Study Guide

# 2016 University of South Africa
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Printed and published by the
University of South Africa
Muckleneuk, Pretoria
PVL3702/1/2017–2019
70517703
3B2
CONTENTS
GENERAL OVERVIEW v
Study unit
NATURE AND BASIS OF CONTRACT 1
1 The nature of contract (introduction to the law of contract) 2
2 The basis of contract 8
3 Cornerstones of contract 12
4 The Consumer Protection Act 16
5 The impact of the Constitution 18
FORMATION OF CONTRACT 21
6 Offer and acceptance: the offer 22
7 Offer and acceptance: the acceptance 25
8 Pacta de contrahendo: options and rights of preference 28
9 Conflicting rights 38
10 Mistake/absence of consensus 41
11 Improperly obtained consensus: introduction 49
12 Misrepresentation 51
13 Duress 59
14 Undue influence 62
15 Commercial bribery 66
16 Consumer’s right to fair and honest dealing under the Consumer Protection Act 68
17 Legality: illegal contracts that are void 72
18 Legality: illegal contracts that are valid but unenforceable 76
REQUIREMENTS OF A VALID CONTRACT 79

19 Formalities 80
20 Possibility 83
21 Certainty 86
CONTENTS AND OPERATION OF A CONTRACT 89

22 Parties to contracts 90
23 Obligations and terms 93
24 Interpretation of contracts 99
(iii)
BREACH OF CONTRACT AND REMEDIES 103
25 Breach of contract: introduction 104
26 Mora debitoris 106
27 Mora creditoris 109
28 Positive malperformance 112
29 Repudiation 114
30 Prevention of performance 116
31 Remedies for breach of contract: introduction, and choices, alternatives and concurrent remedies 118
32 Remedies for breach of contract aimed at keeping the contract alive: exceptio non adimpleti
contractus and specific performance 121
33 Cancellation 125
34 Damages 127
35 Interdict and declaration of rights 131
TRANSFER AND TERMINATION OF RIGHTS AND OBLIGATIONS 133

36 Cession 134
37 Introduction to termination of obligations and termination by performance 137
38 Termination of obligations by agreement 140
39 Termination of obligations by operation of law 143
BIBLIOGRAPHY 146
(iv)
GENERAL OVERVIEW
In this study guide, we discuss the general principles of the law of contract,
which discussion broadly encompasses the principles underlying the law of
contract, the influence of the Constitution of the Republic of South Africa, 1996,
the requirements for a valid contract, the contents and interpretation of
contracts, breach of contract and the remedies for breach of contract, the
transfer of claims, ways in which obligations are terminated, and the Consumer
Protection Act 68 of 2008.
PURPOSE OF MODULE
In this module, we cover a wide variety of aspects of general contract law
principles. These principles are usually applicable to all contracts, to some
degree or another. However, many contracts have their own specific principles
and rules which are sometimes particular applications of the general principles
and sometimes completely unique to the type of contract in question. Although
reference may be made to certain specific contracts in the material for purposes
of illustration, the detailed study of specific contracts such as sale, lease or
suretyship is not part of this module. Nevertheless, a study of general contract
principles is not possible without reference to case studies involving specific
types of contracts to which these principles have been applied. The subjects
covered in the material are for the most part regulated by the common law, but
there are also references to important legislative provisions. This module is
essentially aimed at third-year students because of the complexity of the
contract law principles involved.
The purpose of this module is to teach you the general principles of the law of
contract as they have been developed by the courts and, in certain instances,
modified by statutory law. The purpose is furthermore to equip you with the
necessary knowledge, skills and competencies to interpret and apply the
positive law, as well as the statutory provisions where applicable, and to solve
practical problems by applying the general principles of the law of contract.
If you follow the study guide properly in conjunction with the prescribed
textbook and tutorial letters, work through all the activities in the study guide
and answer all the questions in the assignment, you should acquire the skills
that we require of you.
METHOD OF STUDY
There is a prescribed book for this module by Hutchison, D and Pretorius, CJ
(eds) entitled The Law of Contract in South Africa Cape Town: Oxford University
Press (2009). Your study material consists of this study guide, the prescribed
textbook and a number of cases which are listed under the heading
‘‘PRESCRIBED STUDY MATERIAL’’ in the study guide and in Tutorial Letter
101. All of these judgments, as well as further court decisions, are largely
discussed in the textbook and this study guide and therefore form part of your
prescribed study material. In the course of the year, additional material may be
(v)
prescribed in further tutorial letters. We cannot emphasise sufficiently that all
the prescribed material is very important. Everything forms an integral part
of the module and must be studied intensively for examination purposes.
The purpose of this study guide is to aid and guide you through the prescribed
textbook and to provide additional material for study purposes. In this study
guide, we shall provide you with instructions on how to work through the
textbook and determine what material is relevant and must be studied for
examination purposes, and what is background information and need only be
read carefully or is not required for purposes of this module and may be left
out altogether.
Examples from the textbook and study guide serve to illustrate the content of
the module. Examples are quite often taken from case law and can appear in
examination questions in the same or a slightly different form. The same applies
to the self-assessment questions in the text and at the end of each study unit.
These questions can be used to determine whether you understand the content
and whether you can apply it. The feedback that follows the self-assessment
questions can be used as a guideline to help you in this assessment process. If
you are unable to complete the self-assessment questions, you need to revisit
the basic study material and ensure that you understand the content in context.
You could consider creating a study journal in which you write down your
answers to the various activities and self-assessment exercises throughout the
study guide. The journal will be a valuable tool in assessing your own
understanding and skills in respect of the material, as well as your growth in
the module. The activities and self-assessment exercises may be reused in the
exams, but, in any event, they provide examples of the type of questions you
may expect in the exam.
MEANING OF ‘‘STUDY’’, ‘‘READ CAREFULLY’’AND ‘‘READ’’ IN THIS STUDY

GUIDE
In the study guide, we shall indicate to what extent you have to know and
understand the material presented in the prescribed textbook. The following
instructions have the following meanings:
‘‘Study’’ means you have to know and understand the indicated material for
examination purposes.
‘‘Read carefully’’ means that you only have to read a section of the material,
and do not have to study it for examination purposes. But do not leave the
particular section out, because it will help you to understand another section of
the work which you do have to know for examination purposes.
‘‘Read’’ means that you should read the indicated section of the material, but
that it will not be asked in the examination.
EXAMINATION
In preparing for your examination, it is important that you have a good grasp
and knowledge of the subject matter of this module. You must know the
general principles and rules of the law of contract and be able to apply them to
(vi)
practical scenarios. In the examination, you will be asked to deal with three
types of questions which will appear either in a multiple-choice or essay-
question format:
* straightforward theoretical questions where a systematic discussion of
aspects of the material is required
* problem-type questions where a practical scenario is given and you are
required to
– identify the legal issue or question raised
– discuss the relevant rules that may be applicable to these facts and to apply
the rules to the facts
– provide a solution to the problem
* critical assessment of a theoretical or practical approach, viewpoint and

differences of opinion where you are required to
– recognise the issue
– summarise the different viewpoints
– critically evaluate each viewpoint
– provide your own reasoned viewpoint
SUMMARIES
At the end of each study unit, you will find a reference to a summary of the
particular study material in the prescribed textbook. Note that the summary in
the textbook is not sufficient for examination purposes. The summary should
be consulted after you have studied the material to refresh your memory or
understanding of a particular section of the work.
(vii)
NATURE AND BASIS OF CONTRACT
1
STUDY UNIT 1
THE NATURE OF CONTRACT
(INTRODUCTION TO THE LAW
OF CONTRACT)
OVERVIEW
In this study unit, we introduce you to the concept of what a contract is, what its characteristic features are
and where it fits into the scheme of private law, and, more specifically, the law of obligations.Contracts give
rise to enforceable obligations, but so do other sources of obligation, such as delicts and unjustified
enrichment.Contracts must therefore be clearly distinguished from other sources of obligation. Although
contracts are usually referred to as agreements, not every agreement is a contract: for an agreement to be
binding in law, it must comply with certain requirements. So, for example, if you agree to accompany a friend
to a social event and cancel the arrangement at the last moment, you will not be liable for breach of
contract, because an essential element of a contract is missing, namely the intention to create an
enforceable contractual obligation when the agreement was entered into.
The purpose of this study unit is to enable you to
* explain what a contract is and how it differs from other agreements
* explain what the requirements for a valid contract are
* explain the nature or characteristic features of a contract
* explain what an obligation is
* distinguish and discuss contractual liability on the one hand and delictual liability and liability for
unjustified enrichment on the other
* explain the relationship between the law of contract and the passing of ownership
* understand the modern notion of contract
LEARNING MATERIAL
Prescribed textbook, chapter1, sections1.1^1.6.3.
CONTENT OF THIS STUDY UNIT

1 THE NOTION OF CONTRACT
1.1 Contract as an agreement to create enforceable obligations
Study section 1.1.1 of the textbook. At the outset, it is important to ascertain
what a contract is. Among other things, it is the key to understanding the
relationship between the law of contract and the law of obligations in general.
A contract is essentially an agreement to create enforceable obligations. Note
then that, generally, a contract is both an agreement and an obligation, but
remember that obligations are also derived from other sources, such as delicts,
as will be seen in due course.
2
1.2 Legally binding agreements that are not contracts
Study section 1.1.2 of the textbook. While some agreements are not contracts
because they are not intended to be legally binding, some other agreements,
although intended to be legally enforceable, are in fact not contracts. So,
contracts must be distinguished from other legally relevant agreements such as
real agreements whereby rights are transferred (transfer agreements) and
agreements which extinguish obligations (absolving agreements). Bear this
distinction in mind when you work through the relationship between the law of
contract and the law of property further on. Furthermore, obligationary,
absolving and real agreements may overlap to a greater or lesser extent and
occur more or less simultaneously. For example, suppose you walk into a shop,
put R10 on the counter and point to a packet of sweets. The proprietor takes the
money and hands over the sweets. In giving you the sweets, the proprietor
(1) accepts your tacit offer to buy the sweets (in other words, an agreement
creating obligations comes into existence)
(2) performs and thereby extinguishes the obligation in terms of which he or
she is obliged to deliver the sweets to you (that is an agreement
extinguishing obligations)
(3) transfers the ownership of the sweets to you (that is a real agreement)
Here, the act of delivery therefore had three effects: it created obligations,
extinguished an obligation and transferred a right.
1.3 Legally binding agreements that are more than just contracts
Carefully read section 1.1.3 of the textbook. Some legally binding agreements
are more than just contracts because they contain elements which give them a
specific character, the most obvious of which is marriage. Although these
agreements fall outside the scope of this module, you should read through this
section carefully so that you understand that some contracts are highly
specialised and often comprise much more than just agreements to create
obligations.
1.4 Definition of a contract

Study section 1.1.4 of the textbook. To constitute an enforceable contract, an
agreement must be one which the law recognises as binding on the parties, and,
to this end, the agreement will have to comply with further requirements set for
an enforceable contract. Take note, therefore, that an agreement does not
necessarily constitute a contract, and, as we have seen, that there is a clear
distinction between an agreement to create enforceable obligations (ie a
contract) and other types of legally relevant agreements (ie absolving and real
agreements).
2 REQUIREMENTS FOR A VALID CONTRACT

Study section 1.2 of the textbook. The requirements for a binding contract are
absolute, in the sense that they must all be complied with for the creation of a
valid contract. These requirements will be dealt with separately and in detail in
3
due course and make up the bulk of this module. Try at the outset, however, to
memorise the requirements for a valid contract: this will not only provide you
with an idea of what you are dealing with as you work through the material,
but also of what is to come and how the pieces of the puzzle ultimately fit
together.
Bear in mind, however, that the fact that the contract is valid when it is
concluded does not mean that it cannot be challenged subsequently. The
contract, or rather its operation, may, for example, be terminated because the
performance has become impossible or unlawful after formation of the contract;
or one of the contracting parties may cancel because of the other’s breach of
contract; or one of the parties may cancel the contract because of the other’s
misrepresentation, duress, undue influence or commercial bribery. However,
all these cases presuppose the existence of a valid contract. In brief,
impossibility of performance at the time the contract is entered into prevents
the creation of a valid contract, because one of the basic requirements is lacking;
supervening impossibility of performance, however, can only prevent the
continued existence of an existing contract, since all the basic requirements
were met at the time of conclusion of the contract. So, too, a material and
reasonable mistake will have the result that a contract is void (ie no contract
comes into existence), since it excludes the basic requirement for the existence of
a contract, namely consent. Misrepresentation, duress, undue influence or
commercial bribery, however, can only render a contract voidable (ie a contract
comes into existence but it may be terminated), because, in such a case, there is
consensus, so that the contract cannot be void, but the consent has been
obtained in an improper manner, rendering the contract assailable. The factors
that influence the existence of a valid contract, or its continued existence, will be
thoroughly dealt with in due course, so do not be concerned if these concepts
seem confusing at present. The important thing is merely to understand the
difference between void and voidable contracts.
3 THE NATURE OF CONTRACT

Study section 1.3 of the textbook. The concept of a contract covers a vast array
of transactions in terms of which two or more parties make promises or
undertakings to each other to render specific performances. Importantly,
however, while some contracts (especially large commercial transactions) may
be extensively negotiated, formalised in writing and signed, most contracts are
concluded informally and even tacitly (ie without the parties expressing their
agreement orally or in writing). So, interestingly, the filling of a car’s petrol tank
is no less a contract than buying a car or letting a house. This should give you
an idea of the multitude of contracts concluded on a daily basis and of the
general importance of the law of contract.
4 CONTRACT AND THE LAW OF OBLIGATIONS

4.1 The concept of obligation
Study section 1.4.1 of the textbook. The nature of an obligation as a juristic
(legal) bond or enforceable legal relationship between two or more legal
subjects forms the essence of this section. Pay careful attention to the fact that
4
obligations give rise to personal rights as opposed to real rights. These rights
are very different in nature and effect. This distinction is not only relevant to the
law of contract, but also the law of obligations in general, as well as the law of
property. Another important aspect of contractual obligations is that parties
usually fill the roles of both creditor and debtor, since, as a matter of course,
they have both a right to performance (creditor) as well as a duty to perform
(debtor) in terms of the contract. Carefully study the ‘‘Pause for reflection’’ box
in this section in this regard.
4.2 Contract and delict

Study section 1.4.2 of the textbook. Traditionally, the difference between a
contract on the one hand, and a delict and unjustified enrichment on the other,
is that, in the former instance, the parties usually voluntarily assume their
obligations, whereas, in the latter instances, the obligations are imposed by law
irrespective of the will of the parties. Note, however, that breach of contract and
a delict are very similar, in that they both constitute civil wrongs and, in
appropriate circumstances, give rise to a duty to pay damages. Also pay careful
attention to the fact that, sometimes, concurrent contractual and delictual
liability can arise, so that the plaintiff can sue on either basis. Table 1.1 provides
a useful comparison of contract, delict and enrichment which will help you to
grasp the distinction between these different forms of obligation at a glance.
4.3 Contract and enrichment

Study section 1.4.3 of the textbook. The useful key to distinguishing
contractual from enrichment liability lies in the question of whether or not a
transfer of wealth from one estate to another occurred pursuant to a valid legal
cause, such as a contract. Where such a ground is present in the form of a
contract, one is purely dealing with a contractual obligation; whereas, if it is
absent, one is dealing with an enrichment obligation. Refer again to table 1.1 in
this regard.
4.4 Contract and the law of property

Carefully read section 1.5 of the textbook. Carefully read section 1.5 as
background. However, the most important aspect of contracts and property
law relates to the passing of ownership in the case of void and voidable
contracts. Study this section of the study guide carefully.
Sometimes it is argued that a void contract can have no consequences
whatsoever, so that ownership can never pass to the other contracting party on
the strength of it, while a voidable contract can have consequences and can
therefore lead to the transfer of ownership. Thus where A delivers a thing to B
in terms of an invalid contract, it is argued that B does not become the owner;
hence A remains the owner and may consequently claim the thing with the rei
vindicatio from a third party, C, to whom B may have transferred it. If the
contract is merely voidable, on the other hand, B becomes the owner on
delivery and A will not be able to recover the thing from C with his or her rei
vindicatio if it has been delivered to him or her.
5
This argument will not bear up under scrutiny, however. A contract gives rise
to obligations, not to the transfer of ownership. Transfer of ownership is
effected, as we have seen, by a real agreement, for example by delivery or
registration. The real agreement may be entered into to discharge a contractual
obligation, but this is not necessarily the case. The mere fact that a void contract
does not give rise to an obligation does not mean that it cannot lead to the
transfer of ownership through a valid real agreement. Whether ownership
passes depends on whether all the requirements for the transfer of ownership
have been complied with. One of those requirements is that there should be a
iusta causa traditionis, and it is important to determine what this requirement
means. This is a question belonging, strictly speaking, to the law of property.
What is required for transfer of ownership, therefore, is not a valid contract
followed by delivery, but the intention to transfer ownership on the part of the
transferor and the intention to acquire ownership on the part of the transferee at
the time of delivery. Such an intention may be apparent even from a void
contract, for example where A delivers a car to B in terms of a contract of sale
which is void for some reason. A contract that is void may, therefore, lead to the
passing of ownership, and with that the distinction between void and voidable
agreements falls away as far as transfer of ownership is concerned. In this
regard, it is said that South African law follows an abstract system of transfer.
4.5 The development of the modern notion of contract

Carefully read section 1.6 of the textbook. Carefully read the entire section 1.6.
It will provide you with insight into how the modern notion of contract law
developed from Roman and Roman-Dutch law, and was further influenced by
English law. This section indicates that the development of the modern law of
contract was part of a historical process which culminated in or about the 19th
century. Of course, developments in contract law are ongoing and especially
the impact of the Constitution and other statutory law is of tremendous
importance in modern South Africa. These developments will be dealt with in
due course.
6
ACTIVITY
1 Describe the following concepts:
Contract
Juristic act
Personal and real rights
Obligation
Civil and natural obligations
Agreements creating obligations
Absolving agreements
Real agreements
2 List and very briefly explain the requirements for a valid contract.
3 Write a short note on contract obligations and the passing of ownership.
4 Briefly distinguish contracts from delicts and unjustified enrichment.
FEEDBACK
1 It is important that you know and understand each of these concepts from the outset.Without this
knowledge, you will find it difficult to study the rest of this module.
2 Although the requirements for a valid contract seem straightforward enough when reading through
them, it is far more difficult to memorise and explain them to another person. Remember that these
requirements will be dealt with in detail further on, but a bird’s-eye view should provide you with some
perspective on what constitutes a valid contract at this stage.
3 It is essential to note that South African law follows an abstract system of passing of ownership, so that,
even if an agreement is invalid, ownership in property may still be passed.
SUMMARY
Consult points 1–14 of ‘‘This chapter in essence’’ at the end of chapter 1 of the
textbook. Note that points 12–14 need only be read.
7
STUDY UNIT 2
THE BASIS OF CONTRACT
OVERVIEW
In this study unit, we address one of the most important and difficult questions of the law of contract, namely:
what is the reason that underlies the enforcement of contracts by the courts? In other words, why do certain
agreements bind the parties and carry the weight of the law behind them? Historically, in terms of Roman-
Dutch law received in1652, contracts were binding simply because the parties agreed to them. This is
referred to as a subjective approach to the determination of contractual liability. However, when the courts
were called upon to determine whether a party was bound by an agreement, they adopted an objective
approach under influence of English law. In the ensuing years, the courts proceeded to fluctuate between
subjective and objective approaches to contractual liability. The issues discussed in this study unit are fairly
complex, so don’t be surprised if, initially, they are difficult to grasp. Furthermore, most of the development
around the theories that underpin contractual liability occurred within the context of mistake, so we suggest
that you study study unit10 in conjunction with this study unit.You will find that these two study units overlap to
a large extent.

* explain what is meant by the basis of contractual liability
* explain what is meant by actual subjective agreement (consensus)
* explain what is meant by apparent or objective agreement
* explain the theories of contract that have influenced the South African law of contract
* explain whether the approach to contractual liability is subjective or objective
* explain the dual basis of contract in modern law
LEARNING MATERIAL
Smith v Hughes (1871) LR 6 QB 597.
Pieters & Co v Salomon 1911AD121.
South African Railways & Harbours v National Bank of South Africa Ltd 1924 AD 704.
Saambou-Nasionale Bouvereniging v Friedman 1979 (3) SA 978 (A).
Steyn v LSA Motors Ltd 1994 (1) SA 49 (A).

1 INTRODUCTION
Study section 1.7.1 of the textbook. This section merely reiterates the
fundamental question whether our law follows a subjective or objective
approach to the formation of contracts. The ensuing sections explore exactly
what is meant by these approaches to contract.
8
2 ACTUAL SUBJECTIVE AGREEMENT
Study section 1.7.2 of the textbook. Actual subjective agreement (consensus ad
idem) means that the parties are in complete agreement regarding the important
aspects of their contract; intend their agreement to be binding in law; and are
aware of each other’s intention in this regard. These elements of consensus are
very important not only for present purposes, but also for determining whether
one (or more) of the parties has laboured under a material mistake. A material
mistake excludes one of the elements of consensus and has the effect that a
contract based on actual agreement cannot arise. However, even if a material
mistake has occurred, the parties may yet be liable on the basis of, for instance,
the reliance theory. These concepts are further explored in study unit 10, but it
is essential for you already at this stage to note the effect of a mistake on
subjective agreement. Material mistakes are, however, the exception and not
the norm: in most instances, a party’s actions are an accurate reflection of what
they intend, and so most contracts are concluded on the basis of actual
agreement between the parties.
3 APPARENT OR OBJECTIVE AGREEMENT

Study section 1.7.3 of the textbook. Apparent or objective agreement implies
that, although the parties are not actually in agreement regarding the
conclusion of a contract (ie there is dissensus or a material mistake), the outward
manifestations of their intention (conduct) indicate that agreement has been
reached. For example, a party might sign a contractual document without
properly reading it and be confused as to its contents, or say one thing and
mean another, or one party might deliberately mislead the other into believing
that he or she has agreed to a contract with the former, while actually not
intending to be contractually bound. In these instances, there is no actual
agreement to speak of, but, outwardly, it appears as if the parties reached
consensus. We shall see that, sometimes, the law holds a party bound to a
contract, despite the lack of actual agreement, on objective grounds. So,
crucially, at this stage you must understand that, while most contracts are
based on agreement, in the absence of true agreement, sometimes contracts are
still found to exist on an objective basis.
4 THEORIES OF CONTRACT
Study section 1.7.4 of the textbook. In this section, three theories of contract,
namely the will theory (subjective approach), the declaration theory (objective
approach), and the reliance theory (considered to contain a mixture of
subjective and objective elements) are critically dealt with. There is evidence of
all three theories, in some form or another, in the South African law of contract.
How these theories have been applied in practice is dealt with in study unit 10
on the doctrine of mistake, but it is very important for you at this stage to be
able to distinguish between these approaches to contractual liability from a
theoretical perspective. Look carefully at table 1.2, for it provides a summary at
a glance of what these theories entail.
9
5 APPROACH TO CONTRACT: SUBJECTIVE OR OBJECTIVE?
Study section 1.7.5 of the textbook. As previously mentioned, there is evidence
of South African law subscribing to a subjective approach (will theory), an
objective approach (type of declaration theory), and the reliance theory (a
compromise objective approach). The law has fluctuated between these
subjective and objective approaches over the years, but, more recently, the
courts seem to have preferred the will theory as the primary basis of contractual
liability, but which is corrected in exceptional instances (where actual
agreement is lacking) by the reliance theory (secondary basis of contractual
liability). This section briefly traces the development of contract theory in
positive law. Take note of the discussion of the prescribed cases and the theory,
or theories, of contractual liability which they tend to reflect (Smith v Hughes
(1871) LR 6 QB 597; Pieters & Co v Salomon 1911 AD 121; South African Railways
& Harbours v National Bank of South Africa Ltd 1924 AD 704; Saambou-Nasionale
Bouvereniging v Friedman 1979 (3) SA 978 (A); Steyn v LSA Motors Ltd 1994 (1) SA
49 (A)).
6 DUAL BASIS OF CONTRACT IN MODERN LAW

Study section 1.7.6 of the textbook. This section confirms the preferred
approach to contractual liability in modern law: the will theory as
supplemented by the reliance theory. It is also important to note that the
reliance theory has risen to prominence because it tends to be more acceptable
as a compromise between a wholly subjective approach (only the will theory)
and a wholly objective approach (only the declaration theory). So, while the
courts accept that most contracts are based on actual agreement, there are
instances where, despite a lack of subjective agreement, a contract can
nevertheless be found to have arisen on the basis of reasonable reliance. For
details, refer to study unit 10.
7 PROVING THE EXISTENCE OF A CONTRACT

Study section 1.7.7 of the textbook. Here, you essentially have to know that the
onus of proving a contract rests on the party who alleges that it exists. This is
done by adducing (objective) evidence of either actual consensus (primary
basis) or reasonable reliance (secondary basis).
ACTIVITY
1 Distinguish between the will theory (subjective approach), declaration theory (objective approach) and
reliance theory (compromise approach containing subjective and objective elements).
2 Which theory, or theories, of contractual liability does South African law follow?
FEEDBACK
1 At this stage, you should be able to describe briefly what each of these theories entails, as well as how
they differ from one another.
10
2 Although it may seem fairly straightforward, this issue is still fairly controversial. Here, you must
remember that the courts have in fact fluctuated between subjective and objective approaches to
contractual liability. In all probability, the reasons for this phenomenon are historical: Roman-Dutch
law subscribed to a consensual approach, while English law probably generally adopted an
objective approach. The reliance theory, as a compromise between these two approaches, was also
received from English law (see Smith v Hughes (1871) LR 6 QB 597; Pieters & Co v Salomon 1911AD
121) and has exerted great influence on the question of contractual liability.The general consensus of
opinion in modern law is to accept that contracts are primarily based on actual agreement, but that,
further, where actual agreement is lacking, a contract may nevertheless be grounded in reasonable
reliance (Saambou-Nasionale Bouvereniging v Friedman 1979 (3) SA 978 (A)). Thus there seems to
be less emphasis on the declaration theory in recent times (see Steyn v LSA Motors Ltd1994 (1) SA 49
(A)), but remember that traces of a type of declaration theory do exist in case law (see South African
Railways & Harbours v National Bank of South Africa Ltd 1924 AD 704).
SUMMARY
textbook.
11
STUDY UNIT 3
CORNERSTONES OF CONTRACT
OVERVIEW
In this study unit, we address fundamental ideals and values that influence and shape the law of contract,
and the goals of contract law. The principles of freedom of contract, sanctity of contract, good faith and
privity of contract are underlying values that inform contract law. These concepts sometimes tend to come
into conflict with one another, producing tension that runs throughout the body of contract law. So, for
instance, while a person may freely choose to enter into a contract (freedom of contract), the principles of
good faith and equity may require that the contract be undone if the terms thereof are particularly onerous
or unfair and consequently in conflict with public policy. On the other hand, the goals of contract law relate
to its aims and function in society. Contract law strives to ensure that people keep their promises (contractual
undertakings) and to promote legal certainty by providing a framework within which they can transact with
one another. But, it also aims to promote fairness and reasonableness in contractual dealings.One can see
how the underlying values of contract law are also reflected in its goals. The cornerstones and goals of the
law of contract are important aspects of this module, and we shall see how they have shaped, and continue
to shape, the principles and rules (contract law doctrine) of this body of law.
* identify the cornerstones of contract

* explain the goals of contract
* explain what is meant by competing values in the law of contract
* explain the concepts of freedom of contract and sanctity of contract
* explain the concepts of good faith and equity in contract law
LEARNING MATERIAL
Printing & Numerical Registering Co v Sampson (1875) LR19 Eq 462.
Barkhuizen v Napier 2007 (5) SA 323 (CC).
Bank of Lisbon & South Africa Ltd v De Ornelas 1988 (3) SA 580 (A).
Sasfin v Beukes 1989 (1) SA1 (A).
Eerste Nasionale Bank van Suidelike Afrika Bpk v Saayman 1997 (4) SA 302 (SCA).
Brisley v Drotsky 2002 (4) SA1 (SCA).
Bredenkamp v Standard Bank of South Africa 2010 (4) SA 468 (SCA).
Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC).
12
1 INTRODUCTION: CORNERSTONES OF CONTRACT
Study the introduction to section 1.8 of the textbook. This section provides a
brief account of what the cornerstones or underlying values of the law of
contract are. These concepts are discussed in greater detail in the study material
that follows. Here, you should merely concentrate on identifying these
underlying values.
2 THE GOALS OF CONTRACT LAW

Study section 1.8.1 of the textbook. You will find useful summaries of the aims
of contract law in the ‘‘Pause for reflection’’ box and in the second paragraph of
section 1.8.1. You merely need to understand and briefly describe the goals of
contract law for purposes of this module.
3 COMPETING VALUES IN THE LAW OF CONTRACT

Study section 1.8.2 of the textbook. Freedom and sanctity of contract are
values that promote free choice in entering into contractual relations, as well as
certainty and the strict enforcement of contractual arrangements. However,
even if voluntarily entered into, a contract can sometimes have very harsh and
even unintended consequences for the individual. The values of fairness and
good faith provide a counterbalance to freedom and sanctity of contract and
emphasise reasonableness and fairness in contracting. Although freedom and
sanctity of contract are primary values in contract law, there are several ways in
which the courts temper these concepts to effect contractual justice in
appropriate circumstances. So, we see that the values of contract law tend to be
in a constant state of tension with one another, and it is the task of a court to
find a balance between the competing goals of certainty and fairness in a given
instance.
4 FREEDOM AND SANCTITY OF CONTRACT

Study section 1.8.3 of the textbook. Here, we examine in greater detail what
the concepts of freedom and sanctity of contract entail, and the emphasis placed
on them in what is commonly referred to as classical contract law. Note
carefully the features of classical contract law, for they still have relevance in
modern contract law. The main features of classical doctrine are that parties
have the utmost freedom in engaging in contractual relations with others
(freedom of contract), but, once freely entered into and if not contrary to public
policy, a contract should be enforced by a court of law to the hilt, irrespective of
patent unfairness to one of the parties. See, in this regard, the famous quotation
from the English case of Printing & Numerical Registering Co v Sampson (1875) LR
19 Eq 462 at 465. The idea was that the exchange was inherently fair, since it
was the product of negotiation between parties with equal bargaining power.
In modern law, it has become increasingly obvious that the assumed fairness of
the exchange and the equality of the parties are simply mythical, and that
absolute freedom of contract simply does not exist. Perhaps, where large
13
corporate entities contract with each other, the classical notions apply, but far
less so when private individuals are involved. Consumers, for instance, often
have very little leverage when entering into contracts: a person can usually
bargain for a better price at a retail store but not when entering into contracts
for essential services, such as electricity or water provision. So, although still
relevant in modern law, freedom of contract is not an absolute value. Note that
you do not have to study the references to English law near the end of section
1.8.3, but we do suggest that you at least read through them. Also note what the
Constitutional Court said in Barkhuizen v Napier 2007 (5) SA 323 (CC), discussed
in the ‘‘Pause for reflection’’ box.
5 GOOD FAITH AND EQUITY IN CONTRACT

Study section 1.8.4 of the textbook. Carefully observe how the concepts of
good faith and equity are applied in the modern law of contract. While
acknowledging the relevance of these concepts, the Supreme Court of Appeal
has frequently emphasised that a contract will not be struck down merely
because it is unfair or contrary to good faith. There have to be more tangible
indications of harm to public interest before a contract freely entered into will
not be enforced. But, while this court has generally tended to adopt a more
limited view of equitable doctrines, in Barkhuizen v Napier 2007 (5) SA 323 (CC)
the Constitutional Court seems to have made the concepts of reasonableness
and fairness the focus of an enquiry into what public policy requires within the
circumstances of a case, thus suggesting a more expansive role for these values
in modern contract law.
Carefully study the decisions of the Supreme Court of Appeal in Bank of Lisbon
& South Africa Ltd v De Ornelas 1988 (3) SA 580 (A), Sasfin v Beukes 1989 (1) SA 1
(A), Brisley v Drotsky 2002 (4) SA 1 (SCA) and Bredenkamp v Standard Bank of
South Africa 2010 (4) SA 468 (SCA), and contrast with the minority judgment of
Olivier JA in Eerste Nasionale Bank van Suidelike Afrika Bpk v Saayman 1997 (4) SA
302 (SCA), as well as the approach of the Constitutional Court in Barkhuizen v
Napier 2007 (5) SA 323 (CC) and Everfresh Market Virginia (Pty) Ltd v Shoprite
Checkers (Pty) Ltd 2012 (1) SA 256 (CC). These aspects are further discussed in
study unit 17 dealing with legality.
ACTIVITY
1 Briefly identify and discuss the cornerstones and goals of contract law.
2 What is meant by competing values in contract law?
3 Discuss, with reference to case law, the role and importance of the values of freedom and sanctity of
contract on the one hand, and good faith and equity on the other, in modern contract law.
FEEDBACK
1 At this stage, you should be able to briefly identify and describe what each of these concepts entails,
as well as the interrelationship between them.
2 The important thing to remember is that contract law is not influenced by only one set of values, but
14
reflects continuing tension between conflicting values which shape the way this body of law develops,
as well as how the courts approach contractual issues.
3 One must compare the stricter, more traditional approach which the Supreme Court of Appeal has
emphasised regarding the enforcement of transactions freely entered into (irrespective of unfairness)
and the more expansive approach suggested by the Constitutional Court (according reasonableness
and fairness a greater role in the concept of public policy).The question as to which direction case law
will develop is still uncertain, but, in Barkhuizen v Napier 2007 (5) SA 323 (CC), the Constitutional
Court seems to have made the concepts of reasonableness and fairness the focus of the enquiry into
what public policy requires within the circumstances of a case, at least suggesting a more expansive
role for these concepts in modern law.
SUMMARY
textbook.
15
STUDY UNIT 4
THE CONSUMER PROTECTION ACT
OVERVIEW
This study unit briefly deals with the Consumer Protection Act 68 of 2008, the primary purpose of which is to
afford protection to consumers from exploitation in the marketplace, and to promote their economic and
social welfare. The Act recognises a number of fundamental consumer rights to give effect to its aims, and,
amongst other things, either prohibits or limits certain terms in consumer contracts. In consequence, the Act
will play an enormous role in policing consumer contracts in South Africa and in ensuring that consumers get
a fairer deal than they have received thus far.

