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When one of the requirements for a valid contract is absent then no contract is concluded. A contract is however voidable when it can be set aside on account of a defect that existed at the time of conclusion (e.g. consensus improperly obtained). An unenforceable contract is indeed concluded but it creates only a natural obligation, which is recognised but not enforced by law. Read Spenmac (Pty) Ltd v Tatrim CC for your ease of reference.

A contract can be written down or typed out, it can be verbal or it may even just exist in the minds of the parties. However, contracts for the sale of immovable property (land and buildings) must be in writing and signed by the parties. An agreement for the sale of immovable property that is not recorded in this formal manner has no legal force. The parties must be in agreement that the object of the contract is to purchase and to sell the res concerned, for the price agreed upon, and that the seller (usually) ensures the transfer of possession and/or ownership of the res to the buyer.

Chief Executive Officer SAIA: Obert Chakarisa

As part of our commitment to keep members informed we plan to provide you with a newsletter focusing on SAIA’s business every second month. Additionally, every alternate month we would like to provide you with valuable insights and business related information to help you in your practice. This will be produced under the title NEWS@SAIA, Information and Opinions.

This month we proudly remind you of one of our newest benefits, Legal advice from Solace, available to SAIA members. In this article Solace has provided you with a conceptual overview of Contractual Law. We trust you find the information of benefit and that you immediately turn to Solace when you are in need of sound legal advice by simply phoning 0860 765 223.

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NEWS@SAIA, Information and Opinions

An insight into South African Contract Law by Chantal Cronje – Legal and Tax Services

South Africa follows English law in both criminal and civil procedure, company law, constitutional law and the law of evidence while Roman-Dutch common law is followed in contract law, law of delict (tort), law of persons, law of things, family law, etc. Contract law provides a legal framework within which persons can conclude contracts, secure in the knowledge that the law will uphold their agreements and enforce them if need be.

We enter into contracts every day, for example, you enter into a contract whenever you buy or sell something, or when you build, renovate or rent a house. The contract of sale example, derives its origins from the Roman consensual contract of emptio venditi, i.e. a sale is a contract in which one person (the seller or vendor) promises to deliver a thing to another (the buyer or emptor), the latter agreeing to pay a certain price. The essential elements of a contract of sale are no different from the essential elements of any other contract:-

• There must be contractual capacity and consensus. The general principles relating toconsensus in purchase and sale are the same as those pertaining to other multilateralconsensual contracts in that there must be an agreement of the minds of the parties,mutually communicated, usually by means of offer and acceptance. The parties must actwith the intention of contracting a sale, there must be a concursus animorum animocontrahendi.• The agreement should be legal and satisfy the dictates of public policy. It should be freefrom mistake or error, and should not have been induced wrongfully bymisrepresentation, duress or undue influence.• Performance must be possible. It cannot therefore exist in cases of extreme youth,irrational intoxication or insanity.• Any other formalities required by law must be complied with.

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"If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms." In the present case, the court held that the letters, sent to Pillay by the estate agents acting for the seller, had reasonably led Pillay to believe that her offer to purchase had been accepted by the seller. As a result, the court held that the seller was legally bound to the contract, just as if the seller had in fact counter-signed the offer to purchase, thereby signifying acceptance.

A contract is different from other agreements, like an agreement to meet someone for lunch. This is because contracts create legal rights and duties. It creates an obligation, a legal bond (vinculum iuris) between the contracting parties and when you enter into a contract, you cannot decide later that you don’t want to carry out the obligations you have agreed to do or not to do, that would be a breach of contract. Delict is wrongful and blameworthy conduct that harms a person thus breach of contract and a delict are similar in that both are civil wrongs and may give rise to a duty to pay damages as compensation or deliver specific performance.

Generally, in the absence of a clause that provides for cancellation (a lex commissoria), rescission of a contract is permissible only if the breach in question is regarded as a material breach if it relates to essential or vital term of the contract. A ‘material’ breach is a ‘serious’ breach. But, whether a party can cancel a contract will also depend on the type of breach. The Courts mostly follow the maxim pacta sunt servanda (contracts shall be enforced), or the strict liability approach, which aims to prevent parties from not honouring their obligations. In addition, the courts normally award damages for breach of contract on the basis of restitution in integrum, which means to be placed in the position one was in prior to the agreement. The courts will award damages as they are proven and quantified accordingly.

However, before approaching the courts, one should first consider Arbitration which enables the parties to adopt a procedural framework which incorporates a mix of procedures and legal practices that both parties are comfortable with. There are no prescribed formalities to such an agreement and it can be made in writing or viva voce (orally). If made orally the common law applies. Once agreed it can only be revoked by means of consent of all the parties or be set aside by the court on good cause shown. The inherent jurisdiction of the courts cannot be circumvented by means of an agreement that purports to exclude the jurisdiction of the courts entirely. The court retains the authority to set aside the award of an arbitrator however when used correctly, arbitration is far superior to court litigation and yields the precise benefits that are most important to parties, reducing their expenses and lost time while increasing their control over the process.

Links to Case Law as Spoken about above

1. Spenmac (Pty) Ltd v Tatrim CC - http://www.saflii.org/za/cases/ZASCA/2014/48.html2. Spring Forrest Trading Vs. WIlberry - http://www.saflii.org/za/cases/ZASCA/2014/178.html3. Smith v Hughes - https://en.wikipedia.org/wiki/Smith_v_Hughes

A recent court decision, Spring Forest Trading v Wilberry potentially allows contracting parties to sign their contracts by way of a data message (which includes emails and other communication platforms such as WhatsApp, BBM and social media) by typing their name at the end of a message. In the case, the contract was subject to a non-variation clause stating that no variation or consensual cancellation would be valid unless reduced to writing and signed by both parties. It is clear from this judgment that emails will be taken as complying with the “in writing” requirement; and placing names at the foot of such emails will be accepted as “signatures” required in terms of non-variation clauses to vary and/or cancel contracts. The tools of the modern businessperson have evolved from writing letters and sending them by post, facsimile or delivery to email and other electronic and digital means. It is clear from this judgment that the Courts have acknowledged this.

Our courts have also held that a contract entered into without any words being spoken at all, can be enforceable if it is clear that the parties had reached an agreement which they intended to be legally binding by relying on the doctrine of quasi-mutual assent. The doctrine is one of the three theories for the formation of contracts in our law, and a compromise between the other two, being the will and declaration theories. Also known as the reliance theory, the doctrine was relied upon in the the 2008 decision of our Supreme Court of Appeal in the case of Pillay v Shaik. Property developers had established a sectional title development on the Natal North coast, and offered the units for sale through an estate agent. On appeal, the Supreme Court of Appeal upheld the decision of the Durban High Court. Both the Durban High Court and the Supreme Court of Appeal based their decisions on the so-called "doctrine of quasi-mutual assent", which was first articulated in the case of Smith v Hughes, decided in England in 1871, where the judge said that:-

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