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Unit 1 - Slide Pack (For Notetaking)

The document provides an introduction to contracts, emphasizing their importance in commercial transactions and the legal framework governing them. It outlines key concepts such as the definition of contracts, elements required for validity, and the distinction between agreements and contracts. Additionally, it discusses sources of liability, types of performance, and the application of constitutional principles to contractual disputes.

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0% found this document useful (0 votes)

1 views29 pages

Unit 1 - Slide Pack (For Notetaking)

Uploaded by

krabbykhumalo56

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Slide 1

Contracts
(LAWS3044A)

2025

Unit 1: Introduction to Contracts

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Slide 2

How to use these Slides

 Dos and Don’ts

It is NOTsufficient These slides are a

These slides are to study these basic outline of
REMEMBER you
NOT a summary of slides only –you the work, and
must attend class
the prescribed MUSTstudy all additional slides
as well as prepare
material. They prescribed may be used in
for class. Use
provide a basic material (that class. It is your
these slides to
outline of the includes the responsibility to
help you navigate
lecture and the textbook, the take notes in class
the prescribed
prescribed prescribed cases, and supplement
material.
material. legislation and these slides where
journal articles). necessary.

Importance and purpose of contracts

 People enter into contracts every day.

 Contracts is central to commercial transactions.

 Contracts are the basis for trade, industry and the country’s economy.

 The law of contracts provides a legal framework, which provides for the following:

 Holds people to their promises.

 Ensures legal and commercial certainty.

 Sustains trade, industry and the economy.

BUT …. what exactly is a contract?

What is a contract?
Definition of a contract (para 1.1)
“ Contracts are agreements between parties who have the intention to create
legal rights and duties between them and which are legally binding on the
parties [which the law recognises as being valid and enforceable]”

 Five elements to the definition of contracts:

1. “Contracts are agreements” (not all agreements are contracts, but all contracts are indeed agreements
– what’s the difference?).

2. “Between parties” (this relates to the creation of “personal rights” and principle of “privity of
contracts”.

3. “Create legal rights and duties” (this relates to the principle of “animus contrahendo”

4. “Binding on the parties”

5. “Law recognises as being valid and enforceable” (requirements of a contract)

Format of a Contract

 Contracts need not be in writing to be valid. Consensus

 A contract can take the following forms:

Certainty Capacity
 Writing.

 Verbal (oral).
Requirements

 Tacit (via silence).

 A contract must meet the requirements for a valid contract. Possibly Legality

 This is cumulative, meaning that all the requirements must be met.

Formalities

Animus Contrahendi

 Not all agreements are contracts (but all contracts are agreements).

 What is the difference between an “agreement” and a “contract”?

 The distinguishing factor is the parties have the serious intention to contract (the Latin word for this is called
animus contrahendi).

 Serious intention to contract (or animus contrahendi) talks to the contracting parties intended to create
legal rights and duties between them.

 Agreements that lack the serious intention to contract (or animus contrahendi) are social agreements.

 Examples include:
 Gentlemen’s agreement.
 Letter of intent.
 Memorandum of understanding.

Case Law
 Kgopana v Matlala 2019 JDR 2365 (SCA)

 Kgopana and Matlala had a romantic relationship, from which there was a child.
 Kgopana had to pay maintenance for the child (e.g., via a court order). There was
negotiations to pay for the maintenance via a pension payout. However, subsequently,
Kgopana won the Lottery. He sent the following WhatsApp message to Matlala:

“'if I get 20m I can give all my children 1 m and remain with 13m .I will just stay
at home and not driving up and down looking for tenders’” Remember:
You must read
 Matlala action against Kgopana was based on the above WhatsApp. and study the
 What did the court say in relation to the principle of animus contrahendo. case in full!
 Take special note of the court’s conclusions in paragraphs 12 -13.
 You will need re-read this case when you have studied Units 2-6, at which stage you
will need to also understand what the decision’s approach was to:

1. The principles of basis of contractual liability.

2. The principles of offer and acceptance.

Pause and Reflect

It is time to pause and reflect on what you have leant so far.

