Business Law Notes PDF

lOMoARcPSD|14927450 Business Law Notes to print Business law (Varsity College) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Amanda Fumba ([email protected]) ...

lOMoARcPSD|14927450 Business Law Notes to print Business law (Varsity College) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Business Law Notes LU1 LO1: Explain the term ‘law’ and what it entails  The law is a set of rules made by the state to order the way in which the people in a society behave.  This is part of a social contract that members of society follow to so that there is order in society.  Laws define what you have to do, what you may not do and what other people are not allowed to do to you.  So, the law tells you what your duties or obligations are and also what your rights are.  Legal Rules/Laws: rules that everyone in a society has to obey. If you break a law, the state can take you to court and may punish you with a fine or a prison sentence.  Ethical Rules/Moral rules: Subjective. They are personal standards of behaviour as to what is right or wrong based on people’s belief systems, which are usually shaped by their religion. LO3: Differentiate between the roles of the three arms of government The Legislature or Parliament  The legislature -otherwise known as Parliament- is considered the first arm of government and is responsible for making the laws of the country and holding the government accountable, monitoring the executive.  The highest elected law-making body which we can consider the first arm of government.  Legislation is the set, or system, of laws made by the legislature.  The Constitution of the Republic of South Africa, 1996, is the highest law of the land to which all other laws and conduct must abide, and it reflects public policy.  Legislation is the most important source of law, because it overrides any other source of law, except the Constitution of the Republic of South Africa, 1996, which must be understood as a special form of supreme legislation, and therefore stands as a separate source of law on its own.  Legislation consists mainly of Acts (also called statutes), which are laws passed by the national Parliament.  Assuming that there is no constitutional issue at play, if two sources of law conflict with each other, you have to follow legislation. If any source of law conflicts with the Constitution (which, as stated, is supreme), then the Constitution’s provisions must be followed.  The legislature has to follow the proper law-making procedures, otherwise its legislation will not be legally binding. The Cabinet /Executive  The second arm of government is the Cabinet, which is the Executive, consisting of the president of the country, the deputy president and the ministers of various state departments. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  The Executive governs the country and develops policies, proposes laws and implements new laws. The Judiciary  The third arm of government is the Judiciary, the Courts.  The role of the judiciary is to uphold the law of the country, trying cases and administering justice LO4: Briefly differentiate between natural persons and juristic persons as legal subjects  Natural persons are human beings  Juristic persons are artificial persons such as companies, universities, municipalities, and the state, which enjoys legal rights and are subject to legal duties.  Although they have no actual physical existence like natural persons, juristic persons have a legal status in terms of our law.  Because a company qualifies as a juristic person, it has a separate legal existence from the directors and members of the company. LO6: Differentiate between a legal system based on parliamentary sovereignty and one of constitutional supremacy. LO8: Describe each source of law The main sources of South African law are: legislation the Constitution of the Republic of South Africa, 1996  Common Law  Customary Law  Judicial Precedent  Foreign Law  International Law Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Trade Practices and Customs  Academic Textbooks and Journals Common Law  South African common law is a set of laws that developed over time.  It includes contributions from various European cultures, as well as South African court decisions.  three ways in which common law can develop: 1. decisions made in superior courts of the land can help to shape and change common law by addressing new issues or interpreting the legislation in new ways. 2. When these courts have to deal with a problem that is not covered by the common law or by legislation, they sometimes look to the legal systems of other countries for suggestions. In this way, the courts can bring in pieces of foreign law and make them part of our common law. 3. If the legislature wants to remove, adapt or develop a part of the common law, it can do so by passing legislation. Case law  Case law refers to the body of law established by judicial decisions from courts.  It is also known as judicial precedent.  In South African law, case law is developed through the judgments made by higher courts, which become binding on lower courts in future similar cases due to the principle of stare decisis (to stand by things decided).  Case law provides interpretations of statutes, clarifies legal principles, and can fill gaps where legislation or common law may not explicitly address an issue. Customary Law  Customary law is generally unwritten law.  It is fixed practices in accordance with which people live because they regard it as the law.  In modern law custom does not play such an important role as a formative source of law. Any assertion of a custom as law has to be proved.  the following be proved before a custom could qualify as law:  It must be immemorial;  It must be reasonable;  It must have continued without exception since its immemorial origin; and  Its content and meaning must be certain and clear. Judicial precedent The law of judicial precedent is based on the principle that courts should decide similar cases in a similar way for the sake of fairness. In this way, the courts try to maintain consistency in the law. We use the Latin term stare decisis to describe this principle. Writings of modern authors Many academics and other lawyers write books and articles in law journals. There are useful sources in which to find legal principles. Although these writings do not have Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 binding authority, they can sometimes have persuasive authority. A court may decide to follow the opinion of a particular author. Indigenous Law  Many black communities live according to indigenous law, which also takes on the form of written or unwritten customary law.  Indigenous law is applied in the ordinary courts.  The Evidence Amendment Act, (Act 45 of 1988) stipulates that a court can take judicial notice of indigenous law, provided that it is not in conflict with the principles of public policy or natural justice. Foreign law  South African courts often come across legal problems that are new to this country but have already been handled and decided on by courts in other countries.  For this reason, our Constitution allows our courts, in such cases, to consider the decisions made about similar problems in those foreign courts.  Section 39(1)(c) of our Constitution indicates that our courts may consider foreign law in their decision-making. That means that our courts do not have to do so, but have the power to consider the laws, including court decisions, from other countries. International Law  is also a source of our law.  International law originates from agreements or treaties between countries or from international organisations like the United Nations Trade practices and customs  Any methods or dealings which have been done in a clear, particular way for a sufÏcient period of time to become law. Academic Textbooks and Journals  Writings of well-respected academics in textbooks and recognized journals are also considered to be sources of law. This source of law is also known as modern writings. LO9: Explain the difference between civil and criminal cases Civil Cases Criminal Cases A civil case is a case between A criminal case is a case that exists persons. between a person accused of committing a crime, and the state. In a civil case, the court needs to In a criminal case, the accused has decide whether the allegations made to be proven guilty beyond any in the pleadings are correct or not. reasonable doubt and has to be prosecuted while having their rights protected by the state. In a civil case, a defendant is In a criminal case, the person who is accused or sued by a plaintiff. on trial is called the accused and they are accused by the state. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Upon closing of a civil case, the court Upon closing of a criminal case, the can sanction damages and cost court can sanction punishment, such orders. as a prison sentence. The aim of a civil case is to find the The aim of a criminal case is to find defendant liable or not liable. the accused guilty or not guilty. LO10: Differentiate generally between the superior courts and the inferior courts  Different courts in South Africa have different levels or areas of power.  The range of matters that a particular court is authorised to hear is called its jurisdiction.  In other words, if a court has jurisdiction in a certain subject area or geographical region, it has authority to adjudicate, or rule, in those cases.  