LLOC 2605

LAW OF CONTRACT

NQF level 6

20 credits

Department of Private Law

Compiled by

Mrs. September Van Huffel

2021
TABLE OF CONTENTS
1. Welcoming.................................................................................................................... 5
2. Module Objective ......................................................................................................... 5
3. Module Outcomes ........................................................................................................ 5
4. Learning Units .............................................................................................................. 6
5. Prerequisites ................................................................................................................ 7
6. Credits and Notional Learning Hours ......................................................................... 7
7. Study Material .............................................................................................................. 8
8. Assessment .................................................................................................................. 8
8.1. Assessment Breakdown....................................................................................... 8
8.2. assessment timetable ........................................................................................... 9
8.3. Calculation of the Final Mark ............................................................................... 9
8.4. Passing the Module ........................................................................................... 9
9. Updating of Module Information and Resources ....................................................... 9
10. Student Graduate Attributes ....................................................................................... 9
11. Learning Unit Guide (Example: Unit 1) ...................................................................... 14
11.1. Unit Overview .................................................................................................... 14
11.2. Learning Outcomes .......................................................................................... 14
11.3. Unit-Specific Study Material ............................................................................. 21
11.3.1. Preparation Material ....................................................................................... 21
11.3.2. Content Material ............................................................................................. 21
11.4. Learning and Assessment Activities ............................................................. 115
11.5. Questions to Consider in this Unit................................................................. 115
11.6. student Graduate attributes developed in this unit ...................................... 115
12. Appendix A: Example of a Module Journey Map .................................................... 116

Table 1: Icon Library ........................................................................................................... 2

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Table 1: Icon Library

Icon Description

Welcoming message

Module objective

Module outcomes

Action words, terms and concepts that need to be understood

Activities and resources made available on Blackboard

Prerequisites of the module

Credits and notional hours relevant to the module

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Face-to-face contact sessions

Activities to be completed individually (preparation). You may still ask

for feedback from your tutor or lecturer when you encounter aspects
that you have difficulty with

A quiz – usually made available for self-assessment on Blackboard

Unit-specific content for the module

The resources to be consulted (such as the textbook, additional reading

material, etc.)

The roadmap that contextualises (puts into perspective) the different

pieces of information in the module

An important reminder/caution from your lecturer

Assessment questions and opportunities

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Unit-specific assessment criteria

A learning unit

Learning unit outcomes for a specific unit

Purpose of the learning unit

Student graduate attribute

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 1. WELCOMING

Dear student,

Welcome to the module LLOC 2605. This module focuses on the Contract Law and is
presented in the Department of Private law.

It is the responsibility of all students to ensure that they obtain all the information in connection
with this module. This information will be made available during formal lectures and tutorial
sessions; on Blackboard; and in the Faculty of Law Rulebook. Attendance of all formal classes
is compulsory. Please note that only registered students will be allowed to attend the contact
sessions of this module.

2. MODULE OBJECTIVE

The module currently forms part of the B. Com (Law) and LL.B programmes, and is taken in
the second year of study. The purpose of this module is to acquaint the student with an
understanding of the origins of and constitutional values underlying the South African law of
contract. The module aims to provide a thorough analysis of the requirements of a valid
contract and the forms of breach of contract. The different remedies that are available for
breach of contract are addressed from a South African law and foreign law perspective. The
module furthermore aims to enable students to practically and critically apply knowledge in
the law of contract to authentic scenarios and to develop students’ writing and contract drafting
skills. In order to furnish the student with the practical skills required to not only draft a contract,
but also to take cognisance of the consequences of poor or incomplete drafting, the contract
of sale has been identified as an example of how the theoretical requirements of a contract
find application in practice. To achieve the purpose, use is made of formal lecturers, audio-
visual media, textbooks, casebooks, discussions of court decisions, articles, self-study and
tasks.

3. MODULE OUTCOMES

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After successful completion of this module, you should be able to:

 Critically discuss the historical development of the law of contract in

South Africa.
 Analyse and evaluate the constitutional values underlying the law of
contract in South Africa, with specific reference to the freedom of
trade, occupation and profession, freedom of property and equality.
 Distinguish between the different forms of breach of contract.
 Classify and critically analyse the remedies available for breach of
contract in South Africa and in selected foreign jurisdictions.
 Contrast the methods by which contractual obligations may be
terminated.
 Distinguish between the essentialia of the contract of sale.
 Critically discuss the duties imposed on the seller and purchaser
under a contract of sale.
 Apply the concepts, principles and legal theory of the law of contract
and the sales agreement to factual scenarios when solving problems
in a critical and ethical way.
 Identify, discuss and distinguish between terms, conditions, time
clauses and assumptions and the relevance of each to the operation
of a contract.
 Draft a letter placing a party in potential breach of contract in mora.
 Structure and draft a pre-agreement memorandum between
potential contracting parties.

 Identify, analyse and draft relevant clauses in a contract including (but not limited to)
the amendment clause, entire agreement clause, cession or assignment jurisdiction
and alternative dispute resolutions.
 Identify and distinguish between the types of terms that may be included in a contract.
 Identify and discuss the principles applicable to the legal constructs of agency and the
stipulatio alteri.
 Identify certain legal issues involved in any particular contract and draft a thorough and
professional legal opinion on the contents of said contract and the probability of
success (for either party) in case of breach thereof.

4. LEARNING UNITS

In addressing the module outcomes above, the following learning units will be covered in this
module:
PART 1 - THE REQUIREMENTS OF A VALID CONTRACT

LEARNING UNIT 1: INTRODUCTION TO THE LAW OF CONTRACT

AND BASIC CONCEPTS.

LEARNING UNIT 2: THE REQUIREMENT OF “CONSENSUS”.

LEARNING UNIT 3: CONSENSUS OBTAINED BY IMPROPER MEANS.

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 LEARNING UNIT 4: OFFER AND ACCEPTANCE.

LEARNING UNIT 5: CONTRACTS INTER ABSENTES.

LEARNING UNIT 6: PACTA DE CONTRAHENDO.

LEARNING UNIT 7: FORMALITIES.

LEARNING UNIT 8: POSSIBILITY OF PERFORMANCE.

LEARNING UNIT 9: LEGALITY.

LEARNING UNIT 10: CERTAINTY.

PART 2 - BREACH OF CONTRACT

LEARNING UNIT 11: MORA DEBITORIS

LEARNING UNIT 12: POSITIVE MALPERFORMANCE

LEARNING UNIT 13: REPUDIATION

LEARNING UNIT 14: PREVENTION OF PERFORMANCE

LEARNING UNIT 15: MORA CREDITORIS

PART 3 - REMEDIES

LEARNING UNIT 16: THE PRINCIPLE OF RECIPROCITY.

LEARNING UNIT 17: SPECIFIC PERFORMANCE, CANCELLATION AND DAMAGES.

PART 4 - SPECIFIC CONTRACTS

LEARNING UNIT 18: LEASE CONTRACT

LEARNING UNIT 19: DRAFTING CONTRACT CLAUSES

5. PREREQUISITES

Please consult the faculty yearbook for more information.

6. CREDITS AND NOTIONAL LEARNING HOURS

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‘Notional learning hours’ indicate the amount of learning time taken by the ‘average’ student
to achieve the specified learning outcomes of the course unit or programme. This includes all
learning relevant to achieving the learning outcomes, e.g., directed study, essential practical
work, group work, private study, preparation and assessment.

This module has 20 credits, which implies that 200 notional hours of learning are expected
from students.

7. STUDY MATERIAL

 The prescribed textbook in this module is:

Van Huyssteen, Lubbe & Reinecke.

2020. Contract. General Principles. (6th Edition) Juta.

 In addition to the textbook, other study material will also be used as part of the teaching
and learning in this module. This material and activities will be made available on
Blackboard throughout the semester. It is students’ responsibility to ensure that they
obtain and prepare all reading material for this module in time.

8. ASSESSMENT

8.1. ASSESSMENT BREAKDOWN

Your module mark (predicate) / final mark will be calculated as follows:

ASSESSMENT TYPE (E.G. TEST, QUIZ, ASSIGNMENT, ORAL, CONTRIBUTION TO

BLACKBOARD ACTIVITY) MODULE MARK
Assessment 1 Online Test 1 20%
Assessment 2 Online Test 2 20%
Assessment 3 Online Test 3 20%
Assessment 4 Online Test 4 20%
Assignment Written assignment 1 10%
Assignment Written assignment 2 10%

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8.2. ASSESSMENT TIMETABLE

Please consult the assessment timetable of the Faculty of Law for the dates, method and time
of assessments. The assessment timetable will be available on Blackboard at commencement
of the semester.

8.3. CALCULATION OF THE FINAL MARK

Your final mark for this module will be calculated as follows:

In modules that are assessed by way of continuous assessment, the average mark of all the
assessment opportunities whilst taking into consideration the different weightings of the
assessments.

8.4. PASSING THE MODULE

In modules which are assessed by way of continuous assessment (different assessment

opportunities throughout the semester without an examination), a student should have taken
part in all the assessment opportunities and obtain an average of 50%.

9. UPDATING OF MODULE INFORMATION AND RESOURCES

The module schedule and learning unit content, either orally or in writing, can be updated or
modified at any time by the lecturer. It is the responsibility of students enrolled in this module
to stay up to date with the schedule and curriculum. An announcement of this type can be
given in face-to-face class sessions or communicated on Blackboard. It is recommended that
students check Blackboard weekly to keep up to date with the latest developments in this
module. Any work discussed during contact sessions can be used for assessment purposes.

10. STUDENT GRADUATE ATTRIBUTES

Graduate attributes may be broadly defined as the qualities, competencies and

understandings of a graduate which a university community agrees students should develop
during their time at the institution, both for their future professions and to contribute as ordinary

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citizens. These attributes include but go beyond the disciplinary expertise or technical
knowledge that has traditionally formed the core of most university courses. They are qualities
that also prepare graduates as agents of social good and for personal development in light of
an unknown future. The eight student graduate attributes identified by the UFS that will be
developed during the course of a student’s undergraduate studies, are the following:

The 8 Graduate Attributes:

Academic competence is a graduate attribute embedded in all assessments and refers to

the knowledge, skills and attitudes that students develop through their interaction with
discipline specific content. Critical to academic competence is lifelong learning, which is an all
purposeful learning activity, undertaken on an ongoing basis with the aim of improving
knowledge, skills and competence. Lifelong learners are curios, take initiative, learn
independently, transfer knowledge, and reflect on their learning.

Academic competence for the LLB learner means that the learner has a comprehensive
and sound knowledge and understanding of the South African Constitution and basic areas or
fields of law. This relates to the body of South African law and the South African legal system,
its values and historical background. The learner can demonstrate an integrated
understanding of legal principles, concepts, theories and values, also in relation to societal
issues. The graduate has knowledge and understanding of:
(a) the dynamic nature of law and its relationship with relevant contexts such as political,
economic, commercial, social and cultural contexts;
(b) a discipline other than law and law’s relationship to other disciplines; and
(c) select areas of the law.

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Critical thinking is a habit of mind characterized by the comprehensive exploration of issues,
ideas, artifacts, and events before accepting or formulating an opinion or conclusion.

Critical thinking for the LLB learner means that the learner can demonstrate the ability to
research, analyse and evaluate information from a legal perspective. The learner is able to:
(a) recognise and reflect on the role, place and limitations of law in South African society and
beyond;
(b) analyse a text and/or scenario to find the key issues, i.e., distinguish between relevant and
irrelevant information and distinguish between legal and non-legal issues;
(c) identify and address the issues presented in a text or scenario; and
(d) make judgments on the merits of particular arguments and make and present reasoned
choices between alternative solutions.

Problem solving is the process of designing, evaluating and implementing a strategy to

answer an open-ended question or achieve a desired goal.

Problem solving for the LLB learner means that the learner is able to:
(a) find, select, organise, use, analyse, synthesise and evaluate a variety of relevant
information sources;
(b) determine the relative authority of relevant information sources;
(c) present and make a reasoned choice between alternative solutions;
(d) use techniques of legal reasoning, methodology and argumentation to reach a plausible
conclusion; and
(e) demonstrate academic integrity in research.

Communication comprises of oral as well as written communication.

Oral communication is a prepared, purposeful presentation designed to increase

knowledge, to foster understanding, оr to promote change in the listeners' attitudes, values,
beliefs or behaviours.

Written communication is the development and expression of ideas in writing. Written

communication involves learning to work in many genres and styles. It can involve working
with many different writing technologies, and mixing texts, data, and images. Written
communication abilities develop through iterative experiences across the curriculum.

Communication as an attribute of the LLB learner means that the learner is proficient in
reading, writing, comprehension and speaking and is therefore able to:

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(a) communicate effectively by choosing appropriate means of communication for a variety of
contexts;
(b) demonstrate effective oral, written, listening and non-verbal communication skills;
(c) apply communication skills to relevant situations and genres; and
(d) engage with diverse audiences.

Ethical reasoning is reasoning about right and wrong human conduct. It requires students to
be able to assess their own ethical values and the social context of problems, recognize ethical
issues in a variety of settings, think about how different ethical perspectives might be applied
to ethical dilemmas and consider the ramifications of alternative actions. Students’ ethical self-
identity evolves as they practice ethical decision-making skills and learn how to describe and
analyze positions on ethical issues.

Ethical reasoning as an attribute of the LLB learner means that the learner can solve
complex and diverse legal problems creatively, critically, ethically and innovatively.

The LLB learner has knowledge of relevant ethical considerations in law and is able to conduct
her/himself ethically and with integrity in her/his relations within the university and beyond,
with clients, the courts, other lawyers and members of the public.

Community engagement is continuous negotiated collaborations and partnerships between

the UFS and/or its members and the interest groups that it interacts with, aimed at building
and exchanging the knowledge, skills, expertise and resources required to develop and
sustain society.

Community engagement as an attribute of the LLB learner means that the learner has
skills and knowledge to understand the responsibilities of the legal professional in service to
the community. In doing so, the learner is able to recognize, reflect and apply social justice
imperatives in acknowledging the capacity, agency and accountability of the legal professional
in shaping and transforming the legal system and promote social justice.

Entrepreneurial mindset is a set of attitudes, skls and behaviours that can be applied in all
spheres of life. This mindset enables citizens to nurture their personal development, to actively
contribute to social development, to enter the job market as employee or as self-employed,
and to start-up or scale-up ventures which may have a cultural, social or commercial motive.

Entrepreneurial mindset as an attribute of the LLB learner means that the learner is able
to:

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(a) function effectively in independent and collaborative settings;
(b) Recognise opportunities, be creative and innovative, be future-orientated, comfortable
with risk-taking, take initiative, be self-reliant, flexible and adaptable.

Assessment of Graduate Attributes

Academic competence will form the foundation of all assessments throughout the LLB
programme in terms of which one or more of the other attributes will also be assessed to
establish the attainment thereof. It is a priority of the Faculty of Law of the UFS to develop all
eight of the identified student graduate attributes in all the modules presented throughout the
course. However, the assessment to establish the attainment thereof might only be performed
in specific identified modules on different levels, depending on the moment within which it falls
during the academic programme.

These assessments could form part of a student’s formative or summative assessments and
contribute towards his/her final mark for a particular module but will be designed to provide
proof of the attainment of one or more specified graduate attribute at a particular level.
Learners will be informed of the nature and purpose of these assessments and will be
encouraged to compile portfolios (or ePortfolios) in order for them to be able to:
a) reflect on their development of graduate attributes across the LLB programme;
b) provide evidence for how and where graduate attributes were developed across the
curriculum; and
c) improve their skills and marketability for potential employers, funders and work network.

_________________________________________________________________________

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 11. LEARNING UNIT GUIDE

The graduate attributes that are developed in this LLOC 2605 module and that are more specific
to the learning outcomes found in the learning units below as listed below, are problem -solving,
critical thinking and written communication skills. problem solving comes to the fore in those
learning units that require the student to apply legal principles to factual scenarios in order to
highlight the rights and obligations but more importantly the remedies applicable in order to reach
the best possible outcome for the parties; critical thinking requires of the stud ent to have a solid
understanding of the learning content and to use this knowledge and understanding of concepts
and theories to critically analyse the past and present positions; the attribute of written
communication is assessed during online assessments, however it is most relevant to the
assignment which requires the student to use their own words to articulate, contextualize and
communicate their thoughts, contractual clauses and outcomes in a clear, coherent, and
grammatically correct, and logical order.

11.1. UNIT OVERVIEW

This module consists of 19 learning units which have been divided into 4 parts, namely the
requirements of a valid contract, breach of contract, remedies and specific contracts. Part 1
includes units 1-10 and focuses on elements for a valid contract such as consensus, legality,
compliance with contractual formalities to name a few. Part 2 includes units 11 – 15 and
focuses on breaches of contracts such as malperformance by either of the parties to the
contract. Part 3 includes unit 16 and unit 17 which focuses on remedies available to the
aggrieved party(s). Part 4 includes unit 18 and unit 19 and focuses on specific contract, this is
a special contractual relationship and introduces students to the drafting or preparation of
certain common clauses found in these types of contracts to familiarise students with the
content and purpose of these clauses for both drafting of contracts and advisement on terms
and conditions found in contracts.

11.2. LEARNING OUTCOMES

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Each learning unit has specific learning outcomes that students must achieve at the
completion of each learning unit, these are as follows:

Part 1

Unit 1: Introduction to legal concepts

Learning outcomes:
After completion of this unit, the student should be able to:

1. Discuss the historical roots of the Law of Contract in South Africa.

2. Define the term “contract”
3. Define the term “obligation”
4. Classify and discuss the different types of obligations.
5. Distinguish between the terms “contract” and “obligation”
6. Identify and discuss the characteristics or terms of a contract.
7. Distinguish between the terms “void” and “voidable”
8. Analyze the Social and Constitutional values embedded within the Law of Contract.
9. List the requirements for a valid contract.

Unit 2: The Requirement of “Consensus”

Learning outcomes:
After completion of this unit, the student should be able to:

1. Explain what is meant by the “basis of a contract” and how it is formed.

2. Explain what is meant by the term “consensus”.
3. List and discuss the three theories for determining the presence of consensus.
4. Explain what is meant by the “objective approach” for determining consensus.
5. Explain what is meant by the term “mistake” and identify the solutions thereof.

Unit 3
Consensus obtained by improper means (I)

Learning outcomes:
After completion of this unit, the student should be able to:

1. Discuss the background of consensus obtained by improper means.

2. Explain the term “misrepresentation” in detail.
3. List and discuss in detail the elements of misrepresentation.
4. Identify and discuss in detail the two different types of misrepresentation.

Unit 3 (Continued)
Consensus obtained by improper means (II)

Learning outcomes:

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After completion of this unit, the student should be able to:

1. Explain what is meant by the term “duress”.

2. List the elements of duress as established in the case of Broodryk v Smuts.
3. Name and discuss the elements of duress.
4. Explain what is meant by the term “undue influence”.
5. Discuss the case of Preller v Jordaan with specific reference to how the elements of
undue influence were derived from the case.
6. Name and discuss the elements of undue influence.
7. Name and discuss the remedies available to a claimant in terms of duress and undue
influence.

Unit 4
Offer and Acceptance

Learning outcomes:
After completion of this unit, the student should be able to:

1. Explain where the terms “offer” and “acceptance” are derived from.
2. Discuss the term “offer” with specific reference to the following:
2.1.Elements of a valid offer.
2.2.Legal consequences of an offer.
2.3.Lapse of an offer.
3. Discuss the term “acceptance” with specific reference to the case of Steyn v LSA
Motors.

Unit 5
Contracts Inter Absentes

Learning outcomes:
After completion of this unit, the student should be able to:

1. Explain in detail, with the aid of relevant case law, what the so-called “information
theory” with regard to determining where and when a contract comes into existence
entails.

2. Shortly explain how Van Huyssteen et al deal with certain departures from the
information theory in South African Law.

3. Explain what is meant by the “dispatch” or “expedition” theory. Critically evaluate

the appropriateness of this theory in South African Law.

4. Shortly discuss the declaration theory for determining the time and place when and
where a contract comes into existence.

5. Discuss the acceptance theory for determining consensus with specific reference to
Christie’s contribution to this topic as well as Section 23 of the Electronic
Communications and Transactions Act 25 of 2002.

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 Unit 6
Pacta de Contrahendo

Learning outcomes:
After completion of this unit, the student should be able to:

1. Explain what is meant by the term “pactum de contrahendo” and distinguish this
terms from other forms of preliminary contracts.
2. Discuss the legal nature of the option contract.
3. List and discuss the requirements for an option contract.
4. Briefly discuss the breach of an option contract and the remedies available to a party
who has suffered as a consequence of breach.
5. List examples of contracts of preference.
6. Briefly explain what is meant by the term “right of pre-emption”.
7. Discuss the requirements for a right of preference.
8. Distinguish between options and preference contracts.

Unit 7
Formalities

Learning outcomes:
After completion of this unit, the student should be able to:

1. Analyze and discuss the background and current position regarding the compliance
with formalities as a requirement for a valid contract.

2. Provide a critical discussion of the legal position regarding formalities imposed by the
parties themselves to a contract.

3. Analyze the position regarding non-variation clauses in South African law from the
Shifren-decision in 1964 to the Cecil Nurse-decision in 2008.

4. Provide a critical discussion of the legal position regarding formalities imposed by

law and statute.

5. Explain the position regarding non-compliance with formalities.

6. Analyze and critically evaluate the position and presence of the ‘parol evidence’- rule
in South African law, with specific reference to case law.

7. Analyze and critically discuss the position regarding rectification in South African
law.

Unit 8
Possibility of Performance

Learning outcomes:

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After completion of this unit, the student should be able to:

1. Provide a brief background as to the position of possibility of performance as a

requirement of a valid contract in South African law.

2. Fully distinguish between the terms Subjective (relative) impossibility and objective
(absolute) impossibility, with specific reference to the case of Blou Bul
Boorkontrakteurs v McLachlan and South African Forestry Co Ltd v York Timbers
Ltd.

3. Shortly discuss the effect of impossibility of performance on a contract.

Unit 9
Legality

Learning outcomes:
After completion of this unit, the student should be able to:

1. Explain what is meant by the concept “illegality”.

2. Briefly explain how concepts such as “public interest” and “good morals” determine
the legality or illegality of agreements.
3. Describe in detail how illegality is determined, with specific reference to the case of
Sasfin v Beukes.
4. Analyze the par delictum rule as an element of the consequences of illegality.
5. Explain what is meant by agreements “in restraint of trade”.
6. Discuss the case of Magna Alloys v Ellis, with specific reference to the way in which
South African courts have dealt with restraint of trade clauses in the past, and how
this case has changed the position.
7. Interpret the term “public interest” in the context of the legality/illegality of restraint
of trade-clauses in contracts.
Unit 10
Certainty

Learning outcomes:
After completion of this unit, the student should be able to:

1. Explain what the requirement of certainty entails in terms of the validity of a contract.
2. Discuss the consequences of uncertainty.

Part 2
Unit 11
Mora Debitoris
Negative malperformance by the Debtor

Learning outcomes:
After completion of this unit, the student should be able to:

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 1. Provide a critical introduction to the nature of breach of contract, and also shortly
mention the forms and divisions of breach of contract and what they entail.
2. Discuss the nature and forms of mora debitoris.
3. List and critically discuss the requirements for mora debitoris.
4. Distinguish between the terms mora ex re and mora ex persona.
5. Distinguish between mora debitoris and other forms of breach of contract in general.
6. Analyze the aspect of cancellation on the ground of mora debitoris with specific
reference to the case of Kragga Kamma Estates CC v Flanagan 1995 (2) SA 367 (A).

Unit 12
Positive Malperformance

Learning outcomes:
After completion of this unit, the student should be able to:

1. Analyze and discuss the nature and forms of positive malperformance.

2. List and critically discuss each of the requirements for positive malperformance.
3. Distinguish between positive malperformance and other forms of breach of contract.
4. Discuss the special consequences of positive malperformance.
5. Discuss the possibility of cancellation of a contract on the ground of positive
malperformance.

Unit 13
Repudiation

Learning outcomes:
After completion of this unit, the student should be able to:

1. Analyse the origin and nature of repudiation. The analysis should include a discussion
of the historical nature of repudiation as well as the change brought about by the case
of Tuckers Land and Development v Hovis and any opposition towards this “new
approach” to repudiation.
2. List and discuss the requirements for repudiation with reference to the case of
Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA).
3. Distinguish between repudiation and other forms of breach of contract in general.
4. Discuss the specific consequences of repudiation.
5. Discuss cancellation on the grounds of repudiation.

Unit 14
Prevention of Performance

Learning outcomes:
After completion of this unit, the student should be able to:

1. Explain the nature of prevention of performance, with specific reference to the

distinction between absolute and relative prevention of performance.
2. List and discuss the requirements for prevention of performance.
3. Distinguish between prevention of performance and other forms of breach of contract
generally.

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 4. Discuss the specific consequences of prevention of performance.
5. Discuss cancellation on the grounds of prevention of performance.

Unit 15
Mora Creditoris
Negative Malperformance by the Creditor

Learning outcomes:
After completion of this unit, the student should be able to:

1. Shortly discuss the nature of mora creditoris.

2. List and shortly discuss the requirements for mora creditoris.
3. Distinguish between mora creditoris and other forms of breach of contract in general.
4. Critically evaluate and discuss the special consequences of mora creditoris.

Part 3 Remedies
Unit 16
The Principle of Reciprocity

Learning outcomes:
After completion of this unit, the student should be able to:

1. Critically discuss the nature of the principle of reciprocity and the exceptio non
adimpleti contractus as applied in the case of BK Tooling (Edms) Bpk v Scope Precision
Engineering (Edms) Bpk 1979 (1) SA 391 (A)
2. List and discuss the requirements for the application of the principle of reciprocity.
3. Discuss the attributes of the right to withhold performance.
4. Analyze the notion of relaxing the principle of reciprocity.

Unit 17
Specific Performance, Cancellation and Damages

Learning outcomes:
After completion of this unit, the student should be able to:

1. Identify, analyze and critically discuss the remedy of specific performance.

2. Identify, analyze and critically discuss the remedy of cancellation.
3. Analyze and discuss the claim for damages and what it entails, with specific reference
to the case of Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3)
SA 670 (A).

Part 4 Specific contracts

Unit 18
Lease contracts

Learning outcomes:

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After completion of this unit, the student should be able to:
1. Provide the different sources of the law of lease.
2. Define a contract of lease.
3. Identify the essential elements of a contract of lease.
4. Identify and explain the rights and obligations of the lessor/landlord.
5. Identify and explain the rights and obligations of the lessee/tenant.
6. Explain cession, subletting, delegation and assignment.

Unit 19
Draft and advise on contract terms and conditions

Learning outcomes:
After completion of this unit, the student should be able to:

1. Prepare clauses commonly found in lease contracts the information for which shall be
provided in a set of facts.
2. Advise a client in consultation of their lease contract of their legal rights and obligations,
the information for which shall be provided in a set of facts.

11.3. UNIT-SPECIFIC STUDY MATERIAL

Each learning unit consists of specific preparation material and content material that will assist
each student in understanding the key concepts of this unit. It is the responsibility of each
student to ensure that he/she familiarises him/herself with unit-specific study material.

11.3.1. PREPARATION MATERIAL

Students must prepare by studying and engaging with the relevant lecture slides, content in
the study guide, audio videos, prescribed textbook, readings and case law as directed to in
lectures and on blackboard.

11.3.2. CONTENT MATERIAL

The following material needs to be studied in this learning unit:

LEARNING UNIT 1 STUDY:

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 1. Van Huyssteen et al.
2020. Contract. General Principles. Sixth Edition. Chapter 1.

2. From List of cases:

Afrox Healthcare v Strydom 2002 (6) SA 21 (SCA) and

Brisley v Drotsky 2002 (4) SA 1 (SCA)

Barkhuizen v Napier 2007 (5) SA 323 (CC)

Beadica 231 CC and Others v Trustees Oregan Trust [2020] ZACC 13

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 1.

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 1.

1. Historical introduction

According to Christie, “the law of contract is of fundamental importance in the modern world,
because it is woven into and inseparable from every form of economic activity.” Because of
this fact, international business relations are governed to a large extent by the principles of
the law of contract. The Roman-Dutch law adopted the principle of treating each and every
agreement made seriously and deliberately as a contract, obviously influenced by the canon
law (specifically the ius gentium, or law of mankind), and by a notion that the honouring of
promises was inherent in peoples of Germanic origin. Grotius in the 17th century exclaimed
that the rule stipulatio = pactum = contract and the Roman distinctions between these
concepts no longer existed.

The term “contract”

No two definitions of a contract are the same. However, the following definitions by different
writers will indicate that certain elements are ever-present.

Note to student: It is expected that you familiarize yourself with all the definitions of a
contract provided herein. In any question in a test or exam, you will be required to provide all
the different definitions provided below, except where indicated otherwise.

