lOMoAR cPSD| 48680473
1
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, lOMoAR cPSD| 48680473
Overview
Read through the overview at the beginning of the study guide as this will equip you
with the skills you need to complete the Assignments as well as answer the
questions in the examination. In the learning outcomes, you will get an
understanding of what is expected of you.
Study Unit 1
In study Unit 1 you are introduced to the nature of a contract. Although contracts
are referred to as agreements, not all agreements are contracts.
• Contract as an agreement intended to create enforceable obligations
There must be a serious intention to create legally enforceable obligations. (animus
contrahendi)
• Legally binding agreements that are not contracts
Obligationary agreements – whereby one or more obligations are created
Absolving agreements – whereby obligations are discharged or extinguished
Real (or transfer) agreements – whereby rights are transferred
• Legally binding agreements that are more than just contracts
Marriage and judgement by consent are examples of legally binding agreements that
cannot be regarded as merely contracts.
• Definition of a contract
An agreement entered into by two or more persons with the intention of creating a
legal obligation or obligations.
Requirements for a valid contract
• Consensus
• Capacity
• Formalities
• Legality
• Possibility
• Certainty
2
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, lOMoAR cPSD| 48680473
The nature of contract
A contract is a bilateral (or multilateral) juristic act, that entails undertakings on one
or both sides, to do something or not to do something. Most contracts entail
reciprocity.
There is freedom of contract and all contracts are consensual and are bona fidei.
Contracts and the law of obligations
• The concept of obligations
An obligation is a legal bond between 2 or more people, obliging the one to give, do
or refrain from doing something to the other. An obligation comprises a right and a
corresponding duty.
The legal relationship created by an obligation is a personal one, the right created is
a personal right.
• Contract and delict
A delict is a wrongful act which causes harm to a person. Such conduct obliges the
wrongdoer to compensate the injured party. Contracting parties agree on the terms
of their contract, any breach of these terms might entail legal consequences,
including a duty to pay damages. There is a close similarity between breach of
contract and delict; both are civil wrongs giving rise to a duty to pay damages as
compensation.
• Contract and enrichment
Unjustified enrichment occurs when there is a shift of wealth from one persons
estate to another’s, without a good legal cause for this shift. The enrichment must be
unjustified, and the enriched party is under a legal duty to make restitution to the
aggrieved party.
Understanding the nature of a contract is essential to determine if the agreement is
in fact a “contract”. A useful exercise is to think of daily “agreements” that you are
party to, and apply the requirements for a valid contract to determine if these are, in
3
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, lOMoAR cPSD| 48680473
fact, valid contracts. The example given in the study guide of filling petrol at a
petrol station is a good example of where to begin.
Weekly summary
Study unit 1
Understand the differences between a contract and an agreement, as well as
• The requirements for a valid contract.
• The consequences of a valid contract (obligations created).
Understand the relationship between the law of contract and the law of obligations,
with regard to
• Contract and delict
• Contract and enrichment
• Contract and the law of property
Pay special attention to the values that influence and shape the law of contract.
In study unit 2 the will theory (subjective approach), the declaration theory
(objective approach)and the reliance theory (compromise approach) are discussed.
You need to understand these approaches as well as what approach is preferred in
South Africa.
Note the dual basis of contract, namely actual consensus in terms of the will theory
(meeting of the minds of the parties), and the alternate basis being the reliance
theory.
Study the cases prescribed and you will see the fluctuating approach of the court as
to which approach is preferable.
Remember that the onus of proving a contract rests on the party who alleges the
contract exists.
Study unit 3 deals with the freedom and sanctity of contracts, as well as the
principals of good faith and equity in contracts. A balance needs to be established
between the freedom of parties to enter into contracts, and that the contracts should
be fair to both parties and not unjustifiably prejudice one party.
The prescribed cases illustrate the struggle of the courts to establish this fine
balance.
