STUDY GUIDE

LAW OF CONTRACT
LLB (Bachelor of Laws)
CCT3630

Centre for Open, Distance and e-Learning

Materials Development and Instructional Design Department
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Acknowledgements
The Centre for Open, Distance and eLearning Materials Development and Instructional
Design Department wishes to thank those below for their contribution to this study guide:

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 LAW OF CONTRACT

Contents
About this study guide 1
How this study guideis structured ..................................................................................... 1

Course overview 3
Welcome to The Law of Contract [ CCT3630 ].............................................................. 3

3
LAW OF CONTRACT CCT3630 ................................................................................. 4
Is this course for you? ....................................................................................................... 4
Exit Learning Outcomes ................................................................................................... 4
Timeframe ......................................................................................................................... 6
Study skills ........................................................................................................................ 6
Need help? ......................................................................................................................... 7
Assignments ...................................................................................................................... 7
Assessments ...................................................................................................................... 7

Getting around this study guide 9

Margin icons...................................................................................................................... 9

UNIT 1 10
Introduction to the Law of Contract ................................................................................ 10
1. What is a Contract?............................................................................................ 11
Characteristics .................................................................................................................. 11
2. Brief Historical Development of The Law of Contract. .................................... 12
Law of contract under Roman law ................................................................................... 12
Roman-Dutch law ............................................................................................................. 12
. ......................................................................................................................................... 12
Unit summary .................................................................................................................. 14
References ....................................................................................................................... 15

UNIT 2. 15
Contract within the Law of Obligations .......................................................................... 15
1. What is Private Law? ......................................................................................... 16
2. Contract and the law of obligations ................................................................... 18
3.Contract and Delict ............................................................................................. 18
4. Contract and Unjustified Enrichment ................................................................ 19
5. Contract and the Law of Property...................................................................... 19
Abstract theory of transfer of ownership .......................................................................... 19
Causal theory of transfer of ownership: ........................................................................... 20
 6. Contract and the Constitution: ........................................................................... 20
Unit Summary ................................................................................................................. 21

UNIT 3: 22
Basis of Contract ............................................................................................................. 22
1. Basis of Contract. .............................................................................................. 23
2. Theories of Contract Formation. ....................................................................... 24
......................................................................................................................................... 24
Will theory ........................................................................................................................ 24
Declaration theory ............................................................................................................ 25
Reliance theory ................................................................................................................. 25
3.The Namibian Approach .................................................................................... 25

Summary ......................................................................................................................... 28
References ....................................................................................................................... 29

UNIT 4 - 29
Rectification of Mistakes ................................................................................................ 29
Unit summary .................................................................................................................. 33
References ....................................................................................................................... 33

UNIT 5 35
Offer and Acceptance ...................................................................................................... 35
Introduction ..................................................................................................................... 35
1. Offer and Acceptance ........................................................................................ 36
2. Acceptance: ....................................................................................................... 37
Summary ......................................................................................................................... 39
References ....................................................................................................................... 39

UNIT 6 41
Pactum De Contrahendo & Option Contracts ................................................................ 41
Introduction ..................................................................................................................... 41
1. Pacta de contrahendo ......................................................................................... 42
2.The Oryx Mechanism ......................................................................................... 43
References ....................................................................................................................... 44

UNIT 7 45
Tenders ............................................................................................................................ 45
Introduction ..................................................................................................................... 45
1.Content: .............................................................................................................. 46
2.Definition of Tender: .......................................................................................... 46
3.Open Tendering. ................................................................................................. 46
4.Restricted Tendering........................................................................................... 48
5. Tender box: ........................................................................................................ 48
6.Types of calls for tenders.................................................................................... 50
 7.Two-Stage Tendering ......................................................................................... 50
1.The first procedure is as follows: .................................................................................. 51
(Advantages of the two-stage tendering process .............................................................. 51
Unit summary .................................................................................................................. 52
Reference: ....................................................................................................................... 53

UNIT 8: 54
Ticket Cases .................................................................................................................... 54
Introduction ..................................................................................................................... 54
1. General Description of Ticket Cases: ................................................................ 55
Other ticket cases include: ................................................................................................ 55
Doctrine in the ticket cases ............................................................................................... 55
Reasonable steps to draw attention to terms? ................................................................... 55
Facts in Forbes waterproofing v Government of UK case: .............................................. 56
‘8. LIMITATION OF LIABILITY ....................................................................... 57
Construction of the writing in faxed form ........................................................................ 58
Unit summary .................................................................................................................. 60
eferences .......................................................................................................................... 61

UNIT 9: 62
Improperly-Obtained Consent (Voidable contracts). ...................................................... 62
Introduction ..................................................................................................................... 62
1. General remarks ................................................................................................. 64
2. Misrepresentation .............................................................................................. 64
Different Types of Misrepresentation .............................................................................. 65
3.Duress: (In Latin, Meaning “Metus” (Fear). .................................................... 68
Requirements for duress ................................................................................................... 68
Duress and nature of coercion. ......................................................................................... 69
2- Duress (or Metus) ........................................................................................................ 69
4. Undue Influence ................................................................................................ 69
5. Commercial Bribery .......................................................................................... 71
6. Abuse of Circumstances .................................................................................... 72
Unit summary .................................................................................................................. 72

UNIT 10 74
Formalities....................................................................................................................... 74
Introduction ..................................................................................................................... 74
1. Formalities: General Rule .................................................................................. 75
 Unit Summary ................................................................................................................. 78
References ....................................................................................................................... 78
References ....................................................................................................................... 78

UNIT 11 79
Legality ........................................................................................................................... 79
Introduction ..................................................................................................................... 79
1 General observations .......................................................................................... 80

UNIT 12: 88
Possibility ........................................................................................................................ 88
Introduction ..................................................................................................................... 88
1.Introduction ........................................................................................................ 89

UNIT 13: 92
Contractual Capacity ....................................................................................................... 92
Introduction ........................................................................................................... 92
1. What is mental capacity? ................................................................................... 92
2.Legal capacity of natural persons and legal capacity of juristic persons............ 93
3. Limited contractual Capacity............................................................................. 94
4.Legal capacity of juristic persons. ...................................................................... 95
Unit Summary ................................................................................................................. 96
References ....................................................................................................................... 97

UNIT 14: 98
Contractual Certainty ...................................................................................................... 98
Introduction ........................................................................................................... 98
General comments ................................................................................................. 99
Unit Summary ............................................................................................................... 102
References ..................................................................................................................... 102

UNIT 15 104
Parties to Contracts ....................................................................................................... 104
Introduction ......................................................................................................... 104
1. Parties to Contracts .......................................................................................... 105
Contract of agency:......................................................................................................... 105
2.Stipulatio alteri: ................................................................................................ 105
Stipulatio alteri (Cont): ................................................................................................... 106
Delegation....................................................................................................................... 106
Cession: .......................................................................................................................... 106
 Unit Summary ............................................................................................................... 107
References ..................................................................................................................... 107

UNIT 16 109
Obligations and Terms .................................................................................................. 109
Introduction ................................................................................................................... 109
Overview of the Unit ........................................................................................... 110
....................................................................................................................................... 111
Introduction .................................................................................................................... 111
1.Obligations........................................................................................................ 111
Classifications................................................................................................................. 111
Reciprocal obligations .................................................................................................... 112
3.Other types of Obligations:............................................................................... 112
4.Terms ................................................................................................................ 113
5.Other Modern Classifications: .......................................................................... 113
Terms implied ex lege .................................................................................................... 114
Tacit terms ...................................................................................................................... 115
6. Kerr's classification: ........................................................................................ 115
7. Material terms .................................................................................................. 115
Conditions....................................................................................................................... 116
8. Fictional fulfilment of conditions. ................................................................... 117
Time clauses ................................................................................................................... 117
9. Other common contractual terms .................................................................... 117
Warranties....................................................................................................................... 117
Unit Summary ............................................................................................................... 118
References ..................................................................................................................... 119

UNIT 17 121
Interpretation of Contract .............................................................................................. 121
Introduction ......................................................................................................... 121
1. The Law Applicable To Contracts................................................................... 122
2. Primary Rules of Interpretation. ...................................................................... 123
Integration rule ............................................................................................................... 124
Where the rule excluding oral evidence does not apply ................................................. 124
3. Secondary Rule of Interpretation ..................................................................... 125
Textual context ............................................................................................................... 125
Broader context .............................................................................................................. 125
Surrounding circumstances ............................................................................................ 125
Criticism of parol evidence rule. .................................................................................... 126
Circumventing the parole evidence rule ......................................................................... 126
Other Canons of Construction ........................................................................................ 126
4.Tertiary Rules of Interpretation ........................................................................ 126
 When all rules are exhausted .......................................................................................... 127
Unit summary ................................................................................................................ 128
References ..................................................................................................................... 128

UNIT 18 129
Breach of Contract ........................................................................................................ 129
Introduction ......................................................................................................... 129
1. Forms of Breach .............................................................................................. 131
2. Prevention of Performance .............................................................................. 134
Unit summary ................................................................................................................ 135
References ..................................................................................................................... 136

UNIT 19 137
Remedies for Breach of Contract .................................................................................. 137
Introduction ......................................................................................................... 137
1-Specific Performance ....................................................................................... 139
2. Cancellation ..................................................................................................... 140
3. Damages .......................................................................................................... 141
4. Claim for Interest: ............................................................................................ 142
5. Market Damages ............................................................................................. 142
6. Other Remedies .............................................................................................. 143
Interdict........................................................................................................................... 143
Unit summary ................................................................................................................ 144

UNIT 20 147
Cession .......................................................................................................................... 147
Introduction ......................................................................................................... 147
1.Basic notion of Cession. ................................................................................... 147
There are two types of cession: ...................................................................................... 148
2. Cession in Roman-Dutch Law and in the Current Law of Namibia ............... 149
Basic principle: ............................................................................................................... 149
Who's who in this process? ............................................................................................ 149
3. The Problem with Cession .............................................................................. 150
4. More on Cession .............................................................................................. 151
Unit Summary ............................................................................................................... 160
References ..................................................................................................................... 161

UNIT 21: 162

1.Termination by Performance ............................................................................ 163
2. Termination by Agreement .............................................................................. 165
3.Termination through Novation ......................................................................... 165
4.Termination by Compromise: ........................................................................... 166
5. Termination by Operation of Law ................................................................... 166
Insolvency....................................................................................................................... 167
 6. Death ................................................................................................................ 168
Unit Summary ............................................................................................................... 168
References ..................................................................................................................... 169

UNIT 22: 170

Unjustified Enrichment ................................................................................................. 170
Introduction ......................................................................................................... 170
1. What is Unjustified Enrichment? .................................................................. 171
Enrichment ..................................................................................................................... 171
Forms of enrichment....................................................................................................... 172
....................................................................................................................................... 172

Unit Summary ............................................................................................................... 177

References ..................................................................................................................... 178

Unit 23 178
Drafting........................................................................................................................... 178
Commencement .............................................................................................................. 179
Nature and Recitals......................................................................................................... 179
Effective date .................................................................................................................. 179
Sequence of clauses ........................................................................................................ 179
Specific terms. ................................................................................................................ 179
General terms.................................................................................................................. 179
Structure and language ................................................................................................... 179
References. .................................................................................................................... 180
 LAW OF CONTRACT

About this study guide

Law of Contract CCT363 has been produced by the Centre for Open,
Distance and e-Learning.All study guides produced by the Centre for
Open, Distance and e-Learning are structured in the same way, as
outlined below.

How this study guideis structured

The course overview
The course overview gives you a general introduction to the course.
Information contained in the course overview will help you determine:

§ If the course is suitable for you.

§ What you will already need to know.

§ What you can expect from the course.

§ How much time you will need to invest to complete the course.

The overview also provides guidance on:

§ Study skills.

§ Where to get help.

§ Course assignments and assessments.

§ Activity icons.

§ Units.

We strongly recommend that you read the overview carefully before

starting your study.

The course content

The course is broken down into units. Each unit comprises:

§ An introduction to the unit content.

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About this study guide Introduction to the Law of Contract

§ Unit outcomes.

§ New terminology.

§ Core content of the unit with a variety of learning activities.

§ A unit summary.

§ Assignments and/or assessments, as applicable.

§ Answers to Assignment and/or assessment, as applicable

Resources
For those interested in learning more on this subject, we provide you with
a list of additional resources at the end of this study guide; these may be
books, articles or web sites.

Your comments
After completing LAW OF CONTRACTwe would appreciate it if you
would take a few moments to give us your feedback on any aspect of this
course. Your feedback might include comments on:

§ Course content and structure.

§ Course reading materials and resources.

§ Course assignments.

§ Course assessments.

§ Course duration.

§ Course support (assigned tutors, technical help, etc.)

Your constructive feedback will help us to improve and enhance this

course.

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 LAW OF CONTRACT

Course overview

Welcome to The Law of Contract

CCT3630
The Namibian law of contract in essence is still very similar to the
South African law of Contract. This branch of law is based on
Roman-Dutch law. Therefore, current Namibian law is essentially
“a modernized version of the Roman-Dutch Law”. The Roman-
Dutch Law of contract itself is rooted in Cannon and Roman laws.

In the broadest definition, contract is an agreement entered into

between two or more parties with the serious intention of creating a
legal obligation. Therefore, contract law provides a legal
framework within which persons can transact business and
exchange resources, secure in the knowledge that the law will
uphold their agreements and, if necessary, enforce them.

The law of contract is part of the branch of Private law called the
Law of Obligations. Alongside in this group are the other two
branches (the law of delict (law of tort in English terminology) and
the law of unjustified enrichment (law of restitution in English and
American terminologies).

PLEASE NOTE: All students must buy the prescribed book.

Hutchison D & Pretorius CJ (eds), The Law of Contract in
South Africa, 2nd Edition (2012), Oxford University Press of
Southern Africa, Cape Town. (ISBN: 9780199055111).

NOTE: There is a newer edition for this book now (3rd edition),
but the 2nd edition will still be used as the prescribed version, as
the 3rd edition may not yet be available in some centres. But
you can buy the 3rd edition if you see it in bookshops. They will
be used interchangeably.

Students are also provided with a “Casebook” (e-version), which

may also contain additional material such as Journal Articles. The
“Casebook” alongside the Book by “Hutchison & Pretorius, The
Law of Contract in South Africa,” are all prescribed material with
your “Course Manual for Distance Education”. So, you must
read these three sources together. (Most cases you will have to read
them more than once to understand the argument of the court).

3
Course overview Introduction to the Law of Contract

In your “Casebook” you will see the expression “cur. adv. vult”
(which is an abbreviation of the Latin expression “Curia advisari
vult” . This is a Latin legal term meaning "the court wishes to
consider the matter" (literally, "the court wishes to be advised"). It
is a term reserving judgment until some subsequent day. It often
appears in case reports, abbreviated as "Cur. adv. vult” (or c.a.v.).
It will be followed by the word “Postea” (plus a date), which
means “delivered on”. The combination of these terms indicate
that the judgment had been reserved for court deliberation after
arguments and it was delivered at a future date. Look at that
expression and that where the actual case from the Court starts.
Any summary you are given before that usually termed “headnote
: kopnota” isn’t the work of the court; it is the work of the
Reporter. As law student you must read the actual case delivered
by the Court, and not simply the summary of the Reporter. The
summary of the Reporter may not reflect the essence of the
decision and is usually incomplete; sometimes even inaccurate. It is
given to you for organization purpose only. In older cases, you are
also given the summary of the arguments presented by both
counsels before the expression “cur adv vult”. Occasionally I
deleted that “counsels’ summary argument” where it was too long.
Please note that we use interchangeably the South African and the
Namibian cases in this course as does still the High Court and
Supreme Court of Namibia in this field.

LAW OF CONTRACTCCT3630

Is this course for you?

No pre-requisites.

Exit Learning Outcomes

The exit learning outcomes for this course are:

. Students who complete this course should: (a) understand the general
principles of the law of contract — that is, the Namibian law and
statutory rules relating to enforceable agreements; (b) understand the
practical and social context in which those rules operate.

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 LAW OF CONTRACT

Exit Learning Outcomes

§ The course is designed to satisfy certain requirements of the Legal
Profession in Namibia regarding the knowledge expected of
applicants for admission to legal practice. It is not a simplified course
like law courses students take at Faculty of Commerce.

§ The course is designed to contribute to the development of the

following LLB graduate attributes in particular:
(a) a knowledge and understanding of the basic principles of the
primary areas of Namibian law as required to satisfy the academic
standards for admission to practice law in Namibia.
(b) the capacity to analyse, evaluate and synthesise information
from a wide variety of sources and experiences;
(c) an awareness of the incompleteness of law and the continuous
state of development of legal principles; and
(d) the development of critical thinking and problem solving skills.

§ Thus, in this course, students learn the art and skill of reasoning from
precedent and of applying underlying principle to new fact patterns.

§ Analyse and evaluate the nature and meaning of contracts, the

regulation of the form of contracts, and evaluate the impact of
legislation upon contract law.

§ Analyse and assess the nature and significance of the terms of a

contract, the differences between representations and terms, the
nature and significance of collateral contracts, the different types
of contract and the nature and operation of exclusion clauses
§ Evaluate, analyse and specify the different circumstances and
consequences that result in a contract being discharged; or
alternative, analyse the various remedies available when a
contract is breached, and apply to relevant case studies.
§

5
Course overview Introduction to the Law of Contract

Timeframe
This is a year course whose main exam is in October/November

This module is designed for distance education and there is very minimal
formal study. The bulk of it is self-study.
How long? As much as you can, you should try to spend about 4 hours per week to
digest the material. Do not leave your study at weekends or end of the
year.

Study skills
As an adult learner your approach to learning will be different to that
from your school days: you will choose what you want to study, you will
have professional and/or personal motivation for doing so and you will
most likely be fitting your study activities around other professional or
domestic responsibilities .

Essentially you will be taking control of your learning environment. As a

consequence, you will need to consider performance issues related to
time management, goal setting, stress management, etc. Perhaps you will
also need to reacquaint yourself in areas such as essay planning, coping
with exams and using the web as a learning resource.

Your most significant considerations will be time and space i.e. the time
you dedicate to your learning and the environment in which you engage
in that learning.

We recommend that you take time now—before starting your self-

study—to familiarize yourself with these issues. There are a number of
excellent resources on the web. A few suggested links are:

§ http://www.how-to-study.com/
The “How to study” web site is dedicated to study skills resources.
You will find links to study preparation (a list of nine essentials for a
good study place), taking notes, strategies for reading text books,
using reference sources, test anxiety.

§ http://www.ucc.vt.edu/stdysk/stdyhlp.html
This is the web site of the Virginia Tech, Division of Student Affairs.
You will find links to time scheduling (including a “where does time
go?” link), a study skill checklist, basic concentration techniques,
control of the study environment, note taking, how to read essays for
analysis, memory skills (“remembering”).

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 LAW OF CONTRACT

§ http://www.howtostudy.org/resources.php
Another “How to study” web site with useful links to time
management, efficient reading, questioning/listening/observing skills,
getting the most out of doing (“hands-on” learning), memory building,
tips for staying motivated, developing a learning plan.

The above links are our suggestions to start you on your way. At the time
of writing these web links were active. If you want to look for more go to
www.google.com and type “self-study basics”, “self-study tips”, “self-
study skills” or similar.

Need help?
For routine enquiries please contact the Student Support Department at
+264 61 206 3416.

For further assistance you can go to your nearest Regional UNAM

Help Centre.

Assignments
You are given 4 assignments in this module. They are already integrated
in your manual.

Please see tutorial letter for instructions on the submission of

assignments.
Assignments

Assessments
Course materials may have activities and/or self-assessment exercises to
check your own understanding of the material, but there are also tutor-
marked assignments/tests which you have to submit. Please see tutorial
letter for more details.
Assessments

7
Course overview Introduction to the Law of Contract

8
 LAW OF CONTRACT

Getting around this study guide

Margin icons
While working through this study guideyou will notice the frequent use
of margin icons. These icons serve to “signpost” a particular piece of text,
a new task or change in activity; they have been included to help you to
find your way around this study guide.

A complete icon set is shown below. We suggest that you familiarize

yourself with the icons and their meaning before starting your study.

Activity Additional Answers to Assessment

reading Assessments

Assignment Audio Casestudy Discussion

Exit Learning Feedback Group Activity Help

Outcomes

Prescribed Recommended
Note it!/Warning Outcomes Reading website

References Reflection Study skills Summary

Terminology Tip Video

9
UNIT 1 Introduction to the Law of Contract

UNIT 1

Introduction to the Law of

Contract

After completed this unit you should be able to :

§ explain the relationship of Contract with the Constitution as the

supreme law of the country.
Outcomes
§ describe an overview the historical development of the contract law.

§ explain how Roman- Dutch law is and the English law influenced the
Contract law .

§ explain the contract as a promise

§ describe the concept of obligations

Prescribed reading: (None) . The information given here in this

study guide should be enough.

OBS: You may however read some of the information in your

Prescribed reading prescribed text book , Hutchison & Pretorius, The Law of Contract
in South Africa (2012). Oxford Univ. Press; Chapter 1. But not
all of it is there.

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 LAW OF CONTRACT

1. What is a Contract?
A contract is a voluntary arrangement between two or more parties that is
enforceable by law as a binding legal agreement. Contract is a branch of
the law of obligations in jurisdictions of the civil law tradition.

Characteristics
A contract has certain characteristic features:
§ It is a juristic act. The law attaches the consequences intended by the
parties. The parties should be aware that they are creating a legal
obligation between them.
§ It is necessarily bilateral or even multilateral; a contract cannot be
unilateral. This means you cannot contract with yourself. Thus in
contract we always have at least party “A” and party “B” at the
minimum (bilateral agreement). There can be more than two parties
(that is why it can be multilateral).
§ It is an obligationary agreement. This means it creates “duties”. But it
also entails rights. The contract entails “undertakings” or
“forbearances”, on one or both sides, to tender certain performances:
that is, to give (dare), to do (facere) or not to do (non facere). “To
give” (dare) and “to do” (facere) are positive agreements. “Not to do”
(non facere) is a negative agreement. Alternatively, it may be a
warranty or that a certain state of affairs exists.

Usually a contract entails reciprocity (this means the rights and duties
flow both ways). In other words, one party's performance is promised in
exchange for the performance of the other party. (But note however, we
do not have the notion of “consideration” under Namibian law. In
essence, the notion of “consideration” entails that an exchanged promise
must be backed up by something of value. If you exchange a promise
where you get nothing of value, then under English and American law, it
is said that the contract lacks consideration, and therefore, under those
laws, such agreement would not count as a contract. An example of an
agreement lacking consideration is where your exchange is just
reciprocated by a “thank you”. You give something to someone, and that
someone does not give you anything of value in exchange, but just says
“thank you”).

The modern concept of contract is generalised so that an agreement does

not have to conform to a specific type to be enforced, but contracting
parties are normally required to conduct their relationship in good faith
(bona fides).

11
UNIT 1 Introduction to the Law of Contract

2. Brief Historical Development of The Law of Contract.

Our law of contract (like other branches of private law), essentially trace
their remote origins to Roman law and Roman-Dutch law. Thus, in
essence, this branch of law has more in common with the Civil-law of
Continental Europe than the Common law of England. Nevertheless, as
we introduced to you in the first year, we have a mixed legal system.
Over time, the law of contract was also influenced to some extent by
certain English principles in some few areas; but it is not the same as the
English law.

Law of contract under Roman law

Roman law that started more than 2000 years ago, recognised a
number of distinct contract types (example are: contracts consensu,
re, verbis and litteris). These contracts were binding only on the
parties if they were ‘clothed’ in special forms and formulas; in
other words, Roman law had ‘a law of contracts” (in plural), rather
than “a law of contract” (in singular)’. [We currently have the “law
of contract” (in singular)]. This Roman law feature of “law of
contracts” distinguishes it from the modern practice of regarding
any obligationary agreement meeting certain general requirements
as an enforceable contract. Under the old Roman law, only for
contracts consensu (example: sale, lease, partnership and mandate)
was mutual assent (consensus ad idem) ‘clothed’ in solemnities
sufficient to make the agreement enforceable. Any agreement that
did not rigidly conform to the four types mentioned above was
considered a “nudum pactum” (naked agreement) and was not
actionable unless there had been part performance. The
development of “contracts consensus” was impelled by the
commercial needs of the growing Roman state. But even at its
height, Roman law never reached the point of enforcing all serious
and deliberate agreements as contracts. Consequently Roman “law
of contracts” remained a fragmented area of law.

Roman-Dutch law

Although most European states did have their indigenous laws,

those laws were quite rudimentary compared to Roman law. Thus
with the advent of the first university in Bologna (Italy), [Bologna,
was the first place of study to use the term “universitas” for the
corporations of students and masters, which came to define the
institution located in Bologna, Italy. The University's cresttoday
carries the motto “Alma mater studiorum” and the date is year
A.D. 1088)], many European students used to travel to Bologna
and study law there. When they went back home, they took with

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 LAW OF CONTRACT

them the spirit of the Roman law. Thus, the first Dutch jurists, like
the French, Spanish, etc, were inspired by the Roman law. But
when they went back home, they infused this Roman law with their
local characteristics. For this reason, for the Netherlands, we call
the law they implemented and practiced as “Roman-Dutch law”.

In the area of contract law, the Roman-Dutch law of contract

recognised the “cannon-law” principle that all serious agreements
ought to be enforced (pacta sunt servanda). (Cannon-law was the
law of the “church’ in the Middle Ages). Adopting the canonist
position, all contracts were said to be an exchange of promises that
were consensual and in “good faith” (bonae fidei). Said differently,
contract is based simply on mutual assent and good faith. Under the
causa theory, for the contract to be binding it had to have a causa,
(reason or an underlying ground) or lawful contractual motive.
Thus under Roman-Dutch law influenced by the cannon-law, a
nudum pactum (naked agreement) was redefined as any agreement
unenforceable for lack of causa (lack of reason or underlying
ground or lack of lawful contractual motive).

Brief observations on the notion of “Causa” and

“Consideration”.

Under Roman-Dutch law influenced by the cannon-law of Middle

Age, the broad notion of causa was said to be necessary to create
obligations. This broad notion of “causa” could include love and
affection, moral consideration, or past services, among other things.
Thus under the original Roman-Dutch law, contractual
relationships required a “iusta causa” (reasonable cause or ground)
rising from a lawful or just right, title, or cause of action. For this
reason, for a contract to be enforceable, a party wishing to enforce
it had to show that such contract was based on a “iusta causa”, or
reasonable motive. In the absence of such “iusta causa”, the
contract would not be enforceable.

Lingering views that a “iusta causa” was still a necessary element

of contract during English rule over South Africa, then gave rise to
a celebrated dispute in early South African law, whether there was
an equivalent notion of “consideration” under South African law.

In the late 19th century, under the general influence of English law
‘and the particular dominating influence of Lord Henry de Villiers
CJ’, some South African courts reinterpreted “iusta causa” to mean
“valuable consideration” (causa lucrativa), as a “quid pro quo”
("something for something" or "this for that" in Latin), and
therefore necessary for a valid contract. This interpretation was
met with fierce resistance by jurists of the then Northern provinces
of South Africa (such as Free State and Transvaal) like the jurist

13
UNIT 1 Introduction to the Law of Contract

John Gilbert Kotzé. Thus, the notion of “valuable consideration”

was later rejected outright by the Transvaal Supreme Court in the
case Rood v Wallach (1904 TS 187). De Villiers, however, refused
to concede the point, so that the dispute continued until, almost 50
years after it began. This dispute was finally settled by the
Appellate Division in the case of Conradie v Rossouw (1919 AD
279). In this case the court took the view that a binding contract
may be constituted simply by any serious and deliberate agreement
made with the intention of creating a legal obligation, thus rejecting
the “consideration doctrine” of English law. Therefore, now in both
South Africa and Namibian law of contract it is clear that a iusta
causa (reasonable ground) in whatever form it might be clothed, is
not a separate requirement in our law of contract. Therefore, for a
contract to be valid, it must simply have been seriously intended by
the parties [as well as the other obvious elements such as it must
lawful and performable]; it is a matter of course [and] does not
need causa (or consideration) as an independent element’.

Unit summary
In this unit you learned

That a contract is an exchange of promises; or a voluntary assumption of

obligations that must be carried out.
Summary
You also learned what is the relationship between contract and the
Constitution of Namibia.

Again, you are now familiar with a brief historical development of

Contract law from the Roman law, the European Ius commune, through
Roman-Dutch and its reception into South Africa and eventually into
Namibia.

You also gained some insight into the English notion of “consideration” ,
but with clarity such concept is not part of our law of contract.

14
 LAW OF CONTRACT

References
Hutchison & Pretorius, The Law of Contract in South Africa
(2012). Oxford Univ. Press; Chapter 1.

Wessels, J W, The Law of Contract in South Africa. (1937) Buttherworths,

Durban.

Zimmerman R, The Law of Obligations: Roman law Foundations of the Civilian

Tradition, 1990, Juta, Cape Town.

UNIT 2.

Contract within the Law of

Obligations
After this unit you should be able to:

§ distinguish contract(s) from Delictual (tort) and Unjustified enrichment

actions.
Outcomes
§ differentiate action in rem from action in personam

§ explain the what other obligations are in law.

§ differentiate natural obligations from civil and moral obligations

15
UNIT 2.Contract within the Law of Obligations

§ explain how the three fields of the law of obligations interact.

Prescribed reading: Hutchison & Pretorius, The Law of Contract in

South Africa (2012), at Chapter 1.

Prescribed Cases:
Prescribed reading
Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers(Pty) Ltd 2012
(1) SA 256 (CC)= CASEBOOK” pages 1

Napier v Barkhuizen 2006 (4) SA 1 (SCA) =

CASEBOOK” pages 18

Barkhuizen v Napier 2007 (5) SA 323(CC) in your =

“CASEBOOK” pages 65 .

Contract law forms part of Private law, and within this private law,
contract law is part of the law of Obligations.

Note it! /
Warning

1. What is Private Law?

As you might have studied in your first year in the course introduction to
law, Private Law is a branch of the law that deals with the relations
between individuals (private individuals among themselves) or
institutions (such as banks, insurance companies, shops, etc), rather than
relations between these individuals and the government. Thus “Private
law” refers to the body of legal doctrines and rules that govern the
relationships between private individuals. It covers a number of key areas
of law: contracts, property, delict (torts), agency, law of persons,
unjustified enrichment (law of restitution), succession and family law,
among others.

16
 LAW OF CONTRACT

Within this vast group of subjects, there is a group called the “law of
obligations”.

The law of obligations is one branch of private law normally under the
civil law legal system and so-called "mixed" legal systems such as ours.
An obligation thus imposes on the obligor a duty to perform, and
simultaneously creates a corresponding right to demand performance by
the obligee to whom performance is to be tendered. The terms “obligor”
and “obligee” are sometimes replaced with the terms “debtor” and
“creditor”.

In Justinian's generic definition: "The obligation is a legal bond that

compels us to provide certain things according to the laws of our
country." Obligation as a legal relationship: The obligation (obligatio) is
a legal relationship between two parties, one of which is a creditor
(creditor) and the other debtor (debitor).

Thus the discussion of the law of obligations is normally divided into

three parts: the law of contract, the law of delict, and enrichment law
(sine causa enrichment). The first of these parts considers the creation
and the effects of contracts. The second part considers the liability of
personal fault, liability for the ‘actions of things’, liability for another
person’s action, special liability regimes, causation, and harm (in other
words the law of wrongs). The last part deals with unrequested
management of another person’s affairs, recovery of ‘undue payments’,
enrichment sine causa, and restitution as between parties to a failed
contract. In one word, the third part deals with the law of unjustified
enrichment.

Note however that there are other obligations. Here we have just a few
indicators:

Natural obligation - A natural obligation arises from circumstances in

which the law implies a particular moral duty to render a performance. It
may not be enforced by judicial action. However, whatever has been
freely performed in compliance with a natural obligation may not be
reclaimed, and a contract made for the performance of a natural
obligation is onerous.

An example of a natural obligation is an obligation that has been

extinguished by Prescription or discharged in insolvency proceedings.

Real obligation - A real obligation is a duty correlative and incidental to

a Real Right.

Heritable and Strictly personal obligation - An obligation is heritable

when its performance may be enforced by a successor of the obligee or
against a successor of the obligor. An obligation is strictly personal when
its performance can be enforced only by the obligee, or only against the
obligor.

There are also other obligation such as “Conditional obligation”;

17
UNIT 2.Contract within the Law of Obligations

“several, joint, and solidary obligations”; “conjunctive” and

“alternative obligations” and “divisible and indivisible obligations”.
These will be discussed later in the course, as part of course content in
semester two (See Unit on Terms and Obligations below).

2. Contract and the law of obligations

Contract law forms part of the law of obligations. An obligation is a legal
bond (vinculum iuris) between two or more parties, obliging the obligor
(the ‘debtor’) to give, to do or to refrain from doing something to or for
the obligee (the ‘creditor’). The right created by an obligation is personal,
a ius in personam, as opposed to a real right (ius in re) [real rights are
dealt with in the law of property or law of things]. Because a contract
requires ‘an obligor’ and an ‘obligee’, it is in essence a bilateral act.
Because the contract is a bilateral act (or multilateral), in essence it has at
least two parties “A” and “B” (or an ‘obligor’ and an ‘obligee’).
Sometimes the words ‘obligor’ and ‘obligee’ are replaced by the words
‘creditor’ and ‘debtor’. The words ‘creditor’ and ‘debtor’ apply not only
in respect of a claim for money, but to a claim for anything else that is
owed—whether unconditionally, conditionally, or in the future. If an
obligation is enforceable by action in a court, it is a civil obligation,
rather than the less common and unenforceable natural obligation.
[‘Natural obligation, is one which in honor and conscience binds the
person who has contracted it, but which cannot be enforced in a court of
justice’]. The most important point’, in discussing the legal effect of
contracts, is ‘the duty of the parties to perform their obligations’.

