SPECFIC CONTRACT:

TOPIC 2: CONTRACT OF SALE

PART 1

1. NATURE AND CONCLUSION

1.1 DESCRIPTION:

• Definition: agreement betweenn the parties that seller will deliver the merx and transfer all his
rights therein in return for payment of purchase price by buyer
o Reciprocity
o You do not have to be the owner of the merx to conclude a contract of sale because
it entails a transfer of rights (If owner, then the buyer will be made owner, but not a
requirement that he has to be the owner to conclude a contract of sale). NB see later
when we get to discussion on the sale of another’s things.
• Essentialia of COS: must agree on 1) merx and 2) price for there to be a COS
• NB:
o NOT an essentialia/validity requirement of COS that the S transfer ownership to the
buyer
§ COS is not void/invalid if the S does not make the buyer owner
§ (See reasons later when coming to sale of something belonging to someone
else)
o Parties must have intention to buy and sell (some textbooks claim this is essential)
§ Myburgh thinks this is redundant because by agreeing on the price and the merx
naturally and inherently there is the intention to sell and buy. Thus don’t need
separate requirement

Distinguish from other types of contracts:

a. Sale and Lease
o Superficially similar looking contracts – pay sum of money for a merx.
o COS intention of parties that Seller transfers their rights in merx permanently
o Lease: intention that lessor transfers their rights to the leased object temporarily

b. Sale and Exchange

o Usually, object given in exchange for another object
o COS: merx is given in exchange for sum of money not another object.

Object in exchange for object + sum of money?

• EG – Trade in transactions
o A wants to purchase a new car from a car dealership
o A trades in old car plus pays money to B
o For the trade in B gives A new car
• This type of contract can either be a COS or a contract of exchange.

• Wastie v Security Motors 1972 –how to determine whether exchange or COS.

• POD – parties’ intention is decisive
• If the intention is UNCLEAR, then court looks at which component of the traded in
performance has the largest VALUE.
o If traded in part (“car”) has the higher value = exchange
o If money component has greater value, then is COS.
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 § Trade in contracts with vehicles are presumed to be COS
§ Emphasis on purchase price
• It is not only about the monetary value
o Test to determine = look at the intention and where the monetary value of the car
is used to calculate the amount of cash – then sale and not exchange.
o Not look at whether the thing is valued more than the money
o Look at how the thing is being used

Difference between sale and exchange will be important in the case listed below
• Right of pre-emption and what constitutes a trigger event which would make that right
enforceable.
• Right of pre-emption – someone has right of preference to conclude a contract to acquire
an object.
o “Should grantor of right ever wish to sell the object, the holder of the right will have
first choice of purchase thereof”
• Trigger event (activates right and allows holder to exercise it) = some indication that the
seller wants to sell.
o If you were sneaky as the holder and wanted to avoid the preference right, then can
simply exchange the object with someone else and conclude contract of exchange
• Approaches numerous people, entering into conversation / negotiating about potential to sell
(VAGUE) VS actually making an offer
o Would need to specify in your contract

• Distinction is important with transfer of ownership where the transfer of ownership is a concern
(price payment rule)
• If the seller of the merx is also the owner, then the intention is that the right of ownership will
be transferred.
• With exchange, ownership is transferred at delivery.
• With COS need to draw distinction between cash and credit sale.
o Cash sale: ownership transfers when there has been delivery of merx + payment of
the purchase price.
o Credit sale, ownership transfers upon delivery only.

• Aedilitian actions/remedies:
• Available when dealing with merx which is defective or where seller has made certain
misrepresentations about the characteristics or attributes of the merx.
• Available remedies to a party in event object is defective or not what it was promised to be is
o either terminate contract and reclaim purchase price OR claim a reduced purchase
price.
• Aedilitian remedies initially developed for COS but then also extended to exchange
contracts.

Question was whether aedilitian remedies are also available when dealing with trade in
transactions (mixed types of contracts)
• Trade in transaction of vehicles, the buyer had a new vehicle and as payment for the new
car, he traded in his old car and paid a sum of money. The buyer misrepresented the year
model of the car that he traded in.
• Could the seller could institute an aedilitian action against the buyer?
• When dealing with aedilitian remedies we are looking at remedies these are remedies
available to the buyer against the seller when they are defects in the merx or
misrepresentations about the attributes about the merx = general rules.
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 o The facts of this case are opposite of these rules, why? Because the question is
whether the seller can institute the AA against the buyer and
o whether the AA remedies are available in relation to the performance which
constitutes the price? More specifically when the defects relate to the non-monetary
component of the price (here it is a car)?

