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BCom PM Year 2 Business Law Semester 1 January 2021
BCom PM Year 2 Business Law Semester 1 January 2021
Module Guide
Copyright © 2021
MANCOSA
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without the written permission of the publisher. Please report all errors and omissions to the following email address:
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This Module Guide,
Business Law (NQF level 6),
will be used across the following programmes:
Preface.................................................................................................................................................................... 2
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List of Contents
List of Tables
Table 2.2: Summary of remedies available to an aggrieved party arising from breach of contract ................... 39
Figure 1.2: Process for making Primary and Secondary Legislation ................................................................ 17
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Preface
A. Welcome
Dear Student
It is a great pleasure to welcome you to Business Law (BL6). To make sure that you share our passion about
this area of study, we encourage you to read this overview thoroughly. Refer to it as often as you need to, since it
will certainly make studying this module a lot easier. The intention of this module is to develop both your confidence
and proficiency in this module.
The field of Business Law is extremely dynamic and challenging. The learning content, activities and self- study
questions contained in this guide will therefore provide you with opportunities to explore the latest developments
in this field and help you to discover the field of Business Law as it is practiced today.
This is a distance-learning module. Since you do not have a tutor standing next to you while you study, you need
to apply self-discipline. You will have the opportunity to collaborate with each other via social media tools. Your
study skills will include self-direction and responsibility. However, you will gain a lot from the experience! These
study skills will contribute to your life skills, which will help you to succeed in all areas of life.
MANCOSA does not own or purport to own, unless explicitly stated otherwise, any intellectual property rights in or
to multimedia used or provided in this module guide. Such multimedia is copyrighted by the respective creators
thereto and used by MANCOSA for educational purposes only. Should you wish to use copyrighted material from
this guide for purposes of your own that extend beyond fair dealing/use, you must obtain permission from the
copyright owner.
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B. Module Overview
The module is a 15 credit module at NQF level 6
The purpose of this module is to provide students with a basic introduction into the South African legal system
relating to commercial law. Whilst the learner will not be required to know the details of the historical development
of the legal system, it is within this structure that current legislation has been developed.
The module also covers the law of obligations; introduction to the law of contract; the formation of a contract;
principles and rules concerning valid and binding contracts; breach of contract; remedies on the ground of breach
of contract; the transfer and termination of obligations.
The law of lease governs the occupation of properties and possession of durables. The law of purchase and sale
is also critical in business as it determines the way in which goods and services are offered and accepted. The
law of insurance is covered briefly as an overview of this important element of business operational requirements.
The law pertaining to employment and alternative dispute resolution in South Africa is currently dynamic and
evolves daily. The learner will gain an understanding of the key legal relationships and requirements governing
businesses and the participants in business relationships.
Course Overview
Describe the legal framework within which businesses operate;
Explain the requirements associated with the formulation of a contract;
Outline the rights of parties associated with sale agreements;
Outline the rights of parties associated with lease agreements;
List the salient details of the laws associated with employment;
Identify the essential elements of any contract of insurance;
Display knowledge of consumer legislation; and
Evaluate the impact of consumer legislation.
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Explain the requirements associated Nature and sources of commercial law are explored and
with the formulation of a contract an understanding demonstrated on the essential
elements required to formulate a valid contract
Outline the rights of parties associated Sale and supply of goods and services are explored in
with sale agreements order to describe the requirements of a sale contract
Outline the rights of parties associated Rights of parties associated with lease agreements is
with lease agreements outlined to identify the requirements of a valid lease
agreement
List the salient details of the laws Essential labour laws are listed to gain an understanding
associated with employment of employment climate in the workplace
Identify the essential elements of any Contractual concepts are explored and identified in order
contract of insurance to understand the principles related to the law of contract
The purpose of the Module Guide is to allow you the opportunity to integrate the theoretical concepts from the
prescribed textbook and recommended readings. We suggest that you briefly skim read through the entire guide
to get an overview of its contents. At the beginning of each Unit, you will find a list of Learning Outcomes and
Associated Assessment Criteria. This outlines the main points that you should understand when you have
completed the Unit/s. Do not attempt to read and study everything at once. Each study session should be 90
minutes without a break
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This module should be studied using the prescribed and recommended textbooks/readings and the relevant
sections of this Module Guide. You must read about the topic that you intend to study in the appropriate section
before you start reading the textbook in detail. Ensure that you make your own notes as you work through both the
textbook and this module. In the event that you do not have the prescribed and recommended textbooks/readings,
you must make use of any other source that deals with the sections in this module. If you want to do further reading,
and want to obtain publications that were used as source documents when we wrote this guide, you should look
at the reference list and the bibliography at the end of the Module Guide. In addition, at the end of each Unit there
may be link to the PowerPoint presentation and other useful reading.
F. Study Material
The study material for this module includes tutorial letters, programme handbook, this Module Guide, a list of
prescribed and recommended textbooks/readings which may be supplemented by additional readings.
In addition to the prescribed textbook, the following should be considered for recommended books/readings:
Scott, J. et al. 2014. The Law of Commerce in South Africa. 2nd ed. Cape Town: Oxford University Press.
Chapter 1: Scott J (consulted) et al The Law of Commerce in South Africa 2ed (2014) Oxford
Chapter 2: Scott J (consult Ed) et al The Law of Commerce in South Africa 2nd edition (2014), South Africa:
Oxford University Press.
Hutchison, DB and Pretorius, CJ (Eds), The Law of Contract in South Africa 2nd edition (2012), South Africa:
Oxford University Press Southern Africa.
Chapter 3: Scott J (consult Ed) et al The Law of Commerce in South Africa 2nd edition (2014), South Africa:
Oxford University Press.
Chapter 1: Bradfied & Lehmann Principles of the Law of Sale and Lease 3ed (2013) Juta
Chapter 5: Scott J (consult Ed) et al The Law of Commerce in South Africa 2nd edition (2014), South Africa:
Oxford University Press.
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Chapter 2: Bradfield & Lehmann Principles of the Law of Sale and Lease 3ed (2013) Juta
Chapter 8: Scott J (consult Ed) et al The Law of Commerce in South Africa 2nd edition (2014), South Africa:
Oxford University Press.
Chapter 9: Scott J (consult Ed) et al The Law of Commerce in South Africa 2ed edition (2014), South Africa:
Oxford University Press.
McGregor M (ed) et al Labour Law Rules 2ed (2014) Siber Ink
Reading J. Scott, D. Baqwa, S. Eiselen, T. Humby, M. Kelly-Louw, I. Konyn, S. Kopel, A. Mukheibir, H.
Schoeman, S. Scott, N. Smit, P. Sutherland, C. Van Der Bijl (2009). The Law of Commerce in South Africa,
Cape Town, South Africa: Oxford University Press. Chapter Eight.
H. Special Features
In the Module Guide, you will find the following icons together with a description. These are designed to help you
study. It is imperative that you work through them as they also provide guidelines for examination purposes.
You may come across Activities that ask you to carry out
specific tasks. In most cases, there are no right or wrong
ACTIVITY
answers to these activities. The purpose of the activities is
to give you an opportunity to apply what you have learned.
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PRACTICAL
Practical Application or Examples will be discussed to
APPLICATION OR
enhance understanding of this module.
EXAMPLES
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Unit
1: Introduction to Business
Law
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1.2 A brief history of South African Law Understanding the basic origins of South African legal
system
1.3 Fundamental Concepts Understand and define the basic fundamental concepts of
law (Law, the State, Rule of Law)
1.4 Legal Relationships Understand and define private and public relationships
1.5 Types of legal right(s) Understand and explain the difference between real rights
and personal rights
1.6 Legal liability Understand and explain the difference between public and
private relationships in legal liability
1.8 The Law and commercial activity Understand the minimum standards articulated by the law,
different kinds of property, business agreements,
corporate and commercial activity and the authoritative
mode of dispute in resolution
This chapter will give you an in depth understanding of the sources of our law. It
is important to understand the sources of our law in order to comprehend the
substructure from which our law derives its validity.
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The law goes further to standardize what is acceptable behaviour and what is not. By standardizing behaviour,
citizens are given a clear understanding of what they are required to do (duties), what they may do (rights) and
what they must not do (offences).
With the advent of the global market and international trade, there has been the development of ‘International Law’
to set a standard of acceptable economic standards across borders irrespective of the law of individual countries.
Thus to participate and profit from international trade, countries are bound by the standards of the international
community.
In most communities, people are constantly engaged in commercial activity and business transactions which need
to be regulated. Such transactions may in itself incorporate contractual law dealing with other related areas of law.
Before the first European settlers arrived in South Africa, the indigenous people of this country had developed their
own system of law to govern relationships in their society. Gibson (2003: 5) refers to this as customary law (Gibson
2003: 5).
When Dutch settlers arrived in the Cape from 1652 onwards, they implemented legal practices from their
indigenous Holland. This is referred to as Roman-Dutch law. The law of Holland was founded on Roman law and
interpreted and adapted by Dutch lawmakers. The Roman empire, which had a highly developed legal system,
had dominated much of Europe for many centuries (Gibson 2003: 5). Roman-Dutch law was the official law of the
Cape until the British took over the governance of the Cape in the early 1800’s and introduced parts of their English
law. Over time, laws have had to change in order to cater for the increasing complexities and changes of modern
society. The South African courts adapted the various rules and principles of these different legal systems to meet
local needs and situations (Gibson 2003: 5).
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The law can be said to be a set of rules governing human interaction and which is recognised, endorsed and
enforced by the State. These said rules specify acceptable and unacceptable behaviour of the citizens of a country
and the consequences for failure to adhere to such rules.
The Legislature (also known as Parliament) is tasked with making the law which takes the form of legislation.
Parliament is made up of the National Assembly and the National Council of Provinces. Parliament promulgates
law by passing Acts of Parliament (also known as statutes). Rules and regulations pertaining to the implementation
of such law is generally delegated to ministers of each province.
The Judiciary is tasked with hearing and deciding upon legal disputes. These may include disputes between private
individuals or between private individuals and the State itself. The judiciary is made up of the:
Constitutional Court
Supreme Court of Appeal
High Court
Magistrates Court
There are also specialist courts which deals exclusively with particular issues such as the Maintenance Court or
the Equality Court. The judiciary has the power to interpret the law, apply the law and develop the law when
necessary. Furthermore, by the virtue of the stare decisis doctrine, lower courts are bound by the decisions of
higher courts; it is thus argued by some that, courts also have the power to make laws.
Think Point
Identify and discuss the three structures and branches in South African and
Why, in your opinion are these structures important?
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In a state that is governed by the rule of law; the exercise of state power must be based on the established
principles of law and the founding document of such a state (usually the Constitution). The Constitution (Act 108
of 1996) sets the underlying values of the law (Bill of Rights) and constraints on state power. The rule of law
ultimately seeks to prevent the abuse of power or state authorities acting ultra vires.
