The

Law of Contract
in
South Africa

FIFTH EDITION

by

RH CHRISTIE
QC MA LLB (Cantab) FCIArb FAArb
President, Association of Arbitrators (Southern Africa)
Honorary Professorial Research Associate, University of Cape Town

assisted by

VICTORIA MCFARLANE
BA (Hons) LLB (Cape Town)

LexisNexis Butterworths
Durban
 CONTENTS

Page
Preface to the Fifth Edition v

Chapter 1
Historical Introduction 1
The Roman concept of contract 3
The Roman-Dutch concept of contract 6
The modern South African concept of contract 8
Current problems 12
Unfair contracts 12
Unfairness in the making of a contract 13
Unfair contracts and contract terms 14
Unfair enforcement of a contract 15
The way forward 16
Effect of the Constitution 18

Chapter 2
Agreement 21
Proof of agreement 21
Two or more parties 21
True agreement 22
Quasi-mutual assent 24
The technique of ascertaining agreement 28
Time and place of contracting 28
Offer 29
Animus contrahendi (intention to contract) 29
Offer unequivocal 32
Preliminary negotiations 32
(a) Invitations to treat, offers to negotiate, offers to chaffer 33
(b) Requests for an offer 33
(c) Statements of information 34
(d) Statements of intention 34
(e) Proposals for partial, incomplete or provisional agreement 35
(f) Enforceable agreements to contract (pacta de contrahendo) 37
(g) Agreements to negotiate 38
Advertisements, circulars, catalogues, price tickets 39
Calling for tenders 42
Auctions 44
Communication of offer 47

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Termination of offer 47
(a) Effluxion of fixed time 47
(b) Lapse of reasonable time 48
(c) Death 48
(d) Loss of contractual capacity 49
(e) Rejection 49
(f) Counter-offer 49
(g) Battle of the forms 50
(h) Withdrawal or revocation 51
(i) Irrevocable offers 52
Options and rights of pre-emption 53
Acceptance 57
Necessity for acceptance 57
Who may accept 58
Knowledge of offer 60
Acceptance unequivocal 60
Acceptance must correspond with offer 62
Method of acceptance 64
Silence as acceptance 65
Communication of acceptance 68
Contracts made by post 70
Telegrams 75
Telephone, telex, fax, e-mail etc 77
Contracts without offer and acceptance 79
Tacit contracts 81
(a) Tacit offer 81
(b) Tacit acceptance 82
(c) Tacit contracts 82
Offer and acceptance without contract 90
Lack of animus contrahendi (intention to contract) 90
Agreements which cannot in law be contracts 92
Agreements which the courts are unable to enforce 93
Initial impossibility 93
Contracts void for vagueness 95
(a) Vagueness determinable by evidence or by interpretation of the contract 96
(b) Unlimited option reserved to the promisor 99
(c) Vague and uncertain language 102

Chapter 3
Formalities 105
Formalities decided on by the parties 105
Formalities required by law 109
Alienation of land Ill
(a) General object Ill
(b) Alienation 112
(c) Land 112
(d) Signature 114
(e) Signature by agents 116
(f) Contents of the written contract 117
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(g) Description of the land 119
(h) Identity of the parties 121
(i) Price 122
(j) Effect of non-compliance 122
Executory donations 123
Contracts of suretyship 124
Credit agreements 128
Miscellaneous contracts 128
Notarial execution 129
Registration 129
Marriage 129

Chapter 4
Conditional Contracts 131
What is a condition 131
Promise dependent upon past or present fact 132
Modal clauses (modus) 133
Time clauses (dies) 133
Terms of the contract 134
Conditions destructive of the contract 138
Conditions precedent and resolutive conditions 139
The onus of proof 140
Pending fulfilment of the condition 141
Condition precedent 141
Resolutive condition 142
Fulfilment and non-fulfilment of conditions 142
What amounts to fulfilment 142
Time for fulfilment 144
Resolution of uncertainty by other events 144
The effects of fulfilment and non-fulfilment 145
Fictional fulfilment and non-fulfilment 147

Chapter 5
The Terms of the Contract 153
Ascertaining the terms 153
Proof 153
Distinction between terms and other statements 155
Implied and tacit terms 158
Terms implied by law 159
Terms implied by trade usage 161
Tacit terms, or terms implied from the facts 167
Written terms 174
Signed documents - caveat subscriptor 174
Unsigned documents - the "ticket cases" 179
Exemption clauses 183
(a) Permissible limits of exemption clauses 184
(b) Narrow interpretation of exemption clauses 188
(c) Legislation to control exemption clauses 191
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Interpretation 1"^
The parol evidence or integration rule 192
Extrinsic evidence in aid of interpretation 204
The technique of interpretation 205
(a) Grammatical and ordinary meaning 206
(b) The context within the contract 210
(c) The wider context, background evidence 212
(d) Extrinsic evidence of surrounding circumstances 215
Rules of interpretation 219
(a) Equitable interpretation 219
(b) Avoidance of inconvenience 219
(c) Ut res magis valeat quampereat 220
(d) Presumption against tautology or superfluity 220
(e) Change of language 221
(f) Eiusdem generis, noscitur a sodis 221
(g) Generalia specialibus non derogant 223
(h) Expressio unius est exclusio alterius 223
(i) Construction contra proferentem or contra stipulatorem 224

