Financial Training Company

Corporate and
2007 Business Law- F4
(Zimbabwe)
Casebook

Essentials of a simple contract

The essentials of a simple contract can be summarised as follows: there must be an agreement,
intention to enter into legal relations, capacity to contract, reality of the consent and lawfulness
of the object.

Agreement:
In most cases if not all, an agreement may be analysed as an offer made by one party to
another and acceptance by that other party. It was said in Ley v Banket Holdings (Pvt) Ltd 1956
that, in considering whether there is an agreement between two parties, the court is not
interested in the state of mind of the parties considered in the abstract. It must decide the issue
on the state of mind of the parties as manifested by word or deed.
Intention to create legal relations:
Even when parties have reached an agreement, there is not necessarily a contract in being.
The Roman-Dutch common law demands also that there be an intention to enter into a legal
relationship. Without this intention there will be no contract but only an agreement. An invitation
to dinner may result in an agreement, but such an arrangement is unlikely to be intended to
have legal consequences. An arrangement of this kind is likely to be a social one with no legal
consequences intended, Edwards v Skyways 1964.

Capacity to contract:
The law does not allow every person to enter into contracts freely. In some cases the law
denies a person contractual capacity in order to protect him. Classes of persons who fall into
this category are infants (sometimes called minors), persons of unsound mind and drunk
persons.
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Reality of consent:
Where there is an offer and acceptance and both parties are of full age, there is an apparent
contract. Yet this may have no legal effect at all on account of the presence of some additional
factors. These factors are known as ‘vitiating factors’. They include mistake, misrepresentation,
duress and undue influence, illegality and non-disclosure in contracts of ‘utmost good faith’.

Lawfulness of the object:

Any contract in which the provision or the object is unlawful will be void and, from the point of
view of one or both of the parties, will be unenforceable. This situation may arise because the
contract is (a) illegal at common law or (b) illegal by statute or (c) void by statute.

Invitation to treat
A contract is defined as a lawful agreement made by two or more persons within the limits of
their contractual capacity with the serious intention of creating a legal obligation, communicating
such intention without vagueness, each to the other being of the same mind as to the subject
matter to perform positive or negative acts which are possible of performance.

For the contract to be binding there must be a valid offer and a clear acceptance of the same.
Before the offer can lead to a binding contract, the offer must define all the terms on which
agreement is sought, must be consistent with the essentials of contract and must be firm and
deliberate with an intention of its being accepted and not a mere invitation to do business.

The invitation to do business is commonly known as the invitation to treat.

Invitation to tenders, advertisements and the display of prices on a shop window usually
constitute an invitation to treat rather than a firm offer.
In Crawley v Rex (1909), a shopkeeper advertised a particular brand of tobacco at a cheap
price, displaying a placard outside his shop on which the price was shown. Crawley entered the
shop, bought some tobacco and left. He then re-entered the same shop and asked for some
more tobacco. This time around, the shopkeeper refused and upon being requested to leave the
shop Crawley refused to do so without the tobacco. Ruling on the matter the court said:
‘It is clear that according to the ordinary law of contract the display of an article with a price on a
shop window is merely an invitation to treat. It is in no sense an offer for sale, the acceptance of
which constitutes a contract …’
Likewise a quotation is not a firm offer but simply an invitation to treat.

In this case Nelion Dube’s statement that ‘you might be interested in this and why not get a

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quotation together and let me have a look at it’, clearly is not a firm offer to create a binding
contract but simply an invitation to treat or to do business. The fact that an offer must be firm
and deliberate and not a mere invitation to do business is highlighted by the case of Crawley v
R (1909) (supra), Carlill v Carbolic Smoke Ball Company (1893), Lee v American Swiss Watch
Company (1914).

The present case must clearly be distinguished from the case of Brown and Company v
Jacobson (1915) in which J wrote saying ‘should you require a guarantee from me l am quite
willing to do so … trusting you agree to my proposal.’ And where B and Company replied, ‘we
beg to state that we shall be very pleased to agree to your request in consideration of your
guarantee’. It goes without saying that the court held that there was a contract of guarantee.

