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FOUNDATIONS

CONTRACT

1. REQUIREMENTS
• Agreement between the parties (consensus ad idem)
• Contractual capacity
• Intention to create legally binding obligations (animus contrahendi)
• Agreement must be certain
• Contract must be lawful
• Performance must be possible
• Formalities (if any) must be complied with

2. AGREEMENT (CONSENSUS)
The core element of a contract is an agreement between two or more persons. ‘Agreement’ for
these purposes means a meeting of minds (consensus ad idem). The parties must concur, and
know that they concur, on all aspects of the transaction. If the parties do not have consensus in this
sense then, in principle, they are not liable. However, as will be seen below there are certain
exceptions. In the great majority of cases, agreement can be resolved into an offer by one party
(the offeror) and an acceptance of that offer by the other party (the offeree).

2.1 Offer
Offer: a proposal of certain terms of performance made with the intention of being accepted by
the other person. The offer can be written, oral (verbal) or tacit.

Roberts and Another v Martin 2005 (4) SA 163 (C)

• M was interested in sponsoring an aspiring tennis player (the second applicant).
• M instructed his attorneys to prepare a contract purporting to regulate the sponsorship
agreement. After the written agreement had been prepared, it was presented to the
applicants (the father and his daughter – the aspiring tennis player) by an employee of M
for signature. Both of the applicants signed the contract but M did not sign the contract.
• M subsequently informed the applicants that he had 'elected not to pursue the sponsorship
agreement' and that he considered himself not 'bound thereby'.
• The court held that the only reasonable inference that could be made was that M by
presenting the agreement to the applicants for signature, had made an offer to them to
enter into a contract as embodied in that agreement.
• The signing by the applicants of the agreement constituted an unequivocal act of
acceptance.
• Accordingly, M was bound by the contract.

Rules pertaining to the offer:

• The offer must be communicated to the offeree

The offer must be communicated to the offeree. A person does not become an offeree until
communication has taken place. A party can only accept an offer if he knows of its
existence.
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Bloom v American Swiss Watch Co 1915 AD 100

• American Swiss had suffered a series of thefts. Mr. Bloom gave the police information,
which led to the arrest and conviction of the crooks.
• Unbeknown to Mr. Bloom, American Swiss had advertised in the newspaper a reward to
anyone who gave information which led to the arrest and conviction of the robbers.
• After Bloom had given the information required he claimed the reward. However,
American Swiss refused to pay him and he sued.
• The court held that at the time of giving the information Mr. Bloom did not know of the
reward offer. He was thus not the offeree. Accordingly, he was not entitled to receive the
reward and American Swiss had no obligation to pay it to him.

• The offer must be valid

The offer must not have lapsed.

Lee v American Swiss Watch Co 1914 AD 121

• L had given information to the police after they had received the information from B
which led them to the thieves.
• The offer had lapsed by the time that L had purported to accept it.

The offer must not have been revoked prior to acceptance. Revocation only occurs if it is
communicated to the offeree before acceptance. If the offeree accepts the offer before the
offeror notifies him that it is withdrawn a contract is formed.

Odendaal v Norbet 1973 (2) SA 749 (R)

• O instructed an estate agent to find a buyer for his farm. The agent received an offer
from N and this was passed on to O who accepted it.
• N, however, subsequently decided to revoke his offer.
• When the agent contact N, the agent spoke first and told N of the acceptance of the offer
before N could tell him that he was withdrawing the offer.
• It was held that a contract had come into existence between O and N.

Yates v Dalton 1938 EDL 177

• Y made a telegraphic offer to let a cafe to D. The next day D sent a telegram accepting
the offer.
• An hour and a half later, D received a telegram from Y withdrawing the offer.
• It was held that as the withdrawal of the offer had not been communicated prior to the
dispatch of the telegram by D, a contract between Y and D had come into existence.

2.2 Acceptance
Acceptance: assent by the offeree to the terms of performance. The offeree accepts the offer
made by the offeror, Acceptance may be written, oral or tacit.

Rules pertaining to acceptance:

• The acceptance must be communicated in the time, manner and place prescribed by
the offeror.

• Only the offeree may accept the offer

Only a person whom the offeror intended to accept may do so.
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• The acceptance must be unequivocal and must correspond to the terms of the offer
The acceptance must be unequivocal and unambiguous. It must be such that a
reasonable person in the position of the offeror would understand the answer to be
affirmative i.e. an acceptance.

The offeree must agree to the transaction as described in the offer. Should the offeree
purport to accept the offer but on different terms then, in effect, he makes his own offer (a
counter-offer), and this implies a rejection of the first offer which accordingly lapses.

Watermeyer v Murray 1911 AD 61

• Watermeyer offered his farm for sale to Murray for £ 1700 and stipulated that £ 1000
should be paid on signature of the agreement.
• Murray purported to accept this offer but fixed a different date for the deposit.
• It was held that this amounted to a counter offer which caused Watermeyer’s offer to
lapse.

2.3 OFFER AND ACCEPTANCE IN RELATION TO ADVERTISEMENTS

An advertisement is not an offer; it is merely an invitation to do business. It is designed to entice
a customer to shop where he will then be tempted to make an offer on the goods available for
sale.

