BUSINESS LAW

MODULE 1

1.0 INTRODUCTION

Welcome to BUSINESS LAW. In our daily activities, we

consciously and subconsciously enter into business transactions
whose legal implications we are aware of. For instance, the bus
ride to work on a Zupco bus is a contract of carriage, the
purchase of bread at a corner of shop is a contract of sale and to
rent we pay for our lodging is a contract of lease, etc. The
importance of appreciating the legal consequences of our
commercial transactions cannot, therefore, be over-emphasized.
Business law impacts on our daily lives are it is a private citizen or
security practitioners. This makes Business Law one of the most
important courses of security management programme.

1.1 AIM

The aim of this course is to provide and develop in the candidate

an understanding of legal aspects and their impact on the
operations of organizations.

1.2 OBJECTIVES
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The objective of this course is to equip candidates with the
knowledge of law which affect both business operations and
relationships. At the end of the course, qualifying candidates
should be able to interpret legal issues relating to their functions.

1.3 RECOMMENDED TEXT BOOKS

Students are expected to read and the following statutes and

textbooks.
Prescribed textbooks.
-Christie R H, Business Law in Zimbabwe, 2nd Edition, Juta &
Co, (1998)
-Gibson, S.A. Mercantile Law, Juta & Co.
Other recommended reading
- Hire Purchase Act (Chapter 14:09)
- Bills of Exchange Act (Chapter 14:02)
- Contractual Penalties Act (Chapter 8:04)
- Consumer Contract Acts (Chapter 8:03)
- Prescription Act (Chapter 8:11)
- The commercial Premises (Rent Regulations) 1983 (S.I
676/1983)
- The Rent Regulations 1982 (S.I 626 OF 1992)
- Manase & Madhuku: A Handbook of Commercial Law in
Zimbabwe (UZP)
- E.C MacColl: First Year Business Law Zimbabwean
Students College press (1995)
- E.C. MacColl: Case Brief in Contract and Sale for
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 Zimbabwean Students, College Press (1995)

1.4 SOURCES OF BUSINESS LAW

Read Christie: pp22-29

The main sources of our Business Law are:

- Legislation
- The Common Law
- Authoritative Texts
- Custom

1.4.1 Legislation

These are Acts of Parliament and any subsidiary enactments

authorized by Parliament. These are the most important source
of law and have to be applied by all courts in Zimbabwe, subject
to the provisions of the Constitution. Examples of statutes
relevant to business law are the Hire Purchase Act (Chapter
14:09) and the Bills of Exchange Act (Chapter 14:02).

1.4.2The Common Law

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This refers to law which is not derived from legislation and which
has been defined by the courts from case to case in the process
of interpreting or applying the laws.
In terms of section 89 of the Constitution of Zimbabwe, the law to
be applied in Zimbabwe shall be the law in force at the Cape of
Good Hope as of 10th June 1891. That law was Roman-Dutch
law as modified by English law had a lot of influence in
Commercial Law at the Cape at the time.
1.4.3 Authoritative texts
1.4.4
Modern textbooks such as Business Law in Zimbabwe by
Christie are a valuable source of law where the common law is
unclear. They are of persuasive authority.
1.4.4.1 Custom

A Custom is a constant practice observed over a long period of

time. Custom in this sense refers to trade usage instead of
traditional customary law, which is of no significance in business
law. For a custom to be recognized as such it must meet the
following requirements set out in the South African case of Van
Breda v Jacobs:
- it must be well known
- it must have been in existence for a very long time
- It must not be contrary to acceptable morals or any statutory
provisions.
-
Activity of 1.4A

Explain the sources of business law in Zimbabwe

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1.5 GENERAL PRINCIPLES OF THE LAW OF CONTRACT

Read Christie pp30-52

1.5.1.1 DEFINITION OF CONTRACT

A contract is an agreement enforceable at the law between

two or more persons whereby rights are acquired by one or
more to give something or to do or refrain from doing some act..

The essential features of a valid contract include the

following:-
(a) There must be an offer and acceptance
(b) There must be an intention to create legal relations
(c) The parties must have capacity to contract
(d) There must be an agreement
(e) The agreement should be enforceable at law
(f) It must be possible of performance.

1.5.1.2 OFFER AND ACCEPTANCE

A contract is an agreement and comes into existence when

one party makes an offer which the other accepts. The person
who makes the offer is called the OFFEROR. The person to
whom is made is called the OFFEREE.

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AGREEMENT

A contract comes into existence when there is a complete,

true agreement between the contracting parties. Complete
agreement is often defined as consensus as idem (Latin for
meeting or coming together of the minds, coincidence of the
wills).
Agreement can be expressed in words i.e. where X says to Y
I will sell this radio for $100, 00 and Y says- I agree. It can also
be implied from the conduct of the parties. This is where there
is no actual agreement but one of the parties leads the other
through his words or conduct into reasonably believing that
they are in agreement. Agreement is inferred from his
conduct. This is known as apparent agreement or quasi-
mutual assent; (Smith v Hughes (1871); Springvale v Edward
(1968).

Generally, an agreement comes about as a result of one

party making an offer and the other accepting the offer.
However, not every agreement is a valid contract. For instance
agreement to take out your wife for lunch is not a contract. She
cannot sue you because it is not made with the intention that
rights flow from it, enforceable against the other, and thus not
enforceable at law.
An offer and an acceptance must comply with certain rules.

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 REQUIREMENTS OF A VALID OFFER

An offer must meet the following requirements:

- It must be definite
- It must be firm offer, deliberately made with the intention of
being accepted by some other person.
- It must be communicated to the offeree.

(i) It must be definite

An offer must contain definite terms. Where the terms of
offer are vague, any consequent agreement, thus entered on
such terms is void. In the case of Finestone v Hamburg,1907
where Hamburg undertook to let a hotel to Finestone on
certain specified conditions, stating that – if these conditions
were agreed to then the further clauses can be discussed’ it
was held the contract was void for uncertainty, since all the
terms had not been settled and thus agreement was not final.

(ii) Intention
The general rule is that an offer is not what the offeror
thought he meant but what a reasonable third party, knowing
the facts would interpret him to mean. However, there are
situations where a contracting party means to do one thing, but
acts in such a manner as to lead another person to reasonably
believe that there was not, intention may be inferred from his
conduct and he will be bound to his contract. This is known as
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‘quasi-mutual assent’ and is outlined in the case of
Springvale v Edwards, 1968 as follows:

if whatever a man’s real intention may be

he so conducts himself that a reasonable man
would believe that he was assenting to the
terms proposed by the other party , and that
other party upon that belief enters into the
contract with him, the man thus conducting
himself would be equally bound as if he
intended to agree to the other party’s terms.

If the offeree remains silent and leads another party to

believe that he is accepting the terms of an offer made, he will
be deemed to have consented to the terms of the offer, Benoni
Produce and Coal Co. Ltd vs. Gundelfinger, 1998.

(iii) The offer must be a ‘firm’ offer

It must be a deliberately offer made with the intention that if it
is accepted, a binding contract ensues. Firm offers must be
distinguished from invitations to do business which do not
result in agreements. In Efroiken v Simon, 1921 where a
Johannesburg broker telegraphed another at Cape Town that he
had a seller of 3 000 bags of oats at a price on terms stated in
the telegraph, it was held at this was a mere invitation to do
business and not an offer that the Cape Town broker could
accept so as to compel the Johannesburg broker to carry to its
terms.

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 Advertisements

Advertisements to sell are not offers to sell, nor are displays

of goods by shopkeepers offers to sell at the displayed prices,
they are mere invitations to do business. It is the customer, when
tenders the price he makes the offer, which the shopkeeper
may accept or reject.

In Crawley v Rex, 1909, a shopkeeper displayed a placard

outside his shop advertising tobacco at a cheap price. Crawley
bought some of the tobacco, left the shop when they returned to
ask for more. The shopkeeper then refused. Crawley claimed
that he had a contract with the shopkeeper. The judge in the
court said:

The mere fact that the tradesman advertises the price

at which he sell goods does not appear to me to be
an offer to any member of the to enter the shop and
purchase goods, nor do I think that a contract is
constituted when any member in and tenders the
price in any advertisement. It will lead to most
extraordinary result if that were the correct
view of the case. Because then, supposing a
shopkeeper were sold out of a particular
class of goods, thousands of members of
the public might crowd into the demand to

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 be served and each one would have a right
of action against the proprietor for
not performing his contract.

The offer must be communicated to the offeree

Where the offer is made to one specific person, as is usually

the case, it is only the offeree who may accept the offer. In the
case of Bird v Somerville and Another, 1961, an offer was
made to one person, who accepted jointly with another. It was
held that no contract had been concluded because the offer
had not been simply accepted by the offeree. However, an
offer may, at times be made to the whole world e.g. in the
case of advertisement for reward, prices set out in price lists,
catalogues, circulars, etc.

1.5.4.1 TERMINATION OF OFFER

An offer does not exist forever. It terminates in the following

circumstances:
- When the time fixed for acceptance has expired
- Upon the expiration of a reasonable time in the
circumstances, where there is no fixed time limit given.
- Rejection
- Counter offer
- Revocation / withdrawal notified to offeree before withdrawal
- Death of either party before acceptance

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1.5 ACCEPTANCE

Acceptance of an offer concludes the agreement and contract

comes into existence. A person who accepts the offer must
have the serious intention of entering into a contract (animus
contrahendi). He must appreciate that his mere
acceptance of the offer results in the birth of a contract.
A number of rules govern acceptance.

