Unit 1: Purchase and sale

Theme 1: Introduction
General
 A specific contract must always comply with the general requirements for validity (consensus, contractual capacity, legality,
physical possibility, formalities) and parties must have consensus on essentialia of that specific type of contract
 Once specific contract is determined through essentialia, we immediately know what the naturalia is
 Naturalia: rights and duties each party must comply with and corresponding right and remedies if it is not complied with
 If parties agree on particular terms and conditions or exclude certain naturalia in the agreement, it is referred to as incidentalia
 Law of purchase and sale has a bearing on all legal rules applied to contracts of sale
 Contract of sale is most common / prevalent contract found in practice
 Contract of sale: specific, nominated, reciprocal agreement to buy and sell, in terms of which seller has true intention to deliver
a determined or determinable object together with all his rights in object undisturbed, to buyer, and buyer has true intention of
paying a determined or determinable price for object

Requirements for valid contract of sale

 For a contract to qualify as a contract of sale, seller and buyer must reach consensus on essentialia of contract of sale
 McWilliams v First Consolidated Holdings (Pty) Ltd:
- Letter of confirmation of verbal sale contract drafted by seller’s lawyer and sent via post to buyer
- Buyer did not respond to nor dispute the letter
- Court had to decide whether or not valid sale was concluded
- Court confirmed that for a valid sale to be concluded, parties must have consensus on essentialia
- Mere quiescence (keeping quiet) is not acceptance of contents by buyer, especially where commercial practice and human
experience would call for response from buyer
- Buyer had to respond to letter if it did not reflect the true position
 Essentialia of contract of sale are:
- the intention of seller to sell and buyer to buy (that is, consensus on nature of the contract)
- object sold (that is, consensus on what is bought and sold) – merx / res vendita
- purchase price (that is, consensus on monetary performance owing by buyer to seller) – pretium
 Difference between contract of sale and contract of lease:
- In contract of lease, ownership does not pass to lessee, whereas a contract of sale is concluded with intention of passing
ownership
- Contract of lease is of a temporary nature, while a contract of sale is not term-bound
 Contract of sale distinguished from a contract of exchange:
- In contract of exchange, one object is rendered as consideration for another object, while a monetary amount (usually)
constitutes the consideration in case of a contract of sale
- In contract of exchange, right of ownership passes upon mere delivery of various objects of exchange, while delivery is
(usually) not the only requirement for passing of ownership in terms of a deed of sale
 Seller does not have to be owner of object sold in order to conclude a valid and binding contract of sale
- Seller is only obliged to transfer all his rights in object to buyer without interference or disturbance
- If one of these rights is the right of ownership, the seller must transfer this right to the buyer
 Conclusion of a contract of sale does not result in transfer of ownership – buyer only obtains a personal right against seller
(McWilliams v First Consolidated Holdings)
 Other requirements exist for transfer of ownership (such as delivery of object sold and/or payment of price) before real right
exists
 Real right is always stronger than personal right

Theme 2: Essentialia
 Nature of the contract
 Essentialia:
- nature of the contract
- object sold
- purchase price
 Seller and buyer must reach consensus on essentialia before valid contract of sale can exist
 They must reveal their intention to buy and sell
 If parties only create a pretence of sale, but in reality conclude another type of contract (such as a donation), courts will not
give effect to pretence, but rather to true intention of parties
- Parties must indeed have this intention, and cannot merely be under impression that this intention might be present
 Vasco Dry Cleaners v Twycross:
- Facts complicated with consecutive sale of dry cleaning business including equipment
- Court had to determine whether agreement between parties was indeed sale
- Court stated that parties must have consensus on all 3 essentialia
- True intention was not sale, but rather moneylending secured by pledge
- Court will only give effect to true intention of the parties and not pretence of sale
 Intention of parties to a contract of sale is to deliver rights of undisturbed use, enjoyment and disposal of object to buyer; in
other words, to enable the buyer to obtain ownership of the object sold
 Consequently there can be no question of a contract of sale if there is a stipulation in contract that ownership will not pass to
buyer
 Where both the buyer and the seller know that object sold does not belong to seller and that seller is not entitled to sell object,
such as a stolen object, deed of sale is null and void as a result of juridical impossibility of performance (illegality)

The object sold / merx

General
 Object must be determined or determinable at time of conclusion of contract
 This satisfies requirement that execution of a contract must be physically possible
 If description of object is too vague to determine exactly what is sold, contract will be null and void
 Object sold can be movable (e.g., a car) or immovable (e.g., a farm), material (e.g., a dress) or immaterial (e.g., book debts)
 It must also be merchantable merx; in other words, be property of a person and able to be sold commercially
 CWA Snyders NO v Louistef (Pty) Ltd:
- Louistef hired immovable property from Snyders Familietrust and operated a filling station at the site
- Louistef secured a site licence and retail licence in terms of new Petroleum Products Amendment Act 58 of 2003,
authorising it to sell petroleum products on the site
- Louistef later sold the site licence to trust for R1 million
- Trust applied to HC for a declaratory order to effect that sale was invalid and unenforceable
- The HC judgement:
o Trust’s case was based on a common mistake that res vendita (which is site licence) was a merchantable merx
o Mistake rendered agreement impossible of performance, with result that it was void ab initio
o Court granted the declaratory order, but Louistef appealed judgement
- SCA judgement:
o Granting of a site licence constitutes a delectus personae whereby applicant for licence is personally granted right to
exploit site for purpose of selling petroleum products upon obtaining a retail licence
o Site licence had a commercial value, not only to Louistef, but also to trust, therefore, it constituted a merchantable
merx and was an asset of Louistef, which it could sell and transfer with consent of Controller of Petroleum products
o Court confirmed the validity of sale and upheld appeal, but trust applied to CC for leave to appeal
- CC judgement:
o Court held that lessee’s entitlement to transfer a site licence is an asset with commercial value, but is subject to 2
constraints – it can be transferred only to new lessees or new owners; and it cannot survive termination of lease period
o Site licence has commercial value, but it exists only for a limited time, and only against new lessees and new owners
 o Court found that there is no deprivation of property involved in application of Act and constitutional angle that trust
belatedly sought to attach to application was without merit
o Court was not convinced by trust’s argument that site licence adhered to its property and was transferred to it without
any further application of its own for a site licence in terms of the Act
o Court held that trust benefitted from transfer of site licence and had a right to operate on premises in terms thereof
o Court concluded that trust wanted to have its cake and eat it, and thus dismissed application for leave to appeal
 Sometimes object sold appears to be merchantable, but alienation thereof is prohibited by law: for example no portion of
agricultural land shall be sold or advertised for sale unless Minister of Agriculture has consented in writing to such subdivision
 Where a restraint of trade is incidental to a business and forms part of its goodwill, contractual right to enforce restraint is sold
with business as part of goodwill and object sold
 Botha v Carapax Shadeports:
- One sells a business together with its trademarks, net asset value, and goodwill
- Goodwill thus forms part of thing sold (business)
- Restraint of trade forms part of the goodwill and thus part of the merx
- Cession of rights against former employee to buyer as matter of law
- Trego prohibition – seller of goodwill is prohibited from retrieving it (they cannot canvass old clients)

Different objects sold

Sectional Title property
 Property must be registered in Deeds Office (thus must be very clear on specific unit and undivided common property)
 Object consists of a unit and joint ownership in common property (Phone-A-Copy Worldwide v Orkin) ; (Exdev v Pekudei
Investments)
 Owner of a unit may obtain a right of exclusive use and enjoyment of a demarcated area of common property
 In agreement of sale

Timeshare property
 If timeshare scheme is administered as a sectional title scheme, object sold is same as sectional property, but with limitation
that use and enjoyment is allocated to different owners in terms of a time-schedule
 Where scheme is administered as a share block scheme or a club, object sold is merely a personal right (and not a real right) to
undisturbed use and enjoyment of an exclusive area allocated to persons entitled to it in terms of a time schedule

Future objects
 These objects are only determinable at time of conclusion of contract in terms of certain specifications or occurrence of a
certain event
 Object becomes determined / fixed at occurrence of event (exception = emptio spei)

Emptio rei speratae

 Thing is only determinable at conclusion – will be determined when thing materialises and is fixed
 E.g., S sells next season’s crop to B for R20 per bag – before crop realises, object sold is only determinable and will be
determined when crop has been fixed in units

Emptio spei
 Purely an aleatory sale and chance determines object sold, thus object sold is fixed as soon as the contract is concluded
 E.g., S sells next season’s crop to B for lump sum of R10 000 irrespective of whether crop materialises or not

Generic sale
 Object is indicated in general and only individualised later with result that before individualisation – which consists of a
physical and psychological element – object sold is determinable and will be fixed only after individualisation
 E.g., 20 bags of cement from all the bags available in the seller’s store

 Phone-A-Copy Worldwide v Orkin:

- Sectional property sold with reference to flat numbers before opening of sectional register (future object)
- Court confirms that object sold must be, at the very least, determinable at time of conclusion, otherwise too vague
 Exdev v Pekudei Investments:
- Purchase of a future office unit and an option to procure additional office space in the same impending development
- Merx, a future office unit, was described along lines of an existing merx bought from P and transferred to E, but merx in
the option to purchase was described differently
- The sale of the future office unit and option were contained in the same document
- P claimed damages, founded on E’s repudiation of the sale and option, but E raised validity of contract as a defence and
argued that deed of alienation failed to comply with requirements set out in s 2(1) of Alienation of Land Act 68 of 1981,
rendering it void in terms of s 28(1)
- Court confirmed test to verify whether description of a merx is in compliance with s 2(1): can it be identified from the
contract itself, without resorting to evidence from parties about their negotiations and consensus?
- Court stated that s 2(1) does not require ‘a faultless description of property sold couched in meticulously accurate terms’
- Court highlighted notion to divide possible property description in two broad categories:
o Those where document itself sufficiently describes merx to cause identification of it per se
o Those where it appears from contract that parties intended that either buyer or seller should choose merx from a genus
or class
- Confirmation of latter category can be found in Clements v Simpson:
o Merx must be at least identifiable after seller (or purchaser) decided on lay-out and shape of merx in conformance
with their agreed specified requirements
o Parties’ consensus will thus be complete once merx is individualised
- Court concluded that size and location of future office unit within new building were determined
- All that was left open was individualisation, in accordance with parties’ contractual arrangement, of merx by seller
- As a result, consensus of parties was complete and appeal must fail (E’s argument dismissed)

 Consumer Protection Act 68 of 2008 is applicable where suppliers supply goods and / or services to consumers for
consideration in the ordinary course of the suppliers business
 If CPA is applicable:
- Future objects (goods) sold by description or sample must in all material aspects and characteristics, as envisaged by an
ordinary alert consumer (purchaser), correspond with delivered object (s 18)
- Before accepting delivery of merx, a consumer is entitled to examine it to make sure it is of type and quality agreed upon
or, if a special order was placed, reasonably match material specifications (s 19)
- If consumer did not have an opportunity to examine merx, or if merx does not comply with implied standard, a consumer
may return merx to a supplier (seller) and cancel agreement within 10 business days (s 20)
- Risk and expense in respect of return of merx in this instance lies with supplier

Res aliena
 This is an object of which seller is not owner (does not affect validity of sale)
 Seller’s only duty in terms of a contract of sale is to deliver undisturbed use and enjoyment of all his rights in object to buyer
 If seller knows that he is not owner of object and proceeds with sale, buyer who acts in good faith will be able to hold seller
liable for fraud or fraudulent misrepresentation – actions could also constitute an offence (theft or fraud)
 Where a seller sells a res aliena to a buyer, true owner is, in terms of common law, entitled to claim his property from buyer
with rei vindicatio
 This right of owner stems from nemo plus iuris rule, which provides that a person can only transfer rights which he has to
another person – cannot transfer more rights than you have
 Where a buyer possesses a res aliena in good faith, true owner can claim his property from buyer only if property still exists
 If such a buyer sold property to someone else, true owner cannot claim value of the property from the former buyer
 Owner will be able to claim value where buyer, through his negligent or intentional conduct, made it impossible for owner to
reclaim his property
 Where a buyer buys a res aliena and acts in bad faith, true owner can claim his property from such a buyer
 Where such a buyer is no longer in possession of property or where he has destroyed it, true owner will be able to claim value
of property from buyer
 True owner can exercise these rights against all subsequent buyers who act in bad faith
 True owner of property is not entitled to exercise his rei vindicatio where:
 -
real owner represented to buyer that seller (and not himself) is owner of object sold – doctrine of estoppel will prohibit
true owner from invoking real state of affairs
- object was sold in terms of an order of court and buyer acted in good faith
- an object which, without knowledge on part of curator, does not belong to insolvent estate is sold by a curator who acts in
good faith
- buyer has, by law, a lien or tacit hypothec over object sold
- real owner has instructed a factor to sell object on his behalf, and factor takes purchase price for his own account, while
not being authorised to do so, a buyer, who has acted in good faith, may only be vindicated by real owner compensating
him purchase price
 In the event that CPA is applicable:
- every consumer (purchaser) has right to assume, and it is an implied term of every transaction or agreement, that a supplier
(seller) of goods has legal right and authority to supply, sell, provide ownership or lease those goods (s 44)
- A supplier is fully liable for any charge or encumbrance relating to goods (for example the outstanding debt on a car) vis-à-
vis a third party if it is not disclosed in writing before conclusion of transaction, or if supplier and consumer have colluded
to defraud third party (s 44)

Res litigiosa
 Res litigiosa doctrine: where a second sale occurs pendente lite (pending litigation), rights of first purchaser must prevail and
are consequently enforceable against second purchaser, irrespective of whether second purchaser acted in good or bad faith
 A merx becomes a res litigiosa when summons is served
 This is thus an exception to the rule that a real right is stronger than a personal right

The purchase price

General
 The requirements for a valid price determination are:
- agreement on the price
- the price must be certain
- the price must consist of acceptable currency (or any currency which could be exchanged into currency of country where
price is paid)
o Letters of credit are the most frequent method of payment in international trade
o Where payment does not consist of money, it is not a contract of sale, as one of essentialia of a contract of sale is
absent
- Patel v Adam:
o Purchase price in sale contract: “purchase price shall be payable in monthly instalments free of interest” – wording
too vague because number and amount of instalments cannot be determined
o In effect method of payment left in sole discretion of purchaser, which is unacceptable
o Contract void because manner in which price to be paid not described adequately
 If payment consists of a combination of money and other goods, question is whether contract is one of sale or one of
exchange:
- True intention of parties must be determined to determine what kind of contract it is, irrespective of value of money or
goods
- If parties’ intention cannot be determined or is uncertain, value of money in relation to value of goods must be determined.
If money is of a higher value, it will be a contract of sale. If goods are of a higher value, it will be a contract of exchange
- If money and goods are of equal value, it will be a contract of sale as a presumption exists that parties intend to conclude a
contract of sale rather than a contract of exchange
 Seller and buyer must reach consensus on payment of price, amount thereof and fact that it will be paid as a sum of money

Agreement on the price

 No contract of sale exists where price is not determined or determinable
 Parties must have serious intention that agreed price will be price for their contract and that it will be payable as agreed
 Law will not recognise an agreement on price where there is a serious disproportion between price and value of object sold
 Parties are expected to look after their own interests, although it is possible that a sale could be a bargain, without one party
doing other a favour (price can be less than value of object, but where it is completely out of proportion – no contract of sale)
 Where price is only determinable (and not determined), method of determination must be valid and effective to prevent
contract from being null and void
 Examples of valid methods of price fixing:
- Where price is fixed as a lump sum (e.g., R125)
- Where price is determined per unit (e.g., R120 per bag)
- Where an objective measure is used (e.g., purchase price plus 30%)
 Examples of ineffective methods of price fixing:
- Where one of parties may fix price unilaterally
- Where an unnamed third party is to determine price
- Where the price is only described as reasonable and fair
 Where a third person makes a reasonable determination, parties are bound thereby
 Any discretionary power had to be exercised arbitrio boni viri
 Where determination is unreasonable, a court can correct it, and other party is given a choice to abide by agreement or not
 Where there is a current or usual price for object sold, the selling price may be the current or usual selling price

Influence of the CPA on purchase price

 If CPA is applicable, a supplier (seller) is prohibited to enter into an agreement to supply (or market) any goods at a price that
is unfair, unreasonable or unjust (s 48)
 If a price is unfair, unreasonable or unjust, a court may make any order that it considers just and reasonable, such as return of
money or property, or awarding compensation to consumer / purchaser (s 52) – hence, it seems that abolished laesio enormis
doctrine has been revived in respect of price
 A retailer / seller must adequately display price of goods on sale and they are not entitled to charge a higher price than
displayed price (s 23)
 If more than one price is concurrently displayed, supplier is bound by lowest price (s 23)
 Supplier is not bound by a displayed price if it contains an obvious error or has been tampered with (s 23)
 A retailer is not required to display price of goods that are displayed predominantly as a form of advertisement of supplier, or
of goods that are not ordinarily accessible to consumers (s 23)

Theme 3: Formalities
General
 Formalities (as a requirement for conclusion of a valid contract of sale) refers to external visible form required for that specific
contract (such as a written contract, signed by the parties)
 General rule of common law is that no formalities are required for a valid or enforceable contract of sale
 This general rule still applies to the law of purchase and sale of movable property
 However, certain statutory formalities are required for the valid purchase and sale of immovable property
 Parties themselves may also (where no statutory formalities are required) agree to certain formalities for their contract
 Their intention has to be examined carefully, as two possible reasons for such an agreement could exist:
- that contract will only be valid after the formalities are complied with
- that formalities (such as writing it down) will only serve as proof of an existing contract between the parties, in which
case a valid contract already exists before the formalities are complied with.
 However, a written contract need not be a formal document. It can, for example, be contained in a letter or invoice
 Where formalities are required by statute, parties cannot, as a general rule, change, exclude or abandon these formalities
through mutual agreement

Contracts for sale of land

Formalities in terms of Alienation of Land Act
 S 2(1) of ALA, which commenced on 19 October 1982, requires following formalities with regard to contracts for the
purchase and sale of land:
- No alienation of land after commencement of this section shall, subject to provisions of s 28, be of any force or effect
unless it is contained in a deed of alienation signed by parties thereto or by their agents acting on their written authority
 A deed of alienation of land cannot be concluded by electronic means, for example, e-mail, Internet or SMS (s 4(4) of
Electronic Communications and Transactions Act 25 of 2002 (ECTA))
 Requirement that agent must have the written authority of his principal, is excluded:
- where the agent acts with regard to a pre-incorporation contract of a company or close corporation not yet floated
- where a partner acts on behalf of the partnership
- where a person is by operation of law authorised to act on behalf of another person (e.g., a parent who purchases land on
behalf of their minor child)
- where functionaries or organs act on behalf of a company
 None of the formalities required for sale of land is necessary where sale is by public auction
 Such a sale is complete not on subsequent acceptance of conditions of sale, but upon property being knocked down to highest
bidder

Important concepts
 Terms that are important for interpretation of s 2(1) of ALA:
- Alienate: to sell, exchange or donate, irrespective of fact that it is subject to a suspensive or resolutive condition, and
alienation has a corresponding meaning
o Reason for qualification regarding presence of a suspensive or resolutive condition stems from Corondimas
principle, that when a contract of sale is subject to a true suspensive condition, no sale exists unless and until the
condition is fulfilled
o Although subject to criticism (that a contract does exist yet its enforceability or continuation is affected by such a
condition), this still reflects the law as it stands
- Land includes the following:
o any unit (thus same requirements have to be met where sectional property is sold)
o any right to claim transfer of land
o any undivided share in land
o for purposes of chapters I and II of ALA, also any interest in land, except a right or interest registered or which can
be registered in terms of the Registration of Mining Titles Act 1967. There is a tendency to interpret this aspect of
the definition restrictively, so as to exclude agreements envisaging the acquisition of indirect interests in land
- Deed of alienation: document or documents in terms of which land is alienated, and has a wider meaning than contract.
An interest in land will, inter alia, include a habitatio, usus and ususfructus
 Similar formalities for other kinds of immovable property governed by other legislation (e.g., shareblocks, timeshares, etc.)

