Law of Contract Summary

1
LAW OF CONTRACT
PART I
THE REQUIREMENTS OF A VALID CONTRACT
Unit 1: Introduction to the Law of Contract and basic concepts.
Learning outcomes:
After completion of this unit, the student should be able to:
1.
2.
3.
4.
5.
6.
7.
8.
Discuss the historical roots of the Law of Contract in South Africa.

Define the term contract
Define the term obligation
Classify and discuss the different types of obligations.
Distinguish between the terms contract and obligation
Identify and discuss the characteristics or terms of a contract.
Distinguish between the terms void and voidable
Analyze the Social and Constitutional values embedded within the Law of
Contract.
9. List the requirements for a valid contract.
Study:
1. Van der Merwe et al.
Contract. General Principles. Third Edition. Chapter 1.
2. From List of cases:
Afrox Healthcare v Strydom 2002 (6) SA 21 (SCA) and
Brisley v Drotsky 2002 (4) SA 1 (SCA)
Alternative study:
1. Christie.
The Law of Contract in South Africa. Fifth Edition. Chapter 1.
2. Bhana et al.
Students guide to the Law of Contract. Second Edition. Chapter 1.
2
1. Historical introduction
According to Christie, the law of contract is of fundamental importance in the
modern world, because it is woven into and inseparable from every form of
economic activity.1 Because of this fact, international business relations are
governed to a large extent by the principles of the law of contract. The RomanDutch law adopted the principle of treating each and every agreement made
seriously and deliberately as a contract, obviously influenced by the canon law
(specifically the ius gentium, or law of mankind), and by a notion that the
honouring of promises was inherent in peoples of Germanic origin. 2 Grotius in the
17th century exclaimed that the rule stipulatio = pactum = contract and the Roman
distinctions between these concepts no longer existed.
The South African concept of contract
According to Brand JA3, South African Private Law is essentially uncodified, and
at the heart of this uncodified system lies seventeenth-century Roman-Dutch law. 4
When the Dutch occupied the Cape of Good Hope in 1652, this system was
adopted in the Cape. In 1806, however, the Cape was colonised by the British,
and consequently aspects of British law were incorporated into our legal system.
In 1826 it had to be decided whether English law should replace Roman-Dutch
law in the Cape Colony. The Supreme Court in the Cape likewise had to decide
whether to adopt a basically English or basically Roman-Dutch concept of
contract.5 In the case of Louisa and Protector of Slaves v Van den Berg (1830),
neither counsel nor the court made any reference to English law, but instead chose
to rely on Voet, Grotius and Groenewegen. However, throughout the next century,
English concepts such as the parole evidence-rule were continuously incorporated
into South African law of contract.
The importance of the contract in modern day international business
Ryan Murray, senior lecturer at the Nottingham Law School, provides a very apt
description of the vital importance of modern day law of contract:
The law of contract is truly remarkable. In fact, it is difficult to think of an area
of law that plays a more important part in everyday life. Literally millions of
contracts are formed each day and few of us will make it through 24 hours
without entering into a contract. A bus ride to work, the purchase of a sandwich at
lunchtime or a ticket to see a film at the cinema, these are all simple examples of
contracts that pass us by without much thought as to the legal principles that
1 Christie 2006:1
2 Christie 2006: 6
3 Justice of Appeal Brand is an Honorary Professor in the Faculty of Law, University of
the Free State.
4 Brand 2008: 71
5 Christie 2006: 8
3
govern these activities. The reason so many of us are unaware of these contractual
principles is that in the vast majority of cases there will be no need to challenge
the contract. Most contracts are performed without difficulty with both parties
meeting their contractual obligations. Despite the number of contracts that are
made every day only a tiny proportion will be challenged by the parties and out of
these an even smaller amount will ever reach the courts. However, it is also
important to understand the fundamental principles of contract law as it not only
provides the framework for resolving disputes when things go wrong under a
contract, but it also provides a framework that allows individuals to regulate their
own contractual obligations.6
2. The term contract
No two definitions of a contract are the same. However, the following definitions
by different writers will indicate that certain elements are ever-present.
Note to student: It is expected that you familiarize yourself with all the
definitions of a contract provided herein. In any question in a test or exam, you
will be required to provide all the different definitions provided below, except
where indicated otherwise.
Van der Merwe et al define a contract as follows:
A contract is a promise to fulfill an obligation.
A contract is an obligationary agreement
An agreement will be a contract only if the parties intend to create an obligation
or obligations
Not all agreements constitute contracts. The difference is that a contract is a legal
fact, in other words something which has its basis in empirical reality and has
legal consequences.
Christie, another South African writer, defines a contract as follows:
An agreement (arising from either true or quasi-mutual assent) which is, or is
intended to be, enforceable at law.
Kerr provides a somewhat complex definition, or rather explanation of what a
contract entails:
In contract the legal bond, the iuris vinculum, is formed by the parties
themselves (or their agents), and, within the limits laid down by law, the nature of
6 Murray 2008: 1
4
the obligations is determinable by them. In some cases their agreement is actual
(meaning both parties understand and concur in all the provisions of a simple sale
of goods), in others apparent (meaning one of the parties, being in a position to
understand what is written on a form containing the proposed provisions of a
contract, but without coming to any agreement, signs the form without bothering
to read it), and in yet others partly actual and partly apparent.7
Bhana et als definition is simpler, and reads as follows:
Contracts are agreements between parties who have the intention to create legal
rights and duties between them and which are legally binding upon the parties.8
Major, an English writer, defines the term contract as follows:
A contract is defined as a legally enforceable agreement. This means that a
contract is enforceable in the sense that there is a legal remedy available in case
one party should fail to comply with his promise under the agreement.9
It is evident from the abovementioned definitions that academics have similar notions of
what the contract as a legal document entails. Two words that pop up ever so
often in the mentioned definitions are agreement and obligation.
Consequently we will take a look at what is meant by the latter.
3. The term obligation
Van der Merwe et al explain the concept of an obligation as follows:
Obligation is a term derived from the Latin obligare which means to tie or to bind
together. It refers to a legal bond (vinculum iuris) which binds together two legal
subjects. The relation entails (on the one hand) a right to performance (this right belongs
to the creditor), and (on the other hand) a duty to render the performance (which rests on
the debtor). The nature of the performance is related to the delivery of a thing (dare) or
the doing of something (facere) or the refraining from doing something (non facere).
The creditors right is called a personal right, because the subject-matter or object of the
right is a performance by another person. This right is also called a claim The debtors
duty to perform is sometimes called a debt. An obligation, then, entails both a right and
a duty.10
Bhana et al add hereto the following:
A legal obligation is a legal tie or relationship (vinculum iuris) between two people which
means that one party has a duty to give a certain performance, while the other party has a
7 Kerr 1989: 3
8 Bhana et al 2009: 2
9 Major 1990:123
10 Van der Merwe et al 2007: 2
5
corresponding right to receive the performance. Every obligation therefore involves one
right and one duty.
One can see from these definitions that there are always at least two parties to an
obligation. As already touched on above, the party who has the duty to deliver the
performance is called the debtor, while the party who has the right to receive the
performance is called the creditor. It is important to remember that obligations do not
arise from contracts only, but may also arise from delicts and something like unjustified
enrichment, which are not dealt with in detail in this module.
4. Different types of obligations
4.1.
Natural
obligations
(obligationes naturales):
Those obligations that cannot be enforced in a court of law, such as the unassisted
contract of a minor.
4.2.
Civil
obligations
(obligationes civiles):
Those obligations that may be enforced by a court of law, such as obligations arising
from a contract of service or a contract of sale.
5. The difference between contract and obligation
Obligations may simply be described as the consequences of a contract.
In order to conclude that a contract has come into existence, one has to rely on
certain historical facts. No subsequent events can change these historical facts. At
most, its legal consequence, the obligation, can be terminated by fulfillment, release
or cancellation. The existence or operation of an obligation may depend on a
supposition, a condition or a modus, whereas the contract itself is not made to
depend on such qualifying terms. Contracts are thus clearly distinguishable from
their consequences, namely obligations. A term such as breach of contract is
actually erroneously applied, as breach in fact refers to the obligation, rather than the
contract.11
6. Identifiable characteristics of the contract:
According to Bhana et al, obligations created by a contract are determined by the
terms of the contract. These terms can be divided into three sub-classes:
6.1.
Essentialia: Those elements

that identify and differentiate the contract from other types of contract.
6
Example: In a contract of sale, the essentialia will be the price and the thing that
is sold.
If the essentialia for a particular type of contract are not present, the contract will
still be valid, but it wont be that specific type of contract anymore.
6.2.
Incidentalia: Clauses that

make provision for residual matters for which the parties wish to make special
provision or to alter or exclude the naturalia.
Example: The parties to a contract of sale can include a clause that the thing is
sold voetstoots or as is. This means that the seller does not give a warranty
against latent defects in the thing sold. In other words, the parties exclude this
naturalia of the contract of sale.
6.3.
Naturalia:
The
legal
principles of the law of contract that will apply to the contract in the absence of
clauses to that effect in the contract itself. These are the terms automatically
attached by law to a specific type of contract without them having to be inserted
by the parties.
Example: One of the naturalia of a contract of sale is a warranty against latent
defects, meaning that the buyer will be able to cancel the contract or claim a price
reduction if the thing sold has a latent (hidden) defect. This term will
automatically form part of the contract of sale, even if the parties do not
specifically agree thereon.
7. Void or voidable?
A contract is void ab initio (from the beginning) and has no legal effect whatsoever if the
constituent requirements are absent.
A contract is valid but may be declared void if an applicant proves successfully that
certain factors influenced his/her mind to enter into a contract, e.g. duress,
misrepresentation or undue influence.
8. Principles and policies of the Law of Contract: Social and Constitutional Values
Study in particular Van der Merwe et al. pp. 11-18
The view that a contract is constituted by agreement signifies the recognition of
individual autonomy as a philosophical premise. Freedom of contract means that an
individual is free to decide whether, with whom, and on what terms to contract.
The principle of consensuality (consensus) requires concurrence of at least two such
decisions for a valid contract. However, autonomy also entails that the decision-maker
must accept responsibility for his/her considered actions. The principle of pacta sunt
servanda, in turn, requires exact enforcement of contractual obligations created in
7
circumstances which are consistent with freedom of contract and consensuality. (This
doctrine entails the freedom to enter into a contract. Former Justice of Appeal JJ Hefer,
who is also an extraordinary professor of law at the Department of Private Law at the
University of the Free State, mentions that the pacta sunt servanda-principle is probably
the most important foundation of the South African law of contract. 12 However, it is
inevitable that this principle sometimes results in situations where contractants are bound
by agreements which may be to their detriment. In the case of SA Sentrale Ko-op
Graanmaatskappy Bpk v Shifren en Andere13 Steyn JA held that parties to a contract were
bound by a stipulation in their contract that no variation in the specific contract should be
of force or effect unless it was in writing. In this case, two parties entered into a lease
contract, which contained a so-called non-variation- clause, which stipulated that no
variation to the contract would be valid if not in writing. The lessee wanted to sub-let the
property in question, and got the oral permission from the lessor to do so. The lessor
decided to cancel the contract on the grounds that the non-variation-clause was not
complied with. The court decided that the oral permission was insufficient.
This may sound like hard law, especially since the decision was reached in 1964, about
thirty years before the new constitution, which was initially known as Act 108 of 1996.
However, it is interesting to note that the Shifren-decision was upheld in the case of
Brisley v Drotsky14 (which can be found in the KON 214 list of cases, and which must be
studied in detail).
The fact that an obligation is recognized by law, and receives its effect through the
agencies of the state, implies that contracting parties, when exercising their private
autonomy, are subject to the values of society. The very principles of morality or socioeconomic expediency may in particular circumstances require that less weight be
attached to the ideals of individual autonomy and freedom of action. The rules of the law
of contract reflect the attempts in the legal system to achieve a balance between relevant
principles and policies so as to satisfy prevailing perceptions of justice and fairness, as
well as economic, commercial and social expediency. For the abovementioned reason, the
law of contract has a dynamic and ever-changing nature (Van Zyl, J in Janse van
Rensburg v Grieve Trust 2000 (1) SA 315 (C) on 323-324). Chapter 2 of the constitution
has specific implications for the abovementioned position: The basic rights of the
constitution are a concrete expression of principles, policies and values which prevail in
South African society. Many of the rights awarded to the individual in Chapter 2 of the
constitution, are also inherent to the law of contract: freedom to contract, private
autonomy, public policy and interest, the boni mores, bona fides, reasonableness and
fairness, and equality. Because of the fact that the constitution is the supreme law of the
country, and the Bill of Rights is the most recent expression of the values upheld in South
African society, precedent set by appeal courts after the constitution came into effect has
been said to bind lower courts.
12 Hefer 2004: 1.
13 1964 4 SA 760 (A)
14 2002 (4) SA 1 (SCA)
9. Requirements for a valid contract

Over the next few lectures, we are going to look at the requirements for a valid contract.
There are six of them, each of which will be discussed in detail. They are the following:
9.1 Consensus
9.2 Formalities
9.3 Possibility of Performance
9.4 Legality
9.5 Certainty
9.6 Capacitated parties
Unit 2: The Requirement of Consensus

Learning outcomes:
1.
2.
3.
4.
5.
Explain what is meant by the basis of a contract and how it is formed.

Explain what is meant by the term consensus.
List and discuss the three theories for determining the presence of consensus.
Explain what is meant by the objective approach for determining consensus.
Explain what is meant by the term mistake and identify the solutions thereof.
Study:
Contract. General Principles. Third Edition. Chapters 2, 3 and 4.
Trollip v Jordaan 1960 1 PH A 25 T
Spindrifter v Lester Donovan 1986 1 SA 303
Du Toit v Atkinson Motors 1985 2 SA 893
Allen v Sixteen Sterling Investments 1974 4 SA 174
De Jager v Grunder 1964 1 SA 446 AD.
Alternative study:
3. Christie.
The Law of Contract in South Africa. Fifth Edition. pp. 22-24
4. Bhana et al.
10
1. The Basis of a contract15

The basis of a contract is either consensus, which means an actual meeting of the
minds of the contracting parties, or the reasonable belief by one of the contractants
that there is consensus. Roman jurists did not accept that each and every simple
agreement (nudum pactum) was a legally binding agreement (contractus) to the
extent that it created an obligation in law. For an agreement to be a binding one
they usually required the presence of a special reason for the creation of an
obligation (causa obligationis). In Roman times, verbal contracts were only
binding if expressed in very specific words. Some agreements were binding only if
accompanied by the delivery of a thing (contractus re), whereas another type of
agreement was binding if an entry of (fictitious) payment had been made in the
creditors account book (contractus litteris). Some agreements, however, were
legally binding although they were not accompanied by special causae
obligationum. These were the consensual contracts (contracts ex consensus) which
were binding simply because the parties to the agreement concurred on the
essential parts of their pact. Contractus ex consensus played a vital role in
economic discourse as they reflected some of the most common economic
transactions, such as sale, lease and employment.
Roman jurists accepted the fact that a meeting of will or intentions could be the
basis of a binding contract, although they did not elevate consensus to the general
basis of all contracts.
Germanic law did not even recognise consensus to the extent to which it was
accepted in Roman law. The Germanic conception of a binding agreement seems to
have required either some final cause or completed performance. In the course of
time, though, the binding force of consensus as a general value in what was
regarded as proper conduct came to be accepted as part of the philosophy of
natural law, and the doctrines of the Catholic Church. Adherence to agreements
because one had consented to them acquired a moral or religious connotation
inasmuch as it was regarded as improper or sinful not to abide by ones word. For
reasons both moral and economic, medieval merchants also accepted consensuality
as a basis for adhering to their agreements. Thus consensuality became a part not
only of moral philosophy and canon law, but also of the lex mercatoria or law
merchant, the law that was internationally accepted by merchants and traders.
The outcome of this was the acceptance of the maxim pacta servanda sunt as one
of the guiding principles of the law of contract, particularly in view of the
reception of Roman law into the systems of law which obtained in Western
Europe. On the one hand, the emphasis fell on pacta, in other words that mere
agreements could be binding without recourse to form. On the other hand, the
words servanda sunt indicated that it was imperative to honour simple agreements.
15 Van der Merwe et al 2007: 19-21
11
By the seventeenth century, the scene was set for the acceptance in the law of
Holland of the principle that mere consensus was legally binding.
2. The Term Consensus
Consensus refers to the so-called meeting of the minds of contractants, and can be
said to be the basis of a contract. A contract comes into existence of the parties are
agreed (ad idem) on creating between themselves an obligation (or several
obligations) as well as on all its particulars, such as its content and subsidiary
features.
If A wants to sell his car to B, a contract will arise only if they both agree
on the object which A must deliver (the particular car) and the price which B
must pay in return, as well as on subsidiary matters pertaining to the
obligations and which the parties regard as important (such as the fact that B
must get a loan from a recognised financial institution).
Reasons for binding parties in terms of a contract include the following:
-
Intention of the contractants;

Legal certainty;
Good faith;
Protection of reasonable expectations;
Creation of undue risks.
The general theory that has developed for determining consensus is called the Will
Theory.
A contracting partys will is formed by the following:
Motives:
(a) Own motive: Plays no role in the question of whether consensus exists or not. The
other party is innocent, and did not influence you in entering into the contract.
(b) False establishment of a motive: Plays a role in the question of whether consensus
exists- it leads to the voidability of a contract. False information moved you to
enter into the contract: Misrepresentation.
(c) Motive still unknown: The other parties have no knowledge of your motive to
enter into contract. This may lead to a situation where two parties have totally
different motives at the signing of the contract. The argument exists that in this
instance, no consensus exists.
12
Decision:
(a) Decisions are reached after having established your motive.
(b) A legal will requires the parties to reach consensus on all aspects of the
contract.
(c) The other party still carries no knowledge of the motive and/or decision, because
it hasnt been conveyed yet.
Declaration of will:
(a) Known as offer and acceptance- declarations.
See Van der Merwe et al. Chapter 3
3. The three theories for the determining of consensus
It has already been mentioned that the Will Theory developed for the determining
of whether consensus is indeed present at an agreement, and subsequently whether
a valid contract exists. However, because of critique against the Will Theory, two
other theories for the determining of consensus have developed, namely the
Declaration Theory and the Reliance Theory.
3.1. The Will Theory
According to the will theory, consensus is found in the so-called meeting of
the minds, or consensus animorum animo contrahendi.
The elements of consensus are as follows:
Contractants must be agreed on the consequences they wish to create.

They must intend to bind themselves legally.
They must be aware of their agreement.
Advantages of the will theory:
In a society which accepts the free expression of individual will and

the personal autonomy of each individual as primary values, the will
theory has the obvious advantage that it can be expressed in terms of
principles which are fundamental to the society.
The theory has strong historic roots in the Roman-Dutch Law.
13
The theory functions satisfactorily as an explanation for contractual

liability where the parties are in actual agreement.
It also functions satisfactorily in the case of absence of liability where

they disagree on some fundamental aspect of their intended contract.
Critique against the will theory:
The theory experiences problems with explaining misrepresentation

and error.
It fails to explain the doctrine of representation satisfactorily.
It fails to explain the doctrine of reservatio mentalis.
This theory differs from case law in instances concerning the moment
of reaching of consensus in contracts concluded inter absentes.
It is difficult to prove in court.
The theory follows a subjective approach.
The Will Theory was preferred in the following cases:

Swart v Vosloo 1965 1 SA 100 AD op 104H:
A lease is a mutual contract flowing from agreement of the minds of the parties, a
concursus animorum animo contrahendi.
Jonnes v Anglo African Shipping:
The general rule is that the court should determine what the true intention of the
parties was.
Maize Board v J Jackson:
As a general rule parties to a contract intend it to be exactly what it purports to
be. Not infrequently, however, they may endeavour to conceal its true character.
In such a case, when called upon, a court must give effect to what a transaction
really is and not what in form it purports to be. (Ponnan, J on 2[1])
PW Michau v The Maize Board:
He conceded, however, that he had no idea of the price of day-old chickens or
poultry and that, although in terms of his agreement with Rainbow the price at
which the chickens were sold would be decisive as to whether there was a profit
or not, the price of chickens was to no importance to him at the time. He said he
simply placed his faith in Rainbow to give him an added value on his maize.
Although the abovementioned four cases need not be studied in detail,
14
3.2.
students must have a thorough understanding of what the courts said in

each case.
The Declaration Theory
According to the declaration theory consensus is to be found in the objective coinciding declarations of the contractants. Van der Merwe et al states the following:
According to the declaration theory contractants are bound to their contract not on
the basis of their subjective, co-inciding intentions but on the basis of their
objective, coinciding declarations of will. This theory only takes into account a
partys declaration of will, and not its intentions.
Advantages of this theory:
Wessels, J stated the following in the case of South African Railways & Harbours
v National Bank of South Africa Ltd 1924 AD 704 op 715-716:
The Law does not concern itself with the working of the minds of parties to a
contract, but with the external manifestation of their minds. Even therefore if from
a philosophical standpoint the minds of the parties do not meet, yet, if by their
acts their minds seem to have met, the law will, where fraud is not alleged, look to
their acts and assume that their minds did meet and that they contracted in
accordance of what the parties purport to accept as a record of their agreement.
This is the only practical way in which courts of law can determine the terms of a
contract.
Critique against the abovementioned theory:
It is of a subjective nature.
It causes problems with simulated acts.
Contracts are forced upon parties containing clauses that they did not
want.
With the doctrine of representation the following question arises:
Whose declaration should enjoy preference: The principles or the
representatives.
In cases of contracts inter absentes, the problem arises that as soon as
the declaration of acceptance has been made, the offeror is bound,
although he/she is not even aware of the acceptance.
The following case must be studied in detail from the case list:
Trollip v Jordaan 1960 1 PH A 25 T
Courts of law can only judge from external facts whether this has or has not
occurred. In practice therefore it is the manifestation of their wills and not the
unexpressed will which is of importance.
15
The following case need not be studied in detail, but students should take note
of the following excerpt:
Union Government v Smith:
we must take the grammatical and ordinary sense of the words used in order to
ascertain what the parties meant, even though we may doubt whether this was the
intention of the parties at the making of the contract. It is our first duty to see what
the parties intended by the language used.
3.3. The Reliance Theory
The reliance theory determines that consensus is established in the bona fides of the inter
partes-relationship. This bona fides and the consequential reliance on the information
provided by the other contractant must be protected.
Van der Merwe et al states that this theory determines that a contract is based on the
intention of one party to the contract and the reasonable reliance on his/her side that the
other party has the same intention. The reliance theory is seen as supplementary to the
will theory: If the two parties have corresponding intentions, consensus is present and it
is not a prerequisite to determine whether one of the parties had a specific idea of the
intention of the other party. If one of the parties erred regarding the intention of the other
party, and for that reason theres no consensus, the reliance theory states that if one of the
parties relied on the idea that consensus was present, a contract was created.
Thus, a contract is created where actual consensus exists, or where the intention of one of
the parties to an agreement reasonably relied on the intention of the other party.
In the first instance, the contract is based on actual consensus, and in the second instance
it is based on the reliance that consensus exists.
Critique against the reliance theory:
It has a subjective nature.

Extrinsic evidence must be used to determine the reliance.
It is expected from a party who possesses more knowledge to make
available all information to the other party regarding the fine print.
The following two cases must be studied as authority from the case list
16
4. The Objective Approach for determining Consensus

The objective approach to the determination of consensus stems from the
shortcomings of previous three theories. Consensus is attached to a party or both
parties, after consideration of all relevant and proven evidence before the court.
By following an objective approach, a court will look at all evidence regarding
inner intention, the outer version thereof and any reliance on the behaviour of the
other party. The effect of the objective approach is the merging of the previous
three theories. One isnt applied at the cost of the other. This approach provides
solutions for the determination of consensus at the doctrine of representation and
contracts inter absentes.
The following case must be studied as authority from the case list
Allen v Sixteen Sterling Investments 1974 4 SA 174
I accept that our law follows a generally objective approach to the creation of contracts.
The following case need not be studied in detail, but students should take note
of the following excerpt:
Springvale v Edwards 1969 1 SA 464:
that the test to be applied in deciding whether consensus exists, is an objective one, is
firmly established in both South Africa and Rhodesia.
5.Mistake (Error)
The German jurist Von Savigny distinguishes between 2 types of mistake:
a.MATERIAL MISTAKE:
Mistake is already present at the declaration of will.
The parties are not on the same wavelength- one refers to lease and the other to
buying.
Dissensus exists from the beginning, and no contract is created.
17
b. ERROR IN MOTIVE:
In this instance, consensus exists with the declaration of will, but the error exists in
the motive.
There are two types of error in motive:
i. Unilateral mistake:
- The contracting party is the cause of his own mistake.
- There is consensus at the declaration of will and a contract comes into
existence.
The following cases must be studied as authority from the case list:
ii. Misrepresentation or mistake caused by the other party:
- The contracting party is misled by the other contracting party as far as his
motive is concerned, and because of this he is led to make a declaration of
will.
-The misrepresentation can be intentional, negligent or innocent.
The following case must be studied as authority from the case list:
De Jager v Grunder 1964 1 SA 446 AD.
SOLUTIONS FOR THE PROBLEM OF MISTAKE:
The iustus error-doctrine:
-This doctrine implicates that someone who mistook some element of a

contract, may withdraw from such contract if he/she can prove that the
mistake was made innocently, bona fide and reasonable.
- Maritz v Pratley.
The Estoppel-doctrine:
18
-The guilty misrepresentor is bound by/held liable for his misrepresentation.

c.Some interpretory-rules:
- The contra preferentum-rule: Determines that a clause in a contract must be
interpreted keeping in mind who the author of such clause is.
- The parole-evidence rule: Determines that the written documents are the
only source of the contracts contents. No extrinsic evidence is allowed.
19
Unit 3
Consensus obtained by improper means (I)
Learning outcomes:
1.
2.
3.
4.
Discuss the background of consensus obtained by improper means.

Explain the term misrepresentation in detail.
List and discuss in detail the elements of misrepresentation.
Identify and discuss in detail the two different types of misrepresentation.
Study:
Preller v Jordaan 1956 1 SA 483 (A).
Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A).
Phame v Paizes 1973 (3) SA 397 (A).
Labuschagne Broers v Spring Farms 1976 2 SA 828 T
Alternative study:
3. Christie.
4. Bhana et al.
5. Kerr.
The Principles of the Law of Contract. Fourth Edition. Chapter 11
20
1. Introduction
The requirement of an actual or apparent meeting of the minds of contractants as
the basis of a contract means that the intention or will of the parties is a central
pivot in the juristic act concerned 16. The expression of such a will may be
influenced by any number of factors: Fear, economic necessity, influence by
someone in whom he places great trust, or simply because he desires to change
his economic and social situation17. The law does not does not take cognisance of
each and every factor which influences an expression of will. It is in keeping with
the values protected by the constitution and with good faith, and in the public
interest, that serious expression of intent must be adhered to and given their
intended legal consequences18. Some factors accept that a contractant is allowed
to undo the consequences of the agreement because it was defective in the sense
that it was not conceived in the free and unfettered manner regarded by the law as
necessary for the expression of a contractants individual autonomy. In such
circumstances the law may regard a will as so defective as to not have any
legal relevance at all. No juristic act would then result. This is not the state of our
modern law, however: The law has rather opted for an approach that under the
above circumstances actual agreement will ensue, but may sometimes be voided
at the behest of the contractant whose will has become defective19. Where
consent has been obtained improperly, the injured party may rescind the contract
and may often claim a financial award. The exact content of the remedies is
applicable to the juridical nature of the act whereby consent is received as
contractual misconduct or a delict. Traditionally, the law approached the matter
of voidability on the assumption that one of two specific grounds for rescission
must be proved, namely misrepresentation or duress. The courts eventually also
accepted a third ground for rescission called undue influence, which intitially
received a fair amount of criticism, especially in the case of Preller v Jordaan
1956 1 SA 483 (A). In this case, which must be studied in detail for the purposes
of this module, the argument in the court a quo was that undue influence was an
English legal principle which had no peer in Roman-Dutch Law, and did not
constitute any ground for the remedy of restitutio in integrum20. The general
consideration which underlies the voidability of a contract is the fact that
consensus has been obtained in a manner which, in the eyes of the law, is
improper21.

