LAW OF

CONTRACT

• LACO 6311
LU 2
• Semester 1 of
2024
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ICE tasks

Assignment
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4
 • In Learning Unit 1 we learned that contracts are
agreements with the intention to create legally binding
rights and obligations, but the question remains, how do
contracts begin?
• A contract usually begins with an offer, which is

What to accepted.
• This offer and acceptance need to meet specific

expect for requirements that have been developed for the creation
of a valid contract. Apart from these rules, there are more

this learning
theories that govern when and where an offer is accepted
as well as the requirements of Consumer Protection Act,
when it applies.

unit: • In this learning unit, we will examine the requirements for

valid offer and acceptance.
• We will look at the rules relating to offers made to the
public. We will also consider the different types of pacta
de contrahendo and how these agreements function.
LU 2: • Consensus, or agreement, is an essential part of
contracts under our legal system and in absence thereof
Formation of a a contract may be declared void.
• This will also be true in cases where consensus was

contract improperly obtained, the parties to the contract are

mistaken about their agreement, or where the acceptance
was obtained because of misrepresentation, duress or
undue influence.
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 We will start with:
Theme 1: Offer and Acceptance
➢ LO1: Discuss the legal effect of an offer; ➢ TB: Chapter 2 (pages 50 – 85)
➢ LO2: Apply the requirements for the valid ➢ Prescribed Case Law
formation and termination of an offer to a
practical scenario; ▪ Associated SA Bakeries (Pty) Ltd v Oryx
& Vereinigte Backereien (Pty) Ltd 1982
➢ LO3: Explain the legal position with regard (3)SA 893 (A)
to offers to the public, in the form of
advertisements, tenders, etc.; ▪ Crawley v Rex 1909 TS 1105

➢ LO4: Apply the requirements for valid ▪ Hirschowitz v Moolman 1985 (3) SA 739
acceptance to when and where acceptance (A)
takes effect in a practical contract scenario ▪ Pillay v Shaik 2009 (4) SA 74 (SCA)
using the theories of acceptance;
▪ Mokone v Tassos Properties CC and
➢ LO5: Explain the different types of pacta de Another [2017] ZACC 25
contrahendo and the legal position of the
parties involved in such agreements.
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WHAT IS THE DEFINITION OF A CONTRACT?

“ A contract is defined as an agreement entered into

by two (2) or more persons with the
intention of creating alegal obligation …and one which
the law recognizes as
being binding on the parties”

Hutchinson, D. et al 3rd ed (2017)

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 Inter
WHAT IS A CONTRACT absentes
Inter absentes
vsvsinter
praesentes
inter praesentes

OFFER ACCEPTANCE
Proposal to contract Agree to the proposal

1. UNEQIVOCAL
1. FIRM 2. UNQUALIFIED
2. COMPLETE – 3. CONSCIOUS
nothing further to response to the
negotiate offer
3. CLEAR AND 4. in a FORM
CERTAIN PRESCRIBED by
the offeror 8
 An Offer – Legal effect

EFFECT (TH p 52):

DEFINTION: A contract is:
An offer is a proposal to ❖ Bilateral juristic act
contract, a declaration of ❖ Offer cannot in itself give
intention by one party (the rise to binding obligations
offeror) to another (the ❖ But if accepted then a
offeree) indicating the contract comes into being
performance he/she is ❖ Offeror can withdraw the
prepared to make and the offer – unless there is a
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terms onwhichwill make it. separate agreement
 An Offer - requirements
Requirements for a valid
offer:
1. Must be firm
2. Complete
3. Clear and certain

Firm : Complete : Clear and Certain:

Offer must be animo Offer must contain all Sufficiently certain –

contrahendi the relevant terms to address merely
= acceptance will proposed -there answer “yes” .
result in a binding should not be further
contract. negotiations required.
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An Offer – RequiRements … continue
CPA
Introduced additional
Requirements (TB p 54 – 55):
Cooling off Plain and Reconditioned Negative Option Catalogue
period (Sec 16) understandable goods (Sec 25) : Marketing (Sec marketing (Sec
• If goods have language (Sec • Consumers must 31): 32(1)):
been marketed to 22): be made aware in • Prohibition on • if consumer
the consumer • Consumers must the offer sell the negative option purchases goods
directly other be able to rebuilt or remake marketing prior to being
than at the usual understand the of the goods able to inspect
place of terms that are the goods - must
business the being offered to have details of
consumer must them the supplier & all
have access to relevant licenses
the relevant and an option to
information cancel with
supplier.

