Contracts of Sale
Thursday, 22 August 2024 20:35
Apply to all types of contracts, unless a specific type of contract has its own special rules. Not all
types of contracts have special rules but some do, for example Sale and Lease.
If an issue arises under a specific type of contract, and the contract does not have a special rule, then
the general principles of contracts apply.
A contract of sale is where one party undertakes to deliver a thing to another, in return for
payment.
People either bartered (traded) or bought and sold goods.
The main source of law for contracts of sale in Roman-Dutch law and judicial precedent
(interpreting and applying RDL), referred to as common law.
Contracts of sale are governed by the common law and by the Consumer Protection Act 2008.
Applies to transactions between suppliers who supply, sell, lease, provide the service etc., "in
the ordinary course of business and consumers who are NOT juristic persons with annual
turnover or net asset value above R2m.
Definition
A contract in which the seller agrees to deliver free and undisturbed possession of a thing to a
buyer in exchange for a payment of a purchase price.
Only possession is mentioned, not ownership.
The buyer expects that he will become the owner once the thing has been delivered and he
has paid the purchase price.
Common law does not require the seller to be the owner (or even to act on the authority of
the owner) for the contract of sale to be a valid contract.
It is important to distinguish between:
○ The validity of the contract of sale, and
○ The transfer of ownership from seller to buyer.
For the sale to be valid, all that is required is that the seller intends to permanently transfer
whatever rights he has to the item to the buyer.
If the seller does not intend to transfer his rights permanently, the contract will not be a sale
but another type of contract (probably a lease).
A seller who is not the owner cannot transfer ownership to the buyer.
○ Can transfer possession.
No one can transfer more rights in a thing than they have.
If the seller is the owner, the seller is expected to transfer ownership to the buyer.
Every seller must transfer his full rights in the thing to the buyer.
Owners must transfer ownership.
Ownership is not immediately and automatically transferred from the seller to the buyer.
Various requirements must be satisfied before ownership is transferred.
These requirements is stated under Passing of Ownership.
Although the law of sale does not require that the seller be the owner of property in order for
the sale to be valid, the law of sale does require that the seller give the buyer the 'undisturbed
use and possession' of the thing sold.
If the buyer's use and enjoyment is disturbed, because the seller was not the true owner and
the owner subsequently claims the property back from the buyer. The buyer is entitled to the
remedies available under the Implied Warranty against Eviction.
Essential requirements of a valid sale
All requirements are based on common law principles (Roman Dutch Law) and have not been
altered by the CPA. Principles are still applicable even in transactions that fall under CPA.
Intention to transfer free and undisturbed possession
To sell a thing, a person must do no more than undertake to transfer free and
Specific Contracts and Legislation Page 1
, ○ To sell a thing, a person must do no more than undertake to transfer free and
undisturbed possession to the other party - vacua possessio.
Agreement on subject matter of the sale.
Agreement on price.
○ The price must be in money or at least it must have a monetary component.
AND
○ The price must be fixed or the parties must have agreed upon some external method or
standard by reference to which the price can be ascertained.
Legal effects of a contract of sale
Passing of ownership
○ Common law principle applies to sales both in common law and those that fall under the
Act.
○ Sales does not necessarily transfer ownership, merely vacua possessio.
For ownership to be transferred the seller must himself be the owner AND the following
requirements must be met:
Delivery and intention to pass ownership
Delivery
Intention to pass ownership
If the sale is a cash sale, the courts usually decide that the seller intended ownership to pass
when both delivery and full and proper payment of the purchase price had taken place.
If the sale is a credit sale, the courts usually decide that the seller intended ownership to pass
on delivery alone, even though the full purchase price had not yet been paid.
A cash sale is a sale in which the parties agree that the buyer will pay the full purchase price
either before delivery or at the same time as delivery.
Cash includes hard currency (money), a cheque (provided it is not postdated, but the use of
cheques is becoming increasingly rare in South Africa) and payment by credit card (because it
is a financial institution that is providing credit, not the seller, the seller receives immediate
payment in full from the bank).
A credit sale is a sale in which the parties agree that the buyer will pay the purchase price (or a
portion of the purchase price) after delivery.
After delivery does not mean one minute, or even an hour, after delivery.
It is only a credit sale if the time given to the buyer to pay the purchase price is a ‘non-
negligible period’ after delivery.
If it is after delivery, but the time-lapse is negligible, it is a cash sale.
Based on existing case law, it seems that if the seller and buyer agree that payment must be
made on the same day (date) as delivery, this will be a non-negligible period, and the sale will
be a cash sale.
However, if the seller agrees that the buyer may make payment the day after delivery, this is
considered to be a non-negligible period, and the sale is a credit sale.
A sale that starts out life as a cash sale can become a credit sale if the seller agrees to give the
buyer an extension of time within which to make payment.
The moment the seller allows a sale to become a credit sale, the effect may be that ownership
will transfer immediately from the seller to the buyer.
The question of whether ownership has passed from the seller to the buyer is extremely
important in the real world.
The issue of whether ownership was transferred from the seller to the buyer has come up in
many cases.
One of the most common scenarios involves contracts for the sale of motor vehicles.
Remember, only the owner of a motor vehicle can transfer ownership.
If the owner has not transferred ownership, the possibility exists that the true owner will later
come forward to reclaim (vindicate) the car that was sold.