* explain the purpose and aims of the Act
* set out the fundamental consumer rights recognised by the Act, as well as how they are to be
protected and enforced
* explain the scope of the Act
* explain which contractual terms are prohibited in terms of the Act, and the effect thereof
* explain the effect of the concepts of reasonableness and fairness on consumer contractual terms in
terms of the Act
LEARNING MATERIAL
Prescribed textbook, chapter1, section1.9.

Study section 1.9 of the textbook. The Consumer Protection Act 68 of 2008 is
intended to effect greater reasonableness and fairness in specifically consumer
contracting. Its scope, however, is very wide and it applies not only to natural
persons, but also to a franchisee and a juristic person with an asset value or
annual turnover below a threshold of R3 million. Section 1.9 contains a
summary of the aims of the Act and how it seeks to achieve them, as well as
when it applies, what terms it prohibits, and the effect of the concepts of
reasonableness and fairness on consumer contract terms. You would do well to
study section 1.9 diligently. The Act will no doubt have a tremendous impact
on consumer transactions. You will find further details on, and references to,
the Act in the rest of the study material, where appropriate. You must note,
however, that the Act did not come into operation in October 2010 as originally
intended, but on 31 March 2011. Further note that the monetary threshold
applicable to a juristic person affected by the Act is R3 million.
16
ACTIVITY
Write a short essay on the Consumer Protection Act 68 of 2008, explaining its purpose and aims, the
fundamental consumer rights it recognises, the scope of the Act, which contractual terms it prohibits, and the
effect of the concepts of reasonableness and fairness on consumer contractual terms in terms of the Act.
FEEDBACK
Remember that the discussion in this study unit merely entails a brief introduction to the Act. Further details will
be discussed within the context of the general principles of contract law.You will see how the Act amends and
supplements the general principles of the law of contract.
SUMMARY
Consult point 24 of ‘‘This chapter in essence’’ at the end of chapter 1 of the
textbook.
17
STUDY UNIT 5
THE IMPACT OF THE
CONSTITUTION
OVERVIEW
This study unit examines the impact of the Constitution of the Republic of South Africa,1996, on the law of
contract. Although the matter has yet to be finally settled, it appears that the Constitution generally applies
indirectly to contractual relationships.You should refer to study unit 3 on the cornerstones of contract again
when working through this study unit.Constitutional issues are raised in that study unit as well, especially in
regard to the concepts of freedom and sanctity of contract, and equity in contract law.

* explain the effect of the Constitution of the Republic of South Africa,1996, on contract law
LEARNING MATERIAL
Bredenkamp v Standard Bank of South Africa 2010 (4) SA 468 (SCA).

Study section 1.10 of the textbook as well as the content of this study unit.
Although the interim Constitution, 1993, has been repealed, we suggest that
you nevertheless study the comments in the textbook in this regard. You will
probably come across a contract law case dealing with the interim Constitution
at some time or another, and such Constitution still provides a point of
reference for the Constitution itself. The crucial question is whether the
Constitution applies directly (ie whether the constitutionality of a contractual
term can be tested directly against a provision of the Constitution) or indirectly
to contractual relations (ie whether a contractual term offends public policy as
informed by the fundamental values enshrined in the Constitution). In
Barkhuizen v Napier 2007 (5) SA 323 (CC), the Constitutional Court preferred the
latter approach, which seems to be entirely appropriate.
Constitutional values may primarily impact on a contract by rendering some of
its provisions, or the entire contract, contrary to public policy (for being in
conflict with the Constitution), and thus invalid or unenforceable. But the
Constitution may also impact on contractual relations in other ways. One such
way is by possibly rendering invalid the exercise of a contractual power, such
as the right to cancel a contract. Note the important case of Bredenkamp v
Standard Bank of South Africa Ltd 2010 (4) SA 468 (SCA). It may also be possible
for a party to be compelled to contract with another where refusal to enter into
18
the contract amounted to unfair discrimination (compare Hoffmann v South
African Airways 2000 (11) BCLR 1211 (CC)).
It is apparent, though, that the full impact of the Constitution on the law of
contract has not been settled. Refer also to the diagram in figure 1.1.
ACTIVITY
Write a short essay explaining the effect of the Constitution of the Republic of South Africa,1996, on contract
law.
FEEDBACK
Your discussion of the effect of the Constitution on contract law should also include aspects discussed in study
unit 3 on the cornerstones of contract, since many of the concepts discussed there are relevant here. The most
important aspect, however, relates to the fact that it seems as if the Constitutional Court prefers an indirect
application of the Constitution to contractual relations. Also remember to explain how the Constitution can be
drawn into a contractual dispute, and cite some examples from case law.
SUMMARY
textbook.
19
FORMATION OF CONTRACT
21
STUDY UNIT 6
OFFER AND ACCEPTANCE:
THE OFFER
OVERVIEW
This and the next study unit deal with the legal constructs of offer and acceptance.These are useful tools that
are used to explain and analyse the process by which parties reach consensus, assuming that most
agreements are based on consensus (see, once again, study unit 2 in this regard).Contractual parties may
obviously express their intentions in any discernible manner, depending of course on the nature of the
contract in question. However, the courts often use the concepts of offer and acceptance to give some
concrete meaning to the conduct of the parties, and to determine when and if agreement has been reached.
Sometimes, however, there may be no real offer and acceptance to speak of (a contract may, for instance,
simply be based on reasonable reliance), so the facts of each case should not always be forced to fit into an
offer-and-acceptance mould.

* explain the general relevance of the rules of offer and acceptance in the law of contract
* explain what is meant by an offer, and what the legal effect of an offer is
* set out and briefly explain the requirements for a valid offer
* explain the impact of the Consumer Protection Act 68 of 2008 on offers to which it applies
* set out and explain the various categories of offers to the public
* explain the circumstances in which an offer terminates
* apply the relevant principles to practical problems
LEARNING MATERIAL
Prescribed textbook, chapter 2, sections 2.1^2.2.4.6.
Carlill v Carbolic Smoke Ball Co [1893] 1QB 256.
Crawley v Rex 1909 TS1105.
Bloom v American Swiss Watch Co 1915 AD100.

1 INTRODUCTION
Study section 2.1 of the textbook regarding the general meaning and relevance
of the rules of offer and acceptance for the law of contract. Note also the
overview in figure 2.1.
22
2 THE OFFER
Study sections 2.2–2.2.2.3 of the textbook. In this part of the work, you must be
able to describe briefly what an offer and its legal effect are, as well as what the
general requirements for an offer are.
3 THE CONSUMER PROTECTION ACT

Study section 2.2.2.4 of the textbook. The Consumer Protection Act introduces
further requirements regarding contracts to which it applies. You should briefly
be able to explain what they are.
4 OFFERS TO THE PUBLIC

Study sections 2.2.3–2.2.3.4. of the textbook. Offers are usually addressed to a
specific person, but that is most definitely not always the case. Offers may also
be directed to the public at large or to a segment of the public, and a contract
may be concluded with someone who responds to the offer. It may be difficult,
however, to determine whether a contract has arisen where a dispute exists
between the parties. Refer, here, to the example provided by the famous English
case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.
Advertisements can be especially problematic: consider, for instance, whether
an advertisement is merely a marketing ploy to attract business or an actual
offer to contract. To effect a measure of certainty, the courts have held that,
generally, an advertisement merely constitutes an invitation to do business
rather than an offer. See the discussion of Crawley v Rex 1909 TS 1105. On the
other hand, a promise of reward can constitute an offer to the general public.
See the discussion of Bloom v American Swiss Watch Co 1915 AD 100.
Auctions can also be rather tricky, and here you must study the differences
between simple auctions and auctions subject to conditions. Note also the
implications of the Consumer Protection Act in this regard.
5 TERMINATION OF AN OFFER
Study sections 2.2.4–2.2.4.6 of the textbook. Here, you must be able to state
and briefly explain the circumstances in which an offer terminates.
ACTIVITY
1 John offers to sell his only car to Jane. Does a valid contract of sale arise in the following circumstances?
(a) Where Jane accepts the offer, but the parties agree to determine the price at a later date.
(b) Where the price is determined, but the offer is jointly accepted by Jane and Fred.
(c) Where the price is determined and Jane accepts the offer, but requires that John install a new
compact disc player in the car.
2 Distinguish between a simple auction and an auction subject to conditions.
23
FEEDBACK
1 (a) No valid contract will arise because the offer is not definite and complete. The price is an
essential element of a contract of sale and must be determined or determinable upon
conclusion of the contract.
(b) No valid contract will arise because the offer is not jointly addressed to Jane and Fred, but to
Jane only, and therefore only Jane may accept it.
(c) No valid contract will arise because Jane’s ‘‘acceptance’’amounts to a conditional acceptance,
and that is tantamount to the offer being rejected and a counteroffer being made.
2 In the case of a simple auction, it is the bidder who makes an offer which the auctioneer may accept or
reject, while, in the case of an auction subject to conditions, it is the auctioneer who makes the offer as
regards the conditions to which the auction and the envisaged contract of sale are subject, and the
bidder who then makes an offer in regard to purchasing the particular article.The bidder’s offer in the
last-mentioned instance also serves as an acceptance of the auctioneer’s offer regarding the auction
conditions. Remember that the Consumer Protection Act also applies to auctions that are subject to the
Act.
SUMMARY
textbook.
24
STUDY UNIT 7
OFFER AND ACCEPTANCE:
THE ACCEPTANCE
OVERVIEW
The acceptance constitutes the other half of the mechanics of consensus and entails the declaration of the
offeree’s intention to be bound by the terms contained in the offer. In other words, the offeree’s acceptance is
the mirror image of the offeror’s offer. However, as mentioned in study unit 6, bear in mind that the rules of
offer and acceptance are not written in stone, and not every factual situation giving rise to a contract can be
forced to fit such a construction.
* explain what is meant by an acceptance, and what the legal effect of an acceptance is
* set out and briefly explain the requirements for a valid acceptance
* set out and explain the principles and rules applicable as to when and where acceptance takes effect
* explain briefly that, generally, negotiations may be broken off by a contractual party without
incurring liability
LEARNING MATERIAL
Prescribed textbook, chapter 2, sections 2.3^2.4.
Bird v Sumerville 1961 (3) SA194 (A).
Bloom v American Swiss Watch Co 1915 AD100.
Cape Explosives Works Ltd v South African Oil and Fat Industries Ltd; Cape Explosives Works Ltd v
Lever Brothers (South Africa) Ltd 1921CPD 244.
Smeiman v Volkersz 1954 (4) SA170 (C).
Pillay v Shaik 2009 (4) 74 (SCA).

1 INTRODUCTION
Study section 2.3 of the textbook. In many cases, an acceptance will be clear
and in as many words, but remember that it may also be tacit, such as when
items are purchased at a retail store without a word being spoken.
2 REQUIREMENTS FOR VALID ACCEPTANCE

Study sections 2.3.1–2.3.1.4 of the textbook. As in the case of offers, here you
must be able to describe briefly what an acceptance and its legal effect are, as
well as what the general requirements for an acceptance are. Familiarise
25
yourself with the discussion of Bird v Sumerville 1961 (3) SA 194 (A) and Bloom v
American Swiss Watch Co 1915 AD 100.
3 WHEN AND WHERE ACCEPTANCE TAKES EFFECT

Study sections 2.3.2–2.3.2.5 of the textbook. Since actual agreement is usually
considered to be the prime basis for contractual liability, it follows from the
elements of consensus (refer again to study unit 2) that the offeror must learn of
the offeree’s acceptance before a contract arises, and so that is usually the
moment when and the place where the contract arises. This represents the
information theory, which is considered to be the general rule. However, in the
case of postal contracts (and contracts by telegram), the courts adopted the
expedition theory, which provides that the contract comes into being when and
where the offeree posts the letter of acceptance. This theory was adopted from
English law in Cape Explosives Works Ltd v South African Oil and Fat Industries
Ltd; Cape Explosives Works Ltd v Lever Brothers (South Africa) Ltd 1921 CPD 244
and has been severely criticised, probably because it flies in the face of the will
theory. Note that the expedition theory applies only in certain circumstances,
notably where the offer is made by post (contrast Smeiman v Volkersz 1954 (4)
SA 170 (C)).
You must also take careful note of the effect of the Electronic Communications
and Transactions Act 25 of 2002, which provides that contracts concluded by
e-mail and other means of electronic communication are concluded at the time
when and place where acceptance of the offer is received by the offeror (the
reception theory).
4 BREAKING OFF NEGOTIATIONS

Study section 2.4 of the textbook. Although parties are generally free to break
off negotiations without legal consequences, bear in mind that, if a party has
brought the other party under the reasonable impression that consensus has
been reached, he or she may still be held contractually liable in terms of the
reliance theory (consult study unit 2 again).
ACTIVITY
1 Discuss the requirements for a valid acceptance.
2 Distinguish between the declaration theory, the expedition theory, the reception theory and the
information theory. Also indicate why the information theory is generally considered to be the most
appropriate. See if you can find practical examples of the application of each.
3 Thandi writes a letter to John offering him R35 000 for his speedboat, which letter she arranges to be
delivered to John. John decides to accept the offer and posts a letter of acceptance to Thandi. Before
the letter reaches Thandi, however, Jan offers John R37000 for his speedboat. John accepts Jan’s offer
and immediately telephones Thandi and tells her to ignore his letter. Thandi institutes action against
John for breach of contract. Did a valid contract arise between Thandi and John?
26
FEEDBACK
1 You should be able to name and discuss each of the different requirements. Always remember that the
acceptance must meet certain requirements before it can give rise to the formation of a contract
between offeror and offeree.
2 In terms of the declaration theory, the agreement is concluded once the offeree has expressed his or
her acceptance, that is, when he or she has written his or her letter; in terms of the expedition theory, the
agreement is concluded as soon as the offeree has posted his or her letter of acceptance; another
theory holds that the agreement comes into being when the offeror receives the offeree’s letter of
acceptance (the reception theory); and, finally, in terms of the general principle embodied in the
information theory, the agreement is concluded only when the offeror has been informed of the
acceptance ^ in other words, when he or she has read the offeree’s letter. The information theory is
derived from and reinforces the will theory, which is generally considered to be the primary basis for
contractual liability. But, while the information theory is regarded as the general rule, the controversial
expedition theory applies to postal contracts (and contracts by telegram), and the reception theory
applies to transactions governed by the Electronic Communications and Transactions Act 25 of 2002.
The declaration theory could, for instance, come into play where the parties have reduced their
agreement to writing and the document provides that the contract will arise when and where the
offeree signs the document; in other words, the offeror has dispensed with being notified of
acceptance.
3 A valid contract did not arise. Although Thandi expressed her offer by way of a letter, she did not
expressly or tacitly waive her right to be notified of possible acceptance. If she had posted the letter, it
would mean that the expedition theory would have applied and a contract would have been
concluded once John had mailed his letter of acceptance, but, since she did not, the general rule,
namely the information theory, will apply. A contract would therefore only have been concluded the
moment that Thandi had been notified of John’s acceptance. Since she had as yet not received and
read his letter, John was entitled to revoke his acceptance, with the result that there was no acceptance
of Thandi’s offer, and thus no valid contract arose.
SUMMARY
textbook.
27
STUDY UNIT 8
PACTA DE CONTRAHENDO:
OPTIONS AND RIGHTS
OF PREFERENCE
OVERVIEW
A pactum de contrahendo is a contract aimed at the conclusion of another contract. Although this
concept encompasses more, South African law essentially recognises two species or types of pacta de
contrahendo, namely the option contract, which is an agreement restricting an offeror’s right to revoke his
or her offer, and the contract of preference, which creates a preferential right to conclude a specific
contract should the grantor decide to conclude such a contract.

* discuss option contracts with reference to the following: description and requirements; consequences;
juristic nature; termination; formalities and cession of options
* discuss rights of preference with reference to the following: description and requirements; legal
nature and consequences of a right of pre-emption; and formalities concerning rights of pre-
emption
LEARNING MATERIAL
This study unit replaces chapter 2, section 2.5 of the prescribed textbook.We do suggest, however,
that you read section 2.5 of the prescribed textbook.
Brandt v Spies 1960 (4) SA14 (E).
Hirschowitz v Moolman 1985 (3) SA 729 (A). Owsianick v African Consolidated Theatres (Pty) Ltd
1967 (3) SA 310 (A).
Associated SA Bakeries (Pty) Ltd v Oryx & Vereinigte B�ckereien (Pty) Ltd 1982 (3) SA 893 (A).
28
1 OPTION CONTRACTS
1.1 Description and requirements
Contracting parties may enter into an agreement in terms of which the offeror
undertakes not to revoke his or her offer. In such a case, it is said that one party
grants the other an option. In essence, in the case of an option, we are dealing
with an offer which forms the subject matter of an agreement not to revoke a
substantive offer. The parties agree that the offeror will not revoke the offer,
either expressly or by implication, for example by offering the same thing to a
third party. It therefore amounts to the person granting the option, undertaking
to do nothing to prevent the coming into existence, through acceptance of the
offer by the grantee, of a contract capable of being performed (substantive
contract). The option contract must, however, comply with the requirements set
for contracts in general.
1.2 Definition
We could, therefore, define an option as an offer (substantive offer) reinforced
by an agreement (option contract) in terms of which the offeror (grantor)
undertakes as against the offeree (grantee) to keep open his or her offer (usually
for a specific period) to the offeree, or, to put it differently, in terms of which the
offeree acquires the power to consider and accept the offer (usually within a
specified time period). Options may be granted in regard to a variety of
contracts. It may be an option to buy, to hire, to do work, and so on.
Where A offers B an option, for instance to buy his or her farm, we are actually
dealing with two offers which can grow into two contracts on acceptance of the
various offers, that is
(1) an offer by A that B can purchase his or her farm for R300 000, subject to the
terms expressed in the offer
(2) an offer by A that the above-mentioned offer will remain open to B for a
certain period (A may stipulate a remuneration for this right, for example
R2 000.)
If B now accepts the second offer, an option contract is created forthwith, on the
one hand entitling A to the R2 000 and, on the other, binding him or her to keep
the offer to sell, open to B for the stipulated period.
1.3 Consequences of an option

If B accepts the first offer (offer (1) above) by exercising the option, a contract of
sale is created immediately. Nothing more is required of the grantor for the
formation of the contract of sale. Thus it was decided in Scott v Artus 1964 (3)
SA 384 (E) that a pactum de retrovendendo, that is, an agreement whereby the
seller can repurchase the merx (thing sold) within a certain period, also involves
an option, since
... it embodies the two essential characteristics of what is commonly
called an option to purchase – an offer to sell the property back to the
29
plaintiff, coupled with a binding agreement to keep that offer open for a
stipulated period of time. A contract of resale comes into being only if the
plaintiff accepts the offer before it lapses.
De Wet and Van Wyk (33–34) state that an offer is made irrevocable by
agreement (ie by the conclusion of an option contract). This means that an
attempted revocation of the substantive offer would have no legal effect. Van
der Merwe et al (3.3.2) state the following in this regard:
An offer can be made irrevocable only by means of an option contract.
[A] unilateral declaration by an offeror that the offer is irrevocable is
generally regarded as ineffective in our law.
Our courts also regard an offer supported by a pactum de contrahendo as

irrevocable (see Thompson v Van der Vyver 1954 (2) SA 192 (C)). There is,
however, the viewpoint that an option does not render the substantive offer
irrevocable, but that revocation (or denial) of the substantive offer will
constitute breach of the option contract, which should give rise to the normal
remedies available in the case of breach of contract. As it is possible, however,
to commit breach of contract, the fact that the offeror will be committing breach
of contract should he or she unilaterally revoke his or her substantive offer,
should not mean that he or she cannot revoke it, and, once he or she has
revoked it, there will no longer be an offer for the offeree to accept (cf Lotz 1988
THRHR 237). In general, however, the opinion of writers and the courts is that
an option renders the substantive offer irrevocable.
Nevertheless, it should also be mentioned that, in University of the North v
Franks [2002] 8 BLLR 701 (LAC) at 720, it was stated that
[w]here an offer is (either expressly or tacitly) stated to be irrevocable for
a given period and communicated to the offeree it becomes irrevocable
upon receipt unless the offeree rejects the irrevocability. To require a
mental acceptance would be meaningless in practice as that cannot be
evidenced. Such requirement would merely pander to theory. To require
notification of acceptance of the irrevocability would set a standard
which in normal business practice will not be followed and will be
regarded as rather foolish.
Whether such an approach will become generally accepted law, is uncertain at

this stage. In Oos-Vrystaat Kaap Bedryf Bpk v Van Aswegen 2005 (4) SA 417 (O),
the concept of an irrevocable offer was rejected, but without reference to the
Franks case.
1.4 Remedies for breach of an option

Breach of an option contract and the consequences thereof are governed by the
general principles of the law of contract. An attempted revocation of the
substantive offer does not prevent the exercise of the option, and the option
holder may enforce the contract specifically by means of an interdict against the
grantor of the option. The option holder may also claim damages, if suffered, to
place him or her in the position that he or she would have been in if the option
had been exercised (see study unit 34 regarding damages for breach of contract,
30
and you may also consult figure 2.3 in section 2.5.1.8 of the prescribed
textbook).
1.5 Juristic nature of an option

In Hersch v Nel 1948 (3) SA 686 (A), Davis JA stated:
An option has been analysed into an offer to sell together with an agreement to
keep that offer open for a certain time but perhaps a better way is to look at it
simply as an agreement between the giver and holder of the option by which
the giver has bound himself to sell a certain thing to the holder at a certain price
if the holder shall require him to do so within the time fixed by the option; by
this agreement the giver grants and the holder acquires a right to buy.
To regard an option, however, as a ‘‘right to buy’’ with a corresponding ‘‘duty
to sell’’ is to create the impression that the person granting the option is
contractually obliged to make the true offer to sell only at the stage when the
holder of the option wants to exercise the option, and that is not the case.
Moreover, the term ‘‘right to buy’’ is open to criticism from a legally scientific
point of view, as is the description ‘‘the grantee acquires the right to accept the
offer to sell’’ (Brandt v Spies 1960 (4) SA 14 (E)). The grantee has only a power to
accept the offer and not a subjective personal right to acceptance.
The option contract does give the grantee a personal right, but it is not so much
a ‘‘right to buy’’ as a right to claim that the offer be kept intact as against him or
her, the grantee, with a corresponding duty on the grantor to keep the offer
open to the grantee. The object of the right, the performance, is the maintenance
of the option as against the grantee for the duration of the option. The content
of the right is the power of the grantee to claim that the grantor shall do nothing
to prevent the coming into existence, through acceptance of the offer, of a
contract capable of being performed. It is this personal right which, as it were,
ensconces or entrenches the offer. The offer is the basis of the right and, as such,
offer and claim share each other’s fate as regards cession, termination, and so
on. The option as such is simply an election; an election to accept or not to
accept the entrenched offer.
The offer to sell and the offer not to revoke the offer to sell will normally occur
simultaneously, but there is no reason why this should necessarily be the case.
It may happen, for example, that the offer to sell is made first and that the
option contract is concluded later. However, confusion often arises where the
transactions are combined, and, where this happens, the word ‘‘option’’ serves
only as a name for this complex of juristic acts: an offer ensconced or backed by
an agreement from which at least one right arises, that is, the right to
maintenance of the offer (for a discussion of the nature of an option see Venter v
Birchholtz 1972 (1) 276 (A)).
1.6 Termination of options

1.6.1 Passage of time
Where the option contract fixes a time limit for the acceptance of the substantive
offer, the option lapses if it is not exercised within the prescribed period. What
31
the position is where no such time limit is fixed, has not yet been decided. It is
submitted that it must then be accepted that the parties intended the
substantive offer to be kept open for a reasonable time.
1.6.2 Death of the grantor or grantee

In general, it is accepted that an option is actively and passively transmissible
upon the death of the offeror or offeree. This means that, in principle, the option
does not automatically terminate upon the death of either the grantor or the
holder of the option. Unless the parties intended otherwise, the obligation to
keep the option open does not lapse with the death of the grantor (Beyers v
Beyers 1933 CPD 31; Major’s Estate v De Jager 1944 TPD 96). Whether the death
of the grantee terminates the option depends on whether the option is
transferable. If it is not, it lapses; if it is, it devolves on the grantee’s heirs. On
the question whether an option is transferable, see below regarding the cession
of an option.
1.6.3 Refusal
By his or her decision not to exercise the option, communicated to the grantor,
the grantee waives his or her right. The option therefore lapses on rejection.
1.6.4 Lapse of the right

The option will also lose its efficacy or terminate in any manner in which claims
are normally terminated.
1.7 Formalities concerning options

As we have already seen, two contracts come into play in the case of an option:
the option contract and the substantive contract created when the option is
exercised. Both must comply with the usual requirements for the formation of
contracts in general. Where, in terms of a particular statute, the substantive
agreement must comply with certain formalities, the question arises whether
the option contract must likewise comply with the formalities in question.
In particular, the question arises whether an option to alienate land must be in
writing and signed. Section 2(1) of the Alienation of Land Act 68 of 1981
provides as follows:
No alienation of land after the commencement of this section shall,
subject to the provisions of section 28, be of any force or effect unless it is
contained in a deed of alienation signed by the parties thereto or by their
agents acting on their written authority.
In Brandt v Spies (above), the defendant orally granted an option to the plaintiff
to purchase his farm. Disregarding the option, he sold the farm to a third party.
The plaintiff, who had exercised the option in writing, then claimed damages
for breach of contract, but an exception to his claim was upheld. The court
stated as follows:
32
If the offer is not in writing there is nothing which the offeree can accept
so as to create a vinculum iuris between himself and the offeror. An
undertaking to keep open an offer which is incapable of forming the basis
of a valid contract can itself confer no right upon the grantee for in law
there is nothing to keep open.
This judgment, it is submitted, is correct in the case where the offer to sell and
the offer to keep the first offer open are made simultaneously and orally. As
regards the contract of sale, both offer and acceptance must be in writing in
accordance with the above-mentioned legislation, and the offer has been made
orally in such a case. However, what of the case where the offer to sell is made
in writing on one occasion and is later followed by an oral offer to keep the offer
to sell open? The Act provides that no alienation of land will be valid unless it is
reduced to writing. The option contract which comes into question with the
acceptance of the oral offer is not an alienation of land and, consequently, one
can conclude that it need not be in writing. What must be in writing is the offer
to sell.
In Hirschowitz v Moolman 1985 (3) SA 729 (A), the court, however, held that, as a
general rule, pacta de contrahendo must conform to any formalities prescribed for
the substantive contract, including option contracts relating to the purchase of
land. This case dealt with a right of pre-emption and therefore the statement of
the court must be regarded as obiteras far as options are concerned. As stated
above, there seems to be no compelling reason why options relating to such
contracts must comply with section 2(1) of the Act in question.
Since the exercise of the option is nothing but an acceptance of the substantive
offer to sell, it is obvious that it must also be in writing before a contract of sale,
in writing, is created. Subject to the usual exceptions, this acceptance is binding
only when it has been communicated to the offeror (grantor of the option). The
communication of acceptance need not, however, be in writing (Hersch v Nel
above).
1.8 Cession of options