Validity of a contract
Indeed it is common cause that the general rule is that no formalities are prescribed for the
validity of a contract. This means that the parties do not have to announce their intention to
contract in any formal manner. If an offer is clear, unconditional, complete, unambiguous,
communicated to the offeree with the intention that it will serve as an offer and equally the
acceptance is clear,
unambiguous, communicated by the offeree to the offeror within the stipulated time and
manner, a valid contract will result therefrom. Thus the contract may be concluded verbally or
even tacitly and still be perfectly valid.
Legislation has however created certain exceptions to the general rule and in such specific
instances contracts would have to comply with certain formalities in order to be valid. The three
broad categories of exceptions are as follows:
(1) That the contract must be rendered in writing
(2) That the contract must be notarially executed
(3) That the contract must be registered.
1. Writing
If a contract is in writing irrespective of whether this is due to the decisions of the parties or
whether it is required by law the parole evidence rule applies to the contract. In terms of this rule
the document is the sole and exclusive source of the terms of the contract and the terms of the
contract may therefore not be sought in any other expression of intention whether written or
verbal. Any amendments, omissions or additions must also be in writing. Contracts that have to
be in writing are, inter alia, the following:
– The alienation of immovable property must be in writing and signed by and on behalf of all the

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parties in order to be
valid. Alienation includes purchase and sale, exchange and donation of immovable property.
– Contracts concluded in terms of the Hire Purchase Act.
– Suretyship agreements must be written and signed by or on behalf of the parties.
– Contracting parties may agree verbally that their contract will be reduced to writing. If the
intention is that the writing down of their contract will be a condition precedent or prerequisite for
the validity thereof, no contract will be deemed to exist until such time as the contract has been
written.
In Woods v Walters (1921), in an action to compel execution and performance of a contract for
the lease by Woods to Waltersof certain land plus a furnished house and other buildings,
Woods argued that he was not bound since it had been agreed that the contract must first be
reduced to writing – which had not been done.
The court ruled that although
‘the broad rule is that writing is not essential (except in certain cases) to the validity of a contract
...
parties may of course agree that there will be no vinculum juris (legal bond) between them until
that has
been done...’ In conclusion, the principle here is that where a signed written document is agreed
between parties to be a pre-condition of a contract, such contract is void without it. But where
writing is simply mentioned as desirable for the record, lack of a written agreement does not
void the contract.

2. Notarial Execution
Notarial execution entails the conclusion of the document in the presence of a Notary Public.
Examples of contracts that have to be notarially executed are the following:
(a) antenuptial contracts
(b) leases of mineral rights and cessions of the right flowing from these contracts have to be
notarially executed
(c) change of name.

3. Registration
Registration entails the making of an entry in the registers of the state in order to publicise the
contents of the particular contract.
Examples include antenuptial contracts, leases of immovable property for ten years or longer,
marriage contracts, etc.

Implied contracts

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Parties to a contract can agree on anything as long as it is legal. This is called freedom of
contract. Parties can agree on whatever term of their contract either expressly or impliedly.
Terms of a contract determine the consequences of a contract. In the absence of express
agreement, certain terms are implied by operation of the law, trade usage or facts. In the event
of any dispute, it should be borne in mind that it is not the court’s business to improve on the
contract the parties have made. The court should imply terms reasonably necessary in the
circumstances. Courts should not make contracts for the parties implying terms which parties
would never have agreed.
In the case of Reigate v Union Manufacturing Co (1918) Sculton L J said ‘a term can be implied
if it is necessary in the business sense to give efficacy to the contract i.e. if it is such a term that
it can confidently be said that if at the time the contract was negotiated someone had said to the
parties: What will happen in such a case? They would both have agreed that: of course so and
so will happen we did not trouble to say that, it is too clear.’

Necessity in the business sense must be clearly distinguished from reasonableness and a term
will not be implied merely because it would seem reasonable to do so. Business efficacy must
be judged against the circumstances contemplated by the parties and not in light of any unusual
situations that have subsequently developed.
An implied term is a term which is implied either ex lege or as a result of circumstances
pertaining when the contract was concluded. In the case of Alfred McAlpine and Son (Pty) Ltd v
Transvaal Provincial Administration (1974), Corbet JA said the term ‘implied term’ denotes two
distinct concepts. Firstly, it is used to describe an unexpressed provision of a contract which the
law imports, generally as a matter of course. It is imposed by the law from without, often where
it is by no means clear that the parties would have agreed to incorporate it in the contract.
Secondly, an implied term is used to denote an unexpressed provision of the contract which
derives from the common intention of the parties as inferred by the court from the express terms
of the contract and surrounding circumstances.

