Jana Oosthuizen [19990677]
Private Law 372
Semester 2
Topic 10 – Content and Operation of Contracts
Prescribed:
Bellingan v Clive Ferreira & Associates CC and others 1998 (4) SA 382 (W) 402-406
Bob’s Shoe Centre v Heneways Freight Services (Pty) Ltd 1995 (2) SA 421 (A)
Stocks & Stocks v TJ Daly 1979 (3) SA 754 (A)
Wilkens NO v Voges 1994 (3) SA 130 (A)
South African Forestry Co Ltd v York Timbers 2005 (3) SA 323 (SCA)
Westmore v Crestanello 1995 (2) SA 733 (W)
CPA s49
Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) [18]-[26]
Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk 2014 2 SA 494 (SCA)
CPA s4(4)
1 General
• 1 Factor to look at: The number of parties involved in a contract → Deals with a question – who
st
must perform to whom? (Fairly easy if you have only two parties involved; in which case it is a
debtor who must perform to a creditor) BUT it does become more tricky if:
- there are multiple debtors + creditors/
- in a situation where the contract also affects third parties (becomes tricky to determine to
whom the performance is due?)
• Another factor that can influence the content and operation of a contract = differences of the
nature of certain types of obligations and types of terms. **Concerns a question of what precisely
must be performed? → Here you will see: Content of a contract consists of more than simply the
terms that have been expressly agreed upon. (Some terms are read in – pragmatic considerations
+ other terms are based on the unexpressed intention of the parties).
- By contrast, other terms qualify or limit the performance obligation e.g. conditions/time
clauses.
• Even if we know what the terms of a particular contract are → we still need to know what that
terms MEAN.
- I.e. Is this a matter of interpretation?
• What about other factors?
- Deals with the question: To what extent is a contract determined solely by the parties + to
what extent do we also take into account other considerations?
- Fairly simplistic answer = the content of a contract is determined solely by the intention of the
parties. But it is not entirely true – because courts do/ can interfere in the content of a contract
e.g. by reading in certain terms that the parties never thought about OR by affording a
meaning to a specific term that they did not think about.
- This relates to: To what extent does Contract Law give effect to values e.g. reasonableness,
fairness, good faith, etc.
- Our courts do not recognise things like good faith as an independent standard against which
one can measure the validity of a particular contractual term.
▪ However: It would not be correct to say that good faith is not given any consideration
in Contract Law. Note that in cases like Brisley → Good faith is seen as a value or a
mechanism UNDERLYING the development of new rules/ the adjustment of existing
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rules and we see this particularly in the issues that we will look at in the second
semester. (Not necessarily articulated very clearly – considerations like
reasonableness and fairness do play a role e.g. when we read in certain terms in a
contract/ recognise certain forms of breach + even ito certain remedies afforded in
the event of a breach → Keep in back of your head through the semester)
▪ Against this background that we start 😊
Recap
• A contract is a bilateral juristic act and it involves at least two parties: one who is obliged to
perform (debtor – said to be on the passive side of the obligation) and the party who is entitled to
performance (creditor – said to be on the active side of the obligation).
- Sounds strange to say the debtor is on the passive side, when they are the party obliged to
perform and thus to be ‘active’.
- Presumably this designation of active + passive has to do with the fact that the creditor has
the right to claim performance – and in that sense, we should understand that the creditor is
on the active side and debtor on the passive.
• A contract will create at least one obligation, but more often than that it creates multiple.
- Think about this – students sometimes struggle in a sense that they assume that the party
who is a creditor to one obligation is for some reason the creditor iro ALL the obligations
created in the contract. Similarly, that the party who is a debtor to some obligation is the
debtor iro all the obligations. THAT IS A MISTAKE
- What will happen: Party might be a creditor in respect of ONE obligation, but a debtor in
respect of another. This is NB: You need to be able to distinguish who is the creditor and who
is the debtor to an obligation, because (as you will see later) a party can commit breach of a
contract as a debtor, but they can also commit breach of contract in their capacity as a
creditor. You must be able to understand who the creditor is and who is the debtor i.o.t
identify the correct type of breach.
- Example → in a Contract of Sale – @ least 2 obligations: 1. To deliver the merx and 2. Pay the
purchase price. Duty to deliver – Who is the creditor/ entitled to that merx? The buyer.
Who has a duty to deliver? The seller.
Thus, in respect of the first obligation – the buyer is the creditor and the seller is the debtor.
Payment of the purchase price – Who is the creditor/ right to claim it? The seller. Who has a
duty to perform? The buyer.
parties are not always just creditor or just debtor.
• Multiple persons can be involved in a contractual obligation/ relationship. This can give rise to
problems with the operation of the contract. So we need to be certain about who is involved with
which obligations.
- This is why we look at these various situations in which multiple parties are involved.
1.2.1) Multiplicity of parties
o Can get multiple debtors and creditors or both.
o Example:
- A1, A2 and A3 sell their business to D for 3 mil.
- We now have 1 performance = Delivery of the business, but we have multiple debtors
involved in that performance.
- Q: Who precisely can claim what from whom and who must perform what to whom?
