E.g. if someone owes you R200 000 due to a breach of contract, it cannot be considered in the
district magistrates court, but rather the case goes straight to the high court
No constitutional jurisdiction
No appeal jurisdiction (no other court is below this court)
2.4.3 Powers of Regional Magistrates Courts
o They have jurisdiction over their specific geographical areas
o They only hear criminal cases (not civil or constitutional) BUT NOT TREASON (considered
too big therefore case taken straight to the high court, which becomes the court of first
instance)
o No appeal jurisdiction
EXAM TYPE EXAMPLES
e.g.1
X who lives in Cape Town is charged with murder. Where will his case be heard? What are his avenues
of appeal?
In tests and exams, you must always state both options or whatever other possibilities you can think of
Option 1:
1. Cape Town Regional Magistrates Court – Guilty
2. Cape Provincial Division of High Court – 2 judges – Guilty
3. Supreme Court of Appeal – Guilty and Death sentence
DOES NOT GO TO C with 3 judges, because it only has jurisdiction to hear appeals from a single
judge of the same division or another division in the same geographical area
There can, however, be once more appeal after the Supreme Court of Appeal…
He can go to the Constitutional Court – BUT ONLY ABOUT THE DEATH PENALTY – not about the
guilty verdict
Option 2:
1. Cape Provincial Division – 1 judge and 2 assessors – guilty
2. Cape Provincial Division – 3 judges – guilty
3. Supreme Court of Appeal - +- 8 judges – guilty and hence nowhere else to go!!!
e.g.2
X enters into a contract with Y to buy Y’s car for R1 million
They both live and work in Cape Town
X does not pay on the due date, and Y wants to sue him for the money (sale contract – type of
agreement)
Is this a crime? - - - NO! (Murder, rape, treason etc are regarded as crime, not this situation)
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Which court will Y sue in and what are his avenues of appeal?
Answer:
1. Cape Provincial Division – 1 judge (no assessors) – Finds in favour of X (never ever say “not
guilty” – only used in criminal cases)
2. Cape Provincial Division – 3 judges (regarded as a full bench) – Finds against Y (basically in favour
of X, as above)
3. Supreme Court of Appeal – Y wins the case
--- The above process actually takes about 5 years, from the Court of first instance to the final verdict
in the Supreme Court of Appeal
BUT WHO PAYS THE COST? – normally the lose pays his own fees as well as the fees of the winner!
3. Sources of South African Law
3.1) Legislation and Interpretation of statutes
3.1.1 What is legislation?
o Legislation is the same thing as a statute or acts of parliament
o Legislation takes precedence over all other laws derived from other sources
o E.g. until 1988 – the matrimonial power act (legislation), where the husband and wife were regarded
with equal footing, came into power and took precedence over the previous marital law
o The constitution is also a piece of legislation and that takes precedence over everything, even other
forms of legislation
o Add Note: our laws are all derived from Roman-Dutch law (some laws fall into abrogation – where
they are useless or no longer relevant to the respective time period)
3.1.2 Types of legislation
i) The constitution
o The supreme law of South Africa
o Anything in conflict with the constitution is invalid
o Constitutional matters consists of human rights issues and how the country must be
governed
ii) Original Legislation
o There are actually 2 types of legislation (A and B)
o A
o Theses are acts of parliament or statutes
o These are the laws passed by parliament
o E.g. the Guardianship Act of 1993 (the year it became law)
o B
o This is the law passed by the provincial legislatures
o Each province has its own provincial government
o They can pass laws relating to certain matters like education or health (to a certain
extent) – e.g. different matric final exams in Gauteng and KZN and different school terms
and holidays
iii) Delegated legislation
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o
o
o
o
o
o
o
o
o
o
There are 2 types of bodies that will pass delegated legislation
A
Local authorities (like city councils etc)
Legislation passed by city councils is always referred to as by-laws (not “acts of
parliament” or “statutes”)
E.g. Parliament passes a piece of legislation (original) which states that the Cape
Metropolitan Council (CMC) can make laws regarding the building of a residential home.
The CMC will then pass a by-law which states that residential homes in the cape can only
have walls that are 2 metres high
Another e.g. – in Johannesburg there is currently a by-law from the city council that
states that any swimming pool in a residential home, must be surrounded by a fence and a
new by-law is in the pipelines to state that all swimming pools must be covered by a net.
The consequences of not abiding to these by-laws can be a fine or possible imprisonment
B
Laws passed by government departments are known as regulations
Parliament passed an act known as the Companies Act (this is a piece of original
legislation)
In terms of the Companies Act, the department of trade and industry or the department of
finance or any other government department can make regulations regarding South
African companies (delegated legislation)
iv) Importance of Distinction
o The courts cannot refuse to apply the constitution
o With original legislation, it will be declared invalid if it conflicts with the constitution
and hence the courts cannot apply it
o With delegated legislation, the courts will only apply those laws (by-laws and
regulations) if they fall within the area delegated to them
o E.g. continued from before – the city council has the right to make laws regarding
residential buildings – this is an example of what happens when they make a law about
commercial buildings – e.g. make a law saying that all buildings must be painted yellow
(by-law); the court doesn’t have to follow this or abide by this law, because it only has
the jurisdiction over residential areas and not commercial areas!!!
3.2) Roman-Dutch Law (common law)
 The common law is the basis of our entire legal system
 Constitution is definitely not made from the common law
 Our common law is made up of:
i. Roman law
ii. Dutch law
iii. English law
 Our common law is the same as Zimbabwe, and Louisiana in America
3.3) Judicial precedent (case law)
3.3.1 What is judicial precedent and case law?
 Judicial precedent and case law are synonyms for each other
 It is the law that is made by judges in applying the law to the facts of the case before them
 E.g. – based on a true case
Shopkeeper – shop broken into on a regular basis (weekly) – 1970’s
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He set a trap – i.e. if you tampered with any of the shop doors or windows, then a mechanism
gets released, which is attached to a loaded gun… The gun would be triggered and the thief
will be shot.
Shortly after this, a thief broke into the shop, and was shot dead using this mechanism
The issue before the court was this: Was the shopkeeper guilty of murder or was he not
guilty, because you can kill in defence of property?
The court looked at the existing law on the subject and they found something in the Roman /
common law and applied it (applying an existing common law and making it a case law)
The court held that the shopkeeper was not guilty of murder and that you can kill in defence
of property.
Using that decision – the court made a law that you can kill in defence of property.
The judges decision here is known as the ratio decidendi (decision – this becomes law)
It is the ratio decidendi that becomes law
In the same case, the judge also said that warning signs must be put up etc. (like electric
fence warnings) or about the fact that precautions should have been taken in order to protect
the general public, i.e. innocent people or children
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The part of the decision about the warning signs is known as the Obiter dictum (deals with
side issues – the original issue was “can you kill in defence of property or not?”, hence this
is a side issue) – it is not directly relevant to the main issue and hence does not actually
become law
Add note: judges decisions are +- 50 pages long – this shows that they also deal with quite a
few side issues
Class question: Why bother if already in the common law? Well, the common law is not
directly the law in issue, so it re-instates this as case law
Another e.g. – Divorce case (hypothetical – not how it works now) – The wife is having an
affair – this is grants for divorce (adultery – ratio decidendi), but her husband now sues her
for R10 million as deformation of character etc. – this is a side issue, therefore it cannot be
made law or else every single divorce case in the future where the wife has committed
adultery will demand R10 million from the wife! – this is the obiter dictum
3.3.2 Stare Decisis
 The way that the judges decision or the ratio becomes law, is through the principle of stare
decisis (translated – “let the decision stand”)
 The principle of stare decisis says that a judge or magistrate must always follow the decision
(the ratio) of a higher court where the facts of the cases are similar, and the legal issues are
the same
 Lets go back to the shopkeeper e.g.
Case was heard in the Supreme Court of Appeal (SCA)
2 years later a case comes before the C (Cape Provincial Division)
This time a drunk driver has killed a pedestrian
The C cannot follow the shopkeeper case, because the facts of the case are not similar and the
legal issues are not the same
Hence, remember always that the facts of the case, as well as the laws applied must be
similar
Magistrates Courts must follow:
 “Everybody”
 Basically, the magistrates court must follow all the court’s above it, i.e. the SCA, High Court
as well as the Constitutional Court (CC)
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 If there is a conflict between the SCA and the high court- the magistrates court must follow
the SCA
 If there is a conflict between the CC and the SCA – then the magistrates court must follow
the CC
 Add note: If a case comes to court, where a judges fines you for speaking on your cellphone
while driving. If the court does not rule in your favour and you are fined, and later on the law
is actually abolished, the verdict cannot be changed, as the previous decisions that were made
where relevant to the law at that time
 When it comes to following the High Court decisions, they have to follow decisions of all the
divisions. However, if there is a conflict, then they follow the decision made by their division
in their geographical area
 E.g. Once again we go back to the shopkeeper example… If the law in N states that you can
kill in defence of property, however the C says that you cannot kill in defence of property;
and a few years down the line a case comes before the Wynberg Magistrates Court – i.e. a
person had shot a thief for stealing his car
The thief is now dead – and what follows if the issue of “can you kill in defence of property
or not? – But which provincial division does he follow? – The Cape Provincial division (C)
 Add note: if one law is made in one of the provincial divisions (N) and a conflicting law
is made in C, and there is a case in Johannesburg of the same nature as these conflicting
laws, then applying the law of both C and N would be valid, and this is what lawyers
would debate about in court – the two sides of the case would try and prove that one
law is better than another law…
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3.3.2 Stare Decisis
Magistrate’s Courts must follow: (looked at this the last time)
Provincial and Local Division of High Court must follow:
 The Constitutional Court (CC)
 Supreme Court of Appeal (SCA)
 If conflict of interest between CC and SCA – follow the CC
 Do not follow the Magistrate’s Court under any circumstances
 They must follow decisions of their own division if a greater or equal number of judges sat in
the previous case
 E.g. – At the C – one judge on the bench – there is a previous decision of a full bench of the
C (3 judges) – is our single judge bound by this previous decision? – YES - HE IS BOUND
 E.g. – previous decision of a full bench (3 judges) of the N – in this case our single judge in
the C is NOT BOUND by this previous decision. The C can only be bound by its division –
so N would be bound by this previous decision, not C.
 Add note: It is the responsibility of every South African to find out exactly what the civil law
states regarding particular issues – E.g. there was a case where a woman actually went
overseas to purchase diamonds… and when she arrived in South Africa with them, she was
arrested for contravening the Diamond Act, which she was completely unaware of at that
time!
SCA must follow:
o CC
CC must follow:
o Itself
o CC has the power to overturn its own decisions
3.3.3 Law Reports (same reports as the book passed around in lectures)
 All decisions made, except those made in the magistrates court (no one follows those), are
reported or recorded in the law reports
 There are 4 volumes that are released every year
 Cases are identified by what’s known as a case citation or notation
 E.g. Jones v Brown 2006 (3) SA 123 (C)
Names of Parties, year is was heard, volume no.3, SA law report page 123, Cape ProvDiv
Plaintiff – person suing – Jones
Defendant – the one being sued – Brown
E.g. – Jones loses the case and he takes it on appeal to the SCA -- -Jones v Brown 2007 (1) SA 49 (SCA) – therefore both of these items are recorded in the
law reports during their respective periods, where a short reference is made to any related
cases and update cases after appeals have taken place etc. The notation also changes to
Brown v Jones if Brown was the person that appealed
Appellant – no longer called the plaintiff – John
Respondent – Brown (responds to the appeal charge)
3.4) African Customary Law (Often this law and the following two are confused – make sure you
specifically understand the differences between each of the laws, as well as be very specific as to which
law you are referring to in tests or exams!!)
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 These are laws that have been followed by black communities for thousands of years
 Our court (Magistrates Court, High Court, SCA and CC) can apply African customary law,
only if both parties choose to apply it
 E.g. A Divorce case – normally governed by the Divorce Act – however both parties can
Apply African Customary Law – BUT THEY HAVE TO BE BLACK PEOPLE
 When there is a clash (i.e. one of the parties wants to apply African Customary Law and the
other party does not want to), then normal civil law must be applied in the case (legislation
and common law)
3.5) Custom
 A custom is a rule of conduct, that has been established through a very long use; and it
becomes an unwritten law
 One e.g. – 1921 case
There were some commercial fisherman (sell fish) and they passed out their lines
in order to catch some fish
A short while later, a second group of fisherman came along, and they stood in
front of the first group and cast out their lines
What happened, was that the second group actually intercepted the first group (cut
them off) and they caught all the fish
The first group sued the second group for the value of the fish
The judge found in favour of the first group – because there is a custom amongst
fisherman (unwritten law/rule) that is one group have cast out their lines, then
another group cannot cast in front of them.
3.6) Customary International Law
We will deal with this section under International Law – Section 6.1
4. Legal Rights
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A legal right is a right that is given and protected by the law
2 kinds of legal rights – real rights and personal rights
4.1) Personal Rights
 A personal right, is a right that is enforceable against one or more PARTICULAR people…
(must be a specific person)
 E.g. X and Y enter into a contract of sale
X sells his car to Y for R1000
X delivers the car to Y and Y does not pay
Question: Who will X sue for the money?? – Obviously he will sue Y
This is due to the fact that X has a personal right against Y for the money
Can X sue Y’s neighbour or brother for the money? – No, off course not, because X has a
personal right against Y
Add note:
if Y dies – sue the estate
If employer paid Y late – Y’s problem
If Y’s brother has signed surety ship over Y – different case altogether…
4.2) Real Rights
 Real rights are enforceable against the whole world – anybody – not against particular people
 This is because a real right is a right in a thing itself (a thing is an item in law – a thing refers to
an item of property – even the “law of things” exists)
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 An example of a real right is ownership
 E.g. X owns a car
A steals the car from X
A sells the car to B, who buys it in good faith (did not know that be was buying a stolen
car – happens very often in South Africa)
B sells to C, who also buys in good faith
Question: Against who will X have a right to reclaim the car??? – C
Even though X has no personal right against C, he still has a real right to reclaim the car
Would happens from here, is that C would sue B (personal right), and B would sue A
(personal right) and hopefully A would be convicted for the crime!
5. Legal Personality
 The law recognises, as legal persons: Natural persons (human beings) and Juristic entities /
persons
 Focus is on these specific juristic entities for the rest of this section
 Juristic entities are actually groups or associations (e.g. companies, partnerships, close
corporations, universities, sports clubs)
 Legal persons in their own right
 They have their own rights and obligations, separate from their members or management
 They can sue or be sued in their own name
 E.g. SAB Limited (Public company) enters into a contract with John, to deliver him 500 crates of
beer
John pays for the beer, but SAB does not deliver the beer
Who will John sue? (MCQ type question)
a) The employee who took the order
b) The manager who forgot to authorise the delivery
c) The directors
d) The shareholders
e) SAB Ltd
Therefore, the case citations would read: John v SAB Ltd
If John wins the case – SAB Ltd is entitled to all legal costs
6. Branches of the Law
6.1) International / National Law
6.1.1 International Law
 International Law governs the relations between states or countries (not between individuals
within countries)
 So it is states that bear the rights in International Law, not individuals
 It deals with matters such as airspace, territorial waters, treatment of diplomats (different law in
each of their countries), and extradition of criminals (to extradite a criminal – send to originating
country at which the crime he has been accused of, was performed)
 E.g. during the Apartheid era – airplanes from South Africa were not allowed to fly over the rest
of Africa – if they did, case is country against country in the International Court
 SOURCES of International Law
o Customary International Law
 Same as CUSTOM LAW, but at an international level
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
Extradition amongst most countries is custom (don’t normally harbour criminals
from other countries or their country of origination)
o Conventional Treaties (like International Legislation)
 Most of these are United Nations conventions (UN) – e.g. convention on the law
of the sea – when you have 2 vessels on the high seas (far from the shore – not
owned by a particular country etc)
6.1.2 National Law
 This is the internal or domestic law
 We have numerous sources of National Law: (as stated previously in notes)
 Legislation
 Roman-Dutch Law (common law)
 Judicial Precedent (case law)
6.2) Public / Private Law
o Public / Private Law forms part of our National Law
o There is a diagram on page 28 of our textbook – don’t learn this! – see diagram below instead
A VERY IMPORTANT THING TO NOTE IS THAT THE ENTIRE PUBLIC LAW AND PRIVATE
LAW, INCLUDING ALL IT’S BRANCHES AND SIDE BRANCHES, ALL FORMS PART OF
CIVIL LAW…
THE ONLY THING THAT DOES NOT FORM PART OF CIVIL LAW IN THE DIAGRAM ON THE
NEXT PAGE, IS CRIMINAL LAW!!!
PUBLIC
LAW
(1st major
division)
Constitutional
Law
Persons and
Family
Company Law
PRIVATE
LAW
nd
(2 major
Administrative division)
Criminal
Law
Law
Mercantile Law
(Commercial
Law)
(Entire
BUS LAW 2!!)
Negotiable
Instruments
Banking
Labour
Law
Law of
Taxation
Property Law
(Law of things)
Law of
Succession
Law of
Obligations
(BUS LAW 1)
Insolvency
Delict
Contract
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Unjustified
Enrichment
6.2.1 Public Law
o Public Law governs the following: (hence constitutional law falls under Public Law)
1. The relations between the state (govt) and its subjects (you and me – common public) – hence
these only deal with relations between the public and the state
2. Relations between the various organs of state (Legislative, Judiciary and executive)
(e.g. Administration vs Labour Law)
o Criminal Law
 A crime is an act that is prohibited by law and is punishable by the state
 In a criminal case, it is the state that prosecutes the accused, NOT THE VICTIM
(that is why it is referred to as Public Law)
 S v Jones – e.g. – if Jones abused Smith
State versus Jones
All criminal cases, therefore, if we see “S” we immediately know that it is a
criminal case
6.2.2 Private Law
o Deals with the subjects of the state (you and me) and their relationships with each other (that is
why it is referred to as Private Law)
o Common e.g’s – Divorce (Persons and Family Law) and Inheritance (Law of succession)
o People’s relation to each other has nothing to do with the state or the government in these cases
above, therefore they form part of Private Law
6.3) Criminal / Civil Law (section added in on the course outline)
o Criminal Law deals with criminal matters (such as murders, rape etc.)
o ALL OTHER AREAS OF THE LAW, FALL UNDER THE CIVIL LAW
o There are 4 main differences between criminal and civil matters
1. Criminal case – always “S v X” (where X=name of person) - CITATION
The parties are known as the state and the accused (before 1961 – Rex (King) and
Regina (Queen) and therefore all the cases where actually R v Jones etc.)
Civil Case citation: Smith v Jones
Parties are the plaintiff and the defendant
To sue the state in a CIVIL MATTER – X or Jones v President of Republic of SA
We use this name to represent the state, but if it is a CRIMINAL CASE: S v Jones
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If, as in the Tygerberg Hospital case there is the use of unsterilised equipment, due to the
inadequate supply of cleaning fluids and the person wants to sue the state for being
infected during an operation, due to unclean equipment:
Jones v Minister of Health (this was you get “more money out of it” than by merely suing
the doctor, nurse or hospital at which the operation was performed
Jones v Minister of Justice (if in a car accident with a policemen)
Add note: if caught and captured in another country and abused for no particular reason –
then this forms part of International Law, due to the fact that you are not a citizen in the
country in which you were falsely accused.
2. This part is very important – people often make mistakes here in tests and exams and
hence lose unnecessary marks!!!! – Learn well
In a criminal case, if the court finds out that the accused did commit the crime, we say
that they found the accused guilty
HOWEVER, YOU MUST NEVER EVER EVER EVER USE THE WORD “guilty” in a
CIVIL MATTER
You must state that the judge found in favour of X or the judge found against Y
3. In a criminal case, if the accused is found guilty; he will either go to jail or pay a fine to
the state. The victim gets nothing (from the accused and the state). They only gain the
psychological satisfaction of the criminal going to jail
However in a civil case, if the plaintiff wins, the defendant will have to pay damages or
perform some “act” for the plaintiff – (NB) – must to something for him in return
4. In a criminal case the “burden of proof” {also referred to as the “owness of proof”}, is
beyond reasonable doubt – if you want to convict somebody, you must be absolutely
certain that the person is guilty – as you are taking away somebody’s freedom and
scarring them for life by allowing it to be added to their criminal record
Add Note: A Speeding fine is referred to as a minor criminal offence
In a civil case, the burden is different, where there is a balance of probabilities and
hence there is a lighter burden (only monetary)
6.4) Criminal Law, Delict, Contract and Unjustified Enrichment
6.4.1 Criminal Law – refer back to previous notes
6.4.2 Delict
o Forms part of Civil Law
o Private Law
o Subdivision of Law of Obligations
o A delict is a wrongful [intent or negligence (negligence is completely prohibited in RomanDutch Law)] act that causes harm to a person or their personal property
o Every person has a legal duty not (with intent or negligence) to harm others or their property
o E.g. crashing into another car / someone’s car
Delict – negligent
Parties will be called the Plaintiff and the Defendant
NOT “NOT GUILTY” – not a crime
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If plaintiff wins, defendant must pay the relevant “damages”
o Another e.g. of Delict – Pick ‘n Pay has wet floors and they don’t put a sign up – person X then
comes along and slips and brakes her back – what happens is that she now sues Pick ‘n Pay for
damages (Add Note: - if intentionally done by someone at Pick ‘n Pay – delict and a crime)
o If “gross negligence” – e.g. mother s a restless sleeper and puts her newborn baby next to her and
at night rolls over the baby and kills it – murder due to this unforgiveable negligence or gross
negligence + drunken driving is also a crime!
6.4.3 Summary of the Differences between a crime and a delict
1. The ACT itself (no hard and fast rule)
 Certain things are always regarded as crimes – there is no rule is order to classify whether
the issue is a criminal offence or not – e.g. rape, murder, theft, treason etc.
 On the other hand, certain things are always delicts
 Sometimes the SAME ACT can be both a crime and a delict
 For e.g. – Y deliberately crashes into X’s car numerous times in the parking lot
This is regarded as a DELICT, but also as a CRIME (Malicious damage to
property)
The Delictual case citation: X v Y (in the C) - where X has to “pay Y” for the damages
The Criminal case citation: S v Y (regional or district magistrate court) – where the
outcome can be jail or a fine payable to the state
In this e.g, we have 2 cases running concurrently… BUT YOU MUST REMEMBER
THAT THE CASES ARE COMPLETELY SEPARATE TO ONE ANOTHER (with 2
different set of judges and hence unaffected outcomes)
2. The LEGAL Remedy
Criminal case – remedy – fine payable to the state or jail (imprisonment)
Delict – damages and compensation to the plaintiff, or some “act” must be performed
3. The purpose of the sanction
In criminal law, the purpose of the sanction is to punish the accused and sometimes
protect society (serial killers etc.)
In a delict case, the aim is to simply compensate the other party (not actually punishing
the other person)
e.g. if hand is burnt at McDonald’s – you cannot score by suing them, but you can rather
be compensated for all you medical bills etc.
Add Note: The law previously did not compensate on the basis of emotional damages, as
it is extremely hard to quantify, but from 10 years, there is some sort of compensation for
those that suffer severe or serious emotional loss
4. The burden of proof
Criminal Matters – beyond reasonable doubt (absolutely certain)
Delict – balance of probabilities (Civil Matters)
6.4.4 Contract
 Part of Civil Law
 Under Private Law – Law of Obligations
 The Law of contract deals with agreements between people
 Breach of contract occurs when one of the parties does not comply to the terms of the agreement
 Balance of probabilities occurs in terms of issues regarding contract
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6.4.5 Contract and Delict compared
 There are 2 main differences between delict and contract:
o 1) In delict, the liability of the wrongdoer (not the “accused” – not a criminal matter)
arises from a wrongful act which causes harm
o The act is wrongful by the operation of law, because each person has a duty not to harm
others
o In contract, it is different, the liability of the wrongdoer arises from an agreement that
has been breached (still a civil matter)
o 2) In delict, the duty not to cause harm, is owed to all people
o In contract, the duty not to breach is owed to the other party of the agreement
o **Although there are differences, sometimes the same act can be both a delict and a
contractual matter
o E.g. – NB – MUST UNDERSTAND THIS!!!!
There is a surgeon called Dr Phil and he performs an operation on a person, Mrs Zuma.
He was actually supposed to remove her appendix. It is a private hospital (therefore there
can be no constitutional issues – if government hospital than constitutional issues will be
tackled). By mistake, he negligently removed one of her kidneys instead (this means that
infected appendix was not removed!). Mrs Zuma gets an infection and becomes even
more ill than she was before, due to the fact that she now has one less kidney and still has
her appendix, her hospital bills rocket and she is off work for even longer (therefore, her
earnings are further reduced)
NB Addnote – most contracts are not in writing – it is verbal (e.g. buying a Coke – is a
contract of sale!)
He is in breach of contract, and she can sue for damages. Her damages under contract
are only monetary – hospital bills, loss of income etc. (no claim for emotional loss is
allowed)
She could also sue him for delict – negligence that actually caused her harm
BOTH OF THESE ARE CIVIL CASES
In South African Law, you cannot get a double compensation – hence in a case like
this, you cannot “score” or gain a profit
Therefore, she has an option to choose which path she will take – i.e. she can sue under
contract or delict – most people choose the one in which they will reap the greatest
money, and sue under it.
On the other hand, if she dies – then it is a criminal matter (Culporable Homicide)
S v Dr Phil
If government hospital – X v Minister of Health
If there are dependants (i.e. Mrs Zuma is a breadwinner or primary caregiver), then they
can sue for support and help
6.4.6 Unjustified Enrichment
 Unjustified Enrichment deals with compensating someone for a benefit which they caused you,
without any legal justification
 E.g. Person X believes that he owes person Y R200
BUT, Person X actually owes person Y R180
Person X then pays person Y R200
Hence, Person Y has been “unjustly enriched” by R20
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If Person Y does not pay Person X back (i.e. compensated him accordingly), then Person Y
would be sued by Person X, under the law of unjustified enrichment
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PART B: THE LAW OF CONTRACT
1. The formation of a valid contract
 In order for a contract to be valid and binding in law, specified requirements have to be met
or must be met
 All of the requirements must be met, if one or more is not met, then it is not a valid contract
(void) – can’t sue on it
 REQUIREMENTS:
1. The parties must have a contractual capacity
2. The parties must have a serious intention to contract
3. They must communicate their intentions to each other (In law you have to communicate –
both parties must agree, in order to have a contract)
4. The parties must be of the same mind (their must be no mistakes and no misunderstandings)
– must be on the same page!
5. The agreement must be lawful (e.g. is a drug addict orders drugs from his dealer, and the
dealer does not give him the drugs (does not deliver), then he cannot be sued, as it is illegal!)
6. Performance of the contractual obligations must be possible (e.g. can’t plan to build a soccer
stadium on mars!)
7. The agreement must comply with any formalities that are required for that type of contract
(Not all contracts need to be in writing, but some do)
8. The agreement must be “certain” in its terms
1.1) Contractual Capacity
o The general rule, is that every legal person (not necessarily a human being), has full contractual
capacity (i.e. can enter into any contract). There are exceptions, however; i.e. some people have
limited contractual capacity:
a. Minors (under 21) – most of us in this room
b. Married person
c. Mentally Ill
d. Intoxicated persons
e. Insolvents
a) Minors
 A minor is an unmarried person below the age of 21, who has not been declared a major by the high
court
 A major is an adult, over 21, who can enter into a contract in his own name or possesses contractual
capacity
 The legal theory of minors – you cannot make decisions in your own right, therefore the law trusts
your parents to make decisions for you, in your best interests
 There are only 2 ways that a minor can become a major before the age of 21 (i.e. possess full
contractual capacity):
i. Get married
ii. Apply to the high court (add note: in criminal matters, all minors are treated as majors –
but sometimes the sentence is lighter)
i) Marriage
 A minor becomes a major in marriage, regardless of his or her age
 If the marriage is dissolved (either by death or divorce), before the person turns 21, then the
person remains a major
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ii) Emancipation by the court
 A minor who is 18 and over, can apply to the high court in terms of the Age of Majority Act
(a piece of original, not delegated legislation – or else would be called a bylaw), for an order
declaring that he or she is a major. If the court grants the order, then he will be a major of full
contractual capacity
 The court will only grant this order, if in the best interest of the minor
 This used to be useful in the past – e.g. a family where the father is in the army, and there is a
son over the age of 18 who is supporting the family – he can apply to become a major and
enter into contracts under his own name (have a contractual capacity)
 The court looks at the following factors weighed up on a balance of probabilities (all of them
do not have to be satisfied with the balance of the probabilities):
1. Age of the minor - the older he is, the greater the chance
2. Whether he lives with his or parents or not
3. Whether the parents support the application (if they do, the chances are substantially
higher)
4. Whether he or she is financially independent
5. Whether he or she owns immovable property (land, flat, house, office buildings) –
inherited from Roman Law, as there were no shares then, land was the most
important and was a form of investments (but even now, shares are not
considered as immovable property)
 e.g.1 We have Thandi, who is 20 ½ years old and she has a Bcom degree; she works as an
office manager full-time and she earns a net salary of R30 000 per month. She lives with her
mother in her mother’s house (father has passed away). She pays for everything – electricity,
telephone, rates etc. The mother is indifferent about the application. Thandi doesn’t own any
immovable property.
Judge – the judges would most likely grant it. She lives with her mother, but doesn’t have to,
as she is financially independent.
Compare this case with Nadia, who has just turned 18 years old, 1st year Bcom student at
UCT, in residence, waitresses part-time and hence provides her own pocket money and
entertainment. But, parents pay fees and residence bills and parents are absolutely indifferent
about the application. Has no immovable property.
Judge – The judge will not grant the emancipation, as Nadia stays in residence (which is
merely a glorified boarding school!), and is not financially independent etc.
Add note: Under criminal law, when a minor is over the age of 7 years old, treated the same as a major
in a criminal case; however, here it is different as this is contractual law!
iii) There is NEW LEGISLATION IN THE PIPELINE:
Children’s Act of 2005
 New Act
 Passed in 2005
 Hasn’t yet become legislation and therefore the existing laws STILL APPLY
 The reason why it hasn’t applied yet, is because it affects over 20 legislation, which need to
be amended in order to accommodate for this legislation!) – problem is that lawyers have to
wait until this becomes law!
 Hence, this act can come into operation at any time
 EXAM WILL ASSUME THAT IT HASN’T YET COME INTO EFFECT
(NBNBNBNBNB)
 Changes to be effected by the Act (when it comes into operation) :
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1. Reduces the age of majority from 21 to 18
2. Application to the court for declaration of majority becomes superfluous and Age of
Majority Act 57 of 1972 will be repealed
3. Does not provide for minors under the age of 18 to bring application for declaration of
majority
4. New definition of a minor:
“An unmarried person below the age of 18”
But existing one is:
“An unmarried person, below the age of 21, who has not been declared a major by the
High Court”
iv) Contractual capacity of minors who have not been married or emancipated by the court, “under the
existing law”
Guardianship = (deals with all important or major stuff, such as whether the minor should go to
University or not; or which school etc.) Guardianship means the control of a minor, as well as assistance
in performing legal acts, such as contracting. Add note: in the case where the parents of a minor dies,
then his or her legal guardian, has control over their entire money including all other possessions, such
as their television and mp3 players.
Custody = Custody – who the child actually lives with and all minor decisions (i.e. what will the child
eat for breakfast, can the child watch a movie or not?)

