Contract B Lecture Notes PDF

Preview

Summary

Contract B Lecture NotesLecture 1Classification of terms 1The contents of a contract: chapter 10. Contains obligations that the parties undertake to perform. A contractual obligation creates personal rights and duties between the parties, enforceable by a right of action (10). The obligations are ge...

Description

Contract B Lecture Notes Lecture 1 Classification of terms 1 The contents of a contract: chapter 10. -

Contains obligations that the parties undertake to perform.

-

A contractual obligation creates personal rights and duties between the parties, enforceable by a right of action (10.2).

-

The obligations are generally identified through the terms of the contract (10.3).

Schematic Position (Petit). Puff Representation Terms (what have the parties specifically agreed on the terms of the contract).

Classification of terms 3 methods 1. Medieval classification (10.3.1) a. Essentialia b. Naturilia c. Incidentalia/ Acciddentalia Essentialia -

Terms essential for the classification of a contract as a particular kind of contract. (e.g., sale, lease).

Naturalia -

Terms that are attached by operation of law ( ex lege) to each contract of a particular kind. 1. Common law: can be excluded expressly by the parties. 2. Now… Statutory terms.

Incidentalia/ Accidentalia -

Terms the parties have agreed upon between themselves in excess of the other two categories.

Lecture 2 Classification of terms 2 2. The modern classification today a. Express terms; and b. Implied terms

Express terms: 10.3.2 -

Things expressly agreed upon between the parties, or written down, or incorporated by reference.

-

10.3.2.1 to 7.

Implied terms: 10.3.3 – implied terms are those terms not explicitly agreed upon by the parties, but which nevertheless form part of the contract. They may be implied by operation of law ( ex lege), by custom or trade usage, or from the facts surrounding the agreement of the parties (ex consensu). -

Divided out into two distinct types of implied term: 1. Terms implied by law 2. Unexpressed terms ‘implied’ between the parties [aka tacit].

-

Leading discussion- per Corbett AJA Alfred McAlpine v Transvaal Provincial Administration at 531-4. (In this case the court stipulated a tacit term to be ‘… an unexpressed provision of the contract which derives from the common intention of the parties, as inferred by the court from the express terms of the contract and the surrounding circumstances.’ Whether a contract contains such a term is a question of interpretation. Generally, a court would be very slow to import a tacit term into a contract, particularly where the parties have concluded a comprehensive written

agreement that deals in detail with the subject and where it is not necessary to give the contract business efficacy.)

1. Terms implied by law Naturalia -

Tend to be legal duties

-

Can be varied/ excluded by the parties ‘Derive from common law; trade usage or custom; or from statute

Custom ‘a custom is a particular rule applying to contracts which has existed either actually or presumptively from time memorial in a particular locality and has obtained the force of law in that locality, although technically being contrary to the general law of the land’ -

Applies geographically

-

Halsbury’s laws of England vol 12(1) para 601.

Trade usage -

A particular trade or industry that a particular thing or aspect be included in the contract even if no one mentions it.

-

Must be uniformly observed

-

Long-established

-

Notorious

-

Reasonable

-

Certain

-

Does not conflict with positive law

-

Does not conflict with an express term of the contract.

-

Golden Cape fruits (pty) ltd v Fotoplate (pty) ltd 1973 (2) SA 642 (c).

-

Coutts v Jacobs 1927 EDL 120.

Chapter 10 textbook

Obligations and terms Obligations -

An obligation is a legal bond between two or more persons. It comprises both a right and a duty. The debtor bears a duty to make the performance agreed upon, and the creditor has a right to claim performance. All contractual obligations give rise to personal rights and duties. In other words, the right arising from a contractual obligation is only enforceable against th other party to that obligation. This can be contrasted with a real right, which is enforceable against the world at large.

