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What is a pacta de contrahendo?
What is a pacta de contrahendo?
A contract aimed at the conclusion of another contract.
Define an option contract.
Define an option contract.
An agreement restricting an offeror's right to revoke an offer.
What is a preference contract?
What is a preference contract?
An agreement where one person binds themselves to give preference to another in certain specific agreements.
Explain the components of an option.
Explain the components of an option.
What does an option offer include?
What does an option offer include?
How does an option contract work?
How does an option contract work?
What are the possible remedies for breach of an option in a preference contract?
What are the possible remedies for breach of an option in a preference contract?
What is the difference between a preference contract and a right of pre-emption?
What is the difference between a preference contract and a right of pre-emption?
In a preference contract, what happens if the offeror attempts to revoke the option? Is this considered a material breach?
In a preference contract, what happens if the offeror attempts to revoke the option? Is this considered a material breach?
What formalities are required for a preference contract to be valid?
What formalities are required for a preference contract to be valid?
What principle applies to options in terms of formalities and compliance?
What principle applies to options in terms of formalities and compliance?
What does the innocent party seek through claiming damages in the event of breach of an option?
What does the innocent party seek through claiming damages in the event of breach of an option?
What happens if an ordinary revocable offer is terminated by the offeror before it is accepted?
What happens if an ordinary revocable offer is terminated by the offeror before it is accepted?
In the context of options, when does an attempt to revoke the offer result in a breach?
In the context of options, when does an attempt to revoke the offer result in a breach?
What is the effect on an offer if the option specifies a time period for its exercise and the option is not exercised within that time period?
What is the effect on an offer if the option specifies a time period for its exercise and the option is not exercised within that time period?
When does the death of either party terminate an option contract?
When does the death of either party terminate an option contract?
How can an option be transferred?
How can an option be transferred?
What happens if an offeror tries to revoke an offer that has an option attached to it?
What happens if an offeror tries to revoke an offer that has an option attached to it?
What is the main power retained by the grantor in a pre-emption agreement?
What is the main power retained by the grantor in a pre-emption agreement?
In a pre-emption agreement, what is the obligation of the grantor if the grantee exercises the option to purchase?
In a pre-emption agreement, what is the obligation of the grantor if the grantee exercises the option to purchase?
What does the grantee have the legal right to expect from the grantor in a pre-emption agreement?
What does the grantee have the legal right to expect from the grantor in a pre-emption agreement?
What type of contract is a right of pre-emption considered to be?
What type of contract is a right of pre-emption considered to be?
What is the significance of the grantor's obligation in a pre-emption agreement?
What is the significance of the grantor's obligation in a pre-emption agreement?
What is the trigger event in a pre-emption agreement?
What is the trigger event in a pre-emption agreement?
What is the trigger event in a pre-emption agreement for the grantor?
What is the trigger event in a pre-emption agreement for the grantor?
What type of offer must be made by the offeror in a preference contract?
What type of offer must be made by the offeror in a preference contract?
What must an offer in a preference contract abide by if terms are stipulated?
What must an offer in a preference contract abide by if terms are stipulated?
How long must an offer be kept open in a preference contract?
How long must an offer be kept open in a preference contract?
In the case of Wissekerke en 'n Ander v Wissekerke 1970, when can the grantor withdraw an offer made to the grantee?
In the case of Wissekerke en 'n Ander v Wissekerke 1970, when can the grantor withdraw an offer made to the grantee?
What is the Oryx mechanism associated with in preference contracts?
What is the Oryx mechanism associated with in preference contracts?
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Study Notes
Pacta de Contrahendo (Contracts Aimed at the Conclusion of Another Contract)
- Generally prohibited, with exceptions of option and preference contracts
Options
- An agreement restricting an offeror's right to revoke an offer
- Holder of option has power to bring contract into existence by accepting the offer
- May be granted gratuitously or for some consideration
- Can be an exclusive right or transferable to 3rd parties
- Has two parts: main offer and ancillary offer
- Offers coupled with a stipulated period of time during which the offeror is not free to revoke it
Formalities of Options
- Preference contract need not comply with the formalities required for the main agreement
- Deed of alienation: Alienation of Land Act
Remedies for Breach of an Option
- Breach is material if offeror attempts to revoke the option
- Innocent party has choice to cancel or uphold contract
- Cancellation terminates the contract and entitles innocent party to restitution for any performance made
- Uphold entitles innocent party to specific performance
- Cancellation/uphold entitles innocent party to claim for damages
Preference Contracts
- An agreement where one person binds himself to give preference to another should he/she decide to conclude some other specified type of agreement
- Right of pre-emption/pre-emptive right: grantor is under no obligation to sell property, the grantee merely acquires the preferential right to buy if/when grantor decides to sell
Transferability of Option
- Can be transferred through cession
- Exceptions: prohibited in the option (Express/Implied)/ Option is personal to the Offeree
- Whether identity of Offeree is of any importance to Offeror
Effect of Options
- Renders offer irrevocable
- Attempt to revoke is a breach with no force or effect
- Offer remains open
Duration of the Option
- Option should specify the time within which the option must be exercised
- Failure to exercise option in the given time - automatic termination of option
- If option does not stipulate a time period - offer must be kept open for a reasonable time
- Death of either party will not terminate option unless contract stipulates otherwise
Obligations of the Grantor in Preference Contracts
- Grantee has the correlative legal right against the grantor that he should not sell
- Trigger event in pre-emption agreement
- Offer must be bona fide
- Grantor cannot avoid pre-emption agreement by making an unreasonable offer
Remedies for Preference Contracts
- Usual civil remedies (Interdict?), but also, The Oryx mechanism
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