Question: Identify and discuss the various sources of South African Law (Tabulate) (18)

Legislation – (Schulze et al,2014:3) explains that legislations is the development of laws by a

competent authority. This is the most important source of law. These laws are known as acts or
statutes that is implemented by Parliament as well as provincial legislatures (Schulze et al,
2014:3)

Case law – Case law is a result of decisions that were made by judges and magistrates in the
Court of Law. Lawyers and legal practitioners would use this type of law and reference it when
presenting cases in the court of law. The judge that is hearing the case will take into account the
previous judgements of similar cases because they need to follow the same approaches as
what was followed in previous cases (Gov,2022). When a judge stand by previous decisions
that was made in a case it is known as doctrine of stare decisis. It is important to note even
though decisions are influenced by case law, every case is treated on its own merit. (Gov,2022)
(https://www.justice.gov.za/policy/african%20charter/afr-charter02.html)

Common Law - Common Law is mainly 17th and 18th Roman Dutch Law that was transplanted in
the Cape. Examples of common law crimes include murder, robbery and rape. Even though
most of the common law principles came from Roman Dutch law, not all principles were
transferred. Sometimes the English Law had an influence on the South African Common law.
So in other words it is a combination of both Roman Dutch Law and English Law (Gov.za,2022)

Customary Law – is certain rules of conduct that are adapted because it has become an norm in
the society. This can include norms, traditions and cultures in the society. Customary law does
not consist of written rules but rather actions or habits of the community that has been passed
through generations (Schulze et al,2014:5). Customary law might be for some people the most
important law of their lives, controlling certain areas of their lives like marriages and what they
will inherit. Customary laws must meet certain criteria which will include, Firstly, it must be
known and followed by the community, Secondly, it must be reasonable and fair, Thirdly; the
meaning and the consent of the law must be certain and clear, Fourthly; it must be abled to be
carried out(enforceable), Fithly; it must be inlign with the principles of the bill of rights, Sixth; it
must be inline with the Constitution

(https://section27.org.za/wp-content/uploads/2010/04/09Manual.pdf)

Academic Writings – is based on the fact that judges, lawyers and many academics write either
books or articles where the legal principles. The author will explain the legal position with
respect to legislation, common law and case law. The information that is seen and gathered in
articles does not have a binding authority but can have a legislative authority (Gov,2022)

Indigenous law- this is a law that is based on the culture of a community. It can also be referred
to as customary law which can either be written or unwritten. These laws must be interpreted
and applied in terms of the principles of the Constitution of South Africa Act 108 of 1996.
(Regenttextbook,2022:10)

Question: Outline the principles on which the Separation of Powers is based (7) or ex
Explain the concept separation of powers (7)
The constitution of South Africa distinguishes between 3 branches of governments. This is
known as the principle of separation of powers. The reason for this is to ensure that power in
not only in one branch which will further prevent abuse of power. The separation of powers is
based on four principles namely; Division of government power, Separation of functions, Checks
and Balances and Separation of personnel. (Parliament,2014)

The powers of the state is then further broken down into 3 arms namely; The executive, the
legislature and the judiciary (Civicadacdemy,2022) (https://civicsacademy.co.za/what-is-the-
judiciary-2/)

The executive - The President as the head, The Deputy President and Ministers. The president
appoints the deputy president, ministers he then furthers assigns them powers and functions
however he also has the right to dismiss them(Gov.za,2022). There is no limit to the amount of
ministers the president is allowed to choose. Most of the ministers are chosen from inside the
assembly however he is allowed to choose two from outside the assembly (Gov.za,2022). The
President as the head of the executive cabinet is responsible for approval of the Bill of rights
and the rest of the cabinet is responsible for implementing the bill and have to take have to
awnser to members of parliament if there any discrepancies . The bill can be draugted by any of
the member of the National Assembly, minister or a committee of the National Assembly. It is
further the duties of the Executive cabinet (Gov.za,2022)

The Legislature (Parliament)

National Assembly - Under the Constitution, the National Assembly is chosen to represent the
people and to guarantee that government is led by the people. (gov.za,2022). It does this by

 Appointing the president (Gov.za,2022)

 Approving and implementation of laws
 Managing the performance of the executives
 Establishing a national forum for public debate on important topics
(https://www.justice.gov.za/legislation/constitution/chp04.html)

National Council of Provinces - The NCOP is tasked by the Constitution to guarantee that
provincial concerns are included in national policymaking. This is accomplished through
participating in the national legislative process and providing a national platform for the
discussion of provincial concerns. The NCOP also has a unique role in promoting cooperative
government and intergovernmental relations ideals. It guarantees that the three branches of
government work together to carry out their constitutionally mandated responsibilities while
without infringing on each other's domain of competence. This guarantees that on topics of
concurrent competence, there is synergy between the sectors. (Parliament,2022)

The Judiciary (Courts of Law)

Is also known as the courts of law. The judiciary consist of a number of courts of law that is
responsible for the interpretation, implementation and application of the law Section 166 of the
Constitution sets out a strict hierarchy of courts. (Regent Textbook 2022:12). In the name of
the state, the judiciary interprets the law, resolves disputes, and implements the
Constitution. South Africa's judicial authority is vested in its court system, as well as the
judges and magistrates who sit in these various courts. (civicasacademy,2022)

The Constitutional Court (Regent Textbook,2022:12)

The Supreme Court of Appeal (Regent Textbook,2022:12)

High Court (Regent Textbook,2022:12)

Magistrate Court (Regent Textbook,2022:12)

Question: Delineate/List the hierarchy of courts in accordance with Section 166 of the
Constitution (4)

The Constitutional Court (Regent Textbook,2022:12)

The Supreme Court of Appeal (Regent Textbook,2022:12)

High Court (Regent Textbook,2022:12)

Magistrate Court (Regent Textbook,2022:12)

Question: Define the concepts of a natural person and a juristic person (3)

In South African law there are two categories of legal subjects namely natural persons and
juristic persons. All human beings are referred to as natural persons and are thus legal subjects.
Juristic persons, however, can be defined as certain associations of natural persons, such as
companies and universities. They are viewed as entities and are also considered to be
“persons” and thus legal subjects in terms of the law. (Ramages,2018)- reword if asked

(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/
courseoutlines2018/Introduction_to_Law_-_JR.pdf)

Question: Describe 8 acts of insolvency which a debtor may commit (15)

A debtor can commit eight acts of insolvency that is stipulated in Section 8 of the Insolvency Act
24 of 1936

First Act of Insolvency – the debtor leave the republic of RSA, his residence or he lives outside
the Republic of RSA with the intention to avoid or delay payment of debts. The intention of the
debtor might be very difficult to prove as it is subjective test (Janse van Rensburg,2021)

Second Act of Insolvency and has three 3 criteria however it is important to note that only of the
3 criteria has to be met to be classified as an act of insolvency. The criteria are as follows
Firstly; Where the court has given judgement against a debtor, or the debtor has failed to pay
the debt. Secondly; If the debtor fails to show the sherrif of the court their disposable movable
property that is enough to pay the debt and Lastly; If it appears from the return made by the
sheriff that they could not find enough disposable assets to cover the judgement. This is fairly
easy to prove as the sherrif’s return of service in itself constitutes prima facie evidence (Janse
van Rensburg,2021)

Third act – related to property of debtor. In the case the a debtor tries to dispose any of their
moveable assets or property, which could or have an affect of prejudicing his/her creditors or
the disposable will benefit one creditor over the other, it will amount to an act of insolvency. This
act might be difficult to prove because a creditor under normal circumstances don’t have the
inside information on a debtor circumstances and conduct (Janse van Rensburg,2021)

Fourth Act – this is where the debtor either removes or tries to remove any of his/her property
with the intension to prejudice their creditors or that they prefer one creditor over the other. This
act is very difficult to prove. Because the intent is subjective the onus proof is more difficult
(Janse van Rensburg,2021)

Fifth Act – this is where the debtor makes or offers to make arrangements with his/her creditors
to either release him partly or wholly from his debtors. This can be very difficult to prove the
creditors are not are of one another (Janse van Rensburg,2021)

Six Act – this is where the debtor publishes a notice to surrender of his/her insolvent estate
which has not lapsed or been withdrawn in terms of section 6 & 7 of the Act (Janse van
Rensburg,2021)

Seventh Act – this is where the debtors gives written notices either via email or formal letter that
he/she is not able to pay either some or all of their debt (Janse van Rensburg,2021)

Eighth Act – is when a debtor, as a trader, gives notice in terms of Section 34 of the Act and
publish it in the Government Gazette, and despite the publication is unable to pay the
outstanding debts. This is a very easy act to prove because it is published in the government
gazette (Janse van Rensburg,2021)

It is important to note that the a creditor has to prove one the above mentioned acts , in order for
an Debtors to be declared as insolvent (Janse van Rensburg,2021)

(https://mlvlaw.co.za/Resources/Acts-of-Insolvency.pdf)

Question: Explain the term rule of law (4)

The Rule of Law, in its most basic form, is the principle that no person is above the law. The rule
is built on the presumption that truth, and hence law, is founded on fundamental principles that
may be discovered but cannot be produced by an act of will. It further places the obligation on
the government to ensure that the law is fair, just and equitable in all
situations(Lexisnexis,2022).

Question: Explain the meaning of the term judiciary (1)

Is also known as the courts of law. The judiciary consist of a number of courts of law that is
responsible for the interpretation, implementation and application of the law Section 166 of the
Constitution sets out a strict hierarchy of courts. (Regent Textbook 2022:12). In the name of
the state, the judiciary interprets the law, resolves disputes, and implements the
Constitution. South Africa's judicial authority is vested in its court system, as well as the
judges and magistrates who sit in these various courts. (civicasacademy,2022)
(https://civicsacademy.co.za/what-is-the-judiciary-2/)

Question: Differentiate between different types of companies (15)

Companies are classified into different categories as outlined in the Companies Act 71 of 2008
(Companies Act) namely State Owned Companies, Private Companies, Personal Liabilities
Companies and a Public Companies. Profit companies have two major similarities: Firstly, their
main objective is that they are established to generate profit for their shareholders and Secondly
there is no limit as to how many shareholders they can have (Schulze, 2014: 328)

The different companies will each be outlined below

State owned company

A state owned company is recognized by Section 8(2) of the Companies Act and it falls within
the meaning of State-owned enterprise in terms of the Public Finance Management Act 1 of
1999, however it can also be owned by a municipality. (Schulze, 2014: 328) The main objective
of a State owned company is that it provides services to the South African Public on behalf of
the government. (Kenton,2020)

State-owned companies are characterised with regards to the fact that it ends with the
expression “SOC Ltd”. (Schulze, 2014: 328) Furthermore the legislation then specifies that it
needs to have three or more directors and one or more shareholders. They are then required to
register the company with the Registar of companies by drawing up a memorandum of
Incorporation (MOI) (Joraan, 2020)

However, it is then important to differentiate between a state owned entity and a state owned
enterprise. A state owned entity is defined in the Public Finance Management Act 1 of 1999 as
an entity which is a juristic person under the ownership of the National Executive and is given
the authority to conduct business as a principle business and business is funded either in full or
partially from National Revenue or tax. An typical example of a state owned entity is South
Africa is Denel (Military Equipment, Eskom (Electricity), Transnet ( Railways), SABS (Schulze,
2014:328).

The state-owned companies provide essential services to the South African Public that may not
be offered by any other company in the private sector, however the downfall with this is that it
creates inefficiency because of poor management within the government sector. (Unknown,
2019) In my opinion a typical example of this would be Eskom, and due to the poor
management, has led to loadshedding

Furthermore, Then within these state owned entities, one will find the state owned enterprises.
A State owned enterprise is an independent body that is either fully or partially owned by the
National Government of South Africa (Rossouw, Unknown).

If one need look at an example of a state –owned enterprise is that of ACSA (Airports Company
of South Africa they are 74% owned by the South African Government and the rest of it is
owned privately

Further to the discussion above there are a number of advantages and disadvantages of a state
owned enterprise as per Hosbeg will briefly outlined below

Advantages

Firstly, they provide essential services to the South African public at a lower and more
affordable rate than what it would have been if this service was only provided privately.
Secondly, they create job opportunities within the communities (Hosbeg, Date unknown)

Disadvantages

Hosbeg then further mentioned that some of the disadvantages could be, Firstly; there is a
possibility of high levels of corruption within a state owned enterprise. Secondly; there are
sometimes a lot of political interference within the organisation; thirdly; the employees of this
type of organisation tends to have a negative attitude (Hosbeg, Date unknown)

Private Companies

A private company is identified with “Proprietary” Limited or the abbreviation (Pty) Ltd.
Legislation then further requires a private company, the same as with a State Owned Company
to Register with the Registar of Companies by drawing up a Memorandum of Incorporation
( MOI). (Schulze, 2014:328).

The newly established company is required to have one or more directors and one or more
shareholders, however there is no limit to the amount of shareholders. ( Jordaan, 2020)

The MOI of these types of companies prohibits the company of making any of its shares
available to the public and thus the transfer of these shares are restricted (Schulze, 2014, Pg
328). The shareholders of a private company have limited liabilities and the main objective of a
private company is to generate profit the shareholders and their owners (Burger,2018)

This is however is the most common type of company registered that you will find in South
Africa, and the main reason for this is because of the efficiency and the simplicity of setting up
this type of company. This further refers to a company that operates for profit and this type of
company can exist into eternity. The company does not change even if the shareholders of the
company change (Burger,2018)

Should one sell the business, the transfer of ownership is fairly easy and uncomplicated and is
adaptable to any size of a business whether you are just starting your business or whether your
business is growing into a larger business (Rossouw, Unkown)

Further to Rossouw’s article, there are a number of advantages and disadvantages which will
be listed below

Advantages

Firstly; one can consider the main advantage is the legal nature of this type of company is that It
is regarded as a separate entity with it’s own rights and duties. Secondly; the shareholders have
very limited liabilities and are generally not responsible for the liabilities of the company so the
benefit the shareholders that there is less or a risk. Thirdly; Private companies are suitable for
both large organisations and small organisations (Rossouw, Unknown),

Disadvantages

However if one had to look at the disadvantages that Rossouw outlined is that; Firstly; there is a
lot of capital investments are required to start this type of business; Secondly; taxations as
outlined by the South African revenue services are much higher. Thirdly, the financial
statements of the company are required to be reviewed and prepared by a qualified person as
per the companies act which can result in further expenses for the company.(Rossouw,
Unknown),

An example of this type of company is: Life and Brand Pty (Ltd)

Personal Liabilities companies

A personal Liabilities company has the same criteria as that of a private company and its
Memorandum of Incorporation (MOI) t must state that it is a personal liability company. It is
outlined in the MIO that there must be at least one director on their board of directors (Hefer,
2018)

The difference between a Private company and a Personal Liabilities is that the current directors
of the company and previous directors of the company are jointly and severally liable together
with the company for any debts and liabilities that the company incurred during the time they
were at the company (Burger,2018)

The name of the company will end with Incorporated and the abbreviation will be Incorporated
or Inc.. (Schulze, 2014:328)

A personal liability company is a private company that trades for profit. One of the many
advantages is that of continuous successesion and the flexibility of profit distribution (Rossouw,
Unknown) and further to that, it has the same advantages and disadvantages as outlined in that
of private companies other than the personal liabilities (Jordaan, 2020)

A good example of this type of company will be that of lawyers - Ferreria & Rossouw Attorneys
Incorporated

Public Companies

The same as the other companies that was discussed – the public company is required to
Register with the Registar of Companies by drawing up a Memorandum of Incorporation (MOI).
The company only requires on person to start this company, however it requires three or more
directors and three or more shareholders (Schulze, 2014:328)

If the company should liquidate the owners and shareholders will loose what they originally
invested in the company and they will not be held personally liable for the debts that is still
outstanding for the company, however within the Companies Act with regards to the Public
companies is that it forces personal liabilities on directors that knowingly participated in carrying
out business in a wreckless and/or fraudulent manner (Burger,2018)

A public company is identified by its name, which will end with the word “Limited” and the
abbreviation Ltd is used. All companies that are not state owned, private or personal liabilities
companies are Public Companies. A public company is seen as a justice entity that exist
separately to that of the owners and the shareholders and can exist into entirenty. The company
consist of shares and these shares are available to purchase by the public. Their shares are
listed on the Johannesburg Stock Exchange (JSE) but it is not mandatory. (Schulze, 2014:328)
The shareholder of the company can sell their shares freely, the company actually grows when
shares are sold. The shareholders of the company have limited liabilities and should the
company liquidate, they will only loose what they have invested (Jordaan,2020)

However the more shareholders there is within the company the less with profit share will be. As
in private companies, Financial statements are required to be done by a qualified person as well
as Auditors and mandatory which can be quite costly and once the financial statements are
prepared they are required to be made public

Advantages

Firstly; the biggest advantage of a public company is that capital can be raised directly from the
public by selling the shares publicly; Secondly; The company is treated as a separate legal
entity from it owners; Thirdly; Public Companies last indefinitely (Unknown, 2017)

Disadvantages

Firstly; Directors can be held personally liable for debts and actions; Secondly; Setting up of a
public company can be costly and time consuming; Thirdly; A public company generally need to
be very large to justify their establishment (Unknown, 2017)

An example of this type of company is: Massmart

Question: List the 3 types of non-profit organization recognized by South African Law,
Explain the characteristics of each type (12)

South Africa currently has a numerous of laws that govern the non-profit sector. These laws
don’t apply at provincial level but also at national level. The Non profit organisations that are
recognized by common law and statutory law and can be further divided into 3 different
sections: Firstly Voluntary associations, trusts and section 21 companies as the legal entities
available to non-profit organisations. These three kinds of entities may then register as Non-
profit Organisations in term of the Non-profit Organizations Act (Non Profit Organisation Act 71
of 1997)

Voluntary Associations

A Voluntary Association of persons is an entity that is useful for those interested in conducting a
business for a public benefit purpose
Voluntary Associations don’t have to be registered because there is no registration office for
them, however there has to be an agreement between three or more people to achieve a
common (usually non-profit) objective, other than making profit for example recreational and/or
public benefit activity (Small,2020). These agreements can either be verbal or written. The best
would be if the agreement between parties are written to avoid any disputes at a later stage
(INCL,2004).