It should be emphasised that in order to have business completeness, common intention should
include not only the actual intention but also imputed intention. In other words, the court implies
not only terms which the parties must actually have had in mind but did not trouble to express,
but also terms which the parties, whether or not they actually had them in mind, would have
expressed if the question, or the situation requiring the term had been drawn to their attention.

Implied terms of law may be derived from the common law, trade usage or custom, or from the
statute. Despite the general principle that parties are free to contract as they wish, the common
law permits the term that would be implied to be expressed, modified
or excluded (Electra Rubber Products (Pvt) Ltd v Socrat (Pvt) (1981)). Under the common law,

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the seller’s implied guarantee or

warranty against latent defects is usually an implied term in a contract of sale. However, parties
can agree to expressly exclude the implied term in a contract of sale. The same applies where
parties can agree to expressly exclude the implied warranties see Elston v Dicker (1995). Under
the sale of movables some terms of a contract are implied from the Consumer Contracts Act
[Chapter 8:03].

By implying so many terms in the sale of many movables, it saves a lot of time, effort and
affords protection to weaker parties in the contract, particularly consumers. For instance, every
day one buys bread, salt or cooking oil in a supermarket, it is not necessary to enter into full
contracts of sale expressly stating all terms and conditions of sale.
Terms implied by law may be affected by trade usage. This occurs when a person enters into
an agreement under circumstances which are governed by a particular trade. That usage must
be considered part of the agreement whether the parties knew of the usage or not, unless they
have expressly agreed to exclude it. The requirements of trade usage are that it must be
notorious, certain, reasonable and not contrary to positive law. Coults v Jacobs (1927). The
application of these requirements is exemplified by Barclays Bank Ltd v Smallman (1976) in
which the banking usage of charging compound interest on overdrafts was sufficiently proved.
Similarly, in the case of Greenacres Farm (Pvt) Ltd v Haddon Motors (Pvt) Ltd (1983) in which
an alleged usage in the motor vehicle trade that a request to ‘check over’ a vehicle included
putting it to running order was not properly and sufficiently proved.

It should be noted that some terms of a contract may be implied from the facts. In Elite Electrical
Contractors (EEC) v The Covered Wagon Restaurant (CWR) (1973) CWR, a restaurateur, hired
EEC, a proprietor of a small electrical business, to do all the electrical work involved in moving a
stove and other electrical appliances from one part of his kitchen to another. Due to difficulties
in making
an advance estimate of the cost of work of this kind, no firm quotation was given and the parties
agreed that EEC would proceed on this basis. Having duly completed the work, EEC contended
there had been an implied agreement that CWR would pay a fair and reasonable price for the
materials supplied and services rendered. The court held that the term implied and relied upon
by EEC was valid and enforceable. The court emphasised that the term implied in any particular
contract will depend upon the circumstances surrounding that contract and it is not a matter to
be decided by reference to other cases.

Implied terms are necessary to enhance business efficacy but there is a danger that the courts
may end up making contracts for the parties, by implying terms which the parties never agreed
on. This would end up conflicting with the time honoured Roman Dutch principles of freedom of

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contract and the doctrine of sanctity of contracts. In Hamlyn and Company v Wood (1891) W,
who were brewers, agreed in writing to supply H all the grains made by W for ten years. After
five years W sold their business. The court held that, a term would not be implied that W would
not by any voluntary act of their own prevent themselves from continuing the sales of grains to
H for ten years. The court ought not to imply the term unless it necessarily arises from the
language of the contract itself, and the circumstances under which it is entered into. Such
interference with the parties’ contract, that the parties must have intended the stipulation in
question must be exercised cautiously and sparingly.

Unless specifically excluded by the agreement of sale it can be said in summary that the
corresponding duties and rights of the buyer and seller are in a way part of the implied terms of
an agreement of sale. These are as follows:
The buyer (implied duties)

1. To pay the price as agreed and if no specific figure has been mentioned it is implied
that the purchaser is liable to pay a reasonable price.
2. To compensate the seller for any expenses incurred in safe-keeping and
maintaining the thing sold until delivery can take place.
The seller’s duties are the following:
1. To care for the thing sold until delivery takes place.
2. To deliver the thing sold.
3. To guarantee the purchaser undisturbed possession. This is known as the tacit
warranty against eviction and it forms an integral (ex lege) part of the contract of sale.
The warranty ensures that the purchaser will not be disturbed in his possession, that
is, he will have peaceful and quiet enjoyment of the thing.
4. To give the purchaser a warranty against latent defects. The seller (ex lege) is
obliged to deliver the thing sold to the purchaser without defects. The seller is therefore
liable for any latent defects in the thing sold irrespective of whether he was aware of
such defects at the time of the conclusion of the contract of sale.