Pharmaceutical Manufacturers Association of SA, in re: Ex Parte Application of President of Republic of SA 2000
3 BCLR 241 (CC), Chaskalson P stated that the ‘requirement of the rule of law that the exercise of public power
by the executive and other functionaries should not be arbitrary. Decisions must be rationally related to the purpose
for which the power was given, otherwise they are in effect arbitrary and inconsistent…
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Firstly, there are ‘real rights’ which relate to corporeal property and may be enforced against anyone. For example,
a man has a real right of ownership over his car. Should B Damage A’s car, a will have a right against B to pay for
such damage.
Secondly there are ‘personal rights’ which relate to the conduct, behaviour or performance by another legal entity.
These rights may only be enforced against that particular legal entity. For example, a has the right to a good
reputation, however, B has published untrue and nasty comment about A on Facebook. A may has a personal
right against B to remove such comments or to pay damages.
Activity
1. Distinguish between Public and Private Relationships? Provide an example
2. There are five classes of legal objects form in South African Law. List and explain
these classes by providing examples to substantiate your answer?
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(vi) Real rights flow from juristic acts like the transfer of property, cession and occupation. This means that real
rights cannot be established by mere agreement between two contracting parties.
Examples The most important real right is that of Personal rights may be created by contract
ownership. Other examples of real (that is, by agreement), undue enrichment
rights are the rights of servitude and real (where one person has been unjustifiably
security rights, such as mortgage and enriched at the expense of another), or by
pledge. delict (a wrong done by one person to
another).
Method of Transfer Real rights may be transferred from one Personal rights may be contractually
person to another person by delivery in transferred from one person to another by
the case of movable (for example, a means of an agreement called cession.
motor vehicle), or by registration in the
case of an immovable (for example,
land).
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Liability basically refers to an obligation or duty to do something. Legal liability may arise both in public and private
relationships.
In public relationships, the most common example arises in the context of criminal law. For example, everyone has
a legal duty to show reasonable care when driving on public roads. If you fail such duty by driving negligently, you
will be committing a crime and face a fine or imprisonment. In criminal cases, the State is always the party
prosecuting the matter on behalf of public interest or the values of society (bona mores).
In summation, personal liability cases will lead to civil proceedings being instituted and the parties referred to as
the Plaintiff and Defendant. In public liability cases, criminal proceedings will be instituted and the parties are
referred to as the State and the Accused.
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i. Constitution
The Constitution (Act 108 of 1996,) is the supreme law of the country. Whilst it looks like any other piece of
legislation, the Constitution binds the state and all its structures including the legislature, the executive and the
judiciary. There are various values and rights contained in the Constitution that provides a basis for all other law;
every law in South Africa is subject to standards of the Constitution and if it is found to be inconsistent it will be
declared invalid. Furthermore, the Constitution directs the manner in which the state should conduct its activities
and the limitations that may be imposed on the rights contained in the Bill of Rights. There are a few rights that are
relevant to the discussion of commercial activity.
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ii. Legislation
Legislation is passed for various reasons: to supersede common law; to bring clarity to something which is disputed
or not clear according to the common law; to create exceptions form common law.
In researching a legal issue, it is necessary to refer first to legislation; if the legislation does not deal with the issue
of interest, the researcher should refer to the common law.
Legislation is a set of binding rules set down by the Legislature. There are two types of legislation, the first primary
legislation which is made by original authorities empowered to do so (provincial legislatures) and delegated
legislation which is made by subordinate authorities (regulations by municipal councils).
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Business Entities: These statues set out how such Companies Act 71 of 2008
entities may be formed, managed and dissolved or
wound up.
Taxation: These statutes define the tax liability of Value-Added Tax Act 58 of 1962
individuals and business entities.
Value Added Tax Act 89 of 1991
Insurance: These statutes regulate the granting of Long-term Insurance Act 52 of 1998
short and long-term insurance respectively.
Short-term Insurance Act 53 of 1998
Intellectual property: This legislation is the basis for Copyright Act 98 of 1978
recognising and protecting the various forms of
Patents Act 57 of 1978
intellectual property.
Trade Marks Act 194 0f 1993
Insolvency: This statue regulates the situation where Insolvency Act 24 of 1936
a natural person’s liabilities exceed his assets.
Employment: These laws regulate the individual and Labour Relations Act 66 of 1995
collective aspects of labour and address safety in the
Basic Conditions of Employment Act 75 of 1997
workplace.
Occupational Health and Safety Act 85 of 1993
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into account. There are also instances whereby the decision of a case will only be used as a guideline or persuasive
authority by another court.
v. Custom
The customs of a community and the manner in which they have been applied in the past will be taken into
consideration by the courts. Custom will acquire the force and effect of law if it can be proven that the custom is
substantially established, definite, reasonable and observed by the said community.
Customary law relates to custom of a specific ethnic group. Persons belonging to such a group may elect to
observe such laws and upon request, these laws may be enforced by the court.
Reading
Read Chapter 1:
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The law stipulates how property may be acquired, the rights attached to certain types of property, remedies for
damage to property and how property may be traded.
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Unit
2: The Law of Contract
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2.9 Interpretation of contracts Understand and explain terminologies such as express terms,
tacit terms and implied terms
2.10 Conditional contracts Identify and explain the difference between suspensive and
resolutive conditions
2.11 Special clauses commonly found in State and describe the various special causes commonly
contracts found in contracts
2.13 Third parties to a contract Understand and outline factors pertaining to third parties to a
contract
2.14 Breach of contract Understand the factors which could lead to a breach of
contract
2.15 Termination of contract Understand and outline the factors which could lead to a
termination of contract
2.16 Remedies for breach of contract Understand and explain the remedies for a breach of contract
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Additional Reading:
Read:
Hutchison, DB and Pretorius, CJ (eds), The Law of Contract in South
Africa 2nd edition (2012), South Africa: Oxford University Press
Southern Africa.
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2.1 Introduction
A contract is an agreement entered into by parties with the purpose of creating legal rights and duties that may be
enforced by a court. There are no formalities for entering into a contract however there are CERTAIN requirements
(essentialia) that must be satisfied before a contract may be considered valid and enforceable. These requirements
include:
The agreement must be lawful
The contracting parties must have capacity to contract
The contracting parties must seriously intend to contract
The contracting parties must communicate their intentions to each other
The agreement must be sufficiently certain in its terms
The contracting parties must be of the same mind as to the subject matter
The contract must be possible to perform
The agreement must comply with any formalities required for that type of contract
A contract usually encompasses a commitment by the parties to perform or refrain from performing a specific act
at a specified time. A contract may also be based on an assurance by a party that a certain set of circumstances
exist, have existed or will come into being in the future.
Parties to a contract usually fulfil their obligations on the basis of reciprocity, that is, the performance of one party
is contingent on the performance of the other party. Contracts may be concluded either in writing, verbally or tacitly.
In terms of South African contractual law, the principle of the ‘freedom of contract’ plays a significant role. This
principle asserts that contracting parties may agree to almost anything to the extent that such contractual terms
are lawful, possible and are in line with values or interests (boni mores) of society.
Think Point
Paul is a drug lord. He enters into a contract with James to sell drugs for him.
Would the contract still be valid although it is illegal?
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2.3 Consensus
Consensus is one of the requirements of a valid contract. A contract is considered to come into existence when
parties reach agreement or there is a ‘meeting of the minds’ on the essential terms of the contract. Parties are
required to declare their intention in a clear and explicit manner. The manner in which the parties declare such
intention may vary and may be written, verbal or both.
The Consumer Protection Act 68 of 2008 introduces further requirements for a valid offer:
The offer must be made in an understandable language
The offer must disclose whether the goods have reconditioned or rebuilt
Negative marketing is prohibited – suppliers/offerors may not promote a product on the basis that
an agreement will come into existence unless it is rejected
Consumers have the right to a cooling-off period if goods are marketed to them directly
2.3.1 Acceptance
Acceptance of an offer is a clear and unequivocal declaration of intention by the offeree to accept the offer and be
bound by it. Like the offer, the acceptance may be written, verbal or tacit.
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There is often the situation whereby parties enter into an ancillary agreement regarding the main agreement that
may be concluded in the future. This ancillary agreement may take the form of an ‘option’ or a ‘preference contract’.
An option is an agreement limiting the offeror’s right to withdraw his offer for a certain period of time. A preference
contract is whereby one person undertakes to provide the other with a preference to contract with him in the event
that he decides to enter in a particular contract (there is no stipulated time period).
In principle, there is no contract if the parties are not in agreement regarding the material terms of their agreement.
Where the parties lack consensus their contract is void for ‘mistake’ (error). We will now discuss the concept of
mistake in a contract.
2.3.2 Mistakes
There are instances where there is no subjective consensus between the parties due to some material mistake by
one or both of the parties. If there is no actual agreement, the contract may be rendered void or voidable at the
election of the injured party. With regard to the law of contract, the term mistake has a restricted meaning and over
time the courts have identified the types of mistakes that may lead to dissensus.
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2.3.3 Misrepresentation
Misrepresentation occurs where a false statement of fact is made by one person to another, before or at the time
of the contract, of some matter or circumstance relating to the contract, with the intention of inducing the latter to
contract, and which actually induces him to do so (Scott et al., 2009:94).
Generally contracting parties will negotiate terms and conditions of the contract before actually concluding the
contract. During such negotiations it is quite possible that statements made are factually untrue. Misrepresentation
is thus a false statement of fact or a false statement regarding a certain state of affairs accompanied with an
intention to induce the other party to contract. If a party has been induced into contracting on the basis of a
misrepresentation of a material aspect of the contract, the contract will be rendered voidable.
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The injured party is entitled to cancel the contract and claim restitution if the following four requirements can be
proved:
There was misrepresentation by the other party;
This misrepresentation induced the injured party into contracting;
There was an intention to induce the injured party to contract; and
The misrepresentation related to a material aspect of the contract
Think Point
Jade offers to sell her ‘genuine leather’ jacket to Sue. (Jade thinks it is unlikely to
be leather as she bought it from a flea market). She stresses to Sue that it is made
of pure Italian leather and was bought in a boutique in Milan. (She knows that Sue
is mad about Italian fashion and design). Sue told Jade she will only buy a
genuine leather jacket as she has had bad experiences with pseudo leather in
the past. Sue does not have time to shop around and it is summer in South Africa
so she cannot find many leather jackets. She buys the jacket from Jade. Is the
contract voidable?
2.3.4 Duress
If a person is induced into contracting due to violence, threat or fear then there is no legitimate consensus between
the parties. The contract will be voidable at the election of the aggrieved party. The following requirements must
be proved by the party who wishes to set the contract aside. Each one of these requirements must be proved.
