UNIT 10: AGENCY, MULTIPLICITY AND THIRD-PARTY CONTRACTS

Explain the difference between divisible and indivisible performances

Performance is divisible if it can be physically or legally split into parts without losing its essential nature or value, allowing for partial performance or partial cancellation (Bob's Shoe Centre v Heneways Freight Services).

Conversely, performance is indivisible if it must be rendered as a single, complete unit, meaning partial performance constitutes a material breach.

Define simple joint liability and explain how debt is split

Where a contractual performance is physically or legally divisible, South African common law applies a strong presumption of simple joint liability (Vaal Reefs Exploration and Mining Co Ltd v Burger).

Each co-debtor is liable only for their proportionate pro rata share of the debt, requiring the creditor to sue each debtor individually for their specific portion.

 Define joint and several liability and the right of recourse

Under joint and several liability (in solidum), a creditor possesses the legal right to demand the entire debt from any single co-debtor (Vaal Reefs Exploration and Mining Co Ltd v Burger).

Full payment by one debtor discharges the obligation for all, granting the paying debtor an automatic right of recourse or contribution to recover proportionate shares from the other co-debtors.

Define collective joint liability for indivisible performances

When a contractual performance is physically or legally indivisible, co-debtors are subject to collective joint liability (Vaal Reefs Exploration and Mining Co Ltd v Burger).

Debtors must perform, and the creditor must demand performance, collectively as a single unit, leaving the creditor with no standing to sue any co-debtor individually.

Define privity of contract and state its delictual exception

The baseline rule of privity of contract dictates that agreements bind only the immediate contracting parties.

However, under the exception of delictual interference, an innocent party may sue a third party in delict for damages if that third party intentionally induced a contracting party to breach the agreement (Jansen v Pienaar).

Explain the doctrine of notice exception to privity of contract

Under the doctrine of notice (or knowledge doctrine), a third party who acquires property in bad faith—knowing that the seller previously promised a prior right over that property to another—is legally compelled to honor the prior contract (Jansen v Pienaar).

Distinguish between a contract of mandate and representation (agency)

A mandate is a bilateral contract where one party undertakes to perform a service for another, governing strictly their internal relationship (Joel Melamed and Hurwitz v Cleveland Estates).

Representation, by contrast, is the legal power regulating the external relationship with third parties, clothing the representative with authority to bind the principal.

Define the legal nature of authorisation

Authorisation is a unilateral juristic act of the principal that creates representative power (Joel Melamed and Hurwitz v Cleveland Estates).

It takes full legal effect without requiring the agent's consent, allowing a principal to validly authorize an agent who lacks full contractual capacity, such as a minor.

Distinguish express actual authority from tacit actual authority

Express actual authority arises from an explicit written or oral delegation of power from principal to agent (Hely-Hutchinson v Brayhead).

Tacit actual authority is implied from the principal's conduct and surrounding circumstances, establishing an objective meeting of minds that actual authority was conferred.

Explain ostensible authority under the Makate majority judgment

In Makate v Vodacom, the Constitutional Court majority established that apparent or ostensible authority is an active, independent source of contractual liability.

Distinct from estoppel, the third party does not need to prove prejudice; the principal is bound because their conduct objectively created a reasonable expectation of authority.

Explain ostensible authority under the Makate minority judgment (estoppel)

The concurring minority in Makate v Vodacom maintained that ostensible authority is identical to agency by estoppel.

To hold the principal liable under this view, a third party must strictly prove a representation of authority, reasonable reliance, and detriment or prejudice if the principal were allowed to deny authority.

Explain the "trappings of office" rule in corporate agency

Appointing an individual to a senior, publicly recognized organizational position creates a representation that they hold the authority usually attached to that role (NBS Bank v Cape Produce; Makate v Vodacom).

Under this trappings of office or "aura of authority" rule, the company bears the commercial risk of the officer's unauthorized transactions.

State the four strict requirements for a valid ratification

Retroactively validating an unauthorized act through ratification requires four elements (Vallaro obo BR v Road Accident Fund):

1. The agent professed to act as an agent at the time of contracting.

2. The principal was in existence and possessed legal capacity.

3. The transaction is legally capable of performance.

4. The principal ratifies the entire transaction (partial ratification is void).

Explain tacit ratification and state the capacity limit on curators

Tacit ratification is established when a principal, knowing of an unauthorized act, performs unequivocal conduct inconsistent with an intent to repudiate (Vallaro obo BR v Road Accident Fund).

However, a curator cannot ratify contracts made when capacity was completely absent (e.g. severe dementia), because ratification cures a lack of authority, not an absolute lack of capacity.

 Explain the two chronological stages of the undisclosed principal doctrine

The undisclosed principal doctrine operates in two distinct phases (Cullinan v Noordkaaplandse Aartappelmoere):

• Stage 1 (Pre-disclosure): The contract exists strictly between the agent and the third party, making the agent personally liable.

• Stage 2 (Post-disclosure): Upon discovering the principal, the principal may intervene to enforce the contract, and the third party acquires a reciprocal right to sue the principal.

State the election rule when an undisclosed principal is revealed

Because the liability of an agent and an undisclosed principal is alternative, the third party must make an irrevocable election once the principal is revealed (Absa Brokers v Stoltz; Natal Trading v Inglis).

Unequivocal conduct choosing to hold one party liable permanently extinguishes the right to sue the other, even if the chosen debtor defaults or becomes insolvent.

Distinguish between an undisclosed principal and an unidentified principal

In an undisclosed principal scenario, the agent contracts in their own name, completely hiding the existence of any agency (Capitec Bank v Coral Lagoon).

In an unidentified principal scenario, the agent explicitly discloses that they act on behalf of a principal, but withholds that principal's specific name or identity.

Define a stipulatio alteri and explain the double contract theory

A stipulatio alteri is a contract created for the benefit of a third party (Capitec Bank v Coral Lagoon).

Under the double contract theory, Contract 1 (between stipulator and promisor) binds the promisor to keep an offer open, while Contract 2 is born directly between promisor and third party only when the third party accepts the benefit.

State the requirements for third-party right vesting and the reciprocity rule

A third party's right under a stipulatio alteri only vests upon formal acceptance of the benefit and notification to the promisor (Capitec Bank v Coral Lagoon).

Under the reciprocity rule, the third party cannot accept rights without also accepting any reciprocal obligations or duties linked to those rights.

Explain the revocation window and the impact of the insolvency gap

Prior to third-party acceptance, a stipulatio alteri remains a mere offer that the contracting parties may mutually modify or revoke (Capitec Bank v Coral Lagoon). If a party enters liquidation or sequestration before acceptance (the insolvency gap), the offer falls into the insolvent estate and can be unilaterally revoked by the trustee.