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This essay continues the topic discussed in the previous essay by explaining The Law of Contract in South Africa.
Contract Law is currently undergoing a process of thoughtful changes and renewals as they adapt to the needs of the new political era in South Africa. The fixed system of contract freedom – and with the fundamental idea of contracts that are freely closed, should be enforced. There is also a concern about fairness in contractual relations. This trend is reinforced by the recent enactment of legislation designed to protect consumers, especially the Consumer Protection Act of 2008 and the National Credit Act of 2005. This process of change presents a challenge for everyone because of the branching of the law, and this must be understood and be kept up to date.
This TIS was done because I find the Law of contract in South Africa very interesting, and this help me to get a better understanding of what is required to draw up a contract and also how this will have an impact on any party that do not comply with a contract. This will help me in the future when I want to start up my own business and needs to get contracts in place.
The TIS started off explaining what the law of contract is and then what the requirements for a contract are to be valid, what the goals are of contract law, and what will happen when a contract is breached. Formalities that are required as the law prescribed them. Also mentioned in the TIS are the Legal rightful actions, certainty of the contract, performance possibilities and how a contract can be terminated by performance. Jurisdiction was also described and lastly what contribution does contract law have in South Africa and should there be a contract law in South Africa?
Drs. Birgit Kuschke
BLC LLB (University of Pretoria) LLD (Unisa)
Drs. Kuschke is a senior lecturer in the Department of Private Law at the University of Pretoria, where she is teaching contract law to undergraduate and postgraduates. She is an Attorney, Notary and Conveyancer of the High Court of South Africa, and specializes in engineering contracts. She also serves as a member of the President’s Council of the International Association of Insurance and is a member of the Working Party for New Technologies, Prevention and Insurance of the lnternational Association for Insurance Law.
Professor Dale Hutchison
BCom LLB (UCT) PhD (University of Cambridge)
Professor Hutchison is an Advocate of the High Court of South Africa and the Head of Internal Research Unit at the law firm Edward Nathan Sonnenbergs Ing. He is also a professor in the Department of the University of Cape Town, where he was the general principles of contract law and the law regarding teaching session.
Professor Chris-James Pretorius
BLC LLB (University of Pretoria) LLD (Unisa)
Professor Pretorius was a professor in the Department of the University of South Africa, where he taught contract law. He is also an Attorney of the High Court of South Africa.
Professor Jacques du Plessis
BCom LLB LLM (Stellenbosch University) PhD (University of Aberdeen)
Professor Du Plessis is a Professor of Private Law at the University of Stellenbosch, where he lectures the law of contract and unjustified enrichment. He is also an Attorney of the High Court of South Africa.
WHAT IS THE LAW OF CONTRACT?
A contract can be defined as an agreement between two or more parties with the purpose to create a commitment. The requirements for a contract to be valid, it must comply with the following: Consensus, Capacity, Formalities, Legality, Possibilities and Security.
In light of the foregoing discussion. A person may add a further element to this definition, that the agreements have the right to be bonded on both parties. The reason is that if a contract is seen as bound, that there are several other requirements in addition to be complied with the agreement. The label “contract” is in reality not reserved for agreements that are manage to bind commitments. Even if one or more of the requirements for validity is lacking, it is a common practice to describe the agreement as a “void contract”.
REQUIREMENTS FOR A VALID CONTRACT
For an agreement to serve and to be recognized as a valid and binding contract, it must meet the following requirements:
Consensus: the parties’ intent in their minds must match (or at least appear to match) on all material aspects of their agreement;
Capacity: the parties must have the necessary legal capacity to contract;
Formalities: where in exceptional cases, require that the agreement should be in a certain format (for example, in writing and signed), these formalities must be respected.
Legality: the agreement must be lawful – in other words it cannot be prohibited by law or common law;
possibility: the undertaken commitments must be performed when the agreement is entered, and
Security: the agreement must have definite or determinate content, so that the commitments can be enforced.
GOALS OF THE CONTRACT LAW
In a simple economy goods and services gets exchanged through swapping’s or immediate payments of cash and so the role of contract is limited. When time delay between the business and the fulfilment of commitment is in progress, the parties in the transaction are forced to start to rely on mutual commitments to perform on a later date. This increases the risk of the transaction largely and requires a certain degree of confidence between the parties. Trust alone is not sufficient. To permit commercial initiative on any significant scale to grow, the parties know if any of them fail their promise to comply, the other can get help from the law in order to maintain the agreement. The Law must be therefore to provide mechanisms to enforce promises, or appropriate compensation to be paid when it is broken. At the same time the State will use its power to enforce private contracts, only if he is happy that under the circumstances it is fair and reasonable to do so. The State must consequently to some extent regulate the conclusion & implementation of agreements to ensure that there is no fraud or duress, and that all parties act in an appropriate manner. The function of contract law is not simply to ensure that people keep their promises but it is a matter of honour or morality. Provide a legal framework in which people can do business and exchange resources with the secure knowledge that if they act honestly and perform fairly and follow the proper procedures where applicable, the right to similarities will maintain and, if necessary, enforced. Contract form the basis of private initiative and it regulates the behaviour of fair and honest transactions.
