CAMPUS: UNKNOWN

PROGRAMME: BACHELOR OF COMMERCE IN ACCOUNTING

MODULE: COMMERCIAL LAW
INDIVIDUAL ASSIGNMENT 2
NAME: UNKNOWN
 TABLE OF CONTENTS
Introduction……………………………………………………………………………….
Q1. List and explain the duties of a seller in terms of Contract of Sales…………..
Q2. List and explain the various ways in which a lease agreement can be terminated
by the lessor………………………………………………………………………………
Q3. Define the term Reckless Credit and provide an illustration thereof……………
Q4. Define the term Over-Indebtedness and provide an illustration thereof……….
Q5. List and explain the duties of the mandatory………………………………………
Q6. List and explain the essentialia of a Contract of Insurance……………………..
Conclusion…………………………………………………………………………………
Reference………………………………………………………………………………….
Contract Law is when two or more persons have an agreement that results in an
obligation to do or refrain from a particular act, which the obligation is recognized
and enforced by law (https://lawwithshaheen.com/definition-of-contract-law-and-its-
essentials/).
A contract of sales is basically an agreement between one party (seller) and another
party (buyer) where the seller agrees to deliver or sell goods to the buyer at a set
price. For this to happen both the buyer and seller have a set of duties that they have
to follow and this assignment will talk more about the duties of the seller. This
assignment will also go in depth about the various ways a lease agreement can be
terminated, the duties of a mandatory, the essential elements of a Contract of
Insurance, the term Reckless Credit and its examples, and the term Over-
Indebtedness and its examples.

Q1. Duties of a seller in terms of contract of sales

A contract of sales is when two parties (seller and buyer) have an agreement where
the seller agrees to deliver or sell goods to the buyer for a certain price
(https://www.upcounsel.com/what-is-contract-of-sale).
The following are some of the duties that a seller has;
1. Duty to deliver goods
 The seller has the duty of delivering the goods to the buyer if it is stated
in the terms and conditions of the contract. If the seller fails to deliver
the goods, the buyer has a right to sue the seller for damages for not
delivering (https://lawwithshaheen.com/rights-and-duties-of-buyer-and-
seller/).
2. Duty to refund the price
 The seller has the duty of refunding the buyer if he/she (seller) fails to
deliver the goods to the buyer if the seller had received the payment in
advance (https://lawwithshaheen.com/rights-and-duties-of-buyer-and-
seller/).
3. Duty to pay damages for breach of warranty
 If there happens to be a breach of warranty from the seller’s side, the
seller is bound to pay the buyer for the damages for the breach
(https://lawwithshaheen.com/rights-and-duties-of-buyer-and-seller/).
4. Duty to pay interest
 If the seller had already been paid in advance but fails to deliver the
goods, he/she must pay the back the buyer an interest amount on top
of the price amount of the goods at a reasonable rate on the total
received price, from the date of receiving such price until it is paid back
to the buyer (https://lawwithshaheen.com/rights-and-duties-of-buyer-
and-seller/).
 5. Duty to put goods in deliverable state
 If it is necessary for the seller to do something with the goods so that
they can be in a right state, the seller must do so, so that the goods
can be in deliverable state when it is time to deliver them to the buyer
(https://lawwithshaheen.com/rights-and-duties-of-buyer-and-seller/).