3.Contract and Delict

The primary sources of obligations are contract and delict, the latter being
wrongful and blameworthy conduct that harms a person. There is a close
similarity between a breach of contract and a delict, in that both are civil
wrongs and may give rise to a duty to pay damages as compensation. It is
unsurprising, then, that certain conduct may constitute both a breach of
contract and a delict (as when, in the case Van Wyk v Lewis (1924 A.D.
438), a surgeon negligently left a cotton swab inside a patient’s body), in
which case there is concurrent liability, permitting the plaintiff to sue on
either basis (either contract or delict).

According to Neethling et al (the Law of Delict (2006:3), a “delict” is

defined as an “act of a person that in a wrongful and culpable way causes
harm to another”. The elements of delict are: (i) Conduct, which means
an act or omission; (ii) Wrongfulness — according to Neethling et al,
‘‘wrongful’ may be expressed as unreasonable or legally reprehensible”;
(iii) Fault, which can be either intent or negligence; (iv) Causation, which
means that there must be a causal connection between the wrongful act or
omission and the damage suffered; and (v) Damage must be the result,
the test for which is “but for conduct of the defendant would the event
have occurred”.

18
 LAW OF CONTRACT

On the other hand, a “contract” is an agreement entered into between two

or more parties and has the effect of creating reciprocal obligations. As
will be seen in more details in subsequent units, its elements are
“consensus” (which is also known as the meeting of minds); contractual
capacity, formalities (where applicable); legality; certainty and
possibility.

4. Contract and Unjustified Enrichment

Another source of obligations is “unjustified enrichment”, which occurs
when wealth or benefits shifts from one person’s patrimony or asset to
another’s person’s patrimony or asset without legal justification. (Please
note here the emphasis is on “lack of justification” and not on the
‘unjustness of the act”). Where a party transfers an asset to another in
performance of a contract that is for some reason invalid, the shift of
wealth or benefits is without ‘legal ground’ (or sine causa), and an
enrichment action for the restitution (returning) of the asset lies.

Liability for an unjustified enrichment arises irrespective of wrongdoing

on the part of the recipient. The concept of unjustified enrichment can be
traced to Roman law and the maxim that "no one should be benefited at
another's expense" (nemo locupletari potest aliena iactura or nemo
locupletari debet cum aliena iactura). The enrichment of the ‘defendant’
(respondent) must have been at the expense of another, and currently in
our law, there must be ‘a corresponding’ loss to the plaintiff; and
obviously the defendant must have no defence why he was enriched.

We will cover in some extra detail the content on unjustified enrichment

at the end of the course, because so far UNAM LLB programme does not
have a stand-alone subject on unjustified enrichment.

5. Contract and the Law of Property

Many commercial transactions involve both the law of obligations and
the law of property, and so have both proprietary and obligationary or
contractual elements may occur at the same time. For example, a contract
of sale, obliges the seller to deliver the thing being sold to the buyer. As
such, the “contract of sale” is the causa (or underlying reason), for the
subsequent transfer of ownership of the thing sold. The contract of sale of
itself, however, does not effect the transfer, which is accomplished by the
real or transfer agreement (the concurring intentions of the parties to
make and receive transfer of ownership). If the underlying contract is
invalid, ownership nonetheless passes, because our law adheres to the
abstract rather than the causal system of transfer. The transferor,
however, generally has the option of a restitutionary action to recover the
property. Therefore this recovery will be done using the law of
unjustified enrichment, and not the law of property.

Abstract theory of transfer of ownership: according to this

theory the legal ground giving rise to delivery plays no essential role in
the transfer of property and as such it is irrelevant whether the causa is

19
UNIT 2.Contract within the Law of Obligations

defective or faulty. All that is required is a serious intention to pass and

receive ownership. The transaction must contain an obligation-creating
agreement. The said agreement comprises the reason for passing of
ownership and the real agreement in which consensus for transfer is
achieved. Whether or not the causa is defective, ownership passes if the
real agreement is essentially valid.

Causal theory of transfer of ownership: according to this theory

a valid underlying transaction known as the iusta causa is a pre-requisite
for the passing of transfer. Simply put, the causal theory lays down that if
the causa of the transfer of ownership is defective, ownership will not
pass, notwithstanding that there has been delivery in the case of movables
or registration in the case of immovable property with the non-palatable
result that a registered deed of transfer is cancelled and retransfer to the
real owner takes place.

6. Contract and the Constitution:

It is trite law that all things honourable and possible can be the subject of
a contract. The principle expressed in the maxim pacta sunt servanda
("agreements must be kept") remains the bedrock of the law of contract.
But with the advent of the Constitution, such principle, to some extent, is
no longer as sacrosanct as it used to be. In fact, well before the current
constitutional order, some inroads were already made. For example, the
statutory measures such as contained in chapter 2 of the Alienation of Land
Act 68 of 1981 and the Conventional Penalties Act 15 of 1962 predate the
present Constitutional order and much of that law was specifically aimed at
protecting purchasers of property against oppressive contractual clauses and
rouwkoop forfeitures. [(A ‘rouwkoop’ clause included in a sale agreement
provides for the purchaser to pay a deposit to the seller, which deposit
may be retained by the seller should the purchaser decide to withdraw
from the agreement. This does not constitute breach of the agreement, but
is a mechanism whereby the purchaser legally buys his way out of the
agreement.)].

While traditional contract law is based on established principles most of

them over 2000 years, the Constitution as the supreme law of the land, is
based on values, which include the idea of fairness. Therefore, the
interaction between the Constitution and the law of contract is bound to
create some misalignments or even conflicting norms. In this regards the
proper approach to the Constitutional challenges to contractual terms is to
determine whether the term is contrary to public policy, in particular
those found in the Bill of Rights. This approach leaves space for the
doctrine of pacta sunt servanda to operate, but at the same time allows
Courts to decline to enforce contractual terms that are in conflict with the
values of the Constitution even though the parties may have consented to
them. Put differently the Constitution applies indirectly to contract as
well (as it does in other areas of private law). When it does apply, we say
that the constitution applies horizontally to private law as well.

Please read the cases of Everfresh Market Virginia (Pty) Ltd v Shoprite
Checkers (Pty) Ltd 2012 (1) SA 256 (CC), Napier v Barkhuizen 2006 (4) SA 1
(SCA) & Barkhuizen v Napier 2007 (5 ) SA 323(CC) in your “Casebook”

20
 LAW OF CONTRACT

(pages 1, 18 and 65 respectively) for examples of the interaction between

the Constitutional order and Contractual norms. You can also read the
case Sasfin v Beukes 1989 (1) SA 1 (A) at page 504 in the “Casebook”.

ThefundamentalrightsandfreedomsguaranteedbytheConstitution,andconstitution
alprinciplesformtheobjectivevaluesapplicableinallareasoflaw.Theconstitutional
valuesalsodeterminetheprinciplesandgeneralaimsofprivatelawandthebasesforsha
pingvaluebeliefs.Therefore,fundamentalrightsandfreedomsandconstitutionalpri
ncipleshavetobetakenintoaccountintheinterpretationandapplicationofprivatelaw
provisions.Courtsoftenhavetoconsiderveryspecificindividualandconflictinginte
restswhen settling private law
disputes,andtheattainmentofajustsettlementcanbeextremelydifficult.
Forthesakeofajustsettlementofadispute,aninterpretationofprivatelawprovisionst
hroughthefundamentalrightsandfreedoms,orthedirectapplicationoftheConstituti
on,maybeinevitableinsuchacase.

Unit Summary
An example of a natural obligation is an obligation that has been
extinguished by Prescription or discharged in insolvency proceedings.

Real obligation - A real obligation is a duty correlative and incidental to

a Real Right.
Summary
Heritable and Strictly personal obligation - An obligation is heritable
when its performance may be enforced by a successor of the obligee or
against a successor of the obligor. An obligation is strictly personal when
its performance can be enforced only by the obligee, or only against the
obligor.

21
UNIT 3: Basis of Contract

UNIT 3:

Basis of Contract

After you finished this unit, you should be able to :

§ explain the notion contract entails an exchange of “promises”

between two parties.
Outcomes
§ highlight the necessity of freedom when entering into a contractual
obligation.

§ explain genuine consent or apparent consent form the basis for a

contract

§ explain the meaning of “iustus error” and the various theories in

formation of contract

22
 LAW OF CONTRACT

Prescribed Reading: Hutchison & Pretorius, The Law of

nd
Contract in South Africa, 2 Edition- Chapter 1 & 3. In this unit,
please read chapter 1 and 3 together.

Prescribed reading You must also read the following cases: All cases deal with
different manifestations of consent and/or mistake.

Please note that you should spend about 2 to 3 weeks in this unit.

Trollip v Jordan 1961 (1) SA 238 (A)

Page 96 Casebook
George v Fairmead 1958 (2) 465 (A).
Page 74 Casebook
Spindrifter v Lester Donavan 1986 (1) SA 303 (A).
Page 82 Casebook
Humphrys v Laser Transport Holding 1994 (4) SA 388 (C) .
Page 125 Casebook
Scheffer v Institute for management 1997 NR 50 (HC).
Page 115 Casebook
Sonap Petroleum v Pappadogianis 1992 (3) SA 234 (A).
Page 172 Casebook
Spenmac (Pty) Ltd v Tatrim CC 2015 (3) SA 46 (SCA).
Page 108 Casebook.
Brits v Van Heerden 2001 (3) SA 257 (C).
Page 144 Casebook.
Brink v Humphries & Jewell 2005 (2) SA 419 (SCA).
Page 234 Casebook.

1. Basis of Contract.
Our law of contract has dual basis: “genuine consent” and “apparent
consent”.

Genuine consent is “subjective”, while apparent consent is “semi-

objective”.

Actual subjective agreement

Genuine agreement (or consensus) as the basis for contractual
obligations, presupposes an actual ‘mutual assent’ of the parties.
Subjective consensus of this nature exists when all the parties

23
UNIT 3: Basis of Contract

involved:

§ Seriously intend to contract (animus contrahendi);

§ Are of one mind (or ad idem) as to the contract’s material terms; and
§ Are conscious of the fact that their minds have met.

Objective agreement
Where there is a divergence between the true intention and the
expressed or perceived intention of the parties, the question of
whether or not a legal system will uphold a contract depends on its
approach to contract: Is it subjective (focused on an actual
consensus), or is it apparent or objective (focused on the external
appearance of agreement)?

Thus the issue of “apparent consent” only arises where there is

allegation of some kind of mistake.

Because of the possibility of mistake in contract, then we have

different theories in the formation of contract.

2. Theories of Contract Formation.

(Note the difference between these three theories and the four
theories that will be referred to in the unit on Offer and
Acceptance).

Note it!

Will theory

The will theory of contract postulates an extremely subjective

approach to contract formation, whereby consensus is the only
basis for contractual liability. The upshot of this theory is that, if
there is no genuine concurrence of wills, there can be no contract. It
is generally agreed, though, that an unqualified adherence to this
theory would produce results both unfair and economically
disastrous. The basis of this theory goes back to Roman law. For
parties to be bound under contract, they must have genuinely
intended to be bound.

24
 LAW OF CONTRACT

Declaration theory

The declaration theory, in contrast, stipulates that the only

important consideration is the external manifestation of the parties’
wills. The true basis of contract, then, is to be found in the
concurring declarations of the parties, not in what they actually
think or intend. This extremely objective approach has also
generally been found to be unacceptable in practice, unless it is
qualified.

Reliance theory

In terms of the compromise ‘reliance theory’, the basis of contract

is to be found in a reasonable belief, induced by the conduct of the
other party, in the existence of consensus. This protects a party's
reasonable expectation of a contract. The reliance theory should be
seen as a supplement to the will theory, affording an alternative
basis for contract in circumstances where the minds of the parties
have not truly met.

Please note that the ‘declaration theory and reliance theory’ are
only relevant if there is allegation of mistake. If no mistake is
alleged, then normally we have the will theory (genuine consent) as
the foundation of contract. But even when there is allegation of
mistake, the court may still apply the will theory after evaluating
the full spectrum of the facts. For example, in Spindrifer v Lester
Donovan case, there was allegation of mistake; but the court
applied the ‘will theory’ in order to found the contract to be invalid
from the beginning due to differing minds as to the nature of the
agreement between the parties.

3.The Namibian Approach

Both the Namibian and the South African laws, with their Roman-Dutch
roots, but strongly influenced by English law, had at some point
vacillated between a subjective and an objective approach to contract. At
some point, for example, Judge Wessels statement in South African
Railways and Harbours v National Bank of South Africa Ltd 1924 AD 704 at
715 Wessels JA stated:

“The Law does not concern itself with the working of the
minds of parties to a contract, but with the external
manifestation of their minds. Even therefore if from a
philosophical standpoint the minds of the parties do not meet,
yet, if by their acts their minds seem to have met, the law
will, where fraud is not alleged, look to their acts and assume
that their minds did meet and that they contracted in

25
UNIT 3: Basis of Contract

accordance with what the parties purport to accept as a record

of their agreement. This is the only practical way in which
Courts of law can determine the terms of a contract.”

This statement created the impression that we had an objective approach

in the law of contract. But a clear scrutiny of the sources and working of
the law does not support a purely objective approach.

It is now clear, however, that the subjective will theory is the point of
departure; in cases of dissensus, the shortcomings of that theory are
corrected by an application of the reliance theory.

4.Divisions of Mistakes:
Material mistakes and Non-material Mistakes.

Mutual mistakes and Common mistakes

Unilateral mistakes.

Subdivision of mistakes according to categories:

“Error in substantia”; “error iuris”; “error in motive”, “error in

corpore”; “error in negotio”; “error in personam”.

Please read chapter 3 in Hutchison & Pretorius, The Law of South

Africa, 2012 2nd ed.

Alongside reading this chapter, read also the cases mentioned

above at Unit 3.

Description of the above errors:

Error in substantia (= mistake about qualities or attributes of the

object)

Error iuris (=Mistake about the law governing the contract)

Error in motive (= Mistake about the reasons or intention for

entering the contract)

Error in corpore (=Mistake about the object of the contract)

Error in negotio (=Mistake about the nature of the agreement or the

juristic act).

Error in personam (=Mistake about the person with whom one is

contracting).

26
 LAW OF CONTRACT

“Privity of Contract” = (only parties that have agreed to the

contract incur liability to that contract).

Contract creates rights and duties. The parties to a contract are

called “creditor” and “debtor”. They may also be referred to by
various descriptions such as “obligor” and oblige”; “offeror and
offeree”, etc. These other descriptions depend on the context of the
discussion.

6. Proving the Existence of a Contract

The onus of proving the existence of a contract rests on the person
who alleges that the contract exists.

MODEL CASE DISCUSSION & ANALYSIS: TROLLIP V

JORDAAN.

Trollip v Jordaan 1961 (1) SA 238 (A)(Casebook page 96).

Please read the full case provided to you in the reader. This is just a
summary of the case.

Plaintiff and respondent had decided to enter into a contract of sale of

farm. Respondent was the owner of the farm, and plaintiff the intended
buyer. Plaintiff was interested in the business of making paper.
Respondent employed an agent, as is normal for sale of immovable
property. Nevertheless the seller had in a written form, clearly established
that he and his agents were not making any representations. On the day
of showing the farm, respondent’s agent took the plaintiff to the farm.
When they got there, they stood at certain elevation in the farm and the
agent with his fingers pointed out to the plaintiff the other boundaries of
farm. This farm and the neighouring farm had pine trees. The extent of
the forestation with pine trees was estimated to be more than 100 000
trees. Both farms had forestry, but the neighouring farm seems to have
more forestry than Jordaan’s farm. After this event, the agent and the
plaintiff returned to town and they met with the owner. Plaintiff and
respondent had met again for several occasions after the first meeting. All
papers pertaining to the farm (diagrams with dimensions, etc) were
presented to the buyer. After the deeds registry process run its course
(passing several weeks), plaintiff went now to take possession of his
farm. At this stage he discovered that not all the ‘densely forested part of
the farm that was allegedly pointed to him, formed part of the farm. Thus
the farm looked smaller than he initially had thought.

Then plaintiff instituted a claim asking the court to declare the contract
null and void on the ground of “error in corpora”. He alleged that due to
the plaintiff’s agent having pointed out the ‘wrong boarder’, he was

27
UNIT 3: Basis of Contract

misled to believe that the farm he was buying was bigger and he if he had
known the facts before he would never have contracted.

The court, after hearing evidence, reasoned that in such a case, the
alleged mistake (the size of the farm and the quantity of trees in it) was in
our law an “error in substantia” (error about the qualities and attributes
of the object); but not an ‘error in corpore’. Trollip bought the same
farm he exactly intended to buy. It was just small than he thought. Again,
in these scenario, only the plaintiff was mistaken (thus a unilateral
mistake). Because the alleged mistake in our law is not a material mistake
(unless other qualifications are met); then, such mistake would not render
the contract void. Although there was a mistake, such mistake does not
go to the heart of the contract itself. And if the mistake does not go to the
heart of the contract itself, then such contract can only declared to be
voidable at the instance of the aggrieved party, but it is not void.
Therefore, the court concluded that Trollip was bound by his contract, as
there was an apparent meeting of minds, despite the alleged mistake.

In this case, the court implicitly made use of the reasonable reliance
theory; a theory which says that if a mistake if alleged in the formation of
contract (thus discounting from the outset the possibility of genuine
meeting of minds); the court will look a several factors to determine
whether the parties’s minds have met. Among such factors are, whether
the party alleging mistake acted reasonably; whether the party
ascertaining the contract could have said to believe that the contract
denier was binding himself; and whether any reasonable person in the
position of the plaintiff would have acted as the plaintiff did.

Because no reasonable person could have acted as Trollip did, then the
court cannot protect a person who is entirely negligent given the wide
opportunity to ascertain the extent of the farm. Because the papers had
the correct measurements of the farm, and the buyer had had access to
these papers well before ultimate transfer took place; the court could not
protect the plaintiff. Thus the court declared the contract to be valid and
that Trollip was bound by the liabilities arising from that contract.

Summary
In this unit you learned :

After study in this unit you will be familiar with the various theories in
the formation of contract: Will Theory, Declaration theory and reliance
Summary
theory. Knowing these theories is just a first step; but you will first
understand that in Namibia we use the will theory as starting point.
Where there is no allegation of mistake, the will theory suffices to justify
the contract. However, if a mistake is alleged, then some elements of the
“declaration of the will” as expressed in acts, words, or action of the
parties may be considered. But because it becomes very unreliable and it
shakes the foundation of the contract itself, the courts will look at the
reasonableness of the alleged mistake. Therefore, the outcome is that the

28
 LAW OF CONTRACT

courts in essence apply a reliance theory where they affirm a contract in

which a mistake was alleged. If the contract is not affirmed, we say that
the alleged error was a “iustus error”.

You also learn to differentiate the various types of mistakes. Not all
mistakes will invalidate a contract. Only mistakes that go to the heart of
the contract will invalidate the contract. For other mistakes, the contract
is valid, but it is voidable at the instance of the aggrieved party.

References
Hutchison & Pretorius, The Law of South Africa, 2012 2nd ed,
chapter 3.

Kerr A J, The Principles of law of Contract, 3rd Edition, Chapter 1

and 2.

Christie, RH (2006). The Law of Contract in South Africa, 5th edition (5th
ed.). LexisNexis/ Butterworths., Chapter 1, 2, 3.

D Hutchison and F du Bois “Contracts in General” in F du Bois (ed.)

Wille’s Principles of South African Law 9 ed (2012) 733-887.

UNIT 4 -

Rectification of Mistakes

29
UNIT 4 - Rectification of Mistakes

Introduction

In this unit you will learn that some mistakes in contract can be rectified.

You will learn that when a mistake in contract is rectified, it means the
parties mind did meet, but the expression of that mind in the instrument
was wrong.

You will learn that the actual contract of the parties is not the instrument,
but the what the parties intended when entering into the agreement.

After you studied this unit, you should be able to:

§ explain what happened when one rectifies a mistake in the contract

Outcomes § explain the autonomy of courts to make contracts

§ dscribe what happened if the parties minds did not meet

§ elaborate the concept of “parol evidence rule

Brits v Van Heerden 2001 (3) SA 257.

Mounton v Hanekon 1959 () SA 35.

Prescribed reading Aswegen v Fourie 1964 (3) SA 94.

Humphrys v Laser Transport Holdings Ltd and Another 1994 (4)

SA 388 (C).

Introduction

30
 LAW OF CONTRACT

Rectification is available where parties had a particular intention

and, by mistake, that intention was not properly reflected in the
document recording their contract. The purpose of rectification is
to make the document conform to the true agreement of the parties.
The court is not there to make the agreement between the parties;
the court is only called upon to give effect to the agreement of the
parties themselves. This is normally known as the rule of party
autonomy.

It is established fact in our law in principle that rectification is

available for a unilateral mistake (i.e. where one party makes a
mistake which the other party knows about) even though a contract
contains an entire agreement clause. The Courts have had several
opportunities to consider the ability of a court to rectify a mistake
in a contract despite the existence of an entire agreement clause in
that contract. See for example Humpies v Laser Transport 1994
(4) SA 388 [C] - (Casebook page 125).

1.Rectification
Rectification is a process that allows a party, under certain
conditions, to amend the contents of the original document to
reflect the original common intention. One may bring to this
process extrinsic evidence, including negotiations, to convince the
court to order the document's rectification. In cases where the
contract must be written in order to exist, the parol evidence rule
applies.

dAlthough this would suggest that the document cannot be rectified

by order of court, case law shows that rectification is normally
accepted where the common intention of parties differs completely
from the written text. Thus, this is not a court making the contract
for the parties, but simply the court given effect to the true
intention of the parties.

The typist in Humphries v Laser Transport (Casebook page 125)

had stated that the parties were joining their activities and that the
“joining manager from the insolvent company” would not compete
in the business of selling furniture for two years. In this case, both
parties were clearly agreed that their business was for oil rigs, and
not to sell furniture. Because that was the mistake of the typist, the
court granted an order for rectification of the contract. In American
law, rectification is called “reformation of contract”. And it is
expressed as “Contract reformation is a specific type of remedy for
cases involving contract disputes. Reformation means that the court
allows the parties to rewrite a portion of the contract so that it
reflects the parties' original intentions more closely”. So the

31
UNIT 4 - Rectification of Mistakes

meaning of “rectification” in our law also means the court “allows

the parties to rewrite a portion of their contract in order for it to
reflect their original intention”.

Read the other cases given to you that deal with similar issues at
the beginning of this unit.

Please note that in Humphries v laser Transport Holdings the court

deals with two different issues: Rectification and Severance. For
this Unit only rectification of contract is important.

“Severance” in contract means to cut (removing) parts of that

contract in order to save the contract from invalidity. Thus in this
way the contract remains in effect after removing parts of it.
Severance may be used, for example, where the contract contains
an illegal clause. This is only possible where (1) the agreement
contains more than one part, (2) you can comply with some clauses
and parts and disregard other parts, but without altering the original
intention of the parties. Thus, by severance (3) a substantial life is
left in the contract, and (4) there is no opposition to what remains
in the contract between the parties.

For example in Humphries case, a restraint of trade clause stated

that one party could not open a similar business after leaving the
company for two years in several regions, which included the
Western Cape Province in South Africa, where the business was
based, as well as the whole South Africa, Lesotho, Botswana,
Namibia and Swaziland. Because the geographical extent of this
clause was too wide, the court “severed” (cut or removed) all other
regions of South Africa, except Western Cape Province. It also
removed all other countries mentioned above, Namibia, Lesotho,
Swaziland and Botswana. Thus, the parties had agreed a non-
competition clause within certain geographical area, and that was
given effect by the court. It was reasonable for a party not to
compete within Western Cape Province, but it was unreasonable to
include in the contract all other regions of South Africa as well all
neighouring countries. In this way, the purpose of the contract was
still achieved as the parties had intended it. Note however that with
“severance”, the court is actively “re-writing” the contract, while
with rectification, the court is not re-writing the contract, but
simply giving effect to the parties’ intention not properly recorded
in the written contract. In any event, the court will also not engage
in “severance:” of contract if doing so would alter the significance
of the original contract or it would prejudice one of the parties to

32
 LAW OF CONTRACT

the contract. If that would be the case, the court will simply
declare the contract invalid.

Unit summary
In this unit you learned :

That Rectification is a process that allows the parties, under certain

conditions, to amend the contents of the original document to
Summary reflect the original common intention of both parties. This can
only be achieved if it is clear from both parties and the court that
the instrument is wrong, but the parties are at idem in their
intention.

You also learned that rectification is called “reformation” in

American law, and that the court is not re-writing the contract, but
simply giving effect to the parties’ intention not properly recorded
in the written contract.

You were also introduced to the notion of ‘severance’ which must

clearly be distinguished from the concept ‘rectification’. When the
court ‘severs’ a clause in a contract, in effect it is re-writing the
contract for the parties. Courts will only do that if the original
intent of the parties will not be altered.

References

33
UNIT 4 - Rectification of Mistakes

Richard Zimmermann; Daniel Visser, eds. (1996). Southern Cross: Civil

and Common law in South Africa, Oxford University Press.
Van der Merwe, SW; LF van Huyssteen; MFB Reinecke; GF Lubbe
References (2007). Contract: General Principles (3rd ed.). Juta &
Company, Ltd.
Reinhard Zimmermann (1996) The Law of Obligations: Roman
Foundations of the Civilian Tradition, Oxford University Press.

Hutchison & Pretorius, The Law of South Africa, 2012 2nd ed,
chapter 3.

34
 LAW OF CONTRACT

UNIT 5

Offer and Acceptance

Introduction

§ outline the process how contracts are started including the concept of
offer and acceptance.

§ § explain the notion of mirror-image between offer and acceptance.

§ Outcomes
§ highlight the notion of offer directed at the population at large.

§ explain theories applicable when the contracting parties are in absentia of

each other

§ describe the problems associated with contract formation in internet age.

35
UNIT 5 Offer and Acceptance

Prescribed reading: Hutchison & Pretorius, The Law of Contract in

South Africa”, Chapter 2.

Prescribed cases: (You must read the following cases):

Prescribed reading
Stein v LSA Motors 1994 (1) SA 49 (A).
Casebook Page 179

Novartis v Maphil Trading (Pty) Ltd 2016 (1) SA 518 (SCA). Casebook,
page 190

Cape Explosive Works v SA Oil Fat Industries 1921 CPD 244 (Not in
casebook, information in Book is sufficient).

The Article by “ Jorge A & Usebiu L “Liability in Contract in Electronic

Transactions under South African and Namibian Law” (2014) in Sylvya
Kierkergaard (ed) Information Ethics and Security: Future of
International World Time” pp 167 -178) at the end of your “Casebook, at
page 862” must also be read here.

1. Offer and Acceptance

The rules of offer and acceptance constitute a useful, but not essential,
analytical tool in understanding the formation of contracts.

Originally under Roman law, for a contract to be valid, one person had
formalistically to ask a question:

Question: “A” - Do you accept to do so and so? Answer: “B” – Yes, I

accept?

Only after such pronunciation was the contract valid.

With the passage of time such formalistic requirement was dispensed

with. But still essentially, most contracts still entail an offer and
acceptance.

Offer

An offer is a statement of intent in which the offeror expresses (to the

person to whom the offer is conveyed) the performance and the terms to
which he is prepared to bind himself. Being a unilateral declaration, an
offer does not in itself give rise to a binding obligation. For an offer to be
valid, it must be: (i) Definite; (ii) Complete; (iii) Clear and (iv) certain.

An offer lapses if: (i) The offeree rejects the offer; (ii) The offeror
revokes the offer and (iii) Either party dies; (iv) The offer may also lapse
though the passing of time. Obviously the offer also lapses if it is

36
 LAW OF CONTRACT

“accepted”. The offer lapses through the passing of time if the period
prescribed by the offeror expires, or—in the absence of a prescribed
period—a reasonable amount of time has elapsed.

The following elements may also be indirectly be applicable in Namibia.

Thus far, Namibia does not have a single “Consumer Protection Act”,
like South Africa. But it does not mean our consumers are not protected.
It simply means for us to apply the Consumer protection, we have to look
in several legislations in different sectors of businesses. Nevertheless the
offer and acceptance obtained though a negative “negative option
marketing” and “bait marketing” are also not acceptable in Namibian law.

An offer is usually directed at a definite person or persons, but it may also

be directed at undefined persons. An advertisement does not generally
constitute an offer; it qualifies merely as an invitation to do business,
although a promise of reward is a form of advertisement that does
constitute an offer. The status in this regard of proposals and tenders is
contingent on the intention of the parties, which is in turn determined by
the circumstances of each individual case.

Offers and acceptances also occur at auction houses: In that situation one
must distinguish between simple auction, auction subject to condition
without reserve and auctions subject to conditions with reserves; At a
simple auction, not subject to conditions, the bidder is construed as
making the offer. At an auction without reserve, the potential purchaser is
construed as making the offer; at an auction subject to conditions with
reserve price, the auctioneer is construed as making the offer. An auction
subject to conditions is construed as two potential contracts: The first
binds the parties to the auction conditions, while the second constitutes
the substantive contract of sale.

2. Acceptance:
An acceptance is an expression of intent by the offeree, signifying
agreement to the offer. For an acceptance to be valid, it must be: It must
be (i) Unconditional; (ii) Unequivocal; (iii) Consciously accepted by the
person to whom it was addressed; (iv) Compliant with any formalities set
by law or the offeror. Thus it is normally said that the acceptance must
mirror the offer. If it does not mirror the offer, usually it is not
acceptance; but it is a rejection of the offer.

The offeree must also actively manifest his/her offer. There is no

acceptance through silence.

When parties contract at a distance, questions arise as to when and where

acceptance takes place. The general rule in Namibian law follows the
information theory, which requires actual and conscious agreement
between the contracting parties, such that agreement is established only
when the offeror knows about the offeree’s acceptance. The place or
venue of the formation of the contract is generally where the acceptance
is brought to the offeror’s notice.

37
UNIT 5 Offer and Acceptance

Exceptions to the information theory include cases where there has been
an express or tacit waiver of the right to notification. Another exception is
the postal contract, which is governed by the expedition theory (Cape
Explosive Case &A to Z Bazaar Case) according to which the contract
comes into being as soon as the offeree has posted the letter of
acceptance. Contracts concluded by telephone are governed by the
information theory, but contracts entered into by means of email or
through other means of electronic communication in South Africa are
now governed by the Electronic Communication Act. For case of
Namibia such application must still be by analogy as the Electronic
Communication Bill has not yet been passed into law. Parties involved in
negotiating a contract may generally terminate the process as they wish.

Offer and acceptance inter-absentes (Prescribed book. Page 57)

§ --Declaration theory
§ --Expedition Theory (Mailbox rule).
§ --Information theory
§ --Reception theory

Theory of general application in Namibia is “information theory”.

Exceptions: In cases of postal contracts, unless the parties have

specifically stated otherwise, the “expedition theory applies”. This theory
is called “mailbox rule” in American law.

In cases of electronic contracts, so far the Namibian law is moot. But it

can be assumed that by analogy to the South African law that adopted the
UNCITRAL Model law (on which the Current Namibian Electronic Bill
is also based), then the “reception theory” will apply to such contracts.

Other forms of e-contracts: Please read Aimite Jorge and Lineekela

Usebiu Article (Casebook, page 862).

Shrink-wrap Contracts.

Click-wrap contracts.

Browse-wrap contracts.

Offer and Acceptance at Auctions: (Prescribed book: “Hutchison &

Pretorius”’ pages 53-55).

Simple auctions.

Auction with conditions without reserved price.

Auctions with condition and reserved price.

Auctions normally are invitations by the auctioneer for bidders to come

and make offers on products being auctioned. Thus an auction in law

38
 LAW OF CONTRACT

functions the same way as normal shop inviting customers to come and
make offers on their products on sale. Normally in such scenarios the
client is the offeror as he holds the ultimate decision either to make an
offer to the seller or simply browse around and leave the shop. In the case
of auctions with reserved price, the roles however are reversed.

Summary
In this unit you learned:

That contracts are normally started by an offer followed by an

acceptance. You learned that if the parties are in the presence of each
Summary
other, this process occurs at the same time. But if the parties are not in the
presence of each other, there is a time lag between offer and acceptance.
Therefore it becomes crucial to know when and where the actual meeting
of minds took place. The time and place where the meeting of minds took
place will depend how the parties decided to communicate between them.
If the parties decided to communicate by post “snail mail”, then the
meeting of minds takes place when the offeree posts his acceptance.
Otherwise, the meeting of mind takes place when the offeror is made
aware of what the offeree accepted. In e-contracts, the reception theory
applies if the parties are in different information systems.

You also learned that e-contracts have special rules, such as the browse-
wrap, shrink wrap and click wrap rules in the formation of the contract.

In auction situations, you learned that the auctioneer may not be the
offerror, because an auction is simply an invitation to make offers.

References
Van der Merwe, SW; et al; (2007). Contract: General Principles, 3rd
ed.). Juta & Company, Ltd.
D Hutchison and F du Bois “Contracts in General” in F du Bois (ed.)
References Wille’s Principles of South African Law 9 ed (2012) 733-887.
Reinhard Zimmermann (1996) The Law of Obligations: Roman
Foundations of the Civilian Tradition, Oxford University Press.
Hoexter, Cora (2004). “Contracts in Administrative Law: Life after
formalism”. South African Law Journal. Vol: 121: 595–618.

39
UNIT 5 Offer and Acceptance

40
 LAW OF CONTRACT

UNIT 6

Pactum De Contrahendo & Option

Contracts

Introduction
In this unit, you will learn what is an option contract You will learn that
there used to be an asymmetry between the application of the contractual
remedies in all cases and the way they worked in option contract cases.

After you finished this unit you should be able to :

§ describe what problems arise in option contracts as regards to the

remedies in contract law.
Outcomes
§ sketch out difference between an ‘option contract’ and a ‘pre-
emption contract’.

§ describe the Orix Mechanism in option contracts.

§ explain the principles of “first in time, first in law”, and the notion
or relevance of ‘good” or “bad faith” in option contracts.

41
UNIT 6 Pactum De Contrahendo & Option Contracts

Prescribed reading:

Hutchison & Pretorius, The Law of Contract in South Africa, (Chapter 2

at Pages 62-76).
Prescribed reading
Cases: Hirschowitz v Moolman 1985 (3) SA 739 (A).
Casebook Page 204.