1.6.1 RULES AFFECTING ACCEPTANCE

1.6.1.1 Who may accept?

The general rule is that an offer must be accepted by the

party to whom the offer is made, that is, an offer made to a
specific person may only be accepted by that person. (This is
what is known as privity of contract). Further, under the doctrine
of freedom of contract, parties are free to choose whom to
contract with.

1.6.1.2 Unequivocal acceptance

An acceptance must be clear, definite, unequivocal and

unconditional. If the offeree tenders his own conditions different
from those given by the offeror, it does not amount to acceptance
of the offer but a rejection of the offer. It may amount to a
counter-offer which is the original offeror is free to accept or
reject, Borne v Harris, 1949 and Selected Mines & Marketing
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Rhod Ltd v Asbestos Mining Company Ltd,1952.

1.6.1.3 Once an offer is rejected, it lapses and cannot be

accepted again.

In Hyde v Wrench, 1840 defendant offered to sell to the

plaintiff his farm for 1000 pounds. Plaintiff counter-
offered 950 pounds, which defendant refused. Plaintiff later
wrote the defendant agreeing to pay 1000 pounds.
Defendant now refused to agree to this price. It was held
that no contract existed because; plaintiff’s counter-offer of
950 pounds rejected the original offer of 1000 pounds.
Once rejected, it lapsed and could therefore not
subsequently be validity accepted.

1.6.1.4 Knowledge of offer

A person can only accept an offer he knows exists. Logically, a
person cannot intend to accept what he does not know about.
Remember, the parties to a contract must have a serious
intention to contract. For example, in Bloom v American Swiss
Watch Co (1915), jewellery worth 5000 pounds was stolen from
the watch company’s premises after a burglary and the company
offered in the press a reward of 500 pounds for information
leading to the arrest of the thieves and recovery of jewellery.
Bloom, unaware of the reward gave the required information.
When he became aware of the reward, he claimed it. His claim
failed because had not acted on the basis of the offer in the press
and therefore had accepted that offer.

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1.6.1.5 Manner of accepted
Where the offeror specifies in his offer a mode of acceptance, an
offeree must accept via that mode. For example in the case of
Law v Rutherford (1924) where the offeror had stipulated that
acceptance was to be made within three months by registered
letter but was attempted after a manner is not specified , the
offeree may accept through the mode used by the offeror e.g. a
letter of offer may also be accepted by letter. (Orion I
investments v Ujamaa Investments (1981).

1.6.1.6 Time of acceptance

Where a time frame for acceptance is not stipulated, the offer
lapses if not accepted within a reasonable time.

1.6.1.7 Revocation of offer

The offeror can revoke or withdraw his offer at any time before
acceptance, unless he has been granted an option. An option is
an agreement not to withdraw the offer for a specified period of
time.
1.6.1.8 Communication of acceptance

(1) The offeree must communicate his

acceptance to the offeror or must manifest
it in some other way. The communication
must be in the manner stipulated in the offer.
(2) Acceptance can be made by conduct.
Offer and acceptance may be implied from the
conduct of the parties’ e.g. passenger hands

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 over bus fare to a bus conductor who issues a
ticket without saying anything. Where,
however, the offeree simply remains silent,
without manifesting his acceptance by a
means, the offeror cannot stipulate that the
offeror’s silence amounts to acceptance.

(3) Contract made by post or telegram,

(Expedition Theory)

A contract negotiated through the post is conducted

by positioning of the letter of acceptance and not
when the letters received or read by the offeror,
Cape Explosive Works Ltd v S.A. Oil and Fat
Industries 1921. This obviously creates problems
if the letter is lost in the post.

It should, however, be noted that this rule only

applies when they are normal postal operations.

Further, the agreement is made at the place i.e. the

post office where the offeree posts his letter or
hands in his telegram. This is important for the
purpose of jurisdiction.

(4) Contracts concluded by telephone

The parties are regarded as being virtually in each
other’s presence, thus communication is no
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 different from the ‘face to face’ communication.
Communication is regarded as being effective from
the time the offeror becomes aware of the offeree’s
acceptance.

However, where an offer and acceptance are made

by telephone, the contract is concluded at the place
where the offeree is since acceptance is deemed to
take place where the offeree is.

1.6.1.9 Effect of Death of a party

The effect of death depends on the type of the contract, whether

the death is that of the offeree or offeror, and whether takes place
before or after acceptance.

Death of offeror before Acceptance:

If the contract envisaged by the offer does not involve the

personality of the offeror (e.g. to act as an agent) the offeror’s
death will not until notified to the offeree prevent acceptance.

Death of offeree before Acceptance

Once the offeree is dead, there is no offer which can be

accepted. His executors cannot, therefore, accept the offer on his
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behalf. The offer being made to living person can only be
accepted by that person and assumes his continued existence,
whether envisaged contract involves a personal relationship or
not.

Death of parties after Acceptance.

This generally has no effect on the contract unless the contract is

for personal services for example, I sell my car to you, I die
before delivery, and you will be able to sue my executors for
delivery of the car because it does not involve personal services.
On the other hand, I engage Tuku to play music at my wedding
and he dies before the wedding date, I cannot sue his executors.

Activity 1.6.A
1. In your own words, define a contract
2. Outline the essential elements of a valid contract and discuss
the legal requirements of each element.

1.6 AGREEMENT MUST BE ENFORCEABLE AT LAW

Apart from the fact that there must be a true agreement between
the parties, the agreement itself must be enforceable at law.

Contracts which cannot be enforced at law or those which do not

create legal rights are considered a legal nullity and therefore
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void.

Contracts which are not totally enforceable, but where the

innocent party or aggrieved party may not want to be bound by it
are called voidable contracts.

1.7.1 VOID CONTRACTS: These have no legal effect and are

totally unenforceable.

Factors which cause contracts to be void:

-Lack of contractual capacity e.g. lunatic is wholly incompetent to
enter into a contract.
-Initial impossibility of performance, for instance, where the matter
which is the subject is non-existent, or subsequent impossibility.
-Illegality, where the contract is against public policy such as
gambling contracts
-Lack of intention to contract.

1.6.1.1 Lack of contractual capacity:

A contract in which one of the parties’ lacks contractual capacity

is void and cannot be enforced unless and until the incapacity is
removed.

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1.6.1.2 Initial impossibility of performance

Generally, a contract is void if at the time of its inception its

performance is impossible both physically and legally. A contract
which is impossible to perform at the time it is made is, therefore,
treated as void or non-existent. It is void ab initio (from the
beginning) due to initial impossibility. In the case of Peters,
Flamman and Company v Kokstad Municipality (1919), the
company was contracted by Kokstad Municipality to supply street
lighting to Kokstad town. This was World War 1. The company
was then declared allies of the enemy and their business was
wound up as a result. The court held that the contract was
impossible to perform and was, therefore, void.

The rule, however, does not apply where:

The impossibility has been brought about or caused by one of the

parties, Theron v Gross, 1939. Where, however, the
performance can be substantially performed though not
completely, performance will not be considered impossible. The
debtor also has to give proportionately reduced performance in
return

1.6.1.3 Illegality

An illegal contract cannot be legally enforced and is therefore, of

no lawful effect.
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1.6.1.4 Lack of intention to contract (animus contrahendi)

An agreement in which the parties lack the serious and deliberate

intention to create a legal obligation is unenforceable and is
treated as void. Lack of animus contrahendi may also be inferred
from the circumstances of the case e.g. in the case of social
arrangement to take someone for lunch.

1.6.1.5 Vagueness

Where the terms of an agreement are so uncertain and vague

that performance is impossible, the contract is void for vagueness
and treated as nullity.

In the case of Lowenstein v Levestein, 1955 the judge classified

four cases of contract that are void for vagueness:
(a) Contract which reserved an unlimited option to the
promisor.
(b) Contract where the vague and uncertain language
indicates that the parties where never truly in agreement.
(c) Incomplete contract not yet amounting to a contract.
(d) Contracts which, although apparently incomplete, can be
shown by evidence to be complete.

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1.6.2VOIDABLE CONTRACTS :

These are contracts that can be made void. They are otherwise
valid contracts but are somehow flawed or defective. The flaw
then entitles the innocent party in the contract, at his option, to
resile from the contract.

The aggrieved party may also choose to stand by the contract, in

which case the contract becomes binding and enforceable
against the other party.

If the innocent party elects to stand by the contract, he is obliged

to fulfill his duties under the contract, as well as the other party. If
he repudiates the contracts, the whole contract becomes
unenforceable on both sides.

Contract are usually rendered voidable on the basis that there is

no true agreement between the parties because one of the
parties did not bring his ‘full, true and free consent’ to it.

Where, however, the contract is reduced to writing and signed by

the defendant, there is a presumption that the signatory was
aware of the contents of the contract and that he consented
thereto. This is known as the caveat subscriptor rule. Caveat
subscriptor is Latin for ‘let the signatory beware’.

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Factors which cause contracts to be voidable:

-Misrepresentation, either innocent or willful or negligent.

