LCN301

LAW OF CONTRACT
STUDY GUIDE
Compiled by: Advocate Charl van Eetveldt and Advocate Henry-Willem van Eetveldt

Developed and produced by Southern Business School.

No part of this publication may be reproduced in any manner or
form or published without the prior written permission from the
publisher.
Copyright material is utilised under the provisions of the Copyright
Act, 98 of 1978, read together with the Copyright Regulations of
1978, promulgated thereunder. Readings indicated in this work
have been copied by Southern Business School for private study by
students only, under the exceptions granted by the Act.

 2018 Southern Business School

To be revised 2021
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Plot 10, R28 Service Road, Diswilmar, Krugersdorp
Phone: +27 (0) 11 662 1444
Fax: +27 (0) 11 662 1462
Email: info@sbs.ac.za
Web: http://sbs.ac.za
 LCN301 LAW OF CONTRACT

TABLE OF CONTENTS

WELCOME TO STUDENTS 4
LEARNING OUTCOMES – GENERAL 4
PRESCRIBED TEXTBOOK 6
FACILITATOR OF LEARNING 8
ICONS 8
SABINET AND EBSCO 9
Assignment 11

STUDY UNIT 1 1
WHAT IS A CONTRACT? 1
LEARNING OUTCOMES 1
READING 1
1.1 INTRODUCTION 1
1.2 ACTIVITIES 2
1.3 SELF-ASSESSMENT EXERCISES 3

STUDY UNIT 2 4
HOW TO MAKE A CONTRACT 4
LEARNING OUTCOMES 4
READING 4
2.1 INTRODUCTION 5
2.2 ACTIVITY 5
2.3 SELF-ASSESSMENT EXERCISES 6

STUDY UNIT 3 7
WHEN WILL A CONTRACT BE VALID AND BINDING? 7
LEARNING OUTCOMES 7
READING 7
3.1 INTRODUCTION 7
3.2 ACTIVITY 8
3.3 SELF-ASSESSMENT EXERCISES 9

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 LCN301 LAW OF CONTRACT

STUDY UNIT 4 10
PARTIES TO, AND CONTENT OF, CONTRACTS 10
LEARNING OUTCOMES 10
READING 10
4.1 INTRODUCTION 10
4.2 ACTIVITY 11
4.3 SELF-ASSESSMENT EXERCISES 11

STUDY UNIT 5 10
PARTIES TO, AND CONTENT OF, CONTRACTS 10
LEARNING OUTCOMES 10
READING 10
4.1 INTRODUCTION 10
4.2 ACTIVITY 11
4.3 SELF-ASSESSMENT EXERCISES 11

STUDY UNIT 6 14
REMEDIES FOR BREACH OF CONTRACT 14
LEARNING OUTCOMES 14
READING 14
6.1 INTRODUCTION 14
6.2 ACTIVITY 15
6.3 SELF-ASSESSMENT EXERCISES 15

STUDY UNIT 7 17
INTERPRETATION OF CONTRACTS 17
LEARNING OUTCOMES 17
READING 17
7.1 INTRODUCTION 17
7.2 ACTIVITY 18
7.3 SELF-ASSESSMENT EXERCISES 18

STUDY UNIT 8 19
DRAFTING CONTRACTS 19
LEARNING OUTCOMES 19
READING 19
8.1 INTRODUCTION 19
8.2 ACTIVITY 19
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 LCN301 LAW OF CONTRACT

STUDY UNIT 9 21
THE CONSUMER PROTECTION ACT 68 OF 2008 21
LEARNING OUTCOMES 21
READING 21
9.1 INTRODUCTION 21
9.2 ACTIVITY 22
9.3 SELF-ASSESSMENT EXERCISES 22
LIST OF REFERENCES 31

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 LCN301 LAW OF CONTRACT

WELCOME TO STUDENTS
Welcome to Law of Contract (LCN301)!
We trust that you will enjoy the exciting issues and challenges you will be facing. We look
forward to accompanying you on this meaningful and positive learning journey. We are,
however, even more interested in the impact that you will make once you have mastered this
subject.

LEARNING OUTCOMES – GENERAL

After studying this study guide, you should be able to:

 Explain the difference between a contract and an agreement.
 Explain the concept of an obligation.
 Know the cornerstones of a contract.
 Explain the impact of the Constitution of the Republic of South Africa on the law of contract.
 Be able to define the purpose of contract law.
 Understand the concept of consensus.
 Explain the requirements for a valid offer and a valid acceptance.
 Appreciate the impact of the Consumer Protection Act 68 of 2008 on a legally binding offer
and acceptance.
 Explain the information theory, and its exceptions, in broad terms.
 Understand how a contract could be formed in the absence of actual consensus between
the parties.
 Comprehend the effect of duress and undue influence on contractual liability
 Explain under which circumstances the law requires a contract to comply with formalities.
 Understand the type of formalities that the law imposes.
 Understand the legal consequences of formalities imposed upon a contract by the parties
themselves.
 Discuss when a contract will be illegal and the consequences that such illegality may
engender.
 Comprehend the import of “possibility” and “certainty” on the law of contract.
 Distinguish between simple joint, and joint and several, liability or entitlement.
 Understand the principle of privity of contract.
 Comprehend the basic principles of agency
 Distinguish between essentialia, naturalia, and incidentalia
 Discuss conditions and their effect on a contract.
 Understand pacta de contrahendo (contracts about contracting) in broad terms, including
the distinction between options and preference contracts.

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 LCN301 LAW OF CONTRACT

 Identify the different forms of breach of contract.

 Distinguish between the different forms of breach of contract.
 Explain the requirements of each form of breach of contract.
 Identify the different three main types of remedies for breach of contract.
 Explain the remedies of exeptio non adimpleti contractus and specific performance.
 Explain the requirements for cancellation of a contract.
 Understand the idea of damages in the context of the law of contract and distinguish this
idea from damages in the law of delict.
 Cogently interpret a contract.
 Discuss the current state of the law regulating the interpretation of contracts, in particular:
 the parol evidence rule;
 rectification; and
 the interpretation of exemption clauses.
 Competently draft a basic contract after completing this study unit.
 to explain the purpose and policy of the Consumer Protection Act 68 of 2008 (“the Act”);
 to identify the transactions to which the Act applies;
 to describe the fundamental consumer rights created by the Act; and, in particular,
 to explain what the following rights entail:
 a consumer’s right to expiry and renewal of fixed-term agreements;
 consumer’s right to return goods;
 the right to information in plain and understandable language; and
 the right not to be subject to bait marketing.

PRESCRIBED TEXTBOOK

The prescribed textbook for Law of Contract (LCN301) is:

 Hutchison D, & Pretorius, C. 2012. The Law of Contract in South Africa. 2nd ed. Oxford
University Press.
[ISBN: 978-0-19-905511-1]

Important – please note:

 Prescribed Textbooks – Southern Business School is not a supplier of prescribed

textbooks. Students must obtain their own prescribed textbooks, as Southern
Business School cannot buy textbooks on behalf of students.
Please note, prescribed textbooks cannot be borrowed from the library.

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 Availability of Textbooks

AVAILABILITY OF TEXTBOOKS

Textbooks are available at most of the major bookshops.

We urge learners to buy the prescribed textbook, as you will not be able to
prepare for the examination properly or complete assignments without
having studied it thoroughly. Obtaining the prescribed textbook is the
responsibility of the student.

