Law of Contract study notes for Semester one and two PDF

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LAW OF CONTRACTEXAM NOTES2021IMPACT OF A TRANSFORMATIVE CONSTITUTION AND LEGISLATIONThe notion of the ContractContract as an agreement which is intended to create enforceable obligations A contract is an agreement between two or more parties, but not all agreements are contracts  The character tha...

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LAW OF CONTRACT EXAM NOTES 2021 IMPACT OF A TRANSFORMATIVE CONSTITUTION AND LEGISLATION The notion of the Contract Contract as an agreement which is intended to create enforceable obligations  

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A contract is an agreement between two or more parties, but not all agreements are contracts The character that distinguishes contracts from non-binding agreements is the intention to create legally enforceable obligations (animus contrahendi) o Where a party lacks animus contrahendi, but leads the other party into reasonable belief that he/she does intend to bind him/herself, the law will protect that reasonable belief and uphold the contract. Whether or not the parties intended their agreement to be legally binding in law depends on the available evidence

Legally binding agreements that are not contracts     

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The intention of a legally binding effect does not necessarily mean that there is a contract Some agreements are formed not to create obligations, but to destroy them through the transfer of rights Obligatory agreements o Where one or more obligations are created Absolving agreements o Where obligations are discharged or extinguished Real agreements o Where rights are transferred o Seen in movable and immovable property (sale of a house) The transfer of a thing through contract takes place by traditio (real/transfer agreement) where there is a mental element and a physical element to the transfer of ownership The sale itself does not transfer the rights but rather the cession

Legally binding agreements that are more than just contracts    

The primary purpose is not the creation of obligations and many of the normal laws of principles do not apply to it Cannot be made/unmade without the intervention of the State Marriage o Sui generis Judgement by consent o Parties settle the dispute and thereafter ask the court to make an order that reflects the judgement o Agreement carries judicial authority

Definition of a contract 

An agreement entered into by two/more persons with the intention of creating a legal obligation

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In addition, it should be an agreement which the law recognises as being binding on the parties Contracts create bilateral obligations Hutchinson D et al o An agreements entered into by two or more persons with the intention of creating a legal obligation/s Van de Merwe o Agreement made with the intention of creating an obligation/s Bhana D et al o Agreements between parties who have the intention to create legal rights and duties between them and which are legally binding on the parties

Requirements for a valid contract If one of the essentials are absent = contract is void 

Abinitio-Contracts which are null and void

Voidable 

Contract came into being but can be set aside due to some defect in the process of concluding the contract

Valid 

Enforceable

Implications of a void contract    

There are no rights and duties that arise from the contract Complete nullity Parties may disregard such a contract Courts may refuse to enforce such a contract

Consensus

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Capacity Formalities

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Legality

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Possibility

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Certainty

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There must be a meeting of the minds on all material aspects of their agreement Parties must have corresponding intentions regarding the contract and a serious intention of concluding the contract The parties must have the necessary capacity to contract Where the agreements is required to be in a certain form, these formalities need to be observed The agreement must be lawful and not prohibited by statute or common law, public policy and good morals The obligations must be capable of performance when the agreement is entered into The contract must have a definite or determinable content, so that the obligations can be ascertained and enforced

Nature of a contract  

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Juristic acts through which the law attaches consequences intended by parties Bilaterial/Multilateral legal act o There must be at least 2 persons o Unilateral promises are not recognised Entails reciprocal undertakings on one or both sides o To give something (dare)

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o To do something (facere) o To refrain from doing something (non facere) o May also be an undertaking that a certain state of affairs exists or has existed (warranty) o Performance is dependent on each other The promise will not be enforced unless it is supported by consideration o Something of value must be given/promised in return, as quid pro quo Freedom of contract All contracts are consensual and bonae fidei Can be concluded orally, in writing, tacitly or perhaps implied

Contract and the law of obligations The concept of obligation     

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Derived from a Latin word ‘obligare’ which means to ‘tie’ or ‘bind together’ Obligation is a legal bond(vinculum iuris) between two or more persons obliging the parties to perform An obligation comprises of rights and corresponding duties including services to be rendered by either of the parties Contractual obligations are self-imposed whereas delictual obligations are statutory imposed Legal obligations are personal ones as they bind only the parties o The right created by the obligation is a personal right (ius in personam) o As opposed to a real right (ius in rem) If the obligation is enforceable by action in the court of law, it is a civil obligation o Distinguished from a natural obligation The primary source of obligations are contract and delict o Other sources: Unjustified enrichment, negotiorum gestio, family relationships, wills and statutes

What is the law of contract?  

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The collection of legal rules which govern contracts Falls under private law o Rules that govern legal subjects in their personal capacity o Has become blurred through State involvement Forms part of the law of obligations

The purpose of the law of contract     

Ensures that parties maintain their undertakings Provides a legal framework in which people can transact Promotes legal and commercial certainty Promotes reasonableness and fairness in contractual dealings o By imposing standards that encourage good commercial behaviour Provides a workable system of rules that encourages private enterprise

Contract and the neighbouring branches of law

Naidoo v Birchwood Hotel 2012 (6) SA 170 

Entrance gate of Birchwood hotel fell onto Naidoo, a guest, when he was trying to exit the hotel premises.

