SECTION: 3
Formalities and
Terms of a Contract
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TABLE OF CONTENTS
Content
Section 3
Formalities and Terms of a Contract
Page
19
Overview
21
3.1
22
Assisting the Learners with this Section
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Overview
Learning Outcome
The following is the Learning Outcome of this Section:
3. Conceptualise the Formalities and Terms of a Contract.
Learning
Objectives
The Learning Objectives are as follows:
On completion of this Section, the Learner must be able to:
3.
Assessment
Criteria
Conceptualise the Formalities and Terms of a Contract by:

Recognising Contracts where formalities are required

Comprehending the terms of a Contract

Comprehending the conditions of a Contract

Comprehending the different clauses of a Contract
To demonstrate the achievement of the Learning Objectives, Learners are
required to meet the criteria and/or provide the following evidence:


List Contracts that include formalities required by law
Describe formalities included by parties to a Contract


Identify the terms of a Contract
Differentiate between express and implied terms


Differentiate between a resolutive and a suspensive condition
Differentiate between a supposition and a modus

List the clauses that may form part of a Contract
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3.
Formalities and Terms of a Contract
3.1
Assisting the Learners with this Section
Overview of the
main concepts of
this Section
This Section introduces the Learner to the formalities and terms of a Contract.
To determine whether a valid Contract has come into existence, one needs to
establish whether compliance with any formalities is prescribed for the
formation of a particular type of Contract.
Formalities are requirements relating to visible form in which the agreement
must be cast in order to create a valid Contract. These requirements may be
predetermined by the law or by the Contracting parties themselves. In
most cases, compliance with formalities consists of reducing the Contract to
writing with or without the signatures of the parties.
The conditions of a Contract as well as the clauses that could form part of a
Contract are discussed.
Summary of key
learning points
Below is a summary of the key learning points of this Section.

Formalities are requirements relating to visible form in which the
agreement must be cast in order to create a valid Contract
In the majority of cases, an informal Contract is binding and Contracts are
validly concluded without the observation of any formalities

The law requires that certain Contracts must be in writing, namely:
 Contracts for the alienation of land
 Contracts of Suretyship
 Contracts of donation in terms of which performance is due in the
future

Any credit agreement must be in writing and signed by or on behalf of
every party thereto

The parties to a Contract may themselves prescribe formalities

The terms in a Contract imposes on a Contracting party obligations to:
 Act in a specific manner
 Refrain from performing a specific act
 Qualify the contractual obligations

Terms are statements which are made seriously and deliberately and
with the intention that they should be enforceable in law

Terms may be imposed on a person, for example the terms that a bank
imposes on all applications for loans or credit

The person who wants to impose special terms in a Contract should
ensure that the other party is made aware of the terms
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3.
Formalities and Terms of a Contract
Summary, continued

Any Contract contains terms that are deliberately stated

A condition is a particular kind of term and does not include all the terms
generally found in Contracts

A suspensive condition is a contractual term which suspends the
operation of the contractual obligations in terms of the Contract until
the condition has been fulfilled

A resolutive condition is a contractual term which renders the continued
existence of the Contract dependent on the occurrence (or nonoccurrence) of a specified uncertain future event
The terms which render the existence of the Contract dependent on an
event which has already taken place, or on a state of affairs which exists
at the time of concluding the Contract, is known as a supposition (belief
or assumption)
A modus is a contractual term which burdens a Contracting party’s right to
the performance made to him/her in terms of the Contract
There are 5 types of clauses that could be included in a Contract, namely:
1.
2.
3.
4.
5.
The Cancellation Clause
The Penalty Clause
The Forfeiture Clause
The Rouwgeld Clause (Rouwkoop Clause)
The Entrenchment Clause
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3.
Formalities and Terms of a Contract
Summary, continued

There are four types of mistakes which will not make a Contract
“voidable":
1. Mistake of Law.
2. Mistake of Motive.
3. Mistake of Expression.
4. Mistake as to Quantity.

Misrepresentation can take one of four forms, namely:
 Things which are said
 Things which are not said
 Things which are done (also referred to as designed concealment” by
one of the parties
 Things which are not done (e.g. deliberate omissions designed to
mislead the other party)

Types of misrepresentation are:
 Fraudulent misrepresentation
 Negligent misrepresentation
 Innocent misrepresentation

Duress can be defined as an unlawful threat of harm or injury, made by
a party to the Contract or someone acting on his/her behalf that causes
the other party to conclude a Contract

Undue influence may be defined as any improper or unfair conduct by
one of the Contracting parties by means of which the other party is
persuaded to conclude a Contract contrary to his/her independent will
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3.
Formalities and Terms of a Contract
Content covered in
the Learner Guide
The following is covered in this Section of the Learner Guide. Included is a list
of topics as well as the page numbers relevant to the Learner Guide.
TABLE OF CONTENT
Content
Page
Outline of the Learning Outcomes and Objectives
covered in this Section
62
Contracts where formalities are required
 Introduction
 The general rule
 Formalities required by law
 Credit agreements
 Formalities required by parties
63
63
63
64
64
65
Terms of a Contract
 Introduction
 Terms and statements
 Special/important terms
 Express and implied terms
66
66
66
67
70
Conditions of a Contract
 Introduction
 Suspensive conditions
 Resolutive conditions
 Supposition
 Modus
71
71
72
73
75
76
Clauses of a Contract
 Introduction
 The cancellation clauses
 The penalty clause
 The forfeiture clause
 The Rouwgeld clause
 The entrenchment clause
77
77
77
77
79
79
79
Summary
81
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3.
Formalities and Terms of a Contract
Activities covered in
the Learner Guide
The following activities are covered in this Section of the Learner Guide.
Page Activity
63
Reflection activity: Self-explanatory.
65
Activity: The Learner needs to list all the Contracts in his/her work
environment that must adhere to all the formalities as discussed on
pages 64-65.
69
Activity: Self-explanatory. The Learner needs to note the procedure
when explaining the terms and conditions of a credit agreement, lease
or loan to a client before he/she signs the Contract.
70
Activity: The Learner needs to list 2 examples of Contracts that
contain “express and implied terms”.
74
Activity: The Learner needs to note 2 examples of Contract in which
resolutive and suspensive conditions are contained.
75
Activity: The Learner needs to investigate whether a supposition can
be applied within THE BANK and list 2 examples of Contracts in which
such a condition is contained. If not, he/she needs to motivate his/her
answer.
76
Activity: The Learner needs to investigate whether a modus can be
applied within THE BANK and list 2 examples of Contracts in which
such a condition is contained. If not, he/she needs to motivate his/her
answer.
80
Activity: The Learner needs to investigate whether any of the clauses
are included in Contracts in THE BANK. The Learner needs to list the
Contract and the clause(s) included in the Contract.
82
Activity: Self-explanatory. The Learner needs to note additional
learning points or draw a mind-map of the learning points in the space
provided.
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