Van Huyssteen et al define a contract as follows:

“A contract is a promise to fulfill an obligation.”

“A contract is an “obligationary agreement”

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 “An agreement will be a contract only if the parties intend to create an obligation or
obligations…”

Not all agreements constitute contracts. The difference is that a contract is a “legal fact”, in
other words something which has its basis in empirical reality and has legal consequences.

Hutchison et al:

“An agreement entered into by two or more persons with the intention of creating a
legal obligation or obligations”

Christie, another South African writer, defines a contract as follows:

“An agreement (arising from either true or quasi-mutual assent) which is, or is intended to be,
enforceable at law.”

Kerr provides a somewhat complex definition, or rather explanation of what a contract

entails:

“In contract the legal bond, the iuris vinculum, is formed by the parties themselves (or their
agents), and, within the limits laid down by law, the nature of the obligations is determinable
by them. In some cases their agreement is actual (meaning both parties understand and
concur in all the provisions of a simple sale of goods), in others apparent (meaning one of the
parties, being in a position to understand what is written on a form containing the proposed
provisions of a contract, but without coming to any agreement, signs the form without
bothering to read it), and in yet others partly actual and partly apparent”.

1. The term “obligation”

Hutchison et al explain the concept of an “obligation” as follows:

“It refers to a legal bond (vinculum iuris) which binds together two legal subjects. The relation
entails (on the one hand) a right to performance (this right belongs to the creditor), and (on the
other hand) a duty to render the performance (which rests on the debtor). The nature of the
performance is related to the delivery of a thing (dare) or the doing of something (facere) or
the refraining from doing something (non facere).
The creditor’s right is called a personal right, because the subject-matter or object of the right
is a performance by another person. This right is also called a “claim” The debtor’s duty to
perform is sometimes called a “debt”. An obligation, then, entails both a right and a duty.

Bhana et al add hereto the following:

A legal obligation is a legal tie or relationship (vinculum iuris) between two people which
means that one party has a duty to give a certain performance, while the other party has a
corresponding right to receive the performance. Every obligation therefore involves one right
and one duty.

One can see from these definitions that there are always at least two parties to an obligation.
As already touched on above, the party who has the duty to deliver the performance is called

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the debtor, while the party who has the right to receive the performance is called the
creditor. It is important to remember that obligations do not arise from contracts only, but
may also arise from delicts and something like unjustified enrichment, which are not dealt
with in detail in this module.

2. Different types of obligations

2.1.Natural obligations (obligationes naturales):

Those obligations that cannot be enforced in a court of law, such as the unassisted contract
of a minor.

2.2.Civil obligations (obligationes civiles):

Those obligations that may be enforced by a court of law, such as obligations arising from
a contract of service or a contract of sale.

3. The difference between “contract” and “obligation”

“Obligations” may simply be described as the consequences of a “contract”.

In order to conclude that a contract has come into existence, one has to rely on certain
historical facts. No subsequent events can change these historical facts. At most, its legal
consequence, the obligation, can be terminated by fulfillment, release or cancellation. The
existence or operation of an obligation may depend on a supposition, a condition or a
modus, whereas the contract itself is not made to depend on such qualifying terms.
Contracts are thus clearly distinguishable from their consequences, namely obligations. A
term such as “breach of contract” is actually erroneously applied, as breach in fact refers
to the obligation, rather than the contract.

4. Identifiable characteristics of the contract:

According to Bhana et al, obligations created by a contract are determined by the terms of
the contract. These terms can be divided into three sub-classes:

4.1.Essentialia: Those elements that identify and differentiate the contract from other types of
contract.

Example: In a contract of sale, the essentialia will be the price and the thing that is
sold.
If the essentialia for a particular type of contract are not present, the contract will still
be valid, but it won’t be that specific type of contract anymore.

4.2.Incidentalia: Clauses that make provision for residual matters for which the parties wish
to make special provision or to alter or exclude the naturalia.

Example: The parties to a contract of sale can include a clause that the thing is sold
“voetstoots” or “as is”. This means that the seller does not give a warranty against latent

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 defects in the thing sold. In other words, the parties exclude this naturalia of the
contract of sale.

4.3.Naturalia: The legal principles of the law of contract that will apply to the contract in the
absence of clauses to that effect in the contract itself. These are the terms automatically
attached by law to a specific type of contract without them having to be inserted by the
parties.

Example: One of the naturalia of a contract of sale is a warranty against latent defects,
meaning that the buyer will be able to cancel the contract or claim a price reduction if the thing
sold has a latent (hidden) defect. This term will automatically form part of the contract of sale,
even if the parties do not specifically agree thereon.

5. Void or voidable?

A contract is void ab initio (from the beginning) and has no legal effect whatsoever if the
constituent requirements are absent.

A contract is valid but may be declared void if an applicant proves successfully that certain
factors influenced his/her mind to enter into a contract, e.g. duress, misrepresentation or undue
influence.

6. Principles and policies of the Law of Contract: Social and Constitutional Values

The view that a contract is constituted by agreement signifies the recognition of individual
autonomy as a philosophical premise. Freedom of contract means that an individual is free to
decide whether, with whom, and on what terms to contract.

The principle of consensuality (“consensus”) requires concurrence of at least two such

decisions for a valid contract. However, autonomy also entails that the decision-maker must
accept responsibility for his/her considered actions. The principle of pacta sunt servanda, in
turn, requires exact enforcement of contractual obligations created in circumstances which are
consistent with freedom of contract and consensuality. (This doctrine entails the freedom to
enter into a contract. Former Justice of Appeal JJ Hefer, who is also an extraordinary professor
of law at the Department of Private Law at the University of the Free State, mentions that the
pacta sunt servanda-principle is probably the most important foundation of the South African
law of contract. However, it is inevitable that this principle sometimes results in situations
where contractants are bound by agreements which may be to their detriment. In the case of SA
Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere Steyn JA held that parties to a
contract were bound by a stipulation in their contract that no variation in the specific contract
should be of force or effect unless it was in writing. In this case, two parties entered into a lease
contract, which contained a so-called “non-variation”- clause, which stipulated that no
variation to the contract would be valid if not in writing. The lessee wanted to sub-let the
property in question, and got the oral permission from the lessor to do so. The lessor decided
to cancel the contract on the grounds that the “non-variation”-clause was not complied with.
The court decided that the oral permission was insufficient.

This may sound like “hard law”, especially since the decision was reached in 1964, about thirty
years before the new constitution, which was initially known as Act 108 of 1996. However, it
is interesting to note that the Shifren-decision was upheld in the case of Brisley v Drotsky.

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The fact that an obligation is recognized by law, and receives its effect through the agencies of
the state, implies that contracting parties, when exercising their private autonomy, are subject
to the values of society. The very principles of morality or socio-economic expediency may in
particular circumstances require that less weight be attached to the ideals of individual
autonomy and freedom of action. The rules of the law of contract reflect the attempts in the
legal system to achieve a balance between relevant principles and policies so as to satisfy
prevailing perceptions of justice and fairness, as well as economic, commercial and social
expediency. For the abovementioned reason, the law of contract has a dynamic and ever-
changing nature (Van Zyl, J in Janse van Rensburg v Grieve Trust 2000 (1) SA 315 (C) on
323-324). Chapter 2 of the constitution has specific implications for the abovementioned
position: The basic rights of the constitution are a concrete expression of principles, policies
and values which prevail in South African society. Many of the rights awarded to the individual
in Chapter 2 of the constitution, are also inherent to the law of contract: freedom to contract,
private autonomy, public policy and interest, the boni mores, bona fides, reasonableness and
fairness, and equality. Because of the fact that the constitution is the supreme law of the
country, and the Bill of Rights is the most recent expression of the values upheld in South
African society, precedent set by appeal courts after the constitution came into effect has been
said to bind lower courts.

7. Requirements for a valid contract

Over the next few lectures, we are going to look at the requirements for a valid contract. There
are six of them, each of which will be discussed in detail. They are the following:

9.1 Consensus
9.2 Formalities
9.3 Possibility of Performance
9.4 Legality
9.5 Certainty
9.6 Capacitated parties

LEARNING UNIT 2 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 2.

2. From List of cases:

Trollip v Jordaan 1960 1 PH A 25 T

Spindrifter v Lester Donovan 1986 1 SA 303

Du Toit v Atkinson Motors 1985 2 SA 893

Allen v Sixteen Sterling Investments 1974 4 SA 174

De Jager v Grunder 1964 1 SA 446 AD.

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 Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA 234.

Slip Knot Investments 777 (Pty) Ltd v Du Toit 2011 (4) SA 72 (SCA).

Nyandeni Local Municipality v Hlazo 2010 (4) SA 261 (ECM).

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 1, pp. 14-21.

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. pp. 22-24

1. The Basis of a contract

The basis of a contract is either consensus, which means an actual meeting of the minds
of the contracting parties, or the reasonable belief by one of the contractants that there
is consensus. Roman jurists did not accept that each and every simple agreement (nudum
pactum) was a legally binding agreement (contractus) to the extent that it created an
obligation in law. For an agreement to be a binding one they usually required the
presence of a special reason for the creation of an obligation (causa obligationis). In
Roman times, verbal contracts were only binding if expressed in very specific words.
Some agreements were binding only if accompanied by the delivery of a thing
(contractus re), whereas another type of agreement was binding if an entry of (fictitious)
payment had been made in the creditor’s account book (contractus litteris). Some
agreements, however, were legally binding although they were not accompanied by
special causae obligationum. These were the consensual contracts (contracts ex
consensus) which were binding simply because the parties to the agreement concurred
on the essential parts of their pact. Contractus ex consensus played a vital role in
economic discourse as they reflected some of the most common economic transactions,
such as sale, lease and employment.

Roman jurists accepted the fact that a meeting of will or intentions could be the basis of
a binding contract, although they did not elevate consensus to the general basis of all
contracts.

Germanic law did not even recognise consensus to the extent to which it was accepted
in Roman law. The Germanic conception of a binding agreement seems to have required
either some final cause or completed performance. In the course of time, though, the
binding force of consensus as a general value in what was regarded as proper conduct
came to be accepted as part of the philosophy of natural law, and the doctrines of the

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 Catholic Church. Adherence to agreements because one had consented to them acquired
a moral or religious connotation inasmuch as it was regarded as improper or sinful not
to abide by one’s word. For reasons both moral and economic, medieval merchants also
accepted consensuality as a basis for adhering to their agreements. Thus consensuality
became a part not only of moral philosophy and canon law, but also of the lex mercatoria
or law merchant, the law that was internationally accepted by merchants and traders.

The outcome of this was the acceptance of the maxim pacta servanda sunt as one of the
guiding principles of the law of contract, particularly in view of the reception of Roman
law into the systems of law which obtained in Western Europe. On the one hand, the
emphasis fell on pacta, in other words that mere agreements could be binding without
recourse to form. On the other hand, the words servanda sunt indicated that it was
imperative to honour simple agreements.

By the seventeenth century, the scene was set for the acceptance in the law of Holland
of the principle that mere consensus was legally binding.

2. The Term “Consensus”

Consensus refers to the so-called meeting of the minds of contractants, and can be said
to be the basis of a contract. A contract comes into existence of the parties are agreed
(ad idem) on creating between themselves an obligation (or several obligations) as well
as on all its particulars, such as its content and subsidiary features.

If A wants to sell his car to B, a contract will arise only if they both agree on
the object which A must deliver (the particular car) and the price which B must
pay in return, as well as on subsidiary matters pertaining to the obligations and
which the parties regard as important (such as the fact that B must get a loan from
a recognised financial institution).

Reasons for binding parties in terms of a contract include the following:

- Intention of the contractants;

- Legal certainty;
- Good faith;
- Protection of reasonable expectations;
- Creation of undue risks.

The general theory that has developed for determining consensus is called the Will
Theory.

A contracting party’s “will” is formed by the following:

Motives:

(a) Own motive: Plays no role in the question of whether consensus exists or not. The
other party is innocent, and did not influence you in entering into the contract.

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 (b) False establishment of a motive: Plays a role in the question of whether consensus
exists- it leads to the voidability of a contract. False information moved you to enter
into the contract: Misrepresentation.

(c) Motive still unknown: The other parties have no knowledge of your motive to enter
into contract. This may lead to a situation where two parties have totally different
motives at the signing of the contract. The argument exists that in this instance, no
consensus exists.

Decision:

(a) Decisions are reached after having established your motive.

(b) A “legal will” requires the parties to reach consensus on all aspects of the contract.

(c) The other party still carries no knowledge of the motive and/or decision, because it
hasn’t been conveyed yet.

Declaration of will:

(a) Known as “offer and acceptance”- declarations. See Unit 4.

3. The three theories for the determining of consensus

It has already been mentioned that the Will Theory developed for the determining of
whether consensus is indeed present at an agreement, and subsequently whether a valid
contract exists. However, because of critique against the Will Theory, two other theories
for the determining of consensus have developed, namely the Declaration Theory and
the Reliance Theory.

3.1.The Will Theory

According to the “will theory”, consensus is found in the so-called “meeting of the
minds”, or consensus animorum animo contrahendi.

The elements of consensus are as follows:

 Contractants must be agreed on the consequences they wish to create.

 They must intend to bind themselves legally.
 They must be aware of their agreement.

Advantages of the will theory: !NB!

 In a society which accepts the free expression of individual will and the personal autonomy
of each individual as primary values, the will theory has the obvious advantage that it can
be expressed in terms of principles which are fundamental to the society.

 The theory has strong historic roots in the Roman-Dutch Law.

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 The theory functions satisfactorily as an explanation for contractual liability where the
parties are in actual agreement.

 It also functions satisfactorily in the case of absence of liability where they disagree on
some fundamental aspect of their intended contract.

Critique against the will theory: ! NB !

 The theory experiences problems with explaining misrepresentation and error.

 It fails to explain the doctrine of representation satisfactorily.
 It fails to explain the doctrine of reservatio mentalis.
 This theory differs from case law in instances concerning the moment of reaching of
consensus in contracts concluded inter absentes.
 It is difficult to prove in court.
 The theory follows a subjective approach.

The Will Theory was preferred in the following cases: ! NB !

Swart v Vosloo 1965 1 SA 100 AD op 104H:

A lease is a mutual contract flowing from agreement of the minds of the parties, a
concursus animorum animo contrahendi.
Jonnes v Anglo African Shipping:

The general rule is that the court should determine what the true intention of the parties
was.

Maize Board v J Jackson:

As a general rule parties to a contract intend it to be exactly what it purports to be. Not
infrequently, however, they may endeavour to conceal its true character. In such a case,
when called upon, a court must give effect to what a transaction really is and not what
in form it purports to be. (Ponnan, J on 2[1])

PW Michau v The Maize Board:

He conceded, however, that he had no idea of the price of day-old chickens or poultry
and that, although in terms of his agreement with Rainbow the price at which the
chickens were sold would be decisive as to whether there was a profit or not, the price
of chickens was to no importance to him at the time. He said he simply placed his faith
in Rainbow to give him an added value on his maize.

Although the abovementioned four cases need not be studied in detail,

students must have a thorough understanding of what the courts said in
each case.

3.2.The Declaration Theory

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 According to the declaration theory consensus is to be found in the objective co-inciding
declarations of the contractants. Van Huyssteen et al state the following: According to the
declaration theory contractants are bound to their contract not on the basis of their subjective,
co-inciding intentions but on the basis of their objective, coinciding declarations of will. This
theory only takes into account a party’s declaration of will, and not its intentions.

Advantages of this theory: ! NB !

Wessels, J stated the following in the case of South African Railways & Harbours v National
Bank of South Africa Ltd 1924 AD 704 op 715-716:

The Law does not concern itself with the working of the minds of parties to a contract, but with
the external manifestation of their minds. Even therefore if from a philosophical standpoint the
minds of the parties do not meet, yet, if by their acts their minds seem to have met, the law will,
where fraud is not alleged, look to their acts and assume that their minds did meet and that
they contracted in accordance of what the parties purport to accept as a record of their
agreement. This is the only practical way in which courts of law can determine the terms of a
contract.

Critique against the abovementioned theory: ! NB !

 It is of a subjective nature.
 It causes problems with simulated acts.
 Contracts are forced upon parties containing clauses that they did not want.
 With the doctrine of representation the following question arises: Whose declaration should
enjoy preference: The principle’s or the representative’s.
 In cases of contracts inter absentes, the problem arises that as soon as the declaration of
acceptance has been made, the offeror is bound, although he/she is not even aware of the
acceptance.

The following case must be studied in detail from the case list: ! NB !

Trollip v Jordaan 1960 1 PH A 25 T

Courts of law can only judge from external facts whether this has or has not occurred. In
practice therefore it is the manifestation of their wills and not the unexpressed will which
is of importance.

The following case need not be studied in detail, but students should take note of the
following excerpt:

Union Government v Smith:

…we must take the grammatical and ordinary sense of the words used in order to ascertain
what the parties meant, even though we may doubt whether this was the intention of the

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 parties at the making of the contract. It is our first duty to see what the parties intended by
the language used.

3.3.The Reliance Theory

The reliance theory determines that consensus is established in the bona fides of the inter
partes-relationship. This bona fides and the consequential reliance on the information provided
by the other contractant must be protected.

Van Huyssteen et al states that this theory determines that a contract is based on the intention
of one party to the contract and the reasonable reliance on his/her side that the other party has
the same intention. The reliance theory is seen as supplementary to the will theory: If the two
parties have corresponding intentions, consensus is present and it is not a prerequisite to
determine whether one of the parties had a specific idea of the intention of the other party. If
one of the parties erred regarding the intention of the other party, and for that reason there’s no
consensus, the reliance theory states that if one of the parties relied on the idea that consensus
was present, a contract was created.

Thus, a contract is created where actual consensus exists, or where the intention of one of the
parties to an agreement reasonably relied on the intention of the other party.
In the first instance, the contract is based on actual consensus, and in the second instance it is
based on the reliance that consensus exists.

Critique against the reliance theory: ! NB !

 It has a subjective nature.

 Extrinsic evidence must be used to determine the reliance.
 It is expected from a party who possesses more knowledge to make available all
information to the other party regarding the fine print.

The following two cases must be studied as authority from the case list ! NB !

Spindrifter v Lester Donovan 1986 1 SA 303

Du Toit v Atkinson Motors 1985 2 SA 893

4. The Objective Approach to determining Consensus

The objective approach to the determination of consensus stems from the shortcomings of
previous three theories. Consensus is attached to a party or both parties, after consideration of
all relevant and proven evidence before the court. By following an objective approach, a
court will look at all evidence regarding inner intention, the outer version thereof and any
reliance on the behaviour of the other party. The effect of the objective approach is the
merging of the previous three theories. One isn’t applied at the cost of the other. This
approach provides solutions for the determination of consensus at the doctrine of
representation and contracts inter absentes.

The following case must be studied as authority from the case list

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Allen v Sixteen Sterling Investments 1974 4 SA 174

I accept that our law follows a generally objective approach to the creation of contracts.

The following case need not be studied in detail, but students should take note of the
following excerpt:

Springvale v Edwards 1969 1 SA 464:

…that the test to be applied in deciding whether consensus exists, is an objective one, is
firmly established in both South Africa and Rhodesia.

5. Mistake (Error)

The German jurist Von Savigny distinguishes between 2 types of mistake:

a. MATERIAL MISTAKE:

Mistake is already present at the declaration of will.

The parties are not on the same wavelength- one refers to lease and the other to buying.
Dissensus exists from the beginning, and no contract is created.

b. ERROR IN MOTIVE:

In this instance, consensus exists with the declaration of will, but the error exists in the
motive.

There are two types of error in motive:

i. Unilateral mistake:

- The contracting party is the cause of his own mistake.

- There is consensus at the declaration of will and a contract comes into existence.

The following cases must be studied as authority from the case list:

Spindrifter v Lester Donovan 1986 1 SA 303

Du Toit v Atkinson Motors 1985 2 SA 893

ii. Misrepresentation or mistake caused by the other party:

- The contracting party is misled by the other contracting party as far as his motive
is concerned, and because of this he is led to make a declaration of will.

-The misrepresentation can be intentional, negligent or innocent.

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 The following case must be studied as authority from the case list:

De Jager v Grunder 1964 1 SA 446 AD.

SOLUTIONS TO THE PROBLEM OF MISTAKE:

 The iustus error-doctrine:

-This doctrine implicates that someone who mistook some element of a contract,
may withdraw from such contract if he/she can prove that the mistake was made
innocently, bona fide and reasonable.

- Maritz v Pratley.

 The Estoppel-doctrine:

-The guilty misrepresentor is bound by/held liable for his misrepresentation.

c. Some interpretory-rules:

- The contra preferentum-rule: Determines that a clause in a contract must be

interpreted keeping in mind who the author of such clause is.

- The parole-evidence rule: Determines that the written documents are the only
source of the contract’s contents. No extrinsic evidence is allowed.

LEARNING UNIT 3 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 4.

2. From List of cases:

Preller v Jordaan 1956 1 SA 483 (A).

Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A).

Phame v Paizes 1973 (3) SA 397 (A).

Labuschagne Broers v Spring Farms 1976 2 SA 828 T

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 4.

Bradfield

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 Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 7.

Kerr.
The Principles of the Law of Contract. Fourth Edition. Chapter 11

1. Introduction

The requirement of an actual or apparent meeting of the minds of contractants as the

basis of a contract means that the intention or will of the parties is a central pivot in the
juristic act concerned. The expression of such a will may be influenced by any number
of factors: Fear, economic necessity, influence by someone in whom he places great
trust, or simply because he desires to change his economic and social situation. The law
does not does not take cognisance of each and every factor which influences an
expression of will. It is in keeping with the values protected by the constitution and
with good faith, and in the public interest, that serious expression of intent must be
adhered to and given their intended legal consequences. Some factors accept that a
contractant is allowed to undo the consequences of the agreement because it was
‘defective’ in the sense that it was not conceived in the free and unfettered manner
regarded by the law as necessary for the expression of a contractant’s individual
autonomy. In such circumstances the law may regard a ‘will’ as so ‘defective’ as to not
have any legal relevance at all. No juristic act would then result. This is not the state of
our modern law, however: The law has rather opted for an approach that under the
above circumstances actual agreement will ensue, but may sometimes be voided at the
behest of the contractant whose will has become ‘defective’. Where consent has been
obtained improperly, the injured party may rescind the contract and may often claim a
financial award. The exact content of the remedies is applicable to the juridical nature
of the act whereby consent is received as contractual misconduct or a delict.
Traditionally, the law approached the matter of voidability on the assumption that one
of two specific grounds for rescission must be proved, namely misrepresentation or
duress. The courts eventually also accepted a third ground for rescission called undue
influence, which intitially received a fair amount of criticism, especially in the case of
Preller v Jordaan 1956 1 SA 483 (A). In this case, which must be studied in detail for
the purposes of this module, the argument in the court a quo was that undue influence
was an English legal principle which had no peer in Roman-Dutch Law, and did not
constitute any ground for the remedy of restitutio in integrum. The general
consideration which underlies the voidability of a contract is the fact that consensus has
been obtained in a manner which, in the eyes of the law, is improper.

One has to of course consider exactly what is meant by the term “improper”. There is
no definite or watertight division between the three grounds for rescission of a contract,
and particularly between duress and undue influence. In the case of Savvides v Savvides
the applicant requested that a power of attorney which she had executed in favour of
her husband be rescinded on the ground of what she called “duress”: her husband had
threatened to leave the matrimonial home permanently. According to the court, the
threat in question might has well have constituted undue influence, since duress and
undue influence may sometimes overlap. In the case of Malilang v MV Houda Pearl, a
party to a contract of employment wished to rescind the contract on the ground of

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 “economic duress” in the sense of commercial pressure, inasmuch as it had been
threatened with the “blacking” of its ship unless it entered into a contract. The court
once again pointed to the analogy between duress and undue influence. The viewpoint
has in fact been advanced that undue influence is part of a wider concept in Roman-
Dutch law, allowing redress to a contractant whose circumstances have been abused by
the other party.

In the case of Plaaslike Boeredienste (Edms) Bpk v Chemfos Bpk, the appellate division
actually went beyond the existing three grounds for rescission. The court in this case
held that where a contractant had bribed the agent of his co-contractant to persuade the
latter to contract, the principal was entitled to rescind the contract. Although the term
“fraud” was advanced as the relevant ground for rescission, the court found that the act
of persuasion through bribery did not constitute fraud as such but did amount to an
improper means of obtaining consensus. This approached raised the distinct possibility
that the traditional specific grounds for rescission might be subsumed under one general
principle to the extent that there would be but a single ground for rescission due to a
prior “defective” will, namely improper obtaining of consensus.

In the case of Extel Industrial (Pty) Ltd v Crown Mills (Pty) Ltd, the appeal court held
that “commercial bribery” was a ground for rescinding the contract, but accepted that
such bribery and other specific grounds for rescission can be classified dogmatically as
allowing avoidance of a contract because consensus, though real, was improperly
procured.

Although a few cases have been mentioned above, students only need to study
the case of Preller v Jordaan in detail. A thorough understanding of how the other
cases fit into the discussion is essential, however.

2. Misrepresentation

2.1. Introduction

The decision of a prospective contractant to conclude a contract is often brought about

by a false representation by or on behalf of the other party to the negotiations. The
misled party is said to labour under a mistake. If such mistake is material, no consensus
and subsequently no contract arises. However, a representation frequently causes an
error in motive. Although not material, and therefore not excluding consensus, such an
error does affect the quality of the consensus.

A is the registered owner of a farm. B wants to buy the farm registered in A’s
name. A points out the farm to B in such a manner as to create the false impression
that the farm includes certain afforested land. B purchases the farm in this belief.
He signs a deed of sale in which the farm is described in terms of the seller’s title
deed. B’s decision to purchase was influenced by an error in his motive, inasmuch
as he wrongly believed that the land which was pointed out to him (and which he
believed to include the afforested portion) which was the land described A’s title
deed. If B can prove that his consent was obtained improperly, because it was

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 given as the result of an actionable misrepresentation by A, he is entitled to relief
by way of rescission or a financial award, depending on the circumstances.

2.2.Representation and contractual terms

A representation that occurs during precontractual negotiations can be made a part of

the consensus between the parties and as such becomes a term of the ensuing contract.
An example would be if the representation is warranted to be true. In the
abovementioned example, the parties may have intended that A was binding herself
absolutely by the representation that the land which was being sold included the
afforested portion- a warranty being a special contractual term which requires strict
adherence from the contractant who gives the warranty. Should the representation turn
out to be false, the contract will have been breached and the normal consequences of
breach of contract by way of breach of warranty will follow. Whether a representation
amounts to a contractual term or whether it merely causes an error in motive without
becoming a part of the contract must be decided according to the intention of the parties.

2.3.Elements of misrepresentaion i.e Outcome 3

2.3.1. Act or conduct:

The act must be a representation made by the contractant or by someone for whose
acts he can be held liable, such as an employee acting within the scope of his
employment or someone who is executing a mandate. A misrepresentation by a
third party which misleads one of the contractants cannot be the basis of a claim
against the other contractant. The party who has been misled must then have
recourse against the third party.

A representation is any conduct which creates a particular impression on the mind

of the other contractant. The conduct may be a commission (positive act) or an
omission (refraining from committing a positive act). A representation by
commission may be made in words (orally or in writing) or by conduct alone.

For example, a declaration that a wrist-watch is made of solid gold is a

representation, but so is the act of displaying the watch amongst objects of solid
gold.

Also, fencing off two sections of land as a single unit amounts to a

representation that they are indeed one entity.

A representation by omission usually occurs when someone omits to disclose

information within his knowledge or refrains from removing a wrong
impression which to his knowledge exists in the mind of the other contractant.
Such an omission will only be actionable if it is wrongful (wrongfulness is a
separate element of misrepresentation discussed below), and this depends on
whether there was a duty to act positively. The representation must be false or
at least inaccurate. Consequently, a representation which is correct and accurate

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 can never found liability for misrepresentation. A representation which is not
wholly false may nevertheless be so incomplete or only partially true as to be
inaccurate.

For example, if the question is raised “Has any proposal for insurance ever
been declined or cancelled?” and the answer thereto is “ No proposal for
insurance has ever been declined”, this leaves the possibility that a
proposal for insurance has indeed been cancelled. The mentioned
answer to the mentioned question is thus a half-truth.

A representation may relate directly to facts of the past or present, such as the
previous occurrence of an accident or one’s present state of health. It may also be
expressed in an opinion, particularly concerning the future, such as financial
advice about the potential return on an investment (Study in this instance the case
of Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A), where the
“misstatement” referred to by the court may have been interpreted as an opinion).
The argument goes that an opinion cannot be an actionable misrepresentation. Van
Huyssteen et al disagree with this argument. They state the following:

Quite apart from the fact that opinions and similar statements more often than not contain some
statement of fact as to the representor’s state of mind or knowledge, the question whether a
representation was a ‘mere’ opinion or prediction bears upon the quality and reasonableness of the
act or conduct, and thus relates to wrongfulness.