Aim of statutory requirements

 The aim of these requirements as set out above is to prevent:
- disputes regarding the contents of a contract
- any uncertainties regarding contents of contract
- malpractices

Written contract required

General
 A contract usually consists of only 1 document, but this is not a requirement as more than 1 could constitute a single contract
 Parol evidence rule also applies – no verbal testimony is allowed in legal proceedings to supplement, change or contradict
terms of a written contract
 Where the contract is valid, but document does not reflect true intention of parties, verbal testimony (as an exception to parol
evidence rule) is allowed to prove the true intention of the parties – contract can then be rectified
 Deed of alienation must contain all essentialia and material terms expressly raised or implied in negotiations by parties
[Herselman v Orpen]
 If this should be lacking or be incomplete, contract is void
 A material term is one that parties regard as important enough to insert in contract
 To decide whether a term is material, following questions must be answered in the affirmative [ Herselman v Orpen]:
- did the parties apply their minds to the term; and
- did they agree, either expressly or impliedly,
o that the term should form part of their contract, and
o be binding on them?
 This only applies to those terms that are not naturalia
 Deed of alienation must also contain right of buyer to terminate deed of alienation in terms of s 29A of ALA, or s 16 read with
s 32 of CPA (if applicable) [Section Three Dolphin Coast Medical Centre CC v Cowar Investments ]

Object sold must be clearly defined

 Written contract must clearly identify the object that is sold – if it cannot be identified, contract will be null and void [ Phone-
A-Copy Worldwide (Pty) Ltd v Orkin; Exdev (Pty) Ltd v Pekudei Investments (Pty) Ltd ]
 This question will be determined by facts and circumstances of each case
 Test is whether object can be identified as determined or determinable with reference to written contract only, without any
parol evidence being led

Clements v Simpson:
 S sold an erf, which was still to be subdivided, to C (at the time of conclusion of contract, merx was merely a future merx)
 Validity of contract of sale was disputed on grounds that merx had not been adequately described and that s 2(1) of ALA
formalities had not been met
 Court laid down general guidelines to determine whether an object sold has been defined correctly in law:
- Absolutely accurate description of object sold is not required. As long as object sold can be reduced to certainty, it is by
itself certain
- It should, however, be possible to determine intention of parties to contract with a reasonable degree of certainty
- Inelegant, unrefined or poor use of language does not automatically affect validity of deed of sale, on condition that
stipulations of contract can still be established with a reasonable degree of certainty
- Test is whether object sold can be identified properly only under deed of sale itself, without extrinsic evidence being
adduced

- As a general rule, there are 2 categories of contract as far as description of merx is concerned – where contract of sale
o itself describes the merx adequately; and

o lays down a workable formula for fixing merx, which is usually case where merx is from a genus or class
- Category applicable to a specific contract is determined by intention of parties and wording of the contract itself
 Court held that, despite clumsy and verbose description of merx, parties’ intention to conclude a generic sale could be gleaned
from contract, which was declared valid

 Other possibilities in properly defining object sold are to:

- Attach a map to contract. Such map (which forms an integral part of contract), should be attached at time of concluding
contract and may not be added once contract has been concluded
- Describe object sold by way of an objective criterion (e.g., The farm Knoppieslaagte which is registered in name of X
and is hypothecated by a bond in favour of Y)
 Where sectional title register has been opened, sectional property may be circumscribed on the basis of:
- unit’s number, the name of the building(s) and the number of the sectional title plan
- undivided share in the common property
- exclusive-use area, if such an area exists
 Where sectional title register has not been opened, sectional title property may be circumscribed on the basis of:
 - a draft sectional plan which circumscribes unit three-dimensionally and which also contains a description of undivided
share in common property and exclusive-use area (if there is one); or
- a generic sale [Phone-A-Copy Worldwide (Pty) Ltd v Orkin]

Purchase price must be clearly defined

 Deed of alienation must also clearly state purchase price, as well as method and time of payment
 Where the price is payable in instalments, deed of alienation must clearly state amount of periodic payments, periods between
payments and time when payments must be made [Patel v Adams]
 Where these are absent or not stated clearly, the contract will be null and void
 Chretien v Bell:
- Agreed that purchase price payment details would be agreed on in writing not later than 30 April 2005, which never
happened
- SCA held that that s 2(1) of ALA requires that all material terms must be in writing and that a material term is not
restricted to the essentialia of a contract
- Court also held that manner and time of payment is generally a material term and that there is no valid contract where a
material term was left open for further negations to be agreed thereon
- Consequently, deed of alienation in this matter did not comply with s 2(1), and was for this reason void
 Terms that are naturalia do not have to be in writing

Parties must be clearly described

 Parties to contract must also be clearly described in the deed of alienation
 This means that both the seller and the buyer must be identifiable in terms of the contract
 Contract must also state that there is both a seller and a buyer
 If other persons are involved in the contract, their capacities must be clearly described in the contract
 Scheepers v Strydom
- Deed of sale described purchaser as HC Strydom and HW Scheepers in their capacities as directors of a company to be
formed (Long Valley (Edms) Bpk), or in either of their personal capacities
- Since the name Long Valley was not available, intended company was formed under name Stryper (Edms) Bpk, and it
took registration of merx against payment of purchase price
- Court a quo held contract of sale to be invalid because identity of purchaser could not be determined ex facie the written
contract
- According to court a quo, purchaser could have been one of three persons:
o HC Strydom and HW Scheepers in their capacities as directors of a company to be formed
o HC Strydom in his personal capacity; or
o HW Scheepers in his personal capacity
- Appellate Division held that all essential terms of a contract for sale of land, including identities and capacities of parties,
must be described adequately in deed of alienation
- HC Strydom and/or HW Scheepers could qualify as purchasers in their personal capacities because company to be formed
was incorporated, but did not ratify agreement
- Seller would then be entitled to hold either HC Strydom or HW Scheepers or both of them liable as purchasers – contract
was therefore declared valid

Alteration of written contracts

 Where any substantial stipulation in a deed of alienation is altered, alteration must comply with any statutory formalities
applicable to that contract
 If these formalities are not complied with, the deed of alienation would be null and void
 If informal alterations were allowed, the aim of the legislator would be frustrated
 Termination and re-instatement of written
contracts
 Cancellation or re-instatement of a deed of alienation does not have to comply with statutory formalities required for
conclusion or alteration thereof – termination or re-instatement can be effected verbally

Blank spaces
 Deeds of sale of land are often drawn up in practice on basis of printed standard format contracts
 Blank spaces are left for variable data (such as the purchase price) on these printed standard format contracts, and have to be
completed by hand
 These blank spaces are sometimes not completed, which brings validity of the contract into question
 Where standard terms of sale had been printed in such fine print as to render them practically illegible, said conditions will not
form part of contract and the parties will not be bound by them, which also influences the validity of the contract

Johnston v Leal:
 Standard-form contract where the amount of bond and period within which to procure was left blank
 In order to determine effect of incomplete blank space(s) on validity of deed of sale, 3 possible constructions should be
examined
- Intention of parties to contract is that (blank) clause concerned should not form part of the agreement – in this case, clause
is regarded as unwritten, which will have no effect on the validity of the contract
- Intention of parties to contract is that (blank) clause concerned should form part of agreement, and that it should be left
blank until parties have consensus about the content thereof. If the parties have not reached consensus about content of
blank clause and have not completed it accordingly, the contract is null and void, because:
o there is no consensus about all fundamental stipulations of the contract; and
o statutory formality precepts have not been met
- Parties to contract intend blank clause to form part of agreement and in fact there is consensus about content thereof. For
some reason, blank space is inadvertently not completed. In this case the contract is unenforceable but amenable to
rectification, as true intention of parties to contract is not reflected
 This contract fell into third category and extrinsic evidence was admitted regarding
- Whether or not blank space forms part of contract
- Why it was left blank

Rectification of blank spaces

 Rectification of a blank space is possible only if it appears from ( ex facie) written document that it is a valid deed of sale
 Where a material clause has been left blank rectification may not take place, as it appears from written document that there is a
deed of sale which is null and void and contracts that are null and void are not rectifiable
 Sometimes it is impossible to determine from written document whether blank space contains a material clause or not
 In order to determine materiality of clause concerned, extrinsic evidence may be adduced
 If it is found that clause is material, deed of sale is null and void and rectification cannot take place
 If it is found that clause which has been left blank is not material, rectification is possible by law and evidence on content of
the blank space can be adduced
 Smit v Walles:
- Contract of sale between S and W was in a pre-printed form upon which certain terms were typed in blank spaces
- Space dealing with particulars of occupation provided: ‘Date to be agreed upon by seller or his agent and the purchaser.’
- S had already been in occupation of property at time of conclusion of contract
- Dispute regarding the validity of the contract of sale later arose between S and W
- Court held that first question to be answered was whether it appeared from document itself that term in question was a
material term – if so, contract was invalid and not susceptible to rectification
- Court pointed out that it may sometimes be impossible to determine ex facie the document itself whether a term is
material
- Next question was whether integration rule allowed evidence to be led which conflicted with provisions of contract of sale
- To surmount the latter obstacle, the court followed the following modus operandi:
 o Evidence may be heard to determine whether or not the term was material
o Should term be found to be material, contract of sale would be void because of non-compliance with the statutory
formalities and rectification would not be allowed
o Should the term be found not to be material, the contract of sale would be valid and susceptible to rectification
o In the latter instance, parties did not necessarily intend term to be pro non scripto (unwritten) and evidence could be
heard on the contents of the term.
- In casu, court held that contract of sale complied with statutory formalities and that evidence on circumstances
surrounding non-completion of the clause was admissible

Signature of parties
 As a second formal requirement, both parties must sign the deed of alienation
 If the parties do not act personally, their representatives must act on their written authority
 A party to a contract does not have to sign his name in full
 Any mark or initial that identifies the party is sufficient
 If CPA requires a document to be signed or initialled, that signing or initialling may be effected in any manner recognised in
law, including an electronic or advanced electronic signature as defined in s 2(3) of ECTA, provided that a supplier takes
reasonable precautions to ensure an electronic signature is not used for any other purpose (s 2(4))
 Nevertheless, in terms of s 4(4) of ECTA, a deed of alienation of land may not be concluded by electronic means
 Due to fact that an offer and the acceptance thereof can be contained in two different documents, each document must be
signed by both parties to the agreement to effectively form a deed of alienation [ Herselman v Orpen]
 Extrinsic evidence is admissible to determine identity of the signatory
 An agent can only act on behalf of either a seller or a buyer (as the principal) where a sale of land is concluded, if the agent has
written authority to act on behalf of his principal
 Object of this requirement is to minimise the risk of subsequent disputes as to authority of an agent who purports to sign on
behalf of a principal
 Written authority must already exist at time of conclusion of the contract and the agent must have knowledge thereof
 Agent does not have to be in possession of this authority when he signs the contract
 A telegraphic authority is also sufficient
 An agent cannot act on behalf of a trust still to be formed – such a deed of alienation will be null and void, because one cannot
act as an agent on behalf of a principal who does not exist at the time of the representative act
 A letter of authority by the Master of Supreme Court in terms of s 6(1) of the Trust Property Control Act 57 of 1988 is
required before a trust may enter into a deed of alienation of land
 Thorpe v Trittenwein:
- To put quality and effectiveness of a written authority in terms of s 2(1) of ALA in perspective, following aspects have to
be considered:
o Authority does not have to be signed by principal, resulting in possible tarnishing of authenticity thereof.
Declaration of an agent’s authority, written in presence of his principal, will suffice
o Nature of writing and document containing authority is irrelevant
o It is not necessary to identify agent by name in authority
o If agent initially had written authority to enter into the deed of sale, written authority is not required anew for
amendment thereof
- It is difficult to understand how a document of this quality can accord with the legislature’s intention, being the
prevention of uncertainties, exclusion of disputes and avoidance of malpractices.

 Previously, a written authority was not required if an agent acted on behalf of a company [s 69 of Companies Act 61 of 1973]
 However, Companies Act 71 of 2008 does not have a similar provision
 A company, being a legal entity, cannot itself sign any agreement and cannot provide its functionaries with written authority to
sign on its behalf
 In terms of s 66(1) of the Companies Act 71 of 2008, business and affairs of a company must be managed by or under
direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company
except to the extent that Act or the company’s memorandum of incorporation (MOI) provides otherwise
 Contracting powers of directors and managers may be declared in MOI, and if not, s 15(3) authorises board to make
supplementary rules relating to the governance of the company in respect of affairs that are not addressed in Act or in MOI
 Therefore, board is allowed to make rules delegating powers to administrators of company, such as company’s managing
director
 However, a clear distinction must be drawn between a company’s representatives whose authority derives from the company’s
MOI or rules, or from the Act, and those representatives whose authority is founded on an act of authorisation
 Former are not agents in the strict sense of the word, and their relationship with company is not governed by the law of agency
 These persons are better referred to as company’s organs or functionaries
 Functionaries are to be distinguished from persons who have no management powers, either by law or in terms of company’s
MOI or any delegated power granted to them by the company’s functionaries
 These persons do not speak and act as the company, but they may be authorised by the company’s functionaries to sign a
contract on behalf of the company, but they then do so as the company’s agents, and their relationship with the company is
governed by the normal principles of the law of agency
 Within the framework of legislation governing formalities, it is generally recognised that term “agent” refers to an agent in
strict sense of the word
 Therefore, an “agent” for purposes of legislation dealing with formalities does not include a company’s functionaries or
organs, and latter may sign agreements for alienation of land on behalf of a company without being authorised in writing
 Persons who are not functionaries of a company may be appointed by company as its agents and be authorised to sign
agreements for the alienation of land on behalf of the company
 Authority granted to such agents must be in writing, irrespective of whether agent is a person within organisation of company
or an outsider
 If CPA is applicable and an agent falls within the definition of an “intermediary”, they must disclose (and put in safekeeping)
information prescribed by Minister of Trade and Industry (s 27(3)) to any person whom they represent regarding sale or supply
of any property, goods or services
 Information to be disclosed includes, inter alia, full identification, services to be rendered, fees, commission and costs payable,
disclosure of any code of conduct which may be relevant and the revealing of dishonest or criminal behaviour

Influence of CPA on formalities

 Formality requirements in terms of s 2(1) of ALA seem to be in conflict with CPA, if applicable, which does not require
agreements in general to be in writing and, if in writing, to be signed by a consumer (purchaser) (s 50)
 If an agreement is required to be in writing, such written agreement should be in plain and understandable language (s 22)
 However, it is not compulsory that the agreement should be provided in one of the official languages
 Electronic signatures are also allowed by CPA (not applicable to deed of sale)
 To solve conflict ALA and CPA, provisions of s 2(9) of CPA apply, which instructs that if there is any inconsistency with any
other Act and CPA, the provisions of both Acts apply concurrently if possible to apply and comply with one of inconsistent
provisions without contravening any of the Acts
 If this is not possible, the provision that extends the greater protection for the consumer prevails
 Borcherds v Duxbury:
- Party signed via an app on their phone
- Electronic signature contrary to ECTA and ALA (thus not valid)
- Approach by court was pragmatic, not formalistic – function of signature (to authenticate ID of signatory) rather than
form
- No possibility of abuse in casu (which is usually why electronic not allowed) thus signatures complies with ALA
- Criticism:
o Judgement creates uncertainty
o Not binding on other provinces
o Only SCA or legislative amendment of ECTA and ALA can change legal position

Consequences of non-compliance with

formalities
Legal consequences of non-compliance with the formalities (s 28(1) and (2) of ALA):
 The contract is null and void. No legal obligation exists between the parties
 If one of parties delivered whole or only a part of his performance, he cannot claim counter-performance from other party
 Any party who delivered such a performance is entitled to reclaim his performance from the other party
 Buyer who has made performance in terms of the invalid contract, is entitled to claim the following from the seller:
 - interest at the prescribed interest rate, on any payment made by the buyer to the seller; and
- reasonable compensation for:
o any essential expenses, incurred with or without consent of owner, for protection and improvement of the land; and
o any improvement made with express or tacit consent of the owner, which increases the market value of the land
 Seller who allowed the buyer to possess the land, is entitled to claim the following from the buyer:
- reasonable compensation for the buyer’s occupation, use and enjoyment of the land; and
- compensation for any intentional or negligent damages caused to land by actions of buyer or someone for whose actions
he is responsible
 Where both parties delivered complete performances in terms of a contract which is actually null and void due to the fact that
formalities were not complied with, contract is deemed to have been valid and binding from the time of conclusion thereof

Legator v McKenna:
 Mrs S was in a serious motor vehicle accident and suffered severe brain injuries and HC appointed Attorney M as her curator
bonis to manage her affairs and her estate
 Acting in his capacity as curator bonis, Attorney M sold Mrs S’s home to Mrs and Mr E for R540 000
 Property was transferred into names of Mrs and Mr E by registration thereof in Deeds Office in Pietermaritzburg (KZN) in
April 2002 upon which date the full purchase price was paid into the estate of Mrs S
 Mrs S recovered from consequences of her brain injuries and Durban HC declared her capable of managing her own affairs
 Later she instituted an action for return of her house (de-registration thereof in Deeds Office) against repayment of purchase
price
 Mrs S argued that sale was void as it was not reduced to writing and therefore not compliant with s 2(1) of ALA
 Court found that general consequences of non-compliance with s 2(1) where parties performed in full are that purported sale
was never properly concluded
 Court held that abstract theory of transfer applied to transfer of both immovable and movable property and that requirements
for the passing of ownership were:
- Delivery - which, in case of immovable property, was effected by registration of transfer in the deeds office
- Real agreement – essential elements thereof is an intention on part of transferor to transfer ownership and intention of
transferee to become owner of property
 Abstract theory did not require a valid underlying contract, ownership would not pass – despite registration of transfer - if
there was a defect in the real agreement
 There were no defects in real agreement, with result that property was validly transferred to the second respondents
 Rule in Wilken v Kohler (if both parties to an invalid agreement had performed in full, neither party can recover their
performance purely on basis that agreement was invalid) is underpinned by idea that, if parties had received exactly what they
had bargained for, they should not be allowed to escape the consequences of a bad bargain by means of an enrichment action
(which is an equitable remedy)
 Rule can find application where, despite non-existence of an agreement, parties' intention, or purpose of transaction, was
achieved, but cannot apply where this purpose is prohibited by law
 Rule applied equally where agreement was void for non-compliance with statutory formalities
 Sale was declared valid by the court

 The same consequences are applicable to a contract of sale of land concluded before the commencement of ALA
 Any renunciation or surrender of these rights and consequences by the parties is null and void
 CPA, if applicable, is, however, silent on consequences of non-compliance with formalities imposed in terms thereof

Right to revoke offer or terminate deed of

alienation
 In terms of s 29A of ALA, a buyer may within five days after signature unconditionally terminate a deed of alienation by a
written and signed notice, provided that the purchase price does not exceed R250 000, the buyer is a natural person and the
land is used for residential purposes
 Section 3 Dolphin Coast Medical Centre v Cowar Investments:
- X, a natural person, bought a sectional title unit – purchase price was under R250 000 and none of exceptions mentioned
in s 29A(5) of ALA applied, thus X could make use of the cooling-off right
- X contended that agreement was void because of non-compliance with s 2(2A), which provides that deed of alienation
shall contain right of purchaser or prospective purchaser to revoke offer or terminate deed of alienation in terms of s 29A
- S 2(2A) is silent as regards non-compliance therewith
 - Court stated that s 29A distinguishes between a purchaser who only signs an offer and one who signs a deed of alienation
o If purchaser signs an offer, cooling-off period may expire even before offer is accepted (before a contract of sale
comes into being)
o ALA nowhere requires an offer to contain reference to rights embodied in s 29A, while it is required in a deed of sale
o Reason for this distinction can be found in purpose of s 2(2A) – it does not create rights but aims to bring rights that
already exist pursuant to s 29A to attention of an ignorant purchaser
o Therefore, an offer that does not comply with s 2(2A) should merely be voidable at instance of party for whose
benefit it was enacted
o Fact that a deed of sale must contain a reference to cooling-off right does not mean that offer also has to contain such
a reference – if a seller receives an offer that is silent regarding s 29A, lacking information can be supplemented and
document, which is then signed, will comply with s 2(2A)
- On appeal SCA confirmed that a deed of alienation which does not comply with s 2(2A) is not ipso facto void, but at the
instance of the purchaser

 Where a deed of alienation is terminated as contemplated in s 29A of ALA, every person who received any amount from buyer
shall refund full amount of such payment within 10 days after the said notice was delivered to the seller
 Notwithstanding any other right in law and if CPA is applicable, a consumer (purchaser) may return goods to a supplier and
cancel agreement within ten business days if goods were delivered as a result of direct marketing (s 16)
 Supplier must then return any payment received from the consumer within 15 business days
 Goods are returned in this instance at the consumer’s risk and expense (s 20)
 It is also a requirement that a contract has to contain a provision informing a consumer of their right to rescind (“cool-off”)
from contract (s 32) – similar to s 2(2A) of ALA
 “Direct marketing” means to approach a consumer, either in person, by mail or electronic communication for direct or indirect
purpose of promoting or offering to supply any goods and services in ordinary course of business or requesting a person to
make a donation of any kind for any reason

Theme 4: Seller’s Duty of Safekeeping of Thing

Sold
Introduction
 When a valid contract of sale is concluded, both seller and buyer have to fulfil certain contractual duties
 These duties or contents thereof are naturalia of every contract of sale
 Parties may by agreement exclude or limit these duties (in form of incidentalia)
 Duties of seller are:
- safe-keeping or duty to take care of the object sold
- delivery of ownership
- warranties against eviction and latent defects

Safe-keeping of Object Sold

Seller’s duty
General principles
 First duty of seller is to take care of and protect object from time of conclusion of contract until object is delivered to buyer
 A buyer may claim damages from a seller for any damage caused by seller’s intentional or negligent conduct
 As a general rule, seller will not be liable for damages where his conduct was without fault (doctrine of passing of risk)
 Parties may change duty of safe-keeping through agreement
 Culpable conduct of seller resulting in damage or destruction of object sold, can be divided into the following:
 - Intentional acts, where seller intended specific consequences of his act
- Negligent acts, where seller does not act in the way a reasonable man would have acted under same circumstances
Negligence takes two forms:
o Mere carelessness
o Gross negligence
- In these instances, coincidence or an act of God is irrelevant

Factors that influence the duty of safe-keeping

 Mora debitoris or mora creditoris of buyer and mora debitoris of seller
 Where buyer is in mora debitoris or mora creditoris (where he fails to pay price or fails to receive object sold), seller will only
be held liable for damages caused by his intentional or grossly negligent conduct
 Where seller is in mora debitoris (where he fails to deliver the object sold), he is responsible for any damage whatsoever, even
in absence of fault on his part
 Mora creditoris of seller (where he fails to receive payment) has no influence on duty of safe-keeping

Passing of risk
General principles
 Doctrine of passing of risk determines whether seller or buyer bears risk where accidental damage is caused to object either by
coincidence or by acts of God, and not by culpable conduct of either party
 General rule is that owner suffers loss when his property is destroyed
 Seller, while retaining ownership, would bear burden of total or partial destruction of object, without being able to claim
purchase price from buyer
 Doctrine of passing of risk causes risk to pass to buyer when sale is perfecta
 A contract is perfecta when:
- buyer and seller have intention of buying and selling
- object to be sold is determined. In the case of:
o an emptio rei speratae, object sold is fixed after being measured or weighed
o an emptio spei, object sold is fixed as soon as the contract is concluded
o a generic sale, object sold is fixed after individualisation
- purchase price is determined
- contract is not subject to a suspensive condition
 Result is that buyer bears risk where object is damaged or destroyed through coincidence or an act of God
 Buyer is still liable to pay purchase price even where seller has not yet delivered the object to him
 This is a naturale of any contract of sale and parties may by agreement exclude or change it

Damage and advantage

 All damage caused to object of sale without fault of any of parties is borne by either seller or buyer
 Such damage may be caused by many different factors (e.g., fire, floods, earthquakes or war), as long as it is due to
coincidence or an act of God, and not to the culpable conduct of either seller or buyer
 Any advantage or benefit derived from object sold after conclusion of contract but before delivery, is also allocated to one of
parties according to rules
 Principles as applied to passing of risk also apply to allocation of benefits
 Advantages may consist of:
- natural / accessory accrual of object of sale (e.g., where a cow has a calf after date of sale but before delivery of cow to
buyer)
- benefits / substitutive advantages which form an inherent part of object sold (e.g., to bring a civil action against a thief
after conclusion of contract but before delivery of object sold)
Summary of duty of safe-keeping and passing
of risk
Damage to object after
conclusion of contract
but before delivery

Fault No fault
(Intent / (coincidence / acts
Negligence) of God)

Duty of Passing of Risk

Safekeeping

Seller bears Buyer bears risk if

damages contract is
perfecta

Influence of the Consumer Protection Act on

risk
 S 19 of CPA, if applicable, provides that in absence of an express agreement to contrary, goods to be delivered, remain at
supplier’s (seller’s) risk until consumer (purchaser) has accepted delivery
 Acceptance of delivery is deemed when:
- consumer expressly or implicitly communicates to a supplier that they have accepted delivery of such goods
- consumer does anything in relation to goods that is inconsistent with supplier’s ownership
- consumer keeps goods for an unreasonable period without informing supplier that they do not want it
 These provisions do not apply to franchise agreements or where transaction is governed by s 46 of ECTA

