Section B Chapter 4 48

CHAPTER 4:

GENERAL INTRODUCTION

OBJECTIVES

After completing this chapter you should be able to:

 Define a contract
 Distinguish between valid, void and voidable contracts
 State the requirements for a valid contract
 Explain what is a “unilateral” contract
 Explain what is a “bilateral” contract
 Apply the contents of this chapter to solve problems

Contents Page

1. What is a contract? 48-50

1.1 When is an agreement a contract?

1.2 Valid, void and voidable contracts
1.3 Types of agreements

2. Methods of communication between the parties 50

1. WHAT IS A CONTRACT?

When considering contracts in general, it is apparent that all contracts are

agreements, but not all agreements are contracts. A social appointment or
engagement is, for example, an agreement, but not a contract.

EXAMPLE

If you invite twenty people for dinner and six of them fail to turn up, you
have no right to sue any of them for breach of contract. If the liquor store
or the caterer, however, fails to deliver the refreshments for your party,
you have the right to sue them for breach of contract.
 Section B Chapter 4 49

It is therefore necessary to establish the true nature of a contract before

studying the basic principles of the law of contract. The most important
aspects of a contract are:

 The party’s intention to create legal obligations; and

 The legal results (rights and duties) that follow.

That is also why a social agreement does not create a legal duty, but
rather a moral duty. The relationship between the parties to an obligation
is one recognized and regulated by law.

1.1 When is an agreement a contract?

To answer this question, one must look at the definition of a

contract:

A contract is an agreement entered into by two or more persons (a

Definition of a person cannot contract with himself alone) with the serious
contract intention of bringing about an obligation, provided that such an
obligation will only be valid if:

 The parties have reached consensus;

Requirements
for a valid  The parties have contractual capacity;
contract  Performance is possible at the time the contract is entered
into;
 The conclusion, object and performance is lawful; and
 Formalities have been complied with.

These five requirements for the formation of a valid contract are

discussed in more detail in Chapters 5 – 11.

1.2 Valid, void and voidable contracts

A valid contract can be described as a contract that fulfills all the

requirements laid down in the foregoing definition.

A void (invalid) contract is used to refer to an agreement that is in

fact not a contract because one (or more) of the requirements for a
contract is absent. A void contract creates no rights and duties
whatsoever.
Section B Chapter 4 50

By contrast, a voidable contract1 is binding on both parties, but one

of the parties has the option to set it aside (cancel), but, until
he/she does so, it remains valid and enforceable.

1.3 Types of agreements:

 Unilateral agreements

A unilateral contract is one in which only one party to the

contract has a duty to perform and the other a corresponding
right. An example is a donation where one party binds
himself/herself to a commitment or obligation, while the other
party (if the terms of the proposed offer are accepted) has a
corresponding right to claim such commitment or obligation.

 Bilateral agreement

A contract where both parties assume a duty to perform and

both have a corresponding right. A bilateral agreement can
further be divided into a reciprocal or a non-reciprocal
agreement. In a reciprocal contract there is an exchange of
performances such as in the case of a contract of purchase and
sale2, while it is not the case in a non-reciprocal contract, such
as a loan agreement.

2. METHODS OF COMMUNICATION BETWEEN THE PARTIES

The parties may communicate with each other in any language, as long as
both understand the language used. They need not use the same
language, provided that the answer corresponds with the question.

It is not necessary to use language at all. Goods are often bought and
sold with no words spoken, for example, buying a newspaper from a
newspaper vendor where an implied contract (or contract by conduct) is
concluded. It is, however, still required that the parties must have the
intention to contract with each other.

1
See discussion on voidable contracts in chapter 7, pages 74-79.
2
This principle of reciprocity gives rise to the defence of exceptio non adimpleti contractus, which allows a
party to a reciprocal contract to withhold performance until the other party has performed, where such other
party claims performance and performance does not take place simultaneously (Ndjavera v Du Plessis 2010
(1) NR 122 (SC).
Section B Chapter 4 51

 ADDITIONAL READING

1. Christie, R.H and Bradfield G.B (2016). Christie’s Law of Contract in

South Africa, 7th ed. Cape Town: LexisNexis. (Pages 23-31).
2. Fouché, M.A., Botha, J., Collier-Read, T., Haupt, A., Ncube, C, N.,
Schonwetten, T., Van As, H.J. (2015) Legal Principles of Contracts &
Commercial Law, 8th ed. South Africa: LexisNexis. (Pages 43-44).
3. Hutchison, D., Pretorius, C., Naude, T., du Plessis, J., Eiselen, S., Floyd,
T., Hawthorne, L., Kuschke, B., Maxwell, C., & Stadler, E. (2017) The
Law of Contract in South Africa. 3rd ed. South Africa: Oxford
University Press. (Pages 1-20).
4. Kerr, A.J. (2002). The Principles of the Law of Contract, 6th ed.
South Africa: Butterworths. (Pages 3-19).
5. Kleyn, D and Viljoen, F. (2010). Beginner’s Guide for Law Students.
4th ed. Cape Town: Juta & Co. Ltd. (Pages 162-163).
6. Sharrock, R. (2017). Business Transactions Law. 9th ed. Cape Town:
Juta & Co. Ltd. (Pages 54-83).
7. Schulze, H., Kelbrick, R., Stoop, C., Manamela, E., Manamela T., & Stoop,
C., Hurter, E., Masuku, B., and Stoop C (2017). General Principles of
Commercial Law. 9th ed. Claremont: Juta & Co. Ltd. (Pages 47-50).
8. Visser, C., Pretorius, J.T., Sharrock, R., Van Jaarsveld, M.C. (2005) South
African Mercantile & Company Law, 8th ed. Cape Town: Juta & Co
Ltd. (Pages 50-51).