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CONTRACT QUESTIONS:
1. Distinguish an option from a right of pre-emption.
Description: An option may be defined as a substantive offer reinforced by
an agreement in terms of which the grantor undertakes as against the
grantee to keep open his offer, with the result that the grantee acquires
the competence to consider the offer and to accept or reject it.
A right of pre-emption is an agreement in terms of which one prospective
purchaser acquires a preferential right to contract with the seller should
the latter actually decide to sell.
The option contract obliges the grantor to maintain his substantive offer
in accordance with the terms of the option contract. A substantive
contract arises if the grantee accepts the substantive offer. The option
holder determines whether a contract in accordance with the substantive
offer arises.
A right of pre-emption does not place a duty on the grantor to sell the
subject matter of the right; the grantee merely acquires the preferential
right to buy should the grantor decide to sell. The obligation of the
grantor is negative. The grantor may not alienate the thing to a third
party except under the conditions prescribed in the agreement creating
the right. The grantor primarily determines whether the parties will
conclude a substantive agreement, usually after negotiating the
contractual terms.
Breach of an option contract and the consequences thereof are governed
by the general principles of the law of contract. Should the grantor of the
option attempt to revoke the substantive offer contrary to the option
contract, the holder of the option may enforce the contract specifically by
means of an interdict. Furthermore, damages may be claimed to place the
option holder in the position he would have been in if the option had been
exercised.
In the case of breach of a right of pre-emption the holder may apply for
an interdict to prevent the grantor from alienating the thing to a third
party. A claim for damages is also available. It seems uncertain whether
the holder may claim specific performance but in associated SA Bakeries
the court found that in the even that the grantor contrary to the right of
pre-emption concluded a sale agreement with a third party, the holder
may step into the position of the third party by way of a unilateral
declaration of intent.
2. Simon lives in Johannesburg, he sends a letter to Peter, who lives in
Bloemfontein, by private courier. In the letter, Simon offers to sell Peter
his car, a red Honda, for R200 000. In the letter, Simon states that his
offer will fall away on 1 April. Peter accepts Simon’s offer by letter, which
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he posts on 30 March. Simon receives the letter on 5 April and only reads
it the next day. Peter pays the R200 000 but Simon refuses to accept
payment. Did a valid contract arise between Simon and Peter? Advise
Peter and substantiate your answer.
The question is whether Peter has accepted Simons offer in time and thus
whether Simon and Peter have reached consensus. Simons offer lapses
after the time that he has prescribed for acceptance. Although Peter
accepted the offer in time, Simon was only informed of the acceptance
after the time set for the lapse of the offer, by reading the letter. The
general rule is that acceptance must be communicated to the offeror for
consensus to arise (R v Nel) (Cape Explosives Works) (Smeiman v Volkersz).
The principle is that actual and conscious agreement between the parties
form the primary basis for contractual liability. The parties must be aware
of their unanimity.
The offeror may, however, expressly or tacitly waive his right to
notification of acceptance. Simon did not expressly do so as the offer
contains no words to that effect, but Simon tacitly did so by making his
offer by post. He had tacitly indicated that his offer was accepted as soon
as Peter posted his letter of acceptance. Peter is not obliged to accept by
post. We can conclude that Simon and Peter did not reach agreement
before Simons offer lapsed.
3. Name and briefly discuss the requirements for a valid offer & a valid
acceptance. Discuss with reference to case law. (15)
The offer must be definite and complete
The offer must embody or contain sufficient information to enable the
person to whom it is addressed to form a clear idea of exactly what the
offeror has in mind. The offer must be so certain that it is enough for the
addressee merely to answer ‘yes’ for a contract to be constituted. The offer
must be clear and certain.
The offer must contemplate acceptance and a resultant obligation
It is not enough for the one party to make a tentative statement to the
other merely to sound him out, that is, to find out whether he would be
prepared to enter into negotiations.
Thus, the offer must be a firm offer.
An important question arises in this connection with regard to the legal
effect of advertisements.
For instance, a shop-keeper places an advertisement in the window of his
shop: ‘Jimmy Choo shoes obtainable here at R1500 per pair’.
This statement does not constitute an offer since the advertiser clearly
could not have contemplated that mere acceptance of his statement would
create a legal bond between himself and the acceptor. (Crawley v Rex)
However, a promise of reward is a form of advertisement that does
constitute an offer. (Bloom v American Swiss Watch Co)
The offer must come to the attention of the offeree (addressee)
This requirement is a natural consequence of the fact that, as has been
stated, an agreement is a conscious or stated mutuality of consent.
