The Law of Contract PDF

THE LAW OF CONTRACT MR LK THUTSE Date: Week 19 to 23 February 2024. MR LK THUTSE Office: 4-26 Law Building, Department of private law. Email: [email protected] Consultation hours: Wednesdays: 10:30 to 14:00 (Office) Thursdays: 09:00 to 10:00 (Blackboard) Fridays: 11:30 to 13:00 (Office) For the...

THE LAW OF CONTRACT MR LK THUTSE Date: Week 19 to 23 February 2024. MR LK THUTSE Office: 4-26 Law Building, Department of private law. Email: [email protected] Consultation hours: Wednesdays: 10:30 to 14:00 (Office) Thursdays: 09:00 to 10:00 (Blackboard) Fridays: 11:30 to 13:00 (Office) For the sixth consecutive year, according to THE World University Rankings, 2023, UP LAW ranks best in Africa and Top 78th in the world. A feat unequalled in Africa! What is a contract? ❑ An agreement entered into by two or more parties with the intention of creating a legal obligation or legal obligations. ❑ Aminus contrahendi: Serious intention to create legally enforceable obligations. ❑ Intention to contract: Question of fact determined with reference to available evidence. ❑ Absence of Aminus contrahendi: Where X leads Y into reasonable belief that she does not seriously intend to bind herself, the law will protect the reasonable belief and uphold the contract, despite the absence of a genuine contract. ❑ A contract is an agreement, but not all agreements are contracts. ❑ Social or domestic arrangements do not intend their agreements to give rise to legally binding obligations. Therefore, they are not contracts. For the sixth consecutive year, according to THE World University Rankings, 2023, UP LAW ranks best in Africa and Top 78th in the world. A feat unequalled in Africa! Legally binding agreements that are not contract They are not contracts because they do not create legal obligations but they destroy (discharge/ extinguish) or honour an obligation(s). Legally binding agreements that are more than just contracts These type of agreements create obligations, but cannot be treated as mere contracts. (i) Marriage: Creates obligations, such as a reciprocal duty of support. However, the primary goal of marriage is not to create obligations. Furthermore, many of the principles of contract law do not apply to marriage. Sui generis in nature: Cannot be made without the intervention of the state… Confers on the parties a status of public nature. (ii) Judgement by consent: A judgement issued based on an agreement between parties to a lawsuit. Similarities/differences with ordinary contracts? (iii) Contracts entered into by organs of state: GR: Contracts treated like any other in the commercial domain. Exceptions? Public interest…Minister given the discretion to exercise power in the public interest, such power cannot be altered by the contract. Requirements for a valid contract Requirement Brief explanation (a) Consensus The minds of the parties must meet (or at least appear to meet) on all material aspects of their agreement. (b) Capacity The parties must have the necessary capacity to contract. Someone who appreciates the nature and consequences of their act can contract. (c) Formalities Where the contract is required to be in a certain format (e.g. in writing), the must comply with the required format. (d) Legality The contract must be lawful, it must not be prohibited by law (statute, common law, Constitution etc.) (e) Possibility The obligations undertaken must be capable of performance when the agreement is entered into. (f) Certainty The agreement must have a definite or determinable content, so that the obligations can be ascertained and enforced Nature of a contract Feature Explanation 1. Juristic act An act which the law attaches the consequences intended by the parties. 2. Bilateral/ Multilateral Involves at least two parties. 3. Undertaking Parties undertake to perform (To do something, refrain from doing something and that a certain state of affairs existed) 4. Reciprocity One parties performance promised in exchange of another. 5. Freedom of contract Parties can agree on anything that is possible and lawful. 6. Consensual Based on an agreement of some sort. 7. Creation Orally, tacitly. Contract and the law of obligations The law of contract is a sub-division of the law of obligations, which falls within the private law spectrum. Obligation: A legal bond between the debtor and his creditor. Obliges the debtor to give, do , to refrain from doing something to or for the other (the creditor). Obligation comprises a right and a corresponding duty, which are enforceable in law. The right of the creditor to demand performance by the debtor and the duty of the debtor to make performance. The right created by the contractual obligation is a personal right. It is civil obligation, enforceable through legal action as opposed to a natural obligation and moral obligation. Contract and the law of obligations Contract Delict Enrichment Event giving rise to