PRL5901/201/0/2023

Tutorial Letter 201/0/2023

Drafting of Commercial Contracts

PRL5901

Year module

Department of Private Law

This tutorial letter contains important information
about your module.

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 CONTENTS

1 Commentary on assignments

2 Commentary on the examination

1 Commentary on assignments

1.1 Commentary on assignment 1 (Unique number: 739791)

ASSIGNMENT 1
QUESTION
In point form set out all the clauses which are usually found in a LEASE contract, but provide
descriptions of the essential clauses. Make use of the format and structure used in the Reader.
It will require you to work through the Reader and consider the form and structure of a contract.
This is a straightforward easy assignment and will count 5% towards your year mark. You could
get 100% for this assignment if you do your best. If you have the time and wish to do so you
should give content to the different clauses. You will not get more marks but obviously you will
benefit from doing so. [100]

COMMENTARY

This was an easy assignment and most students obtained full marks. Please note that the
examination will be far more difficult. The purpose of the assignment was for you to work
through the Reader and familiarise yourself with the study material. We have used the example
of a contract of lease to illustrate in summary form the format and structure of a contract. This
layout may be adapted for other nominate as well as innominate agreements, for example,
contracts of sale or co-operation agreements.

It would be a very good idea to know the order of the different clauses. This would enable you to
draft just about any lease contract without forgetting important clauses.

NB: Virtually all students did not include a clause that the property was not being let in the
ordinary course of business of the landlord. This means that potentially the Consumer
Protection Act 68 of 2008 applies and its implications would have to be reflected in the clauses
in the contract. We did not deduct marks if students did not include such a clause, but be wary
of the application of the Act within such circumstances.

Furthermore, many students simply listed the clause headings without reflecting on what they
meant. Although the marking was very lenient, the question did not require merely listing clause
headings; a description of the essential clauses was required. Some students, for instance,
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merely referred to “Agreement” as one of the headings without indicating what the parties had to
agree upon. Consequently, in some cases marks were deducted.

ANSWER

NB First of all set out the parties and recitals – USE YOUR IMAGINATION

THEREAFTER THE FOLLOWING NEEDS TO BE INCLUDED

THE LANDLORD DECLARES AS FOLLOWS:

THAT HE/SHE/IT IS NOT RENTING OUT THIS PROPERTY IN THE ORDINARY COURSE OF
HIS/HER/ITS BUSINESS (UN LESS YOU WANT TO DRAFT A LEASE CONTRACT
SUBJECT TO THE CONSUMER PROTECTION ACT)

1 Definitions and Interpretation

1.1 In this lease, except in a context indicating that some other meaning is intended,

1.1.1 “the Buildings” means the house and outbuildings situated on the Property;

1.1.2 “day” means any day of the week, excluding Sundays and public holidays;

1.1.3 "the Lease Period” means the period for which this lease subsists, including any period
for which it is renewed;

1.1.4 “the Lessor’s Equipment” means all fixtures and fittings contained in the Buildings and
forming part thereof as well as the appliances, equipment, appurtenances, tools, and
other articles and things described in the schedule to this lease, and (where consistent
with the context) includes all replacements thereof, if any;

1.1.5 “month” means a calendar month, and more specifically

1.1.5.1 in reference to a number of months from a specific date, a calendar month commencing
on that date or the same date of any subsequent month; and

1.1.5.2 in any other context, a month of the calendar, that is, one of the 12 months of the
calendar, and “monthly” has the corresponding meaning;

1.1.6 “the Property” means (set out in detail exactly what premises eg the house situated at 17
Leeukop Street, Varsforntein) together with the Buildings and all other improvements to
or upon the Property;

1.1.7 “the Rates” means the assessment rates payable on the Property and includes any other
charges payable by the Lessor to the local authority (such as, but not limited to, refuse
removal charges or sanitary fees), but not charges for water, electricity or gas;

1.1.8 “the Rent” means the rental payable by the Lessee to the Lessor for the hire of the
Property;

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1.1.9 “year” means a period of 12 consecutive months commencing on the date on which this
lease comes into operation or any anniversary of that date;

1.1.10 references to notices, statements and other communications by or from the Lessor
include notices by or from the Lessor’s agent;

1.1.11 expressions in the singular also denote the plural, and vice versa;

1.1.12 words and phrases denoting natural persons refer also to juristic persons, and vice
versa; and

1.1.13 pronouns of any gender include the corresponding pronouns of the other gender.

1.2 Any provision of this lease imposing a restraint, prohibition, or restriction on the Lessee
shall be so construed that the Lessee is not only bound to comply therewith but is also
obliged to procure that the same restraint, prohibition, or restriction is observed by
everybody occupying or entering the Property or any part thereof through, under, by
arrangement with, or at the invitation of, the Lessee, including (without limiting the
generality of this provision) the family, guests and servants of the Lessee.

1.3 Clause headings appear in this lease for purposes of reference only and shall not
influence the proper interpretation of the subject matter.

1.4 This lease shall be interpreted and applied in accordance with South African law.

2 Letting and hiring

2.1 The Lessor lets and the Lessee hires the Property on the terms of this lease.

3 Equipment

The Lessee shall for the Lease Period and for no additional consideration have the use of the
Lessor’s Equipment subject to the terms of this lease relating thereto (if applicable).

4 Duration

This lease shall come into operation on (set out the exact date) and shall subsist for (set out
exactly) years and (set out exactly) months from that date.

