LAW OF CONTRACT
PVL3702
Rika Odendal
2019 First Semester
,Contract as an agreement intended to create enforceable obligations
→ A contract is an agreement between two or more parties with the intention of creating enforceable
obligations. To constitute an enforceable contract, an agreement must be one which the law
recognizes as binding on the parties.
→ The extra ingredient that distinguishes contracts from non-binding agreements is a serious intention to create
legally enforceable obligations (animus contrahendi).
→ The absence of an animus contrahendi explains why ‘gentlemen’s agreements’ are not enforceable as
contracts (binding on their honour only).
Legally binding agreements that are not contracts:
→ The fact that the parties seriously intend their agreement to have a binding legal effect does not necessarily
mean that it is a contract.
→ Classification of legally binding agreement:
1. Obligationary agreements (e.g. sale/lease), whereby one or more obligations are created. This is by
far the most important of the three agreements;
2. Absolving agreements (debt), whereby obligations are discharged or extinguished. Discharge is
achieved by the debtor's performing what he has undertaken to perform with the consequence that the
obligation concerned is terminated in a natural way;
3. Real (or transfer) agreements, whereby rights are transferred. Real rights, for example ownership, are
transferred by delivery (movable property) or registration.
→ These agreements may sometimes overlap to a greater or lesser extent. Suppose D walks into a cafe, puts
his R5 on the counter and points to a packet of sweets. The proprietor takes his money and hands over the
sweets.
Requirements for a valid contract – must all be complied with
Consensus: the minds of the parties must meet (or at least appear to meet) on all material aspects of
their agreement;
Capacity: the parties must have the necessary capacity to contract;
Formalities: where the agreement is required to be in certain form (for example, in writing and signed),
these formalities must be observed;
Legality: the agreement must be lawful – not prohibited by statute or common law;
Possibility: the obligations must be capable of performance when the agreement is entered into;
Certainty: the agreement must have a definite or determinable content, so that the obligations can be
ascertained and enforced.
The nature of a contract
→ A contract is a juristic act. The conclusion of a contract is bilateral or multilateral. There must be at least
two parties to an agreement.
→ A contract entails undertakings on one or both sides. Undertaking may be to make a certain performance
immediately or in future. May be an undertaking that a certain state of affairs exists/existed (warranty). Most
contracts entail reciprocity (an exchange).
→ All contracts are consensual, in the sense of being based on an agreement of some sort and are bona fide
(with good faith).
,Contract and the law of obligations
→ The law of contract forms part of private law (specifically the law of obligations).
→ From a contract, arises an obligation or obligations. An obligation is a legal bond between two or more
persons, obliging the one (the debtor) to give, do, or refrain from doing something to or for the other
(the creditor) to demand a performance by the debtor, and the duty of the debtor to make that
performance.
→ Right created by obligation is a personal right (ius in personam). If the obligation is enforceable by action in
a court of law, it is referred to as a civil obligation.
→ Primary sources of obligations are contract and delict. Other sources include undue enrichment, family
relationships, negotiorum gestio (unauthorized administration of another’s affiars), wills and statutes.
→ A distinction is made between civil obligations (obligatio civilis) and natural obligations (obligatio naturalis).
→ Civil obligation may be enforced directly by recourse to a court of law, whereas a natural obligation may not.
→ However, a natural obligation does have some legal effect: it is a legal relationship as opposed to a merely
moral relationship, and just as in the case of a civil obligation, it can be validly discharged, is capable of indirect
enforcement by way of set-off, and can serve as the basis of an accessory contract such as suretyship.
→ An example of a natural obligation is a contractual obligation that requires a minor who acted without the
necessary consent, to perform something, or an obligation which requires the payment of a wagering or
gambling debt.
Real rights and Personal Rights
→ The only real right recognised in our law is ownership. Where a person has complete title (or control) over a
thing or property. A person may also hold a limited real right in relation to property, which is a subcategory of
real rights - they are held by a person in relation to someone else's property. One can never have a whole real
right in relation to someone else's property.
→ A personal right is one against another person for the performance of an obligation, i.e.: the other person
must either do or refrain from doing something. These rights are usually created by contract.
Contract and Delict
→ A delict is wrongful and blameworthy conduct that causes harm to a person (i.e. defamation or negligent
damage to property). Such conduct obliges wrongdoer to compensate injured party.
→ Essential difference between contractual and delictual obligations: Contractual obligations are voluntarily
assumed by the parties themselves. Delictual obligations are imposed by law, irrespective of the will of the
parties.
