Contract A notes part 2 PDF

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Irrelevant mistake: the mistake doesn’t result in dissensus this is because it didn’t affect the mistaken party’s decision to contractKhan v NaidooThe appellant signed an agreement as surety for the debt of her son. She was under the impression that she was consenting to something completely differe...

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Irrelevant mistake: the mistake doesn’t result in dissensus this is because it didn’t affect the mistaken party’s decision to contract Khan v Naidoo The appellant signed an agreement as surety for the debt of her son. She was under the impression that she was consenting to something completely different. The appellant’s mistake would usually indicate an absence of consent on her part the court still held that she was bound to suretyship because she would have signed the document anyways even if she were aware of its true nature. Thus, proving that the mistake MUST influence a party’s decision to conclude a contract to be relevant to the question of possible dissensus.

The material mistake is a mistake that negates actual consensus between parties. A material mistake must exclude an element of consensus. When there’s unless it can be upheld on a secondary basis of reliance. A material mistake will usually be reasonable if caused by misrepresentation on the part of the asserter. It must be unacceptable in the eyes of the law for a mistake to be reasonable. sometimes the representation must be wrongful or contra bonos mores. A misrepresentation is either positive or negative. Allen v Sixteen Stirling Investments The plaintiff’s error as to the property he was purchasing was caused by the misrepresentation of the defendant’s agent. The agent misled the plaintiff b pointing out a different property to that stipulated in the deed of the sale that the plaintiff signed. The court found that the plaintiff’s mistake had been reasonable because it was caused by the misrepresentation of the defendant’s agent in pointing out the wrong property. (positive misrepresentation). If there are no animus contrahendi then there can be no consensus. For instance, the agreement was made in jest or it was merely intended as a social agreement (gentleman’s agreement) Mondop EDms v Kemp en De Beer The appellant’s representative signed a document that the respondent alleged to an undertaking to pay certain cash to the respondent. The appellant denied that the document contained such an undertaking and contested its liability. The court majority found that no contract between the parties had come into existence. The appellant’s representative didn’t intend to give an undertaking in terms of which the appellant would become the debtor of the respondent. The representative didn’t sign the document to incur contractual liability for the appellant.

Immaterial/ Nonmaterial mistake does not exclude the actual agreement between the parties because it doesn’t relate to an element of consensus. Consequently, in the case of this type of mistake, a valid contract will still rise but is still voidable if consensus has been obtained improperly through misrepresentation. It is typically referred to as an error in motive

Four classifications of mistakes Error in corporate – historically mistakes have been categorized according to this type/ the materiality of a mistake is determined on the type of mistake in question. Relevant case: Maresky v Morkel The respondent was under the impression that he was buying a property at site A because of the advert in the newspapers. The appellant’s agent did not point out that the property was situated on a different site. The court found that the respondent’s mistake was in corporate which inhibited his ability to consent to the contract

Error in negotio – this is a material mistake that relates to the true nature of the contract. The relevant case is khan v Naido but this type of error is relatively rare

Error in persona – this is usually a material mistake that involves the identity of the other party to the contract. Relevant case: Kok v Osborne The defendant believed that was selling his property to the plaintiff and another party. In reality, he was only contracting with the plaintiff who was the purchaser. The court found that the defendant was mistaken as to the identity of the party with whom he was contracting with which meant dissensus.

Error in substantia – this kind of mistake isn’t seen as a material mistake in our law. It is about an attribute or characteristic of the subject matter in the contract (object of performance). Relevant case Trollip v Jordaan The appellant purchased a farm from the respondent. The deed of sale had correctly set out the boundaries of the farm. The appellant was misled to believe that the farm includes more land than it does because the respondent’s estate agent had pointed incorrect farm boundaries. The court, however, found that the appellant’s mistake wasn’t in corporate and rather an error in substantial and thus not a material.

