Parties to the Contract

Number of parties
As a contract is based on agreement and the agreement presupposes a concurrence of wills or
intentions, there will always have to be at least two parties to the contract
The courts have accepted that a person can contact with themselves when acting in two
different capacities

Acting in their capacity as an agent for a company and concluding the contract with
themselves

Multiplicity of parties
If the contract contains more than two parties, the provisions of the contract have to be
considered closely to determine the liability and entitlement of each party to the agreement
In this contract, there are multiple obligations to different parties and in each obligation there
will be at least one debtor and one creditor

Moreover, the party who is a debtor in respect of one obligation may be the creditor in
respect to another obligation due in terms of their reciprocal contract

There may be several co-debtors or co-creditors involved on either side of the obligation

It then becomes necessary to determine the share in liability of each co-debtor and the
share of entitlement of each such co-creditor

This determination depends on multiple factors such as the intentions of the parties, the
nature of the contract and the nature of the performance owed under the obligation

Divisibility of the performance

A performance can be either divisible or indivisible

A divisible contract would be the sale of 100 cows

An indivisible contract would be the sale of one cow to two purchasers

Whether a performance is divisible or not depends on the nature of the performance and the
intentions of the parties
Simple joint liability and entitlement
Simple joint liability means that each of the debtors is liable only for a proportionate share of
the performance and these shares are presumed to be equal

Parties to the Contract 1

 Where several debtors are liable to make a performance to a creditor and the performance is
divisible, there is a strong presumption that the liability was intended to be joint rather than
joint and several
Where more than one co-creditor is entitled to receive a divisible performance, the co-
creditors are, in the absence of an agreement to the contrary, each entitled to claim a
proportionate share of the performance and these shares are presumed to be equal
Where the creditor releases one of the co-creditors from delivery or payment of their share,
this does not automatically release the other co-debtors from their obligations to the creditor

However, the bargain struck between the creditor and the single debtor might be of the
nature that the intention is also to free the other debtors from liability

A joint debtor who has paid more than their required share of the debt will not have the right
to recover the excess from the other debtor
Joint and several liability or entitlement
The parties may expressly or by clear implication, agree that their liability should be joint and
several

For example, partners are liable in solidum for the debts of the partnership as co-
signatories of a negotiable instrument

Each debtor is liable for the full amount of the debtor and the creditor can claim the full debt
or any lesser amount from any one or more of them
Payment of the full debt by one of the co-debtors discharges the debt completely with the
result that the creditor cannot proceed against the other co-debtors

Part performance discharges the debt pro tanto and the creditor can recover the balance from
any or all of the co-debtors

If the debtor has paid the full amount of the debtor or more than their proportionate share,
they have an automatic right of recourse against the co-debtors to recover their proportionate
share of the debtor
If the co-debtor takes cession from the creditor of the claim against the co-debtors, they
cannot recover from any of the co-debtors more than their proportionate share of the debt

Where a creditor releases one of the co-creditors from the debt, the liability of the remaining
co-debtors is reduced proportionately

The same principles apply in the case of co-creditors

Any of the co-creditors may claim performance from the debtor entirely or in part

Performance in full to any one of the co-creditors will discharge the debt

Parties to the Contract 2

 The debtor may choose the creditor to whom they want to make the performance, wholly or
in part, unless one or more of the co-creditors has claimed performance from the debtor, then
they cannot elect to perform to any of the others

Collective joint liability and entitlement

Where co-creditors are liable to make a performance jointly as a collective, the creditor may
not demand performance, in whole or in part, from any one of the debtors individually
Co-creditors, as a collective, are entitled to a performance from the debtor and no one of the
creditors can claim the performance from the debtor as they have to act collectively

This collective form of liability or entitlement will arise where the performance is inadvisable
and the intention of the parties is that the liability or entitlement should be collective
Several liability

Occurs in instances where multiple parties are involved in the contract and it is convenient to
draft a single document that may contain more than one contract

