Law of Contract Essay

A arrangement int dyings to validate an obligation of two or more placeies, in relation to a bettericular subject. Contracts push aside multiply an extremely broad range of themes including the sale of goods or real proportion, the m bingletary value of employment or of an free lance squeezeor relationship, the settlement of a dispute and sustainership of intellectual property developed as part of work for hire.Essential Elements of a Contract* Clear genuine and communicated agreement. Meaning that the parties argon consensus ad idem or argon of the very(prenominal) mind. The parties to the flinch pass water mutual run a fall into placeing of what the arrangement covers, eg. In a induce for the sale of a moldi mantleang the buyer thinks that he leave obtain a car and the seller believes he is digest to sell a horse, there is no showdown of the minds and the pledge entrust likely be held unenforceable.Offer and AcceptanceAgreement = whollyege + evaluatean ceRequirements of a valid post* Offer inherent be definite. It essential non* leave al atomic number 53 aspects of the agreement dep reverseent upon the future testament of parties (Kantor v Kantor) * Leave aspects of the agreement blank or open to subsequent negotiation (Bundell v Blan & King v Potgieter & Finestone v Humburg) * Contain wording which is vague* Offer essentialiness(prenominal) be made with the intention of universe recognized by some opposite person. Excludes the following which are non passports but simply invitations to do short letter. * cosmopolitan statements of lowest price (Efroiken v Simon)* Statements of lowest price in response to a particularized interrogative (Harvey v Facey)* Invitations to tender (Spencer v Harding)* Newspaper advertisements in safe habitual (Shepherd v Farrel Estate Agency)* Advertisements by ecstasy companies of their charges for conveying goods (Frazer v Frank Johnson)* Displays in shop windows (Crawly v Rex)* Displays on self service counters (Pharmaceutical night club of GreatBritain v Boots Cash Chemists Ltd) * Restaurant menus.Reward CasesAdverts constitutes passing game (Carlill v Carbolic Smoke Co integrity abide by is just offered first person doing what is required is entitled to that reward. (Lee v Ameri eject Swiss take care Co.) No reward whitethorn be claimed by whateverone who fulfilled the requirement non knowing of that reward (Bloom v Ameri dejection Swiss Co.) What is required moldiness be done voluntarily.* Offer must not have been revoked. Offer whitethorn have been revoked or lapse in one of the following ship gital* Offeree is notified that it has been revoked.* Either the offerer or offeree dies.* Lapse of a reasonable period of duration.* Supervening impossibility or illegality* Rejection as where the of radicale vexs a counter offer which contradicts the master offer by proposing specific alterations to the legal injury of that offer.* Offer must be one on which an optimal time limit has not expired.* Note keeping an offer open until the offeree is in a position to accept is permissible, since the period, although unknown, is not indefinite (Hanekan v M turn upon) * In the crusade of an option which is offered gratuitously, silence is not credence (Beinart v Zeffert) * The right of adoption of an option, provided that it is also a bills sale, hind end be ceded. (Hersh v Nel) * Written credence of an verbal option is only valid upon know regardless of the distance between the parties. (Smeiman v Volkersz) * A provisional option allows either caller to get come in before the overdue date, whilist an option for a limited time at the descetion of the offeror similarly allows that offeror to withdraw, as state at his discretion. (Gerson v United Tobacco Co.s) exit of the Offer* By acceptance- an offer which has been accepted constitutes a fetch. That offer is no longer available for acceptance. * By rejection- an offer is rejected if 1) The offeree notifies the offeror that he does not wish to accept the offer. 2) The offeree moves to accept the offer but subject to certain thoughtfulnesss. 3) The offeree makes a counter offer (Hyde v Wrench) * By revocation before acceptance- an offer whitethorn be revoked (with haggard) whatsoever time before acceptance, but will only be solutionive when the offeree learns about it.* If the offer lapses-the offeror may stipulate that the offer is only open for a limited period of time. Once it has pass any acceptance is invalid. Even if no time limit is mentioned, the offer will not roost open indefinately. It must be accepted within a reasonable period of time. * Death- if the offeror dies later onward having made an offer and the offeree is notified of the death any acceptance will be invalid. * Failure of a condition attached to the offer. An offer may be made subject to conditions. such(prenominal) a condition may be stated expressly by the offeror or implied by the acts from the circumstances. If the condition is not satisfied, the offer is not capable of universeness accepted.Requirement of a valid acceptance* Acceptance must be definite and unconditional. (Watermeyer v Murray & Jones v Reynolds) acceptance must be unequivocal and stated intention to accept is not adequate. (Boerne v Harris)* Acceptance must be communicated.