Comprehensive summary of the first semester work for Mercantile law 193 complete for the mid-year exam. This includes all work covered throughout the entire first semester including Section B and Section C
They are incomplete. The summary stops halfway through a chapter with another section still to go.
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By: sdkennealy • 6 year ago
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Section B: General principles of the law of contract
Chapter 1- The obligation
Definition and Characteristics:
Contract= an agreement that creates obligations.
Consequences of the contract are rights and duties.
Obligations are also created from delict and enrichment.
Obligation= relationship between two legal subjects (natural persons or juristic
persons) where the parties are bound to one another to do or give something or
refrain from doing something.
Multiparty obligations= contract creates obligations for more than one person.
Performance can be a duty to do something or a duty to give something (positive
obligation), for example an obligation to build a house. Negative obligations, entail
that you refrain from doing something, for example not sub-letting a flat.
The person bound to perform is known as the debtor and the person to whom he is
bound is the creditor and he has contractual rights (personal rights).
Consequence of obligations= performance is recognised by the law and it cannot be
claimed back once it is performed in accordance with the contract.
Consequence of obligations= Obligation may be legally enforced. If the debtor fails to
perform, a creditor can enforce his obligation in a court of law.
Natural obligations:
Arise from agreement and are enforceable by law.
Natural obligations are not enforceable by law e.g. informal bets.
Other agreements:
Only agreements made with the intention of creating obligations are contracts.
Agreements made without the intention to be legally bound by them, are not
contracts e.g. social agreements.
Contract types:
The principle of freedom in South African law allows any contract to be concluded as
long as its content or performance are not illegal or against the public good (Contra
bones mores contracts).
1. Unilateral contract: creates obligations for only one party and duties for the other e.g.
a donation.
2. Bilateral contract: both parties have rights and duties i.e. there is more than one
obligation e.g. a loan
3. Reciprocal contract: the obligations exist in exchange for one another. E.g. the
obligation to pay the purchase price and the obligation to deliver the goods in the
case of a cash sale.
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,Requirements for a valid contract:
1. Capacity to act
2. Agreement or reliance of agreement.
3. Proper behaviour at conclusion.
4. Formalities
5. Lawfulness
6. Possibility of performance.
7. Certainty of performance.
Chapter 2- Contractual capacity
Introduction:
Contractual capacity is the capacity to perform a juristic act, i.e. to conclude a
contract independently without the assistance of anyone else.
Capacity is determined by age, mental state and status (marriage status)
Capability to form a will (volition) and to express that will is essential for the
performance of a juristic act.
The influence of age on contractual capacity:
1. The infans:
1.1. Under 7 years of age with no contractual capacity therefore contracts must be
concluded on their behalf by a parent or guardian.
1.2. The infans will obtain the relevant rights and obligations.
1.3. Obligations and rights bind the infans and not the parent (but will be enforced by
them on behalf of the infans).
2. The minor:
2.1. Between the ages of 7 and 18 with limited contractual capacity.
2.2. Must be assisted by a parent or guardian to be contractually obligated.
2.3. Parents grant permission either with a specific transaction in mind or class of
transactions.
2.4. Permission can be granted after the contract is concluded by means of ratification.
2.5. Permission may be tacit or express.
2.6. If the minor concluded a contract without assistance, to the extent that the minor has
obtained rights the contract is binding, but to the extent he has acquired obligations,
it is not binding.
2.7. A limping contract occurs when the minor enters into a contact unassisted.
2.8. The contract is not void as the minor can enforce rights.
2.9. The other party cannot enforce rights acquired against the minor.
2.10. If the minor performs in terms of the contract he can reclaim his performance
with the help of a parent/guardian.
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, Remedies for contracting with an unassisted minor:
If the minor wishes to claim performance, then he/she must first tender
performance.
Minor can be held liable on the grounds of unjustified enrichment. You
can only claim your own impoverishment or the minor’s enrichment,
whichever amount is smaller at the time.
In the case of living necessities, the minor will be liable for the full
purchase price. If it does not relate to living necessities, and the minor
has already sold the goods to a third party, the amount of his enrichment
would be equal to the price received if he has not spent the money yet or
the value of the asset bought with the proceeds.
Fraud by the minor:
If the minor fraudulently misrepresents himself as being 18 or older
and has already reached such a stage of development that he could
reasonably be mistaken for a major, and the other party acts in good
faith on the misrepresentation, the minor will be held bound by the
contract.
Ratification:
Once a major, the minor can ratify any agreements he entered into as
a minor- the agreement becomes fully operative.
A parent or guardian can also ratify a contract that wasn’t made with
permission.