BREACH OF CONTRACT
Mora Debitoris: Is the criminal neglect of a debtor to achieve a positive obligation, despite the failure.
Positive Malperformance: While Mora is in both forms at the time of performance of the contractual relationship, you need to be positive about the content of the performance rendered. This can take on one of two forms, depending on whether the relevant duty is positive or negative.
When there is a duty to do something, something positive will happen when the debtor excels properly, but in an incomplete manner. A dealer delivers e.g. goods of the wrong quality or quantity, a building contractor doesn’t follows the plans and specifications, a university lecturer is frequently late with the listings of his or her readings.
In the case of “obligatio non faciendi” (“negative obligation), malperformance takes place when the debtor performs an act which he or she may not perform. For example, a tenant sublet the property or hangs laundry out the windows in breach of a provision in the lease, a former employee accepted a job with a competitor in breach of an agreement to reduce trade freedom, a student behaves in a way that violate his or hers university’s reputation.
Repudiation: A party in the contract commits a breach of contract in the form of repudiation when he or she, by words or conduct, and without a valid excuse, shows an unambiguous intent to stop the contract or any obligation that is part of the contract form. Another striking feature of repudiation is that an on-going form of contract drafting breach. While the innocent party was initially selected for the maintaining of the contract, he or she can cancel in a later stadium if the repudiator refuses to be bounded by the contract.
Prevention of Performance: Where performance after the closure of the contract on both sides is impossible, due to the fault of either the debtor or the creditor, the contract is not terminated, but the party that is responsible for making performance impossible, is guilty of impossible making performance. Objective impossible making is not required, subjective impossibility is sufficient. Debt is an essential element of this contract, unless the debtor’s guaranteed performance (and the creditor is not guilty). The ordinary remedies, except for specific performance, are available to the creditor. In the case of material impossible performance of a split bet, the creditor may only “pro tanto” (“to that extent”) resign his or her consideration and will be reduced proportionately.
FORMALITY REQUIREMENTS THAT THE LAW PRESCRIBED
Various Laws require that certain types of contracts must meet the prescribed formalities. These formalities usually require that the contract must be in writing and also must be signed by one or more of the parties, sometimes the contract is executed and notary in order for the third parties to be effective. Certain statutory requirements also apply to the formalities relating to electronic contracts. Key examples are discussed below. Although many different policy considerations that underlie the establishment of formalities each has its own goals and uses its provisions to explain.
Although the wording of any statutory determination that prescribed title statement as a formality, the actual incidence of the provision determined, the following general observation can be made:
All the material terms of the contract shall be in writing.
The terms of legal remedies is not needed to be in writing.
All the terms don’t have to be in one document.
In changes in the material terms of the contract must be in writing to be valid.
Sometimes a party mislead the other party by agreeing to an oral amendment of the contract.
If the formalities are not met, the contract is void.
Consensus obtained in an improperly manner
A misrepresentation is a form of false statement. Where a false statement is simply a statement which is inconsistent with the true facts, the misrepresentation in contract law gradually got a narrower, more technical meaning – namely an untrue statement of a past or existing fact, non-legal requirements or opinion, before or on time of contract conclusion by one party to another party in respect of any matter or circumstance which the contract relates to.
Duress of Metus: is an improper pressure to constitute intimidation. It involves force directed against the will in the sense that a party is forced to choose between closing a contract to be disadvantaged.
Undue Influence: is also a form of undue pressure on a person to bring him or her to persuade to a contract. The pressure here is more subtle because it involves the will of the other party to be made bendable without any threat or harm.
LEGAL RIGHTFUL ACTIONS
CERTAINTY OF THE CONTRACT
This is a common requirement for the emergence of a contractual commitment that the content should be controlled through mechanisms in the contract. The South African Law recognizes the famous Roman say “id certum est quod certum reddi potest” (“Something sure as it certainly can be”). Mechanisms to obtain security must operate independently of the intentions of the parties. This does not mean that one of the parties should not be involved to further determine the final duties. An understanding not living up to security requirements is invalid. If such commitment is separable, in other words if it can be separated from the other commitments that was created through the contract, the other commitments can still remain operational. Such determination, must however be subjected to an element of objective control. The following examples illustrate the principle:
Security is achieved with reference to a mechanism contained in the contract. In contracts with repeated performance (e.g. payment of rent, or the supply of goods on a continuous basis), it may be necessary to provide a gradual increase in the range of expected performance for unseen circumstances such as inflation. A simple example is a provision that rent of each year over a five year period will increase by ten percent.
