Law of Contract Overall summary

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Introduction to the law of Contract

Thursday, 09 February 2023 15:48
Principles Cited
Basic Concepts in Contract Precedent:
Contracts are agreements between parties who have the intention to create rights and duties • Church of the provinces of South
between them that are legally binding upon the parties. Africa, Diocese of Cape Town v CCMA
Note ○ The agreement did not
Contracts can taken on various forms such as an oral, written or even tacit contract. constitute a contract because
Your arguments will determine if such a contract will be a valid contract the parties did not have the
required animus contrahendi,
rather it was seen as a religious
Animus Contrahendi contract
A contract only becomes legally binding when both parties have the intention to enter a legally
binding contract. This intention is called animus contrahendi. If an agreement lacks this, they are
not legally enforceable.
Note
Any type of contract can be legally binding f the parties have animus contrahendi and all other Glossary
requirements are met.
Obligations Word Meaning
Contracts are legally binding obligations between persons or legal subjects. It creates a legal tie or Vinculum iuris Legal tie or relationship
relationship. This means one party has a duty to give a certain performance and one party has a
right to receive such performance. A performance can either be dare, facere or non-facere Dare To give something
Note Facere To do something
• Creates legal rights and duties Non-facere To refrain from doing
something
It is important to know when a contract concludes, which gives rise to the duty to perform, from Unilateral Only one right and one
the actual performance itself. Obligations duty
Note Bilateral Both parties have rights
and duties
You are bound to a contract even before performance takes place
Parties in a contract
• Creditor - party who receives the performance
• Debtor- Party who has to give the performance
Contracts can create more than one obligation. A separate obligation arises from each
performance that must be given.
Nature of Rights created by contract

• The right to claim a performance from a debtor is a personal
○ Can only be claimed from a specific debtor and not someone who is not a party to the
contract
• Real right (absolute right)
○ Right to a specific object which can be enforced against anyone in possession of that
object
Privity of contract
This is the principle that you can only enforce a contract against the other party in a contact/ can
not be enforced against someone who did not agree to the contract.
Terms
Obligations of are determined by the terms of a contract. These terms are categorised in different
ways:
Essentialia
The essential terms that identify the type of contract we are dealing with
Naturalia
The terms that are automatically attached by law to a specific type of contract without the parties
having to specifically include them
Incidentalia
Terms that cover residual matters for which the parties wish to make special provisions or that
alter or exclude the naturalia
Express
Those terms agreed expressly, either orally or in writing
Implied
Those terms that become part of a contract by operation of law (naturalia is generally and implied
Intoduction Page 1
Those terms that become part of a contract by operation of law (naturalia is generally and implied
terms)
Tacit terms
Those terms which are not agreed upon expressly but are read into the contract due to the parties'
actual or imputed intention
Cornerstone of contract law

Contract law is based on 2 important principles, freedom of contract and good faith.
Note
If a contract is illegal or against public policy, it is not enforced
Theories of contract law
Declaration theory
A contract is valid because parties declare their intention to be legally bound by a contract. It
focuses on the declaration of the parties
Will theory
Parties are bound to a contract because they intended to be bound to it. The contract represent
the free will of the parties. Only executed when the parties reach consensus
Note
This theory focuses on what the parties subjectively intended
Reliance theory
This deals with whether the parties objectively decided to enter into a contract and conclude such
contract.
Note
In our law it seems that the will theory is the point of departure and then later we rely on the
reliance theory.
Intoduction Page 2
Problem Solving
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Legal Principle
The structure of Contract Law Legislation:
Common Law Rules and Cases • Consumer Protection Act 68 of 2008
• Contract Law is made up primarily of common law rules • National Credit Act 34 of 2005
• Contractual liability is based on a legal rule • Electronic Communications and Transactions Act 25 of 2002
• You should state the rule and its possible different interpretations or uncertainty surrounding it, • Alienation of Land Cat 68 of 1981
and show how these might lead to different results • Conventional Penalties Act 15 of 1962
• While using a legal rule, it is necessary to indicate the source of or the authority fir the rule. Precedent
Legislation • Boots - simulated contract - not accepted in South Africa - court
• The notable pieces of legislation to bear in mind is the consumer protection Act 68 of 2008, NCA, must give effect to the substance rather than the form of a
etc. contract rather than the contract itself.
• Legislation on sticky note • Roschon - Simulated contract - you must have genuine animus
contrahendi for a contract to be valid. This is true even if the
Note contract is structured for some legal benefit of the parties
When answering questions, it is therefore important to refer to both the common law rule and
legislation
The Bill of rights and the Constitution

• The common law is now subject to the constitution and BoR
• The rules and doctrines must be in line with the Con.
Reading cases and Using them as Authority

• Headnotes may serve as a mind map to guide your case reading
• Read your case as a required preparation for lectures and them summarize them
• Pay particular attention to the judgement in regard to the rule of law you are studying
• Extract the legal principle from the case
Problem solving in Contract Law
How to solve
2 phases:
1. Thinking phase
2. Writing phase
Thinking phase
Consists of:
1. Knowledge
2. Understanding
3. Application
a. Analysis of the problem
b. Synthesis
c. Evaluation
Writing Phase
Consists of:
1. Planning your answer
2. Elements of a good answer
a. Identification of the legal issue
b. Discussion of the legal principles involved
c. Application of the principles to the facts
d. Conclusion
Criteria used to mark
Intoduction Page 3
Intoduction Page 4
1. Valid Contracts
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Requirements for a valid contract

For a valid contract the following needs to be met:
1. Agreement - There must be agreement on the terms of the contract and
the parties must intend for it to be legally binding.
2. Contractual capacity - Must have the necessary legal capacity to enter
into a contract.
3. Certainty - The terms must be sufficiently certain.
4. Possibility - At the time of conclusion, it must be objectively possible to
perform in terms of the contract.
5. Formalities - Formalities may be prescribed by statute or by the parties
themselves.
6. Legality - An agreement cannot be contrary to a common-law rule or
public policy. Glossary
All requirements pf a contract need to be met in order for the contract
to be valid.
Word Meaning
Consequences of fulfilment of all the requirements:
Pro Sono As if they never formed the
Validity Scripto contract
Once parties enter into a valid contract, that contract becomes legally binding
and the parties would be required to carry out the terms of the contract. Once
a contract is entered into, a party may not withdraw from it. If a party fails to
perform, they would be seen as breaching the contract and then the other
party may gain certain legal remedies,. These remedies are:
• Specific performance - the innocent party asks the breaching party to
carry out their duty by delivering performance.
• Cancelation - the innocent party may cancel the contract, parties no
longer have to perform.
• Damages - innocent party ca claim for any losses suffered as a result of
the breach.
Some contracts only create natural obligations. These are valid but not directly
enforceable.
Consequences of non-fulfillment of all requirements:
Invalidity
If any requirement is not met the contract becomes invalid or void. There are
no legally binding obligations. Therefore:
• A contract cannot be enforced
• Return of performances - if any party performed, they are given their
performance back. Either ownership or unjustified enrichment.
Consequences of improperly obtained agreement:

Voidability
This is when all the requirements were met, but one of the parties acted
improperly in getting the other party to agree. This could be done in the
following ways:
1. Misrepresentation
2. Duress
3. Undue influence
When this happens the innocent party has the choice of setting aside the
contract or upholding it.
If upheld, normal consequences of a valid contract apply
Partially void Contracts: Severability
If the reason for invalidity only affects certain parts of a contract, the court will
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If the reason for invalidity only affects certain parts of a contract, the court will
determine if the invalid parts can be separated from the valid parts. If so, it
will be regarded as pro sono scripto and the valid parts will be enforced
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2. 2.Offer
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Overview Legal Principle

For there to be an agreement, there must in principle be: Constitution:
a. Expressed agreement •1
b. Consensus between the parties. •2
If consensus is lacking, the agreement could still be enforced by using the principle of reasonableness. •3
Legislation:
Note • The Provisions of the Consumer
Practice Act 68 of 2008
The overriding rule is that there must be a valid offer followed by a valid
acceptance. ○ S23 - retail displays and
displayed, a consumer cannot
be forced to pay more
• Electronic Communications and
Transactions Act 25 of 2002
○ S43
Precedent
1. Wessels v Swart No 2002 (1) SA 680
(T)
a. The existence of a contract is a
matter of fact. The offer and
acceptance can be in any form
unless prescribed
2. Gelbuild Contractors CC v Rare Woods
South Africa (Pty) Ltd 2002 (1) SA 886
(C)
Offer a. For a valid offer, the terms of a
contract must be certain, and
Requirements for a valid offer the object should clearly be
An offer is an invitation by one party to create obligations with another party, with animus contrahendi. defined. A 'Price is subject to
fluctuation' is not sufficient./) [
Requirements 3. Kgopana v Matlala (1081/2018)
[2019] ZASCA 174
a. Animus contrahendi
1. Prescribed form
2. Complete, certain or ascertainable
3. Communicated
4. With Animus Contrahendi
1. Prescribed form (If any)