[An alternative clause which can be used:

This lease shall come into operation on (set out the exact date) and shall subsist from month to
month, being terminable on one month’s notice in writing from either party to the other, which
notice shall not be given so as to terminate this lease with effect prior to (set out the exact
date)].

5 Rent

5.1 The Rent shall be

5.1.1 R.......... (..........RAND) for each month of the first year of the Lease Period;
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5.1.2 R.......... (..........RAND) for each month of the second year; (and so on).
(Alternative clause 5.1:

5.1 The Rent shall be

5.1.1 R.......... (..........RAND) for each month of the first year of the Lease Period; and

5.1.2 an amount for each month of every subsequent year of the Lease Period which is
..........% (..........PERCENT) greater than the amount of the Rent for the last month of the
preceding year.)

5.2 Whenever the Rates are increased during the Lease Period, the Lessor may, by written
notice to the Lessee, increase the Rent by the amount of the increase in Rates,
calculated on a monthly basis. Every such increase in the Rent shall take effect on the
first day of the month following that in which the Lessor’s notice of the increase is
received by the Lessee or, whichever is the later, the date on which the increase in the
Rates takes effect.

5.3 The Lessee shall pay the Rent monthly in advance on or before the (state exactly) day of
every month.

6 Additional charges

In addition to paying the Rent, the Lessee shall reimburse the Lessor, monthly in arrear within
(state exactly) days after receiving an account from the Lessor reflecting the amount(s) so
payable, with the cost of electricity, water and gas consumed on the Property, determined at the
prevailing municipal tariff of charges.

7 Payments

7.1 All payments due by the Lessee to the Lessor under this lease shall be made to (specify
lessor or agent) at (place) or to such other person, if any, at such other place, if any, as
the Lessor has designated for the time being by written notice to the Lessee.

7.2 The Lessee shall not withhold, defer, or make any deduction from any payment due to
the Lessor, whether or not the Lessor is indebted to the Lessee or in breach of any
obligation to the Lessee.

7.3 The Rent and all other amounts payable by the Lessee under this lease shall be inclusive
of value-added tax in so far as it is applicable.
[An alternative clause which can be used:
The Rent and all other amounts payable by the Lessee under this lease shall be net of
value-added tax in so far as it is applicable and such tax shall be recoverable by the
Lessor from the Lessee in addition to the Rent and such other amounts.)

7.4 The Lessee shall be liable for interest on all overdue amounts payable under this lease at
a rate per annum ..........% (..........PERCENT) above the (specify) rate per annum of
(name of bank) from time to time, reckoned from the due dates of such amounts until
they are respectively paid.

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8 Deposit

8.1 On entering into this lease the Lessee shall pay the Lessor a deposit of R..........
(..........RAND), which amount the Lessor may apply, in whole or part, in meeting any
payment due by the Lessee to the Lessor at any time during the Lease Period or after
the termination of this lease.

8.2 Whenever during the Lease Period the deposit is so applied in whole or part, the Lessee
shall on demand reinstate the deposit to its original amount.

8.3 As soon as all the obligations of the Lessee to the Lessor have been discharged
following the termination of this lease, the Lessor shall refund to the Lessee, free of
interest, so much of the deposit as has not been applied in terms of the above provisions.

9 Insurance

9.1 The Lessee shall not keep or do in or about the Property anything such as is liable to
enhance any of the risks against which the Buildings or the Lessor’s Equipment may be
insured to the extent that the insurance of the Buildings or the Lessor’s Equipment is
rendered void or voidable or the premiums of such insurance are, or become liable to be,
increased.

9.2 Without prejudice to any other right of action or remedy which the Lessor may have
arising out of a breach of the foregoing provision, the Lessor may recover from the
Lessee on demand the full amount of any increase in insurance premiums attributable to
such breach.

9.3 For the purposes of the above provisions, the Lessee shall be entitled to assume that the
Buildings and the Lessor’s Equipment will at all material times be insured against such
risks, on such terms, for such amounts, and at such premiums as are for the time being
usual in respect of similar buildings and the like contents of similar dwellings.

10 Assignment and subletting

10.1 The Lessee shall not, except with the prior written consent of the Lessor

10.1.1 cede or assign all or any of the rights and obligations of the Lessee under this lease;

10.1.2 sublet the Property in whole or part;

10.1.3 give up possession of the Property to any third party;

10.1.4 sublet or give up possession of all or any of the Lessor’s Equipment; or

10.1.5 remove or allow to be removed from the Property all or any of the Lessor’s Equipment
except for repair.

10.2 The Lessor shall not, however, unreasonably withhold its consent to a subletting of the
whole of the Property together with all the Lessor’s Equipment.
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11 Sundry duties of the lessee

The Lessee shall

11.1 keep the Property and all parts thereof clean, tidy, and habitable;

11.2 not use the Property or allow it to be used, in whole or part, for any purpose other than
that of a private dwelling;

11.3 take good and proper care of the Lessor’s Equipment and every item thereof, and refrain
from causing or allowing it to be used for any purpose for which it was not intended;

11.4 take all reasonable measures to protect the Property, all parts thereof, and the Lessor’s
Equipment from abuse, damage, destruction, and theft;

11.5 not bring onto the Property any article which, by reason of its weight or other
characteristics, is liable to cause damage to any of the Buildings or the Property;

11.6 not contravene any of the conditions of title of the Property or any of the laws, rules or
regulations affecting owners, tenants or occupiers of the Property;

11.7 not cause or commit any nuisance on the Property or cause any annoyance or
discomfort to neighbours or the public;