Wrongfulness

Test for wrongfulness:

As a delict, misrepresentation involves wrongful conduct. An act is wrongful if it is contrary

to the norm or standard of acceptable conduct in a particular society, often referred to as the
boni mores. The most recent reference to the latter term can be found in the case of ABSA Bank
Ltd v Fouche 2003 (91) SA 176 (SCA). Such an act is considered unreasonable in the eyes of
the community because it offends against the standard for reasonable or socially acceptable
conduct. A representation that occurs during the course of contractual negotiations will be
wrongful if it infringes a norm protecting a contracting party against being misled.

Commission and omission:

The wrongfulness of a representation by commission is more readily apparent than the

wrongfulness of an omission. The latter will only be wrongful if the representee breached a
duty to act positively in order to prevent a wrong impression from arising or to remove an
existing wrong impression. South African law does not recognise a general duty to act
positively to remove from the mind co-contractant each and every wrong impression by
disclosing each and every fact that may be material. Omissions are, in fact, prima facie lawful.
The existence of a duty to act will therefore depend on the circumstances of each individual
case.

In the past, the appeal court has often construed a duty to disclose information with reference
to the type of contract involved, rather than in more general terms. In the case of ABSA Bank

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 Ltd v Fouche 2003 (1) SA 176 (SCA) on 181, the court expressed the test involved in terms of
the ordinary delictual concept of misrepresentation by omission:

A negotiating party is expected to speak when the information he has to impart falls within his exclusive
knowledge (so that in a practical business sense the other party has him as his only source) and the information,
moreover, is such that the right to have it communicated to him ‘would be mutually recognised by honest men in
the circumstances’.

Opinion:

A representation by means of an expressed opinion is not readily regarded as actionable. One

reason for this is that an opinion, even if false, will often not be in conflict with the norm
involved and as such will not be wrongful. A statement which purports to state actual facts
made by one party to contractual negotiations and which actually misleads the other party, will
usually be regarded as infringing the norm, since it would normally be reasonable for the other
party to act on such a statement. A statement that is clearly an expression of the mere view or
conviction of the representor cannot so easily entitle the representee to rely on it. Hence, the
materiality of the facts to which the opinion refers assumes special importance. As far as the
reasonableness of the act is concerned, there does not seem to be a difference in principle
between a representation relating to a fact and an opinion.

Puffing:

Representation made during the course of negotiations in order to persuade another to conclude
a contract, will not be actionable if they amount to what is generally called mere puffing or
puffery. Puffing refers to persuasive talk and claims commending and praising the properties
of the representor’s performance. In the case of Cockroft v Baxter 1955 (4) SA 93 (C), the court
decided that the claim that a car has an “excellent” engine, whereas its condition was merely
normal considering its year and mileage, was not actionable, because it was not a wrongful
representation. Such a statement amounts to a simple commendation (simplex commendatio)
as long as it does not go “beyond mere praise and commendation”. Study the case of Phame v
Paizes 1973 (3) SA 397 (A) in detail. See also Milne v Harilal 1961 (1) SA 799 (N).

2.3.2. Fault:

Fault refers to the legal blameworthiness which accompanies the wrongful conduct of the
misrepresentor. Fault takes two forms, intent (dolus) and negligence (culpa in the narrow
sense).

Intent is defined as “a legally reprehensible state of mind which

consists in directing the will to attaining a particular result while
conscious of the wrongful conduct in question.

Negligence is the lack of the necessary degree of care in

circumstances under which the reasonable person in the
position of the actor would have foreseen the possibility of
harm to the other and would have taken reasonable steps to
guard against the harm.

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 Not every representation which is false is accompanied by fault on the part of the representor.
We shall deal with the aspect of innocent misrepresentation later on.

2.3.3. Causation

A misrepresentation will be actionable only if it has induced the misrepresentee to enter into
the contract as it is. This means that the misrepresentation must have caused the misrepresentee
to contract where he would not have contracted at all, or at least to conclude a contract on terms
which otherwise not have consented. The test for determining a causal link or nexus is the one
which is applied elsewhere in the law. In practice, it has developed into a two-tier test. In
comprises, in the first place, an inquiry whether the misrepresentation in fact caused the
contract. In the second instance, this inquiry entails determining an existing fact, yet it is
commonly conducted by the application of the conditio sine qua non test.

The conditio sine qua non-test asks the question whether the contract or
its specific terms would have resulted but for the misrepresentation.

A misrepresentee will therefore prove factual causation even if he can prove no more than that
the misrepresentation was only one of the operative facts which induced him to contract as he
did.

2.3.4. Undesirable result: Contract or Damage

When a claim for damages based on misrepresentation is brought, proof is required that damage
in the form of patrimonial loss has actually been suffered as a result of the misrepresentation.
This is in keeping with the general rule applicable to the law of delict in South Africa.

2.4.The two different forms of misrepresentation. i.e Outcome 4

2.4.1. Fraudulent misrepresentation:

A delict is committed in the case of fraudulent misrepresentation, and so a delictual remedy is

used: the Actio Legis Aquiliae. It has nothing to do with breach of contract: the delict is already
committed before the creation of the contract.

Intentional misrepresentation: The misprepresentor knows that the fact/statement/promise is

false and that it will move the other party to contract. The motive is gained fraudulently and is
intended towards moving the victim to enter into the contract.

Negligent misrepresentation: The misrepresentor ought to have been aware of the falsity of
his statement as a reasonable person would have done to make sure of the correctness of the
statement. See the case of FF Holzhausen v ABSA Bank Ltd (280/2003) on the Supreme Court
of Appeal’s website (need not be studied in detail, though). If misrepresentation is proven, the
contract is voidable. The contract remains intact, however, until a court decides that
misrepresentation lead to the conclusion thereof. If the victim cancels the contract, he/she
would commit breach. Damages at misrepresentation are calculated according to the negative
interest: Only damages actually suffered may be claimed for, not consequential damages.

2.4.2. Innocent misrepresentation:

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Both contracting parties act in a bona fide, innocent and reasonable manner during negotiations,
but one suffers damages because certain facts are unknown to them.

Study the following two cases regarding innocent misrepresentation:

Phame v Paizes 1973 3 SA 297 A

Labuschagne Broers v Spring Farms 1976 (2) SA 828 (T).

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 4.

2. From List of cases:

Broodryk v Smuts 1942 TPD 47.

Malilang v MV Houda Pearl 1986 (2) SA 714 (A)

Medscheme Holdings (Pty) Ltd v Bhamjee 2005 (5) SA 339 (SCA)

Consol Limited t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd & Another
2005 (1) SA 1 (SCA).

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 4.

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 7.

Kerr.
The Principles of the Law of Contract. Fourth Edition. Chapter 11

1. Duress (metus)

1.1.Introduction

It sometimes happens that a contractant’s decision to enter into a contract is influenced because
of the fact that he was forced or compelled to agree to the contract. In the case of Ilanga
Wholesalers v Ebrahim 1974 (2) SA 292 (D) for instance, someone who had stolen postage
stamps from his employer was compelled by threat of prosecution to agree to an
acknowledgment of debt. In the case of Salter v Haskins 1914 TPD 264, a person who had

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committed adultery with his partner’s wife was persuaded to transfer his share of the
partnership’s property to the aggrieved partner for fear of an action for damages. In the
Savvides-case, already mentioned in the previous lecture, the husband threatened to leave the
matrimonial home if his wife didn’t sign a power of attorney, and in the case of Malilang v MV
Houda Pearl 1986 (2) SA 714 (A) a shipowner threatened not to off-load his cargo if he didn’t
receive increased wages.

It is important to keep in mind at this stage that there is no watertight

distinction between duress and undue influence (which is for all practical purposes
an English law concept). See the introduction of Lecture 3.

Van Huyssteen et al state that compulsion may be exercised by a direct application of physical
force or indirectly by way of a threat of harm. The direct application of physical force is called
vis absoluta when someone is physically overpowered in such a manner that he cannot be said
to act at all, for instance a person’s signature to a document is obtained by physically forcing
his hand to write. A threat of harm, on the other hand, which is used to evoke a consenting
expression of will, is called vis compulsiva or duress. The will of the contractant who is
subjected to the threat is nevertheless a valid expression of intent: “A forced will is nevertheless
a will”. The one who consents therefore acts, albeit in fear. A prospective contractant may be
in such fear of a threat that he becomes incapable of forming a legally relevant will, in which
case he cannot be said to have acted at all.

1.2.Elements of duress

The act of duress is a delict. A contractant who wishes to avail himself of the remedies for
duress must accordingly prove the existence of the elements of the delict. The important classic
case to be studies in detail here is that of Broodryk v Smuts 1942 TPD 47.

In the abovementioned case, Broodryk, an employee of the state, was persuaded to enlist in the
armed forces by government officials who threatened otherwise to have him imprisoned or
interned. In considering an exception to Broodryk’s claim for rescission of the enlistment
contract, the court expressed “the elements necessary to set aside a contract on the grounds of
duress” as follows:

(1) Actual violence or reasonable fear.

(2) The fear must be caused by the threat of some considerable evil
to the party or his family.
(3) It must be the threat of an imminent or inevitable evil.
(4) The threat or intimidation must be contra bonos mores.
(5) The moral pressures used must have caused damage.

1.2.1. Act (conduct)

The act consists in compelling the other party to agree to the contract by the direct application
of physical force or by a threat of harm. There must be actual compulsion in the eyes of the
law. However, the immediacy of the undesirable consequences which the act of compulsion
may bring about does not form part of the content of the act/conduct, although in given
circumstances it may contribute to a conclusion about the presence or absence of an act of
compulsion. The fact that the physical violence or impending harm is not imminent, but is

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experienced by the other contractant as a more remote possibility in the future, would not
necessarily exclude the conclusion that compulsion has occurred.

The requirement of a “threat of an imminent or inevitable evil” as set in Broodryk v Smuts can
be interpreted in this light.

The reference in the abovementioned case to the existence of “reasonable fear” does not refer
to the act itself, in the sense that the act as such must consist in the actual excitement of fear.
Fear may be the result of the act of duress. As such, the existence of “reasonable fear” may be
indicative of the wrongfulness of the act, or of the existence of a causal link between the act
and the alleged harm. It is doubtful, however, whether the presence or absence of reasonable
fear should carry much weight in this regard.

Van Huyssteen et al mention that according to De Groot De jure

belli ac pacis 2.11.7 the question whether the fear was reasonable should
not be considered at all, and a contractant in whom fear was actually
instilled should not be open to the reproach that he should not have
been so easily scared.

Several additional factors are often mentioned in relation to the act. So, for example, in the
Broodryk-case, the court required a “threat of some considerable evil against the party or his
family”. The threat must also be directed against at their lives or physical integrity, whereas it
is doubtful whether duress directed at the property or “goods” of a contractant should be
actionable (notably in the case of Van den Berg & Kie Rekenkundige Beamptes v Boomprops
1028 BK 1999 (1) SA 780 (T) on 784-785). These factors, together with others such as gender,
status and age of the other contractant, are considerations in the process of evaluating the
reasonable reasonable quality of the conduct. This applies particularly to the requirement that
there must be “reasonable fear”.

1.2.2. Wrongfulness

The wrongfulness of an act of duress is determined by the same general test which applies to
misrepresentation. According to Broodryk v Smuts the act must be contra bonos mores. This
implies in fact that the act must be wrongful, or that there must be a threat of unlawful action.
The question which must be posed is whether the act of compulsion itself is wrongful. This
may be the case even where a contractant is threatened with lawful action, but to obtain a result
to which the contractant who exerts the duress is not reasonably entitled in the circumstances.
The latter situation has occurred particularly in the context of agreements concluded under
threat of criminal prosecution. Although the courts have not given a uniform expression of their
approach to the matter, on a close reading (according to Huyssteen et al) of the decisions it
becomes clear that they (the decisions) are based on the same principle: A threat of prosecution
is wrongful if it is employed by a contractant to exact a performance which is more
advantageous than that to which he is reasonably entitled.

Obtaining consensus by a threat of civil proceedings (such as instituting

action for payment of a cheque) will not be readily be regarded as contra
bonos mores. It is however, according to Van Huyssteen et al, unthinkable

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 that the boni mores may frown on some threats of instituting civil
proceedings.

Occasionally, a contractant concludes a contract due to duress by a third party for whose acts
the co-contractant cannot be held legally liable. Anagolous to the position pertaining to
misrepresentation by a third party, such duress should not be imputed to the co-contractant,
although there is some support in our law for the opposite view.

1.2.3. Fault

Generally, the circumstances surrounding an act of compulsion will allow an inference of fault.
There will normally be a deliberate act which in law will constitute an intentional act if the
perpetrator realises that his conduct is wrongful. In less obvious cases of duress, particularly
threats of criminal prosecution, the present of intent (dolus) may not be so apparent, since
knowledge of wrongfulness will often be absent. Although the facts of a particular case may
warrant the inference of negligence, the question arises whether proof of fault is at all necessary
where the contract is rescinded without a claim for damages. Since the basis of duress as a
ground of rescission lies in the inability to express an intention in a free and unfettered manner
due to the improper conduct of a co-contractant, one may well ask whether the unlawful
expression of a threat should not suffice for rescission of the contract.

In the case of Arend v Astra Furnishers (Pty) Ltd 1974 (1) SA 298 (C), the
court stated the following:

…it is clear that a contract may be vitiated by duress (metus), the raison d’etre of the rule
apparently being that intimidation or improper pressure renders the consent of the party
subjected to duress no true consent…

The court’s reference to “true consent” should be taken to mean that there was
no free expression of will and not that there was no legally relevant consensus.

1.2.4. Causation

The remedies for duress will be available only to a contractant who proves that the contractant
who can prove that the contract was caused by the duress. The considerations applying to
causation in the context of misrepresentation apply to duress as well.

1.2.5. Undesirable result: Contract or damage

Actual damage as a result of the conclusion of the contract is a prerequisite for a successful
claim for damages. The courts have actually expressed the elements of duress so as to include
damage also where the contract was being rescinded without a claim for damages. (See
particularly Broodryk v Smuts and Arend v Astra Furnishers (Pty) Ltd In so far as duress as a
ground for rescission is based on the consideration that the expression of intent is not

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completely free, it seems logical that actual damage need not be proved to justify rescission
alone.

1.3.Duress of goods and “economic duress”

These matters have already been touched on above. Keep in mind that “duress of goods” does
not constitute a spate principle in South African law. In so far as it refers to a threat directed at
the property of a contractant, it must be treated like a threat directed at any other protected
interest. In so far as it relates to a claim for the repayment of money paid to avoid harm to
property, the term “duress of goods” relates to a claim for enrichment. The requirement that
repayment will only be granted if performance was agreed to under protest, is then part of the
requirements for the condictio indebiti, more particularly that performance must have been
made sine causa.

Where a person concludes a contract under so-called “economic duress”, like in the case of
Malilang (see above), has been discussed often. In the case of Medscheme Holdings (Pty) Ltd
v Bhamjee 2005 (5) SA 339 (SCA) it was decided that the principle that economic pressure
may, in appropriate cases, constitute duress, does not form part of South African law.

2. Undue influence

2.1.Introduction

A third specific ground for rescission of a contract came to be raised before the courts as a basis
for relief distinct from the traditionally accepted grounds of misrepresentation and duress. The
contention was that, under certain circumstances, a contractant who had been persuaded to
conclude a contract with someone, who had previously acquired some influence over him and
who had exerted that influence to obtain his consent, should be entitled to rescind the contract.
As mentioned before, this new ground for rescission was not accepted easily, notably by Van
den Heever JA in Preller v Jordaan. (It was incorporated into our law by Mauerberger v
Mauerberger 1948 (4) SA 902 (C). The main objections to undue influence as a ground for
rescission of a contract were that it was historically not part of our law and that it was incapable
of exact definition and limitation and would therefore lead to uncertainty in the enforcement of
contracts. Historically, the criticism was not without substance, for undue influence did not
form a part of our common law of contract. It is derived from English law, where it had
originally been developed as a concept of equity, justifying rescission of a contract under
circumstances where it could not have been impugned under the strict principles of the common
law. It was effectively incorporated into South African law by the majority decision in Preller
v Jordaan.

2.2.Elements of undue influence read with the case of Preller v Jordaan:

In the abovementioned case, the appellant was a doctor who had been treating the respondent
for some years. The respondent was critically ill, of an advanced age, and mentally and
physically exhausted. He had great concern over the continuance of his farming operations in
the interest of his dependants if he should die. Against the respondent’s initial doubt, the
appellant persistently advised and eventually persuaded the former to transfer four farms into

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his (the appellant’s) name, which was subsequently done. The respondent recovered and
wished to rescind the contract on the ground that the appellant had exerted his influence over
the respondent improperly. The majority decision by the appeal court regarded this as undue
influence.

According to the court a contractant who wishes to rescind a contract on the ground of undue
influence must prove the following:

(i) That the other contractant obtained an influence over

him;
(ii) That this influence weakened his powers of
resistance and made his will pliable;
(iii) That the other contractant used this influence in an
unconscionable manner to persuade him to agree to a
transaction which was (a) to his detriment and (b) he
would not have concluded if he had enjoyed normal
freedom of will.

Once again, as with the other two grounds for rescission, the question arises whether the
requirements expressed by the courts characterise undue influence as a delict. The courts have
not expressly called it such, but according to Van Huyssteen et al it will be appropriate to deal
with the rather wide concept of undue influence outside the strictures of the law of delict.

2.3.Elements of Undue influence

2.3.1. Act

The act consists in exercising influence over a co-contractant.

2.3.2. Wrongfulness

According to the courts, the influence must have been such as to weaken the other party’s
resistance and to make his will pliable, and must have been exercised in an unconscionable
manner. This would mean that the act must have been wrongful.

2.3.3. Fault

There is no clear indication that fault is required for a successful rescission of a contract because
of undue influence. In the context of the conclusion of contracts, it does not seem necessary to
prove fault as an element of undue influence. (In case one considers undue influence as a delict,
fault will have to be proved, though.)

2.3.4. Causation

Rescission for undue influence requires proof that the contract would not have been concluded
if the contractant who rescinds had not been unduly influenced. The considerations applying
to causation in the context of misrepresentation apply here.

2.3.5. Undesirable result: Contract or damage

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According to the courts, rescission for undue influence requires proof that the contract was to
the detriment of the contractant who wants to rescind. Detriment does not necessarily mean
damage in this regard, though.

2.4.Remedies for the three forms of consensus obtained by improper means

2.4.1. Upholding of the contract:

The victim realises that consensus wasn’t only achieved because of the misrepresentation.

The victim would still have contracted, but:

-Would have paid less if he were aware of the true facts;

- He claims for the difference in price on a delictual basis.
- He is dissatisfied because the other party doesn’t perform in terms of the contract (positive
malperformance).
- He claims contractually.
- He claims i.t.o. estoppel or breach of contractual-principles.

2.4.2. Rescission

The victim claims that no contract ever came into existence, because of the fact that his will
was influenced by misrepresentation, and no consensus exists.

He wouldn’t have contracted if he had been aware of the true facts.

LEARNING UNIT 4 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 3.

2. From List of cases:

Crawley v Rex 1909 TS 1105

Bloom v American Swiss Watch Co. 1915 AD 100

Steyn v LSA Motors 1994 (1) SA 49 (A)

Legator McKenna Inc and Another v Shea and Others [2009] All SA 45 (SCA).

Emadyl Industries CC t/a Raydon Industries (Pty) Ltd v Formex Engineering 2012 (4)
SA (ECP) – see only p 34 “The nature of the agreement”.

Alternative study:

Hutchison et al.

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 The Law of Contract in South Africa. Second Edition. Chapter 2.

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 2

1. Introduction

In its simplest form, a contract consists of an invitation to consent to the creation of

obligations between two or more parties (called an “offer”), and an affirmative response
(called an “acceptance”). The rules regarding offer and acceptance must accordingly be
understood in the light of their underlying premise, namely that a contract entails the
formation of a common intention by the contractants through an exchange of declarations
which express their respective intentions.

A clearly discernible offer and distinct acceptance are not by themselves requirements for
the creation of a contract. Since a contract is a juridical act, the agreement of the parties
must of course be declared outwardly in order to be legally relevant. Whether particular
declarations constitute a contract must however be answered with reference to the general
requirements for the creation of a contract. One of these requirements is the presence of
consensus, and offer and acceptance are facts from which consensus may be inferred.

Offer and acceptance may also be relevant in other respects, though. It may, for instance,
serve to indicate exactly where a contract was concluded, or exactly when it generated legal
consequences. In the absence of special provisions in the contract itself, the place and time
of conclusion of the contract are determined by the rules governing offer and acceptance.
These rules also provide a basis for explaining problematic aspects of the relations between
contracting parties in the preliminary phase of their negotiations before the conclusion of
the contract.

2. The Offer
2.1.Elements of a valid offer

An offer is an expression of will, made with the intention of creating an obligationary

relationship on certain or ascertainable terms with another, and brought to the attention of
the addressee, so as to enable him to establish a contract by accepting the offer as it was
made. Although ordinarily addresses to a specific person, an offer does not require an
addressee to be valid. An offer of reward, for instance, is made to the public at large, while
some kinds of auction involve an offer to a particular class of persons. An offer may be
made in any particular form, and may be made in any way that the offeror thinks fit, whether
expressly or tacitly. The offeror may, in the offer itself, prescribe certain formalities with

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which the proposed should comply. An offer made by way of a tender has been held to be
ineffective where made in a way adjudged to be contrary to public policy, most notably in
Warrenton Munisipaliteit v Coetzee 1998 (3) SA 1103 (NC).

To constitute an offer, a declaration of intention must set out the essential and material
terms of the envisaged contract too such an extent that mere acceptance will render the
legal consequences of the contract certain or objectively ascertainable. In practice,
declarations contained in advertisements for the sale of goods or invitations calling for
tenders for the completion of specified work or for the purchase of land will often fail to
meet this requirement, and will for that reason not qualify as offers.

See in this instance the well-known case of Crawley v Rex 1909 TS 1105, where an
advertisement for the sale of tobacco, although specifying a price, failed to specify the
quantity involved in each sale.
Even of a declaration sets out the detail of a proposed relationship with sufficient certainty,
it will only constitute a valid offer if it was made with the intention that the offeree should
have the power to create a contract by accepting it. The intention with which an offer is
made, if not expressly articulated, is established by inference from the declaration and the
surrounding circumstances. Whether a declaration amounts to an offer or is nothing more
than an invitation to negotiate depends finally on whether the elements of an offer are
present, and not on the classification of the particular declaration. There can, accordingly,
be no inflexible rule that declarations contained in advertisements and similar expressions
of intentions can never amount to offers. The legal effect of declarations by way of
advertisements, catalogues and circulars, and the display of goods, with or without price
tags, in a self-service setting or otherwise, depends on the intention with which a particular
declaration is made, its content and, in exceptional cases, its form.

According to Christie, “what distinguishes a true offer from any other proposal or statement
is the express or implied intention to be bound by the offeree’s acceptance”. If the intention
to be bound by mere acceptance is lacking, the offeror lacks the necessary animus
contrahendi. The term “lack of animus contrahendi” is descriptive of the instances where
it is clear from the surrounding circumstances or the manner in which the offer was made
that the offer was not intended to be taken seriously.

An offer made in jest, for instance, cannot lead to the creation of a contract.
Neither can an offer made in a moment of anger, unless the offeror afterwards persists
in his offer. Likewise, an offer made as an illustration of how an offer is made, or made
unintentionally while telling a story, or an offer made in a vague, impersonal way, or
finally an offer made as a compliment, can never constitute a valid offer fr the creation
of a contract.

2.2.Legal consequences of an offer

A contract is a bilateral juristic act and in the main, liability ex contractu is based on the
agreement of the parties. It is not accepted in our law that an obligation may be created
voluntarily by a unilateral act, as was possible by the pollicitatio of Roman law. An
ordinary contractual offer, therefore, does not in itself create rights and duties between
offeror and offeree. It does, however, give rise to the expectation of a future right, because
the offeree has the capacity to create by acceptance the obligations envisaged by the offer.

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No matter what value an offer in itself may have to the parties involved, its legal
consequences are of limited commercial importance. In so far as it does not create
obligations, an offer may be revoked and because it does not form part of the estate of either
the offeror or the offeree, an offer lapses on the death of the either party and cannot be
ceded. See Manna v Lotter and Another [2007] 3 All SA 50 (C).

2.3.Lapse of an offer

Because of the fact that an offer has no obligationary effect, it may be revoked by the offeror
(according to the case of Oos-Vrystaat Kaap Bedryf Bpk v Van Aswegen 2005 (4) SA 417
(O)). Revocation is possible until the moment upon which the contract is concluded and is
not precluded by a time limit set for acceptance. Because an offer is made with the purpose
of eliciting a response from the offeree, the contention has been made that the capacity to
withdraw lapses as soon as the offeree begins to articulate a response. Revocation of an
offer is effective only if the offeree is notified of the decision to revoke. An offeror who
has not communicated to the offeree his decision to revoke may -upon acceptance- be held
liable on subjective grounds, regardless of the fact that that he no longer intended to incur
liability. Because an offer does not create assets or liabilities in the estate of either the
offeree or the offeror, it lapses on the death of either these parties.

An offer will lapse if it is rejected by the offeree, and a counter-offer by the latter is regarded
as tantamount to a rejection. An inquiry by the offeree merely to clarify aspects of the offer
or a request to modify its terms does not necessarily amount to a counter-offer, and the
same is true of an acceptance which departs from the offer in immaterial respects only. An
offer has a limited duration. Where the offer stipulates a period for acceptance, it lapses if
acceptance does not take place within that period. Otherwise an offer lapses if not accepted
within a reasonable period.

3. Acceptance

In the case of Lowe v Commission for Gender Equality 2002 (1) SA 750 (W), it was decided
that acceptance is a declaration of will, which indicates assent to the proposal contained in
the offer and which is communicated to the offeror. Where an offer envisages a unilateral
contract involving duties for the offeror only, an unexpressed decision to accept would
suffice as a valid acceptance. An intention to enter into obligations with the offeror is an
essential element of acceptance. The consensual basis of contract implies that acceptance
should be by way of conscious reaction to the offer, and that for consensus to be effective
it should correspond with the terms set out in the offer. The acceptance must be
unambiguous, so that it is clear to the recipient, using ordinary reason and knowledge, that
the agreement is complete. It should be kept in mind that anything more or less than an
unqualified offer constitutes a counter-offer, and is for all practical purposes a rejection of
the original offer. Where an addressee in declaring his acceptance refers to certain terms,
which are not mentioned in the offer but will be included in the eventual contract by
operation of law, his declaration should be a valid acceptance. An enquiry in an acceptance
whether the offeror is willing to modify the offer will not affect the validity of the
acceptance, as long as modification is not a condition for acceptance.

According to the prescribed textbook, an incomplete acceptance may sometimes reflect an

intention to create obligations with a certain or ascertainable content, while negotiations on
outstanding issues continue.

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 According to Christie, an unaccepted offer cannot create a contract, “since it emanates from
the offeror alone, and the necessary agreement cannot be held to exist without some
evidence of the state of mind of the offeree. The general rule is thus that no contract can
come into existence unless the offer is accepted. A logical but important question that arises
is of course who, in fact, has the power to accept. Christie states that a “simple contractual
offer made to a specific person can be accepted only by that person”. A purported
acceptance by some other person is ineffective and does not bring about the conclusion of
a contract.

In the interesting case of Steyn v LSA Motors 1994 (1) SA 49 (A), which must be
studied in detail, a valid offer was accepted by someone who did not have the power
to accept the specific offer. Consequently, no contract was concluded.
Because the object of analyzing a transaction into offer and acceptance is to ascertain
whether the parties have reached agreement, a party who claims to have accepted an offer,
the existence of which such a party was oblivious at the time of his alleged acceptance, is
“trying to place form before substance”.

In the case of Bloom v The American Swiss Watch Co 1915 AD 100, Bloom failed
to recover the advertised reward because he was ignorant of the advertised offer of
reward at the time he performed the act of giving information to the CID which, had
he known of the offer, would have amounted to the necessary acceptance of that offer.
He thus acted without animus contrahendi.

Christie states, very importantly, that acceptance must be “unequivocal or unambiguous”, as

well as corresponsive to the offer.

Methods of acceptance

English writers such as Chitty take the view that a method that is as advantageous to the offeror
as the method he has prescribed will suffice unless he has made it clear that his prescribed
method and no other is to be employed. In such a case the offeror’s wishes must be respected,
no matter how capricious they may be, because it is not for the court to make a contract for the
parties.

