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Private Law 372 - Law of Contract Unit 6
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The Law of Contract: Study Unit 6Private Law 372: 2021
Table of Contents
6 FORMAL REQUIREMENTS (WRITING)................................................................................2
6.1 INTRODUCTION.................................................................................................................................... 2
6.2 STATUTORY FORMALITIES....................................................................................................................... 4
6.3 FORMALITIES IMPOSED BY PARTIES......................................................................................................... 12
6.4 THE ‘PAROL EVIDENCE’ RULE............................................................................................................... 24
6.5 RECTIFICATION.................................................................................................................................. 33
1
,6 FORMAL REQUIREMENTS (WRITING)
6.1 Introduction
Formalities = means writing & sometimes a signature, normally required for a contract
General principle:
o Formalities are NOT normally required for a valid contract.
Exceptions to this general rule: where the LAW or the PARTIES prescribed formalities.
Historical development of early law of contract:
o In early Roman Law, they were obsessed with FORM (contract had to be in a
particular format of a particular type & only then was it binding)
For eg. stipulatio
Have to use a certain verb
Eg: “do you promise to give me this?” The answer would be “yes I
promise to give you this”
There had to be exact formal correspondence between the words
used
Eg. Contractus literries
Certain contracts had to be in writing
Other contracts required you to have to hand over things (eg. loan –
it was only established once you actually gave the money)
o So, the historical development has changed from ‘ex nudo pacto non oritur actio’
to ‘ex nudo pacto oritur actio’
ex nudo pacto non oritur actio
From a bare agreement does NOT arise from an action
o But over time we moved away from this and said that a mere
agreement (nudo pactum) should be binding
ex = from
nudo = nude/ bare
pacto = agreement
non = not
oritur = arise
actio = action
Position nowadays: ex nudo pacto oritur actio (from nude agreement
arises action)
Our contracts are ‘form free’
but there are certain exceptions to this
Exceptions to ‘form free’ principle:
o 1) When the law/ legislation requires it (statutory formalities)
o 2) When the parties themselves require it
Why does the law still impose/ require formalities?
o Answer: what are the benefits of requiring writing?
if you put something in writing it creates certainty
it prevents litigation
it prevents disputes
it prevents risk of perjury
it prevents risk of fraud
o ‘Paper is patient and has an evidentiary function, it creates certainty and
reduces the risk of disputes’
Eg. suretyship must be in writing – what is an advantage of this?
2
, Creates certainty
The other party will be protected until such time that they actually
positively put their hand on that piece of paper
Writing & signature alerts people to the significance/ importance of
the transaction that they are going to conclude
It makes people take more positive steps in indicating their assent
rather than just doing so orally
Negatives of imposing formalities
o Opens the gates for potential abuse
Where parties hide behind formalities or allege that formalities have not
been complied with in order to escape the contractual liability
o This highlights the shift from formalities being imposed to protect parties to a
contract, towards allowing parties a possible escape route to escape the contract
(simple because of non-compliance with formalities)
I.e., someone no longer wants to be bound to a contract even though they
perfectly & clearly assented to it
How to comply with formalities?:
o How to comply with formalities depends on what the formality is but also
depends on what the parties/ statute requires
o Mostly, it would just be writing & signature
1) Writing, also electronic:
What does writing mean?
o Traditionally this involved a hardcopy/ piece of paper with
writing on it
o But what about use of electronics? How do you comply with
writing in our modern environment?
Answer = we have statutory provisions which deal with
this (eg: s12 ECTA)
o S12 ECTA
Indicates to us that writing could also include = a data
message which is accessible in a manner usable for
subsequent reference.
I.e., data messages are acceptable & constitute
writing in terms of ECTA
2) Signature, also electronic:
Generally speaking, a signature is a mark which is intended to
represent a particular person
o Initials, surname, anything that is intended to represent you
& your act
o Signature intends to represent you in a distinctive way & as a
way of identification
What about electronic signatures?
o Must turn towards statutory provisions such as s13 of ECTA,
which makes provision for electronic signatures
o S13(2) of ECTA now provides that electronic signatures are
now the functional equivalent of a ‘wet’ signature (when a
person uses a pen or seal to sign on a physical document,
then they have endorsed it with a ‘wet’ signature = today,
electronic signatures are equal to this)
S13 ECTA gives us 2 types of electronic signatures
3
, 1. Advanced electronic signature
This is the default option if a signature is required by
law
So, if there is a specific statutory requirement and it is
not specified what type of signature is okay and you
want to use an electronic signature – this would be the
default
2. ‘Ordinary’ electronic signature
You can also sign with an ‘ordinary’ electronic
signature
This is not the same as an advanced electronic
signature
What must this signature do?
1) it must identify the party who signs
2) & must indicate some form of approval of
the communication
Spring Forest Trading CC v Wilberry (Pty) Ltd t/a
Ecowash 2015 (2) SA 118 (SCA)
Is it sufficient to simply type your
name?
As long as you meet the 2 requirements; (1)
identify party signing it & (2) indicates some
form of approval, then it is okay, if it is intended
as such, to type your name.
What does this look like in practice?
Eg: If you accept an offer by way of SMS/ email/
WhatsApp or link via an email, what would
suffice as an ordinary electronic signature?
o So, we work on the basis of what is
actually, substantively intended.
o We do not necessarily require something
of you like to take a picture of your
signature.
Sources of formalities
o 2 main sources of formalities (2 main reasons a contract might have to be in
writing) (this is an exceptional requirement – normally no contract has to be in
writing):
1) if legislation/ statute requires it
2) if the parties require it
6.2 Statutory formalities
Purpose/ benefits of formalities
o Prevents perjury/ fraud – it creates certainty
o Fulfils a warning function: ‘flag to people’ that they are entering into an
important transaction
When does statute impose formalities?
o 1) Interpret statute
Must first interpret the statute (does the statute require adherence to
formalities)
o 2) Interpret contract
4
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