1. INTRODUCTION
1.1 Key concepts: “contract”, “obligation” and “agreement”
• Introduction
○ The position of contract law in the law as a whole
▪ Falls under the private law sphere, as distinguished from public law
▪ Not a water-tight distinction because of the Constitution - great impact
▪ Falls within a specific category within private law - the law of obligations (deals with relationships between people, personal rights, rather than relationsh
between people and their things or real rights)
□ Various sources of obligations
Contract
Other sources of obligations - delicts; enrichment law; negotiorum gestio
□ The difference between the two above:
Contract - parties voluntarily acquire obligations; they agree to be liable for something
Other sources - the law imposes the obligations
□ The notion that a contract is based on the notion of voluntary liability - forms the basis of the principles of contract law - contracts must be enforce
because of this value
□ If we accept the contract as an obligation source - presuppose that we know what a contract is
• What is a contract?
○ Bourbon-Lefley v Wpk Bpk:
▪ Facts
□ Cold storage facility to be built - contract concluded on a certain date
□ Bpk says no contract was concluded
▪ Legal question
□ Was there a contract concluded?
I.e. was there a meeting of the minds or was there an intention to conclude a contract?
▪ A contract is an agreement creating obligations
▪ A contract is an agreement made with the intention to create an obligation or obligations
▪ This agreement arises when the parties consciously come to unanimity regarding the contents of the agreement
▪ The unanimity is known as consensus or a meeting of the minds
▪ Two requirements
□ Consensus
Meeting of the minds
Easiest way is to look for an offer, and an acceptance of that offer
◊ Made with the intention to contract
◊ An offer must be unambiguous, unequivocal, must know exactly the terms of that offer
Problem with the offer: at various meetings, during the course of negotiations, the terms of the offer kept changing - did not meet
the requirement of unambiguity - therefore the issue of consensus is a moot issue
But, if there was consensus, an agreement or the meeting of the minds, was this agreement made with the intention to create a
contract (animus contrahendi)? NB because not every agreement gives rise to a legally enforceable contract
Distinction between a binding contract and a gentleman's agreement
◊ Binding contract
A definite contractual undertaking enforceable law
◊ Gentleman's law
A general promise binding in honour and conscience
Kahn identifies 7 categories where animus contrahendi does not exist
◊ Ostensible promise - made as a joke; too excited
◊ A domestic arrangement - where you agree with a flat mate etc.
◊ A social arrangement - agreement with a friend to play tennis etc. A date.
◊ Puff - where the seller praises his wears in such an exaggerated fashion that no one believes him
◊ Exclusion of the animus contrahendi - eg. where you set up a document and state "subject to contract"
◊ A gentleman's agreement
◊ Offer to negotiate; an invitation to do business etc.
□ Intention to create obligations
Was there an intention to conclude a contract? - animus contrahendi
▪ Therefore the problem fell in between category 5, 6, 7
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, ▪ Therefore the problem fell in between category 5, 6, 7
□ Why?
Found to be no animus contrahendi expressed by both parties on the evidence.
Undertaking seemed to be more of an understanding between the parties as co-operatives.
Still in the process of negotiation when the contract was alleged to have been made.
▪ Further requirements for a valid contract
□ Consensus must be obtained in a proper way
Improperly obtained consensus - holding a gun to someone's head
□ Contractual capacity
□ Content of the contract must be certain, possible and legal
□ Sometimes formal requirements
Contract must be in writing
◊ General opinion that for a contract to be valid, it must be in writing - invalid. Only certain types of contracts where this is applicable. An o
contract is valid. BUT memory is unreliable etc. Reducing the agreement to writing has the added advantage of proof
□ Other legally relevant agreements that are not contracts
For eg. agreements which terminate obligations; the transfer of rights; sui generis agreements (marriage)
• Obligations
○ The consequences of a contract
○ Definition
▪ A legal bond - viniculum iuris, between two or more persons which obliges the one party, who is known as the debtor, to give, to do or to refrain from do
something in favor of another party, who is known as the creditor
○ Characteristics
▪ At least two parties
□ The creditor, on the active side, has the right to receive the performance
□ The debtor, on the passive side of the obligation, has the duty to perform
Who is the creditor and who is the debtor is dependent on the obligation
◊ For eg. a seller has a duty to warrant against latent defects: seller is the debtor, buyer is creditor. The buyer has a duty to pay the price:
buyer is the debtor, seller is the creditor.
