Professional Documents
Culture Documents
betrveen cortracting parties and at the same time recognises the constitutional
value of ubuntu.
It must contain all the terms by which the of1'eror is willing to abide. as rvell
as allthc temls to rvhich he or she r.vants to bind thc o11crcc. This requiremerll
flows naturally from the pler iotrs requirement.ls en incomplele ol't-er cannot
be accepted 'exactly as sct out in the offer'.
(c) The oller. as wcll as the acceptance. must be clear and certain.
Thus the intcndcd obligations must be slated unequivocallv and
unconditionallv so that the rights antl dutics intcnded by thc ol'leror are
cletermined or ascertainable. No contract can arisc if the offer is Yague or
ambiguorrs. since one of the recluirenrents 1ix il contract is that the performance
56 General Ptittiples oJ Commercial Lay'
4.2.3.2 The cont nued existe nce of the olter: The option
The offeror can ensure the continued existence of the offer by means of an option.
Options can be given in respect of different kinds of contracts, for example,
contracts of sale and contracts oflease. The option-giver makes an offer to conclude
a particular contract (this is the substanlive offer) and, in addition, makes a further
offer to keep the first offer open fbr a specified period (the second offer being
5IJ General Principles of Co,tunerciol Law
the option). If the offeree accepts the second offer (thus, if he or she accepts the
option), the option contract comes into being. The offeror is bound to keep open
the substantive offer for the agreed period. Whar this means is that, fbr rhe duration
of the option, the offeror (option-giver) may neither revoke the substantive offer
nor conclude a contract witlr another person concerning the same subject. When
the holder of the option has exercised his or her option, the contract comes into
being in accordance with the terms contained in the substantive otler.
For example, Nomsa offcrs her horse for sale to Jacques and also undertakes to
keep that offer open for two weeks. The option arises only when Jacques accepts
the second of}er. When the option does come into being, Jacques has two weeks in
which to decicle whether or not he wjshes to accept the substantive offer. Moreover,
Nomsa may neither offer the horse to someone else nor accept another's offer in
respect of the horse unlil this period has elapsed or until Jacques has rejected
the substantive offer. The option is exercised if Jacques accepts the substantive
offer within this period and communicates his acceptlnce to Nomsa. If Jacqucs
exelcises his option, the substantive contract comes into being.
4.2.4.4 Auctions
At an auction certain rules relating to thesale are made known beforehand by
advertising them or by reading the rules to those present at the auction. Every
person who makes a bid at the auction (loes so subject to the conditions of the
auction. Thus a contract exists between thc auctioneer and each bona.fide bidder to
conduct the auction according to the advertised conditions of sale. These conditions
form the basis of the distinction between auctions held subject to reservation and
auctions not subject to rescrvation. If the auction rules state, for example, that the
goods will be sold only ifa pre-determincd price is fetched or exceeded, the auction
is held subject to reservation. Auctions arc usually held subject to reservation and,
if the auctioneer does not mention anything. it is presumed that the auction is held
subject to reservation. In this case. thc auctioneer extends an invitation to those
present to make an offer. The person bidding makes an offer and is the offeror.
The auctioneer can accept or re1ect any bid regardless of whether it is thc highest
bid. Only when the auctioneer accepts iln ofTer is consensus reached and a contract
arises. Conversely, an auction is not subject to reservatiol if the conditions of
auction expressly provide that the goods will be sold without reserue. In such an
event it is the auctioneer who makes an offer. The auctioneer's offer is to sell to the
highest bidder, and it is this offer which is accepted by the bidder who makes the
highest bid. The agreement of sale will be concluded subject to a condition that, if
a highcr bitl is not made within a reasonable time, the sale shall then be effective.
decide whether the offcr can still be revoked; whether the offer has expired as a
result of the passage of 1ime, and whel the contractual dlrties become enfbrceable
- for example, the moment from which payment of interest must be calculated.
The place of fomation is important in determining, for example, the couft which
has julisdiction to hear a claim in connectiot] with the contract.
