Law of Obligations (3) Flashcards
An obligation implies?
that you have to do something, or that you must perform a certain task.
An obligation creates?
a legal bond between two (or more) persons. You now owe the other person something, and they can claim it from you in terms of law.
True or false: Joanne and Miriam agree to go to the cinema on Friday at 19h00. Joanne does not arrive and Miriam is forced to watch the movie by herself. Miriam can take Joanne to court for not keeping her promise.
False. They must have the necessary intention to be legally bound. This is a natural obligation.
True or false: Gary and Woody have a game of golf. They make a bet that the loser must buy a round of drinks at the pub. Gary loses and refuses to buy Woody a drink. Woody can sue Gary.
False. They must have the necessary intention to be legally bound. This is a natural obligation or ‘gentlemen’s agreement’.
True or false: Elwyn finds an advert on Gumtree for a PlayStation 4 being sold at R 2 000. He contacts the owner, pays her the R 2 000 via EFT, but she refuses to deliver the PlayStation 4. Elwyn can take her to court.
True. They had the necessary intention to enter into a sale contract. This is a civil obligation.
True or false: A delict forms part of the law of obligations because you are obligated to sue someone if they damage your property.
False. A delict forms part of the law of obligations, because if you damage someone else’s property and they take you to court, then you are obligated to compensate them for their loss.
What is a contract?
A legally binding agreement, written, oral or flowing from conduct, to give, do or refrain from doing something.
Contracts are important because it legally binds them to the terms of an agreement
A contract can be written or?
oral or flowing from conduct
A contract can be written or?
oral or flowing from conduct
What are the five requirements for a valid contract?
- Consensus
- Contractual capacity
- Legal possibility
- Physical possibility
- Formalities
All laws below are included as Private law, as a branch of South African law, except?
Criminal law
Requirements for the conclusion of a valid and enforceable contract include all the options below except?
Causation
On his way home from a party, Regan drives into his neighbour’s mailbox. Regan will be liable to pay his neighbour R 500 for the damage he caused. This is an example of the law of obligations because it operates in which field?
The law of delict
Sipho accidentally deposits his rent into the wrong bank account. The bank account holder refuses to transfer the money back to Sipho. This is an example of the law of obligations as it operates in which field?
The law of unjustified enrichment
Ramona sells her car to her friend Sarah. Ramona informs Sarah that the car is in a good working condition, and that it is a 2016 model. However, after Sarah has paid Ramona, and she receives the car, Sarah discovers that it is a 2014 model. Which requirement is not met in the contract between Ramona and Sarah and makes it an invalid contract?
Consensus
Explain Consensus?
Consensus is arguably one of the most important requirements, as it is the premise from which a contract is formed. As simple as it sounds, a contract cannot exist unless both parties agree on the same thing.
Explain Offer?
There must be a serious intention to form a contract. You must want to form a contract in order to satisfy this requirement. If a party merely wants to enter into negotiations with the intention of hopefully later concluding a contract, then that conduct does not constitute an offer to form a contract.
Offers do not last forever and will eventually lapse
Explain acceptance with regards to the law of contracts?
Once an offer is made, it is up to the other party to accept it or not.
The requirements for a valid acceptance are as follows:
- It must only be accepted by the offeree
- Acceptance must be made with the serious intention to form a contract
- It must be made at the time, and in manner and place that the offer stipulates
- It must be unqualified and unambiguous
Only once all the above requirements have been satisfied, can it be said there is a valid offer and a valid acceptance, and now the parties have consensus
Only once all the above requirements have been satisfied, can it be said there is a valid offer and a valid acceptance, and now the parties have consensus. Explain these requirements?
- It must only be accepted by the offeree
- Acceptance must be made with the serious intention to form a contract.
- It must be made at the time, and in the manner and place that the offer stipulates
- It must be unqualified and unambiguous
- It must only be accepted by the offeree: The same applies for when an offer is made to a group of individuals. Any person from that designated group may accept. A person to whom the offer was not made, cannot accept it.
- Acceptance must be made with the serious intention to form a contract: Much like an offer, the offeree must be aware that what is accepted to, will form a contract. If the offeree does not have the intention to form a valid contract, then the contract resembles that of a gentleman’s agreement.
