Derivative Aquisition

Question 1

Definition of Derivative acquisition

Answer 1

Derivative acquisition of ownership is the passing of ownership to a new owner with the cooperation of the previous owner, where the acquired ownership is derived from that of the previous owner.

Question 2

What does the transfer of this kind of ownership require?

Answer 2

transfer of ownership requires a consensual agreement between the parties in terms of which both the transferor (previous owner) and transferee (new owner) intend respectively to transfer and receive ownership

Question 3

Synonymous to transfer of ownership:

Answer 3

Transferor = owner
Transferee = new owner

Question 4

ORIGINAL ACQUISITION

Answer 4

• Original acquisition does not involve any consensus or collaboration between the previous and new owner and, in fact, no act of transfer as such takes place.
• Thus, original acquisition of ownership involves no bilateral act but entails unilateral receiving of ownership based on the various principles.
• The new owner’s title is original; he OR she is given a ‘clean slate’ with none of the burdens and limitations that were on the property when it was owned by its previous owner.

Question 5

DERIVATIVE ACQUISITION

Answer 5

• Derivative acquisition involve consensus or collaboration between the previous and new owner
• Transfer is a bilateral juridical act in that it requires the consent and co-operation of the transferor and transferee.
• The transferee’s title (ownership) derives from the title of the transferor in that the right of ownership (with all its burdens and limitations) that previously vested in the transferor is transferred to and now vests in the transferee.

Question 6

MAIN DISTINGUISHING ELEMENT OF DERIVATIVE ACQUISITION:

Answer 6

Derivative acquisition of ownership is a so-called real agreement between the transferor and transferee.
The real agreement is the juridical act through which the parties express their respective intentions to transfer and receive ownership. Hence for the valid transfer, you must:
* Focus on requirements of transfer (juridical act of transfer)
* NOT on the contract for transfer (juridical act of concluding contract)

Question 7

What are the two systems of transfer of derivative acquisition?

Answer 7

Causal system and abstract system

Question 8

What does a causal system entail?

Answer 8

Causal system entails that a valid iusta causa (valid contract/cause/ reason) must underpin the transfer.

Question 9

How is validity in the causal system determined

Answer 9

In the causal system, if the sale, donation, exchange or inheritance is invalid then the transfer will also be invalid

Question 10

What else should also be present in a causal system?

Answer 10

In this system, the intention to transfer must also be present (a valid transfer with delivery and registration)

Question 11

what does the causal system rely on?

Answer 11

Causa

Question 12

Causal system on the transferor

Answer 12

It also favors the transferor.
Owner will have a real remedy to recover or reclaim the property via the rei vindicatio from the purchaser because he or she never lost ownership of the property.

Question 13

What are the implications of the causal system?

Answer 13

• Void ab initio (in other words transfer invalid)
• Look at validity of underlying agreement.
• Transferor remains owner.
• “Seller” will have rei vindication as a remedy

Question 14

What is the abstract system of transfer based on?

Answer 14

It is based on the abstract theory of transfer which essentially separates the judicial act of concluding a valid causa from the juridical act of valid transfer

Question 15

Describe the difference between the underlying causa and real transfer act in abstract system

Answer 15

They are mutually exclusive according to the abstract system. Hence the name abstract, where the validity requirement is abstracted from the causa.

Question 16

Two judicial acts under the abstract system

Answer 16

In this regard, the transfer of ownership depends on a valid real agreement.
The causa has no affect on a valid transfer taking place

Question 17

Implications of the abstract system

Answer 17

• Transfer still valid.
• Look at intention to transfer.
• Transferee becomes owners.
• “Seller”: no rei vidicatio (contractual remedies/ enrichment

Question 18

What approach does the SA system use?

Answer 18

South African property law uses the abstract system of transfer following the decision in Commissioner of Customs and Excise v Randles, Brothers and Hudson

Question 19

Commissioner of Customs and Excise v Randles, Brothers and Hudson:

Answer 19

Court held that:

-“Ownership of movable property does not in our law pass by the making of a contract.

-It passes when delivery of possession is given
accompanied by an intention on the part of the transferor to transfer ownership and on the part of the transferee to receive it.

-If it is delivered in pursuance of a contract of sale, the ownership may pass at the time of delivery or it may not.