-

Obligations may be classified in various ways. These classifications overlap

Lecture 3 Classification of terms 3 2. Terms implied between the parties (tacit terms) 10.3.3.2 -

Terms which the parties must have had in mind as binding, agreed obligations, but which were obvious they did not ever articulate them expressly.

-

Derive from common intention of parties (express terms plus surrounding circumstances.), a matter of influence

Test: the “officious bystander” -

It is an imagined test that courts use to determine a tacit term.

-

It is a difficult test to satisfy (Wilkens).

-

See Alfred MaCalpine 531-533 referring to:

-

Reigate v Union Manufacture CO [1918] 1 KB 592 AT 605. (a tacit term can only be imported into a contract if it is necessary in a business sense to give efficacy to the contract.)

-

Shirlaw v Southern Foundries [1939]2 KB 206 AT 227.

-

If an officious bystander were to ask, “what about X?”, the parties would say, together: “of course that is part of our contract. It is something so obvious it applies without us needing to say so.” And if both parties say this in unison then there is a tacit term. Defining feature (MacAlpine 532-3 and Wilkens 136-17 and 1423)

Matter of necessary interference from express terms and surrounding circumstances

-

(bystander test). -

Cannot conflict with an express term.

-

Capable of clear, simple formulation.

-

Must satisfy the requirement of ‘business efficacy’

-

May concern actual or imputed consensus. (i.e., terms they thought about but found unnecessary to express and terms they would have definitely incorporated if they had thought about them.)

-

An example of a tacit term: elite electrical v the covered wagon restaurant.

Lecture 4 Classification of terms 4

3. Academic classification 1. Invariable terms [include essentialia and statutory terms]. 2. Express terms 3. Tacit terms 4. Residual terms (terms implied by law).

Tacit contracts 10.3.2.8 -

The inference of an entire contract between the parties.

-

Test: is the conduct of the parties capable of no other reasonable interpretation than that the parties are engaged in a contract of the terms alleged?

-

Main examples: vending-type; new leases, universal partnerships (LoLP).

Week 2 Lecture 5 Types of terms 1 Common types of contractual terms affecting the operation of a contract.

Warranties -

The contracting party assumes absolute or strict liability.

-

They guarantee that a particular state of affairs will occur 100% if not then they are liable to the terms. Types Express: Schmidt v Dwyer-Vines “I, the insured, guarantee that all vehicles left in the open must be locked up at all times out of business hours, and all keys will be removed and kept in a locked safe on the premises.”

Tacit: Wilkins; Scholtz Residual: “warrant against eviction invariable: CPA.”

Consumer Protection Act -

Section 56: A 6 month ‘warranty of quality’ imposed by law.

-

Cross-references section 55, which establishes a consumer right to safe, good quality goods.

-

Also, section 57: warranty on repairs.

Modus (Modal Clauses) 10.3.7.2 -

A term qualifying the other party’s rights or performances in some way.

-

Usually… to perform certain standards (performance clauses); or to use the subject matter in a certain way (e.g., restrictive covenants); or to refrain from using the performance in a particular way (donations).

-

Failure to comply= breach of contract

Dies (Time clause) -

Qualifies the time of performance by reference to a certain moment or event in the future.

-

Such clauses can be either: a. Suspensive; or

b. Resolutive.

Week 2 lecture 6 Types of terms 2 COMMON TYPES OF CONTRACTUAL TERM AFFECTING THE OPERATION OF A CONTRACT Conditions: 10.3.5 -

Qualify the operation of a contract with reference to an uncertain future event (but which is theoretically possible).

-

“I will give you R30 000 if you climb Mount Everest.” [Makes it an uncertain event, making it a conditional clause].

-

“Terms and conditions apply” [A condition is a special type of term which qualifies the operation of a contract in relation to an uncertain event].

Classification of conditions According to: 1. The effect of the fulfilment of the condition on the obligation 2. The nature of the event attached to the condition 3. Who has the power to fulfil the condition

1. To the effect of condition -

Most common form of classification

-

Can either be suspensive or resolutive [10.3.5.2]

Suspensive conditions -

condition suspends the contract and obligation until the occurrence of the uncertain future event.

