LOC262 Exam Notes PDF

**LOC262 Exam Notes** **Topic 1: The Notion of a Contract** **1.1 Contract as an Agreement Intended to Create Enforceable Obligations** - **A contract:** is a legally binding agreement between two or more parties. For an agreement to be a contract, the parties must intend to create lega...

**LOC262 Exam Notes** **Topic 1: The Notion of a Contract** **1.1 Contract as an Agreement Intended to Create Enforceable Obligations** - **A contract:** is a legally binding agreement between two or more parties. For an agreement to be a contract, the parties must intend to create legal obligations. - **Non-contractual agreements:** Social or domestic arrangements (e.g., agreeing to meet for coffee) are not contracts because there is no intention to create legal obligations. **1.2 Requirements for a Valid Contract** **Here's a refined version of the points you provided:** Consensus (Mutual Agreement): All parties must reach a clear and mutual understanding (a \"meeting of the minds\") on the essential terms of the agreement. **Capacity:** Each party must possess the legal competence to enter into a contract, meaning they must be of sound mind, of legal age, and not under any disqualifying legal status. **Formalities:** Certain types of contracts must comply with specific formalities, such as being in writing and signed by the parties, to be legally enforceable. **Legality:** The subject matter of the agreement must be lawful; contracts involving illegal activities or purposes are void and unenforceable. **Possibility of Performance:** The obligations outlined in the contract must be realistically achievable and capable of being performed. **Certainty and Clarity:** The terms of the agreement must be sufficiently clear, specific, and definite to allow the parties to understand their rights and obligations. **This version improves readability and ensures each point is concise and precise. Let me know if you need further adjustments!1.3 Nature of a Contract (Characteristics)** - **Consensus:** Both parties must agree on the essential terms. - **Capacity:** Parties must be legally capable of entering into a contract. - **Legality:** The contract must not violate the law or public policy. - **Possibility of Performance:** The obligations must be achievable. - **Formalities:** Some contracts require specific forms (e.g., written and signed). **Meaning of *Animus Contrahendi* and \"Gentleman\'s Agreement,\" Electronic Offers, and Restraint of Trade Conflicts** - **Animus Contrahendi** refers to the intent to create binding legal obligations. - A **Gentleman\'s Agreement** is an informal arrangement based on trust rather than enforceable law. - **Electronic Offers** are legally recognized in South Africa under the Electronic Communications and Transactions Act. - **Restraint of Trade** clauses must balance contractual freedom with constitutional rights (e.g., freedom to work) and are only enforceable if reasonable and fair. **1.4 Cornerstones of the Law of Contract** **Freedom of Contract --** The principle that individuals are free to choose whether to enter into a contract, with whom they contract, and the terms of the agreement, allowing autonomy in personal and commercial transactions. **Sanctity of Contract --** The doctrine that contracts entered into freely and with intent are binding and should be honoured, with courts upholding the enforceability of such agreements (pacta sunt servanda). **Good Faith --** The expectation that contracting parties act honestly and fairly toward each other, ensuring integrity and mutual respect in fulfilling contractual obligations. **Privity of Contract --** The principle that contractual rights and obligations are confined to the parties directly involved in the agreement, excluding third parties from claims or duties under the contract. **1.5 Consumer Protection Act (CPA) -- Right to Information** The CPA ensures that consumers are treated fairly and have access to clear information. Section 22: Requires suppliers to provide information in plain and understandable language. **Prohibited Terms:** - Terms that waive consumer rights. - Terms that limit supplier liability. - Terms that are unfair or unreasonable. **Requirements for a Valid Offer; *Bloom v American Swiss Watch Co*** - The offer must be **firm**, meaning it should not be vague or subject to change. - The offer must be **complete**, containing all essential terms without omissions. - The offer must be **clear and certain**, leaving no room for ambiguity. In *Bloom v American Swiss Watch Co*, a reward advertisement was found to be an offer to the general public, which could be accepted through specific performance (e.g., finding the stolen item), illustrating the