Theme 5: Seller’s Duty of Delivery; Transfer of

Ownership & Double Sales
General
 Mere conclusion of a contract of sale does not transfer ownership to buyer – other requirements have to be met before
ownership is transferred
 On conclusion of contract, buyer only obtains a personal right (legal claim) against seller for delivery of object sold
 Contract merely enables buyer to obtain a real right in the object sold
 Real right can only exist if all requirements are met
 Lendalease Finance:
- C bought Maize from Maize Board and maize was loaded onto a ship
 - Seller was to provide purchaser with bill of lading and mass certificate as proof of delivery, after which purchaser was to
pay cash by means of a letter of credit
- C approached X to undertake conveyance of maize, but their shipping contract was never implemented, and C concluded
a shipping contract with Y
- X sued C for repudiation of their shipping contract and ceded this claim to L, the appellant
- L contended that ownership of maize passed to C once it was loaded on ship, but C said it passed when documents had
been handed over to C’s bank
- Appellate Division laid down the following requirements for the passing of ownership:
o Ownership does not pass by virtue of contract of sale alone
o There must be delivery of merx, which is subject to: intention of parties; contractual conditions affecting passing of
ownership; and whether sale is for cash or credit
o In case of a cash sale, ownership passes upon delivery and payment made pari passu (simultaneously)
o In case of a credit sale, ownership passes upon delivery, if parties intended that credit be granted expressly or tacitly –
credit is usually granted where payment has been postponed for a period after delivery
o Whether a sale is for cash or credit depends on intention of the parties
o Until the contrary is established, every sale is presumed to be for cash
- In casu, symbolic delivery takes place by handing over of a bill of lading by seller
- In casu, intention was that ownership would pass upon symbolic delivery and payment of purchase price (cash sale)
- Loading of maize did not constitute delivery; it merely put carrier in possession (control) of merx – delivery would only
take place upon handing over of bill of lading to purchaser
- Since a cash sale was intended, purchase price also had to be paid before ownership could pass
- L contended that it was a credit sale because of substantial period between loading of maize and payment of purchase
price, which would mean that ownership had passed to C when the maize was loaded
- Appellate Division rejected this argument because loading did not constitute delivery
- L argued that letter of credit caused transaction to be a tacit credit sale because it provided security for payment of
purchase price
- Court rejected this argument and held that under these circumstances, letter of credit merely assured seller that purchaser
was willing and able to implement his obligation to pay
- Appeal was dismissed
 There is no duty on seller to transfer ownership to buyer, as ownership is not one of requirements for a valid and binding
contract
 Exception is where seller is in fact owner of object sold, in which case duty to transfer ownership is present

Requirements for passing of ownership

Immovable property
 A buyer will only obtain ownership (a real right) of immovable property where:
- seller is the owner of the object sold
- seller has intention of transferring ownership and buyer has intention of obtaining ownership
- property is registered in name of buyer
 Payment of purchase price is not required for transfer of ownership of immovable property

Movable property
 A buyer will only obtain ownership (a real right) of movable property where:
- seller is the owner of the object sold
- both parties have the intention to pass ownership from the seller to the buyer
- where it is a cash sale:
o seller must deliver the object to the buyer
o buyer must pay the purchase price;
- where it is a credit sale:
o only requirement is delivery of object to the buyer
o price does not have to be paid to transfer ownership, as is case with a cash sale, but parties could agree that ownership
only passes when price has been paid
 Payment of purchase price
Cash sale
 Cash sale exists where both parties intend to effect delivery and payment of purchase price at same time, or at least on same
day
 Rebuttable presumption exists that each sale is a cash sale unless parties expressly or tacitly agree that it is a credit sale
 Mere delivery of object sold to buyer does not constitute a credit sale
 If payment has to be made in cash (thus, at same time as delivery or at least on same day), seller is entitled to reclaim object
from buyer within a reasonable time if he does not receive payment from buyer
 If he does not do so, his actions could constitute a change of intention of parties, in that parties intend sale to be a credit sale
- In this case, buyer will receive ownership through mere delivery of object sold
 What is seen as a reasonable time will depend on facts and circumstances of each case
 In terms of Insolvency Act, 10 days is a reasonable time for a seller to reclaim object delivered in terms of a contract of sale
 Statutory period can be used as a broad guideline for the determination of a reasonable time

Credit sale
Tacit granting of credit
 If seller tacitly provides credit to buyer, ownership passes to buyer through mere delivery of object sold
 Grosvenor Motors v Douglas:
- D sold a car to K and after concluding sale, K told D that he did not have his cheque book with him
- D gave K opportunity to travel with the car to fetch a cheque
- D had mislaid car’s registration documents, and K asked for a letter to effect that D had sold him car before his departure
- K’s cheque in payment of purchase price was handed to D the following day, but 2 days later, D was informed that cheque
had been dishonoured because no such account existed
- Meanwhile, K had resold the car to G
- D succeeded with a claim based on rei vindicatio for return of car by G – G appealed
- Legal question: in whom was ownership of car vested?
o If it was a cash sale, ownership did not pass to K because there was no payment
o If it was a credit sale, ownership would have passed to K upon delivery of the car
- Appellate Division held that mere delivery of a merx did not constitute credit sale, and that credit sale was not intended
- G contended that because cheque had been drawn on a place other than place where it was handed over as payment, time
had elapsed between delivery and payment which indicated that credit had been granted
- Appellate Division rejected this argument
- According to the court, letter given by D to K did not entitle K to sell the car to G, nor did it prevent D from instituting
rei vindicatio
- Court further held that negligence was a requirement for estoppel, and since D was found not to have been negligent in
giving letter to K, doctrine of estoppel found no application in circumstances
- Appeal was dismissed, and D could proceed to claim return of car from G with the rei vindicatio
 In general, the following would constitute tacit granting of credit:
- seller accepts security for payment of purchase price (such as a pledge, bond or surety)
- parties agree on an interest rate for payment of interest on purchase price
- granting of credit can be deduced from previous transactions between parties
- where it is customary for that commercial transaction to be concluded on a credit basis
- seller accepts a post-dated bill of exchange or cheque as payment
- seller does not insist on immediate payment, or does not reclaim object sold within a reasonable time even though parties
agreed on a cash sale

Payment by cheque
 Cheque is not legal tender
 Sale is not a credit sale, and ownership is not transferred to the buyer merely by delivery of the object sold
 Sale is not a cash sale, and ownership is not transferred to the buyer when payment is made by cheque
 Intention of the parties determines whether it is a cash or a credit sale
 Payment by cheque is a conditional payment and will only be made when amount represented by cheque is actually paid to
seller
 Post-dated cheque suggests tacit granting of credit, where ownership passes to buyer on mere delivery of object sold
 If a cheque is drawn in one place payable on demand, but is collected in another place, payment will only be made when
amount is actually paid to seller
- Fact that a considerable lapse of time arises between time when cheque is drawn and when it is collected (paid out) does
not cause it to be a credit sale, unless parties to contract have expressly or tacitly intended it to be so

Delivery of object sold

General
 Minimum requirement for transfer of ownership from seller to buyer is delivery of object sold
 Ownership will never be transferred to buyer where delivery has not been effected, even though buyer has already paid
purchase price
 Right to use, enjoy and dispose of object is transferred to buyer on delivery of object sold
 Ordinarily a buyer is entitled, upon delivery, to deal with object sold as he pleases without any need to account to seller

Forms of delivery
Immovable property
 Immovable incorporeal property (such as servitudes) is delivered through registration of cession of rights in terms of
Registration of Deeds Act 47 of 1937
 Immoveable corporeal property (such as land) is delivered through registration in terms of Registration of Deeds Act

Movable property
 Movable incorporeal property (such as debts) is delivered through cession
 For movable corporeal property, delivery can be effected in different ways:
Actual delivery / delivery in its literal form (de manu in manum)
 Most common form
 Object sold is handed physically by seller to buyer
Delivery with the short hand (traditio brevi manu)
 Buyer is already physically in possession of object sold and delivery takes place by change of intention of buyer and seller
 E.g., where buyer, before concluding deed of sale, rents a car from seller and later decides to buy car. Buyer remains in
possession of car and delivery takes place through change of intention of parties to contract
Constitutum possessorium
 This method of delivery is opposite of delivery with short hand
 Delivery takes place through change of intention of buyer and seller, but seller remains, after contract has been concluded,
physically in possession of object sold
 E.g., S sells a car to P, but at same time S and P agree that S will rent car from P. Therefore S (seller) remains physically in
possession of car after contract has been concluded
 Attornment
 Object sold is physically in possession of a third party and delivery takes place through a change of intention of buyer and
seller
 Before deed of sale is concluded, third party keeps object on behalf of seller, but after conclusion thereof intention of
buyer and seller is that third party should keep object on behalf of buyer
 E.g., car is placed by seller in possession of a panel-beater for repairs and car is sold during this period of repair. Before
contract is concluded panel-beater keeps car on behalf of seller, but after contract has been concluded, panel-beater keeps
car on behalf of purchaser. Consequently delivery has taken place through change of intention of the parties to contract
 Mere notice to third party of this change of intention is sufficient and no co-operation of third party in respect of this
change of intention is required
Symbolic delivery
 Delivery takes place by seller placing buyer in possession of a symbol by means of which buyer gains control over object
sold
 E.g., Lendalease Finance
Delivery through marking
 Delivery takes place by marking object(s) bought or sold
 E.g., where part of a flock of sheep is bought, sheep forming part of object sold can be marked by a yellow mark on hind
leg. Delivery takes place as soon as yellow marks are made on the hind legs of the sheep concerned
Delivery with the long hand
 Delivery takes place in that object sold is pointed out by seller to purchaser with intention that ownership should pass
Clavium traditio
 Delivery by handing keys to or for an object to the purchaser
 This is not a form of symbolic delivery, but handing over of possession and control
 If party delivering retains a duplicate of the keys, delivery is deficient

Object delivered
 Seller must deliver object agreed upon and all accessories required for proper use and enjoyment of object (i.e., car’s keys)
 Seller must also deliver to buyer all benefits which accrued after contract became perfecta (i.e., calves of cows sold)

Date of delivery
 Parties may agree on a date for delivery
 If no agreement was reached, seller must deliver object sold within a reasonable time
 Facts and circumstances of each case will determine what is a reasonable time

Place of delivery
 Seller must deliver object sold to buyer at place agreed upon
 If no agreement was reached, delivery must be effected at place where contract was concluded, or at business or home of seller

Influence of the Consumer Protection Act on

delivery
 S 19 of CPA is relevant
 If CPA is applicable and parties did not expressly agree on details of delivery, it is an implied term that supplier (seller) is
responsible to deliver goods on agreed date and time, if any, or otherwise within a reasonable time at agreed place of delivery
and at cost of the supplier
 Supplier may not require that consumer (purchaser) accept delivery at an unreasonable time
 Presumed place of delivery is supplier’s place of business, if any, or residence
 Before accepting delivery of goods, a consumer is entitled to examine them to make sure they are of type and quality agreed
upon or, if a special order was placed, reasonably match material specifications
 If a supplier tenders delivery of goods at a location, date or time other than as agreed, a consumer has option of either agreeing
to change or insisting on delivery at agreed location, date and time or cancelling transaction without penalty, treating delivered
goods as unsolicited goods in accordance with s 21
 If a supplier delivers a larger quantity of goods than were ordered, a consumer may reject all of delivered goods, or accept and
pay only for agreed quantity and treat the rest as unsolicited goods
 If some of goods delivered are as agreed, but others not, a consumer may accept those goods as agreed and reject rest, or reject
all delivered goods
 These provisions do not apply to franchise agreements or where the transaction is governed by s 46 of ECTA

Double sales
 A double sale takes place when a seller sells same object to two different purchasers
 Two possibilities are at issue:
- Neither first buyer (B1) nor second buyer (B2) has already acquired ownership of object bought or sold
o He who is first in time, is preferred in right
o Legal claim of buyer with whom seller first concluded a deed of sale enjoys preference above legal claim of a buyer
with whom the seller later concluded a deed of sale
o B1 can enforce his legal claim in terms of deed of sale against seller and B2 or protect it by means of an interdict
o If B2 had been unaware of first deed of sale, he has a contractual claim on basis of: eviction; mora debitoris;
rendering performance impossible; or repudiation against seller
- If either first buyer (B1) or second buyer (B2) has already acquired ownership, personal right of buyer who did not
become owner is subordinate to real right of buyer who did become owner of object sold, provided that latter was unaware
of other contract of sale
o (Prejudiced) buyer without ownership has a contractual claim based on eviction, mora debitoris, rendering
performance impossible or repudiation against seller, provided he did not know of other contract of sale
o In terms of doctrine of notice, a purchaser who knows that merx has been sold to another, may, in spite of having
obtained transfer or delivery, be forced to hand it over to prior purchaser ( Meridian Bay Restaurant v Mitchell)
o Doctrine of notice appears to be inconsistent because it allows holder of a personal right to prevail over holder of a
real right
 According to res litigiosa doctrine, where merx is subject matter of a lawsuit and a second sale occurs pending a lawsuit, rights
of first purchaser must prevail and are enforceable against second purchaser, irrespective of whether second purchaser acted in
good or bad faith

Theme 6: Warranty against eviction

General
 Eviction: any action by a third party who has better rights in object sold than buyer, and who deprives buyer of total or partial
use, enjoyment and disposal of object sold

General principles
 Buyer does not become owner of object sold by mere conclusion of a valid contract of sale
 Seller is also not obliged to transfer ownership to buyer except where he himself is owner of object sold
 Seller is obliged to give buyer a warranty against eviction
- Warranty applies ex lege and is part of naturalia of sale – parties may agree that warranty be excluded ( Plitt v Imperial
Bank)
- Reason for eviction must already be present at the time of conclusion of the contract
 Eviction takes place when it appears that temporary deprivation of possession has become permanent
 Where eviction is merely a threat, buyer has no cause of action against seller
 Forms of eviction
 True owner of object sold claims his property from buyer
 Third party obtains possession of property and buyer cannot claim this property from third party due to a defective title
 In terms of rule that lease goes before sale (huur gaat voor koop), buyer is sometimes obliged to allow lessee to use and enjoy
property until lease expires
 Holder of a limited real right (such as holder of a servitude of right of way), may prevent buyer from having full use and
enjoyment of object sold

Duties of buyer when eviction imminent

General
 Buyer must comply with certain rules as soon as eviction threatens
 Buyer could lose his cause of action against seller if he does not comply with rules, unless he can prove that title of seller was
defective and that third party would in any case have succeeded with his action for eviction
- Burden of proof does rests with buyer, who has to prove that title of the seller was defective
 It could happen that third party does not have a better title or that seller might have a defence against claim of third party
 Lammers and Lammers v Giovannoni:
- City Motors had sold a car to X on a hire-purchase contract
- X sold car to L & L, who stripped it and sold bare shell to G, with knowledge that G intended to rebuild it into a new car
- Neither L & L nor G knew that City Motors was true owner of stripped shell
- City Motors brought an action against X under their hire-purchase contract, and messenger of court attached rebuilt car
- G immediately informed L & L of attachment, but they failed to assist him in attachment proceedings
- G signed a compromise in terms of which he waived any claim which he might have had against City Motors
- G then brought an action for damages against L & L based on eviction
- Court stated that gist of warranty against eviction is that seller must protect purchaser’s right to possession of merx
o If seller is in breach of warranty, he must restore price already paid and pay damages suffered by purchaser as a
result of eviction
o If value of merx has appreciated between time of purchase and time of eviction, it forms part of purchaser’s
damages
o Where appreciation in value was caused by improvements made to merx, damages are limited to amount which
seller could reasonably have expected
- L & L knew that G was going to make improvements to the car, therefore they could not deny that their responsibility
extended to such improvements
- As a general rule, purchaser benefits from a lien which entitles them to retain merx until true owner pays them value of
the improvements
o General rule can be altered through set-off and purchaser’s right to remove improvements
- If purchaser can prove that seller’s title to merx was defective:
o Actual eviction is no longer a prerequisite for vesting of purchaser’s claim based on eviction
o Purchaser giving notice of eviction to seller and conducting a defence are no longer prerequisites for seller’s
liability to purchaser
- Confirmed what seller can do upon receiving notice (discussed under rules)
- Where eviction is imminent and seller is called upon to assist purchaser, their failure to lend assistance must aggravate
their liability
- Appellate Division held L & L liable to G on grounds of eviction

The rules
 As a general rule, buyer must not surrender object to someone threatening him with eviction
 Buyer must notify seller of threatened eviction
- Purpose of notification is to enable seller to assist buyer, or to put up a defence against claim of third party
- Notification must be given in sufficient time to enable seller to prepare his defence and to assist buyer in proving his title
 - Buyer has to notify the seller even if the seller has already received knowledge of eviction
- Where seller cannot be found, or intentionally avoids notification, buyer is relieved from any further duty – deemed to be
sufficient if he delivers notification to seller’s last known address
 As soon as seller receives notification of threatened eviction, he can:
- take cession of the buyer’s rights and intervene
- assist the buyer and furnish the necessary proof of title
- be joined as a party to the lawsuit
- do nothing
 Where buyer does not effectively notify seller of eviction, or where seller does not assist buyer in lawsuit, buyer must put up a
forcible / virile defence against claim of third party before he can hold seller liable
- Circumstances of each case will determine whether defence is forcible or not
- Buyer must act as a reasonable litigant in lawsuit – if buyer does not defend lawsuit or fails to put up an available
defence, he is not acting as a reasonable litigant

Buyer’s right of recourse

Total eviction
Alpha Trust v Van der Watt:
 Van der Watt bought a car from Alpha Trust by means of a hire-purchase agreement – at the time, both parties believed in
good faith that Alpha Trust was real owner of car
 Later, car was repossessed by real owner
 Appellate Division decided that buyer is, in terms of actio ex empto, entitled to:
- cancel the contract of sale
- claim repayment of total purchase price (not value of object at time of eviction). Where there is a lot of wear and tear,
courts may adjust purchase price
- claim damages, which can include:
o fruits which had to be delivered to true owner
o legal costs of the lawsuit
o costs for any improvement
o any increase in value of object sold

Partial eviction
 Following possibilities exist (Lammers and Lammers v Giovannoni) :
- where eviction has left buyer with so little a remainder of object sold that it cannot be said that a reasonable man would
have bought same, buyer may cancel contract, claim repayment of purchase price and payment of damages, provided that
he offers to return remains of object sold to seller
- where portion evicted is not of such a substantial nature, and remains of object sold can be effectively used, buyer may
retain remains and claim a pro rata repayment of purchase price as well as damages from seller

Where buyer has no or limited right of

recourse
 Seller is only liable in terms of warranty where reason of eviction already existed at time of conclusion of contract, or where it
was caused after conclusion of contract due to seller’s fault
 Even where seller has excluded his liability for damages, buyer may still cancel sale and reclaim purchase price
 Seller will not be held liable where buyer knew that seller was not owner of object at time of conclusion of contract
 Where seller was unsure at time of conclusion of contract whether object belonged to him and has made this known to buyer,
seller cannot be held liable
 Seller will not be liable where buyer’s claim against him has prescribed
 Where eviction was caused by force majeure (vis maior) buyer has no right of recourse

Influence of the CPA on the warranty against

eviction
 S 44 of CPA is of relevance
 Every consumer (purchaser) has right to assume, and it is an implied term of every transaction or agreement, that a supplier
(seller) of goods has legal right and authority to supply, sell, provide ownership or lease those goods
 In case of a supply of goods per se (if no transaction or agreement is involved), a consumer also has right to assume that a
supplier has legal right and authority to supply those goods
o In latter instance it is uncertain whether supplier must pass ownership to purchaser
 Supplier is fully liable for any charge or encumbrance relating to goods (e.g., outstanding debt on a car) pertaining to a third
party if it is not disclosed in writing before conclusion of transaction, or if supplier and consumer has colluded to defraud third
party
- Uncertain how rule “huur gaat voor koop” is influenced by this provision
 Guaranteed by supplier that consumers will have and enjoy quiet possession of goods

Theme 7: Warranty against latent defects and

defective consumer goods
General
 Last duty of seller is his warranty against latent defects in object sold
 Warranty may be given
- by operation of law (as naturale)
- contractually (as incidentale) as an express or tacit contractual guarantee or warranty
 Type of warranty will determine what buyer may claim from seller in terms of warranty
 Legal aid available for implied warranty differs from legal aid available for contractual warranty

Meaning of latent defect

 Latent defect: defect in object sold which is of such a nature that it renders it unfit for purpose for which it was bought or is
normally used, which was not known to buyer at time of conclusion of contract, and could not be discovered by him upon a
reasonable examination of object sold
 Holmdene Brickworks v Roberts Construction:
- Court gave above definition for latent defect
- R brought bricks from H, a manufacturer of bricks, to build factory, but had to rebuild it because of latent defect in bricks
- R’s claim for consequential damages against H succeeded in the court a quo. H appealed
- Following questions may be asked to determine whether defect is a latent one:
o Is the defect easily visible?
o Is the defect reasonably discoverable?
o Is the defect reasonably discoverable by an ordinary purchaser?
- Fact that purchaser has considerable expertise in regard to merx would not by itself affect nature of defect
- Court had to decide whether seller / manufacturer could be held liable for consequential damages caused by latent defect
o Cause of action can be either contractual or delictual in nature
- In casu, court held that consequential damages could be recovered on a contractual basis – purchaser should be placed in
position they would have occupied had contract been properly performed, provided that no undue hardship is imposed on
seller and that purchaser had performed their duty to mitigate their damages
- Fact that seller had no knowledge of defect is of no avail to them – if seller is also manufacturer, they are liable for latent
defects without further ado, unless agreed to contrary
 - Apart from consequential damages, sufferer (purchaser) is also entitled to restitution
- Appellate Division confirmed the broad division of damages into:
o General damages – limited by objective test of foreseeability
o Special damages – limited to those damages which, in special circumstances attending conclusion of contract,
parties had contemplated
- Appeal was dismissed because defect was a latent one, general damages had been proved and buyer had performed his
duty to mitigate
 A difference exists between a latent defect and a patent defect
- Latent defect cannot readily be noticed or discovered by a diligent person
- Patent defect will be noticed by a diligent person
 Only substantial defects would qualify as latent defects
 Defect must exist at time of conclusion of contract (burden of proof on buyer)
 Concealed servitude is not a latent defect, but would constitute a form of eviction because a servitude restricts use, enjoyment
and disposal of object sold

Warranties against latent defects

Warranty by operation of law
 An implied warranty against latent defects, which applies automatically by operation of law (as naturale), forms part of every
contract of sale unless it is specifically excluded by a voetstoots (as is) clause
 Differentiate between cases where merx was unfit for purpose for which it had been bought (because of absence of certain
attributes), and cases where merx, in spite of lack of such attributes, was still fit for purpose for which it had been bought
 Freddy Hirsch Group v Chickenland:
- F, a manufacturer of spices, sold spices which were contaminated with banned artificial colorant (thus unfit for human
consumption) to C, a fast-food retailer

