Commercial Law I Slides PDF - Walter Sisulu University 2024

BUSINESS MANAGEMENT & ECONOMIC SCIENCES COMMERCIAL LAW I 2024  UNIT -1 INTRODUCTION TO THE STUDY OF S.A. LAW 1. NORMATIVE SYSTEMS Law falls under a group of systems of norms, collectively known as ‘normative systems. The normative systems regulat...

BUSINESS MANAGEMENT & ECONOMIC SCIENCES COMMERCIAL LAW I 2024  UNIT -1 INTRODUCTION TO THE STUDY OF S.A. LAW 1. NORMATIVE SYSTEMS Law falls under a group of systems of norms, collectively known as ‘normative systems. The normative systems regulate human conduct (behaviour). The other normative systems, besides law, are ethics and positive morality. Are laws that prescribe, determine, and regulate the norms or standards of human conduct, that is, what a person may or may not do in relation to oneself, in relation to other persons and in relation to the things around us. Normative systems have as their primary function the regulation of a person’s behaviour in human society so that peace and order can prevail in a civilised state.  1. What is Law? Law is the body of rules that govern the conduct of persons both natural and juristic, which is recognized by the State as binding, and which is enforced when necessary. Legal rules are prescribed and enforced by the state. The Sanction/ Punishment The sanction (punishment) for breaking the law is punishment by a court of law. As to what form of punishment will be meted out by the court against the wrong-doer depends on the nature of transgression the wrong-doer has committed. For example, breaking a criminal law rule may result to imprisonment (i.e. wrong-doer being sent to jail), whilst breaking a civil law rule may result to the wrong-doer being ordered to pay a sum of money (called damages) to the aggrieved party.  1. ETHICS Ethics refers to a set of rules governing human conduct which are adopted by an individual for himself/herself. For instance, an individual may have a principle that he/she will not partake in liquor, or will never tell a lie, etc. Sanction Breaking one’s own ethical rules is not punishable by courts, but the individual will suffer a guilty conscience (i.e. feeling of guilt inside).  4 POSITIVE MORALITY Positive morality is a set of rules governing human conduct which are adopted by a community at a given time as binding upon each member of the community. One may say it is a moral obligation that community members owe towards each other. For example, in the rural areas if there is going to be a funeral young men have a moral obligation to assist the family of the deceased in the digging of the grave. But, what if a particular young man consistently fails to attend to the digging of tombs without any good reason? Sanction The other community members (young men) will, in turn, refuse to assist the family of that of that young man should someone from that family pass on. This means the community will isolate that young man. Thus, the punishment for breaking positive morality rules is not through punishment by a court, but isolation or rejection of the concerned member by the other members. 1.5 The distinction between law, ethics, and positive morality Although the law may be recognised by the State as binding upon its subject, it is by no means the only normative system that governs human behaviour. Other normative systems that also regulate human conduct such as ethics and positive morality. 1.6 Sanctions in law, ethics, and positive morality Ethics, positive morality, and the law vary/differ in their enforcement, but enforcement always involves the imposition of some form of penalty. The way sanctions or penalties are applied also helps to distinguish between law and other normative systems. In the case of ethics, it is the individual himself who imposes a sanction upon himself. This sanction consists of a sense of guilt caused by the individual’s conscience. Both positive morality and law are directed towards the outward behaviour of a person, but the difference between them lies in the sanction for disobedience. In the case of an infringement of positive morality, rejection by the community is imposed on the individual. By contrast, if the law is transgressed, the legal machinery(Courts) imposes sanctions in the form of fines or period of imprisonment if the transgressor is found guilty of an offence.  7 LEGAL PRACTITIONERS  Judge A judge is presiding officer in a superior court and can deal with any type of case. Judges are required to be independent and are appointed by the State on the advice of Judicial Service Commission (JSC) and their salaries- are fixed by Parliament. Traditionally judges were appointed exclusively from the ranks of senior advocates, but since 1994 other legal practitioners and academics have been appointed as judges. A judge may not be dismissed on the grounds of incompetence or misconduct unless Parliament agrees thereto. The judge heading a division of the High Court is called Judge President (JP)  Magistrate Magistrate is the presiding officer in the Magistrate court in the district and civil courts of the Magistrate Court. A regional magistrate presides over the matters in the regional court. Magistrates used to be part of the civil service, but when Magistrate Act and Chapter 8 of the Constitution, as well as recent legislation relating to wages and remuneration have ensured that the status of magistrates has changed to that of independent office bearers. A Magistrate deals with criminal and civil matters and in each case required to make an appropriate decision. Apart from court work, a magistrate also has some administrative duties to fulfil, such as acting as a marriage officer and conducting inquests(a judicial inquiry to ascertain the facts relating to an incident) Act 90 of 1993, See in particular ss 10&12.  Prosecutor A prosecutor works for NPA and appears on behalf of the State in criminal cases. A prosecutor’s primary responsibility is to put all the facts before the court. In order to do so , he must examine witnesses for the State and cross-examine called by the accused. Apart from the court work, a prosecutor also performs other functions, such as assisting the Director of Public Prosecutions in deciding whether a person should be prosecuted or not.  Advocate For one to become to be an advocate, they must have obtained an LLB degree, served a period of pupillage with practicing advocate and after passing the bar examinations, been admitted to the bar as an advocate. An advocate may appear in superior courts, lower courts (excluding small claims court) and any tribunal. An advocate is in the ordinary course briefed by an instructing attorney to appear for a client but may be approached by a member of the public directly (after the Legal Practice Act 28 of 2014) though this happens rarely. An advocate usually specialises in litigation but is also involved in giving legal opinions in implicated matters and drafting and preparing complex legal matters. S 25 of the Legal Practice Act 28 of 2014  Attorney An Attorney must possess an LLB degree, in addition to serving a period of “articles of clerkship” must satisfy the requirements of an examination set by South African Legal Practice Council before admitted to the side bar to practise as an attorney. An attorney has a right to appear in any court (excluding Small Claims Court) or any tribunal, but to appear in the High Court, Supreme Court of Appeal, and the Constitutional Court a special- application must be made to the high court. An attorney bringing that application must be in possession of an LLB degree and must have practised continuously for period of not less than 3 years. An attorney can also be a notary public or a conveyancer, which are specialised additional qualifications. A notary public draws up and attests antenuptial and other specialised contracts, while a conveyancer attends to the transfer of immovable property. Unlike an advocate, an attorney can consult directly with the public.  