LAW OF CONTRACT

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 1. INTRODUCTION

The legal problem addressed in this assignment deals with seven legal aspects. The first deals
with the promise of sale, the second deals with the issue relating to the preference of sale, the
third addresses the issue of offer to the public and with the issue of the freedom of contract.
Furthermore, it also deals with the validity of contract of sale, legality and impossibility. The
questions arising from the assignment scrutinize as to whether a valid contract existed between
a seller and a buyer, the rights to pre-emption, offer and acceptance and investigating the
governance of advertisements in the context of the Consumers Protection Act and the
constitutional analysis of freedom of contract and the right to dignity, privacy and equality of
an applicant for employment. There is also a query as to whether or not a valid contract came
into existence before revocation, legality of subsequent contracts entered into and finally
impossibility regarding the contracts.

Problem
The problem is whether or not, Keegan fully understands the implications of making a promise
of sale for immovable property as well as underlying factors for an offer to the public and
ultimately the repercussions of discriminating a job applicant based on her HIV status and
furthermore the breach of contract for the option of sale to Lerato by offering it to Sam (a third
party)

1.1 Questions

● Is there a valid contract between the buyer(Lerato) and the seller(Keegan)?

● Should Keegan pay Carla for contracting influenza while using his herbs as per
advertisement?
● Is Keegan subjected to not providing employment to Karen based on her status?
● Does Keegan have grounds to sell the farm to Sam and not Lerato?
● Was there a valid contract of sale between Keegan and Lerato?
● Can Keegan claim back monetary value from Lerato?
● Was there a breach of contract by Chris?

2. PROMISE TO SELL
An option contract is an agreement between a buyer and a seller that gives the purchaser of the
option, the right to buy or sell a particular asset at a later date at an agreed upon price.1 For an
option contract to be valid, it has to comply with the requirements of a contract being consensus
between the parties, they must have legal capacity to contract, any required formalities must
be adhered to, the agreement must be lawful, performance must be possible and the terms of

1 https://www.investinganswers.com accessed on 7 April 2019

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the contract must be certain. An option is a contract about concluding a main contract after a
specified period between the parties. It is not revocable before the expiry of the specified
period. It would also not be revocable after acceptance by the option holder at the specific
period. Any revocation by the option granter during the specified scenario would amount to
breach of the option contract and the option holder would have remedies available to her as
result.
Keegan, by giving Lerato an option to buy the farm essentially made a promise to sell, one that
is irrevocable and any attempt by Keegan to revoke the offer is not just a breach but also
ineffectual.2 Keegan’s reason for withdrawing the offer asserting that there was no
consideration exchanged with Lerato and therefore concluding that there was no valid contract
between them is invalid as per Conradie v Rossouw.3 The promise to sell was expressed in an
oral form and acceptance (affirmative response) was given, so we can say that consensus was
established, both parties are majors and have contractual capacity.

2.1 Legal principle Governing contract in question

This contract is governed by the ‘Reliance theory.’ The reliance theory states that the basis of
a contract is to be found in the ‘reasonable belief that the existence of consensus, induced by
the conduct of the other party.’ 4 The reliance theory therefore protects a party’s reasonable
expectation of a contract and Lerato did in fact have a reasonable expectation as a result of the
option given to her by Keegan. Previously, South African law was undecided between a
subjective and objective approach to contract, however, subjective will theory was seen to be
the point of departure, with shortcomings of the aforementioned theory corrected by application
of the reliance theory.5
2.2 Case Law
With regards to case law, Conradie v Rossouw is the legal authority for Keegan and Lerato’s
case. The facts in Keegan and Lerato’s case are very similar to the ones in Conradie v Rossouw.
It was held in Conradie that ‘the English Law requirement of valuable consideration, in the
absence of which a contract is unenforceable does not form part of our law.’ 6 Therefore, this
only serves to accentuate that Keegan’s argument that no contract had come into effect because
no consideration had been received was actually invalid. A valid contract would have come
into effect with or without consideration.
2.3 Conclusion
The lack of consideration between Lerato and Keegan has no bearing on the validity of the
option contract between them and the option contract between the two parties is therefore a
binding contract. Lerato has remedies available to her; she could interdict Keegan and hold him
to performance as per option contract or she could claim positive damages that would put her
in a position she would have been in had the main contract been concluded.

2 Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 68.
3
Conradie v Rossouw 1919 AD 276
4 Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 16.
5 Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 20.
6 Ibid 3 para 288.

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 3. OFFERS MADE TO THE PUBLIC
An advertisement (offer to the public) constitutes an offer to do business. The question of offers
to the public was address in Carlil v Carbonic Smoke Co.7The court ruled that the terms of the
offer to the public were so clear and precise that they provided no doubt that there was an offer
being made, by acting on the offer. Mrs Carlil was accepting and a contract was concluded.
The court held that it was not necessary for the acceptance to be in person as acting on the offer
and performing as directed constituted acceptance. The court further held that there was a
contract arising out of an offer to the public. In the Carlil case, Carbonic Smoke Ball Co
promised 100 pounds to anyone who contracted flu after using their smoke ball. The facts of
the Carlil case mirror that of the offer made by Keegan to the public. Keegan promised that
nobody will contract influenza after using his formulation of herbs and if they do, he would
pay R1000 to anyone who contracted influenza. By acting on this challenge, Carla accepted
the offer and there was a contract formed without the need to communicate the acceptance to
Keegan. There may have not been an amount of money set aside to pay claims as in Carlil but
the terms are mistakable.