- F sued C for payment of purchase price, but C counterclaimed for delictual damages suffered as a result of defect in merx

- Court held that problem in this case was not that there was a latent defect in merx, but that merx delivered was different
from that which had been purchased, thus F was not entitled to rely on the voetstoots clause
o Dealing with non-performance, not defective performance – voetstoots clause does not offer a defence to F
- If voetstoots clause in this case were to be enforced, it would: result in an infringement of a statutory provision; be
unreasonably harsh and oppressive; be against public policy
 Remedies are 2 aedilitian actions:
- Actio redhibitoria (to claim restitution)
- Actio quanti minoris (to claim reduction in purchase price)
- The buyer cannot claim damages with these actions

Contractual warranties
 Seller may give an express or tacit contractual warranty against latent defects
 He warrants that object sold does not have any latent defects or that it can be used for purpose for which it was bought
 Tacit warranties differ from warranties by operation of law, because the latter are not given expressly
 To determine whether a tacit warranty was given or not, examine:
- facts of each case
- evidence of parties
- all circumstances
- Where it can be deduced on a balance of probabilities that a tacit warranty was in fact given, such a warranty will be
acknowledged and enforced
 Guarantees distinguished from
misrepresentations and sales talk
 Misrepresentation: untrue declaration made within or out of contractual context (can be fraudulent, negligent or innocent)
 Where misrepresentation forms part of a contractual clause, aggrieved person is entitled to usual contractual remedies for
breach of contract
 Where misrepresentation is made out of contractual context, malefactor incurs delictual liability for damages, on condition that
misrepresentation was made intentionally or negligently and all other requirements for delictual liability are present
 Sales talk: declarations praising (marketing) object sold, which merely represents an opinion and is neither a guarantee nor a
misrepresentation
 If such sales talk is untrue, buyer has no right of recourse against seller
 Actio empti is available for contractual warranties, while aedilitian actions are available for implied warranties (seldom used
for contractual warranties as it provides no damages)

Actio empti
Grounds for institution
Warranty against latent defects
 Seller may give buyer an express or tacit contractual warranty against latent defects in the object sold
 Where defects are present, buyer may institute actio empti

Warranty for presence of special qualities

 Seller may give buyer an express / tacit warranty that certain good characteristics are present in object sold, or that certain bad
characteristics are absent
 These warranties are found where object is bought for a specific purpose, and where buyer notifies seller of this purpose
 If seller then sells object to buyer, he is deemed to have given buyer a tacit warranty that object is suited for that specific
purpose

Seller conceals latent defect

 Seller is obliged to disclose any latent detects that he knows about, to buyer
 Where seller intentionally conceals these defects, a fraudulent misrepresentation is made to the buyer
 Buyer may claim cancellation of contract and / or damages with actio empti
 Seller must have intention to conceal defect and deceive buyer before buyer can act with actio empti (Van der Merwe v
Meades)
 Waller v Pienaar: There is no general duty to disclose, but a seller has a duty to disclose when relevant information falls within
his exclusive knowledge and honesty in circumstances requires disclosure
- Test is:
o Does information to be disclosed fall outside purvey of purchaser’s knowledge?
o Does no reasonable possibility exist that a purchaser would on his own obtain such information?
o Does advantage of such exclusive knowledge result in an unfair bargaining position?
- If answers to these questions are affirmative, a duty to disclose exists
 Voetstoots clause in a contract will not protect seller against liability where he knew of defect at time of conclusion of contract

Dealer and manufacturer

 Where seller acts as a dealer, he will be held liable for all buyer’s damages (including consequential damages) due to latent
defect only if he professed in public that he has expert knowledge of object sold ( Pothier rule)
 Where seller is manufacturer, he will be liable for all damages (including consequential) due to latent defect ( Holmdene)
o Manufacturer will be liable without any declaration whatsoever that he has expert knowledge regarding object sold
o Negligence or ignorance of defect is no defence against liability
 Ciba-Geigy v Lushof Farms:
- C was manufacturer of a herbicide, which L bought from Van Staden, a merchant seller
 - Herbicide caused physical and economical damage to purchaser’s pear trees
- L claimed damages from C and Van Staden, and court a quo held C liable to both L and Van Staden – C appealed
- SCA held that herbicide, because of a latent defect, caused damage
- Van Staden’s liability:
o Van Staden satisfied prerequisites for Pothier rule, and court held him as merchant liable to L because of his breach
of a contractual guarantee
o Under actio empti, L was entitled to cancellation of the contract and damages
- Ciba-Geigy’s liability:
o Direct contractual relationship existed between Van Staden and C in terms of which C warranted that herbicide
complied with manufacturer’s specifications
o C liable in delict against L because it was negligent in manufacture, testing and distribution of a potentially dangerous
herbicide

What may be claimed with the actio empti

 Cancellation of contract of sale, only where defect is of such a serious nature that it cannot be expected of buyer to retain
object sold
 Damages

Aedilitian actions
 Available to buyer where latent defect is present in object sold and no express or tacit contractual warranty was given by seller
 Also available where latent defects are present and express or tacit contractual warranty was given by seller
o Buyer will in this case seldom use these actions, as they do not provide him with a claim for damages

Actio redhibitoria and actio quanti minoris

Grounds for institution
 Aedilitian actions can be instituted where:
- Object sold has a latent defect
- Seller was aware of a latent defect and fraudulently concealed such fact
o Banda v Van der Spuy:
 V had made repairs to thatch roof before sale, but it continued to leak after sale

 In order to encourage B to proceed with transaction, an addendum was added to deed of sale specifying that V
would transfer guarantee on thatch roof to B – problem with leaking roof persisted

 B’s claim for a reduction in purchase price was based on actio quanti minoris, fraudulent misrepresentation
derived from an invalid roof repair guarantee, and actio ex empto

 B had to prove that V had essential knowledge of latent defects in roof, and fraudulently concealed it from B

 SCA held that one must objectively evaluate facts to ascertaining whether V knew of latent defects and had,
with intent to defraud B, concealed these defects – any conclusion must be drawn exclusively from facts
revealed by evidence

 V was aware of ineffective support structure, incomplete repair, and that guarantee had expired, which he
fraudulently concealed

 V had a duty to disclose latent defect to B

  Fact that V was unaware that roof leaks were caused by an inadequate roof pitch, did not influence fact that their
conduct was fraudulent, thus voetstoots clause did not offer them protection

 B entitled to difference between purchase price of house and its value with defective roof – no evidence of
market price of house with defective roof at time of sale, thus court took repair cost as a gauge to determine
amount to be awarded
- Seller expressly or tacitly guaranteed presence of good characteristics or absence of bad characteristics
- Seller made a false dictum et promissum to buyer
o Dictum et promissum: declaration made by seller during negotiations with regard to qualities and characteristics of
object sold, and which is more than mere recommendation or praise
o In general, such false dictum et promissum is equated with an innocent misrepresentation
 Actions are also available in contracts of purchase and sale for corporeal and incorporeal object, where object does not contain
a latent defect but has merely been misrepresented as being something which it is not
 It does not matter whether defective or misrepresented object was object of a sale or barter
- Aedilitian actions are equally applicable to an object forming part of the purchase price

What may be claimed with the actio

redhibitoria
 Purpose of this action is to place parties in position they were in before conclusion of contract – restitution has to take place
 Buyer may reclaim purchase price which he paid to seller, and seller may reclaim object sold from buyer
 Such an action can only be instituted once
 Buyer may only institute actio redhibitoria where defect in object sold is of such a nature that restitution is justified
 Test which has to be applied is whether the object can be used for purpose for which it was bought

What may be claimed with the actio quanti

minoris
 Buyer may claim a pro rata reduction of sale price
 This action can be instituted more than once should more latent defects appear in future
 Exact reduction which buyer may claim has to be calculated as follows:
- Courts determine difference between price paid and true value of object with latent defect, at time of action
- Buyer cannot claim any reduction in price where object, in spite of defect, is worth more than price paid for it

When aedilitian actions may not be instituted

 Defect arose / originated after conclusion of contract
 Defect is of patent, not latent nature
 Where sale is voetstoots
- Seller only has to deliver object to buyer
- Such a condition in a contract of sale is never presumed – parties must specifically agree to include such a clause
- If seller is aware of latent defects at time of conclusion of and intentionally conceals them to mislead buyer in order to
persuade him to conclude contract, voetstoots clause will not offer him any protection (Van der Merwe v Meades)
- Odendaal v Ferraris: operational sphere of a voetstoots sale is wide enough to cover both physical defects and defects in
title or area of property (non-compliance with statutory requirements) – thus seller will also be protected by voetstoots
clause
 Latent defect repaired before conclusion of contract
- If defect is not repaired before conclusion of contract, buyer has no duty to allow seller to repair defect
- Exception to this rule is where object was manufactured by seller, in which case buyer must allow him opportunity to
repair object before he can institute action against seller
 Waiver
- Buyer may waive actio empti or aedilitian actions
- Waiver is not accepted lightly and should be proved on a balance of probabilities by seller
- Waiver is deliberate abandonment of an existing legal right by right holder acting with full knowledge of right
 Prescription
- Actio empti and aedilitian actions prescribe if they are not instituted within three years after the claim arose
- Prescription only starts to run after the buyer has become aware of the latent defect.

Influence of CPA on the warranty against

latent defects
Quality of goods
 S 55 of CPA, if applicable, provides that all goods, except goods bought at an auction, must be:
- reasonably suitable for purposes for which they are generally intended (also subject to Pothier rule)
- of good quality, in good working order and free of any (not just material) defects
- useable and durable for a reasonable period, for normal use / surrounding circumstances
- in compliance with any applicable standards set under the Standards Act 29 of 1993, or any other public regulation
 To determine whether goods are in line with requirements, consider circumstances surrounding supply thereof: manner in
which goods were marketed, packaged and displayed; use of any trade description or mark; any instructions for, or warnings
about use of goods; range of objects reasonable to be done with goods; time when goods were produced and supplied

Product failure or defects in goods

 Irrelevant whether a product failure or defect was latent or patent, or whether it could have been detected by a consumer before
taking delivery of the goods (s 55)
 If an improved model of such goods becomes available from same or any other supplier, it cannot be assumed that
improvement was because of a product failure or defect in earlier model (s 55)
 “Defect” in goods: any material imperfection in manufacture of goods or components that renders goods less acceptable than
persons generally would be reasonably entitled to expect in circumstances, or any characteristic of goods or components that
renders it less useful, practicable or safe than persons generally would be reasonably entitled to expect in circumstances (s 53)
 Failure: inability of goods to perform in intended manner or effect (s 53)
 It is unclear whose (consumers, suppliers, producers, importers or retailers) “intended manner or effect” is under consideration

Available defence for product failure or

defective goods
 It is a defence if a consumer was informed of specific condition of goods and they expressly accepted goods on that basis or
knowingly acted in a way compatible with accepting goods in that condition (s 55)
 Effect of this section is that use of a “voetstoots” clause is drastically limited and that suppliers will generally have a duty to
disclose all attributes of a merx – rule caveat emptor (purchaser beware) seems to have been abolished

Remedies
 If goods do not comply with requirements and standards of s 55, a consumer may return goods within six months after delivery
to supplier (without penalty) at supplier’s risk and expense (s 56)
 This remedy may pose a practical problem where goods are immovable property and transfer thereof into name of consumer
and registration of a bond over it has been effected
 If goods are returned, a supplier must, at direction of consumer, repair or replace defective goods, or refund purchase price (s
56) provided that if a supplier repairs any goods unsuccessfully, they must, within 3 months of failed repair, replace it or
refund purchase price (s 56)
- Uncertain whether 6-month limitation has reference to life span of implied warranty (in which case a voetstoots clause
may become operational after 6 months from conclusion of an agreement), or execution of remedies (in which case
implied warranty will exist indefinitely and normal prescription rules regarding institution of a claim will prevail)
 These six- and three-month periods may not be extended by a court

Implied warranty for good quality of goods

 In terms of s 56 any transaction or agreement is subject to an implied warranty by seller, to effect that any supplied goods
comply with quality requirements and standards in s 55
 Implied warranty is not applicable if goods fail to meet necessary standard because they were tampered with after leaving
control of entity claimed against (s 56), or if a consumer was informed of specific condition of goods and they expressly
accepted goods on that basis or knowingly acted in a way compatible with accepting the goods in that condition (s 55)
 Implied warranty is in addition to any other implied warranty or provision imposed by common law, CPA, public regulation or
express contractual warranty or condition (s 56)
 Vousvoukis v Queen Ace:
- V purchased a motor vehicle from AM, but vehicle was defective even after various repairs
- Confirmed application of s 56 of CPA to second-hand goods
- Remedy of implied warranty available in s 56:
o If goods do not comply with requirements and standards, a consumer may within six months after delivery, return
goods to supplier without penalty, at suppliers risk and expense
o Supplier must then, at direction of consumer, either repair or replace defective goods or refund purchase price paid
o If supplier repaired goods and it failed again within 3 months, supplier must replace goods or refund purchase price
paid
- Implied warranty of s 56 was not available to V, as a period of more than six months had passed since vehicle was
bought
o Court held that it is not open to a court, under guise of making an ‘innovative order’, to extend this period
- Court accepted that there was a latent defect in engine, which is a material imperfection preventing ordinary use of
vehicle, but that defect was not so severe that a reasonable purchaser would not have entered into sale
- By purchasing a second-hand vehicle one may anticipate that mechanical problems may develop, thus V’s claim based
on actio redhibitoria, failed as well
 Implied warranty of s 56 applies to both “transactions” (which excludes once-off transactions) and “agreements” (which
includes once-off transactions) and its application is extended to “producers”, “importers”, “distributors” and “retailers”, but
not to “suppliers”
 Remedies available in s 56 are vis-à-vis “consumer” and “supplier” – practical implementation of s 56 will be problematic
 A service provider also impliedly warrants labour and every new or reconditioned part for a period of three months after
installation or such longer period as supplier may specify in writing (s 57)

Liability for damage caused by defective

goods
 A producer, importer, distributor, or retailer (not a supplier or service provider) of any goods is liable for any harm, without
negligence on their part, caused as a consequence of supplying any unsafe goods, product failure, or inadequate instructions or
warnings provided to a consumer for use of such goods (s 61 of CPA)
 For the purpose of s 61, a “supplier of services” who, in conjunction with performance of those services, applies, supplies,
installs or provides access to any goods, must be regarded as a “supplier of those goods” vis-à-vis a consumer
 Damages for which a person may be held liable include death, illness or injury to any natural person, any loss or physical
damage to any property and any economic loss that results from aforementioned
 If more than one person is liable, their liability is joint and several
 Liability in terms of s 61 cannot be circumvented by a contractual indemnity or waiver (s 51)
 A plaintiff will still have to proof wrongfulness
 It is a defence in terms of s 61 if:
 - Damages are wholly attributable to the compliance with any public regulation
- Alleged unsafe product characteristic, failure, defect or hazard did not exist in goods at time it was supplied
- Damages arose from not complying with instructions provided by supplier
- It is unreasonable to expect distributor or retailer to have discovered shortcomings in goods, taking into account that
person’s role in marketing goods to consumers
 Claim for damages in this instance must be brought within three years (s 61) after death or injury of a person, or earliest time
at which a person became aware of an illness and its cause, or earliest time at which a person with an interest in any property
became aware of loss or damage to that property, or latest date on which a person suffered any economic loss
 If goods are supplied within RSA in terms of a transaction that is exempted from application of CPA, such goods, including
importer, producer, distributor and retailer of those goods, are still subject to s 60 and 61

Theme 8: Miscellaneous Aspects

Payment of Purchase Price
 Method of payment
- Most important duty of buyer is to pay purchase price
- Payment must be made in legal tender
- Buyer’s representative may pay on his behalf and seller or his representative must receive payment
- Purchase price can be withheld in circumstances where exceptio non adimpleti contractus is applicable, but purchaser
who has taken delivery of object sold may not refuse to pay full purchase price
 Date of payment
- For movables, distinguish between cash and credit sales (discussed in theme 5)
- For immovables, payment usually takes place through delivery of payment guarantees, which are paid out on date of
registration of immovables in name of buyer
o To effect payment, sale of immovables is usually subject to a suspensive condition (granting of a mortgage bond)
o Payment of purchase price is not a prerequisite for passing of ownership and buyer becomes owner on date of
registration of immovables in his name
 Payment in instalments
- Buyer is only entitled to pay in instalments where parties reached an agreement that this method of payment is acceptable
- Number of instalments, time of payment of each and amount of each instalment must be determined or determinable,
otherwise contract is null and void
- Where payment is effected in instalments and buyer fails to pay one instalment on due date, seller may not claim all
outstanding instalments unless he is entitled to do so in terms of an acceleration clause
 Place of payment
- Parties may agree on place where payment is to be effected
- In absence of such an agreement, purchase price must be paid where contract was concluded, or where object is delivered

Receipt of Thing Sold

 Buyer must receive object sold on date and at place agreed upon for delivery
 Where no date was agreed upon, buyer must receive object sold within a reasonable time after conclusion of contract
 Where he fails to do so, he will be guilty of breach of contract in form of mora creditoris
 Where object is delivered to buyer and it does not comply with specifications and qualities agreed upon, buyer may reject
object without committing breach of contract – seller commits breach of contract in form of positive malperformance
 Where buyer fails to receive object sold and seller has expenses of a necessary or useful nature for protection and upkeep of
object, seller can claim these expenses from buyer

Miscellaneous Duties
 Buyer has following duties where a contract of sale exists:
- For immovable property, buyer has to pay transfer costs and transfer duty, but it is seller’s obligation to pay VAT
 - For immovable property, buyer has to pay occupational rent to seller where he had already enjoyed occupation of
property before registration thereof in his name
- Buyer has to deliver all benefits (such as rent) which accrued to object sold before contract became perfecta, to seller,
unless otherwise contracted

Pre-emptive Right and Option

Pre-emptive right
 Pre-emptive right: personal right by virtue of agreement, in terms of which, if owner (person granting pre-emptive right)
should one day decide to sell property concerned, holder of pre-emptive right will have first and exclusive choice to either
make or receive an offer to buy property
 Before person granting pre-emptive right has in fact decided to sell property, holder of pre-emptive right is not entitled to
make or receive an offer to buy property
 A pre-emptive right is a right created by an agreement regarding making of an offer in future by either seller or buyer

Option
 Option: contract in terms of which person holding option has a personal right towards person granting option, that an existing
offer to buy or sell should be held open for a determined / determinable period for exclusive acceptance of option holder
 If seller is person granting option, they may not withdraw their irrevocable offer to sell property during this period to
somebody else
 Should offer to sell be accepted by person holding option, a second contract, namely a deed of sale between person holding
option and person granting option, is brought about
 If person holding option decides to accept offer, person granting option is obliged to abide by stipulations of deed of sale that
has been brought about (which includes all terms of offer to sell)
 Should this option not be exercised by person holding option, option contract, together with offer to sell, is terminated

Formalities in respect of pre-emptive rights

and options
Movables
 General rule: no formalities are required for valid conclusion of a pre-emptive right or option, unless expressly required
statutorily or by means of an agreement
 Even where law or parties prescribe formalities for proposed agreement that is focus of option contract, option contract itself
does not have to comply with these formalities as well
 Position is uncertain for contracts creating preferential rights – agreement providing one party with a preferential right, appears
not require formalities set for main contract it aims to achieve

Immovables
 ALA requires certain formalities (writing and signature) for conclusion of a valid deed of sale of immovables
 Uncertain whether these formalities are also applicable in case of pre-emptive rights and options dealing with immovables
 Unit 2: Letting and Hiring of things
(lease)
Theme 1: Introduction and Essentialia
Introduction
 Definition shows essentials that parties must have consensus on for agreement to be a valid contract and lease agreement
- Lease: reciprocal agreement where one party (lessor) undertakes to confer upon another party (lessee) temporary use and
enjoyment of a particular thing in exchange for a counter-performance
 When dealing with lease agreements, always start with contract itself (particular agreement between parties)
- First step: is it a valid contract? (look at general requirements)
- Second step: what kind of contract is it? Is it a lease? (look at essentialia)
- Third step: if it is a lease agreement, what are rights and duties (and remedies) that naturally flow from this type of lease
agreement? (look at naturalia)
- Fourth step: have parties tailored / changed their rights and duties in any specific way? Have extra terms been added or
any amendments made to naturalia? (look at incidentalia)
 Parties to general lease agreements are called:
- Lessor (landlord)
- Lessee (tenant)

Sources of law
 Legislation applies with common law (look at legislation first and common law second)
 There is particular legislation for different types of lease agreements
 Common law recognises 3 types of lease agreements:
- Letting and hiring of things
- Letting and hiring of service
- Letting and hiring of work
 As types of lease agreements developed, legislative intervention was necessary to make sure that each type is properly
governed and regulated, for example:
- Rent Control Act (RCA)
o Places limits on amount of rent that can be charged in respect of certain lease agreements and limits grounds on
which lessees could be evicted
o Was repealed by the RHA
- Rental Housing Act (RHA)
o Applies to renting of immovable property for residential purposes (thus only applicable to residential leases)
o Has been amended by Rental Housing Amendment Act (RHAA), which was signed by President and published in
Government Gazette, but has not yet come into force
- CPA:
o S 14 has severe consequences for residential and commercial property
o Applies when lessor supplies access to property for consideration in his ordinary course of business to lessee
o Definition of ‘rental’ in CPA is wide enough to include residential and commercial leases
- Prevention of Illegal Eviction from Unlawful Occupation of Land Act (PIE)
 All these legislative interventions stem from s 26 of Constitution (housing clause)

Definitions
 RHA
 Lease: an agreement of lease concluded between a tenant and a landlord in respect of a dwelling for housing purposes
 Dwelling: includes any house, hostel room, hut, shack, flat, apartment, room, outbuilding, or similar structure which is leased
 From definition of lease, we can see following:
- In order to be regulated by RHA, lease has to be residential in nature (whenever leased property is residential in nature,
RHA will apply to relationship between lessor and lessee)
- If lease is agricultural or commercial, there is protection under other Acts and common law rights
 Primary purpose of RHA
- Regulate relationship between lessor and lessee
- Give effect to s 26 of Constitution
- Regulate particular rights and duties of parties
o Apart from rights and duties that naturally flow from a lease agreement (naturalia and common law), RHA gives
additional rights and duties that both parties must comply with
 RHA also established Rental Housing Tribunal (RHT)
- When dealing with a residential issue, can approach RHT first, then court
- RHT is a judicial body / institution established to deal with disputes between lessors and lessees
- Tries to settle disputes in an alternative way and keep issue from going to court (which is expensive)
- This is a way to assist tenants who cannot afford attorney’s
- Provisions of the RHA are enforced by RHT
 Maphango and Others v Aengus Lifestyle Properties:
- Deals with importance of RHT and broad meaning of ‘unfair practice’
- Tenants argued that termination of their lease agreements was an unfair practice because landlord just wanted to get them
out of building so that he could improve property and increase rent
- SCA held that landlord’s conduct does not comply with definition of ‘unfair practice’ because ‘practice’ means that
conduct has occurred multiple times
- CC held that, even if something only occurs once, it can still be an unfair practice
- CC referred issue back to RHT and held that it must make final decision on matter (importance of RHT)
- Unfair practice: any act or omission by a landlord or tenant in contravention of RHA, or a practice unreasonably
prejudicing rights or interests of a tenant or landlord (s 1 of RHA)