20 See Fagan, JAs decision at 489.
21
One has to of course consider exactly what is meant by the term improper.
There is no definite or watertight division between the three grounds for
rescission of a contract, and particularly between duress and undue influence 22. In
the case of Savvides v Savvides23 the applicant requested that a power of attorney
which she had executed in favour of her husband be rescinded on the ground of
what she called duress: her husband had threatened to leave the matrimonial
home permanently. According to the court, the threat in question might has well
have constituted undue influence, since duress and undue influence may
sometimes overlap. In the case of Malilang v MV Houda Pearl24, a party to a
contract of employment wished to rescind the contract on the ground of
economic duress in the sense of commercial pressure, inasmuch as it had been
threatened with the blacking of its ship unless it entered into a contract. The
court once again pointed to the analogy between duress and undue influence 25.
The viewpoint has in fact been advanced that undue influence is part of a wider
concept in Roman-Dutch law, allowing redress to a contractant whose
circumstances have been abused by the other party26.
In the case of Plaaslike Boeredienste (Edms) Bpk v Chemfos Bpk 27, the appellate
division actually went beyond the existing three grounds for rescission. The court
in this case held that where a contractant had bribed the agent of his cocontractant to persuade the latter to contract, the principal was entitled to rescind
the contract. Although the term fraud was advanced as the relevant ground for
rescission, the court found that the act of persuasion through bribery did not
constitute fraud as such but did amount to an improper means of obtaining
consensus28. This approached raised the distinct possibility that the traditional
specific grounds for rescission might be subsumed under one general principle to
the extent that there would be but a single ground for rescission due to a prior
defective will, namely improper obtaining of consensus29.
In the case of Extel Industrial (Pty) Ltd v Crown Mills (Pty) Ltd 30, the appeal court
held that commercial bribery was a ground for rescinding the contract, but
accepted that such bribery and other specific grounds for rescission can be
classified dogmatically as allowing avoidance of a contract because consensus,
though real, was improperly procured.

23 1986 (2) SA 714 (A)
24 1986 (2) SA 714 (A)
27 1986 (1) SA 819 (A)
30 1999 (2) SA 719 (SCA)
22
Although a few cases have been mentioned above, students only need to
study the case of Preller v Jordaan in detail. A thorough understanding of
how the other cases fit into the discussion is essential, however.
2. Misrepresentation
2.1.
Introduction
The decision of a prospective contractant to conclude a contract is often brought
about by a false representation by or on behalf of the other party to the
negotiations. The misled party is said to labour under a mistake. If such mistake is
material, no consensus and subsequently no contract arises31. However, a
representation frequently causes an error in motive. Although not material, and
therefore not excluding consensus, such an error does affect the quality of the
consensus.
A is the registered owner of a farm. B wants to buy the farm registered in
As name. A points out the farm to B in such a manner as to create the false
impression that the farm includes certain afforested land. B purchases the
farm in this belief. He signs a deed of sale in which the farm is described in
terms of the sellers title deed. Bs decision to purchase was influenced by an
error in his motive, inasmuch as he wrongly believed that the land which was
pointed out to him (and which he believed to include the afforested portion)
which was the land described As title deed. If B can prove that his consent
was obtained improperly, because it was given as the result of an actionable
misrepresentation by A, he is entitled to relief by way of rescission or a
financial award, depending on the circumstances.
2.2.
Representation and contractual terms

A representation that occurs during precontractual negotiations can be made a
part of the consensus between the parties and as such becomes a term of the
ensuing contract32. An example would be if the representation is warranted to be
true. In the abovementioned example, the parties may have intended that A was
binding herself absolutely by the representation that the land which was being
sold included the afforested portion- a warranty being a special contractual term
which requires strict adherence from the contractant who gives the warranty 33.
Should the representation turn out to be false, the contract will have been
breached and the normal consequences of breach of contract by way of breach of

33 Van der Merwe et al 2007: 106 fn 24
23
warranty will follow. Whether a representation amounts to a contractual term or
whether it merely causes an error in motive without becoming a part of the
contract must be decided according to the intention of the parties34.
2.3.
Elements of misrepresentaion
2.3.1. Act or conduct35:

The act must be a representation made by the contractant or by someone for
whose acts he can be held liable, such as an employee acting within the scope
of his employment or someone who is executing a mandate. A
misrepresentation by a third party which misleads one of the contractants
cannot be the basis of a claim against the other contractant. The party who has
been misled must then have recourse against the third party.
A representation is any conduct which creates a particular impression on the
mind of the other contractant. The conduct may be a commission (positive act)
or an omission (refraining from committing a positive act). A representation
by commission may be made in words (orally or in writing) or by conduct
alone.
For example, a declaration that a wrist-watch is made of solid gold is
a representation, but so is the act of displaying the watch amongst objects
of solid gold.
Also, fencing off two sections of land as a single unit amounts to a
representation that they are indeed one entity.
A representation by omission usually occurs when someone omits to disclose
information within his knowledge or refrains from removing a wrong
impression which to his knowledge exists in the mind of the other contractant.
Such an omission will only be actionable if it is wrongful (wrongfulness is a
separate element of misrepresentation discussed below), and this depends on
whether there was a duty to act positively. The representation must be false or
at least inaccurate. Consequently, a representation which is correct and accurate
can never found liability for misrepresentation. A representation which is not
wholly false may nevertheless be so incomplete or only partially true as to be
inaccurate.
For example, if the question is raised Has any proposal for insurance ever
been declined or cancelled? and the answer thereto is No proposal for
insurance has ever been declined, this leaves the possibility that a
24
proposal for insurance has indeed been cancelled. The mentioned
answer to the mentioned question is thus a half-truth.
A representation may relate directly to facts of the past or present, such as the
previous occurrence of an accident or ones present state of health. It may also be
expressed in an opinion, particularly concerning the future, such as financial
advice about the potential return on an investment (Study in this instance the case
of Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A), where the
misstatement referred to by the court may have been interpreted as an opinion).
The argument goes that an opinion cannot be an actionable misrepresentation. Van
der Merwe et al disagree with this argument. They state the following:
Quite apart from the fact that opinions and similar statements more often than not contain some
statement of fact as to the representors state of mind or knowledge, the question whether a
representation was a mere opinion or prediction bears upon the quality and reasonableness of the
act or conduct, and thus relates to wrongfulness36
2.3.2. Wrongfulness
Test for wrongfulness37:
As a delict, misrepresentation involves wrongful conduct. An act is wrongful
if it is contrary to the norm or standard of acceptable conduct in a particular
society, often referred to as the boni mores. The most recent reference to the
latter term can be found in the case of ABSA Bank Ltd v Fouche 2003 (91) SA
176 (SCA). Such an act is considered unreasonable in the eyes of the
community because it offends against the standard for reasonable or socially
acceptable conduct. A representation that occurs during the course of
contractual negotiations will be wrongful if it infringes a norm protecting a
contracting party against being misled.
Commission and omission38:
The wrongfulness of a representation by commission is more readily apparent
than the wrongfulness of an omission. The latter will only be wrongful if the
representee breached a duty to act positively in order to prevent a wrong
impression from arising or to remove an existing wrong impression. South
African law does not recognise a general duty to act positively to remove from
the mind co-contractant each and every wrong impression by disclosing each
and every fact that may be material. Omissions are, in fact, prima facie lawful.
37 Van der Merwe et al 2007: 10938 Van der Merwe et al 2007: 110-111
38
25
The existence of a duty to act will therefore depend on the circumstances of
each individual case.
In the past, the appeal court has often construed a duty to disclose information
with reference to the type of contract involved, rather than in more general
terms. In the case of ABSA Bank Ltd v Fouche 2003 (1) SA 176 (SCA) on 181,
the court expressed the test involved in terms of the ordinary delictual concept
of misrepresentation by omission:
A negotiating party is expected to speak when the information he has to impart falls within his
exclusive knowledge (so that in a practical business sense the other party has him as his only
source) and the information, moreover, is such that the right to have it communicated to him
would be mutually recognised by honest men in the circumstances.
Opinion39:
A representation by means of an expressed opinion is not readily regarded as
actionable. One reason for this is that an opinion, even if false, will often not
be in conflict with the norm involved and as such will not be wrongful. A
statement which purports to state actual facts made by one party to contractual
negotiations and which actually misleads the other party, will usually be
regarded as infringing the norm, since it would normally be reasonable for the
other party to act on such a statement. A statement that is clearly an expression
of the mere view or conviction of the representor cannot so easily entitle the
representee to rely on it. Hence, the materiality of the facts to which the
opinion refers assumes special importance. As far as the reasonableness of the
act is concerned, there does not seem to be a difference in principle between a
representation relating to a fact and an opinion.
Puffing40:
Representation made during the course of negotiations in order to persuade
another to conclude a contract, will not be actionable if they amount to what is
generally called mere puffing or puffery. Puffing refers to persuasive talk and
claims commending and praising the properties of the representors
performance. In the case of Cockroft v Baxter 1955 (4) SA 93 (C), the court
decided that the claim that a car has an excellent engine, whereas its
condition was merely normal considering its year and mileage, was not
actionable, because it was not a wrongful representation. Such a statement
amounts to a simple commendation (simplex commendatio) as long as it does
not go beyond mere praise and commendation. Study the case of Phame v
Paizes 1973 (3) SA 397 (A) in detail.
39 Van der Merwe et al 2007: 111-11240 Van der Merwe et al 2007: 112
41 Van
40
der Merwe et al 2007: 113-114
26
2.3.3. Fault41:
Fault refers to the legal blameworthiness which accompanies the wrongful
conduct of the misrepresentor. Fault takes two forms, intent (dolus) and
negligence (culpa in the narrow sense).
Intent is defined as a legally reprehensible state of mind which
consists in directing the will to attaining a particular result while
conscious of the wrongful conduct in question.
Negligence is the lack of the necessary degree of care in
circumstances under which the reasonable person in the
position of the actor would have foreseen the possibility of
harm to the other and would have taken reasonable steps to
guard against the harm42.
Not every representation which is false is accompanied by fault on the part of
the representor. We shall deal with the aspect of innocent misrepresentation
later on.
2.3.4. Causation43
A misrepresentation will be actionable only if it has induced the
misrepresentee to enter into the contract as it is. This means that the
misrepresentation must have caused the misrepresentee to contract where he
would not have contracted at all, or at least to conclude a contract on terms
which otherwise not have consented. The test for determining a causal link or
nexus is the one which is applied elsewhere in the law. In practice, it has
developed into a two-tier test. In comprises, in the first place, an inquiry
whether the misrepresentation in fact caused the contract. In the second
instance, this inquiry entails determining an existing fact, yet it is commonly
conducted by the application of the conditio sine qua non test.
The conditio sine qua non-test asks the question whether the contract
or its specific terms would have resulted but for the misrepresentation.
27
A misrepresentee will therefore prove factual causation even if he can prove
no more than that the misrepresentation was only one of the operative facts
which induced him to contract as he did44.
2.3.5. Undesirable result: Contract or Damage45
When a claim for damages based on misrepresentation is brought, proof is
required that damage in the form of patrimonial loss has actually been
suffered as a result of the misrepresentation. This is in keeping with the
general rule applicable to the law of delict in South Africa.
2.4.
The two different forms of misrepresentation.
2.4.1. Fraudulent misrepresentation:

A delict is committed in the case of fraudulent misrepresentation, and so a
delictual remedy is used: the Actio Legis Aquiliae. It has nothing to do with
breach of contract: the delict is already committed before the creation of the
contract. Intentional misrepresentation: The misprepresentor knows that the
fact/statement/promise is false and that it will move the other party to contract.
The motive is gained fraudulently and is intended towards moving the victim to
enter into the contract. Negligent misrepresentation: The misrepresentor ought
to have been aware of the falsity of his statement as a reasonable person would
have done to make sure of the correctness of the statement. See the case of FF
Holzhausen v ABSA Bank Ltd (280/2003) on the Supreme Court of Appeals
website (need not be studied in detail, though). If misrepresentation is proven, the
contract is voidable. The contract remains intact, however, until a court decides
that misrepresentation lead to the conclusion thereof. If the victim cancels the
contract, he/she would commit breach. Damages at misrepresentation are
calculated according to the negative interest: Only damages actually suffered may
be claimed for, not consequential damages.
2.4.2. Innocent misrepresentation:
Both contracting parties act in a bona fide, innocent and reasonable manner
during negotiations, but one suffers damages because certain facts are unknown to
them.
Study the following two cases regarding innocent misrepresentation:
Phame v Paizes 1973 3 SA 297 A
Labuschagne Broers v Spring Farms 1976 (2) SA 828 (T)
44
28
Unit 3 (Continued)
Consensus obtained by improper means (II)
Learning outcomes:
1.
2.
3.
4.
5.
Explain what is meant by the term duress.

List the elements of duress as established in the case of Broodryk v Smuts.
Name and discuss the elements of duress.
Explain what is meant by the term :undue influence.
Discuss the case of Preller v Jordaan with specific reference to how the elements
of undue influence were derived from the case.
6. Name and discuss the elements of undue influence.
7. Name and discuss the remedies available to a claimant in terms of duress and
undue influence.
Study:
Broodryk v Smuts 1942 TPD 47.
Malilang v MV Houda Pearl 1986 (2) SA 714 (A)
Medscheme Holdings (Pty) Ltd v Bhamjee 2005 (5) SA 339 (SCA)
Consol Limited t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd & Another
2005 (1) SA 1 (SCA).
Alternative study:
3. Christie.
4. Bhana et al.
29
5. Kerr.
The Principles of the Law of Contract. Fourth Edition. Chapter 11
1. Duress
1.1.
Introduction46
It sometimes happens that a contractants decision to enter into a contract is

influenced because of the fact that he was forced or compelled to agree to the
contract.47 In the case of Ilanga Wholesalers v Ebrahim 1974 (2) SA 292 (D) for
instance, someone who had stolen postage stamps from his employer was
compelled by threat of prosecution to agree to an acknowledgment of debt. In the
case of Salter v Haskins 1914 TPD 264, a person who had committed adultery
with his partners wife was persuaded to transfer his share of the partnerships
property to the aggrieved partner for fear of an action for damages. In the
Savvides-case, already mentioned in the previous lecture, the husband threatened
to leave the matrimonial home if his wife didnt sign a power of attorney, and in
the case of Malilang v MV Houda Pearl 1986 (2) SA 714 (A) a shipowner
threatened not to off-load his cargo if he didnt receive increased wages.
It is important to keep in mind at this stage that there is no watertight
distinction between duress and undue influence (which is for all practical
purposes an English law concept). See the introduction of Lecture 3.
Van der Merwe et al state that compulsion may be exercised by a direct
application of physical force or indirectly by way of a threat of harm.48 The direct
application of physical force is calles vis absoluta when someone is physically
overpowered in such a manner that he cannot be said to act at all, for instance
when a persons signature to a document is obtained by physically forcing his
hand to write. A threat of harm, on the other hand, which is used to evoke a
consenting expression of will, is called vis compulsiva or duress. The will of the
contractant who is subjected to the threat is nevertheless a valid expression of
intent: A forced will is nevertheless a will. The one who consents therefore acts,
albeit in fear. A prospective contractant may be in such fear of a threat that he
becomes incapable of forming a legally relevant will, in which case he cannot be
said to have acted at all.49
1.2.
Elements of duress

30
The act of duress is a delict. A contractant who wishes to avail himself of the
remedies for duress must accordingly prove the existence of the elements of
the delict. The important classic case to be studies in detail here is that of
Broodryk v Smuts 1942 TPD 47.
In the abovementioned case, Broodryk, an employee of the state, was
persuaded to enlist in the armed forces by government officials who
threatened otherwise to have him imprisoned or interned. In considering an
exception to Broodryks claim for rescission of the enlistment contract, the
court expressed the elements necessary to set aside a contract on the grounds
of duress as follows:
(1) Actual violence or reasonable fear.
(2) The fear must be caused by the threat of some considerable evil to the
party or his family.
(3) It must be the threat of an imminent or inevitable evil.
(4) The threat or intimidation must be contra bonos mores.
(5) The moral pressures used must have caused damage. 50
1.2.1. Act (conduct)51

The act consists in compelling the other party to agree to the contract by the
direct application of physical force or by a threat of harm. There must be
actual compulsion in the eyes of the law. However, the immediacy of the
undesirable consequences which the act of compulsion may bring about does
not form part of the content of the act/conduct, although in given
circumstances it may contribute to a conclusion about the presence or absence
of an act of compulsion. The fact that the physical violence or impending
harm is not imminent, but is experienced by the other contractant as a more
remote possibility in the future, would not necessarily exclude the conclusion
that compulsion has occurred.
The requirement of a threat of an imminent or inevitable evil as set in
Broodryk v Smuts can be interpreted in this light.
The reference in the abovementioned case to the existence of reasonable
fear does not refer to the act itself, in the sense that the act as such must
consist in the actual excitement of fear. Fear may be the result of the act of
duress. As such, the existence of reasonable fear may be indicative of the
wrongfulness of the act, or of the existence of a causal link between the act
and the alleged harm. It is doubtful, however, whether the presence or absence
of reasonable fear should carry much weight in this regard.
Van der Merwe et al mention that according to De Groot De
jure belli ac pacis 2.11.7 the question whether the fear was
31
reasonable should not be considered at all, and a contractant in
whom fear was actually instilled should not be open to the
reproach that he should not have been so easily scared.52
Several additional factors are often mentioned in relation to the act. So, for
example, in the Broodryk-case, the court required a threat of some
considerable evil against the party or his family. The threat must also be
directed against at their lives or physical integrity, whereas it is doubtful
whether duress directed at the property or goods of a contractant should be
actionable (notably in the case of Van den Berg & Kie Rekenkundige
Beamptes v Boomprops 1028 BK 1999 (1) SA 780 (T) on 784-785). These
factors, together with others such as gender, status and age of the other
contractant, are considerations in the process of evaluating the reasonable
reasonable quality of the conduct. This applies particularly to the requirement
that there must be reasonable fear.
1.2.2. Wrongfulness53
The wrongfulness of an act of duress is determined by the same general test
which applies to misrepresentation (see lecture 3). According to Broodryk v
Smuts the act must be contra bonos mores. This implies in fact that the act
must be wrongful, or that there must be a threat of unlawful action. The
question which must be posed is whether the act of compulsion itself is
wrongful. This may be the case even where a contractant is threatened with
lawful action, but to obtain a result to which the contractant who exerts the
duress is not reasonably entitled in the circumstances. The latter situation has
occurred particularly in the context of agreements concluded under threat of
criminal prosecution. Although the courts have not given a uniform expression
of their approach to the matter, on a close reading (according to Van der
Merwe et al) of the decisions it becomes clear that they (the decisions) are
based on the same principle: A threat of prosecution is wrongful if it is
employed by a contractant to exact a performance which is more
advantageous than that to which he is reasonably entitled.
Obtaining consensus by a threat of civil proceedings (such as instituting

action for payment of a cheque) will not be readily be regarded as contra
bonos mores. It is however, according to Van der Merwe et al, unthinkable
that the boni mores may frown on some threats of instituting civil
proceedings.
Occasionally, a contractant concludes a contract due to duress by a third party

for whose acts the co-contractant cannot be held legally liable. Anagolous to
32
the position pertaining to misrepresentation by a third party, such duress
should not be imputed to the co-contractant, although there is some support in
our law for the opposite view.
1.2.3. Fault54
Generally, the circumstances surrounding an act of compulsion will allow an
inference of fault. There will normally be a deliberate act which in law will
constitute an intentional act if the perpetrator realises that his conduct is
wrongful. In less obvious cases of duress, particularly threats of criminal
prosecution, the present of intent (dolus) may not be so apparent, since
knowledge of wrongfulness will often be absent. Although the facts of a
particular case may warrant the inference of negligence, the question arises
whether proof of fault is at all necessary where the contract is rescinded
without a claim for damages. Since the basis of duress as a ground of
rescission lies in the inability to express an intention in a free and unfettered
manner due to the improper conduct of a co-contractant, one may well ask
whether the unlawful expression of a threat should not suffice for rescission of
the contract.
In the case of Arend v Astra Furnishers (Pty) Ltd 1974 (1) SA 298 (C),
the court stated the following:
it is clear that a contract may be vitiated by duress (metus), the raison detre of the
rule apparently being that intimidation or improper pressure renders the consent of the
party subjected to duress no true consent
The courts reference to true consent should be taken to mean that

there was no free expression of will and not that there was no legally
relevant consensus.55
1.2.4. Causation
The remedies for duress will be available only to a contractant who proves
that the contractant who can prove that the contract was caused by the duress.
The considerations applying to causation in the context of misrepresentation
(see lecture 3) apply to duress as well.
1.2.5. Undesirable result: Contract or damage56
Actual damage as a result of the conclusion of the contract is a prerequisite for
a successful claim for damages. The courts have actually expressed the
elements of duress so as to include damage also where the contract was being
33
rescinded without a claim for damages. (See particularly Broodryk v Smuts
and Arend v Astra Furnishers (Pty) Ltd In so far as duress as a ground for
rescission is based on the consideration that the expression of intent is not
completely free, it seems logical that actual damage need not be proved to
justify rescission alone.
Duress of goods and economic duress57
1.3.
These matters have already been touched on above. Keep in mind that duress
of goods does not constitute a spate principle in South African law. In so far
as it refers to a threat directed at the property of a contractant, it must be
treated like a threat directed at any other protected interest. In so far as it
relates to a claim for the repayment of money paid to avoid harm to property,
the term duress of goods relates to a claim for enrichment. The requirement
that repayment will only be granted if performance was agreed to under
protest, is then part of the requirements for the condictio indebiti, more
particularly that performance must have been made sine causa.
Where a person concludes a contract under so-called economic duress, like
in the case of Malilang (see above), has been discussed often. In the case of
Medscheme Holdings (Pty) Ltd v Bhamjee 2005 (5) SA 339 (SCA) it was
decided that the principle that economic pressure may, in appropriate cases,
constitute duress, does not form part of South African law.
2. Undue influence58
2.1.
Introduction
According to Van der Merwe et al, a third specific ground for rescission of a
contract came to be raised before the courts as a basis for relief distinct from the
traditionally accepted grounds of misrepresentation and duress.59 The contention
was that, under certain circumstances, a contractant who had been persuaded to
conclude a contract with someone, who had previously acquired some influence
over him and who had exerted that influence to obtain his consent, should be
entitled to rescind the contract. As mentioned before, this new ground for
rescission was not accepted easily, notably by Van den Heever JA in Preller v
Jordaan. The main objections to undue influence as a ground for rescission of a
contract were that it was historically not part of our law and that it was incapable
of exact definition and limitation and would therefore lead to uncertainty in the
enforcement of contracts. Historically, the criticism was not without substance,
for undue influence did not form a part of our common law of contract. It is
derived from English law, where it had originally been developed as a concept of
equity, justifying rescission of a contract under circumstances where it could not
34
have been impugned under the strict principles of the common law. It was
effectively incorporated into South African law by the majority decision in
Preller v Jordaan.
2.2.
Elements of undue influence read with the case of Preller v Jordaan60:
In the abovementioned case (which has been included in your case list and must
be studied in detail), the appellant was a doctor who had been treating the
respondent for some years. The respondent was critically ill, of an advanced age,
and mentally and physically exhausted. He had great concern over the
continuance of his farming operations in the interest of his dependants if he
should die. Against the respondents initial doubt, the appellant persistently
advised and eventually persuaded the former to transfer four farms into his (the
appellants) name, which was subsequently done. The respondent recovered and
wished to rescind the contract on the ground that the appellant had exerted his
influence over the respondent improperly. The majority decision by the appeal
court regarded this as undue influence.
According to the court61 a contractant who wishes to rescind a contract on the
ground of undue influence must prove the following:
(i)
(ii)
(iii)
That the other contractant obtained an influence

over him;
That this influence weakened his powers of
resistance and made his will pliable;
That the other contractant used this influence in
an unconscionable manner to persuade him to
agree to a transaction which was (a) to his
detriment and (b) he would not have concluded
if he had enjoyed normal freedom of will.62
Once again, as with the other two grounds for rescission, the question arises whether the
requirements expressed by the courts characterise undue influence as a delict. The courts
have not expressly called it such, but according to Van der Merwe et al it will be
appropriate to deal with the rather wide concept of undue influence outside the strictures
of the law of delict.63
2.3.
Elements of Undue influence64
2.3.1. Act
The act consists in exercising influence over a co-contractant.
60 1956 (1) SA 483 (A)
61 See 492G-H
35
2.3.2. Wrongfulness
According to the courts, the influence must have been such as to weaken the
other partys resistance and to make his will pliable, and must have been
exercised in an inconscionable manner. This would mean that the act must have
been wrongful.
2.3.3. Fault
There is no clear indication that fault is required for a successful rescission of a
contract because of undue influence. In the context of the conclusion of
contracts, it does not seem necessary to prove fault as an element of undue
influence. (In case one considers undue influence as a delict, fault will have to
be proved, though.)
2.3.4. Causation
Rescission for undue influence requires proof that the contract would not have
been concluded if the contractant who rescinds had not been unduly
influenced. The considerations applying to causation in the context of
misrepresentation apply here.
2.3.5. Undesirable result: Contract or damage
According to the courts, rescission for undue influence requires proof that the
contract was to the detriment of the contractant who wants to rescind.
Detriment does not necessarily mean damage in this regard, though.
2.4. Remedies for the three forms of consensus obtained by improper means
2.4.1. Upholding of the contract:
The victim realises that consensus wasnt only achieved because of the
misrepresentation.
The victim would still have contracted, but:
-Would have paid less if he were aware of the true facts;
- He claims for the difference in price on a delictual basis.
- He is dissatisfied because the other party doesnt perform in terms of the contract
(positive malperformance).
- He claims contractually.
36
- He claims i.t.o. estoppel or breach of contractual-principles.
2.4.2. Rescission
-
The victim claims that no contract ever came into existence, because of the
fact that his will was influenced by misrepresentation, and no consensus
exists.
He wouldnt have contracted if he had been aware of the true facts.
Pages 130-135 of Van der Merwe et al need not be studied for test and/or exam
purposes.
37
Unit 4
Offer and Acceptance
Learning outcomes:
1. Explain where the terms offer and acceptance are derived from.
2. Discuss the term offer with specific reference to the following:
2.1.
Elements of a valid offer.
2.2.
Legal consequences of an offer.
2.3.
Lapse of an offer.
3. Discuss the term acceptance with specific reference to the case of Steyn v LSA
Motors.
Study:
Crawley v Rex 1909 TS 1105
Bloom v American Swiss Watch Co. 1915 AD 100
Steyn v LSA Motors 1994 (1) SA 49 (A)
Alternative study:
3. Christie.
The Law of Contract in South Africa. Fifth Edition. Chapter 2
4. Bhana et al.
38
1. Introduction65
In its simplest form, a contract consists of an invitation to consent to the creation of
obligations between two or more parties (called an offer), and an affirmative
response (called an acceptance).66 The rules regarding offer and acceptance must
accordingly be understood in the light of their underlying premise, namely that a
contract entails the formation of a common intention by the contractants through an
exchange of declarations which express their respective intentions.67
A clearly discernible offer and distinct acceptance are not by themselves requirements
for the creation of a contract. Since a contract is a juridical act, the agreement of the
parties must of course be declared outwardly in order to be legally relevant. Whether
particular declarations constitute a contract must however be answered with reference
to the general requirements for the creation of a contract. One of these requirements is
the presence of consensus, and offer and acceptance are facts from which consensus
may be inferred.
Offer and acceptance may also be relevant in other respects, though. It may, for
instance, serve to indicate exactly where a contract was concluded, or exactly when it
generated legal consequences. In the absence of special provisions in the contract
itself, the place and time of conclusion of the contract are determined by the rules
governing offer and acceptance. These rules also provide a basis for explaining
problematic aspects of the relations between contracting parties in the preliminary
phase of their negotiations before the conclusion of the contract.68
2. The Offer
2.1.
Elements of a valid offer69
An offer is an expression of will, made with the intention of creating an obligationary

