Business Law

Law of Sale Chapter 14

In this chapter we learned the following about the duties that the law of sale imposes on sellers and buyers:

When a contract of sale is concluded, the risk of accidental harm passes to the buyer as soon as the sale is perfecta, or perfected. The
sale is perfected when:
• the item to be sold is determined
• the purchase price is decided
• the contract is not subject to any conditions.

The seller has the following duties to the buyer:

• a duty of care until the goods are delivered
• a duty to make the goods available
• a duty to warrant against latent defects
• a duty not to make untrue statements
• a duty to warrant against eviction.

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 Law of Sale Chapter 14 cont..

There are certain situations where the risk may not pass to the buyer because the sale is not perfected. One example is where the
goods still have to be measured, weighed or counted. Signature of a contract of sale is not enough to transfer ownership of property
from the buyer to the seller. Ownership passes when:

• the seller is allowed to sell the item

• both parties have the intention that ownership will be transferred

• the price is paid (or credit is given)

• in the case of immovable property, the property is registered in the name of the buyer

• in the case of movable property, delivery has taken place.

• Delivery of movable property may take any one of a number of forms, such as actual delivery, symbolic delivery, tradition longa
manu, traditio brevi manu, constitutum possessorium and attornment.
Law of Sale Chapter 14 cont..

The intention of the parties determines the way in which the purchase price is paid (cash, cheque, or credit granted). The manner of
payment determines when ownership passes. Generally speaking, unless the contract of sale excludes this duty (normally by way of a
voetstoots clause), the seller is responsible to the buyer for hidden defects in the property, even if the seller was unaware of them.

• The remedies available to an innocent buyer for hidden defects are known as the aedilitian remedies.

• The duties of the buyer are:

• to pay the purchase price

• to accept delivery of the item

• to reimburse the seller for any necessary expenses incurred.

• Two specific types of contracts of sale are those involving:

• a sale of land

• a sale in execution.
 Law of Lease Chapter 15

In this chapter, we learned the following about the law of lease:

• A contract of lease provides for a lessee to pay rent in return for the temporary use of the lessor’s property.

• There are four types of lease, namely:

• fixed-term leases

• tenancy at will

• periodic leases

• hybrid leases.

• A lease agreement does not have to be in writing, but a tenant may demand a written lease and must get receipts for all money
paid.
Law of Lease Chapter 15 cont..

The lessor has the following duties in terms of a lease:

1. The lessor has a duty of delivery. The lessee’s possible remedies for non-compliance are:

• a specific performance order

• refusal of delivery

• cancellation

• repair of the fault at the lessor’s expense

• damages

• a reduction in rental.
Law of Lease Chapter 15 cont..

2. The lessor has to give the lessee full use and enjoyment during the lease, including the following:
• maintaining property in a fit condition
• not disturbing the lessee’s occupation.
• The lessee’s possible remedies for inadequate maintenance are the same as for non-compliance with
• the duty to deliver. The lessee’s possible remedies for disturbance are:

• an interdict
• a spoliation order (mandament van spolie)
• cancellation
• damages or a rental reduction.
Law of Lease Chapter 15 cont..

3. The lessor gives the lessee a warranty against eviction or disturbance by a third

party. The lessee’s possible remedies against disturbance by a third party are:

• cancellation

• damages

• a rental reduction proportionate to the disturbance.

• The lessor has a duty to pay the rates and taxes for the property.

• hypothec for rent.

Law of Lease Chapter 15 cont..

The lessee has the following duties in terms of the lease:

1. The lessee’s main duty is to pay the agreed rental.

The lessor’s possible remedies for non-payment are:

• specific performance
• cancellation
• damages
Law of Lease Chapter 15 cont..

2. The lessee has a duty to use the leased property appropriately and care for it properly. The lessor’s possible remedies for
breach are:
• an interdict
• a specific performance order
• damages
• cancellation (in the case of major breach).
3. The lessee has a duty to repair any damage to the property or reverse any changes made without permission.
The lessor’s possible remedies for breach are:
• ejectment
• damages
• a specific performance order to fix the property.
Credit agreements Chapter 16

• In this chapter, we have learned the following about credit agreements:

• The NCA came into effect in June 2007, and it superseding previous laws on credit agreements and the provision of credit.
The NCA seeks to deal with the weaknesses of previous legislation and make the whole process of providing credit more
transparent and fair. In terms of greater transparency, credit providers and credit bureaus have to ensure that their
information on the credit history of consumers is accurate, and that consumers themselves are able to see details of their
credit history.

• All credit agreements have to be in writing in order to be enforceable. The NCA provides definitions of what constitutes a
credit agreement and defines which credit agreements are covered by the Act.
Credit agreements Chapter 16 cont..