- Mistake of fact (and not law). The mistake may be common
between the parties common on one side only.
- Duress/ fear- that is, the use of force or coercion.
- Undue influence
- Lack of contractual capacity e.g. a minor can withdraw from
a contract entered into without the assistance of his
guardian.

1.6.2.1 Misrepresentation

This is a false statement of fact made by one to the other before

or at the time of contracting on some matter of substance which
induces the other party to enter into a contract e.g. A buys a
stone sculpture from B on the strength of B’s representing that it
was made by Dominic Benhura later B finds that it was an
imitation by another artist. B has included by a misrepresentation
on A’s party to make the purchase. Such a contract is voidable at
the instance of A, Harper v Webster, 1956

The misrepresentation must be material and fundamental (going

to the root of the contract such that were it not for the false
representation, the other party would not have entered into the
contract. There must be an intention to mislead or induce the
other party to enter into the contract.

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There are three types of misrepresentation:

(a) Innocent misrepresentation: this is made innocently, in the

honest belief that the statement is true. Generally, no
damages may be awarded as a result of innocent
misrepresentation.
(b) Fraudulent misrepresentation: this is a statement a partly
knowing it to be false or made recklessly without caring about
its truth, Derry v Peak, 1889. It may also involve making a
statement when in doubt about its truth, without actively
checking its accuracy, ‘fraudulent diligence in ignorance’.
(c) Negligent misrepresentation: this is a statement made
negligently. The maker fails to take steps which a reasonable
man would have taken in the circumstances to establish the
true position.

In the case of innocent or fraudulent misrepresentation, the

following essentials must be shown:

(i) The misrepresentation must be material, i.e. such that it

would have induced a reasonable person to enter into the
contract.
(ii) The misrepresentation must have been made to
induce the other party to enter into the contract i.e.
the other party would not have entered into the
contract had he known the truth.
(iii) The other party must have acted on the
representation. Silence may amount to
misrepresentation where there is a duty of disclosure
e.g. in contract of insurance.
(iv) The misrepresentation must relate to a manner of

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 fact and not of law or opinion
(v) It must be made by the contracting party or his agent
and not by a third party.

1.6.3 REMEDIES FOR MISREPRESENTATION

Whether it is innocent, fraudulent or negligent misrepresentation,

the contract is voidable. The innocent party has a choice whether
to uphold the contract or rescind it. Rescission means the
innocent party may treat the contract as cancelled. If he cancels
or rescinds the contract, the innocent party may get paid
damages. Delictual damages are available for fraudulent and
negligent misrepresentation only (not innocent
misrepresentation).

Damages are meant to put the innocent party in the same

position in which he would have been had the misrepresentation
not happened.

The damages in this case are delictual (based on the law of

delict) as opposed to contractual. Delictual damages put the
innocent party back in the position he was before the
misrepresentation. Contractual damages on the other hand put
the innocent party in the position he would have been had the
contract been properly performed.

1.6.4 MISTAKE OF FACT

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This occurs where there is misunderstanding as to some material
fact. The parties think that they have entered an agreement when
in fact there is no contract. The following essentials must be
proved:-
- That it is a mistake of fact and not law.
- That it was material to the contract.
- Further, depending on whether the mistake is what is
classified as unilateral or common, the following must be
established:

1.6.4.1 Unilateral mistake

This is where only one of the parties is labouring under some

misapprehension. The general rule is that such party cannot
avoid the contract unless he proves that his error in the
circumstances was justus (justus) i.e. reasonable, justifiable and
material, and was not due to his own negligence, National and
Grindlays Bank Ltd v Yelverton,1972;
Mabhena v Bulawayo Polytechnic,1994

1.6.4.2 Common Mistake

This is where both parties are in agreement but under a

misapprehension. Dickinson Motors (Pty) Ltd v Oberholzer,
1952. Either of the parties can avoid the contract without having
to prove justus error i.e. the mistake does not have to be
reasonable. There is also a further distinction known as mutual
mistake- where the parties are at cross purposes. In that case

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the mistake has to be reasonable and material.
1.6.4.3 Material Mistakes:

For a contract to be voidable, a mistake must be material. The

test for this is: Would the parties have entered the contract
had they know the true position or, is the mistake vital or
material?

Examples of material mistakes:

(i) Mistake as to the subject matter i.e. its existence, identity or
essential properties.
(ii) Mistakes as to the nature of the agreement i.e. A thinks he
is selling his radio set and B thinks he is pawning it, there is
no contract.
(iii) Mistake as to the identity of the person one is contracting
with.

Examples of mistakes which are not material:

(i) mistake as to motive
(ii) mistake of expression
(iii) mistake as to quantity.

1.6.4.4 Rectification

A common mistake may result in a contract being wrongly

recorded. Where a party wishes to have the contract enforced,
not withstanding the error, instead of having it set aside, he may
approach the court ask it to rectify the error: Meyer Merchants,
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1942.

1.7 DURESS

Where a party is induced to enter into a contract by fear or threat

of harm or injury, he may withdraw from a contract. The contract
is voidable at the option of the innocent party.

The requirements are as follows:-

- The must be reasonable (not fear of the unknown)
- The fear must be caused by the threat to the party
concerned or to his family or some serious evil e.g. death,
serious bodily harm
- The threat or intimidation must be illegal or contra bonos
mores (against good morals)
- The duress must have induced the innocent party to
conclude the contract.
- The innocent party must take steps to withdraw from the
contract as soon as the source of the fear is removed.

Threats of justifiable legal proceedings do not amount to duress,

Shepstone v Shepstone.

1.9.1. UNDUE INFLUENCE

This is where the innocent party is subjected to improper and
unfair influences which induce him to enter into a contract against
his will. Undue influence usually occurs where a special
relationship exists between the parties e.g. doctor and patient,
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lawyer and client, guardian and minor, trustee and beneficiary.
There is no consensus as the innocent party concludes without
his free consent. An example is the case of Preller v Jordaan,
1956 where an old and sick farmer was unduly influenced by his
doctor to donate some farms to the doctor.

1.9.2An innocent party is allowed to withdraw from the contract.

In Patel v Grobbellar,1974 it was held that he must,
however, prove the following:-
(i) that the other party exercised an influence over him
(ii) that this influence weakened his powers of resistance and
made his will pliable
(iii) that the other party exercised this influence in an
unscrupulous manner in order to induce him to enter into
a transaction which:
(a) is to his detriment; and
(b) he, with normal free will, would not have concluded.

1.9.3 CONTRACTUAL CAPACITY

Certain persons lack contractual capacity. Any contracts they

enter into are void ab initio (wholly ineffective from the beginning)
e.g. a contract of an insane person or an insolvent disposing of a
property of his insolvent estate, drunken persons etc.

1.10.1 Insane Persons

Contracts of insane persons are wholly void. A lunatic has to act
under a court appointed curator’s knowledge and authorization.

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1.1.0.2 Minors

Under the General Law Amendment Act [Chapter 8:07] the age of
majority is 18 years when persons have full contractual capacity.

All persons under the age of 18 are termed minors and the
general common law rule is that they require the authority of a
guardian into a contract. If a minor enters into a contract
unassisted, that contract cannot be enforced against him unless it
is ratified expressly or impliedly by his guardian, by himself when
he reaches majority. A contract entered by a minor without the
assistance of his guardian is not enforceable against the other
party but the other party may not enforce it against the minor.
Edelstein v Edelstein, 1952). A minor who induces the other
party to contract with him by misrepresentation his age is
delictually liable for any loss cause to the other party . A contract
which is entirely beneficial to the minor such as a gift may be
enforced by him. These are however, some statutory
expectations , e.g. the Building Society Act, Chapter 24: 0]
allows a minor over 16 to open a deposit account, the Post
Office Savings Bank Act, Chapter 24:10 allows a minor of 7
years and older to open a savings account .

Minority ends on the minor’s 18th birthday or marriage.

Tacit emancipation: This arises when a minor released from
parental control and no longer under parental control, and is fully

28
in charge of his affairs e.g. when he gets employed, earns a
salary and lives on his own.

1.1.0.3 Intoxicated Persons

Contracts entered by persons who are so intoxicated that they

lose control of their reasoning powers and do not know what they
are doing are null and void.

1.1.0.4 Companies

The general rule is that a company has full contractual capacity,

subject to the provisions of the Companies Act, Chapter 24:03
and its articles and memorandum of association.

1.1.0.5 Insolvents

An insolvent person is a person who has failed to pay his debts or

whose liabilities exceed his assets. In terms of the Insolvency Act
(Chapter 6:04), the High Courts empowered to declare a person
insolvent and appoint a trustee to administer his estate. An
insolvent has full contractual capacity but his transactions must be
authorised by his trustee. He may, however, not purport to
dispose of any assets of any assets of the insolvent estate or
enter into any contract which likely to detrimentally affect his
estate without the trustee’s written consent [S. 35 (2)]. Any

29
contract made without compliance with these provisions is
voidable at his trustee’s instance.

1.1.0.6 Prodigals

A prodigal is someone who is so financially irresponsible that he

threatens to reduce himself or family to destitution. The High
Court may declare a person a prodigal on application and appoint
a curator bonis. An unassisted contract entered by the prodigal
is voidable at the option of the curator.

1.1.0.7 The State

The State has the same contractual capacity as an ordinary

person in terms of s.2 of the State Liabilities Act, Chapter 8:14.

