IURI 373

The Law of Contract

Obligations & Terms (Chapter 10 of the Textbook)
Part 4
Learning Outcomes

After engaging with the materials and activities in this study unit you should have:
 Integrated knowledge of the essentialia, naturalia and incidentalia of a contract with the ability to evaluate the
purposes of these respective terms;
 Integrated knowledge of express terms, implied terms and tacit terms with the ability to examine the incorporation
of these terms to the content of a contract;
 A clear understanding of the relationship between essentialia, naturalia, incidentalia, express terms, implied terms
and tacit terms pertaining to the content of a contract;
 A critical understanding of the distinction between the legal principles applicable to signed and unsigned
documents pertaining to the express terms of a contract;
 A critical understanding of the different tests and relevant factors to determine whether a tacit term forms part of
the content of a contract;
 Integrated knowledge of conditions with the ability to provide a classification of the different types of conditions
and evaluate their respective effects on a contractual obligation;
 Integrated knowledge of time clauses with the ability to provide a classification of the different types of time
clauses and evaluate their respective effects on a contractual obligation.
Terminology
• Contractual obligation
• Par 10.2 of the Textbook
• Terms
• Par 10.3 of the Textbook
• Terms: stating the rights and duties of the parties
• Conditions
• Par 10.3.5 of the Textbook
• A term that qualifies a contractual obligation in such a manner as to make
its operation and consequences dependent on whether un uncertain future
event will happen or will not happen
• They merely express the parties’ agreement on what is to happen to the
obligations in the contract on the occurrence of an uncertain future event
• Therefore: They do NOT confer rights/duties
Conditions and their effect on the contract
• Conditions are terms that qualify obligations with reference to an uncertain
future event
1. Positive and negative conditions
• Positive condition (affirmative condition):
• Depends on happening of an uncertain future event
• In other words, the occurrence of a positive condition requires an affirmative act by one of
the parties. If the condition is not met, the obligation may not arise, and the contract may
not be enforceable
• Negative condition:
• Depends on an uncertain future event not happening
• In other words, conditions that require the absence or non-occurrence of a specific event or
situation for the contract to be fulfilled or an obligation to be triggered. In this case, the
occurrence of the negative condition prevents the contract from becoming enforceable or
may discharge existing obligations
Examples: Positive and negative conditions
• Alice agrees to sell her car to Bob on the condition that he obtains financing from a
reputable bank by a specified date.
• The positive condition here is Bob obtaining financing from a reputable bank.
• Until Bob fulfills this condition by obtaining the financing, Alice is not obligated to sell the car,
and the contract is not binding. Once Bob satisfies the condition, the contract becomes
enforceable, and Alice must transfer the car to him.
• John agrees to rent an apartment from Mary, and they include a negative condition in
the contract. The condition states that if the apartment fails to pass a safety inspection
by the local authorities before the move-in date, the contract will be nullified.
• The negative condition here is the failure of the apartment to pass the safety inspection.
• If, before the move-in date, the apartment successfully passes the safety inspection, the negative
condition is not met, and the contract becomes enforceable. John must pay the rent, and Mary
must provide him with access to the apartment. However, if the apartment fails the safety
inspection, the negative condition is satisfied, and the contract is nullified. Both parties are
released from their obligations, and any advance payments made by John may need to be
refunded.
Conditions and their effect on the contract (continued)
2. Suspensive and resolutive conditions
• Classification relates to effect on operation of obligation or contract as a whole
• Suspensive condition (condition precedent):
• Operation of obligation suspended pending fulfilment or failure of the condition
• Note: obligation itself not suspended
• Pending fulfilment/non-fulfilment: conditional right
• Resolutive condition (condition subsequent):
• Obligation operates in full but will end if uncertain future event does or does not
happen
• Regarding both suspensive and resolutive conditions:
• They may be positive or negative
• Fulfilment/non-fulfilment of the condition has retroactive effect.
Examples: Suspensive and Resolutive Conditions
• [previous examples, under positive & negative conditions = suspensive]
• Suspensive
• Sarah agrees to sell her car to Mike on the condition that he obtains a valid driver's
license by the end of the month.
• The suspensive condition here is Mike obtaining a valid driver's license.
• Until Mike fulfills this condition by obtaining the license, the contract is not enforceable, and Sarah is
not obligated to sell the car. However, if Mike obtains the driver's license within the specified time
frame, the suspensive condition is met, and the contract becomes enforceable. Sarah must then transfer
the car to Mike, and he must pay the agreed-upon price.
• Resolutive
• Alex enters into a lease agreement with Rachel for the rental of his commercial property.
The lease agreement includes a resolutive condition that states the contract will be
terminated if the property is damaged by fire before the commencement of the lease term.
• The resolutive condition here is the occurrence of fire damage before the lease's commencement.
Conditions and their effect on the contract (continued)
3. Potestative, casual and mixed conditions
• Potestative condition: depends on creditor’s doing or not doing something entirely
within his or her power
• Casual condition: depends on something beyond the control of the parties
• E.g. Michael agrees to sell his house to Emily on the condition that she secures a mortgage loan from a
bank before a specified date.
• The casual condition here is Emily's ability to secure a mortgage loan. Since the fulfillment of the
condition depends on factors beyond the parties' control (e.g., the bank's decision and Emily's
financial situation), it is a valid condition, and the contract becomes enforceable if Emily successfully
secures the loan.
• Mixed condition: depends partly on creditor’s actions and partly on events beyond the
parties’ control
• E.g. James agrees to sell his business to Olivia on the condition that she pays the purchase price within 30
days and obtains approval from the local zoning authority for the property's use.
• The mixed condition here consists of two parts: Olivia's payment within 30 days (potestative) and the
approval from the zoning authority (casual). The casual element, i.e., the approval from the zoning
authority, does not depend on Olivia's will but on external factors. As long as the potestative part is not
excessive (e.g., an unreasonably short time for payment), the mixed condition is valid, and the
contract becomes enforceable if both conditions are met.
Conditions and their effect on the contract (continued)