11.8 not leave refuse or allow it to accumulate in or about the Property except in adequate
refuse bins suitably placed;

11.9 refrain from interfering with the electrical, plumbing, or gas installations or systems
serving the Property, except as may be necessary to enable the Lessee to carry out its
obligations of maintenance and repair in terms of this lease;

11.10 not allow more than (state specifically) persons to reside on the Property at the same
time;

11.11 keep not more than (state specifically) live animals on the Property as pets and maintain
proper control of them at all times;

11.12 not do or display anything which causes the Property to appear unsightly;

11.13 take all reasonable measures to prevent blockages and obstructions from occurring in
the drains, sewerage pipes and water pipes serving the Property; and

11.14 provide at the Lessee’s own expense all electric, fluorescent, and incandescent light
bulbs required on the Property.

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12 Maintenance and repairs

12.1 The Lessee shall at his own expense and without recourse to the Lessor

12.1.1 throughout the Lease Period maintain in good order and condition the interiors of the
Buildings, including all windows and doors, and the Lessor’s Equipment;

12.1.2 promptly repair or make good all damage occurring in or to the interior of any of the
Buildings or any of the Lessor’s Equipment from time to time during the Lease Period,
whatever the cause of such damage, and including damage to any part or item of the
Lessor’s Equipment or to any window or door, and replace all the same (as well as any
keys) which have been broken, lost or destroyed (again regardless of cause);

12.1.3 if any item of the Lessor’s Equipment is destroyed or damaged beyond repair (whatever
the cause of the destruction or damage, but subject to clause 19.4), promptly replace it
with a brand new, identical item in good and (where appropriate) operative condition or, if
an identical item is not obtainable, one which is as closely similar to the original as
possible;

12.1.4 take good and proper care of the garden on the Property, including all lawns, plants,
shrubs, trees, and hedges, replacing all such as may die or be damaged (due regard
being had to seasonal factors), carrying out such watering, cutting, trimming, mowing,
pruning, fertilising, and other gardening activities as may reasonably be required, and
supplying all the fertiliser and other substances necessary for these purposes;

12.1.5 take good and proper care of the swimming pool on the Property, causing it to be filled,
cleaned, and treated with chemicals and otherwise, as regularly and effectively as may
reasonably be required, and supplying all chemicals and other substances necessary for
the purpose;

12.1.6 on the termination of this lease, howsoever and whenever it terminates, return to the
Lessor in good order, condition and repair, fair wear and tear excepted

12.1.6.1 the Property and all parts thereof, together with the landlord’s fittings and all keys; and

12.1.6.2 the Lessor’s Equipment and all items thereof (similarly with keys where applicable).

12.2 If the Lessee notifies the Lessor in writing within (state exactly) days after having taken
possession of the Property of the need for any repairs to or in the Property or any of the
Lessor’s Equipment or of the fact that any part of the Property or the Buildings, including
any lock, key, door or window, any of the Lessor’s Equipment, the swimming pool, or any
other improvement on or to the Property is damaged, missing, or out of order, the Lessor
shall promptly cause the necessary repair or replacement to be effected at the Lessor’s
own expense. If or in so far as the Lessee does not give such notice, the Lessee shall be
deemed to have acknowledged that the Property, the Buildings, all parts thereof, the
Lessor’s Equipment, and all items thereof, were intact, in place, and in good order,
condition and repair when the Lessee took possession of the Property under this lease.
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12.3 The Lessor shall be responsible for the maintenance of, and for all repairs and
replacements becoming necessary from time to time in or to, the roofs and outside walls
of the Building, and the Lessor’s obligations in this respect shall include the maintenance
and repair of the structure of the Buildings, and all systems, works and installations
contained therein, and in particular the burglar alarm or security system.

12.4 The Lessor shall not, however, be in breach of clause 12.3 in so far as any of its
obligations thereunder are not or cannot be fulfilled by reason of any vis major or the acts
or omissions of others over whom the Lessor has no direct authority or control, and
where the Lessor is indeed in breach of clause 12.3, the Lessee’s only remedy against
the Lessor shall be a right of action for specific performance.

12.5 Should the Lessee fail to carry out any of its obligations under this lease with regard to
any maintenance, repair, or replacement, the Lessor shall be entitled, without prejudice
to any of its other rights or remedies, to effect the required item of maintenance, repair, or
replacement and to recover the cost thereof from the Lessee on demand.

13 Alterations, additions and improvements

13.1 The Lessee shall not make any alterations or additions to any of the Buildings, the
Property, any part thereof, or any item of the Lessor’s Equipment without the Lessor’s
prior written consent, but the Lessor shall not withhold its consent unreasonably to any
such alteration or addition which is of a minor nature and not structural.

13.2 If the Lessee does alter, add to, or improve the Property in any way, whether in breach of
clause 13.1 or not, the Lessee shall, if so required in writing by the Lessor, restore the
Property on the termination of this lease to its condition as it was prior to such alteration,
addition or improvement having been made. The Lessor’s requirement in this regard may
be communicated to the Lessee at any time, but not later than the (state exactly) day
after the Lessee has delivered up the Property pursuant to the termination of this lease;
and this clause shall not be construed as excluding any other or further remedy which the
Lessor may have in consequence of a breach by the Lessee of clause 13.1.

