QUESTION 1

Read the facts provided below and answer the questions which follow:
Phumzile is an aspiring winemaker who is working on creating her first vintage of wine at a
boutique winery in Paarl. To promote her wine (the first released under her own label),
Phumzile applies to participate in a Food and Wine expo planned by CityGourmet (CG). The
expo is planned to be held from 8-11 July 2021 at a market venue in Stellenbosch. CG
eagerly accepts Phumzile’s application and sends her an information package including a
registration form that she is required to complete and submit to CG by the end of May 2021.
The registration form is divided into part 1 and part 2, with standard terms and conditions
printed in greyscale overleaf. The participants are required to complete part 1 and sign at the
bottom of the page to indicate their acceptance of a spot at the expo. Just above the space
provided for signature, there is a sentence that states “When completed, this form will serve
as the contract between the participants and CityGourmet”. Phumzile duly completes the
relevant portions of the form, signs the form and submits it to CG together with a payment of
the registration fee of R2500. She intends to read the terms and conditions contained in the
registration form but does not get around to it in all the preparation for the expo. A week
before the event, CG contacts the participants to say that the venue has burned down, the
event will be moved to an alternate venue and thus they would have to reduce the number of
participants. Phumzile is one of the participants who is cut from the expo and she requests the
return of her application fee. CG refuses to return the money, citing a clause in the terms and
conditions which states that if a participant is prevented from participating in the expo for any
reason other than the organisers’ intentional and wrongful act or omission, then the
participants must forfeit any monies paid in preparation for the showcase. Phumzile was not
aware of this provision and approaches you for advice. Assume that the Consumer Protection
Act does not apply.
2.1. Advise Phumzile on the likelihood of her reclaiming the money paid to CG on the
basis that she was mistaken as to the true contents of the contract. Your answer must
include any alternate claims available to her. [10
Marks]
2.2. Advise Phumzile on whether she could claim on the grounds of impossibility. Your
answer must include a distinction between supervening impossibility of performance,
initial impossibility of performance and prevention of performance.
[5 Marks]

QUESTION 1.1
What is the Legal Issue here?
The legal issue pertains to whether Phumzile may reclaim the R2500 paid to CG on the basis
that Phumzile thought she was to be included in the expo, and this mistake was the cause of
her participation in the agreement. Further, there is evidence that CG mislead her to believe
that she would be included in the expo. Phumzile is the contract denier and CG is the contract
asserter.
What is Mistake and Misrepresentation?
Mistake and misrepresentation are interlinked. A mistake occurs when contracting parties are
under the impression that their intentions to contract are mutually inclusive, but in reality, this
is not the case and there is objective dissensus regarding some or other term of the contract
(in accordance with the Roman law classifications). Mistakes can have two effects,
depending on the severity of this mistake. If the mistake is material, it would negate
consensus completely and render the contract void (Allen, Khan v Naidoo, Kok v Osborne,
Spenmac). However, if it is a non-material mistake, then it would not negate consensus, but
can render the contract enforceable, nonetheless (Venter, Van Reenen, Trollip, Diedericks).
On the other hand, misrepresentation, as explained in Phame v Paizes, can be described as a
false statement of a past or present fact made by one party to another before or at the time of
contracting. It usually concerns some matter or circumstance relating to the contract, and it is
not a legal principle or opinion. It is important to note that there is no requirement that the
innocent party knows that the misrepresentation was false. Ultimately, a misrepresentation
refers to an error in motive (Diedericks, Du Toit v Atkinson) and does not refer to a mistake
of some or other material term of a contract. The link between mistake and misrepresentation
is ultimately that misrepresentation is often the cause of a mistake, whether material or
immaterial. It is important to note that all actionable misrepresentations induce a mistake
(Trollip). However, the converse is not true because misrepresentation usually refers to an
error in motive (Diedericks, Du Toit v Atkinson), and not to an error which pertains to a
material term of the contract, however it may refer to one (Prima Toy Holdings, President
Property Investments, Phame v Paizes).
What kind of mistake was made?
As alluded to above, the first step is to enquire whether the mistake was material. The reasons
for the classification of mistake, as explain above, is that the mistake will either negate
consensus or create the impression that there in dissensus. As per the Roman law
classification of the mistake, Phumzile’s mistake can be classified as an error in corpore or an
error in substantia. An error in corpore means that there is a mistake as to the object of the
performance. For example, in Allen there was a mistake regarding the object of the contract,
and this was categorised as a material mistake, and the agreement was rendered ineffectual.
Similarly, her mistake could be an error in substantia. This is where there is a mistake which
relates to the identity of the object of the contract and is often classified as non-material (Van
Reenen, Trollip). However, recent caselaw provides evidence of that fact that the law is
developing to categorise an error in substantia as a material mistake. The principle posited
from the Spenmac case is as follows. Where there is mutual mistake about the true nature of
the subject of the agreement, the whole agreement is void as a result of both a material, and
reasonable mistake.
Material Mistake: Implications of classifying Phumzile’s Mistake an error in corpore?
Where there is evidence that the mistake was material, then it is accepted that there is
dissensus between the parties. The contract will be void for mistake, however, if CG can rely
on the secondary application of the reliance theory, they may be able to uphold the contract
and keep Phumzile’s money. Our law takes two approaches to the operation of the Reliance
theory. Firstly, it takes a subjective approach (as informed by the Will Theory) and chooses
to look at the intention of the parties. This approach is a form of direct application of the
Reliance theory and may take the form of Quasi-Mutual Assent (Smith v Hughes). The
second approach is where the Court opts to take an objective approach (as informed by the
Declaration theory) it will not look at the intention of the parties, but rather whether it
appeared as if the parties had reached consensus. This is in the form of justus error (George v
Fairmead). If CG is able to fulfil any of these requirements, they may succeed in their claim
to retain the R2500.
Definition of Quasi-Mutual Assent
This approach is open to use by the contract asserter (CG) in order to gain a court order to
uphold the contract. Posited by Smith v Hughes, this doctrine applies if there is no subjective
consensus. It prescribes that where the contract assertor reasonably relies on the appearance
of consensus, which was induced by the contract denier, then a contract exists. This is in-line
with the Reliance Theory. Thus, on this basis, the contract asserter is entitled to a remedy
where they are able to meet the requirements.
Requirements
As mentioned in the Sonap case, quasi-mutual assent will arise in the following instances.
Firstly, where the contract denier misled their intention. Secondly, the asserter did not realise
that there was this misrepresentation, and finally, a reasonable person in the position of the
contract asserter would not have realised a misrepresentation has occurred. If the contract
asserter can show that the second and third requirements have been fulfilled, it can be
assumed that the contract asserter reasonably relied on appearance of a contract. Thus, a valid
contract existed between the parties. CG may be able to demonstrate that Phumzile mislead
her agreement with the clause in the agreement, by reflecting her agreement by way of
signature (Moolman). Secondly, if CG can establish that they were unaware of the fact that
they had misrepresented their intention in anyway, especially because they did not know that
Phumzile was mistaken. This is on the basis that CG themselves were unaware that the venue
was set to change. Finally, they may be able to allege that the reasonable person in their
position also would not have realised that there was any form of misrepresentation, especially
because the events were exceptional and extra-ordinary (as previously explained). Therefore,
CG may be able to allege that they had reasonably relied on Phumzile’s misrepresentation of
her intention to be bound by the agreement.
Justus error used by CG in addition to Quasi-Mutual Assent
Based on the declaratory theory, the justus error doctrine acts as a corrective measure to the
reliance theory. It may be used by the contract denier in an attempt to rescind the contract,
and if they can show that their reliance on the contract was reasonable (George v Fairmead),
then they will succeed on their claim.
Requirements for justus error
The criteria for whether a mistake is material and excusable, and therefore reasonable, will
depend on the following factors: whether there was misrepresentation and whether that
misrepresentation is excusable (George v Fairmead, Potato Board). As CG was able to
demonstrate there was misrepresentation as to Phumzile’s true intention, and that they
seemingly had mislead their own intention to include Phumzile in the expo initially, but then
changed their intention. However, as established above, the accident which caused the event
venue to burn to the ground was unforeseeable and thus reasonably excusable for forcing CG
to reduce the number of participants allowed into the new expo venue. Therefore, if CG is
able to establish that they had reasonably relied on Phumzile’s misrepresentation and that the
misrepresentation made by their own actions was excusable, then they may be able to hold
Phumzile to the agreement. However, Phumzile is not without recourse.
Immaterial Mistake: What if Phumzile tries to claim that the mistake was immaterial?
If Phumzile can rely on the traditional position that classifies as error in substantia as an
immaterial mistake, she may be able to rely on the remedies under misrepresentation. In order
to successfully cancel the contract and claim restitution to place herself back into the pre-
contractual financial situation before the misrepresentation had occurred, Phumzile must
establish four things. Firstly, she must demonstrate that there was misrepresentation made by
the other (misrepresenting) party, which induced them (misled party) to enter into the
contract, with the intention to ensure that such inducement to contract would take place, and
the misrepresentation made by the responsible is material (Karoo, Trust bank, Novick,
Orville). There is no need to establish fault, but unlawfulness is required (Karoo, Trust bank,
Novick, Orville).
It is evident from the facts that CG has misrepresented their intention to allow her to
participate in the expo. She may also be able to prove that this misrepresentation made by CG
is what ultimately lead her to contract. She may be unlikely to establish that CG had the
intention to mislead her into contracting. She may also struggle to allege that their
misrepresentation was unlawful because the fire was an exceptional circumstance, they
weren’t unlawful in reducing the number of expo participants. Therefore, it is unlikely that
Phumzile will succeed on her claim to restitution. However, she may be able to claim
contractual damages for the specific amount paid to CG based on a balance of probabilities
that she would have participated in the expo, even if she had been allowed to attend the expo
in the new, smaller venue. This, however, is up to the Court before them.
Conclusion and advice
It is evident that Phumzile is unlikely to succeed in her claim to render the contract void for
mistake. This is because CG might have a stronger claim in reasonably reliance which will
ultimately enforce the contract. It is unlikely that she will be entitled to restitution as it will be
difficult to adequately meet all the requirements for misrepresentation. However, she may be
able to claim contractual damages for the money lost as a result of the contract, if she can
demonstrate on a balance of probabilities that she would have participated in the expo in any
case if she had not been excluded.