Herewith contact details of major bookshops:

Bookshops Tel Fax Email

ACADEDMIKS BOOKSTORE

+27 (0) 12 803 1534

Pretoria Email: anne@academiks.co.za
+27 (0) 84 598 9293

ARMSTRONG’S SECOND HAND AND NEW BOOKS

Linden +27 (0) 11 888 6129 Email: info@armstrongs.co.za

VAN SCHAIK BOOKSTORE

Hatfield +27 (0) 12 362 5701 Email: portia.ndlazi@vanschaik.com

Namibia +264 61 2063364 Email: Thembinkosi.ndlovu@vanschaik.com

LIBRARIUM BOOKS

Parkwood -
+27 (0) 11 880 3843 +27 (0) 11 442 7910 picsie@mweb.co.za
Rosebank

BOOKDEN

Windhoek +264 61 239976 elmarie@bookden.com.na

ELECTRONIC ORDERING OPTIONS

https:/juta.co.za

http://www.takealot.com

http://www.loot.co.za/

SECOND-HAND BOOK OPTIONS

https://groups.google.com/a/sbs.ac.za/forum/?hl=en#!forum/secondhandtextbooks
or
Navigate to Groups. Search for "Second Hand Textbooks". Join Group.
Follow posting instructions on the group.
(You must be logged into MySBS to access this feature)

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LCN301 LAW OF CONTRACT

FACILITATOR OF LEARNING

Lecturer/Facilitator of Learning Mr C Swart

Consultation times Tuesdays and Thursdays, 08:00–16:00
Telephone 011 662 1444 or 082 337 9905
Email cswart@sbs.ac.za

You may contact your Lecturer/Facilitator of Learning should you have questions or
experience problems with the subject.

The cluster manager for this subject is Mr C Swart (email: jsmit@sbs.ac.za).

ICONS

Specific icons have been used throughout the study guide to enhance its user-friendliness.
These icons and their meaning are listed below:

Important information. Pay attention to this important

information!

Learning outcomes. This is what you need to know or should be

able to do after completing a section of work in the study guide.

Recommended reading. You have to study this information

before continuing with the rest of the study guide.

Self-assessment activities. You have to apply a management

task to test your insight in and practical application of the subject
matter.

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 LCN301 LAW OF CONTRACT

SABINET AND EBSCO

Valuable information can be obtained from Sabinet e-journals and EBSCO e-journals and e-
books.

To access Sabinet and EBSCO

1. Go to the Southern Business School web page (www.sbs.ac.za).
2. Click on Students Quick Links (at the top of the page to the right).
3. Select the Online Resources icon.
4. That will take you to a landing page, where you will have to sign in with your MySBS
account (your user name is your studentnumber@sbs.ac.za as the user name and your
ID number as the password), unless you have a private Gmail account, then you will select
“Sign in with another account”.
a. Alternatively, you can navigate to your Student Group by clicking on the (3×3)
square Google Apps icon at the top right of your inbox and selecting Groups > My
Groups > Students.
b. If you are already logged in to your SBS email, simply search your mail for “Online
Resources” to access the resources.
5. Once your MySBS account is authenticated, you will be taken to the SBS online Journals
Catalogue web page, which will give you the list of available resources, such as Sabinet
and EBSCOhost.
6. Below each of the links, there will be a user name and password that you will need
to use to access that specific resource.
7. Click on the link and enter the supplied user name and password to access the specific
source.

Please note that the only journals available from Sabinet are journals published in South Africa.

Please contact the Southern Business School library if you experience any further difficulties
at library@sbs.ac.za.

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 TUTORIAL LETTER 01

ASSIGNMENT 01

SEMESTER 2nd Semester 2018

SUBJECT LAW OF CONTRACT
SUBJECT CODE LCN301
DUE DATE 25 SEPTEMBER 2018

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LCN301 LAW OF CONTRACT

IMPORTANT INFORMATION!
 This assignment is compulsory. Handwritten assignments will not be accepted. This
assignment must be typed and submitted in MS Word format, 12 pt Arial font and
1,5 line spacing.

 It is the responsibility of the students to ensure that their assignments reach Southern
Business School on time. Southern Business School accepts no responsibility for
assignments being lost or destroyed during the submission process.

 Assignments must be posted or hand delivered or sent by courier to Southern

Business School. This assignment may NOT be submitted by email or fax. Keep
a copy of your assignment for your own records.
i. Mail
When students mail (post) their assignments it should be addressed to:
 ASSIGNMENTS, Southern Business School, Private Bag X03,
Helderkruin, 1733
OR
 ASSIGNMENTS, Southern Business School Namibia, Private Bag
13026, Windhoek, Namibia
Students must mail or courier their assignments in time to reach Southern
Business School on or before the due date of the assignment. The due dates
are indicated in the study guides and must be strictly adhered to.
ii. Personal Delivery
Personal deliveries can be made to:
 Southern Business School, Plot 10, R28 Service Road, Diswilmar,
Krugersdorp
OR
 Southern Business School NAMIBIA, 24 Wagner Street, Windhoek-
West, Namibia
iii. Courier Delivery Services
Deliveries by courier can be made to Southern Business School - Refer to par. (ii)
Personal Delivery. Please ensure that you indicate the delivery to be COUNTER
TO DOOR.

 Please note the due date. Assignments must be submitted before or on the due
date. This means that students must post their assignments to reach Southern
Business School on time. Assignments that reach Southern Business School
after the due date will not be assessed, but will be returned to the student.

 IMPORTANT! Please contact Southern Business School in due time to make

sure that your assignment was indeed received as it is your responsibility as
a student to confirm this.

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LCN301 LAW OF CONTRACT

 All assignments MUST HAVE an ASSIGNMENT COVER PAGE. This was sent to
you with your study material or it can be downloaded from (MySBS). This must
be used as the cover page (front page) of the assignment you submit. Remember
to complete the assignment cover page. If your RETURN ADDRESS is not
indicated on the cover page, you will not receive your assessed assignment.

 How to access MySBS : Go to http://mail.sbs.ac.za or http://mail.google.com.

Access your MySBS-account and log in. If you have an existing Gmail account, you
can simply select “Add Account” to log into both accounts simultaneously.
To log in: Default username = StudentNumber@sbs.ac.za & Default password =
Student’s ID Number.

 For additional reading or if a question refers to Sabinet or EBSCO, please go to the

Student Group on MySBS under the heading Online Resources and follow the
guidelines. Alternatively, visit the Southern Business School website and select the
Online Resources icon, which can be found under Student Quick Links at the top
right of the page.

 Southern Business School reserves the right in terms of its Plagiarism Policy to
subject all assignments to a similarity detection program to verify the validity of a
student’s work. To safeguard yourself against plagiarism, download the Plagiarism
Detection Program free of charge from the link on MySBS in the Student Group. If
an assessor discovers that a student has used but failed to acknowledge another
source in his/her assignment, the assessor may disregard the question and allocate
a mark of zero.

 Copying from Tutorial Letter 03, previous Tutorial Letters (containing the
model answers to assignment questions) or another student’s work is not
allowed. If an assessor discovers that the student has copied directly from another
student’s work (from the same programme or a previous programme), or
commissioned another person to complete his/her assignment, the matter will be
referred to the Examination Committee and disciplinary action will be taken. Students
who study in groups and then submit identical assignments will forfeit the marks for
such assignments/questions.

