LAW OF PROPERTY NOTES FOR TEST TWO(S.U 11-13)
STUDY UNIT 11
Study Unit 11: Derivative Acquisition of Ownership
Introduction Derivative acquisition of ownership involves the transfer of ownership
from a previous owner to a new owner. It requires the co-operation of the transferor
(the current owner). In this process, the new owner accepts all the rights derived from
the predecessor's ownership, and also accepts any existing obligations or limitations
(with real effect) on the thing. The principle of nemo plus iuris applies, meaning no
person can transfer more rights than they possess themselves.
1. Meaning of transfer of ownership Transfer of ownership in derivative acquisition is a
bilateral juridical act where ownership is transferred by the current owner and
accepted by the new owner. It involves the transition of ownership from one person to
another. This is contrasted with original acquisition, where ownership is acquired by
operation of law without the co-operation of a previous owner.
2. Requirements for derivative acquisition of ownership The sources list nine
requirements for the transfer of ownership using the derivative method:
• The thing must be negotiable (res in commercio). This means it is a thing over
which real rights can be acquired and transferred.
• The transferor must have contractual capacity. This capacity is determined by
factors like age, mental health, and marital status. Owners with limited capacity
need assistance from a parent, guardian, or curator.
• The transferor must be the owner of the thing. The nemo plus iuris rule dictates
that only the owner can transfer ownership. The owner can act personally or
through an agent or nominee.
• The transferee must have the contractual capacity to accept the transfer of
ownership. This is also subject to factors like age, mental health, and marital
status, potentially requiring assistance.
• Ownership must be accepted by the transferee or their nominee or agent.
• The publicity principle must be satisfied. For movables, this is achieved through
delivery (traditio). For immovables, it is achieved through registration in the
deeds registry.
• There must be a real agreement. This refers to the intention of the owner
(transferor) to transfer ownership and the intention of the transferee to accept
, ownership. This mutual intention embodies the subjective aspect of the transfer
and must exist at the time of transfer.
• There must be a legal cause (causa) for the transfer of ownership. (Note: one
source excerpt states that South Africa has no abstract system of transfer of
ownership and requires a valid obligation-causing agreement, but this is
immediately contradicted by the same paragraph and other sources which state
South Africa follows the abstract system. The dominant view in the sources is the
abstract system). The intention with which transfer is given and accepted can
embody this causa.
• The full purchase price must be paid, unless credit was granted by the seller to
the buyer.
3. Distinction between a causal and an abstract system of transfer of ownership
The sources distinguish between two systems of transfer:
• Causal System: Ownership transfers only if the underlying obligation-creating
agreement (e.g., contract of sale) is valid and the requirements are met. The
validity of the obligatory agreement is the cause (causa) for the transfer.
• Abstract System: Ownership transfers if there is a valid real agreement, even if
the underlying obligation-creating agreement is invalid. The intention to transfer
and receive ownership (the real agreement) is the cause for the transfer.
The case of Quartermark Investments (Pty) Ltd v Pinky Mkhwanazi 2014 (SCA) is
discussed in this context. The court held that an invalid obligatory agreement in the
case of fraud automatically results in an invalid real agreement. However, the court also
stated that in every instance of an invalid obligatory agreement, the court must
determine if its invalidity means the parties did not intend to transfer ownership. If that
intention (a valid real agreement) exists, ownership will transfer despite the invalid
obligatory agreement. The case of Cape Explosive Works Ltd v Denel (Pty) Ltd 2001
(SCA) also confirms the principle that ownership cannot be transferred by contract
alone, but requires a real agreement followed by delivery or registration, and that the
intention to transfer embodies the causa.
4. Requirements for payment of the purchase price in the case of cash sales and
credit sales The ninth requirement for transfer of ownership is that the full purchase
price must be paid, unless credit was granted by the seller.
• In a cash sale, the purchaser becomes owner when the full purchase price is
paid and delivery (or registration) takes place. There is a rebuttable presumption
that a sale is a cash sale if there is no explicit provision for credit.
