BER310 Slides and Explanatory notes

Mr S Makhubu
 Study unit 2.1.2:
Consensus and the
Contents of the Contract
CONTENTS OF THE CONTRACT

• A contract is concluded when the offer subject to other requirements

is accepted.
• In other words, declarations of intent of the parties must correspond
and be the same.
• The contents of each contract must be determinable from the
declarations of intent by the parties.
• These declarations of intent are a consensus between the parties.
• However, contracts are usually wider than the terms found in the
declarations of intent by the parties as some of the terms will be
implied by law and assumptions.
• Consensus is divided into divisions.
ACTUAL CONSENSUS
• Parties actually reach consensus expressly (words/writing) or
by conduct (Tacit) and the law will also bring other terms in
the contract and these terms that come by operation of the law
are known as naturalia.
• These are automatically applicable and do not depend on the
contract or agreement.
Express consensus
• The contents of the contract as determined by actual
consensus are known as:
❑ essentialia,
❑ incidentialia,
❑ conditions,
❑ terms,
❑ assumptions,
❑ guarantees and
❑ modul clauses.
 ESSENTIALIA
• These are the basic minimum characteristics of a nominate
contract or specific contract that distinguish it from other
contracts.
• Consensus on these minimum characteristics of the contract must
be reached.
• Without them there is no specific contract.
• Note well, the essentialia are not validity requirements.
• If you have all the essentialia, the contract should still comply
with all the general requirements of the contract.
• If one essentialia is missing but the general requirements are met,
you will have a contract, but not a specific contract. E.g. Sale.
 e.g. In the contract of sale, the essentialia are:
• The nature of the contract is to buy and sell. (objective/aim of the
contract)
• The item or thing to be sold (object of the contract)
• The price. (money to be paid to gain the object)
• These characteristics make the contract of sale and distinguish it
from the contract of lease.
• This means that a consensus on other requirements of the contract
can be reached without reaching consensus on the essentialia and
a contract would be valid.
• But will not qualify as a contract of sale (nominate contract).
Incidentialia
• These are terms that parties can reach consensus on to
suit their respective circumstances. E.g. payment of
money on the last day of the month or taking
possession of the property on the last day of the month.
Conditions
Conditions do not refer to terms, guarantees, assumptions
or modal clauses but refers to the circumstances where
performance of all or some duties by one of the parties
depends on the occurrence of an uncertain event future
event.
• There are suspensive and resolutive conditions.
Conditions continues
• Suspensive conditions refer to a situation where performance
cannot be claimed until the occurrence of the condition (uncertain
future event).
• The non-occurrence of the condition suspends the enforcement of
the contract.
• E.g. A agrees to sell his crops to B and B buys the crops. This is on
condition that the crops will successfully grow and A will harvest.
The contract is sealed but subject to a suspensive condition. B can
only claim the crops unless A’s crops have grown and has harvested.
A cannot destroy his crops. OCCURANCE OF UNCERTAIN FUTURE
EVENT MAKES CONTRACT OPERATIVE.
 Resolutive conditions refer to a situation where the continued existence of
the contract depends on the occurrence of an uncertain future event.
• E.g. B agrees to lease A’s property for the next 5 years on condition that
effects of Covid 19 will be resolved and things will go back to normal in the
next 2 years. IF NOT CONTRACT ENDS.
• These do not prevent the existence of the contract but the continued
existence depends on it.
• Event must not be illegal or contrary to the aim of the contract.
• Where no time frame is given for the condition, reasonable time will be
applicable.
• Where one party unreasonably prevents the condition to happen then
fictitious fulfilment of the condition will be assumed.
 The requirements of suspensive conditions
• Only enforceability of the contract is affected not validity.
• A condition must refer to a future event.
• The future event must be uncertain.
Requirements of resolutive conditions
• Contract exists
• The condition must be uncertain and refers to the future.
• The circumstances of the contract will determine the
consequences of termination.
Terms
• Terms is when the enforcement of a contract or continued
existence depends on certain future event, even if not known
when it will happen.
• e.g. Suspensive term: Jack and Piet conclude an agreement of the sale of the car, in
terms of which Jack is selling his car to Piet. Moreover, they agree that the possession of the
car is transferred to the buyer after the death of the seller or after 10 March 2024.

