LECTURE 2.

INTRODUCTION: CONTRACT WITHIN THE LAW OF OBLIGATIONS

• 1- What is a Contract?
• 2- Contract within the LAW of OBLIGATIONS
• 3- PRIVATE LAW versus PUBLIC LAW
• 4- Freedom of Contract & Social Values.
• 5- Basis of Contract (dual basis).
• [[ Main reading: Hutchison & Pretorius Ch 1]
 cases

• Main Reading:
• (Hutchison & Pretorius –, Ch. 1 & 3). The Law of Contract in
SA

• (As Engineering student, you don’t have to read the cases

occasionally mentioned in the slides. Just remember the basic
principles mentioned in the notes about each case
mentioned).
• (You can also read Van der Merwe et Al, Contract – General
Principles - Ch 1).
 1== What is a Contract?
• Contract is a juristic Act=
• Act to which the law attaches the
consequences intended by the parties.
• == In this sense contract is similar to a Will (it is
unlike delict); However, while execution of a will
is a unilateral Act, Contract is a bilateral Act (or
even a multi-lateral Act).
• There must be at least two parties to a contract.
 What is a Contract? (Cont)
• Contract entails Promises or Undertakings:
• The undertaking may be to make a certain performance
(immediately or in a future): To Give something; to do
something; or to refrain from doing something.
• (to give something; to do something are positive
obligations; to refrain from doing something is a
negative obligation).
• Alternatively, it may be that a certain State of affairs
exists or existed (ex: warranty that a car is a 2016 model
and has been services regularly).
 What is a Contract? (Cont)
• Most Contracts entail RECIPROCITY.
• This means that one party’s performance is promised in exchange for the
other party’s performance.

• This is the notion of a contract as a bargain (which is prominent in England

and USA/Australia) = the concept of CONSIDERATION.

• But this concept of consideration is not part of Namibian Law.

• (In English/USA law, it is said that a “promise will not be enforced unless it is
supported by a consideration // This term means that something of value
must be given or promised in return (a quid pro quo).
 2-Private Law x Public law
(distinguishing public law from Civil obligation)

Example: A person who has been the victim of a crime can complain
to the police, who will investigate, and if the police feels it
appropriate they will hand over the case to a prosecutor to initiate
the prosecution (this is an example of public law). But a person who
wishes to complain of a breach of an obligation owed privately to
him/her, such as a breach of a contract, must enforce his right in the
courts without the assistance of any public authority. (This is called
‘civil obligation’. Thus this scenario is an example of private law).
2- Private LAW versus Public Law (Cont)
• Namibian Constitution & Contract (Private Law in General)
• = (a) Freedom of Contract & Social values)
•
There is sometimes tension/competition between the
underlying values in a certain society and its legal principles.
Knowing how a legal system deals with those tensions and
solves the problems, helps one to understand the difference
between legal systems.
In the case of Namibia & (also South Africa) the values
embodied in the Constitution also inform the Law of Contract
(We will return to this topic again later in the course).
 Sanctity of Contracts

Sanctity of contracts: is the idea that

contracts freely and voluntarily entered
into must be honoured and, if necessary,
enforced by the courts. This element is
generally expressed as “pacta sunt
servanda”.
 Freedom of Contract & Social
values
Contract is a self Imposed obligation:

However, such self-imposed obligation must be

informed with certain values that inform the law of
contract. In other words, the principles and values
governing a legal system must permeates its entire law,
including the law of contract. (using a SA term, we
would say the values of ubuntu must also permeates the
law of contract).
 Privity of Contract

Privity of contract – is the idea that a

contract creates rights and duties only for
the parties to the agreement, and not for
third persons.
 Main Branches of Law of Obligations
Where the obligation entails
(Contract & other Branches of Law ‘Ius in personam’

CONTRACT

• Contract
within the Law
OBLIGATIONS
of Obligations.
UNJUSTIFIED
DELICT
ENRICHMENT
 An Obligation in general
• What is an Obligation?
• An obligation – is a legal bond (vinculum juris) between two or more
persons, obliging the one (the debtor) to give, do, or refrain from
doing something to or for the other person (the creditor).

• Obligation comprises a right & a duty.

• (One’s person’s right is the other’s duty).
• NOTE on Latin Expressions: At the end of each chapter in your book
on Contract by “Hutchison & Pretorius” Latin terms are explained.
But for engineering students, the lecturer will explained the few
terms that will pop in and lecturer’s notes will be enough.

• (ius in personam x ius in rem)=Personal right v Real right)

 Note on Latin Expressions

• Latin Expressions will appear very often in

your study of Namibia contract law: At the
end of each chapter in your book most Latin
terms used in that chapter are explained.
(Engineering students need not know the Latin
terms; but their equivalent in English).
 Sources of Obligations
Contract
(agreement)- self
imposed
obligation.