• There must be actual violence or damage or a threat of violence or damage directed at the life, limb
or freedom of the threatened person, or his or her property, which causes a reasonable fear that the
threat may be executed.
• If duress is caused by a threat, the threat must be imminent (about to occur) or inevitable (so that the
victim cannot escape).
• The duress must be unlawful. This means that that the party exercising it uses it to obtain some
benefit he or she would otherwise not have obtained.
• A party to the contract or someone acting on his or her behalf must be responsible for the duress.
• The duress must cause the victim to conclude the contract. This requirement will not be met if the
threat has been removed and the victim freely enters into the contract anyway, or if the victim ratifies
the contract (confirms its validity with retrospective effect). This requirement is also met if the party
placed under duress concludes the contract or concludes it on particular terms he or she may not
have accepted but if it was not for the duress.
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2.4 Capacity
Capacity to act must be distinguished from legal capacity. Capacity to act refers to the capacity to perform juristic
acts, conclude contracts and participate in legal dealings (Havenga). Capacity refers to the party’s legal ability to
enter into a contract. Capacity determines whether a legal subject may enter into binding contracts, and whether
such person can sue and be sued in his or her own name. In other words, it refers to competence in the eyes of
the law.
It is deemed that every natural person has contractual capacity until otherwise is proven. A person’s legal status
will directly influence his capacity to contract. Thus, natural persons can be categorised as:
Those with no capacity
Those who have limited capacity
Those with full capacity
A person who lacks contractual capacity may only acquire rights and duties if a contract has been entered into on
his behalf and endorsed by a court of law. Intoxication may preclude contractual capacity to the extent that it
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impairs a person’s ability to appreciate the nature and consequences of his actions. Where a person is found to
lack contractual capacity, unless otherwise assisted, the contract entered into will be deemed void.
a.) Minors
A minor is a person who is 18 years old and unmarried. A minor below the age of 7 years has no capacity to
contract. Minors between the ages of 7 and 18 years have limited capacity to contract; generally, minors are
required to obtain consent and assistance from their parent or guardian before contractual rights and duties will
accrue to them. However, a minor may, without the necessary consent or assistance, enter into a contract. In this
instance the minor will only acquire rights and no duties. Instead of providing assistance or consent, the guardian
may personally enter into contracts on behalf of the minor. The rights and duties will accrue to the minor irrespective
of his consent or knowledge to such contract. The minor may be able to escape liability in such contracts if he can
show that the contract was entered into by his parent or guardian unreasonably. The court may, in this instance,
order the restitution of the both parties.
When a major reaches the age of majority, he may elect to repudiate or ratify any contract entered to whilst he was
a minor. The ratification will then deem the contract to have been valid as at the date entered into.
Where a minor has contracted without the necessary consent or assistance, the contract will not be enforceable
against him and will be void. The contract may be enforced against the other contracting party provided that the
minor is willing to adhere to his own obligations; if the minor is unwilling, he must return any benefit already
received. If the benefit cannot be returned for whatever reason, the other party may have an action for unjustified
enrichment.
Lastly, if the minor fraudulently misleads the other contracting party into believing that he has the necessary
capacity to contract, the aggrieved party may institute delictual action against the minor.
Think Point
This means that if a minor buys a motorbike, and then wishes to get out of the
contract, the minor gets back all the money, and must give back the bike. If the
bike was subsequently stolen or destroyed, then the minor does not have to give
back anything. He will still get all his money. Is this fair?
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b) Married persons
With regard to married persons, a distinction is made between those who have married in community of property
and those who married out of community of property. Firstly, spouses married out of community have separate
estates and their contractual capacity is unaffected. Secondly, spouses married in community of property have a
joint estate and administer their marital property jointly. Each spouse has the equal contractual capacity and may
bind the joint estate on behalf of their spouse. There are also certain types of contracts that require the consent of
both spouses such as suretyships. Where a spouse contracts without the requisite consent and where the other
contracting party was unaware that such consent was required and could not have reasonably known, the joint
estate will still be bound.
c) Insolvent Persons
An insolvent person is a person whose liabilities exceed his/her assets. In such instance, the estate of such person
is sequestrated. Sequestration refers to the surrendering of the insolvent estate through a court process.
Once a court has granted an order declaring a person to be insolvent, his contractual capacity is limited. Once the
process of sequestration begins, the estate of the insolvent vests with the trustee. The function of the trustee is to
administer the estate according to the law of insolvency. The trustee may enter into contracts on behalf of the
insolvent and the insolvent will require the trustee’s consent for any juristic act that may impact the estate negatively
e.g. disposing of estate assets.
d) Prodigals
A prodigal is a person who squanders his assets irresponsibly and such squandering has the result of jeopardising
the welfare of himself or his dependants. Such a person, upon application by an interested party, may be declared
a prodigal and his capacity to enter into juristic acts is limited. A High Court may appoint a curator to a prodigal.
The curator will administer the prodigal's affairs, and contract on their behalf.
The prodigal will require consent from the curator of his estate to conclude contracts. Contracts entered into without
the necessary consent may be ratified by the curator at a later stage therefore the contracts in this instance are
merely voidable and not void.
e) Juristic persons
A juristic person has full capacity to enter into contracts and perform juristic acts. The rights and extent of such
rights are determined by its founding documents (the rights of a company will be regulated by the memorandum
of association).
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2.5 Certainty
When entering into a contracts, parties must ensure that the terms and conditions are clear and unambiguous. The
intention of the parties must be reflected in the contract. In the event of a dispute arising between the parties, the
court is tasked with considering the contract without recourse to other evidence (parol evidence rule). A contract
may be invalidated on the grounds that it is vague and uncertain.
2.6 Lawfulness
With regard to the lawfulness of contracts, the courts are constantly faced with the competing interests of society.
On one hand, there is a need to uphold contracts that are freely and voluntarily entered into by private individuals.
On the other hand, the courts need to take into account the interests and values of society at large. Therefore,
when dealing with lawfulness, courts endeavour to balance public policy as well as the principle of the sanctity of
contracts.
As a general rule, all contracts are deemed to be lawful; a contract may be unlawful if it contravenes a statute or
the common law.
In the event that a contract infringes a statutory provision, the contract will not necessarily be rendered void. In
each such case, the court will consider the intention of the legislature in promulgating the Statute and the intended
consequences of non-compliance with the Statute. In doing so, the court will consider the scope, language and
objects of the Act. The court will generally declare a contract void if enforcing such an agreement would defeat the
purposes of the legislation.
If, after considering the competing interests of the parties of the contracts and that of society at large, the court
finds that the contract is against public policy; the court will declare the contract void and unenforceable.
Impossibility may be due to vis majore or causus fortuitus. Vis majore refers to acts of nature, or acts of God. For
example, it is not possible to deliver a car to a client in another town on the agreed date if there is an earthquake.
Causus fortuitus refers to inevitable acts of an irresistible force such as acts of the state or government, death, or
plague. It would not be possible to complete a contract to resurface the roads if a civil war broke out in the streets
(Scott et al., 2009:99).
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There can be no contract if the contract is not physically capable of being possible when the contract is made.
Contracts are void if performance is objectively impossible at inception, or may be void if it becomes impossible to
perform. For example, it is not possible for someone to agree to stay awake for twelve days in order to complete a
job.
Supervening impossibility may only be operative, this means that it makes the contract void, if it arises by an act
of God (vis majore), or act of the state, or an irresistible force beyond the control of either party (causus fortuitus).
Contracts will remain binding if the impossibility arises due to deliberate or negligent acts of one of the parties. A
contract may be voidable where performance becomes impossible only after the contract was entered into.
2.8 Formalities
This is the final requirement for a valid contract. Most contracts do not require formalities, as long as their intentions
are clearly communicated; verbally, in writing or by conduct. Some contracts, however, require certain formalities
as laid down by Statute.
See Consol Ltd t/a Consol Glass v Tweee Jonger Gezellen (Pty) Ltd and another 2005 (6) SA 1 (SCA)
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For example, Mavis offers to sell her lounge suite to Joyce for R1000.00 and Joyce agrees to pay for the lounge
suite in monthly payments of R100.00 each for ten months. Mavis adds a suspensive condition to the contract of
sale. Mavis states that although Joyce can take the lounge suite and use it, the ownership of the lounge suite will
stay with Mavis and only pass to Joyce on condition that the last R100.00 payments is made. This will mean that
the contract of sale will be suspended, and not be complete, until Joyce fulfils the suspensive condition and makes
the last payment.
For example, if Mavis sells her lounge suite to Joyce for R1000.00 and adds a resolutive condition that Joyce must
pay the full amount by the end of the month. If Joyce has not paid the full price by the end of the month, the contract
is ended and Mavis can take the lounge suite back.
If either party intentionally prevents a condition from being fulfilled, the courts will apply the doctrine of the fictional
fulfilment and the condition will be considered to have been fulfilled by the parties.
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2.12 Rectification
As mentioned above, most contracts include non-variation terms, however, there are instances whereby parties
wish to correct and edit minor details of the contract. Rectification occurs when parties agree to correct, add or
delete certain aspects of the contract without changing the substance or meaning of the contract. Parties may not
rectify any terms that would prejudice a third party to the contract.
Points to note:
The third party accepts both obligations and duties
The third party need not be in existence at the time the offer is made to the promissee by the promisor
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The promissee and promisor must have intended to keep the offer open for the benefit of the third party
The third party must accept the offer within a reasonable time
b.) Assignment
This occurs when the two parties to a contract are both debtors and creditors. Assignment merely means that a
third party will step into the shoes or replace one of parties. The third party accordingly becomes both the debtor
and creditor. All three parties must consent to the assignment.
c.) Cession
A cession occurs when one party transfers his personal rights to another. In other words, one party to the contract
(the cedent) may give his rights of action to another (cessionary).
This usually occurs when a debtor owes person, a money and person A then cedes his right to claim the money
from the debtor to person B. The debtor need not consent to the cession. There are five requirements for a valid
cession:
The cedent must own the right he wishes to cede to another
The right must be able to be ceded to another
The cessionary and the cedent must have the intention to cede the right
The right ceded must be adequately described
The cession of the right must not be unlawful
d.) Delegation
Delegation in contrast to assignment is whereby the debtor cedes his obligations to a third party. Therefore, the
initial agreement between the debtor and creditor falls away as the claim against the debtor now becomes a claim
against the third party. The debtor, creditor and third party must all consent to the delegation.
a.) Repudiation
Repudiation refers to the instance whereby a party to the contract refuses (express/implied refusal) to perform in
terms of the contract. The aggrieved party then has two choices. In the first instance he may accept the repudiation,
cancel the contract and claim compensation for any loss suffered. Alternatively, he may institute action to compel
the other party to perform his contractual obligations and in doing so, reject the repudiation.