 For more information on the technical requirements of an Essay, List of References

and source referencing in the text, consult your Tutorial Letter 02 (General Tutorial
Letter). Marks will be deducted for non-compliance.

Please take note:

No answer may exceed two (2) pages. The reason for this is that you must learn to write
concisely and come straight to the point, and not wander off the track. Therefore you
need to have good insight, and insight occurs only when you have studied your topic
thoroughly. Five marks will be deducted per answer if your answers exceed the two
pages.

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LCN301 LAW OF CONTRACT

Question 1 [20]
In an essay discuss what you understand under the legal term “animus contrahendi”. In
your answer refer to examples.

Question 2 [20]
Your friend wants to purchase land. He informs you that he and the purchaser entered
into an oral agreement regarding the purchase of a portion of land. He also paid a
deposit of R10 000-00 to the purchaser. Write an essay on the advice which you will
give to your friend.

Question 3 [20]
You are a lecturer in law of contract. Prepare a power point presentation to teach your
students about remedies aimed at keeping a contract alive. Your presentation can consist
of 5 slides maximum.

Question 4 [20]
Read the article “Contract, constitution and confusion: the case of Brisley v Drotsky”,
written by Irma Kroeze (2006) on Sabinet – and discuss what lessons you have learned
from studying this article.

Question 5 [20]
You are invited by De Rebus to write an article on the Consumer protection Act of 2008.
You have only two pages in which to discuss the act. Write the article to give an overview
of the topic.

TOTAL: [100]

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 STUDY UNIT 1
WHAT IS A C ONTRACT?

STUDY UNIT 1

WHAT IS A CONTRACT?

LEARNING OUTCOMES
After completing this study unit, you should be able to:

 Explain the difference between a contract and an agreement.

 Explain the concept of an obligation.

 Know the cornerstones of a contract.

 Explain the impact of the Constitution of the Republic of South Africa on

the law of contract.
 Be able to define the purpose of contract law

READING
Before continuing with this study unit please read the following:
• Chapter 1: The Law of Contract in South Africa, Oxford University
Press 2nd Edition.
• Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd
2012 (1) SA 256 (CC) - and in particular the minority judgment.
• Barkhuizen v Napier 2007 (5) SA 323 (CC) and in particular
paragraphs 57 and 87
• Botha v Rich 2014 (4) SA 124 (CC) and in particular paragraphs 42-
46 and 49-51

1.1 INTRODUCTION

In this study unit, we deal with the law of contract in general against the
backdrop of its role in the South African legal system and especially in
commerce.
We will touch on the history and development of the law of contract. While
it is important to understand the origins of the law of contract, it is arguably
even more important to understand certain fundamental concepts that lie
at the heart of this subject. To that end, this study unit introduces the
concept of a “contract” and explains how this concept differs from the
concepts of an “agreement” and an “obligation”.

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 STUDY UNIT 1
WHAT IS A C ONTRACT?

These concepts may be confusing and counterintuitive. For that reason, it

is important that you study Chapter 1 and understand the concepts set out
therein before considering subsequent study units.
We will also pay particular attention to the impact of the Constitution on the
law of contract and in particular the roles that good faith and Ubuntu play in
the continual development of this field of law. We will also consider a
fundamental tension in the development of the law of contract, being the
tension between freedom of contract, on the one hand, and reasonableness
and fairness, on the other.
Please read the three cases referred to above carefully as they will provide
you with some background relating to the importance of the law of contract
(Barkhuizen) and the role of good faith and Ubuntu in the law of contract
(Shoprite Checkers). When you read the cases, try to identify which
conflicting principles the Court had to balance in order to reach its decision.

1.2 ACTIVITIES

Three friends agree to watch a soccer game at the house of friend A.

Friends B and C agree to bring pizza and cooldrink to serve as
refreshments whilst friend A agrees to make available his house and TV
set.
1.2.1. Explain shortly whether the different agreements referred to above
constitute legally binding contracts and motive your answer.
1.2.2. In your own words set out the aims of the law of contract.
1.2.3. For the next week, keep note of all the contracts that you conclude
and with whom you conclude them.
1.2.4. You are an attorney. You client, Mr Confused, approaches you for
advice. Mr Confused has just read the judgment of the Western
Cape Division of the High Court in Beadica 231 CC v Trustees for
the time being of the Oregon Trust and Others 2018 (1) SA 549
(WCC). As Mr Confused is a francisor who conducts business
exclusively in the Western Cape, he is concerned about the impact
of this judgment on his business. In no more than 500 words, write
an opinion for Mr Confused in which you:
1.2.4.1. Explain the facts underlying the dispute, the judgment’s
ratio and its outcome;
1.2.4.2. Explain the possible impact of the judgment on Mr
Confused’s business;
1.2.4.3. Opine whether the judgment is likely to be overruled,
should it be taken on appeal to the Supreme Court of
Appeal.

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 STUDY UNIT 1
WHAT IS A C ONTRACT?

1.3 SELF-ASSESSMENT EXERCISES

1.3.1. In your opinion, should good faith play a decisive role in contract?
Motivate your answer with reference to case law.
1.3.2. Explain the principle of "freedom of contract".
1.3.3. Furnish a few examples of legally binding agreements that are
not considered to be contracts.
1.3.4. Set out the six basic requirements for a valid contract.
1.3.5. Discuss how the principle of Ubuntu can be infused into the law
of contract with reference to case law.
1.3.6. What is an “obligation”? Are all obligations contracts? Explain
your answer.
1.3.7. List at least four sources of the law of contract. Which source is
most important, and why?
1.3.8. What does it mean when a court “develops” the common law of
contract? Where does a court find the power to do so?
1.3.9. Given an example of contracting parties that do not have equal
“bargaining power”. Explain the relevance of this fact for the legal
relationship between them.
1.3.10. The law of contract is traditionally seen as a subject within private
law. Private law is generally concerned with the legal
relationships between persons (both natural and juristic), while
public law is generally concerned with the relationship between
such persons and the state. Bearing this distinction in mind, do
you think that the State concludes contracts? If so, what is the
effect of section 217 of the Constitution on the conclusion of such
contracts?

3
 STUDY UNIT 2
HOW TO MAKE A CONTRACT

STUDY UNIT 2

HOW TO MAKE A CONTRACT

LEARNING OUTCOMES
After completing this study unit, you should be able to:

 Understand the concept of consensus.

 Explain the requirements for a valid offer and a valid acceptance.

 Appreciate the impact of the Consumer Protection Act 68 of 2008 on a

legally binding offer and acceptance.

 Explain the information theory, and its exceptions, in broad terms.

 Understand how a contract could be formed in the absence of actual

consensus between the parties.
 Comprehend the effect of duress and undue influence on contractual
liability.

READING
Before continuing with week 1 of this study unit please read the following:
• The Law of Contract in South Africa Oxford University Press 2nd
Edition (2012), chapter 2, pages 47-60.
• The Law of Contract in South Africa Oxford University Press 2nd
Edition (2012), chapter 2, pages 81-108.
• Du Toit v Atkinson’s Motor Bpk 1985 (2) SA 893 (A) (for guidance,
read together with pages 101-102 of The Law of Contract in South
Africa supra).
• Sonap Petroleum SA (Pty) Ltd v Pappadogianis 1992 (3) SA 234
(A) (for guidance, read together with pages 103-107 of The Law of
Contract in South Africa supra).
Before continuing with week 2 of this study unit please read the following:
• The Law of Contract in South Africa Oxford University Press 2nd
Edition (2012), chapter 2, pages 136-144.