An offer which does not make it unequivocally clear that the prescribed method and no other
is to be employed should be given an equitable interpretation to permit acceptance by a method
equally advantageous to the offeror.

Silence as acceptance

A necessary limitation on the offeror’s liberty to indicate the mode of acceptance is that he
cannot force a contract on the offeree by saying that he will take the offeree’s silence as
acceptance. Silence may, however, amount to acceptance of an offer in circumstances which
give rise to a “duty to speak”, if the offeree is not prepared to accept the offer.

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LEARNING UNIT 5 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 3 pp. 60-70.

2. From List of cases:

Reid v Jeffreys Bay Property Holdings 1976 3 SA 134 (C)

Driftwood Properties v McLean 1971 1 SA 591 (A)

Cape Explosive Works Ltd v South African Oil and Fat Industries Ltd
1921 CPD 244.

Craib v Crisp 1984 (3) SA 594 (T)

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 2.

Bradfield.
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 2.

1. Introduction

According to Van Huyssteen et al, South African law accepts that a contract is concluded
when and where consensus is reached. This usually occurs at the place where and at the
moment when a person who has made an offer (offeror) is informed that it has been
accepted by a person legally entitled to do so (offeree). This is what has become known as
the “information theory”. This theory rests on the principle that the primary basis of
contractual liability is the actual agreement between the parties to the transaction.

Consensus is the essence of the legal act, and should in principle mark the cut-off point
between the stages of negotiation and obligation. Although determining the place and time
consensus is reached may sound simple enough, one should take into account that in the
contemporary business world, one depends on offers and acceptances made via e-mail,
post, fax and others. In these instances, it becomes rather more difficult to determine exactly
where and when a contract has come into existence.

The information theory is not the only theory used in order to determine where and when a
contract comes into existence. Three other theories exist for this purpose, namely the
expedition theory, reception theory and the declaration or expression theory. They will
form the basis of this lecture. These theories should not be confused with the three theories
used for determining the presence of consensus, as discussed previously.

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2. The 4 theories for determining the time and place where a contract comes into
existence

2.1.Information Theory

As mentioned above, the information theory requires the knowledge of the offeror that his offer
has been accepted by the offeree. Such knowledge may be conveyed by way of the following:

 Reading a letter, fax, e-mail or sms of acceptance (of which the offeree is the author) of the
relevant offer.
 Listening to a message left by the offeree on an answering machine, or a voice message on
a mobile phone, accepting the relevant offer.

The case of Reid v Jeffreys Bay Property Holdings 1976 3 SA 134 (C) presents a very
interesting scenario. In this case, A was domiciled in Cape Town. A wanted to sell his property
situated in Human’s Dorp, near Jeffrey’s Bay in the Eastern Cape. B was interested in
purchasing the property, and engaged in negotiations with an agent of A in Pinetown, Natal. B
was domiciled in Durban. B subsequently signed the written agreement of sale in Durban, and
it was given to A’s agent to deliver to A in Cape Town. A director of A’s company subsequently
signed the agreement on behalf of A in Cape Town. Two questions are relevant here:

1. Firstly, who is the offeror and who is the offeree?

2. Secondly and most importantly: Where did the contract come into existence?

The answer to the first question seems simple enough. A offered his property as for sale, B
accepted the offer, which makes A the offeror and B the offeree. This is the correct assumption.
Confusion sets in, however, when one considers that B signed the agreement of sale first. B in
fact made A an offer on A’s property, which A accepted by proxy. Looking at it from this point
of view, it would seem that B was in fact the offeror and A the offeree (for the purchase of A’s
property). It should be kept in mind, however, that an agreement of sale commences as an offer
to purchase, and only becomes a contract when accepted. Thus: The offer was made by A,
accepted by B in Durban, and knowledge of acceptance of the offer by B was received by A in
Cape Town.

So where did the contract come into existence? Remember that we are currently looking at the
information theory, which determines that the contract comes into existence at the time when
and the place where the offeror (A) learns that his offer has been accepted. Although the
acceptance was handed to A’s agent in Durban, the latter had no authority other that negotiating
with B. In the current case, it was decided that the contract came into existence in Cape Town,
as this was where the offeror of the property (A) learned that his offer had been accepted by
the offeree (B).

What would have been the situation if A’s agent had telephoned A from Durban and
left a message on A’s answering machine (which of course didn’t exist in 1972, but for the
sake of discussion) in Cape Town that he’s (A’s) offer had been accepted. Would it have
made any difference to where the contract had come into existence? What about the
question of when the contract had come into existence?

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In the case of Driftwood Properties v McLean 1971 1 SA 591 (A), the respondent was the
offeror of certain property. V (on behalf of a trust) was the offeree. The contract stated that the
offer had to be accepted by V on or before the 17th of May 1969. The respondent (offeror)
already signed the “offer to purchase” (if and when accepted would amount to an agreement or
contract of sale) on the 30th of April 1969
2009. V duly signed the offer on 17 May 1969, thereby
seemingly exercising a valid acceptance of the respondent’s offer.

However, at the time of the acceptance of the respondent’s offer (17 May 1969), the latter had
not received any knowledge that his offer had indeed been accepted. The letter of acceptance
was posted on the 18th of May 1969, and only received by the respondent on 27 June 1969.
Obviously, the latter date was the one on which the respondent finally learned that his offer
had been accepted.

The court, in its decision, quotes Grotius by stating the following:

…I may make an offer in two ways. I can either make an offer and say that the contract will be established by
your mere acceptance; or I can make the offer and say that the contract will be completed when I come to hear of
your acceptance. And if there is a doubt upon the matter, we must always presume that the second was the case…

In the abovementioned case, the court decided that “the signature of V on 17th May 19689 turned
the offer into a binding contract.”

The information theory is the general rule in South African Law with regards to contracts inter
absentes. There are, however, certain exceptions to the general rule:

 With regards to postal contracts, South African Law follows the dispatch/expedition theory.
(see the discussion of the Cape Explosives-case below).

 The acceptance theory is prescribed by statute with regards to internet transactions. See in
particular Section 22 of the Electronic Communication and Transactions Act 25 of 2002,
read with the Electronic Communication Act of 2005.

 Where the parties themselves determine the moment and place when and where their
contract comes into existence. (As in the case of Reid v Jeffreys Bay Property Holdings).

 The case of A-Z Bazaars v Minister of Agriculture 1975 3 SA 468 (A). In this case, the
offeree accepted the offer by way of a letter. He then revoked his acceptance by means of
a telegram, which travelled faster than the letter. The State argued that the offer of
expropriation had already been accepted by the offeree by way of letter, and that the later-
sent telegram had no effect on the moment the contract came into existence. The Cape
Provincial Division followed the dispatch/expedition theory. On appeal, the court
interpreted the Expropriation Act applicable at the time. The Expropriation Act determined
that the acceptance had to be “delivered” (“gelewer”) to the Minister. The telegram was
delivered first, and consequently the dispatch/expedition theory did not apply to
expropriation-offers.

It must be remembered, though that each set of facts must be considered on its own.

For enrichment’ sake, you might want to read the case of Kergeulen Sealing and
Whaling v CIR 1939 AD, which rather creates a contrast to the A-Z Bazaars-case.

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2.2.Departures from the information theory

2.2.1. The Dispatch/Expedition Theory

As far as the original reasons for the introduction of the expedition theory in
regard to postal contracts are concerned, see the very interesting article of Simon
Gardner, Trashing with Trollope: A Deconstruction of the Postal Rules in Contract in
the Oxford Journal of Legal Studies Vol 12, No.2 (1992). Note that this article need
not be studied in detail for examination purposes, but will provide the student with a
clear understanding of why the dispatch/expedition theory forms part of South
African law at all.

The application of the dispatch/expedition theory today is explained (or should it read
“allowed”?) on the basis that the resort to the post to convey the offer serves as a prescription
of the post as the mode of acceptance. In the Cape Explosives-case the dispatch/expedition
theory was preferred on account of its supposed practical convenience. The judge in the
aforementioned case (Searle J) stated that “much confusion and complication” would arise if
the rule were not adopted, because “the acceptor would certainly be at a loss to know when his
notification reached the offeror and his hands would be tied until he was assured on this point.”

Van Huyssteen et al note that the offeree will generally be favoured by the adoption of the
dispatch/expedition theory, because once expedition has taken place, the offeree has certainty
that the contract has been concluded, irrespective of whether the offeror ever becomes aware
of the acceptance. Obviously, similar circumstances would not be beneficial to the offeror at
all (have a look at what happened in the Driftwood Properties-case). If the offeror, on failure
to receive a reply because of the fact that the letter had become lost in the post, were to assume
that the offer was rejected, and on that assumption were to conclude a contract with another,
he (the offeror) would bear the risk. This seems unfair towards the offeror- there is no reason
why the offeree should be favoured above the offeror. The explanation stems from English law.
The dispatch/expedition theory originated in the English legal system in circumstances when
it seemed fair to place the risk of loss on the party who initiated negotiations through the post.
It is argued that the contemporary liability of the postal service results in a reasonable reliance
on the part of the offeree/acceptor that his acceptance will in the ordinary course of events
come to the notice of the offeror. This reliance may then provide an immediate basis for a
contract at a stage when there is no consensus ad idem.

The question must be asked, of course, whether the postal service, either in South
Africa or the United Kingdom, is really so reliable as to take the view that an offeree may
accept that in the ordinary course of events his acceptance will be delivered to the offeror.

It must be mentioned, though that the expedition theory places the risk on the offeror only so
far as such risk/risks is/are inherent or typical of the postal system. External or abnormal
circumstances which disrupt the operation of the postal service will therefore exclude the
application of the expedition theory.

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 Will the dispatch/expedition theory apply in the case where an acceptance by letter
follows on an offer made inter praesentes, or made inter absentes by telephone?

The moment of expedition of an acceptance will only determine the time and place of
conclusion of a postal contract in the absence of indications to the contrary. In the case of A-Z
Bazaars (Pty) Ltd v Minister of Agriculture 1975 (3) SA 468 (A) an indication to the contrary
was indeed found in the provisions of a statute: It was held in Section 6 of the Expropriation
Act 55 of 1965 that the contract in issue could come into existence only upon actual delivery
of a written acceptance to the minister, and that the offeree, who had posted a letter of
acceptance, could “neutralize” it by means of a subsequent telegram, which was received
before the letter. Another example of an indication to the contrary was found in the case of SA
Yster & Staal Industriële Korporasie v Koschade 1983 (4) SA 837 (T), wherein the terms of
the offer itself indicated an intention on the part of the offeror that the moment of reception of
the acceptance would be decisive (This is similar to the information theory). Likewise, the
nature of the transaction may justify an inference of a particular intention.

In terms of the dispatch/expedition theory, acceptance of an offer can validly occur in one of
the following manners:

 of a letter into a post box;

Submittance od
 The speaking of an acceptance into the answering machine of the offeror’s telephone;
 The sending of the acceptance with a messenger;
 Sending of the acceptance via telegram- see Craib v Crisp.

In the case of Craib v Crisp 1984 (3) SA 594 (T), the respondent wanted to sell her property in
Sedgefield, Natal. She mandated an estate agent to find a purchaser for the said property. A
document named “offer to purchase” was subsequently signed by the prospective purchaser
(the applicant in the current matter). The last page of the offer to purchase made provision for
the signature of the seller as acceptor of the offer to purchase the property made by the
applicant. There was no acceptance of the offer by any writing on the said document.

What happened, in fact, was that the estate agent had telephoned the respondent, informed her
of the existence of the written offer as well as its terms, and requested her to signify her
acceptance by telegram, the contents of which were dictated to the respondent by the estate
agent. The telegram of acceptance was duly sent by the respondent, and stated unequivocally
that the offer was accepted.

The respondent, however, wished to withdraw from the contract for the following reasons:

i. The sending of the telegram did not constitute proper acceptance of an offer to
purchase immovable property.

ii. A communication of acceptance addressed to the seller’s own agent could not be
considered an acceptance of the purchaser’s offer.

The court’s decision was as follows:

With regard to the reason (i) above, the court said that a telegram did indeed constitute a valid
acceptance of offer, especially considering Section 1 of the Formalities of Sale of Land Act 71

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of 1969, which applied at the time. (It should be considered that although a writer such as
Christie agrees with Preis, J’s decision in this case, De Wet & Yeats are of a different opinion
regarding this issue).

As far as reason (ii) is concerned, the court felt that “under the circumstances in which the
respondent was asked by the estate agent to transmit the telegram, and in the light of the clear
wording of the telegram, coupled with the undeniable fact that its contents were conveyed to
the applicant long before the respondent purported to withdraw from this contract, a binding
contract of sale came into being.

2.2.2. The Declaration Theory

The declaration theory basically holds that a contract comes into existence at the moment when
and place where the offeree expresses/declares his acceptance of the offer.

This can happen in one of the following ways:

 Verbal expression;
 Writing down an acceptance of an offer;
 Dictating an acceptance to another;
 Entering an acceptance into a computer programme, such as Microsoft Word;
 Expressing acceptance of an offer through sign language.

The problem one is faced with at the declaration theory is of course that the offeror would not
necessarily be aware of the acceptance of his offer at the time of the declaration/expression of
the acceptance by the offeree. This leaves a question as to the presence of consensus ad idem
between the offeror and the offeree. This problem is similar to the one experienced by the
dispatch/expedition theory.

2.3.The Acceptance Theory

What makes this a very relevant and important theory, is the fact that it is used in South African
law with regard to internet transactions, according to Sections 22 and 23 of the Electronic
Communications and Transactions Act 25 of 2002.

According to Christie, the abovementioned statutory rules equate e-mail contracting as far as
possible with traditional contracting. Section 23 of the abovementioned act states the following:

23. A data message –

(a)used in the conclusion or performance of an agreement must be regarded as having been sent by the
originator when it enters an information system outside the control of the originator or, if the originator
and addressee are in the same information system, when it is capable of being retrieved by the addressee;

(b)must be regarded as having been received by the addressee when the complete data message enters an
information system designated or used for that purpose by the addressee and is capable of being retrieved
and processed by the addressee; and

(c)must be regarded as having been sent from the originator’s usual place of business or residence and as
having been received at the addressee’s usual place of business or residence.

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Christie exclaims that the abovementioned section assumes that when the originator’s message
reaches the addressee’s information system, it stays there. Technology is currently advancing
so fast that this assumption may not be correct, as the originator may be able to change his
mind and remove his message from the addressee’s information system. If he does this before
the addressee has retrieved and processed it, it would be unrealistic to decide that the addressee
had received it, or even that the originator had sent it.
Typical situations where the acceptance theory may find application:

 The letter of acceptance is placed on the offeror’s desk, but the latter has not read the letter
yet;
 The offeror takes the letter of acceptance from his mailbox, but hasn’t opened the envelope
yet;
 The message of acceptance is recorded on the offeror’s answering machine, but he hasn’t
listened to it yet;
 Section 23 above.

LEARNING UNIT 6 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles Sixth Edition. Chapter 3 pp. 80-110.

2. From List of cases:

Venter v Bircholtz 1972 (1) SA 276 (A)

Hirschowitz v Moolman 1985 3 SA 739 (A)

Ficksburg Transport (Edms) Bpk v Rautenbach 1988 (1) SA 318 (A)

De Jager v Burger 1994 (1) SA 402 (C).

Dettmann v Goldfain 1975 (3) SA 385 (A)

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 2.

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 2.

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1. Pacta de contrahendo

1.1.Introduction

A pactum de contrahendo is a contract aimed at the conclusion of another contract. An

example from South African Law would be an option contract and a contract of preference.

The option contract restricts the offeror’s capacity to revoke an offer. A contract of
preference is intended to create a preferential right to conclude with another a specified
type of contract, should he decide to conclude such a contract at all. Some continental legal
systems do not see the abovementioned types of contract as pacta de contrahendo, but
employ the latter term to obligationary agreements which bind one of the parties, or both,
to eventually conclude a substantive contract of some form or nature. This type of
preliminary contract provides only a right to insist on the co-operation of the other party
towards the conclusion of the substantive contract. Contracts of this nature are relevant
where parties who have reached consensus on the conclusion of a substantive contract, but
are unwilling to or unable to conclude it immediately, wish to protect themselves against a
later refusal to conclude the agreement.

The concept pactum de contrahendo in its widest sense also encompasses diverse other
arrangements fulfilling a range of distinct functions. It should be distinguished from
preliminary arrangements, which are devoid of any obligationary effect. Preliminary
arrangements include memoranda of understanding, heads of agreement, agreements in
principle, or letters of intent. The principle use of these preliminary contracts or agreements
is to promote trust by demonstrating a commitment on the part of the parties to the
conclusion of a contract or to place on record any progress that has been achieved in
negotiations. This enables a review of progress by lawyers, identifies outstanding issues
and provides a basis for further progress towards a binding agreement. The consequences
of these preliminary arrangements depend on the interpretation of their terms in the context
of the particular circumstances.

Where such a document records a partial agreement, the question is whether what has been
agreed upon can have an existence independent from what has been left open for later
negotiation. Should the document reveal an intention to establish obligations and a
sufficient degree of certainty as to the terms agreed to, the label attached to it cannot be
decisive. Obligations, even if only of a limited or partial nature, might be agreed to and will
be given effect.

In the case of Hirschowitz v Moolman 1985 3 SA 739 (A) (to be studied in detail), Corbett JA
said the following:

A pactum de contrahendo is simply an agreement to make a contract in the future.

Christie mentions that provided the agreement results from a firm offer and is not too vague, it
will be enforceable. It follows that if the remuneration or price is fixed or ascertainable the
contractual duties must be performed whenever demanded within the limits fixed by the
pactum. Each demand initiates a separately identifiable contract containing some of its own
terms and some terms imported from the pactum.

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We shall subsequently study two pacta de contrahendo, namely option contracts and contracts
of preference. Remember that there are also other types.

2. Option contracts:

2.1.Legal nature

Van Huyssteen et al call an option “a legal concept which comprises a contract between two
parties, the option grantor and the option holder, to keep open an offer to contract (the
substantive offer) made by the grantor to the holder”. The contract which thus entrenches the
substantive offer is called the option contract. Acceptance of the substantive offer (commonly
referred to as “the exercising of the offer”) brings about the substantive contract envisaged by
the arrangement, and is governed by the ordinary principles regarding acceptance of offers.
The option agreement is distinct from the substantive contract, and the view that the option
contract amounts to the substantive contract qualified by a suspensive condition has been
rejected, notably in the case of Venter v Birchholtz 1972 (1) SA 276 (A) on 283, where Jansen
JA had the following to say:

The option is seen as a unique contract, which is dissected as an offer to purchase accompanied by an agreement
to keep the offer standing for a specific period. Although the grantor of the option’s obligation to sell may probably
be seen as conditional, no conditional contract of purchase exists, and the exercising of the option does not amount
to the compliance to a condition by the purchaser.

The case of Venter v Birchholtz must be studied in detail, and specific attention should
be paid to how the court deals with the legal nature of the option contract.

The option contract creates at least one obligation, in terms of which the holder of the option
has the right that the option grantor shall keep the substantive offer open for acceptance, or not
revoke the offer. The grantor of the option thus has a duty not to do anything to prevent the
option holder from creating an enforceable contract by exercising the option. The option holder
furthermore enjoys a legally protected power to establish the substantive contract by exercising
the option. The exercise of this power, which cannot be withdrawn by the grantor of the option,
may be circumscribed by the terms of the pactum de contrahendo. An offer can be made
irrevocable only by means of an option contract. Van Huyssteen et al feel that a unilateral
declaration by an offeror that the offer is irrevocable is generally regarded as ineffective in our
law. An offer that specifies a fixed period of time for acceptance merely limits the duration of
the offeree’s power of acceptance and does not prevent revocation.

2.2.Requirements

An option contract must satisfy the requirements generally applicable to contracts. Although it
has been held that a period of time for which the offer is to be kept open is a requirement for
an option contract, this cannot be said to be an actual requirement. The better view, according
to Van Huyssteen et al, is that the abovementioned “requirement” is in fact not a requirement
for a valid option contract, and that an option which does not specify a period for its duration
or which is stated to be of unlimited duration, is not void for vagueness, although it may
terminate after a reasonable time.

The requirements for an option contract may be listed as follows:

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2.2.1. The object of the option must be clearly described.
2.2.2. The price/cost of the object must be determined or determinable.
2.2.3. The manner of payment for the object must be determined.
2.2.4. The period for exercising the option must be determined (however- see the
abovementioned argument).

The parties may agree on the manner or way in which the substantive offer must
be accepted. In this instance, two cases are important for the purposes of this lecture,
namely Ficksburg Transport (Edms) Bpk v Rautenbach 1988 (1) SA 318 (A) and De
Jager v Burger 1994 (1) SA 402 (C).

2.3.Useful clauses to include in the option contract

2.3.1. A restriction on transfer of the option (pactum de non cedendo).

2.3.2. Counter-performance for the granting and holding of the option.
2.3.3. Clause prohibiting the inheritance of the option.

2.4.Breach and remedies

The breach of an option contract and its consequences are governed by the general
principles of the law of contract. An attempted revocation of the substantive offer does not
preclude the exercise of the option and the option holder is entitled to enforce the option
contract specifically by means of an interdict against the grantor. The option holder may
claim damages to be placed in the position which he would have been had the option been
exercised. The rights flowing from an option contract may be ceded, unless there are factors
which prohibit cession (such as the pactum de non cedendo-clause). Extinction of
obligations flowing from option contracts is governed by the principles applying to the
extinction of obligations in general.

In order to assist the student to further develop an understanding of the nature

of the option contract and the right to cede same, the case of Dettmann v Goldfain 1975
(3) SA 385 (A) is prescribed for detailed study.

3. Rights of Preference

3.1.Legal Nature
3.1.1. General:

A contract may be concluded to grant a contractant a preferential right to conclude another

contract with the other contractant. Common examples of such contracts, often referred to
as “contracts of preference” or “preference contracts” are the following:

 Contracts creating a “right of first refusal”, which is a preferential right to lease property.
 Contracts creating a “right of pre-emption”, which is a preferential right to buy property.
 A preferential right may also be created by a contract which grants a seller the right to sell
something to another.

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3.1.2. Rights of pre-emption:

A contract which creates a right of pre-emption does not place a duty on the grantor to sell
the subject-matter of the right. The holder of the right obtains a preferential right to buy, if
the grantor should decide to sell. It could be argued then, that the pre-emptive right is
conditional in the sense that its operation is made subject to the occurrence of some event
(the grantor’s decision to sell his property). This “event” is aptly described as a “trigger
event” in the case of Breytenbach v Stewart 1985 (1) SA 167 (A). In normal circumstances
and in principle, the contractants determine the event which brings the pre-emptive right
into operation.

But how is an agreement structured in practice to grant a preference of some kind or

another? An arrangement commonly resorted to is an agreement that, should the grantor
decide to sell his property, he is bound to make an offer to the holder of the right (This
construction is the one preferred by the courts). The construction has also been advanced,
however, that a pre-emptive right already contains an inherent offer by the grantor of the
right to the holder thereof, if the grantor decides to sell. In these latter-mentioned cases, the
preference mechanism is of such a nature as to enable the holder to acquire the subject-
matter of the right.

The granting of a preferential right does restrict the grantor’s capacity to alienate the
subject-matter and, since the restraint on alienation falls away if the holder waives the
preference, an offer voluntarily made to the grantee affords the grantor a way around the
restraint, should it not be taken up by the holder.

3.2.Requirements for rights of preference

A contract which grants a right of pre-emption must, like the option contract, meet all the
requirements for contracts in general. Contracts of pre-emption often specify the price at
which the holder may buy, or render the price objectively ascertainable. The contention
that a contract which creates a right of pre-emption must “foreshadow” at least the
essentialia of the substantive contract envisaged by the parties, and that the contract must
therefore invariably contain a substantive offer directed at a substantive contract, is
somewhat problematic, according to Van Huyssteen et al. In Hirschowitz v Moolman, the
appellate division of the High Court reaffirmed the more traditional approach that a
substantive offer is not an essential requirement for a contract of pre-emption. In the latter-
mentioned contract, the determination of the price may be left to the grantor. In the
Hirschowitz-case the court depended on the assumption of a general rule that any pactum
de contrahendo must comply with formalities prescribed for the substantive contract and
the further assumption that the legislation requiring formalities would otherwise be
frustrated.

3.3.Distinction between options and preference contracts

According to the courts, an option entails an offer to the grantee, which the latter can accept,
whereas in the case of a right of pre-emption, there is no offer at the time of the grant, and
the grantor is not obliged to make an offer unless and until he wishes to sell the property.
Accordingly, the acceptance of the offer contained in the option contract by the option-
holder is sufficient for the exercising of an option, whereas the exercising of a right of first
refusal (or pre-emption) “imports the bilateral action”- the making of the offer and its

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 acceptance. Because an option contract entails an offer that is to be kept open, an agreement
which does not foreshadow the terms of the substantive contract with the degree of
particularity necessary to amount to an offer cannot be an option contract. Such agreements
have been styled as “ordinary preference contracts”. They encompass not only the case
where the grantor is obliged to make an offer on the specified eventuality, but also those
instances where the duty of the grantor is a negative one. The distinction becomes blurred
where what is styled as a preference contract foreshadows the terms of the substantive
contract. This provides a basis for the argument that a contract of pre-emption contains a
substantive offer, subject to a potestative condition. Accordingly, this means that in such a
case, what is styled as a contract of pre-emption actually becomes a conditional option. The
traditional distinction between options and preference contracts can be maintained on the
basis that even where the terms of the substantive contract are specified in the pactum de
contrahendo, the qualification that he grantor will be bound to those terms only if he or she
so desires, precludes the animus contrahendi necessary for an offer. A further possible point
of distinction is that, whereas in the case of a true option the offer has to be kept open, it is
a characteristic of a contract of pre-emption that the substantive offer can be revoked before
acceptance, provided that the grantor no longer desires to sell.

LEARNING UNIT 7 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 5.

2. From List of cases:

Goldblatt v Freemantle 1920 AD 123

SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA

760 (A)

Miller and Another NNO v Dannecker 2001 (1) SA 928 (C).

Cecil Nurse (Pty) Ltd v Nkola 2008 (2) SA 441 (SCA)

Akasia Road Surfacing (Pty) Ltd en ‘n ander v Shoredits Holdings Ltd en

Andere 2002 (3) SA 346 (SCA)

Nyandeni Local Municipality v Hlazo 2010 (4) SA 261 (ECM).

Beijers v Harlequin Duck Properties 231 (Pty) Ltd t/a Office Space Online
(1216/2017) [2019] ZASCA 89 (31 May 2019).

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Second Edition. Chapter 6.

1. Introduction

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South African law follows an informal approach to the creation of contracts. This was
essentially decided in the case of Goldblatt v Freemantle 1920 AD 123, which is not included
in the list of cases for this module, but should be studied in detail for the purposes of this unit.
South African law recognizes both express contracts and terms, where the intention of the
parties is articulated verbally, whether orally or in writing, and tacit contracts and terms, where
the intention is inferred from the unarticulated conduct of the parties. In the case of Conradie
v Rossouw 1919 AD 279 The Appellate Division accepted into South African law the simple
Roman-Dutch concept of a contract as a serious and deliberate agreement. According to
Christie, it logically follows that no special formalities are required for the making of an
enforceable contract.

In order to strengthen the general rule that no formalities are required in order to create a valid
contract, Christie also provides the following examples:

Innes, J in Timoney and King v King 1920 AD 133 at 141:

“An acceptance may be inferred from conduct”

Eloff, J in Ally v Dinath 1984 2 SA 451 (T) at 454F:

“the principle is firmly established that any contract can be brought about by conduct”.

There are instances where statute prescribes certain formalities for the creation of a contract.
A fine example would be the Alienation of Land Act. Section 2 of this act reads as follows:

FORMALITIES IN RESPECT OF DEEDS OF ALIENATION

2 Formalities in respect of alienation of land

(1) No alienation of land after the commencement of this section shall, subject to the provisions of section
28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto
or by their agents acting on their written authority.

(2) The provisions of subsection (1) relating to signature by the agent of a party acting on the written
authority of the party, shall not derogate from the provisions of any law relating to the making of a
contract in writing by a person professing to act as agent or trustee for a company not yet formed,
incorporated or registered.

(2A) The deed of alienation shall contain the right of a purchaser or prospective purchaser to revoke the offer
or terminate the deed of alienation in terms of section 29A.

Effectively this section implies that if any deed of alienation (or contract of sale) of land
(immovable property) is not in written form, such contract will be void ab initio. The reason
for statute sometimes prescribing certain formalities for the conclusion of a valid contract, is
because formalities contribute to legal certainty and prevent malpractices, serve a cautionary
and protective function by drawing the line between negotiations and liability, and may be
utilized to afford protection to those in danger of exploitation and to assist in the identification
of the type of contract entered into by the parties.