□ SA doesn’t recognize the fact that one person can unilaterally bind themselves to an obligation -pollicitatio. Scottish law allows this
Donation isn’t unilateral in our law
▪ The object of this obligation is a right to performance
□ A personal right, not a real right
□ Not binding on other parties
▪ Economic value
□ In general, the obligation has an objective economic value, or represents something that is in short supply
○ Types of obligations
▪ Civil/real obligations
□ Creditor has the right to receipt and retention of performance
□ Creditor has a personal right against the debtor, therefore creditor has the right to enforce the obligation
□ Capable of being enforced or transformed by other transactions, for eg. novation, set-off, suretyship, pledge
Novation - transform the original obligation into a new one by means of agreement, with the effect that the original obligation is extinguished
Set-off - occurs where two parties owe each other something. If the requirements of set-off are met, then both debts are extinguished, or if n
for the same amount of money, then the smaller debt is extinguished and the larger debt is reduced by the amount of the smaller debt
▪ Natural obligations
□ Creditor has the right to the receipt and the retention of performance
□ Creditor has no right to enforce the obligation
□ Created by valid contracts, but are not enforceable
□ Difference:
Gentleman's agreement - absence of intention
□ Type of agreement: gambling in terms of the common law; minors
□ Set-off; novation?
▪ Purpose
○ Persons affected by obligations
▪ The two parties involved
▪ Situations where third parties can be held liable if they interfere with contract
□ Where third party induces a party to breach the contract
Innocent party has a delictual claim
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, Innocent party has a delictual claim
Doctrine of Notice
◊ For eg. A sells shares to B. Before shares are delivered to B, A decides he wants to sells the shares and delivers it to C. Where C had knowledge of tha
prior sale, C will be obliged to transfer the shares to B.
□ Cession
Transfer your right as a creditor to another party
○ NB:
▪ Void
□ As if there was no contract
▪ Valid
□ Separate issue whether this valid contract is enforceable or unenforceable
Enforceable
Unenforceable
◊ Gambling transaction
◊ Creation of natural obligations
◊ Is the transaction capable of other transactions?
1.2 The development of the law of contract and the underlying values of the law of contract
• Roman law did not recognize an open list of contracts - only a closed list of contracts
○ The notion of purely consensual contracts was odd to Romans, therefore such a small group
○ Gradual relaxation of requirements
• Therefore, no theory regarding philosophical underpinnings of contractual liability
• Roman-Dutch law
○ As a result of bona fides, mere agreement was sufficient, unaccompanied by saying or giving something
• One of the underlying values of SA law is good faith - recognize that it underlies the general rules
1.3 The relationship between common-law rules of contract law and consumer legislation
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, Chapter 1 Cases
1. Bourbon-Leftley v WPK (Landbou) Bpk 1999 1 SA 902 (K); translation on SunLearn
❖ Facts
○ Plaintiffs (export grape farmers) wanted the defendants (an agricultural co-operative) to build cold storage facilities for the refrigeration of grapes which
plaintiffs farmed.
○ Defendant’s general manager indicated that they were prepared to erect the facility, but plaintiff was not happy with the cost of their proposal.
○ After a series of negotiations and amendments, a document was formed which was considered the ‘model’ on which the subsequentverbal ‘contract’ wa
based – a model particularly advantageous to the plaintiffs.
○ Defendant expressed reservations about the proposal, negotiations continued, but the plaintiff’s executive decided to recommend that the defendant ca
erect a cold storage, a recommendation that was accepted.
○ Cold store was erected and taken into use the following year, but defendant was no longer prepared to comply with the terms of the verbal contract
(defendants had to manage the cold store).