Jurisdiction also refers to the limits of the orders, or decisions, that the court can make, such as the maximum fines or prison terms it can impose.  The jurisdiction of a court determines its place in the legal hierarchy.  To understand more about how judicial precedent operates as a source of law, you have to know the jurisdiction of the various courts and where each type of court fits into the court hierarchy.  The pyramid diagram shows you how the main courts in the South African court hierarchy relate to one another. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 INFERIOR COURTS  Inferior courts handle the less serious cases compared to the superior courts.  Their geographical area of jurisdiction is smaller than for superior courts.  Inferior courts cannot create judicial precedent.  They have to follow the decisions of superior courts.  Include the Small Claims Courts, chiefs’ or headmen’s courts, and Magistrates’ Courts. Types of Inferior Courts: Small Claims Courts  Small claims courts are at the bottom of the court hierarchy.  They try, or hear, civil matters that only involve claims of R15 000 or less.  The procedure is informal, with no lawyers present to represent litigants.  The advantage of this system is that justice becomes more accessible to litigants, mainly because it’s less expensive and generally quicker.  Only natural persons can initiate proceedings in the Small Claims Court.  Juristic persons (for example, corporate legal entities) can be sued, but cannot sue in the Small Claims Court. Chiefs’ and headmen’s courts  These courts deal with customary law cases, which are heard by a chief or headman.  As in the small claims court, the procedure is informal, and there are no lawyers to represent the litigants.  Chiefs’ and headmen’s courts have criminal and civil jurisdiction that is limited to disputes of customary law between people who live in the jurisdictional area of the court.  Litigants who are not satisfied with the decision in a chiefs’ or headmen’s court can take their matter to the Magistrates’ Court for it to reconsider the matter. Magistrates’ Courts There are two levels of Magistrates’ Courts:  District Magistrates’ Courts  Regional Magistrates’ Courts. (A region is larger than a district.) The jurisdiction of each Magistrates’ Court is limited in terms of:  geographical area (district or region)  the type of case  the maximum sentence or value of the claim sought. District Magistrates’ Courts have jurisdiction over local areas, called magisterial districts, with certain limitations:  In the civil category, they cannot hear cases of divorce or adoption, or those relating to a person’s sanity or the validity or interpretation of a will. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  A District Magistrates’ Court may hear civil claims of up to R200 000, whereas a Regional Magistrates’ Court may hear claims of up to R400 000.  In the criminal category, District Magistrates’ Courts cannot hear cases involving murder, rape or treason. They can sentence convicted people to a maximum of three years’ imprisonment per offence. Regional Magistrates’ Courts hear criminal and some civil cases within their region (which is larger than the region of a District Magistrates’ Court).  They are the highest in the hierarchy of the inferior courts.  Regional Magistrates’ Courts have jurisdiction over all criminal cases except treason.  They can sentence convicted persons to a maximum of life imprisonment or a fine per crime.  Decisions of Magistrates’ Courts, whether district or regional, do not create judicial precedent. In other words, if a Magistrates’ Court decides a case a certain way today, another court can decide a similar case differently tomorrow if that second magistrate interprets the law differently. However, where a higher court has decided a similar case a certain way before, the Magistrates’ Court has to follow the precedent set by the higher court in its jurisdiction.  A Magistrates’ Court is bound to follow Constitutional Court and Supreme Court of Appeal decisions on a particular legal issue and to follow its High Court Division’s decision where there is no precedent from these other two courts. SUPERIOR COURTS  The superior courts are the most important courts in the court hierarchy.  Only superior courts create judicial precedent.  A lower court has to follow the decisions of a superior court in its area/jurisdiction, and superior courts follow their own previous decisions. High Courts  Instead of a magistrate, the High Courts have judges, with a judge president at the head of each High Court.  A High Court’s jurisdiction extends only over the province in which it is located.  High Courts hear both criminal and civil matters, and they review cases and hear appeals from the inferior courts.  They can also hear some constitutional matters, but some of these decisions need to be confirmed by the Constitutional Court.  Have inherent jurisdiction - may hear any criminal charges and also civil claims over any amount of money.  In criminal matters – have jurisdiction to sentence convicted criminal to various punishments, even life sentences.  Has provincial and local divisions.  Bound by their own earlier decisions in same province. But one high court not bound by judgement of high court in another province.  Size of high court determined by number of judges presiding over a matter, the larger the court, the more weight it carries when setting judicial precedent. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  When 2 high courts disagree, magistrates courts in each province bound by viewpoint of their own high court. Special Courts  Special courts are at the same level of the court hierarchy as the High Courts, and create judicial precedent for themselves.  Their purpose is to hear specialised types of cases.  The Labour Court, the Income Tax Special Court and the Water Court are some examples of special courts. Supreme Court of Appeal  The Supreme Court of Appeal is generally the highest court in South Africa dealing with matters not involving the Constitution of the Republic of South Africa.  It is staffed by judges of appeal and headed by the President of the Court.  The Supreme Court of Appeal is seated in Bloemfontein.  Main Function – to hear any non-constitutional civil or criminal appeal arising anywhere in the country.  Has limited constitutional jurisdiction as it may not hear and decide constitutional issues which fall within the exclusive jurisdiction of the constitutional court. The Constitutional Court  The function and purpose of the Constitutional Court is to uphold the Constitution of the Republic of South Africa as the highest law of the land.  The Constitutional Court has ten judges plus the head judge, who is the Chief Justice.  It is the highest court in the country to interpret, protect and enforce the provisions of the Constitution of the Republic of South Africa.  has had its jurisdiction extended to also cover non-constitutional issues, which it does on occasion.  Among other things, the Constitutional Court deals with any violation of any fundamental or basic right that the Constitution is designed to protect. LO13: Explain the part of a court judgement known as ratio decidendi as it relates to judicial precedent  Ratio decidendi means ‘the reason or rationale for the decision’.  The part of a judgment that binds future court decisions is called the ratio decidendi.  We can describe the ratio decidendi as the legal principle that comes out of the court’s decision.  When a lawyer has found an earlier case that helps his client’s case, he can use the earlier case (the judicial precedent) to support his client’s arguments to the court. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 LO15: Explain the divisions and subdivisions of South African national law 1.Public law: is the law that governs the relationships between the government and its citizens. 2. Private law: also called civil law, deals mainly with the legal relationships between private individuals. 3. Procedural law: has to do with the way legal rules are enforced. It describes the steps you can take to get help when you have suffered harm or loss. LO16: Differentiate between trial procedure and application procedure as forms of civil procedure Trial Procedure:  The trial procedure is used when the parties are in dispute about the ‘wrongdoing’ of a person, since they need the opportunity to question each other in court.  When the parties disagree about what the true facts of the matter are, the trial procedure allows them to argue it out in court.  In other words, we use the trial procedure when there are differences of opinion as to what happened and who is in the wrong.  The trial procedure, or method of getting a case to be heard before a court, has four phases, namely: 1. the pleadings 2. the trial 3. appeals and reviews 4. the enforcement of court judgments Application Procedure:  Instead of calling witnesses, the parties can argue the matter on paper by way of afÏdavits - a statement made by someone who swears it is true and who signs it before a Commissioner of Oaths.  