Study Section 2.
1
LAW OF CONTRACT
terms may be classifed as
- essentiala
- naturalia
- indidentalia
What is a Tacit term?
a Tacit term is an unexpressed provision in a legal agreement or contract which derives from
the common intention of the parties and which is infered from the express terms of the
contract and the surrounding circumstances.
- a tacit term is expressed in a non verbal manner
- a tacit term is inferred by the court from the expressed terms as well as the
surrounding circumstances
Requirements for a tacit term to be included in a contract :
1. The inclusion of the term must be fair and reasonable
2. The term must be compatible with the common intention of the parties, in order for
them to be deemed to have reached consensus on the inclusion of such a stipulation.
3. The interpretation of the contract as a whole must unambiguously indicate that the
parties would have included the tacit term in the contract, should they have been
aware of that fact during conclusion of the contract. If the problems regarding she
omission of the term from the contract, and they would have answered that they
would undoubtedly have included such a term in their contract, the term is deemed to
be part of the contract. It is also known as the hypothetical bystander test or but of
course test.
4. The stipulation must be necessary in order to give business efficacy to the contract
as a whole.
5. The contents of the stipulation must be clear and certain.
6. The inclusion of the stipulation must be necessary.
7. The tacit term must not be contrary to an express term of the contract.
Distinguish between a suspensive and resolutive condition:
1) Suspensive condition:
when the right or duty to performance is postponed pending the occurence or non-occurance
of an uncertain future event specified in the contract
Explain the effect of a suspensive condition on the duty to perform ?
- performance is thus made dependent on the occurance or non-occurance of the
condition
- only the enforceable of the contract and not the existance of the contract is affected
by the suspensive condition
- future event must contain element of uncertainty
- if event is certain it is a term
2) Resolutive condition:
when the continued existence of the contract is made dependent upon an uncertain future
event
Explain the effect of a resolutive condition on the duty to perform?
- the normal consequences of the contract follow immediately after the parties enter
into the contract therefore parties are liable for and entitled to performance
- event must be future and uncertain
Real life example :
1)
Suspensive - the happening of the condition gives rise to an obligation.
Example:
Maya binds herself to deliver a determinate car to Tito if he marries Gaya. The obligation is
only demandable upon the happening of the condition that is , if Tito marries Gaya. The
obligation is suspended and not yet demandable.
2)
Resolutory - the happening of the condition extinguishes the obligation already existing.
Example:
Arvin binds himself to lend his only car to lan until the latter passes the CPA Board. The
obligation to lend is immediately demandable. lan's right over the car is extinguished upon
his passing the CPA board. lan is now obliged to return the car.
Time clause
a time clause is a contractual term which makes the existence of an obligation / performance
dependent on an event or time that is certain to arise in the future
What is a time clause :
Distinguish between a suspensive and resolutive time clause in a contract:
1) suspensive time clause
suspends the duty to perform until the occurence of a certain future event
2) recolutive time clause
terminates the continued existance of the contract upon the occurance of a certain future
event
Explain the concept ‘cession’ ?
Cession is an act of transfer of a personal right or claim.
cession takes place when personal rights are transfered from one party of the the contract to
another person.
Requirements :
- the cedent must have a primary claim against the debtor
- the cedent must be entitled to dispose of the personal right
- the personal right must be capable of cession
Explain the rights and duties of the parties after cession of the personal right :
personal right
- a right against another person in terms of which debtor has the duty to deliver a
particular performance, to peform a certain act, or to withold themselves from a
particular act or conduct
delegation
- duties are transfered from one party of the contract to another by means of
delegation
consensus must be reached by all three parties in terms of delegation
● debtor
● creditor
● new debtor
Explain the liabilities of the parties if they are joint and several liable for pertormance :
Three forms of liability and entitlements ?
1. Joint liability and entitlement;
2. Joint and several liability and entitlement;
3. Indivisible co-liability and entitlement
1. Joint liability and entitlement
• General rule when parties bind themselves to each other: they are jointly
(proportionately) entitled and liable to each other.
• Thus = each person → entitled or liable to his pro rata share.
• Joint liability always applies (It pertormance Is divisible = eg. 50 bags of peanuts) UNLESS
parties agree to the contrary - or if the law provides otherwise.
Joint liability
- each debtor and each creditor is equally or propotionaly liable for and entitled to
performance
- the performance must be divisable
2. Joint and several liability and entitlement
Joint and several liability and entitlement
- each debtor and each creditor is sevrally liable for or entitled to the whole
performance
- this type of liability and entitlement is often created by statute
- the debtor who has made performance has the right of recourse against the other
debtors who did not perform at all or in full
Describe the rules that must be followed when a written contract is interpreted :
formalities refers to the external visible form required for that specific contract
the general rule of common law is that no formalities are required for a valid or enforceable
contract of sale
interpretation of a contract
to interpret a document means to ascertain or determine the meaning of the particular words
used.
The golden rule or most important principle when interpreting a written contract is to
ascertain and follow the intention of the parties, and if the contract itself affords a definite
indication of the intention of the contracting parties, then effect should be given to that
intention.
Explain the parol evidence rule :
Rule against extrinsic evidence
= this means that under the parol evidence rule any
agreement that is not contained within the written contract is inadmissible in court
Define the concept rectification ?
Remedy whereby a court orders a change in a written document to reflect what it ought to
have said in the first place
rectification of a contract is a process whereby one or all of the parties to a written
contract contend that the contract as it is written does not correctly reflect their true intention
and that the contract must therfore be rectified so that it does
allows oral evidence which changes the contents of the written contracts but puts the written
contract in accordance with the true intention of the parties to the contract
Explain the circumstances when a written contract may be rectified :
the parties must not only prove that their written agreement does not accurately reflect their
true agreement, but also that they had intended that the point in question should be reduced
to writing and included in the written agreement
