Theme 9

Question 1

What is a contract?

Answer 1

1. A contract is a verbal or written agreement between two consenting parties who
   both have the legal capacity to conclude the agreement.
2. The agreement must be legally executable (not contain any illegal content that
   cannot be executed by both parties due to legislative restrictions).
3. Its purpose is to give rise to a binding legal commitment by both parties in which
   both parties have rights and obligations.
4. A contract is therefore an agreement entered into by specified parties with the
   specific intent to create obligations which are binding and as a result thereof,
   legally enforceable.

Question 2

What are the requirements for a valid contract?

Answer 2

1. CONSENSUS (both parties must agree to the terms of the agreement)
2. CAPACITY TO CONTRACT (the parties must be legally able to contract. For
   example — minors, unrehabilitated insolvents and mentally ill individuals are
   not allowed to contract)
3. LEGALLY EXECUTABLE (the contract may not be contrary to any common law
   principle, legislation or the morals of society)
4. PHYSICALLY EXECUTABLE (the performance or object of performance must
   be determined or determinable and must at the time of under signing of the
   agreement be objectively possible)
5. FORMALITIES (must comply with statutory and other formalities)

Question 3

Explain the parties within a contract

Answer 3

1. Always two or more parties to a contract.
2. Who consent to the terms thereof (for example: A cannot force B to sign the
   contract)
3. Both have rights and responsibilities (to pay or render a service/receive goods
   or services)
4. Both parties need to have the capacity and authority to contract.
5. Two types of persons who can contract:
   (a) Natural Persons
   (b) Juristic Persons

Question 4

What are the person types?

Answer 4

1. Natural Persons

2. Juristic Persons

Question 5

What are natural persons?

Answer 5

Are persons over the age of 18, who are NOT unrehabilitated insolvents or mentally
incapable of contracting;

Question 6

What are juristic persons?

Answer 6

(a) Are for example: Companies — PTY (LTD) OR close corporations – CC OR
Statutory Entities such as the SABC OR Clubs and Churches.

(b) These entities cannot contract by themselves and are represented by
specific individuals (natural persons) who have been appointed to contract on
their behalf. These individuals are usually Directors or other individuals who
have been specifically authorised to act on behalf of the company by way of a
resolution, or act as its agent. The agent’s identity must ALWAYS be stated.

Question 7

What are the three different subcategories of performance?

Answer 7

1. to do something;
2. to refrain from doing something;
3. to give/surrender something

Question 8

What are the types of contracts?

Answer 8

1. Unilateral Contract

2. Reciprocal contract (mutual agreement)

Question 9

What is a unilateral contract?

Answer 9

An example of a unilateral contract is a donation.
Where one party is obliged to give a sum of money and the other party is entitled
to receive said sum.

Question 10

What is a reciprocal ontract?

Answer 10

(a) Is an agreement where both parties have rights and obligations toward
one another. (bilateral/multilateral agreement)
(b) Both parties must give a certain performance and is entitled to receive a
certain performance;
(c) Example: A decides to sell his time machine to B. A has an obligation to
hand over the time machine to B and the right to receive money for it. B has
an obligation to pay A for the time machine and the right to receive the time
machine in return for the payment.

Question 11

What are the three distinct categories of clauses which a contract contains?

Answer 11

1. Essentialia — The essential clauses of the agreement that makes it a specific
   contract. These are the clauses that define what type of contract it’s going to
   be. For example: a rental agreement/hire purchase agreement/service level
   agreement/contract of sale etc.
2. Naturalia –– Are the elements in an agreement that automatically governs the
   legality of the agreement. For example: legislation or the common law. The
   common law principle of a guarantee against hidden defects is an example of
   thereof.
3. Incedentalia — Are clauses that can be added specifically by agreement
   between the parties and encompasses the rest of the contractual terms. For
   example: a “Voetstoots” clause – [discussed in class]

Question 12

What are void contracts?

Answer 12

Void contracts are contracts where one or more of the requirements for a valid
contract are missing.

For example: If one of the parties is not allowed to contract due
to common law or legislative restrictions (minors, unrehabilitated insolvents, mentally
incapable)

Question 13

What are voidable contracts?

Answer 13

Voidable contracts Are contracts where an agreement was concluded between the
parties, but a material deficiency was present at the time when the contract was
concluded.