13.3 Save for any improvement which is removed from the Property as required by the Lessor
in terms of clause 13.2, all improvements made on or to the Property shall belong to the
Lessor and may not be removed from the Property at any time. The Lessee shall not,
whatever the circumstances, have any claim against the Lessor for compensation for any
improvement or repair to the Property or the Lessor’s Equipment, nor shall the Lessee
have a right of retention in respect of any improvements.

14 Exclusion of lessor from certain liability and indemnity

14.1 The Lessee shall have no claim for damages against the Lessor and may not withhold or
delay any payment due to the Lessor by reason directly or indirectly of

14.1.1 a breach by the Lessor of any of its obligations under this lease;

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14.1.2 any act or omission of the Lessor or any agent or servant of or contractor to the Lessor,
whether or not negligent, or otherwise actionable at law, and including (without limiting
the generality of the foregoing) any act or omission of any cleaner, maintenance person,
handyman, artisan, labourer, workman, watchman or guard;

14.1.3 the condition or state of repair at any time of the Property, the Buildings, or any part of
the Property or the Buildings;

14.1.4 any failure or suspension of, or any interruption in, the supply of water, electricity, gas,
air-conditioning, heating, or any other amenity or service to the Property or any of the
Buildings, whatever the cause;

14.1.5 any breakdown of, or interruption in the operation of, any machinery, plant, equipment,
installation, or system situated in or on, or serving, the Property or any part thereof or any
of the Buildings, and including (but without limiting the generality of the aforegoing) the
swimming pool plant or any geyser, boiler, burglar alarm, or security installation or
system (again regardless of cause);

14.1.6 any interruption of or interference with the enjoyment or beneficial occupation of the
Property caused by any building operations or other works on or about the Property,
whether carried out by the Lessor or by anybody else; or

14.1.7 any other event or circumstance whatever occurring, or failing to occur, upon, in, or
about the Property or any of the Buildings, whether or not the Lessor could otherwise
have been held liable for such occurrence or failure, and the Lessee indemnifies the
Lessor against all liability to members of the Lessee’s household, the Lessee’s servants,
guests and other invitees, and all other persons who may occupy or be entitled to occupy
the Property or any parts thereof through or under the Lessee, in consequence of any
such matter as is referred to in clauses 14.1.1 to 14.1.7 above.

14.2 The Lessor shall not, however, be excused from specific performance of any of its
obligations under this lease, whether express or implied, and particularly (but not only) its
obligations to afford the Lessee occupation and enjoyment of the Property as
contemplated by this lease and to carry out such maintenance and repairs as are
incumbent upon the Lessor in terms hereof; and if the Lessor fails to carry out any such
obligation of maintenance or repair with reasonable speed or efficiency, and persists in
such default after reasonable notice in writing requiring that it be remedied, the Lessee
may cause the necessary maintenance or repair (including any incidental or necessary
replacement) to be carried out and may then recover the reasonable cost thereof from
the Lessor on demand.

15 Lessor’s rights of entry and carrying out of works

15.1 The Lessor’s representatives, agents, servants and contractors may at all reasonable
times, without thereby giving rise to any claim or right of action on the part of the Lessee
or any other occupier of the Property or any part thereof, enter the Property or any of the
Buildings in order to inspect them, to carry out any necessary repairs, replacements, or
other works, or to perform any other lawful function in the bona fide interests of the
Lessor or the Lessee; but the Lessor shall ensure that this right is exercised with due
regard for and a minimum of interference with the beneficial enjoyment of the Property by
those in occupation thereof.
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15.2 The Lessor shall not, however, cause or allow any major building works to be carried out
upon the Property for a duration longer than (specify period) from the date of their
commencement unless

15.2.1 such works are necessary and do not merely involve additions to any of the Buildings,
the construction of any additional buildings, or redecorations of a solely aesthetic nature;
or

15.2.2 the Lessee has consented otherwise in writing.

16 Servant’s accommodation

It is recorded that included in the Buildings are certain accommodation and other facilities on
the Property for the bona fide domestic servant(s) of the Lessee; that the same are let as part of
the Property under this lease; and that the contents thereof described in the schedule to this
lease constitute part of the Lessor’s Equipment.

17 Security

17.1 The Lessee shall at all material times comply with such reasonable requests as are from
time to time made in writing by or on behalf of the Lessor for observance by the Lessee
and other occupiers of the Property and their invitees, including (without generality being
limited) rules and regulations in connection with the security of the Property and the
protection of persons and property thereon, including in particular (again without
generality being restricted).

17.2 Whilst the Lessor shall at all times be liable for the maintenance and repair of the burglar
alarm or security system on the Property, the Lessee shall take all reasonable measures
to prevent the system from being abused, damaged, or rendered inoperative, and shall
promptly report to the Lessor or its agent

17.2.1 any breakdown in the system; and

17.2.2 any burglary, housebreaking, trespass, or other crime, whether actual or attempted,
occurring on or in connection with the Property.

17.3 Clause 17.1 shall not be construed as implying that the Lessor assumes any liability
which it would not otherwise have had in connection with the subject matter of any rule or
regulation referred to therein. [NB: This clause could be drafted to make the lessee
responsible for a security system.]

18 Landline/fibre optic connections

The Lessee shall make his own arrangements for the hire and operation of landline or fibre optic
services on the Property and shall solely bear the cost thereof, but the Lessor shall sign
whatever consents and the like documents may reasonably be required of the Lessor for the
purpose and shall not unreasonably refuse to allow the Lessee to use any instrument or
equipment located on the Property.