Voluntary Association is found in common law, but since became recognized by

legislation(Small, 2020)

In order for a voluntary association to be incorporated in terms of the common law. the
Voluntary Association must have a constitution which will outline that: Firstly there will be
perpetual memberships, Secondly that all assets and liabilities of the association will be held
separate from the organisation. Should the Voluntary Associations want to be incorporated
through legislation it must comply with the criteria set out in the Companies Act 71 of 2008
and/or Non-profit Organisations Act, 71 of 1997 (Small, 2020)

The South African common Law relating to a Voluntary Association is a blend between Dutch
and English Law and this combination then describes a Voluntary Association as a Universitas

The main purpose of a Voluntary association is that it is established for a purpose, other than
making and division of profits, yes it is allowed to make some profits by doing fund raising and
other activities but their main purpose is not the acquisition of gain. (Small,2020)

An Association's powers are determined by its constitution. Through its constitution, an

Association may be granted any of the rights and powers that any other corporate entity, such
as a Company, may be granted. Such powers must be employed within the context of the
Association's objectives, which are also outlined in the constitution. (Rosendal & Walters
1998:14)

The constitution of a voluntary association usually provides for the appointment of a

management committee who are given executive powers to manage the association. The
constitution should outline the rules and regulations with regards to processes and procedures
for; election of members to the various offices, a chairperson treasurer and the guidelines for
holding meeting, the procedures that has to be held in these meetings and lastly the manner in
which the voting process must take place ( Rosenthal & Walton 1998:15)

Advantages
Firstly; It is a separate legal entity which means that the members are not personally liable for
any cost or debt incurred by the association, Secondly; It will continue into entirety and when
members of the association change the association will continue, Thirdly; It is exempt from
paying tax Fourthly; It does not have to be registered, which means it is less formal other than
that of trusts or section 21 companies and lastly; People can be employed either on a fulltime or
part-time basis (Roux, 2016)

Disadvantages

Firstly; The biggest disadvantage of a Voluntary association is that lack of formality; Secondly;
Their main aim is to collect donations for charities and companies would rather deal with a
registered organisation so they might find it difficult to find sponsors and lastly; If the constitution
is not properly drafted, the members of the association may not be protected properly (Roux,
2016)

Closing

A voluntary association is a common law body that is typically utilized to promote a shared aim
among its members. Those interested in conducting business for a public-benefit purpose might
consider doing it through a Voluntary Association due to how simple and inexpensive it is to
utilize.(Small 2020)

Example -Black Lawyers Associations and sporting bodies (Small, 2020)

Trusts

A trust is an arrangement, outlined in a written document called the trust deed where there
owner or the found hands over the property and or funds to a group of people called the
trustees who is responsible for administering the assets for the benefit for the beneficiaries (Lee,
2015)

Broadly speaking there are a number of ways in which trusts in South Africa can be classified.
This includes the following classifications

Ownership Trust – this type of trust is created when the trust founders transfers ownership of
assets or property to a trustee(s). This is the most common form of trust and is also known as
an ordinary trust. (Sars.gov.za)

Bewind Trust – this type of trust is created when the founder makes a donation to the
beneficiaries and vest the administration of the assets in the trustees. (Sars.gov.za)
Curatorship trust – this type of trust has a similar structure to that of the bewind trust, except
that the assets are administered on behalf of a beneficiary who does not have the capacity to
manage it themselves. (Child that is a minor or a disabled person) (Sars.gov.za)

Testamentary Trust – this trust will come into effect after the person pass away (Sars.gov.za)

Vesting Trust – this type of trust is where income, capital gains or assets are assigned to a
beneficiary in term of the trust instrument (Sars.gov.za)

The trust is governed by the board of trustees and they have the same powers as that of as the
executive committee in a company. They must be able to make decisions on all aspects of the
trust. (Lee, 2015) The trustees might receive some form of payment is the trust deed allows for
it. Trusts are regulated by the common law and trust property Control Act57 of 1988. It is
important to note that a trust don’t have an independent legal personality unless there is tax or
insolvency scenarios. As it is outlined the Trust property Act57 that if any of the trustees are
sued in their personal capacity the trust is protected (Lee, 2015)

The Trust Property Control Act, No 57 of 1988 together with the common law determines that
the first trustees must lodge the trust deed with the Master of the High Court (Lee, 2015).

A trustee can only act in their capacity as trustees once authorization of obtained by the Master
of the High Court (Trust Proptery Control Act, No57 of 1988, Section 6)

The following information is included in trust deed: Record of why the trust came into being,
Name, Purpose, Donations, founding donations, powers of trustees, use of trust funds, specific
clauses pertaining to members of the trust ( Roux,2016)

A trust is very flexible in structure and can be used for a variety of purposes. For example a trust
can be created to protect the family assets, or it can be used for a charity or for business
purposes (Roux, 2016)

The trust deed of discretionary trust usually give the trustees of the trust the widest possible
powers to enable them to achieve the objectives of the trust. A trust don’t have a separate legal
personality therefore it acts through the trustees. Some of the powers that are given to trustee
can be the power to sell ,buy, take out financing etc (Rosethal & Walton 1998:11)

Business Trust

A Business Trust is the more recent development in the South African Commercial Law. A
Public Business Trust often invite members of the public to invest money in the trust and in
return they become members of the trust but usually they are not part of the management of the
trust (Schulze, 2014:335)

A Business Trust is a trust in which the trustees do more than only safeguard and administer the
trust assets; they also use the assets for profit in order to benefit the trust beneficiary or
beneficiaries or to promote the trust's goals (Schulze, 2014:335)

For Example

The trust is often established by entrepreneurs who want to contribute capital to a firm and
utilize the trust as a vehicle to do business. For Example - (Goodricke and Son (Pty) Ltd v
Registrar of Deeds case of 1974). The trustees normally have the authority to trade with and
grow trust assets, and the beneficiaries, who are often awarded certificates of interest in the
trust, have the authority to transfer their rights to other beneficiaries upon payment. (Van der
Spuy, 2019)

Advantages

Firstly; a trust protects your assets should you become mentally unstable; Secondly; A trust can
offer protection to disabled members of the family; Thirdly A Trust remains confidential as
opposed to documents like wills and records of deceased estates which are public documents
and therefore open for inspection; The taxes of a business trust is less complicated (Coetzee,
2016)

Disadvantages

Firstly; The biggest disadvantage of a trust is that you don’t have full control over your assets,
members of the trust has an influence of aswell. Secondly; A trust is a registered and authorities
can gain access to it and Thirdly; you can possibly choose the wrong trustees and it can have
an impact on the trust; (Coetzee,2016)

Closing

A trust can be used to hold and protect personal or commercial assets, which is especially
useful if the assets are liquidated, sequestered, or divorced. Trusts can also be used to hold
stock in companies and assure asset ownership continuity (Forbes,2020)

A Trust is also used to protect family assets like when you have a disabled family member and
the parents of disabled person would like to leave their house and belongings to this child they
will generate a trust and all the assets will belong to the trust. The Trust deed will be written in
such a way that the disabled person will be cared for until the day that he passes away for
example

Section 21 Companies

Section 21 of the Companies Act 61 of 1973 allows for a 'not-for-profit company' or 'association
incorporated not for gain'. Section 21 companies are non profit companies registered to offer
their services for free and at a cost at the same time. They don’t offer any remuneration to any
of the shareholders or directors. When the new companies act came into affect section 21
companies were converted to NPC ( Nyapotse, Date Unknown)

Section 21 Companies must be registered with the Registar of companies in Pretoria. The
Registration process is complex and a section 21 company must comply with a number of
prerequisites and it must be clear that the organisation will use the profits that it will be
generating and any other income it will be receiving to promote the reason why it was
established however they are not allowed to pay any dividends to the members of the
organisation (Small, 2020)

To establish a Section 21 company they need to ensure that; Firstly they are established with a
lawfull objective and Secondly; their main purpose is for the promotion of religion, arts,
sciences, education, charity and any other cultural or social activity or communal group interest
(Bamford, 1982:117)

Section 21 Companies generally have the same powers to carry out their objectives as any
other company for example to employ staff, sell or purchase movable property, financing etc
( Rosethal & Walton, 1998:2)

A Section 21 company has a two-tiered governance structure consisting of the members and
directors. The company must have a minimum of 7 members and they excise their powers in a
general meeting – i.e, they can appoint new or remove directors etc. There has to be a
minimum of two directors. The names of the directors must appear on every letter, email or any
communication sent to the public. All minutes of meetings has to be kept (Rosethal & Walton,
1998:11)

Advantages

Firstly; By establishing a section 21 company, the founding member has legalize their cause
which will result in showing the dedication which will then lead to people offering their services;
Secondly: The Organisation can accrue tax incentives (Clement,2019)
Disadvantages

Firstly; A person that establishes a Section 21 company can never be the owner of the
company, they can be a director Secondly; Dividends are not allowed to be distributed between
members (Clement,2019)

Closing

A Section 21 company is most suitable when there is a common cause within the community for
example – feeding scheme, teaching young adults skills so that they don’t get involved in
violence etc

Question: Define a trust (3)

A trust is an arrangement, outlined in a written document called the trust deed where there
owner or the found hands over the property and or funds to a group of people called the
trustees who is responsible for administering the assets for the benefit for the beneficiaries (Lee,
2015).The trust is governed by the board of trustees and they have the same powers as that of
as the executive committee in a company. They must be able to make decisions on all aspects
of the trust. (Lee, 2015) The trustees might receive some form of payment is the trust deed
allows for it. Trusts are regulated by the common law and trust property Control Act57 of 1988

Question: identify and explain the impact of the 5 forms of breach of contract (20)

When parties enter an agreement, a general requirements is that the parties that are involved in
the contract will act in good faith. Therefore the last thing that the parties that entered the
contract want to think about is the possibility that the contract will fail or that one of the parties
involved are not performing as outlined in the contract, in other words commit a breach of
contract (Atkinson, 2021)

In South Africa there are generally 3 forms of remedies available when a contracting party is in
breach of the contract. The applicability of each of these remedies are depending on a number
of factors namely: Firstly; type of breach, Secondly; the extend of the breach; and Thirdly; the
terms which has been agreed upon by the parties in respect of breach (Atkinson, 2021)

The three general remedies for breach are the following: (Schulze, 2014:127)

 Execution of the contract and also known as Specific Performance

 Cancellation of the contract
 Damages
1) Execution of the contract (Specific Performance)

Execution of the contract is the primary remedy as a remedy calls on the party that is in breach
of the contract to still perform the terms of the contractual obligations so that the same results
can be achieved as it was originally outlined in the contract or alternatively as close as possible
to that(Atkinson, 2021)

Execution of the contract can compromise one of three possible orders namely:

 An order for specific performance (Schulze, 2014:128)

 An order for reduced performance (Schulze, 2014:128)
 A prohibitory interdict (Schulze, 2014:128)
1.1 Orders for specific performance

This is a court order that directs a contracting party to do the performance that they committed
to in the contract. However there are two scenarios where such a remedy cannot be imposed;
Firstly, The party that is in breach, estate has been sequestrated because it may prejudice the
other creditors and Secondly; where the performance is no longer possible because the law
cannot force anyone to do the impossible, whereby in a case like this, the innocent party can
claim for damages in lieu of performance. (Schulze, 2014:128)

Haynes v Kingwilliamstown Municipality 1951 (A) in this case Mrs Haynes was the farmer
that entered into a contract with Kingwilliamstown Municipality for the supply of water to her
farm. As a result of a draught the municipality was unable to supply Mrs Haynes with water,
which was in breach of the contract. Mrs Haynes sought an order of specific performance

During this case the court came up with the following pieces of law

 A court has a discretion as to what remedy it would like to grant. In deciding what remedy to
grant, the court needs to consider the interest of the plaintiff, the defendant and where
applicable, the 3rd parties, however more importantly the court said that the following factors
should be considered:
o Are damages an adequate remedy?
o Is performance more readily available elsewhere?
o Is it difficult for the court to enforce this order?
o Would specific performance require a personal performance to be rendered?
o Would specific performance cause hardship for the defendant or third parties?
 The court must make determination on a case by case basis

Ultimately, the court held that Mrs Haynes had failed to prove damages. Furthermore, the court
held that the interests of the broader Kingwilliamstown community in adequate water mitigated
against an order of specific performance in this case. The court furthermore emphasised the
above factors were not rigid rules but factors to consider

1.2 Order for reduced performance

In some cases, the court will require a contracting party to perform at a reduced level. This
signifies that the contractual party has performed parts of its obligations, but the performance is
incomplete. (Schulze, 2014:128)

Within most of the commercial contracts rights and duties are created for both parties and that
the principle of reciprocity is present, which means that the plaintiff can claim the defendant’s
performance only if they have performed or is willing to perform. (Schulze, 2014:128)

Reciprocity exists when there is a relationship between the responsibilities of the contract's
separate parties, in the sense that the various obligations are undertaken in return for one
another. It is important to note that the parties' intent is the deciding factor in determining
reciprocity. (Schulze, 2014:128)

The party claiming performance has the power to withhold it until the party claiming
performance provides their own performance. That is, when the plaintiff has provided
incomplete performance, the defendant can claim performance from the plaintiff, and the plaintiff
can protect themselves by refusing to perform since the plaintiff has not yet performed in full.
(Schulze, 2014:129)

This type of defence is known as exceptio non adimplenti contractus, however this is only
available where performance by both parties must occur at the same time or where the plaintiff
performs before the defendant. (Schulze, 2014:1289)

It is important to note that exceptio is not available to the defendant, when the plaintiff has
cancelled the contract or where the plaintiff is claiming damages instead of performance.
(Schulze, 2014:129)

The court will only grant a plaintiff an order for reduced performance if they can prove the
following:
 The defendant is making use of the term "defective performance." (Schulze, 2014:129)
 The circumstances are such that the court would be justified in exercising its discretion in
issuing the order. (Schulze, 2014:129)
 What the reduced price should be, in other words, the contract price less the amount
needed to bring performance up to the acceptable standard (Schulze, 2014:129)
1.3 Prohibitory interdicts

An interdict is granted by the court. The aggrieved or plaintiff can apply for the interdict in the
following circumstances (Schulze, 2014:130)

 Where one party do something they are not supposed to do in terms of the contract
(Schulze, 2014:130)
 The threaten to act in this manner (Schulze, 2014:130)

2. Cancellation of contract

Cancellation of a contract in the event of breach is an extremely drastic remedy. This remedy
are usually used in three major instances namely; firstly, when a breach is extremely serious in
nature . Secondly, where the parties has agree to cancel the contract or Thirdly- the breach of
the contract is material. (Schulze, 2014:130)

This is a very difficult remedy to implement and in most cases it is often the last resort in
instances of breach (Schulze, 2014:130)

The availability of cancellation can best be described in relation to each from of breach of
contract individually as listed below (Schulze, 2014:130)

2.1 Cancellation and default of the debtors

The creditor will have the remedy of cancellation in the following circumstances only

 Where there is a completed date stipulated in the contract and there is no cancellation
clause and the other party fails to perform the duties in before or on the date stipulated,
this then can be seen a very serious breach and the creditor will be able to cancel the
contract, however in the event that the debtor are not able to perform because of a
circumstances that are completely out of his control like a Natural disaster, then a
specific date for performance order will not be justified (Schulze, 2014:131)
  The creditor will have the authority to cancel the contract should the debtor default even
if there is not cancelation clause in the contract (Schulze, 2014:131)
 When both parties has agreed to that the creditor cancel the contract should the debtor
default, even if the default is not material breach of contract (Schulze, 2014:131)

2.2 Cancellation and default of the creditor

The innocent party will be entitled to cancel the contract in the following circumstances

 Where the creditor works with the debtor to ensure timely performance (Schulze, 2014:131)
 The debtor informs the creditor that they will cancel the contract should the creditor not
cooperate to receive the debtors performance (Schulze, 2014:131)
 If both parties agrees that the debtor can cancel the contract should the creditor default, the
debtor will be able to cancel the contract even if the default is not a material breach of
contract (Schulze, 2014:131)

2.3 Cancellation and defective performance

The creditor will be entitled to cancellation of the contract following the faulty performance of the
debtor

 The creditor has the right to cancel the contract if the breach is of such a serious nature that
the creditor cannot reasonably be expected to continue with the deal. (Schulze, 2014:132)
 When both parties agree on the cancellation clause, the creditor can cancel the contract
within the agreed circumstances even if the performance is not materially defective
(Schulze, 2014:132)

2.4 Cancellation and repudiation of the contract

Cancellation is available in the following circumstances

 Before the innocent party can terminate the contract, the repudiation must be of a materially
essential duty, just as it is with cancellation for significantly faulty performance. (Schulze,
2014:132)
 Despite the fact that the contracting parties agreed on a cancellation clause, the innocent
party may cancel the contract in line with the cancellation provision even if the repudiation
does not apply to the significantly important duty (Schulze, 2014:132)

2.5 Cancellation and prevention of performance

In this case, the debtor prevents performance, and then the creditor has the right to cancel the
contract, because the performance of the contract is no longer possible (Schulze, 2014:132)

2.6 The Act of Cancellation

When the parties have the right to cancel the contract, they must choose between cancelling it
and enforcing it. It should be noted that the innocent party is not obligated to cancel the
contract. The innocent party may always claim for the balance of the contract, but if
performance is impracticable, the innocent party may seek damages in place of performance.
(Schulze, 2014:132)

2.7 Consequences of Cancellation

There are two major consequences of cancellation

1) Unfulfilled obligations will not be enforced which means that neither parties has performed ,
both of them are relieved of their obligations to perform (Schulze, 2014:133)
The following are some exceptions:
 Some clauses are meant to operate after cancellation – examples of these are
arbitration awards, penalty clauses etc (Schulze, 2014:133)
 An obligation accrued as a clause of the action independent of the rest of the contract
that still has to be performed, then that obligation will survive cancellation – only the
executory part of the contact will be cancelled (Schulze, 2014:133)
2) Reciprocal obligation to effect restitution which the obligation to restore any performance
made under the contract, subject to obligations that survive cancellations. (Schulze,
2014:133)

3. Damages

An innocent party to a contract may claim for contractual damages from the breaching in the
event of breach of contract.

In South Africa there are two types of damages

Patrimonial Damages

The fact that one of the parties broke their contract does not imply that the other experienced a
loss. Before one of the parties can determined to have incurred a loss, it must be established
that patrimonial loss has occurred, which indicates the breach has harmed the innocent party's
estate or financial well-being. Compensation for pain and suffering, on the other hand, cannot
be claimed on the basis of a contract (Schulze, 2014:134)

When the calculation of a loss is calculated they look that where the estate of the innocent party
would’ve been if the contract was fulfilled, therefore they look at the difference between of
where the innocent parties estate would’ve been and their actual financial position (Schulze,
2014:134)

If there is a difference between the first mentioned and second mentioned the innocent party
has suffered a loss. The defendant then have to compensate the innocent party for loss
(Schulze, 2014:134)

Casual connection between breach of contract and loss - If other factors other than the breach
of contract, including negligent conduct of the innocent party, also contributed to the loss, the
guilty party will also be held liable as long as the loss incurred because of the breach of contract
(Schulze, 2014:135)

Foreseeable loss- A defendant will not be liable for the patrimonial loss of the other party,
despite the fact the loss has resulted from the breach of contract by the defendant. A defendant
liability is limited to such loss as naturally and generally flows from the breach of contract in
question (Schulze, 2014:135)

Non- Patrimonial Damages

This refers to damages that has resulted in the innocent party claiming for pain and suffering

In terms of the law of contract, no contractual claim may be made for anything other than
financial loss. No Award will be made for loss of comfort, pain and suffering. Claims for these
factors can only be made under delictual action and not action based on the contract (Scott et
al, 2019:123)

It is important to note that compensation for pain and suffering cannot be claimed purely on
breach of contract

The innocent party to claim for damaged they have to prove the following

 The contract existed between the parties

 The other party beached the contract
 They suffered a loss because of the breach of contract
  They have to prove or quantify damages that it has incurred because of the breach
(Scott et al, 2019:123)

Question: Explain the differences between patrimonial and non patrimonial damages and
how damages are calculated (21)

An innocent party to a contract may claim for contractual damages from the breaching in the
event of breach of contract.

