Question 1

Identifying the problem

Facts are clearly indicating that Z and X did not reach an actual consensus based on the will theory
because Z sold the watch to D for a greater amount of R300 000. Z sent a valid contract, which clearly
states the succession of the sale of the Rolex watch to X. The question thus deals with whether X and
Z met the necessary requirements for a valid contract and the implications of not withholding good
faith within the contract concluded.

The requirement for a valid offer withholds:

• The offer must be firm.

• The offer must be complete.
• The offer must be clear and certain.
• No application of the CPA applies.

The requirements for a valid contract

• Consensus.
• Capacity.
• Formalities.
• Legality.
• Possibility.
• Certainty.

Consensus took place where both minds of the parties met.

X had the capacity to contract otherwise he would not have taken the contract on.

Formalities was completed. Both Z and X (plus Y) did sign the valid contract.

The agreement was legal. It was a clean transfer between Z and X, no illegal drugs or exchange of
stolen or illegal goods. As per Hutchison and Pretorius in the Law of Contract in South Africa illegal
contracts are void.

There was certainty between Z and X, both signed the contract consensus.

Case law relevance and applicable to the problem and applying law to certain facts of the problem.

Z’s offer was firm. The offer must be made with the intention that its acceptance will result in a
binding contract. Z did not advertise his Rolex watch as in Crawley v Rex 1909 1105 where there
would be a door for third parties to enter, this was private. Which already qualifies the contract as
valid. A promise of the watch for the funds concludes a firm offer. As per Bloom v American Swiss
Watch Co 1915 AS 100, Z’s offer was thus firm and not a tentative statement with a possible
agreement in mind.

Y’s offer was complete. An offer must include all material terms of the proposed agreement and
there cannot be additional matters that still have to be discussed before the agreement can take
effect. Z’s offer contained all the material terms: providing information leading to the done
consensus contract of the Rolex watch, in exchange for R250 000, not a cent less, nor a cent more.
Z’s offer was clear and certain. An offer is sufficiently clear and certain if the answer of ‘yes’ was
agreed upon. In this instance there is a valid contract with both signatures from both partying, the
offeror, and the acceptor. If the offer was unclear and cannot capture what the offeror has in mind,
no acceptance of the offer can create a binding contract. The offer by Z was clear: R250 000 in
exchange for a Rolex watch. Both signatures of the parties constitute acceptance of the offer.

Providing the information by X was a valid acceptance of Z’s offer:

1. X’s acceptance was unqualified, because X accepted the offer as it was by the giving required
information. The acceptance is competed and unequivocal, where the entire offer and
nothing more of less is accepted.
2. X’s acceptance was made by himself. He did not get Y only to accept the offer, but both did. Z
also accepted the contract validly. As per Bird v Sumerville 1961 (3) SA 194 (a), only the
offeree can validly accept the offer which he did by signing the contract. The general rule is
that an offer should be addressed to a specific person, in this case X, and it was.
3. X’s acceptance was a conscious response to the offer because X was aware of the contract
and provided Z with the required information in response to it. In Bloom v American Swiss
Watch Co 1915 AD 100, the plaintiff provided the information required in the contract of
agreement.
4. X accepted the offer in the form prescribed by the offeror by providing Z with the completed
signed contract. The offeror is allowed to prescribe any method of acceptance that he or she
sees fit as per Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256, which the valid contract did.

X and Y thus have a concluded a valid contract with Z, because both the offer and acceptance was
valid and met the requirements of a valid contract.
Question 2
2.1 In a Will Theory. Where a serious intention to contract is met.

2.2 Reception Theory.

2.3 The Expedition Theory.

2.4 The Reception Theory.

2.5 The Information Theory; the general rule is that a contract comes into being only when the
acceptance is communicated to the mind of the offeror.
Question 3

Determining whether Gloria entered a legal binding agreement/contract with Jack using the will
theory and iustus error doctrine.

The essence of this problem is whether Gloria and Jack have reached consensus. Gloria will not be
contractually bound if this requirement for a valid contract is absent.

Consensus has three elements: 1. The parties must seriously intend to contract 2. The parties must
be of one mind as to the material aspects of the proposed agreement and 3. The parties must be
conscious of the fact that their minds have met.

