COMMERCIAL

LAW
BY MISS SHEZI
 What is law
• Ordering of society through prescriptive rules
• Law can be also defined as an attribute of human beings
that appears when groups of people associate themselves
into a society.
• Legal rules apply to everyone and must be obeyed
• Moral rules are personal standards of behaviour as to
what is right or wrong.
 The role of the state
• The Constitution sets out and regulates the powers and
functions of the state (government).
• The state must respect, protect, promote, and fulfil the
human rights in the BOR in the Constitution.
• The state’s power is divided up between three organs or
arms: Legislature, the executive and the judiciary.
 Organs of state and their
functions
• Parliament or Legislature- is the highest elected law-
making body and makes legislation (Acts)
• The Executive- consists of the president and all the
ministers of various state departments, make policies that
put legislation into practice or result in new laws.
• The judiciary- consists of the courts, in an independent
organ of government, which is tasked with interpreting
and applying law to cases that serve before it.
Natural v Juristic person
 Sources of law
• Primary sources: (legally binding)
The Constitution
Legislation
Common law
Customary law
Customs (trade practices)
Judicial precedent
• Secondary sources of law: (persuasive)
International law
Foreign law
Modern writing
 Civil v Criminal cases

Distinguishing features civil criminal

Example Unlawfully and negligently Criminal offence
cause damage, loss, harm
Dominant parties plaintiff state
Procedure Civil procedure and law of Criminal law and law of
evidence. Summons evidence. The victim lays
charges.
Standard of proof plaintiff The prosecutor proves
that the accused is guilty
Case example Sne v Mandla State v Thabo Bester
Findings Court will either favour The accused will be found
plaintiff or defendant guilty or not guilty
Sanctions Compensation Prison sentence or
CIVIL CASES
 TRIAL PROCEDURE vs
APPLICATION PROCEDURE
 APPLICATION PROCEDURE

An affidavit is a
No real dispute on an The argument between Instead of witnesses, statement made by
important question of the parties is mostly parties can argue the someone who swears it
fact between the the interpretation of matter on paper by is true and who signs
parties. the law way of affidavits. it before a
commissioner of oaths.

Commissioner of
oaths-takes sworn
statements/affirmation
s from members of the
public. Police stations,
post office. Attorneys
and Advocates
• Notice of motion instead of summons- Attached is a founding
affidavit with all the statement of facts that are necessary
for the court to decide on the dispute.
• If affidavits disagree on an important fact, the court can
refer the matter to trial and hear oral evidence.
• The person seeking legal relief or remedy is called an
Applicant and the other party a respondent.
• Less cheaper and more quicker compared to trial procedure.
 TRIAL PROCEDURE

Enforcem
Appeals
ent of
Pleadings The trial and
court
reviews
judgement
 Pleadings
• The person who makes the first claim is Plaintiff, and the other is defendant
• To start the claim, the plaintiff’s attorney issues a summons to the defendant.
• Summons: A document that contains the plaintiff’s claim against the
defendant.
• If the defendant wants to defend the matter they send the Notice of intention
to defend stating that they will dispute the claim and defend the matter.
• Then the defendant must send a plea that sets out the grounds for the defence.
• The plea must respond to each claim in the summons by either admitting or
denying or claiming no knowledge of the allegation.
• What is a judgement by default?
 Notice to set down
• After the close of pleadings, the court sends out the Notice of set down to both
parties with date and time for trial.

