Introduction to the Theory of Law & Law of Contract

ASSIGNMENT NUMBER CL1 PART A

INTRODUCTION TO THE THEORY OF LAW &

PART B
LAW OF CONTRACT

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Introduction to the Theory of Law & Law of Contract

PART A: INTRODUCTION TO THE THEORY OF LAW

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TABLE OF CONTENT
PART A: INTRODUCTION TO THE THEORY OF LAW.................................2 QUESTION 1.....................................................................................................5 ..........................................................................................................................5 ANSWER 1 .......................................................................................................5 QUESTION 2.....................................................................................................8 ANSWER 2........................................................................................................8
The three rules of Natural Justice are as follows:................................................................................9 Hear the Other Side (Audi Alteram Partem)......................................................................................12 No one is fit to be judged in his own cause (Nemo iudex idoneus in propria causa est).................15 Justice must be seen to be done............................................................................................................16 Conclusion..............................................................................................................................................19

QUESTION 3 ..................................................................................................21 ANSWER 3......................................................................................................21

Difference between Substantive and procedural Law.......................................................................22 Examples of categories of the law which fall into each type:............................................................25

QUESTION 4 ..................................................................................................26 ANSWER 4......................................................................................................26 QUESTION 5...................................................................................................31 ANSWER 5......................................................................................................31

Which part of judgment is relevant:....................................................................................................33 The extent of the application of this principle insofar as the different courts of South Africa and those of foreign countries are concerned: ..........................................................................................35

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Introduction to the Theory of Law & Law of Contract PART B: LAW OF CONTRACT.....................................................................37 QUESTION 1 ..................................................................................................38 ANSWER 1 .....................................................................................................38
Difference between Terms and Conditions:........................................................................................41

QUESTION 2 ..................................................................................................42 ANSWER 2 .....................................................................................................42

The difference between void and voidable contract and its examples are as follows:....................43

QUESTION 3 ..................................................................................................53 ANSWER 3......................................................................................................53

Difference between Misrepresentation and Mistake:........................................................................54

QUESTION 4 ..................................................................................................63 ANSWER 4......................................................................................................63

Repudiation:...........................................................................................................................................63 Options available to party when other party has repudiated:..........................................................64

QUESTION 5 ..................................................................................................67 ANSWER 5 .....................................................................................................67 QUESTION 6 ..................................................................................................71 ANSWER 6......................................................................................................71 BIBLIOGRAPHY.............................................................................................74

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QUESTION 1

Custom is a source of our law. List the requirements before a custom acquires the force of law.

ANSWER 1

Bois et al. (105:2011) states that

A custom or social commercial practice can be held by a court to be legally binding. Hence custom can serve as a source of law.

Based on the above-statement it is clear that the custom is a source of law because it can be held by the court of law legally binding. Further it is to be noted that almost all the universal custom is presently in the form of law and hence custom is a major source or law.

Bois et al. (106:2011) described the requirements for custom to acquire the force of law and listed the requirements for the custom as follows: 1. Reasonable 2. has been long established 3. has been uniformly observed, and 4. is certain

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Introduction to the Theory of Law & Law of Contract In addition the custom must not be in conflict with the constitution of Southern Africa.

Further Plessis and Hees (238:2009) identifies requirements such as the custom should be certain, lawful, ingrained, generally followed, must be

regarded by those who are in contact with it, old enough, regularity in pattern, clearly defined, reasonable, just and those who acts in this way may be interested parties or organization of state, which applies the law.

Reasonable: Any custom to acquire the force of law must be reasonable. Further any custom to be reasonable the custom must not be contrary to moral, should be non-injurious or should not be non-oppressive.

Has been Long Established: The custom must have existed and applied for a long time to be acquired as a force of law.

Has been uniformly Observed: The custom must be uniformly adhered and invariably complied with by people.

Is certain: A certain number of witnesses are needed to substantiate the certainty of the custom, however in case of a trade usage does not require strict proof as a custom.

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Introduction to the Theory of Law & Law of Contract The custom must not have any conflict with the Constitution, which is the supreme law of the country, to acquire as a force of law.

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Question 2

What are the Rules of Natural Justice and why are they important in arbitration proceedings?

Answer 2

Butler and Finsen (165) stated that:

Although the courts generally appear to regard the arbitrator as master of his own procedure he must nevertheless conduct the proceedings in accordance with the rules of natural justice.

Further they states:

When an arbitrator has conducted the proceedings in a manner that did not ensure the fair administration of justice between the parties, the court will intervene. The arbitrators duty to comply with the rules of natural justice means no more than the duty to act fairly .. in carrying out the decision making process. There are three rules in particular which he should always bear in mind.

They refer the importance of rules of justice in arbitration proceeding and clearly indicated that it is duty of the arbitrator to follow rules of natural justice 8 of 75 Assignment CL1 of Rakesh Kumar

Introduction to the Theory of Law & Law of Contract and act fairly while carrying out the decision making process. They further stated the three rules of justice.

The three rules of Natural Justice are as follows:

1. Hear the Other Side (Audi Alteram Partem) 2. No one is fit to be judged in his own cause (Nemo iudex idoneus in propria causa est) 3. Justice must be seen to be done

Importance proceedings

of

rules

of

natural

justice

in

Arbitration

The Article 2 (Supremacy of Constitution) of Constitution of South Africa states:

This Constitution is the supreme law of the Republic; law or conduct inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.

This indicates that the law stated in Constitution is supreme and further Article 33 (Just Administrative Action) of Constitution, while inferring to the rules of natural justice states that:

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(1) Everyone has the right to administrative action that is lawful, reasonable and procedurally fair. (2) Everyone whose rights have been adversely affected by administrative action has the right to be given written reasons. (3)National legislation must be enacted to give effect to these rights, and must- (a) provide for the review of administrative action by a court or, where appropriate, an independent and impartial tribunal; (b) impose a duty on the state to give effect to the rights in subsections (1) and (2); and (c) promote an efficient administration.

Hence, it can be seen that the supreme law of the country (South Africa) has provided utmost important to the rules of natural justice and directs that everyone has the right to administrative action that is lawful and impartial to ensure fair decision. Adversely affected person must receive the written reason, and national legislation should be in line with it, to provide independent and impartial tribunal to effect to the rights of the people.

Further Article 34 (Access to Courts) of Constitution of South Africa states:

Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.

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Introduction to the Theory of Law & Law of Contract Here we can see that Supreme law of the country providing right to resolve his/her dispute through applicable law, by fair public hearing, and for this the court should be independent and impartial.

Guided by the instruction of the Constitution of South Africa the Section 33(1) of Arbitration Act 42 of 1965 states:

33 Setting aside of award (1) Where (a) any member of an arbitration tribunal has misconducted himself in relation to his duties as arbitrator or umpire; or (b) an arbitration tribunal has committed any gross irregularity in the conduct of the arbitration proceedings or has exceeded its powers; or (c) an award has been improperly obtained, the court may, on the application of any party to the reference after due notice to the other party or parties, make an order setting the award aside.

