IPLW201 Lecture 6: Introduction to Law of Contract 2024 PDF

INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) LECTURE 6 INTRODUCTION TO LAW OF CONTRACT 21 August, 2024  INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Law of contract forms a subdivision of law of obligation In Roman law an obligatio is defined as “a legal bond whereby a p...

INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) LECTURE 6 INTRODUCTION TO LAW OF CONTRACT 21 August, 2024  INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Law of contract forms a subdivision of law of obligation In Roman law an obligatio is defined as “a legal bond whereby a person is obliged to deliver some or other thing” An obligation is a relationship which contains a commitment Commitment is obligation resting on someone to give (dare) something to another person, to perform (facere) something to another person to perform (praestare) something INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) An obligation is the ‘giving’ of something or ‘doing’ of something. However, the content of obligation includes the ‘not doing’ (non facere) of something and the tolerance of something The performance one person may demand from the other person in terms of their contract thus consists of the giving, doing, not doing or tolerance of something INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Obligation – between two or more persons The obligation, is a relationship between two persons Party entitled to performance – this is the one who may claim performance from the other party (Creditor) The obligation party responsible for delivering the performance is the (Debtor) INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Obligation create a right in favour of the creditor(Right to claim the due performance from the debtor) (Personal right – ius in personam) Obligation place a duty on the debtor (duty to perform – giving, doing, refraining from, or allowing) Obligatio create a personal right Obligatio is temporary in nature – extinguished by fulfilment Terminate at some point e.g contract of lease INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Contract as a source of an obligation Refers to undertaking between persons which bring about obligations and which complied with certain requirements. The obligation contains legal consequence- right to claim performance and duty to perform Contract is an agreement which is made with the intention of creating an obligation. When parties conclude a contract they have the intention that the law will acknowledge their agreement and attached legal consequences thereto INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Basic concepts The parties – at least two corresponding wills of consensus must exist The performance – this is the obligation which a contracting party takes upon himself. positive conduct or negative conduct Positive performance- to do , to give or deliver INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Unilateral contract: source of duty rest on only one (Contract of donation). One of the parties acts in the capacity of debtor and the other as creditor. Only one obligation is created Reciprocal contract – (duties are created for all parties to the contract) where the parties to contract act simultaneously in the capacity of both debtor and creditor Multi-lateral legal act – contracts that exist between two or more persons INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Nominate contract – a type of contract which has occurred so often and as result has its own name and for which specific legal rule has developed over ages. Example Letting and hiring Purchase and sale Borrowing and lending Suretyship Employment Partnership agreement etc INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Every nominate contract can be classified according to its own typical essential minimum characteristics (Essentialia) The parties must reach consensus on the at least the essentialia of a particular contract before the contract between them can be classified as nominate/specific Eg contract of sale Intension of the parties to purchase and sale Certainty regarding the object sold Certainty regarding the purchase price INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Essentialia of a contract These are the essential elements that are necessary in terms of the law to place a contract in a certain category. The essential minimum characteristics that must present in a contract in order to identify it as a certain specific nominate contract and to distinguish it from other nominate contract  INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Naturalia of a contract Naturalia are those contractual provisions which naturally (automatically) and by operation of law form part of a contract unless they are expressly excluded by the parties e.g implied warranty against latent defects which is inherent in contract of sale (not patent defects) Warranty against eviction that no person with a better title than the buyer will evict the buyer from the object (This cannot be excluded by agreement) The contract of sale where the parties agreed to credit sale instead of cash sale that payment is postponed to a later date after delivery of the object of sale  INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Incidentalia of a contract All additional terms and condition which the parties which to include in the contract expressly or tacitly in order to satisfy their mutual agreement No limit to the number of clauses Must comply with legality, certainty and physical possibility e.g stipulation by the parties of a time and place of delivery of the article purchased INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Unenforceable contract These are contract which do not in all respect fulfil the requirements for a valid contract which nevertheless give rise to an obligation. In such a case the law will not compel the debtor to perform nor award damages to the creditor if the debtor fails to perform INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Other basic concepts Valid contract Void contract Voidable contract INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Valid contract Means contract exist between two persons  A contract between the contract parties  Complies with certain requirements which is recognised by law  Consequences which the law attaches to the contract involve the right and duties of the parties INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Valid contract Requirements of a valid contract o Serious intention to conclude the contract o Consensus o Contractual capacity o Lawfulness o Formalities o Physical possibility, certainty or ascertain performance INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Note:  Agreement is a contract only when it complies with all the requirements  Not all contract has to complies with formalities in order to be valid INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Contract definition A contract is an agreement (based on consensus between legal subjects who have contractual capacity to do so, and which is lawful, physically possible and complies with the prescribed formalities) reached with the intention to create obligation with resulting rights and duties. INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Void contract Means there is no contract  No agreement between the parties to which the law attaches any consequences  No rights and obligations rest upon the parties INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Void contract A contract is void when: When one or more of its requirements for valid contract is lacking e.g i. where there is no consensus, ii. the parties misunderstood each others intention iii. and parties are not in agreement regarding the terms of the contract A void contract is an agreement which is not a contract and can never be a contract despite the fact that the parties might have thought that it was a contract  INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Voidable contract Means the contract may be enforced or set aside One of the parties has the option to continue or to have the contract set aside. In some cases damages may be claimed Definition A voidable contract is a contract which came into existence validity but which is due to a ‘fault’ which occurred at conclusion, capable of being challenged. A voidable contract occurs when there is a defective consensus INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) A voidable contract occurs when there is a defective consensus – one of the parties has persuaded the other parties to give his consent which he would not have given under normal circumstances Defective consent is caused by Error/mistakes Misrepresentation Duress Undue influence INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) The choice between enforcing or setting the contract aside rest with the person giving a defective consent (wrong person) He must exercise the option as soon as he became aware of the voidability of the contract or at least within a reasonable time INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Requirements for a valid contract CONSENSUS Most important requirement that must be met before the conclusion of a contract (corner stone) a) The will of the parties b) The parties intention to the contract Meeting of minds Parties must be at one regarding the terms of the contract Intention must be communicated (declaration of intention) Elements of consensus INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Elements of consensus The parties must be unanimous that they which to create certain consequences, by having the serious and true intention to do so They must be unanimous that this consequence are juristic consequence They must be aware of unanimity (agreement, union, consensus) INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Law recognise two types of contract Actual consensus Ostensible consensus – where true consensus is absent but the law wishes to recognise contractual liability INTRODUCTION TO PRINCIPLES OF LAW (IPLW201 ) Recommended reading 1. Basic principles of South African Business Law (Nagel, CJ) 2. Workbook for commercial Law (Otto, JM) 3. Commercial law 4th Edition (Nagel CJ) 4. Legal Principles of Contracts and Negotiable Instruments 4th Edition (MA Fouche) We acknowledged the works of the above-mentioned authors in the preparation of this lecture slides. These slides are intended as an aid to the study of the textbooks and not a substitute for it.