Crawley v Rex 1909 TS 1105

• A shopkeeper advertised a certain brand of tobacco for sale at a cut price and placed a
placard outside his shop stating the price per pound.
• Crawley bought a pound of tobacco, left the shop, and five minutes later was back asking for
another pound. At the same time, five or six other persons, who had also been server earlier
with tobacco, came in and asked for more tobacco.
• The shopkeeper declined to serve Crawley. Crawley refused to leave without the tobacco
and the shop keeper called a policeman who was standing outside the shop.
• Crawley was charged under a Transvaal Ordinance which made it an offence to refuse to
leave a certain premises on the request of the occupier of the premises.
• Crawley’s defence was that he had accepted an offer to sell made by the shopkeeper and,
therefore, he had a right to be in the shop to take delivery of the tobacco.
• The court rejected this contention. It held that the shopkeeper’s advertisement of the
tobacco for sale was merely an announcement of his intention to sell. There was nothing
which obliged him to sell to a customer who came in and tendered the price mentioned in
the advertisement. As the shopkeeper had refused Crawley’s offer to buy the tobacco, there
was no contract which entitled Crawley to remain in the shop.
• Accordingly, in refusing to leave on request by the shopkeeper, Crawley had committed the
offence.

Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) Ltd [1953] All
ER 482 (CA)
• Boots Chemists carried on a self-service shop which contained a pharmacy department. On
entering the shop, a customer was provided with a wire basket.
• After taking the items he wanted from the selves and putting them in his basket, the customer
was expected to take the basket to the cashier who calculated the total price and took
payment. The Society brought an action against Boots alleging that it was infringing the
Pharmacy and Poisons Act, 1933, which required the sale of certain drugs to be ‘effected by,
or under the supervision of a registered pharmacist’.
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• Boots did have a pharmacist in supervision of at the cashier’s desk, but the Society
contended that the sale took place before this, when a customer selected a drug from
the shelves and put it into his basket, and that this was not done under supervision.
• The court held that the self-service system amounted merely to an invitation to the
customer to make an offer to buy, and that the customer’s offer was accepted at the
cashier’s desk. As the transaction was concluded under the supervision of a registered
pharmacist there was no contravention of the Act.

It should not be deduced from has been said above, that a person cannot make an offer to the
public by way of an advertisement. If the nature of the advertisement, its wording, or
surrounding circumstances make it clear that it is intended to be an offer then the court will treat
it as such.

Carlill v Carbolic Smoke Ball Co (1883) 2 QBD 484 (HL)

• The Carbolic Smoke Ball Company were manufacturers of a medical preparation called the
‘carbolic smoke ball’.
• They placed an advertisement in the press to the effect that £ 100 would be paid by the
company to any person contracting influenza after having used the ball three times daily in
accordance with the printed directions supplied with each ball.
• The advertisement further stated that ‘£1000 is deposited with the Alliance Bank, Regent
Street, showing our sincerity in the matter’.
• Mrs Carlill, on the strength of the advertisement, bought a smoke ball and used it as
instructed for more than three weeks but she nevertheless caught influenza. She brought an
action against the company and succeeded.
• The court held that the terms of the advertisement were such as to indicate that it was to be
understood and treated by the public as a firm offer.
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2.4 CONTRACTS WITHOUT AGREEMENT

The general rule is that there can be no valid contract without an agreement between the
parties. This agreement must be consensus ad idem (agreement as to the same thing) between
the parties to the contract. If the parties’ minds have not met on any aspect of the transaction
then they have no contract. However, the law does accept in certain circumstances that a
contract is created even though one party denies liability and can show that he and his opposite
number were not completely ad idem regarding the nature and terms of the contract.

2.4.1 Immaterial dissensus

Once instance in which the law upholds a contract without complete consensus is where
the matter in respect of which there is dissensus is immaterial i.e. where the party that
seeks to avoid liability would have still contracted on the terms envisaged by the other
party had he been aware of the latter’s true intention.

Parow Lands (Pty) Ltd v Schneider 1951 (3) SA 183 (SWA)

• A German immigrant (Schneider) was sued for the balance of the purchase price on
some land that he bought from Parow.
• Schneider defended the claim saying that his English wasn’t too good and he had not
understood the written contract.
• The written agreement reflected a price of £ 3 600, at which price the seller had
intended to sell. However, Schneider intended to buy for £ 4 800 and Parow intended
to sell for £ 3 600.
• In one sense there was no consensus ad idem. However, the court reasoned that if
Schneider was prepared to buy at £ 4 800 then he must have been equally, if not
more prepared, to buy at £ 3 600.
• His defence thus failed and the agreement could be inferred from the facts. If he
would have contracted on the basis envisaged by Parow (ie the lesser price) – and
simple logic says he would – then he would be bound.