An offer can be in any form. However this changes when legislation prescribes a certain formalities for a
contract.
See Wessels under precedent
2. Complete, Certain or ascertainable

i. Complete offer
All the material terms of a contract should be laid out in the offer. It should contain the essentialia and
incidentalia (if the offeror wishes so).
If there are outstanding terms, there is no contract. Unless there are sub-contracts which are negotiated
separately.
ii. Certain or ascertainable content

If the offer is not certain or ascertainable (capable of being made certain), the contract will be void for
vagueness).
See Gelbuild under precedent
It is certain or sufficient where it stipulates a method or formula by which the price can be ascertainable.
3. Communicated to the offeree

• Has to be addressed to the offeree
• Communicated to them in someway
• Has to become aware of the offer before accepting
Can be addressed to the public
4. Offer must be made with animus contrahendi
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4. Offer must be made with animus contrahendi
i. General
A true offer is one made with the intention that mere acceptance by the offeree will create legally
binding obligations. Parties need to be committed to concluding a contract immediately upon mere
acceptance by the other party.
An invitation to negotiate does not conclude animus contrahendi.
Guidelines
• A quote is generally a valid offer unless the party giving the quote does
not want to be bound by it (Gelbuild)
• Goods sold at an auction generally constitutes an invitation to negotiate
unless it is stated without reserve
• An invitation to submit tenders is usually an invitation to do business.
ii. Animus Contrahendi and offers to the public

a. Common law
An offer can be made to th public at large but it must meet the requirements for a valid offer. Usually
these are void for vagueness. Animus is generally lacking because the offeror cannot control how many
people accept.' Therefore this is generally an invitation to negotiate.
Crawley case and Boots Cash
Important note
In order for the offer to the public to be a valid offer, it must be made
with the necessary animus contrahendi and is sufficiently certain and
complete.
THE OVERALL QUESTION IS ALWAYS WHETHER THE PROPOSER WISHES TO RETAIN THE FINAL SAY
WHETHER A CONTRACT IS CONCLUDED (NOT A VALID OFFER) OR WHETHER THE PROPOSER IS WILLING
TO BE BOUND TO EVERYONE WHO RESPONDS AFFIRMATIVELY (VALID OFFER).
b. The Provisions of the Consumer Practice Act 68 of 2008
This act only applies to consumer transactions as defined in the act.
• Shop displays
S23 a consumer will not be expected to pay more than the displayed price. If more than one price is
displayed, cannot be expected to more than the lowest displayed price. If the displayed price was an
error, the supplier is not bound by it after:
a. correcting the error in the displayed price and
b. Taking reasonable steps to inform the consumer to whom the erroneous price may have been
displayed of error and the correct price
The display of goods therefore constitutes an offer that the consumer accepts when she presents the
good for payment.
This does not apply to electronic transactions
• Bait Marketing
According to s 30 of the Consumer Protection Act, ‘[i]f a supplier advertises particular goods or services
Legal Principle
as being available at a specified price, and the advertisement expressly states a limitation in respect of
the availability of those goods or services from that supplier at that price, the supplier must make those Precedent
goods or services available at that price, to the extent of the expressed limits.’ In other words, an • Gelbuild Contractors CC v Rare Wood
advertisement stating a limit on availability constitutes a valid offer in terms of the Consumer Protection South Africa (Pty) Ltd 2002 (1) SA 886
Act. According to s 30 of the Consumer Protection Act, ‘[i]f a supplier advertises particular goods or (C)
services as being available at a specified price, and the advertisement expressly states a limitation in
○ A quote generally constitutes an
respect of the availability of those goods or services from that supplier at that price, the supplier must
offer but you must look at the
make those goods or services available at that price, to the extent of the expressed limits.’
factors.
In other words, an advertisement stating a limit on availability constitutes a valid offer in terms of the
These factors are on pg 43
Consumer Protection Act.
• Pharmaceutical Society of Great
This needs to be read together with s46(3) of ECTA.
Britain v Boots Cash Chemists
(Southern) Ltd
Termination of an offer ○ Display of good is not an offer, it
If an offer is terminated before acceptance, there is no contract. Termination can take place in the is invitation to do business
following ways: ○ Requirem
a. Revocation
b. Rejection
c. Expiry or lapse of reasonable time
d. Death
e. Initial impossibility
Revocation
This is the withdrawal of an offer by the offeror. It is possible to do so any time before acceptance.
Agreement Page 8
This is the withdrawal of an offer by the offeror. It is possible to do so any time before acceptance.
Revocation is only possible once it has been communicated to the other party.
An offer to the public needs to be revoked in the same way the offer was made
This cannot be done for option contracts.
Rejection
If the offeree rejects the offer, the offer falls away. Any conduct that shows an offeree is not willing to
contract to the terms will constitute a rejection.
This is only effective if this rejection is communicated.
One needs to distinguish a counteroffer (terminates the contract)this from a mere enquiry (does not
terminate the original offer) or request/suggestion to modify the terms.
Expiry
An offeror can set a time period. If there is no acceptance during this time period, the offer terminates.
If a time period is not given, the offer lapses after a reasonable period of time.
Death
Death of a party will terminate an offer.
Initial impossibility
Where the performances of any party at the time of concluding the contract becomes impossible. The
offer falls away.
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3. Acceptance
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Acceptance
Requirements for a valid acceptance
1. Acceptance must be made with animus contrahendi.
2. By the person to whom the offer was made
3. Must correspond to the terms of the offer
4. Expressed in the prescribed manner if any
5. Communicated to the offeror unless communication is dispensed with
6. Acceptance must take place before the offer terminates
Made with animus contrahendi
The offeree must have the intention to enter into a legally binding contract by his acceptance. If the offeree is not ready
to commit yet, the lack animus contrahendi.
The acceptance must be a conscious one. Legal Principle
Precedent
The offer must be accepted by the person to whom it was made. • JRM Furniture v Holdings v Cowlin
Only the offeree can accept the offer (Privity of contract) - Levin v Drieprok If this was a public offer, the specified class (1983) SA 541 (W)
of persons, any member of the public or that class of persons can accept the offer. ○ If the demands are not
The identity of the offerees is always a question of the intention of the offeror. separable from the acceptance,
the acceptance will therefore
result in a counteroffer.
The acceptance must correspond to the terms if the offer
• Union Spinning Mills (Pty) Ltd v Paltex
The acceptance must be a complete and unequivocal assent to every part of the offer. Dye House (Pty) Ltd 2002 (4) SA 408
Note (SCA)
○ When a contract expressly
The following are different from acceptance:
states that someone has to
1. Counter offer- adding or subtracting anything from the offer. reject an offer explicitly with x
2. Adding terms implied by the law. This is an acceptance. amount of days, the persons's
3. Where the offeree has an enquiry whether the offeror will modify the silence after these days will
terms or asks for more information, but has no intention of rejecting the amount to acceptance.
offer - the offer still stands but neither acceptance or rejection has taken • Hoffman v South African Airways
place. (2000) 21 ILJ 2357 (CC)
4. Where there is an unqualified acceptance with an offer to modify - the two ○ If refusal to contract leads to
must be separated to make the acceptance valid and the offeror can choose unfair discrimination, there will
whether or not to accept the modification then be a duty to contract.
Legislation
• Consumer Practice Act 25 of 2002
JRM Furniture • Electronic Communications Act 25 of
Partial acceptance is not an agreement. The offer needs to be accepted completely. 2002
• National Credit Act 34 of 2005
There is an exception to this rule in complex contracts. Parties may intend each part of an agreement to be divisible and
binding in itself. If each part is divisible, a party may partially accept each part.
The Acceptance must be expressed in the prescribed manner

In general acceptance can take any form unless legislation prescribes a specific format.
The offeror may also prescribe a specific manner of acceptance. This will lead to the acceptance only being valid if done
in the prescribe manner - A to Z Bazaars (Pty) Ltd v Minister of Agriculture 1975 (3) SA 468 (A).
There are 2 methods of acceptance:

1. Authorized - the offeror allows a particular method but does not intend for it to be the only method
2. Prescribed - the offeror intends for this to be the only method.
Important to note as well is that if an offeror uses a particular method of communicating the offer, the same method
may be used to accept the offer - Jafta v Ezemvelo KZN Wildlife.
Communicated to the offeror, unless communication has been dispensed with

The general rule is that acceptance needs to be communicated to the offeror. However the offeror can dispense with
communication. When the offeror prescribes or authorizes certain manner of acceptance, he impliedly dispenses with
the need to be informed. In such cases, acceptance may be completed before the offeror is informed of the acceptance.
Acceptance must take place before an offer terminates.