- It must be made at the time, and in manner and place that the offer stipulates: If the offeror stipulates in the offer as to when, where and how the acceptance should be made, then the offeree must satisfy those requirements for a valid offer and acceptance to come into being.
- It must be unqualified and unambiguous: It must be clear and certain that the offeree is accepting the offer on the same terms set out by the offeror. Remember, that if the offeree has their own terms, then that is in fact a counter-offer, which the other person can choose to accept or not.
There are four general theories of when a contract comes into being, what are they?
- Reception theory
- Information theory
- Expedition theory
- Declaration theory
- Reception theory: An agreement is concluded when the offeror receives notice of the offeree’s acceptance.
- Information theory: An agreement is concluded when and where the offeror is informed of the acceptance by the offeree.
- Expedition theory: This theory only applies when letters are sent via post, which in modern times is becoming far less common.
- Declaration theory: This theory states that an agreement exists when and where the offeree expresses their acceptance
The four general theories of when a contract comes into being are?
- Reception theory
- Information theory
- Expedition theory
- Declaration theory
- Reception theory: An agreement is concluded when the offeror receives notice of the offeree’s acceptance. In terms of this theory, if a letter or email is sent, where the offeree accepts the offer, then the offeror does not even need to read the email for the offer to be accepted. As long as the email amounts to an acceptance of the offer, then an agreement will have been concluded. In terms of this theory, Joey will have a right to the laptop even though Andiswa did not read Joey’s email, because his email amounted to an acceptance of her offer, and was sent before Unathi accepted it.
- Information theory: An agreement is concluded when and where the offeror is informed of the acceptance by the offeree. If it is in person or over the phone, then the offeror is informed immediately that the offer is accepted, and therefore the agreement is concluded. But what if, like in the previous Example section, the offeree received a letter beforehand, did not read it, but accepted, another offer? In that case, the person who wrote the letter is prejudiced, as this theory states that it is only when the person learns of the acceptance (Matzukis, 2014: 228). If Andiswa never read the email, she was not informed, and therefore the contract was not concluded. Joey would have no claim to the laptop in terms of this theory.
- Expedition theory: This theory only applies when letters are sent via post, which in modern times is becoming far less common. This theory states that a contract is concluded when the offeree puts their letter of acceptance in the postbox. Therefore, if a person writes a letter accepting the offer, but only sends that letter three days later, then this theory states that the contract is formed only at the time that the letter was actually put into the postbox, and not three days before, when they actually wrote the letter. Therefore, had Joey sent a letter instead of an email, but posted the letter on the Wednesday, then the contract still would have come into existence.
- Declaration theory: This theory states that an agreement exists when and where the offeree expresses their acceptance (Matzukis, 2014: 228). Compare this with the expedition theory discussed above. In terms of this theory, if Joey decides on Wednesday that he wants to accept Andiswa’s offer, but does not send the email yet, then in terms of this theory, the contract is formed when he expressed his acceptance, despite not yet sending the email. But what if Unathi decided on Tuesday that she would accept it, wrote a message to Andiswa on Tuesday via WhatsApp but decided to rather wait and tell her on Thursday? Well, in terms of this theory, Unathi expressed her interest first, and therefore is entitled to the laptop. This theory is not widely accepted in South African law.
What theory states that a contract comes into being as soon as the offeree puts his or her letter of acceptance in the post-box?
Expedition theory
If an offeree does not have the intention to form a valid and enforceable contract, what sort of understanding is formed?
A gentleman’s agreement
What characteristics are required for a valid acceptance to take place?
Unqualified and unambiguous
(Not open to one and more than one interpitation)
Diana owns a material shop. Bridget wants to buy a yard of red cotton material from Diana. Diana offers to sell material to Bridget and she points to her shelves where there are a number of different colours and types of material on display. Which requirement needs to be met to make Diana’s offer valid?
An offer must be complete, clear and certain
What theory states that a contract comes into being when the offeror receives notice of the offeree’s acceptance?
Reception theory
Explain Contractual capacity?
