lOMoARcPSD|7789998 Study Unit 1: History and Sources of SA Law History of SA Law: SA Legal History has 3 categories: Roman Law Roman Dutch Law South African Law Roman Law: - Periods: Period of the Kings: (± 753 BC – 510 BC), as the community was more primitive and mainly rural the legal system = mainly customs Republican Period: (± 510 BC – 27 BC), written down for the Prst time in the form of 12 Tables, began to develop rapidly to adjust to the socially changing environment. Period of the Emperors: (± 27 BC – 284 AD), Roman legal system reached its peak due to signiPcant development. Post-classical Period: (± 284 AD – 565 AD), Roman empire was divided into the Eastern and Western empires, this led to a systematic deterioration (decline) of the legal system. - 476AD Germanic tribes conquered the Western empire which led to the economic and social decline of the Roman law due to the Germanic legal system. - In the Eastern empire Emperor Justinian created the Corpus luris Civilis: The Codex: a collection of legislation. The Digesta: selections from the works of Roman jurists. The Institutes: a textbook for students. The Novellae: a collection of the legislation promulgated after the completion of the Codex. - After the death of Justinian, what remained of the Roman empire deteriorated rapidly and eventually disappeared completely because of invasions and the in_uence of other cultures. Roman Dutch Law: Glossators: legal scholars who embarked on a critical analysis and st d f thi Roman law still formed a small part of the legal systems of mediaeval Europe because some of its principles were adopted and applied and because the canon/ clerical law, which was based on Roman law, played a predominant role. Classical Roman Law was revived in the twelfth century by the Glossators. The law of the Netherlands consisted mainly of Germanic customary law. It was as primitive as the simple rural communities to which it applied. The expansion of trade and commerce brought with it the need for a more ebcient and sophisticated legal system. During the sixteenth century, the Roman law was increasingly applied in combination with the law of the Netherlands. This gradual adoption of the principles of Roman law is known as the reception of Roman law, which resulted in the development of RomanDutch law. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 South African Law: - In 1652, Jan van Riebeek brought the Roman-Dutch law to South Africa. It remains the basis of our legal system, better known as the common law, despite the strong in_uence of English law which was introduced into South Africa during the British occupations of the territory. (4 factors for English In_uence) 1. 2. The South African Legal System The law must be distinguished from rights. 3. English judges and magistrates presided in the South African courts. Local jurists studied in England. English decisions were applied by the South African courts. The Law: - - The law consists of rules that the community must adhere to, they are intended to regulate society in an orderly way. The State is empowered to enforce the law, so when a law is disobeyed the State can intervene and order compliance, penalise or punish the ocender. This distinguishes the law from other behavioural rules such as moral, ethical, or religious rules, where no State sanction or punishment is applied. Legal rules can be of a coercive (peremptory) or regulatory nature. Forces the parties to comply with, or adhere to, certain prescriptions contained in the Allows parties the freedom to regulate their own relationships and will only apply if the Parties cannot agree to be exempted from the rule or agree not to adhere to these coercive rules. Rights: - - - A right can be described as the legally protected interest of a legal subject (person) in a legal object or a thing (such as a house or a car), which interest can be protected or enforced against other legal subjects. A legal subject is any entity who can be the bearer of rights and duties. Legal subjects can be divided into two groups: Natural persons: Every human being is a natural person and is recognised as a legal subject from the moment of birth until the moment of death. Juristic persons: A juristic person (for example, a company) is also a legal subject. A legal object, on the other hand, is that which forms the object of an interest (a right) protected by law. A right is the legal right that a person has to an object or thing. The opposite of a right is always a corresponding duty. Legal rights are divided into the following four categories: Real Right: is the right to a corporeal thing, the right being ecective against all the world (for example, ownership in property). Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 A Personal Right: is a right that entitles one person to claim performance of some act or delivery of something from another, which right is created by a contract or by a wrongful act. An Intellectual Property Right: is the right of a person to the creations of his/her mind or intellect (for example, copyright or trademark). A Personality Right: is the right of a person to aspects of his/her personality (such as dignity, bodily integrity, honour, good name, and so forth). Creation of the Rules of Law The basic source of the South African law is our common law (Roman-Dutch law). Sources of Law: Customs Legislation Court Decisions Customs as a Source of Law: - A custom can become so entrenched that it creates an unwritten legal rule or abolishes an existing legal rule. Customs Requirements: It must be reasonable. It must have existed for a reasonably long time. It must have been generally accepted and complied with by the community within which it applies. The contents of the rule must be clear and certain. Legislation as a Source of Law: - Legislation consists of rules laid down by a person or a body of persons with legislative authority. Legislative Bodies in SA: Parliament: has the highest autonomous legislative authority in South Africa and consists of the National Assembly and the National Council of Provinces. Legislation is usually accepted by a normal majority vote in both houses of Parliament. Sections 73 to 77 of the Constitution of the Republic of South Africa, 1996 prescribes the legislative process. Provincial Legislators: Parliament may in certain circumstances also issue legislation on matters that have been delegated to the provincial legislators. Provincial legislation on these same matters will in principle enjoy precedence above parliamentary legislation, apart from certain exceptions, for example, where the parliamentary legislation is required for economic unity. Subordinate Legislative Bodies (local governments or municipalities): Legislative authority can also be delegated in terms of an Act of Parliament to a certain person or body of persons. Subordinate legislation must meet certain requirements in order to be valid and binding upon the community: fall within the authority given to the speciPc subordinate legislator, otherwise it will be ultra vires. be reasonable. be impartial or unbiased. be clear and certain. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 be promulgated or, in other words, published. Court Decisions as a Source of Law: The primary function of the courts is to administer justice and not to create rules of law. However, from time to time the courts are confronted with an issue that is not provided for by either the legislator or the common law. In such a case the courts may, through the judge’s decision, create new rules of law. - Structure and Jurisdiction of the South African Courts (1966): the Constitutional Court the Supreme Court of Appeal ‘higher the High Courts the Lower Courts Magistrate other courts specially instituted by parliamentary legislation Appeals: - - Appeals from the lower and other courts are heard in the relevant provincial division of the High Court. A judgment by a single judge in a High Court matter may also be taken on appeal to a so-called full bench of the same High Court. The matter is then heard by three judges in the same High Court. From the High Court a party may then appeal to the Supreme Court of Appeal. The Constitutional Court is the Pnal court of appeal as far as constitutional matters are concerned. Doctrine of precedent: - the doctrine of precedent (or stare decisis) is applied in South Africa; certain courts create a precedent through their decisions that must be followed by other courts. - This doctrine has the ecect that as soon as a legal principle is laid down by a court: (a) judges of the same court (b) courts of a lower order who are subordinate to that court, must follow this precedent - A decision will only create a precedent if it was laid down as the ratio decidendi, or reason, for the speciPc decision. Where the court merely gives its opinion or makes a passing remark, this is called an obiter dictum, and does not create a precedent. 