LWBLA1 slide deck week 2 lesson 1 2024.pptx

BUSINESS LAW LWBLA-B22 Eduvos (Pty) Ltd (formerly Pearson Institute of Higher Education) is registered with the Department of Higher Education and Training as a private higher education institution under the Highe...

BUSINESS LAW LWBLA-B22 Eduvos (Pty) Ltd (formerly Pearson Institute of Higher Education) is registered with the Department of Higher Education and Training as a private higher education institution under the Higher Education Act, 101, of 1997. Registration Certificate number: 2001/HE07/008 Law of contracts  What will be covered in the week’s lessons? Formation of a valid contract (offer & acceptance). What is a valid contract Requirements for consensus and factors that affect it Requirements for contractual capacity. Continued…. Concepts of legality and their effect on a contract. Possibility of performance. The formalities and terms of a contract. Suspensive and resolutive conditions Formalities to comply with in a valid contract.  Learning outcomes Define law of contract. Discuss what the law requires in order for a valid and binding contract to be created. Understand void and voidable contracts. Discuss the requirement of consensus. Discuss offer and acceptance. Understand the concepts of mistake, misrepresentation, duress and undue influence.  General principles of contract & consensus Chapter 2 Sections 2; 3 (3.1 – 3.3) Sections 3.4; 3.5; 3.6; 3.7; 3.8. Sections 4.1; 4.4; 4.5; 4.6.  1. Your friend Anisa approaches you, as she knows that you are studying Activi Commercial law. She would like to know about an ‘obligation’ in terms of the law. ty i. Explain to Anisa what is an obligation? ii. Describe to Anisha the meaning of Pacta sunt servanda 2. Sarah wants Mohammed to tile her kitchen. She offers to pay him R80 per square meter for his labour. Mohammed asks Sarah to enter into a contract. Explain to Sarah the requirements for a valid and binding contract? 3. Femidah and Hamid make arrangements to meet at Mugg & Bean for coffee on Friday at 2pm. Answer the following: i. Is this a contract? Provide a reason for your answer ii. Is a person allowed to enter into a contract with himself/herself? Provide a reason for your answer  Contract = law of obligations & private law = consensus is the basis Contract is an agreement between persons in which they Definition agree to do something, not do something or deliver something of a “meeting of the minds” contract Objective approach to whether there was an agreement  would the reasonable man assume that the 2 parties had reached an agreement Must meet all the requirements to be valid Essential elements of a contrac  IDENTIFY THE NATURALIA, INCIDENTALIA AND ESSENTALIA Sifiso wants to sell his vehicle, a Volkswagen Beetle, to Patrick. They agree on a price of R5 000. Patrick walks around the car, kicks the tyres, sits in the driver’s seat, and starts the engine. He then decides to buy the car. Patrick pays the price to Sifiso. IDENTIFY THE NATURALIA, INCIDENTALIA AND ESSENTALIA Patrick has been driving his new purchase for a week, the engine block falls apart. Upon investigation he hires a mechanic. Patrick asks the mechanic to repair the vehicle. The cost of repairs is R3 000. IDENTIFY THE NATURALIA, INCIDENTALIA AND ESSENTALIA Patrick is hired by Auto cars to work as a mechanic and ears R20 000 per month. He is not happy with the long hours and overtime and wants to take the company to court. The company however promises bonuses to their workers for doing overtime.  The parties must communicate their consensus to one another (offer and acceptance) Parties must seriously intend to enforce the contract 8 requirements There must be a reality of consent between of a valid the parties contract (according to the Capacity to contract TB) Terms of the agreement can't be vague (certainty) Lawfulness Possibility of performance formalities  Void vs voidable Void  contract never came into existence Read the table on E.g unlawful contract, agreement reached by mistake, impossibility of performance page 42 & Remedy: condictio indebiti  if one party has performed and the other has not, the party may claim his performance 43 back /compensation Voidable  has a flaw and the aggrevied party can choose to render the contract valid or void E.g. contracts without true agreement, misrep, duress, undue influence, performance later became impossible Remedy: normal contractual remedies  cancellation, specific performance & damages Requirements Possibility of a valid contract Formalities consensus capacity Legality Consensus Consensus forms the basis of all contracts and is the result of negotiation between the parties One party’s will or intention needs to correspond with the will or intention of the other party – Consensus is reached Make each other aware of your intentions  express / tacit Consensus is reduced to whether there was an offer and acceptance.1.4 rules of offer and acceptanc An offer may be made to a defined person, a group or the whole world (e.g. offers for rewards for giving information) The offer must be communicated to the offeree before it can be accepted If you didn’t know about the reward for finding a dog and you hand the dog over, you cant accept the reward (Bloom case – police reward) The offer must have been seriously intended to create legal relations between the parties Not promises made as a joke / social arrangement / invite to do business Read Crawley v Rex – man wouldn’t leave shop, claimed advert for tobacco was an offer and he was there to claim it, but it was just an invite to do business and he was trespassing when asked to leave the shop Self service shop – offer is accepted when at the till Request for tenders – not an offer  an invite to submit a tender (tender awarded to bidder with the highest points) Auction with reserve – Auctioneer invites bidders to do business with him. The seller specifies a minimum price