Simulated Contracts:

 Issue is GENUINE animus contrahendi

 Boots- Simulated contracts have no force or effect and are not legally binding
 A contract is a simulated contract if the parties do not have genuine animus
contrahendi in respect of the contract and do not intend to have it be
legally binding
 Roschcon case -The fact that an agreement is structured for legal advantage does
not make it simulated provided the parties genuinely intended to be bound

Requirements for a valid contract:

 Agreement If all met, then contract = VALID

 Contractual capacity and can sue for breach
 Certainty
-Remedies for breach are: SPECIFIC
 Possibility
PERFORMANCE, DAMAGES,
 Formalities CANCELLATION
 Legality
 If requirements are NOT FULFILLED,
the contract will be INVALID/VOID and cannot be enforced = RETURN
PERFORMANCES
 If requirements are met but there was improper action (misrepresent,
duress) to get 1 party to agree then they can choose to UPHOLD or to VOID it
and make it invalid
 PARTIALLY VOID contracts and severability- would parties have entered
without invalid parts which are read as never being part of contract

1. AGREEEMENT:
 For a valid agreement there must be:
 Express (declared) agreement
 Consensus between the parties (or reasonable reliance which would make the
agreement enforceable)
 Valid OFFER + Valid ACCEPTANCE = AGREEMENT
 Identify valid offer, if it was accepted or terminated and if a new offer was made and
if it was accepted or rejected

i. Requirements of a valid offer:

 Must be in prescribed form, if any (Wessels)
 any form (not necessarily in writing) and can be prescribed by
parties/legislation
 Offer must be communicated to the offeree
 Needs to be aware of offer to have animus to respond and can be to a
specific person OR public at large
 Offer must be complete and its contents certain or ascertainable (Gebuild)
 Essentialia &Incidentalia, no outstanding matters and clearly
described object with price OR made certain by enquiring
 If proposal is NOT sufficiently certain it can NEVER be an offer
 Offer must be made with ANIMUS CONTRAHENDI (Kgopana, Pitout)
 made with serious intention that mere acceptance by other party
would create a legally binding contract
 INVITATION TO NEGOTIATE- offer not made with animus and offeror
wishes to retain final say
 Determine using OBJ and SUBJ factors (Pitout)
- Quotes usually valid offer unless indicated otherwise (Gebuild)
- Goods on auction are invitations to negotiate unless “without
reserve” then it is an offer
- Invitation to submit tenders is an invitation to negotiate

Animus and offers to the public:

COMMON LAW:
 General Rule- advertisements/display of goods with price tags to the
public are merely invitations to negotiate due to the lack of animus
(Crawley, Boots)
 DOES OFFEROR wish to retain final say
 Look for facts- questions that indicate animus contrahendi:
1. Does offeror wish to retain final say with regard to the
conclusion of a contract?
2. Does offeror wish to control over acceptance?
3. Does offeror wish to control who they contract with
 NOT INFLEXIBLE RULE (Bloom, Carlil) if certain and animus is present
it CAN be a valid offer
- Carlil- very specific class, money for the pay-outs, how to
accept (contact by email/return) and this showed CERTAINTY
and ANIMUS

CONSUMER PROTECTION ACT:

a. SHOP DISPLAYS- s23 of CPA says display of goods with price IS a
valid offer
- Consumer cannot be forced to pay more than advertised price
UNLESS it is an obvious error that has been corrected and
communicated to those who saw it that it was a mistake
- NOT APPLICABLE to electronic transactions- USE COMMON
LAW
 b. BAIT MARKETING/ADVERTISMENTS- s30 of CPA says adverts with a
limit on availability constitute a valid offer in terms of the CPA
- If NO LIMIT use Common Law
- Applicable to electronic transactions and s46(3) ECTA says
inform of unavailability in 30 days and arrange refund

ii. TERMINATION OF AN OFFER before acceptance:

 Revocation
 Provided it is communicated to offeree and NOT if agreed not to revoke
(option contract)
 Rejection
 LOOK at conduct to show offeree is unwilling to be bound, COUNTEROFFER is a
rejection and MUST be communicated to offeror and an
 Expiry/Time lapse
 Within time period/reasonable time BUT can wave protection and say
acceptance valid after expiry
 Death
 Initial impossibility
 Performance is impossible before offer is even accepted

iii. REQUIREMENTS OF A VALID ACCEPTANCE:

 Acceptance must be made with animus contrahendi (Bloom)
 Offeree must have intention to enter into a legally binding contract
upon acceptance and MUST be a conscious response to offer
 Offer must be accepted by the person to whom it was made (Levin)
 Privity of contract, QUESTION OF FACT as to who the offeror intended
to make the offer to
 If made to public or a class of persons any member of the public/class
can accept the offer
 Acceptance must correspond to the terms of the offer
 Must be complete and unequivocal, ANY addition/subtraction is NOT
complete acceptance and is a rejection by way of a counteroffer
 EXCEPTIONS (JRM Furniture)
- Inserting naturalia is not a counteroffer
- Enquiring/modification/clarification is NOT rejection but can still
decide to accept/reject
- Agreement and proposal to modify shortly after is agreement on
original terms NOT dependant on whether modification is
accepted/rejected
 PARTIAL ACCEPTANCE IS NOT VOID IF agreement is divisible, and each
part forms a valid contract when accepted (CGEE)
  Acceptance must be in the prescribed form, if any
 If legislation prescribes any form for contract, acceptance must be in the
same form
 A to Z Bazaars- if the parties prescribe a method of acceptance this is the
ONLY form it may take
 Jafta- if the offeror and offeree communicate by a certain mode, they
impliedly authorise this mode ad valid for acceptance
 Acceptance must be communicated to the offeror unless dispensed with
 Acceptance is completed when it has been communicated to the offeror
 A to Z Bazaars- Offeror can dispense with req of informed of acceptance
 When the offeror prescribes or authorises manners of acceptance, he
impliedly dispenses with the need to be informed
 Acceptance must be made before the offer terminates
 Effective acceptance only takes place before the offer terminates

ACCEPTANCE BY SILENCE OR INACTION:

a. Common Law:
 CANNOT in general force the offeree to act positively to refuse an offer
and silence/inaction does NOT amount to acceptance or consent
 EXCEPTION (Union Spinning Mills)- silence can taken as acceptance when
there is a duty to do something or there is a prior relationship
 Would a RP infer from the silence that the offeree is assenting to the
offer?
b. Legislation:
 Electronic Communications and Transactions Act
- S45 ECTA- failure to respond to unsolicited communications does NOT
amount to valid acceptance
- If communication is solicited look at COMMON LAW and Union Mills
 National Credit Act
- An offer on credit CANNOT state that silence or inaction is valid
acceptance and there is NO duty to return goods in order to reject the
offer
 Consumer Protection Act
- Section 31- INACTION IS NOT VALID ACCEPTANCE including the failure
to return unsolicited goods (where payment wasn’t arranged) which
according to s21 must be stated as a mistake and collection must be
arranged by the offeror
Duty to Contract:

 Due to freedom of contract an individual CANNOT be forced to enter into or to

make/accept an offer
 HOFFMAN- PEPUDA and anti-discrimination statutes may create a duty to
contract where a refusal amounts to unfair discrimination

Tacit Contracts:

 Buffalo City- clarified test for proving the existence of a tacit contract
 BALANCE OF PROBABILITIES TEST- a party must prove that the most plausible
explanation for their conduct was that they had intended to create a tacit contract

iv. TIME AND PLACE OF FORMATION:

 NB for prescription and jurisdiction and identification of when a contract is binding
 Time lag between declaration of acceptance and hearing of acceptance is an issue
when parties are not in the same place when contracting = TIME AND PLACE OF
FORMATION is an issue
 4 theories to deal with this:
 Declaration Theory- contract concluded when and where the offeree
declares/expresses their acceptance
 Expedition Theory- contract is concluded when and where the acceptance is
transmitted (posted) to the offeror
 Reception Theory- Contract is concluded when and where the offeror
receives the acceptance whether he is aware of it or not
 Information Theory- Contract is concluded on the offeror getting knowledge
(hearing/reading) acceptance and there can ONLY be consensus when the
offeror becomes aware of the acceptance
 Law chooses risk allocation and the risk of not knowing if the contract is concluded
or not and each theory places the risk on either the offeror/offeree

SA Law position:

 Dietrichsen- SA uses information theory and offeror MUST have knowledge of the
acceptance and the acceptance MUST be communicated to the offeror
 2 scenarios where this applies:
1. Contracts concluded telephonically (TEL PEDA)- communication by
telephone/telex is almost instant and thus there is no reason the information
theory shouldn’t apply
 2. Contracts concluded by fax (Jamieson)- INFORMATION theory applies
- Faxes via email or mobile can be “electronic transactions’ under ECTA and
then receipt theory applies

Exceptions:

 Offeror stipulates the specific method of acceptance

 May dispense with needing to be communicated with
 Driftwood- Time and place depend on stipulated method (e.g., If by email the
rules on electronic contracts apply)
 If no particular rule applies the contract is concluded when and where the
offeree complies with the offeror’s instructions regarding method of
acceptance
 Postal Contracts
 Cape Explosives- This is a contract concluded by mail and EXPIDITION theory
applies due to risk taken by offeror of using this method
 Also applicable to telegram/telex (Also applicable to telegram/telex (Yates)
 Expedition theory will only apply to postal contracts if:
 Offer and acceptance were made by mail or the offeror
prescribed/authorised acceptance by post
 Acceptance was correctly addressed
 Lebven- if offeree was responsible for incorrect address, then
expedition NOT APPLICABLE
 if OFFERER gave wrong details, then expedition applies
 Postal service functioned normally at the time
 Bal- if not delivered due to exceptional circumstances (war)
then expedition doesn’t apply
 Offeror did not indicate a different intention or specify a particular
method and that expedition shall not apply
 Electronic Contracts
 Contracts concluded electronically (offer and acceptance were electronic OR
offeror authorised electronic acceptance) are regulated by ECTA
 ECTA applicable to any communication where data is created, sent, received
or stored electronically (online transactions, SMS, mail, automated voice
messages)
 JAFTA- RECIEPT theory applies unless parties agree otherwise
- PLACE of receipt is the offerors usual place of business or residence
- Definition of ‘time’ of receipt:
a. Enters the information system designated or used by offeror
b. Acceptance is capable of being retrieved and processed by the
offeror
PACTA DE CONTRAHENDO:

 Hirschowitz- A preliminary agreement to make a main contract in the future

 There is the MAIN contract (sale, lease) AND the Pacta contract which facilitates the
formation of the main contract
 Not enforceable in SA law but 2 exceptions of pacta that are valid
 Option contract
 Contract of preference (pre-emption agreement)

Option Contracts:

 A contract to keep the main offer open for a period of time where the main offer is
irrevocable for this period of time
 Can be for free OR in exchange for payment
 Without a valid offer on the main contract there can be no valid option
 REQUIREMENTS-
 OPTION must satisfy all the requirements of a valid contract (there must be
agreement on the offer and acceptance of the offer for an option contract)
 MAIN CONTRACT OFFER must satisfy all the requirements for a valid offer
 Brandt- if the main offer is invalid, the option contract will fail due to
lack of certainty
 FORMALITIES- NOT required BUT what if the main contract is subject to formalities?
Does the option also have to comply?
- VENTER says no verbal is sufficient to keep open written offer
- HIRSCHOWITZ says option is subject to the same formalities
 KRETZMANN in the HC says option does NOT have to comply but this is a HC
decision BUT likely to follow due to same reasoning in MOKONE CC
 DURATION-
 Falls away when main contract is accepted and comes into being or rejected
and both fall away
 Lapses on expiry of time (reasonable or specified)
 LEGAL EFFECT-
 Creates rights and duties for both grantor and holder
 GRANTOR has duty to keep option open and may not withdraw it or do
anything to frustrate the holders’ rights (selling to someone else)
 HOLDER has no duties if option is free BUT if it is paid the older has the duty
to pay the fee
 EXERCISE OF RIGHT OF OPTION-
 Holder exercises right by accepting the main offer which becomes binding,
and option falls away
 BREACH AND REMEDIES-
 If grantor fails to honour duties of option agreement and NORMAL remedies
apply
  Holder has a choice to:
- Cancel the contract
- Claim damages for loss caused by the breach (Sommer)
- Uphold option contract:
 If grantor about to breach, then use an INTERDICT to prevent
 If holder upholds then accepts main offer if no breach and
grantor is bound
o if grantor has concluded a competing contract and
already sold item, he will have to either breach option
or another contract
o OPTION HOLDER gets preference to claim specific
performance and competitor claim damages
o If ownership has transferred the option holder cannot
force return as they don’t have a real right, then option
holder will have to claim damages from the grantor
o If 3rd party KNOWS of option contract, then doctrine of
notice will allow option holder to claim item from 3rd
party

PRE-EMPTION AGREEMENT:

 Grants a party a preferential right to conclude a further contract with the other party
 Confers right on GRANTEE to be given preference to buy the object should a trigger
event occur such as the grantors decision to sell
 One of the parties makes the offer when on trigger and the other accepts it
 Can be for free or paid
 2 forms upon trigger:
 GRANTOR makes the first offer to the GRANTEE (right of first refusal)
 GRANTEE will have the opportunity to make the first offer to the GRANTOR
 REQUIREMENTS-
 Pre-emption is a valid contract MUST satisfy all the req of a valid contract
o Content of pre-emption MUST be certain or ascertainable BUT the
main contract doesn’t have to be as it is not made at the time of pre-
emption
 FORMALITIES-
 Hirschowitz- Formalities of pre-emption MUST comply with those proposed
for the main contract
 MOKONE- formalities do NOT need to comply with main formalities
 LEGAL EFFECT-
 Creates rights and duties for parties
 Negative duty-
o restrains grantors power to sell matter/do anything that frustrate the
grantees right to preference- if they do then they are in breach
  Positive Duty-
o Can it place positive duty on grantor to do something (make/invite an
offer)? Depends on terms of pre-emption and problematic to enforce
 EXERCISE-
 Trigger event brings grantees right into effect one party makes offer
 Soteriou- Grantor cannot avoid duty to make offer by making an
unreasonable offer- offer must be bona fide otherwise grantor is in breach
 To conclude main contract the other party must accept the offer
 If pre-emption lapses, then there are no further rights and duties
 BREACH AND REMEDIES-
 If grantor breaches the grantee can choose to UPHOLD or CANCEL as well as
CLAIM DAMAGES for losses
 grantee can prevent this frustration/threat by an interdict (Owsianick)
 Enforcing positive duty- problematics as these are ‘agreements to agree’ and
are thus unenforceable in SA law due to lack of certainty
 Associated SA Bakeries-
o ORYX mechanism for when grantor has breached and already sold
subject matter without giving grantee preference
 Grantee can buy the property from the grantor on same
terms as 3rd party on their unilateral choice and they only
have to inform the grantor who has no choice
o If grantor not yet sold item, the grantee cannot compel the grantee to
conclude or negotiate the main contract
o GRANTOR party to 2 contracts when ORYX used and will be in breach
o PRE-EMPTION right given preference to thing and other party claim
damages
o If ownership has already transferred to 3rd party, then grantee claim
damages
o If 3rd party knew of pre-emption, then use doctrine of notice and claim
from 3rd party
o Plattekloof- 2 farm in pre-emption or buy all 8- look at nature of pre-
emption and if there is pro-rata for different components and in this
case, court said no

CONTRACTUAL CAPACITY:

 In order to have the necessary animus contrahendi for consensus the parties MUST have
contractual capacity
a. Mental incapacity:
 To enter a legally binding contract a party must understand the nature and
consequences of entering into a contract AT THE TIME of entering into it
 If they don’t the contract is NULL and VOID
  Even when derives rights only from a contract (donation)
 Curator appointed to concluded contracts on mentally ill persons behalf
 Effect of court order declaring a person mentally ill:
o Declaration of mental illness and detention in facility doesn’t mean the
person can NEVER conclude a contract
o LOOK AT state of mind AT TIME of concluding contract
o Rebuttable presumption that at the relevant time they were incapable of
contracting
o Person wanting to enforce contract must prove that AT TIME OF
CONCLUSION person was capable of understanding legal nature and
consequences and was having a lucid interval
o If NO DECLARATION, the presumption is that they DID have capacity

b. Prodigals:
 Declared by court has limited contractual capacity- Assisted by Curator
 Without assistance can only contract to obtain rights
 If incapable of manging finances but no declaration of prodigal, then FULL capacity

c. Insolvency:
 Declared insolvent by court- FULL contractual capacity for most transactions
 Certain transactions in insolvency act require consent of curator and if not obtained
contract is VOIDABLE by curator
 Factually insolvent but no declaration by court has FULL capacity

d. Minors:
 S17 of CA the new age of majority is 18 where has FULL capacity
 Younger than 7- NO CAPACITY even in contracts that benefit them
 7-18 Years- LIMITED capacity and only conclude contracts with parent/guardian
permission
o Without permission- ONLY contracts where rights obtained
o Without permission is VOIDABLE- can be ratified by parent or minor when
they turn 18
o Even with assistance minor can claim return to previous position if contract
to detriment
o Certain contracts (land) need permission of HC and parent/guardian

Implication of the Consumer Protection Act:

 S39 of the CPA changes the common law position relating to contractual capacity
 ONLY applicable to consumer contracts
 Mental illness-
 S39(1)(a) the contract will be void if the supplier knew or could reasonably have
determined that there was such a court order
 Creates impression that contract will be valid if the mentally ill person creates the
impression that there is no limit on their capacity
  Unassisted minors-
 S39(b)- contracts with unemancipated minors without parental permission are
voidable at the instance of the minors UNLESS the minor/parent ratifies the contract
 Suggests contract will be valid where the minor created the false impression that
they had full contractual capacity
 Critique-
 Why does it only deal with mentally ill and minors?
 Poorly draftable and not reconcilable with s39(1)
 Imposing liability on those who pretend to have capacity undermines protection
against their own lack of judgement

CERTAINTY:

 terms must be CERTAIN (clearly described performance) or ASCERTAINABLE (objective

method that allows performance to be worked out such as a formula)
 if VOID for uncertainty- uncertainty can be remedied and contract will be valid
 if vagueness is divisible then contract can be made valid

Performance chosen from a closed group:

 Contract contains generic, alternative and facultative terms
 Terms allow one party (or a 3rd party) to select the performance from a closed group
 These clauses will NOT be void for uncertainty since performance is ascertainable
 an obligation is a specific number of things chosen from a class/group of things
 Contract contains different types of obligations:
 Generic Obligations-
- Performance selected from a class (genus) of things
- parties MUST specify the quantity of their performance
- unless stipulated otherwise the debtor must make the selection from the
genus
- e.g., you get a red Ferrari
 Alternative obligations-
- Performance chosen from 2 or more alternative possibilities
- Can be selected by one of the parties or a 3 rd party
- E.g., Professor A’s class or Professor B’s class
 Facultative obligations-
- Primary obligation together with the qualification that the debtor can
substitute another performance
- Creditor can ONLY enforce the primary performance, but the debtor can
deliver an alternative performance
- Debtor foresees they may not be able to deliver a certain performance and
obtains the right to give a similar performance
- E.g., Car A but you may deliver Car B
Discretion to fix performance:

 Term provides either/both parties or a 3 rd party to fix performance or to change it after

conclusion then ask if this is a sufficiently certain or ascertainable term or VOID
 Law recognises some discretions as valid
 Emphasis on WHO is afforded the discretion and the parameters of the discretion
 Discretion to fix/vary performance given to a 3rd party-
 Not an employee or agent of 1 party (so they don’t act in prejudice)
 A clause allowing a 3rd party to fix/vary performance is VALID and CERTAIN even if
not completely independent of the parties
 Discretion in bad faith can be set aside by the court
 E.g., A agrees to sell car to B at a price determined by Z an expert car dealer
 Discretion afforded to one of the contracting parties/their agents:
 To determine own or others performance is problematic
 Most agree this is void for uncertainty due to risk of unreasonable determination
(e.g., A deciding B must pay for R5000 for A’s pen)
 Discretion to fix other party’s performance-
- NBS BOLAND BANK- term conferring discretion on parties to fix/vary others
performance is valid if it is NOT relating to PURCHASE PRICE and RENTAL and
the discretion is limited
- If no express limitation the court reads in that discretion is exercised
limitedly
- Court left open question where contract expressly states discretion is limited
and it relates to price- NO REASON IT SHOULDN’T APPLY
- Discretion for rental/purchase SHOULD be valid if its limited
 Discretion to fix own performance-
- ENGEN- discretion is valid even where it relates to purchase price/rental
PROVIDED that it is LIMITED

Discretion afforded to both parties (Agreements to agree):

 When parties reach some agreement but not finality on ALL terms = VOID for incomplete
 AGREEMENT TO AGREE is an agreement to negotiate a 2 nd contract
 A and B agree they will negotiate the sale of A’s car in 1 months’ time
 Is the preliminary agreement enforceable? 3 CONCERNS:
1. Freedom to contract-
 If we enforce the contract, we undermine the freedom of contract of the party who
does not want to be bound
 This was freely negotiating so if we don’t enforce, we undermine BOTH freedom to
contract
2. Courts will not make the contract for the parties-
 Enforcement of duty to contract must NOT be the court making the contract
 Order for specific performance can force negotiations BUT cannot prescribe
terms or force them to contract
3. Certainty-
 Impossible to determine breach of obligation to negotiate since freedom of
contract says party can withdraw during negotiations
  Impossible to determine damages for breach
 AGREEMENTS TO AGREE ARE NOT ENFORCEABLE due to absolute discretion afforded to
parties to agree or disagree (Premier, Free State)
 Southernport- Agreements to agree will be enforceable if there is a deadlock breaking
mechanism in the scenario of no agreement

NEW APPROACH:

 Everfresh- importance of good faith in contract supported agreements to agree and

negotiation in good faith
 Indwe Aviation- Argued CERTAINTY issue would be solved by implying term is good faith and
honest negotiating and deadlock break is not material
 Roazar- Agreements to agree NOT enforceable because of absolute discretion vested in
parties
 Not sure what factors to use to determine good faith
 Public policy- if one party is unwilling, we cannot force the negotiations
 Shepard- agreement to agree is NOT enforceable and void for uncertainty as deadlock was
NOT directly linked to agreement to agree

POSSIBILITY:

 At the time of the conclusion of the contract it must be possible to render the performances
 If it is not, then the contract is VOID from the BEGINNING
 Contracts Void for Impossibility:
 INITIAL IMPOSSIBILITY-
- The impossibility must exist at the time of the contract’s conclusion
- This renders performance OBJECTIVELY IMPOSSIBLE
- Impossibility after conclusion is BREACH or SUPERVEINING IMPOSSIBILITY of
performance
 OBJECTIVE IMPOSSIBILITY-
- Objective impossibility = impossible for ALL people to perform
- Subjective impossibility does not affect validity
- If performance is OBJECTIVELY impossible then the contract is INVALID
- Subjective impossibility of the debtor not being able to perform is irrelevant
 PAYMENT of MONEY can never be objectively impossible because
someone in the world can pay it even if the debtor cannot
- GENERIC obligations can’t be objectively impossible because a genus cannot
be destroyed but if the genus is very limited it could be objectively
impossible
 10 tons of first grade yellow maize is NOT impossible as somewhere
someone’s farm will have this
 If we say from X’s farm and his crops fail then it is impossible
- ALTERNATIVE obligation will only be impossible if ALL the alternatives are
impossible
- FACULTATIVE obligation will be VOID for impossibility if the primary
performance is impossible even if the secondary obligation is possible
Factual vs Legal Impossibility:

 FACTUAL IMPOSSIBILITY-
 Performance must be factually impossible (debtor can’t perform)
 If it is impractical, dangerous, costly or extremely difficult then it is objectively
impossible
 COMMERICALLY REASONABLE (economic and practical) is test of factual possibility
 Ordinary circumstantial hardship is NOT factual impossibility
 LEGAL IMPOSSIBILITY-
 A legal rule preventing a party from performing is sometimes treated as objective
legal impossibility (Wilson)
 Actually, an instance of illegality

Partial Impossibility:

 Only part of the performance is objectively impossible the entire contract will be VOID
unless the contract is divisible
 TEST is whether parties would have concluded the contract without the impossible parts

EXCEPTION to general rule of impossibility:

 GENERAL RULE is contract will be impossible where it is objectively impossible to perform

 WILSON- If this was the party’s intention was that this was the case, and they foresaw the
possibility of impossibility of performance and undertook this risk
 Which party caries the risk of impossibility:
 If the DEBTOR guarantees performance, he carries the risk of impossibility and will
have to compensate the creditor with damages if the performance becomes
impossible
 CREDITOR undertakes the risk they will be liable to perform their own obligations
even if the debtor’s performance proves to be impossible
FORMALITIES:

 Most common are writing and signature

 WRITING can be a FORMALITY (no valid contract concluded UNLESS it is written)
 WRITING can also a method of PROOF (prove existence of contract)
 Where it is in doubt is writing is a formality for validity or proof the presumption is
that it is for the purposes of proof
 If the contract has to be in writing for validity all the MATERIAL TERMS must be in writing
(essentialia and incidentalia)
 Stalwo- TACIT (unexpressed, imputed attention) need not be in writing

Formality of signing:

 A contract that needs to be signed as a formality needs to be signed in its COMPLETED

form
 Offer must be in its completed form before it is signed by the offeree and accepted
in signature by the offeree
 Fraser- Signing blank pages with the intention that they will be completed later will
NOT suffice
 JOHNSON-
 3 scenarios relating to blank spaces left in a printed document:
- STILL NEGOTIATING- contract will be INVALID as there was no agreement
between the parties
- NOT INTEDED TO BE PART OF THE CONTRACT- contract will be VALID and we
ignore the blank clauses as if they were never part of the contract
- AGREED TO BUT LEFT OUT ACCIDENTALLY- contract is INVALID as not all the
material terms are included in writing and thus non-compliant with the
requirements for a contract HOWEVER this can be rectified

Writing and Signature in ELECTRONIC CONTRACTS:

 ECTA says electronic contract conclusions are subject to formalities

 Section 4(4)- If a requirement is that the contract must be in writing an electronic contract
will be valid if it is accessible in a manner for reference
 Section 13(1)- Where a formality is SIGNATURE the electronic contract must be signed with
an ADVANCED electronic signature
 Applicable where signature is a statutory formality
 Section 13(3) If it was SELF IMPOSED then it does not have to be an advanced
electronic signature but merely an appropriate method to identify oneself and to
indicate approval
 SPRING FOREST-
 emails satisfy the requirement of writing for formalities
 if signature is self-imposed one’s name at the bottom of the email suffices as it is
logically connected to the email and will be reliable if there is NO DISPUTE between
the parties as to the authenticity of the emails
  Global & Local Investments-
 provisions of ECTA allowing non advanced signature for self-imposed formalities
(such as a name at the end of the email) CANNOT be used to validate a forged
electronic signature where the validity is in dispute
 forgery of a party’s signature can NEVER be valid according to the common law

 Some contracts (ALIENATION of land) requiring statutory formalities are excluded from the
provisions of ECTA
 Some authors state the meaning of this is that these contracts cannot be concluded
electronically
 BORCHERDS- these contracts can be executed electronically however the common
law applies and NOT the provisions of ECTA
 this means no advanced signature is required and there are fewer formalities, and it
is HIGHLY unlikely that this is the case given the importance of these excluded
contracts

Statutory Formalities:

 Contract won’t be valid unless it complies with the formalities prescribed by statute
 Variations to the contract MUST comply with the statutory formalities