2.4.2 Reasonable reliance on appearance of assent

The law also upholds a contract without consensus (even if the dissensus relates to a
material matter) if this is necessary to protect a party’s reasonable reliance on the
appearance of assent. In other words, whatever the real intention of a party might be, if
he so conducts himself as to give the other party the reasonable impression that he
intends to be bound, he cannot escape the contract on the basis of lack of consensus.
This is called the reliance theory.
National and Overseas Distributors Corporation (Pty) Ltd v Potato Board 1958 (2)
SA 472 (A)
• The Potato Board called for tenders for the erection of a ready-made steel shed.
• National and Overseas Corporation submitted a tender and the Board subsequently
sent the Corporation a letter saying that its tender had been accepted.
• National Corporation immediately ordered from a manufacturer a shed of the type
required; arranged for the erection of the shed by a subcontractor; and instructed an
engineer to draw up plans.
• Shortly thereafter, the Board advised National Corp that the letter of acceptance had
been sent ‘as a result of an administrative error’ and that the Board had actually
resolved earlier to accept the tender of another firm.
• The court held that as the Board had led National Corp reasonably to believe that it’s
tender had been accepted it was not open to the Board to contend otherwise.
Accordingly, the contract was binding on it.
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The reliance theory applies where a party has done something to indicate that they are in
agreement with the contract. This can be achieved by conduct, speech, even silence or by
writing i.e. signature. Where the conduct giving rise to reasonable reliance consists of a written
and signed representation the rule is: CAVEAT SUBSCRIPTOR - let the signatory beware.

The act of signing a document gives the reasonable impression that you agree to it, i.e. you are
ad idem, allowing the other party to treat the contract as binding and the court to do the same.
The general rule is that you are bound by what you sign!

George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A)

• George hired a room in Fairmead’s Hotel in terms of an verbal agreement. Subsequently, on
moving in he was asked to sign the hotel register.
• At the top of the register there were spaces for various particulars. Thereafter, there followed
a number of printed lines which read as follows: ‘…I hereby agree that it is a condition of
my occupation …that…the proprietor shall not be responsible for loss or damage to
my property brought onto the premises, whether arising from fire, theft or otherwise
by whomsoever caused, or arising from the negligence or wrongful act of any person
in the employ of the proprietor…’ Below this, was a space for George’s signature. He filled
in his name, date of arrival, tariff and nationality at the top of the page, and appended his
signature at the bottom, but he did not bother to read the printed passage in between.
• After George had been in occupation for a period, certain of his belongings were stolen from
his room. George sued Fairmead Hotel for damages.
• The action failed. The court held that, when George signed the hotel register, the parties
concluded a variation of their verbal agreement of hire and thereby excluded Fairmead’s
liability for the type of loss sustained. George had been aware that he was signing a
document with contractual terms and he had chosen not to read the passage in question.

Herman v Oosthuizen 2015 JDR 0605 (WCC)

• The defendant engaged the services of the plaintiff, an attorney, on various matters.
• The plaintiff subsequently instituted action to recover the fees that the defendant owed to
him.
• The plaintiff admitted that she filled out a form to become a client of the firm and signed
certain annexures to the form. However, she argued that she was not given an opportunity to
read the Letter of Engagement which was concluded between the parties.
• The court found that the plaintiff was bound to the document. The court pointed out that when
a person signs a contract, he is taken to be bound by the ordinary meaning and effect of the
words which appear over his signature.

‘…how can an estate agent and a renowned businesswoman… simply sign a

document without reading it? I find it hard to accept.’

The reliance theory postulates actual and reasonable reliance on the part of the person seeking
to uphold the contract. The reliance theory will not, however, be applicable under certain
circumstances:

• Where the party seeking to enforce the contract knows that the other party is under a
misapprehension regarding the document signed or that the other party is mistaken as to
the terms of the contract.
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• Where the party seeking to enforce the contract knows that the other party did not read the
written terms before signing and the contract contains one or more terms which a
reasonable person would not expect to find in that type of contract.
• Where the party seeking to enforce the contract realises that the other party had made a
typing error and the information contained in the document did not reflect the latter’s
intention.
Horty Investments (Pty) Ltd v Interior Acoustics (Pty) Ltd 1984 (3) SA 537 (W)
• The plaintiff sought an order declaring a lease to be null and void.
• In terms of clause 1, the lease was to ‘commence on 1 May 1981 and would continue for
a period of two years’. Thereafter, the lease was to continue on the same terms and
conditions as a monthly tenancy, “subject to three calendar months' notice on either
side... but under no circumstances shall notice commence to run before 1 May 1993".
• The date 1993 was an undetected typing error and should have read ‘1983’. The typist
had copied an old lease, altering the dates, but had mistakenly typed ‘1993’ at the end.
• The court held that a reasonable man would definitely have realised that the lease
should have read ‘1983’ and not ‘1993’ and because of this the defendant could not hold
the plaintiff to the lease.