Obviously, a written contract will have certain advantages over an oral one. Christie provides
that the following are three advantages of written contracts:
(i) The preparation of the contract gives the parties time to consider their positions
before committing themselves by their signatures.

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 (ii) The burden of proof is simplified: once the defendant’s signature is proved or
admitted the plaintiff has discharged his burden, and the burden is then on the
defendant to prove fraud, misrepresentation, or whatever defence he might have.

(iii) The scope for subsequent disagreement about the terms of the contract is very much
narrowed, since the terms are in writing for all to see.

To these advantages identified by Christie can be added the following:

(iv) Litigation is limited.

(v) Legal certainty is created.
(vi) Remedies can be included in advance.

It is of course also possible that the contracts themselves make compliance with formalities a
prerequisite for the creation of obligations, but this must not be confused with the case where
the agreement is reduced to writing merely to facilitate proof. A reduction to writing for this
particular purpose may have some legal consequences, but does not subject the operation of
the agreement to a formal requirement.

In the case of Bailes v Highveld 7 Properties (Pty) Ltd 1998 (4) SA 42 (N), it was stated that
even in respect of contracts subject to statutory formalities, parties might stipulate a greater
degree of formality than that required by the applicable statute.

Formalities imposed by either the parties or statute may be of divergent nature, but but most
commonly it is required that the agreement be reduced to writing and signed by the
contractants.

Basically, then, there are two instances where formalities are required for a valid contract:
Formalities imposed by the contractants and formalities imposed by statute.

1. Formalities decided on by the parties

Parties usually resort to writing of their own accord for evidential reasons rather than to impose
formalities. If the writing was intended as a formality for the creation of the contract, no legal
consequences ensue and no contract exists prior to the execution of the document. A party to
the agreement can probably not be compelled to comply with the formality. Parties may,
however, conclude an oral contract with a term that the agreement shall be reduced to writing
by them. It often happens that during the negotiations leading to the formation of a contract, or
in the terms of an informal contract itself, mention is made of a written document or of the
reduction of the terms of the contract to writing. This raises the question whether the informal
contract is binding and the written document only intended for purposes of proof of the terms
of the contract, or whether there is to be no contract until the written document has been drawn
up and executed. Christie even goes so far as to quote Grotius in answering this question:

The contract of sale may be made in writing or without writing. A written sale is not considered to be complete
until the writing has been fully executed. But with us, although there is no mention of writing this is understood
not to be with a view to a written contract, but merely for the purpose of reducing to writing the terms agreed upon
for better remembrance and proof, unless there is clear evidence of a contrary intention.

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This precise principle was adopted in Goldblatt v Fremantle: The burden of proof is on the
party who asserts that an informal contract was not intended to be binding until reduced to
writing and signed. Innes J had the following to say in the abovementioned judgment:

Subject to certain exceptions, mostly statutory, any contract may be verbally entered into; writing is not essential
to contractual validity. And if during negotiations mention is made of a written document, the Court will assume
that the object was merely to afford facility of proof of the verbal agreement, unless it is clear that the parties
intended that the writing should embody the contract. At the same time it is always open to parties to agree
that their contract shall be a written one; and in that case there will be no binding obligation until the terms
have been reduced to writing and signed. The question is in each case one of construction.

This is exactly what happened in Goldblatt v Fremantle. The parties entered into an oral
contract, but stipulated that the contract will not come into force before it has been reduced to
writing. Subsequently, the parties themselves created a formality, failing to comply with would
result in the contract being void.

A self-imposed formal requirement for the creation of a contract (such as the one imposed in
Goldblatt) may be done away with by a subsequent oral agreement to dispense with it. Once
the contract has been concluded in writing, the contractants will be entitled to cancel it orally,
unless formalities have also been prescribed for cancellation. Irrespective, however, of whether
parties resort to writing for the creation of a contract or merely for purposes of proof, the
agreement can be varied by informal agreement. However, where by means of a so-called non-
variation clause, parties have prescribed writing as a formal prerequisite for variation of a
contract, the position may be different.

The position regarding non-variation clauses in contracts

The non-variation clause is part of the contract, and if it is phrased wide enough to entrench
itself, no part of the said contract, including the non-variation clause itself, may be varied in
any way other than writing. A non-variation clause may also serve to prevent oral variation of
a clause, which prescribes formalities for cancellation. Non-variation clauses are intended to
protect contractants against disputes and problems of proof in regard to variations of their
contract. The enforcement of such a clause in the face of a subsequent informal agreement by
the parties to alter their contract seems to conflict with the freedom which contractants should
have to alter their previous consensus by subsequent agreement. (Students are reminded of the
cases of Brisley v Drotsky discussed in unit 1 of this study module). Yet, non-variation clauses
are enforced by the courts on the very assumption that to do so does not conflict with the
requirement of public policy that agreements freely entered into must be given legal effect. In
the final instance, the decision of the courts to enforce non-variation clauses is a policy
decision, based on an apparent preference for commercial certainty and avoidance of litigation.
The strict enforcement of non-variation clauses by the courts often causes problems for
contractants, and a variety of ways have been developed to mitigate the effect of what has come
to be known as the ‘Shifren straight jacket’.

In the case of SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA 760
(A), the plaintiffs in the court a quo (respondents in the current case) sought damages against
the respondents (appellants in the current case) because the latter had contrary to
the contract between them, ceded its rights to another without the permission (written or orally)
of the plaintiff. The contract in question contained the following two clauses:

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11.The tenant shall not have the right to sub-let the said business premises or any portion thereof, nor shall he
have the right to cede this agreement to any person whomsoever without, in either event, the written consent of
the owner first being had and obtained.

19. Any variations in the terms of this agreement as may be agreed upon between the parties shall be in writing
otherwise the same shall be of no force or effect.

The appellant admitted to the cession, but pleaded that he had entered into an oral agreement
with the respondents in terms of which the latter agreed to the said cession on condition that
the appellant took responsibility for the payment of levy by the cessionary.

The case first served before Erasmus, J, who decided that the parties were allowed to orally
agree that oral permission for the said cession would be sufficient. Thereafter, the case was
referred to Potgieter, R, who disagreed with the abovementioned decision of Erasmus’s. The
question before the appellate division, as posed by Steyn, JP, was thus whether, despite the
wording of clauses 11 and 19 mentioned above, the parties could conclude a valid oral
agreement whereby the contract would be amended to allow for the fact that oral permission
for cession would be permitted. Justice Steyn came to the following conclusion (freely
translated):

It cannot be derived from the fact that the parties were permitted to freely revoke their agreement orally, that they
possessed the same freedom with regard to orally amending their agreement where they have explicitly decided
that no amendment to their written contract would be valid if not in writing. On the other hand it cannot be derived
from the mentioned fact that the parties were allowed to amend without consideration of the formality.

Thus, Justice Steyn decided that an oral contract couldn’t be amended orally.

In the case of Miller and Another NNO v Dannecker 2001 (1) SA 928 (C), the defendant had
purchased certain franchise rights from one T in respect of a guest house for an amount of R350
000.00. Part of the purchase price had been payable on signature of the agreement and the
balance in two further installments. Clause 15.2 of the said agreement provided as follows:

This agreement constitutes the entire agreement between the parties who acknowledge that there are no other oral
or written understandings or agreements between them relating to the subject-matter of this agreement. No
amendment or other modification of this agreement shall be valid or binding on a party hereto unless reduced to
writing and executed by both parties hereto.

Although this case differs slightly to the matter in question and also the facts in the Shifren-
case (in the current case the pactum de non petendo finds application, which is an agreement
not to enforce a right), the following statement by Ntsebeza, AJ is interesting:

The dictates of public policy and the views of the community would never be served by a slavish adherence to a
non-variation clause in the face of an agreement in the form of a pactum.

Careful precaution should be taken not to confuse oral amendment of a contract and oral waiver
of the obligation to amend a written contract in writing only. In the case of Impala Distributors
v Taunus Chemical Manufacturing Co (Pty) Ltd 1975 (3) SA 273 (T), the court had the
following to say:
When a contract provides that dissolution thereof can only take place in writing, such a restriction can be revoked
by oral agreement. When the contract contains a further provision that no provision of the contract can be varied
other than in writing, it entrenches the restriction on revocation and oral dissolution is no longer possible. An oral
waiver is valid, but only by a party in regard to a right which accrues exclusively to himself in terms of the
contract. An already existing right of action arising out of breach of contract can also be waived orally.

This was effectively a support of Steyn, JP’s point of view in Shifren.

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In the case of Brisley v Drotsky mentioned above, a tenant sought to preclude a reliance on a
non-variation clause on the basis that to do so would in the circumstances be “onredelik,
onbillik en in stryd met die beginsels van bona fides (goeie trou)”. This argument was of course
derived from the Miller-case mentioned above. The argument that considerations of good faith
are relevant in assessing whether an agreement or term meets the criterion of public policy,
was “roundly rejected by the majority of the supreme court of appeal”. It was held that there
was no general equitable discretion on the strength of which a court could decide not to enforce
a non-variation clause merely because it was unconscionable or against good faith. The ethical
principle of good faith does not, therefore, intervene in contract law directly, but is realised
through the instrumentality of the technical, black-letter rules and institutions of contract
doctrine in which it is discounted and balanced out with other principles and policy concerns.
Inequitable results which might arise from the stance adopted in Shifren, are to be corrected by
the application of “die besondere reëls en beginsels” (“the particular rules and principles”) of
the law of contract.

In the case of Cecil Nurse (Pty) Ltd v Nkola 2008 (2) SA 441 (SCA), the respondent had
returned to the appellant a duly executed suretyship document and credit application form. The
suretyship provided that alterations to its terms would only be binding if agreed to in writing
by the appellant. The appellant instituted action in the magistrates’ court on the basis of the
suretyship for payment of a debt. However, the respondent then contended that the suretyship
had mistakenly been sent by his assistant in his absence as he was still negotiating limiting his
liability. The magistrates’ court had found in favour of the appellant, but this was set aside by
the court a quo. The appellate division found that once the original suretyship signed by the
surety was sent to and received by the creditor, a contract of suretyship had come into being.
Whether or not an amended document had subsequently been sent to the creditor was irrelevant.
It had constituted no more than a proposed amendment to a suretyship agreement already in
existence. That being so, the onus would be on the surety to prove that the creditor had agreed
to the proposed amendments, thereby bringing into being a ‘new’ contract of suretyship.

The court subsequently decided that the creditor had not agreed to the proposed amendments.

The current legal position is thus that a written contract cannot be varied by a subsequent oral
one. However, the following paragraph written by Neels in the South African Law Journal
should be kept in mind (freely translated from the Afrikaans):

The courts should exercise the discretion to correction in a principled and hesitatory manner. The principles of
legal certainty and autonomy demand that the consensus which was reached by the parties to the contract or the
reasonable belief that was created should serve as motivation. Only in instances where the unreasonableness or
unfairness of the preliminary legal decision is clear, must it be corrected on the grounds of fresh rules and
principles.

Van Huyssteen et al finally submit then that there may well be situations where the strictures
of the Shifren strait jacket should be eased by recourse to a notion of public policy or the
application of estoppel informed by, or, if needs be, developed with reference to the right to
dignity.

Please also study Nyandeni Local Municipality v Hlazo 2010 (4) SA 261 (ECM).

2. Formalities required by law

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Christie states the following:

In evolving the general principle that any serious and deliberate agreement, made with the intention that a lawful
obligation should be established, is enforceable, the Roman-Dutch lawyers of the 17th century must be credited
with a very considerable achievement. It is no longer necessary to investigate whether they were mainly influenced
by canon law, ius gentium (the law of mankind) or Germanic custom, because the achievement remains with us
except in respect of certain classes of contracts for which the law prescribes certain formalities.
The only justification for prescribing formalities can be to ensure reliable evidence of the terms of the contract
and so cut out wasteful litigation caused by faulty memory or attempts to maintain fraudulent claims or defences.

This basically provides an answer to the question why the law sometimes imposes formalities
for contracts. However, statutes which prescribe formalities for contracts may have different
objectives, which are relevant to the interpretation of the provisions of the relevant statute. For
instance, the objective of the Alienation of Land Act is to promote certainty regarding
transactions for the alienation of land, thereby limiting disputes and discouraging fraud and
perjury in respect of an important class of transaction.

The following are examples of statutes that impose formalities on contracts:

 The Alienation of Land Act 68 of 1981 (already mentioned), which requires alienations of
land to be in writing and signed by the parties or by their agents, acting on written authority.

 The General Law Amendment Act 50 of 1956 requires contracts of suretyship to be in

writing and signed by or on behalf of the surety. In terms of the same act, an executor
donation must be in writing and signed by the donor or his agent acting on written authority.

 Under the National Credit Act 34 of 2005, credit agreements are required to be in a
documentary form, complying with requirements applicable to the various categories of
such agreements and delivered to the consumer in the prescribed manner.

To establish whether statutory formalities apply in a particular case, the agreement must be
interpreted to ascertain whether it contains the essential features of the type of transaction,
which the statute, on a proper interpretation thereof, seeks to regulate. The courts have held
that, in order to avoid frustration of the objectives of the legislature, material variations to
contracts for which writing is prescribed must also be in writing to be effective. This applies
even where the particular statute does not refer to variations as such. The approach of the courts
is not without problems of its own: it may well happen that that a contractant who has agreed
to an informal variation (such as an informal agreement to extend the time for performance)
attempts to escape the consequences of his own agreement simply because he may rely on its
formal invalidity.

Subject to these limitations, a contractant who denies the validity of an informal variation to
which he agreed may be held to have waived his right to rely on the relevant part of the written
contract. There is also a tendency in case law to give effect to an informal agreement which
grants an extension of time or amounts to a forbearance to sue, or postpones performance on
the basis that such an informal agreement is not a variation of the contract, and need therefore
not comply with the prescribed formalities.

3. Non-compliance with formalities

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Non-compliance with formalities results in the nullity of the transaction. Performance rendered
in terms of a formally defective agreement, is regarded as having been made without legal
ground (sine causa), and recoverable by means of an enrichment action. In terms of the
common law, the proper remedy where the performance consists of money or involves the
delivery of property, is a condictio. For cases of performance pursuant to a formally defective
alienation of land, however, the courts fashioned an enrichment liability sui generis contrary
to the common law. Under this doctrine, recovery of performance was permitted irrespective
of the technical requirements of the relevant condictiones, but was limited in that the recipient
of performance could defeat an action by performing or tendering to perform his side of the
bargain. No action was available where both parties had performed in full. Thus, although a
party who had performed could not sue on the contract for the counter-performance, recovery
of his own performance was possible only where the recipient was unwilling or unable to
perform his side of the bargain. This rule, which became known as the “rule in Carlis v
McCusker”, was severely criticised as being contrary to the general principles of enrichment
liability, as having anomalous results and rejected for enrichment claims in respect of formally
defective hire-purchase agreements. In 1981, the legislature attempted to consolidate the
position by introducing a statutory enrichment action in the Alienation of Land Act. The Act
permits recovery not only of what has been performed in terms of a formally defective
alienation of land, but also of interest and compensation for detrimental consequences of the
enriching event. If the land has been transferred to the alienee, and the latter has performed in
full, an action for recovery is precluded and the alienation is regarded as valid ab initio in all
respects.

4. The parol evidence rule

Despite the difficulties attendant upon the parol evidence rule, it serves the important purpose
of ensuring that where the parties have decided that a contract should be recorded in writing,
their decision will be respected, and the resulting document or documents will be accepted as
the sole evidence of the terms of the contract. Van Huyssteen et al add hereto that since the
parties themselves integrated their agreement in a document that is a full and final
crystallization of their consensus, parol evidence (which means oral or other extrinsic evidence
to the document) regarding the negotiations and the contents of the agreement, is irrelevant and
misleading.

Van Huyssteen et al exclaim that when a dispute arises about an agreement reduced to writing,
a party will often experience the need to bring the evidence from outside the document
(‘extrinsic evidence’) to prove his version of the content and meaning of the contract. In such
circumstances the parol evidence rule generally comes into play to restrict the nature and extent
of the evidence that may be brought. The rule originated in English law, and was received into
our law on the assumption that it formed part of the law of evidence.

What exactly is the meaning of the parol evidence rule and what does it entail? Van Huyssteen
et al are consulted on this matter, as well as case law:
Corbett JA in Johnston v Leal 1980 3 SA 927 (A) at 943B:

It is clear to me that he aim and effect of this rule is to prevent a party to a contract which has been integrated into
a single and complete written memorial from seeking to contradict, add to or modify the writing by reference to
extrinsic evidence and in that way to redefine the terms of the contract…

To sum up, therefore, the integration (parol evidence) rule prevents a party from altering, by the production of
extrinsic evidence, the recorded terms of an integrated contract in order to rely upon the contract as altered.

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The Appellate Division in Lowrey v Steedman 1914 AD 532 543:
The rule is that when a contract has once been reduced to writing no evidence may be given of its terms except
the document itself, nor may the contents of such document be contradicted, altered, added to or varied by oral
evidence.

Solomon JA in Marquard & Co v Biccard 1921 AD 366 at 373 (one of the best-known English
formulations of the rule, according to Christie):

The rule of the law of evidence upon which he relies is nowhere more clearly stated than by Lord Denman in the
well-known case of Goss v Nugent (5 B & Ad 54): ‘By the general rules of the common law if there be a contract
which has been reduced into writing, verbal evidence is not allowed to be given of what passed between the parties
either before the written instrument was made or during its preparation, so as to add to or subtract from or in any
manner to vary or qualify the written contract’.

Watermeyer JA in Union Government v Vianini Ferro-Concrete Pipes (Pty) Ltd 1941 AD 43

on 47 (in what has come to be regarded as the leading case in this regard):
Now this court has accepted the rule that when a contract has been reduced to writing, the writing is, in general,
regarded as the exclusive memorial of the transaction and in a suit between the parties no evidence to prove its
terms may be given save the document or secondary evidence of its contents, nor may the contents of such
document be contradicted, altered, added to or varied by parol evidence.

Botha JA in National Board (Pretoria) (Pty) (Ltd) v Estate Swanepoel 1975 3 SA 16 (A) on 26
(wherein the term “integration rule” was accepted):

The rule is well summarized by Wigmore, Evidence, 3rd ed vol 9 sec 2425, as follows:

‘This process of embodying the terms of a jural act in a single memorial may be termed the integration of the act,
ie its formation from scattered parts into an integral documentary unity. The practical consequence of this is that
its scattered parts, in their former and inchoate shape, do not have any jural effect; they are replaced by a single
embodiment of the act.

In other words: When a jural act is embodied in a single memorial, all other utterances of the parties on that topic
are legally immaterial for the purpose of what are the terms of their act.’

The parol evidence rule has been said to comprise two distinct rules, namely the ‘integration
rule’ (see Botha JA’s explanation above) and the ‘interpretation rule’. The integration rule
determines the extent to which extrinsic evidence is admissible to prove the terms or content
of that part of a contract contained in a document which the parties intended to be finally
embodied in that document. The interpretation rule determines when and to what extent
extrinsic evidence may be brought to interpret the words used in a document intended as a final
reflection of the transaction. A document that purports to be an exhaustive record of the
transaction is assumed to be an integration. Where it is established that a specific document
does not amount to an integration of the agreement, the parol evidence rule does not apply. The
parol evidence rule applies principally in litigation between parties to a contract, but it may
also be relevant where the terms of the contract are in a dispute between litigants who are not
parties to the contract.

When will parol evidence be admissible?

The prohibition of extrinsic evidence of course extends only to evidence tending to contradict
the terms of the contract as reflected by the document. Accordingly, parol evidence to counter
admissions of fact recorded in a document is not subject to the rule, nor is evidence to prove

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the nullity or voidability of the contract, or that the transaction amounts to a simulation.
Extrinsic evidence which relates to the terms of the agreement but which is not inconsistent
with the document will be regarded as admissible. Thus it has been held that parol evidence is
admissible in respect of a document which is part of a ‘larger agreement’ and is intended ‘to
enable the main agreement to be carried out’, or in respect of an oral agreement which embodies
an additional consideration which induced the written contract. Furthermore, there is authority
for the view that extrinsic evidence is admissible to establish the existence of a ‘prior
contemporaneous oral agreement that the written contract is not to take effect except in a certain
contingency’, but the application of this exception regarding the proof by extrinsic evidence of
a suspensive condition is uncertain.

Parol evidence to prove that a party ostensibly contracting as a principal was in fact only an
agent in order to introduce the principal as the real party is not regarded as contradicting the
document, and is accordingly admissible.

Van Huyssteen et al feel that there is a question mark over the continued recognition of the
parol evidence rule in South African law. The rule limits the evidence admissible to determine
the intention of the parties to written contracts- an anomaly in a system of law that, in principle,
bases contractual on the intention of the parties. It is furthermore a matter of policy whether a
legal system should accept the rationale advanced for the rule, namely that certainty of
transactions should be enhanced, that the number of disputes should be decreased, and that the
risk of perjury should be restricted.

5. Rectification

Contractants who reduce their agreement to writing run the risk that, by accident or by design
of one of them, the document may not give accurate expression to their common intention.
Because of the subjective approach followed by South African law, and also the basis of
contractual liability, it follows that parties cannot be held bound to a document which does not
reflect their true agreement. A party to an incorrectly recorded agreement must therefore be
entitled to rely on the real consensus and even to have the document corrected to express their
true common intention. Such a correction of a contractual document by a judicial decree is
called rectification (of course judicial intervention will be obsolete if the parties agree to the
correction among themselves).

The contract itself as a juristic act is not rectified. What is rectified, is the document, inasmuch
as it does not express what the contractants intended to be the content of the juristic act. In the
case of Spiller v Lawrence 1976 (1) SA 307 (N) on 310, the court said that “all that the court
ever touches is the document”. Although rectification has been regarded as a necessary
companion to the parol evidence rule, it is not based on that rule, neither on special grounds
such as the exception doli generalis, good faith or fairness, all of which has been advanced to
explain rectification. Rectification is a logical consequence of the principle that a contract binds
because of actual consensus or a reasonable reliance on consensus.

When may a party claim rectification?

Rectification may be claimed without seeking ancillary relief, and a court may be requested
merely to correct a document, which records the common intention of the parties incorrectly.
Since the document, and not the juristic act expressed by the document, is corrected,
rectification does not amount to a variation of the contract. According to the courts, a party

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claiming rectification must establish that as a result of error or mistake the document does not
reflect the common intention of the parties, and how the document is to be reformed to reflect
that intention.

Proof of a prior or antecedent agreement (‘common intention’) on the terms of the contract is
a sufficient basis for rectification. Such an antecedent agreement need not in itself necessarily
constitute a contract. Rectification is thus possible where writing is a constitutive requirement
for the contract, and even where the agreement was first formulated when it was reduced to
writing. Rectification may also be granted where there was no prior common intention, for
instance where a fraudulent contractant, who represents that he has reached a common intention
with his co-contractant, drafts the document so as to prevent its reflecting that common
intention. This will also be the case where a party, aware of the other party’s ignorance of a
mistake in the recording of their agreement, remains silent. Rectification here serves to bring
to the fore in the document the reasonable belief of the victim as to the terms of the contract.

In the case of Akasia Road Surfacing (Pty) Ltd en ‘n ander v Shoredits Holdings Ltd en Andere
2002 (3) SA 346 (SCA), the parties had entered into a written contract, as well as a
supplementary contract in terms whereof the respondents had sold certain businesses and
assets, as well as clientele of those businesses. The purchase price was constituted as follows:

- R6 237 000 in respect of the businesses and assets;

- R400 000 in respect of immovable property;
- R2 582 000 in respect of clientele.

One of the assets in the annexure to the contract was described as a “new asphalt plant” with a
market value of R2 990 850. The appellants claimed that at the conclusion of the contracts, this
“asphalt plant” had not been finished. The appellants wanted to rectify their contract by
including the following clause:

The purchaser shall pay the full sum of R2 990 850,58 in respect of the new asphalt plant to the sellers as
hereinbefore provided, regardless of the fact whether the aforesaid asphalt plant is completed and erected at the
time of signature hereof or not. The sellers shall be obliged to complete and erect the new asphalt plant according
to plan and to the purchaser’s full satisfaction on or before 31 October 1996. The completion and erection of the
new asphalt plant shall be effected at the seller’s cost. Should the seller fail to complete and erect the new asphalt
plant, or should the sellers fail to commence with the completion and erection of the aforesaid new asphalt plant
immediately after the builders’ holidays of December 1995/January 1996, the purchaser shall be entitled to
complete and erect the asphalt plant at the purchaser’s cost, whereupon the purchaser shall be entitled to deduct
the full amount of the moneys expended upon the construction and erection of the aforesaid plant from the
outstanding balance from time to time owing and due to the sellers in terms of this agreement.

The court decided the following:

Rectification of a contract has as its purpose the bringing of the written document into harmony with the true
intention of the contracting parties, which intention they failed, by reason of a common mistake, to put into
writing. If that true intention is vague, it might affect the validity of the rectified contract but not a defendant’s
claim for the rectification of the contract. The law is not, after all, that effect should be given to a written document
which incorrectly reflects the agreement between the parties on the ground that the incorrect written version does
indeed constitute a valid contract while that upon which the parties actually agreed does not constitute a valid
contract.

See particularly Van der Merwe v Van der Merwe (843/2018) ZASCA 76 (30 May 2019).

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LEARNING UNIT 8 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 6.

2. From List of cases:

South African Forestry Co Ltd v York Timbers Ltd 2005 (3) SA 323
(SCA)

Blou Bul Boorkontrakteurs v McLachlan 1991 (4) SA 283 (T)

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Second Edition. Chapter 8.

1. Introduction

The performance agreed upon must be objectively possible when the agreement is concluded,
in order to constitute a valid contract. In the case of impossibilium nulla obligatio est (initial
objective impossibility) no obligations will be created by the agreement. The mere fact that
circumstances attending the conclusion of a contract preclude the realization of the objective
of a contractant in respect of the contract does not render the transaction void for impossibility.
What is required is that a performance envisaged by the agreement should be impossible.

Initial possibility of performance was already a requirement in respect of contracts in Roman

and Roman-Dutch law. Opinions might have differed on the precise scope and effect of initial
impossibility of performance with regard to the legal efficacy of an agreement intended to be
a contract, but a general principle was eventually developed from the premise that individual
volition was rational only to the extent that it was directed at doing what was possible. An
undertaking to do the impossible could not, on this view, be regarded as a rational choice and
would therefore preclude the conclusion of a contract. This reasoning largely underlies the
requirement of initial possibility of performance in modern law in so far as a contract is based
on actual consensus. Where a contract is based on an objective foundation, one might say that
it would simply not be reasonable to hold someone to an impossible performance. There is no
need to ascribe the doctrine to the operation of a tacit or implied term: the effect accorded to
impossibility results from objective policy considerations underlying the theoretical basis of
contractual liability.

The point of departure seems to be that because neither party would have contracted if the
actual state of affairs had been known, the risk of initial impossibility cannot, in the absence of
an undertaking or legal rule to the contrary, be allocated to either of them. The reasoning is
akin to that which underlies the doctrine of supervening impossibility of performance.

2. The meaning of “impossibility”

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2.1.Subjective (Relative) impossibility

Subjective impossibility means that, although someone else may be possible to render the
performance in question, the debtor is unable to do so. It thus relates to the inability of a
particular debtor to perform.

Example: ABC Brickmakers receives an order to manufacture 1 million bricks.

Because of physical and inherent restraints, ABC Brickmakers is unable to manufacture
that amount of bricks. This does not mean, however, that no brickmaker will be able to
manufacture that amount of bricks, just that this specific one (ABC) is unable to do so.

2.2.Objective (absolute) impossibility

Objective impossibility involves a general inability to perform: In the eyes of the law, no-one
is able to render the performance. Examples of objectively impossible performances are:

 Delivery of a non-existent thing, whether it had existed but ceased to exist, or never existed
at all;

 A res extra commercium, such as an attempt to sell a natural person;

 A thing belonging to the purchaser is abortive on his account, such as a mandate to sell
shares on the stock exchange which is objectively impossible because the shares are not
listed.

The test for objective impossibility is a pragmatic standard. While an absolute physical
impossibility will satisfy the test (for instance where the contemplated performance is
physically or notionally wholly incapable of performance), a performance might conceivably
be rendered will nevertheless be impossible if insistence of its performance would be
unreasonable in the circumstances. Where performance is prohibited by law, the inability to
perform may be treated as an instance of objective impossibility or illegality. Where it is clear
that invalidity of the agreement is the prescribed sanction- as often appears from legislation- it
would probably be best to apply the rules of illegality here. Where invalidity is not so obviously
required, the notion of objective impossibility may well be adequate for dealing with the matter.
If such matter were to be approach as an instance of illegality, it would be necessary to consider
the possible moral turpitude and other public and private interests involved.