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19 Damage to or destruction of premises

19.1 If the main residential Building on the Property is destroyed or so damaged that it can no
longer be beneficially occupied, this lease shall terminate when that happens unless the
parties agree in writing otherwise.

19.2 If such Building or any other Building on the Property is significantly damaged but can
still be beneficially occupied, this lease shall remain in force and the Lessor shall repair
the damage without undue delay but the Rent shall be abated so as to compensate the
Lessee fairly for the effects on the enjoyment of the Property of the damage and repair
work. Failing agreement on such abatement or on the applicability of this clause to any
particular circumstances, the matter shall be referred to an expert appointed by the
parties jointly or, if they do not agree on such appointment, nominated by the President
for the time being of The Institute of Estate Agents of South Africa, and the decision of
such expert shall be final and binding. The expert’s fees and disbursements, including
any inspection costs, shall be borne by the parties in equal shares. Pending
determination of the abatement the Lessee shall continue to pay the Rent in full as if
there had been no damage (or be excused from payment of the Rent), and as soon as
the matter has been resolved the Lessor shall make the appropriate repayment to the
Lessee (or the Lessee shall make up the arrears in the Rent as abated).

19.3 If any damage to any of the Buildings or the destruction thereof is caused by an act or
omission for which either party is responsible in terms of this lease or in law, the other
party shall not be precluded by reason of any of the foregoing provisions of this clause 19
from exercising or pursuing any alternative or additional right of action or remedy
available to the latter party under the circumstances.

19.4 The foregoing provisions of this clause 19 shall apply also to any damage to, or the
destruction of, all or any of the Lessor’s Equipment which occurs together with any
damage to or the destruction of the Buildings or any of them, the foregoing references to
repairs to be read as including reference to the replacement of any items of the Lessor’s
Equipment which are destroyed or irreparably damaged.

20 Special remedy for breach

20.1 Should the Lessee default in any payment due under this lease or be in breach of its
terms in any other way, and fail to remedy such default or breach within (state exactly)
days after receiving a written demand that it be remedied, the Lessor shall be entitled,
without prejudice to any alternative or additional right of action or remedy available to the
Lessor under the circumstances without further notice, to cancel this lease with
immediate effect, be repossessed of the Property and the Lessor’s Equipment, and
recover from the Lessee damages for the default or breach and the cancellation of this
lease.

20.2 Clause 20.1 shall not be construed as excluding the ordinary lawful consequences of a
breach of this lease by either party (save any such consequences as are expressly
excluded by any of the other provisions of this lease) and in particular any right of
cancellation of this lease on the ground of a material breach going to the root of this
lease.
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20.3 In the event of the Lessor having cancelled this lease justifiably but the Lessee remaining
in occupation of the Property, with or without disputing the cancellation, and continuing to
tender payments of the Rent and any other amounts which would have been payable to
the Lessor but for the cancellation, the Lessor may accept such payments without
prejudice to and without affecting the cancellation, in all respects as if they had been
payments on account of the damages suffered by the Lessor by reason of the unlawful
holding over on the part of the Lessee.

21 Option of renewal

21.1 The Lessee shall have the right to renew this lease upon the terms and subject to the
conditions set out below.

21.2 The period for which this lease may be so renewed is (state exactly for how long)
commencing on (specify date) (or the date immediately following the date of expiry of the
initial term of this lease).

21.3 All the terms of this lease shall continue to apply during the renewal period, save that

21.3.1 the Rent shall be (state exactly and adapt clause 5.1); and 21.3.2 there shall be no
further right of renewal.

21.4 The right of renewal shall be exercised by notice in writing from the Lessee to the Lessor
given and received not later than (state the exact date) (or at least (specify) months/days
prior to the date on which the renewal period is to commence), and shall lapse if not so
exercised.

21.5 If the right of renewal is duly exercised, this lease shall be renewed automatically and
without the need for any further act of the parties.

21.6 The Lessee may not, however, exercise the right of renewal while in breach or default of
any of the terms of this lease.

21.7 If this lease does not endure at least for the full term for which it is initially contracted (or
until (state the exact date)), the right of renewal shall lapse and any notice of exercise
thereof given prior to such lapsing shall be null and void.

22 New tenants and purchasers

The Lessee shall at all reasonable times

22.1 during the Lease Period, allow prospective purchasers of the Property or of any shares
or other interests in the Lessor; and

22.2 during the last (state exactly) months of the Lease Period, allow prospective tenants of
the Property, to enter and view the Property, the interiors of the Buildings and the
Lessor’s Equipment.

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22.3 The Lessor, however, undertakes that he will not accept any offer for the purchase of the
premises without first offering to sell the premises to the Lessee.

23 Costs

The legal costs incurred in the preparation of this lease and the stamp duty payable thereon
shall be borne by (specify the lessor, the lessee, or the parties in equal shares).

24 Domicilia and notices

24.1 The parties choose as their domicilia citandi et executandi their respective addresses but
such domicilium of either party may be changed by written notice from such party to the
other party with effect from the date of receipt or deemed receipt by the latter of such
notice.

24.2 Any notice, demand or other communication properly addressed by either party to the
other party at the latter’s domicilium in terms hereof for the time being and sent by
prepaid registered post shall be deemed to be received by the latter on the (specify)
business day following the date of posting thereof. This provision shall not be construed
as precluding the utilisation of other means and methods (including telefacsimile) for the
transmission or delivery of notices, demands and other communications, but no
presumption of delivery shall arise if any such other means or method is used.