importance of clear terms and intent. **Topic 2: Offers, Acceptance, and Pacta de Contrahendo** **2.1 Offers to the Public** - Advertisements: Generally, advertisements are invitations to do business, not offers. - Example: A store advertising a TV for sale is inviting customers to make an offer to buy it. - Promise of Reward: Can be an offer if it meets certain conditions. - Example: A reward for finding a lost dog is an offer to the public. - Calls for Tenders: An invitation for others to make offers. - Example: A government inviting companies to bid for a construction project. - Auctions: Bidders make offers, and the auctioneer accepts or rejects them. **2.2 Requirements for Valid Acceptance** - **Unqualified Acceptance:** The acceptance must match the offer exactly. - **Proper Offeree:** Only the person to whom the offer was made can accept it. - **Conscious Response:** Acceptance must be a deliberate act. - **Compliance with Prescribed Mode:** Acceptance must follow the method specified in the offer. **2.3 Pacta de Contrahendo** A pacta de contrahendo is a preliminary agreement to enter into a future contract. **Example:** An option contract where a seller agrees not to sell a property to anyone else for 30 days while the buyer decides whether to purchase it. **2.4 Duress** Topic 2.6: Duress (Metus) **2.6.1 Definition of Duress** Duress (or metus) occurs when one party uses improper pressure or intimidation to force another party into a contract. The pressured party consents not out of free will but out of fear caused by an illegitimate threat. Example: If someone threatens to harm you unless you sign a contract, your consent is obtained under duress. **2.6.2 Legal Effect of Duress** A contract induced by duress is ***valid*** because, in the eyes of the law, consent (even if forced) is still consent. However, the contract is ***voidable*** at the option of the threatened party. This means the victim can choose to cancel the contract. **2.6.3 Requirements for Duress** For duress to be proven, the following elements must be present: **1. Nature of Coercion:** The coercion must affect the ***will*** of the victim, not just their body. The victim is forced to choose between two evils: entering into the contract or suffering harm. Example: Threatening to destroy someone's property unless they sign a contract. **2. Reasonableness of the Fear:** The threat must be serious enough to affect a reasonably steadfast person. Example: A threat of physical harm would likely affect a reasonable person, whereas a minor threat might not. **3. Object of the Threat:** The threat must be directed at the life, bodily integrity, or property of the victim or their immediate family. Example: Threatening to harm the victim's child unless they sign a contract. **4. Imminence of the Harm:** The harm threatened must be ***imminent or inevitable***. Example: A threat to burn down the victim's house \"tomorrow\" is imminent, whereas a vague threat of harm \"someday\" is not. **5. Unlawfulness of the Threat:** The threat must be ***unlawful*** or against good morals (contra boni mores). Example\*: Threatening to commit a crime (e.g., assault) unless the victim signs a contract. **2.6.4 Damages in Cases of Duress** If the victim suffers financial loss due to the duress, they may claim Aquilian damages. Aquilian damages are a form of compensation for financial harm caused by wrongful conduct. **Requirements for Aquilian Damages:** - Wrongful Conduct: The threat must be unlawful or against good morals. - Financial Loss: The victim must have suffered a quantifiable financial loss. - Causal Link: The loss must be directly caused by the duress. - Fault: The party applying duress must have acted intentionally or negligently. **Examples of Duress** **1. Physical Threat:** A builder threatens to harm a homeowner unless they agree to pay double the agreed price for construction work. The homeowner can cancel the contract and claim damages for any financial loss. **2. Threat to Property:** A landlord threatens to evict a tenant unless they sign a new lease with higher rent. The tenant can cancel the new lease and claim damages if they suffer financial loss. **3. Threat to Family:** A business owner threatens to harm a supplier's family unless they agree to a contract with unfair terms. The supplier can cancel the contract and seek compensation for any losses. **2.5 Mistake** **Unilateral Mistake:** One party is mistaken, and the other knows it. **Mutual Mistake:** Both parties are mistaken about each other's intentions. **Common Mistake:** Both parties share the same incorrect belief. **2.6 Doctrine of Quasi-Mutual Assent:** If one party reasonably believes there is an agreement due to the other party's actions, a contract may still be formed. **2.7 Undue Influence:** When one party uses their influence to pressure the other into a contract. **2.8 Commercial Bribery:** When a contract is induced by bribing an agent. **Topic 3: Formalities in Contracts** **Prescribed Formalities Required For Validity** **Certain contracts must meet specific legal formalities to be valid. Failure to comply renders the contract void.