Contracts 💚

Define Contract

An agreement between two or more people, intended to be enforceable by law

Three types of Contracts

Written, Spoken (verbal), and Tacit (understood or implied)

Define Parties of a Contract

Those people who have reached an agreement

List Elements of a contract

Offer & acceptance, Consideration, Intention, Capacity, Form, Genuine consent, Legality of purpose, Possibility of performance

Offer & Acceptance

Both parties must understand terms of contract to be the same thing

Consideration

Something of value must be

Intention

Intend for agreement to be legally bound

Capacity

Both parties must be legally able to enter contract (not under any influence)

Form

Any legal forms required must be completed

Genuine consent

Parties should not be forced or under threat to enter contract

Legality of purpose

Contract must not be for an illegal purpose

Possibility of performance

Must be possible for contract to be fulfilled

Contract format

1. Full names of parties to the contract

2. Details of agreement (details of payment if applicable)

3. Consequences if contract is broken

4. Signature of all parties with a date and place of signing

Contract Rights and Responsibilities

1. Fair practice

2. Contracts are binding and legally enforceable

3. Products must be in working condition

4. Breaches must be compensated

5. Cooling period to cancel contracts signed outside the place of business

6. Read fine print before signing

Fair practice

Terms must be transparent, contracts must be concluded voluntarily, and musn’t be misleading

Cooling period length

5 - 15 days

Plaintiff

A person who brings a case against another in a court of law

Defendant

An individual, company, or institution sued or accused in a court of law

Legally binding

Enforced by law

Contractual capacity

The ability of a person to enter into a contract

Employment Contracts

A contract that stipulates the behaviour of employees in the work place. Employers must provide employees a written contract of employment on the first day of work (at the latest). The contract has to be signed by the employer and the employee and regulates the terms and conditions of employment in regards to the employers compliance with labour law and company benefits

Items included in an employment contract

1. Job title and description

2. Remuneration

3. Benefits

4. Hours

5. Breaks

6. Leave

7. Termination

8. Details of employees

(Employment Contracts) Renumeration

Wage / salary package plus deductions for UIF (unemployment insurance fund), medical aid, and pension

(Employment Contracts) Benefits

Car allowance, contributions to medical aid or pension

(Employment Contracts) Hours

Hours of work and overtime agreements

Breaks

Tea and lunch breaks in compliance with employment conditions

Termination

Conditions in which contracts can be terminated by either party

Details of employee

Full name, address, contact, ID, income tax number

Defective contracts

Contracts that have a flaw that prevents them from being fully valid or enforceable by law

Contracts are defective when they are

Void, Voidable, and Unenforceable

Void contract

A contract that is invalid from the start. It has no legal effect and cannot be enforced

Voidable Contract

A valid contract that one party may legally cancel due to certain issues (misrepresentation, duress, or minor age)

Unenforceable Contract

A contract that is valid but cannot be enforced in court due to some legal technicality

Breach of Contract

A breach of contract is a failure, without legal excuse, to perform any promise that forms all or part of a contract.

Breach of Contract - Remedies Available

The injured party can either accept the breach and sue for damages or to reject it and sue for specific performance

Insurance Policy

Contract taken out by a person or business (the insured) to manage risk

Regular Premium (Usually monthly)

Paid to insurer so if loss or damage occurs in the future, the insurer will pay out the insured according to agreement made in the contract

Insurance

Short-term insurance taken incase an accident happens

Assurance

Long-term insurance for incidents

Excess

Portion paid by the insured before insurer pays

Example of Insurance

Car insurance, theft, household insurance

Examples of assurance

Life insurance, and death insurance

Another name for hire purchase agreement

Instalment agreement

Hire Purchase agreement

1. Purchaser pays a deposit

2. The item only becomes the property of the purchaser once all installments have been paid

Hire purchase agreement: What happens when a purchaser defaults on payments

Owner has a right to repossess the item

Lease

The form outlining an agreement between lessor and lessee that dictates how long an asset or property will be rented.

Typical Lease items

Land, furniture, equipment, machinery and property

Two parties of a lease agreement

Lessor and Lessee

Lease agreement

Covers an extended period of time known as the term.

Real estate term of lease

One year

Lease Renewal

Drawn up to in order to continue use of property after a lease ends as it does not automatically extend past the end of term

Renting

Short term arrangement of one party living in, or using, a piece of property owned by another party

Rent

Regular payment made to a landlord by a tenant leasing some type of property, like a house or apartment

Rent terms

Landlord has the right to change the terms of the rental agreement as they see fit

Outsourcing

A business practice in which a company hires a third-party to perform tasks, handle operations or provide services for the company

Example of Outsourcing

Spar Administrative Department

Outsourcing benefits/characteristics

• 3rd party providing the service is an expert in their field

• Fixed costs associated

• Cuts down on Administration for the owner/manager

• Only pays for services when they are needed

Franchising

One party (franchiser) grants another party (franchisee) the right to use its trademark or trade name as well as certain business systems and processes, to produce and market a good or service according to certain specifications

Costs of Franchising

• Initial lump sum payment

• Furnishing costs

• Management fee

• Royalties

• Advertising fee

Initial lump sum payment

Done to secure right to trade in the name of the business, it is valid for ten years and must be renewed

Turnkey operation

Franchiser assists with set up, management fee only payed then

Royalties

Payment for the use of the trademark, usually 5-10% of turnover

Advertising fee

Payment made towards the group advertising

Cooling off Period

A cancellation of contract that can be done without reason or penalty, the supplier is mandated to refund any payments within 15 business days

CPA

Consumer Protection Act

Cooling period minimum

5 days