25 Whole agreement

25.1 This is the entire agreement between the parties.

25.2 Neither party relies in entering into this lease upon any warranties, representations,
disclosures or expressions of opinion which have not been incorporated into this lease as
warranties or undertakings.

25.3 No variation or consensual cancellation of this lease shall be of any force or effect unless
reduced to writing and signed by both parties.

26 Non-waiver

26.1 Neither party shall be regarded as having waived, or be precluded in any way from
exercising any right under or arising from this lease by reason of such party having at
any time granted any extension of time for, or having shown any indulgence to the other
party with reference to, any payment or performance hereunder, or having failed to
enforce, or delayed in the enforcement of, any right of action against the other party.

26.2 The failure of either party to comply with any non-material provision of this lease shall not
excuse the other party from performing the latter’s obligations hereunder fully and
timeously.

27 Warranty of authority

The person signing this lease on behalf of the Lessor expressly warrants his authority to do so.
 PRL5901/201/0/2023

28 Suretyship

This lease is subject to the suspensive condition that (full name of surety and co-principal
debtor) becomes bound to the Lessor in writing on the terms of the draft document annexed to
this lease (and being the (specify) schedule thereto) as surety and co-principal debtor for all the
obligations of the Lessee to the Lessor under this lease as well as those arising in consequence
of any termination thereof. If that condition remains unfulfilled by (specify time and date) or any
later time and date agreed upon between the parties in writing, this lease shall not come into
operation but shall be null and void save that the Lessee shall then solely bear and pay or
reimburse the Lessor on demand with the costs of this lease and the Lessor’s expenses in
reletting the Property, including any agent’s commission and advertising costs.

29 Sale of property

The validity of this lease shall not in any way be affected by the transfer of the Property from the
Lessor pursuant to a sale thereof. It shall accordingly, upon registration of transfer of the
Property into the name of the purchaser, remain of full force and effect save that the purchaser
shall be substituted as lessor and acquire all rights and be liable to fulfil all the obligations which
the Lessor, as lessor, enjoyed against or was liable to fulfil in favour of the Lessee in terms of
the lease

30 Termination by death or insolvency

30.1 This lease shall not terminate with the death of either the Lessor or the Lessee. The
executor of the deceased Lessee’s estate shall have the option, depending upon the
circumstances of the estate, either to abide by the contract for the remainder of the lease
period (the successor or successors of the Lessee assuming his rights and obligations)
or to cancel the lease by giving the Lessor (state exactly the number of ) months written
notice of termination, such notice to be given not more than (specify number of ) months
after the death of the Lessee.

30.2 The insolvency of either the Lessor or the Lessee shall not terminate this lease.
However, the trustee of the Lessee’s insolvent estate shall have the option to terminate
the lease by notice in writing to the Lessor. If the trustee does not within three months of
his appointment as trustee notify the Lessor that he desires to continue with the lease on
behalf of the estate, he shall be deemed to have terminated the lease at the end of the
three months.

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SIGNED at .................... (place) on this .................................... (day, month, year) in the
presence of the undersigned witnesses

Witnesses:

2
(Signatures of witnesses) (Signature of lessor)

SIGNED at............................... (place) on this.....................................(day, month, year) in the

presence of the undersigned witnesses

Witnesses:

2
(Signatures of witnesses) (Signature of lessor)

Total for assignment: [100]

1.2 Commentary on assignment 2 (Unique number: 739803)

ASSIGNMENT 2
QUESTION

A consortium of 2 young computer technology engineers are the members of a close

corporation known as Alpha Consortium. They have developed a track and tracing system for
the motor industry which enables companies to keep track of their vehicles at all times. Alpha is
the owner of the intellectual property relating to the technology of track and tracing. Alpha has
also managed to establish a client base and a track and tracing market share.

Alpha is approached by Doux Start, a private company incorporated in terms of the Companies
Act 71 of 2008, which specialises in the field of communications technology and has the
expertise to develop and implement projects in marketing and sales of the communications
sector. Doux Start proposes a collaborative venture to Alpha which would make provision for (1)
the equity structure; (2) the external relationships of such a business; (3) as well as the internal
affairs of such a commercial venture.
The aim of the collaboration is that Alpha will as a first phase provide their existing track and
tracing technologies in order to collaborate in the development of new communications
technology projects with specific application to military requirements. Doux Start undertakes to
develop new communications technology projects. They also undertake to fund or acquire
 PRL5901/201/0/2023

outside funding for such projects. Doux Start also undertakes to provide eighty square meters of
laboratory space to Alpha. Once such development has taken place Alpha undertakes to grant
Doux Start as a second phase marketing and sales rights.

Alpha approaches you to draft the contract. They are concerned that they are contributing more
to the venture than Doux Start is, but on the other hand Doux Start has very good military
connections and owns a laboratory which Alpha does not have.

Draft a contract of not more than 10 pages or 5000 words that makes provision for the above
scenario making sure you protect your client. [100]
COMMENTARY
In marking the assignments, we took into account that you may have included different clauses
or solved certain problem clauses differently. If you have missed something completely, it has
been indicated in your assignment. Here are some common issues that were encountered in
the marking:

• Drafting a letting and hiring of services contract (mandate), where Alpha Consortium as
contractor renders services to Doux Start as the client or vice versa. The relationship
between the parties is rather on an equal footing, being ‘partners’ in a business venture.

• Drafting a simple partnership agreement. Usually this will not be the case where
corporate entities are the parties because such entities inter alia normally intend to be
severally liable, whereas in a simple partnership the parties are jointly and severally
liable.