-

AKA ‘conditions precedent.’

-

The obligation to perform is suspended until later.

-

An example is that “if you pass your matric and get an Aggregate, I will sponsor you for university”.

-

Park 2000 v Page [purchase of immovable property]. Making the contract subject to a) the securing of finance (A bond); or b) the successful sale of one’s previous home.

-

May have a dies attached to it.

-

Paragraph 2 of the judgement.

-

Park 2000 and waiver? 4th term

Resolutive -

Opposite of suspensive:

-

On the happening of the uncertain future event, the contract comes to an end.

-

AKA ‘conditions subsequent.’

-

“You must archive particular marks, or the sponsorship ends.”

2. Nature of the event (10.3.5.1) -

In this sense, the condition can either be positive [If you pass, I will sponsor] or negative [if you do not pass then I will not sponsor].

3. Power to fulfil (10.3.5.3) -

Can either be causal (not causal) [a condition that depends on its fulfilment on a third party], potestative [condition that depends on achievement on one of the other parties involved opposite of causal], mixed [combination of both causal and potestative].

Week 2 lecture 7 Types of terms 3 Common types of contractual term affecting the operation of a contract. Conditions continued… What happens if there is an interference with the fulfilment of a suspensive condition?

-

What if the donor can no longer sponsor, then they prevent or sabotage the fulfilment of the condition?

Fictional fulfilment -

It establishes a duty. A contracting party is under a duty/ obligation not to obstruct the fulfilment of a condition.

-

If a party deliberately prevents the condition from being fulfilled, then the condition will be deemed to be fulfilled- a legal fiction comes into effect.

-

The test is that of intent. The law will pretend as if the conditions were fulfilled and now the obligation is owing.

-

See Scott v Poupard 1971 (2) SA 373 (A). This was an agreement with relation to mining in Mauritius, He entered into contract with Scott from SA, but it was subject to some conditions, which were to establish a company and the company should negotiate and procure rights to mine in the Mauritian government. For reasons unclear Scott and Du Preez simply stopped participating in the venture, so it became that the conditions were not fulfilled. Poupard brought this before the SA government as a deliberate obstruction, fictional fulfilment, Poupard entitled to $100 000 fee!!

-

NOTE: remedy may not always be performance based and may end up being an award for damages.

-

But it is hard to show see Lekup v Wright 2012 (5) 246 (SCA).

Assumptions/ suppositions 10.3.7.1 -

Make the contract/ obligation depend on the truth of an assumption the parties have made about a past or present fact.

-

Its not a condition it is different.

Week 3 Lecture 8 Interpretation of contracts

Chapter 11

The focus: written contracts Theory:11.9 -

Joubert v Enslin 1910 AD 6 AT 37.

-

“Ascertain… the intention of the parties” (subjective).

-

But… in fact it is often said the approach is more objective. A court’s retrospective search for notional common intention through the words used by the parties.

-

Interpretation is the courts business.

-

Creates a paradox… “Subjective objectivity”!!

-

Was traditionally an area of law bedevilled by hierarchical “rules”, literalism, and terminological confusion.

-

And… fanatical tradition to limit what evidence could be led to interpret a contract.

-

But… recent developments have resulted in a shift in understanding of how we interpret contracts. (NB; textbook change).

Crucial starting point: the parol evidence rule 11.5.1 -

If the contract is ‘integrated’ into a written document, then it alone must be subject of interpretation to determine the obligations:

-

“When a contract has been reduced to writing, the written document is regarded as the exclusive memorial of the transaction between the parties. No extrinsic evidence may be brought to prove its terms, nor to contradict alter or amend the document.” [Union govt v Viannini (see Johnston v Leal AT 943)]

-

Kingswood Golf Estate case.