3.1 Statutory Governance

As we have already established, offers can indeed be made to the public, however, legislation
governs them in the form of The Consumer Protection Act. 8 The Consumer Protection Act
(CPA) provides further requirements regarding offers such as:
● Plain and understandable language
● Disclosure of whether goods are reconditioned or grey market
● Prohibition of negative option marketing
● Right to a cooling off period; and
● The regulation of catalogue marketing
Keegan’s advertisement seems to adhere to all the additional elements required in terms of the
CPA, and Carla was able to meet the requirements, therefore, Keegan’s offer to the public is
valid and Carla accepted the offer and there was a contract formed without the need to
communicate the acceptance to Keegan.
3.2 Case Law
When arguing on whether or not to pay, Keegan could argue that his advertisement was merely
an offer to do business as that is the default position in our law as established in Crawley v
Rex.9 Relying on the position established in Crawley, Keegan’s offer to the public was merely
an invitation to do business. However, as already established in Carlill v Carbolic Smoke Co
an offer can be accepted by the public if they adhere to the specified conditions which is
certainly the case for Carla. There is however the additional element of a conscious response
to the advertisement as was established in Bloom v American Swiss Watch Co10 which is to say

7
Carlil v Carbonic Smoke Ball Co 1893
8 The Consumer Protection Act 68 of 2008
9 Crawley v Rex 1909 TS 1105
10 Bloom v American Swiss Watch Co 1915 AD 100.

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that whoever accepted the offer had to be conscious that they were doing so. If Carla only found
out about the terms of the advertisement after she had followed the recipe, she could not
possibly have accepted the offer and as a result Keegan would not have to pay her.
3.3 Conclusion
The general rule in South African law is that an offer made to the public is an invitation to do
business. Furthermore, the Consumer Protection Act is statutory governance providing the
additional elements that an offer should and shouldn’t contain. An offer can be accepted by the
public through adherence of terms, however it has to be a conscious response, and Carla only
knew about it after she contracted influenza, therefore, her response could not have been
conscious

4. FREEDOM TO CONTRACT

The right to freedom of contract is not specifically spelt out in The Constitution 11 but it is a
recognized right through case law. When there are conflicting rights, there are certain rights
that will trump others due to the classification as being rights that cannot be derogated. This is
especially so in the light of our recent past of discrimination.

4.1 Constitutional right to trade

Section 22 of The Constitution 12 enshrines freedom of trade, occupation and profession. This
set of rights are unique among human rights instruments. This specific section states that
“Every citizen has the right to choose their trade, occupation or profession freely. The practice
of trade, occupation or profession may be regulated by law.” It is important to note that this
right is not unqualified and it may be restricted by law if it is in the interest of the public in an
open, fair and democratic environment.

4.2 Conflicting rights

The right to equality 13 contains strong provisions on legal and social equality emphasis on
Section 9 (1) which stipulates that everyone is equal before the law and has the right to equal
protection and benefit of the law.

The Constitution lists the right to dignity 14 as one of those rights that cannot be derogated from
even in a state of emergency. This right is explicitly protected as non-derogable in its entirety.
The freedom of contract is derived from common law which itself is subject to the Constitution.
In exercising the freedom of contract one cannot therefore trample upon other people’s right to
human dignity which is enshrined as a basic human right. This was confirmed in Hoffman v
South African Airways15

11 The Constitution of the Republic of South Africa, 1996

12
Ibid 18
13 Section 9 of The Constitution
14 Section 10 of The Constitution
15 Hoffman v South African Airways 2000 CC

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4.3 Case Law

Hoffman v SAA held that the denial of employment to the appellant because he was living with
HIV has impaired his dignity and constituted unfair discrimination. 16it violated his right to
equality guaranteed by section 9 of The Constitution.

4.4 Conclusion

Karen’s constitutional right to trade/occupation/profession was violated by Keegan when he

refused to hire her based on her status, this constitutes unfair discrimination. He further violated
her right to equality and impaired her human dignity. Legitimate commercial requirements are
important but they cannot serve to disguise stereotype and prejudice. As held in Hoffman v
SAA as a result of unfair discrimination Keegan needs to grant Karen a job because his action
was inconsistent to section 187 (1) (f) of the Labour Relations Act 17

5. PREFERENCE CONTRACT

A preference contract is an ancillary agreement where one person(the grantor) binds

him/herself to give preference to another person (the grantee), should he/she decide to conclude
another agreement.18 According to the aforementioned definition, Keegan would be bound to
give preference to Lerato as he obliged himself by giving preference to Lerato. The main
agreement of a preference contract will usually be a sale in which the ancillary agreement is
known as a pre-emption agreement which gives right to a pre-emptive right.19

5.1 Pre-emption
A right of pre-emption is a right to be given preference in the event of a sale of property with
the important feature that the grantor of the right is under no obligation to sell. 20 Under the pre-
emption contract Keegan would not be obliged to sell to Lerato. The essential difference lies
in that an option to buy has a firm offer to buy already, whereas with a pre-emption agreement
there is no firm offer on the table as yet. 21

5.2 Case Law

ORYX MECHANISM
In the recent case of Mokone v Tassos Properties 22 the Constitutional Court developed the
common law dealing with a pre-emptive right to purchase immovable property. The common
law position was that a right of pre-emption pertaining to the sale of land must comply with
the formalities required for the sale of land for it to be enforceable. The Constitutional Court

16 Ibid 21 para 40
17 The Labour Relations Act 66 of 1995
18 Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 71..
19
Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 72..
20 Supra
21 Supra note 8 pg. 72.
22 Mokone v Tassos Properties CC and Another [2017] ZACC 25

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overruled this and held that, since a right of pre-emption is not in itself an agreement for the
sale of land, it need not comply with the formalities of The Alienation of Land Act, 23 which
requires the sale agreement for land to be signed by both parties.

Ms. Mokone, as tenant, signed a one-year lease for the rental of the property from where she
conducted the business of a bottle store. The lease was renewable for a further year and
provided her with a pre-emptive right to purchase the premises. After the expiry of the lease,
the tenant remained on the premises in terms of an oral extension of the lease. Thereafter, the
written lease was extended by an endorsement on the face of the lease agreement, signed only
by the landlord and not by the tenant. The landlord sold the premises to a third-party prompting
the tenant to exercise her pre-emptive right and upset the transfer of the land to the third-party.