• Drafting only a software development agreement.

• Drafting a joint venture agreement without properly providing for the rights and
obligations of the parties.

• Drafting a pure distribution agreement in terms of which Doux Start only distributes the
product or products of Alpha Consortium.

• Drafting an agreement with combined elements of the abovementioned agreements.

• Not including a clause protecting the intellectual property of Alpha Consortium.

• Only drafting confidentiality and non-circumvention clauses, with no substantive

agreement between the parties.

• Poor and imprecise grammar.

Although, as previously mentioned, there is more than one way to draft an agreement in these
circumstances, it is important to remember that the parties intend a form of business
relationship to their mutual benefit and hopefully for a long period. As the parties here intend an
ongoing legal relationship for their joint benefit, a private company in which each holds shares
and provides some form of input, would probably be the more suitable option.
Any draft agreement should therefore take account of:

• The ongoing nature of the relationship;

17
 • The phases in which it is structured (development and thereafter marketing and
distribution);

• A business plan;

• The legal entity which the parties wish to use to implement their business venture
(probably a private company) and their respective equity participation therein; and

• The respective rights and obligations of the parties in the business venture.
Most students gave a good account of themselves and several students produced very good
drafts and were rewarded with distinctions.
ANSWER

Memorandum of Understanding
Entered into by and between:
The Alpha Consortium, a Close Corporation established in terms of the Close
Corporations Act 69 of 1984 with registration ......................... , (hereinafter referred
to as Alpha Consortium)
whose address is the following:
...............
............
....
herein represented by Mr Quentin Boudoit in his capacity as Member of ALPHA
CONSORTIUM and duly authorised thereto
and
Doux Start (Pty) Ltd, a company incorporated in terms of the Companies Act 71 of
2008 with reg no ............... (hereinafter referred to as Doux Start),

whose address is the following:

............
......
....

herein represented by Dr Benoit Marchand in his capacity as Managing Director of

Doux Start and duly authorised thereto
 PRL5901/201/0/2023

WHEREAS:
ALPHA CONSORTIUM is the owner of the intellectual property relative to the
technology of track and tracing;

AND WHEREAS:
ALPHA CONSORTIUM has established a clientele base and a track and tracing
market share;

AND WHEREAS:
Doux Start has a market share in the field of communications technologies and has
the expertise to develop and implement projects in marketing and sales in this sector;

AND WHEREAS:
The parties are desirous to establish a process for the implementation of a co-
operation and collaboration in the field of innovative digital engineering in South
Africa, Africa and elsewhere;

AND WHEREAS:
The parties are desirous to establish a business structure which will incorporate the
equity structure as well as the external relationships of such business as well as the
internal affairs of such commercial collaborative venture.

NOW THEREFORE THE PARTIES HERETO AGREE AS FOLLOWS:

1. The parties agree to jointly use their best endeavours to co-operate to form a private
company for the exploitation and development of track and tracing technologies
(hereinafter referred to as the company).

2. The parties agree to jointly recruit other strategic and financial members in South Africa
and other countries for participation in the projects of such a company.

3. The parties undertake to observe transparency and the utmost good faith in their
dealings with each other.

4. The parties undertake that this memorandum of understanding shall be used as the basis
of their co-operation or be incorporated in the Memorandum of Incorporation (MOI)
should a private company come into being.

19
5. ALPHA CONSORTIUM agrees to:

1) as a first phase provide to the company the existing track and tracing technologies
relative to commercial vehicles as a basis for new project-developments within the
company, provided that both parties understand and agree that the existing
intellectual property is and remains in the ownership of ALPHA CONSORTIUM;

2) collaborate in the development of new communications technologies projects

within the company, provided that such project is viable, which viability will be
determined by ALPHA CONSORTIUM in its sole discretion;

3) as a second phase, provided that the company body has reached the targets set
out in Annexure A, attached hereto and duly signed and initialed by both parties,
grant the company rights of marketing and sale relative to communication
technology for military purposes.

6. It is agreed and understood by both parties that each project will be subject to its own
contract, the content of which shall be determined by the parties, provided that the
ownership of the intellectual property developed from such projects shall belong to the
company, which shall grant a royalty-free license to ALPHA CONSORTIUM for research
purposes.

7. ALPHA CONSORTIUM's equity in the company shall be 50% (fifty percent) on the basis
of the value of said technology, as determined and quantified by both parties.

8. Both of the members of ALPHA CONSORTIUM shall be members of the board of

directors of the company.

9. DOUX START undertakes to:

1) draft the business plan for the company;

2) pro-actively promote the marketing and sale of the products developed in

terms of contracts concluded within the ambit of this memorandum of
understanding of the ALPHA CONSORTIUM track and tracing
technologies in South Africa, Africa and elsewhere within the framework of
the company;

3) pro-actively develop new communications technology projects within the

company/co-operation body, provided that such project is viable, which
viability will be determined by ALPHA CONSORTIUM in its sole discretion;

4) fund or acquire outside funding for such projects for the company;

5) provide support services for developed products of the company;

6) provide access of an eighty square meter laboratory to the company and fit
such laboratory out according to the specifications developed by ALPHA
CONSORTIUM.
 PRL5901/201/0/2023

7) DOUX START's equity in the company shall be 50% (fifty per cent)
determined on the basis of the above inputs, as determined and quantified
by both parties.