Janse van Rensburg v Grieve Trust 2000 – PRESCRIBED

Facts:
• Parties entered into an agreement whereby the buyer bought a 1990 model Opel from the
seller for R44 000. Payment was agreed to be done by a trade-in of the buyer’s other
vehicle, a bakkie. The balance minus the value of the traded vehicle was agreed to be paid
in cash through a credit agreement. – parties entered into a single contract of purchase and
sale and the traded in vehicle formed part of the purchase price of the vehicle.
• Seller was under a bona fide impression that the vehicle to be traded in by the buyer was a
1993 model but was a 1989 model – misrepresentation by way of dictum as being
something which it is not.
o The parties agreed that any representation of the vehicle would be innocent and in
good faith.
o The parties also agreed that if the respondent was aware of the true state of affairs
he would not have consented to the trade-in value of R44000 but rather the reduction
in purchase price being claimed by the seller.

Legal question:
• Are aedilitian actions available in trade-in agreements to the seller?

Ratio:
• Judge referred to Wastie v Security Motors where it was held that the action for a reduction
in purchase price applies to a latent defect in a vehicle traded as part of the purchase
price (facultative performance).
o Datio in solutum – a giving in payment to discharge a duty btya performance
of something other than the agreed or due debt agreed to by the creditor. It
relates to the whole debt and not a part thereof.
• Does the actio quanti minoris apply to trade in agreements?
o Court held that this court is bound by the Wastie decision where the Court extended
the use of the AQM to trade in agreements where the vehicle traded in is defective.
o The seller should be protected from the consequences of latent defects or
misrepresentations relating to the vehicle traded in by the purchaser as in line with
principles of justice, equity and reasonableness in our common law.
o In addition to public policy, boni mores also demands that the relevant law be
extended and adapted to meet the needs of modern commercial practice.
• In accordance with logic and fairness applied in the Wastie decision – the judge
understands public policy to require a fine balance to be established between the relative
rights, duties and interests of the parties.
• In a trade-in agreement, it would be unjust that the seller be liable for latent defects in and
misrepresentations in relation to the vehicle sold by him while no liability attaches to the
purchaser regarding the vehicle traded in by him.
o If the aedilian actions are available to the one they should be available to the other =
otherwise contradicts public policy.

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 • Held: There should be an extension of the aedilitian actions in accordance with the Courts
constitutional duty to develop the common law in S8(3) of the Constitution. NB here is that it
does not matter that the defective or misrepresented thing is not the object of a sale, the
aedilitian actions are equally applicable to an object forming part of the purchase price of a
thing purchased.
o The AQM is available to the seller here for the misrepresented vehicle.

Two opposing views to question above in JVR (both discussed in this case)
• In favour of extension of remedy to seller (Wastie v Security Motors)
o (1) Trade in transaction is similar to a contract of exchange where the object being
exchanged are treated as both merx AND price simultaneously.
§ If it is available to both parties, then why can’t you extend rule to a seller in COS
when the issue is with the price
o (2) policy based reason
§ In the absence of such an extension to the seller it creates the possibility that the
buyer would be in the position where he could act with impunity (creates
possibility that they buyer can make as if he didn’t know that the non-monetary
part of the price was defective and unless the seller can prove FRAUD (difficult),
the buyer will get off scott free.
§ In order to correct or avoid that potential problem there is a need to balace the
interests of buyer and seller. We do that by awarding the aedilitian remedies to
the seller as well.

• Mountbatten v Mohamed – dissenting view

o Against awarding aedilitian remedies to the seller because
§ (1) Buyer has special remedies irt merx (aedlitian), no reason to extend
application to the seller, BECAUSE seller can protect himself with a SPECIFIC
CONTRACTUAL clause in the contract
• The judge in this case was not aware of any need to trend in the law of
sale of balancing the interests between buyer and seller
§ (2) In other contracts (lease, mandate) one of the parties doesn’t get similar kind
of protection (aedlitian remedies) where landlord has misrepresented the quality
of lease premises OR agent representative has misrepresented their skills
• If not available to parties in these similar situations then why should it be
afforded to a seller?
• Response to this argument: aedlitian remedies have NEVER been
available in a lease/mandate contract, they have unique remedies to deal
with issues of misrepresentation or defective premises
o Thus argument in MB falls flat

o Argument that its always open for the seller to project themselves
§ This argument based on the idea that the seller is always in a stronger bargaining
power which is not always the case
§ There are plenty of cases in the law of sale where the law does balance both
parties interests

