PRIVATE LAW 411
SPECIFIC CONTRACTS
GENERAL INTRODUCTION
Why do we have rules relating to specific contracts?
Main reason: The general principles of contract are sometimes insufficient.
Other reasons: Although they supplement the rules relating to specific contracts, they also
often deviate from them because of certain policy reasons. Furthermore, the general rules
of contracts are sometimes silent when it comes to specific contracts or, lastly, there are
specific legislation that has to be applied to specific forms of contract.
Methodology of classification
There are two broad approaches:
a) Essentialia-naturalia model
- Nature:
o Essentialia = Characteristic rights and duties that distinguishes one type of
contract from another. The essence of a specific contract.
o Naturalia = Certain ex lege terms automatically read in by the law, unless the
parties decide to vary or exclude them by means of incidentalia.
- Shortcoming:
o Very much an all or nothing approach. Parties have to agree on the
essentialia. No room to have sub-types/mix-types of contracts.
o Sometimes insufficient: Think of the employment contract and the contract
of the independent contractor where the essentialia of the contract is exactly
the same. This ignores the major differences between these two contract
types, especially with regards to legislative protection.
o Examples of shortcoming: AFROX Healthcare v Strydom
AFROX HEALTHCARE v STRYDOM
Facts
Strydom had to go in for an operation. When he got to the hospital he had to sign an
admission from and in the fine print there was a clause which exempted the hospital of any
liability for any damage suffered as a result of the negligence of its staff. Strydom had his
operation and as a result of one of the nursing staff wrapping a bandage to tight around his
leg, Strydom eventually had to have his leg amputated.
1
,Shortcoming of the essentialia-naturalia model
Strydom went to court trying to get around this exemption clause arguing that it is contrary
to public policy. Court held that it is not because it is a clause that you typically get in a
contract of the independent contractor. We are not really dealing here with an ordinary
independent contractor; we are dealing here with an independent contractor with the
expertise of providing medical services which creates a completely different scope of what
can be expected from the independent contractor.
b) Typological model
- Nature:
o An analysis in terms of ‘concepts’ (“contract of sale”/“lease”/”suretyship”) is
valuable, but insufficient. Therefore, rather focus on ‘types’ which does not
give in to an all or nothing criteria.
o What is the dominant impression obtained when looking at the relationship?
o Disadvantage = less certain than essentialia-naturalia approach.
o Thus, when dealing with an employment contract and the contract of an
independent contractor, look at other factors and not only the essentialia.
This is what is done in practice.
Sources
1. Common law mostly influenced by Roman law
2. Legislation
a. Formalities prescribed for contracts of sale in terms of the Alienation of Land Act
b. Rental Housing Act 50 of 1999
c. Formalities in respect of Leases of Land Act 18 of 1969
d. Consumer Protection Act 68 of 2008
3. Constitution
2
,CONTRACT OF SALE
1. Nature and conclusion of a contract of sale
Definition:
- An agreement in terms of which the seller agrees to deliver an object (merx) and
transfer all his rights therein in return for payment of the purchase price by the
buyer.
- Essentialia: Merx + Price
- Not a validity requirement for the seller to be the owner of the merx.
- Distinguish between contract of sale and:
o Lease
§ Transfer of rights in a contract of sale is permanent, whereas the
transfer of rights in a lease agreement in temporary.
o Exchange
§ In a contract of sale there must be some monetary amount part of the
purchase price. However, in an exchange agreement, it is sufficient to
merely exchange objects without having a monetary component.
§ What about an object for an object + a monetary amount?
• Wastie v Security Motors 1972 (C)
WASTIE v SECURITY MOTORS
The rules relating to the above situation:
If the parties’ intention is clear, then that is decisive. However, when the intention is not
clear, we need to determine which of that trade-in transaction (object and money) has the
larger value. If the object has the higher value = exchange agreement. If the monetary
amount has the higher value = contract of sale.
§ Practical relevance of the distinction?
• Right of pre-emption dependent on a trigger event. If that
trigger event refers to a contract of sale, then you can
essentially escape that right of pre-emption by disposing of
the merx by way of an exchange agreement.
• Transfer of ownership (price payment rule). With a contract
of sale, we distinguish between credit and cash sales. In the
event of a credit sale, ownership is transferred upon delivery
of the merx. With a cash sale, the price payment rule applies
(ownership only transfers when the merx is delivered and the
purchase price has been paid). In a contract of exchange,
ownership transfers upon delivery of the object.