at which the auctioneer can sell the item for. The bidder makes an offer, which the auctioneer can accept. No obligation (invite to do business) Auction without reserve - Auctioneer sells to the highest bidder. Auctioneer makes an offer (price), and the bidder accepts, thereby creating a contract An advert that says first come first served is an offer rules of offer and acceptance contin The acceptance of the offer must be absolute (unconditional), unambiguous, and correspond with the terms of the offer Must comply with terms of the offer reg time, place and method of acceptance Conditions / counter-offer is not acceptance but request for more info / modify terms is not rejection of the offer (Watermeyer – stating a different payment date cannot mean the offer has been accepted) Error may not mean rejection (Men’s Fair – typo wont invalidate the acceptance) The offer and the acceptance must result in certain and definite terms No definite terms > contract = void for vagueness Some terms can be “read in” – implied by law, in circumstances or trade usage (well–known) Only the person to whom the offer is made may accept it Options might be ceded The acceptance must be communicated to the offeror Mental agreement is not enough to give rise to a contract Fern Gold Mining Company v Tobias  shares purchased by letter, before the acceptance letter had reached the party, the party had called and revoked his offer, thus no contract came in to being as he had not received the acceptance yet  Acceptance must be made in the manner prescribed by the offeror Silence does not amount to acceptance An offer comes to an end on rejection, revocation or lapse Express rejection / a counteroffer Hyde v Wrench  a counter offer was made to purchase at a lower price, this was refused by the seller, the buyer then tried to purchase the property at the original price but the court found that the counter offer revoked the original offer. NB read Maxi Security case page 56 Case Study Katlego, who resides in Johannesburg places the following advertisement in the Daily Times newspaper on 15 January 2019. 2012 white Audi A3 for sale. Only 30 000 km on the clock! Excellent condition!! R150 000 negotiable! Contact me before it’s too late!! 011-555-5555/084-555- 5555/ PO BOX 12345, Auckland Park, Johannesburg 2006. Casey, who lives in Cape Town sees the advert and responds. She sends a letter via post to Katlego on 17 January 2019, in which she makes an offer to purchase the car for R100 000. Katlego receives the letter on 25 January 2019; but only reads it on 27 January 2019. Katlego doesn’t think R300 000 is a fair price, and so informs Casey via sms that he thinks R130 000 is more acceptable. Casey agrees to this price and sends an e-mail to this effect, on 1 February 2019. The e-mail is delivered almost immediately. Katlego ignores all of Casey’s messages after that. Case Study 1.1 Identify the Offeror and Offeree. (3) 1.2 Explain when and where this contract came into being. (3) 1.3 Identify which theory was used in order to arrive at your answer in 1.2 above? (1) 1.4 Does an advertisement amount to an offer? Explain. (2) 1.5 Assume that Katlego accepted the offer of R300 000 and sent Casey a sms expressing his acceptance on the 27th of January 2019. 1.5.1 When and where would the contract have been concluded? (1) 1.5.2 Which theory would have applied? (1) 1.6 Assume Katlego accepted the offer of R100 000 telephonically; 1.6.1 Which theory would have applied? and (1) 1.6.2 When and where would the contract be concluded? (1) 1.7 List the requirements to be met before a mistake will render a contract void. (3) 1.8 Assume that Katlego lied about the year model of the Audi, it is in fact a 2011 model. Casey purchased the car on the basis of it being a 2012 year model. 1.8.1 Indicate whether the contract is valid, void, or voidable? (1) Case Study 1.7 List the requirements to be met before a mistake will render a contract void. (3) 1.8 Assume that Katlego lied about the year model of the Audi, it is in fact a 2011 model. Casey purchased the car on the basis of it being a 2012 year model. 1.8.1 Indicate whether the contract is valid, void, or voidable? (1) 1.8.2 Explain this form of misrepresentation. (1) 1.8.3 What remedy is available to Casey in this instance? (2)  An option is a commitment (legal obligation – creates rights and duties) on the part of the grantor to conclude a contract in future with the holder The offeror makes a substantive (separate) offer to the offeree, and then concludes a separate option agreement The offeror agrees to keep his offer open for a specific Options period of time. In a contract of option, the offeror agrees to make the offer irrevocable (cannot be withdrawn) for a specific period of time. Example – A offers to sell B a painting. B doesn’t have the money right now, but should have it later. A agrees to keep the offer open for 2 months Holder exercises the option = offer accepted, and then the contract is concluded Holder does not exercise the option = offer rejected 3.1.5 The doctrine of estoppel and the doctrine of quasi-mutual assent Estoppel This creates a fictional contract A party who has relied (to their where true consensus hadn’t disadvantage) on a actually been reached and can misrepresentation made by only be used by a contracting another can prevent the party party (not a 3rd party who had from relying on the truth. also been disadvantaged) 3.1.5 The doctrine of estoppel and the doctrine of quasi-mutual assent Doctrine of quasi-mutual assent If parties had not consented but had a reasonable belief that consent had been reached, a fictional contract will be created Liability created by the reliance on the appearance of a contract 2 requirements: Reliance was reasonably in the The belief that there was consensus circumstances Caveat subcriptor (signer beware) a person who signs a contract may be liable for the terms of