Prescribed Textbook Notes Law of Contract
First Semester
Table of Contents
1. INTRODUCTION: THE CONTRACT AS AN AGREEMENT THAT CREATES
OBLIGATIONS ........................................................................................................................ 5
1.1 Key Concepts: ............................................................................................................. 5
1.1 The Notion of Contract............................................................................................ 5
1.3 The nature of contract............................................................................................. 6
1.4 Contract and the law of obligations ...................................................................... 7
1.8 The basis of contract .............................................................................................. 7
Case Summary: Bourbon-Leftley v WPK (Landbou) Bpk 1999 1 SA 902 (K) ......... 9
1.2 The Requirements for a Valid Contract: ................................................................. 10
1.2 Requirements for a valid contract ....................................................................... 10
1.3 The Relationship Between Common-Law Rules of Contract Law and Consumer
Legislation ........................................................................................................................ 11
1.10 The Consumer Protection Act 68 of 2008 (CPA) .............................................. 11
17.1 Introduction to the Consumer Protection Act (CPA) ...................................... 12
17.2 The purposes of the CPA .................................................................................... 12
17.3 Interpretation of the CPA .................................................................................... 13
17.4 When does the CPA apply? ................................................................................ 14
17.6 The enforcement of the CPA .............................................................................. 15
2. CONSENSUS AS REQUIREMENT FOR CONTRACTUAL LIABILITY ........................ 16
2.1 Offer and Acceptance as an Indication of (actual) Consensus: ......................... 16
2.1 Introduction to Contract Formation .................................................................... 16
2.2 The offer .................................................................................................................. 16
2.3 The acceptance ...................................................................................................... 19
Case Summary: Seeff Commercial & Ind. Props. (Pty) Ltd v Silberman 2001 3 SA
952 (SCA) ...................................................................................................................... 24
2.2 The pre-contractual phase: pacta de contrahendo (options and rights of
preference), pre-contractual relationships: ................................................................. 25
2.4 Breaking off negotiations ..................................................................................... 25
2.5 Pacta de contrahendo ........................................................................................... 25
Case Summary: Oos-Vrystaat Kaap Bedryf Bpk v Van Aswegen 2005 (4) SA 417
(O) .................................................................................................................................. 34
Case Summary: Mokone v Tassos Properties CC 2017 5 SA 456 (CC) ................ 35
2.3 Contractual Liability in the Absence of (actual) consensus: .............................. 37
2.3.1 The impact of a mistake on consensus ........................................................... 37
Case Summary: Van Reenen Steel (Pty) Ltd v Smith 2002 4 SA 264 (SCA) ......... 43
Case Summary: Allen v Sixteen Stirling Investments (Pty) Ltd 1974 4 SA 164 (D)
........................................................................................................................................ 44
2.3.2 Theories of Contractual Liability in the Absence of Consensus ................. 46
1
,Prescribed Textbook Notes Law of Contract
First Semester
Case Summary: Saambou-Nasionale Bouvereniging v Friedman 1979 3 SA 978
(A)................................................................................................................................... 51
2.3.3 Doctrines that Impose Contractual Liability in the Absence of Consensus:
........................................................................................................................................ 53
(a) The iustus error – doctrine ................................................................................... 53
Case Summary: Du Toit v Atkinson's Motors Bpk 1985 2 SA 893 (A) ................... 56
(b) The Smith v Hughes – doctrine and quasi-mutual assent ............................... 57
Case Summary: Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA
234 (A) ........................................................................................................................... 59
Case Summary: Durban's Water Wonderland (Pty) Ltd v Botha 1999 (1) SA 982
(SCA) ............................................................................................................................. 60
(c) Estoppel................................................................................................................... 61
(d) Reconciling the doctrines ..................................................................................... 63
Case Summary: Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis ..................... 66