If performance is merely difficult, it would not amount to objective impossibility, but to

subjective impossibility (this is a factual question- see the case of Blou Bul Boorkontrakteurs
below). However, performance may be so difficult and lead to such economic or other hardship
that it will be regarded as objectively impossible in terms of the applicable standard. The
inability of the particular debtor and the general inability to perform may coincide, with
resultant objective impossibility, for example where someone is engaged to perform in a
personal capacity at a specified time but is already incapable of doing so.

For instance, if an artist’s manager undertakes that he (the artist) will give a
performance in an hour’s time, yet at that very moment the artist is 10 000 km away.

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Also, where a tenant is unable to take occupation of the rental property because of the
manifestation of a previously unsuspected allergy to materials used in its construction.
No person in the position of the landlord is seemingly in a position to render the premises
fit for occupation by the particular tenant.

An initial impossibility attributable to the conduct of a party to an agreement will not exclude
contractual liability.

3. The effect of impossibility

Subjective impossibility of performance does not prevent the creation of an obligation. If the
debtor eventually does not perform, he may be liable for breach of contract.

Objective impossibility of performance at the time of conclusion of the agreement, will lead to
the situation where no obligation is created in respect of that performance. Furthermore, no
obligation is created in such a case with reference to any agreed counter-performance.

Performance may be warranted (guaranteed) to be possible. The party who gives the warranty
will be bound by the contract and will be liable for breach of warranty if he fails to perform
correctly, and even if the performance turns out to be objectively impossible.

Blou Bul Boorkontrakteurs

The plaintiff and defendant had entered into a written settlement agreement in the Magistrates’
Court wherein it was agreed that the plaintiff would clean a drilling hole to a depth of 132
metres, at R18 per meter drilled. He would also install the necessary material up to that depth,
also at R18 per meter. After drilling had started, steel poles and waste were found in the drilling
hole, which made further drilling objectively impossible.

The following exclamation by Eloff, JP is relevant to this unit (freely translated from the
Afrikaans text):

Where impossibility is raised, it is no longer about the question of the presence of consensus. What is then
applicable is that one of the ways in which an obligation had arisen, can be eliminated.
It ought to be mentioned that the appellant’s claim to impossibility can only succeed if the impossibility is
(objectively speaking) absolute. Also, the claim can only succeed if the plaintiff had not guaranteed performance
in any way.

The more recent case of South African Forestry Co Ltd v York Timbers Ltd 2005 (3) SA 323
(SCA), presents a somewhat more complex set of facts.

Two contracting parties had entered into a contract more than thirty years before the case in
question. In each case, the South African Government had been the “seller” of softwood logs
obtained from two government plantations in the Mpumalanga Province. The parties had
agreed that should any disagreement arise between the parties regarding the terms of the
contract, the Minister of Forestry would be approached to settle the disagreement. Failure by
the Minister to do so would result in arbitration-proceedings. In 1982, the respondent (York)
took over all the rights and obligations of the other party in terms of both contracts. With effect
from 1 April 1993, the government transferred all its rights and obligations under the said
contracts to the appellant (South African Forestry Company Ltd), pursuant to the provisions of
Section 4 of the Management of State Forests Act 128 of 1992.

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It eventually happened that the appellant approached the Minister to take a decision regarding
a certain disagreement that had occurred between the parties. The Minister did not decline to
become involved (as he had done some time earlier), but refused to express the opinion sought
by the appellant. The appellant’s case was based on the fact that the contracts had lapsed
through intervening impossibility, because of the Minister’s refusal to perform his assigned
functions in terms of the contracts. The appellant subsequently cancelled the two agreements.

Brand, JA held that

…an order is issued declaring that the plaintiff validly cancelled the two contracts between the parties, referred to
as the Swartfontein agreement and the Witklip agreement, on 10 November 1998.

LEARNING UNIT 9 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 7.

2. From List of cases:

Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A)

Mort NO v Henry Shields-Chiat 2001 (1) SA 464 (C)

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

Magna Alloys v Ellis 1984 (4) SA 874 (SCA)

Coetzee v Comitis and Others 2001 (1) SA 1254 (C)

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 7.

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 10.

1. Introduction

1.1.The concept “legality”

An agreement must be legal to constitute a contract, with the consequence that an illegal
agreement will not create obligations. The reason why legality is a requirement for a valid
contract rests on the interests or convictions of a society pertaining to the recognition of
transactions between individuals, namely that it is generally desirable which are entered into
seriously and properly should be enforced. However, agreements which are not necessarily in
conflict with the interests and convictions of society ought not to be enforced. Contracts that
are “unconstitutional” are said to be unenforceable, especially where “strong public policy

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considerations” are involved. Agreements are illegal if they conflict with statutory law or
common law. Illegality occurs where the conclusion of an agreement or the agreed performance
or the purpose for which the agreement is concluded is contrary to the law. A statutory or
common-law rule may clearly express that certain agreements will be illegal. This is however,
not always the case.

1.2.Public interest and good morals

Agreements will be illegal if they are contra bonos mores (contrary to the good morals) or
against public interest or policy. Remember that the law does not enforce morals simply
because they are morals, but it does to a certain extent absorb moral content into legal doctrine
and even specific rules. The reason for this absorption of morals is of course for the sake of
expediency and justice, to the extent that the latter-mentioned concepts form part of the purpose
and function of the law. The distinction between boni mores on the one side and public interest
and policy on the other hand is not clear. In practice, the term boni mores with regard to
illegality applies to agreements relating to the everyday morals or conduct set by a specific
society. Examples would be the norms governing sexual morals and honest and proper conduct.
The following agreements are said to be contrary to public interest and policy:

 Agreements which are to the detriment of the state;

 Agreements which obstruct or defeat the administration of justice;
 Agreements which restrict someone’s freedom to act or to be economically active.

Agreements which are in accordance with public policy and in the public interest would include
those which are in accordance with good morals.

2. Determining illegality

Sometimes, agreements are contrary to public policy to such an extent that the mere conclusion
thereof would be illegal. The illegality of these agreements is either found in statute or in
provisions of the common law.

Examples of prohibitions contained in statutes:

 Prohibitions relating to the sale and distribution of:

 Alcohol: The Liquor Act 59 of 2003;

 Drugs: The Drugs and Drug Trafficking Act 140 of 1992;
 Dangerous weapons: The Dangerous Weapons Act 71 of 1968;
 Precious stones: The Diamonds Act 56 of 1986;
 Commodities on Sundays or outside approved business hours: Various statutes regulating
shopping hours.

Examples of common law prohibitions:

 Attempts to oust the jurisdiction of the courts;

 Attempts to deprive a contractant of the opportunity to properly defend himself or apply
for an administration order;
 Agreements with enemy subjects;

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 Certain pacta de quota litis (agreement for in the proceeds of litigation);
 Certain pacta commissoria;
 Certain pacta successoria;
 Certain marriage brokering agreements for reward;
 Agreement in terms of which a contractant purports to waive, in advance, the protection
afforded by the Prescription Act against the public interest.

It is possible for an agreement which was legally concluded to be illegal because of the
performance which is its subject matter. For instance, an agreement to commit a crime or a
delict would be illegal. A sale of a pistol by a licensed dealer to a licensed buyer would be
legal, but not if the buyer binds himself to use the pistol to kill someone. Even if neither the
conclusion of a contract nor the performance being undertaken is illegal, the agreement may
still be illegal because of the purpose for which it was concluded. If, for instance, the buyer
does not bind himself as against the seller to commit a murder, but if the seller knows that the
buyer intends to kill someone, the agreement will still be illegal for its purpose: Both parties
must have the same legal purpose. If one of the contractants is not aware of the other’s motive,
the agreement cannot be said to have an illegal purpose.

Where it is clear that a term is illegal, the matter is simple. Where the situation is not so simple,
however, one should consider the tendency of the agreement to be contrary to public policy,
public interests or the boni mores. This mentioned tendency would have to be proven with a
considerable degree of probability in order to result in illegality of the agreement.

In the case of Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A), the appellant was a company which
conducted business as a financier, and the respondent was an anaesthetist. The parties had
entered into a discounting agreement in terms of which the respondent was obliged to offer for
sale to the appellant any book debts he wished to sell. The purchase of such book debts was to
be governed by the said discounting agreement.

On the same date the abovementioned discount agreement had been entered into, the
respondent had also executed a deed of cession in favour of the appellant and two other
companies, in terms whereof the respondent had ceded to the creditors (the abovementioned
three companies) the following:

…all claims, rights of action and receivables which are now and which may at any time hereafter become due to
me/us by all persons (hereinafter referred to as my/our debtors) without exception, from any cause of indebtedness
whatsoever (“the claims”) as continuing covering security for the due and proper performance of all obligations
which I/we may have in the past owed or incurred or may at the present or in the future owe or incur to all or any
of the creditors from whatsoever cause and whenever arising…

In effect, the respondent had ceded all debts owed to him to the appellant. The question before
the court was whether this cession was a valid one.

Smalberger, JA decided, with Van Heerden, JA and Rabie, ACJ concurring in a minority
judgment, that our common law did not recognise agreements that are contrary to public policy.
He explained that when deciding what is meant by public policy and when it can be said that
an agreement is contrary to public policy, the interests of the community are of paramount
importance. Agreements which are clearly inimical to the interests the community, whether
they are contrary to law or morality, or run counter to social or economic expedience, will, on
the grounds of public policy, not be enforced.

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The learned judge continued to state that “no court should shrink from the duty of declaring a
contract contrary to public policy when the occasion so demands. The power to declare
contracts contrary to public policy should, however, be exercised sparingly and only in the
clearest of cases, lest uncertainty as to the validity of contracts result from an arbitrary and
indiscriminate use of the power.”

In the case of Mort NO v Henry Shields-Chiat 2001 (1) SA 464 (C), Davis, J made the following
obiter observations about the principle of bona fides in South African law of contract:

For the past thirty years…it has been repeatedly claimed that in modern South African law of contract contracts
are bonae fidei.

...but it is clear that if the doctrine is to be taken seriously then the primary importance accorded to the private
autonomy of contracting parties must be reconsidered as must the hegemony of the will theory of contract which
survives even in the context of dicta which nod in the direction of social responsibility.

…Like the concept of boni mores in our law of delict, the concept of good faith is shaped by the legal convictions
of the community. While Roman-Dutch law may well supply the conceptual apparatus for our law, the content
with which concepts are filled depends on an examination of the legal conviction of the community- a far more
difficult task. This task requires that careful account be taken of the existence of our constitutional community,
based as it is upon principles of freedom, equality and dignity.

…In short, the constitutional State which was introduced in 1994 mandates that all law should be congruent with
the fundamental values of the Constitution. Oppressive, unreasonable or unconscionable contracts can fall foul of
the values of the constitution.

3. Consequences of illegality: The in pari delictum-rule

Delictum, according to Van Huyssteen et al, refers to illegality. The question that is most often
raised is whether the expression in pari delicto necessarily implies that a party who is barred
from reclaiming must have been in delicto at least to the same degree as the other party.

On the one hand, it is argued that degrees of disgraceful conduct cannot be distinguished. This
argument rests on the fact that it is practically impossible to measure degrees of disgraceful
conduct. This approach would entail that where the claimant is in any way in delicto the rule
will apply without exception or relaxation. As a consequence of the distinction between mere
illegality and immorality it has been suggested that the par delictum rule should apply only if
the party who wishes to reclaim performance has acted immorally.

In the case of Klokow v Sullivan 2006 (1) SA 259 (SCA), Cachalia AJA noted that the par
delictum rule, “which curtails the right of the delinquent party to avoid the consequences of his
performance or part performance of an immoral or illegal act, is concerned with the moral guilt
of contracting parties, not their criminal liability. Where a contract is in contravention of a
statute, the question whether or not the plaintiff is also prima facie liable for prosecution under
the (Liquor) Act, albeit as an accomplice, has no direct bearing on the question of his moral
turpitude.”

The parties in the abovementioned case had entered into a written agreement in terms of which
the plaintiff (in the court a quo) was to acquire from the defendant a business that provided
“adult entertainment”, which included the selling of liquor to its clients. The plaintiff had paid
to the defendant half of the purchase price, and subsequently took possession of the business.
However, only a month after having taken over the business, the plaintiff returned the business
to the defendant, and claimed repayment of the portion of the purchase price.

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The basis of this case is that the plaintiff alleged that the defendant (the holder of a liquor
licence) had concluded the agreement permitting the plaintiff to procure a controlling interest
in the business without obtaining the necessary permission of the chairperson of the Liquor
Board. This constituted an omission in terms of section 38 of the Liquor Act, which reads as
follows:

The holder of a licence shall not permit any other person to procure a controlling interest in the business to which
the licence relates, unless the chairperson has, on application by the holder, granted consent that such a person
may procure such an interest in that business.

The defendant submitted on his part that the Act had placed an obligation on the plaintiff to
(with the defendant) make written application for the licence in question to the chairperson of
the Liquor Board. This was not done by the plaintiff. The defendant accordingly pleaded that
the plaintiff was precluded from recovering the amount claimed, as “both he and the plaintiff
were in pari delicto.

The court decided that before the decision in Jajbay v Cassim in 1939, a party seeking to
extricate himself from the consequences of an illegal or immoral contract had to demonstrate
that he had come to court with clean hands. This “clean hands” doctrine from English law is
similar to the par delictum maxim from Roman law. A plaintiff who was found to be in pari
delicto was unable to recover any money paid or property handed over to a defendant pursuant
to it, and if such plaintiff based his case on such a contract in formulating his pleading, he
would fail on this basis alone. In the Jajbay v Cassim-case, the court recognized that the strict
enforcement of the par delictum-rule as explained above, may sometimes cause inequitable
results between parties to an illegal contract. To prevent inequities, therefore, the court said
that the rule had to be relaxed where it is necessary to prevent injustice or to promote public
policy.

The Appellate Division found that there was no need for the plaintiff to plead relaxation of the
par delictum-rule on grounds of public policy, or that the defendant had been unjustly enriched.

Although the case of Jajbay v Cassim 1939 AD 537 is not prescribed for study in this
module, students would benefit from reading the case.

The complete maxim reads as follows: in pari delicto potior est conditio defendentis.

4. Agreements in restraint of trade

Van Huyssteen et al define an agreement in restraint of trade as “an agreement by which

someone is restricted in his freedom to carry on his trade, profession, business or other
economic activity.” A restraint of trade is usually imposed in order to protect the economic
interests of the party in whose favour it is imposed. Employers often restrain employees in their
service contracts to the extent that an employee who leaves the employ undertakes not to
compete with his former employer, either independently or in the employ of another. Many
partnership agreements contain a clause which restrains partners who leave the partnership
from competing with it.

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The fact that an agreement places some restraint on one of the parties does not in itself make
the agreement objectionable. If, however, the restraint is so restrictive of one of the parties as
to conflict with the public interest it will be illegal and unenforceable.

In the case of Magna Alloys v Ellis 1984 (4) SA 874 the respondent had instituted action against
the appellant in the court a quo wherein he claimed that he had entered into an oral agreement
with the latter for the sale of some of the appellant’s apparatus (mainly welding apparatus), and
that he, at the time of instituting the action, had not yet received his full commission for the
sale of such apparatus. In terms of a certain clause in the agreement, the respondent had
undertaken that for a period of two years following the termination of the agreement for any
cause, and within a radius of 10 kilometres of the perimeters of a certain geographical area, he
(the respondent) would not:

i. directly or indirectly either as a partner, employee, agent, salesman, or

representative enter into or engage in any business in competition with the
defendant;

ii. sell any other thing, in substance, or material, the function, use or purpose which is
similar to or the same as the function, use or purpose of the products of the
appellant.

iii. seek or solicit customers or business for the sale of such said thing, substance or
material within the area mentioned above;

iv. promote or assist financially or otherwise any person, firm, association or

corporation engaged in a business which competes with the appellant.

The respondent subsequently joined a rival firm of the appellant. The respondent claimed the
following:

The clause is a covenant in restraint of trade in that it purports to restrict the common law right of the plaintiff to
trade or work and the defendant seeks, pursuant to this clause, an order which has the effect of interdicting the
plaintiff from continuing with his present work. The agreement being, by virtue of the above facts, a covenant in
restraint of trade, is prima facie void and unenforceable. The onus is upon the defendant to satisfy the Court that
the restraint is reasonable. The plaintiff contends that the entire clause is unreasonable and unenforceable.

The appellant responded that the clause in question was indeed reasonable and therefore
enforceable, for the following reason, as stated in a clause in the contract:

The agent (respondent/Ellis) acknowledges that the training materials, advice and assistance of the company’s
supervisors, customer lists, route sheets and other confidential information, all given to him by the company
(appellant/Magna Alloys) or acquired or formulated by him during the effectiveness of this agreement as a result
of his having access to the aforementioned aids and information and dealing in the company’s products are of
such a nature as to make it reasonable and necessary for the protection of the company that the agent will not
compete with the company within or in the vicinity of the geographical area in question for custom amongst the
customers or potential customers of the company for the period hereinafter mentioned.

The court stated that on numerous occasions in the past South African courts had followed
English law in proclaiming that every restraint of trade-clause was prima facie invalid, because
it was against public policy. A party who alleged otherwise, had to prove same. Rabie CJ had
the following to say on this point (freely translated from the Afrikaans text):

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One can thus with certainty accept that there is no proclamation in our common law which declares a restraint of
trade-clause invalid just because of the nature thereof. Consequently, there is no authority in our common law to
follow the notion that has for so long been used by our courts, that is, that a restraint of trade is prima facie invalid.
It is an approach which follows English law.

Of course, the court’s decision above does not imply that all restraint of trade clauses are
necessarily valid. What it does imply, is that each set of facts should be considered and judged
on its own merit. If a court should find that a restraint of trade clause indeed impeaches on
public interest, the clause should be found to be invalid. But it is not prima facie invalid.
Restraints of trade should be treated like all other contractual terms and, in principle, are
enforceable. Herein lies the importance of the Magna Alloys v Ellis-case.

The term “public interest” and the constitutional values embedded therein

In order to determine whether a particular restraint of trade-clause is in fact contrary to the

public interest, one would first have to determine what “public interest” entails. Van Huyssteen
et al mention that two constitutional freedoms or values come into conflict when the legality
of a restraint of trade clause is in issue: freedom of contract v freedom of trade. The one cannot
be given preference to the exclusion of the other. The fact that a contractual restraint of trade
may be enforceable in principle is in keeping with the general approach to the creation and
enforceability of contractual terms in Roman and Roman-Dutch law as understood by the South
African Courts. It has already been mentioned above in the discussion of the Magna Alloys-
case that the provincial courts in South Africa followed the approach of English courts
regarding the question whether and when a restraint of trade-clause would be illegal. The
position in English law was (and is still today) that restraints of trade are prima facie illegal
and void (See Magna Alloys-case). If, however, in the circumstances, the restraint is reasonable
between the parties (inter partes) and not against public interest, it is valid and enforceable.

Freedom of contract is thus the preferred value.

Freedom of contract as a primary value can also probably be inferred from certain
provisions of the constitution of the Republic of South Africa, e.g. the very fact that
certain basic rights can only be effectively exercised if the particular person can freely
conclude contracts, and also the provisions regarding the limitation of basic rights.

When determining the public interest in respect of a restraint of trade, the courts often inquire
into the “reasonableness” of a restraint. This “reasonableness” is not to be equated with
reasonableness inter partes. Courts are intent, however, to focus on individual interests in
general and on the particular protectable interests of the contractants. Whether the restraint is
reasonable or not inter partes is not by itself a measure for legality, but unreasonableness may
be an important indication that the restraint is against public interest.

The most important factors to be considered when the public interest is determined are the
following:

 The nature of the restrictive activity;

 The geographical area in which the restriction is intended to operate;
 The period of the restriction;
 The particular interests which stand to be protected by the restriction, such as business or
trade connections, clientele and trade secrets.

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A restriction intended to exclude competition as such, without also protecting some
legitimate interest, will normally be against public interest. This consideration will apply to
all kinds of restraint, including those between employer and employee, since employees are
no longer automatically regarded as being in an unfavourably unequal bargaining
position.

Whether a restraint conflicts with the public interest is, as a rule, determined with reference tot
the circumstances prevailing at a time when a court is required to decide the issue and not when
the agreement was concluded. Occasionally, though, it would be necessary to take a look at the
circumstances that prevailed between the parties at the time of signing of the contract in
question. Remember that public interest does have an ever-changing content and may indeed
have changed since the conclusion of the agreement, or may change in future.

A court is not constrained to make a simple choice between enforcing the entire restraint or
not, but may decide that a restraint is partially enforceable and partially unenforceable. The
onus of proving the legality of a restraint of trade-clause rests on the party who relies on the
existence of such a restraint of trade-clause. If a restraint which runs contrary to public interest
remains valid, there would be good reason to burden the contractant who resists the
restraint with the onus of proving conflict with the public interest.

Clarity is evasive on the whole issue of public policy and constitutional rights. The reason for
this is that the text of the constitution is not definitive on the precise relation between and the
weight attached to freedom of trade, freedom of contract and, overall, freedom of personal
choice.

LEARNING UNIT 10 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 8.

Alternative study:

Hutchison et al.
The Law of Contract in South Africa. Third Edition. Chapter 8, pp.210-215.

1. Introduction

The agreement in question must bring about certainty regarding its legal consequences. The
contractants have a duty to clearly describe the nature and practical aspects of the performance
and obligations. Failure to do so would probably result in the nullity of the agreement. Courts
have in the past been unwilling and incapable of relieving the parties of the burden of
determining the consequences of their transaction for themselves. Irrespective of whether the
agreement is oral or in writing, or concluded tacitly by conduct, the question is whether it
defines the agreement in such a way as to render the obligations capable of being enforced by
the courts. The test in this regard is an objective one and an agreement may be void for
vagueness despite the parties’ belief that a contract has been concluded.

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Extrinsic evidence is not admissible to show that a contract is void for vagueness if on the face
of it, its terms, on a linguistic treatment, do not justify such a conclusion. It has been said that
the issue of vagueness is to be determined with reference to the state of affairs obtaining at the
conclusion of the contract.

An agreement may attempt to achieve certainty by means of a full and exhaustive description
of the performances and other aspects of the relationship contemplated by the parties. Where
it is impractical, or for business reasons undesirable, to spell out the consequences of a contract
in full at its conclusion, certain aspects of the contract may be left open for determination at a
later stage in terms of a mechanism agreed to by the contractants. Provided that such an
arrangement renders the consequences of the contract objectively ascertainable, this course of
action is unobjectionable.

Although this requirement of a valid contract is in content not as voluminous as the other
requirements, it is arguably the most important, because good writing skills and use of grammar
are needed to comply with this requirement. The performance and counter-performance must
be described so completely as to discharge any possibility of vagueness in terms of the
performance.

In the next unit, attention will be given to drafting of certain clauses in a contract. The
requirement of certainty will come under sharp focus in that unit.

2. Consequences of uncertainty

An agreement that is uncertain in an essential respect creates no obligations and the same holds
true where the agreement is uncertain in a material respect, unless the affected part is severable
from the agreement as a whole. The possibility that uncertainty in a contractual term, intended
for the exclusive benefit of one of the parties, may be circumvented by a waiver of that term
by the relevant party, has been rejected. Performance in terms of a contract that is void for
vagueness may be recovered by means of an enrichment action, provided that the requirements
of a recognized enrichment action are satisfied.

End of Part I

LEARNING UNIT 11 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 11 pp. 391-399.

Alternative study:

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 13.

Nature and forms of Mora Debitoris

Mora debitoris refers to the wrongful failure by the debtor to perform timeously. The mora
occurs where the debtor either fails to tender the performance owed by him in terms of a

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particular obligation timeously, or timeously tenders incomplete or defective performance.
Mora can by its nature only occur in respect of positive obligations. Because the debtor does
not effect performance at all, this form of breach can be described as negative malperformance.
See Birkenruth Estates (Pty) Ltd v Unitrans Motors (Pty) Ltd and others [2005] 3 All SA 128
(W).

Different forms of mora are distinguished:

Mora ex re;
Mora ex persona
Mora ex lege

Delay (mora) as a form of breach of contract relates only to the time that performance must
take place. Mora can only occur where performance remains possible in spite of the delay. Here
the time and contents of a performance are so closely linked that performance after the due date
and time would be meaningless, delay by the debtor would usually amount to prevention of
performance. This principle was formulated in Algoa Milling Co v Arkell & Douglas 1918 AD
145.

If a photographer is engaged to take pictures at a wedding ceremony on a particular

date, it would be to no avail if he turns up a week later: through his delay he has made
performance impossible.

Similarly, if an employee does not show up for work, performance in respect of the period
of time which has passed will usually have become impossible.

Mora is of a continuous nature in that it may endure over a period of time. If a debtor renders
performance after having been in delay for some time, he fulfills his duty in terms of the
particular obligation, but he does not cure the breach of the past. He will still be liable to
compensate the creditor for any loss suffered as a result of the breach of contract. If the creditor
has acquired a right to resile on the ground of the debtor’s mora, he cannot be deprived of this
right by an offer of performance. A debtor who is already in delay can commit another form of
breach of contract, for instance by performing defectively. By performing, the debtor will put
an end to his delay, but because the performance is defective he will have committed positive
malperformance. The debtor will then be liable for his mora in the past as well as for positive
malperformance.

Requirements for Mora Debitoris

The element of conduct in respect of mora by a debtor is an omission or failure to act as agreed,
that is to tender performance while the debtor is legally subject to tender performance. If,
however, the failure to act leads to impossibility of performance, the omission cannot be treated
as mora but it may be some other form of breach of contract (such as prevention of
performance).

To constitute breach of contract the failure to tender performance must be wrongful. But before
one can even speak of the wrongfulness of the failure to perform, the debt must be due and
enforceable. A debt is not enforceable before the time set for performance or, if no time has
been set in the contract, before a reasonable time has elapsed. Depending on the circumstances

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of the contract “reasonable time” may mean that performance is due and enforceable
immediately after conclusion of the contract.

Requirements:

I. The debtor must be in mora

In the case of Ponisammy v Versailles Estates 1973 1 SA 372 (A), a written contract was
concluded between the appellant and one Pienaar on behalf of a company that at that stage was
still to be registered. The written deed of sale (contract of sale) contained the following clause:

Payment of the purchase price shall be secured by a banker’s guarantee to be furnished within thirty (30) days
after approval of the diagrams of the property sold by the Surveyor-General.

The deed of sale however did not contain a cancellation clause (a clause entitling the seller to
cancel the contract in the event of there being default on the part of the purchaser).

On 24 September 1970 the Surveyor-General approved the required diagram. However, the
appellant was not informed thereof by the responsible surveyor until late in November 1970.
This meant that the 30 days mentioned in the abovementioned clause had already expired by
the time the parties heard of the approval of the diagrams. Subsequently, the appellant’s
attorney wrote a letter dated 24 November 1970 wherein she exclaimed that Pienaar had to
furnish the appellant with a guarantee on or before 23 December 1970. Early in December
1970, Pienaar informed his attorney, who subsequently informed the appellant, that he
(Pienaar) would not be able to furnish the required guarantees before 23 December 1970.
The two parties’ legal representatives agreed that Pienaar would pay an amount of R200.00 as
a deposit, and that the date before which the guarantee had to be delivered would be extended
to 23 January 1971.

On the 21st of January 1971 Pienaar informed the appellant’s legal representative that he still
couldn’t deliver the guarantees, but that a company called Sapekoe (Pty) Ltd was interested in
purchasing the property from him (Pienaar). The appellant’s legal representative “cancelled”
the contract because of the fact that the guarantees had not been furnished within the specified
time, and the appellant sold the property to a new buyer, Mr Venter. Pienaar’s legal
representative said that there was no right in terms of the contract to cancel such contract, and
provided the necessary guarantees, albeit late. Pienaar also got an interdict against the appellant
forcing her not to transfer the property to Mr Venter. The court a quo decided that the appellant
had to pass transfer of the property to the respondent.

In the Appeal Court, the appellant contended that they had cancelled the contract of purchase
because Pienaar on behalf of the Respondent had failed to furnish the banker’s guarantee
provided for in the said contract within the period specified in the contract. In addition, the
appellant’s attorney had not only initially agreed (on the 23rd of December 1970, when
extension was granted to Pienaar for furnishing the guarantee) to an extension of time for
delivery of the banker’s guarantee, but that she had also placed the respondent in mora (if the
guarantee was not furnished on or before 23 January 1971) and which would have the

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additional effect of a “notice of rescission” entitling the defendants to cancel the sale in the
event of failure on the part of the respondent to perform.