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 STUDY UNIT 2
HOW TO MAKE A CONTRACT

2.1 INTRODUCTION

In the previous study unit you were introduced to the idea of a “contract”
and to the law of contract generally. In this study unit you will consider a
question that flows logically from study unit 1: how do parties make a
contract?
The fundamental principle that you must master in this study unit is
consensus. While you may already understand what “consensus” means in
a general sense, you will discover that, in law, “consensus” is a nuanced
and multi-faceted idea.
The key to understand this idea is to understand the subsidiary ideas of
offer and acceptance. To that end, you will study the requirements for a
legally binding offer and acceptance. You will also briefly consider how the
Consumer Protection Act 68 of 2008 supplements these requirements.
What happens when parties do not reach consensus? Can a contract still
come into being the parties? That is the second main question that you will
consider in this study unit. To provide a cogent answer to this difficult
question, you will have to grapple with:
• The different ways in which parties to a contract may be mistaken;
• The difference between the will theory and reliance-based theories;
• The idea of estoppel; and
• The judgment of the Appellate Division in Sonap Petroleum
(SA) Pty Ltd v Pappadogianis.

2.2 ACTIVITY

Consider the following set of facts. On 1 December 2017, the

Fancypants golf club held its annual golf tournament. The
tournament was open to any member of any golf club.

Mr Mulligan, an avid golfer and member of the Ocean Breeze golf

club, participated in the golf tournament. When he reached the 17th
hole, a difficult par-3, he saw a large noticeboard next to the green.
The noticeboard read:

“Welcome to the 2017 Fancypants golf tournament. Fancypants golf

club hereby offers R 500,000.00 to the first member to score a hole-
in-one on this 17th hole!

Happy golfing,

Happy Gilmore

Chairman, Fancypants Golf Club”

Motivated by the prize on offer, Mr Mulligan played his best shot and
duly scored a hole-in-one. He subsequently ran to the clubhouse,

5
 STUDY UNIT 2
HOW TO MAKE A CONTRACT

joined Fancypants Golf Club as a member and completed his round.

Shortly thereafter, another golfer, Tiger Weeds, also scored a hole-
in-one on the 17th hole. Mr Weeds had been a member of
Fancypants Golf Club for many years at the time.

The prize-giving ceremony was held that evening. Mr Gilmore, on

behalf of the Fancypants Golf Club, awarded the R500,000.00 prize
to Mr Weeds.

Mr Mulligan is upset that the prize was awarded to Mr Weeds and

not to him. Advise him, in no more than 500 words, whether he is
entitled to the prize.

2.3 SELF-ASSESSMENT EXERCISES

2.3.1 In one paragraph, define the concept of “consenus”.

2.3.2 List the requirements for a valid offer.
2.3.3 List the requirements for a valid acceptance of an offer.
2.3.4 When is the acceptance of an offer legally effective?
2.3.5 Give a practical example of common mistake.
2.3.6 What type of mistakes will vitiate consensus.
2.3.7 What is iustus error and how does it determine contractual liability?
Give a practical example.
2.3.8 Given examples of consensus being vitiated by way of duress and
undue influence respectively.

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 STUDY UNIT 3
WHEN WILL A CONTRACT BE VALID AND BINDING?

STUDY UNIT 3

WHEN WILL A CONTRACT BE

VALID AND BINDING?

LEARNING OUTCOMES
After completing this study unit, you should be able to:

 Explain under which circumstances the law requires a contract to

comply with formalities.

 Understand the type of formalities that the law imposes.

 Understand the legal consequences of formalities imposed upon a

contract by the parties themselves.

 Discuss when a contract will be illegal and the consequences that such
illegality may engender.
 Comprehend the import of “possibility” and “certainty” on the law of
contract.

READING
Before continuing with week 1 of this study unit, please read the following:
• The Law of Contract in South Africa Oxford University Press 2nd
Edition, Chapters and 6 and 8
Before continuing with week 2 of this study unit, please read the following:
• The Law of Contract in South Africa Oxford University Press 2nd
Edition, Chapter 7

3.1 INTRODUCTION

This study unit deals with three topics that all have a bearing on the validity
of contracts.
This first topic – dealt with in chapter 6 of your prescribed textbook – is that
of formality. While the general rule is that no formalities are required for a
contract to be validly concluded, there are two main exceptions. The first
exception is that, in limited cases, formalities are imposed by law. The
second exception is the parties to a contract may themselves agree to
impose formalities on the contract between them. In this study unit you will
consider the circumstances in which these exceptions apply.

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 STUDY UNIT 3
WHEN WILL A CONTRACT BE VALID AND BINDING?

The second topic – dealt with in chapter 8 of your prescribed textbook – is

that of possibility and certainty. As you will surely appreciate, it would make
no sense to conclude a contract that is impossible to give effect to. Nor
would it make sense to conclude a contract if it is not clear what the terms
of contracts are. You will therefore study the circumstances in which a
contract will be voided due to a lack of possibility and/or certainty.
The third and final topic in this study unit – dealt with in chapter 7 of your
textbook – is that of legality. Again, as you will surely appreciate, it would
be contradictory if the law gives force to contracts that are contrary to the
law. You will therefore consider the circumstances in which a contract will
be illegal and the consequences which flow from such illegality.

3.2 ACTIVITY

A and B orally agree that B will build A’s house. The house is to be built on
the same erf, and directly adjacent to, the official residence of the President.
The house is to be build exlusively from imported Italian marble, concrete
and wood. These materials are already on site.
A and B receive legal advice that it would be prudent to record their
agreement in writing. A sends a draft contract to by via email. B agrees with
all the terms of the agreement. He appends his electronic signature to the
agreement. On receipt of the draft from B, A does the same.
Section 3 of the contract reads as follows:
“Price
The price of the constuction work to be performed by B will be determined
by A upon completion of the work by B. The price must be reasonable.”
B is to commece work on 2 February 2018. On the evening of 1 February
2018, a tornado rages through the cite and destroys the Italian marble,
concrete and wood.
Analyse the above set of facts in no more than 500 words. In particular,
consider:
• Whether it was legally necessary for A and B to conclude a written
(as opposed to oral) contract.
• On the assumption that it was necessary for A and B to conclude a
written contract, whether their contract complied with this formal
requirement.
• On the further assumption that the contract between A and B
complied with the formal requirement of writing, whether the terms
of the contract were sufficiently clear and certain.
• On the further assumption that the terms of the contract were
sufficiently clear and certain, whether B was absolved from
performing his obligations under the contracy by virtue of the
destruction wrought by the tornado.

