LAW OF CONTRACT
LEARNING UNIT 1 I THE NOTION AND NATURE OF A CONTRACT I
□ LO1: Differentiate between the notion of a contract and other legally binding
agreements;
□ LO2: Explain the requirements and the key characteristics of a valid contract;
□ LO3: Compare the Law of Contract to other branches of the Law of
Obligations;
□ LO4: Set out the historical development of the modern contract;
□ LO5: Discuss the impact of the Constitution on the South African Law of
Contract (with reference to the prescribed articles);
□ LO6: Explain the basis and dual basis of a contract in modern law;
□ LO7: Explain the cornerstones of contract which include, freedom of contract,
sanctity of contract, good faith and privity of contract.
□ LO8: Discuss the interplay between the competing values;
□ LO9: Discuss the interaction between the Common Law of contract, the
Consumer Protection Act 68 of 2008 and the Constitution in analysing the
validity of a contractual term.
LEARNING UNIT 2 I FOUNDATION OF CONTRACT I
□ LO1: Discuss the legal effect of an offer;
□ LO2: Apply the requirements for the valid formation and termination of an
offer to a practical scenario;
□ LO3: Explain the legal position with regard to offers to the public, in the form
of advertisements, tenders, etc.;
□ LO4: Apply the requirements for valid acceptance to when and where
acceptance takes effect in a practical contract scenario using the theories of
acceptance;
□ LO5: Explain the different types of pacta de contrahendo and the legal
position of the parties involved in such agreements.
□ LO6: Discuss the effect of a mistake on the validity of a contract;
□ LO7: Differentiate between material and non-material mistake and the
contractual consequences of both;
□ LO8: Differentiate between the subjective and the objective approach to
mistake and their respective limitations and how the two approaches have
been reconciled in terms of the reliance theory in terms of a practical case
scenario;
□ LO9: Explain the contractual impact of a common mistake;
□ LO10: Identify the way in which parties may be able to apply for rectification
in some cases of mistake.
□ LO11: Apply the elements of misrepresentation of the different types of
misrepresentations that can take place to a set of facts;
□ LO12: Discuss the remedies available for improperly obtained consensus and
how voidable contracts operate;
□ LO13: Explain an omission as a misrepresentation and the relationship
between misrepresentation and mistake;
, □ LO14: Explain the basis on which damages may be claimed for
misrepresentation;
□ LO15: Discuss the nature, elements and remedies for: duress; undue
influence; and bribery;
□ LO16: Explain the impact of the CPA on the elements of duress and undue
influence.
LO 1: Differentiate between the notion of a contract and other legally binding agreements. (p.4-6)
Notion of Contract:
Contract is essentially an agreement to create enforceable obligations.
The difference between contracts and non-binding agreements is that with contracts, there’s a serious
intention to create legally enforceable obligations (animus contrahendi).
i. obligationary agreements (whereby one or more obligations are created) arecontracts.
Distinguish between contract and other legally binding agreements:
The fact that parties seriously intend their agreement to have binding legal effect does not necessarily mean
that it is a contract. This is because not all binding agreements are contracts. Some agreements are
intended not to create but to destroy obligations or to honour an obligation by transferring rights.
Legally binding agreements that are not contracts include:
i. real agreements (whereby rights are transferred)
ii. absolving agreements (whereby obligations are discharged or extinguished)
Contracts may also be more than just contracts:
Some legally binding agreements that create obligations for the parties cannot be regarded merely as
contracts because they contain elements giving them another dimension altogether, or elevating them into a
separate category.
- Most obvious example of such an agreement is marriage.
Definition of contract:
An agreement entered into by two or more persons with the intention of creating a
legal obligation or obligations and which the law recognises as being binding on the parties.
LO 2: Explain the requirements and the key characteristics of a valid contract.
Requirements for a Valid Contract:
1. Consensus: The minds of the parties must meet (or at least appear to meet) on all material aspects of
their agreement;
2. Capacity: The parties must have the necessary capacity to contract;
3. Formalities: Where the agreement is required, unusually, to be in a certain form (for example, in writing
and signed), these formalities must be observed;
4. Legality: the agreement must be lawful- that is, not prohibited by statute or common law;
5. Possibility: the obligations undertaken must be capable of performance when the agreement is entered
into; and
6. Certainty: The agreement must have definite or determinable content, so that the obligations can be
ascertained and enforced.
, LO 2: Explain the requirements and the key characteristics of a valid contract.
However, even if contract is valid ab initio (at beginning), it does not mean it may not be challenged
subsequently.