In South Africa there are two types of damages

Patrimonial Damages

The fact that one of the parties broke their contract does not imply that the other experienced a
loss. Before one of the parties can determined to have incurred a loss, it must be established
that patrimonial loss has occurred, which indicates the breach has harmed the innocent party's
estate or financial well-being. Compensation for pain and suffering, on the other hand, cannot
be claimed on the basis of a contract (Schulze, 2014:134)

When the calculation of a loss is calculated they look that where the estate of the innocent party
would’ve been if the contract was fulfilled, therefore they look at the difference between of
where the innocent parties estate would’ve been and their actual financial position (Schulze,
2014:134). The amount of damages for patrimonial loss may be calculated by using an objective
criterion such as the market value or reasonable cost of repairs. The damages for Patrimonial
loss are of the same nature as the impaired patrimonial interest and thus can be the true
equivalent of such damage

If there is a difference between the first mentioned and second mentioned the innocent party
has suffered a loss. The defendant then have to compensate the innocent party for loss
(Schulze, 2014:134)

Casual connection between breach of contract and loss - If other factors other than the breach
of contract, including negligent conduct of the innocent party, also contributed to the loss, the
guilty party will also be held liable as long as the loss incurred because of the breach of contract
(Schulze, 2014:135)

Foreseeable loss- A defendant will not be liable for the patrimonial loss of the other party,
despite the fact the loss has resulted from the breach of contract by the defendant. A defendant
liability is limited to such loss as naturally and generally flows from the breach of contract in
question (Schulze, 2014:135)

Non- Patrimonial Damages

This refers to damages that has resulted in the innocent party claiming for pain and suffering in
other words it is not directly measured to money

In terms of the law of contract, no contractual claim may be made for anything other than
financial loss. No Award will be made for loss of comfort, pain and suffering. Claims for these
factors can only be made under delictual action and not action based on the contract (Scott et
al, 2019:123). The compensation for non patrimonial damages are based on the subjective
injury to feelings and can be assessed by means of a fair estimate. So in other words there is no
relationship between money and the loss

It is important to note that compensation for pain and suffering cannot be claimed purely on
breach of contract

The innocent party to claim for damaged they have to prove the following

 The contract existed between the parties

 The other party beached the contract
 They suffered a loss because of the breach of contract
 They have to prove or quantify damages that it has incurred because of the breach
(Scott et al, 2019:123)

If question is asked check below

https://www.studocu.com/en-za/document/university-of-south-africa/law-of-damages/law-of-
damages-notes/8216540

Question: Differentiate between suspensive and restrictive conditions in a contract of

sale (20)

Restrictive and Suspensive conditions are a very common known factor in drafting of contracts,
but is very common is contracts of sale.

Suspensive Condition - Is a condition that suspends the rights, obligations or the validity of the
entire contract until a future event occurs. When the future event occurs, the part of the contract
that has been suspended or might even be the entire contract is bought back to life or is valid
again. If it should happen that, the future event does not take place it means that the suspensive
condition of the contract is not met, which means, the rights and obligations never came to
existences and the agreement was never concluded (Unknonw,2018).. An example would be if
you sign an offer to purchase to buy a car, it is subject to the person qualifying for finance at the
bank, so if the person qualifies for the finance the contract is valid but if the person does not
qualify for the finance the contract become null in void. Another example can be that the buyer
of house needs to sell his property first. Suspensive conditions protect both the seller and the
buyer. The buyer would be able to walk away from the deal without consequences if he does
not qualify for finance or manage to sell his/her house. (Matsheta,2021).And as for the seller
which can either be the agent or the owner can continue marketing the property because the
buyer cannot meet the conditions. The due date of meeting the obligations of the suspensive
condition is of utmost importance. Common Law of South Africa states that if the suspensive
conditions is not met on the specified dates, it has an impact on the entire contract, even if both
parts have performed in terms of the agreement after the fact. It goes as far as, the party who
has already performed cannot claim any performance and for damages. If the event that both
parties wish to continue with the transaction, they have to draw up a new contract
(Matsheta,2021).

Resolutive Condition – Once the Suspensive Conditions has been met, the rights and
obligations or the entire contract become active, however when the resolutive conditions has
been met, the rights and obligations and entire contract ends or become inactive. In the case of
resolutive condition, there is no suspension or postponement of the terms and conditions of the
contract or even the validity of the contract/offer itself.(Unknown,2019) Rights, obligations and
the entire contract becomes active the moment an agreement has been reached. If the
resolutive condition has been met, the operation of the rights and obligation ends. Example – An
typical example would be that if the seller cannot provide the buyer proof that there wiring of the
electricity has been signed off by the relevant authorities by a specific date, the agreement
between to two parties will end. If other words if the seller does not provide the set terms and
conditions as outlined, the contract will be terminated between the parties(Matsheta,2021)

However If the parties have already performed prior to the condition being fulfilled, and the
contract is thus dissolved after performance has been delivered, each party is normally required
to refund whatever he or she has received under the contract. Example – Peter is at varsity and
uses his mothers laptop and the agreement is that if he fails his exams he must return the
laptop. The contract's implications take effect as soon as the contract is concluded and Peter
will have to return the laptop. So in other words, if Peter fails the conditions of the contract is
fulfilled and the contract is terminated.(Schulze et al 2014:104)

It is also important to note that in all types of contracts, total restitution of performance upon the
fulfilment of the resolutive condition is not needed. When a contract imposes continuous duties,
that is, frequent performances by the party or parties throughout time rather than a single
performance, total restitution does not occur upon fulfilment of the resolutive condition. For
Example – Mary is rents her house to Peter on the condition that if he is transferred to another
branch the contract will be terminated. Peter is then transferred to another branch and the
contract is terminated as well as future obligations. In other words, Peter does not owe Mary
any other monies because the contract is ended early (Schulze et al 2014:104)

If asked – add time clause information on page 105 of the text book

Employment examples – click link below

(https://www.labournetblog.com/post/2018/02/06/suspensive-and-resolutive-conditions-in-
employment-contracts)

(https://www.mondaq.com/southafrica/real-estate/1109100/understanding-the-legal-
implications-of-suspensive-and-resolutive-conditions-in-property-sale-agreements-)

Question: What is meant by passing of risk. Use an example in your awnser(10)

The general rule of passing the risk in South Africa is regulated by the Roman Dutch law
(Schoemanlaw,2019). Passing of the risk mean that once the buyer has been accepted the offer
by the seller and the sale of the concluded, the risk of accidental damage of the product that has
been sold shifts to the buyer(Regenttextbook,2022:63), however the following implies; Firstly;
Any and/or conditions relating to contract has been fulfilled, Secondly; The sale's purpose is
clear, and there is agreement on it; Thirdly; The purchase price of the sale has been agreed
upon by both parties (Schoemanlaw,2019)The person that is holding the risk is the person that
is responsible for the financial implications of any damages or losses. It often happens that once
a sale has been done between two or more parties, the delivery and time of delivery can vary,
therefore it is very important that the parties involved regulate as to whom will be responsible to
carry the risk before delivery and under which circumstances. (Schoemanlaw,2019). Some
examples for risk can be goods are stolen whilst in transit, goods are damaged whilst in transit

A typical example can be that a person buys a new house and moves into the house before the
house is registered on their name and pays occupational rent. At the time when he moves in, he
discovers damp in the house, the geyer burst, the water pipe burst. A the time of signing their
agreement is will be determined if the risk is passed to the person on the day of occupation or
only on the day of registration. If it was on the day of occupation, the new owner will be lailable
for the cost, however if it is on the day of registration only, the risk will lie with the seller

Scenarios – look at the below

https://www.schoemanlaw.co.za/wp-content/uploads/2019/06/MR-internal-article-June-
2019-Contracts-and-the-passing-of-risk.pdf

Question: What requirements must be met for a valid contract of agency to come into
existence (5)???? –

Or

3.1 In order for a valid agreement to exist there are certain formalities that must be
complied with. (7) – is this the 6 requirements?
If questions is asked, more information can be seen in the study guide – page 27

Concensus - The process through which two or more individuals reach an agreement is known
as consensus. Such an agreement might be made in accordance with the offer and acceptance
rules. In most cases, the contractual parties will participate in a negotiation process with one
another, which will last until the parties reach an agreement. However, in order for a contract to
be created, the contractual parties must have a genuine reason for doing so. In general, when
one contractual party develops a will or intention that matches to the will or intention of the other
contractual party, consensus is deemed to have been achieved; hence, acceptance of an offer
constitutes consensus.(Mbhele,Unknown). However it is possible in certain circumstances for
consensus to be improperly obtained. This occurs when people come to an agreement under
false pretences, threats of danger, or undue influence. In certain instances, the contract can
bedeclared null and invalid or voidable, and the innocent party can have it set aside.
(Mbehele,Unknown). Consensus forms the basis of a contract in South African law. It is
important that parties make each other aware of their intentions in terms of the contract.
Communication can take place either verbally or via written communication

Capacity – It is important to distinguish between capacity and legal capacity. Capacity to act is
the ability to execute a juristic act, for example concluding a valid and binding contract. Such
capacity is made up of two factors namely – the competence to formulate a contract and the
competence to act with a sober mind with regards to that contract. It also further refers to the
party’s legal ability to enter a contract. Unless the opposite can be shown, it is presumed that
parties entering into contracts have the legal ability to do so. A person's contractual capacity is
defined by his legal position, which means that anyone, natural or legal, might have legal ability
but not contractual capacity. For Example – a minor under the age of 7 has legal capacity but
has not contractual capacity (Mbehele,Unknown)

Formalities – The formalities of a contract, in terms of contract law, are the outer appearance of
a contract, such as whether or not it is in written and signed by the essential parties. In most
cases, there are no procedures that must be followed in order to conclude a legitimate contract.
A contract might be verbal, written, or even unwritten. Contractual parties may agree to subject
their agreement to a few formalities on occasion. It's worth noting that a written agreement
doesn't have to be a formal contract; it might be included in a letter or even an invoice.
Examples of contracts which are required by statute to comply with formalities are contracts for
sale of land, contracts where property is leases for longer than 10 years and contracts that are
concluded in terms of the national Credit Act (Mbehele,Unknown)

Legality – A contract shall not be in violation of a legislation or the common law, according to
this clause. Statutory illegality refers to a contract that has been regulated by legislation with the
goal of making the contract unenforceable. On the other side, common law illegality occurs
when a contract violates public policy. A contract that does not comply with legal standards may
be declared invalid and unenforceable. (Mbehele, Unknown)
Possibility – It is a general requirement that the performance be able to be performed at the
moment of contract completion. If any of the performances are objectively impossible to
accomplish, the contract does not entail any legal duties. As a result, the contract is null and
invalid. Subjective to impossibility has no bearing on the contract's legitimacy. Subjective
impossibility refers to the debtor's incapacity to perform, whereas objective impossibility refers to
the inability of anybody to perform. If there is a legal law prohibiting performance, it will be
objectively impossible to perform. As a result, the contract is void due to a lack of potential.
(Mbehele, Unknown)

Certainty – A contract must ensure that the legal consequence and performance are both
predictable. The terms and circumstances of an agreement must be known under common law.
A contract term will be certain if there is no uncertainty regarding the execution or performance
of the contract term, and it will be ascertainable if it can be ascertained with confidence. The
contract will be ruled null and void if the terms are ambiguously specified to the point that it is
unclear what the parties' agreement demands. (Mbehele, Unknown)

Question: Explain the term negotiorum gestio with help of an example (3)

You are away from your house and travelling overseas without cellphone reception. The geyser burst in
your house and your neighbor decides that he will call out a plumber to replace your geyser. The
neighbor has not obtained your permission to do this or act on your behalf. The neighbor then pays the
plumber for call out fees and the geyser replacement when I return from Holiday. The neighbor is called
a Negotiorum gastor. So in other words, Negotorum gestio means when someone acts or does
something on behalf of another person without the consent of the individual who is not there to offer
consent. (Regenttextbook,2022:71)

Question: Explain the difference between voluntary surrender and compulsory

sequestration (5)

“The law of insolvency can be described as the totality of rules regulating the situation where a
debtor cannot pay his/her debts, or where his/her total liabilities exceed his/her total assets. The
creditors can then jointly apply for the sequestration for the debtor’s estate. The purpose of this
procedure is to pay at least a dividend to all the concurrent creditors, instead of satisfying only
the claims of a few of the creditors. The main objective is to provide for the orderly distribution
of a debtor’s assets where these assets are insufficient to satisfy all his/her creditors’ claims.” –
(Pepler, 2014)

Sequestration is defined when an estate of a person sequestrated, which means that the
person is no longer able to pay their debts due to uncontrollable circumstances and is
surrendered by order of the court (Venter V Volkskas; Exparte Harmse)

The Estate of Natural persons, partnerships and trusts can be sequestrated; however a
company or a close corporation has to be liquidated
It is important to note that even if all documents are submitted to high court, it is still up to the
discretion of the court whether they will to grant the sequestration or not. (Botha v Botha,
4457/2016)

Sequestration is governed by the rules and regulations set out in the Insolvency Act 24 of 1936

Voluntary Sequestration

The debtor himself applies to the court for their estate to be sequestrated (Schulze, 2014:470)

Tasks of the debtor

At the beginning of the sequestration processes, the debtor has to ensure that he/she publish a
notice in the newspaper inform the creditors, South African Revenue Service, employer and if
there are any employees involved, inform the employees and their registered trade union that
they wish to surrender. It is also the responsibility of the debtor to provide a list of all the assets
and liabilities which is known as the statement of affairs (Schulze, 2014:470)

Once the tasks are completed, the debtor has to proof the following:

 The above mentioned tasks has been completed (Coetzee,2016)

 The he/she estate is in fact insolvent (Coetzee,2016)
 Ensure that there is enough money to cover the sequestration cost (Coetzee,2016)
 It is also the responsibility of the debtor to ensure that the sequestration is to the advantage
of the creditors so that they will receive some dividends, aswell as that the creditors are in
a better position that what they were before the sequestration is deemed to be to their
advantage (Coetzee,2016)

The application includes the motion of sequestration and is supported by at least one affidavit.
The foundation affidavit's goal is to persuade the court that the substantive requirements have
been met while also demonstrating that the preliminary procedural requirements have been
met. (Viljoen, 2017)

Compulsory Sequestration

When a creditor is owed money by the debtor, the creditor then makes an application to the
court to obtain and order for sequestration (Schulze, 2014:471)

The tasks of the creditor at the start of the sequestration process

 The creditor has to give the security to the Master of the court to cover all sequestration
costs until a trustee is appointed (Schulze, 2014:471)
 The creditor has to send the application for sequestration of the debtor to the debtor, South
African Revenue Services, employer and if there are any employees involved, inform the
employees and their registered trade union (Schulze, 2014:471)

Once the tasks of the creditor is completed, the creditor has to proof the following

 The creditor has to prove that they have a claim against the debtor estate of at least R100
(Prinsloo, Unknown)
 The creditor has complied with the formal requirements of a compulsory sequestration
(Prinsloo, Unknown)
 The debtor is actually insolvent and/or has committed an act of insolvency (Standard bank
of South Africa v Sauer + Another 18273/2018)
 There is proof that if they should continue with the sequestration there is a benefit to the
creditor (Prinsloo, Unknown)

A provisional sequestration order will be issued if the court believes that the creditor has
proved its case. The provisional sequestration order will have a return date and has to be
served by the sheriff. The court will in absence of the proof that the estate is solvent, issue a
final sequestration order (Schulze, 2014:471)

An Order will be obtained by the applicant and insolvent will be the respondent, in other words
there is more than one person involved

Question: List the types of property of the insolvent that is excluded from the insolvent
estate (5)

Any Clothing, bedding and any other essential goods, any monies that the insolvent receives for
work done after the date of sequestration, however it is important to note that the only part of
the money that can be claimed is the part that the insolvent don’t need for survival, Any
retirement funds, any money or compensation the insolvent receives because of bodily injury
through something like Workmans Compensation. Any money that is received via
Unemployment Insurance Fund (UIF), Any benefits paid to the estate under long term policies
(Evans,2011)

(http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S1727-37812011000500003)

Question: Explain the principles upon which the concept rule of law is based (5)

 Government action and decisions must be based on law

  The law must be clear (civicsacademy,2022)
 Law must be accesable (civicsacademy,2022)
 Human rights of people must be respected (civicsacademy,2022)
 Every person is equal before the law (civicsacademy,2022)
 Courts must remain impartial in court cases (civicsacademy,2022)
 The laws of the country must be created by through clear and transparent procedures by
legitimate bodies (civicsacademy,2022)

(https://civicsacademy.co.za/rule-of-law/)

Question: Discuss customary law as a source of South African law (5)

Customary Law – is certain rules of conduct that are adapted because it has become an norm in
the society. This can include norms, traditions and cultures in the society. Customary law does
not consist of written rules but rather actions or habits of the community that has been passed
through generations (Schulze et al,2014:5). Customary law might be for some people the most
important law of their lives, controlling certain areas of their lives like marriages and what they
will inherit. Customary laws must meet certain criteria which will include, Firstly, it must be
known and followed by the community, Secondly, it must be reasonable and fair, Thirdly; the
meaning and the consent of the law must be certain and clear, Fourthly; it must be abled to be
carried out(enforceable), Fithly; it must be inlign with the principles of the bill of rights, Sixth; it
must be inline with the Constitution (Section27.org.za:209)

(https://section27.org.za/wp-content/uploads/2010/04/09Manual.pdf)

Question: Explain the differences between the two houses that make up the South
African legislature. Include responsibilities and function of each house (10) ????