Crundal Brothers (Pty) Ltd v Lazarus and Another 1992 (2) SA 423 (ZS).
Casebook Page 224

Other Prescribed reading in this unit:

Naudé T, “The rights and remedies of the holder of a right of first refusal
or preferential right to contract” (2004) 121 South African Law Journal
636. Casebook page 874.

Naudé T “Rights of first refusal or preferential rights to contract: A

historical perspective on a controversial legal figure” (2004) 15
Stellenbosch Law Review 66-90. Casebook page 896.

1. Pacta de contrahendo
A ‘pactum de contrahendo’ is a contract aimed at concluding another
contract.

It is a pactum de contrahendo. If A and B enter into a pactum de

contrahendo in terms whereof A undertakes to enter into another contract
with B upon the happening of a specified event, the pactum de
contrahendo itself must comply with any formalities which are requisite
to B the validity of the proposed second contract.

Preference contracts, also called first refusal contracts, are contracts in

which one party promises to prefer the other party when concluding a
specific type of contract. Such a right to be preferred may also be created
by will, where a testator provides that a beneficiary may not sell the
inherited object without giving another a chance to buy it first, or it may
be created by legislation.

Other examples include the option contract (in terms of which the
grantor’s right to revoke his offer is restricted) and the preference
contract (whereby the grantor gives a preferential right to conclude a
specific contract should he decide to conclude this contract). An option
contract constitutes two offers: a substantive offer and an undertaking or
option to keep the offer open. If the option holder accepts the first offer
by exercising the option, the main contract is created.

42
 LAW OF CONTRACT

An option contract is irrevocable. (Breach invokes remedies such as an

interdict to enforce the contract and damages to place the option holder in
the position that he would have occupied had the option been honoured.)
It is terminated through the:

Effluxion of time (prescribed or reasonable)

Death of the grantor or grantee

Rejection of the offer by the grantee

Lapse of the right by any other means in law

Options may be ceded if such is the grantor’s intention. The cession of an

option need not be in writing; it may be made orally and without
formalities—unless the substantive contract is required to comply, for
instance, with the prerequisite that a sale of immovable property be in
writing. Because the exercise of an option to purchase immovable
property is usually by acceptance of the substantive offer, both the option
and the substantive offer must be in writing.

A right of pre-emption is a type of preferential right ‘to purchase at a

fixed price or at a price at which the grantor is prepared to sell’. It is
granted by a prospective seller to a prospective purchaser to give the
purchaser right of first refusal if the prospective seller should decide to
sell. A pre-emption right must comply with all the requirements for
contracts in general. The capacity of the pre-emption grantor to alienate
the thing in question is restricted. If the grantor breaches his undertaking
to offer the thing to the holder, the holder’s remedy is an interdict
preventing alienation to a third party. It is uncertain, though, whether a
claim by the holder for specific performance would be successful.

2.The Oryx Mechanism

Study specifically here the Oryx mechanism in your book, derived from
the case Associated South African Bakeries (Pty) Ltd v Oryx & Vereinigte
Bdckereien (Pty) Ltd 1982 (3) SA 893 (AD). (Note: You don’t have to
read this case, as it is in Afrikaans. But the comments in your books
about the case are sufficient to understand the reasoning of the case).
Read carefully pages 73-75 in your prescribed book.

The Oryx mechanism is a remedy allowing party by operation of law to

specifically enforce an option contract that has been breached. The
language used in the Oryx case is that of “stepping into the shoes” of the
preferred party.

43
UNIT 6 Pactum De Contrahendo & Option Contracts

Please read carefully the notes in your book

Note it! /
Warning

References
Hutchison & Pretorius, The Law of Contract in South Africa, (Chapter 2
at Pages 62-76).

References Naudé T, “The rights and remedies of the holder of a right of first refusal
or preferential right to contract” (2004) 121 South African Law Journal
636.
Naudé T “Rights of first refusal or preferential rights to contract: A
historical perspective on a controversial legal figure” (2004) 15
Stellenbosch Law Review 66-90.

44
 LAW OF CONTRACT

UNIT 7

Tenders

Introduction
You will learn what a tender is and what types of tenders exist. You
will also learn the relationship between tenders, auctions, and other
similar aspects in law.

You will learn the rational for tendering, specially for Government projects

Outcomes In brief, you will learn how tenders work and how the selection process is done.

You will learn what is in effect a tender in terms of offer and acceptance. A call
for tender is a mere invitation to make an offer and it is not an offer.

You will learn the relationship between tenders, auctions, and other similar
aspects in law.

Prescribed reading: None (except these notes below). Tenders are

mentioned in Chapter two of your prescribed book, but the information
given there is very limited.
Prescribed reading

45
UNIT 7 Tenders

1.Content:
--Open tenders, Advertised tenders and Restricted tenders.
--Offer to the public.
--Open tenders & restricted Tenders.

2.Definition of Tender:

Tender usually refers to the process whereby governments and financial

institutions or other entities invite bids for large projects that must be
submitted within a finite deadline. The term also refers to the process
whereby shareholders submit their shares or securities in response to a
takeover offer.

Definition of tender document: A written invitation sent to potential

suppliers of a good or service to inform them about the information
required for the buyer to choose among them. Issuing a tender document
typically begins the tender process by which a business or government
agency selects qualified and interested suppliers based on such things as
their price, quality of service, availability and proposed delivery terms.

.
Bid solicitation.
(The process of tendering starts by Bid solicitation)

Bid solicitation is the process of making published project data

(construction or other data) readily available to interested parties,
including, for example construction managers, contractors, and the
public.

There are several services, including government entities and private

plan-rooms, that allow project owners to release project details to solicit
and obtain contractor bids. These services act as a gateway for project
owners to release project information to a large group of contractors,
general contractors or subcontractors in an attempt to solicit bids. (Many
of these services are subscription based or charge a flat rate for project
data).

3.Open Tendering.
Open tendering is the preferred competitive public procurement method
used for acquiring goods, services and infrastructure works. It is executed
in accordance with established procedures set out in the procurement
guidelines and detailed in the standard bidding documents.

46
 LAW OF CONTRACT

Open tenderingis also known as open competitive bidding, open

competition or open solicitation, and the procurement notices used to call
for bids for these requirements are identified as: Invitation for Bids or
Invitation to Tender.

The fundamental requirements of open tendering are that they should:

(i) Be open to all qualified and interested bidders,

(ii) Be advertised locally (and internationally, when required),

(iii) Have objective qualifications criteria,

(iv) Have neutral and clear technical specifications,

(v) Have clear and objective evaluation criteria, and

(vi)-Be awarded to the least-cost provider, without contract negotiations.

It is presumed that the open tendering procurement method fosters

effective competition and adds value for money. However, there are
arguments to the contrary given that the open tendering method is strictly
procedure-based and was primarily designed for the procurement of
simple goods. As a result, it is not suitable for complex procurements
where the focus is more on the output and outcome of the contracting
process rather than on strict adherence to standards.

Some disadvantagesof the open tendering process are:

(i)--Lengthy timeframe for completion of the procurement action;

(ii)--Requires strict adherence to procedures,

(iii)-- Assumes existing internal capacity for the completion of clear and
precise specifications,

(iv)--Restricts suppliers’ participation in determining the technical

specifications,

(v)-- Limits the possibility of building long-term relationship with

suppliers,

(vi)-- Focuses only on a least-cost solution,

(vii)-- Suppresses innovation, and

(viii)-- Excessive formalism may limit supplier participation in the

tendering process.

47
UNIT 7 Tenders

4.Restricted Tendering
Restricted tendering is a procurement method that limits the request for
tenders to a select number of suppliers, contractors or service providers.
This method of procurement is also called: Limited Bidding and Selective
Tendering.

Although considered a competitive procurement method, competition is

limited to only firms shortlisted or invited by the procuring entity.

A process should be in place for arriving at the number and specific firms
that will be invited; that number however is dependent on the stipulations
of the public procurement legal framework.

Any decision to use the Restricted Tendering procurement method must

conform to the policies and procedures governing the procurement
system. /// A basic characteristic of this method is that competition is
confined to a certain number of firms either because only a few firms are
qualified to fulfill the specific type of requirement, or certain conditions
warrant the use of a limited number of firms in order to reduce the time
and cost of the selection process.

Contractual Formation through tendering.

Depending upon the language in the bid proposal, a subcontracting

construction company could make its bid final, and, if accepted, a legally
enforceable contract is created. In these circumstances, upon
determination by the general contractor that a bid is the lowest offer, it
can accept the bid and upon acceptance, a subcontractor cannot renege or
revoke its offer. The language of the bid or offer can impact the court's
determination of whether the subcontractor intended for further
negotiations to take place, or whether the bid was intended to be an
option or unilateral agreement to enter into a contract upon acceptance of
the offer.

5. Tender box:
A tender box is a mailbox that is used to receive the physical tender or
bid documents. When a tender or bid is being called, a tender or bid
number is usually issued as a reference number for the tender box. The
tender box would be open for interested parties to submit their proposals
for the duration of the bid or tender.

Once the duration is over, the tender box is closed and sealed and can
only be opened by either the tender or bid evaluation committee or a
member of the procurement department with one witness.

Typical elements in an invitation to tender (Example in a

construction project tender)

A typical invitation to tender template in any project has the

following sections:

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 LAW OF CONTRACT

Introduction

Project background

Legal issues

Maintaining issues

Supplier response required

Timetable for choosing a supplier

Requirements

Open tender versus closed tenders

An open tender is a type of tender that is open to all qualified bidders and
is open to the public in general. They are picked on basis of quality levels
and price. However a restricted tender is one whose invitation is only
addressed to a certain group of pre-qualified suppliers.

Construction bidding is the process of submitting a proposal (tender) to

undertake, or manage the undertaking of a construction project. The
process starts with a cost estimate from blueprints and take offs.

The tender is treated as an offer to do the work for a certain amount of

money (firm price), or a certain amount of profit (cost reimbursement or
cost plus). The tender which is submitted by the competing firms is
generally based on a bill of quantities, a bill of approximate quantities or
other specifications which enable the tenders attain higher levels of
accuracy, the statement of work.

For instance, a bill of quantities is a list of all the materials (and other
work such as amount of excavation) of a project which have sufficient
detail to obtain a realistic cost, or rate per described item of
work/material.

The tenders should not only show the unit cost per material/work, but
should also if possible, break it down to labour, plant and material costs.

In this way the individual who is selecting the tender will be quite
confident that the tender is feasible. Bids are not only chosen on cost
alone. Sometimes contractors submit lower tenders to win the contract
and win the work. Either the costs that the contractor incurs is greater
than the price he is charging the client (as a consequence of a lower
tender determining the contract sum), and thus is likely to go insolvent, or
he will claim for "loss and/or expense" due to discrepancies in the
contract documents (this can be done deliberately). The lowest tender is
not always a feasible tender. The lowest tender is the most likely to
increase the contract sum, the most throughout the course of the project.

49
UNIT 7 Tenders

6.Types of calls for tenders.

Open tenders, open calls for tenders, or advertised tenders are open to all
vendors or contractors who can guarantee performance.

Restricted tenders, restricted calls for tenders, or invited tenders are

only open to selected prequalified vendors or contractors.

This may be a two-stage process, the first stage of which produces a short
list of suitable vendors.

The reasons for restricted tenders differ in scope and purpose. They are so
called because:

There is essentially only one suitable supplier of the services or product.

There are confidentiality issues such as military contracts.

There are reasons for expedience such as emergency situations.

There is a need to weed out tenderers who do not have the financial or
technical capabilities to fulfill the requirements

Double envelope system:

In an open bid or tender system, a double envelope system may be used.

The double envelope system separates the technical proposal (statements

of work) from the financing or cost proposal in the form of two separate
and sealed envelopes.

During the tender evaluation, the technical proposal would be opened and
evaluated first followed by the financing proposal.

The objective of this system is to ensure a fair evaluation of the proposal.

The technical proposal would be evaluated purely on its technical merits
and its ability to meet the requirements set forth in the Invitation without
being unduly skewed by the financial proposal.

7.Two-Stage Tendering
Two-stage tendering is similar to the request for proposals because the
technical and financial proposals are submitted separately, but one before
the other, rather than simultaneously. A key feature of this procurement
method is that the submission of proposals takes place in two stages.
Another, that bidders can assist in defining the technical requirement and
the scope of work.

Two-stage tendering is used for the procurement of goods, services and

construction works, and there are several ways in which the process may
be carried out. Two of the most common are illustrated below:

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 LAW OF CONTRACT

1.The first procedure is as follows:

(i) The first stage is used for determining responsiveness to the request
for offers and for clarifying and reaching agreement on the technical
specifications. In this first stage, bidders are requested to submit a
technical proposal with their best solution for fulfilling the requirement.
The proposal is evaluated and scored, and the firm with the highest
ranked technical proposal invited for discussions with the purpose of
reaching agreement on the proposed technical solution. is lost, and this
may impact price.

Under this modality of the procedure, in the first stage prospective

bidders are requested to submit proposals on a partially developed
technical specifications, and they are expected to contribute to the
completion of the technical specifications and provide a methodology and
work plan for carrying out the assignment. The technical proposals
submitted are evaluated for responsiveness to the solicitation documents.
A clarification and discussions meeting is held with all responsive
bidders, and minutes of this meeting are prepared and distributed to all
responsive bidders. The results of this meeting are used to finalize the
technical specifications and the scope of work. First stage responsive
bidders are then invited to submit technical and financial proposals based
on the amended technical specifications and scope of work.

(ii) In the second stage, responsive bidders submit technical and

financial proposals as requested. The technical proposals are evaluated
first, and the financial proposals remain sealed and secured. Firms
achieving the minimum technical qualifying mark or greater, as stated in
the call for proposals, are then invited to the public opening of their
financial proposals. Financial proposals are then evaluated, and the firm
achieving the highest score on the combined technical and financial
proposals evaluation is invited to contract negotiations. If negotiations
fail, the next highest ranked firm is called for contract negotiations.

The above are only two variations of the two-stage tendering

procurement method. There are others which given the degree of
complexity will not be discussed in this text.

(Advantages of the two-stage tendering process

· It is a more flexible approach to awarding contracts because it allows
participation of prospective bidders in the definition of the technical
specifications and scope of work.

· The preferred bidder is more likely to have a good understanding of the

requirement, which potentially reduces risks in the implementation of the
contract.

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UNIT 7 Tenders

· Prospective bidders are able to make suggestions for improvement of

the technical specifications and scope of work of the assignment, through
their technical proposal and clarification discussions.

· The second stage tendering time is reduced.

· The technical approach and methodology can be adjusted to suit the

agreed technical specifications and scope of work.

· Risk is minimized given the early involvement of prospective bidders in

the definition of the technical specifications and scope of work.

· A financial proposal is submitted only after reaching agreement on the

technical specifications and scope of work.

· A contract is negotiated on the basis of the agreed technical

specifications and scope of work.

· More certainty regarding the qualifications of the preferred bidder.

Unit summary
In this unit you learned

On tender you have learned that tender is merely an invitation to make

offer(s) and is not an offer. That a tender is similar in most regards to an
Summary
auction; that is to say, as the auctioneer invites bids, in tenders, the call
for tenders is also an invitation to make an offer.

Depending on the type of tenders used, the process can be open or can be
restricted.

In two stage tenders, the technical approach and methodology can be

adjusted to suit the agreed technical specifications and scope of work; the
risk is minimized given the early involvement of prospective bidders in
the definition of the technical specifications and scope of work.

After being selected as the preferred tenderer, a contract is negotiated on

the basis of the agreed technical specifications and scope of work. But
even after being selected as the preferred tenderer, it is still no guarantee
that the winner will necessarily sign the contract with these tenderer;
because other qualifications must be complied with; including legal
qualifications.

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 LAW OF CONTRACT

Reference:
Boyce T R. (2002) Tendering and negotiating MOD Contracts .Thorogood,
London.

References The Aqua Group. (1999)Tenders and Contracts for Building , 3rd Edition.
Blackwell Sciences, London.

Sayers P, Competitive Tendering – Management & Reality – Achieving Value

for Money, E & FN Spon, (Chapman & Hall), London.

Brook M, Estimating and Tendering For Construction Work, 3rd Edition,

Elsevier, Amsterdam.

53
UNIT 8: Ticket Cases

UNIT 8:

Ticket Cases

Introduction

You will learn that the test of whether a document fits within the
description of a ticket is an objective test, that is, whether a reasonable
person in the position of the ticket-holder would perceive it to be
contractual in nature. You will learn that in contract law, ticket cases are
a series of cases that stand for the proposition that if you are handed a
ticket or another document with terms, and you retain the ticket or
document, then you are bound by those terms.

After you finished this unit you should be able to :

§ explain what the value of ticket cases is; in the law of contract.

§ elaborate how ticket cases are a special category in law of contract

Outcomes § sketch the relationship between ticket cases and offer and
acceptance.

Prescribed Reading: Hutchison & Pretorius, Chapter 2.

Prescribed Cases: Cape Group Construction at Forbes Waterproofing v

Government of UK 2003 (5) SA 180 (SCA) 173.
Prescribed reading
(You are not given this case in the casebook. But the facts are extensively
transcribed below. You can access the case by yourself in the website of
the South African Supreme Court of Appeal for free, using the year
index.

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 LAW OF CONTRACT

1. General Description of Ticket Cases:

In contract law, ticket cases are a series of cases that stand for the
proposition that if you are handed a ticket or another document with
terms, and you retain the ticket or document, then you are bound by those
terms. Whether you have read the terms or not is irrelevant, and in a
sense, using the ticket is analogous to signing the document. This issue is
an important one due to the proliferation of Exclusion Clauses that
accompany tickets in everyday transactions.

The ordinary rule is that of implied “knowledge of writing and of terms”

which is stated as follows:

“If the recipient of the ticket knew that there was writing on the ticket and
also knew that the ticket contained terms, then the recipient is bound by
the terms of the contract”.

Reasonable person: If the recipient did not know of the existence of the
terms, then the court will consider whether a reasonable person would
have known that the ticket contained terms. If that is so, then the ticket-
holder is bound by those terms; if not, then the court will return to the
general test of whether reasonable notice of the terms was given.

The test of whether a document fits within the description of a ticket is an

objective test, that is, whether a reasonable person in the position of the
ticket-holder would perceive it to be contractual in nature. For instance, if
exclusion clauses accompany a docket, it may be held that it is not
contractual in nature since it is just a receipt.

Furthermore, the additional rule is that “if a party wishes to incorporate

onerous terms into a document that is to be just accepted by the other
party, reasonable notice must be given to make it a term of the contract”.
And “the more onerous the clause, the better notice of it needed to be
given.”

Other ticket cases include:

Doctrine in the ticket cases
The doctrine in the ‘ticket’ cases is designed to bind one who is
indifferent as to the extent of his commitment, not one who, although
acting reasonably, is ignorant of what is sought to be imposed upon him.
(see Forbes v Government of UK 2003 (5) SA 180 (SCA) 173 at
paragraph 21).

Note However, that although reasonable notice of it may not be given, a

party may still be bound if he "knew or believed that the writing
contained conditions.“

Reasonable steps to draw attention to terms?

This leads to a consideration of the third proposition as set out by Scott

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UNIT 8: Ticket Cases

JA Forbes v Government of UK 2003 (5) SA 180 (SCA):

“If there was no actual consensus, the party relying on his terms (terms in
ticket) having been incorporated may yet succeed on the basis of quasi-
mutual assent if he demonstrates that he took steps reasonably sufficient
to give notice of his terms to the other party”. (In Forbes v Government of
UK 2003 (5) SA 180 (SCA) 173case above, Blignault J at Court a quo,
held that “Forbes did not pass this test” (paragraph 22).

Facts of the Cape & Forbes waterproofing v Government of UK Case.

Facts in Forbes waterproofing v Government of UK case:

The issue in this appeal is whether the appellant, Cape Group
Construction (Pty) Ltd t/a Forbes Waterproofing (‘Forbes’) was
successful in its attempt to introduce its standard terms into a contract
concluded with the Government of the United Kingdom (‘the
Government’).

[2] The facts are not in dispute.

The Government owned a house in Bishopscourt, Cape Town, which was

placed at the disposal of the High Commissioner. The roof of the house
developed a leak. Forbes, the defendant below, was called in. It telefaxed
a quotation to Mrs Woolley. She was employed by the British Consulate
and was its estates manager in Cape Town. This was on or about 24 June
1999.

[3] The fax is on a standard letterhead with the logo of Forbes. It reads: (I
have attempted to reproduce the various sizes of the typeface):

[ ‘BAH/pg/30860

24 June 1999

British High Commission

P O Box 500

CAPE TOWN, 8000

ATTENTION: MRS LISA WOOLEY

Dear Madam

RE: ROOF REPAIRS AT THE BRITISH HIGH COMMISSION IN

BISHOPSCOURT

We thank you for your valued enquiry and take pleasure in presenting our
quotation as follows.

[4] Only that one page was sent. There was no ‘overleaf’. Nor did
Woolley notice the concluding words ‘See Terms and Conditions

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 LAW OF CONTRACT

Overleaf’. The repair was urgent and she accepted the quotation
telephonically. At that point the contract was concluded and any
subsequent communication by Forbes could not affect its terms.

[5] The issue is whether what were called in argument Forbes’s

‘standard’ terms, form part of it. On about 28 June 1999 the original
quotation, which did contain certain ‘Standard Terms and Conditions’
overleaf, was posted. Clause 8, headed ‘Limitation of Liability’
(Blignault J, a quo, with justice described this heading as euphemistic),
excludes liability for loss or damage caused by Forbes in sweeping terms,
as follows:

‘8. LIMITATION OF LIABILITY

8.1 Subject to the provisions of any guarantee, neither the contractor nor
any of the contractors,

suppliers, associate companies, officers, employees or agents shall be

liable for any loss or damage whether direct, indirect, consequential or
otherwise, suffered by the employer as a result of any cause arising in
connection with any dealings between the contractor and the employer or
the execution of the works (including without limitation, late completion
for whatsoever reason and any cause arising from anything done or not
done pursuant to the contract) whether such loss or damages results from
breach of contract (whether fundamental/material or otherwise) delict
negligence or any other cause without limitation.

8.2 Without limitation to the aforesaid limitation of liability the

contractor shall not be liable for:-

8.2.1 any delays caused by political unrest, strikes or union action nor any
delays caused by an Act of God, war, fire and floods, excessive rains and
dangerous winds;

8.2.2 any loss or damage to any property or injury or death of any person
or any loss of any person caused by or arising out of the use of or
interference with plant, machinery or means of access by persons other
than employee of the contract and the employer indemnifies the
contractor against claims by third parties in respect of such loss, damage
injury or death;

8.2.3 any damage arising from instruction issued to its employees without
its authority;

8.2.4 any damage to the property of the employer, including the works,
whether such damages are

consequential, reasonably foreseeable or otherwise;

8.2.5 any loss by the employer including any loss amounting to

consequential loss or lost profit;

8.2.6 any leakages occasioned by abnormal causes or agencies, including

57
UNIT 8: Ticket Cases

non-specified traffic,

interference by third parties, including abnormal use and design faults.’

[6] Woolley was on leave from 30 June to 12 July 1999 and did not see
the original posted quotation until after the roof of the house had caught
fire, as a consequence of 5 the negligence of one of Forbes’s workmen.
Hence the action, in which the Government accepted the onus of proving
the terms of the contract on which it relied, that is that Forbes’s standard
terms did not form part of it. It was conceded by Forbes, on the other
hand, that if the terms and conditions had not been incorporated, it had
the contractual duty to carry out the repairs in a proper and workmanlike
manner, and without negligence.

Construction of the writing in faxed form

[7] Although Blignault J (in the court a quo) found for the Government
on other points, he did not decide the logically anterior question; whether
on a proper construction of the fax it purported to incorporate Forbes’s
standard terms and conditions.

[8] The argument for the Government is a simple one. The injunction
‘See Terms and Conditions Overleaf’ does not convey that there are
standard terms, which would be available for inspection if the addressee
wished to see them. The natural meaning, so the argument proceeds, is
that if no additional terms or conditions are transmitted, there are none
applicable to this particular contract.

The judge then agreed with the argument. By saying: “The meaning
contended for is the natural interpretation, a more probable one than that
there were standard terms hovering in the background, and that it was for
the Government to obtain them if it wished to ascertain their content”.

Then, the judge referred to an earlier case similar in facts….and says:

[9] A comparable case is Home Fires Transvaal CC v van Wyk and

Another 2002

(2) SA 375(W). An order was faxed to van Wyk. At the foot appeared the
words: ‘This order can only be cancelled on payment of 15 % of the
total amount: see reverse side for further conditions.’

The reverse side was not transmitted. Van Wyk read the document,
including these words. Believing that they dealt with cancellation, he
signed it. He was later to discover that they dealt with much more than
cancellation, in terms adverse to him. The supplier contended that the
well-established rule, you are bound by what you sign, applied.

Farber AJ’s response (at 381J to 382D) was:

‘It need hardly be stated that the rule can have no application if, on a proper
construction of the agreement, the terms which it is suggested bind the signatory
have not been incorporated therein”.

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“Approaching the matter on an objective basis, which I am enjoined to do, it

seems to me that by omitting to send the reverse side of the order to the
respondents, the appellant must be held not to have intended to conclude a
contract on the basis of the terms and conditions therein set forth. To this end,
the words appended at the foot of the face of the ‘order’ which refer to the
conditions embodied on the reverse side thereof are meaningless and must be
considered pro non scripto. Reducing the matter to fundamental principle, the
appellant, by its conduct, submitted a written offer to the respondents. The
reverse side of the document embodying the offer was not sent to them, founding
the inference that what was there set forth was not intended to form part thereof.
The respondents in turn must be held to have accepted the offer on the basis of
what had been submitted to them. In short, the contract which arose in
consequence of the appellant’s offer and the respondents’ acceptance thereof
falls to be approached on the basis that the terms on the reverse side of the order
were not intended to form part thereof.’

[11] A similar case is the English Poseidon Freight Forwarding Co Ltd v

Davies Turner Southern Ltd and Another [1996] 2 Lloyd’s LR 388 (CA).

The nature of the issue in the case and the manner of its resolution appear
from the following passage from the judgment of Leggatt LJ (at 394):

“This is not a case where a party declares that the terms are available for inspection. It is
a case where, on documents sent by fax, reference is made to terms stated on the back,
which are, however, not stated or otherwise communicated. Since what was described as
being on the back was not sent, it was a more cogent inference that the terms were not
intended to apply”.

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UNIT 8: Ticket Cases

Unit summary
In this case we can see the operation of the ticket cases doctrine,
although the outcome might have been different. In contract law, ticket
cases are a series of cases that stand for the proposition that if you are
handed a ticket or another document with terms, and you retain the
ticket or document, then you are bound by those terms. The cases arise
Summary from a reluctance of courts to enforce the letter of contracts where the
party issuing the ticket is escaping liability on the basis of a term
included on a ticket. In theory, the ticket is treated as an offer and it is
up to the customer to reject it. So far as our common law is concerned,
the limitation clause must be contained in a document having
contractual effect. The ticket cannot include conditions if the contract
has already been formed.

Exemption clauses, which are common in ticket cases (or other kinds
of documents resembling tickets) can be defined as a term used in a
contract to exempt one of the parties from liability, or used to limit the
liability to a specific sum if certain events occur. For example breach
of warranty, negligence or theft of goods. (In the case given above, the
clause exempted liability of the builder). Such clauses may be used to
protect the consumer as well as the seller from being liable if certain
events occur that cause losses to either party. Besides, such clauses are
also known as an advance notices to customers to acknowledge that the
seller has given them notice, and they serve to protect the seller against
any unpleasant events that might occur. In many cases, exemption
clauses may turn out to be terms of contract by signature or notice to
protect the seller or the company from being responsible for any losses.
For example, a person is considered as liable if he signed on a contract
that contains an exemption clause which excludes all liabilities of the
seller even if he did not read it. But courts have frequently held that a
person (customer) cannot be held liable even when he signed on the
agreement if the term excluding all liabilities was misrepresented by
the seller. An exemption clause need not be signed for it to be effective
. It will be effective if it is known to the public at large regarding this
term or reasonable steps are taken to notify the users of this term
before the contract is made.

Read the cases Spindrifter v Lester Donovan 1986 (1) SA 303

(A) and George v Fairmead 1958 (2) SA 303 (A). Read
carefull these cases. You will notice that both cases have similar
facts. In both cases, the parties signed a contract and the
Assessment
signature is clearly visible and the parties know that they are
signing a contract. But the Appellate Division came exactly to
two different conclusions in these cases.

Write an Essay of not less than 2000 words in which you discuss
the differences between these two cases on their ratio decidendi.

Make sure you cite all sources you will use by way of footnotes.
Your references must include the author of the source (Surname
and Initial); the year the source was published; the Title of the

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 LAW OF CONTRACT

source, the publisher or the name of journal that published the

source (in cases of Journal Article); volume number and page
XX-YY (where the Article starts and end in the journal) and
exact page being used. In cases of books, you must give Book
publisher and City of publication and exact page you are using.
If you are citing case law, give full reference of the reported
case, and exact paragraph (or page) you are using. (Word limit
2500 words).

eferences

Van der Merwe, SW; LF van Huyssteen; MFB Reinecke; GF Lubbe (2007). Contract:
General

References Principles (3rd ed.). Juta & Company, Ltd.

Kerr, A J (2004). The Principles of the Law of Contract (5th ed.). Butterworth-
Heinemann,

Christie, RH (2006) The Law of Contract in South Africa (5th ed.).

LexisNexis/Butterworths.

Bradfield G, (2016) Christie’s Law of Contract in South Africa , (7th edition) Durban:
LexisNexis.

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UNIT 9: Ticket Cases

UNIT 9:

Improperly-Obtained Consent
(Voidable contracts).

Introduction
You will learn the difference between void contracts and voidable
contracts

You will learn that where the allegation in contract is

misrepresentation, undue influence, duress or bribery, the contract is
voidable.

By the end of this unit you should be able to:

§ indicate the difference between void contract and voidable contract

§ describe what constitute a vitiated consent

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 LAW OF CONTRACT

Outcomes
§ explain the various types of misrepresentations as well as the difference
between undue influence and duress.

§ explain what “dicta et promissum” is, and what is “simplex

commendation”..

§ differentiate betwen “dolus dans” and “dolus incidence” in the law of

contract.

Prescribed reading:

Hutchison & Pretorius, The law of Contract in South Africa, chapter 4.

Prescribed reading Must also read the following cases:

Extel Industrial (Pty) Ltd r v Crown Mills (Pty) Ltd 1999 (2) SA 719
(SCA)= Casebook ,page 246

Hendricks v Barnett 1975 (1) SA 765 (N)=

Casebook ,page 260.

Ranger v Wykerd 1977 (2) SA 976 (A)=

Casebook ,page 267

Bayer v Frost 1991 (4) SA 559 [A]=

Casebook ,page 288.

Phame (pty) Ltd v Paizes 1973 (3) SA 397 (A)=

Casebook ,page 314.

Absa Bank v Fouche 2003 (1) SA 176 (SCA)=

Casebook ,page 329

Arend v Astra Furniture (pty) Ltd 1974 (1) SA 298 (C)=

Casebook ,page 340

ABSA Ltd v Moore And Another 2016 (3) SA 97 (SCA)=

Casebook ,page 359.

Mauerberger v Mauergerger 1948(4) SA 902 (C)=

Casebook ,page 371

Novick v Comair Holdings Ltd 1979 (2) SA 116 (W)=

Casebook ,page 380.

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UNIT 9: Ticket Cases

1. General remarks
1- Where a person enters into a contract on the strength of either
misrepresentation, or as result of duress or undue influence exerted upon
him/her by the other party, the agreement is nonetheless “real” for
having been induced by such a means. There is no lack of consensus, as
in the case of material mistake, since the party know exactly with whom
and on what terms they are contracting.

The agreement is accordingly a valid one, provided of course, that the

other elements necessary for constituting a valid agreement are present.

However, since the consensus of the parties is vitiated or flawed (in that it
has been obtained by improper means), the contract is voidable at the
instance of the innocent party.

Where a person enters into a contract on the strength of either

misrepresentation, or as result of duress or undue influence exerted upon
him/her by the other party, the agreement is nonetheless “real” for
having been induced but such a means. There is no lack of consensus, as
is the case of material mistake, since the party know exactly with whom
and on what terms they are contracting. The agreement is accordingly a
valid one, provided of course, that the other elements necessary for
constituting a valid agreement are present.

In other words, if he/she wishes so, the party misled, coerced or unduly
influenced into giving his consent may set the contract aside, or have it
set aside by the court – in which case, each party must restore to the other
any benefit that he/she may have received under the contract. However,
until such a time as it is set aside, the contract remains valid.

Contracts entered into on improperly obtained consent may appear in

appear in four or even five different forms:

(i)--Misrepresentation;

(ii)- Duress;

(iii) Undue influence,

(iv) Bribery. There is also the possibility of a 5th element known as

(v) Abuse of circumstances (Abuse of right).

2. Misrepresentation
A misrepresentation is a false statement of past or present fact, not law or
opinion, made by one party to another, before or at the time of the
contract, concerning some matter or circumstance relating to it.
Misrepresentations are classified as being fraudulent, negligent or
innocent. Misrepresentations must be distinguished from

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 LAW OF CONTRACT

Warranties or contractual terms

Opinions, Predictions, and statements of law

Puffery (general laudation or simplex commendatio)

Misrepresentations must clearly be distinguished from other pre-

contractual statements such Puffs [Simplex Commendatio]; However any
dicta et promissa may constitute misrepresentation upon which the
aggrieved party may found his her action.

Dicta et promissa: these are material statements by the seller to the buyer
during negotiations, that bear on the quality of the thing sold, but go
beyond puffery (praise and commendation), and give rise to the aedilitian
remedies (the actio redhibitoria and the actio quanti minoris) if proven
unfounded (See Zimmerman, Law of Obligations: Roman Foundations of
the Civilian Tradition (1990) 360).

