Exercise Question 2 - Memorandum
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Masalesa x2Exercise Question 2 - Memorandum
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Masalesa x2MEMORANDUM – EXERCISE QUESTION 02
FIRST SEMESTER
This exercise question is a self-assessment exercise which does not
contribute towards your semester mark.
Question:
X, an organiser of art exhibitions, contracted with Y for an exhibition to be held on 24
to 27 July. These dates were the only dates mentioned during the negotiations. After
having been pressurized by X, Y hurriedly signed the standard form contract without
reading it. The contract contained a clause permitting X to change the dates of the
exhibition unilaterally. Thereafter X changed the dates. X had no reason to believe
that Y would have signed the contract if he had known of the term. Y averred that the
contract was void. Will Y succeed in his attempt to have the contract set aside?
Substantiate your answer and refer to relevant case law. Apply the direct reliance
approach of the courts in answering this question. Do not apply the Consumer
Protection Act to this question.
(10)
Answer
Identifying the problem
The facts seemingly indicate that X and Y have not reached consensus based on the
will theory. If so, it is necessary to determine if Y may be held bound to a contract with
X, based on the reliance theory, or whether Y will escape liability. Only the direct
approach to the reliance theory will be considered.
Discussing the relevant law applicable to the problem, referring to the relevant
case law, AND applying the law to the facts of the problem
The direct reliance approach can only be applied after it has been determined that Y
acted under a material mistake. It must thus be determined whether agreement
(consensus ad idem) as a contractual basis exists between the parties, as required in
terms of the will theory.
The first step is to determine whether agreement (consensus ad idem) as a contractual
basis exists between the parties, as required in terms of the will theory. Consensus
has three elements (Hutchison and Pretorius (eds) The law of Contract in South Africa
(Oxford University Press Southern Africa 2017) 14): the parties must seriously intend
to contract, be of one mind as to the material aspects of the proposed agreement (the
terms and the identity of the parties to it), and be conscious of the fact that their minds
have met.
In the present case the parties were not in agreement as to the consequences they
wished to create: Y thought that the dates for the art exhibition (X’s performance) was
fixed, while X knew that the contract allowed X to unilaterally change the dates. This
is a mistake as to the obligations the parties wished to create which excludes
consensus between the parties (Hutchison and Pretorius Contract 86). No contract
can arise on the basis of the will theory. This type of mistake can be illustrated with a
number of cases.
In Allen v Sixteen Stirling Investments (Pty) Ltd 1974 (4) SA 164 (D) the plaintiff
believed that he was purchasing the erf shown to him by the seller's agent, while the
written contract that he signed indicated a completely different property. His mistake
related to performance and was material. See also Du Toit v Atkinson's Motors Bpk
1985 (2) SA 889 (A). The appellant signed an agreement containing a term excluding
the respondent from liability for misrepresentation. Finally see Sonap Petroleum (SA)
(Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v Pappadogianis 1992 (2) SA
234 (A) where the appellant erred with regard the period of the lease which was an
aspect of the performance.
The direct reliance approach can now be applied to the facts of the problem (Hutchison
and Pretorius Contract 18-19 98-100 103-108). The court stated the test in Sonap
Petroleum (SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v Pappadogianis
1992 (2) SA 234 (A) 239-240 as follows:
In my view, therefore, the decisive question in a case like the present is this:
did the party whose actual intention did not conform to the common intention
expressed, lead the other party, as a reasonable man, to believe that his
declared intention represented his actual intention? … To answer this question,
a three-fold enquiry is usually necessary, namely, firstly, was there a
misrepresentation as to one party’s intention; secondly, who made that
representation; and thirdly, was the other party misled thereby? … The last
question postulates two possibilities: Was he actually misled and would a
reasonable man have been misled?
A discussion of Ridon v Van der Spuy and Partners (Wes-Kaap) Inc 2002 (2) SA 121
(K) and Steyn v LSA Motors Ltd 1994 (1) SA 49 (A) will also be appropriate.
By signing the contract, Y, a party to the contract, misrepresented his intention to be
bound by the clause allowing X to unilaterally change the dates. X knew that the only
dates mentioned during the negotiations were 24 to 27 July, that Y hastily signed the
contract and that the contract had a clause allowing X to unilaterally change the dates.
Although it could be argued that X was not actually misled by Y’s misrepresentation,
it is clear that a reasonable person would not have been misled in any case. Indeed,
X had no reason to believe that Y would have signed the contract had Y known of the
term allowing X to change the dates of the exhibition unilaterally. In fact X had a legal
duty to point out the presence of this clause in the agreement to Y. There was either
no actual or at least reasonable reliance on the part of X.
The giving of appropriate advice
Y is not bound by the agreement with X because of the lack of actual and apparent
consensus.
Total: [10]
