Summary LPL4801 LAW OF SALE AND LEASE STUDY NOTES.

LPL4801 LAW OF SALE AND LEASE STUDY NOTES. Essentialia of a contract: these classify a contract as one of a specific type – e.g. contract of sale For a contract of sale you look at: a) An undertaking by the seller to deliver the thing to the buyer b) An undertaking by the buyer to pay a sum of money in exchange for the thing If the contract doesn’t have these terms it isn’t a contract of sale. If it doesn’t have the essentialia of any type of contract but is a valid contract it will be a contract sui generis. Naturalia: These are included in the contract by operation of law – they don’t need to be expressly negotiated by the parties (they are based on notions that are fair and reasonable). The operation of these natural terms can be excluded by agreement between the parties – i.e. the operation of the naturalia depends on the will of the parties. When the parties intend to enter into a type of contract = they agree on the essentialia of the contract concerned. The essentialia and the naturalia which is part of the contract by operation of law amount to the contract, which are enough particulars to ensure there is no doubt what they intend. Parties are also free to insert other terms in their contract which the essentialia and naturalia don’t provide for, in order to meet specific requirements = incidental terms. CLS cc © Sale & Lease Notes 2 Critical Law Studies CC © Study unit 2 Definition and essential elements Contract of lease: is a reciprocal agreement between the lessor and the lessee, whereby the lessor binds himself to give the lessee the temporary use and enjoyment of the thing in return for the payment of the rent. Requirements for a valid contract: There is no contract without actual agreement, but not every agreement gives rise to a valid contract. If the requirements aren’t complied with the contract will be rendered null and void. Essential elements of a contract: for a contract of lease for which the lessor and lessee must reach an agreement to conclude a valid enforceable contract are that: 1. The lessor deliver and the lessee receive a thing or property for the temporary use and enjoyment 2. It must be a thing or property which is being let 3. An amount of rent must be paid for the use and enjoyment An agreement, which doesn’t comply with these 3 requirements, isn’t a contract of lease. 1. The parties must agree to deliver and receive a specific thing: Performance must be possible. Performance becomes impossible through: 1. Supervening impossibility: through no fault of the lessor 2. Prevention of performance: 2 forms: a) Absolute impossibility: performance is prevented permanently b) Relative prevention: where its only performance by the debtor which is impossible (breach of contract in terms of repudiation) The letting and hiring of the leased thing must be temporary and not perpetuity: The lease can’t be forever – only a contract in which temporary use and enjoyment of the thing is granted = lease. This doesn’t mean that a contract in which the use and enjoyment of a thing is granted to a party in perpetuity is for that reason invalid – it means that such a contract isn’t one of letting an hiring. The requirement that a contract of lease must be of a limited duration is complied with in the following cases: 1. The lease is run for a definite period (Steyn) CLS cc © Sale & Lease Notes 3 Critical Law Studies CC © 2. If the lease is to run until the occurrence of an event which is sure to occur although the date of its occurrence is uncertain (Davy) 3. If the lease is at the will of the lessor or lessee (Hart) 4. If the lease is for an indefinite time but the rent is payable periodically (means that the lease can be terminated by either party by reasonable notice to the other). The thing can either be corporeal, incorporeal or a thing still to come into existence: In Young and Graham: there was no doubt that an incorporeal thing can form the subject of a lease. The matter arose from granting the tenant the power to conduct a business on a particular piece of land – the court said that what was let was an incorporeal right to trade. The view that incorporeal things can be let and hired is unconvincing – in the abovementioned cases, corporeal things were being let even though the lessee’s powers of use and enjoyment may be restricted by the contract. In the case of a usufructry – the thing, which is the object of the usufruct, is being let. The fact that the lessor is the usufructry of a thing = the lessor is able, because of his valid title, to protect the lessee in the possession of the thing. Where the lessor empowers the lessee to do business on certain premises, the premises are let with the understanding that the tenant will only have a certain proportion of the use and enjoyment thereof. The fact that a lessee’s powers are limited = lease contract. As long as the performances of the parties are ascertainable there is no objection to the landlords agreeing to deliver only a portion of an existing thing (A lets a flat to B). A thing which hasn’t yet come into existence can be let – the fact that the undertaking is to deliver such a thing doesn’t automatically mean that there can’t be a lease – locatio conductio rei spertae: if the thing doesn’t come into being the lessor's performance becomes impossible. Making a fungible thing available at a price can’t be a lease. Letting and hiring