SOURCES OF THE LAW The main sources of our law are the following: (a) The Constitution (b)Common law (c) Legislation (statute law) (d)Judicial precedent (Case law) (e) Custom  1. Constitution The Constitution of the Republic of SA of 1996 is the supreme law of the country. It prevails over all other laws. Any law that is in conflict with the Constitution is likely to be declared invalid and of no force and effect. The Constitution has created three spheres of government, namely the national government, provincial government and local government. Further, in terms of the Constitution there are three main organs of State, namely, legislative authority, executive authority and judicial authority.  1. Common Law The South African common law refers to the unwritten body of laws which emanate mainly from the Roman-Dutch Law system, as well as from the Roman Law and English Law systems, as interpreted and applied by the superior courts. It does not emanate from the legislative authorities. The historic colonization of the country is the main reason why our common law is composed of legal principles emanating foreign legal systems.  1.Legislation (statute law) Legislation is the law passed by competent legislative authorities, such as parliament, provincial legislatures, municipal councils, etc. Legislation is always in writing. Legislation is also called statute/statutory law. Parliament is the main legislative authority. It passes legislation called an Act, (e.g. National Credit Act, Criminal Procedure Act, etc). There are two main categories of legislation, namely: (a)main/primary legislation: It is passed by parliament, and, as a general rule, applicable nationally; and (a)Delegated legislation: This refers to law (legislation) which is passed by body or person authorized by parliament to make such law. There are fou main types of delegated legislation, namely – (i)Proclamations: passed by the State President and Ministers. (ii)Regulations: passed by a Minister to give effect to the purpose of the ma Act. (iii)Provincial ordinances: passed by the provincial governments an applicable in the relevant province. (iv)Municipal by-laws: passed by Municipal Councils and applicable in th relevant municipal area. (v)Court rules: passed by the Rules Board for Courts of Law.  1. Judicial precedent Judicial precedent refers to the body of law resulting from decisions on points of law made by superior courts with regard to the same circumstances. Although it is not the function of the courts to make law but interprete and apply same, they, however, do so in the process of interpreting and applying existing laws. This will occur, for instance, where existing law is unclear, confusing, or ambiguous, or where it is in conflict with the Constitution. For example, in S v Makwanyane 1995 (2) SACR 1 (CC), the Constitutional Court declared the death penalty to be unconstitutional. The Court did this even though the death penalty was permitted in terms of section 277(1)(a) of the Criminal Procedure Act. The court held that the section (which permitted death penalty) was inconsistent with section 9 (right to equality), section 10 (right to human dignity), section 11 (right to life) and section 12 (right not to be punished in a cruel manner), and therefore unconstitutional. Since the court made that decision, it became law that death penalty was not applicable in South Africa.  Precedent Continued…… In applying the law and for the uniformity in the court’s decisions, judicial officers have to avoid any inconsistency, officers have to adhere to the rule of:  Stare decisis- means to stand by previous decisions(judgements).  Ratio decidendi- reason in law upon which decision is based.  Obiter dictum- an incidental remark in passing made by a judge.  1. Customs These are the practices, usages or traditions of a community or particular group in a community. A custom consists of unwritten rules; hence it is referred to as the unwritten part of our law. A custom will only have the force of law if it meets the following requirement as per Van Breda v Jacobs- Appeal (i) It must have existed for a time immemorial (a very long time); (ii) It must be reasonable; (iii)It must be generally accepted and observed in the community; and (iv)It is not in conflict with existing law.  THE HIERACHY OF THE SOUTH AFRICAN COURTS There are several types of courts in South Africa. In terms of their status, some fall under the category of superior courts (e.g. Constitutional Court, Supreme Court of Appeal and High Court of SA) and others are categorized as lower courts (e.g. Regional Court, District Court and Small Claims Court). The presiding judicial officers in superior courts are called judges.  1. CONSTITUTIONAL COURT The Constitutional Court is based in Johannesburg. It deals with constitutional issues, as well as issues of public interest, and it is the final appeal court in constitutional matters. It has eleven judges, who are under the leadership of the Chief Justice and the Deputy Chief Justice. 2. SUPREME COURT OF APPEAL This court only deals with appeals emanating from the decisions of the High Court of SA. It is the final appeal court in all matters, except constitutional matters. The court is based in Bloemfontein, and it is headed by the Judge President, and the Deputy Judge President. It is generally constituted by a panel of 5 judges per case. 3. HIGH COURT OF SA This court is divided into nine provincial divisions and various local divisions. The High Court has inherent jurisdiction (which means it can hear any case that comes before it). It is both a trial court and a court of appeal. As a trial court, it is constituted by one judge per case. As a court of appeal it is constituted by, at least, two judges per case, and it deals with appeals from the lower courts (i.e. Regional & District Magistrates’ Courts) The full bench of the High Court consists of three judges.  2. REGIONAL MAGISTRATES’ COURT (REGIONAL COURT) This is a lower court which deals with –  serious criminal cases, such as murder, rape, robbery, etc; and  civil claims of between R200,000.00 and R400,000.00. Presiding judicial officers in this court are called regional court magistrates. 