MIDLANDS STATE UNIVERSITY

FACULTY OF COMMERCE

DEPARTMENT OF BUSSINESS MANAGEMENT

BUSINESS LAW (BM105)

BERNARD SAWANGA R1914896N

HMAN 1.2

HARARE WEEKEND SCHOOL

QUESTION

1. Read the following situation carefully and answer the questions that follow.

Minor Talent enrols for a 6 month course with a business School without the consent of her
guardian, though he makes no effort to conceal his minority. However, after having attended
and paid for only two months, he withdraws from the course and refuses to make further
payment.

a. Advise the business school on their legal position [10]

b. Would the situation be different if Talent had fraudulently misrepresented that he was
18 years old [5]
c. Describe the concept of unjustified enrichment in relation to this case [5]
d. If Talent wanted ratify the contract, how would he have done it? [5]
e. Describe the contractual liability of an assisted minor. [5]

Question 2.

a. Distinguish between valid offers and invitation to do business in contract law. [10]
b. What are the requirements of a valid acceptance in an agreement? [10]

LECTURER: MR H. MASUKUME 29/30 n 19/20

Due date: 04/05/2020

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1a. A minor does have the ability to enter into a legal contract and such contracts can be void
only when the minor leaves the contract due to lack of capacity. It is common cause that a
minor who enters into a contract without any assistance or consent merely concludes a
limping contract. In the current circumstances it will mean that the contract only binds the
Business School and not the minor Talent. Limping contracts creates a natural obligation on
the minor but cannot be liable for performance.

For a contract to be legally binding there must be an offer, acceptance and intention. Talent
the minor in this case had a valid contract with the Business School. By enrolling and paying
two months fees shows that he did accept the offer from the Business School hence there was
a valid contract. Talent the minor’s refusal to pay fees for the remaining four months was in
breach of the contract between him and the Business School.

It is not in dispute that the Business School entered into a contract with a minor, the Business
School does not have any remedy to recover the four months outstanding fees. Talent is only
liable to the extent enriched and in this circumstance the two months fees paid is enough for
the service rendered. Courts will not enforce a contract where a minor lacks capacity. A
minor cannot therefore be held liable for performance. In the circumstance the contract is
therefore void.

In the Case of Tanne v Foggit 1938 TPD 43

Facts: Foggit a minor child entered into a contract without the knowledge of his father or
natural guardian to take lessons at a college for two weeks in March and for the whole of
April ,fees being payable in advance. He only paid for the March lessons and attended them
but neither paid nor attended the April lessons.

Court: It was decided in Tanne v Foggit, by the Transvaal Provincial Division, that a minor
will not be bound by a contract merely because he benefits from the contract as a whole. The
court opined that the test to be used is rather the extent to which the minor has benefited. The
minor shall therefore not be bound by the entire agreement, but will be liable on the grounds
of unjustified enrichment.

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1b. The situation could have been different if there was an element of misrepresentation.
Where a minor fraudulently lies about age such contracts can still be enforced. A fraudulent
misrepresentation will therefore be completely enforced against the minor. It is argued that a
minor who is old enough to persuade another that he or she is a major would also be old
enough to be legally liable for his acts. The minor will therefore be liable for delictual
damages.

In the Case of J C Vogel & Co. v Greentley 1903 24 NLR 252 254

Facts: The respondent, a minor, presented himself to be of full age and entered into a contract
with the Plaintiff. The contract included a restraint of trade clause .After working for one year
the respondent breached the agreement by starting a business similar to that of the plaintiff.
The plaintiff applied for an interdict preventing him from doing so and defendant pleaded
minority as a defence.

Court: It was held that the minor who fraudulently misrepresented himself to be of age, is
generally bound by that misrepresentation.

In a concurring judgement in Pleat v Van Staden 1921 OPD 21, the court followed the
decision in J C Vogel & Co. v Greentley and held that, a minor who makes a false
representation as to his age is not protected by his minority from responsibility.

