The Law of Contract: Semester 1 2022
Private Law 372
Table of Contents
1 INTRODUCTION.................................................................................................................................................................... 4
1.1 KEY CONCEPTS: THE CONTRACT AS AN AGREEMENT THAT CREATES OBLIGATIONS.......................................................................................4
1.1.1 The definition & features of the contract as an agreement that creates obligations: types of agreements......................4
1.1.2 The definition & features of obligations............................................................................................................................11
1.1.3 Sources of obligations & the position of the law of contract in the SA legal system........................................................13
1.2 THE DEVELOPMENT & SOURCES OF THE SA LAW OF CONTRACT...........................................................................................................15
1.2.1 The development of SA common law of contract..............................................................................................................15
1.2.2 Statutory law & the impact of the Constitution.................................................................................................................16
1.2.3 Indigenous, customary law................................................................................................................................................19
1.3 THE UNDERLYING (CONSTITUTIONAL) VALUES OF THE LAW OF CONTRACT...............................................................................................22
1.3.1 Introduction: distinguish....................................................................................................................................................22
1.3.2 Goals/ functions/ underlying values of the law of contract..............................................................................................22
1.4 THE RELATIONSHIP BETWEEN COMMON-LAW RULES OF CONTRACT LAW & CONSUMER LEGISLATION (CPA)..................................................26
1.4.1 Intro to CPA; its purpose & interpretation.........................................................................................................................26
1.4.2 Application of the CPA.......................................................................................................................................................27
1.4.3 Consumer rights: Chapter 2 of the CPA ‘Fundamental Consumer Rights’.........................................................................29
1.4.4 Enforcement of CPA...........................................................................................................................................................30
2 CONSENSUS AS A REQUIREMENT FOR CONTRACTUAL LIABILITY.......................................................................................... 32
2.1 OFFER & ACCEPTANCE AS AN INDICATION OF CONSENSUS...................................................................................................................32
2.1.1 Introduction.......................................................................................................................................................................32
2.1.2 The requirements for a valid offer.....................................................................................................................................32
2.1.3 The consequences of an offer............................................................................................................................................36
2.1.4 The termination of an offer................................................................................................................................................37
2.1.5 The requirements for acceptance......................................................................................................................................37
2.1.6 The consequences of acceptance.......................................................................................................................................41
2.2 PACTA DE CONTRAHENDO: OPTIONS & RIGHTS OF PREFERENCE............................................................................................................43
2.2.1 Option................................................................................................................................................................................43
2.2.2 Preference contract/ right of preference...........................................................................................................................50
2.3 PRE-CONTRACTUAL RELATIONSHIPS................................................................................................................................................ 59
3 CONTRACTUAL LIABILITY IN THE ABSENCE OF ACTUAL CONSENSUS.....................................................................................59
3.1 WHEN IS CONSENSUS ABSENT: THE INFLUENCE OF VARIOUS TYPES OF MISTAKE, ON CONSENSUS................................................................59
3.1.1 The meaning of mistake....................................................................................................................................................59
3.1.2 Effect of a mistake: depends on type of mistake...............................................................................................................60
3.2 WHEN IS THERE CONTRACTUAL LIABILITY EVEN THOUGH CONSENSUS IS ABSENT?.....................................................................................71
1
, 3.2.1 The subjective and objective theories of contractual liability...........................................................................................71
3.2.2 Doctrines that impose contractual liability in the absence of consensus..........................................................................77
3.2.3 Discussion of tutorial 1.......................................................................................................................................................98
4 RESCISSION OF AN EXISTING CONTRACT DUE TO IMPROPERLY OBTAINED CONSENT.........................................................102
4.1 GENERAL.................................................................................................................................................................................102
4.2 MISREPRESENTATION.................................................................................................................................................................103
4.2.1 Introduction.....................................................................................................................................................................103
4.2.2 Definition & elements of misrepresentation (depend on remedy)..................................................................................104
4.2.3 Remedies arising from misrepresentation:......................................................................................................................118
4.2.4 Excluding liability for misrepresentation.........................................................................................................................135
4.3 DURESS (“METUS”)...................................................................................................................................................................138
4.4 UNDUE INFLUENCE....................................................................................................................................................................150
4.5 OTHER CASES OF IMPROPERLY OBTAINED CONSENT: CONSUMER LAW..................................................................................................157