For an acceptance to be effective, it must take place before the offer terminates.
Common law
Acceptance can be formed tacitly. This will be inferred from the conduct of the offeror to show animus contrahendi.
Sometimes failure to do something to indicate his rejection of the offer amounts to acceptance of this offer.
The difference between tacit acceptance and acceptance by silence is:
• Tacit acceptance - there is positive conduct by the offeree which demonstrates acceptance.
Agreement Page 10
• Tacit acceptance - there is positive conduct by the offeree which demonstrates acceptance.
• Acceptance by silence, there is no action by the offeree - it is his failure to do something that is alleged to
demonstrate acceptance.
Acceptance by Silence or inaction
Common law
Acceptance can be in any form as long as the parties' conduct demonstrates animus contrahendi. There are scenarios in
which the offeror alleges that the offeree failed to do something to indicate their rejection.
There is a difference between tacit acceptance and acceptance by silence:

• Tacit - positive conduct by the offeree which demonstrates acceptance.
• Silence - there is no action. It is a failure to do something that is alleged to demonstrate acceptance.
The general rule is an offeror cannot force an offeree to act positively to refuse an offer. The only time silence can be
regarded as acceptance is when there is a legal duty to do so or if there is a special arrangement or prior relationship. If
the party does not reject an offer in such circumstances, there will be acceptance even if there is no animus contrahendi.
Union Springmills Case
Legislation
Electronic Communications Act 25 of 2002
S45 - an unsolicited communication failure to respond will not amount to a valid acceptance. For solicited the common
law would apply.
National Credit Act 34 of 2005

AN offer to sell something in a terms of a credit agreement may not stipulate that inaction by the buyer will amount to
acceptance. If the seller sends something to a potential buyer and says silence will amount to acceptance, the failure for
a person to return the goods would not lead to the seller being able to claim the return of goods. However, a buyer who
has paid in such a contract, may reclaim their payment.
Consumer protection act 68 of 2008

Any consumer agreement in which the consumer must reject the offer is null and void in terms of s31.
Any unsolicited good, the supplier must notify the consumer that the goods were delivered in error and they must
collect them from the consumer. If the supplier fails to do so, the consumer may keep the goods and the supplier cannot
reclaim the goods for compensation for enrichment, s21.
Duty to Contract
Every person has a freedom not to contract. Certain anti-discriminatory statutes such as PEPUDA and others may have
created duties to contract if refusal amounts to unfair discrimination.
Look at Hoffman case.
Tacit Contracts
Buffalo City Metropolitan Municipal v Nurcha Development Finance (Pty) Ltd 2019 (3) SA 279 (SCA)
The correct test to apply is the 'balance of probability' test. Parties must prove the most plausible explanation for the
parties' conduct that they intended to conclude a tacit contract.
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Time and Place of Formation of Contract
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Generally when parties contract in each other's presence, there's no time lag between the offer and acceptance being heard.
When they contract at a distance from each other. There are four main theories regarding this: Glossary
(a) Declaration theory:
The contract is concluded when and where the offeree declares/expresses his Word Meaning
acceptance.
(b) Expedition theory: Inter Praesentes In each other's presence
The contract is concluded When and where the acceptance is transmitted (for example, Inter Absentes Distance from each other
posted) to the offeror.
(c) Reception theory:
The contract is concluded when and where the offeror receives the acceptance (whether
he is aware of it or not).
Legal Principle
South African Law: The information theory as a general rule Precedent
Contracts concluded telephonically • Dietrichsen v Dietrichsen 1911 TPD
The information theory applies to these contracts. 486
- Tel Peda Investigation Bureau (Pty) Ltd v Van Zyl 1965 (4) SA 475 (E) confirmed this. ○ The onformation theory is our
- starting point in law. The
acceptance must be
communicated to the offeror in
order for a contract to exist
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Causes
Monday, 08 May 2023 10:27
Causes
There are 2 ways in which a contract may be illegal:
• Through the common law
• Statutorily
Statutory Illegality - briefly

Prohibited by legislation
Common Law Illegality - Briefly
The contract is contrary to public policy. There are two ways to determine if a contract us against public
policy:
• General public Policy Test
• Established rules
Consequences of Illegality
Once a contract is deemed illegal, certain consequences will follow:
1. Severance
2. Turpi Causa rule
3. Par Delictum
Severance - Briefly
• Sever illegal parts from legal, provided that the contract is divisible
Turpi Causa
• Claims for the enforcement of an illegal contract.
• Can never enforce
Par Delictum
• Rule applies when relief other than enforcement is sought
Legality Page 13
Statutory Illegality
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What it is?
When a contract contravenes a statute, we need to determine if a contract remains valid or not.
Important note
Just because a contract is forbidden by a statute, does not necessarily mean the contract is
invalid. Only if legislation stipulates so.
Consequences of Prohibited conduct, as per statutes

Expressly prohibited or invalid
If a statute states that a certain type of contract or provision in a contract is illegal and it states what we
should do in those instances, we follow the instructions as per the statute
No express provision
In these instances, we need to look at the intention of the legislature in respect of the contracts. The
courts have developed guidelines to help us determine the intention of the legislature.
Guidelines
1. Wording
a. Words like shall or must - Intended the contract must be void.
b. Negative framing - completely forbidden and therefore void
2. Mischief
a. See what mischief, the statute aims to prevent. Figure out whether upholding this contract,
would in turn uphold the same problem, if so the contract is invalid.
3. Balance of convenience
a. If declaring a contract void on a balance of convenience, would lead to greater
inconvenience and injustice - contract is valid
4. Criminal Sanctions
a. Contract is void if criminal sanctions exist
5. Public Policy
a. Considerations
Metro Western Cape (Pty) Ltd v Ross
• Carrying on prohibited sales business is illegal. However the contracts concluded by the
unlicenced trader were valid
Legality Page 14
Common Law illegality - Objective leg
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Fraud
• Invalid and unenforceable
• Contrary to public policy (Wells v SA Alumenite)
• If it also excludes fraud for non-fraudulent conduct, the part excluding the fraud may be severed
Excluding liability for intentional conduct
• Invalid and unenforceable
• Against public policy (Government of RSA v Fibre Spinners and Weaver)
Excluding liability for the intentional wrongdoings of an employee
• Yes, as long as the employer is not benefitting
• The employer may avoid vicarious liability for the intentional wrongdoings of an employee as long
as the employer does not benefit
• FNB v Rosenblum
Objective and subjective reasonableness

• Barkhuizen introduces the subjective leg of reasoning
• Beadica confirms this
Objective leg
• The main considerations for a valid contract are:
○ Pacta sunt servanda
○ Freedom of contract
• The law does accept, however that the above two may be outweighed by competing
considerations on the void side.
• All the considerations do not necessarily have the same weight.
• The above two considerations are only outweighed in exceptional circumstances.
• The sources for the objective leg of public policy are:
○ Freedom of contract and pacta sunt servanda
○ Boni mores
○ General public interest
○ Fairness- unconscionability
○ BoR
Freedom of contract and Pacta sunt servanda
• Parties should be free to decide whether to contract, with whom and what terms.
• This weighs heavily for validity
• Barkhuizen - the justification for enforcing the particular term/contract and its purpose.
Boni mores
• Relates to good moral standards.
• Contracts that undermine this will generally be illegal for being contra bonos mores.
• Agreements that offend the boni mores are:
○ Trading with the enemy
○ Contracts for the sale of sex
○ Selling people as slaves
○ Agreements to defraud creditors
○ Agreements to commit a crime or delict
Agreements which undermine the institution of marriage
Legality Page 15
○ Agreements which undermine the institution of marriage
○ Themselves legal, but are made for an illegal purpose of which both parties are aware.
• Cannot undermine BoR
• Maseko v Maseko- we do not uphold contracts that are against the boni mores as long as it is to
defraud creditors or undermines the institution of marriage. Cannot enforce
Objective fairness
• There is no general rule that contracts have to be objectively fair.
• Cannot be free floating. And just because it is unfair to a particular judge (Bredenkamp)
• To be taken into account when the court tries to determine if something is contrary to public
policy (Brisley v Drotsky)
• Brisley v Drotsky - The effects are:
○ Good faith is not a legal rule but rather a factor to be weighed when courts determine public
policy
○ The principle of pacta sunt servanda and the rationale of commercial certainty are very NB
in determining public policy for the legality of contracts.
○ The fundamental values of freedom and human dignity favour the recognition of
contractual autonomy even if this results in unfair contracts.
○ The fundamental value of equality is not very NB in the law of contract, alternatively it is
assumed that parties are equal in contracting situations.
○ Courts are not very willing to give credit to claims of unequal bargaining power; unless
there is startling unfairness, contracts will be enforced.”
• The attitude our courts take shows us:
○ Freedom of contract (FoC) and pacta sunt servanda (PSS) weigh more heavily than fairness.
○ Where people are free to bargain with each other, the resulting contract will generally be
fair.
○ Courts should not protect people against their own bad decision.
• Unfairness will lead to illegality if it is unconscionable - grossly unfair and exploitative
Doctrine of unconscionability
• Courts will set aside contracts that are unconscionable and so offend public policy.
• Sasfin v Beukes- to test for unconscionability, we need to ask if the contract is arbitrary and an
indiscriminate use of power. The courts should be wary when making this decision and it should
not be made because a judge subjectively believes so. The defense of severance may be used.
○ Only conducts that are grossly exploitative/unconscionable that they are not in the public
interest.
• Will only be struck down in extreme cases
• This doctrine is only concerned with the tendency of the term/contract in question
Bill of Rights
• Public Policy requires the law to further the values and protect the rights contained in the BoR.
• The common law of contracts is subject to the BoR.
• There are two scenarios in which a contract may be rendered contrary to public policy:
○ They undermine the values of freedom, dignity and equality, as well ubuntu and the rule of
law
○ Contracts that undermine the listed rights in the BoR
• The difference between constitutional rights and values:
○ Rights - are set out in BoR and are more tangible
○ Values - the broader goals for post-apartheid South African
The values of freedom, dignity and equality
• Brisley v Drotsky - freedom of contract informs also the constitutional value of dignity
• This confirmed in Afrox Healthcare Bpk v Strydom and also confirmed in Barkhuizen.
• These can be summarized as follows:
FoC and PSS, commercial certainty.
Legality Page 16
○ FoC and PSS, commercial certainty.
○ Values of freedom and human dignity favour the recognition of contractual autonomy, even
if this results in unfair contracts.
○ Freedom of contract itself is a foundation constitutional value (Afrox)
○ Equality has not received much attention from our courts in the law of contract. UBP
between the parties is an important factor, but that it must be proved with evidence. (Holds
more space under the subjective leg).
Ubuntu
• Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd
○ It needs to infuse the law of contract with constitutional values, including values of ubuntu.
• Ubuntu is therefore related to good faith and fairness in contract.
The rule of law
• Bredenkamp v Standard Bank of South Africa - The principle of legality.
Contracts that undermine fundamental constitutional rights

