Topic 2 preference and options

Question 1

what is a pacta de contrahendo

Answer 1

an agreement to contract sometime in the near future

they are ancillary and aim to produce a subsequent contract

Question 2

what are the 2 main forms of pacta de contrahendo

Answer 2

1. options

2. preference contracts

Question 3

what does an option contract do

Answer 3

allows for the offer to remain open for a specific period of time, the holder of the option can unilaterally cause the new contract to come into being

Question 4

are options transferable

Answer 4

yes via cession

Question 5

are options ancillary

Answer 5

yes they are separate to the main agreement

Question 6

what requirements must options have to be valid

Answer 6

they must have the same requirements of the regular contract (Hiroschwitz)

Question 7

what are the 2 negative obligations on the grantor

Answer 7

1. not to withdraw

2. not to prevent holder from exercising their option

Question 8

Boyd v Nel

Answer 8

an option cannot be revoked during the specific time period

Question 9

when does an option terminate

Answer 9

• on acceptance or refusal
• time period
• impossibility
• death if specifically for holder

Question 10

legal effect of an option

Answer 10

1. another contract created when accepted
2. dual negative oblig on the grantor
3. option holder can take full time period to accept it

Question 11

Sommer v Wilding

Answer 11

a party who sues for damages because the option was revoked during the option period must prove they were intending to exercise the option

Question 12

remedies for breach of option

Answer 12

1. cancel
2. uphold
3. damages

Question 13

cancellation of an option

Answer 13

restitution of any performance already made

Question 14

uphold the contract

Answer 14

order of specific performance + damages

Question 15

the judgement in A to Z bazaars overturned Capex

Answer 15

false it just criticised it

Question 16

an option agreement restricts an oferee;s right to accept the offer

Answer 16

false it restricts the offeror’s right to revoke the offer

Question 17

what is a preference agreement

Answer 17

the grantor binds himself to give a preference right to the grantee in the future should he decide to conclude another agreement

Question 18

what is a trigger event

Answer 18

the event that allows the preference right to be enforced
diff opinions about when it occurs
valid offer to a third party

Question 19

rules for offer of a preference right

Answer 19

1. grantor must make same offer as they would to a third party
2. if 3rd party has made offer in meantime, then grantee must match that offer
3. if this cannot be determined then we like to objective criteria like market value

Question 20

Owasianick

Answer 20

no positive obligation on the grantor, usually holder not able to claim specific performance

Question 21

Mokone v tassos

Answer 21

holder might be able to demand specific performance but this is uncertain

Question 22

remedies for breach of a preference agreement

Answer 22

1. uphold
2. cancel
3. interdict

Question 23

what is the oryx mechanism

Answer 23

protective measure for the holder of a preference right if the grantor concludes a contract of sale with a third party

Question 24

what case does the oryx mechanism come from

Answer 24

SA Bakeries v oryx

Question 25

what did the Appeal court say in oryx

Answer 25

grantee of pre-emption right should have some method of positively enforcing their right - a new contract on the same terms, third parties can claim damages