As a rule, claims may be freely ceded. The claim arising from the option
contract in this case, however, is so closely related to the substantive offer that
the question whether it may be ceded must be rendered dependent on the
intention of the grantor: if it was his or her intention that the option would be
open to the grantee alone, then the option cannot be ceded; if it is immaterial to
him or her who exercises the option, the grantee or a third person, it may in fact
be ceded. The intention must be established in the usual manner (in this regard,
see study unit 3), and an important consideration will naturally be whether the
identity of the person who will be obliged to render the counterperformance if
the option is exercised is of any importance to the grantor. Thus the following
was alleged in Hersch v Nel (above):
... an option to obtain a loan would obviously stand on an entirely
different footing from an option to buy for cash. And for the same reason
an option to buy on credit also stands on a different footing I come to the
conclusion that where there is nothing in the option to show the
intentions of the party, an option to purchase for cash is ordinarily
capable of being ceded.
33
(See further Dettman v Goldfain 1975 (3) SA 385 (A).)
Normally, the cession of an option need not be in writing. Section 1 of Act 68 of
1957 provided, however, that a cession in respect of land or any interest in land
had to be in writing and signed. An option in regard to land, being an offer to
which a claim is attached, surely represents an interest in land and it could
therefore be argued that such option could only be ceded in writing. The words
‘‘or cession’’ appearing in section 1 of Act 68 of 1957 have, however, been
omitted from section 1(1) of Act 71 of 1969 and from section 2(1) of Act 68 of
1981; consequently, it is clear now that the cession of an option in respect of
land need not be in writing.
Thus far, options granted by the prospective seller have been discussed. The
prospective purchaser acquires a personal right to have the offer kept open. The
decision whether a contract of sale will be created or not rests with the
purchaser.
An option may, of course, also be granted by the prospective purchaser. This is
the converse of the above. Here, it is the prospective purchaser who makes the
offer to purchase and supports it with an undertaking to keep it open to the
prospective seller. The decision whether a contract of sale will be created rests
exclusively with the seller. He or she is entirely free to disregard the option and
sell the thing to a third party; that is, the prospective seller acquires a right (ie
that the person granting the option may not revoke his or her offer, for
example), but the prospective purchaser does not also acquire a right as a
matter of course. The prospective purchaser acquires a right only if he or she
specifically stipulates such a right, for example a right of preference of some
kind or other, as discussed below.
2 RIGHTS OF PREFERENCE
2.1 Description and requirements
A right of preference is another type of pactum de contrahendo, in terms of which
one of the prospective contractants is granted a preferential right to conclude a
contract with the other prospective contractant. The rules governing rights of
preference are well illustrated by the rules relating to rights of pre-emption, and
it is the latter contract which will be discussed in this regard. A right of pre-
emption occurs when a prospective seller undertakes as against a prospective
purchaser to give him or her (the purchaser) preference if he or she should
decide to sell. The prospective purchaser thus acquires, in terms of an
agreement, the right to be granted the first opportunity to buy the thing should
the prospective seller decide to sell it. It is formulated as follows in Van Pletsen v
Henning 1913 AD 82:
The grant of a right of pre-emption does not compel the grantor to sell; it
only compels him to give the grantee the preference in case he sells at all.
And consequently it too (like an option granted by him) prevents him
from selling to third parties during the existence of the right.
The agreement which gives rise to the preferential right may, of course, differ
from case to case. For example:
(1) The right of pre-emption may be coupled with an option granted by the
34
purchaser. If this happens, the prospective purchaser is compelled to keep
open his or her offer to buy, for the agreed period, and the prospective
seller is obliged, if he or she decides to sell, to exercise the option granted to
him or her and in so doing to accept the offer. This will differ from the case
where the purchaser only grants an option to the seller, because, in this
instance, the seller may exercise the option and accept the purchaser’s offer
or he or she may decide to sell to a third party. The seller is thus not obliged
to sell to the purchaser should he or she decide to sell.
(2) The prospective seller may bind himself or herself as against the
prospective purchaser to offer the thing for sale to the latter at the first
acceptable price or at the highest price which may be offered to him or her
by a third party. If the prospective seller receives an offer from a third
party, he or she may not accept it before he or she has given the holder of
the right the opportunity to decide whether he or she wants to buy the
thing at that price. The holder of the right is not obliged to buy.
(3) The seller may bind himself or herself as against the prospective purchaser
to offer the thing for sale to the latter on the occurrence of a future event, for
example when it is decided no longer to use the land as a racetrack. Here,
too, the holder of the right is not obliged to buy.
(4) The prospective seller may bind himself or herself as against the
prospective purchaser to sell a thing to a third party only if the prospective
purchaser is unwilling to buy the thing. The matter is described as follows
in Hartswater Boerderye (Edms) Bpk v Van Niekerk 1964 (3) SA 702 (T):
Should the plaintiff not offer to purchase properly, the defendant is free,
should he so wish, to sell to a third party; should the plaintiff offer
properly the defendant has the choice to either accept the offer and clinch
the sale or to refuse the offer and so lose his right to sell to a third party
(our translation).
A contract in terms of which a right of pre-emption is granted must comply

with all the requirements for contracts in general. The existence of a substantive
offer is not an essential requirement for a contract of pre-emption (see
Hirschowitz v Moolman above). The determination of the price and other terms
to the contract may be left to the grantor.
2.2 Legal nature and consequences of a right of pre-emption

The contract of pre-emption does not place a duty on the grantor to sell the
subject matter of the right; the grantee merely acquires the preferential right to
buy should the grantor decide to sell. The prospective seller’s capacity to
alienate the thing in question is thus restricted.
The prospective purchaser therefore also acquires a right, but, whereas the
performance to which the grantor of an option is bound is the maintenance of
an offer, the obligation in the case of the right of pre-emption is a negative one,
that is, that the thing may not be alienated to a third party except under the
conditions prescribed in the agreement creating that right (Owsianick v African
Consolidated Theatres (Pty) Ltd 1967 (3) SA 310 (A) at 321). Furthermore, this
situation differs from an option, in that it is now the seller and not the buyer
(although, as indicated, the purchaser may also be the one to grant the option)
35
who makes the critical decision whether a contract of sale is to be concluded or
not (see, generally, Wissekerke v Wissekerke 1970 (2) SA 550 (A)).
A certain amount of uncertainty regarding the precise construction of the
contract of preference has also resulted in some uncertainty regarding the
position of the holder of the right, upon breach of contract by the grantor. In
Owsianick v African Consolidated Theatres (Pty) Ltd 1967 (3) SA 310 (A), the
Appellate Division held that a right of pre-emption entails a restriction on
alienation and that the holder was entitled to an interdict to prevent the grantor
from alienating the thing to a third party. Furthermore, it held that the only
other remedy available to the holder was a claim for damages. The court
decided that the holder of the right could not enforce his right positively; in
other words, he could not claim to actually purchase and claim delivery of the
thing (ie a claim for specific performance). In certain subsequent decisions, it
has been assumed that a right of pre-emption may be enforced positively (see,
for instance, Hirschowitz v Moolman above). The position in this regard is
therefore not entirely certain.
In Associated SA Bakeries (Pty) Ltd v Oryx & Vereinigte Bäckereien (Pty) Ltd 1982
(3) SA 893 (A), the court also doubted whether the holder could claim specific
performance by means of an order directing the grantor to make him an offer,
but adopted another approach which was set out as follows: if a seller
concludes a contract of sale with a third party contrary to a pre-emptive right,
the purchaser can step into the shoes of the third party by a unilateral
declaration of intent. A contract of sale will then be deemed to have been
concluded between the seller and the holder of the pre-emptive right. Should
delivery already have taken place, the holder of the right would not be able to
pursue the merx in the hands of the third party with his or her personal right,
unless the latter was aware of the existence of the pre-emptive right.
This remedy was also referred to in Hirschowitz v Moolman (above) and entitles
the holder of the right to delivery without the need for an order of specific
performance. However, its nature, basis and limitations are uncertain (see
further on).
2.3 Formalities concerning rights of pre-emption

If the object of the envisaged sale is land, both the offer to buy (or sell) and the
acceptance thereof must be in writing. The contract from which the right of pre-
emption arises also has to be in writing (Hirschowitz v Moolman 1985 (3) SA 739
(A)).
ACTIVITY
Distinguish between an option and a right of pre-emption with specific reference to the following:
(a) requirements
(b) consequences and juristic nature
(c) remedies for breach
(d) formalities
36
FEEDBACK
(a) Remember that both options and rights of pre-emption are contracts and must therefore comply with
the requirements set for contracts in general.
(b) The holder of an option has a personal right that the grantor keeps the substantive offer open. The
holder (grantee) of the option has an election to accept the substantive offer by exercising the option.
On the other hand, the holder of the right of pre-emption has two personal rights, in that the grantor
does not sell, lease, et cetera, to a third party before making an offer to the holder, and, secondly, if the
grantor wishes to sell, lease, et cetera, the grantee should make an offer to the holder first.
(c) Both may be enforced specifically by way of an interdict, but a right of pre-emption cannot be
positively enforced by means of a court order to make an offer. Particular attention should be paid to
the approach of the court in the Associated SA Bakeries (Pty) Ltd v Oryx & Vereinigte B�ckereien (Pty)
Ltd 1982 (3) SA 893 (A) case. It seems that damages are claimable in both instances.
(d) In so far as immovable property is concerned, there seems to be no reason why an option contract
must comply with the provisions of the Alienation of Land Act 68 of1981. An obiter statement in
Hirschowitz v Moolman1985 (3) SA 729 (A), however, indicates the contrary. A pre-emption contract
must, in terms of this decision, be in writing in accordance with the Act if the contract relates to the sale
of immovable property.
See also figure 2.1in section 2.5.2.2 of the prescribed textbook for a comparison of options and pre-emption
agreements.
SUMMARY
textbook. You may also consult figure 2.5 in the prescribed textbook for an
overview of the formation of a contract (comprising study units 6–8).
37
STUDY UNIT 9
CONFLICTING RIGHTS
OVERVIEW
This study unit explains different aspects of conflicting rights.

* explain what is meant by conflicting rights
* explain the principles to determine which right enjoy preference above the other
* apply these to practical problems
LEARNING MATERIAL
This study unit.

1 INTRODUCTION
This study unit deals with the legal position where A
(1) sells a thing to B or
(2) grants B an option or
(3) grants B a right of pre-emption and subsequently sells the same thing to C
In all these cases, B has a personal right against A, as we have already seen,
even if B has not yet exercised the option, and even if the event required for the
operation of the right of pre-emption has not yet taken place. Now, two
questions arise:
(1) What protection does B’s right enjoy before delivery of the thing to C?
(2) What protection does B’s right enjoy after delivery of the thing to C?
2 POSITION BEFORE DELIVERY TO C

Before delivery, both B and C have only personal rights. There has been, and
still is, considerable controversy in our law about whether the adage qui prior est
tempore potior est iure (what is first in time, is first in law) applies to the situation
under discussion. The most generally accepted view is that it does: the prior
vested right, that of B, enjoys preference regardless of whether or not C had
knowledge thereof when he or she acquired his or her (C’s) right. The person
whose personal right vested first enjoys preference, provided that there are no
other circumstances present which make it equitable that the holder of the
second right should enjoy preference. What these equities are, however, is not
indicated with certainty. It amounts to this, therefore, that B, in our example, is
38
entitled to an interdict in terms of which A is prohibited from delivering or
transferring the thing to C. C can then, at most, institute an action for damages
for breach of contract against A. On this point, see Botes v Botes 1964 (1) SA 623
(O); BP Southern Africa (Pty) Ltd v Desden Properties (Pty) Ltd 1964 (2) SA 21 (SR);
Campbell v First Consolidated Holdings 1977 (3) SA 924 (W); Barnard v Thelander
1977 (3) SA 932 (C).
3 POSITION AFTER DELIVERY TO C

3.1 Where C has no knowledge of the existence of the prior vested
interest of B
Delivery to C renders C the owner. C, therefore, has a real right, and B only a
personal right. In the event of a conflict between real and personal rights, real
rights, in accordance with the traditional view, are preferred. B, therefore, has
only an action for damages for breach of contract against A. He or she cannot
claim the thing from C, the new owner.
3.2 Where C does know of B’s prior vested right at the moment of delivery
Delivery (albeit in bad faith) once again makes C the owner. However, C does
have knowledge of the right, and, by virtue of the doctrine of notice (kennisleer),
B is now entitled to apply for an order in terms of which the delivery to C is
cancelled and the thing may be transferred to B. B can uphold his or her claim
against a third party who has knowledge of it.
For cases and criticism on the doctrine of notice, consult: Van der Merwe 1962
THRHR 155; Manganese Corp Ltd v SA Manganese Ltd 1964 (2) SA 185 (W);
Reynders v Rand Bank Bpk 1978 (2) SA 630 (T).
ACTIVITY
Briefly summarise the remedies available to B in the various situations referred to above, indicating in each
case what the remedy is, on what it is based, and against whom it may be instituted.
FEEDBACK
The particular remedy, or remedies, available to B will depend on the specific facts at hand. Since
there exists primarily a contractual relationship between A and B, B will have an action for damages
against A.Whether B may, however, claim specific performance from A or claim the thing in question
from C once delivery has occurred, will depend on the facts of the case and on whether B’s right enjoys
preference over C’s right in the eyes of the law.
SUMMARY
Before delivery, both B and C have only personal rights. The most generally
accepted view is that the prior vested right, that of B, enjoys preference
39
regardless of whether or not C had knowledge thereof when he or she acquired
his or her (C’s) right. The person whose personal right vested first enjoys
preference, provided that there are no other circumstances present which make
it equitable that the holder of the second right should enjoy preference. Where
C has no knowledge of the existence of the prior vested interest of B, delivery to
C renders C the owner. C, therefore, has a real right which enjoys preference,
and B has only an action for damages for breach of contract against A. Where C
does know of B’s prior vested right, delivery once again makes C the owner.
However, C does have knowledge of the right, and, by virtue of the doctrine of
notice (kennisleer), B is now entitled to apply for an order in terms of which the
delivery to C is cancelled and the thing may be transferred to B. B can uphold
his or her claim against a third party who has knowledge of it.
40
STUDY UNIT 10
MISTAKE/ABSENCE OF
CONSENSUS
OVERVIEW
This study unit deals with one of the more complex areas of the law of contract, and that is how the courts
address problems relating to material mistake or lack of agreement (dissensus) between the parties. As
previously mentioned, this study unit and study unit 2 dealing with the basis of contractual liability go hand in
hand. In study unit 2, we said that actual agreement, or consensus, is considered to be the primary basis of
contractual liability. However, when true agreement is lacking, the reliance theory acts as a supplementary
theory to determine if liability should lie despite an absence of agreement. The issue of mistake, then, is
merely the converse to the question of agreement, and so it is hardly surprising that most of the
developments in contract theory in our law have developed around the question of mistake.
However, the courts have not always only worked with consensus supplemented by reliance. As we shall
see, they have fluctuated between a subjective approach supplemented by estoppel and direct reliance,
and an objective approach corrected by an indirect version of reliance known as the iustus error approach.
Today, however, it seems as if the courts favour the subjective approach (as corrected by the reliance
theory), although the objective approach (as corrected by the iustus error doctrine) still remains as well.This
study unit therefore examines developments in positive law around these approaches.You will find many
examples from case law in this study unit. Pay careful attention to these cases, for they will help you to
understand how theories of contract have been applied by the courts.
* explain what is meant by the concept of mistake
* distinguish between unilateral, mutual and common mistake
* explain what is meant by irrelevant and relevant mistake
* explain what is meant by material and non-material mistake
* explain the traditional classification of material and non-material mistake
* distinguish between mistake of law and mistake of fact
* explain the limitations of the will theory and the rise of reliance-based correctives
* explain the subjective approach as qualified by estoppel and the reliance theory
* explain the objective approach as qualified by the iustus error doctrine
* explain what is meant by the reconciliation of the subjective and objective approaches
* explain the dual basis of contract in modern law
* explain what is meant by common mistake
* explain what is meant by rectification
LEARNING MATERIAL
Prescribed textbook, chapter 3.
41
Study unit 2
Khan v Naidoo 1989 (3) SA 724 (N).
Mondorp Eiendomsagentskap (Edms) Bpk v Kemp en De Beer 1979 (4) SA 74 (A).
Allen v Sixteen Stirling Investments (Pty) Ltd 1974 (4) SA 164 (D).
Diedericks v Minister of Lands 1964 (1) SA 49 (N).
Maresky v Morkel 1994 (1) SA 249 (C).
Kok v Osborne 1993 (4) SA 788 (SE).
Trollip v Jordaan 1961 (1) SA 238 (A).
Smith v Hughes (1871) LR 6 QB 597.
Van Ryn Wine & Spirit Co v Chandos Bar 1928 TPD 417.
Pieters & Co v Salomon 1911 AD 121.
Hodgson Bros v South African Railways 1928 CPD 257.
Ridon v Van der Spuy and Partners (Wes-Kaap) Inc 2002 (2) SA 121 (C).
South African Railways & Harbours v National Bank of South Africa Ltd 1924 AD
704.
George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A).
Hartog v Colin & Shields [1939] 3 All ER 566.
Prins v Absa Bank Ltd 1998 (3) SA 904 (C).
Du Toit v Atkinson’s Motors Bpk 1985 (2) SA 893 (A).
Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA).
Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA 234 (A).
Dickinson Motors (Pty) Ltd v Oberholzer 1952 (1) SA 443 (A).
Spenmac (Pty) Ltd v Tatrim CC 2015 (3) SA 46 (SCA)
Steyn v LSA Motors Ltd 1994 (1) SA 49 (A).
1 INTRODUCTION
Study section 3.1 of the textbook. Note that the notion of ‘‘mistake’’ has a far
more restricted meaning in contract law than in general terms and specifically
denotes a lack of agreement (dissensus) between the parties where one, or both,
of the parties is unaware of the situation.
2 CLASSIFICATION OF MISTAKE
Study sections 3.2–3.2.5 of the textbook. In the law of contract, there are
several classifications of mistake which are explained with reference to
examples in the prescribed textbook. You would do well to remember these
42
classifications; they are all still often referred to in case law, and are crucial for
determining whether a particular case scenario deals with a contract in terms of
the will theory, or whether the reliance theory comes into play as a secondary
possibility for contractual liability. The most important distinction is that
between material and non-material mistake (section 3.2.3), because that is
generally the key to whether a problem deals on the one hand with dissensus
caused by a material mistake, or, on the other, with consensus in spite of a non-
material mistake. It is only in the case of material mistake that the reliance
theory as a secondary source of contractual liability comes into play. Pay careful
attention to the examples from case law provided of material mistake (section
3.2.3.1) and non-material mistake (section 3.2.3.2) (Khan v Naidoo 1989 (3) SA
724 (N); Mondorp Eiendomsagentskap (Edms) Bpk v Kemp en De Beer 1979 (4) SA 74
(A); Allen v Sixteen Stirling Investments (Pty) Ltd 1974 (4) SA 164 (D); Diedericks v
Minister of Lands 1964 (1) SA 49 (N); Maresky v Morkel 1994 (1) SA 249 (C); Kok v
Osborne 1993 (4) SA 788 (SE); Trollip v Jordaan 1961 (1) SA 238 (A)).
When studying the traditional classification of material and non-material
mistake (section 3.2.4), bear in mind that this classification is but a guideline;
the important question remains whether the mistake is material or not. A
convenient rule of thumb is first to determine whether a mistake in question is
non-material, since, generally, such a mistake will relate merely to motive. The
only really tricky form of mistake is error in persona, since it is usually material,
but may also not be material. In most instances of error in persona, though, the
identity of a contracting party will be regarded as material (compare Kok v
Osborne for an apt example).
Students sometimes have trouble in determining whether the error is one of
error in substantiaor error in negotio where performance consists in the delivery of
a thing and the one party thinks that the thing has (or hasn’t) a certain
characteristic. A useful question to ask is: Did both parties have delivery of
the same thing in mind? If so, there is no mistake which excludes consensus.
If not, there is a material mistake.
This test has been formulated using the analysis of the Appellate Division in
Trollip v Jordaan 1961 (1) SA 238 (A) 253–254 to determine whether the error in
that case was material. If the Supreme Court of Appeal used the same method
to analyse the error in Spenmac (Pty) Ltd v Tatrim CC 2015 (3) SA 46 (SCA) it
would have come to a different conclusion regarding the materiality of the
relevant error.
In the Spenmac case a sectional title unit, unit 1, was sold. There were two units
in the sectional title scheme and the scheme rules provided that the owner of
unit 2 could only subdivide unit 2 with the consent of the owner of unit 1. The
owner of unit 1 had in fact given consent to subdivision a few years prior to
selling unit 1, but subsequently forgot about it. The seller made an innocent
misrepresentation to the purchaser that there were only two units in the
sectional title scheme and that the owner of unit 1 could veto the subdivision of
unit 2. The Supreme Court of Appeal held (54) that the mistake of the purchaser
was a mistake as to the true nature of the thing sold and that the parties failed
to reach consensus as to the subject matter of the sale. The court nearly followed
verbatim the High Court’s conclusion in Tatrim CC v Spenmac (Pty) Ltd Case
Number 1622.2011 31 January 2013 (ECD) par 43 in this regard without any
discussion or analysis.
43
The High Court described the error of the purchaser as an error with regard to
the existence of a veto right and to the fact that unit 2 was not subdivided (par
43). The court then held, without any discussion, that this was a mistake as to
the true nature of the merx (the thing sold) and that the parties failed to reach
consensus as to the merx (par 43).
If we apply the analysis of the Trollip case, it is clear that the parties wanted to
buy and sell the same thing, unit 1. The number of units in the sectional title
scheme and the existence of a veto right are at the most characteristics of unit 1.
There was thus an error with regard to the characteristics of the performance
(an error in substantia) which was not material.
It is uncertain whether the Supreme Court of Appeal decision in the Spenmac
case will lead to a different approach to error in substantia in which a
characteristic of the performance is so important to the party who is operating
under an error that it amounts to an error in corpore. The reason for this
uncertainty lies in the failure of the court to analyse the error properly and to
discuss the approach of the Trollip case.
3 LIMITATIONS OF THE WILL THEORY

Study section 3.3 of the textbook. This section exposes some of the more
obvious limitations of the will theory and explains why this theory in itself will
not suffice to determine the existence of contractual liability. Refer again to
study unit 2, section 4. Also pay close attention to figure 3.2, for it provides a
very simple but effective bird’s-eye view of how the law pertaining to mistake
functions, and you should refer back to it as you proceed with the ensuing
sections.
4 RELIANCE-BASED CORRECTIVES
Study section 3.4 of the textbook. This section explains how reliance has
(directly and indirectly) been the point of intersection or compromise between
the subjective theory of contract (will theory) and an objective theory of contract
(declaration theory), and sets the stage for the discussion that follows (refer
again to study unit 2, sections 4, 5 and 6).
5 THE SUBJECTIVE APPROACH AS QUALIFIED BY ESTOPPEL AND

QUASI-MUTUAL ASSENT
Study sections 3.5–3.5.2 of the textbook. Here, it is important to note that the
courts have accepted that the will theory may be corrected by either the
doctrine of estoppel or the direct reliance theory (doctrine of quasi-mutual
assent). Both these correctives are reliance-based and thus have strong
similarities, but estoppel is rarely used within the context of dissensus because of
its limitations, especially the fact that this doctrine only gives rise to the fiction
of a contract between the parties as opposed to an actual contract (see section
3.5.1). See also the discussion of Van Ryn Wine & Spirit Co v Chandos Bar 1928
TPD 417 in regard to estoppel and the conclusion of a contract. On the other
hand, the reliance theory has proven itself to be a flexible doctrine for
determining contractual liability in the absence of consensus and is probably
44
the theory preferred in latter-day South Africa (for examples of this theory in
practice, see Pieters & Co v Salomon 1911 AD 121; Hodgson Bros v South African
Railways 1928 CPD 257; Ridon v Van der Spuy and Partners (Wes-Kaap) Inc 2002
(2) SA 121 (C)). The reliance theory does give rise to an actual contract. Pay
close attention to its core elements of a misrepresentation of intention by the
contract denier that leads the contract assertor to reasonably believe that
agreement has been reached (despite dissensus), as well as how they are applied
in the examples provided in the textbook.
6 THE OBJECTIVE APPROACH AS QUALIFIED BY THE IUSTUS ERROR

DOCTRINE
Study sections 3.6–3.6.2 of the textbook.
The declaration theory, as an objective theory of contractual liability (refer
again to study unit 2, section 4), implies that contracts are based on the
concurring manifestations of the parties’ intentions (see the reference to South
African Railways & Harbours v National Bank of South Africa Ltd 1924 AD 704,
section 3.6.1). In other words, if, objectively speaking, it seems as if the parties
are in agreement, a contract arises even if there is no actual consensus to speak
of. Compare, for instance, the facts of National and Overseas Distributors
Corporation (Pty) Ltd v Potato Board 1958 (2) SA 473 (A), where, for all outward
purposes, it seems as if the parties had by way of offer and acceptance reached
agreement, only to discover that no actual meeting of the minds of the parties
had taken place.
This objective approach has, however, never been applied without qualification
and has been corrected by the iustus error doctrine; the question being whether
the material mistake of the contract denier is reasonable from an objective
perspective. Usually, it is reasonable if caused by the misrepresentation of the
other party, but, if the contract denier is to blame for his or her own mistake,
then contractual liability will, despite an absence of true agreement, lie (see the
references to George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A) and National and
Overseas Distributors Corporation (Pty) Ltd v Potato Board 1958 (2) SA 473 (A)).
Consider carefully the instances when a material mistake will be regarded as
reasonable, discussed in section 3.6.2 of the textbook (Allen v Sixteen Stirling
Investments (Pty) Ltd 1974 (4) SA 164 (D); Hartog v Colin & Shields [1939] 3 All ER
566; Prins v Absa Bank Ltd 1998 (3) SA 904 (C); Du Toit v Atkinson’s Motors Bpk
1985 (2) SA 893 (A); Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA)).
7 RECONCILIATION OF THE SUBJEC TIVE AND OBJEC TIVE

APPROACHES
Study sections 3.7–3.7.2 of the textbook. In Sonap Petroleum (SA) (Pty) Ltd v
Pappadogianis 1992 (3) SA 234 (A), the Appellate Division provided much-
needed guidance as to a possible reconciliation between the subjective and
objective approaches to contractual liability referred to above: first, by
confirming that the iustus error approach was indeed an application of the
reliance theory (more specifically, an indirect application), and, secondly, by
affirming that, in cases of dissensus, the reliance theory should be applied. Note
carefully the court’s formulation of the reliance theory, emphasising the
45
elements referred to above, and its application in the circumstances (in section
3.7.1). A complete reconciliation of the reliance theory and the iustus error
doctrine occurs when the circumstances that render the contract assertor’s
reliance reasonable are the very same ones that render the contract denier’s
mistake unreasonable (and vice versa). For example, if the contract denier
misleads the contract assertor into believing that he or she (the contract denier)
has agreed to a contract (eg by signing a document that contains contractual
terms, but without reading it), and the contract assertor does not suspect or
cause the possibility of a mistake on the part of the contract denier, then a
contract exists either because the contract assertor’s belief is reasonable
(successful application of reliance theory) or, conversely, because the contract
denier’s mistake is unreasonable (failure of iustus error doctrine). Refer to figure
3.3 in section 3.7.2 of the textbook for a useful map of how reliance provides a
compromise between the subjective and objective approaches.
Although both the direct and indirect versions of reliance protection apply in
our law, in recent times the reliance theory has proved more popular, and that
is why the general consensus of opinion seems to be that, today, the preferred
approach to contractual liability is the will theory as supplemented by the
reliance theory (refer again to study unit 2, section 6). Also note that, while the
reliance theory can be applied to virtually any conceivable instance of material
mistake, the iustus error approach can only be applied where there is prima facie
a concurrence of the external manifestations of the parties’ intentions; in other
words, an apparent agreement between the parties (see the ‘‘Pause for
reflection’’ box in section 3.7.2).
8 COMMON MISTAKE
Study section 3.8 of the textbook. A common mistake differs fundamentally
from unilateral or mutual (material) mistake in that it does not cause dissensus.
Consequently, the principles discussed above do not apply: the parties are in
complete agreement and each knows the intention of the other and accepts it.
However, both are mistaken about some underlying fact in that they have a
mistaken assumption about a present or past fact, causing the contract to be
void. The most probable explanation for this legal phenomenon is the ‘‘implied
term’’ theory, in terms of which the particular circumstances may justify the
inference that the parties implicitly (tacitly) agreed to make the existence of
their contract dependent on the truth of a material fact, or rather a supposition.
If the fact is incorrect, the contract falls away (compare Dickinson Motors (Pty)
Ltd v Oberholzer 1952 (1) SA 443 (A)).
9 RECTIFICATION
Study section 3.9 of the textbook. Where parties record their agreement in
writing, it may happen that the document does not accurately reflect their
common intention. In these cases, the parties are in full agreement and so, much
like in the case of common error, they are not instances of actual mistake or
dissensus. Usually, the parties will correct the document themselves, but, if one
of the parties is unwilling to do this, the other party may apply to court for
rectification of the document to reflect properly the common intention of the
46
parties. What is rectified, though, is not the contract itself, but the document
which does not reflect the intention of the parties.
ACTIVITY
1 How does one determine whether a mistake is material or not? Discuss briefly with reference to
examples from case law.
2 Explain what is meant by the subjective approach (as corrected) to contractual liability. Discuss with
reference to examples from case law.
3 Explain what is meant by the objective approach (as corrected). Discuss with reference to examples
from case law.
4 What, if any, is the distinction between the direct reliance approach and the iustus error approach,
and how does one determine whether one or the other should be applied?
5 Apply both the direct reliance and iustus error doctrine to examples provided from case law. Do you
come up with the same answer?
6 Consider the following facts from the decision in Steyn v LSA Motors Ltd 1994 (1) SA 49 (A): Steyn, an
amateur golfer, participated in a golf tournament that was open to both amateurs and professionals.
At the17th green, there was on display a new car and a board that stated: ‘‘Hole-in-one prize
sponsored by LSA Motors’’. Steyn managed to score a hole in one at this very hole, but, when he
claimed the car, the sponsor refused to give it to him on the grounds that the prize had been extended
only to professional golfers, a fact which had been announced repeatedly prior to the
commencement of play, but which Steyn said he had not heard. Furthermore, it was clear from the
rules of golf that amateur players, such as Steyn, did not qualify for prizes in excess of R600, and the
car was worth R50 000. Steyn countered that the words on the board constituted an offer which he
had accepted, thus giving rise to a contract. Apply both the reliance theory and iustus error
approaches to the facts. Do you arrive at the same conclusion in both instances?
7 How does common error differ from unilateral and mutual error, and what are its consequences?
Discuss with reference to case law.
8 What is meant by rectification?
FEEDBACK
1 In determining whether a mistake is material or not, one must ascertain whether it affects one or more
of the elements of consensus. Should a mistake relate to the obligations arising from the contract or the
intention to create juristic consequences, it would exclude consensus and be material. It must be
remembered that categorising mistakes into certain types is merely a useful aid in determining the
materiality or not of a mistake and should not be employed as the sole test. For case law, see section 2
above.
2 The (corrected) subjective approach entails the will theory as corrected by either the doctrine of
estoppel or the reliance theory in cases of material mistake (dissensus). For case law, see section 5
above.
3 The (corrected) objective approach entails the declaration theory as corrected by the iustus error
doctrine. For case law, see section 6 above.
47
4 The direct reliance approach bases contractual liability in instances of dissensus on a reasonable
reliance on consensus, while the iustus error approach relieves a mistaken party from an apparent
contract if his or her mistake is both material and reasonable. Remember that, if the factors that make
the contract assertor’s reliance reasonable are the very same as the ones that render the contract
denier’s mistake unreasonable, we have a complete reconciliation between the reliance theory and
the iustus error doctrine (and the subjective and objective approaches) within the circumstances.
5 Provided that there is ostensible or apparent agreement between the parties (without which the iustus
error approach cannot be applied), it matters not which approach is used the answer should be the
same.
6 In Steyn v LSA Motors Ltd, the court applied the reliance theory and came to the conclusion that, even
though it could be accepted that Steyn had not heard that the prize was intended only for
professional golfers, a reasonable person in Steyn’s position would have realised that the offer was
open only to professionals and, accordingly, that he or she had no contractual claim to the car. The
court did not apply the iustus error approach, and we submit that this doctrine cannot be applied to
the facts, because no apparent or ostensible contract existed between the parties. Remember that,
before the iustus error approach can apply, there must be a clear, objective agreement between the
parties, such as when the parties have signed a contractual document. Steyn had one interpretation of
the facts and the sponsor another, but, clearly, the offer had been intended only for professional
golfers and was not open to Steyn to accept.Consequently, there was no clear, apparent contract and
the iustus error approach cannot be applied. So, this case was suitable only for an application of the
reliance theory: ultimately, there was no actual agreement between the parties, and Steyn’s reliance
on the existence of consensus was unreasonable. Hence no contract arose.
7 Common error does not deal with dissensus : the parties actually are in agreement, but they have
made a mistake about the existence or correctness of some underlying fact on which the contract is
based, resulting in the contract being void. For case law, see section 8 above.
8 Much like common error, rectification does not deal with material mistake, but provides that, where the
parties have committed their agreement to writing and the document does not correctly reflect their
intention, a party may apply to court for rectification or correction of the document to reflect properly
the common intention of the parties.
SUMMARY
textbook.
48
STUDY UNIT 11
IMPROPERLY OBTAINED
CONSENSUS: INTRODUCTION
OVERVIEW
Where a person is induced into entering into a contract by way of misrepresentation, duress, undue
influence or commercial bribery, the contract is valid (provided that the other elements necessary to
constitute a contract have been complied with), because consensus does exist. There is no material
mistake; the parties know with whom and on what terms they are contracting. But, since the consensus of
the innocent party is flawed in that it has been obtained by improper means, the contract may be set
aside at the instance of the innocent party and each party must restore to the other party any benefit that
he or she may have received under the contract. This study unit explains in greater detail the concept of
improperly obtained consensus. In the ensuing four study units, we shall look more closely at the specific
forms of improperly obtained consensus mentioned above.
* explain what is meant by the concept of improperly obtained consensus
* explain what is meant by the concept of restitutio in integrum
* explain the role of a delictual claim for damages within the context of improperly obtained consensus
* explain whether improperly obtained consensus constitutes a general ground for the rescission of a
contract
LEARNING MATERIAL
Prescribed textbook, chapter 4, sections 4.1–4.1.3.

