Formation of a valid contract
Thursday, 22 August 2024 20:33
For a contract to be valid and binding in law, ALL of the requirements have to be met, if one is missing then there will normally not be a valid contract and the court will ref use
to enforce it.
Contact will be void - can't sue.
Requirements:
1. The parties must have contractual capacity.
2. The parties must have a serious intention to contract.
3. The parties must communicate their intention to contract.
4. The parties must be of the same mind, i.e. no misunderstandings or mistakes.
5. The agreement must be lawful.
6. Performance of the contractual obligations must be possible.
7. The agreement must comply with any formalities (some contracts need to be written).
8. The agreement must be certain in its terms.
Valid offer + Valid acceptance = Valid contract
Contractual capacity
People with limited contractual capacity are:
○ Minors
○ Certain married persons
○ Insolvents
○ Mentally ill and Intoxicated people.
Married people
Three types of marriages:
Civil marriage
○ Done before a registered marriage officer
○ Most religious leaders are registered, so are most magistrates and some other officials.
○ Recognised as valid in SA
Religious marriage
○ Done according to religious rites with a religious leader
▪ Imam, rabbi, priest
○ If the religious leader is not registered, the marriage is not considered valid in SA, unless it is a Muslim marriage, which has been recognised as valid since CC case
▪ Women's Legal Center Trust v President of the Republic of SA and Others (2022)
Customary marriage
○ Recognition of Customary Law Marriages Act 120 of 1998.
▪ Recognises African Customary marriage as legal
▪ Can be polygamous.
Three different regimes
Marriage in community of property
○ The estate belonging to each spouse before the marriage, are merged into a single estate upon marriage, and they become joint owners of each other's estates.
○ General rule: Both spouses have full capacity to contract concerning the joint estate, without the consent of the other spouse.
○ Contractual capacity
▪ In terms of Matrimonial Property Act of 1984
□ Both parties have full contractual capacity, without the other's consent BUT there are certain exceptions where the consent of both spouses is required.
○ Exceptions:
▪ Formal consent
□ A written and signed consent witnessed by two witnesses.
1. Alienate or mortgage immovable property.
2. Enter into as a credit receiver.
◊ National Credit Act 2005
3. Bind him/herself as surety.
□ In case of (2) consent can be given by ratification. But must still be in writing (signed) before two witnesses.
□ Consent is not required for (2) & (3), if done in the ordinary course of the spouse's trade/business/occupation.
▪ Written consent
□ Alienate, cede or pledge any shares, insurance policies, fixed deposits, or any investments in a financial institution (financial investment assets)
No consent is needed to sell shares listed on JSE or to deal with a deposit in one's own name at a bank.
No is needed if done in connection with the spouse's trade/business/occupation.
□ Alienate or pledge jewellery, coins, paintings, etc. (capital assets)
□ Withdraw money held in the name of the other spouse at bank, building society or post office.
▪ Informal consent
□ Verbal consent.
1. Alienating or pledging household furniture and effects.
2. Receiving money due to the other spouse from
Their trade/business/occupation e.g. salary or pension
Inheritance
Donation
Bursary
Prize
3. Large donation from joint estate.
○ Remember
▪ If the act has not been listed in any of the categories above, then no consent is needed.
○ General rule: If a spouse enters into a contract without the required consent, it is going to be VOID.
▪ Transactions made without consent
□ If the third party (other party to the contract) does not know or could not reasonably have known that the required consent had not been given, then
the contract is valid.
□ If the contracting spouse knew that he or she would not get consent and the estate has suffered a loss, then an adjustment will be made in favour of the
other spouse upon dissolution of the marriage.
Marriage out of community of property
General Principles of Contract Page 1
, Marriage out of community of property
○ Exact opposite of ICOP
○ Each party retains their own separate estates, whatever they acquired before the marriage and whatever they individually acquire during the marriage.
○ Upon dissolution of the marriage, each party retains their own separate estates and neither is liable for the other person's debt and neither has a claim against the
other (children and maintenance is an entirely different issue)
Out of community of property with the accrual
○ Same as OCP, except for one difference:
○ The spouse, whose estate has shown the smaller accrual (growth), has the right to half of the difference between the accruals of both spouses upon dissolution
of the marriage.