When you have a divorce case, one parent may have custody, however both parents are legal
guardians
Children of parents who are / were married:
o The father and the mother are equal guardians (until 1993, only the father was the legal guardian of
the minor) of a child born of the marriage
o This means that either parent, without the consent of the other, can carry out the duties of
guardianship (e.g. if you want a motorbike, dad / mom can sign without notifying the other parent!)
o BUT consents of both parents is required for the following:
1. Marriage of the minor child
2. The adoption of the child (i.e. to give the child up for adoption)
3. The removal of the child from South Africa (even if on holiday)
4. Application for the passport of the child, if he or she is under the age of 18
5. Alienation of immovable property belonging to the child (i.e. selling, leasing, mortgaging) – but
if selling shares, only the consent of 1 parents is actually required, as it is not immovable
property!
Children of parents who were never married: The mother is the sole guardian; the father has no rights of
guardianship
Infans and Pupillus = two categories of minors
Infans…
 A child under the age of 7 (infant)
 Has no contractual capacity at all
 If they want to acquire rights and duties under contract, then it must be entered into by the
guardian on their behalf
 The guardian must actually sign the contract
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 E.g.
 Sipho is 6 years old and wants to join the gym
 His parents were married but are now divorced and he lives with his mother (Both are
hence his guardians)
 Only 1 parent needs to consent and the contract must be signed on his behalf by his
mother or his father
 Signature clause will look as follows:
Father/Mother’s signature:
xxxxxxxxxxxxxxxxx
(Maria Madisa for Sipho Madisa)
for = on behalf of Sipho Madisa
**NOTE** Sipho is liable for all unpaid fees!!








Pupillus…
A minor between the ages of 7 and 21 years old
Have LIMITED contractual capacity
Can make and sign contracts in their own name provided they are ASSISTED by their guardian
ASSISTANCE = guardian must CONSENT to the contract either before or at the time that it’s
entered into
The consent can be expressed either verbally or written, it can also be implied
To test if there has been implied consent, OBSERVE THE CONDUCT of the guardian, and ask
yourself: “was he/she aware of the contract?” and “did he/she show no objection?”
Guardian can sign on their behalf, but doesn’t have to!!!!
E.g.
 Sipho is now 16 years old and leaves a note for his mother that says: “Dear Mother, I’ve
gone to buy a motorbike.”
 She says nothing but that day buys a motorbike helmet (hence she did not object!!! –
therefore, because she says nothing she has indirectly consented!)
 There is IMPLIED CONSENT, as she has not objected
 If she doesn’t consent, then it actually becomes an invalid contract
Effect of an assisted contract
A duly assisted contract is:
 In the case of an INFANS, one made ON BEHALF of the minor
 In the case of a PUPILLUS, it is a contract made by the minor WITH THE ASSISTANCE of the
guardian or ON THE MINOR’S BEHALF by the guardian
 THIS IS ROMAN-DUTCH COMMON LAW!!!
 The effect of a duly assisted contract, is that the MINOR IS BOUND and not the guardian
Substantially prejudicial contracts:
 If the contract is to the minor’s PREJUDICE, then he may get a COURT ORDER setting it aside
 BUT, the prejudice must be substantial and not trivial
 E.g. if the guardian paid too much money for something (using the minor’s money), then this is
substantially prejudicial to the minor and not in his or her best interest
 Add note: In test and exams, use example to back up your point
 Wood v Davies 1934 CPD (or C) 250
In 1934, SA was still a colony – This case can be found in Basic Principles pp.47
 The father of Wood (Jnr) bought a house on his behalf from Mr Davies (Price = £1750)
 The purchase price was payable in INSTALLMENTS
 This is a DULY ASSISTED CONTRACT and is therefore a VALID CONTRACT!!
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










When Wood (Jnr) turned 21 years old, he sued Davies for cancellation of the contract and the
return of the instalments paid up until that point
The court held that it was a valid contract (because it was duly assisted etc.) but, it was
SUBSTANTIALLY prejudicial to Wood (Jnr) for the following reasons:
1) Purchase price was excessive i.e. exceeded market value by £200 (a lot of money,
therefore, not trivial!) – at that time this was quite a substantial amount of money, and
now it still is!
2) It was unnecessary, Wood (Jnr) did not need a house
3) It tied up most of Wood (Jnr)’s money (inherited a lot of money!!)
So the court held that Wood (Jnr) was entitled to cancellation and that each party must
restore to the other what they had received under the contract, i.e.
i.
Wood (Jnr) gives back the house and pays rental for the time that he had stayed there
ii.
Davies gives back the instalment with interest
The COURT ORDERED:
 Cancellation
 RESTITUTIO IN INTEGRUM = each give back to each other what they received
under the contract and BOTH parties are restored to the position they were in before
the contract
*****NOTE***** - The contract was valid but cancelled because it was bad for the
MINOR!! (This is not the case when 2 adults sign a contract as it only protects minors!!)
Could Wood (Jnr) sue his father ??
Not under breach of contract (as there is no contract)
Perhaps under DELICT (wrongful act that causes harm)
BUT, Wood (Jnr) is not necessarily OUT OF HARM!
Maybe he could sue for Potential Investment Income!
Effect of an unassisted contract
If a minor contracts without the proper assistance of a guardian; then he is not bound under the law
of contract
Even if the contract is to the minor’s benefit, he is not bound under the law of contract
However, the contract is binding on the other party (the adult). As far as the other party is concerned,
there is a valid contract.
Legal term for this type of contract = LIMPING CONTRACT
MINOR
No Contractual Obligation

ADULT
Contractual Obligation
In practical terms, what the limping contract means is that the minor can choose whether or not to
enforce the contract
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




The decision lies solely with the minor, and the adult is bound by the minor’s choice
If the minor chooses to enforce the contract = RATIFICATION
If the minor chooses not to enforce the contract = REPUDIATION
Repudiation:
o (here the minor chooses not to enforce the contract)
o In this case, the minor is not bound, but neither is the other party to the contract
o The effect of repudiation, is as if the contract did not exist (limping contract disappears)
o NEVER EVER EVER EVER USE THE WORD “CANCEL!!” (the minor cannot “cancel”
the contract as there is no contract in the first place – i.e. it is a limping contract, therefore
not initially valid)
o The minor can therefore recover whatever he gave under the contract
o If he paid out money – use a legal action called the CONDICTIO
o For things – REI VINDICATIO (i.e. “things vindicated”)
o ****NOTE**** - This is not the same as RESTITUTIO IN INTEGRUM!! – which is only
applied to valid contracts that are cancelled
o The other party to the contract (the adult / major), can reclaim what was given, under the
LAW OF UNJUSTIFIED ENRICHMENT (e.g. the minor is now sitting with a motorbike
that doesn’t belong to him etc. – as there is no valid contract)
Ratification:
o If the minor chooses to enforce the contract, then both parties are bound, and the contract is
no longer a limping contract, and therefore a VALID CONTRACT
o If he wants to validly ratify, while still under the age of 21 (i.e. still a minor), then he needs
the consent of a legal guardian (consent can be verbal, written or implied)
o The effect of ratification, is that the contract is deemed to be valid; from the date it was
originally entered into (e.g. you are 17 years old, apply on 03/03, but granted 03/04 – to pay
back or backdate from the 03/03 as it is valid on this date!!)
o E.g. enter into a contract at 20 ½ years old, and then turn 21 years old, and then ratify – in
this case no assistance is required by legal guardian (can ratify on his or her own!)
o Ratification can be implied, verbal or written
o Stuttaford v Oberholzer 1921 CPD 855 (example of implied ratification)
 (In the old cases, many where about motorbikes etc., now its all about cellphones etc)
 Oberholzer bought a motorbike at the age of 20 years, 8 months. The purchase price of the
bike must be paid in instalments. The contract was unassisted (therefore, a limping contract).
After Mr Oberholzer turned 21, he continued to use the motorbike, but he failed to pay the
outstanding instalments
 Stuttaford (seller of the motorbike) sued Mr Oberholzer for the amount owed
 Oberholzer argued that he was an unassisted minor and therefore not liable under the law of
contract
 Judge’s decision – the court held that he had ratified this contract by continuing to use the
motorbike after the age of 21 years of age, and therefore had to pay (he even used the
motorbike to court!!!)
 Therefore, Mr Oberholzer is bound on the date of the contract originally entered into (not on
the court date!!)
v) Cases where the minor incurs (obtains or gets) valid legal obligations, without the assistance
of the guardian:
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­ When a minor enters into an unassisted contract, but it is not later ratified, then he will not be
bound under the law of contract
­ BUT – he may be bound under some other area of the law (THIS IS WHERE THE
INTRODUCTION SECTION COMES IN…)
­ He can be bound by:
1. Enrichment (The Law of unjustified enrichment – civil, private law)
2. Delict / Fraudulent Misrepresenation (pretend to be over 21 etc)
3. Statutory exceptions (e.g. bank account – unassisted but still binding if over 16 years
of age)
4. Tacit emancipation – different from emancipation by the court under the Age of
Majority Act
1) Unjustified Enrichment
 E.g. Brian is 18 years old and he buys a motorbike from Bob (assume that Bob is an adult / major –
normally this assumption must be made in tests and exams if not clearly stipulated!!!); the contract is
unassisted, no fraud (Bob knows that he is contracting with an unassisted minor); the purchase price
of the motorbike is payable in monthly instalments of R1000. Brian uses his motorbike for 6 months,
without his parents’ knowledge. This is not ratification, as he is under 21 and parents do not know
(not ratification) that he uses the bike for 6 months. He decides that he does not want to use the
motorbike anymore and hence, he fails to pay the outstanding instalments amounting to R6000.
Discuss:
ANSWER:
o Valid, void or limping? – Limping
o Has not been ratified
o Brian can repudiate the contract
o Brian says to Bob – that he does not want the bike anymore
o The court will not award restitution in integrum (as it is NOT a valid contract – it’s as if it did
not exist)
o Bob is not going to get motorbike back or R6000 under the law of contract
o Brian will be ordered to give the motorbike back to Bob under the law of unjustified
enrichment (as Brian is unjustly enriched by the bike) – BUT, Brian is not enriched by
R6000 as it is his own money
o Add note: He could be said to be enriched by bus or taxi fare saved by using the bike as an
alternative mode of transport
o Brian would get back his already paid instalments under the condictio
o Add note : if Brian was in an accident prior to this, then the damages bike must be given back
to Bob as this it he only thing that Brian was enriched by, according to the law of unjustified
enrichment!!
 E.g. Mohammed is 18 years old and goes to a jewellery store and buys a diamond ring for R500 000
(pays a deposit of R50 000 and the balance is due in 1 month’s time)
o Gives the ring to his girlfriend as a gift
o His girlfriend and him break up and she goes to Australia with the ring
o He now repudiates the contract and does not want to pay the balance of R450 000 (parents
have no clue as to what’s going on)
ANSWER:
o Limping contract
o No ratification (even if given to her), can repudiate
o No liable under the law of contract to pay R450 000 and under the law of contract no
restitution in integrum.
o He is also not liable under the law of unjustified enrichment – as he is NOT enriched
o Therefore, the shop gets nothing
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o However, if this is done deliberately in order to try and make a “cut” = fraud
o Mohammed will repudiate contract and can get back R50 000 under the legal action called
the condictio.
2) Delict / Fraudulent Misrepresentation
 Legal term for a lie
 The minor can fraudulently misrepresent himself in the following ways:
1. He can pretend to be over 21 years of age
2. He could pretend that he has the guardian’s consent
3. He could pretend that he is married or emancipated
 If he does this, and the other person is reasonably deceived (can’t be reasonably deceived if a 12
year old is mistaken for a 21 year old etc) and induced or enticed in entering the contract and
suffers a loss, then the minor will incur a legal obligation under the law of delict.
3) Statutory Exceptions
 Basic Principles pg 49, paragraph 2.1.1.5:
 Minor’s contracts for which no assistance is required
 There are a number of contracts that minors have the capacity to enter without assistance. Their
capacity to enter these contracts derived not from the common law, but from statute.
 For example, s 87(1) of the Banks Act 94 of 1990 permits minors over the age of 16 to open and
operate deposit accounts without assistance.
 Under the new Children’s Act 38 of 2005 (not yet in force), children over the age of 12 can
consent to non-invasive medical treatment, but need parental assistance to consent to surgical
operations.
4) Tacit Emancipation
 Tacit Emancipation is different to emancipation from the high court in terms of the Age of
Majority Act
 Tacit Emancipation is done informally (no application to court etc)
 It occurs with the consent of the legal guardian of the minor
 A minor of any age, can be tacitly emancipated; to be emancipated by the court – must be over
the age of 18 years old
 Tacit Emancipation normally occurs where a minor is allowed by a guardian to carry on some
business or occupations
 Therefore, when a minor is TE (Tacitly Emancipated), he can enter into valid contracts without
the assistance of a guardian, but only in connection with his particular business or occupation –
he can’t contract outside that sphere without the consent of the guardian (law still very
unsettled – due to conflicting decisions between provinces)
 Limited contractual capacity – according to business occupation
 However, sometimes the extent of the tacit emancipation has been held to reach further than just
the business or occupation of the minor (contradictory to above statement)
 BUT, one thing is certain: no matter how far reaching the emancipation, the minor will never be
able to marry or alienate immovable property without the guardians’ consent (if emancipated by
the court in terms of the Age of Majority Act, can marry and alienate immovable property
without the consents of the legal guardian; therefore, tacit emancipation can be very limited!)
 To determine whether TE has actually taken place, and the extent of the emancipation, you have
to look at the facts of the case.
 E.g. Pam is 20
26