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Positive malperformance will also take place where a party has initially agreed to refrain from doing something and
then consequently does the very same thing. The aggrieved party will then be entitled to cancel the contract on
the basis of breach. Once again the act committed must relate to an essential term of the contract.
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Table 2.2: Summary of remedies available to an aggrieved party arising from breach of contract
4
Outcome wanted Type of legal remedy Circumstances in which the Additional legal
by the aggrieved legal remedy may be available remedies that
party may be possible
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b.) Notice
Parties may include a term in the contract which allows either of them to cancel the contract. The cancellation
clause will usually state the manner in which the contract must be cancelled. There are also instances where the
law may prescribe circumstances in which a party or both parties may terminate the contract.
c.) Release
One or both parties may waive the other’s duty to perform in terms of the contract which will have the effect of one
or both parties being released from their respective duties. There are no formalities that need to be complied with
before a party may waive his rights to performance by another.
d.) Novation
Parties may choose to substitute the old contract with a new one, however, both parties must consent to such
substitution. All respective rights and duties that arise from the original contract will terminate and be replaced with
rights and duties of the new contract.
e.) Set-off
This occurs when both contracting parties, for whatever reason, end up owing each other the same and/or equal
payment. Instead of paying each other, each party writes his debt off against the other.
There are four requirements that must be satisfied before set-off will occur:
The debt must be between the same parties in their same capacities
Both debts must be money or movable property of the same kind
The debt must be liquidated amounts (ascertainable in monetary value)
Both debts must be due, payable and without attached conditions
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f.) Prescription
Prescription relates to the expiration of a particular time period and in particular the termination of a party’s
contractual obligations due to the effluxion of time. The effect of prescription is that the debt is no longer payable
including any accessory liabilities that may have arisen through such debt e.g. interest owed also falls away.
The law contends that a creditor should have a specified amount of time within which to institute action for recovery
of debts; if a creditor fails to do so within the prescribed time, he will permanently lose such rights.
There are different time periods for different types of debts:
A creditor has 30 years to institute action for payment of debt for: debts secured by a mortgage bond, a
judgment debt or taxes
The state has 15 years to institute action for debts owed to it as a result of loans, sale or lease of state land
A creditor has 6 years to institute action for debts arising from bills of exchange, negotiable instruments
A creditor has 3 years to institute action for any other debt owing
Prescriptions usually begins to run on the date that the debt becomes due and payable and only when the creditor
has knowledge of the identity of the debtor.
See the Prescription Act 68 of 1969.
Van Zijl v Hoogenhout [2004] 4 ALL SA 427 (SCA).
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Either the creditor or debtor is deceased or an executor has not been appointed.
h.) Death
Where it is possible, the executor of the deceased estate will be liable on any contracts entered into by the
deceased and is also able to claim any contractual rights or benefits that would have accrued to the deceased.
The executor will be precluded from acting on any contracts that obligated the deceased to perform acts of a
personal nature for e.g. supply of service or skill.
If the breach is not a material one, the aggrieved party may not cancel the contract but may only claim damages.
b.) Cancellation
An aggrieved party may only cancel a contract if the breach relates to a material term, in other words, he would
have not entered into the contract if it were not for the terms being included into the contract.
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Activity
1 Andrew agrees to deliver a lounge suite to Lunga on Friday 7th May. He however
only delivers the lounge suite on Saturday the 8th. Is Lunga be entitled to cancel the
contract?
2 Marital Bliss agrees to deliver a marquee to Julia by 18h00 on the afternoon of Friday
7th May. They however deliver the marquee on Saturday 8th at 08h00 – only 14 hours
late. Julia’s wedding ceremony begins at 09h00. Is she be entitled to cancel the
contract?
3 Write a paragraph on each scenario paying particular attention to whether the time
terms were material or not.
c.) Damages
The purpose behind a court awarding damages, is to place the aggrieved party in the same position he would have
been in had the other party fulfilled his obligations. The aggrieved party must be able to prove the following in order
to claim damages:
The amount of loss – interest may be included in this amount
The breach must be the direct cause of the loss suffered – each case will be judges on its own facts
The loss as a result of non-performance must not be remote or unforeseeable
The loss must be able to measurable in monetary terms
The aggrieved party must have attempted to mitigate the loss - that is to take all reasonable steps to reduce
the loss suffered
The aggrieved party must prove the damages
The aggrieved party must have attempted to mitigate the loss
In terms of contractual law, the only damages that may be claimed will be for financial loss suffered
d.) Interdict
An interdict is a court order directing a person to do so something or to refrain from doing something. It may be
used to prevent someone from doing something that breaches the terms of the contract. It may also be used to
prevent a third party from doing anything that would affect the contractual rights of the interested parties to the
contract.
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f.) Interest
Any claim for interest that an aggrieved party/creditor has lost on money he should have received by a certain date
would normally be claimed at the same time that damages have been claimed. With regard to liquidated amounts,
interest will be payable from the date upon which the amount came due.
When dealing with unliquidated amounts, interest may only be claimed from the date on which the debtor was
placed in mora (notified of amount owed).
Parties to a contract may stipulate the amount of interest to be charged at the time of contracting, if they fail to do
so, the rate of interest will be determined by the law.
For instance, if a contract has been concluded in terms of the National Credit Act 34 of 2005, the rate of interest
will be determined by the Act itself.
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Unit
3: The Law of Sale
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3.1 Definition of the contract of sale Defining the contract of the sale
3.2 Requirements for sale contracts Understanding the nature of a contract of sale
3.3 The transfer of ownership Discuss the transfer of ownership with regards to contract of
sale
3.4 Essential elements for the contract Understanding the essential elements of sale
of sale
3.5 Duties of the parties Explain the obligations of both the buyer and seller
3.7 Remedies Understand the remedies available for both the buyer and seller
Eislen, S. 2014. The Law of Sale. In: Scott, J.et al. The Law of
Commerce in South Africa. 2nd ed. Cape Town: Oxford University
Press, 131-165.
Additional Reading:
This chapter provides a comprehensive overview of the law of sale. This chapter
provides an overview of important concepts such as the duties of the parties,
types and modes of delivery, the passing of ownership, the passing of risk, cash
and credit sales and warranties. It is important to have a sound understanding of
these concepts in order to understand the law of sale. Fundamental to the law of
sale are the concepts that owning something and possessing something are two
different things.
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Activity
1. List and briefly discuss the general requirements for valid contract?
The Consumer Protection Act 68 of 2008 (CPA) aims to regulate ‘transactions for the supply of goods and services’.
The CPA will apply to all sale agreements (unless specifically exempted), the promotion of goods and to sellers of
goods.
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If a seller fails to claim payment of the purchase price within a reasonable time, it may be inferred that it was a
credit sale. If it can be inferred from the contract that the buyer was not required to pay the purchase price on the
delivery of the merx, it will once again be deemed to be a credit sale. When it is unclear whether the contract of
sale is one of credit or sale, the terms of the contract, the surrounding circumstances and the actions of the parties
at the time of contracting will be considered by a court.
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b.) Movables
There are two main ways of delivering movables:
Actual delivery: Is physically handing the thing over to the buyer or putting him into “effective control” of
the thing, e.g. the seller hands the cell phone over to the buyer, or gives him the keys to the new
warehouse.
Constructive delivery: This means the doing of something which the law accepts as being the same as
actual delivery. There are five kinds of constructive delivery:
v.) Attornment
With regard to this type of delivery, there is an agreement between the seller, the buyer and a third party
that the merx is under the factual control of the third party who holds it on behalf of the seller; and who
agrees that upon conclusion of the sale agreement, will continue to retain possession of it on behalf of the
buyer.
Incorporeal (cannot be seen or touched) movable (not immovable property) property will be delivered by the
cession of the rights in the property from the cedent to the cessionary. E.g. A cedes his shares in a Company to
B.
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Think Point
There is a difference between (a) the agreement by the seller and the purchaser
to sell a thing for a price and (b) the passing of ownership from the seller to the
buyer which will only happen when the seller delivers the thing to the purchaser.
It is not a legal requirement of the contract of sale that the seller be the owner of the property; the seller merely
agrees to deliver undisturbed possession of the property to the buyer.
With regard to whether the property is in existence at the time the contract of sale is entered into will require two
different situations to be looked at. Firstly, there is the situation where the parties are under the misapprehension
that the property is in existence when in fact it is not. In this instance, the contract entered into will be void abnitio.
In the second situation, whilst the property is not in existence at the time of contracting, both parties expect it to
come in existence in the future. The parties may include suspensive conditions into the contract stating that the
purchase price will only be payable once the property has materialised. However, for this type of contract to be
entered into, the property must be certain or ascertainable at the time of contracting. If the property is not
identifiable or cannot be identified, the contract may be found to be void on the grounds of vagueness.
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Activity
1. Bradley is getting married soon and wants to sell some of his things. He decides
that he no longer requires his pool table and believes that R5000.00 will be a
reasonable sale price. Before Bradley puts out a public advertisement, he asks
his friends if they are interested in buying the pool table at the said price. His
best friend, Adele, makes an offer of R3500.00 even though Bradley knows that
Adele does not really have that amount of money. Has a valid offer been made
by Adele? Provide a reason for your answer?
The parties may contract to vary the general principles of common law that apply to the passing of risk.
In terms of the common law, the risk of accidental loss or damage to the merx will rest with the buyer when the
contract is complete (perfecta). The contract will be complete when:
All conditions attached to the contract has been fulfilled
The price can be determined
Their property sold must be determined
It is important to note that risk may pass to the buyer even if delivery has not taken place and/or ownership passed
to the buyer.
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However, if the merx sustains loss or damage through no reasonable fault of the seller, the buyer will only have
two remedies available to him. The buyer may cancel the contract on the basis of impossibility of performance; or
receive the damaged goods and request a reduction in the purchase price.
Generally, the seller is entitled to insist that payment of the purchase price is in cash and payment must take place
where delivery takes place.
With regard to credit sales, the time and place for payment will be set out in the contract and only take place after
delivery of the merx. If the payments are going to be done in instalments, the time and place must be specifically
stipulated in the contract and include provisions relating to interest charged if applicable.
With regard to the sale of immovable property, payment will generally take place at the time the property is
transferred to the buyer. In most transactions for the sale of immovable property, the seller will only transfer the
property upon receipt of bank guarantees or security from the buyer within time limits agreed to by both parties.
If the buyer refuses or fails to receive the goods, he will liable for a breach of contract. The seller may then claim
damages for the costs incurred as result of the breach, such as storage costs.