Q2. The various ways in which a lease agreement can be terminated

by the lessor

A lease agreement is a contract between two parties (lessor and lessee) which
states that the lessor will give use and enjoyment of his/her property to another
person (lessee) for a specific time and in turn the lessee will have to pay a monthly
fee for rent (https://www.legalnature.com/guides/what-is-a-lease-agreement).
The following are some of the ways in which a lessor can terminate a lease
agreement;
1. Termination by notice
 It is very normal that for one reason or the other, like failure to receive
rent from the lessee, the lessor may want to terminate the contract. If
so, the lessor can do so by issuing a notice of termination of the lease
agreement to the lessee, Havenga P, Havenga M, Hurter E, Kelbrick R,
Manamela E, Manamela T, Schulze H, Stoop P, General Principles of
Commercial Law (2010: p182).
2. Termination by extinction of the lessor’s title
 This can happen in a situation whereby the lessor was in possession of
the property as a trustee. Hence, if the trust property gets delivered to
the beneficiary, the lessor’s tittle or the right to the object of lease is
nulled, Havenga P, Havenga M, Hurter E, Kelbrick R, Manamela E,
Manamela T, Schulze H, Stoop P, General Principles of Commercial
Law (2010: p183).
3. Termination by death
 If one of the parties to the lease agreement dies, for example the
lessee, then the contract automatically ends.
4. Termination by effluxion of time
 “time” in this context means the period which the lessee will have the
right to use and enjoy the object of lease. In other words, if a lease is
for a fixed period of time, it stands to reason that the obligations arising
from the contract will automatically cease to exist when the period
ends, Havenga P, Havenga M, Hurter E, Kelbrick R, Manamela E,
Manamela T, Schulze H, Stoop P, General principles of commercial
law (2010: p183).
5. Termination by insolvency
 Normally the rental agreements contain a clause that states that upon
the insolvency of the lessee, the lease agreement will terminate
(https://www.tathamwilkes.co.za/NewsResources/NewsArticle.aspx?
ArticleID=2824). However, some of these provisions do not provide
 necessary protection if the provisions of the Insolvency Act 24 of 1993
are not properly considered.

Q3. Reckless credit

Havenga P, Havenga M, Hurter E, Kelbrick R, Manamela E, Manamela T, Schulze

H, Stoop P, General Principles of Commercial Law (2010: p215) mentions that credit
is reckless if the credit provider failed to conduct a proper credit assessment on the
consumer, if the credit provider entered into an agreement that puts the consumer in
an over-indebtedness position, and if the consumer did not understand the risks,
costs or obligations under the agreement.
An example of reckless credit is when a consumer applies for a new loan to pay
back another loan or borrow money to pay debt or cover expenses.

Q4. Over-Indebtedness

A consumer is said to be over indebted if he/she is unable to meet his/her financial

responsibilities or pay their accounts on time according to the credit agreements (
https://www.realpeople.co.za/blog/posts/2017/december/what-is-over-
indebtedness/). When the debt increases with he added interest charges, the
consumer becomes financially strained, over-indebted and as a result unable to pay
back their debt.
This can happen if the consumer tends to spend more money than what they earn or
if they skip their payments to the creditors.

Q5. Duties of the mandatory

A contract of mandate is a contract in which one party (the mandatory), concludes a

contract with another party (the mandatary), in terms of which the mandatary
undertakes to perform the mandate for the mandatory. Authority in a contract of
mandate is usually inferred on the agreement, or agreed upon, therefore, the
mandatory has a set of duties that he/she has to perform as agreed in the contract.
The following are some of the duties :
A. The duty to pay the mandatary the agreed remuneration
 In the situation where an agreement has been reached that the
mandatory should pay remuneration, the mandatory shall pay the
remuneration as per agreement
(https://www.shojihomu.or.jp/minpousaikenhou/en/draft/b3_p2_cp10).
 In a situation whereby there is no such agreement, the remuneration
will be determined in accordance with the normal or traditional rate or a
reasonable rate which has to be paid by the mandatory.

B. The duty to compensate the mandatary for expenses

 Considering that the contract of mandate is no longer a gratuitous
undertaking by the mandatary to perform tasks, the mandatory is now
entitled to compensate the mandatary for all the expenses incurred (i.e;
any amount spent or loss on behalf of the mandatory provided they
 were incurred by the mandatary in good faith), and indemnify him/her in
respect of liability which may arise from the execution of the mandate,
Shulze H, Manamela T, Stoop P, Manamela E, Hurter E, Masuku B,
Stoop C, General principles of commercial law, (2019: p306).

Q6. Essential elements of a Contract of Insurance

A Contract of Insurance is a contract between an insurer and the insured in terms of