THE TRIAL
• The purpose is for the court to decide if the allegations on the pleadings are correct.
• Opening statements
• Witnesses
• Cross examination
• Re-examination
• Closing statements
 APPEALS
• An appeal is when a party to the proceedings believes the judge or
magistrate erred in its findings. Decision was incorrect based on
facts or the law.
• Appellant v Respondent
• The appeal court will look at the previous court’s typed record of
the matter and the arguments by the parties’ lawyers on why the
previous court made an incorrect decision.
• No new evidence heard.
• Uphold or overturn the decision OR dismiss the appeal.
 REVIEW
• If the losing party in a case believes that the magistrate or
judge was biased or unfair, or conducted proceedings
irregularly, they may apply to a higher court to review the
decision of the previous court.
• E.g, the court failed to give your lawyer a chance to cross-
examine a witness, you can apply to a higher court to
review the case.
• Was the procedure followed by the court correct and if the
judge was fair.
 ENFORCEMENT OF THE COURT
JUDGEMENT
• An order of court
• Judgement debtor and creditor
• Warrant of execution- A document that enables the sheriff
to attach the debtor’s property to pay the debt to the
creditor.
• Auction
• Affordable instalments
 Personal rights v Real rights
• Personal rights: are rights that one person can exercise
only against specific people. E.g contract.
• The parties to the contract acquire those rights against
each other when they enter into a valid contract. They can
only enforce these rights against each other.
• Real rights: Can be enforced against the whole world.
Right to property that you own, your rights could be
enforceable against anybody who might try to steal that
property. Eg owning a cell phone.
 Valid contract requirements
• Agreement- Offer and acceptance often in writing. The
parties agree on the essential terms of the contract.
Mutual reciprocity and economic interest.
• Contractual capacity: Legal capacity to act. i.e Mental
capacity, a minor.
• Physical possibility: Contractual performance is
objectively possible. If the performance becomes
impossible due to no fault of the person owing
performance, the contract performance is extinguished
(cancelled). The force majeure / act of god clause, eg
wars, natural disaster.
• Legal possibility: The terms of the contract should be
lawful for it to be valid.
• Formalities: A contract is valid if it is in writing or oral
and the terms may be either express, implied or tacit.
BCEA provides for the important information that the
contract must contain.
• Certainty :
 Contractual capacity
• Mental capacity-
• A person has capacity to make a will at 16 years but may
witness a will at 14 years.
• A boy over the age of 18 years and a girl over 15 years
have the capacity to marry.
• A 12-year-old child could be held criminally liable.
 Minors contractual capacity
• A minor is any person below 18 years.
• Emancipation- When a minor has been freed from parental
authority, the minor no longer needs the protection of
their minority status and is conducting their lives as an
economically independent major.
• A minor can be emancipated by court or through tacit
emancipation by the minor’s guardian.
• Tacit emancipation test page 55.
• Contractual capacity of a child below 7 years- None, even if the contract is for their
benefit.
• Contractual capacity from 7 to 18 years- Limited capacity, to be assisted by a guardian.
• Where a minor has more than 1 guardian, both guardians must consent in the following
matters:
1. Minor being put up for adoption
2. Removing the minor from the country
3. Selling minor’s immovable property
4. Applying for the minor’s passport
5. Consenting to the marriage of the minor
 Capacity of married persons
• Marriage in community of property.
• Written consent and witnesses for:
1. Sale of immovable property
2. Surety agreement
3. Credit
• Written consent
1. Selling shares,
2. Insurance policies
3. Investments (in a bank, paintings, jewellery etc)
• Express or implied Informal consent – Less important contracts, donations or sale of
furniture.
 Out of community of property
• With Accrual
• Without Accrual
 Approaches to holding parties
bound by the contract
• The wills theory- you chose to be bound so you should be
bound
• The declaration theory- states that how people act not
what they think is the reason we hold people accountable
to their contracts.
• The reliance theory- Combination of the above two
theories.
 Consensus
• Consensus is one of the fundamentals of establishing an agreement between
parties of a legally valid contract.
• Reaching agreement, offer and acceptance
• When both parties have agreed and are clear as to what they are agreeing on they
must also intend the contract to be legally binding to both of them.
• There are two parts on how parties can reach an agreement; offer and acceptance.
• An offer- is a proposal or invitation or request to enter into a contract on specific
terms.
• Both offer and acceptance should be valid for the agreement to be binding. There
are therefore requirements to be met.
 Making an offer
• This is the first step in making an agreement.
• The person making the offer is called an offeror and the
person receiving the offer an offeree.
• The offer must include all the terms of the contract.