1c. In the case that it has been established that a valid or enforceable contract is not present
unjust enrichment cause of action is the only way out for the aggrieved party to claim for
damages suffered. Unjust enrichment claims are only applicable where a valid or enforceable
contract is not present. Unjust enrichment occurs when one party gains or profits at the
expense of another and the remedy available is restitution.

In reference to the above case the only remedy available to the Business School is to cause an
action of unjust enrichment. Since it has been established that the contract is void at law the
Business School can only claim for damages suffered.

As opined in the case of Tanne v Foggit 1938 TPD 43 and facts as already given,

The court opined that the test to be used is rather the extent to which the minor has benefited.
The minor shall therefore not be bound by the entire agreement, but will be liable on the
grounds of unjustified enrichment.

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The minor is therefore liable to the extent enriched, which is only two months and not bound
by the entire agreement. The court did focus on the ‘benefits actually enjoyed’ and Talent’s
two month fees payment is enough to compensate any loses or damages which the Business
School may have suffered.

1d. A minor who enters a contract without the required assistance or permission from parent
or guardian merely enters a limping contract. Talent the minor can ratify or affirm the
contract upon attainment of majority age thereby making it contractually binding on him. The
other option available to Talent is for his guardian to repudiate or enforce the contract before
he attains majority (Cockrell, A. in Van Heerden, B. et al 1999).

In the Case of Edelstein v Edelstein 1952 (3) SA 1 (A)

Facts: A minor entered into an unassisted ante-nuptial contract with her future husband which
excluded community of property. When her husband died Mrs Edelstein believed that as a
consequence of the ante-nuptial contract, she was entitled only to those benefits under Mr
Edelstein’s will. She only accepted the benefits and entitlements. She was advised that the
ante-nuptial contract was infact not binding and her marriage was actually in community of
property.

Court: The court held that a contract entered into by a minor without the assistance of the
guardian is not binding upon the minor.

1e. A minor only incurs contractual liability if he is assisted by a parent or guardian when
contract is made or where his parent or guardian acted on his behalf. An assisted contract is
therefore enforceable against a minor at law. The minor can however, escape liability in
certain instances where the contract was prejudicial to him, by relying on the legal remedy
restitutio in intergram (Cockrell, A. in Van Heerden, B. et a 1999).Where a minor enters into
an assisted contract the parent or guardian will not be personally liable towards the other
party. In order to determine who will be liable it is of paramount importance to first
determine the intention of the parties when the agreement was concluded.

In the Case of Marshall v National Wool Industries Ltd 1924 OPD 238

Facts: A minor and his father each bought shares in a company. The father was present
during the conclusion of the agreement and was aware that these shares were being purchased
by his son. The minor failed to pay the full purchase price of the shares and action was

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brought against him. The minor relied on his minority as a defence. The company withdrew
the action brought against the minor and instituted action against the father.

Court: The Appeal Court opined that the father will not be personally liable for a contract that
was entered into by his son purely because the father had knowledge of and consented to the
conclusion of the contract. The true intention of the company, the father and the son was that
the contract would be concluded between the company and the minor son as an individual
and not him as an agent of the father. If the father had authorised his son to act on his behalf,
only then would the father have been personally liable as a principal of his agent’s contract.

In the Case of Skead and Colonial Banking & Trust CO. LTD, 1924 TPD 497

Facts: A minor (8 days before his majority) signed a promissory note on an endowment
policy valued 750 in his favour on the authority of his guardian. Skead, the minor, being short
of money because of his spendthrift ways repudiated liability.

Court: The court held that Skead the minor was bound. Assisted contracts which are clearly
beneficial to a minor at the time they are entered into are binding on the minor, even though
they extend beyond his majority and prove to be subsequently disadvantageous.

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2ai) An offer is made when one party shows willingness to enter into a legal contract. An
invitation to do business or invitation to trade or treat is simply the supply of information to
entice the other party into making an offer. An offer is therefore an unequivocal and
unconditional business proposal whose definite acceptance results in a contract, whilst an
invitation to treat or trade involves an initial discussion which if accepted by the other party
result in an agreement. Window displays or adverts however, does not mean firm offers.