National Assembly - Under the Constitution, the National Assembly is chosen to represent the
people and to guarantee that government is led by the people. (gov.za,2022). It does this by

 Appointing the president (Gov.za,2022)

 Approving and implementation of laws
 Managing the performance of the executives
 Establishing a national forum for public debate on important topics
(https://www.justice.gov.za/legislation/constitution/chp04.html)

National Council of Provinces - The NCOP is tasked by the Constitution to guarantee that
provincial concerns are included in national policymaking. This is accomplished through
participating in the national legislative process and providing a national platform for the
discussion of provincial concerns. The NCOP also has a unique role in promoting cooperative
government and intergovernmental relations ideals. It guarantees that the three branches of
government work together to carry out their constitutionally mandated responsibilities while
without infringing on each other's domain of competenceThis guarantees that on topics of
concurrent competence, there is synergy between the sectors. (Parliament,2022)
(https://www.parliament.gov.za/national-council-provinces)

Question: What is the meaning of CIPC (1)

Companies Intellectual Property Commision. It is the body that governs all registered entities in
South Africa namely Closed Corporations, Public Companies, Private Companies, External
Companies and incorporated companies in terms of the Companies Act (Anlo,2022)
(https://anlo.co.za/blogs-and-articles/2017/1/15/so-what-exactly-are-cipc-annual-duties)

Question: Explain the difference between external and domestic companies (5)

External Company – this is a foreign company that conduct business or non profit activities in
South Africa. The company can either operate for profit or non profit. The company must have
at least one office in South Africa however it is important to note that the external company is
regulated by the country of origin, should they fail to follow the regulations as outlined in the
Companies Act they will be given notification withdraw from South Africa.(Grobler et al
2014:329) Example

Domestic Company – this is a company that was established outside of the borders of South
Africa, but has transferred its registrations to SA. Because of this the company is regulated as if
it was originally established in South Africa (Grobler et al 2014:329) Example:

https://www.intergate-immigration.com/external-company-south-africa.php

Question: Abigail offers to sell a taxi to Mbali for R15k, Mbali accepts the offers and pays
Abigail the money, but will only fetch the taxi next week. Explain whether Abigail or Mbali
bear the risk in the following two scenarios:

Abigail carefully parks the taxi off in her fenced and gated yard, unfortunately thieves manage to
break into her yard and steal the taxi’s tyres, radio and CD Player? (5) (Page 64 of textbook

Because the contract is complete Mbali carries the risk because the damages caused to the
vehicle was not through fault of Abigail as it was parked in her fenced and gated yard .However
because it is not an act of God (Nature event), Abigail will carry the risk, even if she was not
careless

Abigail allows her 17 year teenage son to take the taxi to drop of his friend at her house.
The boy drives carefully but on his way back, a drunken driver crashes into the taxi and
damages it badly? (5)

The risk lies with Abigail because the damage took place because of Abigail. The risk does not
pass if the seller is careless in looking after the property or goods until it is sold. And the same
as in the above mentioned scenario, even if they were not careless and it was not an act of
God, Abigail will carry the risk
The passing of risk is applicable in respect of a contract of sale. It is important to note that when
a contract of sale is concluded, the time, manner and place of delivery can differ in that it might
not take place in one go. Thus, it is important to provide some structure regarding who will bear
the risk before delivery of the merx and at what point such risk will be borne. Generally, the
purchaser bears the risk once the contract has been concluded or become “perfecta”. This,
however, is dependent on the following requirements: any and all of the conditions suspending
the operation of the contract have been fulfilled; the object of the sale is ascertainable and there
is consensus on it; and the purchase price of the sale is certain, and consensus has been
reached in this regard as well. In light of this, it is further important to note that there are
different circumstances regarding the passing of risk in respect of a contract of sale. The first
circumstance is prior to delivery but after the conclusion of the contract – the purchaser bears
the risk as he/she receives the benefit of the merx; the seller is also protected in respect of
unforeseen risk like acts of God, however, if the loss is due to the fault of the seller, this may
constitute a breach of contract, and the purchaser will then have a right of recourse against the
seller. The second circumstance is in respect of a delay by the purchaser or seller – in the event
that the seller’s performance is delayed, this will constitute mora creditoris, and the seller will
thus bear the risk in respect of any damage to the merx other than any damage that would have
occurred had he/her performed timeously; the opposite is true as if the delay in taking delivery
of the merx is due to the fault of the debtor, the seller will only be responsible to the extent that
he/she is grossly negligent or intentionally fails to look after the merx. There are exceptions to
the general rule, so if parties have either included a clause specifying that the seller bears the
risk until after delivery for example, then this clause would be given effect to. Furthermore, if the
contract of sale includes a suspensive condition, and the condition has not yet been fulfilled, this
would mean that the contract is not complete, and thus, the risk will remain with the seller. –
Bronwyn’s awnswer- change if asked

SchoemanLaw Inc.

Question: Explain the concept fiduciary duty as it applied to the contract of agency (5)

An agency partnership is used in many commercial operations. A commercial relationship in

which a principle lends legal power to an agent to act on his or her behalf while dealing with a
third party is known as agency. All agency relationships are fiduciary relationships which implies
that the principal and the agent have a high level of trust and confidence in each other. The
agent bears a fiduciary obligation to the principle because the principal has trusted the agent to
monitor or defend the principal's property. This indicates that the agent must operate in the
principal's best interests (Unknown,Unknown). The agent can act on behalf of the principal as if
the principle were physically present and operating alone. The activities of the agent establish
legal duties for the principal in an agency relationship. As a result, the agent is required to make
business decisions that are consistent with the principal's behaviour. Consider the following
frequent commercial relationships: attorney-client, broker-client, and trustee-beneficiary. A
fiduciary connection exists in each of these situations. The agent must agree to represent the
principal once the principal engages the agency. When an agent accepts an agency
arrangement, he or she also accepts some fiduciary obligations. This implies the agent must
operate in the principal's best interests while adhering to many specific requirements. There are
five types of commitments to remember: Loyalty, Performance, Notification, Obedience and
Accounting (unknown,unknown)

https://study.com/academy/lesson/fiduciary-duties-of-an-agent.html

Question: Describe 5 ways in which a contract of agency may be terminated (5)

Information gathered from Regent Textbook page 75

 When the mandate has been completed. In other words, when the agent has carried out
his/her obligations in terms of the contract/mandate
 When the period comes to an end. In other words, if the agent was asked by the
principle to act as an agent for a period of time for example 3 months, and that period
elapses, the contract will come to an end at the end of the 3 months
 Death – if their one of the parties ( Principle or agent) dies
 Insanity – when either the agent or the principle suffers insanity
 Insolvency –when either of the parties becomes insolvent
 Revocation – this is when the principle revoke the mandate from the agent, which means
the authority is taken away from the agent, the contract comes to an end
 Renunication by agent – there might be scenarios where the agent decides not to carry
on with the mandate from the principle for varouis reasons, the contract will terminate
 Mutual Consent – when both parties agree to end the agreement between them

Question: Outline 5 instances in which the benefit of excussion is not available to surety
(5)

 The debtor estate has been sequestrated

 The Principle debtor is manifestly unable to pay
 The principle debtor is outside the borders of South Africa and are have no assets in
South Africa
 The Principle debtor has a personal defence not available to the surety

(Regenttextbook,2022:81)

Question: Define the concept Law (2)

Question: Identify the system of law that the South African common law is derived from
(2)
Common Law is mainly 17th and 18th Roman Dutch Law that was transplanted in the Cape.
Examples of common law crimes include murder, robbery and rape. Even though most of the
common law principles came from Roman Dutch law, not all principles were transferred.
Sometimes the English Law had an influence on the South African Common law. So in other
words it is a combination of both Roman Dutch Law and English Law (Justice.gov,2022)
(https://www.justice.gov.za/policy/african%20charter/afr-charter02.html)

Question: Define a Memorandum of Incorporation (MOI) (2)

It's a legal document that outlines the rights, responsibilities, and obligations of shareholders,
directors, and other company stakeholders. A Memorandum of Incorporation is required for any
company that is registered in South Africa. A MOI is the founding document of company
(Giles,2012) https://www.michalsons.com/blog/what-is-a-moi-memorandum-incorporation/20697

Question: Outline what the MIO comprises of (3)

The rights, responsibilities and obligations of the shareholders, directors and other company
stakeholders, It will determine the type of company, the objects and powers of the company,
authorized share capital and types of shares. All current articles and memoranda of association
will automatically be converted to a MoI.

The MIO will include the following (Regent textbook 22-23)

 Any matters that the Companies act does not cover

 Intepretations or alterting provisions of the act
 Specific company requirements, for example, greater restrictions, unalterable provisions
etc.

https://www.studocu.com/en-us/document/tshwane-university-of-technology/cost-accounting-i/
learning-unit-5-memorandum-of-incorporation-rules-and-pre-incorporation-contracts1/2566792

Question: The companies Act 71 of 2008 has not only been simplified to reduce the
regulatory buren on companies but it has also made accountability and transparency
requirements stricter for both private and public companies. Discuss this statement by
demonstrating how the act has achieved this (10)
Question: Distinguish between personal rights and real rights (15) – page 23 of textbook
- retype

Question: Discuss the consequences of the Misrepresentation, Mistake, Puffing, duress and
Undue Influence on the validity of a contract
The below mentioned factors are factors are factors that can lead to a contract being cancelled

 Misrepresentation (9) A misrepresentation is a false statement or representation made

by one of the contracting parties either before or at the end of the contract about an
existing fact or condition of affairs with the intent and purpose of enticing the other party
to enter into the contract. The deception might also be about the contract's subject's
attributes or characteristics. A Contract due to misrepresentation will become voidable if
the following can be proven (Schulze et al 2014:62)
o The representation was false in fact
o The representation was made with the intention of inducing him to contract
o The representation was material
o He/she contracted on the faith of the representation.
o The misrepresentation must have been made by one contracting party to the
other party.
o The misrepresentation must be unlawful.
o The misrepresentation must have induced the contract. (Regenttextbook
2022:38)
 Mistake (4) - A mistake is a misinterpretation of a contract by one or more parties, which
can be used to void the contract. Unilateral error, mutual mistake, and common mistake
are the three categories of contract mistakes recognised by common law. When only
one party to a contract makes a mistake on the terms or subject matter, this is known as
a unilateral error. Courts will maintain such a contract unless it is proven that the non-
mistaken party was aware of the error and attempted to profit from it. A contract can
also be declared void if the contractual party's identity has been misrepresented. When
both parties to a contract make a mistake about the terms, this is known as a mutual
mistake. Each person feels they are contracting to a different object. A common mistake
is where both parties hold the same mistaken belief of the facts. Both Mistake and
Misrepresentation are options that can be used by both parties to prove that they
contract was not what they thought it would be. If the conduct of the parties do not fulfil
the standards of a mistake, the contract will be valid. (Schulze et al,2014:66)
 Puffing (4) The law does not regard mere ‘sales talk’ as misrepresentation. For Example
– a sales person advertise an ice machine as almost like brand new, the buyer cannot
claim the fact that it is brand new. Advertisers may also make statements that are
overblown. For instance, tooth paste will strengthen your teeth while also killing all
microorganisms. It is, however, illegal to print or show any advertising that is materially
false or deceptive. A manufacturer cannot claim that a product it wheat free if it contains
traces of wheat. The same applies in contracts of sale – a landlord cannot advertise a
house that their property is in perfect condition if the pipes and roof are leaking
(Regenttextbook 2022:38)
 Undue influence (8) When one person has the ability to convince another's decisions
because of their relationship, this is known as undue influence. Due to increased status,
superior education, or emotional attachments, one of the parties is frequently in a
position of control over the other. The more powerful person utilises this advantage to
 force the other person to make decisions that may not be in their best interests in the
long run.Undue influence is a fairness principle that prohibits one person from abusing a
position of power over another. Because one party is unable to freely express their
independent will due to the disparity in power between the parties, one party's consent
may be void. When exercising excessive influence, the influencing individual is
frequently able to exploit the weaker party. In contract law, a party claiming to be the
victim of undue influence may be able to void the contract. This is different to duress
because there is no need for a threat. (Schuleze et al,2014: 68) If there is a particular
relationship, it is necessary to investigate the relationship's potential for abuse. A court
will consider if the 'stronger' or more intellectual party took advantage of the other's
ignorance, immaturity, illness, ignorance, or mental dependence. Abuse of this
connection undermines the victim's independent will, making it more susceptible to the
other party's control. The contractual party would not have completed the contract if the
relationship had not been abused. (Regenttextbook,2022:40)

Question: Name and discuss the types of contracts that are required by law to comply
with certain formalities (10

The prescription of formalities is the exception rather than the rule, and no formalities are
necessary under common law. However, the legislation has established some standards that
must be met when entering into certain sorts of contracts. These measures are primarily
intended to prevent and reduce fraud, un certainties and evidentiary issues. The most prevalent
requirement is that some contracts be converted to writing and signed in order to be considered
legitimate. (Schulze et al 2014:96)

There are 4 types of contracts that are required by law to comply with certain formalities which
is

Contracts for the alienation of land - No contract for the alienation of land is legitimate unless it
is stated in a contract of alienation signed by the parties to the contract or by their agents acting
on their written instructions, according to the Alienation of Land Act 68 of 1981. Any alienation of
property in violation of the Act, on the other hand, shall be declared lawful provided both parties
have fulfilled fully and the land has been transferred to the new owner. The Act also includes
unique enrichment provisions in the event of invalidity as a result of noncompliance with the Act.
(Schulze et al, 2014:96)

Contracts of Suretyship - According to the General Law Amendment Act 50 of 1956, a surety
contract is only legal if it is in written and signed by or on behalf of the surety. (Schulze et al,
2014:96)

Contract of donation in terms of which performance is due in future - According to the General
Law Amendment Act 50 of 1956, a donation contract whose execution is due in the future is
only legitimate if the terms are stated in a written document signed either by the donor or by
someone acting on his or her written authority. This power can only be provided in the presence
of two witnesses. This clause does not apply to a donation that has been completed via delivery
and transfer. (Schulze et al, 2014:96)
Consumer contracts - A written record of each transaction that comes within the scope of the
Customer Protection Act 68 of 2008 must be provided to the consumer. Minimum information
required in the written record includes the supplier's complete name or registered business
name, as well as its VAT registration number. (Schulze et al, 2014:96)

When it comes to the sale of businesses notices must be published in the local newspaper and
the government gazette (Regent textbook,2022:50)

According to the Merchandise Marks Act 17 of 1941 – it is outlined that there are specific
requirements to labeling of goods (Regent textbook,2022:50)

The parties themselves may agree to any conditions governing the sale – for example – they
may agree there will be no binding contract unless it is in writing and signed by all parties
(Regent textbook,2022:50)

Question: Discuss constitutum and attornement as modes of delivery of the merx in a

contract sales

Consititutum – This is an Latin term. This occurs when at the conclusion of an agreement of a
sale, the seller retains possession of the merx as an agent of the buyer. Example – a
homeowner an sell a house to a buyer and agree that with the buyer that after the sale, the
buyer can remain in the house as a Tenant (Mahove,2021)

Attornement- this is when the property/product is sold whilst in possession of a 3rd party. Upon
conclusion of the agreement of the sale, the 3rd party will conintue possessing the property now
on behalf of the buyer. Both the buyer and the seller will be clear that the 3rd party now
possesses the property on behalf of the buyer. Example – a lady caretakes a house for
someone that is currently unable to do so, whilst she is taking care of the house, the house is
sold to someone that lives in another country, so the caretaker will now possess the house of
behalf of the person living overseas ( the buyer) (Mahove,2021)

https://www.studocu.com/en-za/document/great-zimbabwe-university/tax-law-and-
practice/contract-of-sale-the-most-important-topic-in-commercial-law/15682064

Question: Mavis offers to sell her lounge sent to Joyce for R1 000 and Joyce agree to
pay for the lounge suite in monthly instalments of R100.00 each for 10 months. Mavis
adds a condition to the contract of sale, which states that although Joyce can take the
lounge suite and use it, the ownership of the suite will remain with Mavis and only pass
to Joyce when the R1000 purchase price has been paid in full.

 Identify the type of condition above (1)

 Who bears the risk until the full payment of the purchase price, explain (3)
 Two months after Joyce has taken the lounge suite and started using it, a fire
engulfs her house and totally destroys everything including the lounge suite.
Explain whether Joyce is still obligated to pay Mavis the balance of the purchase
price? (2)
 Would your awnser be any different if the lounge suite was merely damaged (2)
  Explain the legal position if Joyce set fire to the house deliberately (2)

Question: Outline the main purpose of a sequestration order (2)

The purpose of a sequestration order is to guarantee that the profits of sale from the debtor's
assets are distributed in a timely manner to creditors who have valid claims against the
insolvent estate. It guarantees that the order of choice is fair. Instead of a single creditor
receiving all of the proceeds from the sale of the debtor's property, the creditors who have valid
claims are paid out in a fair and predictable manner. As a result, all creditors are safeguarded.
From the time the intention to sequestrate is publicised, the debtor is unable to pay creditors.
The debt has been frozen, and no further interest will be charged. (Insolvencycare,2022)

https://www.insolvencycare.co.za/what-is-sequestration-order/

Question: Discuss the impact of Roman-Dutch law and English law on South African
Law (10)

After the British takeover of South Africa in the 1800s, Roman-Dutch law was kept and
reaffirmed as the country's common law. English became the language of the courts, and
English legal processes and the English rule of evidence were applied in criminal and civil
cases, among other modifications. As a result, in South Africa, there is a distinct link between
English common law and Roman-Dutch law. Since then, statutory law has been added to the
common law, and many court decisions now revolve upon the interpretation and implementation
of statutes. Foreign law is regularly cited as persuasive but non-binding authority because of the
distinctive background of South African law and the constitutional need to take consideration to
comparative law. (Oxfordbusinessgroup,2022)

South Africa features a 'hybrid' or'mixed' legal system of Roman-Dutch Law, which is made up
of the interweaving of many separate legal traditions: civil law acquired from the Dutch, common
law inherited from the British, and customary law inherited from indigenous Africans (often
termed African Customary Law, of which there are many variations depending on the tribal
origin). The English influence is most noticeable in procedural features of the legal system and
techniques of adjudication, whereas the Roman-Dutch impact is most visible in substantive
private law. South Africa uses English law in criminal and civil process, corporation law,
constitutional law, and the law of evidence in general, While contract law, tort law, law of
persons, law of things, family law, and other areas of South African law are governed by
Roman-Dutch common law, (Wikipedia,2022)

www.oxfordbusinessgroup.com

Question: Explain the term contract (4)

Contracts are the foundation of not just any business, but of human collaboration and society as
well. A contract is an oral or written agreement that allows parties (individuals or corporations),
businesses, and society to work together to achieve their unique goals and demands. They are
legally binding formal agreements. A contract, in other terms, is a legal obligation., indicated by
a legitimate offer and acceptance; appropriate consideration; capacity; and legality are the key
characteristics necessary for the agreement to be a legally enforceable contract. A valid
alternative can satisfy an element of consideration in several states. General damages,
consequential damages, reliance damages, and specific performance are all possible remedies
for breach of contract. (Oscar B et al,2022)

https://www.contractscounsel.com/b/define-contract

Question: Explain the distinction between contracts and other agreements (3)

Do research and have a look at page 24 of the module guide

Question: List the characteristics of personal rights (3)

 If the person passes away the personal rights will lapse (Studou,2022)
 Personal Rights are relative in principle which means that the holder can only enforce
his right only against the person who is obliged to perform in terms of the
contract(Studou,2022)
 Personal Rights come into action though obilgations – example – in terms of a
contract(Studou,2022)
(https://www.studocu.com/en-za/document/varsity-college/law-of-property/real-rights-v-
personal-rights/8938968)

Question: Briefly discuss the capacity to enter into contracts of each of the following
persons

 Seetha, 16 years old and unmarried. (2)

 Adam, 17 years old and divorced. (2) Minority is terminated in the ordinary course of
events when the minor reaches the age of 18 or marries. In this regard the minor was
married and got divorced, which means that he is no longer a minor, and therefore has
full capacity to act (Regent, 30).
 Jane aged 25 and unmarried. (2)
 Wendy, aged 26, and certified mentally deficient. (2)
 Jon, 50, a compulsive gambler with 2 minor children (2)

Question: Differentiate between an incorporated association and unincorporated

There are two types of Voluntary non profit associations namely

Incorporated Associations - An incorporated association is when a group of people would like to

formalize their association so that it is recognized by the South African Law – Non Profit
Organsation. So in other words - It is formed when three or more people agree to join an
organisation to accomplish a shared (typically non-profit) goal. It can be formed by common law
or by statute, and it will then be independent of its members. In order for a voluntary association
to be incorporated in terms of the common law. the Voluntary Association must have a
constitution which will outline that: Firstly there will be perpetual memberships, Secondly that all
assets and liabilities of the association will be held separate from the organisation. Should the
Voluntary Associations want to be incorporated through legislation it must comply with the
criteria set out in the Companies Act 71 of 2008 and/or Non-profit Organisations Act, 71 of 1997
(Small, 2020)

Unincorporated Associations - An unincorporated association is a collection of persons who get

together for a common purpose and want to form a legally binding connection between
themselves, according to English law. The list of unincorporated associations is endless, but
some examples include: Local residents of a street who agree to contribute to a street sweeping
fund, A professional association, a trade union. Unincorporated associations are inexpensive
and simple to establish, having only the absolute minimum of paperwork. Some of the basic
rules that will be included in per association can be but not limited to – subscription fees,
financial matters, the objectives of the association etc They're also incredibly adaptable, with
instances ranging from small groups of a few people to nationwide organisations with tens of
thousands of members. The fact that an association is unincorporated is the most important
element from a legal standpoint. This implies they are unable to hold property, enter into
contracts, or conduct or defend oneself against. ( Wikipedia,2022)

https://en.wikipedia.org/wiki/Unincorporated_association

Question: List the situations in which an agent will be held to be personally liable to
third parties (4)

In general agents are not generally personal liable to 3rd parties, however there are some
circumstances that they will be held liable which I will outline below, however it is important
to remember that one or more of the factors that will be listed below has to be present for
agent to be held personally liable (Dane,unknown)

Where the principle does not exist – When an agent convinces a third party that he is
operating on behalf of a principle when the principle does not exist. (Dane,unknown)

Where the principle does not have legal capacity – The principle lacks the legal power
to enter into a contract, but the agent does so nevertheless. (Dane,unknown)

Where the agent does not indicate he is an agent – When an agent enters into a
transaction with a third party without disclosing that he is acting as an agent or on behalf of
a Principle. (Dane,unknown)

Where the agent acts beyond his authority – if the Principle gives the agent a precise
mandate with explicit guidelines to engage into a certain contract with a third party, yet the
agent fails to do so. (Dane,unknown)
(https://www.owlgen.in/when-is-an-agent-personally-liable-to-the-third-party/)

Question: State the formalities required for a valid contract of suretyship. (7) – add
additional information if question is asked v- Regenttexbook,79

a. A legitimate and accepted offer is required.

c. The purpose of the surety to be bound by the agreement must be present.

d. The surety must be able to fulfil its contractual obligations.

c. A suretyship agreement's terms must be written down.

a. The surety and the creditor must sign the instrument on their behalf.

f. The agreement must explicitly identify the major debtor, the creditor, the surety, and the
principal debt.

g.If there are co-sureties, all co-sureties must sign the agreement.