-The form of the contract between the parties does not therefore determine whether a delivery in pursuance of it passes ownership … Whether or not an intention to transfer ownership by delivery exists is a question of fact, not of law”.

Question 20

Arikel v Bodenstein

Answer 20

Clear confirmation later came in this case, where the court distinctly stated that the abstract system is used in South Africa.

Question 21

Legator McKenna Inc

Answer 21

The Supreme Court of Appeal expressly confirmed that the abstract system of transfer applies in South African law with regard to immovable property (it was assumed up until this point).

Question 22

Where were the requirements for valid transfer set out?

Answer 22

Concor Construction v Santam Bank.

Question 23

Prerequisites for valid transfer

Answer 23

1. Res in commercio (Things in commerce/negotiable things)
   real rights can be acquired and transferred.
   Note things can also prescribed by legislation.
2. Nemo plus iuris maxim (only owner or authorized agent can be the transferor).
   None owner can conclude contract but still needs owner to transfer.
3. Both transferor and transferee must have the legal and contractual capacity to transfer and accept transfer
4. Causa for the transfer (a legal reason or cause).
   All that is required is that there is a causa.
5. Payment of the purchase price must be tendered upon delivery.
   There is a distinction drawn between cash transactions, credit transactions and hire purchase agreements

Question 24

ESSENTIAL REQUIREMENTS FOR TRANSFER in a real agreement

Answer 24

• animus
• corpus

Question 25

what is animus according to Concor Construction v Santam Bank?

Answer 25

Reciprocal intention to transfer and receive ownership

Question 26

what does animus entail?

Answer 26

Transferor must have the intention to transfer ownership to the transferee
The transferee must have the intention to accept or receive ownership from the transferee at the moment of conveyancing.
Subjective element of real agreement.
- Objectively determined

Question 27

what does corpus entail?

Answer 27

• Conveyancing: Represents the outward expression of the intention of the parties to transfer ownership in a physical way.
• Compliance with the publicity principle.
• The existence of a real right and, as far as possible, its
  extent and the identity of its holder must be ‘advertised’ to the world at large.
• Delivery (movables) and registration (immovable/land)
  *Objective element of the real agreement.
• Objectively determined*

Question 28

two manifestations of corpus

Answer 28

i. Registration of deed of transfer for immovable
ii. Delivery for movables

Question 29

Definition of ‘Delivery’

Answer 29

The transfer of physical control of a moveable
thing to the transferee to enable him/her to exercise control of the relevant moveable with the intention to be the owner (animus domini)
Absence of the animus (intention) = delivery cannot transfer ownership

Question 30

Requirements for Successful Delivery:

Answer 30

• Delivery is essentially one of the core requirements for a valid transfer of ownership over moveable things.
• It is linked to the ‘animus’ requirement (intention)
• Delivery + animus forms a real agreement.
• Delivery is the outward expression of the reciprocal intention of the transferor to the transferee.
• Absence of the animus element will prevent the delivery of transfer of ownership.
• Thus, even if the parties deliver the moveables, without the animus requirement = ownership will not transfer.
• Animus + delivery = inter-connected for est. of transfer of ownership.

Question 31

Two Recognized Modes of Delivery:

Answer 31

1. Actual Delivery: (Traditio Vera)
2. Constructive Delivery: (Traditio Fictio)

Question 32

describe actual delivery

Answer 32

Transferor literally hands over the legal and physical control of the moveable, to the transferee.

Question 33

describe Constructive Delivery:

Answer 33

• Actual delivery is impossible or impracticable due to the nature of the thing or circumstance.
• It will be regarded as** valid delivery,** although there is no physical transfer.
• Allows for delivery other than actual delivery.
• Parties must intend to use this mode of delivery.
• However, may only be used where appropriate
• Thus, no new modes may be created.
• If the circumstances are not present = no constructive delivery and no transfer of ownership

Question 34

What kind of delivery does Constructive delivery (tradition fictio) allow?

Answer 34

delivery other without actual delivery, which is physical transfer

Question 35

How does delivery with or without actual transfer occur?

Answer 35

This occurs due to the nature of the thing or circumstance (actual delivery being impossible or impracticable) and will still be a valid form of delivery.