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• Back to Janse Van Rensburg
o Judge in JVR supported view aedilitian remedies should be extended
o Court supported the view in WASTIE, for the same reasons raised in WASTIE BUT over
and above that, based on the fact that it has inherent power of a SA court to develop the
CL (Const duty on courts to dev the CL where necessary), power that is part and parcel
of SA’s RD heritage (reasonableness, fairness and justice req dev of law to keep up with
modern times)
o These aedlitian actions were a specific response to a specific problem
§ Inspired by a need for justice, fairness and reasonableness
• Same values that motivate the extension of the application of aedilitian
remedies to sellers as well
• Would promote equality btwn parties that each one has remedies
available for roughly similar facts (either dealing with price or merx)
• Seller could claim reduced contract price (actio quanti minoris)

Difference between COS and contract of mandate (with an independent contractor)

c) Independent contractor
• Renders service for remuneration
• TEST: Ask who provides material
o Making of a gold ring (Roman Law)
i. A asks B to make a gold ring for them
• A provides the gold to B, and B then makes the ring = contract with
independent contractor (purpose of to render a service)
ii. Where B provides material and service = COS
o Test still applied today but there are Issue with tests arises ito building contracts
§ Building contract supplies the material AND the services BUT we still classify
the contract as one with a IC and NOT COS
§ Best solution explaining deviation comes from international trade law (SA not
a party to this but still seems to be alluded)
• Two-fold test
1. Who provides material?
2. If one party provides BOTH material and the service, then
must ask whether the dominant part of the duties on the party
relates to the provision of material OR services?
§ If provision of services à IC
• Building contractor, dominant part of duty is to
provide services not material
§ Provision of material à COS

1.2 CONSENSUS ABOUT THE MERX

1.2.1 Nature of the Merx

• Intra commercium: can be a subject of a commercial transaction
o ONLY few restrictions that still apply (can’t sell piece of sea shore) à this is outside
of commerce
o Can’t validly sell a merx that already belongs to the buyer (him/herself)
• Movable and immovable can be the object of a sale
• Corporeal and incorporeal can be the object of sale
• It is in the interest of sale that things and be freely sold and bought
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1.2.2 Certain / ascertainable
• Your performance (the merx) must either be certain or ascertainable. If not contract is void
• Certain: specific description
• A sells horse moonlight to B (very specific)
• Ascertainable (capable of being made certain):
• You can describe the merx ito certain characteristics it must have
• You can describe the merx ito particular purpose
• Eg: want a water pump capable of producing 2000l per minute
• Sale by sample
• When samples are used to drive a sale, must think about the function of the
sample (why is it being referred to in negotiations)
• Sellers liability for characteristics of merx
• Garrett case
• Good example of a sale by sample
• a) Where sample merely serves as SALES talk / puff (advertising)
• Has no legal implications ito contractual liability

• b) Must distinguish from situation where parties intended that merx that would
form subject of the sale would have exactly the same characteristics as the
sample itself
• Where the sample actually motivates the conclusion of the contract
• Where the merx doesn’t comply with the characteristics of the sample, the
buyer is entitled to reject the merx because the merx delivered is
completely different to the merx promised

• c) Must distinguish from where, the seller is WARRANTING that the merx will
have the attributes of the sample
• Dealing with breach of contract. Therefore, all the contractual remedies
are available.
• Why are these distinctions important?
• Puff: sales talk, if content is incorrect there would NOT be liability on the
seller
• Warranty or same characteristics: seller would incur liability for the fact
that the merx does not have the same characteristics as the sample
• Merx described as part of kind or class – generic/genus sale
• 3 bags of maize / 5 tons of tea to buyer

1.2.3 Must exist or be capable of existing in the future

• Merx: described as part of a family or a class, because you have described it this it has various
other implications, one of which is that the merx must exist OR be capable of existing in the
future
o If the merx does not exist at contract conclusion, what effect does this have on the
contract?
§ Possibility of performance – initial impossibility will ALWAYS render a contract
void because no merx
§ But certain situations when comes to contract of sale in particular where rules
relating to initial / supervening impossibly (after conclusion) are slightly different

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• Basic POD – if performance has become impossible or if it was already impossible without
the knowledge of the parties at the time of contract conclusion, the general rule is that the
contract is void. There are situations where it comes to contracts of sale in particular where
the rule relating to initial impossibility or even supervening impossibility are slightly different:

(a) Generic sale

• Description with regard to kind or class or family of things
• Unlimited or limited genus sale
• i) Unlimited: 3 bags of tea
• Where the source of the merx has not been specified
• Supervening impossibility of performance is IRRELEVANT
• Seller will remain liable if the bags of wheat are destroyed in an
accidental fire because a genus can never perish
• thus if bags are destroyed in accidental fire, seller is still liable to
deliver 3 bags of wheat from somewhere else
• ii) Limited: where source of the merx has been specified
• Eg: 3 bags of tea from rooibos farm / 10 bags of wheat from the farm XYZ
• If source of merx is so important that the buyer only wants the merx from that
source
• Accidental damage or destruction of merx can have an impact on the sellers
liability to deliver the merx but this is regulated by the RISK RULE
• Genus non perit (genus can never perish)