E.g. of how a contract can be challenged: impossibility of performance; unlawfulness; breach of contract;
misrepresentation, duress, undue influence, bribery; [All these pre- suppose a valid contract] →, therefore,
contract voidable]
- Material and reasonable mistake will have the result that a contract is void (ab initio)
since it excludes the basic requirement for the existence of contract, namely consent
Nature or characteristic features of contract:
• A contract is a juristic act
(that is an act to which the law attaches the consequences intended by the parties.)
• A conclusion of a contract is bilateral
(There must be at least two parties to an agreement, and our law does not recognise a
unilateral promise as binding.)
• A contract entails promises or undertakings on one or both sides.
• The undertaking may be to make a certain performance, immediately or at a future
date: to give something (dare); to do something (facere); or to refrain from doing
something (non facere).
Alternatively, it may be an undertaking that a certain state of affairs exists, or has existed; this is known as
warranty.
• Most contracts entail reciprocity, in that the one party’s performance is promised inexchange for the
other party’s performance.
• A promise will not be enforced unless supported by consideration.
• There is freedom of contract which means that parties can agree to anythingpossible and lawful.
• All contracts are consensual since it is based on an agreement of some sort.
• All contracts are bonae fidei in that the parties are required to conduct theirrelationship in a manner
consistent with good faith.
LO 3: Compare the Law of Contract to other branches of the Law of Obligations. (p. 8-11)
1.1. Obligations’ give rise to personal rights as opposed to real rights.
NB parties usually fill the roles of both creditor and debtor.
[Right to performance → Ct]…[Duty to perform → Dt]
1.2. Breach of Contract (BoC) and Delict: Very similar, in that both are civil wrongs, andmay give rise
to damages claim. Delict is a wrongful and blameworthy conduct that causes harm to a person
(e.g. defamation or negligent damage to property). Such conduct obliges the wrongdoer to
compensate the injured party.
The essential difference between contractual and delictual obligations is that the former are
generally voluntarily assumed by the parties themselves while the latterare imposed by law,
irrespective of the will of the parties.
A plaintiff who sues in delict must prove all elements of delictual liability including the
wrongfulness of conduct in question. The mere fact that the conduct constitutes a breach of
contract does not necessarily mean that the conduct is wrongful for the purposes of imposing
delictual liability – the conduct must infringea right of the plaintiff that exists independently of the
contract.
, LO 3: Compare the Law of Contract to other branches of the Law of Obligations.(p. 8-11)
1.3. Contract and Enrichment: Unjustified enrichment occurs where there is a shift of wealth from one person’s
estate to another’s without a good legal ground or causefor this shift. It is important to emphasise that the
enrichment must be unjustified, in the technical sense of lacking a cause, rather than just being unjust.
Transfer ofassets not pursuant to valid causa.
CONTRACT ENRICHMENT
DELICT
An agreement to perform, Unjustified shift of
event that gives rise which is togive, do or Wrongful conduct that wealth or an asset from
tothe obligation refrain from doing causes harm toanother. one estate to another
something.
content ofthe To perform the To avoid causing To return the
obligation promised harm by wrongful enrichment
performance. conduct.
To enforce the agreement Return of the
by actualperformance, or to Compensation for harm enrichment
nature of theremedy
compensate for non- caused by infringing a
performance. legally recognised
interest.
source ofthe Imposed by law
The obligation isself- The obligation is
obligation imposed. imposed by law.
1.4. Contract and Property Law: Most important question: Does ownership pass in thecase of
void/voidable contracts?
[Some argue for distinction between effects of void and voidable.]
But…
(i) Contract gives rise to obligations, not transfer of ownership.
(ii) Ownership is transferred by way of delivery or registration.
→ Essentially, what is required for transfer of ownership is intention
(animus disponendi / transferendi and animus acquirendi)
(iii) Therefore in SA law (abstract system with respect to transfer of ownership)the distinction
between void/voidable contracts may be superfluous as far as transfer of ownership is
concerned.
1.5. Development of modern notion of contract.
LO 4: Briefly set out the historical development of the modern contract. (p 11-14)
Our law of contract is a modernized version of the Roman-Dutch law of contract, though
in today’s time the common law principles are supplemented by a number of important statutes, foremost of
which is the Consumer Protection Act. And it is subject to the Constitution like all branches of law. All principles
and doctrines of contract law must be consistent with the Bill of Rights and the normative framework of the
Constitution.
This discussion focusses on three sections: Roman law; Roman-Dutch law and Causa
and consideration (a celebrated dispute.)