8
 STUDY UNIT 3
WHEN WILL A CONTRACT BE VALID AND BINDING?

3.3 SELF-ASSESSMENT EXERCISES

3.3.1 What does section 2(1) of the Alienation of Land Act 68 of 1981
say?
3.3.2 How does one ensure that your antenuptial contract is binding and
enforceable?
3.3.3 Summarise the ratio of SA Sentrale Ko-operatiewe
Graanmaatskappy Bpk v Shifren 1964 (4) SA 760 (A) in one
paragraph.
3.3.4 Give three examples of contracts that are contrary to public policy.
3.3.5 What is supervening impossibility of performance? Give an
example.
3.3.6 Define “warranty”.
3.3.7 May person X determine the terms of a contract concluded
between persons A and B? If the answer is yes, provide legal
authority.

9
 STUDY UNIT 4
PARTIES TO, AND CONTENT OF, CONTRACTS

STUDY UNIT 4

PARTIES TO, AND CONTENT OF,

CONTRACTS

LEARNING OUTCOMES
After completing this study unit, you should be able to:

 Distinguish between simple joint, and joint and several, liability or

entitlement.

 Understand the principle of privity of contract.

 Comprehend the basic principles of agency.

 Distinguish between essentialia, naturalia, and incidentalia.

 Discuss conditions and their effect on a contract.

 Understand pacta de contrahendo (contracts about contracting) in
broad terms, including the distinction between options and preference
contracts.

READING
Before continuing with week 1 of this study unit, please read the following:
• The Law of Contract in South Africa Oxford University Press 2nd
Edition, chapter 9 and chapter 2 (section 2.5.1 – 2.5.1.1 and
sections 2.5.2 – 2.5.2.3 only).
Before continuing with week 2 of this study unit, please read the following:
• The Law of Contract in South Africa Oxford University Press 2nd
Edition, chapters 10 and chapter 2 (sections 2.5.1 – 2.5.1.1 and
2.5.2 – 2.5.2.3 only).

4.1 INTRODUCTION

Up to this point you may have envisaged contracts as existing between two
natural or juristic persons. But in reality several parties can, and often do,
participate in the same contract. The first topic you will consider in this study
unit is the way in which the law regulates the relationship between several
contracting parties.
The second topic you will consider in this study unit is agency. In a nutshell,
the law of agency regulates the relationship between one person (the
principal) and another person (the agent) acting on the principal’s behalf.
10
 STUDY UNIT 4
PARTIES TO, AND CONTENT OF, CONTRACTS

It is not difficult to see that the law of agency is intertwined with the law of
contract, given that contracts are often concluded and performed by way of
agents.
While the first two topics are concerned with the parties to a contract, the
third and final topic of this study unit is concerned with the content of the
contract itself. In this regard, you will developed a more mature
understanding of contractual terms, learing that such terms come in a
variety of forms with distinct legal consequences.

4.2 ACTIVITY

4.2.1 In no more than 250 words, and with reference to example(s),

discuss the difference between joint liability, on the one hand, and
joint and several liability, on the other.

4.2.2 A instructs B, an estate agent, to sell his house to C. B performs

his mandate. Have B and C concluded a contract for the sale of
immovable property? Motivate your answer in no more than 250
words.

4.3 SELF-ASSESSMENT EXERCISES

Complete the following table:

Type of term Example

Option

When A decides to sell his car, he

shall first offer his car to B.

Term implied by law

The merx must be delivered to the

buyer after he pays the price.

Suspensive condition

Resolutive condition

No variation of this contract will be

valid unless recorded in writing.

11
 STUDY UNIT 5
BREACH OF CONTRACT

STUDY UNIT 5

BREACH OF CONTRACT

LEARNING OUTCOMES
After completing this study unit, you should be able to:
 Identify the different forms of breach of contract.
 Distinguish between the different forms of breach of contract.
 Explain the requirements of each form of breach of contract.

READING
• The Law of Contract in South Africa Oxford University Press 2nd
Edition, chapter 12.
• Datacolor International (Pty) Ltd v Intramarket (Pty) Ltd 2001 2 SA
284 (SCA) paras 1, 16 – 19

5.1 INTRODUCTION

Generally speaking, parties to a contract seriously intend to honour the

terms embodied in the contract between them. If this were not the case,
commerce would be impossible and contracts would have little utility.
But things go wrong. Contracts are often breached and they are breached
in various ways. The purpose of this study unit is to understand the different
ways in which a contract can be breached and the consequences flowing
from each type of breach of contract.
While in this study unit you will learn how agreements can go wrong, in the
next study unit you will learn what the law does to remedy such wrongs.
You will learn, in other words, what remedies the law provides for a breach
of contract. Study units 5 and 6 are thus closely akin. As such, you should
make sure to master the material in this study unit before venturing into the
next.

5.2 ACTIVITY

During the course of the next two weeks, find at least three different types
of breach of contract, or alleged breach of contract, reported in newspapers
or topical magazines.

Tip: for the purpose of this exercise, you may want to consider the Business
Day newspaper or the business section of another newspaper. The
Finweek or Finacial Mail magazines may also be of assistance.
12
 STUDY UNIT 5
BREACH OF CONTRACT

5.3 SELF-ASSESSMENT EXERCISES

Answer the following questions. Your answer for each question should
not be longer than two sentences.
5.3.1 What is a reciprocal contract? As a general rule, when should
the parties to a reciprocal contract perform their obligations
under the contract?
5.3.2 What is the difference between mora ex re and mora ex
persona?
5.3.3 What is an example of mora creditoris?
5.3.4 What is a lex commissoria and why is it important?
5.3.5 A and B conclude a contract. In terms of the contract, B may
not draw water from a stream running across A’s property. If B
breached this term of the contract, and the type of breach B
committed was positive malperformance, what did B do or fail
to do?
5.3.6 What are “surrogate damages”?
5.3.7 The intention to repudiate a contract is judged “objectively”.
What does this mean?
5.3.8 Why would a party to a contract wish to “accept” the repudiation
of the contract by another party?
5.3.9 Why is fault an “essential requirement” for breach of contract by
way of prevention of performance?

13
 STUDY UNIT 6
REMEDIES FOR BREACH OF CONTRACT

STUDY UNIT 6

REMEDIES FOR BREACH OF

CONTRACT

LEARNING OUTCOMES
After completing this study unit, you should be able to:
 Identify the different three main types of remedies for breach of
contract.
 Explain the remedies of exeptio non adimpleti contractus and specific
performance.
 Explain the requirements for cancellation of a contract.
 Understand the idea of damages in the context of the law of contract
and distinguish this idea from damages in the law of delict.

READING
• The Law of Contract in South Africa Oxford University Press 2nd
Edition, chapter 13.

6.1 INTRODUCTION

Pacta servanda sunt: contracts should be honoured. This is a fundamental

principle of the law of contract. But as you would have learnt in the previous
study unit, contracts are often breached and this fundamental principle is
therefore often disobeyed.
The law does generally not condone such disobedience. Instead, it
provides remedies, or “cures”, where contracts are breached. These
remedies provide the “innocent” party (being the party who did not breach
the contract) with some form of relief or compensation.
Such relief or compensation comes, broadly, in three forms. First, there are
remedies aimed at keeping the contract alive and given the innoncent party
his due under the contract. Second, there are remedies aimed at cancelling
the contract. Finally, there are remedies aimed at compensating the
innocent party for the harm he or she may have suffered through the
breach.
The purpose of this study unit is, in broad terms, to introduce you to the
remedies engendered by a breach of contract.

14
 STUDY UNIT 6
REMEDIES FOR BREACH OF CONTRACT

6.2 ACTIVITY

A is in the business of developing and renting commercial property. A and

B conclude a contract of lease.