(b) Emptio rei speratae (B & L 28 n 171)

• Merx does not exist at the time of contract conclusion but given the nature of things it is
likely to exist in ordinary course of events in the future
• Sale on condition that merx will exist in the future
• EG: sale of future of crops and sale of objects that have not been manufactured yet
but which are likely to come into existence in the future
• EG: set of false teeth, designed specifically for your mouth – buy them because will
most likely in ordinary course of events exist in the future
• SELLER bears risk
• If merx does not materialise
• Argument, when dealing with a ERS it is a sale subject to a suspensive condition
(that merx materialises)
• Effect on a contract where condition is fulfilled: the contract will come into
existence and become enforceable
• If not fulfilled: contract terminates retrospectively and seller will not be
compensated

c) Emptio spei (B & L 28 n 172)

• Purchase of a spes (a hope)
• Where a buyer gambles because they are purchasing a hope that the merx will
materialise but nothing more than a hope
• Speculative - buyer bears a risk, has to pay full purchase price even if nothing is caught the
following day. But also means that should the seller catch more fish than what the parties
thought that benefit also comes to the buyer.
• Buyer bears risk of merx not materialising
• Buyer has to pay the full purchase price even though seller catches nothing in net on
the following day

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 • Also means, should the seller catch MORE fish that parties thought he would then
this benefit also comes to the buyer
• EG: hunting contracts – conclude contract on assumption that hunter would be able
to shoot an animal
• EG: lotto
• Normal COS – not subject to suspensive condition

1.2.4 Sale of res aliena

• Sale of merx belonging to someone else (other than the seller).
• It is not validity requirement for sale that seller must be owner
• COS will not be void if seller is not the owner of the merx
• Reasons for this
• 1) would put a spanner in the commercial works if you make ownership a validity
requirement for a COS as there are many COS concluded with sellers who are not
owners
• 2) if ownership were a validity requirement then buyers who sensibly conclude COS
with sellers who are not owners, when they find out the COS is not valid, will only sit
have unjustified enrichment remedy at their disposal
• Tricky remedy to use effectively
• Thus to circumvent this, the law comes up with the following solution, COS concluded with a
seller who is not the owner is valid BUT should a 3p with a stronger right threaten to take
away the merx from the buyer then the seller would be liable because implicit warrant given
by seller that the buyer will not be evicted / disturbed in their possession of the merx
• BUT transfer of all rights and possibility of liability for eviction
• Effect of contract and delivery where seller is not owner –not void the buyer becomes
a bone fide possessor of the merx therefore if the buyer has made any improvements
to the merx while it was in his possession, compensation for the improvements may
be claimed either form the true owner or in circumstances from the seller where that
buyer is evicted.
• If you guarantee that you are the owner of the thing and you are not =
misrepresentation

1.3. CONSENSUS ON THE PRICE

Westinghouse Brake and Equipment (Pty) Ltd v Bilger Engineering (Pty) Ltd 1986 2 SA 555
(A) 574B-C:
• “It is a general rule of our law that there can be no valid contract of sale unless the parties have
agreed, expressly or by implication, upon a purchase price. They may do so by fixing the
amount of the price in their contract or they may agree upon some external standard by the
application whereof it will be possible to determine the price without further reference to them.”

• Agreement requires parties to either agree on an amount that will be paid OR agree on a
formula or external std that will make it possible to det the price without further reference to
parties themselves
• What does “without further reference to the parties mean”?
• 1) Underlying assumption is that it assumes your contract of sale is in writing
• 2) Because it is in writing and appears to be an integration then both the parol
evidence rule will be applicable as well as the closely related rules of
interpretation.

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 • A court may not consider the parties prior negotiations either in
determining whether a term exists as part of the written agreement OR in
determining what the meaning is of a particular term
• If want to establish if parties have agreed on a price you cannot look at
evidence of prior negotiations OR what they may have intended

1.3.1 Price must be sound in money or partly in money

• Initially the Romans applied this rule quite strictly, if you want to conclude a sale the price
has to be in money. Over time this rule was relaxed slightly so that there is the possibility of
that you price can be partly in money and partly of a thing.
• However, this remnant of the RL emphasis on money still finds expression when we are
trying to figure out, when dealing with mixed types of contracts (whether its sale/contract of
exchange) – parties intention is decisive and if not need to look at the performance that is
trade in and the value of the money vs the vehicle.
o Traditional view (RL): Where there is doubt, you have to look at the value of the thing
that is traded in/part of the price and the value of the money and whatever is more,
will determine the nature of the contract.
§ If a large amount of money and there is relatively little value in the thing which
accompanies it = contract of sale
§ If the value of the thing is more than the value of money = contract of
exchange
o Modern view used in SA: The intention of the parties have to be considered to
determine which type of contract. If the intention is unclear then you can look at the
value – Wastie v Secuirty Motors & Mountbatten Investments v Mohammed
§ When the money part has greater value than the object within a contract of
sale, this is from RL and the emphasis on money that distinguishes sale from
an exchange.