If at the time of delivery, the buyer feels that the goods do not meet the standard or description agreed to, he is
entitled to refuse to accept such goods and claim damages from the seller based for breach of contract or positive
malperformance.
If the buyer finds that after delivery has occurred, the merx is defective, he must give notice of such defect to the
seller within a reasonable time period.
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3.6 Warranties
3.6.1 Warranty against eviction
A warranty against eviction is a promise by the seller that the buyer will not be dispossessed of the merx. If the
seller is aware that he is not the owner of the property and fails to tell the buyer; and the buyer is subsequently
dispossessed of the merx, the buyer is entitled to cancel the contract on the basis of fraud.
If on the other hand, the seller is not aware that he is not the owner of the property and contracts a bona fide sale
with the buyer, the contract remains valid and enforceable. The buyer will then have a remedy against anyone who
threatens to dispossess him of the property (provided that such dispossession is not by the owner who has a real
right in the property).
The warranty will provide the buyer with the following remedies upon dispossession:
He may cancel the contract
He may claim the value of the merx at the time of dispossession
He may claim the purchase price
He may claim damages for any cost incurred
He may also claim interest from the date of demand
The seller may exclude any liability for latent defects if both parties agree that the merx is sold ‘voetstoots’ (as is).
The buyer thus agrees to buy the merx and bear the risk of any latent defects. The responsibility then rests with
the buyer to inspect the merx. The seller will not be able to rely on a voetsoots clause and is liable for fraudulent
misconduct where he was aware of the latent defect and deliberately remains silent about it.
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3.7 Remedies
3.7.1 The actio rehibitoria
The actio rehibitoria will be used by the buyer to rescind the contract, if the buyer can prove that he would not have
bought the goods had he been aware of the latent defect. Here the court will look at the degree of impairment that
the defect causes to the utility of the merx. If the buyer is able to prove the above, he will be entitled to cancel the
contract and claim restitution.
Restitution will place the buyer in the same position he was in before he performed in terms of the contract of sale
i.e. the repayment of the purchase price with interest. Therefore, if the buyer has already paid the purchase price,
he will be able to claim back the purchase price as well as interest. Restitution will further allow the buyer to claim
for reasonable losses incurred as a result of the transaction. Restitution also obliges the buyer to return the
defective merx to the seller unless this is impossible through no fault of his own. (The buyer will not be able to use
this remedy and simultaneously claim damages.)
The buyer must choose either a remedy based on the actio rehibitoris or the actio quanti minoris.
The buyer can lose his right to these actions for latent defects if he does not act quickly once he finds out about
the latent defect. He cannot wait six months and then take a faulty radio back to the shop and claim restitution or
a reduction in price. Also if the buyer knows about the defect at the time that he buys the goods, but still buys them
despite the defect, he cannot later claim against the seller. Even if the buyer did not know about the defect at the
time he buys the goods, but finds out about the defect soon after buying the goods and instead of taking them back
to the seller, he tries to repair the goods himself or have someone else repair the goods, he will not be able to use
these actions against the seller. The reason is that the law presumes that he is prepared to accept the goods with
the latent defect.
A seller can protect himself against a buyer's claim for latent defects by putting a voetstoots clause into the contract
of sale. This will mean that the buyer takes the goods as they are. If the goods later turn out to have a latent defect,
the buyer cannot take them back and claim restitution or a reduction. Consumers must be very careful about buying
goods which are sold voetstoots. The only way a buyer can claim against the seller where there is a voetstoots
clause is where the seller knew about the defect in the goods and was fraudulent in selling it knowing that it had a
serious problem or defect. But this is difficult for the buyer to prove.
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Think Point
Can you recall having bought a product that proved to be faulty? What was it?
What did you do about it? What was the result of your action?
Reading
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Unit
4:
The Law of Lease
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4.2 The essential elements of a lease Explain the essential elements of a lease
agreement
4.6 Termination of the lease Discuss the ways in which a lease can be terminated
Read Chapter 5:
Konyn, I .2014. The Law of Lease. In: Scott, J. et al. 2. The Law of Commerce
in South Africa. 2nd ed. Cape Town: Oxford University Press, 217-245
Additional Reading:
Read Chapter 2: Bradfied & Lehmann Principles of the Law of Sale and Lease
3ed (2013) Juta
This chapter provides a comprehensive overview of the law of sale. This chapter
provides an overview of important concepts such as the duties of the parties, types
and modes of delivery, the passing of ownership, the passing of risk, cash and credit
sales and warranties. It is important to have a sound understanding of these concepts
in order to understand the law of sale. Fundamental to the law of sale are the concepts
that owning something and possessing something are two different things.
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4.1 Introduction
The law of lease deals with the letting and hiring of immovable property and involves a contract between the
landlord (lessor) and the tenant (lessee). A lease agreement is made up of mutual agreements between the parties
whereby the lessor will provide temporary use and enjoyment of the property in return for payment of money from
the lessee.
There is no requirement that the lessor must provide the lessee with full use and enjoyment of the property; partial
use and enjoyment of the property may be granted.
The property to be let must be identified or be able to be identified. The lessee only acquires temporary use and
enjoyment of the property with the intention of returning the property, in the same condition, it was leased to him.
Activity
1. Sandiya does not know when she will get another job and may consider
selling her property. Advise her on the rules relating to the sale of property
where the whole/part of the property has been leased.
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4.3 Formalities
There are generally no formalities attached to the leasing of property. With regard to long leases of immovable
property, the formalities in respect of the Lease of Land Act 18 of 1969, states that such leases must be registered
against the title deeds of the property.
The property delivered by the lessor must allow the lessee to use and enjoyment of the property. The parties may
specify the condition in which the property must be delivered, however, it is generally accepted that the property
must be delivered in a condition that is reasonable for the proper use and enjoyment of the property.
The lessee’s remedies if the lessor fails to deliver or maintain the property
a.) Where the lessor has failed or refuses to maintain the property in a reasonable condition, the courts are slow
to enforce specific performance as it if difficult to enforce. The lessee may repair the property himself and
thereafter claim the costs of repair from the lessor. Alternatively, the lessee may set off the costs of the repair
against the rent due to the lessor. The lessee will only be able to recover the costs of repair if the lessee:
had given the lessor notice of his intention to repair the property and;
allowed the lessor reasonable time to repair the property
See: Mpange v Sithole 2007 (6) SA 578
b.) Should the lessor fail to perform any of his duties; and the lessee cannot objectively be expected to be satisfied
with the defective performance, the lessee will be entitled to cancel the contract.
c.) If at the time of delivery, the lessor delivers property that is defective, the lessee may choose not to accept
such delivery and may cancel the contract. If whilst the lease is already in existence, the property becomes
defective to the point that the lessee cannot objectively be expected to continue with the lease (property must
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be rendered practically useless for their purpose); the lessee must first provide the lessor with an opportunity
to remedy the situation and thereafter cancel the contract if the lessor fails to perform.
d.) If the lessor fails to deliver or to maintain the property in a reasonable condition, the lessee will only be able
to claim consequential damages if:
he can prove that the lessor knew or ought to have known of the defective property;
the lessor failed to remedy the situation
See Fourie NO v Hansen 2001 (2) SA 823 (W)
e.) The lessee, may choose to abide by the lease even though the property is defective if he believes that the
defect is not serious enough to warrant cancellation. In this instance, the lessee will be able to claim a reduction
in rent to the extent that the use and enjoyment of property was impaired by the defect.
4.4.3 The duty to ensure the lessee’s undisturbed use and enjoyment of the property
The lessor must ensure that the lessee has the property at his disposal and is free to use and enjoy it without being
disturbed by the lessor or anyone else. In other words, the lessor must not unreasonably disturb the lessee from
using and enjoying the property and further prevent third parties with superior title from disturbing (evicting) the
lessee.
Apart from effecting repairs, the lessor also has the right to inspect the leased property. According to Unit 4 (2) of
the Rental Housing Act 50 of 1999, a lessor may only exercise his right of inspection in a reasonable manner and
after reasonable notice to the lessee.
Should the lessor unlawfully disturb the lessee’s use and enjoyment of the property, the lessor will be guilty of
committing a breach of contract and the lessee will have the usual remedies for breach of contract available to
him. However, an interdict is the normal means of restraining the unlawful conduct of lessors in these instances. If
the lessor has unlawfully prevented the lessee from entering and occupying the property, the lessee may recover
his rights by means of the mandament van spolie action that is, a person who has been dispossessed of property
without due legal procedure may apply to court to have the property returned to him.
The lessee will only be entitled to a reduction in the rent payable for the period he was deprived of the use and
enjoyment of the property.
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Think Point
What should happen in a case where a landlord suspects that a tenant is using
the premises for an unauthorized and possibly illegal business? Should the
landlord be allowed to ‘snoop around’ while the tenant is out so as to make sure
there is nothing illegal happening on his premises?
The lessee is required to notify the lessor of any threaten eviction to allow the lessor to remedy the situation. The
lessee will be entitled to a reduction in rent in accordance with the deprivation of his use and enjoyment of the
property.
Parties may agree that payment be made at a particular office and it will be accepted that parties intended that
payment be made during the business hours of that office. If the parties have agreed on a time but no place for
payment, the duty is on the lessee to find the lessor to effect payment and avoid defaulting on payment.
If the lessor has not specified a date for payment, he will first have to stipulate the date by means of a letter of
demand before the lessor can fall into default.
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The third party’s property will only form part of the hypothec to the extent that the lessee’s property does not satisfy
the arrear rent due to the lessor.
According to the common law, the court order is brought against the lessee on notice and has the effect of making
the lessor a ‘privileged creditor’.
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The hypothec will terminate once payment of the arrear rental occurs; upon such termination, the lessor must
return all attached movable property to the rightful owner.
According to The Magistrates’ Courts Act 1944, the lessor may apply for an automatic rent interdict which may be
issued when the summons for claiming arrear rent is issued. The interdict has the effect of preventing any person
from removing any goods subject to the lessor’s hypothec before a court decision has been made on the matter.
4.5.2 The lessee’s duty of proper use and care of the property
Generally, the lease contract will stipulate the purpose for which the property has been leased but parties may also
agree upon the purpose tacitly:
The lessee may use and enjoy the property for the purpose for which the lessor anticipated it to be used
and be enjoyed;
For the purpose for which it had been previously used;
Or for the purpose that flows from the nature of the property.
Furthermore, in using the property for its said purpose, the lessee is required to use and care for the property in
the same manner he would have done if he was the owner of the property.
a.) The lessor remedies in the event the lessee misuses the property
The normal contractual remedies will accrue to the lessor upon the lessee’s breach of the contract. The lessor may
obtain an interdict preventing the lessee from using the property unreasonably, improperly and for anything other
than its contemplated and intended purpose. The lessor may be entitled to cancel the contract provided the contract
has a forfeiture clause or the breach is serious. The lessor will be entitled to claim damages if the lessee’s improper
use of the property results in loss to the lessor. However, if the breach committed does not allow for a cancellation,
the lessor will not be able to claim for damages prior to the expiry of the lease as the lessee is still able to restore
the property to good order.