• The occurrence of the certain future event leads to

enforcement and non occurrence (while waiting) leads to
suspension of enforcement.
• Resolutive term: A can occupy the leased property until he dies
or until 2028 which ever occurs first. See example in the book.
Assumptions
• Assumption is when parties assume that a certain specific
fact exists.
• Consensus must be reached on the bases of the actual
existence of the fact and if not, then there is no contract.
• E.g. B agrees to buy C’s car on assumption that the car has
been serviced annually or upon covering 15km annually
throughout its life span.
• If this is not the case then no consensus is reached.
Guarantees
• Guarantee refers to the affirmation or undertaking that a legal
fact exists or not.
• e.g. A sells his BMW to B and guarantees that it was serviced by
Charmain a well known BMW specialist mechanic in the country.
• If this is not the case, then A will be held liable for material non-
performance.
• A will be in breach of a guarantee.
• Not fault is required before A can be held liable.
• Guarantees may be made expressly, tacitly (from circumstances) and
apply by operation of the law. E.g. Warranty against latent defects.
Modul (Modus) clauses
• Modus is where one party in a contract places a duty
on the other party to do a specific performance.
• e.g. B sells his land to C for R7000 and requires C to
build a park for the community.
• Modus refers to a future event.
SEE CONSENSUS THROUGH CONDUCT IN THE
TEXTBOOK. THE EXAMPLES IS CLEAR.
CONTENTS BASED ON ASSUMED CONSENSUS
• Assumed consensus is that which is taken or deemed to exist.
• It can affect all the terms of the contract.
• Assumed consensus can be in terms of implied terms or the terms
of a ticket contract.
• In instances where parties failed to agree expressly or tacitly about a
term of a contract, courts may add the term as implied term from
the contract.
 The court may read the term on condition that or upon
the fulfilment of these requirements:
• The inclusion of the term is fair and reasonable(sensible)
• The term must be based on the common intention of the
parties.
• The only reasonable interpretation of the contract must show
on the balance of probabilities that the parties would have
included the term if they were aware of their omission.
• The term must promote business efficiency to the contract.
• Must be clear and unambiguous (not capable of two
meanings)
• The term must be necessary.
Ticket contracts
These are contracts where a service provider issues a ticket or a document or
publishes a sign that contains terms and conditions of the contracts. E.g. a bus
ticket or a sign as you enter a shopping complex.
Are the terms binding?

• The contracts are binding if the receiver of the ticket knows or ought to have
known there is writing the ticket, doc or sign.
• And the writing referred to the terms and conditions of the contract.
❑ If the receiver answers yes to the questions, the contract is binding.
❑ If the above requirements are not met, did the issuer of the ticket,
document or sign do what is reasonably necessary to inform the
receiver about the terms and conditions?
❑ If yes, to the latter question, then there is a contract, if not, there is no
contract.
 The influence of the Consumer Protection Act if
applicable
• Where the supplier is indemnified from liability, the
consumer must be notified in clear and catchy writings.
Where the supplier is indemnified for injury or death of
unusual character, the consumer must assent (sign or initial)
to the indemnification.
• Indemnification should fair and reasonable.
• The indemnification must not include abuse, false,
misleading information.

• Failure to comply with this means that the contract is void.

 Cancellation or over-booking by the supplier
in ticket contracts (CPA)
In ticket contracts, receivers have the right to
cancel.
➢ In case of over-booking by the supplier, the receiver of

the ticket is entitled to the refund, interest at the

appropriate rate and compensation for loss suffered.
➢Defence is that failure was not as a result of the doing
of the supplier and the supplier has an alternative and
informed the receiver and acted reasonably (diligent).
Consensus through operation of the law
The parties in the contract need not to reach consensus in terms of the
terms that are included by law: Legislation, common law and trade
usage.
Common law:
• The terms included in terms of common law in the contract are
known naturalia. These terms may be excluded by incidentalia.
• Warranty against latent defects (hidden defects) is a naturalia.
• Warranty against latent defects forms part of every contract unless
excluded by “voet stoets or as is term”.
• Exclusion of warranty against eviction by third parties is invalid.
Legislation
• Certain contracts invite the application of NCA and
CPA to promote efficiency of business and protect
consumers.
• Legislation may include terms that cannot be
excluded in the contract even if parties did not
agree for its inclusion.
• Consensus will be deemed to exist.
Trade usage
Consensus may be deemed to exist between parties in terms of trade
usage e.g. interest paid on sale on credit.
The following requirements must be complied with:
➢ Be applied universally and uniformly. This means that it applies to
everyone in the same manner.
➢ Been established over a long period of time.
➢ Well known in the industry
➢ Be sensible and needed or necessary
➢ Content specific and determined with certainty.
➢ Not against any rule
➢ Not be against any term in the contract
THE INFLUENCE OF CPA TO THE CONTENTS OF
CONTRACTS.
• The CPA has sections that aim to ensure fairness in the
supplier and consumer relationship in the context of
contracts.
• Suppliers no longer have the unfair advantage that
manifested from principles such as the court cannot look
behind the signature of the consumer.
• Suppliers should refrain from any form of
misrepresentation.
• Suppliers must provide adequate information to
consumers in writing.
Plain language contract
• Contracts should be drafted in plain language.
• Terms that excuse the supplier from liability must be
written in catchy form of writing.
• Failure to comply, the court may remove clauses in the
contract or declare void or provide any order that is just
and reasonable.
 A contract is plain and understandable if a
consumer with minimum literacy skills and
consumer experience is expected to understand
it.
The following factors should be taken into consideration:
• Context, detail and consistency of the contract
• Organisation, form and style of the document.
• Vocabulary, usage and structure of the document.
• Use of example or aids of reading.
 Unfair, unreasonable and unjust terms of contract
• The supplier cannot enter into a contract that is unfair to the
consumer or where the consumer is required to waive their
right or where the supplier is excused from liability.
Unfair, unjust and unreasonable terms and
conditions:
• One sided in favour of the supplier
• Inequitable to the consumer
• Consumer relied on false, misleading and deceptive
representations.
Prohibited transactions, agreement, terms and
conditions
• Suppliers are prohibited from entering into contracts
that aim to defeat the purpose of CPA and to subject
consumers to fraud or misrepresentation.
• See all the prohibited practices in paragraph 3.86
• The requirements cannot be avoided and any
agreement that seeks to avoid the above is void.
Right to return of goods