4
Downloaded by Vincent kyalo ()
1
Downloaded by Vincent kyalo
()
, lOMoAR cPSD| 48680473
Overview
Read through the overview at the beginning of the study guide as this will equip you
with the skills you need to complete the Assignments as well as answer the
questions in the examination. In the learning outcomes, you will get an
understanding of what is expected of you.
Study Unit 1
In study Unit 1 you are introduced to the nature of a contract. Although contracts
are referred to as agreements, not all agreements are contracts.
• Contract as an agreement intended to create enforceable obligations
There must be a serious intention to create legally enforceable obligations. (animus
contrahendi)
• Legally binding agreements that are not contracts
Obligationary agreements – whereby one or more obligations are created
Absolving agreements – whereby obligations are discharged or extinguished
Real (or transfer) agreements – whereby rights are transferred
• Legally binding agreements that are more than just contracts
Marriage and judgement by consent are examples of legally binding agreements that
cannot be regarded as merely contracts.
• Definition of a contract
An agreement entered into by two or more persons with the intention of creating a
legal obligation or obligations.
Requirements for a valid contract
• Consensus
• Capacity
• Formalities
• Legality
• Possibility
• Certainty
2
Downloaded by Vincent kyalo ()
, lOMoAR cPSD| 48680473
The nature of contract
A contract is a bilateral (or multilateral) juristic act, that entails undertakings on one
or both sides, to do something or not to do something. Most contracts entail
reciprocity.
There is freedom of contract and all contracts are consensual and are bona fidei.
Contracts and the law of obligations
• The concept of obligations
An obligation is a legal bond between 2 or more people, obliging the one to give, do
or refrain from doing something to the other. An obligation comprises a right and a
corresponding duty.
The legal relationship created by an obligation is a personal one, the right created is
a personal right.
• Contract and delict
A delict is a wrongful act which causes harm to a person. Such conduct obliges the
wrongdoer to compensate the injured party. Contracting parties agree on the terms
of their contract, any breach of these terms might entail legal consequences,
including a duty to pay damages. There is a close similarity between breach of
contract and delict; both are civil wrongs giving rise to a duty to pay damages as
compensation.
• Contract and enrichment
Unjustified enrichment occurs when there is a shift of wealth from one persons
estate to another’s, without a good legal cause for this shift. The enrichment must be
unjustified, and the enriched party is under a legal duty to make restitution to the
aggrieved party.
Understanding the nature of a contract is essential to determine if the agreement is
in fact a “contract”. A useful exercise is to think of daily “agreements” that you are
party to, and apply the requirements for a valid contract to determine if these are, in
3
Downloaded by Vincent kyalo
()
, lOMoAR cPSD| 48680473
fact, valid contracts. The example given in the study guide of filling petrol at a
petrol station is a good example of where to begin.
Weekly summary
Study unit 1
Understand the differences between a contract and an agreement, as well as
• The requirements for a valid contract.
• The consequences of a valid contract (obligations created).
Understand the relationship between the law of contract and the law of obligations,
with regard to
• Contract and delict
• Contract and enrichment
• Contract and the law of property
Pay special attention to the values that influence and shape the law of contract.
In study unit 2 the will theory (subjective approach), the declaration theory
(objective approach)and the reliance theory (compromise approach) are discussed.
You need to understand these approaches as well as what approach is preferred in
South Africa.
Note the dual basis of contract, namely actual consensus in terms of the will theory
(meeting of the minds of the parties), and the alternate basis being the reliance
theory.
Study the cases prescribed and you will see the fluctuating approach of the court as
to which approach is preferable.
Remember that the onus of proving a contract rests on the party who alleges the
contract exists.
Study unit 3 deals with the freedom and sanctity of contracts, as well as the
principals of good faith and equity in contracts. A balance needs to be established
between the freedom of parties to enter into contracts, and that the contracts should
be fair to both parties and not unjustifiably prejudice one party.
The prescribed cases illustrate the struggle of the courts to establish this fine
balance.
4
Downloaded by Vincent kyalo ()
