Valid, Void, and Voidable Contracts PDF

Powered by Valid, Void, and Voidable Contracts Valid contracts comply with prescribed validity requirements All validity requirements must be present for a contract to be valid Create legally enforceable rights and duties for both parties Void contracts do not comply with validity requirements Nonex...

Powered by Valid, Void, and Voidable Contracts Valid contracts comply with prescribed validity requirements All validity requirements must be present for a contract to be valid Create legally enforceable rights and duties for both parties Void contracts do not comply with validity requirements Nonexistent and cannot be legally enforced Voidable contracts contain a legal flaw to the disadvantage of 1 party Can arise through misrepresentation, mistake, non-disclosure, duress, or undue influence The aggrieved party can choose to uphold the contract or set it aside Veritable contracts give the aggrieved party the power to uphold or set aside the contract Consensus is a requirement for a valid contract The minds of the parties must meet on all material aspects of the agreement for consensus to be satisfied Agreement or unanimity between the contracted parties is called consensus The analytical tool of offer and acceptance helps establish whether consensus has been reached There must be an offer which is ultimately accepted for a contract to be concluded Contract Negotiations and Offers Negotiations between parties are necessary for reaching consensus and concluding a contract. Declarations of intention to contract can be expressed (derived from words) or implied (derived from actions or behavior). In certain circumstances, silence can signify agreement, such as when previous dealings between parties make it reasonable to interpret a failure to respond as an acceptance of an offer. Important questions regarding offers include: What is an offer? An offer is a proposal to contract, declaring the offeror's intention to conclude a contract and setting out the terms on which they are prepared to contract. Offers can be made to specific individuals, to a group, or to the general public. The legal effect of an offer is that it is a unilateral declaration and does not create binding obligations. However, if the offer is accepted, the terms stipulated in the offer become binding, and a contract comes into being. An offer can be withdrawn unless it is subject to an option. Requirements for a Valid Offer The first requirement for a valid offer is that the offer must be firm, made with a serious intention to create legally binding obligations. The second requirement is that the offer must be complete, containing all material terms of the proposed contract with no further matters to be negotiated. The third requirement is that the offer must be clear and certain, failing which no acceptance can create a binding obligation and the agreement may be void for vagueness. If the terms in the agreement are capable of reasonable interpretation, courts will use intrinsic evidence and rules of interpretation to determine the meaning and intention. The Consumer Protection Act 68 of 2008 adds further requirements, including that a valid offer must be in plain and understandable language, as outlined in section 22 of the Act. Valid Offers and Consumer Protection Act A valid offer must be in plain and understandable language. Section 22 of the Consumer Protection Act contains important provisions regarding the content, significance, and import of a notice or offer. Plain and understandable language may differ from person to person, depending on the facts and circumstances of each case. In terms of the Consumer Protection Act, a valid offer should disclose whether goods are reconditioned or are gray market goods. Reconditioned goods must be disclosed unambiguously to the person to whom the offer is being made. Gray market goods are those sold outside authorized distribution channels and must also be disclosed. Negative option marketing, which promotes goods or services on the basis that they are to be supplied unless the consumer declines, is prohibited by section 31 of the Consumer Protection Act. Consumers have a cooling off period for direct marketing offers made in the comfort of their home, as outlined in the Consumer Protection Act. Consumer Protection Act Section 32(1) of the Consumer Protection Act provides a cooling off period for products directly marketed to consumers outside of the supplier's usual place of business. The offeror must notify the offeree of section 16 of the Consumer Protection Act, and the offeree has 5 days to rescind the contract in writing after conclusion or delivery of goods. Catalog marketing agreements must provide certain information to the consumer, including the supplier's name, license or registration number, physical address, and refund policy. Offers can be made to a specific person, a group of persons, or to the public in general, with the general rule being that contracts are concluded with specific members of the public who respond to the offer. Examples of offers made to the public include advertisements, auctions, and offers for rewards. The Nature of Advertisements and Offers An advertisement is considered an invitation to do business, not a valid offer Intention behind a statement or the reasonable impression it creates determines if it constitutes an offer Consumer Protection Act section 30 sub 1 prohibits misleading or deceptive advertising of goods and services Limit placed on