Unit 2: General Principles of the Law of Contract
Introduction to Contract Law •
⑯
Auctions
Contract: an agreement (based on consensus between parties with contractual - With reserve: No obligation to accept the highest bid.
capacity, and meeting requirements of legality, physical possibility, and sometimes - Without reserve: Highest bid must be accepted.
formalities) made with the serious intention of creating a legal obligation •
⑯
Options: Right to accept an offer within a set time.
• Negative Option Marketing: Generally prohibited by the CPA.
Legal Obligations
⑯
Def: a recognized duty enforced by law between legal subjects. It gives rise to CPA on Offers
rights and corresponding duties. •
⑯
Displayed prices must be honoured unless there is an obvious error.
Eg: A seller’s obligation to deliver goods upon receiving payment. •
⑯
Consumer must be treated honestly and fairly.
Types of Legal Obligations Conditions and Terms
1. Civil Obligations: Enforceable by law (e.g. contractual obligations). • Essentialia: Core elements of a contract.
⑯
2. Natural Obligations: Recognized by law but not legally enforceable (e.g. moral •
⑯
Naturalia: Terms automatically included by law.
obligations). •
⑯
Incidentalia: Additional terms agreed by parties.
•
⑯
Suspensive vs Resolutive Conditions:
Sources of Legal Obligations - Suspensive: Suspends obligation until condition occurs.
• Go
Contract - Resolutive: Ends obligation when condition occurs.
•
Go
Delict (wrongful act) •
⑯
Assumption vs Guarantee:
•
Go
Statute - Assumption: A belief about a future event.
•
Go
Other juristic facts (e.g. unjustified enrichment) - Guarantee: A promise that a fact or condition will occur.
Transfer of Rights and Duties Consensus Theories (Conclusion of Contract)
Cession: Transfer of personal rights from cedent to cessionary. Declaration theory: Acceptance is valid when declared.
Delegation: Transfer of duties from one party to another (requires creditor’s Expedition theory: Valid when posted.
consent). Reception theory: Valid when received.
Assignment: Simultaneous transfer of both rights and duties (tripartite agreement) Information theory: Valid when the offeror becomes aware.
• Electronic contracts: Valid when acceptance is received (per ECTA s22).
Formation of the Contract
⑯
Requirements for a Valid Contract Improperly Obtained Consensus
1. Consensus (true agreement) •
⑯
Mistake: Must be reasonable and material.
2. Contractual Capacity •
⑯
Misrepresentation: False statement inducing contract.
3. Legality •
⑯
Duress: Threat of harm induces contract.
4. Physical Possibility and Certainty •
⑯
Undue Influence: Exploitation of relationship to gain unfair advantage.
5. Formalities
2. Contractual Capacity
1. Consensus Def: The legal ability to form intent and understand consequences in a contract.
True consensus exists when: Categories
•
⑯
Parties have animus contrahendi (serious intention to contract). No Capacity – Infants (under 7), insane persons, intoxicated persons.
•
⑯
Their wills correspond and create legal consequences. Limited Capacity – Minors (7–18), insolvents, some married persons.
Full Capacity – Most adults.
Types of Consensus
•
⑯
True Consensus – reached expressly or by conduct Minors’ Contracts
• Assumed Consensus – implied by parties
• With assistance: Valid and binding.
⑯
⑯
• Consensus ex lege – imposed by law or trade usage
• Without assistance: Voidable (‘limping contracts’).
⑯
⑯
Offer and Acceptance •
⑯
Ratification possible on turning 18 or by guardian.
Offer: Clear and complete expression of willingness to contract. Married Persons
Acceptance: Unqualified agreement to the terms. •
⑯
In community of property: Consent needed for certain contracts.
•
⑯
If a counter-offer is made, the original offer is terminated. •
⑯
Out of community of property: Full capacity retained.
Special Offers Insolvency
Public Offers: May constitute real offers (e.g. reward cases like Bloom v American •
⑯
Insolvent persons may not contract independently without trustee's consent.
Swiss Watch)
, I
3. Legality Remedies for Breach of Contract
• Must not contravene law, public policy or good morals. 1. Specific Performance
-• Examples of illegal contracts • Court order to fulfil obligations.
·
• Not granted if performance is impossible or impractical.