A person must have the necessary legal capacity, or otherwise referred to as contractual capacity, before they can enter into a contract. Briefly put, contractual capacity is a characteristic of a person which ensures that they can appreciate the nature and content of a contract.
We will now consider the exceptions to the requirement of contractual capacity, and explain them?
- Age
- Minor
- Infants
- Age
For children entering into contracts, there are three relevant age categories. The first age group is from 0–7 years of age, also known as infans. From 8–18 years of age is known as a minor. Lastly, any person over the age of 18 is regarded as being a major. Majors are generally regarded as having sufficient contractual capacity and may enter into any contracts of their own will. There are of course a few exceptions which will be discussed below. The two most important age categories, which impact contractual capacity in a material respect, is the infans and the minor. - Infans
At the outset, an infans has no contractual capacity. This means that a child below the age of seven cannot enter into any contracts. Should an infans attempt to enter into a contract, then the contract is, strictly speaking, void. Think about those situations where parents often give their child money to buy some sweets from the shop. Once again, a child purchasing a sweet is entering into a contract with the store, and this contract should be regarded as being void. This is seldom implemented in reality. If an infans wants to enter into a contract, then their parent or legal guardian must do so on their behalf. All the rights and obligations that arise as a result of that contract will pass onto the infans, even though it was their parent who entered into the contract. - Minor
The minor is a fascinating age group, as minors are regarded as having limited contractual capacity. This is important, as it means they may enter into contracts, without parental supervision, but that a contract will not apply to them in the same way that it would apply to a major. As a point of departure, if a minor enters into a contract with parental guidance, then the contract applies to them as it would any other person – i.e. the minor has both rights and obligations in terms of the contract. This means that the minor has certain benefits from the contract (the rights), but must also perform their role in terms of the contract (the obligations). But, if a minor enters into a contract without parental supervision, then the minor can only acquire rights from the contract and not obligations. This is what makes this age category unique. In essence, a minor can only stand to benefit from the contract, while not having any responsibility to perform in terms of the contract. This can, and often does, result in unfair circumstances for the other contracting party, but fortunately, there are forms of relief available to them (Hutchison et al., 2011: 151).
As alluded to above, if a person enters into a contract with a minor, and the minor does not perform, then there may be certain remedies available to the contracting party. Firstly, a contracting party can rely on the legal remedy known as exceptio non adimpleti contractus. This remedy allows a party not to perform in terms of a contract until the other party (the minor) has performed. For example, if a minor signs a contract to take a six-week cooking course for R 1 000 per class, but the contracting party (i.e. the chef) does not force the minor to pay for the first three weeks, then in those circumstances, the contracting party cannot compel the minor to pay for those three classes. Therefore, the contracting party potentially loses income on those three classes. But, the contracting party can inform the minor that they may not attend any more classes until they have paid, or rather that the contracting party will not be giving any more classes to the minor until the minor has paid. In this circumstance, the contracting party is withholding performance, despite both parties having entered into an agreement. This is perfectly valid.
Secondly, the contracting party may rely on the remedy known as unjustified enrichment. This remedy will be dealt with in greater detail, but by way of introduction, if the contracting party can prove that the minor was enriched at the expense of the contracting party, then this remedy will apply. For example, if a merchant sells a bike to a minor, but the minor only pays half the price upfront, and fails to pay the remainder, then the merchant can rely on this remedy. The merchant can say that the minor was enriched by the full value of the bike, whilst the merchant’s estate decreased; so in those circumstances, the merchant could claim the full amount from the minor.
There are several exceptions to the above situations?
- Fraud
- Emancipation
- Ratification
- Statutory exceptions
- Fraud: When a minor fraudulently misrepresent themselves to be over the age of 18, and it could realistically be assumed that the minor is 18 years of age, then the other party may hold the minor liable to the contract, including the obligations that are imposed on them. The other contracting party must, however, act in good faith. If it was clear that the minor was not 18 years old, yet the contracting party still attempted to enter into a contract with the minor, then the contracting party is not bona fide (acting in good faith), and cannot rely on this defence.