Application proceedings are generally quicker and less expensive than trials but can be brought only when there is no real dispute on any important question of fact between the parties. LO17: Differentiate between appeals and reviews as application procedures An appeal is a process by which a party requests a higher court to reconsider the decision of a lower court, usually to challenge the legal correctness of a lower court’s decision. It focuses on whether the court made an error in interpreting or applying the law, or in its findings based on the evidence presented. A review, on the other hand, is a procedure where a party requests that a higher court examine the way in which the lower court or administrative body conducted its proceedings, usually to assess the procedural fairness and legality of the proceedings rather than the merits of the case itself. It focuses on whether the process followed was lawful, unbiased, and reasonable. LO18: Explain what it means to interpret a statute (piece of legislation).  Interpreting a statute involves finding the purpose and aims of a piece of legislation to determine whether a statute applies in a particular factual situation, and how it applies to that situation. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  A court may also look at the context within which the legislation is promulgated. The literal approach o is also called the text-based approach. o The words of a statute are the primary source upon which the court relies and if the words are clear and unambiguous, effect is given to them. o In the literal approach, the words in the statute are given their ordinary, grammatical meaning in order to determine the intention of the legislature. o South African courts will usually interpret statutes by the words of the statute and a court would depart from the literal approach only in very limited circumstances. The functional approach o The functional approach to statutory interpretation is a method in which courts interpret legislation by focusing on the purpose and function of the law within its broader context, rather than solely on the literal meaning of the words. o The goal is to ascertain the legislature's intent and to ensure that the interpretation serves the practical purpose of the statute in real-life scenarios. The historic approach According to this approach, the historical situation from which the rule became law is studied in order to clarify the intention of the legislature. The parliamentary history of the wording of the statute may be consulted, as well as the predecessor of the provision. The purposive approach o also called the contextual or text-in context approach, takes a broader view of interpreting a statute. o The purposive approach aims to make sense of the statute in the light of the contextual environment, including social and policy directions. o The courts may consider intertextual aspects such as the language, as well as extra-textual aspects such as the purpose and consequences of the statute. LO20: Explain the impact of the Constitution on the approaches to statutory interpretation When courts have to interpret a statute, they can use a number of aids or tools. These aids help a court in deciding whether, and if so, how, a statute applies to a particular set of facts. If the aids are part of the statute itself, they are known as internal aids, while aids from outside the statute are known as external aids. A statute consists of the following:  a short title (also the ofÏcial name of the piece of legislation), which is a brief description of what the statute is about. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  the date assented to, which is the date on which the statute was passed into law, and the date of commencement, which is the date on which the statute came into operation  the long title or preamble, which explains the purpose and objects of the statute  the definitions section, which is a mini-dictionary of the terms used in the statute and which explains their meaning within the context of the statute  the purpose, interpretation and application sections  the provisions, which set out what the legislature aims to regulate and how the statute applies in a particular context. LU2 LO2: List and define the legal requirements for a valid contract Requirements for a Valid Contract:  Contractual capacity  Agreement  Formalities – the contract must comply with any formalities required by law or agreement  Certainty – the contract must be clear and certain  Possibility of performance – the performance expected from each party must be possible  Legality – you cannot hold someone to a contract that requires them to do something illegal LO3: Explain contractual capacity as a requirement for a valid contract o Contractual capacity is the legal ability to enter into a contract. Contractual Capacity Regarding Minors: o A Minor is anyone under the age of 18. o Minors need protection and therefore have limited to no contractual capacity. o If a minor is emancipated or married, they become a major and have contractual capacity. o Under the age of 7, you have no contractual capacity. o Between 7 and 18 you have limited contractual capacity – may enter into a contract only with the assistance of a guardian. LO6: Differentiate between the contractual capacity of persons married in a community of property and those married out of a community of property  When a couple gets married in community of property, the separate assests and liabilities of each spouse are joined together in a joint estate.  Marriage in community of property is the automatic regime in SA – unless they draw up an antenuptial agreement.  Both spouses are jointly and severally liable for liabilities, which means they can be sued independently or together for the full amount. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  When one is married in community of property, both spouses have full and equal contractual capacity individually to enter into contracts concerning their joint estate.  However, the law regards some contracts too important, and therefore require consent from the other spouse to be valid. Such as: the sale or mortgage of immovable property, a surety agreement and a credit agreement.  One spouse signs the contract and the other spouse signs consent to that contract, with two witnesses also signing. Marriage out of Community of Property  When a couple gets married out of community of property, they each continue to own their property separately.  Have full contractual capacity over their own property and do not need consent from their spouse.  Both parties have to sign an antenuptial contract in front of a notary public.  The contract has to be registered at the deeds ofÏce within 3 months.  There are 2 types of antenuptial contract: those with accrual and those without accrual. Marriage out of Community of Property without Accrual: o The assets a liabilities of the spouses are kept sperate before and after the marriage. Marriage out of Community of Property with Accrual: o The properties the partners bring into the marriage are kept separate and while the marriage continues the assets acquired and liabilities incurred are also kept separate. o However, if the marriage comes to an end, the money or property gained during the marriage is then shared according to a percentage previously agreed upon. LO8: Apply, to a set of facts, the various factors that influence contractual capacity and indicate the effect on a contract in each instance Contractual Capacity regarding Drunken Persons  If a person enters into a contract while they are so drunk that they do not realise they are entering a contract or does not understand the terms of the contract – they are not bound by the terms of the contract.  The contract is void.  The person cannot be forced to comply with the contract, but they would have to return what they received in terms of the contract. Contractual Capacity regarding Insolvent Persons  A person is insolvent if they owe more than they own, or their liabilities exceed their assets.  When a person is declared insolvent, the court issues as sequestration order, which gives control of that person’s assets to a trustee.  To sequestrate means to take legal possession of a insolvents persons property until a debt has been paid or other claims have been met. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Once a person is declared insolvent, they have full contractual capacity in all areas, expect for 3 instances:  Contracts to dispose of any assets that form part of the insolvent’s estate.  Contracts that negatively affect the insolvents estate.  Acting as a general dealer or manufacture.  The insolvent cannot enter into any of these contracts without the consent of the trustee -otherwise the contract is voidable at the instance of the trustee. LU 3 LO1: Explain the process of offer and acceptance, which leads to the parties reaching a consensus WHAT MAKES A LEGAL AGREEMENT? Two initial requirements: - Both parties must agree on something (and be clear on this) - Both parties must seriously intend to be bound by the terms of the contract. Two parts to all contracts:  offer and acceptance.  Once contract is created both parties are bound to perform.  If contract does not exist, parties can still change mind. The three aspects to a valid contract: 1. Making an offer:  (Offeror = makes an offer) (Offeree = receives an offer)  An offer is the way in which an offeror declares to the offeree her intention to enter into a contract and specifies the terms of the contract. 2. Accepting an offer:  The offeree declares his intention to enter into a contract with the offeror, with terms as stated in the offer agreed to. Acceptance of offer makes interaction into a contract. 3. Concluding the contract:  The general rule is that the contract is created when and where the offeror is informed that the offeree accepts the offer. Requirements for a Valid Offer: For an offer to be valid it has to meet the following 5 requirements: 1. The offer must be complete 2. The offer must be clear 3. The offer must be made with the intention of creating a contract 4. The offer must be communicated to the offeree 5. The offer must be current, and must not have lapsed, been rejected or revoked. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 1. Completion o The offer must contain all the terms that the offeror wants to have in the contract. o The offeror must explain fully what they wants the contract to say, so that if the offeree agrees to these provisions, the contract will come into being. 2. Clarity o The offer must be clear and made in such a way that the offeree can understand exactly what contract the offeror wants. o Some of these points offer clarity: - Type of contract - Aim of contract - Amount of money involved - Time of performance 3. Contract Intention o The offer must be made with the intention of creating a contract. o The offeror must intend to be bound by the contract so that if the offeree accepts, there will be a contract.  An advertisement is not an offer, just an invitation to do business.  Advertisements for rewards or auctions, however, are seen as an offer :  Offers of reward: offeror’s intention is to pay a reward to anyone who meets the conditions of the reward.  Offer of reward is an offer to the public so if a person fulfils the requirements for reward, the offeror is contractually liable to pay the reward.  Auction: Public sale of goods or property where people bid.  Auction without reserve: goods sold to highest bidder (auctioneer is making offer to sell and by bidding you are accepting the offer; therefore a contract is created).  Auction with reserve – seller specifies minimum price, auctioneer offers, bidders accept or reject. 4. Communication o The offer must be communicated to the offeree as they caanot accept the offer if they are not aware of it. 5. Current o The offer cannot be lapsed, rejected or revoked. o Offer lapses: Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  offer usually valid for a stipulated time period (without specified time period a ‘reasonable’ time period is used).  Automatically lapse in case of death of one party. o Offeree rejects:  refuse or make a counteroffer. o Offeror revokes offer: The offeror withdraws their offer before it is accepted. Requirements For a Valid Acceptance: 1. Source:  The acceptance must come from the offeree.  Exception: offer made to the public (intention that anyone can accept the offer). 2. Awareness: Offeree must know about offer. 3. Clarity:  There must be an unequivocal expression of the offeree’s acceptance of the offer. 4. Compliance:  The offeree must accept all the terms of the offer.  If offeree changes a term of the offer, she is rejecting the current offer and making a counteroffer.  Original offer now lapses - Original offeror can now accept or reject. 5. Timeliness:  The offer has to be accepted within stipulated or reasonable time (before it lapses). 6. Form:  The offeror may prescribe a certain manner in which the offeree should communicate their acceptance of the offer.  If these conditions are not met, the acceptance will not be valid. 7. Communication:  An acceptance is complete, and a contract is created only when the offeror knows about the acceptance.  Until then, there is no contract, and the offeror can revoke at any time.  Once the offeror has heard about the offeree’s acceptance, a contract is created. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Establishing when and where a contract was concluded by applying the correct acceptance theory: Postal Contracts:  If the parties send their offer and acceptance by post, we need to look at when and where the contract was formed. The law has two approaches to this question: 1. The information theory: - States that the contract is formed where and when the offeror reads the letter of acceptance. 2. The expedition theory: - Suggests that the contract comes into existence where and when the letter of acceptance is posted. - The expedition theory applies to contracts concluded by post when the following requirements are met:  The offeror must have authorised the offeree to send their acceptance via post.  This can be agreed explicitly or implied if the offeror send the offer by psot and does not prescribe how the offeree should communicate their acceptance.  The acceptance must be posted to the correct address.  The postal service must be working.  If these conditions are met, the expedition theory will apply, if one or more are missing, the information theory will apply. Telephonic Contracts and Electronic Communication:  The information theory applies, and the contract is concluded where and when the offeror hears of the offerees acceptance of the offer. Options and Rights of First Refusal Options:  An option is a contract where an offeror agrees to keep her offer open for a specific period  The general principle is that an offeror can revoke their offer at any time before the offeree accepts it, BUT, if the two parties enter a contract of option – it’s irrevocable for a specific period e.g. 6 months – can’t be withdrawn during that period. Rights of First Refusal:  Contract between two people where one person agrees that if she ever decides to enter a contract, she will make an offer to the other person first.  The person who gives a right of first refusal is not making an offer - just guaranteeing that if she does make the offer – it will first be made to the person with the right of first refusal Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  E.g. tenant in flat gets right of first refusal in the event of the owner selling the flat. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Void and Voidable Contracts Void Contracts  A contract is considered void or non-existent if one of the 6 basic requirements of a valid contract is missing.  When a contract is void, it is as if it never existed and the parties have no legal rights or obligation under the contract.  If someone has already performed under the contract, they can use the law of unjustified enrichment to claim back money.  They can also use rei vindicatio to claim back their property from the other party. Voidable Contracts  all requirements for valid contract are present, but the agreement reached in an improper manner.  Due to: - Misrepresentation: false description to get an advantage. - Duress: forced by threats. - Undue influence: influence that prevents someone from making independent judgement about a transaction.  A voidable contract is a valid contract and will remain in force until the innocent party decides to set it aside after proving the requirements for misrepresentation, duress or undue influence.  The effect or result of a voidable contract is that the innocent party has a choice.  Rescind and claim restitution: return items or money if items cannot be returned.  or Uphold: contract remains valid.  Contract remains valid until rescinded - Choice must be made within reasonable time. Contracts that are void due to lack of Agreement / Consensus  A contract that is void due to lack of agreement is called MISTAKE.  There are two types of mistake: UNILATERAL or COMMON o A Unilateral Mistake is when parties misunderstand each other because they see facts or circumstances differently. o The parties cannot be said to be in agreement because they are misudnerstadning each other. o For a unilateral mistake to make a contract void it must meet the requirements: - The mistake must be about facts concerning the contract. - The mistake must be reasonable: if a reasonable person in the same situation would have made the same mistake - The mistake must be material: o The mistake must have influenced the party’s decision to enter the contract. If they had known the truth, they would not have entered. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 o The following mistakes are considered to be material: 1. Error in negotio – type of contract (selling vs donating) 2. Error in corpore – subject matter 3. Error in persona (only if important to know other party) o A Common Mistake is when both parties share a common belief about a certain fact or legal position, and then discover it not to be true. o The contract is void because of common mistake. o There are 2 legal requirements for a common mistake: - It has to be mistake that is shared by both contracting parties. - It has to be a material mistake, i.e. the parties would never have entered into the contract had they known the true facts. Contracts That Are Voidable Due to Misrepresentation o Parties reach agreement but in an improper manner. o The contract is valid until the innocent party makes the decision to rescind the contract. o Misrepresentation is false/misleading statement of fact or conduct made by one contracting party, before the contract is concluded, with the intention to persuade the other party into agreement. o Misrepresentation makes a contract voidable if all 6 of the following requirements are met: 1. The representation must be untrue: - Duty to disclose important facts. - Keep silent = misrepresentation by non-disclosure - Untrue representation by act (showing size with arms) 2. The misrepresentation must be about a fact. 3. The misrepresentation must be material 4. The misrepresentation must be made by one of the contracting parties. 5. The intention must be to induce the other party to contract. 