** **1.1 Alienation of Land:** Section 2(1) of the Alienation of Land Act mandates that contracts involving land sales be in **writing and signed** to be enforceable. **1.2 Suretyship:** A suretyship is a contract where the surety agrees to fulfil the debtor's obligation if they default. Under Section 6 of the General Law Amendment Act, it is only valid if in writing and signed by or on behalf of the surety. The creditor need not sign. **1.3 Donation:** An executory donation is valid under Section 5 of the General Law Amendment Act only if recorded in writing, signed by the donor, and witnessed by two people. The donee must accept but need not sign. **Formalities for a Valid Contract: Alienation of Land and Antenuptial Contracts** - **Alienation of Land:** Section 2(1) of the Alienation of Land Act mandates that contracts involving land sales be in **writing and signed** to be enforceable. - **Antenuptial Contracts:** Section 87(1) of the Deeds Registries Act requires antenuptial contracts to be in **writing, signed, and registered** at the Deeds Office. **2. PRESCRIBED FORMALITIES REQUIRED FOR ENFORCEMENT AGAINST THIRD PARTIES** Some contracts are valid between the contracting parties but require additional formalities to be enforceable against third parties. **2.1 Antenuptial Contracts** An oral antenuptial contract is valid between the parties. However, to be enforceable against third parties, it must be notarially executed and registered within three months. **2.2 Long Leases of Land** According to Section 1 of the Formalities in Respect of Leases of Land Act, an oral lease is valid between the parties. However, a long-term lease exceeding 10 years must be registered against the title deed to be enforceable against creditors or successors. **3. FORMALITIES IN ELECTRONIC CONTRACTS** Section 12 of the Electronic Communications and Transactions Act states that a legal requirement for a document to be in writing is met if it exists in the form of a data message and is accessible. However, this does not apply to contracts for the alienation of land or long-term leases exceeding 20 years. It does apply to suretyships and executory donations, excluding land. **4. FORMALITIES STIPULATED BY THE PARTIES** Parties may specify their own formalities for creating, modifying, or cancelling a contract. Neither party may unilaterally depart from these agreed formalities. **4.1 Non-Variation Clauses and the Shifren Principle** A non-variation clause requires that any modification to the contract must be in writing and signed to be valid. In SA Sentrale Ko-operatiewe Graanmaatskappy Bpk v Shifren, the court upheld that non-variation clauses are binding, making oral variations ineffective. **5. POSSIBILITY** A contract must be possible to perform. If performance is objectively impossible at the time of contracting, the contract is void. Examples include the sale of a destroyed object or the sale of a non-existent object. **5.1 Consequences of Impossibility** No obligation arises from an impossible contract, meaning no claim for performance or damages can be made. Any performance already rendered must be returned based on the principle of unjustified enrichment. **6. CERTAINTY** Contractual terms must be certain or at least capable of being made certain. **6.1 Consequences of Uncertainty** An uncertain contractual obligation is invalid. If the uncertainty relates to a severable obligation, the rest of the contract may remain valid. However, if the uncertain obligation is inseverable, the entire contract is void. Any transfers made under a void contract can be reclaimed based on unjustified enrichment. **Topic 4: Multiplicity of Parties and Terms** **THE PURPOSE OF THE CONSUMER PROTECTION ACT (CPA)** **Section 3(1) provides that the purpose of the CPA is to promote and advance the social and economic welfare of consumers by:** - Establishing a legal framework for a fair, accessible, efficient, sustainable, and responsible consumer market; - Reducing disadvantages experienced by low-income consumers; - Promoting fair business practices; - Protecting consumers from unconscionable, unfair, or fraudulent conduct; - Improving consumer awareness and access to information; - Developing a culture of consumer responsibility; - Providing an accessible and efficient system of redress for