5 CONTRACTUAL CAPACITY [NOT PRESCRIBED].................................................................................................................... 166
5.1 DEFINITIONS............................................................................................................................................................................ 166
5.2 CAPACITY OF NATURAL PERSONS..................................................................................................................................................166
5.3 CAPACITY OF JURISTIC PERSONS...................................................................................................................................................168
6 FORMAL REQUIREMENTS (WRITING)................................................................................................................................. 169
6.1 INTRODUCTION.........................................................................................................................................................................169
6.2 STATUTORY FORMALITIES........................................................................................................................................................... 172
6.3 FORMALITIES IMPOSED BY PARTIES...............................................................................................................................................181
6.3.1 Formalities imposed by parties for concluding contract.................................................................................................182
6.3.2 Formalities imposed for variation of contract.................................................................................................................183
6.3.4 How do you escape from the Shifren straitjacket?..........................................................................................................187
6.4 THE ‘PAROL EVIDENCE’ RULE.......................................................................................................................................................195
6.5 RECTIFICATION......................................................................................................................................................................... 204
6.5.1 Introduction.....................................................................................................................................................................204
6.5.2 Requirements for rectification.........................................................................................................................................205
6.5.3 Link between rectification and the parol evidence rule...................................................................................................209
6.5.4 Link between rectification & formalities..........................................................................................................................210
7 POSSIBILITY OF PERFORMANCE......................................................................................................................................... 216
7.1 GENERAL RULE.........................................................................................................................................................................216
7.2 DISTINCTIONS.......................................................................................................................................................................... 217
7.3 MEANING OF IMPOSSIBILITY........................................................................................................................................................218
7.4 CONSEQUENCES OF IMPOSSIBILITY................................................................................................................................................222
7.5 PARTIAL IMPOSSIBILITY...............................................................................................................................................................222
7.6 TEMPORARY IMPOSSIBILITY.........................................................................................................................................................223
8 CERTAINTY OF PERFORMANCE.......................................................................................................................................... 224
2
, 8.1 GENERAL RULE.........................................................................................................................................................................224
8.2 APPLICATION OF RULE & PROBLEM CASES IN TERMS OF APPLICATION..................................................................................................225
8.2.1 Agreement aimed at concluding further agreement.......................................................................................................226
8.2.2 Vague language & gaps...................................................................................................................................................231
8.2.3 Contract of indefinite duration........................................................................................................................................232
8.2.4 Contractual mechanism to obtain certainty....................................................................................................................233
8.2.5 Contractual discretion awarded to one party..................................................................................................................234
8.2.6 Consumer protection.......................................................................................................................................................238
8.3 CONSEQUENCES OF UNCERTAINTY................................................................................................................................................238
9 LEGALITY........................................................................................................................................................................... 240
9.1 INTRODUCTION.........................................................................................................................................................................240
9.2 STATUTORY ILLEGALITY...............................................................................................................................................................241
9.3 COMMON-LAW ILLEGALITY......................................................................................................................................................... 243
9.3.1 Application of common-law public policy test for illegality.............................................................................................244
9.4 SPECIFIC EXAMPLES OF ILLEGALITY................................................................................................................................................254
9.5 CONSEQUENCES OF ILLEGALITY....................................................................................................................................................277
9.5.1 Introduction.....................................................................................................................................................................277
9.5.2 Valid but unenforceable...................................................................................................................................................278
9.5.3 Void & unenforceable......................................................................................................................................................279