4.3.1 Where the offeror and the ofteree are in each other's
presence
If the olieror and the offeree are in cach other's presence when the ofl'er and
acceptance are made. it is usually easy to determine the time and place of tblmation
of the contract, since the offeror learns of the acceptancc of the ofl'er at the same
time and place the acceptance is made known. The contract comes into being at
the tinc when the acceptance is comrnunicated and at the place wherc the parties
happcn to be at that moment. This is l-et'emed to as the information or ascertainment
theory. according to which the contract comes into bcing when and whcre the
oft'erol leams of the acceptance of his or her offer.
the practicalities of the situation (for example, wherc the otTerror receives the
withdrawal notice he may act upon it, and the ofTerol cannot thereafter change
his mind and attempt to cnfbrce the slower letter of acceptance). Gert could thus
undo his acceptance by a speedier means of communicatior before it (the eallier
communication) comes to Nabilah's knowlcdge.
4.3.3 Electronicagreements
In considering which rulc to apply to contracts made, fol example, by fax, sms,
email or via the intelnet, the type of machine used to transmit the acceptance is not
important when trying to determine the place and timc of fbrmation in tcrms of
the common-law principles set out abovc. It should rather be considered whcther
the circumstances of the case indicate an instantaneous method of communication
and, if that is the casc, whether a conversational situation similar to a telephone
call existed allowing uncertainties to be cleared up in.rmediately. Wherc the
communication medium allows for this typc of instantaneous and 'conversational '
communication, the panies are in a position analogous to being in each other's
presence, and the ascertainment theory should then prevail. In all other instances
the choice of theories should be influencecl by the intention of the partics, sound
business practice and, perhaps, also by a judgment of where the nsk should lil:.
In the case of cont[acts concluded over the internet. thc choice of a suitable
theory is further complicated by the fact that different services are offered on
the internet, lbr instance electronic data interchange and email. Only thc cmail
procedure will be briefly discussed here. As soon as an email has been sent, it
travels to the sender's server. The server acts as a central point for the collection
and dispatch of messages from a number of computers. The server sends the
messagc into the internet. The messagc is reassembled by the recipient's server
and placed in the recipient's mailbox, where it renains until it is retrieved by
the lecipient, whether it is minutes, days or months later. Communication is thus
usually non-instantaneous, but where thc email is sent via an intemal company
network to a recipient who is logged on at thc moment of its being mailed, it may
well takc place instantaneously. This is also the case in respect of so-called 'chat
roorns where parties are in real-time colnmunicelion.
It is clear fiom the above that the application of the commonlaw rules in an
e-commerce environment may differ from situation to situation, depending on the
facts. The Electronic Comnrunications and Transactions AcT.25 of 2OO2 addressed
some uncefiainties in this regard. It regulates contracts concluded by electronic
means where the parties fhiled to, or chose not to, rcgulate contract formation
specilically. The Act provides that, in tho absence of a different agreement between
the parties, an agreement concluded electronically is concluded at the timc when.
and the place where, the acceptance ol'the offer is received by the offeror. This
is called the 'reception theory' and it takcs precedencc over the common-law
principles. As the 'receipt' of an electronic message plays a crucial role in this
theory, this concept has been statutofi]y defined. A data message is deemed to
have been received by the addressee whcn the completc data message enters an
62 Ceneral Principles of Contmercial ktrt
4.4.1 .1.1 The mistake must relate to a fact, legal rule or principle
In orcler to have an el1ect on consensus. a mistake mLlst be one of fact or law. It is
unllecessarv 1(l elaborate tlrlher on mistake of fact. An examplc of a mistake in
law is where Tessa pays Elton R2 000 in the mistaken beiicf that she owes hinr the
rroney.
A mistake in lau or fact will onl1, inv:Llidate a contrilct if it is considcled to be
excusable in the circurnsttnces.
matedal and will not affect consensus. Also remember that a mistake in respect
of the other person's attributes, such as his or her full names or characler,
will usually not eliminate consensus, as opposed to a mistake relating to the
identity of the other contracting party.