o In her 1st year of university when she was 17, she starts her own business, selling
sandwiches on campus
o This was done with the guardian’s consent
o The business is very successful, and she uses the money to pay her university fees, her
pocket money and a rental to her parents (she lives at home)
o One day, she enters into an unassisted contract with Pick ‘n Pay for the delivery of 26
loaves of bread
o The bread is to be used for the business for making sandwiches
o She fails to pay, and so they sue her for the amount owed
o Pam argues that she was an unassisted minor and therefore not liable under the law of
contract (limping – can choose to repudiate!)
o Pick ‘n Pay concede that she was an unassisted minor (i.e., they agreed with her), but
they argue that she has been tacitly emancipated and therefore liable under the law of
contract. [BUT == “He who alleges must prove!”]
o Hence, PnP must prove that she was tacitly emancipated and get her money from court
o Must show that: Guardian has consented to release of the minor from his / her power
o To ascertain this, the courts look at:
1) Age of the minor
2) Does the minor live away from home
3) Does he manage his own business or pursue an occupation / trade – if yes, what
type and how long?
4) Relationship between the minor and the guardian
5) Is the minor financially independent (cannot be emancipated if cannot pay for
herself)
o Pam is quite old (in favour of emancipation)
o Technically not living at home – paying rent to parents
o Has her own business from 17 years old
o Financially independent
o Therefore, under a balance of probabilities – she has been tacitly emancipated.
o PnP will sue Pam for unjustified enrichment though, and may claim for the money gained
from the sandwiches sold that were produced from the loaves of bread!
Under the same e.g. Pam takes an unassisted gym contract – not liable even if tacitly
emancipated… This is because the gym contract has nothing to do with her specific trade or
business – hence, it is a regular limping contract and if she doesn’t pay membership – then she
cannot be claimed against under the law of unjustified enrichment, as she is not enriched in any
specific way. Hence, she is not liable at all as the extent of the tacit emancipation does not extend
further than the realm of the business. BUT – Pam cannot get married without consent of both
guardians, or be responsible for the alienation of immovable property!
…We are still looking at people with limited contractual capacities…
b) Married persons
 In South Africa, there are 3 different ways that you can be married (choices = hence, we can
make an informed decision):
o ICOP – In community of Property
o OCP – Out of Community of Property
o OCP with accrual – Out of Community of Property with accrual – in SA only -- -- Part of
legislation (not Roman-Dutch) = everything belongs to each spouse independently, but
upon dissolution of the marriage, then an accrual calculation is performed.
o MOST COMMONWEALTH COUNTRIES – only have the 1st 2 options above
27
 Textbook – pg 49 (only 2 options)
 In order to be married OCP of OCP with accrual, have to enter into an Antenuptial contract
(ANC!)
 Must be signed BEFORE the marriage, in the presence of a Notary public and 2 witnesses
 If you do not have an antenuptial contract, the marriage is automatically an ICOP by default (In
Zimbabwe and England, default is OCP)
 Antenuptial contract is known as a Prenuptial contract in America
1) Marriage In Community of Property (ICOP = default)
a. Effect of a marriage ICOP
i. The assets belonging to each spouse before the marriage, are merged into a single
estate upon marriage, and they become joint owners of each other’s assets.
e.g = if you have a house (even if the house is only your name or one of the
spouses names), and you get married, now jointly owned – i.e. each spouse now
owns “half”
ii. The liabilities of each spouse before the marriage become the joint liabilities upon
marriage
iii. Any property acquired during the marriage, becomes joint property (who’s name
it is on becomes irrelevant!)
iv. Liabilities also acquired during the marriage becomes jointly liable by each
spouse
v. Upon dissolution of the marriage by death or divorce, the joint estate is divided
and each gets half.
e.g. if R500, wife gets half (R250) if husband dies – other half is given according
to the will
It is a mission to change matrimonial association (application to the high court)
and advertise in papers for any objections etc. (Add note: the Law of Domicile
governs marriage – i.e. where you live etc)
b. Contractual Capacity of spouses
o In terms of Matrimonial Property Act of 1984
o Both parties have full contractual capacity (husband and wife), without the
other’s consent; BUT there are certain exceptions, where the consent of
both spouses is required
Some definitions first:
Alienate = sell, mortgage, lease out, give away
Cede = manner of alienating, usually used for incorporeal assets (assets that do not take up space or do
not physically exits – such as airtime, shares (even though you have a share certificate), patents,
intellectual property)
Pledge = to give something as security (same as collateral) – e.g. give a person your cellphone as a
security that you will pay back R1000 to your creditor etc
Formal consent
Written consent from the other spouse, signed before 2 witnesses and must be given for each separate
act
1. Alienate or mortgage immovable property – must acquire husbands consent even if on your name
(BUT can buy without consent)
2. Buy residential land in instalments **
3. Enter into, as a credit receiver, a credit agreement (e.g. credit at a bank or a Woolworths credit card)
**
28
4. Bind him / herself as surety **
e.g. X owes Y R100, Mr B stands surety for X’s debt. If X doesn’t pay, Y sues B - - THE MORAL
OF THE STORY IS = NEVER STAND AS SURETY FOR SOMEBODY ELSE!
For (2) and (3) above – consent can be given by ratification, but it must still be in writing before 2
witnesses (must be afterwards)
** for (2), (3) and (4)
Consent is not required, if it is done in connection with the spouse’s business or occupation
E.g. you have doctor B who is in partnership with doctor A. Doctor A buys an X-ray machine for the
practice on credit (Doctor A is unmarried). Doctor B is married ICOP and he stands surety for Doctor A
for the purchase price of the machine.
Doctor B does not need consent with his wife to bind himself as surety – as it is in the normal course of
the business
Written consent
­ Formal consent in writing (therefore, do not need 2 witnesses)
­ Can be given as a general consent (note for each separate act, as in the case of formal consent,
therefore lighter)
1. Alienate, cede or pledge any shares, stocks, insurance policies or any fixed deposit (all investment
assets) or any other investment at a financial institution
General consent e.g. – You own 1000 shares in a company and want to sell 100 shares to 10
different people – You can get ONE letter from your wife for all the sales – this is general consent
(In the case of formal consent – a written letter is required for EACH SALE and it must be done in
the presence of 2 WITNESSES
You don’t need consent for alienating the following investments:
A. Shares that are listed on the stock exchange (JSE) – public company; but shares in a private
company DOES require consent
B. You don’t need consent to deal with a deposit held at a bank or building institution
2. You need written consent to alienate, or pledge jewellery, coins or painting etc – ALL ITEMS
THAT ARE HELD AS “capital assets”
3. Withdraw any money held in the name of the other spouse in a bank, building society or post office
(Your money anyway)
Consent for all of them (points 1-3) can be given by ratification – but MUST BE IN WRITING (if
other spouse refuses this – then what happens is explained later in the notes)
Informal consent
Verbal – can I do this? YES!!
1) Alienating or pledging household furniture and effects
2) To receive money due to the other spouse as a result of:
­ Their trade, business or occupation
­ Inheritance, donation, bursary or prize (even if given to you – what’s yours is yours and
what’s mine is mine!!)
3) Large donations from the joint estate (e.g. with the lotto – both win it!!)
CONSENT FOR ALL 3 ABOVE CAN BE GIVEN BY RATIFICATION!!
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Transactions made without consent
 General rule – if a spouse enters into a contract without the required consent, it is going to be
VOID!!!
 There is one exception
o If a 3rd party did not know that the required consent had not been given, then the contract
is valid
o E.g. – If husband sells furniture (supposed to be verbal consent) – 3rd party won’t know if
consent had been given
 If the contracting spouse knew that he or she would not get consent, and the estate suffers a loss;
then an adjustment will be made, in favour of the other spouse upon dissolution
 E.g. John and Jill are married ICOP – John sells expensive jewellery (THEREFORE, written
consent required!) – he didn’t have Jill’s consent (didn’t ask her), and he knew that he wouldn’t
get her consent. He shows the buyer a letter consenting that he sells the jewellery (from Jill)
where he forges the signature. Therefore, this is a VALID CONTRACT
The true value of the jewellery is R1000; John sold it for R500 (he is dishonest and a bad
bargainer!). John and Jill later get divorced. If they got divorced and John DID NOT sell the
jewellery – each would receive R 500 (assuming that the jewellery is their only asset)… BUT, he
sold it for R500 – therefore, each only get R250
Hence, Jill suffered a loss of R250 and therefore John must pay her R250 on dissolution
If John had sold it for R2000 – nothing more would be paid to Jill (did not suffer a loss!)
There are negative consequences to be married ICOP – it is all about personal choice
Add note: SOMETIMES, lawyer’s fees are even more than 50 / 50 split in the case of a divorce
ii) Marriages out of community of Property (OCP) or out of community of Property with accrual (OCP
with accrual) (NEED ANC FOR THIS!)
a) Effect of marriage OCP:
 Exact opposite of ICOP
1) Each party (spouse) retains, as their own separate property, whatever they acquired before
the marriage and whatever they individually acquire during the marriage
2) Each party is liable for their own debts, which they incurred before or during the marriage –
i.e. they are not liable for each other’s debts
3) Upon dissolution of the marriage, each party retains their own separate assets and neither is
liable for the other’s debts and neither has a claim against the other (CHILDREN and
MAINTENANCE IS AN ENTIRELY SEPARATE ISSUE HERE)
It is up to the 3rd party to find out if a person is married ICOP or OCP
Because of this, there is now a middle ground to avoid the maintenance from a husband – as under OCP,
a housewife can end up with nothing, if brought nothing to the marriage
b) Effect of a marriage OCP with accrual:
 Exactly the same as OCP, but with one main difference
 The spouse, whose estate has shown the smaller accrual (only growth), has the right to half
of the difference between the accruals of both spouses upon dissolution of the marriage
 NB e.g.
o John and Jill got married in 2000 and NET ASSETS (Assets – Liabilities):
JILL
JOHN
30
R500
R1000
2000
R10500
R1000
2007
Accrual
R10000
R0
(The theory behind this concept is – “Jill would not have been as successful without John”)
Therefore, difference between accruals = R10 000 – R0 = R10 000
And John gets R5 000 from Jill
NB – CASH CLAIM FOR THE ACCRUAL (not joint owner of the house or any other asset) – if one
of the spouses cannot afford to pay the accrual to the other, then some of their assets must be sold or
property mortgaged in order to finance the cash amount owed to the spouse upon dissolution of the
marriage. This takes into account ALL ASSETS AND LIABILITIES (when doing the accrual
calculation), but CASH GRANT…
If:
JILL
JOHN
R500
R1000000
2000
R10500
R1000000
2007
Accrual
R10000
R0
Then, Jill still pays John (only difference between the accruals is compared, and there is no accrual in
terms of John’s Net assets).
Add note: CAN USE a trust account on children’s name or own name – BUT, must be states in the ANC
that the marriage agreement excludes any money in the trust, or else it will be classified as part of the
spouses net assets.
c) Contractual capacity of spouses married under OCP and OCP with accrual
1. Each party has unrestricted power over their own assets / with regard to their own estate
2. Neither party has power over the other spouse’s estate
3. They are NOT liable for debts incurred by the other spouse – with one exception:
They are jointly liable for all household necessaries
e.g. – husband buys a fridge – and he fails to pay – then they can sue the wife for the amount
outstanding
What qualifies as a household necessary?
Depends on the financial means of a party (e.g. poor house – microwave NOT a necessary)
But the following are always household necessaries:
I.
Food
II.
Clothing (to a certain extent)
III.
Medicals and dentals
Still looking at contractual capacity:
c) Insolvents
 An insolvent is somebody who’s estate has been sequestrated (order of bankruptcy) by the “High
Court” in terms of the Insolvency Act (in other words – he is bankrupt!)
 His liabilities exceed his assets
 Insolvency Act – part of legislation
 If someone has not been sequestrated by the high court, then he is not an insolvent in the
technical sense, and his capacity is not limited
31

e.g. University students are mostly insolvent (e.g. outstanding fees etc as opposed to the amount
of assets that they personally own)
 If someone is actually sequestrated by the court (technically insolvent), thjen his estate is placed
in the hands of a trustee (all the things are removed). The trustee will sell the assets and divide
the proceeds among the creditors
 If the proceeds are greater than the liabilities (i.e. all creditors are paid in full), then additional
proceeds are given to the insolvent and the person is immediately reinstated
 They take everything except all household furniture, clothing and tools of trade
 Secured preferent - to concurrent (order of creditor payment) : banks - employees / SARS - ...
 Add note: If a couple is married ICOP and the husband gets sequestrated, then the wife is also
sequestrated, as all assets and liabilities are jointly owned
 General rule - the insolvent has full contractual capacity, with 2 exceptions:
1) The insolvent cannot enter into any contract in terms of which he disposes of any assets insolvent in
his estate - can't do this - don't belong to him anymore (in the hands of the trustee chosen by the
creditors)
2) The insolvent cannot, wihtout the written consent of the trustee, enter into any contract which may
adversely affect the estate (capacity is therefore limited). This means that the person cannot enter into
any credit contract. If declared insolvent - cannot work as an accountant (not as a CA, but can work as a
bookkeeper) or an attorney.



Estate planning - is actually allowed - as this protects a person against insolvency and aids in tax
evasion
If married OCP and transfer asset to wife before being sequestrated and being declared insolvent
by the court, then this is fraud - as it is an avoidance of creditors
Trustees chosen by creditors
d) Mental Incapacity arising from mental illness or intoxication
 Mental illness: All people are presumes to be sane, unless they have been claimed or declared
mentally ill by the High Court, in terms of the Mental Health Act.
 If someone has not been declared mentally ill - contracts are valid (as the person is presumed to
be sane)
 If a person wants to get out of such a contract, then the person must prove mental illness
 They must prove that at the time of contracting they could not understand what they were doing,
or they did understand what they were doing, but they were being motivated by an insane
dillusion (requires about 3 different psychiatric reports).
 On the other hand, if someone has been declared mentally ill, then it is presumed that the
contract is void
 The burden is on the part wanting to enforce the contract to prove that the mentall ill person was
having a Lucidum Intervallum (lucid interval - sane interval or moment of sanity)
 or that he could understand the transaction and was not motivated by an insane dillusion (if you
can prove this, then the contract will be valid).
 If a contract is signed and later on a person is declared mentally ill - contract is still valid at the
time of contracting
 If a person buys a car (R20 000 / month repayments) and is later declared mentally ill in terms of
the Mental Health Act, then a curator is placed in charge of his assets and the contract remains
valid (only 2 personal contracts can later be legally cancelled: (1) Marriage and (2) Employment
 The person may be liablbe under the law of unjustified enrichment for person entering into
contract with mentally ill but is unaware
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e) Intoxication
 Drugs, alcohol etc
 If a person is so intoxicated, at the time of contracting, that he doesn't know that he is entering
into a contract or he cannot appreciate the terms of the contract (do not know the proce and what
he or she is buying etc), then it would be a void contract
 In this situation, the person can still be held liable under the law of unjustified enrichment, even
though he is not liable under the law of contract
 HOWEVER, the mere fact that somebody is more willing or more easily persuadable when they
are "slightly drunk" does not make the contract void (you must be completely intoxicated) - [e.g.
contract of engagement when "tipsy" still valid - NOT VOID!!]
 There was a case in the 1960's where a man proposed to a women when tipsy and she accepted but he claimed that he was "tipsy" - however, the women actually sued him for relocation costs,
loss in salary and limb costs (i.e. sue for damages)
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1.2 Agreement / Consensus (also known as offer and acceptance)
a) Offer and Acceptance
i) Offer
An offer is a proposal (e.g. buying another person's car and paying next week) made by one party to
another, containing terms and conditions which, if accepted by the other person, binds them
contractually (verbal is sufficient)
VALID OFFER + VALID ACCEPTANCE = VALID CONTRACT
The requirements for a valid offer are the following:
1) It must meet all the requirements for a valid contract
2) It must define all the terms on which agreement is sought


If one of these requirements is missing - no valid offer
Even if someone accepts it - NO VALID OFFER
From (1): Must meet all the requirements for a valid contract (Beginning of PART B)

Offeror must have contractual capacity

Offeror must have a serious intention to contract ** (Focused on in this section)

Offer must be communicated to the other party ** (Focused on in this section)

Must be lawful

Must be possible of performance

Must comple with all the formailities

Must be certain in its terms

(Application to valid offer from valid contract)
a) Serious intention

The party who makes the offer must have the intention that if it is accepted, there wil be a
binding contract

The courts apply certain rule in determingin whether there was a serious intention to make an
offer (emotions on the day NOT TAKEN INTO ACCOUNT)

The courts have held that adverts, price list and catalogues are not offers, they are simply
invitations to do business

So, if someone responds to an advert, price list or catalogue, they are not accepting an offer, they
are merely responding to an invitation to do business, and they are the one making the offer

Crawley v Rex 1909 TS 1105
(Rex = King = represents the state - NOT THE NAME OF THE SHOPKEEPER) (TS = Transvaal
Supreme Court) (Not Rex v Crawley as it went on appeal) (One volume in the past = page 1105)
A shopkeeper advertised a certain brand of tobacco at a cheap price. Crawley went to the shop
(responding to the advert) and he offered to buy some of the tobacco, and the shipkeeper sold it to him.
Crawyley came back a while later with some friends and he wanted to buy a lot more of tobacco.
The shopkeeper refused to sell it to him (he had thought that Crawley was a competitor - buy it cheap
and sell it elsewhere). He then asked Crawley to leave the premises and Crawley refuses. Crawley was
then arrested for failure to leave the premises when asked to do so. The case came to court (criminal
case).
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One of the issues in the case was whether the shopkeeper was obliges to sell the tobacco to Crawley.
The court held that the advert was an invitation to do business, and Crawley, in his response to the
advert was actually the one making the offer; and the shopkeeper could accept or reject and hence didn't
sell the tobacco.

Pharmaceutical Society of Great Britian v Boots Cash Chemist Ltd [1952] 2 ALL ER 45
(England and ALL ER - All English Law Reports) - pgs 53-54 in Basic Principles of Business Law
textbook
[Boots Cash Chemist is like Dischem, all medication is on open shelves]
There is legislation in the UK which says that it is unlawful to seel medication unless the sale is
supervised by a chemist (qualified and registered pharmacist).
The customers pick the medication off the shelves and puts it in their basket. There was no pharmacits
wandering around the shop. The is a pharmacist standing at the till. the pharmaceutical company says
that the sales were illegal because boots made the offer when they display the goods on the shelves. The
customer accepts the offer, when he puts an item in his basker. At that point, the sale is concluded.
Therefore, the sale is unlawful, as there is no pharmacist in supervision (can't take it out of the basket breach of contract!!!!).
As a judge, the court held that the products on the shelves are invitations to do business and the
customers make an offer at the till and acceptance takes place when the cashier rings it up. The sale is
therefore concluded at the till, in the presences of a pharmacist. Therefore, because of the fact that the
pharmacist is at the till, the sale is NOT unlawful or the sale IS LAWFUL.


False advertising is not part of the law of contract.
Some adverts, however, can be an offer. To decide if an advert is an offer, you look at the
surrounding circumstances, and the wording of the offer. The courts have held (judicial
precedent or case law) that an advert to do business with whoever shall perform certain acts, is
an offer, not an invitation to do business.

The most common example is an offer with a reward

Another e.g.
A few years ago, Pepsi launched a competition, where if someone collected 200 000 Pepsi bottle lids,
then you would win an aeroplane.
Pepsi said that they didn't have to give him the plane ("just a small handshake saying well done"),
because it is not an offer, and customers is offering.
The court said that this particular advert was an offer, and therefore the guy collecting the lids was
accepting the offer (performing an act) and therefore a valid offer + valid acceptance = valid contract
b) Communication

The offer must be communicated to the other person

Bloom v American Swiss Watch Co 1915 AD 100 (AD = Appellate division... Basic Principles
pg 58
American Swiss was robbed and some jewellery was taken, so they placed an advert in the paper
offering a reward for anyone with information about the robbery (a valid offer).
Mr Bloom came forward wiht some information, but at that point in time he had not seen this advert at
all (just being a good and honest citizen); so he didn't ask for a reward and nobody paid him.
Later on he discovered that there was actually an advert for a reward and he claimed the money.
American Swiss argued that it was an invitation to do business. The court said it is a valid offer, becuase
it hadn't been communicated to him (he didn't know about it). Therefore, there was nothing to accept,
35
hence there is no contract, therefore he didn't get the money.
Requirements for a valid offer contd:
2) It must define all the terms on which agreement is sought
­ (i) The offer must contain all the final terms and conditions of the contract, so that an
unconditional acceptance will bring about a binding contract
­ An unconditional acceptance = “Yes”
­ If any terms or conditions are left out and still need to be negotiated, then it is not a valid offer
­ Answer must only be “Yes” – for a valid offer (amount / details of sale must be stipulated to be a
valid offer)
­ (ii) Revocation, lapse and rejection of offer
Revocation:
 Revocation is the withdrawal of the offer by the offeror
 Revocation can take place at any time prior to acceptance
 Once acceptance takes place = valid contract, hence if try to revoke = breach of contract!!!
Lapse of offer:
 This means that the offer expires, dies or comes to an end
 An offer will lapse in the following situations:
1. If it has not been accepted in a “reasonable time” (obviously can’t hang around forever),
and this time actually depends on the facts of the case (e.g. share offer = couple of
hours…; whereas the sale of a house = a few weeks as the market is not as volatile as that
of the share market)
2. IF it has not been accepted within the time specified for acceptance
3. It will expire on the death of the offeror or the offeree, provided that acceptance has not
yet taken place (contract still stands – except for 3 contracts that terminate upon death =
(i) Marriage, (ii) Engagement (iii) Employment)
4. The offer is valid at the time that it is made, but later, before acceptance, it becomes
invalid because it conflicts with one of the requirements – e.g. offer by West Indies to
host the ICC World Cup 2007 – but if there is a tsunami long before the World Cup
begins, then the offer is no longer valid on the grounds of incapacity and hence cannot
contract
Rejection:
 Rejection by the offeree will bring the offer to an end
 There are 2 ways that rejection can take place:
1. Express rejection (e.g. Will you marry me? NO! – offer dies)
2. By making a counter offer
Watermeyer v Murray 1911 AD 61
(Watermeyer = W and Murray = M and AD = Appellate division)
W offered to sell his farm to M on certain terms. M did not accept unconditionally. But instead, he
wanted to pay the deposit on a different date. W, was not prepared to deviate from the original terms
(wanted the deposit to be paid within one week). M then tried to accept that original offer without any
amendments.
W then refused to sell him the farm (went to court and then to appeal)
The court held that when M had tried to arrange a different date for the deposit, he was actually
rejecting the offer and making a counter offer. W was entitled to accept or reject the counter offer, so
he didn’t have to sell the farm to M.
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NBNBNBNBNB: A conditional acceptance is NO ACCEPTANCE AT ALL – it is a rejection and a
counter offer!!
­ (iii) Acceptance
­ In order to have a valid contract, you have to have a valid acceptance (valid offer and valid
acceptance = valid contract)
­ These are the requirements for a valid acceptance (all of these requirements must be met):
1. It must meet all the requirements for a valid contract – read / see previous notes
2. It must be unequivocal and in terms of the offer (must not be conditional!!!!)
3. It must be made in the manner, if any, prescribed by the offeror
Add note: if offeree does not contact offeror – automatic rejections or lapse
NBNBNBNBNBNB – Definitely in tests and exams!
 If the offeror sets out the manner of acceptance, then acceptance must take place in that
manner, in order to be valid. (e.g. condition – must accept in writing and you phone to accept
the valid offer – THIS IS NOT A VALID ACCEPTANCE)
 This becomes particularly relevant when we are dealing with contracts that are made either by email, telephone or the post (used mainly for the purposes of original copies with original
signatures – e.g. bursary…)
 Expedition Theory
­ This applies in the following 2 situations:
1. Where the offeror makes his offer via the post, or
2. Where the offeror authorises postal acceptance (send contract to same one – sign and
return to them)
­ In these situations (1 and 2), the offeree may accept via the post
­ The Effect is as follows:
Acceptance takes place and the contract is conducted at the time and place where the letter
of acceptance is posted
e.g You have Y in Cape Town who sends and offer via the post to X in Durban on the 01 / 03. X posts
the letter of acceptance in Durban on the 15th March. The letter reaches Y in Cape Town on the 21st
March.
Contract is concluded in Durban on the 15th March. Y can revoke up to anytime before the 15th of
March. But this is strange, because Y does not know when X will get the letter and accept (It can be said
that: Y has authorised the post office as his agent)
­ The expedition theory will only applies in certain circumstances:
1. Commercial contracts (sale, lease etc.) – not letter of marriage etc!
2. If the postal system is working normally (if there is a massive strike or letter lost in the
post, then the expedition theory does not apply.
3. Only applies if letter of acceptance is correctly addressed
4. If the offeror has not stipulated that acceptance is only valid once he has read and
received the letter
5. It also only applies if the offeror has not stipulated that acceptance must take place in
some other manner.\
­ Expedition theory - includes telephones and telegrams!

Information theory
o This applies to contracts made by:
1. Telephone, and also contracts where the
2. Expedition theory and the reception theory (later) do not apply
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o Acceptance is only valid and the contract concluded, when it has been communicated to the
offeror
o This means that the offeror must actually see or hear the acceptance (very different to
expedition theory)
o E.g. A who is in Cape Town, phones B in Johannesburg and offers him to sell his car
B accepts
The contract is concluded in Cape Town, where A actually hears the acceptance (NOT IN
JOHANNESBURG!!!)
o Add note: Expedition Theory – only applied to Commercial theory – therefore, information
theory in the case of a letter of marriage of acceptance being sent in the mail! – THIS IS
VERY NB as the two different theories have two different contractual dates ~ Good test
question
o Add note: if a grantee accepts over the phone – and the offeror sends a letter later confirming
the offer and acceptance – this is not a letter of acceptance or a contract, but merely a
confirmation letter

