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201 1 2013 - Assignment feedback

Law Of Enrichment Liabilty And Estoppel (University of South Africa)

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PVL3704/201/1/2013

Tutorial Letter 201/1/2013

Undue Enrichment and Estoppel

PVL3704

Semester 1

Department of Private Law

This tutorial letter contains important information
about your module.

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CONTENTS

1 COMMENTARY ON THE ASSIGNMENTS ................................................................... 3

2 COMMENTS ON THE EXAMINATION ......................................................................... 9
3 AMENDMENT TO THE STUDY MATERIAL ................................................................ 10
4 EXAMPLES OF PREVIOUS EXAM QUESTIONS ........................................................ 10

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PVL3704/201

Dear Student

1 COMMENTARY ON THE ASSIGNMENTS

This tutorial letter contains the memorandum, as well as a discussion, of the answers to the two
assignments.
1.1 ANSWERS TO ASSIGNMENT 1

Question 1
Discuss the general requirement that the defendant’s enrichment must have been at the
expense of the plaintiff. Refer in your answer to case law. (15)

Answer
See your Study guide par 2.2.3 page 17 ff
(a) Discussion of the causal link requirement and provision of relevant examples. (2)
(b) Discussion of indirect enrichment problem
(i) Explanation of the problem (2)
(ii) De Vos’ view (2)
(iii) Discussion of Gouws v Jester Pools case (2)
(iv)Discussion of Buzzard Electrical case (2)
(v) Discussion of the retention issue and Brooklyn House Furnishers case (2)
(vi)Discussion of Hubby’s Investment case and ABSA Bank v Stander (3)
(vii) Motivated exposition of your own view (2)
[max 15]

Question 2
A has sold uncut diamonds to B for an amount of R100,000 in contravention of statutory law. B
has paid the amount but before the diamonds could be delivered, the money was confiscated by
the police during a raid of A’s house. Advise B on the availability of an enrichment action to
reclaim the R100,000. Refer in your answer to case law. (10)
Answer

If you receive a similar type of question in the exams, you should follow the following steps in
answering the question:
(a) You first need to identify the correct unjustified enrichment action. If necessary explain
why another enrichment claim cannot be used. (2)
(b) Then discuss the relevant requirements for a successful claim under the action and any
defences against such claim. (4-5)
(c) Apply the requirements of the claim to the facts provided. (2-3)

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(d) Make a definite conclusion on the question asked. (1-2)

(a) Identifying the correct action

In this case the contract between the parties is an illegal contract because it is prohibited by
law. The contract therefore is void from the outset. When a contract is void from the outset there
are two enrichment actions that come into play: the condictio indebiti if the contract is void due
to reasons other than illegality; and the condictio ob turpem vel iniustam causam if the contract
is void due to illegality. The latter is the appropriate action. In general see your Study guide par
3.4 on p 32 and par 5.4 on page 55. (2)
(b) Requirements for the action and defences against it
See par 5.4 and onwards of your Study guide for the requirements. Discuss each of the
requirements:
(i) Payment of money or transfer of property. (1)
(ii) In terms of an illegal agreement. Explain when an agreement will be regarded as
illegal. (2)
(iii) Restriction of the par delictum rule. Explain what the rule encompasses and how it
is applied. Also discuss the judicial discretion created in Jajhbay v Cassim (3)
(iv)Tender to return any money or goods received. (1)
(c) Applying the rules to the facts
(i) The contract is illegal in terms of statutory law. (1)
(ii) Both parties are turpi personae as they were aware of the illegality of their
contract. (1)
(iii) Is there any reason to relax the par delictum rule in these circumstances?
Probably not, but you may present a different reasoned argument. (1)
(d) Conclusion
B will not be successful with this enrichment action if the par delictum rule is strictly applied. B
may be successful if the court should be lenient and exercises its discretion to relax the rule.
However, on grounds of public policy, most courts will not be inclined to help a person who
comes to court with “dirty hands”. (1-2)
[max 10]

1.2 ANSWERS TO ASSIGNMENT 2

The correct answer to each of the questions below is the one that is blocked and highlighted.
Brief explanations are given as to why each choice is right or wrong. Revert back to that part of
the Study Guide if you still do not understand why a certain choice is right and the others wrong.
Choose the most correct option in every instance. If there is more than one correct
option, choose the appropriate combined option.

