Legal possibility (8)

Question 1

A contract could be seen to be?

Answer 1

• in contravention of a law,

Question 2

Explain National Credit Act 34 of 2005?

Answer 2

• Section 90: Unlawful provisions of credit agreement.
• A credit agreement must not contain an unlawful provision. A provision of a credit agreement is unlawful - its general purpose or effect is to–
  defeat the purposes or policies of this Act;
  deceive the consumer; or
  subject the consumer to fraudulent conduct;

Question 3

Explain Consumer Protection Act 68 of 2008?

Answer 3

• Section 51: Prohibited transactions, agreements, terms or conditions

Question 4

Define ‘rules of interpretation’?

Answer 4

It is the process of ascertaining the true meaning of the words used in a statute. The Court is not expected to interpret arbitrarily and therefore there have been certain principles which have evolved out of the continuous exercise by the Courts. These principles are sometimes called ‘rules of interpretation’.

Question 5

Legislation is clear on law, and contract contravenes
law, or does not fulfil statutory requirements

Answer 5

• Contract is void
• No force and effect

Question 6

Statute expressly stating contract is void, unless certain requirement is met?

Answer 6

This is a suspensive condition contract is unenforceable if requirement not fulfilled, but parties
cannot resile from it

Question 7

Contract contravenes a statute that does
not expressly state that a contract shall
be void

Answer 7

Provision shall have to be interpreted wi have to
determine what was the intention of the legislature
on contract

Question 8

How legislation may impact on contracts

Answer 8

• Factor 1: What is the purpose of the contract and what harm does statute seek to prevent?
• Factor 2: Does the law impose a criminal sanction?
• Factor 3: Is the purpose of the law to protect state revenue?
• Factor 4: Does the law seek to protect a public interest?
• Factor 5: What are the consequences of a particular interpretation?

Question 9

When is a provision of a credit agreement unlawful?

Answer 9

Its general purpose is to deceive the consumer/subject consumer to fraudulent conduct

Question 10

What is the purpose of having certain types of contracts or contractual provisions prohibited by statute?

Answer 10

To regulate the legality of contracts and prevent injustice between parties

Question 11

What is the consequence of a contract that is contrary to a statute if the statute does not expressly state what the consequences must be?

Answer 11

A court of law interprets the provision to determine the intention of the legislator

Question 12

In order to determine the intention of the legislator,
which rules must the courts use?

Answer 12

The rules of interpretation

Question 13

What test do the courts use to determine the intention of the legislator?

Answer 13

Balance of convenience test

Question 14

Contracts that fall outside commerce are those contracts that in their very nature, are impossible to execute. They have terms and conditions attached to the contract?

Answer 14

in terms of which the rights and duties cannot be expected to be performed.

Question 15

Normally, contracts that are unfair are still upheld by the courts, because it is not the law’s function to assist a?

Answer 15

‘bad bargainer’.

Question 16

The term ‘contra bonos mores’ is a Latin phrase that means?

Answer 16

‘that which is against good morals’

Question 17

Define contra bonos mores?

Answer 17

against good morals : harmful to the moral welfare of society an act contra bonos mores.

Question 18

A contract may be illegal if it is?

Answer 18

against public policy.

Question 19

The salient facts of the Sasfin case are as follows?

Answer 19

There were certain terms in a contract that provided a financier with effective control of a doctor’s income.

Question 20

Explain Collusion?

Answer 20

Ordinarily speaking, in our law collusion is akin to connivance, and means ‘an agreement or mutual understanding between the parties that the one shall commit or pretend to commit an act in order that the other may obtain a remedy at law as for a real injury’.

Question 21

Explain ?

Answer 21

This principle means, where one party agrees to another party in a matter of litigation by providing funds, in order to proceed with the matter, and in the event that the party litigating was successful, the party who provided the funds, would be entitled to a portion of the proceeds.

A pactum de quota litis in the law of contract is an agreement by which the creditor of a sum difficult to recover promises a portion to the person who undertakes to recover it

Question 22

Which of these contracts is not contrary to public policy?

Answer 22

Pactum de quota litis

Question 23

What does the term contra bonos mores means?

Answer 23

That which is contrary to the good morals of society

Question 24

In the case of Baart v Malan (2) SA 862 (2), during divorce proceedings, Baart won custody of the children and Malan had to pay maintenance. In terms of the settlement agreement, Malan had to pay an amount of maintenance that was equal to her gross salary and annual bonus for a period of twenty years.
What was the court’s judgment in the case?

Answer 24

The amount was found to be unfair and the court declared the agreement null and void

Question 25

Which case formulated the following test: The two-question test is to ask firstly, whether the provision in question is unreasonable and secondly, if the clause is found to be unreasonable, should the clause then be enforced?

Answer 25

Barkhuizen v Napier 2007 (5) SA 323 (CC)

Question 26

What does section 39(2) of the Constitution of the
Republic of South Africa say with regards to when the court seeks to develop common law?

Answer 26

The spirit, purport and objects of the Bill of Rights must be promoted

Question 27

List two types of contracts that have been identified in the unit that could be considered to be contrary to public policy?