Reception theory
o Electronic Communications and Transactions Act 2002
o Deals with contracts made via e-mail and other kinds of electronic communication
o In terms of this act, the contract is concluded at the time and place where the acceptance is
received by the offeror. An electronic message is regarded as having been received by the
offeror at his usual place of business or residence when the complete data message enters his
information system and is capable of being retrieved and processed by him – SECTION 23
of the Electronic Communications and Transactions Act 2002
o The most important thing about this, in a nutshell, is that the contract is concluded at the
time and place when the acceptance is sitting in the offeror’s inbox (even if he hasn’t
read it or checked it!)
o Add note: even if the person is on leave, when it goes into the server, it is classified as the
acceptance date by LAW
o Add note: if retrieve the e-mail from another country – but South African e-mail - THEN SA
IS THE PLACE OF CONTRACT!!!
o This theory also applies to faxes – obviously if someone accepts via fad – contract is actually
concluded when the fax is sitting in the offeror’s fax machine.
o In terms of SMS’s – not yet part of the Act – this Act is not perfect or fullproof, it is still
fairly new (2002), therefore not all necessary terms and conditions are included
4. It must be made before the offer comes to an end
(a) – acceptance and offer
3 ways a contract comes to and end:
1. Revocation
2. Lapse (very differentiated – many different ways)
3. Rejection
(b) Options and Rights of First Refusal (NOT IN TEXTBOOK -- -- -- -- NB)
i) Options
 “An option is a contract whereby one party (the granter) undertakes to keep open, for a certain
period and offer (main offer) he has made to… the other party (the grantee)
 During that period of time, the offer is irrevocable (cannot possibly be revoked!!)
 E.g. B offers to sell his car to A for R20 000
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That is the main offer (Offer 1)
B says to A that he will keep his offer open for only 2 weeks
This offer (offer 2) to keep the offer open is ancillary (DEPENDENT ON) to the main offer
A says okay – he will think about if for two weeks – i.e. A is actually accepting the ancillary offer
He has now accepted the ancillary offer and there is now an option contract (to keep the main offer
open!)
The option contract is that B will keep this offer open for only 2 weeks
So B cannot, during those 2 weeks revoke the offer
 Add note: Some people want time, before they place an offer for a R5 million building, as they need
to arrange the adequate finance and may be willing to pay up to R200 000 for an option contract!!!!
 HENCE, there are two contracts:
o The option contract, and
o The main contract (potential sale here in this example) which may or may note come into
being
o Addnote: if offered to more than one person by the offeror, and both accept, then the offeror
can be sued!!!!)
 An option contract is different from an offer that will expire during a certain time
 Where an offer will expire after a certain time, all it means is that it can’t be accepted after that date /
time, but it can be revoked (by grantee) prior to that data/time
 Hence, Grantee can revoke option contract before the valid time
ii) Rights of First Refusal (NOTE IN TEXTBOOK!!!)
 “A contract giving a rights of first refusal is a contract whereby one party (the granter) agrees that, if
he should be willing to enter into a particular contract, the other party (the grantee) will have the
right to enter into that contract with him before any other person.”
 E.g. A says to B, if I ever sell my house, I will first offer it to you. B accepts.
Now, there is a Rights of First Refusal contract in place
If A does not sell at all – no contractual obligation
If A decides to sell and doesn’t offer it to B - - - - - In breach of contract!!!
Add note: Normally have to have a written right of refusal contract with a specific minimum
monetary amount (usually linked to a market related price)
If person forgets and sells to someone else, then can only claim for damages (no other action can be
taken against the offeror)
Add note: If A is married ICOP and A’s wife sells to C instead of B, then it is also in breach of
contract and they are still liable
Add note: if sold to C – OFFER IS LEGAL – The valid or invalid does affect the legality
(c) Online Contracting
Introduction
­ Online contracting via the Internet is considered an electronic transaction
­ Electronic Communications and Transactions Act 2002
­ Everytime you contract on the Internet – it is all governed by the Act
­ Electronic contract is concluded at the time and place, where the acceptance enters the offeror’s
info system at his usual place of business or residence and is capable of being retrieved by him
(once again, BEFORE HE READS IT!)
­ Some definitions:
 A Supplies is any person who offers goods or services for sale, hire or exchange on the
web
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
A Consumer is any natural person (human being), so not a company or any other juristic
entity, who enters into an electronic transaction with a supplier (juristic persons – can
contract online – BUT NOT PROTECTED BY THE ACT!)
Requirements for website and online transaction
­ (by Act – not governed by common law –Romans obviously didn’t know about computers then!)
­ Section 43 (1) says that any supplier (above) must make the following information available on
their website:
 About the supplier: (Not like this in the act)
1. Supplier’s full name and legal status (Jane Franco OCOP or minor). If it is a
juristic person, you must have a registration number and a list of the office bearers
(Chancellor of UCT etc)
2. All the supplier’s contact details
3. Details of any self-governing body to which the supplier belongs and their code of
conduct (e.g. law society)
4. The physical address where the supplier would receive legal documents
 About the goods:
1. There must be a description of the goods or services that will enable the consumer
to make an informed decision as to whether to enter into the contract.
 About the contract (itself):
1. The full purchase price of the goods or services
2. The manner of payment (e.g. credit card, instalments etc)
3. Any terms of the contract such as guarantees or conditions
4. The time within which the goods or services will be dispatched (obviously
something you would want to know when ordering)
5. How and when the consumer can access a full record of the transaction
6. The return and exchange policy of the supplier
7. If the contract is an ongoing one, then the minimum period for which it must
continue e.g. online subscription to the Cape Argus – what is the minimum
period?
 Security:
1. It must set out their security procedures and privacy policy
2. Section 44 rights: These will be discussed below
All of the above, are requirements of Section 43 (1) to put on the website
­ Section 43 (2) – new section
­ In terms of Section 43 (2), the supplier must give the consumer an opportunity to review the
entire transaction and correct any mistakes (e.g. 5 cd’s instead of 3), or withdraw entirely (most
websites have this)
­ Consumer’s rights in terms of Section 44:
­ The consumer is entitled to a “cooling-off-period” during which he can cancel the transaction
without any valid reason at all and without incurring a penalty (not under Roman Law – only
under this ACT!!)
­ Where the contract is for the supply of goods, then the consumer can cancel the contract within 7
days (not working days) from receiving the goods (cooling off period)
­ Where the contract is for the supply of services, then the consumer can cancel within 7 days after
the conclusion of the contract
­ Hence, the cooling-off-period for both the purchase of goods and services is the same – but
calculated from different dates
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­ Add note: Q – does this apply to foreign websites, since this is an Act of South Africa? (e.g.
Amazon)
A – What this Act says is – no matter which law governs the contract, the contract is concluded
at New York (or wherever ACCEPTANCE IS RECEIVED) – American Law governs the
contract. This Law, however, still applies and covers the technical validity. The problem, is that
this is a Relatively NEW ACT and so there are many problems and no case has actually come to
court yet, regarding this act (legislation vs case law / judicial precedent, but there is no case law!
­ The “cooling-off-period” does not apply to the following transactions:
1. Transactions for the provision of financial services (online banking – if transfer – cannot
reverse – same as for insurance)
2. Auctions – e.g. Ebay (as prices change all the time)
3. Transactions for the supply of food and beverages (i.e. only human food and beverages,
not dog food etc!) and other consumables (things you use up – e.g. shampoo, soap etc)
[Add note: if a company buys dog food, then they are not protected by the Act as they are
a juristic entity! – tricky!!]
4. Transactions where the price of goods and services is dependent on a fluctuating market
(e.g. shares = logical!)
5. Transactions where the goods are made to customer specification or personalised (e.g.
UCT soccer club order’s 15 jerseys – can’t return them)
6. Where audio or video recordings or software has been unsealed by the consumer
7. Transactions regarding the sale of newpapers (out of date), magazines, books or
periodicals.
8. Transactions for online gambling or betting – logical
9. Transactions for the provision of accommodation, transport, catering, or leisure services
10. Transactions regarding the supply of services that have already begun within the 7 day
period, with the consumer’s consent.
e.g. of something where the cooling-off-period actually applies is for dog food and
clothes etc
Add note: consent for the last one – not for the contract – for the provision of services
Security:
­ Supplier must use a payment system that is sufficiently secure (go to court to decide this – i.e. if
sufficiently secure!)
­ If he fails to comply with this obligation, then he will be liable for any damage suffered by the
consumer as a result (e.g. theft of credit card and somebody steals R5 000 – supplier must
reimburse you!)
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Performance by Supplier (online contracting contd)
­ Section 46 of the Electronic Communications and Transactions Act 2002
­ The supplier must perform the customers order within 30 days of receiving it, unless they have
agreed otherwise.
­ If the supplier does not perform within the 30 days, or within the specified agreed period of time,
then the consumer can cancel the agreement by giving 7 days notice (not working days). This is
not the same as the cooling-off-period – cancellation with a valid reason
Automated transactions:
­ In order to understand Automated transactions, it is important to understand what an electronic
agent is
­ An electronic agent is an automated response to a data message (e.g. Internet Banking transfer =
“you transaction is successful” or “your order has been processed”)
­ An electronic agent can also be used to initiate an online contract
­ An automated transaction is an electronic transaction in which one or both parties uses an
electronic agent (automated response) – these are allowed in terms of Section 20 of the Act
Contractual exclusion not allowed:
 The parties cannot exclude by agreement any of the provisions that we have looked at. Such
exclusion will be invalid; (e.g. on the net – tick I agree to cancel my “cooling-off-period”) –
invalid, cannot do this!
As we continue with the Formation of a valid contract (Section 1 of Part B [The Law of Contract])
1.2 (d) Factors which can taint or prevent the conclusion of a valid contract
This section is NBNBNB in tests and exams, especially in long questions, so LEARN WELL!
1. Mistake
2. Misrepresentation (false information)
3. Duress (threaten to kill you if don’t sign etc or hold a gun to your head to force you to sign)
4. Undue influence (subtle manipulation – not physical)
These can all render a contract either void or voidable
Void contract
 A void contract is no contract at all (doesn’t exist) – NBNBNBNBNBNB
 The courts will not therefore enforce it
 Contract will normally be void, if any of the essential requirements are missing:
1. Contractual Capacity
2. Serious intention to contract
3. Communication
4. Parties must be of the same mind, i.e. no misunderstandings or mistakes
5. The agreement must be lawful in all its terms (sometimes renders it void)
6. Performance must be possible
7. Compliance with all formalities
8. Certainty
 Ratification does not normally make these contracts valid (mentally ill) except for two
exceptions:
1. Minors limping contract (NOT STRICTLY SPEAKING a void contract = Limping)
2. Marriage / Married people
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Voidable Contracts (Void, valid, limping and now the 4th type = voidable contracts)
 This is a valid contract – all the requirements have been met (as above); but there is a defect in
one of the consent of one of the parties (this is the problem)
 Defect can be due to misrepresentation, duress or undue influence (e.g. somebody lied / made a
decision with a gun to his head)
 The party who has been wronged (not victim – as it is not a criminal case), has an election:
 The person either can:
 Cancel the contract (set it aside) and claim restitutio in integrum = recession and
restitution
 Or might decide to abide by the contract / stick to the contract
 Pg 63 of the textbook: instead of saying cancel and abide, they say repudiate and
ratify = this is incorrect as you cannot ratify or repudiate a valid contract
 Until such times as the party actually makes his election, there is a valid and
binding contract
 Once the party has made his or her elections, they cannot change their mind
(i) Mistake
There are 3 types of mistakes: (we will go into detail later)
1) Common mistake – both parties share the same mistake
2) Unilateral mistake – you can tell from the name that only one person is mistaken, and the other is
not
3) Mutual mistake – both parties are mistaken, but they are at cross-purposes i.e. do not share the
same mistake (one thinks one thing, other thinks some thing else – this means that they are both
wrong!)
A mistake may render a contract VOID



1) COMMON MISTAKE (analysis of each type)
E.g. from Roman-Dutch Law (good one):
o A sells B a sealed container of oats. They both believe that it contains rice or there is rice
inside the container. They want to buy and sell rice.
o Parties are in agreement, want to buy and sell rice, but they are both mistaken – selling oats
(THE CONTRACT WILL THEREFORE BE VOID)
o If the contract is void, both parties must restore what was given and received
If one party chooses not to give back, then he can be sued under the law of unjustified enrichment
In order for a common mistake to render a contract void, the following requirements must all be
met:
1) Must be a mistake
2) Must be common to both parties
3) Must be material
4) Does not have to be reasonable (NB – if one or more of the requirements are missing
and there is a mistake, the contract is still VALID!!!)
(^)Material Errors (these apply to common, unilateral and mutual mistakes!!)
1) Mistake as to the nature of the transaction (might sound bizarre – but people make mistakes like
confusing a sale and lease agreement – which is the nature of the contract)
2) Mistake as to the subject matter (car or bike purchase)
3) Mistake as to the identity of the parties – but only where the identity is an essential ingredient of the
contract (marriage, adoption and employment)
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e.g. Newspaper – buying from the wrong person – unilateral mistake – does not make the contract
void!!
4) Mistake as to the attribute or quality of the subject matter – only material if mistaken party believed
that it was a term of the contract that the article had the particular attributes or qualities
Add note: in the textbook – pg 64 – they say that a mistake as to the attributes and qualities is not
material – this is correct – but is material if mistaken party believed that it was a term of the contract
(therefore, no conflict – just a simplified view in the textbook)
Remember – we are looking at the factors that can prevent or taint a valid contract
Void contract = no contract at all (does not exist)
Voidable contract = valid – but defect in consent – and that person has a right to accept or
alternatively recent the contract
e.g. A buys a chair from an antique shop, and she believes that it is a term of the contract that this
chair is an antique. It turns out not to be an antique, i.e. it is just a normal wooden chair – this means
that it is a material mistake and so the mistake renders the contract void.
e.g. 2 – A goes to a flea market (Greenpoint) and she sees some wooden chairs selling for R20 each.
She buys one. She thinks it may be an antique worth R2 000 and that she is getting a great deal. It
turns out to be old wooden chairs. There is a mistake. It’s a mistake as to the qualities. It is not
material and therefore the contract is valid.
The following is not a material error:
1) An error in motive:
e.g. You think that you have lost your watch. So, you go and buy a watch to replace it. You come
home and you find your watch. The reason to purchase that watch was to replace the old one,
therefore an error in motive (can’t take watch back legally) and therefore the contract is valid
[sometimes, jewellery stores have a return policy; however, legally the contract is still valid]
Unilateral and mutual mistake
o A unilateral mistake – only one party is mistaken, the other one is not (very different from common
mistake)
o E.g. Maritz v Pratley 1894 SC (Unilateral Error) – this case is not in the txtbk and SC = Supreme
court = High court
 There was an auction. Lot no. 1208 (item in auction) was a marble mantelpiece – the label
was very small and placed in an obscure place (“size 5 font”). On top of the mantelpiece
stood a mirror – that was Lot no. 1209 – again obscurely labelled with small print
 The auctioneer put the marble mantelpiece up for sale and he sold it to Pratley
 Pratley was mistaken – can see how this is possible with the labelling – he thought he was
buying both at this price
 The court held that the contract was void – material error – mistake of subject matter and
also a unilateral error
o A mutual mistake:
o E.g. There is a tin of oats (similar example from common error, but different version). A sells it to B,
thinking that it contains rice. B buys it, and he thinks that it contains corn – mutual mistake – BUT
they are NOTE making the same mistake – this time they are BOTH WRONG!
o In order for a unilateral and a mutual error to render a contract void, all of the following
requirements must be met:
1) Must be a mistake
2) Identify if unilateral or mutual (NOT COMMON)
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3) It must be material (see list under common mistake (^)) – i.e. nature, subject matter and
quality or attributes of the item
4) Must be reasonable (no like common mistake!) i.e.
An iustus error or justus error (I and J were interchangeable in Roman Times – as they
couldn’t chisel curves for the street signs)
An error will only be iustus in the following two situations:
1) If the other party (the one who is NOT mistaken) knows or ought to have known that the mistaken
party had made an error, [must look at other person’s perspective] – then it is iustus – other party
being unreasonable
e.g. Horty Investments v Interior Acoustics 1984 (3) SA 537 (W) – NB e.g. not in textbook and
remember that the W can hear appeals (from the Magistrate’s Courts only)
o Horty rented out business premises to interior
o They were verbal negotiations (common)
o They reached agreement (price, length etc) and the contract was reduced to writing
o Clause 1 of the contract stated: the lease will begin on the 1st May 1981 and continue for a period
of 2 years. Still with clause 1, during that period no notice of termination can be given
o Clause 2 says that notice may not be given before the 1st May 1993 (not 1983 – this means 12
years! – they make a mistake / typing error). The date error – obviously Horty was unhappy and
upset – can’t kick them out when he wanted to
o Interior says that they did think it was going to be 12 years
o Horty applied to the court to have the contract declared void – because it was a mistake.
o Horty was arguing that they themselves were mistaken – although the contract said 1993 – it
means to say 1983
o The court had to decide – is this a justus error?
o The court held that Interior ought to have known that Horty made a mistake – because Clause 1
said that it was only valid for 2 years.
o Interior was hence acting unreasonably and Horty was reasonable
2) If the other party misled the mistaken party
e.g. gold interior of plastic pen – material – not due to subject matter – due to qualities – void
contract – deliberately misleading
If both made a mistake – common mistake – even if obvious
Rectification: (STILL PART OF MISTAKE)
Can occur in the following circumstances:
1) Written Agreement
2) At the time of contracting verbally (i.e. during negotiations) the parties were of the same mind
3) There was no mistake in their consensus whether common / unilateral / mutual mistake
4) However, when the contract is later reduced to writing, the written document contains an error and
does not conform to the terms of the verbal agreement (like the Horty Investments case)
In such a case, the parties may apply to the court for rectification of the written agreement, so that it
conforms to the terms of the verbal agreement.
Rectification can occur at the request of either party
Party applying for rectification must prove the following things:
1) That the written agreement does not accurately reflect what the parties agreed upon or what they
both intended
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2) What the terms of the written agreement should be (prove to the court what the terms should be)
3) There will be no prejudice to 3rd parties (A and B have a loan agreement, A owes B R100 000, C
stands as surety for A – then B says that is should actually be R1 000 000 – not accepted!)
Back with Horty Investments v Interior Acoustics 1984 (3) SA 537 (W)
o Before setting aside the contract on the basis of mistake, Horty applied for rectification
o They failed on the rectification argument because they could not prove that it is what “both”
parties intended (Interior thought was a 12 year lease)
4) On the face of it (on the actual paper), writing sets out all the material terms of the contract (only if a
requirement that the contract is in writing is met)
e.g. contracts for the sale of any land must be in writing – material terms include price, description,
parties involved in the sale (who is selling and who is buying) etc. If the price is omitted, can’t have
it rectified as (4) does not apply, and the contract is declared void. BUT if the contract has a price of
R10 instead of R10 000 then (4) DOES APPLY and the contract can be rectified.
HENCE – MISTAKE ALWAYS RENDERS A CONTRACT VOID!!
ii) Misrepresentation (NOT COVERED IN TEXTBOOK!)
o Renders contract “voidable”
o Valid contract – misrepresentation in consent and person has the right to abide or recint
o Defn – A misrepresentation is a false statement of fact made by one person to another, with the
intention of inducing the other party to enter into a contract, and which actually induced him to do so
o There are different types of misrepresentation:
1. Fraudulent Misrepresentation
This one is made without any belief in its truth (i.e. a lie in layman’s terms)
2. Negligent misrepresentation
Here, the person believes in the truth of what he is saying, but he is being careless and the
information is incorrect.
e.g. the sale of a car – 1.5 l engine not 2 l engine – negligent – should have looked at the
service book for exact specifications of the vehicle
3. Innocent misrepresentation
This is neither fraudulent or negligent – completely innocent
e.g. A tells B that a painting is an original Moné. In 1935 B sells it to C and they also both
believe that it is an original Moné. In 1990, C sells it to D for $20 million USD – C tells D
that it is the genuine Moné and he believes it. This induces the sale, as D wants the original.
It turns out that it is actually a fake; but it is a brilliant forgery; and only one scientist can tell
that this is a forgery in Eastern Russia. This is an innocent misrepresentation between C and
D.
o Forms of misrepresentation (this applies to all 3 types – fraudulent, negligent and innocent…)
1) Verbal / written misrepresentation
2) Misrepresentation by conduct
e.g. Trotman v Edwick 1951 (1) SA 443 (A) [This case is on appeal, and A = AD =
Appellate Division = now the SCA]
 Trotman sold a piece of land to Edwick
 The land was surrounded by a boundary wall
 Two sevenths (2/7) of the land, enclosed by the wall, actually belonged to the
municipality (very misleading)
 Trotman knew that in the future, that that piece of land (2/7’s) was going to be used to
build a road
 During the negotiations, Trotman said to Edwick – “look at the extent of this land!”
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 He then paced up to the boundary wall and by his conduct he created the impression
that even the 2/7’s was his to sell
 This is a misrepresentation by conduct – FRAUDULENT
3) Misrepresentation by silence
 The general rule in SA is that there is no duty to speak or to disclose information
 But there are exceptions: (in these few exceptions, there is a duty to speak and if you
don’t it is a misrepresentation by silence!)
a. Where the person had told a “half truth” and creates a misleading impression
e.g. Marais v Eldman 1934 CPD 212
 Eldman sold a farm to Marais
 He told him that he had pumped a borehole on the farm for 3 years and it
never failed (very NB to have a borehole on a farm as it is very cost
effective)
 This was the truth… BUT:
 Eldman didn’t mention that this was 14 years ago and the depth of the
borehole had changed from 124 to 104 feet (had a duty to tell him)
b. Where he has, by his conduct, prevented the other party from discovering the
true state of affairs: happens very often (NEXT CASE – EXTREME e.g. of
this possibility)
Dibley v Furter 1951 (4) SA 73 (C)
 Furter sold a farm to Dibley.
 Next to the farmhouse there used to be a graveyard
 A while before the sale, he had taken down the tombstones or headstones
and he ploughed over the graveyard
 There was no longer visible traces of it
 Should he have mentioned it?
 He failed to mention to Dibley that there was a graveyard
 By his conduct, he prevented Dibley from finding the true state of affairs
c. Where the person has, by an earlier statement or conduct, given the other
party a certain impression and now the circumstances have changed
e.g. You live in a block of flats and now you decide to sell you flat. At that
point in time there is no perimeter security around the block. But you say to
the potential buyer that the Body Corporate will put up a wall. But during the
sale going through – there were insufficient funds and so the circumstances
changed.
d. Common law rule that a seller must disclose latent defects (i.e. defects that are
not obvious) – hence a latent defect will be a state or condition of the brake
pads of a car, but a dent on a car is not latent – as you should see it as a buyer!
o Requirements for a misrepresentation to render a contract voidable (This applies to all the kinds
of misrepresentation – verbal, conduct, etc etc and ALL THE REQUIREMENTS MUST BE
MET)
1. The misrepresentation was made with the intention of inducing the other party to enter
into the contract (includes innocent misrepresentation – “intention” no always so bad!!)
2. Must be made by the other party to the contract (obvious!) – other person thinks the
wrong thing
3. The misrepresentation did actually induce the contract i.e a causal misrepresentation.
A causal misrepresentation = will render a contract voidable, if the other requirements are
met and this actually DOES induce the contract. This is different to an incidental
misrepresentation (pay more etc) which DOES NOT make a contract voidable.
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An incidental misrepresentation does not induce the person into entering the contract.
They would have contracted anyway. Sometimes an incidental misrepresentation may
cause the person to contract on less favourable terms (e.g. may pay a higher price for
misrepresentation, but still would have had to contract – for example a pen can be sold
for R20 and it is instead sold for R50 – under the law of delict the person will have to pay
back R30). The contract is still not voidable (still would have entered into contract), but
the person may be able to claim for damages in delict (suffered a loss, therefore delict)
Bird v Murphy 1963 (2) PH A42 (D) [PH = Prentice Hall Publishers – sometimes the law
reports are published by different publishers etc]
 Mr Bird has long admired Mr Murphy’s car.
 Bird decided that if he could get the car for R2 600, he would take it! (all by
himself – he decided this on his own, without even consulting Mr Murphy)
 He then approaches Mr Murphy and Murphy agrees to sell it for R2 600 (his
dream comes true!).
 Murphy told him that the car was a 1957 model, but in fact it was a 1953 model
(he lied).
 When Bird discovered the truth, he tried to set the contract aside on the basis of
misrepresentation (incidental not causal)
 Hence, the contract is voidable, as he was going to buy the car anyway
4. The misrepresentation was MATERIAL [NBNBNBNBNBNBNB!!!!]
Material here, has a different meaning to material under mistake
The misrepresentation must be one of such a nature that it will be likely to induce a
reasonable person to contract
Lourens v Genis 1962 (1) SA 431 (T)
 Lourens told Genis that his son (Louren’s) has special X-ray eyes. He said that his
son could see through the ground and see that there is water underneath. On the
strength of this information, Genis entered into a contract with Lourens and his
son, in terms of which the son will use the X-ray vision to point out where to sink
a borehole and in return, will get paid a large sum of money.
 The son pointed out a place and Genis paid them and there was no water
 Genis paid for the borehole and paid Lourens!
 Contract was not voidable as a reasonable person would not have believed this,
therefore not material, hence this is fraudulent misrepresentation (this is Sad – as
Genis lost a lot of money)
 He could actually get his money back under delict or breach of contract
5. The misrepresentation was a false statement of fact
 To render a contract voidable, the misrepresentation must be a statement of fact,
not an opinion or a “puff”
 Fact – 1953 but 1957 model car
 Opinions:
 An honest opinion, which later turns out to be wrong, will not render a
contract voidable (sharing of opinions regarding prices of things is a
common e.g.)
 Where a person gives a dishonest opinion (say its fair when they know
that it’s not), this is seen as a misrepresentation of fact and it may render a
contract voidable if all the other requirements are met!
The Law regards the state of a person’s mind as fact. When you give a
dishonest opinion, you are misrepresenting the state of your mind (false
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state of your mind), therefore, you are misrepresenting a fact and hence
the contract could be voidable

Puffs:
 A puff is someone who is “singing the praises” of a particular product
 An e.g. of a puff – car salesman – worlds like: “wonderful car, elegant,
can go very fast and smooth ride on the road!” or “it is reliable” (no
facts!!) or an estate agent: “wonderful, cosy, home etc” = all salesman talk
 All of these CANNOT render the contract voidable
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Consequences of misrepresentation
1. Contractual Remedies (applies to fraudulent, innocent, negligent, verbal, written and implied
misrepresentation etc)
 If all 5 requirements have been met, then the contract will be voidable
 This means that the wronged person has an “election”
 Their choices are – they can recind (cancel) and claim restitution (not damages – in this case
each give back what they gave to each other under the contract) or they can abide by the
contract
 If the contract did not meet the requirements, then the contract is valid (X-ray e.g.)
2. Delictual Damages
 In the case of fraudulent and negligent misrepresentation (not innocent – no delict –
therefore, can’t claim for damages), delictual damages can be claimed in the following
circumstances:
1) In addition to rescission and restitution (cancel and get back what you gave under the contract),
if the contract is voidable (can still be damages on top of this – therefore not against the law
2) If the contract is voidable, and the person abides
3) If the contract is NOT voidable (X-ray case – couldn’t get out of the contract) – no contractual
remedy – but can claim for delictual damages
Relationship between mistake and misrepresentation (Partly answers tut D – pg 16)
1) Mistake renders a contract void
2) Misrepresentation renders a contract voidable
3) If the misrepresentation leads to a mistake, then the person could get out of the contract on the basis
of mistake, provided the requirements are met, and it will therefore be void (material and Justus
error, are the requirements!)
4) It is very common for contracts to contain clauses to the effect that any misrepresentations will not
be actionable (we may have lied, misrepresented – but contract completely valid – looked at in more
detail in the terms in the contract section)
5) If the misrepresentation resulted in a mistake, and the requirements for a mistake are met, then the
contract would be void (contract doesn’t exist anymore) and so the clause would not apply or
doesn’t exist and the person would be able to avoid the contract on the basis of mistake!
Allen v Sixteen Stirling Investments 1974 (4) SA164 (D) (this case is very famous – has had 3 court
battles – eventually ending up in the SCA, who passed the same judgement as the D, but both contrary
to the judgement of the N)





