Offer

Terms of an agreement - simply a proposal to contract

- Essentialia:identify the type of contract– for example, The - invitation from the offeror to the offeree to create legally binding
essentialia of a contract of sale are the price (pretium) and the obligations\
thing (merx) that is sold / parties - Courts often use OFFER & ACCEPTANCE (as a form) to determine, for
Requirements - naturalia are those terms that are automatically attached by the example;
- Consensus ( corresponding intentions) law to a specific type of contract . For example, one of the - WHETHER - contract has been formed.
- Capacity (legal) naturalia of a contract of sale is a warranty against latent - WHEN & WHERE - contract was concluded.
- Formalities (comply- set by law; recognised by parties) defects
- Legality ( lawful, not against CL, ROL,PP) Types of offers
- incidentalia are those terms that cover residual matters for
- Possibility ( determined+ determinable) - Offer — (made to a specific person/s with the purpose of eliciting
- Certainty ( certain of duties+ obligations) which the parties wish to make special provision, alter, or
response)
exclude the Naturalia. For example, the parties to a contract of
- Auction - Makes an offer to a particular class of person/s
sale of a car include a clause that requires the seller to have the
- An offer cannot in itself, give rise to legally binding obligations:
car serviced before making delivery to the buyer - PRACTICAL EFFECT: places the offeree in a position whereby a unilateral
- The parties can also agree that the seller will not be liable for act of acceptance, s/he can call the contract into being.
Characteristics of a contract any latent defects in the car – a “voetstoots” clause – in other - Until such acceptance, the offeror can withdraw the offer.
- -juristic act words they exclude the particular naturalia of the contract of - Exception: OPTION CONTRACT requires that the offer be kept open
- -bilateral/multilateral act sale - THE OFFER MUST BE FIRM
- Entail undertakings - THE OFFER MUST BE COMPLETE
- Reciprocal - THE OFFER MUST BE CLEAR & CERTAIN
- Offer must be “sufficiently certain” ie ascertainable.
- Must be possible to determine the content of the obligation.
- If the offer is vague – in that it fails to provide a reasonably clear
Express terms indication of what the offeror had in mind — it may be void for
- Agreed expressly , eg purchase vagueness
price - None acceptance cannot create binding obligations
- A undertakes to pay R20 000 for
B’s car Contract summaries - OFFER CAN BE ADDRESSED TO A PARTICULAR PERSON, YOU & I
- CLASS OF PERSONS, GROUPS, JURISTIC PERSONS & ORGANISATIONS
Implied provision Obligations
- is an unexpressed provision in a - PUBLIC - for example - REWARD, ADVERT & AUCTION SALE
-Natural: based on equity, morality - Simple auction: bidder makes the offer to the auctioneer —can
legal agreement or contract which
derives from the common and natural law accept/reject- must comply with - s45 (3) of CPA.
intention of the parties and which -Moral: considerations of what is right Cornerstones of a contract - Auctions subject to conditions (1) Auction with reserve i.e. reserve
is inferred from the express terms & wrong q Freedom of contract - the price is set — thing sold to the highest bona fide bidder provided the
of the contract and the -Civil: one which binds in law - idea that people are free to offer is not lower than the reserve price
surrounding circumstances viniculum juris – legal bond or tie decide with whom & on - The auctioneer is considered to make invitations to make offers.
- For example – The warranty -Contractual: each party is legally what terms to contract - The bidder then makes an offer to purchase
against latent defects is an implied which ties in with party - (2) Without reserve — article is sold to the highest bona fide bidder —
responsible for in an agreement
term of a contract autonomy. - Bona fide bidder is a person who bids in good faith.
Tacit term q Sanctity of contract = - Auctioneer is considered to be making an offer to sell to the highest
- The tacit term/s of a contract are Cornerstones of democracy pacta sunt servanda bidder by calling for bids.
those terms on which the parties contract/s enter in to
= Ensure parties keep promises as a matter - The conditions may be advertised beforehand ie newspaper or
did not agree expressly, but which freely & seriously must be
are read into the contract because
of honour & morality catalogue.
honoured & if neccessary - Or maybe announced at the auction itself.
of the parties actual or imputed = Promote legal certainty & commercial
enforced by the courts
(fictional) intention certainty - What happens when auctioneer changes the conditions? Can he be
q Privity of contract –
= Promote fairness & reasonableness in held liable based on contractual liability?
contract creates rights &
contractual dealings by imposing duties only for the parties - First contract: contract binding bidder to the auction conditions.
standards that discourage over-reaching to the agreement & no - Second contract — is the substantive contract of sale.