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The offeree must therefore have knowledge of the offer to be able to react
to it. (Bloom case)
An offer must as a rule be directed at a definite person (offeres) or
persons (offerees), although it may also be directed at undefined persons.
An offer directed at a defined person or persons: Where an offer is
addressed to unascertained persons, it may be accepted by anyone of
them, but where it is addressed to a specific person or persons, it may be
accepted by only the addressee(s). An offer directed at undefined persons:
A promise of reward, and auctions, are forms of this type of offer.
An offer lapses in the following circumstances:
o after the expiry or lapse of the prescribed time, or of a reasonable
time
o upon the death of either the offerer or the offeree
o upon being rejected
o Upon revocation.
Requirements for a valid acceptance
The acceptance must be unconditional and unequivocal
When the acceptance contains conditions or reservations, it is no
acceptance but is in fact a counter-offer which the original offeror may
accept or reject in turn.
The offer must be accepted by the person to whom it is addressed
The offer cannot be accepted by anyone but the person to whom it is
made.
The acceptance must be a reaction to the offer – a person cannot accept
an offer of which he is not aware
Bloom v American Swiss Watch case:
In casu, the company offered a reward to any person who could provide
information which would lead to the arrest of thieves who had stolen
jewellery from the company.
B furnished information while ignorant of the reward offered.
When the advertisement of the reward came to his notice, he tried to
claim the promised sum from the company.
Court held that he could not claim the reward because ‘until the plaintiff
knew of the offer he could not accept it, and until he accepted it there
could be no contract’.
Thus, if the one did not know what the other was proposing, the 2 minds
never came together.
The acceptance must comply with any formalities set by law or by the
offeror
The acceptance must comply with formalities for a valid contract to arise.
4. Briefly distinguish simple auction from auction subject to conditions. (5)
Simple auction:
, 4
Here the most acceptable construction is that the bidder makes an offer
which the auctioneer considers & either accepts or rejects. Making of a
higher bid doesn’t mean displacement of a previous bid per se.
Auction subject to conditions:
Conditions may relate to many things: manner & time of payment, passing
of ownership, auctioneer’s remuneration, fact that articles are sold
voetstoet (as it is) & so on. These conditions relate to the contract of sale
which are envisaged. The auction can take place with or with out reserve.
Auction subject to conditions isn’t same as auction with reserve – the
latter is 1 of conditions. These conditions may be advertised in various
ways – isn’t binding on auctioneer. If auctioneer announces conditions of
auction he’s making an offer. Therefore making the offer to undefined
persons, so by bidding, the bidder accepts the conditions, therefore
conditions are now binding on both parties & now auctioneer is bound to
accept the highest bid (contract of sale arises = substantive contract).
5. Discuss whether an advertisement & a promise of reward constitutes an
offer. (10)
It’s not enough for 1 party to make a tentative statement to the other
merely to sound him out, that is, to find out whether he would be prepared
to enter into negotiations. Offer must be a firm offer; a tentative
statement with a possible agreement in mind isn’t sufficient.
An NB Question arises in this connection with regard to the legal effect of
advertisement. E.g. shopkeeper places ad in window: ‘Shoes obtainable
here for R150 per pair’ – this statement doesn’t constitute an offer since
advertiser clearly couldn’t have contemplated that mere acceptance of his
statement would create a legal bond between himself & the acceptor. If
more people accepts the statement than there is stock – this
advertisement as an offer would therefore lead to impossible situations; its
in fact no more than an invitation to do business. Advertiser’s real
intention is to elicit or invite an offer from some member of the general
public. (CRAWLEY V REX). Therefore an advertisement doesn’t generally
constitute an offer.
There is however, 1 special kind of advertisement which does constitute
an offer, namely a promise of reward. It often happens that a reward is
offered to any person who performs a certain act, for e.g. restores a lost
article to its owner. (BLOOM V AMERICAN SWISS WATCH CO). Promise of
reward is a form of advertisement that does constitute an offer.
6. Discuss ‘Cape Explosive Case’ and ‘Smeiman v Volkerz Case’ with regards
to the moment of formation of a contract (6)
Cape Explosive:
Offer & Acceptance – Where & When are contract’s concluded by post
entered into.