• Fundamental rights are not absolute.
• Limitation of fundamental rights
• A contract undermining or infringing a fundamental right is not necessarily invalid or void. A
balance will be made against freedom of contract and the applicable fundamental right that is
allegedly infringed.
• The fundamental right that is allegedly infringed will be put on the void side of the scale.
Practical steps
Step 1 : Infringement of a fundamental right
• First establish whether a fundamental right has in fact been infringed or undermined.
• Cases are:
○ Garden Cities Incorporated Association Not for Gain
○ Afrox Healthcare
○ Johannesburg Country Club
○ Barkhuizen - The first case to deal with an actual infringement of a right
Factors pertinent when a fundamental right is implicated

• Factors as per Barkhuizen
○ Policy considerations/values underlying pacta sunt servanda and freedom of contract (Valid
Side)
○ Policy considerations/values underlying protection of the relevant fundamental right (Void
Side)
○ Extent of the infringement
○ Whether the clause serves a legitimate purpose in the context of the contract
○ Importance and purpose of the clause as compared to the extent of the infringement of the
relevant right
Legality Page 17
Established rules
Saturday, May 13, 2023 6:41 PM
The established rules

There are certain established rules in terms of the common law, that speaks to legality of certain
contracts. These are:
1. Gambling contracts
2. Champerty
3. Restraint of trade
4. Prohibition of interest in duplum
5. Clause which oust the jurisdiction of the courts
Gambling contracts - Wagers and Bets

• Courts refuse to uphold gambling debts. Wagers and bets (that are not recognized by law), gives
rise to natural obligations. They are therefore valid but not enforceable.
○ Halsey v Jones
▪ We do not uphold gambling debts
○ Gibson v Van der Walt
▪ A debt that is closely related to a gambling debt is not enforceable. To know if this is
true, ask whether merely a device for enforcing the gambling debt
• Managed by statute now
○ Licensed - enforceable
○ Unlicensed but lawful - subject to common law, creates natural obligations
○ Unlicensed and unlawful - not enforceable at all
Champerty
• This is whereby a person agrees to provide fund for litigation by another person in exchange for a
share in the proceeds if a case is won.
• Contrary to public policy if it encourages frivolous litigation and speculation by law suits. Also if it
undermines the integrity of the judicial system.
• Contingency Fees Act 66 of 1997 - SA lawyers may have a "no win, no fee" agreement or if the
case is won the lawyer will charge more than the usual fee, subject to certain limits.
○ Price Waterhouse Coopers v national Potato Co-Operative Ltd
▪ Whether or not Champertous agreements are allowed is an issue of public policy. The
right to access of courts s34, is a constitutional value underlining freedom of contract.
▪ Will be allowed when it helps with access to courts.
○ Mostert v Nash
▪ Prohibition does not currently extend to non-litigious work
Restraints of Trade
• Two main competing interests:
○ Freedom of trade, occupation and profession - s22 of the Constitution
○ PSS, favour enforcement. Further the con values of freedom and dignity
• Current position
○ Magna Alloys v Ellis
▪ These are in principle valid
▪ May be unenforceable if against public policy
▪ Onus of proof is on party wishing to escape the restraint (not clear who onus is on
currently)
□ Onus should be shifted onto the party trying to enforce the contract
▪ Unreasonableness of the restraint is just one factor to consider when deciding
whether restraint is contrary to public policy
Legality Page 18
whether restraint is contrary to public policy
▪ Court may restrict scope of a restraint of trade by severing the portions which are
contrary to public policy and enforcing the rest
○ Fidelity guards holdings
▪ Con may now require the onus to be on the party wanting to enforce the restraint
▪ SCA left this open
Factors to be considered
• Both an objective and subjective leg - Basson
• Interest of the community (objective leg)
○ Freedom of contract and PSS
○ Free and fair competition
○ Other public policy considerations
▪ Scarcity of skill
▪ Kleyenstruber
□ It is in the public interest that medical professionals should have the freedom to
recommend patients to physiotherapist of their choice.
□ Merely obiter
• Interests of the parties (subjective leg)
○ Protectable interest
▪ Without this, restraint will never be enforceable
▪ The restraint must protect a legitimate interest like:
□ Trade secrets
 Qualifier - must be unique and peculiar to the employer's business and
not public property or public knowledge
□ Confidential information
□ Customer base
 Established relationship between business and its customers
□ Good will
 The ability of a business to attract customers
▪ Especially if paid for.
▪ Employee can't be prevented from using his skills and experiences, even if the
employer spent time and money training him.
□ This is not a protectable interest -Highlands Park Football Club Ltd
□ The above is confirmed in Basson
○ Extent of restraint
▪ Must not go further than is necessary to protect the protectable interest.
▪ The courts will however, cut down the extent of the restraint to make it enforceable
○ Absence of reciprocal obligations
▪ Could count against enforcement -Sunshine Records
○ Differences in BP
• Carry out a balancing exercise similar to the scale tests in PP. The side with the most weight will
determine whether the contract should be enforced or not.
Clauses that oust the jurisdiction of the courts
• These may be against public policy in terms of the common law and the constitutional right to
access of courts (s34)
• There are various types of clauses:
○ Conclusive proof clause
○ Time bar clause
○ Clauses preventing a debtor from obtaining debt relief
○ Parate executie of self help
Conclusive proof clause
• That the creditor may, by producing a certificate or some other document, conclusively prove the
amount to which the debtor is indebted to him
Legality Page 19
amount to which the debtor is indebted to him
• Debtor cannot dispute the amount of the creditor's claim in a court, even though she may still
dispute the fact of indebtness.
○ Ex parte Minister of Justice: In Re Nedbank Ltd v Abstein distributors
• The reason it is illegal and contrary to public policy is it allows the creditor to be the sole judge of
the amount owed and excludes the jurisdiction of the courts.
• This rule only applies if the certificate is prepared by the creditor, her employee or agent. It will be
valid if it is produced by an independent party
Time bar clause
• Prevents a party instituting legal proceedings if not done so within a specific time period of time.
• This is subject to the general two-pronged public policy test
○ Barkhuizen
○ Normal test for objective
○ Subjective leg considered; party aware of the clause, reasons why the party did not institute
proceedings in time period, relative circumstances of the parties, and bargaining powers.
• Essentially the time bar clause is not per se unconstitutional or illegal.
• If the clause allows an unreasonably short period of time for instituting a claim, the clause will be
unreasonable and therefore illegal and invalid under subjective leg.
• Even if a reasonable period is given, the clause may still be unenforceable in the subjective leg,
based on the particular circumstances of the parties and the case
Clauses preventing a debtor from obtaining debt relief
• The clause prevents a person for applying for debt relief in terms of s74(1) of the MCA is against
public policy and unenforceable.
○ Bafana Finance Mabopane v Makwakwa
Parate executie or self help
• This clause allows a creditor to seize a particular asset and sell it in execution without first having
to obtain a court order.
• This is not enforceable to immoveable property.
• A statutory provision authorising this is invalid and against public policy.
• Extended to notarial bonds in terms of Findevco (Pty) ltd v Faceformat SA (Pty) Ltd.
○ The effect of this judgement is
▪ Clauses allowing this are not generally void. Only those which allow the creditor to
take the law into their own hands and prevent the debtor from resorting to the courts
will be illegal.
▪ If the clause is so far reaching it only allows the exercise of it in an unconscionable
manner, then the courts will find it illegal. If it can be exercised in a legal or illegal
manner, then the courts will not find the clause itself to be illegal.
• Bock v Duboro Investments (Pty) Ltd, the following types of clauses against public policy and
therefore invalid:
○ Clause allowing the creditor to seize the debtor's assets against her will without a court
order is unconstitutional. A creditor can still get possession for a court order.
○ A clause allowing a creditor to keep the debtor's assets as payment of the debt.
• The following are not against pp:
○ A clause allowing a creditor to sell the debtor's assets after lawfully obtaining possession.
○ A clause allowing the creditor to buy the assets is valid, provided it is done at a fair price
Legality Page 20
Common Law illegality - subjective leg
Friday, May 26, 2023 5:38 PM
• Introduced by Beadica
• This is for specific parties in specific circumstances.
• Barkhuizen sets out multiple factors for the subjective leg of the test
Freedom of Contract and Pacta Sunt Servanda

