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Powered by Introduction to the Law of Contract Lecturer: Lawodi Tutsi Department: Private Law Contact Information: Office: 426 in the law building Email: [email protected] Consultation Times: Wednesdays: 10:30 am - 2:00 pm (office) Thursdays: 9:00 am - 10:00 am (Blackboard platform) Fridays: 11...

Powered by Introduction to the Law of Contract Lecturer: Lawodi Tutsi Department: Private Law Contact Information: Office: 426 in the law building Email: [email protected] Consultation Times: Wednesdays: 10:30 am - 2:00 pm (office) Thursdays: 9:00 am - 10:00 am (Blackboard platform) Fridays: 11:30 am - 1:00 pm (office) Module Focus: The legal principles governing the law of contract Definition of a Contract: An agreement entered into by 2 or more parties with the intention of creating a legal obligation Requirement for a Contract: Minas Contrahendi: Parties must seriously intend to create legally enforceable obligations Determining Intention: Factual inquiry based on available evidence to ascertain the intention of the parties Validity of a Contract: Protection of reasonable belief in certain circumstances, even in the absence of aminess contrahendi Legal Agreements and Contracts Not all agreements are contracts, especially social or domestic arrangements Legally binding agreements may not always be considered contracts if they do not create legal obligations Obligatory agreements create one or more legal obligations, such as sale and lease agreements Absolving agreements discharge or extinguish obligations, such as compromise agreements Example of an absolving agreement: canceling an obligation in a sale agreement by entering into a subsequent agreement to absolve the seller or buyer Legally Binding Agreements Absolving a friend from paying the purchase price is a transfer agreement that extinguishes obligations and transfers rights. Certain legally binding agreements create obligations but are not the same as ordinary contracts, such as marriage. Marriage creates reciprocal duties of support, but many principles of contract law do not apply to it. It is sui generis and requires state intervention. A judgment by consent is a binding agreement between parties to a lawsuit, different from an ordinary contract. Judgment by Consent and Contractual Requirements A judgment by consent is a contract made an order of the court. Breach of this type of contract can result in liability for contempt of court. Violation of an ordinary contract may not result in contempt of court, but normal contract remedies apply. Contracts entered into by the state or state organs are legally binding but may have exceptions, such as ministerial discretion. Valid contracts require consensus, contractual capacity, formalities, and legality. Consensus is the agreement of the parties on all material aspects of the contract. Contractual capacity involves the ability to appreciate the nature and consequences of the agreement. Contracts may be required to meet specific formalities, such as being in writing. Contracts must also be lawful and not prohibited by law. Key Requirements and Features of a Contract Contracts must meet five key requirements to be considered valid, including agreement, consideration, contractual capacity, possibility, and certainty. These requirements ensure that the obligations in a contract are capable of being performed and have definite content that can be enforced. If any of these requirements are missing, the contract will not be considered valid. Contracts are defined by certain characteristics or features, including being a juristic act, involving at least two parties, and the parties undertaking to perform certain actions or refrain from certain actions. A contract is a juristic act in that it attaches legal consequences intended by the parties, such as the duty to perform obligations outlined in the contract. Contracts involve at least two parties and can be bilateral or multilateral, but not unilateral. The parties to the contract undertake to do something, refrain from doing something, or ensure a certain state of affairs exists, such as making leased property available to a tenant in a lease agreement. Features of a Contract The tenant undertakes to pay the rental amount in a lease agreement. Landlord may also undertake to refrain from interfering with the tenant's right to enjoy the leased property. Tenant also undertakes to refrain from causing damage to the leased property. Undertaking can also refer to a state of affairs existing, such as a car having gone through all necessary maintenance. Reciprocity in a contract means one party's performance is promised in exchange for another's. Freedom of contract allows parties to agree to anything possible and lawful. Contract is consensual, based on an agreement, and can be created orally, in writing, or tacitly. The law of contract falls within the private law realm and involves the regulation of the relationship between private persons. Understanding Legal Obligations The law of obligations falls within the broader spectrum of private law. An obligation is a legal bond between a debtor and a creditor, obliging the debtor to give, do, or refrain from doing something for the creditor. In the context of a lease agreement, parties have responsibilities and obligations, as well as rights and corresponding duties enforceable in law. The rights and duties of each party in a contractual relationship create personal rights that can be enforced through legal actions in case of breach of contract. Legal obligations created by contractual relationships are civil in nature and are enforceable through court actions or legal