• The NCA also set up the National Credit Regulator, which monitors the effectiveness of the Act, registers credit
providers, regulates their activities and registers debt counsellors. The National Consumer Tribunal (NCT)
adjudicates disputes relating to the NCA.

• The NCA significantly improves the rights of consumers, protecting them from unfair discrimination in the
granting of credit, and trying to ensure that they have a full understanding of all the terms and implications of
the agreement they are signing.
 Credit agreements Chapter 16 cont..

• Consumers have a duty to provide relevant information on their financial situation to the credit provider fully and truthfully. The
NCA seeks to prevent credit providers from lending money recklessly by requiring them to take into account the financial
circumstances of consumers who apply for credit, and by restricting the ways in which they might promote their products. Where
consumers do become financially overextended, or over-indebted, the NCA provides for a declaration of over-indebtedness that
will enable the consumer’s debts to be re-scheduled over a longer period of time.
 Consumer Protection Act (CPA) Chapter 17

• In this chapter, we learned the following about the CPA:

• The CPA aims to promote and advance the social and economic welfare of consumers in South Africa by establishing a legal
framework for achieving a consumer market that is fair, accessible, efficient, sustainable and responsible.

• The Act seeks to achieve this purpose by providing consumers with extensive consumer rights and an effective system for enforcing
these rights. The CPA is not a complete codification of consumer protection in South Africa, but it does provide consumers with a
comprehensive set of consumer rights, and it forms part of a larger legislative framework providing consumer protection.

• The CPA must be interpreted in a purposive manner. This means that the ultimate aim the Act is trying to achieve must be
considered when interpreting and applying the Act. It is important to determine whether the CPA actually applies in a particular
situation as the Act does not apply to all transactions.
 Consumer Protection Act (CPA) Chapter 17 cont..

• The CPA provides consumers with nine general consumer rights, each of which may in turn contain more than one specific right.

• The first is the right to equality in the consumer market. Suppliers may not unfairly discriminate against consumers on any of the
prohibited grounds of discrimination when promoting or supplying goods or services to such consumers.

• These grounds include race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability,
religion, conscience, belief, culture, language and birth. Excluding some consumers from accessing goods or services offered by the
supplier on any of the mentioned grounds will constitute unfair discrimination.

• The second consumer right protects the privacy of consumers by limiting the use of direct marketing by suppliers.
Consumer Protection Act (CPA) Chapter 17 cont..

• The third consumer right provides the consumer with the right to choose. This right regulates the bundling of goods. It allows
consumers to cancel fixed-term contracts, as well as any advance reservations, bookings or orders. This right also contains
important provisions regarding delivery of goods, and it regulates the position regarding unsolicited goods.

• The fourth consumer right provides for the right of a consumer to receive relevant information. This includes the right of the
consumer to receive all documents and notices to which the consumer is entitled, in plain and understandable language. The
right also regulates the display of prices, and entitles consumers to be informed when goods are reconditioned or grey-market
goods.
Consumer Protection Act (CPA) Chapter 17 cont..

• The fifth consumer right provides the consumer with a right to fair and responsible marketing. This entails a general right to
marketing that is not misleading or deceptive. Specific marketing practices are regulated as well, including a complete
prohibition of negative option marketing. Promotional competitions, loyalty programmes and bait marketing are other
specific marketing practices regulated by the CPA.

• The sixth consumer right provides the consumer with a right to fair and honest dealing. This right protects the consumer
against any form of unconscionable conduct on the part of the supplier at any time during the marketing or supply process.
 Consumer Protection Act (CPA) Chapter 17 cont..

• The seventh consumer right provides the consumer with a right to fair, just and reasonable terms and conditions. The CPA
provides that a supplier may not include unfair, unreasonable or unjust terms in a consumer contract. This includes supplying
goods or services at a price that is unfair, unreasonable or unjust. A term will be unfair if it is excessively in favour of the supplier
or so adverse to the consumer so as to be inequitable.

• The eighth consumer right provides the consumer with a right to fair value, good quality and safety. This right makes any person in
the supply chain strictly liable for harm caused by the use of a defective product. The right also entitles a consumer to return a
defective product and claim a refund, repair or replacement within six months of buying the product.
Consumer Protection Act (CPA) Chapter 17 cont..

• The ninth consumer right provides the consumer with a right that the supplier is accountable to consumers for goods of the
consumer in the care or possession of the supplier. In terms of a lay-bye agreement, the supplier carries the risk in the goods
forming the subject of the lay-bye agreement until the delivery to the consumer.