• An offer can be defined as the way in which the offeror
declares to the offeree their intention to enter into a
contract and specifies the terms of the contract.
 Accepting an offer
• Acceptance is the offeree’s declaration of their intention to enter into a contract with the
offeror with the terms of the contract in the offer.
• The offeree’s acceptance is what makes the interaction become a contract
• Concluding a contract- It is important to know where and when a contract was concluded.
This indicates when and where it became legally binding on the parties.
• The general rule is that a contract is created when and where the offeror is informed that
the offeree accepts the offer, or the offeror hears the offeree accepting the offer.
(Information theory)
• Where parties are not in each other's presence it could be complicated.
• Think of an offer by an insurance company through a letter, then you receive the letter
(offer) then sign it, on the way to posting it, you get into an accident, are you covered by
the insurance?
 Requirements of a valid offer
 Completeness
Clarity
Contract intention e.g advertisement. Crawley v Rex 1909
and Great Britain v Boots 1953
In the prescribed form if any
Communication
Current- not lapsed, been rejected or revoked.
 Requirements of a valid
acceptance
 By the intended offeree
Must have the intention to contract when accepting
Must be clear and unambiguous
Must match the terms of the offer
Must be made within the prescribed time
Must be made in prescribed form and place.
Must be completed
 Requirements for concluding a
contract
• Postal contract- concluded when and where the
acceptance letter is posted (expedition theory).
• A telephonic/ fax contract- concluded when and where the
offeror hears about the acceptance. (information theory)
• An electronic contract- concluded when and where the
acceptance is received (reception theory)
 Consensus and defects in
consensus
• Where there is no consensus there is no valid contract.
• Void contracts- or Non-existent if one or more of the 6 basic requirements
of a valid contract are not met. When a contract is void, it is as if it never
existed, and parties have no rights or obligations against each other.
• If one party has performed already before seeing that the contract is void
because a certain requirement was not met, the law of unjustified
enrichment is used to claim back any money or performance already paid
or done.
• Secondly, Rei vindication to claim back their property and put all parties
back to the position they were in before the ‘contract’.
• Voidable contracts- A contract is voidable if all the requirements are satisfied
but the way in which parties reached the agreement is problematic because
one of them committed either misrepresentation, duress or under the influence.
• A voidable contract remains valid until the innocent party decides to set it aside
after proving the requirement of misrepresentation, duress or under the
influence.
• The innocent party has 3 options:
 Set-aside
 Rescind- cancel
 Claim restitution- restore
 Mistake
• Unilateral mistake- parties misunderstanding each other. They see facts, events,
circumstances differently.
• Example:
• Common mistake- When both parties believe that something is true and they discover
that its untrue.
• Example:
• Material mistake- there is no subjective agreement that is required for a valid contract.
• Example
• Reasonable mistake
• Example:
 Misrepresentation
• Fraudulent
• Negligent
• Innocent misrepresentation
FORMALITIES
• Most contracts have no formalities, they do not need to comply
with any form or format.
• E.g walking into a shop and buying a pack of snacks.
• However, there is types of formalities that often apply to contracts:
1. Written down and signed
2. Signed in front of a notary public ( who acts as a witnesses to
signatures)
3. Registered at the deeds office
 Formalities required by law
• Legislation often prescribes that certain contracts must be in a particular
form.
• However, in some cases, these are not formalities in the sense of a
requirement for a validity, rather failure to comply with the prescribed form
will just amount to a criminal offence that is punishable by a fine. The
agreement will still be valid and binding. E.g NCA and CPA
• Some important contracts that require formalities are:
• 1. ANC
• 2. Transfer of immovable property
• 3. Surety.
 Antenuptial contracts
• A contract entered by a couple before they get married.
• The ANC details the couple’s rights of ownership of items
and money while they are married and in the event that
the marriage ends. Example on page 117.
 ANC Requirements
• The Deeds Registry Act requires that the antenuptial
contract complies with these two formalities:
• 1. It must be notarially executed before the parties marry,
notarially executed means the parties must sign it before
or at the presence of a notary public, who signs as a
witness.
• 2. It must be registered within three months of the date of
the execution.
87. (1) An antenuptial contract executed in the Union shall not be registered unless it
has been attested by a notary public and unless it has been tendered for registration
in a deeds registry within two months after the date of its execution or within such
extended period as the court may on application allow.