CPA
 Broader scope than RHA
 Definition of ‘rental’ in CPA is wide enough to include residential property / lease and commercial property / lease
 Service (s 1): including access to, or use of premises or other property in terms of a rental agreement
 Remember when CPA applies (supplier supplies services to consumer in ordinary course of business for consideration)
- Lessor qualifies as supplier if they supply services in ordinary course of business
- Lessee qualifies as a consumer if they are a natural person or if they are a juristic person below R2 million threshold

General requirements for the conclusion of a

lease
General
 Since a lease agreement is a type of contract, it has to comply with general requirements for a valid contract :

- Consensus - Physical possibility of performance

- Contractual capacity - Formalities
- Legality
 Formalities
 Under common law, there is no general requirement that lease agreement must be in writing – lease can be concluded tacitly,
verbally, or in writing
 General rule = there are no formalities for lease agreements unless parties specifically agree to it or legislation prescribes it
 Exception:
- S 50 of CPA empowers Minister of Trade and Industry to prescribe categories of consumer agreements that are required
to be reduced to writing (Minister has not yet done this)
- Contracts of lease in respect of movables must be reduced to writing if they fall within scope of NCA
- In cases where there is a written lease agreement, CPA requires it to be in plain language
o Plain language (s 22 CPA): agreement must be able to be understood by someone with average literacy skills (not an
expert/professional) and must be in a language understood by lessee
o S 40 CPA places a duty on lessor to ensure that lessee fully understands agreement concluded between them
 S 5(2) RHA: a lessee has right to request a written contract from lessor
- In reality, most tenants are not aware that they have this right
- If lessor doesn’t comply, they are guilty of an offence and may be criminally convicted
 When RHAA comes into force, legal position with regard to formalities is going to change:
- Residential leases that fall under RHAA must always be in writing, even if tenant does not specifically request it
- Written lease agreement must always include certain minimum information, such as:
o Names of the parties and their addresses
o Description of dwelling that is subject of lease (street address)
o Rental amount and reasonable escalation
o Frequency of rental payments
o Deposit amount
o Lease period or notice period requested for termination of lease
o Rights and duties of parties
o Any other charges payable in addition to rental (charges must be identified in lease)

Formalities of long-term leases

 Long-term lease: lease agreement for 10 years or longer (includes leases that are renewable for a period which, together with
first period, is 10 years or longer)
- E.g., lease a property for 5 years, with an option that after 5 years, you may renew lease for a further 5 years
 Can be registered in Deeds Office, which grants lessee a limited real right in land
- Lessee’s personal right becomes a limited real right
- It is a limited right because there is no transfer of full ownership, but there is a real right that is stronger than a personal
right against lessor
 Huur gaat voor koop principle (lease goes before sale) – applies when distinguishing difference between a real right and
personal right, thus determining whether it is a long- or short-term lease is important
- Personal right: right between 2 or more persons that is only enforceable against those persons
- Real right: right within a property that is enforceable against anyone
 In a normal lease agreement, lessee gets a personal right against lessor

Essentialia of a lease contract

General
 Apart from general requirements, parties must also reach consensus on:
- Leased property
- Temporary transfer of use and enjoyment of property
- Nature and extent of counter performance
 o Counter-performance = rent payable
 Essentialia is important because once it is established, common law rights, duties, and remedies become automatically
applicable (these are naturalia)
- Depending on type of lease agreement, legislation like RHA and CPA may also become applicable

First essentialia = leased property

 Parties must agree on type of property to be leased
 Type of property that leased property can be:
- Moveable, immoveable, incorporeal, and corporeal property / things which are commercially available
- Res in commercium (lease agreements in commercial realm, such as factories)
 Leased property must be identified or identifiable at time of conclusion of contract, otherwise there cannot be consensus, and
contract is void for vagueness
 Examples of identifiable leased property that have become crystalised through practice:
- Specific number of units
- Fact that object could be specifically described
- Fact that it could be part of a property (like a room in a house)
 Must also distinguish between urban and rural land
- Key to difference is not location, but purpose for which the land is used
- If the purpose is agricultural, it is rural land
- If the purpose is residential / domestic, business, commercial, industrial, mining, it is urban land
- Distinction becomes important when we deal with rights and duties of parties

Second essentialia = temporary transfer of use

and enjoyment
 Parties must agree that lessee gets right to use and enjoy property, not to destroy / consume / dispose of it
 Right to use and enjoy property is not ownership, because ownership means that you use, enjoy and dispose of property
 Transfer of right to use and enjoy property is temporary transfer, because if it is permanent or ‘in perpetuity’, then it may
become a sale and no longer be a lease
- If there is no time period clause in agreement, then it cannot be a lease agreement because very essence of a lease
agreement is fact that it is only temporary
 Examples of ways in which term of lease can be described that have crystalized through practice:
- From a specific date to a specific date
- From a specific date for a specific period
- From an event for a specific period or until a future event occurs
- For as long as either party desires
- Periodic: day-to-day / month-to-month / year-to-year
o If nothing is said about duration, periodic lease can be implied
- Customs that have transpired or particular usage in trade and practice that have developed in respect of a particular thing
 Regulation 5 of CPA: Minister has set maximum period for fixed-term agreements at 24 months
 S 14 of CPA places severe implications on some lease agreements that fall within scope of the CPA, such as:
- Lease agreements can be concluded for a maximum period of 24 months (2 years)
- Only if lease agreement complies with requirements of CPA can it be concluded for longer than 24 months
- Important requirement is that there must be a demonstrable (very big) financial benefit to lessee
o Lessor must be able to justify why they want to conclude a longer lease agreement
- Commercial agreements are usually longer than 2 years, but sometimes lease agreements go on for so long that tenant
struggles to get out of it (and cancellation can cost a lot of money). S 14 was created to protect vulnerable tenants from
getting into long lease agreements that they may not realize are not to their financial benefit
 Third essentialia = counter performance
(nature and extent)
 Parties must agree on what will be given as counter-performance in exchange for temporary use and enjoyment of property –
they must agree on rent
 SA case law confirms that counter-performance has to be money
- If it is not money, it is still a valid contract, but it is not a lease
- This is an archaic rule – law must be developed by changing legislation or by judicial precedent/case law. We should
measure this principle against our Constitution and decide whether it should be amended (many scholars say yes)
 As long as it is certain that a counter-performance is payable, extent can be calculated according to various methods
 Examples that have crystalized in practice that are considered to be valid methods of describing / calculating rental:
- Stipulate that it is a specific amount for a certain period of time (e.g., R1000 per month) – most common method
- Calculated by way of a fixed formula – exact amount hasn’t been given, but a clear formula by which it is calculated has
been given – counter performance is at very least determinable, and there can be consensus on it
- Parties may agree that a specific 3rd person will determine rental (auditor, legal professional, arbitrator etc.)
o Court will scrutinize it more closely
o There must be an objective standard by which discretion is exercised
o Courts can be asked to intervene if there is an unequal bargaining position or if it is unreasonable
o One party must not have absolute discretion (not a valid method of calculating counter-performance)

Increase of rental
 RHA is very clear on how increase of rental works
 A good lease agreement always deals with the increase of rental in the actual contract
 In theory, one party must not have absolute discretion at determining the rental
 In practice, it can be discretion of a single party (landlord) to increase rental – whether increase amounts to an unfair practice
is a separate issue where we must look at facts and circumstances of case (such as reason behind increase)
 General rule: if there is a unilateral increase of rent by lessor, even though it might not be a valid increase, if lessee gets
enough notification of increase beforehand, notification / increase is done in a clear and fair way, and increase is reasonable
taking into account area or type of property being leased, lessor is justified to increase rental
- In other words, landlord is allowed to increase rent, but it must just be done in right way and for right reasons
 Benlou Properties v Vector Graphics:
- Deals with the counter performance / the rental and confirms a few basic principles in our law of lease:
o Since counter-performance is part of essentialia, rent must be determined or at very least determinable
- Lessor had discretion to increase rental if expenses increased, which makes practical sense
- However, court confirmed general rule is that rental cannot be left to sole discretion of only one of parties
o Although one party may have power to increase rent unilaterally, this party may not be given an absolute discretion to
do so – discretion must be exercised according to an objective standard
- In casu, lessor did not have an unqualified discretion to increase rental, because actual agreement contained an objective
standard of increase of rental under circumstances, and was therefore allowed

The importance of essentialia

 Ferndale Crossroads Share Block v Johannesburg Metropolitan Municipality:
- Dealt with statute which stated that if city of Johannesburg wants to conclude a lease agreement with a lessee, there must
always be an advertisement first
- In this case, there was no advertising before lease agreement was concluded
- Argument was that, due to non-compliance with statutory requirement, lease is void
- Counter argument was that statutory non-compliance would only be an issue it is was indeed a lease, which it was not
- Court must always look at true intention of the parties
- Court confirmed what essentialia of a lease agreement is
- Court determined that true intention of parties was a lease agreement – clear consensus between parties on essentialia of
lease, which means that agreement is void (for non-compliance with statutory requirement)
 Theme 2: Duties of lessor
Introduction
 Common law duties of lessor:
- Deliver the property
- Maintain the property
- Ensure the undisturbed use and enjoyment of the property for the lessee
- Compensate the lessee for improvements made to the property
 Duties of both parties flow naturally from lease agreement and may be altered by parties
 One party’s duties correspond to the other party’s rights
- Lessee has corresponding right to claim performance based on these duties of lessor
- Lessee has certain remedies to enforce these duties should the lessor fail to fulfil them
 In practice, depending on the type of lease agreement, these kinds of duties are specifically stipulated
- It must be very clear what responsibility of lessor and lessee are
- If rights and duties are tailored by parties, contract is still valid as long as there is consensus
- If parties change rights and duties, naturalia becomes incidentalia

Duties of lessor

First duty of lessor - delivery of leased

property
 Property must be made available to use and enjoy for that temporary period of time the parties agreed on
 Property must be delivered in condition agreed upon
 Day that a tenant is about to move in, there should be a list made by leasing agent of exact condition of property
- When lease terminates / tenant moves out, it must be clear what was broken/fixed beforehand and what is broken/fixed
now
- If things are broken when lease terminates, deposit that lessee paid is held back and used to fix the problems
- Agreeing on condition of property at conclusion of lease is important to prevent future litigation
 If no agreement was made on condition of property:
- Common law says that we accept condition of property at time of conclusion of contract
o If you conclude an agreement but will only occupy property later, look at condition of property when contract was
concluded (not condition of property when you moved in)
- If property / thing is leased for a particular purpose, it must be in condition so that it can be used for that purpose
o If thing must comply with statutory requirements, then it must do so
o Thing must be delivered with necessary attachments and additions to make it suitable for purpose for which it was
leased (e.g., keys to a house)

Impact of CPA
 S 54 deals with defective goods that form part of a leased property or defective service
 S 54: where a supplier undertakes to perform a service for consumer, consumer is entitled to delivery of goods that are free of
defects and of a suitable / reasonable quality (except where particular defects have been specifically excluded from this duty
by way of agreement between the parties, subject to s 49)
 S 54 duties extend to maintenance of leased property by lessor
 Second duty of lessor – maintenance of
leased property
 Lessor must maintain property for duration of lease unless otherwise agreed (in incidentalia)
 Parties can tailor this duty (e.g., transfer, limit, change) – as long as there is consensus, contract is still valid
- If parties tailor this duty by placing it on lessee, it will be construed more strictly because it goes against normal naturalia
/ common law rule
 Scope of duty depends on arrangement between parties (agreement determines scope)
- If there is no agreement, common law principles determine scope of duty
- Common law says that property must be maintained in such a way that it is suitable for purpose for which it was hired /
leased (confirmed in Mpange case)
 This duty excludes:
- Repairing of damage caused by lessee or persons they are responsible for
- Minor repairs that are not attributed to age or quality of property
o This is normal wear and tear of residential property or when thing leased is used regularly
o Minor repairs are lessee’s duty to fix because they are using and enjoying thing for a period of time (there is a
presumption that lessee caused damage through their use and enjoyment of object)
o E.g., replacement of windowpanes or door handles
 If lessor fails to fulfil duty of maintenance or delivery (1 st and 2nd duty), they are in breach of contract and lessee is entitled to:
- Normal / general contractual remedies:
o Specific performance
o Rescission
o Damages
o Reduction of rent
- Specific remedies:
o Lessee themselves undertakes repairs (and recovers costs from lessor)
o Remedies in terms of CPA

General contractual remedies

Specific performance
 Mpange v Sithole:
- Even though there was past reluctance to grant specific performance as a remedy, this was not an absolute rule – courts
have always had discretion to grant it and still have this discretion
- Specific performance should be granted where a failure to perform maintenance (maintain property) impacts negatively
on lessee’s housing rights
- Case was connected to s 26 of Constitution – right to adequate housing (specific performance should be allowed where
lessor’s failure to maintain premises affects lessee’s Constitution rights to adequate housing, dignity, and privacy)
- If issue is connected to a Constitution right, then law should be developed, and courts must be more lenient when
granting specific performance

Rescission / cancellation
 Only granted if there is a material breach of contract
 It is a material breach if property is defective in a very essential aspect
- Essential aspects: particular agreement, particular type of leased property, and content of contract
- Thus, if essentialia of contract is defective, then it is a material breach
 Important question to ask: would a reasonable person continue with the contract taking into account this defect?
- Defect must be of such a nature that a reasonable person would not have continued with the lease
 Also applicable where leased property was delivered late, but then time must have been of essence to contract (lessee can
cancel or rescind contract under such circumstances)
 If parties included a cancellation clause in contract, then cancellation clause is an incidentalia and must be adhered to
- If contract allows cancellation under certain circumstances, then contract must be cancelled in terms of that clause
- Cancellation clause is also called lex commissoria
Damages
 Lessee can only claim damages if they can prove that they actually suffered damages
 Court will always consider whether lessee also attempted to minimize damages suffered and whether such damages were
foreseeable by lessor at time of contracting
 Lessor must place lessee in position he would have been in had no breach of maintenance duty occurred

Reduction of rent
 General rule: reduction of rent is always in proportion to reduced enjoyment of property
 Initial common law position before legal development: lessee could refuse to pay rental whilst remaining in property if
property was not maintained
 Arnold v Viljoen:
- Liability to pay rent by lessee depends on occupation itself and not on use and enjoyment – as long as lessee is in
occupation of property, they must pay full rent
- Only after lessee has vacated property, can they claim damages in form of reduction in rent
o Liability to pay rent depends on occupation itself – not on whether occupation was beneficial
- Technically speaking, if lessee vacates the property, that is also a cancellation of agreement
 Steynberg v Kruger:
- Disagreed with Arnold case
- Court said: if lessee is entitled to cancel agreement (because of breach of duty) but chooses not to, lessee should be able
to claim a reduction in rental and damages
 Ntshiqa v Andreas Supermarket and Thompson v Scholtz (current legal position):
- Held that it is not necessary for lessee to vacate leased property before claiming reduction in rent as a form of damages
- Even if lessee is not entitled to cancel agreement, reduction of rent is not connected to occupation of property but directly
with reduced use and enjoyment because lessor is not complying with this duty
- Pothier’s rule was confirmed in this case:
o Reduced rental is in proportion to the reduced use and enjoyment
o Lessee doesn’t have to vacate the property before lessee can use this remedy
 Mpange v Sithole:
- Landlord leased out rooms in a dangerous building to vulnerable lessees (homeless people living in slum conditions) –
even though there was no written lease agreement, lessor did not comply with his common law duties to maintain property
in a reasonably fit condition
- Because these were destitute lessees, remedies usually applied in practice was not going to work in this scenario – court
tried to assist these lessees and develop our law at the same time
- Destitute lessees could not just cancel contract, claim damages, and find somewhere else to live – homelessness was only
alternative
- Court held: there must be a reduction in rental in relation to reduced use and enjoyment – reduction in rent must last until
the property was repaired
- Court stated that unless lessor complies with his duties to maintain property, he will not receive full rent he is entitled to
- This forced lessor to upgrade and maintain the property and lessees were entitled to stay in occupation
- Court had to develop common law in terms of s 39(2) of Constitution and grant orders for specific performance
- Court further held that reduction in rent is also appropriate in these circumstances (thus 2 remedies applied at once)
- Where lessee pays rent despite a defect in leased property, lessee is entitled to reduction in rent proportional to diminished
use and enjoyment of the thing

Specific remedies available to the lessee

Lessee himself undertakes repairs:
 Lessee can only undertake repairs himself after he gives lessor reasonable notice that these repairs are needed (and lessor fails
to act on this notification to repair property)
 Lessee must do repairs himself or get someone else to do it for him and pay them (lessee must prove expenses incurred so that
expenses can be deducted from rental)
 This remedy enables lessee to achieve specific performance in an indirect manner

Remedies in terms of the CPA:

 If CPA is applicable to particular lease agreement and lessor fails to fulfil his duties in terms of s 54(1), there are additional
remedies available in terms of s 54(2) that offer more protection to lessee
 Lessor’s duty in terms of s 54(1): performance of services in a manner and quality that persons are generally entitled to expect
 Remedies available to the lessee in terms of s 54(2):
- Lessee can request for lessor to remedy the defect
- Lessor may refund a reasonable portion of rental paid by the lessee
 CPA remedies become applicable when there has been a defect in the service (e.g., not maintaining the property)

Impact of RHA on condition of the property

 New regulations in terms of RHAA (NB not in force yet):
- “A landlord must provide a tenant with a dwelling that is in a habitable condition, as well as maintain existing structure
of dwelling and where possible facilitate provision of basic services to dwelling”
- In other words, landlord must provide and maintain a place that is habitable
 What amounts to unfair practice:
- If landlord fails to fulfil his maintenance duty, this amounts to unfair practice
- Tenant can approach the RHT
- Note: some provinces have their own specific “Unfair Practice Regulations” (e.g. Gauteng & Western Cape)
 In terms of s 13(4) and (5), RHT can order:
- Specific performance
- End unfair practice by discontinuing the lack of maintenance and unacceptable living conditions
- Determine amount of rent payable

Third duty of lessor – ensure undisturbed use

and enjoyment
 Lessor does not have to be owner of property in order to have this duty
 Lessor does not have to guarantee right to lease property (does not have to warrant that lessee is entitled to lease property)
 Lessor must guarantee that whilst property is in temporary position of lessee, there will be undisturbed use and enjoyment of
property for purpose for which it is being rented or leased
 Nobody must interfere with possession – 2 aspects:
- Lessor themselves will not disturb the lessee in possession
- Lessor must also guarantee that no third party with a better title will disturb lessee in possession for that period of time
(e.g., new owner, even though they have a stronger title to property than lessee)

Disturbance by the lessor

 Examples of ways in which lessor can disturb use and enjoyment of lessee:
- Changing the keys/locks
- Frequent hunting on premises without lessee’s consent
- Using the property without lessee’s permission
- If it is lease of a vacation home and lessor randomly shows up to visit lessee for the weekend
 These examples must be distinguished from certain things that are necessary for lessor to do, such as:
- Where lessor has right to inspect property regularly
- Where lessor has duty to fulfil his maintenance duties
- Where lessor must do repairs
o If lessee must vacate property because of repairs, lessee will also have claim for reduction in rental
o Extent of reduction depends on degree of disturbance – if disturbance could have been foreseen at time of contracting,
lessee is not entitled to any reduction
- However, in these situations, lessor cannot just randomly arrive at property – must give reasonable notice to lessee
 Ordinary remedies can be instituted by lessee for breach of contract if lessor does not comply with this duty
- Specific performance
- Recission
- Damages
- Reduction of rent
 If lessor does not comply with this obligation but he is not owner of leased property, lessee cannot claim specific performance
and has to be satisfied with damages
- E.g., A sells his farm to B, and B leases it to C before registration, but registration fails to take place with result that B
never becomes owner. C cannot enforce lease against A (with specific performance), but can claim damages from B

Disturbance by a third party

 Lessor guarantees that no other person with a better title will infringe on lessee’s possession (e.g., a real owner who wants to
evict the lessee)
 This is similar to seller’s duty to warrant buyer against eviction (but rules apply a bit differently)
 General process to be followed:
- When lessee sees that there will be an imminent disturbance by a third party, they must inform lessor of threat to enable
lessor to defend lessee’s possession (not lessee’s title – as in case of eviction)
- If lessor fails to act, lessee may not give up possession, but must first put up a vigorous defence. However, lessee does
not have to comply if it is clear that third party’s title is unassailable or indisputable (clearly the owner)
- If lessee then loses possession, he can claim damages from the lessor
 Lessor does not have to protect lessee against 3rd parties with no title or an inferior title than that of lessee (such interreference
is not breach of contract)
- Lessee has right to sort this out themselves (by means of an interdict or spoliation order) – lessor only comes into play
when 3rd party has a better title than the lessee
 Huur gaat voor koop principle:
- Principle was established to assist lessee’s in these circumstances
- General rule: lease agreements establish a personal right for the lessee against lessor
- This automatically kickstarts the naturalia (one of them being the duty of undisturbed use and enjoyment)

Lessor sells property during lease period (without notification) / Disturbance by a 3rd party with a better title
 In Roman law:
- Lessee had no rights against new owner – nothing the lessee could do against the new owner
- New owner had a stronger real right (ownership) in property that outweighed personal right of lessee
- Lessee must be forced to vacate (but they could still claim damages from the previous owner for breach)
 In Roman-Dutch law: (current law)
- HGVK principle developed and was adopted in SA law to assist lessees in these circumstances
- It is unfair towards lessee who has to vacate just because lessor sold property to someone else
 In South African law (aka how HGVK rule applies in SA):
- HGVK principle states that lease contract continues and enjoys priority over the sale contract
- This means that personal right of lessee has effect of becoming a real right, albeit limited, against the new owner
- There is 1 requirement that must be met for rule to operate: lessee must be in occupation of property when it is
transferred to new owner
- New owner is bound to essential terms of lease (e.g., if there is an option in lease agreement to renew lease and lessee
decides to renew in accordance with this, new owner must step back)
- New owner steps into shoes of previous owner and new owner may also become new lessor
- There is no formal cession of rights. Two things happen by operation of law:
o The new lessor has to comply with the previous lessor’s duties
o Lessee has to pay new owner/lessor compensation for use and enjoyment of property instead of previous lessor
 HGVK rule has a certain duration of protection for lessee, which depends on whether contract is a short-term or long-term
- Short term lease – anything less than 10 years
o Rule will operate for term of the original lease agreement
- Long term lease – more than 10 years
o If it is a registered long-term lease in deeds office, rule operates for the full period of the registration
o If it is an unregistered long-term lease, protection is only for the first 10 years (if the lessee is in occupation)