Exercise 1.1
1. Give two examples of a contract Warm-Up
2. Give two examples of an oral and tacit contract Exercise
3. Give two examples of a social agreement

Remember, you need to supplement with your class notes.

Legal Obligations
 There are civil obligations, natural obligations and moral obligations

 Contracts are juristic acts (they create legal obligations between the contracting parties).

 Contracts form civil obligations (one or two exceptions two exist).

 The legal obligation is a “legal tie” (in Latin this is called vinculum iurus) which exists between two or
more people.

 For every obligation there is a right and a corresponding duty.

 One party has the duty to perform (debtor) and the other party has the corresponding right to receive
performance (creditor).

Duty Right Obligation

Types of Performance

 Performance may be done in one of three ways:

 Dare (to give something e.g., donation).

 Facere (to do something e.g., make payment).

 Non facere (to refrain from doing something e.g., restraint of trade or non-compete).

Legal Relationship (Unilateral Obligation)

Duty Performance Right

A
Debtor dare / facere / non facere
B
Creditor

Types of Performance
 It is possible for a contract to create more than one obligation.

 Separate obligations arise for each of the performances (each performance has as right (creditor) and a
duty (debtor).
Legal Relationship (Bilateral Obligation)
Duty Performance Right

A B
Debtor dare / facere / non facere Creditor

Right Performance Duty

A B
Creditor dare / facere / non facere Debtor

Pause and Reflect

It is time to pause and reflect on what you have leant so far.

Exercise 1.2
Identify the performance due in each of the following contracts and determine
whether it is dare, facere or non facere:

a) Cecilia and her 18-year-old daughter Grace agree that Cecilia will give
Grace her old car.
Beginner Level
b) Kabelo promises to sing at a charity concert for the Thuli Children’s Fund. Question
The Fund thanks him profusely.

c) X contracts with his neighbour Y that X will not play loud music on Sundays.

Remember, you need to supplement with your class notes.

Pause and Reflect

It is time to pause and reflect on what you have leant so far.

Exercise 1.3
Refer back to Exercise 1.2(a). Cecilia’s duty to give Grace her car arises
immediately upon the conclusion of the contract. Assume that they
agree that performance in terms of their contract will take place at the
end of the month. However, the day after reaching this agreement,
Cecilia decides that she would rather give the car to her other daughter Can Cecilia
Ursula. change her
mind?
Can Cecilia now refuse to give Grace the car?

Remember, you need to supplement with your class notes.

Sources of Liability
 There are different sources where a person may be found
Sources of Liability
legally liable.

Contract  This means that there are areas in the law that places a duty
on a person.

 Contract the duty is placed on a person voluntarily via

the agreement (whether it is verbal, written or tacit)
Delict  Delict the duty is placed on a person automatically if the
requirements of delict is met (there is an expected
standard linked to the “reasonable person”).
Unjustified  Unjustified enrichment the duty is placed via common
Enrichment law on a person if they were enriched (when not entitled
to do so)

 Statutory duties exist where legislation places a

Statutory Duty specific duty on a person.

 There are different remedies for each!

Personal v Real Rights

 The rights in contracts are classified as “personal rights”

 The principle of “privity of contracts” applies.

 Personal rights can only be enforced against the parties to the contract.

 Property rights are generally classified as “real right”.

 Real rights are absolute and can be enforced against anyone in the world.

Pause and Reflect

It is time to pause and reflect on what you have leant so far.

Exercise 1.7
a) X contracts with Y that X will give his car to Y. It turns out
that X stole the car, and that the true owner of the car is Z. Think about how
Can Y claim the car from Z? Why/why not? real rights and
b) Assume that X already gave the car to Y. Can Z claim the personal rights
car from Y? Why/why not? apply here.

Remember, you need to supplement with your class notes.

Pause and Reflect

It is time to pause and reflect on what you have leant so far.

Exercise 1.8
C Bank concludes a written contract with D that he will stand
guard at one of their ATMs after hours and on weekends, and that
he will take all reasonable steps to prevent their customers from Think about the
being robbed when using the ATM. principle of
One night, D decides that he would rather go to a party thrown by “ privity of
his best friend than guard the ATM. That night, E, a customer of C contracts”
Bank, is robbed when using the ATM. Can E sue D for breach of
contract? Why/why not?

