LCN 301

Consultation session 1
Requirements for a valid contract
What is a contract?

• An agreement entered into by two or more persons with the intention of creating a legal
obligation or obligations.

• Animus contrahendi - A serious intention to create legally enforceable obligations by contract;

Differs from a gentleman’s agreement

• Void contract: No obligations, there is no contract

• Voidable contract: there is a contract, but in a way defective, so the contract can be voided.
REQUIREMENTS FOR A VALID CONTRACT: Consensus

• minds of the parties must meet on all material aspects of their agreement.
• South African Law: approach is fundamentally subjective, though tempered by objective
considerations in cases of dissensus. Consensus and reasonable reliance.
• Primary basis is consensus (will theory) conclusion, than enquiry end.
• Not – go on with reasonable reliance theory – ask whether either party by their words or conduct led
the other party into the reasonable belief that consensus had been reached

Aspect influencing consensus:

• Mistake: material and non-material mistake
• Improperly obtained consensus: misrepresentation, duress, undue influence
REQUIREMENTS FOR A VALID CONTRACT: Capacity

• must have necessary capacity to contract

• Competence to create rights and duties by concluding a contract.
• Persons with limited capacity: minors, married persons, insolvent persons, prodigals
• Go and study the difference between legal capacity and contractual capacity.
• Legal capacity:
• All persons, natural and juristic have legal capacity.
• Can be the bearers of rights and duties. Not dependant on age.
•
• Contractual capacity:
• Competence to create rights and duties by concluding a contract with another person.
• Natural persons
- Persons without contractual capacity, e.g., infans and mental health deficiencies, intoxicated
- Persons with limited contractual capacity, e.g., minors – require consent and assistance of their guardians.
• Married persons
• Juristic persons: companies, close corporations, statutory entities – endowed with separate legal personality by operation of
statute, are represented by authorised natural persons.
• State
REQUIREMENTS FOR A VALID CONTRACT: Formalities

• where required e.g. in certain form like writing and signed, must be observed
Formalities required by law:
• Alienation of Land, Suretyship, donation, antenuptial contracts, long leases of land. (In writing, signed
and registered)

• Formalities in electronic contracts

• formalities stipulated by parties

- Creation of contract
- Non-variation clause (Shifren-principle)
- Non-cancellation clause
- Non-waiver clause
REQUIREMENTS FOR A VALID CONTRACT: Legality

• must be lawful and not prohibited by law

• Illegal contracts: contracts against good morals, statutory illegality, Pacta de quota litis, champerty
and maintenance, unfair contracts, unfair enforcement of a contract

An illegal contract can’t be enforced as one of the requirements for a contract (legality) is not present.
An illegal contract creates no obligations.
• Neither party can institute action for performance or claim damages because from an illegal cause
no action arises (ex turpi rule)
• Performance by one or both parties does not make the contract legal
• Where both parties are guilty, the par delictum rule applies that the possessor is in the strong position
and restitution cannot be claimed
REQUIREMENTS FOR A VALID CONTRACT: Possibility

• obligations undertaken must be capable of performance when the agreement is entered into
• General rule: impossibility of performance prevents the creation of obligations, or impossibilium nulla
obligatio est

• Subjective and objective impossibility, factual and practical impossibility, legal impossibility

• Initial impossibility: contract not possible at time of concluding the contract

• Supervening impossibility: performance becomes impossible after the contract has been concluded
• Performance made impossible: fault by one party – breach of contract
REQUIREMENTS FOR A VALID CONTRACT: Certainty

• must have definite or determinable content, obligations can be ascertained and enforced
• Vague language and gaps,