LEARNING UNIT 1 I THE NOTION AND NATURE OF A CONTRACT I
□ LO1: Differentiate between the notion of a contract and other legally binding
agreements;
□ LO2: Explain the requirements and the key characteristics of a valid contract;
□ LO3: Compare the Law of Contract to other branches of the Law of
Obligations;
□ LO4: Set out the historical development of the modern contract;
□ LO5: Discuss the impact of the Constitution on the South African Law of
Contract (with reference to the prescribed articles);
□ LO6: Explain the basis and dual basis of a contract in modern law;
□ LO7: Explain the cornerstones of contract which include, freedom of contract,
sanctity of contract, good faith and privity of contract.
□ LO8: Discuss the interplay between the competing values;
□ LO9: Discuss the interaction between the Common Law of contract, the
Consumer Protection Act 68 of 2008 and the Constitution in analysing the
validity of a contractual term.
LEARNING UNIT 2 I FOUNDATION OF CONTRACT I
□ LO1: Discuss the legal effect of an offer;
□ LO2: Apply the requirements for the valid formation and termination of an
offer to a practical scenario;
□ LO3: Explain the legal position with regard to offers to the public, in the form
of advertisements, tenders, etc.;
□ LO4: Apply the requirements for valid acceptance to when and where
acceptance takes effect in a practical contract scenario using the theories of
acceptance;
□ LO5: Explain the different types of pacta de contrahendo and the legal
position of the parties involved in such agreements.
□ LO6: Discuss the effect of a mistake on the validity of a contract;
□ LO7: Differentiate between material and non-material mistake and the
contractual consequences of both;
□ LO8: Differentiate between the subjective and the objective approach to
mistake and their respective limitations and how the two approaches have
been reconciled in terms of the reliance theory in terms of a practical case
scenario;
□ LO9: Explain the contractual impact of a common mistake;
□ LO10: Identify the way in which parties may be able to apply for rectification
in some cases of mistake.
□ LO11: Apply the elements of misrepresentation of the different types of
misrepresentations that can take place to a set of facts;
□ LO12: Discuss the remedies available for improperly obtained consensus and
how voidable contracts operate;
□ LO13: Explain an omission as a misrepresentation and the relationship
between misrepresentation and mistake;
, □ LO14: Explain the basis on which damages may be claimed for
misrepresentation;
□ LO15: Discuss the nature, elements and remedies for: duress; undue
influence; and bribery;
□ LO16: Explain the impact of the CPA on the elements of duress and undue
influence.
LO 1: Differentiate between the notion of a contract and other legally binding agreements. (p.4-6)
Notion of Contract:
Contract is essentially an agreement to create enforceable obligations.
The difference between contracts and non-binding agreements is that with contracts, there’s a serious
intention to create legally enforceable obligations (animus contrahendi).
i. obligationary agreements (whereby one or more obligations are created) arecontracts.
Distinguish between contract and other legally binding agreements:
The fact that parties seriously intend their agreement to have binding legal effect does not necessarily mean
that it is a contract. This is because not all binding agreements are contracts. Some agreements are
intended not to create but to destroy obligations or to honour an obligation by transferring rights.
Legally binding agreements that are not contracts include:
i. real agreements (whereby rights are transferred)
ii. absolving agreements (whereby obligations are discharged or extinguished)
Contracts may also be more than just contracts:
Some legally binding agreements that create obligations for the parties cannot be regarded merely as
contracts because they contain elements giving them another dimension altogether, or elevating them into a
separate category.
- Most obvious example of such an agreement is marriage.
Definition of contract:
An agreement entered into by two or more persons with the intention of creating a
legal obligation or obligations and which the law recognises as being binding on the parties.
LO 2: Explain the requirements and the key characteristics of a valid contract.
Requirements for a Valid Contract:
1. Consensus: The minds of the parties must meet (or at least appear to meet) on all material aspects of
their agreement;
2. Capacity: The parties must have the necessary capacity to contract;
3. Formalities: Where the agreement is required, unusually, to be in a certain form (for example, in writing
and signed), these formalities must be observed;
4. Legality: the agreement must be lawful- that is, not prohibited by statute or common law;
5. Possibility: the obligations undertaken must be capable of performance when the agreement is entered
into; and
6. Certainty: The agreement must have definite or determinable content, so that the obligations can be
ascertained and enforced.
, LO 2: Explain the requirements and the key characteristics of a valid contract.
However, even if contract is valid ab initio (at beginning), it does not mean it may not be challenged
subsequently.