• Whether the party seeking to escape enforcement was aware of the clause in question when they
entered into the contract.
• If they were aware, this would support freedom of contract and therefore enforcement.
• If they were not aware, this might diminish the weight of pacta sunt servanda (PSS)
Unequal bargaining powers (UBP)

• This would undermine PSS in so far as the weaker party in the circumstances may not really have
exercised a free choice in 'agreeing' to the clause they seek to avoid.
• If they do however, have equal powers, that would support freedom of contract and therefore
enforcement, on the basis of free choice in consenting to the contract.
Boni Mores
• The enforcement of a contract in a specific scenario would be contra bonos mores.
Public interest
• The enforcement of a contract in the particular circumstances will not be in line with the public
interest.
• Refer to Beadica.
The BoR
• We look at the BoR in the particular circumstances.
• Here, importantly is UBP as informed by socio-economic circumstances of the parties - Barkhuizen.
• The dignity of one of the parties in this instance would be offended or undermines. Whether the
enforcement will undermine other constitutional objectives. - Beadica
UBP
• When one party is in a stronger position to dictate the clause of the contract, and the other party
has little choice but to submit to these demands.
• This is important in determining whether a contract is against public policy. - Afrox, Napier and
Barkhuizen
○ Where a party has little or no bargaining power (BP). The argument is that the contract is an
exercise of their autonomy is much weaker. It will then be put into the unenforceable side
of the subjective public policy test.
○ Ignoring this will undermine the values of dignity and equality.
• UBP is not sufficient on it's own, even if the contract favours the stronger party.
• Other public policy (PP) considerations counting against enforcement must be present
• United Reform Church
• Party arguing UBP must bring evidence to establish UBP.
• Standard form contracts
○ It is generally argued that UBP is always present in standard form contracts.
○ Courts refuse to recognise such cases without further evidence.
○ Napier sets out the specific evidence that would be needed:
▪ No alternative; and
▪ Is it a necessity
The exception to this is set out in Barkhuizen
Legality Page 21
○ The exception to this is set out in Barkhuizen
▪ Parties are often ignorant to the onerous terms of the contract
▪ They hold a number of advantages for businesses
▪ UBP is present by their very nature
▪ Courts need to determine whether a particular clause is against PP. Generally the case
when it is unreasonable or unfair.
▪ The test in this regard should remain objective. The tendency of the clause rather than
its effect in a particular case.
▪ Majority of the CC rejected this and so it does not form part of our law
Subjective Fairness
• There is no general rule of fairness.
• We generally will deem a contract unfair in terms of good faith, BoR and especially ubuntu
Good faith
• This requires that contracting parties should be honest and not take undue advantage of one
another.
• PSS- parties are presumed to have acted in good faith and as such, the law ought to respect the
parties' contract.
• Also imposes a positive duty to respect the interest of contracting parties and society as a whole.
• Ubuntu is relevant in this regard.
• The question to ask therefore is, whether a party can escape liability of a contract on the basis
that the other party is acting in bad faith?
○ Brisley
▪ Not an independent free floating principle. This means that good faith is merely a
factor to be placed on the unenforceable side of the subjective leg.
• Unfairness weighs more heavily in the balancing exercise than the objective leg.
• Bad faith does not automatically render the contract illegal.
Fairness as a freestanding requirements?

• Bredenkamp
○ Fairness is not a freestanding requirement for contract.
• This was settled in Beadica.
○ Unfairness is not a separate self-standing ground, upon which a court may generally refuse
to enforce contractual provisions.
Legality Page 22
Summary
Thursday, June 1, 2023 4:43 PM
Reasons for non-compliance

• Barkhuizen and Beadica
• Relevant reasons are most likely
○ PSS
○ Freedom of contract
○ UBP
• Will include personal attributes such as socio-economic status
• If they are good reasons for non-compliance, this will favour the non-enforcement of the clause.
• If the reasons are insufficient - heavier weight for enforcement
Unduly harsh impact of enforcement
• Botha
○ What was fair appears to be based on what was considered the disproportionate or 'unduly
harsh' impact of enforcement of the clause in the current circumstances
• Beadica
○ Reinterpretation of Botha
○ Disproportionate per se cannot be used as a basis to refuse to enforce a contract.
• It ought to at least be linked to the values of freedom of contract, dignity and equality as well as
ubuntu and the relative socio-economic circumstances of the parties.
• A comparison of the impact of enforcement vs non-enforcement on both parties is required.
Other factors
• Include bad faith
The scale of subjective reasonableness

• In the particular case
Enforceable
• PSS
○ Aware
○ Equal BP
• Fairness
○ Insufficient reasoning of non-compliance
○ Other
Unenforceable
• PSS
○ Not aware
○ UBP
• Fairness
○ Good reason for non-compliance
○ Unduly harsh impact
○ Other
• Public interest
○ Constitutional objectives such as transformation
• Boni Mores
Legality Page 23
Consequences of illegality
Thursday, June 15, 2023 12:13 PM
Same for both statutory and common law illegality
Severing the illegal part of the contract

• When only part of the contract is illegal, while the rest is perfectly acceptable.
• If this is the case, the general rule is that the illegal portions of the contract can be severed, and
what is left is essentially what the parties agreed on.
• The turpi causa rule and par delictum will not apply to the legal part of the contract.
• The factors we use:
○ Do the illegal parts of the contract form part of the main purpose of the contract or are they
merely subsidiary?
○ Are the illegal parts of the contract contained in separate sections and could they easily be
removed, without re-writing the contract?
○ Are the illegal parts of the contract interlocking and interdependent?
○ Does the contract consist of separate promises, some legal and some illegal?
• If the contract is divisible, the consequences of illegality set out below will only apply to the illegal
part.
• The legal parts will be fully valid and enforceable.
• The converse is true as well
Turpi Causa
• Basically, no action arises from an illegal clause.
• The courts will not enforce an illegal contract.
• This rule is inflexible and the courts have no discretion to relax it
• Applies when one party tries to enforce the contract against the other party.
Par delictum
• When both parties are equally guilty, the position of the defendant is the strongest.
• This will also apply if the plaintiff is more 'guilty' than the defendant.
• The plaintiff will fail in an attempt for a claim of relief.
• Guilt in this instance simply means being a party to an illegal agreement.
• When a party is not seeking enforcement of the contract, but some other legal relief.
• Generally a return of performance by way of an enrichment action or the rei vindicatio.
Ex turpi cause - a party claims enforcement
Par delictum- to other claims
Relaxing the rule
• Courts have a discretion to relax the par delictum rule
• Factors for this set out in Jajbhay v Cassim:
○ May be relaxed to do simple justice between man and man
○ Pertinent public policy considerations as sourced in boni mores, the public interest and con.
▪ Consider why contract is illegal and if allowing it will encourage parties to conclude
this type of contract in the future.
○ Relative blameworthiness of the parties' conduct
▪ If the plaintiff is less morally blameworthy than the defendant, this would count in
favour of relaxing the rule.
○ Doing justice between the parties.
▪ Whether disallowing the claim will lead to unjust enrichment of the defendant. If so
will count in favour of relaxing
○ Whether relaxing the rule would amount to indirect enforcement.
• We must look at the factors collectively and exercise a value judgemet
Legality Page 24
Revision
Saturday, May 13, 2023 10:03 AM
What is a contract?
1. An agreement
2. 2+ persons
3. Animus contrahendi
a. Intention to create legally binding obligations
Requirements for a valid contract
1. Consensus
2. Capacity
3. Possibility
4. Legality
5. Formalities (Only required when some imposed by parties or by statute)
Certainty
Why certainty should not be a separate requirement? Should be under consensus.
Everfresh, Brisly v Drotsky
Option to renew the lease. In terms of the price parties will agree upon it. When the next year lease
lapses, parties would need to agree on price. Free State - void for vagueness.
Everfresh - Good faith and could uphold but it was not in the interest of justice to hear the matter.
Deadlock breaking mechanism (Southern Port Developments)

• Parties must agree and if they cannot, we will appoint an independent arbitrator to make a
decision.
• NBS Boland Banks - If there is a clause that allows for adjustment to interest rate, it is allowed if
parties act reasonably and objectively
Possibility
Three scenarios:
1. Only objective impossibility will void a contract. At the time of the conclusion of the contract. Void
2. Supervening impossibility - obligations terminated by supervening impossibility (after contract is
signed. Valid unless supervening Impossibility
3. Impossibility arises after the conclusion but one of the parties is the cause - breach of contract
(prevention of performance)
Legality
2 categories:
• Statutory illegality - contract is void
• Common law illegality - illegal if it is contrary to the common law - contrary to public policy
Common law legality
Sasfin v Beukes vs Barkhuizen
Sasfin - they take an objective approach.
In Barkhuizen- 1st Is the clause Prima Facie unfair, 2nd does the clause operate unfairly in the
circumstances. Sets out two stage test.
Baedica - Fairness is not a free standing value
Brisly v Drotsky -
Everfresh - can enforce a contract
Baedica - CC takes a more conservative approach. A court may not refuse to enforce a contract, if it
subjectively unfair to a judge. Must be objectively unfair.
2 rules that apply only to illegal contracts.