4. Interference in the fulfilment of conditions

• Parties may not deliberately interfere in the fulfilment/non-fulfilment of a condition
• If a party does so, condition is deemed to have been fulfilled/not: doctrine of fictional
fulfilment.
Time clauses

• A time clause is also called a dies

• General rule: performance due immediately
• Time clause: postpones or fixes the date of performance (certain event)
• Example:
• Alex enters into a contract with Beth to purchase her house. The contract includes a time clause
that states the closing date for the transaction.
• Time Clause: "The closing of the sale shall take place on or before 31 August 2023."
• In this example, the time clause specifies the deadline for completing the real estate transaction.
Both parties must complete all necessary paperwork, inspections, and payment by 31 August
2023. If the closing does not occur by this date, the contract may be considered breached, and the
parties could be subject to legal consequences.

• Compare with conditions?

Other common contractual terms

• Suppositions
• Also called assumptions
• Term that bases a contract or an obligation on the supposition that a
certain state of affairs exists or existed
• Must be shared by both parties
• Such clauses are valid and effective:
• If supposition true, contract valid
• If supposition false, contract void
• Compare with conditions.
Other common contractual terms (continued)
• Modal clauses
• A modal clause is also called a modus
• A term that charges the recipient of a performance with a duty to do something in the future
• Valid and enforceable
• Exemption clauses
• Also called exclusion clauses or disclaimers
• They are terms that exempt a party from liability that would otherwise be imposed upon him
or her
• E.g. In a lease agreement between a landlord and a tenant for a commercial property, there might
be an exemption clause relating to the landlord's liability for certain issues:
• "The landlord shall not be held liable for any loss, damage, or injury caused by any electrical or mechanical
failures, including but not limited to power outages, elevator malfunctions, or HVAC system breakdowns,
affecting the leased premises."
• General rule: valid and enforceable
• Exceptions e.g. exclusion of liability for fraud or intentional injury.
Other common contractual terms (continued)

• Non-variation clauses
• A term in a written contract that specifies that the parties:
• May not vary the contractual terms by agreement
• May only vary the contractual terms in writing
• Effect: valid and enforceable
• E.g. This Agreement represents the entire understanding and agreement between the parties
concerning the subject matter herein. No modification, amendment, or variation of any
provision of this Agreement shall be valid unless made in writing and signed by both parties.
• Governing law clause
• Regulates which system of law will govern the legal relationship
• E.g. This Agreement shall be governed by and construed in accordance with the laws of the
Republic of South Africa/ South African law
• See par 16.8.7 of the textbook
Pause and reflect

Can you identity the following terms and conditions:

1. Essentialia, Naturalia and Incidentalia
2. Express and Implied terms
3. Material and non-material terms
4. Positive, negative, suspensive, resolutive, potestative, casual or
mixed conditions
5. Time clauses