For Example:
➢ A threatens B that if he does not sign the agreement, A will scratch B’s new
Mercedes Benz.
Therefore, an agreement was concluded, but one of the parties was forced to sign the
agreement.
➢ OR if A thought bona fide that he was contracting with B, but he was in fact
contracting with C, then the agreement is voidable.

Question 14

Describe why time and place of contracting is of utmost importance:

Answer 14

It is of the utmost importance to always indicate where and when a contract was
concluded between parties.

WHERE – the place where is always relevant, as it determines in which court’s
jurisdictional area it was signed. If a party is in breach of that contract the
disadvantaged party can approach the court where the contract was signed to exercise
its remedies.

WHEN – is paramount, as it determines at what time the parties’ rights and obligations
came into effect.

Question 15

What is a commercial contract?

Answer 15

A commercial contract in itself is relevant to the world of business transactions and
professional relationships.

Question 16

Which principles should a commercial agreement take into account?

Answer 16

1. Risk Management
2. Tax efficiency
3. Business Practice
4. Trade Usages

Question 17

Which contracts are generally considered engineering contracts?

Answer 17

1. Service – where the Engineer offers specific knowledge as the “product” he/she
   sells;
2. Products – where the engineer works for a company that offers certain products
   or specified systems;
3. When these products, services or a combination of the above are offered to
   another party, a contract is usually concluded between the aforesaid. Preferably
   any and all contracts should be reduced to writing, to ensure that both parties
   enjoy the appropriate protection in the event of breach. A verbal contract is
   extremely difficult to prove, unless the circumstances surrounding the
   agreement serve as irrefutable evidence of the agreement itself, as well as the
   terms thereof.

Question 18

How is the content of a contract determines?

Answer 18

By law, commercial reality, practical considerations and the circumstances of each individual case.

Question 19

Can contracts be used for multiple different agreements?

Answer 19

Yes, contracts can be used as templates for numerous transactions. However, every transaction is in itself
unique and should be approached with the utmost diligence to avoid negligence
and subsequent fault or possible liability

Question 20

What are the guidelines for the drafting of contracts?

Answer 20

1. Establish what your requirements are and do proper research;
2. Provide for any eventuality that might become a potential dispute in the future;
3. Consider inserting a clause for arbitration (dispute resolution);
4. Keep the language simple and avoid ambiguous or vague terminology that can
   later prove to be problematic;
5. Ensure that the object of performance and the parties are properly described to
   avoid confusion;
6. Ensure that the agreement complies with all regulatory legislature and rules of
   Engineering practice;
7. Prepare a first draft and have it checked by a partner, colleague or attorney for
   advice.

Question 21

What are common clauses also known as?

Answer 21

“Boiler Plate” Clauses

Question 22

Describe why common clauses are used?

Answer 22

It is common in practice to include in any agreement certain clauses of a general
nature which facilitates the enforcement of the contract

Question 23

Describe the “Whole Agreement” clause:

Answer 23

1. This clause is standard in most agreements. Its purpose is to ensure that
   neither party can enforce external rights or remedies that are not included in
   that specific agreement. In short, it reads as follows:
2. This Document contains the whole agreement between the parties. No party
   will have any right or remedy arising from any undertaking, warranty or
   representation which is not included in this agreement.

Question 24

Describe a variation clause:

Answer 24

1. The variation clause serves as a security mechanism and prevents either party
   from altering the terms of the agreement. A normal variation clause reads as
   follows:
2. “This agreement or any part thereof can only be waived, varied, added to or
   cancelled by way of a further written agreement by both parties and signed by
   both parties”

Question 25

What is the jurisdiction of the magistrates’ court clause?

Answer 25

1. Both parties can consent to the jurisdiction of the magistrates’ court, as these
   courts are usually less expensive to institute litigation in. An example could read
   as follows:
2. “Each party to this agreement consents to the jurisdiction of the Magistrates’
   Court in terms of Section 45 of the Magistrates’ Court Act of 1944 in respect of
   any litigation proceedings pursuant to this agreement”

Question 26

Describe the addresses for service clause:

Answer 26

To simplify the exchange of important documentation and/or service of these
documents on the other party. The parties can determine the manner of exchange, but
in most cases every possible form of communication medium is inserted in this clause,
including mail address, fax and e-mail. Faxes and emails are regulated by the
Electronic Communications and Transactions Act to establish precisely when a
communique was sent and/or received by either party.