Muller, JA exclaimed the following relevant words:

Where time is not of the essence of the contract, but one of the contracting parties elects to make it so, giving a
notice of rescission (a unilateral act), he should at least take care that the notice is clear and unequivocal, so that
the other contracting party is aware of the consequences of a failure on his part to perform timeously.
The court decided that whilst the appellant had indeed placed the respondent in mora, that
placing someone in mora did not constitute cancellation of the contract. The court thus upheld
the court a quo’s decision.

Mora ex re

It may happen that contractants do not agree on a specific time of performance. If they do,
however, failure to tender performance at that moment would be prima facie wrongful. In such
a case, the creditor is not required to claim performance from the debtor, because dies
interpellat pro homine (literally: “the day demands from the person”). Mora that takes place in
this manner is called mora ex re, meaning mora according to the nature of circumstances. In
order for mora to arise ex re a “precisely calculable date” must have been set, as was decided
in the case of Van der Merwe v Reynolds 1972 (3) SA 740 (A).

In the case of LTA Construction v Minister of Public Works & Land Affairs 1995 (1) SA 585
(C) the construction contract read that the contractor was entitled to final payment as soon as
the engineer had certified that the work was in order. Due to the uncertainties that had to be
surmounted before such a certificate could be issued, it was decided that there had been no
agreement as to a “precisely calculable day”. A time will only be a “precisely calculable date”
if it is not only certain that it will arrive but also when it will arrive. In the case of Repinz v
Dacombe 1994 (3) SA 756 (E) the court decided that before fulfillment a debtor must indeed
have certainty about the time of his performance, but that the certainty need not exist upon
conclusion of the contract. Consequently, if the contract reads that the performance must be
made a specific time after a certain occurrence, mora ex re can arise after that period has
expired, irrespective of any uncertainty upon conclusion of the contract as to whether the
occurrence will take place and if so, when it will take place.

Mora ex persona

Where a contract does not stipulate a time for performance, the debtor must usually take steps
to recover the debt. The creditor must place the debtor in mora by means of a demand or notice
that the debtor must perform by a certain time. The creditor thus determines the time of
performance by a unilateral juristic act. The purpose of the demand is to inform the debtor
exactly when he must perform. Mora that occurs by way of demand is called mora ex persona,
because it requires an act by the creditor. A demand (interpellatio) must indicate the debt that
must be discharged and set a specific time for performance, which is reasonable in the
circumstances. It must contain an unequivocal and unconditional claim that the creditor desires
performance. In the case of a reciprocal contract the demand must, where applicable, contain a
tender of performance by the creditor.

The reasonableness of the time for performance set in a demand must be determined with
reference only to the circumstances affecting the time of performance of which the parties were
either aware when the contract was concluded or which they could at that moment have

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reasonably foreseen. A demand which does not expressly lay down a time for performance may
possibly be interpreted to mean that performance is required immediately. Such a demand may
well be reasonable in the case of a monetary debt, but not necessarily in all other instances.

In the case of Willowdene Landowners v St Martin’s Trust 1971 (1) SA 302 (T), no time was
stipulated for performance and no right to cancel included. However, the one party could place
the other part in mora by giving the opposite party a reasonable time within which to perform
and that, if within that reasonable time performance was not accomplished, a right to
cancellation ensued. It was decided that “the time given for performance must be reasonable in
the circumstances. If this is not the case, the notice is of no effect.” In this case, a period given
by one contractant to the other from 26 March 1969 until 30 June 1969 to perform was judged
by Claassen J to be insufficient and therefore the mora was ineffective.

The demand or notice by the creditor to perform may take the form of:

- Interpellatio iudicialis: Formal demand by way of summons, or

- Interpellatio extra iudicialis: Informal demand by way of letter, telephone, sms, etc.

II.The Performance must be due and enforceable

Performance does not become due and enforceable before the determined date of performance
has arrived or before a reasonable period has lapsed. Van Huyssteen et al put it very clearly:
Mora cannot occur in terms of an unliquidated debt. A debtor cannot object to enforcement of
the obligation raising defences such as prescription or that the enforcement of the performance
is subjected to a suspensive condition that has not as yet been fulfilled or that the time to
perform has not yet arrived.

III. The delay must be caused by the fault of the debtor and/or his workforce.

“Fault” in this instance refers to fault in the delictual sense. Van Huyssteen et al say that the
duty to prove the absence of fault rests on the debtor to prove same by way of an excusatio a
mora. If the delay is caused by the creditor, we are dealing with mora creditoris.

IV. The Performance must remain possible notwithstanding the failure to perform.

If the performance has become impossible, we are dealing with a different type of breach,
namely impossibility of performance.

See in this instance the case of South African Forestry Co Ltd v York Timbers Ltd 2005 (3) SA
323(SCA), which had to be studies in Unit 8 of this module.

Distinction between mora debitoris and other forms of breach of contract

According to Van Huyssteen et al, mora can be readily distinguished from other forms of
breach of contract. In the case of positive malperformance the debtor does effect performance,
albeit defectively. Where performance is prevented, it is no longer possible and delay as such
cannot exist. Nor can a delay in itself constitute repudiation, since it will not justify a reasonable
conclusion that in the future performance will not take place at all or will be defective.

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Special consequences of mora debitoris

A special consequence of mora debitoris is that it perpetuates the obligation. This means that
if performance becomes impossible after the debtor has fallen in mora, he will not be excused
because of the impossibility. Under such circumstances the responsible contractant would
actually be guilty of prevention of performance.

Cancellation on the ground of mora debitoris

There is a reason Van Huyssteen et al make specific provision for a discussion of this particular
ground for cancellation. The reason is that Roman-Dutch law did not provide a general right
of cancellation on the ground of breach of contract. In the case of mora debitoris, a creditor
was allowed to cancel a contract only where a contract contained a cancellation clause or lex
commissoria. A cancellation clause could be attached to a contract whether a date for
performance had been set or not. Where a date had not been set, the creditor had to put the
debtor in mora by way of an interpellatio (see above) before he could exercise his right to
cancel.

Subject to a lex commissoria, the same applies in modern South African law. However, because
Roman-Dutch law did not provide sufficient opportunity for cancellation of the contract on the
ground of mora, South African courts adopted the English legal doctrine of “time is of the
essence of the contract” (the term is often used in the Ponisammy and Nel v Cloete cases). The
result hereof is that cancellation of a contract needs no longer be based on an express lex
commissoria. A right to cancel is also recognized if the debtor is in mora, whether ex re or ex
persona. The urgency of performance may be apparent from a variety of circumstances, such
as:

 The contract may concern a performance which is subject to price fluctuations;

 The performance may relate to food or articles of fashion with a certain durability or
attractiveness in the market;
 The performance may be of a speculative or commercial nature.

In English law, a creditor can (after conclusion of the contract) make time of the essence of the
contract by giving the debtor a notice of rescission. South African courts have adopted the same
approach. If a debtor is in mora, the creditor may by a unilateral act obtain a right to cancel the
contract by notifying the debtor that he reserves the right to cancel the agreement if the debtor
fails to perform by a certain date. In such notice, the creditor must provide the debtor with
reasonable time to perform, taking into account the steps the debtor will have to take in order
to effect performance.

Although usually called a “notice of rescission”, a notice of this nature does not itself cancel
the contract, but simply warns the debtor of impending cancellation. To effect cancellation, in
other words to resile, a further juristic act is required, namely a notice that the creditor cancels
the contract. It would eliminate the possibility of uncertainty if the “notice of rescission” were
rather referred to as “notice of intention to cancel”.

In the case of Kragga Kamma Estates CC v Flanagan 1995 (2) SA 367 (A), the appellant and
respondent had entered into a contract of sale which included a lex commissoria, which entitled
the seller to cancel the agreement in the event of the purchaser breaching any of its obligations.

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In terms of the contract, the purchase price amounted to R120 000.00, payable as to R70 000.00
on signature of the contract and R50 000.00 at R500.00 a month. The respondent later claimed
that the respondent had in fact cancelled the contract, because the appellant had not paid the
R70 000.00. Additionally, the respondent claimed that she had called the appellant to pay the
R70 000.00 within a reasonable time, that the latter had failed to do so, and that she (the
respondent), had accordingly notified the appellant of the cancellation of the contract.

Nestadt JA exclaimed that the failure of the appellant to pay the R70 000.00 constituted mora
ex re, because the payment had to be made at a specific time: At the signature of the agreement.
However, after the appellant had been placed in mora, the respondent had continued receiving
the monthly payments of R500.00. In other words, she had given a notice of intention to cancel
the contract, but not notice of cancellation.

The judge continued to state that he did not agree with the stance that the respondent had given
the appellant an extended period in which to pay the R70 000.00, and that the respondent had
to give notice to the appellant of her intention to cancel the contract in case of non-payment.

Consequences of mora debitoris

 Perpetuation of the obligation (perpetuation obligationes): If the performance becomes

impossible after the debtor has fallen in mora, the debtor remains liable for performance.
If the performance becomes impossible after conclusion of the contract, the obligation
becomes void.

 Interest a temporae morae: This refers to interest on the loss of income which timeous
performance would have meant for the creditor. The rate of interest is determined by
statute, but may also be determined contractually.

 Interest in duplum: This means that the interest may never exceed the capital debt, and is
based on public interest and fairness. It was dealt with in the case of LTA Construction v
Administrateur Transvaal 1992 (1) SA 473 (A).

 Passing of Risk: In a contract of sale, all risk passes from the seller to the buyer on the date
which the contract of sale is perfecta.

LEARNING UNIT 12 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 11 pp. 401-407.

2. From List of cases:

Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3)

SA 670 (A)

Shatz Investments (Pty) Ltd v Kalovyrnas 1976 (2) SA 545 (A)

BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms ) Bpk

1979 (1) SA 391 (A)

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Alternative study:

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 13

Nature and forms of positive malperformance

Positive malperformance relates to the manner in which an obligation is executed. Two forms
of positive malperformance are distinguished:

- Defective performance.
- Conduct contrary to a contractual prohibition.

Defective performance:

Whether performance is defective, depends primarily on whether the performance made

complies with the terms of the contract. “Terms of the contract” refers not only to the
consensual terms (express or tacit) but also to the ex lege terms or naturalia of the contract.
Delivery of a thing that is defective or to which the debtor has no title does not constitute
positive malperformance. Performance can be defective whether made before, on or after the
due date for such performance.

Conduct contrary to a contractual prohibition:

If a contractant commits conduct contrary to an express or tacit prohibition in the contract, he

also commits positive malperformance. An example would be where the seller of a business
undertakes not to compete with the purchaser for a specific time within a certain area and then
does compete with him. Positive malperformance can endure for a period of time, for example
where the quality of the possession that a lessor gives to his lessee is less than what is required
by the contract.

In the case of Shatz Investments (Pty) Ltd v Kalovyrnas 1976 (2) SA 545 (A), the appellant and
respondent had entered into a lease agreement which contained the following clauses:

3. The lessee (respondent in the case under discussion) shall be entitled to use the leased premises for
the purpose of carrying on the business of a restaurant, take-away-foods and general dealer, and for no
other purpose whatsoever, save with the consent of the lessor, which consent shall not unreasonably be
withheld.

5a. The lessor (appellant in the case under discussion) agrees to give full protection to the lessee by not
letting any of the existing other shops, and those still to be erected in the same building, for the same nature
of business or allied business, as that of the lessee, i.e. coffee bar, fish and chips, tea room, take-away foods,
steak house etc., and such like, other than bakery and allied lines produced on the premises.

Clause 5a was inserted on the appellant’s request, except for the italicized words, which were
inserted at the respondent’s request.

When the agreement was still in negotiation-phase, the appellant contemplated letting one of
the other shops in the same building as a bakery. The respondent agreed thereto provided that

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the bakery did not sell confectionery or take-away food like kosher and other Jewish foods.
The respondent continued to equip the leased premises for the business of a restaurant and
selling take away foods.

While the respondent was preparing to open his business, an advertisement appeared in the
vacant corner shop of the building stating that a new bakery (Quinta Bakery) would open there
soon and that this bakery was to sell confectionery and take-away foods. The appellant had
also already contracted with the owner of Quinta Bakery on these terms. When the Quinta
Bakery opened, it had an immediate and a substantial effect on the business of Miami
Restaurant, the name of the respondent’s restaurant and take-away business. The court a quo
correctly found that the appellant had breached contract in the form of positive
malperformance.

Requirements for positive malperformance

Conduct in the case of positive malperformance can be described as “any conduct of the debtor
that eventually results in delivery of defective performance”. The two main requirements are:

a. The debtor must have performed.

When can it be said that the debtor has indeed performed? As a rule, performance can only be
made with the co-operation of the creditor. The debtor will have to tender performance and
will only have performed when such performance has been accepted by the creditor. If a debtor
were to tender sufficient, correct and complete performance, and such performance is refused
by the creditor, the latter would be guilty of breach of contract in the form of mora creditoris.
If, however, the debtor tenders defective performance and it is refused by the creditor, there is
no question of completed performance, but merely an attempt to commit malperformance.
There can only be malperformance if indeed there was performance. As soon as performance
that is defective has been made, positive malperformance as an act in breach of contract is
complete. The creditor, after receiving the defective performance, bears no general duty to
return it to the debtor to rectify the defects. However, in the case of BK Tooling v Scope
Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A), Jansen JA remarked that a creditor
who has not cancelled the contract is obliged to return the defective performance in order to
enable the debtor to rectify any defects. This remark by the judge implies that if a contractant
relies on the defence of reciprocity and thus claims counter-performance, he is obliged to allow
the other party to perform or to rectify his defective performance, if such performance is still
possible.

The contractants may however make an exception to this rule by means of express or tacit
agreement.

A contract often states that if malperformance has taken place, the debtor must be notified to
rectify the defects within a certain time. In such a case the debtor gets a “second chance” and,
depending on the tenor of the provision, there can be no action against him before the period
of time has elapsed.

b. The performance rendered must be defective.

This requirement relates to the requirement of wrongfulness that is set for breach of contract.
Whether the performance is defective depends primarily on the whether it conforms to the

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provisions of the contract. If the performance does not conform to the contractual standard, the
conduct is prima facie wrongful and therefore constitutes breach of contract, unless the
shortcoming is due to vis maior or circumstances beyond the control of the debtor. Where a
debtor is required to perform to the satisfaction of a third party (such as an expert like an
architect or engineer), approval by the third party is of crucial importance in determining
whether the performance is defective.

Positive malperformance by way of conduct in conflict with a contractual prohibition can only
be present if the debtor concerned committed an act and it is found that such act is in conflict
with the particular obligatio non faciendi.

Another question is whether fault is a requirement for positive malperformance. To answer this
question, one must distinguish between warranties and other types of term.

Warranties create strict liability in the sense that impossibility of performance and a fortiori
also lack of fault offer no defence if the warranty was not carried out properly. The question of
whether fault is in fact a requirement has not been dealt with much. Van Huyssteen et al feel
that fault should, in principle, not be a requirement or a defence in respect of positive
malperformance.

Distinction between positive malperformance and other forms of breach of contract

Because positive malperformance can only occur by way of a positive act, it differs from the
forms of negative malperformance in that the latter consists in a negative act, namely failure
to perform. Performance that does not conform to the terms of the contract can be distinguished
from repudiation in that such malperformance can only occur if performance has already taken
place, whereas repudiation as a form of anticipatory breach of contract relates to conduct that
occurs before actual performance and justifies the inference that the contractant is not going to
perform as the contract requires. Thus, a tender of defective performance can amount to
repudiation. Conduct contrary to an obligatio non faciendi amounts to positive
malperformance, although such an obligation can also be repudiated, for example where the
debtor indicates in advance that he is going to what he undertook not to do. Like repudiation,
prevention of performance is a form of breach of contract in anticipando that takes place
before actual performance and for that reason it can be distinguished from positive
malperformance.

Special consequences of positive malperformance

A creditor in the case of positive malperformance has at his disposal the normal remedies for
breach of contract. If the creditor accepted defective performance, he could retain the
performance and insist on rectification of the defects. The question that arises is whether a
creditor may reject defective performance, which is tendered or has already been received, in
order to obtain proper performance in terms of the contract. The general opinion used to be that
a creditor could reject defective performance (for whatever purpose) only if it was seriously or
substantially defective.

In the BK Tooling-case the appellate division rejected the doctrine of substantial performance
for the purposes of the defence of reciprocity in respect of reciprocal contracts. The court held

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that a creditor who has not yet performed may retain his performance until the debtor has
performed precisely and completely. Analogous hereto it is suggested by Van Huyssteen et al
that also where the defence of reciprocity does not come into play, a creditor may reject
performance that is defective though substantially complete, in order to obtain proper
performance. The only conditions are that the defect must not be trivial and that proper
performance must still be possible. If complete and proper performance is no longer possible,
the creditor will only be able to reject performance if the latter is substantially defective. Where
this is the case, the creditor could reject performance and claim a sum of money as surrogate
for the performance. If the performance is not substantially defective, the creditor will have to
retain the defective performance and be satisfied with damages.

Rejection of defective performance is not in itself cancellation. If performance is rejected for

the purpose of obtaining proper performance or damages as a surrogate, the contract remains
in force and each contractant must render his performance. If, however, the defective
performance is rejected with a view to cancellation, the contractual obligations are dissolved.

Cancellation on ground of positive malperformance

A lex commissoria is a requirement for cancellation of a contract on the ground of positive

malperformance. In the absence of such a cancellation clause a contractant may only resile if
the breach is serious. A right to resile cannot be obtained by a notice of intention to cancel (see
previous unit for more information on this notice). In order to determine the seriousness of the
breach, a test has been expressed in a variety of ways, for example:

- the breach must go to the root of the contract;

- the breach must affect a vital part or term of the contract;
- the breach must be so serious that it would not be reasonable to expect that the creditor
should retain the defective performance and be satisfied with damages to supplement
the malperformance.

The competing interests of the party in breach of the contract and the innocent party must be
judged equally. What must also be determined is whether the breach in question is so serious
that it would be fair to allow the innocent party to resile. This would be up to judicial discretion.

If performance is divisible and only part of the performance is seriously defective, the innocent
contractant may resile pro tanto only. A creditor who is entitled to resile may resile
immediately, without giving an opportunity for rectification. If the creditor does not cancel the
contract but claims damages for breach, the debtor cannot insist on making proper performance
instead of paying damages.

LEARNING UNIT 13 STUDY:

1. Van Huyssteen et al.

Contract. General Principles. Fifth Edition. Chapter 11 pp. 408-416.

2. From List of cases:

Tuckers Land and Development v Hovis 1980 (1) SA 645 (A)

Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284

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 (SCA)

Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA).

Intech Instruments v Transnet Limited t/a South African Port Operations

(1165/18) [2019] ZASCA 79(31 May 2019).

Sizazonke Electrical CC v Eskom Holdings (222/2018) ZASCA 36 (29 March

2019).

Alternative study:

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 13

Origin and nature of repudiation

The form of breach known as repudiation was unknown in Roman-Dutch law as a form of
breach. The notion that it does constitute breach was received from English law.

Repudiation refers to any conduct of a contractant from which a reasonable person in the
position of the innocent contractant would conclude that the first contractant does not intend to
comply with his duties, for example where a contractant erroneously denies the validity of the
contract. Conduct constituting repudiation may endure over a period of time, and it is also quite
possible that one and the same obligation is repudiated on various occasions. According to the
traditional view of repudiation, it amounts to an offer by a contractant to cancel the contract
and breach of contract is only present once the “offer” has been accepted. Acceptance of
repudiation puts an immediate and abrupt end to the agreement between the parties. On the
other hand, if the repudiation is ignored, contractual obligations continue to exist, as there is
no breach of contract present.

In the case of Tuckers Land and Development v Hovis 1980 (1) SA 645 (A), there was an
express move away from the notion that repudiation can be explained in terms of offer and
acceptance. The respondent had bought two erven from the appellant, a township developer, in
a proposed township. The contract of sale was suspensive and subject to the successful
demarcation of the township. The respondent had made certain payments, but became aware
later on that the appellant had run into some difficulties proclaiming the township, and as a
result thereof had prepared a new plan for submission to the proper authorities. The problem
was, however that the two erven the respondent had purchased previously did not appear on
the new plan. The respondent accepted this as an act of repudiation of the contract and
subsequently cancelled same. In a lengthy analysis of the nature of anticipatory breach in
general, Jansen JA had the following to say:

It could be said that it is now, and has been for some time, felt in our domain, no doubt under the influence of the
English law, that in all fairness there should be a duty upon a promisor not to commit an anticipatory breach of
contract, and such a duty has in fact often been enforced by our Courts.

The question had to be asked whether the appellant’s action would have lead a reasonable
person to believe that he (appellant) did not intend to honour the contract. Jansen JA answered

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this in the affirmative, and decided that the appellant indeed committed anticipatory breach of
contract. The respondent was thus entitled to rescind from the contract and claim back what he
had paid. Anticipatory breach in this instance was construed as breach that sets in immediately
due to the breach of an ex lege duty, flowing from bona fides not to commit anticipatory breach
of contract. Jansen JA expressed himself against the use of the concepts of offer and acceptance
in this context and regarded the decision of a creditor to react to repudiation as an election.

Further support for this new approach can be found in a decision that repudiation occurs at the
place where the repudiating party is notified of it and not at the place where the repudiating
party is informed of the acceptance of the repudiation, as it would have to be in accordance
with the construction of offer and acceptance (This was decided in the case of Veneta Mineraria
Spa v Carolina Collieries (Pty) Ltd 1985 (3) SA 633 (D), which need not be studied in detail
for this unit). The new approach is also supported by the rule that if a contractant repudiates
and his co-contractant chooses to ignore the repudiation, the aggrieved contractant can
nevertheless, on the ground of repudiation, temporarily be excused from the duty to take certain
steps which otherwise he would have had to take.

Opposition to the “new approach” to repudiation

In the case of HMBMP Properties (Pty) Ltd v King 1981 (1) SA 906 (N) the Court had to decide
when prescription in respect of a claim for damages on the ground of repudiation commences.
If acceptance is required to complete repudiation as breach of contract, prescription cannot
commence before acceptance, but if acceptance is not required, prescription will commence as
soon as repudiation takes place. The court in this instance held that repudiation becomes a
breach of contract only if it is accepted. And found that prescription commenced on the date of
acceptance of repudiation. In Culverwell v Brown 1990 (1) SA 7 (A) the court held that
repudiation “merely affords the injured party an election to terminate the agreement by
accepting the repudiation…and unless and until that happens the repudiator’s obligation to
perform and the other party’s right to receive performance remain wholly unaffected.”

This viewpoint is in direct conflict with the “new” approach. The court also intimated that a
claim for damages on the ground of repudiation arises only upon acceptance of the repudiation,
because prior to acceptance of repudiation there would not yet be breach of contract.

In the case of Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA)
the traditional approach was finally rejected. This means that the current position is that
repudiation in itself is breach of contract because the objectionable conduct is wrongful and
not because it is turned into breach of contract by offer and acceptance. Acceptance of the
repudiation is not required to complete the repudiation as an act of breach of contract, but
simply amounts to the exercising of an election to exile.

Requirements for repudiation

Van Huyssteen et al exclaim that repudiation is “any conduct by a contractant from which a
reasonable person in the position of the innocent contractant would infer that the first
contractant, without lawful grounds, does not intend to comply with his duties in terms of the
contract.” It should however also be mentioned that a contractant who correctly refuses
performance on the ground of a term in the contract, does not repudiate the contract, but
actually enforces it.

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To complete breach in the form of repudiation, three requirements needed to be met
traditionally:

a. The defendant must have displayed conduct that indicates an intention of future non-
compliance with the provisions of the contract. The test is whether, fairly interpreted, the
defendant exhibits a deliberate and unequivocal intention no longer to be bound. The law
requires not only objective consideration of the defendant’s conduct, but its impact on the
other party to be assessed as well.

b. The plaintiff must have accepted this conduct as breach of contract, as was written by the
counsel in Highveld 7 Properties v Bailes 1999 (4) SA 1307 (SCA).

c. The plaintiff must have given notice to the defendant that he has accepted the conduct as
breach of contract.

In the case of Highveld 7 Properties v Bailes, the respondent had sold immovable property to
the first appellant in terms of a written contract of sale. The property was to serve as a golf
course residential estate. The original agreement obliged the appellant to facilitate steps to
secure approval of a development plan for the property and, within seven days of such approval
having been granted, to deliver to the respondent certain guarantees for the payment of the
purchase price. After the original agreement had been concluded, the parties conducted further
negotiations with a view to the possible variation thereof. It was sought to adjust the boundaries
of the property in question, with a concomitant adjustment of the purchase price. As a result of
these negotiations, the respondent adopted the attitude that consensus had been reached about
the new boundaries and about the increased purchase price of the property. However, the
appellant denied that any such further agreement had come into existence. The respondent
nonetheless demanded performance from the appellant in terms of the disputed agreement. He
caused application to be made for the approval of a development plan for the property,
reflecting the adjusted boundaries entailed by the disputed agreement, and thereupon demanded
that he appellant deliver guarantees for the payment of the increased purchase price, threatening
legal action if his demand was not met.

The appellant eventually formed the view that the respondent’s insistence on the
implementation of the disputed amounted to a repudiation of the original agreement, and
accepting such repudiation, cancelled the original agreement. The court a quo held that the
disputed agreement had not been proved, but that the respondent’s conduct had not amounted
to a repudiation of the original agreement.

On appeal, Streicher JA held that the question which had to be determined was whether the
attitude adopted by the respondent constituted repudiation. The test to determine whether
conduct amounted to a repudiation was whether, fairly interpreted, it exhibited a deliberate and
unequivocal intention no longer to be bound. On appeal, the court thus overturned the decision
of the court a quo, and decided that the respondent’s attitude did indeed constitute repudiation.

Special consequences of repudiation

Repudiation per se does not advance the date of performance, nor does it give rise to mora
debitoris where no date for performance has been fixed. If a contractant repudiates his duty to
perform, the repudiation affects his co-contractant’s outstanding corresponding duties to
perform even where the latter prefers to maintain the contract in spite of the repudiation.

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Cancellation on the ground of repudiation

Any true form of repudiation justifies cancellation. In terms of the “new” approach to
repudiation discussed above, repudiation of any contractual duty amounts to breach of contract,
although repudiation in respect of a subordinate duty would not warrant cancellation. The
creditor will only be able to resile if the anticipated malperformance would justify cancellation.

If mora is thus anticipated, the creditor can resile on the ground of repudiation if the contract
contained a lex commissoria or of “time is at the essence of the contract”.

Van Huyssteen et al feel that cancellation should probably also be allowed if the debtor
repudiates completely by intimating that he is not going to perform at all.

LEARNING UNIT 14 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Fifth Edition. Chapter 11, pp. 416-420.

2. From List of cases:

Administrator, Natal v Edouard 1990 (3) SA 581 (A).

Alternative study:

3. Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 13.

Nature of Prevention of Performance

Prevention of performance consists in conduct after the conclusion of the contract by which
the debtor makes it impossible for himself to perform. Such conduct may be a positive act or a
neglect to perform. The resulting impossibility may be total or partial. Performance is
impossible where it is physically impossible but also where it is in fact physically possible but
for all reasonable and practical purposes impossible.

In the case of Administrator, Natal v Edouard 1990 (3) SA 581 (A), a medical doctor undertook
to sterilise a patient immediately after the birth of her third child. The doctor failed to perform
the sterilization, with the result that the woman fell pregnant again. The doctor’s failure
amounted to prevention of performance in terms of his undertaking to (successfully) sterilise
his patient.

Prevention of performance is a form of anticipatory breach of contract, and can therefore occur
before, on, or after the date set for performance. By virtue of its nature, however, prevention
takes place before actual performance. Performance may be made absolutely (objectively) or
relatively (subjectively) impossible. Absolute prevention of performance predicts
malperformance with absolute certainty, while relative prevention of performance anticipates
malperformance only with reasonable certainty. One can understand Van Huyssteen et al’s

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argument, then, that relative prevention of performance should actually classify as a particular
form of repudiation, rather than prevention of performance.

Breach of contract in the form of prevention of performance is complete as soon as performance

has been prevented.

Requirements of Prevention of Performance

Prevention of performance can only be breach of contract if the particular conduct infringes a
contractual obligation and is therefore wrongful. If post-contractual impossibility of
performance is due to vis maior or casus fortuitous, the obligation concerned is entirely or
partially extinguished and the chain of events is called supervening impossibility of
performance. Under these circumstances there is no breach of contract, because the element of
wrongfulness is excluded.

Fault is another requirement of prevention of performance.

Distinction between prevention of performance and other forms of breach of contract

Prevention can be distinguished from mora on the basis that in the case of the former,
performance is no longer possible.

The distinction between prevention and positive malperformance lies in the fact that the former
is anticipatory breach of contract and thus occurs before performance is rendered.

Repudiation and prevention are distinguished in that prevention predicts eventual

malperformance with absolute certainty, while repudiation anticipates it with relative certainty
only.