This document contains various independent contracts and it should not be confused as an
instance with a multiplicity of parties who share in one another’s rights and duties
The contract for the benefit of a third party

A contract where certain provisions are aimed at conferring benefits on persons who are not
parties to the contract
Roman law states that stipulations in favour of third parties are not enforceable

South African courts have shown a willingness to enforce contracts in favour of third parties
The law for these contracts is as follows:

Two parties, A and B, can validly contract for the benefit of a third person, C, who isn't a
party to the contract and who at that stage does not even exist

A (the stipulans) stipulates the benefit that they wish to be conferred on C and extracts a
promise from B(the promittens) that B will confer the benefit on C or at least offer the
benefit to C

A and B should intend to create an enforceable obligation in favour of C, obligating B to

make a performance to C and giving C a legal right to demand that performance

C acquires a legal right to the benefit only when they notify B of their acceptance of the
benefit. Before the acceptance, A and B may validly agree to vary or cancel the contract
with having to obtain the consent of C, or A might release B from the obligation to confer
the benefit upon C

Parties to the Contract 3

 The relationship between A and B will depend on their agreement. A might have to give a
reciprocal undertaking to B in return for B’s promise to confer the benefit upon C

A will have no right to demand performance to themselves personally, their right pending
acceptance by C is to insist that B should do nothing in conflict with B’s promise. A
cannot compel performance by B to C, after the acceptance of the benefit by C

Once C has accepted the benefit in their favour, C acquires an independent right to
enforce performance to them by B

The number of contracts

The stipulatio alteri consists of two bilateral relationships:

One between A and B

B is under a legal duty, owed to A, to make an offer to the third party, C.

One between B and C

Upon the acceptance of the offer by C, the second bilateral relationship, between B and C,
comes into being. Whether the relationship between A and B continues to exist or is
discharged by B having made the offer to C will depend on the agreement

The older alternative states that there is a contract between A and B and that C’s right to the
benefit springs directly and immediately from this contract, rather than from any act on C’s
part.

However, the right thus created for C is conditional because, although already in
existence, it will become enforceable only upon acceptance by C

There have been issues with this view as the idea that the third party can acquire a
contractual right directly from a contract concluded between two other parties, without
the need for any act of concurrence on their part, is difficult to reconcile with basic
contract principles such as consensus and the bilateral nature of the contractual bond

Transfer of rights and duties to a third party

A party may wish to transfer the rights and duties they obtained under the contract to a third
party and this is only possible with the consent of the other party of the contract
Cession

Contractual rights are transferred by means of a transfer agreement called cession

Cession entails a substitution of creditors: the right that the creditor has against the debtor is
transferred to a third party who becomes the creditor in their place

Parties to the Contract 4

 Cession requires the consent of the current creditor and the new creditor, therefore the
consent of the debtor is not required

It is common practice to include a clause in a contract that prohibits or restricts the transfer of
the rights under the agreement

Delegation

Contractual duties can be transferred to a third party through the process of delegation
Delegation entails a substitution of debtors and requires the consent of all the parties
concerned: the creditor, the original debtor and the new debtor

The traditional view is that the delegation will always involve a novation which is the
extinction of the original debt and the creation of a new one in its place

Recently, it has been held that novation is not needed to transfer a contractual debt but
this remains uncertain

A party may transfer all of their rights and duties to a third party other by a complete novation
of the contract or by a combination of cession and delegation

This process is called an assignment and if effected by means of a contract that has three
parties

Performance by a third party

If a third party intervenes in a contractual relationship between others by making a

performance owed by one of the parties, their intervention does make them a party to the
contract

Performance made to a third party

if the parties agree that the debtor may discharge their obligation by making their
performance to a third party, this is called an adiectus solutionis causa

The third party is merely added for the sake of payment and they do not become a party to the
contract

Parties to the Contract 5