QUESTION 1.2
Definitions
Initial impossibility arises where the contract is a void for non-compliance on the basis that
the object ceased to exist, and that the contract was impossible to perform at the time of its
inception. A supervening impossibility refers to one where the performance could not have
happened because the performance was impossible after the contract was concluded.
Application to the facts
Based on the facts, it is clear that there was no initial impossibility, and the agreement
between Phumzile and CG had therefore created valid obligations. However, the supervening
impossibility which had occurred (the fire) was something which neither of the parties could
have contemplated, and therefore, the obligations previously established are terminated.
Advice to Phumzile
Therefore, Phumzile is unlikely to succeed on her claim of impossibility. However, had the
parties planned for such an impossibility, then she may have been able to uphold her claim of
impossibility. The facts do not indicate an inclusion of such a clause, however, there is no
evidence that Phumzile had read the agreement. If she finds anything which relates to
planning for the event of a fire, then she could claim for impossibility. However, to come
back to the question, on the current fact set alone she is unable to reclaim the R2500 on
impossibility.
QUESTION 2
Tantrum CC (represented by its sole member, T) concluded an agreement of sale with
Spendthrift (Pty) Ltd (represented by S) in terms of which it bought a unit in a multi-storey
building that was part of a sectional title scheme. The unit comprised commercial premises,
while the remainder of the scheme was residential. During the course of the negotiations that
preceded the sale, T had enquired about the number of units in the scheme, since he did not
want to acquire a portion of a building in which there were many units: having to deal with
multiple owners did not make sound business sense. He was assured by S that there were
only two units in the scheme – unit 1, the subject of the sale, and unit 2, the residential part of
the building. He was furthermore informed by S that, in terms of the rules of the scheme, unit
2 could not be subdivided without the consent of the owner of unit 1; thus T would have a
right to veto any such subdivision.

Subsequent to the sale it was discovered that these representations by S were false: a few
years earlier S had in fact granted permission to the owner of unit 2 to subdivide the unit into
110 units, and unit 2 had prior to the sale been subdivided into 110 units. The right of veto
had thus been rendered nugatory. However, the evidence clearly revealed the absence of
fraud: S had genuinely forgotten about his granting of permission for the subdivision, and
was unaware of the fact that unit 2 had been subdivided.

The deed of sale signed by T contains the following provision, in clause 14:
The purchaser hereby acknowledges that he has not been induced into entering into
this agreement by any express or implied information, statement, advertisement or
representation made by or on behalf of the seller, and … hereby waives any rights
whatsoever which he may otherwise have obtained against the seller as a result of
such information, statement, advertisement or representation made by or on behalf of
the seller.