Remember, you need to supplement with your class notes.

Cornerstones of a Contract
 There are four cornerstones to a contract:

 Freedom to contract (a party is free to contract with whoever they

want, on the terms they want and when they want). Freedom
of contract
 Sanctity of contract (the Latin term for this is pacta sunt servanda) Pacta sunt
which means that contracts that are freely entered into must be servanda
honoured.

 Good faith reflects the idea that parties must act honestly and fairly
in their dealings with one another (which is reflected in contractual
doctrine and closely linked to the principle of public policy).
Good faith
 Privity of contract reflects the principle that rights and duties can via public
only be enforced between the parties to the contract. policy

 There is a clear tension between sanctity of contracts (pacta sunt

servanda) and good faith (as well as “fairness” and “reasonableness” as
reflected in public policy).

Application of the Constitution

 Does the Constitution apply directly or indirectly to a private contractual dispute between parties?
 If the Constitution applies directly, then a contractual term can be challenged based on the Constitution (Bill of
Rights) alone.
 If the Constitution applies indirectly then the Constitution influences the development of common law of
contract and therefore it impacts the contractual dispute indirectly.
 Three Constitutional provisions are of importance when considering this question:
 Section 39(2): Constitution contemplates direct application of the Constitution – the purpose of the
provision is to infuse the common law with the principles of the Constitution. E.g., it creates a
normative system that reflects the values of the Constitution.
 Section 36: (limitation clause of Constitution) which only applies to the “law of general application”.
Consider, is a contract is not a law of general application?
 Section 172(1)(a): a court must declare invalid Constitutional inconsistencies of “law and conduct”. Is
a contract a “law” nor “conduct” in this context?
 Barkhuizen v Napier provides answers to these questions.

Case Law
 Barkhuizen v Napier 2007 (5) SA 323 (CC)

 Central issues: “What then is the proper approach of constitutional challenges to

contractual terms where both parties are private parties?”

 If a contractual term is to be tested directly against the principles of the Constitution it

would result in a horizontal application of the Constitution (also referred to as a “direct
application”).

 However, this poses a challenge. When reading (and studying this case), you should You only need
focus on: to study the
majority
 The court’s interpretation of section 39(2), section 36 and section 172(1)(a). E.g.,
what did the court say about these provisions?
decision.

 The court’s views of the function of public policy in contractual engagements.

 The court’s approach to when a court can judicially intervene.

 What did the court conclude? E.g. how should the Constitution apply to private
contractual engagements?

Remember you need to be able to read, analyse and explain the court’s position.

Case Law
 Beadica 231 CC and Others v Trustees, Oregon Trust and Others 2020 (5) SA 247 (CC)

 Since the Barkhuizen case there was inconsistency in the application of the equity
principles (fairness, reasonableness, good faith and Ubuntu) in contracts. This
necessitated the Constitutional Court to confirm its earlier decision in Barkhuizen.

 Central to the issue was when judicial intervention or control is permitted to amend the
contractual terms of the contracting parties in instances of bad faith, unfairness or
unreasonableness. You only need
 Take note: to study the
majority
 You should (after having read and studied the Barkhuizen case) has a good
understanding of the approach of the Constitutional Court.
decision.

 Although the Constitutional Court confirmed Barkhuizen it also added and

explained additional principles in relation to the tension between pacta sunt
servanda and good faith, the principle of good faith and the issue of subjective
fairness.

 You need to, be able to explain what the Constitutional Court added to the
discussion.

Application of the Constitution

 A contracting party cannot directly challenge the provisions of a contract in relation to the Constitution –
however may do so indirectly (e.g., via indirect horizontality through the principle of public policy).

 Public policy in a nutshell is:

 Represents the values of the Constitution.
 Legal convictions of the community (e.g., the general sense of justice / boni mores / values of society /
simply justice between individuals)

 Informed by the concept of Ubuntu.

 Imports the notion of fairness, reasonableness and justice.
 Confirms freedom to contract & sanctity of contract BUT allows to refuse enforcement if it is unjust /
unreasonable as determined by public policy.

 Constitutional values inform public policy.