2.4 Improper Ways of Obtaining Consensus: .............................................................. 68
2.4.1 General ................................................................................................................. 68
2.4.2 Misrepresentation............................................................................................... 69
Case Summary: National Stevedores (Pty) Ltd v MV Afris Pioneer 2004 (3) SA 88
(N)................................................................................................................................... 75
Case Summary: Feinstein v Niggli 1981 (2) SA 684 (A) .......................................... 76
Case Summary: Extel Industrial (Pty) Ltd v Crown Mills (Pty) Ltd 1999 2 SA 719
(SCA) ............................................................................................................................. 77
Case Summary: Ranger v Wykerd 1977 2 SA 976 (A) ............................................. 78
2.4.3 Duress or metus ................................................................................................. 79
Case Summary: BOE Bank Bpk v Van Zyl 2002 5 SA 165 (K) ................................ 81
2.4.4 Undue Influence .................................................................................................. 82
Case Summary: Preller v Jordaan 1956 1 SA 483 (A) ............................................. 84
Case Summary: BOE Bank Bpk v Van Zyl 2002 5 SA 165 (K) ................................ 86
2.4.5 Other cases of improperly obtained consent; consumer law ...................... 87
Case Summary: BOE Bank Bpk v Van Zyl 2002 5 SA 165 (K) ................................ 89
3. Contractual Capacity ...................................................................................................... 91
5.1 Legal Capacity ........................................................................................................... 91
5.2 Contractual Capacity ................................................................................................ 91
5.3 Natural Persons ......................................................................................................... 91
5.3.1 Persons without contractual capacity................................................................... 91
5.3.2 Persons with Limited Contractual Capacity ......................................................... 92
5.3.3 Persons with Full Contractual Capacity ............................................................... 94
5.4 Juristic Persons ........................................................................................................ 94
5.5 The State ..................................................................................................................... 95
4. FORMAL REQUIREMENTS (Writing) ............................................................................ 96
6.1 Introduction: Formal Requirements (Writing) ....................................................... 96
2
,Prescribed Textbook Notes Law of Contract
First Semester
6.2 Formalities prescribed by law ................................................................................. 96
6.2.1 Prescribed formalities required for validity ........................................................... 97
6.2.2 Prescribed formalities required for enforcement against third parties ................ 98
6.2.3 Formalities in electronic contracts ........................................................................ 98
6.2.4 Diverse other statutory instances ......................................................................... 98
6.3 Formalities stipulated by the parties ...................................................................... 99
6.3.1 Creation of the contract ........................................................................................ 99
6.3.2 Variation of the contract: non-variation clauses and the Shifren principle ........ 100
6.3.3 Cancellation of the contract: non-cancellation clauses ..................................... 100
6.3.4 Limiting the Shifren principle .............................................................................. 101
6.3.5 Non-waiver clause .............................................................................................. 102
11.5.1.1 The integration aspect of the parol evidence rule ...................................... 104
3.9 Rectification ............................................................................................................. 105
Case Summary: Johnston v Leal 1980 3 SA 927 (A) ................................................. 106
Case Summary: Brisley v Drotsky 2002 4 SA 1 (SCA).............................................. 107
Case Summary: Van As v Du Preez 1981 3 SA 760 (T) ............................................. 108
Case Summary: Magwaza v Heenan 1979 2 SA 1019 (A) ......................................... 109
5. POSSIBILITY OF PERFORMANCE AS REQUIREMENT FOR CONTRACTUAL
LIABILITY ........................................................................................................................... 111
8.1 Possibility ..................................................................................................................111
8.1.1 The general rule: impossibility of performance prevents the creation of
obligations .....................................................................................................................111
8.1.2 Different types of impossibility .............................................................................111
8.1.3 Exceptional cases: liability despite impossibility ................................................ 113