- Value based - Revocation — offeror whithdraws offer - Has to be communicated to
=Provide a workable system that will third party.
system the offeree - What happens when the offer is accepted before
- - can’t be against encourage private enterprise & which
revocation reaches the offeree? – TO DO SOME
public policy/ underpin the operation of a free-market
THINKING?????????????
contra bona- economy - 2) If offeror/offeree rejects the offer, the offer falls away - counter-
mores q Consensus - agreement on the offer constitutes rejection. It must be communicated to the offeror.
material terms of the contract; - 3) Expiry/effluxion of the prescribed time or reasonable time. Offer
q Reliance - reasonable belief in lapses automatically.
the surrounding circumstances; - 4) Death of either party — an offer doesn’t create obligations —
q Good faith - that parties must be doesn’t affect the estate of the deceased.
fair & honest in their dealings - 5) Loss of legal capacity to act.
with one another. - 6) Acceptance of offer by offeree. The offer terminates.
 Acceptance
Declaration Theory Reception Theory - It occurs when an offeree agrees to an offer to create legally
SA LAW binding obligations.
- General rule: Starting point is the information § Writes & signs § Letter reaches the - Can take any form: expressly stated or tacitly indicated – for
theory ie offeror must have knowledge of the letter of address of offeror example nodding his/her head in agreement
acceptance — must have been communicated - Silence cannot usually be construed as acceptance - IMOJI
- EXCEPTIONS:
acceptance - ACCEPTANCE MUST BE UNQUALIFIED;
- Where the offeror stipulates a different method - ‘Mirror image rule’ there can only be acceptance where the
whole offer & nothing more or less is accepted.
of acceptance. Information Theory - General rule: acceptance must not “add or subtract” anything
- A contract is concluded when & where the
offeree complies with the offeror’s instructions § Offeror reads the from the offer: exception naturalia clauses.
- Must not contain new terms or leave out the original terms – nor
regarding the method of acceptance. letter of make conditional terms - (no consensus will be reached).
- Postal contracts
- Electronic contracts
acceptance - Qualified acceptance constitutes a counter-offer, which the
original offeror can accept or reject - none acceptance.
- EXPEDITION THEORY: AN EXCEPTION TO THE - An ambiguous acceptance doesn’t qualify as a valid acceptance–
GENERAL RULE. eg I will see if I can afford it .
- Used for postal contracts by telegram in S.A. - Expedition Theory - 2) THE ACCEPTANCE MUST MADE BY THE PERSON TO WHO
where an offer has been made through the post MADE THE OFFER — DOCTRINE OF PRIVITY OF CONTRACT.
- indicative of authorisation of acceptance § Letter is posted - Where the offer has been made to the general public, it maybe
through post. accepted by any member of the public or member of the
- Contract is concluded when & where the specified class. See Steyn v LSA Motors.
acceptance is transmitted/posted - Cardinal principle of the law of contract - that a simple
- Declaration Theory;
Contract summaries contractual offer made to a specific person can be accepted only
- Contract is concluded where & when the by that person
offeree - declares /expresses his acceptance. - THE ACCEPTANCE MUST BE A CONSCIOUS RESPONSE TO THE
- An agreement is not without legal force and effect merely OFFER.
- Reception Theory;
because it was concluded partly or in whole by means of data - A person cannot accept an offer he/she is unaware of especially
- The contract is concluded when & where the
messages. with offers of reward. Bloom v American Swiss Watch Co 1915
offeror receives the acceptance (whether he is
- AD 100
aware of it or not). - The court held that Plaintiff could not recover the reward,
(2) An agreement concluded between parties by means of
- When the acceptance reaches the information because “until the plaintiff knew of the offer, he could not accept
data messages is concluded at the time when and place
system of the offeror. it, & until he accepted it there could be no contract…”
where the acceptance of the offer was received by the
- The reception theory applies to electronic - (4) Acceptance must be in the form prescribed (if any). Means
offeror:
transactions. that this will be the only form for a valid acceptance.