Question 36

different modes of constructive delivery

Answer 36

Mode 1: Symbolic Delivery (Clavium Traditio)
Mode 2: Delivery with the Long Hand (Traditio Longa Manu)
Method 3: Delivery with the Shorthand (Traditio brevi manu)
Method 4: Attornment
Method 5: Constitutum Possessorium

Question 37

whats symbolic delivery?

Answer 37

• The moveable thing is delivered by handing over a symbol or instrument of the thing.
• Not actual delivery of the thing, rather a symbol/instrument is used to transfer.

Question 38

requirements for symbolic delivery

Answer 38

• Symbol/Instrument must provide the transferee with Effective & Exclusive control over the thing.
• Effective control: ability for the transferee to take and maintain control over the thing.
• Exclusive control:ability of the transferee to have the only power to exclusively exercise control over the thing. (No one else has the power to exercise control over the thing)

Question 39

Circumstances triggering Symbolic Delivery:

Answer 39

• Used where due to the nature and size of the thing prevent physical delivery.

Question 40

Process of Symbolic Delivery:

Answer 40

• Physical and mental elements involved in handing over
  instrument or symbol.
• Symbol must provide exclusive and effective control.

Question 41

Examples of Symbols/Instruments:

Answer 41

• Keys to a warehouse.
• Silo certificate.
• Bill of lading

Question 42

Description of delivery with the Long hand

Answer 42

• Delivery occurs when the item is pointed out and clearly identifiable.
• Entails the thing pointed out by the transferor to the transferee.
• Must be done in a way that is clear to the transferee which thing is being transferred.
• Thing must be clearly identifiable

Question 43

Requirements of delivery with the Long hand

Answer 43

• Clear intention of parties.
• Pointing out must be in the presence of both parties.
• Must also allow transferee to exercise effective control.
• Clear separation and identification of the item.
• Pointing out = clearly identifiable + Exercise effective
  control.

Question 44

Circumstances Triggering Long Hand Delivery:

Answer 44

• Used when the thing is too big.
• Impossibility of physical delivery due to the item’s nature,size or weight

Question 45

Examples for Long Hand Delivery:

Answer 45

Billboard structure

Question 46

Cases for delivery with the long hand

Answer 46

Groenewald case

Question 47

Delivery with the Shorthand (Traditio brevi manu) Description

Answer 47

• Takes place where you have a transferee, that was in
  physical control of the thing before the transfer.
• Transferee that was in physical control of the thing before the transfer of ownership + remained in physical control of the thing during the transfer, but with a changed intention to hold ownership.
• Intention to receive ownership (transferee)
• Intention to seize being the owner (transferor)
• Transfer occurs through a change in intention.

Question 48

Requirements for delivery with the short hand

Answer 48

• Transferee must have pre-existed physical control over the thing.
• Transferee must continue to have physical control over the thing.
• Intention for a change in status regarding the thing.

Question 49

Examples of Delivery with shorthand

Answer 49

Boat
sell thing to the lessee

Question 50

Summary of delivery with the short hand

Answer 50

• Transferee that has physical control of the thing.
• Before transfer of ownership,
• And remains in physical control subsequent to the transfer.
• Change of intention.

Question 51

Case law on delivery with the shorthand

Answer 51

• Info Plus case:
  the court overturned a decision stating that direct possession at the final payment is unnecessary for shorthand delivery.
• The court emphasized the real agreement presence

Question 52

Description of attornment

Answer 52

• Constructive delivery mode where the moveable thing is
  held by a party (third party), other than the transferor or
  transferee.
• The third party is in physical control at the moment of
  transfer.
• Parties involved: Detentor (in physical control of the thing)+ Transferor (owner) + Transferee (future owner)
• No physical possession of the thing by either the transferor or the transferee.

Question 53

Case law for Requirements for attornment

Answer 53

The requirements for attornment were first set in the
Vorenstein case and where confirmed in the Southern Tankers
case

Question 54

Southern Tankers case (requirements confirmed for valid
Attornment)

Answer 54

1. Tripartite agreement
2. Detentor must exercise physical control (detentio) over the moveable at the conclusion of tripartite agreement

Question 55

what is a tripartite agreement

Answer 55

Agreement among transferor + transferee + detentor.

Question 56

form of a tripartite agreement

Answer 56

Instruction on the part of the transferor + decleration on the part of the detentor.