4.5.3 The lessees’ duty to restore the property in termination of the lease
The lessee only has a right to temporary use and enjoyment of the leased property; upon termination of the lease,
the lessee is obliged to return or restore the property to the lessor. The lessee’s failure or refusal to return the
property will constitute ‘unlawful holding over’ of the property which amounts to a breach of the contract. Whilst the
lessor’s right against the lessee will include the right to terminate the contract, The Rental Housing Act 50 of 1999
indicates that a lessor bears the onus of proving that the termination of a lease does not amount to an unfair
practice and is permitted in terms of the lease itself.
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Legal process must be adhered to when a lessor contemplates the eviction of a lessee. With regard to the eviction
of commercial lessees, the lessor must prove that he is the owner and that the lessee is in occupation of the leased
property.
With regard to lessee’s who have leased the property for residential purposes, the provisions of The Prevention of
Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 will apply. The courts have stated that the
aim of the Act is to regulate eviction in a fair manner. The Court, in considering the circumstances of the case
(rights and needs of the elderly, children, disabled person etc.), will only order eviction where it is just and equitable
to do so.
See Ndlovu v Ngcobo; Bekker and another Jika [20020] All SA 384 (SCA).
Section 26 of the Constitution (Act 108 of 1996).
If the parties have agreed that the lease contract will be for a specified period of time, the contract will terminate
automatically upon expiry of such time.
If the parties have not specified a specific date upon which the contract will terminate, either party may terminate
the contract upon reasonable notice to the other. The period of notice must allow the lessor sufficient time to lease
the property to another or allow the lessee sufficient time to find alternative accommodation.
The notice of termination will only be deemed valid and enforceable when the other party receives actual
knowledge of it.
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Should, for any reason, the lessor’s title over the property terminate, the lease will not automatically terminate. If,
however, the lessee’s right to use and enjoy the property has diminished due to the lessor’s absence of title, the
lessee may claim damages from the lessor.
The lessee will also be protected by the doctrine of the ‘huur gaat voor koop’ (lease before sale). In terms of this
doctrine even though the lessor sells the leased property and his title over the property has extinguished; the
lessee’s right to use and enjoy the property remains intact until lawfully terminated for any other reason other than
the sale itself.
Once the debtor is declared insolvent, he is sequestrated and a trustee is appointed by the court to take away all
the debtor's remaining assets. The trustee then sells the assets, which is called realisation. The trustee then
distributes the proceeds to creditors with secured claims. This payment causes the discharged.
Discuss the duties of the lessor and the lessee in a contract of lease.
What ordinary and extraordinary remedies can a tenant use if the landlord
does not carry out his duties in terms of the lease?
What is the landlord’s tacit hypothec and in what circumstances can he use
it?
Explain the doctrine of “huur gaat voor koop”.
If a tenant makes improvements to the rented property what can he do when
the lease period is ends?
How can a lease be terminated?
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Unit
5: The Law of Insurance
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5.5 Manner in which claims must be Identify the ways in which claims must be lodged
brought
5.6 The doctrine of subrogation Discuss the requirements that must be satisfied before an
insurer can initiate the subrogated claim
This chapter provides a comprehensive overview of the law of insurance. In this chapter you
are introduced to the essential elements of an insurance contracts; the different types of
insurance, and the duty of disclosure which attaches to insurance contracts. It is important
to understand the various contractual concepts which are discussed in this chapter to gain
a sound understanding of the law of insurance.
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5.1 Introduction
There are various reasons for a business experiencing a financial loss. All businesses risk damage to their property
or liability for the actions of their employees. To safeguard against potential legal liability and to allow the business
to continue to exist, should any of the contemplated risks materialise, businesses mandate another entity to bear
such risk on its behalf. Therefore, insurance deals with the transfer of risk whereby one party (the insurer) will
indemnify another party (the insured) should a specified risk occur. In return, the insured agrees to pay a certain
some of money (the premium) to the insurer.
Activity
List all the possible events that may take place at some point in your life that you
may need to insure against. Is it possible to think of everything? Is it possible to
know how many of these things will actually happen?
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The insured undertakes to pay a premium to the insured. It is not a prerequisite that the insured actually pays a
premium in order for the contract to become valid and enforceable. The contract will come into being if the insured
undertakes to pay a premium in the future. Insurance policies may stipulate a date upon which the premium must
be paid and it is generally accepted that such premium must be paid in money.
Think Point
Relatively few young people buy life insurance. Why? Do you think they should?
What might change their attitude toward buying insurance?
5.3.4 To compensate the insured for the materialisation of the uncertain event
The performance tendered by the insured must meet legal requirements according to the type of insurance policy
entered into by the parties. With regard to indemnity insurance, the insured must be indemnified for patrimonial
losses caused by the uncertain event. In terms of non-indemnity insurance, the insurer must agree to pay the
insured a specified some of money upon the occurrence of the uncertain event.
When considering what would constitute a ‘material disclosure’, the courts consider whether a reasonable person
would have thought the disclosure would allow the insured to calculate the potential risk of the situation. The court
will also consider whether or not the insurer would not have entered into the contract or entered into the contract
on different terms had the insured disclosed all material facts.
The duty to disclose not only applies to the insured providing accurate information to all questions put to him but
also extends to disclosing, on his own accord, facts to the insured that are material to the policy. The insured is
obligated to disclose all information that is within his knowledge or which he should have known had it taken
reasonable steps to obtain such knowledge.
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Think Point
Is there anything that you believe you should have or would have to disclose when
applying for an insurance contract? Is there anything you would be tempted not
to disclose? Why?
Activity
Koos’ policy stipulates that losses must be reported to the police in the first
instance, within 48 hours, and then to the insurance company in writing, within
another 48 hours. When his car is stolen, Koos immediately telephones the
insurance company, but goes to the police after six days. Can he claim?
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The law of subrogation will only arise where the insured has a cause of action against a third party for compensation
of loss suffered by the said insured. The insurer then steps into the shoes of the insured for the
purpose of instituting legal action against the third party for any intentional or negligent harm caused to the insured
or his property.
There are three requirements that must be satisfied before an insurer can institute a subrogated claim against the
third party.
The insurance contract entered into must be valid and enforceable
The insurer must have indemnified the insured for any loss that may be incurred on the occurrence of an
uncertain specified event
The insured loss must have been fully compensated for by the insurer
Reading
Read Chapter 8
Sutherland, P and Van der Bijal, C .2014. The Law of Insurance. In:
Scott, J.et al. 2014. The Law of Commerce in South Africa. 2nd ed.
Cape Town: Oxford University Press, 301-324.
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Unit
6: Labour Law
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6.2 Sources of Labour Law in South Africa Discuss the sources of labour in South Africa
6.3 The Contract of Employment Identify the different types of employment contracts
6.5 Essentials of an employment contract Identify the requirements for the validity of an
employment contract
6.6 Essentials of the contract Identify the requirements for a valid contract
6.11 Termination of the Employment Discuss the ways in which the employment contract can
Contract be terminated
6.12 The Employers Delictual Liability Discuss the employers delictual liability
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Additional Reading:
Read:
McGregor M (ed) et al Labour Law Rules 2ed (2014) Siber Ink
This chapter provides a comprehensive overview of the labour law. In this chapter
you are introduced to the consequences which flow from an employment contract;
individual and collective employment, the basis of the relationship between the
employer and employee as well as the principles of law that apply to the
employment relationship. It is important to understand the various contractual
concepts which are discussed in this chapter to gain a sound understanding of
labour law.
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6.1 Introduction
Labour law deals with all legal relationships that may arise in the workplace, be it individual (entered into between
the employer and an employee) or collective (entered into by several employees and the employer) relationships.
The employment relationship is governed by the employment contract which is informed by the basic principles of
the law of contract. There are further essential elements of the employment contract that are regulated by the
common law and endorsed by specific labour legislation.
6.2.2 Legislation
Numerous pieces of legislation have been promulgated to specifically deal with employment issues as well as
promote constitutional values such as fairness and equality. While the discussion of every labour legislation is
beyond the ambit of this guide, there are several Acts worth noting and which continuously inform labour relations
in South Africa. These include.
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Activity
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The above factors, when considered collectively, may assist in determining whether a person is, in fact, an
employee.
(1) A person who works for, or renders services to, any other person is presumed, until the contrary is proved, to
be an employee, regardless of the form of the contract, if any one or more of the following factors is present
(a) The manner in which the person works is subject to the control or direction of another person;
(b) The person’s hours of work are subject to the control or direction of another person;
(c) In the case of a person who works for an organisation, the person is a part of that organisation;
(d) The person has worked for that other person for an average of at least 40 hours per month over the last three
months;
(e) The person is economically dependent on the other person for whom that person works or renders services;
(f) The person is provided with tools of trade or work equipment by the other person; or
(g) The person only works for or renders services to one person.
(2) SubSection (1) does not apply to any person who earns in excess of the amount determined by the Minister in
terms of Section 6 (3).
(3) If a proposed or existing work arrangement involves persons who earn amounts equal to or below the amounts
determined by the Minister in terms of Section 6 (3), any of the contracting parties may approach the CCMA for an
advisory award about whether the persons involved in the arrangement are employees.
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The effect of this Section is that a person who earns less than the threshold (determined by the Minister from time
to time, currently R205 433.30 per annum) is presumed to be an employee if any one of the above indicators is
present. The onus is on the employer to prove the contrary. The result of S83A is if an employer fails to prove that
the person is an independent contractor, that person is deemed to be an employee,
6.5.1 Consensus
It is required that both parties have a serious intention to create mutual rights and duties to which they are legally
bound. Consensus is generally reached when there is an acceptance by one party of the other’s offer e.g.:
employee accepts the offer of employment made by the employer.
6.5.2 Capacity
The person must be legally capable of performing in terms of the contract. Some people have limited capacity and
therefore cannot enter into a contract e.g.: minors and persons married in community of property.
6.5.5 Formalities
If formalities are prescribed for the formation of the contract it must be observed.
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The employee agrees to perform certain specified and/or implied duties for the employer;
For an indefinite or specified period;
In return for payment of a fixed or ascertainable remuneration;
Giving the employer a right to direct the employee as to the manner in his or her duties are carried out.
6.6.1 Agreement
It is required that both the employer and employee enter into a contract of employment freely and voluntarily. No
person can be compelled to work for another. Duress (forced – can be physical or psychological), common
misunderstanding about the material terms of the contract or misunderstanding induced by intentional or
unintentional misrepresentation will render the contract void.