In this case, Gloria was not in agreement with Jack as to the specific type of property she should like
to purchase.

In George v Fairmead, the appellant signed a hotel register without reading it. The register contained
a clause excluding the respondent from liability for certain acts. The appellant was unaware of this
term and his mistake related to a term that he believed would not be in the contract and as such was
material because it related to an aspect of performance.

In Allen v Sixteen Stirling Investments, the plaintiff believed he was purchasing the erf pointed out to
him by the seller’s agent, while the written contract that he signed indicated the correct erf, which
was a completely different property. His mistake related to performance and was material. However,
the matter does not end here. A party may be held contractually liable based on a supplementary
ground for liability, namely the will theory. In this regard, the direct or indirect approach to the
reliance theory may be considered.

1. INDIRECT APPROACH (iustus error doctrine): In terms of this approach, a party may escape
liability to be bound to a contract if it can be proved that the party laboured under a mistake,
which was both either material and or reasonable. It has already been shown that Gloria
mistake is material in the discussion above. It still must be determined if Gloria’s mistake was
reasonable.
Gloria’s mistake will be reasonable in the following circumstances: if it was caused by a
misrepresentation on Jack’s side pf if Gloria did not cause Jack to have a reasonable belief
that she assented to the contract.
Since Jack had no reason to believe that Gloria would have signed the contract had Gloria
known of incorrect property, Gloria had a legal duty to point out this clause to Jack. Gloria
doing so renders Gloria’s material mistake reasonable.
2. DIRECT APPROACH (iustus error doctrine): With reference to the direct approach, contractual
liability is based on the reasonable reliance that consensus has been reached, which the one
contractant (Gloria) creates in the mind of the other contractant (Jack).

According to the Sonap case, the direct reliance approach involves a threefold enquiry:

1. Was there a misrepresentation regarding one party’s intention?

2. Who made this misrepresentation?

 3. Was the other party misled by this misrepresentation, and if so, would a reasonable person
have been misled?

By signing the contract, Gloria, Jack a party to the contract, misrepresented her intention to be
bound by the clause allowing Gloria to unilaterally change the dates. Jack knew that the only
about the incorrect property listed, and that Gloria signed the contract. Gloria was probably not
actually misled by the misrepresentation by Jack, and nor would a reasonable person be misled
in any event. There was therefore no reasonable reliance on consensus on the part of Gloria.
Gloria is not bound by the agreement because of lack of apparent and actual consensus.

The direct reliance approach can now be applied to the facts of the problem (Hutchison and Pretorius
Contract 18-19 95-97 103-105). The court stated the test in Sonap Petroleum (SA) (Pty) Ltd (formerly
known as Sonarep (SA) (Pty) Ltd) v Pappadogianis 1992 (2) SA 234 (A) 239-240 as follows: In my view,
therefore, the decisive question in a case like the present is this: did the party whose actual intention
did not conform to the common intention expressed, lead the other party, as a reasonable man, to
believe that his declared intention represented his actual intention? To answer this question, a three-
fold enquiry is usually necessary, namely, firstly, was there a misrepresentation as to one party’s
intention; secondly, who made that representation; and thirdly, was the other party misled thereby?
The last question postulates two possibilities: Was she misled, and would a reasonable man have
been misled?

A discussion of Ridon v Van der Spuy and Partners (Wes-Kaap) Inc 2002 (2) SA 121 (K) and Steyn v LSA
Motors Ltd 1994 (1) SA 49 (A) will also be appropriate.

Legal advise to Gloria with regards her case

Although it could be argued that Gloria was not actually misled by Jack’s misrepresentation, a
reasonable person would not have been misled in any case. Indeed, Jack had no reason to believe
that Gloria would have signed the contract had Gloria known of incorrect property. In fact, Gloria had
a legal duty to point out the presence of this clause in the agreement to Jack. There was either no
actual or at least reasonable reliance on the part of Gloria. The giving of appropriate advice to Gloria
is not bound by the agreement with Jack because of the lack of actual and apparent consensus.
Question 4
1. that the other party obtained an influence over the individual.

2. that this influence weakened his or her powers of resistance and rendered his or her will
compliant.