Here it can be seen that the arbitration act 42 of 1965 clearly directs that if the arbitration proceeding will be misconducted or gross irregularity in the conduct of arbitration proceeding found or if the award has been improperly obtained, the court may make an order to setting the award aside. Hence

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Introduction to the Theory of Law & Law of Contract there is no scope for irregularities, unfairness, bias in the arbitration proceeding.

This rules of natural justice inferred under article 33, 34 of Constitution of South Africa and Section 33 (1) of Arbitration Act 42 of 1965 guides and indicates the importance of rules of natural justice in arbitration proceeding.

The aim of the arbitration proceedings is to resolve the dispute between the parties with fairness, without bias and to achieve this aim, arbitrator must conduct the proceedings in accordance with rules of natural justice as guided by Constitution of South African and Arbitration Act, so that the decision of award will be fair, without bias and just, otherwise the court will intervene as stated in section 33(1) of arbitration act.

Hear the Other Side (Audi Alteram Partem)

The Constitution of Republic of South Africa (article 33) provided every citizen of South Africa right to administrative hearing, which is fundamental to the fairness of arbitration proceeding. Hence before taking any decision by the arbitration tribunal, the party must be given opportunity to be heard.

As per Butler and Finsen (165) this rules guides that:

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A party should be fully informed of the evidence and arguments which have been produced against his case and have a proper opportunity of presetting his own case to the arbitrator before the arbitrator takes a decision.

The arbitrator must inform the parties, what the evidence, documents, argument and claims are made by one party to other party. During arbitration proceeding while sending any document to arbitrator, one party should copy the document to other party, similarly arbitrator while writing to one party must copy the letter/document to other party. The arbitrator should not communicate with one party when other party is not present. Following these procedures, will help all the parties, to be fully informed of the matters in dispute and arguments presented by parties. Further the arbitrator must provide sufficient time to parties to present their case and, all the parties of the dispute, and arbitrator must ensure that one party must here what other party is stating or claiming, so that other party can counter the statement, and can produce the evidence to counter the claim, made by the first party.

Here it is very important that the defendant must be told what claimant is claiming and claimants must be told what is the counterclaim of defendant, so that accordingly the parties can prepare there defense.

In case of Kollberg v cape town Municipality 1967 (3) SA 472 (A), the court has stated that: 13 of 75 Assignment CL1 of Rakesh Kumar

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If the rules of natural justice are implied, the audi alteram partem rule is applicable. Non constat , however, that every breach of the principles of natural justice automatically renders void the decision in question..

Hence if the arbitrator during arbitration makes the award without informing both the parties about the evidence, argument, claim, documents etc produced by one party against each party or If the arbitrator does not gives an opportunity to the affected person or entity to present his case or if the award is not based on reasoning the court will intervene and render the award void.

The arbitration tribunal must provide written notice to finalize the date and time of arbitration proceeding, convenient to all parties, and if reasonable reasons provided for change of the date and time, it should be accepted. Inspect goods and property involved in dispute, if required.

The oral evidence should be recorded, as the parties agree; only in case the parties do not agree, the arbitrator should direct the way to record the oral evidence.

Following this rule of natural justice helps arbitrator carryout the proceeding in transparent manner, gathering all the information that helps better analyzing evidence and argument presented during arbitration proceeding and eventually leading to quality award.

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No one is fit to be judged in his own cause (Nemo iudex idoneus in propria causa est)

As the heading clearly states that No one is fit to be judged in his own cause, this rules guides that one can not judge himself, that is, if one has got his interest in the outcome of the arbitration proceeding, he can not be the arbitrator himself.

In case of Kolleerg v cape town Municipality 1967 (3) SA 472 (A), the court has stated that:

it is quite foreign to the concept of arbitration that one of the parties to dispute should be the arbiter of the dispute a judge in his own case.

Hence it can be seen that, in no arbitration proceeding, an arbitrator can decide if he has interest in the outcome of the arbitration proceeding.

If the arbitrator is not impartial and free from bias during the arbitration proceeding, the award will also be biased, and in that case, if any party will come to know that, the arbitrator has got his interest in the arbitration proceeding then, he may go to court and the court may decide to turn down the award. Further this will lower down the reputation of the arbitration

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Introduction to the Theory of Law & Law of Contract proceeding too. Hence it is extremely important, that the arbitrators are impartial, and work in such a manner that parties have faith in him.

Since the arbitrator must be impartial, hence he must disclose any conflict of interest in the arbitration proceeding, at the beginning of arbitration proceeding, and at any time, he comes to know that he is in conflict of interest, during the arbitration proceeding.

Hence it is very important to have impartial and non-biased arbitration tribunal.

Justice must be seen to be done

This rule, guides the arbitration proceeding, that not only justice is to be done, but it must be seen to be done. Hence arbitrators must act, in such a way that all parties have faith in him. During arbitration proceeding, he must act, such a way that all parties have confidence in him, that he is handling the proceeding in right way. For example, the communication with one party must take place in presence of another party, so that other party, if in disagreement can counter and present his case in support.

Following this rule increases the faith of parties in arbitration proceedings and hence more reasons to accept the arbitration award (avoid further litigation).

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Butler and Finsen (167) stated that

In practice, arbitrators would be well-advised to remember the advice of Mustill & Boyd, who suggested that an arbitrator is unlikely to be held to have acted unfairly, if he observes the following rules: 1) He should endeavour to act fairly between the parties, eliminating conscious, and so far as he can, unconscious bias. 2) He should not only be impartial in fact, but should act in such a way that the parties are confident of that fact. 3) He should pay careful attention to any evidence or arguments presented by the parties, and should be seen to be doing so. 4) He should keep the parties fully informed of what he is doing, and what he proposed to do.

Hence, the arbitrator must act, in such a way that, his all action should be fair, and gives impression to the parties, that he is acting fairly, such as not traveling with one party to inspection site, not having lunch with one party, without substantive reason not having hearing in absence of one party, hear both parties equally, do not give argument in support or against of any argument of any party during proceeding, copy all correspondence to all parties, if he receives any correspondence from one party, which is not copied to other party, he must send the copy of that correspondence, to the party who has not received that correspondence and communicate with one party only in presence of other party. Following all these provisions will

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Introduction to the Theory of Law & Law of Contract indicate that the arbitrator is acting fairly and hence will increase faith of the parties in arbitrator and arbitration proceeding.

The arbitrator must submit the award based on logical reasoning and analysis of facts. The decision should clearly point out the evidence based on which the determination of the arbitrator is based. The award must indicate that the arbitrator has gone through all the evidence provided by all the parties. It should also indicate that the arbitrator has analyzed the evidence and argument of all parties in depth, and then came to any conclusion. The logic and reasoning provided with the award will let the party understand the award better and clear. This will clarify the issues in mind of the loosing party too, that why he lost. This way both the parties will feel that justice is being done by the arbitrator, and hence increase the faith in arbitration proceeding and award.