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 12

OFFERS
TO THE
PUBLIC

TB pages 55 – 58)
 ADVERTISEMENTS PROMISES OF REWARD CALL FOR TENDERS AUCTIONS
Generally just invitations to do Offered to any person who An invitation to the public to Who makes the offer?
business rather than an offer performs a certain act submit a tender for work is not Auctioneer/bidder
i.e. Crawley v Rex an offer that is open for Distinction between a simple
acceptance by the highest auction and an auction subject
tenderer to condition
Whether a statement is an offer Cannot accept a reward when It is an invitation to potential Simple auction = bidder is
depends on the intention of the you had no notice of the tenderers to make offers that making the offer (supported by
statement or the impression reward will be considered after the S45(3) CPA)
reasonably created in the mind closing date
of the person it is directed to
Carlill v Carbolic -the words of Bloom v American Swiss Auctions subject to conditions
the advert were clear and met Watch Co advertising of a ▪ with reserve –reserve price
the requirements of a valid reward can be seen as an offer ▪ without reserve –goes to the
offer to the public, the first person highest bona fide bidder
who performs accepts the offer Therefore the auctioneer
and is contractually entitled to makes the offer
the reward

Important for traders Offer would have to be

advertising a bargain to add in sufficiently certain “ until the
fine print “while stocks last” plaintiff knew of the reward he
could not accept it, there is no
contract as there is no
consensus of two minds

Bait marketing is prohibited 13

(Sec 30 (1) CPA)
TERMINATION OF AN OFFER
TB pages 58 -59

Rejection of Effluxion of Acceptance

offer time

Loss of Revocation Death

capacity
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 15

An acceptance is a clear and

unambiguous declaration of

intention by the offeree –

unequivocally assenting to the

all the terms of the proposal.

Requirements:
1. Be unqualified

2. By the person whom the

offer was made to

3. Conscious response to the

offer

4. In the prescribed form by the

offer if required

TB Pages 59 - 60

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17 The question now is –
when and where
acceptance takes effect

Did the parties accept in

time?

Which court has

jurisdiction?
 Class exercise
Pandelani is a farmer just outside East London and he is interested in buying another tractor but can only
afford a second hand one. He comes across an advert placed in the Farmer’s Weekly magazine by Wouter,
who resides in Bothaville, to sell his second‐hand John Deere CX60.

Pandelani emails Wouter to enquire about the availability of the tractor and Wouter replies that it is still
available, after which Pandelani makes an offer. Wouter emails Pandelani his letter of acceptance on the
20th May 2019. Wouter’s email enters Pandelani’s Gmail account also on the 20th May 2019. On the 25th
May 2019, Pandelani logs into his Gmail account while at a prestigious sheep auction in Bloemfontein and
reads Wouter’s email of acceptance.

Questions:
1) Does the advertisement by Wouter in the Farmer’s weekly amount to an offer?
2) Evaluate whether the requirements of a valid acceptance have been met.
3) Indicate when and where the contract between Pandelani and Wouter came into existence. 18
 THEORIES OF ACCEPTANCE

Declaration Theory Expedition Theory

• Contract comes into being
• Contract comes into being
when and where the offeree
when and where the offeree
posts her letter of acceptance
expresses acceptance, when
s/he signs the letter of
acceptance

Reception Theory Information Theory

• Agreement comes into being • Agreement is concluded when
when the letter of acceptance and where the offeror
reaches the address of the learns/informed of the
offeror acceptance, offeror reads the
letter of acceptance

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 Class exercise
Pandelani is a farmer just outside East London and he is interested in buying another tractor but can
only afford a second hand one. He comes across an advert placed in the Farmer’s Weekly magazine
by Wouter, who resides in Bothaville, to sell his second‐hand John Deere CX60.