3. that the other party used this influence in an unscrupulous manner to persuade him or her to
agree to a transaction that

• was prejudicial to him or her, and

• which he or she would not have concluded with normal freedom of will.
Question 5
Identifying the problem

The question deals with whether the contract between S and Q is illegal and void. Depending on the
outcome of this enquiry, it must be considered if Q can claim the rent from P, or if P can claim the
tractor back (restitution).

Discussion of Law and applicable known facts to law

1. Illegality: The contract is illegal because Q does not have a liquor license and both P and Q
know that it is illegal to operate a liquor business without a liquor license.
2. The consequences of a contract that is void for illegality and the contract cannot be
enforced (ex turpi rule).

The law:

An illegal contract is void or invalid since one of the requirements for a valid contract is not present.
An illegal contract creates no obligations and, consequently, it cannot be enforced as per Cape Dairy
and General Livestock Auctioneers v Sim 1924 AD 167.

Neither party can institute action on the contract or claim performance from the other party,
because from an illegal cause, no action arises as per ex turpi causa non oritur actio – known as the
ex turpi rule). In example, if a party has suffered damage because of such a contract, he or she may
not claim contractual damages from the other party due to illegality. The court does not have the
discretion to ease this rule and there is absolutely no exceptions to it. Actions by one or even both
the offeree and the acceptor to the illegal contract does not make the contract legal.

Application to the problem

S cannot claim payment from Q as this amounts to the enforcement of a contract which is void.
Reclaiming performance that has been made in terms of illegal agreements or contracts as per the
delictum rule.

If a contract is void and there has been performance, restitution of what has been performed should,
in principle, be granted. Where accountability of the performance has not succeeded, the
performance can be reclaimed with the rei vindication (the action of the owner for the return of his
or her property) – in example, the return of rented property, where occupation has been given to the
lessee. If ownership did pass, the claim for the return of the performance will be based on unjustified
enrichment, which is relevant to present case.

Furthermore, the par delictum rule, in pari delicto potior est conditio possidentis (where both parties
are equally and morally guilty), will prevent restitution from taking place. The par delictum rule is
based on two considerations of public policy: a court will not assist those who approach it with
‘unclean hands,’ and unlawful contracts should be discouraged. Also, this rule does not preclude the
enforcement of an unlawful contract by means of a claim for specific performance or lack thereof.

S and Q are equally morally guilty as the were both aware of the fact that it is illegal to run a liquor
store without a registered liquor license. Therefore, the par delictum rule applies and the possessor
of the tractor is in the stronger position. But it does not end here.
The par delictum rule may sometimes operate very harshly towards a party who claims the return of
his or her performance. Consequently, in Jajbhay v Cassim (1939 AD 537), the Appellate Division held
that this rule may be relaxed in appropriate circumstances to do justice between the parties.

The underlying principle of the par delictum rule is public policy, but public policy also demands that
‘justice shall be done between man and man’. The court considered the facts of the case. A
sublessor applied for the ejectment of a sub-lessee on the ground that the sub-lease was illegal. Both
parties were criminal offenders by being parties to the sub-lease. The sub-lessor did not terminate
the lease with a month’s notice as provided for in the illegal contract, while the sub-lessee complied
with his obligations under the lease. Neither party was enriched at the expense of the other party.
The court consequently refused to relax the rule.

The courts consider the following factors when deciding the question whether the par delictum rule
should be relaxed:

1. Whether the defendant will be enriched at the expense of the plaintiff if the rule is not
relaxed;
2. any other consideration of public policy;
3. whether easing up on the rule would enforce the illegal contract that took place.

In Klokow v Sullivan, the contract of sale of a business was illegal for lack of compliance with
statutory requirements regarding the sale of a liquor-licensed business.

P will clearly be enriched at the expense of Q if the par delictum rule is not relaxed, as P has both the
tractor and the price. Therefore, in line with the decision in Klokow v Sullivan, the par delictum rule
should be relaxed, and the tractor returned to S. Also, relaxing this rule would not result in the
enforcement of an illegal contract, but it would result in granting restitution to S in terms of an
enrichment claim, to do justice between man and man. There does not also appear to be any other
consideration of public policy which gravitates against the relaxation of the par delictum rule.