Apart from the contract of sale there are a lot more other forms of contracts in which the rights
and duties of the parties are regulated and governed by the implied terms of the agreement.
The parties are at liberty to agree on the regulatory framework of their contract as long as the
proposed terms are not specifically outlawed by legislation or any other positive law. Examples
(among others) of such contracts include agency, lease, partnership and many more.

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caveat subscripto rule

In terms of the caveat subscripto rule the general rule of law in Roman–Dutch law is that a
person who signs a document is presumed to have familiarized himself with the contents of that
document. The general effect of signing a contract is that the party signing the contract is
bound. This rule is applied not only when the person signing studies the document but also
when he signs carelessly or recklessly and when he fails to avail himself of an opportunity to
study provisions incorporated by reference.
In George v Fairmead (1958) G, a hotel guest signed a hotel register which contained
contractual terms some of which he completed by filling in blank spaces but the rest of which he
did not read. One clause exempted the proprietor from liability
for loss caused by theft. Certain clothing belonging to G was stolen and he sued the hotel
company. The court held that G was bound by the terms because he knew that he was signing
a contractual document.
And in the case of Bhikhagee v Southern Aviation Company (1949) the court made the following
apposite remark in relation to the caveat subscripto rule.
‘It is a sound principle of our law that when a man signs a contractual document he is taken to
be bound
by the ordinary meaning and effect of the words which appear over his signature, although he
may not
have read them and professes to be ignorant of their contents . . .’
However in situations where simple justice between man and man so requires our courts can
depart from the caveat
subscripto rule. For example where there is fraud, illegality, duress, mistake and
misrepresentation the affected party might not be bound by his signature. Ultimately each case
will depend on its own facts.

The following cases illustrate how the exceptions operate.

In Curtis v Chemical Cleaning and Dyeing Company (1951), C, when delivering a dress to a
company for cleaning, was asked to sign a document which contained a clause that the dress
was accepted on condition that the company was not liable for any damage howsoever arising.
C asked why she had to sign it and was told the company would not accept liability for damage
done to beads and sequins on the dress. She signed without reading the whole document.
HELD, the company’s assistant had made the misrepresentation innocently, but nevertheless
as C had relied on it, she was not bound by the wide indemnity contained in the document.
And in Shephard v Farrel’s Estate Agency (1921) S who wished to sell his business had gone to
the estate agency, being induced by a newspaper advertisement of the agency: ‘Our motto no

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sale, no charge’. He was given a document to sign which was in direct conflict with the
advertisement, namely that the agency would have the sole selling right and would receive
commission if the business was sold within three months, whether through the agency or not.
S’s attention had not been drawn to the fact that the terms of the advertisement were being
departed from. HELD, S was not bound by the condition.

Quasi-mutual assent
As a general rule if a dispute arises in terms of the existence of a contract, it becomes
necessary to determine the content of the promises made and the obligations undertaken by
either party.
The idea is to establish the true intentions of the parties at the time they conclude the contract
or purported to conclude one. The intention of the parties is therefore paramount and if the
parties do not envisage legal consequences the agreement between them is not a contract.

A contract can only come into being if the contracting parties have the intention to be bound to
each other and if they intentionally reach unanimity on all the terms of their agreement. The
unanimity between the contracting parties (consensus ad idem) is therefore the cornerstone of a
contract. When consensus is achieved between the parties and provided that the other
requirements have been met a contract comes into existence between the parties.
Apart from an express offer and the acceptance, an agreement can be reached through
conduct. Conduct can take the place of written and spoken words in the case of both offer and
acceptance or in the case of the one or the other. In deciding whether there is an intention to
contract the test is objective and not subjective. The practical effect of the quoted statement is
that, in the main, in determining the existence of a contract the courts look for offer and
acceptance, be it express or implied. Short of that formula, the parties might still be deemed to
have concluded a binding agreement on the basis of quasi-mutual assent. In terms of this
doctrine a person who gives a reasonable man the impression of consensus in relation to an
intended contract will be taken to have indeed consented even if inwardly they have
reservations and misgivings which remain unexpressed. Some of the case law which
underscores how the principle of quasi-mutual assent operates was decided as follows:

In Levy v Banket Holdings (Pvt) Ltd (1956), B was successor in title to a partnership to which L
had sold a business in Banket and leased the plot on which the business was situate for five
years. B alleged a verbal agreement between L and the partnership to grant an option to renew
the lease for a further five years. L denied this despite the fact that he accepted £600 proffered

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in terms of the contract which unequivocally stated that the money was consideration for the
option to renew. It was held that L’s conduct gave rise to an inference that he had agreed to
grant an option to renew the lease.

Equally in the case of Collen v Reitfontein Engineering Works (1948), after some
correspondence regarding the supply of a pump and a Fairbanks Morse engine, C wrote to R:
‘Enclosed please find my cheque in part payment of pumping plant.’ R paid the cheque for £150
into its banking account but did not reply to the letter. Later R supplied a different type of pump
which proved unsatisfactory and C repudiated the contract. It was held that treating C’s letters
as an offer, R did by its conduct accept the offer.

It did not reply in writing that it accepted, but it paid C’s cheque into its banking account. Its
conduct in so doing and its retention of the proceeds of the cheque, coupled with the fact that it
failed to notify C that it did not accept this offer, was a sufficient indication to C that it had
accepted his proposal.
Finally in the case of Peters and Company v Salomon (1911), having undertaken to pay
Berger’s creditors, including S, the amounts of their respective accounts against B, P requested
them to send in their statements of account. S sent in a statement showing the sum of £490 to
be owing to him, and P without raising any objection to this amount, confirmed the undertaking
previously given. HELD, although P had previously agreed to the undertaking having been led
by an examination of B’s books to believe that £345 was owing by B to S, and may really have
undertaken to pay S the amount which by its course of dealing with him it had led him
reasonably to believe would be paid. Said the court, ‘when a man makes an offer in plain and
unambiguous language which is understood in its ordinary sense by the person to whom it is
addressed, and accepted by him bona fide in that
sense, then there is a concluded contract. Any unexpressed reservations hidden in the mind of
the promisor are in such circumstances irrelevant. He cannot be heard to say that he meant his
promise to be subject to a condition which he omitted to mention and of which the other party
was unaware . . .’
In the main, the quote captures the spirit of our law in terms of the courts’ approach to the
doctrine of quasi-mutual assent. However the rule will not be applied where there was a mutual
mistake, the parties honestly attaching different meanings to words in a contract which are not
self-explanatory.

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Contracts with minors

It is common cause that at 17 years of age Solomon is a minor and therefore he has limited
contractual capacity. In our law, a contract involving an unassisted minor is voidable at the
option of the minor. The option of treating the contract as void or valid rests with the minor. If the
minor elects to treat the contract as valid he can compel the other party to perform. On the other
hand if the minor prefers to treat the contract as void the other party cannot compel him to
perform his part of the agreement.
In Edelstein v Edelstein (1952) the court made the following observation:
‘From the principles of the law it is clear that a minor who contracts without the assistance of his
guardian can render others under an obligation to himself, but does not himself become obliged
to them . . .’
There are a number of common law and statutory exceptions under which an unassisted minor
can be contractually bound. One of the exceptions (which happens to be the most applicable
here) relates to tacit emancipation. Where a minor is tacitly emancipated he can incur a binding
contractual obligation within the field of his emancipation. Tacit emancipation occurs when he is
allowed by his guardian to carry on business or other occupation on his own behalf.
In Dickens v Daley 1956 Daley a minor aged 20 (age of majority then was 21) gave a cheque as
rent for Dicken’s house which Daley’s mother and stepfather had agreed to hire at the time and
for the previous twelve years Daley had been living with his mother and stepfather, he was
contributing a sum to his mother for board and lodging, he had been in employment as a clerk
for four years, he had nothing to do with his father, his guardian, who exercised no control over
him. Two and a half years earlier he had opened up a bank account without his father’s
assistance which he operated unassisted.