Different Types of Misrepresentation

(a) - Fraudulent misrepresentation

(b) Negligent Misrepresentation

(c-) Innocent Misrepresentation

(d) Misrepresentation by Silence – Non disclosure

Where a person enters into a contract on the strength of a

misrepresentation made to him, (or as a result of duress or undue
influence by the other party), the agreement is nevertheless valid because
there is no dissensus. Since the consensus was improperly obtained,
however, the contract is voidable at the instance of the innocent party.

The remedy used to set aside a voidable contract is “rescission” coupled

with “restitution” (known as restitutio in integrum), and is available as
both an action and a defence.

Of course, the innocent party may also elect to uphold the contract. The
conduct of the party who induces a contract by improper means
frequently constitutes a delict. In such a case, the innocent party may
recover damages in respect of any financial loss suffered as a result of the
delict, irrespective of whether he elects to affirm or rescind the contract.
Despite the contractual context, the damages are delictual in character
and are assessed according to the party's negative interest.

Misrepresentation in case law: Example: Phame v Paizes 1973 3 SA

397

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UNIT 9: Ticket Cases

Take note of some expressions & terms

Simplex Commendatio= Puff (mere lauding ones’ wears, or singing

the praises of ones’ goods).

Dictum et promissum (=“said & promised”) (it means statements &

promises made seriously and expected to be acted upon; i.e; they give
assurance that the qualities and attributes of the object or other matter are
true). For example, if the qualities of the thing sold fell short of what was
said and promised, the aggrieved party will be entitled to a remedy.

Aedilitian remedies: Are remedies available usually in contract of sale if

the res vendita (thing sold) suffered from defect at the time of sale. These
aedilitian remedies are generally of two types: (a) Actio redhibitoria
(cancellation of the agreement and obtain full restitution/refund; (b) Actio
quanti minoris (refers to price reduction) – here the agreement is not
cancelled, but re-affirmed, however, due to the discrepancies of the
qualities of the object, if the buyer want to keep it, may have its price
reduced.

Other two concepts that appear in misrepresentations are: Dolus dans

locum in contractui and Dolus incidens in contractum. These Latin
expressions are generally abbreviated as “dolus dans” and “dolus
incidens”.

The word “dolus” in Latin literally means “intent”. The word dolus is
also used in criminal law and it appears in the form of “dolus
directus”and “dolus eventualis”. Thus “dolus eventualis” in criminal law
means "legal intention, which is present when the perpetrator of an
offence objectively foresees the possibility of his act causing ‘death’ and
persists regardless of the consequences. So in criminal law it suffices to
find someone guilty of murder”.

But in civil law, it has slightly a different connotation. In civil law,

“dolus” geneally means “fraud; deceit, especially involving or evidencing
evil intent, and then must be (distinguished from culpa)”.

So in contract law there are two recognised types of contract-inducing

fraud, namely dolus dans locum in contractui and dolus incidens in
contractum. Thus “Dolus dans” is an intention fraud (deceit/or
misrepresentation), while “dolus incidens”, is an incidental fraud
(deceit/misrepresentation).

So, If, but for the fraud, the contract would not have been concluded at
all, it is dolus dans; if there would still have been a contract, but on
different terms, it is dolus incidens.

Stated in full, “dolus dans” means an intentional misrepresentation

amounting to fraud (a fraudulent misrepresentation), that leads to the
conclusion of a contract where, if there was no such fraud, the contract
would never have been concluded. And “dolus incidens” means an
incidental fraud/incidental misrepresentation that also lead to the
conclusion of a contract, but where regardless of such misrepresentation

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the contract would still have been concluded, but if the misrepresentation
was known at the time of contracting, the terms of the contract would
have been different. So, in cases on ‘dolus incidens” the contract would
still have been concluded, but on different terms. “Dolus dans” gives an
automatic right to ‘rescission of the contract” procured by intentional
fraud.

Although this point has not yet been settled, “dolus incidens” probably
gives a right only to damages, not to rescission of the contract; this is
likely also to apply to an "incidental" misrepresentation made without
fraud.

Whether the contract is set aside or upheld, the “representee” may claim
damages for any financial loss that he has suffered as a result of the
misrepresentation. It makes a difference, though, whether the
misrepresentation was made fraudulently, negligently or innocently.
Since Ancient Roman times, it has been recognised that fraud is a delict,
and that fraudulent misrepresentation accordingly gives rise to a claim for
delictual damages. Only very recently was it decided that the same
applies to a negligent misrepresentation. These damages, being delictual
in character, are measured according to the plaintiff's negative interest
and include compensation for consequential losses.

In the case of an innocent misrepresentation, there can be no claim for

delictual damages, since the misrepresentation was made without fault;
nor a claim for contractual damages, since there is no breach of
contract—unless, that is, the representation was warranted to be true.
Where the innocent misrepresentation amounts to a dictum et promissum,
however, the purchaser may claim a reduction of the price under the actio
quanti minoris: a limited form of relief, because not compensating for
consequential losses caused by the misrepresentation.

A misrepresentation may be made by words or conduct or even silence.

This last occurs when a party fails to disclose a material fact in
circumstances where there is a legal duty to do so. In the past, the law
recognised such a duty to speak in only a limited number of exceptional
cases—where, for example, there is a special relationship of trust and
confidence between the parties, as in the case of partners, or where a
statute obliges a person to disclose certain information. Today, however,
a general principle is emerging that requires a party to speak when the
information in question is within his exclusive knowledge, and is of such
a nature that the other party's right to have the information communicated
would be mutually recognised by honest persons in the circumstances. A
failure to speak in such circumstances entitles the other party to the same
remedies as in the case of a positive misrepresentation.

Misreresentation in case law (example): Phame v Paizes. Case

discussion: Factual background:

Case discussion (Phame (Pty) Ltd v Paizes 1973 (3) SA 379 (A))

Factual background: In October 1970 the plaintiff was negotiating with

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the defendant for the purchase of the defendant’s shareholding in, and
certain claims against, a company –XB). The principal assets of the
company were immovable property.

(Price of share “negligently misrepresented”: Court discussion of rules

and norms).

Please read fully the case (Casebook page 314).

3.Duress: (In Latin, Meaning “Metus” (Fear).

Contract in circumstances where one is (Latin “METICULOSUS’

("fearful, timid", "full of fear,").

2- Duress (or Metus) – Basic Rule: Voluntas coacta est tamen

voluntas (a coerced will, is still a will) or (Coacta voluntas, voluntas
est; volui, quia coactus volui” .

The French say: “Une volonté contrainte est une volonté; j'ai voulu parce
que j'ai voulu constraint”. (A constrained will is a will; I wanted, because
I wanted constrained).

Requirements for duress:

(a) Actual violence or reasonable fear;

(b) Fear must be caused by the threat of some considerable evil to

the party or his family

(c-) It must be the threat of imminent or inevitable evil

(d) the threat or intimidation must be contra bonos mores … … …

(e) The moral pressure must have caused damage.

Duress or metus is improper pressure that amounts to intimidation. It

involves coercion of the will: A party is forced to choose between
entering into a contract or suffering some harm. A party who consents to
a contract under such circumstances does so out of fear inspired by an
illegitimate threat. The consent is real but improperly obtained. The
contract, therefore, is valid, but it may be set aside at the election of the
threatened party, provided that certain requirements are met.

There is some uncertainty about what these requirements are. It is

established that the threat must be unlawful or contra bonos mores, and
must have induced the contract. According to some authorities, the
induced party must have a reasonable fear of some imminent or inevitable
harm to him- or herself, or to his property or immediate family. In the
case of a threat directed at property (duress of goods), the courts have
required an unequivocal protest at the time of entry into the transaction.

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In addition to rescission and restitution, the threatened party may recover

damages in delict for any loss caused through entry into the contract.

Duress and nature of coercion.

2- Duress (or Metus)
Rule: (Voluntas coacta est tamen voluntas).

(1) The nature of coercion

(2) The Reasonableness of the fear

(3) The Object of the threat

(4) The imminence of the harm

(5) The Unlawfulness of the threat

(6)Damage

(6) Duress by a third party

4. Undue Influence
(a) Origins of the doctrine // (b) Requirements // (c-) Abuse of
Circumstances

Undue influencein Namibian law is a concept of English origin, which is

now accepted in our law. The narrow scope of the English common law
doctrine of duress led to the development, in equity, of the doctrine of
undue influence. The doctrine of undue influence applies wherever
improper pressure (not amounting to duress at common law) is brought to
bear on a party to enter a contract. Where undue influence is found, the
contract is voidable; therefore, contracts may be avoided under the
doctrine.

Definition of 'Undue Influence': It is a situation in which an individual is

able to persuade another's decisions due to the relationship between the
two parties. In exerting undue influence, the influencing individual is able
to gain an advantage.

Undue influence is also a form of improper pressure brought to bear upon

a person to induce a contract, but the pressure is more subtle, involving as
it does, without any threat of harm, an undermining of the will of the
other party. The pressure usually emanates from a close or fiduciary
relationship in which one party abuses a superior position to influence the
other. To set aside a contract on the ground of undue influence, the party
so affected must establish that the other party obtained an influence over
him, that this influence weakened his powers of resistance and rendered
his will compliant, and that the other party used this influence in an
unscrupulous manner to induce an agreement that he would not have

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concluded with normal freedom of will. (Some authority also requires

prejudice, but this is disputed.) Unconscionable exploitation of another's
emergency is akin to undue influence: Both have been described as abuse
of circumstances, and both render the contract voidable. In suitable cases,
delictual damages may also be claimed.

Undue influence may be categorized as follows:

1 Actual undue influence. The claimant must establish that the defendant
used undue influence in relation to particular transaction. There does not
need to be any previous history of such influence, although there is
normally some relationship between the parties, such as husband and
wife, parent and child, Guardian and ward, etc. In undue influence, the
transaction does not have to be to the victim’s manifest disadvantage
before the court will exercise its powers to rescind the contract.

2 (a) Special relationship. This category applies to established special

“fiduciary” relationships: parent and child; guardian and ward; religious
advisor and disciple; solicitor and client; and trustee and beneficiary (but
not husband and wife). Such a special relationship gives rise to a
presumption of influence only, but not undue influence. If the transaction
in question is suspicious, i.e. it “calls for an explanation”, then a second
evidential presumption, of undue influence, will arise. This second
presumption, unlike the first, is rebuttable.

(b) No special relationship. In exceptional circumstances, there can be

undue influence with special relationship. This category covers cases
where there is no special relationship as explained above, but the
relationship is nevertheless one of “trust and confidence” where one party
is in a position to exert undue influence over the other. Normally, the
claimant must show they placed trust and confidence in the defendant;
once that is established, then, where there is a transaction “calling for an
explanation” an evidential presumption that there has been undue
influence will arise. It will be for the defendant to prove that no such
influence was exercised.

Thus, an inference of undue influence may also apply even if the

relationship is not within one of the special relationships but one party, by
reason of the confidence reposed in him or her by the other weaker party,
is able to take unfair advantage of the other. For example, where an
elderly farmer gives a Bank a guarantee in respect of his son’s overdraft
and mortgages the farmhouse to the Bank as security, it may be clear that
the farmer may have placed himself entirely in the hands of the assistant
bank manager and may not be given an opportunity to seek independent
advice. Although, normally, the presumption of undue influence would
not apply between bank and customer, the Courts sometimes look at such
scenarios with extra care and may set the transaction aside.

Thus, an inference of undue influence may also apply even if the

relationship is not within one of the special relationships but one party, by
reason of the confidence reposed in him or her by the other weaker party,
is able to take unfair advantage of the other. For example, where an
elderly farmer gives a Bank a guarantee in respect of his son’s overdraft

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and mortgages the farmhouse to the Bank as security, it may be clear that
the farmer may have placed himself entirely in the hands of the assistant
bank manager and may not be given an opportunity to seek independent
advice. Although, normally, the presumption of undue influence would
not apply between bank and customer, the Courts sometimes look at such
scenarios with extra care and may set the transaction aside.
Bars to Relief on Undue Influence Claim

Where a contract is voidable for duress or undue influence, relief (i.e.

rescission) may be barred by:

(i)--affirmation of the contract by the weaker party after the undue

pressure or presumptive relationship has terminated;

(ii)-- lapse of time;

(iii)-- the impossibility of restitution; and

(iv)-- the intervention of third party rights.

Duress and undue influence side-by-side

Like duress, undue influence is a form of improper pressure brought to

bear upon a person in order to induce him or her to enter into a contract.
However, in the case of undue influence, the pressure is more subtle,
involving an insidious erosion of the victim’s ability to exercise a free
and independent judgment in the matter, rather than threat or
intimidation.

Note that the basis of the action on undue influence is ‘vitiated consent’.

5. Commercial Bribery
Commercial bribery is now recognized as a further distinct ground for
rescinding a contract.

By its definition, a Bribery is the act of giving money, goods or other

forms of recompense to a recipient in exchange for an alteration of their
behavior (to the benefit/interest of the giver) that the recipient would
otherwise not alter. ... The bribe is the gift bestowed to influence the
recipient's conduct.
Requirements and Elements of Commercial Bribery in law of
contract:

(i) a reward (ii) paid or promised (iii) by one party, the briber, (iv) to
another, the agent (who may be an agent in the true sense or merely a go-
between or facilitator (v) who is able to exert influence over (vi) a third
party, the principal, (vii) with the intention that the agent (viii) should
induce the principal (ix) without the latter’s knowledge and (x) for the
direct or indirect benefit of the briber (xi) to enter into or maintain or
alter a contractual relationship (xii) with the briber, his principal,

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associates, or subordinates.

Please read the case Extel Industrial (Pty) Ltd v Crown Mills 1999 (2) SA
719, Casebook 246).

Basic facts of the case: Business case involving sale of sausages but not
delivered.

Allegations: First – that delivery of sausages not proved/ Alternative

ground that even if delivery proved, contract unenforceable because ‘the
Appellant’s co-owners had bribed two of the respondent’s directors.

6. Abuse of Circumstances
Abuse of Circumstances is akin to undue influence.

The abuse of circumstances, sometimes is treated as a form of duress. It is

usually a situation where a party (X) unconscionably exploits an
emerging situation in which B finds himself or herself to secure B’s
consent to a prejudicial contract, but the emergence of such contract not
being caused by X.

Unit summary

Summary

What you have learned in this unit?

You have learned that there are two types of effects where a “defect” is
alleged in contract: Void contracts and voidable contracts. Normally void
contracts entail mistake (or other elements such as illegality, incapacity,
impossibility, etc, to be studied later in the course). Voidable contracts
entail either misrepresentation, duress, undue influence or bribery. A
voidable contract is valid, but it is rescindable.

You also have learned that the concept ‘misrepresentation’ is an untrue or

misleading statement of fact made during negotiations by one party to
another, the statement then inducing that other party into the contract.
The misled party may normally rescind the contract, and sometimes may
be awarded damages as well (or instead of rescission).

You have learned that undue influence is closely related to duress, but
these concepts are differentiated by the degree of ‘pressure’ exerted on
the other parties and the special relationship that may exist between the
parties in the case of undue influence, which is not a requirement for
duress.

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Yu have earned equally the various elements need to prove a bribe, and
what is the effect of commercial bribery is in law.

Read the cases Napier v Barkhuizen [2006] 2 All SA 469 (SCA) and
Barkhuizen v Napier 2007 (5) SA 323 (CC) (casebook pages 18 and 65).
Read carefully these cases. In both Courts, the plaintiff was not
successful, but the courts give different reasons for his non success.
Assessment
Write an 2500 (maximum words maximum) essay where you discuss
these cases and present in a systematic manner the reason why the
plaintiff was not successful. Contract the reasoning of the Supreme
Court of Appeal and that of The Constitutional Court. Also pay attention
to the dissenting Judgments by Moseneke J in the Constitutional Court
and Comment on the effect of that dissenting judgment in the law of
contract and the general jurisprudence.

Make sure you cite all sources you will use by way of footnotes. Make
sure you cite all sources you will use by way of footnotes. Your
reference must include the author of the source (Surname and Initial);
the year the source was published; the Title of the source, the journal
that published the source (in cases of Journal Article); volume number
and page XX-YY (where the Article starts and end in the journal) and
exact page being used. In cases of books, you must give Book publisher
and City of publication and exact page you are using. If you are citing
case law, give full reference of the reported case, and exact paragraph
(or page) you are using. (Word limit: 2500 words).

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UNIT 10

Formalities

Introduction
You will learn that formalities may be imposed by law, or agreed by the
parties themselves.

You will learn that where law imposes formalities, if they are not
complied with, the contract is invalid.

You will learn that where formalities are agreed between the parties, no
compliance is problematic.

After you studied this unit you should be able to :

§ explain what we mean by normally there are no formalities in the

formation of contracts.

§ describe the situation where formalities are imposed by the law

Outcomes
§ explain the Shifren rule

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Prescribed reading: Hutchison & Pretorius, The Law of Contract in

South Africa, Chapter 6.

Cases to Read: Kovacs Investment 724 (Pty) Ltd v Marais 2009 (6) SA
Prescribed reading 560 (SCA): Casebook page 538.

1. Formalities: General Rule

As a general rule, our law does not require any formalities for the
conclusion of a contract, in order for such a contract to be valid. One can
enter into an oral contract or express the agreement in any way the parties
so desire.

However there are few exceptions to this general rule. Basically the
exceptions are of two fold: (i) When the law so requires and (ii) if the
parties themselves agree on such formalities.

The exceptions generally required by law are as follows: (a) alienations

of land according to the Alienation of Land Act. Land here includes
“houses” (flats) and farmland. (b) Contracts of “suretyships” are also
normally required to be in writing; (c) Executory donations of anything
(except land); (d) although the law isn’t very clear on this point, it is
normally required that a contract for ‘credit agreement” also to be in
writing. (d) Ante-nuptial agreements, because they require writing and
notarial execution in terms of the Deeds Registry Act; (e) Long leases of
land, which require writing, notarial execution, and registration against a
title deed, in terms of the Formalities in respect of Leases of Land Act; (f)
Mortgages, which require writing, drawing up by a Conveyancer as well
as execution in presence of, attestation by, and registration by the
Registrar of Deeds against a title deed; (g) Mineral prospecting contracts
and mining leases, which require writing, notarial execution, and
registration in the Mining Titles Registry or against the title deeds.

The exception imposed by the parties themselves is the other

predominant form of formalities. For example, most large project
construction contracts are normally in writing. The parties themselves
agree that such contracts should be in writing. It is also normally found
that most insurance contracts are in writing. The parties themselves agree
that such contract should be in writing.

Usually when the parties themselves agree that formalities should apply
to their contract, the following is normally found as given facts:

All material terms of the contract must be in writing.

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Terms implied by law such as (naturalia), as well as most tacit terms,

may not need to be in writing.

The terms need not all be in one document. For example, in construction
contract, the drawings of the architect & engineer are part of the contract,
but usually they are not integrated in the actual contract. They are
included by reference.

Any variation of a material term of the contract normally has to be in

writing to be effective. Note however that if the parties in one way or
another agree on ‘extension of time’; such extension of time may not
constitute a variation. In the same vein, a cancellation of contract and the
revival of a cancelled contract normally do not amount to variations of
such a contract.

The defence of estoppel may not be raised where a party has been misled
to believe that there has been an oral variation of the contract. For
example if you pay your rent on the first day of the month, but at given
month due severe family problems, your landlord did agree to accept
your rent on the 15th day of the month; you cannot raise that ‘temporary
waiver’ as estoppels to force the landlord to accept the rent on the 15th
day of the month in subsequent months.

Because formalities is one of the requirement for validity of contract

(where they are needed or agreed), if such formalities are not complied
with, then the contract is void. It means, I has no effect. Where a contract
has been declared void for any reason (such as mistake, illegality, lack of
certainty; impossibility of performance, etc), the return of a performances
that passed between the parties in a void contract may be claimed with an
enrichment action. In order words, we say that the performance was ‘sine
cause’ (i.e., without a legal ground).

The legislature is motivated by diverse policy considerations when

prescribing formalities: For example, the main aim behind requiring
writing and signature in contracts concerning the alienation of land and
suretyship is legal certainty regarding the authenticity and content of
these contracts. Certainty limits litigation and discourages malpractice.
On the other hand, the reason for requiring writing and signatures for
executory contracts of donation of anything but land is apparently to
make sure that the donor has a serious intention to conclude the contract.
Finally, the reason behind requiring notarial execution for “antenuptial
contracts” and “registration for long leases of land” is certainly in order
to give notice to third parties that might have interest in such matters. For
example, if a grandson inherited a farm from a grandparent, and such
grandson is now in the verge of marriage (which without express
agreement to the contrary may be deemed to be in community of
property, and the future wife would be entitled to half of the farm), other
relatives of the grandson may have interest for such farm to remain in the
family and not to be given for free to strangers to the grandparent who
had worked for such asset.

The parties themselves may prescribe formalities regarding the

conclusion, variation or cancellation of their contract, as well as the

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waiver of any right arising from their contract. Where the parties agree
that their agreement must be in writing, they may have one of two
possible intentions. (The first is presumed if no clear intention is evident.)
Either their agreement is reduced to writing merely to facilitate proof of
its terms, in which case the contract is binding immediately, or their
agreement acquires legal effect only once it is reduced to writing and
signed by the parties.

A non-variation clause prescribes formalities (usually writing) for any

variation of the contract. Such a clause is not against public policy; it is
valid and enforceable if it entrenches both itself and the other contractual
terms against oral variation. This is known as the Shifren Rule or Shifren
Principle. The Shifren case was not given to you in the Casebook, but
the information in your prescribed book about the operation of such rule
is sufficiently clear and should be enough.

You may however need to deepen your understanding of the rule by

reading further in the South African Law Journal some articles by Dale
Hutchison and others on the issue.

Examples: Louise Tager , “The effect of non-variation clauses in

contracts”, (1976) 93 SALJ 423; Tukishi Manamela „ “The enforcement
of an oral pactum de non petendo where a contract contains a non-
Example variation clause” (2001) 13 South African Mercantile Law Journal 655;
Dale Hutchison, “Non-variation clauses in contract: Any escape from the
Shifren straitjacket?” (2001) 118 SALJ 720.

A non-cancellation clause inserted into a contract is valid and

enforceable, but it is normally restrictively interpreted. It applies only to
consensual cancellations. To be effective, therefore, a non-cancellation
clause must be coupled with a non-variation clause. A non-waiver clause
is also valid and enforceable, but it is restrictively interpreted as well.

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Unit Summary
In this unit you learned

That there are no formalities in formation of contract except if they are

required by law (statute), or if the parties have chosen to integrate formalities
in their contract.
Summary
If the parties have chosen to use formalities, then normally the contract will be
in writing; the same as where the formalities are imposed by law. But where
the parties have chosen formalities, h=any variation of the written terms not
complying with the writing may not be valid despite the parties having
unintentionally agreed to the variations. You also have learned the problem
arising from variation of contract and waiver of rights in the application of the
Shifren rule.

References

References
Christie, RH (2006). The Law of Contract in South Africa 5th ed.).
LexisNexis/Butterworths.
Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,
References Durban, LexisNexis.
Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in
South Africa, 3nd Edition, Oxford University Press.

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UNIT 11

Legality

Introduction
You will also learn other types of illegalities such as “pactum de quota
litis” and “pactum successorium”.

You will learn that the rationale of the illegality rule is to avoid a party
going to court with dirty hands and therefore abusing the law

After you studied this unit, you should be able to:

§ explain what is meant by the contract is unforceable

§ explain the rules “ex turpi causa no oritur action” and the “pari
delictum”. rule.
Outcomes
§ explain what is a wagering contract, and what is effect in law is

§ describe other types of illegalities

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UNIT 11 Ticket Cases

Prescribed reading: Hutchison & Pretorius, The law of Contract in South

Africa, Chapter 7.

Please note that you should spend about 2 to 3 weeks in this Unit.
Prescribed reading
You must read the following cases in this Unit:

Advtech Resourcing (Pty) Ltd V Kuhn And Another 2008 (2) SA 375
(C). Casebook page 426.

Bafana Finance Mabopane v Makwakwa and Another 2006 (4) SA 581

(SCA). Casebook page 446.

Osman v Reis 1976 (3) SA 710 (C).

Casebook page 455.

Klokow v Sullivan 2006 (1) SA 259 (SCA).

Casebook page 460.

Sunshine Records (Pty) Ltd V Frohling And Others 1990 (4) Sa 782 (A).
Casebook page 469.

HX=(Namibia) Moolman & Another v Jeandre Development CC 2016 (2)

NR 322 (SC). Casebook page 483.

Sasfin v Beukes -1989 (1) SA (1) SCA.

Casebook page 504

HX=(Namibia) Stat illegality-=Marot & Others v Cotterell 2014 (2) NR

340 (SC). Casebook page 426

Automotive Tooling Systems v Wilkens 2007 (2) SA 271 (SCA)

Casebook page 529.

1 General observations
Legality is one of the pillars of contract law, alongside with “consent,
capacity, possibility and certainty”. In essence for a contract to be valid
and enforceable, it must not contradict any principle of legality. Its terms
must comply with the law of the land. Both the terms of the contract and
its performance must be legal. If its terms or its performance is illegal,
then such contract is either invalid or is unenforceable. The law regards
illegal or unlawful contracts either as void and thus unenforceable, or as
valid but unenforceable. The concept of legality in case law often appears
in its negative form “illegality”. Illegality as you might have studied in
constitutional law and other subjects can appear in different forms,
amongst which are “statutory illegality”, “common law illegality”,
“against public policy” and “against good morals” (Contra boni mores)”.

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Because the basic principle of contract law is “pacta sunt servanda” (or
sanctity of contract”, which means that agreement seriously concluded
should be enforced (if not enforced by the parties themselves, it must be
enforced by court action), then it is expected that such agreements must
first comply with the law for them to be enforced by court action. If the
agreement is detrimental to the interest of the community as a whole,
whether they are contrary to the law itself, or are against good morals or
the run counter to the recognized social or economic expediency or they
infringe the public policy, then such agreement cannot be enforced in
court of law. Thus from the Roman times, the maxim applicable in cases
of illegality is “ex turpi causa non oritur action” ((is Latin which means
"from a dishonorable cause an action does not arise"). This is a legal
doctrine which states that a plaintiff will be unable to pursue legal
remedy if it arises in connection with his own illegal act.

This Latin maxim “ex turpi causa non oritur action” refers to the fact
that no court action may be founded on illegal or immoral conduct. Thus,
of an illegal cause there can be no lawsuit.

The basic reasoning behind this maxim is that for a plaintiff to invoke the
protection of the law, he/she must first himself abide by the law. If he/she
dos not abide by the law, then the court will not entertain his/her action
which is already in violation of the law. In essence, if the court were open
to hear such case, then the plaintiff effectively would be saying: ‘I can
break the law; if things go wrong, then I can go to court and invoke the
law to protect me”. In other words, the plaintiff would be making
mockery of the law.

The basic assumption in the “ex turpi causa non oritur actio” maxim is
that the plaintiff is the one who has committed an illegal act or wants an
illegal performance of the contract. The plaintiff will want an
enforcement of the “said” contract in court because he/she feels
aggrieved. But it mau happened that both the plaintiff seeking
enforcement of the contract and the defendant (respondent under such
enforcement), may have been both parties to the illegality itself. In such
case then the second maxim would be applied: in pari delictum portior
est condictio possidentis (defendentis). This is Latim maxim which
translates as “in equal fault, better is the condition of the possessor” (or
the defendant).

The pari delictum (abbreviated) rule means, when the parties are equally
at wrong, the condition of the possessor is considered to be better. Simply
put, it means a person in a wrongful act cannot sue another person in the
same wrongful act. When two parties have equally wronged, courts will
generally not interfere with the status quo, which is the reason why the
possessor is at benefit. The doctrine is also known as the dirty hands or
unclean hands doctrine. Said differently, if you want the court to hear
you case, you must have your ‘hands clean’ in law. If your hands are
‘unclean’, then you must first wash your hands before coming to court
(i.e. You must first comply with the law to invoke the protection of the
law).

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Because of the application of the ex-turpicausa rule, the loss falls with it
currently is. If you break the law and in the process you suffer loss, then
you must just sustain your loss because it resulted from breaking the law.

In Jajhbay v Cassim case back in 1939 the ex-turpicausa and the pari
delictum rule were enforced strictly.

However, the strict enforcement of the pari delictum rule may lead also to
one party breaking the law, exactly making mockery of the law itself
because in such scenario such party will greatly benefit by the inaction of
the law.

The Jashbay v Cassim 1939 AD 537 facts were in brief as follows: “A”
the lessor, had let a flat to “B” the lessee. At somepont “B” the lessee
failed to pay his rent. Then “A” approached the court for an eviction
order against “B”. At this action, then “B” alleged that “A” could not
obtain an eviction order against him, because “A” was letting a property
that belonged to the government in violation of the Statute. He was not
authorized to let such property nor did the government know that “A”
was indeed letting the property. But at the time of the action, “B”, in
order to be in better position, had already settled his arreas. Then “A”
also alleged that “B” all along knew that “A” was acting illegally.
Therefore, “A” argued for the court not hear “B”’s defence either,
because “B” had no clean hands. The court strictly applied the maxim “in
pari delictum portior est conditio possidentis” (defendentis).

In Jajbhay v Cassim, the Supreme Court, while affirming the principle

underlying the par delictum rule ─that courts must discourage illegal
transactions ─nevertheless recognised that its strict enforcement may
sometimes cause inequitable results between parties to an illegal
contract. To prevent inequities, therefore, it thus enunciated the principle
that the rule must be relaxed where it is necessary to prevent injustice or
to promote public policy. One such instance where the rule would be
subordinated to ‘the overriding consideration of public policy’ was where
the defendant would be unjustly enriched at the plaintiff’s expense. The
approach that commended itself in Jajbhay was that: “...(W)here public
policy is not foreseeably affected by a grant or a refusal of the relief
claimed...a Court of law might well decide in favour of doing justice
between the individuals concerned and so prevent unjust enrichment.

Please note “the small difference in the maxim: “in pari delictum portior
est conditio possidentis” and “in pari delictum portior est conditio
defendentis”. In case law sometimes the courts use the version ““in pari
delictum portior est conditio defendentis”, which is the English law
version. Our law should normally use the version ““in pari delictum
portior est conditio possidentis”. The difference is very small. The
English law assume that the person in better position is the ‘defendant’.
But that may not necessarily always be the case, although most of the
time it is. In our law we say the “possessor” is in better position,
regardless whether he is the defendant or not.

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Exercise:

Contrast the brief facts of the Jashbay v Cassim 1939 AD 537 case given
Activity to you above with the case Klokow v Sullivan 2006 (1) SA 259 (SCA)
(Casebook page 460). Please read fully this case. It does give you an
exposition of the Jashbay v Cassim case. After reading this case, also
read the case of Bafana Finance Mabopane v Makwakwa and Another
2006 (4) SA 581 (SCA). Read careful the reasoning of the courts in these
cases.

2. Some other illegal contracts:

[i] =Pactum de quota litis (agreement to benefit from the proceeds of the
litigation). This agreement is illegal. As lawyer, for example, you cannot
enter into agreement with a client to share the proceeds of the litigation.
As lawyer, you must charge your client according to the tariff of the law
society. Example if you work 10 hours in a case, and your fees are N$
1000 per hour, you can only bill the client N$ 10 000. If the case you are
representing the client, the client would recover N$ 2 000 000 (two
million), you can bill the client N$ 100 000 or N$ 200 000 for just
working 10 hours.

Please note that the position in your prescribed book in Contingency Fees
is not applicable to Namibia. It is only applicable in South Africa under
their Contingency Fees Act. We do not have an equivalent Act in
Namibia.

[ii] =Pactum successorium– this is an agreement to succeed by contract

on the deceased estate. If the person is dying you cannot enter into
contract with him/her to succeed to his estate. It is illegal under common
law. The person is free to dispose of his estate as he wishes and to
whoever he wishes to do so. It cannot be done by contract. He/she must
dispose of his/her estate of his/her free will.

[iii] =Contract against bonos mores (against good morals). Most of the
case law about performance contra bonos mores involves immoral or
sexually reprehensible conduct. The legislator sometimes expressly or
impliedly prohibits the conclusion of certain contracts. Since 1990, public
policy in Namibia has been anchored primarily in the values enshrined in
the Constitution. The courts use their power to strike down a contract as
contra bonos mores only sparingly and in the clearest of cases. It is
required that the general tenor of the contract be contrary to public policy.
But cases of contracts against good morals are not limited to immoral or
sexually reprehensible conducts.

“The concept of good morals rather relates to fundamental values of

society and is not of a purely legal nature. It includes basic legal, as well
as economic, ethical, moral, and social values that the individuals of the

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relevant community generally consider binding and crucial for their

peaceful coexistence in that community. Such fundamental values of
morality and justice arise from and are based on a broad social consensus
and thus shape the morality of a community. Good morals, therefore,
involve a broad and objective standard. They relate to the social morality
of a community, not to the individual morality of the judge or arbitrator
who decides a given case”. (Extract from Commentary to Trans-Lex
Principle , https://www.trans-lex.org/937000").

[iv] =Restraint of Trade Contracts. In principle in our law, these

contracts are prima facie valid, since the Magna Alloys case, if the person
freely entered into such contract. Obviously it does not mean that one
person can willy-nilly restrict another person’s freedom of trade. It
simply means that if a person enters a restraint of trade contract, and
subsequently he/she does not want to continue into that contract, the
contract denier must prove to the court the alleged illegality of such
clause or ‘contract’. The courts will not presume the invalidity of the
contract just because one person alleges it to be so. Therefore, the onus of
proof of illegality and invalidity befalls on the contract denier.
[v] =Gambling contracts and wagers (Wagering contracts).

Originally under Roman and Roman-Dutch law gambling contracts and

wagers were said to be ipso facto invalid. Wagers are contract of a
chance. A wager is an agreement under which each bettor pledges a
certain amount to the other depending on the outcome of an unsettled
matter. A wager is matter bet on; a gamble, or is something that is staked
on an uncertain outcome. Because of this nature, it was said to be invalid.