The deed also includes a clause in which the purchaser acknowledges that the property
bought is subject to the rules and regulations of the Body Corporate which has been
established in terms of the sectional title scheme.
Acting on behalf of the purchaser, T wishes to resile from the contract on the grounds
that he was misled by S as to the nature of what he had agreed to buy. Advise T on the
prospects of success should the matter go to court, considering all possible grounds on
which the validity of the contract might be attacked.
 Feedback from Robin
The facts of this question are virtually identical to those in the Spenmac case, where the SCA
decided the case on the basis of mistake.
I expected a proper discussion of both mistake and misrepresentation. Many students also
argued breach of warranty, for which I gave them credit; but since this is a sale of immovable
property governed by the Alienation of Land Act, there is no room for a collateral oral
warranty, since all the terms of the agreement must be in writing and signed by the parties.
Misrepresentation:
The contract was clearly induced by a material misrepresentation made by S. Normally this
would give rise to a claim for cancellation and restitution (restitutio in integrum) (plus
damages, if the misrepresentation was made negligently, as appears to be the case here: no
fraud – Bayer v Frost). It was advisable to show the requirements for restitutio in integrum,
but not necessary to discuss them in detail, because a claim based on misrepresentation is
clearly blocked by clause 14 (the no-misrep clause) – Wells v SA Alumenite – no fraud on
these facts. Some students argued such clauses ought not to be enforceable in the
Constitutional era – Barkhuizen – I gave credit for this, but until the law is changed the
present position is that these clauses are valid and enforceable, absent fraud. Unless of course
the clause is void for mistake, which brings us to the next issue.
Mistake:
The contract cannot be void for common mistake because, although both parties seemed to
share the same mistake, it was not vital to the transaction in the sense that neither of the
parties would have been prepared to contract had they known the true state of affairs: the
mistake was not fundamental to S. Dickinson Motors, Van Reenen Steel cases.
Unilateral mistake: contract void if the mistake is both material and iustus / no reasonable
reliance by S on the appearance of consensus created by T’s signature/apparent agreement to
the terms.
Materiality: this looks to me most like mistake as to characteristics of the thing bought (error
in substantia), hence not material; but in Spenmac the SCA treated it as a mistake as to the
nature of the thing bought (error in corpore? negotio?) and as material, so you would be very
ill advised to just abandon the mistake argument here. Rather proceed to next step regarding
second basis for contractual liability: reasonable reliance.
Leading case: Sonap v Pappadogianis. Given material mistake, fundamental issue is whether
S can uphold the contract on the basis of reasonable reliance on appearance of consensus
created by T.
Sonap decisive questions (really direct application of reliance theory):
Did one party misrepresent its contractual intention? (Yes, T did, by signing and thereby
appearing to agree to and be content with the terms proposed).
Did this mislead S into thinking there was consensus? (Yes, probably, since S genuinely
forgot about the earlier permission to subdivide).
Was S reasonably misled into believing there was consensus? (No, because he was negligent:
he ought reasonably to have remembered).
Hence: no reasonable reliance, no consensus, contract void for mistake (including clause 14).
Same result obtained by application of iustus error approach. Did S know that T was
mistaken? (No). Ought S as a reasonable person to have known? (Yes, unreasonable to forget
permission had been granted). In any event, S induced T’s mistake, by positive
misrepresentation. So T’s error is iustus, contract void for mistake.
Many students confused the parties, asking whether T’s reliance on S’s misrepresentation
was reasonable, etc. Remember to label the parties: T is the contract denier, so was his error
iustus; S in the contract assertor, was his reliance (on appearance of consensus) reasonable in
the circumstances.
Some students preferred to attack clause 14 on the Du Toit v Atkinsons Motors line of
reasoning: S ought to have drawn T’s attention to clause 14, failure to do so =
misrepresentation by silence inducing an error as to the terms of the contract, which is
material error. I gave credit for this, although I think it is a less strong argument, particularly
in light of decision in Spenmac.
Dictum et promissum: some students argued that the contract could be set aside on this basis,
but I think clause 14 (if valid) would have precluded this option.
QUESTION 3
Cyril wishes to buy a house in Retreat that his wife can use to open a crèche. The seller,
Mervyn, sends his agent Gugu to show the property to Cyril. The property seems to fit all of
Cyril’s requirements: there is a house on one side which can be used as the school building,
there is a spacious yard on the other side for children to play in and the property is enclosed
by a secure fence. The yard includes a large tree and a swing set, which could form part of a
playground for the crèche. Cyril is happy with the proposed terms of the contract and signs a
deed of sale, which describes the property as “Erf 324 Retreat”. The deed of sale contains a
provision stating that the purchaser was not induced to buy the property by any
misrepresentation of the seller or his agent. After taking transfer of the property, Cyril’s wife
Merle submits plans to the local authority for the conversion of the house to make it suitable
for use as a crèche. She and Cyril then learn that their property, Erf 324, only encompasses
part of the fenced-in area, namely the part that the house stands on. The rest of the land,
including the yard and the tree, are part of a separate plot (Erf 323) also owned by Mervyn.
Cyril is furious, and believing that Mervyn has acted in bad faith, he institutes an action
against him, in which he asks the court for an order declaring the contract void for mistake.
Mervyn wishes to enforce the contract as set out in the deed of sale.
Advise Mervyn on whether he will be able to uphold the contract based on his reliance
that Cyril bound himself to the terms as set out in the deed of sale. [15 – 20 marks]
What is the mistake?
The mistake in question refers to an error in substantia. This is where there is a mistake
which relates to the identity of the object of the contract and is often classified as non-
material (Van Reenen, Trollip). Recent caselaw provides evidence of that fact that the law is
developing to categorise an error in substantia as a material mistake. The principle posited
from the Spenmac case is as follows. Where there is mutual mistake about the true nature of
the subject of the agreement, the whole agreement is void as a result of both a material, and
reasonable mistake.
Effect of a material mistake?
Where there is evidence that the mistake was material, then it is accepted that there is
dissensus between the parties. The contract will be void for mistake, however, if the contract
asserter relies on the remedies proposed by the Reliance theory, then he may be able to
uphold the contract. The Will theory does not account for recourse in instances where there
has been a mistake. Therefore, as a corrective to the Will theory, the Reliance theory
operates. Here, the inquiry will turn on whether the injured party had reasonably relied on the
mistake made by the other party (Sonap, Constantia). Our law takes two approaches to the
operation of the Reliance theory. Firstly, it takes a subjective approach (as informed by the
Will Theory) and chooses to look at the intention of the parties. This approach is a form of
direct application of the Reliance theory and may take the form of Quasi-Mutual Assent
and/or Estoppel (Smith v Hughes). The second approach is where the Court opts to take an
objective approach (as informed by the Declaration theory) it will not look at the intention of
the parties, but rather whether it appeared as if the parties had reached consensus. This is in
the form of justus error (George v Fairmead).
Does the contract asserter have a claim under reasonable reliance to have the contract
enforced?
APPROACH 1: Quasi-Mutual Assent: The Direct approach to the Reliance Theory
This approach is open to use by the contract asserter in order to gain a court order to uphold
the contract. Posited by Smith v Hughes, this doctrine applies if there is no subjective
consensus. It prescribes that where the contract assertor reasonably relies on the appearance
of consensus, which was induced by the contract denier, then a contract exists. This is in-line
with the Reliance Theory. Thus, on this basis, the contract asserter is entitled to a remedy
where they are able to meet the requirements.
Requirements of Quasi-Mutual Assent
As mentioned in the Sonap case, quasi-mutual assent will arise in the following instances.
Firstly, where the contract denier misled their intention. Secondly, the asserter did not realise
that there was this misrepresentation, and finally, a reasonable person in the position of the
contract asserter would not have realised a misrepresentation has occurred. If the contract
asserter can show that the second and third requirements have been fulfilled, it can be
assumed that the contract asserter reasonably relied on appearance of a contract. Thus, a valid
contract existed between the parties. Mervyn may be able to uphold the contract on the basis
of the following factors which satisfy the Sonap requirements. Firstly, Cyril had mislead his
intention by signing the contract, this lead Mervyn to reasonably believe that he had read it
and was signing in agreement to the terms. Secondly, because Cyril had not expressed his
dissatisfaction at the contents of the agreement, Mervyn could not possibly have been aware
of the fact that Cyril was misled. Cyril could have asked for clarification on the terms of the
contract if there was anything he was uncertain about, that it what a reasonable person who
had done the necessary due diligence would have done. Finally, without having received any
form of notice or dissatisfaction from Cyril, again, Mervyn could not reasonably have been
alerted to the fact that Cyril was misled in anyway. Therefore, Mervyn’s reliance on Cyril’s
misrepresentation is reasonable.
APPROACH 2: Justus Error: The Indirect approach to the Reliance Theory
Based on the declaratory theory, the justus error doctrine acts as a corrective measure to the
reliance theory. It may be used by the contract denier in an attempt to rescind the contract,
and if they can show that their reliance on the contract was reasonable (George v Fairmead),
then they will succeed on their claim.
Requirements
Thus, the criteria for whether a mistake is material and excusable, and therefore reasonable,
will depend on the following factors: whether there was misrepresentation and whether that
misrepresentation is excusable (George v Fairmead, Potato Board). Therefore, as established
above, Mervyn has demonstrated that there was misrepresentation. Further, the Quasi-Mutual
Assent approach produced the result that his reliance on the misrepresentation made by Cyril
was reasonable because the reasonable person in his (Mervyn’s) situation, who had not been
alerted to any dispute to the material terms of the contract, could not possibly have been
aware of the misrepresentation alleged by the contract denier.
Therefore, Mervyn could succeed in his claim to uphold the contract. Based on the direct and
indirect application of the Reliance theory, as a corrective to Cyril’s misrepresentation of his
intention as protected by the Will theory. However, it is important to determine whether Cyril
might have any cause of action against Mervyn which may tarnish the effectiveness of his
claim. Cyril’s legal adviser may allege that the mistake is immaterial because it is an error in
substantia, as the traditional approach permits. However, this may have a negative impact on
Mervyn’s defences.
QUESTION 4
Nina is an aspiring fashion designer who runs her own one-woman design project from home,
Nina E Designs. To promote her project, she applies to participate in a new designers’
showcase planned by Vogue Adjacent Fashions (VAF) to be held in a conference venue in
Cape Town from 5-7 June 2020. hoping that it will bring exposure to her business. She is
accepted, and VAF sends her an information package including a ‘further particulars’ form
for her to complete. The form is divided into section A and section B, with standard terms
and conditions printed in greyscale overleaf. The designers are required to complete section
A and sign at the bottom of the form to indicate their acceptance. Just above the space
provided for signature, there is a sentence that states “When completed, this form will be the
contract between the Designer and VAF”. Nina duly completes and signs the relevant
portions of the form and pays VAF a fee of R3000 to rent a stall for the duration of the
showcase. She reminds herself to read the terms and conditions properly before the showcase.
A week before the event, VAF sends out a notice to all designers saying that there was a typo
in the original advertising material and the event is actually from 5 to 7 July 2020. Nina is
unable to attend the showcase as she is getting married on 5 July and requests the return of
her R3000. VAF refuses to return the money, citing a clause in the terms and conditions
which states that if a designer cannot participate in the showcase for any reason other than the
organisers’ intentional and wrongful act or omission, then the designer must forfeit any
monies paid in preparation for the showcase. Nina was not aware of this provision and
approaches you for advice.