presumes that the use and enjoyment of the thing will be made available and not that the lessee will use up the thing. Lease: the parties limit the power, which the lessee may exercise over a thing. Only the use and fruits of the thing are granted to the tenant CLS cc © Sale & Lease Notes 4 Critical Law Studies CC © Lessee must pay rent for the leased thing: Where the counter performance for the use and enjoyment of the leased thing doesn’t sound in money there is no contract of lease. There is one exception: rural leases where the rent is either a definite quantity or an agreed proportion of the produce of the leased property. CLS cc © Sale & Lease Notes 5 Critical Law Studies CC © Study unit 3 Legality of the contract of lease General: conclusion of the contract, its performance and its objective must be lawful – it’s unlawful when its reason or conclusion is forbidden by statute, common law or is contrary to public interest/ good morals. Consequences of illegality: the contract is void and unenforceable – the court won’t enforce the illegal lease irrespective of whether the parties to the contract raise the question of illegality. If illegality is alleged, the party alleging it must prove it. Ex Turpi Causa: the 1st consequence of nullity of an illegal contract is that neither party may institute an action on the contract – ex turpi causa: from an immoral cause no action arises. This is an absolute rule of contract = no exceptions. The fact that one of the parties has performed her undertaking makes no difference because performance doesn’t render the contract lawful. The courts will refuse to enforce such a contract. The unlawfulness of a contract = that 1 party cant claim performance from the other but the unlawfulness also means that a party who has suffered damages as a result of the contract cant claim damages from the other party by relying on the contract. Par Delictum Rule: It seems unfair to allow the lessor to keep the rent paid by the lessee in terms of an illegal contract: e.g. where X lets his house to Y, Y operates a brothel and X contravenes the Rental Housing Act by not investing the deposit in an interest bearing account. X knows that Y wants to operate a brothel and knows its contrary to the law – X charges a high rent of R30 000p/m and required a deposit of R60 000. Because the contract is void restitution should in principle be granted – BUT the par delictum rule prevents this = where both parties are guilty, the one who is in possession is in the stronger position – based on unjust enrichment. This rule is founded on the public’s interest, as the court will do everything in its power to discourage an unlawful contract. Q: what relief is available to the lessee to gain possession of the premises? Relaxation of the Par Delictum Rule: the though behind the rule is that the party who has acted disgracefully by executing the performance shouldn’t be able to recover such performance – where a party to an unlawful contract has CLS cc © Sale & Lease Notes 6 Critical Law Studies CC © performed but his performance isn’t disgraceful = he can recover what he has performed from the other party. The argument raised to relax the application of this rule is that the par delictum rule is founded on public interest which demand that justice be done = it cant be in the public interest to enforce the rule where its unjust to the plaintiff. The par delictum rule should be applied as a general rule to which an exception must be made whenever simple justice between man and man demands it. Whether the court will relax this rule is uncertain and will be decided on the merits. CLS cc © Sale & Lease Notes 7 Critical Law Studies CC © Study unit 4 Obligations of the lessor The lessor must: 1. Make available or deliver the use and enjoyment of the property 2. Refrain from disturbing the lessee’s use and enjoyment of the property 3. To place and maintain the property in the condition agreed upon 4. Warrant against eviction Failure to comply with these = breach: - Failure to deliver: mora debitoris - Delivery of defective performance: positive malperformance - Delivery to someone other than the contracting party: repudiation - Failure to prevent eviction: positive malperformance. CLS cc © Sale & Lease Notes 8 Critical Law Studies CC © Study unit 5 Lessor must deliver the thing (duty 1) The lessor must deliver the thing at the agreed time and place – he must make it available to the lessee. Delivery must be such that the lessee gets vacuo possession. The lessor must ensure that subject to an agreement to the contrary no one will, lawfully or unlawfully, interfere with the lessee’s exercise of the full and undisturbed use and enjoyment of the thing. The lessor must deliver everything without which the thing can’t be used properly. Problem: where the lessor lets the same object to 2 different parties but established neither in possession of the object: A enters into a contract of lease with B, in terms of which B rents A’s thing, before he takes possession A leases the same thing to C. If C isn’t in possession and at the time of the contact was aware of the contract between A and B, B’s right prevails. B can prevent A from delivering the object to C by means of an interdict. Where C contracted bona fide with A = problem: Some jurists apply the prior in tempore rule – B can prevent A from putting C in possession. Other holds that C should be given possession. Our courts follow