PVL3702 LAW OF CONTRACT ALL ASSIGNMENTS WITH MEMOS FROM

PVL3702 LAW OF CONTRACT ALL ASSIGNMENTS WITH MEMOS FROM . Question Read the judgments in Cape Explosive Works Ltd v South African Oil and Fat Industries; Cape Explosive Works Ltd v Lever Brothers (South Africa) Ltd 1921 CPD 244, Bal v Van Staden 1902 TS 128 and A to Z Bazaars (Pty) Ltd v Minister of Agriculture 1975 (3) SA 468 (A). Use the cases to identify the relevant examinable section(s) in the prescribed textbook. Study the relevant section of the textbook. Use these cases and textbook to answer the following question: S, who lives in Upington, sends P, who lives in Cape Town, a letter by post in which she offers to sell him her (S’s) motorcycle, a collector’s piece, for R100 000. She states in her letter that her offer will expire on 1 February. P accepts S’s offer by letter which he posts on 8 January. The postal service is disrupted by a strike which starts on 6 January and only ends on 1 February. During this period no post is delivered. S receives the letter only on 7 February and only reads it on the next day. Did a valid contract of sale arise between S and P and, if so, where and when was the contract concluded? Advise P fully. Substantiate your advice and refer to relevant case law. Do not discuss option contracts. TOTAL [10] Answer Preliminary steps relating to basic research: In order to identify the law, which you should apply to the problem, you were asked to: (1) read three court judgments; and (2) identify the relevant section(s) in the prescribed textbook. (1) Read three cases In Cape Explosive Works Ltd v South African Oil and Fat Industries; Cape Explosive Works Ltd v Lever Brothers (South Africa) Ltd 1921 CPD 244, the expedition theory was introduced into South African law. In terms of this theory, if certain requirements are met, a contract is concluded where and when the letter of acceptance was posted by an offeree. In this case, two 4 offers were made from different companies, to the offeree. The offeree was based in the Cape where it received the offers. The offerors sent their offers by letter through post from Gauteng and Durban, where they were based respectively. In response to both offers, the offeree sent letters of acceptance which were posted at Somerset West in the Cape, and addressed to the offerors. These acceptance letters were then subsequently received and read in Gauteng and Durban respectively, by the respective offerors. The court had to address the issue of where and when the contracts were concluded. The offerors argued that each contract was concluded in the relevant province where and when the offerors received and read the offerees acceptance. The court disagreed and held that the contracts were concluded at Somerset West, where the letters of acceptance were posted. From the judgment in Bal v Van Staden 1902 TS 128, it seems that the expedition theory can only apply when the postal services are operating normally. It emerges from A to Z Bazaars (Pty) Ltd v Minister of Agriculture 1975 (3) SA 468 (A), that the expedition theory will not apply where the offeror has expressed a contrary intention, either expressly or tacitly. (2) Identify the relevant section(s) in the textbook If the “Table of Cases” is consulted at the end of Hutchison and Pretorius (eds) The Law of Contract in South Africa 3 rd ed (Oxford Cape Town 2017), you will find the pages where Cape Explosive, Bal and A to Z are discussed in the textbook. Only those relevant pages which are prescribed for you to study are referred to below. The relevant page on which Cape Explosive appears in the text, is on page 60. The page mainly deals with postal contracts relating to the expedition theory. Accordingly, it explains the framework of how a contract may be concluded by post, and thereafter there is a discussion of this case and the court’s ruling. In this case the expedition theory was successfully applied and the court held that the contract was concluded when and where the letter of acceptance was posted. This does not automatically mean that the expedition theory will apply to the facts in your question. Whether or not the expedition theory applies, will be based on the application of the law to the facts presented. Bal appears in footnote 61 on page 60 as authority for the requirement that the postal service should be operating normally for the expedition theory to apply. Therefore, where there is a disruption of such postal services, like in times of war, the expedition theory would probably not apply. A to Z appears in footnote 66 on page 61 as authority for the requirement that, for the expedition theory to apply, the offeror must not have indicated a contrary intention, expressly or tacitly. This theory will therefore not apply if the offeror prescribes a different mode of acceptance to be complied with by the offeree, for the contract to be concluded. Regarding the above cases, the relevant sections of the textbook are pages 60-61 where the application of the expedition theory relating to postal contracts is discussed. The requirements to be met for the expedition theory to apply, are also set out. The application