1.1.0.8. Corporations
Companies have contractual capacity and powers of natural
person. See s. 9 Companies Act, Chapter 24:03. Private
business corporations have the same capacity in terms of the
Private Business Corporation Act, Chapter 24:11

1.1.0.8 Contracts for the benefits of a third party(Stipulatio

Alteri)

30
The general rule is that only the parties to a contract and no one
else can acquire the rights or duties under it: ‘nemo alteri
stipulari potest’ no one can contract for another. However, in
certain situations a party can enter into a contract which provides
for a benefit to a third party who if he is aware of it and if accepts
it becomes party to it.

1.1.1. TERMS OF CONTRACT

Promises, undertakings or warranties which form party of the

contract and define the content of the contract are known as
terms of the contract.
These are distinct from other statements which may have been
made to induce one of the parties to enter into the contract i.e.
mere puffs or commendations. Mere puffs and commendations
cannot give rise to any action for breach of contract if they turn
out to be untrue but terms do.

1.1.1.1 Terms of contract may be either express or implied.

Express terms
These are contractual terms gathered from what the parties
actually stated either in writing or orally.

31
Implied Terms
These are terms which are put into contract by implications from
the circumstances in which the contract was made. Terms may
also be implied by law [Statute or the Common Law] or trade
usage.

Trade Usage
Terms may be implied into a contract by trade usage where they
fulfill certain requirements set out in the case of Golden Cape
Fruits v Footplate 1973 i.e. they must be universal, uniform,
notorious (well known), reasonable, certain and should not be in
consisted with other provisions of the contract or the law.

1.1.1.2 Terms implied by law

These are law which the law invariably attaches to the particular
type of contract e.g. a contract of lease may have a term implied
by law that the landlord shall keep the property let in a proper
state of repair, even if the contract is silent on it.

1.1.1.2 Terms implied from the context

The circumstances in which a contract which a contract was

made may result in a term being implied into a contract where
the wording of the contract and the surrounding circumstances
clearly indicate that both parties must have entered into the

32
transaction on the understanding that the implied terms formed
party of the contract.

1.1.1.3 Conditions

A condition is a stipulation in a contract which determines whether

a contract comes into being or is terminated by making the
consequences of the agreement dependent upon the happening
(or vice versa) of an uncertain future extent.

A condition must be:

- An uncertain event
- A future event
- Not illegal
- Not in conflict with the contract itself.

There are two types of conditions:

a) Suspensive Condition/ condition subsequent:

this is a condition which suspends the flow of
obligations until the condition is fulfilled. A
contractual relationship will, however, be in
existence in the interim.
b) Resolutive condition/ condition subsequent:
when the condition comes into being, the
contract is terminated. In other words, there is
an operative contract which subsists until the
happening of the uncertain future event.
33
1.1.1 EXMPETION CLAUSES

These are terms which seek to exclude or limit the liability of one
of the parties to the contract e.g. the condition on the bus tickets
excluding ,the bus company from liability for any loss of
passengers’ luggage

The general rule is that they form part of the contract and are
enforceable if the party affected knew about them.

Parking garages also usually put up notices that parking is at

‘owner’s risk’. If a customer is to be bound by such notice it must
be proved that he saw the notice and that he understood the
words.

Where however, a party signs a contract with a written exemption

clause, the general rule is that he is bound by such clause
whether or not he has read or understood the words. This is in
terms of the caveat subscriptor rule. In the case of George v
Fairmead (Pty) Ltd, 1958, a customer signed a hotel register
containing printed words he never bothered to read. He was
bound by the contents. The court said: ‘if he chose not read what
that something was, he was, with his open eyes, taking the risk of
being bound by it’.

34
The rule, however does not apply where the signature was
induced by fraud, undue influence, duress, misrepresentation or
by mistake (justus error), where he is not to blame.

1.1.2.1 Consumer Contracts Act

It must be noted that the Consumer Contracts Act (Chapter

8:03) render in operative certain exemption clauses in ‘consumer
contracts’. The objective of the law is to control terms in
consumer contracts are unduly harsh and unfair to consumers.
Read the Act

1.1.2 ILLEGALITY

This affects the enforceability of a contract because some rule of

law has been contravened. There are three type of illegality:
a) Statutory illegality
b) Common law illegality
c) Contract contrary to public policy (contra bonos
mores)

1.1.3.1 Statutory illegality

When a contract contravenes a statute, the general rule is that

such a contract is void. In the case of York Estates Ltd v
Wareham 1949, the judge said:

35
 ‘As a general rule a contract or agreement which is expressly
prohibited by a statute is illegal and null and void event when, as
here to declaration of nullity has been added by the statute.’

In another case, Standard Bank v Estate Van Rhyn, 1925 the

Administration of Estate Acts 1913 (SA) provided that a cheque
drawn against the account of a deceased estate must express
cause of payment and the name of the payee. Certain cheques
where debited against the estate of Van Rhyn, which did not
comply with the provisions of the Act and the executor sued the
bank on the grounds that the debiting of the legislature penalizes
an act it impliedly prohibits that an act and the effect of the implied
prohibition is to render the act void and even if there is there is no
declaration of nullity.

The court said that this was a general rule. The court further held
that it was also important to ascertain the true intention of the
legislature because in some cases, where the legislature imposes
a penalty is sufficient and to proceed and hold the contract as
void will be adding to the penalty.

Further, in some, instances, where a statute provides a penalty for

entering into a particular contract, the court may have a choice of
either upholding the contract or declaring it void Flanagan v
Wheeler, 1976.

36
Contract in fraudem legis

A contract that is carefully crafted to avoid a statutory prohibition

will be held void as being in fraudem legis if, instead of
legitimately avoiding the statute, it illegitimately evades it. In
dealing with such a case the courts do not seek to look at the
letter and spirit of the law but the statute is interpreted in the
ordinary way and the true nature of the contract investigated.
If the true nature of the contract falls within the prohibition
although disguised so as to appear outside it, the contract will be
held in fraudem legis. In the case of Dadoo Ltd v Krugersdorp
Municipality Council, 1820, D in an effort to bypass a prohibition
of Asiatics from owning immovable property in areas reserved for
whites registered a company which bought immovable property in
the prohibited area. The contract of sale was held to be in
fraudem legis as it was viewed as designed to evade the
provisions of the statute.

1.1.3.2 Common Law Illegality

Certain types of contracts are prohibited by the common law

grounds of public policy and are accordingly treated as void. In
the SA case of Eastwood v Shepstone, 1502 the judge said:

‘… this court has the power to treat as void and to refuse in

any way to recognise contracts and transactions which are
against public policy or contrary to good morals. It is not a

37
power to be hastily or rashly exercised, but once it is clear that
any arrangement is against public policy, the court would be
wanting in its duty if it hesitated to declare such an
arrangement void.’

Arrangements will be contrary to public policy where they are

clearly inimical to the interest of the community, contrary to law or
morality or run counter to social or economic expedience.

Contracts contrary to public policy generally fall under the

following categories:-

i) Contracts injurious to the state e.g. trading with enemy

in times of war, Adler v Salisbury City Council 1947.
ii) Contracts injurious to the administration of justice or
agreements to oust the jurisdiction of the court, Sakala
v Wamambo, 1990.
iii) Contracts encouraging crime, delict and other unlawful
acts including agreements to stifle prosecution of
crimes Legan v Thompson, 1972.
iv) Miscellaneous contracts illegal at common law,
including contracts tainted with sexual immorality, loans
given in consideration of illicit intercourse, Heyns v
Heyns 1978.

1.1.3 CONTRACTS IN RESTRAINT OF TRADE

A contract in restraint of trade is basically a contract which ties the

trading activities of either party after its termination i.e. a party’s
38
right to exercise his trade or carry on his business is restricted
after leaving his employer’s service.
The general rule is that it is not the business of the court to make
contracts for parties. If parties make unreasonable contracts,
they are generally bound by them.

The law governing restraints of trade is outlined in the case of

Book v Davidson, 1988 as follows:

(i) A contract in restraint of trade is on the face of it valid and

enforceable. However, it will not be enforced as contrary to public
policy if it is shown to be unreasonable in the interests of the
public parties.
A restraint is unreasonable if:
-it is too wide e g an ex-employee is not allowed to work ‘within
an area of Rhodesia in which the company is carrying on
business, Carthew Gabriel v Fox and Carney (Pvt) Ltd 1977.
- It prohibits an unnecessary wide range of activities.
- It is imposed over too large a geographical area or for too
long a time.

(ii) The reasonableness of the restraint is to be determined

at the time the court is being asked to enforce it.
(iii) The court may partially enforce the good parts of the
contract and leave the bad parts, Mangwana v
Mparadzi 1989.
(iv) The onus of proving that the contract is unreasonable

39
 is on the person being restrained by the contract. In
assessing the reasonableness of the restraint the court
may look at whether the parties contracted from
positions of equal or unequal bargaining strength,
Biografic Pvt Ltd v Wilson, 1974.

1.1.4 FORMALITIES
The common law position is that no formalities are necessary for
a contract to be valid. There is no requirement that a valid
contract should be written or that it should be under a seal.
Where parties enter into an agreement and mention is made of
reducing the agreement to writing, it is the oral agreement, which
constitutes the contract with the written document being produced
for the purpose of certainty and proving the contract. In some
cases the parties may decide that they will be no contract unless
and until there is a written document signed by both parties.
Where it is established that was the intention of the parties, the
courts will give effect to that intention.

