LAW OF CONTRACTS
Contract: an agreement entered into with the intention of creating an obligation.
Obligation: a juristic bond in terms of which one party has the right to a performance and the
other party has a duty to perform.
REQUIREMENTS FOR A VALID CONTRACT
Consensus:
Unanimity as to consequences they wish to create (for persons and content), to juristic
consequences (intention to be bound, to be able to enforce), and awareness of unanimity
(acceptance of offer must be received).
1. Offer: statement of intention to what performance, and on what terms, offeror is
prepared to bind themself to offeree.
Þ essential terms: written offer to purchase or lease immovable property must
contain the names of the respective parties as well as a description of the
purchase price/rental and the property concerned.
Þ material terms: the date of occupation, suspensive conditions
Þ must contemplate acceptance and a resultant obligation (firm offer)
Þ must come to the attention of the offeree
Þ immovable property must be in writing and signed by the purchaser
Þ movable property need not be in writing but can be made verbally
Lapse:
- after expiry of the prescribed or reasonable time
- upon the death of either the offeror or the offeree
- upon being rejected
- upon revocation
2. Acceptance: Expression of intention signifying his assent to the proposal.
Þ unconditional and unequivocal
Þ accepted by the person to whom it was addressed
Þ reaction to the offer
Þ comply with any formalities set by law or by the offeror
3. Mistake: if a person enters into a contract but subsequently discovers that they
misunderstood or had the wrong impression of the nature of the contract or its terms,
the contract is null and void. The mistake must relate to a material fact and be reasonable.
4. Common Error: despite consensus, the contract is void because each party is
mistaken about some underlying and fundamental fact.
5. Misrepresentation: false statement of fact made before the conclusion of the contract.
6. Duress: prospective contractant is forced or compelled to enter into a contract. The
decision is influenced. Voidable, since the consensus is obtained in a wrongful manner.
Þ it must be an unlawful action which is threatened
Þ the threat must be aimed at the person
Þ the threat must be of immediate and unavoidable harm
Þ fear must be reasonable, justified and not frivolous.
Þ threat must come from other contracting party or a third party.
Performance must be possible:
A contract is void if it is impossible at conclusion (objectively, or if it is not the fault of either parties
for impossibility)
Performance and Object must be Lawful at conclusion of Contract:
A contract is unlawful when its conclusion, or performance to be rendered is forbidden by law,
contrary to public interest or policy, or good morals.
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Alienation of Land Act 68 of 1981: cannot have the same nominee for the buyer and
seller
Aliens Control Act 96 of 1991: cannot sell or let immovable property to a foreigner
that doesn’t have a residence permit.
Sectional Titles Act 95 of 1986: developer bound to a lease agreement of a unit in a
building cannot sell the unit to a third party, unless offered first to the lessee the lessee
has refused the offer.
Matrimonial Property Act 88 of 1984: regulates the disposal of property by spouses
married in community of property.
Capacity to conclude contract:
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Unmarried Persons: over 18, sober at time of conclusion, does not need curator, not
an unrehabilitated insolvent
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Married Persons:
- In community of property: system of joint management (co-owners). Written
consent for:
Þ Alienating mortgage
Þ Conferring real right in immovable property
Þ Enter into a contract about them
Þ Pledge shares
Þ Buy property
Þ As themself as surety
- Out of community of property: full contractual capacity to conclude
transactions affecting his or her own estate, without obtaining the other
spouse’s consent.
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Minors: unmarried person under the age of 18
Formalities must be complied with:
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Section 2(1) of Act 68 of 1981: no alienation of land unless contained in a deed of
alienation signed by parties.
• Section 5 of the General Law Amendment Act: no donation is invalid for lack of
registration or notarial execution.
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Section 6 of the General Law Amendment Act: writing in the case of contracts of
suretyship.
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Parties agree that their agreement must be in writing.
CONDITIONS
A qualification which renders the operation and consequences of the contract dependent on
an uncertain future event.
Þ Suspensive condition: makes the operation of the contract subject to the occurrence of
a future event.
- once the condition is fulfilled the contract becomes binding and its terms can
be enforced by the respective parties
- Pending fulfilment of the condition, the risk of damage to or destruction of the
property sold remains with the seller
Þ Resolutive condition: provides that all or some of the obligations flowing from the
contract would terminate on the occurrence of a future event
- fully operative as if it is unconditional
- risk of damage to or destruction of the property sold passes to the buyer
- if the event specified in the resolutive condition occurs the risk reverts to the
seller
Þ Particular condition:
- Mortgage Bond Clause: agreement of sale usually takes the form of a
suspensive condition that the purchaser can raise a loan of not less than Rx by
or on a certain date. Sale automatically falls away if the loan is not procured
by the stated date.
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Selling Own House Clause: the successful sale of a person’s own property.
Must contain property to be sold, the minimum price, period of sale, and a
statement that the condition will only be fulfilled if the purchaser receives the
purchase price on the sale of his property by a certain date.
OPTIONS AND RIGHTS OF PREFERENCE
Option: an offer to buy or sell property with an undertaking not to revoke the offer for a period of
time.
Right of Pre – emption: a right giving the grantee a preference to buy a particular property should
the grantor (owner) wish to sell it.
TERMINATION OF A CONTRACT
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Performance (completed obligations)
Agreement (consensus to terminate)
Prescription (rights terminate if not enforced after a period of time)
Set-off (both parties owe each other the same amount of money, both debts are cancelled)
Merger (same person becomes creditor and debtor)
Impossibility of performance after conclusion
Insolvency (breach of contract)
Termination by notice