Agreement to make Wrongful conduct Unjustified shift of the obligation the performance (to that causes harm to wealth of an asset give or not do another. from one estate to something) another. Content of obligation the To make promised performance Nature remedy the Actual performance, Compensation or compensation for harm caused. non-performance. of Source obligation Nature of wrong of Self-imposed Civil the To avoid causing To return harm by wrongful enrichment. conduct. for Return of enrichment. Imposed by law Imposed by law Civil Civil the the Contract and property law ❑ Property: Corporeal things (Car, House, TV set etc.) & Incorporeal things (Patent, Trademark, copyrights etc.) ❑ Many commercial contracts involved property: Sale/ lease/ allowing use of trademark etc. ❑ Contract to transfer property. Development contract of the modern notion ❑ Common law ❑ Statute (CPA, NCA, ECTA) ❑ Recently, infusion of African customary law and the Constitution to the law of contract. of The influence of the Constitution of the Republic of South Africa, 1996. S 2: Supremacy of the Constitution. Application: ❑Vertical: State and private individuals. ❑Horizontal: Private individuals inter se. Direct horizontal application: Attack a contract on the basis of non-compliance with the Constitution without reference or reliance to common law. Indirect horizontal application: B.O.Rs impacts on a dispute between private parties by exerting the influence of the Constitution on contract law. S 39(2): When interpreting any legislation, and when developing the common law and customary law, every court, tribunal or forum must promote the spirit, purport and objects of the B.O.Rs Purpose of s 39(2) is to ensure that the common law is infused with the values of the Constitution [K v Minister of Safety and Security 2005 (6) SA 419 (CC)]. Barkhuizen v Napier: Contracts are subject to constitutional control. Contractual terms must be consistent with the policy objects of the Constitution. Contractual term cannot limit a right in the Constitution. The basis of a contract ❑ Consensus must be proven to show the existence of a contract. Actual subjective agreement: ❑ Consensus is reached through a process of communication involving the declaration of wills by parties. ❑ Declarations: Words, conduct or silence. ❑ Offer and acceptance. ❑ Presupposes: ▪ ▪ ▪ Serious intention to contract. One mind as to the material aspects of the contract. Conscious of the fact the minds have met. Apparent objective agreement: ❑ X is under the reasonable belief created by Y that an agreement has been reached. See example in para 1.8.3 of the textbook. ❑ Whether the legal system will uphold the contract depends on the approach adopted (Wholly subjective or at least to some extent objective). SA’s approach: Actual subjective & apparent objective. Onus to prove existence of a contract: He who alleges. The basis of a contract (Continued) Theories: Will theory Basis of contract Nature agreement a Consensus: Concurring wills. of Subjective Declaration theory Reliance theory Appearance of Belief in existence of consensus: consensus, induced concurring by other the party declaration of wills Objective Semi-objective Contract stands Contract fails reliance unreasonable. Effect of mistake Contract fails if is Draw back Fails to protect Favours form over Merely a secondary reasonable reliance substance basis for contract Cornerstones (Values) of contract Cornerstones Description 1. Freedom of contract People are free to decide whether, with whom and on what terms to contract (party autonomy). 2. Sanctity of contract Contracts freely and seriously entered into must be honoured and, if necessary, enforced by courts (Pacta sunt servanda) 3. Good faith Parties to a contract should behave honestly and fairly in their dealings with one another; African notion of Ubuntu. 4. Privity of contract Contracts creates rights and obligations only for the parties to the agreement, and not for third parties. The goal(s) of contract law and competition of cornerstones (values) the Goal: Create legal certainty by ensuring that people fulfill their promises, if not, the aggrieved party can enforce the promise through legal avenues. Competition of cornerstones (values): Values (cornerstones) often in competition. Strike balance which is in line with constitutional values. Values: Sanctity of contract vs. Good faith (Fairness in contractual dealings). Freedom of contract vs. Sanctity of contract. Freedom of contract vs. Good faith. Paragraphs 1.9.3,1.9.4 and 1.10 in the textbook Para 1.9.3: Freedom and sanctity of contract ❑ Study for context and understanding of the cornerstones & their competing nature. ❑ Standard Form Contracts (SFC): Freedom of contract. Take-it-or-leave-it approach. Majority of transactions concluded by way of SFC (95% estimate) SFC: Convenient and less costly. Para 1.9.4: Good faith, equity and public policy Para 1.10: CPA