8.1.4 The consequences of impossibility .................................................................... 114
Case Summary: Wilson v Smith 1956 1 SA 393 (W).................................................. 115
6. CERTAINTY OF PERFORMANCE AS REQUIREMENT FOR CONTRACTUAL
LIABILITY: .......................................................................................................................... 117
8.2 Certainty ................................................................................................................... 117
8.2.1 The general rule: uncertainty about what has to be performed prevents the
creation of obligations .................................................................................................. 117
8.2.2 The application of the certainty requirement: some practical examples ........... 117
8.2.3 The consequences of not meeting the certainty requirement ........................... 120
Case Summary: NBS Boland Bank Ltd v One Berg River Drive CC 1999 4 SA 928
(HHA) ............................................................................................................................... 121
Case Summary: Roazar CC v Falls Supermarket CC 2018 3 SA 76 (SCA)............. 123
7. LEGALITY AS REQUIREMENT FOR CONTRACTUAL LIABILITY ........................... 125
7.1 Introduction - Legality ............................................................................................ 125
3
, Prescribed Textbook Notes Law of Contract
First Semester
7.2 Illegal contracts that are void ................................................................................ 126
7.2.1 Public interest ..................................................................................................... 126
7.2.2 The conclusion, performance, and object of the contract must be lawful ......... 127
7.2.3 Specific examples of illegal or invalid contracts ................................................ 128
7.2.4 The consequences of a contract that is void for illegality .................................. 134
7.3 Illegal contracts that are valid but unenforceable .............................................. 136
7.3.1 Wagering and gambling contracts...................................................................... 136
7.3.2 Agreements in restraint of trade ......................................................................... 137
FIRAC Analysis: SA Bank of Athens Ltd v Van Zyl 2005 5 SA 93 (SCA) ................ 141
FIRAC Analysis: Barkhuizen v Napier 2007 5 SA 323 (CC) ...................................... 143
FIRAC Analysis of Beadica 231 CC v Trustees, Oregon Trust 2020 (5) SA 247 (CC)
......................................................................................................................................... 145
FIRAC Analysis of Basson v Chilwan 1993 (3) SA 742 (A) ....................................... 147
4
First Semester
Table of Contents
1. INTRODUCTION: THE CONTRACT AS AN AGREEMENT THAT CREATES
OBLIGATIONS ........................................................................................................................ 5
1.1 Key Concepts: ............................................................................................................. 5
1.1 The Notion of Contract............................................................................................ 5
1.3 The nature of contract............................................................................................. 6
1.4 Contract and the law of obligations ...................................................................... 7
1.8 The basis of contract .............................................................................................. 7
Case Summary: Bourbon-Leftley v WPK (Landbou) Bpk 1999 1 SA 902 (K) ......... 9
1.2 The Requirements for a Valid Contract: ................................................................. 10
1.2 Requirements for a valid contract ....................................................................... 10
1.3 The Relationship Between Common-Law Rules of Contract Law and Consumer
Legislation ........................................................................................................................ 11
1.10 The Consumer Protection Act 68 of 2008 (CPA) .............................................. 11
17.1 Introduction to the Consumer Protection Act (CPA) ...................................... 12
17.2 The purposes of the CPA .................................................................................... 12
17.3 Interpretation of the CPA .................................................................................... 13
17.4 When does the CPA apply? ................................................................................ 14
17.6 The enforcement of the CPA .............................................................................. 15
2. CONSENSUS AS REQUIREMENT FOR CONTRACTUAL LIABILITY ........................ 16
2.1 Offer and Acceptance as an Indication of (actual) Consensus: ......................... 16
2.1 Introduction to Contract Formation .................................................................... 16
2.2 The offer .................................................................................................................. 16
2.3 The acceptance ...................................................................................................... 19
Case Summary: Seeff Commercial & Ind. Props. (Pty) Ltd v Silberman 2001 3 SA
952 (SCA) ...................................................................................................................... 24
2.2 The pre-contractual phase: pacta de contrahendo (options and rights of