In the argued Case of Harvey & Another v Facey & Others, 1893 AC 552

Facts: Facey, D. was in negotiations with the Mayor and Council of Kingston regarding the
sale of his store. Harvey, P. sent Facey a telegram asking if he can buy his shop, and he was
ready to pay the lowest asking price. Facey responded by telegram stating the lowest asking
price as GBP 900. Harvey responded to Facey agreeing to the GBP 900 asking price. Facey
refused to sell and Harvey sued for specific performance and got an interdict to prevent
Council of Kingston from taking over the property.

The Trial court ruled that an enforceable contract had not been formed and the case was
dismissed.

Harvey appealed against the Trial Court ruling.

Issue: Is a statement of the minimum price at which a seller would sell an offer?

Holding and Rule: No. A mere statement of the minimum selling price is an invitation to treat
and not an offer to sell.

The Court held that by replying to Harvey’s question regarding the lowest price of the
property, Facey did not make an affirmative answer to the first question regarding his
willingness to sell.

The Court opined that Facey had made an invitation to trade and not an offer.

2aii) An invitation to treat or trade is an action inviting other parties to make an offer so
much so that a binding contract is made. It is of paramount importance to understand that in
some instances an invitation to treat can appear to be offers ,which can be difficult to
ascertain the differences .To ascertain the difference accepting an offer creates a binding
contract whilst accepting an invitation to treat or trade creates an offer. A good example are

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advertisements which are usually invitations to treat, by such, sellers can refuse to sell
products at prices erroneously marked.

In the Case of Fisher v Bell 1961 1 QB394

Concurring cases:

Carlill v Carbolic Smoke Ball Co. 1893 1 QB256

Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) LTD 1953 EWCA

Crawley v Rex 1909 TS

Adams v Lindsell 1818 EWHC KBJ59

Facts: The defendant had a flick knife displayed in his shop window with a price tag on it.
Statute made it a criminal offence to offer such flick knives for sale.

Held: The Court opined that goods on display in shops are not ‘offers’ in the technical sense
but an invitation to treat.

The defendant was discharged.

2b) Discussed below are some of the essential requirements of a valid acceptance in an
agreement.

2bi) Acceptance must be given by the person to whom the proposal is made.

For an acceptance to be binding at law it must be assumed only by a person to whom offer
has been given. Acceptance must therefore move from the offeree only.

In the Case Blew v Snoxel 1931 TPD

Facts: Blew offered to buy a piece of land from a company, Richard Currie Ltd. However, the
land in fact belonged to Snoxell who, upon becoming aware of the offer wrote to Richard
Currie Ltd, accepting it, whereupon Blew was notified. In a law suit later, Blew argued that
there was no contract between him and Snoxell.

Held: The court opined that there was no contract. The Court agreed holding that, ‘it is trite
law that an offer made by one person to another cannot be accepted by a third part’. In this

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case, the offer was made to Richard Currie Ltd and not to Snoxell. In short, if A offers to B,
then C cannot accept and bind A unless A so wishes.

2bii) Acceptance can be given only when acceptor has knowledge of the offer.

The offeree is expected to accept an offer whose existence is aware of. A contractual situation
cannot therefore arise from ‘a blind date’.

In the Case of Bloom v American Swiss Watch Co. 915 AD

Facts: The company premises were broken into and jewellery stolen. The respondent
advertised offering reward to the public for information leading to the arrest of the thieves.
Mr Bloom witnessed the heist and reported the matter to the police, who recovered the said
jewellery. It was common cause that Bloom was not aware of the existence of an offer. Upon
learning of the offer he tried to lay a claim, which the company refused.

Held: It was held that Bloom was not entitled to the reward because he could not accept an
offer that he was not aware of.

2biii) The acceptance cannot be presumed from silence.