2. DISTRICT MAGISTRATES’ COURT (DISTRICT COURT) This is a lower court which deals with –  Minor criminal cases, such as theft, assault, traffic offences, etc; and  Civil claims of up to R200,000.00. The presiding judicial officers in this court are called district court magistrates.  2.SMALL CLAIMS COURT This court only deals with civil claims of not more than R15,000.00. Its main objective is to deal with minor claims in a speedy and simple manner. As a result, lawyers are not allowed in this court. The presiding officers in this court are called commissioners.  INTRODUCTION OF LAW OF CONTRACTS The law of contract is a subdivision of the law of obligations derived from the word obligatio. - Obligatio- derived from the Roman Law and is defined as a legal bond whereby a person is obliged to deliver some or other thing. - Obligation is a relationship which contains a commitment. This obligation is an obligation resting on one person to give something to another person, something for another person or to perform something. - Obligation must be between two or more persons. Obligation creates a right in favor of the creditor, namely the right to claim due performance from a debtor. This right is called a personal right (ius in personam). - Obligation places a duty on the debtor, namely a duty to perform. - Similarly, obligation creates a right in favor of the creditor, e.g., a right to claim due performance from a debtor. Y CONTRACT AS A SOURCE OF OBLIGATION Roman law-contractus-refers to an understanding between persons which brings about the obligation which complies with requirement. These obligations contain legal consequences e.g., a right to claim performance and the duty to perform. In your upcoming chapters, you will learn more about entering contracts that it has something to do with agreement which is made with intentions to create obligation. In other words, parties enter and conclude contract with intentions that the law will acknowledge their agreement and attach legal consequences thereto.  SUMMARY OF LAW OF OBLIGATION If one poses a question and ask what obligation is, this is how you must furnish you answer: 1. An obligation or obligatio entails the giving of something, doing of something or not doing something or the tolerating of a certain situation. 2. An obligation exists between two or groups of persons. They form the two parties to obligation for example the contract. 3. Can contract is an agreement between parties (which can be one or more persons on one or both sides of the contract). The agreement complies with certain requirements that is recognized by law. 4. Both parties to the contract have rights and obligations in terms of the contract rendering the simultaneously debtors and creditors (excluding a unilateral contract, such as a donation). 5. A party is a debtor when he has an obligation to perform. A party is a creditor when he has a personal right to claim performance from the other part.  Unit 2 – introduction to the law of contract and basic concepts of contract LAW OF CONTRACT What is a contract? A contract can be defined as an agreement/ consensus between two or more parties which gives rise to enforceable rights and obligations to the parties. The concept of obligation As a general rule, each party to a contract has an obligation to perform for the other party. This means that the parties owe each party duties to perform certain obligations. [Example: A (buyer) buys a motor vehicle from B (seller). This a sale contract. A has an obligation to pay the purchase price to B, and B has an obligation to deliver the motor vehicle to A]. Therefore, each party is both a debtor and a creditor to the other party. For instance, in the example given above, A is the debtor of B in respect of the purchase price (and,  automatically, B is the A’s creditor in that regard), whereas B is the debtor of A in respect of the delivery of the motor vehicle (and, automatically, A is the creditor of B in that regard). Categories of Contracts There are three categories of contracts, namely – (a)Valid contract – This is a contract that is recognised by the law as legally binding to the parties, because it complies with certain legal requirements. These requirements are serious intention, consensus (or agreement), lawfulness (or legality), contractual capacity, possibility of performance and formality. Question-When does an agreement between two or more constitute a contract? Answer- a contract comes into being when the agreement between the parties complies with the legal requirements for a valid contract. Legal Requirements for a valid contract:  Serious intention  Consensus or agreement  Contractual capacity  Lawfulness  Possibility of performance  Formalities N.B a contract is recognized as valid when it complies with the above requirements. An example: If the parties do not reach a consensus on essential terms and conditions or something unlawful is included whatever the agreement, they reach does not constitute a contract in law. The word contract in void contracts may cause confusion, however, it is meant to illustrate that the parties attempted to conclude a contract, but that particular contract is lacking one or more requirements. Therefore, their agreement does not become a recognized contract in law. The validity of a contract gets tested later in court when the dispute arises. (b)Void contract –This is a contract which lacks one or more of the requirements of a valid contract. It is not recognised and not enforceable in court. It is a contract that does not exist in the eyes of the law. In essence, this is not a contract. Example of a void contract: ICT Essentials CC negotiate and Mondli negotiate a sale of a computer system. They agree that Mondli may use the computer system against the payment of R20,000 per month. It was later discovered that they misunderstood each other. Mondli wanted to buy the system thinking his monthly instalment would be R20.000 a month. They had clearly not reached agreement on the terms of the contract because consensus is lacking no contract exists between them. (c)Voidable contract This contract meets all the requirements of a valid contract but has defective consensus. The consensus is defective because at the conclusion of the contract the consent of one of the parties (i.e. the innocent party) was influenced by either duress, or undue influence, or misrepresentation. The innocent party has a choice to either to continue with contract or to have it set aside. When he/she has exercised the choice he/she cannot later on change his mind. Consent is obtained in an improper manner. Please note that:  A voidable contract is a contract that validly comes into existence but de to a ‘fault’ at the time of conclusion, it is capable of being challenged.  If a consent of a party is obtained in an improper way/ fraudulently is called defective consensus.  