The landlord argued the extension of the lease had to comply with the formalities contained in
the Alienation of Land Act for the pre-emptive right to be valid i.e. it had to be signed by both
landlord and tenant. The Constitutional Court disagreed and found that when a pre-emptive
right is triggered, all that is required is for the holder of the pre-emptive right to make a written
offer to purchase the land. Having found the pre-emptive right to be valid, the Constitutional
Court could see no reason why the notion of the holder of a pre-emptive right “stepping into
the position of the third-party” could not be achieved in a manner that does not by-pass the
requisite formalities as set out in the Alienation of Land Act. It applied a remedy known as the
‘Oryx Mechanism’ after the case of Associated South African Bakeries v Oryx and Vereinigte
Bäckereuen24 where the Supreme Court of Appeal held that the holder of a right of pre-emption
may be allowed to step into the buyer’s place upon a sale in conflict with his rights.

5.3 Conclusion

The judgment in Ms. Mokone’s case gives rise to the question whether an option to purchase
land should comply with the formalities provided for in the Alienation of Land Act in
circumstances where a pre-emptive right does not have to comply. In principle, contrary to
what the SCA held about the holder of a right to pre-emption being allowed to step into the
buyer’s place upon a sale in conflict with his rights, it is difficult to see why a right to exercise
an option will be treated differently to a pre-emptive right, but until the Court has pronounced
on it, contracting parties will be well advised to err on the side of caution when drafting an
option to purchase land and ensure compliance.
6. VALIDITY OF CONTRACT OF SALE

6.1 Elements of a Contract

When parties who have the requisite intention agree together that the one will make something
available to the other in return for the payment of a price is known as the contract is a sale. 25

These six elements are essential for any contract of sale:

23 The Alienation of Land Act 68 of 1981

24 Associated South African Bakeries (Pty) Ltd v Oryx and Vereinigte Bäckereuen (Pty) Ltd 1982 (3) SA 893 (A
25 A.J Kerr The law of sales and lease/general collection SAJ 346.68072K41L 1996

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1. Two parties (Keegan and Lerato)
2. Items to be sold (Keegan’s other farm)
3. Price (R800,000)
4. The transfer of ownership (From Keegan to Lerato)
5. A contract of sale (The farm)
6. An agreement to sell (acceptance offer). 26
For an agreement to be identified as a contract of purchase and sale the parties must agree on
the following three elements (known as the essentialia of the contract): One party must have
the intention of buying and the other of selling. The parties must agree on the object (merx)
sold. This must be a specific object, or must be at least ascertainable. 27 The parties must agree
on a purchase price, which must be in money. Definite and ascertainable: a certain horse; not
definite but ascertainable: a unit of a generic item.28 It can consist of movable or immovable
goods, or may even be an incorporeal thing such as a claim, servitude or a patent. 29 Immovable
property transfers are governed South African legislation - the Land Alienation Act to protect
all the parties involved.30 Furthermore, in the formation of a contract, the elements of offer and
acceptance will have to be analysed and if found to have been met, a valid contract will more
likely than not, have been entered into.

6.2 Valid Offer

An offer is a declaration of intention by the offeror to the offeree, which indicates the
performance which the offeror is prepared to make and the terms on which he/she will make
it, and is usually addressed to one person, who in this case is Lerato. 31 However, this is not
enough, there are additional requirements to be met for an offer to be considered valid.

● The offer must be firm – made amino contrahendi, which is to say that it has the
intention of being legally binding and will fall short if considered to be tentative;
● The offer must contain the material terms of the agreement, which is to say that there
cannot be further terms that are yet to be negotiated;
● The offer must be clear and certain – This is to say that it should be sufficient for the
offeree to merely agree to the contract for it to come into effect as uncertainty can have
the effect of the offeree agreeing to an impossible obligation. 32

26 https://accountlearning.com/5-essential-elements-of-a-valid-sale-or-a-contract-of-sale/
27 Available at https://www.studyblue.com/?src_url=https://www.studyblue.com/#flashcard/flip/21905177
Accessed on 21 May 2019.
28 Ibid note 27.
29
Ibid note 28.
30 Ibid note 29.
31 Ibid note 1 pg 49.
32 Ibid note 2 pg 50-51.

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6.2.1 Offer being definite and complete
In the case of Humphreys v Cassell, a solicitor agreed not to demand any fees “until such time
as defendant’s mine was producing and he was on his feet again financially”. When he was
sued for fees, Cassell advanced this clause in defence. Held: the special agreement was “too
vague to enforce and... interpret”. The agreement was set aside for uncertainty and Cassell was
compelled to pay immediately. Where an offer is vague and imprecise any consequent
agreement is void. With regards to the scenario, the time period of Lerato buying the farm
“after the death” of Keegan is vague therefore this scenario cannot be constituted as a valid
offer.

6.2.2 Offer being firm

With regards to an offer being firm, in the case of Humphreys v Cassell, a Johannesburg broker
sent a Cape Town broker a telegram to the effect that he had a seller of 3 000 bags of oats at
11 shillings a bag, adding the terms of delivery. The question before the Court was whether
this telegram was an offer which could result in a valid contract if accepted. Gardiner J had this
to say: “There are certain offers, offers made to the whole world, acceptance of which before
withdrawal constitutes a binding contract, but it is not every offer of this nature. One has to
ascertain from the offer itself whether it is tentative, or whether it is meant to constitute upon
acceptance a binding contract. This telegram starts: Have seller of 3 000 oats, and it goes on to
give certain terms. Tomy mind it means this: “I have a seller, can you find me a buyer and then
we may do business?” The telegram was not intended to be an offer. Statements of lowest price
are not offers.
6.2.3 Attention of offer to offeree
In Bloom v American Swiss Watch Co the defendants advertised a reward for any person who
gave information to the police regarding to a jewellery robbery that took place on their
premises.33 The court held that the offer had not been accepted by the first person who supplied
information to the police because he had at the time been unaware of the offer. 34 So therefore,
for there to be a valid offer the offeree has to be responding to the offer knowing of its existence.