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Private Law 372
Table of Contents
1 INTRODUCTION.................................................................................................................................................................... 4
1.1 KEY CONCEPTS: THE CONTRACT AS AN AGREEMENT THAT CREATES OBLIGATIONS.......................................................................................4
1.1.1 The definition & features of the contract as an agreement that creates obligations: types of agreements......................4
1.1.2 The definition & features of obligations............................................................................................................................11
1.1.3 Sources of obligations & the position of the law of contract in the SA legal system........................................................13
1.2 THE DEVELOPMENT & SOURCES OF THE SA LAW OF CONTRACT...........................................................................................................15
1.2.1 The development of SA common law of contract..............................................................................................................15
1.2.2 Statutory law & the impact of the Constitution.................................................................................................................16
1.2.3 Indigenous, customary law................................................................................................................................................19
1.3 THE UNDERLYING (CONSTITUTIONAL) VALUES OF THE LAW OF CONTRACT...............................................................................................22
1.3.1 Introduction: distinguish....................................................................................................................................................22
1.3.2 Goals/ functions/ underlying values of the law of contract..............................................................................................22
1.4 THE RELATIONSHIP BETWEEN COMMON-LAW RULES OF CONTRACT LAW & CONSUMER LEGISLATION (CPA)..................................................26
1.4.1 Intro to CPA; its purpose & interpretation.........................................................................................................................26
1.4.2 Application of the CPA.......................................................................................................................................................27
1.4.3 Consumer rights: Chapter 2 of the CPA ‘Fundamental Consumer Rights’.........................................................................29
1.4.4 Enforcement of CPA...........................................................................................................................................................30
2 CONSENSUS AS A REQUIREMENT FOR CONTRACTUAL LIABILITY.......................................................................................... 32
2.1 OFFER & ACCEPTANCE AS AN INDICATION OF CONSENSUS...................................................................................................................32
2.1.1 Introduction.......................................................................................................................................................................32
2.1.2 The requirements for a valid offer.....................................................................................................................................32
2.1.3 The consequences of an offer............................................................................................................................................36
2.1.4 The termination of an offer................................................................................................................................................37
2.1.5 The requirements for acceptance......................................................................................................................................37
2.1.6 The consequences of acceptance.......................................................................................................................................41
2.2 PACTA DE CONTRAHENDO: OPTIONS & RIGHTS OF PREFERENCE............................................................................................................43
2.2.1 Option................................................................................................................................................................................43
2.2.2 Preference contract/ right of preference...........................................................................................................................50
2.3 PRE-CONTRACTUAL RELATIONSHIPS................................................................................................................................................ 59
3 CONTRACTUAL LIABILITY IN THE ABSENCE OF ACTUAL CONSENSUS.....................................................................................59
3.1 WHEN IS CONSENSUS ABSENT: THE INFLUENCE OF VARIOUS TYPES OF MISTAKE, ON CONSENSUS................................................................59
3.1.1 The meaning of mistake....................................................................................................................................................59
3.1.2 Effect of a mistake: depends on type of mistake...............................................................................................................60
3.2 WHEN IS THERE CONTRACTUAL LIABILITY EVEN THOUGH CONSENSUS IS ABSENT?.....................................................................................71
1
, 3.2.1 The subjective and objective theories of contractual liability...........................................................................................71
3.2.2 Doctrines that impose contractual liability in the absence of consensus..........................................................................77
3.2.3 Discussion of tutorial 1.......................................................................................................................................................98
4 RESCISSION OF AN EXISTING CONTRACT DUE TO IMPROPERLY OBTAINED CONSENT.........................................................102
4.1 GENERAL.................................................................................................................................................................................102
4.2 MISREPRESENTATION.................................................................................................................................................................103
4.2.1 Introduction.....................................................................................................................................................................103
4.2.2 Definition & elements of misrepresentation (depend on remedy)..................................................................................104
4.2.3 Remedies arising from misrepresentation:......................................................................................................................118
4.2.4 Excluding liability for misrepresentation.........................................................................................................................135
4.3 DURESS (“METUS”)...................................................................................................................................................................138
4.4 UNDUE INFLUENCE....................................................................................................................................................................150
4.5 OTHER CASES OF IMPROPERLY OBTAINED CONSENT: CONSUMER LAW..................................................................................................157