relationship on certain or ascertainable terms with another, and brought to the
attention of the addressee, so as to enable him to establish a contract by accepting the
offer as it was made.70 Although ordinarily addresses to a specific person, an offer
does not require an addressee to be valid. An offer of reward, for instance, is made to
the public at large, while some kinds of auction involve an offer to a particular class
67 Van der Merwe et al 2007: 5468 Van der Merwe et al 2007: 55
68
69
70
39
of persons. An offer may be made in any particular form, and may be made in any
way that the offeror thinks fit, whether expressly or tacitly. The offeror may, in the
offer itself, prescribe certain formalities with which the proposed should comply. An
offer made by way of a tender has been held to be ineffective where made in a way
adjudged to be contrary to public policy, most notably in Warrenton Munisipaliteit v
Coetzee 1998 (3) SA 1103 (NC).
To constitute an offer, a declaration of intention must set out the essential and material
terms of the envisaged contract too such an extent that mere acceptance will render
the legal consequences of the contract certain or objectively ascertainable. In practice,
declarations contained in advertisements for the sale of goods or invitations calling
for tenders for the completion of specified work or for the purchase of land will often
fail to meet this requirement, and will for that reason not qualify as offers.
See in this instance the well-known case of Crawley v Rex 1909 TS 1105,
where an advertisement for the sale of tobacco, although specifying a price,
failed to specify the quantity involved in each sale.
Even of a declaration sets out the detail of a proposed relationship with sufficient
certainty, it will only constitute a valid offer if it was made with the intention that the
offeree should have the power to create a contract by accepting it. The intention with
which an offer is made, if not expressly articulated, is established by inference from
the declaration and the surrounding circumstances. Whether a declaration amounts to
an offer or is nothing more than an invitation to negotiate depends finally on whether
the elements of an offer are present, and not on the classification of the particular
declaration. There can, accordingly, be no inflexible rule that declarations contained
in advertisements and similar expressions of intentions can never amount to offers.
The legal effect of declarations by way of advertisements, catalogues and circulars,
and the display of goods, with or without price tags, in a self-service setting or
otherwise, depends on the intention with which a particular declaration is made, its
content and, in exceptional cases, its form.
According to Christie, what distinguishes a true offer from any other proposal or
statement is the express or implied intention to be bound by the offerees
acceptance.71 If the intention to be bound by mere acceptance is lacking, the offeror
lacks the necessary animus contrahendi.72 The term lack of animus contrahendi is
descriptive of the instances where it is clear from the surrounding circumstances or
the manner in which the offer was made that the offer was not intended to be taken
seriously.73
71 Christie 2006: 29
40
An offer made in jest, for instance, cannot lead to the creation of a contract.
Neither can an offer made in a moment of anger, unless the offeror afterwards
persists in his offer. Likewise, an offer made as an illustration of how an offer is
made, or made unintentionally while telling a story, or an offer made in a vague,
impersonal way, or finally an offer made as a compliment, can never constitute a
valid offer fr the creation of a contract.
2.2.
Legal consequences of an offer74
A contract is a bilateral juristic act and in the main, liability ex contractu is based on
the agreement of the parties. It is not accepted in our law that an obligation may be
created voluntarily by a unilateral act, as was possible by the pollicitatio of Roman
law. An ordinary contractual offer, therefore, does not in itself create rights and duties
between offeror and offeree. It does, however, give rise to the expectation of a future
right, because the offeree has the capacity to create by acceptance the obligations
envisaged by the offer. No matter what value an offer in itself may have to the parties
involved, its legal consequences are of limited commercial importance. In so far as it
does not create obligations, an offer may be revoked and because it does not form part
of the estate of either the offeror or the offeree, an offer lapses on the death of the
either party and cannot be ceded.
2.3.
Lapse of an offer75
Because of the fact that an offer has no obligationary effect, it may be revoked by the
offeror (according to the case of Oos-Vrystaat Kaap Bedryf Bpk v Van Aswegen 2005
(4) SA 417 (O)). Revocation is possible until the moment upon which the contract is
concluded and is not precluded by a time limit set for acceptance. Because an offer is
made with the purpose of eliciting a response from the offeree, the contention has
been made that the capacity to withdraw lapses as soon as the offeree begins to
articulate a response. Revocation of an offer is effective only if the offeree is notified
of the decision to revoke. An offeror who has not communicated to the offeree his
decision to revoke may -upon acceptance- be held liable on subjective grounds,
regardless of the fact that that he no longer intended to incur liability. Because an
offer does not create assets or liabilities in the estate of either the offeree or the
offeror, it lapses on the death of either these parties.
An offer will lapse if it is rejected by the offeree, and a counter-offer by the latter is
regarded as tantamount to a rejection. An inquiry by the offeree merely to clarify
aspects of the offer or a request to modify its terms does not necessarily amount to a
counter-offer, and the same is true of an acceptance which departs from the offer in
41
immaterial respects only. An offer has a limited duration. Where the offer stipulates a
period for acceptance, it lapses if acceptance does not take place within that period.
Otherwise an offer lapses if not accepted within a reasonable period.
3. Acceptance76
In the case of Lowe v Commission for Gender Equality 2002 (1) SA 750 (W), it was
decided that acceptance is a declaration of will, which indicates assent to the proposal
contained in the offer and which is communicated to the offeror. Where an offer
envisages a unilateral contract involving duties for the offeror only, an unexpressed
decision to accept would suffice as a valid acceptance.77 An intention to enter into
obligations with the offeror is an essential element of acceptance. The consensual
basis of contract implies that acceptance should be by way of conscious reaction to
the offer, and that for consensus to be effective it should correspond with the terms set
out in the offer. The acceptance must be unambiguous, so that it is clear to the
recipient, using ordinary reason and knowledge, that the agreement is complete. It
should be kept in mind that anything more or less than an unqualified offer constitutes
a counter-offer, and is for all practical purposes a rejection of the original offer.
Where an addressee in declaring his acceptance refers to certain terms, which are not
mentioned in the offer but will be included in the eventual contract by operation of
law, his declaration should be a valid acceptance. An enquiry in an acceptance
whether the offeror is willing to modify the offer will not affect the validity of the
acceptance, as long as modification is not a condition for acceptance.
According to the prescribed textbook, an incomplete acceptance may sometimes
reflect an intention to create obligations with a certain or ascertainable content, while
negotiations on outstanding issues continue.
According to Christie, an unaccepted offer cannot create a contract, since it
emanates from the offeror alone, and the necessary agreement cannot be held to exist
without some evidence of the state of mind of the offeree.78 The general rule is thus
that no contract can come into existence unless the offer is accepted. 79 A logical but
important question that arises is of course who, in fact, has the power to accept.
Christie states that a simple contractual offer made to a specific person can be
accepted only by that person.80 A purported acceptance by some other person is
ineffective and does not bring about the conclusion of a contract.
In the interesting case of Steyn v LSA Motors 1994 (1) SA 49 (A), which must
be studied in detail, a valid offer was accepted by someone who did not have the
power to accept the specific offer. Consequently, no contract was concluded.
77 Note that Van der Merwe et al are not entirely convinced by this argument.
42
Because the object of analyzing a transaction into offer and acceptance is to ascertain
whether the parties have reached agreement, a party who claims to have accepted an
offer, the existence of which such a party was oblivious at the time of his alleged
acceptance, is trying to place form before substance.81
In the case of Bloom v The American Swiss Watch Co 1915 AD 100, Bloom
failed to recover the advertised reward because he was ignorant of the advertised
offer of reward at the time he performed the act of giving information to the CID
which, had he known of the offer, would have amounted to the necessary
acceptance of that offer. He thus acted without animus contrahendi.
Christie states, very importantly, that acceptance must be unequivocal or
unambiguous82, as well as corresponsive to the offer.83
Methods of acceptance84
English writers such as Chitty take the view that a method that is as advantageous to the
offeror as the method he has prescribed will suffice unless he has made it clear that his
prescribed method and no other is to be employed.85 In such a case the offerors wishes
must be respected, no matter how capricious they may be, because it is not for the court
to make a contract for the parties.
An offer which does not make it unequivocally clear that the prescribed method and no
other is to be employed should be given an equitable interpretation to permit acceptance
by a method equally advantageous to the offeror.86
Silence as acceptance87
A necessary limitation on the offerors liberty to indicate the mode of acceptance is that
he cannot force a contract on the offeree by saying that he will take the offerees silence
as acceptance.88 Silence may, however, amount to acceptance of an offer in circumstances
which give rise to a duty to speak, if the offeree is not prepared to accept the offer.
84 Christie 2007: 64-65
87 Christie 2007: 65-66
43
Unit 5
Contracts Inter Absentes
Learning outcomes:
1. Explain in detail, with the aid of relevant case law, what the so-called
information theory with regard to determining where and when a contract
comes into existence entails.
2. Shortly explain how Van der Merwe et al deal with certain departures form the
information theory in South African Law.
3. Explain what is meant by the dispatch or expedition theory. Critically
evaluate the appropriateness of this theory in South African Law.
4. Shortly discuss the declaration theory for determining the time and place when
and where a contract comes into existence.
5. Discuss the acceptance theory for determining consensus with specific reference
to Christies contribution to this topic as well as Section 23 of the Electronic
Communications and Transactions Act 25 of 2002.
Study:
Contract. General Principles. Third Edition. Chapter 3 from p. 55-72
Reid v Jeffreys Bay Property Holdings 1976 3 SA 134 (C)
Driftwood Properties v McLean 1971 1 SA 591 (A)
Cape Explosive Works Ltd v South African Oil and Fat Industries Ltd
1921 CPD 244.
Craib v Crisp 1984 (3) SA 594 (T)
Alternative study:
3. Christie.
The Law of Contract in South Africa. Fifth Edition. Chapter 2 p. 70-79
44
1. Introduction
According to Van der Merwe et al, South African law accepts that a contract is
concluded when and where consensus is reached. 89 This usually occurs at the place
where and at the moment when a person who has made an offer (offeror) is informed
that it has been accepted by a person legally entitled to do so (offeree). This is what
has become known as the information theory. This theory rests on the principle that
the primary basis of contractual liability is the actual agreement between the parties to
the transaction.90
Consensus is the essence of the legal act, and should in principle mark the cut-off
point between the stages of negotiation and obligation. Although determining the
place and time consensus is reached may sound simple enough, one should take into
account that in the contemporary business world, one depends on offers and
acceptances made via e-mail, post, fax and others. In these instances, it becomes
rather more difficult to determine exactly where and when a contract has come into
existence.
The information theory is not the only theory used in order to determine where and
when a contract comes into existence. Three other theories exist for this purpose,
namely the expedition theory, reception theory and the declaration or expression
theory. They will form the basis of this lecture. These theories should not be confused
with the three theories used for determining the presence of consensus, as discussed
previously.
2. The 4 theories for determining the time and place where a contract comes
into existence
2.1.
Information Theory
As mentioned above, the information theory requires the knowledge of the offeror that
his offer has been accepted by the offeree. Such knowledge may be conveyed by way of
the following:
Reading a letter, fax, e-mail or sms of acceptance (of which the offeree
is the author) of the relevant offer.
Listening to a message left by the offeree on an answering machine, or
a voice message on a mobile phone, accepting the relevant offer.
The case of Reid v Jeffreys Bay Property Holdings 1976 3 SA 134 (C) presents a very
interesting scenario. In this case, A was domiciled in Cape Town. A wanted to sell his
property situated in Humans Dorp, near Jeffreys Bay in the Eastern Cape. B was
interested in purchasing the property, and engaged in negotiations with an agent of A in
45
Pinetown, Natal. B was domiciled in Durban. B subsequently signed the written
agreement of sale in Durban, and it was given to As agent to deliver to A in Cape Town.
A director of As company subsequently signed the agreement on behalf of A in Cape
Town. Two questions are relevant here:
1. Firstly, who is the offeror and who is the offeree?
2. Secondly and most importantly: Where did the contract come into existence?
The answer to the first question seems simple enough. A offered his property as for sale,
B accepted the offer, which makes A the offeror and B the offeree. This is the correct
assumption. Confusion sets in, however, when one considers that B signed the agreement
of sale first. B in fact made A an offer on As property, which A accepted by proxy.
Looking at it from this point of view, it would seem that B was in fact the offeror and A
the offeree (for the purchase of As property). It should be kept in mind, however, that an
agreement of sale commences as an offer to purchase, and only becomes a contract when
accepted. Thus: The offer was made by A, accepted by B in Durban, and knowledge of
acceptance of the offer by B was received by A in Cape Town.
So where did the contract come into existence? Remember that we are currently looking
at the information theory, which determines that the contract comes into existence at the
time when and the place where the offeror (A) learns that his offer has been accepted.
Although the acceptance was handed to As agent in Durban, the latter had no authority
other that negotiating with B. In the current case, it was decided that the contract came
into existence in Cape Town, as this was where the offeror of the property (A) learned
that his offer had been accepted by the offeree (B).
What would have been the situation if As agent had telephoned A from Durban
and left a message on As answering machine (which of course didnt exist in 1972,
but for the sake of discussion) in Cape Town that hes (As) offer had been accepted.
Would it have made any difference to where the contract had come into existence?
What about the question of when the contract had come into existence?
In the case of Driftwood Properties v McLean 1971 1 SA 591 (A), the respondent was
the offeror of certain property. V (on behalf of a trust) was the offeree. The contract stated
that the offer had to be accepted by V on or before the 17th of May 1969. The respondent
(offeror) already signed the offer to purchase (if and when accepted would amount to
an agreement or contract of sale) on the 30 th of April 2009. V duly signed the offer on 17
May 1969, thereby seemingly exercising a valid acceptance of the respondents offer.
However, at the time of the acceptance of the respondents offer (17 May 1969), the latter
had not received any knowledge that his offer had indeed been accepted. The letter of
acceptance was posted on the 18th of May 1969, and only received by the respondent on
27 June 1969. Obviously, the latter date was the one on which the respondent finally
learned that his offer had been accepted.
46
The court, in its decision, quotes Grotius91 by stating the following:
I may make an offer in two ways. I can either make an offer and say that the contract will be established
by your mere acceptance; or I can make the offer and say that the contract will be completed when I come
to hear of your acceptance. And if there is a doubt upon the matter, we must always presume that the
second was the case
In the abovementioned case, the court decided that the signature of V on 17 th May 1968
turned the offer into a binding contract.
The information theory is the general rule in South African Law with regards to contracts
inter absentes. There are, however, certain exceptions to the general rule:
With regards to postal contracts, South African Law follows the

dispatch/expedition theory. (see the discussion of the Cape Explosivescase below).
The acceptance theory is prescribed by statute with regards to internet

transactions. See in particular Section 22 of the Electronic
Communication and Transactions Act 25 of 2002, read with the
Electronic Communication Act of 2005.
Where the parties themselves determine the moment and place when
and where their contract comes into existence. (As in the case of Reid
v Jeffreys Bay Property Holdings).
The case of A-Z Bazaars v Minister of Agriculture 1975 3 SA 468 (A).

In this case, the offeree accepted the offer by way of a letter. He then
revoked his acceptance by means of a telegram, which travelled faster
than the letter. The State argued that the offer of expropriation had
already been accepted by the offeree by way of letter, and that the
later-sent telegram had no effect on the moment the contract came into
existence. The Cape Provincial Division followed the
dispatch/expedition theory. On appeal, the court interpreted the
Expropriation Act applicable at the time. The Expropriation Act
determined that the acceptance had to be delivered (gelewer) to
the Minister. The telegram was delivered first, and consequently the
dispatch/expedition theory did not apply to expropriation-offers.
It must be remembered, though that each set of facts must be
considered on its own.
For enrichment sake, you might want to read the case of Kergeulen Sealing and
Whaling v CIR 1939 AD, which rather creates a contrast to the A-Z Bazaars-case.
91 De Jure Pacis ac Belli, Bk. 2, Chap. 11, para.15
47
2.2.
Departures from the information theory
According to the courts, initially it was accepted that the time and place of the
conclusion of a contract were to be determined with reference to the information
theory, irrespective of whether the parties were contracting inter praesentes or
inter absentes.92 It was recognized that the offeror could prescribe a mode of
acceptance which rendered it unnecessary that he should be informed of the
acceptance. This principle is still recognized today- read the Driftwood-case again.
The facts of a particular case will prove decisive in any attempt to prescribe a special
method of acceptance aimed at displacing the information theory. The following are
examples of facts that may warrant such an inference:
-
Geographical separation of parties;

Form and commercial nature of the envisaged contract;
Existence of an execution clause
Declaration that the contract will be concluded upon signature.
In the case of Cape Explosive Works Ltd v South African Oil and Fat Industries Ltd 1921
CPD 244, a different approach regarding contracts concluded inter absentes by offer and
acceptance through the post was adopted (so-called postal contracts).
In the abovementioned case, the court agreed that from a theoretical perspective the
information theory accorded with the modern notion of contract based on the agreement
of the parties.93 Nevertheless, in the Cape Explosive Works-case, the dispatch/expedition
theory was, under the influence of English law, adopted as the most satisfactory
pragmatic way of determining the time and place of conclusion of a postal contract.94
According to the court, a postal contract was held to arise at the place and moment of
posting the acceptance:
where in the ordinary course the Post Office is used as the channel of communication, and a written
offer is made, the offer becomes a contract on the posting of the letter of acceptance. 95
The correctness of the Cape Explosive Works-case was confirmed in the Kergeulen
Sealing & Whaling Co Ltd-case.
Students are expected to study the Cape Explosive Works-case in detail, although
it does not appear in the case list. Students must visit the library and obtain the case
by themselves.
93 Van der Merwe et al 2007: 6994 Van der Merwe et al 2007: 69
94
95
48
2.3.
The Dispatch/Expedition Theory
As far as the original reasons for the introduction of the expedition theory in
regard to postal contracts are concerned, see the very interesting article of
Simon Gardner, Trashing with Trollope: A Deconstruction of the Postal Rules in
Contract in the Oxford Journal of Legal Studies Vol 12, No.2 (1992). Note that
this article need not be studied in detail for examination purposes, but will
provide the student with a clear understanding of why the dispatch/expedition
theory forms part of South African law at all.
The application of the dispatch/expedition theory today is explained (or should it read
allowed?) on the basis that the resort to the post to convey the offer serves as a
prescription of the post as the mode of acceptance. 96 In the Cape Explosives-case the
dispatch/expedition theory was preferred on account of its supposed practical
convenience. The judge in the aforementioned case (Searle J) stated that much confusion
and complication would arise if the rule were not adopted, because the acceptor would
certainly be at a loss to know when his notification reached the offeror and his hands
would be tied until he was assured on this point. 97 Van der Merwe et al note that the
offeree will generally be favoured by the adoption of the dispatch/expedition theory,
because once expedition has taken place, the offeree has certainty that the contract has
been concluded, irrespective of whether the offeror ever becomes aware of the
acceptance.98 Obviously, similar circumstances would not be beneficial to the offeror at
all (have a look at what happened in the Driftwood Properties-case). If the offeror, on
failure to receive a reply because of the fact that the letter had become lost in the post,
were to assume that the offer was rejected, and on that assumption were to conclude a
contract with another, he (the offeror) would bear the risk. 99 This seems unfair towards
the offeror- there is no reason why the offeree should be favoured above the offeror. The
explanation stems from English law. The dispatch/expedition theory originated in the
English legal system in circumstances when it seemed fair to place the risk of loss on the
party who initiated negotiations through the post. It is argued that the contemporary
liability of the postal service results in a reasonable reliance on the part of the
offeree/acceptor that his acceptance will in the ordinary course of events come to the
notice of the offeror. This reliance may then provide an immediate basis for a contract at
a stage when there is no consensus ad idem.100
The question must be asked, of course, whether the postal service, either in
South Africa or the United Kingdom, is really so reliable as to take the view that an
offeree may accept that in the ordinary course of events his acceptance will be
delivered to the offeror.
49
It must be mentioned, though that the expedition theory places the risk on the offeror only
so far as such risk/risks is/are inherent or typical of the postal system. External or
abnormal circumstances which disrupt the operation of the postal service will therefore
exclude the application of the expedition theory.
Will the dispatch/expedition theory apply in the case where an acceptance by
letter follows on an offer made inter praesentes, or made inter absentes by telephone?
Find the answer in Van der Merwe et al, p. 71.
The moment of expedition of an acceptance will only determine the time and place of
conclusion of a postal contract in the absence of indications to the contrary. In the case of
A-Z Bazaars (Pty) Ltd v Minister of Agriculture 1975 (3) SA 468 (A) an indication to the
contrary was indeed found in the provisions of a statute: It was held in Section 6 of the
Expropriation Act 55 of 1965 that the contract in issue could come into existence only
upon actual delivery of a written acceptance to the minister, and that the offeree, who had
posted a letter of acceptance, could neutralize it by means of a subsequent telegram,
which was received before the letter.101 Another example of an indication to the contrary
was found in the case of SA Yster & Staal Industrile Korporasie v Koschade 1983 (4)
SA 837 (T), wherein the terms of the offer itself indicated an intention on the part of the
offeror that the moment of reception of the acceptance would be decisive 102(This is
similar to the information theory). Like wise, the nature of the transaction may justify an
inference of a particular intention.103
In terms of the dispatch/expedition theory, acceptance of an offer can validly occur in one
of the following manners:
Submittance od a letter into a post box;

The speaking of an acceptance into the answering machine of the
offerors telephone;
The sending of the acceptance with a messenger;
Sending of the acceptance via telegram- see Craib v Crisp.
In the case of Craib v Crisp 1984 (3) SA 594 (T), the respondent wanted to sell her
property in Sedgefield, Natal. She mandated an estate agent to find a purchaser for the
said property. A document named offer to purchase was subsequently signed by the
prospective purchaser (the applicant in the current matter). The last page of the offer to
purchase made provision for the signature of the seller as acceptor of the offer to
purchase the property made by the applicant. There was no acceptance of the offer by any
writing on the said document.
What happened, in fact, was that the estate agent had telephoned the respondent,
informed her of the existence of the written offer as well as its terms, and requested her to
50
signify her acceptance by telegram, the contents of which were dictated to the respondent
by the estate agent. The telegram of acceptance was duly sent by the respondent, and
stated unequivocally that the offer was accepted.
The respondent, however, wished to withdraw from the contract for the following
reasons:
i.
The sending of the telegram did not constitute proper acceptance of an offer to
purchase immovable property.
ii.
A communication of acceptance addressed to the sellers own agent could not

be considered an acceptance of the purchasers offer.
The courts decision was as follows:

With regard to the reason (i) above, the court said that a telegram did indeed constitute a
valid acceptance of offer, especially considering Section 1 of the Formalities of Sale of
Land Act 71 of 1969, which applied at the time. (It should be considered that although a
writer such as Christie agrees with Preis, Js decision in this case, De Wet & Yeats are of
a different opinion regarding this issue).
As far as reason (ii) is concerned, the court felt that under the circumstances in which
the respondent was asked by the estate agent to transmit the telegram, and in the light of
the clear wording of the telegram, coupled with the undeniable fact that its contents were
conveyed to the applicant long before the respondent purported to withdraw from this
contract, a binding contract of sale came into being.104
2.4.
The Declaration Theory
The declaration theory basically holds that a contract comes into existence at the moment
when and place where the offeree expresses/declares his acceptance of the offer.
This can happen in one of the following ways:
Verbal expression;
Writing down an acceptance of an offer;
Dictating an acceptance to another;
Entering an acceptance into a computer programme, such as Microsoft
Word;
Expressing acceptance of an offer through sign language.
The problem one is faced with at the declaration theory is of course that the offeror would
not necessarily be aware of the acceptance of his offer at the time of the
declaration/expression of the acceptance by the offeree. This leaves a question as to the
104 Craib v Crisp: 601-602
51
presence of consensus ad idem between the offeror and the offeree. This problem is
similar to the one experienced by the dispatch/expedition theory.
2.5.
The Acceptance Theory
What makes this a very relevant and important theory, is the fact that it is used in South
African law with regard to internet transactions, according to Sections 22 and 23 of the
Electronic Communications and Transactions Act 25 of 2002.
According to Christie, the abovementioned statutory rules equate e-mail contracting as
far as possible with traditional contracting. 105 Section 23 of the abovementioned act states
the following:
23. A data message
(a)used in the conclusion or performance of an agreement must be regarded as having been sent by the
originator when it enters an information system outside the control of the originator or, if the originator
and addressee are in the same information system, when it is capable of being retrieved by the addressee;
(b)must be regarded as having been received by the addressee when the complete data message enters an
information system designated or used for that purpose by the addressee and is capable of being retrieved
and processed by the addressee; and
(c)must be regarded as having been sent from the originators usual place of business or residence and as
having been received at the addressees usual place of business or residence.
Christie exclaims that the abovementioned section assumes that when the originators
message reaches the addressees information system, it stays there. Technology is
currently advancing so fast that this assumption may not be correct, as the originator may
be able to change his mind and remove his message from the addressees information
system. If he does this before the addressee has retrieved and processed it, it would be
unrealistic to decide that the addressee had received it, or even that the originator had sent
it. 106
Typical situations where the acceptance theory may find application:
The letter of acceptance is placed on the offerors desk, but the latter
has not read the letter yet;
The offeror takes the letter of acceptance from his mailbox, but hasnt
opened the envelope yet;
The message of acceptance is recorded on the offerors answering
machine, but he hasnt listened to it yet;
Section 23 above.
105 Christie 2006: 78

106 Christie 2006: 79
52
Unit 6
Pacta de Contrahendo
Learning outcomes:
1. Explain what is meant by the term pactum de contrahendo and distinguish this
terms from other forms of preliminary contracts.
2. Discuss the legal nature of the option contract.
3. List and discuss the requirements for an option contract.
4. Briefly discuss the breach of an option contract and the remedies available to a
party who has suffered as a consequence of breach.
5. List examples of contracts of preference.
6. Briefly explain what is meant by the term right of pre-emption.
7. Discuss the requirements for a right of preference.
8. Distinguish between options and preference contracts.
Study:
Contract. General Principles. Third Edition. Chapter 3 from p. 77.
Venter v Birchholtz 1972 (1) SA 276 (A)
Hirschowitz v Moolman 1985 3 SA 739 (A)
Ficksburg Transport (Edms) Bpk v Rautenbach 1988 (1) SA 318 (A)
De Jager v Burger 1994 (1) SA 402 (C).
Dettmann v Goldfain 1975 (3) SA 385 (A)
Alternative study:
3. Christie.
The Law of Contract in South Africa. Fifth Edition. Chapter 2 p. 37-38.
4. Bhana et al.
Students guide to the Law of Contract. Second Edition. Chapter 3. (From
p. 62 onwards)
53
1. Pacta de contrahendo
1.1.
Introduction
According to Van der Merwe et al, a pactum de contrahendo is a contract aimed at

the conclusion of another contract.107 An example from South African Law would be
an option contract and a contract of preference.
The option contract restricts the offerors capacity to revoke an offer. A contract of
preference is intended to create a preferential right to conclude with another a
specified type of contract, should he decide to conclude such a contract at all. 108 Some
continental legal systems do not see the abovementioned types of contract as pacta de
contrahendo, but employ the latter term to obligationary agreements which bind one
of the parties, or both, to eventually conclude a substantive contract of some form or
nature.109 This type of preliminary contract provides only a right to insist on the cooperation of the other party towards the conclusion of the substantive contract.
Contracts of this nature are relevant where parties who have reached consensus on the
conclusion of a substantive contract, but are unwilling to or unable to conclude it
immediately, wish to protect themselves against a later refusal to conclude the
agreement.110
The concept pactum de contrahendo in its widest sense also encompasses diverse
other arrangements fulfilling a range of distinct functions. It should be distinguished
from preliminary arrangements, which are devoid of any obligationary effect.
Preliminary arrangements include memoranda of understanding, heads of agreement,
agreements in principle, or letters of intent. The principle use of these preliminary
contracts or agreements is to promote trust by demonstrating a commitment on the
part of the parties to the conclusion of a contract or to place on record any progress
that has been achieved in negotiations. This enables a review of progress by lawyers,
identifies outstanding issues and provides a basis for further progress towards a
binding agreement.111 The consequences of these preliminary arrangements depend on
the interpretation of their terms in the context of the particular circumstances.112
Where such a document records a partial agreement, the question is whether what has
been agreed upon can have an existence independent from what has been left open for
later negotiation. Should the document reveal an intention to establish obligations and
a sufficient degree of certainty as to the terms agreed to, the label attached to it cannot
be decisive. Obligations, even if only of a limited or partial nature, might be agreed to
and will be given effect.113
54
In the case of Hirschowitz v Moolman 1985 3 SA 739 (A) (to be studied in detail),
Corbett JA said the following:
A pactum de contrahendo is simply an agreement to make a contract in the future. 114
Christie mentions that provided the agreement results from a firm offer and is not too
vague, it will be enforceable. It follows that if the remuneration or price is fixed or
ascertainable the contractual duties must be performed whenever demanded within the
limits fixed by the pactum.115 Each demand initiates a separately identifiable contract
containing some of its own terms and some terms imported from the pactum.116
We shall subsequently study two pacta de contrahendo, namely option contracts and
contracts of preference. Remember that there are also other types.
2. Option contracts:
2.1.
Legal nature117
Van der Merwe et al call an option a legal concept which comprises a contract between
two parties, the option grantor and the option holder, to keep open an offer to contract
(the substantive offer) made by the grantor to the holder. 118 The contract which thus
entrenches the substantive offer is called the option contract. Acceptance of the
substantive offer (commonly referred to as the exercising of the offer) brings about the
substantive contract envisaged by the arrangement, and is governed by the ordinary
principles regarding acceptance of offers. The option agreement is distinct from the
substantive contract, and the view that the option contract amounts to the substantive
contract qualified by a suspensive condition has been rejected, notably in the case of
Venter v Birchholtz 1972 (1) SA 276 (A) on 283, where Jansen JA had the following to
say:
The option is seen as a unique contract, which is dissected as an offer to purchase accompanied by an
agreement to keep the offer standing for a specific period. Although the grantor of the options obligation to
sell may probably be seen as conditional, no conditional contract of purchase exists, and the exercising of
the option does not amount to the compliance to a condition by the purchaser.119
The case of Venter v Birchholtz must be studied in detail, and specific attention
should be paid to how the court deals with the legal nature of the option contract.
114 Christie 2006: 37

115 Christie 2006: 37
116 Christie 2006: 37
119 Own translation from the Afrikaans text.
55
The option contract creates at least one obligation, in terms of which the holder of the
option has the right that the option grantor shall keep the substantive offer open for
acceptance, or not revoke the offer. The grantor of the option thus has a duty not to do
anything to prevent the option holder from creating an enforceable contract by exercising
the option.120 The option holder furthermore enjoys a legally protected power to establish
the substantive contract by exercising the option. The exercise of this power, which
cannot be withdrawn by the grantor of the option, may be circumscribed by the terms of
the pactum de contrahendo.121 An offer can be made irrevocable only by means of an
option contract. Van der Merwe et al feel that a unilateral declaration by an offeror that
the offer is irrevocable is generally regarded as ineffective in our law. 122An offer that
specifies a fixed period of time for acceptance merely limits the duration of the offerees
power of acceptance and does not prevent revocation.
2.2.
Requirements
An option contract must satisfy the requirements generally applicable to

contracts.123Although it has been held that a period of time for which the offer is to be
kept open is a requirement for an option contract, this cannot be said to be an actual
requirement. The better view, according to Van der Merwe et al, is that the
abovementioned requirement is in fact not a requirement for a valid option contract,
and that an option which does not specify a period for its duration or which is stated
to be of unlimited duration, is not void for vagueness, although it may terminate after
a reasonable time.124
The requirements for an option contract may be listed as follows:
2.2.1.
2.2.2.
2.2.3.
2.2.4.
The object of the option must be clearly described.