- s22
- Regulated by Electronic Communications & - Authorised means - the offeree may use a particular method but
- data message" means data generated, sent, received or
Transactions Act 25/2002: s22 & 23 - Eg of such that it is not only the form of valid acceptance.
stored by electronic means and includes —
contracts by email, sms, on-line transactions. - Where an offeror prescribed a specific form, acceptance must
-
- The reception theory applies where both offer meet that format.
(a) voice, where the voice is used in an automated - (5) ACCEPTANCE MUST BE COMMUNICATED TO THE OFFEROR.
& acceptance were made electronically unless
transaction; and - GENERAL RULE: Offeror is bound only if he/her is aware of the
where parties agreed otherwise.
- acceptance - Acceptance must reach the mind of the offeror.
- Contract comes into being where acceptance is
(b) a stored record - There are exceptions:
received by the offeror.
TELEPHONIC / FAX CONTRACTS - Offeror has dispensed /waived the requirement of being notified.
- Place of receipt is deemed to be the offeror’s
- The Information Theory is applicable. - Where the stipulated method of communication is used but is
usual place of business/residence.
- Rationale: communication is almost instantaneous & there is unsuccessful.
- Time of receipt is deemed to be when complete - Offeror makes it impossible for the offeree to communicate with
no reason to depart from the information theory---
acceptance enters the information system used. him — should make reasonable attempts/steps
- Parties are in virtually in the same position as if they were
- And “is capable of being retrieved & - INFORMATION THEORY - (GENERAL RULE - S.A. LAW)
inter - praesentes — S v Henckert 1981 (3) SA 445 (A) at 451.
processed” by the offeror. - The contract is concluded when offeror gets knowledge,
- Some fax contracts fall under the definition of electronic
- transaction ito the Act, in which case the Reception Theory informed or learns of acceptance for example - READS the letter
of acceptance.
will apply
- Rule: Acceptance must be communicated to the offeror-
- Must learn of the acceptance – there can only be consensus
when the offeror knows of the acceptance.
- The information theory based on the fact that the basis of a
contractual liability is consensus / actual agreement.
-
Pacta de contrahendo
- “A pactum de contrahendo is simply an agreement to make a contract in future.” Preference contracts
- Thus: Contract aimed at the conclusion of another contract - A preference contract is an ancillary agreement whereby on
- Option contracts – 2 types person (the grantor) binds himself to give preference to
- Preference contracts – Right of first refusal another person (the grantee), should he or she decide to
- Option contract conclude another (the main agreement).
- Agreement in terms - grantor undertakes to keep the offer open - for a specific - The main agreement will be the sale, in which case the
period of time. ancillary agreement is known as the pre-emption agreement,
- Grantee acquires the power to consider & accept the offer. - And the right to which it gives rise is known as a pre-emptive
- An option can be granted eg an option to buy, to hire, to do work. right.
- The first contract gives a right to insist on the co-operation of the other party towards - Occurs when a prospective seller - undertakes to give the
the conclusion of the substantive contract. prospective purchaser a preference if s/he decides to sell.
- Restricts the grantor’s capacity to revoke an existing substantive offer. - The prospective purchaser thus acquires a right in terms of an
- Option holder – grantee can accept or reject existing offer. agreement,
- - For example - the right to be granted the first opportunity to
- Parties agree - not revoke the offer by offering the same thing to a 3rd party. buy the thing should the seller decides to sell it.
- Option - meet the requirements for a valid offer. - Is only obliged to make an offer - a specified eventuality —
- If holder of the right accepts the first offer by exercising the option, a contract of sale “trigger event”.
is created immediately. - Contains a substantive offer - power in the hands of grantor.
- Nothing required of the grantor - formation of the contract. - Grantor is only bound to the terms only if so desires - offer can
- An option renders the substantive offer irrevocable. be revoked if the Grantor no longer desires to sell.
- Grantor contractually bound not to perform any act that will prevent the holder from - Grantor of a right of pre-emption can’t be forced to sell.
being able to exercise the rights. Eg selling the property or transferring it to a 3 rd - Sale is conditional upon the occurrence of a trigger event:
party. - Trigger event is an indication of a definite decision to sell or
- Option contract is the only way to make an offer irrevocable. manifestation of willingness to sell - grantor.