that contract given the impression given by signing the document 3.2 Serious intention Understanding between parties of the serious and binding legal relations that result from an agreement  NB for a contract to be binding Difference between saying “there’s no valid contract until it is written and signed” (not yet binding – creates formalities) vs “lets reduce this agreement to writing” (already binding) Must agree on all “MATERIAL” aspects to be bound Can agree to leave some issues to be negotiated at a later date while still having a valid contract Doctrine of valuable consideration  a contract is not valid until something is given in return Not serious intent  marketing tools (pamphlets, price lists, catalogues or adverts) or social appointments 3.3 reality of consent Mistake Misrepresentation Void vs Undue influence voidable? Duress  Mistake A misapprehension of the existence / non-existence of a fact / state of facts If all elements of a mistake are present = void 4 types of mistakes Mistake of Mistake in law expression Mistake in Mistake of motive fact Mistake of law  ignorance of the law is no excuse Mistake in expression Generally  caveat subscriptor George v Fairmed  sign a contract without reading it = still bound If the contract signed by mistake does not reflect the common intent of the parties  apply to court for ratification Courts wont enforce a contract where one party knew of the mistake and took advantage of it Mistake in motive Will never affect the validity of a contract Mistake of fact Only type of mistake that will render a contract void in SA law The mistake must be reasonable and material to render the contract void 4 types Error in negotio Error in corpore (ID Error in substantia Error in persona (nature of of contract subject (attributes of (ID of parties) contract) matter) subject matter) Three common mistakes of fact: Common mistake of fact - both Ps made the same mistake, if material, contract is void Mutual mistake of fact - both parties made a different mistake Unilateral mistake of fact - only one party is mistaken so it must be reasonable and material Contract is void so any property handed over must be claimed back ito Unjustified  Misrepresentation 4 types of statements made between parties in negotiating a contract: an exaggeration (i.e. of the quality of the goods) reliance Puff: won’t constitute a misrep unless the exaggeration was the material reason for entering into the contract maker of the statement undertakes that the statement Warranty: will be complied with. Guarantee is a type of warranty. If the maker knows the person is going to rely on it & they breach it = misrep & remedies for breach (place party in position as if the statement was true.) generally not misrep unless the person Opinion: giving their opinion knows their opinion to be untrue a statement made to induce a party into Representation: entering the contract. Remedy  place party in position as if the statement was true.  Misrepresentation Definition: Misrepresentation = a false statement of fact made by one person to another before / at the time of the contract, of some matter relating to the contract, with the intent of inducing the contract, which actually results in a party being induced to contract. Fraudulent misrepresentation Negligent 3 types: misrepresentation Innocent misrepresentation  Rep of a false fact, made fraudulently, believed by the representee & was a factor in inducing him to contract Express statement or conduct (not a puff or opinion) Active concealment  fail to correct false opinion / half-truth Trotman v Edwick – paced property and stated it was “roughly 150 feet” knowing that some of the land belonged to the municipality and did not disclose that fact Designated concealment  purposefully conceals info where there’s a duty to disclose Dibley v Furter  concealed a graveyard and didn’t tell buyer Disclosure is obligatory when: (read paragraph on page 62) Fraudulent misrep  statement was made without honest belief in its truth, doesn’t matter if a reasonable person would’ve believed it but rather if it would’ve led them into contracting (Feinstein case) The misrep must actually induce the party into contracting (Bird v Murphy – car) Misrep can be a defence for non-performance or a claim for cancellation / specific performance / delict  Rep of a false fact made Rep of a false fact made negligently but believed by the innocently but believed by the representee and one of the main representee and one of the main factors he entered into the factors he entered into the contract contract Can be used as a defence / claim Can be used as a defence / ground for cancellation or SP but for cancellation probably not for a delict (the court is uncertain if a person may  Duress The plaintiff was induced by fear, violence or threat to enter into the contract  force was so great that no reasonable person would have resisted it  no true meeting of the minds Voidable with 3 elements (1) reasonable and substantial fear of imminent harm obo the plaintiff’s life, body, family or dignity or if property the court needs proof that the victim protested the contract (2) threat was illegal /illegal result (3) pressure caused the plaintiff to agree - there would be no contract without the duress  Undue influence Weakening of a person’s resistance to make his will pliable Would otherwise have never entered into if had normal freedom of will (Preller v Jordaan – doc took transfer of patients properties while patient was ill and exhausted) Voidable but aggrieved party must act soon after the influence is removed What Happens Next? You are expected to go through the rest of the content for Week 2 before the next lesson. Cover all activities on myLMS in preparation for the next lesson. (Capacity to contract, certain, lawfulness, possibility of performance and formalities). Chapter 2 Section 3.4; 3.5;3.6; 3.7; 3.8; 4.1; 4.4; 4.5; 4.6.