Civil Law 1 Study Guide 2024 PDF

DIPLOMA IN LAW: PARALEGAL STUDIES CIVIL LAW 1 STUDY GUIDE Faculty of Law NQF Level 6 Copyright 2024 © Faculty of Law: Paralegal Studies (Copyright subsists in this work. No part of this work may be reproduced in any form or by any means without the author’s written permission) National Diploma in Law (Paralegal Studies) Module 3 Civil Law 1 Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 2 Module 3 Introduction to Civil Law Contents General introduction........................................................................................ 5 Prescribed and recommended reading................................................................... 7 Study schedule............................................................................................... 7 Module outcomes............................................................................................ 8 Unit 1: Contracts........................................................................................... 8 1.1 Introduction............................................................................................ 9 1.2 The five essential requirements for the conclusion of a valid contract...................... 12 1.2.1 A contract must be lawful................................................................ 12 1.2.2 Contracting parties must have contractual capacity to contract.................. 12 1.2.3 Consensus................................................................................... 12 1.2.4 Possibility of performance............................................................... 16 1.2.5 Formalities.................................................................................. 17 1.3 Breach of contract and the legal remedies available where a................................ 18 1.3.1 When is a contract breached................................................... 18 1.3.2 Remedies for breach of contract............................................. 20 Unit 2: Content of Contracts.................................................................... 22 2.1 Introduction........................................................................................... 22 2.2 The format of a contract...................................................................... 23 2.3 Headings and clauses................................................................................. 24 2.4 The Terms of a Contract............................................................................. 29 2.4.1 Express Terms..................................................................... 30 2.4.2 Tacit Terms........................................................................ 30 2.4.3 Implied Terms..................................................................... 31 2.4.4 Provisions excluded from a written contract …………........................ 33 2.4.5 Rectification....................................................................... 34 Unit 3: Types of contracts............................................................................... 35 3.1 The law of purchase and sale....................................................................... 38 3.1.1 Genera l............................................................................. 38 3.1.2 Alienation of land................................................................. 40 3.1.3 Duties of seller.................................................................... 41 3.1.4 Duties of buyer.................................................................... 47 3.2 The contract of letting and hiring.................................................................. 48 3.2.1 The essentialia of a contract of lease......................................... 49 3.2.2 Duties of the lessor............................................................... 49 3.2.3 Duties of the lessee.............................................................. 49 3.2.4 Termination of the lease agreement.......................................... 50 3.3 Insurance.............................................................................51 Unit 4: The Small Claims Court (SCC).................................................................. 57 4.1 Introduction............................................................................................ 57 4.2 Who makes the Small Claims Court work.......................................................... 58 4.3 The procedure for bringing a case before the Small Claims Court............................ 60 4.4 The hearing........................................................................................... 65 Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 3 4.5 Judgments............................................................................................ 63 4.6 Complying with the judgment..................................................................... 65 Unit 5: Civil Procedure.................................................................................. 66 5.1 General Background................................................................................. 67 5.2 Types of proceedings................................................................................. 68 5.2.1 What types of proceedings can be followed?................................. 68 5.2.2 Terminology....................................................................... 69 5.2.3 Prescription........................................................................ 70 5.3 The right to be heard................................................................................ 72 5.3.1 Introduction....................................................................... 72 5.3.2 Method of notification........................................................... 72 5.3.3 Return of service................................................................. 73 5.4 Action proceedings................................................................................... 73 5.4.1 The Summons and particulars of claim........................................ 73 5.4.2 Notice of intention to defend................................................... 74 5.4.3 The time period................................................................... 74 5.4.4 Judgment by Default............................................................. 76 5.4.5 A Plea............................................................................... 76 5.4.6 Counterclaim....................................................................... 77 5.4.7 Replication......................................................................... 77 5.4.8 Closing of pleadings............................................................... 77 5.5 The trial stage......................................................................................... 78 5.5.1 The unrepresented litigant....................................................... 78 5.5.2 Who are present in the courtroom?............................................ 78 5.5.3 The defendant’s case............................................................. 79 5.5.4 Absolution from the instance.................................................... 79 5.5.5 Judgment and the court order.................................................. 79 5.5.6 Postponements.................................................................... 80 5.6 Judgment and the execution process............................................................. 81 5.6.1 The court order................................................................... 81 5.6.2 The execution process............................................................ 81 5.7 Application proceedings.............................................................................. 82 5.7.1 Introduction........................................................................ 82 5.7.2 Ex parte application.............................................................. 82 5.7.3 Application with notice (both applicant and respondent are involved).. 83 5.7.4 The service process............................................................... 84 5.7.5 Exchanging affidavits............................................................. 84 5.7.6 The hearing......................................................................... 84 5.8 Self-evaluation questions ………………………………………………………………………………………………….. 85 Assessment Criteria......................................................................................... 87 Assignments 1 and 2 Past paper questions Bibliography................................................................................................. 110 Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 4 General introduction The National Diploma in Law (Paralegal Studies), a three-year course, consists of eight modules. This module, the third one of the eight, explores Civil law. Although these modules may deal with different aspects of South African law, you should never dispose of any of the study material, even when you have finished the work and written a test or examination on it. The modules refers to one another. For example, a unit in Module 3 may refer to work covered in a unit in Module 1. Your study guides, textbook and notes may even be useful references when you begin to work as a paralegal, so keep them. The integration icon will assist you in this matter. The guide leads you through some of the fundamental aspects of Civil law. In your mind, you are probably visualising mounds and mounds of laws and case studies that you will have to memorise. Remember though, that theory without practice is of very little use. Do not only try to memorise important facts. There are many activities in this study guide, which will allow you to will apply what you learned. This is very important because the work you will do one day is very practical. If you have a friend or relative in the legal profession, talk to him or her. You could even accompany them to their place of work to see what the legal profession is all about. Try to use examples from your own experience to illustrate your answers to the various activities. Above all, once you feel you have mastered or understood a theoretical point see if you can apply it to some daily activity. Finally, remember that the skills you acquire through your studies, like certain study and planning skills, will enable you to do many other things in your future career. As you glance through the study material, you will notice that the authors have used symbols or icons to catch your attention. Different icons are used because the authors want to draw your attention to different things. These symbols will now be explained. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 5 Learning outcomes: A learning outcome has three components: what you may do (skills), what you know (knowledge) and what your attitude is towards something (attitude). When you see this icon, you will know that the authors wish to draw your attention to something for which you will need all three things mentioned above. This icon will always be used at the beginning of every module AND every unit. Activity: Remember, learning includes what you can actually do. When you see this icon, you will know that the authors want you to try an experiment, to convey an experience or to apply something that you have learnt. Take these activities seriously, since they are often wonderful opportunities for learning a skill. This icon will also be used to draw your attention to a particular law or case study. Remember that these laws or cases are included in your study material. Self-evaluation: Once you have completed all the activities in a module, you will probably be ready to evaluate or check yourself. The questions or activities you are required to do in these sections will help you determine whether or not you have learned the material, in all three senses of the word. Take note or Definition: When you see this icon, pay careful attention. The authors probably want to provide you with a definition, highlight an important point or refer you to additional information. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 6 Integration: Remember not to throw away study material at any stage. When you see this icon, you will be referred to another section or another module to get a fuller picture regarding an aspect of your studies. Prescribed and recommended reading Your prescribed textbook is: Kleyn and Viljoen Beginner’s Guide for Law Students (Fifth Edition 2018). Throughout the study material your textbook is referred to as ‘Kleyn & Viljoen’ followed by a page reference. You have also been provided with a number of case studies and relevant statutes. You may also use any other references, case studies or laws when doing activities or answering questions. In fact, the more additional reading you do, the better. A list of sources is provided at the end of every module. These books, journals, newspaper clippings and so forth are available at most libraries. You will also find the state library a useful source of information. Study schedule You need to plan your year well in advance in order to give yourself enough time to work through the study material properly. You have one year to complete the first four modules. The exact dates for tests and other important events are provided in the general information guide included in your study material. By working according to a sensible study schedule, you should be able to give yourself enough time to complete the work and revise sections that you may find challenging. The following is a schedule – we recommend that you work it out, taking into consideration the due Portfolio dates. You may find that you spend more time on one and less time on another section, but time management will be necessary. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 7 UNIT TOPIC WEEK Unit 1 Contracts.................. Unit 2 Interpretation of Contracts.................. Unit 3 Types of Contracts.................. Unit 4 The Small Claims Court.................. Unit 5 Civil Procedure.................. Module outcomes When you have finished working through the material in this module, you should be able to:  use basic knowledge of the principles of contracts to explain the different options to your clients.  advise your clients on the interpretation of basic contracts as they apply to their specific needs.  analyse and interpret different basic types of contracts.  identify, analyse and resolve basic contractual problems and Small Claims Court matters.  work and interact with the different role players in the Small Claims Court and lower courts.  advise on and assist with the drafting and implementation of certain basic steps in the civil process.  take responsibility for the assistance of clients with their Small Claims Court matters.  do a literature study of legal information on the contract, the Small Claims Court and basic civil procedure.  effectively and appropriately advise verbally on different contracts and doing follow-up work by writing letters to the different parties involved in contracts and to court officials involved in the civil process.  explore, apply, understand and reflect on different learning strategies that paralegals use in advising clients on different contracts, in referring matters to the Small Claims Court and in dealing with civil proceedings. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 8  explore employment and career opportunities through fieldwork, assignments and interviews during interactions with the relevant role players in the legal process, e.g. by working in advice offices, attorney’s offices and as court officials, applying civil procedure.  do self-assessment of your own knowledge and understanding, skills and attitudes. Unit 1: Contracts When you have completed this unit, you should be able to:  know, understand and apply the general principles of the law of contracts.  explain to your clients these general principles by giving examples.  explain breach of contract and remedies by drawing a schematic outline.  know the position, sources and importance of the law of contract in the legal system.  self-assess your knowledge and understanding, skills and attitudes pertaining to the law of contracts. 1.1 Introduction Where does the law of contract fit into our legal system? The law of obligation regulates the type of relationship between persons where one person (the creditor) has the right against another for performance, and the latter person (the debtor) has a corresponding duty to perform. Such a relationship is called an obligation. Both contracts and delicts can create such obligations. See Kleyn & Viljoen page 100 and page 101 for the difference between a contract and a delict. General: The law of contract is based on Roman-Dutch law influenced by English law and by the Bill of Rights as contained in Chapter 2 of the Constitution of the Republic of South Africa of 1996. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 9 The Bill of Rights has both vertical effect (that is ruling the relations between organs of the state and its subjects), and will have a horizontal effect between contracting parties insofar the Bill of Rights influences public policy considerations. Furthermore, the Bill of Rights imposes on every court a duty:  to promote the values that underlie an open and democratic society based on human dignity, equality and freedom (section 39(1)(a)); and  to promote the spirit, purport and objects of the Bill of Rights when developing the common law. But what is a contract? A contract is an agreement reached by two or more parties with the intention of creating a legal obligation with the resulting rights and duties that are recognised by the law. It can thus be said that a contract is an agreement between two or more persons in terms of which a right and a corresponding duty to a performance, come into existence. See example Kleyn & Viljoen page 100. Why is the law of contract so important? Because it sets out the rules relating to the rights and duties of people in contracts and governs the manner in which contracts are concluded and enforced. The following two situations are examples of contracts from everyday life:  UJ offers to present this course to you at Rx. You accept the offer to enrol and pay Rx.  The café offers to sell bread to you. You accept its offer and pay for the bread. Activity 1.1 Write down two examples of your own, showing the importance of the law of contract. OVERVIEW – THE LAW OF CONTRACT:  A contract is in essence an agreement, which is entered into between two or more persons (be they natural or juristic/legal persons) with the intention of creating legally binding obligations that are recognised in law. It can then be said that the law of contracts forms the primary source of legal relationships between the contracting persons in society. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 10  Typical examples of contracts could include, but certainly not limited to, lease agreements, purchase and sale agreements, employment contracts, contracts of suretyships, credit agreements, the letting and hiring of work, joint venture agreements, partnership agreements, loan agreements with financial institutions etc.  We will examine the legal requirements of a contract as well as the effects and consequences where one or more of these requirements are not met.  In addition to the above we will look at the interpretation of the various specific terms and conditions which can be found in a contract. We will also cover the aspect of a breach of a contract and the possible rights and remedies at the disposal of the parties to such a contract. DEFINITION A contract can be broadly defined as: A tacit (through the mere conduct of the parties), verbal or written agreement which is legally binding on the contracting parties and which is enforceable in court, and is:  Entered into between two or more persons (natural persons – individuals or legal persons – corporations).  Who have the legal capacity (authority) to enter into the contract – and have the serious intention to form a legal obligation (relationship) between the contracting parties.  Reached consensus on the material terms of the agreement. Normally, their intentions must be clear and certain to perform:  A positive act: For example, to sell a car, purchase fixed property, or to employ a secretary, undertake to construct a building, conduct an analysis on a failed component etc.  A negative act: Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 11 For example, not to go and work for a company (like MTN) after you have resigned from another company (like Vodacom) and were paid a severance package, this is known as a restraint of trade agreement.  Which performance is certain and physically possible to perform.  