, • If the seller grants credit without a reservation of ownership clause, the
purchaser becomes owner upon delivery (or registration), irrespective of when
payment occurs.
• If the seller grants credit with a reservation of ownership clause (common in
hire-purchase agreements or credit agreements under the National Credit Act),
the purchaser only becomes owner on payment of the last instalment, even
though physical control may have been transferred earlier.
The Info Plus v Scheelke and Another 1998 (SCA) case illustrates this point regarding
credit sales with reservation of ownership. The court held that the real agreement
made at the time of initial delivery under the hire-purchase contract was sufficient,
and no further agreement or physical control by the purchaser (IP) at the time of the
final payment was required for ownership to transfer to IP via traditio brevi manu. The
condition (payment of the final instalment) simply needed to be fulfilled for ownership
to pass based on that initial real agreement. Payment by a third party was sufficient to
fulfil the condition.
5. Different forms of delivery and their principles Delivery (traditio) is the method of
satisfying the publicity principle for the transfer of ownership of movable property. It
involves transferring physical control of the movable to the transferee with the intention
of enabling them to exercise control as owner. Delivery can be actual (traditio vera) or
constructive (traditio ficta).
• Actual Delivery (Traditio Vera): The movable is physically handed over to the
transferee, allowing them to exercise physical control with the intention to be
owner.
• Constructive Delivery (Traditio Ficta): Used when the thing's size or nature
makes physical delivery difficult, or when the transferee is already in control, or a
third party is in control. Various forms exist:
o Clavium traditio (Symbolic delivery): Involves delivering an instrument
that enables the transferee to exercise physical control, such as keys to a
warehouse or car, or bills of lading.
o Delivery with the long hand (traditio longa manu): The thing is pointed
out to the transferee, and they are placed in a position to exercise
physical control to the exclusion of others. Requirements established in
Groenewald v Van der Merwe 1917 (A):
1. Intention of the parties must be clear.
2. Thing must be pointed out by the transferor in the presence of the
thing.
STUDY UNIT 11
Study Unit 11: Derivative Acquisition of Ownership
Introduction Derivative acquisition of ownership involves the transfer of ownership
from a previous owner to a new owner. It requires the co-operation of the transferor
(the current owner). In this process, the new owner accepts all the rights derived from
the predecessor's ownership, and also accepts any existing obligations or limitations
(with real effect) on the thing. The principle of nemo plus iuris applies, meaning no
person can transfer more rights than they possess themselves.
1. Meaning of transfer of ownership Transfer of ownership in derivative acquisition is a
bilateral juridical act where ownership is transferred by the current owner and
accepted by the new owner. It involves the transition of ownership from one person to
another. This is contrasted with original acquisition, where ownership is acquired by
operation of law without the co-operation of a previous owner.
2. Requirements for derivative acquisition of ownership The sources list nine
requirements for the transfer of ownership using the derivative method:
• The thing must be negotiable (res in commercio). This means it is a thing over
which real rights can be acquired and transferred.
• The transferor must have contractual capacity. This capacity is determined by
factors like age, mental health, and marital status. Owners with limited capacity
need assistance from a parent, guardian, or curator.
• The transferor must be the owner of the thing. The nemo plus iuris rule dictates
that only the owner can transfer ownership. The owner can act personally or
through an agent or nominee.
• The transferee must have the contractual capacity to accept the transfer of
ownership. This is also subject to factors like age, mental health, and marital
status, potentially requiring assistance.
• Ownership must be accepted by the transferee or their nominee or agent.
• The publicity principle must be satisfied. For movables, this is achieved through
delivery (traditio). For immovables, it is achieved through registration in the
deeds registry.
• There must be a real agreement. This refers to the intention of the owner
(transferor) to transfer ownership and the intention of the transferee to accept
, ownership. This mutual intention embodies the subjective aspect of the transfer
and must exist at the time of transfer.