preference), pre-contractual relationships: ................................................................. 25
2.4 Breaking off negotiations ..................................................................................... 25
2.5 Pacta de contrahendo ........................................................................................... 25
Case Summary: Oos-Vrystaat Kaap Bedryf Bpk v Van Aswegen 2005 (4) SA 417
(O) .................................................................................................................................. 34
Case Summary: Mokone v Tassos Properties CC 2017 5 SA 456 (CC) ................ 35
2.3 Contractual Liability in the Absence of (actual) consensus: .............................. 37
2.3.1 The impact of a mistake on consensus ........................................................... 37
Case Summary: Van Reenen Steel (Pty) Ltd v Smith 2002 4 SA 264 (SCA) ......... 43
Case Summary: Allen v Sixteen Stirling Investments (Pty) Ltd 1974 4 SA 164 (D)
........................................................................................................................................ 44
2.3.2 Theories of Contractual Liability in the Absence of Consensus ................. 46
1
,Prescribed Textbook Notes Law of Contract
First Semester
Case Summary: Saambou-Nasionale Bouvereniging v Friedman 1979 3 SA 978
(A)................................................................................................................................... 51
2.3.3 Doctrines that Impose Contractual Liability in the Absence of Consensus:
........................................................................................................................................ 53
(a) The iustus error – doctrine ................................................................................... 53
Case Summary: Du Toit v Atkinson's Motors Bpk 1985 2 SA 893 (A) ................... 56
(b) The Smith v Hughes – doctrine and quasi-mutual assent ............................... 57
Case Summary: Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA
234 (A) ........................................................................................................................... 59
Case Summary: Durban's Water Wonderland (Pty) Ltd v Botha 1999 (1) SA 982
(SCA) ............................................................................................................................. 60
(c) Estoppel................................................................................................................... 61
(d) Reconciling the doctrines ..................................................................................... 63
Case Summary: Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis ..................... 66
2.4 Improper Ways of Obtaining Consensus: .............................................................. 68
2.4.1 General ................................................................................................................. 68
2.4.2 Misrepresentation............................................................................................... 69
Case Summary: National Stevedores (Pty) Ltd v MV Afris Pioneer 2004 (3) SA 88
(N)................................................................................................................................... 75
Case Summary: Feinstein v Niggli 1981 (2) SA 684 (A) .......................................... 76
Case Summary: Extel Industrial (Pty) Ltd v Crown Mills (Pty) Ltd 1999 2 SA 719
(SCA) ............................................................................................................................. 77
Case Summary: Ranger v Wykerd 1977 2 SA 976 (A) ............................................. 78
2.4.3 Duress or metus ................................................................................................. 79
Case Summary: BOE Bank Bpk v Van Zyl 2002 5 SA 165 (K) ................................ 81
2.4.4 Undue Influence .................................................................................................. 82
Case Summary: Preller v Jordaan 1956 1 SA 483 (A) ............................................. 84
Case Summary: BOE Bank Bpk v Van Zyl 2002 5 SA 165 (K) ................................ 86
2.4.5 Other cases of improperly obtained consent; consumer law ...................... 87
Case Summary: BOE Bank Bpk v Van Zyl 2002 5 SA 165 (K) ................................ 89
3. Contractual Capacity ...................................................................................................... 91
5.1 Legal Capacity ........................................................................................................... 91
5.2 Contractual Capacity ................................................................................................ 91
5.3 Natural Persons ......................................................................................................... 91
5.3.1 Persons without contractual capacity................................................................... 91
5.3.2 Persons with Limited Contractual Capacity ......................................................... 92
5.3.3 Persons with Full Contractual Capacity ............................................................... 94
5.4 Juristic Persons ........................................................................................................ 94
5.5 The State ..................................................................................................................... 95
4. FORMAL REQUIREMENTS (Writing) ............................................................................ 96