(Answer becomes difficult if parties do not indicate this)
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- To answer: We work with certain types of categories of multiple debtors and multiple
creditors.
Types:
1. Simple joint relationship (liability and entitlement)
Not true joint
Category that helps us to determine when we are NOT dealing with a true joint relationship.
Example:
- Bank A lends 3 mil to B1, B2 and B3.
- Because the performance is divisible, the intention here is probably that each debtor binds
themselves to repay a pro rata/ proportionate part of the debt. (Parties can agree on a
different division).
- 1 mil each. Contract creates more than 1 obligation – each relating to a distinct part of the
performance.
- Why is this NOT a true joint relationship? Because when it is a TJR, the performance in its
entirety is owed by more than one debtor. When we are dealing with this type of TJR, we
can distinguish 2 categories:
1) Common joint relationship → Performance can only occur jointly (by the co-debtors) or
be claimed jointly by the co-creditors.
Only one obligation
Performance can only occur jointly
(It is clear here that there is only one obligation related to the performance in its
entirety.)
Creditor may not demand performance, in whole or in part, from any of the debtor’s
individually, and similarly co-creditors entitled to performance collectively from a debtor
have to act so.
Procedurally speaking you must sue co-debtor jointly.
Example:
- A and B sells a house to C. This performance cannot be divided into a duty on A to deliver ½
of the house and a duty on B to deliver the other ½ of the house.
- For the P to be meaningful, it has to occur as a whole (B/c we are dealing here with an
indivisible P)
2) Joint and several co-debtorship or co-creditorship. (Solidary liability)
Solidary can be misleading: Not really the case that the performance always occurs jointly.
In the case when we are dealing with JS co-debtors: What it means is that the creditor can
choose from whom he wants to claim the P:
o Can claim the entirety of the P from one of the DT’s; or
o A part of the P from some of the co-DT’s and another part from another co-DT.
(it is up to the CR).
o Should make it clear: A JS relationship is the most beneficial from a CR’s
perspective, b/c it allows them to only choose a P from solvent co-DT’s in the
case of one being insolvent.
Makes JS liability a very useful form of personal security for a CR.
Example:
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- Bank A lends a sum of money to DT’s B1, B2 and B3. If B1 then subsequently becomes
insolvent – this does not have an impact on the ability of the CR to claim the full amount
from B2 and B3/ either of them.
- It would be a different case: If rather than undertaking JSL, the co-debtors simply stood in a
simple JR, because B1’s insolvency in that event means that the creditor can only claim 2/3
of the loan from B2 and B3 (he loses out).
- Take note: A case of JSL does look very similar to the situation that arises when a DT lends a
sum of money to a principal DT and then gets a number of additional parties to sign as co-
sureties to secure that debt. Suretyship is a very different beast to what we find in the event
of JSL, predominantly bc we find certain features that we don’t find in the case of a JSL.
Two of these are:
1. Suretyship = accessory to a principal debt (The validity of the suretyship = dependant
upon the validity of the principal debt)
2. Suretyship = imposes a form of secondary liability, which means that the rule is that a CR
can only approach a surety in the event that the principal DT has committed a breach of
contract.
By contrast: The L undertaken in the case of a JSR = Primary → A CR is entitled to
approach any of the co-DT’s for the P. Does not have to wait for one of the co-DT’s to
commit a breach to go to the others.
Number of obligations involved in a JSR:
Was a few debates – 1) There was one P relating to 1 obligation (that bound all the
co-DT’s) or 2) There were separate obligations relating to the same P.
Professor De Wet: Initially ifo the first, but then changed his mind. Thought it was theoretically
more sound to analyse a JSR/L as multiple obligations relating to the same P. B/c: This would
allow for a more nuisance treatment of the relationship between the CR and the co-DT’s. E.g. He
thought it would be easier to explain why you could attach conditions to some of these
obligations, but not to the others. + According to him, it would allow for these obligations to
prescribe separately – so if the prescription of one debtors obligation was interrupted, it would
not have an effect on the other debtor’s obligations.
Now seems to be fairly settled that the courts prefer an approach which says there is ONE P
relating to ONE obligation that BINDS ALL THE CO-DT’s.
Note: There is nothing stopping the parties from treating aspects of that obligation differently
for different debtors. Thus: One debtor’s liability could still be conditional upon something
happening whereas the others are unconditional – you do not have to have separate obligations
in order to allow for that nuance treatment. **But it does mean that if the prescription of one
co-debtors obligation is delayed or interrupted – it will also delay/interrupt the other debtors
obligations (can be a bit rough).
Idea that regardless of how many obligations you have relating to the P, when one or more of
the co-DT’s deliver their P in full, the obligation is extinguished (finish en klaar, cannot go and
claim from the others). → P extinguishes the O
Tricky part: E.g. one DT performs in full, but he only got a part of the loan.
- Bank A lends 3 mil to B1, B2 and B3 – each of those co-DT’s received 1mil each. But b/c they
are JSL, the CR can claim the full amount from B1.
- If B1 pays that full amount, can he then go and claim/ have a ROR from those co-DT’;s who
were not asked to pay?
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