Which contract and performance is legal and lawful. The FIVE ESSENTIAL REQUIREMENTS for the conclusion of a valid contract: 1.2.1 A CONTRACT MUST BE LEGAL AND LAWFUL A contract may not be:  in conflict with any statute (legislation e.g. the Road Traffic Act);  in conflict with the common law; and  against public policy or the good morals of society (e.g. agreement to threaten the safety of another person or injure another person or against all intention to defraud the public or to limit somebody’s constitutional right to freedom etc.). 1.2.2 CONTRACTING PARTIES MUST HAVE CONTRACTUAL CAPACITY TO CONTRACT A person who has full control over his/her mental faculties, can take informed decisions and has the legal authority to enter into contracts. A person’s capacity to contract can be limited in the following cases:  Insolvency – a person who was declared insolvent by court ;  Minors between the age of 7 and 18 years old (who require the consent of their guardian to contract, which is called ratification). A person can also be without any capacity to contract, such as in the following circumstances:  Mental illnesses – persons suffering from a mental deficiency and an inability to fully comprehend and take control of their own affairs.  Extreme Intoxication – liquor / drugs. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 12  Infants (children under the age of 7 and only their guardians can contract on their behalf). 1.2.3 CONSENSUS 1.2.3.1 What is consensus? Contracting parties must be in agreement about the contract. The parties’ intentions must correspond regarding the type of contract that they want to enter into, its terms, as well as the serious intention to attach certain consequences to this specific contract. For a valid and enforceable contract (which creates obligations) the parties must have reached consensus. Consensus may be described as a “meeting of the minds”, which means that the parties’ respective wills or intentions must be the same. The elements of consensus are the following: (a) the parties must seriously intent to contract; (b) the parties must be of one mind (or have a “meeting of the minds”) as to the material aspects of the contract; and (c) the parties are conscious (or aware of the fact) that their minds have met. We use a tool called “offer and acceptance” to help us determine whether consensus has been reached by the contracting parties. One party, for example, will make a declaration of intent to another party to accept or reject. These declarations can either take the format of an “offer” or an “acceptance”. What is an offer? A declaration of intent made by the offeror (prospective contracting party) that contains all the proposed terms regarding the proposed contract, and that is of such a nature that mere acceptance thereof by the person to whom the offer was addressed (the offeree), legally brings a contract into being. The following are requirements for a valid offer:  the offer must be complete;  the offer must be definite and must include proposal regarding all the essentialia (see 1.3.1 for meaning) of the proposed contract, where applicable;  the offer must be clear, certain and unambiguous; and  the offer must be made with the serious intention that will result in a legal obligation. When does an offer come to an end, in other words, when does it terminate? Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 13  Rejection of the offer by the offeree.  Revocation of the offer by the offeror before it was accepted by the offeree.  In case of no set time, within a reasonable time lapse.  When one of the parties dies.  When one of the parties loses his or her contractual capacity. When is an offer accepted? In other words, when is an acceptance made? The acceptance must be an unqualified declaration of intent made by the offeree, approving the offer without reservation. The following are requirements for a valid acceptance:  the acceptance can only be made by the offeree, who is aware of the offer.  the offeree must have the serious intention to be bound to his or her acceptance.  the acceptance must be clear, certain and unambiguous.  the contents of the acceptance must correspond with the contents of the offer.  the acceptance does not have to comply with any formalities, unless the offeror required it in the offer.  acceptance is only complete when the offeror is notified of the acceptance. 1.2.3.2 Factors influencing consensus: There must be a true meeting of the “minds” and if not the contract can be ruled as being either:  VOID – if there was no consensus then the requirement for a valid contract has not been met, and in these instances the contract can be found to have no legal validity whatsoever; or  VOIDABLE – if there was consensus but the consensus was defective or flawed then the prejudiced party can choose to either keep the contract valid or to have the contract declared VOID. - A lack of proper consent occurs where there is: 1.2.3.2.1 Error / Mistake: An error / mistake could influence consensus in a contract. In some instances an error / mistake could result in a contract being voidable, whilst in other instances an error / mistake could result in no consensus at all, which would render the contract void. For an error / mistake to impact consensus, it must have been:  reasonably made (not foolishly); and Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 14  material i.e. it was essential / vital to inducing or leading the other party consent to the terms of the contract. 1.2.3.2.2 Misrepresentation: Misrepresentation is a false statement of fact made (sometimes deliberately) prior to conclusion of the contract which induces/directly leads the other party to enter into the contract. In addition to innocent misrepresentation, there are 2 other types of misrepresentation:  Fraudulent Misrepresentation: A party deliberately gives or represents false information to the other party who acts on this information and enters into the contract. Take for example, Party A who sells an old house to Party B, and falsely states that s/he can guarantee the electrical wiring system is in a perfect condition as it was completely replaced recently while s/he knows that this is not true. Requirements: - The misrepresentation must have been deliberate (or very reckless); - The false info must have been a direct reason for the other party to enter into the contract. Remedies available to the prejudiced party (dealt with in detail in par 10 on pg18) - Cancellation of contract; - A claim for specific performance; - Defence of any claim i.t.o the contract made by the other party; and - A separate claim for loss or damages.  Negligent Misrepresentation: This is where one party negligently (i.e. innocently or by neglecting to check the true facts) makes a false representation of the facts. Take for example, Party A wants to buy Party B’s house as s/he feels the location is ideal for his/her new business and s/he asks Party B if the house has business rights which are essential to him/her in opening the business. S/he specifically asks Party B about this who says “yes it would have” or “I am certain it has as all of the houses in this road have full business rights” without checking the true state of affairs. Party A signs the contract in good faith only to discover that there are no business rights and that he cannot open the business. Remedies - Defence to B’ claims for contractual performance; Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 15 - Cancellation of contract; and - Damages. 1.2.3.2.3 Duress: Duress occurs where a party uses violence, threats or fear against a party who is reluctant to entering into an agreement. For example, Party A forces Party B to sign a contract that s/he does not want to sign by threatening him/her or their family with violence. “Sign or I will kill you” The threat must be such that any reasonable person would have entered into the agreement totally against their will. Such a contract will be voidable. 1.2.3.2.4 Undue influence Consensus can also be impacted where a reluctant party is coerced or brow beaten into entering into an agreement For example: a doctor misuses his/her position of trust with an elderly cancer patient and persuades him/her that s/he (patient) should avoid any further stress and should thus sell his house to the doctor (at a lower price). 1.2.4 POSSIBILITY OF PERFORMANCE AND CERTAINTY The parties who have to perform in terms of the contract must be able to do so physically and certain what a person must do to perform under the contract. Performance must also be legal. 1.2.4.1 Physical impossibility The following are examples of instances where performance can be impossible: 1. Objective impossibility For example, Party A sells his/her car to Party B even though s/he knows that it was stolen and 2 months previously. In this instance it will be physically impossible to perform in terms of the contract and deliver the vehicle Party B once Party B has paid the purchase price. 2. Supervening impossibility For example, Party E sells his/her only cow to Party F who is planning a wedding feast. Party F pays Party E on Tuesday and Party E undertakes to deliver the cow on Saturday however on Friday night the cow is stuck by lightning and the carcass is badly burnt and can no longer be eaten. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 16 1.2.4.2 Legal impossibility A contract and its performance must be legal and lawful for it to be valid and enforceable. A) Illegal agreements: These are agreements which would be against the law or illegal where they are:  Contrary to legislation e.g.an agreement to sell fuel without a permit, or  A contract to assassinate someone (committing a crime). B) Agreements in conflict with public policy: These are types of contracts (like gambling agreements) which although valid are not enforceable in court. C) Agreement on a restraint of trade:  Take for example, this is where someone resigns from a company (like MTN) and is paid a severance package on the understanding that s/he will not go and work for a competitor (such as Vodacom) for a 2 year period (i.e. not taking MTN’s trade secrets/strategy to Vodacom).  This agreement, being a restraint of trade agreement, is generally valid UNLESS a court finds the agreement to be unreasonable and thus unenforceable. Take for example, the restraint of trade prevent the ex-employee from working for a competitor for 20 a year period anywhere in South Africa.  The period would be regarded as to long and the geographical area of prohibition to extensive. A two year period of prohibition in a certain area such as Gauteng can, under the circumstances, be regarded as reasonable.  