This legal opinion looks at whether a valid contract of sale was concluded between Shane
and the dealership, if there may have been a problem with the way the mode of
acceptance took place. The focus is on whether the failure to follow the mode of
acceptance cancels the agreement, and how the reliance theory may affect the outcome.
The mode of acceptance is simply the method by which an offer can be accepted. If the
offer specifies a particular mode of acceptance, it is generally required that the acceptance
follows that mode for the contract to be valid. Things to look at is where the offer
specifically states what the mode of acceptance is, if yes then this should be adhered to
for example “this contract will only be valid if Mr. Green signs surety-ship”.
In Pillay v Shaik 2009 (4) SA 74 (SCA) (Appeal, 2008) the Supreme Court of Appeal had
to decide whether a contract was valid despite the sellers not signing the written
agreement. The Court applied the reliance theory and found the sellers liable and the
contract valid because of their conduct, such as providing the required documents and
negotiations that made the purchaser believe that a valid contract was in place. Same can
be seen with Shane, especially after they paid the purchase price and thereafter was still
questioned if he wanted extra additions, namely the sun roof which had also been paid for.
If extra questions were asked such as if he wanted the extras Shane could reasonably
believe that a valid contract was in place. In the above mentioned case the Court made a
decision stated that contractual liability can occur when one party's conduct leads another
party to reasonably believe a contract exists, even if there was no actual agreement on
paper.
If there is an absence of express terms with regards to the mode of acceptance then a
valid contract can be implied based on the nature of the transaction but if a specific
method is mentioned then it must be followed for the contract to be valid. (Eiselen, 2016)
In Constantia Insurance Co Ltd v Compusource (Pty) Ltd 2005 (4) SA 345 (SCA) (Appeal,
2005) the Court made the conclusion that a reasonable person in the position of
Constantia's representatives would not have thought that Rust had actually agreed to the
second clause concerned. Constantia's appeal was dismissed with costs. In this case the
reliance theory did not work.
The reliance theory has had a significant impact within the law because generally most
contracts are based on a fully signed agreement, however with the reliance theory it can
be seen that a contract can still be found to be valid based on reasonable reliance. The
reliance theory acts as a secondary possibility for contractual liability. 1
If Shane did not comply with the prescribed mode of acceptance, then the contract would
not be valid however there was no official prescribed mode of acceptance and the
behaviors of the manager of the dealership led Shane to believe that the contract was
binding.
1
Study Guide: Law of Contract Page 10
and the dealership, if there may have been a problem with the way the mode of
acceptance took place. The focus is on whether the failure to follow the mode of
acceptance cancels the agreement, and how the reliance theory may affect the outcome.
The mode of acceptance is simply the method by which an offer can be accepted. If the
offer specifies a particular mode of acceptance, it is generally required that the acceptance
follows that mode for the contract to be valid. Things to look at is where the offer
specifically states what the mode of acceptance is, if yes then this should be adhered to
for example “this contract will only be valid if Mr. Green signs surety-ship”.
In Pillay v Shaik 2009 (4) SA 74 (SCA) (Appeal, 2008) the Supreme Court of Appeal had
to decide whether a contract was valid despite the sellers not signing the written
agreement. The Court applied the reliance theory and found the sellers liable and the
contract valid because of their conduct, such as providing the required documents and
negotiations that made the purchaser believe that a valid contract was in place. Same can
be seen with Shane, especially after they paid the purchase price and thereafter was still
questioned if he wanted extra additions, namely the sun roof which had also been paid for.
If extra questions were asked such as if he wanted the extras Shane could reasonably
believe that a valid contract was in place. In the above mentioned case the Court made a
decision stated that contractual liability can occur when one party's conduct leads another
party to reasonably believe a contract exists, even if there was no actual agreement on
paper.
If there is an absence of express terms with regards to the mode of acceptance then a
valid contract can be implied based on the nature of the transaction but if a specific
method is mentioned then it must be followed for the contract to be valid. (Eiselen, 2016)
In Constantia Insurance Co Ltd v Compusource (Pty) Ltd 2005 (4) SA 345 (SCA) (Appeal,
2005) the Court made the conclusion that a reasonable person in the position of
Constantia's representatives would not have thought that Rust had actually agreed to the
second clause concerned. Constantia's appeal was dismissed with costs. In this case the
reliance theory did not work.
The reliance theory has had a significant impact within the law because generally most
contracts are based on a fully signed agreement, however with the reliance theory it can
be seen that a contract can still be found to be valid based on reasonable reliance. The
reliance theory acts as a secondary possibility for contractual liability. 1
If Shane did not comply with the prescribed mode of acceptance, then the contract would
not be valid however there was no official prescribed mode of acceptance and the
behaviors of the manager of the dealership led Shane to believe that the contract was
binding.
1
Study Guide: Law of Contract Page 10