• Aedilitian actions. Also available in the case of contracts of
exchange. This remedy is available to the buyer (sale) in two
situations. Either where there is a latent defect in the merx or
3
, where there has been a misrepresentation about the quality of
the merx. Can then either cancel the contract or claim a
reduced purchase price.
o Janse van Rensburg v Grieve Trust 2000 (C)
JANSE VAN RENSBURG v GRIEVE TRUST
Issue
Trade-in transaction with vehicles are presumed to be contracts of sale. Traditionally, the
aedilition action was available to the buyer against a seller who had, for example, delivered
a defective merx. But in this case the question was whether those aedilition actions were
also available to the seller who has received payment consisting of both money and an
object and the object has defects.
Two opposing views on whether it should be allowed
First view (affirmative and based on Wastie v Security Motors): At least insofar it refers to
the components of the price, its analogous to a contract of exchange and because it is so
similar, the aedilition action should be available by extension to a seller in these cases.
Provides for an equitable balance between the parties.
Alternative view: Should not be allowed because, inter alia, the seller can protect
himself/herself by means of an express warranty (Myburgh’s counter argument: So too is
the buyer, but the buyer gets extra protection). Another argument is that it is not given to a
lessor in a lease contract and a mandator in a mandate, so why should it be given to the
seller (Myburgh’s counter argument: It is irrelevant, because the aedilition action has never
been available to either the lessor or the lessee).
Decision of the court
Decided to follow the approach set out in Wastie v Security Motors rather than the second
one on the basis that it is also in line with a court’s duty to develop rules so that they cater
for modern day situations. Trade-in transactions are an everyday occurrence, and the law
needs to keep up with these situations. Therefore, in line with the court’s equitable
jurisdiction which it inherited form Roman law via Roman-Dutch law to develop rules to fit
current situations. Furthermore, it is also in line with the notions of good faith and
reasonableness (BUT this judgment was delivered in the hay day of when it was believed
that the independent notion of good faith can be introduced into our law, so treat it with a
pinch of salt). Lastly, court held that it promoted equality between the parties in a court of
law.
o Independent contractor
§ Test: Who provides the material?
• X provides all the material and Y pays the price = contract of
sale
4
SPECIFIC CONTRACTS
GENERAL INTRODUCTION
Why do we have rules relating to specific contracts?
Main reason: The general principles of contract are sometimes insufficient.
Other reasons: Although they supplement the rules relating to specific contracts, they also
often deviate from them because of certain policy reasons. Furthermore, the general rules
of contracts are sometimes silent when it comes to specific contracts or, lastly, there are
specific legislation that has to be applied to specific forms of contract.
Methodology of classification
There are two broad approaches:
a) Essentialia-naturalia model
- Nature:
o Essentialia = Characteristic rights and duties that distinguishes one type of
contract from another. The essence of a specific contract.
o Naturalia = Certain ex lege terms automatically read in by the law, unless the
parties decide to vary or exclude them by means of incidentalia.
- Shortcoming:
o Very much an all or nothing approach. Parties have to agree on the
essentialia. No room to have sub-types/mix-types of contracts.
o Sometimes insufficient: Think of the employment contract and the contract
of the independent contractor where the essentialia of the contract is exactly
the same. This ignores the major differences between these two contract
types, especially with regards to legislative protection.
o Examples of shortcoming: AFROX Healthcare v Strydom
AFROX HEALTHCARE v STRYDOM
Facts
Strydom had to go in for an operation. When he got to the hospital he had to sign an
admission from and in the fine print there was a clause which exempted the hospital of any
liability for any damage suffered as a result of the negligence of its staff. Strydom had his
operation and as a result of one of the nursing staff wrapping a bandage to tight around his
leg, Strydom eventually had to have his leg amputated.
1
,Shortcoming of the essentialia-naturalia model
Strydom went to court trying to get around this exemption clause arguing that it is contrary
to public policy. Court held that it is not because it is a clause that you typically get in a
contract of the independent contractor. We are not really dealing here with an ordinary
independent contractor; we are dealing here with an independent contractor with the
expertise of providing medical services which creates a completely different scope of what
can be expected from the independent contractor.
b) Typological model
- Nature:
o An analysis in terms of ‘concepts’ (“contract of sale”/“lease”/”suretyship”) is
valuable, but insufficient. Therefore, rather focus on ‘types’ which does not
give in to an all or nothing criteria.
o What is the dominant impression obtained when looking at the relationship?
o Disadvantage = less certain than essentialia-naturalia approach.
o Thus, when dealing with an employment contract and the contract of an
independent contractor, look at other factors and not only the essentialia.