1 INTRODUCTION
Study section 4.1 of the textbook. This section explains the notion of
improperly obtained consensus. It is, however, very important to understand
this concept from the outset, because it relates to the next four study units.
2 RESTITUTIO IN INTEGRUM
Study section 4.1.1 of the textbook. The remedy of rescission coupled with
restitution is known as restitutio in integrum and it is aimed at restoring the
parties to the positions they were in before contracting. This remedy is
governed by essentially the same principles that apply to rescission for breach
of contract, so refer to study unit 33 as well in this regard. An important aspect
49
that we wish to point out is that, although, generally, the innocent party’s right
to claim restitution is dependent on his or her own willingness and ability to
return what he or she received under the contract, as in the case of rescission for
breach of contract, a court may relax this principle on the basis of equitable
considerations.
3 DELICTUAL DAMAGES
Study section 4.1.2 of the textbook. This section is important in that it explains
that the conduct of the party who induced the contract by improper means will
often constitute a delict, and this enables the innocent party to recover delictual
damages, irrespective of whether he or she rescinds the contract or not.
Remember, however, that the courts do not generally treat restitutio in integrum
as a delict, but, if damages are claimed, then the elements for delictual liability
must in addition be complied with.
4 A GENERAL GROUND FOR RESCISSION?

Study sections 4.1.3 and 4.6 of the textbook. The crux of the discussion in this
section is that the notion of consent improperly obtained seems to underlie the
specific grounds for restitutio in integrum. As of yet, the courts have not
recognised one overarching ground for rescinding a contract and claiming
restitution, but further grounds for applying this remedy will no doubt be
recognised by the courts in future.
ACTIVITY
Explain the concept of restitutio in integrum and how it relates to delictual liability.
FEEDBACK
In answering this question, you should bear three things in mind: first, it is essential to note that restitutio in
integrum arises only once a contract has been found to exist (ie there is consensus), but consensus has been
obtained by improper means (misrepresentation, duress, undue influence or commercial bribery); secondly, this
remedy encompasses both rescission of a contract and restitution of any performances received as a result of
the contract; thirdly, although the conduct of the party who induced the contract by improper means will often
constitute a delict, this is not necessarily the case where, however, this is the case, the innocent party will be
entitled to claim delictual damages, irrespective of whether he or she sets aside the contract or not.
SUMMARY
textbook.
50
STUDY UNIT 12
MISREPRESENTATION
OVERVIEW
Of the specific forms of conduct constituting improper behaviour in obtaining consensus, misrepresentation
is the most important and the most frequently encountered. Misrepresentation generally manifests itself in
two forms: culpable misrepresentation and non-culpable misrepresentation. From this, it is apparent that the
former has close ties with delictual liability, while the latter does not. In this study unit, we examine the
concept of misrepresentation, its forms and the remedies therefor.
* explain what is meant by the concept of misrepresentation
* distinguish misrepresentation from other precontractual misstatements
* distinguish misrepresentation from mistake
* explain the remedies for misrepresentation
* explain what is meant by misrepresentation by silence
LEARNING MATERIAL
Prescribed textbook, chapter 4, sections 4.2^4.2.4.
Trotman v Edwick 1951 (1) SA 443 (A).
Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A).
Phame (Pty) Ltd v Paizes 1973 (3) SA 397 (A).
Wells v SA Alumenite Co 1927 AD 69.
Absa Bank Ltd v Fouche 2003 (1) SA176 (SCA).
1 INTRODUCTION
Study section 4.2 of the textbook. A misrepresentation is generally a false
statement of past or present fact (not law or opinion) made by a contractual
party to another prior to the conclusion of a contract and regarding some matter
or circumstance relating to the contract. Here, you must take note not only of
the description of a misrepresentation, but also the forms that a
misrepresentation can assume, and that a misrepresentation can be
accompanied by fault or be made completely innocently.
51
2 MISREPRESENTATION DISTINGUISHED FROM OTHER
PRECONTRACTUAL STATEMENTS
Study sections 4.2.1–4.2.2 of the textbook. This section of the material is very
important for understanding what constitutes an actionable misrepresentation.
It comprises a detailed discussion of what does not generally constitute an
actionable misrepresentation. We suggest that you make brief summaries of the
concepts discussed in section 4.2.1.1 so as to be able to differentiate them.
However, take careful note of the construction of a dictum et promissum (section
4.2.1.4), because, as will be seen, this form of misrepresentation does carry legal
consequences.
3 MISREPRESENTATION AND MISTAKE

Study section 4.2.2 of the textbook. The distinction between misrepresentation
as an independent cause of action and the doctrine of mistake is crucially
important for your understanding of the law of contract, and especially also for
examination purposes. This distinction has been alluded to before (refer to
study unit 10, section 2 and section 3.2.3.2 of the prescribed textbook). Similarly,
figure 4.2 once again provides a useful overview of the relationship between the
doctrines of mistake and misrepresentation (refer also to figure 3.2 in section 3.3
of the prescribed textbook). A rule of thumb that will stand you in good stead
when you approach any problem that contains some or other form of
misrepresentation is to determine whether the misrepresentation causes a
material mistake, in which case the problem relates to mistake proper, or
whether the misrepresentation causes a non-material mistake, in which case the
problem relates to actionable misrepresentation. Remember, however, that the
elements of whatever remedy is called for in the circumstances must be
complied with for the remedy to be successful.
4 REMEDIES FOR MISREPRESENTATION

Study sections 4.2.3-4.2.3.3 of the textbook. You would do well to study the
remedies for misrepresentation very carefully; they are not only important from
a theoretical perspective, but also frequently appear in examination questions.
In a nutshell, one can distinguish between the remedy of rescission and
restitution (restitutio in integrum) on the one hand, and damages on the other.
There are different requirements for restitutio in integrum than for a claim for
damages, but the two may overlap: a party may claim rescission and
restitution, as well as damages in a given instance. Pay careful attention to the
requirements for restitutio in integrum. We suggest that you make brief
summaries of each for study purposes. Note that fault is not a requirement for
the rescission of a contract, and so a contract may be set aside on the basis of
mere innocent misrepresentation (provided that the other requirements have
been met).
The question of damages for misrepresentation is slightly more intricate than
restitutio in integrum. Traditionally, only damages for fraudulent
misrepresentation, a form of delict, were recognised, and, accordingly, damages
are assessed according to the delictual measure: the victim of fraudulent
misrepresentation is to be put in the financial position he or she would have
52
been in had the misrepresentation not been made. In regard to the difference
between the delictual and contractual measure of damages, see the reference to
Trotman v Edwick 1951 (1) SA 443 (A). You should also pay close attention to the
distinction between dolus dans and dolus incidens in calculating the quantum of
damages. These concepts are sufficiently explained in the text, but we wish to
draw your attention to the following: dolus dans and dolus incidens apply only
within the context of damages for fraudulent and negligent misrepresentation.
They do not apply to innocent misrepresentation or dicta et promissa, and they
most certainly do not apply to damages for breach of contract (which will be
dealt with later).
Note that, historically, a claim for damages for negligent misrepresentation was
impermissible, but, in Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A), the
Appellate Division placed negligent misrepresentation on the same footing as
fraudulent misrepresentation. Consequently, either will suffice for a claim for
delictual damages for misrepresentation, and it follows that the measure of
damages in either case will be delictual. You may read carefully the historical
section relating to negligent misrepresentation, but you must study the
discussion on Bayer South Africa (Pty) Ltd v Frost, which represents the law at
present.
The question of damages for innocent misrepresentation has caused a fair
amount of consternation over the years. It is clear that delictual damages can be
claimed only if the necessary requirements have been met, and, within the
present context, if fault is of course lacking. Remember that restitutio in integrum
may be claimed even for innocent misrepresentation, but the real question has
been whether the contract could be upheld and the financial equivalent of
rescission and restitution claimed. This is usually referred to as restitutional
damages (as opposed to true, delictual damages). The position in our law was
uncertain until the decision in Phame (Pty) Ltd v Paizes 1973 (3) SA 397 (A),
where the Appellate Division held that a purchaser who entered into a contract
on the basis of the seller’s dictum et promissum may invoke the aedilitian
remedies: cancellation with the actio redhibitoria, or, more importantly, to abide
by the contract and claim a reduction of the purchase price with the actio quanti
minoris. A dictum et promissum is essentially a misrepresentation as to the quality
of the merx (article purchased), and the purchaser is in effect afforded a remedy
for restitutional damages for innocent misrepresentation. Pay careful attention
to the definition of a dictum et promissum as formulated in Phame, namely a
material statement made by the seller to the buyer during the negotiations,
bearing on the quality of the res vendita (merx) and going beyond mere praise
and commendation. Note, however, that the aedilitian remedies apply only to
the contract of sale and perhaps exchange. The definition of a dictum et
promissum is wide enough to cover fraudulent, negligent and innocent
misrepresentations, but, in the case of culpable (ie fraudulent and negligent)
misrepresentations, the aedilitian remedies are superfluous, since the innocent
party can claim even consequential damages with a delictual action. The
important section on innocent misrepresentation concerns the Phamecase and its
implications regarding dicta et promissa and the aedilitian remedies. You may
concentrate on this aspect in the prescribed textbook, but we suggest that you
read carefully the historical section which precedes it.
Note that contracts often contain clauses that either limit or exclude the
remedies available to either or all the contracting parties. A very common such
53
clause is one excluding liability for misrepresentation. The remedies for
negligent and innocent misrepresentation can be excluded by agreement
between the parties, but not the remedies for intentional misrepresentation
(Wells v SA Alumenite Co 1927 AD 69). For a further discussion of exclusion
clauses, see study unit 23.
5 MISREPRESENTATION BY SILENCE: NON-DISCLOSURE

Study section 4.2.4 of the textbook. Usually, there is no liability for mere
silence or omission, unless there is a duty to speak in the circumstances. If a
party is under a duty to speak and fails to discharge this duty, he or she may be
liable on the basis of misrepresentation. We suggest that you summarise briefly
the exceptional case where the law imposes a duty to speak discussed in section
4.2.4, and study the general test for liability adopted in Absa Bank Ltd v Fouche
2003 (1) SA 176 (SCA).
ACTIVITY
PLEASE NOTE:
THIS ACTIVITY RELATES TO STUDY UNITS10,11AND12.
ONLY APPLY THE COMMON LAW TO THIS ACTIVITY. DO NOT APPLY THE CONSUMER PROTECTION
ACT 68 OF 2008 TO THESE QUESTIONS.
See study unit16 for a discussion of the Consumer Protection Act.
1 Draw a comparison between the requirements and remedies for culpable misrepresentation and
non-culpable misrepresentation respectively.
2 Ahmed asks his neighbour,Oliver, over the fence one day, what Oliver regards as a sound short-term
investment.Oliver assures Ahmed that the best investment is to purchase shares in a certain company.
Ahmed does this, but it transpires that the company has huge debts that it is unable to meet and it goes
into liquidation. Ahmed loses R20 000. May he claim his loss from Oliver on the basis of
misrepresentation?
3 Josh sells his truck to Wasim for R100 000. During the negotiations, Josh, in order to get a better price,
tells Wasim that the truck is capable of carrying a 20-ton load. Josh knows that the truck is only
capable of carrying a10-ton load. The market value of the truck is R90 000. Had Wasim known that
the truck was only capable of carrying10 tons, he would still have purchased it, but would only have
been prepared to pay R80 000.
(a) What type of misrepresentation is present here, and how would damages be calculated in this
instance?
(b) Does Josh’s statement amount to a dictum et promissum?
4 Assume that the facts are the same as in question 3, but that Wasim furthermore loses a lucrative
contract to transport certain goods because the truck’s capacity is too small to carry them.Wasim
would have made a profit of R10 000 if the contract had not been cancelled.
(a) What type of loss has Wasim suffered?
(b) Will Wasim successfully be able to claim his loss of profit, and, if so, with what action?
54
(c) Would Wasim be able to claim the loss which is considered in question 4(a), with the aedilitian
remedies?
5 V, a wholesale dealer in jewellery, places the following advertisement in the newspaper:

’’Swatch watches manufactured by X company are now available in South Africa at V wholesaler!
Stocks limited.’’
K, a dealer in watches, reads the advertisement. K rushes off to Vand signs a contract of sale for1000
of the watches without reading the contract.V notices that K does not read the contract, but says
nothing.When V delivers the watches, K notices that the watches were manufactured by Y company
and that they are of an inferior quality.
(a) Did a valid contract of sale come into being?

(b) Does K have any remedy available, and what would the basis of his claim be?
(c) Would your answer to question (b) be different if the contract of sale contained a clause
excluding liability for any misrepresentation and K read the contract before signing it?
(d) Would your answer to question (a) be different if K and V both honestly believed that the
watches were real Swatch watches and were aware of each other’s belief?
(e) Would your answer to question (a) be different if K wrongly believed, when he signed the
contract without reading it, that V warranted that the watches were real Swatch watches?
(f) Would your answer to question (a) be different if V in good faith brought Kunder the impression
that such a warranty was a term of the contract of sale?
(g) Is K bound by a term excluding V’s liability for any misrepresentation if the contract of sale
contained such a clause and K signed the contract without reading it?
FEEDBACK
1 It is important to note that culpable misrepresentation, in the context of contract or otherwise, is a delict
and must therefore comply with the requirements set for delicts in general. An innocent
misrepresentation, whether a dictum et promissum or not, is not a delict and therefore has different
requirements. Remember to distinguish between an innocent misrepresentation per se and a dictum et
promissum, because they are not the same thing.
2 Oliver expressed an opinion which cannot in the circumstances be regarded as wrongful for the
purposes of actionable misrepresentation. A mere opinion asked and given during casual
conversation will not, on the whole, amount to wrongful conduct.The matter might have been different
if Oliver had been Ahmed’s financial advisor and had advised Ahmed without taking steps to
ascertain the accuracy of his advice.
3 (a) This is a fraudulent misrepresentation, since Josh knew what the capabilities of the truck were.
(b) This is a case of dolus incidens, since Wasim would still have purchased the truck, although he
would have done so on different terms.Wasim’s damages would thus be calculated by
deducting the putative price (R80 000) from the purchase price (R100 000), which comes to
R20 000. Remember that Wasim must prove that the parties would have agreed on the
putative price of R80 000 if there had been no misrepresentation.
55
4 (a) Consequential loss.
(b) Wasim will be able to claim his consequential loss of R10 000 with a delictual action.
(c) Consequential loss cannot be claimed with the aedilitian remedies. The type of damages
claimable with the aedilitian remedies is restricted to restitutional damages.
5 Students often find it difficult to determine whether a problem-type question relates to

misrepresentation or mistake.Question 5 deals with both, as well as with common error.Where the
misrepresentation causes a material mistake, we are dealing with mistake, but where it only causes a
non-material mistake, we are dealing with a misrepresentation.
(a) Please note that you are asked whether a valid contract came into being. From this, you should
be able to deduce that this question deals with the requirements for a valid contract. If you look
at the facts of the question, you should realise that this question deals with mistake, as the facts
are silent as to the other requirements.You must further remember that a valid contract arises in
the case of misrepresentation, but no contract arises where consensus and a reasonable
reliance are absent.You must determine from two facts whether there is an absence of either an
agreement (consensus) or an ostensible agreement. These two facts are: the statement that the
watches are Swatch watches and K’s signing of the contract without reading it.
Step1: Is the error material?
For a mistake to be material/operative/essential, it must relate to one or more of the following:
(1) the intention to be legally bound
(2) the persons between whom the obligations are to be created, and
(3) the performance(s) to be delivered in terms of the contract
The misrepresentation regarding the fact that the watches were Swatch watches led to a
mistake on K’s part relating to a characteristic of the performance (error in substantia). The
reason is that the parties were in agreement to buy and sell1000 watches, but Kwas mistaken
in that he thought they were Swatch watches. The position seems to be that the mistake
relating to a characteristic of the performance is not material. This seems to be the position in
the positive law (Trollip v Jordaan). However, see the discussion of Spenmac (Pty) Ltd v Tatrim
CC 2015 (3) SA 46 (SCA) in paragraph 2 (CLASSIFICATION OF MISTAKE) of study unit10
above.
It can be argued that there is no indication in the given facts of this problem that K’s intention
differed from the written contract of sale which he signed without reading it. It therefore seems
as if K did not act under a material mistake.On the other hand, it can also be argued that K is
mistaken as to the obligations which the contract of sale created, as he did not read the
contract before signing it. In such a case, the mistake is material. To determine whether the
contract denier is bound to the contract, either the direct reliance approach or the iustus error
approach may be applied.
56
Step 2: Which approach of the courts can be applied to the facts of the problem?
An ostensible contract (a written contract signed by both parties) exists and, consequently,
either of the approaches can be applied. In the examination, you could be expected to apply
both the approaches.
Step 3: Apply both approaches to the facts of the problem.
A material mistake is seen to be reasonable in the iustus error approach where the mistake is
induced by the other party’s positive misrepresentation (positive) or failure to remove an
incorrect impression. The latter situation is applicable where the contract assertor had a duty
to speak which arose: (1) because he or she knew, or ought reasonably to have known, that the
contract denier was labouring under a false impression, or (2) because, before the conclusion
of the agreement, the contract assertor created an impression which is in direct conflict with
the agreement he or she seeks to enforce. In this problem, the contract denier’s (K’s) mistake
was not caused by any misrepresentation by V, nor did a duty to speak rest on V. K’s mistake is
unreasonable and he cannot therefore rely on his mistake. He is bound by the contract of sale.
The caveat subscriptor rule thus applies.
The threefold enquiry in Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis is: (1) was there a
misrepresentation as to one party’s intention (2) who made the misrepresentation, and (3) was
the other party misled thereby, and, if so, would a reasonable person also have been misled
thereby. In our problem, K, a party to the contract, made a misrepresentation of his intention by
signing the contract. By signing, he indicated that he wished to be bound by it.V was misled
thereby, and a reasonable person would also have been, because a reasonable person
would assume that someone who signs a contract without reading it wishes to be bound by it.
The caveat subscriptor rule therefore applies. K has thus created a reasonable reliance in V’s
mind that they have reached agreement.
We can thus conclude that a valid contract of sale did arise.
(b) The statement in the advertisement that the watches are Swatch watches is not mere puffing
and amounts either to culpable (intentional or negligent) misrepresentation or a dictum et
promissum. It is not clear whether V intentionally, negligently or innocently made this false
statement, and it should furthermore be remembered that some culpable misrepresentations
amount to dicta et promissa.You should therefore discuss all these possibilities.
You should briefly discuss the elements of the delict, misrepresentation, and apply your
discussion to the facts. It is not clear that V acted intentionally, but it is at least certain that a
reasonable person would not have made such a statement without checking the truth of it.This
false statement induced K to buy the watches. This also proves the wrongfulness of V’s false
statement in the form of a commission. K’s remedies are rescission or upholding the contract. In
both cases, damages may be claimed.When discussing damages, please note that it is
uncertain whether this is a case of dolus dans or dolus incidens.You should therefore discuss
both.
This statement also amounts to a dictum et promissum, as it is a material statement of fact made
during the negotiations which relates to the quality of the things sold and which goes beyond
mere praise and commendation. The aedilitian remedies are available to K.
(c) The answer to question (b) would be different. V would now only be liable for fraudulent
misrepresentation. Liability for negligent as well as innocent misrepresentation may be
contractually excluded, but not liability for fraudulent misrepresentation (Wells v SA
Alumenite Co).
57
(d) The answer to question (a) would now be different, as no valid contract came into being.There
is a common error. In the case of common error, both parties have exactly the same incorrect
perception regarding an important aspect of their contract (ie that the watches are Swatch
watches). The parties are in complete agreement, but the contract is void. An explanation for
this voidness is that the parties had tacitly made the validity of their contract dependent on the
existence of a past or present fact (that the watches are indeed Swatch watches).When the
fact proves to be non-existent, no contract comes into existence. This is the position in our
problem. The watches are not Swatch watches, and thus the contract of sale is invalid.
(e) The answer to question (a) would now still be the same. The only difference is that it is now
certain that K’s mistake is material. A mistake which relates to a term of the contract (such as a
warranty) is material, because it relates to performance. The application of the two
approaches is exactly the same as in question (a). A valid contract thus arose.
(f) The answer to question (a) would now be different, as no valid contract arises. K’s mistake is still
material. The application of the two approaches to the facts is now different.When we apply
the iustus error approach to the facts, K’s mistake is now reasonable, because V induced it by
an innocent misrepresentation. K may therefore rely on his mistake to void the contract.When
we apply the direct reliance approach, we find the following: K misrepresented his intention
by signing the contract without reading it. This did not mislead V (nor should he have been
misled) because he caused K to believe that the contract of sale contained a warranty. The
contract is therefore void.
Please note that V’s creation of the impression that the warranty is a term of the contract does
not amount to a dictum et promissum, because it does not relate to the quality of the thing sold,
but to the existence of a term of the contract.
(g) The answer to this question is similar to the answer to question (f). K is not bound by such a
term. K’s mistake as to the presence of the exclusionary term is material, because it relates to an
aspect of performance. The facts of this problem are similar to the facts in Du Toit v Atkinson
Motors.V’s misrepresentation is, however, different from V’s misrepresentation in question (f).V’s
failure to draw K’s attention to the existence of the clause excluding liability for any
misrepresentation amounts to a misrepresentation of the terms of the contract of sale by an
omission. If, in an advertisement, certain characteristics are attributed to a thing offered for
sale (ie that the watches are Swatch watches) and the purchaser later signs a contract without
reading it, the seller’s silence as to the presence of the clause excluding liability for
misrepresentation also amounts to a misrepresentation (ie that the written contract of sale
does not differ from the advertisement).
When we apply the iustus error approach to the facts, K’s mistake is reasonable, because V
induced it by a misrepresentation. K may therefore rely on his mistake to void the contract.
When we apply the direct reliance approach, we find the following: K misrepresented his
intention to be bound by the term excluding liability for misrepresentation by signing the
contract without reading it. This did not mislead V (nor should he have been misled) because
he caused K to believe that the contract of sale did not contain a clause excluding liability for
any misrepresentation. The contract is therefore void.
SUMMARY
textbook.
58
STUDY UNIT 13
DURESS
OVERVIEW
Duress (also known as metus) boils down to intimidating a person into entering into a contract to which they
otherwise would not have assented. In this study unit, we examine this concept and the remedies therefor.
* explain what is meant by the concept of duress and to distinguish it from misrepresentation
* explain the elements of duress
* explain the remedies for duress
* explain the effect of duress by a third party
LEARNING MATERIAL
Broodryk v Smuts 1942 TPD 47.

1 INTRODUCTION
Study section 4.3 of the textbook.
Duress occurs where a prospective contractant is forced or compelled by the
other contractant, or someone for whose acts he or she may be held liable, to
enter into a contract. The decision on the part of the innocent party to enter into
the contract has been influenced by the improper conduct of the other party.
Thus, in the same way that a misrepresentation that does not vitiate consent to
the contract renders the contract voidable (rescindable), so consensus that has
been obtained by way of duress renders the contract rescindable. Consensus is
present, but it has been obtained in an improper (wrongful) manner. This
improper conduct on the part of one contractant renders the contract voidable
at the instance of the other party.
Here are some examples of duress: someone who has stolen from his or her
employer may be compelled by threat of prosecution to agree to an
acknowledgement of debt (Illanga Wholesalers v Ebrahim 1974 (2) SA 292 (D)); a
person who has committed adultery with his partner’s wife may be persuaded
to transfer his share of the partnership property to the other partner for fear of
an action for damages (Salter v Haskins 1914 TPD 264); a wife may sign a power
of attorney in favour of her husband because he threatens to abandon her if she
does not (Savvides v Savvides 1986 (2) SA 325 (T)); or a shipowner may conclude
a contract for increased wages under threat of his or her ship not being off-
loaded (Malilang v MV Houda Pearl 1986 (2) SA 714 (A)).
59
2 REQUIREMENTS
Study sections 4.3–4.3.6 of the textbook. Study the requirements for duress as
formulated by Sir John Wessels and adopted in the leading case of Broodryk v
Smuts 1942 TPD 47. You must be able to state these requirements and expand
on them as indicated in section 4.3 and its subsections. Note that the courts
have at times required financial loss even for restitutio in integrum. The more
correct view seems to be that the mere conclusion of a contract as a result of
duress should suffice to satisfy the requirement of ‘‘damage’’ (see, further,
section 4.3.6). However, like fraud, duress is considered to be a delict, and, if
actual damage is suffered, the victim of duress may claim damages in delict.
Note, specifically, also that, in the case of duress of goods (threat to property),
the courts have required unequivocal protest by the innocent party as proof of
the involuntary nature of the agreement (see section 4.3.3).
3 REMEDIES
Study sections 4.3–4.3.6 of the textbook. Once again, as in the case of
misrepresentation, although consensus exists and a valid contract arises, the
consent has been obtained through improper means and the law affords the
innocent party an election to rescind the contract and claim restitution (restitutio
in integrum). In addition, if the requisite delictual element of actual damage is
present, the victim of duress may claim damages.
4 DURESS BYA THIRD PARTY

Study section 4.3.7 of the textbook. Summarise section 4.3.7 very briefly. Note
that the question of duress by an independent third party has not as yet been
before our courts.
ACTIVITY
1 Distinguish between misrepresentation and duress.

2 Discuss the requirements and remedies for duress as traditionally expressed by the courts.
FEEDBACK
1 Although both misrepresentation and duress are forms of a delict, their requirements differ from each
other and from the general requirements for a delict. The essential difference between the two lies in
the type of act in question. In the case of misrepresentation, a contract is concluded as a result of a
false representation, whereas, in the case of duress, a contract is concluded as a result of force or
pressure that is brought to bear on one of the contracting parties.
2 Refer to the formulation of Wessels, which was adopted in the leading case of Broodryk v Smuts. It
seems, however, that the mere entering into a contract as a result of duress constitutes ‘‘damage’’ for
purposes of affording the victim the remedy of rescission and restitution. But, if a claim for delictual
damages is instituted, actual, patrimonial loss is required.
60
SUMMARY
textbook.
61
STUDY UNIT 14
UNDUE INFLUENCE
OVERVIEW
Undue influence is a form of improper pressure used to induce a party to conclude a contract, but, as
opposed to duress, the pressure is more subtle, involving the wearing down of the victim’s ability to exercise
a free and independent will rather than threats or intimidation. In this study unit, we examine this concept, its
origin and the remedies therefor.
* explain what is meant by the concept of undue influence, and to distinguish it from misrepresentation
and duress
* briefly explain the origins of undue influence
* explain the elements of undue influence
* explain the remedies for undue influence
* explain what is meant by abuse of circumstances
LEARNING MATERIAL
Preller v Jordaan 1956 (1) SA 483 (A).
Blackburn v Mitchell (1897) 14 SC 338.