1.1.4.1 Formalities Prescribed by Law

As stated above the Zimbabwean Common Law does not require
any formalities. However, some statutes require certain contracts
to be in writing such as:

i) The Hire Purchase Act, Chapter 14:08- section

5 requires that all Hire Purchase agreements be
made in writing and that be the documents
should state the case price, agreement to writing
is not to render the contract void but they are

40
 certain penalties involved.
ii) Contractual Penalties Act, Chapter 8:04-
section 7 requires that an installment sale of land
be reduced to writing and the failure to do so
renders the contract null and void. The onus of
proving the existence of terms of the contract
rests on the party alleging its existence.
iii) Companies Act, Chapter 24:03- section 47
requires a reincorporation contract be in writing.
If the contract is not in writing then the contract is
not biding in terms of the Act.
iv) Mines and Minerals Act, Chapter 21:05-section
284 requires that tribute agreements be in writing
and companies to be filed with Mining
Commissioner.
v) Manpower Planning and Development Act,
Chapter28:02- section 38 requires that a
contract of apprenticeship must be in writing.

The above are common statutes which normally feature in

contracts but there are others we need not discuss.

1.1.5.2. Formalities decided on by the parties

Parties to a contract may agree that their agreement shall

become binding only upon being reduced to writing and upon
signature of the parties. Sometimes the parties do not express
their intention so clearly. They may simply agree that they shall
reduce their verbal agreement to writing but fail to fulfill this wish
or one of the parties fails to sign. The question then arises as to

41
whether there is a contract between the parties based on the
verbal agreement.

The court has to look at all the surrounding circumstances to

determine the intention of the parties, Woods v Walters. In the
absence of proof to the contrary, the court presumes, that the
requirement that the contract was to be reduced to writing, was
meant for record purposes rather than to suspend the coming into
operation of the agreement. The onus resting on the party
alleging that no binding contract was meant to come into force i.e.
the party denying the existence of the contract, Goldblatt v
Fremantle 1920.

1.1.5.3 Advantages of a Verbal Contract

- It remains flexible and easy to modify

- Illiterate parties can contract
- You can reject to be bound by it
- It is quick and cheap as no paperwork is involved and no
lawyer’s fees.

1.1.5.4 Disadvantages

- As it is based on memory, it can be distorted or suspect due

to bias.
- It is unreliable
- It is difficult to prove

42
1.1.5.5 Advantages of a written contract

- The preparation of the contract gives the parties’ time to

consider their positions before committing themselves by
signature.
- Onus of proof is simplified once signatures are identified and
the presumption is that the contract exists, Mans v Union
Meat, 1919.
- The scope for subsequent disagreement on the terms of the
contract is very much narrowed since terms would be there
for all to see.

1.1.5DISCHARGE OF CONTRACT

Read CHRISTIE, pp 105-120

After a contract has been validly entered into, the next stage
would be fulfillment of its obligations (that is, the promise made by
the parties).

The process whereby the obligations come to an end is called the

discharge of the contract.

A contract may be discharged through various ways, the most

common of which are by: -
1. Agreement
1. Performance

43
2. Set-off
3. Prescription
4. Supervening impossibility
5. Novation
6. Delegation
7. Cession
8. Breach of Contract
9. Death

1.1.6.1 Agreement

Contracts are made by agreement. They may, therefore, also be

terminated by agreement. In other words, a party cannot
unilaterally vary the contract without the knowledge and consent
of the other party. The parties may agree to waive the contract.
Waiver occurs when one of the parties abandons part of his rights
and obligations in the contract. As outlined in Alberts v Bryson,
1976: ‘waiver is bilateral transaction and does not result from a
unilateral declaration or decision of the creditor and nothing
more.’

Clear evidence is required to prove waiver and it must also be

shown that the party who is alleged to have agreed to waive his
rights had full knowledge of those rights. If waiver by conduct is
alleged, the alleged conduct must be plainly inconsistent with an
intention to enforce the rights i.e. the conduct must be
unequivocal in the circumstances.

1.1.6.2 Performance

44
The parties perform in terms of their agreements.

1.1.6.3 Set-off (Compensation)

This is sometimes referred to as compensation. This is when the

two parties are reciprocally indebted to each other and the debts
are of the same nature. If the debts are equal then both are
discharged, if they are unequal the smallest debts is discharged
and the larger debts is reduced by the amount of the smaller debt.
This takes effect automatically.

The reciprocal debts must however be liquid or easily liquidated.

There must also be true reciprocity of debts i.e. they must be
owing between the same parties and each party must have been
acting in the same capacity.

1.1.6.4 Prescription

This means that the time limit has expired. The Prescription
Act, Chapter8:11 in s. 15 gives different periods of prescription of
debts which range from 3 to 30 years. Contracts generally fall the
3 year period. S.2 defines a debt as including anything which
may be sued for claimed by reason of an obligation arising from a
statute, delict or otherwise.

45
1.1.6.5 Supervening Impossibility

This occurs where a contract which was initially possible to

perform, has become impossible due to fault of both parties. This
may be due vis major (irresistible force) act of State or God e.g.
passing an adverse legislation making one of the parties declared
as enemy by the State after an outbreak of war or there is a
natural disaster (Hurricane Katrina).

The parties are thus released from any performance due.

1.1.6.6 Novation

This occurs where the parties agree on a new contract,

substituting the terms of the old contract with a new one. This
terminates the old contract by agreement. Examples of Novation
include delegation and arrangement. Delegation is where a new
debtor is introduced into the transaction with the agreement of the
creditor.

1.1.6.7 Breach of contract

Breach occurs where a party does not properly perform in terms

of the contract

46
Breach may be due to the following:-
- Positive Mal-performance- doing what one promised not to
do
- Repudiation -stipulating that one no longer wants to
perform as agreed
- Anticipatory breach- clearly when showing that one will not
perform when the time for performance is up.
- Mora debitoris- failure to perform or late performance when
the time is stipulated and important.

A breach of contract is said to go to the root of the contract will

only entitle the innocent party to the remedy of damages or
specific performance.

1.1.6.8 Delegation

This is where, by agreement between all the parties, a third party

is introduced as a new debtor in substitution for the original
debtor. This discharges the old debtor. The creditor has to agree
as the creditworthiness of the new debtor is important.

1.1.6.9 Cession

47
This is the opposition of delegation. A new creditor (the
cessionary) is substituted for the old creditor (the cedent). This
involves a transfers his incorporeal rights to the cessionary.

The law regarding cession of presupposes a triangle- a debtor, a

creditor (who becomes a cedent) and a third party (the
cessionary).

There is generally no need for agreement or consent of the debtor

as it does not matter who pays as long the debts remains the
same.

Consent of the debtor may, be necessary in the following cases:

- The right of a personal nature and it makes a substantial
difference to the debtor.
- There is an express agreement that the right shall not be
transferred and it is to the interest or advantage of the
debtor.
- Where a portion of the debt only is ceded because a creditor
cannot unilaterally increase the debtor’s burden.
- The cession is prohibited by the law e.g. a person’s right to
maintenance payment.

Cession offers some commercial advantages, for instance, it

enables one to sell one’s right even before they fall due. In
practice, this has enabled sale of immovable property in hi-density
suburbs before the original owners obtain transfer of the
properties in question.
48
1.16.10 Death

The death of party terminates the contract only where the

obligations are of a person nature or there is a clear intention not
to extend the obligations under the contract beyond the lifetimes
of the parties.
If not, the estate of the deceased may have to meet the
deceased’s obligations. This may also be by express agreement
binding the executor to the estate to the performance of
obligations under the contract. However, the contract may
expressly provide for termination on the death of the parties.

1.16 REMEDIES FOR BREACH

Where one party breaches the contract, the other party is entitled
to certain contractual remedies which may be divided into two
groups:
a) Those which seek to enable the contract, i.e.,
specific performance, interdict and declaration of
rights.
b) Those which seek recompense for non-
performance i.e. cancellation and damages.

The remedies available are:

-Specific performance

49
-Damages
-Cancellation
-Interdict

The injured party is entitled to choose a remedy which best

soothes his injuries and he is entitled to choose more than one
remedy which he may claim together or as alternatives. He may,
however, not claim inconsistent remedies together e.g.
cancellation and specific performance. He is not expected to be
overcompensated. A party may seek remedies for actual breach
or threatened breach of the contract.

1.1.7.1 Specific performance

This is an order sought by an injured party to compel the

defaulting party to perform a specific act in pursuance of their
contractual obligations. Before claiming specific performance, the
injured party must perform or tender to perform his own reciprocal
obligations in the contract.

The order is at the election of the injured party subject to the

discretion of the court. The remedy would not be granted if it is
impossible to accomplish, or where it would cause undue
hardship to the defaulting party or when the extent of the
obligation is too uncertain or where the order will be to the great
detriment of the public or where the guilty party has become

50
insolvent and where also performance is of personal nature
requiring skills or expertise of the defaulting party.

1.1.7.2 Damages

The object of awarding money to the injured party is to

compensate him for loss arising from breach. Damages may be
claimed as an alternative to specific performance. The damages
must be proved.