1. Constitutional Court 2. Supreme Court of Appeal 3. High Court a. Full bench decision b. Single Judge 4. Magistrates Court (not bound by own decisions) Some decisions of the higher courts are published monthly in the law reports to facilitate access to the decisions, like: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Study Unit 2: General Principles of the Law of Contract Theme 1: Introduction to the Law of Contract Brief Historical Overview - - The Roman law concept of an obligation was that it created a legal tie between legal subjects, with the result that the rights and duties created thereby were recognised by law. These rights and duties only operated between the subjects themselves and were known as personal rights. In contrast, certain other rights, called real rights, could be enforced against all other legal subjects. Historically, a legal obligation consisted of two components (as it does today), namely, the right of the creditor to claim performance (to demand that something is done or not done), and the duty of the debtor to perform accordingly. The Concept of a “Legal Obligation” A legal obligation is a legal tie between legal subjects, recognised by law, that, through established legal facts (such as a contract or delict), creates (personal) rights and duties between the parties. Civil Obligation: when rights and duties are recognised and enforced by law. Natural Obligation: when rights and duties are recognised by law but not enforced by law. Sources of Obligations Juristic fact: A juridical fact is a fact that is recognized by law as an event that has legal meaning and that will therefore set oc a particular legal reactio - - Only certain juristic facts give rise to legal obligations - The most important of these are: Contract Delict Statue/ Administrative Authority A juristic fact must meet certain requirements to create a legal obligation. Requirements that a contract has to meet before it can give rise to a legal obligation are consensus, contractual capacity, legality, physical possibility and requirements as to form (formalities). A delict will only give rise to a legal obligation where the following elements are present, namely an act (or omission), unlawfulness, fault (intent or negligence), causation and damage. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 The Concept of a “Contract” A contract is an agreement (based on consensus between subjects having contractual capacity, which agreement must be legal, and physically possible, and which sometimes must meet certain formal requirements) made with the serious intention of creating a legal obligation, that gives rise to the parties' rights and duties. The serious intention to be bound to the agreement distinguishes a contract from an agreement of a social nature (for example, to meet for lunch). Transfer of Rights and Duties A contract is concluded for the purpose of establishing rights and duties between the parties. It may happen that one of the contracting parties does not wish either to exercise his/her rights or to perform his/her duties him-/herself. Such a party may transfer his/her rights or duties to another by means of cession or delegation, respectively. This is to the ecect that one of the parties to the contract is substituted by another. Cession: Cession takes place when personal rights are transferred from one party to the contract (the cedent) to another (the cessionary). EXAMPLE: Andrew owes R500 to Brian in terms of a loan made by Brian to Andrew. (A (original) owes B) Brian decides to donate R500 to Xavier. (B (cedent) owes X (cessionary)) Brian (the cedent) can acect this donation by ceding his right to claim the R500 from Andrew, to Xavier (the cessionary). (B makes A owe X instead of A owe B) Xavier can then claim the R500 from Andrew. (A owes X) All rights that are transferable may be ceded. Rules to apply Cession: The cedent and the cessionary must enter a contract of cession. The consent, knowledge or co-operation of the debtor is not required. If the debtor does not know of the cession and he/she makes performance to the cedent (the original creditor), his/her duty to perform is extinguished. The cessionary cannot claim further performance from the debtor. It would, therefore, be wise for the cessionary to notify the debtor of the cession. No formalities are required. There is no prohibition against the cession of personal rights, except where these rights are of a highly personal nature (for example, where A and B agree that B will give music lessons to A), or where cession is prohibited or limited by legislation, or where the parties reach an agreement prohibiting cession. A right may only be ceded in its entirety because a debtor could then be exposed to a multiplicity of actions where only a part of a right is ceded to another creditor. In accordance with the principle of nemo plus iuris that no one may transfer more than he/she has him-/herself, the claim is transferred together with all the benePts, privileges, disadvantages, and limitations relating thereto. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 A right may be ceded as a form of security by a so-called cession in securitatem debit. Such a cession may be in the form of an out-and-out security cession where the right passes in ownership to the cessionary, combined with an undertaking that the cessionary will cede the right back to the original cedent where the need for security lapses. Another form of security cession is merely a cession in the form of a pledge, where only the quasi-possession of the right transfers to the cessionary, yet the ownership of the right remains with the cedent. Delegation: Duties are transferred from one party to a contract to another by means of delegation. EXAMPLE: Andre (a debtor) owes R500 to Betty (a creditor) in terms of a loan made by Betty to Andre. Andre may delegate his duty to pay to Xhosi. Xhosi (the new debtor) must now pay the R500 to Betty. - - Vital importance for a creditor to know the identity of the debtor from whom he/she must exact or claim performance, the creditor’s consent is required before delegation may take place. Delegation is a tri-party agreement. (Original Debtor, New Debtor, Creditor) Assignment: Where the cession of rights and delegation of duties in terms of the same obligation take place at the same time, such simultaneous transfer of rights and duties is called assignment. As the transfer of duties is part of the assignment, it goes without saying that it will also be a tri-partite agreement (all must agree). Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Study Unit 3: Formation of a Contract Introduction Requirements of a Contract: Consensus: which means that the parties to the contract must have corresponding intentions to create a legal obligation with certain legal consequences between them. Contractual Capacity: which means that the parties to the contract must (for purposes of the contract) form an intention and to understand the consequences thereof. Legality: which means that the contract must be lawful or legal. The contract may not con_ict with either the common law or legislation. Physical Possibility: which means that performance, in terms of the contract, must be possible and determined or determinable. Formalities: which means that the contract must be reduced to some visible form or must comply with speciPc procedures in its conclusion, such as notarial execution, as required or prescribed by law. Requirement 1: Consensus General: Consensus forms the basis of all contracts and is the result of negotiations between the parties. Once each party has formulated a will or intention that corresponds with the will or intention of the other party or parties, consensus is reached. - - Consensus can only exist: where the parties to the contract have serious and true intention. where their respective wills or intentions, through intentional cooperation, are identical. in the creation of a legal obligation with certain legal consequences, such as the creation of rights and duties with a certain economic value. Consensus can be divided into three categories: True Consensus: reached expressly or through conduct (tacitly). Assumed Consensus: consisting mainly of terms implied by the parties. Consensus by Operation of Law: because of common-law rules, legislation, or trade usage. Consensus and the Formation of Contracts: - - Communication and conscious co-operation between the parties are required before there can be any consensus. The law cannot determine the intention of a party if it is not disclosed in one way or another. Disclosure normally takes place through a process of negotiation where the parties declare their intentions. These disclosures: can be a mere invitation to do business. the parties’ intentions and the purpose and contents of the disclosure will determine and identify their nature. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 these disclosures can be made informally, except where the law or the parties require certain formalities. the negotiations must be precisely analysed to determine whether binding declarations of intent were made. Consensus will only exist if the declarations of intent are the same and where consensus was reached through intentional co-operation between the parties. - • The Ocer: Declaration of intent by a prospective party to a contract, which contains proposals with a certain content regarding the proposed contract, and which is of such a nature that mere acceptance thereof brings a contract (a legal obligation) into being. - An ocer must be distinguished from a mere invitation to do business. EXAMPLE: An advertisement is usually only an invitation to do business, yet could in limited circumstances also constitute an ocer, where all the requirements for an ocer are met. The intention of the advertiser will determine whether a mere invitation to do business was made, or whether it constituted an ocer. - Requirements for an ocer: The ocer must come to the actual knowledge of the oceree. All stipulations and essential elements in terms of which the oceror is prepared to conclude the contract, must be contained in the ocer. Certain stipulations, on the other hand, are automatically included in the ocer by operation of law (for example, common-law stipulations) or by necessary implication. The content of the ocer must be so comprehensive that mere acceptance thereof creates a valid contract. The ocer must be clear, certain, and unambiguous. As a rule, no formalities are required, unless prescribed by legislation or by the parties themselves. The ocer must be made with the intention of creating a legal obligation. The oceror must have the intention to be legally bound to his/her ocer. This must be distinguished from a mere social appointment (for example, where A invites B to lunch) or an invitation to do business (such as a so-called “testing of the waters”, or an advertisement). Consumer Protection Act: Field of application of the Consumer Protection Act 68 of 2008 (CPA): * SIGNIFICANT INFLUENCE on the contents of contracts * Mechanisms in place to address unfairness between CONSUMERS and