The price/cost of the object must be determined or determinable.
The manner of payment for the object must be determined.
The period for exercising the option must be determined (however- see the
abovementioned argument).
The parties may agree on the manner or way in which the substantive offer
must be accepted. In this instance, two cases are important for the purposes of
this lecture, namely Ficksburg Transport (Edms) Bpk v Rautenbach 1988 (1) SA
318 (A) and De Jager v Burger 1994 (1) SA 402 (C).
2.3.
Useful clauses to include in the option contract125

122 Christie has a different opinion hereon. See Van der Merwe et al 2007: 81
125 Grobler 2006: 39
56
2.3.1. A restriction on transfer of the option (pactum de non cedendo).
2.3.2. Counter-performance for the granting and holding of the option.
2.3.3. Clause prohibiting the inheritance of the option.
2.4.
Breach and remedies
The breach of an option contract and its consequences are governed by the general
principles of the law of contract.126 An attempted revocation of the substantive offer
does not preclude the exercise of the option and the option holder is entitled to
enforce the option contract specifically by means of an interdict against the grantor. 127
The option holder may claim damages to be placed in the position which he would
have been had the option been exercised. The rights flowing from an option contract
may be ceded, unless there are factors which prohibit cession (such as the pactum de
non cedendo-clause). Extinction of obligations flowing from option contracts is
governed by the principles applying to the extinction of obligations in general.128
In order to assist the student to further develop an understanding of the
nature of the option contract and the right to cede same, the case of Dettmann v
Goldfain 1975 (3) SA 385 (A) is prescribed for detailed study.
3. Rights of Preference129
3.1.
Legal Nature
3.1.1. General:
A contract may be concluded to grant a contractant a preferential right to conclude
another contract with the other contractant. Common examples of such contracts,
often referred to as contracts of preference or preference contracts are the
following:
Contracts creating a right of first refusal, which is a preferential right

to lease property.
Contracts creating a right of pre-emption, which is a preferential
right to buy property.
A preferential right may also be created by a contract which grants a
seller the right to sell something to another.
3.1.2. Rights of pre-emption:

A contract which creates a right of pre-emption does not place a duty on the grantor to
sell the subject-matter of the right. The holder of the right obtains a preferential right
57
to buy, if the grantor should decide to sell. It could be argued then, that the preemptive right is conditional in the sense that its operation is made subject to the
occurrence of some event (the grantors decision to sell his property). This event is
aptly described as a trigger event in the case of Breytenbach v Stewart 1985 (1) SA
167 (A). In normal circumstances and in principle, the contractants determine the
event which brings the pre-emptive right into operation.
But how is an agreement structured in practice to grant a preference of some kind or
another? An arrangement commonly resorted to is an agreement that, should the
grantor decide to sell his property, he is bound to make an offer to the holder of the
right (This construction is the one preferred by the courts). The construction has also
been advanced, however, that a pre-emptive right already contains an inherent offer
by the grantor of the right to the holder thereof, if the grantor decides to sell. In these
latter-mentioned cases, the preference mechanism is of such a nature as to enable the
holder to acquire the subject-matter of the right.
The granting of a preferential right does restrict the grantors capacity to alienate the
subject-matter and, since the restraint on alienation falls away if the holder waives the
preference, an offer voluntarily made to the grantee affords the grantor a way around
the restraint, should it not be taken up by the holder.
3.2.
Requirements for rights of preference
A contract which grants a right of pre-emption must, like the option contract, meet all
the requirements for contracts in general. Contracts of pre-emption often specify the
price at which the holder may buy, or render the price objectively ascertainable. The
contention that a contract which creates a right of pre-emption must foreshadow at
least the essentialia of the substantive contract envisaged by the parties, and that the
contract must therefore invariably contain a substantive offer directed at a substantive
contract, is somewhat problematic, according to Van der Merwe et al.130 In
Hirschowitz v Moolman, the appellate division of the High Court reaffirmed the more
traditional approach that a substantive offer is not an essential requirement for a
contract of pre-emption. In the latter-mentioned contract, the determination of the
price may be left to the grantor. In the Hirschowitz-case the court depended on the
assumption of a general rule that any pactum de contrahendo must comply with
formalities prescribed for the substantive contract and the further assumption that the
legislation requiring formalities would otherwise be frustrated.
3.3.
Distinction between options and preference contracts
According to the courts, an option entails an offer to the grantee, which the latter can
accept, whereas in the case of a right of pre-emption, there is no offer at the time of
the grant, and the grantor is not obliged to make an offer unless and until he wishes to
sell the property. Accordingly, the acceptance of the offer contained in the option
contract by the option-holder is sufficient for the exercising of an option, whereas the
58
exercising of a right of first refusal (or pre-emption) imports the bilateral actionthe making of the offer and its acceptance. Because an option contract entails an offer
that is to be kept open, an agreement which does not foreshadow the terms of the
substantive contract with the degree of particularity necessary to amount to an offer
cannot be an option contract. Such agreements have been styled as ordinary
preference contracts. They encompass not only the case where the grantor is obliged
to make an offer on the specified eventuality, but also those instances where the duty
of the grantor is a negative one. The distinction becomes blurred where what is styled
as a preference contract foreshadows the terms of the substantive contract. This
provides a basis for the argument that a contract of pre-emption contains a substantive
offer, subject to a potestativel condition. Accordingly, this means that in such a case,
what is styled as a contract of pre-emption actually becomes a conditional option. The
traditional distinction between options and preference contracts can be maintained on
the basis that even where the terms of the substantive contract are specified in the
pactum de contrahendo, the qualification that he grantor will be bound to those terms
only if he or she so desires, precludes the animus contrahendi necessary for an offer.
A further possible point of distinction is that, whereas in the case of a true option the
offer has to be kept open, it is a characteristic of a contract of pre-emption that the
substantive offer can be revoked before acceptance, provided that the grantor no
longer desires to sell.
59
Unit 7
Formalities
Learning outcomes:
1. Analyze and discuss the background and current position regarding the
compliance with formalities as a requirement for a valid contract.
2. Provide a critical discussion of the legal position regarding formalities imposed
by the parties themselves to a contract.
3. Analyze the position regarding non-variation clauses in South African law from
the Shifren-decision in 1964 to the Cecil Nurse-decision in 2008.
4. Provide a critical discussion of the legal position regarding formalities imposed
by law and statute.
5. Explain the position regarding non-compliance with formalities.
6. Analyze and critically evaluate the position and presence of the parol evidencerule in South African law, with specific reference to case law.
7. Analyze and critically discuss the position regarding rectification in South African
law.
Study:
Goldblatt v Freemantle 1920 AD 123
SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA
760 (A)
Miller and Another NNO v Dannecker 2001 (1) SA 928 (C).
Cecil Nurse (Pty) Ltd v Nkola 2008 (2) SA 441 (SCA)
Akasia Road Surfacing (Pty) Ltd en n ander v Shoredits Holdings Ltd en
60
Andere 2002 (3) SA 346 (SCA)
Alternative study:
3. Christie.
4. Bhana et al.
Students Guide to the Law of Contract. Second Edition. Chapter 4 para.5
1. Introduction
South African law follows an informal approach to the creation of contracts. This was
essentially decided in the case of Goldblatt v Freemantle 1920 AD 123, which is not
included in the list of cases for this module, but should be studied in detail for the
purposes of this unit. South African law recognizes both express contracts and terms,
where the intention of the parties is articulated verbally, whether orally or in writing, and
tacit contracts and terms, where the intention is inferred from the unarticulated conduct of
the parties.131In the case of Conradie v Rossouw 1919 AD 279 The Appellate Division
accepted into South African law the simple Roman-Dutch concept of a contract as a
serious and deliberate agreement. According to Christie, it logically follows that no
special formalities are required for the making of an enforceable contract.132
In order to strengthen the general rule that no formalities are required in order to create a
valid contract, Christie also provides the following examples:
Innes, J in Timoney and King v King 1920 AD 133 at 141:
An acceptance may be inferred from conduct
Eloff, J in Ally v Dinath 1984 2 SA 451 (T) at 454F:
the principle is firmly established that any contract can be brought about by conduct.
There are instances where statute prescribes certain formalities for the creation of a
contract. A fine example would be the Alienation of Land Act. Section 2 of this act reads
as follows:
FORMALITIES IN RESPECT OF DEEDS OF ALIENATION
2 Formalities in respect of alienation of land

132 Christie 2006: 105
61
(1) 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.
(2) The provisions of subsection (1) relating to signature by the agent of a party acting on the written
authority of the party, shall not derogate from the provisions of any law relating to the making of a
contract in writing by a person professing to act as agent or trustee for a company not yet formed,
incorporated or registered.
(2A) The deed of alienation shall contain the right of a purchaser or prospective purchaser to revoke
the offer or terminate the deed of alienation in terms of section 29A.
Effectively this section implies that if any deed of alienation (or contract of sale) of land
(immovable property) is not in written form, such contract will be void ab initio. The
reason for statute sometimes prescribing certain formalities for the conclusion of a valid
contract, is because formalities contribute to legal certainty and prevent malpractices,
serve a cautionary and protective function by drawing the line between negotiations and
liability, and may be utilized to afford protection to those in danger of exploitation and to
assist in the identification of the type of contract entered into by the parties.133
Obviously, a written contract will have certain advantages over an oral one. Christie
provides that the following are three advantages of written contracts:
(i)
The preparation of the contract gives the parties time to consider their
positions before committing themselves by their signatures.134
(ii)
The burden of proof is simplified: once the defendants signature is proved or

admitted the plaintiff has discharged his burden, and the burden is then on the
defendant to prove fraud, misrepresentation, or whatever defence he might
have.135
(iii)
The scope for subsequent disagreement about the terms of the contract is very
much narrowed, since the terms are in writing for all to see.136
To these advantages identified by Christie can be added the following:

(iv)
(v)
(vi)
Litigation is limited.
Legal certainty is created.
Remedies can be included in advance.
It is of course also possible that the contracts themselves make compliance with
formalities a prerequisite for the creation of obligations, but this must not be confused
with the case where the agreement is reduced to writing merely to facilitate proof. A
134 Christie 2006: 105
135 Christie 2006: 105
136 Christie 2006: 105
62
reduction to writing for this particular purpose may have some legal consequences, but
does not subject the operation of the agreement to a formal requirement.
In the case of Bailes v Highveld 7 Properties (Pty) Ltd 1998 (4) SA 42 (N), it was stated
that even in respect of contracts subject to statutory formalities, parties might stipulate a
greater degree of formality than that required by the applicable statute.
Formalities imposed by either the parties or statute may be of divergent nature, but but
most commonly it is required that the agreement be reduced to writing and signed by the
contractants.137
Basically, then, there are two instances where formalities are required for a valid contract:
Formalities imposed by the contractants and formalities imposed by statute.138
2. Formalities decided on by the parties139
Parties usually resort to writing of their own accord for evidential reasons rather than to
impose formalities. If the writing was intended as a formality for the creation of the
contract, no legal consequences ensue and no contract exists prior to the execution of the
document. A party to the agreement can probably not be compelled to comply with the
formality. Parties may, however, conclude an oral contract with a term that the agreement
shall be reduced to writing by them.140It often happens that during the negotiations
leading to the formation of a contract, or in the terms of an informal contract itself,
mention is made of a written document or of the reduction of the terms of the contract to
writing.141 This raises the question whether the informal contract is binding and the
written document only intended for purposes of proof of the terms of the contract, or
whether there is to be no contract until the written document has been drawn up and
executed. Christie even goes so far as to quote Grotius in answering this question:
The contract of sale may be made in writing or without writing. A written sale is not considered to be
complete until the writing has been fully executed. But with us, although there is no mention of writing this
is understood not to be with a view to a written contract, but merely for the purpose of reducing to writing
the terms agreed upon for better remembrance and proof, unless there is clear evidence of a contrary
intention.142
This precise principle was adopted in Goldblatt v Fremantle: The burden of proof is on
the party who asserts that an informal contract was not intended to be binding until
reduced to writing and signed. Innes J had the following to say in the abovementioned
judgment:
138 Bhana et al 2009: 86
139 Van der Merwe et al 2007: 153-162; Christie 2006: 105-108; Bhana et al 2009: 9197
141 Christie 2006: 105
142 Grotius 3 14 26, as quoted in Christie 2006: 106
63
Subject to certain exceptions, mostly statutory, any contract may be verbally entered into; writing is not
essential to contractual validity. And if during negotiations mention is made of a written document, the
Court will assume that the object was merely to afford facility of proof of the verbal agreement, unless it is
clear that the parties intended that the writing should embody the contract. At the same time it is always
open to parties to agree that their contract shall be a written one; and in that case there will be no
binding obligation until the terms have been reduced to writing and signed. The question is in each
case one of construction.143
This is exactly what happened in Goldblatt v Fremantle. The parties entered into an oral
contract, but stipulated that the contract will not come into force before it has been
reduced to writing. Subsequently, the parties themselves created a formality, failing to
comply with would result in the contract being void.
Van der Merwe et al state, however, that a self-imposed formal requirement for the
creation of a contract (such as the one imposed in Goldblatt) may be done away with by a
subsequent oral agreement to dispense with it. 144 Once the contract has been concluded in
writing, the contractants will be entitled to cancel it orally, unless formalities have also
been prescribed for cancellation. Irrespective, however, of whether parties resort to
writing for the creation of a contract or merely for purposes of proof, the agreement can
be varied by informal agreement. However, where by means of a so-called non-variation
clause, parties have prescribed writing as a formal prerequisite for variation of a contract,
the position may be different.145
The position regarding non-variation clauses in contracts146
The non-variation clause is part of the contract, and if it is phrased wide enough to
entrench itself, no part of the said contract, including the non-variation clause itself, may
be varied in any way other than writing. Anon-variation clause may also serve to prevent
oral variation of a clause, which prescribes formalities for cancellation. Non-variation
clauses are intended to protect contractants against disputes and problems of proof in
regard to variations of their contract. The enforcement of such a clause in the face of a
subsequent informal agreement by the parties to alter their contract seems to conflict with
the freedom which contractants should have to alter their previous consensus by
subsequent agreement. (Students are reminded of the cases of Brisley v Drotsky discussed
in unit 1 of this study module). Yet, non-variation clauses are enforced by the courts on
the very assumption that to do so does not conflict with the requirement of public policy
that agreements freely entered into must be given legal effect. In the final instance, the
decision of the courts to enforce non-variation clauses is a policy decision, based on an
apparent preference for commercial certainty and avoidance of litigation. The strict
enforcement of non-variation clauses by the courts often causes problems for
contractants, and a variety of ways have been developed to mitigate the effect of what has
come to be known as the Shifren straight jacket.
143 At 128-129, as quoted in Christie 2006:106

64
In the case of SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA
760 (A), the plaintiffs in the court a quo (respondents in the current case) sought damages
against the respondents (appellants in the current case) because the latter had contrary to
the contract between them, ceded its rights to another without the permission (written or
orally) of the plaintiff. The contract in question contained the following two clauses147:
11.The tenant shall not have the right to sub-let the said business premises or any portion thereof, nor shall
he have the right to cede this agreement to any person whomsoever without, in either event, the written
consent of the owner first being had and obtained.
19. Any variations in the terms of this agreement as may be agreed upon between the parties shall be in
writing otherwise the same shall be of no force or effect.
The appellant admitted to the cession, but pleaded that he had entered into an oral
agreement with the respondents in terms of which the latter agreed to the said cession on
condition that the appellant took responsibility for the payment of levy by the cessionary.
The case first served before Erasmus, J, who decided that the parties were allowed to
orally agree that oral permission for the said cession would be sufficient. Thereafter, the
case was referred to Potgieter, R, who disagreed with the abovementioned decision of
Erasmuss. The question before the appellate division, as posed by Steyn, JP, was thus
whether, despite the wording of clauses 11 and 19 mentioned above, the parties could
conclude a valid oral agreement whereby the contract would be amended to allow for the
fact that oral permission for cession would be permitted. Justice Steyn came to the
following conclusion (freely translated):
It cannot be derived from the fact that the parties were permitted to freely revoke their agreement orally,
that they possessed the same freedom with regard to orally amending their agreement where they have
explicitly decided that no amendment to their written contract would be valid if not in writing. On the other
hand it cannot be derived from the mentioned fact that the parties were allowed to amend without
consideration of the formality.
Thus, Justice Steyn decided that an oral contract couldnt be amended orally.
In the case of Miller and Another NNO v Dannecker 2001 (1) SA 928 (C), the defendant
had purchased certain franchise rights from one T in respect of a guest house for an
amount of R350 000.00. Part of the purchase price had been payable on signature of the
agreement and the balance in two further installments. Clause 15.2 of the said agreement
provided as follows:
This agreement constitutes the entire agreement between the parties who acknowledge that there are no
other oral or written understandings or agreements between them relating to the subject-matter of this
agreement. No amendment or other modification of this agreement shall be valid or binding on a party
hereto unless reduced to writing and executed by both parties hereto.
Although this case differs slightly to the matter in question and also the facts in the
Shifren-case (in the current case the pactum de non petendo finds application, which is an
agreement not to enforce a right), the following statement by Ntsebeza, AJ is interesting:
147 See Shifren p. 764
65
The dictates of public policy and the views of the community would never be served by a slavish adherence
to a non-variation clause in the face of an agreement in the form of a pactum.
Careful precaution should be taken not to confuse oral amendment of a contract and oral
waiver of the obligation to amend a written contract in writing only. In the case of Impala
Distributors v Taunus Chemical Manufacturing Co (Pty) Ltd 1975 (3) SA 273 (T), the
court had the following to say:
When a contract provides that dissolution thereof can only take place in writing, such a restriction can be
revoked by oral agreement. When the contract contains a further provision that no provision of the contract
can be varied other than in writing, it entrenches the restriction on revocation and oral dissolution is no
longer possible. An oral waiver is valid, but only by a party in regard to a right which accrues exclusively
to himself in terms of the contract. An already existing right of action arising out of breach of contract can
also be waived orally.
This was effectively a support of Steyn, JPs point of view in Shifren.

In the case of Brisley v Drotsky mentioned above, a tenant sought to preclude a reliance
on a non-variation clause on the basis that to do so would in the circumstances be
onredelik, onbillik en in stryd met die beginsels van bona fides (goeie trou). This
argument was of course derived from the Miller-case mentioned above. The argument
that considerations of good faith are relevant in assessing whether an agreement or term
meets the criterion of public policy, was roundly rejected by the majority of the supreme
court of appeal.148 It was held that there was no general equitable discretion on the
strength of which a court could decide not to enforce a non-variation clause merely
because it was unconscionable or against good faith.149 The ethical principle of good faith
does not, therefore, intervene in contract law directly, but is realised through the
instrumentality of the technical, black-letter rules and institutions of contract doctrine in
which it is discounted and balanced out with other principles and policy concerns.
Inequitable results which might arise from the stance adopted in Shifren, are to be
corrected by the application of die besondere rels en beginsels (the particular rules
and principles) of the law of contract.150
In the case of Cecil Nurse (Pty) Ltd v Nkola 2008 (2) SA 441 (SCA), the respondent had
returned to the appellant a duly executed suretyship document and credit application
form. The suretyship provided that alterations to its terms would only be binding if
agreed to in writing by the appellant. The appellant instituted action in the magistrates
court on the basis of the suretyship for payment of a debt. However, the respondent then
contended that the suretyship had mistakenly been sent by his assistant in his absence as
he was still negotiating limiting his liability. The magistrates court had found in favour
of the appellant, but this was set aside by the court a quo. The appellate division found
that once the original suretyship signed by the surety was sent to and received by the
creditor, a contract of suretyship had come into being. Whether or not an amended
document had subsequently been sent to the creditor was irrelevant. It had constituted no
more than a proposed amendment to a suretyship agreement already in existence. That
66
being so, the onus would be on the surety to prove that the creditor had agreed to the
proposed amendments, thereby bringing into being a new contract of suretyship.
The court subsequently decided that the creditor had not agreed to the proposed
amendments.151
The current legal position is thus that a written contract cannot be varied by a subsequent
oral one. However, the following paragraph written by Neels in the South African Law
Journal should be kept in mind (freely translated from the Afrikaans):
The courts should exercise the discretion to correction in a principled and hesitatory manner. The principles
of legal certainty and autonomy demand that the consensus which was reached by the parties to the contract
or the reasonable belief that was created should serve as motivation. Only in instances where the
unreasonableness or unfairness of the preliminary legal decision is clear, must it be corrected on the
grounds of fresh rules and principles.152
Van der Merwe et al finally submit then that there may well be situations where the
strictures of the Shifren strait jacket should be eased by recourse to a notion of public
policy or the application of estoppel informed by, or, if needs be, developed with
reference to the right to dignity.153
3. Formalities required by law
Christie states the following:
In evolving the general principle that any serious and deliberate agreement, made with the intention that a
lawful obligation should be established, is enforceable, the Roman-Dutch lawyers of the 17 th century must
be credited with a very considerable achievement. It is no longer necessary to investigate whether they
were mainly influenced by canon law, ius gentium (the law of mankind) or Germanic custom, because the
achievement remains with us except in respect of certain classes of contracts for which the law prescribes
certain formalities.
The only justification for prescribing formalities can be to ensure reliable evidence of the terms of the
contract and so cut out wasteful litigation caused by faulty memory or attempts to maintain fraudulent
claims or defences.154
This basically provides an answer to the question why the law sometimes imposes
formalities for contracts. However, statutes which prescribe formalities for contracts may
have different objectives, which are relevant to the interpretation of the provisions of the
relevant statute. For instance, the objective of the Alienation of Land Act is to promote
certainty regarding transactions for the alienation of land, thereby limiting disputes and
discouraging fraud and perjury in respect of an important class of transaction.155
The following are examples of statutes that impose formalities on contracts:
151 Cecil Nurse (Pty) Ltd v Nkola 2008 (2) SA 441 (SCA)
152 Neels 1999: 700
154 Christie 2006: 109
67
The Alienation of Land Act 68 of 1981 (already mentioned), which

requires alienations of land to be in writing and signed by the parties
or by their agents, acting on written authority.
The General Law Amendment Act 50 of 1956 requires contracts of

suretyship to be in writing and signed by or on behalf of the surety. In
terms of the same act, an executor donation must be in writing and
signed by the donor or his agent acting on written authority.
Under the National Credit Act 34 of 2005, credit agreements are

required to be in a documentary form, complying with requirements
applicable to the various categories of such agreements and delivered
to the consumer in the prescribed manner.
To establish whether statutory formalities apply in a particular case, the agreement must
be interpreted to ascertain whether it contains the essential features of the type of
transaction, which the statute, on a proper interpretation thereof, seeks to regulate. The
courts have held that, in order to avoid frustration of the objectives of the legislature,
material variations to contracts for which writing is prescribed must also be in writing to
be effective. This applies even where the particular statute does not refer to variations as
such. The approach of the courts is not without problems of its own: it may well happen
that that a contractant who has agreed to an informal variation (such as an informal
agreement to extend the time for performance) attempts to escape the consequences of his
own agreement simply because he may rely on its formal invalidity.
Subject to these limitations, a contractant who denies the validity of an informal variation
to which he agreed may be held to have waived his right to rely on the relevant part of the
written contract. There is also a tendency in case law to give effect to an informal
agreement which grants an extension of time or amounts to a forbearance to sue, or
postpones performance on the basis that such an informal agreement is not a variation of
the contract, and need therefore not comply with the prescribed formalities.156
4. Non-compliance with formalities157
Non-compliance with formalities results in the nullity of the transaction. Performance
rendered in terms of a formally defective agreement, is regarded as having been made
without legal ground (sine causa), and recoverable by means of an enrichment action. In
terms of the common law, the proper remedy where the performance consists of money
or involves the delivery of property, is a condictio. For cases of performance pursuant to
a formally defective alienation of land, however, the courts fashioned an enrichment
liability sui generis contrary to the common law. Under this doctrine, recovery of
performance was permitted irrespective of the technical requirements of the relevant
condictiones, but was limited in that the recipient of performance could defeat an action
by performing or tendering to perform his side of the bargain. No action was available
68
where both parties had performed in full. Thus, although a party who had performed
could not sue on the contract for the counter-performance, recovery of his own
performance was possible only where the recipient was unwilling or unable to perform
his side of the bargain. This rule, which became known as the rule in Carlis v
McCusker, was severely criticised as being contrary to the general principles of
enrichment liability, as having anomalous results and rejected for enrichment claims in
respect of formally defective hire-purchase agreements. In 1981, the legislature attempted
to consolidate the position by introducing a statutory enrichment action in the Alienation
of Land Act. The Act permits recovery not only of what has been performed in terms of a
formally defective alienation of land, but also of interest and compensation for
detrimental consequences of the enriching event. If the land has been transferred to the
alienee, and the latter has performed in full, an action for recovery is precluded and the
alienation is regarded as valid ab initio in all respects.
5. The parol evidence rule
THE PAROL EVIDENCE RULE IS A DOG WHICH HAS BEEN GIVEN A
BAD NAME
CHRISTIE 2006: 192
Despite the difficulties attendant upon the parol evidence rule, it serves the important
purpose of ensuring that where the parties have decided that a contract should be
recorded in writing, their decision will be respected, and the resulting document or
documents will be accepted as the sole evidence of the terms of the contract. 158 Van der
Merwe et al add hereto that since the parties themselves integrated their agreement in a
document that is a full and final crystallization of their consensus, parol evidence (which
means oral or other extrinsic evidence to the document) regarding the negotiations and
the contents of the agreement, is irrelevant and misleading.159
Van der Merwe et al exclaim that when a dispute arises about an agreement reduced to
writing, a party will often experience the need to bring the evidence from outside the
document (extrinsic evidence) to prove his version of the content and meaning of the
contract. In such circumstances the parol evidence rule generally comes into play to
restrict the nature and extent of the evidence that may be brought. 160 The rule originated
in English law, and was received into our law on the assumption that it formed part of the
law of evidence.
What exactly is the meaning of the parol evidence rule and what does it entail? Van der
Merwe et al are consulted on this matter, as well as case law:
Corbett JA in Johnston v Leal 1980 3 SA 927 (A) at 943B:
158 Christie 2006: 192