→ Breach of contract and a delict are very similar – both constitute civil wrongs and give rise to a duty to pay
damages.
→ Sometimes concurrent contractual and delictual liability can arise so that Plaintiff can sue on either basis.
Plaintiff who sues in delict must prove that all the elements of delictual liability are satisfied – the conduct must
infringe a right of the Plaintiff that exists independently of the contract.
Contract and Enrichment
→ Key to distinguishing contractual from enrichment lies in question whether or not a transfer of wealth from one
estate to another occurred pursuant to a valid contract. Where such ground is present in form of a contract,
one is dealing with a contractual obligation; whereas if it is absent, one is dealing with an enrichment
obligation.
, → Undue enrichment is a principle of our law that no-one should unjustifiably be enriched at the expense of
another. Here undue enrichment means that there is no valid legal ground for the one's obtaining a benefit at
the expense of the other.
→ Comparison of contract, delict and enrichment:
CONTRACT DELICT ENRICHMENT
Event giving rise to Agreement to make the Wrongful conduct that Unjustified shift of wealth
obligation performance (to give, do causes harm to another or asset from ne estate
or not do) to another
Content of obligation To make promised To avoid causing harm To return the enrichment
performance by wrongful conduct
Nature of remedy Actual performance, or Compensation for harm Return of enrichment
compensation for non- caused
performance
Source of obligation Self-imposed Imposed by law Imposed by law
Void and Voidable contracts
→ The fact that a contract is valid when it was concluded, however, does not mean that it cannot be challenged
subsequently.
→ The contract may for example, be terminated because the performance has become impossible or illegal; or
one of the contracting parties may cancel because of the other’s breach of contract; or one of the parties may
cancel the contract because of the other’s misrepresentation, duress or undue influence.
→ A material mistake will have the result that a contract is void (that is no contract comes into existence) since
it excludes the basic requirement for the existence of a contract, namely consent. A void contract creates no
obligations.
→ Misrepresentation, duress or undue influence, can only render a contract voidable, because in such a case
there is consensus, so that the contract cannot be void, but the consent has been obtained in an improper
manner, rendering the contract voidable.
→ A contract which is merely voidable does create obligations, and these obligations then exist until the
contracting party who has the election (choice) decides to terminate them. He is not, however, obliged to
terminate them and if he does not, the obligations continue to exist unaffected.
PVL3702
Rika Odendal
2019 First Semester
,Contract as an agreement intended to create enforceable obligations
→ A contract is an agreement between two or more parties with the intention of creating enforceable
obligations. To constitute an enforceable contract, an agreement must be one which the law
recognizes as binding on the parties.
→ The extra ingredient that distinguishes contracts from non-binding agreements is a serious intention to create
legally enforceable obligations (animus contrahendi).
→ The absence of an animus contrahendi explains why ‘gentlemen’s agreements’ are not enforceable as
contracts (binding on their honour only).
Legally binding agreements that are not contracts:
→ The fact that the parties seriously intend their agreement to have a binding legal effect does not necessarily
mean that it is a contract.
→ Classification of legally binding agreement:
1. Obligationary agreements (e.g. sale/lease), whereby one or more obligations are created. This is by
far the most important of the three agreements;
2. Absolving agreements (debt), whereby obligations are discharged or extinguished. Discharge is
achieved by the debtor's performing what he has undertaken to perform with the consequence that the
obligation concerned is terminated in a natural way;
3. Real (or transfer) agreements, whereby rights are transferred. Real rights, for example ownership, are
transferred by delivery (movable property) or registration.
→ These agreements may sometimes overlap to a greater or lesser extent. Suppose D walks into a cafe, puts
his R5 on the counter and points to a packet of sweets. The proprietor takes his money and hands over the
sweets.
Requirements for a valid contract – must all be complied with
Consensus: the minds of the parties must meet (or at least appear to meet) on all material aspects of
their agreement;
Capacity: the parties must have the necessary capacity to contract;
Formalities: where the agreement is required to be in certain form (for example, in writing and signed),
these formalities must be observed;
Legality: the agreement must be lawful – not prohibited by statute or common law;
Possibility: the obligations must be capable of performance when the agreement is entered into;
Certainty: the agreement must have a definite or determinable content, so that the obligations can be
ascertained and enforced.
The nature of a contract
→ A contract is a juristic act. The conclusion of a contract is bilateral or multilateral. There must be at least
two parties to an agreement.
→ A contract entails undertakings on one or both sides. Undertaking may be to make a certain performance
immediately or in future. May be an undertaking that a certain state of affairs exists/existed (warranty). Most
contracts entail reciprocity (an exchange).