1.3.2 Certain / ascertainable

• Price OR agreement on price must be certain / ascertainable
• Agreement can be
o Express or
o Tacit – Buy groceries in the shop, bring to checkout and pay, don’t say anything
• How can the parties meet the requirement of certainty?
o Agreement on fixed sum OR method of determination (reference to an external
standard or formula)
o Formula catering or fluctuation of commodities
§ Eg A agrees to sell 50 barrels of oil to B ito A’s ruling price list as at 15 March
2022
• Method at det. a price when don’t know how much barrels of oil will
cost on 15 March
§ Eg escalation clause in lease agreement
§ What is too uncertain? Where this is some indication that the price the parties
have agreed upon is a not the final price, a random amount and not certain
that it will be the final price.
§ Burroughs Machines v Chenille Corp of SA 1964 (W)
• “Appropriate price”; “not final”
• The price was not final – it was an approximate price. Did not want to
decide on the final price up until delivery so that the parties can make
changes for the manufacturing costs

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 • They wanted the price to be adaptable
• Approximate price = not sufficiently certain and not a valid contract of
sale

Specific instances where certainty requirement can be tricky:

(a) Sale ad mensuram

• Price is certain only once the merx is counted, weighed, measured
o Eg A buys all the wheat in B’s silo at R10 000 per ton
§ All this wheat needs to be weighed before det how many tons of wheat there
are so you can finally establish the price
o Before this merx is counted, weighed or measured the price is merely ascertainable
§ Only once merx has been weighed will the price become certain
• Do not confuse with a genus sale or specifically a limited genus sale. Limited genus
sale is to do with the merx, whereas a sale ad mensuram has to do with ascertainable
price.
• Therefore, it is possible to have a limited genus sale and a sale ad mensuram on one set of
facts as they are dealing with TWO different essentialia.
o Limited: has to do with the MERX being ascertainable and not the price
§ Eg A buys all the grade 1 wheat produced by the farm X (specific place)
§ Iof the merx to become certain rather than merely ascertainable this grade 1
wheat must be INDIVIDUALISED from the rest of the sellers wheat and be
appropriated to this particular contract
• Ie must be some or other action that identifies the particular merx as
the subject of the COS

o Sale ad mensuram relates to ascertainable price

§ At R1000 a ton
o à possible to have both of these on the same set of facts since dealing with two
different essentialia

(b) Reasonable price?

• Parties are agreeing on possibility that the parties will agree on a reasonable price
• Acceptable in contract involving the performance of service that the parties may agree
on a reasonable remuneration BUT in a COS and lease – parties may NOT validly agree
on a reasonable price or a reasonable rental
• Cases setting out traditional position in SA law – that an agreement on a reasonable
price is too uncertain, because HOW do we determine what this reasonable price is and
WHO determines a reasonable price
o POD: if parties agree on a reasonable price or reasonable rental then this is not a
valid COS or lease agreement
§ (i) Adcorp Spares v Hydromulch 1972 (T) - PRESCRIBED
• Court did mention in passing that while the agreement on a
reasonable price or lease does not result in valid sale or lease, it may
still be possible to conclude that the contract is valid albeit nameless
• Thus not a specific type of contract but it may still be possible to
recognize the parties arrangement as contractually biding albeit a
nameless type of contract

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 • Romans: nameless contract (when don’t fit into other categories) à
this is the argument being made in this case
o 1) agreement on reasonable price is a valid way of agreement
o 2) Alternatively say it is a valid contract, just doesn’t have a
name

§ (ii) Erasmus v Arcade Electric 1962 (T)

§ iii) Genac Properties v NBC Administrators 1992 (A) - PRESCRIBED

• Relevant portion of this judgement is quoted in Engen Petroleum =
only have to know what is quoted in Engen about Genac.
• Court states that it is illogical that it is acceptable that parties can
agree on the performance of a service for remuneration but that they
cannot decide on a reasonable price ostensibly on the basis that it is
too uncertain. = why is it certain to agree on reasonable remuneration
but not on a reasonable price or rental?
• SA position is outdated compared to other jurisdictions which leads
Court to make the remark – if a court can on the basis on relevant
evidence determine what would be a reasonable price in the
circumstances, then that particular contract of sale should be valid.