6.1 Introduction: Formal Requirements (Writing) ....................................................... 96
2
,Prescribed Textbook Notes Law of Contract
First Semester
6.2 Formalities prescribed by law ................................................................................. 96
6.2.1 Prescribed formalities required for validity ........................................................... 97
6.2.2 Prescribed formalities required for enforcement against third parties ................ 98
6.2.3 Formalities in electronic contracts ........................................................................ 98
6.2.4 Diverse other statutory instances ......................................................................... 98
6.3 Formalities stipulated by the parties ...................................................................... 99
6.3.1 Creation of the contract ........................................................................................ 99
6.3.2 Variation of the contract: non-variation clauses and the Shifren principle ........ 100
6.3.3 Cancellation of the contract: non-cancellation clauses ..................................... 100
6.3.4 Limiting the Shifren principle .............................................................................. 101
6.3.5 Non-waiver clause .............................................................................................. 102
11.5.1.1 The integration aspect of the parol evidence rule ...................................... 104
3.9 Rectification ............................................................................................................. 105
Case Summary: Johnston v Leal 1980 3 SA 927 (A) ................................................. 106
Case Summary: Brisley v Drotsky 2002 4 SA 1 (SCA).............................................. 107
Case Summary: Van As v Du Preez 1981 3 SA 760 (T) ............................................. 108
Case Summary: Magwaza v Heenan 1979 2 SA 1019 (A) ......................................... 109
5. POSSIBILITY OF PERFORMANCE AS REQUIREMENT FOR CONTRACTUAL
LIABILITY ........................................................................................................................... 111
8.1 Possibility ..................................................................................................................111
8.1.1 The general rule: impossibility of performance prevents the creation of
obligations .....................................................................................................................111
8.1.2 Different types of impossibility .............................................................................111
8.1.3 Exceptional cases: liability despite impossibility ................................................ 113
8.1.4 The consequences of impossibility .................................................................... 114
Case Summary: Wilson v Smith 1956 1 SA 393 (W).................................................. 115
6. CERTAINTY OF PERFORMANCE AS REQUIREMENT FOR CONTRACTUAL
LIABILITY: .......................................................................................................................... 117
8.2 Certainty ................................................................................................................... 117
8.2.1 The general rule: uncertainty about what has to be performed prevents the
creation of obligations .................................................................................................. 117
8.2.2 The application of the certainty requirement: some practical examples ........... 117
8.2.3 The consequences of not meeting the certainty requirement ........................... 120
Case Summary: NBS Boland Bank Ltd v One Berg River Drive CC 1999 4 SA 928
(HHA) ............................................................................................................................... 121
Case Summary: Roazar CC v Falls Supermarket CC 2018 3 SA 76 (SCA)............. 123
7. LEGALITY AS REQUIREMENT FOR CONTRACTUAL LIABILITY ........................... 125
7.1 Introduction - Legality ............................................................................................ 125
3
, Prescribed Textbook Notes Law of Contract
First Semester
7.2 Illegal contracts that are void ................................................................................ 126
7.2.1 Public interest ..................................................................................................... 126
7.2.2 The conclusion, performance, and object of the contract must be lawful ......... 127
7.2.3 Specific examples of illegal or invalid contracts ................................................ 128
7.2.4 The consequences of a contract that is void for illegality .................................. 134
7.3 Illegal contracts that are valid but unenforceable .............................................. 136
7.3.1 Wagering and gambling contracts...................................................................... 136
7.3.2 Agreements in restraint of trade ......................................................................... 137
FIRAC Analysis: SA Bank of Athens Ltd v Van Zyl 2005 5 SA 93 (SCA) ................ 141
FIRAC Analysis: Barkhuizen v Napier 2007 5 SA 323 (CC) ...................................... 143
FIRAC Analysis of Beadica 231 CC v Trustees, Oregon Trust 2020 (5) SA 247 (CC)
......................................................................................................................................... 145
FIRAC Analysis of Basson v Chilwan 1993 (3) SA 742 (A) ....................................... 147
4