Answer 27

• A contract condoning a party’s fraud or theft
• A provision that deprives a party of the opportunity to defend themselves in legal proceedings
• A provision permitting parate executie of immovable property
• A provision that excludes all statutory ‘conditions, terms, and warranties’ relating to goods supplied

Question 28

Edmond and Thembile want to enter into a contract that is contra bonos mores. Will such a contract be valid and enforceable? Give reasons for your answer?

Answer 28

No. As a rule of thumb, a contract that is contra bonos mores will not be enforceable. A litigant may therefore challenge the validity of such an agreement.

Question 29

Notwithstanding what is contained in section 22 of the Constitution, it is common practice for restraint of trade clauses to be found in?

Answer 29

• contracts of employment where the employee - agrees to not work for other employers, where they could potentially compete with their former employer, in the event that they leave their employment;
• contracts where there has been a sale of a business and where the seller agrees that they will not carry on, or start a similar business in competition with the purchaser; and
• partnership agreements.

Question 30

Why do we have a restraint of trade clauses?

Answer 30

is to restrict an employee from being economically active, after the termination of the contract of employment, by preventing them from engaging in trade or profession in competition with their former employer.

Question 31

The factors that the court will look at, when determining the enforceability of a restraint of trade clause?

Answer 31

• Question 1: Does a party have an interest worthy of protection?
• Question 2: Is that interest threatened by the conduct of the other party?
• Question 3: Does that interest weigh up qualitatively and quantitatively against the interest of the other party, to be economically active and productive?
• Question 4: Is there another aspect of public policy that requires restraint to be maintained or rejected?

Question 32

In which of these agreements below is a restraint of trade clause usually found?

Answer 32

Partnership agreements

Question 33

Who bears the onus of proof in a restraint of trade
agreement?

Answer 33

The party who alleges that they are not bound by the restraint of trade

Question 34

What does Section 22 of the Constitution of the Republic of South Africa, 1996 state?

Answer 34

Every citizen has the right to choose their trade, occupation or profession freely

Question 35

What did the court confirm in the case of Fidelity Guards Holding (Pty) Ltd t/a Fidelity Guards v Pearmain 2001 (2) SA 853 (SE)?

Answer 35

A restraint of trade clause is in compliance with section 36 of the Constitution

Question 36

What is the test in the case of Basson v Chilwan and Others 1993 (3) SA 742 (A), used to determine?

Answer 36

Whether or not the restraint of trade is reasonable

Question 37

An illegal contract is?

Answer 37

of no force and effect, and is therefore void. However, it may happen that only part of a contract may be considered to be illegal, in which case the contract shall stand, and that illegal part or provision shall be severed (i.e. removed) from the contract.

Question 38

The consequences of an illegal contract may be as follows?

Answer 38

• Ex turpi causa rule applies, and contract cannot be enforced
• Par delictum rule applies

Question 39

Define Ex turpi causa rule applies, and contract cannot be enforced?

Answer 39

The ex turpi causa rule means that no action can arise from illegality. This means that where a contract is void, it cannot be enforced, even though, for example, one of the parties may have rendered some type of performance.

Question 40

Define Severing part of the contract?

Answer 40

If certain provisions of the contract are held to be illegal, then the offending (illegal) parts will be severed and the remainder of the contract is enforceable.

Question 41

In order to determine whether an illegal provision may be severed from a contract, the intention of the parties to the contract will have to be considered. In order to determine the intention of the parties, the following factors would be considered?

Answer 41

• Is the illegal provision distinct or independent from the remainder of the contract?
• If the illegal provision is removed from the contract, would it effect the nature of the contract?
• If the illegal provision was hypothetically not included in the contract, would the parties still have concluded the contract?

Question 42

Define Par delictum rule applies?

Answer 42

The par delictum rule applies where both parties to an illegal agreement or contract are considered to be equally morally guilty. This means that the party who is in possession is in the stronger position, and the rule precludes any restitution from taking place.

Question 43

However, this rule can be relaxed, depending on the facts of the matter, such as:

Answer 43

• whether, if the rule is relaxed, the illegal contract is indirectly enforced;
• if a situation occurs where someone would be unjustifiably enriched – e.g. see the Klokow case, discussed as follows; and
• considerations of public policy.

Question 44

What does the ex turpi causa rule mean?

Answer 44

It means that no action can arise from illegality

Question 45

Which statement correctly describes the ex turpi causa
rule?

Answer 45

It can never be relaxed: none of the parties can claim damages from each other

Question 45

Which statement correctly describes the ex turpi causa
rule?

Answer 45

It can never be relaxed: none of the parties can claim damages from each other

Question 46

In order to determine whether an illegal provision in a
contract is severable, what factor must the court take
into account?

Answer 46

The intention of the parties

Question 47

What does the par delictum rule mean?

Answer 47

The courts do not assist those who approach them with unclean hands

Question 48

The court in the case of Klokow v Sullivan relaxed the par delictum rule. For what situation did the court relax the rule?

Answer 48

The situation where someone would be unjustifiably enriched