Voidable cont….. Example of voidable contracts When A puts a pistol/firearm to B’s head and threatens to shoot him if he refuses to sell his house to A. B fears for his life, he gives the undesirable consent, and the contract is concluded. B gave the consent under duress and consent was improperly obtained by threats. B’s consent is defective and therefore the contract is voidable contract. Terms of a contract The terms of a contract fall into different categories, namely; essential terms (essentialia), natural terms (naturalia), incidental terms (incidentialia), express terms and implied terms. Essentialia -are the terms which distinguish a particular type of contract from another type of contract.. A contract of sale will have the following terms:  Price  Article(product) This means that a stipulated article(product) and stipulated price must be included in thew agreement to purchase (e.g. The essentialia of a contract of sale are agreement on the item sold and the price, whilst the essentialia of a contract of insurance are the premium, the compensation money and the risk). The parties must reach consensus (i.e. agreement) on the essentialia, failing which the contract will be invalid. Naturalia are those terms of a contract which are included naturally or automatically by operation of the law, unless specifically excluded by the parties. They are implied terms, meaning that even if the parties did not expressly agree on them, they are automatically applicable in the contract. For example, in a contract of sale the seller’s warranty against latent defects (i.e. an assurance by the seller that the item sold has no invisible defects) is automatically applicable in the contract even though the parties did not even talk about it when they concluded the contract.  Incidentialia are those terms which the parties may specifically agree on in order to ensure the smooth running of the contract. They have no bearing on the validity of the contract. For example, in a contract of sale the parties may agree that delivery of the item sold will take place on a particular date, at a particular place and time. However, even if the parties did not agree on these particulars (i.e. date, place and time of delivery) the contract would still be valid and the seller would still have a duty to deliver the things sold to the buyer.  Express terms are those terms which the parties specifically agreed on as being applicable in the contract. Essentialia and incidentialia of a contract are examples of express terms.  Implied terms are those terms of the contract which either come naturally (e.g. naturalia) or can be inferred from the reading of the contract. Naturalia examples of implied terms.  UNIT -3 FORMATION OF A CONTRACT The intention of the parties is of paramount importance for a contract to be concluded. Consequently, it should be noted that with obvious reasons any contract- entered and concluded without agreement between the parties will not amount to a contract/ valid contract. How do Legal systems look at the Serious Intention? 1. Other Systems (Common Law)  Roman Law- requires more than just intention. A definite reason or cause for the contract to be concluded is required. The reason is simply called causa.  Roman-Dutch Law- iusta causa, required for reasonable cause to give rise to a contract.  English Law- operates on the doctrine of consideration which means there must be some valuable consideration (a quid pro quo) 1. South African Law Serious intention to conclude a contract is fundamental to the conclusion of a contract. It is defined in terms of animus contrahendi(intention to conclude a contract). A contract of a social nature like a joke made without a serious intention cannot be regarded as a contract as it will have no legal consequences and cannot constitute a contract REQUIREMENTS FOR A VALID CONTRACT: CONSENSUS Objectives: 1. The student must be able to define concept “consensus” 2. Define the concepts “offer and acceptance” 3. Name and explain the requirement for a valid offer and acceptance 4. Discuss the termination of an offer 5. Discuss the conclusion of the following: o Postal contracts o Telephonic contracts o Electronic contracts 1. Define the following concepts: o Counter-offer o Option o Tacit agreement An agreement or contract can only come into being if the contracting parties have the intention to be bound to each other and if they intentionally reach unanimity on all the terms of their agreement. Parties must negotiate with each other. The intention to conclude a contract is not sufficient to create a contract. Such intention must be communicated to the other contracting party and the latter must turn make his intention of communication of their intention is thus required to reach agreement the negotiation. An example If A in Durban writes a letter to B in Cape Town in which he offeror to buy B’s sports car for B writes a letter to A offering his sports car for sale and these letters across in the post, a contract has not yet come into being. Each has simply communicated his intention to contract to the other. A contract will be concluded when either A or B responds to the offer of the other and accepts the offer made to him. In essence The unanimity between the contracting parties- consensus and is the cornerstone of a contract. When consensus has been achieved between the parties an agreement has come to an existence between them. 1. CONSENSUS / AGREEMENT In essence, the concept of conclusion of a contract means that the parties have reached consensus (i.e. have agreed) on the essential terms of the contract. This means that consensus is the main requirement of a valid contract. It entails that the parties must be in agreement about the material terms of the contract. They must be of the same mind regarding the terms of the contract. For example, in a contract of lease both parties must be in agreement regarding the leased property and the amount of rental. If one party thinks that rental payable is a particular amount (say R1500.00 and the other thinks it is another amount (say R1000.00, then they have not reached consensus, and, therefore, the contract is invalid. Consensus has to components, namely offer and acceptance. One of the parties makes an offer and the other party accepts that offer. OFFER What is an offer? An offer is a declaration by the offeror of his intention to conclude a contract while all the terms on which he is prepared to contract are out in his declaration. REQUIREMENTS OF AN OFFER 1. Clear and unambiguous The offer must be clear, in other words, it must contain enough information to place the offeree in a position to assess sufficiently what the offeror has in mind. If a contract is contained in written document, all the terms of the contract must be included in the document. 2. The offer must be complete The offer must contain all the terms the offeror wishes to embody in the contract. The offeree will be bound only by those terms set out in the offer and accepted by him. If any essential terms omitted the declaration cannot be considered to be an offer and cannot lead to a valid contract. An example Mongi wishes to sell his car to Sizwe. Mongi asks Sizwe who has no knowledge of the car the following “Don’t you wish to buy my car”? The question is not an offer because it makes no mention of the purchase price, type of the car and even the manner of payment. In essence, not all essentials are mentioned here and therefore this cannot be termed as an offer. It lacks essentialia. 