availability of goods must be honored Prohibited to advertise goods on a discount and then not fulfill the advertised availability or price The case of Crowley versus Reicks illustrates the importance of understanding the nature of advertisements and offers In the case, an advertisement for cheap tobacco did not constitute a binding offer, but rather an intention to sell at the advertised price Legal Considerations of Advertisements and Tenders Smith Jay's observations on advertisements indicate that an advertisement is not a valid offer, but rather an invitation to do business. It is unclear in South African law whether the offer in a supermarket is made by the customer or the shopkeeper, but the English law case of Pharmaceutical Societies of Great Prine vs. Boots Cash Chemists, Southern Ltd suggests that the customer makes an offer to purchase while the shopkeeper makes an invitation to do business. When it comes to call for tenders, it is important to note that it is an invitation to the public to make offers, and the person who submits the tender bid is the one who makes an offer. Types of Offers and Acceptance Offers can be made in various forms, such as tender bids, promises of reward, and auctions. A person who tenders or submits a tender bid is the one who makes an offer, and the government can accept the offer if they are happy with the tender bid. In the case of a promise of reward, the offer must be known to the person responding to it in order for a contract to be formed. The case of Blum versus American Swiss Watch Company illustrates the importance of being aware of an offer in order to be able to claim a reward. Parties who agree to a contract must be aware of their agreement, as discussed in the requirements for a valid acceptance. In the context of auctions, there is a distinction between a simple auction and an auction subject to conditions, such as auctions with or without reserve. In simple auctions, bidders make an offer to the auctioneer, as stated in section 45.3 of the Consumer Protection Act. Auction Conditions and Offers An offer must be complete when the hammer falls or upon any customer action for a bid to be retracted. The auctioneer is considered to have accepted an offer when the hammer falls. Auctions attached to conditions can be divided into auctions with reserve and auctions without reserve. Auctions with reserve require the bid to be higher than the reserve price, which must be clearly stipulated in the notice of the auction. Sections 455 and 45.4 of the Consumer Protection Act are important to note when considering auctions with reserve, as they outline requirements for notice and auctioneer/ oowner participation in bids. Auctions without reserve result in the auctioneer making an offer to sell to the highest bidder, who accepts the offer. It's important to understand who makes an offer in different auction contexts. Offers can be terminated by rejection, either expressed or implied, as well as by the offering making a counter offer. Termination of Offers in Contract Law A counter offer terminates the original offer and creates a new offer with different terms. A counter offer is a qualified acceptance, and if the original offeror accepts it, a contract is concluded. The death of either the offeror or offeree terminates an offer, although it may still be binding in certain circumstances. Offers may be terminated upon the passage of a prescribed or reasonable time, which depends on the individual case. If no time for acceptance is indicated, the offer will terminate after a reasonable period, determined by the facts and circumstances of the case. An offer may also be terminated by revocation, although this is not possible if the offer is subject to an option agreement. Revocation is only effective when communicated to the offeree, and a contract will be deemed concluded if the offeree accepts before becoming aware of the revocation. The loss of legal capacity to act of the offerer or offeree may also terminate an offer. Acceptance and the Requirements of a Valid Acceptance An acceptance is a clear and unambiguous declaration of intention by the offeree unequivocally assenting to all the terms contained in the offer. The intention to accept may be expressed verbally, in writing, or tacitly through actions. Once acceptance has been made, consensus is reached in the circumstances. Requirements for a valid acceptance include: it must be unqualified, made by the person to whom the offer was made, a conscious response to the offer, and in the form prescribed by the offeror. The first requirement is that the acceptance must be unqualified, requiring complete and unequivocal assent to every element contained in the offer. If the acceptance is conditional, contains new terms, or leaves out original terms, there is no clear acceptance and no valid contract concluded between the parties. The second requirement is that the acceptance must be made by the person to whom the offer was made, with considerations for offers made to specific individuals, classes of persons, and the general public. Legal Principles of Acceptance and Transfer of Rights It is possible for a person to transfer the right of acceptance to a third party, especially under an option contract. This is known as a session, and if allowed under the specific terms of the contract, a personal right of acceptance can be transferred from one party to a third party, known as the sessionary. In the case of Baird versus Somerville and another, it was established