• Where the party seeking to enforce the contract ought reasonably to have known that the
‘offeror’ did not intend to make the offer to him.
Steyn v LSA Motors Ltd 1994 (1) SA 49 (A)
• Steyn, an amateur golfer with a low handicap, took part in a ‘pro-am’ golf tournament
(i.e. one open to both professionals and amateurs). Steyn hit a hole-in-one at the 17th
hole.
• At the 17th green there was on display an Opel motor car and an advertising board
stating ‘Hole-in-one prize sponsored by Reeds Delta’ (the trade name of LSA Motors).
This prize had been mentioned earlier in the press and Steyn had read about it then.
• When Steyn attempted to claim the prize, LSA Motors refused to award it to him. LSA
argued that the offer of the prize was limited to professional players.
• Steyn sued for delivery of the vehicle or payment of its value (R50 000).
• The action failed. The court held that a reasonable person in Steyn’s position would not
have considered the words on the board to be an offer which was open to him to accept.
• In reaching this conclusion the court had regard, inter alia, to the following factors:
o neither the newspaper report not the notice had said that the hole-in-one prize was
open to amateur golfers.
o Steyn had known that the other prize money at the competition was for professional
golfers only.
o The newspaper report had mentioned both the hole-in-one prize and the other prize
money, and in neither case had said whom the prizes were for; so Steyn had no
good reason for believing that the hole-in-one prize stood on a different footing to
the other prize money.
o Steyn had known that as an amateur he was not entitled to a prize worth more than
a few hundred rand.
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• Where the party seeking to enforce the contract had himself induced the signature by
deception.
Du Toit v Atkinson’s Motors 1985 (2) SA 893 (A)
• Du Toit saw an advertisement by Atkins for a 1979 Mercedes. He test drove the car and
agreed verbally to buy it. He later signed an agreement to buy, wherein the year of
manufacture was not specified. The agreement also contained small print stating that the
seller was not liable for any misrepresentations regarding the year of manufacture.
• Du Toit drove off happily. Unfortunately, he later discovered that the Mercedes was a
1976 model. He sought to have the contract set aside i.e. to return vehicle and then
recover the purchase price paid.
• The court held that there was no consensus and it set the contract aside because:
o The advert gave impression of a newer car, soliciting or inviting offers for it
accordingly;
o Atkinson’s were aware that Du Toit was buying because he thought it was a 1979 car;
o Atkinson’s misled Du Toit into signing a contract in which the terms conflicted with the
terms agreed upon verbally. Du Toit had thus been misled and his signature to the
agreement did not reflect consensus ad idem.

3. CONTRACTUAL CAPACITY
To be able to form a contract the parties must have capacity to perform juristic acts, and in
particular, the capacity to bind themselves by agreement. Capacity to perform juristic acts must be
distinguished from the capacity to have rights and duties generally and from the capacity to incur
civil or criminal liability for wrongdoing.

3.1 MINORS
For the purposes of determining contractual capacity a distinction is drawn between two
classes of minors, namely a minor below the age of 7 years (infans) and a minor between the
ages of 7 and 18 years (pupillus).

3.1.1 Minor below the age of 7 years

A minor below the age of 7 years has no capacity to act and may not conclude a
contract even with the assistance of his guardian. In the eyes of the law, he has neither
understanding nor discretion or judgment. In order to acquire rights and duties under a
contract, his guardian must act on his behalf.

The Children’s Act 38 of 2005 provides that the parent or guardian of a child must assist
or represent the child in administrative, contractual and other legal matters (s 18 (3) (b)).
The Act also provides that a parent or guardian of the child must administer and
safeguard the child’s property and property interests (S 18 (3) (a)).

3.1.2 Minor above the age of 7 but below the age of 18

A minor above the age of 7 but below the age of 18 years has limited contractual
capacity. Such a minor may conclude contracts in his own name but generally requires
the assistance of his guardian. 1 This assistance may take the form of the guardian giving
his consent, either expressly or impliedly, at the time the contract is concluded or prior to
the contract being concluded. He may also ratify the contract after it has being
concluded. The guardian may also conclude the contract on behalf of the minor and, in

1
When the minor enters into a contact in terms of which he only acquires rights but does not incur any duties or
obligations then he can conclude the contract without the assistance of his guardian.
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doing so, the guardian binds the minor to the contract and generally does not incur
personal liability.

Certain contracts cannot be performed even with the guardian’s assistance. If a minor
wants to alienate or mortgage immovable property belonging to him then it is not
sufficient for him to obtain the consent of his guardians. In terms of the Administration of
Estates Act 66 of 1965, the minor would require the consent of the Master of the High
Court (in addition to the consent of his guardians) if the value of the immovable property
that he wants to alienate or mortgage does not exceed a certain amount prescribed by
the Minister. If the value of the immovable property exceeds the prescribed amount then
the minor must obtain the consent of the High Court in addition to the consent of his
guardians.

3.1.3 Statutory exceptions

Example: In terms of s 87 (1) of the Banks Act 94 of 1990, a minor over the age of
16 years may be a depositor with a bank. Such a minor may deal with his
deposit as he thinks fit and shall also enjoy all the privileges and be liable
to all the obligations and conditions applicable to depositors.

3.1.4 Effect of a minor’s assisted contract

Where a minor enters into a contract with the assistance of his guardian (or the guardian
represents the minor in concluding the contract) then the minor is bound by the contract
and is liable to perform it. The guardian incurs no personal liability.

Marshall v National Wool Industries Ltd 1924 OPD 238

• Marshall, a minor, bought some shares from National Wool Industries Ltd. He signed
an application form for the shares in the presence, and with the full knowledge, of his
father.
• National Wool Industries Ltd sued Marshall for the balance of the purchase price and
Marshall raised as a defence the fact that he was a minor at the time of the contract,
evidently believing that this constituted a good defence.
• National Wool Industries Ltd withdrew the action against Marshall and sued his father
instead. The action failed, the court holding that a guardian is not liable on his minor
child’s contracts.

If an assisted contract is or becomes patently prejudicial to the minor, he may apply to

court to set it aside. Where the court grants the application, the minor is entitled to
recover what he has paid or handed over under the contract, but he is also required to
restore what he has received pursuant to the contract.