Allen bought a piece of land from this company, Sixteen Stirling Investments
It was part of a development and he bought it “off-plan”. When they went to the building site
(Actual, physical sight), the estate agent pointed out the wrong piece of land that was allocated to
him.
The pointing out, by the agent, was a misrepresentation (by conduct)!
When Allen discovered the misrepresentation, he wanted to get out of the contract (quite significant
reasoning, as he wanted a house by the sea and instead got a piece of land behind the land he had
thought he purchased!)
But, there was a clause in the contract which said, that any misrepresentations would NOT be
actionable. So Alllen argued, that the misrepresentation lead to a mistake (due to subject matter)
and the mistake was material and Justus (met the requirements); and therefore the contract is void,
and so he could actually get out of it! Sixteen Stirling Investments (seller) stated that the clause
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prevented Allen from relying on the misrepresentation. The court held that they weren’t relying on
the misrepresentation, but they were actually relying on the mistake, therefore, the contract is void /
does not exist.
 During the time of this court case, the Allen still owned the land, and so he has to pay rates and other
costs during this period, until a final verdict arises from this battle in court!
(END OF misrepresentation!!)
(iii) Duress and undue influence
Duress
a) Here a person is induced to enter a contract due to violence or intimidation
b) The contract will be voidable, only if the following requirements are met:
1) There must have been a threat of considerable harm to a person, his family or his property
(does not include friends etc!)
2) The threat or harm must have been imminent or inevitable (e.g. if somebody says to you – “If
you don’t buy my car in 20 years time, I will come and kill your wife!” – this is NOT
imminent or inevitable…
3) The threat must have actually induced the person into entering the contract or to contract on
less favourable terms
4) The threat must have been unlawful or contra bonos mores – against public policy (unlawful
threat – murder) or good morals (matters against the values of society)
5) The fear must be reasonable (e.g. 5 year old Rugby player – reasonable fear?)
Undue Influence
 This is where one party to a contract is able to influence the other party to such a degree that they
cannot for an independent opinion (no violence, threat, inherent intimidation – more of a subtle
manipulation or influence)
 To render the contract voidable, the following requirements must be met:
1) One part exercised an influence over the other party (under historic case law or judicial
precedent – this was typical among doctor / patient relationships – e.g. patient is dying and
there is a bribe for life by doctor, or between an attorney and his or her subject, and there is
strong evidence among religious leaders and their congregants! Can also be marriage – but
not ICOP!
2) The influence must have weakened the other party’s powers of resistance and make him
easily intimidates
3) The influence must have been exercised in an unscrupulous manner (not done with the
person’s best interests in mind!)
4) The influence must have induced the wronged party to enter into a contract which is
prejudicial to him AND which he would not have done of his own free will
END OF VOID AND VOIDABLE CONTRACTS!
1.3 Legality
It is a requirement for a valid contract that it must be lawful
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a) Statutory Illegality:
 An agreement prohibited by statute (acts of parliament or legislation) is unlawful and it will
generally be void – But, not always!
 So, you may have a contract which is illegal, but valid, and the courts will enforce it (strange
situation!)
 The issue is whether the legislature intended for that agreement to be illegal “as well as” void
 To determine this, the court look at several factors – we are not going into factors in intense detail
but there are 2 e.g’s below to explain
 E.g.1
o Let’s say that it is an offence to sell liquor without a licence.
o If one does so, then there will be a fine or the establishment will be closed (restaurant / bottle
store) or BOTH
o A owns a bottle store and has no liquor licence. Over a period of 4 months before he was
found out, he sold alcohol to 50 000 customers!
o Contracts are illegal – but valid (impossible to track down customer and won’t serve any
purpose) and A will be punished for the crime and his shop will be closed down (sale
contract not void)
o The contract does not defeat the purpose of legislation – as there is no legislation prohibiting
the drinking of alcohol and hence the sale agreements between A’s bottle store and the
customers are not void – as his aim is not to stop people from drinking
 E.g. 2
o There is a statutory prohibition against trafficking in ivory and endangered animals
o A sells B 5 tons of ivory
o The purpose of this legislation is to protect these species (prevent the culling of endangered
species)
o The contract will therefore be void here – as it defeats the whole purpose of the legislation
(doesn’t stop the killing of these species)
o Add note: In SA, it is now illegal to even own any ivory!
 Therefore, a contract that is illegal, is not necessarily coid
b)




Common Law Illegality:
All contracts that are illegal under common law are automatically void
These are agreements which are contra bones mores (against good morals or public policy)
There is no definite list of contracts that are against public policy, because the concept of good
morals changes with the times (e.g. a couple of years ago, it was actually moral to have slaves – now
this is no longer moral!)
There are, however, certain contracts that will always be against certain morals:
(Prostitution used to be on the list – but now with the whole notion to legalise prostitution, this is not
as bad anymore!)
1) An agreement to commit a crime or a delict (e.g. if someone hires someone to murder wife –
always bad no matter what time period we are referring to!)
2) An agreement which undermines the institution of marriage (an existing marriage is regarded as
sacred)
Friedman v Harris 1928 CPD 43
­ Mr Harris was a married man
­ Miss Friendman was an unmarried woman
­ They had an affair and Miss Firendman wanted to sue Mr Harris for damages for seduction
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­ Harris agreed to settle with her, with the payment of £1000 (a lot of money in 1928)
­ He later approached Friendman and he said – if you give me the rest of the £1000 that I gave
you (which was £800 pounds at that time), the I will leave my wife and marry you
­ Miss Friendman agreed and she paid back the £800 and obviously, Mr Harris did not leave
his wife
­ Miss Friendmen decides to sue him again, and she asked the court to order that he honours
the agreement, leaves his wife and marry her
­ The court held that it is an illegal agreement, as it goes against good morals (undermining the
institution of marriage) and hence it was void – This means that Mr Harris was not liable to
honour the contract, and therefore cannot be accused of breach!
­ In this case, the law of unjustified enrichment DOES NOT APPLY TO ALL ILLEGAL
CONTRACTS – therefore, Miss Friendman leaves with nothing
3) Unconscionable agreements:
­ The general rule is: an agreement that is unfair is upheld by our courts
­ It is not the courts job to assist a bad bargainer (not a nanny!)
­ However, in the extreme cases (really extreme), where the contract is grossly unfair, the
courts will declare that it is illegal and void
Baart v Malan 1990 (2) SA 862 (E) (Textbook – pg 78)
 Mr Baart and Mrs Malan were once married, and they got divorced
 In terms of the divorce agreement, Mr Baart got custody of the children
 Mrs Malan had to pay maintenance to Mr Baart for the children which was here gross
monthly salary (before tax) plus her annual bonus (school teacher) for 20 years.
 She applied to the court later to have the contract declared void
 The court held that the agreement was illegal and void (against public policy), and the
reason why, is that it was illegal and against public policy – she derived no benefit from
her employment and therefore was a slave * (court shouldn’t do this – but (E) had not
made the correct decision in the first place)
c) Illegality and its effects on contracts:
 This applies to contracts that are void due to statutory and common law illegality (BOTH!!)
 If a contract is void for any reason other than illegality, then each party can recover what they gave
under the law of unjustified enrichment
 Where a contract is void due to illegality, it is different, because the In pari delicto rule applies (in
equal guilt)
 What this means, is that if the parties are in equal guilt (both acted illegally), then they may NOT
recover what they gave as a result of the performance of the requirements in the contract (FORM OF
PUNISHMENT FOR ILLEGAL ACTIVITY!)
 E.g. A hires B to kill his wife and B doesn’t do it – A has already given R1 million to do it and B
keeps the money (A LOSES OUT!)
 If the parties are NOT equally guilty, then the part who did not act illegally can recover his
performance under the law of unjustified enrichment
 E.g.
o It is an offence to sell gas without a licence
o It is not an offence to buy gas without a licence
o The legislation says that if you sell gas without a licence, then the contract will be void
o A sells a canister of gas to B for R1000
o A does not have a licence – the contract is illegal and void
o Are the parties in pari delicto?
o The parties are not in pari delicto
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o So B can claim back her R1000 and she can keep the gas canister (she is not unjustly
enriched – punishment to seller – want to punish him for illegal conduct)
d) Severing invalid terms:
If illegal terms can be taken out of the contract, then the contract can still be valid – as long as it still has
meaning and substance once these terms have been removed (i.e. must be able to remove) (e.g.
Friendman case – can’t do this!)
e) Unenforceable contracts:
These contracts are not illegal (they are valid), but the courts may refuse to enforce them
(Note! – in textbook on page 80-81, they speak about these contracts being VOID – INCORRECT –
they are just not enforceable by the court, hence the name)
1. Contracts in restraint of trade (sign if employed in asset management in large firms etc)
i. These are agreements where an employee agrees with his employer that he will not work
for a competitor after he has left their service (contract is signed with the contract of
employment – this contract alone is about 80 pages long!)
ii. An agreement between the seller of a business and the buyer, that the seller will not
compete with him (e.g. somebody who owns a café, only one in the suburb, sells to Mr B,
who buys it because there is only one there in the suburb, and for some time after this, the
seller cannot open another café within a certain radius from the sold one!)
 These agreements are valid and are generally enforceable, but the courts will refuse to
enforce them if they are unreasonable
 The owness of proving that it is unreasonable and unenforceable lies on the restrained person
(NB – one person against a corporate!!)
 The courts take the following factors into consideration to decide if unreasonable or not on a
balance of probabilities (not requirements – factors, therefore all of these do not need to be
satisfied!!) :
1) Did the restrainer have an interest deserving protection and did he do no more than
protect that interest
E.g. An electronics co. hires a scientist called A. His job is to develop a new
cellphone that can do amazing things. He has a restraint which says that if he leaves,
he can’t work for their major competitor for the next 5 years. This is reasonable
(financial interest) = doing no more than protecting interest
2) Would the restrained person be unduely prejudiced if it were enforced?
e.g. continuing with the scientist example – restraint now ways that the scientist can’t
work as a scientist anywhere in the world for the next 20 years – unreasonable – can
work in a pharmaceutical company – won’t affect cellphone!!
3) Did the restrainer pay a large sum of money for the restraint?
e.g. scientist can’t work for 20 years anywhere, paid him £50 million – reasonable…
Add note: restraint does apply whether fired or head-hunted!!!!
4) When enforcing the restraint, would deprive the public of valuable services – e.g.
limiting heart surgery from Chris Barnard that will help individuals across the world
2. Gambling contracts
Not covered anymore – because mostly governed by legislation now – i.e. if you win, must be pd
1.4 Possibility of Performance (another requirement for a valid contract)
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1. Initial Impossibility
 The general rule is that a contract is VOID if it is impossible of performance from the moment that it
is entered into
 In order to render the contract void, the impossibility must be objective
 Objective impossibility – impossible for anybody in society to perform – if it is impossible due to a
person’s own personal situation or fault, then it is NOT objectively impossible. So the contract will
NOT BE VOID and the person will be in breach of contract if he doesn’t perform (like Mrs Tyebi –
Tut 3 – can’t get car from Bob, therefore, due to own personal fault – can be sued for breach!)
 There are 2 types of objective impossibility:
i. Objective physical impossibility
ii. Objective legal impossibility
i) Examples of Objective physical impossibility
 A agrees to transport B to Mars (nobody in society can do this). Therefore, it is objectively
physically impossible and hence VOID (A won’t be in breach if he doesn’t take B to Mars!)
 A sells his holiday cottage to B. Unknown to both of them, the cottage has been swept away in a
flood (there is no longer a cottage!) – objectively physically impossible to transfer to B’s name –
therefore VOID
All Acts of God (vis maior) – Hurricanes, earthquakes etc are always objectively impossible (if house is
burnt down – depending on cause of the fire – usually NOT AN ACT OF GOD!)
 X buys a house from Y for R500 000. He is unable to raise the finances and hence it is
impossible for him to pay the purchase price – this is not objectively impossible – due to the fact
that it is his own personal fault and circumstances (somebody else can actually purchase the
property). Contract will NOT BE VOID and X will be in breach when he doesn’t pay.
ii) Examples of Objective Legal Impossibility:
 A agrees to sell B the seabed (where Nemo lives!). This is impossible because nobody actually
owns the seabed (not even countries) and therefore someone can’te sell it – objectively legally
impossible and contract is VOID and therefore A won’t be in breach
 A sells his holiday cottage to B. There was an error and A actually doesn’t own the cottage
(happens often where there is an error in the title deed) – this means that he cannot sell it to B.
This is NOT objectively impossible – as someone else (the actual owner) in society can still sell
the cottage to B. Therefore, it is a VALID CONTRACT – A can be sued for Breach (e.g. where
Bob sells the car in Tut3)




If a contract is objectively impossible (either physical or legal) then it will be VOID, and so both
parties are excused from performing (Therefore, there can be NO BREACH!)
However, if one party has guaranteed his performance, then he is bound by that guarantee and even
if it is objectively impossible, he can be sued for breach!
E.g. if A guarantees the Mars trip to B – bound for breach of contract (NBNBNBNBNBNB**)
Add note: No contract is automatically guaranteed, unless it is clearly stated in the terms of the
contract!!
2. Supervening Impossibility:
 Here the contract becomes impossible AFTER IT HAS BEEN ENTERED INTO
 The contract will come to an end (*not necessarily becomes void – see txtbk) as soon as it is
impossible and there can be no breach after that point
 Again, it must be objective physical or legal impossibility
 Examples of Supervening Objective legal impossibility:
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A sells half of his farm to B. Between the times that the contract is concluded and the land is actually
transferred (approx. 3 months), the government passes a new law. The law prohibits the subdivision
of agricultural land (currently in existence in SA). Therefore, A cannot transfer half of his farm to B
– cannot subdivide the land (this is legal impossibility [govt] and objectively impossible [nobody
else can do it] and hence the contract comes to an end and A is not in breach!
Benjamin v Meyers 1946 CPD 655 (textbook pg132)
Mr Meyers rented out a petrol station to Mr Benjamin. In terms of the lease contract, Benjamin had
to stock and sell certain brands of petrol at all times. Sometime later, B was convicted (by the court
for a crime) of contravening petrol regulations (petrol is heavily regulated). The court prohibited him
from actually stocking or selling petrol at all. Now there is no petrol at the station. Meyers sued him
for breach (term of the contract to stock and sell certain brands of petrol at all times!). Benjamin
argued that it was objectively legally impossible for him to stock petrol and to sell it; and therefore
he is NOT IN BREACH! The court held that it was NOT objectively impossible, as somebody else
could stock it, and t=hence was WAS ACTUALLY IN BREACH.
Add note: If breach – lease will still continue
 Examples of Supervening Objective Impossibility:
o Physical Impossibility here is judged according to the standards of the reasonable person in that
business community
o E.g. A agrees to deliver 100 tons of bricks to B (a lot of bricks). A is in Cape Town and B is in
Johannesburg. Just before the delivery, the roads between Cape Town and Johannesburg are
flooded and cannot be used (vis maior – Act of God). It is possible to airlift the brick from Cape
Town to Johannesburg; but a reasonable brick deliverer would not airlift it (assume that railing
the bricks down is NOT AN OPTION!). It is therefore, objectively physically impossible and A
is not in breach
o E.g. 2 – A modelling agency hires a model called Pam to do a show. They are going to pay her
R200 000 to do the show. On the way to the event, she has a very bad car accident, and it was
not her fault. She ends up in Acoma, and she has very bad burn wounds all over her body
(obviously she can’t do the show). The agency has to find another model at the last minute.
Thandi, another model, agrees to do it; but because it is the last minute – must pay her R500 000!
When Pam wakes up from acoma, they sue her for R300 000 (500-200) for breach of contract.
She argues that she is not in breach; nut that the contract came to an end because of supervening
objective physical impossibility. Look at the facts here – physically impossible is NOT
OBJECTIVE, as another model could still do it! It is her own personal situation and hence she is
in breach and can get sued for R300 000. Add note: She could claim damages from the person
who caused the accident. This is the law as it stands for tests and exams – it is based on
Roman-Dutch Common Law [don’t listen to the textbook in this case)
o General rule: The effect of supervening impossibility, is that the contract comes to an end; both
parties are excused from performing (objectively legally or physically impossible) and there can
be NO BREACH!
o There are 2 exceptions: (looked at in more detail in the section handling sale contracts)
i.
Where a person is guaranteed performance
ii.
In contacts of sale, where the buyer bears the risk of performance
e.g. A orders and buys a Lamborghini from B dealership. It is a special kind of Lamborghini (one of
a kind) and he pays R3 million. It is sitting in the showroom – the night before it was delivered to
him, there was an earthquake (act of God – vis maior) and the Lamborghini was destroyed
(objectively physically impossible for the dealership to deliver Lamborghini and supervening – All
Acts of God are objectively physically impossible). Normally the contract comes to an end and A
wouldn’t have to pay. But, contracts of sale are the exception, and A will have to pay the R3 million
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even if he doesn’t get the car (if he has only paid a deposit for the car, then be must still pay the
balance = full purchase price).
1.5 Formalities
Textbook – pgs 84 and 85
A formality is simply a formal or technical requirement with which a contract must comply in order for
the contract to be valid and binding. Typical examples of formalities are that the contract must be:
 In writing
 Signed by both parties
 Signed by witnesses
 Signed in front of an attorney or notary public (an attorney with special qualifications)
 Registered in the deeds office within a given period
­ As a general rule, contracts do not have to comply with any formalities in order to be valid and
binding contracts.
­ Most contracts do not, in other words, have to be recorded in writing or signed by both parties and
by witnesses in order for them to be valid. Verbal contracts are therefore just as valid as written
contracts
­ Naturally, the fact that a contract is in writing, provides helpful evidence of the actual terms of the
contract should a dispute arise between the parties, but, it is not a prerequisite for validity
­ This is the general rule under common law, but Parliament has introduced exceptions to the common
law rule in respect of certain types of contracts.
­ For example, in relation to contracts for the sale of immovable property, ante-nuptial contracts and
credit agreements, Parliament requires that the contract comply with specific formalities. The
formalities, and the consequences should the parties fail to comply with those formalities, are set ou
in the relevant Act of Parliament in each case.
­ The Alienation of Land Act 68 of 1981 states that contracts for the sale of immovable property
must be:
o Recorded in writing
o Signed by both parties.
­ If these formalities are not complied with, then the contract of sale is void
­ The Deeds Registries Act 47 of 1937 says that ante-nuptial contracts must be:
o Recorded in writing
o Signed by both parties in front of a notary public
o Registered in the deeds office within three months of marriage
­ If these formalities are not complied with, creditors may treat the couple as though they are married
ICOP, although the ante-nuptial contract will be valid and binding as between the married couple
themselves
­ The recently repealed Credit Agreements Act 75 of 1980 contained numerous formalities with
which contracts subjected to the Act had to comply, including that the contract had to be:
o Recorded in writing
o Signed by both parties
­ The Act expressly states that failure to comply with the formalities did not render the contract void,
but did constitute a criminal offence. As with contracts prohibited by statute, whether a particular
contract must comply with any formalities, and what the consequences of non-compliance will be,
depends on Parliament’s intention. The court must infer Parliament’s intention in this regard in the
same way and on the same basis that it infers Parliament’s intention in relation to instances of
statutory illegality. [End of formation of a valid contract!!].
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2. Contents of the Contract
2.1 What are the terms of a contract?
 The terms are the provisions (the actual writing etc) of a contract
 There are various classifications of terms:
a) Material / Essential terms (material and essential are synonyms for each other)
 These are terms which are the essence of the contract (e.g. contract of employment – payment
and job description and for sale of land – description of parties, description of land and the price)
 Terms that are not material, are called non-essential terms
 Whether a terms is material or non-essential, it may be expressed or implied (very logical)
b) Express terms:
 An express term, is a term that the parties have expressed in words or writing (as all contracts do
not need to be in writing)
 Focus on this section is on standard form contract
 These are the types of contracts where you sign for your car to be serviced or repaired, or if you
go to hospital to be operated on – signed. Or when you send your clothes to the dry cleaners –
ticket given is a form of a standard form contract
 When looking at the standard form contract – must distinguish between signed and unsigned
contracts
Signed contracts
 With signed contracts, the caveat subscriptor rule applies (caveat = beware in English and
=warning direct Latin translation, and subcriptor is “he who signs” – therefore entire rule means he
who signs beware!
 What that means, is that if a person signs a contract, then they are bound by that contract, even if
they haven’t read it or understood it [logical] – they simply say I agree, and sign!
 Famous case (1st case where this rule was applied = judge derived it from Roman-Dutch Law)
George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A) [the A is the SCA or the Appelate Division]
 Mr George hired a room at the Fairmead Hotel in Cape Twon
 Upon arrival, he was asked to sign a hotel register, that contained terms and conditions which
was the contract between Mr George and the hotel
 He did sign it, but he didn’t read it at all
 One of the clauses said that the hotel was not liable for any loss suffered by the guest
 Mr George had some things stolen from his room and so he sued Fairmead hotel under the law of
delict (negligence).
 He says that the clause did not apply to him because he did not read the contract
 The judge said that the contract applied by caveat subscriptor and hence the hotel was not liable

The caveat subscriptor used to be very strictly applied; but over recent years, the courts have
developed certain exceptions
 Situations where the caveat subscriptor will not apply:
1. Where the other party knows or ought to have known that the signatory is mistaken as to the terms or
the nature of the document (very similar to mistake – justus error – REFER BACK TO NOTES
AND LOOK AT REQUIREMENTS FOR A JUSTUS ERROR!!! - NBNBNBNBNB)
Dlovo v Brian Porter Motors Ltd 1994 (2) SA 518 (C) – almost 50 years after the George v
Fairmead case!!!!) – see textbook page 66
 Mrs Dlovo took her car to be repaired at Brian Porter Motors Ltd. She was asked to sign
what they called a “job card”. And they told her it was to authorise them to do the repairs.
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




Mrs Dlovo signed it without reading it. There was actually a clause on the card which said
that the company would not be liable for any loss or damage to the vehicles.
The car was stolen from the premises overnight
And while it was stolen, further damage was incurred of R8000 (thieves had an accident etc)
The car was later retrieved, and Mrs Dlovo sues Brian Porter Motors Ltd for R8000.
The company argued that they were not liable because of the clause in the contract that Mrs
Dlovo had signed under caveat subscriptor.
The court, however, found in favour of Mrs Dlovo for the following reasons:
1) The company ought to have known that she was mistaken as to the nature and terms
of the document. She was told that she was signing a job card to authorise repairs.
Therefore, she didn’t reasonably think it was a document that contained contractual
terms and therefore caveat doesn’t apply
2) The contract was void due to mistake (all the section overlap in this example – like
the pieces of a puzzle). Mrs Dlovo was mistaken as to the terms and nature of the
document and her error was therefore a justus error.
Addnote: in the textbook – the coveat subscriptor is in the same section as mistake
2. Where the other party knew or ought to have known that the terms did not reflect the signatory’s
true intention:
Spindrifter (Pty) Ltd v Lester Donovan (Pty) Ltd 1986 (1) SA 303 (A) [page 67 – textbook] – the
case is on appeal
 Spindrifter (Pty) Ltd is a clothing manufacturing company.
 It was run and owned by a Mr Levinson
 Lester Donovan (Pty) Ltd ran fashion trade fares in Cape Town
 Mrs Cats, who worked for Lester Donovan (Pty) Ltd, approached Mr Levinson
 They discussed his participation in the Winter trade fair
 [This is important] - which she told him will run from the 27th to 29th July 1981 (and the case
citation is 1986!)
 Mrs Cats said to Mr Levinson that he must sign as soon as possible, because there were
limited stands available (it was said that she was an aggressive saleswoman)
 She gave him a form to sing and on the front of the form it clearly said that the trade fare will
run from the 27th to 29th July 1981
 However, on the reverse side of the form, there was a clause which said that if the fates of the
fare were to change for any reason at all, then the exhibitor will still be bound and would still
have to pay the contract price. Mr Levinson signed without looking at the reverse side.
 The Dates were changed to the 30th July – 1st August 1981
 Mr Levinson was unable to exhibit on those dates
 He called Lester Donovan (Pty) Ltd to cancel and they said that he must still pay the contract
price (still has to pay them)
 When he failed to pay them, they sued him for the amount owed
 The case went all the way to the SCA (AD). Where the SCA held that he was NOT BOUND
by the caveat subscriptor for the following reasons:
1) All the negotiations were based on the dates 27th to 29th July 1981
2) Mrs Cats knew that Mr Levinson was unaware of the terms on the reverse side of the
form and that he hadn’t read them
3) It could not be said, therefore, that the document reflected his true intention
4) Mrs Cats knew this and therefore the caveat subscriptor did not apply
5) Mrs Cats should have pointed out the reverse side to M Levinson
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6) The contract was therefore void due to mistake, Levinson was mistaken as to the
terms of the contract and it was a justus error.
3. Where the other party misleads the signatory as to the terms of the contract
 Refer back to notes here – would also lead to a mistake rendering the contract void
(justus error)
Unsigned contracts
 E.g.
1. You and your friends decide to go shark diving
2. There is a queue. While you are queuing, you are chatting to your friends and you do not see
several notices on the wall
3. These notices say that the shark diving company “will not be liable for any loss or injury
sustained”
4. Eventually you get to the ticket office and you buy a ticket
5. The same terms is contained on the ticket (co not liable etc)
6. You go into the cage and go underwater, and the sharks are swimming around you, and the next
minute one of the sides of the cage collapses
7. The sharks get inside the cage and you lose an arm and a leg
8. The reason that the side collapsed, was that the maintenance engineer was drunk when doing his
inspection
9. You will probably not be able to sue the company for your losses and injuries
 These types of clauses are called exclusion clauses (as they exclude liability)
 Our courts have held, that they can exclude liability even for gross negligence (but not if done on
purpose! - delict)
 Terms contained in notices and signs, and tickets are called imposed terms (imposed on you), and
they form part of an unsigned contract between the customer and the provider
 The rule is, the customer is bound by these terms, as long as the other party has done everything that
is reasonably necessary to draw the customer’s attention
 Add note: (i) if the minor was on their own – then not bound and (ii) the person could sue the
engineer for delict – but not often done as people can make money from companies
 The requirements that are necessary to draw the attention of the customer:
1. The term must be imposed before or at the time of contracting (separate rules for tickets and
signs)
 The ticket must be handed over before the contract is concluded
 e.g. from English Law (as there is no South African case on this matter yet)
 A man went to park his car in a parkade
 On the outside of the parkade was a big notice with the parkade’s name and
their hourly rates
 The man entered the parkade and drove up the ramp
 At the top of the ramp was a red light
 When the front wheels of the car touched the magnetic strip underground, the
light then turned from red to green (trigger)
 After that, the ticket is pushed out automatically
 The ticket contained a term that excluded the parkade from a person’s injury
or loss
 The man was injured in the car park and he sued the parkade company for
damages
 The court had to decide whether this term on the ticket actually formed an
unsigned contract or not
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 The court held that the notice on the front of the parkade was the offer, and
the judge said that acceptance took place when the wheels touched the
magnetic strip and the light changed from red to green (in SA – when we
press the button). The ticket was thrust out after that point. Hence, the ticket
did not form part of the unsigned contract; so, the company was actually liable
for the damages
 They are saying that it is too late to see the terms after the conclusion of the
contract (should have signs up detailing terms!)
 With a notice, the notice must be able to be seen before or at the time that the contract
is concluded
Durban’s Water Wonderland v Botha 1999 (1) 982 (SCA) [textbook – pg92]
 Mrs Botha and her daughter (+- 2years old) went on one of the rides at Water
Wonderland
 The seat that they were sitting on, broke loose from the ride and they were
flying into the air, and they landed in a flowerbed some distance away
 They were both severely injured
 The reason for the accident, was that the seat had not been properly bolted to
the ride, and there were also certain design flaws (human negligence)
 Mrs Botha sued Water Wonderland for her and her daughter’s injuries
 At the cashier’s window, there was a notice that contained an exemption
clause excluding liability for any loss or damage incurred
 Mrs Botha makes the offer at the cashier’s desk when she wants to buy the
tickets
 Acceptance takes place when the cashier hands her the tickets (like in the
Boots Pharmaceutical case)
 This, the contract is concluded at the cashier’s desk and the Notice was at the
cashier’s desk. Therefore, it was an imposed term in the notice, excluding
liability, and so Water Wonderland was not liable
 Add note – if somebody had dies – can sue for damages – but can’t put the
company in jail (most people don’t sue for money in this case, they want some
sort of justice to be served, so it doesn’t happen often)
2. It must be in a contractual form
 This requirement only applies to tickets, not to notices
 The following documents are considered to be in a contractual form, and will bind the
customer:
1) An order form
2) A ticket (bus, train, taxi, movie ticket [still debate about whether it is a ticket
or a receipt – but take it as a ticket])
 The following documents are not in a contractual form and will not bind the
customer:
1) Receipts (e.g. dry cleaner – terms on receipts are not legal – and therefore, if
any loss is suffered, company is liable)
2) Vouchers
3) Statements of account
4) Invoices
3. There must be sufficient notice of the term
 All this means that the writing on the ticket and the notice must be prominent and
reasonably legible
 The customers attention must be drawn to the writing / must be prominent and easily
legible
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