1 INTRODUCTION
Study section 4.4 of the textbook. Note that, in most cases of undue influence,
there is a close relationship between the parties (eg as between a doctor and
patient or parent and child) which enables the one party to misuse his or her
superior position to influence the weaker party to assent to the contract in
question.
2 REQUIREMENTS
Study sections 4.4.1–4.4.2 of the textbook. Study the requirements for undue
influence as formulated in Preller v Jordaan 1956 (1) SA 483 (A) and adopted in
Patel v Grobbelaar 1974 (1) SA 532 (A). You must also be able to discuss briefly
the origins of the doctrine.
In Gerolomou Constructions (Pty) Ltd v Van Wyk 2011 (4) SA 500 (GNP) Van Wyk
subcontracted with Gerolomou Constructions to do certain construction work
62
for the latter. Gerolomou Constructions falsely alleged that certain aspects of
the work and materials were defective and deliberately delayed payment of the
outstanding amount for a considerable time. Van Wyk was experiencing
financial difficulties at that stage and was desperate to receive the money to pay
his workers. Gerelomou Constructions knew about these difficulties. After the
delay, Gerolomou Constructions offered to pay Van Wyk less than half the
money owed to Van Wyk in full settlement and informed Van Wyk that if he
refuses to sign the settlement he will receive nothing. This occurred at the
building site while Van Wyk’s workers were waiting outside. Van Wyk signed
the settlement after protesting that it was unfair. Van Wyk claimed the balance
of the amount owed to him and succeeded. The court found inter alia that, even
if a valid compromise agreement was concluded, Van Wyk acted under undue
influence and could cancel the agreement because it was voidable.
The court applied the requirements as formulated in Patel v Grobbelaar 1974 (1)
SA 532 (A) and found they were all present (505–507). Gerolomou
Constructions gained influence over Van Wyk. It knew that Van Wyk was in
financial difficulties, that he needed the money to pay his workers, and that he
could not afford a protracted dispute. The bargaining power of the parties was
unequal. Gerelomou Constructions took advantage of Van Wyk’s situation to
induce him to conclude the agreement which was to his disadvantage and
which Van Wyk regarded as unfair. Gerolomou Constructions also acted
unconscionably. The court held in this regard (507–508):
I have no doubt that it is entirely permissible for one party to exploit the
economic weakness of the other when a genuine settlement of a disputed
indebtedness is involved, but it is quite another thing when an
economically powerful party withholds what is admittedly owing to an
economically weaker party, in order to seek commercial advantage. Pacta
sunt servanda is a prescription that is intimately connected with the
constitutionally protected values of freedom and human dignity. It
follows that to use the threat of breaching a contract to induce an
economically less powerful contractual counterpart to act to his
disadvantage in relation to an accrued contractual right, the enforcement
of which is not contrary to public policy, is subversive of freedom and
human dignity. In the present case the defendant’s conduct further
trenched upon the plaintiff’s constitutional right to have his dispute with
the defendant adjudicated by fair legal or other process. In my view, the
plaintiff has established the element of unconscionability required.
This decision is open to criticism because the conduct of Geromolou

Construction does not seem to amount to undue influence, but rather economic
duress (Pretorius and Ismail ‘‘Compromise, undue influence and economic
duress. Gerolomou Constructions (Pty) Ltd v Van Wyk 2011 (4) SA 500 (GNP)’’
2012 Obiter 688–689). Gerolomou Construction did not gain an influence over
the mind of Van Wyk by ’insidiously eroding’ Van Wyk’s ’ability to exercise a
free and independent judgment’ in deciding whether to sign the agreement or
not, but Gerolomou Constructions rather threatened to breach the construction
contract by not paying Van Wyk at all if he refused to sign the settlement
document. This threat compelled Van Wyk to sign. See study unit 13 for a
discussion of duress.
63
3 REMEDIES
Study sections 4.4.1–4.4.2 of the textbook. Once again, as in the case of
misrepresentation and duress, although consensus exists and a valid contract
arises, the consent has been obtained through improper means and the law
affords the innocent party an election to rescind the contract and claim
restitution (restitutio in integrum). In Preller v Jordaan, the court found that the
grounds for restitutio in integrum in Roman-Dutch law were wide enough to
include what is known today as undue influence. Undue influence renders a
contract voidable at the instance of the aggrieved party, but, traditionally,
rescission and restitution are the only remedies available on this ground.
Whether an action for delictual damages will lie has not yet been entertained by
the courts. The courts have not regarded undue influence as a delict, and the
fact that it originates in English law also suggests the contrary.
4 ABUSE OF CIRCUMSTANCES
Study section 4.4.3 of the textbook. We suggest that you summarise section
4.4.3 briefly. Similar to undue influence, but also treated as a form of duress,
abuse of circumstances occurs where a party unconscionably exploits another
party’s emergency situation to secure the latter’s consent to a contract. Refer, in
this regard, to Blackburn v Mitchell (1897) 14 SC 338 for an example. Although
our common law is unclear, it seems as if the contract is enforceable. There is
also authority to the effect that the performance in terms of the contract must be
reduced to what is reasonable in the circumstances.
ACTIVITY
1 Explain what is meant by undue influence.
2 State the requirements for undue influence.
3 State the basis for the recognition of this doctrine in our law.
4 Explain briefly what is meant by abuse of circumstances.
FEEDBACK
1 Undue influence, as distinct from misrepresentation and duress, is a ground for rescission of a contract
which is available to a contractant who has been persuaded by someone who has influence over him
or her to conclude a contract which, with an unfettered will, he or she would not have concluded.
Typical of such cases is a close relationship between the parties.
2 Refer, here, to the requirements for undue influence as formulated in Preller v Jordaan.
3 Although, in Preller v Jordaan, the Appellate Division held that the concept of dolus is wide enough to
serve as the basis for this doctrine, it is highly probable that undue influence is directly derived from
English law.
64
4 Abuse of circumstances occurs where a party unconscionably exploits another party’s emergency
situation to secure the latter’s consent to a contract. The legal position in this regard is uncertain, but it
appears as if the contract will be enforceable subject to reduction of the victim’s performance to what
is reasonable.
SUMMARY
textbook.
65
STUDY UNIT 15
COMMERCIAL BRIBERY
OVERVIEW
Commercial bribery involves the situation where a party bribes the agent or representative of another party
to facilitate a contract between the briber and the party whom the agent represents. In this study unit, we
examine this concept and the remedies therefor.
* explain what is meant by commercial bribery
* explain the elements of commercial bribery
* explain the remedies for commercial bribery
LEARNING MATERIAL
Prescribed textbook, chapter 4, section 4.5.
Extel Industrial (Pty) Ltd & another v Crown Mills (Pty) Ltd 1999 (2) SA 719 (SCA).
1 INTRODUCTION
Study section 4.5 of the textbook. In the case of commercial bribery, a
contractual party (the briber) bribes the agent or representative (the bribed
party) of another party (the principal) to facilitate a contract between the briber
and the principal. The wrongful means used to secure the agreement render it
voidable at the instance of the principal (Plaaslike Boeredienste (Edms) Bpk v
Chemfos Bpk 1986 (1) SA 819 (A)). In Extel Industrial (Pty) Ltd & another v Crown
Mills (Pty) Ltd 1999 (2) SA 719 (SCA), the Supreme Court of Appeal placed
beyond all doubt the fact that commercial bribery is a distinct ground for
rescinding a contract.
2 REQUIREMENTS
Study section 4.5 of the textbook. The requirements for commercial bribery
were authoritatively formulated in Extel Industrial (Pty) Ltd & another v Crown
Mills (Pty) Ltd. You must understand and be able to explain what these
requirements are.
66
3 REMEDIES
Study section 4.5 of the textbook. As in the case of misrepresentation, duress
and undue influence, commercial bribery constitutes a distinct ground for
setting aside a contract and claiming restitution (restitutio in integrum).
Furthermore, note that, in Extel, the court distinguished between the agreement
between the briber and the agent, which is void for being illegal, and the
agreement that results from the bribery between the briber and principal, which
is voidable owing to the improper obtaining of consensus. An action for
delictual damages has not been entertained within this context as yet.
ACTIVITY
Explain what is meant by commercial bribery, and what remedies it gives rise to.
FEEDBACK
Commercial bribery occurs where a contractual party (the briber) bribes the agent or representative (the
bribed party) of another party (the principal) to facilitate a contract between the briber and the principal.The
wrongful means used to secure the agreement render the agreement voidable at the instance of the principal.
Alongside misrepresentation, duress and undue influence, commercial bribery constitutes a distinct fourth
ground for the setting aside of a contract and claiming restitution (restitutio in integrum).
SUMMARY
textbook.
67
STUDY UNIT 16
CONSUMER’S RIGHT TO FAIR AND HONEST DEALING
UNDER THE CONSUMER
PROTECTION ACT
OVERVIEW
In this study unit, we examine the ways in which the Consumer Protection Act 68 of 2008 addresses
improperly obtained consensus.
* explain the ways in which the Act addresses improperly obtained consensus
* explain the remedies which the Act makes provision for
LEARNING MATERIAL
Prescribed textbook, chapter 4, section 4.7.
Sections 40, 41and 51of the Consumer Protection Act 68 of 2008.

1 INTRODUCTION
Study section 4.5 of the textbook. The Consumer Protection Act has several
provisions which overlap with the common law and deal with improperly
obtained consensus.
2 PROVISIONS OF THE ACT

Study section 4.7 of the textbook, and sections 40 and 41 of the Act.
Section 4.7 contains a summary of sections 40 and 41 of the Act. Study this
section carefully. The text of these provisions, which you must take note of,
reads as follows:
‘‘40. Unconscionable conduct
(1) A supplier or an agent of the supplier must not use physical force against a
consumer, coercion, undue influence, pressure, duress or harassment,
unfair tactics or any other similar conduct, in connection with any –
(a) marketing of any goods or services;
(b) supply of goods or services to a consumer;
(c) negotiation, conclusion, execution or enforcement of an agreement to
supply any goods or services to a consumer;
(d) demand for, or collection of, payment for goods or services by a
consumer; or
(e) recovery of goods from a consumer.
68
(2) In addition to any conduct contemplated in subsection (1), it is
unconscionable for a supplier knowingly to take advantage of the fact that
a consumer was substantially unable to protect the consumer’s own
interests because of physical or mental disability, illiteracy, ignorance,
inability to understand the language of an agreement, or any other similar
factor.
(3) Section 51 applies to any court proceedings concerning this section.’’
‘‘41. False, misleading or deceptive representations

(1) In relation to the marketing of any goods or services, the supplier must not,
by words or conduct –
(a) directly or indirectly express or imply a false, misleading or deceptive
representation concerning a material fact to a consumer;
(b) use exaggeration, innuendo or ambiguity as to a material fact, or fail to
disclose a material fact if that failure amounts to a deception; or
(c) fail to correct an apparent misapprehension on the part of a consumer,
amounting to a false, misleading or deceptive representation, or permit
or require any other person to do so on behalf of the supplier.
(2) A person acting on behalf of a supplier of any goods or services must not –
(a) falsely represent that the person has any sponsorship, approval or
affiliation; or
(b) engage in any conduct that the supplier is prohibited from engaging in
under subsection (1).
(3) Without limiting the generality of subsections (1) and (2), it is a false,
misleading or deceptive representation to falsely state or imply, or fail to
correct an apparent misapprehension on the part of a consumer to the
effect, that –
(a) the supplier of any goods or services has any particular status,
affiliation, connection, sponsorship or approval that they do not have;
(b) any goods or services –
(i) have ingredients, performance characteristics, accessories, uses,
benefits, qualities, sponsorship or approval that they do not have;
(ii) are of a particular standard, quality, grade, style or model;
(iii) are new or unused, if they are not or if they are reconditioned or
reclaimed, subject to subsection (4);
(iv) have been used for a period to an extent or in a manner that is
materially different from the facts;
(v) have been supplied in accordance with a previous representation;
or
(vi) are available or can be delivered or performed within a specified
time;
(c) any land or other immovable property –

(i) has characteristics that it does not have;
(ii) may lawfully be used, or is capable of being used, for a purpose
that is in fact unlawful or impracticable; or
69
(iii) has or is proximate to any facilities, amenities or natural features
that it does not have, or that are not available or proximate to it;
(d) the necessary service, maintenance or repair facilities or parts are

readily available for or within a reasonable period;
(e) any service, part, replacement, maintenance or repair is needed or
advisable;
(f) a specific price advantage exists;
(g) a charge or proposed charge is for a specific purpose;
(h) an employee, salesperson, representative or agent has the necessary
authority to negotiate the terms of, or conclude, an agreement;
(i) the transaction affects, or does not affect, any rights, remedies or
obligations of a consumer;
(j) a particular solicitation of, or communication with, the consumer is for
a particular purpose; or
(k) the consumer will derive a particular benefit if they assist the supplier
in obtaining a new or potential customer.
(4) A representation contemplated in subsection (3)(b)(iii) to the effect that any

goods are new is not false, misleading or deceptive if those goods have
been used only –
(a) by or on behalf of the producer, importer, distributor or retailer; and
(b) for the purposes of reasonable testing, service, preparation or delivery.
(5) Section 51 applies to any court proceedings concerning this section.’’
3 REMEDIES
Study section 4.7 of the textbook, and section 51(3) of the Act. Consumers
have different procedures to enforce their rights. See section 4.7 in this regard.
Note, however, that section 51(3) provides that ‘‘[a] purported transaction or
agreement, provision, term or condition of a transaction or agreement, or notice
to which a transaction or agreement is purported to be subject, is void to the
extent that it contravenes this section’’. Section 51 applies to both sections 40
and 41, which means that agreements which arise in the circumstances that
these provisions govern are void and not merely voidable.
ACTIVITY
Explain how the Consumer Protection Act addresses improperly obtained consensus.
FEEDBACK
Consult section 4.7, and sections 40, 41and 51of the Act. Attempt to draft a summary of about one page
dealing with the provisions of the Act which relate to improperly obtained consensus.
70
SUMMARY
Consult section 4.7 of the textbook.
71
STUDY UNIT 17
LEGALITY: ILLEGAL CONTRACTS THAT ARE VOID
OVERVIEW
In this and the next study unit, we will discuss the requirement that a contract has to be legal, which is one of
the six requirements for a valid contract. The other requirements are consensus or ostensible consensus,
contractual capacity, formalities, possibility and certainty. This study unit primarily focuses on illegal
contracts that are void.
* explain the two possible consequences of illegality
* explain the role of public interest in determining public policy
* explain when the conclusion, performance and object of the contract are against public policy
* explain when contracts are against good morals
* explain statutory illegality
* explain when unfair contracts are against public policy
* explain when the unfair enforcement of contracts is against public policy
* explain the consequences of illegal contracts that are void
LEARNING MATERIAL
Sasfin (Pty) Ltd v Beukes 1989 (1) SA1 (A).
Klokow v Sullivan 2006 (1) SA 259 (SCA).
Jajbhay v Cassim 1939 AD 537.

1 INTRODUCTION
Study section 7.1 of the textbook. Note, first, that there are two principles that
have to be balanced when applying the rules regarding illegality, and,
secondly, that there are two possible consequences of illegality.
The Constitution plays a crucial role in determining public policy, and this has
become the most important influence of the Constitution on the law of contract.
The distinction between a void contract and an unenforceable contract is
simple. A void contract has no legal consequences (obligations) from the
beginning, while an unenforceable contract is valid from the beginning, but the
obligations cannot be enforced when the agreement is against public policy.
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2 ILLEGAL CONTRACTS THAT ARE VOID
Study the introduction to section 7.2 of the textbook. Public policy is informed
by many sources.
2.1 Public interest

Study section 7.2.1. of the textbook. This section is crucial and you should see
to it that you thoroughly understand how the courts go about determining
public policy. The content of footnotes 9 and 12 should also be studied, as it
explains the text.
In practice, case law forms the starting point in determining what the public
interest is, but a thorough understanding of constitutional values has become
important.
2.2 The conclusion, performance and object of the contract must be lawful
Carefully read section 7.2.2. Illegality can affect the conclusion, performance
and object of a contract, and note the different examples of such illegal
contracts.
3 SPECIFIC EXAMPLES OF ILLEGAL CONTRACTS THAT ARE VOID

3.1 Contracts against good morals
Carefully read section 7.2.3.1 of the textbook. Note that there is a close
relationship between good morals and public policy.
3.2 Statutory illegality

Study section 7.2.3.2 of the textbook. This type of illegality is very important in
practice and involves determining the intention of the legislator, which is often
a difficult task. You have to know the factors the courts take into account when
determining the legislator’s implied intention.
Now carefully read the illustration on how this could be done with reference to
the National Gambling Act 7 of 2004. You do not have to study this illustration,
but you must be able to undertake such an application yourself.
3.3 Unfair contracts

Study section 7.2.3.4 of the textbook. A basic distinction should be made
between contracts falling within the provisions of the Consumer Protection Act
68 of 2008 (the CPA) and all other contracts. The CPA has empowered the
courts with an equitable jurisdiction. Study the factors the court has to take into
account. In all other contracts, unfairness of the contract on its own will not
make the contract illegal. There must also be a serious infringement of some or
other public interest. Also revisit study unit 3 and section 1.8.4 of the textbook,
where the focus is on good faith and equity.
73
3.4 Unfair enforcement of a contract
Study section 7.2.3.5 of the textbook. This defense has created much
excitement among academics, but much uncertainty still surrounds it, even
after Botha v Rich 2014 (4) SA 124 (CC). In Botha the Constitutional Court
refused to enforce a cancellation clause because it was unfair to do so without
finding it necessary to refer to the infringement of any specific public interest.
Unfortunately this judgment does not set out any objective criteria to determine
whether or not it is unfair to enforce a term in a contract. This will lead to
uncertainty because each judge can decide the issue of unfairness according to
his/her own idea of what is unreasonable or unfair.
Also revisit study unit 3 and section 1.8.4 of the textbook where the focus is on
good faith and equity.
4 THE CONSEQUENCES OF A CONTRACT THAT IS VOID FOR

ILLEGALITY
Study the whole of section 7.2.4–7.2.4.3 with all its subsections. Students often
fail to distinguish clearly between the ex turpi rule and the par delictum rule. The
ex turpi rule simply means that an illegal contract is void and that no obligations
arise out of this contract. There are NO exceptions to this rule. If one or both of
the parties perform in terms of such a void contract, performance will
unjustifiably enrich the other party, as there is no obligation to perform. This
means that the party who has performed may claim back his or her
performance with an enrichment action. But, here, the par delictum rule comes
into play and prohibits such a claim on policy considerations in certain
circumstances. However, fairness between the parties is also a policy
consideration and allows the courts to relax the par delictum rule in certain
circumstances. Thus, a balancing of policy considerations takes place.
The test for severance of the illegal part of the contract is often important in
practice.
ACTIVITY
1 A regulation reads as follows: ‘‘Anyone who catches and has in his or her possession crayfish with a
length of less than 6 cm is guilty of an offence which is punishable with a maximum fine of R5 000’’. X,
a wholesaler, sells Y 500 crayfish for R10 000. All the crayfish only have a length of 5 cm. X delivers
the crayfish, but Yrefuses to pay X R10 000, as the contract is illegal. Advise X. The regulation has
been enacted under legislation which aims to protect marine life against overfishing.
2 X insures the contents of her house withY Insurer.The insurance contract contains the following clause:
If we reject liability for any claim made under this policy we will be released from liability unless
summons is served within 60 days of repudiation.
X’s house is burgled and her TV and hi-fi are stolen. X notifies Y Insurer of the theft, but Y Insurer rejects
her claim. X only serves summons on Y Insurer 61days after rejection of her claim. X was involved
during this period in a serious car accident and, as a consequence, she was hospitalised for 30 days.Y
Insurer raises the defence that Y Insurer has been released from liability based on the relevant clause.
Discuss whether the court will uphold Y Insurer’s defence.
74
FEEDBACK
1 This is a question on the possible statutory illegality of the contract of sale. The regulation does not
expressly prohibit trading in undersized crayfish, but only criminalises the possession thereof.You have
to apply the factors the courts take into consideration to determine whether the legislator impliedly
intended the contract to be void.
The purpose of this regulation does not involve the protection of revenue. The regulation aims to
protect our marine resources, and thus aims to protect a public interest.The purpose of the regulation is
clearly the protection of crayfish by allowing them to grow and reproduce. This seems to indicate that
the legislator had the intention that the contract of sale should be void.
However, there are two factors that militate against such a conclusion. If trading in undersized crayfish
is allowed, it will certainly encourage the catching of undersized crayfish, but the prohibition of the
possession of such crayfish by both the seller and the purchaser would be adequate to protect the
crayfish. In fact, the regulation has a far wider reach as it completely criminalises the possession of
undersized crayfish, as the reason for the possession thereof cannot be an excuse. Furthermore, only
the possession of crayfish is criminalised and not the selling and buying thereof.
We can thus conclude that the contract of sale should be valid, but that X and Y have committed an
offence and are liable to be prosecuted. X may claim the purchase price from Y.
2 The facts of this problem are based on the Barkhuizen case. However, the time period for the institution
of a claim is far shorter and the insured has a good reason for failing to be in time with the institution of
her claim. The first question is whether the clause gives X a fair opportunity to seek legal redress. The
period is only two-thirds of the period in the Barkhuizen case, and it can be validly argued that the
short period in the clause amounts to a denial of the right to seek judicial redress (a public interest
informed by the constitutional right in section 34 of the Constitution). It may furthermore be argued
that the enforcement of the clause against X is unfair in the circumstances where X was in hospital for
30 days and only had 30 days to institute a claim against Y Insurer, as this could amount to a denial of
the right to seek judicial redress. X will have to plead the illegality of the clause or the unfairness of
enforcement.The onus will also rest on X to prove illegality and unfairness. X will have to lead evidence
on how long it usually takes to institute a claim.
If we assume that the clause is illegal, a further question will arise: Can the clause be severed from the
rest of the insurance contract, as X would like to enforce the rest of the contract against Y Insurer. The
guidelines which the courts use will have to be applied. First, the clause is grammatically and
notionally separate from the rest of the contract, as it forms a separate clause. Secondly, if the clause is
severed from the rest of the contract, the contract still stays an insurance contract. The substantive
character of the insurance contract remains intact. Thirdly, it could be argued that the insurer’s
hypothetical intention would still be to enter into the insurance contract, as no insurer can survive
without business.Y Insurer would be faced with the possibility that all its insurance contracts with such
a clause would be invalid. X would, of course, have entered into the insurance contract. It can be
concluded that the clause could be severed from the rest of the contract.
SUMMARY
textbook.
75
STUDY UNIT 18
LEGALITY: ILLEGAL CONTRACTS THAT ARE VALID BUT
UNENFORCEABLE
OVERVIEW
In the previous study unit, we primarily discussed illegal contracts that are void. In this study unit, we will focus
on illegal contracts that are valid but not enforceable because they are against public policy. Both these
study units deal with the requirement that a contract has to be legal. The other requirements for a valid
contract are, needless to say, consensus or ostensible consensus, contractual capacity, formalities, possibility
and certainty.
* explain why the law attaches different consequences to different illegal contracts
* explain briefly the current legal position with regard to wagering and gambling contracts
* explain the principles with regard to agreements in restraint of trade
LEARNING MATERIAL
Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A).
Basson v Chilwan 1993 (3) SA 742 (A).

1 INTRODUCTION
Study the introduction to section 7.3 of the textbook. Focus on the discussion
of the reasons why the law attaches two different consequences to illegal
contracts.
2 WAGERING AND GAMBLING CONTRACTS

The wagering and gambling industry plays a major role in the economy. A
basic knowledge of the validity of these contracts is essential. First read the
whole of section 7.3.1 as background and then study points 10 and 11 of ‘‘This
chapter in essence’’ at the end of chapter 7.
3 AGREEMENTS IN RESTRAINT OF TRADE

Study section 7.3.2 of the textbook. A thorough knowledge of agreements in
restraint of trade is important, as their use in the economy is very widespread.
76
ACTIVITY
X, the owner of Tex-Mex Fried ChickenTake-Away inTown A, sells her business as a running business toY for
R900 000.The contract of sale provides that X may not conduct a similar business inTown A and Town B for
a period of two years. Six months later, X opens a similar business in Town B. X uses the same recipe she
always used when preparing the chicken.Yseeks to enforce this clause in the contract against X with an
interdict. It appears that, at the time of conclusion of the sale, theTex-Mex Fried ChickenTake-Away drew its
customers only from Town A and that the Tex-Mex chicken is not prepared according to a secret recipe.Will
Ysucceed? Discuss.
FEEDBACK
Y will only succeed if the agreement in restraint of trade is reasonable, but the onus of proving that it is
unreasonable rests on X (the contract denier). In this regard, the Basson test should be applied to the facts of this
problem.
The first question is whether Y has a protectable interest.Goodwill definitely exists as part of the running
business. There is no right to a trade secret, as the recipe is useful, has an economic value, but is not secret (it is
public knowledge).
The second question is whether the goodwill will be threatened by the conduct of Y. The opening of a similar
business in Town B directly infringes the restraint.
The third question involves a weighing up of the interests of X and Y. The business only drew its customers from
Town A. This shows that the restraint goes further than necessary to protect the goodwill of the business.
The conclusion is thus that the restraint is not reasonable as between the parties. But the enquiry does not end
here. The fourth question that should be asked is whether there is any other relevant aspect of public policy
which indicates that the restraint should be enforced. In our problem, there is none.
Y will thus not be successful in enforcing the restraint against X.
SUMMARY
textbook.
77
REQUIREMENTS OF A VALID CONTRACT
79
STUDY UNIT 19
FORMALITIES
OVERVIEW
In this study unit, we discuss formal requirements for a contract which may be prescribed by law or by the
parties.Complying with formalities is one of the six requirements for a valid contract.The other requirements
are consensus or ostensible consensus, contractual capacity, legality, possibility and certainty.
* discuss the formalities prescribed by law
* discuss the formalities agreed to by the parties
LEARNING MATERIAL
Goldblatt v Freemantle 1920 AD123.
SA Sentrale Ko-operatiewe Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA 760 (A).
Brisley v Drotsky 2002 (4) SA1 (SCA).
Impala Distributors v Taunus Chemical Manufacturing Co (Pty) Ltd 1975 (3) SA 273 (T).
1 INTRODUCTION
Study section 6.1 of the textbook. Note the two exceptions to the general rule
that no formalities are required for a contract to be valid.
2 FORMALITIES PRESCRIBED BY LAW

Study the introduction of section 6.2 of the textbook. Study the introduction
of section 6.2 especially the general comments on writing as a formality.
Writing is the most common formality prescribed by law.
Read section 6.2.1 of the textbook on the different formalities prescribed by
legislation. This will help you understand the summary of this section in points
2, 3, 5 and 6 of ‘‘This chapter in essence’’ at the end of chapter 6, which you
must study. You will learn more about these formalities when you study
specific contracts such as partnership, sale, lease, mandate and employment.
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3 FORMALITIES STIPULATED BY THE PARTIES
Study section 6.3.1 of the textbook and remember the important role that the
parties’ intention plays, but that the law presumes an intention where their
intention cannot be determined. The parties often stipulate formalities in
important contracts where the law does not require formalities.
Non-variation clauses are extremely important in practice (study section 6.3.2
of the textbook). The views of the courts and academics on the legality of such
clauses are especially important. Refer back to the discussion of public policy in
study unit 17.
Non-cancellation clauses have also become standard clauses in contracts (study
section 6.3.3 of the textbook).
Study the introduction of section 6.3.4 and section 6.3.4.1 of the textbook. The
restrictive interpretation of non-variation clauses is very important in practice.
You should know the different exceptions. You only have to read carefully the
application of the exceptions to the given example, but make sure that you
understand the application of exceptions to the stated problem and are able to
do so yourself.
Read sections 6.3.4.2 and 6.3.4.3 of the textbook. All you have to remember is
that a non-variation clause will not be enforced when such enforcement is
against public policy or where the defence of estoppel can be raised. Note that
the first defence has been successfully raised in the case law, but that there is no
reported case as yet where the latter defence has been successfully raised.
Study section 6.3.5 of the textbook on non-waiver clauses, as they have
become common in contracts.
ACTIVITY
1 X promises Y R1000 orally because X likes Y. X gives the money toY, but, when X and Y later quarrel, X
wants his money back.Will Y have to give back the R1 000? Discuss.
2 B and S agree orally that B will buy S’s Toyota Hilux truck for a purchase price of R100 000.The parties
further agree that the contract between them will be reduced to writing. Before this can be done, B
informs S that he is no longer interested in buying the truck. The reason is that he has found a similar
truck, with fewer kilometres on the clock, at a lower price. S approaches you for advice. S wants to
know whether a valid contract of sale was concluded between the parties. Discuss.
3 X lends Y R10 000 in a written contract which is signed by both parties.Y has to pay back R1 000 on
the first of every month.The contract contains the following clause: ‘‘No variation of any of the terms or
conditions of this contract shall be of any force or effect unless it is recorded in writing and signed by
the parties thereto’’. The contract furthermore provides that the full amount of the outstanding
instalments will immediately become due if Y fails to comply strictly with her obligations.Y becomes ill
and asks X to give her an extension of two weeks to pay the next instalment of R1 000. X gives her
permission, but then enforces the acceleration clause and claims the whole outstanding amount.
(a) May X do so? Discuss.
(b) Would your answer to question (a) be different if their contract also had a non-waiver clause?
Discuss.
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4 Do you think that the justification of the courts for the enforcement of non-variation clauses outweighs
the unfairness often involved in the enforcement of such clauses? Discuss.
FEEDBACK
1 Although the contract of donation of money was oral (and thus unenforceable), the contract was
performed by X and thus became binding. X will thus not be able to claim back the R1 000.
2 In order to ascertain what the intention of B and S was with the further agreement, their agreement has
to be construed.The courts assume that the parties intended the formalities to facilitate proof, unless it
can be proved that they intended it as a requirement for validity.The question is thus whether there are
any indications to the contrary.
The given facts of this problem differ from the facts in the Goldblatt case, where the parties agreed on
how the reduction to writing had to take place. The one party would set out in a letter the terms of the
contract, and sign it.The other party would confirm these terms in a letter.The court found that this was
an indication that the parties intended writing as a requirement for validity. The court also referred to
authority to show that, where the signatures of both parties are required, the contract only arises when
the parties sign the contract.
It is uncertain what the intention of the parties was in our problem, and the assumption will therefore
apply. Thus the parties only intended writing to facilitate proof and a valid contract of sale arose.
3 (a) This problem deals with the consequences of a non-variation clause and the application of
the Shifren principle. It is clear from the wording of the non-variation clause that the whole
contract is protected by the clause. However, the parties do not attempt to vary their contract
orally, as they do not change the obligation to pay the instalments on the first of every month.
We are thus dealing with a waiver of the right to receive payment of one instalment on the first
of the month. The non-variation clause thus does not apply; the waiver is valid,Ydoes not
breach the contract and the acceleration clause will not come into operation.
(b) As you have seen, this is a case of waiver and the presence of a non-waiver clause will make
a difference, as any waiver will have to be in writing to have effect.Y thus breaches the
contract and the acceleration clause will come into operation.
4 The question on whether non-variation clauses should be regarded as valid involves an enquiry into
the legality of such clauses. As you noted in study unit17, determination of public policy often involves
the balancing of competing public interests.You should be able to identify the interests involved here
and argue how they should be balanced. Note that the constitutional principle of equality also comes
into play.You should know not only the black-letter rules of the law of contract, but also the underlying
principles that shape these rules.
SUMMARY
Consult the summary of chapter 6, namely ‘‘This chapter in essence’’, at the end
of chapter 6 of the textbook.
82
STUDY UNIT 20
POSSIBILITY
OVERVIEW
In this study unit, we discuss the requirement for a valid contract that performance must be possible at the
time that the contract was entered into. The other requirements for a valid contract are consensus or
ostensible consensus, contractual capacity, legality, formalities and certainty.
* explain the general rule that impossibility of performance prevents the creation of obligations
* distinguish between the different types of impossibility
* explain the exceptional cases where liability arises despite initial impossibility
* explain the consequences of impossibility
LEARNING MATERIAL
Wilson v Smith 1956 (1) SA 393 (W).