of this theory impacts on determining whether a contract has been concluded, and if so, where and when the contract has been concluded (or put another way, where and when the acceptance took effect). Considering that where and when an acceptance takes effect is applicable to this discussion, means that pages 58-59 are also relevant to the facts in the question. PVL3702/201/2/2020 5 Identifying the problem The question is whether P accepted S's offer in time and S and P thus reached consensus and concluded a valid contract of sale. To be more specific, the question relates to the legal rules pertaining to when and where the acceptance takes effect (Hutchison and Pretorius (eds) The Law of Contract in South Africa 3 rd ed (Oxford Cape Town )). Discussing the relevant law applicable to the problem AND applying the law to the facts of the problem In our problem S made an offer to sell her motorcycle in a letter sent to P, by post. In this letter she stated that her offer will expire on 1 February. An offer which has a time limit for acceptance lapses automatically if it is not accepted within the prescribed time period (Hutchison and Pretorius Contract 56). P accepted S's offer in a letter that he posted on 8 January, but S only received the letter and read it after the due date for acceptance. The issue is thus whether P timeously and validly accepted the offer on or before 1 February. The general rule is that a contract only comes into being when the offeror knows that his/her offer has been accepted (Hutchison and Pretorius Contract 59). The theory which explains this rule is the information theory. This general rule gives effect to one of the requirements of subjective consensus (Hutchison and Pretorius Contract 14) which is the primary basis of contractual liability in accordance with will theory (Hutchison and Pretorius Contract 20). If we apply the general rule, it is clear that the offer expired before acceptance, but first it has to be decided whether the general rule (information theory) applies, or whether a recognised exception to the general rule will apply. There are exceptions to the general rule (Hutchison and Pretorius Contract 58-61). One such exception is where the offeror stipulates a different method of acceptance. In this regard, the offeror may dispense with the need for acceptance being communicated to him/her or he/she can indicate in the offer that the contract will come into being at an earlier stage (Hutchison and Pretorius Contract 59-60). This may be expressly indicated in the offer itself, but this is not the case in our problem. It may also be implied from all the circumstances, the language of the offer itself and the nature of the contract. None of these implied instances are possibly applicable to the facts presented in the question. Another exception to the general rule pertains to the expedition theory. Where an offer is made through the post it is assumed (a legal fiction thus), if certain requirements are met that the offeror authorised acceptance by post, as well as indicated that the contract is concluded as soon as the acceptance is posted (Kergeulan Sealing and Whaling Co v Commissioner of Inland Revenue 1939 AD 487; Cape Explosive Works Ltd v South African Oil and Fat Industries; Cape Explosive Works Ltd v Lever Brothers (South Africa) Ltd 1921 CPD 244; Hutchison and Pretorius Contract 60-61). The expedition theory explains the rule pertaining to postal contracts (Hutchison and Pretorius Contract 59-61). There are four requirements which must be proved for the expedition theory to apply (see Hutchison and Pretorius Contract 61). Three of these requirements are met, in that S made the offer by post; S did not indicate a contrary intention expressly or tacitly, (A to Z Bazaars (Pty) Ltd v Minister of Agriculture 1975 (3) SA 468 (A)); and the transaction/contract was of a commercial nature (the anticipated sale of a motorcycle). 6 However, one of the requirements have not been met, as the facts in the question indicate that the postal services were not operating normally (see Hutchison and Pretorius Contract 61). One of the reasons for giving recognition to the application of the expedition theory is because of the general reliability of the post office, as it is presumed that a properly addressed letter will reach its destination (Hutchison and Pretorius Contract 60). However, when the postal services are disrupted, the expedition theory would probably not apply (Bal v Van Staden 1902 TS 128). In this question, the postal services were disrupted due to a strike, therefore the letter of acceptance addressed to S did not reach S timeously. When the letter of acceptance was posted by P on 8 January, the strike had already commenced and it clearly had a negative impact on the general reliability of the postal services, as the said letter did not reach its destination timeously. Accordingly, because one of the requirements, being that the postal services must be operating normally (Bal v Van Staden), cannot be met, the expedition theory does not apply to this question. Because an exception (relating to postal contracts in accordance with the expedition