SUPPLIERS. * CPA applies to: - every transaction occurring within the Republic, unless it is exempted Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 - the promotion of any goods or services, or of the supplier of any goods or services, within the Republic, unless exempted * CPA requires that suppliers: - Make speciPc info available to consumers. - Refrain from making false/deceptive representations. - Provide notices in writing. * Position in terms of the CPA: - Right to plain and understandable language. - Unfair, unreasonable, or unjust terms. - Prohibited transactions, agreements, terms, and conditions. - Right to return goods. - Right to cancel reservations or orders. - Implied warranties: ^ Of safety of goods ^ Of good quality labour and repair work ^ Of timely delivery and performance - Termination of Ocer: Although an ocer does not, by itself, create a legal obligation, it remains legally relevant as it has certain legal consequences. An ocer creates the expectation that an unqualiPed acceptance thereof will create a legal obligation. An ocer is also not meant to exist forever. An ocer can be terminated in the following ways: Rejection of ocer: Where the oceree (expressly or tacitly) rejects the ocer, it is terminated. Rejection also takes place where the oceree does not accept the ocer in an unqualiPed manner. Where he/she qualiPes his/her acceptance, a counterocer is made. A counterocer terminates the initial ocer. Revocation of ocer: An ocer can only be revoked prior to its acceptance. As a rule, an ocer can only be withdrawn ecectively if the revocation comes to the actual knowledge of the oceree. Lapse of time: The oceror may specify that his/her ocer can only be accepted within a determined or determinable period. If acceptance does not occur within such period, the ocer is terminated automatically. If the ocer is not made for a certain period only, it is deemed to have been made for a reasonable period. The question whether the period is reasonable must be answered in view of the facts and circumstances of each case. Death of oceror or oceree before acceptance: Because an ocer does not create a legal obligation, no rights and duties exist that can be transferred to the estate of the deceased. For the same reasons, an ocer cannot be “ceded” to another person. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Contractual incapacity: As we have seen, contractual capacity is one of the requirements for the conclusion of a valid contract. Where either the oceror or the oceree loses their contractual capacity before the contract is concluded, the ocer is no longer susceptible to acceptance and expires. • The Acceptance: An acceptance is an unqualiPed declaration of intent made by the oceree, approving the ocer without reservation, with the purpose of reaching - - There can always be only one single acceptance. If an acceptance contains certain qualiPcations or reservations, it in fact constitutes a counterocer, which in turn can be accepted or rejected by the other party. No contract (including a donation) can come into being before the ocer has been accepted. Requirements for an acceptance: The ocer can only be accepted by the oceree. Where an ocer is made to a certain group of persons (for example, a public ocer), only the members of that group may accept. The nature of the ocer determines the identity of the oceree. The ocer must be clear, certain, and unambiguous. As a rule, no formalities are required, unless prescribed by legislation or by the parties themselves. The terms of the acceptance must correspond exactly with the terms of the ocer. If this is not the case, no consensus and, therefore, no contract can exist. Both parties must also have the intention to conclude a contract. The oceree can only accept an ocer if he/she had actual knowledge of the ocer. As a rule, the acceptance will only be ecective if the oceror is notiPed that his/her ocer has been accepted. (* Exceptions discussed later). The oceree must have the serious intention of being legally bound to his/her acceptance. • Special Ocers: Public Ocers: An ocer is usually made to an individual or to a group of individuals. An ocer can also be made to a certain group of unidentiPed individuals or to members of the public in general. Auctions: Who makes the ocer? (Auctioneer / bidder?), this depends on: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 The T&C: o o o T’s & C’s of Auction will determine with/without reserve. Simple auction / speciPc conditions. If condition ≠ state with/without reserve = RULE → presumed WITH reserve. CPA: Notice in advance must be given if an auction is with reserve (in other words, subject to a reserved or lowest price at which a seller is willing to sell). o Unless notice in advance has been given, neither the owner nor the auctioneer or their representatives may bid at the auction. In the absence of such notiPcation, a purchaser may approach a court to declare the sale fraudulent. o When goods are put up for sale in lots, each lot is regarded to be the subject of a separate sale, unless there is evidence to the contrary. o A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or any other customary manner. Until that announcement is made, a bid may be retracted. Options and Preferential Rights: o Options: Preferential Rights: Commitment by grantor to conclude contract in future with holder. Holder exercises option = ocer is Holder has right to make or receive Prst ocer. Right to Prst refusal Grantor need not accept. Negative Ocers: A negative ocer (option) consists of informing a purchaser that an agreement will come into existence unless the purchaser informs the seller that he/she does not wish to proceed with the agreement, for example where a seller delivered goods to a purchaser, informing him/her that an agreement of purchase and sale will automatically came into existence, unless the goods is returned within seven days after receipt thereof. Section 31 of the Consumer Protection Act 68 of 2008 prohibits this practice (and NCA). Any Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 agreement purportedly entered because of a negative ocer (option), will be void. • Multiple to Ocer and Acceptance: In most cases two individuals make an ocer or an acceptance to each other, with the result that a legal obligation then exists between only these two individual legal subjects. However, more than one party can make an ocer or accept an ocer in which case more than one debtor or creditor could then be involved in a contract. The question then arises as to how the rights and duties in terms of the contract are to be shared by the parties. Three possibilities exist: simple joint liability or entitlement joint and several liability or entitlement joint (or common) liability or entitlement. Joint liability or entitlement Joint liability or entitlement: - Each debtor and each creditor are equally or proportionally liable for and entitled to performance. EXAMPLE: Alice and Ben (debtors) jointly owe R500 to Xita and Yen (creditors),. Alice is liable in the sum of R250, Ben owes R250 too. In the same way, Xita is entitled to R250, Yen is entitled to R250 too. - An absolute prerequisite is that the performance must be divisible. Unless the parties agree to the contrary or the law determines otherwise, simple joint liability ensues by operation of law. Joint and several liability and entitlement Joint and several liability and entitlement: - Each debtor and each creditor are severally liable for or entitled to the whole performance. EXAMPLE: Edgar and Buhle (debtors) are jointly and severally liable to pay R500 to Pete and Yaz (creditors), Edgar or Buhle will be liable to pay the full R500 to Pete or Yaz, if Pete and Yaz are also jointly and severally entitled to payment. - The debtor who has made performance has a right of recourse against the other debtors who did not perform either at all or in full. The extent of the right of recourse is determined by the contractual relationship between the debtors. EXAMPLE: They could agree that Edgar must pay R100 and Buhle R400 otherwise the parties are deemed to be equally or proportionally liable. Where one debtor has performed in full, the creditors cannot claim anything else from the other debtors, as the contract is terminated through performance. The same principles apply to joint and several creditors. - The performance must be divisible for joint and several liability to exist. Parties are only jointly and severally liable or entitled where they expressly Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 - agreed thereto, or where law requires it. Partners are deemed to be jointly and severally liable for partnership debts. The parties may agree to combine these two possibilities and will then (depending on their choice) be either jointly, or jointly and severally, liable or entitled. Joint or common liability and entitlement Joint or common liability and entitlement: - Where performance is not divisible, and joint and several liability or entitlement is not prescribed by law or by the parties, the debtors are jointly liable, which means that they are all liable together for delivery of the whole performance. The creditors are all entitled together to receive the entire performance. The performance is not divided into various shares or portions. EXAMPLE: New geyser is installed in a house owned by two persons. The single geyser is installed to the benePt of both owners, and not half a geyser to the one owner and the remaining half to the other. They can together claim only the one single geyser from the installer. Vicarious liability: - If the Consumer Protection Act is applicable [see 40.09 – 40.14], an employer or principal is jointly and severally liable for anything done by his/her employee or agent in the course of that person’s employment or agency activities, excluding criminal liability. Contents (terms) of the Contract: - It is important to note that the contents of each contract are always more extensive than can be determined merely by looking