THE ESSENTIAL ELEMENTS IN THE FORMATION

OF A CONTRACT:

2. CONSENSUS: ABSENCE OF CONSENSUS

(Continued)

LECTURE 9
12 March
 1. Introduction

Progress 2. Requirements for a valid contract

2.1 Contractual Capacity
Map 2.2 Consensus – agreement
(a) Offer & Acceptance
(b) Absence of consensus
(c) Improperly obtained consensus

2.3 Legality – must be lawful

(a) General principles
(b) Impact of Constitution
(c) Specific topics

2.4 Possibility of performance at conclusion

2.5 Certainty - definite / determinable content
2.6 Formalities - if required (alienation of land)
3. Parties to contracts
 Absence of consensus

today :-
• common mistake
• ticket cases
• interface between common law and statute
 Common mistake
Hutchinson p 111

Distinguish :-

• unilateral mistake

• A is mistaken

• B knows and says nothing

→ dissensus - if mistake material = contract void

•  mutual mistake

– both parties are mistaken about other party’s intention

→ dissensus - if mistake material = contract void

 Common mistake occurs when :-

• both parties are in complete agreement

• each knows the other party’s intention and accepts it

→ consensus

BUT contract nonetheless void

• because both mistaken about

• fundamental (material) underlying fact

 Case study: common mistake
Dickinson Motors (Pty) Ltd v Oberholzer 1952 (1) SA 443 (A)
• Dickinson sold Plymouth A to Oberholzer's son on credit
• Dickinson later took judgment against the son and a writ of execution was issued
• when messenger of court served writ on son, nulla bona return issued which it was recorded that the son had said
that Plymouth A was in the possession of Oberholzer
• the son’s statement was false because
– the son had in the meantime bought Plymouth B from Alris Motors, also on credit
– by agreement with Oberholzer son had then swapped Plymouth B for Oberholzer’s Hudson
– the son had then sold the Hudson and Plymouth A to other parties
• messenger went to Oberholzer’s farm and attached and removed Plymouth B
• Oberholzer was told that if he paid Dickinson £291 (the sum of the son’s debt on the car), he could collected
Plymouth B from Dickinson
• Both Oberholzer and Dickinson were of belief that the car attached was Plymouth A, but it was in fact Plymouth B
• Oberholzer paid the sum to Dickinson and collected the Plymouth
• Alris had in the meantime also taken a judgment against the son
• Alris then went with the messenger of the court to Oberholzer and Plymouth B was seized and removed
• when mistake discovered, Oberholzer claimed back the £291 paid to Dickinson - argued no debt owed to him and
therefore, agreement to pay and secure return of car not valid
• Dickinson refused to repay the sum - contended agreement valid
 Dickinson Motors (continued)

The court held that :-

• there was a mistake common to both the parties
– the money was paid by Oberholzer to Dickinson
– under a common mistake
– in regard to a matter which was vital (i.e., material) to the
transaction
• both thought Plymouth B was Plymouth A
• i.e., mistake about subject matter of agreement
• if either of them had been aware of the true position, the
agreement to pay would not have been concluded
• Oberholzer was entitled to a refund of the amount paid
 Unsigned documents - the “ticket case”
Hutchinson p 250

What is the usual “ticket case”?

• you buy a ticket for something subject to express terms recorded elsewhere

– e.g., notice board, internet (e.g., car rental agreements; airplane tickets);
train tickets; bills of lading; etc.

– usually exemption clause (e.g., exclusion of liability for negligence)

• is a person bound by those terms?

– answer depends on whether the person ought reasonably to expect that

the “ticket” incorporates contractual terms
 Central South African Railways v McLaren 1903 TS 727

• the Court drew a distinction between

– documents which a person ought reasonably to suppose would
contain conditions, and
– documents which a person cannot reasonably suppose would
contain conditions
• the court held that in the case of a bill of lading or even certain
railway tickets
– any man accustomed to
• travelling and
• the usages of companies who carry passengers and goods
– would be taken to know that those documents usually contain
conditions
 Durban's Water Wonderland (Pty) Ltd v Botha and Another
1999 (1) SA 982 (SCA) at 991D - 992A
• Botha and daughter flung from a ride at Wonderland's amusement park -
injured – damages claim in magistrates court
– cause: mechanical failure in the machinery
• Wonderland denied liability :-
– disclaimer (exclusion clause) painted on window-pane at ticket office :
• “unable to accept liability or responsibility for injury or damage of any
nature whatsoever whether arising from negligence or any other cause
howsoever which is suffered by any person …”
• on evidence, disclaimer :-
– not directly in the line of vision at cashier's window but adjacent and
readily visible and legible
– could be read from about six paces away
 Durban's Water Wonderland (continued)

• three issues to be decided by magistrates court :-

– (i) whether the disclaimer was incorporated into the contract

governing the use of the park's amenities
– (ii) whether the disclaimer exempted Wonderland from liability for
negligence
– (iii) whether Wonderland had been negligent

• magistrates court found against Wonderland on all three issues

• on appeal, Durban Provincial Division

– found against Wonderland on issues (ii) and (iii)

– that finding rendered a decision on the first issue unnecessary
 Durban's Water Wonderland (continued)