(b) A mistake conceming the contert of the intended contract. This may be an
error relating to the time when perfomance must be rendered, or the place
and method of delivery, or the performance itself. Mistake in respect of the
performance to be rendered occttrs, for example, whele Shoni is under the
impression that she is making an offel to buy E]na's house in Cape Town but
Elna is under the impression that the offer is being made to buy her house
in Durban. In such a case there will be a material mistake with regard to the
thing which is the subject of the agreement. the performance to be rendered,
and there can be no consensus. By confiast, a mistake about the atffibutes
of the object of performance is not a material mistake and does not affect
consensus. Consequently, if Shoni and Elna are in agreement that the offer
and acceptance are made in respect of the purchase of a speciflc house in Cape
Town, but there is a misunderstanding with regard to one of the attributcs
of the house (for example the zoned purpose of the erf, or the existence or
absence of a servitude over the erf, or the number of bathrooms in the house)
wh.ich has not been elevated to a supposition (see chapter 8), that mistake has
no beadng on the formation of consensus and does not render the contract
void.
(c) A mistake in respect of an interyretation the law attaches to the offer and
acceptance. In such an instance one or both pafiies have a particular perception
of the content of the contract (that is to say, of the rights and duties created by
the ageement), whereas the law attaches a different intelpretation to it. For
example, there can be a mistake about the nature of the conract. Mike offers
to pay Tshepo a sum of money to live in a unit in an old-age horne, thinking
that he acquires ownership of the property, whereas the law's interpretation of
the contract is such that Mite acquires only occupation for the remainder of
his life.
Mistake may sometimes be caused by a misrepfesentation by the other contracting
party. Misrepresentation will normally not void an agreement and merely gives rise
to the voidability of the contract at the option of the deceived pafiy (see paragraph
4.4.2.1 below). However, where the misrepresentation leads to a material mistake,
it results in the absence of consensus and no contract will arise.
4.4.2.1 Misrepresentation
A misrepresentation can be defined as a untrue statement or representation
conceming an existil]g fact 01'state of aff'airs which is made by one palty to ths
cortract with the aim, and result, of inducing the other party into concluding the
contract. The misrcpresentation may relate to the qualities or characteristics of the
subject of the contract.
A contract will be voidable as a result of misrepresentation if the following
requirements are satislied:
(a) There must be a misrepresentation, that is, an unfiue stateme]rt concerning
an existing fact or condition. A misrepresentation of the law will generally
not entitle the misrepresented party to a remedy. It is considered to be
similar to a statement of opinion, which, if given honestly, will not result in a
misrepresentation. Misrepresentation can be made by an express statement or
by conduct (eg gestures and actions). Misrepresentation may also be infered
from circumstances that prevailed at the time the contract was concluded, and
can even be tacitly made. It must be clear from the lepresentation that is made
66 General Principles of Cononercial ktw
that particulal mes\age \\,as conve!ed. Concealmc t of the lacts ( tix instancc
a
b,"- keepin-r: silcnt about something) can also constitutc llisrr-presentllli()n.
blrt onl), if a dLrt\, to disclose cellain relevant lacts c\ists. tbr instance u hen
appl),ing tbr an insurarce polic1,. An xpplicant s lailule to clisc]ose all rclcvrr.rt
tacts concerninc the insura[rlc risk rvoukl constitLlte r nr istepresentJtion.