at the declarations of intent of the parties. Certain contractual terms based on assumptions, or where consensus is created by operation of law, are not evidenced by the declared contract itself. • Contents determined by actual consensus: The parties reach actual consensus either expressly or through Express consensus: o Essentialia: Distinctive terms used to identify a contract as one of the speciPc contracts recognized by common law. To conclude such a contract, the parties must reach consensus regarding the minimum characteristics of that speciPc type of contract = essentialia. This Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 distinguishes that speciPc contract from other contracts. They are not validity requirements for the valid conclusion of the contract. EXAMPLE: The parties intend to enter a contract of sale. They must reach consensus on: (1) the nature of the contract, that is, to buy or sell. (2) the thing to be sold; and (3) the price. Incidentalia: These are terms agreed to by the parties for their own purposes and to fulPl their own needs arising from their speciPc circumstances. EXAMPLE: The parties could agree in their contract of lease that the lessee may occupy the property as from 23 September 2001, as this date suits their speciPc needs. o Conditions: Suspensive Condition: A condition is suspensive if performance in terms of the contract cannot be claimed before the condition (the happening of an uncertain future event) is fulPlled. Note: o EXAMPLE: “This contract of sale is subject to the condition that the buyer will obtain a bank loan before or on 30 May 2001 for not less than R1 million against interest of 14% per annum.” A contract is concluded, and a legal obligation is created between the parties, yet can be enforced (payment of the price can be claimed from the buyer) only once the buyer fulPls the condition and obtains the prescribed bank loan. Where the bank refuses to lend the money to the buyer, the contract is terminated without any further liability ensuing for either party. Enforceable rights and duties that existed before termination of the contract (because of the non-fulPlment of the condition) remain enforceable if the performance is divisible. Resolutive Condition: Where a resolutive condition applies, the continued existence of the contract is made subject to the occurrence of an uncertain future event. Note: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 EXAMPLE: “A rents B’s house, subject to the condition that the lease shall continue until A marries.” If A does get married, the agreement terminates. o Terms: Suspensive Term: A term is suspensive when the enforceability of some or all the performance in terms of the contract is subject to the occurrence of a certain future event, even if it is uncertain exactly when it will happen. EXAMPLE: “The full purchase price is payable 14 days after the death of the seller.” Resolutive Term: A term is resolutive if the continued existence of the contract depends on the occurrence of a certain future event, even if it is uncertain exactly when it will happen. EXAMPLE: “The employee must remain in the service of his employer until he reaches the age of 65 years or until his death, whichever occurs Prst.” o o Assumptions: In the case of an assumption, both parties assume that a certain fact exists and that it forms part of their contract. An assumption dicers from conditions or terms in that it refers to something that has happened in the past or to some existing situation. Consensus must be reached on the basis that the situation exists. If it appears that the situation did not or does not exist, there can be no consensus and, therefore, no contract. EXAMPLE: B buys a farm from S for the purpose of growing vegetables. B and S enter the contract on the assumption that the owner of the farm has the right to draw water from the adjacent river. The true facts are not known to them and are thus only assumed. Should their assumption prove to be wrong in that the owner does not have these rights, there is no consensus between B and S and, therefore, no contract of sale comes into being. Guarantees: A guarantee is a contractual undertaking as regards the absence or presence of some legal fact. If such undertaking proves to Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 be untrue, the party who made it is guilty of a breach of warranty. Fault is no requirement. EXAMPLE: A guarantees B that Pierneef painted a certain picture that B wishes to buy. Should this not be the case, A is liable to B for breach of contract. Non-compliance with a warranty or guarantee always constitutes substantial non-performance in terms of the contract, which entitles the prejudiced party to the ordinary contractual remedies. A guarantee or warranty can be made in respect of a future, present or past fact and can be made expressly, tacitly or by operation of law. Guarantees may also be given by operation of law, for example, in terms of a deed of sale a seller will be held liable for the buyer’s damages because of a latent defect in the thing sold. Impossibility of performance is no excuse for a breach of warranty. Modal Clauses: A modal clause (modus) is a contractual stipulation in terms of which one party places a duty upon the other to deliver a speciPc performance. Like a condition, modus always refers to a future event. EXAMPLE: A donates his farm to B subject to the modus that B builds a school on it. If B accepts the donation, he must build the school. • Consensus through conduct: Declarations of intent are usually made either by words or in writing. Sometimes these “declarations” may be deduced from the parties’ conduct (tacitly) because the ocer and acceptance can in fact be made without the spoken or written word (tacitly). The parties may, therefore, reach actual consensus merely through their conduct. NOTE: actual consensus, as in the case of express consensus, was reached by the parties and that the principles discussed above are equally applicable to consensus through conduct. • Contents based upon assumed consensus: Assumed consensus is that which is deemed to exist between the parties. Such assumed consensus can in_uence some or all the terms of a contract. Unlike actual consensus, consensus is merely deemed to exist in this case. Implied terms: These terms are relevant where the parties to a contract fail to reach agreement, either expressly or through conduct, regarding a speciPc aspect of their contract. It is not the function of the courts to conclude, formulate, alter, or improve contracts on behalf of the parties. Requirements: The inclusion of the term must be fair and reasonable. The term must be based on the common intention of the parties, for the parties to be deemed to have given their implicit consent to such a stipulation. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 The only reasonable interpretation of the contract must show, on balance of probabilities, that all the parties to the contract would have included such a term, had they been aware of the omission thereof at the time of conclusion of the contract. It must be certain, by necessary implication, that all parties would have reached consensus regarding the term and that this consensus would have been present in their declarations of intent (made expressly or through conduct) at the time of conclusion of the contract. The term must be necessary to give business ebciency to the contract. The term must be clear and unambiguous as to its contents. The inclusion of the term must be not only desirable, but actually necessary. Ticket contracts: Where one of the parties to a contract issues a ticket containing all the terms of their contract, or that refers to another document containing these terms, a so-called ticket contract is concluded. o TO DETERMINE IF A PARTY IS BOUND TO A TICKET CONTRACT ASK: If CPA applies – all ticket contracts need to comply with CPA otherwise contract = VOID o CPA Rules regarding Ticket-Contracts: If suppliers limit consumer risk: Advance bookings: Overbookings: • Consensus through operation of law Consensus through operation of law: The parties to a contract need not reach consensus on the terms that form part of a contract by virtue of legislation, the common law or trade usage. These terms form part of the contract by operation of law. The parties do not have to have the Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 intention, or even the knowledge, that these terms are to form part of their contract. Common Law: The naturalia form part of the contract unless the parties speciPcally agree to exclude them from the contract (by means of incidentalia). Legislation: Certain statutory provisions exist to protect the consumer and to promote the ebciency of commercial transactions. These provisions either require or prohibit certain contractual terms. The parties to the contract may not by agreement alter or exclude such a term. Trade Usage: CPA In_uence: o If CPA applicable – in_uences contents of a contract CPA applies to: All transactions In RSA Including promoting of goods and services CPA protects: Natural persons Juristic persons with assets/T-over of less than R2 million Example of CPA requirements: Time and Place of Conclusion of Contract: It is important to determine when and where a contract came into being. In the case of a dispute between the parties, the place where the contract was concluded will determine which court has jurisdiction to hear the matter. The time of conclusion of the contract is relevant where, for example, it is uncertain whether or not an ocer was revoked before acceptance thereof. Declaration theory: o In terms of this theory the contract is concluded when and where the oceree expresses/voices/declares his/her acceptance. At present this theory enjoys no application in our law. Expedition theory: o In terms of this theory the contract is concluded when and where the acceptance, made by the oceree, is dispatched to the oceror. Reception theory: o According to this theory, the contract is concluded when and where the oceror receives the acceptance made by the oceree. Information theory: o This theory holds that the contract is concluded when and where the oceror is informed of the oceree’s acceptance. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 • General rule of South African practice General rule of South African practice: - The information theory is applied as the general rule in South African law. Therefore, as a rule, the contract is concluded when and where the oceror is actually informed that his/her ocer has been accepted. • Exceptions to the rule: Where both the ocer and the acceptance are made by post, telegram, or phonogram, but not by telephone or fax, the expedition theory is applied, provided that the following requirements are met: Both ocer and acceptance are made by post. The oceror does not prescribe another method of acceptance in this ocer. The general postal service must be operational. The letter of acceptance must bear the correct address. Factors that In_uence Consensus: The parties to a contract may at Prst glance appear to have reached consensus while this is not the case, because of the existence of certain factors that have an in_uence on consensus. These factors may have the ecect that either no contract came into being (the contract is null and void) or that a contract did come into being but is voidable. VOID: Error: VOIDABLE: Misrepresentation Duress Undue In_uence Commercial Bribery • Error (mistake) Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Validity can only be contested if error = reasonable and material Depends on the facts and circumstances of each case. Error in motive: - Error as to party’s reasons for entering contract. No inIuence on validity of contract (& consensus) What if error in motive due to misrepresentation? →voidable Error regarding the contents or existence of a contract: - - - - Error regarding the person of the other contracting party. In this case, one of the parties is under misapprehension as to the person of the other party. For example, A wishes to conclude a contract of employment with B who is trustworthy, but mistakenly concludes the contract with C (a criminal) whom he thinks is B. This contract is null and void because of error with regard to the person of the other contracting party. Error regarding the identity of the other contracting party. In this case, a contracting party makes a mistake as to the actual name of the other party. For example, where A employs Bert (whom he wants to employ), but mistakenly thinks his name is Sam, this mistake is not fatal to the validity of the contract. This kind of mistake does not acect consensus, and a valid contract between A and Bert has come into being. Error regarding the nature of the agreement. For example, where A wants to sell his house to B, but enters a contract of lease, there is no consensus and, therefore, no contract. Error regarding performance. This is a mistake regarding the performance or the terms of the contract in respect of performance. For example, where A wishes to buy a candlestick made from silver, but a bronze candlestick is delivered to him while he is under the impression that it is made from silver, there can be no consensus between him and the seller. Similarly, where A wishes to conclude a contract of sale without giving any warranties, and B thinks that A gives a warranty against latent defects, error in_uences consensus in such a way that no contract comes into being. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Dispute: • Misrepresentation: False statement of facts Expressly or though conduct o Fraudulent o Negligent o Innocent Contracts are valid yet voidable. Claim for (delictual) damages in case of fraudulent and negligent misrepresentation. • Duress: Force through threat of violence • Undue In_uence: Use position of authority to in_uence someone to conclude contract. Person would not have concluded otherwise. Contract valid yet → voidable Requirements: o One party obtained undue in_uence. o In_uence weakened powers of resistance and rendered will compliant. o Used in_uence in unscrupulous manner. o In_uence induced the conclusion of the contract. o Contract prejudicial to injured party. • Commercial bribery: Takes format of an agency relationship: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Right to fair and honest dealing in terms of the Consumer Protection Act: Requirement 2: Contractual Capacity What is contractual capacity? The competence to perform a juristic act. Components: the ability to form a will. the ability to act with sound judgement in accordance with such will. Who has contractual capacity? Persons (or legal subjects) is the bearer of rights and duties and, therefore, has a legal capacity. All persons, be it natural or juristic (legal) persons, have legal capacity. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 All human beings are natural persons’, but their statuses dicer (based on age, sex or circumstances). Natural persons are divided into 3 categories: 1. Persons with NO CC 2. Persons with LIMITED CC 3. Persons with FULL CC VERSUS Juristic Person: Natural Person: An artiPcial person created by law. All human beings The law awards a separate legal identity with its own legal personality to such a juristic person. CPA dePnes juristic person as: a body corporate. a partnership or association. a trust as dePned in the Trust Property Control • 1. Persons with NO CC These persons cannot perform any juristic act, such as the conclusion of a contract, on their own. Persons under the age of 7 (infans): Has legal capacity but no contractual capacity. Guardian acts on their behalf. may only conclude contracts on behalf of the infans for purposes of the administration of his/her estate and for his/her maintenance and support. Certain acts may never be performed on behalf of the infans (for example, an engagement to be married). Mental health care users: - In our law every person = sane unless proven otherwise (mentally unstable, insanity etc.). - On the other hand, the person who alleges that someone who has been classiPed as a mental health care user, does or did have contractual capacity, must prove this fact. - They have legal capacity but no contractual capacity, any contracts with them becomes null and void. - Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 - Test – “Lucid for a moment” or Mentally ill at time of conclusion? = Null and Void CPA: provides that any agreement with persons who are held as mentally unPt is void, where the supplier knew or could reasonably have determined this fact. The fact that such a person has been certiPed or that an administrator or curator has been appointed for him/her, does not change the fact that he/she has no contractual capacity at all. can only acquire rights and duties through juristic acts performed by his/her administrator or curator on his/her behalf. Persons under the inIuence of drugs or alcohol: A person who is unable to form a will because of the in_uence of alcohol or drugs, and who is unable to realise the consequences of his/her actions, has no contractual capacity at all whiles in such a state of intoxication or stupefaction. Any juristic act performed in such a state is null and void. Any party who has already made performance in terms of such act (for example, in terms of a contract) may claim the return of such performance. Where return of performance is not possible, the other party is liable on the grounds of enrichment. where an intoxicated person still can form a will despite his/her intake of alcohol or drugs, his/her contractual capacity is not acected. The onus is on the person claiming contractual incapacity because of drugs or alcohol to prove it. - - - - - • 2. Persons with limited CC As a rule, persons with a limited contractual capacity can conclude contracts only with the assistance of another person. This aid or assistance is intended to supplement the inadequate powers of judgement of the person with limited contractual capacity. Minors: 7<minor<18 - - - A minor can attain majority in three dicerent ways, namely: Reaching the age of 18. by concluding a valid marriage. through an order of court. Minor will have a guardian else the High Court will appoint a tutor to the minor. The tutor only obtains capacity once obcial letters of appointment have been issued by the Master’s Obce. Some contracts require the consent or assistance of the guardian or tutor to bind the minor. Contracts binding upon minors: Where minor has full contractual capacity: Minor can act without a guardian, (legislation/statute example: bank account/medical treatment). Where minor acts with consent or assistance of guardian: The guardian/tutor can consent to such an act before, during or after it is done. If the consent is given after performance of the act, ratiPcation takes place. RatiPcation renders the act valid and binding as if it was done Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 - - - with the necessary consent or assistance at the time of performance of the act. Guardian/tutor acts on behalf of the minor: The guardian/tutor may perform certain acts on behalf of the minor. The minor obtains the rights and duties that arise from these acts, which may only be performed to his/her benePt. If they are in any way to the minor’s detriment or disadvantage, these acts may be set aside by an order of court. The parties are then placed in the position in which they were before the act was performed. This is called restitution or restitutio in integrum. Additional consent above and beyond consent of guardian/tutor: example is where immovable property of the minor is alienated. Prohibited actions: Certain juristic acts may not be performed by or on behalf of the minor. An engagement contract may, for example, not be concluded by or on behalf of a minor before the minor has reached puberty. Emancipation of minor: Where a minor is emancipated, he/she is entitled to act independently in certain business transactions. A general consent given by the