(2) An antenuptial contract executed outside the Union shall not be registered unless
it has been attested by a notary public or has been otherwise entered into in
accordance with the law of the place of execution and unless it has been tendered for
registration in a deeds registry within six months after the date of its execution or the
commencement of this Act, whichever may be the later date, or within such extended
period as the
court may on application allow.
(3) Unless an antenuptial contract has been tendered for registration in terms of sub-
section (1) or (2}, or if so tendered and rejected by the registrar and not re-tendered
within the respective periods prescribed in the said sub-sections, the contract shall
not be registered except upon an order of court and within such further period as the
court may direct:
Provided that if the registrar suspends or refuses registration pending the submission
of further information in order to enable him to determine whether any party to the
contract is or is not a person whose name appears in any register or document in the
deeds registry concerned, such suspension or refusal of registration shall not be
(4) A signed original contract (or an equivalent thereof according to the law of the
country where it was executed) bearing the attestation of the notary public or
otherwise duly authenticated as required by law, for filing of record as the registry
duplicate, and a further signed original, similarly attested or authenticated, or a
grosse or a copy of the original contract certified by a notary public, shall be
tendered for
registration.
(5) Registration of an antenuptial contract in anyone deeds registry in the manner
prescribed in this ·section shall be effective as registration for the whole Union :
Provided that if any transaction in connection with which evidence of such contract
is necessary takes place in a deeds registry other than that in which such contract
has been registered, a copy of such contract certified by the registrar of the place
of registration
or a notary public shall be filed in such first-mentioned deeds registry.
 Transfer of immovable
property
• Section 2(1) of the Alienation of Land Act states that
contracts of immovable property must be in writing and
signed by the contracting parties.
• If this formality is not met, the contract is void.
• Verbal agreement of sale of property is void and has no
legal effect.
Formalities in respect of alienation of land
(1)No alienation of land after the commencement of this section shall, subject to
the provisions of section 28, be of any force or effect unless it is contained in a
deed of alienation signed by the parties thereto or by their agents acting on
their written authority.