5 CONTRACTUAL CAPACITY [NOT PRESCRIBED].................................................................................................................... 166
5.1 DEFINITIONS............................................................................................................................................................................ 166
5.2 CAPACITY OF NATURAL PERSONS..................................................................................................................................................166
5.3 CAPACITY OF JURISTIC PERSONS...................................................................................................................................................168
6 FORMAL REQUIREMENTS (WRITING)................................................................................................................................. 169
6.1 INTRODUCTION.........................................................................................................................................................................169
6.2 STATUTORY FORMALITIES........................................................................................................................................................... 172
6.3 FORMALITIES IMPOSED BY PARTIES...............................................................................................................................................181
6.3.1 Formalities imposed by parties for concluding contract.................................................................................................182
6.3.2 Formalities imposed for variation of contract.................................................................................................................183
6.3.4 How do you escape from the Shifren straitjacket?..........................................................................................................187
6.4 THE ‘PAROL EVIDENCE’ RULE.......................................................................................................................................................195
6.5 RECTIFICATION......................................................................................................................................................................... 204
6.5.1 Introduction.....................................................................................................................................................................204
6.5.2 Requirements for rectification.........................................................................................................................................205
6.5.3 Link between rectification and the parol evidence rule...................................................................................................209
6.5.4 Link between rectification & formalities..........................................................................................................................210
7 POSSIBILITY OF PERFORMANCE......................................................................................................................................... 216
7.1 GENERAL RULE.........................................................................................................................................................................216
7.2 DISTINCTIONS.......................................................................................................................................................................... 217
7.3 MEANING OF IMPOSSIBILITY........................................................................................................................................................218
7.4 CONSEQUENCES OF IMPOSSIBILITY................................................................................................................................................222
7.5 PARTIAL IMPOSSIBILITY...............................................................................................................................................................222
7.6 TEMPORARY IMPOSSIBILITY.........................................................................................................................................................223
8 CERTAINTY OF PERFORMANCE.......................................................................................................................................... 224
2
, 8.1 GENERAL RULE.........................................................................................................................................................................224
8.2 APPLICATION OF RULE & PROBLEM CASES IN TERMS OF APPLICATION..................................................................................................225
8.2.1 Agreement aimed at concluding further agreement.......................................................................................................226
8.2.2 Vague language & gaps...................................................................................................................................................231
8.2.3 Contract of indefinite duration........................................................................................................................................232
8.2.4 Contractual mechanism to obtain certainty....................................................................................................................233
8.2.5 Contractual discretion awarded to one party..................................................................................................................234
8.2.6 Consumer protection.......................................................................................................................................................238
8.3 CONSEQUENCES OF UNCERTAINTY................................................................................................................................................238
9 LEGALITY........................................................................................................................................................................... 240
9.1 INTRODUCTION.........................................................................................................................................................................240
9.2 STATUTORY ILLEGALITY...............................................................................................................................................................241
9.3 COMMON-LAW ILLEGALITY......................................................................................................................................................... 243
9.3.1 Application of common-law public policy test for illegality.............................................................................................244
9.4 SPECIFIC EXAMPLES OF ILLEGALITY................................................................................................................................................254
9.5 CONSEQUENCES OF ILLEGALITY....................................................................................................................................................277
9.5.1 Introduction.....................................................................................................................................................................277
9.5.2 Valid but unenforceable...................................................................................................................................................278
9.5.3 Void & unenforceable......................................................................................................................................................279
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