10. Two of the directors of DOUX START shall be a member of the board of directors of the
company.

11.1 Doux Start agrees and undertakes to treat all intellectual property and information
supplied by ALPHA CONSORTIUM or which may come to its attention as strictly
confidential. Doux Start will not at any time after last signature hereof divulge to any party
not signatory hereto any information relating to the intellectual property and information
received from ALPHA CONSORTIUM.

11.2 Doux Start undertakes to conclude the necessary confidentiality undertakings with its
agents, representatives, officers, and employees who shall hold in confidence all
information received from ALPHA CONSORTIUM, directly or indirectly, and all writings
related in any way to the intellectual property or ALPHA CONSORTIUM's confidential
information.

12. This agreement shall not be construed as establishing or creating a relationship of

master and servant or principal and agent or partnership between the parties.

13.1 This Agreement, or parts thereof, is subject to termination at any time by mutual consent.

13.2 Either party may unilaterally terminate this entire agreement at any time by giving the
other party written notice not less than one hundred and eighty days (180) calendar days
prior to the desired termination date.

13.3 Pledges of confidentiality shall survive such termination.

13.4 If any party unilaterally terminates this agreement pursuant to this clause, each party
shall return to the others or destroy, as shall be then agreed, any and all data and
materials originated or provided by one party to the others that is still in the receiving
party’s possession.

14.1 Any dispute arising from any matters relating to this agreement or the validity or meaning
or execution thereof must be solved by means of arbitration, in accordance with
procedures stipulated hereunder:
a) Any party shall be entitled to demand in writing that the dispute be referred for
arbitration within 10 days after agreement could not be reached.
b) The arbitrator shall be, if the matter in dispute is:
i) primarily an accounting matter, an independent registered chartered
accountant;
ii) primarily a legal or any other matter, a practicing advocate;

21
 agreed upon between the parties involved in the dispute and failing agreement in that
regard within ten days after the arbitration has been demanded, appointed by the
president of the Pretoria bar.
c) Within 30 (thirty) days after the notice in 14.1.a each party shall submit a
comprehensive written statement to the arbitrator containing all evidence, sworn
statements, facts, submissions of expert witnesses etc. on which their case is
based, a copy of which is to be served on the other party.
d) Within 14 days after receipt of a copy of the abovementioned documents the other
party may reply thereto and submit a supplementary document to the arbitrator, a
copy of which is to be served on the other party.
e) The arbitrator shall consider the dispute and based on the documents before him,
without appearance of the party or any legal representative before him, decide the
issue. Should the arbitrator be unable to decide the issue on the documents, he
may request the parties to present further evidence or to call witnesses to testify in
the presence of the parties. These witnesses must be questioned by the arbitrator
and may be questioned by the parties.
f) The arbitrator may announce any decision or make any award which according to his
discretion is legally valid, fair and appropriate.
g) The arbitrator must take cognisance of the intention of the parties and reach a
decision based on the South African law. He is not strictly bound by the rules of
law but must be guided by the principles of justice.
h) The finding of the arbitrator shall be final and binding on the parties and may only be
made a court order should one of the parties fail or refuse to give effect to the
arbitrator's finding or award.

14.2 This clause shall be severable and shall remain valid notwithstanding the termination or
invalidity of the agreement.

15. The parties hereto choose for all purposes and in regard to this contract their respective
addresses as domicilium citandi et executandi. Any party may change such address by
notice given to the other in the manner set forth above.

16. The parties confirm:

a) that this document and Annexure A contain the whole agreement between the
parties;
b) that no other terms apart from those contained herein were stipulated;
c) that no other suggestions, guarantees and motives apart from those contained herein
have been made by either the parties themselves or on their behalf.

17. No variations of the terms of this contract will be binding unless reduced to writing and
signed by both the parties to the contract.
 PRL5901/201/0/2023

Signed at ............ ...........................on this ............................. day of 20…. in the presence of the
undersigned witnesses

For: Alpha Consortium CC Witness 1: -----------------

2: -----------------
Being duly authorised thereto

--------------------------
For: Doux Start (Pty) Ltd Witness 1: ----------------
Being duly authorised thereto 2: ----------------

23
ANNEXURE A

The parties have set the following targets in respect of the continuation of the company:

1. A minimum of two clients with a contract value of R --------- within the first twelve months
of the date of registration of the company.

In respect of phase two as set out in clause 5 3), the following targets have been agreed
upon:

A turnover of R ---------- within the period of --- years.

Total for assignment: [100]

2 Commentary on the examination

NB: THE EXAMINATION PAPER WILL BE AVAILABLE ONLY IN ENGLISH

The examination is an open book examination. This means that you may use all your study
material in the examination. Many students run out of time and fail to complete the examination
because they spent valuable time trying to find the relevant sections in the study material. While
going through the study material ensure that you flag and index everything in some or other
manner and are familiar with the layout of the study material. The examination is not difficult, but
it is long and you will not be able to spend time finding clauses or information for the first time
during the examination.
The examination will be in the form of a Take Home Examination. You will find and download
the examination from the myExams platform. After completing your answers, your exam file
must be uploaded on the myExams platform. This examination will probably be proctored via
the Invigilator App. Further details regarding the examination will be posted on myModules23 in
due course.
Please note that the examination paper will count a total of 100 marks: There are 3 questions.

The National Credit Act will NOT be asked in the examination.

The Consumer Protection Act MAY be asked in the examination

 PRL5901/201/0/2023

Best wishes with your examination preparation.

PROF CJ PRETORIUS Telephone number: 012 429-8418

083 922 8200
ADV R ISMAIL 012 429-8353

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