Advice:

S cannot claim the purchase price because the contract is void. However, S should successfully claim
the return of the tractor, based on an enrichment claim.
Question 6
Identifying the problem

This question deals with one of the remedies for breach of contract by Matthew, as he used defective
materials to build the ceiling. As a result of this breach, Craig now seeks to claim damages. The type
of breach that has transpired is positive malperformance on the part of Matthew, and the damages
claimed by Mathew will be determined based on whether such damages constitute general
damages.

Discussing the relevant law applicable to the problem, referring to the relevant case law, AND
applying the law to the facts of the problem.

It must be considered if Craig is entitled to R15 000 and R30 000 compensation from Mathhew for
the cost of repairing the ceilings.

To succeed with a claim for damages because of a breach of contract the innocent party, Craig, must
prove the following:

• Breach of contract took place.

• Craig has suffered financial or patrimonial losses.
• There is a link between the breach of contract and the lost.
• The loss is not too remote a consequence of the breach (legal causation).

Discussion

1. Breach of contract took place: Positive malperformance takes place where a contracting
party does not comply with the terms of the contract either by performing something in a
manner which does not comply with the terms of the contract, or by doing something which
he undertook not to do. In this question, by using defective materials Matthew breached a
term of the contract as the parties agreed that the materials to be used will be of a
reasonably good standard.

Accordingly, Mathhew’s breach constitutes positive malperformance.

2. Craig has suffered financial or patrimonial losses: Breach of contract does not give a right to a
claim for damages unless patrimonial loss has been incurred. Craig must prove actual
pecuniary or patrimonial loss. Patrimonial loss is a loss suffered by the estate of the person
concerned.

To ascertain whether damage has been suffered because of breach of contract, one
compares the present value of the creditor's estate with the value it would have had, had the
breach of contract not occurred. In other words, in the case of breach of contract one
compares the present value of the innocent party's estate with the value it would have had,
had the contract been carried out properly and on time. If the present value declined
because of the breach of contract, damage has been suffered. The debtor must place the
creditor in the same patrimonial position as he would have been in had proper and timeous
performance taken place.
 Craig must receive his positive interest - in contrast with negative interest; that is the
compensation payable if the injured party would have to be placed in the position in which
he would have been, had the contract never been entered.

In this problem damages have been suffered by Craig, in the form of R30 000 for the cost of
repairing the gate.

3. Causation (factual causation): There must be a causal binding between the breach of
contract and damage. The damage must be caused by the breach of contract. The question is
whether the damage would have been incurred if the guilty party had properly fulfilled her
part of the contract properly. A specific result is caused by a certain act if that result would
not normally have ensued but for such act which is known as conditio sine qua-non-test.

Craig will need to prove that the loss would not have been suffered had it not been for
Matthew using defective products. If Craig fails to do so, his enquiry for breach of contract
against Matthew will fail.

Factual causation is occurring in this problem. If Matthew did not breach the contract, the
ceilings would not have needed any repairs. Adding to that, if Matthew did not breach the
contract, the ceilings never would have collapsed and caused damage to Craig’s car. But
because Matthew used defective materials, the ceilings collapsed, damaging Craig’s car,
which causes double the damages of repairs on his car as well as the ceilings.
4. Legal causality: The question which arises after factual causation has been determined
whether Craig may hold Matthew liable for all the consequences of the breach. In the
interests of fairness to Matthew, a line must be drawn between damages caused by her
breach and for which he is to be held liable, and damages which, although caused by the
breach, are so remote from it that he should not be held liable for them. It is often very
difficult to make this distinction.

Where Craig can prove that his claim constitutes general damages, the claim will most
definitely be successful.

General damages are those which flow naturally and generally from the specific kind of
breach that has been committed. Those are the sort of damages that might be expected in
the ordinary course of things to result from the breach. As such, they would have been
expected to a reasonable person entering the contract as a probable consequence. The party
that commits a breach of contract is held liable, in this case Matthew, without further ado,
for general damages.

An example of general damages is the cost of repairing or replacing defective goods. The
repair costs of R30 000 of the gate are thus general damages. Therefore, Craig is likely to be
successful with this claim.

Final Advice

Craig will succeed with his damages claim for the R30 000 repair costs to the ceilings.