Fourth duty of lessor – Compensation for

improvements
 This duty comes into play when lessee has attached things onto or improved property and, in doing so, incurred expense
 General rule: If there was an agreement on compensation (including amount), lessor must pay lessee as agreed
 If there was no agreement, common law will apply

Common law position

 If it is rural land and lessee did not have permission to improve property, or there was permission but there was no agreement
on whether there would be compensation, ‘Placcaat of 1658/1696’ applies
 If it is urban land and/or the Placcaat rules are not applicable:
- If there was no permission for improvements, there can be no compensation
o Lessee must remove all improvements and attachments before lease ends and must not leave property in a worse off
condition by doing so nor cause damage
- If it is immovable property and there was permission to improve, but there was no agreement on compensation for these
improvements, usual rules for unjustified enrichment apply
o Onus is on lessee to prove that these improvements were either necessary (then all expenses can be claimed from
lessor) or that expenses were useful because they increased market value of property (only improvements that
increased market value of property will lessor be liable to compensate lessee for)
o If it is a luxury expense, there will be no compensation (no rules as to what constitutes a luxury expense – depends on
facts of case)

Theme 3: Duties of lessee

Introduction
 Common law duties of tenant / lessee:
- Pay rent
- Proper use of the leased property
- Return the property in a particular condition upon termination of the lease

Duties of lessee

First duty of lessee – payment of rent

 Payment of rent is the most important duty of the lessee
 Nature and extent of counter-performance (rent) is one of essentialia of lease agreement so there has to be consensus on it for
contract to be a valid lease agreement
 Lessee is obliged to pay rent for as long as he has use and enjoyment of property
 Amount of rent must be amount that was agreed to in the contract
- This is extent of counter-performance (essentialia = determined in contract itself)
 When rent must be paid is dependent on what was agreed on in contract
- Duty to ensure that rent is paid on time rests with lessee
 Common law position: if there is no agreement, rent must be paid at end of term
- Unless legislation (such as the RHA) provides otherwise
- In practice, rent is usually paid at beginning of month – contract is still valid as long as parties have consensus on it
- If it is a periodic lease, rent must be paid at end of each period
 When reduction of rent is possible:
- Where lessor does not deliver the property in the condition agreed upon
- Where the lessor does not maintain the property properly
- Where there is a disturbance by the lessor or a 3rd party with a better title
- Where there is complete or partial destruction of the property due to vis major
o Vis major = act of God / natural occurrence / coincidence
 o No party is at fault
o Complete destruction – no rent has to be paid
o Partial destruction – rent may be reduced in proportion to the loss

Remedies of lessor in cases of non-payment

of rental
 Remedies available:
- General / normal contractual remedies
o Specific performance
o Recission
o Damages (if it can be proved)
- Tacit hypothec
 By failing to pay the rent, the lessee commits mora debitoris or repudiation

General contractual remedies:

 Recission:
- Must always occur upon notice (lessor must inform lessee of his decision to rescind contract)
- Does not flow naturally from agreement, which is why it is important to establish right to cancel in contract via a
cancellation clause
- Lessor may rescind the contract if:
o Lease contains a lex commissoria (must be material breach)
o He acquires right to recission by reasonable notice
- If there is continual non-payment of rental, eviction from property occurs (very specific rules for this – see below)
 Specific performance
- Remedy available if there is arrear rental
- Claim for payment of rent in arrears is considered to be claim for specific performance
- Arrear rental is where lessee has missed some of payments, but lessor doesn’t want to cancel contract
 Damages / unjustified enrichment:
- If lessee occupies property after termination of lease agreement, lessor can claim unjustified enrichment or damages

Tacit hypothec remedy

 Security right that is given to lessor that is connected to arrear rental (this security right does not apply to other types of rental)
 In order to ensure payment of rent, lessor has a tacit hypothec over movable assets brought onto leased premises
 In other words, where lessee falls behind on rent payments, lessor obtains a security right (tacit hypothec) over movables that
are present on leased property
 Animals, furniture, ornaments, clothes, firearms, implements and tools brought onto premises by lessee with intention to be
held there permanently, are subject to hypothec
 This security right is not applicable to movables that are subject to a special notarial bond or that are part of an instalment
agreement in terms of NCA
- E.g., car that is financed still belongs to bank until the last payment is made – cannot have a tacit hypothec over this car
because it is subject to an instalment agreement in terms of NCA
 There can be a tacit hypothec over movable assets of 3 rd parties, but all 4 requirements must be met:
- Lessor is unaware that assets do not belong to lessee
o Lessor usually acquires knowledge of true position as a result of having received a notice to that effect from owner
o Other ways lessor may become aware of true position: by receipt of a copy of an agreement between lessee and a 3 rd
party under which latter reserves ownership, despite fact that goods are in the possession of lessee
o Nature of lessee’s business could also determine whether lessor, through exercise of reasonable care, could have
established that goods did not belong to lessee (e.g., goods left for sale on premises leased by an auctioneer
normally do not belong to the lessee)
- Assets were brought onto premises with knowledge that an impression can be created that lessee is owner of assets and
3rd party fails to correct this impression
o Actual knowledge by third party that assets have been brought into premises is not required
o 3rd party must have been in a position to have taken reasonable steps to discover whether premises were being
leased and failed to do so
 - Assets were brought onto premises with intention to hold them there permanently
o Such intention is absent if a company car used exclusively for business purposes is brought onto leased premises
- Assets were brought onto premises for use by lessee
o Assets brought onto premises by visitor are usually for use by visitor (not lessee) and are not subject to a hypothec
 Effect if lessor has a tacit hypothec
- Lessor is entitled to sell these movables to make up for the arrear rental
- Hypothec comes into operation at moment rent falls into arrears and exists only for period in which rent remains in
arrears
 Solgas v Tang Delta Properties: While tacit hypothec has predominantly been affected to help secure rental payments, it can
also be used as a means to secure payment of damages afflicted on leased property

Second duty of lessee – proper use of

property
 It is important for lessee to properly use property as was agreed upon
 Always make sure there is an agreement on condition of property before you move in, or else problems will arise when you
move out

Meaning of lessee using property properly

 Lessee must act as bonus paterfamilias (as if he was caring father/authority over property) – must act as a reasonable person
would over property
 Lessee must not damage property
- Lessee must return property in same condition it was in at time contract was concluded
- E.g., lessee may not cut down trees that lessor planted to provide decoration, shade, or fruit; if lessee plants his own tree
and cuts it down, garden must remain in same condition as it was given to lessee
- People of whom lessee is in charge of (guests) must also not damage property – damages will be liability of lessee
 There must be a proper use of property for purpose for which it was leased
- E.g., if you rent a house for residential purposes, you can’t operate your business from that house (didn’t rent property for
commercial reasons)
 Lessee must not alter anything on property without lessor’s permission, unless lessee can reverse alteration before handing
property back

Remedies of lessor if lessee doesn’t use

property properly
 Specific performance in form of an interdict may be claimed (to force lessee to start using it for purpose it was leased)
 Rescission in terms of lex commissoria if there was a material breach
- If there is no cancellation clause, must be a material breach for cancellation to occur
 If parties can prove damages, then a claim for damages is also possible

Third duty of lessee – return of property upon

termination of lease
 Property must be returned in same condition it was received
 There will always be allowance for normal wear and tear due to effluxion of time and ordinary use of property
 Onus of proving that damage to property was not caused by lessee’s actions or by persons for whose actions lessee is
responsible rests on lessee
 If there is a major issue with property upon return, lessor has normal contractual remedies available to him
- Specific performance
- Damages
- Eviction (if lessee fails to vacate)
o If lessee does not want to evict property upon termination of lease, action of eviction could be instituted

Eviction
 Eviction has to do with the rei vindicatio (claiming back possession of property)
 Court may allow a reasonable period for lessee to vacate
 Eviction is a court order where court orders lessee to vacate property and pay damages (if any)
 There are rules for residential property and various legislation that must be considered when it comes to eviction:
- S 26(3) of Constitution: court must consider all relevant circumstances before granting an eviction order
- Prevention of Illegal Eviction from Unlawful Occupation of Land Act (PIE)
o There are special procedural rules to evict an unlawful occupier
o ‘Unlawful occupier’ can include an occupier that used to be lawful (like lessee who is holding over after lease ends)
or someone who never had permission to occupy property (there was no lease agreement to begin with)
 RHA also addresses issues regarding eviction:
- Terms in Chapter 3 of RHA are deemed to be included in residential lease agreements even if parties didn’t expressly
mention them in agreement (implied terms):
o Lessor must furnish lessee with a written receipt of all payments made between them
o Receipt must contain all necessary information (e.g. address, date etc.)
o Deposit must not exceed the amount agreed upon
o Lessor must invest deposit into an interest-bearing account at a financial institution; lessee can ask for written proof
of this at any time
o Before lessee occupies property, both parties must inspect dwelling and make a list of defects
o After lessee moves out, both parties must inspect dwelling within 3 days before lease expires
o Upon expiry of lease, lessor may apply with deposit and interest to settle lessee’s outstanding amounts
o If there are no outstanding amounts, full deposit must be returned to lessee within 7 days of lease expiration date
o If lessee vacates property without notification, lease is deemed to have expired on date lessor established that lessee
had vacated dwelling
o Copy of house rules must be attached to the lease agreement
- Rights listed above cannot be waived
o Even if landlord attempts to waive these rights in agreement, these clauses will not be applicable nor enforceable
- RHA includes:
o There shouldn’t be discrimination (lessor must not discriminate against a lessee based on their race, gender etc.)
o Rights of the lessee (e.g., right to privacy)
o Rights of the lessor (e.g., right to regular payment)
o Particular remedies

Theme 4: Miscellaneous aspects

Sub-lease
Schematic diagram of sub-lease:
 Sub-lease: reciprocal agreement in terms of which one party (sub-lessor) undertakes to confer upon another party (sub-lessee)
temporary use and enjoyment of a specified thing in exchange for a counter-performance
 How it works:
- Original lessor leases to original lessee (original lease contract / lease contract 1)
- Original lessee sublets his room to a 3rd party (allows person to live with him and pay him) – original lessee becomes a
sub-lessor (lease contract 2)
- There is no contract or contractual relationship between original lessor and sub-lessee
o Sub-lessee’s rights depend on sub-lessor’s title
o Term of sub-lease (lease contract 2) cannot be longer than term of original lease (lease contract 1)
 In urban land, sub-letting is allowed unless there is a specific agreement to contrary (prohibited in original lease agreement)
 In rural land, there must be express written consent of lessor before there can be subletting of property (authority: Placcaat)
 Remedies when there is a sub-lease in contravention of agreement in urban land (material breach) or if there is no express
written consent in rural land:
- Breach of contract by way of positive malperformance (there was performance, but it was incorrect)
- Lessor can cancel lease and evict sub-lessee (normal contractual remedies)
 Mighty Solutions t/a Orlando Service Station v Engen Petroleum Ltd:
-
Referred to common law position that states that sub-lessee cannot raise sub-lessor’s lack of title as a defence against
eviction by sub-lessor (fact that original lease agreement expired is not a defence against eviction)
- E (sub-lessor) applied to HC for an order to evict M (sub-lessee), but M argued that E cannot evict them because original
lease expired
- The court held:
o Lessee is bound by terms of lease even if lessor has no title to property
o E had a common-law right to evict M and that this right had not been superseded by Petroleum Products Act
o M could not question E’s right to occupy the property
o M had no common law right to continue occupying premises as both operating lease and subsequent lease had been
validly terminated
- Only way that M could have succeeded in their argument was if court retrospectively altered contract; M would have to
prove that contractual term was contrary to public policy (M failed to do this)

Cession, delegation, and assignment

 Cession: transfer of personal rights
- Lessee (cedent) transfers their rights against lessor to a 3 rd party (cessionary)
- 3rd party becomes new lessee – but only in as far as it has to do with personal rights (not duties)
o Lessee can only transfer his rights (not his duties) via cession – lessee will still be responsible to pay rent
- Original lessee falls away as creditor since cessionary steps into his shoes and lessor remains debtor in terms of lease
- With urban land, cession of rights is permissible in terms of lease agreements, unless agreement provides otherwise
- With rural land, lessor needs to give written permission for cession to happen in terms of lease agreement
- Agreement which confers upon lessee power to cede his rights under lease usually also confers upon him power to sub-let
 Delegation: transfer of duties
- Consent is needed from:
o The lessee (the original creditor)
o The lessor (original debtor)
o The new lessee (the new creditor)
 Assignment: transfer of rights and duties
- Second lease is not formed, but 3rd party takes over rights and obligations of original lessee

Termination of lease
 Lease agreement can be terminated in same way as normal contracts, e.g., fulfilment of contract; agreement; set-off;
prescription; supervening impossibility of performance
 Additional ways in which a lease agreement can be terminated:
 - Effluxion of time - Death (not always)
- Notice - Dissolution of partnership
- Recission (as result of breach of contract) - Insolvency

Effluxion of time
 General rule (if CPA does not apply): if a lease is concluded for a specific period of time or until a specific event, then it will
terminate automatically on that event and no notice is required
 Legislative intervention to make this concept less litigious in practice (e.g., s 14 of CPA)
 If both parties are juristic persons, s 14 does not apply to contract
 If s 14 applies to a lease, it must be read in conjunction with Regulation 5 (exception to rule):
- If s 14 applies to a lease, then that lease agreement is not allowed to be for more than 24 months
- Regulation 5: can be longer if lessor can show that lessee expressly agreed for a longer period and that there was a
demonstrable financial benefit for lessee
 What happens after the expiry (if s 14(2) CPA applies):
- CPA will apply if there has been no agreement on when lease will terminate (and it is a fixed-term lease)
- General rule: lease will continue on a month-to-month basis unless lessee wants termination or agrees to renewal
- Has to be notification of impending expiry of fixed term contract (otherwise landlords can be open to situations where
lessees can continue on a month-to-month basis)
o Must be between 40 – 80 business days before expiry
o Notice must include information with regard to material changes if lessee agrees to renewal or stays on after expiry
o In practice, usually there is an increase in rental every year or period
o Increase in rental is a material change (notification is necessary)
- Important to address this in contract, or else s 14 will automatically apply (lessee will be allowed to rent on a month-to-
month basis)

Notice
 If CPA does not apply to lease, but lease does not specify its duration (periodic lease), agreement may be terminated at any
time on reasonable notice by any of parties (common law position)
- Notice must be subject to what is in agreement itself and the legislation applicable
- Usually, notice period is stipulated in contract, otherwise, it must be reasonable notice
- Reasonableness depends on the circumstances
- Court may allow a reasonable time for lessee to find an alternative place (with regard to residential lease agreements;
extra important with vulnerable lessees) and may also allow a reasonable time for lessor to find another tenant

Malan v City of Cape Town:

 Dealt with termination of a lease agreement for public rental housing (specific kind of lease agreement)
 Important legal issues that arose:
- Can a government agency cancel on mere notice or is something more needed?
o Lease agreement in this case said that either party may terminate lease on 1 months’ notice, but court said that mere
notice was not enough – something more was needed (i.e., further breaches of lease or other pressing public
reasons)
- Can there be cancellation based on arrear rental?
o Court said yes, but procedural fairness in terms of court is very important (must be notice and must be an
opportunity for lessee to try and rectify arrear rental)
- Are illegal activities enough to cancel an agreement?
o Court said yes, as long as certain requirements are met:
 It is clear that the conduct is defined and prohibited
 The tenant has the means to control the prohibited conduct
 The tenant has an opportunity to rectify a breach before cancellation
 Public housing is a scarce public resource, and to evict a non-paying lessee in this situation coincides with constitutional duty
to provide adequate housing to all historically deprived persons (such as Malan)
 Court held that proper notice of cancellation was given – valid cancellation of lease on grounds of illegal activity
 Eviction is just and equitable if it complies with PIE Act, s 26(3) of Constitution, and is just and equitable for both parties
 - For vulnerable tenants, alternative accommodation must be made available (old age home was arranged for Malan)
- Since its public housing (a scarce resource), property must be made available to another needy family (requirement was
met)
 Therefore, both cancellation and eviction were valid and confirmed by the court

Notice in terms of s 14 of CPA

 S 14 says that lessee can cancel agreement (despite contractual term to contrary):
(1) upon expiry of fixed term (24 months or less) without penalty
(2) any time during lease as long as written notice is given 20 business days before actual cancellation
- Lessee will still be liable for any remaining amounts owing up to date of cancellation (arrear rentals, levies, taxes etc.)
- Lessor is entitled to impose a reasonable cancellation penalty for early termination of lease
 Regulation 5 provides guidelines as to what constitutes a reasonable cancellation penalty:
- Penalty charged may not exceed a reasonable amount
- Penalty charged by lessor may not have effect of negating lessee’s right to cancel lease agreement

Recission due to breach

 In case of breach of contract, normal rules of cancellation apply unless there is a lex commissoria that deals with right to
cancellation if there are particular forms of breach in the agreement
 Remember: s14 CPA only applies if lease agreement is a fixed-term contract
 In terms of s 14
- Lessee can cancel fixed-term lease agreement with written 20 business days’ notice without reason or penalty
- Lessor can cancel fixed-term lease agreement with written 20 business days’ notice, but there must be:
o Written notice of material failure to comply with the lease agreement (must be material breach and notice of it)
o Opportunity for tenant to rectify this breach within 20 business days

Death
 Death does not always terminate a lease agreement
 If one party dies, lease is not terminated unless:
- There is a particular agreement that lease will end upon death of one of parties
- It is agreed that lease continues as long as lessor/lessee wants it to continue – and then lessor/lessee dies

Insolvency
 Insolvency: debts / liabilities / expenses outweighs income / assets
 General rule: insolvency is not an automatic termination of lease
 If it is insolvency of lessor:
- Lease is not terminated
- Immoveable property may be sold subject to lease and HGVK principle – unless price is not enough to cover claims of
mortgage creditors
 If it is the insolvency of lessee:
- The lease is not automatically terminated
- Trustee can choose to terminate lease by notice – 3-month rule applies
o If trustee does not make a choice within 3 months, it is presumed that lease is terminated upon expiry of 3 months
o If trustee chooses to cancel the lease, lessor can claim damages from insolvent estate
 A stipulation / term in lease agreement that says that agreement is terminated upon insolvency of either party is null and void
 Renewal of the lease
 There are 2 ways to renew a lease:
- by way of agreement
- by operation of law

Renewal by way of agreement

 After termination, parties can agree to renew lease either expressly or tacitly
 Tacit renewal is more difficult to prove in practice – have to look at conduct of parties, surrounding circumstances, lease
agreement itself, etc.
 Renewal of the lease is a new contract on same terms as previous lease agreement, unless otherwise agreed (not continuation
of old lease)
 Unless an intention to contrary appears, at common law, new lease is concluded for an indefinite period and can be terminated
by reasonable notice at any time
 In terms of common law, incidental terms of original lease do not automatically form part of new lease (changed by Mokone):
 Mokone v Tassos Properties:
- Common law position after this case: incidental terms of original lease automatically form part of renewal of lease
agreement
- Effect: all terms of original lease agreement (including right of pre-emption) form part of renewal of lease agreement
- CC based its decision on manner in which a lay-person (rather than a lawyer) is likely to consider renewal
o A lay person is likely to consider “renewal of a lease” to pertain to renewal of lease in its entirety, and would not
think to draw a distinction between “collateral” terms of lease and terms considered to be “an incident of relation
between lessor and lessee”

Renewal by operation of the law

 If its residential property, s 5(5) RHA states that:
If, on termination of lease, lessee remains in occupation of property with consent of lessor, then parties are deemed to have
entered into a periodic lease on same terms as expired lease, and either party must be given at least 1 month’s written notice of
termination
 General approach: sometimes both CPA and RHA apply to lease agreement at same time – residential agreements fall squarely
under RHA, thus CPA should be seen as ancillary to RHA
 If there seems to be a contradiction between CPA and another piece of legislation, then whatever approach gives best
protection and is most beneficial to the consumer is the approach that must be followed

Option to renew
 Option to renew is a clause in agreement that gives lessee option / right to renew lease after current lease expires
 Not the actual renewal – just option to have choice to renew lease or not (can be included in lease agreement, but not
necessarily acted upon/enforced)
 Option can be exercised by lessee – does not force lessee to renew
o If lessee chooses to exercise option to renew, lessor must accept it and act accordingly
o If the lessee chooses not to exercise option to renew, lessee must convey decision to lessor (lessor must accept)
 Can be made conditional (e.g., “this option can only be exercised whilst the property is not up for sale”)
 Can stipulate time period in which to exercise option – if not mentioned, option must be exercised before expiry of lease
 Option to renew must contain essentialia of a lease
- If an essentialia is missing (e.g., no rental amount is specified or can be inferred from agreement), no valid lease will
result from exercising option to renew
 Unit 3: Agency
Theme 1: Introduction
Basic concepts
 Agency: where one person (agent) is authorized to perform a juristic act on behalf of another person (principal)
 There is always at least 3 parties involved (tripartite relationship):
- Principal: person who authorises someone else to act on their behalf and who will then acquire all rights and duties under
act performed on their behalf
- Agent: person who has authority to represent another person
- 3rd party – can be a natural or juristic person
 There are 2 agreements that come into play with agency:
- Agreement between principal and agent
- Agreement between principal and 3rd party (does not bind agent)
 Permission or authority can be obtained and vested in agent in different ways:
- Via contract
- By operation of law
- Ratification
- Ostensible authority
 If agent did have valid authority, rights and duties are created between 3 rd party and principal
- Agent is not a party to the contract – he is middleman / conduit

The act of agency

 Act of agency: juristic act that agent performs on behalf of principal (e.g., conclude a contract with 3rd party, selling a house,
investing money)
 An agent cannot be used if
- Act is of such a personal nature that only principal can conclude it (performance by principal is material)
- Legislation requires personal performance
 Consequences of act of agency:
- Attributes rights and duties to principal and 3 rd party
- If agent acts outside scope of their authority, they will be held personally liable
 Ongevallekommissaris v Onderlinge Versekeringsgenootskap:
- Explains difference between agency and employment
- Employment has an element of agency, but it is not the same thing
- If one party supplies other with equipment necessary for him to carry out his task, it is indicative of employment contract
- Court studied X’s letter of appointed and held him to be AVBOB’s agent – wording wasn’t decisive factor
- Decisive factor was fact that X enjoyed great freedom in performance of his duties
- General rule = if agent is not subject to control of employer but can act independently and in his own discretion, then
person is an agent not an employee
 Validity of contract between principal and 3rd party:
- Normal requirements for valid contract (consensus, contractual capacity, lawfulness, possibility, formalities)
- Authority requirements: agent must have authority (permission / mandate) and must act within scope of this authority