the prior in tempore rule. Lessee’s remedies: if there is a major breach of contract – where the debtor fails to deliver the thing = cancellation, this includes the case where the condition of the property is such that it’s unfit for the purposes for which it was let = can cancel and possibly to get an action for specific performance. If the property is delivered on the due date but isn’t up to the standard of the contract (defective) this is a case of positive malperformance and the lessee can recover his losses, provided it was foreseeable, by means of an action for damages. Damages claimed may include both actual and consequential loss – the rule of mitigation applies. CLS cc © Sale & Lease Notes 9 Critical Law Studies CC © Study unit 6 (10% in exam) Lessor mustn’t disturb the tenant in his possession = duty to give undisturbed use and enjoyment: Lessor mustn’t disturb the lessee in his possession: Once the property is delivered to the lessee – the lessor can’t disturb his use and enjoyment thereof, except lawfully: where he reasonably required such right to inspect the property or effect repairs. Sishen Hotel: AD extended this rule by interpreting the lessee’s right against the lessor to include a restraint on him to refrain from direct or indirect conduct, which negatively affects the profitability of the leased thing. Facts: the parties concluded a 20 year lease on a hotel – the hotel was next to a national road, which increased custom – 8years after concluding the lease, the national road was diverted on application and at the expanse of the lessor, to expand his mining operations in the area = the result was that the hotels profits declined and eventually turned to losses. 3 years later the hotel closed down and the lessee instituted action against the respondent for the payment of damages for breach of contract = the claim was dismissed by the court a quo. The appellant raised the argument that the contract had an implied term that the respondent wouldn’t take any steps to interfere with the access to the hotel and prevent the flow of custom to the hotel. The judge: Commodus usus could include the idea of profit where the lessee runs a business from the leased premises. The judge found that because the lessee conducted business to make a profit, closing or diverting the road indirectly infringed with his use. This extension of the meaning of Commodus usus was challenged in Sweets from Heaven v Ster Kinekor: Q: whether profitability was one of the naturalia of a commercial lease or whether the lessee has to rely on a tacit term. SK was the lessee of an entertainment center and sub-lets the premises to 3rd parties. A franchise of SFH occupied the premises through the 1st appellant with the consent of SK. They then sublet to another sweet shop situated next door to SFH – they both sold similar products. Court a quo: granted the interim interdict to prohibit SK from giving the 2nd respondent occupation of the premises. The applicants based their claim on the respondent’s failure to ensure free and undisturbed use and enjoyment (commodus usus) of the property in allowing the 2nd respondent to compete. CLS cc © Sale & Lease Notes 10 Critical Law Studies CC © The judge found that the lessor hadn’t breached its obligations and of the lessee to succeed the lease contract would have to tacitly or otherwise prohibit the lessor from such conduct. It was held that the lessor was entitled to let the business premises to competitors. I.e. the extension in Sishen wasn’t regarded as a naturalia of the lease contract. Also included in this obligation is: - Lessor isn’t entitled to take the fruits of the leased property - Lessor cant graze cattle on land let to another - Lessor may not exclude the lessee from the leased property or from a portion thereof or deprive him of the use thereof - It’s a breach of this obligation if the lessor who has undertaken to prevent plastic bags blowing onto land let for grazing fails to do so. Remedies Since the lessor’s obligation is negative, the lessees’ normal remedies are an interdict, cancellation and damages. Remission of rent isn’t claimable. CLS cc © Sale & Lease Notes 11 Critical Law Studies CC © Study unit 7 Lessor must deliver the thing in a specific condition and maintain it The condition of the property at the time it’s made available: Poynton v Cran: the condition in which the thing is delivered must be in accordance with the provisions (express or tacit) of the agreement If there is no express agreement: the lessor must deliver the thing in the condition in which it was when the contract was entered into in accordance with any implied agreement. So where the thing has been let for a specific purpose it must be delivered in such a condition so it’s fit for that purpose. Where there’s an express agreement about the condition of a thing – lessor must comply. A lease creates continuous obligations – the lessor must ensure that the thing is in a fit and proper state. At the moment of delivery there must be no defects in the article, which are contrary to the contract. Should the defects have occurred after the contract was entered into but during the subsistence of the contract = the lessor is compelled to effect repairs to eliminate the defects provided there are no stipulations to the contrary. The condition of the thing during the currency of the lease Lessor need not carry out repairs due to wear and tear and deterioration