E.g. of how a contract can be challenged: impossibility of performance; unlawfulness; breach of contract;
misrepresentation, duress, undue influence, bribery; [All these pre- suppose a valid contract] →, therefore,
contract voidable]
- Material and reasonable mistake will have the result that a contract is void (ab initio)
since it excludes the basic requirement for the existence of contract, namely consent
Nature or characteristic features of contract:
• A contract is a juristic act
(that is an act to which the law attaches the consequences intended by the parties.)
• A conclusion of a contract is bilateral
(There must be at least two parties to an agreement, and our law does not recognise a
unilateral promise as binding.)
• A contract entails promises or undertakings on one or both sides.
• The undertaking may be to make a certain performance, immediately or at a future
date: to give something (dare); to do something (facere); or to refrain from doing
something (non facere).
Alternatively, it may be an undertaking that a certain state of affairs exists, or has existed; this is known as
warranty.
• Most contracts entail reciprocity, in that the one party’s performance is promised inexchange for the
other party’s performance.
• A promise will not be enforced unless supported by consideration.
• There is freedom of contract which means that parties can agree to anythingpossible and lawful.
• All contracts are consensual since it is based on an agreement of some sort.
• All contracts are bonae fidei in that the parties are required to conduct theirrelationship in a manner
consistent with good faith.
LO 3: Compare the Law of Contract to other branches of the Law of Obligations. (p. 8-11)
1.1. Obligations’ give rise to personal rights as opposed to real rights.
NB parties usually fill the roles of both creditor and debtor.
[Right to performance → Ct]…[Duty to perform → Dt]
1.2. Breach of Contract (BoC) and Delict: Very similar, in that both are civil wrongs, andmay give rise
to damages claim. Delict is a wrongful and blameworthy conduct that causes harm to a person
(e.g. defamation or negligent damage to property). Such conduct obliges the wrongdoer to
compensate the injured party.
The essential difference between contractual and delictual obligations is that the former are
generally voluntarily assumed by the parties themselves while the latterare imposed by law,
irrespective of the will of the parties.
A plaintiff who sues in delict must prove all elements of delictual liability including the
wrongfulness of conduct in question. The mere fact that the conduct constitutes a breach of
contract does not necessarily mean that the conduct is wrongful for the purposes of imposing
delictual liability – the conduct must infringea right of the plaintiff that exists independently of the
contract.
, LO 3: Compare the Law of Contract to other branches of the Law of Obligations.(p. 8-11)
1.3. Contract and Enrichment: Unjustified enrichment occurs where there is a shift of wealth from one person’s
estate to another’s without a good legal ground or causefor this shift. It is important to emphasise that the
enrichment must be unjustified, in the technical sense of lacking a cause, rather than just being unjust.
Transfer ofassets not pursuant to valid causa.
CONTRACT ENRICHMENT
DELICT
An agreement to perform, Unjustified shift of
event that gives rise which is togive, do or Wrongful conduct that wealth or an asset from
tothe obligation refrain from doing causes harm toanother. one estate to another
something.
content ofthe To perform the To avoid causing To return the
obligation promised harm by wrongful enrichment
performance. conduct.
To enforce the agreement Return of the
by actualperformance, or to Compensation for harm enrichment
nature of theremedy
compensate for non- caused by infringing a
performance. legally recognised
interest.
source ofthe Imposed by law
The obligation isself- The obligation is
obligation imposed. imposed by law.
1.4. Contract and Property Law: Most important question: Does ownership pass in thecase of
void/voidable contracts?
[Some argue for distinction between effects of void and voidable.]
But…
(i) Contract gives rise to obligations, not transfer of ownership.
(ii) Ownership is transferred by way of delivery or registration.
→ Essentially, what is required for transfer of ownership is intention
(animus disponendi / transferendi and animus acquirendi)
(iii) Therefore in SA law (abstract system with respect to transfer of ownership)the distinction
between void/voidable contracts may be superfluous as far as transfer of ownership is
concerned.
1.5. Development of modern notion of contract.
LO 4: Briefly set out the historical development of the modern contract. (p 11-14)
Our law of contract is a modernized version of the Roman-Dutch law of contract, though
in today’s time the common law principles are supplemented by a number of important statutes, foremost of
which is the Consumer Protection Act. And it is subject to the Constitution like all branches of law. All principles
and doctrines of contract law must be consistent with the Bill of Rights and the normative framework of the
Constitution.
This discussion focusses on three sections: Roman law; Roman-Dutch law and Causa
and consideration (a celebrated dispute.)