During arbitration proceeding the arbitrator may require parties to make discovery of document, deliver pleadings or statements of claim and defense, allow inspection of any goods and appoint any a commissioner to take the evidence. Further arbitration tribunal determines the time and place of the arbitration proceeding, administer oaths of the parties and witness, examines the parties and require them to produce all books, documents which may be required for the trail, examine any person who has been summoned to give evidence, receive evidence by affidavit, inspect goods and property involved

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Introduction to the Theory of Law & Law of Contract in dispute. All these works that is the part of the arbitration proceeding could be vulnerable with respect to providing just and fair result to the parties. The arbitration tribunal must provide the parties sufficient time to produce their case with supporting documents, any relevant book for the trail and any witness. Providing enough information and opportunity to the parties will help party to present their case properly to the arbitration tribunal, and will give parties a feeling that arbitrator is giving all opportunity, and is not biased.

Following this rule of justice, creates faith of parties in the arbitration proceeding and hence high chance of acceptance of award.

Conclusion

These three rules must be observed by the arbitrators during arbitration proceeding, as following these rules of natural justice will lead to the decisions based on facts and will be accurate, will provide the confidence of the parties. Sufficient time for presentation of documentation, calling of witness and asking for inspection, and recording the matter stated by the witness as per the agreement, and reasoned decisions based on these facts will clearly indicate to all, that the decision is not biased, and will improve the confidence of the parties in the decision. If the rules of natural justice will not be observed in the arbitration proceeding, aggrieved party may go to court

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Introduction to the Theory of Law & Law of Contract and the court may refer the matter back to arbitration tribunal to observe the rules of natural justice or cancel the award.

The adherence of rules of natural justice in arbitration proceeding is extremely important as it is guided by the supreme law of the country, that is constitution of republic of south Africa, to follow the rules of natural justice in any action which has civil consequences. Further if the rules of justice will not be followed during the arbitration proceeding then the court will intervene and as stated in case of Kollberg supra, the breach of the principles of natural justice automatically renders void the decision in question.

Following rules of natural justice in arbitration proceeding, promotes faith and confidence in the arbitration proceeding, and leads to right, just and fair decision.

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Question 3

What is the difference between adjectival or procedural law and substantive law? Give two examples of categories of the law which fall into each type.

Answer 3

Kleyn and Viljoen (95:2011) states that

South African national law is divided in to substantive and adjective law.

It is further stated that these laws are interdependent. The adjective law can not exist without substantive law.

The Association of Arbitrators (Southern Africa) in their study material for Certification of Arbitration clarifies the substantive and procedure laws as follows:

Substantive Law tells us what the law is. It tells us what the rights and duties of legal subjects are. Law of Procedure tells us how one would enforce ones rights. The law of procedure therefore deals with the process that one would follow in enforcing ones rights. This branch of law

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focuses on the process of bringing a matter to court and the rules relating to how the courts may operate.

Based on studies of different books, study material and relevant internet resource specially on www.taxlawpro.org the identified difference between adjectival or procedural law and substantive law is as follow:

Difference between Substantive and procedural Law

Sl. Substantive law No. Substantive 1 legal rules, it tells us what the law is. violated, that is, it regulates the enforcement of substantive law. Substantive law defines what are the The procedural law determines rights, 2 power of the citizen. 3 and power of the citizen shall be enforced. Substantive law defines how the Defines the step-by-step process facts in the case will be handled, that the case will go through. how the crime is to be charged. It The procedural law deals with provides the legal solution to the the process how private law case. It Prohibits us from committing action can be brought before criminal offences the court and case should proceed. The procedural law responsibility, duties and how right, responsibility, duties law determines the Procedural law determines what content and meaning of different to happen when such rules are Adjective or Procedural Law

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Introduction to the Theory of Law & Law of Contract Sl. Substantive law No. deals with the rules related to how the courts may operate, it regulates the manner in which facts are proved in the court. What materials may be Adjective or Procedural Law

presented as evidence and to whom? How one individual or state may bring an action

against

another

individual?

How one party is to serve a summon against another, how pleading are drawn up, which court will be competent to here matter. In summary it regulates the enforcement of

substantive law and determines the manner in which a case must be practically handled, when a legal rules has allegedly been 4 violated. The Substantive law refers to written The procedural law is the set of or statutory law which governs the rules followed when a courts is

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Introduction to the Theory of Law & Law of Contract Sl. Substantive law No. relationship between people, or hearing a case. between people and the state. It defines the crime and punishment Defines the manner in which a 5 to which the accused will be case will proceed. provides the process Adjective or Procedural Law

subjected. It determines which human acts It 6

constitute criminal offences, such as according to which someone is murder. prosecuted for murder. Substantive law decides the fate of Procedural law does not decide the case, that is, who wins the case the fate of the case.

7 and who is going to receive the compensation. Substantive law has independent Procedural law does not have 8 power to decide the fate of a case. independent power to decide the

fate of a case. Substantive law can not be applied Procedural law can be applied to 9 to non-legal context. Determines the content non-legal context. and Determine how the law will be It when provided one want the to

application of the different rights executed. which an individual may have, process 10

example: It determined how an reclaim ones motor vehicle from individual can obtain ownership of a someone who removed it without motor vehicle. ones permission.

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Introduction to the Theory of Law & Law of Contract In general the substantive law guides about what to do, where as procedural law guide us how to do.

Examples of categories of the law which fall into each type:

Example of categories of law falls in to adjectival or procedural law 1. Law of Criminal Procedure, which described the law concerning the investigation and prosecution of crime. 2. Law of Criminal Evidence, which prescribes the way in which a case has to be proved in the court.

Example of categories of law falls in to substantive law 1. Law of Person such as Companies Law, which defines the legal subject and her legal subjectivity. 2. Property Law such as law of deeds, which regulates the family relationship.

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Question 4

List the 5 main types of court in the South African legal system, in descending order of rank, and indicate which courts generate judgments which are binding.

Answer 4

As per article 166 (judicial system) of the Constitution of South Africa, the 5 main types of court in the South African legal systems are as follows:

(a) (b) (c)

the Constitutional Court; the Supreme Court of Appeal; the High Courts, including any high court of appeal that may be

established by an Act of Parliament to hear appeals from High Courts; (d) (e) the Magistrates' Courts; and any other court established or recognised in terms of an Act of

Parliament, including any court of a status similar to either the High Courts or the Magistrates' Courts.

The courts mentioned under (a), (b) and (c) above are superior court and Magistrate court (district and regional) and their equivalent courts are considered lower court. Here constitution court is the highest court then

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Introduction to the Theory of Law & Law of Contract comes supreme court and then high court. Magistrate court is lower in rank from high courts. The courts mentioned above under (e) could be of high court status or could be of Magistrate court status.

Highest court has got highest priority in case of decision made on similar case that is in case of similar facts and legal issues.

Plessis and Hees (243:2009) too, while stating the hierarchy of the courts states the same hierarchy and further states:

The following hierarchy of the courts from those with high status to those with low status which is also the scheme according to which courts are bound by decisions may be distinguished for stare decisis purpose.

This indicates clearly that courts stated lower in the list are bound to accept the decisions made by the higher courts.

The decision of constitution court is binding upon all the court, however constitutional courts deals the cases only related to constitutional matter and highest court in constitutional matter. Then comes the Supreme Court of appeal, which is the highest court in all other matter except constitutional matter. The decision of Supreme Court of Appeal is binding on all high

courts, magistrate court and special courts. The decision of high court is binding on the Magistrates courts and other courts in that division and on

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Introduction to the Theory of Law & Law of Contract Magistrates Courts in other division where there is no conflicting decision by a High Court in its division as stated by Association of Arbitrators (page 29). Hence A lower court is bind by the decisions of the higher courts. In addition it is also of importance that a single judge is bound by the decision made by two or more judges, in case of high courts, but in case of Supreme Court of appeal heads are not counted. The judgment of lower court does not makes precedent and not binding.