• The CPA provides that consumer rights can be enforced by different bodies. Emphasis is placed on self-regulation within industries
through the encouragement of the use of accredited industry codes. The main body responsible for the implementation and
enforcement of the CPA is the National Consumer Commission (NCC). The NCC may issue compliance orders to suppliers in order
to bring about compliance with the CPA. Failure to comply with such a notice may lead to a substantial fine imposed by the NCT.
Chapter 18:Law of agency

What is agency?
Agency occurs when one person, the agent, performs a juristic act for another person, the principal. A juristic
act occurs between the principal and a third party. The agent, who concludes the contract with the third
party, does so on the principal’s behalf.
In our example about leasing the house, you would be the agent for your neighbour (the principal).
You would act on behalf of your neighbour and conclude the contract with the tenant (the third party),
but the contract will be between your neighbour (the principal) and the third party.
When you deal with an agency, there are always at least three parties involved, namely:
■■ the principal
■■ the agent
■■ a third party.
Chapter 18:Law of agency cont..

Difference between agency and mandate

We need to distinguish between agency and mandate. A contract of mandate is an agreement where one party, the mandatory,
agrees to perform a task for another party, the mandator. A mandatory differs from an agent. While an agent has to perform a
juristic act, such as concluding a contract, on behalf of the principal, a mandatory has to carry out a particular task. This task does
not have to be a juristic act. If you instruct an estate agent to find a buyer for your house, the estate agent is a mandatory and not
an agent. The term ‘estate agent’ can be misleading and an estate agent is often misunderstood to be an agent instead of a
mandatory The task of the mandatory in this case is to simply find a buyer and bring the buyer to you.
Chapter 18:Law of agency

Who can be an agent?

A person who does not have the necessary capacity to perform juristic acts for herself cannot act as the agent for another person.
Thus, an insane person or a minor below the age of seven years cannot act as agent for another person. However, a person with
limited capacity to conclude juristic acts can act as the agent of another person, as the agent binds not herself but the other
person (the principal). A minor person over the age of seven years of age or an insolvent person may therefore act as the agent of
another person.

Who can be a principal?

Any person who has the necessary capacity to perform a particular juristic act or acts, can authorise another person (an agent) to
perform such act on her behalf (the principal). However, in a number of instances the law authorises a person to act as an agent
on behalf of another person where that person has no or limited capacity to perform juristic acts. An example is where the
guardian of minor is authorised by law to act on behalf of the minor.
Chapter 18:Law of agency

Requirements for agency

There are three requirements for valid agency:
1. The principal must exist.
2. The agent must have authority to do what he or she does on behalf of the principal.
3. The agent must make the third party aware that he or she is acting on behalf of the principal and
not in a personal capacity.

The principal must exist.

It is a general rule that a person cannot act as an agent on behalf of a principal who does not exist. However, in the world of
business, there are some important exceptions to this rule. One such exception is contained in section 21 of the Companies Act 71
of 2008 (Companies Act). In terms of this section a person may act as agent for an entity that is to be incorporated in terms of the
Companies Act, but does not yet exist at the time.
Chapter 18:Law of agency

The agent must have authority to act on behalf of the principal.

For the agent to be able to conclude juristic acts on behalf of a principal, the agent must have been authorised by the principal to
act on behalf of the principal. The authority may be given expressly or impliedly. Where the agent does not have authority to act
on behalf of the principal, agency may still arise through the ratification of the act by the principal or where it is found that the
agent had ostensible authority. We discuss ratification and ostensible authority below.

The agent must make the third party aware that she is acting on behalf of the principal, and not in a personal capacity.
Chapter 18:Law of agency

The agent must have the necessary capacity to conclude juristic acts.
A person who acts as agent for a principal must have sufficient understanding to appreciate what she is doing. A person who has
no capacity to conclude juristic acts cannot act as an agent for a principal. Therefore, an insane or drunk person, or an infant
cannot conclude a valid juristic act on behalf of another person. But, as the agent does not bind herself, she can act on behalf of a
principal, even though she has limited contractual capacity. For example, a person who is insolvent may act as agent for a
principal, as it is not the agent’s estate that is affected by concluding the juristic act, but that of the principal. Similarly, a minor
with limited contractual capacity can act as agent for a principal.
Chapter 18:Law of agency

Appointing an agent through authorisation

Authorisation is an act by which one person gives another person the power to act on her behalf. For agency to come into
existence, the principal asks another person to perform a certain juristic act or acts for the principal. If the other person accepts
the request (offer), a contractual relationship comes into existence between the parties. There is consensus between the parties
and the authority of the agent to act for the principal flows from this contractual relationship.
Other sources of authority
Authority may come about automatically by operation of law. A good example is the common law rule that provides that every
partner in a partnership has the power to bind the partnership (including the partner acting as agent) to contracts falling within
the normal course of business of the partnership. In a number of instances the law grants certain people the power to act as
agent on behalf of another or regulates the relations between the principal, agent and third parties. Let us consider three
relevant statutes.
Chapter 18:Law of agency

Different ways the agent can be authorised to act

For an agent to perform a juristic act on behalf of the principal, the agent must have the authority to do so. In this context,
authority is the power to perform a juristic act on behalf of another. An agent can obtain this power by:
■■ being authorised to act as an agent
■■ other legal sources of authority, such as:
■■ Children’s Act
■■ Close Corporations Act
■■ Companies Act
■■ another authorised agent delegating authority to the agent.
Chapter 18:Law of agency

Delegating authority
As a general rule, an agent may not delegate the authority to represent the principal to another person. But, the contract
between the principal and the agent may expressly or tacitly allow for delegation. If the agent is allowed to delegate, the agent
has the authority to authorise another person to perform a juristic act for the principal. In the absence of express authority, the
authority to delegate is a question of fact.