 Remember, this is not the same as the subsidiarity principle.

Application of the Constitution

 The principle of freedom to contract reinforces the principle that a person can regulate their own conduct –
even if its to their own detriment. This is founded on the Constitutional values of freedom and dignity.

 This leads to the principle that contracts freely entered into should be honoured e.g., sanctity of contracts
(pacta sunt servanda). This is the cornerstone of commercial activity.

 Although contracts are subject to judicial control via the Constitution, the Constitution is not applied directly
but rather indirectly through the principle of public policy.

 Public policy incorporates values in the Bill of Rights, fairness, reasonableness & Ubuntu.

 A courts cannot refuse to enforce a contract because it would be subjectively unfair, unreasonably or unduly
harsh. A court’s power to judicially intervene is limited to instances where the contract if it is against public
policy.

 Onus of proof lies with the person who alleges the contract has infringed public policy.

Pause and Reflect

It is time to pause and reflect on what you have leant so far.

Exercise 1.10
Alex asks the cashier at the Wits Cafeteria for a bottle of sparkling
mineral water. She replies, ‘That will be R10 please.’ The cashier hands
the water to him as he searches for his wallet. To his surprise, the water
is lukewarm.
a) Is there a valid contract between Alex and the Wits Cafeteria? Put your
b) If so, what are the rights and duties created by the contract knowledge to
between Alex and the Wits Cafeteria? More specifically, did the the test!
Cafeteria have a duty to give Alex a cold bottle of water?
c) If so, has the Cafeteria breached its duty to Alex and further, would
he be entitled to contractual remedies?

Remember, you need to supplement with your class notes.

Introducing the Consumer Protection Act

 The Consumer Protection Act 68 of 2008 (CPA) came fully into force on 1 April 2011.
 The CPA is a comprehensive, but not a full codification of consumer legislation as there are other laws that
also provide consumer some level of protection, such as:
 The CPA protects eight fundamental rights of consumers:
The general rules of contract (e.g. the common law) will apply to all contracts, unless this has been
amended by legislation.
In order to determine whether the CPA changes the general common law rule(s), it must be determined
whether the CPA applies to a particular transaction (or contract).

The right to The right to

The consumer's The consumer’s
equality in the disclosure and
right to privacy right to choose
consumer market information

The right to fair, The right to fair

The right to fair The right to fair
just and and honest
and responsible value, good
reasonable terms dealings
marketing quality and safety
and conditions

Introducing the Consumer Protection Act

 The CPA applies if:
 the consumer is a natural person.
 the consumer is a juristic person with an annual turnover/asset value less than R2 mil.
 all franchisees are protected regardless of their asset value or annual turnover.
 if the supplier is the provider of goods/services in the ordinary course of business.
 the supply is for consideration.
 The CPA does not apply to:
 goods or services promoted or supplied to the State;
 the consumer is a juristic person with an asset value or annual turnover equals or more than the threshold
(R2 mil);
 if the transaction falls within an exemption granted by the Minister that constitutes a credit agreement
under the National Credit Act, but the goods or services that are the subject of the credit agreement are
not excluded from the ambit of the CPA;
 services supplied under an employment contract;
 a collective bargaining agreements.

Consumer Protection Act – Checklist for Application

 Does the transaction occur before or after the commencement of the CPA?
 Who is the Supplier? (This is the person who provides goods / services)
 Must market / provide goods and services as defined under CPA.
 Must be in the ordinary course of business (definition of a “transaction”).
 Can be a natural person or juristic person (of any value or size).
 There must be consideration paid (in other words there must be money / value given for the goods / services)
(definition of a “transaction”)

 Who is the Consumer? (This is the person who receives goods / services)
 Always applies to natural persons.
 Only applies to juristic person with asset value / annual turnover of R 2 mil or more.
 Are there any other prohibitions / limitations / exclusions under section 5 applicable?
e.g., employment contract, collective bargaining agreement etc.

Keep Practicing
Sometimes additional resources and exercises will be posted on Ulwazi

Additional exercises and resources

may be posted on Ulwazi – make
sure to keep checking the Ulwazi
course page for updates.

“The secret to getting ahead is

getting started.”

- Mark Twain

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