Pandelani emails Wouter to enquire about the availability of the tractor and Wouter replies that it is
still available, after which Pandelani makes an offer. Wouter emails Pandelani his letter of acceptance
on the 20th May 2019. Wouter’s email enters Pandelani’s Gmail account also on the 20th May 2019.
On the 25th May 2019, Pandelani logs into his Gmail account while at a prestigious sheep auction in
Bloemfontein and reads Wouter’s email of acceptance.

Questions:
1. Indicate when and where the contract between Pandelani and Wouter came into existence.
2. Which theory would be applied to determine the time and place of the conclusion of the contract
between Pandelani and Wouter?
3.1. Assume that Wouter accepted Pandelani’s offer telephonically on 25 May. Indicate which theory
would apply to determine the time and place of conclusion of the contract.
3.2. Indicate when and where the contract between Pandelani and Wouter came into existence in
this instance 20
THEORIES OF ACCEPTANCE … continue
General rule -
Information theory
applies to all
contracts

Exceptions to the general rule

➢ Offeror stipulates a different method of
acceptance
➢ Postal contracts
➢ Electronic contracts

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PACTA de CONTRAHENDO
TB pages 66 - 80

▪ Before an offer is accepted/made

parties enter into an ancillary
agreement in terms of the main
agreement namely, first right to
buy property

▪ Ancillary agreement – pacta de

contrahendo “contracts about
contracting” thus a contract aimed
at the inclusion of another contract

https://youtu.be/3UHkkfrU09o
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 TWO FORMS OF PACTA CONTRAHENDO

OPTION Agreement – restrict 1 person binds himself to give

offeror’s right to revoke preference to another person TB Pages 74 – 80)
offer
Usually a sale – ancillary

PREFERENCE CONTRACT
Offer irrevocable for a agreement – pre-emption
period agreement, i.e. Pre-emptive
right
Option holder – power to
unilaterally act to enter
Lease – “first refusal”
into main agreement and
accept the offer
Right to pre-emption – grantor is
Holder is entitled not not obliged to sell property
obliged to conclude the
agreement Grantee acquires preferential
tight to buy if the grantor
TB Pages 67 – 74) Legally binding contract intends to sell thus conditional
preferential right to buy property

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24
 Theme 2: Mistake/absence of consensus

➢ LO6: Discuss the effect of a mistake on the

validity of a contract;
➢ LO7: Differentiate between material and ➢ TB: Chapter 3 (pages 88 – 121)
non-material mistake and the contractual
consequences of both; ➢ Prescribed Case Law
➢ LO8: Differentiate between the subjective
and the objective approach to mistake and ▪ Allen v Sixteen Sterling Investments
their respective limitations and how the two (Pty) Ltd 1974 (4) SA 164 (D)
approaches have been reconciled in terms
of the reliance theory in terms of a practical ▪ Brink v Humphries & Jewell (Pty) Ltd
case scenario; 2005 (2) SA 419 (SCA)

➢ LO9: Explain the contractual impact of a ▪ Sonap Petroleum SA (Pty) Ltd v

common mistake; Pappadogianis 1992 (3) SA 234 (A)
➢ LO10: Identify the way in which parties may
be able to apply for rectification in some
cases of mistake.
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 Basics on mistakes
Types of Mistakes :
▪ Unilateral
▪ Mutual
▪ Common

REMEMBER that intention is the primary basis

on which contracts are entered into - is there is
a mistake attached to intention – it pulls the
contract into possible disrepute.

Therefore was consensus ad idem reached?

We have to consider if the mistake was material

OR non-material and what would be the effect of
either.?
▪ Material mistake = void
▪ Non-material mistake = voidable

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 Class exercise
What kind of mistake will the following examples be:

George owns a house in Grey street, House nr 1, which he wants to sell.