Doctrine of estoppel The doctrine of estoppel by representation is from English law. One party (estoppel raiser) has a reasonable belief in misrepresentation made by the other party (estoppel denier) and relies on his or her detriment. The estoppel raiser may holder the denier to the misrepresentation. They can prevent the estoppel denier from relying on the true state of affairs. Fawdon v Lelyfeld The owner of the racehorse hired it out to B and L. to avoid the Jockey club regulations. The agreement between the parties was to create an impression of a contract of sale but it was a lease contract, B and L got an ae receipt for the fake sum of 100 pounds to enable them to act as owners of the horse for their dealings with the club. However, they sold the horse to the defendant so when the true owner of the house claimed it from the defendant the defendant pleaded estoppel. The owner of the horse placed B and L in a position to represent themselves to the defendant as the owners of the horse. So, the court held that although the receipt was fake to deceive the club it still allowed to and L o present themselves as owners of the house to the public. The court upheld the fiction as if it were the truth.

Doctrine of quasi-mutual assent It contrasts the estoppel. It’s the basis of an actual contract, not a fictitious one. It argues the contractual liability to arises in the absence of consensus and requires a reasonable belief from one party (the contract asserter) induced by the contract denier that the latter had agreed to the contract in question. The contractual liability is established in reasonable reliance on the appearance of agreement or rather a reasonable belief in the existence of a consensus that was induced by the other party. Hodgson Bros v South African Railways The plaintiffs offered to sell a lorry to the defendant for 500 pounds. The defendant wrote back and indicated that they would take the lory if spare parts were included. The plaintiffs accepted these terms. After the plaintiffs received a telegram telling them that the defendant had omitted in their letter the price they were prepared to pay for the lorry and that was only 300 pounds. The plaintiffs adopted the stance that the defendant was bound to the contract to purchase the lorry for 500 pounds while the defendant repudiated any form o contracture liability. The court found that it may have been unfortunate for the defendant but having induced the erroneous belief in the minds of the plaintiffs they were bound whatever their actual intention may have been.

The iustus error doctrine This originates from the text with restitutio in intergrum on the grounds of reasonable error. This approach is like estoppel it’s not a theory of contractual liability. It functions as a corrective measure when there’s dissensus and provides that a party won’t be bound to an agreement if the part mistakenly gave their consent and if their mistake is material and reasonable. Once the contractor shows that there is consent from an objective view or that there is a common intention expressed then the contract denier

must prove that their mistake was both material and reasonable so that they can be absolved from liability in terms of the apparent contract. If the denier is successful in proving both then the contract is void but if they’re unsuccessful then they are contractually bound to the original terms of the contract.

Obiter dictum from National and Overseas Distributors Corporation Ltd v Potato Board “Our court allows a party to set up his own mistake in certain circumstances to escape liability under a contract that they’ve entered. But where the other party hasn’t made any misrepresentation and hasn’t appreciated the time of acceptance that his offer was being accepted under a misapprehension, the scope for a defence of unilateral mistake is narrow, if it exists at all. At least the mistake would have o be reasonable and it would have to be pleaded”.

Misrepresentation Definition: a pre-contractual statement that is false. This can be through words, conduct or silence. It can be done innocently or fraudulently overall it must have to lead a party to conclude the contract.

Reasonable reliance and mistake

What happens normally if the contract is void ab intio (it never existed from the begging) then there was evidence of a lack of consensus. Either there was unreasonable reliance/mistake. This is the usual effect. Looks at Dobs v Verin In Allen’s case, the aggrieved buyer couldn’t rely on the agreement cause the estate agent showed the buyer wrong property. There was factual confusion. The seller claimed that they bear no responsibility for any confusion we cause in the showing of the property. There is a clause within the contract. When there’s an error incoperaor an error for the subject matter. That clause does not affect because if the whole contract is void ab initio then the entire contract is dismissed as well as the clause in that said contract. It therefore doesn’t create a defence.