which the insurer undertakes to pay the insured an amount of money or its
equivalent, in exchange for payment of a monetary premium, should the risk, borne
by the insurer on behalf of the insured, materialize by the happening of an event in
which the insured has an interest
(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/10-students/
courseoutlines2ndsemester2010/COL_202_Paper_2_-
_Ins,_Arb_and_Marketing.pdf). At the center of every insurance company is the
insuring agreement that specifies the risks covered, the limits of the policy, and the
terms of the policy. The South African law of insurance is primarily governed by
Roman-Dutch common law.
The essentialia of a contract are those terms of a particular contract which
differentiate it from other types of contracts and the following are some of the
essentialia of an insurance contract;
A. Premium
 It is very important for the parties involved to agree on the payment of a
monetary premium
(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/
10-students/courseoutlines2ndsemester2010/COL_202_Paper_2_-
_Ins,_Arb_and_Marketing.pdf). The premium is the consideration that
is given or that is to be given in return for the agreement to provide
policy benefits.
 The premium, which is a fixed amount will depend on the consensus
reached between the parties.
B. Risk
 The risk is another element in a contract of insurance. Description of
the risk in the contract is very important as the insurer must have an
idea about the nature of the risk and the insured must also know the
extent of the cover
(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/
10-students/courseoutlines2ndsemester2010/COL_202_Paper_2_-
_Ins,_Arb_and_Marketing.pdf).
 The description of the risk must include; the object being insured, (for
example, a vehicle or a person’s life), the hazard insured against, (for
example, theft or death), the circumstances affecting the risk, (for
example, the limitations of the insurance to theft of the vehicle while it
 is parked in a specific place, or if the suicide risk must rise due to an
uncertain future event)
(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/
10-students/courseoutlines2ndsemester2010/COL_202_Paper_2_-
_Ins,_Arb_and_Marketing.pdf).

C. Insurable interest
 This exists whenever a particular event cause someone damage. It is
only those who have an insurable interest can recover on the policy
and only to the extent to which that insurable interest is damaged or
lost.
 The insured must also have some kind of an interest of economic value
which the client wishes to insure against certain risks
(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/
10-students/courseoutlines2ndsemester2010/COL_202_Paper_2_-
_Ins,_Arb_and_Marketing.pdf). The continued existence of the interest
must offer an economical benefit or the loss or damage of the interest
must cause economic loss.
D. cover
 In non-indemnity insurance the cover is a contractually agreed amount
which means that the insurer pays a specified amount to the insured on
the happening of an event, regardless of the extent of the actual loss
which was incurred (https://visagievos.co.za/2019/09/06/the-basics-of-
south-african-insurance-law/).
 In the case of indemnity insurance, the cover is determined with the
reference to the loss or damage which may be suffered or a
contractually agreed amount which is less than the loss or damage
(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/
10-students/courseoutlines2ndsemester2010/COL_202_Paper_2_-
_Ins,_Arb_and_Marketing.pdf).
E. Period of cover
 The scope of the risk and size of the premium that is payable is only
decided with reference to the period of insurance which must be
determined or determinable
(https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/
10-students/courseoutlines2ndsemester2010/COL_202_Paper_2_-
_Ins,_Arb_and_Marketing.pdf).
 Where the period is determined by reference to specific dates, the civil
method of calculation applies unless the parties agree otherwise (the
civil method includes the first date but excludes the last).
The South African law recognizes two types of insurance contracts, indemnity
insurance and non-indemnity insurance. Indemnity insurance is when an insurance
policy compensates the insured party for a certain unexpected damage or loss to a
certain limit (https://www.investopedia.com/terms/i/indemnity_insurance.asp), and
non-indemnity insurance is when the cover amount is contractually agreed upon and
is paid to the insured by the insurer on the happening of an event regardless the
extent of the actual loss which was incurred.
 BIBLIOGRAPHY

https://lawwithshaheen.com/definition-of-contract-law-and-its-essentials/
https://www.upcounsel.com/what-is-contract-of-sale
https://lawwithshaheen.com/rights-and-duties-of-buyer-and-seller/
https://www.legalnature.com/guides/what-is-a-lease-agreement
Havenga Peter, Havenga Michele, Hurter Eddie, Kelbrick Roshana, Manamela
Ernest, Manamela Tukish, Schulze Heinrich, Stoop Philip, General principles of
Commercial Law, 7th Edition, 2010, Juta Publications.
Schulze Heinrich, Kelbrick Roshana, Manamela Tukish, Stoop Philip, Hurter Eddie,
Manamela Ernest, Stoop Chrizell, Masuku Boaz, General principles of law, 9th
Edition, 2019, Juta publications.
https://www.realpeople.co.za/blog/posts/2017/december/what-is-over-indebtedness/
https://www.ru.ac.za/media/rhodesuniversity/content/law/documents/10-students/
courseoutlines2ndsemester2010/COL_202_Paper_2_-_Ins,_Arb_and_Marketing.pdf
https://visagievos.co.za/2019/09/06/the-basics-of-south-african-insurance-law/