E.g. in Water Wonderland case – notice was 80cm x 60cm (2x3 rulers) – big notice
and the letters were about 2.5cm in length. It had a white border, which drew
attention, and it was positioned at eye level
Obviously in tickets the writing is small – therefore, must be bold and legible
Add note: what if a tourist can’t read English – court will have to decide that
Add note: a speeding fine – law not contract – if a tourist doesn’t understand signs –
tough luck, as the signs merely serve as warnings and nothing else!
c) Implied terms
An implied term is a term of the contract that is binding on the parties, despite the fact that they have
not expressly mentioned it.
There are 3 different kinds or types of implied terms:
i) Tacit terms (in textbook pg94 – these are referred to as “terms implied on the facts” (same thing)
 These terms are implied to give effect to the common intention of the parties
 The contract is silent about this term (nothing is mentioned), but it is clear that the parties
intended it to be part of the agreement
 When dealing with tacit terms, the court apple the “curious bystander test”
 It works like this:
o If a curious bystander had asked both parties at the time that the contract was conducted,
“what about this particular terms that you haven’t mentioned?”
o Then they would have both said: “Oh, of course that is included, but we didn’t think
about it” or
o “Oh, of course it is included, but it was so obvious that we didn’t think mention it”
o If these are the answers to the curious bystander’s question, then the term will be a tacit
term and will form part of the contract, even though it has not been expressly mentioned
 E.g. West Witwaterstrand Areas Ltd v Roos 1936 AD 6 (textbook – pg94)
o Mr Roos owed a farm
o He gave W the rights to obtain government permission to mine the land
o You could only get permission from the government to mine, if you could prove that
there were precious metals in the land
o In order to do this (i.e. to determine whether there were precious metals), they had to
prospect the land (drill holes and take samples)
o The right to prospect was not an expressed terms of the contract and Mr Roos refused to
allow them to do it (was just being difficult – wanted easy money without affecting the
land!)
o W argued that it was an implied tacit term of the contract, and that they could prospect
the land
o So the court applied the “curious bystander test”
o They said, that if someone had asked the parties at the time of contracting, “can the
company actually prospect the land?”
o The answer would have been: “Oh, of course, it is so obvious, we didn’t even mention it”
o Because, if you can’t prospect the land, take out samples and make investigations, then
you also can’t prove that there were precious metals; which means that you can’t get
permission to mine and so the contract will actually be meaningless
o Therefore, the company could actually prospect the land
o The curious bystander test, is based on what the reasonable person would have accepted,
and is independent of Roos’s intention
ii) Terms implied by law
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o Again, these are terms which the parties haven’t expressly mentioned, but they are
implied by law to certain kinds of agreements (tacit terms – implied because agreed, but
these are implied because the law says so)
o In all contracts of sale (looked at in much more detail in the sale section), there is this
implied warranty against latent defects
o Latent defects are ones that are not obvious to the buyer (hidden and can’t be seen with a
naked eye)
o E.g. CD from a shop – scratch and jumps – latent defect
o The implied warranty says that the seller guarantees that the product has not latent
defects, and if it does, then the buyer will have a right of recourse against him (not the
same as restitution for damages – this is also a remedy, but more specific here)
o Most terms implied by law can be varied or excluded by express agreement
o So, a seller can exclude liability of latent defects and is protected by a “voetstoets” clause
(also used overseas – if no clause like this, then the seller is liable!)
iii) Terms implied by trade usage
o These terms are implied in business contracts between persons of a certain trade
o E.g. joint business venture between engineering and building company to build a bridge –
similar terms in both contracts!
o Again, these terms can be varied or excluded by express agreement
2.2 Common Contractual terms
a) Conditions and the terms
o Definition of a condition – A qualification which renders the operation and the consequences of a
contract dependent upon an uncertain future event
o There will definitely be a question in the exam or test about this! (NBNBNBNBNB)
o DO NOT CONFUSE CONDITIONS AND TIME TERMS!!!!
o A condition is uncertain, a time term is certain
o E.g.1 – I will pay you R2 million when you graduate (condition – not a certainty – can fail or die)
o E.g.2 – I will pay you R2 million when you die (time term – you are going to die – certainty)
o E.g.3 – I will pay you R2 million when you marry (condition – uncertainty)
o E.g.4 – I will pay you R2 million on the 1st January 2008 (time term – certain) – if you die, estate
will be paid
o There are 2 different types of conditions:
Suspensive Conditions
 It suspends the contract (hanging in the air, can’t do anything, can’t go anywhere!)
 The contract only comes into operation when and if that uncertain event happens
 NBNBNB – The contract is valid from the moment it is entered into, but it is not enforceable
(suspended) until the conditions are fulfilled
 If the conditions fail, then the contract comes to an end
 Sometimes, the conditions will have a time limit, and if it’s not met within that time, the contract
will end
 If there is no time limit, it will fail after a reasonable time (what is reasonable? – depends on the
facts)
Resolutive conditions
 Here the contract comes into operation and is enforceable from the beginning (NOT
SUSPENDED!!!!)
 But if the condition is fulfilled, then the contract comes to an end (resolves the contract –
different to suspensive!!!)
 E.g. A and B get divorced and they enter into a settlement agreement
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o A must pay B maintenance until she remarries
o That contract is valid and enforceable from the start (must pay maintenance from the date
of signature)
o If she does remarry – obligation comes to an end
o Add note: if pay R2 million to marry – suspensive!!!
Fictional fulfilment of conditions
 People may want to prevent a condition from being fulfilled (for some reason)
 E.g. You have done some travelling (22 years old) – father says go to university and get a
degree- I will pay you R50 000 until you graduate – while a university discover that you won’t
even earn this much when working one day – and somehow, you fail on purpose – but this is a
resolutive condition (father will have to keep paying you until you get the degree)
 E.g. of house – lie about salary – don’t get a loan if made an offer on a house by mistake!
 The law says that there is a duty not to deliberately prevent the fulfilment of a condition
 But let’s say that a bank does not grant a loan for the house – not deliberate…
 If one does so, then even though the condition hasn’t been fulfilled (i.e. if you deliberately
prevent it) – e.g. haven’t graduated, the law will deem that it has been fulfilled (pretend that it is
fulfilled – fictional fulfilment of conditions) – in the house e.g. – can be sued for breach if not
fulfilled
b) Warranties(guarantees)
 A warranty and a guarantee are the same thing
 A warranty is a contractual undertaking, that a certain statement of fact is correct.
 E.g. – if you buy a 2nd hand car, and the seller says that he guarantees that the car has only done 50
000 km’s – if the car has done 80 000 km’s - sue him for breach
 More common e.g. – if buy a microwave with 2 year guarantee – if breaks down – instead of suing
them for breach – they will replace it
c) Exclusion clauses (exemption clauses)
 These are clauses which exclude one party’s liability, delictual or contractual, that the law would
otherwise attach to him (normally would be liable)
 We have seen this twice before – in (Durban’s Water Wonderland, Shark tank e.g. and parkade e.g.)
unsigned contracts and imposed terms; as well as in mistake and misrepresentation (e.g. the guy
bought a house on the Durban coast – but gave him the wrong plot – excluded liability for
misrepresentation)
 Add note – cannot get rid of criminal liability!
d) Cancellation clauses
 The general rule is that you can only cancel a contract if the breach is material if it is serious (will
look at this under remedies for breach)
 To get around that (this rule), parties can include a cancellation clause
 This allows them to cancel for any breach (even the most tiny and trivial breach – normally can only
cancel if severe breach)
 In a lease agreement – if the tenant doesn’t pay the rent on time – not a serious material breach
(therefore cannot cancel the contract) – therefore, if include a cancellation clause – then can cancel
the contract
e) Penalty clauses
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 Self study – Basic Principles pages 101 – 102:
Whenever one party commits a breach of contract, the other party is entitled to claim compensation for
the financial losses incurred as a result of the breach. In order to recover those losses, the innocent party
must of course first calculate what her losses have been, and then prove to the court that she has in fact
suffered losses in the amount claimed. In order to avoid the necessity for calculating and proving the
actual value of the losses sustained, which is often both a time-consuming and difficult process, the
parties can include a penalty clause in their contract in which they agree, in advance, precisely what it is
that the innocent party will be able to claim in the event that the contract is breached.
Penalty clauses are commonly found in building contracts, in which the builder agrees to pay a fixed
sum for every day the builder is late in completing the work. A clause of this type might read as follows:
“The contractor (builder) shall be liable to pay a penalty of R500 per day to the client for the number of
days the work remains incomplete beyond 1 December 2006.
The advantage of penalty clauses for the client is that she is entitled to claim the pre-agreed sum without
proving that she has actually suffered a financial loss in that amount. The Conventional Penalties Act 15
of 1962 contains a provision permitting a court to reduce the agreed penalty if it far exceeds the actually
financial loss suffered.
The disadvantage for the client is that she is limited to recovering the re-agreed sum, even if her actual
damages are considerably higher, for there is no provision in the Conventional Penalties Act permitting
a court to increase the pre-agreed sum. However, the parties are free to include a further clause in the
contract, in which they agree that the client will be entitled to claim her actual damages, should they be
higher than the pre-agreed penalty.
f) No-variation clauses
 This applies to written contracts only
 It is a term in the contract, to the effect, that no variation of the contractual terms will be of any force
and effect, unless it is reduced to writing, and signed by both parties
 E.g. – there is a written lease agreement – the rent must be payable on the first of every month – the
agreement contains a no-variation clause – the parties want to change the date of payment from the
first to the seventh – how must they do that? – THEY HAVE TO DO THAT IN WRITING – e.g. a
piece of pay – “an amendment to lease agreement etc” etc
 The reason you do this is that it creates certainty and avoids evidentiary problems
 E.g. – written agreement says must pay on the 1st – tenant phones and says that he wants to pay on
the 7th and landlord says that it is ok – but the next month landlord sues tenant for not paying on the
first – has to be in writing, so landlord is correct
2.3 Disagreement on the Terms of a Contract
a) Parol (oral) evidence rule (comes from English laws – doesn’t sit well in the Roman Dutch
system)
­ Again, this applies to written contracts
­ The rule is this: If the parties have a written contract, then that document is all that the
court can look at to ascertain the terms and the obligations under the contract. Generally,
the court may not admit oral evidence, to show that the true terms are different from
those in the written document.
­ There are many exceptions to this rule
­ E.g. – there is a lease agreement reduced to writing - this is the only document that the
court can look at – the lease agreement says that the tenant needs to pay the landlord on
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the 1st of every month – may have contradicting oral evidence – court will only apply the
written document
­ Exceptions – e.g. rectification in the Horty case
b) Rectification
 Refer back to previous notes on mistake – Horty investments case!!
THIS BRINGS US TO THE END OF CONTENTS OF A CONTRACT
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3. BREACH OF CONTRACT (important section)
 Breach occurs, where one of the parties fails to observe the terms and fulfil his obligation under the
contract
 Debtor = the performance debtors i.e. the person who must perform (doesn’t necessarily mean
payment)
 Creditor = the performance creditor i.e. the person to whom performance is owed (doesn’t
necessarily mean money – can be good health performance – e.g. contract with a doctor)
 E.g.
o A sells a lounge suite to B
o A must deliver the lounge suite
o & B must pay R1000
o As far as delivery of the lounge suite is concerned – A is the (performance) debtor (he is the
one who has to do something)
o & B is the performance creditor – he is the one to whom the performance is owed
o Now, with regards to payment, B is the performance debtor and the performance creditor is
actually A! – in most contracts, one person will be a debtor and a creditor
 Different types of breach: (different types of remedies for individual breaches)
1. Late performance by the debtor = mora debitoris (mora in Latin is delay – delay of the debtor) time
2. Late performance by the creditor = mora creditoris (e.g. landlord doesn’t pitch to provide flat for
rent – i.e. keys etc) - time
3. Positive malperformance (incomplete or defective performance) – content of the performance
4. Repudiation – are you going to deliver the lounge suite (NO – not going to honour the terms of
the contract)
5. Prevention of performance – link up the idea of possibility – someone makes their own
performance impossible – breach due to impossibility
3.1 Late performance by the debtor – mora debitoris:
 Here the debtor fails to make performance by the due date
 All of the following requirements must be met, before a person is in mora (meaning that they’re in
breach of contract for mora debitoris):
1. Debt or obligation (not always money) must be due and enforceable
 If a time limit has been set in a contract, then it is obvious (e.g. if the contract says that
lounge suite must be delivered on the 01/05/2007 etc)
 If no time limit has been set in the contract, then the contract is due and enforceable after a
reasonable time (look at the facts to determine what a reasonable time is)
 If there is a suspensive condition in the contract, then it becomes due and enforceable after
the conditions are fulfilled
2. The time for performance must have been (i) fixed, either in the contract or in a (ii) subsequent
demand, and the debtor must have failed to then perform timeously (STUDENTS TEND TO
FORGET THIS REQUIREMENT IN TESTS AND EXAMS!)
 2 situations here: (i) and (ii)
 (i) Where a time limit has been fixed in the contract:
o E.g. You will deliver a lounge suite on the 7th May 2007
o On the 8th May 2007, the lounge suite has not been delivered
o The first requirement has been met here, i.e. it became due and enforceable on the 7th
May 2007
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o The 2nd requirement has been met, i.e. the time in the contract has been fixed
 (ii) Where no time limit has been fixed in the contract:
o E.g. X orders and pays for a lounge suite on the 30th April 2007-04-27 Y must deliver
the lounge suite to X
o No time limit is set out in the contract
o By the 30th November, Y has still not delivered the lounge suite
o In this case, the first requirement is met, as the obligation is due and enforceable – i.e.
a reasonable time has passed (7 months)
o The time of performance has not been fixed in the contract; the performance has not
been fixed in a subsequent demand. In order to meet the second requirement, he has
to send a demand (i.e. “You must deliver the lounge suite in one week”) or issue a
demand in order to place the debtor in mora (person does not need to receive it!)
o The demand usually takes the form of a written letter, but it can also be verbal (i.e.
you can phone him etc.) – if still not delivered (breach of contract)
o The time for performance, given in the demand, must be reasonable in the
circumstances (NBNBNBNB)
o In considering what is reasonable, the courts will take into account the amount
of time that the debtor already had to perform
o If the debtor wants to argue that the time given in the demand is unreasonable, then
the owness rests on him to prove it. BUT,
o If the demand is couple with a notice of cancellation, then the owness shifts (the
creditor has to prove that the time given was reasonable).
o Notice of Cancellation: “If you don’t perform by the 31st December 2007, then the
contract will be cancelled”
3. Failure to perform must have been due to the fault of the debtor
 If the failure to perform was due to the fault of the creditor, then this requirement is not met
(e.g. Y tries to deliver the couch to X, but X not at home all the time – MORA
CREDITORIS!)
 The delay must also not be due to “objective impossibility” – if it is, then the contract will be
void due to impossibility (NOT BREACH). Remember, if NOT Objective impossibility, then
breach or else void
3.2 Late performance by the creditor – mora creditoris:
 When we speak about performance here, we refer to the “cooperation of the creditor” – doesn’t have
to perform anything; just needs to cooperate
 E.g. with a lease agreement, if the landlord is not available to pay the rent or the bank account is
closed, then cannot pay it
 Requirements for mora creditoris is (all must be met):
1. The debtor must be under an obligation to make performance (obvious)
2. The cooperation of the creditor must be necessary for the proper performance of the debtor’s
obligations (sometimes the cooperation of the creditor is not needed – e.g. the transfer of money
into the creditor’s account – cooperation is not needed!)
3. The debtor must make all reasonably possible efforts to perform fully (Y arrives to deliver the
lounge suite to X – must make all effort to perform)
4. (THIS IS THE ESSENCE OF THE BREACH!) – There must be a delay in accepting
performance by the creditor
5. If the debtor is going to perform before the due date, he must notify the creditor in advance so
that the creditor can make himself available (by agreement between the debtor and the creditor!)
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6. The delay must be due to the fault of the creditor (It must not be the fault of the debtor! – mora
debitoris; and it must not be objective impossibility – or else the contract is void, not in breach!)
3.3 Positive malperformance:
 Mora debitoris and mora creditoris related to the time of performance (delay is the issue)
 Positive malperformance is different, as it relates to the actual content of the performance
 There are two types of malperformance:
1. Where there is a duty to do something positive
 “Positive” – must do something – e.g. must build a house or make a payment etc
 Positive malperformance occurs if there is an incomplete or defective performance
 E.g. a builder must finish building a house by 7th May 2007
By the 7th May, he has completed the house, but it is structurally defective (could fall down any
minute!) and not according to plan
This means that there is positive malperformance
E.g. 2 – A builder must finish building a house by the 7th May 2007. By the 7th May, he has only
completed the 1st floor of the house (which is perfect and has no problems), BUT not the second
floor
This is not mora – as mora is where there is no performance at all by the debtor (NBNBNB)
Here, there was performance, but it was incomplete
2.
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Where there is a duty to do something negative
This kind of breach will be positive malperformance of a negative duty
A negative duty is a duty not to do something (opposite to a duty)
E.g. – Very common example in law – A lease agreement between a landlord and a tenant might
say that the tenant cannot have animals on the premises (negative duty – not to do something). If
the tenant gets a cat, then he is in breach, and it is positive malperformance (got a cat) of a
negative duty (not supposed to keep animals)
3.4 Repudiation
 This type of breach can be made by either party (the creditor or the debtor)
 It occurs when one party, by his conduct, and without any justification in law, that he no longer
intends to be bound by the contract (makes it clear by his conduct – no justification!)
 A mere delay in giving or receiving performance will not be repudiation (will be one of the mora’s)
 The test for repudiation is whether the debtor or the creditor acts in such a way as to lead a
reasonable person to believe that he doesn’t intend to be bound by the contract
 E.g. of repudiation
o You buy a TV from a shop
o Before delivery, they sell it to somebody else
o They cannot deliver the TV to you
o Repudiation
 E.g. 2 – When Bob sold his car to 3 people (in the tut!)
 E.g. 3
o A and B enter into an agreement
o A must deliver two tons of bricks to B
o Before the delivery, A phones B and says that he is only going to deliver one ton
o This is repudiation by conduct or words (does not want to be bound by the agreement
o Can also be positive malperformance (incomplete performance)
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3.5 Prevention of performance:
 Performance by one party becomes impossible due to their own fault or due to the fault of the other
party
 The party who made the performance impossible will be in breach, unless of course, they can prove
that the impossibility is objective, in which case the contract will be void and there is no breach!!
(refer back to notes on impossibility)
 E.g.1
o A hires a BMW from AVIS
o He has an accident and the car is written off (Was his fault)
o AVIS gives him a 2nd BMW – he is driving drunk and has an accident, and that one is also
written off
o They have no more BMW’s left to give him (Christmas time is very busy in Cape Town!)
o So, A wants to sue AVIS for breach of contract
o In this case above, AVIS’s performance is impossible (can’t provide)
o It is not objectively impossible (HERTZ can still provide it, for e.g.) and it is A’s fault that
they cannot provide him with a BMW
o Therefore, breach is by A – prevention of performance (prevented AVIS from providing)
o AVIS will sue him for the cost of the cars and the money for daily rates for the month for the
time that he should have had the car (under the law of delict) – whether AVIS actually claims
from insurance or not is irrelevant, i.e. they will benefit!
END OF BREACH OF CONTRACT
4. REMEDIES FOR BREACH
There are 3 kinds:
1. Specific performance (SP)
2. Cancellation
3. Contractual damages (DIFFERENT FROM DELICTUAL DAMAGES!)
4.1 Specific Performance:
 One party gets a court order compelling the other party who is in breach, to perform what he has
undertaken to do in terms of the contract
 E.g. With the builder and the house – if left with 1st floor or defective – court order will order 2nd
floor and structurally sound structure must be produced
 Before the court will actually order specific performance the person who is NOT IN BREACH (not a
victim! – not a crime), must do one of the following:
o Either (i) They must perform their own obligation, or
o (ii) At least tender performance (i.e. offer performance)
o In building e.g. – before insist on builder to continues – must pay tender into court until the
job is completed – then it is handed over to the builder once complete
1. Mora debitoris
 Here, it can be claimed (must deliver in specific number of days)
2. Mora creditors
 Specific performance can be claimed;
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However, where the debtor has been prevented from performing fully, due to the delay of the
creditor, then the debtor’s right to claim specific performance will be reduced to the amount by
which his performance has been reduced. (R300 v R900 as in next example)
E.g. A hires B to do an hour of gardening for him
o The cost for that hour is R1200
o B arrives at A’s house with his gardening equipment all ready to go (on time etc)
o But A is not there and there is no-one to let him in
o A arrives 45mins late (mora creditoris); lets B in, but B can only do 15mins of gardening
(as scheduled), as he had another appointment
o Hence A didn’t pay B anything at all! – this is why the case went to court
o B wants to claim specific performance from A (45mins late – mora creditoris)
o The court will only reward him R300 according to specific performance (only performed
for 15mins)
o He can claim the remaining R900 under contractual damages
3. Positive malperformance of a positive duty
 The creditor can reject the incomplete or defective performance and demand complete and
perfect performance (don’t want to take the house with structural damage or one floor etc!)
4. Positive malperformance of a negative duty (e.g. animals in flat)
 You can claim specific performance here
 Here claim for specific performance is by an interdict (restraining order in America) – it is a
court order that stops someone from doing something
 Add note: if didn’t follow court order – arrested for criminal offence
5. Repudiation
 There has been some debate as to whether you can claim specific performance here
 In some cases it has been awarded, so it does seem that you can (sometimes) – uncertain, courts
are awarding it more and more
6. Prevention of performance
 The Nature of the breach – due to the nature of the breach, can’t claim specific performance
(logical)
All of the above are general rules – the court always has discretion
 The court may not grant specific performance, in the following situations; no matter what type of
breach it is:
1) Where the contract is of a personal nature (e.g. contract of engagement – can under contractual
damages)
2) Where there may be undue prejudice to the defaulting party, or the public at large
o If the court doesn’t order specific performance, you may be able to claim contractual
damages instead
o You can also claim contractual damages in addition to specific performance
o E.g. in the gardener example – both specific performance (R300 – court wants you to
perform according to the contract) and contractual damages (R900)
o E.g. 2 – Municipality and farmer e.g. for fixed amount of water – due to water shortage –
municipality couldn’t provide amount of water in contract as the public at large would be
prejudiced – farmer wanted to sue for specific performance, but as just stated, the public
at large would be prejudiced
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4.2 Cancellation / recission:
 Cancellation is considered an extreme remedy
 For this reason (i.e. it is so extreme), it is only permitted in 2 situations:
1. Cancellation clause (for any breach) – refer to notes under common contractual terms (cancel
for any breach)
2. Where the breach is material – in detail below – with reference to each kind of breach
 Mora creditoris and mora debitoris
o The nature of these two is that it is got to do with time and it is late
o This breach will be material when time is of the essence (when it is NB) – only here!
o The mere fact that the parties have stipulated a time for performance in the contract, does not
make time of the essence (very very NB)
o E.g. in lounge suite e.g. – lounge suite must be deliverd by the 7th May. By the 7th August he
has not delivered. Is Y in Mora? – Yes, mora debitoris, and he is in breach. Here, time is not
of the essence
o These are two situation where the courts have held that time is of the essence: (can cancel)
1. Where the party who is not in breach [not in the innocent party – not a crime!!!], gives notice of
recission to the other party (e.g. if you do not perform by X date, I will cancel (in lounge suite
e.g. – can’t cancel)
 If you want time to be of the essence – send a notice of recission
 The notice of recission can be couple with the demand placing the debtor in MORA in
the case of mora debitoris
 E.g. no date set, after a reasonable time – notice of demand coupled with notice of recission
(place debtor in mora and can cancel the contract – breach)
2. Where the time for performance is stipulated in the contract AND it can be inferred from the
facts that time was of the essence
 E.g. A is getting married. She hires a photographer to take picture of the wedding ceremony.
The contract says that the photographer will be there at the service on the 5th December @
6pm. The photographer arrives at 8pm. It can be inferred from the facts that time is of the
essence
3. Time is normally of the essence in MERCANTILE transactions (for e.g. – where goods are sold
on credit etc)
 E.g. X must supply grapes to Pick ‘n Pay because Pick ‘n Pay are going to sell them to their
customers. Time is of the essence – as Pick ‘n Pay will lose sales
4. When no time of performance is stipulated in the contract, but one can infer that time was of the
essence
 E.g. Shares normally used as an example here – if a person phones their stock broker to sell
their shares – must not take 2 weeks!
 E.g. 2 – or medical operation required for burst appendix – time is of the essence!
 Positive malperformance (incomplete or defective)
o You determine if the breach is material, by looking at the circumstances and the facts of each
particular case (usually quite obvious)
o E.g. Builder – 3 storey mansion supposed to be built – he does everything correctly except
for the 1 thing – one of the windows is 2cm narrower than it should have been (not a material
breach – owner can’t cancel!!)
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 Prevention of performance
o If the whole contract becomes impossible, breach is material, and you can cancel
o If the impossibility is only partial, the breach will only be material if the impossibility realtes
to a major part of the contract
o E.g. you hire a painter to paint your huge house – while he is busy with the job, you knock
down one of the interior walls therefore, he cannot paint it – HE can still paint the rest of the
house (minor part of contract affected)
 Repudiation
o Breach is only material if there is repudiation of the entire contract or a substantial part of
the contract
o E.g. A is meant to deliver 5 tons of bricks to B – is it material if A delivers 4.9999 tons of
bricks to B? – NO!!!!!
The Effect of Cancellation
 Once cancellation has occurred, the contract comes to an end, and each party must claim restitution
(restitution in integrum)
 The contract is NOT VOID and if cancelled, can’t ask for specific performance (opposite!)
 You can claim damages either in addition to, or instead of cancellation
4.3 Damages
 Contractual damages are aimed at putting the person in the position that they would have been in,
had the contract been properly performed.
 You can claim damages in addition to or instead of specific performance or cancellation [in Test or
exam always have damages!!]
 In order to claim damages, ALL of the following requirements must be met (same requirements as
for any type of breach!):
1) The loss must be financial (actually monetary loss)
Jackie v Meyer 1945 AD 354 (textbook – pg117)
 Mr Jackie was a Chinese Naval Officer, working for the British Navy
 He was a very high ranking officer (important later in the case)
 The British Navy had docked in Port Elizabeth
 The Navy had booked rooms at Meyer’s Hotel for the entire crew
 They arrived at Meyer’s Hotel and they were all given the keys to their rooms (every one)
 So, Jackie went up to his room; and a short while later, he was called down to reception
 There were several people in the reception area, including other members of the crew
 He was asked to return his key and was told that there was actually a mistake and that the
hotel was full
 There was a bit of an argument (in front of everyone) and he was asked to leave the hotel
 The real reason why they asked him to leave was because he was Chinese (1945 in SA!) –
didn’t expect this from the British Navy
 Jackie sued Meyer for the following damages:
I.
Money spent on alternative accommodation
II.
Money spent due to the inconvenience (taking a taxi elsewhere etc)
III.
Humiliation that he had suffered at the hotel – he was a high rank officer – can normally
claim this under delict BUT NOT IN 1945 (racist!)
 The last claim failed – not a financial loss, therefore, can’t quantify
2) The loss must be as a result of the breach (THE LOSS MUST BE A DIRECT RESULT OF THE
BREACH!)
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E.g. John is a student at UCT, but he lives in Johannesburg
He goes home for study week before the final exams
He books his flight back to Cape Town on the morning of the first exam
The airline made an error and forgot to book him on the flight
As a result, he misses the first exam (can’t write it); doesn’t graduate because of this, loses
the job that he had lined up (because he didn’t graduate) and he has to come back to varsity
for another semester.
He sues the airline for breach and he claims the 1st year’s salary for the job that he would
have had if he had graduated, as well as the 1st semester’s fees at UCT.
It comes out in evidence that he had no DP for this course and a year mark of -12% (it
happens!).
The University would not have market it anyway (Chancing it!)
He wasn’t going to graduate anyway and therefore his loss was not a direct result of the
airline’s breach, and so he doesn’t get the damages
3) The loss must be a NATURAL consequence of the breach
 What this means is that the loss must have been reasonably foreseeable by the person who was
in breach
 This requirement limits no.2 (can’t go on and on forever)
 E.g. The facts are the same as the Jackie v Meyer, but now it is modern day
 Mr Jackie is not only a Naval Officer, but he is also the captain of the English Cricket side
(professional cricket)
 The same thing happens to him at Meyer’s Hotel
 But on his way to the next hotel in a taxi; he gets hijacked and his passport is stolen
 He arrives at the only other hotel available and it costs R2000 more per night
 He was supposed to return to England on the 1st May to play a cricket match, and for the
playing the match, he was going to get £10 000
 Because his passport was stolen, he can only get to England on the 8th May and therefore will
lose £10 000
 In the meantime, while he is waiting for his passport, there is a fire at his hotel
 He gets caught in the fire and his right arm is so burnt, that it becomes singed, and he can’t
move his arm at all. He is also now blind due to the fire and so he can no longer play cricket.
 His loss of income for not playing cricket is £200 000 per year
 He also has to take an inferior position in the Navy and the loss of income there is £100 000
per year
 All of these losses are a DIRECT result of Meyer’s breach (domino effect)
 All meets requirement no 2
 But is all of this reasonably foreseeable?
 No!!! Only the costs for the taxi and the other hotel fees can be classified as reasonably
foreseeable (can’t even claim for the passport fees – not reasonably foreseeable)
4) The wronged party must have done everything in their power to mitigate their loss
 This means, they have a duty to minimise their loss (within reason)
 E.g. Jackie can’t go to a 5-star hotel, if equivalent is available – must to everything in his power
to mitigate loss (reasonably)
 Or – if John at UCT had DP and everything that happed was the airline’s fault – can’t sit at home
and sulk for the rest of the year, can apply for a job etc. and minimise that loss in income to
mitigate the amount payable by the airline company
 Can’t wallow in misery – must aim at minimising loss
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PART C: SPECIFIC CONTRACTS
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1. Contracts of Sale
Definition – A contract of sale is one where one party delivers a thing to another, in return for
payment
The contract is concluded when acceptance takes place (just like any other contract) and the normal
rules for a valid contract applies
Special qualities to this particular contract are explained below
1.1)
Essential requirements (for a sale):
a) Intention to transfer free and undisturbed possession [nbnbnbnbnbnbnb!]
o To sell a thing, a person must do no more than undertake to transfer free and undisturbed
possession to the other party
o Vacua possession – legal term for: “free and undisturbed possession”
o What this means, is that generally speaking, the seller does not have to undertake to transfer
ownership, only VACUA POSSESSIO (possessor)
o Therefore, it is possible for somebody who is not the owner, to sell a thing
o E.g. if someone stole a DVD player and sold it, then it is a valid contract of sale – new person =
possessor NOT THE OWNER!!
o Before delivery takes place, there is a valid contract of sale, provided the requirements have been
met (for a valid contract!)
o At this stage (before delivery), the buyer has a personal right against the seller for delivery
o Once delivery takes place, the buyer now has a real right of possession (not necessarily
ownership!!)
o Ownership stronger than possession, but possession is still strong (need a court order to get
something in the possession of another person!)
b) Subject matter of the sale:
o Legal term for subject matter of the sale: res vendetia (subject matter) or merx (merchandise) =
things sold
o The parties must both agree on the subject matter of the sale (or else void if mistake)
c) Price
o A. The price must be in money or at least it must have a monetary component
o E.g. you buy a boat for R500 000. You agree that the purchase price (R500 000) will be made up
as follows – R250 000 in money (cash, cheque, post-dated cheque or credit card); the balance
will be made up by trading in your old boat to the seller, which is worth R250 000 (if “swop”
boat – barter or swop – NOT SALE; if given a boat – donation, NOT SALE; therefore, sale must
have a monetary component)
o B. The price must be fixed or the parties must have agreed upon some external method or
standard by reference to which the price can be ascertained (price can be a fixed value, or price
less 10%, or, as in the case of shares, the share price will be determined by the shareholders)
1.2) Legal effect of a contract of sale
a) The passing of ownership:
 Sale does not necessarily transfer ownership, simply vacua possession (undisturbed possession)
 Ownership is a stronger real right for possession
 An owner can reclaim his property wherever he finds it called the rei vindicatio
 The rei vindicatio can be exercised even against the possessor
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E.g. you bought a 2nd hand laptop and owner has rei vindicatio, then he can claim it back
To become an owner, we need to look at how the ownership is transferred
(So some buyers will be owners, but not all of them!)
Ownership, like possession, is transferred by delivery
But in addition, all of the following requirements must be met:
1. The seller must himself be the owner. There is a rule in our law that you can’t transfer more than
you have.
i.e. a thief can’t transfer ownership
Add note: Agent can sell on behalf of the seller (via a sole mandate!) – must be in written form
for immovable property!!!
2. The owner must intend to transfer ownership
3. The buyer must intend to acquire ownership
4. If the sale is a cash sale of a movable, i.e. anything other than land, then the purchase price must
be paid – cash sale is one where payment is made on delivery
5. If it is a credit sale of a movable, ownership is passed on or passes on delivery alone – before
the purchase price is paid
E.g. you buy clothes on Woolworths credit – ownership transfers at the time that the clothes
passes through the till and the account is debited
6. For the sale of immovable property (land, house or farm), ownership passes on delivery before
the purchase price is paid
Delivery of immovable property is done by registering the transfer at the deeds office
Add note: if sell one thing to two people – there are two valid contracts of sale – upon delivery, the
product can only be delivered to one of the customers; therefore, the other sale contract is in breach due
to repudiation and partly due to prevention of performance!
Add note: a voucher will count as a monetary component
b) The passing of risk and profits:
Risk
 Look at example in impossibility about risk – Lamborghini destroyed but the buyer still had to pay
the full purchase price
 The rule is that the risk of accidental loss passes to the buyer as soon as the sale is perfecta even if
the thing has not yet been delivered to him
 (i) Risk of accidental loss
 Loss is either damage or total destruction of a thing
 If the article is damaged or destroyed before delivery, the buyer must still pay the full
purchase price (if he already paid the purchase price – can’t get it back)
 A loss could also mean any other disadvantage (e.g. if the government imposes tax, or
existing tax on an article increases, then the buyer bears the risk and is liable to pay it)
 Accidental loss is loss resulting from an Act of God or an Act of Nature (hurricances,
earthquake, tornado etc) or an Act of a third party for whom the seller is not responsible
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 E.g. A sells a farm to B. Before delivery, the farm is expropriated (taken over) by the
government. This is considered accidental loss, and B has to pay the full purchase price (this
is supervening impossibility – but this is the exception to the rule!!)
 The buyer does not bear the risk if the loss is caused by the fault of the seller, or by a 3rd
party for whom the seller is responsible
 When we say that the buyer bears the risk – pay full purchase price; if seller bears the risk –
then this means that he will not receive the purchase price or he will have to return the full
purchase price back to the buyer if it had already been paid by him.
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1)
(ii) The risk passes as soon as the sale is perfecta
In most simple contracts of sale, the sale is perfecta as soon as it is concluded
But this is not always the case (therefore need to look at the following three points)
All of the following requirements must be met, in order for a sale to be perfecta:
The purchase price must be fixed, not merely ascertainable
o E.g. A and B enter into a contract of sale on the 1st June. A is in South Africa and B is in
England. A must deliver 500kg of biltong to B on the 1st July. The purchase price is the
equivalent of R100 000 in pounds, as determined by the exchange rate on the 28th June.
On the 1st June, there is a valid contract of sale, because the price is ascertainable by
some external method. The sale only becomes perfecta on the 28th June. Therefore valid
contract of sale from the 1st June, but perfecta once used exchange rate to calculate price.
The risk only passes to the buyer on 28th June.
2) Subject matter must be ascertained, not merely ascertainable
o Poppe, Schunhoff and Guttery v Mosenthal 1879 Buch 91
(P)
(M)(Buchannon’s – special law house law reports)
 P sold 200 caskets of brandy to M
 Valid sale, agreed on the subject matter – 200 caskets of brandy
 Before delivery, and before P had set aside particular bottles that were going to go to
M; the government imposed a duty on the sale of brandy
 Because the subject matter had not yet been ascertained (specifically set aside for M),
the sale was not perfecta and therefore the seller bore the risk and he has to pay the
duty.
o Similar Case: Taylor & Company v Mackies, Dunn and Co. 1879 Buch 166
(T)
(M)(first time tax was imposed on alcohol!!)
 T sold brandy to M and the government imposed a duty
 But this time before the government imposed the duty, the brandy had been set aside
in the warehouse and was marked with the buyer’s name
 The sale is perfecta this time, as the subject matter is attained
 The buyer bears the loss, and in practical terms has to pay the tax
3) Any suspensive condition to which the sale is subject, must have been fulfilled
o E.g. the sale is only perfecta when a house mortgage bond is granted (suspensive
condition)
o (The sale being perfecta here is a common rule)
 (iii) Situation where the risk will not pass to the buyer once the sale is perfecta
 (a) where there has been express or implied agreement varying the rule
 To vary this, you will have a clause that says “risk passes on delivery” (put in every
contract of sale)
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 Add note: not like this by default, as the South African Law is based on Roman-Dutch
Law
 Add note: Can you attain insurance on this? – no! not yet the own, therefore can’t (you
have no personal insurable interest)
 (b) Where there is a default / delay on the part of the seller in making delivery
 If the seller is late in making delivery, it is presumed that any damage or loss caused
during the delay period, is due to the fault of the seller.
 The seller can only disprove this presumption by showing that the loss would have
occurred even if the delivery had been made on time
 E.g. A must deliver a fridge to B on the 5th July. A is late in delivering, and on the 6th
July, while in the warehouse, the fridge is struck by lightning.
The seller bears the loss in this case, as there is no way that the damage could have been
incurred if delivered on time!
Profits
 Any profits in the article pass on as soon as the risk passes / at the same time as the risk
 For e.g. If you had to buy a farm that produces fruit, then any fruit that grows on that farm and any
income on that sale of that fruit, since the sale is perfecta, will pass to the buyer
 What normally happens (buyer says risk only passes on delivery and seller ways profits will only
pass on delivery!)
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1.3) Rights and duties of parties to the contract of sale:
(a) Duties of the seller
1. The duty to take care of the merx (merchandise) until delivery (logical – follows with the fact
that the seller bears the risk initially)
2. Duty to deliver the merx (if seller does not deliver – personal right against him)
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3. Implied warranty against eviction
A contract of sale does not necessarily transfer ownership (as we have discussed before), simply
vacuo possession.
Therefore, the buyer who is not the owner, is protected by this warranty against eviction
It is a term implied by law, where the seller undertakes that the buyer will not be disturbed in his
vacuo possession by either the seller himself or by any third party due to defective title of the seller
I a buyer is disturbed, then he has a right of recourse against the seller
This warranty applies in all contracts of sale, even if the seller genuinely believed that he was the
owner
E.g. (common one)
o X sells a car to Y
o A while later Z comes along and tells Y that the car was stolen from him and that he is the
true owner
o The true owner can recover his possessions with the rei vindicatio
o Z will use this action to get a court order to repossess the car
o Y has a right of recourse against X, as he has been disturbed in his vacuo possession, in terms
of his warranty against eviction
o NBNBNB here, this applies even if X believes that he is genuinely the owner (didn’t know
that the car was stolen from Z)
o Add note: X could also have a right of recourse under the law of delict, if brought from
person who originally stole it from Z
o
o
o
o
Compare this E.g. above to E.g. 2
X sells a car to Y
The car is stolen Y by Q
X is not in breach under implied warranty against eviction, as it is not taken from Y due to
defective title of the seller (X).
o Add note: If claim car from the theif and it has any extras, then the thief can legally claim
under the law of unjustified enrichment!!
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Where the warranty applies, the buyer has 2 choices:
1) He can choose not to surrender the goods until dispossessed by a court order
(In South Africa, don’t have to give back to the owner without a court order)
In order to have a right of recourse against the seller, the buyer must notify him as to the
proceedings. The seller has a duty to come to the assistance of the buyer in the court proceedings
If the seller can’t be found, the buyer must defend his action to the best of his ability, or else, he
loses the right of recourse against the seller.
2) He gives up the article without a court order
If you choose this option, in order to have a right of recourse against the seller, you must be able
to prove that the person has an incontestable title (something you can’t defeat) – e.g. ownership
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 The buyer’s right of recourse against the seller is the following:
1. It is a breach of contract and he can cancel and claim the return of the purchase price (can’t claim for
specific performance)
2. He can also claim damages representing the following
a. Any increase in the value of the article
b. The costs in defending the action against the owner (Add note: any small / quick [6-12
months] court case is between R50 000 and R100 000)
c. Any further loss as a result of the eviction, are subject to the general rules concerning
contractual damages
Instances where the warranty will not be implied
1) Where the parties expressly agree (or an exclusion clause!)
1. If the seller knew that his title was defective, and remained silent, then this clause will not apply
2. Any clause which excludes the liability for eviction, will not exclude the buyer’s claim for the
return of the purchase price (will always have to return the purchase price!)
2) If the buyer is aware that a 3rd party had a claim to the article (e.g. London – sell expensive jewellery
– not protected by express agreement!)
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
(a) Duties of the seller contd!
4. Implied warranty against latent defects
The seller is liable for latent defects, which existed at the time of the sale, whether he knew about
them or not
These are the requirement for a latent defect: (ALL MUST BE SATISFIED!)
1) It is not obvious to an ordinary person doing a reasonable inspection
 E.g. common e.g. – faulty brakes in cars – even in test drive might not be able to detect, but a
professional / mechanic can!
 Buying a house – damp walls – therefore, can’t see latent defect!
2) It must be an abnormal characteristic
 E.g. if you buy a suade coat and it gets damaged in the rain, not abnormal; but if it is a leather
jacket, and the leather falls off in pieces in the rain, then it is obviously abnormal
 Add note: Not abnormal if wear and tear in car that’s 2nd hand!!
3) It must materially impair the usefulness of the object for the purpose for which things that type
are normally used
 E.g. – logical – buy a car with faulty brakes – can’t drive up hills = problem
4) The defect must have existed at the time of the sale
 If it can be proven that there was no defect on the day of sale, but one day later there is a
problem, then the requirement is not met!!
5) The purchaser must not have been aware of the defect, at the time that the contract was
concluded (obvious!)

