Chapter 7 - Formalities

Question 1

Formalities

Answer 1

Final factor taken into consideration when determining whether a contract has come into existence.

Formalities are requirements relating to the outward, visible form in which they agreement must be cast. to create a valid contract.

Requirements may be stipulated by law or by contracting parties.

Compliance consists of reducing the contract to writing with or without signatures

If the law requires certain formalities to be observed they must be satisfied

Question 2

The general rule of formalities

Answer 2

As a general rule, no formalities are required for contract to be valid or for the formation of the contracts.

Informal contract - this is binding and contracts are validly concluded without formalities.
- contract of sale in a supermarket

Parties are free to choose the way they wish to create a contract
- writing, orally or tacitly

It is also possible for certain aspects of the contract to be in writing while other matters are agreed upon orally or tacitly.

Question 3

Contracts where formalities are required

Answer 3

Formalities are required by law

Legislation sometimes prescribes formalities to be compiled for a contract to be valid or for the contract to be enforceable against 3rd parties.

Examples:

Contracts for the alienation of land must be in writing and signed by the parties or their agents acting on written instruction.

Suretyship contract must be in writing and signed by or on behalf of surety ( may be orally)

And executory contract of donation must be in writing and signed by or on behalf of either the donor or someone on his or her behalf.

• donor must give written authorisation to the person to sign in his/her behalf
• Authority must be granted in the presence of two witnesses

Consumer contracts like Gym contracts must be in writing and contain minimum prescribed information.

Franchise agreements must also be in writing and contain certain minimum information in addition to being framed in plain language.

Credit agreements there is no provision in the national credit act that a credit agreement must be reduced to writing.
- however the fact that the act requires that the consumer receives delivery of the details of the terms of the credit agreement implies that the agreement must be in writing.

Antenuptial contracts: they must be in writing, notarised and registered in the deeds office within three months of wedding before they are enforceable against third-parties.

Long leases of land: they require writing, to be notarised and registration against the title deed.
- Long lease is for 10 years or more

Question 4

The parole evidence rule

Answer 4

This is applied to written contracts and implies that a person cannot use anything else to interpret a written contract.

That’s one is confined to the four corners of the written agreement.

In order to do away with the potential unfair interpretation of the contract, a party may approach a quote to rectify mistake in the contract

Question 5

Writing and signing electronic transactions

Answer 5

The electronic communications and transactions act provides that information contained in the data message, and stored in a manner where it is accessible for future use, can substitute for writing.

And electronic signature is likewise accepted as a signature.

Exclusions to this rule are alienations of land, certain long term leases over 20 years, wills and execution of a bill of exchange.