Question: Identify the ways in which a contract of suretyship may be terminated. (3)

Any changes to the terms of a suretyship contract must be made in writing. A surety contract, on
the other hand, can be ended informally unless the contract specifies termination in writing.
(Schulze et al 2014:359)

Termination of the principal debt - The suretyship is ended when the principal debtor's obligation
is completed. For Example – debt has been paid. It is important that if the principle only pays
part, the surety is not lifted. If someone has R20k debt and they pay 15k the surety won’t be
lifted, but if they pay the entire amount of 20k, the surety will be lifted (Schulze et al 2014:359)

Principal debtor remains bound, but not the surety - If the surety pays the debt he is discharged,
but the principal debtor is not discharged. If Harold’s father pays the R 50 000.00 his duty as surety
is discharged, but it does not discharge Harold as the principal debtor. A surety who binds himself
for a limited period of time will be discharged after that period. If he binds himself for debts
incurred during that period he will be liable for three years after the lapse of that time period.
(Regenttextbook,2022:84)

Creditor's conduct is prejudicial to the surety - When a creditor agrees to a material change in the
primary debtor's obligations, the surety is released. It will be significant if the surety would not have
agreed to deal under such terms. (Regenttextbook,2022:84)

Discharge by operation of law - The surety will be released if the principal debtor sets off a debt
due to him by the creditor. The surety is released as a result of the merger. The suretyship is also
prescribed when the primary debt is prescribed. (Regenttextbook,2022:84)
Question: Discuss the differences between ‘voluntary winding up’ and ‘compulsory
winding up’ of an insolvent estate. (8) – is this different to voluntary sequestration or
compulsory sequestration

Question: Outline the composition of Executive Cabinet of South Africa (3)

The President as the head, The Deputy President and Ministers. The president appoints the
deputy president, ministers he then furthers assigns them powers and functions however he
also has the right to dismiss them(Gov.za,2022). There is no limit to the amount of ministers the
president is allowed to choose. Most of the ministers are chosen from inside the assembly
however he is allowed to choose two from outside the assembly (Gov.za,2022)

The President as the head of the executive cabinet is responsible for approval of the Bill of
rights and the rest of the cabinet is responsible for implementing the bill and have to take have
to awnser to members of parliament if there any discrepancies . The bill can be draugted by any
of the member of the National Assembly, minister or a committee of the National Assembly. It is
further the duties of the Executive cabinet (Gov.za,2022)

(https://www.gov.za/about-government/government-system/executive-authority-president-
cabinet-and-deputy-ministers)

Question: Outline the circumstances under which an offer will lapse (5)

Expiry - If an offer is not accepted within a certain amount of time, it becomes invalid. To put it
another way, if an offer is open for a certain amount of time, it will close at the end of that time.
For instance, 'A' offered to sell a car to 'B' for a period of ten days. After 10 days, 'B' is no longer
permitted to accept the offer. If no time limit has been set, the deal will expire after a reasonable
period of time. (Unknown,2017)

Revocation - An Offer to Purchase becomes a legally enforceable sales agreement as soon as

the seller signs it. The buyer can retract the offer before the seller accepts it, as long as the offer
is not specified to be 'irrevocable' for a specific amount of time and it is brought to the seller's
knowledge within that time frame. (Unknown,2017)

Rejection - If the seller rejects the offer, it becomes null and void immediately. After rejecting an
offer, the seller will not be able to reverse their choice and accept it. If the seller counters the
buyer's offer, it is deemed a rejection of the buyer's original offer, according to Goslett. "A
counter offer is when the seller crosses out the amount the buyer has placed in the offer and
writes in a greater figure and initials the change," Goslett says. "The offer fails if the buyer
determines the sum is too high and does not accept the counter offer." The seller will
subsequently be unable to accept the earlier offer made by the bidder. - A new offer has to be
made -(Unknown,2017)

Counter –offer - When the offeree rejects the first offer but makes a counter-offer, the original
offer is replaced by the counter-offer.(regenttextbook,2022:28)
Death -The offer will automatically lapse if the buyer or seller dies before it is accepted. All rights
and obligations resulting from the contract will be conveyed to the dead estate if the offer has
been signed and accepted. Unknown,2017)

https://www.privateproperty.co.za/advice/property/articles/when-does-an-offer-to-
purchase-lapse/5741

Question: Discuss the difference between valid, void and voidable contracts (15)

Valid - have all of the necessary components and can be enforced in court. A legitimate
contract binds the contracting parties to legal responsibilities. It allows one side to force the
other to do or not do anything. The parties are legally accountable for the contract's
performance. If one party breaches a contract, the other party has the option of taking the
dispute to court. In most cases, signing on the dotted line binds you to the contract's terms, but
there are several circumstances that render contracts invalid in court. There are several factors
that go into determining whether a contract is legitimate or not in the realm of contract law.
When trying to figure out what makes a contract legally binding, things might get confusing.
(unknown,2014)

Void - Contracts that are void are not contracts. A void contract, in most situations, lacks one or
more fundamental components that would make it legitimate. Because it isn't a legally binding
agreement, neither side needs to do anything to end it.When a contract is made, it may be
lawful if it fulfils all of the legal requirements, such as capacity and free assent. However, failure
to act or a future change in the law that makes execution impossible renders the contract void
and renders it unenforceable. When a contract is in violation of public policy, it loses its
enforceability. Neither side has the right to sue for failure to fulfil. Some of the characteristics of
a void contract is -It isn't legally binding., It does not bind the parties in any way. It is unable to
establish legal rights. Neither side will be compensated in any way. (Unknown,2014)

Examples of void contracts include the following:

 Contracts with a party who's not mentally or legally competent, such as someone
with a mental illness or a minor
 Contracts that involve illegal actions, such as committing a crime
 Contracts requiring an impossible performance or the occurrence of an impossible
event
 Contracts that are too unfair
 Contracts restraining certain activities, such as the right to work or the right to
choose one's spouse

Voidable- Contracts that are voidable have all of the necessary elements to be enforced,
so they appear to be valid. They do, however, have a weakness that allows one or both
parties to void the contract. A voidable contract may start of to be legally binding at first
but then becomes void. Contingency clauses are common in sales contracts, making
them voidable. One of the parties must exercise its choice to enforce the legitimacy of a
voidable contract. Either party has the legal authority to carry out or refuse to carry out
the contract. Only one of the parties is usually obligated by the terms. The contract may
be cancelled by the person who is not obligated, rendering it invalid. The following are
characteristics of voidable contracts. (Unknown,2014)

 It can be enforced by one or both parties.

 A party that was duped, pressured, or misled into signing the contract has the
right to challenge its legality.
 Either party can rescind consent at any time.
 Contracts that are taken under under duress, fraud, deception, or coercion are
voidable.

Examples of voidable contracts include the following:

 Contracts involving a minor as one of the parties (minors can walk away from
contracts)
 Contracts that tricked or forced a party into them
 Contracts involving an incapacitated party at the time of signing; incapacitated
includes being drunk, delusional, or insane

https://www.upcounsel.com/void-valid-and-voidable-contracts

Question: Discuss the rights and duties of a buyer and a seller in a contract of sale (8)

A seller only has one right which is payment for the product that he/she sold. Further to that the
seller has two duties namely: Firstly-The duty to care for thing sold which means that Despite
the fact that the buyer bears the risk of unintentional loss once the transaction is complete, the
seller is still responsible for the item sold. The usual rule is that the seller is responsible for the
products from the time the transaction is completed until they are made accessible to the
customer or delivery is delayed. This implies that the seller is responsible for any harm
produced by his fraud or carelessness, but not for unintentional damage that occurs without his
or her fault. It's worth noting that a delay might change the obligation of care. If the customer is
late in receiving the product, the seller is solely responsible for the consequences of severe
negligence or purposeful neglect to care for the merchandise. The vendor will then be immune
from liability for simple carelessness. If the seller is late in making the item offered available, the
seller is responsible for any loss, regardless of how it occurs. Secondly – The duty to deliver the
goods sold to the buyer which means -When a legitimate contract of sale is signed, the seller is
obligated to make the item sold available to the buyer. According to this responsibility, the seller
must place the product at the buyer's disposal and allow him or her to take it away without legal
permission or impediment under proper conditions. The delivery of the sold goods are an
important part of a sale because it is here where the ownership passes from the seller to the
buyer. (Unisa commercial law summeries, unknown)

When a product is delivered to the buyer there are two unstated promises which a seller makes
which is Implied Warranties – which means that the seller promises that no one will take the
sold product from the buyer, it is not written but it is implied by law. It also further means that the
seller promises that no one else is the owner of the product. This is also known as warranty
against eviction. Example – a car is sold by a dealership, the dealership promises that the buyer
is the only owner and the car is not stolen. Secondly – Warranty against latent defects which
means that the buyer promises the buyer that the product sold is without any latent defects.
Latent defects can be defined as the hidden faults that is not always noticeable immediately.
This warranty also means that it can be used for the purpose it was sold for. When a car is
bought at a dealership – the car’s engine is in a proper working condition
(Regenttextbook,2022)

Buyers Rights

A buyer has two very important rights which is Firstly – right to delivery which means that the
buyer can demand delivery of the product bought, which does not always mean the actual
delivery but that the seller makes the product available to the buyer and Secondly- the right to
receive the things sold without latent defects which means that he has the right to receive goods
without any damages (Regenttextbook,2022)

The buyer has two duties which is the buyer has the duty to pay the purchase price and The
buyer has the duty to accept delivery

There is another important Aspect that has to be taken into consideration during the sale of
goods which is Passing the risk which means The general rule of passing the risk in South
Africa is regulated by the Roman Dutch law (Schoemanlaw,2019). Passing of the risk mean that
once the buyer has been accepted the offer by the seller and the sale of the concluded, the risk
of accidental damage of the product that has been sold shifts to the
buyer(Regenttextbook,2022:63), however the following implies; Firstly; Any and/or conditions
relating to contract has been fulfilled, Secondly; The sale's purpose is clear, and there is
agreement on it; Thirdly; The purchase price of the sale has been agreed upon by both parties
(Schoemanlaw,2019)The person that is holding the risk is the person that is responsible for the
financial implications of any damages or losses. It often happens that once a sale has been
done between two or more parties, the delivery and time of delivery can vary, therefore it is very
important that the parties involved regulate as to whom will be responsible to carry the risk
before delivery and under which circumstances. (Schoemanlaw,2019). Some examples for risk
can be goods are stolen whilst in transit, goods are damaged whilst in transit

A typical example can be that a person buys a new house and moves into the house before the
house is registered on their name and pays occupational rent. At the time when he moves in, he
discovers damp in the house, the geyer burst, the water pipe burst. A the time of signing their
agreement is will be determined if the risk is passed to the person on the day of occupation or
only on the day of registration. If it was on the day of occupation, the new owner will be lailable
for the cost, however if it is on the day of registration only, the risk will lie with the seller

(Regenttextbook,2022)

Question: Explain who co-sureties are and what the right of contribution from the co-
sureties are (5)

Where two or more individuals have bound themselves as sureties for the same principal debtor
and in respect of the same principal debt, they are called co-sureties. On the suretyship, co-
sureties are jointly and severally accountable. When a single surety is sued for the entire sum,
he may be entitled to the benefit of partition. This implies that the claim will be split
proportionately between him and the other solvent and able-to-pay sureties. As a result, the
surety can limit the creditor's claim against him to a percentage of the entire amount

Rights

Two or more sureties who are sureties for the same principal debtor in respect of the same
obligation are co-sureties. For example, Harold’s father and his brother have signed surety
for the R50 000.00, even if they have given their guarantees by separate instruments or in
separate documents, independently of each other or at different times or even unbeknown
to each other.
Sureties who each guarantee only a portion of the debt are not co-sureties. For example, if
Harold’s father is surety for R 30 000.00 and his brother is surety for R 20 000.00 then they
are not co-sureties. The basis of the right to contribution from a co-surety is that by payment
of the debt, the co-surety has relieved the other co-sureties of their liability, and they have
been enriched at his expense. Co-sureties do not require a cession of action to proceed
against a co-surety. Other co-sureties may only be sued for their pro-rata share of the debt,
not the entire debt. (Reword – copied from student guide)

Question: In a Contract of sale, delivery of the merx is an essential element of the sale.
Provide a discussion on the modes of delivery, including delivery with short hand,
consitutum possessorium and attornment. Provide examples to substantiate your
answers. (10)

After a product or goods has been sold delivery of goods needs to take place. There are a
number of different types of deliveries that is recognized by the law in Africa. It is important to
note that there is one requirement for the delivery of goods from both the seller and the buyer
which is the seller must have the intention to delivery the goods to the buyer and the buyer must
have the intention to accept the goods that is delivered from the buyer

There are two main forms of delivery goods that has been sold to a buyer which is

Actual delivery – this is when the goods that was sold by the seller is physically handed over to
the buyer. For example – when the keys of the house is actually handed over to the new owner
(Schulze et al 2014:160)

Constructive delivery - This refers to the act of doing something that the law considers to be the
same as real delivery. There are 5 different types of constructive delivery which is (Schulze et
al 2014:160)

Symbolic – this is when the goods are not physically handed over to the purchaser but
something else is handed over to the purchaser which will enable him to take ownership of the
goods. Keys of a car is handed over to the new owner by the seller(Schulze et al 2014:160)

Long Hand – this is when the goods are pointed out to the purchaser and is made available to
the purchaser. This is used when the goods that has been sold are too large to physically hand
over to the buyer – example – game farm owner buys stock – bucks, elephants, etc(Schulze et
al 2014:160)

Short Hand – this happens that the goods is already in the possession of the purchases but the
purchaser is not the owner, but then it changes to become the owner. For Example – A car is
lend to Marius and whilst he has it his possession he agrees to buy the car (Schulze et al
2014:160)

Consititutum – This is an Latin term. This occurs when at the conclusion of an agreement of a
sale, the seller retains possession of the merx (goods) as an agent of the buyer. Example – a
homeowner an sell a house to a buyer and agree that with the buyer that after the sale, the
buyer can remain in the house as a Tenant (Mahove,2021)

Attornement- this is when the property/product is sold whilst in possession of a 3rd party. Upon
conclusion of the agreement of the sale, the 3rd party will conintue possessing the property now
on behalf of the buyer. Both the buyer and the seller will be clear that the 3rd party now
possesses the property on behalf of the buyer. Example – a lady caretakes a house for
someone that is currently unable to do so, whilst she is taking care of the house, the house is
sold to someone that lives in another country, so the caretaker will now possess the house of
behalf of the person living overseas ( the buyer) (Mahove,2021)

Question: Distinguish between cash and credit sales. (10)

In Laing v SA Milling Co Ltd 1921 AD 387 at 398 Juta JA said ‘On a sale of movables followed by delivery
the property does not pass until the purchaser has paid the money or secured the seller for the same, or
unless the sale is on credit.

Cash Sale - When the price is paid, ownership goes to the buyer. Ownership does not pass to the buyer if
the seller has already delivered the item to the buyer but the buyer has not paid the purchase price. If
the buyer has paid the purchase price but has not received delivery of the item, ownership does not
pass until it is delivered.