• There must be a legal cause (causa) for the transfer of ownership. (Note: one
source excerpt states that South Africa has no abstract system of transfer of
ownership and requires a valid obligation-causing agreement, but this is
immediately contradicted by the same paragraph and other sources which state
South Africa follows the abstract system. The dominant view in the sources is the
abstract system). The intention with which transfer is given and accepted can
embody this causa.
• The full purchase price must be paid, unless credit was granted by the seller to
the buyer.
3. Distinction between a causal and an abstract system of transfer of ownership
The sources distinguish between two systems of transfer:
• Causal System: Ownership transfers only if the underlying obligation-creating
agreement (e.g., contract of sale) is valid and the requirements are met. The
validity of the obligatory agreement is the cause (causa) for the transfer.
• Abstract System: Ownership transfers if there is a valid real agreement, even if
the underlying obligation-creating agreement is invalid. The intention to transfer
and receive ownership (the real agreement) is the cause for the transfer.
The case of Quartermark Investments (Pty) Ltd v Pinky Mkhwanazi 2014 (SCA) is
discussed in this context. The court held that an invalid obligatory agreement in the
case of fraud automatically results in an invalid real agreement. However, the court also
stated that in every instance of an invalid obligatory agreement, the court must
determine if its invalidity means the parties did not intend to transfer ownership. If that
intention (a valid real agreement) exists, ownership will transfer despite the invalid
obligatory agreement. The case of Cape Explosive Works Ltd v Denel (Pty) Ltd 2001
(SCA) also confirms the principle that ownership cannot be transferred by contract
alone, but requires a real agreement followed by delivery or registration, and that the
intention to transfer embodies the causa.
4. Requirements for payment of the purchase price in the case of cash sales and
credit sales The ninth requirement for transfer of ownership is that the full purchase
price must be paid, unless credit was granted by the seller.
• In a cash sale, the purchaser becomes owner when the full purchase price is
paid and delivery (or registration) takes place. There is a rebuttable presumption
that a sale is a cash sale if there is no explicit provision for credit.
, • If the seller grants credit without a reservation of ownership clause, the
purchaser becomes owner upon delivery (or registration), irrespective of when
payment occurs.
• If the seller grants credit with a reservation of ownership clause (common in
hire-purchase agreements or credit agreements under the National Credit Act),
the purchaser only becomes owner on payment of the last instalment, even
though physical control may have been transferred earlier.
The Info Plus v Scheelke and Another 1998 (SCA) case illustrates this point regarding
credit sales with reservation of ownership. The court held that the real agreement
made at the time of initial delivery under the hire-purchase contract was sufficient,
and no further agreement or physical control by the purchaser (IP) at the time of the
final payment was required for ownership to transfer to IP via traditio brevi manu. The
condition (payment of the final instalment) simply needed to be fulfilled for ownership
to pass based on that initial real agreement. Payment by a third party was sufficient to
fulfil the condition.
5. Different forms of delivery and their principles Delivery (traditio) is the method of
satisfying the publicity principle for the transfer of ownership of movable property. It
involves transferring physical control of the movable to the transferee with the intention
of enabling them to exercise control as owner. Delivery can be actual (traditio vera) or
constructive (traditio ficta).
• Actual Delivery (Traditio Vera): The movable is physically handed over to the
transferee, allowing them to exercise physical control with the intention to be
owner.
• Constructive Delivery (Traditio Ficta): Used when the thing's size or nature
makes physical delivery difficult, or when the transferee is already in control, or a
third party is in control. Various forms exist:
o Clavium traditio (Symbolic delivery): Involves delivering an instrument
that enables the transferee to exercise physical control, such as keys to a
warehouse or car, or bills of lading.
o Delivery with the long hand (traditio longa manu): The thing is pointed
out to the transferee, and they are placed in a position to exercise
physical control to the exclusion of others. Requirements established in
Groenewald v Van der Merwe 1917 (A):
1. Intention of the parties must be clear.
2. Thing must be pointed out by the transferor in the presence of the
thing.