6. The effect must be to induce the other party to contract. Consequences of Misrepresentation: Consequences in terms of law of contract: The innocent party can Rescind (only if above 6 requirements are met) OR Uphold. Consequences in terms of law of delict: Innocent party can sue for misrepresentation if they prove all 5 requirements of the Lex Aquilia: 1. There was an untrue statement (or a non-disclosure) 2. The statement was made wrongfully Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 3. The innocent person suffered loss 4. The loss was caused by the false statement 5. The misrepresentation was the fault of the person making the statement. Types of misrepresentation:  Fraudulent misrepresentation: - Statement made intentionally or deliberately – knowing it to be untrue. - Intending that the false statement should persuade the party - Innocent party can claim Delictual damages  Negligent misrepresentation: - Making untrue statement without taking the care a reasonable person would have to ensure the statement is true. (person believes statement to be true) - Innocent party can claim Delictual damages  Innocent misrepresentation: - Person making the untrue statement is acting neither fraudulently nor negligently. - Person believes statement to be true, has backing for believing so. - Reasonable person would believe the same. - No Delictual damages can be claimed. How much can you claim in damages? Three cases: 1. The contract is voidable and rescinded: Restitution + wasted costs (e.g. legal costs) 2. The contract is voidable but not rescinded: Claim difference in value between what was paid and what should have been paid if no misrepresentation was made + wasted costs 3. The contract is not voidable (in terms of the law of contract): Claim the difference in value + wasted costs. Contracts That Are Voidable Due To Duress Consent to the contract is flawed, not given freely and voluntarily – contract voidable. Requirements for duress: 1. Threat of harm to the contracting party, their family or property 2. The threat must have been of imminent or inevitable harm Imminent: ‘I will shoot you now’ Inevitable: ‘If you don’t sign in 5 days I will shoot you’ 3. The fear that the innocent party felt must be reasonable 4. The threat must have been unlawful or immoral Immoral if ‘lawful’ threat is made to blackmail – expose tax evasion 5. The threat must have persuaded the innocent party to enter the contract Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Consequences of duress: - Voidable (only if all requirements above are met) - Delictual damages for restitution and wasted costs Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Contracts That Are Voidable Due to Undue Influence Occurs when one contracting party has such an influence over the other party that they are incapable of thinking for themselves. Under influencing party’s influence, they must enter a contract they would not normally have entered. Requirements: 1. One party has influence over other party 2. influence must have weakened party (under control of other party) 3. used influence in unscrupulous way 4. resulted in contract 5. contract was prejudicial Consequences: Rescind or Uphold Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 LU 4 Formalities  General rule: no formalities  Most contracts can be concluded with verbally or through actions  Certain contracts require formalities – in terms of the law or imposed by the contracting parties. TYPES OF FORMALITIES o The contract must be written down: All terms of the contract must be written in a document that each party must sign. o The contract must be registered at the Deeds OfÏce. o The contract must be signed in front of a notary public. Formalities required by law: Marriage – Antenuptial contracts: - Must be notarially executed before the parties marry. - Must be registered within 3 months of the date of execution. Contracts for the sale of immovable property: - Regulated by the Alienation of Land Act 68 of 1981 - Must be in writing and signed by contracting parties - Must be registered at the Deeds OfÏce Contracts of suretyship: Third party (the surety) guarantees that if a debtor does not honour an obligation, the surety will be liable to honour the contract - Must be in writing and signed by surety (not creditor) - Non-compliance = void contract Electronic Contracts The electronic communications and transaction act provides that an accessible data message is generally sufÏcient to satisfy the formality that a contract be in writing. This applies to suretyship agreements but not alienation of land. The act also allows an electronic signature to replace a written signature in certain circumstances. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 LU 5 Certainty of Performance in Contracts  If it is not clear what performance is required on each party, the contract is void due to uncertainty.  The contract must either: - State clearly what performance is required - Enable the person to decide what performance is required – it must be ascertainable. Possibility Of Performance in Contracts  A contract will be made void because it does not meet the requirements of possibility, only in the case where the performance is objectively impossible at the time the contract is agreed to.  Objective Impossibility – impossible for anyone anywhere – contract void.  Subjective impossibility – impossible for contracting party – contract not void. LO8: Differentiate between the initial impossibility of performance, the supervening impossibility of performance, and rendering performance impossible/prevention of performance. INITIAL IMPOSSIBILITY OF PERFORMANCE  This occurs when the performance of a contractual obligation is impossible from the very outset, at the time the contract is concluded. In other words, the impossibility exists before or at the moment the contract is formed.  If the initial impossibility is objectively known, the contract is generally void from the beginning and has no legal effect. Neither party can enforce the contract because the agreement lacks a fundamental requirement of a valid contract: the ability to perform the obligations. SUPERVENING IMPOSSIBILITY OF PERFORMANCE 1. This arises when performance was possible at the time the contract was concluded, but due to unforeseen and unavoidable events that occur after the formation of the contract, performance becomes impossible. The impossibility must be due to external factors that are not the fault of either party. 2. When supervening impossibility occurs, the contractual obligations are generally discharged, meaning neither party is held liable for non-performance. This is because the impossibility was beyond their control. PREVENTION OF PERFORMANCE / RENDERING PERFORMANCE IMPOSSIBLE  This situation occurs when one of the contracting parties intentionally or negligently makes performance impossible, either through their actions or failure to act. Essentially, it is the deliberate or careless act of a party that prevents the contract from being performed. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  The party who causes the impossibility is in breach of contract and may be held liable for damages. The innocent party may also have the right to terminate the contract and claim for any resulting losses. Statutory Illegality  The contract is prohibited by statute.  Generally, if a contract goes against what an Act says, the contract will be void.  But in each case, the court will have to interpret the particular statute carefully.  If the contract would bring about the harm that the Act is trying to prevent, the agreement will be void due to statutory illegality. Common-law illegality  Agreements that are against public policy or good morals also void. Effects Of Illegality Of Contracts  If someone has performed in terms of a contract that is void because it is illegal, they cannot recover performance.  Two rules apply here:  In pari delicto: - When both parties are equally guilty, the party in possession of an item is in a stronger position.  Ex turpi causa: When there is an illegal contract, the court will not allow any action to recover the performance in terms of such contract. - Neither party can force the other to perform. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 LU6 Identifying Terms by Their Role Essentialia o Some contracts, called specific contracts, fall into specific groups or types, and therefore have to include particular terms. o Those terms of a contract that identify it as a specific contract are called the essentialia. Naturalia o Naturalia are the terms that are implied into a specific contract. o Once contract is identified as a specific contract, there are terms that the law automatically reads into it. Incidentalia o The other terms that the parties have agreed to, but which are neither the essentialia nor naturalia. Identifying Terms by The Way They Become Part Of The Contract Express terms o A term of a contract that is put into words or given some physical from by the contracting parties. Implied terms o Parties don’t expressly agree to implied terms – terms automatically read into certain contract by law or trade practices. Tacit term o An unexpressed provision that is not explicitly stated in a contract but is understood to be part of the agreement based on the conduct of the parties, the nature of the contract, and the surrounding circumstances. o It is a term that the parties would have agreed upon had they thought about or discussed it at the time of forming the contract. Imposed terms o Terms parties are forced to include o Terms imposed by law: Legislation that requires specific contracts to include particular terms. o Terms imposed by the parties themselves: Party will not contract unless term is part of conduct. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Clauses About Whether or When A Contract Will Take Effect Or End Conditions  Indicates whether a contract will start or continue to operate.  Describes an event that may or may not happen – uncertain future event.  Two types of condition:  Suspensive conditions: Suspends or delays an operation until the condition is met. If condition not met, the contract falls away.  Resolutive condition: Contract is immediately binding and operational but comes to an end should the future uncertain event occur. Time Clauses  Clause in which the rights or duties of a contract start or end at a specific time or event.  Unlike a condition, event is certain to occur.  Two types of time clauses:  Suspensive time clause: Indicates when the duties in a contract must be performed. Agreement can only be enforced once the time specified arrives  Resolutive time clause: Indicates when the contract will come to an end – specific date / after specified period. Suppositions  Contractual term stating that contract will only become operative if a given situation exists or a given event has occurred.  Relates to a possible present state of affairs, rather than a future one (unlike condition).  Bound by the contract only if the circumstances meet the requirements.  E.g. I will agree to buy your ring only if it is 18 karat gold. Cancellation clauses  Enables harmed party to cancel contract if other party fails to perform as agreed in contract.  Without cancellation clause the contract can still be cancel only if breach is sufÏciently serious. Clauses About Contractual Obligations Warranties  Binds a contracting party to extra duties relating to the quality, quantity or other aspects of the thing being contracted to.  Failure to comply = breach of contract. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Can be expressly agreed to, or a tacit warranty, which is imposed by law in certain contexts. Exclusion Clauses  Limits one party’s liability in terms of the law of delict.  Serves opposite function as warrantee. Exemption Clauses  States that a contracting party is exclude or limited from liability in certain circumstances.  Protects one party from certain legal claims from the other party. Modus  An extra condition as to how something must be done or used.  Places a duty on the contracting party to perform some future action related to the original contract.  Operation of the contract is not dependent on the modus being performed (differs from condition).  If fails to comply with modus, breach of contract. Penalty Clauses  Allows parties to agree in advance about what will happen if they fail to perform contractual obligations.  Related to punishments (damages)  Incentive for parties to meet their agreed obligations.  Normally defaulter has to pay an amount of money to the other party. Entrenchment Clauses  Creates formalities that the parties must meet if they want to change their contractual obligations.  Often called no-variation clauses.  To change, change must be in writing and both parties have to sign. Clauses About How to Resolve Disputes Jurisdiction clauses  Serves to indicate what both parties have agreed as to which court will have the power to decide disputes, if they arise, concerning the contract Arbitration clauses  When parties want to avoid going to court to resolve a dispute, seek ADR (Alternative dispute resolution).  Arbitrator listens to what both parties have to say and makes a decision which both parties must follow Cost clauses Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Cost of drawing up an agreement – parties share cost equally  Legal costs: party-and-party costs or attorney-and-client costs LU7 Debtor: The person who has to perform. Creditor: The person who has the right to receive performance. Types of Breaches of Contracts: - Breach due to Malperformance - Breach due to Repudiation - Breach due to impossibility - Breach due to delay in performance by debtor - Breach due to delay in performance by creditor Breach due to impossibility  Either the debtor can make their own performance impossible OR the creditor can make it impossible for the debtor to perform. 1. Debtor Makes Their Own Performance Impossible: o If the debtor’s behaviour is to blame for their own inability to perform as agreed, then they can be held to be in breach of contract. 2. Creditor Makes it Impossible for Debtor to Perform: o If the creditors behaviour is to be blame for the debtor not being able to perform as agreed, then the creditor can be held to be in breach of contract. \ o The debtor has no contractual obligation to perform when the creditor has made it impossible for them to do so. Breach due to Repudiation  To repudiate something means to reject or deny it.  When the creditor receives some form of notification that the debtor will not k=honour their obligations and where there is no legally valid reason for this refusal, the debtor will be in breach of contract. Breach due to Malperformance  If one of the parties performances in a way that is against the agreed terms, then this is a breach of contract. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Distinguishing characteristics: The debtor does actually perform, but the performance is not in line with what was agreed upon. Breach due delay in performance by Debtor  The debtor failed to perform within the time requirements of the contract.  Debtor is in breach.  Mora debitoris – breach by debtor Breach due delay in performance by Creditor  Creditor is in breach for not allowing the proper performance of the debtor.  Mora creditoris – breach by creditor.  This type of breach can only arise where the debtor cannot perform properly without the creditor’s assistance.  Conditions that have to be met for creditor to be at fault in this way: - The time for the debtor to perform must have arrived. - Performance must be possible. - The debtor must have tendered proper performance to the creditor, as per the terms in the contract. - The creditor must have failed to give their cooperation. - The default must be due to the fault of the creditor. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 LU 8 The three categories of remedies available when a contract has been breached Remedies are what is available to rectify the situation in case of breach – protect rights of innocent. Types Of Remedies 1. Those that enforce the contract. 2. Those that rescind the contract. 3. Those that compensate the harmed party for the breach. 1. Those that enforce the contract:  Two enforcement remedies: specific performance order AND an Interdict. SPECIFIC PERFORMANCE: o An order for specific performance is an enforcement order to do what is promised. o When a contracting party is able to perform in terms of the contract but choses not to do so, the court will usually grant an order for specific performance. o The court is not likely to grant the order if: - The performance is impossible. - The performance will cause too much suffering. - The cost for the dependant will be too high. - The debtor is insolvent.  If the court refuses to grant the specific performance order, the innocent party can sue for damages. INTERDICT A court order that orders someone not to do something (prevent or stop breach). 2. Those that Rescind the Contract:  Cancelling a contract due to breach means that the harmed party is released from their obligations.  IF there is no cancellation clause, the court can grant cancellation orders but only if the breach is material  Reasons for cancelation: - Cancellation due to lateness - Cancellation due to malperformance - Cancellation due to repudiation - Cancellation due to mora debitoris - Cancellation duet to mora creditoris  Results of cancellation: the contract ceases to exist and restitution must be made. 3. Those that compensate the harmed party for the breach / Damages Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Damages refers to the money payable to the innocent party to compensate for loss caused by breach.  The payment of damages should put the harmed party in the financial position they would have been in if the defaulting party had met their duties in terms of the contract.  To work out damages, compare the finical position of the harmed party after the breach, and compare it to what it would have been if the contract had been properly completed. LU9 LO2: Differentiate between simple joint liability and joint and several liability Simple Joint Liability  Each of the debtors is responsible for paying only his pro rata share of the debt.  Under simple joint liability, two or more parties are collectively responsible for fulfilling an obligation.  However, the creditor can only claim the full amount from all the liable parties together, not from an individual party.  If one of the joint parties cannot pay their share, the creditor may be at risk of not recovering the full amount because the liability is distributed among all parties as a single unit. Joint and Several Liability  The partners are all liable in solidum.  This form of liability means that each of the co-debtors is liable to pay the full amount of the debt, not just their portion.  In terms of the contract, the creditor can claim the full amount from any of the co- debtors.  But the debtor who pays the full debt has the right of recourse against his co- debtors to recover their shares of the debt. LO3: Explain the concept of a stipulation alteri  stipulation alteri: A contract between two parties for the benefit of the third party (i.e. life insurance).  