The agreement presupposes that at the time of contracting the parties were fully aware of the nature of the duties
to which they agreed and of the obligations i.e. employees renders personal services at the disposal of the
employer and the employer is required to remunerate the employee.
6.6.2 Formalities
The common law does not impose any formalities when concluding a contract of employment. A contract of
employment is concluded when an employee unconditionally accepts the employer’s offer of employment. Sections
28 and 29 of the BCEA requires that all employers who employ more than 5 employees to conclude agreements
with the employees setting out certain particulars. Failure to comply with this renders the contract void but it does
mean that the employer may be subject to certain penalties.
6.6.3 Commencement
A contract of employment commences when the parties have agreed to the essential terms e.g.: remuneration;
leave; hours of work and so on. The parties can agree to suspend the operation of the contract for a particular
period e.g.: the parties agree that the employee will commence working at some future date.
The employment becomes fully enforceable from the moment the parties reach consensus on the terms. However,
it is not necessary that the parties reach agreement on each and every detail of the conditions of employment,
these can be finalised at a later date. However, if agreement is not reached on fundamental terms such as duties
or remuneration no contractual relationship is formed unless in time the parties have taken to have tacitly
(words/conduct/practices) consented to the terms.
Tacit terms are read into the contract because it is assumed that although the parties did not include them expressly
they would have done so had they thought about it at the time of concluding the contract.
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Implied terms are read into the contract irrespective of the intention or wishes of the parties – implied terms are
deemed by law to form terms of contracts even if the contracting parties were unaware of them.
6.6.4 Content
The BCEA requires that the employer provide an employee with certain essential details at the commencement of
employment, this includes but not limited to:
The full name and address of the employer;
The name and occupation of the employee or a brief description of the work;
The place of work;
The date of which employment commences;
The hours of work;
The wage or salary;
The rate for overtime;
Deductions;
Leave;
Notice period for terminating employment,
Duration of employment;
Safety and security.
6.6.6 Remuneration
The parties must agree on the remuneration to be paid to the employee at the conclusion of the contract.
Remuneration may be payable in cash and/or in kind. If remuneration is payable in money, the amount there of
need not be fixed but it must at least be reasonably ascertainable. Where remuneration is paid in kind, a value
must be attached thereto.
Think Point
It is common practice to pay labourers on wine farms partly in cash and partly
with cheap wine. Is this ethical? What are the social repercussions of such
employment practices?
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Think Point
A client has asked you to provide six copies of a hundred-page contract document
within an hour. You ask the marketing assistant to give you a hand and she
refuses because photocopying is not her job. It is the job of the secretary who is
off sick. What now?
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Where there is no agreement regarding the time of payment, payment will usually take place at the end of the
period of service. Where the employee is working for an uncertain or indefinite period, he must be paid on a regular
basis. The general rule is that the employee must render his services before receiving payment.
6.8.1 Cancellation
Material breach of contract by the employer allows the employee to resile (abandon a position or course of action)
from the contract. When the employee claims cancellation of the contract, it amounts to summary termination of
the contract, as opposed to where the employee gives due notice of termination. If the breach is less serious the
employee may cancel the contract by giving the required notice of his intention to terminate.
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discovered by courts is although reinstatement would normally not be ordered, specific performance is not
excluded as a remedy for the employee.
The courts have discretion to refuse specific performance and award damages instead if they deem it to be in the
public interest that specific performance should not be granted. The fact that the relationship between the employer
and employee has irretrievably broken down is one of the factors which may induce the court not to award specific
performance.
6.8.3 Damages
An employee who suffers a loss as a result of the breach of contract by the employer, may claim damages against
the employer. The amount of damages is calculated in accordance with the remuneration which he would have
received if the breach of contract had not taken place. The employee must, however, take reasonable steps to
mitigate his losses.
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The employee must commence working on the agreed date and must obey all lawful instructions given by the
employer. If he is absent without reason or consent, he is committing breach of contract and such absence may
be a reason for a summary dismissal,
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to obey a lawful and reasonable command or request and the refusal is wilful and serious (wilful disobedience), or
when the employee’s conduct poses a deliberate (wilful) and serious challenge to the employer’s authority’.
Insubordination may assume a number of forms from verbal defiance, to the most serious being a refusal to obey
a reasonable instruction. An employee will be committing a breach of contract should he behave in a defiant
manner and may be dismissed accordingly.
The employer is entitled to dismiss the employee summarily (without notice) when the latter has committed a
material breach of contract. Some accepted common law grounds for the summary dismissal include:
Incompetence to do particular work;
Refusal to work;
Disobedience of reasonable commands;
Rude behaviour towards the employer;
Disclosure of trade secrets or the misuse of information obtained through his employment;
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Dishonesty in the scope of his duties, for example, fraud and theft. Dishonesty must be proved;
Putting the employer’s property to private use;
Misconduct, for example, drunkenness or assaulting co-workers or customers; and
Insubordination, rebelliousness and conduct undermining discipline.
In terms of legislation, a dismissed employee is entitled to outstanding remuneration for time served and payment
for all annual leave days to his credit. If an employee is summarily dismissed, he is not entitled to notice pay. If he
is dismissed on notice, he may be required to work during the notice period; alternatively, the employer may exempt
him from working the notice period, but must then pay him in lieu of the notice.
In some circumstances the courts are reluctant to order specific performance, for instance the court is unlikely to
compel a deserting employee to return to his employer. In cases of this nature the employer will be entitled to
damages only.
However, specific performance in other circumstances may be the appropriate order to make. For example, the
employer A has a restraint of trade clause in the contract of employment of X. X resigns and takes up employment
with the competition. The employer A applies to court for an order of specific performance i.e. that X complies with
the terms of the contract.
6.10.3 Damages
Whether the contract is cancelled or specific performance demanded, the employer is entitled to claim damages
from the employee if the behaviour or negligence of the latter causes him damages or losses. The onus is on the
employer to prove that the damages flowed from the breach of contract.
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6.11.1 By notice
If the contract of service was concluded for an unlimited period, it may be terminated by the giving of due notice.
Notice may, of cause, be given by either party. In other words, the employee may give notice that he intends to
terminate his services, that is, to resign, or the employer may give notice to employee to terminate his services.
Common law does not prescribe minimum periods of notice and thus reasonable notice must be given, however,
Section 37 of the BCEA prescribes notice periods and requires notice to be in writing, unless the employee is
illiterate.
6.11.3 By agreement
The parties may terminate the contract by mutual agreement.
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6.11.8 By cancellation
If one of the parties commits a material breach of contract, the other party is entitled to cancel the contract.
6.12.2 The delict must have been committed by the employee in the course of the performance of his
duties
The employer is not liable to third parties for all delicts committed by his employee, but only those committed during
the scope of employment.
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Whether an action falls within the scope of an employee’s duties depends on the particular circumstances of each
case. The employer will generally be liable in the following instances:
While the employee was carrying out the duties of the employer;
When the employee was acting within the scope of his employment, whether during or after working
hours;
If the employee performs an illegal act necessary for the carrying out of his duties;
If the employee performed an act which was prohibited by the employer, but nevertheless promoted the
interests of the employer;
Where the employee committed a delict while promoting partially the interests of the employer and
partially his own interests;
Before the employer will be held liable, it must be proved that the employee was the cause of the delict and is
legally liable for such delict. Where the employee is liable, the employer may be sued as a co-defendant. Both the
employer and employee are jointly and severally liable for the delict.
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An employee is entitled to a meal interval of at least The meal interval can, by agreement, be
one hour after five hours of continuous work reduced to 30 minutes, or be done away with
Lunch
The employee has to be paid double the normal rate The same principle and payment scale
Sundays and public holidays
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An employee is entitled to: The BCEA makes provision for daily and
weekly periods
A daily rest period of 12 hours between ending
Rest periods
Parties may agree that the employee will work up to Averaging of working hours and overtime is
12 hours a day (including a meal interval) without allowed where hours are calculated over a
receiving overtime pay, provided that period of time
Compressed work week
The employee does not work more than 45 This is to cater for peak periods in certain
ordinary hours in any week, sectors, for example agriculture, where
(during harvest time) employees may agree
More than 10 hours’ overtime in any week, or
to extend hours of overtime to a maximum
On more than five days in any week of 15 hours per week, but after harvesting,
Ordinary hours and overtime can be averaged over this will no longer be necessary.
a period of up to four months in terms of a collective
agreement (Section 11 and 12).
vacation leave (excluding public holidays) per year for additional leave, either paid or unpaid
most employees. This would amount to 15 working days
(Section 20).
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An employee is entitled to four consecutive months’ The employee must notify the employer in
maternity leave, which may commence at: writing of the dates of the leave she intends
Any time from four weeks before the expected date to take.
of birth, or It is unpaid leave but she may claim from
On a date that a medical practitioner or midwife UIF.
Maternity leave
certifies that it is necessary either for the Remember that the BCEA sets the
employee’s health or her unborn child (Section 25). minimum leave, but the parties can agree to
An employee may not work for six weeks after the birth more favourable terms, for example, paid
of her child. If an employee miscarries in the third maternity leave. If an employee is not paid,
trimester of her pregnancy or has a still born child, she she may claim from the UIF.
is entitled to six weeks’ leave after the miscarriage or still
birth.
An employee is entitled to three days’ family Only for employees who have worked for
responsibility leave for every 12 months worked longer
(Section 17). Family responsibility leave may be than four months and who work at least four
taken when an employee’s: days
Family responsibility leave
Six week’ paid sick leave in every three-year cycle A leave cycle is calculated as the number
worked (Section 22). of days that an employee would normally
work during a six-week cycle.
If an employee has been absent from work for more
Sick leave
than two consecutive days or on more occasions in an If an employee works five days a week,
eight-week period, the employer may request the she/he would work 30 days in six weeks
employee to submit a medical certificate (Section 23). and that would entitle her/him to 30 days’
Such a certificate may be issued by a medical doctor or sick leave in three years.
a person registered with a professional council.
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To better understand the EEA, it is important to understand the following constitutional provisions:
The Equality Clause (Section 9(1))
In terms of Section 9(1) of the Constitution everyone is equal before the law. The right to equal protection of the
law is thus guaranteed to everyone.
Equality includes equal enjoyment of all rights and freedoms, not only in society in general, but also in the
workplace. Affirmative action is the measure produced by law to create equal opportunities in the workplace for all
people in South Africa. Affirmative action is necessary as a positive action to overcome institutionalized
discrimination.