Plessis and Hees (245:2009) stats that:

Court of Equal status is not bound in a qualified way by one anothers decisions provided that in the case of high courts and local divisions they fall within the same area of jurisdiction.

So high courts of different jurisdictions are not bound by each others decision, however the decision of high court of another jurisdiction is an persuasive evidence. Further the high courts of same status are not bound by the decision of a high court in another jurisdiction irrespective of the decisions taken by the number of judges.

Highest court has got highest priority in case of decision made on similar case that is in case of similar facts and legal issues.

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Introduction to the Theory of Law & Law of Contract It is to be noted that only Constitutional Court, Supreme Court of Appeal and High Courts decisions is documented and hence reference for precedent can only be given to the court decisions made by these courts.

Bois et al (89:2011) states:

Finally, only the courts decisions of which are published can establish precedents, for the obvious reason that the operation of the doctrine depends on the public accessibility of the courts decision. For this reason, the lower courts decision do not constitutes precedents at all, not even inter se.

Hence it was noted that only Constitutional Court, Supreme Court of Appeal and High Courts decisions is documented and hence reference for precedent can only be given to the court decisions made by these courts.

The decision of the Magistrates' Courts/Lower courts are not bounding to any court.

However decisions of the High Court are binding on the Magistrates Courts in that division and on Magistrates Courts in other division where there is no conflicting decision by a High Court in its division.

In addition many specialized superior courts and important inferior courts also constituted as per provision of section 166 (e) of the constitution to hear the

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Introduction to the Theory of Law & Law of Contract dispute of special nature, such as Land Claim Courts established in 1996 to hear the dispute arising from those law which underpin the post-apartheid Where as Income Tax Appeal court is also an specialized court constituted in terms of Income Tax Act 58 of 1962 and hear the appeal against income tax assessment is a lower court. Here Income tax appeal court judgment are not binding judgment to any court as this is a lower court.

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Question 5

Describe what is meant by stare decisis. Include in your discussion which parts of a judgment are relevant thereto and the extent of the application of this principle insofar as the different courts of South Africa and those of foreign countries are concerned.

Answer 5

The study material of Association of Arbitrators (26:2011) states:

The system which provides that an earlier decision is binding on later ones is called the precedent system. The Latin term for the precedent system is stare decisis which means the decision stands.

Hence the stare decisis mean the stand by with the previous decision taken by other courts. However this rule does not follow in all the cases, the situations where the rule is applicable and not applicable is stated latter.

Plessis and Hees (240:2009) states that:

According to the stare decisis rule, court A: Is either absolutely obliged to follow the judgement of court B;

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Or follows the judgement of court B because A can find no fault with it; Or allow itself to be persuaded by the arguments of court B.

Hence we can see that stare decisis rules allow court A to consider the decisions made by court B. The decision could be obligatory or persuasive.

Bois et al (77-78:2011) states that:

The doctrine of precedent has been endorsed by the Constitutional Court as an incident of the Rule of Law that serves to enshrine a fundamental principle of justice: that like cases should be determined alike and to promote legal certainty.

Here it is clarified the importance of the stare decisis, by following the stare decisis, judges or arbitrators follows the principle of fundamental justice, because it provide legal certainty, that, what will be the court decision if something similar will happen in future. The advantage of stare decisis is further clarified by Bois et al (78-2011) while referring to the statement made by Hahlo & Khan:

Certainty, predictability, reliability, equality, uniformity, convenience: these are the principle advantage to be gained by legal system from the principle of stare decisis.

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Introduction to the Theory of Law & Law of Contract It is important to note that by stare decisis rule courts gets the power to make law, though this authority is not vested in the court.

Which part of judgment is relevant:

Plessis and Hees (240:2009) while defining what is binding in the judgment of a court states that:

In a judgment a court normally makes finding on two kinds of issues in other words, two kinds of questions are answered:

Factual issues or question of fact, and Legal issues or questions of law.

Factual issues generally differs from case to case and are unique to a specific instances. Hence the facts of one case can not be relevant to another case. But at the same time the legal issues of one case could be relevant to another case. A fact in a particular case is not binding in another case, but the courts finding in respect of question of law of once case could be binding in another case, in case if there is a significant similarity between the aspect of two cases. This statement is substantiated by the statement of Plessis and Hees (241:2009) which is:

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A courts answer to the question of fact in a particular case cannot be binding on a latter court; its answer to a question (or questions) of law does, however, have binding force.

Further it is to be noted that all decided by one court in previous decision is not binding to the other court. Kleyn and Viljoen (61:2011) states that:

Only ratio decidendi creates a precedent.

That is only legal principle applied by the court to the material facts to reach the decision is binding. Obiter dicta that is remarks in passing made by the court is not binding but persuasive evidence.

In addition if the previous court order is made by more than one judges, and if the judges differs with one another then more than one judgment can be handed over. In this case judgment made by majority of judges will be ratio decidendi, and judgment made by minority will have persuasive force in future. If majority of judges differ on the conclusion of the judgment that is judges judgments are based on different reasons, in that case, the decision made by the majority of judges are also not binding.

The stare decisis principle also depends on the hierarchy of the court, higher court decision is binding on lower court and lower court decision is not binding and hence can not be considered as precedence. The detail is stated latter.

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It is to be noted that in below mentioned conditions the rule of stare decisis can not be followed: 1. The last decision made by the court has overlooked a government enactment. 2. The last decision made by the court was considered wrong. 3. There is change in legislations since the last decision has been given.

The extent of the application of this principle insofar as the different courts of South Africa and those of foreign countries are concerned:

Stare decisis or precedent system is applicable in South Africa, however the judgment of all court is not considered as precedent. The judgment of only Higher courts that is Constitutional Court, Supreme Court of Appeal and High Courts is considered for precedent. Further hierarchy of the court dictate that the decision made by constitutional court could be considered as precedent for all the courts in constitutional matter and decision made by supreme court of appeal could be considered as binding precedent to all high court and lower courts. High court decision considered precedence for the lower courts. Lower courts can not overrule the precedents made by the higher court. Lower courts decision does not make precedence.

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Introduction to the Theory of Law & Law of Contract Further in case of high court, the decision made by two or more judges are bound by single judge in future. High court decision of other reasons is considered persuasive evidence for other high courts. Magistrate courts are bound by the decision of Supreme Court of appeal and if there is no decision available from Supreme Court of appeal then the decision of high court. However in case there is conflict between the decisions made by different high court the decision of the high court of same reasons will be considered as binding and precedent for magistrate court.

Similarly the decisions made by the courts of foreign countries are just persuasive evidence for the court of South Africa. These decision are not considered stare decisis/binding.

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PART B: LAW OF CONTRACT

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Question 1

Explain

and

differentiate

between

terms,

conditions

and

warranties in the context of contract law.