If the party only has an issue with one key fact but not material to the operation of the contract? The effect can be different, and the offending clause can be struck out and they can leave the rest of the contract. Please see the Compusource case. The insurance contract there was an unusual cancellation clause and then a payment of a lot of money as a premium. The court found that it was a trap clause that should’ve been explained and therefore there was unreasonable reliance. That clause was struck out, but the rest was kept so the insurance could be used in the matter. This is usually for error in negotio where one clause is the issue.

Signed documents? Usually, the cavit subscriptor applies. The objective declaration case is very strong because the person sighed unless unreasonable reliance can be shown. Unsigned documents? Caviot subscriptor rule can’t apply because it needs a signature. But there are lots of contracts that exist without a signature. There are contracts done by ticket like going to see a match, getting o the gautrain or going to a concert etc. its impossible to sign up every contracting party. They could put up a notice for the terms of use of service or the place so that the people are informed. You can also print it on the ticket. Or terms by reference like putting a sign up that say the facility or whatever are subject to terms on a website or written elsewhere, those are terms incorporated by reference. Google (social media platforms) has terms incorporated by reference. If the person who is enforcing a contract can prove that they have produced a ticket, written document that either have the terms or that there was an incorporation of terms by reference then there’s reasonable reliance and you will be held to the contract. 1. Did the person who received the ticket/sign/document know that there was writing or printing on the ticket. And is it reasonable to assume that they could know that those were terms. Yes? Then there’s reasonable reliance. 2. Could the party make it more evident that there were terms and that there wasn’t a trap. SA railways v McClaren is the unsigned documents case similar to Burger’s case(signed). McC left his bag at the railway cloakroom for safe keeping. He got a token from the operating officer and he assumed that the token informed him of which locker his bag was in. his bag was stolen, he was aggrieved, and he sued. The railways had a defense saying that the token had written that the use of this facility has certain claims that are behind the desk (terms incorporated by reference). Amongst those terms is one that says they are not liable for the loss or damage of the property left in the cloakroom. They relied on the token as it constituted as a ticket which is essentially a contract (since there was no signed document). Judgement: The court said it may reasonable to expect people to know that these types of services has certain terms and conditions. But ruled that handing someone a token without explaining the token and the token just has the number. The railway made no effort to inform the person to look at the terms behind the desk. It clearly claims create confusion about the purpose of the token. They would have normal assumptions for people looking after belongings would apply. So, in that case the court held that there was unreasonable reliance, the token was misleading and that this was a trap. Therefore, there was a contractual mistake and the railways couldn’t rely on that contract.

There’s a change in policy on trapping. More of an onus on banks and large retailers etc to explain their contracts to us especially if they are unusual or strange or to advertise those terms more vigorously. If not there’s more leeway to argue for unreasonable reliance or mistake in such cases. This approach has been adopted by the courts in the last 30 years and section 49(2) of the CPA. This act indicates the obligation of suppliers to explain usual, strange or complicated terms or clauses to their consumers. Please read Standard Bank v Dlamini. Relating to how its possible for someone who isn’t very well educated and wont understand the terms in the contract before signing and agreeing. This issue is fact and circumstance dependent because Dlamini was not well educated and so the onus

is greater to explain the complex contract. Please read Slipknot because if you’re educated, you’re expected to know what the contract is about and the possibility of you escaping is much harder.