actions. Natural and moral obligations do not necessarily have enforceability, but civil obligations created by contracts can be enforced through available legal avenues. The section will distinguish between contract law and the law of delict, as well as between contract law and enrichment law. Law of Obligations The law of obligations includes the law of contract, delict, and enrichment. An obligation arises from an agreement in a contract, where parties agree to perform certain actions or refrain from doing something. In the context of a sale, the agreement may involve transferring the subject of the sale to the buyer. A delict is a wrongful conduct that causes harm to another, such as a negligent car accident. Enrichment refers to an unjustified shift of wealth or assets from one party to another. An example of enrichment is erroneously transferring funds to the wrong account, leading to unjustifiable enrichment of the recipient. Obligations in a contract require fulfilling promised performances, such as paying rent as a tenant or ensuring property availability as a landlord. In a delict, the obligation is to avoid causing harm to others. Comparison of Obligations in Contract Law, Delict, and Enrichment Wrongful conduct includes negligence on the road causing harm to others and damage to their property. Obligation in enrichment entails the enriched party returning the enrichment unjustifiably received. The nature of the remedy in contract law is specific performance or compensation for nonperformance. In delict, the nature of the remedy is compensation for harm caused to others' property. In reenrichment, the nature of the remedy is the return of the enrichment received without justifiable cause. The source of obligation in contract law is self-imposed via entering into a contract, while in delict, the obligation is imposed by law due to causing harm to others' property. The nature of the wrong in all cases (contract law, delict, and enrichment) is civil, leading to civil proceedings against the wrongdoer. Understanding the differences and similarities between contract law, delict, and enrichment is important, especially noting that these are all civil claims falling within the private law division. Relationship between the Law of Contract and the Law of Property The law of property falls within the broad spectrum of private law but is not part of the law of obligations. Property refers to both corporeal (tangible) things and incorporeal (intangible) things such as patents, trademarks, and copyrights. Many commercial contracts involve property, including sale agreements, lease agreements, and contracts involving trademarks or property transfer. The law of contract is traditionally regulated in terms of common law but has also been impacted by statutes such as the Consumer Protection Act, National Credit Act, and Electronic Communications and Transactions Act. These statutes have specific provisions that contracts must comply with, depending on the scope of the contract. African customary law and the constitution have also recently influenced the law of contract, expanding its scope and impact. Influence of the Constitution on the Law of Contract The constitution is the supreme law of the land, and any other area of law must be consistent with it. The modern notion of contract has been influenced by African customary law as well as the constitution. The constitution in South Africa is regarded as the supreme law, and any law inconsistent with it will be declared invalid. The constitution applies vertically and horizontally, with the state and private individuals both obligated to respect and promote it in their dealings. Vertical application means the state must respect and promote the constitution in dealings with private individuals, while horizontal application means private individuals must also respect the constitution in their dealings. Vertical application also applies to the state ensuring that policy objects of the constitution are fulfilled in their dealings with private individuals. The horizontal application requires private individuals to ensure they promote and respect the constitution in their dealings. Horizontal application is divided into direct and indirect applications, where direct application allows one to attack a contract on the basis of noncompliance with the constitution without reliance on common law. Indirect horizontal application occurs where the bill of rights impacts a dispute between private parties by exerting influence. The Influence of the Constitution on Private Law Section 392 of the constitution requires courts and tribunals to promote the spirit, purport, and objects of the bill of rights when interpreting legislation and developing common and customary law. Courts and tribunals must ensure that the development of common law principles, such as those in the law of contract, align with the values of the constitution. The case of Kaye v. Minister of Safety and Security confirmed the purpose of section 392 is to infuse the common law with the values of the constitution. In the case of Barkeesen v. Naber, it was confirmed that contracts are subject to constitutional control, and contractual terms must be consistent with the policy objects of the constitution. A contractual term cannot limit a right in the constitution, as rights in the constitution can only be limited by the law of general application, and a contract does not qualify as the law of general application. Consensus is a requirement for a valid contract and can be reached through the actual subjective agreement or the apparent objective agreement. Actual subjective agreement involves the communication