Post on 20-Dec-2021
Define the terms “obligatio” and “contract”
Discuss the essentials of a valid contract
Discuss the consequences of “valid”, “void” & “voidable” contracts
Distinguish between the essentialia, naturalia and incidentalia
Define “iusta causa”
Discuss the rules of offer & acceptance
Discuss the ways in which offers terminate
Discuss when contracts by post, telephone & electronically are concluded
Differentiate between express & implied terms
Differentiate between suspensive & resolutive terms
Understand consensus & defects in will
Read Module 3 of study guide
Chapter 3,4 and 8 of General Principles of Commercial Law
Module 3 of Business Law for B Com (www.letslearnmore.weebly.com)
Obligatio – the legal relationship between parties to a contract when they acquire personal rights against each other
Contract – an agreement that creates a legally enforceable obligation ◦ “All contracts are agreements but not all
agreements are contracts”
Iusta Causa – just cause
Generally speaking, people are free to choose with whom and on what grounds they wish to contract with another
Consensus between the parties
Contractual capacity
Agreement must be legally possible
Agreement must be physically possible
Required formalities complied with
Each party must have serious intention to be bound to the contract
Common intention
Must make intention known to the other party
A valid contract is one that complies with all the requirements of a contract – it is enforceable
A void contract is a contract that actually does not come into existence because of some insurmountable problem – it is invalid.
A voidable contract is a contract that comes into being but can be set aside by the Court because of some flaw
Essentialia (essential terms) ◦ Those terms that are essential to a paryticular type of
contract; eg: the thing sold & the price are essentials in a contract of sale
Naturalia (residual terms) ◦ Those terms that are automatically implied by law; eg:
warranty against latent defects in contract of sale
Incidentalia (incidental terms) ◦ Those terms added by the parties or changes to residual
terms; eg: that delivery will only take place 30 days after payment
One party must have made an offer
The offer must have been communicated to the offeree
The offer must not have lapsed or been revoked
The offer must have been accepted in the prescribed manner
The offer must be accepted by an intended person
The acceptance must be communicated, and be: ◦ In the prescribed manner
◦ Within the prescribed time
◦ At the prescribed place
If the offer is only open for a certain period it will terminate at the end of that period if not accepted For example; “do you want to buy my bike for
R500? The offer is open until 15:00 tomorrow” – if the offer is not accepted by 15:00 tomorrow it will automatically fall away
If the offer is rejected by the offeree it will automatically fall away
If before the offer is accepted, the offeror informs the offeree that he is revoking the offer it will automatically fall away
If the offeror or offeree dies before the offer
is accepted the offer falls away
If the offeree does not accept the offer exactly as it was made but puts in a counteroffer the original offer falls away
Option giver makes an offer (substantive offer) & agrees to keep open for a period (the option)
If offeree accepts option the option contract comes into being allowing offeree to accept substantive offer within option period
Those issues specifically discussed & agreed upon by the parties during negotiations
Agreed orally or in writing
Can be included in a notice or a ticket for example
These terms are inferred from the surrounding circumstances ◦ Is the term necessary to give effect to the parties
intention – if so the Courts will read it into the contract even if the parties did not think about it
◦ Common law rules may apply to something
◦ Terms implied by trade usage
◦ Statutory terms
A condition is a type of term “which qualifies the operation of a contractual obligation in such a way that it is dependent on the taking place of an uncertain future event”
Vrancken et al, 2002 (67)
It is not certain when or if the event will take place
Two types of condition
The operation of the obligation (performance of rights & duties) is suspended or delayed until the uncertain future event (condition) takes place
◦ Eg: A agrees to employ B if she graduates at
the end of the year
The obligation comes into operation immediately (performance takes place) but if the uncertain future event (condition) is fulfilled the obligation will immediately terminate
◦ Eg: A agrees that B may use his car until he finds
employment. Once B is employed he must hand back the car to A
When parties in each others presence
◦ Information theory
Contract comes into being at the time acceptance communicated and at the place where parties are
Where parties not in each others presence
◦ By telephone – Information theory applies – contract comes into being at time & place when offeror becomes aware of offeree’s acceptance
◦ By post – Expedition theory – contract comes into being at time & place when offeree posts letter of acceptance
Mistake – contract void – provided: ◦ Mistake relates to fact, legal rule or principle
◦ The fact, rule or principle is material
◦ The mistake is also reasonable
Misrepresentation – contract voidable if: ◦ Untrue statement regarding existing fact or
condition
◦ Made by one party to the other
◦ Misrepresentation must be unlawful
◦ Misrepresentation must have induced (caused) the contract
◦ Can be intentional, negligently or innocent
Duress – unlawful threat of harm or injury causing other party to enter into contract
Voidable if: ◦ Actual or reasonable fear of physical violence or
damage
◦ Imminent or inevitable
◦ Unlawful
◦ By one party against another
◦ Causes party to contract
Undue Influence – improper or unfair conduct by a party to persuade other party to contract against their free will
Voidable if: ◦ One party exercises influence over another
◦ Influence used to weaken will / resistance
◦ Influence used to persuade other party to contract against own free will & to their disadvantage