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Questions 1 to 3.
The following facts are relevant for questions 1 to 3.
A has demanded payment from B of an amount of R50,000 which he believes B is owing. B has
checked its records and has paid the amount in the bona fide belief that the amount is owing in
terms of their contract. Unbeknown to B, his bookkeeper, C had already paid the amount a
week earlier by way of an electronic funds transfer in to the account of A. At the time of the
second payment A's account was overdrawn in the amount of R30,000 and was therefore in
credit of R20,000 after the payment. A has taken R15,000 out of his account to pay his
employees their monthly wages. He has also paid R10,000 for a luxury weekend after realising
that his account was in credit.
Answer: These questions deal with the condictio indebiti and its requirements. The claim
cannot be delictual because A's misrepresentation was innocently made. The claim can also not
be based on the contract, because there had already been payment which extinguished the
duty to pay in terms of the contract. Next evaluate the answers against the requirements of the
condictio indebiti. Here the one party made a bona fide payment that was not owing and under
circumstances that were excusable, partly because the mistake was induced by A's
misrepresentation.
Question 1
Which statement best explains the nature B’s the claim against A?
1. B has a claim against A based on delict for a fraudulent misstatement.
2. B has contractual claim against A based on their contract.
3. B has an enrichment claim against A based on the condictio causa data causa non secuta.

4. B has an enrichment claim against A based on the condictio indebiti.

5. B has no claim against A because he paid the amount voluntarily.

Question 2
Answer: A's enrichment took place at the expense of B because B was the person who in law
is regarded as the one who made the payment, even if C physically made the payment. At the
time of the payment, the duty to pay had already been extinguished – the payment therefore
cannot be in terms of the agreement, even if B thought so. The enrichment is not unlawful
because A's conduct was not delictual in nature. The bank made payment in terms of its
agreement with B and is therefore entitled to debit B's account. Accordingly the bank was not
impoverished. Consider whether all of the other requirements for enrichment liability and the
condictio indebiti have been complied with.
Which statement regarding the requirements for an enrichment action is correct?

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1. A has been enriched at the expense of B.

2. A has been enriched at the expense of C, who made the payment.

3. A's enrichment is not unjustified as there was a contract between A and B.
4. A's enrichment is unlawful because he made a demand for payment at a time that it was not
due.
5. B has been impoverished at the expense of the bank.
Question 3
Answer: A was initially enriched by an amount of R 50,000 on receipt of the money. The fact
that his overdraft was extinguished does not diminish his enrichment as his debts have
decreased by R 20,000. The payment of the wages also does not cause his enrichment to
diminish as those are expense he would have had in any event. The cost of the luxury holiday,
however, does constitute an extinction of his enrichment, as he would probably not have made
these expenses if his account had not been in credit. There is no indication on the facts
provided that A should have realised that he was enriched.
Which statement best explains the calculation of the enrichment claim?
1. B can claim an amount of R50,000 from A with an enrichment action.
2. B can only claim R20,000 from A because his account was overdrawn and the bank
received the benefit of the other R30,000.
3. B can claim nothing as A has not been unjustifiably enriched at his expense.
4. B can claim only R25,000 because the rest of the enrichment amount has been spent on the
wages and A's holiday.

5. B can claim only R40,000 because the rest of the enrichment amount has been lost on the
luxury holiday.

Question 4
Answer: Have another look at the requirements for the condictio indebiti. Unlawfulness is not a
requirement. For the condictio indebiti it is required that the impoverished party must have made
a payment that was not owing as a result of an excusable mistake.
In order to be successful with a claim based on the condictio indebiti, the plaintiff must
prove the following fact(s) or requirement(s):
1. That the impoverished party made a payment that was not due.
2. That the enrichment was unlawful.
3. That the mistake of the impoverished party was excusable.

4. 1 and 3 are correct.

5. 1 and 2 and 3 are correct

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Question 5
Answer: In the case of stopped checks the appropriate action is the condictio sine causa
specialis. Where a contract is terminated due to breach, the action ground is contractual and not
in enrichment. Where one is dealing with illegal contracts, the appropriate action is the condictio
ob turpem vel iniustam causam. In instance number 5 the correct action is the condictio sine
causa.
In which one of the following circumstances can the condictio indebiti be used?
1. Where a bank has made payment in terms of a countermanded cheque.

2. Where a party knowingly makes a payment that is not due, but under duress and protest.

3. Where a contract is rescinded due to a breach of contract.

4. Where a party has made an undue payment in terms of an illegal contract.
5. Where a party has made payment which is due but where the cause for the payment later
falls away.
Question 6-7
The following facts are relevant for Question 6 and 7.
X has concluded a contract with Y to build a tennis court at a cost of R40,000 on the
property it is renting from Z in Pretoria. It can be shown that the value of the property has
increased by R20,000 due to the improvement. X has disappeared before paying Y for the
work done. Y now wants to lodge a claim against Z, the owner of the property.
Answer: This case deals with indirect enrichment. Have another look at the decisions in Gouws
v Jester Pools and the Buzzard Electrical case. In the Gouws case it was decided that Y only
had a contractual claim against the lessee, X and no enrichment action against the owner, Z. In
the Buzzard Electrical case this issue was left undecided by the appellate division.
Question 6
Which statement best explains the ground on which and the amount that Y can claim?
1. Y has an enrichment claim against Z for an amount of R40,000.
2. Y has an enrichment claim against Z for an amount of R20,000.