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He sustained fractures of the lumbar spine and ankle and sued the hotel in delict for damages. He argued that the hotel had been negligent in that it had not properly maintained the gate; had not ensured the gate was safe for public use; and had not warned the public of danger posed by the gate. The hotel, basing its defence on the law of contract, relied on the disclaimers it had posted at the gate and around the premises which Naidoo would have seen. It also relied on the fact that he signed the register upon the reverse which were printed the various terms and conditions including an exemption clause.

Contractual Obligations   

Those duties that each party is legally responsible for in a legal contract of agreement In a contract, each party exchanges something of value On both sides of the agreement, each party has various obligations connected with the exchange

Moral Obligations  

An obligation arising out of considerations of what is wrong and right An obligation arising out of ethical motives or mere conscientious duty which is unconnected with any legal obligation

Natural Obligations    

Has no legal basis and does not give rise to any action to enforce its performance Cannot be enforced in courts Based on equity, morality and natural law Should be voluntary

Civil Obligations  

Viniculum juris – one which binds in law May be enforced in a court of law

Contract and Delict 

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A delict is a wrongful and blameworthy conduct that causes harm to a person o Obliges the wrongdoer to compensate the injured party o Within limits, parties are free to determine the nature and content of the obligations that regulate their relationship  Done by negotiating the terms of the contract  Any breach of these terms might entail legal consequences o You must prove all the elements of a delict to have a delictual claim in law  HARM sustained by the plaintiff  CONDUCT on part of the defendant which is wrongful  CAUSAL CONNECTION between the conduct and the plaintiff’s harm  FAULT/BLAMEWORTHINESS on the part of the defendant Similarities o Breach in contract and delict are both results and legal consequences o Both are species of the word genus ‘wrongful conduct’ in private law o Both involve payment of damages as compensation o The same conduct can give rise to concurrent liability Differences

Contract Contractual obligations are voluntarily assumed by the parties themselves.

Delict Delictual obligations are imposed by law irrespective of the will of the parties.

Contractual duties are specific in nature. The law attaches the consequences.

Imposes obligations in accordance with the general societal norms of reasonableness.

Contractants determine the nature and content of the obligations that regulate their relationship. There is freedom of contract.

Contract and Unjustified Enrichment     

Enrichment occurs when there is a shift of wealth from one person’s estate to anothers without good cause. Enrichment liability concerns only economic benefit in SA. A valid contract provides a causa for the receipt of a benefit. Serves the “domineering position” of the law of contract over rival branches of the law Law of contract is generally aimed at achieving the objectives contemplated by the contract either in the real sense or by delivering the economic equivalent. Enrichment MUST be unjustified

Contract and the Law of Property            

Law of property deal with physical things, corporeal and incorporeal Law of contract is concerned with interpersonal relationships arising from an agreement Law of property is concerned with real and limited real rights. Real rights can be enforced against the whole world. Personal rights can be enforced only against the person who should perform Law of property consists of rules that regulate the legal relationship of legal subjects with regard to a specific legal object. Property refers to anything with monetary value that is capable of forming an asset in a person’s estate. It includes personal rights Commercial transactions involve both contractual obligations and proprietary aspects The contract is the underlying reason for the transfer Where ownership has passed without a proper cause (sine causa) o Enrichment action to cover the property If ownership has not passed o Transferor recovers the property with rei vindication Legator v McKenna Inc and Another v Shea and Others 2010 (1) SA 35 (SCA) o Invalidity of the underlying contract does not affect transfer

Event giving rise to the obligation. Content of the obligation. Nature of the remedy.

Source of the obligation.

Contract

Delict

Enrichment

Agreement to make the performance. To make the promised performance. Actual performance/Compensa tion Self-imposed

Wrongful conduct that causes harm. To avoid causing harm. Compensation for harm caused.

Unjustified shift of wealth from one estate to another. To return the enrichment.

Imposed by law

Imposed by law

Development of the modern notion of contract Roman Law 

Under roman law, we are dealing with 6 centuries of development

Return of the enrichment.

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o Progressing from strict formality of the early stricti iuris contracts o To the sophisticated informality of the later consensual contracts, based on good faith Had law of contracts rather than a law of contract o Never developed a fully generalised theory of contracts Recognised a number of distinct categories of contracts o Real contracts: Created by agreement + delivery of the thing o Verbal contracts: Most important was stipulation, created by the use of prescribed, formal words to express a promise o Literal contracts: Created by recording an agreed debt in a ledger o Consensual contracts: Created by mere agreement Fundamental principle was ex nudo pacto non aritur action o Informal agreements/bare pacts give no rise to action

Roman-Dutch law  

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Roman Dutch writers completed the process of generalisation Influenced by o Canon Law o Mediaeval commercial law known as the Law Merchant o Germanic Customs Disgarded the subtle distinction of the Roma Law of contracts and Accepted as the basis of Roman-Dutch law of contract o The fundamental principle that, as a matter of good faith, all serious agreements ought to be enforced (pacta sunt servanda) Many writers o Continued to assert that a iusta causa was a necessary element of contract o Gave rise to a dispute in early SA law