o If parties agree in their contract that the price will be reasonable = not certain
enough. Must at least specify a certain amount of money.
o Development in law regarding flexibility towards recognising a reasonable price – see
this in obiter remarks in Genac but it is also a suggestion made academically:
§ We should not assume as a matter of course that a contract, where the
parties have agreed on a reasonable price, is always invalid. Instead, we
should try and discover what the parties meant when they agreed on a
reasonable price and if this is possible to discover, then we need to look at
whether there is sufficient evidence that helps to give effect to what the
parties meant.
o If the parties no specifically agree on an amount or there is a reference to a RP the
assumption is that what the parties mean is the retailers usual price.
§ Court would look at evidence to determine whether the amount of the usual
price can be established. That usual amount would be what the retailer
charges other customers / what that retailer himself paid for that merx
(conclusion depends on facts at hand).

• Will be asked in exams + what do you think the current position should be (argue for or
against the current position)- Go read cases to be able to make an argument
o Erasmus v Arcase Electric
§ If the price is a reasonable one, then it is uncertain and there is no valid
contract of sale. It might be another form of contract but it is not a contract of
sale. It might be another form of contract but it is not a contract of sale.
o Adcorp Spares v Hydromulch
§ Confirmed traditional position, as mentioned in Erasmus v Arcade Electric.
Judge mentioned reasons why it is too uncertain.
§ includes – Reasonableness can fluxgate
§ Third party can be used as long as he can be identified.
o Genac Properties v NBC Administrators (Obiter remark )
§ Judge did not agree with the traditional approach.

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 • For work done – reasonable price is acceptable so why is it not
allowed with regard to sale and lease.
§ Referred to English law
• Acceptable – if there is no price agreed upon, then the price is a
reasonable one
§ What a reasonable price will be depends on the matter
• Why is there still a debate? Not necessary to be decided on for the
appeal in this case.
§ England and USA – accepted. A reasonable price is considered sufficiently
certain.

Genac Properties v NBC Administrators 1992 (A) [PRESCRIBED relevant portion quoted in
Engen Petroleum v Kommandonek]
• Judge cites Adcorp Spares, which held that a sale for a reasonable price is invalid, and also the
contrary opinion of Prof Zeffertt, who says that you cannot say as a blanket rule that agreement
on a ‘reasonable price’ is always too uncertain
o Prof Z says that an agreement to pay a reasonable price may be capable of being
reduced to certainty if the court is able to determine what is reasonable in the
circumstances of a particular agreement
• There are situations where the meaning of a reasonable price is ascertainable, and we should
give effect to these situations
• The court says that a reasonable price is acceptable in contracts of sale in England and the
USA
• The statements by the court in Genac Properties are obiter as it was not necessary for the court
to decide the issue
• The facts in Genac concerned a clause in a lease contract which allowed the landlord to charge
the lessee a portion of his actual and reasonable maintenance and running expenses in respect
of the property
o Court accepted without deciding that these amounts formed part of the rental
o Court held that this clause did not provide for payment by the lessee of a reasonable
amount in respect of the landlord’s expenses
o The word ‘reasonable’ is used in relation to the actual expenses, not to the amount
payable by the lessee
o Does not create uncertainty
o The actual expenses are readily ascertainable from the landlord’s financial records
o Whether they are reasonable is also capable of objective ascertainment
o The clause does not leave the determination of the amount payable to the discretion of
the landlord, because the expenses must firstly be actually incurred, and secondly, they
must be reasonable
§ That is something which is to be objectively ascertained and is not subject to the
will or whim of the landlord
o Clause was held to be binding on the lessee

(c) Price to be fixed by one of the parties?

• Usually, the seller determines the price – but here we are talking about including a clause in
the contract that one of the parties to the contract will determine the price at a future date.
• Should this be allowed or not?
o Usually – buyer still has the option to accept the price – can shop around for a better
price. In the end consensus must be reached – the buyer makes the decision.
o Here we are talking about consensus that is reached but the price is not yet
determined.