3. Y has a contractual claim against X for R40,000.

4. Y has an enrichment claim against Z for R40,000.

5. Y has an enrichment claim against X for R 20,000.

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Question 7
Which statement best explains the authority on which you based your answer in
question 6?

1. In terms of the decision in Gouws v Jester Pools (Pty) Ltd 1968 3 SA 63 (T) it was held that
Y has no claim against Z because Z had not been enriched at his expense.

2. In terms of the decision in Gouws v Jester Pools (Pty) Ltd 1968 3 SA 63 (T) it was held that
Y has a claim against Z because Z had been enriched at his expense.
3. The decision in the Gouws case was confirmed in Buzzard Electrical v 158 Jan Smuts
Avenue Investments 1996 4 SA 19 (A)
4. The decision in the Gouws case was rejected in Buzzard Electrical v 158 Jan Smuts Avenue
Investments 1996 4 SA 19 (A)
5. The decision in the Gouws case was confirmed in Brooklyn House Furnishers Ltd v Knoetze
& Sons 1970 3 SA 264 (A)
Question 8
G has noticed that his neighbour's (H) stud bull is seriously ill. The neighbour is
currently on a hiking trip in Nepal and cannot be reached. G has called out a veterinary
doctor to attend to the bull and has paid all his bills as well as for the medication. The
total cost was R12,000. Despite the treatment the bull has died. Which statement best
explains the basis of G's possible claim against H?
Answer: In this case G does not have to rely on an enrichment claim, because in that case he
would have no claim as the neighbour is not enriched any longer. G can rely on the real action
for tending to another's property, namely the actio negotiorum gestorum contraria. In terms of
this action he can reclaim all expenses reasonably made in the attempt to preserve his
neighbour's property.
1. G has no claim against H because the bull has died and the expenses have been wasted.
2. G has an enrichment claim against H for his expenses as necessary expenses.

3. G has a claim against H in terms of the actio negotiorum gestorum contraria for R12,000.

4. G has a claim against H in terms of the actio negotiorum gestorum utilis for R12,000.
5. G's claim against H in terms of the actio negotiorum gestorum contraria will fail because the
bull died.
Question 9
G has noticed that his neighbour's (H) stud bull is seriously ill. The neighbour is
currently on a hiking trip in Nepal and cannot be reached. G has called out a veterinary
doctor to attend to the bull and has paid all his bills as well as for the medication. The
total cost was R12,000. Despite the treatment the bull has died. G is a meddlesome
neighbour and H has previously warned him not to do anything on his farm under any
circumstances, but rather to call K, if G should notice any problem. G did not bother to
call K. Which statement best explains the basis of G's possible claim against H?

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Answer: In this case G cannot rely on the true actio negotiorum gestio because he has acted
against the express instructions of his neighbour. He can only rely on the actio negotiorum
gestorum utilis, which is a true enrichment action. Because the bull died, the neighbour is no
longer enriched.

1. G has no claim against H because the bull has died and the expenses have been wasted.

2. G has an enrichment claim against H for his expenses as necessary expenses.

3. G has a claim against H in terms of the actio negotiorum gestorum contraria for R12,000.
4. G has a claim against H in terms of the actio negotiorum gestorum utilis for R12,000.
5. G's claim against H in terms of the actio negotiorum gestorum contraria will fail because the
bull died.
Question 10
Which statement correctly explains the possession or occupation of another's property?
Answer: A bona fide occupier's possession is always unlawful. A possessor always occupies
as if it is the owner, not as a lessee.
1. A bona fide occupier is someone who lawfully occupies the immovable property of another
person.
2. A bona fide occupier is someone who lawfully occupies the immovable property of another
person as if he is the owner thereof.
3. A bona fide possessor is someone who lawfully occupies the property of another person as
if he is the owner thereof.

4. A bona fide possessor is someone who unlawfully occupies the property of another person
as if he is the owner thereof.

5. A mala fide possessor is someone who unlawfully occupies the property of another person
temporarily as if he is entitled to occupy the property as a lessee.