1 THE GENERAL RULE THAT IMPOSSIBILITY OF PERFORMANCE
PREVENTS THE CREATION OF OBLIGATIONS
Study section 8.1.1 of the textbook. If performance is impossible, the contract is
void. You should understand the subtle distinction between error in motive and
initial impossibility. You do not have to study the counterpoint.
2 DIFFERENT TYPES OF IMPOSSIBILITY

Study section 8.1.2–8.1.2.4 of the textbook.
You should be able to draw all the distinctions made in these sections.
You should notice that, although it is stated that objective impossibility means
that the impossibility is so serious that no-one can perform, practical
impossibility (where the cost of performing is totally disproportionate to the
value of the performance) will also preclude liability from arising.
A difficulty arises where performance is legally impossible. Theoretically
speaking, this should be a case of illegality, yet the case law sometimes regards
it as initial impossibility. The distinction between initial impossibility and
illegality is not only a theoretical issue, but the consequences are also similar (a
claim for unjustified enrichment arises) up to a point (the par delictum rule only
83
applies to illegality). Refer back to study unit 17 with regard to the
consequences of illegality.
The distinction between initial impossibility, supervening impossibility (a form
of termination of obligations) and prevention of performance (a form of breach
of contract) has practical importance, as their consequences are different.
3 LIABILITY DESPITE IMPOSSIBILITY

Study section 8.1.3–8.1.3.2 of the textbook
There are two exceptions to the general rule where obligations arise despite
initial impossibility: where both parties contemplated impossibility of
performance, and a warranty of performance.
Notice that the possibility should exist that a claim for delictual damages can be
instituted in certain cases.
With regard to tacit warranties, see study unit 23 on tacit terms.
4 THE CONSEQUENCES OF IMPOSSIBILITY

Study section 8.1.4 of the textbook. Where performance is impossible, no
obligation will arise, and, if there is a reciprocal obligation, that reciprocal
obligation will also be void. See study unit 32 on the exceptio non adimpleti
contractus for a discussion of reciprocal contracts. Any performance in terms of
a void contract can be reclaimed on the basis of unjustified enrichment.
The test of divisibility of performances can play a role here. See study unit 23 in
this regard.
ACTIVITY
1 Indicate whether the impossibility in the following cases is a case of initial impossibility which makes
the contract void:
(a) X undertakes to paint Y’s house for R30 000.The house is destroyed by lightning a day after the
(b) X undertakes to paint Y’s house for R30 000.Unknown to both parties, the house was destroyed
by lightning the day before.
(c) X undertakes to paint Y’s house for R30 000.Unknown to both parties, the price of paint tripled
the day before. The paint would now cost X R15 000.
(d) X undertakes to paint Y’s house for R30 000. Y deliberately destroys his house a day after the
(e) X buys paint from Y to paint his (X’s) house for R10 000. X did not know that his house was
destroyed by lightning the day before the conclusion of the contract.
(f) X sells a house toY for R800 000. The house is registered in the name of X and Z. The contract
complies with the required formalities. Z refuses to allow registration in Y’s name to take place.
2 Mr Greedy is a businessman who sells his wares through a number of street vendors. Poor Boy is his
nephew, who cannot find work and is interested in working for his uncle as a street vendor. Mr Greedy
and Poor Boy conclude a written contract of service. Poor Boy has to pay Mr Greedy the lawyer’s fee
84
of R500 for the drafting of the contract. Mr Greedy undertakes to employ Poor Boy for a year and to
pay him R3 000 per month. Poor Boy undertakes to run Mr Greedy’s street stall on the pavement of
Pearce Street in Mega City. Both parties are unaware that street vending in Pearce Street is prohibited
by regulation.One day, a traffic officer arrives and tickets Poor Boy for selling the wares on Pearce
Street.
(a) Poor Boy is desperate and asks you for legal advice. He wants to know whether he is bound by
the contract of service, and if he has any claim against Mr Greedy.
(b) Would your advice be the same as in question (a) if the regulation only prohibited street
vending without a licence? All applications for licences are accepted. Discuss.
FEEDBACK
1 (a) No. Although the impossibility is absolute, X’s performance was still possible when the
contract was concluded. This is a case of supervening impossibility of performance.
(b) Yes. X’s performance was absolutely impossible when the contract was concluded, as no-one
would have been able to paint a burnt-out house.
(c) Probably not. Performance seems to be factually and objectively possible. It is doubtful,
however, whether this would be regarded as a case of economic or practical impossibility
that would make the obligation void.
(d) No. Although X’s performance was still possible when the contract was concluded,
performance became absolutely impossible after Y’s deliberate act.Y breached the contract
(prevention of performance).
(e) No. Neither payment of the price nor the performance of delivering the paint was impossible
at the conclusion of the contract. The contract of sale is valid, because X only acted under an
error of motive, which is not a material error. The parties thus had consensus.
(f) No. Performance by X is not objectively impossible, because the house still exists. It is only
subjectively impossible for X to perform.
2 (a) Performance by Poor Boy is legally impossible. This problem is either a case of absolute
impossibility of performance (all street vending is prohibited) at the time of conclusion of the
contract or illegality. In both instances, the contract is void and Poor Boy has no contractual
remedy. Performance by both parties amounts to unjustified enrichment and restitution of the
performances must occur. Restitution of Poor Boy’s labour is, however, not possible.
(b) No. The contract is now valid and enforceable. Performance by Poor Boy is now not illegal, as
performance can legally be carried out with a licence. Performance is only subjectively
impossible for Poor Boy, as street vendors with licences may freely sell their wares. Poor Boy
will have to apply for a licence.
SUMMARY
textbook.
85
STUDY UNIT 21
CERTAINTY
OVERVIEW
In this study unit, we discuss the requirement for a valid contract that the contents of the obligations must be
certain or capable of being made certain through a mechanism set out in the contract. The other
requirements for a valid contract are consensus or ostensible consensus, contractual capacity, legality,
formalities and possibility.
* explain the general requirement for a valid contract that the content of the obligations must be
certain or capable of being made certain through a mechanism set out in the contract
* explain the application of the certainty requirement to some practical examples
* explain the consequences of not meeting the certainty requirement
LEARNING MATERIAL
NBS Boland Ltd v One Berg River Drive CC 1999 (4) SA 928 (SCA).

1 THE GENERAL RULE THAT UNCERTAINTY ABOUT WHAT HAS TO BE
PERFORMED PREVENTS THE CREATION OF OBLIGATIONS
Study section 8.2.1 of the textbook. Certainty is one of the requirements for a
valid contract. This means either that the contents of the obligations are certain
or that they are capable of being made certain through a mechanism set out in
the contract. You only have to read the ‘‘Pause for reflection’’ box in this
section. You should understand that consensus and certainty are distinct, but
that it is sometimes difficult to determine whether a contract is void because of
lack of consensus or because of uncertainty.
2 THE APPLICATION OF THE CERTAINTY REQUIREMENT: SOME

PRACTICAL EXAMPLES
Study section 8.2.2–8.2.2.4 of the textbook.
All the examples are important.
The mechanisms which can be validly used to obtain certainty are very
important when drafting contracts. Also note how vague language is addressed
86
in the rules of interpretation, and of how gaps are filled by terms read into the
contract with terms implied by law.
3 CONSEQUENCES OF NOT MEETING THE CERTAINTY REQUIREMENT

Study section 8.2.3 of the textbook. The uncertainty of an obligation can make
the contract void, unless the uncertain obligation can be severed from the rest of
the contract. See study unit 32 on the exceptio non adimpleti contractus for a
discussion of reciprocal contracts. And note, again, the importance of the test of
divisibility of performance. See study unit 23 in this regard.
ACTIVITY
Are the following terms certain?
1 X will pay Y the price of R10 000 when her financial position allows her to.
2 X has an option to buy Y’s farm for a price to be determined by agreement between X and Y when X
exercises the option.
3 X has an option to buy Y’s farm for a price to be determined by agreement between X and Y. X and Y
undertake to negotiate the price in good faith when X exercises the option.
4 X undertakes to pay a substantial amount of the purchase price of R600 000 for a house each month
until the price is paid off.
5 X leasesY’s house for R7000 per month.The parties do not agree on how long the lease will remain in
force.
6 X, the seller of a car toY, will determine the purchase price of his car.
7 Z will determine the purchase price of the car in the contract of sale between X and Y.
8 Y will pay X a reasonable fee for the installation of Y’s stove.
FEEDBACK
1 Yes. The term is not vague, as the financial position of X and her ability to pay are a question of fact.
2 No. This is an invalid agreement to agree (pactum de contrahendo). There is no deadlock-breaking
mechanism.
3 No. This is an invalid agreement to agree (pactum de contrahendo). The undertaking to negotiate in
good faith is not a deadlock-breaking mechanism.
4 No. A‘‘substantial amount’’ is vague.
5 Yes. The parties have agreed on a lease and therefore intend that the contract will not be of an
indefinite duration. The courts will probably interpret this contract to mean that either party may
terminate the lease by giving notice of a month.
6 No.One of the parties may not validly determine the price in a contract of sale.
7 Yes.Here,a mechanismis created for the determination of the purchase price:a third party(Z)will doso.
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8 Yes. An agreement to perform a service at a price to be determined by one of the parties, X, is valid,
but X has to exercise his discretion in a reasonable manner.
SUMMARY
textbook.
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CONTENTS AND OPERATON OF A CONTRACT
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STUDY UNIT 22
PARTIES TO CONTRACTS
OVERVIEW
In this and the next two study units, we will discuss the contents and operation of a contract. As you will
remember, a contract is an agreement which creates, or is intended to create, obligations. An obligation is
a juristic relationship between legal subjects which entails a right to performance for one party to the
agreement, and, consequently, a duty to perform for the other. In this study unit, we are going to examine the
parties to the agreement. In study unit 23, we will discuss the obligations which are created by contracts,
and the terms that determine or qualify the obligations. In study unit 24, we will examine the interpretation of
contracts.
* distinguish between simple joint liability, joint and several liability, and collective joint liability
* explain the principle of privacy of contract
* explain briefly what representation is
* explain the stipulation for the benefit of a third party
LEARNING MATERIAL
Prescribed textbook, chapter 9 and the contents of this study unit.

1 INTRODUCTION
Study section 9.1 of the textbook. Consensus presupposes at least two parties,
or at least one person in two capacities.
2 MULTIPLICITY OF PARTIES
Study section 9.2–9.2.4 of the textbook. A sound knowledge of the different
forms of liability (and entitlement) is required when drafting contracts. You
have to be able to distinguish between the three forms of liability (and
entitlement). You should also know when the different forms of liability (and
entitlement) apply. The intention of the parties, presumptions, divisibility of
performance, and the law all play a role in this regard. See the next study unit
on the test for divisibility of performance.
3 THIRD PARTIES
As we have already seen, a contract creates at least one obligation between the
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parties to the contract, or, in other words, at least one claim or right to
performance arises. There rests a duty on the debtor to perform, and it is
obvious that the debtor may not interfere with the creditor’s claim. The debtor
must refrain from any interference with it, whether in the form of faulty
performance (positive and negative) or in the form of repudiation or prevention
of performance. The debtor also has a duty to perform, but the creditor’s claim
does not enjoy protection against the debtor only.
Third parties (ie all legal subjects not party to the contract) must also refrain
from any action which may amount to culpable interference with the claim. (See
your lectures on the law of delict.) In this sense, the contract between A and B
places on third parties a general (negative) obligation to refrain from
interference. However, it is also possible that, by their contract, A and B may
impose specific (positive) duties on third parties and also stipulate rights for
them, and this brings us to the field of representation and the stipulation in
favour of a third party.
Study section 9.3.1. You have to know that privacy of contract is one of the
principles of the law of contract, and you have to know what it involves in
order to understand representation and stipulations for the benefit of third
parties.
3.1 Representation
In contracting with B, A may be acting not in his or her own name, but as the
representative of some third person, C. In other words, A is concluding the
agreement with B in the name of and on behalf of the principal, C. The intention
of A and B is clearly to forge an immediate juristic bond between B and C, so
that A falls completely out of the picture as soon as the agreement itself has
been completed. A may derive his or her representative authority either from
some express authorisation by C or by reason of some office he or she holds (eg
a guardian who acts for a minor), in which case he or she derives his or her
authority directly from the law itself.
4 THE CONTRACT FOR THE BENEFIT OF A THIRD PARTY

Study section 9.3.3. You have to know the law as stated by the courts. The
different theoretical constructions of the stipulatio alteri are important, as they
could make a difference in practice.
ACTIVITY
1 X and Ysell any two horses to Z for R4 000.The horses are delivered to Z, but Z does not pay. X sends a
letter of demand to Z for payment of R4 000. Advise Z.
2 X and Ysell a specific team of two horses to Z for R4 000. The two horses are a team trained to pull a
horse buggy. X and Yare co-owners of the horses. The horses are delivered to Z, but the purchase
price is not paid. X sends a letter of demand to Z for payment of R4 000. Advise Z.
3 X and Ysell a specific team of two horses to Z for R4 000. The two horses are a team trained to pull a
horse buggy. X and Yare co-owners of the horses. Z pays the purchase price, but the horses are not
delivered to Z. Advise Z.
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4 X sells his car toY for R50 000. In their contract, the parties agree that Yundertakes to first offer the car
for sale to X’s son, Z, if she (Y) wants to sell the car.Ysells and delivers the car to A. Advise Z.
FEEDBACK
1 The obligation to pay R4 000 is divisible, and the parties have not expressly or by implication agreed
on what the entitlement of X and Y would be. The presumption is thus that this is a case of simple joint
entitlement and that the share of X and Y is equal. X is entitled to payment of R2 000 from Z and
not R4 000.
2 This question also deals with the obligation to pay R4 000.This remains a case of joint entitlement and
the advice is the same as in question1.
3 Here, the obligation to deliver the two horses is indivisible, as the intention of the parties is to sell the
horses as a pair. The parties have not expressly agreed on what the liability of X and Y would be, but
they have agreed by implication that it would be a case of collective joint liability. X and Yare also co-
owners of the horses. Z will thus only be able to claim delivery of the horses from both X and Y.
4 If a binding obligation arises betweenYand Z, it would be a right of pre-emption. See the discussion
of a right of pre-emption in study unit 8. X and Y intend to create an enforceable obligation in favour
of Z.There is thus a stipulation for the benefit of a third party (Z) in the agreement between X and Y, but
Z never accepted the benefit. No obligation between Yand Z consequently arises, and Z has no
remedy.Y has, however, breached her contract with X.
SUMMARY
Consult points 1-3 of ‘‘This chapter in essence’’ at the end of chapter 9 of the
textbook.
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STUDY UNIT 23
OBLIGATIONS AND TERMS
OVERVIEW
We are in the middle of the discussion of the contents and operation of a contract. In this discussion, we
focus on various aspects of the obligations which are created by contracts. In the previous study unit, we
investigated the parties to a contract, and, in the next study unit, we will look at the interpretation of
contracts. In this study unit, we are going to discuss the different kinds of obligations, and the terms that
determine or qualify the obligations.
* define an obligation
* explain who the debtor and who the creditor is with regard to a contract
* distinguish between civil, natural and moral obligations
* distinguish between simple, alternative, generic and facultative obligations
* explain when a performance is divisible and when indivisible
* explain a term of a contract
* distinguish between the essentialia, naturalia and incidentalia of a contract
* distinguish between express terms, terms implied by law and tacit terms
* explain what a standard-form contract is
* explain what incorporation by reference is
* explain the threefold test which our courts apply in the ticket cases and in respect of notices
* explain briefly the requirement of the Consumer Protection Act that the attention of consumers should
be drawn to certain clauses and notices
* explain the conclusion of a contract by conduct and the two tests used by the courts in this regard
* explain briefly where terms implied by law come from
* explain how the courts establish tacit terms
* distinguish between terms and conditions
* distinguish between conditions and time clauses
* explain suppositions, modal clauses and exemption clauses
LEARNING MATERIAL
Prescribed textbook, chapter10.
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1 INTRODUCTION
2 OBLIGATIONS
Study the introduction to section 10.2, and section 10.2.1 of the textbook. You
should know the definition of an obligation and understand that an obligation
only creates a personal right.
Study section 10.2.3 with regard to whom the debtor and creditor are in a
contract.
Carefully read section 10.2.2 with regard to civil, natural and moral
obligations. Then study point 2.1 of ‘‘This chapter in essence’’ at the end of
chapter 10.
Also study section 10.2.4 with regard to simple, alternative, generic and
facultative obligations. This distinction plays an important role when drafting
and interpreting contracts, as the consequences of the different obligations are
not the same. Make certain that you also understand the examples that are
given in illustration of the different types of obligations.
This distinction is also important in the case of supervening impossibility of
performance. As a general rule, a simple obligation will be extinguished in such
instances. Before the performance has been fixed in the case of a generic
obligation, the doctrine of supervening impossibility can hardly play a part,
since the rule is genus non perit (a genus does not perish). After performance has
been fixed, however, all the rules applicable to simple obligations take effect. In
the case of an alternative obligation, the right of selection is limited by our
common law to the remaining alternative performances, and, if there is only
one left, then that alternative has to be delivered. If delivery of the first
performance (the cow, Annabel) in a facultative obligation becomes impossible
through supervening impossibility of performance, the obligation is
terminated.
As we have seen, the divisibility of a performance can play an important role
with regard to possibility of performance (study unit 20), certainty (study unit
21) and multiplicity of parties (study unit 22). Study section 10.2.5 with regard
to divisibility of performance. You should know the test of divisibility and
understand the examples that are given in illustration.
3 TERMS
Terms can be classified with regard to their nature and effect.
3.1 Essentialia, naturalia and incidentalia

Study section 10.3. This distinction will play a very important role when you
study any of the specific contracts.
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The classification of a particular contract as a specific type of contract is
important, as this classification will determine the naturalia that the law attaches
to the particular contract. Knowing what the essentialia and naturalia of a
specific contract are is thus important when you draft or interpret a contract.
You simply cannot change the naturalia without knowing what they are.
However, note that legislation often prohibits such exclusion or exemption
clauses altering naturalia in order to protect the weaker party. Such clauses are
also strictly interpreted.
3.2 Express terms, terms implied by law and tacit terms

The distinction between these three types of terms is important.
3.2.1 Express terms

Study the introduction to section 10.3.2, as well as sections 10.3.2.2, 10.3.2.3,
10.3.2.4, 10.3.2.5 and 10.3.2.8. Standard-form contracts have become
commonplace in commerce and have caused many problems. The courts and
legislator have attempted to address these problems.
The terms of a contract sometimes do not appear in the contract itself, but are
incorporated into the contract by reference. This is often done on tickets. You
must know the threefold test that the courts apply to tickets and notices in
order to determine if the other party is bound to the terms. Note that the three
questions can be replaced with the ordinary rules regarding consensus and
reasonable reliance. Here, no document has been signed by the contracting
parties.
You must know the two competing tests (the one subjective and the other more
objective) used by the courts to determine if a contract has been concluded by
the conduct of the parties. Note that these tests are particularly problematic,
because both have been approved by the highest court in civil matters.
Carefully read section 10.3.2.6 with regard to the provisions of the Consumer
Protection Act, and then study point 3.3 of ‘‘This chapter in essence’’ at the
end of chapter 10 of the textbook.
3.2.2 Terms implied by law

Study the introduction to section 10.3.3, as well as section 10.3.3.1. You must
know what terms implied ex lege are. Please note that these terms are not based
on the consensus of the parties. Terms implied by law are also called naturalia
and may arise from either the common law or legislation. Note that the courts
may create new naturalia. You should only have an overview of the naturalia
created by legislation.
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3.2.3 Tacit terms
Study section 10.3.3.2. You should know what tacit terms are, how the courts
determine the existence thereof, that the tests are at present objective, and the
role trade usage plays with regard to tacit terms.
3.3 Conditions and time clauses

The word ‘‘condition’’ is, however, sometimes also used as a synonym for
‘‘term’’. This use often causes confusion, because the word ‘‘condition’’ usually
means a condition precedent, a true condition on which the continued existence
or operation of the contract depends. The word ‘‘term’’, however, always
means a stipulation in the contract, while ‘‘condition’’ sometimes means a
condition precedent and sometimes a term.
Study sections 10.3.5 (with all its subsections) and 10.3.6. You must be able to
distinguish between conditions and time clauses, and their respective legal
consequences. Take note that, when the taking place of the future event is
uncertain, we are dealing with a condition (eg if it will rain next week), but that
when the future event is certain to take place, although it is uncertain when it
will occur (eg when I die), we have a time clause.
Study section 10.3.7 with all its subsections. You should be able to distinguish
between a supposition, condition and error in motive, and also between a
modal clause and a stipulation in favour of a third party (see the previous study
unit). You should know what the limits are of exclusion clauses. See, in this
regard, also study unit 12.
ACTIVITY
1 On11September 2010, Sipho enters into a written contract for articles of clerkship with a law firm.The
contract contains a clause which stipulates that Sipho will be employed from 3 January 2011, but that
he will only continue to be employed if he graduates in March 2011.What type of clause is this?
Discuss.
2 X gives her son,Y, R50 000 to buy a car. Indicate what type of clause the donation is subject to.
3 In a divorce settlement agreement, a husband undertakes to pay R5 000 in maintenance to his
daughter who has already reached majority and is studying at Unisa.What type of clause is this
undertaking? Discuss.
4 X gives a cheque to Y which is payable when X becomes 30 years old. X is at present 28 years old.
What type of clause is the cheque subject to? Discuss.
5 Y buys a new Toyota Yaris from XYZ Garage for R150 000. Identify the obligation of XYZ Garage to
deliver a Toyota Yaris to Y.
6 X leases a flat from Y for R3 000 per month.Who is the debtor and who is the creditor?
7 X,Yand Z take part as a team in a deep-sea angling competition. X,Yand Z sign the entry form for the
competition.They undertake in the entry form to be bound by the set of rules which is available on the
internet at a certain internet address. According to these rules, all the members of the winning team
will be entitled to the prize, but it will be paid out to the captain of the winning team. X,Yand Z agree
that X will be the captain and that he will provide the boat and equipment and pay the entry fee.Y
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undertakes to buy the fuel and bait. Both X and Y have taken part in many competitions before, but Z
has never fished in his life and is only going along for the fun. Z catches a huge blue marlin and, to their
surprise, they win the competition. The organiser pays out the prize to X. Although X,Yand Z did not
agree on how to share the prize if they should win, a trade usage exists among the angling fraternity
that the prize is to be shared equally among the members of the team after deduction of the costs. X
wants to share the prize with Yonly after deduction of the costs. Advise Z.
8 X slips on the wet floor of her local shopping mall, falls and hurts her back. She incurs R40 000 in
medical expenses. At the entrance to the mall there is a huge notice which one cannot help but see
when entering. X, however, did not see the notice. The notice excludes all liability on the part of the
owner of the building for the injury or death of anyone entering the shopping mall. Her fall has been
caused by the negligence of the owner of the building.
FEEDBACK
1 The clause in the employment contract is in fact a suspensive time clause (employment will commence
on a future date: 3 January 2011) and a resolutive condition (employment will only continue if Sipho
graduates). The contract thus comes into existence on11September 2010, but its full operation is
suspended till 3 January 2011. The condition is a negative condition, as it will only be fulfilled if Sipho
does not graduate. It is also a mixed condition, because it depends partially on Sipho and partially on
events beyond the control of both parties. Sipho has till March to graduate. But this date does not
change the resolutive condition into a time clause. Remember that it is uncertain if Sipho will graduate.
2 This is a modal clause.Yreceives a performance (R50 000) to do something with in future (to buy a
car).
3 This question relates to what you learnt in the previous study unit. It is a stipulation for the benefit of a
third party. The divorce settlement agreement is between the parents, and the daughter is not a party
to this contract. The clause places a duty on the husband to confer a benefit on a third party, his
daughter.
4 This is a suspensive condition, as it is uncertain whether X will become 30 years old, and the cheque is
only payable if X does. The condition is positive because it is dependent on the happening of the
uncertain event. The event is beyond the control of the parties and the condition is thus casual.
5 This is a generic obligation, as the specific Toyota Yaris has not yet been identified from the genus,
Toyota Yaris cars. XYZ Garage may decide which Yaris has to be delivered, as the parties have not
agreed on who may do so. As soon as the garage does so, the obligation becomes a simple
obligation, as the performance is exactly specified.
6 It depends on what obligation we are looking at. Besides the two express obligations, there are the
naturalia of a contract of lease. Both the lessor and lessee have duties and rights. For instance, X is
the debtor and Y is the creditor with regard to the payment of the rent, but Y is the debtor and X the
creditor with regard to the delivery and use of the flat.
7 When X,Yand Z enter the competition, they conclude a contract with the organiser of the competition
and undertake to comply with the rules of the competition. These rules are incorporated by reference
into their contract. The organiser undertakes to pay out a prize to the captain of the team that catches
the biggest fish. Here, we have multiple parties (X,Yand Z) who are entitled to the prize, but the
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parties have agreed that this duty of the organiser will be discharged by payment thereof to the
captain. Z thus has no remedy against the organiser.
The second question is whether Z has a remedy against X.This depends on the agreement between X,
Yand Z about the sharing of the prize. The parties have not expressly come to an agreement in this
regard. Although X and Ymost probably knew of the custom regarding the sharing (they have
participated in many competitions), Z cannot be held bound to the custom, because he was unaware
of the custom. However, all the parties (including Z) would have most probably answered that the
prize should be divided as it is usually done if the officious bystander had asked them how they would
share the prize if they should win. Such a term will not be against the express agreement between X,Y
and Z on their participation, as they have only agreed on each party’s contribution to the costs and
who the captain would be. Such a term is also necessary to give business efficacy to their agreement
on their participation in the competition. Z is thus entitled to an equal share after deduction of the
costs.
8 The question is whether X is bound by the notice at the entrance. The notice contains an exclusion
clause attempting to exclude all liability for injury or death. It cannot exclude liability for the
intentional conduct of the owner of the mall, but it will exclude liability for negligence. The threefold
test of the ticket cases has to be applied to this notice. Although X did not know of the existence of the
notice, reasonable steps have been taken to bring it to her notice. The owner of the mall is thus not
liable, as he was only negligent.
SUMMARY
Consult ‘‘This chapter in essence’’ at the end of chapter 10 of the textbook.
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STUDY UNIT 24
INTERPRETATION OF
CONTRACTS
OVERVIEW
We are busy discussing the contents and operation of a contract. In the previous two study units, we looked
at the parties to the agreement and at the obligations and terms of contracts. In this study unit, we will
examine the interpretation of contracts.
* understand the textual approach to the interpretation of contracts
* explain the contextual approach to the interpretation of contracts
* explain what the parol evidence rule is
* explain the rules of interpretation of contracts
LEARNING MATERIAL

1 INTRODUCTION
The courts are seldom called upon to interpret oral contracts, because the
process of proving the terms of the contract usually simultaneously clarifies the
meaning of the terms (Christie and Bradfield Contract 199). A party’s testimony
on the wording of their oral contract usually reflects his/her understanding of
meaning of the words and not a mere recollection the wording itself. In
contrast, the court often has to construe the actual wording of a written contract
(Christie and Bradfield Contract 199).
Interpretation is an objective process and involves determining what the
language used in the contract means. The testimony of the parties as to what
either of them had in mind at the time of conclusion of their contract is thus
irrelevant (Shakawa Hunting & Game Lodge (Pty) Ltd v Askari Adventures CC (44/
2014) [2015] ZASCA 62 (17 April 2015) par 12).
In recent years we have seen the courts move from a textual to a contextual
approach to the interpretation of contracts.
2 THE TEXTUAL APPROACH

Initially the courts followed a textual approach to contractual interpretation.
Read section 11.2 to the introduction of section 11.5 of the textbook in this
regard. Note that the textual approach involves a step by step approach. The
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ordinary or grammatical meaning of the words is first determined. The next
step is to consider the textual context of the contract as a whole. Only if the
intention of the parties cannot thus be determined, is the extended context
considered.
Study section 11.5.1–11.5.1.2 of the textbook. Note the role of the parol
evidence rule in determining admissible evidence and the distinction which
was made between background and surrounding circumstances.
3 THE CONTEXTUAL APPROACH

Read section 11.5.1.3–11.5.1.4 of the textbook as background. The first step the
courts took in the change to a contextual approach was to jettison the
distinction between background and surrounding circumstances, because it has
proved to be a difficult and confusing distinction (KPMG Chartered Accountants
(SA) Securefin Ltd 2009 (4) SA 399 (SCA) 409–410 as confirmed by later SCA
cases). The parol evidence rule, however, remains part of our law (KPMG
Chartered Accountants (SA) Securefin Ltd 2009 (4) SA 399 (SCA) 409). Now study
paragraph 11.5.2 of the textbook on the circumventing of the parol evidence
rule.
The next step was to jettison the three step approach (textual approach) and to
adopt a unitary contextual approach to interpretation. The reason for this new
approach has been explained in Natal Joint Municipal Pension Fund v Endumeni
Municipality 2012 (4) SA 593 (SCA) 609:
Most words can bear several different meanings or shades of meaning
and to try to ascertain their meaning in the abstract, divorced from the
broad context of their use, is a unhelpful exercise.
The integration aspect of the parol evidence rule determines that the starting
point is the language of the document in the light of the ordinary rules of
grammar and syntax. The words should, however, be read from the beginning
in the context of the document as a whole and in the light of all the relevant
circumstances surrounding the conclusion of the contract (factual matrix).
Three possible scenarios have been identified in Natal Joint Municipal Pension
Fund v Endumeni Municipality 2012 (4) SA 593 (SCA):
1 The first scenario is (609):
Sometimes the language of the provision, when read in its particular
context, seems clear and admits of little if any ambiguity.
2 The second scenario is (609):

At the other extreme, where the context makes it plain that adhering to
the meaning suggested by apparently plain language would lead to
glaring absurdity, the court will ascribe a meaning to the language that
avoids the absurdity.
This interpretation involves (609–610):

... a restriction or extension of the language used by the adoption of a
narrow or broad meaning of the words, the selection of a less
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immediately apparent meaning or sometimes the correction of an
apparent error in the language in order to avoid the identified
absurdity.
3 The third scenario is (610):

In between these two extremes, in most cases the court is faced with
two or more possible meanings that are to a greater or lesser degree
available on the language used. ... . In resolving the problem, the
apparent purpose of the provision and the context in which it occurs
will be important guides to the correct interpretation.
When the text lends itself to more than one meaning each possibility must be
weighed in the light of all the factors of the factual matrix. These factors are
inter alia: the apparent purpose of the provision under consideration, the
purpose of the contract, background to the preparation and production of the
document in question (circumstances in which the document came into being),
the correspondence which passed between the parties leading up to the
conclusion of their agreement and the way the parties carried out their
agreement (Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4)
SA 593 (SCA) 603–604; Dexgroup (Pty) Ltd v Trustco Group International (Pty) Ltd
2013 (6) SA 520 (SCA) 526; Unica Iron and Steel (Pty) Ltd v Michandani 2016 (2)
SA 307 (SCA); Hangar v Robertson (211/2015) [2016] ZASCA 102 (10 June 2016)
par 10).
An important consideration in determining which meaning should be given to
a provision is that it must be a commercially sensible meaning. It should not
lead to impractical, unbusinesslike or oppressive consequences, or stultify the
broader operation of the contract (Ekurhaleni Metropolitan Municipality v
Germiston Municipal Retirement Fund 2010 (2) SA 498 (SCA) 501; Natal Joint
Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) 610).
4 RULES OF INTERPRETATION
Study section 11.6.1–11.7 of the textbook. You only have to read carefully the
‘‘Counterpoint’’ in section 11.6.2 for an example of the application of the contra
proferentem rule.
It is uncertain what role these rules of interpretation are going to play in the
new contextual approach to interpretation. The courts were able to sensibly
interpret the relevant agreements without resorting to the rules of interpretation
where the courts applied the contextual approach.
5 INTERPRETATION OF DISCLAIMERS, INDEMNITIES AND EXEMPTION

CLAUSES
Study point 15 of ‘‘This chapter in essence’’ at the end of chapter 11.
ACTIVITY
1 Discuss the contextual approach to interpretation of contracts.
2 Briefly discuss the parol evidence rule.
3 Discuss the rules of interpretation of contracts.
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FEEDBACK
It is very difficult to formulate short problem-type questions on this section of the work.You can therefore expect
direct questions on the interpretation of contracts.
102
BREACH OF CONTRACT AND REMEDIES
103
STUDY UNIT 25
BREACH OF CONTRACT:
INTRODUCTION
OVERVIEW
A contract is normally terminated by performance. However, matters do not always proceed exactly
according to plan. The debtor or creditor may have miscalculated as regards his or her expectations or
arrangements to such an extent that he or she cannot render or accept the promised performance at the
given time. This, then, leads to breach of contract.
In this study unit, you will be merely introduced to the different forms of breach of contract, and, in the
following five study units, we will look closely at the different forms of breach of contract.
* distinguish briefly between the different forms of breach of contract
* understand that our law recognises a unitary concept of breach of contract
* understand that the various forms of breach may overlap
* explain briefly the remedies for breach of contract
* apply the relevant principles to simple practical problems
LEARNING MATERIAL