Delict (Imposed Enrichment

by law) (Imposed by law)

Others:
Negotiorum
Ex: Statutes
Gestion {
(imposed by law)
 COMPARISON OF CONTRACT, DELICT & ENRICHMENT OBLIGATIONS

     

    Contract   Delict   Enrichment

Event giving rise agreement to wrongful unjustified shift

to the obligation make the conduct of wealth or an

  performance (do that causes asset from one

  give, do or not harm to estate to

    to do something)   another   another

       

content of the to make the promised To avoid causing To return the

obligation performnace harm by wrongful enrichment

        conduct    

       

Nature of the Actual performance, Compensation Return of the

remedy or compensation for harms enichment

  for non-performance   caused    

       

Source of the Self-imposed Imposed by law imposed by law

Obligation            
 Contract: Definition
• What is a Contractual Obligation?
• A Contract is an agreement entered into by
two or more persons with the intention of
creating a legal obligation or obligations.

• - The agreement must also be one that the

law recognizes as binding between the parties.
 WHAT IS A CONTRACT?
A CONTRACT IS A BILATERAL (OR
MULTILATERAL) AGREEMENT BETWEEN TWO
OR MORE PARTIES WITH THE INTENTION OF
CREATING A LEGAL OBLIGATION (OR LEGAL
OBLIGATIONS). In order to constitute a valid
contract the agreement must be legally binding
between the parties and ordinarily capable of
being enforceable in a court of law.
 3--Consensus
(Dual Basis of Contract)

• Genuine Consent & Apparent Consent

 3-consensus
• There must be consensus between the parties
on all material terms of the relationship into
which they intend to enter (consensus ad
idem). The consensus must exist about the
nature of the agreement, its object and its
finality… and any other material terms.
 Consensus & (“reliance”)

Technically a contractual liability is founded on the idea of consensus (&

reliance). A contract is a self-imposed obligation, voluntarily entered
into with another person.
The contract will be based on ‘reliance’ if one of the parties alleges
mistake, but then the court decides that despite the alleged mistake,
there is still a contract because one of the parties relied on the
‘manifestation of consent shown by the other party’. Such reliance must
be reasonable, and the mistake alleged by the other party must be
unreasonable.
 Consensus & Reliance
(Following lectures)
• There must be consensus between the parties
on all material terms of the relationship into
which they intend to enter (consensus ad
idem). The consensus must exist about the
nature of the agreement, its object and its
finality… and any other material terms.

• The Opposite of “consensus” is “dissensus”.

 2- capacity
• The parties entering into a contract must have
capacity to contract.
• - Eg. Not mentally incapable of understanding
the nature of the agreement;
• Not infants; not insane; not prohibited by law;
etc.
• Minors; Insolvents; Prodigals;
• The State
 3- Object possible
(Possibility)
The object of the contract must be possible. If it is a contract for a
thing, the thing must exist at the time of contracting or able to
exist in the future.
Eg. If I sell you a horse and at the time of bargaining the horse is
already dead even if I do not know it, there is no legal obligation.
Thus the rule “Impossibilium nulla obligatio est” (no obligation
arises where there is impossibility).
 4- certainty.

The agreement must have a definite or determinable

content, so that the agreement can be ascertained and
enforced.
 5-Legality

Agreements contrary to public policy (illegal,

immoral & against public interest) are normally
not enforceable.
Considerations of public policy indicating that an
agreement should not be enforced are to be found
in legislation, the common law, good morals (boni
mores) and the public interest.
 6-Formalities

Usually formalities are not required in the formation

of contract. But if the law requires that certain
formalities must be adhered to, the contract will not
be valid unless those formalities were complied with.
 Freedom of Contracts

FREEDOM /SELF-IMPOSED OBLIGATION

 Freedom & Sanctity of contracts
Freedom of contract – It is the idea that the
parties are free to decide whether they want to
enter into a contract, with whom they want to
enter into that contract & on what terms they
willing to contract. This is one as principle of party
autonomy.
 Freedom of contract (cont)

The creation of contracts is the result of free

choice, without external interference, and in
the process of contracting the parties are
sovereign.
 Freedom of contract (cont)

An underlying idea in freedom of contract is the normative concept

normally expressed in the following words: ‘the courts will not make a
contract for the parties’. (The issue will come back again when we deal
with rectification of contracts).
Rectification of contract means that both parties are in agreement that
their expressed wishes in an instrument does not correspond to what they
have actually agreed; and the court will order rectification of the
instrument to correspond to the agreed ‘wishes’ of the parties themselves.
On rectification, the court isn’t making the contract for the parties, but it is
just giving effect to the wishes of the parties themselves.
 Freedom of contract (cont)

As a result, if the court is satisfied that the

contract was freely entered into and that its
terms are not illegal, immoral or contrary to
public policy (public interest), it should uphold it
and if necessary enforce the contract: ‘pacta
sunt servanda’.
 Sanctity of Contracts

Sanctity of contracts: is the idea that contracts

freely and voluntarily entered into must be
honoured and, if necessary, enforced by the
courts. This element is generally expressed as
“pacta sunt servanda”.
 Good Faith

Good faith (bona fidei) – is the idea that parties to a

contract should behave honestly and fairly in their
dealings with one another: (this aspect will be
extremely important when we consider ‘remedies’ in
contract, because it goes along with the idea that in
Namibian law the primary remedy in contract is
‘specific performance’.
 Privity of Contract

Privity of contract – is the idea that a

contract creates rights and duties only for
the parties to the agreement, and not for
third persons.