3. The offer must be communicated to the offeree The offeree must be aware of the existing offer obviously he cannot accept an offer of which he is not aware of. 4. The offer must be made with intention that it shall serve as an offer so that it may be accepted into existence The offer must be more than a mere declaration by the offeror. It must be a statement of his willingness to do business. TERMINATION OF AN OFFER How is an offer terminated? An offer is terminated in one of the following ways:- (a) Revocation – The offeror withdraws the offer before acceptance. (b)Rejection – The offeree does not accept the offer. (c) Effluxion of time – The offeree fails to accept the offer within the specified time-limit. (d)Death – Any of the parties (i.e. offeror or offeree) dies before acceptance. (e)Counter-offer – The offeree accepts the offer on condition some changes are made to the terms of the offer. Example: X offers to sell his motor vehicle to P at R100,000.00, but P accepts the offer on condition the price is reduced to R90,000.00. The original offer by X (i.e. to sell his motor vehicle at R100,000.00) automatically terminates, and a counter-offer (which is, in fact, a new offer) by P (i.e. to buy the motor vehicle at R90,000.00) is now open for acceptance by X. It is up to X to accept or reject it. If X accepts it the contract will be concluded in terms of the counter-offer (i.e. at R90,000.00).  2 ACCEPTANCE A declaration by the offeree of his intention to conclude a contract in accordance with the terms set out in the offer. REQUIREMENTS OF ACCEPTANCE 1. The acceptance must be clear and unambiguous. There must be no doubt that the offer has been accepted and all the terms of acceptance explained in the offer 2. The acceptance must be unconditional The acceptance must be an acceptance of all terms set out in the offer. There must be no conditions attached to the acceptance. If by chance there are conditions, that amounts to counter-offer and the original offer lapses. 3. The acceptance must take place within the prescribed period. The offer stipulates a period within which acceptance must be made, the offeree must accept within prescribed time. If acceptance is not made within the prescribed period, the offer lapses automatically when the period expires, and no contract can come into being. 4. The acceptance must be communicated by the offeree to the offeror in the prescribed manner. The acceptance must be communicated to the offeror: the offeror must be informed of the acceptance. DATE AND PLACE OF CONCLUSION OF THE CONTRACT The contract comes into being the moment and place where parties reach consensus. It is important when the contract is concluded since parties need to know from which moment are they bound by the contract to each other.  Contract concluded by post  Contracts concluded by telephone  Contracts concluded by Telex and Fax  Contracts concluded electronically Once acceptance occurs a contract is concluded. Logically, acceptance should be made before termination of the offer. As rule, the date and place of acceptance determine the date and place of the contract. The date and place of the contract are very essential information in the event one of the parties wishes to sue the other party based on the contract. This is so because, as a rule the date and the place of the contract must be alleged in the summons to prove the existence of the contract. The place of the contract also determines the proper court which has jurisdiction to hear the matter. ACCEPTANCE BY POST A problem regarding the date and place of the contract often arises where the offeror requires that the letter of acceptance be posted to the offeror’s postal address. There are four theories that may determine the answer to the problem. Courts in determining answers look at the following theories:– (a)Declaration Theory – According to this theory the date and place of the contract are determined by the date when and place where the letter of acceptance was written by the offeree. (b) Expedition Theory – In terms of this theory the date and place of the contract are the date when and place where the letter of acceptance was posted. (c )Reception Theory – In terms of this theory the date and place of the contract are the date when and place where the letter of acceptance was received by the offeror. (d) Communication Theory – According to this theory the date and place of the contract are the date when and place where the offeror read the letter of acceptance. As to which theory will be applied by the court in a given situation depends on the discretion of the court and the circumstances of each case. The expedition theory seems to be the one which the courts support, the assumption being that the postal services are functioning well. ACCEPTANCE BY EMAIL In terms of section 22 of the Electronic Communications and Transactions Act 25 Of 2002 (“ECTA”) a contract concluded by way of email is concluded on the date when and at the place where the acceptance was received by the offeror. This when and where the acceptance reaches the “inbox” of the offeror not when he reads the email. The reception theory applies. FACTORS INFLUENCING CONSENSUS Aim: the student must be able to identify certain concepts, apply the information to practical situations and find solutions. Objectives The student must be able to: 1. Give the meaning of the following concepts and able to discuss the requirement of each.  Mistake  Misrepresentation  Duress  Undue influence 1. Name, describe and give.an example of the various forms of mistake and misrepresentation. 2. Name and describe the remedies available in the case of mistake misrepresentation, duress, and undue influence 3. Name and explain the effect on the contract of these factors. 4. Clearly describe the difference between a mistake and misrepresentation In the previous chapter we discussed the requirement of consensus as the parties reach “meeting of the mind” before a contract can be concluded. There are four factors that may affect consensus, namely – mistake, misrepresentation, duress, and undue influence. As general rule, mistake excludes consensus, thus making the contract is void (due to lack of one of the essential requirements of a contract). The other factors (i.e. misrepresentation, duress and undue influence) influence consensus to the extent that the contract becomes voidable at the instance of the innocent party. MISTAKE A mistake is an erroneous belief (at the time of contracting) that certain facts are true, whereas they are not. Mistakes are classified into, namely – material mistakes and non-material mistakes. A material mistake may relate to –  the subject-matter of the contract (error in corpore); Example A thought he bought a white horse from B whereas in fact B was selling a white mule.  identity of one of the parties (error in persona) – Example: A thinks he is contracting with B whereas in fact it is C; or  the true nature of the contract (error in negotio) – Example: One party thinks he is entering into a sale contract, whereas the other thinks it is contract of lease. A non-material mistake may occur where the error relates to a characteristic or an attribute of the subject-matter (error in substantia) An example of an error in substantia is where A buys a sheep from B, but he was not aware that the sheep was black, instead, he thought it was white). There are three types of mistake, namely –  Unilateral mistake – Where only one party is mistaken about a fact, but the other party is not mistaken. For example, where A is mistaken about the price of a product he is buying.  