Wood v Davies 1934 CPD 250

• The father and natural guardian of Wood, bought a house on Wood’s behalf from
Davies. The price was £ 1750 payable in instalments.
• On reaching majority, Wood sued Davies for rescission of the sale and return of all
instalments paid, with interest. He court found that the contract was prejudicial to
Wood in several respects:
o the price was excessive: it exceeded the value of the house by approximately
£ 200 pounds.
o the purchase had be unnecessary since Wood did not need the house to live in.
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o Wood’s father had paid the instalments out of the interest on a sum of money
which Wood had inherited. Furthermore, payment of the remaining instalments
would absorb a large portion of the interest accruing on that sum.
o the contract contained a number of onerous clauses.
o the contract imposed liabilities on Wood which would remain operative for a
considerable length of time.
• The court held that Wood was entitled to cancellation of the agreement and recovery
of all the instalments paid with interest. However, he had to allow Davies a credit in
respect of the value of the use and occupation which he (Wood) had derived from the
property, together with interest on that amount.

3.1.5 Effect of the minor’s unassisted contract

To be discussed further in lectures

In terms of s 39 (1)(b) of the Consumer Protection Act 68 of 2008, an agreement for the
supply of goods or services to, or at the direction of, a consumer who is an unassisted
minor is ‘voidable at the option of the consumer’.

3.2 MENTAL DEFICIENCY

If a person’s mental condition is such that he is not able to understand or appreciate the
nature or consequences of his conduct, such a person cannot form the necessary will to
conclude a contract. Such a person is completely contractually incapable. If such a
person concludes a contract, the contract is void and without consequence, so that no
rights or duties are created by it. This also applies to agreements in terms of which the
mentally deficient person acquires rights without incurring obligations.

Eerste Nasionale Bank Van Suidelike Afrika Bpk v Saayman No 1997 (4) SA 302
(SCA)
• Mrs M had, inter alia, stood surety for her son’s debts. Mrs M was 85 years old, was
hard of hearing and was almost blind when she was asked to sign the documents in
question. At the time she had often been confused and disoriented.
• She had been persuaded by her beloved son to sign one utterly prejudicial document
after the other. She was under the impression that she was merely making certain
shares available to him, without any prejudice to her rights, and that she needed only
to ask for their return in order to get them back. She had signed the documents
without having their import explained to her and without having read them.
• The majority of the court concluded on the expert and factual evidence that the
probability was that Mrs M had indeed lacked the capacity to understand the nature or
consequences of her actions when she had entered into the said agreements, and
accordingly dismissed the appeal.
• Olivier JA, in a concurring minority judgment, disagreed with the view that Mrs M had
lacked contractual capacity when she had signed the agreements in question.
However, he concluded that the appeal had to be dismissed on the basis of the
application of the bona fide principle.

Theron v AA Life Assurance Association Ltd 1995 (4) SA 361 (A)

• The insured had taken out an insurance policy which provided life cover of R100 000
and an additional accidental death benefit of R100 000.
• When the insured died (as a result of multiple injuries sustained when he was run
over by a motor vehicle) the insurer repudiated liability under the policy.
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• One of the issues was whether the insured had the necessary mental capacity to
conclude the contract of insurance. It was alleged that the insured was mentally
retarded and that he had attended a special needs school.
• The court held that the insurer had not proved that the insured lacked the required
mental capacity to conclude the contract in question. The court adopted the view that
the contract of insurance in question was a fairly simple one and it did not require a
high degree of intelligence to understand the nature of the contract and the nature of
the obligations created thereby. Furthermore, at the time of the insured's death no
premiums were outstanding and it had to be accepted that the insured at least
understood his responsibility of paying the premiums.

Herman v Oosthuizen 2015 JDR 0605 (WCC)

• The defendant alleged that she was not in a sound mental state at the time of signing
the Letter of Engagement and was therefore unable to enter into a valid and legally
binding agreement.
• The court found that the defence pleaded by the defendant had not been proved at
all. The defendant could not refute that on the day that she concluded the contract
she had been able to give proper instructions to her attorney. Furthermore, the
following day she was able to depose of an affidavit. The defendant also failed to call
expert evidence in support of her defence.

3.3 INTOXICATION
Intoxication (due to alcohol or drugs) may impair a person’s ability to form a will and
perform a juristic act. It is a question of fact to determine whether a person had
capacity to act at the time the agreement was concluded. Generally speaking, a
person who is in such a state of intoxication that he cannot appreciate the nature and
consequences of his actions, is incapable of forming a will and performing a juristic act.
An agreement concluded with a person in such a condition will be void and
unenforceable.

Van Metzinger v Badenhorst 1953 (3) SA 291 (T)

• Drunkenness, in order to nullify a contract, must be of such a nature that the party
concerned did not know that he had entered into a contract or had no notion of the
provisions of the contract.

