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Contract Requirements Slides Part 2 with Answers

The document outlines the essential requirements for a valid contract, including possibility, certainty, legality, and formalities. It explains that a contract must be possible to perform, certain in its terms, legal in its purpose, and may require specific formalities depending on the nature of the agreement. Additionally, it discusses the consequences of impossibility, uncertainty, illegality, and the imposition of formalities by law or agreement between parties.

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14 views

Contract Requirements Slides Part 2 with Answers

The document outlines the essential requirements for a valid contract, including possibility, certainty, legality, and formalities. It explains that a contract must be possible to perform, certain in its terms, legal in its purpose, and may require specific formalities depending on the nature of the agreement. Additionally, it discusses the consequences of impossibility, uncertainty, illegality, and the imposition of formalities by law or agreement between parties.

Uploaded by

ngimphiwegivenm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Law of

Contra
ct
Requirements
Part 2
Possibilit
y
Agreement Capacity Intention Possibility Certainty Legality Formalities
The contract must be objectively possible of
performance at the time that it is concluded.

General rule: Impossibility of performance prevents


the creation of obligations

If performance is impossible on either side, the


contract is a nullity and accordingly does not create

Possibility
any binding obligations.
• Subjective vs Objective
• Factual vs Practical/Economically
• Legal
• Which requirement? Legality vs Possibility
• Would be considered impossible rather than
illegal.
• Initial vs supervening
• NB: Cannot be at the fault of one of the parties

Possibility
There cannot be a claim for performance or
contractual damages based on a breach arising from
impossibility.

Any performance already made must be returned.

If performance is partially impossible (and therefore


partially possible), the contract may be void or

Possibility
alternatively part performance could be required.

Consequences of impossibility
Answer: A
Answer: A
Certainty

Agreement Capacity Intention Possibility Certainty Legality Formalities


Certainty
Uncertainty of language
A contractual term could be void for uncertainty due to the vague
language in which it is couched. Generally, courts will try to
interpret agreements in a manner that leads to validity rather than
invalidity.

Levenstein v Levenstein
In exchange for a property and business, party A undertook to
maintain party B ‘to the best of his ability during the remainder
of her life’.
Held, sufficiently certain

Beretta v Beretta
Agreement to pay off ‘substantial sum’ each year
Held, too vague
Certainty
Contracts of indefinite duration
Generally valid, must look to the terms of the contract to
infer the period intended by the parties

For example, parties might intend the contract to


terminate:
• by notice
• after a reasonable period of time
• indefinitely
Certainty
Contracts containing a mechanism to
determine certainty
Maxim: ‘something is certain if it can be rendered certain’

Such tests must operation independently of the subjective intention


of the parties.

Examples include:
• Escalations clause (which provides for an automatic increase
in the amount of performance over time.)
• Clauses referring to an external, objectively attainable factor
• Third-party determination clauses

Shell v Corbit
Granted Shell preference to sell petroleum based on ‘latest price
lists at the time’
Held, certain
Certainty
Agreements to agree
Valid, so long as the terms of the future contract are agreed upon.

Southernport v Transnet
• Agreement to enter in good faith negotiations AND failing
which referral to binding arbitration
• Held, valid
Certainty
Consequences of uncertainty

An obligation that does not meet the certainty requirement is


invalid.

If such an obligation is severable from the other obligations created


by a contract, the other obligations could remain in force.
• The contract is then only partially invalid.

If it is not possible to sever the offending obligation, the contract as


a whole is void.
Answer: C
Legality

Agreement Capacity Intention Possibility Certainty Legality Formalities


Legality

The agreement must be legal (or not be illegal), in terms of its


conclusion, performance and object. This means that it must not be
contrary to public policy (as expressed in legislation, the common
law and the Constitution) or contra bonos mores (ie, contrary to
good morals).

According to Hutchison, public interest includes:

• Sanctity of contracts • Safety of the state


• Justice • Efficient public service
• Equal bargaining power • Legal rights should not be
• Administration of justice interfered with

Also see our discussion about the application of the Constitution


from last week.
Legality
Contracts that violate statutes

Contracts that violate statutes (by their conclusion, performance or


object) are void if the legislature (explicit or by inference) intended
that result
Examples:
• Sale of dangerous weapons, diamonds, alcohol, etc.
• Contracts with enemy subjects (during war time)

If the statute expressly provides for voidness, then contract void, if


not, the intention of the legislator is the primary determinant of
voidness. In making this determination, the factors considered
include:
• does validity bring about the harm in question
• is there a criminal sanction
Legality
Contracts against good morals

Contracts that are contra bonos mores are void.

An exact definition of what is contrary to good morals (contra


bonos mores) remains elusive. Nevertheless, good morals
apparently refer to good behaviour in the community.

Maseko v Maseko
Legality
Unfair contracts

The individual interests of the parties also play a role in


determining whether a contract or clause is against public policy.

The necessity of doing simple justice between parties and the need
to address inequality of bargaining power between parties are both
recognised as public interests.

Unfairness alone is not sufficient to make a contract void, more is


required

Sasfin v Beukes

Consumer Protection Act (section 48) prohibits unfair, unjust and


unreasonable terms.
Legality
Consequences of illegality

An illegal contract is void or invalid since one of the requirements


for a valid contract is absent.

An illegal contract creates no obligations and, consequently, it


cannot be enforced.

Neither party can institute action on the contract or claim


performance from the other party because from an illegal cause no
action arises (ex turpi causa non oritur actio – known as the ex turpi
rule).

Performance by one or even both the parties to the illegal contract


does not make the contract legal.
Formaliti
es
Agreement Capacity Intention Possibility Certainty Legality Formalities
Answer: No
Formalities
As a general rule, there are no formalities for a contract
to be valid.

However,
(i) in respect of certain transactions formalities must
be imposed by law, and
(ii) in terms of freedom of contract the parties
themselves can agree to impose their own
formalities.
Formalities
Imposed by law

Some agreements are invalid if such formalities are not adhered, such
as:
• sale, exchange and donation of land (Alienation of Land Act of
1981 provides: ‘No alienation of land after the commencement of
this section shall … 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.’)
• suretyship (must be signed by surety, not creditor)
• donation (must be signed by donator)

Some agreements are not invalid if formalities are not met, but cannot
be enforced against third parties, such as:
• Antenuptial contract (must be registered within three months)
• Long-term leases (must be registered against the title deed)
Formalities
As agreed to by the
parties

Parties may impose formalities for the creation, variation or cancellation


on the contract

Examples of such formalities include:


• parties may agree that an oral agreement is only valid once
reduced to writing and signed
• parties may insert a ‘non-variation clause’, which provides that ‘No
variation of this agreement shall be of any force or effect unless
reduced to writing and signed by the parties’.
• Parties may agree that the cancellation of the contract shall only
be valid if in writing

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