However with the passing of time, and the increasing licensing of some
gambling activities, such contracts have been refined, and in essence they
may be either valid and enforceable or valid but unenforceable. Because
some gambling activities are licenced, the situation now generally stands
as follows:

Debts arising from licensed gambling activities are valid and fully
enforceable in law.

Debts arising from unlicensed lawful gambling activities are valid and
enforceable if the parties have an independent interest besides the
outcome of the wager. If they do not have such an interest, the debts are
valid but unenforceable.

Debts arising from lawful informal bets are valid, but unenforceable.

Debts arising from unlawful gambling activities are almost certainly void,
as are debts from gambling activities of minors or persons excluded from
participating in gambling.

Wagering Contracts: (Additional Remarks).

The Common law (Cont)

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Examples to illustrate the above proposition:

§ For example, parties to an insurance contract have no intention to bet
on the question whether the insured house will burn down, but rather
intend to guard against just such a possibility. Thus insurance in this
example, is intended as a method of protecting the interest of the
person insured.
§ Another example is where parents promise their daughter a motor car
if she passes her examination.
§ In this example, this is usually a conditional donation, because the
parents have the independent interest to encourage their daughter to
study.
Examples to illustrate the above proposition:

Wagering contracts are not illegal or immoral as such, but usually they
are against the pubic interest and usually unenforceable.

The reason why wagering contracts are unenforceable is that they

encourage wastefulness and prodigality., which have harmful
consequences for the individual, his/her family and the society in general.

NB: Under common law, a gambling debt can be validly discharged and
ceded, but cannot be directly enforced by way of an action. It also cannot
even be enforced indirectly, such as by way of a claim on the novation of
gambling debt.

NB: Under common law, a gambling debt can be validly discharged and
ceded, but cannot be directly enforced by way of an action. It also cannot
even be enforced indirectly, such as by way of a claim on the novation of
gambling debt.

What is a novation? (See further details on novation in the Unit on

Termination of Contracts).

A novation is a an agreement between the creditor and the debtor to an

existing obligation (gambling debt) whereby the old debt between the
parties is extinguished and a new obligation is created in the place of the
old one.

It is however uncertain whether a wagering debt is capable of being set-

off against another debt.

[Viii] =Contracting with the Enemy:

Normally in times of conflict it would be illegal to contract with the

enemy. But this can also apply in peace time. For example, it would not

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UNIT 11 Ticket Cases

be legal to contract with terrorists, although we are not in war. It is also

illegal to deal with “uncut diamonds” in Namibia unless you are licenced
to do so.

[ ix]= Other Statutory illegalities:

Contract to sale farm land to foreigners without authorization from the

relevant Minister are also illegal in Namibia. Therefore such contract are
void.

See Moolman and Another v Jeandre Development CC 2016 (2) NR 322

(SC). “Casebook page 483”.

Unit summary
Legality is one of the pillars of contract law, alongside with “consent,
capacity, possibility and certainty”. In essence for a contract to be valid
and enforceable, it must not contradict any principle of legality. Its terms
must comply with the law of the land. Both the terms of the contract and
its performance must be legal. If its terms or its performance is illegal,
then such contract is either invalid or is unenforceable. The law regards
illegal or unlawful contracts either as void and thus unenforceable, or as
valid but unenforceable. The concept of legality in case law often appears
in its negative form “illegality”. Illegality as you might have studied in
constitutional law and other subjects can appear in different forms,

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References

Christie, RH (2006). The Law of Contract in South Africa 5th ed.).

LexisNexis/Butterworths.

References Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,
Durban, LexisNexis.
Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in
South Africa, 3nd Edition, Oxford University Press.

H L MacQueen and A Cockrell, ‘Illegal contracts’, in R Zimmermann, D

Visser, and K Reid (eds), Mixed Legal Systems in Comparative Perspective:
Property and Obligations in Scotland and South Africa (Oxford, 2004
Van Kooten H J, ‘Illegality and restitution as a matter of policy
considerations’, [2001] 9 Restitution Law Review 67-75.

Alfred Cockrell, (1997) ‘Second-guessing the exercise of contractual power

on rationality grounds’, (1997) Acta Juridica Vol. 26 at 31-43.

Zweigert K and Kötz H, Introduction to Comparative Law (3rd revised edn,

trans T Weir, 1998), pp 380-382.

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UNIT 12: Ticket Cases

UNIT 12:

Possibility

Introduction

You will learn that the basic applicable rule on impossibility is

“impossibilium nulla obligation est”. Therefore the contract is
invalid.

You will learn that there are various types of impossibility, but
that the first division is in two categories: “pre-existing
impossibility” and “subsequent impossibility”.

You will learn that some types of impossibility do not vitiate the
contract, and it will still be enforced.

After you studied this unit, you should be able to :

§ explain the various types of impossibility

§ outline the types of impossibility that do not vitiate the contract

Outcomes § differentiate between the application of the rule of impossibility in

our law and in common law systems.

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Prescribed reading: Hutchison & Pretorius, The law of Contract in

South Africa, Chapter 8.

Cases: Novick v Comair Holdings Ltd 1979 (2) SA 116.

Prescribed reading Casebook page 380.

Scoin Trading (Pty) Ltd v Bernestein NO 2011 (2) SA 118 (SCA).

Casebook page 583.

1.Introduction
While in some legal systems, “impossibility in contract law is an excuse
for the non performance of duties under a contract, based on a change in
circumstances (or the discovery of pre-existing circumstances), the non
occurrence of which was an underlying assumption of the contract, that
makes performance of the contract literally impossible”; in our law we
state the rule more clearly as “impossibilium nulla obligation est”, which
means, where there is impossibility the obligation does not arise.
Therefore, impossibility is not a mere excuse for non-performance of a
contract, but it makes the contract itself to be invalid for luck of
possibility of performance.

However in our law we do distinguish impossibility in two different

categories:

Pre-existing impossibility and (b) subsequent impossibility.

The rule “impossibilium nulla obligation est” presupposes that the

impossibility existed at the time of the conclusion of the contract.
Therefore is such impossibility preceded the contract, then the obligation
does not arise. However, if the impossibility was subsequent to the
conclusion of the contract, then we say that the obligation that arose
under a contract that subsequently is hit by impossibility, such obligation
falls away; that is to say, it is terminated by operation of law. The end
result is obviously the same. Because the obligation falls away, non
performance is due under such case.

While pre-existing impossibility automatically discards the contract,

subsequently impossibility does not automatically terminate all the

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obligations. It depends on various factors.

Thus, subsequently impossibility is classified as

§ Subjective impossibility versus Objective impossibility
§ Total impossibility versus partial impossibility.
§ Temporary impossibility versus permanent impossibility.
§ Factual impossibility and practical impossibility.

Legal impossibility raises a fundamental question. As seen in the Unit on

Illegality, it is a requirement o a valid contract that performance should
be lawful or legal. If at the time of the conclusion of the contract, it is
legally impossible to render performance, the question arises is whether
the contract is void due to non-compliance with the requirement of
possibility, or is it void due to non-compliance with the requirement of
legality? Because the impossibility flows from the illegality, it is
probably more appropriate to say that the legality requirement has not
been met. But case law is not clear cut on this issue. For example in
Wilson v Smith 1956 (1) SA 393 (W), it was indicated that the distinction
can be subtle. In that case it was not possible, as matter of law, to
subdivide the property. The performance promised by the seller was
illegal. Yet, the case was dealt with as one of impossibility, and not
illegality.

In these various scenarios the consequences of impossibility vary. Not all

cases it will be said that the obligation falls way.

Exception to the rule “impossibilium obligation est”.

First is “warranty” or guaranteeing performance; (ii) contemplation of

impossibility; (subjective impossibility); relative impossibility; partial
impossibility; temporary impossibility; (vi) assumption of risk; (vii)
divisibility of performance; (viii) ‘impracticability’; (ix) contemplation of
impossibility and assumption of risk, and (x) making performance
impossible; i.e., part alleging impossibility at fault.

Please note that the Scoin Trading (Pty) Ltd v Bernestein case deals with
two issues. One is mora debitoris (late payment) by the executor on the
interest payment and the other the aspect of impossibility, because the
debtor had died. You should read again this case under Breach of contract
Unit.

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ASSIGNMENT NUMBER 3.

Read the case Scoin Trading (Pty) Ltd v Bernestein NO 2011 (2) SA 118
(SCA).
Case Study /
Example
Discuss the following issues:

It is evident that one of the contracting parties had died, and on that
ground, the contract, by law had fallen away (i.e. terminated by operation
of law). However the obligation assumed prior to death and which were
in mora (delay) in performance, should have continued; as indeed they
continued.

Reading however the case, the court apparently deals with the concept of
“mora”; delay in performance also by the executor.

Analyse on what ground the court dealt with the concept of ‘mora’ if the
other contracting party had died. The person who was dealing with the
deceased estate is the executor. The executor however, is not a
contracting party between the original contractors. He is also not a third
party beneficiary. So, on what ground the concept of mora debitoris
applied to the executor if he wasn’t party to the contract?

On the issue of interest (interest in money), was the executor assumed to

have invested the money? If he was not the original debtor, on what
ground a claim of interest would apply against him?

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UNIT 13:

Contractual Capacity

Introduction
You will learn that natural persons have contractual capacity if they are
majors.

You will learn that the contractual capacity of juristic persons derive from
the founding documents of that juristic person, or in the absence of it, by
other means

After you studied this unit you should be able to :

§ difference between legal capacity and contractual capacity.

§ explain when it is allowed to use a representative in a contract

Outcomes § explain the relationship between contractual capacity and the effect
of insolvency of a person.

Prescribed reading: Hutchison & Pretorius, The law of Contract in South

Africa, Chapter 5.

Prescribed Cases: None

Prescribed reading

1. What is mental capacity?

For a person to have contractual capacity, he/she first must have ‘mental
capacity’ in the first place. To this mental capacity, then additional
elements will be required.

Grammatically “mental capacity” is a noun and it is understood to mean

as “the degree of understanding and ability to comprehend and remember
a situation in which one finds oneself; understanding the purpose and

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consequences of an act or transaction to which one agrees or enters into”,

or “the minimum degree of understanding required by law for an person
to be charged with responsibility for an act or transaction”.

2.Legal capacity of natural persons and legal capacity of juristic

persons.
In law there are two types of persons: Natural persons and juristic
persons. Legal personality of a natural person starts at birth, while a
juristic person acquires its personality by operation of law according to
the act creating it. Legal personality does not automatically entail
contractual capacity.

The legal capability to form a binding contract. A number of classes of

people lack contractual capacity, and these include minors, the mentally
challenged, those under the influence of an intoxicating substance and
incarcerated convicts; prodigals and insolvent persons.

The law typically recognizes these classes of individuals who are, in

general, not regarded as having a great enough understanding or mental
capacity to be bound by a legal agreements. These individuals normally
include:

Mentally impaired or Incompetent person – any individual in a state of

arrested or incomplete mental development, which may include
impairment of intelligence and social functioning.

Minors – any individual under the legal age of 18 years.

Intoxicated persons, or persons under the influence of any substance

– any individual who has ingested, or is otherwise subject to severe
influence of, alcohol, drugs, medications, or other substances, whose
judgment may be impaired, may lack contractual capacity.

Prodigals & 5. Insolvent persons.

For minors a please note the difference between infants and other minors
above certain age. Although minors do have legal personality (as are all
other persons listed above), they lack contractual capacity because they
cannot appreciate the consequences of their action. In orders works they
may say “yes” to an agreement, but because they cannot understand in
full the consequences of that “yes”, in effect, the law regard that yes, as
not having been given. Generally for them to contract, they must be
assisted by a guardian or another competent person such as a fiduciary in
cases of Trust.

For mentally impaired persons (not minors), the basic reason for being
classified as such is their ‘level of developmental or intellectual
disabilities (deficiency). Such level of deficiency is sometimes referred to
as “mental retardation”. While some of such persons live on their own
and may hold jobs, a great deal of effort goes into adapting to an

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independent lifestyle. Whether or not such an individual has the mental

capacity to enter into a legally binding contract is a matter taken
seriously, and considered on a case-by-case basis by the courts. Some
individuals with developmental disabilities have a guardian (sometimes
also called “tutor” or “conservator”) who is allowed to make legal
decisions and sign legally binding documents on behalf of the disabled
person.

Please note that with the exception of minors, any other party to a
contract only later deemed to lack contractual capacity will not
automatically freed from his duties under the agreement. On evaluation
the situation after such an allegation, the court will often take into
account the series of circumstances under which the agreement was
concluded. For instance, a written agreement will be deemed to be
potentially voidable if one contracting party was intoxicated or under the
influence of drugs at the time the agreement was made and the document
signed. The intoxicated party may, at a later time, have the right to void
the contract, especially if the other party knew he was impaired at the
time of the agreement, or had the intent to take advantage of the
intoxicated party. Obviously in such cases evidence of intoxication will
need to be proved, for example by credible witnesses.

Please note “prodigal” in contract is not exactly the same as the term
“prodigal son” in the bible, although there might be some similarities.

In the bible “prodigal son” is character in a parable Jesus told to illustrate

how generous God is in forgiving sinners who repent. The Prodigal Son
was a young man who asked his father for his inheritance and then left
home for “a far country, and there wasted his substance with riotous
living”.

A prodigal, in private law simply means a person who, although of full

age, is incapable of managing his/her own affairs and the obligations
which attend to him/her and in consequence of such ‘bad conduct’ a
curator is appointed to manage his/her affairs. A prodigal is a person who
carelessly, foolishly, recklessly and freely spends his/her money, time, or
uses his resources freely and recklessly.

3. Limited contractual Capacity.

Although married person have their natural contractual capacity, such
contractual capacity may be curtail by the regime of their marriage. Thus,
persons married in community of property must obtain the consent of the
other spouse for certain, specified transactions. In this respect we say that
‘married persons have ‘limited contractual capacity’. In the same vein, if
an estate goes insolvent, then trustees of an insolvent estate must be
appointed. But such trustees must act on behalf of insolvent estates;
therefore their contractual capacity is also limited.

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4.Legal capacity of juristic persons.

“Capacity to act” refers to the capacity to perform valid juristic acts, for
example to conclude contracts. Only natural persons are potentially
capable of performing juristic acts. Therefore, a natural person must
conclude a contract on behalf of a juristic person.

But a juristic person has a separate existence from a natural person. While
in normal context when a natural person contracts, he incurs personal
liability and duties under such contract, when a ‘natural person’ contracts
on behalf of a juristic person, he does not incur personal liability in his
capacity as natural person, but binds the juristic person to such liability.
Therefore a natural person acts as ‘representative’ of the juristic person
when he contracts. In order to do so, he must have a ‘mandate’ from the
juristic person to act on its behalf, and must act within the powers
conferred upon him/her by the juristic person. If he acts beyond such
powers, then his/her acts are said to be ‘ultra vires’ and potentially
invalid.

Juristic persons, including companies, close corporations, statutory

entities and certain voluntary associations, are represented by authorised
natural persons. The state may generally enter into contracts just like any
other person, but its capacity to bind itself and its freedom to exercise its
contractual powers may be limited by principles of public law.

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Unit Summary
In this unit you learned that

All persons, whether natural or juristic, have passive legal capacity

and can therefore bear rights and duties, but not all have contractual
Summary capacity, which enables persons to conclude the contracts by which
those rights and duties are conferred. Natural persons can be
divided into three groups:

1. All natural persons, as a general rule, have full contractual

capacity.
2. Persons without any contractual capacity, such as infants, and
some mental health care users and intoxicated persons, must be
represented by their guardians or administrators.
3. Persons with limited contractual capacity include minors. They
require the consent or assistance of their parents or guardians, or
of another person such as the Master of the High Court or a court
order for specific transactions. A court may grant restitution to a
minor where a contract is detrimental to him. Persons married in
community of property must obtain the consent of the other
spouse for certain, specified transactions. Trustees must act on
behalf of insolvent estates.

In the case of juristic persons, (which including companies, close

corporations, statutory entities and certain voluntary associations),
are represented by authorised natural persons. But these natural
person must always act within the mandate conferred to them by
the juristic person. The state may generally enter into contracts just
like any other person, but its capacity to bind itself and its freedom
to exercise its contractual powers may be limited by principles of
public law.

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References

Christie, RH (2006). The Law of Contract in South Africa 5th ed.).

LexisNexis/Butterworths.

References Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,
Durban, LexisNexis.
Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in
South Africa, 3nd Edition, Oxford University Press.

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UNIT 14: Ticket Cases

UNIT 14:

Contractual Certainty

Introduction
After you studied this unit,you should be able:

§ discuss certainty of contract;

§ discus why the certainty of sale is important ;

Outcomes § give some requirements of the contract;

Prescribed reading: Hutchison & Pretorius, The Law of Contract in

Prescribed reading South Africa, Chapter 8.

Prescribed cases:

NBS Boland Bank v One Berg One Berg River Drive CC 1999 4 SA 928
(SCA). Casebook page 529.

Full case name: (NBS Boland Bank Ltd v One Berg River Drive CC;
Deeb v ABSA Bank Ltd; Friedman v Standard. Bank of SA Ltd 1999 4
SA 928 (SCA)).

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General comments
Alongside the elements of consent, legality, capacity and possibility, is
the requirement of certainty. A contract devoid of certainty is clearly
invalid. Therefore it has the same effect as a contract lacking consent. For
a contract to be valid there must be certainty on what is being agreed;
there must be certainty on the subject matter of the contract and its
elements and certainty on the performance required in the contract. The
contract that say “more or less this or that” is certainly not certain and
therefore invalid due to lack of certainty.

One clear area where the issue of certainty arises is in the contract of sale.
One of the requirements for a contract of sale to be valid is that there
must be a price for the object being sold/bought. The determination of
such price may be done by an exact number or by a formula. But if it is
by a formula, such formula must be readily reducible to an exact number.
If the formula cannot be easily converted to an exact ‘determination’ then
the contract can be said to be invalid due to vagueness., or lack of
certainty.

Certainty of price as a requirement for a valid contract of sale goes back

to Roman law.

Certainty of price: In Roman law, one of the essential elements of a

contract of sale was agreement on the price, which had to be certain.
Gaius (a Roman jurist) states in his Roman Institutes (Gaius , Inst 3 137)
that agreement on price is a requirement for a contract of sale and that the
price must be certain. Similarly, the requirement of certainty in price was
enshrined in the Roman Corpus Iuris Civilis(Roman Digest) . Gaius Inst.
3 135–140; D 18 1 2 1; D 18 1 8; I 3 22 1. In the Roman Codex (Digest)
(D 18 1 8; I 3 22 1 ) it is stated that a sale without a price is
unenforceable.

Many legal scholars argue such as Kerr, Kerr & Glover, Lötz, Howthorne
and Van der Berg argue that the provision in the Roman Digest (D 18 1
35 1) “uncertainty of price” must be interpreted to mean that the contract
is void.

Three main arguments may be identified to support such position and are
below, namely that a discretion to determine the price:

(a) excludes agreement on one of the essential elements of a contract of

sale;

(b) would allow for an unreasonable contractual imbalance between the

parties, and

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(c) amounts to a pure potestative condition.

Further reading:

Kerr & Glover (2000) South African law Journal 202–203; Kerr, Law of
Study skills Sale, p 58–59; Lötz (1991) De Jure 230 n 98; Hawthorne (1992) THRHR
639; Van den Bergh (2012) TSAR 61.

A discretion to determine the price excludes agreement on one of the

essential elements of a contract of sale One of the reasons advanced for
the rule is that where contracts are formed by agreement it is required that
parties agree on the essential provisions of the contract. This ensures that
they conclude a firm contract and that the transaction will not break down
subsequently because the price had not been determined (Thomas 1967
Tijdschrift voor Rechtsgeschiedenis 86).

Following this line of argument, Arangio-Ruiz (Arangio-Ruiz (1980) La

Compravendita in diritto Romano 141) believes that because one of the
essential elements of the sale (the price) is missing where a party is given
the discretion to determine the price, there can be no agreement.

This view is supported by Thomas ((Thomas (1967) Tijdschrift voor

Rechtsgeschiedenis 83), who argues that the term “imperfectum” has two
possible interpretations in the context of sale (Thomas 1967 Tijdschrift
voor Rechtsgeschiedenis, 88):

First, there is agreement on the subject and the price and therefore there is
a contract, but the agreement is subject to a condition which has not yet
been satisfied or fulfilled.

Secondly, there is no contract because the price or subject of the sale has
not been agreed and the contract is incomplete. ((Thomas (1967)
Tijdschrift voor Rechtsgeschiedenis, 88-89). Therefore, since the price is
uncertain when left to the discretion of one of the parties, the contract is
imperfect in the sense that it is incomplete and is therefore void.

Thomas argues that the question relates to “[completion] and not

[enforceability] of the contract” because without agreement on the price
there is no contract.

See generally Du Plessis HM, (2012) The Unilateral Determination of

Price in Contract of sale Governed by the Consumer Protection Act 68

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of 2008 (LLM Dissertation submitted to the University of Pretoria), pages

22-27.

Thus in law, the uncertainty whether it is related to price or any other

element essential to the contract, would render such a contract to be
invalid, if a proper determination of what was agreed cannot be reached.

In general terms, a contract can is defined as “an agreement made with

the intention of creating an obligation or obligations”.286 In other words,
the parties must have the intention to be bound by the terms of the
agreement. Therefore, the enforcement of such agreements will be
possible only if the obligations that the parties are binding themselves to
are certain or can be ascertained (Hutchison & Pretorius (2012), 218). As
such, it is an accepted legal principle that the terms of a contract must
result in certainty regarding their legal consequences (Hawthorne (1992)
THRHR 638). This usually implies that the parties must clearly state the
material aspects of the obligations and how they should operate (Du Bois
et al (eds) (2007) Wille’s principles of South African Law 754). No
contract can exist if the agreement is so vague that its material aspects
and obligations cannot be determined.
In NBS Boland Bank case the court stated the following:

A recurring theme in those cases in which it was held that the clause in
question is invalid is that a contract which empowers one of the parties
to fix a prestation is void for vagueness. With one exception that was
undoubtedly the view of Roman-Dutch law writers in regard to the
determination of the price in a sale and the rental in a lease.

In his commentary on the above extract, Kerr remarks that there is no

reference in Roman-Dutch law supporting the view that a contract
allowing for the determination of the price by one of the parties is void
for vagueness. However, there are cases in South African law that do
support such a view and almost all of these cases cite Dawidowitz as
authority. This is probably because the first mention of vagueness in
respect of a discretion to determine the price is found in this case, where
the court stated as follows:

[I]f there is no price, there is no contract. If I say, for instance: ‘I will

buy your horse for what I think it is worth , or: for what I choose to pay
for it, 'there is no sale. This principle applies to every form of contract. If
a person who claims that he has made a contract proves that it depends
wholly on his own will what part of it he should perform, then according
to my view there is no contract; it is

void for vagueness (my emphasis).

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Unit Summary
In this unit you learned that

It is a general requirement for the creation of contractual obligations that

their contents must be certain, or capable of being rendered certain.
Courts generally try to interpret a contract as valid, rather than as void for
Summary
uncertainty. In some circumstances, obligations may be void for
uncertainty if they are pacta de contrahendo, or because they use vague
language or are of indefinite duration. The parties may agree on a
mechanism for determining what has to be performed. Where this
mechanism takes the form of a power granted to a third party, or possibly
even to one of the parties to determine what has to be performed, the
courts will (depending on the type of contract) uphold the contract,
provided that the power has been exercised reasonably.

An obligation that does not meet the certainty requirement is invalid.

Depending on circumstances, though, it may be severable from the rest of
the contract. A transfer made in purported fulfilment of an obligation that
is invalid for uncertainty can be reclaimed with remedies based on
unjustified enrichment. The reclaiming based on unjustified enrichment
also apply in all other circumstances leading to invalidity of contract such
as mistake, illegality, impossibility, lack of formalities, etc. Note however
that for voidable contracts you cannot reclaim the transferred benefits
under unjustified enrichment; but a contractual claim.

References

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Christie, RH (2006). The Law of Contract in South Africa 5th ed.),

Durban, LexisNexis/Butterworths.
References
Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,

Durban, LexisNexis.

Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in

South Africa, 3nd Edition, Oxford University Press.

Visser D, (2008) Unjustified Enrichment. Cape Town: Juta & Co.

Visser, D (1992), 'Rethinking Unjustified Enrichment: A Perspective

of the Competition between Contractual and Enrichment Remedies', Acta

Juridica 203-236.

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UNIT 15

Parties to Contracts

Introduction

You will also learn that where more than two parties conclude a
contract,
their involvement in sharing its rights and duties must be determined:
Thus you will be introduced to the concepts of Simple and joint liability,
several liability or entitlement, pro rata share or specific shares.

After you studied this unit ,you should be able to:

§ explain the concepts of Simple and joint liability.

Outcomes § explain learn about the notion of “stipulatio alteri” contract for the
benefit of third parties.
§ differentiate between intended beneficiaryand an incidental
beneficiary

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Prescribed reading: Hutchison & Pretorius, Chapter 9.

Cases: None (There are no prescribed cases for this unit. But your book
does refer you to some cases; just understand the principles enunciated in
Prescribed reading the book and the cases that it cites).

1. Parties to Contracts
A contract is an agreement entered into between two parties “A” and “B”
(or more than two parties). Because the contract entails consent, the basic
rule is that only parties privy to that consent are bound by the contract.
Thus a contract confers rights and duties on the privies, but cannot
impose them on outsiders (penitus extranei). Where more than two
parties conclude a contract, their involvement in sharing its rights and
duties must be determined. In this scenario we can have “simple joint
liability”, or other forms or entitlement that the contract confers on each a
pro-rata share: either in equal or, by agreement, in specific shares.
Where the parties have joint and several liability or entitlement, they may
be held liable or be entitled to any share of performance, or even the
entirety. Where performance is indivisible, be it by nature or by the
intentions of the parties, a plurality of parties leads to a collective joint
liability or entitlement.

Third parties may become involved in one way or another in the

contractual relationship between others:

Contract of agency: A principal may authorise his agent to represent

him in concluding a contract. Resulting rights and duties are conferred on
the principal (not the agent) and on the other contracting party. The
principal in such circumstances may be unidentified or even undisclosed.
(This, indeed, is often the very rationale for using an agent in the first
place.) The agent may only bind a non-existing principal, however, where
statute allows this.

2.Stipulatio alteri:
According to Justinian’s Institutes it is impossible to stipulate in favour of
a third party: alteri stipulari nemo potest. This rule implies that such a
contract, although not prohibited by law, simply has no effect. From other
texts in the Corpus Iuris Civilis it appears that this principle not only
applied to the verbal contract of stipulation, but also to other contracts,
pacts and clauses in favour of an absent beneficiary. At the same time, the
Institutes acknowledges two exceptions:

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UNIT 15 Ticket Cases

However, under Roman law, the stipulation in favour of a third party is

valid in the case where the stipulator has a monetary interest in the
performance for the third party, for example, when he stipulates payment
to his creditor in order to fulfill an obligation. The second exception
exists in the fact that adding a penalty clause renders the stipulatio alteri
valid. In both cases only the stipulator can invoke the contract. The third
party does not acquire a right. The Institutes contains yet another maxim
which is relevant for this issue, namely the rule that it is impossible to
acquire anything through an extraneous person, that is someone who is
not one’s slave or child under paternal control: per extraneam personam
nihil adquiri posse (See Jan Halebeek “Contracts For A Third-Party
Beneficiary: A Brief Sketch From The Corpus Iuris To Present-Day Civil
Law” (2007) 13) Fundamina 10-27 at page 13.

Stipulatio alteri (Cont):It is possible to conclude a third-party

contract (stipulatio alteri) for the benefit of a third party beneficiary
(alteri). The third-party beneficiary may claim the benefit only once he
has accepted it, and under the ius quaesitum tertio principle may sue for
performance.

The concept of obligation as being a strictly personal bond between the

two parties who had concluded the contract found highly characteristic
expression in the fact that Roman law did not recognize contracts in the
favour of third parties, direct agency, and the cession of rights…. The
Roman expressed this concept this way: Alteri stipulari nemo potest:

A third-party beneficiary, in the law of contracts, is a person who may

have the right to sue on a contract, despite not having originally been an
active party to the contract. This right, known as a ius quaesitum tertio,
arises when the third party (tertius or alteri) is the intended beneficiary of
the contract.

Delegation: - transfer of obligations (right and duties) to another person

either temporarily or for a longer period of time.

Cession: Contractual rights and obligations can be transferred from

one of the contracting parties to a third party by: This type of transfer is
known as Cession - transfer of rights. See details in a subsequent UNIT
below.

Please note that Assignment is the American term for cession:

combining cession and delegation

There are circumstances in which a person who is not a party to the

contract may perform on behalf of a debtor, or in which a debtor may
deliver performance to the third party.

Assessment

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Unit Summary
In this unit you learned that

A contract confers rights and duties on the privies (the parties to the
contract, say A & B), but cannot impose them on outsiders (penitus
Summary
extranei). Where more than two parties conclude a contract, their
involvement in sharing its rights and duties must be determined. Simple
joint liability or entitlement confers on each a pro rata share: either in
equal or, by agreement, in specific shares. Where the parties have joint
and several liability or entitlement, they may be held liable or be entitled
to any share of performance, or even the entirety. Where performance is
indivisible, be it by nature or by the intentions of the parties, a plurality of
parties leads to a collective joint liability or entitlement.

On the aspect of agency, you have learned that a principal may authorise
his agent to represent him in concluding a contract. Here although there
appear to be three parties in the process (the principal, the agent and the
other parties, in reality the contract is between the principal and the other
party. The agent is only an internmediary facilitating the process. Thus,
resulting rights and duties under this contract concluded through agency
are conferred by/and on the principal (not the agent) and on the other
contracting party. The principal in such circumstances may be
unidentified or even undisclosed.

You also learned that it is possible to conclude a third-party contract

(stipulatio alteri) for the benefit of alteri. The third-party beneficiary may
claim the benefit only once he has accepted it, and under the ius
quaesitum tertio principle may sue for performance.

References

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UNIT 15 Ticket Cases

Christie, RH (2006). The Law of Contract in South Africa 5th ed.),

Durban, LexisNexis/Butterworths.
References
Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,

Durban, LexisNexis.

Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in

South Africa, 3nd Edition, Oxford University Press.

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UNIT 16

Obligations and Terms

Introduction
In addition you will learn about terms in the contract such as “Essentialia,
naturalia and incidentalia”.
You will also be introduced to other terms, such tacit and implied terms
and conditions. Potestative and causal conditions. suppositions, modal
clauses, exemption clauses and non-variation clauses.
Finally you will learn about the narrow and ‘restrictive interpretation of
terms ‘contra preferens’ where the terms may be ambiguous.

§ explain the classifications of obligations ;

§ explain Essentialia naturalia and incedentialia ;

Outcomes § describe potestative and causal conditions ;

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UNIT 16 Ticket Cases

Prescribed reading: Hutchison & Pretorius, The law of Contract in South

Africa, Chapter 10.

Cases:
Prescribed reading
Stier and Another v Hanke 2012 (1) NR 370 (SC)

City of Cape Town v Bourbon-Leftley and Another NNO 2006 (3) SA 488
(SCA).

Overview of the Unit

OBSERVATION: In this unit you will learn the significance of various

terms and the different types of obligations. In order to properly
understand a contract, you need to dominate these various obligations and
terms and related issues. For example, the mere fact that parties have
Note it! /
agreed to do something, it does not per se entail that there is a contract in
Warning
the legal sense. Parties in such circumstances may have only assumed
moral obligations or natural obligations. For an agreement to be
enforceable into court, its terms must constitute a civil obligation. In this
case, the parties have duties and rights and such legal duties and rights are
enforceable in a court of law. The prescribed chapter in your “prescribed
book” gives you full details about these terms and obligations. You
should read it thoroughly alongside the cases mentioned in this Unit.

Please also note that this unit requires a fair amount of memory unlike
other units so far in this course reader.

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Mind Map to the Unit (16)

Obligations Terms
• Essentialia, Naturalia &
• = Classification of Obligations Incidentalia
• = Civil, natural & Moral • Express Terms
Obligations;
• = Reciprocal Obligations • Implied terms
• = Simple, Alternative,
• generic or Facultative
Obligations • Material terms
• = Divisible or Indivisible
Obligations • Time Clauses

Introduction

The subject matter of a contract is contained in the terms of an

agreement. These terms define and qualify the obligations a contract
creates.

1.Obligations
An obligation is a legal bond between two or more persons and comprises
both a right and a duty:

The debtor bears a duty to make the performance agreed upon.

The creditor has a right to claim that performance.

All contracts give rise to personal rights and duties, so that a right that
arises from a contractual obligation is enforceable only against the other
party to that obligation.

Classifications
As seen in Unit 2 above, obligations may be classified in various ways:

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Civil, natural and moral obligations

A moral obligation, such as the duty to fulfill a promise to join a friend

at the beach on Sunday for beach volleyball practice, is not regarded as a
legal obligation; it has no legal significance at all. The duty derives
merely from a social agreement, or from the dictates of one's conscience.

A civil obligation, most common in contracts. A Civil obligation is a

legal obligation enforceable by a right of action in court, so that, if the
obligation is not complied with, the creditor may sue the debtor for
breach of such an obligation.

A natural obligation, may not be enforced in a court of law, but it is not

without legal significance:

For example, if a person performs in terms of a natural obligation, he may

not later reclaim the performance on the basis that it was not owed. If
performance is made, it is regarded as having been owed.

Reciprocal obligations
Reciprocal Obligations are linked obligations, where one obligation is
owed in exchange for another: Most contracts entail reciprocal
obligations.

3.Other types of Obligations:

Simple, alternative, generic or facultative obligations.

Indivisible Obligations & divisible Obligations (these apply on the

performances of the obligations). .

Natural obligations may be set off against civil obligations.

Natural obligations arise when, for example, a minor concludes a

contract: If the other party is major or a juristic person, he is bound by a
civil obligation, but the minor is bound only by a natural obligation.
Another example would be a betting agreement or wager.