The loss or damages must also not be too remote and must result
from the normal course of the breach. The innocent party is
expected to take reasonable steps to minimize his loss. The
innocent party must, in respect of the amount of damages, be put
in the same position as far as the payment money can do as if he
breach had not taken place.

Parties may agree on the dangers payable in the event of a

breach. Such penalty stipulations are only enforceable if they are
consistent with the provisions of the Contractual Penalties Act.

All penalty stipulations entered into after 9 November 1993 are

governed by the Act.
The Act obliges the court to reduce an agreed penalty if, in the
eyes of the court, it is disproportionate to the prejudice actually
suffered, e.g. in Scotfin Limited v Africa Trade Supplies
51
(1993), a claim damages where the defaulting party has
repudiated the contact or delayed in the performance of the
contract.

1.1.7.3 Cancellation of the Contract

If the breach is serious, i.e. going to the root of the contract, the
innocent party can at his election cancel the contract. He may
also claim damages where the defaulting party has repudiated the
contact or delayed in the performance of the contract.

1.1.7.4 Interdict

This is a court order in terms of which a person is ordered to act

or to refrain from acting in a certain way. It is the preferred
remedy to prevent a breach or threatened breach. Disobedience
of an interdict invites contempt of court sanctions.

52
53
 MODULE TWO (2)

THE LAW OF LEASE

Read: Christie pp 272-293

2.0 WHAT IS A LEASE?

A lease is a contract whereby a lesser agrees to give the lessee

use and enjoyment of a certain property for a certain time and the

54
lessee in return binds himself to pay a certain rent for it.

A contract of lease grants the lessee a right to use and enjoy the
property let. It does not confer ownership on the lessee.
Consequently, the lessee has no right to destroy, consume or
appropriate the subject matter of the lease in the same way as a
buyer in a contract of sale can. He must, therefore, at the end of
the period of lease, restore the subject matter to the lesser in the
same case condition in which it was before the lease. Fair wear
and tear is accepted as long as it is a result of normal use.

Essential Elements of lease

There are three essential elements of the contract of lease,

namely:
i) Agreement to let and hire property
ii) Agreement on the property to be let
iii) Agreement on the rent to be paid.

2.1 AGREEMENT

There must be an agreement that the lesser gives the lessee

receives the temporary use and enjoyment of the property.

2.1.1Formalities

55
No formalities are necessary to bind the parties. The agreement
may, therefore, be oral or written. The parties may, however,
agree that their agreement be in writing. It must be noted that the
lease is created automatically once the parties have agreed on
the use of a definite property for a fixed rent.

(2) By Notice-a periodic lease may be

terminated by notice given by either party.
(3) Mutual consent-both parties mutually agree
to cancel.
(4) Cancellation-by either party where lawfully
entitled to do so.
(5) Merger- where the tenant becomes the
landlord by e.g. purchasing the property
inheriting it.
(6) Repudiation-a party expressly or impliedly
indicates an intention not to be bound by the
contract e.g. the tenant leaving the premises
and returning the keys.
(7) Extinction of lessor’s title – where the
lessor’s right in the property terminates, the
lease ends, unless the case of the sale, the
lessee is protected by the ‘huur goat voor
koop’ rule.
(8) Destruction of leased premises- not due
to the lessee’s fault. If due to lessee’s
negligence, the lease is liable for the rent due
for the unexpired period of the lease. He
may also be liable for the damage suffered
(9) Effect of death – death does not terminate
a lease unless it is expressly said so in the
lease. The estate of the deceased party is
bound.
56
ACTIVITY 2:1

1. Explain the common rights of the lessee and his

obligations to the lessor

2. Explain the rights of the lessor

3. Explain what is meant by the landlord’s lien

4. Explain the rules governing the rights of the lessee to

remove and claim Compensation for any improvements he
has affected to the property listed.

The common law also provides that where a buyer purchases

property which is the subject matter of an existing lease, the
purchaser is bound to recognise and give effect to that lease and
is bound to the agreement as if he was party to it ‘huur gaat voor
koop’ meaning ‘goes before sale’ Scrooby v Gordon and Co.
1904.

This is, however, subject to the following qualifications:

a) Short lease (i.e. lease for period less than 10

years). The lessee must either be in actual
occupation or the buyer must have actual or
57
 constructive notice of the lease Shalala v Gelis
1950
b) Long lease (i.e. lease for a period exceeding 10
years). If the lessee has not been registered
against the title deeds or the buyer knew of the
lease, it shall only be binding on the buyer for a
period of 10 years and not for the duration of the
lease.

2.2 PROPERTY LET

The parties must agree on the property to be let. If there is no

agreement then no binding lease ensues. The property may
consist of anything. If there is no mention of the property in the
lease or the parties are mistaken as to the identity of the property,
then the lease is constituted.

2.3 THE RENT

Rent must consist of money or an ascertained quantity of fruits or

produce e.g. in agricultural leases. Where the rent consist of
money, as is usually the case, it must be a definite sum or else
ascertainable by the parties e.g. by the parties agreeing that it
shall be fixed by a named independent arbitrator.

As rent is an essential element of a lease, if the parties fail to

58
agree on the rent, then there can be no lease. Parties are
generally free to agree on the rent payable. Stipulations in
contracts of lease to pay ‘reasonable’ rent are void as they are
uncertain, Trook v Shaik 1983

2.4 RIGHTS OF THE LESSEE

Parties to a contract of lease are entitled to a certain common law

rights and are liable to certain duties upon the conclusion of the
contract. Certain rights, if not expressly agreed upon in the
contract, may be implied as flowing from the lease.

The common law rights of the lease:

1. To receive occupation and quiet undisturbed
enjoyment of the leased premises.
2. To have the property kept properly repaired and
to be compensated against defects in the
property.
3. To have all taxes levied on the property paid by
the lessor
4. To be compensated for the improvements on
termination of lease.

2.4.1 RIGHT TO RECEIVE OCCUPATION AND QUIET

ENJOYMENT

The landlord must give the lessee occupation of the property as

59
stipulated in their agreement and allow him to remain in
occupation and to use the property for the duration of the lease.

Where the property is less for a specific purpose e.g. a restaurant,

the landlord must deliver it in a condition reasonably fit for the
purpose for which it is let

The tenant’s right to occupation expires with the passage of the

agreed time. Where the property is let for an indefinite period, as
is usually the case, particularly in the townships either party may
terminate the lease upon giving the reasonable notice. In the
case of a monthly or weekly, respectively. Where the lease is
annual, 3 months notice has been held to constitute reasonable
notice. In Tiopazi v Bulawayo Municipality 1923, a calendar
month’s notice has been held sufficient to terminate the tenancy
that month.

Lessee’s remedies for failure to deliver occupation

-Specific performance - if landlord is able to make delivery

-Damages for any loss sustained if cancels agreement?
-Reinstatement in the property and damages where there has
been a wrongful ejectment.
-Where delivery has been partial i.e. occupation given to the part
of the premises, a proportionate reduction of the rent.

60
2.5 RIGHT TO QUIET ENJOYMENT

The lessee is entitled to use the property and to gather and enjoy
its fruits. To this end, the landlord/lessor undertakes not to disturb
the lessee in his enjoyment and use of the property either by
himself or someone else with a legal right to do so.

Remedies for breach

-He can claim reinstatement if the lessor evicts him. If a third

party with a superior title (e.g. the owner of the premises, where
the property is being sublet), he has no claim if he is aware of the
lessor’s defective title at the time he entered into the lease.

-He may cancel the lease and claim damages if the lessor
disturbs his use and enjoyment. Again where a third party
disturbs his use, he will not have any claim if he was aware of the
lessor’s defective title. He will have a claim if he was ignorant of
the lessor’s defective title, but he will depend on the seriousness
of the disturbance.

2.6 PAYMENT OF TAXES

The lessor has a duty to pay all the taxes on the property imposed

61
by the state or local authority unless there is an agreement to the
contrary or there is legislation excluding it. However, the lessee
has a duty to pay any taxes on the produce or fruits of the
property.

2.7 RIGHT TO HAVE PROPERTY KEPT IN DUE REPAIR

There is under a duty to maintain the premises in a condition

reasonably fit for the purpose for which it was leased. He has an
obligation or repair doors, windows or other parts of the premises,
not caused by the lessee’s negligence.

If the lessor fails to make the necessary repairs, the lessee may
upon demand and notice to the lessor, repair the premises himself
and deduct the cost thereof from the rent. He may also claim any
loss caused by the existence of the defects on the premises, if the
lessor had knowledge, express or implied of them.

2.8 IMPROVEMENTS

The lessee is entitled to make improvements to the leased

premises and claim compensation for them (unless there is an
agreement to the contrary). He is entitled to claim compensation
for necessary improvements (those necessary for the protection
or preservation of the property).