Robin’s feedback
This question combines mistake and misrepresentation to test your understanding of the
relationship between these doctrines and their application.
In this instance, Nina was clearly mistaken in thinking that the showcase would take place in
June instead of July and this mistake influenced her decision to enter into the contract with
VAF. Be sure to note at this point that Nina seeks to escape the contract based on this mistake
and reclaim the money that she paid to VAF.
We must first ask whether the mistake was material or not material and examine the effect
that this would have on the contract.. The main question is thus whether this was a material
mistake negating consensus, or merely a mistake in motive relating to Nina’s reasons for
contracting, and her agreement to pay a particular price to participate in the showcase.
Proceeding from this, you would explain the distinction between material and immaterial
mistakes, referring perhaps to the Roman distinction between error in corpore and error in
substantia. I would argue that this is a case of error in corpore, or at least a material error,
based on the Spenmac decision of the SCA (mistake as to the nature of the contract, as the
dates for the showcase are key to the performance of the contract).
Some of you argued that the mistake only influenced Nina’s motive to attend, and so was not
material. In this instance, the arguments were grounded on misrepresentation. If this approach
was taken, marks were given if you showed a proper understanding of the law relating to
misrepresentation. However, there was a lot of confusion in this section, and some
explanations of the distinction between mistake and misrepresentation were often muddled.
For this reason, I will be uploading a refresher on this concept when the time comes to revise
for the final exam.
If Nina’s mistake was material, then it would negate consensus, meaning that the primary
basis of contracting is absent. We must then question whether VAF could still uphold the
contract based on a reasonable reliance. Two approaches can be taken by the courts: quasi-
mutual assent (direct application of reliance theory) and iustus error doctrine (indirect
application of reliance theory).
The Sonap case provides decisive questions that can be used to determine whether VAF had a
reasonable reliance that there was consensus and can uphold the contract (including the
clause that states that participants would forfeit their deposits). The questions and application
are dealt with in the following paragraph.
Did one party misrepresent its contractual intention? (Yes, Nina did, by appearing to agree to
and be content with the terms proposed). Did this mislead VAF into thinking there was
consensus? (Yes, VAF did not know that Nina was mistaken as they themselves were
unaware of the error in the dates). Was VAF reasonable in believing there was consensus?
(Yes, for the same reason). Nina’s signature to the contract indicates her acceptance, and
VAF relied on that. Thus they could argue that there was a reasonable reliance, as Nina’s
signature led them to believe that she assented (caveat subcriptor would come into play here)
and the contract was thus valid. If this argument is made successfully, the contract would
stand and Nina would have no grounds to reclaim her money.
There were those who argued that VAF made a misrepresentation, which could well be.
However, that misrepresentation was an innocent one, and would limit the remedies available
to Nina. It would also not be necessary to argue misrepresentation if you have established that
the relevant error in this case was material, as then you would argue based on mistake. If
misrepresentation was argued, marks were awarded for acknowledging that it would have
been an innocent misrepresentation.
Some argued that VAF’s conduct amounted to misrepresentation by silence, but that is not
seen here. Nina was in possession of all of the contractual terms, she simply failed to read
them. Again, the misrepresentation was due to the typo (June/July) and thus VAF did not
intend to mislead the designers, rendering the misrepresentation innocent. They also did not
keep quiet about any information, when the mistake was spotted they aimed to correct it.
Lastly, there were a number of students who argued using delictual principles. In this case no
marks were awarded for that section of your answer as your focus was to be on the
contractual remedies available to Nina
QUESTION 4.2
The terms and conditions include a clause stating that designers who participate in the
showcase are forbidden from selling or using any designs displayed in the showcase for
a period of two years following the event as this could lead to unfair competition with
VAF. Briefly discuss the validity of this clause. [5]

This question required you to identify the restraint of trade clause and provide a brief
discussion of its validity.
The point of departure is that (since Magna Alloys) restraint of trade clauses are seen as valid
in South African law. The onus of proof is on the person alleging that a restraint of trade is
invalid. They must prove that the clause is unreasonable or otherwise contrary to public
policy.
To assess the reasonableness of the restraint of trade clause, you would refer to the test as
formulated in Basson v Chilwan and as confirmed in Reddy v Siemens Telecommunications.
The application of this test and the eventual outcome (either fair or unfair based on your
assessment of the circumstances) provided the bulk of the marks for this section.
If there was no mention of the relevant case law or no assessment of whether the clause
provided was in fact a valid restraint of trade, then you could not have received full marks for
this section.
 QUESTION 5
B, who professes to be “quite an expert” in matters relating to art, offers to buy from S, by
private sale, a painting that S has on display in her lounge. The price offered by B is far in
excess of what S knows the painting to be worth. From comments made by B, S is aware that
B thinks the painting is an original work by a well-known and long-dead South African artist.
S knows that B is mistaken in this belief, but keeps this knowledge to herself and accepts B’s
offer. When B subsequently learns that the picture was painted by a still-living and relatively
unknown artist, she takes it back to S and demands the return of her money. S refuses to undo
the transaction, insisting that the contract was perfectly valid. Discuss.
QUESTION 5: Feedback from Robin
 This is a good question, combining mistake, misrepresentation and non-disclosure to test your
understanding of the relationship between these doctrines.

 B was quite clearly mistaken in thinking that the painting was painted by a famous artist, and
this equally clearly influenced his decision to buy at the price that he did.

 The central question is whether this was material/fundamental mistake negating consensus, or
merely a mistake in motive, relating to his reasons for contracting on the terms he did.

 Explain the distinction between material and immaterial mistakes, referring perhaps to the
Roman distinction between error in corpore and error in substantia. It is not error in persona
as some students thought (that is error as to the identity of the other contracting party). It
seems to me that this is more a case of error in substantia (quality of the merx), and thus a
mistake in motive; after all, both parties knew exactly which painting was being sold and
bought. However, a case can be made for it being an error in corpore, or at least a material
error, especially in the light of the recent Spenmac decision of the SCA (mistake as to the
nature of the merx). A good exam technique would be to consider both possibilities, to show
your knowledge of the subject.

 Consider first the position if it is immaterial error in substantia. A mistake in motive does not
invalidate the contract qua mistake; but if the error is induced by the other party the contract
might be voidable for misrepresentation.

 Discuss the requirements for restitutio in integrum for misrepresentation: misrepresentation

by other party or his or her agent; inducement, materiality; perhaps intention to induce; fault
not required.

 Central issue: was there a duty on the part of S to speak (point out B’s error), and hence
a misrepresentation by silence.
 Discuss briefly the developing law in this regard: the general rule; the exceptional cases; the
emergence of a general test, based on Millner’s formulation: involuntary reliance etc; Absa
Bank v Fouche. It seems clear from developments in case law relating to mistake that when A
knows that B is mistaken A is under a duty to speak; and this is in line with the growing
importance of fairness, Ubuntu in the law of contract.

 So I would say: even though B professed to be quite an expert, S was under a duty to speak,
and his failure to do so would render the contract voidable at B’s option. Indeed, it was
probably fraudulent, and might thus give rise to a claim for damages in delict (not under the
aedilician edict: not a latent defect, and silence is not a dictum et promissum). If it was a
material error that negated consensus: primary basis of contract absent, but can S uphold the
contract on the secondary basis of reasonable reliance (ie on the appearance of consensus
created by B’s conduct)?