Study section 12.1 of the textbook. In this study unit, you are introduced to the
different forms of breach of contract. It is very important that you realise that,
although we distinguish different forms of breach, they not only can overlap
but that our law also recognises a unitary concept of breach. They are
nevertheless important, because the consequences depend on the type of breach
involved.
Ensure that you know the brief definitions of the various forms of breach. The
illustrations in the ‘‘Pause for reflection’’ box are very helpful in understanding
the definitions. Study table 12.1 carefully. It provides you with a useful
summary and overview of the different forms of breach. Return to this table
from time to time to maintain this overview. It will also be very handy when
preparing for your examination. But remember that it is only a summary and
that the rules are more detailed and intricate.
You will notice that the different remedies for each form of breach of contract
are briefly discussed. These remedies are later discussed in more detail. It
would make sense for you to revise the different forms of breach after you have
studied the remedies.
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ACTIVITY
X sells a cow which is in milk toY for R10 000.The parties agree that delivery is to take place on1February at
Y’s farm. Identify the type of breach in the following circumstances:
(a) X delivers a cow which is dry toY.
(b) When X delivers the cow toY, Yrefuses to accept it. He also fails to pay X R10 000. He tells X that he
does not want to continue with the sale.
(c) X delivers the cow on 2 February.
(d) Y kills the cow on 29 January to save him from paying X R10 000.
FEEDBACK
(a) Positive malperformance.
(b) Y is the creditor with regard to the obligation to deliver the cow, but the debtor with regard to payment
of the price.Y’s refusal to accept delivery amounts to mora creditoris, but his failure to pay to mora
debitoris. Y’s statement is repudiation, because he indicates that he does not want to honour the
contract.
(c) X fails in his duty to perform timeously; hence mora debitoris.
(d) Yas creditor prevents performance by killing the cow.
SUMMARY
textbook.
105
STUDY UNIT 26
MORA DEBITORIS
OVERVIEW
In the previous study unit, you were introduced to the different forms of breach of contract.When the debtor
fails to perform timeously, we speak of mora debitoris. In this study unit, we examine this form of breach, its
requirements, remedies and consequences.
* explain what is meant by the concept of mora debitoris
* distinguish mora debitoris from other forms of breach
* explain the requirements for mora debitoris
* explain the remedies for mora debitoris
* explain the further consequences of mora debitoris aside from remedies for breach of contract
LEARNING MATERIAL

Study the definition of mora debitoris in the introduction to section 12.2 of the
textbook.
1 DISTINGUISHED FROM OTHER FORMS OF BREACH

Study section 12.2.1 of the textbook. These distinctions are very important.
You should return to this discussion after you have studied the other forms of
breach, as the distinctions will make more sense then.
2 REQUIREMENTS
Study section 12.2.2–12.2.2.3 of the textbook. Study the requirements for mora
debitoris. The distinction between mora ex re and mora ex persona is very
important. Know the role demand plays to place the debtor into mora in this
regard. Study the ‘‘Counterpoint’’ in section 12.2.2.2 of the textbook.
Note the discussion in section 12.2.2.3 of the textbook on fault as a requirement
for mora debitoris. However, in Scoin Trading (Pty) Ltd v Bernstein 2011 (2) SA
118 (SCA) 122–3 the Supreme Court of Appeal held that fault is no requirement:
‘‘As correctly submitted by counsel for the appellant, contractual damages do
not depend on fault. All that the creditor is required to prove is that the debtor
is in mora. It is not necessary to prove any fault on the part of the debtor.’’
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Although fault may not be a direct requirement for mora, it seems that it is an
indirect requirement because the debtor’s mora is excused if he/she can prove
that performance is temporarily impossible and not due to the fault of the
debtor.
3 REMEDIES
Study sections 12.2.3.2-12.2.3.3 of the textbook. Mora debitoris has a number of
consequences. Focus, first, on the usual remedies for breach of contract:
damages and cancellation of the contract. Specific performance is not relevant
here, as performance may be claimed as soon as it becomes due and
enforceable. Cancellation is an extraordinary remedy. You should ensure that
you know when rescission may be claimed.
Note that, in the case of mora ex persona, the creditor sometimes has to take three
steps before the contract is cancelled. First, the debtor only falls into mora after a
demand has been sent to the debtor. Secondly, where there is no express or tacit
lex commissoria, a notice of rescission has to be sent to the debtor. Only then can
the creditor elect to rescind the contract. All three steps may, of course, be
combined into one.
You should furthermore take note of the role a reasonable period of time plays
with regard to the demand and the notice of rescission.
4 FURTHER CONSEQUENCES OF MORA DEBITORIS

Study section 12.2.3.1 of the textbook. If the performance becomes impossible
after the debtor has fallen into mora, the debt is not discharged unless the debtor
can prove that the thing would have suffered the same fate in the hands of the
creditor.
ACTIVITY
X contracts with a dress designer,Y, for the making of her wedding dress. No date for delivery is stipulated,
as X has not finalised the date of the wedding. After months of fittings, she casually remarks that the
wedding will be held in a week’s time and that she hopes it doesn’t rain.Y is shocked and protests that
maybe he won’t be finished by then. Advise X.
FEEDBACK
The question is whether Y will commit breach of contract if the dress is not finished for the wedding.Y is the
debtor and the question is thus whether mora debitoris will occur. A date for performance has seemingly been
set (before X’s wedding), but it is neither certain to arrive, nor certain as to when. This is thus a case of mora ex
persona. A demand is thus required to placeY in mora. X’s remarks can be construed as a demand.The fact that
it is oral is acceptable, but it is debatable whether the period of time is reasonable. The time at which its
reasonableness should be judged (the time of conclusion of the contract or the time of the demand) could
make a difference in this regard.
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SUMMARY
textbook.
108
STUDY UNIT 27
MORA CREDITORIS
OVERVIEW
It is not only a debtor who can commit breach of contract, but also a creditor who can act wrongfully.Where
the cooperation of the creditor is necessary for the fulfilment of the obligation of the debtor, the creditor is
guilty of breach of contract if he or she culpably (ie due to his or her own fault) fails to cooperate timeously
and performance remains possible.We then speak of mora creditoris. In this study unit, we examine this form
of contractual breach, its requirements and remedies.
* explain what is meant by the concept of mora creditoris
* explain briefly how mora creditoris differs from mora debitoris
* explain the requirements for mora creditoris
* explain the remedies for mora creditoris
* explain the further consequences of mora creditoris aside from remedies for breach of contract
LEARNING MATERIAL
Martin Harris & Seuns OVS (Edms) Bpk v Qwa Qwa Regeringsdiens 2000 (3) SA 339 (SCA).

1 INTRODUCTION
Study the introduction to section 12.3 of the textbook. The failure of the
creditor to cooperate, with performance remaining possible, occurs when he or
she fails to accept the proper performance tendered by the debtor or when he or
she fails to perform an act which is necessary to enable the debtor to perform
(eg where the purchaser (creditor) is obliged to accept delivery of the thing at
the seller’s (debtor’s) shop and fails to do so, or where an artist (debtor) agrees
to paint a person’s (creditor’s) portrait and the person fails to arrive to sit for the
artist). Note that, in these cases, the creditor fails to cooperate in his or her
capacity as creditor, while failure to perform in the capacity of a debtor
amounts to mora debitoris. A person could very well be guilty of both forms of
mora (see the discussion and example at the end of section 12.3).
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2 REQUIREMENTS
Study section 12.3.1–12.3.1.5 of the textbook. Study the requirements for mora
creditoris. How do the requirements for mora creditoris and mora debitoris differ?
Note also that, in Martin Harris & Seuns OVS (Edms) Bpk v Qwa Qwa
Regeringsdiens 2000 (3) SA 339 (SCA), the court held that, for mora creditoris to
exist, it is necessary for the debtor to call upon or demand from the creditor the
required cooperation. However, such action on the part of the debtor is not
necessary where either the agreement or the creditor has prescribed a time for
performance by the debtor and thus (by implication) a time for cooperation by
the creditor.
3 REMEDIES
Study section 12.3.2.1–12.3.2.4 of the textbook. Mora creditoris has a number of
consequences. Focus, first, on the usual remedies for breach of contract:
cancellation of the contract; specific performance; and damages. Note the
further possibility that, in appropriate circumstances, the debtor may sue the
creditor for counterperformance. In respect of counterperformance, the creditor
becomes a debtor and, if he or she fails to perform in that regard, he or she will
be guilty of both mora debitoris (by not counterperforming) and mora creditoris
(by not cooperating with the other party’s attempted performance).
4 FURTHER CONSEQUENCES OF MORA CREDITORIS

Study sections 12.3.2.5–12.3.2.7 of the textbook. Aside from the usual remedies
for breach of contract, there are other consequences that mora creditoris has.
These consequences are: a diminishment of the debtor’s duty to take care of an
article; the creditor bears the risk of supervening impossibility of performance;
sureties are released; the obligation toward the creditor remains unfulfilled; and
possible discharge by consignation (study the ‘‘Pause for reflection’’ box in
section 12.3.2.7). In our common law, the debtor was able to free himself or
herself of his or her debt by means of consignation, that is, by payment into
court (or to another authority) of the proceeds of the thing promised, or by
delivery of the thing itself. Consignation, as a general form of discharging a
debt, has, however, fallen into disuse. Whether the debtor can free himself or
herself by means of abandonment is also doubtful.
Remember, also, that a creditor and debtor cannot, in respect of the same
obligation, be in mora creditoris and mora debitoris respectively at the same time.
Therefore, if a debtor who is in mora validly tenders performance, he or she is
thereby no longer in mora, so that he or she will incur no further liability for it
(but the creditor remains in mora). There is some justification to be found in our
common law for the view that the debtor should be able to compel the creditor
to accept the performance tendered.
ACTIVITY
1 How do mora creditoris and mora debitoris differ from each other?
110
2 X buys a lounge suite from a big department store, to be delivered on a specific Friday afternoon.The
store sends its van, but X cannot take delivery of the suite because she is at the hairdresser having her
hair done. The store approaches you for advice.
FEEDBACK
1 Remember that, in the case of mora creditoris, it is the creditor who fails to cooperate in his or her
capacity as creditor to enable the debtor to perform, but, in the case of mora debitoris, it is the debtor
who fails to perform in his or her capacity as debtor. Note, further, that a creditor and debtor cannot, in
respect of the same obligation, be in mora creditoris and mora debitoris respectively at the same time.
Therefore, if a debtor who is in mora validly tenders performance, he or she thereby purges his or her
mora, so that he or she will incur no further liability for it (but the creditor remains in mora).
2 X’s cooperation is necessary to facilitate the delivery of a lounge suite by acceptance thereof. X’s
refusal to accept the suite amounts to breach of contract. The form of breach is mora creditoris. The
store’s remedy is to cancel the contract, and, if it can prove that it has suffered loss, it can institute a
claim for damages. Note that the store’s duty to take care of the lounge suite while the contract is alive
diminishes.
SUMMARY
textbook.
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STUDY UNIT 28
POSITIVE
MALPERFORMANCE
OVERVIEW
In the previous three study units, you gained an overview of the various forms of breach of contract and you
studied mora creditoris and mora debitoris. In this study unit, you will study positive malperformance. Here,
the breach relates to the contents of the performance.

* explain what is meant by the concept of positive malperformance
* explain the distinction between two forms of positive malperformance
* explain whether fault is a requirement for positive malperformance
* explain the remedies for positive malperformance
LEARNING MATERIAL

Study the introduction to section 12.4 of the textbook. Positive
malperformance takes place where a contracting party does not comply with
the terms of the contract either by performing something in a manner which
does not comply with the terms of the contract, or by doing something which
he or she undertook not to do.
1 FAULT
Study section 12.4.1 of the textbook. Although this discussion is somewhat
theoretical, it will facilitate your understanding of exactly when positive
malperformance can occur.
2 REMEDIES
Study section 12.4.2–12.4.2.2 of the textbook. The remedies are the usual ones.
As you have realised by now, cancellation is an unusual remedy. The
malperformance has to be sufficiently serious. Students very often fail to realise
this.
You should realise that only in exceptional circumstances should the debtor be
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given a chance to remedy defective performance before the contract is
cancelled.
ACTIVITY
X hires, from a rental shop, a machine to sand the floors of the house she is renovating. The rental shop
undertakes to deliver the machine on Friday afternoon at16:00. At the time agreed upon, the machine is
delivered. However, when X tries to use the machine on Friday evening, she finds that the sandpaper does
not rotate as it should, and, as a result, she is unable to sand the floors.
(a) X approaches you for legal advice.
(b) What would your answer have been if the shop had failed to deliver the machine?
FEEDBACK
(a) Should this breach be treated as mora debitoris or positive malperformance? See section12.2.1of the
prescribed textbook. It is a case of positive malperformance. X may reject the defective performance
and claim proper performance within a reasonable time. Failure to comply will place the debtor in
mora.
(b) Where the shop fails to deliver the machine, it breaches the contract in the form of mora debitoris, as
performance is still possible. It is not prevention of performance or repudiation (see, again, section
12.2.1 of the prescribed textbook). X has the following alternative remedies:
(i) X may enforce the contract, as the debt is due and enforceable. X may also claim damages if
she has suffered any damage.
(ii) A day for performance was set, so this is an example of mora ex re. No provision was made for a
right to resile, and this is not a case of a tacit lex commissoria. So X will first have to obtain a right
to resile by sending a notice of rescission to the shop to such effect. X may also claim damages if
she suffered any damage.
(iii) X may uphold the contract and claim damages.
SUMMARY
textbook.
113
STUDY UNIT 29
REPUDIATION
OVERVIEW
After gaining an overview of all the different forms of breach and after studying mora creditoris, mora
debitoris and positive malperformance in the previous four study units, you will now focus on repudiation in
this study unit. Here, the conduct of the guilty party indicates a refusal to perform the agreed upon
performance or honour the contract.

* explain what is meant by the concept of repudiation
* state the test to be applied in cases of repudiation
* explain when repudiation may occur
* explain the two approaches to the nature of repudiation
* discuss the different remedies available in a case of repudiation by one of the contracting parties
LEARNING MATERIAL

Study the introduction to section 12.5. Study the definition of repudiation. The
test is very important, so ensure that you know the instances the courts have
considered to be repudiation. Repudiation may occur before, on or after the due
date for performance. Note that repudiation is a continuing form of breach.
Both the debtor and creditor can commit repudiation.
1 CONFLICTING APPROACHES TO REPUDIATION

Carefully read section 12.5.1 as background to section 12.5.2, which you must
study. Both these constructions are being used at present by the courts. You
should know both constructions, as the consequences of repudiation are
determined by the specific construction. The construction that repudiation is a
breach of contract is to be preferred.
2 EFFECT OF REPUDIATION
Study section 12.5.3–12.5.3.2 of the textbook. There is some uncertainty about
the effect of repudiation that is caused by the two possible constructions. You
do not have to study the ‘‘Pause for reflection’’ box in section 12.5.3.2.
114
ACTIVITY
1 Critically discuss the two constructions of repudiation.
2 Charles orders a steak in a restaurant. He waits one hour for his food and then walks out, since he has
not as yet received it. Does Charles or the restaurant owner commit breach of contract? If so, what kind
of breach? Explain your answer.
FEEDBACK
1 A critical assessment of the two constructions required you to
(i) recognise the issue
(ii) summarise the different viewpoints
(iii) critically evaluate each viewpoint
(iv) provide your own reasoned viewpoint
2 No time for performance was specified, so, until Charles issued a demand for his food and allowed a
reasonable period in which the steak could be delivered, the restaurant owner had not committed
mora debitoris. See study unit 26 in this regard. By leaving the restaurant,Charles commits breach of
contract in the form of repudiation. His walking out would cause a reasonable person to conclude that
he was not going to pay and was not going to accept delivery of the steak. There is a bona fide
obligation on the client not to repudiate.
SUMMARY
textbook.
115
STUDY UNIT 30
PREVENTION OF
PERFORMANCE
OVERVIEW
You are now coming to the end of your study of breach of contract. In this study unit, you will study prevention
of performance.The other forms of breach are mora creditoris, mora debitoris, positive malperformance and
repudiation. Prevention of performance takes place where performance is made impossible by a
contracting party after conclusion of the contract.
* explain what is meant by the concept of prevention of performance

* explain the difference between initial impossibility of performance, supervening impossibility of
performance and prevention of performance
* explain the type of impossibility that is required for prevention of performance
* distinguish between prevention of performance and certain other forms of breach
* explain when prevention of performance may occur
* explain whether fault is a requirement for prevention of performance
* explain the remedies for prevention of performance
* explain the effect of partial impossibility
* explain the effect of temporary impossibility
LEARNING MATERIAL

Study the introduction to section 12.6. You should know the definition of
prevention of performance. Subjective impossibility seems to be sufficient, but
note that some writers argue that it would only amount to repudiation.
Understand the distinction between initial impossibility of performance (see
study unit 20), supervening impossibility of performance (see study unit 39)
and prevention of performance. The distinction between prevention of
performance, repudiation and mora creditoris is important. Prevention of
performance may occur before, on or after the due date for performance. Both
the debtor and creditor can commit prevention of performance.
1 FAULT
Study section 12.6.1. Although this discussion is somewhat theoretical, it will
116
facilitate your understanding of exactly when prevention of performance can
occur.
2 REMEDIES
Study section 12.6.2 of the textbook. Note that specific performance is
excluded, as it will not be ordered. Note, also, that the discussion only deals
with the case where the entire performance becomes impossible.
3 PARTIAL IMPOSSIBILITY
Study section 12.6.3 of the textbook. Know the importance of materiality for
rescission. The divisibility of performance again pops up as important. See
study unit 27 for the test of divisibility of performances.
4 TEMPORARY IMPOSSIBILITY
Study section 12.6.4 of the textbook. Study the different situations.
ACTIVITY
X, an antique dealer, sells an apparently worthless Chinese vase toY for R50. They agree that Y will take
delivery of the vase as soon as she has arranged for the transport. Before delivery, X discovers to his horror
that the vase is worth R100 000, as it dates from the Ming dynasty. In a fit of anger, X smashes the vase in
preference to allowing Y the pleasure of possessing something so valuable.
(a) Advise Y.
(b) Would your answer to (a) be different if X sold and delivered the vase to Z for R80 000? Explain your
answer.
FEEDBACK
(a) This is a case where the debtor commits the prevention of performance. Performance has become
absolutely impossible through the act of X.Ycannot thus claim specific performance, as this will not be
ordered.Ymay uphold the contract or cancel the contract (the breach is material).Ymay claim
damages in both cases. In the first case,Ymay claim the value of the vase (R100 000) minus the price
she had to pay (R50). In the second case,Ymay claim the value of the vase (R100 000). See study unit
34 on the calculation of damages.
(b) It seems that the advice will stay the same. It seems as if subjective impossibility of performance is
sufficient, but take note of the view that subjective impossibility amounts to repudiation.
SUMMARY
textbook.
117
STUDY UNIT 31
REMEDIES FOR BREACH OF CONTRACT:
INTRODUCTION, AND CHOICES, ALTERNATIVES
AND CONCURRENT REMEDIES
OVERVIEW
In the previous study units, you became acquainted with the different forms of breach of contract. A breach
of the contract is an unintended event in the life of the contract.The breach of the contract causes a break in
the intended execution (performance) of the contract, and, very often, also causes a breakdown in the
relationship between the contractual parties. In this and the next four study units, you will study the different
consequences of a breach of contract. In this study unit, we will introduce you to the different remedies.
* distinguish between the different remedies following a breach of contract

* identify the contractual provisions that are designed to regulate the consequences of a breach of
contract
* make a choice between the various remedies that are available to the non-breaching party in the
event of a breach of contract
* describe which remedies are mutually exclusive and which are cumulative
* distinguish between contractual and delictual claims and remedies in the context of contract law
* discuss whether a delictual claim can be lodged as an alternative to a contractual claim based on the
breach of the contract by one of the parties
LEARNING MATERIAL
Prescribed textbook, chapter13, sections13.1^13.2.
Lilicrap,Wassenaar and Partners v Pilkington Bros (Pty) Ltd 1985 (1) SA 475 (A).

1 INTRODUCTION
A contract is naturally aimed at fulfilment, but it often happens that one of the
parties does not comply with its obligations under the contract, that is, the
contract is breached. When a contract has been breached, the non-breaching
party has a number of different choices, depending on the nature, consequences
and seriousness of the breach. You must ensure that you obtain an overview of
the different types of remedies and their objectives.
118
Also pay attention to the different contractual provisions that are designed to
regulate the consequences of a breach of contract. They are important in
practice when drafting contracts.
Study figure 1.3. It provides you with a graphic overview of the different types
of remedies. Ensure that you return to this figure from time to time to maintain
this overview. It will help you to distinguish between the different types of
remedies, and to apply them to practical situations.
2 CHOICES, ALTERNATIVES AND CONCURRENT REMEDIES

Study section 13.2 of the textbook. The remedies for a breach of contract can be
divided into two big groups, namely those remedies aimed at keeping the
contract intact whilst compensating the non-breaching party for any damages
that it may have suffered as a result of the breach, and those remedies aimed at
terminating the contract, untangling the relationship between the parties and
compensating the non-breaching party for any damage that it may have
suffered. You will see that a contract may only be terminated or cancelled in the
event of a breach that is serious enough in the circumstances. You must ensure
that you gain a clear understanding of which remedies will be appropriate in
particular circumstances, as some of the remedies are mutually exclusive. You
can claim either specific performance (a remedy aimed at keeping the contract
intact) or cancellation (a remedy aimed at terminating the contract). Some of the
remedies are cumulative, because they can be used in conjunction with the
other remedies. The most important of these cumulative remedies is the claim
for damages.
Make sure that you understand the fact that certain remedies are mutually
exclusive, whereas other remedies such as interest and damages are cumulative
to the remedies such as specific performance and cancellation.
You dealt with the difference between claims founded upon contract and delict
in earlier study units. In this section, we briefly deal with the consequences of
this distinction for the remedies that are available to a party. Make sure that
you can describe the differences and apply them to practical examples. In this
context, the decision in Lilicrap, Wassenaar and Partners v Pilkington Bros (Pty) Ltd
1985 (1) SA 475 (A) is of particular importance.
ACTIVITY
X goes toY, a plastic surgeon, to have her breasts enlarged.Y’s fees are R50 000.ThroughY’s negligence, the
surgery fails and it would cost R60 000 to rectify. Identify the possible claims X has against Y.
119
FEEDBACK
Only a simplified answer is possible at this stage of your studies. X will have a choice between contractual and
delictual remedies, as her loss flows from an injury to her body.Y has breached the contract, as she has
performed, but the performance is defective (positive malperformance). X has most probably lost her
confidence inYand would not likeYto correct her performance. A claim for specific performance would not be
instituted. X would most likely like to claim damages (R60 000) to have another plastic surgeon rectify the
surgery. X also has an alternative claim based on delict for her medical expenses (R60 000).
SUMMARY
textbook.
120
STUDY UNIT 32
REMEDIES FOR BREACH OF CONTRACT AIMED AT
KEEPING THE CONTRACT ALIVE:
EXCEPTIO NON ADIMPLETI CONTRACTUS
AND SPECIFIC PERFORMANCE
OVERVIEW
In the previous study unit, you were introduced to the different remedies for breach of contract. In this study
unit, we will introduce you to the remedies aimed at keeping the contract alive, namely specific
performance and the exceptio non adimpleti contractus.We refer to the Latin name for this remedy, as it is
the term commonly used in textbooks and case law. The exceptio is a temporary remedy in terms of which
the non-breaching party withholds its performance until such time as the other party has performed in full.
The remedy of specific performance is aimed at forcing the other party to comply with its obligations.
* explain what the defence of the exceptio non adimpleti contractus is

* explain the requirements relating to the exceptio
* explain the factors affecting the application of the exceptio
* explain the court’s equitable discretion to allow a claim for reduced contract price
* explain the scope of the exceptio
* explain what the order of specific performance is
* explain the scope of specific performance
* explain the requirements for specific performance
* explain the discretion of the courts to refuse an order of specific performance
* explain the execution of orders for specific performance
LEARNING MATERIAL
BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A).
Haynes v Kingwilliamstown Municipality 1951 (2) SA 371 (A).
Santos Professional Football Club (Pty) Ltd v Igesund 2003 (5) SA 73 (C).

1 INTRODUCTION
Study the introduction to section 13.3. Do not study the ‘‘Counterpoint’’.
121
2 EXCEPTIO NON ADIMPLETI CONTRACTUS
Study section 13.3.1–13.3.1.4 of the textbook. This is the first remedy aimed at
keeping the contract intact and forcing the other party to comply with its
obligations. The concept of reciprocity is a requisite for this remedy. It is a
difficult concept to understand and apply in practice. You must make sure that
you can distinguish between reciprocal and non-reciprocal obligations.
Note that there are important common law rules that provide certain
presumptions about the sequence in which performances has to take place,
unless the contract determines otherwise.
There are a number of factors that may affect the application of the exceptio. You
must be able to recognise these factors and apply them to practical examples.
The BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk (1979 (1) SA
391 (A)) case is of particular importance in discussing these factors. Make sure
that you understand the difference between the situation where a party cancels
a partially-performed contract and that where a party keeps the partially-
performed contract intact, as happened in the BK Tooling case. Also take note of
the equitable discretion that a court has in the latter instance.
3 SPECIFIC PERFORMANCE
Study section 13.3.2–13.3.2.4 of the textbook. Specific performance is regarded
as the point of departure in the case of a breach of contract, based on the
principle that parties must comply with their contractual obligations (pacta
servanda sunt). The non-breaching party is, in principle, entitled to specific
performance, except in certain exceptional circumstances. In this part of the
study unit, you will become acquainted with the legal nature of specific
performance, its scope, and the different forms in which it appears. Make sure
that you know the three requirements that need to be satisfied to obtain an
order for specific performance.
Under the influence of English law, our courts have developed a number of
exceptions to the general rule that a party is always entitled to specific
performance. You must be able to discuss the types of situations where a court
will exercise this equitable discretion in favour of the breaching party and
refuse specific performance.
ACTIVITY
1 A has contracted with B to build a garden wall for R20 000. In terms of the contract, the wall has to be
completed by15 February. After B has built the wall to half its height, his workers go on strike. A is
anxious to get the wall finished for security reasons.On10 February, she employs X to finish the wall at
a cost of R14 000. The wall is eventually completed by 25 February. B now sues A for payment of the
wall, claiming that A prevented him from finishing the wall by employing X. Advise A on any possible
remedies or defences at her disposal. Also advise A on any possible claims that may arise against her
from the above facts.
2 A has contracted with B to build a garden wall for R20 000. In terms of the contract, the wall has to be
completed by15 February. After B has built the wall to half its height, his workers go on strike. A is
anxious to get the wall finished for security reasons.On10 February, she gives notice to B that, if B does
122
not resume building the wall on11February, she will get an urgent interdict against B to finish the wall.
Advise B on any defences he may raise against this claim for specific performance.
FEEDBACK
1 In considering A’s remedies and defences, you should think about the following issues:
(i) Will A be entitled to rely on the exceptio non adimpleti contractus? What are the requirements
for this defence? Was this a reciprocal contract and did B fail to complete his part of the
contract? The contract between A and B is a contract of work. This contract is a reciprocal
contract where B has to complete his performance (building the wall) before A has to perform
(paying R20 000). B clearly cannot complete the wall, as it is already complete. A will thus be
able to raise the exceptio if B tries to enforce the contract (payment of R20 000).
(ii) In these circumstances, it would be unfair for A to utilise B’s performance without paying for it,
even if it was just part performance. Did A accept B’s performance and is she liable to pay at
least half of the contract price? If so, on what basis? A court has a discretion to allow a claim for
a reduced performance. A is utilising B’s partial performance (part of the wall) by her getting a
third party to complete the wall. B will be able to claim a reduced performance from A, and he
will have to prove the amount by which the price should be reduced. The cost to complete the
wall is the amount by which the price will have to be reduced.
(iii) Does A breach the contract by getting a third party to complete the wall? What form of breach
are we dealing with? What are B’s remedies? By getting a third party to complete the wall, A is
in fact repudiating the contract as well as preventing performance. A’s conduct by getting a
third party to complete the wall clearly shows that she does not intend to allow B to complete
his performance. After the third party has completed the wall, B cannot perform. Refer to study
units 29 and 30 for B’s possible remedies.
2 In considering B’s defences, you should think about the following issues:
(i) Courts are sometimes reluctant to order specific performance where the obligation or
performance consists of personal services. Is this such a case? This is not a case of personal
services.
(ii) Courts will also not order specific performance where performance has become impossible. Is
performance impossible (subjectively and objectively) in these circumstances or is it merely
inconvenient or costly for B? It can perhaps be argued that performance by B has become
subjectively impossible, but this will depend on the question whether B is able to get other
labour (even if it is more expensive) in such a short space of time.
(iii) Should the court use its equitable discretion in B’s favour? What remedies are available to A if
the court should refuse specific performance? A will have a number of remedies available on
15 February. If B fails to complete the wall on time, his conduct will amount to positive
malperformance, as he has performed, but his performance is incomplete (see, in this regard,
section12.2.1of the textbook). A will only be able to cancel the contract if she tenders restitution
of the monetary value of B’s performance, as his performance itself cannot be returned, and if
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the breach is material. If A decides not to cancel the contract, she still will have a claim for
damages against B.
SUMMARY
textbook.
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STUDY UNIT 33
CANCELLATION
OVERVIEW
You are in the middle of a study of the remedies for breach of contract. In the previous two study units, you
briefly became acquainted with the different remedies for a breach of contract and you studied the
remedies aimed at keeping the contract alive, namely specific performance and the exceptio non adimpleti
contractus. In this study unit, you will look at cancellation as a remedy aimed at terminating the agreement.
You will see that it is an extraordinary remedy that may only be employed in cases of a serious breach.You
will also become acquainted with the principles that determine when a breach is serious enough to cancel
the contract.

* explain what cancellation of the contract is
* explain when a party will be entitled to cancel the agreement following a breach of contract
* explain materiality of the breach as a requirement for the cancellation of a contract
* explain the importance of a lex commissoria
* explain when the right to cancel is lost
* explain the legal consequences of cancellation
* explain the duty of restitution
LEARNING MATERIAL

Study section 13.4–13.4.6 of the textbook. You need not study the ‘‘Pause for
reflection’’ box in section 13.4.6.
Whereas specific performance is regarded as the usual remedy for breach of
contract, cancellation or termination of the agreement is regarded as an
exceptional remedy that is only available in specific circumstances. In this study
unit, you will encounter the requirements that need to be met in order for a
party to cancel the agreement. It is a remedy that should be exercised with care,
because, if a party is not entitled to cancel the contract, the purported
cancellation in itself may be a breach of contract, namely repudiation. You must
therefore make sure that you have a clear understanding of the requirements
for cancellation. There are also certain circumstances where a party may lose
the right to cancel the contract, even if it existed. Where a party becomes
entitled to cancel the contract, it must make a decision to cancel or to enforce the
contract. Once that choice has been made, the party is stuck with that choice. If
the party elects to insist on specific performance, it will be deemed to have
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waived its right to cancellation. You must also make sure that you gain a clear
understanding of when the right is lost and how it may be revived.
One of the requirements for cancelling the contract is that the breach must be
material or sufficiently serious. The requirements for materiality are not dealt
with in this part of your textbook and you will have to revise sections 12.2.3.3
and 12.4.2.1 of the textbook (see study units 26 and 28) again to obtain a proper
understanding of cancellation as a remedy.
You should know the consequences of termination. The contractual relationship
is ended, but any performance that has been made needs to be returned to the
other party. You will encounter the requirements for restitution and how
restitution should be made.
ACTIVITY
A has contracted with B to build a garden wall for R20 000. In terms of the contract, the wall has to be
completed by15 February. After B has built the wall to half its height, his workers go on strike. A is anxious to
get the wall finished for security reasons.On10 February she gives notice to B that, if B does not resume
building the wall by12 February she will cancel the contract and get X to complete the wall. Advise B on his
legal position.
FEEDBACK
In considering B’s legal position, you should think about the following issues:
(i) Is A entitled to cancel the contract where B is going to be merely late in his performance? In
considering this issue, you should revise the legal rules as set out in section12.4.2.1 of your textbook,
where this issue is discussed more fully.
(ii) Would it make any difference if the contract contained a lex commissoria? And, if so, why?
(iii) Can the notice that A sent to B be regarded as a valid demand entitling her to cancel the contract,
taking into account the time allowed for performance?
SUMMARY
textbook.
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STUDY UNIT 34
DAMAGES
OVERVIEW
In the previous three study units, you gained an overview of the different remedies for breach of contract
and you studied the remedies of specific performance, the exceptio non adimpleti contractus and
cancellation.
In this study unit, you will deal with the most important of the corrective remedies, namely damages.
Damages are the remedy that is most often employed in practice to compensate the non-breaching party
for the losses or damages suffered by that party.
You will also become acquainted with the rules that deal with contractual penalties which may be claimed
instead of damages.Contractual penalties are now governed by statute, namely the Conventional Penalties
Act15 of1962.You will learn how penalty clauses and claims for damages interact under the influence of the
Act.
Although the claim for interest is in part a claim for damages, it is usually dealt with as a separate claim in
practice.Where a party is in default (mora debitoris), the non-breaching party becomes entitled to the
payment of interest.