Glr ing ln honest opinion or cstintate (such as a staternent aboul the lirtLrre
prolltxbilit) of a blrsincss). eren il the opinion tulns out to bc ntistaken.
does not constitutc- a mislepresentation.'fhe othcr pcrsol) riill irol htrve anv
renrecll agairst thc llerson u,hri grves an opinion. unless in dclict u,here
it can be proYen that tltc oplnior $,ls qiYen negligentlv. -fhus a dishonest
opinion as 1o a fLrtLrre event nav bc sufiicicnl 1o found i1u action fil tlauclnlcnt
misrepre\ertation in so llir as it tiilsch,rcflccts tltc state of nrincl of the partl
nraking thc Iepresentilt ion . In such a case. the palt1, \\ho wanls to rel\ on
the cipinion o1' the persol l.ic or shc is balgaining \\ ilh nLrst protect him- or'
helself bv har ins the opinion rradc a rcrm ()1 1he conrlact. The salne applics
To stat!-rncrt\ of contirienrlatiori or-pLrlhng (see also palaeraph -1.1.2 abo|c).
'l'he representation rrLrst lle thlse or untruc. f'orrcct or accurttc stitteulents
can revcr give rise to a lnisrcplcscntation. The rellresentaticltr should concern
a state ol alTairs that exists oI has c\istcd: in othcr words. it sltoLrld relate to
facts ol the part o[ present.
(b) Thc rrisrcprcsentation m,.lst be m:rde bv or)e contraciing part), to anotlter
cortritcting paft\' o[ b], somconc acting in the sen,ice. of a e,frrruetl|r!:
pafi,\'. or on his or hcr authority. or in collusion uith him or her'. lf such a
cortractirlg partv is inclirccd t0 conclirdc a contract b1,thc falsc fcpraserri,ru()u
lnaclc b! ar outsidcr. thc outsidcr's statcr-ncnt is not a nri sr cII csentation bu1 a
nrisstaterrent. \\hich has ro efl'ect on the consenslrs ofthe contracting l.irtir:s.
Rcscission is an rrbvious rcmed-v \\,hcrc parties to lhc contract lre involr,ecl.
Horvever. whele it is ln outsidel u,ho nrrkes the misreplesentation. rL-sci\5iolr
r.,uoulcl aftcct an inDoccnl conlractinll llxrl) iinal nol 1llc pcIson u,ho l]irrie the
or islcpfcscntatioll.
(c) Thc nisrcllrcscntalion mLlst be unlarr,lirl. Nor nialll- iln rct 1(n orri..lon in .Ll
instancc mcntioncd in (a) abo\,e) $,ould be unleu,ful il it is corrtrar), to thc
nolnr or stlurdalcl of a speciiic cornrrunity's idea ol acceptable conduct. [t is
not considcrc.l to b!- unlawtll mcrciv bccausc it is l'alsc: thc rcprescnLation
nrust iilso be nraterial. Thc rcpresentation js nonrrallr, rnatc al if it conecrllr
lhcts which $'ould probablii induce somebodv to coDClude a conh-act. [n
other \\'ords. the irrpoltlince ofthe nr isleplese nteal frct is weighecl against thc
contritct its a u,hole to ensule that the misreplese[tati(]n of an LLnilnpoftiult tnct
docs rlot sink thc \\holc contract.
(d) The mislcplcscntatiorr mLrst ha\,c incluccd thc contli:rcl as il stiinds. This is
rlso rcltrrcd to as thc ICq[ircment ol causa]itv. beciluse there has to he a
causal link b.l$'een the m isrepresen tal ion and the contruct. This merns
that. but tbr the nrisrepresentation. the deceiVed pa[]' \\'oul.l either not haYe
concluder:l thc contract at all oI woLll:l not hx\,e concludeal it on the sii|ne
terms. B\ irrpliciilion. this requires thrt rhe misrepresentltion should havc
Conse tts u,s
been rnrcie during thc ncgotiations preceding the colclusion ofthe contract.A
fnlse lepresentation of tacts after the conclusir)r of x contrrct cannr:lt induce a
contracting party to conclude a contract. as it has alread), been concluded.It
starcls 1o reason that r person uho knew that the statcnrcnt rvas false cannot
allege that hc or she was induced b1, thc misrepresenlalion to concludc thc
contriict. Howcvcr. the person to whon] a represcntation is mrde is under no
ohligation to ascei'tain \\,hether the represcntation is tnle or not. The person
tlal' rcly on the misrellresentation !vithout nraking firrther enelr-ririe., eren
where the ascertainlncnt of thc trutir would have been a sirrrple thing to do.