Mutual mistake - Where both parties are at cross-purposes about the same material fact. For instance, where A offers to sell a horse, but B accepts sale of a donkey.  Common mistake – Both parties hold a similar misguided belief of the material fact. For example, both parties believe that the carpet sold is navy, whereas in actual fact it is black. A material mistake usually leads to the contract being declared void ab initio (i.e. void from the onset) due to the fact that the parties never reached consensus at all from the onset. However, for the contract to be declared void the mistake must be reasonable, which means that it must be capable of being committed by a reasonable person. However, a non-material mistake does not affect the validity of the contract, but it may amount to misrepresentation (depending on the circumstances of each case), which may lead to the contract being voidable. MISREPRESENTATION A misrepresentation is a false statement by one party on the basis of which the other concludes a contract to his/her detriment. REQUIREMENTS OF MISREPRESENTATION 1. It must consist of false statement or facts. 2. It must be material. 3. It must be made by a contracting party for whom assumes responsibility. 4. It must be made in such a way that the other party concludes the contract on faith of the other party.  TYPES OF MISREPRESENTATION 1. Intentional(fraudulent) misrepresentation- this misrepresentation is made knowingly and deliberately with the intention to persuade the other party to conclude a contract. 2. Innocent misrepresentation- this misrepresentation is made by a perty while honestly believing the facts are true. 3. Negligent misrepresentation- this is a false statement of facts but the person making the statement thinks it is being truthful. He neglects to ascertain the true facts as the law expects a reasonable person to do so. Rectification/Remedy for any type of misrepresentation- An aggrieved party may continue with the contract or set it aside. Where there is a substantial damage or suffering, the aggrieved party may claim for the damages and loss suffered because of the misrepresentation. DURESS Duress is described as a threat or intimidation which engenders fear in a person, causing him to conclude a contract because of this fear. REQUIREMENTS OF DURESS 1. A fear must be reasonable 2. Fear must be caused by a threat of ‘considerable evil’ and directed to contracting party or family or property. 3. It must be a threat of immediate danger which cannot be averted. 4. The threat or intimidation must be contra bonos mores 5. The moral pressure which is exerted must cause damage. REMEDY OF DURESS Since duress renders contract voidable, the threatened party has a choice to enforce or set aside the contract as well as claim damages when desired. UNDUE INFLUENCE Undue influence is a degree of influence to the extent that the recipient of the influence is incapable of forming independent opinion. REQUIREMENTS UNDUE INFLUENCE 1. One party obtains influence over the other party 2. The influence weakens the other party 3. The other party exerting influence uses his influence in an unscrupulous manner. 4. The influence led to conclusion of a contract to the detriment of the other party. Remedy of undue influence A contract is voidable as a result of the undue influence and the wronged party has a choice to enforce the contract or having it set aside and or make a claim. 1. SERIOUS INTENTION The law requires that the parties to a contract must have serious intention to be bound by the terms of the contract. As is indicated above (see the discussion on ‘the concept of obligation’), each party owes the other performance of obligations. This intention to perform in terms of the contract must be present as from the time the offeror makes the offer to the time the offeree accepts the offer. In other words, this must not be a mere jest (joke). Let us consider, for example, a contract of sale. Let us say, A offers to sell a laptop to B at R1500.00. A must have serious intention to deliver (to give) the laptop to B if the latter accepts the offer, and B, by accepting the offer, he is committing himself (has serious intention) to pay the purchase price of R1500.00. If A was just making the offer in jest (jokingly), there is no serious intention on his part, and therefore, there cannot be a contract between him and B. Unit 4 – Contractual Capacity, Lawfulness, Possibility of Performance, Formality LAWFULNESS The law requires that the nature of the contract and the subject-matter of the contract must be permissible in law, failing which the contract is void. For example, sale of a human being (i.e. human trafficking) is prohibited. 1. CONTRACTUAL CAPACITY It is a legal requirement that the parties to a contract must have capacity in the eyes of the law to conclude a contract. This means that each party who concludes a contract must be capable of concluding a contract (in other words must be competent to conclude a contract). So, if one of the parties is not allowed to enter into a contract, such contract will be void ab initio. Contractual capacity is categorised into three, namely:- (a)Full contractual capacity – Persons in this category conclude contracts on their own, without any assistance. Examples are married persons, majority persons (i.e. personaged 18 years old and above) and juristic persons (e.g. companies, Municipalities). (b)Limited contractual capacity– Persons in this category need assistance to conclude contracts. Examples include minors aged between 7 years and 18 years old (assisted by guardians), prodigals (assisted by curators), insolvent persons (assisted by trustees). (c)No contractual capacity – Persons in this category have no capacity to conclude a contract at all. Examples include insane persons, intoxicated persons, minors aged less than 7 years old. POSSIBILITY OF PERFORMANCE The law of contract requires that the obligations of the parties in terms of the contract must be capable of being performed or carried out. If it is impossible to perform the obligation, the question that arises is: did the impossibility of performance arise prior to the conclusion of the contract, or during the course of the contract? If it arose prior to the conclusion of the contract such impossibility of performance is known as initial impossibility of performance, and the contract is void, due to lack of the requirement of possibility of performance. However, if it (i.e. the impossibility of performance) occurred during the course of the contract, it is referred to as supervening impossibility of performance, in which event the contract is valid. Therefore, initial impossibility of performance renders the contract void ab initio, whereas supervening impossibility of performance results to the contract being terminated.  