→ All contracts are consensual, in the sense of being based on an agreement of some sort and are bona fide
(with good faith).
,Contract and the law of obligations
→ The law of contract forms part of private law (specifically the law of obligations).
→ From a contract, arises an obligation or obligations. An obligation is a legal bond between two or more
persons, obliging the one (the debtor) to give, do, or refrain from doing something to or for the other
(the creditor) to demand a performance by the debtor, and the duty of the debtor to make that
performance.
→ Right created by obligation is a personal right (ius in personam). If the obligation is enforceable by action in
a court of law, it is referred to as a civil obligation.
→ Primary sources of obligations are contract and delict. Other sources include undue enrichment, family
relationships, negotiorum gestio (unauthorized administration of another’s affiars), wills and statutes.
→ A distinction is made between civil obligations (obligatio civilis) and natural obligations (obligatio naturalis).
→ Civil obligation may be enforced directly by recourse to a court of law, whereas a natural obligation may not.
→ However, a natural obligation does have some legal effect: it is a legal relationship as opposed to a merely
moral relationship, and just as in the case of a civil obligation, it can be validly discharged, is capable of indirect
enforcement by way of set-off, and can serve as the basis of an accessory contract such as suretyship.
→ An example of a natural obligation is a contractual obligation that requires a minor who acted without the
necessary consent, to perform something, or an obligation which requires the payment of a wagering or
gambling debt.
Real rights and Personal Rights
→ The only real right recognised in our law is ownership. Where a person has complete title (or control) over a
thing or property. A person may also hold a limited real right in relation to property, which is a subcategory of
real rights - they are held by a person in relation to someone else's property. One can never have a whole real
right in relation to someone else's property.
→ A personal right is one against another person for the performance of an obligation, i.e.: the other person
must either do or refrain from doing something. These rights are usually created by contract.
Contract and Delict
→ A delict is wrongful and blameworthy conduct that causes harm to a person (i.e. defamation or negligent
damage to property). Such conduct obliges wrongdoer to compensate injured party.
→ Essential difference between contractual and delictual obligations: Contractual obligations are voluntarily
assumed by the parties themselves. Delictual obligations are imposed by law, irrespective of the will of the
parties.
→ Breach of contract and a delict are very similar – both constitute civil wrongs and give rise to a duty to pay
damages.
→ Sometimes concurrent contractual and delictual liability can arise so that Plaintiff can sue on either basis.
Plaintiff who sues in delict must prove that all the elements of delictual liability are satisfied – the conduct must
infringe a right of the Plaintiff that exists independently of the contract.
Contract and Enrichment
→ Key to distinguishing contractual from enrichment lies in question whether or not a transfer of wealth from one
estate to another occurred pursuant to a valid contract. Where such ground is present in form of a contract,
one is dealing with a contractual obligation; whereas if it is absent, one is dealing with an enrichment
obligation.
, → Undue enrichment is a principle of our law that no-one should unjustifiably be enriched at the expense of
another. Here undue enrichment means that there is no valid legal ground for the one's obtaining a benefit at
the expense of the other.
→ Comparison of contract, delict and enrichment:
CONTRACT DELICT ENRICHMENT
Event giving rise to Agreement to make the Wrongful conduct that Unjustified shift of wealth
obligation performance (to give, do causes harm to another or asset from ne estate
or not do) to another
Content of obligation To make promised To avoid causing harm To return the enrichment
performance by wrongful conduct
Nature of remedy Actual performance, or Compensation for harm Return of enrichment
compensation for non- caused
performance
Source of obligation Self-imposed Imposed by law Imposed by law
Void and Voidable contracts
→ The fact that a contract is valid when it was concluded, however, does not mean that it cannot be challenged
subsequently.
→ The contract may for example, be terminated because the performance has become impossible or illegal; or
one of the contracting parties may cancel because of the other’s breach of contract; or one of the parties may
cancel the contract because of the other’s misrepresentation, duress or undue influence.
→ A material mistake will have the result that a contract is void (that is no contract comes into existence) since
it excludes the basic requirement for the existence of a contract, namely consent. A void contract creates no
obligations.
→ Misrepresentation, duress or undue influence, can only render a contract voidable, because in such a case
there is consensus, so that the contract cannot be void, but the consent has been obtained in an improper
manner, rendering the contract voidable.
→ A contract which is merely voidable does create obligations, and these obligations then exist until the
contracting party who has the election (choice) decides to terminate them. He is not, however, obliged to
terminate them and if he does not, the obligations continue to exist unaffected.
