State the requirements for a valid offer and a valid acceptance. Do not discuss these
requirements. And in your answer do not make any reference to the Consumer Protection
Act 68 of 2008.
[10]
1.1 The offer must be firm
The offer must be a firm one, made animo contrahendi – that is to say, with the intention that its
acceptance will call into being a binding contract. This requirement is not fulfilled if one of the
parties makes a tentative statement to the other with the intention of sounding the other out in
order to find out whether he or she would be prepared to enter into negotiations (Efroiken v Simon
1921 CPD 367). Whether a particular declaration amounts to a firm offer, or is merely a tentative
indication of willingness to do business, may not always be easy to determine. It is ultimately a
question of fact to be decided in the light of all the relevant circumstances (Pitout v North Cape
Livestock Co-operative Ltd 1977 (4) SA 842 (A).
1.2 The offer must be complete (1)
The offer must contain all the material terms of the proposed agreement – there cannot be further
matters that still have to be negotiated before the overall agreement can take effect (OK Bazaars
v Bloch 1929 WLD 37; Lambons (Edms) Bpk v BMW (Suid Afrika) (Edms) Bpk 1997 (4) SA 141
(SCA)). Often, when large contracts are negotiated, various issues have to be settled before the
deal can go ahead. In such a case, it is said that ‘nothing is agreed until everything is agreed’. In
other words, the fact that the parties have reached agreement on issues A, B and C cannot give
rise to binding obligations, if issues D and E still have to be discussed, and the intention of the
parties is that there will be no binding contract until a comprehensive agreement is reached.
However, if the intention of the parties is that the preliminary agreement in respect of issues A, B
and C should be binding on them, irrespective of whether they ever reach consensus on
outstanding issues D and E, then of course the preliminary agreement will indeed constitute a
binding contract. If agreement is subsequently reached on issues D and E, the preliminary
agreement will be incorporated into and superseded by the more comprehensive agreement
(CGEE Alsthom Equipments et Enterprises Electriques, South African Division v GKN Sankey
(Pty) Ltd 1987 (1) SA 81 (A);Belmore v Minister of Finance 1948 (2) SA 852 (SR)).
1.3 The offer must be clear and certain
The offer must be sufficiently certain; it should be enough for the addressee merely to answer
‘Yes’, for a contract to come into being. If the offer is so vague that it fails to provide a reasonably
clear indication of what the offeror has in mind, no acceptance of the offer can create a binding
obligation, because it will be impossible to determine the content of that obligation.
, QUESTION 2
Y meets Z on 1 July and hands Z a signed written offer (including all the material terms), for the
purchase of Z’s Rolex watch. Y’s offer is for R50 000 and one of the terms of the offer states:
“This offer lapses on 30 August”. Z accepts the offer and signs this document on 15 August. Z
posts the document to Y on 28 August. The letter reaches Y on 1 September and on this date Y
opens the letter and notices that Z has signed the document. Did Y and Z conclude a valid contract
of sale? Discuss fully. Do not apply the Consumer Protection Act 68 of 2008. [10]
The question relates to the legal rules pertaining to when and where an acceptance takes effect.
More specifically, it has to be considered whether Z’s acceptance was legally effective, based on
the facts presented
The general rule is that a contract only comes into being when the offeror knows that
his/her offer has been accepted The theory which explains this rule is the information
theory. This general rule gives effect to one of the requirements of
subjective consensus which is the primary basis of contractual liability. If we apply the
general rule, it is clear that the offer expired before acceptance, but first it has to be decided
whether the general rule (information theory) applies, or whether a recognised exception to
the general rule will apply.
There are exceptions to the general rule . The offeror as dominus may dispense with the
need of acceptance being communicated to him /her or can indicate in the offer that the
contract will come into being at an earlier stage . This may be expressly indicated in the
offer itself, but this is not the case in our problem. It may also be implied from all the
circumstances, the language of offer itself and the nature of the contract. Not one of these
implied instances are possibly applicable in our facts.
Where an offer is made through the post it is assumed (a legal fiction thus), if certain
requirements are met that the offeror authorised acceptance by post as well as indicated
that the contract is concluded as soon as the acceptance is posted (Kergeulan Sealing and
Whaling Co v Commissioner of Inland Revenue 1939 AD 487). The expedition theory
explains the postal rule. The postal rule is, however, not applicable to our problem as the
offer was not made by post, which is one of the requirements to be met for the expedition
theory to apply.
As a consequence, the general rule (in terms of the information theory) must out of
necessity apply: Y had to be informed that her offer was accepted before the time of
termination of her offer, and this did not transpire. Accordingly, by the time she read Z’s
letter on 01 September , her offer had already lapsed, and could not be validly accepted.
The giving of appropriate advice
No contract of sale came into being because Z failed to accept Y’s offer timeously. Z may
thus validly refuse to accept Y’'s performance in terms of an invalid contract.
QUESTION 3
, State the requirements that a party must prove in order to have a contract set aside, based on
undue influence. Do not discuss these requirements. [6]
• That the other party exercised influence over him
• That this influence weakened his power of resistance and made his will pliable
• That the other party exercised this influence in an unscrupulous
manner in order to induce him to consent to a transaction which firstly was to his detriment
and secondly, which he with normal free will would not have concluded
QUESTION 4
Carol, an owner of an exclusive bicycle shop advertised a special limited-edition bicycle for sale,
and invited the public to make offers for the bicycle. Jane and Portia were among many other
people who submitted written offers for the bicycle. Jane’s offer was for R150 000, and Portia’s
offer was for R190 000. Although Carol intended to accept Portia’s offer, she erroneously wrote
a letter to Jane, wherein she accepted Jane’s offer. Jane believes that an enforceable contract
was formed but Carol denies this. Apply the direct reliance theory or the iustus error doctrine and
advise if a legally binding contract was concluded between Carol and Jane. Discuss fully and refer
to case law in your answer. Do not apply the Consumer Protection Act 68 of 2008. [20]
The facts seemingly indicate that Carol and Jane may not have reached actual consensus based
on the will theory because Carol sent the acceptance letter to the wrong person. Carol sent the
letter of acceptance to Jane by mistake as it intended to contract with another party. The question
thus deals with error, and the application of the iustus error doctrine. The iustus error doctrine has
two requirements: the mistake must be material (an application of the will theory) and reasonable
(an indirect application of the reliance theory). Because Carol as the contract denier believes that
a valid contract was not concluded, it must prove both of these requirements for the agreement
to be declared null and void. If it fails to do so, then the contract will be valid and legally binding.
Carol sent the letter of acceptance Jane by mistake as it intended to contract with another party.
The question is thus whether this mistake on the part of Carol is both material and reasonable in
terms of the iustus error doctrine.
The mistake on the part of Carol relates to an error in persona. With this type of error, where a
party intends to accept the offer of one party, but mistakenly accepts the offer of another party,
such an error is usually material. This applied in Kok v Osborne where a party was mistaken as
to the identity of the party or parties with whom he was contracting with, and the court held that
his mistake was material. And in National and Overseas Distributors Corporation (Pty) Ltd v
Potato Board a company incorrectly sent a letter of acceptance to the wrong offeror, as it intended
to accept the offer from a different offeror, and such a mistake was considered to be material.
Therefore, the judgments in Potato Board and Osborne provides judicial support to reason that
the mistake made by Carol was material.
Having established that there was a material mistake, the next leg of the enquiry based on the
iustus error doctrine is to determine if the mistake Carol made was reasonable. There are usually
three instances when a material mistake may be considered to be reasonable.
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