* distinguish between contractual and delictual damages, positive or expectation interest and
negative or reliance interest, and critically discuss the importance of this distinction
* explain the requirements for a damages claim
* distinguish between patrimonial and non-patrimonial loss, and discuss the importance of this
distinction
* distinguish between the difference theory and the concrete approach to the quantification of
damages
* describe the different methods that may be employed to determine the extent of damages
* distinguish between factual and legal causation, and general and special damages
* describe the mitigation rule and apply it to practical examples
* describe what a penalty clause is, what its objects are and how its enforceability has been changed
by legislation
* discuss the nature of claims for interest, and how interest rates are determined
* discuss the importance of the Prescribed Rate of Interest Act for contractual claims
LEARNING MATERIAL
Prescribed textbook, chapter13, sections13.5 and13.6.
Thoroughbred Breeders Association v Price Waterhouse 2001 (4) SA 551 (SCA)
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1 DAMAGES
Study section 13.5 of the textbook. Damages are a cumulative remedy that
may be claimed in conjunction with any of the other remedies, provided that
there has been a breach of contract and that the non-breaching party has
suffered patrimonial damages. You must carefully study damages, as the rules
concerned are sometimes intricate and difficult to apply.
One of the most difficult issues in respect of damages is the quantification of a
damages claim. In this section, you will become acquainted with the
requirements for a damages claim, with the different types of damages, and
with the calculation of damages. Study figure 13.3 carefully – it provides you
with an overview of the different aspects relating to damages in the law of
contract. It will assist you in obtaining a proper perspective on this difficult part
of the law.
You should be able to describe the object of a contractual damages claim. You
should also be able to discuss the differences, if any, between contractual and
delictual damages, that is, the difference between positive or expectation
interest and negative or reliance interest. Figures 13.4 and 13.5 should assist
your understanding of these alleged differences and how they are applied in
practice.
The first requirement for a damages claim is proof that the non-breaching party
suffered actual pecuniary or financial loss. In this section, you will see that the
courts often take a practical approach to the determination of a damages claim
rather than a highly theoretical approach. Despite this approach, the underlying
theoretical foundations are important for a consistent approach to damages
claims. You need to understand clearly these theoretical approaches and their
practical consequences. In this discussion, the focus will first be on the
difference rule compared with the concrete approach. Both approaches should
lead to the same result, but, often, the concrete approach is easier to apply
because it focuses on the specific part of a person’s patrimony that has been
diminished rather than his or her patrimony as a whole. Make sure that you
have a clear understanding of the different methods that may be employed to
quantify damages. None of these methods is better or worse, but it will depend
on the particular circumstances as to which method will be the most suitable to
come to a correct assessment.
The second requirement for damages is that there must be a causal link between
the breach and the damages suffered. As in the law of delict, a court will
enquire into factual and legal causation. In the law of contract, the enquiry into
legal causation has evolved somewhat differently from that in the law of delict.
In this context, the courts prefer to make a distinction between general and
special damages. Make sure that you understand the difference between
general damages, which can always be claimed, and special damages, which
may only be claimed in exceptional circumstances because they are generally
considered to be too remote.
The test for general damages is that the damage should be foreseeable as a
probable consequence of the breach of contract. In Thoroughbred Breeders
Association v Price Waterhouse 2001 (4) SA 551 (SCA) the defendant, a firm of
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auditors, contracted with the plaintiff to audit a certain year’s financial
statements. The Supreme Court of Appeal held that the defendant breached the
contract by failing to appreciate the significance of the unusual features and
discrepancies in the plaintiff’s books and failing to pursue them. M, the
financial manager of the plaintiff, had at that stage stolen some money from his
employer and continued to do so after the audit. The plaintiff thus suffered loss
as a consequence of the later thefts after the audit which could not be redeemed
from M. The court found that dishonesty was one of three conceivable and
predictable reasons why the discrepancies had occurred in the books of the
plaintiff. The other two being, an innocent explanation and neglect. The court
held that the loss suffered was a realistic possibility and thus general damages
(582)
The extent of a party’s liability for damages may be influenced by the
mitigation rule. In terms of this rule, the non-breaching party is expected to take
reasonable steps to mitigate its damages. It cannot simply sit back and let the
damages run their course. Make sure that you know how to apply this rule.
Quite often parties will include a penalty clause or liquidated damages clause in
their contract. The object of this clause is to bypass all of the uncertainties and
difficulties associated with the calculation of damages and provide a quick and
easy mechanism for the non-breaching party to claim damages. This area of the
law is now regulated by the Conventional Penalties Act 15 of 1962. Ensure that
you understand the impact of the Act on penalty clauses.
2 INTEREST
Carefully read section 13.6, and then study point 10 of ‘‘This chapter in
essence’’ at the end of chapter 13 of the textbook. A claim for interest
compensates the non-breaching party for the loss of the use of money or funds
for the period that the amount remains unpaid. The common law rules relating
to the payment of interest have been modified by the Prescribed Rate of Interest
Act 55 of 1975.
ACTIVITY
A has contracted with B to build a garden wall for R20 000. In terms of the contract, the wall has to be
completed by15 February. After B has built the wall to half its height, his workers go on strike. A is anxious to
get the wall finished for security reasons. Despite a demand on B, B has failed to complete the wall by15
February. A has cancelled the agreement in terms of the lex commissoria contained in the contract. A has
now contracted with X, her brother, to complete the wall, but X will only do it against payment of R16 000. As
a result of the wall not having been completed in time, A has suffered a burglary during which goods worth
R15 000 have been stolen. A has now lodged a claim against B for damages for an amount of R55 000. A
has made no payments to B. In the summons, the amount of damages is made up as follows: (a) R16 000 for
the amount to be paid to X; (b) R15 000 for the goods stolen; and (c) R19 000 for the inconvenience suffered
owing to the breach of contract. Advise B on any defences he may raise against this claim, as well as of any
counterclaims that he may have. B has provided evidence that the R16 000 paid to X was excessive, and
that most other builders in town would have completed the job for no more than R12 000.
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FEEDBACK
In your answer, you should apply all of the principles in respect of the determination and quantification of
damages claims that you have studied so far. In respect of each of the individual claims, you should consider
the following:
(i) In terms of the contract, A was entitled to obtain a wall worth R20 000 against payment of R20 000.
The amount of R16 000 to be paid to X cannot be claimed as a whole, because part of that claim
includes an amount of R10 000 which A would have had to pay in any case (to B if B had completed
the contract). A has only paid R16 000 so far, namely the price paid to X. B may have a claim for the
half of the wall he did complete of R10 000, which will mean that A may be liable to pay R26 000 for
the wall. In that event, she would have suffered damages of R6 000. B may, however, prove that the
R16 000 paid to X was excessive, as other builders would have done the job for no more than R12000.
In terms of the mitigation rule, it could be argued that A failed to mitigate her damages, and that her
claim should be limited to the R2 000 which she would have paid in excess of the R20 000 originally
contracted for.
(ii) B may have a claim for the R10 000 based on his part performance. Although his claim or
counterclaim may be resisted with the exceptio non adimpleti contractus, there is a good prospect that
a court will allow his claim for a reduced amount for the work actually done, especially since A has
accepted and utilised that performance. A’s damages claim of R2 000 will, of course, be offset against
B’s claim for a diminished amount, that is R10 000 ^ R2 000 = R8 000.
(iii) The claim for R15 000 for the stolen goods is a claim for special damages rather than general
damages.You must apply the principles associated with the convention principle to determine
whether A should be entitled to these damages.
(iv) The claim of R19 000 for the inconvenience suffered cannot be sustained, because those damages
are not patrimonial damages. They cannot be claimed for a breach of contract.
SUMMARY
textbook.
130
STUDY UNIT 35
INTERDICT AND DECLARATION
OF RIGHTS
OVERVIEW
In the previous study units, you were initially introduced to contractual remedies and you then focused on
specific performance, the exceptio non adimpleti contractus, cancellation, damages and interest. In this
study unit, some additional remedies that may be used in the case of a breach of contract, or to prevent a
breach of contract, are looked at. Interdicts are employed to enforce negative obligations such as restraints
of trade or threatened breaches, whereas declarations of rights are used to obtain legal certainty in
circumstances where the parties are in disagreement about the meaning of their contract or the scope of
their respective obligations.

* distinguish between interdicts and declarations of rights
* explain briefly the objectives of an interdict, and its requirements
LEARNING MATERIAL

Carefully read section 13.7, and then study point 11 of ‘‘This chapter in
essence’’ at the end of chapter 13 of the textbook. Although all of the remedies
discussed so far follow on a breach of contract, there are also some remedies
which may be exercised to prevent a breach of contract or to determine the
rights of the parties in the case of uncertainty. In this section, we briefly discuss
the requirements for an interdict and a declaration of rights. You should be able
to distinguish between an interdict and a declaratory order and describe when
these remedies should be used by a party.
ACTIVITY
1 Distinguish between interdicts and declarations of rights.
2 Briefly explain the objectives of an interdict, and its requirements.
131
FEEDBACK
See point11of ‘‘This chapter in essence’’at the end of chapter13 of the textbook.
SUMMARY
textbook.
132
TRANSFER AND TERMINATION OF RIGHTS AND
OBLIGATIONS
133
STUDY UNIT 36
CESSION
OVERVIEW
In this study unit, we discuss the transfer of claims by way of cession.

* explain what cession is
* distinguish between obligationary and transfer agreements
* distinguish between cession and the transfer of movable property
* distinguish cession from delegation and assignment
* explain what may be ceded
* explain the requirements for a valid cession
* explain the consequences of cession
* explain security cession
LEARNING MATERIAL

1 INTRODUCTION
Study sections 14.1 and 14.2 of the textbook. This introduction involves a
number of distinctions that are difficult to understand. Study the examples and
figures that are given as illustration and make sure that you understand the
distinctions that are discussed.
Cession is an act of transfer of a claim. You should be able to distinguish
between the obligationary agreement that precedes the cession and a transfer
agreement (of which cession is an example). The obligationary agreement is
often the causa of the cession. You should also be able to distinguish between
the transfer of movables and the cession of claims.
You do not have to study the ‘‘Pause for reflection’’ box in section 14.2.
2 THE SUBJECT MATTER OF CESSION

Read section 14.3. All you should remember is that personal rights or claims
can be ceded. A personal right is the right to performance that arises out of an
obligation.
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3 THE REQUIREMENTS FOR A VALID CESSION
Study the whole of section 14.4–14.4.7.2. You do not have to study the ‘‘Pause
for reflection’’ box in section 14.4.3.2 and the ‘‘Counterpoint’’ in 14.4.3.5.
Note, furthermore, the similarities between the requirements for a valid
contract and those for a valid cession. They are, of course, both agreements.
4 THE CONSEQUENCES OF CESSION

Study section 14.5–14.5.5. You do not have to study the ‘‘Counterpoint’’ in
section 14.5.5. In section 14.5.5 it is stated that the Supreme Court of Appeal has
not yet decided the issue whether the good faith approach or the estoppel
approach should be followed. However, in Momentum Group Ltd v Van Staden
2010 (2) SA 135 (SCA) 140 the court merely applied the good faith approach
without even referring to the estoppel approach. This case cannot be construed
as settling the question which approach should be followed.
5 SECURITY CESSION
Study the introduction to section 14.6 – 14.6.2, as well as all its subsections.
You do not have to study the ‘‘Pause for reflection’’ box in section 14.6.2. If
you have already done Property Law, refresh your memory with regard to
pledge as a form of security.
ACTIVITY
1 X sells her claim of R10 000 against Z toY for R7 000. X cedes the right toYand Ypays the purchase
price. X discovers that the contract of sale is void. Advise X.
2 The following clause appears in a contract of lease:
The lessee may not cede his or her rights under this lease, except with the written permission of the
lessor. Such permission may not be unreasonably withheld by the lessor.
The lessee cedes her rights under the lease to Z without obtaining the lessor’s permission. Z takes
occupation of the leased property. May the lessor evict Z? Discuss.
3 X cedes R4 000 of her claim against D for the payment of R10 000, toY. Is the cession valid? Discuss.
4 X works for Yas a domestic servant.Ycedes her right to X’s labour to her mother, Z, and informs X that
she will be working for Z in future, but that she (Y) will still pay her (X’s) salary. X does not wish to work
for Z, because Z always finds fault with everything X does. Does X have to work for Z? Discuss. Do not
consider labour law in your answer.
5 X cedes her claim of R10 000 that she has against Z, toY. Z is never notified of the cession, but he hears
from a very unreliable source that the claim has been ceded to Y. Z phones X, a family friend, and
enquires whether this is so, but X denies it. Z pays X the R10 000 when it becomes due.Y claims
payment of R10 000 from Z. Advise Z.
135
6 X cedes her claim of R10 000 that she has against Z, to Y. The claim arose from a contract of sale
between X and Z.Ynotifies Z of the cession, but, when he enforces the claim against Z on the due date,
Z raises the defence that she (Z) concluded the contract under the undue influence of X. Advise Y.
7 X cedes her claim which she has against Z toYas security for a loan fromY.There is no indication in the
loan agreement between X and Y what form their security cession will take. X repays the loan toY, but
Y is immediately afterwards declared insolvent. Advise X.
FEEDBACK
1 The contract of sale is the causa of the cession. A valid causa is not a requirement for a valid cession.
The cession is thus valid, but X will be able to claim re-cession of the claim, as Y has been enriched. X
will, of course, have to return the purchase price, because the contract of sale is invalid and X has been
enriched.
2 The clause in the lease is a pactum de non cedendo, which is only valid if the lessor (the debtor with
regard to delivery of the leased property) has a legitimate interest in the restriction.The lessor has such
an interest, because the identity of the occupier of the leased property is important to the lessor. The
lessee will not be able to cede her rights under the lease and the lessor will be able to evict Z.
3 X’s cession toYamounts to a splitting of the claim, which would prejudice D. The cession is thus invalid.
4 The obligation to work is of such a personal nature that it would make a reasonable and substantial
difference to X whether Yor her mother enforces the right.Y’s mother is a far more difficult creditor, as
she always finds fault with X’s work. The right to X’s work thus cannot be ceded.
5 The normal rule is that Z has to pay the new creditor,Y, in order to be released from the duty to perform.
Even after the recent decision of the Supreme Court of Appeal, both approaches should be applied.
Although Zwas not notified of the cession, Z knew of the cession. It could be argued that payment to X
was nevertheless in good faith, because X denied that cession had taken place. X furthermore created
the impression that no cession has taken place.
6 X cannot transfer more rights toY than those which she (X) has. Z may raise the same defences that she
has against X, against Y.
7 The courts will interpret a security cession as a pledge, unless the parties have clearly indicated that
they wish to create a fiduciary security cession. In a pledge, the ownership of the claim remains with X.
Only possession of the claim passes to Y.When X paid back the loan (the principal debt), the claim
automatically reverted to X. The claim will thus not fall in the insolvent estate of Y.
SUMMARY
Consult ‘‘This chapter in essence’’ at the end of chapter 14 of the textbook.
136
STUDY UNIT 37
INTRODUCTION TO
TERMINATION OF OBLIGATIONS AND TERMINATION BY
PERFORMANCE
OVERVIEW
In this and the next two study units, we will discuss the various ways in which an obligation may be
terminated. These ways include termination by performance, by agreement and by operation of law.Other
ways of terminating an obligation (which will not be discussed) arise when an aggrieved party exercises a
right of termination in the context of voidable contracts (see study unit11) or after an aggrieved party
terminates an obligation resulting from a breach of contract that is sufficiently serious to justify cancellation
of the contract (see study units 26, 28 and 30). In this study unit, we focus on performance.
* give a short explanation of the ways in which an obligation is terminated
* explain termination of an obligation by performance
LEARNING MATERIAL

1 INTRODUCTION
Study the introduction to section 15.1 of the textbook and identify the different
ways in which an obligation may be terminated.
2 TERMINATION BY PERFORMANCE
Study section 15.2 for an introduction to the situation where an obligation and
an accessory obligation terminate by performance.
2.1 Required performance

Study section 15.2.1 of the textbook. Only full and proper performance by the
debtor will generally terminate the obligation. Make sure that you understand
the exceptions to this rule. Also make certain that you are able to distinguish
between facultative obligations (see study unit 23) and datio in solutum.
137
2.2 Performance by a third party
Read section 15.2.2 of the textbook. All you have to know is that a third party
may in certain circumstances terminate an obligation on behalf of the debtor.
2.3 The person to whom performance must be made

Read section 15.2.3 of the textbook. All you have to understand is that the
debtor’s performance should ordinarily be made to the creditor, but that there
are instances when it may be validly made to a third party. Sometimes, a third
party may be authorised to receive performance, without also being authorised
to claim performance. You must know the difference between the case where a
third party has been authorised to receive performance and where the third
party has the right to performance after cession (see study unit 36 with regard
to cession).
2.4 Place of performance

Study section 15.2.4 of the textbook. You must know the circumstances which
the courts use to determine the place of performance in the absence of a specific
agreement relating to this issue.
2.5 Time of performance

Study section 15.2.5. Know that, in the absence of an agreement as to the time
of performance, the ordinary rules relating to mora debitoris (see study unit 26)
will apply.
2.6 Performance as a bilateral act

Study section 15.2.6 and the ‘‘Counterpoint’’. A debt-extinguishing agreement
is not always required to explain performance.
ACTIVITY
Tanya enters into a contract with a famous fashion designer, Edgar Ahlers, in terms of which he will design
and make a wedding dress for her. A week before the wedding, when the dress is complete,Tanya finds out
that the dress was in fact sewn by Ahlers’ friend, Susan. Ahlers, however, designed the dress.Tanya says that
Ahlers has breached their contract. Ahlers says that Susan’s performance is perfectly satisfactory. Discuss.
FEEDBACK
The question deals with performance by a third party. Normally, the creditor cannot refuse the performance
from a third party (acting on behalf of the debtor) if the creditor would not be prejudiced and performance is
effective. However, a creditor may refuse performance by a third party where the performance agreed upon
requires the personal skill and attributes of the debtor. In this question, it can be argued that the designing of a
138
wedding dress was personal in nature, as the personal touch of the debtor was crucial, but that the sewing can
be performed by any good seamstress. Hence it appears that Tanya may not refuse the contributing
performance of Susan and that Ahlers has not breached the contract.
SUMMARY
textbook, as well as figure 15.2.
139
STUDY UNIT 38
TERMINATION OF
OBLIGATIONS BY AGREEMENT
OVERVIEW
In the previous study unit, we discussed performance as a way of terminating an obligation. In this study unit,
we will discuss the various ways in which an obligation may be terminated by agreement, and, in the next
study unit, the different ways in which an obligation may be terminated by operation of law.

* explain release and waiver
* explain novation
* explain compromise
* distinguish between novation and compromise
* explain briefly effluxion of time
* explain notice briefly
LEARNING MATERIAL

1 INTRODUCTION
Study the introduction to section 15.3 and note that an obligation may be
terminated in various ways by agreement.
It is important to know that the rules on the termination of obligations are
applicable to all obligations from whatever source they may have arisen. It does
not matter whether the obligation arises from contract, delict, unjustified
enrichment or whatever source.
2 RELEASE AND WAIVER

Study section 15.3.1 of the textbook. You must know that different
consequences may apply for a complete release from all contractual obligations
than to a partial release in the context of complying with prescribed formalities
(for formalities relating to variation of a contract, see study unit 19). You must
understand that release is normally bilateral in nature, in that it entails an
agreement between the debtor and the creditor, but that waiver has, in certain
circumstances, been construed to be enforceable following a unilateral act by
140
one of the parties who abandons a right or remedy that formed part of the
contract for her or his sole benefit. Study carefully the conclusion of section
15.3.1 on whether a party has actually abandoned a right.
3 NOVATION
Study section 15.3.2 of the textbook. Study the nature and consequences of a
novation. You must also know what delegation is. You must understand what
the effect of a judgment and acknowledgement of debt is on a debt.
4 COMPROMISE
Study section 15.3.3 of the textbook. Study the nature of a compromise, and its
consequences. You should understand how it is interpreted whether or not an
agreement of compromise exists in the context of payments made ‘‘in full and
final settlement’’. Furthermore, you must be able to make the important
distinction between novation and compromise, in that, with the former, there
must already have been an existing obligation, whilst there need not be an
existing obligation between the contracting parties for the latter to be
concluded. Table 15.1, in section 15.3.3, relating to a comparison between true
novation and compromise is very useful and important.
5 EFFLUXION OF TIME
Read section 15.3.4 on when a contract terminates. You only have to study
point 2.4 of ‘‘This chapter in essence’’ at the end of chapter 15.
6 NOTICE
Read section 15.3.5, and then study point 2.5 of ‘‘This chapter in essence’’ at
the end of chapter 15.
ACTIVITY
Sarah goes to a new attorney, Naomi, for legal advice. Sarah has a one-hour consultation with Naomi.
Three weeks later, Sarah receives an account from Naomi for R2 500. Sarah is furious, as her previous
attorney (who is now living overseas) used to charge her R1000 per hour. Subsequently, Sarah has several
discussions with Naomi wherein she (Sarah) disputes the amount Naomi claims. Sarah sends a cheque for
R1500 to Naomi, which includes a note that reads: ‘‘This cheque is sent in full and final settlement of my
account in order to avoid litigation and bring finality to our dispute.Once you deposit this cheque, you will
have no further claim against me.’’ Naomi then deposits the cheque and advises Sarah in writing that she
rejects Sarah’s offer in full and final settlement and that, instead, she (Naomi) accepts Sarah’s cheque as
partial payment towards the account. Naomi then sues Sarah for R1 000. Advise Sarah if she will be
successful in defending Naomi’s claim.
141
FEEDBACK
The question deals with the issue of an agreement of compromise. For such an agreement to exist, there must be
a valid offer and a valid acceptance. In this question, a valid offer of compromise can be inferred, as Sarah
clearly put the amount (R2 500) in dispute and made an offer of R1500 (in full and final settlement) to bring
finality to the dispute.There is also a valid acceptance by Naomi, even though she advised Sarah in writing that
she rejected the offer, the reason being that Sarah as offeror can prescribe the mode of acceptance, with which
Noaomi complied. As she (Sarah) prescribed the mode of acceptance to be the depositing of the cheque by
Naomi, the latter accepted the offer when she deposited the cheque.
SUMMARY
142
STUDY UNIT 39
TERMINATION OF
OBLIGATIONS BY OPERATION
OF LAW
OVERVIEW
In the previous two study units, we discussed performance and agreement as ways in which an obligation
may be terminated. In this study unit, we will focus on the various ways in which an obligation can be
terminated by operation of law.

* explain set-off
* explain merger
* explain supervening impossibility of performance
* explain prescription
* explain briefly the effect of insolvency on obligations
* explain briefly the effect of death on obligations
LEARNING MATERIAL

1 INTRODUCTION
Read the introduction to section 15.4 and note the various ways in which an
obligation may be terminated by operation of law.
2 SET-OFF
Study section 15.4.1 of the textbook. See to it that you understand the concept
of set-off and the requirements for set-off to operate. Only take note that some
academics disagree with the position under South African law that, normally,
set-off need not be invoked by one of the contracting parties, as it operates
automatically when the requirements are met.
3 MERGER
Study section 15.4.2 on merger.
143
4 SUPERVENING IMPOSSIBILITY OF PERFORMANCE
Study the introduction to section 15.4.3 and see to it that you know the nature
and consequences of supervening impossibility of performance. You should be
able to distinguish between initial, objective impossibility of performance at the
time the contract is concluded (see study unit 20), objective impossibility of
performance after concluding the contract (ie supervening impossibility of
performance) and prevention of performance (see study unit 30).
Study section 15.4.3.1, but not the ‘‘Counterpoint’’ in this section. You should
be familiar with the two requirements that must exist before supervening
impossibility of performance will lead to the termination of a contract.
Regarding the first requirement, see study unit 20 for a discussion on objective
impossibility as well. Regarding the second requirement, remember that
supervening impossibility of performance does not arise only from
unforeseeable acts, but that it could also arise from foreseeable acts . On the
other hand, there could also be situations where foreseeable acts at the time of
contracting may lead to the inference that the debtor assumed the risk of the
impossibility occurring, which means that supervening impossibility of
performance would not be applicable in such cases.
Study section 15.4.3.2 and know the effect that supervening impossibility of
performance has for the debtor or the creditor (or both parties), in the three
different contexts discussed therein, relating to their contractual obligations.
Study the mind map in figure 15.1, as it is very helpful.
5 PRESCRIPTION
Study section 15.4.4 – 15.4.4.5. Do not study the ‘‘Pause for reflection’’ box in
section 15.4.4.2. Extinctive prescription is a very useful special plea in practice,
and the prescriptive periods should always be kept in mind.
6 INSOLVENCY
Read section 15.4.5 of the textbook.
7 DEATH
Read section 15.4.6 and study point 3.5 of ‘‘This chapter in essence’’ at the end
of chapter 15.
ACTIVITY
Arnold is an artist, with a unique style, who lives in a shack situated on the banks of the Diepsloot River,
which is prone to flooding. Andile agrees to pay Arnold R2 500 for a particular painting of his wife. As
Andile cannot pay the full amount immediately, the parties agree that he will pay a deposit of R500 and
that the remainder will be paid on delivery of the painting. Following heavy rain, the river bursts its banks
and sweeps away Arnold’s shack and all his possessions, including the painting for Andile. Briefly discuss
the liability, if any, of the parties.
144
FEEDBACK
The question deals with the issue of supervening impossibility of performance. For supervening impossibility of
performance to exist, two requirements must be established. In this question, the first requirement is easily
established, because the performance is objectively impossible, as the painting has been destroyed by the
floods. It also seems that the second requirement (that the impossibility must be unavoidable by a reasonable
person) can also be established, the reason being that, even though it is foreseeable for flooding to take place
at Arnold’s shack (as the area is prone to flooding), it seems that no reasonable person could have avoided the
damage, and neither Arnold nor Andile foresaw the occasion for impossibility when the contract was
concluded. The existence of supervening impossibility of performance means that both parties’obligations
become extinct, and Andile can recover his R500 deposit from Arnold through an enrichment action.
SUMMARY
145
BIBLIOGRAPHY
Textbooks
Christie and Bradfield Contract
Christie RH and Bradfield GB Christie’s The Law of Contract in South Africa 6th ed
(Lexis Nexis 2011)
De Wet and Van Wyk Kontraktereg
De Wet JC and Van Wyk AH Die Suid-Afrikaanse Kontraktereg en Handelsreg Vol
1 5 ed (Butterworths 1992)
Van der Merwe et al Contract
Van der Merwe S et al Contract: General Principles 4 ed (Juta 2012)
Wessels Contract
Wessels J The Law of Contract in South Africa Vol 1 2ed (1951)
Articles
Lotz 1988 THRHR 237
Lotz JG ‘‘Is kontrakbreuk moontlik by ’n opsiekontrak?’’ 1988 (51) THRHR 237–
239
Pretorius and Ismail 2012 Obiter
Pretorius and Ismail ‘‘Compromise, undue influence and economic duress.
Gerolomou Constructions (Pty) Ltd v Van Wyk 2011 (4) SA 500 (GNP)’’ 2012
(33) Obiter 681–692
Van der Merwe 1962 THRHR 155
Van der Merwe NJ ‘‘Die aard en grondslag van die kennisleer in die Suid-
Afrikaanse privaatreg’’ 1962 (25) THRHR 155–175
146

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REQUIREMENTS OF A VALID CONTRACT 79

CONTENTS AND OPERATION OF A CONTRACT 89

TRANSFER AND TERMINATION OF RIGHTS AND OBLIGATIONS 133

MEANING OF ‘‘STUDY’’, ‘‘READ CAREFULLY’’AND ‘‘READ’’ IN THIS STUDY

* critical assessment of a theoretical or practical approach, viewpoint and

CONTENT OF THIS STUDY UNIT

1.4 Definition of a contract

2 REQUIREMENTS FOR A VALID CONTRACT

3 THE NATURE OF CONTRACT

4 CONTRACT AND THE LAW OF OBLIGATIONS

4.2 Contract and delict

4.3 Contract and enrichment

4.4 Contract and the law of property

4.5 The development of the modern notion of contract

The purpose of this study unit is to enable you to

CONTENT OF THIS STUDY UNIT

3 APPARENT OR OBJECTIVE AGREEMENT

6 DUAL BASIS OF CONTRACT IN MODERN LAW

7 PROVING THE EXISTENCE OF A CONTRACT

The purpose of this study unit is to enable you to

* identify the cornerstones of contract

2 THE GOALS OF CONTRACT LAW

3 COMPETING VALUES IN THE LAW OF CONTRACT

4 FREEDOM AND SANCTITY OF CONTRACT

5 GOOD FAITH AND EQUITY IN CONTRACT

The purpose of this study unit is to enable you to

CONTENT OF THIS STUDY UNIT

The purpose of this study unit is to enable you to

CONTENT OF THIS STUDY UNIT

The purpose of this study unit is to enable you to

CONTENT OF THIS STUDY UNIT

3 THE CONSUMER PROTECTION ACT

4 OFFERS TO THE PUBLIC

CONTENT OF THIS STUDY UNIT

2 REQUIREMENTS FOR VALID ACCEPTANCE

3 WHEN AND WHERE ACCEPTANCE TAKES EFFECT

4 BREAKING OFF NEGOTIATIONS

The purpose of this study unit is to enable you to

1.3 Consequences of an option

Our courts also regard an offer supported by a pactum de contrahendo as

Whether such an approach will become generally accepted law, is uncertain at

1.4 Remedies for breach of an option

1.5 Juristic nature of an option

1.6 Termination of options

1.6.2 Death of the grantor or grantee

1.6.4 Lapse of the right

1.7 Formalities concerning options

1.8 Cession of options

A contract in terms of which a right of pre-emption is granted must comply

2.2 Legal nature and consequences of a right of pre-emption

2.3 Formalities concerning rights of pre-emption

This study unit explains different aspects of conflicting rights.

CONTENT OF THIS STUDY UNIT

2 POSITION BEFORE DELIVERY TO C

3 POSITION AFTER DELIVERY TO C

CONTENT OF THIS STUDY UNIT

3 LIMITATIONS OF THE WILL THEORY