-

“The seller will cause the following to be constructed and/or furnished for the benefit of the proposed development and Homeowners Association, namely, 1.2.4 a clubhouse, duly furnished in accordance with the upmarket quality and nature of the proposed development.”

-

Can a post-contractual newsletter be used to aid interpretation of this clause?

-

The court said no that is extrinsic evidence, it is parole evidence, evidence produced textually long after the parties entered into contract. You cannot bring a post contractual newsletter.

The only exceptions to strict approach are… 11.5.2 -

Contract ‘partly written and partly oral.’

-

A tacit term.

-

Where there are questions about the foundation of the contract itself (mistake, improperly obtained consensus, legality)

-

Rectification.

Lecture 9 Interpretation 2 Modern principles 2010-2019: Approach to interpretation modernised and rearticulated. 1. The parol evidence rule still applies ( Kingswood). The document remains the focus of the interpretation, and you can’t lead evidence simply designed to contradict its terms. 2. But: the method in which the document is to be constructively interpreted to give it meaning has been modernised. Ekurhuleni Metro 2010 Para 12,13(Lewis JA): -

Court must interpret a contract in its context, including the ‘factual matrix’ in which the parties operated (IE broader context, or circumstances in which the contract was concluded).

-

Approach the exercise with “common sense and perspective.”

-

Must give the contract a “commercially sensible” meaning.

-

Adopt a “purposive approach.”

Natal Joint municipal pension Fund v Endumeni (2012)

Paras 17-26 (Wallis JA): -

“Common sense” approach. Interpretation through the eyes of ordinary readers (2010 SALJ 673).

-

Draw together approaches to contractual interpretation with statutory interpretation.

-

Use text, context of rest of contract, Factual Matrix, purpose in a ‘unitary’ way.

-

Interpretation is inherently an ‘objective’ exercise.

Bothma- Batho (2014) Paras 10-12 (Wallis JA): -

The old literalist approach to contractual interpretation in the 20 th century is no longer the law.

-

The words of the document the “starting point” but does not stop there.

-

Words must be considered in the light of “relevant and admissible context,” including the circumstances in which the contract came into being and its “purpose.”

-

Interpretation does not occur in stages, but is a “unitary exercise”

-

The common- law presumptions of interpretation are available to assist (see chapter 11.6.1- make a note yourself, revision of lt2).

Novartis (2016). Lewis JA- paras 27 to 31 -

The previous judgements and reference to an “objective approach” do not mean that the words/document “on paper” must be looked at in isolation.

-

The approach remains one which is dependant on text, context, purpose, and a consideration of the “factual matrix.”

-

The aim is, and remains, to determine what the “intention of the parties” was when they crafted the contract/clause in the circumstances of their case. This could include “contemporaneous documents; their conduct in negotiating the contract, and steps taken to implement the contract.” (Forms of “objective” evidence that demonstrate their common intention.)

-

But… “it is the role of the court, not witnesses, to interpret the document.”

Tshwane city/ Blair Atholl (2019) NAVSA ADP- paras 55- 71. -

Parol evidence rule has not been relaxed! Still plays a crucially important role.

-

The focus remains on interpreting the documenting in its appropriate context.

-

The courts are not going to get too involved with trying to reconcile objective and subjective theoretical approaches.

-

The acceptance that the process is somewhat paradoxical (see chapter 11.9 on “objective subjectivity”), But it is an effective practical approach- and one which does not differ from what is going on in other countries.

Tutorial Lecture Question 1 -

The issues involves implied terms

-

Is there a tacit term (unspoken/unexpressed terms but nevertheless apply either they thought about them)

-

The officious by standard test (Matter of necessary interference from express terms and surrounding circumstances (bystander test).

-

Cannot conflict with an express term.

-

Capable of clear, simple formulation.

-

Must satisfy the requirement of ‘business efficacy’ (Reigate v union manufacturing) [that a tacit term can only be imported into a contract if it is necessary in a business sense ...