Common mistake Both parties are mistaken about something vital that underpinned their entire contract. There’s no dispute about the nature of the contract or the essential terms of the contract or subject matter or the terms. The problem is the whole assumption/reason for attempting to contract is untrue. SA law says that because the purpose of the contract was fake and the whole contract was void. Because the contract was based on a material fact that was found to be false. Therefore, cannot be a binding contract between the parties. Its void ab inito Dickson motors v webberosomething. On page 111 -112 so please read. Webberhoser jnr entered into two separate agreements to buy two separate cars that are exactly the same make. Car A was bought from Dickenson car motors. Then he bought car B he bought from another dealer. He purchased these cars on credit. Mr W realized he couldn’t pay for either of the cars on credit, so he approached his father to exchange a car he has for the father’s vehicle. His father agreed to do a car swap and then they traded the cars. Then W jnr disappears with the father’s car and is not seen again. The father now has the vehicle in his possession and his son has stopped paying for his cars and Dickenson motors is first at trying to resolve this and get their payments. They get a reposition order from the court. They approach the father with this court order. The car then is repossessed. Mr W snr enters into a contract to pay off the debt from the car and then he can get the car back. Both parties agree. Then the other car dealership wants to repose. They found that the car actually belonged to the second car dealership and not Dickenson motor’s vehicle so everything the contract was based on was a lie. It was an agreement built on a false assumption and therefore a common mistake as dealership b was the only one entitled to reposes that car and to contract with Mr W snr. The SCA rued that the arrangement was a common mistake and therefore the whole agreement was void and Mr W snr was entitled to get his money back. The whole contract failed.

Rectification Applies only to contracts reduced to writing not oral contracts. It’s a good idea but in reality, sometimes, even if parties have common intention, the document can be mis reordered. Then you have a problem with the written document then the parties may rectify this mistake if it interferes with the contract. It about fixing a mis recording to reflect the true subjective intention of the parties. Law comes if there’s a dispute about the rectification. Then you must sort out what the true contract s then move to what needs to be fixed. Concept in liminae refers to proceedings that must be sorted out first before you can get to the main issue, sometimes rectification matters are in liminae. Only the document is fixed not the contract.

Requirements for rectification? SONAP case one of the parties wanted a rectification saying that the lease had the wrong amount of years. the other party denied 1. Can the party saying that there’s a mis recording, they must prove the true common intention of the contract and that the contract doesn’t reflect that. They must prove this with evidence. Previous documentation, video recording, voice recording etc to prove the common intention. 2. There are some contracts that don’t exists up front only when they’re written up like sales of land and suretyship agreements. Discussions held before are pre-contractual. In these circumstances its harder to have evidence and get an application to rectify. 3. If the mis recording affects the essential details or the identification of the parties. The parties will either be locked in or the contract is void because rectification is impossible 4. If the mis recording affects the not so essential details, then rectification can occur in SA law. The case Meyer v Merchants trust. There was a suretyship agreement. One party agrees to bind themselves as surety for a loan. Gabi and Mayr takes out a loan from merchants trust and MT need some security. Meyer binds himself as surety, in his personal capacity, for this loan. However, there are restrictions put in place, he is only prepared to undertake a limited suretyship amount of 250 pounds. This was found to be the true common intention of the parties but there was a mistake in the written agreement. The typist left a line out of the document. The mis reordered document now stated that if the loan went above 250 pounds his suretyship was discharged. The court ruled in favor of MT on the balance of probabilities. It was found there could be a rectification of the written agreement to reflect the true common intention.

Misrepresentation (from the podcasts) Improperly obtained consensus by misrepresentation It’s possible for a misrepresentation to cause dissensus as to the actual terms of the contract (the 3 errors listed above). Usually where the contract assertor is in the wrong/was the one misrepresenting the information. This is part of the requirements for unreasonable reliance (The Allen case about the property). If there are no disputes on the contract content, the subject of the part or what is on the document. But the precontractual misrepresentation creates an impression about the bargain you’re getting into that’s not true. This is all happening before the contract (precontractual misleading). For instance, for medical insurance and you lie about what your actual health is to get lower premiums ie you don’t have cancer. Then that would induce consensus, but the problem is that the pre-contractual statement was untrue. Void and voidable contracts? The outcome for this type of misrepresentation will result in the contract being voidable. Misrepresentation can be made innocently, fraudulently or negligently.

Misrepresentation fraud elements

Fraudulent misrepresentation requirements: There must be a representation of fact or serious opinion. In the case o...