Theme 2: Authority
Sources of authority
Contractual authority (express or tacit)
 Derives from an agreement between agent and principal (can be an express or tacit agreement)
 2 main forms of contract whereby agent can derive authority:
 - Contract of mandate: agreement where principal gives particular authority to an agent. Mandator instructs mandatee to do
something on their behalf (most typical)
o All normal requirements for valid contract must be met and there must be a valid offer and acceptance
o Agent can accept or reject this offer. If accepted, it is indication of consensus between principal and agent –
authority comes into existence
- Employment contract
o Agent is employee of principal (employer)
o Is employee an agent of employer or just a normal employee? Depends on terms of contract
o Ongevallekommissaris case – general rule is if agent is not subject to control of employer but can act independently
and in his own discretion, then person is an agent not an employee
 Express contractual authority doesn’t need to be in writing – can also be granted orally, however, verbal agreements cause
problems in practice

Ratification
 When act was committed by agent, there wasn’t authority / agent acted outside scope of authority, but that authority was later
given, and legal act was ratified as if it existed when agent acted
 Can be express or tacit
 Deemed that act of agency has been done validly and with retrospective effect (juristic act will bind principal retrospectively)
 Ratification will not affect vested rights that came into existence in between juristic act done without authority and ratification
of that act with retrospective effect
- E.g., if an innocent person did not know that agent acted without authority and acquired rights in property that was subject
of ratified judicial act, their rights in that vested in property is not nullified
 Requirements:
- Principal must have existed when agent acted
- Principal must have intention to ratify unauthorised act
- Principal must unilaterally declare ratification (expressly or tacitly)
- Principal must ratify act within a fixed or reasonable time period after act was performed
- Agent must have intended to perform act on behalf of a specific or ascertainable principal, not for himself
- Act of agency must have been valid
 If these requirements are met, unauthorised act will become authorised and principal will be retrospectively bound by
consequences of juristic act from date agent performed act

Implied authority / by operation of law

 Where law provides that an agent has a certain authority / common law or statute authorises someone to act on behalf of
another (source of authority is regulated by legislation)
 E.g., where trustee acts on behalf of a trust, curator acts on behalf an insolvent, guardian acts on behalf of a child, partner acts
on behalf of a company
 These people have authority by operation of law

Ostensible authority
 Where an impression was created, but it was not corrected – principal cannot rely on absence of authority
 Principal creates impression that agent has true authority, which results in 3 rd party believing that agent has authority when
they don’t
 If principal was aware that an impression was created but didn’t correct it, they cannot later try get out agreement or claim that
agent didn’t have authority – will be bound towards 3 rd party in terms of act of agent
 Position before Makate case:
- Approach was that ostensible authority is based on doctrine of estoppel
- In order for ostensible authority to be enforced (to be source of authority) requirements for estoppel must be met:
o Principal must have created an impression / representation (either intentionally or negligently)
o Impression must have been of such a nature that one can reasonably expect it to have misled 3 rd party
o 3rd party must have acted on strength of impression
 o 3rd party must have experienced prejudice as a result of acting on representation
 Makate v Vodacom
- Approach to ostensible authority changed
- Court held that ostensible authority is not based on estoppel, as it only requires element of an impression (not all
requirements of estoppel)
- Ostensible authority is a form of actual authority (it is not just a defence) – concept of ostensible authority was broadened
 E.g. of ostensible authority: Pharma rep worked for a pharma company, but later leaves company. Pharma company becomes
aware that rep still goes to same doctors to sell same products, but they do not correct impression that doctors have (that rep
still works for them). Pharma company will still be liable towards doctors because company prevented them from relying on
truth. If rep fails to deliver products, company cannot escape rights and duties that was created between them and doctors due
to this impression.

Scope of authority
 Scope of authority depends on source of authority (contract, ratification, enactment)
 Important to determine scope of authority because if agent acted outside of scope, they might be held personally liable
 Authority can either be given for only one act or it can be a general authority
 Agents may only perform acts that are legal or physically possible
 Scope of authority can also be extended by tacit or implied or ostensible authority

Express authority
 Makes the scope of authority clear
 Scope of authority is based on either written or verbal communication between principal and agent
 Terms of express authority do not have to include each and every particular of what the agent may and may not do on
principal’s behalf – principal can grant agent discretion and freedom of action under certain circumstances
- If there are issues, court will scrutinize source of authority to see if it was reasonable to give such broad authority

Tacit authority
 Authority is unspoken / between the lines, but must always be based on consensus (both parties had intention to be bound to
this authority)
 Objective bystander test is employed to determine existence or scope of tacit authority
- An objective bystander (with no vested interest) must be asked whether relevant term is included in authority (would he
be aware that agent had authority to act on behalf of principal?)
- If answer is yes, one can accept that tacit authority exists
 Kinds of tacit authority:
- General / related authority: if agent is appointed to a position or given general authority, they have tacit authority to do
anything normally associated with that particular position to fulfil that general authority
- Special / customary authority: if agent is given a specific task, they can do whatever is necessary to fulfil specific task
and / or allowed by usages of that trade
- Normal authority of professional persons: if a person is appointed and given authority to conduct work in professional
capacity (such as an attorney), client tacitly authorises that professional person (agent) can do anything that someone in
that profession usually does (unless parties agree otherwise) – see Nel case
 Nel v SA Railways and Harbours:
- Court held: there is no difference between express and tacit/implied agency as far as scope and limitation of agency are
concerned
- Extent of authority depends directly on contents of instructions and nature of act + is usually limited by purpose for which
agent is appointed
- When an agent’s authority exceeds scope of authority, they cannot say that they acted for benefit of principal as a defence
- Agent may only perform juristic acts which share a natural and causal link with the particular act of agency
- Test of whether an agent acted within limits of his agency depends on what is usual practice under such circumstances
(not what is reasonable)
 Ostensible authority
 Distinguish between:
- Where authority was granted ostensibly (impression of authority that principal created towards 3 rd party)
- Where there was actual authority, but scope of authority was made wider due to false impression created
 Determine scope by looking at impression that was created (how far does impression go?)

Formalities
 General rule = agency agreement / mandate does not have to be in writing (no formal requirements)
 Exceptions to this rule: in certain situations there are formalities because agent is creating rights and duties that have got
serious consequences relating to property or legal status
 When agency agreement is required to be in writing, a power of attorney is needed
- Power of attorney must be in writing and signed (by principal)
- It must clearly state what agent’s specific or general authority involves
 Examples of when power of attorney is needed
- If principal authorizes agent to purchase land on his behalf, s 2(1) ALA requires that that authority must be signed and in
writing
- Where conveyancer transfers land or registers mortgage bond on behalf of someone, must be in writing and signed
- Where legal practitioner lodges or opposes an appeal in HC on behalf of a client, needs power of attorney

Ways in which authority can be terminated

 Authority is executed (task is completed by agent)
 When authority was granted for a specific period and that period expires
 Through mutual agreement between principal and agent
 Specific legal relationship ends (e.g., employer-employee)
 Change in status of parties (e.g., where principal or agent becomes mentally-ill, insolvent or dies)
 Principal revokes authority he granted to agent
- Not possible if authority was granted irrevocably / authority was already executed / principal did not inform agent and 3 rd
parties
- Agent has a claim against principal if he suffers damage as a result of revocation
 Agent renounces the authority that was granted to him
- Not possible if principal will suffer prejudice or loss as a result of the renunciation

Theme 3: Rights and duties of principal and

agent
Duties of principal
 Relationship between agent and principal is a legal relationship that involves certain rights against and duties towards one
another
- One’s duties correspond to other’s rights
 Duties of the principal
- Compensate agent
- Indemnify agent against loss
- Reimburse agent for any expenses incurred
- Account to agent
 Agent has right to expect performance of those duties
 1st duty of principal – must compensate agent
 Agent is not automatically entitled to compensation (remuneration) for work he performed on principal’s behalf
 Principal only has duty to pay compensation if it is stipulated in agreement
 Onus of proof rests on agent to prove existence of an agreement that entitles him to compensation
 If there is a duty to compensate, principal must pay compensation, even if they did not receive a benefit (unless agreement
determines otherwise)
 Barnabas Plein v Sol Jacobson & Son:
- How to determine compensation of an agent when no specific amount was agreed upon
- Principal must pay usual compensation to which an agent of that type is normally entitled
- If we cannot determine this amount, then we look at trade usage for that type of trade – principal must pay agent an amount
that corresponds to trade usage
- If we cannot determine that, court can determine a reasonable amount based on all circumstances of case
 When agent is not entitled to compensation
- When they acted outside the scope of authority
- Where they negligently caused damage to the principal
- Where they made a secret profit
- Where their own interests conflicted with performance of their duties towards the principal
- Where they committed breach of contract

2nd duty of principal – must indemnify agent

against loss
 Principal is duty-bound to indemnify agent against “all loss or liability duly incurred by him in execution of his mandate or
directly caused by such execution”

3rd duty of principal – must reimburse agent

for expenses incurred
 Agent is entitled to be reimbursed for all necessary and reasonable expenses that he incurred while he was performing
appointed task(s)
 Principal does not have to reimburse the agent if:
- Expenses were a result of agent’s negligence or failure to fulfil his duties
- Duty to reimburse was contractually excluded
 Difference between duty to compensate for work done and duty to reimburse for expenses:
- Duty to reimburse is automatically applicable (unless contractually excluded)
- Duty to compensate is only applicable if agreed to
 2 ways in which agent can enforce this duty to reimburse against principal:
- Lien (right of retention)
o Only possible if agent is in possession of property that belongs to principal
o Agent can refuse to hand over the property unless they are compensated
o Moment agent loses possession of property = the moment they lose lien to enforce compensation
- Set off
o If agent is in possession of money belonging to principal, they can deduct compensation owed to them from that

4th duty of principal – must account to agent

 Principal must regularly draw up statements of account
 Principal must give an account to agent with regard to any compensation or commission that is owed to agent
 This duty and extent thereof will depend on nature of tasks to be performed by agent and circumstances of transaction

Duties of the agent

 Duties are:
- Perform the mandate
- Act in good faith
- Account to the principal
- Keep principal’s property separate
- Return principal’s property
 Principal has right to expect performance of these duties

1st duty of agent – perform the mandate

 Agent has duty to perform task they were appointed to do and execute authority granted to them
 How and when this task must be performed depends on actual authority
 Agent must execute mandate at time stipulated in the authority
- If parties did not agree to a specific time, agent must perform task within a reasonable time, which will depend on
circumstances of case
 If agent did not perform this duty:
- They cannot get compensation
- They may be held personally liable for damages suffered by principal
 If there was some form of authority, but agent exceeded the scope of authority:
- They will be held liable for damages suffered by principal
- Principal will not be bound to the contract
 General rule = agent must act in person and cannot delegate this authority to another person
 Examples of exceptions to this rule
- When auditor is given authority to do certain financial things for a client, but they cannot do it, they can tell someone else
to complete authority on their behalf
- Principal may expressly/tacitly permit agent to delegate his authority to another person
- If there is a sub-agent, agent must ensure that authority/task is still performed properly
 How agent must perform the mandate
- Common law rule is that it must be performed with knowledge, care, and skill
- There is a high level of moral duty that is expected of an agent (as they are looking out for interests of someone else)
- If duty is not performed in this way, agent will be liable for damages suffered by principal
- Level of care, knowledge, and skills depends on circumstances
- If it is not clear what specific level of care, knowledge and skill is, question is how a reasonable professional would
behave in those circumstances
 Mouton v Die Mynwerkersunie:
- Dealt with an attorney’s duty of care and question of what would a reasonable attorney in those circumstances do?
- Court held that attorney would be liable for negligence if he failed to execute his mandate with necessary degree of
knowledge, care and skill
- Degree of knowledge, care and skill required is that which would be required from the average attorney
- It is important for legal professionals to act in an ethical way

2nd duty of agent – to act in good faith

 This relationship is based on the contract of mandate, which suggests relationship of good faith between principal and agent
 Agent must always prefer principal’s interests above their own because agent holds a position of trust and confidence
 Conflict of interests
- If there is a conflict of interests, agent must always act in interests of principal and not of himself
- Agent may not act in a way that causes a conflict of interests
- Agent cannot act on behalf of both principal and a 3 rd party
- Agent cannot act in their own name when performing their duties (there are exceptions to this rule)
- Agent cannot purchase principal’s property that he was supposed to sell
 - If agent does one of these things, principal can set contract aside unless principal gave permission for agent to do this
 Secret profits
- Sometimes there are unforeseen extra profits that arise from a transaction
- Agent may not keep these extra profits or hide them as a secret – must hand over these profits to principal
- Extra profit (if any) must be declared – not hidden
- If secret profits are hidden, principal may terminate authority and claim damages from agent
 Bribery and corruption
- If agent is guilty of bribery and corruption, delictual and criminal consequences occur
- Accepting a bribe violates duty of good faith
- Principal may repudiate contract due to the bribe
- Plaaslike Boeredienste v Chemfos Bpk:
o Bribery happens where agent receives some gift or remuneration from 3 rd party who intends to influence agent to act
in their interests and not that of his principal
o Bribery is an immoral and unlawful act
o 3rd party is not allowed to enforce a contract which he obtained by means of immoral and unlawful conduct (bribery)
 Secret information
- May not be exposed or used to benefit of agent in particular circumstances

3rd duty of agent – to account to principal

 Agent has duty to keep updated records of all transactions, payments, expenses, receipts etc. that relate to performance of his
tasks on principal’s behalf, so that he can provide a proper account to principal
 Principal has right to inspect these records and he can obtain a court order compelling agent to grant him access to such
records

4th duty of agent to keep principal’s property

separate
 If agent has any of his principal’s property (including money) in his possession, he must keep it separate from his own
 If agent does not do this and principal suffers prejudice, principal can sue agent for damages

5th duty of agent – to return principal’s

property
 If agent has any of his principal’s property (including money) in his possession, agent must return these to principal after his
authority has ended
 If agent invoked set-off with reference to money owed to him by principal, agent is only required to return surplus to principal
 If agent has a lien, he can refuse to return principal’s property until he is reimbursed for expenses pertaining to that property

Tripartite relationship
Relationship between principal and 3rd party
 Terms of contract concluded between agent and 3rd party must be considered when determining legal relationship between
principal and 3rd party
 There is only a legal binding relationship between 3 rd party and agent in exceptional circumstances
 If agent acts within scope of authority, rights and duties will be vested in 3 rd party and principal (principal will be bound)
 Principal will be liable towards 3rd party for wrongs committed by agent:
 - If agent commits a delict against 3rd party and agent acted within scope of authority, principal will be liable if:
o Agent is in employment of principle
o Agent committed delict while executing his duties of employee (vicarious liability)
o Principal authorised and had knowledge of agent’s act that caused damage, they will be held liable (even if agent is
not an employee)
- Where agent makes fraudulent misrepresentations that causes 3 rd party to suffer damage, principal is liable if agent acted
inside scope of authority (principal not liable if agent made fraudulent misrepresentations outside scope of authority)

Relationship between agent and 3rd party

 Generally no legal relationship between agent and 3 rd party – not liable towards each other
 3 exceptions to this
- Absence of authority
o Agent is liable towards 3rd party unless both are under a false impression that agent had authority – must be bona fide
o Agent is liable towards 3rd party unless 3rd party knows or should have reasonably known that agent didn’t have
authority
o Thus, agent and 3rd party are liable towards each other if they were mala fide and knew that agent did not have
authority
- Express warranty
o If agent gave an express warranty that they do have authority, they will be personally liable against 3 rd party for
breach of warranty
- Misrepresentations
o Where agent creates an impression that they have authority they do not have
o If it is fraudulent misrepresentation, agent can cause principal to be liable (if agent acted within scope of authority). If
agent acted outside scope, they will be held liable for fraudulent misrepresentation

Special types of principals

Non-existing principal
 General rule = one cannot conclude a contract on behalf of a principal that does not exist and such a contract cannot be ratified
later when principal comes into existence
 Exception to this rule is that of pre-incorporation contracts for companies
- S 21 of Companies Act says that an agent may conclude a written contract on behalf of a company that still needs to be
registered or incorporated (does not yet exist)
- Agent is liable towards 3rd party if this company ends up not being incorporated at all (it never comes into existence)
- Agent is also personally liable if company does get incorporated, but after consideration, company rejects the contract

Undisclosed principal
 Where agent concludes a contract in his own name, but is acting as an agent for another person (undisclosed principal)
 Agent does not inform 3rd party that he is acting on behalf of a principal
 Special contractual relationship forms between agent and 3 rd party (and a contractual relationship forms between principal and
3rd party)
 If 3rd party discovers that agent acted on behalf of somebody else, they can choose which relationship to rely on
- They can claim either from agent or from principal
 Cullinan v Noordkaaplandse Aartappelkernmoerkwekers:
- Despite objections, Court accepted doctrine of undisclosed principal and gave reasons
- Objections against this doctrine – it is against principles of contract law because only an actual party to a contract can be
bound to it and acquire rights and duties in terms of it
- Court accepted this doctrine for following reasons:
o Doctrine had been applied in commercial dealings in SA for over 100 years
 o Numerous transactions had already been concluded in terms of which parties have acquired rights and duties which
would be retrospectively lost if court rejected the doctrine
o Doctrine had already been incorporated into legislation (s 16 of the Transfer Duty Act)
- Overview of this doctrine:
o This doctrine should be limited to one undisclosed principal
o As soon as 3rd party finds out that agent acted on behalf of an undisclosed principal, he has a choice between holding
either principal or agent liable. Once this choice is made, 3 rd party is bound to it

Special types of agents

 Brokers
 Estate agents / property practitioners
 Auctioneers
 Company representatives
 Intermediaries in terms of CPA
 All these agents have legislation that governs them

Estate agents / property practitioners

 Are a sub-category of brokers because they bring together buyer / seller or lessor / lessee
 Particular legislation that governs this relationship, such as Property Practitioners Regulatory Act 22 of 2019 (PPRA)
 The PPRA prescribes the following:
- Property Practitioners Regulatory Authority was established to regulate estate agent profession and maintain integrity of
estate agents in their dealings with consumers
- Property Practitioners Fidelity Fund was established – estate agents contribute on a yearly basis to a fidelity fund and get a
certificate. All estate agents should belong and contribute to this fund
- Estate agents cannot lawfully practice or claim remuneration without this certificate because large amounts of money are
attached to property transactions
- Buyer can be compensated from this fund if they suffer loss due to their estate agent
 When it comes to complaints, PPRA established Property Practitioners Ombud Office
- Based on consensual dispute resolution
- Ombud only makes recommendation – not a final decision (to keep the issue out of court)
- Ombud hears complaints against estate agents
- Consumers / buyers and lessors / sellers should be able to have access to this ombud office wherever they live in SA
 General task of an estate agent is to find a purchaser or lessee for property he was mandated to sell or let on his client’s behalf
– once task is complete, estate agent is entitled to remuneration (in the form of commission)
 Since relationship between an estate agent and his client is generally based on contract of mandate, estate agent is bound to
same duties as ordinary agents, however, unlike normal agents, an estate agent can choose to not find a suitable buyer (in
which case he simply will not be paid)

Remuneration
 Many times, there is more than one estate agent trying to sell a property – remuneration is a headache in practice
 Right to payment of commission is usually made conditional on finding a willing and able buyer
 Sale agreements for property must be very clear on exactly how and when estate agent should receive commission

Steps to determine whether estate agent is entitled to compensation:

 If there is no valid fidelity fund certificate, there will be no compensation
 We must look at terms of contract between estate agent and client and circumstances of case to determine whether estate
agent’s actions trigger principal’s duty to pay that – guidelines of case law
 When determining whether particular estate agent can get compensation, court will look at the following factors:
- If there were multiple estate agents, which agent was effective cause of sale agreement? ( Gordon case)
- Which agent introduced a willing and able buyer? ( Aida Real Estate case)
- Remuneration contingent on the occurrence of a particular event
 o If contract between principal and estate agent stipulates a certain event upon which payment of remuneration is
contingent, then when such event occurs, principal is duty-bound to pay agent
o Clause that states commission for estate agent (10% of purchase price) is due and payable on date of registration +
transfer of ownership
o Remuneration is contingent on finalization of this sale

 Gordon v Slotar:
- Court confirmed that one must ask which agent’s actions qualified as effective cause of sale – will depend on facts of case
- If it is impossible to determine which of agents was effective cause, principal might have to pay both of them and will
only have himself to blame for not properly regulating this relationship with separate agents
 Aida Real Estate v Lipschitz:
- Potential buyer had considered buying property via agent but then backed out due to financial constraints. Later, they
approached principal directly with financial means to buy property and concluded a sale agreement directly with principal
- Court found that one must ask whether introduction by agent of a potential buyer was effective cause of sale, or whether
an overriding event (between introduction and sale) effectively cancelled out impact of the initial introduction
- Current position: if an agent introduced a buyer to property, buyer must be willing and able to actually purchase property

Brokers
 Any person who, in terms of a contract, assists another person with conclusion of a contract or concludes a contract on that
person’s behalf with a 3rd person
 Broker can function as an agent but also as a middleman or intermediary who merely brings 2 contracting parties together
 Particulars of his role will depend on his agreement with person who appointed him as broker
 E.g., property brokers (estate agents), financial brokers (investment broker and stock insurance)

Auctioneers
 Agent who is appointed in terms of a contract of mandate to sell principal’s property at a public auction
 Movable goods: principal usually delivers them to auctioneer, who arranges auction, sells property, delivers it to buyer, and
receives payment on principal’s behalf
 Immovable property: purchase price is usually not paid to auctioneer but directly to seller (principal)
 An auctioneer may not personally or through an intermediary bid on or buy anything at auction
 Contract of mandate between auctioneer and principal should set out particulars of how auctioneer should be remunerated
- If there is no express agreement, assumed that they tacitly agreed to compensation usually payable to auctioneers
 Auctions and actions of auctioneers are subject to certain statutory rules (such as CPA)

Company representatives
 A registered company is a juristic person which does not have physical capability to act in person, and therefore a natural
person must act on its behalf
 Companies Act provides that a board of directors has authority to exercise all powers and functions of company – unless Act
itself or company’s memorandum of incorporation stipulates otherwise
 Board can delegate authority (express, tacit, ostensible) to another person (such as a specific director or an employee) to
perform certain acts on company’s behalf

