FORMATION

OF A VALID
CONTRACT
CHAPTER 6
WHAT IS A
CONTRACT?
• is a lawful agreement made by two or
more persons within the limits of their
contractual capacities, with the serious
intention of creating a legal obligation,
communicating that intention without
vagueness to each other, and being of the
same mind as to the subject matter, to
perform positive or negative acts which
are possible of performance.
 1. Self-imposed formalities
a. Formalities for the creation of the
contract
FORMALITI b. Formalities for the variation of the

ES OF A c.
contract
Formalities for the cancellation of the
VALID contract
2. Statutory formalities
CONTRACT d. Written contracts
e. Signed by the parties
f. Signed by the witnesses
 • d. Notarial execution
• e. Registration
Examples of formalities imposed by
statute/legislation
1.The Alienation of Land Act requires the sale of
land (eg farm) to be in writing and the contract
CONT..... must be signed by the parties or their agents acting
on their written authorities.
The writing must describe the property sold to
enable it to be identified.
2. Lay-by agreement must be in writing and signed
by both parties. If not the parties may be liable for
an offence.
 • 3. An agreement to sell or to construct a
home must be in writing and signed by the
parties.
• 4. Long leases (ten years or more) must also
be in writing and be signed, stamped and
registered by a notary public.
CONT.... • 5. Credit agreements must be in writing or
stored electronically.
• 6. Suretyship contracts must be in writing
and must be signed by or on behalf of the
surety.
 A term of a contract describes the rights and duties
that the parties to a contract have agreed to.
A condition in a contract is a provision of the
agreement that affects its existence. It determines
TERMS AND whether or not there is a contract. If the condition if
fulfilled, it has an automatic effect.
CONDITION Terms of a contract may either be:
S OF A a. Expressed/Stated

CONTRACT b. Unexpressed
-Implied terms
-Consensual tacit terms
-Imputed tacit terms
Essential, Automatic and Additional terms of
Contract

The essential terms= of a e.g in a contract of sale, the

contract are the key terms parties must agree on the
These terms are also called
Essential that must be agreed on for delivery of the thing being
essentialia.
an agreement to be sold to the purchaser in
effective and binding. exchange of money/price.

Other terms arise

automatically by operation e.g in a contract of sale, the
These terms are also called
Automatic of law in the form of rights purchaser will have an
Naturalia.
and duties owed by the undisturbed possession.
parties to each other.
CONT...

Incidentalia/Additional

The parties might also agree on

additional incidental terms to govern
their contract. eg- payment will be
made to the following account: 12345.

These terms are also called Incidentalia.

 South African law recognises two types of
conditions that may apply to contracts:
1. Suspensive conditions
2. Resolutive conditions
CONDITION Either suspensive or resolutive conditions may be
S describes as:
3. Casual
4. Potestative
5. Mixed
SPECIAL CLAUSES IN A CONTRACT
1. Time clause
2. Supposition
3. Modus
4. Warranty
5. Indemnity clause
6. Penatly clause
7. Rouwkoop clause
8. Non-variation clause
CONT.....
9. Cancellation clause
10. Acceleration clause
11. Domicilium citandi et executandi
12. Notice
13. Jurisdiction
14. Arbitration
15. Costs
STRUCTURE OF A
TYPICAL CONTRACT
1. Identity of the parties
2. Recitals
3. Obligations of the parties
4. Term of the contract
5. Price
6. Payment terms
7. Representation and warranties
8. Liabilities
9. Termination of the contract
10. Miscellaneous clauses
 • Void contract-Legally never comes into
existence
VOID, • Voidable contract- It is legally binding on
VOIDABLE both parties but has a defect that allows a
party to choose whether or not to set the
AND VALID contract aside. Until that is done, however,
the contract remains legally enforceable.
CONTRACT • Valid contract- No flaws
S
• SEE TABLE 6.2 ON PAGE 109 (7TH ED)
THE END!!!!!!!

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