(2) The provisions of subsection (1) relating to signature by the agent of a party
acting on the written
authority of the party, shall not derogate from the provisions of any law relating to
the making of a contract in writing by a person professing to act as agent or
trustee for a company not yet formed,
incorporated or registered.
 Contracts of suretyship
• A contract of suretyship is a contract in terms of which a third party (the
surety) guarantees that if a debtor does not honour an obligation to a
creditor, the surety will be liable to the creditor.
• Since this type of contract places a heavy burden on the surety, section 6 of
the General Amendment Act imposes the formality that the contract of
suretyship must be in writing and signed by the surety.
• The creditor does not have to sign, but the surety must.
• If this formality is not met, the contract of suretyship is void and can be
ignored.
• E.g student loans, they usually ask guardians to sign as surety
 Electronic contracts
• The Electronic Communication and Transaction Act
provides that an accessible data message is generally
sufficient to satisfy the formality that a contract should be
in writing.
• In some circumstances you can replace a hand-written
signature by an electronic signature.
CERTAINTY
• Performance: means what each party to the contract has to do as
agreed in the contract (duties).
• If the performance is unclear the contract is void due to uncertainty.
• Performance must be certain or ascertainable.
• Ascertainable means when something is not certain but could be
made certain with more information.
• E.g Where the parties agree that one party is to pay the other a
'reasonable amount' rather than a specific price or percentage of
profits.
 Definition: a term that is certain will have the exact performance described
clearly in the contract. A term will be ascertainable if the performance is
capable of being made certain(certum est quod certum reddi potest).
 Contracts can be rendered void for uncertainty. However, this contract is not
irrevocably lost but is not valid yet.
 If the uncertainty is remedied, then the contract may become valid.
 Divisibility- If the vague term can be separated from the rest of the
contract, then the rest is valid and the vague term is ignored.
 Performance chosen from a closed group: A contract containing generic,
alternative or facultative obligations, allows one of the parties(or a third
party) to select performance from a closed list of things.
 These will not be void for uncertainty, as the performance is ascertainable.
1] Generic obligations – performance can be selected from a class of things and the
parties must specify the quantity of the performance. The debtor must therefore make
a selection from the genus.
 A generic obligation exists when the contract allows someone to choose
performance from a genus, or Abs, of things. For that performance, the person
choosing can be a debtor or creditor, or a third party. Such clauses are valid.
 For example, Lester agrees to buy one of the horses from Gary’s stable at a price of
R5 000. They have not specified which of the horses, but Gary is to choose the horse
from "class of things” (the horses at Gary's stable). The performance is
determinable, and it will be for Gary to choose one of the horses from the stable to
deliver to Lester.
2] Alternative obligations – performance can be selected from two or more
alternative possibilities.
 An alternative obligation exists when the contract allows someone to choose
performance from one or more alternatives. Once again, the contract is valid.
 For example, Lester agrees to buy either Horse A or Horse B from Gary for R5
000 and allows Gary to choose which one of the horses they would like to sell.
 The performance is again determinable. The alternative obligation is more
specific than the generic obligation because it refers to a choice between
particular individual items, not just one of a group.
3] Facultative obligations – there is a primary obligation, together with the
qualification that the debtor can substitute another performance if they wish. The
creditor may only enforce the primary obligation, but the debtor may choose to
deliver the alternative performance. This is used where the debtor foresees that they
may not be able to give the particular-performance and obtains the right to give a
similar performance.
 A facultative obligation exists when the contract provides for a primary
performance, but allows the debtor to substitute that performance with another.
Once again, the contract is valid. For example, Gary agrees to sell Horse A to
Lester for R5 000, but reserves the right to substitute Horse A with Horse B
instead. Facultative obligations look quite similar to an alternative obligation but
here, there is clearly a primary obligation. However, in the case of alternative
obligations, the choices are on an equal footing. The difference becomes important
if one of the performances is impossible. In the case of an alternative obligation,
the party just has to deliver the remaining performance. In the case of a
facultative obligation, if the primary performance is impossible, the contract falls
So, for example, if Gary said to Larry I will sell you Horse A or Horse B for R5 000'
(alternative obligation), and Horse A dies, the contract remains valid, and Gary must
deliver Horse B to Larry. If Gary said to Larry I will sell you Horse A for R5 000 but, if I
want, I can deliver horse B instead' (facultative obligation), and Horse A dies, the contract
falls away due to impossibility, and Gary does not have to deliver any horse to Larry.