Ex Turpi rule - cannot enforce an illegal contract. Claim an enrichment for money given in the void rule
Revision Page 25
Ex Turpi rule - cannot enforce an illegal contract. Claim an enrichment for money given in the void rule
Par delictum rule - Jajbhay v Cassim- the rule can be relaxed in certain circumstances.
Informal wager- valid but unenforceable - can pay but cannot recover your money.
Formalities
Start with the general rule - formalities are not required.
There are two types:
1. Statutory
2. self-imposed formalities
Non-variation clauses
A clause that says, no variation, will be valid and enforceable unless in writing and signed by parties.
Shifren - non-variation clause is valid and supported by Brisley v Drotsky.
Waiver- certain amount to variation (Bi-lateral) and certain do not (unilateral waiver)
Pacta de non patendo - an agreement not to enforce your right and stands beside your right. Best
possible defense to circumvent a non-variation clause
Estoppel- never successfully been done in the courts.
Revision Page 26
Questions
Saturday, May 13, 2023 11:44 AM
Question one
b.
Revision Page 27
Revision Class with Nortjie
Monday, June 5, 2023 12:09 PM
June 2022 paper

Question 2
• Looking at interpretation of term.
• Important is the word 'pet'
• Spiders could fall under pets.
• Context
• We are not sure whether the prior evidence is admissible.
Revision Page 28
Introduction
Friday, June 16, 2023 12:48 PM
Terms and obligations

• The terms of a contract determine which obligations are created by the contract
• Not all terms create obligations
• The word condition is sometimes used to refer to terms of a contract
○ Do not use condition, in contract law, the word condition has a specific, technical meaning
Kinds of obligations
• Dare,facere and non-facere
• Reciprocal and non-reciprocal
• Divisible and non-divisible
• Generic, alternative and facultative
Kind of terms
• Essentialia, naturalia and incidentalia.
• Classification of terms according to how they become part of a contract:
○ Express
○ Implied
○ Tacit
Terms and statements
• During negotiations, parties may make statements of facts or opinion to induce the other party
• Generally statement of facts are not intended to form part of the contract. This can be an
exception when they take the form of warranties, conditions or suppositions.
• Distinguish between mere pre-contractual statements and statements that form part of the
express terms of a contract.
○ The consequences differ for each
Overview
Incorporation
• Which terms form part of the contract.
• The rules for incorporation determine which express terms form part of a contract, and in what
circumstances implied and tacit terms will form part of a contract.
Interpretation of express terms
• Meaning of express terms may be unclear or ambiguous.
• The rules for interpretation are used to determine the meaning.
• Only happens when we have established the term forms part of the contract.
• Only relevant for express terms and not tacit, or implied terms
Rectification of express terms
• When the document with express terms is incorrect
• The document will then be rectified to bring it in line with the parties' true agreement.
• If a contractual dispute arises from the rights and duties of the parties; it is possible that more
than one set of rules may apply:
○ The express terms of a contract are our primary source for determining the rights and
obligations of the parties.
○ If this does not resolve the issue the courts will consider the implied or tacit terms to form
part of the contract.
○ If none solves - court will hold disputed term does not form part of the contract.
▪ If the disputed term is an essentialia, the contract will be void for uncertainty
When answering a question you do not need to discuss all rules, rather the one that is relevant to the
question
Contents of a Contract Page 29

question
Starting point is expressed terms

Express terms
Incorporation
• These are terms expressed in writing or in speech.
• Not all of these suggested terms or pre-contractual statements will become part of the eventual
contract.
• As a general rule, only those expressed terms agreed upon will be incorporated into the contract.
• No special rules apply if a contract was concluded purely by speech.
○ The party alleging term must prove that the parties intended the term to form part of the
contract.
• The rules for incorporation are:
○ The parol evidence rule
○ Incorporation by reference
○ The caveat subscriptor rule
○ The ticket case rule

The rules
Parol Evidence rule

• Most important rule.
• Once a contract has been concluded in writing, the courts will look only at the written document
to determine which term forms part of the contract and what they mean.
• It does not matter whether or not writing was a formality for validity of the contract.
• Parol evidence- is evidence outside of the written contract itself.
○ Can be evidence of what the parties said or did before, during or even after the conclusion
of a contract, evidence of what they thought during the negotiations and so forth.
• This rule prohibits courts from considering such extrinsic evidence when there is a written
contract.
• This rule had two components:
○ The integration rule - which terms form part of the contract. Only terms in the written
contract form part of the express terms of a contract
○ The interpretation rule - Deals with the meaning of the express terms of the contract.
The integration rule
• When in writing, the written document is considered the 'exclusive memorial' of the agreement
between the parties.
○ The court will assume the parties intended the document to reflect all express terms of the
contract.
• The courts will, for this reason, not consider parol evidence that differs from the written
document.
• Union Government v Vianini Pipes
○ When a contract is reduced to writing, in general, the writing is regarded as the exclusive
memorial of the transaction and no evidence may be given except the document for proof
of its contents, nor may the contents of the document be contradicted, altered, added or
varied by parol evidence.
• The idea is that the document is the best evidence of their consensus.
• The rule is there to reduce disputes and thus save time.
• Used to distinguish between terms and pre-contractual statements.
Exceptions to the rule
Several exceptions:
1. Only applies if the parties intended the document to be the 'sole memorial' of their agreement. It
does not apply if parties intended it to be a partial record of their agreement. In this sense,
extrinsic evidence may be used to show that the parties only intended for the contract to be a
partial record.
2. Only applies to express terms. Parties are free to bring evidence that the contract contained
implied or tacit terms.
3. The rule does not apply to disputing the validity of a contract
4. The rule does not apply to subsequent verbal variation.
5. The rule does not apply to the rectification of a document.
6. May bring evidence that the document was a simulated transaction and they did not intend to be
bound to it.
7. That the entire contract was subject to a suspensive condition that was not expressed in the
contract.
a. Verbal evidence that a contract was subject to a resolutive condition may not be given -
Sealed Africa (Pty) Ltd v Kelly
8. Evidence may be brought of a collateral verbal agreement which induced the written contract.
a. Has to be separate from the contract, and that it must not be inconsistent with the terms of
the written document

the written document
Still forms part of our law
Incorporation by reference
• A contract may be incorporated into the contract terms that are written down in a separate
document, simply by referring to the document.
• You do not need to repeat those terms if the document is identified with sufficient certainty in the
contract.
• It is regarded as the other parties responsibility to ask for the separate document if he wished to
know what the incorporated terms are.
• If he does not do so, he will generally be bound to them even if there was no actual consensus
between the parties
• Electronic contracts
○ Term will only be incorporated if it would be noticed by a reasonable person, and the terms
could be accessed in a stored readable format - ECTA s11(2)
• CPA
○ If the consumer contracts in writing, the supplier must supply the consumer with a free
written or electronic copy - s50
○ Certain onerous terms must be brought to the consumer's attention in prescribed ways, and
the consumer must be given adequate opportunity to read and understand them - s49
▪ It would be insufficient to refer to them without giving the consumer adequate access
to the document.
○ Non-compliance does not automatically invalidate a term, rather, the terms will still be
incorporated but the courts have the discretion to declare them invalid if they are unfair -
s48 read with s52
Caveat Subscriptor
• Applies if a party signed a document containing contractual terms.
• The general rule is a party that signed is bound by all the terms contained in the document, even if
he or she did not read them or intend to be bound by them.
• This is an exception to the consensus rule.
Ticket case rules
• If it was not signed, this rule applies.
• A party is bound to the rules contained in the contract if he was willing to be bound by them or if
the party took reasonable steps to bring those terms to his attention

Interpretation of express terms
Factors to be considered
These factors are:
• Wording of the contract
• The context in which the wording is used
• Rules of construction
All must be weighed up against each other
Wording of the contract
• Starting point is to look at the written or spoken words used by the parties when contracting.
• General rules:
○ Words are interpreted according to their ordinary grammatical meaning.
○ Courts will carefully analyse the grammar and punctuation used in a phrase or sentence in
order to determine its meaning.
Context of the words
• Courts will look at the context in which the words were used to determine their meaning.
• They do this by:
○ Meaning of the phrase in the context of the contract as a whole.
▪ May deviate from the grammatical meaning if the ordinary meaning would lead to
results that are inconsistent with the rest of the contract
○ In addition, the court will look at evidence of an identificatory nature.
▪ Evidence to identify persons and objects referred to in the contract is allowed under
this.
○ The nature and purpose of a contract, and its genesis.
○ Consider evidence surrounding the circumstances
▪ Matters probably present to the minds of the parties when contracted, as well as the
conduct of the parties after conclusion.
○ Certain types of contextual evidence are still excluded.
▪ Tshwane City v Blair Atholl Homeowners Association
▪ In a recent decision the CC seemed to overturn this by holding that the evidence of
the parties' negotiations is admissible for the purpose of interpretation.
Canons (rules) of interpretation
Expressio unius est exclusio alterius
• Express mention of the one implies the exclusion of the other.
• If a contract expressly refers to a specific matter, then by implication it makes the contrary
provision for the opposite case.
Eiusdem Generis
• Of the same kind
• Meaning of general terms that are used together with words of a more specific nature.
• A court will limit the ambit of the general words to matters similar to the thing covered by more
specific phrases.
Change of language
• If similar clauses are worded differently, the courts assume that the change in wording indicates
the clauses should be interpreted differently.
Construction favouring validity
• If the phrase is capable of two meanings, one of which would lead to the contract being invalid,
the court will use the meaning that makes the contract valid.
Contra proforentem
• The term will be interpreted against the party who was responsible for the wording of the clause.

