Pacta de Contrahendo: Law of Contract Quiz and Flashcards

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Questions and Answers

What is a pacta de contrahendo?

A contract aimed at the conclusion of another contract.

Define an option contract.

An agreement restricting an offeror's right to revoke an offer.

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.

An option has two parts: the main offer (offer to enter into the main agreement) and the ancillary offer (agreement to keep the main offer open for a certain time). Signup and view all the answers

What does an option offer include?

An offer coupled with a stipulated period during which the offeror cannot revoke it. Signup and view all the answers

How does an option contract work?

The offeror makes an offer to the offeree and specifies a time within which the offeree must accept the offer. Signup and view all the answers

What are the possible remedies for breach of an option in a preference contract?

Cancellation or uphold contract Signup and view all the answers

What is the difference between a preference contract and a right of pre-emption?

A preference contract involves giving preference to another party if a specific agreement is reached, while a right of pre-emption grants the holder the first option to buy if the grantor decides to sell. Signup and view all the answers

In a preference contract, what happens if the offeror attempts to revoke the option? Is this considered a material breach?

Yes, it is considered a material breach. Signup and view all the answers

What formalities are required for a preference contract to be valid?

Preference contract does not require compliance with formalities of the main agreement. Signup and view all the answers

What principle applies to options in terms of formalities and compliance?

Options need not comply with formalities required for the main agreement. Signup and view all the answers

What does the innocent party seek through claiming damages in the event of breach of an option?

To be placed in the financial position as if the breach had not occurred. Signup and view all the answers

What happens if an ordinary revocable offer is terminated by the offeror before it is accepted?

It must be communicated with the offeree. Signup and view all the answers

In the context of options, when does an attempt to revoke the offer result in a breach?

When the offer has been rendered irrevocable. Signup and view all the answers

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?

Automatic termination of the option. Signup and view all the answers

When does the death of either party terminate an option contract?

Only if the contract stipulates so, either expressly or impliedly. Signup and view all the answers

How can an option be transferred?

Through cession, unless prohibited or if the option is personal to the Offeree. Signup and view all the answers

What happens if an offeror tries to revoke an offer that has an option attached to it?

The revocation has no force or effect, and the offer remains open. Signup and view all the answers

What is the main power retained by the grantor in a pre-emption agreement?

The power to decide whether or not to sell. Signup and view all the answers

In a pre-emption agreement, what is the obligation of the grantor if the grantee exercises the option to purchase?

The grantor is obliged to give the grantee the preference of purchasing. Signup and view all the answers

What does the grantee have the legal right to expect from the grantor in a pre-emption agreement?

The grantee has the correlative legal right that the grantor should not sell to a third person without offering them the first refusal. Signup and view all the answers

What type of contract is a right of pre-emption considered to be?

It is considered a negative contract. Signup and view all the answers

What is the significance of the grantor's obligation in a pre-emption agreement?

The grantor is prevented from selling to a third person without giving the grantee the first refusal. Signup and view all the answers

What is the trigger event in a pre-emption agreement?

The grantee exercising the option to purchase. Signup and view all the answers

What is the trigger event in a pre-emption agreement for the grantor?

Negative obligation Signup and view all the answers

What type of offer must be made by the offeror in a preference contract?

Bona fide offer Signup and view all the answers

What must an offer in a preference contract abide by if terms are stipulated?

The terms stipulated Signup and view all the answers

How long must an offer be kept open in a preference contract?

For a reasonable period Signup and view all the answers

In the case of Wissekerke en 'n Ander v Wissekerke 1970, when can the grantor withdraw an offer made to the grantee?

If the grantor genuinely changes his/her mind about selling the property Signup and view all the answers

What is the Oryx mechanism associated with in preference contracts?

Remedies Signup and view all the answers

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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Description

This quiz covers the concept of Pacta de Contrahendo in contract law, specifically focusing on contracts aimed at the conclusion of another contract. It explains the exceptions of option and preference contracts, along with their respective definitions and implications.

The Law of Contract: Pacta de Contrahendo