○ Cash claim for the accrual.
○ Contractual capacity of spouses married under OCP and OCP with accrual:
▪ Each party has unrestricted power over their own assets/ with regard to their own estate.
▪ Neither party has power over the other spouse's estate.
▪ They are NOT liable for debts incurred by the other spouse - with one exception:
□ They are jointly liable for all household necessaries.
Terms
Alienate: Sell, mortgage, lease out (as lessor/landlord), given away.
Cede: Manner of alienating usually used for intangible assets.
Mortgage: You can borrow money to purchase immovable property and as security for a loan, you mortgage the property.
Pledge: Give something as security
Minors
A minor is an unmarried person, below the age of 18 (which is the age of majority/adulthood).
Minors cannot make4 decisions in their own right, therefore the law trusts their legal guardians to make the decision for the m, in their best interests.
Minor may enter into a contract with assistance.
○ Guardian enters into the contract on behalf of the minor
▪ The guardian signs the contract.
○ Minor enters into the consent with consent of the guardian
▪ Minor signs with her guardian's consent.
○ The guardian must consent to the contract before or at the time that the agreement is entered into.
Marriage
○ A minor becomes a major in marriage, regardless of their age.
○ If the marriage is dissolved, before the person turns 18, then the person remains a major.
Minors who have not been married or emancipated by the court "under the existing law"
Guardianship
Control over and the administration of the estate of a minor, as well as assistance in performing legal acts, such as contrac ting.
Custody: Who the child actually lives with and all minor decisions.
When you have a divorce case, one parent may have custody, however both parents are legal guardians.
Were/Are Married
○ The father and mother are equal guardians of a child born of the marriage.
○ Either parent, without consent from the other parent, can carry out the duties of guardianship.
○ Consent from both is required for:
▪ Marriage of the minor child.
▪ The adoption of the child (i.e. giving the child up for adoption)
▪ Removal of the child from South Africa (even if it is just for holiday)
▪ Application for passport, if they are a minor
▪ Alienation (selling, leasing, mortgaging - getting rid) of immovable property belonging to the child.
□ Selling of shares only requires the consent of one parent (not immoveable property)
Never married
○ Mother is the sole guardian.
○ Prior to the Children's Act 07, Fathers did not have automatic access or guardianship rights.
○ The Children's Act gives fathers equal guardianship rights with mothers, provided that:
▪ At the time of the child's birth the father and mother are living together in a permanent life partnership.
OR
▪ He has in some way acknowledged the child AND contributed to its maintenance and upbringing.
Infants
A child under the age of 7
Has no contractual capacity at all.
If they want to acquire rights and duties under contract, then it must be entered into by the guardian on their behalf.
Pupillus
A minor between the ages of 7 and 18 years old.
Have LIMITED contractual capacity.
Can make and sign contracts in their own name provided they are ASSISTED by their guardian.
Assistance: Guardian must CONSENT to the contract either before or at the time that it's entered into.
The consent can be expressed either verbally or written, it can also be implied.
To test, ask "Were they aware of the contract?" and "Did they show any objection?"
Guardians can sign on behalf of the minor but doesn't have to.
Effects
A duty assisted contract is:
○ Infans - made on behalf of the minor
○ Pupillus - made by the minor with the assistance of the guardian or on the minor's behalf by the guardian.
○ Roman-Dutch/Common law
Minor is bound and liable in terms of the contract, not the guardian.
Fully valid and enforceable against the minor
The only time the minor will not be bound by a duly assisted contract is if the contract was inherently prejudicial. The prej udice however must be substantial and not
trivial.
General Principles of Contract Page 2
, trivial.
○ The contract is valid (not void) but the contract can be cancelled.
Effects of an unassisted contract
If a minor contracts without the proper assistance of a guardian, then he is not bound under the law of contract.
Even if the contract is to the minor's benefit, he is not bound under the law of contract.
The contract is binding on the other party (the adult). As far as the other party is concerned, there is a valid contract.
Limping contract: The minor can chooses whether or not to enforce the contract.
The decision lies solely with the minor, and the adult is bound by the minor's choice.