* Mere stated intention to accept is insufficient. (Dietirchsen v Dietrichsen) * Acceptance may be ither expressly stated or manifested by channelize. (Reid Bros v Fisher Bearings Co) * curb can not be acceptance. (East Asiatic Co.v Midland Manufacturing Co.) except where there is a duty expressly to repudiate as with brokers notes. (Benoni Produce & Coal Co. v Grendelfinger) * An offeror is free to dispense with the normal modes of communication to indicate alternative elans of acceptance eg by dispatch of goods (Rex v Net &Mackenzie v Farmers Co-op Ltd) * Where specific form of communication is demanded by the off fracture acceptance by any other method is void. (Eliason v Henshaw) * Whilist an offeror may prescribe the manner of acceptance, he may not prescribe the manner of refusal.eg by taking acceptance for grantedif the offeree has not acted in a certain way by a certain time. (Feltho mapping v Bindley)Acceptance by post or telegram or telephone or telexIn acceptance by post, the basic chemical formula is that the manner of offer implies the manner of acceptance, thus * Where written acceptance follows awritten offer, acceptance is valid at the timeof posting (Cape Explosive kit and caboodle Ltd v Lever Brothers Ltd) * Where written acceptance follows an oral offer or option (Smeiman v Volkers) acceptance is only valid upon receipt regardless of the distance between the parties. But * Where offeror has demanded some other form of acceptance, written acceptance is void (Eliason v Henshaw). Note * Acceptance to a wrong cover due to the offerors fault, is valid unl ess the offeree knew or suspected without checking, but where the mistake is the offorees acceptance is void. * Acceptance to the correct address, where the offeror has left that address without notifying the offeree is valid. (Naude v Malcom)* Correctly addressed and posted acceptance which does not arrive is valid. (Household Fire Insurance Co. v Grant) * An address incorrectly spelt by the offeree will only postpone acceptance to the time of receipt if the error was so fundamental as to make out delay. (Levben Products Ltd v Alexander Films Ltd) * Acceptance must be made by person for whom the offer was intended. proper(a) of acceptance can not be ceded by offeree to a third caller. (Blew v Snoxell & Bird v Summerville) * Acceptance must not be based on some justifiably mistaken. A engageing troupe may only avoid a contract based on his mistake if * Justus error was present and he was so blameless plus * Mistake was maternal and essential or important. book CasesUnsigned do cument such as tickets or receipts, which contain call waiving liability on the part of contracting society A which are unknown to the other party B. Thus B can only sue A if B is blameless and this will only be the case if all of the following apply * in that respect was no public notice displaying the terms.* The terms were not pointed out.c) The ticket was not of the type.* Contractual Capacity, meaning that the parties are legally capable of contracting. Only persons can contract, a person having the electrical capacity to find out rights and duties. But not only natural persons can do so. Our law recognizes the existence of staged persons who can likewise acquire rights and duties. The most important of these are companies incorporated in terms of the companies act. The general rule is that every person is able to contract freely, within the limits of the law. But there are certain persons of limited contractual capacity whose power to enter into binding agreements is lim ited. Minors a lowly is a unmarried person under the age of 18. During the term of his barbarianity he is under the custody and straight ascendence of a protector whose duty it is to maintain the minor until he can maintain himself, dish out his property and assist him in contracting.* Unassisted contractsA minor may not, as a general rule sue or be sued or contract without the assistance of his guardian should he attempt to do so the contract is void. The Roman Dutch authorities speak of such purpoted contracts as being void in one direct (that is as far as the minor is concerned) and valid in another (that is as far as the other is concerned. A minor may, notwithstanding, in certain cases acquire a perfectly valid obligation without his guardians assistance. These obligations are only exceptionally contractual, regular(a) though they often arise in the course of attempts to contract.