The court will respect the validity of a contract which is entered into voluntarily but at the same time it will weigh this up against the party’s fundamental constitutional right to obtain a chosen form of employment. 1.2.6 FORMALITIES: These are the formal requirements of a contract which affect the validity of a contract. Should these requirements not be met the contract will thus not be valid and binding on the parties. Generally, the law does not require any formalities to be Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 17 complied with for a valid contract, however, there may be instances where legislation or the parties themselves require formalities for the validity, amendment or cancellation of a contract. An example of a formal requirement or formality would be the requirement to have a contract reduced (set out) in writing and signed by the contracting parties and independent witnesses. This formality is optional to the parties entering into an agreement of sale of a movable item such as a motor car where such an agreement may be concluded verbally but is advisable to be reduced to a written contract which will contain all of the detailed terms and conditions of the contract and once signed will serve as evidence of the specific agreement which is binding on the parties thereto. Certain formalities are required ex lege (latin word for required by law) i.e. compulsory legal requirement. An example is instances of the sale of immovable land there is a legislative requirement to have such an agreement in writing and signed by the contracting parties. Activity 1.3 Read the two relevant chapters in the MPA and write down in your own words at least five contracts for which the one spouse would need the written consent of the other spouse. 1.3 Breach of contract and remedies for breach of contract 1.3.1 When is a contract breached? Breach of contract occurs when a party to the contract fails to adhere or to honour his or her contractual obligations. Five forms of breach of contract are recognised by law. They are:  Mora debitoris (delay of the debtor): Failure by the debtor to perform on time is referred to as mora. A party is in mora if he or she fails to perform on time without a valid defence. It must be known that he or she knows the nature of performance required and the time when it is due. It is irrelevant whether the failure to perform on time is wilful or negligent. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 18 For example the seller (debtor) will be in mora and guilty of mora debitoris if s/he fails to deliver the object (motor vehicle) on the agreed date and time to the creditor (buyer) or the buyer (debtor) will be in mora and guilty of mora debitoris if he fails to pay the purchase price on the agreed date and time to the seller (creditor).  Mora creditoris (delay of the creditor): This form of breach of contract takes place when the creditor delays or refuses to render assistance to accept proper performance by the debtor or fails to co-operate in order to enable the debtor to perform. For example the seller (creditor) will be in mora and be guilty of mora creditoris if he is not available when the buyer (debtor) wants to pay the purchase price which is due and payable on the due date or the buyer (creditor) fails the accept the motor vehicle on the date and time as agreed upon.  Positive malperformance: This form of breach of contract takes place when the debtor performs but the performance is defective due to the fact that it does not meet the contents or quality requirements of the agreed performance. Two types can be identified: - where the debtor has a positive duty to perform (for example where the parties agreed that the debtor will deliver 100 cases of beer and s/he only delivers 60 cases of beer); - where the debtor has a negative duty to perform (for example where the debtor must refrain from doing something like to compete with his ex- employer in terms of a restraint of trade clause or where the debtor is the lessee and must refrain from subletting his apartment which he rents from the creditor).  Repudiation: This form of breach of contract takes place when a contracting party has no lawful reason or excuse for non-performance by indicating to the other contracting party his or her unequivocal intention to no longer be bound by his obligations in terms of the contract. This intention can be either by his or her conduct or words. For example, Party X entered into a contract of employment with Party Z and on the day that s/he is supposed to start with employment informs Party Z that s/he is going to work for Party Y.  Prevention of performance (rendering performance impossible): This form of breach of contract refers to the situation where performance is made impossible by the culpable (intentional or negligent) conduct of any one of the parties to the contract. This form of breach is an act that is accompanied by the fault of either of the contracting parties. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 19 For example, Party X (the seller) poisons a bull which s/he sold to Party Y (the buyer) before delivery but after conclusion of a contract of sale. The reason for poising of the bull is that Party X found that he can claim more (R 190 000) for the dead bull from his insurance than the R 150 000 that Party Y is paying for it. Party X therefore intentionally prevents performance. 1.3.2 Remedies for breach of contract Once breach of contract has taken place, the aggrieved/injured party is entitled to certain remedies. He/she can use the operation of law (ex lege) remedies or the agreed remedies if the parties contractually included remedies in their contract. (a) Remedies by operation of law (ex lege): (i) Specific performance  This a natural remedy because the innocent party claims from the guilty party fulfilment of the contract. The innocent party can make use of interdict to prevent a breach or threatened breach of contract. The party asks the court to order the guilty party to do exactly as agreed. In some cases the court may not order specific performance.  For example: if it is impossible for the guilty party to do as agreed (i.e. the court will not force a municipality to release the full supply of water promised to people during severe drought); OR if paying money is a better way of compensating the innocent party (the court will not order the hairdresser to re-cut or re-perm your hair, or easily force an employer to reinstate an employee). (ii) Cancellation  This is a drastic (or extraordinary) remedy. The innocent/injured party may elect to cancel the contract where the contract has a lex commissoria (a cancellation clause) or where the breach of contract is material.  The breach of contract would be material where it goes to the “root of the contract” meaning that the breach is so serious that it cannot be expected of the innocent/injured party to continue with the contract and content himself with an eventual claim of damages.  For example where time is of the essence meaning that if Party X (the debtor) fails to deliver fresh fish on the day on which it is caught for re-sale purpose it will, due to the perishable nature, be material to cancel the contract because Party Y (the buyer) will not be selling the fish the next day. (iii) Damages  This is a combination remedy. The reason why it is a combination remedy is because it can be claimed with either specific performance or cancellation. The objective of damages is to place the innocent/injured party in the financial Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 20 position s/he would have been in had the guilty party properly performed in terms of the contract. (b) Agreed remedies: The remedies have the same consequence as the ex lege remedies such as fulfilment or cancellation of the contract as well as damages but they are contractually agreed upon by the contracting parties. (i) Acceleration clause  An acceleration clause in the contract between the parties will provide that the creditor becomes entitled to all future instalments.  The consequence of this will be that the creditor can claim all outstanding instalments even the instalments that are still due and payable in future. So if a debtor falls behind with his instalments the acceleration clause will entitle the creditor not only to claim these instalments but also the future instalments. By claiming all the outstanding (arrears and future) instalments the creditor thus claims specific performance. (ii) Lex commissoria  With this remedy the innocent/injured party is contractually entitled to claim cancellation in the event that the guilty party commits breach of contract. This remedy entitles the innocent/injured party to immediately cancel the contract even if breach of contract is of a non-material nature or negligible. (iii) Penalty clause  Such a clause entitles the innocent/injured party to claim an amount of money or other performance from the other party who acts contrary to his or her contractual obligations. This clause is inserted into a contract to avoid litigation and the parties agree to an amount of money paid to the innocent/injured party in the event of breach of contract by the guilty party.  There must be some trigger, for example a due date for performance that is not met and the performance payable by the guilty party if this due date is not met. The Conventional Penalties Act 15 of 1962 regulates these clauses. Unit 2: Content of the contract When you have finished working through the material in this module, you should be able to: Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 21 Determine the terms of a contract. Know where to find the terms of a contract. Determine the meaning of the terms. Know what aids may be used to determine the meaning of the terms. Apply the meaning of the terms to the case before you. Identify the parties, items and matters to which the contract refers. Resolve ambiguities in any contract. Advise your clients on the meaning of any contract. 