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LIEZL SCHOLTZ 1
- 41941497
LAW OF CONTRACT (PVL3702)
SEMESTER 1
ASSIGNMENT 01
Due date: 9 March 2017
Unique number: 853779
IDENTIFYING THE PROBLEM
Was a legal contract entered into?
LEGAL CONSIDERATIONS
According to the Study Guide¹ as well as Prescribed Text Book2 the following law applies to
Contracts.
A contract can be defined as an agreement entered into by two or more persons with the
intention to create a legal obligation. A contract is an Obligationary agreement that creates
enforceable obligations. It will come into being with Consensus ad idem, in other words
meeting of the minds, intent, Capacity to contract, Certain and definite terms, Formalities
must be observed, Lawful, Obligations must be possible to be performed as well as Content
must be certain.
As a contract creates obligations we need to understand what exactly an obligation is. It is a
legal bond between two or more parties. The Debtor must give or do or refrain from doing
something to or for the creditor. A personal right will be created. It is also important to
remember that both parties are the creditor and the debtor.
There are three instances that give rise to obligation:
1. Contract where obligations are voluntarily assumed;
2. Delict where obligation is imposed by the law; as well as
3. Enrichment where the transfer of wealth takes place from one estate to another
without a legal cause.
Contractual liability can be based on either what we say (Subjective agreement) or what we
do (Objective agreement). Actual Subjective agreement (consensus ad idem) is where the
parties is in complete agreement on the important aspects, they intent the agreement to be
binding in law and are aware of each other’s intentions. While Apparent or Objective
agreement implies that although there is dissensus or material mistake, the outward
manifestations of their intention or conduct indicate that the agreement was reached.
South Africa takes a Subjective approach and uses the Will Theory of Contract as a point of
departure where consensus is the only basis for contractual liability. However if there is
dissensus the court will use the Reliance Theory to correct the shortcomings of the Will
Theory as illustrated in Smith v Hughes3 and Pieters & Co v Salomon4. In terms of the
Reliance Theory reasonable belief is induced by the conduct of the other party. The
declaration Theory (External manifestation of parties’ wills) are rarely used by our courts but
do exist in case law such as South African Railways & Harbours v National Bank of South
Africa5.
¹ Law of Contract, Prof GTS Eiselen, Prof T Floyd, Prof CJ Pretorius, Adv R Ismail, 2017
2
Hutchison & Pretorius (eds) The Law of Contract in South Africa 2nd ed (2012) Oxford, Cape Town
3
Smith v Hughes (1871) LR 6 QB 597
This study source
4 was&downloaded
Pieters by 100000832361371
Co v Salomon 1911 AD 121 from CourseHero.com on 03-12-2022 17:13:37 GMT -06:00
https://www.coursehero.com/file/25002869/PVL3702-Assignment-1-853779-Liezl-Scholtz-41941497pdf/
LIEZL SCHOLTZ 1
- 41941497
LAW OF CONTRACT (PVL3702)
SEMESTER 1
ASSIGNMENT 01
Due date: 9 March 2017
Unique number: 853779
IDENTIFYING THE PROBLEM
Was a legal contract entered into?
LEGAL CONSIDERATIONS
According to the Study Guide¹ as well as Prescribed Text Book2 the following law applies to
Contracts.
A contract can be defined as an agreement entered into by two or more persons with the
intention to create a legal obligation. A contract is an Obligationary agreement that creates
enforceable obligations. It will come into being with Consensus ad idem, in other words
meeting of the minds, intent, Capacity to contract, Certain and definite terms, Formalities
must be observed, Lawful, Obligations must be possible to be performed as well as Content
must be certain.
As a contract creates obligations we need to understand what exactly an obligation is. It is a
legal bond between two or more parties. The Debtor must give or do or refrain from doing
something to or for the creditor. A personal right will be created. It is also important to
remember that both parties are the creditor and the debtor.
There are three instances that give rise to obligation:
1. Contract where obligations are voluntarily assumed;
2. Delict where obligation is imposed by the law; as well as
3. Enrichment where the transfer of wealth takes place from one estate to another
without a legal cause.
Contractual liability can be based on either what we say (Subjective agreement) or what we
do (Objective agreement). Actual Subjective agreement (consensus ad idem) is where the
parties is in complete agreement on the important aspects, they intent the agreement to be
binding in law and are aware of each other’s intentions. While Apparent or Objective
agreement implies that although there is dissensus or material mistake, the outward
manifestations of their intention or conduct indicate that the agreement was reached.
South Africa takes a Subjective approach and uses the Will Theory of Contract as a point of
departure where consensus is the only basis for contractual liability. However if there is
dissensus the court will use the Reliance Theory to correct the shortcomings of the Will
Theory as illustrated in Smith v Hughes3 and Pieters & Co v Salomon4. In terms of the
Reliance Theory reasonable belief is induced by the conduct of the other party. The
declaration Theory (External manifestation of parties’ wills) are rarely used by our courts but
do exist in case law such as South African Railways & Harbours v National Bank of South
Africa5.
¹ Law of Contract, Prof GTS Eiselen, Prof T Floyd, Prof CJ Pretorius, Adv R Ismail, 2017
2
Hutchison & Pretorius (eds) The Law of Contract in South Africa 2nd ed (2012) Oxford, Cape Town
3
Smith v Hughes (1871) LR 6 QB 597
This study source
4 was&downloaded
Pieters by 100000832361371
Co v Salomon 1911 AD 121 from CourseHero.com on 03-12-2022 17:13:37 GMT -06:00
https://www.coursehero.com/file/25002869/PVL3702-Assignment-1-853779-Liezl-Scholtz-41941497pdf/