* EnrichmentWherever a minor is unjustly enriched in terms of a purpoted contract he is bou nd to the extent that he is enriched. He is bound to rectify to the other party to the purpoted contract so much of what he has received as remain in his possession or to pay a sum of money to the value of the advantage received. But the minor is not bound by the contract, the contract remains void. His obligation arises simply because he has been enriched at psyche elses expense. (Tanne v Foggit)* double-tongued falsifying of MajorityWhere a minor fraudulently misrepresents his age or pretends that he has been emancipated and by so doing deceives another person who is induced to contract with the minor, believing him to be of all-embracing age or emancipated, the minor incurs an obligation. But once again the obligation is not contractual. The minor is not bound by the contract, which is void. But the fraud being a delict, he is bound delictually to make good to the other party any loss he suffered as a result of the fraud. It is essential that the other person be misled, othe rwise there can be no loss as a result of the fraud. It follows that a minor must be of such an age that it is possible for an transparent person to be misled.* Tacit EmancipationWhere a minor is tacitly emancipated he can incur a binding contractual obligation within the field of his emancipation. Tacit emancipation occurs where a minor is allowed by his guardian to carry on business, or any other occupation, on his own behalf. In such circumstances the minor may himself validly contract in regards to that business. He may not, however, contract outside that business without his guardians assume.* RatificationWhere a minor purports to contract without his guardians consent the contract may be subsequently ratified by either guardian, when the effect is precisely the same as if the guardian had consented at the time of the contract or the minor himself on attaining majority. Such ratification may be express or implied. It is implied eg where a person after attaining his majority, continues to use an article, which he purpoted to buy during his minority as his own, or indicates otherwise by his actions an intention to be bound. (Stuttaford & Co v Oberholzer) Once the ratification has taken place the contract is rendered valid and effective from the time of the purpoted agreement. The authority which was lacking is supplied by the subsequent ratification.Assisted contractsA minor is bound either by contracts on his behalf by his guardian or by contracts made by himself with the assistance of the guardian.* Mentally ill personsA purpoted contract made by a mentally ill person is void if at the time of agreement he could not understand and appreciate the transaction into which he purpoted to enter or if his consent was motivated or influenced by an insane decision cause by mental disease. All persons are presumed to be sane, unless they have been declared mentally disordered by an expert in the medical field. The contract is presumed void unless it can be shown that it was entered into at a time when the person concerned was in full possession of his faculties. (Prisloos Curators v Crafford & Prinsloo) or that his state of mind was such that he was able to understand the nature of the contract into which he entered and to appreciate properly the duties and responsibilities which were created by that contract.* Drunk PersonsWhere a person enters into a purpoted contract while so drunk that he does not know he is entering into a contract or he has no idea of the terms of the contract, the contract is void. The fact of drunken ness will not prevent the person concerned from incurring an obligation on the ground of enrichment.* ProdigalsA prodigal (that is a person declared by the coquette to be incapable of managing his affairs as a result of a propensity to squander his assets) cannot contract with regard to his property. If he purports to do so the contract is void. Ut outside the field of his property he is entitled to contract freely. He may marry. The tribunal in declaring a person to be prodigal appoints a curator bonis whose duties are to pass around the affairs of the prodigal, subject to the overriding approval of the courts.* Insolvent PersonsThe sequestration of the solid ground of insolvent divests him of his estate and vests it, after troth in a trustee. Property which he subsequently acquires before rehabilitation also vests in the trustee with certain exceptions. Certain re uncompromisingions are place on his freedom to contract, but he is in all other respects fully capable of contracting The restrictions are-an insolvent may not contract in such a way as to purport to dispose of any property of his insolvent estate. -he may not without the written consent of his trustee enter into any contract whereby his estate is likely to be adversely affected. -he may not without the written consent of his trustee have any interest in or be employed in the business of a trader who is a general dealer. Should th e insolvent, however purpot to contract in breach of these provisions of the act the contract is not void. It remains valid until it is set aside by the trustee.* Persons who have been convicted of CrimeIn certain cases, which do not require setting out in detail, ad which vary dependency on the crime commit and the sentence, imposed convicted persons are subject to various disqualification eg if convicted of theft, fraud, forgery or perjury and sentenced to imprisonment, they are disqualified from being appointed company directed.* Alien EnemiesAn alien enemy (namely a person residing or carrying on business in enemy territory) may not sue on our courts and all commercial relations with him is prohibited.