160 Van der Merwe et al 2007:173
69
It is clear to me that he aim and effect of this rule is to prevent a party to a contract which has been
integrated into a single and complete written memorial from seeking to contradict, add to or modify the
writing by reference to extrinsic evidence and in that way to redefine the terms of the contract
To sum up, therefore, the integration (parol evidence) rule prevents a party from altering, by the production
of extrinsic evidence, the recorded terms of an integrated contract in order to rely upon the contract as
altered.
The Appellate Division in Lowrey v Steedman 1914 AD 532 543:

The rule is that when a contract has once been reduced to writing no evidence may be given of its terms
except the document itself, nor may the contents of such document be contradicted, altered, added to or
varied by oral evidence.
Solomon JA in Marquard & Co v Biccard 1921 AD 366 at 373 (one of the best-known
English formulations of the rule, according to Christie):
The rule of the law of evidence upon which he relies is nowhere more clearly stated than by Lord Denman
in the well-known case of Goss v Nugent (5 B & Ad 54): By the general rules of the common law if there
be a contract which has been reduced into writing, verbal evidence is not allowed to be given of what
passed between the parties either before the written instrument was made or during its preparation, so as to
add to or subtract from or in any manner to vary or qualify the written contract.
Watermeyer JA in Union Government v Vianini Ferro-Concrete Pipes (Pty) Ltd 1941 AD

43 on 47 (in what has come to be regarded as the leading case in this regard):
Now this court has accepted the rule that when a contract has been reduced to writing, the writing is, in
general, regarded as the exclusive memorial of the transaction and in a suit between the parties no evidence
to prove its terms may be given save the document or secondary evidence of its contents, nor may the
contents of such document be contradicted, altered, added to or varied by parol evidence.
Botha JA in National Board (Pretoria) (Pty) (Ltd) v Estate Swanepoel 1975 3 SA 16 (A)
on 26 (wherein the term integration rule was accepted):
The rule is well summarized by Wigmore, Evidence, 3rd ed vol 9 sec 2425, as follows:
This process of embodying the terms of a jural act in a single memorial may be termed the integration of
the act, ie its formation from scattered parts into an integral documentary unity. The practical consequence
of this is that its scattered parts, in their former and inchoate shape, do not have any jural effect; they are
replaced by a single embodiment of the act.
In other words: When a jural act is embodied in a single memorial, all other utterances of the parties on
that topic are legally immaterial for the purpose of what are the terms of their act.
The parol evidence rule has been said to comprise two distinct rules, namely the
integration rule (see Botha JAs explanation above) and the interpretation rule. The
integration rule determines the extent to which extrinsic evidence is admissible to prove
the terms or content of that part of a contract contained in a document which the parties
intended to be finally embodied in that document.161 The interpretation rule determines
when and to what extent extrinsic evidence may be brought to interpret the words used in
a document intended as a final reflection of the transaction. A document that purports to
be an exhaustive record of the transaction is assumed to be an integration. Where it is
70
established that a specific document does not amount to an integration of the agreement,
the parol evidence rule does not apply. The parol evidence rule applies principally in
litigation between parties to a contract, but it may also be relevant where the terms of the
contract are in a dispute between litigants who are not parties to the contract.162
When will parol evidence be admissible?
The prohibition of extrinsic evidence of course extends only to evidence tending to
contradict the terms of the contract as reflected by the document. Accordingly, parol
evidence to counter admissions of fact recorded in a document is not subject to the rule,
nor is evidence to prove the nullity or voidability of the contract, or that the transaction
amounts to a simulation. Extrinsic evidence which relates to the terms of the agreement
but which is not inconsistent with the document will be regarded as admissible. Thus it
has been held that parol evidence is admissible in respect of a document which is part of
a larger agreement and is intended to enable the main agreement to be carried out, or
in respect of an oral agreement which embodies an additional consideration which
induced the written contract. Furthermore, there is authority for the view that extrinsic
evidence is admissible to establish the existence of a prior contemporaneous oral
agreement that the written contract is not to take effect except in a certain contingency,
but the application of this exception regarding the proof by extrinsic evidence of a
suspensive condition is uncertain.
Parol evidence to prove that a party ostensibly contracting as a principal was in fact only
an agent in order to introduce the principal as the real party is not regarded as
contradicting the document, and is accordingly admissible.
Van der Merwe et al feel that there is a question mark over the continued recognition of
the parol evidence rule in South African law.163 The rule limits the evidence admissible to
determine the intention of the parties to written contracts- an anomaly in a system of law
that, in principle, bases contractual on the intention of the parties.164 It is furthermore a
matter of policy whether a legal system should accept the rationale advanced for the rule,
namely that certainty of transactions should be enhanced, that the number of disputes
should be decreased, and that the risk of perjury should be restricted.165
6. Rectification166
Contractants who reduce their agreement to writing run the risk that, by accident or by
design of one of them, the document may not give accurate expression to their common
intention. Because of the subjective approach followed by South African law, and also the
basis of contractual liability, it follows that parties cannot be held bound to a document
71
which does not reflect their true agreement. A party to an incorrectly recorded agreement
must therefore be entitled to rely on the real consensus and even to have the document
corrected to express their true common intention. Such a correction of a contractual
document by a judicial decree is called rectification (of course judicial intervention will
be obsolete if the parties agree to the correction among themselves).
The contract itself as a juristic act is not rectified. What is rectified, is the document,
inasmuch as it does not express what the contractants intended to be the content of the
juristic act. In the case of Spiller v Lawrence 1976 (1) SA 307 (N) on 310, the court said
that all that the court ever touches is the document. Although rectification has been
regarded as a necessary companion to the parol evidence rule, it is not based on that rule,
neither on special grounds such as the exception doli generalis, good faith or fairness, all
of which has been advanced to explain rectification. Rectification is a logical
consequence of the principle that a contract binds because of actual consensus or a
reasonable reliance on consensus.
When may a party claim rectification?
Rectification may be claimed without seeking ancillary relief, and a court may be
requested merely to correct a document, which records the common intention of the
parties incorrectly. Since the document, and not the juristic act expressed by the
document, is corrected, rectification does not amount to a variation of the contract.
According to the courts, a party claiming rectification must establish that as a result of
error or mistake the document does not reflect the common intention of the parties, and
how the document is to be reformed to reflect that intention.
Proof of a prior or antecedent agreement (common intention) on the terms of the
contract is a sufficient basis for rectification. Such an antecedent agreement need not in
itself necessarily constitute a contract. Rectification is thus possible where writing is a
constitutive requirement for the contract, and even where the agreement was first
formulated when it was reduced to writing. Rectification may also be granted where there
was no prior common intention, for instance where a fraudulent contractant, who
represents that he has reached a common intention with his co-contractant, drafts the
document so as to prevent its reflecting that common intention. This will also be the case
where a party, aware of the other partys ignorance of a mistake in the recording of their
agreement, remains silent. Rectification here serves to bring to the fore in the document
the reasonable belief of the victim as to the terms of the contract.
In the case of Akasia Road Surfacing (Pty) Ltd en n ander v Shoredits Holdings Ltd en
Andere 2002 (3) SA 346 (SCA), the parties had entered into a written contract, as well as
a supplementary contract in terms whereof the respondents had sold certain businesses
and assets, as well as clientele of those businesses. The purchase price was constituted as
follows:
-
R6 237 000 in respect of the businesses and assets;

R400 000 in respect of immovable property;
72
-
R2 582 000 in respect of clientele.
One of the assets in the annexure to the contract was described as a new asphalt plant
with a market value of R2 990 850. The appellants claimed that at the conclusion of the
contracts, this asphalt plant had not been finished. The appellants wanted to rectify
their contract by including the following clause167:
The purchaser shall pay the full sum of R2 990 850,58 in respect of the new asphalt plant to the sellers as
hereinbefore provided, regardless of the fact whether the aforesaid asphalt plant is completed and erected at
the time of signature hereof or not. The sellers shall be obliged to complete and erect the new asphalt plant
according to plan and to the purchasers full satisfaction on or before 31 October 1996. The completion and
erection of the new asphalt plant shall be effected at the sellers cost. Should the seller fail to complete and
erect the new asphalt plant, or should the sellers fail to commence with the completion and erection of the
aforesaid new asphalt plant immediately after the builders holidays of December 1995/January 1996, the
purchaser shall be entitled to complete and erect the asphalt plant at the purchasers cost, whereupon the
purchaser shall be entitled to deduct the full amount of the moneys expended upon the construction and
erection of the aforesaid plant from the outstanding balance from time to time owing and due to the sellers
in terms of this agreement.
The court decided the following168:

Rectification of a contract has as its purpose the bringing of the written document into harmony with the
true intention of the contracting parties, which intention they failed, by reason of a common mistake, to put
into writing. If that true intention is vague, it might affect the validity of the rectified contract but not a
defendants claim for the rectification of the contract. The law is not, after all, that effect should be given to
a written document which incorrectly reflects the agreement between the parties on the ground that the
incorrect written version does indeed constitute a valid contract while that upon which the parties actually
agreed does not constitute a valid contract.
167 See Akasia Road-case, 349.

168 See Akasia Road-Case, 347
73
Unit 8
Possibility of Performance
Learning outcomes:
1. Provide a brief background as to the position of possibility of performance as a
requirement of a valid contract in South African law.
2. Fully distinguish between the terms Subjective (relative) impossibility and
objective (absolute) impossibility, with specific reference to the case of Blou Bul
Boorkontrakteurs v McLachlan and South African Forestry Co Ltd v York
Timbers Ltd.
3. Shortly discuss the effect of impossibility of performance on a contract.
Study:
South African Forestry Co Ltd v York Timbers Ltd 2005 (3) SA 323
(SCA)
Blou Bul Boorkontrakteurs v McLachlan 1991 (4) SA 283 (T)
Alternative study:
3. Bhana et al.
Students Guide to the Law of Contract. Second Edition. Chapter 4 para.4
74
1. Introduction
The performance agreed upon must be objectively possible when the agreement is
concluded, in order to constitute a valid contract. In the case of impossibilium nulla
obligatio est (initial objective impossibility) no obligations will be created by the
agreement. The mere fact that circumstances attending the conclusion of a contract
preclude the realization of the objective of a contractant in respect of the contract does
not render the transaction void for impossibility. What is required is that a performance
envisaged by the agreement should be impossible.169
Initial possibility of performance was already a requirement in respect of contracts in
Roman and Roman-Dutch law. Opinions might have differed on the precise scope and
effect of initial impossibility of performance with regard to the legal efficacy of an
agreement intended to be a contract, but a general principle was eventually developed
from the premise that individual volition was rational only to the extent that it was
directed at doing what was possible.170 An undertaking to do the impossible could not, on
this view, be regarded as a rational choice and would therefore preclude the conclusion of
a contract. This reasoning largely underlies the requirement of initial possibility of
performance in modern law in so far as a contract is based on actual consensus. Where a
contract is based on an objective foundation, one might say that it would simply not be
reasonable to hold someone to an impossible performance.171 There is no need to ascribe
the doctrine to the operation of a tacit or implied term: the effect accorded to
impossibility results from objective policy considerations underlying the theoretical basis
of contractual liability.172
The point of departure seems to be that because neither party would have contracted if
the actual state of affairs had been known, the risk of initial impossibility cannot, in the
absence of an undertaking or legal rule to the contrary, be allocated to either of them. The
reasoning is akin to that which underlies the doctrine of supervening impossibility of
performance.173
2. The meaning of impossibility
2.1.
Subjective (Relative) impossibility
Subjective impossibility means that, although someone else may be possible to render the
performance in question, the debtor is unable to do so. It thus relates to the inability of a
particular debtor to perform.
75
Example: ABC Brickmakers receives an order to manufacture 1 million bricks.

Because of physical and inherent restraints, ABC Brickmakers is unable to
manufacture that amount of bricks. This does not mean, however, that no
brickmaker will be able to manufacture that amount of bricks, just that this specific
one (ABC) is unable to do so.
2.2.
Objective (absolute) impossibility
Objective impossibility involves a general inability to perform: In the eyes of the law, noone is able to render the performance.174Examples of objectively impossible performances
are:
Delivery of a non-existent thing, whether it had existed but ceased to

exist, or never existed at all;
A res extra commercium, such as an attempt to sell a natural person;
A thing belonging to the purchaser is abortive on his account, such as a

mandate to sell shares on the stock exchange which is objectively
impossible because the shares are not listed.
The test for objective impossibility is a pragmatic standard. While an absolute physical
impossibility will satisfy the test (for instance where the contemplated performance is
physically or notionally wholly incapable of performance), a performance might
conceivably be rendered will nevertheless be impossible if insistence of its performance
would be unreasonable in the circumstances. Where performance is prohibited by law, the
inability to perform may be treated as an instance of objective impossibility or illegality.
Where it is clear that invalidity of the agreement is the prescribed sanction- as often
appears from legislation- it would probably be best to apply the rules of illegality here. 175
Where invalidity is not so obviously required, the notion of objective impossibility may
well be adequate for dealing with the matter. If such matter were to be approach as an
instance of illegality, it would be necessary to consider the possible moral turpitude and
other public and private interests involved.176
If performance is merely difficult, it would not amount to objective impossibility, but to
subjective impossibility (this is a factual question- see the case of Blou Bul
Boorkontrakteurs below). However, performance may be so difficult and lead to such
economic or other hardship that it will be regarded as objectively impossible in terms of
the applicable standard. The inability of the particular debtor and the general inability to
perform may coincide, with resultant objective impossibility, for example where someone
175 Van der Merwe et al 2007: 188.
76
is engaged to perform in a personal capacity at a specified time but is already incapable
of doing so.
For instance, if an artists manager undertakes that he (the artist) will give a
performance in an hours time, yet at that very moment the artist is 10 000 km
away.
Also, where a tenant is unable to take occupation of the rental property because of
the manifestation of a previously unsuspected allergy to materials used in its
construction. No person in the position of the landlord is seemingly in a position to
render the premises fit for occupation by the particular tenant.
An initial impossibility attributable to the conduct of a party to an agreement will not
exclude contractual liability.177
3. The effect of impossibility
Subjective impossibility of performance does not prevent the creation of an obligation. 178
If the debtor eventually does not perform, he may be liable for breach of contract.
Objective impossibility of performance at the time of conclusion of the agreement, will
lead to the situation where no obligation is created in respect of that performance.
Furthermore, no obligation is created in such a case with reference to any agreed counterperformance.
Performance may be warranted (guaranteed) to be possible. The party who gives the
warranty will be bound by the contract and will be liable for breach of warranty if he fails
to perform correctly, and even if the performance turns out to be objectively
impossible.179
Blou Bul Boorkontrakteurs
The plaintiff and defendant had entered into a written settlement agreement in the
Magistrates Court wherein it was agreed that the plaintiff would clean a drilling hole to a
depth of 132 metres, at R18 per meter drilled. He would also install the necessary
material up to that depth, also at R18 per meter. After drilling had started, steel poles and
waste were found in the drilling hole, which made further drilling objectively impossible.
The following exclamation by Eloff, JP is relevant to this unit (freely translated from the
Afrikaans text):
Where impossibility is raised, it is no longer about the question of the presence of consensus. What is then
applicable is that one of the ways in which an obligation had arisen, can be eliminated.

77
It ought to be mentioned that the appellants claim to impossibility can only succeed if the impossibility is
(objectively speaking) absolute. Also, the claim can only succeed if the plaintiff had not guaranteed
performance in any way.180
The more recent case of South African Forestry Co Ltd v York Timbers Ltd 2005 (3) SA
323 (SCA), presents a somewhat more complex set of facts.
Two contracting parties had entered into a contract more than thirty years before the case
in question. In each case, the South African Government had been the seller of
softwood logs obtained from two government plantations in the Mpumalanga Province.
The parties had agreed that should any disagreement arise between the parties regarding
the terms of the contract, the Minister of Forestry would be approached to settle the
disagreement. Failure by the Minister to do so would result in arbitration-proceedings. In
1982, the respondent (York) took over all the rights and obligations of the other party in
terms of both contracts. With effect from 1 April 1993, the government transferred all its
rights and obligations under the said contracts to the appellant (South African Forestry
Company Ltd), pursuant to the provisions of Section 4 of the Management of State
Forests Act 128 of 1992.
It eventually happened that the appellant approached the Minister to take a decision
regarding a certain disagreement that had occurred between the parties. The Minister did
not decline to become involved (as he had done some time earlier), but refused to express
the opinion sought by the appellant. The appellants case was based on the fact that the
contracts had lapsed through intervening impossibility, because of the Ministers refusal
to perform his assigned functions in terms of the contracts. The appellant subsequently
cancelled the two agreements.
Brand, JA held that
an order is issued declaring that the plaintiff validly cancelled the two contracts between the parties,
referred to as the Swartfontein agreement and the Witklip agreement, on 10 November 1998.
180 On p. 286
78
Unit 9
Legality
Learning outcomes:
1. Explain what is meant by the concept illegality.
2. Briefly explain how concepts such as public interest and good morals
determine the legality or illegality of agreements.
3. Describe in detail how illegality is determined, with specific reference to the case
of Sasfin v Beukes.
4. Analyze the par delictum rule as an element of the consequences of illegality.
5. Explain what is meant by agreements in restraint of trade.
6. Discuss the case of Magna Alloys v Ellis, with specific reference to the way in
which South African courts have dealt with restraint of trade clauses in the past,
and how this case has changed the position.
7. Interpret the term public interest in the context of the legality/illegality of
restraint of trade-clauses in contracts.
8. Analyze the problem/s identified in the case of Coetzee v Comitis with regard to
restraint of trade-clauses in sport contracts.
Study:
Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A)
Mort NO v Henry Shields-Chiat 2001 (1) SA 464 (C)
Klokow v Sullivan 2006 (1) SA 259 (SCA)
Magna Alloys v Ellis 1984 (4) SA 874 (SCA)
Coetzee v Comitis and Others 2001 (1) SA 1254 (C)
Alternative study:
3. Christie.
The Law of Contract in South Africa. 2006. Chapter 10
79
1. Introduction
1.1.
The concept legality
An agreement must be legal to constitute a contract, with the consequence that an illegal
agreement will not create obligations. The reason why legality is a requirement for a valid
contract rests on the interests or convictions of a society pertaining to the recognition of
transactions between individuals, namely that it is generally desirable which are entered
into seriously and properly should be enforced.181 However, agreements which are not
necessarily in conflict with the interests and convictions of society ought not to be
enforced. Contracts that are unconstitutional are said to be unenforceable, especially
where strong public policy considerations are involved. 182 Agreements are illegal if
they conflict with statutory law or common law. Illegality occurs where the conclusion of
an agreement or the agreed performance or the purpose for which the agreement is
concluded is contrary to the law.183 A statutory or common-law rule may clearly express
that certain agreements will be illegal. This is however, not always the case.184
1.2.
Public interest and good morals
Agreements will be illegal if they are contra bonos mores (contrary to the good morals)
or against public interest or policy. Remember that the law does not enforce morals
simply because they are morals, but it does to a certain extent absorb moral content into
legal doctrine and even specific rules.185 The reason for this absorption of morals is of
course for the sake of expediency and justice, to the extent that the latter-mentioned
concepts form part of the purpose and function of the law.186 The distinction between
boni mores on the one side and public interest and policy on the other hand is not clear. In
practice, the term boni mores with regard to illegality applies to agreements relating to
the everyday morals or conduct set by a specific society. Examples would be the norms
governing sexual morals and honest and proper conduct.187 The following agreements are
said to be contrary to public interest and policy:
Agreements which are to the detriment of the state;

Agreements which obstruct or defeat the administration of justice;
Agreements which restrict someones freedom to act or to be
economically active.
Agreements which are in accordance with public policy and in the public interest would
include those which are in accordance with good morals.
2. Determining illegality
80
Sometimes, agreements are contrary to public policy to such an extent that the mere
conclusion thereof would be illegal.188 The illegality of these agreements is either found
in statute or in provisions of the common law.
Examples of prohibitions contained in statutes:
Prohibitions relating to the sale and distribution of:
Alcohol: The Liquor Act 59 of 2003;

Drugs: The Drugs and Drug Trafficking Act 140 of 1992;
Dangerous weapons: The Dangerous Weapons Act 71 of 1968;
Precious stones: The Diamonds Act 56 of 1986;
Commodities on Sundays or outside approved business hours: Various
statutes regulating shopping hours.189
Examples of common law prohibitions:
Attempts to oust the jurisdiction of the courts;

Attempts to deprive a contractant of the opportunity to properly defend
himself or apply for an administration order;
Agreements with enemy subjects;
Certain pacta de quota litis (agreement for in the proceeds of
litigation);
Certain pacta commissoria;
Certain pacta successoria;
Certain marriage brokering agreements for reward;
Agreement in terms of which a contractant purports to waive, in
advance, the protection afforded by the Prescription Act against the
public interest.190
It is possible for an agreement which was legally concluded to be illegal because of the
performance which is its subject matter. For instance, an agreement to commit a crime or
a delict would be illegal. A sale of a pistol by a licensed dealer to a licensed buyer would
be legal, but not if the buyer binds himself to use the pistol to kill someone. 191 Even if
neither the conclusion of a contract nor the performance being undertaken is illegal, the
agreement may still be illegal because of the purpose for which it was concluded. If, for
instance, the buyer does not bind himself as against the seller to commit a murder, but if
the seller knows that the buyer intends to kill someone, the agreement will still be illegal
for its purpose: Both parties must have the same legal purpose. If one of the contractants
81
is not aware of the others motive, the agreement cannot be said to have an illegal
purpose.192
Where it is clear that a term is illegal, the matter is simple. Where the situation is not so
simple, however, one should consider the tendency of the agreement to be contrary to
public policy, public interests or the boni mores. This mentioned tendency would have to
be proven with a considerable degree of probability in order to result in illegality of the
agreement.193
In the case of Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A), the appellant was a company
which conducted business as a financier, and the respondent was an anaesthetist. The
parties had entered into a discounting agreement in terms of which the respondent was
obliged to offer for sale to the appellant any book debts he wished to sell. The purchase
of such book debts was to be governed by the said discounting agreement.
On the same date the abovementioned discount agreement had been entered into, the
respondent had also executed a deed of cession in favour of the appellant and two other
companies, in terms whereof the respondent had ceded to the creditors (the
abovementioned three companies) the following:
all claims, rights of action and receivables which are now and which may at any time hereafter become
due to me/us by all persons (hereinafter referred to as my/our debtors) without exception, from any cause of
indebtedness whatsoever (the claims) as continuing covering security for the due and proper performance
of all obligations which I/we may have in the past owed or incurred or may at the present or in the future
owe or incur to all or any of the creditors from whatsoever cause and whenever arising
In effect, the respondent had ceded all debts owed to him to the appellant. The question
before the court was whether this cession was a valid one.
Smalberger, JA decided, with Van Heerden, JA and Rabie, ACJ concurring in a minority
judgment, that our common law did not recognise agreements that are contrary to public
policy. He explained that when deciding what is meant by public policy and when it can
be said that an agreement is contrary to public policy, the interests of the community are
of paramount importance. Agreements which are clearly inimical to the interests the
community, whether they are contrary to law or morality, or run counter to social or
economic expedience, will, on the grounds of public policy, not be enforced.
The learned judge continued to state that no court should shrink from the duty of
declaring a contract contrary to public policy when the occasion so demands. The power
to declare contracts contrary to public policy should, however, be exercised sparingly and
only in the clearest of cases, lest uncertainty as to the validity of contracts result from an
arbitrary and indiscriminate use of the power.194

194 See pp. 2 and 3
82
In the case of Mort NO v Henry Shields-Chiat 2001 (1) SA 464 (C), Davis, J made the
following obiter observations about the principle of bona fides in South African law of
contract195:
For the past thirty yearsit has been repeatedly claimed that in modern South African law of contract
contracts are bonae fidei.
...but it is clear that if the doctrine is to be taken seriously then the primary importance accorded to the
private autonomy of contracting parties must be reconsidered as must the hegemony of the will theory of
contract which survives even in the context of dicta which nod in the direction of social responsibility.
Like the concept of boni mores in our law of delict, the concept of good faith is shaped by the legal
convictions of the community. While Roman-Dutch law may well supply the conceptual apparatus for our
law, the content with which concepts are filled depends on an examination of the legal conviction of the
community- a far more difficult task. This task requires that careful account be taken of the existence of our
constitutional community, based as it is upon principles of freedom, equality and dignity.
In short, the constitutional State which was introduced in 1994 mandates that all law should be congruent
with the fundamental values of the Constitution. Oppressive, unreasonable or unconscionable contracts can
fall foul of the values of the constitution.
3. Consequences of illegality: The in pari delictum-rule