- Spearhead Property Holdings Ltd v E & D Motors (Pty) Ltd 2010 (2) SA 1 (SCA) — - Once the trigger event has occurred, the grantor cannot free
option to purchase leased property. Contract summaries himself of the negative obligation by making an unreasonable
- An option contract doesn’t have to specify a time - Offer expires - a reasonable time offer to the grantee.
& when the substantive offer expires so does the option contract. - Must comply with the requirements for a valid contract
- Passage of time. Offer lapses if it is not exercised within the prescribed period. If no - The existence of a substantive offer is not an essential
such time is fixed the offer must be kept for a reasonable time. requirement for a contract of pre-emption.
- Death of the grantee or grantor. Unless the parties intended otherwise, the - OBTAIN AN INTERDICT - to restrain grantor from selling the
obligation to keep the offer open does not lapse upon death. It is transferable, it property or transferring it to a 3rd party.
devolves on the grantee’s heirs. If it is not, it lapses. - CANCEL THE CONTRACT - the pre-emption comes to an end—
- Refusal. The option lapses on rejection. The decision must be communicated to the restitution follows of any amount paid.
grantor. - CLAIM DAMAGES - for the loss of profit he would have made
- Lapse of the right. on the main contract of sale —
- Enforce the contract: obtain an order for specific performance. - Provided - he can prove on a balance of probabilities that if
- Claim damages - prove that holder would probably have exercised the option (ie the grantor had honored her/his obligation by making an
purchased the item from someone else or contracted with someone else to do so, or offer to him, he would have accepted that offer & also that
contracted to manufacture the goods) the ensuing sale would have been a profitable one.
- Damages - place him or her in the position that he or she would have been had he or - No main offer yet made
she exercised the option (the positive interest). - Grantor never obliged to sell.
- Eg: wasted costs, loss of profit. - Contingent (conditional) upon the trigger event.
- Relates to an existing valid offer ie main offer ‘on the table’. - Power in hands of grantor
- Grantor obliged to sell if grantee exercises the option. - Terms of main agreement usually not yet determined.
- Power in hands of grantee. -
- Terms of main contract set out in the offer..
-
-
 Material Mistake
- So Chapter 1 sets out the elements of consensus, being that the parties must – (1) must seriously intend to contract, (2) be of one
Mistakes
mind to the material aspects of the agreement & the identity of the parties, (3) be conscious of the fact that thier minds have met.
- Unilateral mistakes
- 1. SERIOUS INTENTION TO CONTRACT – if a party lacks the intention to be legally bound by the agreement there can no consensus
- It seems that a unilateral mistake occurs where only party is mistaken, while the other
- there could be various reasons for this for example – the declaration was made in jest or it was made to act as a social agreement
party is aware of THE mistake
- 2. AGREEMENT RELATING TO THE MATERIAL ASPECTS OF THE CONTRACT – the parties must be ad idem regarding the consequences
- For example, X buys a jacket from Y believing that it is made from genuine leather &
they intend to create – namely, the persons between whom the obligations are to be created and the content of the obligations (the
would not have bought the jacket had the X known the truth.
performance in other words) to be rendered.
- All this relate to “which of the party/s made a mistake
- A mistake regarding the parties to a contract will usually be material – so in other words – if a party inadvertently accepts the offer of
- A agrees to purchase B’s property. A, erroneously mistakes another property for B’s
one party, while it actually intended to accept the offer of a completely different party, the resultant error will be material.
property, while in fact B’s property is situated down the road;
- See Allen Sixteen Stirling Investments (Pty) Ltd – READ!!!!!!!