2.1 Introduction A contract is an agreement between two or more people which creates legal rights and obligations. In Module 3, Civil Law 1, we discussed the principles of the law of contract. Activity 2.1 Think about contracts for a moment. Integrate your knowledge of contracts that you have attained in the previous modules and analyse why you, at this stage, think it is important that you have to be able to interpret contracts. Do revision of paragraphs 1.2.1 – 1.2.6 (pages 10-18) thereof. Ensure that you are familiar with the following concepts: Consensus. Contractual capacity. Validity. Formalities. Breach of contract. Remedies for breach of contract. When people enter into contract they expect that the other party will perform his/her obligations faithfully and fully. Yet often, contracts do result in disagreement when one or both the parties do not perform their obligations. Normally, this will result in a difference of interpretation of the terms of the contract and who is to blame for the problematic situation. The situation can be further complicated if the contract is ambiguous, vague, incomplete or not in written form. The nature of the obligations depends in general on the terms and conditions of the specific contract. These circumstances will necessitate the interpretation of the contract, or in other words, the terms and conditions of the contract. For purposes of this unit, we shall concentrate on the written contract. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 22 2.2 The format of a contract Generally, there are is no prescribed format or the structure of a contract. Stilwell (chapter 10 in Clinical Law in South Africa, 2nd ed. 2006 p. 224) points out that even those statutes which require written formality fall short of prescribing the layout. The format is governed by custom, convention, practice and individual preference. According to Stilwell commercial contracts generally contain the following features, usually arranged in a certain order. He lists them as follows (p 224): “A heading This is the label of the contract as it indicates the type of contract. A description of the parties Here, the full names, addresses and identity numbers (or registration numbers in the case of juristic persons) may be set out. A recital clause This sets out the background to, or the context of, the contract. Two points need to be noted. Not all contracts have or require a recital clause. It is usually included as an aid to: Ascertain the intention of the parties; and The recital clause is not usually a term of the contract itself. It is, rather, historical information which may assist in its interpretation. If the parties request it, a clause can be included in the main body of the contract to the effect that the recital clause is meant to form part of the contract for interpretation purposes. The main body of the contract This is the important part and here one will commonly find clauses relating to the following: The nature of the contract (for instance, whether it is a sale, lease, agency, etc.); The principal obligations of the parties; Any subsidiary obligations; and Other clauses relating to matters such as breach, non-variation, choice of jurisdiction or domicile and so forth. The conclusion/ending This is the part of the contract where provision is made for the date and signatures. Although it is not a legal requirement, written contracts should be witnessed. It is a habit of modern life that many people take less care in writing their signatures than writing any other word. The signatures of some people are not more than a mere Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 23 scribble and bear little or no resemblance to a recognisable name. It is advisable that witnesses be required to print their names below their signatures.” 2.3 Headings and clauses Before we start with the theory of interpretation of contracts we are giving you some examples of a selection of headings and clauses normally found in contracts. 1. The heading or label Contract of Sale It is not uncommon to come across headings such as "... Memorandum of Agreement of Sale...". This is not only tautology but may even create confusion. The words "... Memorandum of Agreement..." suggest that the parties have concluded a prior oral agreement and that the written instrument is merely a recording of it. Issues of capacity, authority and legality could arise requiring a court to decide whether the document itself is the contract or whether it is merely a written recording of an earlier oral agreement. 2. The recital According to Stilwell a recital is not necessary in a straightforward commercial contract. Sometimes the actual terms of the contract will be better understood if the background circumstances to it are explained. It must be emphasised that the recital is no more than explanatory material. Recitals usually set out in contracts the terms of which would be better understood, if viewed against a certain historical background. The following is an example of a recital clause: Background Whereas the plaintiff instituted divorce proceedings in the above Honourable Court against the defendant in which the plaintiff sues for: 1. A decree of divorce. 2. Custody of the minor children. 3. Maintenance for the two minor children in the amount of R600-00 per child per month. 4. Rights of reasonable access for the defendant to the minor children. 5. Costs if defended. 6. Further or alternative relief. And whereas the parties wish to put on record an agreement between them regarding the custody and access to their two minor children, the division of the joint estate and other related aspects, the plaintiff and the defendant agree as follows: Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 24 3. The parties The parties to this contract are: I M Shark (Identity Number 610421 0831 080) Presently residing at 27 Marine Drive, UJ Park, Johannesburg (who, in this contract, will be called the Seller) and M E Lamb (Identity Number 580731 1819 080) Presently residing at 10 Mutton Road, UJ Lands, Johannesburg (who, in this contract, will be called the Purchaser). 4. The main clause(s) The Seller agrees to sell to the Purchaser a............................................... (Note: Here, one would have to insert a description of the property being sold. It may be a piece of land or it may be a moveable item, such as a motor vehicle.) The item of property being sold may be described as follows: A certain piece of land described as Sub 34 of Lot 315 of the Township of Alexandra Or A 1999 model Ford Fiesta motor vehicle, registration number …….engine number…………………….chassis number…………………………………… 5. The consideration clause According to Stilwell in all commercial contracts, one of the parties is exchanging an item or service of commercial value in exchange for a piece of property or payment of money. He gives two examples - the one relates to an agreement of sale, and the other to an agreement of lease. “The Purchaser agrees to pay the Seller the sum of R25 000,00 for the property described in Paragraph 1 above. Or The Lessee agrees to pay the Lessor a rental of R2 000,00 per month for the leased premises.” 6. Method of payment Payment is normally required upon delivery of the item or service. Alternatively, it may be done by way of periodical instalments. The following are examples given by Stilwell (p136): Example 1 “The Purchaser agrees to pay the Seller an amount of R25 000,00 for the property described in this in this contract. Or The lessee agreed to pay rent to the Lessor in the amount of R2 000,00 per month.” Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 25 Example 2 “The Purchaser agrees to pay the full purchase price of R25 000,00 on delivery of the motor vehicle to him. Or The Purchaser agrees to pay the purchase price of R25 000,00 in the following way: R10 000,00 on delivery of the motor vehicle to him and the balance in monthly instalments of R1000, the first of which must be paid on the 1st May 2004 and subsequent payments on the first day of every month there-after until the full price has been paid. Or The full purchase price on registration in his name of the said piece of land. Or The Purchaser agrees to pay the purchase price as follows: R10 000,00 on delivery of the said motor vehicle to him. The balance of R15 000,00 in ten (10) equal instalments of R1 500,00 each, the first of which is payable on 1 November 2010 and all subsequent payments on or before the first day of each succeeding month thereafter until the full purchase price has been paid. Or The Lessee agrees to pay the rental of R2 000,00 per month, monthly in advance, which must be paid on or before the seventh day of each and every month during the currency of the lease.” 7. Subsidiary clauses in a lease The Lessee may not without first obtaining the lessor’s written consent: Vacate the premises before expiry of the lease. Leave the premises unoccupied for more than six weeks at a time. Sublet any portion of the leased premises to any other person. The Lessor must: Keep the structure of the premises including the walls and the roof in a state of good repair. Maintain the premises in a condition reasonably fit for the purpose for which they are let. Attend to defects in and damage to the premises for which the Lessor is responsible in terms of this agreement within five days after becoming aware of such defect or damage. 8. Voetstoots clause A ‘voetstoots’ clause in a contract protects the seller. It means that the seller is not responsible for serious or big ‘hidden’ faults that the sold goods (such as a car) may have at the time when the buyer buys the goods from the seller. A fault is hidden (latent) or unnoticeable if the buyer is not aware of it. If the seller knows of this fault when he or she sells the goods, he or she will be liable for its repair and NO ‘voetstoots’ Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 26 clause will save him or her. The seller should then either fix the fault at his own expense or reduce the selling price. The vehicle sold under this agreement is sold voetstoots. 9. Suspensive condition Stilwell points out that this type of clause is commonly found in agreements of sale where the parties intend that the agreement should not be binding unless a certain event occurs. Often in sales of immoveable property, the purchaser is only able to pay the purchase price if he/she obtains a loan from a financial institution. The agreement is thus made dependent on the granting of that loan. The terms and conditions of this agreement will be binding on the parties only if the purchaser is granted a loan of no less than R200 000,00 by a registered bank or building society, by not later than 16 October 2011. This condition will be deemed to have been fulfilled if a registered bank or building society gives the Purchaser written notification that his/her loan application, for that amount, has been approved in principle. 