through use, which are laid to the charge of the lessee. BUT as soon as wear and tear reach such a stage that the property is no longer fit for the purpose of lease – lessor is compelled to carry out repairs so to comply with the contractual obligation to keep the property in a fit state. The lessor is liable for breach only if he has fault – when he is unaware of the fact that the defect has occurred after the contract has been concluded, he cant be blamed if he fails to effect repairs – our law: lessee should notify the lessor of a defect, unless the lessor was aware or should have been aware of such a defect. Repair: landlord is liable for repairs don’t necessarily mean that he must make structural improvements (except if necessary in view of the purpose served by the rented property) he must merely repair structural defects. Problem: where the lessee undertake to effect repairs – must he also repair structural defects = Salmon: the judge held that the lessee is only liable to make repairs that are ordinarily required if he undertakes to keep the house in a good condition – he isn’t required to make structural alterations to ensure freedom from leaking = CLS cc © Sale & Lease Notes 12 Critical Law Studies CC © subsidiary parts of the property must be replaced but he need not renew the whole thing so as to ensure its continued existence. Q: Sarkin: the lessee had undertaken to repair the thatched roof on the premises. In an action for forfeiture of the lease on the ground that the lessee neglected repairs – plaintiff proved that at the commencement of the lease that the roof was in a proper state of repair and in a condition, which fulfilled the requirements of tenancy until its termination. I.e. if the lessee hadn’t neglected ordinary repairs the roof would have lasted the whole course of the lease. If the lease contains a clause putting an obligation to maintain on the lessee, such obligation must be interpreted in light of the condition of the premises at the date when the lease became operative. The lessee isn’t obliged to improve the roof in the sense of returning it to the lessor in a better condition than it was when he took occupation – where the roof is no longer capable of repair the lessee wont be obliged to put on a new roof, such renewal must be done by the landlord. Contractual duty/ ex lege warranty If the duty to deliver the thing in a specific condition and maintain it involved ordinary duties, the lessor isn’t liable for damages arising from the fact that the thing wasn’t at any time in the required condition, of which fact the lessor was either unaware, or ought not to have been aware or if he had taken all reasonable precautions against it. The reason for the distinction is that fault is normally required for liability by reason of breach. Fault isn’t required for liability by virtue of breach of warranty. With an ex lege warranty in a lease contract = the fact that he was unaware of the reputed defect and that it wasn’t possible for him to have been reasonable aware of it, or he had taken all precautions won’t avail the lessor. Remedies: 1. Cancellation 2. Specific performance: Marais: obligation to repair is vague so the court can’t supervise an order of specific performance. This view is said to be a generalization. The rule that a court can’t grant specific performance where the order would be difficult to enforce is open to doubt. It’s the duty of the party in whose favour the order is given to repair and the court may then take necessary steps. The extension of this rule is questionable. CLS cc © Sale & Lease Notes 13 Critical Law Studies CC © 3. Remission of rent: If the lessor fails to comply with his requirement for repairs, the lessee may continue to suffer the inconvenience and may then claim remission of rent in accordance with the degree of inconvenience suffered (damages). 4. Damages: Claimed of loss suffered as a result of a defect a) Tenant’s knowledge: where the lessee knows of the defect at the time he enters into the contract, he loses his claim for damages against the lessor for loss caused by the defect – the lessee must safeguard himself by asking the lessor for a warranty. If he doesn’t do so he is held to have assumed the risk for such damage – but the lessee is under no duty to inspect the property before the lease – where he doesn’t inspect it he loses his right to claim damages for all patent defects, which existed at the time of inspection. b) Landlord actual knowledge of the defect: where he knows of the defect he’s liable for any loss caused by the defect – where he gives a warranty he warrants the property to be free from defects, not caring whether that is absolutely so or not = he is liable even if he wasn’t aware of the defect. c) Where the lessor should have known of the defect: old writers: not bound to compensate the lessee for loss because of the lessor's failure to maintain unless he knew or because of his trade should have known of their defective condition. Cooper: lessor should be responsible for loss suffered by the lessee caused by a defect in the thing even if he had no knowledge of the defect. d) Where the lessor has no actual knowledge: he isn’t liable unless he gave an express warranty – Cooper: says that the tenant may also cancel the contract if the defect is serious or claim a remission of rent. These don’t apply in cases where the lessee is responsible or has damaged the thing let.