Business Law Summaries: Chapters 4 to 15 (LU3 to LU11)

Comprehensive vocabulary flashcards covering the core legal concepts, doctrines, Latin maxims, contract types, terms, breaches, and remedies across Learning Units 3 through 9 (Chapters 4 to 13) of commercial law.

Void Contract

A contract that never came into legal existence because one of the six essential requirements is missing, creating no rights or duties.

Voidable Contract

A contract where all six validity requirements are present, but consensus was improperly obtained through misrepresentation, duress, or undue influence; it remains valid and binding until set aside by the innocent party.

Wills Theory

The subjective theory of contractual liability holding that the basis of a contract is what the parties actually intended, meaning no true subjective agreement results in no contract.

Declaration Theory

The objective theory of contractual liability holding that a contract exists if the parties outwardly behaved as if they agreed, focusing entirely on their external conduct.

Reliance Theory

The secondary basis of contract in South African law where a contract can exist without true subjective agreement if one party reasonably relied on the other party's conduct.

Invitation to Do Business

A general display, price tag, brochure, or advertisement where the advertiser does not intend to be bound; the customer makes the actual offer and the seller accepts or rejects (Crawley v Rex).

Expedition Theory

The rule governing contracts concluded via post or courier, establishing that the contract is concluded at the exact time and place where the acceptance is posted.

Information Theory

The general rule for contract conclusion (applicable face-to-face, by telephone, or by fax) stating that a contract is concluded when and where the offeror becomes aware of or hears the acceptance.

Option

A contract in which the offeror agrees to keep an existing offer open for a fixed period, making that offer irrevocable during that timeframe.

Right of First Refusal

A contract where a person promises that if they ever decide to contract in the future, they will offer first to the holder; no offer exists at the time of making the promise.

Unilateral Mistake

A mistake where the parties are at cross purposes and perceive facts differently; it voids the contract only if the mistake is material and there was no reasonable reliance by the other party.

Common Mistake

A situation where both parties share the exact same mistaken belief about a fact; it renders the contract void with restitution if they would not have contracted had they known the truth.

Error in Negotio

A material mistake concerning the fundamental type or nature of the contract being concluded.

Error in Corpore

A material mistake concerning the identity of the contract's subject matter.

Error in Persona

A mistake concerning the identity of the other contracting party, which is material only if personal identity is significant to the contract.

Error in Qualitate

A non-material mistake concerning the qualities, attributes, or characteristics of the subject matter of the contract.

Caveat Subscriptor

The legal principle that a person who signs a written contract is generally bound by its terms even if they did not read them (George v Fairmead).

Rectification

A court order correcting a written document so that it accurately records the true underlying consensus previously reached by the parties.

Ratification

The approval after the fact of an unassisted contract entered into by a minor, made either by the guardian or by the minor upon attaining majority, rendering the contract binding.

Fraudulent Misrepresentation

An untrue statement of fact made by a party who knows it is false, does not believe it, or does not care whether it is true, with the intention to persuade; it renders the contract voidable and allows delictual damages.

Negligent Misrepresentation

An untrue statement of fact made by a party who believes it is true but fails to exercise the standard of care of a reasonable person in verifying it; it renders the contract voidable and allows delictual damages.

Innocent Misrepresentation

An untrue statement of fact made by a party who honestly believes it is true and took reasonable care; it renders the contract voidable but does not allow delictual damages.

Incidental Misrepresentation

A misrepresentation where the innocent party would still have contracted anyway, but on better terms; it does not allow rescission of the contract, though delictual damages may be claimed.

Duress

An unlawful or contrary to public policy threat of imminent or inevitable harm to a person, their family, or their property that induces reasonable fear and causes them to contract.

Undue Influence

An unscrupulous abuse of influence or trust that weakens a person's resistance and induces them to conclude an unconscionable contract not in their best interests (Preller v Jordaan).

Infans

A child under the age of $7$ who possesses zero contractual capacity, requiring a guardian to contract on their behalf; any contract entered into alone is void.

Pupillus

A minor between the ages of $7$ and $18$ who has limited contractual capacity; contracts concluded with guardian assistance are binding on the minor, while unassisted contracts are voidable at the option of the minor or guardian.

Restitutio in Integrum

The remedy of setting aside a contract and restoring both parties to their original pre-contractual positions by returning performances and benefits received.

Entrenchment (Non-Variation) Clause

A contractual clause providing that any subsequent variations to the contract must be in writing and signed by the parties; variations not complying with the clause are invalid (SA Sentrale Ko-op v Shifren).

Ascertainable Performance

Contractual performance that is not explicitly fixed at conclusion, but provides an objective mechanism, formula, or standard to work it out based on the maxim 'that is certain which can be made certain'.

Arbitrio Boni Viri

The legal requirement that a discretion granted to one party to determine or vary contractual performance must be exercised reasonably and honestly, rather than arbitrarily.

Generic Obligation

An obligation where the required performance is defined by selecting an item from a specified genus or class (e.g., choosing one horse from a stable).

Alternative Obligation

An obligation offering a choice between two or more distinctly named performances; if one becomes impossible, the remaining performance must be delivered.

Facultative Obligation

An obligation specifying a primary performance while allowing the debtor the option to substitute another; if the primary performance becomes impossible, the entire obligation falls away.