(c) Thc misrcprcsentatior can be made intentionally, negligentl)r. or innocenllr,. .
The degree ol lauh that can be rttributcd to thc mislcadcr deterrrines the
availability of a clain for,:lanages (see paragraph 4..1.2. 1. I belorv.l.
4.4.2.1.1 The eflect of misrepresentation
N4isrepresentation does not exclude consersus between the parties ard the contract
is thcrclbre not void. This means that a \,alid contract ariscs. Misrcpresentation
causcs tlre contract to bc voidable since it is rcgardccl as impropcr to obtairl
conscnsus in this nanncr.
Thc contract is vojdablc at the instance (choicc) of thc dccci\,ed party. lle or
she may eiect to uphold o[ to lescind the coDtmct. If the irrocent party elects to
uphold thc contracl. he or she ma], claim whatcvcr rcmcdy may bc appropriate lbr
the breach of contract (see chrpter I 1). Where the innocenl parly elects l.o rescind
thc contract. the obligations are terminated. resulting in consequences similal to
those discussed under cancellation of contract in chlpter 1 I .
Tlrc innoccnt prrt),who clccts to contin[c \\,ith tl]c contract may claim specilic
pcrformancc or clarnlges. The party who matle the misrepresentation cannot rely
on his or her m isrepresentation ancl forcc thc innoccnt party to rcscind thc contract
or argue that thc innoccnt parl!'ou.sht to haVC rcscindcd the cootracl. The election
lies solelv with the innocent partv. Rescission rnust corsist of words or actions
which rvill give one palty a clear message that the other pafty irtends to r-escind the
contrrct. The date r.ll'terrninal.ion can be of -ereat irnportancc because evcn though
the contract is rcscindcd trb initirt (from the start) it continues in operation until
terminated and either one or both Parties rna1, have acquircd liabilitics unclel the
contract in thc interim pcliotl.
Whcthcr ol not the funher remedv of a claim fcrr dlrrrges is available to thc
cleceived paft), depends on the degree of lault associate-d with a spccilic t1,'pe
ofmisrepresentation, Three torms of nr isreprese ntation can be distinguishcd.
namcly. intcntional nrisrepresenlatioll. ne-cligellt r.[isrepresen {ation. ard innocent
m isrepresentation.
(c) Innocentmisrepresentation
If a false statement is n.rade with the intention of inducing a contract, but the
party who makes the statement is neither fraudulent nol negligent, the statement
is referred to as an 'innocent misrepresentation'. Assume that Fikile, who has
been assured erroneously by an acknowledged afi expert that his painting is e true
Picasso, and sells it as such to Willem. Fikile has taken every reasonable step that
could have been expected of him to verify who the aftist was, and, consequently,
his misstatement of the origin of the painting is neither liaudulent nor negligent.
Since Fikile, the misrepresentor, has no fault, there is no room for the application
of delictual principles. Accordingly, Willem, the deceived party, has no claim for
damages. Willem nevertheless retains his choice of upholding or rescinding the
contract.
4.4.2.2 Duress
Duress is an unlawful threat of harm or injury. made by a party to the contract or
by someone acting on his or her behalf; that causes the other pafiy to conclude
a contract. It is not necessary for the threat to be in the lbrm of expressed words
or actions. Duress can be implied, tacit, or by conduct and may also be by subtle
folms of intimidation.
Consensus
(e) Thc threlt ]nlist causc the threatened pcrson to concluclc thc contract.
Thcrcfore. it rlust bc llle threatened pcrson s lear of thc impending harnt that
per suaclcs him or her to concludc the contrltct or to conclude il on pnl ticulin. tcrrns.
A person ir'ho. clespite thc threat. concluclcs the contritct foL sonte othcl.reason
crurlot cornplain of clnress.