Chapter 6
Parties to the Contract 227
Contractual capacity 227
The State 227
Corporations 228
Married women 229
Minors 232
(a) General contractual incapacity 232
(b) Statutory exceptions 233
(c) Guardian's assistance 233
(d) Nature of minor's unassisted contract 235
(e) Entirely beneficial contract 236
(f) Liability based on enrichment 237
(g) Fraudulent representation of capacity 239
(h) Ratification after majority 243
(i) Tacit emancipation 244
Insane persons 247
Intoxicated persons 249
Insolvents 250
Prodigals 251
Plurality of parties 252
Co-debtors 253
(a) Joint liability 253
(b) Joint and several liability 255
(c) Several liability 257
Co-creditors 257
(a) Joint entitlement 257
(b) Joint and several entidement 259
(c) Several entitlement 260
Privity of contract 260
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Contracts for the benefit of a third party 261
Development of the contract for the benefit of a third party 261
Requirements for enforceability 263

Chapter 7
Misrepresentation and Fraud 271
By whom the misrepresentation is made 271
What is a misrepresentation 273
Misrepresentation by silence 276
The misrepresentation must be material 280
The intent with which the misrepresentation is made 282
The misrepresentation must induce the contract 284
The innocent party's right to rescind 286
What amounts to fraud 293
Damages for fraudulent misrepresentation 295
Damages for negligent misrepresentation 299

Chapter 8
Duress and Undue Influence 301
Duress 301
The reasonableness of the fear 302
The objects of the threat 303
The imminence of the threat 306
The threat must be unlawful or contra bonos mores 306
The threat must have caused damage 308
Duress by a third party 308
The effect of duress 309
Undue influence 309

Chapter 9
Mistake 313
Unilateral mistake 314
When no knowledge imputable to the other party 315
When knowledge imputable to the other party 318
Unilateral mistake caused by the other party 319
Mutual mistake 322
Common mistake 325
Rectification 329

Chapter 10
Illegality and Unenforceability 337
Statutory illegality and unenforceability 337
Common law illegality and unenforceability 343
Contracts injurious to the State 349
(a) Trading with the enemy 349
(b) Contracts tending to injure the public service 350
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Contracts injurious to the administration of justice 350
(a) Ousting the jurisdiction of the courts 350
(b) Collusion 352
(c) Pacta de quota litis, champerty and maintenance 353
(d) Contracts for excessive attorney's fees 354
(e) Contracts for excessive witness expenses 355
Contracts encouraging crime, delict and other unlawful acts 356
Contracts injurious to the institution of marriage 358
Pacta successoria 359
Restraint of trade 361
(a) The basis of the doctrine 362
(b) What is a contract in restraint of trade 363
(c) The burden of proof 365
(d) The time at which reasonableness is to be tested 365
(e) Severability and restriction 366
(f) Equal and unequal bargaining strength 368
(g) The nature of the restraint 369
(h) Restraints on ex-employees 371
(i) The area and time of the restraint 376
Gambling 377
Miscellaneous contracts 381
Illegality of purpose 383
The effects of illegality 386
Severability - special applications 386
Severability in general 388
Unenforceability 391
Collateral and connected transactions 394
Recovery of money or property 396
(a) Contract void for lack of formality or merely unenforceable 396
(b) Contract illegal because prohibited 397

Chapter 11
Performance 403
Effect of performance 403
Tender of performance 403
By whom performance may be made 406
To whom performance may be made 407
Performance infoitna specifica or per aequipollens 411
Payment of money 412
Guarantee of payment 414
Payment by cheque 415
Payment by bank transfer 418
Payment by credit card 419
Payment by instalments 419
Reciprocal obligations and the exceptio non adimpleti contractus 421
Incomplete performance 424
Quantum meruit 426
Appropriation of payments 427
Time of performance 431
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Place of performance 431
Proof of payment 432

Chapter 12
Variation and Discharge 435
By act of the parties 435
Termination by notice 435
Variation and discharge by agreement- the nature of waiver 437
The requisites of waiver 441
The consequences of discharge by agreement 446
Limitations on variation and discharge by agreement 447
Non-variation clauses 447
Novation 449
Compulsory novation 454
Compromise 455
Delegation 462
Cession 463
Combined cession and delegation 471
Variation and discharge by operation of law 472
Supervening impossibility 472
Set-off (compensatio) 475
Merger (confusio) 481
Prescription 482
Insolvency, liquidation 492
Death 493

Chapter 13
Mora and Breach 495
Mora and breach generally 495
Breach of contract and delict 497
Mora 497
The concept of mora 497
Mora ex lege 498
Mora ex re 498
Mora ex persona 503
Consequences of mora 505
(a) Where the contract contains a forfeiture clause 505
(b) Where the debtor's non-performance amounts to repudiation 506
(c) Where time is of the essence 506
(d) Where time is not of the essence 507
(e) Damages 508
(0 Interest 509
Mora creditoris 511
Breach 513
Forfeiture clauses 513
Material breach of an essential term 513
Anticipatory breach and repudiation 516
Instalment contracts 518
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Chapter 14
Remedies for Breach 521
Specific performance 522
Definition 522
Plaintiffs entitlement to specific performance 523
When specific performance will not be granted 524
(a) Impossibility 525
(b) Undue hardship 526
(c) Contracts for personal services 528
(d) Imprecise obligations 529
Specific performance and damages 530
Miscellaneous points on specific performance 531
Interdict 532
Interdict as a form of specific performance 532
Interdict to protect other rights 534
Declaration of rights 537
Cancellation 538
Damages 542
Causation 542
The nature of damages for breach 543
Remoteness - general damages 550
Special damages 551
Mitigation of damages 553
The collateral benefit principle 554
The once and for all rule 555
When damages to be calculated 556
Plaintiff must not be over-compensated 557
Apportionment of damages 558
Damages in particular cases 559
The Conventional Penalties Act 560
Bibliographical Abbreviations 565
Table of Cases 573
Index 663