PVL3702 Assignment 1 Question and Answer: 2023 Semester 1

Question
Carol, an owner of an exclusive bicycle shop advertised a special limited-edition bicycle for sale,
and invited the public to make offers for the bicycle. Jane and Portia were among many people
who submitted written offers for the bicycle. Jane’s offer was for R150 000, and Portia’s offer
was for R190 000. Although Carol intended to accept Portia’s offer, she erroneously wrote a
letter to Jane, wherein she accepted Jane’s offer. Jane believes that an enforceable contract
was formed but Carol denies this. Apply the direct reliance theory and advise if a legally
binding contract was concluded between Carol and Jane. Discuss fully and refer to case
law in your answer. Do not apply the Consumer Protection Act 68 of 2008.

As part of your research for this question you were required to read Kok v Osborne 1993 (4)
SA 788 (SE), and Constantia Insurance Co Ltd v Compusource (Pty) Ltd 2005 (4) SA 345
(SCA). You were also required to identify the relevant section(s) in the prescribed textbook,
relating to this question.

PVL3702 Assignment 1 Answer

Preliminary steps relating to basic research:

In order to identify the law, which you should apply to the question, you were asked to:
(1) read two court judgments; and
(2) identify the relevant section(s) in the prescribed textbook.

(1) Read two cases

In Kok v Osborne,1 the defendant believed that he was contracting with the plaintiff and another
party jointly, but the reality was that he was only entering into a contract with the plaintiff alone.
This error in persona meant that the defendant was mistaken as to the party or parties with
whom he was contracting. The court held that such a mistake was material. This meant that a
contract was not concluded in accordance with the will theory.

1
1993 (4) SA 788 (SE). Hereinafter referred to as “Osborne”.
In Constantia Insurance Co Ltd v Compusource (Pty) Ltd,2 where there was dissensus between
the parties, the Supreme Court of Appeal applied the direct reliance theory enquiry which was
formulated in Sonap Petroleum (SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v
Pappadogianis.3 The three-fold enquiry set out in Sonap is as follows:

- firstly, was there a misrepresentation as to one party’s intention.

- secondly, who made that representation.

- and thirdly, was the other party misled thereby? This question postulates two
possibilities: Was she actually misled and would a reasonable man have been misled?

To summarise, regarding the above two cases, Osborne dealt with an error in persona and
material mistake, and Compusource related to the direct application of the reliance theory. This
gives you an indication that the assignment question to be answered could be related to
an error in persona, material mistake and the direct application of the reliance theory.

(2) Identify the relevant section(s) in the textbook

If the “Table of Cases” is consulted in the prescribed textbook4 you will find the relevant pages
where the Osborne and Compusource cases are discussed in the content and footnotes in the
textbook. When you look at these content and footnote references, you will notice that these
cases impact on issues relating to error in persona, material mistake, and the direct application
of the reliance theory.
In summary, based on the above preliminary research you should have worked out that error
in persona, material mistake, and the direct application of the reliance theory are relevant for the
assignment question.
What follows below is the answer to the assignment question.

2
2005 (4) SA 345 (SCA) 354. Hereinafter referred to as “Compusource”.
3
1992 (3) SA 234 (A). Hereinafter referred to as “Sonap”.
4
Dale Hutchison and Chris Pretorius (eds), The Law of Contract in South Africa (Oxford 2022) 513 and 519.