Answer 1
Bois et al (793:2011) defines conditions as follows:

A condition is a provision in a contract that, on the occurrence of some uncertain future event, an obligation shall either come into full effect or be discharged. The event must be not only future but also uncertain, that is, something which may or may not take place; the fate of the obligation depends on whether the event takes place or not.

Hence conditions are provisions made in the contract based on occurenance or non-occurrence of uncertain future event that a contract will come in to effect or not. For example: A will give his car to B, if we get selected in national football team. Here the selection of A is not certain and this selection is going to take place in future. The conditions could be positive or negative, for example, A will give a car to B if he will play for national football team. This is a positive condition and if A say that he will give the car to B, if B does not plays for national football team then this is a negative condition. The

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Introduction to the Theory of Law & Law of Contract conditions are also divided in to potestative, causal and mixed condition or suspensive and resolutive conditions.

Bois et al (797:2011) defines terms as follows:

The term of the contract are the provision in it which set out the nature and details of the performance due to the parties under the contract, ie the nature and description of the commodities or services to be rendered, and the manner, time and place of performance.

Here we can see that the intention of the parties to create obligation is clearly expressed in the term, such as details of the performance of each parties due under the contract such as one party will deliver the car and another party will pay him within 30 days. It also includes description of the goods or services to be performed, place and timing. Such as the goods of particular specification will be delivered within 40 days after signing of the contract, the delivery should take place at office address of one of the party.

Bois et al (798:2011) clarifies that the warranty is same as term under South African law and states:

A good deal of confusion has been caused in our law by the use of the expression warranty which has a variety of meanings in English law. In South Africa the word warranty means term. Unfortunately the use of

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words condition and warranty in the English law sense is relatively common in South Africa. This gives rise to difficulties in the construction of documents.

Supporting this statement Bhana, Bonthuys and Nortje (191:2010) and Merwe et al (295:2010) respectively defines the warranty as follows:

A warranty is a term whereby a party assumes contractual liability for the existence of a certain state of affairs or the occurrence of an event. It can relate to the past, present or a future state of affairs or event. A party can be give a warranty that he will comply with his contractual obligations.

A warranty is a contractual term by which a contractant assumes absolute or strict liability for proper performance, to the extent that he cannot rely on impossibility of performance or absence of fault to escape liability. A warranty is an incidentale (accidentale) of a contract that extends the liability of contractant beyond the liability imposed by the essentialia and naturalia of the contract. Inasmuch as it is an incidentale a warranty is a consensual term of the contract.

Hence it is to be noted that warranty is also a terms of the contract. Here one party to the contract takes contractual liability for the existence of certain state or proper performance up to a certain period, such as under sales of goods, the seller provides warranty that the goods sold by him will function properly for a certain period of time without any problem. Further it is to be 40 of 75 Assignment CL1 of Rakesh Kumar

Introduction to the Theory of Law & Law of Contract noted that in this example the warranty starts after delivery of the goods. It is a consensual term of the contract.

Since warranty is also a term and it is already clarified what is specific with the warranty, I am going to discuss in detail the difference between term and condition.

Difference between Terms and Conditions:

Terms create Term obligations and Condition it A condition does not create any

imposes a contractual duty on party contractual right and duties. to perform in future. The terms serve the purpose how the The conditions serve the purpose for parties to the contract will perform the contract to come in to effect or his/her duty under the contract. discharged if a certain future events

occurs or does not occur. If the party to the contract does not Non-fulfillment of conditions is not perform in accordance with terms of considered as breach of contract. Contract, he/she breaches the

contract. In case of breach of Contract the If the party fails to abide by the innocent party is entitled to sue the condition, guilt party can not be sued party who has breached the contract. and forced to perform, but the contact simply falls away.

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QUESTION 2
Explain the difference between a contract which is void, and one which is voidable. Give one example in each case.

ANSWER 2

Bois et al (740:2011) defines the essentials of the elements as follows:

(1) Agreement of the parties for performance or non-performance; (2) capacity of the contract; (3) serious intention of the parties; (4) possibility of performance; (5) certainty; (6) the formalities; and (7) absence of illegality.

If any essentials elements stated above is missing from the contract the contract is said to be void. For example, a contract signed by the parties, where one party has to reach on another start within a year. This contract is void because there is no possibility of performance.

Bois et al (772:2011) while defining the voidable contract stated as follows:

A voidable contract is one which is valid, that is, it comprises all the elements necessary to constitute a contract, but which one of the parties is entitled to rescind because of some cause or defects which existed before or at the time the contract was concluded. The chief of these causes are as

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follows: (1) misrepresentation; (2) duress; (3) undue influence; and (4) commercial bribery.

Hence voidable contract is a valid contract and it has got all essential of valid contract but the consensus obtained is based on improper method that is defective and hence innocent party is entitled to rescind the contract due to those defects that is (1) misrepresentation; (2) duress; (3) undue influence; and (4) commercial bribery. For example, if A threaten B, to sell his car other wise A will harm him (B) and due to this fear B signs the contract with A to sell his car. B is entitled to rescind the contract as the consensus is obtained based on duress. B has also option to uphold the contract, if he wishes to do so.

The difference between void and voidable contract and its examples are as follows:
Void Contract Voidable Contract Example (Void/Voidable) Any essentials of the All essential of Void: If A verbally sales his contract are missing contract exists but the 100 square foot land to B, from the contract. consent for the without signing sales deed.

contract was taken This contract is void as there based on is a statutory requirement

misrepresentation or that sales of land must be in duress influence or undue writing (except in case of or land purchased in public

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract commercial bribery. Example (Void/Voidable) auction). Since one of the essential that is formalities of writing has not been observed, hence the

contract is void.

Voidable: If A gets the consent of B for purchase of As car based on undue influence which weaken Bs power to resist. In this case B is entitle to rescind the contract, because of the

undue influence made by A, before the contract

concluded. Void ab initio, that is Voidable contract is Void: If the performance if the contract is void a valid contract and it mentioned in the contract is of legal effect from the remains beginning. valid until impossible to perform

rescinded.

(such as A asks B, to go to another Star for an amount of R 10,000,000) then the contract is void from the

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract Example (Void/Voidable) beginning due to impossibility performance. of the

Voidable: If one party by providing false information about the condition/quality of goods sold to another. Until the person who purchased the goods, does not rescind the contract, the contract is valid. There is no necessity of a court order to declare the contract is rescinded. A void contract can Voidable contract can Void: A states in joke to B not be enforced legally be enforced legally at that from tomorrow I will go as it does not have whose option it is with you on morning walk any legal effect. voidable. and latter A did not come for the morning walk. B can not legally enforce A to come for morning walk, as in this case intention of party A was not serious.

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract Example (Void/Voidable) Voidable: If A signs a

contract to sell his car to B for an amount of R

40,000.00, stating that the car is of 2009 model, though the car in actual is of 2007 model. B can enforce A to sell his car for R 40,000, if he still wishes to purchase the car knowing that the car Since the is 2007 model. contract The party who due to Void: If A signs a contract to sell his car to B who is an to unemancipated minor, for an

does not come to in misrepresentation, effect from the duress or due

beginning, any party undue influence or by amount of R 40,000.00. If can not seek bribe, signed with the either A does not gives car other to B or if B does not pays to must A. No party can seek

compensation/damage contract from other party. party,

compensate party. aggrieved That

other damage from another party is as the contract is void as B is does not have capacity to

party

entitled to claim the contract.