CONTRACT QUESTIONS:
1. Distinguish an option from a right of pre-emption.
Description: An option may be defined as a substantive offer reinforced by
an agreement in terms of which the grantor undertakes as against the
grantee to keep open his offer, with the result that the grantee acquires
the competence to consider the offer and to accept or reject it.
A right of pre-emption is an agreement in terms of which one prospective
purchaser acquires a preferential right to contract with the seller should
the latter actually decide to sell.
The option contract obliges the grantor to maintain his substantive offer
in accordance with the terms of the option contract. A substantive
contract arises if the grantee accepts the substantive offer. The option
holder determines whether a contract in accordance with the substantive
offer arises.
A right of pre-emption does not place a duty on the grantor to sell the
subject matter of the right; the grantee merely acquires the preferential
right to buy should the grantor decide to sell. The obligation of the
grantor is negative. The grantor may not alienate the thing to a third
party except under the conditions prescribed in the agreement creating
the right. The grantor primarily determines whether the parties will
conclude a substantive agreement, usually after negotiating the
contractual terms.
Breach of an option contract and the consequences thereof are governed
by the general principles of the law of contract. Should the grantor of the
option attempt to revoke the substantive offer contrary to the option
contract, the holder of the option may enforce the contract specifically by
means of an interdict. Furthermore, damages may be claimed to place the
option holder in the position he would have been in if the option had been
exercised.
In the case of breach of a right of pre-emption the holder may apply for
an interdict to prevent the grantor from alienating the thing to a third
party. A claim for damages is also available. It seems uncertain whether
the holder may claim specific performance but in associated SA Bakeries
the court found that in the even that the grantor contrary to the right of
pre-emption concluded a sale agreement with a third party, the holder
may step into the position of the third party by way of a unilateral
declaration of intent.
2. Simon lives in Johannesburg, he sends a letter to Peter, who lives in
Bloemfontein, by private courier. In the letter, Simon offers to sell Peter
his car, a red Honda, for R200 000. In the letter, Simon states that his
offer will fall away on 1 April. Peter accepts Simon’s offer by letter, which
, 2
he posts on 30 March. Simon receives the letter on 5 April and only reads
it the next day. Peter pays the R200 000 but Simon refuses to accept
payment. Did a valid contract arise between Simon and Peter? Advise
Peter and substantiate your answer.
The question is whether Peter has accepted Simons offer in time and thus
whether Simon and Peter have reached consensus. Simons offer lapses
after the time that he has prescribed for acceptance. Although Peter
accepted the offer in time, Simon was only informed of the acceptance
after the time set for the lapse of the offer, by reading the letter. The
general rule is that acceptance must be communicated to the offeror for
consensus to arise (R v Nel) (Cape Explosives Works) (Smeiman v Volkersz).
The principle is that actual and conscious agreement between the parties
form the primary basis for contractual liability. The parties must be aware
of their unanimity.
The offeror may, however, expressly or tacitly waive his right to
notification of acceptance. Simon did not expressly do so as the offer
contains no words to that effect, but Simon tacitly did so by making his
offer by post. He had tacitly indicated that his offer was accepted as soon
as Peter posted his letter of acceptance. Peter is not obliged to accept by
post. We can conclude that Simon and Peter did not reach agreement
before Simons offer lapsed.
3. Name and briefly discuss the requirements for a valid offer & a valid
acceptance. Discuss with reference to case law. (15)
The offer must be definite and complete
The offer must embody or contain sufficient information to enable the
person to whom it is addressed to form a clear idea of exactly what the
offeror has in mind. The offer must be so certain that it is enough for the
addressee merely to answer ‘yes’ for a contract to be constituted. The offer
must be clear and certain.
The offer must contemplate acceptance and a resultant obligation
It is not enough for the one party to make a tentative statement to the
other merely to sound him out, that is, to find out whether he would be
prepared to enter into negotiations.
Thus, the offer must be a firm offer.
An important question arises in this connection with regard to the legal
effect of advertisements.
For instance, a shop-keeper places an advertisement in the window of his
shop: ‘Jimmy Choo shoes obtainable here at R1500 per pair’.
This statement does not constitute an offer since the advertiser clearly
could not have contemplated that mere acceptance of his statement would
create a legal bond between himself and the acceptor. (Crawley v Rex)
However, a promise of reward is a form of advertisement that does
constitute an offer. (Bloom v American Swiss Watch Co)
The offer must come to the attention of the offeree (addressee)
This requirement is a natural consequence of the fact that, as has been
stated, an agreement is a conscious or stated mutuality of consent.