• Consumers are entitled to return goods to suppliers

with 10days after delivery and
• The supplier must refund the consumer within 15
days after delivery.
• This is where the goods were marketed through
direct marketing (writing e.g. email or in person).
• This is known as the right to ‘rescind or cooling off’.
With regards to unsafe goods or defective goods (failure to
meet implied standard) the consumer may return the
goods within 6 months.
• This is on condition that the consumer did not get an
opportunity to inspect the goods.
• Here the risk pertaining to the return of goods lies with the
supplier and may claim costs for use the goods.
Cancellation of reservation or orders
• The consumer may cancel the order or reservation.
• However, the supplier will have right to reasonable deposit for cancellation.
• The reasonable deposit will depend on the following:
✓ Nature of the goods
✓ Cancellation notice
✓ Potential to find substitute
✓ Practice of particular industry
The supplier cannot charge cancellation fee due to hospitalisation of the
consumer or death.
This does not apply to franchise or custom made orders.
Implied warranties
Implied warranty of safe and quality goods
• Implied warranty is affirmation and acceptance that goods are of a
certain standard or quality.
• It does not apply to goods sold on auction or
• Where goods are damaged after leaving the control of the supplier
or
• The consumer was informed and accepted.
• This is addition to any warranty in terms of common law, CPA,
public regulation and express warranty or condition
• The transaction which includes once off transactions and
transactions that excludes once transactions are catered for.
Implied warranty of good quality labour and repair
work.
• The supplier of labour or repair of any repaired part or
installation of a new part warrants or affirms the quality of
work for three months after the work or longer if the
supplier provides in writing.
• This does not apply if the user has abused or damaged the
repaired or the installed part.
• This warranty or affirmation of quality does not apply to
wear and tear.
 Implied warranty of timely delivery and performance

• The supplier must deliver upon the agreed time or reasonable time
if no agreement exists at the agreed place.
• The place of delivery is the supplier’s business.
• The risk of the goods remains with the supplier until delivered to the
consumer.
• Delivery takes place when the consumer communicates that he
takes delivery or does anything that limits the ownership of the
supplier.
• Or if the consumer keeps the goods of the supplier for too long
without authority and without informing or indicating that she does
not want to.
Implied warranty of authority and quite
possession
• It is implied affirmation or warranty that the
supplier of goods and services has the right to
sell, transfer ownership, lease and the
consumer will have the right to enjoy the
goods and services.
 Self assessment
Question 1

Lima is the owner of a game farm. Lima and Kilo concluded a contract in terms of which Kilo must
construct a one kilometre stretch of road connecting Lima’s house to the provincial road. The parties
agreed that the road should have a concrete surface and be at least four metres wide. The following
clauses are found in the contract between Kilo and Lima. Identify the type of clause.
• Kilo and Lima concluded the agreement subject to municipal approval for construction of the road being
obtained by no later than 10 September 2019.

• The contract will terminate immediately if Kilo is sequestrated or dies. Lima shall pay Kilo a fee of R100
000 for the construction of the road.
• The contract will not continue for longer than three calendar years, irrespective of whether or not the
project is completed.
• Kilo may not disclose any information pertaining to the location of the rhinos on Lima’s farm to third
parties.
Question 2
Explain the meaning of the following terms:
Suspensive conditions
Resolutive conditions
Terms
Modus
Assumptions