Contract Law A 2019: 12 February

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CONTRACT LAW A 2019

Adv A J (Bert) Bester, SC


Associate Professor

LECTURE 1
12 February
LAW OF CONTRACT COURSE CONTENT 2019

Contract law A: First Semester

• the development of the law of contract


• the essential elements or requirements for a valid contract
• parties to contracts
LAW OF CONTRACT COURSE CONTENT
2019
 Contract Law B: Second Semester

• important terms that appear in contracts


• interpretation of a contract
• transfer of rights / obligations
• breach of contract and its consequences
• remedies for breach of contract
• termination
PRESCRIBED TEXT:
Hutchison et al The Law of Contract in South Africa,
3rd ed., Oxford University Press, 2018
Lecture 1

The Law of Contract -


a brief introduction

Hutchinson Chapter 1
What is a contract?
Hutchinson p 6

• an agreement
• entered into between two or more persons
• with the intention of creating legally enforceable obligation/s
• i.e.,
• animus contrahendi
• vinculum iuris
Requirements for a valid contract
Hutchinson p 6, 14
1. Capacity (Law of Persons)
2. Consensus - agreement
• point of departure - actual subjective agreement -express –
written / oral
• doubt - apparent or objective agreement – implied - actions, no
explicit agreement
3. Legality – must be lawful
4. Possibility of performance at conclusion
5. Certainty - definite / determinable content
6. Formalities - if required (alienation of land)
Nature of a contract
Hutchinson p 7

• juristic act
• law attaches the consequences intended by the parties
• bilateral / multilateral
• promises / undertakings
• give / do / not to do
• warrantee as of former or existing state of affairs
• reciprocity in performance - quid pro quo
Fundamental concepts of a contract
Hutchinson pp 21, 22
• freedom to contract
• whether or not / with whom / on what terms
• iro anything that is possible and lawful
• sanctity of contract - pacta sunt servanda
• must honour / court will enforce
• privity of contract (gives standing to sue)
• good faith – parties should behave honestly and fairly
(equity / public policy)
Contract Law: Origin & Sources

1. Common law
2. Statute
(Origin & Sources: Common Law)

(a) Roman law


• Hutchinson p 12
• law of contracts - distinct categories -
formalistic
• relaxation - driven by commercial necessity
(Origin & Sources: Common Law)

(b) Roman-Dutch law


• Hutchinson p 13
• pacta sunt servanda
• agreement
• good faith
(Origin & Sources: Statute)

2. Statute

- could serve to shape and supplement the


common law
(a) Consumer Protection Act
• Hutchinson p 34, 35
• applies to suppliers and consumers of goods and services
• exclusion of supplier liability – harm – gross negligence
• no warranties and representations when false
• purpose to protect consumers from exploitation in the
marketplace
• recognises, among others, the right to fair, just and reasonable
terms and conditions in certain contracts
(b) The Constitution & Bill of Rights
•Hutchinson 11, 37
• common law must be consistent with Bill of Rights &
normative framework of the Constitution
•no rule of common law sacrosanct
Barkhuizen v Napier 2007 (5) SA 323 CC at 57, 87
• Insurance – time limitation clause
• Self-autonomy - the ability to regulate one's own affairs, even to one's
own detriment - is the very essence of freedom and a vital part of dignity
• Pacta sunt servanda : content
• parties should comply with contractual obligations that have been
freely and voluntarily undertaken
• a profoundly moral principle, on which the coherence of any society
relies
• gives effect to the central constitutional values of freedom and dignity
• the general rule that agreements must be honoured does not apply to
immoral agreements that violate public policy
CLOSING THOUGHT

• Canada and United Kingdom, e.g., have unfair contract terms


legislation
• the purpose of such legislation is to control, e.g. :-
• one-sided terms in non-negotiated or standard contracts (such as
requirement of legality, exemption clauses, etc.)
• contracts concluded where parties are in an unequal bargaining
position and one party takes an undue advantage of that
inequality in bargaining power (the so-called “doctrine of
unconscionability”).
 
To deal with such problems we rely
principally on :-

• constitutional values
• common law principles and control mechanisms,
and
• judicial control
Afrox Healthcare Bpk v Strydom 2002 (6) SA 21 (SCA)
• patient contract - liability exclusion clause in hospital surgery &
treatment contract – all causes except intentional omission
→ the elementary and basic general principle is that it is in the public
interest that contracts entered into freely and seriously by parties
having the necessary capacity should be enforced
→ only if a rule of the common law is in conflict with a constitutional
provision, is a court obliged to depart from the common law because
the Constitution is the supreme law
→ although abstract considerations such as good faith or bona fides
were the basis and reason for the existence of legal rules and led
to the creation and amendment of those rules, they were not in
themselves legal rules
→ when it came to the enforcement of contractual terms, a court had
no discretion and did not operate on the basis of such abstract
ideas - courts operate on the basis of established legal rules
→ today, exclusionary clauses in standard contracts were the rule
rather than the exception and are expected
→ the relevant clause in the admission document was accordingly
not, objectively speaking, unexpected and, was, therefore, not in
conflict with the principles of good faith or bona fides
Comment :-
• certain standard term contracts with non-negotiated or
standard terms are often presented :-
• on a take-it-or-leave-it basis
• at or after contract conclusion (car rental contracts?)
• as in Afrox, when it is practically really too late to
withdraw
• can these contracts be regarded as a true expression of
contractual freedom and autonomy to contract?
• is the reality not that, in such cases, there is no prior evaluation
and balancing of all of the conceivable consequences of the
transaction by one of the parties?
Consequently,
• are constitutional values, common law principles and control
mechanisms flexible enough to deal with unfair and
unconscionable terms in non-negotiated or standard contracts?
• is there not perhaps an over-confidence in the common law, the
Constitution and judicial control?
• is judicial control (at which point constitutional values and
common law principles usually first come into play) not simply
years too late to do any good?

(see generally, Naude, Unfair contract terms legislation: the


implications of why we need it for its formulation and application
STELL LR 2006 3)

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