If there is a latent defect (i.e. all 5 requirements are met), then the purchaser has what’s known as the
aedilition remedies: laws made to protect the seller = Latin history aediles – senators were also
merchants and they made laws to protect themselves!!)
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

(i) Actio redhibitoria (Return of the full purchase price)
This one you use, when the defect is so serious that the “reasonable purchaser” [NOT THE
DIFFICULT CUSTOMER!] would not have brought the article, had he known about it
Under the Actio redhibitoria, the purchaser can cancel the contract and claim the following:
1. The return of the full purchase price
2. All foreseeable and necessary expenses incurred by him as a result of the sale (including, for
example, delivery costs!)
3. Expenses incurred in examining the object to discover the defect (mechanic or expert)
4. Expenses incurred in returning the object to the seller (transport costs again) or storage etc.
The Buyer may not claim consequential loss!! ******************
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
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
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

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E.g.
o You buy a car and it has faulty brakes
o You have a car accident with another car (as you can’t stop it due to the faulty brakes)
o Damage to the other car is R5 000 (which you have to pay) and you are quite badly injured,
with your medicals totalling R20 000. The cost of the damage to the other car and medicals,
are called consequential loss, dye to the faulty brakes
o In a normal / regular contract, costs can be claimed under damages, BUT not for breach of
latent defects under the aedilition remedies.
o So the purchaser is in a worse position than any other kind of contract
o Add note: can’t claim under breach of contract as sale is specific!! BUT, can try and claim
under delict – however, must prove that it is delict!
(ii) Actio Quanti Minoris
This is a remedy for the reduction in the purchase price (different)
Here the defect is such that the reasonable person or buyer, had he known of it, would have paid less
E.g. of dampness in a house = reasonable buyer would have still purchased the house, but paid less
for it!
The buyer is entitled to have the purchase price reduced to the market value of the object, in its
damaged or defective state, at the time that the defect was discovered
No consequential loss is allowed to be claimed
E.g. in a damp house – put books in a spare bedroom and damaged = your problem!
Add note: interest is not consequential loss = therefore, if you need to claim back the reduction in the
purchase price in the case of a house, then the interest is part of the calculation
Exclusion of the aedilition remedies by agreement
 Include a voetstoots clause
 You agree that the article will be sold as is, even if defects are present (shares can be sold this way,
in order to remove any liability from the seller for the sale of the shares)
 The voetstoots clause will not be effective, if the seller knew there was a defect and he didn’t tell the
buyer
Other possible remedies for defective goods:
1. If the seller has warranted or guaranteed that there are no defects, sue under normal breach of
contract (i.e. entitled to claim consequential loss) = not subject to the aedilition remedies
2. If the seller misrepresented the defects, then sue under misrepresentation (can also get delictual
damages)
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Here, even if he didn’t make an express statement, latent defects is one of the situations where there
is a duty to disclose (normally don’t have to speak in the SA law)
3. Where the buyer has more than one remedy available (aedilition, warranty, misrepresentation) you
can only choose one because of the rule against double compensation, but choose the one that pays
you the most!!
Duty of the seller who is a manufacturer or dealer to indemnify the purchaser against latent defects
 Aedilition remedies don’t allow the claim of consequential loss; however, if the seller manufactured
the thing himself, then you can claim consequential loss in addition to the aedilition remedies
 Holmdene Brickworks v Roberts Construction 1977 (3) SA 670 (A) [Also a manufacturer!]
(H)
(R)
o Textbook pg 153
o H was a brick manufacturer and they sold latently defective bricks to R
o Because of the defects, R had to demolish a wall that they had built with those bricks
o R was entitled to claim the following consequential loss, in addition to the aedilition remedies:
o 1) The cost of demolishing the walls
o 2) The cost of building new walls with new bricks (rebuilding)
 When dealing with a dealer, he will only be liable for consequential loss if he has expressly or
impliedly publicly professed to have expert knowledge or skill with regard to the item sold (e.g. VW
– been in business for so long, therefore liable!)
(b) Duties of the Buyer
1. Payment of the purchase price
2. Payment of the seller’s necessary expenses
E.g. of this = delivery costs (seller has a duty to deliver, but the buyer must pay for it!)
Or expenses incurred for caring for the object prior to delivery (if buying a horse = food)
3. Acceptance of delivery (if the buyer does not accept – mora creditoris or repudiation)
If the buyer is in breach for any of the above duties, then the NORMAL rules and remedies for breach
apply (unlike the seller!)
___________________________(END OF SALE)___________________________________________
2. Credit Agreements
2.1 What is a credit agreement?
Add note: There is a new law – 01/06 = no easy credit anymore, that is why everyone is offering credit
now)
 A credit agreement is one where credit is granted by one party to another usually in return for
payment of interest or a fee
 A credit agreement can take different forms (NB e.g.’s = simple to understand)
 E.g. 1 – John buys a car from Max Motors for R500 000. He takes delivery of the car immediately
But he only has to pay the purchase price in monthly instalments over 10 years at 8% interest
 E.g. 2 – John borrows R100 000 from Big Bank (like a student loan). It must be repaid in monthly
instalments over 2 years. And fees and interest are charged.
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 The party who grants the credit = credit provider
 The party who receives the credit = consumer
2.2 Credit Agreements Act 1980 and Usury Act 1968 (OLD LAW)
 These acts used to govern certain types of credit agreements and they were intended to protect
consumers and to regulate the interest charged
 However, certain agreements didn’t fall under these 2 acts (“Slipped through the cracks”) and there
were a lot of loopholes (MAJOR PROBLEM!)
 An e.g. of an agreement that didn’t fall under these two acts:
o A loan of less than R100 000 that was to be repaid in less than 36 months, was not covered
by either of these acts
o This means that there was no protection for the consumer, and the credit provider could
charge as much as 150% interest! (interest compounding) [There are a lot of loan sharks out
there – microlending]
 Add note: Why would someone take out this loan at such a high interest rate? = credit will not be
granted by bank if not earning enough or blacklisted!
 In addition, credit providers were becoming reckless and offering credit to people who couldn’t
afford it or were already overindebted.
 E.g. in the past – anyone and everyone was getting credit
 Therefore, there was a need to put in place tighter controls and to review the existing legislation and
this resulted in the National Credit Act of 2005
2.3 National Credit Act of 2005
 This replaces the Credit Agreements Act 1980 and the Usury Act 1968 (old one)
 This will become fully operational on the 01 June 2007
 Certain parts or provision are already in force (enforced)
(a) National Credit Register (NCR) and National Consumer Tribunal (Tribunal)
The act establishes a body known as the National Credit Register (NCR)
All credit providers must register with the NCR (even loan sharks as well as people who loan money
to their own staff if interest is charged on that amount; as well as local department stores who offer
credit = i.e. Edgars, Woolworths etc) – [The purpose of this, is to bring everyone under one net]
All credit bureaux (bureau = singular, plural in French= X on the end) also have to register with the
NCR
A Credit Bureau is a place that keeps track or a list of all debtors
One of the services they often provide is to give credit providers or creditors information on the
consumers debt repayment history (blacklisting)
All credit bureaux will also have to register with the NCR
The NCR can investigate complaints and is generally meant to ensure that the provisions of the act
are enforced and adhered to
There was no such body under the old legislation
The act also established a National Consumer Tribunal (Tribunal)
The main function of the tribunal is to judge complaints in terms of the act
The Tribunal has jurisdiction amongst other things, to impose fines or suspend a person’s
registration (can’t loan money anymore and fine of R100 000 is imposed!)
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(b) Applicable Entities and Transactions
The Act applies to every credit agreement between parties dealing at arm’s length with the exception of
the following:
1. A credit agreement in which the consumer is the state or an organ of the state (logical = don’t need
credit protection)
2. A credit agreement in which the consumer is a juristic person whose asset value or annual turnover
exceeds R1 million (this asset value will probably change over time)
3. A large agreement where the consumer is a juristic person. A large agreement is a credit agreement
secured by a mortgage bond or any other credit agreement with a debt of R250 000; other than a
pawn transaction or credit facility
4. A credit agreement in which the credit provider is the Reserve Bank (the Bank is treated as part of
the state here)
5. A credit agreement where the credit provider is located outside the Republic
The Act does not apply to transactions where the parties are not at an “arm’s length”
Parties are not at an arm’s length if:
1. One is a juristic person, in which the other has a controlling interest
E.g. You have Frank, and he owns 75% of the shares in ABC (Pty) Ltd. Frank lends R1 million to
ABC, to be repaid over a period of time with interest
Frank has a controlling interest in ABC (Pty) Ltd, therefore the transaction is not an arm’s length one
and the Act does not apply to the transaction
Also the act does not apply if the company’s asset value is greater than R1 million
2. If they are family or dependant on one another (Both dependant – two brothers dependant on each
other)
3. Where one party (The dependant) is not independent of the owner (e.g. employee dependant on the
company) and will not seek the maximum advantage out of the transaction
This is not a closed list , the ACT does allow or the courts can declare any transaction to be declared one
where the parties are not at arm’s length
(c)Classification of Credit Agreements
(The definitions here are NB!!)
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
The Act applies to three different types or kinds of agreements, but there’s also a lot of overlap
(which is fine, as long as it is covered by the ACT)
The importance of the distinctions is this – certain provisions of the Act only apply to certain types
of credit agreements
1. Credit Facility (very technical)
This is an agreement where the credit provider supplies goods or services or advances money to the
consumer as and when requested by the consumer. The consumer does not have to pay immediately for
the goods or services or make the repayments immediately (in the case of money / or the case of money
loaned). In return for the credit facility, the credit provider charges a fee or interest.
(e.g. buy on credit at a shop = account at a clothing store) = pay back at a later date
2. Credit transaction
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
A credit transaction can be any one of the following types of transactions: (this is more general, so
that the courts have a little leeway / flexibility to work with)