3.4 MARRIAGE
The contractual capacity of married persons will depend upon the marital regime that
they have chosen. With regard to spouses married in community of property, it should
be noted that the Matrimonial Property Act 88 of 1984 places restrictions on the
capacity of spouses married in community of property to perform certain juristic acts.
For certain juristic acts a spouse may require the written consent of his spouse, while
in respect of other juristic acts oral or even tacit consent would suffice. Thus, for
instance, a spouse married in community of property may not without the written
consent of the other spouse alienate or mortgage any immovable property forming part
of the joint estate. Similarly, a spouse married in community of property may not
without the written consent of the other spouse bind himself as surety.
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4. INTENTION TO CONTRACT (animus contrahendi)

The general rule is that unless the parties are in agreement, there can be no contract. However, an
agreement by itself is insufficient. Both parties must also intend to create binding or legal
obligations. Whether either or both parties lack intention, a valid and binding agreement is not
created. It is possible for both parties to have an agreement with each other even though neither of
them has intention to contract.

Bosman v Prokureursorde Van Transvaal 1984 (2) SA 629 (T)

• The applicant entered into ‘articles of clerkship’ with V because his proposed principal, B,
already had the maximum number of articled clerks articled to him.
• Notwithstanding this, the applicant had served his articles under the supervision of B in Pretoria
and the parties never intended that the applicant would work in V’s office (in Cullinan).
• The court held that it had never been intended that the applicant would serve V as an articled
clerk. Accordingly, that there had never been a valid contract of articles of clerkship.

Lucy v Zehmer 196 Va 493, 84 S.E 2d 516 (1954)

• Zehmer wrote and signed an agreement to sell his farm to Lucy for $ 50 000. This amount was
well below the market price).
• When Lucy sued on the contract, Zehmer raised the defence that he was merely bluffing to see if
Lucy could raise the $ 50 000.
• The court held that Zehmer’s words and actions manifested an intention to contract. Thus, he was
deemed to have the necessary intention and was held bound on the contract. In other words, an
intention to enter a legally binding agreement was imputed to him on the basis that his words and
conduct were such as to reasonably give the impression that he intended the contract to come
into being.

5. THE AGREEMENT MUST BE CERTAIN (I.E. IT MUST NOT BE VAGUE)

One of the requirements of a valid contract is that the agreement must not be vague or uncertain
such that a court could not ascertain (work out) its meaning. Where the contract is vague or the
language is imprecise such that an accurate meaning or interpretation cannot be ascertained, the
contract is described as being void for vagueness. Such a contract will be set aside by the courts.
Vagueness is a question to be established with due consideration of the facts surrounding the case.
The contract must not be looked at in a vacuum to decide whether it is void for vagueness or not.

Patel v Adam 1977 (2) SA 653 (A)

• An agreement of sale provided that the price was ‘payable in monthly installments free of
interest’.
• The court held that the agreement was void for uncertainty. It left it up to the buyer to determine
what amount he would pay every month and the court could not determine the monthly
installments.

De Beer v Keyser and Others 2002 (1) SA 827 (SCA)

• A franchise agreement provided that the franchisor would provide the franchisee with ‘technical
assistance’ and ‘administrative support’ as ‘arranged with the franchisee’.
• The court held that the agreement was not void for vagueness. The court held that the phrases
technical assistance’ and ‘administrative support’ were capable of definite content once they
were seen in their context and measured against what was required for the conduct of the
business. What the parties intended was that the franchisor would provide expertise and
guidance that would enable the franchisee to conduct his business. Precisely what expertise
and guidance was required would necessarily depend on what was required from time to time
 13

for the establishment and conduct of the business of that nature. This was something that was
capable of being determined by extrinsic evidence.

6. AGREEMENT MUST BE LAWFUL

An agreement may be unlawful because it is prohibited by statute.

Lion Match Co Ltd v Wessels 1946 OPD 376

• The respondent, Wessels, sued the appellant company for £ 200. The said amount represented
the purchase price of a quantity of wood sold and delivered by the respondent to the appellant
company.
• In terms of certain regulations the disposal, acquisition and use of timber was prohibited without
a licence.
• The court held that the contract in question violated the prohibition contained in the regulations
and rendered the contract unenforceable.

There are contracts which are illegal in terms of the common law, being either contra bonos mores
(against what are perceived by the community to be good morals) or against public policy (against
the interests of the community.) Note that bonos mores and public policy overlap substantially and
are not easy to define, particularly since they change constantly.

Richards v Guardian Assurance Co 1907 TH 24

• The building insured under a policy was used as a brothel.
• The court held that the insurance of a place which the insured knows to be habitually used as a
brothel tends to assist immorality, and it is against the policy of the law to support contracts
which even indirectly effect such a purpose.
• The court held that the contract was contra bonos mores and could be avoided by the insurer.

Baart v Malan 1990 (2) SA 862 (E)

• In terms of a maintenance agreement, the applicant had undertaken to pay, for a period of 20
years, her entire gross salary towards the respondent (her husband whom she was divorcing).
This money was to be used for the purpose of maintaining the children born out of the marriage
between herself and the respondent. In addition, applicant had also undertaken to pay her
entire annual bonus to the respondent for the same purpose.
• The court held the agreement was unconscionable and incompatible with the public interest as it
deprived the applicant of any benefit arising from her professional employment,
• Accordingly, the court found that the agreement was contrary to public policy.