In terms of Section 9(3) no-one may unfairly discriminate, directly or indirectly, against another person on any of
the following grounds: race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual
orientation, age, disability, religion, conscience, belief, culture, language and birth. See (The Employment Equity
Act 55 of 1998) which, read with the Constitution, seeks to achieve equity in the workplace, by:
promoting equal opportunity and fair treatment in employment through the elimination of unfair
discrimination; and
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The list of “stated grounds” is preceded by the word “including”, which indicates that unfair discrimination is not
limited to the stated grounds only. This is not a closed list and other grounds of discrimination, not mentioned in
Section 9(3), may also result in unfair discrimination.
Proof of Discrimination
If discrimination on one of the stated grounds is alleged, the presumption is that the discrimination is unfair. The
onus is then on the respondent to show that the discrimination is not unfair. If discrimination is alleged on a ground
not listed in Section 9(3), the onus rests with the person who alleges discrimination to show that there was
discrimination and that it was unfair. If the differentiation is not on the listed grounds in 9(3), the discrimination can
be classified as an analogous ground. There is no presumption of unfairness with relation to analogous grounds
as provided for in 9(3). The applicant has to show that the law or conduct is based on attributes or characteristics
which have the potential to impair the fundamental dignity of persons or can seriously affect the person is a serious
manner. In the case of Harksen v Lane and Others [1997] (11) BCLR 1489 the Constitutional Court set down 3
factors which must be considered when determining whether the discrimination has an unfair impact:
(a) The position of the complainants in society and whether they have suffered in the past from patterns of
disadvantage.
(b) The nature of the provision or power and the purpose sought to be achieved by it. If its purpose is not
directed, at impairing the complainants but is aimed at achieving a worthy and important societal goal,
such as, for example, the furthering of equality for all, this purpose may, depending on the facts of the
particular case, have a significant bearing on the question whether complainants have in fact suffered the
impairment in question.
(c) The extent to which the discrimination has affected the rights or interests of complainants and whether it
has led to an impairment of their fundamental human dignity or constitutes an impairment of a comparably
serious nature.
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6.13.4 Compensation for Occupational Injuries and Diseases Act 130 of 1993
The Compensation for Occupational Injuries and Diseases Act 130 of 1993 provides for payment of compensation
to employees who have sustained work related injuries or diseases. The employee will be entitled to claim
compensation irrespective of whether the employer was negligently or intentionally the cause of such injury or
disease. Compensation may also be claimed by the dependents of the employee if such employee had died as a
consequence of the work related injury or disease.
Activity
1. List five requirements by employees in terms of the Occupational Health and
Safety Act?
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1. Introduction:
The Labour Relations Act 66 of 1995 (LRA) has been amended by The Labour Relations Amendment Act 6 of
2014. The amendments became operational on the 1st of January 2015.
The main objectives of the Act are to advance economic development, social justice, labour peace and
democratization of the workplace. These goals are to be reached by furthering the primary objectives of the Act,
which are:
To give effect to the fundamental rights conferred by the Bill of Rights contained in the Constitution;
To give effect to obligations incurred by the Republic of South Africa as a member state to the International
Labour Organisation;
To provide a framework for collective bargaining between trade unions and employers and employer’s
organisations; and
To promote orderly collective bargaining, collective bargaining at sectoral level, employee participation in
decision making in the workplace and the effective resolution of labour disputes
As the Act is applicable to every employer and every employee, it is necessary to determine who an employer and
who an employee is.
An “employee”, according to Section 213 of the Act, can be described as:
Any person, excluding an independent contractor, who works for another person or for the State and who
receives or is entitled to receive any remuneration; and
Any other person who in any manner assists in carrying on or conducting the business of an employer.
Whether a person is an employee or an independent contract is further clarified by Unit 200A of the LRA (and
Section 83 of the BCEA).
Below is a Table reflecting the essential characteristics and differences between an employee and an independent
contractor.
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Rendering of personal services by the employee to the The performance of a certain specified work or the
employer. production of a certain specified result.
The employee is at the beck and call of the employer Not obliged to perform the work himself or to produce
to render his personal services. the result himself, unless otherwise agreed.
The employer may choose when to make use of the The independent contractor must perform the work
services of the employee. within the period fixed by the contract.
Employee is obliged to obey the lawful commands, Is subservient to the contract, not under the
orders or instructions of the employer. supervision or control of the employer. Not obliged to
obey the instructions regarding the manner in which
the task is to be performed.
Contract of service is terminated by the death of the The death of the parties to a contract of work does not
employee. necessarily terminate it.
Contract of service terminates on expiration of the Contract of work terminates on completion of the
period of service. specified work or on production of the specified result.
Section 200A provides that if any one or more of the following factors are present, the person who works for or
renders services to another person is presumed to be an employee, regardless of the form of contract. The onus
is on the employer to prove the contrary.
The presumption does not apply to persons who earn in excess of the threshold amount stipulated by the Minister
in terms of the BCEA which is currently R205 433.30.
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Included in the definition of “employee” are casual employees, managers and directors of a company, shop
stewards who are employees, migrant workers, probationary employees and other temporary employees. An
employee who was dismissed and who, therefore, can no longer be termed an “employee” has access to the
dispute resolution procedures of the LRA to challenge the fairness of such dismissal.
An “employer” is a person who receives services from an employee for remuneration or who is assisted in the
conduct of its business by an employee.
2. Collective Bargaining:
Collective bargaining is generally defined as a process through which employers (employer organisations) and
employees (trade unions) engage in bargaining about terms and conditions of employment.
The parties can only bargain about matters of mutual interest which is:
terms and conditions of employment;
terms of the relationship between the trade union and employer; and
set out mechanisms to resolve disputes
The Courts have held that interest disputes (e.g. power play; future wages; terms and conditions of employment)
must be dealt with in the bargaining process through negotiation. Purpose of the bargaining process is to reach
agreement on terms and conditions of employment. If negotiations succeed, the parties form a collective
agreement, which takes precedence over any individual employment contract.
3. Strikes
Section 213 of the LRA defines a strikes as the partial or complete concerted refusal to work, or the retardation or
obstruction of work by persons who are or have been employed by the same employer or by different employers,
for the purpose of remedying a grievance or resolving a dispute in respect of any matter of mutual interest between
employer and employee.
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Step 3: Union or Employer are to give the other party 48 hours written notice before commencement of strike or
lock-out (if the State is the employer, 7 days’ notice is required).
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4. Lock-Outs
A lock-out is the employer’s economic weapon during the collective bargaining process to induce workers to accept
his offer or proposal. A lock-out is therefore the exclusion from the workplace. From the definition provided
in the Act, two elements are implied:
An act by the employer (the exclusion of employees).
With the specific purpose of persuading the employees to accept the proposal of the employer.
If an employer locks out employees in response to a protected strike it is not necessary for the employer to follow
the Section 64 procedure as the union has already followed the procedure for its strike action. It is merely necessary
for the employer to give notice (48 hours or 7 days) before the lock-out commences.
The consequences of a protected and unprotected lock-out respectively are similar to the consequences that follow
upon a protected and unprotected strike.
5. Dismissals
In terms of Section 185 every employee has the right not to be unfairly dismissed. Section 186(1) of the LRA sets
out several grounds which may constitute a dismissal. Section 188 on the other hand sets out the requirements
for a fair dismissal.
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If an employee claims that he was dismissed, but the employer denies this, the onus is on the employee to prove
the existence of the alleged dismissal. Once the existence of a dismissal has been proved, the onus then shifts to
the employer to prove that such dismissal was fair.
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As a general rule, serious misconduct (prior warnings not required) or repeated instances of the similar type of
misconduct will warrant dismissal. For example, an employee may be dismissed for insubordination, drunkenness
at work, theft or absenteeism. Dismissal for less serious forms of misconduct will only be justified where the
employee has previous warnings and has been counselled on the sanction that may be imposed should such
misconduct be repeated.
If the employee is likely to be absent for an unreasonably long period, the employer should investigate all the
possible alternatives short of dismissal. When alternatives are considered, relevant factors might include:
the nature of the job;
the period of absence;
the seriousness of the illness or injury;
and the possibility of securing a temporary replacement for the ill or injured employee
In cases of permanent incapacity, the employer should ascertain the prospect of securing alternative
employment, or adapting the duties or work circumstances of the employee to accommodate the
employee's disability.
The cause of the incapacity may also be relevant. In the case of certain kinds of incapacity, for example
alcoholism or drug abuse, counselling and rehabilitation may be appropriate steps for an employer to consider.
Particular consideration should be given to employees who are injured at work or who are incapacitated by
work-related illness. The courts have indicated that the duty on the employer to accommodate the incapacity
of the employee is more burdensome in these circumstances.
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To note:
The protection against unfair labour practices only applies to a specified list of actions.
An employee cannot commit an unfair labour practice.
the definition makes provision for the protection of employees against unfair labour practices. This
protection does not extend to employers – an employee cannot commit an unfair labour practice;
reference is only made to an employer and employee relationship [, thus an unfair labour practice will only
arise within the domain of an employment relationship that is currently in existence;
the list unfair labour practices is exhaustive. If the conduct of an employer has not been listed, then it will
not amount to an unfair labour practice
7. Dispute Resolution
a.) Mechanisms of Dispute Resolution
The LRA provides for various ways in which a dispute may be resolved:
Mediation/conciliation
Arbitration
Court order
Strike action
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b.) Mediation/Conciliation
Irrespective of how the dispute is ultimately resolved, the first step in all the processes is conciliation or mediation.
This prevents the costs of strike action or litigation before all other alternatives have been exhausted. Each type
of dispute is dealt with by the LRA which specifies which process will lead to a final determination.
The person mediating or conciliating has no power to compel the parties to do anything or to elicit evidence from
them. Therefore, it has been said that the degree of success of such processes is dependent on the good faith of
the parties to attempt to resolve the dispute.
The court will not make a final determination but due to the urgency of the matter, it will issue an interim order
(limited duration of validity). A return date will be set by the court upon which both parties will appear in court with
prepared arguments and the court will make a final order regarding the matter.
Another important function of the Labour Court is to review decisions reached by the CCMA arbitrators. Since
arbitrator’s awards are final and binding, it is not possible to appeal their decisions. Rather the decisions may be
taken on review. The process of review incorporates examining the procedure followed by commissioner and
specifically whether the relevant factors were taken into consideration, whether every party to the arbitration was
afforded an opportunity to make representations etc.
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Bibliography
Chapter 1: Bradfied & Lehmann Principles of the Law of Sale and Lease 3ed (2013) Juta
Chapter 1: Scott J (consult ed) et al The Law of Commerce in South Africa 2ed (2014) Oxford
Chapter 2: Bradfield & Lehmann Principles of the Law of Sale and Lease 3ed (2013) Juta
Chapter 2: Scott J (consult Ed) et al The Law of Commerce in South Africa 2nd edition (2014), South Africa: Oxford
University Press.
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Africa: Oxford University Press. Chapter Eight.
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