and declaration of wills by the parties, which can take the form of words, conduct, or silence. Consensus is typically reached through the analytical tool of offer and acceptance, where a contract is concluded when an offer is accepted. Theories of Contract Creation The agreement approach presupposes the serious intention of the parties to contract and that they are of one mind as to the material aspects of the contract. The parties must be conscious that their minds have met for the agreement approach to be valid. The apparent objective agreement approach allows for a reasonable belief in an agreement, even if there is no consensus or serious intention to contract from both parties. The legal system will uphold a contract depending on the approach adopted. A wholly subjective approach will not uphold the contract, but an objective approach will uphold it under certain circumstances. The South African approach follows the actual subjective approach, but may also adopt the apparent objective approach in certain cases. The burden of proof for the existence of a contract lies with the person alleging its existence. Various theories applicable to the creation of contracts include the will theory, the declaration theory, and the reliance theory. The will theory is based on concurring wills from both parties. The declaration theory is based on the appearance of consensus. Theories of Contract Formation Consensus is the basis for the creation of a contract. Reliance theory is based on induced consensus by the other party. Will theory is subjective and aligned with subjective approach, while deterioration theory is aligned with the objective approach. Appearance of consensus can lead to the conclusion of a contract, even if consensus is not actually present. Reliance theory is semi-objective, and the effect of mistake on a contract will depend on the reasonableness of reliance. Will theory fails to protect reasonable reliance, while declaration theory favors form over substance. Lorenz theory is a secondary basis of a contract and important to keep in mind when discussing contract formation. Cornerstones of the Law of Contract Freedom of contract is the idea that individuals have the freedom to decide whether to contract, with whom, and on what terms. Sanctity of contract means that contracts entered into freely and seriously must be honored and enforced by courts, implying a legal obligation to honor agreements. Good faith, a cornerstone of the law of contract, emphasizes that parties should behave honestly and fairly in their contractual dealings, aligning with the principle of Ubuntu in African philosophy. Privity of contract dictates that contracts create rights and obligations only for the parties involved, excluding third parties from being affected by the agreement. The values of the law of contract may sometimes compete with one another, leading to the consideration of the competing cornerstones of the law of contract. Law of Contract Values and Their Competition The law of contract aims to create legal certainty by ensuring that people fulfill their promises and enforcing those promises through available legal avenues. Values of the law of contract often compete with each other, and it's important for courts to strike a balance between them, influenced by constitutional values. The value of sanctity of contract versus good faith involves the need to enforce contracts freely and seriously entered into, while also ensuring fairness and non-prejudice in contractual dealings. The court must strike a balance between enforcing freely entered contracts and not enforcing contracts that are unfair, as sanctity of contract competes with good faith. Freedom of contract versus sanctity of contract allows parties to freely enter into contracts, but they must also honor these agreements, emphasizing the relationship between freedom and honoring agreements. The competition between freedom of contract and good faith requires that terms decided upon must ensure fairness and non-prejudice in dealings. Parties have the freedom to decide on terms, but these terms must not be unfair. Understanding the cornerstones of the law of contract and how these values compete with each other is crucial for legal purposes. Standard Form Contracts in the Law of Contract The paragraph 1.9.3 in the textbook titled 'Freedom and sanctity of contract' discusses the cornerstones of the law of contract and their competing nature. It emphasizes the importance of understanding standard form contracts, where one party sets the terms and the other has little to no ability to negotiate. Standard form contracts are commonly used in transactions such as purchasing cell phones on contract, where customers are given non-negotiable terms and conditions to either accept or reject. These contracts are convenient and less costly, as they do not require individual legal drafting for each customer, but they limit the freedom of the party that does not have the ability to negotiate terms in their favor. While standard form contracts are suitable for most transactions, they are not ideal for big commercial contracts that require specific and detailed terms. Contract Law Lecture Notes Paragraph 1.9.4: Good faith, equity, and public policy are discussed in this paragraph, but not crucial for our purposes. The principle of public policy will be covered in more detail under legality. Paragraph 1.10: Discusses the Consumer Protection Act and certain consumer rights. These will be covered in more detail in the consumer protection module. Conclusion: This concludes the introductory lecture to contract law. Theme 2 of the module will be discussed in the next lectures.