Causa and consideration: a celebrated dispute 

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Late 19th century, SCA, under influence of Lord Henry de Villiers CJ o Adopted the view that by iusta causa, as a valuable consideration, in the English sense of quid pro quo o A serious promise should not be enforced as a contract unless the other party gave or promised something in return This interpretation was challenged by Mr Justice Kotze Later rejected by the Transvaal Supreme Court under Innes CJ in Rood v Wallach Dispute was settled 50 years after it started o Appellate Division in Conradie v Rossouw o Court ruled that the English doctrine of consideration forms no part of our law in SA o Any serious and deliberate agreement made with the intention of creating a legal obligation, is a binding contract o Dominant view of the court identified causa as ‘the ground or reason of the contract – that which brought it about’  Another view was that it meant ‘the particular transaction out of which the obligation is said to arise, be it sale, hire, donation or any other contract of handeling’ Saambou Nasionale Bouverrenging v Friedman o Jansen JA questioned this tendency to allow iusta causa to be absorbed into the requirements of legality and animus contrahendi o And the concept was unnecessarily employed to deny liability in a subsequent case

Cases   

Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interest (Pty) Ltd (183/17) [2017] ZASCA 176 Roazar CC v The Falls Supermarket (232/2917) [2017] ZASCA 166 Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC)

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Barkhuizen v Napier 2007 (5) SA 323 (CC) Brisley v Drotsky 2002 (4)SA 1 (SCA) Beadica 231 CC v Trustees,Oregon Trust 2020 (5) SA 247 (CC)

BASIS OF A CONTRACT Introduction 

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Modern day law of contract o Based on the idea that all contracts are consensual o There must be a genuine meeting of minds on all aspects Important questions o What is meant by an agreement? o Does South African law adopt a subjective or objective approach to the formation of contract Gareth Cliff v MNET o Was a presenter on a radio station and known to be very outspoken on a number of issues o Question:  On air on radio, GC had made certain remarks which some of the listeners did not take kindly to and felt aggrieved by the remarks made.  As a result, MNET who had employed GC on idols, decided to not hire him as a judge any longer and the matter was taken to court o Judge Caroline Nickels in the High Court:  Ruled that it was disingenuous of MNET to refuse the existence of the 2016 Idols contract with GC, however, the judgement restores the contract between GC and MNET.  MNET was entitled to terminate the contract with a week’s notice  Emphasised that the case was about the contractual relationship between the parties and was not about hate speech or racist remarks.  Judge said that GC only needed to show through the court that he had a prima facie right with regards to the correspondence between them even though there was no oral agreement, there was still a tacit agreement.  It was highly improbable that GC would appear on any of MNET’s adverts for 2016 if the company were of the view that no binding agreement had been reached  The conduct of both the parties were clear and unequivocal  Like MNET, GC depended on his brand and being axed from being labelled as a racist has untold reputational harm to him whereas the Idols brand would not suffer in the same way and it cannot be ignored that Cliff’s value as an Idols judge has been his tendency to shock and provoke and this is an image that MNET has apparently supported and overlooked until now o The case did not deal with the remarks made but rather the fact that MNET did not want GC to be a judge and ended up in a contractual dispute. o The contract would not have been concluded before the show would be aired and would only be followed later on. There was still however, a mutual agreement. o Because it was a contractual dispute, GC argued the following:  The precedent that had been set, he was entitled to remuneration because MNET had already been aware that GC does have a tendency to shock and provoke and had supported and overlooked until some members of the community complained. o On one hand, there was no contract that was signed as of yet, although GC had already participated as an idols judge  The contract would follow to the middle of the TV program which identified that there was an anticipation for the contract to be signed

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MNET argued that there was no contract that was signed and therefore, there could be no dispute but GC argued on the other hand  There was a reasonable expectation that the contract would be forthcoming Question was whether we are dealing with a subjective or an objective agreement

Actual subjective agreement/consensus  

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Concursus animorum Subjective consensus of this nature exists when, the parties involved: o Seriously intend to contract o Are of one mind as to the material aspects o Conscious of the fact that their minds have met There needs to be specifics with regards to the contract Consensus is achieved through a process of communication o Declaration of wills by the parties The communication between A and B has 3 aspects: o True intention in A’s mind o The expressed intention o The perceived intention

Apparent objective agreement  

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Expressed or perceived intention o Result that the message sent or intended to send is not actually the same message received Divergence may be due to a hidden mental reservation on A’s side o He said one thing but secretly intended something different o A may have expressed his intention badly as a misunderstanding In such cases there is dissensus and the question is whether the contract has come into existence

Theories of contract  

They attempt to explain the rules of contract. They should protect certain agreements by providing enforcement mechanisms and try to come to a situation where they can apply these various situation to a contract and identify what parties initially intended. Will theory o Generally accepted in SA law o Consensus exists because parties are in actual agreement due to corresponding intention o Based on their will  Declaration theory o Polar opposit...