 Two approaches by the courts: quasi-mutual assent (direct application of reliance theory) and
iustus error doctrine (indirect application of reliance theory); should lead to same result;
synthesised in Sonap Sonap decisive questions (really direct application of reliance theory);

 Did one party misrepresent its contractual intention?

 Yes, B did, by appearing to agree to and be content with the terms proposed).

 Did this mislead S into thinking there was consensus?

 No, S knew B mistaken, and thus that there was no consensus. Of course, we are assuming
here that in fact the mistake was material, and thus there was no consensus: a questionable
assumption).

 Was S reasonable in believing there was consensus?

 (No, for same reason).

 Hence no reasonable reliance, no basis for contract, contract void.

 Same result on the iustus error approach: the fact that S knew B was mistaken renders B’s
mistake excusable in the circumstances. No need to enquire further: whether S ought to have
known B was mistaken, or induced B’s error. The same objective facts that render B’s error
excusable make S’s reliance on the appearance of agreement unreasonable.

 Many students misapplied the Sonap test, focusing on S’s misrepresentation (by silence) and
thus asking whether B’s reliance was reasonable. But B is the contract denier, and wants
out, so why would B invoke reasonable reliance to uphold the contract?

 This shows a fundamental misunderstanding of the theory at play here. Unfortunately the
SCA appears to have suffered from the same misunderstanding in Brink v Humphries &
Jewell. Overall conclusion: B can escape from the contract, if not on the basis of mistake,
then at least on the basis of misrepresentation by silence. Note finally: where a point is
arguable, I don’t mark you down for taking a view different to my own (eg if you said it was
material error); I see how you make your argument, and whether you understand the
background law. But it is wisest to consider all possibilities in an exam: don’t put all your
eggs in one basket.
 QUESTION 6
P wishes to buy a house in Hout Bay for use by his daughters as a nursery school. He is
shown a large property by E, the estate agent acting for the seller S. This property seems to be
ideal for his purposes, which have been explained to the agent: there is a house on the front
portion of the property nearest the road, which with a little modification can serve as the
school building; there is a large backyard which can serve as a playground; and although
there is a river at the bottom of the property, the whole property, from the road to the river, is
enclosed by a high and secure fence. Since P is happy with the property and the price asked
for it, he signs a deed of sale which describes the property simply as: ‘erf 456, Hout Bay.’
The deed of sale contains all the standard terms, including a voetstoots clause and a
provision that the purchaser has not been induced to buy the property by any
misrepresentation of the seller or his agent. Soon after taking transfer of the property, P
submits plans to the local authority for the conversion of the house to make it suitable for use
as a nursery school. He learns to his dismay that the property that he has bought, erf 456,
encompasses only the front portion of the fenced-in land; the portion behind the house, and
extending down to the river, where he had intended erecting swings etc for a playground, is a
separate plot, erf 457, which belongs to the seller, S. P is furious, and believing that S has
acted in bad faith, he institutes an action against S, in which he asks the court for the
following orders:
1. an order of rectification of the deed of sale (properly describing the property sold as
being erfs 456 and 457, Hout Bay), coupled with an order compelling S to transfer erf
457 to P; alternatively,
2. an order setting aside the sale and transfer of erf 456 on the ground of material
misrepresentation, and compelling S to repay to P the purchase price; alternatively,
3. an order declaring the contract void for mistake, and granting P consequential
relief.

Discuss P’s prospects of success in each of these claims.

(a) Rectification
 Such an order is possible only if there was a common intention of S and P to buy and sell
both plots (erfs 456 and 457) and due to an error in recording their agreement the deed of sale
failed to reflect this common intention.

 The court rectifies the document, not the contract. Onus on P to establish this on balance of
probabilities. S does not have to agree to the rectification before the court grants the order (as
many of you said); if S were agreeable the parties could rectify the document themselves
without a court order. On the facts, most unlikely that there was such a common intention.
 If the deed of sale was so rectified (unlikely), then P could get an order of specific
performance compelling transfer to him of both plots. Formalities: Alienation of Land Act.
See Magwaza v Heenan: provided the deed of sale is regular on its face (ie appears to comply
with the formal requirements of the Act), rectification is competent.

(b) Rescission and restitution for misrepresentation

 Misrepresentation renders contract voidable (rather than void) because of consent improperly
obtained.

 Requirements for restitutio in integrum in such a case: misrepresentation by S or S’s agent;

inducement; materiality; possibly intention to induce. No requirement of fault on part of S (or
E).

 Whether there was any misrepresentation. Most likely: fencing created misleading
impression, giving rise to duty to speak, hence misrepresentation by silence (Milner article,
Absa v Fouche).

 Meaning of inducement and materiality (not to be confused with materiality of mistake); and
whether these requirements are satisfied here (yes). Thus, but for the exclusion clause (“no
misrep”), P would have good grounds to set the contract aside.

- Induced: thought it was large enough for his plans

- Material: significantly affects the purpose for which it was bought and renders the
property less useful in that regard – too small

 However, the courts in the past have permitted a party to exclude liability for
misrepresentation (Trollip, Orban, Du Toit); but not for fraudulent misrepresentation Wells
v SA Alumenite.

 So: depends whether the misrep was fraudulent; likely, but insufficient facts to be sure. Might
argue that such clauses contrary to public policy today even in absence of fraud, on lines of
Barkhuizen, fairness in contracting etc

- VT & No misrepresentation clauses: contra-PP- bound irrespective of any material

latent defects which may arise

(c) Mistake
 Renders the contract void if it is both material and iustus, ie to say, if it excludes both
possible bases for contract: consensus and reasonable reliance by S on the appearance of
consensus.

 Material? Only if the mistake excludes consensus.

 What consensus entails: On virtually identical facts the court held in Orban v Stead that the
error was not material (merely error in motive, or in substantia).

 This is very much open to question, looks more like error in corpore to me (mistake as to the
very object that P was buying. (Spenmac)

 Some of you concluded that the mistake was not material and thus did not go on to discuss
reliance theory. This is bad exam technique; don’t put all your eggs in one basket, hedge your
bets! Rather say: if I am wrong and the mistake is material, then ….

 So, assuming it is error in corpore, no consensus, but that still leaves open the second leg of
the enquiry: whether S could uphold the contract on the basis of the reliance theory. Here you
discuss quasi-mutual assent and/or iustus error doctrine (preferably both, showing that same
result would follow whichever approach is adopted). Employ the Sonap test for upholding
contract on basis of reasonable reliance (by the contract assertor S, not P as many of you said)

(i) Did one party misrepresent its contractual intention, thereby creating an
impression that he agreed to the terms proposed by the other party? – yes, P did,
by signing the deed of sale which referred only to erf 456.

(ii) Did this mislead the other party into believing there was consensus? – yes, S/E
probably had such a belief (if not, then he was snatching at a bargain as in Sonap;
then reliance/belief at all, let alone reasonable reliance).

(iii) If so, was this belief/reliance reasonable in the circumstances? – Almost certainly
not; S/E should as a reasonable person have realised that P was likely to be misled
by the fencing, all the more so in light of P having spelt out his needs and plans
for the kindergarten; hence duty to speak, misrep by silence etc.

 Thus: S cannot uphold the contract on basis of reasonable reliance / QMA; contract void.

 Note: when one contracts through an agent, as here, the conduct and words of the agent are
attributed to the principal, so you can regard S as being in the same position as E. This also
distinguishes the case from Orban v Stead where the seller was not represented by an agent.

 On the iustus error test:

(i) Did S/E know P was mistaken? – not clear on facts

(ii) Ought S/E reasonably to have known that P was mistaken? – yes, for same
reasons as
(iii) above under quasi-mutual assent enquiry
(iv) Did S/E induce P’s mistake? – yes, by keeping quiet when he should have spoken
out.
Thus: P’s error is justus, contract void.
QUESTION 7
Eric, an interior designer, asks Interior Illusions, a furniture business, to give him a quote in
respect of items that he wishes to order for a client. One of Interior Illusions’ salespeople
writes the cost of each item next to the relevant item on Eric’s order form but does not add
them up to provide an overall total. The manager of Interior Illusions, Cathy, notices this
oversight and writes the overall total at the bottom of the form. However, she miscalculated,
and quoted Eric for a much lower amount than he initially expected.