Enforce the contract = Ratification
Not to enforce = Repudiation
Consumer Protection Act 2008
This only applies to certain types of agreement - mainly sale and lease and where the seller/lessor is someone who sells those goods and services in the ordinary course
of the business.
Voidable where the Act applies
Different from a limping and a void contract.
Repudiation
○ Minor not bound under law of contract and neither is other party (adult).
○ Effect: Contract becomes void. Minor can fully recover what they gave.
○ Other party recovers under unjustified enrichment.
○ It is as if the contract did not exist.
○ NEVER SAY "CANCEL"
○ If they paid out money through the use of legal action it is called CONDICTIO
○ REI VINDICATIO: things vindicated
○ Not the same as Restitutio in Integrum which is only applied to void contracts that are cancelled.
Ratification
○ The minor chooses to enforce the contract.
○ Effect: Both minor and the other party (adult) are bound by the contract and it is valid from time it was originally entered into.
○ If they want to validly ratify, while still a minor, they need the consent of a legal guardian (written, verbal or implied).
○ Ratification can be implied, verbal or written
Minor incurs valid legal obligations without assistance
When a minor enters into an unassisted contract, but it is not later ratified, then he will not be bound under the law of con tract.
He may be bound under some other area of the law.
○ Enrichment (Law of unjustified enrichment)
▪ Limping contract
▪ Has not been ratified
○ Delict/Fraudulent misrepresentation
▪ Legal term for a lie.
▪ Ways they can misrepresent themselves:
□ Pretend to be a major.
□ Pretend to have consent from a guardian.
□ Pretend they are married or emancipated.
▪ The other party is reasonably deceived and induced or enticed in entering into the contract and suffer a loss, then the minor will incur a legal obligation under
the Law of Delict.
○ Statutory exceptions
▪ Minor's contracts for which no assistance is required.
▪ There are a number of contracts that minors have the capacity to enter without assistance. Their capacity to enter these contracts derives not from common
law, but from statute.
○ Tacit emancipation
▪ Different from emancipation by the court under the Age of Majority Act.
▪ Done informally (no application to court needed).
▪ Occurs with the consent of the legal guardian of the minor.
▪ To be emancipated by the court they must be over the age of 18.
▪ Tacit emancipation normally occurs where a minor is allowed by a guardian to carry on some business or occupation. Therefore, the minor can enter into valid
contracts without the assistance of a guardian, but only in connection with his particular business or occupation - he can’t contract outside that sphere
without the consent of the guardian.
▪ Limited contractual capacity
▪ To determine whether TE has actually taken place, and the extent of the emancipation, you have to look at the facts of the case.
Liability of an unassisted minor in terms of Fraudulent Misrepresentation
Minor lied about their age
Lied about having consent from their guardians
Minor could incur obligations under the law of delict.
Insolvent
An insolvent is somebody who's estate has been sequestrated (order of bankruptcy) by the High Court in terms of the Insolvency Act.
Insolvency Act
His liabilities exceed his assets.
If someone has not been sequestrated by the High Court, then he is not an insolvent in the technical sense, and his capacity is not limited.
If someone is sequestrated, then the estate will be placed in the hands of a trustee. The trustee will sell the assets and di vide the proceeds among the creditors.
If the proceeds are greater than the liabilities, then the additional proceeds are given to the insolvent and the person is i mmediately reinstated.
They take everything except all household furniture, clothing and tools of trade.
If a couple is married ICOP and the husband gets sequestrated, then the wife is also sequestrated, as all assets and liabilities are jointly owned.
1. Insolvents may not enter into a contract in terms of which he disposes of assets in the insolvent estate.
2. Insolvent may not, without the written consent of the trustee, enter into contract which adversely affects the estate.
3. Insolvent may not, without the trustee's consent be involved in a business which is a general dealer or manufacturer.
Contracts in contravention are voidable at instance of trustee (not void). Contract is valid until the trustee chooses to cancel it and he may or may not choose to do so
depending on what is in the best interests of the creditors.
Mental illness or intoxication
Mental illness
All people are presumed to be sane, unless they have been claimed or declared mentally ill by the High Court, in terms of the Mental Health Act
If someone has not been declared mentally ill, the contract will be valid.
If a party wants out of the contract, then they have to prove mental illness.