6.2.4 Directed to a definite person

In the case of Bird v Sumerville and Anor, Bird signed an offer to sell land addressed to
Sumerville, Sumerville and the second respondent both of whom, the estate agent appointed
by Bird had been conducting negotiations with, added the second respondent’s name as the
purchaser and both signed the agreement of sale. 35 The court upheld Bird’s
contention/argument that no contract had come into existence because even though he initially
had no intention of calling to a specific person, his signature of the claimant addressed to
Sumerville manifested an intention to sell to him and nobody else. 36 The offer was accordingly
not to open for acceptance by Sumerville and another but could be accepted by Sumerville
alone.37

33 Bloom v American Swiss Watch Co 1915 AD 100

34 Bloom v American Swiss Watch Co 1915 AD 100
35 Bird v Summerville 1961 3 SA 194 (A)

36 Bird v Summerville 1961 3 SA 194 (A)

37 Bird v Summerville 1961 3 SA 194 (A)

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The Consumer Protection Act 68 of 2008 (CPA) also provides further requirements for a valid
offer, but more appropriate to this scenario than the others would be that of ‘plain and
understandable language.’38The CPA provides that the language must be plain to the effect that
it is understandable to the ordinary consumer of class of persons, to whom the notice is
intended.39
Unless the offeror has promised not to revoke the offer for a certain period, in which case there
is an option contract, the offer may be withdrawn at any time prior to its acceptance. An option
contract constitutes a substantive offer and an undertaking to keep the offer open. An option
contract is irrevocable. In Hersch v Nel, Nel owned two farms and he gave Mr West an option
to purchase the two farms and the together with another person ceded the option to Hersh who
then accepted Nel’s offer before its expiry. 40 When Hersh accepted the offer Nel refused to
sell the farms. When sued, the rule made in the case of Blue v Snoxell was applied i.e. an offer
made by A to B may not be accepted by C.

The court however distinguished an option made in a case sale. The sale of the two farms was
on a cash transaction thus in accordance with the principles outlined above the court ruled and
the cession to Hersh was valid and his accepted gave him a contract with Nel.

With regards to the Alienation of Land Act Section 2(1) of the Alienation of Land Act
provides that no sale of land (which includes the exercising of an option to buy land) will be
of any force and effect unless it is contained in a written deed of alienation signed by the
parties or by their agents acting under their written authority. In Bird v Sumerville and Anor,
Bird signed an offer to sell land addressed to Sumerville, Sumerville and the second respondent
both of whom, the estate agent appointed by Bird had been conducting negotiations with, added
the second respondent’s name as the purchaser and both signed the agreement of sale. The
court upheld Bird’s contention/argument that no contract had come into existence because
although he initially had no intention of calling to a specific person, his signature of the
claimant addressed to Sumerville manifested an intention to sell to him and nobody else. The
offer was accordingly not to open for acceptance by Sumerville and another but could be
accepted by Sumerville alone. The intention of the parties runs through the whole acceptance

38 The Consumer Protection Act 68 of 2008.

39 The Consumer Protection Act 68 of 2008.
40 Hersh v Nel 1948(3) SA 686(A)

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of contract, parties are bound to what they agreed and they are bound because they agreed
intentionally and voluntarily.

In Oosthuizen NO v Du Preez and Others the appellants point of contention was that the
purported deed of sale (annexure “B”) between Mrs Uijs and the first and second defendants is
null and void and of no force or effect and furthermore, no valid and enforceable deed of
alienation as prescribed in terms of section 2 of The Alienation of Land Act came into being.
It was held that the original contract, it was invalid and of no force or effect in that it did not
comply with the provisions of section 2(1) of Act 68 of 1981 requiring all the material terms
of the contract to be recorded therein.

Pacta de Contrahendo provides that contracts can be verbal or in writing. However, in

Hirschowitz v Moolman the court held that as a general rule pacta de contrahendo should
comply with any formalities, including contracts relating to the purchase of land. In terms of s
2 (1) of The Alienation of Land Act, it is required that contracts pertaining to the sale of land
must be in writing and signed. In Brandt v Spies it was held that where a contract is required
to be in writing, a verbal option to enter into such contracts was not enforceable. The contract
between Lerato and Keegan was in writing and therefore was in compliance with both the land
act and pacta de contrahendo.

6.3 Valid Acceptance

Acceptance is a clear and unambiguous declaration of intention by the offeree, unequivocally

assenting to all the terms of the proposal embodied in the offer which can either be accepted
expressly or tacitly.41 Much like an offer, acceptance also has requirements of its own.
6.3.1 Accepted by addressee
Acceptance must be by the person to whom the offer was addressed unless it is an offer made
to the public which can be accepted by anyone. In this case the offer was made to Lerato and
she accepted the offer. The authority for valid acceptance is found in Bird v Sumerville and
Anor where Bird signed an offer to sell land addressed to Sumerville. Summerville, the offeree
and the estate agent added a second person Anor as an additional purchaser without the Offeror’
s knowledge. Both Summerville and Anor signed the agreement of sale through the estate
agent.42

41 Ibid note 3 pg 57.

42 Bird v Summerville 1961 3 SA 194 (A)

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The court upheld Bird’s argument that no contract had come into existence even though he
initially had no intention of calling to a specific person, his signature of the claimant addressed
to Sumerville manifested an intention to sell to him and nobody else.43 The offer was
accordingly not to open for acceptance by Summerville and another but could be accepted by
Sumerville alone.44
6.3.2 Acceptance must be unqualified
The acceptance of the offer must be unqualified, which is to say that all elements of the contract
must be accepted by the offeror, and not to say that the terms cannot be negotiated but once
accepted, all terms must be accepted. 45 Any changes to the offer would amount to counter-offer
and does not constitute valid acceptance.
6.3.3 Acceptance conscious response offer
The acceptance must be a conscious response to the offer. Where the offeree is not aware of
the offer, there cannot be valid acceptance. In Bloom v American Swiss the appellant provided
information about the robbery to the police. He was doing his civic duty unaware that there
was a reward for information. He found out afterwards about the reward. The court ruled that
there was no valid acceptance as the appellant was unaware of the offer. The appellant was
therefore not entitled to the reward.
6.3.4 Prescribed formalities
The acceptance must comply with the manner acceptance prescribed by the offeror as
Hutchison puts it “... the offeror is entitled to prescribe any method of acceptance he or she
sees fit…”(p.58)