Simple, alternative, generic or facilitative obligations.

A simple obligation involves a performance that has been specified

exactly by the parties in their agreement. An alternative obligation is one
in which the parties agree that someone can choose a performance from
two or more specified alternatives. A generic obligation is one that allows
a party to choose a performance from a specified family of performances.
A facilitative obligation specifies the performance owed by the debtor,

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but gives the debtor the right to choose to make a different specified
performance.

4.Terms
Terms, then, are those stipulations in the contract that the parties have
agreed on, and that bind them to perform. The terms of a contract set out
the nature and details of the performance due by the party.

The parties to a contract frequently agree upon various modifications of

their implied rights and obligations. These pacts or stipulations may be
agreed upon orally, or they may be embodied in a written contract in the
shape of provisions of clauses. Such provisions are often loosely referred
to as ‘conditions’, but they are in fact not conditions at all; they are
merely ‘terms of performance’. The distinction between conditions and
terms is of the utmost importance, since they differ in their legal effect.

It remains the case in Namibia, however, that the word condition is very
loosely used in the drafting of contracts. In the following formulation—‘I
agree to donate N$50,000 on condition that...’—what we have is not a
condition but a modus or modal clause.

Essentialia, naturalia and incidentalia

The primary rights and obligations flowing from a particular contract are
those the parties have have agreed to.

According to the Roman-Dutch classification, then, terms may be

classified as essentialia, naturalia or incidentalia:

Essentialiaare distinctive terms used to identify or classify a contract as

one of the specific types of contract recognised by law.

Naturalia are terms automatically included, by operation of law (ex lege),

in any contract belonging to one of the classes of specific contract
traditionally recognised in Namibia. Naturalia are based on what is fair
and reasonable between contracting parties over contracts of that kind.

Incidentalia(or accidentalia) are all terms other than the essentialia and
naturalia: that is, additional terms agreed upon expressly by the parties
that supplement or modify the rights and duties incorporated by law into
a particular contract.

5.Other Modern Classifications:

Modern classification, as applied by the courts, generally favours the
distinction between terms express and implied. (See Kerr’s classification
below):

Express terms:Express terms are specifically and explicitly agreed upon

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by the parties, fixed by the actual agreement, and are either articulated in
an oral contract or written down. They are the most important terms in
the contract.

Signed contracts: caveat subscriptor

A person who signs a written contract is ordinarily bound by its terms in

terms of the maxim caveat subscriptor: let the signatory beware.

Standard-form contracts

Express terms in standardised contracts are dealt with differently from

express terms negotiated by the parties, in that a party presenting a
standardised contract to another for signature is expected to draw his
attention to any unexpected terms, failing which the signatory may not be
bound.(See for example Spindrifter V lester Donovan 1986 (2) SA 465
(A) and George v Fairmead 1958 (2) SA 465 (A) in your CASEBOOK
pages 82 & 74).

Unsigned documents

Express terms may also be incorporated into a contract by reference to

one or more other documents.

Ticket cases and notices (Unit 6 above deals with ticket cases).

A ticket, with express legal terms.

Express terms contained on tickets and notices that are posted up in

public places may also be binding, depending on whether the party
denying that he is bound by the terms was aware of their existence or
ought reasonably to have been aware of them in the circumstances.

Tacit contracts

Tacit contracts are inferred from the conduct of the parties and sometimes
may be controversial.

Implied terms

Implied terms are not explicitly agreed upon by the parties but
nevertheless form part of the contract. They are binding on the parties
without their having made any explicit agreement as to the points in
question. They are effectively naturalia and usually entail legal duties,
and in some cases may be varied or excluded by the parties, as in a
contract of sale voetstoots.

Terms implied ex lege

A term implied in law (a naturale) is one that the law, in the absence of
agreement to the contrary by the parties, and in some cases compulsorily,
attaches to the particular class of contract.

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A custom is a particular rule that has existed, either actually or

presumptively, from time immemorial in a particular locality, where it
has obtained the force of law despite conflicting with or not being found
in the general law of the land.

A term can be implied on the basis of trade usage, but such an implication
is made not in law, strictly speaking, but on the basis of the parties’
presumed intentions. Trade usages do not apply to a particular space; they
develop in a particular profession or trade. The trade usage to become a
custom must be: (i) Uniformly and universally observed (ii) Long
established; (iii) Reasonable, so that one would expect people in the trade
to be aware of it; (iv) Notorious; (v) Certain; (vi) Not in conflict with
positive law; (viii) Not in conflict with an express term of the contract.

Tacit terms
A term implied in fact is generally referred to as a tacit term. A tacit term
is a wordless understanding between contracting parties. These are terms
the parties must have had in mind but did not expressly articulate because
they are so obvious. A tacit term is implied where the contract is silent on
the point, but where it is clear that the parties intended to include the
term, and they would not have contracted other than on the basis of that
term. A tacit term, accordingly, has the same legal effect as an express
term. It is derived from the common (See example in you CASEBOOK
Stier and Another v Hanke 2012 (1) NR 370 (SC) and City of Cape Town
v Bourbon Leftley 2006 (3) SA 488 (SCA)- CASEBOOK pages 550 and
560).

6. Kerr's classification:
In addition to essentialia, naturalia and incidentalia, on the one hand,
and implied and express terms, on the other, Prof. AJ Kerr a deceased
professor of Rhodes University in South Africa offered another popular
classification of contractual terms. He divides them more narrowly:

A=Invariable terms are those that cannot be altered; no contract can

exist without them. There are two types: (ii) Essentials and (ii) Terms
imposed by statute

B=Express terms are those expressed by the parties.

C=Implied terms are implied between the parties. They are imposed on
the contract by implication.

D=Residual terms (ex lege) are implied by law. They apply to a contract
in the absence of invariable, express or implied terms, and exist outside
of the agreement.

7. Material terms
To determine the nature of the relief one party can claim on a breach of a
term by the other, the terms of a contract are sometimes distinguished as

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either ‘material’ or ‘non-material’. Generally, in the absence of a clause

that provides for cancellation (a lex commissoria), rescission of a contract
is permissible only if the breach in question is regarded as a material
breach, which is usually the case if it relates to a material (or essential or
vital term)—that is, one that goes to the root of the contract.

Material terms are those vital to the performance of obligations. The

breach of a material term entitles the innocent party to cancel the
contract. Breach of a non-material term gives rise to a claim for damages
only. (See Unit on Breach of Contract below). The distinction between
material and non-material terms applies to terms, whether they are
created expressly or implied.

Conditions
A condition in is a term that qualifies a contractual obligation so as to
make its operation and consequences dependent on the occurrence of
some uncertain future event. The event must be not only future but also
uncertain—something that may or may not take place. The fate of the
obligation depends on whether the event takes place or not.(Normally
contracts of insurance are dependent on a condition: for example, if you
have a car insurance, you can only claim under the insurance if your car
is either stolen or involved in accident, etc. If none of that happens, you
cannot claim under the car insurance).

Conditions are usually classified in three ways, by: (a) The effect of the
fulfilment of the condition on the obligation (whether, that is, it creates or
discharges the obligation); (b) The nature of the event attached to the
condition; (c) with whom lies the power to fulfill the condition.

The conditions can be either suspensive (or condition precedent) or

resolutive (a resolutive condition (or condition subsequent) or both.

A suspensive condition (or condition precedent), therefore, is one that

suspends the operation of the obligation until the condition is fulfilled.

A potestative condition depends for its fulfilment on one of the

contracting parties; it is entirely in the power of one of the parties.

Another example of a suspensive condition is a sale of a thing subject to

the thing’s being approved of by a third person.

a resolutive condition (or condition subsequent).

A positive condition depends on the occurrence of an uncertain future

event .

A causal condition depends for its fulfilment on some third party or

outside agency or event, like chance, and not upon the action of either
party.

A potestative condition depends for its fulfilment on one of the

contracting parties; it is entirely in the power of one of the parties.

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A potestative condition depends for its fulfilment on one of the

contracting parties; it is entirely in the power of one of the parties. An
example would be where Mark agreed to give his neighbour, Lewis, a
sum of money if Lewis would cut down a tree that obstructed his view. If
Lewis obliges himself to cut down the tree in return for the money, the
agreement is not conditional: Lewis is bound to perform his side of the
bargain. A pure potestative condition si volam, is that which reserves to
the promise maker an unlimited choice as to whether to perform or not
(example: “I shall give you N$1000 if I so wish”—clearly gives rise to no
obligation whatsoever, but the position is otherwise if fulfilment depends
on the will of the promisee (where, for example, Anthony gives Martha
an option to buy his farm). A potestative condition may be negative, as
where Anthony makes a gift to Martha on condition that Martha refrains
from doing something. A promise subject to a negative potestative
condition is exigible only at the death of the promisee, for only then is the
condition fulfilled.

Please read also “mixed condition” (which is composed of both the

elements “causal and potestative” nature.

The condition attached to the obligation must be possible.

8. Fictional fulfilment of conditions.

Time clauses
A time clause (dies) is a contractual term that makes the existence of an
obligation dependent on an event or time that is certain to arise in the
future. Such clauses may be either suspensive or resolutive:

An example of a suspensive time clause would be one that permits a car

buyer to take the purchased vehicle now, but only commence payment in
three weeks. In other words, the agreement suspends the date of payment
until a certain date in the future.

A resolutive time clause stipulates the duration of the contract, after

which it ceases. Although it comes into existence and is performed right
away, it will, at a certain future point, be resolved and the obligation
terminated. Lease contracts and fixed period contracts of employment are
common examples.

9. Other common contractual terms

Other significant contractual terms include suppositions, modal clauses,
exemption clauses and non-variation clauses.

Warranties
A warranty is a written assurance that some product or service will be
provided or will meet certain specifications. The relevant contracting

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party assumes absolute or strict liability for performance. A warranty

cannot be overridden by a voetstoots clause (voetstoots means “as it is”).

There are, generally speaking, three kinds of warranty:

(i) Express warranties. (ii) Implied warranties. (iii) Residual

warranties.

Exemption clauses

Exemption or exclusionary clauses are the opposite of warranties,

exempting persons from liability that would ordinarily apply to them
under the law, or limiting their liability. To be effective in a given
instance, such a provision must, of course, form part of the contract, and
also encompass the liability and circumstances at issue. The law must
also permit the alleged exemption or exclusion. Whether or not an
exemption or limitation forms part of a contract turns on whether or not it
has been agreed to, and usually depends on the operation of the doctrine
of “quasi-mutual assent” (apparent consent), which protects someone
who reasonably assumes that the other party assents thereto. The assent
may be indicated: (Example Trollip v Jordaan in your CASEBOOK,
page 96).

By a signature on a document (in which case the principle is traditionally

expressed by the phrase “caveat subscriptor”)

By conduct, which is the case where the clause appears, for example, on a
ticket or on a notice at the entrance to premises

Exemption clauses are commonly deployed by many large businesses for

the purpose of planning, to protection them from liabilities in order to
have power over variables that are otherwise uncontrolled. The courts
however regard exemption clauses with some suspicion, and therefore
they interpret them restrictively and they test them against the dictates of
public policy. (See for example, Barkhuizen v Napier, (CASEBOOK,
page 18).

Inequality of bargaining power is not in itself a ground for nullifying

exemption clauses; nor does the principle of good faith operate as an
independent criterion. A clause drafted in terms that exceed the bounds of
what is permissible is confined to those bounds, rather than invalidated.

Unit Summary

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In this unit you learned:

In this unity you have learned the nature of the obligations : natural,
moral and civil obligations. But only civil obligations are relevant to the
Summary
contract, because they attract legal liability. Other terms (moral and
natural, are important for other aspects of life, but they do not attract legal
liability. You also learned that obligations can be simple, alternative,
generic or facilitative obligations

You also have learned various terms that can be found in contract; but not
that all terms are present in a single contract. Some terms are imposed by
law, others are specific to the nature of a specific contract while others
may be agreed between the parties.

You also have learned that terms, are those stipulations in the contract
that the parties have agreed on, and that bind them to perform. The terms
of a contract set out the nature and details of the performance due by the
parties under the contract: that is, the nature and description of the
commodities or services to be rendered, and the manner, time and place
of performance. Not all terms are necessarily in the written contract itself.
Terms comprise both the stipulations that the parties include in their
contract, and those provisions included by law.

You also have learned that contracts do not have to fall into any particular
category, but certain traditional kinds are recognised, along with their
own particular rules and terms and consequences.

References

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UNIT 16 Ticket Cases

Christie, RH (2006). The Law of Contract in South Africa 5th ed.),

Durban, LexisNexis/Butterworths.
References
Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,

Durban, LexisNexis.

Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in

South Africa, 3nd Edition, Cape Town, Oxford University Press Southern
Africa. .
Zimmermann R, (1990) The Law of Obligations: Roman Foundations of
The Civilian Tradition, Cape Town, Juta & Co.
Vsser D, (2008) The Law of Unjustified enrichment, Cape Town, Juta &
Co. ,

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UNIT 17

Interpretation of Contract

Introduction

You will learn that the starting point in interpretation of contract is the
use of the ordinary meaning of the words- the grammatical meaning; the
various techniques used by the courts to try to arrive at an adequate
solution, such as integration rule, cannons of construction, etc

§ outline t he principles applicable in interpretation of contract, where

the contracts have been reduced to writing.

§ explain the cardinal principle in interpretation is to give effect to the

Outcomes intention of the parties.
§ explain the starting point in interpretation of contracts

§ describe the parol evidence rule mentioned earlier in this manual.

§ elaborate the secondary and tertiary rules of interpretation

Prescribed Reading: Hutchison & Pretorius, The law of Contract in South

Africa, Chapter 11.

Cases: Weidts v Goussard and Another 2016 (1) NR 169 (HC).

Prescribed reading Casebook Page 569.

City of cape Town v Bourbon-Leftley 2006 (3) SA 488 (SCA).

Casebook Page 560.

Coopers & Lybrand v Bryant 1995 3 SA 761 (A) Casebook

Page 781.

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Because many contractual disputes, perhaps the majority, arise out of

disagreement concerning the meaning of contractual provisions,
interpretation of contracts is an important area. Issues of interpretation
Reflection may involve “the law applicable to the contract”; the intention of the
parties; admissibility of extrinsic evidence; Terminological confusion;
Canons of construction; Disclaimers, indemnities and exemption clauses;
Subjective versus objective approaches to the idea of interpretation

1. The Law Applicable To Contracts

Sometimes a court is faced with a contract involving a foreign element:
for example, where the contract has been made in one country, but is to
be performed, wholly or partially, in some other country. The court then
has to determine which legal system governs the contract. This
determination is made by applying the appropriate conflict or choice-of-
law rule (private international law). The law that is actually held to be
applicable is known as “the proper law of the contract.”

In the Namibian legal system, the rule is that the proper or governing law
of the contract depends in the first instance on the express or implied
intention of the parties. If the parties have expressly agreed (usually by
means of a “choice-of-law” clause) that the law of a particular country
shall govern their contract, their choice normally prevails. Where there is
no such express agreement, circumstances may nevertheless be present
from which a tacit choice of law may be inferred (for example, where the
contract deals with concepts peculiar to a particular system), but such
cases are in the nature of things relatively rare.

Terms used in this regard include: the lex loci contractus), the lex loci
solutionis); the locus celebrate contractus

Lex loci contractus, is the law of the country where the contract was
made or signed.

Lex loci solutionis is the law the law of country where performance is to
take place.

Locus celebrate contractus, it has been argued that, in view of modern

methods of communication and international trade, the weight of the
locus celebrate contractus (locality where contract was entered into) in
assigning the governing law is diminishing.

The proper law of the contract governs virtually all aspects of the
contract, including its essential validity, nature, content, mode of
performance and interpretation. By way of exception, however, the
contractual capacity of the parties, together with the formalities of
execution, are governed by the lex loci contractus, unless the contract
concerns immovable property, in which case the law of the country where
the property is situated (the lex situs or rei situae) applies.

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The intention of the parties

The primary purpose of the interpretation of a contract, "is to give effect

to the intentions of the parties." The primary rule, therefore, is that effect
must be given to the parties' common intention: that is, to what both of
them intended on entering into the contract. Thus, the golden rule
applicable to the interpretation of all contracts is to ascertain and to
follow the intention of the parties. If, therefore, the contract or admissible
evidence gives a definite indication of the parties' meaning, the court
should effect that meaning. In essence this subjective undertaking is
generally understood to be the ideal in contractual interpretation.

However, where a contract has been put into writing, the language used
by the parties may be subsequently to be found to be vague or
ambiguous. Then a dispute may arise as to what the parties meant. Then it
becomes necessary to ascertain what in fact they did intend. In
ascertaining their intention various rules or canons of construction are
employed. The chief of these rules are as follows: (i) Primary rules on
interpretation; (ii) Secondary rules of interpretation and (iii) Terciary
rules of interpretation.

2. Primary Rules of Interpretation.

Ordinary meaning

The traditional approach is a conservative one that concentrates on the

language of the agreement. The intentions of the parties must be gathered
from the language of the contract and not from what either of them might
have had in mind. In determining the common intention of the parties,
then, the court must consider first the literal and ordinary meaning of the
words in their contract.

Parol evidence rule

As regards the contents or terms of the written agreement, however, there

is a very definite rule of law, known as the parol evidence rule, which
places strict limits on the evidence that may be adduced in aid of
interpretation. The rule dictates that, where the parties intended their
agreement to be fully and finally embodied in writing, evidence to
contradict or vary the terms of the writing, or to add to or subtract from
them, is inadmissible. No evidence to prove the terms maybe given save
the document itself (or, if it is lost, secondary evidence of its contents),
nor may the contents of the document be contradicted, altered, added to
or varied by parol or oral evidence, relating to what passed between the
parties either before the written instrument was made or during its
preparation. Where the parties have decided that a contract should be
recorded in writing, their decision must be respected and the resulting
document accepted as the sole evidence of the terms of the contract. The
document itself, in other words, discloses the obligations.

The rule excluding oral evidence derives not from the Roman-Dutch law,
but from the English law of evidence, which has been adopted throughout

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South Africa and Namibian law by legislation.

Parol evidence rule applies only to written contracts. It does this by its
very nature. The rule applies to all contracts in writing, whether or not the
law requires that they be in writing to be valid. Further, the rule applies
not only to express terms (terms actually in the written contract), but also
to terms implied by law. For example, where land is sold, an obligation to
pay the costs of transfer is, in the absence of express provision to the
contrary, imposed by law on the seller. It follows that, if a written
contract of sale of land makes no reference to the costs of transfer, the
seller is not allowed to give evidence of an alleged prior agreement with
the purchaser that the latter is to pay these costs.

The rule is generally binding only on the parties to the contract, not on
third persons, for the latter may normally lead evidence to contradict or
vary the contents of the contract. When, however, the issue in dispute
(even between third parties) is what the obligations of the contracting
parties to one another are, and those obligations are stated in a written
contract, the integration rule is applicable.

Parol evidence rule does not apply to oral agreements made after the
written document was completed. Consequently, evidence may be given
of a subsequent oral agreement altering or cancelling the written
agreement, except where the contract is required by statute to be in
writing, for such a contract cannot be varied by a later oral agreement,
though it may be cancelled by such an agreement.

Integration rule
The integration aspect of the parole evidence rule therefore "defines the
limits of the contract."

The integration rule is only a backstop, however. It comes into operation

in the absence of some more dominant rule. It does not operate when an
aggrieved party alleges fraud, misrepresentation, mistake, undue
influence, duress or illegality.

Where the rule excluding oral evidence does not apply

Since the rule excluding oral evidence applies only to evidence that varies
terms or contents of the written document, it follows that oral evidence is
admissible that does not vary or modify the terms: namely, evidence that
relates to: (i) The existence or validity of the written contract; (ii)
Explanation of its terms; (iii) Collateral agreements not inconsistent with
the written contract.

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3. Secondary Rule of Interpretation

Textual context
The courts must have regard, firstly (after determining the literal
meaning) to "the context in which the word or phrase is used with its
interrelation to the contract as a whole, including the nature and purpose
of the contract. If there be difficulty, even "serious difficulty," it should
"nevertheless be cleared up by linguistic treatment," if this is possible.

While grammatical meaning is the starting point of interpretation, words

depend by necessity for their meaning on the contract as a whole. An
understanding of the meaning of individual words must be gained from
the wording of the contract as a whole.

Broader context
If, then, the language of the contract is clear and unambiguous, or if any
uncertainty that may exist can be resolved satisfactorily by linguistic
treatment, evidence of “surrounding circumstances”—that is to say,
“matters that were probably present to the minds of the parties when they
contracted”—is unnecessary and therefore inadmissible: cum in verba
nulla ambiguitas est, non debet admitti voluntatis quaestio. If intra-
textual treatment does not clearly yield the intention of the parties, the
interpreter must look to the extended context to draw useful inferences
from the nature of the contract, its purpose and the background against
which it was concluded. In other words, only if a consideration of the
language in its contextual setting fails to produce sufficient certainty (the
degree of certainty required being left to the discretion of the individual
judge) may evidence of “surrounding circumstances” be led. Even then,
however, recourse may not be had to evidence of what passed between
the parties in the course of negotiating the contract unless a consideration
of the “surrounding circumstances” fails to resolve the difficulty.

Surrounding circumstances
Finally, but only "when the language of the document is on the face of it
ambiguous," and its meaning therefore uncertain, the courts may consider
surrounding circumstances: "what passed between the parties during
the negotiations that preceded the conclusion of the agreement." These
include "previous negotiations and correspondence between the parties,
[and] subsequent conduct of the parties showing the sense in which they
acted on the document, save direct evidence of their own intentions" (by
which is meant actual negotiations between the parties).

Where even the use of surrounding circumstances does not provide

"sufficient certainty"—where, that is, there is ambiguity in the narrow
sense—and there is still no substantial balance in favour of one meaning
over another; where, in other words, the case is one "of 'ambiguity' as
opposed to mere 'uncertainty,'" then "recourse may be had to what passed
between the parties on the subject of the contract."

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Criticism of parol evidence rule.

The golden rule of interpretation, together with the principles reflected in
many cases, has led to criticism. The trend, now is to erode the influence
of the parol-evidence rule, admitting rather more kinds of evidence than
fewer, although the practice of allowing all evidence has been also been
criticised. The rule is criticized for being (i) too literal; (ii) too
inflexible; (iii) too hierarchical; (iv) terminologically confusing.

Circumventing the parole evidence rule

A litigant can circumvent the parol evidence rule by various means: For
example by alleging a tacit term (see for example City of Cape Town v
Bourbon-Leftley (2006 (30 SA 488 (SCA) and Weidts v Goussard 2016
(1) NR 169 (HC); or by applying for rectification of the contract.
Evidence relevant to such an allegation or application then becomes
admissible, although it would have been inadmissible for the purposes of
interpreting a written term of the contract. For case on rectification see
for example Humphries v Laser Transport Holdings (casebook page 125
and 117 (Scheffer v Institute of Management 1997 NR 50 (HC)
CASEBOOK page 117).

Other Canons of Construction

Where the meaning of a contract remains unclear despite application of
the primary rules (whereby the court establishes the intention of the
parties by considering the ordinary grammatical meaning of the words in
their textual and extra-textual context), the courts use various further
canons of construction.

Secondary rules of interpretation

Secondary rules include rules or presumptions: generalia specialibus non

derogant, that greater weight should be given to special provisions than
to general ones; noscitur a sociis, that, in the same vein, words are known
or understood by the company they keep, so that they should be read in
their context, not in isolation; (expressio unius est exclusio alterius,
against the implication of a term when an express term already covers the
relevant ground, or expressum facit cessare taciturn); (interpretatio
chartarum benigne facienda est ut res magis valeat quam pereat; that,
where the language of the contract or a term is ambiguous—where, in
other words, it is capable of more than one meaning—the court place the
construction on it that upholds the contract, rather than one that makes it
illegal and void. Please read the chapter 11; it does give you more rules.
This is just a sample of such rules.

4.Tertiary Rules of Interpretation

As a last resort, the courts may use tertiary rules of interpretation. The
goal here, a divergence from prior procedure, is rather to set up a fair
outcome than to give effect to the parties’ common intention. These

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tertiary rules include, (i) the quod minimum rule, which states that
ambiguous words must be narrowly interpreted, so as to encumber a
debtor or promissor as little as possible; (ii) the contra stipulatorem or
contra preferentem rule, which states that a clause, in case of doubt, is
interpreted against the person who stipulates for something (the creditor)
(a person who suggested it) , and in favour of the promisor or debtor (in
stipulationibus cum quaeritur quid actum sit, verba contra stipulatorem
interpretanda sunt). The point here is to limit the operation of the
stipulation and to burden the debtor as little as possible; and (iii) the
contra proferentem rule, which states that ambiguous terms of a contract
are to be interpreted against the party who proposed them.

Similarly, an interpretation putting an equitable construction on

ambiguous words is favoured. A court will not adopt a meaning that gives
one party an unfair advantage over the other. The courts also seek to
safeguard common-law values and principles. Moreover, due regard must
be had to any possible implication the Constitution might have.

When all rules are exhausted

If a court, having gone through all the rules of interpretation, is still
unable to give meaning to the contract (in which case it must have been
too poorly written to admit of any interpretation), then the contract is
declared as void for vagueness.

Disclaimers, indemnities and exemption clauses

In the interpretation of disclaimers, indemnities and exemption clauses,

the courts give effect to language that exempts the proferens (the party
who suggests those terms) from liability in express and unambiguous
terms. If, however, there is ambiguity, the language is construed against
the proferens—but a court must not adopt a strained or forced meaning in
order to import some ambiguity.

Subjective versus objective

At this stage it seems that our courts are moving from a relatively
objective approach to interpretation, with a correspondingly restrictive
attitude to admissibility of evidence, to one that is more subjective: that
is, one whose aim is to discover what the parties subjectively intended.

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Unit summary
In this unit you learned

You have learned that "the primary purpose of the interpretation of

a contract, is to give effect to the intentions of the parties. The
Summary primary rule, therefore, is that effect must be given to the parties'
common intention: that is, to what both of them intended on
entering into the contract. Thus, the golden rule applicable to the
interpretation of all contracts is to ascertain and to follow the
intention of the parties." If, therefore, the contract or admissible
evidence gives a definite indication of the parties' meaning, the
court should effect that meaning. This essentially subjective
undertaking is generally understood to be the ideal in contractual
interpretation.

Where a contract has been put into writing, the language used by
the parties is may be vague or ambiguous and if a dispute arises as
to what the parties meant, it becomes necessary to ascertain what in
fact they did intend. In ascertaining their intention various rules or
canons of construction are employed. The chief of these rules are as
follows: ordinary meaning, parol evidence rule, integration rule,
secondary rules of interpretation and tertiary rules of interpretation.

You also have learned that sometimes a court is faced with a

contract involving a foreign element: for example, where the
contract has been made in one country, but is to be performed,
wholly or partially, in some other country. The court then has to
determine which legal system governs the contract. This
determination is made by applying the appropriate conflict or
choice-of-law rule. The law that is actually held to be applicable is
known as “the proper law of the contract.” So the court may apply
either the “lex loci contractus”, the “lex loci solutions” or the “lex
situs” or “rei situae”).

References

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 LAW OF CONTRACT

Christie, RH (2006). The Law of Contract in South Africa 5th ed.),

Durban, LexisNexis/Butterworths.
References
Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,

Durban, LexisNexis.

Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in

South Africa, 3nd Edition, Cape Town, Oxford University Press Southern

Africa. .

Zimmermann R, (1990) The Law of Obligations: Roman Foundations of

The Civilian Tradition, Cape Town, Juta & Co.

Schwartz, A. (1992.) Relational Contracts in the Courts: An Analysis of

Incomplete Agreements and Judicial Strategies, Journal of Legal Studies.
Vol. 21 pp. 271-318.
Posner, E A. (1998). The Parol Evidence Rule, The Plain Meaning Rule, and
the Principles of Contractual Interpretation. University of Pennsylvania
Law Review, vol. 146: pp. 533-577.
Hadfield, Gillian K. (1994). Judicial Competence and the Interpretation of
Incomplete Contracts. Journal of Legal Studies. Vol. 23 pp. 159-184.

UNIT 18

Breach of Contract
Introduction

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§ describe the various form a contract can be breaches.

§ explain how liability for breach of contract is distinct from liability
in delict.
Outcomes § explain the concept of mora as form of breach of a positive
obligation.
§ describe the concept of repudiation of a contract as well as positive
mal-performance.

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Prescribed reading: Hutchison & Pretorius, The law of Contract in

South Africa, Chapter 12.

Prescribed Cases:
Prescribed reading
Scoin Trading (Pty) Ltd v Bernstein NO 2011 (2) SA 118 (SCA)=
Casebook Page 583.

Spies v Lombard 1950 (3) SA 469 (A)=

Casebook Page 642

Ponisammy and Another v Versailles Estates 1973 (1) SA 372 (A)=

Casebook Page 600

Culverwell and Another v Brown 1990 (1) SA 7 (A)=

Casebook Page 619

Admnistrator Natal v Edourd ==1990 (3) SA 581 (A)=

Casebook Page 658

Masterspice (pty) Ltd v Broszeit Investments CC 2006 (6) SA 1 (SCA)=

Casebook Page 590

Tucker Land and Development Corp v Hovis 1980 (1) SA 645 (A).
Casebook Page 757

XW=(Namibian case)=Ashipala v Nashilongo 2011 (2) NR 740 (HC).=

Casebook Page 765

ISEP Structural Engineering v Inland Exploration 1981 (4) SA 1 (A)=

Casebook Page 741

Please note cases in this unit are also relevant for the next unit on
remedies. You should spend at least 2 weeks studying this chapter.

1. Forms of Breach
Namibian law recognises a general concept of breach. The forms of
breach recognised include:
§ Ordinary breach;
§ Mora, which comprises (Mora debitoris and Mora creditoris)
§ Repudiation
§ Prevention of performance

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§ Positive mal-performance

Repudiation and prevention of performance are forms of anticipatory

breach, since both can be committed prior to the stipulated time for
performance.

Liability for breach of contract is distinct from liability in delict, and fault
is not a general requirement for the recovery of damages for breach of
contract. But a breach of contract may entail a delictual act because a
contract may create an obligation to exercise care or to act without
negligence, but the breach of such an obligation does not per se constitute
a delict; it only amounts to a delict where the conduct independently
constitutes a delict, irrespective of the contractual obligation.

Ordinary breach may also include “Positive mal-performance” because

both relate to the content and quality of the performance made. "If
without lawful excuse a party fails to do what he has contracted to do, or
does what he has contracted not to do, an ordinary breach of contract is
said to have occurred. This is breach in its starkest, most commonsensical
form: essentially a failure to comply with the terms of a contract. All
terms are susceptible to breach; in other words, both positive and
negative obligations can be breached. However positive mal-performance
means that the party has performed, but the performance undertaken does
not correspond to the specification in the contract.

There are two requirements for breach in the form of positive mal-
performance, especially where there is a positive obligation: (i) There
must have been some performance; the debtor must in fact have
performed and (ii) the performance must, however, be incomplete or
defective.

Where the debtor has a negative obligation, positive mal-performance

occurs when the debtor does the act he is bound to refrain from doing.

The usual remedies are available. Where damages are awarded in place of
the performance, or to complete it, they are known as “surrogate
damages,” as opposed to other consequential damages.

In the case of the positive mal-performance of a negative obligation, the

creditor is also entitled to apply for an interdict to restrain the debtor.

Mora=Mora is best defined as "delay without lawful excuse of the

performance of a contractual duty or a wrongful failure to perform
timeously." It relates, then, to the time of the performance, specifically to
the failure to meet it, and is for this reason sometimes referred to as
“negative malperformance.”

Mora debitoris= is the culpable failure of a debtor to make timeous

performance of a positive obligation. There are five requirements:

The debt must be due and enforceable.

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The performance must have been fixed for a particular time, either in the
contract or by way of a subsequent demand for performance.

The debt must (in spite of the failure as yet to perform) still capable of
performance.

The delay must be the debtor's fault

The debtor must have not yet have performed.

The consequences of mora debitoris are threefold. First, supervening

impossibility of performance, which is not due to the fault of either party,
does not terminate the contract; secondly, as in all cases of breach, the
innocent party is entitled to contractual damages for any loss sustained as
a result of the mora, irrespective of whether he can or does rescind the
contract.

Thirdly, the creditor may cancel the contract if “time was of the essence
of the contract,” or was made so by a notice of rescission.” Time is of the
essence when the parties expressly or impliedly agreed that default of
performance by the day fixed would entitle the other party to cancel the
contract.

An express clause entitling one party to automatically cancel the contract

is known as a lex commissoria.

The time element, for obvious reasons the most crucial element of mora,
depends on whether it is mora (ex re) or mora (ex persona).

Mora (ex re)=Where the parties have fixed in their contract a time for
performance, either expressly or by necessary implication, a culpable
failure by the debtor to perform on or before the due date automatically
places him in mora (ex re), without the need for any intervention on the
part of the creditor. There are three contingencies: (i) the time is fixed
expressly in the contract—for example, "performance falls due within ten
days"—in which case, as soon as it lapses, the debtor is in mora; (ii) the
time is fixed by necessary implication and (iii) it may be implied that
performance is to occur immediately, in which case the creditor need not
make any demand for it. If a geyser bursts, and one contracts a plumber
to repair it, the implication is that the plumber must set about his work
immediately, not at some distant date in the future.

Mora (ex persona)==The standard for mora (ex re) is easier to meet than
that for its counterpart. Where no time for the performance has been
stipulated in the contract, or is necessarily implied by it, the creditor must
himself place the debtor in mora (ex persona). This he does by
demanding performance (interpellatio) on or before a definite date or
time that is reasonable in the circumstances. There is no mora until this
has been done. The onus is on the debtor to show that the time or date in
question is unreasonable.

Mora (ex persona) requires an interpellatio to fix the date of

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performance. An interpellatio is a demand added or appended to the

contract after the fact. It is extrajudicial, and may be verbal or written, but
it is usually made in a letter of demand, beginning with the words "I am
now putting you to terms..."