guardian/tutor, either expressly or tacitly, entitles the minor to act without any additional consent or assistance in these business transactions. The minor has full contractual capacity regarding these acts. The consent given by the guardian/tutor may be recalled or withdrawn. The minor then reverts to his/her status of limited contractual capacity. A mere aloof attitude on the part of the guardian/tutor will not constitute consent. A further requirement for emancipation is that the minor must have the ability to be Pnancially independent. In certain instances, emancipation is forbidden by law. Minor pretends to be a major: Where a minor fraudulently creates the impression that he/she is a major, he/she is bound by his/her actions as if he/she had already attained majority at the time such actions were performed. He/she is bound to the contract even if it is to his/her detriment, and he/she is not entitled to restitution. A minor is always entitled to restitution when the contract is to his/her detriment except where: the minor fraudulently pretends to be a major. the minor ratiPes the act after attaining majority. the action has prescribed. If the court orders restitution, an additional order for compensation for the use of the performance enjoyed by the parties during possession thereof can be given. Contracts not binding upon minors: Guardian/tutor acts on his/her own behalf and not on behalf of the minor: where the guardian/tutor acts outside his/her authority on behalf of the minor, or where the guardian/tutor acts on behalf of the minor without obtaining the necessary additional consent (for example, that of the Master of the High Court). The minor acts as the guardian/tutor’s agent: the guardian/tutor acquires the rights and duties _owing from the representative act. The minor acts on his/her own without consent or assistance from his/her guardian/tutor: The minor cannot be held liable for Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 these acts and, therefore, performance cannot be claimed from him/her. The minor can hold the other party bound to the contract only if the action is ratiPed either by the guardian/tutor or by the minor him-/herself after attaining majority. If this is the case, the minor will be held bound to his/her acts. Married persons: - In community of property (ICOP): Applies automatically (by operation of law) if a person does not conclude a ante-nuptial agreement (ANC). - Out of community of property (OCOP): Must conclude ante-nuptial (ANC) agreement, in writing and signed, notarially executed and registered in Deeds Obce within 3 months from date of marriage before it is enforceable against 3rd parties. - Note that civil unions (same-sex marriages) and customary marriages are legally recognised as marriages. - Current legal position (since 1/11/1984) regarding: Marriage in of community of property (ICOP): Equal partners regarding the joint estate and must make pro rata contribution to joint household in accordance with Pnancial ability (right of recourse). Marital power of husband abolished. Both parties = equal capacity & equal power to manage estate. For protection of both spouses: consent required from one spouse before the other spouse can perform certain acts as prescribed by Marriage Act (statute/legislation) → limited contractual capacity: o Express/tacit consent o Written consent o Written consent attested by two witnesses. If prescribed consent not given = act inecective + does not bind estate (void). Defending/Instituting claim – need consent. Both spouses sued together unless separate property/estate/business/occupation. Marriage out of community of property (OCOP): Two (2) separate estates. Both spouses have separate and full cc regarding own estates. Must make pro rata contribution to joint household in accordance with Pnancial ability (right of recourse). Accrual (growth) system automatically applies ex lege (Naturalia of agreement) o except if speciPcally excluded in ante-nuptial (ANC) contract (Incedentalia). Where accrual not excluded: o Bigger of the two accruals is divided in 2 if parties get divorced/upon death. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Prodigals: Person with no ability to handle his/her own acairs (especially Pnances) properly. - By order of court. - Same position as minor. - Curator necessary to perform valid juristic act. - CC can only be restored by another order of court. Persons under curatorship or administration: - Person who cannot handle his/her own acairs due to illness, accident or any other cause placed under curatorship/administration. - Curator/administrator takes control of estate. - Appointment of curator or administrator does not acect cc of the person. Insolvency: - Pre-sequestration: insolvency pre Pnal sequestration does not acect cc of a person. - Post sequestration: insolvent estate vests in trustee who realise and liquidate estate and distribute proceeds to creditors. - • 3. Persons with full CC: - Majors (persons >18 years) and who falls outside abovementioned categories has FULL CC. (& Marriage OCOP). Exceptions: Statute can limit CC. Example: Person guilty of fraud - not be appointed as company director. Requirement 3: Legality A contract is legal if: - not against the law (that is, common law or legislation). if performance is possible at the time of conclusion of the contract. if performance is determined or determinable. Certain contracts prohibited through: - common law legislation Why? Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 - To protect the public interest and good morals of society. What can be prohibited? - Conclusion Purpose Performance Ecect on contract: - Illegal and invalid (general rule) or Valid but unenforceable. • Contracts contrary to statute (Prohibited by legislation): expressly or implicitly prohibited by statute General rule → null and void OR: Parties only guilty of an ocence Ocence without provision as to validity → purpose legislature OR: Null and void + guilty of an ocence • Contracts contrary to common law (Prohibited by common law): contrary to the public interest or the good morals of society. Contracts contrary to good morals: Community see it as wrong /ocends our conscience. Typical examples of these are contracts that promote sexual immorality or contracts that acect the sanctity of marriage. For example: Where X undertakes to donate to Y if Y continues an adulterous relationship with X. For example: Where A agrees to provide sexual favours to B in exchange for preferential treatment in a State tender procedure for work. Contracts contrary to public interest: Against interests of the state / or public service. o For example: contracts with an alien enemy that are to the benePt of the enemy, contracts to sell an appointment to a public obce. Contracts that defeat or obstruct administration justice. o For example: agreements to commit a crime, or delict; an undertaking (against payment) not to notify the police of a crime; an undertaking by one of the parties to take the law into his/her own hands. No common-law rule that a contract or the terms thereof must be reasonable and not in con_ict with bona Pdes (good faith) to be valid. The absence of reasonableness and good faith may, together with other factors, play an important role when a court must determine whether a contract or terms thereof con_ict with the public interest and therefore illegal. What about limitation of free trade? o Extremely severe & unreasonable. Restraint of Trade (RoT)= Prima facie valid & enforceable Two principles against each other: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 o freedom to contract o contractual restraints Employees prohibited to work at competitor and/or passing on of (to competitor): o Methods of training / skill o Information on how business runs (prevented by the restraint of trade) Court can declare RoT unenforceable (wholly/in part) IF can prove RoT = prejudicial to public interest. Aspects the court would consider declaring RoT unreasonable: o Nature of act limited. o Nature of interest protected. o Time and space mentioned in restraint. o (To lesser degree) equal bargaining power between parties. Thus = if unreasonable → invalid / unenforceable because it is against / prejudicial to public interest. Gambling, Lotteries and Wagers: Also acected by requirements of public policy/interest. Gambling and Lotteries: o Total prohibition has been lifted and / or relaxed on lotteries and gambling/casino’s (new social norms) by Parliament. o Necessary permission & Licenses needed. Wagers: o Performance (usually payment) upon occurrence of uncertain future event. o Purely by chance or luck. o Natural obligation. o Thus, valid debt created but not enforceable by legal proceedings (even if allowed/regulated by statute). • Consequences of illegal contract: - Two consequences: Maxim “no action results from disgraceful cause” (the ex turpi causa rule): no legal action may be instituted upon the contract by any party. Because no valid contract came into being. the normal contractual remedies such as speciPc performance, cancellation, and damages, are not available to the parties. The par delictum rule: both parties are equally to blame for the unlawful contract. the right of the possessor of the performance is the stronger, which means the other party cannot reclaim his/her performance. the courts usually enforce the par delictum rule strictly where some form of immorality or disgrace is attached to the contract, they are sometimes prepared to relax the strict enforcement of Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 the rule and to order the possessor to return the performance to the other party. dibcult to determine in which cases the courts would be prepared to relax the enforcement of this rule. Guidelines drawn from court decisions indicate that the courts will deviate from the rule if it is in the public interest and necessary “to do simple justice between man and man”. The courts will not interfere where both parties have already made full performance