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Lecture notes for Law of Contract Private Law 372
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Contract law lecture notes from 2021 for the entire second semesters' work, does not include extensive case summaries or textbook summaries.
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Law of Contracts Semester 2The content and operation of contracts.............................................................................3
Introduction:............................................................................................................................ 3
The parties to the contract......................................................................................................3
Multiplicity of parties:.............................................................................................................. 4
Privity of contract:...................................................................................................................6
Types of obligations created by a contract:..........................................................................11
Types of terms...................................................................................................................... 13
Express, tacit and implied terms...........................................................................................16
General terms....................................................................................................................... 20
Proof and interpretation of contractual provisions.................................................................25
2. Breach of Contract......................................................................................................... 29
General:................................................................................................................................ 29
Types of breach:................................................................................................................... 29
Remedies:............................................................................................................................ 29
Positive malperformance......................................................................................................30
Mora Debitoris...................................................................................................................... 33
Anticipatory breach............................................................................................................... 41
Breach of contract on the part of the creditor........................................................................47
Remedies arising from breach..........................................................................................50
General:................................................................................................................................ 50
Remedies aimed at fulfilment of contract..............................................................................51
Exceptio non adimpleti contractus........................................................................................55
Cancellation.......................................................................................................................... 59
Reciprocal duties of restitution..............................................................................................63
Damages.............................................................................................................................. 65
Statutory remedies for breach of contract.............................................................................79
Transfer of obligations/cession........................................................................................81
Introduction........................................................................................................................... 81
Requirements....................................................................................................................... 81
Consequences of cession.....................................................................................................83
Cession in securitatem debiti................................................................................................84
Termination of a cession......................................................................................................85
Termination of obligations.................................................................................................85
General................................................................................................................................. 85
Termination by performance.................................................................................................85
Termination by agreement....................................................................................................86
Termination by exercising right of termination......................................................................87
Termination by operation of law............................................................................................88
,Exam:.................................................................................................................................. 91
,The content and operation of contracts
Introduction:
Various factors which impact content and operation of a contract
First factor:
o Number of parties involved
Who must perform to whom?
Easily answered where there are 2 parties: creditor and debtor
Where it impacts 3rd parties tricky
2nd factor:
o Differences in the nature of types of obligations and types of terms
o What must be proved?
o Contract consists of more than those terms which are simply agreed upon
o Some terms may be express or unexpressed
o Even if we know what the terms are, we must interpret them accordingly
Other factors?
o To what extent is the content determined solely by the parties and to what extent do we
consider other factors?
o Simply put, content of contract is determined solely by intention of parties BUT this is
not always true as courts do interfere with content of contract
To what extent does contract law give effect to reasonableness, good faith etc.?
o Our courts do not recognise good faith as an independent standard against which one
measures validity of contractual term BUT it is given a lot of consideration
o Good faith is seen as a value or mechanism underlying development of new rules or
adjustment of existing rules.
See this particularly when considering second semester subject matter
Take into consideration the abstract values underlying specific, concrete notions of
contract
The parties to the contract
Introduction:
Contract = bilateral juristic act involving at least 2 parties
Party who is obliged to perform = debtor, on the passive side of obligation
o Why are they on passive side?
Designation of active and passive has to do with fact that creditor has right to claim
performance, and is thus on more active side
Party who is entitled to performance = creditor, on the active side of the obligation
A contract may create just one obligation, but more often creates multiple obligations
o Party may be a creditor in respect of one obligation, but a debtor in respect of another
o NB: must be able to distinguish who is a creditor and debtor to obligation as a party can
commit breach of contract as a debtor but can also commit breach in their capacity as a
creditor
o Must understand who a creditor or debtor in an obligation is to identify the correct type
of breach
Example:
Contract of sale: normally has at least 2 obligations:
1: deliver Merx,
2: pay purchase price
Duty 1 delivery: buyer = creditor, debtor = seller
Duty 2 payment: seller = creditor, buyer = debtor
, In respect of these 2 obligations, parties change positions between creditor and debtor
Multiplicity of parties:
Multiple persons can be part of a contractual relationship or an obligation
o This can give rise to issues with the operation of contract
o Be certain as to who is involved with what obligations
Situation where there are multiple debtors or multiple creditors OR multiple creditors AND
multiple debtors
o Example: A1 A2 and A3 sell their business to D for R3mil
1 performance: delivery of the business
Multiple debtors involved in this performance
Who must perform what and to whom? Or who can claim what from whom?
This can be difficult when parties do not indicate how to answer this question
Therefore, work with different categories of multiple creditors or debtors
1. Simple joint relationship or not true joint relationship:
This category helps us to determine when we are not dealing with a true joint relationship
Example:
o Bank A lends R3mil to debtors B1 B2 and B3
o Because the performance is divisible, intention is probably that each debtor binds him or
herself to repay a pro rata or proportionate portion of the debt R1mil per debtor
o In this situation, contract creates more than 1 obligation
Not a true joint relationship
Why?