2 COMMENTS ON THE EXAMINATION

At the end of the semester you will write one two-hour paper on this module. The paper counts
100 marks. The paper will consist of 50 per cent multiple choice questions and 50 per cent
essay type questions. To pass you need to obtain at least 40 percent for the paper and a final
mark of at least 50 per cent after your year mark has been taken into account. Undue
enrichment and estoppel will each count more or less the same in the examination.
Use the mark allocation at each question to determine how much time you may spend on
that question.
For the examination you will need a thorough knowledge of Study Guides 1 and 2 and the
relevant cases contained in the study guides and tutorial letters.

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The essay part of the examination paper is a so-called fill in paper, in other words you
must answer all those questions on the examination paper itself, and then hand in the
completed paper. Space for your answer is supplied directly below each question. Short as
well as longer questions may be asked. The answers to the multiple choice questions must
be completed on the mark reading sheet that will be provided to you and which you must
also hand in after completion. See further point 8 of Tutorial Letter 101/3 in this regard.
Please note that it is your responsibility to find out whether you have gained examination
admission and on which day the examination will take place.
Please note further that you will not directly be questioned on Roman and Roman-Dutch
Law.

3 AMENDMENT TO THE STUDY MATERIAL

Study Guide 1 Enrichment Liability
Insert the following at the end of page 59 as the last paragraph:
“Recently in ABSA Bank Ltd v Lombard Insurance Co Ltd 2012 (6) SA 569 (SCA) the court
dealt with the situation whether a bank may appropriate stolen funds received from its client to
discharge the debts of the client toward the bank. A fraudster misappropriated money from her
employer (the plaintiff) and used some of it to discharge her indebtedness toward two banks
(the defendants) on home loan, current and credit card accounts. The court a quo allowed the
enrichment claim (condictio ob turpem vel iniustam causam) of the employer against the banks,
but on appeal the Supreme Court of Appeal reversed the decision and found that a bank was
not unjustifiably enriched when it in good faith (that is without knowledge of the fraud) retained
money to discharge the debts of its client toward it, even though the client had obtained the
funds through fraud.”

4 EXAMPLES OF PREVIOUS EXAMINATION QUESTIONS

The questions in the assignments are similar to the types of questions that you may expect in
the exam. Below you will find some more examples of the type of questions that may be asked
in the examination, drawn from previous exam papers. Use these questions as a final test to
evaluate your preparation after you have studied the material. If you can answer these
questions correctly and with confidence, you should have no problems in sitting the exam.
QUESTION 1
John leaves his broken vacuum cleaner at the ABC Store for repairs. The store specialises in
electrical repairs, but also sells second-hand electrical appliances. After being repaired, John’s
vacuum cleaner is displayed by the dealer among the goods for sale in the store by mistake and
the vacuum cleaner is sold to Peter. When John discovers this, he claims his vacuum cleaner
from Peter with the rei vindicatio, but Peter raises estoppel against John’s claim.
1.1 Does John’s conduct in this case amount to a misrepresentation? Explain with
reference to case law. (15)
1.2 Is fault a requirement for a successful reliance on estoppel by Peter? Explain with
reference to case law. (10)

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QUESTION 2
Discuss the requirement that the reliance on estoppel must be allowed by law. (10)
QUESTION 3
Can estoppel play a role in the conclusion of a contract. Discuss with reference to case law. (10)
QUESTION 4
4.1 Can a person’s estate be enriched by moral benefits? Discuss. (5)
4.2 Discuss Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue 1992 4 SA 202 (A) in
regard to the condictio indebiti. (5)
4.3 Briefly discuss the condictio ob turpem vel iniustam causam with reference to Minister
van Justisie v Van Heerden 1961 3 SA 25 (O). (5)
4.4 Briefly discuss the sine causa requirement for enrichment liability. (5)
QUESTION 5
Discuss with reference to case law whether a general enrichment action exists in the South
African law (15)
QUESTION 6
Peter leases a car from John to travel to Cape Town. The lease contract stipulates that in the
event of a breakdown Peter must immediately contact John and not arrange for a third party to
repair the vehicle. On the way to Cape Town the car breaks down and Peter leaves it with
Wasim to repair. Wasim believes that the vehicle belongs to Peter. Peter does not return to
collect the car. When John claims his car from Wasim, Wasim refuses to hand it over until
compensated for the repairs he has effected to the vehicle. At whose expense has John been
enriched? Discuss with reference to case law. (15)

PROF CJ PRETORIUS Telephone number: 012 429-8502

MR KA SEANEGO 012 429-8997
MRS HM DU PLESSIS 012 429-8353

UNISA
/hs

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