Eric receives the quotation, notices that it is significantly lower than the expected amount and
accepts the terms proposed to him by Interior Illusions. The next day, before delivery is to
take place, Cathy discovers the error and refuses to deliver the goods at the quoted price. Eric
approaches you to advise him of whether he is entitled to enforce delivery at the original
price quoted to him by Cathy.

In answering this question, consider the matter from both the iustus error and the quasi-
mutual assent angles.

Guideline to answer:

First and foremost, when going about such questions be sure to keep the parties distinct in
your mind. Thus, note that in this scenario Eric is the contract asserter and Interior Illusions is
the contract denier.

When you start off these problem questions try to begin by identifying the overall issue. The
issue in this case is whether Eric (contract asserter) can insist on the delivery of the furniture
at the quoted price.

Inquiry 1: Was there consensus?

There are three elements of consensus:

1. Parties must seriously intend to contract.
2. They must be of one mind as to the material aspects of the proposed agreement.
3. The parties must be conscious of the fact that their minds have met.

On the facts, there was a material mistake as the error about the true cost of the furniture goes
to a material aspect of the agreement (it is trite that error as to price is material). Since there is
a material mistake, there is no consensus.
Roman and English classifications are not exhaustive. A roman classification, for example
error in corpore, means that there is dissensus as it goes to a material aspect of the contract.
Whereas if you can pinpoint that the mistake is error in substantia (ie. error regarding the
quality of the merx), this means that it is not likely to affect consensus as it does not go to a
material term.

Make sure to note that the English classifications and the Roman law classifications can
overlap. The most important part of the inquiry is deciphering whether or not it was material
by indicating if it went to one of the 3 elements of consensus.

Inquiry 2: Doctrine of Quasi Mutual Assent (QMA)

Given there wasn’t consensus, you need to establish another basis for contractual liability.
Reliance theory is a way to go about this. There are two different approaches (direct and
indirect). This is the direct reliance theory.

Note: this doctrine is a derogation from the harsh effects of a purely subjective approach to
contractual liability, since on such an approach, the fact that there was no consensus would be
the end of the enquiry, meaning that the contract asserter would have no way to hold the
denier to the contract. Therefore, this doctrine is from the perspective of the contract asserter,
as it attempts to hold the contract denier to the contract.

The requirements for the doctrine of quasi-mutual assent:

1. The contract denier’s conduct must have induced the contract asserter that they had
agreed to the contract in question
2. The contract asserter should have relied on this conduct
3. The reliance must be reasonable

When you are answering the first requirement, you are really asking whether the conduct of
the contract denier misrepresented their contractual intent. Ie. Did Cathy represent to Eric that
she wished to contract on the terms that she put forth?
The answer here is probably yes as it by sending the quote to Eric, Eric believed that Interior
Illusions set the correct price and wished to be bound as such.

Moving on to the second and third requirements, here you are able to make your own
argument as it could go either way. Constantia Insurance does provide us with some
pointers: “If there are circumstances that would alter the reasonable person to the possibility
of mistake or lack of agreement, and the contract assert does not take action to clarify the
situation, then their reliance cannot be said to be reasonable.” Given this precedent, and the
fact that the price was so much lower than expected, it is arguable that Eric should have
enquired about the price after seeing that it was so much lower that what was expected.
Relevant also here is the fact that Eric is an interior designed and so could be expected to
know whether the price was mistaken.
Given this, it is likely that the reliance was not reasonable, meaning that the contract denier
cannot be held to the contract using this doctrine.

Inquiry 3: Iustus error

Now moving on to the indirect approach which is applied from the perspective of the contract
denier. This approach is a derogation from the harsh effects of a purely objective approach to
contractual liability, since on such an approach, the fact that the contract denier expressed an
intention to be bound would be the end of the enquiry, meaning there would be no way for
the contract denier to escape the effects of a contract that they do not wish to be bound by. As
such, it allows the contract denier to be absolved of contractual liability should they meet the
requirements.

Once the contract asserter has shown that there is a common intention expressed (as required
in Sonap), then the contract denier (Interior Illusions) bears the onus of proving that their
mistake was:
1. Reasonable and;
2. Material

In inquiry one, we established that the mistake is material, now the inquiry is whether the
mistake is reasonable.
No set guidelines, but there are principles in case law indicating that a mistake is usually
reasonable if:
1. It is caused by a misrepresentation on the part of the contract asserter
2. The contract denier is not to blame for their mistake
3. The contract denier did not cause a reasonable belief in the contract asserter that the
contract denier had assented to the agreement

By running the principles, you could make the argument that the mistake was not reasonable.
Why?
 There was no misrepresentation made by Eric (contract asserter); and
 The error was clearly made by Cathy, manager of Interior Illusions (contract denier) –
so it is clear that they were to blame.
 The contract denier (Interior Illusion) sent an invoice to Eric, Interior Illusions  thus
creating the impression that the contract asserter wished to be bound by the price
contained in such as invoice.
Thus, the mistake was not reasonable and thus it is not iustus. If this approach is relied on,
then Eric (contract asserter) can insist on upholding the contract.
On the other hand, it could be reasonable. Why?
 Could argue that there was a misrepresentation made by Eric: a misrepresentation by
silence as Eric had a duty to speak. One of the occasions where there is a duty to
speak when the contract asserter knows the contract denier is mistaken (should not try
and snatch up a bargain as per Sonap). Prins v Absa Bank also noted out that there is a
duty to speak when one party reasonably should have known that the other party was
mistaken. Given this case law, if the price was so low then they should have known
that the quote was mistaken.
 The requirement of fault has been disputed (look at Sonap’s comments about this –
criticizes Horty’s inclusion of fault  instead blame is characterized as conduct that
leads the other party to reasonably believed that his apparent intention was is true
intention).
o Also note that even in cases where fault has held as a requirement, it is clear
that even if there is fault on the part of the contract denier, it will weigh
against a finding of accessibility on their part, but it will not necessarily
conclusive if the contract denier can prove misrepresentation on the behalf of
the contract asserter.
 The third, the denier (Illusions) did not cause a reasonable belief since the price was
so low. The reasonable conclusion by Ambrose is that they made a mistake, not that
they agreed to the price as displayed. Especially since he is an interior designer and
ought to know the going rates of these prices.

It is clear that the two approaches often do reach the same conclusions, when the objective
circumstances that render the denier’s error iustus are the same as those that render the
asserter’s reliance unreasonable (or vice versa). For instance, if it is the case that the asserter
had a duty to speak then their reliance on the appearance of consensus would be unreasonable
and the denier’s mistake would be caused by a misrepresentation of the asserter, thereby
rendering the denier’s mistake iustus.
Be sure to look at page 111 of the Textbook for a good illustration on this. It indicates how
QMA and Iustus error are mirror images because, although one starts off looking at the issue
starting from the objective approach and reels it in and the other from the subjective approach
and then qualifies it, both come to this middle ground.
QUESTION 8

A sells a motor car to B for R100 000, and B on-sells the car to C for R120 000. None of
these parties is aware that the car was stolen from its true owner T. When T subsequently
recovers the car from C, C has a claim against B for breach of warranty against eviction,
and B in turn has a similar claim against A on the same grounds.