Mutual mistake
a. Suri wants to buy house 3 and George is unaware that Suri wants to buy House nr 3, and thinks Suri
wants to Buy his house.
b. George knows Suri wants to buy House nr 3, but does not say/do anything to make Suri aware of the
mistake. Unilateral mistake

3
1 2

Common mistake
c. George and Suri enter a contract whereby George will transfer goods for Suri from Johannesburg to
Durban. Both parties agree that the transportation cost will be R500. Later the two parties realize the
price of diesel was higher than they both negotiated – raising the transportation cost.
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MATERIAL vs NON-MATERIAL
mistakes
Material
• One of elements of
consensus are not in
contract
• What are the elements of
consensus? See page 91

Non-material
• Influencing a party’s
decision to enter into a
contract

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1. The primary basis of our contract
law is the Will Theory (actual
subjective agreement)

2. The secondary basis is the

Reliance Theory ( parties not in
agreement but there’s a
reasonable belief that consensus
had been reached based on
conduct of other party)

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 TRADITIONAL CLASSIFICATION OF MATERIAL AND
NON-MATERIAL MISTAKE (TB page 94)

Error in corpore Error in negotio Error in persona Error in substantia

material mistake about material mistake to the usually a material not material in our law
the subject matter of true nature of the mistake regarding the
the contract contract see identity of the other
Khan v Naidoo party to the contract

Maresky v Morkel Courts ruled error in A mistake regarding a

persona is only characteristic of the
material if the identity subject In the contract
of the party is
important to the
mistaken party Pothier.
only mistakes that play
a material role in the
decision of the
mistaken party to enter
into the contract is
legally relevant 30
https://youtube/XAT4pHg4l7s

Consensus

VALID CONTRACT (WILL)

REMEDIES FOR CULPABLE

AND NON CULPABLE
MISREPRESENTATION

Misrepresentation inducing
non-material mistake
 DISSENSUS

Objective
Subjective
Approach:
Approach:
Declaration
Will Theory –
Theory –
material
objective
mistake – NO
consent – valid
contract
contract

Reliance
Theory

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1. A misrepresents his contractual intention
2. B relies on this misrepresentation; she
(signing a document that states something
genuinely believes that A has agreed to the
different from his actual intention
terms in the document

3. B belief in the existence of consensus is

reasonable thus a reliance-based contract

RELIANCE TEST
SIMPLIFIED

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 DIRECT APPLICATION OF RELIANCE
APPLICATION OF INDIRECT RELIANCE
THEORY
THEORY
(doctrine of quasi-mutual assent) (p102)
Despite the absence of consensus, contract Despite objective concurrence of declarations,
will be upheld if requirements for reliance contract will be void for mistake if A’s error was
theory are met: iustus( which it will be, if any one or more of the
requirements of the reliance theory are not met):
e.g.
A misrepresented contractual intention B knew that A was mistaken(no reliance by B)

B relied on that misrepresentation (believed B ought reasonably to have realised A was

there was consensus) mistaken(B’s reliance not reasonable)
Two parts: B induced A’s mistake
• A INDUCED the reliance / belief by positive misrepresentation
• B’s reliance was REASONABLE By silence (B’s reliance not reasonable)
(Possibly) A was at fault in making the
representation
(Possibly) B would suffer prejudice if the
contract were not upheld

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 Rectification (TB Pages 118 – 119)
1. In written contracts, there are instances where the document unintentionally
does not reflect the intention of the contracting parties
2. In this instance, and where both parties agree on the terms and conditions, that
document can be rectified
3. A document that incorrectly records the contract between the parties may be rectified
to conform to the common intention. The parties agree that what must be rectified is
not the contract itself but the document in question