- Selling of drugs
• Not suitable in cases involving trust (e.g. employment).
- Contracts with enemy subjects
2. Cancellation
- Agreements violating statues like the NCA
• Ends contract completely.
Consequences of Illegality • Available if breach is material or time is of the essence.
• Ex turpi causa: No action arises from illegal contract. 3. Damages
·
• Par delictum rule: If both are at fault, neither may claim relief. • To compensate for actual loss.
• May be claimed with or without cancellation.
4. Physical Possibility and Certainty
• Must be foreseeable, proven, and financial (no emotional damages).
Physical Possibility
• General Damages: Naturally flow from breach.
• Must be objectively possible at the time of contract. • Special Damages: Must be specifically proven.
• Example: Selling a car that’s already destroyed unknowingly. 4. Interdict
Certainty • Court order preventing further breach or compelling reversal of breach.
5. Penalty Clauses
• Performance must be determinable.
• Governed by the Conventional Penalties Act 15 of 1962
• Unclear or vague terms = void for uncertainty.
• Section 2(1): Cannot claim both penalty and common-law damages unless
5. Formalities
agreed.
• Agreed Formalities: If parties agree, must be followed. • Section 3: Courts can reduce excessive penalties.
·
•
•
•
Statutory Formalities: Required by law for validity (e.g. sale of land).
Non-compliance: Leads to invalidity or unenforceability.
CPA Influence: Contracts must be written in plain language.
Breach of Contract and Remedies
Forms of Breach of Contract
1. Mora Debitoris (Debtor’s Delay)
• Debtor delays performance.
• Performance must still be possible.
• Fault is not required.
• Mora ex re: Due date is missed.
• Mora ex persona: No date – demand is necessary.
2. Mora Creditoris (Creditors Delay)
• Creditor refuses or delays cooperation.
• Performance must be due and properly offered
3. Positive Malperformance
• Performance is defective or incomplete.
• Includes both action and failure to refrain.
4. Repudiation
• Party clearly indicates they won’t perform.
• Can be explicit (words) or implicit (conduct).
• The innocent party may accept or reject repudiation.
5. Prevention of Performance
• A party makes performance impossible through fault.
• Must be intentional or negligent.
-
Introduction to Contract Law •
⑯
Auctions
Contract: an agreement (based on consensus between parties with contractual - With reserve: No obligation to accept the highest bid.
capacity, and meeting requirements of legality, physical possibility, and sometimes - Without reserve: Highest bid must be accepted.
formalities) made with the serious intention of creating a legal obligation •
⑯
Options: Right to accept an offer within a set time.
• Negative Option Marketing: Generally prohibited by the CPA.
Legal Obligations
⑯
Def: a recognized duty enforced by law between legal subjects. It gives rise to CPA on Offers
rights and corresponding duties. •
⑯
Displayed prices must be honoured unless there is an obvious error.
Eg: A seller’s obligation to deliver goods upon receiving payment. •
⑯
Consumer must be treated honestly and fairly.
Types of Legal Obligations Conditions and Terms
1. Civil Obligations: Enforceable by law (e.g. contractual obligations). • Essentialia: Core elements of a contract.
⑯
2. Natural Obligations: Recognized by law but not legally enforceable (e.g. moral •
⑯
Naturalia: Terms automatically included by law.
obligations). •
⑯
Incidentalia: Additional terms agreed by parties.
•
⑯
Suspensive vs Resolutive Conditions:
Sources of Legal Obligations - Suspensive: Suspends obligation until condition occurs.
• Go
Contract - Resolutive: Ends obligation when condition occurs.
•
Go
Delict (wrongful act) •
⑯
Assumption vs Guarantee:
•
Go
Statute - Assumption: A belief about a future event.
•
Go
Other juristic facts (e.g. unjustified enrichment) - Guarantee: A promise that a fact or condition will occur.
Transfer of Rights and Duties Consensus Theories (Conclusion of Contract)
Cession: Transfer of personal rights from cedent to cessionary. Declaration theory: Acceptance is valid when declared.
Delegation: Transfer of duties from one party to another (requires creditor’s Expedition theory: Valid when posted.
consent). Reception theory: Valid when received.
Assignment: Simultaneous transfer of both rights and duties (tripartite agreement) Information theory: Valid when the offeror becomes aware.