In a letter marked “without prejudice”, C’s lawyer informs B that C is willing to settle her
claim against B for an amount of R60 000. Relying on this information (but before
concluding any settlement agreement with C), B in turn approaches A and informs A that
since C is prepared to settle for R60 000 he (B) is prepared to settle his claim against A
for the same amount.
A and B then enter into a written agreement of compromise, in terms of which B
abandons all claims that he has against A in return for A undertaking to pay B the sum of
R60 000.
Thereafter B receives another letter from C’s lawyer informing him that C has changed
her mind and now demands payment of R120 000 from B, failing which C will institute
action against B to recover this amount.
B now wishes to escape from the settlement agreement that he concluded with A.
Advise B whether his agreement with A may be set aside or declared invalid on any of
the following grounds:

(a) misrepresentation (5 marks)

(b) common mistake (5 marks)

(c) unilateral mistake (10 marks)

QUESTION 9
Sibu takes their car to Highland Motors for a service. On their arrival, they are asked to sign a
“service card” by the service technician who will be working on their car, one Adrienne. Sibu
asks Adrienne why they are required to sign the service card and she explains to them that by
signing it, they are authorising Highland Motors to conduct the service on her car, which will
cost R1200. Sibu agrees and signs the service card at the bottom without reading it. While
servicing the car, Adrienne finds minor faults in it unrelated to the service, which she then
repairs, charging Jabu an additional R1300. When Sibu receives the invoice for the service,
they see that they are now required to pay R2500. They only pay R1200 to Highland Motors,
saying that they only agreed to that amount. Adrienne institutes a claim for the rest of the
money on behalf of Highland Motors, arguing that the service card contained a clause
authorising Highland Motors to do any repairs on the motor vehicle which they deem
necessary without asking the client’s authorisation and requiring the client to pay for such
repairs. Advise Adrienne on whether she will be successful in holding Sibu liable for the
payment of R1300 to Highland Motors for the additional repairs.

Robin’s Feedback

The essence of this problem is whether Sibu and Adrienne (on behalf of Highland Motors)
have reached actual consensus or ostensible consensus. If they have not, then Sibu will not be
contractually bound to pay for additional repairs. At the outset, it must be determined whether
agreement (consensus ad idem) as a contractual basis exists between the parties, as required
in terms of the will theory. Consensus has three elements: 1. The parties must seriously
intend to contract 2. The parties must be of one mind as to the material aspects of the
proposed agreement (the terms and the identity of the parties to it) 3. The parties must be
conscious of the fact that their minds have met In the present case, the parties were not in
agreement as to the consequences they wished to create; Sibu thought that they were
authorising Highland Motors to only service their car, while Adrienne knew that the contract
also allowed Highland Motors to conduct repairs which they deemed necessary and payable
by Sibu without any further authorisation from Sibu. This is a mistake as to the obligations
the parties wished to create and is thus a material mistake, which excludes consensus between
the parties. This means that no contract could arise on the basis of the will theory. This type
of mistake can be illustrated with a number of cases: In George v Fairmead, the appellant
signed a hotel register without reading it. The register contained a term excluding the
respondent from liability for certain acts. The appellant was unaware of this term and his
mistake related to a term that he believed would not be in the contract and as such was
material because it related to an aspect of performance. In Allen v Sixteen Stirling
Investments, the plaintiff believed he was purchasing the erf pointed out to him by the seller’s
agent, while the written contract that he signed indicated the correct erf, which was a
completely different property. His mistake related to performance and was material.
However, the matter does not end here. A party may be held contractually liable on the basis
of a supplementary ground for liability, namely the reliance theory. In this regard, the direct
or indirect approach to the reliance theory may be considered. DIRECT APPROACH: With
reference to the direct approach, contractual liability is based on the reasonable reliance that
consensus has been reached, which the one contractant (the contract denier) creates in the
mind of the other contractant (the contract enforcer). According to the Sonap case, the direct
reliance approach entails a threefold enquiry: 1. Was there a misrepresentation regarding one
party’s intention? 2. Who made the misrepresentation? 3. Was the other party misled by the
misrepresentation, and if so, would a reasonable person have been misled? In our question,
firstly, Sibu made a misrepresentation by signing the contract, that his intention is the same as
that expressed in the contract. Secondly, Adrienne could actually have been misled by this
misrepresentation, but a reasonable man would have taken steps to point out to Sibu that the
contract allows Highland Motors to unilaterally conduct repairs on the car, because Sibu
enquired about the purpose of the “service card” and Adrienne misled them to believe that by
signing the card they were merely authorising the service to be done. In Sonap the court
found that the contract enforcer knew that the contract denier was acting under a mistake and
was thus not misled. In our case, Sibu therefore did not create a reasonable reliance that they
wished to be bound by the contract they signed. INDIRECT APPROACH (IUSTUS ERROR
DOCTRINE): In terms of this approach, a party may escape liability to be bound to a contract
if it can be established that the mistake is both material and reasonable. It has already been
shown in the discussion above that Sibu’s mistake is material. It still has to be determined if
their mistake was reasonable. The contract denier’s mistake will be reasonable in the
following instances: 1. If caused by a misrepresentation on the part of the contract enforcer
(an unlawful misrepresentation). 2. If the contract denier is not to blame for the mistake. 3. If
the contract denier did not cause a reasonable belief in the contract asserter that the contract
denier assented to the agreement. Fault is not a requirement for the misrepresentation by the
contract enforcer, but unlawfulness is. If the misrepresentation is a positive act it is unlawful
in itself. If a legal duty to speak exists and the party has kept quiet when he ought to have
spoken, an unlawful negative misrepresentation has occurred. In our problem, Sibu enquired
about the purpose of the “service card” and Adrienne misled them by answering that by
signing they were merely authorising the service. Adrienne’s misrepresentation was a
positive act and was therefore unlawful. Sibu’s error was thus reasonable. Applying the
indirect approach to the reliance theory we do not have a valid contract. Applying the direct
approach, we do not have a valid contract. Sibu is not contractually liable to pay R1300 for
the additional repairs

QUESTION 10
Meredith, the owner of a bookshop specialising in rare and vintage books, offers to buy a
signed first edition of a collection of short stories by Roald Dahl from George, a regular
customer. The price offered by Meredith far exceeds the true value of the book, as the
signature in the book was in fact made by George’s late grandfather, who forged it when
buying the book as a gift for his wife, a fan of Dahl’s. George knows of this forgery. She also
knows that Meredith believes that it is the genuine article. Despite this knowledge, she says
nothing to Meredith and accepts the offer to buy the book. When Meredith has the book
appraised so that she can determine its resale value, she learns of the forged signature and
immediately returns the book to George, demanding that George return the money to her.
George refuses to do this, claiming that the contract was validly entered into. Advise
Meredith of her chances of retrieving her money from George. [15-20 Marks]