10. The VAT clause If value added tax is payable by the Seller in terms of this agreement, the Purchaser will be obliged to refund the Seller such amount as it becomes payable. Or The seller warrants that s/he is not a vendor in terms of the Act on Value-Added Tax and the sale being a private sale does not attract Value-Added Tax. 11. Breach clause (also known as a Lex Commisoria clause) Should any of the parties fail to perform in terms of this agreement or commit a material breach of his/her obligations under this agreement, the innocent party shall be entitled to: cancel the agreement; and claim damages he/she has suffered. Or enforce the agreement; claim such damages as he/she has suffered. Or cancel the agreement after giving the other party not less than ….. days prior written notice sent to the other party at the understated address, requesting rectification of such default; and claim that the party in breach shall be liable for damages accordingly. 12. Interest clause If the Purchase fails to pay any instalment due on or before due date, he/she will be liable to pay interest on the amount of such late instalment, at the rate of 15.5% per annum calculated from the due date of payment until the actual date of payment. 13. Jurisdiction clause The parties consent to the jurisdiction of the Johannesburg Magistrate’s Court in respect of any legal action which might be instituted by either of them arising from this Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 27 agreement, notwithstanding the amount of any such claim arising from or relating to this agreement. 14. The domicilium clause The parties choose as their respective domicilia citandi et executandi the following addresses for any legal proceedings which may be instituted arising from this agreement. The Seller: (insert a physical address) The Purchaser: (insert a physical address) 15. The costs clause The parties agree that each party will be liable for his/her own legal costs incurred. Or The parties will bear the legal costs incurred in connection with the drafting of this agreement in equal shares. Or The Seller will be liable for all legal costs incurred in connection with the preparation of this agreement. 16. Non-variation clause This agreement constitutes the whole agreement between the parties who acknowledge that there are no collateral oral agreements or conditions in any way varying this agreement. The parties further agree that no agreement either cancelling or varying this agreement shall be of any force or effect unless contained in writing and signed by both parties hereto. The reason why we have to interpret contracts is to determine the intention of the parties. There are three important aspects to the interpretation of contracts.  Firstly, it is necessary to determine the extent of the contract. An interpreter must establish the content or terms that will be interpreted.  Secondly, once the terms of the contract have been established, the meaning of those terms must be determined.  Lastly, the meaning of the terms must be applied to the circumstances of the case so that the effect of the contract can be determined.  We are now proceeding with the discussion of the TERMS (par. 2 - 2.6) the MEANING OF THE TERMS (par. 3 - 3.4) and APPLYING the meaning (par. 4 - 4.2). Activity 2.2 Have you entered into any contract before? Give some examples of contracts that you have entered into in your life. The contracts may be verbal or written. Were you able to interpret each of the contracts correctly? Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 28 2.4 The Terms of a Contract 2.4.1 Express Terms The express terms of a written contract are those promises and other matters which the parties have set out in words in the operative part of the contract concerned. The express terms of a contract form the basis of the agreement between the parties. For that reason, a contract can only be understood with reference to the express terms. The following is important with regards to express terms: Not all the words that appear in a written contract set out express terms and the operative part of the contract must be distinguished from the other parts that may be included in the contract, such as a preamble or recital, marginal notes, a date clause and an attestation clause. These parts do not contain any obligations, but only provide information in relation to the contract or assist in the systematisation or presentation of the contract. What may seem to be some other part of the contract, such as a preamble, may indeed contain contractual obligations and is therefore included in the operative part. The express terms of a written contract are not necessarily contained in a single document. It may happen that express terms of a contract are contained in notices posted in prominent positions, as is usually seen in motor car parks. The below disclaimer would be an example of such. DISCLAIMER NOTICE The owners of this property are not liable for any loss, damage or injury of whatsoever nature incurred while on this property. The transaction may be recorded in more than one document, for example, where the parties negotiated and concluded a contract by a series of letters exchanged between them. In such a case, the various documents should be read together as if it were a single document. Express terms may also consist of terms in other documents that are incorporated into the contract by reference. In cases where terms in other documents or notices are incorporated into a contract, they must be read as if they had been written out in full in the contract concerned. Reference to incorporated terms is normally reference to those terms as they were at the time when the contract Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 29 was concluded, so that later amendments to those terms will not be incorporated into the contract. Activity 2.4 Get a copy of any written contract and see if you can identify the express terms of that contract. State clearly the nature of the contract, the parties involved and the express terms. 2.4.2 Tacit Terms Tacit terms are terms that are inferred into a contract by the conduct of the parties, sometimes this can include instances in which the parties intended to include in the contract, but failed to express therein (this would be called an implied tacit term). It often happens that the parties to a contract consider some matter and reach agreement thereon, but fail to express the agreement on that matter in their written contract. It may also occur that the parties have a common expectation with regard to a matter that is not expressly dealt with in the contract. Activity 2.5 John and Sipho agree that John will purchase Sipho’s used minibus. During the negotiations, both of them notice that the colour of the minibus is white, but none of them mentions the colour. They conclude a written contract of sale, but the written contract does not mention the colour of the minibus. Before delivering the minibus to John, Sipho takes it to an advertising company, who paints an advertisement for the Daily News all over the minibus. May John claim that there was a tacit term of contract that Sipho would deliver a white minibus? If so, why? Activity 2.6 Try to find other examples of matters that parties to a contract may have considered, without including an express term on that matter in the contract. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 30 2.4.3 Implied Terms Implied terms are not expressly agreed by the contracting parties but form part of the contract anyway. There are two types, those ex lege implied terms (in other words, implied by law) and those ex consensus implied terms (those implied by, for example, trade usage, custom etc.). Sometimes, ex consensus implied terms can be matters are so obvious that the parties often do not even consider or express themselves on those matters in their contract as the parties had a “wordless understanding” of the matter. A term can be implied if it is necessary in the business sense to make the contract effective. The term must be such that if someone had said to the parties, ‘What will happen in such a case’, they would both have replied, ‘Of course, so and so will happen; we did not trouble to say that; it is too obvious’. This has become known as the “officious bystander test”. A term cannot be implied into a contract simply because the interpreter of that contract is of the opinion that it would be reasonable to do so. A term can only be implied if it is necessary in the business sense to make the contract effective and the officious bystander test is satisfied. The proposed term must be necessary to render the contract effective or performance possible. If there is doubt as to whether the parties would have agreed to a certain term or if the proposed term contradicts an express term of the contract, such a term cannot be implied into the contract. A term cannot be implied into a contract simply because one party would have refused to conclude the contract without that term if he or she had considered the matter. The application of the officious bystander test means that only relatively simple and precise terms can be implied into a contract, as complex or imprecise terms would require more than just a straightforward agreement from the parties. A term can only be implied if it is capable of clear expression and exact formulation. The interpreter must therefore be certain of the extent of the proposed term. The term should not be vague or ambiguous. However, a proposed term will not fail simply because it could have been more elegantly phrased. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 31 A term will not be implied in a contract when third parties may be prejudiced thereby. Activity 2.7 How would you explain to a client, in your own words, what the “officious bystander test” is? Substantiate your explanation with an example. Activity 2.8 John and Sipho agree that John will purchase Sipho’s used minibus. They conclude a written contract of sale, which states that the minibus must be roadworthy when Sipho delivers it to John. The written contract does not mention the condition of the tyres on the minibus. If a bystander had asked John and Sipho, “What should the condition of the tyres on the minibus be when Sipho delivers the minibus to John?”, can it be assumed that the reply would be that the tyres must be in a roadworthy condition? Activity 2.9 Try to find other examples of matters which parties to a contract may never have considered, but which they would have included if a bystander had drawn their attention to the matter. 