• Electronic contracts: Valid when acceptance is received (per ECTA s22).
Formation of the Contract
⑯
Requirements for a Valid Contract Improperly Obtained Consensus
1. Consensus (true agreement) •
⑯
Mistake: Must be reasonable and material.
2. Contractual Capacity •
⑯
Misrepresentation: False statement inducing contract.
3. Legality •
⑯
Duress: Threat of harm induces contract.
4. Physical Possibility and Certainty •
⑯
Undue Influence: Exploitation of relationship to gain unfair advantage.
5. Formalities
2. Contractual Capacity
1. Consensus Def: The legal ability to form intent and understand consequences in a contract.
True consensus exists when: Categories
•
⑯
Parties have animus contrahendi (serious intention to contract). No Capacity – Infants (under 7), insane persons, intoxicated persons.
•
⑯
Their wills correspond and create legal consequences. Limited Capacity – Minors (7–18), insolvents, some married persons.
Full Capacity – Most adults.
Types of Consensus
•
⑯
True Consensus – reached expressly or by conduct Minors’ Contracts
• Assumed Consensus – implied by parties
• With assistance: Valid and binding.
⑯
⑯
• Consensus ex lege – imposed by law or trade usage
• Without assistance: Voidable (‘limping contracts’).
⑯
⑯
Offer and Acceptance •
⑯
Ratification possible on turning 18 or by guardian.
Offer: Clear and complete expression of willingness to contract. Married Persons
Acceptance: Unqualified agreement to the terms. •
⑯
In community of property: Consent needed for certain contracts.
•
⑯
If a counter-offer is made, the original offer is terminated. •
⑯
Out of community of property: Full capacity retained.
Special Offers Insolvency
Public Offers: May constitute real offers (e.g. reward cases like Bloom v American •
⑯
Insolvent persons may not contract independently without trustee's consent.
Swiss Watch)
, I
3. Legality Remedies for Breach of Contract
• Must not contravene law, public policy or good morals. 1. Specific Performance
-• Examples of illegal contracts • Court order to fulfil obligations.
·
• Not granted if performance is impossible or impractical.
- Selling of drugs
• Not suitable in cases involving trust (e.g. employment).
- Contracts with enemy subjects
2. Cancellation
- Agreements violating statues like the NCA
• Ends contract completely.
Consequences of Illegality • Available if breach is material or time is of the essence.
• Ex turpi causa: No action arises from illegal contract. 3. Damages
·
• Par delictum rule: If both are at fault, neither may claim relief. • To compensate for actual loss.
• May be claimed with or without cancellation.
4. Physical Possibility and Certainty
• Must be foreseeable, proven, and financial (no emotional damages).
Physical Possibility
• General Damages: Naturally flow from breach.
• Must be objectively possible at the time of contract. • Special Damages: Must be specifically proven.
• Example: Selling a car that’s already destroyed unknowingly. 4. Interdict
Certainty • Court order preventing further breach or compelling reversal of breach.
5. Penalty Clauses
• Performance must be determinable.
• Governed by the Conventional Penalties Act 15 of 1962
• Unclear or vague terms = void for uncertainty.
• Section 2(1): Cannot claim both penalty and common-law damages unless
5. Formalities
agreed.
• Agreed Formalities: If parties agree, must be followed. • Section 3: Courts can reduce excessive penalties.
·
•
•
•
Statutory Formalities: Required by law for validity (e.g. sale of land).
Non-compliance: Leads to invalidity or unenforceability.
CPA Influence: Contracts must be written in plain language.
Breach of Contract and Remedies
Forms of Breach of Contract
1. Mora Debitoris (Debtor’s Delay)
• Debtor delays performance.
• Performance must still be possible.
• Fault is not required.
• Mora ex re: Due date is missed.
• Mora ex persona: No date – demand is necessary.
2. Mora Creditoris (Creditors Delay)
• Creditor refuses or delays cooperation.
• Performance must be due and properly offered
3. Positive Malperformance
• Performance is defective or incomplete.
• Includes both action and failure to refrain.
4. Repudiation
• Party clearly indicates they won’t perform.
• Can be explicit (words) or implicit (conduct).
• The innocent party may accept or reject repudiation.
5. Prevention of Performance
• A party makes performance impossible through fault.
• Must be intentional or negligent.
-