* upright Intent, meaning the parties intend their agreement to be binding and legally enforceable. When parties enter into an agreement subject to contract they are expressly stating that they will not be bound unless and until a formal contract is drawn up.* Necessary Formaliti es. In some cases , certain formalities (writing) must be observed. * Contracts which must be in the form of a deed. Certain transactions involving land require a deed that is conveyances, legal mortgages and leases for more than 3 years. A promise of a gift is not binding unless in this form. * Contracts which must be in writing a contract for the sale or other disposition of land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed. In one document or where the contracts are exchanged in each. The document must be signed by or on behalf of each party to the contract.Bills of exchange, cheques and promissory notes must be in writing. Similarly the transfer of shares in a limited company must be in writing. Employment contracts should be in writing with terms and conditions of employment. * Possibility of doing that is work of the contract must be possible. * Legality that is the agreement must be lawful. The purpose of the ag reement must not be illegal or contrary to public policy where a contract involves some wrong doing, It will be illegal. If however, the conduct is neither immoral or blameworthy but simply undesirable the contract will be void. A court may object to an agreement either because of a rule of common law or because it is contrary to statute.Contracts illegal at common law* Contracts to commit crimes or civil wrongs eg a contract to assassinate someone or to defraud Zimra* Contracts involving sexual immorality* Contracts be given to promote corruption eg contract to bribe an official.* Contracts trading with an enemy of the state* Contracts directed against the welfare of a friendly foreign state.* Contract prejudicial to the administration of judge eg contract not to prosecute a person for an offence concerning the public.* Genuineness of ConsentThe agreement must have been entered into freely and involves a meeting of the minds. The agreement must not be subvertd by a number of fac tors, mistake, misrepresentation, duress and groundless influence.* MistakeThe general rule is that mistake does not affect the validity of a contract. The guiding convention is the caveat emptor which means let the buyer beware. So if a person agrees to pay $ super C for a car which in reality is only worth $500, the contract is valid and he must stand the loss. It should be noted that a mistake at law will not invalidate a contract, since everyone is presumed to know the law. There are , however some kinds of mistake which so undermine the agreement that the contract is void. If this is the case, no rights of ownership can pass and any goods which have changed turn over can be recovered. A mistake will invalidate the contract in the following situations.* Mistakes as to the subject matter of the contract. The parties may be mistaken as to the identicalness of the subject matter. If a seller makes an offer in respect of one thing and the buyer accepts, thinking of something els e, the parties are clearly talking at cross purposes and there is no contract. * mistake as to the identity of one of the parties. This may invalidate the contract where the identity of the party to the contract is satisfying to the contract, a mistake will result in the contract being void. Where the identity of the party is not material, the contract will be valid until the mistaken party avoids the contract for misrepresentation.* Mistaken signing of a written document. As a general rule, a person who signs a document is assumed to have read, understood and agreed to its contents. Exceptionally, a person may not be able to plead nonest factum- it is not my deed. 3 factors must be present if the contract is to be avoided, the soupcon must have been induced by fraud, the document signed must be fundamentally various from that thought to be signed and the signer must not have acted negligently.Rescission of termsThe court may be prepared to set aside an agreement provided the pa rties accept the conditions imposed by the court for a fairer solution to the problemRectificationIf a mistake is made in reducing an oral agreement into writing, the court may rectify the document so that it expresses the true intention of the parties.Specific performanceA court may refuse to grant an order for specific performance against a party who made a mistake, if it would be unfair to enforce the contract against him.* MisrepresentationThe formation of a contract is often preceded by a series of negotiations between the parties. Some of the statements made may turn out to be faithlessly. The nature of the statement will determine whether a better is available and if it is what type of remedy. A false stamen which is not incorporated into the contract is known as misrepresentation. A misrepresentation is a false statement made by one party to induce the other to enter into a contract. It must be shown that the statement has induced the person to whom it was made to enter in to a contract.Kinds of misrepresentation and their effectsThere are 3 kinds of misrepresentation fraudulent, negligent or innocent. In each case the contract is voidable.