In terms of the contract:

• A lets to B, and B hires from A, the leather tannery situated at 2 Bland
Street, Sandton, Johannesburg.
• The rental is R 50 000 per month.
• The duration of the lease is from 1 January 2017 – 31 December
2017.
• For the duration of the lease:
o A shall make the tannery and all its tanning equipment available
to B;
o B shall use the tannery and its equipment to produce leather
jackets;
o B shall use the tannery and its equipment with reasonable care.
• At the termination of the lease, B shall return the tannery and all its
equipment to A in the condition it was provided to B, fair wear and
tear excluded.

B duly pays the rental for January through July. But he pays no rental for
August or September.

On 1 October 2017, A inspects the tannery he lets to B. Upon A’s arrival,

he is struck by a potent, noxious odour emanating from the tannery. He
enters the tannery and sees heaps of petrufying animal skins. He also
notices fungal growth on the walls and ceiling. He notices, finally, that the
leather tanning equipment – valued at R 500 000 – has vanished.

A approaches you for advice. In no more than 500 words, advise him –
• whether B has breached the contract;
• if so, what remedy or remedies A is entitled to; and
• in particular, whether A is entitled to monetary compensation.

6.3 SELF-ASSESSMENT EXERCISES

Answer the following questions. Your answer for each question should
not be longer than two sentences.
6.3.1 When may a party to a contract raise the exceptio non adimpleti
contractus?
6.3.2 If a party successfully raises the exceptio non adimpleti
contractus, what is he entitled to do or not to do?
6.3.3 What are the requirements for specific performance, according
to the Appellate Division in Farmer’s Co-operative Society v
Berry?
6.3.4 What did the court essentially decide in Santos Professional
Football Club (Pty) Ltd v Igesund?

15
 STUDY UNIT 6
REMEDIES FOR BREACH OF CONTRACT

6.3.5 Why is cancellation a “drastic remedy”?

6.3.6 When will a party to a contract lose the right to cancel that
contract?
6.3.7 What is restitution and how does it effect a person’s right to
cancel a contract?
6.3.8 What is the difference, in the context of damages, between
negative and positive interest?
6.3.9 What is the difference between general and special damages?

16
 STUDY UNIT 7
INTERPRETATION OF CONTRACTS

STUDY UNIT 7

INTERPRETATION OF
CONTRACTS

LEARNING OUTCOMES
After completing this study unit, you should be able to:
• Cogently interpret a contract.
• Discuss the current state of the law regulating the interpretation of
contracts, in particular:
o the parol evidence rule;
o rectification; and
o the interpretation of exemption clauses.

READING
• The law of contract in South Africa Oxford University Press 2nd
edition, chapter 11
• Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4)
SA 593 (SCA) (hereafter “Endumeni”) paras 17 – 26 (Note: it is crucial
that you read these paragraphs, that you read them several times,
and that you read them conscientiously).
• Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport
(Edms) Bpk 2014 (2) SA 494 (SCA) (hereafter “Bothma-Batho”) paras
10-12

7.1 INTRODUCTION

Words often have several meanings depending on the context in which they
are used. Interpretation is therefore of utmost importance: it is the tool
lawyers and lay people use to attribute meaning to ambiguous contracts
and other documents. Without coherent principles of interpretation,
disputes will remain unresolved and transactions will falter.
What is interpretation and how does interpret? Those are the two central
questions that this study unit will equip you to answer. In arriving at this
answer you will realise that this branch of the law has historically been
overgrown with technicalities. You will also realise that courts are now,
thankfully, pruning these technicalities down. You should strive, then, to
17
 STUDY UNIT 7
INTERPRETATION OF CONTRACTS

adopt a business-like and sensible approach to the interpretation of

contracts, and to not get lost in the detail.
A mature understanding of the principles of interpretation is like a map that
shows you the clearest, straightest path to the meaning of a contract. While
the principles will obviously assist you in reading contracts, they will also
assist you in drafting (i.e. writing) these documents. This study unit is
therefore a precursor to study unit 8, which deals with the drafting of
contracts.

7.2 ACTIVITY

Draft a checklist for the interpretation of a contract. The list should contain
a set of activities one should perform whenever one interprets a contract.
There should not be more than 6 activities on your list.

7.3 SELF-ASSESSMENT EXERCISES

Answer the following questions in no more than four sentences.

7.3.1 In paragraph 18 of Endumeni, Wallis JA writes that the process
of interpretation is “objective, not subjective”. What does this
mean?
7.3.2 Why is the so-called “golden rule” – that the interpretation of a
contract is aimed at ascertaining the “intention of the
contracting parties” – actually a misnomer? (Hint: have a look
at paragraph 20 of Endumeni).
7.3.3 It is often said that, when one interprets a contract that seems
to be unambiguous, one gives effect “to the ordinary
grammatical meaning of the words used”. Why is this a
misnomer? (Hint: have a look at paragraph 25 of Endumeni).
7.3.4 When interpreting a term in a contract, what should you
consider first: the language of the term itself or the context in
which the term is embedded? (Hint: have a look at paragraph
19 of Endumeni).
7.3.5 What is the parol evidence rule?
7.3.6 How could a litigant circumvent the parol evidence rule?
7.3.7 What is the contra proferentem rule and what is its rationale?

18
 STUDY UNIT 8
DRAFTING CONTRACTS

STUDY UNIT 8

DRAFTING CONTRACTS

LEARNING OUTCOMES
After completing this study unit, you should be able to:

 Competently draft a basic contract after completing this study unit.

READING
• The law of contract in South Africa Oxford University Press 2nd
edition, chapter 16

8.1 INTRODUCTION

Given that you are studying a degree in commerce, it is highly probably that
you will have occasion to draft contracts in your career after university.
Depending on the occupation that you pursue, drafting contracts might
even be one of your most important priorities. You might otherwise have to
review the contracts drafted by your colleagues, suppliers, and prospective
clients. So, even if you are not a lawyer, knowing how to competently draft
a contract is an important skill. The purpose of this study unit is to equip
you with the knowledge necessary to perform this skill.

8.2 ACTIVITY

Your friend Piet is a fitness enthusiast with an entrepreneurial spirit. He

sends you an email containing the following message:
“I hope you are well and that your studies are not too taxing. I have some
exciting news: with all the money I made from making those aerobics
videos, I finally have enough capital to open a gym!
I’ve already secured a lease of the perfect premises, located at 2
Spandex Street, Illovo. The gym itself will be pretty basic. It will only
have free weights, climbing ropes, exercise bicycles and rowing
machines. This is because the gym will focus exclusively on providing
CrossFit classes (as you know, I’m a fully certified CrossFit instructor)
which do not require much in the way of equipment.