• The term will be interpreted against the party who was responsible for the wording of the clause.
Equitable Construction
• If it is not clear who worded the clause, the court will find the fairest interpretation of the term.
• Will also adopt an interpretation that causes the least inconvenience.
Cumulative effect
• You must look at all factors on a scale (cumulatively).
• The interpretation of the term must reflect the intention of the parties as expressed in the
contract.
○ Natal Joint Municipal Pension Fund v Endumeni Municipality
• If the court cannot determine the meaning of the contract even considering all the factors, the
term will be void for vagueness.

Rectification
General
• Occurs when a written contract, which incorrectly reflects the parties' common intention, is
rectified to reflect the true consensus.
• Based on the idea that court will enforce the parties' subjective agreement and not their declared
agreement.
• This does not change the contract, only the document is changed
What needs to be proven
• The common intention of the parties
• Only occurs if the parties reached consensus on the term. If only one party did, rectification
cannot occur.
• The document incorrectly reflects this intention
• Should be a credible explanation why the document was incorrectly drawn up.
• Usually the document would be incorrect because of the mistake by one or both of the parties
• For a simulated contract, the document may be rectified to reflect the parties true intention.
• A document may be rectified even if this rectification would deem the contract invalid.
Contracts subject to prescribed formalities
• A document that is subject to statutory formalities may be rectified if:
○ The contract can be rectified if it appears valid
▪ The courts will not take into account which terms the parties actually intended to
include in the contract. Without regard to the parties' true intention.
○ The contract cannot be rectified if it appears invalid.

Implied terms
Saturday, June 17, 2023 12:59 PM
Types
Incorporated in to contracts by the following:
• Terms implied by law
• Terms implied by usage
Terms implied by law
• Because of the operation of a legal rule
• Automatically form part of the contract, even if the parties did not reach consensus
• However, parties may change or exclude an implied term from their express agreement.
• These legal rules come from the common law
Common law
• These implied terms form part of the contract unless the parties expressly agree to exclude or
modify them.
• Courts can develop new naturalia on the basis of fairness, justice, reasonableness and the
underlying value of good faith
• NBS Boland Bank Ltd v One Berg River Drive CC; Deeb v ABSA Ltd; Friedman v Standard bank
○ Naturale that banks had to exercise discretion to unilaterally increase interest rates
reasonably and honestly
• Van Nieuwkerk v McCrae
○ Naturale for contracts of sale that residential buildings sold had to comply with all statutory
building regulations. Seller would be in breach if it is not
• Must be good law in general.
• It cannot be read just because the term would be fair or reasonable in a particular case -South
African Forestry Co Ltd v York Timbers Ltd
Statute
• Some terms may be varied or compulsory
Terms implied by Trade Usage
• An established practice in certain trade or business.
• When a particular practice is so common that people involved in that trade will assume that the
practice is a term of contract.
• Requirements:
○ Practice must be long established
○ Reasonable
○ Universal and notorious
○ Uniformly observed
○ Certain
• All the requirements must be met.

Tacit terms
Nature
• Read into contract to fill gaps that the parties did not expressly agree upon.
• They can be unexpressed or imputed terms.
• Read into contract because of the parties' actual or imputed common intention
Test: Necessary implication
• They will only do so if the term is a necessary implication of the contract.
• To do so, the courts use two test:
○ Officious bystander test
○ Business efficacy test
Officious bystander test
• This is the primary test.
• Asks what would have happened if such an officious bystander was present while the parties were
negotiating the terms of the contract, and he asked whether they wished to include the tacit term.
○ If the parties would have agreed upon the tacit term, it will be incorporated
• It is not enough that two reasonable parties would have agreed, the question is whether the
particular parties would have agreed upon that terms (subjective).
Business efficacy test
• Sometimes used instead of above.
• Whether the tacit term is necessary to give business efficacy to the contract.
• The term will be read in if the contract cannot be commercially viable without them.
• If it will still be viable without the term, it will not be read in.
Focus on officious bystander test
Relevant Factors
In applying the test, the courts will look at these factors.
The ease at which the tacit term can be formulated
• If it is hard to formulate, it is unlikely both parties would have agreed upon the same formulation.
• The courts will not read in term
When answering a question on tacit terms, always start with an attempted formulation of the potential
term
The express terms of the contract
• The tacit term cannot contradict the express terms.
• The courts will consider the general scheme of the contract in order to determine the parties'
unexpressed intention
The surrounding circumstances
• Includes the conduct of the parties before and after entering into the contract
• Whether the circumstances leading up to the contract, including the purpose of the contract,
matters probably present to the mind of the parties' subsequent conduct, are reconcilable with
the tacit term or not
Any special knowledge of the parties
• If any party has knowledge of the circumstances that would make them unwilling to agree to the
tacit term, the term cannot be read in.
Whether the term is for the benefit of one party
• If it is, it is unlikely the other party would have agreed, unless it was necessary to make the
contract commercially viable, or there were other reasons for them to agree.
Must view these factors cumulatively

Special terms
Terms qualifying obligations

• Do not create obligations.
• Rather they qualify obligations by suspending or terminating their enforceability in certain
circumstances.
• There are 3 types:
○ Time clauses (dies)
○ Conditions
○ Suppositions
Time clauses
Nature
• Qualifies operation of the contract by making it dependent on a future even which will certainly
occur, although it may be uncertain when it will occur
• Sometimes there is a tacit condition of survivorship.
○ Even if the event is certain to occur, the obligation is subject to the condition that the party
is still alive when it happens.
Types of time clauses
There are two types:
1. Resolutive time clause
a. The contract is fully operational, but will terminate on a certain date or when a future
certain event occurs.
b. When the time period is reached, the contract comes to an end. This does not usually
operate retrospectively.
2. Suspensive time clauses
○ The operation of the contract is suspended until that future event occurs
○ The effects:
▪ Depends on whether the clause was in favour of the debtor or creditor. When there is
doubt, the presumption is, it is in favour of the creditor.
▪ If it is in favour of the debtor, the enforcement of the debtor's obligation is suspended
until the time/event stipulated.
□ May perform sooner if wishes.
□ Credit cannot claim before this time
▪ If it is pro creditor, the creditor is not compelled to accept performance of the debtor
before the time/event.
□ Can enforce performance any time before.
□ Debtor cannot choose to perform earlier
▪ In favour of both
□ Both enforcement and performance are postponed till time/event
Conditions
Nature
• Makes the existence of the contractual obligation dependent on an uncertain future event
• The two features are:
○ Relates to a future event
○ Uncertain whether the event will occur
• A condition can be positive or negative
○ Positive - the condition is fulfilled if the future event does happen
Negative - the condition fulfilled if the future event does not happen

○ Negative - the condition fulfilled if the future event does not happen
Types
• Resolutive
○ Contract is fully operational but may be terminated if the condition is met.
○ Effect:
▪ The obligation arises immediately.
▪ Fulfilment terminates the contract/obligation.
▪ Can be terminated retroactively or from the time the condition is met.
• Suspensive
○ Suspends or postpones the operation of the contract until the condition is fulfilled
○ Effects:
▪ On fulfilment, the obligation becomes unconditional and fully operational.
▪ Does not create a new obligation
▪ When it I clear that the condition will never be met, the condition becomes void -
Ming-Chieh Shen v Meyer
○ Status of contract before fulfilment:
▪ Valid but operation only occurs when the condition is met.
▪ Different for contracts of sale. There is no contract as yet until condition is met.
Ways around non-fulfilment
1. Waiver
a. Whether you can condition unilaterally, so that the contract becomes unconditional
b. Can, provided the condition was inserted into the contract solely for that party's benefit
c. Must be waived before the contract lapses
d. Other party must be notified
i. Ming-Chieh Shen v Meyer
2. Doctrine of fictional fulfilment
a. A condition will be regarded as fulfilled in law even if factually it was not.
b. This happens when one party frustrates the fulfilment of the condition.
c. Requirements (Scott v Poupard)
i. Deliberate prevention of fulfilment
□ One party must deliberately prevent fulfilment of the condition -Lekup Prop Co
No 4 (Pty) Ltd v Wright
ii. Breach of duty not to prevent fulfilment
□ There is no duty to prevent fulfilment. Depending on the intention of the parties
in the case.
iii. Causing non-fulfilment
□ The fulfilment of would have occurred if one party did not act the way he did.
□ The party wanting to enforce will have to prove this.
□ If the condition would not have been fulfilled in any event, the doctrine cannot
apply.
Warranties
• Whereby a party assumes contractual liability for the existence of a certain state of affairs or the
occurrence of an event.
• Can relate to past, present or future state of affairs.
• If the state of affairs does not exist or occur, the contract is valid and fully operational.
• Failure to comply with the warranty constitutes a breach.
• Imposes absolute liability on the person giving the warranty.
• May not escape liability on the basis of impossibility of performance or absence of fault
• The test for this is the intention of the parties