ALIENATION OF LAND ACT-

 Section 1(1)- Alienation of land is any sale, donation or exchange in land or the interests
associated with land (servitudes, usufruct, sale)
 Section 2(1)- MUST BE WRITTEN and SIGNED by both parties OR their agents on written
authority
 Due to economic value
 All material terms included, and signature will ONLY be valid if parties do not add
new terms or information
 Section 28(2)- NON-COMPLIANCE means contract is null and void and has no legal effect
 IF BOTH PARTIES have performed in full in terms of null and void contract then
performance cannot be retrieved, and it is carried out as if performance is valid
 S28(1) If one party has performed in a contract that is null and void for
noncompliance with the formalities the performance can be recovered in the
following amounts:
- Buyer can recover interest on payments made as well as compensation for
necessary expenditure and useful improvements
- Seller can claim compensation for occupation and use and enjoyment of the
land as well as for damage and neglect
SURETYSHIP (General Law Amendment Act)-

 This is a contract between the creditor and the 3 rd party to settle someone’s debt if they
default
 SEPARATE contract between creditor and surety
 Formalities aim to protect the surety
 Section 6- Contract MUST be in writing and signed ONLY by the surety or on their behalf
 NON-COMPLIANCE renders the contract null and void

CONSUMER PROTECTION ACT:

 Promote fair, accessible and sustainable marketplace for consumer goods and services
 Formalities for CONSUMER AGREEMENTS
 Section 50(1) contract MUST be in writing
 Section 50(2)(a) even if it is not signed by the consumer
 Section 50(2)(b) the supplier MUST make a free copy of the agreement available even if it is
electronic
 Section 50(2) (i-ii) agreement MUST be in plain and understandable language and set out
consumers financial obligations
 NON-COMPLIANCE will not automatically make the agreement invalid
 Court has discretion to refuse to enforce the terms if they are unfair

NATIONAL CREDIT ACT:

 Applicable to credit agreements (consumer buys goods or borrows money and doesn’t make
payment immediately) and interest s charged on the amount
 FORMALTIES aimed to prevent exploitation of the consumer by having the formality of some
information in WRITING
 Section 93- credit agreements must be in a from provided by regulation, Creditor MUST
provide a copy of the agreement in paper or electronic form
 NON-COMPLIANCE does NOT render the contract invalid and void BUT criminal sanctions
may be imposed on the credit provider for non-compliance

Statutory Formalities- Variation and Cancellation:

 A contract required by law to be in writing MAY be cancelled verbally unless there is a non-
cancellation clause
 Any VARIATION (change by subsequent agreement) MUST comply with the formalities
prescribed by law
 IMPALA Distributors- formalities required by law generally require the whole contract to be
in writing
- Verbal variation means that the whole contract is not in writing, and this is contrary
to the law
- VERBAL CANCELLATION is valid as it does not amount to variation of the contract
SELF-IMPOSED FORMALITIES:

 Imposed by the parties

 Most common is WRITING and SIGNATURE
 Writing can be either a FORMAL requirement or a form of PROOF = LOOK at INTENTION
 Agreement NOT binding unless in writing = FORMALITY and not valid unless written
 Agreement recorded in writing = PROOF and non-compliance does not affect validity
 Agreement partly verbal and partly written- if writing if FORMALITY then all
MATERIAL terms must be in writing
 Goldblatt- if unsure of intention, then PRESUMPTION is that writing is for PROOF

Different stages where formalities are required:

 Formalities at one stage does not mean formalities are required at all stages
 VALID FORMATION (conclusion)-
- Shaik and requirements of writing and signature
 VALID VARIATION (change of terms)-
- SA Sentrale these formalities are imposed by non-variation clauses
 VALID WAIVER OF RIGHTS (relinquishing of rights)-
- Formalities of waiver imposed by non-waiver clause
- Non-waiver clauses are used to prevent parties escaping the non-variation clause as
waiver is distinct from variation
- Pactum de non petendo (agreement not to sue) is NOT affected by a waiver clause
(Miller)
 VALID CANCELLATION (termination of all obligations)-
- Impala Distributors- Formalities imposed by non-cancellation clause

Variation of a contract:

 Generally, parties can vary their agreement informally UNLESS there is a non-variation
clause stating that a clause may not be varied UNLESS reduced to writing
 2 approaches if parties can still vary informally despite clause:
 NVC unduly RESTRICTS freedom to change minds and parties SHOULD be able to
change agreement by mutual consent DESPITE NVC
 Parties AGREED to NVC and should be bound as not applying NVC restricts parties’
 freedom to use an NVC and therefore parties should not be able to
verbally/informally vary agreement despite NVC
 Settled by Shifren principle in SA Sentrale:
 verbal variations (informal) in the presence of an NVC will be INVALID and contract
will be enforced as if there was NO VARIATION (Confirmed in Brisley)
- Is it possible to alter other clauses in the presence of an NVC
- NVC protects against non-formal variation which PROMOTES CERTAINTY as
avoids verbal variation
- Does NOT limit contract as parties chose to include
- NVC must be enforced to uphold pacta sunt servanda
  NVC is interpreted restrictively and don’t cover matters expressly stated in the clause
 Golden Fried Chicken- Verbal cancellation, waiver and renewal with an NVC will be VALID
unless the clause prescribed formalities