- If B is unaware of A’s misapprehension & B mistakenly believes that there is
- A further common type of material mistake deals with the situation where a contracting party does not understand the legal
consensus – this is a case of ………………….
consequences of a contractual provision, usually because the mistaken party is unaware of the particular provision in a document
- But if B is aware of the A’s mistake, it’s a case of …………………
that embodies the terms of the contract,
- Both scenarios are cases of dissensus & the distinction has little significance –
- So for instance, if a party is unaware of a contractual term that excludes remedies for misrepresentation by the other party, the
Sometimes the term unilateral mistake is used to describe unilateral as well as a
resultant mistake will be material.
mutual mistake
- Generally, speaking, any mistake regarding a contractual term that permits a party to vary any aspect of performance, such as the
- Irrelevant scenario:
date on which performance is to occur, or even entitling a party to release itself from liability altogether in certain circumstances may
- It is sometimes stated that if a mistake does not negate consensus (and is therefore
be material. In all these examples the parties are not ad idem as to the material aspect of the proposed contract between them.
an irrelevant mistake) if it did not affect the mistaken party/s decision to enter into a
- 3. Consciousness of the agreement - an integral element of consensus and the Will Theory is that the parties must not just have
contract,
coinciding declarations of intention, but must also be aware of each other’s intention for a consensual contract to arise - we could
- If the mistaken party would have entered into the contract despite a mistake that
say that a mistake that precludes conscious agreement between the parties will be material.
causes dissensus, it seems that the mistake may be regarded as irrelevant in so far as
- The party/s declaration of intention are usually expressed in the form of an offer and acceptance.
the question of the agreement is concerned,
- See Bloom v American Swiss Watch Co 1915 AD 100.
- Irrelevant / non causal - Mistake does not affect one’s decision to enter into a
contract,
- See Khan v Naidoo 1989 (3) SA 724 (N) – compare the findings ??? Contract summaries
- Relevant mistake:
- The mistake influenced the party’s decision to conclude a contract - Would not have
contracted OR perhaps contracted on different terms NON-MATERIAL MISTAKE
- Khan v Naidoo 1989 (3) SA 742 – Appellant signed a document as surety for debt — - A non-material mistake – while usually influencing a party’s decision to enter into a contract, does not affect an element of consensus.
belief that she was consenting to transfer of property to son — argued that it was an - Notwithstanding a non-material mistake, if the parties are ad idem as to the material aspects of the proposed contract, a consensual
essential mistake - Held she would still have signed even if she was aware. She loved contract comes into being,
her son & would have signed — mistake non-causal. Mistake ignored & was bound as - Typically, a mistake of this nature relates purely to the reason or motive of the mistaken party for entering into an agreement and hence
surety it is usually referred to as an error in motive
- MATERIAL & NON - MATERIAL MISTAKE - See Diedericks v Minister of Lands 1964 (1) SA 49 (A) – page 89 of the prescribed textbook. – Please check page numbers, page
- If we accept that the actual agreement is the primary basis of contractual liability in numbers could vary.
accordance with the Will Theory – then the first question that arises when - AN ERROR IN MOTIVE
determining the existence of a valid contract is whether the parties in fact reached - Affects a party’s reason/s for contracting - can still fall in any of the earlier classes
consensus ad idem. - Either be common, unilateral or mutual - there is consensus between the parties - Contract is valid in principle
- If consensus is reached , and provided the other requirements for a valid contract are - If a party’s mistake in motive is due to a misrepresentation – party can still have recourse – contract can be set aside –
met – a legally and binding contract arises misrepresentation
- However, if the parties are not in agreement, then no contract will exist on the basis - Example = X sells his textbook to Y because he thinks he has passed his final exam - whereas X had failed
of the Will Theory – in such circumstances, unless the contract can stand on the - Trollip v Jordan 1961(1)SA 238(A)
secondary basis of reliance, OR it will be void ad initio - Historically, mistakes have been categorised according to type, and the materiality of a mistake has been determined on the basis of the
- The distinction between material and non-material mistake is crucial to the question type of mistake in question. This does mean that one is dealing with a completely different set of mistakes to those previously
of consensus mentioned.
- A material mistake is an error that vitiates or negates actual consensus between the - It is merely a different way of stating the same principles with reference to prominent instances.
parties – to this end material mistake must relate to or exclude an element of - There are four traditional classifications –
consensus. - Error in corpore - This is a material mistake concerning the subject matter of the contract – or rather the object of the performance. The
- Conversely, a non-material mistake does not exclude, actual agreement between the most prominent example is where property is purchased and the parties have completely different properties in mind. Has a bearing on
parties because it does relate to an element of consensus performance - therefore a material mistake-
- In the case of a non-material mistake – a valid contract will arise, although it may be - Error in negotio - This is a material mistake relating to the true nature / content (the juristic act) of the contract concerned – in other
voidable (rescindable) if consensus has been obtained in an improper manner by way words the juristic act concerned. Therefore, regarded as a material mistake – which is fairly rare.
of misrepresentation, duress, undue influence or commercial bribery. – this will be - Error in persona- Error in persona is usually material - mistake as to the identity of the other party - there is dissensus .Identity must
discussed in later chapters be of vital importance to the mistaken party(has been the approach of courts).