Immoveable property
Two requirements:
Specific Contracts and Legislation Page 2
Thursday, 22 August 2024 20:35
Apply to all types of contracts, unless a specific type of contract has its own special rules. Not all
types of contracts have special rules but some do, for example Sale and Lease.
If an issue arises under a specific type of contract, and the contract does not have a special rule, then
the general principles of contracts apply.
A contract of sale is where one party undertakes to deliver a thing to another, in return for
payment.
People either bartered (traded) or bought and sold goods.
The main source of law for contracts of sale in Roman-Dutch law and judicial precedent
(interpreting and applying RDL), referred to as common law.
Contracts of sale are governed by the common law and by the Consumer Protection Act 2008.
Applies to transactions between suppliers who supply, sell, lease, provide the service etc., "in
the ordinary course of business and consumers who are NOT juristic persons with annual
turnover or net asset value above R2m.
Definition
A contract in which the seller agrees to deliver free and undisturbed possession of a thing to a
buyer in exchange for a payment of a purchase price.
Only possession is mentioned, not ownership.
The buyer expects that he will become the owner once the thing has been delivered and he
has paid the purchase price.
Common law does not require the seller to be the owner (or even to act on the authority of
the owner) for the contract of sale to be a valid contract.
It is important to distinguish between:
○ The validity of the contract of sale, and
○ The transfer of ownership from seller to buyer.
For the sale to be valid, all that is required is that the seller intends to permanently transfer
whatever rights he has to the item to the buyer.
If the seller does not intend to transfer his rights permanently, the contract will not be a sale
but another type of contract (probably a lease).
A seller who is not the owner cannot transfer ownership to the buyer.
○ Can transfer possession.
No one can transfer more rights in a thing than they have.
If the seller is the owner, the seller is expected to transfer ownership to the buyer.
Every seller must transfer his full rights in the thing to the buyer.
Owners must transfer ownership.
Ownership is not immediately and automatically transferred from the seller to the buyer.
Various requirements must be satisfied before ownership is transferred.
These requirements is stated under Passing of Ownership.
Although the law of sale does not require that the seller be the owner of property in order for
the sale to be valid, the law of sale does require that the seller give the buyer the 'undisturbed
use and possession' of the thing sold.
If the buyer's use and enjoyment is disturbed, because the seller was not the true owner and
the owner subsequently claims the property back from the buyer. The buyer is entitled to the
remedies available under the Implied Warranty against Eviction.
Essential requirements of a valid sale
All requirements are based on common law principles (Roman Dutch Law) and have not been
altered by the CPA. Principles are still applicable even in transactions that fall under CPA.
Intention to transfer free and undisturbed possession
To sell a thing, a person must do no more than undertake to transfer free and
Specific Contracts and Legislation Page 1
, ○ To sell a thing, a person must do no more than undertake to transfer free and
undisturbed possession to the other party - vacua possessio.
Agreement on subject matter of the sale.
Agreement on price.
○ The price must be in money or at least it must have a monetary component.
AND
○ The price must be fixed or the parties must have agreed upon some external method or
standard by reference to which the price can be ascertained.
Legal effects of a contract of sale
Passing of ownership
○ Common law principle applies to sales both in common law and those that fall under the
Act.
○ Sales does not necessarily transfer ownership, merely vacua possessio.
For ownership to be transferred the seller must himself be the owner AND the following
requirements must be met:
Delivery and intention to pass ownership
Delivery
Intention to pass ownership
If the sale is a cash sale, the courts usually decide that the seller intended ownership to pass
when both delivery and full and proper payment of the purchase price had taken place.
If the sale is a credit sale, the courts usually decide that the seller intended ownership to pass
on delivery alone, even though the full purchase price had not yet been paid.
A cash sale is a sale in which the parties agree that the buyer will pay the full purchase price
either before delivery or at the same time as delivery.
Cash includes hard currency (money), a cheque (provided it is not postdated, but the use of
cheques is becoming increasingly rare in South Africa) and payment by credit card (because it
is a financial institution that is providing credit, not the seller, the seller receives immediate
payment in full from the bank).
A credit sale is a sale in which the parties agree that the buyer will pay the purchase price (or a
portion of the purchase price) after delivery.
After delivery does not mean one minute, or even an hour, after delivery.
It is only a credit sale if the time given to the buyer to pay the purchase price is a ‘non-
negligible period’ after delivery.
If it is after delivery, but the time-lapse is negligible, it is a cash sale.
Based on existing case law, it seems that if the seller and buyer agree that payment must be
made on the same day (date) as delivery, this will be a non-negligible period, and the sale will
be a cash sale.
However, if the seller agrees that the buyer may make payment the day after delivery, this is
considered to be a non-negligible period, and the sale is a credit sale.
A sale that starts out life as a cash sale can become a credit sale if the seller agrees to give the
buyer an extension of time within which to make payment.
The moment the seller allows a sale to become a credit sale, the effect may be that ownership
will transfer immediately from the seller to the buyer.
The question of whether ownership has passed from the seller to the buyer is extremely
important in the real world.
The issue of whether ownership was transferred from the seller to the buyer has come up in
many cases.
One of the most common scenarios involves contracts for the sale of motor vehicles.
Remember, only the owner of a motor vehicle can transfer ownership.
If the owner has not transferred ownership, the possibility exists that the true owner will later
come forward to reclaim (vindicate) the car that was sold.
Immoveable property
Two requirements:
Specific Contracts and Legislation Page 2