- Emancipation: This is a legal term which means that a minor has contractual capacity as if they were a major. To be emancipated, a minor must apply to the court, and the court will make a determination as to whether the minor should in fact be emancipated. The court will usually consider various factors such as the independence of the minor, and whether they have work etc. Once emancipated, a minor will be treated, as far as the law is concerned, as if they are a major.
- Ratification: If a minor enters into a contract, subsequently reaches the age of majority and then ratifies the contract once a major, then that contract, with all its rights and obligations, will fully apply in respect of the person. Ratification, otherwise known as the consent required after the contract has already been entered into, can be either express or tacit – i.e. made obvious that they ratify, or by the general words and conduct used, imply that they ratify it.
- Statutory exceptions: A minor can make their own will at the age of 16 without parental assistance. This is provided for in the Wills Act 7 of 1953.
Inembisa desperately wants to see her favourite singer in concert, but she can’t afford the tickets. She decides to sell her MP3-player on the internet to be able to go. Sipho responds to Thembisa’s advertisement and transfers the money to her bank account. Thembisa refuses to send Sipho the MP3 player he has paid for. Sipho was unaware that Thembisa is only 16 years old, as she repeatedly stated she was 19. On what grounds can Sipho enforce the contract?
Fraud
What remedy allows for a contracting party to claim in situations where a person receives a benefit or value from the contracting party at the expense of the latter without any legal cause for such receipt or retention of the value or benefit by the former?
Unjustified enrichment
What remedy allows for a contracting party not to perform in terms of a contract until the other party has performed?
Exceptio non adimpleti contractus (ENAC)
Which of the following categories of persons are not able to conclude valid contracts?
Infans
Who is regarded as having limited contractual capacity?
Minors
Anelisa is 17 years old and enters into a contract with Benny to teach her how to play guitar. Anelisa agreed to pay Benny R 1 000 for four guitar lessons (R 250 per class). Benny usually requires payment upfront, but this time he allowed Anelisa to pay R 250 after each class. Anelisa did not have any assistance from her parents or legal guardians before entering into this contract.
Required:
- What is the legal name for the specific age category that Anelisa is part of?
- Will Anelisa be bound to this contract completely, or is there a certain benefit she receives?
- If Anelisa fails to pay for the first two classes (i.e. R 500), is there any remedy available to Benny against her?
- Is Anelisa able to ratify the contract? If so, when?
- What would happen if Anelisa told Benny she was 18 before signing this contract? Would she still be bound to the contract?
Give reasons for your answer.
If Anelisa has a six-year-old daughter, would the daughter also be able to enter into a separate contract with Benny for guitar lessons? State yes or no, and give a brief explanation (in one or two sentences).
Minor
No, she can only receive rights, and does not have to perform the obligations.
Exceptio non adimpleti contractus. He can withhold performance until she has paid.
Yes, but only when she is 18 / a major.
Yes, she fraudulently misrepresented herself as being a major; therefore, she will be fully bound to the contract as if she were a major (i.e. incur rights and obligations).
No, the daughter is an infans, and infans have no contractual capacity.
Explain Legal possibility?
Contracts must be legal, which means they cannot contradict or contravene any law in the country. It is not possible to conclude a contract to commit a crime. Crimes are specifically prohibited by certain parliamentary statutes or the common law; therefore, any contract that regulates the committing of a crime is invalid and unenforceable by the courts.
Explain Restraint of trade?
Is a clause often included in employment contracts. These clauses place a great limitation on employees, given that it often restricts them, at the time of signing the employment contract, from finding employment of a similar nature to their current position elsewhere
Explain Physical possibility?
For a contract to be valid, it must be physically possible to perform in terms of the contract (Hutchison et. al, 2011: 203). If a contract were to require someone to perform something impossible, such as buying a plane ticket for a country that does not even exist, then the contract is void.
Explain Formalities?
Formalities deal with those aspects which must be complied with for a contract to be valid. The most common formality is that a contract must be in writing. Keep in mind that contracts can be verbal or written, but if an offeror demands that it is in writing, then any verbal agreements are invalid.
What is the minimum number of months of warranty that suppliers must give on all sold goods, according to the Consumer Protection Act 68 of 2008?