Supervening Impossibility

Objective impossibility of performance arising after the contract has been concluded, caused by events beyond the parties' control, which extinguishes the contract without breach.

Restraint of Trade

A contractual term restricting a party's freedom to carry on a trade, business, or profession; it is prima facie valid and enforceable unless proven contrary to public policy (Basson v Chilwan).

Ex Turpi Causa Non Oritur Actio

The common-law rule stating that no legal action can be based on a dishonourable or illegal cause, preventing enforcement of an unlawful contract.

In Pari Delicto Potior Est Conditio Possidentis

The rule providing that where both parties are equally guilty of illegality, the party in possession is in the stronger position, barring restitution unless relaxed to prevent unjustified enrichment (Klokow v Sullivan).

Severance

The judicial removal of an illegal or void term from a contract, leaving the remainder intact, provided public policy does not demand the entire agreement be void (Lion Match v Wessels).

Essentialia

The distinctive terms essential to classify and identify a contract as a specific contract type, which the parties must agree upon (e.g., the thing sold and the price in a sale).

Naturalia

Terms automatically implied into a contract by law based on its classification, which apply even if not expressly negotiated unless the parties vary or exclude them.

Incidentalia

Extra, specialized terms agreed upon by the parties that are neither essentialia nor naturalia.

Parol Evidence Rule

The rule establishing that a written document intended as the full record of an agreement cannot be contradicted, altered, or added to by outside extrinsic evidence.

Tacit Term

An unexpressed term read into a contract by a court to fill an unintended omission, based on necessity for business efficacy and passing the officious bystander test.

Suspensive Condition

A clause suspending the operation of contractual obligations until an uncertain future event occurs; if the event does not occur, the contract falls away.

Resolutive Condition

A clause providing that a contract binds immediately but terminates automatically upon the occurrence of an uncertain future event.

Suspensive Time Clause

A clause stipulating that performance of contractual duties is deferred until a specified future event or date that is certain to occur.

Resolutive Time Clause

A clause stating that the contract operates and binds the parties only until a certain future date or inevitable event is reached.

Supposition

A clause making the operation of a contract contingent upon the existence of a past or present state of affairs; if the fact does not exist, no contract exists.

Modus

An added contractual qualification directing how a received benefit or property must be used or performed; failure to comply constitutes a breach of contract rather than suspending its operation.

Penalty Clause

A clause fixing in advance the compensation or penalty payable upon breach; a court may reduce it if out of proportion to the loss under the Conventional Penalties Act 15 of 1962, s 3.

Acceleration Clause

A clause stipulating that all outstanding future instalments fall due immediately if the debtor defaults on a single payment.

Positive Malperformance

A form of breach where the debtor renders defective, incomplete, or improper performance, or performs an act prohibited by the contract.

Mora Debitoris

A form of breach consisting of culpable delay by the debtor in performing a due and enforceable obligation on time, where performance remains possible.

Mora Creditoris

A form of breach occurring when a creditor culpably fails to cooperate or accept performance tendered by the debtor, preventing the debtor from performing punctually.

Repudiation

Conduct by a debtor or creditor that leads a reasonable person to unequivocally conclude that the party does not intend to honour their contractual obligations (Tuckers Land v Hovis).

Specific Performance

A primary discretionary court order compelling a defaulting party to carry out the exact performance promised in the contract.

Interdict

A court order ordering a party to refrain from doing something (prohibitory interdict) or to perform an action (mandatory interdict) to prevent or stop a breach.

General Damages

Contractual damages awarded for financial loss that flows naturally and directly from the breach of contract.

Special Damages

Contractual damages for loss that does not flow naturally from breach, recoverable only if within the actual or presumed contemplation of the parties at conclusion.

Mitigation of Loss

The legal obligation requiring an innocent party to take reasonable steps to minimize and keep their financial loss resulting from a breach as small as possible.

Simple Joint Liability

A co-debtorship situation where each co-debtor is liable only for their pro rata share of a divisible contractual debt.

Joint and Several Liability (In Solidum)

A liability structure where each co-debtor is liable for the entire debt, giving the creditor the right to claim the full amount from any one debtor, who then has a right of recourse against the other co-debtors.

Stipulatio Alteri

A contract between two parties (stipulans and promittens) concluded for the benefit of a third party, who acquires rights under it upon accepting the benefit.

Cession

An agreement whereby a creditor (cedent) transfers a personal right to another party (cessionary) without requiring the debtor's consent.

Pactum de Non Cedendo

An agreement between a debtor and creditor prohibiting the cession of a right, valid only when supported by a legitimate interest that protects the debtor.

Novation

An agreement between the parties terminating an existing obligation and replacing it with a brand new obligation.

Delegation

A tripartite agreement whereby a debtor transfers contractual duties to a third party with the consent of the creditor, discharging the original debtor.

Assignment

A tripartite agreement where a third party replaces an existing party by taking over both their rights and their duties under the contract.

Compromise

An agreement settling a disputed obligation, which extinguishes the original claim and replaces it with the terms of the settlement.

Merger (Confusio)

The termination of an obligation by operation of law when the capacities of debtor and creditor of the same debt unite in the same person.

Set-Off (Compensatio)

The automatic extinguishing of mutual, liquidated, due debts between parties acting in the same capacity, up to the amount of the smaller debt.

Prescription

The extinction of a contractual debt by operation of law under the Prescription Act 68 of 1969 due to the expiration of a statutory time period.