General Principles of Contract Page 3
Thursday, 22 August 2024 20:33
For a contract to be valid and binding in law, ALL of the requirements have to be met, if one is missing then there will normally not be a valid contract and the court will ref use
to enforce it.
Contact will be void - can't sue.
Requirements:
1. The parties must have contractual capacity.
2. The parties must have a serious intention to contract.
3. The parties must communicate their intention to contract.
4. The parties must be of the same mind, i.e. no misunderstandings or mistakes.
5. The agreement must be lawful.
6. Performance of the contractual obligations must be possible.
7. The agreement must comply with any formalities (some contracts need to be written).
8. The agreement must be certain in its terms.
Valid offer + Valid acceptance = Valid contract
Contractual capacity
People with limited contractual capacity are:
○ Minors
○ Certain married persons
○ Insolvents
○ Mentally ill and Intoxicated people.
Married people
Three types of marriages:
Civil marriage
○ Done before a registered marriage officer
○ Most religious leaders are registered, so are most magistrates and some other officials.
○ Recognised as valid in SA
Religious marriage
○ Done according to religious rites with a religious leader
▪ Imam, rabbi, priest
○ If the religious leader is not registered, the marriage is not considered valid in SA, unless it is a Muslim marriage, which has been recognised as valid since CC case
▪ Women's Legal Center Trust v President of the Republic of SA and Others (2022)
Customary marriage
○ Recognition of Customary Law Marriages Act 120 of 1998.
▪ Recognises African Customary marriage as legal
▪ Can be polygamous.
Three different regimes
Marriage in community of property
○ The estate belonging to each spouse before the marriage, are merged into a single estate upon marriage, and they become joint owners of each other's estates.
○ General rule: Both spouses have full capacity to contract concerning the joint estate, without the consent of the other spouse.
○ Contractual capacity
▪ In terms of Matrimonial Property Act of 1984
□ Both parties have full contractual capacity, without the other's consent BUT there are certain exceptions where the consent of both spouses is required.
○ Exceptions:
▪ Formal consent
□ A written and signed consent witnessed by two witnesses.
1. Alienate or mortgage immovable property.
2. Enter into as a credit receiver.
◊ National Credit Act 2005
3. Bind him/herself as surety.
□ In case of (2) consent can be given by ratification. But must still be in writing (signed) before two witnesses.
□ Consent is not required for (2) & (3), if done in the ordinary course of the spouse's trade/business/occupation.
▪ Written consent
□ Alienate, cede or pledge any shares, insurance policies, fixed deposits, or any investments in a financial institution (financial investment assets)
No consent is needed to sell shares listed on JSE or to deal with a deposit in one's own name at a bank.
No is needed if done in connection with the spouse's trade/business/occupation.
□ Alienate or pledge jewellery, coins, paintings, etc. (capital assets)
□ Withdraw money held in the name of the other spouse at bank, building society or post office.
▪ Informal consent
□ Verbal consent.
1. Alienating or pledging household furniture and effects.
2. Receiving money due to the other spouse from
Their trade/business/occupation e.g. salary or pension
Inheritance
Donation
Bursary
Prize
3. Large donation from joint estate.
○ Remember
▪ If the act has not been listed in any of the categories above, then no consent is needed.
○ General rule: If a spouse enters into a contract without the required consent, it is going to be VOID.
▪ Transactions made without consent
□ If the third party (other party to the contract) does not know or could not reasonably have known that the required consent had not been given, then
the contract is valid.
□ If the contracting spouse knew that he or she would not get consent and the estate has suffered a loss, then an adjustment will be made in favour of the
other spouse upon dissolution of the marriage.
Marriage out of community of property
General Principles of Contract Page 1
, Marriage out of community of property
○ Exact opposite of ICOP
○ Each party retains their own separate estates, whatever they acquired before the marriage and whatever they individually acquire during the marriage.
○ Upon dissolution of the marriage, each party retains their own separate estates and neither is liable for the other person's debt and neither has a claim against the
other (children and maintenance is an entirely different issue)
Out of community of property with the accrual
○ Same as OCP, except for one difference:
○ The spouse, whose estate has shown the smaller accrual (growth), has the right to half of the difference between the accruals of both spouses upon dissolution
of the marriage.