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Answer
Identifying the problem
The facts seemingly indicate that Carol and Jane may not have reached actual consensus
based on the will theory because Carol sent the acceptance letter to the wrong person. Carol
sent the letter of acceptance to Jane by mistake as she intended to contract with another party.
In the absence of consensus based on the will theory, it will be necessary to determine if a
legally binding contract was concluded based on the direct reliance theory approach.
Discussing the relevant law applicable to the problem AND applying the law to the facts
of the problem
The direct reliance approach can only be applied if it is determined that Carol acted under a
material mistake. It must thus be determined whether agreement (consensus ad idem) as a
contractual basis exists between the parties, as required in terms of the will theory.
The mistake on the part of Carol relates to an error in persona. With this type of error, where a
party intends to accept the offer of one party, but mistakenly accepts the offer of another party,
such an error is usually material.5 This applied in Kok v Osborne6 where a party was mistaken
as to the identity of the party or parties with whom he was contracting with, and the court held
that his mistake was material. And in National and Overseas Distributors Corporation (Pty) Ltd v
Potato Board7 a company incorrectly sent a letter of acceptance to the wrong offeror, as it
intended to accept the offer from a different offeror, and such a mistake was considered to be
material.8 Therefore, the judgments in Potato Board and Osborne provides judicial support to
reason that the mistake made by Carol was material. It also appears that the mistake was
material because the identity of the correct person that Carol wanted to contract with was of
vital importance as Portia was offering a much higher price to purchase the bicycle.
At this stage it is also worth mentioning that because there is no consensus between Carol and
Jane relating to a material aspect of the agreement with reference to the identity of a party, a
legally binding contract was not concluded based on the will theory. Consensus in accordance
with the will theory has three elements: the parties must seriously intend to contract, be of one
mind as to the material aspects of the proposed agreement (the terms and the identity of the
parties to it), and be conscious of the fact that their minds have met.9
Given that there is no contract in accordance with the will theory, the direct reliance
approach can now be applied to the facts in the question. The direct reliance theory seeks
to address the question: did the party whose actual intention did not conform to the common
intention expressed, lead the other party, as a reasonable man, to believe that his declared

5
Dale Hutchison and Chris Pretorius (eds), The Law of Contract in South Africa (Oxford 2022) 92.
6
1993 (4) SA 788 (SE). Hereinafter referred to as “Osborne”.
7
1958 (2) SA 473 (A). Hereinafter referred to as “Potato Board”.
8
See Dale Hutchison and Chris Pretorius (eds), The Law of Contract in South Africa (Oxford 2022) 92 (with
footnote 33). At times the courts have complicated matters by indicating that an error in persona will only be
material if the identity of a party is of vital importance to the party that is mistaken (Dale Hutchison and Chris
Pretorius (eds), The Law of Contract in South Africa (Oxford 2022) 94).
9
Dale Hutchison and Chris Pretorius (eds), The Law of Contract in South Africa (Oxford 2022) 18.

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intention represented his actual intention? Or in other words, the reliance theory test enquires
whether, in instances of dissensus, the contract denier misled the contract enforcer into a
reasonable belief that the contract denier had actually assented to the contractual terms in
question. If so, contractual liability may be grounded based on the direct application of the
reliance theory.
The legal test for the direct application of the reliance theory was set out in Sonap Petroleum
(SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v Pappadogianis.10 This legal test
was set out in accordance with a three-fold enquiry, as follows:
- firstly, was there a misrepresentation as to one party’s intention Yes, Carol
misrepresented her intention to contract with Jane by sending the letter of
acceptance to Jane.
- secondly, who made that representation - Carol made the representation.
- and thirdly, was the other party misled thereby? This question postulates two
possibilities: Was she actually misled and would a reasonable man have been misled? –
Yes, Jane was actually misled and a reasonable person after receiving the letter of
acceptance would also have been misled to believe that a legally binding contract
was concluded with Carol.
It follows that with the application of the direct reliance theory test, Jane was led reasonably to
believe that a legally binding contract was concluded between her and Carol. This reasoning is
consistent with the finding of the court in the Potato Board11 case. The facts presented in the
question are similar to the facts in the Potato Board case. In Potato Board, the respondent
conducted a tender process for the building of a steel shed. After considering the tenders that
were submitted, the respondent then sent a letter of acceptance to the appellant for the erection
of the shed. Subsequently the appellant was informed by the respondent that this letter was
sent based on an administrative error, and that it actually intended to accept another party’s
tender. The court held that a legally binding contract was concluded based on the concurring
expression of the parties’ intentions (the declaration theory). But with the application of the
direct reliance theory it can also be persuasively rationalised that by accepting Jane’s offer,
Carol clearly led Jane to believe (and the belief was reasonable) that consensus had been
reached and that a legally binding contract was concluded.12

The giving of appropriate advice

A legally binding contract was concluded between Carol and Jane.

10
1992 (3) SA 234 (A).
11
1958 (2) SA 473 (A).
12
See Dale Hutchison and Chris Pretorius (eds), The Law of Contract in South Africa (Oxford 2022) 115-116.

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Kind regards,

MS LB MTSWENI: mtswelb@unisa.ac.za
ADV R ISMAIL: ismair@unisa.ac.za

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UNISA 2022