On further appeal to the SCA, the court held :-

• if Botha had read and accepted the terms of the notices

– there would have been actual consensus

– she and daughter would have been bound by those terms

• if Botha had seen one of the notices

– and realised that it contained conditions relating to the use of the amenities

– and did not bother to read it

– there would similarly have been actual consensus on the basis that she would have
agreed to be bound by those terms

→ NOTE: I would rather say “constructive knowledge”, not “actual knowledge”;

and therefore “constructive consensus”
 Durban's Water Wonderland (continued)

on the evidence before the SCA, it held that :-

• Botha was aware that there were notices of the kind in question at

amusement parks

– BUT she did not admit to actually having seen the notices

• the court, therefore, had to enquire whether Wonderland was reasonably

entitled to assume from Botha's conduct by purchasing a ticket that she

had assented to the terms of disclaimer or that she was prepared to be

bound by them without reading them (negligence)

→ the answer depends upon whether what Wonderland did was

''reasonably sufficient'' to give notice of the terms of the disclaimer

 Durban's Water Wonderland (continued)

The SCA pointed out that :-

• The test for ''reasonably sufficient'' was in Central South
African Railways v McLaren held to be :-
– an objective test
– based on the reasonableness of the steps taken to bring
the terms to the attention of the customer
 Durban's Water Wonderland (continued)

The SCA continued and held that :-

• in this case notices were :-
– prominently displayed on both sides of the cashier's window

– at a place where one would ordinarily expect to find such notices containing
terms governing the contract (entered into by the purchase of a ticket)
• any reasonable person purchasing a ticket would have seen the notices
• the existence of such notice with such terms would not be unexpected by a
reasonable person
• on the facts Botha knew there were such notices at amusement parks
• the steps taken by Wonderland to bring the disclaimer to the attention of patrons
were reasonable
• the contract concluded by Botha was subject to the terms – Wonderland not liable
 See also the more recent SCA case:
Cape Group Construction (Pty) Ltd v Govt of the United Kingdom 2003 (5) SA 180 (SCA) at paragraph 22

• a party relying on terms as having been incorporated in a

contract may succeed
IF
• reasonably sufficient steps were taken to give notice of the
terms to the other party
 Rectification of a contract?
Hutchinson p 112

• Where contract does not reflect the common intention of the parties, it can be

rectified by them or by the court

• it is not the contract between parties itself that requires rectification

– the document incorporating the contract requires rectification because it does not

correctly reflect the contract

And see: Meyer v Merchant's Trust Ltd. 1942 AD 244 :-

• in order to obtain a rectification, it is sufficient to show that

– the parties had a common intention which they intended to express in a written

contract

but

– which through a mistake they failed to express in that written document.

The interface with statute law - the Consumer Protection Act
Hutchinson pp 99, 100, 458

Standard Bank of South Africa Ltd v Dlamini 2013 (1) SA 219 (KZD)
• Dlamini, a functionally illiterate Zulu speaker, bought a car from a
second-hand car dealer in terms of a credit agreement
– the dealer was the bank's agent to facilitate financing for the purchase of the
car

• four days later Dlamini returned the car to the dealer as it was
seriously defective
• he demanded a refund of his deposit
• the dealer refused the refund

• the bank's attorneys then issued summons against Dlamini

 Standard Bank of South Africa Ltd v Dlamini (continued)

the bank argued that :-

• the return of the car was a “voluntary surrender” in terms of the agreement
• the bank could, therefore :-
– sell the car and
– claim any shortfall between the contract and resale prices from Dlamini
• the agreement stipulated only that Dlamini could terminate the agreement :-
– within five business days of the date of the agreement
– on notice to the bank at a given fax number
– and return or tender the return of the vehicle
• Dlamini did not follow the manner of termination, therefore, there was no
valid termination but a “voluntary surrender”
 Standard Bank of South Africa Ltd v Dlamini (continued)
The court held that :-

•that the bank and its agents entered into a credit agreement without reading,

interpreting and explaining the material terms to Dlamini

•Dlamini did not know or understand those terms

•non-compliance with procedural formality would in those circumstances not lead to

the inference that Dlamini had terminated the agreement by a voluntary surrender

•the bank could not have misunderstood Dlamini's reasons for returning the defective

vehicle

•when Dlamini discovered that the bank's agent had sold him a defective vehicle he

was entitled to terminate the agreement an claim a refund in terms of in terms

s121(3)(a) of the National Credit Act, 34 of 2005

 Standard Bank of South Africa Ltd v Dlamini (continued)

• for lawyers and lay persons alike the form of the agreement was an
unappetising and formidable read

• for a labourer like Dlamini who did not read, write or understand English
there might as well have been no written agreement at all

• Dlamini’s failure to comply with a purely procedural obligation had not

been due to an unwillingness to comply, but rather an unawareness of
such an obligation

• the bank could not hold Dlamini bound to the agreement under the
common-law principles of caveat subscriptor and mutual consent
 Standard Bank of South Africa Ltd v Dlamini (continued)
• the agreement was skewed in favour of the bank and in breach of Dlamini’s
rights :
– the agreement did not record that Dlamini would be entitled to a refund
as required by the NCA
– Dlamini was not informed of the contents of the agreement (again, NCA)
• in an official language that he understood
• and in plain and understandable language

• the agreement distorted the balance created in the NCA in a way that was :-
– unlawful (in breach of statute) and

– defeated the purpose of the NCA

• these failures rendered the entire agreement unlawful – agreement set aside