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• Traditional position – you cannot leave the determination of the price to the discretion
of one of the parties – there is no further opportunity to reach further consensus.
• NBS Boland Bank v One Berg River Drive 1999 (SCA)
o Obiter remarks (para 16)
o One party was giving the discretion to vary the interest rate in a mortgage bond. The
court focused when you are dealing with a mortgage bond if this type of contractual
discretion valid.
o Also, made remarks that where there is a contract of sale or lease, the POD is that a
valid contract will not be concluded if one of the parties is given the discretion to fix
the amount of the purchase price or the amount of the rental.
§ a valid contract will not be concluded if one of the parties is given the
discretion to fix amount of purchase price OR the amount of the rental
o Court ruled that a sale/lease containing a power to fix a price = out of step with
modern views and illogical.
o May be validly left to a TP. Either the buyer or seller may be accorded to the power
to individualise the merx in a generic sale.
o Current position – cannot leave it to the parties to determine at some stage in the
future – not yet valid contract of sale. Para 32 Power to fix the price/rental, there
does not appear to be a logical rational. There are other situations where discretion
is left up to the parties – why can’t this be applicable here?
o *Remember this is only an obiter remark, it is not the actual position

• What are the reasons for the trad POD?

o 1) There must be a firm contract on the merx and purchase price at the time of
contract conclusion. Why? Because we are trying to avoid disputes at a later stage
on one of the essentialia of a contract of sale. Implicit – where you afford a party
contractual discretion to change the price at a later stage, then opening door to
dispute potentially.
o 2) If you give a party the discretion to determine the price, that discretion is open to
abuse.

• Should this rule be changed? Does the party who decides to have a limited or
unlimited discretion OR stay with the current position which is that it is not allowed?

• Need to draw distinction between unfettered discretion vs a limited discretion.

o Limited discretion – arbitrio boni veri which means that discretion should be
exercised like a reasonable person – bonus var.
o Will our law ever recognise an unfettered discretion? Extremely unlikely in South
African law because its open to abuse.
o There is a remark in NBS Boland pointing to the illogically of allowing a third party to
fix a price but not allowing one of the parties to the contract themselves to fix the
price.
§ Other considerations need to be taken into account when dealing with fixing
of the price vs the fixing of the price via an independent third party.
§ For example, parties have agreed on of them will fix the price, the person not
involved in the fixing of the price is unhappy. The parties would go to court
and request the court to fix the price.
§ But certain other considerations must take into account when dealing with
fixing of price by one of the parties to contract and by independent 3p

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 • EG: parties agreed one of them will fix the price, but for whatever
reason, person not involved in fixing is unhappy
o Usually will go to court and ask the court to fix the price
• Potential problem: especially if look at how price will be determined -
their agreement said they would agree
o Court can never be buyer or seller of contract
• Different where parties agrees that 3p will fix the price from some
class or category
o Far easier to come to conclusion that court is not interfering
with parties contract, than if parties must establish the price
(interested in more generic category)
§ General view that allowing parties the discretion to fix the price or rental,
should be invalid.

• NBS Boland Bank v One Berg River Drive 1999 (SCA)

o Mortgage agreements: bank had unilateral discretion to vary the interest rate payable
by debtors
o Court said that this type of discretion is valid, but it must be exercised arbitrio boni
viri: like a reasonable person
o If not exercised reasonably, can go to court, and attack the exercise of that power
o Difference between this and setting a reasonable price?
o Court says that our position (SA law) of not allowing one of the parties to the
agreement to set the price is out of touch with other modern legal systems (both
civilian and common law), as well as being illogical
§ Criticises our position regarding contracts of sale and lease
o Allowing one of the parties to the contract to set the price is no more uncertain than
allowing a third party to set the price
o What do we do if the discretion is exercised unreasonably? Do we allow a court to
intervene? If so, are we not merely paying lip service to the notion that we must give
effect to what the parties agreed i.e. that one of them would fix the price, and simply
allowing a court to interfere in their agreement?

(d) Price to be fixed by third party

• Parties can agree / nominate an independent 3p to set the price à valid way to determine
price
• To ensure contract not too vague and thus void – the 3p must be identifiable from the
contract or at least ascertainable
o allowed, provided identifiable in agreement
o Can be identified specifically by name “Mr X”
o OR can identify 3p more loosely as coming from particular group or class but in this
case, must make it clear who will specify the particular 3p

• Reymond v Abdulnabi 1985 (W):

o Too vague to refer to the third party as “an independent auditor”
o Too uncertain, how do you determine whether an auditor is independent or not.
Failed the test that the price had to be certain/ ascertainable.
o To make this more specific you would add “as appointed by President of SAICA on 1
March 2022”
o No requirement that the auditor be independent from the parties, but the closer the
3p is to one of the contracting parties, the bigger the risk that they might make a
biased decision

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 § How, at the time of contract conclusion, could one avoid or mitigate the
potential of a biased decision?
§ A deadlock breaking mechanism: buyer will appoint his 3p, seller will
appoint his 3p, they can battle it out and if they cannot reach agreement on
the price, or one or both of the parties think the price is ridiculous, you include
in the contract the identity of another third party and their decision is final
§ Decision is not so final that you cannot go to court, but there are only very
specific circumstances in which you can go to court

• if 3p refuses / fails to establish the price: no price than no contract

• co-operation by both parties is necessary
o If the inability to establish a price is due to one of the parties (S or B) not co-
operating with 3p, then said we are dealing with something akin to BoC by one of the
contracting parties
o Why not BoC -> because no price then can’t be contract – working on basis of a
fiction
§ Fiction allows one of the parties to have a remedy
o OR treating the price determination by a party as a suspensive condition – doctrine
of fictional fulfilment. Allows innocent party some remedies. A suspensive condition
only suspends the enforceability of a valid contract.