Exclusion Clauses
Exclusion clauses
General
• Term that limit or exclude the liability a party will normally have.
• Examples:
○ Imposed by a term implied by law
○ Breach of contract
○ Misrepresentation
○ Delictual damages
Escaping
• Two main ways of limiting the effects of the exclusion clause are:
○ Striking down the clause on the basis that it is invalid
▪ Can be invalid for any of the reasons that affect the validity of the contract.
▪ Most common reason for invalidity is lack of agreement and illegality
▪ If invalid, the courts will generally sever it and enforce the balance of the contract.
□ If indivisible, the entire contract will fall.
▪ If consensus was obtained in an improper manner, a party may be able to set aside
the contract and so invalidate the exclusion clause
○ Interpreting the exclusion clause so that it does not cover the claim in question
▪ If the clause is ambiguous, it may be possible to interpret it in a way that does not
prevent a particular claim.
▪ We use the normal rules of interpretation but sometimes the courts will try to use
restrictive interpretation.
• Ways around exclusion clauses are :
○ Lack of agreement
○ Illegality
○ Interpretation
Lack of agreement
• If one party was unaware of and/or unwilling to consent to the exclusion clause, he should
therefore not be bound to it.
○ Qualified by the rules relating to mistake.
• Will generally be binding, even with the lack of subjective consensus.
○ Caveat subscriptor
○ Ticket case
Illegality
• May be invalid on the grounds of public policy or statutory illegality.
• There are others that have been recognised by courts
Excluding liability for intentional misconduct by a party
• Contrary to pp to exclude liability for intentional misconduct by a party.
○ Fraud, theft, damages caused intentional or intentional breach
• If the exclusion clause does this, the clause will be invalid and unenforceable.
• If the clause excludes liability for non-intentional misconduct, the court will sever the illegal
portion of the exclusion clause and enforce the balance of the exclusion clause.
• A party will therefore be liable for intentional misconduct but not for non-intentional misconduct.
Excluding vicarious liability for the intentional wrongdoing of an employe
• Generally an employer can exclude vicarious liability for negligent wrongdoing by the employee.
• In terms of intentional wrongdoing, this is what we do.
Ask whether the employer benefitted from the misconduct of the employee.

○ Ask whether the employer benefitted from the misconduct of the employee.
○ If yes - he will remain liable
○ If no - the exclusion clause protects him from vicarious liability
▪ FNB v Rosenblum
• The injured party can still sue the employee personally
Excluding liability for gross negligence
• It is not generally against public policy as long as it is done clearly and unambiguously.
Excluding liability for breach of contract
• One can do so, including a serious breach of contract (fundamental).
• As long as the wording is sufficient and clear
○ Elgin Brown And Hammer (Pty) Ltd v Industrial Machinery Suppliers (Pty) Ltd
Exclusion clauses undermining pp
• May be against pp.
• We need to use the two-pronged pp test for reasonableness:
○ Whether the cause is unreasonable or unfair in general
○ Whether enforcement of the clause is unreasonable in the particular circumstances
• Apart from mention factors under pp, the court will consider whether there are sufficient
safeguards to protect the constitutional right or pp, and whether there are policy reasons for
allowing the exclusion clause
• Can one escape liability for causing another's death.
○ Intentionally, then generally yes.
○ Negligently - considered but not decided in the case of Johannesburg Country Club v Stott
• A clause excluding liability for negligently causing bodily harm was no against pp - Afrox
Healthcare Bpk v Strydom (SCA) but later reconsidered by HC in Naidoo v Birchwood
Statues
• Statutes may also regulate exclusion clauses in particular context
Interpretation of Exclusion Clauses

• Once it is clear it forms part of the contract, we need to determine what does it mean?
• Courts sometimes used the unitary approach to interpretation or the normative approach (deviate
from the normal rules in order to impose standards of fairness and reasonableness on the
exclusion).
○ Restrictively interpret.
Restrictive interpretation
• Assign a meaning to the language that excludes as few claims as possible.
• G4S Cash Solutions (SA) (Pty) Ltd v Zandspruit Cash and Carry (Pty) Ltd
• Johannesburg Country Club v Stott
• Restrictive interpretation cannot be used to give the clause an unrealistic meaning.
○ Durban's Water Wonderland (Pty) Ltd v Botha
Clauses excluding liability for objectionable conduct
• Courts will not easily accept the exclusion of liability for the following causes of liability:
○ Negligence by a party or his employees
○ Intentional misconduct by employees
○ Breach of contract, especially a fundamental breach.
• Restrictive interpretation cannot be used to override the express and unambiguous meaning of
the clause.
• However, if the clause does not expressly mention these clauses, the courts will interpret it as
restrictively as possible.
• One way to do this is to employ the eiusdem generis rule.
• In addition, the courts will also apply the contra proferentem rule.
Application of the contra proferentem rule
1. Does the exclusion clause expressly exclude the objectionable conduct? Only if no go to the next
step

step
2. Could the clause apply to claims arising from the objectionable conduct as well as claims arising
from less objectionable conduct? If it only applies to the objectionable conduct, cannot go further.
If it applies to both, go further.
3. Interpret restrictively so that it excludes liability for the less objectionable grounds
a. Galloon v Modern Burglar Alarms
Evaluation
• The focus in interpretation in the restrictive approach is fairness and justice, rather than
interpretation.
• Must apply both the restrictive interpretation and formalistic interpretation
Consumer Protection Act

Lack of agreement
• The exclusion clause must be brought to the attention of the consumer in prescribed ways -s49
○ In a conspicuous manner
○ In plain language, and the consumer must be given an adequate opportunity to read and
understand the clause
○ If the exclusion clause relates to activity or facility that is subject to unusual risks, the
consumer must sign next to the clause or act in a way that indicates awareness and
acceptance of the clause.
• These rules qualify caveat subscriptor and ticket case to an extent.
• If the supplier does not comply with these prescriptions, the clause is not automatically invalid.
○ The courts have a discretion to strike down the exclusion clause on the basis of unfairness.
Illegality
• Act prohibits certain types of exclusion clauses:
○ Liability for gross negligence of the supplier or his employees are illegal and therefore
invalid -s51
○ Invalidate clauses on the basis of fairness (s52).
▪ Certain types are grey listed, the supplier will have to convince the court that the
exclusion clause is reasonable and fair in the circumstances before they enforce it.
Interpretation
• Act says that the exclusion clauses must be interpreted restrictively so that they only exclude
liability that a reasonable person would expect to be excluded - s4(4)(b)

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Introduction to the law of Contract

Nature of Rights created by contract

Cornerstone of contract law

The Bill of rights and the Constitution

Reading cases and Using them as Authority

Requirements for a valid contract

Consequences of improperly obtained agreement:

Overview Legal Principle

1. Prescribed form (If any)

2. Complete, Certain or ascertainable

ii. Certain or ascertainable content

3. Communicated to the offeree

4. Offer must be made with animus contrahendi

ii. Animus Contrahendi and offers to the public

The Acceptance must be expressed in the prescribed manner

There are 2 methods of acceptance:

Communicated to the offeror, unless communication has been dispensed with

Acceptance must take place before an offer terminates.

There is a difference between tacit acceptance and acceptance by silence:

National Credit Act 34 of 2005

Consumer protection act 68 of 2008

Statutory Illegality - briefly

Consequences of Prohibited conduct, as per statutes

Objective and subjective reasonableness

Contracts that undermine fundamental constitutional rights

Factors pertinent when a fundamental right is implicated

The established rules

Gambling contracts - Wagers and Bets

Freedom of Contract and Pacta Sunt Servanda

Unequal bargaining powers (UBP)

Fairness as a freestanding requirements?

Reasons for non-compliance

The scale of subjective reasonableness

Same for both statutory and common law illegality

Severing the illegal part of the contract

Deadlock breaking mechanism (Southern Port Developments)

2 rules that apply only to illegal contracts.

Shifren - non-variation clause is valid and supported by Brisley v Drotsky.

Estoppel- never successfully been done in the courts.

June 2022 paper

Terms and obligations

Contents of a Contract Page 29

Starting point is expressed terms

Contents of a Contract Page 30

Contents of a Contract Page 31

Parol Evidence rule

Contents of a Contract Page 32

Contents of a Contract Page 33

Contents of a Contract Page 34

Contents of a Contract Page 35

Contents of a Contract Page 36

Contents of a Contract Page 37

Contents of a Contract Page 38

Terms qualifying obligations

Contents of a Contract Page 39

Contents of a Contract Page 40

Contents of a Contract Page 41

Interpretation of Exclusion Clauses