However, an agreement to buy something on terms to be agreed upon would be void,

because of the uncertainty it causes. Similarly, a clause to pay a 'fair' price for a
performance is invalid because fairness is too subjective. Any contract that gives a debtor
an open choice as to whether to perform will also be void on the basis of uncertainty
because it is not clear whether the debtor will choose to perform. If the performance
required by the contract is neither certain nor ascertainable, the contract will be void - in
other words, it is neither determined nor is it determinable. If the obligation under the
contract is severable - in other words, it can be removed from the contract, then only that
part is invalid and the rest remains in force. If it is not possible to sever that obligation, the
whole contract will be invalid. If the parties have agreed on what performances are to be
made, but one still cannot clearly understand what each of them is meant to do, we say the
contract is 'void for vagueness'. In the case below, the court ruled that the agreement was
void for vagueness.
Discretion to fix performance:When a term provides discretion to
either or both parties (or a third party) to fix ordetermine
performance, it creates a problem around if it is ascertainable or
void forvagueness. This therefore depends on who is afforded the discretion
and the parameters ofthe discretion afforded. 1] A third party – if a clause
provides that a third party can fix performance, then it is valid,even if they are
not completely independent of either of the contracting parties. A courtmay
set aside this if it was in bad faith, a mistaken or was obviously unfair. 2] One
of the contracting parties – where the contract allows one of the parties a
discretionin determining their own performance or the performance of the
other party, it considersmany factors.
The discretion to fix another parties performance
was decided in NBS BolandBank where the bank
could unilaterally change the interest rate as long
as it was exercisedarbiitrio boni viri, which was
not arbitrary and rather in good faith and
reasonably. Thereforeone of the parties may fix
the other parties performance and it is valid, if the
discretion isnot one that fixes a purchase price or
rental and if the discretion is limited.Where one
of the parties fixes their own performance,
Erasmus v Senwes extended the above rule.
Agreements to Agree:This is an agreement to negotiate a second
contract.Problems: (1) the freedom not to contract is
undermined; (2) an order for specificperformance can force
parties to negotiate and the court cannot force parties to do so;
(3) it would be impossible to determine if a party is in breach of an
obligation to negotiate andundermines certainty. General rule:
agreements to agree are not enforceable. Case:
Firechem.Exceptions: 1] When there is a deadlock
breaking mechanism for the dispute to be resolved,
anagreement to agree will be enforcable. Example: an
arbitrator. Case: SouthernportDevelopments.2] There seems
to be a change in attitude around enforcing an
agreement to agree,especially when negotiated in good faith
and reasonably. This is supported by Constitutionalvalues. Case:
Everfresh Market Virginia.
Possibility of
performance
• Possibility is the fifth in our list of six requirements for a
valid contract.
• As a general rule, a contract will not be valid if
performance is objectively impossible at the time the
contract is concluded. What do we mean by objective
impossibility?
 • It means that the
performance impossible for
anyone to perform. For
example, suppose that, on 1
April Boni agrees to rent
their donkey out to Christo
for three days at a rental of
RI 500, so that Christo can
plough their lands.
However, unknown to both of them, the donkey had
been struck by lightning on 30 March and died
immediately.
It is impossible for anyone to deliver the donkey to
Christo, since it is now dead (objective
impossibility). This impossibility already existed at
the time of conclusion of the contract (I April), since
the donkey had died two days before (on 30 March).
• Compare this to the situation where
the donkey is still alive but, at the
time the parties entered into the
contract, Christo did not have
enough money to pay Boni. While it
is impossible for Christo to pay,
This is a problem of impossibility
only experienced by Christo. The
payment is not something that is
completely impossible for anyone to
perform. This type of impossibility
is known as subjective impossibility.
It does not make the contract void.
 The rule that a contract is invalid if performance is impossible only applies when the
performance is objectively impossible (completely impossible for anyone) at the time of
the agreement. This is illustrated by the case below.

Wilson v Smith and Another 1956 (1) SA 393 (W)

Principle

If performance is objectively impossible at the time the contract is concluded, the

contract will be invalid.

Facts

Wilson sold a piece of his stand to Smith. However, Wilson would only be able to transfer
the piece of this stand if it was legally subdivided into two stands. Unfortunately, at the
time of conclusion of the contract, there were township regulations forbidding the
subdivision of the stand. The question was whether the contract was void for
impossibility.