Third party will only get the right to enforce performance after notifying the debtor of acceptance of the benefits.  Until third party declares acceptance, contracting parties may change agreement as they wish.  E.g. Party A and party B contract for the benefit of party C: Party A = the stipulans, Party B = the promittens. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Cession  Cession is the legal way in which rights that belong to one person can be transferred to another person.  This is an agreement that happens separately to the initial agreement.  An agreement to ceded is called a transfer agreement because the creditor is transferring their rights to another party.  The person who originally had the rights is called the cedent.  The person to whom the rights are transferred to is called the cessionary.  The cessionary is a third party to the initial agreement.  A cession will only happen because the cedent has a duty to the cessionary.  For a proper cession to take place, all that is required is an agreement between the cedent and cessionary.  Cession involves the following 6 requirements: - Cedent must be entitled to cede the right - The right must be capable of being ceded - The parties (the cedent and the cessionary) must intend for a cession to take place - Any formalities agreed upon by the parties must be complied with - The cession must not be unlawful - The cession must not prejudice the debtor.  Restrictions on the cession of contractual rights: - Illegal: Pension rights, Workmen’s compensation, maintenance - Involves rights that are too personal to be ceded. - Will prejudice the debtor.  Consequences of cession: Concessionary replaces cedent as creditor and the Debtor can raise same defences against cessionary as against cedent.  Complete Cession: o Complete cession refers to the full and unconditional transfer of a right or claim from the cedent to the cessionary. o The cedent permanently transfers all rights and benefits of the claim to the cessionary, who becomes the new holder of the right. o After the transfer, the cedent no longer has any interest or control over the ceded right. The cessionary can enforce the right as if they were the original holder.  Cession as Security (in Securitatem Indebiti): o a conditional transfer of rights used to secure a debt or obligation. o The cedent temporarily cedes their right to the cessionary as collateral for a debt. o Once the debt is fully paid, the ceded right reverts to the cedent. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Types of Changes to Contracts Variation:  Changing the rights and duties of the contract.  Parties are generally free to do this as they wish, unless the law provides for that type of agreement to be in writing, or the parties previously agreed any variations to be in writing. Release:  Releasing one or both of the parties of their duties.  Contract is treated as cancelled and no claims arise. Delegation:  Transfer of debtor’s duties to another.  Creditor must agree (and new debtor).  Debtor’s rights must not be affected.  Tripartite agreement – requires the agreement of three parties. Assignment:  Substitution of a third party.  Third party replaces party to contract (lessee replaced in lease agreement).  All parties will have to agree. Novation:  Replacing an old duty with a new one. Compromise:  Acceptance of new terms.  Settling of dispute by making a new agreement.  Compromise replaces original agreement “In full and final settlement.” Ways In Which a Contract May Be Terminated 1. Proper Performance: o If both parties do what they should in terms of performance, the contract will terminate automatically when it is supposed to end. 2. Prescription: o The law provides obligations to come to an end automatically after a certain amount of time has expired. o Prescription Act 68 of 1969. o Most debts become prescribed after a period of 3 years. o Any debt that arises from a bill of exchange or a notarial contract: 6 years. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 o Debt owed to state (loan) – 15 years. o Any debt secured by mortgage bond, or that concerns taxation or mineral rights, or for civil judgement – 30 years. o Calculated: Including the first day and excluding the last. o Prescription will only start running if the creditor knows the debtor’s identity and facts from which the debts arise (e.g. breach of contract) 3. Impossibility Of Performance: o If performance by a party to a contract becomes impossible, the contract terminates. o Requirements to succeed: o Impossibility must not be due to fault of any of the parties. o Neither party should have guaranteed performance (“I will perform no matter what”). 4. Merger: o In terms of the law of contract, a merger is when one person becomes the debtor and also the creditor in respect of the same debt. o E.g. Renting a flat then deciding to buy the flat. 5. Set-Off: o Debts can be set-off against each other if: - The debts must be between the same two persons in the same capacities (ex. Not personal capacity and capacity as member of CC). - Debt must be of the same kind of nature (both monetary). - Debts must both be due and payable. - Debts must both be liquidated (must be capable of easy and speedy proof). 6. Death: o Death does not automatically terminate contract (right and duties), unless so personal that it cannot be transferred to deceased estate. 7. Insolvency: o The insolvent’s trustee will have to decide whether the rights and obligations of the contract will be met. o Contract does not terminate automatically. o Trustee takes the place of the insolvent with the respect of those contracts. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 LU10 Discuss the essentialia and the naturalia of a contract of sale The two essentialia for a contract of sale: - Agreement on the item to be sold. - Agreement on the price to be paid. The naturalia of the contract:  The duties of the seller.  The duties of the buyer. The Duties of The Seller 1. A duty of care until the goods are delivered. 2. A duty to make the goods available to the buyer. 3. A duty to warrant against latent (hidden) defects. 4. A duty not to make false statements. 5. A warrantee against eviction. 1. A duty of care until the goods are delivered:  When two parties conclude a contract of sale, the risk is generally passed to the buyer as soon as the contract is perfecta (complete).  A contract is perfecta:  When the price has been determined.  When the goods are defined and identified.  If any suspensive conditions have been fulfilled.  The seller still has the duty to care for the goods until they are handed over.  If the goods are damaged before delivery, due to the seller’s fault, then the seller will have to pay for the damage.  If the goods are damaged by accident and not due to the fault of the seller, the risk has passed to the buyer.  However, the risk does not pass to the buyer, even if sale perfecta if: o Parties agree risk will not pass until delivery. o When goods must be weighed, counted, measured to be establish the price – risk only pass when price can be determined when goods are counted. o Contract is subject to above condition – risk remains with seller until condition is fulfilled. o Mora debitoris: if seller does not deliver on time, risk goes back to seller when in mora (if damages happen after set delivery time, if damages that happen after set delivery would have happened regardless of delivery time, like cows that are ill). o Mora creditoris: buyer fails to take delivery on time – seller now only liable for gross negligence and intentional damage, no longer for ordinary negligence (duty to care is reduced). Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 2. A duty to make the goods available to the buyer:  Normally seller has the duty to deliver the goods to the buyer.  Delivery means ‘making the goods available’ so that the buyer can remove it (i.e. not delivery as in take it to the buyer).  Unless parties have agreed otherwise, the seller must make the available immediately, at the place of sale.  Types of delivery: o Actual delivery – physical handing over. o Symbolic delivery – hand over symbol, e.g. keys to a car. o Delivery with long hand (Traditio longa manu) – too big – point out. o Delivery with short hand (Traditio brevi manu) – renting item and in possession – then you buy it – keep it in your possession. o Constitutum possessorium – buyer agrees seller will keep item after sale (opposite of brevi manu). o Attornment – seller sells item, which is in possession of 3rd party, to buyer, and it is agreed that 3rd party retains possession.  Transfer of ownership:  Ownership does not (normally) pass from one owner to the next because of the contract, Further requirements necessary: o Parties must have intention of ownership to pass. o Seller must be able to give transfer (be the owner himself). o Purchase price paid (or credit granted). o Immovable property (delivery is not possible) – transfer is done by registration. 3. A duty to warrant against latent (hidden) defects:  The seller is liable for latent defects in an item sold, even if they were not aware of them at the time of sale.  The defect must be material, meaning the defect impairs the usefulness / effectiveness of the item.  The defect must be latent (hidden).  A fault that is clear or obvious upon inspection is a patent defect and does not result in common law remedies.  Cases where the seller has no duty: o Seller warns buyer of defect. o Buyer knows about the defect and still buys item. o Defect came about after the contract was concluded.  