Delictum, according to Van der Merwe et al, refers to illegality.196 The question that is
most often raised is whether the expression in pari delicto necessarily implies that a party
who is barred from reclaiming must have been in delicto at least to the same degree as
the other party.
On the one hand, it is argued that degrees of disgraceful conduct cannot be distinguished.
This argument rests on the fact that it is practically impossible to measure degrees of
disgraceful conduct. This approach would entail that where the claimant is in any way in
delicto the rule will apply without exception or relaxation. 197 As a consequence of the
distinction between mere illegality and immorality it has been suggested that the par
delictum rule should apply only if the party who wishes to reclaim performance has acted
immorally.198
In the case of Klokow v Sullivan 2006 (1) SA 259 (SCA), Cachalia AJA noted that the
par delictum rule, which curtails the right of the delinquent party to avoid the
consequences of his performance or part performance of an immoral or illegal act, is
concerned with the moral guilt of contracting parties, not their criminal liability. Where a
contract is in contravention of a statute, the question whether or not the plaintiff is also
prima facie liable for prosecution under the (Liquor) Act, albeit as an accomplice, has no
direct bearing on the question of his moral turpitude.199
195 At 474 A/B- 475I
199 pp.259-260
83
The parties in the abovementioned case had entered into a written agreement in terms of
which the plaintiff (in the court a quo) was to acquire from the defendant a business that
provided adult entertainment, which included the selling of liquor to its clients. The
plaintiff had paid to the defendant half of the purchase price, and subsequently took
possession of the business. However, only a month after having taken over the business,
the plaintiff returned the business to the defendant, and claimed repayment of the portion
of the purchase price.
The basis of this case is that the plaintiff alleged that the defendant (the holder of a liquor
licence) had concluded the agreement permitting the plaintiff to procure a controlling
interest in the business without obtaining the necessary permission of the chairperson of
the Liquor Board. This constituted an omission in terms of section 38 of the Liquor Act,
which reads as follows:
The holder of a licence shall not permit any other person to procure a controlling interest in the business to
which the licence relates, unless the chairperson has, on application by the holder, granted consent that such
a person may procure such an interest in that business.
The defendant submitted on his part that the Act had placed an obligation on the plaintiff
to (with the defendant) make written application for the licence in question to the
chairperson of the Liquor Board. This was not done by the plaintiff. The defendant
accordingly pleaded that the plaintiff was precluded from recovering the amount claimed,
as both he and the plaintiff were in pari delicto.
The court decided that before the decision in Jajbay v Cassim in 1939, a party seeking to
extricate himself from the consequences of an illegal or immoral contract had to
demonstrate that he had come to court with clean hands. This clean hands doctrine
from English law is similar to the par delictum maxim from Roman law. A plaintiff who
was found to be in pari delicto was unable to recover any money paid or property handed
over to a defendant pursuant to it, and if such plaintiff based his case on such a contract in
formulating his pleading, he would fail on this basis alone. In the Jajbay v Cassim-case,
the court recognized that the strict enforcement of the par delictum-rule as explained
above, may sometimes cause inequitable results between parties to an illegal contract. To
prevent inequities, therefore, the court said that the rule had to be relaxed where it is
necessary to prevent injustice or to promote public policy.
The Appellate Division found that there was no need for the plaintiff to plead relaxation
of the par delictum-rule on grounds of public policy, or that the defendant had been
unjustly enriched.
Although the case of Jajbay v Cassim 1939 AD 537 is not prescribed for study in
this module, students would benefit from reading the case.
The complete maxim reads as follows: in pari delicto potior est conditio
defendentis.
84
4. Agreements in restraint of trade200
Van der Merwe et al define an agreement in restraint of trade as an agreement by which
someone is restricted in his freedom to carry on his trade, profession, business or other
economic activity.201 A restraint of trade is usually imposed in order to protect the
economic interests of the party in whose favour it is imposed. Employers often restrain
employees in their service contracts to the extent that an employee who leaves the
employ undertakes not to compete with his former employer, either independently or in
the employ of another. Many partnership agreements contain a clause which restrains
partners who leave the partnership from competing with it.
The fact that an agreement places some restraint on one of the parties does not in itself
make the agreement objectionable. If, however, the restraint is so restrictive of one of the
parties as to conflict with the public interest it will be illegal and unenforceable.
In the case of Magna Alloys v Ellis 1984 (4) SA 874 the respondent had instituted action
against the appellant in the court a quo wherein he claimed that he had entered into an
oral agreement with the latter for the sale of some of the appellants apparatus (mainly
welding apparatus), and that he, at the time of instituting the action, had not yet received
his full commission for the sale of such apparatus. In terms of a certain clause in the
agreement, the respondent had undertaken that for a period of two years following the
termination of the agreement for any cause, and within a radius of 10 kilometres of the
perimeters of a certain geographical area, he (the respondent) would not:
i.
directly or indirectly either as a partner, employee, agent, salesman, or

representative enter into or engage in any business in competition with the
defendant;
ii.
sell any other thing, in substance, or material, the function, use or purpose
which is similar to or the same as the function, use or purpose of the products
of the appellant.
iii.
seek or solicit customers or business for the sale of such said thing, substance
or material within the area mentioned above;
iv.
promote or assist financially or otherwise any person, firm, association or

corporation engaged in a business which competes with the appellant.
The respondent subsequently joined a rival firm of the appellant. The respondent claimed
the following:
The clause is a covenant in restraint of trade in that it purports to restrict the common law right of the
plaintiff to trade or work and the defendant seeks, pursuant to this clause, an order which has the effect of
interdicting the plaintiff from continuing with his present work. The agreement being, by virtue of the
above facts, a covenant in restraint of trade, is prima facie void and unenforceable. The onus is upon the

85
defendant to satisfy the Court that the restraint is reasonable. The plaintiff contends that the entire clause is
unreasonable and unenforceable.
The appellant responded that the clause in question was indeed reasonable and therefore
enforceable, for the following reason, as stated in a clause in the contract:
The agent (respondent/Ellis) acknowledges that the training materials, advice and assistance of the
companys supervisors, customer lists, route sheets and other confidential information, all given to him by
the company (appellant/Magna Alloys) or acquired or formulated by him during the effectiveness of this
agreement as a result of his having access to the aforementioned aids and information and dealing in the
companys products are of such a nature as to make it reasonable and necessary for the protection of the
company that the agent will not compete with the company within or in the vicinity of the geographical
area in question for custom amongst the customers or potential customers of the company for the period
hereinafter mentioned.
The court stated that on numerous occasions in the past South African courts had
followed English law in proclaiming that every restraint of trade-clause was prima facie
invalid, because it was against public policy. A party who alleged otherwise, had to prove
same. Rabie CJ had the following to say on this point (freely translated from the
Afrikaans text):
One can thus with certainty accept that there is no proclamation in our common law which declares a
restraint of trade-clause invalid just because of the nature thereof. Consequently, there is no authority in our
common law to follow the notion that has for so long been used by our courts, that is, that a restraint of
trade is prima facie invalid. It is an approach which follows English law.
Of course, the courts decision above does not imply that all restraint of trade clauses are
necessarily valid. What it does imply, is that each set of facts should be considered and
judged on its own merit. If a court should find that a restraint of trade clause indeed
impeaches on public interest, the clause should be found to be invalid. But it is not prima
facie invalid. Restraints of trade should be treated like all other contractual terms and, in
principle, are enforceable.202 Herein lies the importance of the Magna Alloys v Ellis-case.
The term public interest and the constitutional values embedded therein
In order to determine whether a particular restraint of trade-clause is in fact contrary to
the public interest, one would first have to determine what public interest entails. Van
der Merwe et al mention that two constitutional freedoms or values come into conflict
when the legality of a restraint of trade clause is in issue: freedom of contract v freedom
of trade.203 The one cannot be given preference to the exclusion of the other. The fact that
a contractual restraint of trade may be enforceable in principle is in keeping with the
general approach to the creation and enforceability of contractual terms in Roman and
Roman-Dutch law as understood by the South African Courts. It has already been
mentioned above in the discussion of the Magna Alloys-case that the provincial courts in
South Africa followed the approach of English courts regarding the question whether and
when a restraint of trade-clause would be illegal. The position in English law was (and is
still today) that restraints of trade are prima facie illegal and void (See Magna Alloys202 Van der Merwe et al 2007: 215
86
case). If, however, in the circumstances, the restraint is reasonable between the parties
(inter partes) and not against public interest, it is valid and enforceable.204
Freedom of contract is thus the preferred value.205
Freedom of contract as a primary value can also probably be inferred from
certain provisions of the constitution of the Republic of South Africa, e.g. the very
fact that certain basic rights can only be effectively exercised if the particular person
can freely conclude contracts, and also the provisions regarding the limitation of
basic rights.
When determining the public interest in respect of a restraint of trade, the courts often
inquire into the reasonableness of a restraint. This reasonableness is not to be equated
with reasonableness inter partes. Courts are intent, however, to focus on individual
interests in general and on the particular protectable interests of the contractants. Whether
the restraint is reasonable or not inter partes is not by itself a measure for legality, but
unreasonableness may be an important indication that the restraint is against public
interest.
The most important factors to be considered when the public interest is determined are
the following:
The nature of the restrictive activity;

The geographical area in which the restriction is intended to operate;
The period of the restriction;
The particular interests which stand to be protected by the restriction,
such as business or trade connections, clientele and trade secrets.
A restriction intended to exclude competition as such, without also protecting some

legitimate interest, will normally be against public interest. This consideration will apply
to all kinds of restraint, including those between employer and employee, since
employees are no longer automatically regarded as being in an unfavourably
unequal bargaining position.206
Whether a restraint conflicts with the public interest is, as a rule, determined with
reference tot the circumstances prevailing at a time when a court is required to decide the
issue and not when the agreement was concluded. Occasionally, though, it would be
necessary to take a look at the circumstances that prevailed between the parties at the
time of signing of the contract in question. Remember that public interest does have an
ever-changing content and may indeed have changed since the conclusion of the
agreement, or may change in future.
87
A court is not constrained to make a simple choice between enforcing the entire restraint
or not, but may decide that a restraint is partially enforceable and partially
unenforceable.207 The onus of proving the legality of a restraint of trade-clause rests on
the party who relies on the existence of such a restraint of trade-clause. 208 If a restraint
which runs contrary to public interest remains valid, there would be good reason to
burden the contractant who resists the restraint with the onus of proving conflict
with the public interest.
Clarity is evasive on the whole issue of public policy and constitutional rights. The reason
for this is that the text of the constitution is not definitive on the precise relation between
and the weight attached to freedom of trade, freedom of contract and, overall, freedom of
personal choice.
The problem with restraint of trade-clauses in sports contracts:
Coetzee v Comitis and Others 2001 (1) SA 1254 (C)
In the abovementioned case, the applicant was a professional football player who had
been contracted by Ajax Cape Town. Only months before his contract had expired, he
was injured, with the result that he had to play for the Vasco da Gama club, in order to
gradually retain match fitness. He remained under contract by Ajax, though.
When the applicant had regained full fitness, he approached the first respondent
(Comitis) who informed him that Ajax were no longer interested in his services. The
applicant was subsequently approached by Hellenic, but Comitis demanded a transfer fee
to be paid to Ajax before issuing the applicant with a clearance certificate. The court
decided that SAFAs regulations in terms of transfer fees to be paid for players were
unconstitutional, as it resulted in a restraint of trade-clause that is contrary to public
interest- and policy.
Now, consider the following (fictitious) scenario:
Coetzees contract with Ajax has expired.

Ajax are still very much interested in Coetzees services as player, and
keen to keep him at the club.
Coetzee receives an excellent offer from Hellenic to come and play for
them, an offer which Ajax cannot match.
In the original contract between Coetzee and Ajax, a clause existed
that read as follows:
The player agrees that, when the current contract has expired, he will not be allowed to play for another
club which is in direct opposition to his current, for a period of 1 (one) playing season after expiration of
the current contract, provided the club is indeed still interested in the players services and wishes to enter
into a new contract for a period of 1 (one) season.

88
Over the previous two years, Ajax have invested hundreds of thousands of
rands in the development and care of Coetzee. Before they contracted him,
he was an unknown player with little monetary value. Because of the
quality of the coaching at Ajax and other factors, Coetzee has become the
marketable player he is today.
Although Ajax cannot match Hellenics offer, they understand that

Coetzee has developed into a much better player than when they initially
contracted him, and are totally willing to offer him a contract that would
cater for all his needs, while not as big as the Hellenic contract in
monetary terms.
Coetzee claims that the abovementioned restraint of trade-clause infringes

on his right of free trade as envisaged by section 22 of the Constitution.
Ajax claim that if they were to lose Coetzees services as a player now,
after having invested hundreds of thousands of rands in his development
as a player, it would seriously infringe their right to fair labour practices,
as envisaged by section 23 (1) of the Constitution.
What has to occur now is a balancing act: Which right should carry the most weight- the
players right to free trade or the clubs right to fair labour practices? Would it really be
against public policy to compel a player to stay on for a limited period at a club to which
that player basically owes his whole career?
In assessment of any kind, the student will be expected to answer the
abovementioned two questions depending on his/her own, well-informed opinion.
89
Unit 10
Certainty
Learning outcomes:
1. Explain what the requirement of certainty entails in terms of the validity of a
contract.
2. Discuss the consequences of uncertainty.
Study:
Alternative study:
5. Bhana et al.
Students Guide to the Law of Contract 2009. Chapter 4 para. 3
90
1. Introduction
The agreement in question must bring about certainty regarding its legal consequences.
The contractants have a duty to clearly describe the nature and practical aspects of the
performance and obligations. Failure to do so would probably result in the nullity of the
agreement. Courts have in the past been unwilling and incapable of relieving the parties
of the burden of determining the consequences of their transaction for themselves.
Irrespective of whether the agreement is oral or in writing, or concluded tacitly by
conduct, the question is whether it defines the agreement in such a way as to render the
obligations capable of being enforced by the courts.209The test in this regard is an
objective 210one and an agreement may be void for vagueness despite the parties belief
that a contract has been concluded.
Extrinsic evidence is not admissible to show that a contract is void for vagueness if on the
face of it, its terms, on a linguistic treatment, do not justify such a conclusion. It has been
said that the issue of vagueness is to be determined with reference to the state of affairs
obtaining at the conclusion of the contract.211
An agreement may attempt to achieve certainty by means of a full and exhaustive
description of the performances and other aspects of the relationship contemplated by the
parties.212 Where it is impractical, or for business reasons undesirable, to spell out the
consequences of a contract in full at its conclusion, certain aspects of the contract may be
left open for determination at a later stage in terms of a mechanism agreed to by the
contractants. Provided that such an arrangement renders the consequences of the contract
objectively ascertainable, this course of action is unobjectionable.213
Although this requirement of a valid contract is in content not as voluminous as the other
requirements, it is arguably the most important, because good writing skills and use of
grammar are needed to comply with this requirement. The performance and counterperformance must be described so completely as to discharge any possibility of
vagueness in terms of the performance.
In the next unit, attention will be given to drafting of certain clauses in a contract. The
requirement of certainty will come under sharp focus in that unit.
2. Consequences of uncertainty214
An agreement that is uncertain in an essential respect creates no obligations and the same
holds true where the agreement is uncertain in a material respect, unless the affected part
91
is severable from the agreement as a whole. The possibility that uncertainty in a
contractual term, intended for the exclusive benefit of one of the parties, may be
circumvented by a waiver of that term by the relevant party, has been rejected.
Performance in terms of a contract that is void for vagueness may be recovered by means
of an enrichment action, provided that the requirements of a recognized enrichment
action are satisfied.
End of Part I
92
LAW OF CONTRACT
PART II
CONTENTS AND OPERATION OF A CONTRACT
Unit 11
Clauses in a Contract
Learning outcomes:
1.
2.
3.
4.
5.
6.
Prepare the parties-clause in a contract by using certain provided information.

Analyze a parties-clause in completion.
Distinguish between suspensive and resolutive conditions.
Discuss the legal position surrounding time clauses in contracts.
Prepare a breach of contract-clause.
Prepare an entire agreement-clause.
Study:
Van der Merwe et al 2007. Chapter 9
93
1. Introduction
In this part of the module, attention will be given to the drafting of some of the actual
clauses that appear in most contracts. The purpose is not to equip the student with all the
tools necessary for accurate and efficient drafting, but to provide the student with the
introductory background to these clauses. Examples of each clause discussed will be
provided, and students are expected to be able to draft these clauses for test-end exam
purposes.
The following clauses will be dealt with:
Parties to a contract;
Conditions;
Terms;
Breach of Contract;
Domicilium citandi et executandi;
Whole agreement.
1. Parties
By its nature as a juristic bond, an obligation involves at least two persons and a
performance.215 The persons between whom the juristic tie or bond exists are the parties
to an obligation. The party who is under a duty to render the performance to which the
obligation relates is the debtor. The party who has the corresponding right to the
performance is the creditor. The debtor is said to be on the passive side of the obligation,
and the creditor on the active side.216 A contract can be concluded by only two persons.
There may, however, be more than one person on either side. 217 Normally, the persons
who contract become the parties to the ensuing obligations, but not always. Persons other
than the contractants become parties to the obligations when a contract is concluded
through representation or in favour of a third party.218
Examples of Party-clauses in contracts:
I.
1. Johnny Walker, Identity number 720512 3045 085 is an unmarried person,
who is selling his house in his personal capacity.
2. Jane Doe, Identity number 780512 3046 087 is married out of community of
property, and is purchasing the abovementioned house from Johnny Walker.
3. Describe the two parties in the contract of sale between them.
94
1. Johnny Walker
Identity Number: 720512 5045 085
Unmarried
(Hereinafter referred to as the Seller)
2. Jane Doe
Identity Number: 780512 3046 087
Married out of Community of Property
(Hereinafter referred to as the Purchaser)
Analysis:
It has already been mentioned that the minimum amount of parties to any agreement is 2
(two) parties. Hence the numbering of the parties 1. and 2.
The parties names, identity numbers and marital status are of paramount importance in
the description of the parties in the contract. The seller is unmarried, and therefore may
contract on his own. Although the purchaser is married, she is married out of community
of property, which means that she owns an estate separate from her spouses.
Each digit in the identity number of the parties mean something specific, and therefore
care should be taken to copy a persons identity number exactly as in the example shown
above, with necessary spaces between digits as indicated. The meaning of the digits is as
follows:
780512 3046 087:
i.
ii.
iii.
iv.
v.
vi.
The 780512 is the date of birth of the party in question.

The 3 is an indication of the gender of the party (0-4 denotes female, and 59 denotes male)
The 046 is a sequence number for a combination of date of birth and gender,
meaning that this specific person was the 46 th female-birth registered that
particular day.
The 0 is an indication of the partys citizenship. A 0 is indicative of a
South African citizen and a 1 will indicate a foreigner.
The second last digit will usually be an 8 or a 9.
The very last digit is a control digit.
Students must have knowledge of exactly what a South African identity number
entails, and should know the abovementioned analysis for test-and exam purposes.
95
For the sake of expediency, the parties are given aliases (the Seller and the
Purchaser) by which descriptions they will be known throughout the remainder of the
contract.
II.
1. ABC Investments (Proprietary) Limited, Registration Number 1978/10025/21
wishes to sell some of its immovable property to
2. James Hudson, identity number 771212 6234 085, who is married in
community of property to Jane Hudson, identity number 781224 3445 087.
3. Peter Williams, a director of the said company, has been authorized to sign
the contract of purchase of the said immovable property on behalf of the
company by virtue of a resolution dated 12 April 2000.
4. Describe the parties in the contract of sale.
1. ABC Investments (Proprietary) Limited
Registration Number: 1978/10025/21
Herein represented by Peter Williams in his capacity as Director, authorized
thereto by a Resolution of Directors dated 12 April 2000.
2. James Hudson
Identity number: 771212 6234 085
and
Jane Hudson
Identity number: 781224 3445 087
Married in Community of Property to each other.
(Hereinafter referred to as the Purchasers)
Analysis:
A company is a juristic person which cannot enter into legal acts without being
represented. In this case, one of the directors of the company has been authorized to sign
this specific contract on behalf of the company. The authorization must however be
mentioned for the sake of consensus and legality.
In the case of the purchasers, the parties are married in community of property. This
means that whilst they are two separate private persons, they are seen by the law as one
entity that possesses on estate. Therefore, parties married in community of property to
each other will always have to contract jointly.
96
III.
1. A certain trust, which has not been registered yet, wishes to buy property
from Jane Doe, a person married in terms of Scottish law.
2. The trust will be represented by Johnny Walker, in his capacity as future
trustee.
3. Describe the parties in the contract of sale.
4. Provide your own particulars if necessary.
1. Jane Doe
Identity number: 598399
Married, which marriage is governed by the laws of Scotland.
2. Johnny Walker, in his capacity as trustee of a trust still to be registered.
(Hereinafter referred to as the Purchaser)
2.Conditions:
A condition in a contract refers to a clause by which a contractual performance is
qualified by an uncertain occurrence in future.
The requirements of a condition are as follow:
Uncertain future occurrence;
The occurrence must be physically and juridically possible;
The occurrence must not be subject to the decision of the presentor
thereof only, for instance I shall give you R50 if I feel like it.
Two main types of condition are distinguished, namely the suspensive condition and the
resolutive condition.
A suspensive condition suspends or postpones the full operation of the obligation which it
qualifies until certainty is reached, in that the condition is fulfilled or in that it fails. 219 An
example of such a condition would read as follows:
Walker agrees to loan Doe an amount of R10 000.00 on condition that the latter obtains
his LL.B-degree within four years.
A resolutive condition, on the other hand, does not postpone the operation of the
obligation: the obligation operates in full, but may come to an end if certainty is reached,
in that the condition is fulfilled or in that it fails. An example would read as follows:
97
Walker agrees to give Doe a motorcar, but if Doe does not obtain the LL.B-degree
within four years, Walker will take the motorcar back with immediate effect.
3. Time clauses220
A time clause is a contractual term which qualifies an obligation with reference to a
certain moment or event in the future- a dies certus an.221 Unlike a condition, a time
clause relates to a future moment or event which is certain to occur, although it may be
uncertain exactly when it will happen. A time clause may, like in the case of a condition,
be suspensive or resolutive. Where a suspensive time clause is incorporated into a
contract, obligations come into existence when the contract is concluded, but the full
operation of the obligations is postponed until the future moment or event. Since the
future moment or event is certain to arrive at some stage, the position pending fulfillment
of a suspensive time clause differs from the position pending fulfillment or failure of a
suspensive condition. The effect of a suspensive time clause depends on whether it is
intended to be in favour of the debtor (pro debitore) or in favour of the creditor (pro
creditore). If the clause is in favour of the debtor, the enforceability of the obligation in
terms of which the debtor is bound to perform is suspended, but the obligation remains
capable of being performed. The debtor is therefore free to render performance before the
time or event fixed by the fixed by the time clause and the creditor may not refuse to
accept performance. If the clause is in favour of the creditor, the obligation is not capable
of being performed before the time or event fixed for performance. This implies that the
performability of the performance is suspended. The creditor can therefore not be
compelled to accept performance before the fixed time or event, although he is entitled to
enforce performance earlier. If a time clause is in favour of the creditor, to the extent that
it is intended only to protect him against loss of interest, the debtor may render early
performance, if he pays interest for the full period.
A resolutive time clause provides that an obligation will terminate at a certain future date
or when a certain event occurs in future. Normally, resolutive time clauses do not operate
retroactively, but contractants may agree to the contrary.
4. Breach of Contract
One of the positive aspects of freedom of contract is the fact that parties can determine
their own remedies in case of breach of contract. A typical clause in a contract would
look like this:
BREACH OF CONTRACT
Should any of the parties to this contract fail to comply with any of the provisions contained herein, and fail
to rectify the failure to comply within 7 (seven) days of written notice to comply therewith, the other party
will have the right, according to its own discretion, to:

98
a) Claim specific performance of the provision in question;
b) Cancel the contract; and
c) Claim any damages suffered as a result of the other partys breach, including all legal costs.
5. Entire agreement
Inclusion of a clause similar to the following will ensure that no additional contracts or
provisions will determine the nature of the agreement between the parties. Such a clause
will read as follows:
ENTIRE AGREEMENT
The parties agree that this will constitute the entire agreement between them, and that no additional
submittances, promises, warranties or oral agreements, whether clear or by implication, will be legally
binding.
No variations of this document will be legally binding if not made in writing and signed by both parties to
this agreement.
End of Part II
99
LAW OF CONTRACT
PART III
BREACH OF CONTRACT
1. Introduction
According to Van der Merwe et al, breach of contract was originally described (eg by De
Wet & Van Wyk) as malperformance.222 Malperformance in the strict sense of the word
is breach by a contractant of a promise to perform, which is contained in the contract. A
contractant who has promised to deliver on the first day of the month will commit
malperformance of he performs late. Such a person will also be guilty of malperformance
if he delivers defective performance. A contractant who performs late commits negative
malperformance, while someone who carries out his promise in a defective manner is
guilty of positive malperformance.
Should a contractant promise to deliver, for instance, on the thirtieth of the month, but on
the tenth of the same month denies that he is bound to perform, he is not yet on breach of
his promise. Nevertheless his action constitutes breach of contract in the form of
repudiation, because his conduct on the tenth is indicative of the fact the he will not
perform on the thirtieth. Similarly, a contractant usually does not undertake to destroy the
object of performance before delivery thereof, but if he should destroy such object, he
will be guilty of breach of contract in the form of prevention of performance.
Breach of contract can be committed by a debtor or a creditor. In terms of a particular
contract, a creditor may have a duty to co-operate with his debtor in order to enable the
debtor to perform to the creditor. If the creditor does not comply with this duty, he is
committing breach of contract, either by not receiving the performance timeously
(negative malperformance) or by refusing to accept the performance (repudiation).
Traditionally, five forms of breach of contract are distinguished:
Mora debitoris (delay by the debtor)

Mora creditoris (delay by the creditor)
Repudiation
Prevention of performance
Positive Malperformance
The correct approach, according to Van der Merwe et al, would be to divide breach of
contract into four main categories, namely mora or negative malperformance, positive
100
malperformance, repudiation and prevention of performance. These forms can be divided
into two main categories, namely malperformance and anticipatory breach of contract
(repudiation and prevention of performance).223
Unit 12
Mora Debitoris
Negative malperformance by the Debtor
Learning outcomes:
1. Provide a critical introduction to the nature of breach of contract, and also shortly
mention the forms and divisions of breach of contract and what they entail.
2. Discuss the nature and forms of mora debitoris.
3. List and critically discuss the requirements for mora debitoris.
4. Distinguish between the terms mora ex re and mora ex persona.
5. Distinguish between mora debitoris and other forms of breach of contract in
general.
6. Analyze the aspect of cancellation on the ground of mora debitoris with specific
reference to the case of Kragga Kamma Estates CC v Flanagan 1995 (2) SA 367
(A).
Cases:
Ponisammy v Versailles Estates 1973 1 SA 372 (A)
Nel v Cloete 1972 (2) SA 150 (A)
Willowdene Landowners v St Martins Trust 1971 (1) SA 302 (T)
South African Forestry Co Ltd v York Timbers Ltd 2005 (3) SA 323 (SCA)
Kragga Kamma Estates CC v Flanagan 1995 (2) SA 367 (A)
Study:
Alternative study:
6. Christie
101
Nature and forms of Mora Debitoris224