This is what is done in practice.
Sources
1. Common law mostly influenced by Roman law
2. Legislation
a. Formalities prescribed for contracts of sale in terms of the Alienation of Land Act
b. Rental Housing Act 50 of 1999
c. Formalities in respect of Leases of Land Act 18 of 1969
d. Consumer Protection Act 68 of 2008
3. Constitution
2
,CONTRACT OF SALE
1. Nature and conclusion of a contract of sale
Definition:
- An agreement in terms of which the seller agrees to deliver an object (merx) and
transfer all his rights therein in return for payment of the purchase price by the
buyer.
- Essentialia: Merx + Price
- Not a validity requirement for the seller to be the owner of the merx.
- Distinguish between contract of sale and:
o Lease
§ Transfer of rights in a contract of sale is permanent, whereas the
transfer of rights in a lease agreement in temporary.
o Exchange
§ In a contract of sale there must be some monetary amount part of the
purchase price. However, in an exchange agreement, it is sufficient to
merely exchange objects without having a monetary component.
§ What about an object for an object + a monetary amount?
• Wastie v Security Motors 1972 (C)
WASTIE v SECURITY MOTORS
The rules relating to the above situation:
If the parties’ intention is clear, then that is decisive. However, when the intention is not
clear, we need to determine which of that trade-in transaction (object and money) has the
larger value. If the object has the higher value = exchange agreement. If the monetary
amount has the higher value = contract of sale.
§ Practical relevance of the distinction?
• Right of pre-emption dependent on a trigger event. If that
trigger event refers to a contract of sale, then you can
essentially escape that right of pre-emption by disposing of
the merx by way of an exchange agreement.
• Transfer of ownership (price payment rule). With a contract
of sale, we distinguish between credit and cash sales. In the
event of a credit sale, ownership is transferred upon delivery
of the merx. With a cash sale, the price payment rule applies
(ownership only transfers when the merx is delivered and the
purchase price has been paid). In a contract of exchange,
ownership transfers upon delivery of the object.
• Aedilitian actions. Also available in the case of contracts of
exchange. This remedy is available to the buyer (sale) in two
situations. Either where there is a latent defect in the merx or
3
, where there has been a misrepresentation about the quality of
the merx. Can then either cancel the contract or claim a
reduced purchase price.
o Janse van Rensburg v Grieve Trust 2000 (C)
JANSE VAN RENSBURG v GRIEVE TRUST
Issue
Trade-in transaction with vehicles are presumed to be contracts of sale. Traditionally, the
aedilition action was available to the buyer against a seller who had, for example, delivered
a defective merx. But in this case the question was whether those aedilition actions were
also available to the seller who has received payment consisting of both money and an
object and the object has defects.
Two opposing views on whether it should be allowed
First view (affirmative and based on Wastie v Security Motors): At least insofar it refers to
the components of the price, its analogous to a contract of exchange and because it is so
similar, the aedilition action should be available by extension to a seller in these cases.
Provides for an equitable balance between the parties.
Alternative view: Should not be allowed because, inter alia, the seller can protect
himself/herself by means of an express warranty (Myburgh’s counter argument: So too is
the buyer, but the buyer gets extra protection). Another argument is that it is not given to a
lessor in a lease contract and a mandator in a mandate, so why should it be given to the
seller (Myburgh’s counter argument: It is irrelevant, because the aedilition action has never
been available to either the lessor or the lessee).
Decision of the court
Decided to follow the approach set out in Wastie v Security Motors rather than the second
one on the basis that it is also in line with a court’s duty to develop rules so that they cater
for modern day situations. Trade-in transactions are an everyday occurrence, and the law
needs to keep up with these situations. Therefore, in line with the court’s equitable
jurisdiction which it inherited form Roman law via Roman-Dutch law to develop rules to fit
current situations. Furthermore, it is also in line with the notions of good faith and
reasonableness (BUT this judgment was delivered in the hay day of when it was believed
that the independent notion of good faith can be introduced into our law, so treat it with a
pinch of salt). Lastly, court held that it promoted equality between the parties in a court of
law.
o Independent contractor
§ Test: Who provides the material?
• X provides all the material and Y pays the price = contract of
sale
4