Voetstoots Clause: Relieves the seller of liability for any faults: The buyer agrees he is buying an item with faults and will not hold the seller liable for any latent defects. Remedies for latent defects Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Actio redhibitoria: An action for redhibition – the cancellation of a contract and repayment of whatever has been paid plus interest and expenses, putting the person in the financial position he was before the contract.  Actio quanti minoris: Used when an item is not completely useless. It is a reduction in price: the difference between what the buyer paid and what the item is worth with the defect. 4. A duty not to make false statements:  Dictum et promissum.  Misrepresentation in context of contract of sale.  More than mere sales talk.  If induced contract and false – the buyer has aedilitian remedies available (including a reduction in purchase price). 5. A warrantee against eviction:  Seller warrants that buyer will not be disturbed of possession by someone with a better claim (e.g. the true owner).  The buyer will be able to hold the seller liable under the warranty against eviction. The Duties of The Buyer 1. Pay the purchase price. 2. Accept the delivery. 3. To reimburse the seller for expenses.  Pay the Purchase Price:  Buyer must pay entire purchase price once-off or in instalments.  Normally cash payment or by cheque (as long as cheque is honoured).  Accept the Delivery:  Buyer must accept delivery at time and place agreed, otherwise within a reasonable time.  Reimburse the seller for Expenses:  If buyer delays in accepting delivery (removing goods), it can cause expenses for the seller and the buyer is liable to cover these expenses. LU11 Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Contract of Lease  An agreement between lessor and lessee in which a lessor agrees to give a lessee undisturbed, temporary use and enjoyment of specified property and in return, the lessee agrees to pay.  Rental: Rental is the lessees payment to the lessor for the use of leased period.  There must be payment in some sort of rent for the agreement to be one of lease.  The parties must agree expressly or by implication, the amount of rent to be paid,or it must be possible to calculate the amount by an agreed period.  A verbal lease contract is valid, but the lessee does have the right to request the agreement to be in writing.  Huur gaat voor koop (lease comes before sale).  If owner sells leased property, new owner is bound by the lease.  New owner takes over all rights and duties in terms of the lease contract.  New owner must allow lessee to continue to occupy (provide lessee complies with duties).  Lessee is also bound and cannot withdraw from lease because property is sold Types of Leases:  Classified according to their duration.  Fixed-Term Lease: - Agreement states the length of the lease expressly or by implication. - The lease comes to an end at the end of the agreed period. - E.g. Fixed period: from 1/1/14 to 31/12/15.  Tenancy at Will: - Duration not fixed. - The lease continues as long as both parties want it to carry on.  Periodic Leases: - No fixed duration but intended to last through a series of agreed period (months/years). - ‘Monthly lease’ - Ends by one party giving notice – agreed period or reasonable time. - Monthly lease, then one month’s notice. - Yearly lease, the 3/6 months’ notice.  Hybrid Leases: - Agreed for fixed period but either party can give notice to terminate earlier. - If neither part gives notice, lease will end when the fixed period is over. Renewal of leases  Lessee has the option of extending the lease.  To be exercised during the original lease period.  If original period has ended, new lease agreement starts. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 Termination of a lease without notice  Death of One of the Parties: - Does not normally end lease. - Periodic lease – person inherits rights of lease including right of renewal. - Tenancy at will – lease automatically ends.  Insolvency: - Insolvency of the lessee: Trustee has 3 months to make choice about whether to carry on with lease - Terminates automatically if no choice has been made after 3 months. - Insolvency of the lessor: - Decision to carry on with lease lies with the trustee. Protection of a Long-Term Lessee:  If lease is registered against title deed, the lessee is protected against heirs/creditors of the lessor.  Lessee is protected against creditors/heirs who knew of the lease at the time of becoming a creditor/heir.  If occupying the leased property (and no other protection is available), lessee is protected for a maximum of 10 years against the lessors’ creditors and anyone who buys the property. Protection of a Short-Term Lessee:  Law protects lessee for a period of lease if there is occupancy.  If no occupancy, the lease is effective only against heirs/3rd parties who knew about the lease. THE DUTIES OF THE LESSOR 1. Duty to Delivery Property to the Lessee: o Must give the lessee the use and enjoyment of the leased property (residual obligation/residual duty). o Must deliver/make available the leased property on the agreed date. o Deliver the leased property in a condition fit for use. o Must evict previous tenants or trespassers. o Must deliver the agreed property. o Normally excludes movables. o Must deliver as described. o Provide other things necessary for proper use. Remedies available to the lessee if the lessor does not deliver the property as required: - Request specific performance. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 - Refuse delivery: The lessee refuses to accept delivery until the lessor fixes the problems. - Cancel the lease: o In terms of the cancellation clause. o Where there was a major breach:  Delivery becomes impossible because property is with someone else.  Lessor refuses to deliver.  Delivery is late in a time essential case.  Property is largely unsuitable for the purpose of lease and can/ won’t be fixed. - Repair the problem and charge the lessor. - Claim damages. - Claim rent reduction. 2.Duty to Maintain the Property during the Lease: o Must keep property in fit for use condition. o Parties often agree that the lessor maintains outside and lessee inside. o If the lessor fails to maintain the property, the same remedies are applicable as above. o BUT, the lessor is only in breach if the lessee informs lessor of problems and lessor does not arrange adequate repairs within reasonable time. 3.Duty Not to Disturb the Lessee’s Use And Enjoyment: o The lessor must not unlawfully interfere with lessee’s use. o Access only as agreed or at reasonable time, if not specified. o Only take away use and enjoyment lawfully (not cut electrical/water supply). o Cannot evict for repairs, unless repairs are urgently necessary and reasonable notice was given. o If the lessor interferes the lessees use and enjoyment (Remedies): o Interdict: A court order that orders unlawful parties to stop interference. o Spoliation order: an urgent remedy where the court orders return of possession of property. o Cancellation of lease. o Damages or rental reduction. 4. Duty to warrant against eviction of the Lessee: o Warrantee that no one has legal right to disturb lessee’s possession (applies when there is a valid 3rd party claim on the property). o Warrantee does not apply if lessee was aware of 3rd party’s rightful claim. o Lessee’s Remedies: o Cancellation o Damages o Rent reduction Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450 5. Duty to pay the rates and taxes for the leased property: o General rule: lessor pays rates and taxes. o Parties can change this by agreement THE DUTIES OF THE LESSEE 1. Duty to Pay Rent:  In the agreed way (payment method, date, place).  If requested by cheque and cheque is lost in mail, loss of lessor.  If lease specifies fixed day for payment normally can pay before.  If date of payment is not fixed: Rental due after lease period – in monthly lease: 1st day of next month.  If rental is required in advance, but date not given, then on/ before the first day of lease.  Lessors Remedies: o Claim the rental owing: Sue for rent owed. o Claim Damages: Lessor can claim interest from the date when the rent should have been paid or if lessee breaks lease without notice - interest till new lessee starts paying. o Cancel the lease: If lessor informs lessee that they will cancel if not paid by certain date, or if the lessee repudiates the lease, or if there is a cancellation clause about nonpayment. o Hold lessee’s property: landlord’s hypothec. 2. Duty of Reasonable Care of the Property:  May use property only for the purpose it was let (Accommodation, then not for business).  Lessee to look after property – what is easy to look after and just needs regular attention.  Must not misuse or damage property 3. The duty not to make major changes to the leased property without the lessor’s permission:  No structural changes without lessor’s consent.  Lessors Remedies: Interdict, cancel, damages. 4. Duty to return the property in the same condition:  Lesse must return property in the condition in which they received it.  With the exception of fait wear and tear.  Breach this obligation if they fail to leave the property by the agreed date. Downloaded by Amanda Fumba ([email protected])  lOMoARcPSD|14927450  Lessors Remedies: o Ejectment: Court order for the removal of lessee. o Sue for damages suffered. o Order for specific performance. Downloaded by Amanda Fumba ([email protected])