Pacto de Contrahendo PDF

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Summary of pacto de contrahendo...

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Pacto de Contrahendo  Definition: A preliminary agreement to conclude the main contract in the future. There are always two contracts involved, the main contract and the pacto (which facilitates the formation of the main contract).  They are generally not enforceable in South African law, but there are two types that are recognised as valid: 1) Options 2) Contracts of preference  Options:  This is a contract to keep the main offer open, usually for a certain period of time, and this renders the main offer irrevocable for the duration of the stipulated period. Case: Venter.  It is a contract in its own right, which is independent from the main contract but is also linked to the offer in terms of the main contract. Thus, no valid offer in the main contract = no valid option.  For a valid option there must be: (A) The option must satisfy all requirements for a valid contract, including agreement, offer and acceptance. (B) The offer in the main contract must satisfy all the requirements for a valid offer. If the main offer is invalid, the option will fail because of lack of certainty.  Generally options do not need to comply with any formalities. If there are formalities required for the main contract, the same are required for the ancillary contract. Case: Hirschowitz.  If the main contract is accepted or rejected then the option falls away. If there is a stipulated time period and it passes, the offer lapses and falls away. If there is no stipulated period, it will lapse after upon a reasonable time.  If the grantor fails to honour their duty as per the option contract, there is a breach and normal remedies (upholding the contract, cancellation and damages).  To uphold the contract the option holder can get an interdict preventing the grantor from breaching or the holder may simply accept the main offer.  The option holder gets preference over a competing contract when the grantor has breached the contract, when it is a sale of a thing. If ownership has already been transferred to a third party, the holder cannot force the third party to return the thing as they do not have a real right to it. The holder may therefore only be able to claim damages from the option grantor.  Pre-emption Agreements:  It is a contract of preference and grants one party a preferential right to conclude a further contract with the other party. This confers a right on the grantee to be given preference to buy the merx should a certain trigger event occur, which is usually the grantor’s decision to sell.  There is no offer in terms of the main contract at the time of the conclusion of the contraction of pre-emption agreement.  There are two basic forms of preference: (1) if the trigger event occurs, the grantor will make the first offer to the grantee. This creates the ‘right of first refusal’. (2) If the trigger event occurs, the grantee will be given the first opportunity to make an offer to the grantor.  Requirements for a valid pre-emption contract:

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1) The content of the pre-emption agreement must be certain or ascertainable, even though the main contract may not be certain as yet. 2) The pre-emption contract should comply with the relevant formalities. Case: Hirschowitz (obiter) A negative duty is placed on the grantor of a pre-emptive contract, which means that they must refrain from doing anything that will frustrate the rights of the grantee. This can be enforced by the grantee by means of an interdict, which prevents the grantor from selling the thing to someone else. If there is a breach by the grantor, the grantee can elect to uphold or cancel the pre-emption contract. Enforcing a positive duty and claiming damages is problematic as these are generally unenforceable because of a lack of certainty. If the merx is already sold, then grantor will be party to two contracts of the exact same terms (namely the contract between the grantor and the third party, as well as the contract between the grantor and the grantee). The grantor will have no choice but to breach one of these contracts. The grantee is generally in a stronger position and will get preference over the third party. The grantee may thus get specific performance and the third party can settle for damages against the seller. However, if ownership of the property has already been transferred to the third party, then the grantee may claim damages from the grantor, unless the third party was aware of the contract of pre-emption. (Oryx mechanism) Final differences: + Option agreement: a firm offer for the main contract is already on the table and the option serves to keep this offer open for a certain amount of time. Pre-emption agreement: there is no offer for the main contract as yet. It requires both parties to act in order to form the main contract.

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