* Fraudulent MisrepresentationIf the person making the statement knows that what he utter is false, he will be credible for fraud. The wound party may rescind the contract and also sue for redress for the deceit.* Negligent MisrepresentationThis is where the person making the false statement has reasonable grounds for believing it to be true. Damages may be awarded for a negligent misstatement.* Innocent MisrepresentationIs a false statement made by a person who had reasonable grounds to believe that it was true, not only when it was made, but also when the contract was entered into. The basic remedy is rescission of the contract.RescissionIt aims to restore the parties to their pre contractual positions. Money or goods which have changed hands must be returned.* Duress and Undue InfluenceThe general rule of law is that a contract will only be valid if the parties entered into it freely and voluntarily. Where a party to a contract or his family is subjected to threats of violence, the contract may be avoided on the grounds of duress. In unjustified influence, the relationship between the parties may be such that one occupies a position of dominance and influence over the other. There are several relationships such as doctor and patient, solicitor and client, parent and child where it is automatically assumed that undue influence has been at work. The contract will be set aside unless the dominant person can prove that the complainant had independent advice. Where there is no special relationship between the parties the complainant must prove that pressure was applied.Breach of ContractThis may occur in a number of ways. It may be an anticipatory or actual breach.* Anticipatory BreachThis is where a party states in draw near that he does not intend to carry out his side of the contract or puts himself in a position whereby he will be unable to perform. The injured party may sue at a time for breach of contract or alternatively wait for the time for performance to arrive to see whether the other party is prepared to carry out the contract.* Actual BreachOne party may totally fail to perform his side of the bargain or he may fail to carry out one or some of his obligations. Not every breach of contract has the effect of discharging the parties from their contractual obligations. The terms of the contract may be divided into those terms which are important (conditions) and the less important terms (warranties). A breach of a condition does not automatically terminate the contract. The injured party has a choice he may wish to be discharged from the contract and claim damages for the breach. A breach of warranty only entitles the injured party to sue for damages.RemediesEvery breach of contract will give the injured party the right to recover damages (financial compens ation) other remedies such as specific performance and injunction, may be granted at the discretion of the court as part of its straightforward jurisdiction.DamagesIn the business world it is quite common for the parties to agree in advance the damages that will be payable in the event of a breach of contract. These are known as counterbalanced damages. If there is no prior agreement as to the sum to be paid, the tot up of damages is said to be unliquidated damages.Liquidated DamagesThe parties establish at the outset of their relationship the financial consequences of failing to live up to their bargain. Provided the parties have made a genuine attempt to estimate the likely loss, the courts will accept the relevant figure as the damages payable knowing the likely outcome of any legal action, the party at fault will simply pay up without argument.Unliquidated DamagesThe aim is to put the injured party in the position he would have been if the contract had been carried out proper ly. Damages are knowing to compensate for the loss. If no loss has been suffered, the court will only award nominal damages a small sum to mark the fact that there had been a breach of contract. Equitable RemediesThe normal remedy for breach of contract is an award of damages at common law. There are some situations, however where damages would neither be adequate nor appropriate. Equity developed other forms of relief to ensure that justice is done. The more important of these equitable remedies are specific performance and injunction.Specific PerformanceA ordering of specific performance is an order of the court requiring the party in breach to carry out his contractual obligations. Failure to comply with the directions of the court, lays the defendant open to imposition of penalties for contempt of court.InjunctionThis is an order of the court requiring the party at fault not to break the contract. Its main use is to enforce the negative promises that can that can occassionaly be found in employment contracts. The employee may agree eg not to work in a similar capacity for a rival employer during the period of his contract.Cancellation of the ContractThe parties to a contract may expressly agree that breach of a certain