Special consequences of prevention of performance

No order for specific performance can be granted if the performance has become wholly
impossible. If, however, performance is only partially impossible, a creditor can claim specific
performance of the possible part of the performance, and claim damages in terms of the
impossible part. An obligation is not extinguished by total prevention of performance and the
debtor remains bound in terms of the obligation. The creditor may resile from the contract but
may also decide to uphold it. If the latter decides to uphold the contract, he cannot claim
damages as a surrogate for the performance. Van Huyssteen et al argue that a more convincing
view would be to suggest that the obligation is in fact extinguished by total prevention of
performance, and that the contractant who breaches the performance must compensate the other
contractant for damages suffered.

LEARNING UNIT 15 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 11, pp. 422-424.

2. From List of cases:

Pienaar v Boland Bank 1986 (4) SA 102 (O)

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 LTA Construction v Minister of Public Works & Land Affairs 1992 (1) SA 837 (C)

Alternative study:

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 13.

Nature and forms of mora creditoris

Mora creditoris occurs where the creditor wrongfully fails to render his co-operation to enable
the debtor to perform. Mora creditoris can occur before performance by the debtor remains
possible despite the delay by the creditor. This form of breach can take the same forms of mora
creditoris.

If an employer delays in making use of the services tendered by his employee,

performance by the employee for that specific period is rendered impossible.

Requirements for mora creditoris

In the LTA Construction-case, it was decided that where a creditor is required to co-operate
before performance is tendered and a time for his co-operation has been set in the contract, the
creditor must render his performance at the required time, otherwise he will fall into mora ex
re. If no time has been set for co-operation in the contract, or if the debtor wants to perform
before or after the time set for performance, the debtor must demand the creditor’s co-operation
in order to place him in mora ex persona.

Other requirements for mora creditoris are as follows:

 The debt (performance) must have been capable of being fulfilled.

 The debtor must have made proper performance or at least have tendered proper
performance.
 The creditor must have failed to accept the performance tendered or refused to co-operate
to its being made.
 The creditor or his employees must cause the delay.
 The creditor must be at fault

Distinction between mora creditoris and other forms of breach of contract.

It should be kept in mind that mora creditoris is not the only form of breach capable of being
committed by the creditor. This form of breach refers only to delay (negative malperformance)
by the creditor.

Where, for example, a contract of locatio conductio operis requires the creditor to
supply instructions, drawings, specifications, materials or tools, and he does so defectively

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or supplies a defective item, the creditor’s conduct may amount to positive
malperformance.

Also, where a creditor points out the wrong stand for a builder to build on, he commits
positive malperformance. The same applies if the client of an eye surgeon does not give
correct answers to the surgeon’s questions, with the result that the spectacles as delivered
are ineffective.

Mora creditoris can be distinguished from repudiation, in that where a creditor acts in such a
manner that the debtor may reasonably conclude that the creditor will not perform (co-operate)
properly, it would be repudiation.

It may be distinguished from other forms of breach by the creditor by virtue of the same
considerations, mutatis mutandis, as those that apply to mora debitoris.

Special consequences of mora creditoris

When a creditor falls into mora in respect of an obligation, mora by the debtor in respect of
that obligation is terminated, since a debtor and a creditor cannot be simultaneously be in mora
in respect of the same obligation. The debtor is, however, not excused from any liability for
mora prior to the termination of his delay prior to the mora of the creditor.

From the moment of mora creditoris, the debtor is liable only for damage due to his intent or
gross negligence. From the moment of his mora, the risk of supervening impossibility of
performance rests on the creditor.

A surety in terms of the principle debt will be released by the mora of the creditor. Therewith,
liability to pay interest on the principle debt should cease in case of mora by the creditor. The
same principle applies to liability to pay for the use of goods which the debtor has properly
tendered to return. A debtor is not released from his debt just because the creditor is in mora.
A debtor is, however, entitled to sue for counter-performance, provided that he himself has
tendered proper performance. A debtor is entitled to an order for specific performance, in other
words an order compelling the creditor to receive performance.

A creditor will be liable for damages, such as wasted costs, suffered by the debtor as a result
of mora creditoris.

The following cases demonstrate the working of the form of breach as handled by
the courts, and should be studied in detail:

Pienaar v Boland Bank 1986 (4) SA 102 (O)

LTA Construction v Minister of Public Works & Land Affairs 1992 (1) SA 837 (C)

END OF PART 2

LEARNING UNIT 16 STUDY:

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 1. Van Huyssteen et al.
Contract. General Principles. Fifth Edition. Chapter 12 pp. 436-445.

2. From List of cases:

BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391
(A)

Miloc Financial Solutions (Pty) Ltd v Logistic Technologies (Pty) Ltd and others [2008]
3 All SA 395 (SCA)

Alternative study:

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 14.

Introduction to the Principle of Reciprocity

Obligations are reciprocal if they are created one in exchange for the other. A reciprocal
contract, which are governed by what is known as the principle of reciprocity, is a contract in
terms of which performance (or a tender of performance) by a plaintiff is a requirement for the
enforceability of his claim for counter-performance. Thus, a party to a reciprocal contract may
withhold performance in order to secure counter-performance. The right to withhold
performance is generally known as the exceptio non adimpleti contractus (hereinafter referred
to simply as the exceptio). The exceptio is an extraordinary remedy, as it is not an action with
which to commence litigation, but merely a claim in replication.

In cases of reciprocal obligations where the defect in the performance of one contractant does
not justify cancellation of the agreement because the defect does not affect a vital part of the
contract, the other contractant is entitled to withhold his counter-performance while he remains
in possession of the defective performance.

Facts of the BK Tooling-case

Towards the end of 1973 the appellant received a drawing for the implementation of a rubber-
fitting to the engines of certain Ford vehicles from a company known as Paulstra. Paulstra
would manufacture such fittings and supply them to Ford. In order to supply and manufacture
these fittings, Paulstra needed metal-moulds. The appellant was to submit a tender for the
manufacturing and supply of these moulds.

The drawing received by the appellant from Paulstra provided complete measures, and allowed
a tolerance of 0,5 mm. Basically, it was to be symmetrical, consisting of two identical halves
that would fit on top of another. The appellant made the necessary drawings for the
manufacturing of a mould and at the end of 1973 he requested the respondent to finalise the
metal moulds in order to create a prototype. This prototype was presented to Paulstra, which
found it to be acceptable, and Paulstra subsequently placed an order from the appellant for 16
moulds at R5000.00 each. Two separate order forms were used for this order, both containing
the following wording:

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Delivery= 20 May 1974 latest. The purchaser reserves the right to cancel the whole or part of this order at any
time after the mentioned delivery date for goods not yet received.

The respondent was instructed by the appellant to do some finer work, which the latter was not
capable of doing, with regard to the moulds. On the 8th of March 1974 the respondent sent a
letter to the appellant with the following content:

We thank you for your verbal enquiry and have pleasure quoting as follows:

The sinking of 32 rubber moulds.

Price for one mould (one top and bottom impression)…R150.

Material to be supplied by yourselves pre-machined as discussed with (the appellant).

Delivery: 9 weeks after receipt of order and material.

The appellant only received the completed products on 19 June 1974, although he was himself
responsible for certain delays. The appellant did not pay the respondent in terms of a note that
payment would be made, and the respondent was unwilling to continue work on a second batch
of moulds. Also, the respondent went overseas and only returned on 20 July 1974. By that time,
the appellant was under tremendous pressure from Paulstra to deliver the moulds and was afraid
that Paulstra would cancel the agreement between them. The respondent was persuaded to
finish the second batch of moulds for the appellant, and same was received by the latter on 12
August 1974.

On the 15th of August 1974 Paulstra tested the moulds. They did not adhere to the specifications
that were agreed upon. Paulstra refused to accept the moulds. On the 16th of August 1974, the
respondent contacted the appellant regarding payment of the former’s account. The appellant
told the respondent that he was not going to pay the account as the work was unsatisfactorily
done. The respondent, however, requested that the moulds be given back to him in order to
allow him to make rectifications. This request was refused by the appellant.

Application to the current matter

The respondent in the court a quo based his claim on the exceptio in denying that the plaintiff
“has duly performed its obligations”. Jansen JA noted that the basis of the exceptio is an
acknowledgment that with contracts which create reciprocal duties, a contractant has the right
not to perform before the other contractant has performed.

Jansen JA mentioned a few “aspects” of the principle of reciprocity and its application by
means of the exceptio, namely:

a. In contracts wherein reciprocal obligations are created it is basically a matter of

interpretation whether the obligations are so closely linked that the principle of
reciprocity applies.

b. The sequence of performance and counter-performance also depends upon the

contractual provisions. If, however, another intention does not appear, the contractant,
in locatio conductio operis for example, must first perform.

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 c. On the ground that the withholding of the thing sold was already regarded in the Corpus
Iuris as being analogous to the holding of a pledge, on would expect that the exceptio
would only apply as a defence until performance was actually made. The right of
withholding (the converse of the exceptio) is, therefore, essentially a means of enforcing
the counter-performance. It can fulfil a function similar to retention moneys in a
building contract. On the other hand it follows that, as long as performance remains
possible and the contract is not cancelled, the other party can still perform. Indeed, this
possibility should be related to our (the South African) doctrine of mora and purgatio
morae.

d. If the right of withholding is regarded as being analogous to the holding of a pledge, it

would entail that a party’s own performance could be withheld until the counter
performance is fully made. In the case of locatio conductio operis it is all the more the
case that the contractor must fully perform before he is entitled to the contract price.

e. According to Voet 19.1.23 the onus is on the plaintiff, when the exception is raised
against him, to prove that he has in fact performed his side of the contract. Since then,
this has apparently never been doubted as far as our law is concerned.

In the BK Tooling-case, the whole field and application and law relating to the principle of
reciprocity were reviewed.

In principle, thus, a contractant who claims performance by his co-contractant must allege in
his pleadings that he has already performed properly or else that he is ready and able to perform
properly. If the pleadings do not contain such an allegation, the other contractant may raise the
exception that the pleadings disclose no cause of action. The contractant who makes the
averments will bear the onus of proving them. A denial of the averments by the other
contractant is a defence in terms of the principle of reciprocity.

Requirements for the application of the principle of reciprocity

The principle can only apply if the obligations are reciprocal, and if either of the contractants
are required to perform simultaneously or the contractant, who claims performance, is bound
to perform before the defendant. A contract who has a duty to perform first, cannot withhold
that performance by virtue of the principle of reciprocity, even if he has reasonable grounds to
believe that the other contractant will not perform in turn. Obligations are reciprocal if the
contractants intend that one obligation is created in exchange for the other obligation. Contracts
such as sale, lease, mandate, locatio conductio operis and insurance are usually treated as
reciprocal contracts.

A relation of reciprocity may exist where more than one obligation is created in exchange for
a counter-obligation. Reciprocal obligations may even arise from separate contracts, as was
decided in the case of Wynns Car Care Products (Pty) Ltd v First National Industrial Bank Ltd
1991 (2) SA 754 (A). As a rule, parties to a reciprocal contract must perform simultaneously,
unless they have agreed otherwise. The principle of reciprocity can be invoked not only where
the contract creating the rights is still in force, but also where it is cancelled and rights already
accrued survive the cancellation.

Attributes of the right to withhold performance

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The right to withhold counter-performance is an instrument for enforcing specific performance.
In this sense, it has been compared to a pledge, in the sense that the defendant may withhold
his performance until the plaintiff performs properly.

The exceptio is also depicted as a temporary defence aimed at obtaining specific performance
of a performance that is indeed still possible. The defence is, however, not necessarily
temporary in nature, and may also be available where outstanding performance is no longer
possible.

The exceptio is not available to enforce a claim other than a claim for performance under the
contract, such as a claim for damages based on misrepresentation or breach of contract. Finally,
the principle of reciprocity, including the concomitant right to withhold performance, is not a
remedy for breach of contract, but simply denotes a requirement for the eligibility of a
plaintiff’s right to performance.

Relaxing the principle of reciprocity

Should a contractant perform improperly with regard to an indivisible obligation, and

simultaneously the co-contractant upholds the contract, the latter may retain may either retain
the inadequate performance or reject it and claim proper performance. In case of the latter
scenario, the contractant who has committed malperformance cannot claim counter
performance, unless proper performance is offered anew. In terms of the now defunct doctrine
of substantial performance, a contractant could only reject the defective performance if it was
substantially inadequate. For the purposes of the principle of reciprocity the doctrine of
substantial performance has been rejected by the BK Tooling-case. The current emphasis is on
the right of a contractant to receive proper and complete performance in terms of the contract.
Accordingly, a contractant from whom performance is being claimed by a co-contractant, who
is bound to deliver simultaneously with or before him, may in principle withhold his own
performance until the co-contractant performs properly. If a defendant does withhold his
performance, he will have to allow the plaintiff the opportunity to complete the defective
performance, provided that proper performance still remains possible. The explanation for this
is that a defendant who upholds the contract and relies on the defence of reciprocity in effect
demands proper performance and is therefore only entitled to withhold performance in so far
as proper performance is outstanding. If defective performance is eventually properly
completed by the plaintiff, the defence of reciprocity is exhausted.

LEARNING UNIT 17 STUDY:

1. Van Huyssteen et al.

2020. Contract. General Principles. Sixth Edition. Chapter 12.

2. From List of cases:

3. Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3) SA 670 (A)

Alternative study:

Bradfield
Christie’s The Law of Contract in South Africa. Seventh Edition. Chapter 14.

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1. Specific Performance

1.1.Forms

Performance in forma specifica refers to performance of that on which the contractants

agreed. A claim for performance is thus based on the contract, and not the breach thereof.
Where a contractant elects to uphold a contract and claim damages because of not having
received his co-contractant’s performance, the value of the performance that should have
been made must be taken into account when the damages are calculated. When damages
(additional to specific performance) are calculated, all surrounding factors must be
considered.

In practice, damages are usually claimed in addition to specific performance.

1.2.The right to specific performance

In early Roman law, a contractant who committed breach of contract could not be ordered
to deliver a thing or render a service- only to pay a sum of money. In later Roman times
and in Roman-Dutch law, however, the order for specific performance became possible. In
some instances specific performance would not be granted, for instance where performance
became subjectively or objectively impossible or where the debtor became insolvent. In
such a case the creditor would be satisfied with damages. In South African cases such as
Farmer’s Co-operative Society v Berry 1912 AD 343 and Haynes v King William’s Town
Municipality 1951 (2) SA 371 (A), the principle was adopted that a contractant is entitled
to an order for specific performance in South African law, but that a court has a discretion
to refuse such an order. Under influence of English law (which adopts an approach that
specific performance is an exceptional remedy), the courts have exercised their discretion
in such a manner that it appeared as if an order for specific performance would be
automatically refused in the following circumstances:

- If it were supposedly difficult for the court to supervise the execution of the order for
specific performance;
- If damages were to award sufficient redress.

This rather rigid approach to exercising the discretion of the courts elevated the “particular
circumstances” to general rules, and obscured the fact that, according to South African law, an
order for specific performance should be refused only in exceptional circumstances. The
appellate division has reaffirmed that a contractant is entitled to an order for specific
performance in the case of Benson v SA Mutual Life Assurance Society 1986 (1) SA 776 (A),
except where specific performance is impossible or if the debtor is insolvent. The court’s
discretion to refuse specific performance is regarded as a judicial discretion which must be
exercised in accordance with public policy and in such a manner that it does not bring about an
unjust result.

In the case of Haynes v King William’s Town Municipality mentioned above, the
plaintiff had a contractual claim to receive regularly a certain quantity of water from a
dam which supplied the town with water. In spite of a severe drought and a shortage of
water, and although she did not need the water, the plaintiff claimed specific

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performance. The court refused to grant an order for specific performance, as such an
order would have contrary to public interest.

2. Cancellation

Cancellation of a contract, also referred to as “resiling form a contract”, is defined by Van

Huyssteen et al as a “unilateral juristic act which terminates certain consequences of a valid
contract.” Cancellation is a contractual remedy in view of the fact that it is inferred from a
contractual term, which comes into operation upon breach of contract. The term referred to will
usually be an ex lege term.

Cancellation is an extraordinary remedy which is only available in exceptional circumstances,

namely where the breach of contract is material or serious, or where the contract provides for
a right to resile (a so-called cancellation clause or lex commissoria). Common practice is for
contractants to agree that cancellation may only take place after a written demand by one party
to the other has not been complied with within a certain time.

A contractant who has obtained a right to resile, is not necessarily obligated to do so, but
remains entitled to specific performance. Is it possible, however, for there to exist exceptional
circumstances in which a contractant can be expected to resile rather than insist on execution
of the contract? In English law, the general rule is that where a contract has been repudiated,
the other contractant need not accept the repudiation and cancel the contract, but may claim
specific performance. In South African law there is no rule that the victim of repudiation must
resile merely because upholding the obligations would result in wasting a performance. Such
“wastage” may however move a court to refuse an order for specific performance. Any
limitation of a contractant’s capacity to claim specific performance in these circumstances
would in such a case not be restricted to instances of repudiation, but ought to apply to all
instances of breach of contract. I f a court were to refuse to grant an order for specific
performance, the plaintiff could still claim damages where he has suffered damage, but his
claim would be subject to the mitigation rule (see further on in this unit). A contractant who
wants to claim damages after cancellation, may well be compelled to cancel at a convenient
time in order to mitigate his damage.

The right to resile is not a subjective right, but a power or competence.

3. The claim for damages

3.1.Point of departure

The plaintiff (innocent party) must be placed in the financial position he would have been in
had it not been for breach of contract, in so far as he can be place in this position by the payment
of money and without due hardship to the defaulting party (Victoria Falls & Transvaal Power
Co Ltd v Consolidated Langlaagte Mines Ltd 1915 AD 1). This broad pint point of departure is
referred to as “positive interest”, and includes the actual patrimonial loss as well as the loss of
profit.

Study the case of Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977
(3) SA 670 (A) in detail.

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3.2.Patrimonial loss must be suffered

A plaintiff may only claim damages if he actually suffered damage to his estate. Not all
breaches of contract will result in material damage. Consequently all claims for infringement
of personality property will be excluded, as will claims for mental distress. A court will,
however, award a discretionary amount for personal and physical discomfort. The damages
must be estimated if they are not precisely determinable.

3.3.Causation and the claim for consequential damages

Our present legal position is governed by the judgment in Shatz Investments v Kalovyrnas (see
positive malperformance). The damage suffered must be causally linked to the breach itself.

Two aspects of causation are relevant:

 The contemplation of the (ordinary and consequential) damage itself.

 The exact moment of contemplation of all the consequential loss.

In the Holmdene Brickworks-case, the court stated that “the defaulting party’s liability is
limited in terms of broad principles of causation and remoteness to:

a. Those damages that flow naturally from the kind of breach in question and which the
law presumes the parties contemplated as a result of the breach; and
b. Those damages that, although caused by the breach of contract, are ordinarily regarded
by the law too remote to be recoverable, unless in the special circumstances attending
the conclusion of the contract, the parties actually or presumptively contemplated that
they would probably result from its breach.”
For the recovery of special damages, the following are required:

 Special circumstances.
 Both parties contemplated the kind of damages in question should breach of contract occur.
 Both parties must be aware of the abovementioned special circumstances.
 Both parties must have contemplated the recovery of these damages.
 The recovery of these special damages must be expressly pleaded in a particular case.

3.4.The Mitigation Rule

The mitigation rule basically implies the following:

The plaintiff must prevent the accumulation of his damages. The principle is that the plaintiff
cannot recover damages from the defendant caused by himself. Said plaintiff must take active
steps to prevent further damages arising, and must also take reasonable steps to ensure such
prevention of further damages. The said steps must not be laborious, arduous, or expensive.

3.5.The “Once-and-for-all” Rule

It is a principle of our law that a person can only approach the court once on the same cause of
action. If one institutes litigation, the plaintiff must claim everything and all amounts
simultaneously.

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 END OF PART 3

LEARNING UNIT 18 STUDY:

 Unit 18: Law of Lease lecture slides and audio video

LEARNING UNIT 19 STUDY:

 Unit 19: lecture slides and module guide learning unit 19.

Introduction

In this part of the module, attention will be given to the drafting of some of the actual clauses
that appear in most contracts. The purpose is not to equip the student with all the tools
necessary for accurate and efficient drafting, but to provide the student with the introductory
background to these clauses. Examples of each clause discussed will be provided, and
students are expected to be able to draft these clauses for test-end exam purposes.

 Parties

By its nature as a juristic bond, an obligation involves at least two persons and a performance.
The persons between whom the juristic tie or bond exists are the parties to an obligation. The
party who is under a duty to render the performance to which the obligation relates is the
debtor. The party who has the corresponding right to the performance is the creditor. The
debtor is said to be on the passive side of the obligation, and the creditor on the active side.
A contract can be concluded by only two persons. There may, however, be more than one
person on either side. Normally, the persons who contract become the parties to the ensuing
obligations, but not always. Persons other than the contractants become parties to the
obligations when a contract is concluded through representation or in favour of a third party.

Examples of Party-clauses in contracts:

I.

1. Johnny Walker, Identity number 720512 3045 085 is an unmarried person, who
is selling his house in his personal capacity.
2. Jane Doe, Identity number 780512 3046 087 is married out of community of
property, and is purchasing the abovementioned house from Johnny Walker.
3. Describe the two parties in the contract of sale between them.

1. Johnny Walker
Identity Number: 720512 5045 085
Unmarried

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 (Hereinafter referred to as “the Seller”)

2. Jane Doe
Identity Number: 780512 3046 087
Married out of Community of Property

(Hereinafter referred to as “the Purchaser”)

Analysis:

It has already been mentioned that the minimum amount of parties to any agreement is 2
(two) parties. Hence the numbering of the parties 1. and 2.

The parties’ names, identity numbers and marital status are of paramount importance in the
description of the parties in the contract. The seller is unmarried, and therefore may contract
on his own. Although the purchaser is married, she is married out of community of property,
which means that she owns an estate separate from her spouse’s.

Each digit in the identity number of the parties mean something specific, and therefore care
should be taken to copy a persons identity number exactly as in the example shown above,
with necessary spaces between digits as indicated. The meaning of the digits is as follows:

780512 3046 087:

i. The “780512” is the date of birth of the party in question.

ii. The “3” is an indication of the gender of the party (0-4 denotes female, and 5-9
denotes male)
iii. The “046” is a sequence number for a combination of date of birth and gender,
meaning that this specific person was the 46th female-birth registered that particular
day.
iv. The “0” is an indication of the party’s citizenship. A “0” is indicative of a South
African citizen and a “1” will indicate a foreigner.
v. The second last digit will usually be an “8” or a “9”.
vi. The very last digit is a control digit.

Students must have knowledge of exactly what a South African identity number
entails, and should know the abovementioned analysis for test-and exam purposes.

For the sake of expediency, the parties are given aliases (“the Seller” and “the Purchaser”) by
which descriptions they will be known throughout the remainder of the contract.

II.

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 1. ABC Investments (Proprietary) Limited, Registration Number 1978/10025/21
wishes to sell some of its immovable property to
2. James Hudson, identity number 771212 6234 085, who is married in community
of property to Jane Hudson, identity number 781224 3445 087.
3. Peter Williams, a director of the said company, has been authorized to sign the
contract of purchase of the said immovable property on behalf of the company
by virtue of a resolution dated 12 April 2000.
4. Describe the parties in the contract of sale.

1. ABC Investments (Proprietary) Limited

Registration Number: 1978/10025/21

Herein represented by Peter Williams in his capacity as Director, authorized thereto

by a Resolution of Directors dated 12 April 2000.

(Hereinafter referred to as “the Seller”)

2. James Hudson
Identity number: 771212 6234 085

and

Jane Hudson
Identity number: 781224 3445 087
Married in Community of Property to each other.

(Hereinafter referred to as “the Purchasers”)

Analysis:

A company is a juristic person which cannot enter into legal acts without being represented.
In this case, one of the directors of the company has been authorized to sign this specific
contract on behalf of the company. The authorization must however be mentioned for the sake
of consensus and legality.

In the case of the purchasers, the parties are married in community of property. This means
that whilst they are two separate private persons, they are seen by the law as one entity that
possesses on estate. Therefore, parties married in community of property to each other will
always have to contract jointly.

III.

1. A certain trust, which has not been registered yet, wishes to buy property from
Jane Doe, a person married in terms of Scottish law.
2. The trust will be represented by Johnny Walker, in his capacity as future trustee.
3. Describe the parties in the contract of sale.

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 4. Provide your own particulars if necessary.

1. Jane Doe
Identity number: 598399
Married, which marriage is governed by the laws of Scotland.

(Hereinafter referred to as “the Seller”)

2. Johnny Walker, in his capacity as trustee of a trust still to be registered.

(Hereinafter referred to as “the Purchaser”).

 Conditions:

A condition in a contract refers to a clause by which a contractual performance is qualified by

an uncertain occurrence in future.

The requirements of a condition are as follow:

 Uncertain future occurrence;

 The occurrence must be physically and juridically possible;
 The occurrence must not be subject to the decision of the presentor thereof
only, for instance “I shall give you R50 if I feel like it”.

Two main types of condition are distinguished, namely the suspensive condition and the
resolutive condition.

A suspensive condition suspends or postpones the full operation of the obligation which it
qualifies until certainty is reached, in that the condition is fulfilled or in that it fails. An example
of such a condition would read as follows:

“Walker agrees to loan Doe an amount of R10 000.00 on condition that the latter obtains his
LL.B-degree within four years.”

A resolutive condition, on the other hand, does not postpone the operation of the obligation:
the obligation operates in full, but may come to an end if certainty is reached, in that the
condition is fulfilled or in that it fails. An example would read as follows:

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“Walker agrees to give Doe a motorcar, but if Doe does not obtain the LL.B-degree within four
years, Walker will take the motorcar back with immediate effect.”

 Time clauses

A time clause is a contractual term which qualifies an obligation with reference to a certain
moment or event in the future- a dies certus an. Unlike a condition, a time clause relates to a
future moment or event which is certain to occur, although it may be uncertain exactly when it
will happen. A time clause may, like in the case of a condition, be suspensive or resolutive.
Where a suspensive time clause is incorporated into a contract, obligations come into
existence when the contract is concluded, but the full operation of the obligations is postponed
until the future moment or event. Since the future moment or event is certain to arrive at some
stage, the position pending fulfillment of a suspensive time clause differs from the position
pending fulfillment or failure of a suspensive condition. The effect of a suspensive time clause
depends on whether it is intended to be in favour of the debtor (pro debitore) or in favour of
the creditor (pro creditore). If the clause is in favour of the debtor, the enforceability of the
obligation in terms of which the debtor is bound to perform is suspended, but the obligation
remains capable of being performed. The debtor is therefore free to render performance
before the time or event fixed by the fixed by the time clause and the creditor may not refuse
to accept performance. If the clause is in favour of the creditor, the obligation is not capable
of being performed before the time or event fixed for performance. This implies that the
performability of the performance is suspended. The creditor can therefore not be compelled
to accept performance before the fixed time or event, although he is entitled to enforce
performance earlier. If a time clause is in favour of the creditor, to the extent that it is intended
only to protect him against loss of interest, the debtor may render early performance, if he
pays interest for the full period.

A resolutive time clause provides that an obligation will terminate at a certain future date or
when a certain event occurs in future. Normally, resolutive time clauses do not operate
retroactively, but contractants may agree to the contrary.

 Breach of Contract

One of the positive aspects of freedom of contract is the fact that parties can determine their
own remedies in case of breach of contract. A typical clause in a contract would look like this:

BREACH OF CONTRACT

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Should any of the parties to this contract fail to comply with any of the provisions contained
herein, and fail to rectify the failure to comply within 7 (seven) days of written notice to comply
therewith, the other party will have the right, according to its own discretion, to:

a) Claim specific performance of the provision in question;

b) Cancel the contract; and
c) Claim any damages suffered as a result of the other party’s breach, including all legal
costs.

END OF PART 4

11.4. LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during particular assessment
opportunities. Refer to Blackboard for more information and announcements on assessment
opportunities.

11.5. QUESTIONS TO CONSIDER IN THIS UNIT

Please refer to the questions or issues raised at the unit specific information provided at 11.3.2

indicated with icon as matters for consideration.

11.6. STUDENT GRADUATE ATTRIBUTES DEVELOPED IN THIS UNIT

The student graduate attributes developed by the specific learning outcomes in the
corresponding learning units are:

 Critical thinking
 Problem solving
 Written communication skills

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 12. APPENDIX A: MODULE JOURNEY MAP

Please note that a module journey map, also referred to as a module programme will be made
available on Blackboard. The purpose of the “map” is to assist students to monitor and manage
their progress through the learning units, the stages in the journey to completion of the module
in order to reach their destination which is to achieve the module outcomes and pass
successfully pass LLOC 2605.

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