● If the acceptance requires any prescribed formalities, then such formalities must be
complied with.46 Importantly, in Pillay v Shaik, the court held that the reliance theory
could be relied upon, as it were, in that the offeror leads the offeree to believe that the
prescribed mode of acceptance has been complied with that will be sufficient. 47

It is also further, quite important to ascertain where and when acceptance takes place. There
are several theories to explain this. In Keegan and Lerato’s case, it is a postal contract,
therefore, there are two theories to be considered here. There are four theories and they include
the reception theory which states that the agreement comes into being when the letter of
acceptance reaches the address of the offeror.48The expedition theory on the other hand states
that acceptance comes into effect when the offeror posts his letter, the declaration theory states
a contract comes into being when and where the offeree expresses acceptance and finally the

43 Bird v Summerville 1961 3 SA 194 (A)

44 Bird v Summerville 1961 3 SA 194 (A)
45 Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3
46 Ibid note 8.
47 Pillay v Shaik 2009 (4) SA 74 (SCA)
48 Ibid note 10 pg 59.

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information theory which states that an agreement is satisfied when the offeror learns of the
acceptance.49

Because Keegan and Lerato have corresponded by post, the expedition theory will come into
play. To settle this issue, we will have to look at Cape Explosive Works Limited v South African
Oil and Fat Industries; Cape Explosives Works Ltd v Lever Brothers (South Africa) Ltd where
the court held that on both counts, the contract was concluded when the letter of acceptance
was posted.50
6.4 Further requirements of a contract
Furthermore, there are more requirements that should be met for a valid contract of sale and
they include:

● Consensus between the parties.

● Legal capacity to contract
● Formalities must be adhered to
● Lawful performance must be possible
● Terms of the contract must be certain. 51

6.5 Conclusion

As elaborated in the case we see how important it is to understand the terms of the contract as
well as the validity hence because Keegan had signed and delivered a written offer to Lerato
which was valid until the 30th of august, and also following the elements of a valid contract,
there is a valid contract of sale between Keegan and Lerato. However, even though all of the
other requirements were met, Offer is terminated in six ways , rejection, death of either party,
effluxion of the prescribed time, revocation, loss of legal capacity and/ or acceptance. 52 Unless
Keegan has promised not to revoke the offer, by which case he would have provided an option
contract, the offer may be withdrawn at any time prior to Lerato’s acceptance and would need
to be communicated to the mind of Lerato before she communicated acceptance. 53 This was
the case, therefore, ultimately a valid contract did not come into effect.

7. LEGALITY
Legality can be defined as an act, agreement or contract that is consistent with the law or state
of being lawful and unlawful in a given jurisdiction. if you talk about legality of an action or
situation, you are talking about whether it is legal or not. for example, “The auditor has
questioned the legality of the contract.”

49 Ibid.
50 Cape Explosive Works Limited v South African Oil and Fat Industries; Cape Explosives Works Ltd v Lever
Brothers (South Africa) Ltd 1921 CPD 244.
51 R.H Christie, THE LAW OF CONTRACT (2001) 4ed
52 Ibid note 17 pg 56.
53 Ibid.

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7.1 License
According to the Business Act 71 of 1991, you must get a trading license for the selling of
milk.54 Which is obtainable from any local council. in terms of the section 15 (1) of the
Foodstuffs, Cosmetics and disinfectants Act 54 of 1972 the minister of health has made
regulations in the schedule which should be adhered to, when selling perishable goods.55 In
Jajbhay v Cassim the plaintiff entered into an illegal lease with the defendant. 56 The
defendant observed all the terms of the lease and the plaintiff sought to eject the tenant on the
grounds that the lease was illegal.57 it was held that the plaintiff was not entitled to eject the
tenant.58 it was laid down that in actions in illegal contracts the courts must be in each case
guided by public policy.59
In Klokow v Sullivan (410/2004) [2005] ZA SCA 99
On 4 September 2000 Mr Klokow and Mr Sullivan entered into a written agreement in terms
of which Klokow was to acquire from Sullivan a business that provided ‘adult entertainment’,
which included the sale of liquor to its patrons. 60 The business, based in Pretoria, trades under
the name ‘Babe Watch – The Tease’.61 Pursuant thereto Klokow paid to Sullivan R250 000,
half of the agreed purchase price. Klokow took possession of the business on 5 September
2000. However, on 18 October 2000, Klokow returned the business to Sullivan and issued
summons against him for repayment of the R250 000.62 It was Klokow’s case that his
agreement with Sullivan was illegal because Sullivan had failed to obtain consent for the sale
of the business from the Chairperson of the Liquor Board, as required by the Liquor Act.63
Sullivan’s defence was that because Klokow was party to the illegality, he was not entitled to
reclaim the R250 000 which he had paid to Sullivan. The SCA ruled that even though both
parties were party to the illegality, it would not be in the interests of justice, or public policy,
for Klokow to be denied a claim for repayment of the R250 000. 64 If Sullivan was able to keep
the business and the money, he would, said the SCA, be unjustly enriched. It accordingly ruled
that Klokow is entitled to repayment.
In applying facts to the scenario of Keegan and Lerato which concerns contracts that are void
for purposes of illegality. In terms of the rule ex turpi causa non oritur actio (the ex turpi rule)
one cannot institute a claim against the other from an illegal cause. However, we deal here with
a case where one has suffered damage because performance has been made in terms of an
illegal contract.65
Sanctity of a contract

54 Business Act 71 of 1991

55 Foodstuffs, Cosmetics and disinfectants Act 54 of 1972
56 Jajbhay v Cassim (1939 A.D. 537)
57 Jajbhay v Cassim (1939 A.D. 537)
58 Jajbhay v Cassim (1939 A.D. 537)
59 Jajbhay v Cassim (1939 A.D. 537)
60 Klokow v Sullivan (410/2004) [2005] ZA SCA 99
61 Klokow v Sullivan (410/2004) [2005] ZA SCA 99
62 Klokow v Sullivan (410/2004) [2005] ZA SCA 99
63 Klokow v Sullivan (410/2004) [2005] ZA SCA 99
64 Klokow v Sullivan (410/2004) [2005] ZA SCA 99
65 Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 181.