Credit Sales - the fact that credit has been given is an indication that ownership passes on delivery.
When credit is given, the seller enables the buyer to take possession of the items on the condition that
the buyer pay for them later. For example – when you go to a clothing store and you buy the goods on
credit, which means that you take ownership of the goods immediately and you pay it off over monthly
installments, however in the fact of a car sale – the person takes possession of the goods but will not
become the legal owner until the last installment has been paid

Regenttextbook,2022:65

Question: Provide a discussion on the transfer of personal rights. Include in your

response the requirements and consequences, if any (20)

A claim to a performance that is fundamentally owed under duty is known as a personal right.
The obligation might emerge from a contract, but it could also arise from delict or unjustifiable
enrichment, as well as wills and estates. (Qokolo,2021)
Following that, rights are transferred by cession. Cession may be described as an act of transfer
in which a personal right is transferred from one individual's estate, known as the cedent, to the
estate of another individual, known as the cessionary. This occurs as a result of or in
accordance with an agreement between the cessionary and the cedent. As a result, cession is
more of a transfer agreement than a contract. (Qokolo,2021)

Despite traditio (the simple delivery of possession with the intention of passing ownership) being
comparable or similar to that of cession, unlike tradition a cession does not entail physical
delivery nor does it hold a physical element. However, what is ultimately being transferred is an
incorporeal object, which is accomplished by an underlying obligationary compact between the
cessionary and the cedent. The specific transfer agreement compromises or contains the
converging intents of both the cedent to transfer the right and the cessionary to accept the
transfer, and is the precise equal of the traditio mental element. (Qokolo,2021)

In light of this, it is evident that cession too deals with the law of property. The occurrence of
cession take place in instances where the Creditor A (Cedent) essentially transfer person right
that she or he has against Debtor B onto a third person C(cessionary). The right that is
transferred may possibility be a contractual right however this is not required. C thereafter and
in light of the transfer steps into the shoes of A (Cedent) and takes his/her place as the new
creditor in respect of B. As a result, it is clear that cession has both proprietary and obligatory
repercussions. Conversely, cession implies and provides for the substitution of creditors, which
affects and has an influence on the existing obligation between parties. Alternatively, cession is
used to transfer property from the cedent estate to the cessionary estate. (Qokolo,2021)

As a result, cession is likewise concerned with and deals with the law of duties. This is because
one creditor is effectively replaced for by the cessionary, who is then referred to or known as the
cement. The original duties, however, remain to exist. It is critical to remember that where
cession occurs, the debtor is not needed to be notified, nor is the debtor's consent required to
accomplish a legitimate cession of rights. (Qokolo,2021)

In most cases, cession in respect of personal rights to speak place is required. Such a necessity
might emerge in situations where the holder of a right marries in community of property, dies, or
becomes insolvent, or when the cedent wishes to voluntarily dispose of such a personal right.
When a right holder falls insolvent, the personal right is conveyed by operation of law to the
executor, trustee, or spouse instead of via cession. (Qokolo,2021)

The requirements of a valid cession

The Cedent must be in possession of the right that is being transferred. This implies the Cedent
cannot relinquish a right that he or she does not possess. It must be possible to transfer the
right. Personal rights are the only ones that may be transferred. The parties must intend for the
right to pass from one to the other.The cession's object must be accurately described. This
means that the parties must set out the rights to be transferred in great detail. The cession has
to be legal. (Regenttextbook,2022:66)

Consequences of cession
The right is part of the cessionary's estate, not the Cedent's, and the cessionary has exclusive
authority to collect the obligation. The right cannot be ceded by the Cedent to another person
after it has been ceded, although it can be ceded by the cessionary. The debtor has stopped
performing for the Cedent. The Cessionary will be given a performance. The whole claim,
including all advantages and privileges, is passed to the cessionary.The cessionary also
acquires the right, together with all of its drawbacks.(Regenttextbook,2022:67)

Question: Distinguish between a General Power of Attorney and a Special Power of

Attorney (4) - reword

A General power of attorney (GPoA) is a legal document authorising one person (called an
agent) to act on behalf of another (the principal). The principal grants the agent this
authority because he is unable to make the decisions his/herself. This GPoA is not specific
in nature and the agent would have the authority to make legal, medical, financial and
business decisions (but not real estate). Or A general power of attorney gives broad
authorizations to the agent. The agent may be able to make medical decisions, legal
choices, or financial or business decisions.

A Special Power of Attorney (SPoA) is a legal document authorising one person (called an
agent) to act on behalf of another (the principal). The principal grants the agent this
authority because he is unable to make the decisions his/herself. This SPoA is specific to
property. A special power of attorney narrows what choices the agent can make. You can
even make several different POAs, with different agents for each.

For example, you could create a special power of attorney which only allows your spouse to
make medical decisions on your behalf. You could create another POA which would grant a
business partner the ability to use certain assets to care for your business in the event you
become incapacitated.

(https://www.quora.com/What-is-the-difference-between-the-special-power-of-attorney-
and-the-general-power-of-attorney)

Question: Discuss the duties of an agent in a contract of agency (15) – information is

from the regent textbook – reword if asked

Performance - The agent is responsible for carrying out the mandate or the directions of the
principal. As a result, the agent is obligated to act in accordance with the principal's instructions.

The duty to account to the principal - The agent must keep adequate records of all his costs, as
well as information connected to the agent's company. The principal must be provided all
pertinent papers to review.
Agent must keep his property separate - The agent must not get his own money or goods mixed
up with his principal's money or commodities. The agent has a responsibility to maintain his
property distinct from his principal's.

Honesty - The agent must be truthful to his principal. A fiduciary relationship is one in which a
principal and an agent work together. This means that the agent must be transparent and
honest with his principal and act in good faith. This connection requires the agent to manage the
affairs of the principle "in the interests of the principal and not for his or her personal
advantage," according to the agreement. (Havenga et. al. 2010: 304)

No conflict of interest - Even if he or she acts honestly, an agent may not put himself or herself
in a position where his or her interests clash with those of the principal. If a disagreement
emerges, the agent must promptly notify the principal. If an agent fully discloses his or her
adverse interest to the principal and the principle consents, the agent is not in breach of his or
her duty of good faith.

No delegation of authority- Agents must typically fulfil their duties personally and may not
transfer power to a sub-agent, especially where the principal's identity and personal
characteristics are critical. Delagatus non potest delegare - a person who has been assigned
authority may not delegate to another. This is the legislation that governs the agency
relationship.

Care, Skills and diligence - Agents must use as much care, skill, and effort as is reasonably
necessary to complete their 'mandate.' Each of the above-mentioned responsibilities must be
followed by the agent.

Question: List the responsibilities of the National Assembly as contained in section 42(3)
of The Constitution of South Africa (4)

Under the Constitution, the National Assembly is chosen to represent the people and to
guarantee that government is led by the people. (gov.za,2022). It does this by

 Appointing the president (Gov.za,2022)

 Approving and implementation of laws
 Managing the performance of the executives
 Establishing a national forum for public debate on important topics
(https://www.justice.gov.za/legislation/constitution/chp04.html)

Question: Discuss in detail the contractual capacity of the following persons:-

Minority – a person that is unmarried and are under the age of 18 is seen as a minor. A minor
child has either no capacity or limited capacity which is depending on their age.The law distinct
between minors of below 7 years of age and minor child over the 7 years of age. Below 7 years
- In terms of the law a child that is under the age of 7 has insufficient level of development to
enable him/her to make sound decisions on contractual obligations, in other words the minor
has capacity and will not be able to conclude any contract. Any contract that is entered with a
minor is unforeseeable and voidable. Over 7 years – A minor that unmarried and is over the age
of 7 but below the age of 18 has very limited contractual capacity and may enter a contract with
the assistance from an with the assistance of a guardian that has full capacity to act. The
Children’s Act states that the guardian must assist the child in the administration of the child’s
property and property interest which will include food, clothing, shelter, education etc. It is also
further states that the guardian may create rights and duties on behalf of the minor (Schulze et
al 2014:71)

Mental illness - A person is declared mentally ill by the high court in terms of the Mental Health
Care Act 17 of 2002. If and when a person is declared mentally ill a person's mental state is
such that he or she is unable to understand or appreciate the nature or consequences of his or
her behaviour at a level sufficient to manage a particular affair and make rational decisions, it
stands to reason that such a person cannot form the necessary will to conclude a contract. Such
a person is contractually ineligible. (Schulze et al 2014:79) Should a contract be concluded with
a person that has been declared as mentally ill the contract is voidable without any
consequences. The act further states that a curator needs to be appointed to administer such a
person’s estate and to managed their affairs. This is very similar than a guardian for a minor
who has the capacity to act on their behalf and that no contract is enforceable unless it has
been agreed to by the curator. It is important to note that if a person has been declared mentally
ill but then conclude a contract, he/she can be held liable if the contract was signed when the
person was normal (Schulze et al 2014: 79-80)

Intoxication - A person who is intoxicated by alcohol or drugs to the point where he or she does
not understand the nature and implications of his or her acts, or who is unable to control the
actions, is unable to sign a contract. Any agreement reached when a person is in this situation
is null and invalid. It is important to note that everyone is able to act until they have been proven
not to be able to act. The onus of proof falls on the person to prove that they where intoxicated
at the time of entering the contract (Schulze et al, 2014: 80)

Prodigality - is when a person is incapable of managing his or her own affairs properly as a
result of a proclivity to spend his or her own money in a reckless and excessive way, the High
Court may, on application by an interested party, proclaim such a person a prodigal. The
prodigal's affairs will thereafter be managed on his or her behalf by a curator. The curator will
enter contracts on their behalf. If the Prodigal enters into a contract it will be considered invalid
and unenforceable. A prodigals capacity is limited the same way as a minor( Schulze et al
2014:80)

Insolvency -“The law of insolvency can be described as the totality of rules regulating the
situation where a debtor cannot pay his/her debts, or where his/her total liabilities exceed
his/her total assets. The creditors can then jointly apply for the sequestration for the debtor’s
estate. The purpose of this procedure is to pay at least a dividend to all the concurrent creditors,
instead of satisfying only the claims of a few of the creditors. The main objective is to provide
for the orderly distribution of a debtor’s assets where these assets are insufficient to satisfy all
his/her creditors’ claims.” – (Pepler, 2014)
Insolvency has no effect on a person's ability to act. However, if a person's estate is
sequestrated, some sections of the Insolvency Act 24 of 1936 will have an impact on that
person's capacity to act. Without the consent of the trustee, the insolvent may also not enter into
arrangements that are likely to be injurious to the insolvent estate. In certain cases, the
insolvent's ability to act is restricted. The contract is not immediately void because it can be
approved by the trustee, but it is voidable at the trustee's discretion. The insolvent may enter
into contracts only where there is no disposal of assets of the estate – repairing a persons’ car

Criminal Conviction – In some situations if it was found that a person is convicted of a crime
they are not permitted to enter into certain contracts – example – a person that has been
convicted cannot become a director of a company without the authority of court (Scott et
al,2009:68)

Alien enemy – any contract that is entered with a person that is either living or carrying on
business in enemy territory is prohibited. If it does happen that a contract is entered the contract
will become invalid and unenforceable (Scott et al,2009:68)

Question: Explain the four (4) ways in which an agents authority to act on behalf of
another comes into existence. (23)

Express Authority- This is when the principle gives expressively gives permission to another
person to act as an agent for the principle. There are 3 types of express authourity

Oral Agreement - An oral agreement happens when the agent and the principal establish an
agreement about the contract's terms and provisions verbally, i.e. in an unwritten manner.
(Regent textbook, 2022:70)

General Power of Attorney A General power of attorney (GPoA) is a legal document

authorising one person (called an agent) to act on behalf of another (the principal). The
principal grants the agent this authority because he is unable to make the decisions
his/herself. This GPoA is not specific in nature and the agent would have the authority to
make legal, medical, financial and business decisions (but not real estate). Or A general
power of attorney gives broad authorizations to the agent. The agent may be able to make
medical decisions, legal choices, or financial or business decisions.

Special Power of Attorney - A Special Power of Attorney (SPoA) is a legal document

authorising one person (called an agent) to act on behalf of another (the principal). The
principal grants the agent this authority because he is unable to make the decisions
his/herself. This SPoA is specific to property. A special power of attorney narrows what
choices the agent can make. You can even make several different POAs, with different
agents for each.

Authority implied by law - When there is no legal authority but the law indicates or recognises that
power due to the circumstances, this is known as de facto authority. A person who is found incapable of
managing their own affairs by the law is represented by someone else. This is a simple representation
without a mandate. For example, a guardian's authorization to negotiate on behalf of a child. There are
two instances Firstly- when a guardian acts on behalf of his minor child and Secondly- when curator acts
on a mentally ill person ( Regent textbook 2022:71)

Negotiorum gestio- When the term is translated to English it means management of affiars and is
related to enrichment (Schulze et al, 2014:44)You are away from your house and travelling overseas
without cellphone reception. The geyser burst in your house and your neighbor decides that he will call
out a plumber to replace your geyser. The neighbor has not obtained your permission to do this or act
on your behalf. The neighbor then pays the plumber for call out fees and the geyser replacement when I
return from Holiday. The neighbor is called a Negotiorum gastor. So in other words, Negotorum gestio
means when someone acts or does something on behalf of another person without the consent of the
individual who is not there to offer consent. (Regenttextbook,2022:71)

Ratification - The 'principal' is not responsible if he or she professes to act on behalf of another
without authorisation. However, if the principal ratifies the specific transaction completed by
the'agent,' the principle becomes responsible. So when the principle validates the transaction as
mentioned above it is now considered as valid from the beginning which then means it is valid
from the beginning. The person who ratifies it must have knowledge of the particular jursistic act
which is being ratified. Ratification is a unilateral juristic act which means that the ratifier does
not need the approval of the other parties to the transaction, namely the third party and the
person who completed the transaction on the ratifier's behalf. (Schulze et al 2014:313)

Question: Discuss the history of South African Law (10)

South Africa has a hybrid legal system, with a civil law system inherited from the Dutch, a
common law system derived from the British, and a customary law system inherited from
indigenous Africans intertwined (often termed African Customary Law, of which there are many
variations depending on the tribal origin). (Wikipedia,2022)

The Cape was given to Britain in 1806; nevertheless, it was decided that Roman-Dutch law
would continue to apply. English procedural law, on the other hand, came to be used in
proceedings before the British monarch. Following the massive influx of English settlers in 1820,
English became the official language at the Cape in 1827, and a Charter of Justice was
introduced, establishing a Supreme Court and requiring English qualifications for advocates and
judges, it was clear that English law would have an impact on common law.
(Regenttextbook,2022:7)

The English influence is most noticeable in procedural features of the legal system and
techniques of adjudication, whereas the Roman-Dutch impact is most visible in substantive
private law. South Africa uses English law in criminal and civil process, corporation law,
constitutional law, and the law of evidence in general, whereas Roman-Dutch common law is
used in contract law, tort law, law of persons, law of things, family law, and other areas. Another
thread has been added to this weave with the start of the interim Constitution in 1994 and its
successor, the final Constitution, in 1997. (Wikipedia,2022)
The introduction of the Interim Constitution on April 27, 1994, was one of the first stages in the
formation of a post-apartheid state, and it had a dramatic influence on South Africa's legal
system. Importantly, the interim and 1996 Constitutions (written and accepted by an elected
Constitutional Assembly) replaced parliamentary sovereignty with constitutional supremacy,
implying that the Constitution supplanted Parliament as the ultimate source of power. The Bill of
Rights was created at the same time to protect human rights, putting a stop to decades of
oppression. The Constitution establishes checks and balances between the legislative, the
executive branch, and the judiciary to guarantee accountability, responsiveness, and
transparency. The courts, which are formed by or according to the Constitution, have judicial
authority. (unknown,2013)

https://oxfordbusinessgroup.com/overview/adapting-change-brief-history-south-africa
%E2%80%99s-legal-development

https://en.wikipedia.org/wiki/Law_of_South_Africa

Question: Discuss the requirements for proving duress by a party who wishes to a
contract aside (15) (Turn into discussion)Information was just changed for handbook

Duress is a contract defence. Duress is the unlawful use of pressure on a person in order to
compel that person into entering a contract that he or she would not otherwise enter. The
purposeful use of force or fear of force to coerce a contract is known as duress. It can be
physical or mental coercion, but it must be to the point that the other person's free will or
freedom of choice is violated. This signifies that the person has no other reasonable option
except to enter into the contract.

There is a number of requirements that has to be proven for a contract to be cancelled under
duress namely:

 A party threatens to physically harm another person, a member of their family, or their
property. Futher to that Fear must be such that it would overcome a rational person's
resistance in the same situation. A reasonable fear of violence or harm exists if the
threat is directed at the threatened person's or his or her immediate family's life, limb, or
freedom, or at the unlawful destruction of his or her property (Schulze et al 2014:63)
 The danger must be one of an impending or unavoidable devastation. The inquiry will be
whether the threat could not have been avoided if the person had not agreed to the
contract. The amount of time that occurs between when the threat is issued and when
the contract is signed can help determine whether the threat was immediate or not.
(Schulze et al 2014:63)
 Threats of danger or violence must be prohibited unlawfull. If a contracting party
threatens to get a better performance than he or she is legally entitled to, the threat is
valid. (Schulze et al 2014:63)
 The duress must be the responsibility of a contracting party or someone acting on
his or her behalf. (Regenttextbook,2022:39
 The threat must compel the individual who is being threatened to complete the
contract. As a result, the threatened person's dread of impending danger must persuade
 him or her to sign the contract or to sign it on certain terms. A person who finishes a deal
notwithstanding the threat for some other reason cannot claim duress. (Schulze et al
2014:63)

Question: Discuss in detail the essential element of possibility of performance (14) –

textbook Chapter 6 83- 88

The requirements that the agreement must be possible consist of two elements name Legal and
Physical possibility

Legal Possibility

Requires the agreement, as well as the rights and obligations generated, must be authorised by
law . When the conclusion of a contract, or the cause or object of its existence, or the rights and
obligations agreed upon, are prohibited by common or statute law, the contract will be unlawful
or illegal. ( Schulze et al 2014:83)

An agreement can be illegal in common law if it is legally impossible to carry out, or if it is

against good morals, public policy, or public interest. To a considerable degree, the ideas that
underpin these notions are similar. The weighing and balance of a number of interests is
frequently required for determining common-law legitimacy. In general, a contract cannot be
lawfully fulfilled if the contract's rights and obligations cannot be carried out in conformity with
general legal principles, For Example – it is impossible to buy and sell something that is not
capable of being privately owned. Further to this If the contract itself, its aim, or the rights and
responsibilities agreed upon are in conflict with the community's idea of what is proper and
decent, the agreement will be against the community's good morals. Various contracts are
illegal under statutory law because they are prohibited by a Parliamentary Act, a provincial
legislation, or a municipal rule – generally because they are deemed damaging to society. An
arrangement that is illegal or unlawful under common law is sometimes regulated by legislation
in order to broaden the ban or impose criminal penalties. ( Schulze et al 2014:84) Firstly- The
contracts include agreements involving the administration of justice whereby it misuses the
administration of justice, Secondly – Contract involving crimes and delicts whereby if an
agreement is to commit a crime it is contratry to public policy and is legally unenforceable,
Thirdly- Contracts affecting the safety of the state whereby an agreement between a person and
a enemy of state is contratry to public policy and is unenforceable, Fourthly – A contract
restraining a person’s freedom to participate in legal transactions, Fithly – a contract that is
restraining a person’s freedom to participate in trade and lastly gambling contracts (Schulze et
al 2014: 85-87)

Consequences of Illegality

With a few exceptions, an unlawful or illegal 'contract' is invalid under common law. The contract
gives neither party any enforceable rights or obligations. The impact of statutory illegality must
be assessed in light of the statute's language. If the legislature expresses its objective by
legislation that an agreement made in violation of a ban is null and invalid, a proposed contract
will be void. However, such specific terms are not always included, making it difficult to establish
the impact of a breach on a contract. (Schulze et al 2014:89) When an agreement is void due to
illegality, neither party may bring a claim against the other for promised performance based on
the void agreement.

Possibility and Certainty of Performance

Another prerequisite for the construction of a contract is that the fulfilment of the agreement's
rights and obligations must be objectively achievable at the moment of the contract's
completion. It is also necessary for the performance to be certain or ascertainable, as it would
be impossible to accomplish anything that has not been determined and is not determinable.
(Schulze et al 2014:90)

A party is generally excused from performing contractual obligations if it becomes physically or

legally impossible for that party to do so. There are a number of different impossibility of
performance which will can include Firstly - Objective Impossibility which occurs when the
contract is impossible to perform by any of the parties. Secondly Subjectively Impossible when it
cannot be performed by only one contracting party. It is important to note the Subjective
impossibility does not render the contract void. Impossibility may be due to vis major or causus
fortuitous. Vis Major refers to acts of Nature or acts of God whereas Casus Fortuitus refers to
inevitable acts of an irresistible force such of acts such a governments, death or plague.