19
 STUDY UNIT 8
DRAFTING CONTRACTS

I plan to provide three classes a day, at 9 am, 1pm, and 6pm. Members
will also be free to use the gym in between. I’ve calculated that I should
charge members a fee of at least R600 per month. But as an incentive
to secure long-term memberships, I will charge a fee of R500 a month
for a 6-month contract, and R400 a month for a year contract.
I know that you are studying commerce and that one of your subjects is
the law of contract. If you give me a basic contract that I could conclude
with new members, I will give you a one-year membership for free.
If you accept, please draft the contract to incorporate the details I
mentioned above. Please include other details that you think are
necessary.
Best regards,
Piet
P.S. The gym will be called “Iron Will Gym”. It will be operated by the
company I incorporated last year, Piet Spiere (Pty) Ltd (Reg. No:
1258/2017)”
Draft the contract Piet has requested. Make sure that you use plain
language and that the document does not exceed 10 pages.
(Note: As this is a comprehensive activity that assesses your
comprehension of this study unit, the unit has not separate self-
assessment exercises)

20
 STUDY UNIT 9
THE CONSUMER PROTECTION ACT 68 OF 2008

STUDY UNIT 9

THE CONSUMER PROTECTION

ACT 68 OF 2008

LEARNING OUTCOMES
After completing this study unit, you should be able to:

 to explain the purpose and policy of the Consumer Protection Act 68

of 2008 (“the Act”);

 to identify the transactions to which the Act applies;

 to describe the fundamental consumer rights created by the Act; and,

in particular,

 to explain what the following rights entail:

 a consumer’s right to expiry and renewal of fixed-term
agreements;
 consumer’s right to return goods;
 the right to information in plain and understandable language;
and
 the right not to be subject to bait marketing.

READING
• Chapter 17 of your prescribed textbook.
• The Act, with emphasis on the provisions identified as important by
your lecturer.

9.1 INTRODUCTION

The Act ambitiously regulates many fundamental aspects of commerce. It

has a significant impact on the law of contract and on business generally.
Its main purpose is to protect consumers from exploitation and to promote
social and economic welfare. As we are all consumers, it also has a
significant impact on our daily existence.
The purpose of this study unit is to introduce you to the most important
provisions of the Act. You are not expected to master the Act in all its
details. But you are expected to master those areas of the Act that your
lecturer brings to your attention.
21
 STUDY UNIT 9
THE CONSUMER PROTECTION ACT 68 OF 2008

9.2 ACTIVITY

Assume that you are the head of the marketing department of a start-up
company. The company intends to sell an App for mobile devices. It
intends to market the App on various platforms as soon as possible.
Write a memo to the company’s CEO and your team members, in no
more than 500 words, explaining the constraints that the Act places on
your intended marketing campaign.

9.3 SELF-ASSESSMENT EXERCISES

Consider your answer to the activity in the previous study unit. Identify
five respects in which your draft contract does not comply with the Act.
If you believe that your draft contract fully complies with the Act, identify
five respects in which your contract is compliant.

22
 SOLUTIONS

SOLUTIONS
STUDY UNIT 1:
1.2. ACTIVITY SOLUTIONS
1.2.1.
• There are three agreements listed in the activity. The first
agreement is one between all three friends who agree to watch
the soccer game at the house of friend A. The second
agreement is the agreement in terms of which B and C agree
to bring pizza and cooldrink as refreshments and the third
agreement is the agreement in terms of which friend A agreed
to make available house and TV set.
• All three agreements are tri-party agreements; in other words
there are three parties to the agreement. It is important to note
that one party alone cannot conclude an agreement but any
number of parties can be parties to an agreement.
• The main question is to consider whether the agreements
referred to above are social or domestic agreements and
whether the three friends intended the different agreements to
give rise to legally binding obligations.
• Only when an agreement gives rise to a legally binding
obligation can such an agreement and the terms thereof be
enforced in a court of law.
• To consider the activity one has to consider whether the three
friends intended to hold each other to the agreements by
resorting to legal action if there is a breach of the agreement.
For example, would friends B and C bring an application for
specific performance against friend A if he at the last moment
refuses to make his house and TV set available?
• The answer must be that the friends did not intend the different
agreements to be legally binding obligations and the
agreements are therefore not enforceable in a court of law.
1.2.2. It is important that your answer the activity in your own words
but the short answer is that the law of contract ensure that
participants in the economy and civil society keep their
promises. Please refer to paragraph 1.8.1 of the handbook and
ensure that you are comfortable with the discussion that follows
in paragraphs 1.8.2 to 1.8.4.
1.2.4.
1.2.4.1.
• The judgment referred to concerns the question whether a
right to extend a lease agreement has been exercised validly.

23
 SOLUTIONS

The agreement contained a clause that the lessee must give

the lessor written notice of its intention to exercise the option
of renewal at least 6 months prior to the termination date. The
lessee operated a franchise business that had to operate from
the leased premises in terms of the franchise agreement.
• It was common cause that the lessee did not meticulously
comply with its obligations and the court was faced with the
situation that if it was to enforce the strict terms of the lease
agreement, there could be no renewal of the lease, as the
lessee did not give timeous notice of its intention to renew.
• The court referred to the decision of the Constitutional Court in
Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty)
Ltd 2012 (1) SA 256 and found that the law of contract is infused
with constitutional values. The lessee argued that the strict
terms of the lease agreements had to be examined within the
broader context of the purpose behind both agreements read
with the doctrine of good faith and fairness.
• It is important that you read paragraphs [24] and [71] to [72] of
the Everfresh-matter referred to above.
• The court found that, if the lease agreements is cancelled, the
franchise agreements will have no effect and the franchise
businesses will collapse. The court found that the question as
to whether the lessee complied strictly with the provisions of the
lease or whether in substance they did comply is of material
importance. On the basis of the agreed facts that when the
contract was concluded:
- It was envisaged by the lessor and the lessee that a
franchise agreement would endure for 10 years;
- That their businesses would be located in the leased
premises and that after 5 years;
- The lessees would have a right to renew their leases; and
- The court found that the sanction of cancellation in these
circumstances would be disproportionate.
• Accordingly, the court found that the lease agreement has been
validly exercised.
• The case is very important for a proper understanding of the
law of contract and the effect of constitutional values infused
and you should study the judgment carefully.
1.2.4.2. It is important to note that the court specifically mentioned that
the judgment does not mean that every lease agreement and/or
contractual term has lost its importance and meaning as a result
of the judgment. Mr Confused must take note of the judgment

24
 SOLUTIONS

and must also, from his side, interact with lessees to establish
whether they intend to extend leases timeously.
1.2.4.3.
• It is important that you form your own view on whether this
judgment is likely to be overruled and that you argue the matter
extensively as this will significantly contribute towards your
understanding of the law of contract.
• In our view there is little chance of the judgment being overruled
especially in view of the comments in the Everfresh-matter
referred to above.

STUDY UNIT 2
2.2.
• When Mr Mulligan played his best shot and duly scored the
hole-in-one he was not a member of Fancypants Golf Club. He
was a member of the Ocean Breeze Golf Club.
• The factual position is therefore that Mr Mulligan, when he read
the notice on the 17th hole, was not a member of Fancypants
Golf Club.
• Mr Weeds, on the other hand, had been a member of the
Fancypants Golf Club for many years and when he scored his
hole-in-one he was a member.
• The important issue here is to consider the offer made by the
Fancypants Golf Club as advertised on the notice board. When
the Club made the offer it intended to make the offer to
members and not to individuals who would become members
subsequent to them scoring the hole-in-one. Do you agree?
• The intention of Fancypants Golf Club was clearly to pay the
amount of R500 000.00 to an individual who scored the hole-in-
one whilst being a member of it.
• For that reason Mr Mulligan has no reason to be upset as he is
not entitled to the prize. The offer was not made to him so he
could not accept it.
• This matter concerns consensus as a cornerstone of contract
as well as the principle of offer and acceptance. You must
consider the principle that the acceptance of the offer must be
made by the person to whom the offer was made and you
should consider whether the offer from Fancypants Golf Club
was made to golfers who were members of Fancypants Golf
Club at the time when they scored the hole-in-one or also to
golfers who became members before the award ceremony.