Duress mav also be associated u.ith unequal bargaining po!\er bctween
coirtlacting partics \\here power plar, contlibutes in causilg a $cakel partv to
agrce to unlavouluble terlts intlocluced b1 a party uith rlore Lrar_eirintn-l p,'ucr.
Undcr normal circumstiinccs. a \\'eaker piul\, \vould agrcc to such ternis tbr. lelr-
ol econonric harlr that coultl |esult tlom failure to xccepr the tcrlrs ol'fered hv
a strollger partv. This is callecl economic durcss as it errlnates floln econonic
pfessulc.
4.4.2.3 Undueinfluence
Urduc influcncc is rnt, intpropcr or u1.]fair conclr-rct b1 one of tlle contractil)-q
partics by rrreatls 01 ,,r,hich the other contracting partr is persuadcrl to colclucle a
contract \\.ith the formcr. contr'lr\ 10 the latter's inclcpendent uiil.l'he influcnce
rnust \,' eakcn thc other pal tv's llo\,! el ol resistance and rrake h is or hcr l ill pliabJc.
l,Indue inflr-rence is not alwul,s easiJl, distinguishable tl'orn intentional
lnisrepresertation o| fiorn durcss. A court will be nrore r-ead ilY clisposcd to lind thrrt
tundue influcncc has bccir cxclciscd r'l'hele there is a rpccial rclationship bet\\,een
thc partics. Such a special relationship is onc u,hich exists. lix exrnrple. bet\\,cct'l
doclor and patiert. attonev and client. ancl guarclian and rninor. If such a speciiil
lelationsh ip exists. it is lelatively eas) tbr thc 'strolger' parly to abu \e tltc silualior].
This mal tiikc placc. lbr exrmple. tlrrough the abusc ol the other ptfty's ignorance
or llck of experience. physical fi'ailly. inlellectual u,elkness or nental dcpcndence
on the 'stronger' par-ty. Bl taking advantase of the spccjal rclationshill. the othcr's
will is macle pJiable so that hc or shc is influenceii 1o conclude a contract lhat
would otheru,ise not ha\,c becn concluded.
If a partl, is per-suadcd tllfougl] undue infiuence to conclude a contt'act. llis
or hel \\'ill is clilected iit the contents of the contract and a conlracl tloes indcccl
corne into existence. HoueYer. the party s asscltt lo lhe contract hts been obtaincd
inproperlt so that his or hcr indcpcncicnt rvill uls ltot exercised. ConsequcntJr.
lhc victirr rrav elect to uphold or Iescind the contract andror cl:iim damages ba:ecl
on his or lrcr nc-gativc interest. that is. to be plxced in the positior he or shc u,oukl
havc bccn in hacl thc influcnce not been exerted (see the discussiotr on thc ctlect ol'
misreprcscntation abovc: see also para-nraph l l .:l. l belou, ). The elenrents of unduc
infl uence ale the tbilorl,ing:
(a) The partr rvho has allcgcdiv exercised the undLre influence rrust have acquircd
Jn inllLrel)(( oret the rittittt.
(b) That party nust have used his or her influcnce to $ etken the victim's abilitv
io resist. so lhat the f ictim's will bccarnc susceptible.
Consenstts 11
(c) The inllirence mnst ha\,c bccn uscd unscrupulously to persuacle the Yictitr to
corseut to a triinsaclion thc Yictim u'oulcl not hrve eirtered into of his or hcr
nolrral flee $ ill and ivhich wils to the Victim's .lisadvantage.
An cxample o1'undue influence is if Kgomotso. an cldcrlv farmcr who is ailing and
lt,eak. is indLrcccl bY Mi Lrsi. his doctor, to donirtc a farm to N,Ivusi.
FURTHER BEADING
Africu] ed (20I6).
RH Chr-istic & GB Bradlield Chrlsrir',; l-utr of Cuttrut t in .\rturh
LF virn lluyssteen. MFB Reinecke & GF Lubbc Conltu('t: Gerterul Princ'iples
5 cd (20l6).