3
Which term refers to the social norms and legal convictions of a particular society as developed over a period of time?
Public policy
How must an agreement be formulated in terms of the General Laws Amendment Act 50 of 1956, if a person agrees to bind themselves as surety for the debts of another person?
In writing and signed by the surety
TIom and jerry conclude a verbal agreement in which Tom agrees to purchase the contents of Jerry’s workshop for R 15 000. Tom is unaware that the tools and implements which form part of the agreement are the property of Jerry’s employer, Matthew. Why is this contract invalid?
It is subjectively impossible
Abongile works as an accountant at Mckinsey Incorporated based in Cape Town. His contract of employment contains a clause which provides that he is unable to work as an accountant for a period of 6 months, in the greater Cape Town area, upon termination of his employment at Mckinsey Incorporated. What is this an example of?
Restraint of trade agreement
Ismail is speaking with Cebo about biology tutoring classes that Ismail offers. Cebo needs assistance as his biology mark is not very good. Cebo asks if Ismail is willing to tutor him. Ismail accepts and states that his rate is R 80 per class. Cebo accepts that rate. You may accept that both parties have the necessary contractual capacity to enter into an agreement.
Required:
- Has a valid contract been entered into?
- What are the five requirements for a valid contract?
- The contract was not in writing – will this impact the validity of the contract?
- Yes. What is the legal intention of the parties in forming a contract – i.e. what do the parties legally expect from each other?
- Consensus, contractual capacity, legal possibility, physical possibility and formalities.
- No – contracts can be verbal/oral too. The intention is to bind each other to the contract. Both must perform in terms of the contract.
Explain Grounds for rescission?
When all the requirements discussed above are satisfied, then a valid contract comes into being, and the parties are obligated to act in accordance with the contract. However, circumstances can arise that allow for a contract to be rescinded even though all the requirements have been met. It is important to know what these grounds are, so if ever a person (or company) finds themselves in a similar situation, they will know what relief they have in order to rescind the contract.
Explain Misrepresentation?
If a person were to enter into a contract based on being told or informed of something that is favourable to them, but only later to discover, once the agreement has already been signed, that what they were told was not correct, they may want to get out of the contract on account of it not being what they were informed of. This, briefly put, is misrepresentation (Matzukis, 2014: 232). Misrepresentation is any representation made which is false.
Explain Duress?
If a person threatens another person to conclude a contract, it is not fair to say that consensus was reached, as consensus was forced. In circumstances where the threat causes fear within the other party to enter into a contract, then this is most likely duress, and the contract can be rescinded on those grounds.
The requirements for duress, are as follows?
- Threats must be made against the person, their property, family or even their economic status.
- The threat must be imminent.
- The fear caused by such a threat must be reasonable.
- The threat must have caused the other party to have entered into the contract.
- The threat must be unlawful.
Explain Undue influence?
Undue influence is where one person unduly influences another person to enter into a contract. The influencing of a person to enter into a contract is not wrong, but it is where a person, in a position of trust, exploits that trust to influence the other person to enter into a contract that may even be prejudicial to them.
The requirements for establishing undue influence?
- The contracting party must be in a position of trust and influence over the other party.
- The other party must have a pliable will – i.e. must be easily influenced.
- The contracting party must abuse the trusting relationship in an immoral way – i.e. showing no regard for ethical principles.
- The undue influence must have caused the other party to enter into the contract.
What are the different ways in which a person can breach a contract?
- Positive malperformance
- Mora debitoris
- Mora creditoris
- Prevention of performance
- Repudiation
- Remedies for breach of contract
- Specific performance
- Damages
Damages is a novel word in law – it essentially means?
that another party can claim money for any loss they suffered. It need not be physical damage, but if a person in a contract suffered any type of loss, then the defaulting party may be liable to pay damages (i.e. money) to the non-defaulting party. The purpose of claiming damages is to compensate the loss that the other party suffered due to the breach of contract,
Explain breach of contract?