• If price is unacceptable, attack on one of the two bases: what remedies are available
to the disadvantaged party?
o 1) Grounds of improper procedure – parties described a process/guideline to be
followed when determining the price.
o 2) Substantively unfair – when the price is either too high or too low = unjust, unfair,
too high, too low, manifestly unjust
o Remedies in this instance:
§ Recission (cancels)
§ Maintain contract and court adapts the price
o Basis of remedies:
§ (1) Laesio enormis - originally developed in RL
• Initially, if the seller received less than half the value of the merx as
the purchase price, then this seller was entitled to terminate the
contract UNLESS the buyer was prepared to pay a more reasonable
price
• Initially only applicable to the seller but then extended to to buyer
where the buyer paid more than double the value of the merx as the
purchase price UNLESS the seller was prepared to sell the merx for a
more reasonable price.
• Remedy of cancellation that is available in the context, where seller
and buyer are agreeing on the price
• Was abolished in SA law because its application was too difficult. It
allows a court to interfere in a contract purely on the basis that the
judge was of the opinion that the price was unfair.
§ (2) Action based on equitable considerations (actio ex bono et aequo)
• Developed in RDL- remedy specially available in event 3P had set an
unacceptable price, in which case the disadvantaged party could
approach a court and ask the court to set a more reasonable price
• If the court could do this then the contract would be maintained

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• Approach 1: Can go to court
o Gillig v Sonnenberg 1953 (T); Hurwitz v Table Bay Engineering 1994 (C)
§ Where a 3rd party has fixed an unacceptable price the disadvantaged party
can approach a court to fix a more reasonable price
§ However, the party that was previously advantaged by the original price IS
NOT obliged to accept the new price.
§ Does not have to accept the price. Why? Because the parties never agreed
that the courts must set the price, they agreed that a TP must set the price,
thus they do not have to accept the price that the court suggests

• Approach 2: Van Heerden v Basson 1998 (T)

o Court came up with an alternative remedy: Where a third party sets a manifestly
unjust price – there is no basis for this enforcement because there was no
consensus regarding that price, cannot argue that there was reasonable reliance on
consensus in relation to the manifestly unjust price.
o Thus, the court has the power to interfere and adjust the price if determination
arbitrary. However, both parties have the choice to rescind the contract AFTER the
court made a decision

• Approach 3: PROFF Kerr/Glover opinion

• Not happy with modern approach in SA law, because termination of the contract after the
court has set a more reasonable price was not an option based on action of equitable
consideration in RDL
• Because dealing with an unacceptable price set by a 3p, the only option is for court to set
the price and parties are bound (thus no option to terminate the contract)
o Option to terminate is based on application of laesio enormis in the wrong context
(price fixing by a 3p)
§ Thus suggested position should be changed and consider following 2
scenarios
• a) where parties have identified the 3p by name (specific individual)
o “Mr X” – who sets an unacceptable price, then in this case, the
only option is to terminate the contract because the court can
never be Mr X
§ Important to parties that Mr X sets price
o Court can never be a substitute for a specific person
• b) where 3p has been nominated from a class or member of a group
o A court can fix a price and both parties are bound to accept the
price
o Because group/class, then not actual party herself is important
rather that 3p possesses certain skills and expertise.
o Then “easy” for court to step into 3p shoes, hear evidence from
individuals with necessary expertise to set a price in the
context – on basis of this evidence and advice from experts,
the court can formulate a more reasonable price

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1.4 FORMALITIES:
• Can have formal requirements for contracts
o There are some acts that impose formal requirements.
o The legislature can impose formal requirements for different reasons
o Alienation of Land Act 68 of 1981
§ Imposes formalities because they are big important sales
§ There are two concerns
• You want evidence that this NB transaction has been concluded
• This type of contractions gives rise to concerns of fraud/perjury and
therefore we have formal requirements and that non-compliance of the
formalities results in invalidity
• Disclosure function: To provide parties with necessary info
o Consumers – lack info to make informed decision – obliged make info available to the
consumer
o Also has it’s own inherent weaknesses, run risk consumer will be overloaded with info
and don’t read contract in the first place
o National Credit Act 34 of 2005
o Consumer Protection Act 68 of 2008

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