Mora debitoris refers to the wrongful failure by the debtor to perform timeously. The
mora occurs where the debtor either fails to tender the performance owed by him in terms
of a particular obligation timeously, or timeously tenders incomplete or defective
performance.225 Mora can by its nature only occur in respect of positive obligations.
Because the debtor does not effect performance at all, this form of breach can be
described as negative malperformance.
Different forms of mora are distinguished:
Mora ex re;
Mora ex persona
Mora ex lege
These will be discussed later.
Delay (mora) as a form of breach of contract relates only to the time that performance
must take place. Mora can only occur where performance remains possible in spite of the
delay. Here the time and contents of a performance are so closely linked that performance
after the due date and time would be meaningless, delay by the debtor would usually
amount to prevention of performance.226 This principle was formulated in Algoa Milling
Co v Arkell & Douglas 1918 AD 145.
If a photographer is engaged to take pictures at a wedding ceremony on a
particular date, it would be to no avail if he turns up a week later: through his delay
he has made performance impossible.
Similarly, if an employee does not show up for work, performance in respect of the
period of time which has passed will usually have become impossible.
Mora is of a continuous nature in that it may endure over a period of time. If a debtor
renders performance after having been in delay for some time, he fulfills his duty in terms
of the particular obligation, but he does not cure the breach of the past. He will still be
liable to compensate the creditor for any loss suffered as a result of the breach of
contract.227 If the creditor has acquired a right to resile on the ground of the debtors
mora, he cannot be deprived of this right by an offer of performance. A debtor who is
102
already in delay can commit another form of breach of contract, for instance by
performing defectively.228 By performing, the debtor will put an end to his delay, but
because the performance is defective he will have committed positive malperformance.
The debtor will then be liable for his mora in the past as well as for positive
malperformance.229
Requirements for Mora Debitoris
The element of conduct in respect of mora by a debtor is an omission or failure to act as
agreed, that is to tender performance while the debtor is legally subject to tender
performance.230 If, however, the failure to act leads to impossibility of performance, the
omission cannot be treated as mora but it may be some other form of breach of contract
(such as prevention of performance).231
To constitute breach of contract the failure to tender performance must be wrongful. But
before one can even speak of the wrongfulness of the failure to perform, the debt must be
due and enforceable. A debt is not enforceable before the time set for performance or, if
no time has been set in the contract, before a reasonable time has elapsed. 232Depending on
the circumstances of the contract reasonable time may mean that performance is due
and enforceable immediately after conclusion of the contract.
Requirements:
I. The debtor must be in mora
In the case of Ponisammy v Versailles Estates 1973 1 SA 372 (A), a written contract was
concluded between the appellant and one Pienaar on behalf of a company that at that
stage was still to be registered. The written deed of sale (contract of sale) contained the
following clause:
Payment of the purchase price shall be secured by a bankers guarantee to be furnished within thirty (30)
days after approval of the diagrams of the property sold by the Surveyor-General.
The deed of sale however did not contain a cancellation clause (a clause entitling the
seller to cancel the contract in the event of there being default on the part of the
purchaser).
On 24 September 1970 the Surveyor-General approved the required diagram. However,
the appellant was not informed thereof by the responsible surveyor until late in
November 1970. This meant that the 30 days mentioned in the abovementioned clause
had already expired by the time the parties heard of the approval of the diagrams.
Subsequently, the appellants attorney wrote a letter dated 24 November 1970 wherein
103
she exclaimed that Pienaar had to furnish the appellant with a guarantee on or before 23
December 1970. Early in December 1970, Pienaar informed his attorney, who
subsequently informed the appellant, that he (Pienaar) would not be able to furnish the
required guarantees before 23 December 1970.
The two parties legal representatives agreed that Pienaar would pay an amount of
R200.00 as a deposit, and that the date before which the guarantee had to be delivered
would be extended to 23 January 1971.
On the 21st of January 1971 Pienaar informed the appellants legal representative that he
still couldnt deliver the guarantees, but that a company called Sapekoe (Pty) Ltd was
interested in purchasing the property from him (Pienaar). The appellants legal
representative cancelled the contract because of the fact that the guarantees had not
been furnished within the specified time, and the appellant sold the property to a new
buyer, Mr Venter. Pienaars legal representative said that there was no right in terms of
the contract to cancel such contract, and provided the necessary guarantees, albeit late.
Pienaar also got an interdict against the appellant forcing her not to transfer the property
to Mr Venter. The court a quo decided that the appellant had to pass transfer of the
property to the respondent.
In the Appeal Court, the appellant contended that they had cancelled the contract of
purchase because Pienaar on behalf of the Respondent had failed to furnish the bankers
guarantee provided for in the said contract within the period specified in the contract. In
addition, the appellants attorney had not only initially agreed (on the 23rd of December
1970, when extension was granted to Pienaar for furnishing the guarantee) to an
extension of time for delivery of the bankers guarantee, but that she had also placed the
respondent in mora (if the guarantee was not furnished on or before 23 January 1971) and
which would have the additional effect of a notice of rescission entitling the defendants
to cancel the sale in the event of failure on the part of the respondent to perform.
Muller, JA exclaimed the following relevant words:
Where time is not of the essence of the contract, but one of the contracting parties elects to make it so,
giving a notice of rescission (a unilateral act), he should at least take care that the notice is clear and
unequivocal, so that the other contracting party is aware of the consequences of a failure on his part to
perform timeously.
The court decided that whilst the appellant had indeed placed the respondent in mora,
that placing someone in mora did not constitute cancellation of the contract. The court
thus upheld the court a quos decision.
Mora ex re
It may happen that contractants do not agree on a specific time of performance. If they
do, however, failure to tender performance at that moment would be prima facie
wrongful. In such a case, the creditor is not required to claim performance from the
debtor, because dies interpellat pro homine (literally: the day demands from the
person). Mora that takes place in this manner is called mora ex re, meaning mora
104
according to the nature of circumstances. In order for mora to arise ex re a precisely
calculable date must have been set, as was decided in the case of Van der Merwe v
Reynolds 1972 (3) SA 740 (A). In the case of LTA Construction v Minister of Public
Works & Land Affairs 1995 (1) SA 585 (C) the construction contract read that the
contractor was entitled to final payment as soon as the engineer had certified that the
work was in order. Due to the uncertainties that had to be surmounted before such a
certificate could be issued, it was decided that there had been no agreement as to a
precisely calculable day233 A time will only be a precisely calculable date if it is not
only certain that it will arrive but also when it will arrive. In the case of Repinz v
Dacombe 1994 (3) SA 756 (E) the court decided that before fulfillment a debtor must
indeed have certainty about the time of his performance, but that the certainty need not
exist upon conclusion of the contract. Consequently, if the contract reads that the
performance must be made a specific time after a certain occurrence, mora ex re can arise
after that period has expired, irrespective of any uncertainty upon conclusion of the
contract as to whether the occurrence will take place and if so, when it will take place.
Mora ex persona
Where a contract does not stipulate a time for performance, the debtor must usually take
steps to recover the debt. The creditor must place the debtor in mora by means of a
demand or notice that the debtor must perform by a certain time. The creditor thus
determines the time of performance by a unilateral juristic act. The purpose of the
demand is to inform the debtor exactly when he must perform. Mora that occurs by way
of demand is called mora ex persona, because it requires an act by the creditor. A demand
(interpellatio) must indicate the debt that must be discharged and set a specific time for
performance, which is reasonable in the circumstances. It must contain an unequivocal
and unconditional claim that the creditor desires performance. In the case of a reciprocal
contract the demand must, where applicable, contain a tender of performance by the
creditor.
The reasonableness of the time for performance set in a demand must be determined with
reference only to the circumstances affecting the time of performance of which the parties
were either aware when the contract was concluded or which they could at that moment
have reasonably foreseen. A demand which does not expressly lay down a time for
performance may possibly be interpreted to mean that performance is required
immediately. Such a demand may well be reasonable in the case of a monetary debt, but
not necessarily in all other instances.
In the case of Willowdene Landowners v St Martins Trust 1971 (1) SA 302 (T), no time
was stipulated for performance and no right to cancel included. However, the one party
could place the other part in mora by giving the opposite party a reasonable time within
which to perform and that, if within that reasonable time performance was not
accomplished, a right to cancellation ensued. It was decided that the time given for
performance must be reasonable in the circumstances. If this is not the case, the notice is
105
of no effect.234 In this case, a period given by one contractant to the other from 26 March
1969 until 30 June 1969 to perform was judged by Claassen J to be insufficient and
therefore the mora was ineffective.
The demand or notice by the creditor to perform may take the form of:
-
Interpellatio iudicialis: Formal demand by way of summons, or

Interpellatio extra iudicialis: Informal demand by way of letter, telephone, sms,
etc.
II.The Performance must be due and enforceable

Performance does not become due and enforceable before the determined date of
performance has arrived or before a reasonable period has lapsed. Van der Merwe et al
put it very clearly: Mora cannot occur in terms of an unliquidated debt. A debtor cannot
object to enforcement of the obligation raising defences such as prescription or that the
enforcement of the performance is subjected to a suspensive condition that has not as yet
been fulfilled or that the time to perform has not yet arrived.
III.
The delay must be caused by the fault of the debtor and/or his workforce.
Fault in this instance refers to fault in the delictual sense. Van der Merwe et al say that
the duty to prove the absence of fault rests on the debtor to prove same by way of an
excusatio a mora. If the delay is caused by the creditor, we are dealing with mora
creditoris.
IV.
The Performance must remain possible notwithstanding the failure to

perform.
If the performance has become impossible, we are dealing with a different type of breach,
namely impossibility of performance.
See in this instance the case of South African Forestry Co Ltd v York Timbers Ltd 2005
(3) SA 323(SCA), which had to be studies in Unit 8 of this module.
Distinction between mora debitoris and other forms of breach of contract
According to Van der Merwe et al, mora can be readily distinguished from other forms of
breach of contract.235 In the case of positive malperformance the debtor does effect
performance, albeit defectively. Where performance is prevented, it is no longer possible
and delay as such cannot exist. Nor can a delay in itself constitute repudiation, since it
will not justify a reasonable conclusion that in the future performance will not take place
at all or will be defective.236
234 Willowdene Landowners v St Martins Trust: 307
106
Special consequences of mora debitoris

A special consequence of mora debitoris is that it perpetuates the obligation. This means
that if performance becomes impossible after the debtor has fallen in mora, he will not be
excused because of the impossibility. Under such circumstances the responsible
contractant would actually be guilty of prevention of performance.237
Cancellation on the ground of mora debitoris238
There is a reason Van der Merwe et al make specific provision for a discussion of this
particular ground for cancellation. The reason is that Roman-Dutch law did not provide a
general right of cancellation on the ground of breach of contract. In the case of mora
debitoris, a creditor was allowed to cancel a contract only where a contract contained a
cancellation clause or lex commissoria. Acancellation clause could be attached to a
contract whether a date for performance had been set or not. Where a date had not been
set, the creditor had to put the debtor in mora by way of an interpellatio (see above)
before he could exercise his right to cancel.
Subject to a lex commissoria, the same applies in modern South African law. However,
because Roman-Dutch law did not provide sufficient opportunity for cancellation of the
contract on the ground of mora, South African courts adopted the English legal doctrine
of time is of the essence of the contract (the term is often used in the Ponisammy and
Nel v Cloete cases). The result hereof is that cancellation of a contract needs no longer be
based on an express lex commissoria. A right to cancel is also recognized if the debtor is
in mora, whether ex re or ex persona. The urgency of performance may be apparent from
a variety of circumstances, such as:
The contract may concern a performance which is subject to price
fluctuations;
The performance may relate to food or articles of fashion with a certain
durability or attractiveness in the market;
The performance may be of a speculative or commercial nature.
In English law, a creditor can (after conclusion of the contract) make time of the essence
of the contract by giving the debtor a notice of rescission. South African courts have
adopted the same approach. If a debtor is in mora, the creditor may by a unilateral act
obtain a right to cancel the contract by notifying the debtor that he reserves the right to
cancel the agreement if the debtor fails to perform by a certain date. 239 In such notice, the
creditor must provide the debtor with reasonable time to perform, taking into account the
steps the debtor will have to take in order to effect performance.

107
Although usually called a notice of rescission, a notice of this nature does not itself
cancel the contract, but simply warns the debtor of impending cancellation. To effect
cancellation, in other words to resile, a further juristic act is required, namely a notice that
the creditor cancels the contract. It would eliminate the possibility of uncertainty if the
notice of rescission were rather referred to as notice of intention to cancel.
In the case of Kragga Kamma Estates CC v Flanagan 1995 (2) SA 367 (A), the appellant
and respondent had entered into a contract of sale which included a lex commissoria,
which entitled the seller to cancel the agreement in the event of the purchaser breaching
any of its obligations.
In terms of the contract, the purchase price amounted to R120 000.00, payable as to R70
000.00 on signature of the contract and R50 000.00 at R500.00 a month. The respondent
later claimed that the respondent had in fact cancelled the contract, because the appellant
had not paid the R70 000.00. Additionally, the respondent claimed that she had called the
appellant to pay the R70 000.00 within a reasonable time, that the latter had failed to do
so, and that she (the respondent), had accordingly notified the appellant of the
cancellation of the contract.
Nestadt JA exclaimed that the failure of the appellant to pay the R70 000.00 constituted
mora ex re, because the payment had to be made at a specific time: At the signature of the
agreement. However, after the appellant had been placed in mora, the respondent had
continued receiving the monthly payments of R500.00. In other words, she had given a
notice of intention to cancel the contract, but not notice of cancellation.
The judge continued to state that he did not agree with the stance that the respondent had
given the appellant an extended period in which to pay the R70 000.00, and that the
respondent had to give notice to the appellant of her intention to cancel the contract in
case of non-payment.
Consequences of mora debitoris
Perpetuation of the obligation (perpetuation obligationes): If the
performance becomes impossible after the debtor has fallen in mora,
the debtor remains liable for performance. If the performance becomes
impossible after conclusion of the contract, the obligation becomes
void.
Interest a temporae morae: This refers to interest on the loss of income
which timeous performance would have meant for the creditor. The
rate of interest is determined by statute, but may also be determined
contractually.
Interest in duplum: This means that the interest may never exceed the
capital debt, and is based on public interest and fairness. It was dealt
108
with in the case of LTA Construction v Administrateur Transvaal 1992
(1) SA 473 (A).
Passing of Risk: In a contract of sale, all risk passes from the seller to
the buyer on the date which the contract of sale is perfecta.
Unit 13
Positive Malperformance
Learning outcomes:
1. Analyze and discuss the nature and forms of positive malperformance.
2. List and critically discuss each of the requirements for positive malperformance.
3. Distinguish between positive malperformance and other forms of breach of
contract.
4. Discuss the special consequences of positive malperformance.
5. Discuss the possibility of cancellation of a contract on the ground of positive
malperformance.
Study:
Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3)
SA 670 (A)
Shatz Investments (Pty) Ltd v Kalovyrnas 1976 (2) SA 545 (A)
BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms ) Bpk
1979 (1) SA 391 (A)
Alternative study:
3. Christie.
109
Nature and forms of positive malperformance240

Positive malperformance relates to the manner in which an obligation is executed. Two
forms of positive malperformance are distinguished:
-
Defective performance.
Conduct contrary to a contractual prohibition.
Defective performance:
Whether performance is defective, depends primarily on whether the performance made
complies with the terms of the contract. 241 Terms of the contract refers not only to the
consensual terms (express or tacit) but also to the ex lege terms or naturalia of the
contract. Delivery of a thing that is defective or to which the debtor has no title does not
constitute positive malperformance. Performance can be defective whether made before,
on or after the due date for such performance.
Conduct contrary to a contractual prohibition:
If a contractant commits conduct contrary to an express or tacit prohibition in the
contract, he also commits positive malperformance. An example would be where the
seller of a business undertakes not to compete with the purchaser for a specific time
within a certain area and then does compete with him. Positive malperformance can
endure for a period of time, for example where the quality of the possession that a lessor
gives to his lessee is less than what is required by the contract.
In the case of Shatz Investments (Pty) Ltd v Kalovyrnas 1976 (2) SA 545 (A), the
appellant and respondent had entered into a lease agreement which contained the
following clauses:
4.
The lessee (respondent in the case under discussion) shall be entitled to use the leased
premises for the purpose of carrying on the business of a restaurant, take-away-foods and general
dealer, and for no other purpose whatsoever, save with the consent of the lessor, which consent
shall not unreasonably be withheld.
5a. The lessor (appellant in the case under discussion) agrees to give full protection to the lessee by
not letting any of the existing other shops, and those still to be erected in the same building, for the
same nature of business or allied business, as that of the lessee, i.e. coffee bar, fish and chips, tea room,

110
take-away foods, steak house etc., and such like, other than bakery and allied lines produced on the
premises.
Clause 5a was inserted on the appellants request, except for the italicized words, which
were inserted at the respondents request.
When the agreement was still in negotiation-phase, the appellant contemplated letting one
of the other shops in the same building as a bakery. The respondent agreed thereto
provided that the bakery did not sell confectionery or take-away food like kosher and
other Jewish foods. The respondent continued to equip the leased premises for the
business of a restaurant and selling take away foods.
While the respondent was preparing to open his business, an advertisement appeared in
the vacant corner shop of the building stating that a new bakery (Quinta Bakery) would
open there soon and that this bakery was to sell confectionery and take-away foods. The
appellant had also already contracted with the owner of Quinta Bakery on these terms.
When the Quinta Bakery opened, it had an immediate and a substantial effect on the
business of Miami Restaurant, the name of the respondents restaurant and take-away
business. The court a quo correctly found that the appellant had breached contract in the
form of positive malperformance.
Requirements for positive malperformance242
Conduct in the case of positive malperformance can be described as any conduct of the
debtor that eventually results in delivery of defective performance 243 The two main
requirements are:
a. The debtor must have performed.
When can it be said that the debtor has indeed performed? As a rule, performance can
only be made with the co-operation of the creditor. The debtor will have to tender
performance and will only have performed when such performance has been accepted by
the creditor. If a debtor were to tender sufficient, correct and complete performance, and
such performance is refused by the creditor, the latter would be guilty of breach of
contract in the form of mora creditoris. If, however, the debtor tenders defective
performance and it is refused by the creditor, there is no question of completed
performance, but merely an attempt to commit malperformance. There can only be
malperformance if indeed there was performance.244 As soon as performance that is
defective has been made, positive malperformance as an act in breach of contract is
complete. The creditor, after receiving the defective performance, bears no general duty
to return it to the debtor to rectify the defects. However, in the case of BK Tooling v
Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A), Jansen JA remarked that
a creditor who has not cancelled the contract is obliged to return the defective
performance in order to enable the debtor to rectify any defects. This remark by the judge
111
implies that if a contractant relies on the defence of reciprocity and thus claims counterperformance, he is obliged to allow the other party to perform or to rectify his defective
performance, if such performance is still possible.245
The contractants may however make an exception to this rule by means of express or
tacit agreement.
A contract often states that if malperformance has taken place, the debtor must be notified
to rectify the defects within a certain time. In such a case the debtor gets a second
chance and, depending on the tenor of the provision, there can be no action against him
before the period of time has elapsed.
b. The performance rendered must be defective.
This requirement relates to the requirement of wrongfulness that is set for breach of
contract. Whether the performance is defective depends primarily on the whether it
conforms to the provisions of the contract. If the performance does not conform to the
contractual standard, the conduct is prima facie wrongful and therefore constitutes breach
of contract, unless the shortcoming is due to vis maior or circumstances beyond the
control of the debtor. Where a debtor is required to perform to the satisfaction of a third
party (such as an expert like an architect or engineer), approval by the third party is of
crucial importance in determining whether the performance is defective.246
Positive malperformance by way of conduct in conflict with a contractual prohibition can
only be present if the debtor concerned committed an act and it is found that such act is in
conflict with the particular obligatio non faciendi.
Another question is whether fault is a requirement for positive malperformance. To
answer this question, one must distinguish between warranties and other types of term.
Warranties create strict liability in the sense that impossibility of performance and a
fortiori also lack of fault offer no defence if the warranty was not carried out properly.
The question of whether fault is in fact a requirement has not been dealt with much. Van
der Merwe et al feel that fault should, in principle, not be a requirement or a defence in
respect of positive malperformance.247
Distinction between positive malperformance and other forms of breach of
contract248
Because positive malperformance can only occur by way of a positive act, it differs from
the forms of negative malperformance in that the latter consists in a negative act,
namely failure to perform. Performance that does not conform to the terms of the contract
can be distinguished from repudiation in that such malperformance can only occur if
performance has already taken place, whereas repudiation as a form of anticipatory
112
breach of contract relates to conduct that occurs before actual performance and justifies
the inference that the contractant is not going to perform as the contract requires. Thus, a
tender of defective performance can amount to repudiation. Conduct contrary to an
obligatio non faciendi amounts to positive malperformance, although such an obligation
can also be repudiated, for example where the debtor indicates in advance that he is going
to what he undertook not to do. Like repudiation, prevention of performance is a form
of breach of contract in anticipando that takes place before actual performance and for
that reason it can be distinguished from positive malperformance.
Special consequences of positive malperformance249
A creditor in the case of positive malperformance has at his disposal the normal remedies
for breach of contract. If the creditor accepted defective performance, he could retain the
performance and insist on rectification of the defects. The question that arises is whether
a creditor may reject defective performance, which is tendered or has already been
received, in order to obtain proper performance in terms of the contract. The general
opinion used to be that a creditor could reject defective performance (for whatever
purpose) only if it was seriously or substantially defective.
In the BK Tooling-case the appellate division rejected the doctrine of substantial
performance for the purposes of the defence of reciprocity in respect of reciprocal
contracts. The court held that a creditor who has not yet performed may retain his
performance until the debtor has performed precisely and completely. Analogous hereto it
is suggested by Van der Merwe et al that also where the defence of reciprocity does not
come into play, a creditor may reject performance that is defective though substantially
complete, in order to obtain proper performance. The only conditions are that the defect
must not be trivial and that proper performance must still be possible. If complete and
proper performance is no longer possible, the creditor will only be able to reject
performance if the latter is substantially defective. Where this is the case, the creditor
could reject performance and claim a sum of money as surrogate for the performance. If
the performance is not substantially defective, the creditor will have to retain the
defective performance and be satisfied with damages.
Rejection of defective performance is not in itself cancellation. If performance is rejected
for the purpose of obtaining proper performance or damages as a surrogate, the contract
remains in force and each contractant must render his performance. If, however, the
defective performance is rejected with a view to cancellation, the contractual obligations
are dissolved.
Cancellation on ground of positive malperformance250
A lex commissoria is a requirement for cancellation of a contract on the ground of
positive malperformance. In the absence of such a cancellation clause a contractant may
only resile if the breach is serious. A right to resile cannot be obtained by a notice of
113
intention to cancel (see previous unit for more information on this notice). In order to
determine the seriousness of the breach, a test has been expressed in a variety of ways,
for example:
-
the breach must go to the root of the contract;

the breach must affect a vital part or term of the contract;
the breach must be so serious that it would not be reasonable to expect that the
creditor should retain the defective performance and be satisfied with damages to
supplement the malperformance.
The competing interests of the party in breach of the contract and the innocent party must
be judged equally. What must also be determined is whether the breach in question is so
serious that it would be fair to allow the innocent party to resile. This would be up to
judicial discretion.
If performance is divisible and only part of the performance is seriously defective, the
innocent contractant may resile pro tanto only. A creditor who is entitled to resile may
resile immediately, without giving an opportunity for rectification. If the creditor does not
cancel the contract but claims damages for breach, the debtor cannot insist on making
proper performance instead of paying damages.
114
Unit 14
Repudiation
Learning outcomes:
1. Analyse the origin and nature of repudiation. The analysis should include a
discussion of the historical nature of repudiation as well as the change brought
about by the case of Tuckers Land and Development v Hovis and any opposition
towards this new approach to repudiation.
2. List and discuss the requirements for repudiation with reference to the case of
Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA).
3. Distinguish between repudiation and other forms of breach of contract in general.
4. Discuss the specific consequences of repudiation.
5. Discuss cancellation on the grounds of repudiation.
Study:
Tuckers Land and Development v Hovis 1980 (1) SA 645 (A)
Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284
(SCA)
Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA).
Alternative study:
3. Christie.
115
Origin and nature of repudiation251

The form of breach known as repudiation was unknown in Roman-Dutch law as a form
of breach. The notion that it does constitute breach was received from English law.
Repudiation refers to any conduct of a contractant from which a reasonable person in the
position of the innocent contractant would conclude that the first contractant does not
intend to comply with his duties, for example where a contractant erroneously denies the
validity of the contract. Conduct constituting repudiation may endure over a period of
time, and it is also quite possible that one and the same obligation is repudiated on
various occasions. According to the traditional view of repudiation, it amounts to an offer
by a contractant to cancel the contract and breach of contract is only present once the
offer has been accepted. Acceptance of repudiation puts an immediate and abrupt end
to the agreement between the parties. On the other hand, if the repudiation is ignored,
contractual obligations continue to exist, as there is no breach of contract present.
In the case of Tuckers Land and Development v Hovis 1980 (1) SA 645 (A), there was an
express move away from the notion that repudiation can be explained in terms of offer
and acceptance.252 The respondent had bought two erven from the appellant, a township
developer, in a proposed township. The contract of sale was suspensive and subject to the
successful demarcation of the township. The respondent had made certain payments, but
became aware later on that the appellant had run into some difficulties proclaiming the
township, and as a result thereof had prepared a new plan for submission to the proper
authorities. The problem was, however that the two erven the respondent had purchased
previously did not appear on the new plan. The respondent accepted this as an act of
repudiation of the contract and subsequently cancelled same. In a lengthy analysis of the
nature of anticipatory breach in general, Jansen JA had the following to say:
It could be said that it is now, and has been for some time, felt in our domain, no doubt under the influence
of the English law, that in all fairness there should be a duty upon a promisor not to commit an anticipatory
breach of contract, and such a duty has in fact often been enforced by our Courts.
The question had to be asked whether the appellants action would have lead a reasonable
person to believe that he (appellant) did not intend to honour the contract. Jansen JA
answered this in the affirmative, and decided that the appellant indeed committed
anticipatory breach of contract. The respondent was thus entitled to rescind from the
contract and claim back what he had paid. Anticipatory breach in this instance was
construed as breach that sets in immediately due to the breach of an ex lege duty, flowing
116
from bona fides not to commit anticipatory breach of contract. 253 Jansen JA expressed
himself against the use of the concepts of offer and acceptance in this context and
regarded the decision of a creditor to react to repudiation as an election.
Further support for this new approach can be found in a decision that repudiation occurs
at the place where the repudiating party is notified of it and not at the place where the
repudiating party is informed of the acceptance of the repudiation, as it would have to be
in accordance with the construction of offer and acceptance (This was decided in the case
of Veneta Mineraria Spa v Carolina Collieries (Pty) Ltd 1985 (3) SA 633 (D), which
need not be studied in detail for this unit). The new approach is also supported by the rule
that if a contractant repudiates and his co-contractant chooses to ignore the repudiation,
the aggrieved contractant can nevertheless, on the ground of repudiation, temporarily be
excused from the duty to take certain steps which otherwise he would have had to take.
Opposition to the new approach to repudiation
In the case of HMBMP Properties (Pty) Ltd v King 1981 (1) SA 906 (N) the Court had to
decide when prescription in respect of a claim for damages on the ground of repudiation
commences.254 If acceptance is required to complete repudiation as breach of contract,
prescription cannot commence before acceptance, but if acceptance is not required,
prescription will commence as soon as repudiation takes place. 255 The court in this
instance held that repudiation becomes a breach of contract only if it is accepted. And
found that prescription commenced on the date of acceptance of repudiation. In
Culverwell v Brown 1990 (1) SA 7 (A) the court held that repudiation merely affords the
injured party an election to terminate the agreement by accepting the repudiationand
unless and until that happens the repudiators obligation to perform and the other partys
right to receive performance remain wholly unaffected.256
This viewpoint is in direct conflict with the new approach. The court also intimated that
a claim for damages on the ground of repudiation arises only upon acceptance of the
repudiation, because prior to acceptance of repudiation there would not yet be breach of
contract.257
In the case of Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284
(SCA) the traditional approach was finally rejected. This means that the current position
is that repudiation in itself is breach of contract because the objectionable conduct is
wrongful and not because it is turned into breach of contract by offer and acceptance.
Acceptance of the repudiation is not required to complete the repudiation as an act of
breach of contract, but simply amounts to the exercising of an election to exile.258
256 At 28E
117
Requirements for repudiation
Van der Merwe et al exclaim that repudiation is any conduct by a contractant from
which a reasonable person in the position of the innocent contractant would infer that the
first contractant, without lawful grounds, does not intend to comply with his duties in
terms of the contract.259 It should however also be mentioned that a contractant who
correctly refuses performance on the ground of a term in the contract, does not repudiate
the contract, but actually enforces it.
To complete breach in the form of repudiation, three requirements need to be met:
a. The defendant must have displayed conduct that indicates an intention of future
non-compliance with the provisions of the contract. The test is whether, fairly
interpreted, the defendant exhibits a deliberate and unequivocal intention no
longer to be bound. The law requires not only objective consideration of the
defendants conduct, but its impact on the other party to be assessed as well.
b. The plaintiff must have accepted this conduct as breach of contract, as was written
by the counsel in Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA).
c. The plaintiff must have given notice to the defendant that he has accepted the
conduct as breach of contract.
In the case of Highveld 7 Properties v Bailes, the respondent had sold immovable
property to the first appellant in terms of a written contract of sale. The property was to
serve as a golf course residential estate. The original agreement obliged the appellant to
facilitate steps to secure approval of a development plan for the property and, within
seven days of such approval having been granted, to deliver to the respondent certain
guarantees for the payment of the purchase price. After the original agreement had been
concluded, the parties conducted further negotiations with a view to the possible variation
thereof. It was sought to adjust the boundaries of the property in question, with a
concomitant adjustment of the purchase price. As a result of these negotiations, the
respondent adopted the attitude that consensus had been reached about the new
boundaries and about the increased purchase price of the property. However, the appellant
denied that any such further agreement had come into existence. The respondent
nonetheless demanded performance from the appellant in terms of the disputed
agreement. He caused application to be made for the approval of a development plan for
the property, reflecting the adjusted boundaries entailed by the disputed agreement, and
thereupon demanded that he appellant deliver guarantees for the payment of the increased
purchase price, threatening legal action if his demand was not met.
The appellant eventually formed the view that the respondents insistence on the
implementation of the disputed amounted to a repudiation of the original agreement, and
accepting such repudiation, cancelled the original agreement. The court a quo held that
118
the disputed agreement had not been proved, but that the respondents conduct had not
amounted to a repudiation of the original agreement.
On appeal, Streicher JA held that the question which had to be determined was whether
the attitude adopted by the respondent constituted repudiation. The test to determine
whether conduct amounted to a repudiation was whether, fairly interpreted, it exhibited a
deliberate and unequivocal intention no longer to be bound. On appeal, the court thus
overturned the decision of the court a quo, and decided that the respondents attitude did
indeed constitute repudiation.
Distinction between repudiation and other forms of breach of contract260
Repudiation differs from negative malperformance in so far as a delay per se does not
justify a reasonable conclusion that performance is being refused or that defective
performance will be rendered. Repudiation differs from positive malperformance in that
repudiation occurs before actual performance, although repudiation may well anticipate
positive malperformance. In some instances, a contractants conduct can constitute
repudiation as well as positive malperformance. For the latter to happen, the message
should be conveyed that the defaulters intention is not to comply with the particular
obligation in future. Repudiation differs from prevention of performance in that
repudiation anticipates eventual malperformance with relative and not absolute certainty.
Special consequences of repudiation261
Repudiation per se does not advance the date of performance, nor does it give rise to
mora debitoris where no date for performance has been fixed. If a contractant repudiates
his duty to perform, the repudiation affects his co-contractants outstanding
corresponding duties to perform even where the latter prefers to maintain the contract in
spite of the repudiation.
Cancellation on the ground of repudiation262
Any true form of repudiation justifies cancellation. In terms of the new approach to
repudiation discussed above, repudiation of any contractual duty amounts to breach of
contract, although repudiation in respect of a subordinate duty would not warrant
cancellation. The creditor will only be able to resile if the anticipated malperformance
would justify cancellation. If mora is thus anticipated, the creditor can resile on the
ground of repudiation if the contract contained a lex commissoria or of time is at the
essence of the contract.
Van der Merwe et al feel that cancellation should probably also be allowed if the debtor
repudiates completely by intimating that he is not going to perform at all.
119
Unit 15
Prevention of Performance
Learning outcomes:
1. Explain the nature of prevention of performance, with specific reference to the
distinction between absolute and relative prevention of performance.
2. List and discuss the requirements for prevention of performance.
3. Distinguish between prevention of performance and other forms of breach of
contract generally.
4. Discuss the specific consequences of prevention of performance.
5. Discuss cancellation on the grounds of prevention of performance.
Study:
Contract. General Principles. Third Edition. Chapter 10, pp. 366-369.
Administrator, Natal v Edouard 1990 (3) SA 581 (A).
Alternative study:
3. Christie.
The Law of Contract in South Africa. 2006. Chapter 13.
120
Nature of Prevention of Performance