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Sanctity of a contract or pacta sunt servanda is an underlying principle in our law and of
contract which simply means that contracts seriously entered into should be enforced. 66
However, on the opposite end of the Spectrum, public policy needs to be considered and in
doing so, we look at legislation, common law, good morals as well as public interest. 67 When
an agreement is considered to be contrary to public policy, the policy consideration will be
further accentuated above that of pacta sunt servanda, which suggests that in determining of
legality, public and private interests have to be weighed.68 Subsequently, contracts are both
void and consequently unenforceable, or they can be valid and still be unenforceable, all
incumbent upon the degree to which a society regards the contract to be deplorable as it were.69
7.2 Public Policy
Public policy is open ended, In the sense that it has no fixed meaning as it is the opinion of a
particular community at a particular time. 70 Courts will usually render a contract invalid if it is
contrary to good morals or contra bones mores, and for public policy on the other hand and in
both cases the contract will be contrary to public policy. 71 In Sasfin Pty (Ltd) v Beukes it was
held that agreements that are contrary to social and economic expedience will, on the grounds
of public policy not be enforced.72 The purpose of The Consumer Protection Act 68 of 2008 is
to promote and advance social and economic welfare of consumers in South Africa as well as
protect consumers from improper trade practices.73 Selling milk without a licence is an
improper trade practice and does not promote or advance social and economic welfare and is
thus against public policy. Therefore, due to Tony’s illegal trading without a licence, Tony is
acting contrary to public policy.
However, also applying the principle in Sasfin, the court said it would not declare a contract or
one of its clauses ‘contrary to public policy unless it is so clearly inimical to the interest of the
community as a whole, having regard to the mores of the times, that the harm to the public is
substantially incontestable.’ 74
7.3 Void due to Statutory Provision
Some contracts are void because the conclusion of the contract is contrary to a statutory
provision, good morals or public policy such as contracts void on the basis of statutory
provisions.75 S 51 of The Consumer Protection Act provides for ‘prohibited transactions,
agreements, terms and conditions’ particularly s 51 (a) (iii) which instructs the supplier not to
subject the consumer to any fraudulent conduct. 76 Selling without a licence is definitely
considered to be fraudulent conduct and thus agreement or contract would be void on basis of

66
Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 181.
67 Ibid.
68 Ibid.
69 Ibid.
70 Ibid.
71 Ibid note 5 pg 182.
72 Sasfin Pty (Ltd) v Beukes 1989 (1) SA (1) A
73
The Consumer Protection Act 68 of 2008.
74 Ibid note 7.
75 Ibid note 6 pg 185.
76 The Consumer Protection Act 68 of 2008.

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statutory prohibitions. Therefore, Tony was acting contrary to Statutory provisions and as a
result the contract is void.
7.4 Enforcing illegal contracts & The par delictum rule
It is an absolute rule that an illegal contract cannot be enforced, however, if there has been a
performance, then restitution of that performance should be claimable in terms of rei vindicatio,
which is the action of the owner for the return of his property. 77 In a case where performance
has passed, then claim will be based on unjustified enrichment. Therefore, with regards to rei
vindicatio, Keegan could have a claim to recover the monetary value of the goods as Lerato
has been unjustifiably been enriched.
However, under the par delictum rule where two parties are equally guilty in concluding an
illegal agreement, the party in possession of the ownership is in the stronger position and under
the policy that the court will not assist those with ‘unclean hands.’ 78 Therefore, because the
court will not assist those with unclean hands Kigaan will not be able to claim from Lerato
because Kigaan supplied to Tony who does not have a licence and therefore his contract is with
Tony and not Lerato. This is because of the principle of privity of contracts, which states that
it would be manifestly unfair if two parties by their own private act could impose an obligation
on a third party without the parties consent. 79
The par delictum rule will not apply in cases where the plaintiff is less guilty or not guilty at
all.80 However, in Klakow v Sullivan the court felt that whether or not the plaintiff was
criminally liable was of no consequence because he still had moral guilt. 81 Therefore, the par
delictum rule will still apply. However, in Jajbhay v Cassim, the court held that this rule can
be relaxed in order to do justice between the parties as public policy demands that justice be
done.82
If Kigaan supplied Lerato with prohibited drugs from his premises, then he still wouldn’t be
able to claim back monetary value of the goods because of the principles discussed above. It is
quite clearly against public policy and definitely against community mores. Furthermore, in
analysing the notion of illegality in Keegan and Lerato’s case we base it on the comment made
in Aquilius which read:
‘Broadly speaking a contract may be said to be illegal if the law refuses to enforce it and in
this sense it is immaterial whether the law withholds its support because the contract
conflicts with a direct legal command or prohibition, on the ground that it runs counter to
public policy or because it flouts with morality.’ 83
Lerato would be in possession of those drugs and would be in the position of strength in that
the courts would not help Keegan under the par delictum rule. Even though Jajbhay v Cassim
encourages that justice be done in the interest of public policy, it is against public policy to sell
drugs.