The Legal Issue and Definitions

The issue in the fact set pertains to a mistake which was induced by misrepresentation in the
form of a breach of a duty to disclose. Mistake and misrepresentation are interlinked. A
mistake occurs when contracting parties are under the impression that their intentions to
contract are mutually inclusive, but in reality, this is not the case and there is objective
dissensus regarding some or other term of the contract (in accordance with the Roman law
classifications). Mistakes can have two effects, depending on the severity of this mistake. If
the mistake is material, it would negate consensus completely and render the contract void
(Allen, Khan v Naidoo, Kok v Osborne, Spenmac). However, if it is a non-material mistake,
then it would not negate consensus, but can render the contract enforceable, nonetheless
(Venter, Van Reenen, Trollip, Diedericks).
On the other hand, misrepresentation, as explained in Phame v Paizes, can be described as a
false statement of a past or present fact made by one party to another before or at the time of
contracting. It usually concerns some matter or circumstance relating to the contract, and it is
not a legal principle or opinion. It is important to note that there is no requirement that the
innocent party knows that the misrepresentation was false. The statement can either be verbal
or implied by conduct or silence when there is a duty to speak (ABSA v Fouche). Ultimately,
a misrepresentation refers to an error in motive (Diedericks, Du Toit v Atkinson) and does not
refer to a mistake of some or other material term of a contract. The link between mistake and
misrepresentation is ultimately that misrepresentation is often the cause of a mistake, whether
material or immaterial. Further, all actionable misrepresentations induce a mistake (Trollip).
However, the converse is not true because misrepresentation usually refers to an error in
motive (Diedericks, Du Toit v Atkinson), and not to an error which pertains to a material term
of the contract, however it may refer to one (Prima Toy Holdings, President Property
Investments, Phame v Paizes).
Who are the parties?
Meredith is the contract denier in the scenario and wants the contract to be voidable so that
she may reclaim her losses as a result of the sale. On the other hand, George is the contract
asserter and wants to uphold their agreement so that he doesn’t lose the money earned on the
sale. With the parties clearly marked, the evaluation may now turn to the topic of mistake and
misrepresentation.
What kind of mistake was made?
The mistake in question refers to an error in substantia. This is where there is a mistake
which relates to the identity of the object of the contract and is often classified as non-
material (Van Reenen, Trollip). Because it is an immaterial mistake, it is assumed that there is
consensus between the parties (Prima Toy Holdings, President Property Investments, Phame
v Paizes). However, if Meredith can successfully establish that she was mislead into
contracting with George, she may be able to claim remedies under misrepresentation. There
is also the possibility that this could be an error in corpore, or at least a material error, based
on the Spenmac decision of the SCA, but one believes that the stronger claim is the error in
substantia.
Is there a mistake created by a misrepresentation in the form of non-disclosure?
Misrepresentation by silence refers to the instance where a party fails to disclose a fact to
which they are owed a duty to disclose (ABSA v Fouche). It is important to note that the
general rule holds that no one has the duty to speak even where it relates to contractual
matters. However, there is a test to determine whether one holds a legal duty to speak, and it
is based on Milner’s formulation of the involuntary reliance test. The first inquiry is to
determine whether one party possesses any exclusive knowledge on the subject matter, and
whether they have expressed an alternate view against favouring some aspect of the contract
(ABSA v Fouche). The latter refers to an instance where someone may ‘talk up’ and create a
negative impression about the object of the contract but later discovers that this is untrue, and
that is actually a term which should be viewed positively.
Where both requirements have been satisfied and it is found that one party had the duty to
speak, the plaintiff must also show that there are other elements which pertain to
misrepresentation caused by the silence (ABSA v Fouche). Firstly, they must demonstrate that
there was misrepresentation made by the other (misrepresenting) party, which induced them
(misled party) to enter into the contract, with the intention to ensure that such inducement to
contract would take place, and the misrepresentation made by the person responsible is
material (Karoo, Trust bank, Novick, Orville). It is important to note that there is no need to
establish fault, but unlawfulness must be shown (Karoo, Trust bank, Novick, Orville).
On application of these requirements, it is evident that George had a legal duty to disclose the
truth about the forged signature. He had exclusive knowledge on the matter, there is no
evidence that he enforced a negative viewpoint on some aspect of the agreement, which was
later found out to be true, so the second leg is not adequately satisfied. However, the Court
may be persuaded by the exception to the general rule that where the seller has knowledge of
a latent defect relating to the object of sale, they have a duty to disclose (Glaston, Van der
Merwe, Odendaal, Ellis). In addition to this, there is also evidence of misrepresentation, as
explained above. Further, this misrepresentation was induced by George’s failure to disclose.
In addition to this, there is evidence that George’s failure to disclose was done to
intentionally mislead Meredith into binding herself to the agreement. Finally, while
traditionally an error in substantia is an immaterial mistake, Meredith may rely on recent
caselaw which provides evidence of that fact that the law is developing to categorise an error
in substantia as a material mistake. In addition to this, Meredith may also allege that
George’s failure to disclose the truth about the forged signature is unlawful. This is on the
basis that he knowingly sold her the object with a latent defect in order to benefit financially
from the sale. Therefore, even if Meredith cannot conclusively prove that George had a legal
duty to speak, she can rely on the exception and liability may be imposed on George, and she
may be allowed remedies under misrepresentation, she might be entitled to rescind the
contract and claim under the restitutio as all the elements for misrepresentation have already
been satisfied.
Does George have any modes of recourse to dispel Meredith’s claims?
Where there is evidence that the mistake was material, then it is accepted that there is
dissensus between the parties. The contract will be void for mistake, in Meredith’s favour.
However, if the contract asserter (George) relies on the remedies proposed by the Reliance
theory, then he may be able to uphold the contract. The Will theory does not account for
recourse in instances where there has been a mistake. Therefore, as a corrective to the Will
theory, the Reliance theory operates. Here, the inquiry will turn on whether the injured party
(George as a result of potentially losing money from the sale) had reasonably relied on the
mistake made by the other party, Meredith. (Sonap, Constantia). Our law takes two
approaches to the operation of the Reliance theory. Firstly, it takes a subjective approach (as
informed by the Will Theory) and chooses to look at the intention of the parties. This
approach is a form of direct application of the Reliance theory and may take the form of
Quasi-Mutual Assent and/or Estoppel (Smith v Hughes). The second approach is where the
Court opts to take an objective approach (as informed by the Declaration theory) it will not
look at the intention of the parties, but rather whether it appeared as if the parties had reached
consensus. This is in the form of justus error (George v Fairmead).

APPROACH 1: Quasi-Mutual Assent: The Direct approach to the Reliance Theory

This approach is open to use by the contract asserter (George) in order to gain a court order to
uphold the contract. Posited by Smith v Hughes, this doctrine applies if there is no subjective
consensus. It prescribes that where the contract assertor reasonably relies on the appearance
of consensus, which was induced by the contract denier, then a contract exists. This is in-line
with the Reliance Theory. Thus, on this basis, the contract asserter is entitled to a remedy
where they are able to meet the requirements.
Requirements of Quasi-Mutual Assent
As mentioned in the Sonap case, quasi-mutual assent will arise in the following instances.
Firstly, where the contract denier misled their intention. Secondly, the asserter did not realise
that there was this misrepresentation, and finally, a reasonable person in the position of the
contract asserter would not have realised a misrepresentation has occurred. If the contract
asserter can show that the second and third requirements have been fulfilled, it can be
assumed that the contract asserter reasonably relied on appearance of a contract. Thus, a valid
contract existed between the parties. George may be able to uphold the contract on the basis
of the following factors which satisfy the Sonap requirements. Firstly, Meredith had misled
her intention by purchasing the book, this lead George to reasonably believe that she was
happy with the object of the sale. Secondly, because Meredith had not expressed her
dissatisfaction at the contents of the agreement or at the forged signature, George could not
possibly have been aware of the fact that Meredith was misled. She could have asked for any
form of verification which establishes the true nature of the signature in the book, and George
may allege that verifying the legitimacy of the signature is what a reasonable person who had
done the necessary due diligence would have done. However, on application of the last
requirement, George will not be able to demonstrate that a reasonable person in his position
would have realised that there was a misrepresentation, because there is evidence that he was
aware of the fact that the signature was forged at the time of contracting. Therefore, on the
quasi-mutual assent approach George’s actions will be found to be unreasonable as they do
not satisfy all the legs of the test. He may then try to establish a claim under the justus error.
APPROACH 2: Justus Error: The Indirect approach to the Reliance Theory
Based on the declaratory theory, the justus error doctrine acts as a corrective measure to the
reliance theory. It may be used by the contract denier in an attempt to rescind the contract,
and if they can show that their reliance on the contract was reasonable (George v Fairmead),
then they will succeed on their claim.
Requirements
Thus, the criteria for whether a mistake is material and excusable, and therefore reasonable,
will depend on the following factors: whether there was misrepresentation and whether that
misrepresentation is excusable (George v Fairmead, Potato Board). Therefore, as established
above, George may be able to show that Meredith has misrepresented her agreement to the
sale, however, he failed to establish the reasonableness of his actions under the quasi-mutual
assent approach and here, his misrepresentation may not be excusable because he was aware
of the latent defect and chose not to disclose the truth. It therefore follows that George may
be unsuccessful in his claims to uphold the contract. This slightly increases Meredith’s
chances of succeeding in her claim to uphold the contract. However, this is never guaranteed
to actualise in Court.

Conclusion
Based on …….Meredith may succeed in rendering the contract voidable and he may be able
to reclaim her losses under the Restitutio in integrum
(Overall conclusion: Meredith can escape from the contract, if not on the basis of mistake,
then at least on the basis of misrepresentation by silence)