that an offer made to a specific person can only be accepted by that specific person. Joint acceptance by multiple individuals is not permissible. A valid acceptance must be a conscious response to the offer. It is not possible to accept an offer if the party is unaware of its existence. The case of Blum versus the American Swiss Watch Company illustrates the requirement that acceptance must be a conscious response. The respondent could not recover a reward offered by the company because they provided information without being aware of the existence of the reward offer. In summary, in order for a contract to be formed, there must be a consensus between two parties, and this requires that both parties are aware of the offer and consciously accept it. The Validity of Acceptance in Contract Law An offer for reward was not responded to consciously, so the person who eventually sought the reward was denied because for an offer to be accepted, there must be a conscience response to such an offer. The 4th requirement for a valid acceptance is that the acceptance must be in the form prescribed by the offeror. The offeror is the one who sets the terms for acceptance and can authorize a particular method of acceptance without intending to prescribe it as the only method. The intention of the offeror is crucial in determining whether a prescribed method of acceptance is the only method or simply one authorized method. A contract comes into being once an offer has been accepted, but the timing of acceptance is important. The declaration theory states that a contract comes into being at the place and time when the offeree expresses acceptance, such as in writing or signing. The expedition theory applies to contracts concluded by post, stating that a contract comes into being at the place and time where the letter of acceptance was posted. Theories of Contract Acceptance in South African Law There are multiple theories regarding the acceptance of contracts in South African law. The first theory is the expedition theory, which states that a contract is considered accepted at the place where it was posted, specifically relevant to postal contracts. The second theory is the postal rule, which posits that if an acceptance of a contract is posted at a post office in Johannesburg, then it is deemed accepted in Johannesburg when it was posted. The third theory is the reception theory, which applies to contracts concluded by electronic means and states that a contract comes into being at the place and time when the letter of acceptance is received. The fourth theory is the information theory, also known as the communication theory, which holds that a contract comes into being at the place and time when the acceptance is read by the offeror. The general rule in South Africa is to follow the information or communication theory, where a contract comes into being when the acceptance is communicated to the offeror's mind. Exceptions to this rule include postal contracts, electronic contracts, as well as contracts concluded by telephone, fax, email, or SMS, each of which follows different theories. For postal contracts, the expedition theory is applied; for contracts concluded by telephone or fax, the information or communication theory is followed; and for electronic contracts, the reception theory is applied. The perception theory, which applies to agreements concluded by data message, states that a contract is concluded at the place where the acceptance of the offer was received by the offeror. Understanding these theories is important in the context of South African law, and it is crucial to be aware of the exceptions to the general information or communication theory. Electronic Communications and Transactions Act The Electronic Communications and Transactions Act contains relevant provisions for contracts concluded through electronic media. According to this legislation, a data message is considered received when it enters the offeror's information system and is capable of retrieval and processing. Even if the offeror is not aware of the acceptance, a contract is still deemed to be concluded if the acceptance enters the offeror's information system. The reception theory is applied for electronic contracts, emphasizing the importance of the acceptance entering the offeror's information system. Section 23 of the Electronic Communications and Transactions Act is crucial to understand for electronic contracts. Not only must the acceptance reach the offeror's information system, but it must also be capable of retrieval for it to constitute an acceptance. The case of Cape Explosive Works Ltd versus SA Oil and Fed Industries Ltd confirmed that South African courts apply the expedition theory for contracts concluded by post. The expedition theory holds that a contract concluded by post is formed when and where the offeree posts the letter of acceptance. Expedition Theory The expedition theory only applies to offers made by post when postal services are operating normally and the offeror has not indicated a contrary intention, either expressly or tacitly. If the offeror has indicated that the expedition theory would not apply, then it would not apply. Additionally, the contract must be a commercial one for the expedition theory to apply. There is some criticism on the expedition theory in the textbook, which can be read through, but it is not important for the purpose at hand. Just take cognizance of this criticism and that should suffice for the current purposes.