consumers. **FUNDAMENTAL CONSUMER RIGHTS (Chapter 2 of the CPA)** 1. The right to equal access to the consumer market 2. The right to privacy 3. The right to choose 4. The right to disclosure and information 5. The right to fair and responsible marketing 6. The right to fair and honest dealing 7. The right to fair, just and reasonable terms and conditions 8. The right to fair value, good quality, and safety 9. The supplier\'s accountability to consumers **Applicability Of The CPA** The CPA applies to every \"transaction\" for the \"supply\" of \"goods\" or \"services\" within the Republic, unless exempted under Sections 5(2), (3), and (4). It also applies to the \"promotion\" of goods or services that may result in a covered transaction. **ENFORCEMENT OF THE CPA** **The CPA provides for two central enforcement bodies:** - National Consumer Commission (NCC) - National Consumer Tribunal **CONTRACT LAW** **Multiplicity Of Parties In Contracts** Contracts often involve more than two parties. The provisions of the contract must be closely examined to determine each party\'s liability and entitlement. Divisibility of Performance - Divisible Performance: E.g., selling 100 cows to two purchasers. - Indivisible Performance: E.g., selling one cow to two purchasers. **Types of Liability in Multi-Party Contracts** - Simple Joint Liability: Each debtor is liable only for their share of the obligation (e.g., R5 000 split among five debtors means each pays R1 000). - Joint and Several (In Solidum) Liability: Each co-debtor is liable for the full amount, allowing the creditor to recover from any debtor. **Contractual Terms** **Definitions of Contractual Terms: *Essentialia*, *Naturalia*, and *Incidentalia*** - **Essentialia:** Core terms defining a contract type (e.g., price in a sale contract). - **Naturalia:** Terms automatically implied by law (e.g., warranty of quality). - **Incidentalia:** Additional terms agreed upon by parties. **Conditions In Contracts** Conditions qualify contractual obligations based on uncertain future events. Types of Conditions 1. **Positive & Negative Conditions:** - Positive: Depends on the happening of an event (e.g., paying university fees if exams are passed). - Negative: Depends on an event not occurring. 2. **Suspensive & Resolutive Conditions:** - Suspensive: Obligations are enforceable only if a condition is fulfilled (e.g., property purchase subject to local authority approval). - Resolutive: Obligations operate fully but terminate if a condition is met (e.g., scholarship dependent on passing exams). **Pactum De Contrahendo** A pactum de contrahendo is a preliminary agreement in which parties undertake to conclude a contract in the future. It creates an obligation to negotiate or enter into a contract under specified conditions. Common forms include: - Option contracts: One party grants another the right to conclude a contract within a set period. - Pre-emption agreements: One party agrees to give another the first right to purchase an asset before offering it to others. **Topic 6: Remedies for Breach of Contract** Pacta servanda sunt: contracts should be honoured. This is a fundamental principle of the law of contract. As you would have learnt in the previous study unit, contracts are often breached and this fundamental principle is therefore often disobeyed. The law does generally not condone such disobedience. Instead, it provides remedies, or "cures", where contracts are breached. These remedies provide the "innocent" party (the party who did not breach the contract) with some form of relief or compensation. Such relief or compensation comes, broadly, in three forms. First, there are remedies aimed at keeping the contract alive and giving the innocent party his due under the contract. Secondly, there are remedies aimed at cancelling the contract. Finally, there are remedies aimed at compensating the innocent party for the harm he or she may have suffered through the breach. The purpose of this study unit is, in broad **Different Types Of Remedies** Remedies aimed at keeping the contract alive: - Exception non adimpleti contractus - Claim for specific performance - Interdict Remedies aimed at cancelling the agreement: Cancellation Remedies aimed at compensating the innocent party for loss or harm caused by the breach: - Claim for damages - Claim for interest **Remedies Aimed at Keeping The Contract Alive** **6.3.1 Exception non adimpleti contractus** The exception non adimpleti contractus is a defence that can be raised in the case of a reciprocal contract, where the performances due on either side are promised in exchange for one another. It is a remedy that permits a party to withhold his own performance, and to ward off a claim for such performance