The court's finding

Performance was objectively impossible at the time of conclusion of the contract. No-one
 Legality of
Performance
 Legality of Performance
• Dylan agrees with Vince that Dylan will steal a valuable
painting from an art gallery. Is this contract valid?
• This contract is not legally valid because stealing is a crime.
• The court cannot enforce the contract by forcing Dylan to steal the
painting.
• The different kinds of illegality:
1. Statutory illegality- Contract is prohibited by the Legislation/ Act
2. Common law illegality- Contract is illegal on the grounds of public
policy.
 Statutory illegality
• Most Acts passed by Parliament/ Legislature give guidance to citizens of the country as to
what their law makers allow and do not allow.
• Sometimes a parliamentary act or legislation can make an agreement invalid or void. This
is known as statutory illegality.
• E.g An Act may require you to get a licence before you could sell something, i.e Liquor
license, Fire-arms, medical drugs.
• Usually, the Acts will provide penalty for people who enter into such contracts.
• Penalty could be a fine or imprisonment
• The National Health Act imposes a fine and/ or imprisonment if you are found guilty for
selling human body parts.
• The question that usually remains, is whether that contract itself is void or the
imprisonment/ fine stated in the Act is enough punishment.
• Generally, if the contract goes against what the act says, the
contract is void (in addition to any penalty imposed by the Act).
• In each case the court will have to interpret the statute very
carefully.
• The court will look at:
1. The effect of recognising the agreement,
2. The language used
3. The intention of the legislation
• The court will ask itself this question, Would the contract
bring about the harm that the Act is trying to prevent? If
this is the case, the agreement will be void because of
statutory illegality.
• However, if the penalty in the legislation is sufficient to
prevent the harm, the court may uphold the contract.
• If it would cause more harm if the contract is invalid than
if it is valid, the contract will be valid. This is known as the
balance of convenience test and is illustrated by the
case below:
 Metro Western Cape (Pty) Ltd v
Ross 1986 (3) SA 181 (A)
• Principle :If legislation prohibits a certain type of contract, this does not
necessarily mean that the contract will be invalid. If making the contract
invalid will cause more harm than enforcing the contract, the contract will
be valid.
• Facts: Metro Western Cape conducted a business as a general dealer
without a licence to do so. This was prohibited by provincial legislation.
• While doing such business, Metro concluded various contracts of sale with
customers. One of the customers, Ross, owed Metro a large sum of money
for goods purchased. Metro then sued Ross for payment. Ross argued that
the contract of sale was invalid since Metro did not have a licence as
general dealer.
• Since concluding contracts of sale with customers was part of doing business as a general
dealer, such contracts were also prohibited by the legislation.
• The court therefore had to find the intention of the legislation to determine whether the
contract between Ross and Metro was invalid.
• The court's finding: The contract with Ross was not invalid. The harm that the act was
trying to prevent was general dealerships being run by unsuitable persons from unsuitable
premises.
• The penalties in the legislation against unlicenced dealers were enough to prevent such
harm. Moreover, if the resulting contracts of sale were invalid, this would cause even more
harm as innocent customers who bought goods from such dealers would have no remedies
for breach of contract, such as where the dealer sells the customer defective goods).
• Ross was therefore bound by the contract with Metro, and had to pay.
 Common law illegality.
• Agreements that are against public policy are also not allowed.
• It is however, difficult to give a general definition of this concept, since it
draws on many different policy considerations and can change over time.
In the law of contract, a very important consideration is freedom of
contract and the idea that contracts should generally be enforced to give
effect to people's choices and to promote commercial security of bargain.
• This consideration generally supports the validity of contractual terms.
However, there are public policy considerations that may count against
enforcement, such as when the contract is against the boni mores (good
morals), or the interests of the public.
• An unfair contract may also be against public policy in certain
circumstances.
• The Constitution of the Republic of South Africa, 1996, is another
very important consideration in deciding whether a contract is
against public policy.
• As Cameron J stated in Brisley v Drotsky 2002 (4) SA 1 (SCA) 73: In
its modern guise, public policy is now rooted in our Constitution and
the fundamental values it enshrines. These include human dignity,
the achievement of equality and the advancement of human rights
and freedoms, non-racialism, and non-sexism'.
• Examples where courts have found contracts to be void because they were
against public policy.
• These examples will help you understand common-law illegality.
• We will look as five categories, namely:
1. contracts that interfere with the administration of justice
2. contracts relating to marriage
3. gambling contracts
4. unfair contracts
5. restraints of trade
• Contracts that interfere with the administration of justice is a broad category that relates to
contracts undermining the aims of the legal system.
• When two people enter into an agreement that one will commit a crime or a delict in
exchange of money or some other reward, that contract is void.
• In the same way, an agreement in which one person pays another party to keep quiet about a
crime that has been committed would be void.
• Where a crime is committed, no one may benefit from it in terms of any agreement because
that would be against administration of justice. For example, if one spouse murders their
spouse to benefit from their life insurance policy, the murderer cannot claim from the policy.
• Even though the policy itself was a valid contract between the spouse and the insurance
company, the murderer cannot claim under it because they committed a crime in order to
make that claim.
• It is a principle of South law that ‘a bloody hand may not inherit’.
• Which means that a person may not inherit from a person whose death they caused.
• Any agreement that attempts to enable the parties to avoid the courts or the law, and to
take the law into their own hands, is void.
• An agreement with a citizen of a country at war with South Africa will also be void, if that
agreement is to the advantage of the enemy country.
• For example, An agreement to provide that country with weapons and ammunition would be
against public policy and therefore void.
• If both parties to the contract have an illegal purpose in mind, the agreement will be void
for illegality.
• If only one of the parties has an illegal purpose in mind, the agreement will be illegal and
void against only that person.