Ways around the Shifren Principle:

 Shifren can produce hardship and injustice on strict application

 BRISLEY-
 rent payable on certain day and landlord can cancel if not paid, NVC said
amendment in writing, agreed verbally to pay on different day, later landlord argued
verbal variation not valid
 LESSEE said it would be unfair, unreasonable and in conflict with bona fide principles
to invoke the NVC and Shifren Principle
 3 ways to get around Shifren:
1. Informal agreement is not variation
2. Estoppel
3. Public Policy

1. Informal agreement is NOT a variation:

 Escape Shifren if the informal agreement is Not a variation but another transaction
 Waiver, cancellation pactum de non petendo
 Formalities in NVC would not apply to other agreements
 DOCTRINE OF WAIVER- deliberate abandonment or surrender of existing rights
acting with full knowledge
 Waiver can be express or tacit
 If the conduct amounts to waiver and not variation, then the NVC will NOT apply
 Hutchison- MAIN DIFFERENCE is that waiver relates to rights ALREADY ACCRUED
(past obligations) whereas variation changes future agreements
- Agreement not to cancel due to late payment when there is a right to cancel
is WAIVER
- Agreement to change payment date is VARIATION
 A NON-WAIVER CLAUSE closes this loophole afforded by a waiver
- No relaxation, latitude or indulgence should be construed as a waiver or
abandonment of rights
 Courts give effect to non-waiver clauses but interpret them strictly
 Miller- pactum de non petendo did NOT amount to a waiver and NOT a variation and
non-waiver/non-variation clause does NOT apply
- Not a permanent waiver of a right but an agreement not to enforce the right
in court for a period of time
2. Estoppel-
 May soften the Shifren principle
 Miller- Estoppel is a defence that may prevent the other party from relying on the
NVC
 If A creates the incorrect impression in B’s mind and B reasonably relies on the
impression to his detriment, then A cannot subsequently deny the correctness of
this impression
- Lecture says chapter 3 is NOT examinable, student relies on this and doesn’t
study chapter 3
- Lecture is estopped from denying the correctness and BOUND by the
incorrect impression created
- If the lecturer sets the exam the student can estop the lecturer from
asserting that the question on chapter 3 forms part of the exam
 BRISLEY- Estoppel in recent cases not successful defeating the NVC due to strict
requirements of estoppel
 This is because it isn’t reasonable to believe a verbal variation will be binding given
the presence of the NVC
 Nyandeni- Estoppel is also not allowed if the result is not permitted by law- common
law prevents verbal variation of a written contract then estoppel cannot be used to
allow verbal variation

3. Public Policy-
 NVC may be unenforceable if it is against public policy
 A person who fraudulently/in bad faith relies on an NVC will be prevented from
doing so if it is against public policy
 Fraud exists where one party leads the other to believe that he will not enforce the
terms of the NVC and the written contract in order to get the other party to breach
 At the time of agreeing to the verbal variation the party has already intended to set
up a trap for the other party
- rent payable on certain day and landlord can cancel if not paid, NVC said
amendment in writing, agreed verbally to pay on different day in order to
set a trap for the lessee with no intention to abide by it to evict the lessee,
later landlord argued verbal variation not valid
- Enforcing NVC would be condoning Fraud
 If there is NO FRAUD can bad faith be used to escape the NVC
- Bad faith is where a party intended to be bound by verbal agreement when
it was concluded but subsequently decided to enforce the written one and
the NVC
- BRISLEY- SHIFREN not EXCLUDED because enforcement of NVC would be
unfair and BAD FAITH IS INSUFFICIENT to defeat an NVC
 BEADICA- public policy requires that the enforcement of a clause must be
reasonable objectively and subjectively and a variety of factors INCLUDING good
faith must be weighed up
- Didnt deal with NVC so it is unclear how this will be applied in cases of the
NVC
 GF- other public policy considerations may lead to the unenforceability of the NVC
- Bests interests of children protected
 - Parents should maintain children in their ability
- Necessary to change maintenance orders for child best interests
- VERBAL AGREEEMENT to change maintenance order valid
 SH- BOTH parties aware of the NVC and therefore verbal agreement to vary NOT
valid

CANCELLATION OF A CONTRACT:

 Parties can cancel a contract informally

 HOWEVER, parties can prescribe formalities for a cancellation by way of a NON-
CANCELLATION CLAUSE
 Can stipulate cancellation is only valid if it is in writing
 IMPALA- Non cancellation clause can be informally varied UNLESS the contract ALSO
contains an NVC in which case SHIFREN would apply
 Non cancellation clause applies to cancellation by MUTUAL AGREEMENT only and does not
affect the rights for material breach