until the other party has either performed or tendered proper performance of his obligations under the contract. **6.3.1.1 Requirements for the exceptio non adimpleti contractus** Reciprocity of obligations -- BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk. One performance must be given or promised in exchange for the other. Sequence of performance. A general rule that parties must perform pari passu (simultaneously) unless parties have agreed otherwise or the naturalia of the contract in question dictates otherwise. o Lease: Landlord must perform first by providing the use and enjoyment of the property to the lessee. Payment of the rent is only owed at the end of the month or year. o Employment: The employee must perform first. The employer is only obliged to pay the salary or wages at the end of the period. o Building contracts: The **Specific performance** Following the general principle pacta sunt servanda, the parties to a contract are obliged to fulfil their contractual obligations and therefore parties are in principle entitled to insist on proper and full performance by the other party. 6.3.2.1 Requirements for specific performance 1\. The plaintiff must have performed or be ready to carry out his/her obligations. 2\. The defendant must be in a position to perform, i.e. performance must be subjectively and objectively possible. **Cancellation** Cancellation of the contract is an extraordinary remedy that is available to the innocent party only in exceptional circumstances. This is because it entails the drastic step of bringing the transaction to an abrupt and premature end, contrary to the original intentions of the parties. **Damages** Whether the innocent party elects to cancel or to claim specific performance of the contract, he is in addition entitled to claim damages as compensation for any financial loss that might have been suffered as a result of the breach. The claim for damages is probably the single most important remedy for breach of contract. Requirements for a damages claim: - A breach of contract by the defendant. - Financial or patrimonial loss by the plaintiff. - A factual causal link between the breach and the loss; and - Legal causation (the loss must not be too remote a consequence of the breach). **Contract And Delict** **1. CONTRACT** A contract is a legally binding agreement between two or more parties that creates obligations enforceable by law. It is based on the principle of **consensus ad idem** (meeting of the minds), where the parties agree to certain terms and conditions. **Key Elements of a Contract:** - **Offer and Acceptance**: One party makes an offer, and the other accepts it. - **Consensus**: Both parties must agree on the terms. - **Consideration**: Something of value must be exchanged (e.g., money, goods, services). - **Capacity**: The parties must have the legal capacity to enter into a contract (e.g., they must be of sound mind and of legal age). - **Legality**: The contract must be for a lawful purpose. **Remedies for Breach of Contract:** If one party fails to fulfill their obligations under the contract, the other party may seek remedies such as: - **Damages**: Monetary compensation for losses suffered. - **Specific Performance**: A court order requiring the defaulting party to fulfill their obligations. - **Cancellation**: Terminating the contract and restoring the parties to their original positions. **2. DELICT** Delict is a civil wrong (other than a breach of contract) that causes harm or loss to another person, giving rise to a claim for compensation. It is based on the principle that a person who wrongfully causes harm to another must make amends. **Key Elements of a Delict:** - **Conduct**: There must be an act or omission by the defendant. - **Wrongfulness**: The conduct must be legally wrongful, meaning it violates a legal duty. - **Fault**: The defendant must have acted intentionally or negligently. - **Causation**: There must be a causal link between the conduct and the harm suffered. - **Harm**: The plaintiff must have suffered some form of harm (e.g., physical injury, financial loss, or damage to reputation). **Remedies for Delict:** The primary remedy for delict is **damages**, which aim to compensate the injured party for their loss. Damages can be: - **Patrimonial Damages**: Compensation for financial losses (e.g., medical expenses, loss of income). - **Non-Patrimonial Damages**: Compensation for non-financial harm (e.g., pain and suffering, emotional distress). **Key Differences Between Contract and Delict:** 1. **Source of Obligation**: - Contract: Obligations arise from an agreement between the parties. - Delict: Obligations arise from a wrongful act that causes harm. 2. **Nature of the