INTRODUCTION
WHY RULES RELATING TO SPECIFIC CONTRACTS?
General principles are insufficient
o Sometimes there might be a reason to deviate
- E.g. why we need to limit freedom of contract or why we protect consumers
more
- It may be necessary to deviate even within a specific type of contract
E.g. Contract of sale: specific sellers (manufacturers) have a higher
liability for latent defects and the consequences resulting from
latent defects.
Policy consideration: It is fair that an expert whose business it is to
sell goods and who is able to ensure against latent defects should be
liable for all consequences of latent defects.
o Sometimes silent
- Silent about a specific rule of law
o Specific legislation
- E.g. Rental Housing Act, Consumer Protection Act
When we identify specific contract types we typically look at:
o The purpose of the contract
o Interests of the parties
o Policy considerations
METHODOLY OF CLASSIFICATION
Two broad approaches
o Essentialia-naturalia model
- When you look at the purpose of the contract it defines the essence of the
contract and there are certain obligations that flow naturally from that
essence.
- The purpose of the contract of sale is the exchange of a thing for a monetary
value with a view to affording the purchaser permanent enjoyment of the
subject matter of the sale.
- Essentialia: The terms that we use to identify the contract type.
Contract of sale:
Intention to buy and to sell
Purchase price
The merx, subject matter
- Naturalia: The provisions that flow naturally from the type of contract by
operation of the law.
The parties do not have to say anything, if their contract does not
mention any of these provisions then it will flow to the extent that it
is not excluded by the parties.
In the contract of sale, the duties of the seller and buyer are
naturalia of the contract.
E.g. warrant against eviction.
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, - Shortcomings (Naude)
Hides the need for differentiation / sub-types
E.g. a consumer contract
Cannot treat all sales in the same way, there may be
a need for further differentiation
If you only look at the essentialia it may not be easy to
determine when differentiation is needed.
Sometimes not enough,
E.g. employment contract and independent contractor
For the employment contract the only essentialia
you need is a description of the job and the
payment.
However, these essentialia do not differentiate
between the type of employment; a normal
employment contract or an independent contractor
contract.
o Typological approach
- Suggested by Naude to be used in addition to the essentialia-naturalia
model
- Analysis in terms of ‘concepts’ is valuable, but insufficient
We work with contracts where there is a closed list of things.
A contract has to have certain characteristics to be seen as a specific
type of contract.
Naude says that this is harsh as there should be situations where we
work with a more open type.
We have the characteristics and see whether a contract
meets most of those characteristics, but not necessarily all.
However, this is also criticised as it leads to uncertainty.
- Therefore types: not all or nothing criteria
- Employment contract / independent contractor: essentialia might be the
same but other factors need to be looked at:
Such as the measure of control own tools or that of the employer,
level of supervision, working on own premises or that of the
employer.
We need specific contracts because we need to know what the consequences are of a
specific type of contract, specifically if the parties are silent on it.
o E.g. what happens if the merx is damaged on delivery, etc.
SOURCES
Common law
Legislation
o Prescribing certain formalities
- E.g. Sale of immovable property
o Rental Housing Act 50 of 1999
o Formalities in respect of Leases of Land Act 18 of 1969
o Consumer Protection Act 68 of 2008
Constitution
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,CONTRACT OF SALE: NATURE AND CONCLUSION
DEFINITION
Agreement that the seller will deliver a thing (i.e. merx) and transfer all his rights therein in
return for payment of purchase price by the buyer.
o It does not say that you have to transfer ownership
- Thus, you do not need to be the owner of the thing you sell.
- If someone sells you something while not being the owner, it does not
render the contract of sale invalid.
Essentialia
o Merx
o Price
- Often referred to by the Latin term ‘pretium’
o Intention
- Intention is usually decisive factor
- If the parties conclude a sham agreement, e.g. it is actually a donation and
not a contract of sale, then courts do not look at the form of the agreement.
Thus, do not look at whether there is a merx and price.
They only look at the intention of the parties.
A contract of sale does not have to be in writing.
o However, the parties to a contract may agree that no contract between them will
come into existence unless their agreement complies with the formal requirements,
such as being in writing and be signed.
- Thus, reducing the contract to writing is not a requirement for validity but
merely to evidence the terms of their agreement.
o Except for when there are prescribed formalities, such as with the alienation of land.
Distinguish
Lease
o Lease is only a temporary use and possession of the item delivered.
- Sale is permanent.
o The distinction is important for credit sale agreements, lease of mining rights and
the lease of minerals.
Exchange
o Exchange involves the exchange of one thing in return for another.
- Not money, but rather two objects.
o In Roman Law the distinction was more important because sale was enforceable
whereas exchange was not.
o However, in modern law it is important if you buy a new vehicle.
- You trade in the vehicle you have at the moment and pay a sum of money in
exchange for the new vehicle.
- Is this sale or exchange?
- If it is only an object for an object, then it is an exchange.
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, - Object for object and money?
You look at the intention of the parties.
Did they intend it to be a contract of sale or of exchange?
Wastie v Security Motors 1972 (C)
Court decided that if it is partly in money and partly in
something else, then we need to look to see what is in the
mind of the contracting parties.
If the intention of the parties is not clear the transaction
must be classified according to the leading factor.
Thus, if there is more money and less in the value of
other things given, the contract ought to be deemed
as one of sale.
However, if there is more in the thing given than
money then it is a contract of exchange.
What makes it complicated is that sometimes the vehicle
you trade in is worth more than what you have to pay in.
Took place in this case.
The test to determine whether the object is worth more
than the price paid:
Look at the intention, and where the monetary
value of the car is used to calculate the amount of
cash to be paid in then it is considered a contract of
sale.
In Wastie the price of the car is R1250, the vehicle
they wanted to trade in was R 850. They deducted
the R850 from the R 1250, thus R 400 had to be paid
in cash. Therefore, it was a contract of sale and not
exchange.
Mountbatten Investments v Mahomed 1989 1 SA 172 (D)
- Why do we require the distinction?
It could influence the transfer of ownership in a contract of sale
The price payment rule
Ownership of the merx is only going to transfer
when the price is paid, when security for the
payment of the price is provided or where credit is
given.
If there is a sale contract, then it is a trigger event for a right of pre-
emption.
If it is an exchange, then it will not be a trigger event.
Aedilitian actions – both
Remedies available in the case of latent defects or
misrepresentations.
Actio quanty minoris and actio rehibitoria
Only available in sale contracts, not exchange.
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