Divisibility of performance - The divisibility or indivisibility of a performance is also important

when deciding if it is doable. There is no legitimate contract if an indivisible performance is
objectively unattainable. If you're simply interested in a part of a divisible part. Page 91 for more
information

Determined and ascertainable performance - When the nature of the performance is uncertain
and ambiguous, such as when the performance is not decided or ascertainable, it is difficult to
execute under an agreement. The right of a contracting party to pick or designate a specific
performance may decide whether a performance is determined, ascertainable, or indeterminate.
The right to select or identify a specified performance by the contracting party is a contractual
duty based on the exercise of a choice or formula. Because the method in which the right of
choice or identification is to be exercised may vary from contract to contract, the law has
distinguished many sorts of responsibilities based on a right of choice. Page 92 for more
information

Question: Distinguish the requirements for undue influence from the above (13)

When one person has the ability to convince another's decisions because of their relationship,
this is known as undue influence. Due to increased status, superior education, or emotional
attachments, one of the parties is frequently in a position of control over the other. The more
powerful person utilises this advantage to force the other person to make decisions that may not
be in their best interests in the long run.
Undue influence is a fairness principle that prohibits one person from abusing a position of
power over another. Because one party is unable to freely express their independent will due to
the disparity in power between the parties, one party's consent may be void. When exercising
excessive influence, the influencing individual is frequently able to exploit the weaker party. In
contract law, a party claiming to be the victim of undue influence may be able to void the
contract. This is different to duress because there is no need for a threat. (Schuleze et al,2014:
68) If there is a particular relationship, it is necessary to investigate the relationship's potential
for abuse. A court will consider if the 'stronger' or more intellectual party took advantage of the
other's ignorance, immaturity, illness, ignorance, or mental dependence. Abuse of this
connection undermines the victim's independent will, making it more susceptible to the other
party's control. The contractual party would not have completed the contract if the relationship
had not been abused. (Regenttextbook,2022:40)

The requirements of Undue Influence is

 The party who is accused of using undue influence on the victim must have gained
power over the victim. (Schulze et al 2014:68)
 That party must have utilised his or her power to erode the victim's resistance, making
the victim's will vulnerable. (Schulze et al 2014:68)
 The victim's influence had to have been used unethically to persuade him or her to
consent to a transaction that the victim would not have engaged into of his or her own
free choice and that was to the victim's detriment. (Schulze et al 2014:68)

Question: List the duties of a principal in a contract of agency (5)

Payment of the agents fees - Either a paid or unpaid agency relationship exists. If the
remuneration conditions are not specified in the agency agreement, the principal is required to
pay the agent appropriate compensation.

Payment of the agents expenses - The principal must compensate the agent for reasonable
expenses incurred in performing her obligations. Travel, food, housing, and other incidental
expenditures are all covered by reasonable reimbursement.

Payment of Losses – The agent must be reimbursed by the principlefor any losses that has
taken place during the time that the mandate were carried out. This is based on the fact that if
the agent did not have to carry out the mandate, they would not have incurred any losses

Question: Explain the effect of sequestration on the property of the insolvent (12)

All movable and immovable property of the debtor located within the Republic of South Africa
before and after the sequestration process fall within in the insolvent estate. The property
which an insolvent acquired between sequestration and rehabilitation will also form part of the
insolvent estate and can be used to pay the debts that is owed to creditors, unless the property
is excluded in accordance to the Act 24 of 1936 (Standard bank of South Africa v Sauer +
Another 18273/2018)
The debtors basic needs such as clothing, bedding, pension and compensation for personal
injuries, Unemployment Insurance fund monies, property that belongs to 3 rd party, Property that
is not located in South Africa etc are some of the property that are excluded from the insolvent
estate that can be sold to pay for debts (Schulze, 2014:473 - 474)

Add more information

Question: Discuss the aspect of rehabilitation of an insolvent (8)

Rehabilitation mean that the insolvent’s status is restored, the individual will have no debt but will
have a bad credit record. If we look at the example, if a person is under sequestration or is
declared insolvent, one of the factors we have discussed it that the person cannot act in the
capacity of a director, however after the rehabilitation he can now occupy the position of a direct
(Schulze, 2014: 484)

Rehabilitation takes place in either – it is an application that is submitted to the Master or it

automatically happens after 10 years from the date of the provisional sequestration. A creditor
can apply to the court that the automatic rehabilitation does not take place (Schulze, 2014:484)

One of the purposes of sequestration is to enable the debtor to overcome his or her financial
difficulties and to make a fresh start. A partnership cannot be rehabilitation however the partners
that are part of the estate that was sequestrated can be individually rehabilitated (Schulze,
2014:484)

If the composition of no less than 50c in the rand, they may immediately seek an order of
rehabilitation once the certificate from the Master has been obtained that the creditors accepted
the offer of composition in which payment has been given and/or security been given of not less
than 50c in the rand of every concurrent claim against the estate (Schulze, 2014, Pg 484)

The court can use their discretion whether or not they want to grant rehabilitation, it is not a given
if the application is made to court (Schulze, 2014:484)

Rehabilitation has some benefits to the individual whereby their status is restored, they are free
from debt (except if debt occurred because of Fraud) (Schulze, 2014:484)

It is important to note that where an offer of composition has been accepted by the creditors, the
insolvent may be entitled to rehabilitation immediately (Schulze, 2014:484)

Question: In which arm of government are the powers of the state recognized (3)
The Executive

The President as the head, The Deputy President and Ministers. The president appoints the
deputy president, ministers he then furthers assigns them powers and functions however he
also has the right to dismiss them(Gov.za,2022). There is no limit to the amount of ministers the
president is allowed to choose. Most of the ministers are chosen from inside the assembly
however he is allowed to choose two from outside the assembly (Gov.za,2022)

The President as the head of the executive cabinet is responsible for approval of the Bill of
rights and the rest of the cabinet is responsible for implementing the bill and have to take have
to awnser to members of parliament if there any discrepancies . The bill can be draugted by any
of the member of the National Assembly, minister or a committee of the National Assembly. It is
further the duties of the Executive cabinet (Gov.za,2022)

The Legislature (Parliament)

National Assembly - Under the Constitution, the National Assembly is chosen to represent the
people and to guarantee that government is led by the people. (gov.za,2022). It does this by

 Appointing the president (Gov.za,2022)

 Approving and implementation of laws
 Managing the performance of the executives
 Establishing a national forum for public debate on important topics
(https://www.justice.gov.za/legislation/constitution/chp04.html)

National Council of Provinces - The NCOP is tasked by the Constitution to guarantee that
provincial concerns are included in national policymaking. This is accomplished through
participating in the national legislative process and providing a national platform for the
discussion of provincial concerns. The NCOP also has a unique role in promoting cooperative
government and intergovernmental relations ideals. It guarantees that the three branches of
government work together to carry out their constitutionally mandated responsibilities while
without infringing on each other's domain of competence. This guarantees that on topics of
concurrent competence, there is synergy between the sectors. (Parliament,2022)

The Judiciary (Courts of Law)

Is also known as the courts of law. The judiciary consist of a number of courts of law that is
responsible for the interpretation, implementation and application of the law Section 166 of the
Constitution sets out a strict hierarchy of courts. (Regent Textbook 2022:12). In the name of
the state, the judiciary interprets the law, resolves disputes, and implements the
Constitution. South Africa's judicial authority is vested in its court system, as well as the
judges and magistrates who sit in these various courts. (civicasacademy,2022)

The Constitutional Court (Regent Textbook,2022:12)

The Supreme Court of Appeal (Regent Textbook,2022:12)

High Court (Regent Textbook,2022:12)

Magistrate Court (Regent Textbook,2022:12)

Question: A contract will only come into existence if consensus is reached between the
parties on the rights and duties of the agreement. Consensus may be defined as an
understanding between the parties that serious and binding legal relations will result
from the agreement. The offer to the contract, and to be bound by the contract, must be
firm and not a tentative statement of willingness to do business. Explain Offer &
acceptance in consensus. (15)

Every contract begins with one party (offeror) making an offer that is accepted by the other
(offeree). A proposal that demonstrates a person's desire to become a party to a contract on the
terms stated is known as an offer. When another individual accepts the offer, it contractually ties
both of them.

Requirements of an offer – Change from regent textbook 27

The following requirements must be met in order for a valid contract to be formed

 Be consistent with the contract's basics and communicate effectively.

 Be firm and serious;
 Be conveyed to the individual with whom a contractual connection is intended.
 Defining all terms that must be agreed upon, rather than just a proposal on topics to be
discussed or resolved later.
 The offer must be made with the purpose of the offer or becoming legally obligated if the
offeree accepts it.
 The offer must be completed in its entirety.
 Both the offer and the acceptance must be precise and explicit.
 The offer and acceptance may be made explicitly (in writing or orally) or implicitly (in
writing or orally) (by conduct).
 The offer must be made or addressed to the individual or individuals.
 The acceptance and offer must be conveyed.

Duration of an offer

Expiry - If an offer is not accepted within a certain amount of time, it becomes invalid. To put it
another way, if an offer is open for a certain amount of time, it will close at the end of that time.
For instance, 'A' offered to sell a car to 'B' for a period of ten days. After 10 days, 'B' is no longer
permitted to accept the offer. If no time limit has been set, the deal will expire after a reasonable
period of time. (Unknown,2017)

Revocation - An Offer to Purchase becomes a legally enforceable sales agreement as soon as

the seller signs it. The buyer can retract the offer before the seller accepts it, as long as the offer
is not specified to be 'irrevocable' for a specific amount of time and it is brought to the seller's
knowledge within that time frame. (Unknown,2017)

Rejection - If the seller rejects the offer, it becomes null and void immediately. After rejecting an
offer, the seller will not be able to reverse their choice and accept it. If the seller counters the
buyer's offer, it is deemed a rejection of the buyer's original offer, according to Goslett. "A
counter offer is when the seller crosses out the amount the buyer has placed in the offer and
writes in a greater figure and initials the change," Goslett says. "The offer fails if the buyer
determines the sum is too high and does not accept the counter offer." The seller will
subsequently be unable to accept the earlier offer made by the bidder. - A new offer has to be
made -(Unknown,2017)

Counter –offer - When the offeree rejects the first offer but makes a counter-offer, the original
offer is replaced by the counter-offer.(regenttextbook,2022:28)

Death -The offer will automatically lapse if the buyer or seller dies before it is accepted. All rights
and obligations resulting from the contract will be conveyed to the dead estate if the offer has
been signed and accepted. Unknown,2017)

https://www.privateproperty.co.za/advice/property/articles/when-does-an-offer-to-
purchase-lapse/5741

Acceptance – change from regent textbook

Acceptance is defined as the offeree's verbal or inferred reaction showing his desire to be
contractually bound by the conditions of a given offer. To be bound, the offeree must announce
their desire to be bound. Silence does not imply consent unless there is a legal obligation to
speak. A responsibility to talk may arise as a result of the parties' past interactions (Scott et al.,
2009:89).

For an acceptance to be regarded acceptable, it must meet three conditions.

• The acceptance must be informed to the offeror, and it must be made in accordance with the
conditions of the initial offer rather than outside of them. An acceptance that is conditional is not
considered to be an acceptance.

• An offer must be accepted according to the offeror's instructions. To put it another way, the
offer must be accepted in the manner in which the offeror specifies.

Question: Discuss the distinction between mistake and misrepresentation in a valid

contract (21) – add more information because of the high amount of marks

 Misrepresentation (9) A misrepresentation is a false statement or representation made

by one of the contracting parties either before or at the end of the contract about an
existing fact or condition of affairs with the intent and purpose of enticing the other party
to enter into the contract. The deception might also be about the contract's subject's
attributes or characteristics. A Contract due to misrepresentation will become voidable if
the following can be proven (Schulze et al 2014:62)
 o The representation was false in fact
o The representation was made with the intention of inducing him to contract
o The representation was material
o He/she contracted on the faith of the representation.
o The misrepresentation must have been made by one contracting party to the
other party.
o The misrepresentation must be unlawful.
o The misrepresentation must have induced the contract. (Regenttextbook
2022:38)
 Mistake (4) - A mistake is a misinterpretation of a contract by one or more parties, which
can be used to void the contract. Unilateral error, mutual mistake, and common mistake
are the three categories of contract mistakes recognised by common law. When only
one party to a contract makes a mistake on the terms or subject matter, this is known as
a unilateral error. Courts will maintain such a contract unless it is proven that the non-
mistaken party was aware of the error and attempted to profit from it. A contract can
also be declared void if the contractual party's identity has been misrepresented. When
both parties to a contract make a mistake about the terms, this is known as a mutual
mistake. Each person feels they are contracting to a different object. A common mistake
is where both parties hold the same mistaken belief of the facts. Both Mistake and
Misrepresentation are options that can be used by both parties to prove that they
contract was not what they thought it would be. If the conduct of the parties do not fulfil
the standards of a mistake, the contract will be valid. (Schulze et al,2014:66)

Question: Elaborate on the three orders of execution of the contract which may be
obtained from a court in dealing with a breach of contract. (17)

Refer to breach of contract of assignment – Specific Peformance, Reduced performance and

prohibitory interdict

Question: The merx which is the object of a sale in a Sale Agreement is classified into six
categories, evaluate these to enhance understanding and communication of this
requirement. (17) –

Movables – The are all objects that are not property or attached to property. These are things
like equipment, tables, chairs, cars, electricity etc. All the goods that require capital investments
and objects that are used to manufacture products or services are seen movables

Immovables – are the property or those objects that are attached to the property or any limited
real rights attached to the land. A plot is the object that is sold, but the building is a permanent
structure on the plot. The building is sold with the land because it is permanently attached to the
land

Specific Things – a some cases the object sold is specified, for example – someone buys a
specific building or a specific ice machine. In these cases the identity of the specific product will
have an impact on the value and the price of the product sold
Generic Things – some cases where the identity of a good sold is not important but the type of
product sold is important. For example – where a dealership buys a number of cars or a farmer
or where a Coca Cola buys a tonnage of sugar

Corporeal and Incorporeal things – When a product is sold it can consist of both Corporeal
things and incorporeal things. Corporeal things are tangible objects like Trucks, Wine,
Computers, Printers etc where are incorporeal things are Shares, Debits, credits, copy right to
software. When a phone is sold the product consist of both Corporeal (Hardware) and
Incorporeal ( Software)

Things in existence now or in the future – The product being sold does not have to exist yet,
as long as it is stated in sufficient detail in the sale agreement. Example – where a company
manufactures tinned food but the main ingredient is currently out of stock. The manufacturer still
has to deliver the goods at the agreed or same price to the buyer

Regent textbook page 51-52

Question: An acclaimed and brilliant Attorney Mr Legal Eagle advised his son John never
ever to sign a suretyship agreement. He maintained that it was a very onerous contract to
enter into and was challenging to get out off. Tranquil John didn’t see the need for his
father’s stresses over suretyship agreements. He casually approaches you to ask about
‘any room’ for him to worm his way out of the agreement. Distinguish between the
defences that are available to a surety. (16)

The Benefit of Excussion (Beneficium ordinis sea excussion)

If a Creditor seeks payment from the Surety for the execution of secured obligations, the Surety
may demand that the Creditor first excuse the Debtor which means the Creditor must claim and
recover from the primary Debtor before seeking payment from the Surety. In the situation where
the Surety waives this protection, the Surety will no longer be entitled to demand that the
Creditor first exonerate the Debtor before enforcing the Suretyship duty against the Surety. It is
further important to note that when a Surety commits himself as a co-principal debtor, he or she
effectively forfeits the benefits of excussion and division. Furthermore, when the Surety pledges
himself as a co-primary Debtor, the debt becomes enforceable at the same time as the principle
obligation. (Kotze,2020)

https://www.golegal.co.za/drafting-suretyship-creditors/

The benefit of excussion is not available to surety where (Add more from page 81)

 The debtor estate has been sequestrated

 Where the surety has been renounced
 The Principle debtor is manifestly unable to pay
 The principle debtor is outside the borders of South Africa and are have no assets in
South Africa
  The Principle debtor has a personal defense not available to the surety

The Benefit of division (Beneficium divisions)

This is applicable when there is more than one surety for a single debt of the principle. It is
important to note that all co-sureties are liable jointly and serverally on the Suretyship. If a
creditor seeks payment for the entire debt or a proportionate piece of it, a co-surety may request
that the debt be split among the sureties so that each is only responsible for his or her
proportionate share. (Kotze,2020)

The benefit may be lost where (More examples on page 82)

 Co-suriets are outside the borders of South Africa and cannot be found
 Co-surety is declared insolvent before the commencement of the claim
 Co-surety waives his right to the benefit ( Regent textbook page 82)

The benefit of cession of Action (beneficum cedendarum actionum)

A surety who has previously paid according to his suretyship duty is eligible for this. He is
entitled to a cession of action from the creditor, allowing him to pursue the primary debtor as
well as co-sureties. ( Regent textbook,2022)

The right to recourse against the principle debtor

The surety or co-surety has a right of recourse against the primary debtor as soon as the
obligation is settled. He is entitled to the money he paid, as well as any harm, loss, or
expenditure suffered by the surety as a direct result of the debtor's failure to meet his
obligations, including interest paid to the creditor. ( Regent textbook,2022 page 82)

The Right of the surety to recover

Once the amount has been paid to the creditor, the surety might begin legal action against co-
surety or the primary debtor. He had to make a proper payment, which meant he had to pay the
correct creditor. The surety must not have neglected to create, or make accessible to the
debtor, a defence. The debtor must be notified that the creditor has been paid. ( Regent
textbook,2022 page 82)

Recovering without paying the debt

There are a few circumstances in which the surety may collect from the primary debtor even
though he has not paid the creditor.

 When a court order has been obtained against the surety, the surety is entitled to
immediately recover the whole sum from the debtor, even if he has not yet paid the
obligation.
 When the debtor and surety have agreed that the debtor would either acquire the
surety's discharge within a set amount of time or pay the debt when the surety is called
upon to do so.
  When the major debtor's assets are sold in such a way that the surety is alerted.

The right of contribution from co-sureties

Co-sureties are two or more sureties in respect of the same obligation who are sureties for the
same primary debtor. even though they have issued their assurances in distinct instruments or
papers, independently of one another, at different periods, or even without each other's
knowledge.

Co-sureties are not sureties who each guarantee a piece of the debt. The claim to contribute
from a co-surety is based on the fact that by paying the debt, the co-surety has released the
other co-sureties from their obligations and has benefited them at his expense. Proceeding
against a co-surety does not necessitate a cession of action. Other co-sureties can only be sued
for their pro-rata part of the obligation, not for the whole amount owed.

