Upon completing this module, students will acquire a foundational knowledge and reflective understanding of the substantive law relevant to contracts. They will be introduced to the South African legal system, including the essential elements that constitute a valid contract, the legal consequences...
Introduction to the Law of Contract
A law of contract is a set of legal rules and principles that govern agreements
between parties. It outlines the requirements for forming a valid contract, such
as mutual consent, offer and acceptance, consideration (something of value
exchanged), and legal purpose. The law of contract also addresses the rights,
obligations, and remedies available if a party fails to fulfil their contractual
obligations, often referred to as a breach of contract. Overall, contract law
ensures that agreements are enforceable and that parties can seek recourse if
terms are violated.
Essentials for a valid Contract
• Consensus/Agreement - parties must be of the same mind
• Legality – agreement must be lawful
• Contractual capacity – must be made within limits of parties’ contractual
capacity
• Physical possibility – performance of obligations must be physically
possible
• Formalities - by law or by agreement
Consensus/Agreement
Consensus is fundamental to every contract, as it ensures that all parties agree
on the rights and duties that will be established by the agreement. To determine
if consensus exists, an objective inquiry is applied. Several requirements must be
met for consensus to be valid. Firstly, both parties must demonstrate a serious
intention to be legally bound by the contract. Secondly, there must be a common
intention regarding the legal relationship, including the associated rights and
duties. Finally, each party must communicate their intention to the others, which
can be expressed through a declaration of intention—this can be done in writing,
orally, or through conduct, resulting in an offer and acceptance. Once the offer is
accepted, a consensus or "meeting of the minds" is achieved.
• Offeror: Person who makes an offer.
• Offeree: Person who accepts the offer.
• Offer: A statement of intent made by the offeror.
• Acceptance: Agrees to the exact terms of the offer.
• Rejection: Offer is totally rejected by the offeree.
Acceptance in a contract can be tacit or implied, meaning that it does not always
require an explicit or direct statement from the offeree. Both tacit and implied
acceptance depend on the specific circumstances and actions, but they allow a
contract to form even without a clear, verbal “yes.” The following are not
considered true offers because they do not express a clear intent to form a
binding contract.
• Invitations to Negotiate: A coffee shop advertises a coffee and pastry
combo. This invites customers to come in but doesn’t bind the shop to sell to
everyone, as it may be limited by stock.
, • Request for Quotation (RFQ): A construction company requests prices
from brick suppliers but isn’t obligated to buy—they’re just collecting
estimates to decide later.
• Statements of Information: A car dealership posts model prices in an
online catalogue, but these aren’t binding. They provide general
information, not a commitment.
• Statements/Letters of Intent: A tech company’s letter to a software
developer shows interest in buying, but terms are yet to be finalized. It
allows room for negotiation.
• Invitation to Tender: A government agency asks contractors to submit
bids for a project. They can accept or reject bids without commitment, as it’s
just a way to gather options.
Key requirements for a valid offer and acceptance
• Intention to be Legally Bound
• Completeness of the Offer
• Clarity and Certainty
• Express or Tacit Communication
• Addressing the Offer
• Communication of Offer and Acceptance
How can an offer be terminated?
• Expiry of validity period - Offer valid until October 30
• Lapse of reasonable time - a seasonal job offer might no longer be valid
months after the hiring season has ended.
• Death of offeror - an offer to hire someone as a personal trainer
• Loss of contractual capacity - due to mental incapacity, the offer ends
• Rejection of an offer - declining a job offer ends the employer's obligation to
hire that candidate.
• Counter-offer - if someone offers to sell a car for $10,000 and the potential
buyer counters with $9,000, the original $10,000 offer is no longer valid.
Factors that influence consensus. (Voidable/Void Contracts)
• Mistake: A misunderstanding or error by one or both parties the contract
• Duress: If one party is threatened into entering a contract against their will.
• Misrepresentation: If one party makes false statements that induce the
other party to enter into the contract
• Undue Influence: This occurs when one party exerts excessive pressure or
influence over another party.
Legal Capacity and Capacity to Act
Legal Capacity: The ability to have rights and duties.
Capacity to Act: Ability to perform legal actions (like contracts).
, o Only natural persons have this.
o Can be lost or limited.
Liability: Competence to be held responsible for wrongdoings.
Factors Affecting Capacity to Act
Age
Substances (Drugs/Alcohol)
Marriage
Prodigality (wasteful spending)
Mental Health
Insolvency (when debts exceed assets)
Age and Legal Capacity
1. 0-7 years (Infants): No capacity to act (cannot enter any contracts).
2. 7-18 years (Minors): Limited capacity.
o Can act with a guardian’s help or in specific cases without it.
3. 18+ (Major): Full capacity.
Attaining Full Capacity (Majority)
1. Age 18 (according to the Children’s Act).
2. Marriage as a Minor.
3. High Court Application.
Minor’s Limited Contractual Capacity (7-18)
Contracts with a Guardian’s Help: The minor can cancel within one
year after turning 18 if it’s harmful.
Contracts Beneficial to Minors: Minors can enter contracts without
obligations (like donations or debt waivers).
Statutory Exceptions: Minors can consent to medical treatment (age
12+), make wills (age 16+), and other specific acts.
Special Situations for Minors
1. Immovable Property:
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