○ Cash claim for the accrual.
○ Contractual capacity of spouses married under OCP and OCP with accrual:
▪ Each party has unrestricted power over their own assets/ with regard to their own estate.
▪ Neither party has power over the other spouse's estate.
▪ They are NOT liable for debts incurred by the other spouse - with one exception:
□ They are jointly liable for all household necessaries.
Terms
Alienate: Sell, mortgage, lease out (as lessor/landlord), given away.
Cede: Manner of alienating usually used for intangible assets.
Mortgage: You can borrow money to purchase immovable property and as security for a loan, you mortgage the property.
Pledge: Give something as security
Minors
A minor is an unmarried person, below the age of 18 (which is the age of majority/adulthood).
Minors cannot make4 decisions in their own right, therefore the law trusts their legal guardians to make the decision for the m, in their best interests.
Minor may enter into a contract with assistance.
○ Guardian enters into the contract on behalf of the minor
▪ The guardian signs the contract.
○ Minor enters into the consent with consent of the guardian
▪ Minor signs with her guardian's consent.
○ The guardian must consent to the contract before or at the time that the agreement is entered into.
Marriage
○ A minor becomes a major in marriage, regardless of their age.
○ If the marriage is dissolved, before the person turns 18, then the person remains a major.
Minors who have not been married or emancipated by the court "under the existing law"
Guardianship
Control over and the administration of the estate of a minor, as well as assistance in performing legal acts, such as contrac ting.
Custody: Who the child actually lives with and all minor decisions.
When you have a divorce case, one parent may have custody, however both parents are legal guardians.
Were/Are Married
○ The father and mother are equal guardians of a child born of the marriage.
○ Either parent, without consent from the other parent, can carry out the duties of guardianship.
○ Consent from both is required for:
▪ Marriage of the minor child.
▪ The adoption of the child (i.e. giving the child up for adoption)
▪ Removal of the child from South Africa (even if it is just for holiday)
▪ Application for passport, if they are a minor
▪ Alienation (selling, leasing, mortgaging - getting rid) of immovable property belonging to the child.
□ Selling of shares only requires the consent of one parent (not immoveable property)
Never married
○ Mother is the sole guardian.
○ Prior to the Children's Act 07, Fathers did not have automatic access or guardianship rights.
○ The Children's Act gives fathers equal guardianship rights with mothers, provided that:
▪ At the time of the child's birth the father and mother are living together in a permanent life partnership.
OR
▪ He has in some way acknowledged the child AND contributed to its maintenance and upbringing.
Infants
A child under the age of 7
Has no contractual capacity at all.
If they want to acquire rights and duties under contract, then it must be entered into by the guardian on their behalf.
Pupillus
A minor between the ages of 7 and 18 years old.
Have LIMITED contractual capacity.
Can make and sign contracts in their own name provided they are ASSISTED by their guardian.
Assistance: Guardian must CONSENT to the contract either before or at the time that it's entered into.
The consent can be expressed either verbally or written, it can also be implied.
To test, ask "Were they aware of the contract?" and "Did they show any objection?"
Guardians can sign on behalf of the minor but doesn't have to.
Effects
A duty assisted contract is:
○ Infans - made on behalf of the minor
○ Pupillus - made by the minor with the assistance of the guardian or on the minor's behalf by the guardian.
○ Roman-Dutch/Common law
Minor is bound and liable in terms of the contract, not the guardian.
Fully valid and enforceable against the minor
The only time the minor will not be bound by a duly assisted contract is if the contract was inherently prejudicial. The prej udice however must be substantial and not
trivial.
General Principles of Contract Page 2
, trivial.
○ The contract is valid (not void) but the contract can be cancelled.
Effects of an unassisted contract
If a minor contracts without the proper assistance of a guardian, then he is not bound under the law of contract.
Even if the contract is to the minor's benefit, he is not bound under the law of contract.
The contract is binding on the other party (the adult). As far as the other party is concerned, there is a valid contract.
Limping contract: The minor can chooses whether or not to enforce the contract.
The decision lies solely with the minor, and the adult is bound by the minor's choice.
