Law of Contract defintions

Animus Contrahendi

Serious intention to create legally enforceable obligations

Consensus

Meeting of minds on material aspects

Agreement

Act of coming to a mutual decision/agreement

Contract

Agreement entered by 2 or more persons with the intention of creating a legal obligation recognized as binding in law

Delict

A wrongful and culpable act that causes harm to a person, personality or property

Unjustified Enrichment

Benefits that have conferred upon a party at the expense of another without a recognizable legal ground for the transfer of the benefit

Actual Subjective agreement (consensus)

Exists where all parties are not only of one mind as to the material aspects of the contract but are also conscious of their fact that their minds have met

Objective (apparent) agreement (Dissensus)

Exists where there is a discrepancy between the true intention and the expressed/ perceived intention but there appears to be an objective agreement created by one party’s conduct on which the other party reasonably relies

Acceptance

Clear and unambiguous declaration of intention by the offeree assenting to all terms of the proposal embodied in the offer

Pacta de contrahendo

A contract aimed at conclusion of another contract (“contracts about contracting”)

Option contract

Agreement restricting an offeror's right to revoke the offer for a certain amount of time and consists of offer to enter main agreement

Preference contracts

Agreement whereby one person binds themselves to give preference to another person should they decide to conclude some other specified agreement

Law of mistakes

Situations where parties are unaware of dissensus due to misunderstanding of intentions

Material Mistakes

agreement on the above (elements of consensus) then there is a material mistake which would exclude consensus

Non-material mistakes

Can influence a party's decision to enter the contract but does not affect consensus. Relates more to reason / motive for entering the contract (error in motive) but gives rise to a consensual contract

Direct Theory Reliance

Applies to situations where a party claims there was no agreement, in order to escape contractual liability

Iustus error doctrine

Applies to situations where the first party is mistaken and unawre about a material aspect of the contract and signs the document anyway, but the second party knows that the first party is mistaken and unaware

Contractual Capacity

Competence to perform a juristic act and be responsible for rights and obligations that flow from this act

Shifren principle

where there is a non-variation clause in a contract, parties are bound to this clause (because they both agreed to it) and consequently, oral variations are ineffective; any variation must be in writing

Ex Turpi Causa Rule

Neither party may claim in terms of the contract because no obligations were created - contract is invalid

Severance

Instances where a contract is only partially illegal - if against public policy then its void

Par Delictum Rule

Applies only to illegal contracts where parties are equally morally guilty and one party has already performed in terms of that contract

Contracts in restraint in trade

Agreement to limit someone’s freedom to carry on a certain profession, trade or business

Formalities for non-waivers

Formalities prescribed to grant the other party indulgence (waiver of rights)

Mora debitoris

Debtor without lawful excuse failed to perform a positive obligation on time, where this obligation is due, enforceable and capable of being performed (still possible to perform)

Mora creditoris

Where creditor culpable fails timeously to accept proper performance by the debtor or to co-operate with the debtor

Positive malperformance

Relates to content of performance (positive duty & negative duty)

Prevention of Performance

Where performance on either side becomes impossible after the conclusion of the contract owing to the fault of either the debtor or the creditor, the contract is not terminated but the party who rendered performance impossible is guilty of breach

Repudiation

A party to a contract commits the breach of repudiation when, by words or conduct, and without lawful excuse, they manifest an unequivocal intention to no longer be bound by the contract or by any obligation forming part of the contract

Specific performance

Court order compelling party to perform as they agreed to in terms of the contract

Exceptio non adimpleti contractus

Defense against an order for specific performance in terms of which a party is entitled to refuse to render their own performance until such time as the other party has performed in full

Cancellation

Extraordinary remedy available to an innocent party only in exceptional circumstances because it terminates the contract prematurely which was not the intention of the parties

Lex commissoria

A cancellation clause

Damages (and interest)

Compensation for any loss suffered due to the breach

Express Lex Commissoria

If a contract has a cancellation clause and the debtor misses the deadline, the creditor can cancel immediately by giving notice

Tacit lex commissoria

if there’s no cancellation clause exists, the creditor may still cancel if its tacitly agreed and the time is of the essence

Notice of recession

Notice stipulated = cancelled on that date

Notice not stipulated = termination will happen when the creditor tells the debtor about the cancellation

Mora ex re

Contract stipulates time for performance

Mora ex persona

No time stipulated in the contract

Enforcement and cancellation

Can claim one or the other (mutually exclusive remedies)

Damages (+ interest)

Can claim them in addition to the other remedies

Characteristics of a valid contract

1. A juristic act

2. Its bilateral

3. Entails reciprocity

4. Can be oral or in writing

5. Need not have a name

The two types of Dual Basis of contract in modern law

1. Actual subjective (consensus) agreement

2. Objective (apparent) agreement (dissensus)

Dual approaches In SA Law of Contract

1. Primary basis = will theory (consensus)

2. Secondary basis = reliance theory

Pacta sunt servanda

Meaning agreements are freely and seriously entered into must be honoured and enforced by courts

Requirements of valid offer

1. Firm

2. Clear and unambiguous

3. Consistent with the requirements

4. Complete

5. Communicated

Requirements of valid acceptance

1. Unconditional

2. Clear, certain and unambiguous

3. Offeree must accept

4. Animus contrahendi

5. Conscious response to the offer

6. Prescribed form by the offeror

Declaration theory (express)

States that contract occurs when the offeree expresses acceptance (when he signs/writes the letter of acceptance)

Reception theory (reaches)

States that the contract comes into being when the letter of acceptance reaches the address of the offeror

Expedition theory (posts)

States that a contract comes into being when the offeree posts his letter of acceptance

Information theory (reads)

States the contract comes into being then the offeror learn or reads the letter of acceptance

Cornerstones of Contract

1. Freedom of contract

2. Sanctity of a contract (Pacta sunt servanda)

3. Good faith

4. Privity of contract (not for third parties)

Misrepresentation

Form of misstatement - general assertion that does not accord with the true facts

Fraudulent misrepresentation

Intentional misrep where the person knew the statement wasn’t true and would influence other party to contract

Dolus dans (To prove misrep using restitutio in integrum)

Innocent party would have not contracted at all were it not for the misrepresentation

Dolus incidens (To prove misrep using restitutio in integrum)

Innocent party would still have contracted but on better terms (here, innocent party has the right to damages not rescission)

Negligent misrepresentation

Person making misrep didn’t know statement wasn’t true but a reasonable person in his position would have realised/ taken steps to verify

Innocent misrepresentation

Person making misrep didn’t know statement wasn’t true and a reasonable person in his position would also not have known/ realised it - get relief in reduction in the purchase price (Phame case)

Parol Evidence Rule

where parties intended their agreement to be fully and finally embodied in writing, evidence to contradict, vary, add or subtract from the terms of the writing is inadmissible