Breach of contract is a phrase used to explain when a person has not performed or done their part in terms of the contract. In other words, the person is not honouring their promises. If a person is in breach, it gives the other party (the innocent or non-defaulting party, as they are commonly referred to) certain remedies. These remedies will be mentioned shortly
Explain Cancellation?
If a party is in breach, then the non-defaulting party may wish to just cancel the contract. This is an extreme remedy and is seldom relied on, given that there are other remedies available. When a contract is cancelled, neither party will have to continue with their obligations toward the other party, and in fact, the parties must both be restored to their previous positions
Exolain Exceptio non adimpleti contractus?
This relief is more informally referred to as ENAC (it is derived from the first letter of each of the words), as it is cumbersome to refer to the full name each time. ENAC was briefly referred to previously when discussing minors in contractual capacity. If services are being rendered, then ENAC allows the one party to take matters into their own hands, and withhold performance until the other party performs. If it is clear from a contract that only one person is performing in terms of a contract, then that person can stop performing until the other person starts to perform. This remedy is a bit more extreme, as the person is taking law into their own hands
Explain Penalty clauses in contracts?
Finally, many contracts include clauses which make mention of penalties that must be paid if a party is in breach. These penalty clauses are regulated by legislation, as it would be unfair to set extremely high penalty payments for minor breaches such as mora debitoris.
A delict is?
any wrongful and blameworthy action or conduct that causes harm to another person.
The wrongdoer must have physically done something, although, there are a few exceptions where an omission (i.e. not doing anything) can amount to?
a delict
the action must have caused the harm. If a person physically does something, but it did not cause harm to the person who is claiming there was a delict (referred to as the harmed party), then there is?
no delict.
There are broadly speaking six different types of claims that can be brought?
- Lex aquilia
- Actio iniuriarum
- Pain and suffering
- Actio de pauperie and actio de pastu
- Vicarious liability
- Lex aquilia: This is the most common claim brought against a wrongdoer. In this claim, the harmed party has suffered some physical loss which results in them having to spend money for something that was not their fault. They, therefore, seek to claim damages to compensate for the monetary loss they suffered.
- Actio iniuriarum: In this unique claim, there is no actual money lost by the harmed party, but they seek to claim money from the wrongdoer on account of their (the harmed party’s) reputation or dignity having been impaired. This is the claim brought in defamation cases. When one person defames another, there is no monetary loss suffered at all, yet the harmed party still seeks some retribution for the degradation of their reputation. In some cases, the harmed party could argue that there is a loss of money, in that when their reputation is damaged, they will receive less work and less money from prospective customers.
- Pain and suffering: This is where monetary loss was suffered but not due to any physical damage that has occurred to the harmed party’s property. This deals more closely with instances where a party has to incur certain medical, physiological or psychological expenses as a result of a wrongful conduct caused by the wrongdoer. It may even be possible that the wrongdoer does not harm any property of the harmed party, but because of the conduct that was committed by the wrongdoer, the harmed party has to still incur certain medical expenses which the wrongdoer should be liable to pay. It also includes claiming for situations where the harmed party has lost certain amenities in life, such as walking or even brushing one’s teeth because, for example, the harmed party is in a wheelchair or partially paralysed.
- Actio de pauperie and actio de pastu: These claims will not be dealt with in detail, but are mentioned because they are also delictual claims. These are claims relating to domesticated animals. When another person’s animal causes harm to the harmed party, then the wrongdoer must compensate the harmed party for the loss or damage suffered as a result of their animal’s conduct.
- Vicarious liability: This is where the harmed party sues another person who has some type of relationship or link with the wrongdoer. It is usually the case of the employee being the wrongdoer, and the employer being held liable. The rationale is that the employer, or person in charge, ought to have had more control over their employee, and that the employer should be held accountable. The employer is, therefore, sued in place of the employee.
The five elements of delict are as follows?
- Harm
- Conduct
- Causation
- Wrongfulness
- Fault
Explain Harm?
In all delictual cases, the first question to ask is whether any harm was suffered. If there is no harm, then there is no right to bring an action (i.e. legal proceeding) against the alleged wrongdoer
The legal terminology for harm differs. It is often referred to as?
- loss,
- infringement of a right,
- damage or
- cost etc.