Intermediaries in terms of CPA

 S 1 of CPA defines intermediary: person who, in ordinary course of business and for remuneration or gain, engages in business
of—
- Representing another person with regard to supply of goods or services
- Accepting possession of any goods / property from a person for purpose of offering property for sale
 - Offering to sell to a consumer, soliciting offers for, or selling to a consumer any goods / property that belongs to a 3 rd
person, or service to be supplied by a 3rd person
 S 27 of CPA says that intermediary (agent) must disclose certain information to any person whom he represents, such as:
- Personal info of intermediary
- All amounts due
- Services to be supplied
 Definition of intermediary does not include a person whose activities as an intermediary are regulated in terms of any other
national legislation
 Duty to disclose does not apply to:
- Executors or administrators of deceased estates
- Liquidators of insolvent estates
- Trustees of trust property

Unit 4: Suretyship
Theme 1: Introduction
Credit security
 Debt relationship where 1 party (debtor) has an obligation towards other party (creditor) and obligation can be due to more
than 1 scenario, such as:
- Law of obligations
- Contract or agreement where 1 party loans money to another party
- Delict (1 party owes a monetary amount caused by a patrimonial loss to another party)
- Legislation can establish obligations between parties (e.g., unjustified enrichment)
 There is always possibility that debtor might not pay – this is a risk
 Security is best way to alleviate risk from creditor’s perspective if debtor does not pay
 Security is called a ‘2nd option’ or ‘backup plan’ if debtor does not pay
 When creditor has security, they are secured creditor (if not, they are unsecured creditor)
 Benefits of surety:
- Excussion
- Division
- Rescission
- Lien
- Damages

Forms of security
 Form 1: Personal security / suretyship
- Where another person binds himself to fulfil debtor’s performance should debtor fail to pay
- Creditor obtains a personal right against surety (creditor can claim from surety if debtor doesn’t pay)
 Form 2: Real security
- Where creditor is given a security right in an asset / property should debtor fail to pay
- Creditor obtains a real right in object
- Purpose: can attach property and sell it via court processes if debtor does not pay
- Secure creditor (creditor that has real security by way of property) has a preference to proceeds of property against other
unsecured creditors that stand in queue to get their money back
- Pledge: If a movable thing is given as security
- Mortgage: If immovable property is given as security
 Difference between these 2 forms is subjective right that is vested (personal right vs real right)
 Accessory nature of security:
- Personal and real security depends on existence of a valid principal debt or obligation
- Security right secures fulfilment of underlying obligation (if there is no underlying obligation, then there can be no
security)
- Security is an accessory to the principal debt
 Theme 2: Suretyship
Definition of suretyship
 Suretyship: contract in terms of which a 3rd party (surety) binds himself to creditor for proper performance of whole or partial
debt of another (principal debtor)
 There is always 3 parties (a principal debtor, creditor, surety) and a principal debt
 Suretyship agreement is between creditor and surety
 Suretyship is an ancillary agreement because it is dependent on an original principal debt (surety is accessory to principal debt)

Nature of suretyship contract

 Suretyship contract is accessory to principal debt and can only exist and continue to exist if principal debt still exists
 If principal debt lapses, then surety’s liability to stand in for someone else’s debt also lapses
 Principal debt doesn’t have to exist at time when suretyship contract is concluded, but it must within a reasonable time come
into existence for surety’s liability to be created
 Accessory nature of suretyship must be distinguished from other types of primary obligations (not accessory obligations)
 Suretyship creates a secondary obligation, not a primary obligation – principal debt = primary obligation
 Primary obligations are independent liabilities (not accessories) – not dependant on existence of another obligation:
- Guarantee (e.g., someone guarantees that a building construction will be completed by a certain date. If it is not done by
this date, person that made guarantee will be liable for certain payments)
- Indemnity – if someone indemnifies you, it means that if you suffer any losses in your business, they will pay you for
these losses
- Insurance – an insurance company will pay for damages to your property that arise from a certain event
- Delegation - where someone transfers their duty to pay to someone else – creditor has no right to claim payment from
original debtor if new debtor fails to pay
- Co-debtorship – where more than 1 persons owes same debt. Surety is elevated to a primary level (no longer an accessory
obligation)

Surety and co-principal debtor (surety vs co-

debtorship)
 If person signs as a surety but not as a co-principal debtor, creditor must go after primary debtor first
- Only when principal debtor is unable to pay can creditor go after surety
 If person signs as both a surety and as a co-principal debtor, creditor can choose who to hold liable and claim payment from
- Creditor can go directly to surety to request principal debt, thus surety is elevated from accessory to primary level
- Surety is jointly and severally liable with principal-debtor
 Neon and Cold Cathode Illuminations v Ephron:
- N entered into a lease contract with company X, whose director, E, bound himself in lease jointly and severally in his
personal capacity as surety and co-principal debtor for performance by lessee
- X had fallen in arrears with its payment to N, who sued E in his capacity as lessee for outstanding amount, but Court
refused this claim because E was not lessee
- N then sued E in his capacity as surety and co-principal debtor – E was not a co-lessee, just a co-debtor
- If someone signs as both a surety and as a co-principal debtor, liability of that person is based on suretyship (not on co-
debtorship)
- Co-debtorship does not transform suretyship into another contract
- Surety (E) is liable only in their capacity as surety and co-principal debtor
 - Surety (E) does not become a party to main contract in terms of which surety was initially given (surety is not cession –
only relates to debts of another)
- Surety will have certain rights (right of recourse/regress – surety can later claim money they paid from original debtor
with whom they are jointly and severally liable)
- Because surety also signed as a co-principal debtor, they will lose certain benefits of a surety – surety tacitly renounces
ordinary benefits available to them (such as excussion, division)
o Surety (co-principal debtor) retains right to obtain cession of creditor’s rights against principal debtor (X) – E can
step into the shoes of N and sue X
- Liability of surety to pay (if they also signed as co-principal debtor) arises as soon as primary debt becomes due

Formation of the suretyship contract

 Suretyship contract: agreement between creditor and surety
 Normal validity requirements of contract must be met and there must be valid offer and acceptance
 Jurgens case:
- Determine who makes offer and who makes acceptance to establish suretyship agreement
o The surety makes the offer
o The creditor accepts the offer
 Debtor does not have to be party to contract, but if suretyship contract is against debtor’s will, there won’t be right of recourse
- Suretyship will still be valid, but surety will not be able to go to debtor and request for debtor to repay him
 Suretyship contract may not be against public interest or morals of open society that is reflected in values of Constitution
 Spouses married in community of property are jointly and severally liable for certain debts, and thus can only be a surety if
they get written consent from other spouse (unless suretyship is undertaken in normal course of their career, trade, or business)
 S 6 of General Law Amendment Act 50 of 1956 (GLA) establishes formal requirements for suretyship contract:
- Terms must be in a written document that is signed by or on behalf of surety
- Fourlamel case: why must suretyship contract be in writing?
o Legal certainty
o Avoid fraud
o To avoid situations where people accidently agree to be responsible for another person’s debts
o To ensure that person (surety) is aware of what he is getting himself into
- Sapirstein case: which terms must be in writing?
o Identity of the creditor
o Identity of the debtor
o Identity of the surety
o Nature of the principal debt (type of debt and how it arose)
o Amount of secured debt
- If these formalities are not complied with, suretyship contract is invalid
- Amendments to suretyship contract must also comply with these formalities
- If surety denies liability, onus rests on him to prove that he was unaware of suretyship even though he signed document
 Sapirstein case:
- Is it a violation of s 6 of GLA if suretyship is entered into, but principal debt is not yet in existence or identity of a party is
not yet certain?
- Court said that you can conclude suretyship for a debt to be incurred in future provided that you can present extrinsic
evidence to show that future debt was in fact incurred and parties identities were in fact clarified and ascertained
- If you cannot present extrinsic evidence, s 6 GLA formalities not complied with, thus no suretyship contract is established
 Fourlamel case:
- When suretyship was signed, names of co-surety, debtor, and creditor did not appear
- In other words, surety signed a blank form. Other info was only added to form after it was signed
- Court held that it did not comply with s 6 GLA, therefore, it was a void suretyship contract
- Document must contain all terms when it is signed or at least before it is received by the creditor
- Document also cannot refer to another document that might contain necessary info – too far removed from formalities
o Cross-referencing is not allowed – all info needs to be in suretyship contract itself
 Jurgens
- After surety signed document, secretary of surety filled in missing information and sent it to creditor (document was
partially completed)
- Court determined surety comes into existence when creditor accepts the offer
- Court confirmed that you cannot sign a blank document and allow creditor to complete information afterwards
 - However, you can sign document and then allow an authorised agent (such as a secretary) to complete information
afterwards, but all information must be completed in writing before it is sent to creditor
- All terms must be in document when creditor accepts suretyship contract so that there can be consensus

Consequences of suretyship
 Defences surety can raise to no longer be responsible for payment of debtor’s debt
- Surety can say that suretyship contract is invalid for not complying with formalities
- Surety can say that suretyship contracted is terminated by effluxion of time or prescription
 Defences available to surety and principal debtor with regard to obligation
- If it is a defence that relates to actual principal debt (defence in rem), there can be defences for both surety and principal
debtor
o If principal debt is void because contract is illegal, creditor cannot claim from surety because they have same
defences available to them as principal debtor, since defence clings to debt/obligation itself
- If it is a defence of a personal nature that relates to person/principal debtor himself (defence in personam), there might
not necessarily be a defence that can be used by both surety and principal debtor
o If principal debtor is a minor or insolvent (contract is voidable), creditor can still claim from surety if they are not a
minor or insolvent
 Special benefits and rights for surety
- Benefit of excussion
o Creditor must first claim payment from principal debtor before he claims payment from surety – unless surety
signed as a co-principal debtor
o Surety can insist that creditor get payment from debtor himself
- Benefit of division (splitting the debt)
o If there is more than 1 surety, sureties can demand that debt is divided between them (they are liable in solidum).
Surety is only liable for his portion/share of debt
o If person signed as both a surety and as a co-principal debtor, this benefit is not available to him
- Benefit of cession of actions
o Surety who performed to creditor can demand cession of all rights and securities of creditor against principal-debtor
and co-sureties
o If surety obtains cession, then he will become principal debtor’s new creditor
- Right of recourse against co-sureties
o If there is more than 1 surety, surety who paid full debt has a right of recourse against other sureties for payment
(whether or not he is aware of them)
- Recourse against the principal debtor
o If surety pays debt, they have a right of recourse from principal debtor to claim amount of his performance
o If suretyship contract is against debtor’s will, this right of recourse will not be available (in this case, surety will
need to take cession of actions from creditor before recovering his expenses from debtor)

Termination of suretyship
 Suretyship is terminated if principal debt is terminated (accessory nature of suretyship)
- Principal debt can be terminated if principal debtor makes payment/performance
 Suretyship can be terminated in normal ways in which any contract can be terminated
- E.g., prescription, effluxion of time, termination by way of agreement, cancellation due to breach, performance etc.
 If there is a material alteration of principal debt/obligation that is to detriment and prejudice of surety and done without their
consent, they do not have to be bound as a surety to that altered principal obligation any longer
- E.g., creditor allows debtor to pay back loan over a longer period of time which is to surety’s disadvantage as he would
be bound for a longer period of time – suretyship is terminated

Impact of NCA on suretyship

 S 8 NCA: if it is a credit agreement that involves a ‘credit guarantee’, NCA becomes applicable to surety agreement
 S 8(5) NCA defines credit guarantees: agreement where a person undertakes to satisfy upon demand any obligation of another
in terms of a credit facility or a credit transaction to which Act applies
 Whenever NCA is applicable to surety contracts, s 8 NCA must be followed because it also includes common law suretyship
agreement

Unit 5: Letting and hiring of work

Theme 1: Introduction
General
 Common law division between different kinds of letting and hiring – 3 types of letting and hiring in Roman law:
- Locatio conductio rei – letting and hiring of a thing / property (lease)
- Locatio conductio operarum – letting and hiring of a service (employment contract)
- Locatio conductio operis – letting and hiring of a completion of a piece of work (independent contractors and construction
contracts)
 Common law definition of letting and hiring of work: reciprocal agreement between client and contractor where contractor
undertakes to deliver a finished product of work within an agreed time in exchange for payment
- Client = lessor of work; contractor = lessee of work; contract between them = construction contract
 Smit v Workmen’s Compensation: difference between
- Letting and hiring of service:
o Parties are called employer / employee
o Element of supervision is present – employee works under supervision of employer
o Object of contract is labour itself / rendering of personal services
- Letting and hiring of work
o Parties are called client / contractor (and sub-contractor)
o Contractor works independently (not under control of client) – no element of supervision involved
o Object of contract is finished product / result of labour

Contractors and subcontractors

 Relationship between contractors and sub-contractors:
- Contract for letting and hiring of work between client and contractor (rights and duties arise between client and
contractor)
- Contractor can appoint a sub-contractor
- General rule = there is no legal duty between client and the subcontractor (unless agreement indicates otherwise)

Types of contractors and subcontractors

 Original contractor concludes a separate contract with a subcontractor
 Subcontract does not automatically create a relationship between original client and subcontractor

Selected subcontractor
 Where original contractor appoints/chooses a subcontractor in their own discretion
 There is no relationship between the client and subcontractor
 Contractor has a duty to perform towards client (even if there is a subcontractor involved)
 Client has no duty to pay subcontractor
 E.g., a client gets a contractor to build a swimming pool. Contractor does not have someone who specialises in pool tiling, thus
they appoint a subcontractor who specialises in tiling of pools. There is no duty on client to pay pool tiler (subcontractor)
Nominated subcontractor
 Where client nominates subcontractor (as opposed to the original contractor)
 E.g., Client has a brother-in-law who needs a job, so client asks contractor to use her brother-in-law as pool tiler
 Client has to pay contractor and contractor won’t be liable for quality of work of subcontractor unless contract indicates
otherwise

Non-payment of subcontractor from

contractor
 Subcontractor cannot claim from client, because no contractual relationship exists between them
 Subcontractor can exercise a right of retention (lien) over work/property as a way to compel client (owner) to pay
 If client does pay to get property back, it can be set off against money owed to the contractor

Theme 2: Conclusion and contents of the

contract
Conclusion of letting and hiring of work
contract
 Validity requirements of contract must be met (consensus, contractual capacity, legality, possibility, certainty, formalities)
 There must be a valid offer and acceptance (this indicates consensus)
- Irrevocable offers are invalid
- If an offer is made and is available for a certain time period, an option has been granted
- If a certain party is entitled to make first offer in future before another party, this is called a preferential right (they have
right of first refusal)
 Contract is concluded and time and place where offeree accepts offer, unless parties agree otherwise (information theory)
 Exceptions to this rule:
- Reception theory: if parties communicate via data messages:
o Time: contract is concluded when acceptance of offer is received and capable of being processed by server
o Place: contract is concluded where person to whom acceptance is addressed usually resides or works
o Authority = s 22 and 23 of ECTA
- Expedition theory: if offer and acceptance are sent by post or telegram:
o Contract is concluded where and when letter is posted/sent
 There must be consensus on essentialia of letting and hiring of work contract:
- Contractor must complete or deliver a specific piece of work or service with regard to a thing that belongs to client or if
client’s material is used
- Work must be completed independently from client
- Work must be completed within agreed time or within a reasonable time
- There must be agreement on remuneration as counter performance
 CPA applies if there is a supplier (contractor) that supplies a service to a consumer (client) in ordinary course of business for
consideration
 If CPA applies, rights available to consumers in terms of CPA will be available to that client (s 54 CPA – deals with defective
service)
- E.g., if swimming pool leaks, it is defective service in terms of s 54 CPA. There is right of retention for consumer/client
 Letting and hiring of work contract versus
sale contract
 If client provides material and contractor does work, it is a letting and hiring of work contract (essentialia of contract)
 If contractor supplies product and product is made from his own materials, this is a sale contract ( Tulloch v Marsh)
 If contractor uses their own material to install something in a client’s house, this is a sale contract ( Tulloch v Marsh)
- Exception to this rule laid out in Sifris v Vermeulen: general building contracts are letting and hiring of work contracts
(not sale contracts) because contractor supplies only part of total product (e.g., building site)
o Superficies solo cedit – everything that has been erected on piece of land becomes integral part of land

Content of contract: Typical clauses present in

letting and hiring of work agreements
Incidentalia
 These do not normally form part of contract (parties agree to edit naturalia and agree on how clauses will work)
 Conditions
- Contract depends on happening of an uncertain future event
- Suspensive condition (i.e., delivery or performance) – contract will only become enforceable when condition is fulfilled
- Resolutive condition (e.g., if contractor is declared insolvent) – contract will expire upon this condition being fulfilled
 Time periods or terms
- Contract depends on happening of a certain future event
- Can be suspensive or resolutive
 Cancellation clause
- Can have cancellation clause (lex commissoria) that says that prejudiced party can cancel contract if breach occurs (right
of recission)
- Usually includes a notice period wherein breach can be rectified
- If CPA applies, supplier may only cancel contract 20 business days after giving written notice to consumer of his
material failure to comply with agreement
 Penalty clause
- Inserting penalty clauses as an alternative if parties breach contract can be a quicker method of redress than claiming
damages
- If penalties are due to client (contractor breached contract), client can deduct penalty amount (as a set-off) from
contractor’s remuneration
 Standing time clause
- If client fails to cooperate with his contractual duties (such as preparing site) which prevents contractor from completing
his work, contractor may claim extra time extension to complete his task or wasted costs incurred to him
 Substitution of contractor clause
- Remedy aimed at specific performance of contract – not cancellation of original contract (therefore no liability incurs to
client)
- If client is not satisfied with work performed by contractor, client can issue a work stoppage, force contractor to leave,
and appoint a substitute contractor to complete work
 Acceleration clause
- If breach of contract occurs, all future performances become due immediately. This is a penalty for breach of contract
 Clause providing for early completion
- Parties agree that contractor will be entitled to a bonus or additional payment where he completes work ahead of schedule
 Warranties / guarantees
- Usually given for a specific period of time after delivery of performance has taken place to cover any problems that occur
in performance that are not due to normal wear and tear
- If guarantee is broken within time period, contractor bears cost
 Support and maintenance
- Focus is on repairing normal wear and tear and upgrading at extra cost
 - Often concluded as a separate contract to letting and hiring of work contract
 Exclusion and limitation of liability
- Parties must agree to this
- Exemption clauses can only exclude liability for negligent actions, not for intentional actions
- Court will interpret this clause restrictively
 Jurisdiction and costs
- If it is an international agreement, parties must agree on which country’s laws will govern their contract
- Parties must also agree on who will be liable for legal costs and on what scale
- It is to parties’ best interests to first follow alternative dispute resolution procedures before entering into litigation

Naturalia
 Implied terms – if parties don’t change these terms by way of agreement (incidentalia), they always form part of agreement
and apply ex lege
 Performance must be made in a reasonable time (if no time is agreed upon)
 Client must cooperate and enable contractor to complete his task
 Client must provide access to site within a reasonable time for work to be completed
 Contractor must begin his work within a reasonable time after gaining access
 Work must be done with necessary skill, care and diligence; end result must be suitable for purpose for which it was made;
work must be of standard of quality reasonably expected for that type of work; quality material; fit for its purpose; etc.
 Contractor must comply with all statutory provisions that are applicable to his work
 Risk of loss/damage falls onto contractor (vis major) – unless parties agree otherwise

Theme 3: Duties of the parties

Duties of contractor
 Initial duties
- Inspect the premises
- Plan the execution of the work
- Furnish any suretyships or performance guarantees
 Completion of work
- Must complete work properly as agreed upon, according to statutory requirements, with necessary degree of care and
skill, and within prescribed time limit
 Completion of additional work
- No duty rests on contractor to perform additional work unless parties specifically agreed otherwise
- If contractor does extra work, he can claim compensation on basis of unjustified enrichment
 Repairs and maintenance and support
- If there are defects in delivered performance, client may request contractor to repair defects at contractor’s expense (this
can only be done within time period of guarantee)
- As soon as client approves the work, contractor’s duty to repair defects lapses, unless parties agree otherwise
- Contractor is only obliged to deliver maintenance or support (for normal wear and tear) if parties expressly agreed to this
 Final duties
- Contractor must hand over completed work to client
- Must vacate client’s site or premises upon completion of work
- Must leave premises as he initially found it (e.g., remove his tools)
- Transfer possession of instruction manuals to client
- Issue all necessary receipts to client

Non-compliance with duties

 Non-compliance with duties = breach of contract
 Type of breach determines type of remedies available
 Normal contractual remedies are available to prejudiced party (apply ex lege) – cancellation, specific performance, damages
 Parties can also agree on particular remedies, such as:
- Retaining fees
- Substitution of contractor
- Penalty clauses
- Forfeiture clauses

Duties of client
 Initial duties
- Client must provide contractor with: access to site/premises; plans and specifications; necessary tools and equipment for
completion of work
 There must be approval of completed work
- Certificate of approval will be issued in certain cases (can be written or verbal)
o Interim certificate
o Penultimate certificate
o Final certificate
- Legal consequences of a certificate were laid out in Smith v Mouton
- Contractor is only entitled to payment once client approves the work
 Payment
- Client must pay remuneration due to contractor
- Payment usually occurs according to certain timeliness
- Remuneration must be fair and reasonable

Non-compliance with duties

 Non-compliance with duties = breach of contract
 Normal contractual remedies available to contractor by operation of law – cancellation, specific performance, damages
 Right of retention (lien) by contractor if client doesn’t want to pay
 Parties can also agree on additional remedies:
- Immediate cancellation
- Financial penalty clause
- Standing time clause

Theme 4: Termination of contract

 Since letting and hiring of work is a specific contract, normal ways of terminating contracts apply
 Also specific methods of termination that are especially relevant for termination of letting and hiring of work contacts:
 Notice: Parties expressly agree that contract will terminate upon unilateral notice given by one of parties
 Agreement: If one party waives his contractual rights, it must be approved by other party before obligation terminates
 Resolutive term
- Parties agree that contract will terminate at an agreed date, irrespective of proper performance by parties
- This is a fixed-term agreement in terms of CPA
o Cannot be concluded between juristic persons
o May not exceed max period of 24 months unless longer period is expressly agreed upon and there is a demonstrable
financial benefit for consumer
o Client can cancel contract upon expiry of fixed term or by giving 20 business days written warning
o Contractor can cancel by giving written warning to client between 40 – 80 business days before date of termination
 Compromise: Parties intend to terminate total agreement between them and to substitute this agreement with a compromise
 Prescription: Claim in terms of a letting and hiring of work contract prescribes 3 years from date of claim or on date on which
plaintiff becomes aware of a possible claim
 Insolvency (in case of a natural person) or liquidation (in case of a juristic person):
- If any party to a letting and hiring of work contract is declared insolvent/liquidated, trustee of insolvent estate has right to
decide within a reasonable time whether contract is to be maintained or terminated
- If terminated, other party has a claim against insolvent estate