Contracts
A contract is a legally valid agreement between two or more parties where an offer is made
and its terms and conditions are accepted.
The rights and obligations of each party are set out in the contract.
Both parties must give something of value and recieve something of value.
AN AGREEMENT CAN BE REACHED IN THREE WAYS:
1. Oral agreement
2. Silent agreement
3. Written contract - a legally binding agreement between two or more parties is put in writing
and signed by all parties in front of witnesses.
REQUIREMENTS FOR A VALID CONTRACT:
1. All parties must consent to contract/agreement. There must be an offer and an
acceptance to the offer.
2. All parties must have capacity to contract (over 18 and sound of mind).
3. Cannot be illegal
4. Must comply with legal formalities (correctly signed etc.).
5. Agreement and consent must be voluntary (no forcing).
6. Must be possible to perform the contractual obligations.
BREACH OF CONTRACT:
When a party fails to perform the obligations specified in the contract, that party breaches
the contract.
CONSEQUENCES:
Court can declare party guilty for failure to the agreement and a fine/jail sentence may be
imposed
Court can sue guilty party for damages
An interdict can be obtained to prevent the guilty party from continuing with his/her
work
Contract can be cancelled or declared void
Types of contracts
EMPLOYMENT CONTRACTS
, Agreement between employer and employee.
Legal contract and the terms and conditions are legally binding.
It is to the advantage of both the employer and the employee and protects both parties in
terms of contractual obligations and service conditions.
Contract must be signed by the employer, employee and two witnesses.
INSURANCE POLICIES
Agreement between a consumer and an insurance company.
Insurance company undertakes to compensate the consumer in the case of loss or damage to
the insured goods.
The consumer undertakes to pay a monthly sum or premium to the insurer.
EGS: household insurance, motor vehicle insurance, medical fund/ hospital plan, life
insurance
CREDIT AGREEMENTS
Contract between consumer and credit provider (can be a financial institution).
Consumer is offered a loan to buy goods on credit and undertakes to pay the full amount as
well as interest, in the form of monthly instalments, over a fixed number of months.
EGS:
MORTGAGE/HOME LOAN
Money borrowed from a bank/financial institution to buy a property.
Consumer and bank/financial institution enter into an agreement.
Bank/financial institution pays full purchase price of a property on behalf of the consumer
and the consumer pays back the full amount with interest over a fixed number of years
(usually 20 to 30), in the form of fixed installments.
The consumer ‘owns’ the property from the day the contract is signed, but becomes the legal
owner only when the home loan has been paid in full.
The mortgage is registered at the deeds office and the property acts as the security for the
payment of the debt.
BANK LOAN
A contract is a legally valid agreement between two or more parties where an offer is made
and its terms and conditions are accepted.
The rights and obligations of each party are set out in the contract.
Both parties must give something of value and recieve something of value.
AN AGREEMENT CAN BE REACHED IN THREE WAYS:
1. Oral agreement
2. Silent agreement
3. Written contract - a legally binding agreement between two or more parties is put in writing
and signed by all parties in front of witnesses.
REQUIREMENTS FOR A VALID CONTRACT:
1. All parties must consent to contract/agreement. There must be an offer and an
acceptance to the offer.
2. All parties must have capacity to contract (over 18 and sound of mind).
3. Cannot be illegal
4. Must comply with legal formalities (correctly signed etc.).
5. Agreement and consent must be voluntary (no forcing).
6. Must be possible to perform the contractual obligations.
BREACH OF CONTRACT:
When a party fails to perform the obligations specified in the contract, that party breaches
the contract.
CONSEQUENCES:
Court can declare party guilty for failure to the agreement and a fine/jail sentence may be
imposed
Court can sue guilty party for damages
An interdict can be obtained to prevent the guilty party from continuing with his/her
work
Contract can be cancelled or declared void
Types of contracts
EMPLOYMENT CONTRACTS
, Agreement between employer and employee.
Legal contract and the terms and conditions are legally binding.
It is to the advantage of both the employer and the employee and protects both parties in
terms of contractual obligations and service conditions.
Contract must be signed by the employer, employee and two witnesses.
INSURANCE POLICIES
Agreement between a consumer and an insurance company.
Insurance company undertakes to compensate the consumer in the case of loss or damage to
the insured goods.
The consumer undertakes to pay a monthly sum or premium to the insurer.
EGS: household insurance, motor vehicle insurance, medical fund/ hospital plan, life
insurance
CREDIT AGREEMENTS
Contract between consumer and credit provider (can be a financial institution).
Consumer is offered a loan to buy goods on credit and undertakes to pay the full amount as
well as interest, in the form of monthly instalments, over a fixed number of months.
EGS:
MORTGAGE/HOME LOAN
Money borrowed from a bank/financial institution to buy a property.
Consumer and bank/financial institution enter into an agreement.
Bank/financial institution pays full purchase price of a property on behalf of the consumer
and the consumer pays back the full amount with interest over a fixed number of years
(usually 20 to 30), in the form of fixed installments.
The consumer ‘owns’ the property from the day the contract is signed, but becomes the legal
owner only when the home loan has been paid in full.
The mortgage is registered at the deeds office and the property acts as the security for the
payment of the debt.
BANK LOAN
