BER310 THEME 2 STUDY UNIT 1

Mr S Makhubu
History of SA Law of contract, legal obligations
and transfer of rights and duties
OUTLINE OF THE STUDY UNIT
Brief history
Legal obligation
Sources of obligations
Concept of a contract
Interaction of Delict and Contract from the same set of facts
Unjustified enrichment
Consumer Protection Act 68 of 2008, National Credit Act 34 of 2005 (‘NCA’) and Basic
Conditions of Employment Act 75 of 1997 in the relevant contracts.
Nominate and innominate contracts
Transfer of rights and duties
Cession, Delegation and Assignment
1. BRIEF HISTORY
• The foundation of the South African law of contract is Roman law
and Roman Dutch law.
• Roman law of obligations created a legal relationship, or connection
between two legal subjects, where rights and duties were created
and recognised by law.
• The rights and duties were known as personal rights.
• Roman law never developed to such a stage where all agreements
entered into with a serious intention to be legally bound were
recognised as contracts.
• On the other hand, Roman Dutch law was influenced by canon law
and as a result recognised all agreements entered into with the
intention to be legally bound and where other legal requirements are
complied with as contracts.
• Historically, legal obligations consisted of two elements, the right of the
creditor to demand performance and the duty of the debtor to perform.
2. LEGAL OBLIGATION
• A legal obligation is a legal relationship between two legal subjects created by
a legal fact or juristic fact or bases such as contract or delict to create
personal rights and duties between the legal subjects.
• Where rights and duties are recognised and enforced by law (courts can enforce
claim) they create a civil obligation.
• Where rights and duties are recognised but not enforced by law is known as a
natural obligation. (Wager)
• Wager (Bet). E.g. Kaizer Chiefs or Blue Bulls will win and you will pay K2.

• Wagers are recognised contracts but not enforced by law. (Courts cannot enforce a
claim a based on wager)
• This means that legal obligations are sources of all personal rights. These rights
are recognised by law and are enforceable (contracts) and sometimes they are
recognised by law but not enforceable (wager).
 3. SOURCES OF OBLIGATIONS
• Only specific juristic facts or legal facts create legal obligations,
the most important are contract, delict, statute and
administrative authority.
• Other legal facts or juristic facts give rise legal obligations and have
been developed for a particular purpose (ad hoc basis) to
address a particular problem or satisfy the needs of the
community. E.g. Unjustified enrichment.
• Juristic or legal facts must meet specific requirements to create
legal obligations. E.g. Delict must have all the elements which are
act/omission, wrongfulness, culpability/fault, causation and
damages. And contracts must also meet all the requirements.
 4. CONCEPT OF A CONTRACT
A contract is an agreement between legal subjects which is based on:
• Consensus (meeting of two minds)
• Between subjects with contractual capacity (capable of understanding
the terms of contract)
• Has to be legal (in line with public policy or norms of society, common
law and Legislation))
• Must be physically possible
• And sometimes meet certain formal requirements
➢ It must be made with a serious intention to be bound or
creating legal obligations which give rise to rights and duties.
The serious intention to create legal obligations sets contracts
apart from social agreements. E.g. Agreement to meet for gym.
CONTRACT CONTINUES

THUS A CONTRACT IS:

➢ An agreement between legal subjects which is based on

consensus (meeting of minds), where parties have contractual
capacity (attributes that enable them to appreciate the terms of
contracts), where it is lawful, physically possible, and where
certain formal requirements are complied with and entered into
with the intention of creating legal obligations that create rights
and duties.
5. INTERACTION OF DELICT AND CONTRACT FROM THE SAME SET OF FACTS
• Delict and Contract are sources civil obligations.
• In other words, they are legal or juristic facts that create personal rights and
duties.
• Delict is when one person through his or her act that is unlawful; negligently
causes damage to another’s property or impairment of bodily or mental integrity.
• And a contract is an agreement between parties, where parties reach consensus,
where they have the contractual capacity, where the agreement is legal, where the
agreement is physically possible, where formalities are complied with, and where
they have serious intentions to be legally bound and thereby create rights and
duties.
• These interact with one another. Sam enters into a valid contract with the Super
Bike mechanic, Jacque, to fix his Bike for R 7000. Jacque while fixing the Bike
accidentally sets it on fire and it is completely damaged. The value of Sam’s Bike is
R14000. HERE WE SEE CONTRACT AND DELICT.
6. Unjustified enrichment
Unjustified enrichment as legal or juristic fact is
a source of civil obligation. It creates a personal
right. Best Bank accidentally deposits money
into A’s account, A decides to go spend the
money in Cape Town. This amounts to
unjustified enrichment and thus A owes Best
Bank the money. Best Bank has a personal right
against A.
 7. SPECIAL LEGISLATION THAT IS APPLICABE IN CONTRACTS
7.1 Consumer Protection Act 68 of 2008,
• The aim of the CPA is to create a consumer market that is fair,
accessible, efficient, sustainable and responsible for the benefit of all
consumers.
• To also ensure that all consumers especially the disadvantaged have
access to the consumer market.
• To also promote fair business practices.
• To also prevent unscrupulous behaviour (fraud) towards consumers.
• To promote access to information to ensure responsible and informed
consumer choices.
• To also create an efficient system of redress.
7.2. National Credit Act 34 of 2005 (‘NCA’);
• The aim of the NCA is to ensure social and economic
transformation of South Africa. This is done by promoting
fair, transparent, competitive, efficient and accessible credit
market for all, especially the previously disadvantaged.
• It also aims to combat unfair credit, credit marketing
practice and protect all users of credit.
• and also to prevents reckless borrowing, over
indebtedness, reckless lending and to create an efficient
system of debt restructuring and enforcement.
7.3 BASIC CONDITIONS OF EMPLOYMENT ACT 75 OF 1997.
• BCEA provides basic minimum conditions of the employment
contracts such as sick leave, annual leave, and working hours.
The aim is to promote the well-being of the employees and
indirectly promote social justice and economic development.
 8. NOMINATE AND INNOMINATE CONTRACT
• Nominate contracts are agreements that are common and as a
result have specific names and the law prescribes certain terms or
essentialia for these contracts to be effective. (e.g. Lease and sale
contracts)
• They have their own essentialia or minimum characteristics that
distinguish them from other contracts. (Sale - Intention to buy and
sell, certainty of the object and certainty of the price)
• Innominate contracts are agreements that do not have names.
(Permutatio) Contract of exchange, where A undertakes to make
goods available to B and B also undertakes to make goods
available to A.
9. TRANSFER OF RIGHTS AND DUTIES

• Contracts create rights and duties.

• One of the parties may not wish to exercise his or her
rights and to perform his or her duties.
• In some instances, one of the parties may not be able to
do so.
• This party may be substituted by a third party.
• Rights may be transferred to another through Cession
• Duties may be transferred to another through
Delegation.
Cession
• A sells his watch for R 1000 to be B, but
instructs that the R 1000 be paid to C, his
cousin brother who is celebrating his
birthday. A is the Cedent and C is the
Cessionary.
CESSION CONTINUES
• A’s personal right to the purchase price from B is ceded to C. C can
demand or claim this R1000 from B on condition that:
• A as the cedent and C the cessionary conclude or enter into a
contract of cession.
• The consent, knowledge or co-operation of the debtor B is not a
requirement. If the debtor pays the cedent A or original creditor,
then the debt is closed.
• If the latter takes place, the cessionary C cannot claim the money
from the debtor B. Thus the cedent A must timeously inform the
debtor B to pay the cessionary C.
• Which means that no one can transfer more rights than he or she
has.
CESSION CONTINUES

• No formalities are required.

• All personal rights can be ceded except where the rights are of a
highly personal nature. Where A and B agree that B will
provide soccer training to A.
• Cession can also be limited or prohibited by legislation or
prohibited by the parties in terms of the agreement.
• A personal right can only be ceded as a whole (entirety) not in
parts.
• The rights are transferred in terms of the rule nemo plus iuris
principle which means that no one can transfer more rights than
he or she has.
Delegation
• A loans R 1000 to B. B the debtor to A, delegates his duties
to C (new debtor) to pay the loan money to A.
• B delegates his duty to pay A to C.
• C undertakes or agrees to pay A what B owes to A.
• As it is essential for the creditor to know the debtor, the
consent of the creditor is required before delegation can
take place
• Thus, delegation is an agreement of three subjects: the
creditor agrees to delegation, the original debtor undertakes
to transfer his duties to the new Debtor and the new Debtor
agrees to pay the loan money.
 Assignment
• Assignment in essence is when one party is substituted by a
third party as a debtor and creditor at the same time.
• A agrees to cut B’s grass for R50 and A assigns his rights to
R50 and his obligation to cut B’s grass to C. Here we see
cession or delegation.
• The three parties must agree that C becomes the new debtor
and creditor.
See here that all rights and duties of A are transferred to C.
 SELF-ASSESSMENT QUESTIONS
Question 1
In your own words define the following terms
• Legal obligation
• Delict
• Contract
• Contractual rights
• Creditor
• Debtor
• Juristic and legal fact
• Cession
• Cedent
• Cessionary
• Delegation
• Assignment
Question 2

You are a party to a lease contract in terms of which you

lease an apartment for residential purposes from
Company A. Your employer transfers you to Cape Town
while there is still 6 months left on your rental
agreement. Which option would best cater for your
needs: cession, delegation or assignment? Provide
comprehensive reasons for your answer by
discussing the benefits and shortcomings of you
chosen option, and comparing these with the
other available options.