Enforce the contract = Ratification
Not to enforce = Repudiation
Consumer Protection Act 2008
This only applies to certain types of agreement - mainly sale and lease and where the seller/lessor is someone who sells those goods and services in the ordinary course
of the business.
Voidable where the Act applies
Different from a limping and a void contract.
Repudiation
○ Minor not bound under law of contract and neither is other party (adult).
○ Effect: Contract becomes void. Minor can fully recover what they gave.
○ Other party recovers under unjustified enrichment.
○ It is as if the contract did not exist.
○ NEVER SAY "CANCEL"
○ If they paid out money through the use of legal action it is called CONDICTIO
○ REI VINDICATIO: things vindicated
○ Not the same as Restitutio in Integrum which is only applied to void contracts that are cancelled.
Ratification
○ The minor chooses to enforce the contract.
○ Effect: Both minor and the other party (adult) are bound by the contract and it is valid from time it was originally entered into.
○ If they want to validly ratify, while still a minor, they need the consent of a legal guardian (written, verbal or implied).
○ Ratification can be implied, verbal or written
Minor incurs valid legal obligations without assistance
When a minor enters into an unassisted contract, but it is not later ratified, then he will not be bound under the law of con tract.
He may be bound under some other area of the law.
○ Enrichment (Law of unjustified enrichment)
▪ Limping contract
▪ Has not been ratified
○ Delict/Fraudulent misrepresentation
▪ Legal term for a lie.
▪ Ways they can misrepresent themselves:
□ Pretend to be a major.
□ Pretend to have consent from a guardian.
□ Pretend they are married or emancipated.
▪ The other party is reasonably deceived and induced or enticed in entering into the contract and suffer a loss, then the minor will incur a legal obligation under
the Law of Delict.
○ Statutory exceptions
▪ Minor's contracts for which no assistance is required.
▪ There are a number of contracts that minors have the capacity to enter without assistance. Their capacity to enter these contracts derives not from common
law, but from statute.
○ Tacit emancipation
▪ Different from emancipation by the court under the Age of Majority Act.
▪ Done informally (no application to court needed).
▪ Occurs with the consent of the legal guardian of the minor.
▪ To be emancipated by the court they must be over the age of 18.
▪ Tacit emancipation normally occurs where a minor is allowed by a guardian to carry on some business or occupation. Therefore, the minor can enter into valid
contracts without the assistance of a guardian, but only in connection with his particular business or occupation - he can’t contract outside that sphere
without the consent of the guardian.
▪ Limited contractual capacity
▪ To determine whether TE has actually taken place, and the extent of the emancipation, you have to look at the facts of the case.
Liability of an unassisted minor in terms of Fraudulent Misrepresentation
Minor lied about their age
Lied about having consent from their guardians
Minor could incur obligations under the law of delict.
Insolvent
An insolvent is somebody who's estate has been sequestrated (order of bankruptcy) by the High Court in terms of the Insolvency Act.
Insolvency Act
His liabilities exceed his assets.
If someone has not been sequestrated by the High Court, then he is not an insolvent in the technical sense, and his capacity is not limited.
If someone is sequestrated, then the estate will be placed in the hands of a trustee. The trustee will sell the assets and di vide the proceeds among the creditors.
If the proceeds are greater than the liabilities, then the additional proceeds are given to the insolvent and the person is i mmediately reinstated.
They take everything except all household furniture, clothing and tools of trade.
If a couple is married ICOP and the husband gets sequestrated, then the wife is also sequestrated, as all assets and liabilities are jointly owned.
1. Insolvents may not enter into a contract in terms of which he disposes of assets in the insolvent estate.
2. Insolvent may not, without the written consent of the trustee, enter into contract which adversely affects the estate.
3. Insolvent may not, without the trustee's consent be involved in a business which is a general dealer or manufacturer.
Contracts in contravention are voidable at instance of trustee (not void). Contract is valid until the trustee chooses to cancel it and he may or may not choose to do so
depending on what is in the best interests of the creditors.
Mental illness or intoxication
Mental illness
All people are presumed to be sane, unless they have been claimed or declared mentally ill by the High Court, in terms of the Mental Health Act
If someone has not been declared mentally ill, the contract will be valid.
If a party wants out of the contract, then they have to prove mental illness.
General Principles of Contract Page 3
