Contracts and Public Policy

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Questions and Answers

What is the primary driver of changes in public policy in South Africa?

The development of new technologies

The adoption of the Constitution of the Republic of South Africa, 1996 (correct)

Global economic trends

The opinions of policymakers

What is the primary reason why certain contracts are illegal in terms of the common law?

Because they are not in writing

Because they are only verbal agreements

Because they are contrary to public policy (correct)

Because they have not been registered

What is the significance of the cases Barkhuizen v Napier 2007 and Beadica 231 CC v Trustees, Oregon Trust 2020?

They provided a framework for evaluating public policy

They are important post-constitutional decisions on public policy (correct)

They introduced the concept of public policy

They have no relevance to public policy

What is the purpose of the public policy concept in determining the legality of contracts?

To determine the types of contracts that society finds undesirable and therefore void for illegality Signup and view all the answers

What is the primary consideration in evaluating public policy in South Africa?

The values and rights of the Constitution Signup and view all the answers

What is the role of fairness in contractual enforceability in a post-constitutional South Africa?

Fairness carries more weight in contractual enforceability Signup and view all the answers

What is the first step a court takes to determine whether a contract is against public policy?

To determine whether one or more established common-law rules of illegality are applicable Signup and view all the answers

What is the traditional approach to testing public policy?

Enquiring whether recognition of the contract would be against public policy Signup and view all the answers

What happens if an established common-law rule of illegality is applicable to a contract?

The court will apply the relevant rule and does not have to embark on the general public policy exercise Signup and view all the answers

What is the general public policy exercise used for in determining the legality of contracts?

To carry out a balancing exercise where all the considerations that point to validity of the contract are placed on one side of the scale, while those considerations that point to the contract being void are placed on the other side of the scale Signup and view all the answers

What is the 'tendency' or objective reasonableness of a contract or clause?

An objective evaluation of the contract's general validity Signup and view all the answers

What is the significance of the sources of public policy in the evaluation of public policy?

They are drawn from the broader considerations of public policy Signup and view all the answers

What is the outcome of the general public policy exercise?

The side of the scale that carries the most weight determines whether the contract is valid (and therefore legal) or void for illegality Signup and view all the answers

What is the significance of the case of Barkhuizen v Napier in the evaluation of public policy?

It introduced a subjective level to the public policy exercise Signup and view all the answers

What is the purpose of public policy in determining the legality of contracts, in terms of the range of policy considerations?

To draw on a range of policy considerations to determine whether a contract or term is illegal Signup and view all the answers

What is the significance of the established common-law rules of illegality?

They are the specific rules which have developed over time for certain types of contracts Signup and view all the answers

Study Notes

Contracts Against Public Policy

Contracts that are illegal under common law are considered so because they go against public policy, which determines the types of contracts or clauses that society finds undesirable and therefore void.
Public policy evolves over time, and established common-law rules may be re-tested and developed accordingly.

The Public Policy Scale

To determine whether a contract is against public policy, a court will first consider applicable established common-law rules of illegality, and if none apply, will carry out a general public policy exercise.
The general public policy exercise involves a balancing act, weighing considerations that point to the contract's validity against those that suggest it is void.

Evolution of Public Policy

Public policy is not static and may evolve over time as societal needs and policy goals change.
In South Africa, the adoption of the Constitution of the Republic of South Africa in 1996 has been a significant driver of changes in public policy.

Important Court Decisions

The cases of Barkhuizen v Napier (2007) and Beadica 231 CC v Trustees, Oregon Trust (2020) are important in shaping public policy.
Key aspects of these decisions include:
- The public policy scale must align with the values and rights of the Constitution.
- The public policy scale comprises both an objective and a subjective leg.
- Various factors are considered under each leg of the public policy scale.
- Fairness carries more weight in a post-constitutional South Africa, but is not a free-floating requirement for contractual enforceability.

Objective and Subjective Reasonableness

Traditionally, public policy has been tested objectively, considering general broader considerations rather than the specific circumstances of the parties.
The case of Barkhuizen v Napier introduced a subjective level to the public policy exercise, which considers the actual effect of enforcement of the contract in the particular circumstances of the parties.

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Description

This quiz covers the concept of public policy in contracts, including what makes a contract illegal and how courts determine whether a contract is against public policy.