PVL 3702 Law of Contract compiled pack.

PVL3702/201/2/2012 Tutorial Letter 201/2/2012 Law of Contract PVL3702 Semester 2 Department of Private Law This tutorial letter contains important information about your module. Bar code 2 CONTENTS 1 MEMORANDA OF ASSIGNMENTS .............................................................................. 3 2 COMMENTARY ON EXAMINATION ............................................................................. 10 PVL3702/201 3 Dear Student 1 MEMORANDA OF ASSIGNMENTS This tutorial letter contains the memoranda of the answers to the assignments. 1.1 Assignment 01 Question X, an organiser of art exhibitions, contracted with Y for an exhibition to be held on 24 to 27 July. These dates were the only dates mentioned during the negotiations. After having been pressurized by X, Y hurriedly signed the standard form contract without reading it. The contract contained a clause permitting X to change the dates of the exhibition unilaterally. Thereafter X changed the dates. X had no reason to believe that Y would have signed the contract if he had known of the term. Y averred that the contract was void. Will Y succeed in his attempt to have the contract set aside? Substantiate your answer and refer to relevant case law. Apply the direct reliance approach of the courts in answering this question. (10) Answer Identifying the problem The facts seemingly indicate that X and Y have not reached consensus based on the will theory. If so, it is necessary to determine if Y may be held bound to a contract with X, based on the reliance theory, or whether Y will escape liability. Only the direct approach to the reliance theory will be considered. Discussing the relevant law applicable to the problem, referring to the relevant case law, AND applying the law to the facts of the problem The direct reliance approach can only be applied after it has been determined that Y acted under a material mistake. It must thus be determined whether agreement (consensus ad idem) as a contractual basis exists between the parties, as required in terms of the will theory. Consensus has three elements (Hutchison and Pretorius (eds) The law of Contract in South Africa Oxford University Press Southern Africa ): the parties must seriously intend to contract, be of one mind as to the material aspects of the proposed agreement (the terms and the identity of the parties to it), and be conscious of the fact that their minds have met. In the present case the parties were not in agreement as to the consequences they wished to create: Y thought that the dates for the art exhibition (X’s performance) was fixed, while X knew that the contract allowed X to unilaterally change the dates. This is a mistake as to the obligations the parties wished to create which excludes consensus between the parties. No contract can arise on the basis of the will theory. This type of mistake can be illustrated with a number of cases. 4 In Allen v Sixteen Stirling Investments (Pty) Ltd 1974 (4) SA 164 (D) the mistake related to performance and was thus material. The plaintiff believed that he was purchasing the erf shown to him by the seller's agent, while the written contract that he signed indicated the correct erf which was a completely different property. His mistake related to performance and was material. See also in Du Toit v Atkinson's Motors Bpk 1985 (2) SA 889 (A), the appellant signed an agreement containing a term excluding the respondent from liability for misrepresentation. Finally see Sonap Petroleum (SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v Pappadogianis 1992 (2) SA 234 (A) where the appellant erred with regard the period of the lease which was an aspect of the performance. The direct reliance approach (see Hutchison and Pretorius Contract ) can thus be applied. The court stated the test in Sonap Petroleum (SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v Pappadogianis 1992 (2) SA 234 (A) 239-240: In my view, therefore, the decisive question in a case like the present is this: did the party whose actual intention did not conform to the common intention expressed, lead the other party, as a reasonable man, to believe that his declared intention represented his actual intention? … To answer this question, a three fold enquiry is usually necessary, namely, firstly, was there a misrepresentation as to one party’s intention; secondly, who made that representation; and thirdly, was the other party misled thereby? … The last question postulates two possibilities: Was he actually misled and would a reasonable man have been misled? By signing the contract, Y, a party to the contract, misrepresented her intention to be bound by the clause allowing X to unilaterally change the dates. X knew that the only dates mentioned during the negotiations were 24 to 27 July, that Y hastily signed the contract and that the contract had a clause allowing X to unilaterally change the dates. Although it could be argued that X was not actually misled by Y’s misrepresentation, it is clear that a reasonable person would not have been misled. Indeed, X had no reason to believe that Y would have signed the contract had Y known of the term allowing X to change the dates of the exhibition unilaterally. In fact X had a legal duty to point out the presence of this clause in the agreement to Y. There was either no actual or at least reasonable reliance on the part of X. The giving of appropriate advice Y is not bound by the agreement with X because of the lack of actual and apparent consensus. Total: [10] 1.2 Assignment 02 Question 1 An item displayed in a shop window, accompanied by presentation of payment for the item by a customer, generally 1 results in a contract being concluded because an offer and acceptance exists. 2 infers that the customer is the offeror. 3 infers that the customer is the offeree. 4 infers that neither an offer nor an acceptance exists. 5 infers that the customer merely indicates an invitation to do business. (1) PVL3702/201