Question 27

Describe the cost clause:

Answer 27

This clause is normally included in a contract to formally address if one or all of the
parties will be responsible for the costs involved with the drafting of the contract. It is
usually included when corporate attorneys are employed to draft the agreement. Some
contracts require a lot of research and negotiation and can therefore incur very
expensive legal fees

Question 28

Describe the alternative dispute resolution clause

Answer 28

The purpose of an ADR clause is to avoid costly litigation procedures, by means of
negotiation/mediation or arbitration. [This clause will be discussed in detail during the
lecture]

Question 29

Describe the breach clause:

Answer 29

It is very important to include a breach clause in every contract. It serves as the
paramount protective mechanism in each agreement

Question 30

What is the governing law clause?

Answer 30

When drafting an agreement, one must specify which country’s laws will be applied to
govern the agreement. For example: “The agreement will be subject to and governed
by the laws and statutes of the Republic of South Africa”. The above clauses are just
examples of boiler plate clauses and are by no means a closed list.

Question 31

What are other essential clauses?

Answer 31

1. Definitions
2. Interpretation
3. Penalty
4. Obligations/duties of parties
5. Insurance
6. Commencement
7. Force Majeure
8. Subcontracting
9. Remuneration
10. Duration of agreement and termination date
11. Requirements of third parties (certificates from municipalities etc.)
12. Non-competition —NB!!!! Discussion in class

Question 32

What are some of the ways to enter into a bilateral or multilateral agreement?

Answer 32

1. Government or private company tender
2. Requests for Proposal;
3. Request for quote;
4. Public media; &
5. Registered/Pre-approved suppliers

Question 33

What happens after an offer has been accepted?

Answer 33

a contract is concluded between the parties, subject

to the parties’ specific requirements and the offer that was tendered.

Question 34

Describe the request for proposal:

Answer 34

An offer made by a company to business suppliers in
order for them to submit their business proposals, with the express goal to obtain a
specified service or commodity

Question 35

Describe the request for quotation:

Answer 35

The main purpose of an RFQ is to invite bidders to
enter their bids on specified products and/or services. A request for quotation is
therefore also in some instances referred to as an invitation for bid

Question 36

Describe the request for tender

Answer 36

A RFT is a formal invitation to suppliers to bid to supply

certain services or products.

Question 37

What is expected of a professional individual, an engineer?

Answer 37

As a professional individual, an engineer will always be subject to certain rules,
regulations and codes of conduct. It is expected of you to uphold the ethical
standards of the profession, not only for yourself, but to ensure that the
profession itself is continuously regarded as one that promotes and upholds
diligence.

Question 38

What should always be kept in mind when drafting a contract?

Answer 38

When drafting a contract, always keep in mind that you are compelled to adhere
to certain ethical standards. Here are a few questions to ask yourself before
signing an agreement:
`
© 2020 University of Pretoria 10
(a) Can you properly perform/deliver in terms of the agreement? (Competency)
(b) Is the terms of the agreement in accordance with my regulating body’s code
of conduct?

Question 39

When is a party in breach of a contract?

Answer 39

A party is in breach of an agreement if it has not fulfilled one or more of its contractual
obligations in terms of said agreement. The following are broadly situations in which a
party will be regarded as being in breach of an agreement:
1. Where one or more of the parties did not perform timeously in accordance with
the terms of the agreement;
2. Where one or more of the parties’ performance was deficient in some way;
3. One of the parties refuses to continue with their contractual obligation(s);
4. A party makes performance in terms of the agreement impossible;
In this last instance (4), an example would be where Able sells a race car to Benny for
R 1 000 000, but after signing the agreement realises that he could get R 2 000 000 if
he destroys it and claims from his insurance and subsequently proceeds to destroy
the vehicle.

Question 40

What are the remedies for breach of contract?

Answer 40

The list of remedies available to a disadvantaged party is quite short, but the different
forms thereof are quite exhaustive. In short the remedies for breach of contract are as
follows:
1. Claim for compliance with the agreement + damages;
Examples: An interdict OR claim for specific performance
2. Cancellation of the agreement + damages;
3. Damages;

Question 41

How can a contract be terminated?

Answer 41

1. COMPLIANCE – where the parties have satisfied the requirements and
   provisions of the agreement and both parties have performed fully;
2. NEW CONTRACT – The parties can agree that a new agreement be concluded
   between them that incorporates the previous contract, or disregards it in total;
3. DEBT COMPARISON – where the parties owe one another a certain amount
   of money, they can write of their mutual debt;
4. FORCE MAJEURE — So called “acts of god”