in terms of an illegal contract. The parties will not be forced to return the performances already made. Requirement 4: Physical Possibility - Performance must be possible at time when concluding contract. Performance must also be determined or determinable at the time of conclusion of the contract. • Possibility of performance: no valid contract can come into being if it is impossible to perform in terms thereof. For impossibility of performance to have this ecect, the impossibility must be of an objective nature. it must be impossible for anyone (not only for the parties to the contract), to perform in terms of the contract. For example, where A sold B a stud-bull that died the previous night without the parties’ knowledge, performance in terms of the contract is clearly impossible. does not mean that it always must be impossible to deliver the performance. trade test is used to determine whether performance is objectively impossible. Initial impossibility → no contract → reclaim any performance made. For example, if A in the example above guarantees that the bull is still alive, he must make good his guarantee and pay damages to B. Guarantee? → may not rely on initial impossibility. Subjectively impossible? → valid contract comes into being and remains valid. A sells B a bull that belongs to C. A valid contract comes into being. If C does not want to relinquish the bull and A cannot, therefore, deliver it to B, A is guilty of breach of contract for which he/she would probably be liable in damages to B. • Performance must be determined or determinable (certain): at time of conclusion of contract already determined OR at least – determinable: Generic obligation: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 B agrees to buy a sheep from A’s _ock for R100 (generic obligation). The performance that A has to deliver is determinable because, unless it is agreed otherwise, A can choose any average sheep from his _ock to deliver to B. Alternative obligation: o Where A, for example, has a black horse and a brown horse, and B agrees to buy any one of the two for R500 (alternative obligation), the performance that A must deliver is determinable as A can choose which of the two horses, he wishes to deliver to B. o Requirement 5: Formalities • Common-Law Rules - Formalities are the external or visible form of the contract. The general rule of common law is that no formalities are required for the conclusion of a valid and binding contract - and if formalities, it must be applied to amendments too. • Agreed Formalities 1. 2. - - Prerequisite for validity Only proof of verbal agreement Need not be formal → can be an invoice for example. Statutory requirements: Requirements set by legislation to comply with certain formalities. The consequences of non-compliance are determined by the speciPc statutory provision. The purpose of these statutory provisions is to protect the consumer against uncertainty, disputes, and fraud. Cannot be waived. Proof of a written contract Parol evidence rule: • Written document = exclusive memorial of transactions • Only evidence (if contract is in writing) • No other evidence (verbal or in writing) How will unfairness resulting from this rule be counteracted? • Extrinsic evidence not completely excluded and may be placed before the court: a) The written document must evidence a valid contract, as the law does not take notice of an invalid contract. b) A contract that does not comply with statutory formalities is not susceptible to rectiP-cation. c) Evidence necessary for only the rectiPcation of the contract may be brought. d) The purpose of the rectiPcation must be to bring the written contract in line with the true intention of the parties. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 • Consumer Protection Act - Places an obligation on a court to consider a list of factors when determining whether an agreement concluded between a consumer and supplier embody unfair, unreasonable, or unjust terms. Study Unit 4: Breach of Contract and Termination of Contractual Relationship - - - It often happens that, in one way or another, a party fails to honour his/her contractual obligations, and thereby makes him-/herself guilty of breach of contract. Such breach may take one of Pve forms. When breach of contract occurs, certain remedies (forms of legal aid) are by law acorded to the injured party. Apart from these remedies, the parties may agree on other or additional remedies. In some circumstances the injured party is entitled to resile from or cancel the contract because of the other party’s breach, in which case the contractual relationship is terminated. Breach of contract, however, is not the only ground for the termination of the contractual relationship between the parties. Forms of Breach of Contract (5 Forms): BREACH OF CONTRACT = CAUSE OF ACTION • Delay by debtor (mora debitoris) - A debtor is in mora if he/she does not perform timeously in terms of the contract. However, breach of contract is not constituted by the mere late delivery of performance or the fact that the debtor merely delays performance. Requirements: Performance still possible: The debtor must still be able to perform. If performance has become impossible without the fault of any of the parties, there can be no breach of contract in the form of mora debitoris. If the delay by the debtor renders the performance impossible, he/she would be guilty of that form of breach of contract. Debtor fails to perform timeously: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Where a speciPc time for performance is set or where the method to determine such time is agreed upon, the debtor is automatically in mora if he/she does not perform at such time. The debtor is then said to be in mora ex re. No demand for performance by the creditor is necessary to place the debtor in mora, as the arrival of the time for performance as such already is a demand for performance. The creditor must deliver a notice of demand or interpellatio (either verbally or in writing) to the debtor in terms of which performance must be made on or before a certain time. The time set must be reasonable in the circumstances, as the creditor, in fact, unilaterally sets a date for performance. What constitutes a reasonable time, will depend on the facts and circumstances of each case, that were, or should have been, foreseen at the time of conclusion of the contract. The debtor will be in mora if he/she fails to perform after such reasonable time has elapsed. In this case he/she is said to be in mora ex persona. Performance already due and enforceable: If the creditor has a personal right to claim immediate performance from the debtor and the debtor does not have any valid defence to such a claim. Fault not a requirement: A mere delay by the debtor, be it ex re or ex persona, already constitutes breach of contract and the debtor’s intent or negligence is irrelevant. Where the debtor is not able to perform at all, or not able to perform timeously because of circumstances beyond his/her control, he/she is not guilty of breach of contract. o (for example, he/she fails to unlock the store where the debtor must deliver the goods), the debtor is not guilty of breach of contract. Here the debtor has guaranteed that performance will be made at a speciPc time and then fails to perform timeously, the absence of fault on his/her part will not prevent him/her from being in mora. Consequences of mora debitoris: it perpetuates the legal obligation between the debtor and creditor. Usually, the legal obligation between the parties would be terminated if performance became impossible without any of the parties being at fault. In the case of mora debitoris, however, the debtor bears the risk that performance might become impossible while he/she is in mora, in which case he/she will not be excused on the grounds of impossibility. - • Delay by creditor (mora creditoris) - The creditor is in mora creditoris if he/she, because of his/her own fault, fails to accept proper performance by the debtor, or fails to co-operate to enable the debtor to perform. Requirements: Performance still possible: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 However, if the creditor through his/her lack of co-operation renders performance impossible, he/she is in mora, and is guilty of that form of breach of contract. Creditor delays performance: Mora creditoris is possible only where a creditor has a duty to co-operate, in other words, where the creditor has to cooperate with the debtor in order to enable him/her to make proper performance. The creditor cannot be in mora if his/her co-operation is not necessary. Performance due and enforceable: a creditor is under no obligation to accept performance or to co-operate with the debtor if performance is not yet due or enforceable. The creditor will be entitled to refuse premature performance where performance is subject to a suspensive condition or term that is to the benePt of the creditor (pro creditore). If such a condition or term is pro debitore, the debtor is entitled to deliver performance prematurely (before the time set for performance). If the creditor does not co-operate in the latter instance, he/she will be guilty of mora creditoris. Proper performance oMered by debtor: The debtor must take whatever steps towards proper performance are possible without the co-operation of the creditor, and then ocer performance in terms of the contract. Fault not a requirement: The creditor’s failure to accept performance or to co-operate does not have to be caused by fault on his/her part. If, therefore, he/she is entitled to reject defective performance, or if the delay is because of an act of God or coincidence, the creditor will not be in breach of contract. Consequences of mora creditoris: Debtor not excused from performing. Mora debitoris cancelled. Debtor’s duty to take care of object diminished. Obligation perpetuated. - • Positive Malperformance - - There is performance but there is something wrong with the performance. Contents/Quality