62
2.9 DUTIES OF THE LESSEE

2.9.1 Payment of rent.

A tenant has an obligation to pay the rent agreed on the due

date, at the agreed place and to the agreed person. The
general rule is that the rent is payable on the day the lease
expires in the case, i.e. in the case of periodic lease e.g.
monthly lease – the last day of the month. The general rule
applies where there is no agreement to the contrary

2.9.2 Remission of rent

Where the lessee is deprived of the use and enjoyment of the

property in certain circumstances the lessee may claim a
remission of the rent. The lessee is entitled to claim a refund of
the rent if he is deprived of the beneficial use of the property
due to:-
a) the lessor’s fault
b) vis major ( any power or force, over which man has no
control and cannot resist, e g lightning)
c) casus fortuits ( an exceptional occurrence or accident which
could not have reasonably foreseen)

2.9.3The lessor’s (landlord) remedies for unpaid rent

(i) The landlord can sue for payment of the rent upon

63
 the expiry of the due date. He may also claim
damages if they are any suffered.
(ii) The lesser may cancel the lease. Usually landlords
put in a clause entitling them to cancel the lease
upon failure to pay the rent. Where there is no such
clause, the landlord may not cancel the lease unless
it is established that the failure was a deliberate act
by the lessee calculated to abandon or break the
contract.
(iii) Landlord’s tacit hypothec for rent.-
The tacit hypothec is the right to retain possession of
movable property i.e. goods, tools, animals brought
onto the leased premises until the rent is paid. Such
property may consist of any movable property of the
lessee, or in some circumstances, property of a sub-
tenancy or third party. It is the third party, who must
prove ownership of the seized property as the
tenant’s possession of the property creates a
presumption of ownership by the tenant,
The hypothec or lien operates when the following three essential
elements are present:
a) The rent must be in arrears
b) The goods must be on the premises
c) The property comprises all movables (invecta et illita) of the
lessee, including property of sub-tenants brought on the
premises.

2.9.4Duty to use and care for the property

The lessee has the duty to take care of the property let and use it

64
for the purpose for which it was let. He must use the property
with the degree of care expected of a reasonable man in the use
of his own property. The lessor may cancel and claim damages if
the lessee fails in his duty, alternatively, he may interdict the
lessee and claim damages.

2.9.5Duty to restore the property

On the termination of the lease, the lessee has an implied duty to

restore the property to the lessor in the same order and condition
in which it was delivered to him, allowing only for reasonable wear
and tear.

The lessor may claim damages i.e. reasonable cost of repairs, if

the property is restored in a damaged condition. He may also
claim a loss of rent if he is unable to let the property during the
period that the property cannot be let out due to the damage.

2.9 TERMINATION OF LEASE

Lease terminates in the following ways:

(1) Expiration of time-i.e. the expiration of the agreed

period.

65
2.1.1 RENT REGULATIONS

See Christie pp 275-6

21.1.1. The law outlined above reflects the common law rules
governing the law of lease.
These rules are applicable where they have not been
modified by statute.
2.1.1.2 The main regulations governing leases are:

(i) The Rent Regulations 1982 (S.I 626/1982) made in

terms of the Housing and Building Act [ Chapter
22:07]
(ii) The Commercial Premises (Rent) Regulations 1983
(S.I 676 of 1983) made in terms of the Commercial
Premises (Lease Control) Act, 1983

2.1.1.3 The main object of this regulations was that of ‘preventing

landlords from taking advantage of their strong economic
position by charging excessive rents, and of giving tenants
greater security of tenure’ [Christie].

Rent Regulations

2.1.14 these only apply to leases of ‘dwellings’ situated with

urban areas (Municipalities, towns, designated

66
 areas of rural council e.t.c.)

A dwelling is defined in s 3 as any room, flat, apartment, and

house occupied as human habitation (but does not include a
human habitation let at a rent which includes any payment in
respect of a meal, e.g. hotel room)

2.1.1.4 Rent Orders

In terms of s 14, any lessor or any lessee may apply to a Rent

Board (or a variation thereof). Upon the application being lodged,
the parties are invited to a consultation before the secretary of the
Board. They may agree to a fair rent before the secretary who
then issues an interim rent order on the basis of their agreement.
If they disagree, the rent board will be convened to determine the
issue. The board may issue a provisional order.

At the conclusion of the hearing, the Rent Board will issue a Rent
Order fixing the fair rent of the dwelling or where there is an order
already in existence, varying that order.

2.1.1.5 Determination of fair rent

The board determines a ‘fair rent’ using criteria set out in s 18.
Basically the rent must:

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 - provide the lessor with a reasonable return on the value of
the property after allowing for recurrent expenditure; and
- represents a reasonable charge to the lessor for the dwelling
and its amenities.

The board is required to take into account a number of factors

like, the level of rents in the locality; the condition, character and
state of repair of the dwelling and any other factors.

2.1.17 Duration of Orders

An interim order last for two months and a provisional order last
for three months unless replaced by a rent order. A final rent
order lasts until replaced by a further rent order.

Once a final order is issued, no application for a further rent order

may be made until the expiration of two years since the original
order. However, variation may be made if there is a substantial
change to the premises or if the true facts were not placed before
the board at its hearing.

2.1.18 Prohibited Payments

No lessor is allowed to charge more rent that:

-an amount fixed in a rent order
-the amount, if there is no rent order, of a standard rent.
68
Standard rent is defined in s.3

It is basically;
a) the rent charged for the dwelling prior to
December 1981; or
b) the rent to which the first charged for the dwelling
after September 1982 if it was never let before

In some cases of a flat which is let for the first time after
September 1982, the standard rent will be the highest rent that
was ever charged for a similar flat before December 1981.

2.1.19 Ejectment

A lessor may not eject a tenant from a dwelling simply because

the lease has expired as along the tenant pays:

(a) the amount fixed on rent order; or

(b) the standard rent, if there is no rent
order;
(c) and he complies with any other terms of
the
lease.

To eject the lessee, the lessor must apply to the civil court and

69
show in addition that:

(a) the lessee is damaging the property; or

(b) the lessee is causing the inconvenience to neighbors;
or
(c) the dwelling is required to be vacated for the purposes
of reconstruction or rebuilding; or
(d) the rent board has certified that there is some other fair
and reasonable ground.

A lessor who ejects without a court order commits a criminal

offence.

2.1.1.10 Children

A lessor may not refuse to let any dwelling solely on the ground
that the tenant has children who will come into the leased
premises, see s.34 and Maisel v R, 1944.

2.1.1.1.1 Appeals
Appeals against decisions of the Rent Board lie with the
administration court.

2.1.1.1.2 Rent Books

A lessor is required to issue a rent book. See also Housing and

70
Building (Lodgers’ Rent Restriction) Regulations 1980 (S.I
575/1980).

2.10 COMMERCIAL PREMISES (RENT) REGULATIONS

2.12.2 Application

These apply to ‘commercial premises’ defined as premises let for

the purposes of carrying on therein any industry, business, trade
or occupation and includes any ground, parking space, garage
,outbuilding, workers ‘ quarter and other improvements let.
The regulations apply only in ‘urban areas’ (municipalities, towns
and designated areas of rural councils).

2.1.2.2 Application for a fair rent.

A lessor or lessee may apply to a rent board for the determination

of a fair rent. The application must set out the rent desired. The
secretary of the Board serves a copy of the application on the
opposite party.

2.1.2.3 Determination of a fair rent.

The board must generally fix a rent which will provide a lessor
with a reasonable return on the depreciated replacement value of
the premises after allowing for recurrent expenditure or the open
71
market rental, whichever is the lower.

2.1.2.4 Duration of orders

Once the determination has been fixed, it remains in the force for
the duration of the lease but either party may apply for variation
thereof.
Charging more rent than that fixed by the Board is a criminal
offence.

2.1.2.5 Statutory Tenancies

A lessee of commercial premises is entitled to remain in

occupation of the leased premises even if the lease has expired if:
(a) he pays the rent due or the fair rent fixed
(b) he complies with the other conditions of the lease

The lessor cannot have him ejected if he complies with these

conditions, unless he applies to court and can show some good
reason other than simply because he want to lease the premises
to some other person or because the lessee won’t agree to pay
an increase in rent.

2.1.2.6 Appeals

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An appeal lies with the Administration Court.

Activity 2.2

Fully discuss the effects of the Rent Regulations on the rent

which a lessor is entitled to charge, and the circumstances in
which a lessor may eject a lessee.

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 MODULE THREE (3)

3. AGENCY

Read CHRISTIE pp 326-354

3.1 DEFINITION OF AGENCY

Agency is the relationship that exists between two persons when

one, called the agent, is considered in law to represent the other,
called the principal, in such a way as to be able to affect the
principal’s legal position in respect of strangers to the relationship
by the making of contracts or the deposition of property. [
Fridman, The Law of Agency]

3.2 Formation of Agency

Agency is a type of contract. The general principals of the law of

contract are therefore applicable as regards formation of an
agency contract; i.e. there has to be offer and acceptance,
74
capacity to contract e.t.c

3.3 Classes and kinds of Agents

The most common types of agents are the following:

(a) A factor: This is a person given goods to sale by a
merchant who lives a distance away from the place of
sale. He sells the goods in his name without disclosing
his principal’s name.

(b) A Broker: This is a person employed to negotiate

contracts between parties relating to trade, commerce
and navigation. Common examples of brokers are
stockbrokers who deal in shares and insurance brokers
who sell insurance policies.

(c) A Stock Broker: a special type of broker who, as a

member of Stock Exchange, deals in shares, debentures
and other securities of the public companies which have
been accepted as ‘listed securities’ under the rules of
Stock Exchange.

(d) Del Credere Agent: this is an agent or a factor who

guarantees the payment of the purchase price in a
contract of sale [Christie].

(e) Auctioneer: he sells property by public action.