25
 SOLUTIONS

STUDY UNIT 3
3.2.
• The first issue deals with the formalities or requirements for the
conclusion of an agreement. In some instances it is required to
reduce the terms of a contract to writing (please consider this)
but in the instance of a building contract it is not required to
reduce the terms thereof to writing.
• If it was indeed necessary for A and B to conclude a written
contract, you must consider the question whether
correspondence by email can constitute a written agreement.
You must also consider the provisions of the Electronic
Communications Act and the implications of an electronic
signature.
• In our view, the actions of A and B do constitute a written
agreement. It is necessary for the terms of the contract to be
sufficiently clear and certain as an agreement may be void for
vagueness. The question is whether the price is determinable
as the parties have agreed that the price will be determined by
A but only upon completion of the work by B and that the
determination must be reasonable.
• In principle there can be no objection to this mechanism on
condition that it can be determined in some manner what is
reasonable. The agreement does not make any provision for a
determination by a third party, for example by arbitration, what
“reasonable” is and in our view the terms of the contract are not
sufficiently clear and certain as it would be impossible to
determine what is “reasonable”. The parties should be advised
to include a term to the effect that any dispute as to what is
“reasonable” can be determined by a third party for example a
quantity surveyor or an architect and that the parties would be
bound to such a determination.
• Did the destruction wrought by the tornado rendered
performance of the agreement impossible? This has to be
considered in conjunction with the fact that the parties have
agreed that the house is to be built on the same erf as the
official residence of the President. This matter also concerns
the issue of impossible performance and you have to consider
the applicable principles to determine your answer.
• The tornado is a form of vis major. This will excuse
performance and if consent is not obtained to build on the same
erf as the President, the builder can also lawfully not perform.

26
 SOLUTIONS

STUDY UNIT 4
4.2.
4.2.1. The principles of joint liability, on the one hand, and joint and
several liability on the other are important in the law of contract.
To answer this activity, please refer to paragraph 9.2.2 and
paragraph 9.2.3 of the handbook and to satisfy yourself that you
understand the difference in the two concepts, please take
special note and prepare practical examples.
4.2.2.
• The presented facts involve the issue of agency. In this
instance, B had the necessary authority or power to represent
A. The contract was not concluded between the agent, B and
C, but between the principal, A and the third party, C.
• The underlying principles are dealt with in paragraph 9.3 of the
handbook and you should understand the principles set out in
that paragraph as well as the difference between agency and
the contract for the benefit of a third party. (See paragraph
9.3.3)

STUDY UNIT 6
6.1.
• B has breached the contract by not paying rental for the months
of August and September 2017 and the remedy available to A
is to claim the arrears rental with interest if applicable.
• The fact that there is an odour emanating from the tannery as
a result of rotting animal skins (as well as the fungal growth)
suggests that B has not used the tannery and the equipment
with reasonable care. A has a remedy namely to demand that
B either restores the tannery to its pre-existing condition
alternatively if B does not do so, to do the repairs himself and
to hold B liable for the cost thereof.
• B has also breached the contract by not returning the tannery
equipment and the remedy available to A is either to demand
return of the tannery equipment (specific performance) or to
institute a claim for damages (monetary compensation) against
B.

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 SOLUTIONS

STUDY UNIT 7
FACTORS TO CONSIDER HAVE I TAKEN THE FACTOR INTO
ACCOUNT?
The words used in the contract in the light of the ordinary rules of
grammar and syntax.
The words in the context of the contract as a whole.
The apparent purpose that the words in the contract are directed
towards.
The intention of the parties to the contract.
Background and surrounding circumstances.
The cumulative impact of all of the above factors considered together.

STUDY UNIT 8
A basic contract can have many forms and there is no prescribed format.
The important rule is to ensure that that the contract contains all the
basic elements that need to be dealt with. The content must be clear
and unambiguous. What you see below is but one example and it is not
necessary that your contract looks the same.

GYM MEMBERSHIP AGREEMENT

Entered into by and between:
PIET SPIERE (PTY) LTD
(Registration No. 1258/2017)
(herein represented by Piet in his capacity as Director duly
authorised thereto (hereinafter referred to as “the Gym”)
and
SKINNY GALORE
(ID No. 690522 0122 087)
(hereinafter referred to as “the Client”)
WHEREAS the Client desires to be a member of the Gym; and
WHEREAS the parties have agreed to enter into a Gem Membership
Contact and to reduce the terms thereof to writing;
NOW THEREFORE the parties agree as follows:
1. MEMBERSHIP:
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 SOLUTIONS

1.1. The Client will have use of the Gym during normal business
hours from 06h00 to 21h00.
1.2. The Gym will offer free weights, climbing ropes, exercise
bicycles and rowing bicycles. The parties acknowledge that the
Gym will focus exclusively on providing cross fit classes.
1.3. The Gym will provide three cross fit classes a day at 09h00,
13h00 and 18h00.
1.4. The Gym warrants that a fully certified cross fit instructor will
present the classes referred to above.
2. MEMBERSHIP FEES:
2.1. To be entitled to the benefits of membership as set out above
the Client will elect one of the two options set out below:
2.1.1. R500.00 (FIVE HUNDRED RAND) a month for a period for a 6
(SIX) month contract; or
2.1.2. R400.00 (FOUR HUNDRED RAND) a month for a year
contract.
• The above constitutes a simple contract embodying the terms
of the material points.
• In addition thereto, you should consider inserting clauses
relating to:
- remedies for breach of contract (see paragraph 16.7.3 of
the handbook);
- liability, indemnity and exemption (should clients suffer
injury or damage on the premises of the gym);
- amendment (see paragraph 16.8 of the handbook);
- an entire agreement clause (see paragraph 16.8.2 of the
handbook);
- force majeure (see paragraph 16.8.6 of the handbook);
and
- you may also consider to insert a clause relating to
alternative dispute resolution (see paragraph 16.8.9).
• Remember to draft the contract to be in favour of Piet.

STUDY UNIT 9
• It will be counterproductive to provide a model memo as it is
important that you study the provisions of the CPA carefully
before you compose your memo explaining the constraints that
the CPA places on the marketing campaign.
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 SOLUTIONS

• To compose your memo you have to consider the applicability

of the CPA and the definition of a consumer as the provisions
of the CPA will only provide to a “consumer”.
• Take into account the consumer’s right to privacy, direct
marketing, cooling-off period and bundling. You must also
consider the right to disclosure and information, the right to fair
and responsible marketing and the prohibition against false,
misleading and deceptive misrepresentations.
• You do not have to concern yourself with the provisions of the
CPA insofar as the terms and conditions of any prospective
agreement with a client is concerned but you must focus on the
provisions dealing with marketing

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 LIST OF REFERENCES

LIST OF REFERENCES

Hutchison D, & Pretorius, C. 2012. The Law of Contract in South Africa.

2nd ed. Oxford University Press.
[ISBN: 978-0-19-905511-1]

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