Prevention of performance consists in conduct after the conclusion of the contract by
which the debtor makes it impossible for himself 263 to perform. Such conduct may be a
positive act or a neglect to perform. The resulting impossibility may be total or partial.
Performance is impossible where it is physically impossible but also where it is in fact
physically possible but for all reasonable and practical purposes impossible.
In the case of Administrator, Natal v Edouard 1990 (3) SA 581 (A), a medical doctor
undertook to sterilise a patient immediately after the birth of her third child. The doctor
failed to perform the sterilization, with the result that the woman fell pregnant again. The
doctors failure amounted to prevention of performance in terms of his undertaking to
(successfully) sterilise his patient.
Prevention of performance is a form of anticipatory breach of contract, and can therefore
occur before, on, or after the date set for performance. By virtue of its nature, however,
prevention takes place before actual performance. Performance may be made absolutely
(objectively) or relatively (subjectively) impossible.264 Absolute prevention of
performance predicts malperformance with absolute certainty, while relative prevention
of performance anticipates malperformance only with reasonable certainty. One can
understand Van der Merwe et als argument, then, that relative prevention of performance
should actually classify as a particular form of repudiation, rather than prevention of
performance.265
Breach of contract in the form of prevention of performance is complete as soon as
performance has been prevented.266
Requirements of Prevention of Performance
Prevention of performance can only be breach of contract if the particular conduct
infringes a contractual obligation and is therefore wrongful.267 If post-contractual
impossibility of performance is due to vis maior or casus fortuitous, the obligation
concerned is entirely or partially extinguished and the chain of events is called
121
supervening impossibility of performance.268 Under these circumstances there is no
breach of contract, because the element of wrongfulness is excluded.
Fault is another requirement of prevention of performance.
Distinction between prevention of performance and other forms of breach of

contract
Prevention can be distinguished from mora on the basis that in the case of the former,
performance is no longer possible.269
The distinction between prevention and positive malperformance lies in the fact that the
former is anticipatory breach of contract and thus occurs before performance is rendered.
Repudiation and prevention are distinguished in that prevention predicts eventual
malperformance with absolute certainty, while repudiation anticipates it with relative
certainty only.270
Special consequences of prevention of performance271
No order for specific performance can be granted if the performance has become wholly
impossible. If, however, performance is only partially impossible, a creditor can claim
specific performance of the possible part of the performance, and claim damages in terms
of the impossible part. An obligation is not extinguished by total prevention of
performance and the debtor remains bound in terms of the obligation. The creditor may
resile from the contract but may also decide to uphold it. If the latter decides to uphold
the contract, he cannot claim damages as a surrogate for the performance. Van der Merwe
et al argue that a more convincing view would be to suggest that the obligation is in fact
extinguished by total prevention of performance, , and that the contractant who breaches
the performance must compensate the other contractant for damages suffered.272

122
Unit 16
Mora Creditoris
Negative Malperformance by the Creditor
Learning outcomes:
1. Shortly discuss the nature of mora creditoris.
2. List and shortly discuss the requirements for mora creditoris.
3. Distinguish between mora creditoris and other forms of breach of contract in
general.
4. Critically evaluate and discuss the special consequences of mora creditoris.
Study:
Contract. General Principles. Third Edition. Chapter 10, pp. 372.
Pienaar v Boland Bank 1986 (4) SA 102 (O)
LTA Construction v Minister of Public Works & Land Affairs 1992 (1) SA 837 (C)
Alternative study:
3. Christie.
123
Nature and forms of mora creditoris

Mora creditoris occurs where the creditor wrongfully fails to render his co-operation to
enable the debtor to perform.273 Mora creditoris can occur before performance by the
debtor remains possible despite the delay by the creditor. This form of breach can take the
same forms of mora creditoris.
If an employer delays in making use of the services tendered by his employee,
performance by the employee for that specific period is rendered impossible.
Requirements for mora creditoris
In the LTA Construction-case, it was decided that where a creditor is required to cooperate before performance is tendered and a time for his co-operation has been set in the
contract, the creditor must render his performance at the required time, otherwise he will
fall into mora ex re. If no time has been set for co-operation in the contract, or if the
debtor wants to perform before or after the time set for performance, the debtor must
demand the creditors co-operation in order to place him in mora ex persona.274
Other requirements for mora creditoris are as follows:
The debt (performance) must have been capable of being fulfilled.

The debtor must have made proper performance or at least have
tendered proper performance.
The creditor must have failed to accept the performance tendered or
refused to co-operate to its being made.
The creditor or his employees must cause the delay.
The creditor must be at fault
Distinction between mora creditoris and other forms of breach of contract.

It should be kept in mind that mora creditoris is not the only form of breach capable of
being committed by the creditor. This form of breach refers only to delay (negative
malperformance) by the creditor.
124
Where, for example, a contract of locatio conductio operis requires the creditor
to supply instructions, drawings, specifications, materials or tools, and he does so
defectively or supplies a defective item, the creditors conduct may amount to
positive malperformance.
Also, where a creditor points out the wrong stand for a builder to build on, he
commits positive malperformance. The same applies if the client of an eye surgeon
does not give correct answers to the surgeons questions, with the result that the
spectacles as delivered are ineffective.
Mora creditoris can be distinguished from repudiation, in that where a creditor acts in
such a manner that the debtor may reasonably conclude that the creditor will not perform
(co-operate) properly, it would be repudiation.
It may be distinguished from other forms of breach by the creditor by virtue of the same
considerations, mutatis mutandis, as those that apply to mora debitoris.
Special consequences of mora creditoris275
When a creditor falls into mora in respect of an obligation, mora by the debtor in respect
of that obligation is terminated, since a debtor and a creditor cannot be simultaneously be
in mora in respect of the same obligation. 276 The debtor is, however, not excused from
any liability for mora prior to the termination of his delay prior to the mora of the
creditor.277
From the moment of mora creditoris, the debtor is liable only for damage due to his
intent or gross negligence. From the moment of his mora, the risk of supervening
impossibility of performance rests on the creditor.
A surety in terms of the principle debt will be released by the mora of the creditor.
Therewith, liability to pay interest on the principle debt should cease in case of mora by
the creditor. The same principle applies to liability to pay for the use of goods which the
debtor has properly tendered to return.278 A debtor is not released from his debt just
because the creditor is in mora. A debtor is, however, entitled to sue for counterperformance, provided that he himself has tendered proper performance. A debtor is
entitled to an order for specific performance, in other words an order compelling the
creditor to receive performance.
A creditor will be liable for damages, such as wasted costs, suffered by the debtor as a
result of mora creditoris.279
125
The following cases demonstrate the working of the form of breach as handled
by the courts, and should be studied in detail:
Pienaar v Boland Bank 1986 (4) SA 102 (O)
LTA Construction v Minister of Public Works & Land Affairs 1992 (1) SA 837 (C)
LAW OF CONTRACT
PART IV
REMEDIES
Unit 17
The Principle of Reciprocity
Learning outcomes:
1. Critically discuss the nature of the principle of reciprocity and the exceptio non
adimpleti contractus as applied in the case of BK Tooling (Edms) Bpk v Scope
Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A)
2. List and discuss the requirements for the application of the principle of
reciprocity.
3. Discuss the attributes of the right to withhold performance.
4. Analyze the notion of relaxing the principle of reciprocity.
Study:
Contract. General Principles. Third Edition. Chapter 11, pp. 388-392.
BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA
391 (A)
Alternative study:
3. Christie.
126
Introduction to the Principle of Reciprocity

According to Van der Merwe et al, obligations are reciprocal if they are created one in
exchange for the other.280 A reciprocal contract, which are governed by what is known as
the principle of reciprocity, is a contract in terms of which performance (or a tender of
performance) by a plaintiff is a requirement for the enforceability of his claim for
counter-performance.281 Thus, a party to a reciprocal contract may withhold performance
in order to secure counter-performance. The right to withhold performance is generally
known as the exceptio non adimpleti contractus (hereinafter referred to simply as the
exceptio).282 The exceptio is an extraordinary remedy, as it is not an action with which to
commence litigation, but merely a claim in replication.
In cases of reciprocal obligations where the defect in the performance of one contractant
does not justify cancellation of the agreement because the defect does not affect a vital
part of the contract, the other contractant is entitled to withhold his counter-performance
while he remains in possession of the defective performance.
Facts of the BK Tooling-case
Towards the end of 1973 the appellant received a drawing for the implementation of a
rubber-fitting to the engines of certain Ford vehicles from a company known as Paulstra.
Paulstra would manufacture such fittings and supply them to Ford. In order to supply
and manufacture these fittings, Paulstra needed metal-moulds. The appellant was to
submit a tender for the manufacturing and supply of these moulds.
The drawing received by the appellant from Paulstra provided complete measures, and
allowed a tolerance of 0,5 mm. Basically, it was to be symmetrical, consisting of two
identical halves that would fit on top of another. The appellant made the necessary
drawings for the manufacturing of a mould and at the end of 1973 he requested the
respondent to finalise the metal moulds in order to create a prototype. This prototype was
presented to Paulstra, which found it to be acceptable, and Paulstra subsequently placed
an order from the appellant for 16 moulds at R5000.00 each. Two separate order forms
were used for this order, both containing the following wording:
Delivery= 20 May 1974 latest. The purchaser reserves the right to cancel the whole or part of this order at
any time after the mentioned delivery date for goods not yet received.

127
The respondent was instructed by the appellant to do some finer work, which the latter
was not capable of doing, with regard to the moulds. On the 8 th of March 1974 the
respondent sent a letter to the appellant with the following content:
We thank you for your verbal enquiry and have pleasure quoting as follows:
The sinking of 32 rubber moulds.
Price for one mould (one top and bottom impression)R150.
Material to be supplied by yourselves pre-machined as discussed with (the appellant).
Delivery: 9 weeks after receipt of order and material.
The appellant only received the completed products on 19 June 1974, although he was
himself responsible for certain delays. The appellant did not pay the respondent in terms
of a note that payment would be made, and the respondent was unwilling to continue
work on a second batch of moulds. Also, the respondent went overseas and only returned
on 20 July 1974. By that time, the appellant was under tremendous pressure from Paulstra
to deliver the moulds and was afraid that Paulstra would cancel the agreement between
them. The respondent was persuaded to finish the second batch of moulds for the
appellant, and same was received by the latter on 12 August 1974.
On the 15th of August 1974 Paulstra tested the moulds. They did not adhere to the
specifications that were agreed upon. Paulstra refused to accept the moulds. On the 16th of
August 1974, the respondent contacted the appellant regarding payment of the formers
account. The appellant told the respondent that he was not going to pay the account as the
work was unsatisfactorily done. The respondent, however, requested that the moulds be
given back to him in order to allow him to make rectifications. This request was refused
by the appellant.
Application to the current matter
The respondent in the court a quo based his claim on the exceptio in denying that the
plaintiff has duly performed its obligations. Jansen JA noted that the basis of the
exceptio is an acknowledgment that with contracts which create reciprocal duties, a
contractant has the right not to perform before the other contractant has performed.
Jansen JA mentioned a few aspects of the principle of reciprocity and its application by
means of the exceptio, namely:
a. In contracts wherein reciprocal obligations are created it is basically a matter of
interpretation whether the obligations are so closely linked that the principle of
reciprocity applies.
b. The sequence of performance and counter-performance also depends upon the
contractual provisions. If, however, another intention does not appear, the
contractant, in locatio conductio operis for example, must first perform.
128
c. On the ground that the withholding of the thing sold was already regarded in the
Corpus Iuris as being analogous to the holding of a pledge, on would expect that
the exceptio would only apply as a defence until performance was actually made.
The right of withholding (the converse of the exceptio) is, therefore, essentially a
means of enforcing the counter-performance. It can fulfil a function similar to
retention moneys in a building contract. On the other hand it follows that, as long
as performance remains possible and the contract is not cancelled, the other party
can still perform. Indeed, this possibility should be related to our (the South
African) doctrine of mora and purgatio morae.
d. If the right of withholding is regarded as being analogous to the holding of a
pledge, it would entail that a partys own performance could be withheld until the
counter performance is fully made. In the case of locatio conductio operis it is all
the more the case that the contractor must fully perform before he is entitled to the
contract price.
e. According to Voet 19.1.23 the onus is on the plaintiff, when the exception is
raised against him, to prove that he has in fact performed his side of the contract.
Since then, this has apparently never been doubted as far as our law is concerned.
In the BK Tooling-case, the whole field and application and law relating to the principle
of reciprocity were reviewed.
In principle, thus, a contractant who claims performance by his co-contractant must
allege in his pleadings that he has already performed properly or else that he is ready and
able to perform properly. If the pleadings do not contain such an allegation, the other
contractant may raise the exception that the pleadings disclose no cause of action. The
contractant who makes the averments will bear the onus of proving them. A denial of the
averments by the other contractant is a defence in terms of the principle of reciprocity.283
Requirements for the application of the principle of reciprocity
The principle can only apply if the obligations are reciprocal, and if either of the
contractants are required to perform simultaneously or the contractant, who claims
performance, is bound to perform before the defendant. A contract who has a duty to
perform first, cannot withhold that performance by virtue of the principle of reciprocity,
even if he has reasonable grounds to believe that the other contractant will not perform in
turn.284 Obligations are reciprocal if the contractants intend that one obligation is created
in exchange for the other obligation. Contracts such as sale, lease, mandate, locatio
conductio operis and insurance are usually treated as reciprocal contracts.
A relation of reciprocity may exist where more than one obligation is created in exchange
for a counter-obligation. Reciprocal obligations may even arise from separate contracts,
as was decided in the case of Wynns Car Care Products (Pty) Ltd v First National
129
Industrial Bank Ltd 1991 (2) SA 754 (A). As a rule, parties to a reciprocal contract must
perform simultaneously, unless they have agreed otherwise. The principle of reciprocity
can be invoked not only where the contract creating the rights is still in force, but also
where it is cancelled and rights already accrued survive the cancellation.285
Attributes of the right to withhold performance
The right to withhold counter-performance is an instrument for enforcing specific
performance. In this sense, it has been compared to a pledge, in the sense that the
defendant may withhold his performance until the plaintiff performs properly.286
The exceptio is also depicted as a temporary defence aimed at obtaining specific
performance of a performance that is indeed still possible. The defence is, however, not
necessarily temporary in nature, and may also be available where outstanding
performance is no longer possible.287
The exceptio is not available to enforce a claim other than a claim for performance under
the contract, such as a claim for damages based on misrepresentation or breach of
contract. Finally, the principle of reciprocity, including the concomitant right to withhold
performance, is not a remedy for breach of contract, but simply denotes a requirement for
the eligibility of a plaintiffs right to performance.288
Relaxing the principle of reciprocity289
Should a contractant perform improperly with regard to an indivisible obligation, and
simultaneously the co-contractant upholds the contract, the latter may retain may either
retain the inadequate performance or reject it and claim proper performance. 290 In case of
the latter scenario, the contractant who has committed malperformance cannot claim
counter performance, unless proper performance is offered anew. In terms of the now
defunct doctrine of substantial performance, a contractant could only reject the defective
performance if it was substantially inadequate. For the purposes of the principle of
reciprocity the doctrine of substantial performance has been rejected by the BK Toolingcase. The current emphasis is on the right of a contractant to receive proper and complete
performance in terms of the contract. Accordingly, a contractant from whom performance
is being claimed by a co-contractant, who is bound to deliver simultaneously with or
before him, may in principle withhold his own performance until the co-contractant
performs properly. If a defendant does withhold his performance, he will have to allow
the plaintiff the opportunity to complete the defective performance, provided that proper
performance still remains possible. The explanation for this is that a defendant who
upholds the contract and relies on the defence of reciprocity in effect demands proper
285 Van der Merwe et al 2007: 390.
130
performance and is therefore only entitled to withhold performance in so far as proper
performance is outstanding. If defective performance is eventually properly completed by
the plaintiff, the defence of reciprocity is exhausted.
Unit 18
Specific Performance, Cancellation and Damages
Learning outcomes:
1. Identify, analyze and critically discuss the remedy of specific performance.
2. Identify, analyze and critically discuss the remedy of cancellation.
3. Analyze and discuss the claim for damages and what it entails, with specific
reference to the case of Holmdene Brickworks (Pty) Ltd v Roberts Construction
Co Ltd 1977 (3) SA 670 (A).
Study:
3. Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3) SA 670
(A).
Alternative study:
4. Christie.
131
1. Specific Performance
1.1.
Forms
Performance in forma specifica refers to performance of that on which the

contractants agreed. A claim for performance is thus based on the contract, and not
the breach thereof. Where a contractant elects to uphold a contract and claim damages
because of not having received his co-contractants performance, the value of the
performance that should have been made must be taken into account when the
damages are calculated. When damages (additional to specific performance) are
calculated, all surrounding factors must be considered.
In practice, damages are usually claimed in addition to specific performance.
1.2.
The right to specific performance
In early Roman law, a contractant who committed breach of contract could not be
ordered to deliver a thing or render a service- only to pay a sum of money. In later
Roman times and in Roman-Dutch law, however, the order for specific performance
became possible.291In some instances specific performance would not be granted, for
instance where performance became subjectively or objectively impossible or where
the debtor became insolvent. In such a case the creditor would be satisfied with
damages. In South African cases such as Farmers Co-operative Society v Berry 1912
AD 343 and Haynes v King Williams Town Municipality 1951 (2) SA 371 (A), the
principle was adopted that a contractant is entitled to an order for specific
performance in South African law, but that a court has a discretion to refuse such an
order.292 Under influence of English law (which adopts an approach that specific
performance is an exceptional remedy), the courts have exercised their discretion in
such a manner that it appeared as if an order for specific performance would be
automatically refused in the following circumstances:
-
If it were supposedly difficult for the court to supervise the execution of the order
for specific performance;
If damages were to award sufficient redress.
This rather rigid approach to exercising the discretion of the courts elevated the
particular circumstances to general rules, and obscured the fact that, according to South
African law, an order for specific performance should be refused only in exceptional
132
circumstances.293 The appellate division has reaffirmed that a contractant is entitled to an
order for specific performance in the case of Benson v SA Mutual Life Assurance Society
1986 (1) SA 776 (A), except where specific performance is impossible or if the debtor is
insolvent. The courts discretion to refuse specific performance is regarded as a judicial
discretion which must be exercised in accordance with public policy and in such a
manner that it does not bring about an unjust result.
In the case of Haynes v King Williams Town Municipality mentioned above, the
plaintiff had a contractual claim to receive regularly a certain quantity of water
from a dam which supplied the town with water. In spite of a severe drought and a
shortage of water, and although she did not need the water, the plaintiff claimed
specific performance. The court refused to grant an order for specific performance,
as such an order would have contrary to public interest.
2. Cancellation294
Cancellation of a contract, also referred to as resiling form a contract, is defined by Van
der Merwe et al as a unilateral juristic act which terminates certain consequences of a
valid contract.295 Cancellation is a contractual remedy in view of the fact that it is
inferred from a contractual term, which comes into operation upon breach of contract.
The term referred to will usually be an ex lege term.
Cancellation is an extraordinary remedy which is only available in exceptional
circumstances, namely where the breach of contract is material or serious, or where the
contract provides for a right to resile (a so-called cancellation clause or lex commissoria).
Common practice is for contractants to agree that cancellation may only take place after a
written demand by one party to the other has not been complied with within a certain
time.
A contractant who has obtained a right to resile, is not necessarily obligated to do so, but
remains entitled to specific performance. Is it possible, however, for there to exist
exceptional circumstances in which a contractant can be expected to resile rather than
insist on execution of the contract? In English law, the general rule is that where a
contract has been repudiated, the other contractant need not accept the repudiation and
cancel the contract, but may claim specific performance. 296 In South African law there is
no rule that the victim of repudiation must resile merely because upholding the
obligations would result in wasting a performance. Such wastage may however move a
court to refuse an order for specific performance. Any limitation of a contractants
capacity to claim specific performance in these circumstances would in such a case not be
restricted to instances of repudiation, but ought to apply to all instances of breach of

133
contract. 297 I f a court were to refuse to grant an order for specific performance, the
plaintiff could still claim damages where he has suffered damage, but his claim would be
subject to the mitigation rule (see further on in this unit). A contractant who wants to
claim damages after cancellation, may well be compelled to cancel at a convenient time
in order to mitigate his damage.
The right to resile is not a subjective right, but a power or competence.298
3. The claim for damages299
3.1.
Point of departure
The plaintiff (innocent party) must be placed in the financial position he would have been
in had it not been for breach of contract, in so far as he can be place in this position by the
payment of money and without due hardship to the defaulting party (Victoria Falls &
Transvaal Power Co Ltd v Consolidated Langlaagte Mines Ltd 1915 AD 1). This broad
pint of departure is referred to as positive interest, and includes the actual patrimonial
loss as well as the loss of profit.
Study the case of Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd
1977 (3) SA 670 (A) in detail.
3.2.
Patrimonial loss must be suffered
A plaintiff may only claim damages if he actually suffered damage to his estate. Not all
breaches of contract will result in material damage. Consequently all claims for
infringement of personality property will be excluded, as will claims for mental distress.
A court will, however, award a discretionary amount for personal and physical
discomfort. The damages must be estimated if they are not precisely determinable.
3.3.
Causation and the claim for consequential damages
Our present legal position is governed by the judgment in Shatz Investments v

Kalovyrnas (see positive malperformance). The damage suffered must be causally linked
to the breach itself.
Two aspects of causation are relevant:
The contemplation of the (ordinary and consequential) damage itself.

The exact moment of contemplation of all the consequential loss.

299 Recognition is hereby given to Prof N.J. Grobler: KON 224 Study Guide 2006,for
this section.
134
In the Holmdene Brickworks-case, the court stated that the defaulting partys liability is
limited in terms of broad principles of causation and remoteness to:
a. Those damages that flow naturally from the kind of breach in question and which
the law presumes the parties contemplated as a result of the breach; and
b. Those damages that, although caused by the breach of contract, are ordinarily
regarded by the law too remote to be recoverable, unless in the special
circumstances attending the conclusion of the contract, the parties actually or
presumptively contemplated that they would probably result from its breach.
For the recovery of special damages, the following are required:
3.4.
Special circumstances.
Both parties contemplated the kind of damages in question should
breach of contract occur.
Both parties must be aware of the abovementioned special
circumstances.
Both parties must have contemplated the recovery of these damages.
The recovery of these special damages must be expressly pleaded in a
particular case.
The Mitigation Rule
The mitigation rule basically implies the following:

The plaintiff must prevent the accumulation of his damages. The principle is that the
plaintiff cannot recover damages from the defendant caused by himself. Said plaintiff
must take active steps to prevent further damages arising, and must also take reasonable
steps to ensure such prevention of further damages. The said steps must not be laborious,
arduous, or expensive.
3.5.
The Once-and-for-all Rule
It is a principle of our law that a person can only approach the court once on the same
cause of action. If one institutes litigation, the plaintiff must claim everything and all
amounts simultaneously.

Law of Contract Summary

Diunggah oleh

Informasi Dokumen

Judul Asli

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Law of Contract Summary

Diunggah oleh

Hak Cipta:

Format Tersedia

1

Discuss the historical roots of the Law of Contract in South Africa.

Essentialia: Those elements

11 Van der Merwe et al 2007: 8

Incidentalia: Clauses that

9. Requirements for a valid contract

Unit 2: The Requirement of Consensus

Explain what is meant by the basis of a contract and how it is formed.

1. The Basis of a contract15

Intention of the contractants;

Contractants must be agreed on the consequences they wish to create.

Advantages of the will theory:

In a society which accepts the free expression of individual will and

The theory has strong historic roots in the Roman-Dutch Law.

The theory functions satisfactorily as an explanation for contractual

It also functions satisfactorily in the case of absence of liability where

Critique against the will theory:

The theory experiences problems with explaining misrepresentation

The Will Theory was preferred in the following cases:

students must have a thorough understanding of what the courts said in

It has a subjective nature.

4. The Objective Approach for determining Consensus

The iustus error-doctrine:

-This doctrine implicates that someone who mistook some element of a

-The guilty misrepresentor is bound by/held liable for his misrepresentation.

Discuss the background of consensus obtained by improper means.

16 Van der Merwe et al 2007: 102

22 Van der Merwe et al 2007: 104

Representation and contractual terms

31 Van der Merwe et al 2007: 105

2.3.1. Act or conduct35:

der Merwe et al 2007: 113-114

The two different forms of misrepresentation.

2.4.1. Fraudulent misrepresentation:

Explain what is meant by the term duress.

It sometimes happens that a contractants decision to enter into a contract is

46 Van der Merwe et al 2007: 117-118

1.2.1. Act (conduct)51

Obtaining consensus by a threat of civil proceedings (such as instituting

Occasionally, a contractant concludes a contract due to duress by a third party

The courts reference to true consent should be taken to mean that

That the other contractant obtained an influence

Elements of Undue influence64

He wouldnt have contracted if he had been aware of the true facts.

Elements of a valid offer69

An offer is an expression of will, made with the intention of creating an obligationary

Legal consequences of an offer74

With regards to postal contracts, South African Law follows the

The acceptance theory is prescribed by statute with regards to internet

The case of A-Z Bazaars v Minister of Agriculture 1975 3 SA 468 (A).

Departures from the information theory

Geographical separation of parties;

The Dispatch/Expedition Theory

Submittance od a letter into a post box;

A communication of acceptance addressed to the sellers own agent could not

The courts decision was as follows:

The Declaration Theory

The Acceptance Theory

105 Christie 2006: 78

According to Van der Merwe et al, a pactum de contrahendo is a contract aimed at

114 Christie 2006: 37

An option contract must satisfy the requirements generally applicable to

The object of the option must be clearly described.