2.4.4 Provisions excluded from a written contract Where contracting parties decide to reduce their contract to writing, the parol evidence rule applies. The aim of this rule is to prevent either party from redefining the terms of the contract by reference to the prior negotiations of the parties or the surrounding circumstances. The rule provides that if a written document was intended to provide a complete memorial of the contract, no evidence may be given of any earlier agreement made by the parties which is inconsistent with the terms of the written contract. 2.4.5 Rectification The writing is only a record or proof of a contract and therefore a written contract can be rectified if it does not accurately reflect the actual or apparent agreement between Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 32 the parties. Rectification is the correction of the written record and does not allow for the addition of terms which the parties agreed to after the signing of the contract. Omitted words may be added, superfluous words may be deleted and incorrect words may be replaced by means of rectification so that the mistake may yield to the truth of the matter. The starting point for rectification is a valid contract. A contract that seems void because it apparently contravenes some provision of common law, may be corrected by means of rectification, provided that the corrected contract will be valid and not void. A contract which is void because one of the requirements for a valid contract was not met or because it does not comply with the formal requirements of some statutory provision or the other, cannot be saved by means of rectification. If a contract apparently complies with the formal requirements of a certain statutory provision, it depends on the interpretation of the statutory provision concerned whether rectification will be allowed or not, although such a contract may generally be rectified. A document that was never intended to be a contract cannot be made a contract by rectification. It does not matter how the written contract came to be an inaccurate record of the agreement between the parties. Rectification cannot be claimed by a party in the case of a unilateral mistake by that party. If it will be to the detriment of third parties, rectification will not be allowed. Rectification will be allowed where the signature of a party is not correctly placed or not properly qualified. Activity 2.12 Provide three examples of situations in which rectification is not allowed. 2.4.6 Severance of invalid provisions An agreement which has uncertain or illegal provisions, or provisions which are Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 33 impossible of performance or void for informality, may nevertheless be saved from invalidity if the offending provisions can be severed from the rest of the agreement. The basic test for determining whether a provision is severable is whether the parties probably intended it to be severable. As a rule, the court will make a finding to this effect only if the following requirements are satisfied. The objectionable provision is grammatically or notionally distinct from the rest of the agreement. The objectionable provision is subsidiary to the main purpose of the agreement and its elimination would leave the substantial character of the agreement unchanged. The parties would have entered into the agreement even without the offending provision. An example of a provision which would normally be severable is an illegal self-help clause, such as a provision allowing a landlord to evict his tenant without recourse to law if the tenant fails to pay the rent. This would usually be severable because (i) it is notionally distinct from the other provisions in the contract; (ii) it is not an essential part of the contract (so deleting it would not change the nature or purpose of the contract); and (iii) the parties would ordinarily have contracted without it, had they been aware of its illegality. Unit 3: Types of contracts Every ordinary citizen becomes involved with contracts in normal day-to-day living. From the groceries that we buy, the transport that we use, the house that we live in, to the place where we work, the clothing that we wear and the furniture that we sit on, all are examples from everyday life that can be related directly to the existence of agreements. Such agreements exist between individuals, or between an individual and a company or business. Movable items/things such as cars, electrical appliances, food, clothes and many more are bought and sold every day. Contracts or agreements used in such trade do not always have to be in writing. Some agreements may be reached orally. For example: John sells his car to Ben. John delivers the car to Ben. Ben must now pay the purchase price over to John in exchange for the vehicle. Immovable things: Houses, dwellings, a piece of land, flats, business premises such as office buildings and warehouses, are examples of immovable property that is bought and sold by contract. These immovable things may also be available for renting or leasing. Such actions would be subject to a lease agreement. For example: Andy’s family decides that they want to move from a flat to a house. They are interested in a specific house, but first want to live in it for six months to see if they like the neighbourhood, before they buy it. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 34 They would, therefore, firstly conclude a lease agreement with the owner of the property. According to the agreement, they would have the right to occupy the house for six months against the payment of monthly rent. Should they decide to buy the house, they would have to sign a new agreement with the owner. They would then become the new owners of the house against the payment of the purchase price to the previous owner. The rendering of services: Agreements do not always imply the transfer of ownership of physical goods. When people agree to obtain or to render services they may also enter into an agreement. That person obtaining the services would in turn pay for services rendered. For example: A painter, hairdresser, electrician, plumber, builder and television repair technician are examples of people who render services. The people who are in need of their services should pay for them. Another example: Gina goes to the hairdresser to have her hair cut and blow-dried. The hairdresser cuts Gina’s hair and blow-dries it for her. Gina has to pay the hairdresser for services rendered. Agreements complying with the Alienation of Land Act 68 of 1981: There are numerous statutory provisions in the Alienation of Land Act 168 of 1981 to comply with when entering into an agreement. The agreement must be in writing and signed by the parties. The actual transfer of the property only takes place at registration of a title deed in the new owner’s name in the Deeds office. According to law, this registration may only be done by an attorney who is also a registered conveyancer. It is necessary to remember that the drafting of all agreements relating to the sale of immovable property should be referred to an attorney. The following types of contracts will be discussed in detail below:  Purchase and sale.  Lease agreements. When you have finished going through the notes of this sub-unit on buying a used motor vehicle, you should be able to:  define a contract of sale.  list the requirements for a valid contract of sale.  discuss the naturalia and essentialia of a contract of sale.  discuss the formalities for a valid contract of sale. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 35 discuss the relevant sections of the Alienation of Land Act 68 of 1981 with regard to the meaning of the term alienation and the requirements for a valid deed of alienation.  describe the duties of the seller.  define and discuss the various forms of breach of contract.  discuss the following terms – voetstoots sale, cash sale, latent defect.  discuss the requirements for the passing of ownership.  discuss the various forms of delivery.  discuss the warranty against eviction.  identify and discuss the forms of eviction.  discuss the implications of the guarantee against eviction.  discuss the duties of the buyer if eviction is imminent.  discuss the duties of the seller as soon as he receives notification of the threatening eviction.  discuss the warranty against latent defects.  differentiate between the actio redhibitoria and actio quanti minoris and the instances when they may not be instituted as well as the actio empti. 3.1 The law of purchase and sale 3.1.1 General The law of purchase and sale has a bearing on all legal rules applied to contracts of sale and is the most prevalent of contracts found in practice. Contract of sale  A contract of sale is a specific, nominated, reciprocal agreement to buy and sell in terms of which the seller has the true intention to deliver a determined or determinable thing together with all his/her rights in the thing, to the buyer, and the buyer has the true intention of paying a determined or determinable price for the thing sold.  Since the sale agreement is a contract, all the normal requirements for a valid contract must be present. These include (see paragraph 1.2 above for more detail): o Consensus. o Contractual capacity. o Legality. o Physical possibility. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 36 o Formalities: In general there are no formalities required for a valid and enforceable contract for the purchase and sale of movable property. However, there are certain statutory formalities required for the valid purchase and sale of immovable property.  Content of the contract: o Naturalia are those contractual terms which by operation of law naturally or automatically form part of a contract, without the parties specifically agreeing to them, such as a warranty against latent defects in a contract of sale. o Essentialia are the minimum essential characteristics to identify it as a specific nominate contract and to distinguish it from other nominate contracts. Before a contract qualifies as a contract of sale, the seller and buyer must reach consensus on the essentialia of the contract o Incidentalia of the contract of sale. These are additional incidental terms which the parties may elect to add to the contract so as to ensure that the contract is more specific or complete with regards to the parties rights and duties. The incidentalia are not required for purposes of validity. E.g. the seller will make full payment by means of a cash deposit into account number 12578 before or on 10 December 2014. Essentialia of the contract of sale: consensus between the seller and the buyer about the following: the nature of the contract the thing sold the purchase price (to buy and sell) (merx) (pretium) 3.1.2 Alienation of land  Section 2(1) of the Alienation of Land Act 68 of 1981 requires the following formalities with regard to contract for the purchase and sale of land: “No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.”  