term will entitle one of them to erase the contract. Such express terms entitling set outlation may take any form, but the most common are forefeiture clauses, fore closure clauses and the lex commissoria. A forefeiture clause in a contract of letting and hiring is a clause which entitles the landlord to cancel the lease and have the tenant ejected. If the tenant is in breach of certain specified terms one of which is usually the requital of rent on the due date. In the absence of such a forefeiture cluse, a term governing the payment of the rent on a particular date is not material term and the land lord canot therefore terminate the contract merely on the ground that the lesee is in arrear with the rent.A foreclosure clause in a mortg age is a clause entitling the mortgagee to call up the bond where the mortgagor is in default usually by non payment of interest on due date. A lex commissoria is a provision in a contract of sale that the seller is entitled to cancel the contract on breach of one or other of the terms of the contract usually non payment of an instalment in the case of a sale where payment is made by instalments. Such a lex commissoria may, and usually does, contain valid penal provisions entitling the seller to retain so much of the corrupt price as had already been paid to him, despite his cancellationof the contract and recovery of the subject matter of the sale.Termination of ContractsPerformanceA contract is terminated by the performance of the reciprocal obligations of the parties. Set offWhere 2 parties are in debt to each other and the debts are due and liquidated, two debts are automatically extinguish if they are of the sameamount. If one is larger than the other, the smaller is extingu ished and the larger automatically reduced by the amount of the smaller debt. MergerIt is the concurrence of the debtor and creditor in the same person and in respect of the same obligation. It destroys the obligations in respect of which it operates. Thus if x is the tenant of y and he purchases the property from y, the lease comes to an end and for the capacities of landlord and tenant are merged in x.AgreementThe parties may by agreement put an end to contractual obligations by waiver or novation. In both cases the express or implied agreement of both parties is necessary.* WaiverIs the abandonment of rights by one or both parties to a contract. It is itself a contract which requires offer and acceptance in the ordinary way. Agreement to waive may be implied, but the courts will not lightly infer the abandonment of a right. It must appear clearly from the words or conduct of the parties.The person who waives a right can only effectively do so if he has full knowledge of the right . If he purports to waive a right while ignorant of its extent even as a result of ignorance of the law the waiver is ineffective, despite the rule ignoratia uris haud excusat, provided the ignorance is probable and justifiable. The abandonment may be of all rights under the contract, which is in other words cancelled by mutual agreement, or of only certain of the rights eg waiver of one party only.NovationIt occurs where the parties agree to a new contract which replaces the only one completely. The original contract is therefore terminated a new contract comes into being. The new contract, may then bring third parties to the original contract into the new one as parties (eg assignment and delegation) Cession on the other hand is really something different. There is not a rule to the new contract and therefore no novation. The original contract remains in existence but the right to receive performance is ceded by the cedent to the cessionary.Compromise is an agreement between pers ons for the settlement of a matter in dispute, each party abating some of its previous demands. If parties to a contract dispute each others rights in terms of the contract and subsequently they compromise their rights are regulated by the compromise and not by the original contract which falls away. In such a case, as the parties enter into a new contract which replaces the old one, it is clear that compromise is a form of novation and the ordinary rules apply eg a compromise requires strict proof, the presumption being against it.InsolvencyThe contractual rights and duties of an insolvent are affected in various ways by the sequestration of his estate. The majority of the rights and duties of the insolvent vest automatically in the master of the supreme court until the appointment of a trustee when they vest in the trustee. It is the duty of the trustee to recover all debts due to the estate, to liquidate the estate and to distribute the proceeds among the creditors who have prove d claims against the estate. Insolvency is terminated by rehabilitation by court order. Rehabilitation discharges all debts of the insolvent, which were due, or the cause of which had arisen before sequestration.DeathDeath of a party does not terminate the contract. A form of compulsory assignment takes place and the rights and duties of the deceased, other than in terms of contracts involving person-to-person skill which are terminated, pass to the executor.