Security is obtained with reference to an objectively determinable external standard or mechanism: The South African law to accept somewhat paradoxically, an agreement for a service at a reasonable price, but this is not an agreement to do sell or rent something at a reasonable price.
Security is achieved by a third party: A third party can determine who should perform, as long as the third party is identifiable and the discretion implemented objectively and fairly. The contract can obviously determine what the scope of discretion is. If the determination is clearly unfair, the court may modify it, but the influenced party has an option to be bounded.
Exceptio non adimpleti contractus: A defendant in the case of a joint agreement may be put forward where the outstanding achievements of the parties are promised to each other in return. It is a remedy that a party allows his or her own performance to be withheld, and a claim put in for such performance again, until the other party performs, or proper performance of his or her obligations under the contract is offered.
TERMINATION BY PERFORMANCE
‘n kontraktuele verbintenis gaan to niet wanneer die skuldenaar presteer soos wat deur die kontrak vereis word. Behoorlike prestasie beëindig ook ‘n aksessore verbintenis, soos ‘n borgskuld of pand. Die vereistes vir ‘n prestasie wat voldoende sal wees om aan ‘n verbintenis te voldoen, word hieronder bespreek.
Compliance by a third party:
Vir die beëindiging van ‘n verbintenis word oor die algemeen vereis dat die persoon wat presteer ook die persoon moet wees wat tot prestasie ingestem het. Die derde party wat geldiglik namens die skuldenaar presteer het, mag ‘n reg op terugbetaling deur die skuldenaar (‘n regresreg) hê.
The person who should be performed:
Prestasie moet normaalweg aan die skuldeiser geskied. Die skuldeiser kan egter ;n ander persoon aanwys aan wie die skuldenaar mag presteer. ‘n Derde party wat die reg het om prestasie te ontvang, maar (in teenstelling met ‘n agent) nie gemagtig is om prestasie te eis nie, word ‘n adjectus solutionis causa genoem.
Place of Performance:
Prestasie moet geskied op die plek aangewys deur ooreenkoms. ‘n Stilswyende ooreenkoms is voldoende. In die afwesigheid van so ‘n uitdruklike of stilswyende ooreenkoms sal die howe omstandighede soos handelsgebruike, die plek van kontaksluiting, die plek waar die goedere is ( in die geval van verkoop van goedere) en die aard van die prestasie oorweeg ten einde die plek van prestasie te bepaal. Indien twee boere met vakansie in Hermanus byvoorbeeld ‘n kontrak vir die verkoop van ‘b bul sluit, maar nie die plek van prestasie bespreek nie, sal daar afgelei word dat lewering van die bul op die verkoper se plaas moet geskied.
Time of Performance:
Die partye kan ook uitdruklik ooreenkom op die tyd vir prestasie. By ontstentenis van so ‘n ooreenkoms, kan die skuldeiser prestasie onmiddelik eis, maar die skuldenaar moet ‘n redelike tyd vir prestasie gegun word. Die gewone reëls ten opsigte van mora debitoris as ‘n vorm van kontrakbreuk geld.
Performance as a two-sided transaction:
Kragtens die Suid-Afrikaanse reg is prestasie ‘n tweesydig wat die samewerking en instemming van die skuldeiser sowel as die skuldenaar vereis. Soms word daar gesê dat die partye ‘n skulddelgende moet sluit.
All persons, whether natural or legal, have jurisdiction in the sense that they are a legal subject bearing rights. The passive power is the direct results of the legal personality and is not dependent on their age or status. Even an “infans” (“Child younger than seven years”) has the power to inherit and the rights to obtain obligations in a contract that was closed for him/her by his/her guardian. People whose mental abilities are underdeveloped or disabled so they do not have the nature and consequences of their action to realize they are completely without jurisdiction acts.
Young children, mentally ill persons, and persons who are strongly under the influence of drugs and alcohol, fall into this category. A person younger than seven years are considered unable to perform any legal action, and therefore may not close an independent contract. A minor is a person between the ages of 7 – 18. In general, a minor does not have the capacity for binding commitments in a contract.
Spouse outside community of property marriage have their own separate estates, and their capability is unaffected by the marriage.
On the other hand, spouses married in the community of property marriage have a joint estate and their capability is limited by law.
WHAT CONTRIBUTION DOES CONTRACT LAW HAVE IN SOUTH-AFRICA?
WHY SHOULD THERE BE A CONTRACT LAW IN SOUTH-AFRICA
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