○ Plaintiffs alleged that on a certain date, a verbal contract was made between them and the defendant; defendant denied this and alleged that there was
consensus or an intention to create an obligation.
❖ Legal Question
○ Does this oral contract exist?
❖ Court
○ Court looks at the 2 basic requirements for the conclusion of a valid contract:
○ Consensus ad idem
▪ Consensus ad idem – was there a meeting of the minds between the parties that the defendant would build these cold storage facilities?
□ Easiest way to prove consensus = Look at the evidence and determine whether there was an offer and whether there was an acceptance of th
offer.
Not the only method to prove that a contract has been concluded.
Requirements of a valid offer:
◊ Offer must be unequivocal and unambiguous and with the intention to make an obligation.
◊ Court found that, on the facts that if the defendant made an offer, that offer was ambiguous (contradictions between parties) .
Had to be ascertained what exactly the defendant’s offer was (alleged to be on the ‘model’) – None of the ordinary membe
of the plaintiff had knowledge of the ‘model’ (which was discussed by some members of the plaintiff) = clear that no contra
had been entered into between parties.
Contradictions between what members of the defendant said the ‘offer’ was and what the plaintiff alleged the offer was.
◊ Plaintiffs had failed in proving that the necessary consensus had existed between the parties with regard to all the material terms
the alleged contract, because the different offers were ambiguous, if not directly contradictory = not the basis of a binding contra
○ Animus contrahendi
▪ Animus contrahendi (was there an intention to conclude a contract):
□ Court: Not all agreements give rise to a legally enforceable contract.
□ Determining animus contrahendi and whether the parties intended their agreement to be binding is a matter of fact to be determined on all
evidence.
Distinction between:
◊ “A definite contractual undertaking enforceable at law” – “a perpetual binding contract”
◊ Gentlemen’s agreement: “A general promise binding honour and conscience” – “an agreement/understanding based on good fait
with its members”.
Court: Because of the special relationship between a co-operative and its members, the conclusion of an ‘agreement’ was not necessar
indicative of an intention to enter into a contract.
◊ By virtue of the special relationship of trust that existed between the plaintiffs and defendants, they accepted each other’s bona
fides wholeheartedly.
Did not mean they could institute action if one or the other were to deviate from that understanding.
Understanding = ‘gentleman’s agreement’.
□ Kahn identifies 7 categories where animus contrahendi does not exist: (categories overlap; not a closed list):
Ostensible promise meant as a joke or made in an emotional state, etc.;
A domestic arrangement – e.g. washing dishes;
A social arrangement – e.g. a date;
Puff – e.g. car salesmen “best car ever” vibes;
Exclusion of the animus contrahendi;
A gentleman’s agreement;
Offer to negotiate, invitation to do business, etc.
□ Facts of the case fell into points 5-7.
Found to be no animus contrahendi expressed by both parties on the evidence.
Undertaking seemed to be more of an understanding between the parties as co-operatives.
Still in the process of negotiation when the contract was alleged to have been made.
❖ Plaintiffs had not succeeded in proving that the parties had entertained the mutual intention of entering into a contract.
2. Gibson v Van der Walt 1952 1 SA 262 (A); L&M 4-7
❖ Facts
○ Plaintiff (bookmaker) instituted action against defendant for a sum of money claimed by plaintiff that the defendant has failed to pay back.
○ Betting transaction – defendant owes money – transaction 1.
○ Defendant said he would pay the debt by a certain date, which is an acknowledgment of debt – transaction 2.
○ Defendant fails to pay on the date, promises to give plaintiff a racehorse instead – transaction 3.
○ Defendant fails to give plaintiff horse, plaintiff institutes action.
○ Defendant denies liability because the undertaking to pay arose out of a betting transaction and was, therefore, unenforceable.
○ Court
▪ Gambling activities are not immoral, but are unenforceable - induces wastefulness and prodigality
○ Types of obligations that may arise out of a contract:
▪ Civil v Natural obligations;
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