77 Ibid note 10 pg 200.

78 Ibid
79 Dale Hutchison et al. ‘The law of Contract in South Africa’ 2017 3 ed pg 233.
80
ibid
81 Klakow v Sullivan 2006 (1) SA 259 (SCA).
82 Jajbhay v Cassim 1939 AD 537.
83 Aquilius (1941) 58 SALJ 337 at para 344

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7.5 Conclusion
Due to the principle of privity of contracts, the Kigaan and Tony cannot impose any obligations
on Lerato as she is a third party. Therefore, Kigaan will not be able to recover the monetary
value of the goods. Furthermore, the courts would not help Kigaan with regards to his illegal
drugs under the par delictum rule and due to nature of the item hwe is selling to Lerato, it would
definitely be against community mores and public policy.

8. IMPOSSIBILITY
The general rule is that impossibility of performance prevents the creation of obligations, or
impossibilum nulla obligations.84 Because of the possibility requirement, parties are sometimes
absolved of liability if the rule is not met as possibility requirement relates to the performance
itself and not achieving an underlying purpose. 85 However, and quite importantly too, not all
types of impossibility prevent the creation of contractual obligations, as the impossibility has
to be of a certain quality which is to say the different types of impossibility. 86 It is also
important to consider the timing in which the impossibility exists.
8.1 Types of Impossibility
There are different types of impossibility, these include Subjective and objective impossibility
which states that it is not enough for that a particular party cannot perform, which is regarded
as relative or subjective impossibility as the impossibility must be absolute or objective
impossibility in that nobody can render the performance. 87 Section 17 of The Consumer
Protection Act 68 of 2008 provides for a statutory right in which a consumer may exercise
cancellation.88
Other types of impossibility that will need to be looked at are initial impossibility, supervening
impossibility and making performance impossible. Initial impossibility is when it is not
possible to perform the contract at the time of its conclusion which will not give rise to
obligations, however, obligations do arise when impossibility occurs after the conclusion of a
contract.89 Because impossibility arose after the conclusion of the contract between Chris and
Keegan, obligations arose between them. Supervening impossibility on the other hand means
the obligations can no longer be performed because the obligation has become objectively or
absolutely impossible after the contract has been concluded. 90 It is treated differently in cases
where the impossibility is as a result of a party as this constitutes a breach of contract and will
entitle the other party to either pay damages and the affected party may also cancel the
contract.91 Kigaan could on this basis, argue that due to Chris falling ill, he was at fault for the
impossibility.

84 Ibid note 29 pg 214.

85 Ibid.
86 Ibid.
87 Ibid.
88
The Consumer Protection Act 68 of 2008.
89 Ibid note 35 pg 216.
90 Ibid.
91 Ibid.

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8.2 Liability despite Impossibility
However, there are certain circumstances in which liability will still arise despite impossibility.
In Wilson v Smith, Kuper J confirmed this notion and encouraged us to look at the nature of the
contract, the relation of the parties, the circumstance of the case and the nature of the
impossibility invoked by the defendant in our attempt to ascertain whether or not the general
principle would be applied or not.92 Therefore, in observance of the elements laid out in Wilson,
in determining whether Keegan would be liable, we could look at the nature of the impossibility
in that, Chris could not possibly have intended to fall ill. In Wilson, both parties contemplated
that the contract would be capable of execution in the normal way.93 It is reasonable to assume
that Chris and Kigaan did too.
8.3 Divisibility of Performance
In cases where performance is only partially impossible, at the time of the agreement, the
contract could be regarded as being invalid in its entirety or obligations could arise in respect
of what is still capable of being performed. 94 In Stanfeld v Kuhn, the performance was divisible
and as a result the contract was not invalid in its totality but rather an adjustment of the price
was made in proportion to the performance. 95
8.4 Conclusion
Kigaan can claim that Chris was the cause of the impossibility, because he actually was.
However, in applying the test laid out in Wilson we should consider the nature of the
impossibility, which Chris could not possibly have intended. With regard to Stanfeld, Chris is
entitled to claim R8 000 for 80 % completion. However, Keegan has a counter claim of a
R1 000 necessitated by the former’s mal-performance, hence via apportionment Chris will only
be able to recover R7 000. Keegan had contracted to have the job finished for R10 000. If he
were to pay Chris R8 000 plus R3 000 to the contractor who finishes the job he would be
prejudiced to the tune of R1 000.
9. MORA EX RE AND MORA EX PERSONA
9.1 MORA DEBITORIS
This is the culpable failure of a debtor in respect of a contract to make timeous performance of
a positive obligation.
REQUIREMENTS OF A DEBTOR TO BE IN MORA
1. Performance due and possible
● Date for performance stipulated in contract (gives rise to mora ex re).
● No date stipulated: demand made by creditor(interpellatio)-this gives rise to
mora ex persona.
● Demand made by the creditor must give a debtor a reasonable time to performs.
2. Obligation must be enforceable

92
Wilson v Smith
93 ibid
94 Ibid note 39 pg 218. In Stanfeld v Kuhn, the
95 Stanfeld v Kuhn 1940 NPD 238.

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 ● A creditor must have a valid right to performance and debtor must have no defence for
non-performance.
●
9.2 MORA EX RE
Where the parties have expressly or impliedly stipulated a time for performance in their
contract, a culpable failure by the debtor to perform on or before the due date automatically
places him in mora ex re, without the need for any intervention by the creditor.96 (Dies
interpellat pro homine – the due date makes the demand on behalf of the man). But for this
result to follow, the stipulated time must be, not only certain to arrive, but also certain as to
when it will arrive (dies certus an ac quando- for example, 1 January 2010). 97 The fulfilment
of a suspensive condition, or the arrival of an uncertain day which was certain to arrive (for
example, if chris dies), may render the debt due but cannot give rise to mora without a
subsequent demand by the creditor. 98 The time for performance is fixed by implication when
it is clear from the contract itself, or from admissible evidence of the surrounding
circumstances, that the intention of the parties was that performance should be made on or
before a certain date. 99