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract damage. Example (Void/Voidable) Voidable: If A signs a

contract to sell his car to B for an amount of R

40,000.00, stating that the car is of 2009 model, though the car in actual is of 2007 model. Then B sales the Car immediately to C, who pays an amount of R 38,000.00 only because the car is 2007 model. B can seek

compensation/claim from A for the loss (40,000-38,0000 = 2,000 for example) he/she incurred due to false

information of the model of the car stated by A, before sale. A void contract affect Generally a voidable Void: If A ask B to kill C for the transaction. collateral contract affect he does not Rand 1000 and for this

collateral killing A borrows money from

transaction except in D to give it to B. Since the

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract Example (Void/Voidable) cases where the agreement between A and B contract is void based is on the illegal, the contract

unlawful between A and D will also be void. Since in this case the agreement between A and B is void due to illegality of the contract.

consideration.

Voidable: If A agree to sell his car to B for an amount of R 40,000, where B

threatened A to sell his Car to B. Now B borrows R 40,000 from C to pay A. Now before B pays A, A rescind the contract. in this the

condition,

though

Contract between A and B is void, the contract between B Under a void Under a and C will not be void. voidable Void: If A sold the car to B. the third Where B is an

agreement third party contract does not get the right.

party if acquired the unemancipated minor and

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract Example (Void/Voidable) goods against then B sells the goods to C. consideration and Since B is unemancipated

before the contract is minor, the contract between repudiated acquires A and B is void as B do not have capacity to contract, and hence B never was the ownership of the Car to pass the right to C.

the title of the goods.

Voidable: A sold his Car to B, where B provided a

cheque for payment. The cheque provided by B get bounce, but A does not gives notice to B under a reasonable time. Meanwhile B sells the goods to C, where C pays B a cash of Rand 40,000 for the Car. Since C has purchased the car by paying B

(consideration) and A has not given any notice by then,

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract Example (Void/Voidable) hence C is now owner of the

Void Contract remains Voidable void even after become of expiration

car. Contracts Void: A has two cars one is valid after red and one is blue. If A of agrees to sell his car to B, for an amount of R

expiration reasonable time.

reasonable time.

40,000.00. Here A thinks he is going to sell his blue car, while B is thinking he is going to buy red car. Here there is no agreement

between the parties for performance. agreement is Hence void the either

party can not enforce other party to sell and purchase the car (either blue or red) even after expiration of reasonable amount of time time, as (any the

contract is Void ab initio.

Voidable:

If

signs

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract Example (Void/Voidable) contract to sell his 5 car to B for an amount of R 40,000, by paying a bribe of R 2000 to agent (C) of B. But just after contract signature B comes to know that A has paid bribe to his agent C (who was to providing B on

suggestions

purchase of the Car from A) for getting this contract. Out of 5 cars, each month A has to deliver one car up to 5 months. Though B came to know just after the contract signature that A has paid bribe to his agent C to get the contract. After receiving 4 vehicles in 4 months

duration, B wants to rescind the contract. Now B can not rescind the contract after accepting 4 vehicles and

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Introduction to the Theory of Law & Law of Contract Void Contract Voidable Contract Example (Void/Voidable) after 4 months that is expiration of a reasonable time since B came to know about A paying bribe to C for getting the Contract. Now the contract is a valid

contract after expiration of passing of reasonable time since B came to know about bribe.

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QUESTION 3
Describe and differentiate between misrepresentation and mistake and discuss the relevance of each in respect of the law of contract.

ANSWER 3

Bois et al (773-774:2010) defines misrepresentation as:

A misrepresentation is a false statement of fact made by one party to the other before or at the time of contract. It may be made expressly by the use of words, or impliedly, by conduct. Even silence may constitute a misrepresentation where there is duty to speak.

Hence false statement by one party to other party before or at the time of contract is a misrepresentation, it could be through expressed wording or implied by action, and when there is a duty of the party to speak, but the parties does not speak, this could also be a misrepresentation-. If one party mislead the other party, the mislead party is entitled to remedies of misrepresentation such as recission & restitution and damage.

Bois et al (745:2011) clarifies the mistakes as follows:

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If both parties are not of the same mind, one of them at least must be labouring under a mistake or error, ie wrong impression of the actual facts.

Hence while signing the contract, if both parties to the contract are not in same understanding of the essential or material facts of the agreement, one of them must be labouring under a mistake.

Difference between Misrepresentation and Mistake:

No. Misrepresentation Mistake

False statement made by one party to Wrong impression of the actual 1 2 other party before or at the time of facts. contract is a misrepresentation Examples of Misrepresentation: 1. Party make false statement about the material elements/facts of the contract, because of this other party is induced to enter in to the contract. 2. Material statements made by Example of mistake: 1. It is a wrong impression of the actual state of affair. 2. If A agrees to buy from B his blue Mercedes car, but in reality the car is not

Mercedes but it just contain the logo of Mercedes. If B is unaware of A belief, this is a case of Mutual Mistake. But if B is aware of As belief , then

seller to buyer during contract negotiation regarding the quality material to be sold, is considered as material statement and if this

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Introduction to the Theory of Law & Law of Contract No. Misrepresentation statement is found to be false, this misrepresentation. 3. A dishonest opinion, bribe, undue influence, threat gives rise to an action of misrepresentation. 4. The statement by the parties regarding meaning of the clause in the contract and their intention that they will be bound by the meaning is a representation in fact and if this representation found false, this constitutes constitutes this Mistake will be an unilateral

mistake. If both A and B, knows about the belief of each other (thats is car is not Mercedes but it contains logo of it) and accepts it, but both has mistaken about different fundamental fact (A thinks the engine is of 2 L Diesel and B thinks that the engine is 1.5 L Diesel but in actual is 1.5 L Petrol) then, this will be a common mistake.

misrepresentation. 5. Misrepresentation could be

through expressed wording or implied by action. 6. Even silence could be a

misrepresentation if there is duty 3 to speak. What is not misrepresentation: 1. Trade Puff, mere opinions, What is not mistake: 1. In case of unilateral mistake, if the mistake is either not

prediction.

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Introduction to the Theory of Law & Law of Contract No. Misrepresentation 2. Loose, exaggerated statements made by contracting party in praise of his goods does not constitute provide that misrepresentation, such puffing Mistake material or not reasonable. 2. In case of common mistake if the mistaken belief is not vital to the transaction and if there does not exist something

remains vague and non-factual. 3. An expression of law is generally considered opinion only.

which is not known for both the party to be mistaken, as in above-mentioned example, if engine capacity and type is clear to both parties, there is

What

is

the

requirement

no mistake. for What is the requirement for mistake: 1. For the Unilateral mistake:

Misrepresentation: 1. For misrepresentation,

Mistake must be material and reasonable (Justus

representation must be made by other party of the contract or his agent not by third party. 2. The misrepresentation must have induced the plaintiff to enter into the contract. 3. The misrepresentation must have been made with the intention that it should be acted upon by the

error) to be considered the contract void. 2. For Common mistake and Mutual Mistake: False belief about certain state of affair, which is vital and if to the known

transaction

before, neither party would

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Introduction to the Theory of Law & Law of Contract No. Misrepresentation injured party. 4. Misrepresentation must be Mistake have concluded the contract. In the case too the contract is

material. Impact of misrepresentation Validity of the Contract:

void ab initio. on Impact of mistake on Validity of the Contract: 1. In general the mistake does

Voidable at the option of innocent party.

not effect the validity of the Contract.