Statutory exceptions:
A minor that is 16 years or older can open a savings account without
parental assistance.
Emancipation:
Parents or guardian allows the minor to independently conclude
certain types of agreements within the economic sphere in which
he/she is active.
The minor must be able to act independently regarding
financial/economic matters.
A separate place of residence and an own business may provide
proof that a minor is emancipated.
The influence of mental capacity on contractual capacity:
1. Mental illness:
1.1. No contractual capacity.
1.2. Contracts must be concluded by a curator
1.3. Any juristic act that a mental person performs is null and void.
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, 1.4. If performance was made to a mentally ill person in terms of a contract that was
concluded without assistance of the curator, the other party would only have a claim
based on enrichment.
1.5. If the mentally ill person is mentally sane for a temporary period ( lucidum
intervallum), he/she will have full contractual capacity even though the contract is
concluded without the assistance of a curator.
2. Prodigals:
2.1. A prodigal is someone who recklessly squanders their assets owing to a defect of
judgement or character.
2.2. The Supreme Court must declare the person a prodigal and forbid them to manage
their own affairs before their contractual capacity is affected.
2.3. The prodigals position is the same as the minor as without the assistance of the
curator, the prodigal can obtain rights but it cannot obtain obligations.
Chapter 3- Agreement and reliance of agreement
Agreement as a requirement for validity:
Most important requirement for contractual liability is agreement (consensus).
To reach agreement, the parties must consciously agree.
No contract will come into being if there is no conscious meeting of the minds.
The law must make deductions from the parties’ declarations. These declarations
can be done in writing, orally, or tacitly.
The wills of the contracting parties must be communicated before consensus can be
reached. The declarations of will made with the intent to create obligations is referred
to as an “offer” and “acceptance”.
1. Parties must agree on three things:
1.1. Who the parties are.
1.2. The terms of the contract.
1.3. The intention to create legally enforceable obligations (animus contrahend)
What is an offer?
An offer is a proposal or expression of willingness to contract on certain terms, the acceptance
of which will create a contract.
Requirements for a valid offer:
1. Offer must be made with the intention to conclude a valid contract. The statement of intent
(document indicating a person has an intention to conclude a contract) is not an offer (or
a contract) as it only serves a basis for negotiation.
2. The offer must be clear, certain and unambiguous.
3. Clear communication of wills and the offer must be made to a particular person or persons.
Offer is made by an offeror to an offeree.
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, E.g. an advertisement is merely an invitation to make an offer. However, an advertisement
where a sum of money is offered if a product does not function properly will constitute an
offer.
Communication of wills suggests that an offer must be made to a specific person or
persons. An offer made to the public will generally constitute an offer. A reward may be
regarded as an offer.
Revocation of an offer
An offer is not a contract yet. It may, therefore, be revoked before acceptance. Normally,
revocation is only possible when such revocation has come to the knowledge of the offeree.
An option constitutes an exception to the general rule. Where the offeror is contractually bound
to keep an offer open by means of an option, the offer may not be revoked. When the option
is exercised (meaning the original substantive offer is accepted), a contract is concluded on
the terms set out in the offer.
E.g. A wants to sell his house and makes an offer to B. B wants more time to think it over and
A offers to give him two weeks to think about it. B accepts it. In this case, A made two offers
to B: the first one was the substantive offer to buy the house and the second was an offer for
a two week option on the house to keep the substantive offer open for that time. When B
accepts the second offer, the option is concluded. This does not mean that he accepted the
substantive offer; a contract of sale will only come into being once B exercises the option.
However, he might decide not to exercise the option, in which case the substantive offer will
lapse. If A were to accept an offer from C within the option period, the option contract will be
breached and B will be able to sue A for breach of contract.
Various grounds for the lapse of an offer:
1. An offer lapses after a reasonable time or at the time determined in the contract.
2. An offer may also lapse if one of the parties dies or becomes incapable of concluding a
contract, unless the offer provides for substitutes.
3. An offer lapses when it is rejected by the offeree or when a counter offer is made.
4. An offer lapses when it is not accepted in accordance with the offer.
5. An offer lapses when it cannot create an obligation.
What is an acceptance?
Express or implied declaration by the offeree to the offeror of his intention to be bound
contractually on the terms of the offer.
Requirements for a valid acceptance:
1. An offer may only be accepted by the person to whom the offer was made (the addressee).
2. An acceptance must be made with a serious intention to conclude a contract.
3. An acceptance must be unequivocal and made in accordance with the terms of the offer.
It cannot be qualified; if so, it will not amount to an acceptance but it will be a counter offer.
The offeree may ask whether the offeror would accept different terms-not an acceptance
and also not a counter offer.
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