- Error in substantia – error on qualitate – SELF-STUDY TO DO ?????????????
-
-
Voidable contract: Consensus by improper means
- A voidable contract – normally/actually comes into existence with all the normal
consequences.
- The prejudiced party may either affirm or rescind the contract: entitled to an election.
- Is also entitled to restitution of performance already rendered with the simultaneous
duty to return what was received
- Forms ; Duress, Undue influence, Commercial Bribery and misrepresentation
- Duress
- One party compels the other to enter into a contract by improper pressure that
amounts to intimidation.
- Aggrieved party enters into contract without exercising free will- (inspired by an
illegitimate threat).
- However, in view of the fact that the consent was obtained by improper means, the
contract is voidable at the option of the threatened party – He /she may thus set
aside the C, if he/she so wishes, and claim restitution of what he/she has given, or
may resist the enforcement of the C by the other party, and in any event he/she may
also in a proper case recover damages since, like fraud, duress is a delict giving rise to
the Aquilian action,
- For these consequences to arise, however, it is essential that the threat should be
both unlawful & effective cause for C – in the sense that, but for it, the threatened
party would not have contracted at all – or at least not on the terms that he/she did
- Elements For Duress according to Broodryk v Smuts – DURESS
- Actual violence or reasonable fear.
- The fear must be caused by the threat of some considerable evil to the party or his
family. Contract summaries
- It must be a threat of an imminent, inevitable or foreseeable evil.
- The threat must be contra bonos mores.
- The moral pressure used must have caused damage.
- NATURE OF COERCION - TWO-FOLD
- Duress necessarily involves an element of coercion - but it is a coercion of will rather
than the body of the victim, vis compulsiva vs vis absoluta is overwhelming physical
force – for example – A grips a pen in the hand of B and forces B sign to his name on
the document – in such cases there would of course be contract – B has not acted at
all.
- In the case of duress – the coercion operates on the mind of the victim by forcing
him/her to choose between 2 evils: entering into contract or suffer harm.
- The coercion is thus by threat rather than physical force.
- Even where violence is used to pressurize the victim, the factor that induces his/her
consent is the threat, express or implied, that such violence will be continued or
repeated unless he or she agrees to the C
- The notion that the threat should be sufficiently grave to affect the mind of a
reasonably steadfast person — supported by some authorities - they suggest that
one must take cognize of personal attributes eg age, gender - victim should be
considered.
- Grotius — fear need not be reasonable. This is the preferred view -
- REASONS - Amounts to giving a licence to exploit the unreasonable fears of another.
- Provided, therefore, that the threat was made with the intention & effect of inducing
the contract, the person who issued it should not be permitted to argue that his or
her victim ought not to be frightened so easily – naturally the more unreasonable the
fear, the greater will be the reluctance of the courts to accept that it actually induced
the contract, but that is a matter of proof rather than substantive law
Remedies for breach Forms of Improperly obtained consent
- Cancel agreement - Undue influence
- Claim damages - Misrepresentation
- Specific performance - Commercial bribery
- If party innocent and wants to keep contract alive - Duress
o Exceptio non adimpleti contractus: Innocent Party entitled to refuse to o Elements For Duress according to Broodryk v Smuts - DURESS
render performed until breach party performed in full - Actual violence or reasonable fear.
o Specific performance - The fear must be caused by the threat of some considerable evil to the party or his
o Interdict family.
- Remedies to cancel agreement - It must be a threat of an imminent, inevitable or foreseeable evil.
o Cancellation - The threat must be contra bonos mores.
- Remedies at compensating - The moral pressure used must have caused damage.
o Contractual or delictual damges, only if delict -
o Delictual- non patrimonial
o Contractual – Patriomonial
o Claim for interest
- Exceptio non adimpleti contractus
o Defence
o Two requirements
o Reciprocal
o Other party must have been obliged to preform first or at least
simultaneously

Contract summaries