Alienation means to sell, exchange or donate, irrespective of the fact that it is subject to a suspensive condition. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 37  The requirement that the contract must be in writing means that the whole contract concluded by the parties to the sale must be reduced to writing. This implies that not merely the essentials of a contract of sale must be in writing – the price, the property and the parties – but the contract as a whole. It is furthermore not necessary for the contract to be contained in one single document.  The Alienation of Land Act 68 of 1981 has no specific requirements as far as witnesses to the signature of the contracting parties are concerned, but the Matrimonial Property Act 88 of 1984 requires of a spouse married in community of property to obtain the written consent of the other spouse when immovable property is alienated and such consent must be attested by two competent witnesses.  Legal consequences of non-compliance with formalities mentioned in section 2(1) of the Alienation of Land Act 68 of 1981 are: a) The contract is null and void. No legal obligation exists between the parties. b) If one of the parties delivers a whole or only a part of his/her performance, he/she cannot claim counter performance from the other party. c) Any party who delivered such a performance is entitled to reclaim his/her performance from the other party. d) The buyer who has made performance in terms of the invalid contract, is entitled to claim the following from the seller:  Interest on payments made by the buyer to the seller.  Reasonable compensation for any expenses incurred or improvements made with the express or tacit consent of the owner. e) The seller who allows the buyer to possess the land is entitled to claim the following from the buyer:  Reasonable compensation for the buyer’s occupation, use and enjoyment of the land.  Compensation for any intentional or negligent damage caused to the land by the buyer or someone for whose actions he is responsible. f) Where both parties deliver complete performance in terms of a contract which is actually null and void due to the fact that the formalities were not complied with, the contract is deemed to have been valid and binding from the time of conclusion thereof. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 38 Cooling Off Period:  A buyer may within five days after signature, unconditionally terminate a deed of alienation by a written and signed notice to the seller, provided that: a) The purchase price does not exceed R 250 000. b) The buyer is not a trust or a person other than a natural person. c) The buyer has not purchased the land on a publicly advertised auction. d) The seller and buyer have not previously entered into a deed of alienation of the same land. e) The buyer has not reserved the right to nominate or appoint another person to take over his rights and obligations as stipulated in this agreement. f) The buyer has not purchased the land by the exercise of an option which was open for exercise for at least five days. g) The land is used or intended for use mainly for residential purposes. 3.1.3 Duties of the seller When a valid contract of sale is concluded, both the seller and the buyer have to fulfil certain contractual duties. Duties of the seller Safe-keeping of Passing of Delivery of Warranty Warranty the things sold ownership the thing against against latent sold eviction defects (a) Safe-keeping of thing sold  According to this duty the seller must protect and take care of the object from the time of conclusion of the contract of sale until delivery of the object. If the Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 39 damage is caused due to the fault (intentional or negligent) of the seller the buyer may claim damages.  If the object is destroyed or damage is caused to it due to no fault of any of the parties (buyer or the seller) before delivery of the object but after conclusion of the contract (for example by an act of God or due to coincidence), then either the buyer or seller will carry the risk depending on the rules in the “doctrine of the passing of risk”.  The next important aspect of a contract of sale is the so-called “passing of the risk”. We may explain this concept simply as follows: Solly decided to sell his second-hand car to Pete. Everything is finalised on the Friday, for example: the type of car, the price, the method and time of payment, patent and latent defects (faults) and the date and time of delivery. Before Pete could pay and fetch the car the following Monday, Solly’s garage with the car inside burnt down. If Pete had not arranged for insurance on the car, he would have to pay Solly, because in law the risk had been transferred to him once the agreement had been finalised. (b) Passing of ownership The mere conclusion of a contract of sale does not transfer ownership to the buyer. Other requirements will have to be met before ownership can be transferred. The requirements that must be met will depend on whether you are dealing with a cash sale or a credit sale. The requirement for passing of ownership for immoveable property are different from that of movable property. The differences can be illustrated as follows: Requirements for passing of ownership of Requirements for passing of ownership of IMMOVABLE PROPERTY MOVABLE PROPERTY Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 40  The seller must be owner of the  The seller must be owner of the object or thing sold. object or thing sold.  The seller must have the intention  The seller must have the intention of of transferring ownership to the transferring ownership to the buyer buyer and the buyer must have the and the buyer must have the intention of obtaining ownership intention of obtaining ownership from the seller. from the seller.  The object must be registered in  There is a difference between a cash the name of the buyer in the Deeds sale and a credit sale in order to Office. determine if ownership is passed or not. (NB: Registration’s function is the same as delivery for example in (a) If it is a cash sale payment of the cases of movable property). purchase price and delivery of the thing must take place at the (NB: Payment of the purchase same time. Ownership is price is NOT required for transferred if both these transfer of ownership of conditions are met. immovable property). (b) If is a credit sale delivery is the only requirement that must be met. Payment is made in future. Ownership thus passes by mere delivery of the object. (c) Delivery of thing sold The buyer is entitled to delivery of the object or thing sold. Various forms of delivery exist. They are set out as follows: Movable corporeal property Delivery can take on many forms. Actual or physical delivery can take place or constructive delivery can take place. Constructive delivery is where delivery takes place through the mere change of intention by the parties. (a) Actual delivery:  Here physical delivery takes place where the seller hands over the object to the buyer. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 41  For example where Party X buys Party Z’s bag and Party Z hands the bag over to Party X upon payment for the bag. (b) Constructive delivery: (i) Delivery with the short hand (tradition brevi manu)  The object is in possession of the buyer and delivery takes place by mere change of intention.  For example where Party X rents Party Z’s car and decides to buy it for R 50 000.  The parties agree that Party X will buy the car at the set price and s/he pays the money over to Party Z. Because Party X is already in possession of the car, it is delivered to him/her by change of intention. (ii) Delivery with the long hand (tradition longa manu)  The object is pointed out to the buyer with the intention to pass ownership.  For example if Party X buys a big storage container which is too big to be handled physically it will be delivered to him/her if Party Z points to it. (iii) Constitutum possessorium  This method is the opposite of delivery with the short hand.  The object is already in possession of the seller and delivery to the buyer takes place by mere change of intention.  For example Party X sells his/her car to Party Z but is awaiting the delivery of his new car which will take a month. Party X then rents the car from Party Z for the month. Without Party Z actually taking delivery, delivery took place by means of change of intention. (iv) Symbolic delivery  The object is delivered by a symbol in order to gain control over the object.  For example X sells his yacht which is docked in Cape Town to Party Z. Both Party Z and Party X live in Pretoria. Party X hands over the keys to the yacht to Party Z in order for delivery to take place. Copyright 2024 © Faculty of Law: Paralegal Studies University of Johannesburg All rights reserved 42 (v) Delivery through marking  The object is delivered by marking the object.  For example Party X sells 100 cows on his farm to Party Z. He owns 1000 cows. The moment Party Z goes to Party X’s farm and marks the 100 cows with a pink dot delivery took place. (vi) Attornment  The object is in possession of third party and while it is in his possession is sold by the seller to the buyer.  Delivery takes place by mere change of intention and the third party no longer holds the object on behalf of the seller but holds it on behalf of the buyer. (vii) Attornment  The object is in possession of third party and while it is in his possession is sold by the seller to the buyer. Delivery takes place by mere change of intention and the third party no longer holds the object on behalf of the seller but holds it on behalf of the buyer.  For example Party X takes his car to the nearest mechanic to fit new tyres and an exhaust. While the car is at the mechanic’s shop Party X sells it to Party Z. The mechanic now holds the car no longer on behalf of Pa

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