When the acceptor do not express his or her decision to the offer or keeps silent, silence does
not therefore mean acceptance. On the contrary the offerror cannot also enforce a condition
that offeree’s silence is regarded as acceptance.

In the Case:

East Asiatic Co. (SA) Ltd v Midland Manufacturing Co. (Pty) LTD 1954

Facts: The plaintiff argued that the defendant, by failing to timeously refuse to accept a
counter offer, had in fact accepted it by silence.

Court: It was held that no contract existed since ‘mere silence cannot be taken as acceptance
unless there is some duty upon the defendant to speak’.

2biv) The acceptance must be given before the lapse of offer.

A valid contract arises only when the acceptance is given before the offer has lapsed or
withdrawn. An acceptance made after the withdrawal of an offer is unenforceable.

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In the Case Yates v Dalton 1938 EDL

Facts: Yates sent a telegraph to Dalton on 12 February. On 13 February at 9.40am Dalton

telegraphed his acceptance. However, a few minutes after 11.00am, Dalton received a
telegram from Yates cancelling the offer.

Court: It was held that there was a valid contract since an acceptance had been made before
revocation. Acceptance by telegraph is governed by the same rules as acceptance by letter.

2bv) In situations involving reward offers, and it happens that there is only one reward
available , the reward as a rule would go to the first person to bring the information freely
and willingly.

In the Case Lee v American Swiss Watch Co. (ASWC)

Facts: The same as in Bloom v ASWC. When Lee gave information to the police and was
aware of the offer, he did so after Bloom.

Court: It was held that information is not information unless it contains something
substantially new, ratio decidendi , Lee’s information was redundant.

2bvi) The acceptance must be given within the time prescribed or within a reasonable time.

It is up to the offeror to define the rules of arrangement that is the approaches and modus of
acceptance and the time. In situations where time is not agreed the acceptance should be
given within a reasonable time.

In the Case Laws v Rutherford 1924

Facts: Mrs Rutherford offered Mr Laws a contract to cut timber on her farm subject to offer
being accepted by a given time 28th July, and accepted by way of a registered post. On the
29th of July Laws simply moved to the farm and started cutting timber .Mrs Rutherford got a
prohibitory order barring Mr Laws from the farm.

Court: It was held that, the acceptance has not been done by

(i) Registered post, and

(ii) Mr Laws went to the farm on the 29th July a day after the lapse of the offer.

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Bibliography

Primary Sources

Case Laws

Adams v Lindsell 1818 EWHC KBJ59

Blew v Snoxell 1931 TPD

Bloom v American Swiss Watch Co. 1915 AD 100, 68

Carlill v The Carbolic Smokeball Co. 1893 1QB 256, 68, 80, 81

Crawley v Rex 1909 TS

East Asiatic Co. (SA) Ltd v Midland Manufacturing (Pty) Ltd Co. 1954

Edelstein v Edelstein 1952 (3) SA 1 (A)

Fisher v Bell 1961 (1) QB 394

Harvey & Another v Facey & Others 1893

J C Vogel & Co. v Greentley 1903 24 NLR 252

Laws v Rutherford 1924

Lee v American Swiss Watch Co. (ASWC) 1914 AD 121

Louw v MJ & H Trust (Pty) Ltd 1975 (4) SA 268 (T)

Marshall v National Wool Industries Ltd 1924 OPD 238

Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) Ltd 1953 (1) QB
401

Pleat v Van Staden 1921 OPD 91

Skead v Colonial Banking and Trust Co. Ltd 1924 TPD 497

Tanne v Foggit 1938 TPD 43

Yates v Dalton 1938 EDL

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Secondary Sources

Books

Cockrell, A. (1999), ‘Capacity to perform juristic acts: Contracts’ in Van Heerden, B. et al

(eds) Boberg’s Law of persons, Cape Town: Juta

Du Plessis, J. (2012), The South African Law of Unjustified Enrichment Cape Town: Juta

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