theory) does not apply, as a consequence, the general rule (in terms of the information theory) must out of necessity apply: S had to be informed that her offer was accepted before the time of termination of her offer on 1 February, and this did not transpire. Accordingly, by the time she read P’s letter on 8 February, her offer had already lapsed. Therefore, on 8 February, there was neither a valid offer nor a legally effective acceptance in place to form an enforceable contract between the parties. The giving of appropriate advice P’s acceptance was not legally effective, because S did not become aware of it timeously. Therefore, a valid contract of sale was not concluded between S and P. Total: [10] PVL3702/201/2/2020 7 1.2 Assignment 02 Question 1 X advertises her car for sale in the newspaper for the amount of R40 000. Y reads the advertisement, phones X and accepts her advertisement to sell her car. Which statement most probably reflects the CORRECT legal position? 1 X and Y concluded a contract because an offer and acceptance exists. 2 X made an offer to the public at large. 3 Y is the offeree. 4 The advertisement is an invitation to do business. 5 Option 1, 2 and 3. (1) Answer 4. Discussion Option 4 is correct. The general rule in our law is that an advertisement constitutes merely an invitation to do business rather than an offer. See Hutchison & Pretorius (eds) The Law of Contract in South Africa 3rd ed (Oxford Cape Town 2017) 53; see also Eiselen GTS et al Law of Contract study guide for PVL 3702 (University of South Africa) 23. Applying this to the facts above, means that the advertisement is an invitation to do business, which allows Y (as offeror) to make an offer, and X (as offeree) can decide whether to accept the offer. X and Y did not conclude a contract, because even if there was an offer from Y, there is no evidence of X accepting an offer. Therefore option 1 is incorrect. X did not make an offer to the public, as it was merely an invitation to do business. Accordingly, option 2 is incorrect. X is the offeree, therefore, option 3 is incorrect. It follows that option 5 is also incorrect. Question 2 X and Y conclude a contract under circumstances wherein X threatened Y. This threat may be used to prove an element of 1 duress. 2 undue influence. 3 misrepresentation. 4 contractual illegality. 5 material mistake. (1) Answer 1. 8 Discussion You have to look at what the requirements of each option are to answer this question. The presence of a threat is one of the elements that must be proved to establish duress (Hutchison and Pretorius Contract 140-144; Eiselen et al Study Guide 59-60). None of the other options requires the existence of a threat to be proven as a requirement. Question 3 Tony, a petrol attendant, sells heroin to Samuel for R1 000. Tony delivers the heroin to Samuel, but Samuel refuses to pay. Section 5 of the Drugs and Drug Trafficking Act 140 of 1992 provides that no person shall deal in (a) any dependence-producing substance or (b) any dangerous dependence-producing substance or any undesirable dependence-producing substance, while section 4 prohibits the possession of such substances. Section 13 makes the contravention of both sections 4 and 5 a crime. Heroin is furthermore an undesirable dependence-producing substance. Tony approaches a court to assist him, either for the payment of R1 000 from Samuel or the return of the drugs. The material focus of this dispute rests on which requirement relating to the validity of the agreement between Tony and Samuel? 1 Consensus 2 Formalities 3 Possibility 4 Legality 5 Certainty (1) Answer 4. Discussion The contract entered into between Tony and Samuel is illegal because it is in contravention of sections 4 and 5 of the Drugs and Drug Trafficking Act 140 of 1992. The material focus therefore is likely to be on the legality requirement, which impacts on the validity of the agreement. Accordingly, option 4 is correct. See Hutchison and Pretorius Contract 187-189, 199-201. It follows, that options 1,2,3 and 5 are incorrect. Question 4 Assume the same facts as in question 3. Most relevant to the dispute would be to consider the application of 1 the ex turpi rule and the par delictum rule. 2 statutory illegality and restraint of trade agreements. 3 public interest and rectification. 4 the par delictum rule and capacity of the parties to contract. 5 the ex turpi rule and stipulatio alteri. (1) PVL3702/201/2/2020 9 Answer 1. Discussion Based on the facts, the question does not relate to restraint of trade agreements, rectification, capacity of the parties to contract, and stipulatio alteri. It follows that options 2, 3, 4, and 5 are incorrect. Option 1 is the only combination that relates to the consequences of an illegal contract, and therefore it is the correct answer. These consequences apply in accordance with the the ex turpi rule and the par delictum rule, in circumstance where the illegal contract is deemed void (see Hutchison and Pretorius Contract 199-201). Therefore, the first issue to address is whether the illegal contract between Tony and Samuel is also void. In terms of the Act, dealing in drugs (heroin) is prohibited, therefore a contract of sale for drugs is illegal. Where a statute expressly states that such a contract is void, or is of no force or effect, then clearly this will be the case. In the facts of the question, there is no mention that the statute expressly renders a contract of this nature to be void. Therefore, it needs to be considered if the legislator impliedly intended that such a contract must be null and void. If it was impliedly intended to be a nullity, then the contract will be void. To determine if the legislator impliedly intended the contract to be void, the cumulative effect of a number of factors must be considered (see Hutchison and Pretorius Contract 188, for a discussion of these factors). When these factors are applied to the facts in the question, then it appears that the legislator impliedly intended that the illegal contract between Tony and Samuel, be rendered void. The motivation for this is that the legislator clearly prohibited the dealing and possession of undesirable dependence-producing substances like heroin to deter members of the public from being exposed to the intake and harmful effects of this drug. To validate such a contract will therefore bring about the harm that the statute is directed against, which is an indication that the legislator intended the contact between Tony and Samuel to be void. In terms of the Act, Tony’s conduct constitutes a crime (dealing and being in possession of an undesirable dependenceproducing substance). The Act does not merely serve to protect the revenue of the state, as the prohibition of dagga is intended to protect the health of all members of society from the harmful effects of this undesirable substance. As this entails protecting a public interest, is a further indicator that the legislator intended the contract between Tony and Samuel to be void. Nullifying the contract will definitely not cause greater inconvenience and injustice, therefore the contract should be deemed void. Having established that the contract between Tony and Samuel was both illegal and void, the next it is appropriate to look at the consequences of a contract that is void for illegality. These consequences are that, based on the ex turpi rule, an illegal contract is void and that no contractual obligations arise out of it, which is relevant to this question. Where a contract is void in terms of an illegal contract, restitution of what was performed may possibly be claimed, based on an unjustified enrichment claim. However, where the parties are equally morally guilty, the par delictum rule can operate to prevent restitution from taking place. As Tony has already performed by delivering the heroin drugs to Samuel, he may want to claim restitution of this performance. Therefore, the par delictum rule is also relevant to this question. Accordingly, the 10 application of both rules, the ex turpi rule and the par delictum rule are applicable to this question. Therefore option 1 is correct. See Hutchison and Pretorius Contract 199-201. Question 5 Assume the same facts as in question 3. The court hearing this dispute is likely to find that 1 Tony can claim R1 000 contractual damages from Samuel. 2 Tony will be granted an order for specific performance for the return of the heroin. 3 Tony’s request for the return of the heroin will fail because both parties were equally morally guilty. 4 Tony’s claim for a R1 000 from Samuel will succeed, but his claim for the return of the heroin will fail because the contract between both parties was only partially illegal. 5 In order to achieve justice between man and man, Samuel should pay Tony half of the claim, which amounts to R500. (1) Answer 3. Discussion As alluded to above, the contract entered into between Tony and Samuel is illegal because it is in contravention of sections 4 and 5 of the Drugs and Drug Trafficking Act 140 of 1992. This means that the contract is void due to illegality. The first consequence of a void contract due to illegality is that the contract cannot be enforced. This is in accordance with the the ex turpi rule, which always applies and cannot be relaxed. Therefore, contractual damages and a specific performance order based on the illegal contract cannot be granted. This means that options 1 and 2 are incorrect. Where a contract is void, but there has been performance, restitution should generally be granted in principle. However, the par delictum rule provides that where two parties are equally morally guilty, the one who is in possession is in the stronger position and in such circumstances, this rule will prevent restitution from taking place. Both Tony and Samuel are most likely to have been aware of the illegality of buying and selling heroin drugs and therefore they are both equally morally guilty. As Samuel is in possession of the drugs, the enforcement of the par delictum rule is likely to prevent Tony from reclaiming the heroin, because of the equal moral guilt of both parties. This is likely to be the courts finding, therefore, option 3 is correct. Because this is a case of equal moral guilt of both parties, the court will not be inclined to relax the par delictum rule to achieve justice between man and man. Therefore option 5 is incorrect. The entire agreement is illegal, and as such, it is not partially illegal. Accordingly, option 4 is incorrect. See Hutchinson and Pretorius Contract 181, 190-192. PVL3702/201/2/2020 11 Question 6 X places an advertisement in the newspaper in which he offers to sell his car, a Porsche Carrera, for R800 000. X states that the Porsche is a 1995 model in the advertisement, while it is in fact a 1994 model which has been registered for the first time in 1995. X knows that this statement in the advertisement is untrue. Y reads the advertisement, phones X and concludes a contract of sale with X. The statement in the advertisement regarding the year model amounts to 1 fraud. 