Relationship**: - Contract: The parties have a pre-existing relationship based on the contract. - Delict: The parties may have no prior relationship; the duty arises from the law. 3. **Remedies**: - Contract: Focuses on enforcing the agreement or compensating for breach. - Delict: Focuses on compensating for harm caused by wrongful conduct. **1. Introduction To The CPA** - The CPA is a comprehensive piece of legislation that regulates fundamental aspects of commerce and consumer transactions. - Its main purpose is to protect consumers from exploitation and promote social and economic welfare. - The CPA impacts the law of contract and business practices, as well as our daily lives as consumers. **2. Purpose Of The CPA (Section 3(1)** The CPA aims to promote and advance the social and economic welfare of consumers by: - Establishing a legal framework for a fair, accessible, efficient, sustainable, and responsible consumer market. - Reducing disadvantages faced by low-income consumers or those from low-income communities. - Promoting fair business practices. - Protecting consumers from: - Unconscionable, unfair, or improper trade practices. - Deceptive, misleading, unfair, or fraudulent conduct. - Improving consumer awareness and access to information to encourage informed consumer choice and behaviour. - Developing a culture of consumer responsibility. - Providing an accessible, consistent, and efficient system of redress for consumers. **3. FUNDAMENTAL CONSUMER RIGHTS (Chapter 2)** Consumers have the right to access goods and services without discrimination. Suppliers must ensure equal treatment of all consumers. **Right to Privacy:** Consumers have the right to privacy and confidentiality. Suppliers must protect consumers\' personal information and not use it for unsolicited marketing. **Right to Choose:** Consumers have the right to freely select suppliers, goods, and services. Suppliers must not engage in anti-competitive behavior or restrict consumer choice. **Right to Disclosure and Information:** Consumers have the right to clear and accurate information about goods and services. Suppliers must disclose all material terms and conditions of transactions. **Right to Fair and Responsible Marketing:** Consumers have the right to be protected from false, misleading, or deceptive marketing. Suppliers must ensure their marketing practices are honest and transparent. **Right to Fair and Honest Dealing:** Consumers have the right to be treated fairly and honestly. Suppliers must not engage in unconscionable conduct or take advantage of consumers. **Right to Fair, Just, and Reasonable Terms and Conditions:** Consumers have the right to contracts that are fair, just, and reasonable. Suppliers must not include unfair terms or clauses that exploit consumers. **4. When Does the CPA Apply?**\ The CPA applies to: - Every transaction for the supply of goods or services within South Africa. - The promotion of goods or services that could lead to a transaction covered by the Act. **Exemptions (Sections 5(2), (3), and (4))**\ The CPA does not apply to: - Transactions exempted by the Act (e.g., certain financial services, credit agreements, and business-to-business transactions). - Transactions regulated by other legislation (e.g., the National Credit Act). **Enforcement of the CPA**\ The CPA establishes two central bodies for enforcement: 1. **National Consumer Commission (NCC)** - Investigates complaints, enforces compliance, and educates consumers about their rights. - Has the power to issue compliance notices and refer cases to the National Consumer Tribunal. 2. **National Consumer Tribunal** - An independent body that adjudicates disputes between consumers and suppliers. - Has the authority to impose penalties, award compensation, and make binding rulings. **Importance of the CPA** - The CPA protects consumers from unfair practices and promotes fair business practices. - It ensures access to redress mechanisms and empowers consumers to make informed choices. - It promotes economic welfare by creating a fair and competitive market. **Key Points to Remember** - The CPA protects nine fundamental consumer rights. - It applies to transactions and promotions within South Africa, with certain exemptions. - Enforcement is carried out by the NCC and the National Consumer Tribunal. - The CPA aims to create a fair, accessible, and responsible consumer market. **Exam Tips** - Focus on understanding the nine fundamental consumer rights and their practical implications. - Be able to explain the purpose of the CPA and how it promotes consumer welfare. - Know when the CPA applies and when it does not (exemptions). - Understand the roles of the NCC and the National Consumer Tribunal in enforcing the CPA.