The usual remedies, discussed more fully in the next UNIT, apply for
breach in the form of mora debitoris, namely: (i) Specific performance;
(ii) Cancellation; (iii) Damages; (iv) Interest (as per the Prescribed rate of
Interest Act.

One consequence shared by other forms of breach is that, if performance

becomes impossible after a debtor has fallen into mora, the debtor is not
excused from performance (a consequence known as perpetuatio
obligationis or, literally, “the perpetuation of the obligation”).
Mora creditoris=is the failure of the creditor to receive (or to co-
operate ) in receiving performance from the debtor.

Usually mora creditoris arises when the creditor is unavailable or

inaccessible for the performance to be delivered, or if by some other
means he delayed the performance. The requirements for mora creditoris
are in many respects similar to those for mora debitoris. There are five
conditions, although there are minor differences.

Repudiation= Repudiation is a party's demonstration, by words or

conduct, and without lawful excuse, of an unequivocal intention no
longer to be bound by the contract or by any obligation forming part of it.
A deliberate breach of a single provision in a contract to which that
provision is essential amounts to repudiation of the entire contract. There
are two kinds of repudiation:
i Ordinary repudiation occurs when the obligation is already owing,
as in the case of an illegitimate claim (malifide) or a declaration
that one cannot perform, or a denial that the contract is binding on
the denier, or a denial of the existence of an obligation.
ii Anticipatory breach occurs when repudiation is made before the
obligation comes due or in anticipation of an obligation to come.

2. Prevention of Performance
Where performance on either side becomes impossible due to the fault of
one of the parties, the contract is not terminated, but the party who
rendered performance impossible is guilty of prevention of performance.
Objective impossibility is not necessary; the subjective variety suffices.
Fault is not an essential element of this breach, unless the debtor has
guaranteed the performance and the creditor is not at fault. The usual
remedies, except for specific performance, are available to the creditor. In
the case of material prevention of the performance of a divisible

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obligation, the creditor may only cancel pro tanto, and his counter-
performance is reduced proportionately.

This form of breach is very rare, in part because it is so often categorised

under one of the other forms. It offers very little by way of case law, as
such cases are, for the most part, easily settled.

Unit summary
In this unit you learned:

You have learned that there are at least four types of breach of contract:
Mora, positive mal-performance, Repudiation and Prevention of
Summary
performance. You have learned that not all forms of breach are
committed in the same action at the same time.

You have learned that mora e a culpable failure to perform on time an

assumed obligation.

You have learned that repudiation is a party's demonstration, by words or

conduct, and without lawful excuse, of an unequivocal intention no
longer to be bound by the contract or by any obligation forming part of it

You have learned that the intention to repudiate is judged objectively.

You have also learned that there are two kinds of repudiation: (a)
ordinary repudiation and (b) anticipatory breach.

You learned that ordinary repudiation occurs when the obligation

is already owing, as in the case of an illegitimate claim (malifide)
or a declaration that one cannot perform, or a denial that the
contract is binding on the denier, or a denial of the existence of an
obligation.=Anticipatory breach, on the other hand, occurs when
repudiation is made before the obligation comes due or in
anticipation of an obligation to come.

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References
Christie, RH (2006). The Law of Contract in South Africa 5th ed.),

Durban, LexisNexis/Butterworths.
References
Bradfiled G, (2016) Christie’s law of contract in South Africa, 7th edition,

Durban, LexisNexis.

Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in

South Africa, 3nd Edition, Cape Town, Oxford University Press Southern

Africa. .

Zimmermann R, (1990) The Law of Obligations: Roman Foundations of

The Civilian Tradition, Cape Town, Juta & Co.

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UNIT 19

Remedies for Breach of Contract

Introduction

§ discuss remedies for breach or cancellation of a contract.

§ discuss types of remedies available.

Outcomes § discuss cancellation as an extraordinary remedy

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UNIT 19 Remedies for Breach of Contract

Prescribed reading: Hutchison & Pretorius, Chapter 13.

Prescribed cases:
Prescribed reading Guggenhein v Rosebaum 1961 (4) SA 15 (W)=
Casebook page 683.

Benson v SA Mutual Assurance Co 1986 (1) SA 776 (A)=

Casebook page 702.

Santos Club v Igesund 2003 (5) SA 73 (C)=

Casebook page 710.

Haynes V Kingwilliamstown Municipality 1951 (2) SA 371 (A).=

Casebook page 725.

National Unions of Textiles Workers v Stag Packing 1982 (4) SA 151

(T)= Casebook page 733.

ISEP Structural Engineering v Inland Exploration 1981 (4) SA 1 (A)=

Casebook page 741.

Tucker land and Development Corp v Hovis 1980 (1) SA 645 (A)=
Casebook page 757.

XW=(Namibia)= Ashipala v Nashilongo 2011 (2) NR 740 (HC)=

Casebook page 765.

Administrator Natal v Edouard ==1990 (3) SA 581 (A)=

Casebook page 758.

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A party aggrieved by breach of contract is entitled to a remedy in law.

The remedies normally recognized in law are: Specific performance, a
claim for damage, cancellation, interdict and declaration of right.
Reflection

1-Specific Performance
Full performance is the natural outcome of termination of an agreement.
In cases the contract for some reason is not performed or not performed
as agreed (etc), then, the contract is breached. The aggrieved party then is
entitled to a remedy for breach of contract. In our law, the primary
remedy for breach of contract is a claim for specific performance. This
claim for specific performance simply means that the party will approach
the court and ask the assistance of the court for the enforcement of the
agreed performance when entering into a contract. The remedy of specific
performance is in effect, a corollary of the need of good faith in entering
into a contract. The remedy of specific performance is also aimed at
keeping the contract alive.

Obviously, if such specific performance for some reason is not possible

or not desirable, other remedies will ensure. (Please read here the cases of
Benson v SA Mutual Assurance (Casebook page 702); Santos Club v
Igesund ( Casebook page 710); Haynes V Kingwilliamstown Municipality
(Casebook page 725) and Ashipala v Nashilongo 2011 (2) NR 740
(HC)= (Casebook page 765), for the various manifestations and
problems with the remedy of specific performance).

Normally court will not grant specific performance in the following

scenarios: (i) Specific performance has become impossible; (ii) specific
performance will be against public policy; (iii) specific performance will
result in prejudice to third parties; (iv) specific performance is against
good morals; (v), the party requiring specific performance is unable to
perform himself; (vi) where court will not be able to supervise the
remedy of specific performance; (vi), the defendant is insolvent and (viii)
in special some cases, when specific performance relates to the status of
the person).

Exceptio non adimpleti contractus = means where a contract entails

reciprocal performances, if one party is unable or unwilling to perform,
the other party may withhold his own performance. In essence, this
“exceptio non adimpleti contractus” is some sort of ‘self-help”.

Thus, synallagmatic or reciprocal contracts are subject to the principle of

reciprocity. In terms of this principle, a party is not entitled to claim
performance of a reciprocal obligation from another party where the
former has to perform his obligation first or simultaneously, unless he has

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already performed or is tendering performance of his obligation.

= Parties to an agreement may also agree when entering into the contract
on remedies in the event of breach. If the parties have made such
agreement at the beginning, then this agreement takes precedence in the
application of all other remedies for breach of the contract. Three types of
remedy are available:

Remedies aimed at enforcement (which include specific performance and

the exceptio non adimpleti contractus)

Cancellation

Remedies aimed at compensation (which include damages and interest).

2. Cancellation
Cancellation is an extraordinary remedy. This remedy is not aimed at the
fulfillment of the contract, but aimed at its termination. Thus with
cancellation, the contract is rescinded. This is especially helpful in cases
of anticipatory breach, as the claimant does not have to wait for the date
when performance falls due.

Note that cancellation and specific performance are mutually exclusive.

Cancellation takes effect ex nunc (from that point onwards) when the
other party is informed of it. Cancellation is in this way different from
rescission, which applies to voidable contracts ex tunc (from the
beginning of the contract).

Cancellation, the consequence exclusively of a valid contract, cannot be

claimed in all circumstances. It is an extraordinary remedy, available only
if the breach is sufficiently serious or material—unless the parties have
provided a cancellation clause (a lex commissoria) in the agreement, in
which case the agreement takes precedence over common-law rules. If
the breach is minor, and there is no lex commissoria, the innocent party
can always rely on specific performance and claim for damages.

Consequences of cancelation:

The effect of cancelling a contract is that the primary and unexecuted

obligations of the parties are extinguished. Accrued rights continue to be
enforceable. Upon cancellation, each party is obliged reciprocally to
restore whatever performance has been received—that is, to make
restitution—to the other party. If, for example, a lessor cancelled because
the lessee had three months' rent owing, the lessor may still claim the rent
outstanding.

Mora=A contract may be cancelled in light of mora where: (i) it contains

a forfeiture clause; and (ii) time is of the essence, in which case delay
constitutes a major breach.

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Where time is not of the essence, a breach of time does not necessarily
constitute a breach that allows the creditor to cancel. Once mora has
occurred, the creditor is allowed to make time of the essence by serving
notice of the right to rescind, after which he can cancel. This is not an
interpellatio, which determines when mora, not cancellation, occurs.

3. Damages
Damages is a remedy aimed at ‘compensation’. In effect it is a substitute
of the performance initially agreed. A claim for damages is aimed to
compensate for financial loss suffered as a result of the breach. Damages
may be claimed in addition to other remedies.

Damages may be in the form of positive-interest or negative interest.

Positive-interest damages (are also called expectation damages); while

negative-interest damages (are also called reliance damages). The
traditional terms used for these damages in Roman and Roman-Dutch law
is “damnum emergens” and “lucrum cessans”.

Damnum emergens is loss actually incurred because of the breach.

Lucrum cessans is a prospective loss, i.e., a loss a person is expected to
make due to the breach of contract.

The purpose of expectation damages (positive-interest) is to place the

innocent party in the position he would have occupied had the contract
been properly performed (though the defaulting party is not liable for
special consequences he could not have contemplated when he entered
into the contract).

The purpose of the reliance damages (negative-interest) is to place the

plaintiff in the position he would have occupied had he not entered into
the contract at all.

Thus in any given breach of contract, there may be contractual damages

that include both expectation and reliance losses.
The basic requirements for a claim for damages are as follows:

(i)--A breach of contract by the defendant; (ii)--Financial or patrimonial

loss by the plaintiff, (either damnum emergens (loss actually incurred
because of the breach) or lucrum cessans (prospective damages or loss of
profits that would ensue, because of the breach); (iii)-- factual causal link
between the breach and the loss claimed; and (iv)--Legal causation: The
loss must not be too remote a consequence of the breach.

In terms of the difference rule, a plaintiff's financial loss is determined by

comparing the patrimonial position occupied after the breach with the
hypothetical patrimonial position that would have been occupied had the
contract been properly performed. A distinction is made between positive

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interesse, which applies to contractual damages, and negative interest,

which applies to delictual ones.

Factual causation is established by means of the "but-for" (or conditio

sine qua non) test. The test for legal causation asks whether the causal
connection between the breach and the loss is sufficiently close to justify
the imposition of liability. General damages are generally and objectively
foreseeable as flowing from the type of breach and are thus not too
remote and are recoverable. Special damages would not normally be
expected to flow from the type of breach in question and are thus
presumed to be too remote unless exceptional circumstances are present.

4. Claim for Interest:

Where a claim is sounding in money, interest is claimable both on the
‘capital’ owed, and on the prospective damages. Damages and interest are
cumulative to other remedies. An innocent party may have alternative or
additional claims in delict.

5. Market Damages
Is a measure of contract damages based on the difference between the
contract price and the market price at the time of the breach. This
measure of damages encourages market efficiency and deters breach.

Although it is rarely applicable in our law, in some instances courts have

hinted at these damages.

Market damages, however, are widely believed to have a serious defect

when the seller is providing a service. In service cases, buyers commonly
sue for the “cost of completion”-- the cost of purchasing a substitute
performance in the market. But sometimes the cost of completion greatly
exceeds the gain in the market value of the buyer’s property that the
seller’s performance would have produced. Since other sellers will have
similar costs to those of the contract seller, awarding cost of completion
damages in these cases was once thought to subsidize “economic waste.”
The buyer could use the damages to purchase a performance whose cost
much exceeds its value. This putative danger is primarily present in
construction contexts. In typical cases, for example, where a contractor
deviated from the agreed upon performance in an apparently minor way
but the costs of remedying that defect would have been much higher than
the reduction in property value that the deviation produced, in this
scenario, market damages are seriously defective.

Choice of remedies/Concurrence of remedies: because a breach of

contract may also entail a delict, a plaintiff may be in position to choose
between contractual remedies and delictual remedies.

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6. Other Remedies
Other remedies available in the case of breach include the interdict and
the declaration of rights.

Interdict
An interdict is a court order that prohibits the respondent from doing
some specified thing. It may be used as a form of specific performance, to
protect ancillary rights, to prevent a threatened breach of contract and to
prevent third-party intervention. The requirements to be met for the
granting of an interdict are: (i) A clear right; (ii) Injury; (iii) No other
effective ordinary remedy.
Declaration of rights

Where there is uncertainty about rights under a contract, usually in the

context of a dispute, a party may approach the court for a declaratory
order that binds all interested parties, who should therefore be joined.

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Unit summary
In this unit you learned that remedies for breach are aimed either at the
fulfilment or at the rescission or cancellation of a contract. Full performance
is the natural cause of termination of an agreement. Because breach interferes
Summary with proper fulfilment, the primary remedy is accordingly aimed at
fulfilment. Cancellation is an extraordinary remedy.

Remedies may be claimed as soon as the breach occurs. This is especially

helpful in cases of anticipatory breach, as the claimant does not have to wait
for the date when performance falls due.

You have also learned that some remedies are aimed at the fulfilment of the
contract; while other are aimed are recovery of losses suffered’ i.e. damages.

Finally you learned that the requirements for a damages claim are:

1. A breach of contract by the defendant

2. Financial or patrimonial loss by the plaintiff, which may be either
“damnum emergens” (actual loss) or “lucrum cessans” (prospective
damages or loss of profits) because of the breach.
3. A factual causal link between the breach and the loss; and
4. Legal causation: The loss must not be too remote a consequence of
the breach.

You also learned that there are other remedies, such as: interdict and the
declaration of rights.

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References

References References
Christie, RH (2006). The Law of Contract in South Africa 5th ed.),
Durban, LexisNexis/Butterworths.
Bradfiled G, (2016) Christie’s law of contract in South Africa , 7th edition,
Durban, LexisNexis.
Hutchison D & Pretorius C J (eds), (2016) The Law of Contracts in
South Africa , 3nd Edition, Cape Town, Oxford University Press Southern
Africa. .
Zimmermann R, (1990) The Law of Obligations: Roman Foundations of
The Civilian Tradition, Cape Town, Juta & Co.
Naude, T (2003), “Specific performance against an employee Santos
Professional Club (Pty) Ltd v Igesund” SALJ 269 – 282.
Mould, K (2010), “A critical study of the recurring problem of repudiation in
the context of professional rugby in South Africa with particular emphasis on
transformative constitutionalism ” 35(1) Journal for Juridical Sciences 49-70.
Lubbe, G. (1996) “‘Retraction of Repudiation: A Doctrine Writ in Water? ’
Stellenbosch Law Review, volume 6, pp 147-170.
Harker J R ‘The Nature and Scope of Rescission as a Remedy for Breach of
Contract in American and South African La w’ (1980) Acta Juridica 61-105.
Voet, J. (1902) Commentary on the Pandects , Text translated by T
Berwick .

Burrows A, Restatement of the English Law of Contract (2016) Oxford

University Press, Oxford.

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UNIT 20

Cession

Introduction

You will learn that in the application of cession, a cardinal rule

applies: that “nemo plus iuris ad alium transferre potest quam ipse
haberet”, which means no one can transfer more rights than he/she
has.

§ discuss the two types of cession.

§ discuss how both corporeal and incorporeal rights can be ceded

Outcomes
§ discuss how a cession agreement is conluded
§ describe the rights that cannot be ceded

1.Basic notion of Cession.

In our law, Cession is an act of transfer of a personal incorporeal right or
claim from the estate of the cedent (transferor) to that of the cessionary
(transferee) by means of an agreement between the two; it is the
substitution by contract, known as a cessionary agreement, of one
creditor for another. It is the opposite, then, of delegation. (Cession in
American law is called “assignment of rights”. The transfer to another of
a right, interest, or title to property, especially personal property).

The following are requirements for a valid cession: (i) The cedent must
have a primary claim against the debtor; (ii) The cedent must be entitled
to dispose of that personal right; (iii) The personal right must be capable
of cession. Prima facie, all claims are capable of cession except:

A cession agreement must be concluded between the cedent and the

cessionary, giving the latter causa for the ceded claim.

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Both parties must have contractual capacity.

The formalities set by law or by the parties must be complied with.

The cession must not be prohibited by law, or against public policy or the
good moral standards of the community (contra bonos mores).

The cession should not prejudice the debtor. Cession may not split a
claim against the debtor, so that he faces multiple actions; the claim must
be ceded in toto. The only time a claim may be split is when it is with the
debtor's consent.

Although it is not necessary to give notice to the debtor of the fact of the
cession, it is generally seen as advisable. If the debtor is unaware that his
obligation is to a new creditor (i.e., the cessionary), he may still discharge
his obligation to the cedent, in which case the cessionary loses his claim
(although he may have an action for unjustified enrichment against the
cedent). It is therefore usually in the cessionary's interest to serve the
debtor with notice.

A valid causa is not necessary for a valid cession, but it is a requirement

for the cession to have a permanent effect.

There are two types of cession:

Security cession

Cession in securitatem debiti is different from outright cession. It is

designed to secure a debt, often a loan or overdraft facilities. The cedent
does not fall out of the picture completely but retains what is known as a
reversionary interest. In other words, once the loan is paid off, the rights
revert to the cedent.
Out-and-out cession (outright cession).

The fiduciary security cession and the pledge are the two known forms of
security cession. A security cession is interpreted as a pledge unless the
parties make it clear that they wish their security cession to be in the form
of the fiduciary cession.

The fiduciary security cession is an ordinary cession of a personal right as

security coupled with a fiduciary agreement, which is an ordinary
contract. In a pledge of a personal right, the ownership of the personal
right is retained by the cedent, while only quasi-possession is transferred
to the cessionary (pledgee).
Out-and-out cession (outright cession).

An out-and-out cession in terms of which the ceded right is transferred

completely by the cedent to the cessionary and the cessionary is obliged
to re-cede the right back to the cedent if the secured debt is discharged.

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2. Cession in Roman-Dutch Law and in the Current Law of Namibia

Basic principle:
The main point of cession is the transfer of personal rights (claims) as
opposed to real rights. In simplified terms cession is the transfer from one
creditor to another of an obligation from a debtor. When real rights are
transferred, transfer takes place by delivery. Personal rights have no
corpus and cannot therefore be delivered. Accordingly the method of
transfer of personal rights is by cession. Cession therefore encompasses
two concepts.
1. First the creation of a means of transfer of personal rights; and
2. The method of transfer.

Who's who in this process?

The principle parties to any cession agreement are the Cedent and the
Cessionary. The debtor is not a party to the cession agreement, The
debtor merely performs his obligations. It is obviously important to notify
the debtor of any cession agreement when the obligation falls due,
because otherwise he will execute performance to the wrong party.
§ The Cedent is the original owner of the right or claim.
§ The Cessionary is the new ower of the right or claim.
§ The debtor is the person obliged to perform.

In practice it is important to distinguish between the parties because a

cession agreement is usually entered into as a result of an obligation
between the cedent and the cessionary. (i.e. the cedent is usually a debtor
of the cessionary) Do not confuse the obligations of the cedent and the
obligations of the principle debtor. On cession, the vinculum juris is
extinguished between the cedent and the debtor and the vinculum juris is
passed to the cessionary.

It is useful to put the parties to a cession agreement in a diagramatic

scheme as follows.

At the moment of cession:

The Cedent ↔ (transfers his right to) ↔ Cessionary

↑(obligation to Cedent)

Debtor

On conclusion of the cession agreement,

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Debtor ↔ (must perform the obligation to) Cessionary.

Note: On conclusion of the cession agreement, the Cedent falls out of the
picture, and the vinculum juris is between the Debtor and the Cessionary.
Thus in terms of locus standi, the Cessionary has full locus standi and
any defences against the Cedent which the Debtor had are also available
against the Cessionary. (in practise the courts require the cession
agreement to be mentioned in the particulars of claim, to show or prove
the locus standi of the Cessionary).
Here is one example of a Cession

There is a commercial need to transfer obligations.

1. For example:
Case Study /
o Donald owes me N$ 100.00
Example
o I can sell my debt to Maxwell for N$ 80.00. If Maxwell recovers, he
makes a profit and I am happy because I have N$ 80.00 without the
hassle of having to importune or to bring action against Donald.

2. For example:

o Donald owes me N$ 100.00

o I owe Maxwell N$ 100.00.

o I can cede my claim to Maxwell.

3. For example:

o Donald owes me N$ 100.00

o I want to borrow N$ 100.00 from Maxwell.

o I cede my debt as security to Maxwell for due performance of my own

obligation. (This is a cession in securitatem debiti, of which more you
should read in the prescribed book.

3. The Problem with Cession

The theoretical problem with cession is that it straddles two branches of
law, and it does not easily fit into either. This has led to conceptual
confusion when interpreting cession agreements. In Roman Law:
Stipulatio alteri nemo potest; i.e. it is not possible to transfer an
obligation. But it happened! So all the jurists then had to explain it, hence
the three theories of cession.

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First theory: Rooted in Law of property.

§ A claim is an asset in an estate.
§ Assets can be transferred.
§ Therefore claims can be transferred and creditors are substituted as a
consequence of the transfer of the asset.

Second theory: Rooted in the Law of Obligations.

§ A claim is a right in consequence of an obligation. The basic principal
of the law of obligations is that a debtor can only discharge his
obligation by payment to the creditor.
§ The substitution of creditors does not affect the right itself.
§ Therefore claims can be transferred and creditors are substituted as a
consequence of transfer of the right.

Third theory: The dual nature i.e. both in the law of obligations and the
law of property.

o The claim is transferred via the law of property.

o The creditor is substituted on performance of an additional act governed

by the law of obligations.

4. More on Cession
The claim and its structure

As stated in Trust Bank of South Africa Ltd. v Standard Bank of South

Africa Ltd. 1963 (3) SA 166 [C] 189 “The rule of our law is that all rights
in personam, subject to certain exceptions based principally on the
personal nature of the rights, not here relevant, can freely be ceded.”..
The claim refers to the claim by the cedent against the debtor. It is the
obligation to the cedent by the debtor and the object of the cession
between the cedent and the cessionary. Thus schematically, the Cedent
(transfers his claim or "object of cession") ↔ Cessionary ↑(obligation to
Cedent = the claim ) Debtor

Description of the claim

From the above, it is apparent that the claim must be capable of transfer.
In brief:

1. Claims must be legal.

2. Claims cannot be too personal.

3. Claims must be identifiable.

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4. For transferability of the claim, the claim cannot be limited by a

pactum de non cedendo.

Legality of claims

It is trite that an illegal contract is unenforceable, and an unenforceable

contract cannot be ceded.

· Thus if Donald the debtor promised to pay Cedric the cedent from the
proceeds of the bank that he has just robbed; that claim is unenforceable.
This means that:

Cedric could not sue Donald. Cedric could not transfer his claim to
Maxwell the Cessionary.

· Claims which are contra bonos mores but legal are capable of transfer.
An example would be the cession of Donald's pay-packet.

Personal claims (Delictus personae)

Certain obligations are of such a personal nature, that they cannot be

transferred. If the transfer of the obligation will result in a substantially
different obligation on the debtor, then the general principle that a person
may dispose of his rights, is restricted. See Sasfin v Beukes 1989 (1) SA
1 (A) @ 31. Example might be:

· A usufruct granted to a specific person entitling that person to live on a

specific property.

Note that in general terms a legacy itself is capable of cession.

· Certain obligations flowing from a marriage contract.

· The obligation to perform specific employment. E.g. the obligation of

Donald the accountant to perform an audit of Cedric's books, cannot be
ceded.

Remember that the claim is a personal right and a vindicatory claim is a

real right. Accordingly a vindicatory claim is not transferrable by cession,
but is transferrable in the normal course by a deed or agreement of
transfer.

Identifiability of claims

Although this might seem trite, in practice, it often happens that claims
are so widely identified, that they become meaningless. From a drafting
point of view, it is therefore important to state precisely what is being
transferred. In this discussion we shall look at various problems with
identifying claims, and in particular

1. The specificity principle.

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2. Future and contingent claims.

Specificity principle

For an obligation to be identified, three aspects must be incorporated.

· The identity of the debtor (person obliged to perform).

· The identity of the creditor (claimant)

· The nature of the obligation.

The first two aspects need little or no explanation save to say that the
cedent must have an interest or right to the claim. A cedent cannot cede a
third parties claim unless he has an interest in it.

The Nature of the Obligation in Cession agreements

It often happens that the nature of the obligation is too widely identified,
and as a result the cession agreement will be void for vagueness. Coopers
& Leybrand v Bryant 1995 (3) SA 761 (A) is a good example of a very
wide cession.

· The respondent (Bryant the cedent) sued the appellants(the debtor), a

firm of chartered accountants and auditors, in a Circuit Court for damages
arising from an alleged breach by the appellants of a verbal agreement
between them. The appellant, in a special plea to the respondent's
particulars of claim, contended that the respondent's claim was subject to
the terms of a deed of cession ('the deed') concluded between him and
Standard Bank ('the bank'). Consequently he had divested himself of
locus standi to institute the action in question. Respondent averred that,
upon a proper construction thereof, the deed covered only his business
debts.

· The cession agreement contained the following clause: "I / we the

undersigned, hereby pledge, cede, assign and transfer ...my/ our / the
companies right title and interest in all book debts and other debts and
claims of whatsoever nature, present and future due to and to become due
to me / us / the company and all rights of action arising thereunder."

The crisp fact to be decided was whether the cedent had locus standi.
However, the court did not address this question, but looked rather at the
cession agreement and the object of cession. The court found that Bryant
had intended to cede his business debts to Standard Bank, but not his
personal debts. The court found that the matter was essentially one of
interpretation: according to the 'golden rule' language had to be given its
grammatical and ordinary meaning unless it resulted in some absurdity,
or some repugnancy, or inconsistency with the rest of the document. (At
767D/E-F paraphrased.) Further, that the ordinary grammatical meaning
of 'book debt' was a debt owed to a tradesman as recorded in his account
books, but that a particular word or phrase should never be interpreted in

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isolation. (At 767F/G-G and H/I.) The purpose of the cession was to
provide the bank as cessionary with continuing security for allowing the
respondent as cedent banking facilities. (At 768E/F-F.) The expression
'book debts' unquestionably referred to the respondent's trading debts, and
that expressions such as 'trading', 'records', 'accounts', 'books' and 'in the
name of the firm in which I may be trading' were obviously intended to
refer to the respondent's business. (At 768G-H.)

There was nothing in the deed to indicate that the parties intended to
provide security to the bank for the respondent's personal affairs (ie for
his private account). (At 768H-H/I.) The respondent's claim against the
appellants was clearly a personal one which was unrelated to his trading
debts, and that the terms of the deed were accordingly not wide enough to
include the said claim. (At 766A-A/B and B.) The case has been
trenchantly criticized by many academics who point out that the purpose
of the cession was to secure the bank overdraft. The deed of cession
explicitly covered personal and business debts, and the courts finding of
only business debts is just plain wrong. The criticism goes on to state
that: If the courts were to place sufficient emphasis on the principle of
specificity, to the description of the object of cession, lawyers will pay
more attention to the drafting of cession documents and avoid costly
litigation. Furthermore if the courts were to address the whole issue of
locus standi in the case of security cessions properly, there will be no
need for this type of interpretation in deeds of cession.

Future and conditional claims

Future claims distinguished from contingent claims.

1. A future claim is a spes. In other words there is merely an expectation

of a claim in the future. There is no juristic fact from which it could
arise./ i.e there is no existing obligation on which to base the claim:

2. A conditional claim or contingent claim is a claim in which there is an

existing obligation, but it is not enforceable at the present time.

· Future Claim

1.

o Blondie wants to sell her car because Blondie needs money.

o Blondie enters into negotiations to sell the car to Donald.

o Donald hasn’t seen the car, and has merely expressed an interest in
purchasing the car.

o Blondie urgently needs money: Blondie cedes the claim to Susan the
Cessionary.

o Oh dear! There is no cession, because all that Blondie has is a spes that
Donald will buy the car.

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· Conditional Claim

1.

o Future event:
§ Blondie sells the car.
§ Donald says that he will pay if he wins the lottery. (if he inherits) (if he gets
married). [subject to a future event.]
§ Blondie urgently needs money and cedes her claim to Susan. -Susan is
also a bit dim. This is a valid claim.

o Time clause
§ Blondie does sell the car.
§ Donald says he will pay in three months time.
§ Blondie urgently needs money and cedes her claim to Susan the
Cessionary.

o Installments
§ Blondie sells the car.
§ Donald says he will pay in five installments.

o Blondie urgently needs money and cedes her claim to Susan.

Other Examples of Cession in Case Law

FNB v Lynn 1996 (2) SA 339 (A). is an example of a conditional claim.

1.

o Natal Earth Works (Cedent) ceded its debts in securitatem debiti to

FNB (Cessionary).

o They later obtained a contract with the Gov of Qua-Qua (debtor). Qua-
Qua was due to pay them when a final certificate of approval had been
issued.

o Then they went insolvent before the final certificate had been issued.

o The Liquidators (Lynn) then said that the Cessionary (FNB) was not a
secured creditor because the money due by Qua-Qua (debtor) was not due
before NEW (Cedent) went insolvent. FNB who was a secured creditor
appealed.

o The Court found that FNB (cessionary) was entitled to be treated as a

secured creditor. There were various minority judgments on various
points.

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In the main Judgment:

Oliver JA: The claim is a contingent or conditional right [ conditional on

the certificate being issued]. Future rights can be ceded and transferred in
anticipendo. This is the basis for ceding book debts (including future
debts), ceding future rights, and factoring of future rights. Van Der Hever
JA: This is a conditional right not a future right. NEW (Cedent) acquired
a personal right to performance against Qua- Qua (Debtor). The personal
right was delayed [ pending the certificate]. The personal right was
transferred [by the deed of cession in securitatem debiti].

PG Bison Ltd & others v Master of the High Court & another Supreme
Court of Appeal.(judgment delivered 29 November 1999 ) is another
clear case of a conditional claim.

Pats Planks CC (the cedent) ceded its book debts to PG Bison, the
cessionary. ]
§ It was common cause that the cedent's attorney inserted the following
additional clause ("the additional clause") into the deed of cession
prior to its execution by the corporation: "This cession will not be
implemented unless the account is overdue by 30 days and 7 days
notice of the intention to implement this cession has been given."
§ It was also common cause that at the date of the cedent’s liquidation
the account was indeed overdue by thirty days, but the seven days
notice had not been given.
§ The court found that the outcome of the appeal depends mainly upon
the interpretation of the additional clause, read in context. The first
step in construing the additional clause is to determine the ordinary
grammatical meaning of the words in order to ascertain the common
intention of the parties.
§ The court found further that "There can be no doubt in my opinion
that the rights were duly transferred to the appellants (cessionaries)
and remained vested in them" and that that the appellants(
cessionaries) [can] only take steps to recover the debts directly once
they have terminated the corporation’s mandate by giving notice in
terms of the additional clause.

Transfer of Contingent Claims

1. The legality of contingent claims.

o Cession of future contingent claims is not contra bonos mores, although

it has been argued that such cessions limit a persons economic activities,
and that they could lead to a clash of security interests.

2. Specificity principle.

o The future claim must be determinable regarding:

§ The identity of the cedent.
§ The identity of the debtor

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§ The cause of the claim.

This is to enable the cedent to determine what he is transferring and the

cessionary to determine what he is getting.

The following are not acceptable .

1. Any future claim against Donald of N$ 1000.00 where the future claim
against Donald is not N$ 1000.00. [Donalds future claims may be N$
R5000.00 and N$ 3000.00]

2. 50% of any future claim I have against Donald. [sum is not

determinable].

3. My future claims against Donald to the maximum of N$ 50 000.00.

(the cessionary doesn’t know which claim has a maximum of N$ 50
000.00).

The following is acceptable.

1. 50% of each of my (Specified) future claims against Donald.

2. 50% of my (specified) future claim against Donald.

Construction of cession in future claims.

1. The difficulty with ceding a future claim is that of delivery. De Wet &
Van Wyk argue that a future claim cannot be ceded because transfer of a
non-existent thing is impossible. Prof Scott argues that there is a
distinction between
§ A future claim and
§ A corporeal thing not yet in existence.

o A future claim can be transferred, because there is a method of doing

so. i.e the cession agreement, which would include the transfer
agreement.

o A corporeal thing not yet in existence cannot be transferred.

Materialisation of cession

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When does the claim pass? When the future event happens, is it for a
brief instant an obligation in the hands of the cedent, or has it already
passed to the cessionary. There is no uniformity of views and needs to be
determined still.

Priority

1. Where more than one cession of the same future right takes place, the
future rights to claim will take place in the same order as they appear.

See this recent case on cession Born Free Investments 364 (Pty) Ltd v
Firstrand Bank Limited [2014] 2 All SA 127 (SCA) and comments about
this type of cession by Dale Hutchison “Agreements in Restraint of
Cession: Time for a new Approach ” in 2016 Stellenbosch law Review
273 ff.