It is sometimes possible to have a contract, which is, on the whole, quite lawful, but some part of it
is unlawful. The entire contract is not invalidated: it is possible to apply the doctrine of severance
by which we sever or ‘cut off’ the illegal part of the contract. This can be achieved where the
contract is divisible into separate parts and the substance of the contract will be unimpaired by the
fact that the illegal portion is severed. Hence illegality in part will not necessarily destroy the
contract.

Diners Club SA (Pty) Ltd v Singh and Another 2004 (3) SA 630 (D)
• In terms of written contracts between the plaintiff and the defendants, the plaintiff had issued
each of the defendants with a credit card.
• Clause 7.3 of the said contracts provided that the cardholder would be liable irrespective of who
used the PIN (personal identification number) of the cardholder.
 14

• In an action by the plaintiff against the defendants for payment of amounts allegedly withdrawn
by use of the credit cards, the defendants denied that they had withdrawn the amounts claimed
and alleged that the amounts must have been withdrawn by an unknown person/s using the
defendants' PINs. It was suggested that an 'insider' in the plaintiff's organisation might have
done this.
• The defendants also pleaded that clause 7.3 of the contracts was contra bonos mores as it
imposed liability on the cardholder in circumstances where someone else has used his card and
his PIN number and that this was inequitable, unjust and unconscionable.
• The court held that there was no basis for holding that clause 7.3 was against public policy. A
clause of this nature was intended to protect the plaintiff. After the issue of the card to its
customer the plaintiff had, in the nature of things, no control over what the customer did with
his/her card or PIN. The card could be used throughout the world. While it might be said that the
clause was one-sided and favoured the plaintiff, the plaintiff was entitled to protect itself by
placing the risk of a wrongful user on its customer. Furthermore, the defendants had accepted
their cards knowing that they would be bound by the contractual terms and conditions.

7. PERFORMANCE MUST BE POSSIBLE

A contract in respect of which performance is impossible ab initio (from the beginning) on the part of
either of the parties is void. The test for impossibility is objective (i.e. no one can do it) and not merely
subjective (i.e. the particular party cannot do it but someone else can).

8. FORMALITIES (IF ANY) MUST BE COMPLIED WITH

Generally, it is not a requirement that the agreement must be in writing. The contract may also be
concluded verbally or evenly tacitly (inferred from the conduct of the parties). There are certain
exceptions to the rule that contracts do not have to be in writing (see below). The parties may also
agree that certain formalities must be complied with before a valid contract can come into existence.

Alienation of Land Act 68 of 1981

In terms of the Act, an alienation of land must be contained in a deed of alienation (reduced to writing)
and signed by the parties to the contract or by their agents acting on their written authority (s 2(1)).
 15

CLASS EXERCISE 1

QUESTION ONE

COLUMN A COLUMN B

1. Caveat A Manifestation of an intention not to enter into a

subscriptor contract – i.e. the offeror makes it clear that he no
longer intends to contract.
2. Consideration B Parties are free to enter into contracts and decide on
the terms of the contract.
3. Offer C Let the signatory beware.
4. Acceptance D Contractual obligations must be honoured when the
parties have entered into the contractual agreements
freely and voluntarily.
5. Revocation E A requirement for the validity of a contract in English
law but not in South African law.
6. Immaterial F An agreement concluded between two or more
dissensus persons with the intention of creating legally
enforceable obligations.
7. Reliance theory G A proposal of certain terms of performance made with
the intention of being agreed to by another person.
8. Advertisement H Where the party that seeks to avoid liability on the
contract would have still contracted on the terms
envisaged by the other party had he been aware of
the latter’s true intention.
9. Sanctity of I Where the party seeking to avoid liability on the
contract contract gives the other party the reasonable
impression that he intends to be bound and cannot
escape the contract on the basis of lack of
consensus.
10. Contract J Assenting to the offeror’s proposed terms of
performance
11. Consensus ad K Generally regarded as an invitation to do business
idem and not an offer by itself.
12. Freedom to L Meeting of minds
contract

QUESTION TWO
Comment on the correctness of the following statements
2.1 In the case of Roberts and Another v Martin 2005 (4) SA 163 (C), the court held that there
was no binding sponsorship contract between the parties as the offeror had never signed
the contract.
2.2 An offer can be made verbally or tacitly.
2.3 In the case of Odendaal v Norbet 1973 (2) SA 749 (R), the court held that no contract had
been concluded between the parties as the offer had been revoked prior to its acceptance.
2.4 In order to constitute a valid acceptance, the offeree’s response must be unequivocal and
it must correspond with the offer.
 16

2.5 In the case of Carlill v Carbolic Smoke Ball Co (1883) 2 QBD 484 (HL), the court held that
an advertisement by the Carbolic Smoke Ball Company was merely an invitation to do
business and could not be treated as an offer.
2.6 Generally, only a person whom the offeror intends to accept the offer may do so.
2.7 In the case of Parow Lands (Pty) Ltd v Schneider 1951 (3) SA 183 (SWA), the court held
that Scheider was liable for the balance of the purchase price on land that was bought
from Parow even though he intended to buy the land for £ 4 800, but the written
agreement reflected the price as £ 3 600.
2.8 In the case of Herman v Oosthuizen 2015 JDR 0605 (WCC), the court held that a client
that had engaged the services of an attorney was not bound to pay the latter’s fees as she
had not been afforded an opportunity to read the Letter of Engagement that had been
concluded between the parties.
2.9 In the case of Bloom v American Swiss Watch Co 1915 AD 100, the court held that Bloom
was entitled to the reward as he had given information to the police which had led to the
arrest of the thieves.
2.10 In the case of Watermeyer v Murray 1911 AD 61, the court held that by fixing a different
date for the payment of the deposit, the original offeree had now made a counter-offer and
this caused the original offer to lapse.