9.3 MORA EX PERSONA

Where no time for performance has been stipulated in the contract, expressly or by implication,
mere delay by the debtor in performing his or her obligation cannot automatically result in the
debtor falling into mora, even though the debt may be due and enforceable and the delay quite
unreasonable; the creditor must place the debtor in mora (ex persona) by demanding that he or
she perform on or before a definite date or time that is reasonable in the circumstances. 100(Note
that the position is otherwise in the case of contracts regulated by the Consumer Protection
Act.23)The demand (interpellatio) is usually made extra-judicially in a letter of demand,
though an oral demand will suffice, it may however, take the form of a judicial summons
(interpellatio judicialis), but the creditor will have to bear the cost of the summons if the debtor
duly performs.
In Alfred Mcalpine v Transvaal Provincial Administration. Alfred McAlpine & Son was the
plaintiff, and the Transvaal Provincial Administration (TPA) was the defendant, in the court a
quo. The parties had entered into a contract in terms whereof the plaintiff had undertaken to
build a portion of a national road. 101 Certain declaratory orders were applied for on the
plaintiff's behalf. During the execution of the contract, the contractor had received instructions
to introduce an exceptionally large number of alterations which in certain cases had caused
disruption. On McAlpine's behalf, it was alleged that, although each alteration had fallen within
the scope of the contract, the cumulative effect of all the alterations was of such a nature that
the original contract had lapsed and a new contract arisen impliedly through the conduct of the

96 Dale Hutchison et al. ‘The law of contract in South Africa’ 3 ed (2017)

97 Dale Hutchison et al. ‘The law of contract in South Africa’ 3 ed (2017)
98 Dale Hutchison et al. ‘The law of contract in South Africa’ 3 ed (2017)
99 Dale Hutchison et al. ‘The law of contract in South Africa’ 3 ed (2017)
100 Dale Hutchison et al. ‘The law of contract in South Africa’ 3 ed (2017)
101 Alfred Mcalpine v Transvaal Provincial Administration

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parties.102 In terms of this new contract, the plaintiff was entitled to reasonable remuneration
for all the work it had done: that is, from the commencement of the execution of the contract.
The court a quo had held that the variations had been envisaged in the original contract. 103 In
an appeal, the Appellate Division found that, as the plaintiff right up to the completion of the
contract had still relied on the original contract, it could not possibly be said that the original
contract in its entirety had been regarded by the parties as having lapsed and that a new contract
had been entered into. 104 There was, furthermore, a lack of evidence that what the plaintiff had
built was not substantially the road which the contract envisaged. 105 As to an alternative claim
for an order declaring that a certain implied term had to be assumed, in terms whereof the
plaintiff was entitled to compensation for the disruption which had occurred because the
engineer had not introduced his variations at reasonable times, the court held that "at a
reasonable time" was not the same as "within a reasonable time." 106 Such claim, the court found
(Jansen JA and Corbett AJA dissenting), had rightly been rejected by the court a quo. The
decision in the Transvaal Provincial Division, in Alfred McAlpine & Son (Pty.) Ltd. v
Transvaal Provincial Administration, was thus confirmed. In the absence of a properly defined
wording of an implied term which, notwithstanding the express provisions of the contract, had
to be acknowledged, the court determined that it was not at that stage its duty to work out what
wording such a term must have in order to satisfy the plaintiff as well as to comply with the
stated requirements before the term could be acknowledged. 107
9.4 CONCLUSION
Chris as a debtor had created time the time to perform his duty hence his reliable to mora ex re
because it's up to Keegan to perform the mora ex person as explained above

102 Alfred Mcalpine v Transvaal Provincial Administration

103 Alfred Mcalpine v Transvaal Provincial Administration
104 Alfred Mcalpine v Transvaal Provincial Administration
105 Alfred Mcalpine v Transvaal Provincial Administration
106 Alfred Mcalpine v Transvaal Provincial Administration
107 Alfred Mcalpine v Transvaal Provincial Administration

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Bibliography

PRIMARY SOURCES
Cases
Conradie v Rossouw 1919 AD 276

Mokone v Tassos Properties CC and Another [2017] ZACC 25

Associated South African Bakeries (Pty) Ltd v Oryx and Vereinigte Bäckereuen (Pty) Ltd

1982 (3) SA 893 (A)

Carlil v Carbonic Smoke Ball Co 1893

Crawley v Rex 1909 TS 1105

Bloom v American Swiss Watch Co 1915 AD 100.

Hoffman v South African Airways 2000 CC

Bird v Summerville 1961 3 SA 194 (A)

Hersh v Nel 1948(3) SA 686(A)

Pillay v Shaik 2009 (4) SA 74 (SCA)

Cape Explosive Works Limited v South African Oil and Fat Industries; Cape Explosives
Works Ltd v Lever Brothers (South Africa) Ltd 1921 CPD 244.

Sasfin Pty (Ltd) v Beukes 1989 (1) SA (1) A

Klakow v Sullivan 2006 (1) SA 259 (SCA).

Jajbhay v Cassim 1939 AD 537.

Wilson v Smith 1956 (1) SA 393 (W)

Stanfeld v Kuhn 1940 NPD 238

Legislation
The Alienation of Land Act 68 of 1981

The Consumer Protection Act 68 of 2008

The Labour Relations Act 66 of 1995

21 | Page
The Constitution of the Republic of South Africa, 1996

Business Act 71 of 1991

Foodstuffs, Cosmetics and disinfectants Act 54 of 1972

SECONDARY SOURCES

Books

Dale Hutchison et al. ‘The law of contract in South Africa’ 3 ed (2017)

R.H Christie ‘The Law of Contract’ 4ed (2001)

Internet Sources

Available at https://www.investinganswers.com (accessed on 7 April 2019)

Available at https://accountlearning.com/5-essential-elements-of-a-valid-sale-or-a-contract-
of-sale/
Available at
https://www.studyblue.com/?src_url=https://www.studyblue.com/#flashcard/flip/21905177
Accessed on 21 May 2019.

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