2. In cases where the mistake is of fundamental nature which exclude the consensus of the parties, in these cases the contract is void (as stated above).

Type

of Fraudulent Negligent Innocent

Misrepresentation Type

of

Mistake

misrepresentation Mistakes can be divided in to misrepresentation different ways: misrepresentation First way: Unilateral mistake Common Mistake Mutual Mistake

Non-disclosure

Second way: causal and non-causal mistake

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Introduction to the Theory of Law & Law of Contract No. Misrepresentation Mistake Third way: Mistake in Motive and essential mistake Misrepresentation is made by one party Mistake could be 7 8 to other party. Result of Misrepresentation: common or mutual. Result of Mistake unilateral or

A)

CANCELLATION TO

and Mistake may render the contract ORIGINAL void if certain requirements are met.

RESTORATION CONDITION

1) Innocent party may cancel the contract and seek restoration to In case of Unilateral mistake: If the original if requirement (as stated mistake is material that is consensus in point 4) of the is excluded, that is when the parties are in disagreement about the terms of the contract, or about the identity

misrepresentation meet. B) DAMAGES

1) Fraud: In case of fraudulent of the parties (where such identity is misrepresentation the innocent party relevant to the contract), and the can cancel the contract and claim mistake is reasonable then the the damage. 2)Negligent Misrepresentation: the innocent party may be entitled for However different type of mistake Compensation for loss suffered loss has got different result: if it be proved that it is due to contract will be void.

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Introduction to the Theory of Law & Law of Contract No. Misrepresentation wrongful damages. Mistake Error in negotio, ie error is related

Innocent misrepresentation: In this to the nature of the agreement, and case the decision can go either side this type of error is considered of the parties. Non-disclosure: party may repudiate. material and hence may render the contract void.

Error in Corpre, ie error is related to the identity of the thing. This error is also considered material and hence the contract may be void.

Error in motive, ie error relates to a partys reasons for concluding the contract, this error is not material and hence can not invalidate the contract.

Error in substantia, ie error is reacted to the characteristics or quality of the subject-matter of the contract. The mistake is considered non-material but merely incidental.

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Introduction to the Theory of Law & Law of Contract No. Misrepresentation Mistake If the parties believes that the goods is of certain quality, in that case the error is material and may affect the validity of the contract.

Error in quantity: if one party thinks that she has negotiated higher amount of money or more amount of quantity to be received under the contract, compare to what other party is thinking. This type of error is considered material and hence the contract may be considered void; but if both think contrary, the contract could be valid for lesser amount.

Error in persona: In this case one party makes mistake about the identity of other party. This error in general is not material and the contract will be considered valid,

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Introduction to the Theory of Law & Law of Contract No. Misrepresentation however if Mistake the identity makes

reasonable or substantial difference to the mistaken party the contract could be void.

Reasonable (Justus Error): For contract to be void, only material mistake is not enough, the mistake should be reasonable too that is the error is excusable in the

circumstances of particular case.

In case of Common mistake: False belief of party about certain state of affair, which is important for the contract, and if party would have known before, neither party would have concluded the contract. In this case too the contract is void ab initio. Mistake induced by misrepresentation: There are cases when mistake of one party is due to misrepresentation by other party. It the mistake is material

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Introduction to the Theory of Law & Law of Contract there will be no consensus and the contract will be void for mistake, if the requirement of reasonable is also met. But in case where the mistake is not material, the contract could be voidable for misrepresentation.

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QUESTION 4
What is meant by repudiation of a contract? What options are available to a party when the other party has repudiated?

ANSWER 4

Repudiation:
While stating about repudiation Bois et al (866:2011) states that:

A party to a contract commit this form of breach when, by his words or conduct, and without lawful grounds, he indicates to the other party an unequivocal intention no longer to be bound by the contract (or material part of the contract) or that he will not perform his obligations under it.

Hence repudiation mean a conduct or word by the party to the contract, through which he/she indicates incorrectly (as per contract) his/her intention to other party, that he/she is not going to perform his obligation under the contract, or he is not going to perform major part of the contract. Just refusal of a party not to execute the work is not considered as repudiation, there must be words and conduct that can reasonably be interpreted as anticipatory malperformance. The conduct could be that the parties denies the existence of the contract, or if the party carries out his/her performance, but not in accordance with the contract and then refuses to rectify the defects.

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Options available to party when other party has repudiated:

Innocent party has following options when other party repudiates:

1. Innocent party may choose to uphold the contract or 2. Cancel the Contract 3. Damage

1. Innocent party may choose to uphold the contract: The innocent party may elect to uphold the contract and expect the repudiated party to carry out his performance, but the innocent party after upholding the contract can not choose to terminate the contract. However if the guilty party again fails to perform, then this will be new breach and innocent party will have again option to elect for upholding the contract or canceling the contract and at the same time the guilt party will be in mora debitoris. Here it is important to note that till the repudiating party starts to perform, the innocent party do not have any obligation to perform his/her duty under the contract.

2. Cancel the Contract: Once a party repudiated the contract the innocent party may elect to cancel the contract, the party can not latter change his/her mind, once the contract is cancelled. The innocent

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Introduction to the Theory of Law & Law of Contract party must decide about her election within a reasonable time and then he has to inform the decision of cancellation to the guilty party. However the cancellation can only be opted by the innocent party when there is a clause exists in the contract based on which party can cancel the contract and/or if the repudiation is serious, such as even after upholding the contract at first repudiation, the party does not perform.

3. Damages: in both the above mentioned cases if innocent party can satisfy the requirement of damage, he/she entitled to claim the damage too. The innocent party can claim the damages for the loss incurred as a result of repudiation. Damages generally claimed together with other remedies, such as specific performance together with damage or cancellation of the contact plus damage. Example: If A and B signs a contract, where B will deliver the Car to A within one month of contract signature, and A will pay him Rand 40,000.00. A pays an advance on R 10,000.00 to B as per the provision of contract. However after 15 days of contract signature, during monthly meeting B clearly stated that he is not going to deliver the car as he think there does not exist a proper contract (though there exists a proper contract). Even after this repudiation, A gave further 15 more days to B for delivery. However B did not perform. In this case, A is entitled to cancel the contract as well as entitled for damage too. That is B need to return the advance paid

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Introduction to the Theory of Law & Law of Contract and may be interest for the duration B was keeping the money, as A could have earned interest on the same money for same duration, if he would not have paid to B. In this example A can cancel the contract after failure by B not to deliver the car even after extension of time to deliver (specific performance), and sue for damage together with cancellation.

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QUESTION 5
Name the remedies for breach of contract.