FORMALITY This requirement is applicable to only those contracts, which are required by legislation to comply with certain formal requirements. For instance, a statute may require that a particular type of contract be in writing or be signed by a particular official/officer or have a stamp or seal of particular office. Examples of such contracts include a mortgage bond (which must be in Purpose writing and signed by the Registrar of Deeds), deed of alienation (which must be in writing and signed by both parties), to mention just a few. So, a contract which needs to comply with certain statutory requirements, but fails to comply therewith, is void due to lack of the requirement of formality. It is important to note, though, that not all contracts need this requirement to be valid.  Breach of Contract What constitutes breach of contract? Breach of Contract is a failure without legal excuse to perform any promise that forms all or part of the Contract, including performing in acceptable standards. When a party claims a breach of contract, the Judge/ Magistrate Officer must answer the following questions: Did the Contract exist? If so, what did the contract require of each parties? Was the contract modified (adjusted) at any point? Did the claimed breach occur?  If so, was the breach material to the contract? Does the breaching party have a legal defense to enforcement of the contract? What damages were caused of the breach? What is the difference between material and minor breach of the contract? Purpose E.g, Material breach of contract by the employer allows the employee to resile from the contract. Examples include a reduction in status, the non-payment of remuneration etc. In Eagleton & others v You Asked Services (Pty) Ltd 11 BLLR 1040 (LC) the court pointed out that “where an employer breaches a material term of the contract, such as not paying an employee which is a material and fundamental term of the contract, the employee has an election. In Coetzee, supra, at 1332F, the Labour Court pointed out that the innocent party has a choice whether to cancel the contract or to uphold the contract and enforce it. If the employee does not elect to terminate the employment contract by resigning, he or she will not be entitled to claim a constructive dismissal as an essential element of a claim of constructive dismissal will not be present. In order to place an employer in a position to formulate a defense against a claim of constructive dismissal it is therefore, in my view, necessary to make a factual allegation in the statement of claim to the effect that it was the employee who had terminated the contract of employment by resigning.”  UNIT 5- BREACH OF CONTRACT Breach of contract is failure by one party to perform its obligation in terms of the contract. There are five forms of breach of contract, namely:- MORA-FAULT  Mora debitoris – This is failure by the debtor to perform on time or at all. Mora debitoris can be defined as the wrongful delay by the debtor of performance which is due Purpose and enforceable. Mora debitoris is late performance by the debtor where the performance is due, enforceable and possible. Mora happens when performance is not made on time.  Mora creditoris – This is where the creditor by his/her conduct prevents performance by the debtor. Repudiation – This is an express or implied refusal to perform the obligation. The court reiterated the legal principles relating to repudiation. Where a party to a contract, without any lawful grounds, indicates through words or positive conduct their deliberate and unequivocal intention to no longer be bound by the contract, they are said to have repudiated the contract. epudiation is when a party comes right out and admits that they are nwilling or unable to perform their obligations under the contract. E.g epudiation of a Contract occurs when one party abandons their obligations nder the Contract. It can be that the relevant party is either unwilling or nable to perform those obligations..Positive mal-performance – This is where the debtor’s performance is ncomplete, or where the debtor does an act which he/she is prohibited to do in erms of the contract. This occurs when performance of the obligation is made, ut it is defective. Usually this type of breach must be significant or it must elate to a material clause of the contract to be malperformance. Rendering performance impossible – This is where one of the parties causes the performance to be impossible. REMEDIES FOR BREACH OF CONTRACT The following remedies are available to a party who has been affected by the breach of a contract (i.e. the innocent party) –  Specific performance Due to the personal nature of a contract of employment, the courts will not order specific performance where a contract was breached. It was decided in National Union of Textile Workers and Others v Stag Packings (Pty) Purpose Ltd & Another 1082 4 SA 151 (T) that specific performance (reinstatement) was not excluded as a remedy for the employee. The fact that the relationship between the parties has broken irretrievably broken down is one of the factors which may be taken into consideration when the decision to reinstate or not is made.  Cancellation To cancel a contract by consent, each party agrees to give up any rights to receive an agreed upon benefit, and promises not to sue the other person for a breach of contract. A Notice of Contract Termination is a formal declaration that you give to another party that says you intend to cancel the contract. A cancellation agreement is an agreement where the parties legally end their contractual relationship and the cancel the contract. g, An employee may claim damages suffered as a result of the breach of contract by the employer, irresp whether he elects to terminate the contract or to continue with the contract. In Wallace v Du Toit 7 (LC) the employer employed the employee as an au pair to care for his two young children. After two e employee fell pregnant, and her employment was terminated. She sought compensation under the lations Act (“LRA”) for her automatically unfair dismissal and she further claimed damages und mployment Equity Act. The Court awarded an amount of R25 000 damages for the impairment of her digni lf-esteem flowing from the discrimination on the grounds of her pregnancy. Compensation equal to 12 m muneration was added to this. Penalty clause penalty clause is a contractual clause that imposes liquidated damages that are unreasonably high and represent a puni breach, rather than a reasonable forecast of damages for the harm that is caused by the breach, are referred to as uses  UNIT 6-TERMINATION OF CONTRACT A contract may be terminated in one of the following ways:-  By due performance of the obligations  By Notice  Purpose By mutual consent  By Effluxion of time  By novation  By release  Continuation of Termination of Contract.  By waiver  By merger  By set-off Purpose  By supervening impossibility of performance  Prescription  Insolvency  Death End!!  