The court held that inspite of his minority Daley was liable on the dishonoured cheque drawn by
him because he was tacitly emancipated.
In this case the following evidence points in the direction of tacit emancipation.
(1) That Solomon is only one year short of majority status
(2) He is gainfully employed as a mechanic
(3) He lives in an apartment in town not with his parents or relatives but with a girlfriend who is
also employed.
In view of these considerations the court is likely to find Solomon liable on the contract on
account of tacit emancipation.

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Right of first refusal

An option is a legal concept which comprises a contract between two parties, the option grantor
and the option holder, to keep open an offer to contract (the substantive offer) made by the
grantor to the holder. Venter v Birchholtz (1972). The view that the option is already a
substantive contract, qualified by a suspensive condition has been rejected. See Ficksburg
Transport (Edms) Bpk v Rautenbach (1986).

Case law authorities do not always distinguish between an option and a right of first refusal. See
Boyd v Nel (1922). The distinction is not always apparent to those who make contracts but the
concepts are not the same. This position is confirmed by Oglivie Thompson JA in the case of
Owsianick v African Consolidated Theatres (Pty) Ltd 1967 when he said:
‘A right of pre-emption is well known in our law (See Cohen v Behr (1946) and it is to be
distinguished from an option
to purchase. Upon exercise of the latter, by the holder of the option, the grantor of the option is
obliged to sell. The
grantor of a right of pre-emption cannot be compelled to sell the subject of the right. Should he
decide to do so, however, he is obliged, before executing his decision to sell, to offer the
property to the grantee of the right of pre-emption upon the terms reflected in the contract
creating the right.’

In the case of Sawyer v Chioza & Ors (1999) the court was seized with the distinction between
an option, right of first refusal and pre-emption. The honourable judge, Justice Gwaunza,
quoted with approval, Coppers Landlord and Tenant 3rd Edition, where the author states that
the right of first refusal is synonymous with the right of pre-emption. The right of pre-emption
entitles the holder of the first right of purchase should the grantor wish to sell the property. The
court ruled that ‘an agreement of pre-emption contains both a negative and a positive element.
The negative element is that the grantor is restrained from selling to a third party, the positive
element is once he is prepared to sell he is under a positive obligation to sell to the grantee.’ On
the other hand an option contract creates at least one obligation in terms of which the holder of
the option has the right to claim from the option grantor that the latter shall keep the substantive
offer open for acceptance. Generally, therefore, the grantor of the option has a duty not to do
anything which may prevent the option holder from creating an enforceable contract by
exercising the option. Bradt v Spies (1960). Coopers (supra) notes that, ‘whereas an option to
purchase is an irrevocable offer to sell, and if accepted, gives the option holder the right to
conclude a sale by exercising the option which he has accepted, an agreement of pre-emption

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does not compel the grantor to sell, it only compels him to give the grantee the right to purchase
if the grantor proposes to sell.’

It should be noted, however, that although there is a fundamental difference between an option
to purchase and an agreement of pre-emption, the word option is frequently used in granting a
right of pre-emption, conversely, phraseology usually associated with a pre-emption agreement
may be used in granting an option. See Sawyer v Chioza (1999).

Negotiations

One of the characteristics of our common law is that, in general, no special formalities are
required for the making of an enforceable contract, Goldblatt v Fremantle 1920. This means that
an oral or even a tacit contract, once it’s in existence and terms have been satisfactorily proved,
is every bit as legally valid as a written contract.

A decision by the parties to make their contract in writing is not always clear-cut. It may
sometimes become necessary to interpret phrases used in the course of negotiations or in
informal contracts. The issue is to discover the intention of the parties. It could be that Edison
and Bota intended not to be bound until the formal contract is signed. It could also be that they
intended to be bound by the formal contract and that the formal contract is contemplated only
for the proof.

The position stated in Woods v Walters 1921 is that, where the parties are shown to have been
ad idem (in consensus) as to the material conditions of the contract, the onus of proving an
agreement that legal validity should be postponed until due execution of a written document lies
upon the party who alleges it. It appears that Bota, by stating in his letter that ‘he had instructed
his lawyers to prepare the agreement’, intended to be bound by what was stated in the letter
until a proper and formal document was drawn up by the lawyers. This was the decision which
was reached in Mocke v Reuenback 1936 where the circumstances were almost the same.

However, if the court is of the view that the informal arrangement is binding but contains an
obligation to execute the contemplated formal contract, such an obligation can be enforced by
the court by an order for specific performance.

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