Two ways
Applying to court
Informally by the to have the
parties themselves correction done
on the document, or so that the
by them performing document can be
in terms the strictly enforced.
“rectified” intention 35
36
 Theme 3: Improperly obtained consensus
➢ LO11: Apply the elements of
misrepresentation of the different types of
misrepresentations that can take place to a
set of facts;
➢ TB: Chapter 4 (pages 124 – 157)
➢ LO12: Discuss the remedies available for
improperly obtained consensus and how ➢ Prescribed Case Law
voidable contracts operate;
➢ LO13: Explain an omission as a ▪ ABSA Bank Ltd v Fouche 2003 (1) SA
misrepresentation and the relationship 176 (SCA)
between misrepresentation and mistake;
▪ Phame (Pty) Ltd v Paizes 1973 (3) SA 397
➢ LO14: Explain the basis on which damages (A)
may be claimed for misrepresentation;
➢ LO15: Discuss the nature, elements and
remedies for: duress; undue influence; and
bribery;
➢ LO16: Explain the impact of the CPA on the
elements of duress and undue influence.
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Improperly
Obtained
• The contract becomes
voidable for the
innocent party

• Remedies available :
o Recission with
restitution = action
and a defense
OR
o An innocent party
can elect to stay in
the contract

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 MISREPRESENTATION

02 03
01
04

False statement An express,

Form of
of fact = not law verbal Where there is a
misstatement
or opinion statement but duty
Made by 1 party can be Implied to speak even
to another by conduct silence can
before/at time of constitute a
contracting misrepresentation
 MISREPRESENTATION
Fraudulent
a false statement made
with the intention of
FURTHER inducing a contract but
the party who makes the
Seen as Deliberate deception statement is neither
causing another financial fraudulent nor negligent
harm is a delict of deceit and the statement is an
is actionable using actio legis innocent representation
Aquilliae

CLASSIFIED Innocent
Negligent

a false statement of a material

fact, made negligently with the
aim of inducing a contract 40
 What remedies to use in case of
misrepresentation? (TB p132 – 144)

Rescission and Misrepresentation as

Damages
restitution defense

• 4 factors that must be • Rescission • Fraudulent

present: misrepresentation (p
• Misrepresentation 136 – 140)
by other party • Negligent
• Inducement misrepresentation (p
• Intention to induce 140 – 141)
• Materiality • Innocent
misrepresentation (p
141 – 144)

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 Duress (page 147)

Duress is improper pressure that amounts to

intimidation

It is an unlawful threat of harm/injury made by a

party to a contract or someone acting on his behalf
that causes the other party to conclude a contract

There is no exercise of free will, the consent is due

to fear inspired by an illegitimate threat

However, the contract is still valid, forced consent is

still effective consent though voidable

Resile, uphold and claim restitution, also recover

delictual damages
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UNDUE INFLUENCE ▪ Form of improper pressure on a person to
induce him to enter into a contract 43
▪ Pressure is subtle, involving an insidious
wearing down of a victim's ability to exercise
free and independent judgement, rather than
threats and intimidation
▪ Fiduciary relationship - Dr patient
▪ Reverence-parent child - Entitles a party to
advise and assist and he misuses his
superior position to influence/undermine the
will of the other
▪ Preller v Jordaan –held on the grounds of
restitutio in integrum were wide enough to
cover undue influence
▪ Preller v Jordaan –party seeking to set aside
a contract on the basis of undue influence
must establish:
i. That the other party obtained an influence
over him

TB Page 151
ii. Aquilian damages also apply
 Commercial
bribery
(TB page 154)

• Wrongful and immoral means used to

secure the agreement

• Elements:
• Reward
• Paid/promised
• By briber
• To agent (go-between or facilitator)
• Exert influence over principal
• With intention
• Agent induce principal
• Without principal’s knowledge
• For direct/indirect benefit of briber
• To enter into contractual relationship
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CPA – impact on
duress & undue
influence
(TB page 156)

• Sec 40 – prohibits various

forms of “unconscionable
conduct” on part of
supplier / agents

• Sec 41 – prohibiting
misrepresentation and non-
disclosure of material facts
to consumers

• Redress – consumer
protection institutions

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Any
questions …

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