ASSIGNMENT NUMBER 4

Read the case Kudu Granite Operations (Pty) Ltd v Caterna Ltd 2003 (5)
SA 193 (SCA) in your Casebook page 828. You will notice that the
Assessment parties to this case (two companies) “Kudu” and “Caterna” had their
relationship start normally in a contract. Basically, the two companies,
the appellant ('Kudu') and the respondent ('Caterna'), participated in a
joint venture involving granite mining operations in Zimbabwe around
the decade of 1990s. (A joint venture (JV) is a business arrangement in
which two or more parties agree to pool their resources for the purpose of
accomplishing a specific task. This task can be a new project or any other
business activity. Often the joint venture creates a separate business
entity, to which the owners contribute assets, have equity, and agree on
how this entity may be managed). About the year 1997 they negotiated an
end to their relationship. One of the important aspects of their written
agreement to the purpose of the case that ultimately led to court was as
follows: Kudu sold to Caterna its 49 per cent shareholding and its loan
account in another company, Ruenya (which operated the granite mine
through the medium of which the two companies conducted their joint
venture). The price was R4 million, made up of payments in kind as well
as in cash. Kudu was to select 600 cubic metres from Caterna's stock of
granite, on which a predetermined value had been placed. The rest of the
purchase price had to be paid out in cash by Caterna.

The agreed payment process included a stipulation that the cash part of
the price had to be paid within a specified time after the parties had
agreed on the amount owed by yet another company ('CAG') to Caterna,
or, should the parties not be able to reach agreement on the amount owed,
within a further specified time after an accounting firm, KPMG, had
determined this amount.

Pursuant to the agreement, Kudu selected the specified amount of granite

and it was delivered to its nominee. But the parties could not reach
agreement on the value of the CAG loan account, nor was KPMG able to
determine the value. The result of this inability to determine the value

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meant that the agreement failed towards the end of 1998 (para 6). After
this failure, at the beginning of 1999, Caterna commenced legal action in
Court alleging an enrichment action against Kudu (para 8). Caterna
claimed, amongst other things, an order directing Kudu to return the
granite blocks that it had selected, alternatively, should Kudu have
disposed of any of the blocks in the meantime and therefore not be in a
position to return a specific block that had been selected, the value of that
block (para 8). Kudu was able to return only eleven of the 79 granite
blocks that it had selected, and the judge in the original high court case
(Smit J) ordered, first, the return of these blocks and, secondly, the
payment of the market value of those blocks that could not be returned. In
the course of reaching this decision, Smit J stated that when an agreement
failed without fault on the side of any of the parties each of the parties
had to return to the other that which he or she had received in terms of the
agreement. He opined that it was uncertain as to whether this was a
contractual or an enrichment action (para 12), but concluded that it did
not matter in the circumstances and made the order for which Caterna had
prayed (para 13).

Discuss on what legal ground the Supreme Court reversed the High court
decision when this situation all was about contract that one party could
not perform; and why the Supreme Court in its judgment made the
decision that it made, that even though the contract had failed, it
apparently still uses the contract, which has ceased to exist, to determine
the content of the ensuing enrichment claim.

In enrichment action, if the contract for some reason, fails, example, due
to illegality, the parties must return that which they have received. Why
in this case the returned of the blocks was not the basis of the enrichment
action?

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Unit Summary
In this unit you learned

That Cession is an act of transfer of a personal incorporeal right or claim from the
estate of the cedent (transferor) to that of the cessionary (transferee) by means of an
agreement between the two; it is the substitution by contract, known as a cessionary
Summary
agreement, of one creditor for another. It is the opposite, then, of delegation.

That there are two types of cession: One is Cession in securitatem debiti an dthe
other is outright cession.

You also learned that the rule “nemo plus iuris ad alium transferre potest quam ipse
haberet ” applies in cession, that is to say, “no one can transfer more rights than
they have”.

As a general rule, all claims can be ceded: contractual rights as well as delictual
ones. Future rights, too, may be ceded.

That a valid causa is not necessary for a valid cession, but it is a requirement for the
cession to have a permanent effect.

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References
Van der Merwe, et al, Contract: General Principles (3rd ed.) (2007)
Juta & Co. Cape Town.

Wessels, J W, The Law of Contract in South Africa. (1937)

References Buttherworths, Durban.

Zimmerman R, The Law of Obligations: Roman law Foundations of the

Civilian Tradition, 1990, Juta, Cape Town.

Clarke B & Heerden B J “Cession in Securitatem debiti” 1987 SALJ

258.
Damanski A “Cession in Securitatem debiti: National bank v Chohen’s
Trustee Reconsidered” 1995 SA Merc L J 427.
Harker J R “Cession in Securitatem debiti” 1981 SALJ 56.

Harker JR “Cession in Securitatem debiti: In the nature of Quasi Plede”

1986 SALJ 200.
.

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UNIT 21:

Termination of Obligations

Introduction

You will learn that contract normally terminate by performance, as

agreed between the parties.

Outcomes If not terminated by performance, they can also come to an end due
to various factors, such as supervening impossibility; or by
agreement between the parties, or through other mechanisms,
such as mergers, prescriptions, etc.

You will also learn that where the contract terminates due to
supervening impossibility, some qualifications apply to the rule
that ‘the contract falls away’: For the rule to apply, the
circumstances leading to supervening impossibility must have arisen
due to some unavoidable and supervening event; the cause must not
have been the debtor's fault. Otherwise the rule does not apply.

You will also learn that contractual rights and duties are generally

transmissible on death, although not in the case of a delectus personae

or an express or tacit agreement to the contrary, in which case

resolution of the contract is left to the executor of the deceased's estate.

Again, you will learn that in the event of the debtor's insolvency (or
liquidation if it is a company), the contract is not terminated
immediately; its resolution is left to a trustee or judicial manager, to
whom the insolvent estate is handed over. This party decides whether to
terminate the contract or to settle it, or else to keep it alive if this is in the

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best interests of the estate. The procedure is governed by the Insolvency

Act

You will equally learn that a contract can be terminated by prescription:

A person can lose or acquire rights because of the passage of time. The
enforceability of obligations is also limited by time.

Prescribed reading: Hutchison & Pretorius, Chapter 15.

Prescribed reading Prescribed cases: There is no prescribed case for this unit.

The normal way obligations are terminated is upon full and proper
performance.

But obligations not terminated through full and proper performance, may
also be terminated, either by agreement or by operation of law.

1.Termination by Performance
Most contracts are not breached. The primary means of termination is by
due and full and proper performance, which is usually rendered by the
person on whom the duty to perform is imposed. The effect of proper
performance or payment is to release the party concerned from his
contractual obligation. Payment is the delivery of what is owed by a
person competent to deliver to a person competent to receive. When
made, it operates to discharge the obligation of the debtor. Proper
performance of a party's obligation discharges not only that obligation but
also any obligations accessory to it, such as contracts of suretyship and
pledge.

By whom and to whom.

(1)) By whom

The contract determines by whom performance should be made. Usually

it is the person upon whom the obligation is imposed. In cases of delectus

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personae (the selection of a person), if there is no alternative performer; it

is mandatory that the specific debtor perform. In the absence of delectus
personae (the selection of a person), a performance could also be
rendered by third parties, including: (i) An agent, appointed by the debtor
to perform on his behalf; (ii) A surety (as per the previous section); (iii)
Another third party, either charitably or by agreement (which is to say, in
the latter case, by delegation). This may be done even without the
debtor's knowledge.

It is important to note, however, that the third party is a stranger to the

contract and is therefore not bound to perform; if he does not, it is the
party who promised he would who is liable.

The creditor is entitled to reject performance by a third party if it is not in

the name of the debtor. A third party who performs in the name of the
debtor is entitled to payment by the creditor of any security deposited or
pledged by the debtor with the creditor, unless the third party pays as the
debtor's agent. The creditor is not entitled to proceed against the third
party, however, as there is no privity of contract between them.

(2)) To whom

As for the question of to whom performance must be made, there is a

variety of possibilities. Depending on the circumstances, performance
may be rendered to: (i) the creditor; (ii) the creditor's agent; (iii) some
third party indicated by the creditor, thereby producing a subsidiary
contract.

Time and place

The time and place of performance are usually stipulated in the contract.
The first port of call, therefore, is to examine the contract and determine
whether or not it stipulates a particular place for performance. If there is
no specific stipulation, the type of contract generally determines the place
for the requisite performance. If no date is stipulated, performance must
occur "within a reasonable time," to be determined, again, by the nature
of the contract.

Nature of Performance

As for what constitutes performance, there are various criteria to

determine performance:

In reciprocal contracts, a creditor has the right to receive full and

complete performance.

The defaulting debtor may not elect to pay damages in lieu of

performance, unless it is at the prerogative of the creditor. The law does
not require that the creditor accept an offer to this effect; he is entitled to
continue to demand performance.

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2. Termination by Agreement
Termination or alteration of an obligation by agreement may take several
forms.

Variation; Release and waiver; Novation.

Variation: The parties may agree to vary a term of their contract, in which
case the contract is not terminated but is simply altered in some way.
Release and waiver: A release is an agreement between the parties that
the debtor be freed or "released" from an obligation. (The term "waiver"
is sometimes used synonymously, but "release," for reasons soon to
become apparent, is more accurate here.) Releases are most often to be
found in employment contracts; A waiver occurs when the creditor elects,
without discussion or arrangement (and therefore, unlike release, usually
without agreement), to "waive" certain claims or rights under a contract;
it is, in other words, the unilateral act of abandoning a right that exists for
the creditor's sole benefit. By way of example, the non-breaching party
has the right, in cases of major breach, to claim cancellation, but that
right may be waived.

Performance though payment:

Payment:

Performance through payment must be in the form of legal tender. This

includes notes, coins and even in gold-coins or in kind. With respect to
inflation, the principle of “nominalism” applies: Unfortunately, our courts
normally do not make inflation adjustments. If, therefore, one owed
N$100 in the year 2007, it remains N$ 100 today. The debtor should pay
the amount specified in contract, though some contracts specifically
factor in inflation, in which case it applies.

Similarly, the no-difference principle applies to foreign exchange: There

are no currency conversions, so that what is claimed in one currency is
owed in that currency.

Payment by cheque as performance is allowed, but only once the bank

has honoured it; if the cheque bounces, it is regarded as non-payment.

3.Termination through Novation

A novation is an agreement to extinguish and replace one or more
obligations with a new obligation or obligations. Note however that if the
original obligation is void, the novation is also void.

In our law we have two forms of novations: novatio voluntaria and

novatio necessaria.

Novatio voluntaria: is "a transformation and alteration of an earlier

obligation, whether natural or civil, into another obligation whether

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natural or civil, when a fresh cause is created out of a foregoing cause in

such wise that the earlier cause is destroyed (See Swadif (Pty) Ltd v Dyke
NO 1978 (1) SA 928 (AD)).

Novatio necessaria: Compulsory novation, takes place by operation of

law, from "judicial proceedings between parties whose rights and
obligations are in issue between them." Few judicial proceedings lead to
novation; where they do, it is the damages awarded by the court that
novate the contract.

It is important to note that "compulsory novation does not release pledges

or securities nor are sureties discharged; it does not interrupt the running
of interest nor is mora purged."[202] This is "because properly speaking, it
is not a novation, but an additional confirmation or continuation of a
previous obligation.

4.Termination by Compromise:
A compromise is an agreement whereby the parties settle a disputed
obligation or some uncertainty between them. New obligations are
created, and any existing obligations are extinguished. Compromise
classically takes the form of an out-of-court settlement. Where payment is
made in full and final settlement, it depends on the circumstances
whether this is an offer to compromise. The general rule is that the old or
former relationship falls away, and the new relationship is governed by
the settlement agreement.

Termination by Eflluxion of time:

If a contract fixes a specific period for its duration, it terminates

automatically at the end of such period.

Termination by Notice

Long-standing contracts, or contracts for an indefinite period, are

terminable upon reasonable notice unless specifically agreed otherwise.

5. Termination by Operation of Law

Obligations may also be terminated by law, as in the case of set-off,

merger, supervening impossibility of performance, prescription,
insolvency and death.
Set-off

Where two parties are reciprocally indebted to one another by reason of

distinct obligations, one debt may be set off against the other to forestall
the onerous burden of two different sets of possible litigation.

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Merger

The extinction of a debt by merger or confusio occurs when one person

becomes both creditor and debtor in respect of a debt.

Example: “A owes B N$ 500. B dies and leaves her estate to A. A is now

both debtor and creditor in respect of the debt of N$ 500, so that the debt
is extinguished by merger.

Similarly, if a tenant decides to buy the property he is renting, he would

not thereby become his own landlord; the relationship would be merged
and thus cease to exist.

Insolvency
In the event of the debtor's insolvency (or liquidation if it is a company),
the contract is not terminated immediately; its resolution is left to a
trustee or judicial manager, to whom the insolvent estate is handed over.
This party decides whether to terminate the contract or to settle it, or else
to keep it alive if this is in the best interests of the estate. The procedure is
governed by the Insolvency Act.

Supervening impossibility of performance

Supervening impossibility of performance takes place where an event that

occurs (or supervenes) after the contract has commenced objectively
renders the contract no longer performable . This event must have been
unforeseen and unavoidable by a reasonable person, such that no-one in
that position could have fulfilled the obligation.

The distinction between supervening and initial impossibility (which does

not terminate the contract) is an important one and often confused: The
performance must have become objectively impossible, even if at first it
was perfectly doable.

Generic goods and services are not subject to supervening impossibility,

because they are easily obtainable and performance is still theoretically
executable. An inability to meet one's debts is also precluded, because it
entails fault. The impossibility must, in an objective sense, be outside of
one's control. The following are classic examples:

Vis maior: an act of god, beyond one's control; fault is precluded and
performance rendered objectively impossible.

Casus fortuitus: intervention by the state or legislature which renders

performance impossible.

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Termination through Prescription

A person can lose or acquire rights because of the passage of time. The
enforceability of obligations is also limited by time.

Extinctive prescription

Extinctive prescription entails the termination of obligations, and

therefore their enforceability, by lapse of time. This ensures finality in
business affairs and provides an incentive for persons to enforce their
rights when they become due. It is regulated by the Prescription Act.

Acquisitive prescription

Acquisitive prescription describes the acquisition of property, or rights of

ownership, and therefore falls outside the scope of contract law.

6. Death
Contractual rights and duties are generally transmissible on death,
although not in the case of a delectus personae or an express or tacit
agreement to the contrary, in which case resolution of the contract is left
to the executor of the deceased's estate.

Unit Summary
In this unit you learned that

Most contracts are not breached. The primary means of termination is by

due and full and proper performance, which is usually rendered by the
Summary
person on whom the duty to perform is imposed.

The effect of proper performance or payment is to release the party

concerned from his contractual obligation. Payment is the delivery of
what is owed by a person competent to deliver to a person competent to
receive. When made, it operates to discharge the obligation of the debtor.

Proper performance of a party's obligation discharges not only that

obligation but also any obligations accessory to it, such as contracts of
suretyship and pledge.

Termination can occurs in other means such as by agreement; by novatio

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voluntaria, novatio necessaria, effluxion of time; by delegation, etc.

Termination can also occur be terminated by law, as in the case of

set-off, merger, supervening impossibility of performance,
prescription, insolvency and death.

Again termination can also occur due to supervening impossibility

by prescription.

References
Hutchison and Pretorius (eds) (2016) The Law of Contract in South
Africa, 3rd edition, Cape Town, Oxford University Press.
Van der Merwe, SW; LF van Huyssteen; MFB Reinecke; GF Lubbe
(2007). Contract: General Principles (3rd ed.). Juta & Co..
Kerr, A J (2004). The Principles of the Law of Contract (5th ed.).
Butterworth-Heinemann,
Christie, RH (2006) The Law of Contract in South Africa (5th ed.).
Durban, LexisNexis/Butterworths.
Bradfield G, (2016) Christie’s Law of Contract in South Africa , (7th
edition) Durban: LexisNexis.

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UNIT 22:

Unjustified Enrichment

Introduction

§ discuss the nature and function of the law of unjustified enrichment in

Namibia.

§ discuss the general principles of enrichment

Outcomes
liability.

§ outline the notion of enrichment by transfer, and the application of the

Roman “condictiones”.

§ outline notions of enrichment by outlays and encroachment.

Prescribed reading: (Provided notes in the reader).

Cases on Enrichment law

Prescribed reading Besselaar v Registrar, Durban and Coast Local Division 2002 (1) SA
191 (D)= CASEBOOK Page 821.

Kudu Granite Operations (Pty) Ltd v Caterna Ltd 2003 (5) SA 193
(SCA)==[2017]= CASEBOOK Page 828.

McCarthy v Short Distance Carrier 2001 (3) SA 482 (SCA)=

CASEBOOK Page 839.

First National Bank of SA Ltd v B & H Engineering 1993 (2) SA 41 (T)=

CASEBOOK Page 854.

*NOTE: ASSIGNMENT NUMBER 4 ABOVE IS RELATED TO

THIS UNITAND NOT TO THE UNIT ON CESSION.

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Note: The law of unjustified enrichment is a separate branch of the law of

obligations. It is normally a stand-alone course. Because your LLB
programme does not envisage such course for now, then a very basic
content is presented here as a single unit, so that you have full picture of
Note it! / the law of obligations. The other branch “delict” is presented to you in
Warning
your third year. Note also that in English law, this Branch of law is called
the law of unjust enrichment (and sometimes the law of restitution).
However, there are noticeable differences between the English law of
unjust enrichment and our law of unjustified enrichment.

1. What is Unjustified Enrichment?

In law, unjustified enrichment occurs when one person is enriched at
the expense of another in circumstances where there is an absence of
legal ground. Where an individual is unjustifiably enriched, the law
imposes an obligation upon the recipient to make restitution, subject to
any available defences, such as loss of enrichment, estoppel, prescription,
res-judicata, etc. Liability for an unjustified (or unjust) enrichment arises
irrespective of wrongdoing on the part of the recipient. The concept of
unjustified enrichment can be traced to Roman law in the maxim that "no
one should be benefited at another's expense": nemo locupletari potest
aliena iactura or nemo locupletari debet cum aliena iactura (Justinian
Digest, D 50.17.206).

ENRICHMENT LAW: FOUR MODALITIES OF ENRICHMENT:

• DEFENDANT MUST BE ENRICHED · (How?)

§ · Increase in defendant’s assets (which would not have occurred)

§ · Non-decrease in defendant’s assets (which would have occurred)
§ · Decrease in liabilities (which would not have occurred)
§ · Non-increase in liabilities (which would have occurred)

Enrichment
§ Must still exist in patrimony of enriched party at time claim is lodged.
Either the thing – or the money received for the thing sold.
§ Acquisition of a benefit with a monetary value = financial position of
estate at relevant time compared to financial position of estate if
enrichment did not occur.
§ Potential benefit not enrichment – unless received as actual benefit.
§ In appropriate cases invisible or intangible personal benefits may be

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enrichment.
§ The use of another’s thing? Not yet settled law.

Forms of enrichment
§ Direct enrichment (Transfer of benefits)
§ Non-decrease in defendant's assets (which would have occurred)
§ Decrease in liabilities.
§ Non-increase in liabilities which would have increased.

VARIOUS ENRICHMENT CLAIMS AVAILABLE

Condictiones sine causa

·Condictio indebiti ·Condictio ab turpem vel iniustam causam ·Condictio causa data
causa non secuta ·Condictio sine cause specialis ·Condictio ob causam finitam.

Bona fide possessor ·Bona fide occupier ·Mala fide possessor ·Mala fide occupier ·

Improvements to Property Management of another’s affairs

Actio negotiorum gestorum utilis ·actio negotiorum gestorum contraria ·

On Services (Work done or service rendered )

locatio conductio operis ·locatio conductio operarum

EXAMPLES ·electronic funds transfer into incorrect bank account ·payment of cheque
which has been stopped

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ORDINARY Defences in Unjustified

enrichment
• Bona Fide purchase for value from a third party
• Estoppel
• Election
• Prescription
• Res-judicata (dispute resolved)
• Waiver
• Counter-restitution
• Incapacity
• Illegality
• Passing On
• Loss of enrichment (change of position)

Bona Fide Purchaser for value (bfp): - This defence is raised by a person
who had no reasonable basis to suspect that the seller did not have good
title and paid for what he acquired (i.e. for value) in good faith. It mostly
arises if one person seeks to assert a right to a thing against a third party
who has (or has acquired) legal title.

Election as a defence (specially found in Canadian law) means that an

earlier case provided the plaintiff with a choice of remedies, and he
choose what at the time he thought to be the appropriate remedy for his
claim, and in a later case his earlier election might disentitle him
enforcing the other right. This defence often appears alongside with that
of res judicata.

Estoppel is ordinarily a defence raised by someone to whom a

representation was made, and who has altered his position detrimentally
in reliance on that representation. The defence entails that the person who
has made the representation is denied the right to assert that the
representation is not true (so he is stopped).

In law Incapacity is a privation arising from nature, or law, or from both,

which deprives a person of a quality legally to do, give, transmit or
receive something. It arises from nature such as in cases of youth, mental
incompetence or frailty; it arises in law such as in cases of prodigals or
convicted felons.

Illegality is a defence in term of which one party asserts that the

obligation in raised by an agent acting for a principal against an
unjustified enrichment claim brought against him by a third party, where
the agent has paid over money to his principal because it is thought the
appropriate defendant is the principal.

Passing on is a defence in term of which one party resists another’s claim

on the ground that the claimant has already recouped his losses by
transferring to a third party (usually customers) all or part of the burden

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for which he now seeks to recover from the defendant.

Prescription is a defence in term of which the right to claim performance

of an action (or the prerogative to enforce a legal right) is lost due to an
inaction over a specified period of time.

Res judicata is a defence in term of which the defendant pleads that the
matter at issue has already been adjudicated by a competent court with a
final decision and should not be reopened for the interest of justice.

Waiver is a voluntary and intentional relinquishment, surrender, or

abandonment of a known existing legal right, advantage, benefit, claim,
or privilege, which, except for such a waiver, the party would have
enjoyed.

NB. ‘Waiver’ differs from ‘laches’ primarily in that ‘laches’ requires a

showing of prejudice to the party claiming it, whereas ‘waiver’ does not.
(Note however that “laches” is an American terminology, which is
normally not found in our law).

The defence of Estoppel

Estoppel defence (In Namibian & in English Law (compared)

Estoppel in English law is a complex doctrine, with various ramifications.

It is generally divided into common law estoppel and equitable estoppel.
These two main headings have sub-species that vary considerably and
often overlap. The concept is used in various other branches of law such
as contract and property law. For this reason it is said that ‘this defence,
unlike change-of-position, which is not a defence to causes of action
other than those based on unjustified enrichment, there is nothing
peculiarly restitutionary about estoppel’. If one looks at English case law
in the various branches it is clear that any private right, ‘whatever its
origin, may be barred by an express or implied statement that it will not
be exercised’, coupled with change-of-position on the faith of it, in
circumstances such that it would be inequitable to assert it. Nevertheless,
‘estoppel is commonly relevant in practice in restitutionary claims, in
particular where payment by mistake is concerned’. Some examples of
these sub-species of estoppel are: proprietary estoppel, promissory
estoppel, estoppel in pais, etc. (Tottenborn A, The Law of Restitution in
England and Ireland 3rd Ed. (2002) 279).

In sum, estoppel by representation that constitutes a defence in unjustified

enrichment in English law entails a representation which is either
collateral or inherent, and leads to a prejudicial change of position on the
part of the defendant as a result of reliance upon the said representation

Prescription in general is a defence in term of which the right to claim

performance of an action (or the prerogative to enforce a legal right) is
lost due to an inaction over a specified period of time.

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Prescription may also constitute a defence in unjustified enrichment.

Although it can be pleaded in the alternative, it is unlikely to overlap with
loss of enrichment. In any event, the institution of Prescription in
Namibian Law is regulated by the prescription Act of 1969. Any claim or
right alleged to have been prescribed is in principle catered for by this
Act. Obviously, debts can arise from several sources, but the Prescription
Act draws no distinction based on the source of the debt. It refers in
general to debts and it would seem that such general reference
encompasses both debts arising in private law as well as those arising in
administrative-law relationships. Because the effect of prescription is to
extinguish the debt after the period which applies in respect of that debt,
its effect is analogous, to some extent, to the change-of-position defence,
though the defences are based on different rationales. After the lapse of
the period laid down by the statute there is no debt that can be enforced in
any of the ways in which debts can be enforced at law (See Visser DP ,
Unjustified Enrichment (2008) 752-766) and Krause LE ‘The History
and Nature of Acquisitive Prescription and of Limitation of Actions in
Roman-Dutch Law’ (1923) SALJ 26).

In African Diamonds Exporter v Barlays Bank Ltd 1978 (3) SA 699 (A)
(leading case on loss of enrichment)

The court concluded that there is a fundamental difference between, on

the one hand, the legal position of ‘a recipiens who has resold the
property mala fide and with the knowledge of the theft [in the original
acquisition of the property] and, on the other hand, the recipiens who his
bona fide in the acquisition and resale of the property, i.e., has no
knowledge of the theft.’ In contrast, where ‘the acquisition and the re-sale
had been bona fide, then there would be no liability to make good the
value’. That is so, ‘because the good faith of the purchaser would protect
him against any claim ex delicto, and there would be no contractual
relationship and no consideration of natural equity’ Ibid. 711F-G. The
court here was distinguishing the positions stated in two previous cases
namely Morobane v Bateman 1918 AD 460 at 465-466 and John Bell v
Esselen 1954 (1) SA 147 (A) at 153.

Loss of enrichment (change-of-position) is a ‘positive defence’ in terms

of which the defendant ‘acknowledges’ the validity of the plaintiff’s
claim, but he nevertheless pleads to be exonerated from the liability to
restore in full or in part the said enrichment due to changed circumstances
that would render it ‘inequitable’ for him to account to the plaintiff.
However, the defence is not uniformly understood in all legal systems
that have it. (it is known in Germany as “disenrichment defence”; in
America as “Change of Circumstances”; in England and Australia as
“Change of Position”; and in South Africa and Namibia as “loss of
enrichment”.

Normally France which also follows a Roman law tradition, does not

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have this defence. But the Netherlands do have it in their Burgelijk

Wetboek (Dutch Civil Code), and the recent DCFR (Draft Common
Frame of Reference) of the European Union has recognised such defence,
too.

The defence of loss of enrichment (Change of position) appears in two

forms:

§ (a) reliance version

§ (b) disaster version

Passing on is a defence in term of which one party resists another’s claim

on the ground that the claimant has already recouped his losses by
transferring to a third party (usually customers) all or part of the burden
for which he now seeks to recover from the defendant.

Passing on defence arises where a plaintiff has shifted to others the

burden that is consequent upon the defendant’s unjustified enrichment.
Such defence arises overwhelmingly in tax cases.

In the most common scenario, a business apparently liable for tax makes
payment to the government, but it also attempts to recoup its losses by
raising the prices that it charges to its customers. When the tax is
subsequently determined to be improper or inapplicable, for example due
to having been charged ultra-vires, the business seeks repayment as a
relief. The government resists such a claim arguing that its enrichment
came not at the plaintiff’s expense, but rather at the expense of the
plaintiff’s customers.

So, the arguments goes like this: because you have already charged the
customers the ‘ultra-vires’ amount, you recouped the same amount you
have paid to the government, and you “lost nothing”. If now the
government pays you the overpaid amount, you are the one who will be
enriched at the expense of the customers.

Claim for interest in unjustified enrichment

The issue of interest in unjustified enrichment is a matter of debate. There
is no clear cut position on the issue yet. Unlike in common law countries
where enrichment claims are both seen as encompassing rights in
personam and rights in rem, Namibian Law, like other civilian law
countries does not adhere to that proposition. Claims in unjustified
enrichment law are in personam only and for that reason the foundations
of claiming interest, say on money mistakenly paid, may be very shaky. If
one asserts that interest is recoverable, say on mistaken payments, this
very fact may reveal that the legal system may subtly viewing the nature
of the claim with some interface with proprietary claim, viz, the claim
may be treated as though the plaintiff were recovering his own property, a
nuanced rei-vindicatio in disguise. Alternatively, the plaintiff may be

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seen as suing for a debt, but this would introduce a contractual nuance to
the claim. If the claim could be viewed with vindicatory nuances, the
analogy would be made to the loss of interest the payer would have made
by investing the amount mistakenly paid to the recipient. But we know
that an unjustified enrichment claim is personal in nature, and as such
interest is not normally recoverable, because if it were otherwise,
specially where mistaken payments are at issue, such claim would
amount to claiming damages; but damages are only maintainable in
delictual or contractual actions, or proprietary claims as already
mentioned. A further hurdle is that a claim for mistakenly paid money,
for example, is for the return of the precise amount ‘mistakenly’ paid; as
there is no question of fault on the part of the recipient, unless special
circumstances have occurred, there is also no theoretical basis why
interest should be allowed on such a sum.

But there are cases where interest in unjustified enrichment is indeed

claimed. So, technically speaking, such claim is analogous to a “wrong”,
i.e. from the moment the person knows that he is liable for a claim in
unjustified enrichment, if he/she does not pay, he is committing a wrong
(delictual act).

Unit Summary

In law, unjustified enrichment occurs when one person is enriched at

the expense of another in circumstances where there is an absence of
legal ground. Where an individual is unjustifiably enriched, the law
imposes an obligation upon the recipient to make restitution, subject to
Summary any available defences, such as loss of enrichment, estoppel, prescription,
res-judicata, etc. Liability for an unjustified (or unjust) enrichment arises
irrespective of wrongdoing on the part of the recipient.

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Unit 23 Drafting of Contracts

References
Damanski A “Cession in Securitatem debiti: National bank v Chohen’s
Trustee Reconsidered” 1995 SA Merc L J 427.

Glover G, “Reflections on the Sine Causa requirement and the

Condictiones in South African Law” (2009) Stellenbosch Law Review
468-493.

Hadfield, G. K. (1994). “Judicial Competence and the Interpretation of

Incomplete Contracts”. Journal of Legal Studies. Vol. 23 pp. 159-184.

Harker J R “Cession in Securitatem debiti” 1981 South African Law

Journal 56.

Harker JR “Cession in Securitatem debiti: In the Nature of Quasi -

Pledge” 1986 South African Law Journal 200.

Harker J R ‘The Nature and Scope of Rescission as a Remedy for Breach

of Contract in American and South African Law’ (1980) Acta Juridica
61-105.

Hutchison D & Pretorius CJ (eds), The law of Contract in South Africa,

(2012) Oxford University Press, Cape Town.

Unit 23

Drafting of Contracts
Prescribed Reading: Hutchison & Pretorius, Chapter 16.

Read Chapter 16 and the model contracts given to you there.

Observation: Content of this Unit you will learn it at your law firm
when practicing law. This is just a skeleton of what need to be in
contract.

Drafting
The contracting parties’ main objective during contract negotiation
should be to reach a consensus regarding the exact object of their
agreement on the best commercial terms and conditions. Certain contracts
must be notarially executed, e.g. ante-nuptial (ANC) contracts, or
prospecting agreements and mining leases, to be valid, in which case they
are called ‘deeds’ and are public instruments.

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Commencement
It is vital to first identify the type of undertaking and describe the
contracting parties. The parties and their contact details should be
properly described in the contract document.

Nature and Recitals.

The agreement’s nature depends on its contents. When the contract is
nominate, care must be taken to include the essentialia for that agreement
in the contract. Following the commencement should come clauses
setting out the causa of the contract, its object and the extent of the
parties’ obligations, much of which is typically found in the recitals.

Effective date
The contract should be properly signed and dated to be effective. The
contract may be dated in the introductory or execution clauses.

Sequence of clauses
The contract should be structured in a logical and practical fashion. After
the commencement, recitals and the definitions and interpretation clause,
the operative provisions should appear.

Specific terms.
First come clauses on aspects specifically negotiated by the parties for
their contractual relationship, such as clauses on the remedies for breach
of contract, including cancellation, penalty, forfeiture, limitation and
exemption clauses; and conditions and time periods.

General terms
Then follow general clauses on variation, severability, entire agreement,
cession, waiver, domicilium citandi et executandi (notices, address for
service), applicable law and jurisdiction, alternative dispute resolution
procedures, force majeure (vis major and casus fortuitus), costs, and
confidentiality.

Structure and language

Lastly, principles of good language and grammar, and proper numbering,
should be used throughout.

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References.
Andrews N, Contract Law , (2011) Cambridge University Press,
Cambridge (UK).
Boyce T R, Tendering and negotiating MOD Contracts, (2002) Thorogood,
London.
Bradfield G, Christie RH– The Law of Contract in South Africa , 6th ed
(2013), LexisNexis, Durban.
Brook M, Estimating and Tendering For Construction Work, 3rd Edition,
(2004) Elsevier, Amsterdam.
Burrows A, Restatement of the English Law of Contract (2016) Oxford
University Press, Oxford.
Christie, RH, The Law of Contract in South Africa ( 5th ed.), (2006)
LexisNexis/Butterworths, Durban.
Clarke B & Heerden B J “Cession in Securitatem debiti ” 1987 South
African law Journal 258.
Damanski A “Cession in Securitatem debiti: National bank v Chohen’s
Trustee Reconsidered” 1995 SA Merc L J 427.
Glover G, “Reflections on the Sine Causa requirement and the Condictiones
in South African Law ” (2009) Stellenbosch Law Review 468-493.
Hadfield, G. K. (1994). “Judicial Competence and the Interpretation of
Incomplete Contracts” . Journal of Legal Studies. Vol. 23 pp. 159-184.
Harker J R “Cession in Securitatem debiti ” 1981 South African Law
Journal 56.
Harker JR “Cession in Securitatem debiti: In the Nature of Quasi -Pledge”
1986 South African Law Journal 200.
Harker J R ‘The Nature and Scope of Rescission as a Remedy for Breach of
Contract in American and South African Law’ (1980) Acta Juridica 61-105.
Hutchison D & Pretorius CJ (eds), The law of Contract in South Africa,
(2012) Oxford University Press, Cape Town.
Hutchison D and Du Bois F “Contracts in General” in F du Bois (ed.)
Wille’s Principles of South African Law 9 ed (2012) 733-887.
Jorge, A "The Subsidiarity Rule: the Unjust Enrichment Doctrine in
Construction Law" (2013) 5 International Journal of Law in the Built
Environment,.253-270.
Jorge, A “Failed Synallagmatic Contracts : Appraisal of the Maxim "the Party
who has Control and can Iinsure against the loss Should Shoulder the Risk "
(2010) 21 Stellenbosch Law Journal 298-320.

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