Question 57

Content of a tripartite agreement

Answer 57

o Instruction: must state that the detentor would
henceforth hold the property on behalf of the
transferee and not the transferor.
o Declaration: must come from the detentor,
declaring that they will hold property/thing on
behalf of the transferee.
o Arikel v Bodenstein case = mere notification of
change of ownership is insufficient.
o Must be clear and specific.

Question 58

What is required of the Detentor at the conclusion of tripartite agreement?

Answer 58

Detentor must have direct, physical control over the thing

Question 59

Voluntary loss of control:

Answer 59

o Blieman case = giving up physical and legal control - impossible to hold as a detentor.
o Second requirement not met; thus attornment
will be invalid.

Question 60

Involuntary loss of control: (stolen)

Answer 60

o Loss of physical control.
o Retention of the right to retake should arguable be sufficient, but will depend on the factual scenario.
o Regarded as legal control.
o Thus will be a valid attornment

Question 61

Description of Constitutum Possessorium

Answer 61

• Ownership transfer without physical transfer.
• Transfer occurs through a change in parties intention.
• Transactions where moveable’s remain with the transferor after the transfer.

Question 62

Eleof Constitutum Possessorium

Answer 62

• Pre-existing physical control by transferor.
• Transferors continued physical control under a valid causa.
• Intention for a change in status/relationship regarding the thing/property

Question 63

Requirements for Constitutum Possessorium:

Answer 63

• Goldingers Trustee V Whitelaw & Son Case:
  1. Transferor must be in physical control of thing, prior,
  during & after transfer.
  2. Transferor’s intention must change from owner to mere holder (detentor): Transferee’s intention must be animus domini:
  3.Valid and genuine causa detentionis (Vasco
  Drycleaners case)

Question 64

Questions asked in Vasco Dry cleaners

Answer 64

Question 1: Is there causa detenetionis?
Question 2: Is it a genuine causa detentionis

Question 65

Is there causa detenetionis?

Answer 65

o Refers to an agreement between the parties
providing for the basis on which the transferor retains
control.
o Which reflects the changed intention.
o Consider factual scenario to ascertain this.

Question 66

Question 2: Is this ‘causa detentionis’ genuine of stimulated?

Answer 66

• To prevent fraud: It must be genuine (true intentions must be scrutinized)
• Apply a cautious approach (No presumption in favour of constitutum possessorium (Goldinger’s Trustee)
• Give effect to substance over form)

Question 67

Southern Tankers (Pty)
Ltd t/a UNILOG v Pescana
D’oro Ltd

Answer 67

Facts: The dockmaster, acting on behalf of Pescana, placed fish in a cold store owned by ACS in Cape Town harbor. Velmar later purchased the fish.

Issue: Was the dockmaster considered the third-party holder for the purpose of attornment?

Court Decision: The court held that attornment requires mental concurrence among all parties that the third-party holder (dockmaster) will hold the property on behalf of the transferee (Velmar) and not the transferor (Pescana). The holder must have exercised factual control or had the right to control the property at the moment of agreement12.

Question 68

Info Plus v Scheelke and
Another

Answer 68

Facts: Info Plus (IP) instituted an action against Scheelke (S) for delivery of a car that IP alleged was its property. S admitted possession but denied IP’s ownership of the car.

Background: IP purchased the car from W under an instalment sales agreement, with W reserving ownership pending payment of the full purchase price.
Ownership Dispute: The main question was whether (and when) IP became the owner of the car.

Court Decision: The court held that IP did not acquire ownership because the car had been delivered to a motor dealer before the final instalment was paid. Ownership in such cases is typically transferred upon payment of the last instalment, but the transferee must be in effective physical control of the object at that time. Since IP was not in possession, another form of constructive delivery (such as attornment) was required

Question 69

Vasco Dry Cleaners case

Answer 69

Facts: Vasco Dry Cleaners sold their dry cleaning business to A C (Pty) Ltd. The contract suspended ownership transfer for the dry cleaning machinery until the purchase price was paid in full.

Simulated Transaction: The court found that the sale was simulated. Evidence included the fact that the seller did not want to dispose of the machines, the** buyer did not need them**, and the sale price was not based on market value but the purchase price

Question 70

Four factors considered in Vasco Dry Cleaners

Answer 70

• Viewing of the thing before sale?
• Need for thing
• No knowledge of the value of the thing
• Unrealistic purchase price/price equal to amount.