Pawn transactions – The credit provider gives money to the consumer and at the same time takes
goods as security
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Discount transactions – Goods or services are provided over a period of time. A discounted price is
offered if the account is paid before a certain date (i.e. get a discount before a certain date – e.g.
Jane’s mother – get’s a discount on the physiotherapy if pay before a certain date)

Incidental credit agreement (see the overlap…) – Here an account is rendered for goods or services
provided and if the account is not paid before a certain date, then some charge or interest becomes
payable and /or two prices are quoted, the lower price is applied or applies if the account is settled
before a certain date and the higher price if it is not (major overlap here – better than allowing
people to slip through the cracks)

Instalment agreement – This involves the sale of movable property in terms of which the item is
delivered to the consumer, and the purchase price is payable in instalments
Interest or fees are payable to the credit provider.
Ownership remains vested in the credit provider and is only transferred to the consumer once the
full purchase price has been paid (it is like this to protect the creditor against consumer insolvency;
as falls in consumer’s insolvent estate and get R1 instead of R100!)
If you are the consumer and the company goes insolvent (true owner), then you lose your car.
Alternatively, ownership can be transferred immediately to the consumer, but reverts to the credit
provider should the consumer default (clause)

Mortgage agreement – this is a credit agreement secured by a bond over immovable property
Common e.g. – where a buyer of a house takes a loan to finance the transaction and the house is
mortgaged as security by the bank.
Add note: one of the provision in the NCR – must get statements all the time (get every month) =
must comply!!

Secured loan – This is an agreement in terms of which a persona advances money or grants credit to
another and receives security for the loan, in the form of a pledge, cession or lien over movable
property (Don’t panic about these terms too much)
o Pledge – when goods are pledged as security, the credit provider will be in possession of these
goods and he can sell the goods if you default
e.g. – you borrow money from your friend and give her your wedding ring = similar to a pawn
transaction
o Cession – is similar to pledge but it is used for incorporeal assets (can’t touch = e.g. intellectual
property or shares)
o Lien – complicated (BUS LAW 2)
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-
Lease:
o Movable goods are let to a consumer. The rent is payable in instalments or at some later
stage. Interest or fee is payable by the lessee. At the end of the agreement, ownership
passes to the consumers (very unusual).
o Strange definition of a lease (very different to common law lease)
o This seems to overlap with instalment agreement and hence it is very difficult to distinguish
between these 2
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Any other credit agreement: (prevents any loopholes). This means that any credit transactions
which would fall outside the above mentioned transactions (end of Credit transactions (point 2)).
3. Credit Guarantee
Here a person undertakes to pay another consumer’s debt incurred in terms of a credit facility or credit
transactions (e.g. Father signing as surety if son who ha credit card and it a student – therefore, the
Father will be protected by the Act!!)
(END of portions that fall under the Act)
The following types of agreements do not fall under the Act: (rules are very general, therefore the
exclusions are very specific)
1. Insurance Policies
2. Leases of immovable property (not a credit agreement, therefore not protected by the Act) – e.g. rent
a flat etc
(d) Rights and Duties of Parties to a Credit Agreement (essence of the Act (protection of the
consumers))
Rights of consumers
 Right to apply for credit and non-discrimination:
o Be careful here, every person has the right to apply for credit, but not everyone has the
right to receive credit (this is the important distinction!)
o The credit provider can refuse credit on reasonable commercial grounds; BUT
o They cannot discriminate on the grounds of race, religion, marital status, pregnancy, age,
gender etc
 The Right to understandable language (aligning ACT to the constitution):
o As far as is reasonably possible, the consumer has the right to receive any documents in
an official language that he understands (must be SA official language = obviously not
foreign like Spanish!)
 Right regarding information held by the credit bureaux:
o A credit provider must advise a consumer before any adverse information (negative
information) is given to a credit bureau and the consumer can challenge it
o E.g. You have an MTN cellphone contract; and the reason that you haven’t paid last
month, is because they have charged you for calls that you haven’t made – therefore,
there is a dispute (disputing through letters = i9.e. not refusal to pay a bad debt)
Add note: Black listing – no minimum set amount needs not to be paid in order to be black listed
 Protection against marketing practices:
o Adverts for credit may not be misleading
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o They must set out the nature of the credit agreement, the interest rate, and any other costs
(adverts will change quite a lot in terms of this New Act)
o A credit provider cannot go to the home or workplace of the consumer to market the product,
unless it has been pre-arranged (won’t catch you offguard) – this obviously does not apply to
postal adverts
o The Act also prohibits “negative option marketing” (Not allowed even under common law) –
what this means is that an offer is made to you via the post, sms or e-mail (for credit);
and they say that if you don’t respond within a certain time; we take it that you have
accepted!
o With a credit facility (e.g. credit card), the credit provider cannot increase the limit, without
the consent of the consumer
 Indemnity against lost cards:
o This applies to credit facilities that are operated by a card (e.g. credit card – can’t use the
facility without a card) – or an overdraft on a current account also applies
o If the consumer reports that the card is lost or stolen; then they cannot hold you liable for the
use of that facility; unless they have proved that you have authorised it (if the account was in
credit at the time that the card was stolen, and the money was withdrawn by the thief; then
you are NOT PROTECTED BY THE ACT)
 Right to apply for debt review and rearrangement (restructuring) of obligations (killer for service
providers!):
o This does not apply to juristic person (only natural persons; i.e. consumers)
o A debt review to ascertain whether a consumer is overindebted can be initiated in the
following ways:
a) In any court proceedings, the court may refer the matter to a debt councillor for
recommendation or the court itself can declare the consumer overindebted. Overindebtedness
means that a person is unable to satisfy all his obligations in a timely manner due to his
financial means and obligations;
OR
b) The consumers may himself apply to a debt counsellor to be declared overindebted. Debt
counsellors must register with the NCR
These are the two ways in which the consumer can be overindebted…
o If the consumer has been declared overindebted (in one of these two ways); then the
magistrates court can make one or more of the following orders:
a. That one or more of the consumer’s debts be declared “reckless” (we will deal with this later
= can be a reckless transaction – i.e. give credit to an already overindebted person)
b. That one or more of the debtor’s obligations be rearranged. Rearrangement could be, for
example, extending the period of time over which the consumer must pay and making each
instalment smaller or postponing the dates of payment. (e.g. courts can extend the period of
the loan)
Add note: if the debt is postponed – no additional interest or fee can be charged
o While a debt review is pending (deciding if the guy is actually overindebted), the following
still applies:
a) Litigation (advantage) against the consumer is suspended (can’t sue the debtor for not
paying) – can be open to abuse!
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b) The consumer (disadvantage) may not use the credit facility to enter into a further credit
agreement (can’t use existing cards and facilities)
o If there has been a rearrangement, a consumer cannot use his credit facility or enter into a
further credit agreement until he has paid all his debts under the rearrangement
Add note: Debt counsellors will not be paid by the NCR, but charge low lawyer fees (R500 to R1000 per
hour)
 Right to cooling-off:
o A consumer is entitled to a cooling-off period in the case of an instalment agreement and a
lease (only 2 types); which is concluded at any place other than the office of the credit
provider
o The consumer has 5 business days to terminate the agreement
 Right to settle full debt early:
o A consumer may terminate a credit agreement at any time; without advance notice, by paying
the following:
a. The unpaid balance of the principle debt
b. The unpaid fees and interest owing to that date
c. An early termination fee in the case of a large agreement (i.e. > R250 000)
 Right to make part payment early:
o You have a mortgage bond of R260 000, and pay R50 000 to reduce the amount owed
Add note: YOU CANNOT MAKE EXCLUSION CLAUSES FOR ANY OF THESE!!!! – NBNBNB
 Right to dispute entry under a credit agreement:
o A consumer can dispute amount owed and credit availability
 Right to terminate agreement by surrendering goods: (ODD one!)
o This applies to instalment agreements, secured loans and lease (3 types this time!).
o The consumer can terminate the agreement by giving the goods to the credit provider to sell
o The amount realised, must be credited to the consumer’s account, less any expenses of the
sale and the consumer must pay any “balance” owing.
 Statements of account:
o The credit providers must provide the consumers with periodic statements (i.e. monthly…)
Duties of Consumers (1 Duty)
 In the case of instalment agreements and leases (look very similar anyway), where the credit
provider retains ownership until full payment is received; the consumer must inform the credit
provider of the following or any change thereof:
a. The consumer’s business or residential address
b. The premises where the goods are ordinarily kept (can have two houses)
c. The name and address of any person to whom the goods have been transferred
(They want this information to keep track of the goods – because they’re the owners (creditor!))
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Duties of the credit provider (in addition to the previous duties)
 He must provide the consumer with a copy of the credit agreement and any amendment thereto
 Must give notice of change in variable interest rate and related details (e.g. Mortgage bond – 2
options – can fix the interest rate (10 years for e.g.) or state the interest rate in relation to the prime
interest rate (e.g. prime plus 2 etc - fluctuates))
 The Act sets out the maximum interest rates that can be charged (no 150% anymore!!)
 May not unilaterally change the interest rate, service fees, period of repayment or manner of
calculating the fees for minimum payment due (can’t suddenly increase fees… by agreement now!!)

Assessment of credit-worthiness and reckless credit:
o The Act prohibits a credit provider from entering a reckless agreement (lending money to
someone who can’t afford it)
o Before entering into a credit agreement, the credit provider must assess the following:
a. The customer’s understanding of the costs, the risks and his obligations under the credit
agreement
b. The consumers debt repayment history (at the credit bureaux)
c. His existing means (i.e. what he earns etc), his prospects (e.g. student will become an
accountant) and his obligations
d. If the credit is intended for business purposes, they must assess the reasonable basis of
success
o The consumer must provide full and truthful information. Failure to do so by the consumer,
will be a complete defence with the credit provider against the allegation of reckless credit
o A credit agreement will be reckless under the following circumstances:
a. If the credit provider failed to do a proper assessment; or,
b. If they did do a proper assessment (got all the info), but still enter into a credit agreement,
despite the fact that the consumer did not understand the risk and obligations or that the
consumer was overindebted (logical!)
o If a court declares an agreement reckless, it can set aside all or part of the consumer’s
obligations under the agreement. (E.g. Virgin = credit card = no proper assessment = don’t
have to pay (legally))
OR
They can suspend the agreement (hangs in the air) and the debtor has to pay at a later date
without any additional interest charged
o If an agreement is reckless the court can also declare the consumer overindebted and order a
restructuring of any other credit agreement (NB – just because once agreement is reckless,
DOES NOT automatically mean that he debtor is overindebted!!)
o The reckless credit provision do not apply to the following transactions (don’t have to
assess):
1. School loan (a child obviously has to go to school)
2. Student Loan
3. Emergency loan (can’t eat, need money etc)
4. A pawn transaction (confusing as to why this is here!)
5. An incidental credit agreement (Why?) – this is where an account for goods if provided and a
discount offered for early payment
6. An agreement where the consumer is a juristic person (i.e. agreement to protect the man on
the street)
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Rights of the credit provider
 Can enforce the contract and to receive payment of the credit extended with the interest agreed, or
cancel the contract and claim for the return of the goods, in the case of breach (rights are actually
very limited)
 Right to compensation in certain circumstances:
o The court may grant the costs of enforcing the agreement and repossession (legal fees etc)
 Right to suspend or terminate the credit facility if the consumer is in default
_________________________(END OF CREDIT AGREEMENTS)____________________________
3. Lease (exception of the credits agreement ACT!)
 A lease is a contract between a landlord (lessor) and tenant (lessee) for the hiring by the tenant of
immovable property, in terms of which the landlord grants the use and occupation of the property to
the tenant and in return the tenant pays a specified sum of money
3.1 Essential Requirements (for a lease!)
a) Intention to give temporary use and enjoyment:
­ This is the requirement that differentiates lease from sale
­ The parties do not intend that the lessee has use and enjoyment permanently, but only for a
specified period (but sale = permanent use and enjoyment)
­ Another difference is that: in sale the seller agrees to part with every rights that he has in the
property; including a right to diminish or destroy it
­ With a lease, the lessor undertakes to give the rights of use and enjoyment (and even those are
temporary) = simple and logical!
b) The property let
­ The lessor does not have to be the owner, because ownership is not being transferred, only the
use and enjoyment
c) The rent payable
­ The tenant must pay a specified sum of money, otherwise it is not a lease (e.g. you live at home
with your parents and do not pay a specific sum of money, therefore there is not lease; or a
domestic worker that lives with you and pays nothing to stay with you, there is also NO lease
here)
­ The rent must be fixed; or, the parties must have agreed upon some external standard by which
the rent can be ascertained (e.g. in shopping centres – rent charged – fixed amount, plus a % of
turnover – like Canal Walk OR Cavendish –charge per square meter)
3.2 Duration of the Lease
 The parties must agree that the lease be for a definite period (1 year, or 99 years etc); or,
 The lease can expire upon the happening of some event (e.g. when graduate)
 Add note: if a house is destroyed due to vis major = objective impossibility = termination of lease
and lessee not liable and failure to pay is not a breach until a letter of cancellation is sent (then it is
material!!!!)
 Duration of the lease can be as long as the lessee or the lessor pleases
 These are called tenancies at will
 An tenancy at will of the lessor will last for as long as the lessor pleases and vice versa (e.g. at
shopping centres = lessor)
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 Another option – you can have an indefinite lease – these can run from month to month or week to
week or day to day or hour to hour; depending on the interval of payment (e.g. hour to hour =
parkade; and daily = holiday apartment)
3.3. Formalities and Statutory Regulation
 No formalities are required for ordinary leases and they will be valid between the le parties even if
they are not in writing
 There are some requirements for long leases (later)
 Rental Housing Act of 2000:
1. This governs leases of residential (not commercial property)
2. It governs relations between lessees and lessors and lays down certain requirements for leases
3. It sets up rental housing tribunals to hear debates
 The most important provisions of the Rental Housing Act are:
1. When marketing a property or negotiating a lease, a lessor cannot discriminate against a potential
lessee on the ground of race, religion, gender, age or sexual orientation etc. (this applies when
looking for flatmate or subletting – cannot specify these things as is often done in adverts on
campus)
2. The lessee may request a written lease and has the right to be provided with one (isn’t a
formality, but can be requested)
3. The lessor must provide the lessee with written receipts for payments received (must get
receipts)
4. Any deposit paid by the lessee must be invested by the lessor in an interest bearing account
Deposit – in the case that the tenants do not pay the rent, then the deposit can be used to cover
the rent; if it is not used at all in the rental period, then the lessee is entitled to a full refund of the
deposit inclusive of the interest earned on that amount; the lessee can also demand a receipt or
proof of investment
3.4 Duties of the Lessor
(a) Delivery of the Leased property
 The landlord must deliver the property in a reasonable condition for the purpose for which it was let
 He must deliver free and undisturbed possession (nobody must still be living there at the start of the
lease etc)
(b) Maintenance of the property let
 The landlord must maintain the property in a reasonable condition for the purpose for which it was
let (e.g. if a window breaks, however, it is the fault of the lessee, and not the responsibility of the
lessor)
(c) Guarantee of undisturbed use and enjoyment
 This is similar to the warranty against eviction in contracts of slae (vacuo possession) – see notes on
this section
 The landlord impliedly warrants that the tenant will not be disturbed in his possession; either by the
landlord himself or by a 3rd party with a better title (i.e. the true owner)
 The landlord does not warrant that the tenant will not be disturbed by a 3rd party with no legal right
(like if a car gets stolen, can’t sue the seller or if a trespasser is on the property – can’t sue the
owner!)
(d) Generally abide by the terms of the lease
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(e) Remedies for the lessee if lessor is in breach
 If the landlord is in breach of contract for any of his duties, then the tenant will have the usual
remedies for breach of contract (in this case, it will probably be possibility of performance)
(NBNBNBNB – must learn all kinds of breach and their respective remedies!!)
 But take special note of the following:
o Where the landlord does not deliver the property in a reasonable condition (in breach of (a))
o Or he fails to maintain it in a reasonable condition (b)
o Then the tenant, after giving a notice to the lessor, calling upon him to effect the repairs, can
do the repairs himself if the landlord fails to do so and he can deduct the amount spent from
the rent (legally) – but must first give notice to the landlord!!!
o The lessee can also claim for consequential loss, but only if the landlord knew about the
defect (i.e. he knew that the roof was leaking) or he has implied knowledge of the defect
o Knowledge is implied, if the landlord is an expert in matters relating to building (very strange
– i.e. if landlord is a builder or possibly an architect then he is liable for consequential loss!)
3.5 Duties of the lessee
(a) Payment of the rent
(b) Care and use of the leased property
 The tenant must not misuse the property (must not abuse it) and he can only use it for the purpose for
which it was let (for example, can’t rent out a Cavendish shop and live there!)
(c) Restoration of property on termination of the lease
 At the end of the lease, the lessee or tenant must return the property in the same condition that it was
at the beginning
 The tenant is not in breach of this duty if there is a normal wear and tear or if the property is
damaged or destroyed due to an act of Nature (window broken due to wind etc)
(d) Generally to abide by the terms of the lease
(e) Remedies for the lessor if the lessee is in breach:
o Where the lessee is in breach, the lessor has the usual remedies (breach of contract)
o Where the tenant or lessee is in breach of the duty to pay the rent, there is an additional remedy
available to the landlord, and it is known as the Tacit hypothec (BUS LAW 2)
o Tacit hypothec: When the landlord sues for the outstanding rental; he can attach as security for
payment any movable goods that are on the property (can take the car in the garage, but if on the
road can’t take it etc) – or on “hot pursuit” – meaning that the landlord can intercept the goods of
the tenant on transportation to destination (in transit)
o The landlord can attach, not only the goods of the tenant; but also the goods of the third parties
that are on the premises, if the tenant’s goods aren’t adequate enough to cover the rent; provided
that ALL OF THE FOLLOWING REQUIREMENTS ARE MET:
1) The goods must be one the property, with the express or implied consent of the third party (e.g. if
someone lends you a DVD player – then this requirement is met)
2) The goods must have been brought onto the property with the intention that they would remain
there indefinitely for the use of the lessee (if parents lend you their lounge suite then this
requirement is met, but if you’re girlfriend leaves he clothes here for months, then this
requirement is not met as it is not meant for the lessee’s use)
3) The third party must have failed to give notice of his ownership to the lessor (e.g. receipt or
proof of ownership) – Add note: usually it’s wise to give the letter of ownership to the lessor
before the goods are attached, but it can also be given to him during the attachment process
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4) The lessor must be unaware that the goods belong to a third party (very similar to 3)
5) The goods belonging to a sublessee can also be attached (if sublet and you live there – e.g. digs)
but only to the extent of the rent that he owes to the lessee (e.g. renting a house in Rondebosch
and it is 2 bedroom, so you sublet the house to a friend (2 bed) and if the rent is not paid to the
lessor, then the amount that can be claimed from the sublessee – is not the full amount of the
rent, BUT THE PORTION OF THE RENT THAT THE SUBLESSEE PAYS THE LESSEE!!
Add note: Goods of lessee are always taken first – if not enough to cover rent, then goods of 3rd parties
are considered
3.6 Legal Position of the Lessor and Lessee
(a) Renewal of lease
 A lease is renewed when the existing lease terminates, and the parties agree that it will continue for a
further period (carry on renting)
 A renewal is not a continuation of the old lease (very technical point), but rather a new lease that
comes into being
 Even though it’s over the same property and on the same terms (rental amount or rental period can or
may change)
(b) The effect of the lessor selling the leased property (NBNBNBNBNBNBNBNB SECTION IN
EXAMS – will definitely be in the exam!!)

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THESE ARE NOTES SPECIALLY DESIGNED FOR THE LATECOMERS!
4. Contracts of Agency
4.1 What is an agency contract?
 Agency is a contract whereby one person, known as the agent, is authorised by another person,
known as the principal, to conclude juristic acts with a third part, on the principal’s behalf
 Juristic Acts are acts which incur binding legal obligations (for e.g. contract) – agent enters into
contract on behalf of the principal
 Most common e.g. of an agent = lawyer!
 Very NBNBNB – An Agent is different from a Mandatory
 A mandatory does not perform juristic acts on behalf of the principal
 Most common e.g. of a mandatory is an estate agent
 You give the estate agent a mandate to find a buyer for your home
 But he or she doesn’t sign the contract of sale on your behalf; all he or she does is show people your
house. Therefore, she is not an agent and she cannot incur legal obligations on your behalf or the
principal’s behalf
 NBNBNBNB – Once the agent (lawyer) has signed the contract, or entered into the contract;
he falls away (out of the picture) and the right and obligations are between the principal and
the third part only
4.2 Authorisation of the agent
(a) Express Authority
 The General rule is that no formalities are required, and the principal can give the agent authority in
writing or even verbally
 However, normally what happens in practice, is that the principal gives the agent authority in a
document called A Power of Attorney
 For an agent to buy or sell immovable property on behalf of the principal, the authority must be in
writing
(b) Implied authority
 If there is no express authority, implied authority may be inferred from the facts by the conduct of
the principal and the surrounding circumstances (e.g. remember implied ratification of the minor in a
limping contract? – similar type of authority – implied)
 Even where the agent has been given express authority to do certain things, he may have implied
authority to do additional things which are necessary to performing the original acts
 E.g. if a principal expressly authorises an agent to organise the importation of goods from overseas,
then it is likely that he has implied authority to pay customs duty on behalf of the principal.
 Implied authority may be expressly limited by the principal (flip side of the coin)
 E.g.
o A farm manager may have the implied authority to buy supplies on credit from the local
store, by the owner of the farm
o This implied authority may be expressly limited to a maximum amount of R10 000 per
month (express limitation)
o In such a case (in this situation), the principal (farm owner), is bound to the third party (store
owner), to the extent of the implied authority; unless the third party knew about the express
restriction (if the store owner didn’t know about the R10 000, then the principal is liable for
the unlimited amount – but the principal can claim the additional amount from the agent
under the law of unjustified enrichment)
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