, 3
The offeree must therefore have knowledge of the offer to be able to react
to it. (Bloom case)
An offer must as a rule be directed at a definite person (offeres) or
persons (offerees), although it may also be directed at undefined persons.
An offer directed at a defined person or persons: Where an offer is
addressed to unascertained persons, it may be accepted by anyone of
them, but where it is addressed to a specific person or persons, it may be
accepted by only the addressee(s). An offer directed at undefined persons:
A promise of reward, and auctions, are forms of this type of offer.
An offer lapses in the following circumstances:
o after the expiry or lapse of the prescribed time, or of a reasonable
time
o upon the death of either the offerer or the offeree
o upon being rejected
o Upon revocation.
Requirements for a valid acceptance
The acceptance must be unconditional and unequivocal
When the acceptance contains conditions or reservations, it is no
acceptance but is in fact a counter-offer which the original offeror may
accept or reject in turn.
The offer must be accepted by the person to whom it is addressed
The offer cannot be accepted by anyone but the person to whom it is
made.
The acceptance must be a reaction to the offer – a person cannot accept
an offer of which he is not aware
Bloom v American Swiss Watch case:
In casu, the company offered a reward to any person who could provide
information which would lead to the arrest of thieves who had stolen
jewellery from the company.
B furnished information while ignorant of the reward offered.
When the advertisement of the reward came to his notice, he tried to
claim the promised sum from the company.
Court held that he could not claim the reward because ‘until the plaintiff
knew of the offer he could not accept it, and until he accepted it there
could be no contract’.
Thus, if the one did not know what the other was proposing, the 2 minds
never came together.
The acceptance must comply with any formalities set by law or by the
offeror
The acceptance must comply with formalities for a valid contract to arise.
4. Briefly distinguish simple auction from auction subject to conditions. (5)
Simple auction:
, 4
Here the most acceptable construction is that the bidder makes an offer
which the auctioneer considers & either accepts or rejects. Making of a
higher bid doesn’t mean displacement of a previous bid per se.
Auction subject to conditions:
Conditions may relate to many things: manner & time of payment, passing
of ownership, auctioneer’s remuneration, fact that articles are sold
voetstoet (as it is) & so on. These conditions relate to the contract of sale
which are envisaged. The auction can take place with or with out reserve.
Auction subject to conditions isn’t same as auction with reserve – the
latter is 1 of conditions. These conditions may be advertised in various
ways – isn’t binding on auctioneer. If auctioneer announces conditions of
auction he’s making an offer. Therefore making the offer to undefined
persons, so by bidding, the bidder accepts the conditions, therefore
conditions are now binding on both parties & now auctioneer is bound to
accept the highest bid (contract of sale arises = substantive contract).
5. Discuss whether an advertisement & a promise of reward constitutes an
offer. (10)
It’s not enough for 1 party to make a tentative statement to the other
merely to sound him out, that is, to find out whether he would be prepared
to enter into negotiations. Offer must be a firm offer; a tentative
statement with a possible agreement in mind isn’t sufficient.
An NB Question arises in this connection with regard to the legal effect of
advertisement. E.g. shopkeeper places ad in window: ‘Shoes obtainable
here for R150 per pair’ – this statement doesn’t constitute an offer since
advertiser clearly couldn’t have contemplated that mere acceptance of his
statement would create a legal bond between himself & the acceptor. If
more people accepts the statement than there is stock – this
advertisement as an offer would therefore lead to impossible situations; its
in fact no more than an invitation to do business. Advertiser’s real
intention is to elicit or invite an offer from some member of the general
public. (CRAWLEY V REX). Therefore an advertisement doesn’t generally
constitute an offer.
There is however, 1 special kind of advertisement which does constitute
an offer, namely a promise of reward. It often happens that a reward is
offered to any person who performs a certain act, for e.g. restores a lost
article to its owner. (BLOOM V AMERICAN SWISS WATCH CO). Promise of
reward is a form of advertisement that does constitute an offer.
6. Discuss ‘Cape Explosive Case’ and ‘Smeiman v Volkerz Case’ with regards
to the moment of formation of a contract (6)
Cape Explosive:
Offer & Acceptance – Where & When are contract’s concluded by post
entered into.