o When dealing with true joint relationship, performance in its entirety is owed by more
than 1 debtor
2. True joint relationship:
2 categories:
Common joint relationship: performance can only occur jointly by co-debtors or be claimed
jointly by co-creditors
o Only 1 obligation related to performance in its entirety
E.g., A and B sell their house to C: cannot divide performance into duty on A to deliver
1 half and B to deliver the other indivisible performance, must be performed
together as a whole for it to be meaningful
o Must sue jointly
o Indivisible performance
Joint and several co-debtorship or creditorship (solidary relationship)
o Performance must not necessarily only occur jointly
o Creditor, for e.g., can choose from whom he wants to claim performance (e.g., can claim
whole performance from 1 co-debtor, or a portion from 1 and a portion from another)
o This is the most beneficial from a creditor’s perspective as it allows them to, for
example, only then choose performance from debtors who can pay debts
Very useful form of security for creditor
If, for example, a co-debtor becomes insolvent, does not have an impact on the
creditor’s ability to claim from those debtors which are solvent
If it was a simple joint relationship, creditor would only be able to claim 2/3 of debts
owed
o Joint and several liability resembles a situation which would arise when a debtor lends a
sum of money to a principal debtor and gets several parties to sign as co-sureties
, But suretyship = different to joint and several liability as it has features which do not
find application
1. Suretyship is accessory to principal debt
2. Suretyship imposes secondary liability: rule is that creditor may only approach
surety when debtor commits breach of contract
In joint and several relationships, the obligation is primary. Do not need to wait for
breach before approaching other co-debtors
o Previously: debate around number of obligations involved in this relationship:
1. One performance relating to 1 obligation binding all co-debtors
2. Separate obligations relating to same performance
Professor de Wet was initially in favour of 1, but then changed mind and thought it was
sounder to analyse joint and several liability as multiple obligations relating to the
same performance allowed more nuanced treatment of the relationship between
creditor and co-debtors
Would, e.g., be easier to explain why you could attach certain conditions to some
obligations and not to others. Would also allow for them to prescribe separately
Courts now prefer the approach of 1 performance relating to 1 obligation
o When one or more of the co-debtors deliver this performance in full, it is extinguished
o What if, for example, 1 debtor performs in full, but he only received part of the loan
Does that debtor have an automatic right of recourse against those co-debtors who did
not perform?
Regardless of whether a right of recourse exists, how much could a debtor who pays
in full claim from co-debtors?
Case law is not conclusive
Some academics believe that there is such a right, and a paying co-debtor can claim a
proportionate part of this from the co-debtors
Others believe that this right does not exist must either arise from an agreement
between co-debtors which stipulates how much each co-debtor must pay OR must
stem from another source e.g., cession of rights
With cession, unclear whether paying co-debtor may claim proportionate part of the
debt or whether he may only claim a pro rata share of the debt from each co-
debtor?
o Points to remember regarding right of recourse:
Simply because co-debtors are jointly and severally liable to a creditor does not mean
that they are jointly and liable to each other or to a co-debtor who has paid in full for a
debt
Relationship between co-debtors and creditor has no bearing on relationships
between co-debtors themselves regarding a right of recourse
Where the co-debtors have an agreement between them which governs their rights of
recourse against each other and the amount for which each is liable, this will be
decisive - Bellingan v Clive Ferreira 402H ff
Where this agreement exists, a paying co-debtor cannot override the terms of that
agreement by obtaining a cession of the creditor’s rights against the co-debtors
this in effect amounts to fraud
This was at issue in Bellingan case, as applicant obtained cession of creditor’s
rights and tried to claim more than the agreement entitled her to do
if there is not an agreement between parties and the paying co-debtor’s right of
recourse arises from a cession, not clear what this cession allows co-debtor to claim
Cession: vehicle which is used to transfer creditor’s personal rights to another party
with the effect that the other party steps into the shoes of the original creditor with
all the benefits which this entails
Thus, for purposes of this discussion Paying co-debtor who obtained a cession
from creditor now has a right of recourse against co-debtors as the original creditor
would have. But whether this means he can claim full debt minus his pro rata share
, from another co-debtor, or whether the paying co-debtor can only claim pro rata
share regardless of cession IS NOT CLEAR
o Example A lends R4mil to debtors B1, B2, B3 and B4 who are jointly and severally liable
to repay loan to A
Co-debtors do not agree on anything re: respective rights of recourse against one
another
B1 pays full amount of loan and obtains cession of A’s rights
Can B1 now go to B2 and claim that he should pay ¾ of the amount to B1, the idea
being that, having paid to B1, B2 will claim ½ from B3 and so on?
OR can B1 only claim ¼ of the amount from B2, B3 and B4 respectively?
Factors determining a joint relationship:
The intention of the parties
o Decisive element
o If we can infer the relationship intended by the parties, this is decisive
o If the intention is not clear, work with presumption that if we are dealing with, for
example, multiple co-debtors simple joint relationship
This is because it is the least onerous for debtors
The relationship which is the most onerous requires a clear intention before we can
draw this conclusion
Whether performance Is divisible or indivisible:
o Divisible if it can be divided into meaningful/discrete aspects e.g., money debt which can
be divided into meaningful aspects between co-debtors
When divisible: either that we are dealing with simple joint relationship *this is the
presumption* or joint and several liability *this must be CLEAR from intention*
o A performance which cannot be meaningfully divided = indivisible
Common joint liability or joint and several liability
When it comes to indivisible performance, it is possible that a performance can be
physically divisible but that parties intended it to be treated as indivisible
Whether there are any prescribed legal rules dictating what relationship exists between
co-debtors
o E.g., with partnerships: rule is that during the existence of a partnership, provided
sufficient assets are owned by partnership, partners = in common joint relationship
Privity of contract:
Cannot impose duties on somebody who is not a party to the contract
This notion has, however, over time, been relaxed when it comes to conferral of rights or
benefits on somebody who is not a party to the contract
o Theoretically, it is possible to create a right or confer a benefit on a 3 rd party without their
consent
Representation:
Phenomenon where a person concludes a juristic act on behald of someone else
Representation
1. Agent or representative concludes a contract with a 3rd party on behalf of the principal
o Example:
P lives in Gauteng and wishes to buy a car in the Western Cape, but cannot travel due
to the recent unrest
Can phone somebody he knows and ask them to test drive it and buy it on P’s behalf
o Where this has happened, we say that the agent/representative is a contracting party –
i.e., the person physically concluding the contract with somebody else – BUT is not a
party to the obligations arising from that contract.
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