If the act in question requires the special skill and expertise of the agent, it is unlikely that the agent will have the authority to
delegate. If I authorise my stockbroker to buy and sell shares for me, the stockbroker will not be able to delegate that authority to
a secretary. I gave the stockbroker the authority because of the special skill and expertise the stockbroker has in the stock market,
and so the stockbroker must act personally.
Chapter 18:Law of agency

Duties of the principal

The principal has several common law duties, namely:
■■ to remunerate, or pay, the agent for performing the juristic act
■■ to reimburse, or pay back, any money that the agent spent while performing the juristic act
■■ to indemnify the agent against loss or liability incurred by the agent in carrying out the mandate.
These duties of the principal apply generally, even though the parties have not expressly included the duties in the agency
agreement. We discuss these duties in more detail below.
Chapter 18:Law of agency

Paying the agent

The duty of the principal to remunerate exists once the agent has performed the juristic act. This duty only exists if the parties
have agreed that the principal will pay remuneration. If the agent claims remuneration, she bears the onus of proving that there
was an undertaking by the principal to pay and that she has completed the juristic act.

Agency contracts in a commercial or business context would normally imply that the principal must remunerate the agent. So, if
the agent belongs to a class of persons that would normally charge for their services, the principal will be obliged to pay the agent
for her services, even in the absence of an express agreement.
Chapter 18:Law of agency

Duties of the agent

An agent is in a fiduciary relationship with the principal. This means that this is a relationship of trust and confidence, and the
agent is obliged to always act in the best interests of the principal. Other examples of fiduciary relationships are those between:
■■ a director of a company and the company
■■ the members of a close corporation and the close corporation
■■ the trustees and the trust beneficiaries
■■ an attorney and his client.
The obligation to act in the best interests of the principal entails several common law duties for the
agent, namely:
■■ to follow instructions
■■ to exercise care and diligence
■■ to act in good faith
■■ to account properly.
These duties of the agent apply generally, even though the parties have not expressly included the duties in the agency
agreement.
Chapter 18:Law of agency
Concluding a contract without authorisation
An agent can incur personal liability and be personally bound to the contract in certain circumstances. If an agent does not
disclose that he is acting as an agent on behalf of a principal, the agent can be held personally liable for the obligations incurred.
The third party can choose to hold either the agent or the principal liable. Where a person professes to contract as an agent but is
doing so without any authority, no contract is formed. The third party cannot hold the agent to the contract as principal, as either
party intended that consequence. However, the agent can incur personal liability on one of two grounds:

■■ The agent may be held liable for contractual damages because the agent has breached the warranty, if the agent gives a
warranty to the third party that the agent is acting with authority when, in fact, there is no authority,

■■ An agent can be liable on the basis of misrepresentation. Misrepresentation occurs when an agent makes a fraudulent or
negligent representation that he has the authority to perform the act when there is no authority. A misrepresentation may
give rise to claim for delictual damages. A representation will be fraudulent if the agent made the representation
intentionally, knowing that there is no authority. A representation will be negligent if the agent did not take reasonable steps
to establish whether the necessary authority was granted.
Online contracts and e-commerce Chapter 19

• In this chapter, we learned the following about online contracts and e-commerce:

• Similar to the physical world, we can also conclude contracts in cyberspace. As in the physical world, certain legal principles
will regulate the formation, performance and conclusion of online contracts.

• All the legal principles that apply to physical-world contracts, also apply to online contracts, but we find that additional
requirements are also applicable. The single most important thing is that just because you do not read and/or understand
the terms and conditions of the electronic transaction, this does not mean that you will not be held liable in law to those
terms and conditions. If the seller (reasonably) provided you with the opportunity to read the terms and conditions before
you made the purchase, you really have no excuse not to do so.
 Online contracts and e-commerce Chapter 19 cont..

• Shrink-wrap agreements are concluded when you open the shrink-wrapping of the product. Click-wrap agreements are
agreements in which you have to click on a box to accept the terms and conditions of the contract.

• Browse-wrap agreements are agreements that regulate how the content of a specific website is used. If you make a mistake
when contracting with an automated system you may be able to avoid liability if you comply with the provisions of S20(e) of the
Electronic Communications and Transactions Act.
Thank you