Question: Discuss the methods of winding up of a Company (14)

Companies and close corporation companies are not considered debtors under the Insolvency
Act and hence cannot be sequestrated. When a business or a close corporation becomes
insolvent, it may be wound up under the Insolvency Act or the Close Corporation Act, depending
on the circumstances. A liquidator is in charge of winding up a company or corporation under
the supervision of the Master of the Court. It's crucial to remember that a corporation might be
wound up for reasons other than insolvency, such as if the firm no longer intends to operate.
The Companies Act 71 of 2008 governs this. (Schulze et al 2014:485)

There are two methods of winding up a companies name Voluntary Winding up and Compulsory
Winding Up

Voluntary Winding Up

This can either be members’ or a creditors voluntary winding up. Both instances of winding up is
initated in the same way namely by registration of resolution of members. It is important to note
that can only when it’s a members voluntary winding up if there is no creditors or if company has
given secuirity that all the creditors will be paid within 12 months. If this is not the case, the
members cannot use the voluntary winding up method. When it is a creditors winding up it does
not mean that the creditors where involved in the winding up but it means that the creditors will
have a say in the winding up process. The consequences of winding up in these two scenarios
are exactly the same as compulsory winding up the only difference is that the court is not
involved in the process. It is important to note that a voluntary winding can be changed to a
winding up by the court. The process of voluntary winding up will commence when the
resolution is register at the Registrar of Companies (Schulze et al 2014:485)

Compulsory Winding up

A application of Compulsary winding up can be initiated by either – the company, the member or
one of the creditors and in some instances the Master or the judicial manager can apply Notice
of the winding up must be given to the company( unless the company is the applicant), South
African Revenue Services, employees of the company, the registered trade union if they are
representing any of the employees. The court will first grant a provisional order and then
postpone the case in order to give other parties involved to oppose the final order. Once the
final order is made, the winding up will be dated or have commenced when the order was first
lodged/presented at court. Copies of provisional and Final Orders has to presented to all the
parties – SARS, the employees, the trade union if they are representing any employees. The
Companies Act provides the grounds which has to followed for winding up a company by court.
One of the important grounds to mention is the ground that an company is unable to pay its
debt. This ground cannot be applied for by the company or its members but by the creditor.
(Shulze et al: 2014:485-486)There are 3 circumstances in which a company will be deemed to
be unable to pay their debt namely

 Failure to respond to a demand of payment

 When a warrant of execution has been granted, however the sherrif of the court could
not find enough property to attached to cover the debts
 It is proven that the company is unable to pay their debts

Question: Suretyship is an accessory contract whereby the surety agrees to pay jointly
and severally with the principal debtor, the whole or part of an obligation due by the
principal debtor to the creditor. The principal debtor remains bound to the creditor in
terms of the principal obligation, and the surety is bound to the creditor in terms of his
contract of suretyship. Once the principal obligation ends, the suretyship obligation is
terminated.

3.2 Explain the “continuing guarantee” (7)

A Guarantee that extends to a series and multitudes of transactions is known as a “Continuing

Guarantee” in a contract. These assurances have a predetermined time limit and time frame, or
are for a certain period of time, such as a month, a year, or a specific period of time. There
might be instances where the guarantee is indefinitely. It is also important to note that a
guarantee can also have a limited amount. Continuing Guarantee does not come to an end after
the discharge of a single promise or repayment of single debt or transaction. It is the
responsibility of the Surety to ensure that the obligation can be restricted in time or amount
according to his desires and interests. The Surety is accountable for any unpaid and remaining
debt at the conclusion of the guarantee. (Unknown,2021)

Example – in the regent textbook page 80

https://blog.ipleaders.in/continuing-guarantee-nature-modes-revocation/

3.3 Discuss the operation of the beneficium ordinis sea excussionis (15)

If a Creditor seeks payment from the Surety for the execution of secured obligations, the Surety
may demand that the Creditor first excuse the Debtor which means the Creditor must claim and
recover from the primary Debtor before seeking payment from the Surety. In the situation where
the Surety waives this protection, the Surety will no longer be entitled to demand that the
Creditor first exonerate the Debtor before enforcing the Suretyship duty against the Surety. It is
further important to note that when a Surety commits himself as a co-principal debtor, he or she
effectively forfeits the benefits of excussion and division. Furthermore, when the Surety pledges
himself as a co-primary Debtor, the debt becomes enforceable at the same time as the principle
obligation. (Kotze,2020)

https://www.golegal.co.za/drafting-suretyship-creditors/

The benefit of excussion is not available to surety where (Add more from page 81)

 The debtor estate has been sequestrated

 Where the surety has been renounced
 The Principle debtor is manifestly unable to pay
 The principle debtor is outside the borders of South Africa and are have no assets in
South Africa
 The Principle debtor has a personal defence not available to the surety

Question: Point out the duties of a Trustee to an insolvent estate. (6)

As soon as an estate is sequestrated the master may appoint a provisional trustee. With a few
exceptions the provisional trustee has the same powers and duties as a trustee. At the first
meeting of the creditors the creditors elect a trustee and this election is confirmed by the
master. The duties of a trustee are inter alia to take control of the estate, recover the debts due
to the estate, realise the assets of the estate and divide its proceeds among the creditors. The
trustee must administer the estate in accordance with the orders of the creditors and has to
report to them. (Bronwyn)

Regent, 90
Question- Identify and explain the impact of the 5 forms of breach of contract

Mistake

Misreprentation

Puffing

Duress

Undue influence

Question: You are a horse trader and you have been storing several of your highly priced
stallions in a stable. You are woken by a mobile call alerting you to a fire that has broken
out in one of the stables. You rush over only to find that the fire was contained to one
stable and that two of your horses have perished in the fire. You realise that you have a
written contract of sale for one of those horses and that the buyer is scheduled to come
over tomorrow to collect the horse. Your past experience tells you that in order for a
contract to be considered valid, the contract must be possible to perform. You are
seriously concerned about the possibility of the sale contract being invalid. In a haste,
you quickly google “physical impossibility and legal impossibility of performance in
contracts.” Record your findings to discuss with the buyer. (20)

A party is generally excused from performing contractual obligations if it becomes physically or

legally impossible for that party to do so. There are a number of different impossibility of
performance which will can include Firstly - Objective Impossibility which occurs when the
contract is impossible to perform by any of the parties. Secondly Subjectively Impossible when it
cannot be performed by only one contracting party. It is important to note the Subjective
impossibility does not render the contract void. Impossibility may be due to vis major or causus
fortuitous. Vis Major refers to acts of Nature or acts of God whereas Casus Fortuitus refers to
inevitable acts of an irresistible force such of acts such a governments, death or plague.
(Regent textbook)
Supervening Impossibility of performance happens when that after a contract has been
concluded the performance becomes objectively impossible. The impossibility must not be due
to the fault of either of the parties involved in the contract but the non-performance must be as a
result of an external factor such as an Act of Nature, war or death. ( Schulze et al 2014:146)
The fact that the legal consequences differ from case to case it is important to distinguish
between Supervening impossibility of performance and initial impossibility of performance
because if the contract is impossible to perform due to one of the parties, it becomes a breach
of contract and if the performance is impossible because of Supervening Impossibility the
contract does not come into being ( Schulze et al 2014:146)
As a general rule Supervening impossibility of performance extinguishes the obligations of the
contract. It is further important to note that the general rule is not applicable to contracts where
one of the parties has agreed to assume responsibility for supervening impossibility ( Schulze et
al 2014:147).
The impact of supervening impossibility of performance is that: I the debtor is excused from
performing for as long as performance is impossible; and (ii) the counterparty's equivalent
obligations are discharged. This means that the counterparty will not be able to sue for breach
of contract (including cancellation). However, if performance is interrupted for a period of time
that makes it unreasonable for the creditor to continue with the contract, the creditor has the
right to cancel it. The nature of the contract and the surrounding circumstances will determine
what constitutes an unreasonable length of time.
Another important aspect of supervening impossibility to be taken into consideration is the fact
that when subjective impossibility to perform takes place it does relieve him/her of her duties It
is only objective impossibility that has this consequence.
Legality
It is required that a contract must be legal and must be possible to perform. The general rule is
that all agreements are legal or lawfull unless it is prohibited by statute or common law

Common Law - A contract that, in the view of the court, is against good morals, public policy, or
contra bonos mores (i.e., enforcing the contract would go against what the court deems to be
the moral stance of the law) is legally impossible to enforce. The term "public policy" is a bit of a
misnomer. On a case-by-case basis, courts must assess what societal ideals are acceptable.
The Constitution must be followed while making public policy. The essential constitutional ideals
of human dignity, equality, and the promotion of human rights and freedoms are anchored in
these values (Scott et al., 2009:64).In the absence of the supervening impossibility clause in a
contract, the parties can rely on the common law supervening principle may absolve the non
performing party of liability

I am further of the opinion due to the fact that is a Supervening Impossibility because the
stables caught fire and it was not done caused by one of the parties that is involved in the
contract, the contract will be terminated and there is no legal implication due to the fact that the
contract was already in place at the time of the performance

https://www.whitecase.com/publications/alert/south-african-macorporate-and-commercial-covid-
19

Discuss the consequences of the following on the validity of a contract ( Bronwynne

Awnser)
 Misrepresentation (9): “Misrepresentation occurs where a false statement of fact is
made by one person to another, before or at the time of the contract, of some matter or
circumstance relating to the contract, with the intention of inducing the latter to contract,
and which actually induces him to do so (Scott et al., 3009:94). There are a number of
requirements which need to be met before misrepresentation can be proven, namely:
the representation was a false fact; it was made with the intention to induce the other
party; it was material; the wronged person acted on the faith of the representation; the
misrepresentation must have been made by one contracting party to the other
contracting party; it must be unlawful; it must have induced the other contracting party.
As long as the wronged party is able to prove the aforementioned requirements, the
contract will be voidable and allow the wrong party to set the contract aside (Gibson,
2003:5).
 Mistake (4): “Mistake refers to a misunderstanding by one or more of the parties to a
contract about some aspect of the proposed contract or a fact that is material to the
contract or a legal rule” (Regent, 2016:37). The implication of this is that one or both of
the parties was of the view that a term of the contract or the contract in its entirety for
example, was not what they thought it was. The presence of a mistake means that there
was no proper meeting of the minds or consensus, however, there are a number of
requirements which need to be met before a mistake can be proven. The onus of
proving that a mistake exists is on the party who claims the existence of a mistake, and
he/she must prove all of the following requirements: the mistake must relate to a fact or
a legal rule or principle; such mistake must be material (essential, important and relevant
to the contract); the mistake must be reasonable in terms of which reasonableness is
tested objectively. The implication of all of the requirements being met is that no valid
contract came into being, and thus the contract would be void and therefore
unenforceable (Regent, 2016:37).
 Puffing (4): Puffing or puffery refers to “the practice of making exaggerated
commendations especially for promotional purposes”. There is no direct implication for
puffing as a seller or a contracting party cannot be held liable for statements which
amount to an exaggeration, and such exaggeration cannot be deemed to be an express
warranty (Merriam Webster - https://www.merriam-webster.com/legal/puffing). The test
is further how a reasonable consumer in a contract of sale for example, would view the
statement or the subject of the puffery (Bowmans, 2008 -
https://www.bowmanslaw.com/insights/intellectual-property/where-advertising-puffery-
begins-and-ends-wim-alberts/).
 Duress (10): Duress refers to “an unlawful threat of harm or injury by one contracting
party or someone acting on that party’s behalf and which causes or forces the other
contracting party to conclude the contract” (Scott et al., 2009:97). There are a number of
factors which need to be met before a claim of duress can be made by a party who
wishes to set the contract aside, namely: there must be actual violence or damage or a
threat of violence or damage directed at the life, limb or freedom of the threatened
person, his/her property, which causes a reasonable fear that the threat may be
executed; if duress is caused by a threat, the threat must be imminent or inevitable; the
duress must be unlawful which means that the party causing the duress uses it to obtain
some benefit he/she would not have otherwise received; a party to the contract or
someone acting on his/her behalf must be responsible for the duress; and the duress
 must cause the victim to conclude the contract, thereby disallowing the victim to enter
into the contract with his/her own volition (Regent, 2016:39). If all of the aforementioned
requirements are met, and duress is proved, the contract is voidable and the innocent
party can decide whether to set aside the contract or to proceed with the contract (Scott
et al., 2009:97).
 Undue influence (8): Undue influence renders a contract voidable, and refers to
“improper or unfair conduct by one contracting party that persuades the other contracting
party to conclude the contract against the latter’s free will” (Regent, 2016:39). There are
a number of requirements to be met before a claim of undue influence can be made
namely: the party exercising the undue influence needs to have acquired an influence
over the innocent party; this influence must have been used to weaken the innocent
party’s ability to resist resulting in the victim’s independence to become easily
influenced; and the influence must have been used deceitfully with a lack of morality or
rightness of the conduct, to persuade the victim to agree to a transaction which the
victim would not have concluded on his/her own free will, which was used to the victim’s
disadvantage (Regent, 2016:40). It is important to note that undue influence is
presupposed by a special relationship by both parties. In other words, it could be in
respect of a doctor and a patient, where the former might have had a stronger or more
powerful role in the relationship and therefore abused that to gain an advantage over the
patient, thereby weakening the independence of the patient to influence him/her to enter
into the contract (Regent, 2016:40).
 Distinguish between the defences that are available to a surety. (Nerusha)
Surety is undertaken by a third party to stand as guarantor on behalf of a principal debtor by the
principal creditor in the event that performance is defaulted (Nagel et al, 2016:422). As soon as
the debtor fails to perform ito of payment or any obligation as his part of fulfilment of the
contract, the creditor can demand payment or fulfilment from the surety. Therefore the surety
is legally bound by the contract however there are few defences that surety can apply in certain
instances. It is a given that any defenses that the principal can hold against the creditor so can
the surety. These are defenses such as creditor’s breach, impossibility or illegality of
performance, fraud, duress or misrepresentation by creditor. Where the principal debtor’s
defense is of a personal nature related to him only such as duress, then surety cannot rely on
that defense. However the surety does have some common defenses of his own that he can
use;
  Termination of the suretyship obligation may be terminated on payment of the principal
debt, when any merger takes place or when the stipulated time has expired. Provided the
contract allows for it, the surety can also provide reasonable notice to the creditor to terminate
any future liability (Schulze et al., 2014:190).
  Release of the Principal’s obligation for any reason subsequently releases the surety of any
liability. If the principal is only released of part obligation then the surety will also only enjoy
release of part liability (Schulze et al., 2014:190).
  Conduct prejudicial to the surety will warrant the surety to be discharged from his
obligation. Prejudicial conduct arises when the creditor is negligent towards his management of
the principal debtor. The surety will also be released of any obligation when the creditor agrees
to any material changes in the contract with the consent of the surety (Schulze et al.,
2014:191).
  Surety incapacity by means of terminal illness for example
  Exoneration will take place where the Principal debtor has the financial means to pay off his
debts however chooses not to leaving it for the account of the surety. This would be futile as
after paying the debt, the surety is entitled to reimbursement from the principal debt therefore
it would make no sense for the Courts to enact payment from surety when the principal debtor
has the means to pay.
 The following are defenses of surety only: (https://saylordotorg.github.io/text_introduction-to-
the-law-of-property-estate-planning-and-insurance/s19-04-suretyship.html)

  Fraud or duress by creditor on surety

  Illegality of suretyship contract
  Surety’s incapacity
  Failure of consideration for surety contract (unless excused)
  Statute of frauds
  Acts of creditor or debtor materially affecting surety’s obligations:
  Refusal by creditor to accept tender of performance
  Release of principal debtor without surety’s consent
  Release of surety
  Release, surrender, destruction, or impairment of collateral
  Extension of time on principal debtor’s obligation
  Modification of debtor’s duties, place, amount, or manner of debtor’s obligations
 Discuss the operation of the beneficium ordinis sea excussionis
 The surety has the right to insist that the principal creditor first claims liability from the principal
debtor before claiming from him however he must do this immediately after proceedings
against him begin otherwise the availability of this defence lapses (Schulze et al.,
2014:188). This defence prompts the principal creditor to take judgement against the principal
debtor by executing his goods. In the event that the principal creditor does not recuperate all
costs through execution of goods, the surety will be liable for the costs involved as well as the
balance of the principal debt (Schulze et al., 2014:188).
 This benefit is not available to the surety where; (list answers from page 81 in guide)
 The benefit of division (beneficium divisionis)
 Where there is more than one surety, and principal creditor attempts to claim the full debt from
one surety only, the surety may claim that the liability be shared proportionately with all solvent
sureties ensuring that the claim against him is only a portion of the total debt. This will only be
available to the surety if he has no renounced it or he did not make himself a co-principal debtor
(Schulze et al., 2014:189).
 Benefits is not available when… see page 82 of guide for a list
 The benefit of cession of actions
 Where a surety has satisfied performance on behalf of the principal debtor, he has the right to
request that the creditor transfer all rights against the principal debtor and co-sureties to him.
The surety will also hold any recourse against the principal debtor and co-securities to recover
all costs incurred. The surety basically becomes the creditor ito holding all the rights the
creditor had through cession of actions. (Schulze et al., 2014:189).
 The surety’s right of recourse against the principal debtor
 Where the surety has satisfied his obligation with the creditor, he has full legal recourse against
the principal debtor for all costs incurred. The surety loses the right of recourse when he fails to
raise the non-personal defense available to the principal debtor or if he fails to inform the
principal debtor that he had paid the principal creditor resulting in the principal debtor also
paying the principal creditor. Where the debtor and the creditor have allowed the debt to go
unsatisfied for an unreasonable time or where the debtor is recklessly disposing off his assets
even though the creditor has obtained judgement against him, then the surety may compel the
principal debtor to pay the debt so he may be released for the surety contract (Schulze et al.,
2014:189).

 The surety’s right to a contribution from co-sureties
 Co-sureties have no contract between each other however where one surety has fulfilled the
obligation of the debt, he has the right to recover a proportionate amount from each of the
solvent co-securers. Where the principal debtor has paid part of the debt to the creditor or to
the surer who paid the debt, that amount must be excluded from the amount being claimed
from the co-surety (Schulze et al., 2014:190).
 The surety who paid the debt has no right to a portion of the contribution from the co-surety if
he failed to raise the non-personal defense available to the principal debtor or if he failed to
raise benefit of excussion when it was available to him. His only claim will be against the
principal debtor. (Schulze et al., 2014:190).
 The right of the surety to recover
 The surety can only begin the recovery process from the principal debtor and co-surety once the
debt has been paid to the creditor. It must be a valid payment to the correct creditor. The
surety must have followed all available defences to him and the debtor. The surety must infirm
the debtor that he has paid the creditor.
 Recovering without paying debt
 There are few instances where the surety may recover from the debtor before settling the debt
with the creditor;
  Where a court order has been granted against the surety to bind him to pay the creditor,
then the surety may claim the full amount from the debtor even though he has not yet settled
the creditor.
  Where the surety and the debtor had agreed that the surety will offer payment of the debt
by a specific time, which could be three months for example. At the end of three months, the
debtor may ask the surety for the full amount agreed upon.
  When the surety can see that the debtor is recklessly letting go of his assets then he can
request for the principal amount to ensure the debtor is not bankrupt without paying his debt.
  when the surety and creditor agrees to release the principal debtor from his obligation
 (Regent Study Guide, 2016)