Contract of Sale Definition: A contract of sale is a reciprocal contract in terms of which one person, the seller, undertakes to deliver something to another person, the purchaser, and the latter undertakes to pay a certain amount of money to the former in exchange thereof. Contract of sale agreements are powered and protected by National Credit Act 34 of 2005. Upon agreementPurpose by the parties a contract may be reduced into writing and all material terms of the contract to be written and all parties must sign.  Essentialia to a contract of sale 1. Agreement to Purchase and Sell Contract of sale comes into existence when the an agreement of purchase and sale has been concluded between the purchaser and seller. Purpose It involves intentions of the parties and the reciprocal agreement to buy and sell. There is consensus. Note that purchase and delivery of the article are not the prerequisite for the validity of the contract, they are only consequences for the valid sale.  Creates personal rights in terms of which can claim delivery.  Essentialia……… 2. Merx( commodity/ certain thing/ item/goods  Parties must agree on Merx, which must be certain or ascertainable, eg, if it’s a sale of a car, Beijing Baic motor car 2023 model  Merx is ascertainable when its quantity of a thing sold is stated, e.g 100 kg of butter and the purchaser identifies by description in evidence. Purpose  Article can be anythings as long it is legal and not prohibited by law, illegal drugs, and human beings or human parts.  Merx can be an immovable, corporeal or incorporeal\( claim for the debt for outstanding debts or a goodwill in a business)  Once article is sold it is referred to as res vendita  Items sold with possibility of existence in future- is sale of spes(hope) or res sperata, an example is the motor vehicle not yet manufactured.  3. Pretium(Price) Must be payable in money If the purchaser wants another performance other than payment in money, that is not contract of sale but another type of contract, ne.g contract of exchange. When there is partly money payment and partly something else, the parties to the contract determine how to call it. Purpose When there is doubt whether it was a contract of sale or not but predominantly there is money exchange, a contract of sale. Parties must ad idem( meeting of minds) regarding the price. If money is not certain in a contract of sale such a contract is void.  Transfer of ownership When the contract has been concluded with the intensions of the purchaser to take ownership with the following requirements: The seller must be the owner of the thing sold. Purpose Delivery of the thing sold must take place for transfer of ownership  the seller must have intentions to transferring ownership on delivery. The purchaser must intend receiving ownership when taking up deliver If the thing sold is a movable one and the sale is for cash, the price must be paid.  Forms of Delivery There is a distinction of delivery between movable and immovable property Immovable Property Is delivered by a way of registration. For instance a house, registration in the deeds Registry Office must take place to transfer ownership- to the Purpose purchaser. Movable Property Is delivered by actual or constructive delivery. 1. Traditio longa manu( delivery with the long hand) is used where the purchased items are very heavy or large. Delivery takes place by pointing out to the purchaser so that he can exercise control over it, eg lobola, pointing out on cattle.  1. Delivery………… 2. Traditio brevi manu(delivery in short hand)-delivery takes place by agreement where the purchaser is already in possession of the item sold when the contract of sale is concluded. He does not have to return it. Purpose 3. Constitutum possessorium- delivery takes place by agreement- between the parties.  Duties of the Parties Duties of the Purchaser: Pay the agreed price. Compensate the seller for any expenses incurred in the safe keeping and maintenance of the thing sold until delivery could take place. Purpose Duties of the Seller: Deliver the thing sold. Care for the thing until delivery takes place. To guarantee the purchaser undisturbed possession. To give the purchaser a warranty against latent defects  Rights of the Parties Where the purchaser has committed breach of contract , the seller has the usual remedies for breach available to him, claim for damages if suffered loss, warranty, specific performance, cancellation of the contract. Purpose Where the seller is guilty of breach of contract, the purchaser has special remedies, claim specific performance, cancellation. If he wants to pursue and claim damages, he may institute action empti  Lease Lease is a contract whereby one of the contracting parties( landlord/Lessor)undertakes to give to the other( tenant/lessee) enjoyment and use of the thing, partially or in full for a period of time in return for a certain or ascertainable price which the latter undertakes to pay. Purpose Nature of a Lease Lease must comply with essentialia of hiring and letting: 1. Specified Property/Thing Lessor and lessee must be ad idem as to the particular property which forms the subject matter of the contract. If no consensus reached the contract is void. 2. Use and enjoyment of the Property The lessee acquires the property for enjoyment, however it is not required that lessee receives the full enjoyment of the whole thing. Its thus possible that the lessee only hires part of the property Purpose orhire without the exclusive enjoyment of the property. 3. For a period Lease is not permanent. It is for a certain period known and agreed to by the parties as per the contract. Contract may be terminated by either party by giving notice upon the agreed. At the unfortunate it may be cancelled by death of the party.  4. For a Rent(price) The rent must be payable in money.in the case of the land as a share of the fruits or produce of the land/property Duties of the Landlord ToPurpose deliver the thing for use and occupation or enjoyment To deliver the property in a proper condition and to maintain property Not to interfere with the lessee’s use of the property and to protect him against eviction from others. To compensate the lessee for additions and improvements. To pay taxes  Rights of the tenant/lessee If the landlord fails to deliver the property, he is in breach of the contract and may be entitled to pay damages or specific performance or cancellation. If Purpose the landlord fails to deliver the property in good condition or fails to maintain, the lessee may resile if the inconvenience he is suffering because of defects, may refuse to pay the full amount. Where the lessor fails to maintenance or repair the property, the lessee may not claim any damage but may effect necessary repairs with notice to the landlord and cost incurred reduced in  Duties of the Lessee  To pay rent  To use the property for the purpose it was let out and to take care thereof.  To return the property undamaged Termination of the Lease Purpose  By nnotice  By agreement  Cancellation  Expiration of specified period  Supervening impossibility of performance  Merger(where the capacities of lessee and lessor merge into one person e.g marriage  Many Blessings!