of performance. Requirements: Positive duty: the debtor must perform some or other act in terms of the contract. Negative duty: the debtor must refrain from doing something or refrain from acting in a speciPc manner. Fault: The predominant view is that fault on the part of the debtor is not a requirement for this form of breach of contract. A debtor should, however, be able to rely on (and must bear the burden of proving) the fact that the malperformance was caused by an act of God, coincidence, or the conduct of third parties for which he/she is not responsible. Consequences: Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 The injured creditor is in principle entitled to the normal contractual remedies. • Repudiation - - - Repudiation takes place when a party to a contract either expressly or tacitly and without lawful justiPcation, communicates to the other his/her unequivocal intention no longer to be bound to his/her obligations in terms of the contract. Requirements: Conduct or action (expressly/tacitly). Intention to repudiate (objective test, fault not required). Consequences: (act + intention) = breach of ctr → cr must accept (termination of ctr) OR reject (remains is force but breach of ctr) repudiation. • Performance rendered impossible. - - Initial impossibility → No valid contract from start Supervening impossibility → Not because of fault (cause existing legal obligation to end) (example. Force majeure / act of God) Performance rendered impossible (through culpable - intentional/negligent – conduct of any of the parties) Requirements: Act + Fault (intentional/negligent) Consequences (ctr not automatically terminated = breach committed): Debtor renders performance impossible? Creditor can: a. cancels the contract, reclaim any performance already made by him/her to the debtor + claim damages. b. uphold the contract, make his/her own performance, and claim damages as surrogate of performance. Creditor renders performance impossible? Debtor can: a. cancel the contract, return any performance already received and claim damages (if sucered) from the creditor. b. uphold the contract and claim counter-performance from the creditor. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Remedies for Breach of Contract (3 Remedies) By operation by law (common law) 1. SpeciPc performance Natural remedy → aim → fulPlment of contract 2. Cancellation Drastic remedy → aim → nulliPes the parties’ original intention to be bound by agreement. 3. Damages Combination remedy → together with 1. or 2. entitled to claim. • Claims for fulPlment of contract. • SpeciPc performance: Natural Remedy Force by court order to perform the original agreement (pay/deliver/ manufacture) Natural remedy → injured party in principle always entitled to SP. BUT → general rule → court will not allow SP order where it could/would cause hardship/impractical to defaulting party. Depends on circumstances of each case/scenario. Impossible to perform? (or sequestration?) 2. Interdict Party A realises that party B intends to do / have done, something party B agreed not to do. OR something in con_ict with contractual obligations. institutes and interdict (order of by court to stop with / undo) forbidden act. 3. Exceptio non adimpleti contractus (reciprocity defence) When? → Reciprocal agreements ie. Cash sale Parties must perform simultaneously. If plaintic (injured party) claims performance from defendant, then Defendant raises the EXCEPTIO. ∴ → Defendant → Right to withhold own performance until Plaintic counter-performs. Defective / partial performance followed by claim for counter performance? Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 • Cancellation: Drastic Remedy Drastic remedy → may only use when in law entitled but not compelled. 1. Lex commissoria clause: Immediately if breach occurs can cancel (non-material). Or will set out speciPc circumstances/speciPcations/requirements when… (Saudia Airlines no-rebooking and no-cancellation fee). 2. a. Mora debitoris (Creditor automatically entitled to cancel if): Time is of the essence. Creditor’s right to recession/cancellation by notice of demand after reasonable time for correction of breach and not corrected. b. Mora creditoris (Debtor automatically entitled to cancel if): Time is of the essence. Debtor’s right to recession/cancellation by notice of demand after reasonable time for correction of breach and not corrected. c. Positive malperformance (Injured party may cancel if): Only where breach = material / substantial (totally dicerent). otherwise → damages or both. d. Repudiation: Accepted = party exercised right to cancel. Divisible performance? Ctr may be cancelled partially. Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 e. Performance rendered impossible: Indivisible performance → only option = cancel + damages. Divisible performance → Resile from ctr iro part rendered impossible + claim damages (for the other part). Time of cancellation: - Injured party allowed keep the right to cancel “in reserve” for unlimited period of time? Injured party may waive his/her right to cancel by: Upholding ctr and claiming SP and Damages. Counter-performance ito contract. Accepting late performance. Accepting defective performance. Method of cancellation: - No formalities required. Thus verbally / in writing / by conduct. BUT must be communicated to the other party in some way. Consequences of cancellation: - General Rule: ALL obligations ito ctr come to an END. No party may claim performance from other and performance already made must be returned. → Restitution must take place because ctr cannot reach fulPlment. • Damages: Combination Remedy - - Purpose: hypothetically places the injured party in position s/he would have been in ($$$), had breach not occurred or had proper performance been made. Damages → injured party entitled to his/her positive interest. Dicerent rules regarding extent and recoverability of damages. To avoid? = Penalty clause → Predetermined number of damages when breach occurs Rules regarding the extent and recoverability of damages in the absence of a penalty clause: Automatic? No → plaintic must prove s/he in fact sustained damages. Damages in money form ($$$) → only claim once “Once and for all rule” (calculate current and future damages). In calculation → plaintic’s current Pnancial position vs hypothetical Pnancial position would contract been fulPlled (no breach). Notice taken of any benePcial side-ecects of breach → diminish damages accordingly. Damages = must result directly from breach Damages caused by breach: o Only claim if damages were: → foreseen o → should reasonably have been foreseen. Plaintic cannot recover damages he/she could have prevented through reasonable care. Only patrimonial losses → can be recovered (loss that would acect the estate of plaintic). Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Penalty clauses → Regulated by the Conventional Penalties Act Can happen that → Amount / value of performance exceed real damage actually sucered by injured party… Is this fair? Limitation imposed: Section 2(1) of the Conventional Penalties Act 15 of 1962: (Prohibition on cumulation of remedies and limitation on recovery of penalties in respect of defects or delay) o Creditor can only recover in terms of the penalty clause and no alternative damages. o Creditor cannot waive (change) right to penalty to rather claim damages. o Except where the contract speciPcally provides that a penalty as well as damages may be claimed. General damages vs Special damages GENERAL: Flows naturally. Presumed such damage would result from breach. Example. Mora interest. SPECIAL: Not natural/ not probable result from the breach. Plaintic must prove – foresaw damages at conclusion + express/tacit agreement such damage = recoverable. Based on: Real/ presumed consensus. - Agreed Remedies (Separately agreed to, to replace common law remedies) - Parties agree to their own remedies. Usually replaces common law remedies. Termination of Contractual Relationships Cancellation in case of a breach Previous topic. Performance - - When? Full and complete performance as per contract (reciprocal act) Money must be acected through legal tender: Cash → Bank notes / coins Cheques, credit cards Receipt → Debtor entitled and is prima facie (at Prst instance) proof of payment. Partial performance? (In full and Pnal settlement?). Place and time of performance: Place? → agreed/nature of contract/where concluded. Time? → agreed/notice/nature. → days in which to perform: Performance to be made after 14 days from…→ Prst day is not included (Last In First Out – LIFO - start counting from 2nd day – 15th day is last date to perform fully). Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 Performance to be made within 7 (seven) days from date of conclusion → (First day IN last day OUT – LOFI – on 6th day is last day to perform fully). Release - Bilateral act – consensus – debtor and creditor Creditor makes ocer to release debtor. Debtor may revoke/accept. If accepted → Dr released from performing. Compromise - Settlement between parties → existing dispute. New compromise (settlement contract) substitutes old agreement. Validity of compromise agreement? Novation - Parties conclude a valid second contract. Intention to substitute & terminate initial existing contract. Novation ONLY possible where ORIGINAL contract is valid. Creation of NEW debt between existing parties OR Delegation to new debtor. Set-oc - Parties owe each other money. Partial or total discharge. Merger - Person becomes both debtor and creditor of same debt. Impossibility of performance - Impossible without fault (force majeure) Prescription Prescription Act (of 1969) Section 11: - Thirty years, Pfteen years, six years, three years Downloaded by Salome Willemse (salome.email@gmail.com) lOMoARcPSD|7789998 • 1. Acquisitive - A person acquires the property of another person. • 2. Extinctive - a certain legal obligation extinguishes / lapses after a certain amount of time. Downloaded by Salome Willemse (salome.email@gmail.com)