(f) Estate Agent: he generally deals in property, i.e. finds

buyers and sellers leases for his client’s immovable
property or simply manages such property.

75
3.4 THE AUTHORITY OF AGENTS.

Agents derive their authority to act from their principals. When a

third party deals with an agent, it is therefore, necessary to
assess the extent the of his agency. Problems often arise when
the principal alleges that the agent did not have his authority to
act on his behalf in respect of his particular acts.
An agent’s authority to act is determined by the terms of the
agency contact. Authority may be express or implied from the
terms of the contract. There are two types of authority:-
I) Actual authority
II) Apparent authority or ostensible authority

Actual Authority
This is when the agent actually possesses authority expressly or
impliedly given to him by his principal.

Express Authority

The agent is given clear, oral or written authority by his principal

to act on his behalf

Implied Authority

This is where a person acts or professes to act on behalf of

another without having been actually been appointed to do so.

76
This is reasonably inferred from the circumstances i.e. whether a
reasonable man, looking at the conduct of the parties would
consider that the parties have agreed to form an agent. Where
there is a special relationship in existence e.g. that of the
employee, this may assist in determining whether there is implied
authority.

3.5 RATIFICATION

Where a person acts without authority of another person, the

person whom he purports to act for may ratify the acts of the
agents, thereby giving the agent retrospective authority.

For ratification to be valid, the principal must have knowledge of

all the material facts at the time of the purport ratification. The
agent must have acted without authority; represented to third
party that he was acting on behalf of the principal; and the
principal must then adopt the whole transaction.

3.6 POWER OF ATTORNEY

This a document in which actual authority is formally recorded.

Powers of attorney can be special or general. A special power
of attorney gives authority to a special agent. A special agent is
an agent appointed to do one particular act e.g. power of attorney
given to a conveyancer to transfer a piece of land through the
Deeds office.
77
A general power of attorney authorizes a general agent to do
general things, i.e. without a defined constituency.

3.7 APPARENT/ OSTENSIBLE AUTHORITY/ ESTOPPEL

In some cases, a third party may hold the principal liable on

contracts entered into by the ostensible agent and his, even if
there is no express or implied authority.
This is where the principal, by words or conduct, represents a
third party, that the ostensible agent has authority from him and
the third party is induced to enter into the contract with the
ostensible agent on the strength of such conduct, to his prejudice.

Ostensible agency is, therefore, agency by estoppel as the

principal is estoppel from denying that the agent had authority.

A person pleading agency by estoppel must establish the

following factors:-
i) That there was a representation by the principal.
ii) That the representation was of such a nature that it
could reasonably have been expected to mislead
him.
iii) That he acted on the faith of the representation
iv) That he was prejudiced by doing so, see Rwafa v
Small Enterprises Corp 1999.

78
It must be noted that apparent authority is only relevant where
one cannot find actual authority.

3.8 USUAL AUTHORITY

I a principal employees an agent in a certain capacity and it is

recognized that an agent in that capacity has authority to do
certain acts then any of those acts performed by the agent will
bind the principal because there are within the scope of his
apparent authority, e.g. in an auctioneer has ostensible to
conclude a sale in respect of property being sold by their public
auction, a director may bind his company if he does those things
directors ordinarily do.

3.9 NEGOTIORUM GESTOR/ AGENT OF NECESSITY

A person who undertakes the business of another without the

authority of the latter and in the latter’s absence is known as a
negotiorum gestor.

A gestor is not an agent as such but a mere unauthorized

manager of person’s affairs in cases of emergency e g feeding a
person’s animals or taking care of another’s perishable goods.
The gestor acts with intention to benefit the other party (dominus)
in a situation where it is practically impossible to communicate
with the dominus

79
The gestor is entitled to recover all necessary and useful
expenses incurred by him in running the business of the principal.
He is however delictually liable to principle if he causes loss to the
principal by negligence in his voluntary administration.

3.10 THE UNDISCLOSED PRINCIPAL

A principal is undisclosed where the third party enters into a

contract with an agent with the belief that the agent is contracting
on his own account i.e the third party does not know that there is
a principal. The third party believes that the contract is between
himself and the agent. This should be distinguished from an
unnamed principal, where the agent discloses that he is acting
for someone he does not wish to disclose.

3.1.1.1.5 To Act in good faith (Uberrimae fides)

An agent must always display utmost good faith. Every agent

holds a position of trust and confidence and must conduct the
affairs of his principal in the interest of the principal and not for his
own benefit.

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In terms of s.3 (1)(d) of the Prevention of Corruption Act
[Chapter 9:16], it is a criminal offence for an agent to connive with
a third party to commit a breach of the agent’s duty to his
principal. The agent’s duty to act in good faith includes, inter
alia:-

(i) He must make a secret profit

(ii) Must not put himself in a situation where his interest
conflicts with those of the principal
(iii) Must not misuse confidential information.

Where the agent has made secret profit, the principal has two
remedies:-

a) He may elect to terminate the relationship

with or without damage
b) He may elect to continue with the agent’s
relationship and claim the profit with or without
damages. The claim for damages may be in
contract or in delict if the requirements for a
delictual action are met.

3.1.1.1.6 Duty to account

81
He must keep proper accounts of monies received or spend on
behalf of the principal. He must also allow the principal to inspect
the books of accounts.

3.1.1.1.7 Duty to delegate

He must not sub-delegate unless the business does not require

the agent’s discretion or skill

3.12 THE PRINCIPAL’S DUTIES

The principal has the following obligations to his agent:-

3.1.1. THE PRINCIPAL AGENT RELATIONSHIP

3.1.1.1 DUTIES OF THE AGENT

The agent has certain common law duties to his principal.

3.1.1.1..1 Duty to perform his mandate

The agent has a duty to do what he has been instructed to do with

the highest degree of skill, care and diligence, whether or not he
is to be paid for it.
82
An agent who does not do what he has undertaken to do is not
entitled claim remuneration (commission). In fact, he will be in
breach of contract and his principal has the normal remedies for
breach. He may, however in exceptional cases claim his
commission where he has substantially performed in terms of his
mandate.

3.1.1.1 Duty to exercise Care and Diligence

The agent must prosecute the mandate with diligence and in good
faith. The degree of care expected is that of a reasonable person.
In the case of Bloom’s Woollens v Taylor, 1962, the court said:
In the course of time, the law has implied into every
contract of agency an undertaking by the agent that
he will act with the care and diligence of the ordinary
prudent man when he engages upon the principal’s
business.

3.1.1.2 Duty to impart information.

The agent is bound to give his principle all the information which a
reasonable person in the agent’s shoes should be expected to
give i.e facts which are likely to affect the principal’s judgment.

83
3.1.1.3 The Duty to Advice

Where the principal employee skilled agent who has skills which
the principal lacks, the agent is bound to advise the principal of
the likely consequence of a course of action which the principal
proposes to follow.

The undisclosed principal is permitted to come forward and seek

specific performance from the third party Nyamweda v
Georgias,1988.

An undisclosed principal when discovered is liable to be sued on

a contract made by his agent, Natal Trade & Milling Co. v E
1925.

ACTIVITY 3.A

1. Define in your own words the following agents:-

a) Factor
b) Broker
c) Del Credere Agent
d) Stock Broker
2. Explain how an agency situation is created.
3. Distinguish between:
i) Ratification and agency by estoppel
ii) The undisclosed principal and unnamed principal
84
4. Define a negotiorum and explain his rights and liabilities.

3.1.2.1 The Duty to remunerate

The principal must pay the agreed remuneration, if any where the
agent has substantially performed his mandate. Where no
remuneration is expressly stated, the law will imply that a
reasonable remuneration was intended to be paid to a
professional agent. The court will take into account the value of
the service to the principal, time expended and the prevailing
market rates to determine the commission payable.

3.1.2.2 Duty to reimburse and compensate

The principal must always compensate his agent for expense and
liabilities incurred and any loss or damage suffered as a result of
the execution of mandate. However, for the agent to receive the
agent the following must be satisfied:-
- The agent must have acted in terms of his mandate
- The expenses, liabilities or loss suffered by the agent must
be necessary or reasonable.

3.1.2.3 Duty to Account

Where the nature of his transaction with the agent makes it

85
necessary in the interests of justice between the parties, the
principal must account if the agent is entitled to commission on
the payment being made to the principal on orders made by the
agent and later accepted by the principal.

3.13 RELATIONSHIP OF AGENT TO THIRD PARTIES

Generally, the principal is bound by the acts of his agent provided

the agent acted within the scope of his authority. The principal
becomes the party and the agent comes out of the transaction.

Where, however, the agent acts without authority or exceeds his

authority, he is deemed to have warranted that he has authority
and impliedly undertaken to himself perform to the third party as if
the principal was bound.

3.14 TERMINATION OF AGENCY

Agency may be terminated in the following ways;

- Mutual agreement
- Completion of the task assigned
- Principal expressly revokes his authority or the agent
renounces his agency
- Expiration of time, where a agency is for a specific time
86
 - Supervening illegality
- Death of party, insolvency or insanity or either party.

ACTIVITY 3.B

1. Outline and explain the common law duties of an agent

to his principal.
2. Outline and explain the principal’s duties to his agent.
Further, explain the relationship of the agent to the third
parties.

Citing materials from this text use:

Professor Bampton (2001), Business Law, Longman, London

87