2 mere puffing. 3 a dictum et promissum. 4 a guarantee in the contract. 5 both fraud and a dictum et promissum. (1) Answer 5. Discussion X knowingly made a false statement in the advertisement regarding the year model of the Porche. This statement does not amount to mere puffing because it goes beyond singing the praises of the Porche (see Hutchison and Pretorius Contract 123). The statement is not mere puffing, as it amounts to a misrepresentation (see the discussion in the next paragraph regarding this). Option 2 is thus incorrect. Option 1 and option 3 are correct. Option 1 is correct because the statement complies with the requirements for fraudulent misrepresentation (Hutchison and Pretorius Contract 129). There was a false statement which X knew to be false, and intended readers to act upon and which indeed induced Y to conclude a contract with X. Option 3 is also correct because the statement complies with the definition of a dictum et promissum (Hutchison and Pretorius Contract 123). The statement was made during negotiations, bearing on the quality of the Porche (because it related to the year model) and was not mere puffing, as it went beyond mere praise and commendation. It was a material statement because it induced Y to conclude the contract with X. As options 1 and 3 are correct, this means that option 5 is correct. Based on the facts, option 4 is incorrect because the false statement in the advertisement never became a term in the contract of sale (Hutchison and Pretorius Contract 121-2). 12 Question 7 John agrees with Michael, that Michael will paint John's holiday home at the coast for R30 000. Unbeknown to either of them the house had been destroyed in a storm the previous day. This is a case of 1 mutual mistake. 2 supervening impossibility of performance. 3 impossibility of performance. 4 an obligation subject to a resolutive condition. 5 an obligation subject to a suspensive condition. (1) Answer 3. Discussion Option 1 is incorrect because both John and Michael are not mistaken about each other’s intentions or are not at cross-purposes (Hutchison and Pretorius Contract 84). They both agreed on the painting of John’s holiday home for R30 000. Option 2 is incorrect. Supervening impossibility of performance only becomes relevant to consider, when a valid contract has been concluded and the objective impossibility only arises after the conclusion of the contract. In this scenario, it became impossible to paint the house before the agreement was reached between the parties, and not after they reached their agreement. See Hutchison and Pretorius Contract 216, 395. Option 3 is correct since it is objectively impossible to paint a house that has been destroyed. This impossibility already existed when the contract was concluded. Where performance is already objectively impossible when the parties conclude an agreement (which is applicable to this scenario), this is a case of impossibility of performance. See Hutchison and Pretorius Contract 213-214. Option 4 is incorrect because there is no term in John and Michael’s agreement that determines that the performances come to an end if an uncertain future event does or does not occur (Hutchison and Pretorius Contract 260-261). Option 5 is incorrect as John and Michael did not agree that the contract to paint the holiday home will only be enforceable if an uncertain future event does or does not occur. (Hutchison and Pretorius Contract 260-261). PVL3702/201/2/2020 13 Question 8 X and Y conclude a contract, in terms of which X rents a house from Y for R2 000 a month until she finds work in Cape Town. The contract is subject to a 1 suspensive condition. 2 resolutive condition. 3 suspensive time clause. 4 resolutive time clause. 5 modus. (1) Answer 2. Discussion The rental contract will run until X finds work in Cape Town, and if this happens, the obligations will then come to an end. This clause is thus a resolutive condition, as it is uncertain whether X will find work in the future in Cape Town. This also means that it is not a time clause because it is not certain that X will find work in Cape Town. See Hutchison and Pretorius Contract 260. Option 2 is thus correct and options 1, 3 and 4 are incorrect. The clause is not modus, because it is not a term that places a duty on X or Y to do something in the future (Hutchison and Pretorius Contract 262). Option 5 is thus incorrect