ANSWER 5

The remedies for breach of Contract available to innocent party is as follows: 1. Specific Performance 2. Cancellation of the Contract 3. Damages for breach of Contract

The above statement is supported by Merwe et al (380:2010):

The ordinary remedies for breach of contract are specific performance, cancellation and damages.

However Bhana, Bonthuys and Nortje (243:2010) describing the remedies available for breach states:

a) the exceptio non adempleti contractus b) specific performance c) cancellation and d) damages

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Introduction to the Theory of Law & Law of Contract . The remedies of the exception non adempleti contractus and specific performance aimed at fulfillment of contract while cancellation aim to terminate the contract.

These remedies are available only to innocent party not to the guilt party and the innocent party can elect either specific performance or cancellation but not both together, yes damages can be claimed alone or either with specific performance or cancellation, if applicable. If an innocent party is going to sue the guilt party for breach of contract, he/she must sue for all remedies he understand is applicable in that particular case that is cancellation together with damages or specific performance together with damages, this should not be claimed separately.

a) The exceptio non adempleti contractus: This is not a direct remedies but a defence. In certain circumstances the innocent party can withhold his/her performance in order to force the guilt party to perform. For example: If A signs the contract with B to supply a car for a price of R 40,000.00. Latter B does not delivers the car but ask for payment of R 40,000.00. Here A can use exceptio as a defence to Bs claim on the basis that till B does not perform (deliver the car), A do not have to perform, that is to pay R 40,000.00. However, the provision of exceptio can only be used if the contract is bilateral.

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b) Specific Performance: Specific performance of a contractual obligation require the party at default to perform as agreed in the contract or as directed by the court. If the performance is impossible, the court may direct cancellation and/or damage. Example: A signs a contract with B to supply a Car for R 40,000.00. A makes payment in advance of R 40,000. However B fails to deliver the car by the end of agreed time. A may sue B for specific performance, that is B to deliver the car. In case of any impossible performance or the party to contract become insolvent, the court can not grant specific performance. In addition in case of reciprocal performance, innocent party can only sue to guilt party if he himself has made complete and proper performance. As in case of above-mentioned example A has made his performance by making an advance payment and hence he has right to request the court for specific performance.

c) Cancellation: Cancellation is an extraordinary remedy available only in exceptional circumstances when the breach is material. Example: In case of the above-mentioned example of specific performance, B does not deliver the goods even after A sue him for specific performance, in this case, A is entitled to cancel the contract.

d) Damages: The innocent party can claim the damages for the loss incurred as a result of breach. Damages generally claimed together with other

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Introduction to the Theory of Law & Law of Contract remedies, such as specific performance together with damage or cancellation of the contact plus damage. Example: In case of the abovementioned example of specific performance, B does not deliver the goods even after A sue him for specific performance, in this case, A is entitled to cancel the contract as well as entitled for damage too. That is B need to return the advance paid and may be interest for the duration B was keeping the money, as A could have earned interest on the same money for same duration, if he would not have paid to B. In this example A can cancel the contract after failure by B not to deliver the car even after courts ordered to deliver (specific performance), and sue for damage together with cancellation.

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Introduction to the Theory of Law & Law of Contract

QUESTION 6
List 5 circumstances which may bring a contract to an end.

ANSWER 6

As Bois (829:2011) states that:

A contractual obligation is discharged by performance of the obligations or by merger, set-off, release, notice, novation, impossibility of performance, prescription, or insolvency and subsequent rehabilitation.

Hence with this we can note down the followings ways that the contract can end: 1. Discharge of performance 2. By Merger 3. Set-off 4. Release 5. Notice 6. Novation 7. Impossibility of Performance 8. Prescription 9. Insolvency and subsequent rehabilitation and one more added as 10. Judgment

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Introduction to the Theory of Law & Law of Contract Out of these 5 circumstances which may bring the contact to end has been described here: 1. Discharge of performance: 2. By Merger: 3. Notice: 4. Impossibility of Performance: 5. Judgment:

1. Discharge of performance: The Parties to contract perform their respective duty under the contract and by these way the contract comes to an end. Example: A signs contract with B to deliver the car for R 40,000.00 within 1 month duration with free servicing for 1 year. B delivered the car, A pays R 40,000.00 to B and B provide provided free serving for 1 year. Both parties has performed all their obligation stated under the contract, hence the contract comes to an end after 1 years of satisfactory serving provided by B.

2. By Merger: If creditor and debtor merges in to one company then the debt will be considered discharged automatically. Example: If Debtor and Creditor marries with each other in community of property.

3. Notice: The contract could be terminated by parties by giving notice to other party, the notice period could be what stated in the contract, and

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Introduction to the Theory of Law & Law of Contract if duration is not stated in the contract, either party may terminate the contract by giving a reasonable notice, unless in the contract it is stated or intended to continue indefinitely. The reasonable time could be enough time provided to other party, so that other party can take sufficient action to mitigate the damage as much as possible.

4. Impossibility of Performance: If due to change in circumstances it is impossible for the party to perform the contract, in that case the party is discharge from the performance. For example, A signs a contract with B, but after some duration a civil war started in the country. There is no chance of normalcy. Hence either party can not perform their task, hence the contract can be terminated and parties can be discharged due to impossibility of performance.

5. Judgment: If one party sues other party due to breach, by other party. The court order may be for cancellation of the contract, which ends the contract between the parties. Example: A signs contract with B to supply a car for R 40,000 but B fails to deliver on time, A again requested to deliver the goods within reasonable time, but B fails to deliver the car. A sue B, and the court order is to cancel the contract. The contract will end due to judgment of the court.

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Introduction to the Theory of Law & Law of Contract

BIBLIOGRAPHY

Act (1965). Arbitration Act 42 of 1965. South Africa: Government of South Africa.

Anonyms (Time not stated). Difference between Procedural and Substantive Law [online]. Website: www.taxlawpro.org. Available from:

http://www.taxlawpro.org/procedurallaw.html [Accessed18 may 2011]

Anonyms (2011). The Law and Practice of Arbitration. South Africa: Association of Arbitrators, Southern Africa

Bhana, Bonthuys and Nortje (2010). Business Transactions Law. 2nd Impression. South Africa: Juta Law

Bois, Bradfield, Himonga, Hutchison, Lehmann, Roux, Paleker, Pope, Merwe and Visser (2011). Willes Principles of South African Law. 9th Edition. South Africa: Juta Law

Butler and Finsen (1993). Arbitration in South Africa Law and Practice. South Africa: Juta & Co, Ltd

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Introduction to the Theory of Law & Law of Contract Constitution of Republic of South Africa [online]. Website: from: [Accessed 06 April

www.parliament.gov.za.

Available

http://www.parliament.gov.za/content/Constitution.doc 2011]

Kleyn and Viljoen (2011). Beginners Guide for Law Students. 4th Edition. South Africa: Juta Law

Kollberg v Cape Town 1967 (3) SA 472 (A)

Merwe, Huyssteen, Reinecke and Lubbe (2010). Contract General Principles. 3rd Edition. South Africa: Juta Law

Plessis and Hees (2009). An Introduction to Law. 3rd Edition. South Africa: Juta Law

Rules for the Conduct of Arbitration. Johannesburg: Association of Arbitrators Southern Africa.

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