Comment on the legal position in each of the scenarios appearing hereunder (questions three –
seven).

OUESTION THREE

3.1 Julius wants to buy a BMW motor vehicle. He approaches his neighbour, Zuma, and tells him
that he wants ‘to purchase his motor vehicle’ for R 150 000. Zuma agrees to sell the vehicle to
Julius at that price. Julius thinks that he is purchasing Zuma’s 2012 BMW motor vehicle.
However, Zuma accepts the offer to purchase thinking instead that Julius wants to purchase his
2009 VW Polo.

3.2 Cyril wants to buy a car (any car) for his wife. He does not have a specific make or model in
mind but he does not want to spend more than R 180 000 on the purchase. Thabo agrees to
sell his car to Cyril for R 165 000. Cyril thinks that he is purchasing Thabo’s 2009 VW Polo
(valued at R 100 000) whereas in actual fact Thabo is selling his 2012 VW Polo (valued at
R 150 000).

QUESTION FOUR
Thabo, who has lost his beloved dog, places a notice in the newspaper in which he promises to pay a
reward of R 2 000 to any person who manages to find his dog and return it to him. While walking in
the park, Zinhle (unaware of the reward) finds Thabo’s dog and returns the dog to him. The next day,
Zinhle reads about the reward in the newspaper and she phones Thabo and demands the reward of
R 2 000.

QUESTION FIVE
Tammy makes an offer to purchase Adrian’s piano for R 5 000. Tammy subsequently finds a cheaper
piano online and she phones Adrian intending to revoke her original offer. However, before Tammy
can say anything, Adrian tells her that he accepts her offer to buy the piano for R 5 000.
 17

QUESTION SIX
Michael approaches XYZ Bank to obtain a study loan so that he can realise his dream of studying at
a certain college in Cape Town. He takes his aunt, Samantha, along with him to the bank and she
signs a document whereby she binds herself as surety and co-principal debtor for the loan. When
Michael is unable to pay the loan, the bank seeks to hold Samantha liable. Samantha accepts that
she signed the document but argues that she did not know what she was signing. She also argues
that she did not understand the consequences of binding herself as surety.

QUESTION SEVEN
Nkosi and Mambo enter into a written contract of sale in terms of which Mambo agrees to sell her
laptop to Nkosi. The laptop is worth R 10 000. However, unbeknown to Mambo, the written contract
actually contains a typing error and records the purchase price as ‘R 1 000’. Nkosi notices this but,
hoping to save some money, he does not bring this to Mambo’s attention. Nkosi pays R 1 000 to
Mambo and demands delivery of the laptop. He argues that Mambo had signed a written agreement
binding her to sell the laptop to him at that price.
 18

CLASS EXERCISE 2

QUESTION ONE

COLUMN A COLUMN B

1. No contractual A Intention to contract

capacity
2. Consumer B Has limited contractual capacity
Protection Act 68
of 2008
3. Matrimonial C An act which is intended to have, and has, legal
Property Act 88 of consequences.
1984
4. A person who is 16 D In terms of this statute, the parent or guardian of a
years or older child must assist or represent the child in
administrative, contractual and other legal matters.
5. A person who is 14 E This statute places restrictions on the capacity of
years old spouses married in community of property to perform
certain juristic acts.
6. A person who is 18 F In terms of this statute, a minor may require the
years or older consent of the Master of the High Court (in addition
to the consent of his guardians) if he wants to
alienate or mortgage certain immovable property.
7. Children’s Act 38 G A person that is mentally ill to such an extent that he
of 2005 is not able to understand or appreciate the nature or
consequences of his conduct.
8. Animus H In terms of this statute, an agreement for the supply
contrahendi of goods or services to, or at the direction of, a
consumer who is an unassisted minor is ‘voidable at
the option of the consumer’.

9. Juristic act I Juristic person

10. Administration of J In terms of this statute, a contract for the sale or
Estates Act 66 of donation of land must be in writing.
1965
11. A company K May open and operate a bank account without his
guardian’s consent.
12. Alienation of Land L Has full contractual capacity
Act 68 of 1961

QUESTION TWO
Comment on the correctness of the following statements
2.1 Intoxication automatically renders a contract concluded by the intoxicated person void and
unenforceable.
2.2 A guardian who acts on behalf of his minor child and concludes a contract with a third
party is personally liable to perform under that contract.
2.3 In the case of Baart v Malan 1990 (2) SA 862 (E), a maintenance agreement which
obliged the applicant to pay her entire gross salary towards her husband was found to be
contrary to public policy.
 19

2.4 In the case of De Beer v Keyser and Others 2002 (1) SA 827 (SCA), the court held that a
franchise agreement which provided that the franchisor would provide the franchisee with
‘technical assistance’ and ‘administrative support’ as ‘arranged with the franchisee’ was
void for vagueness.
2.5 In the case of Theron v AA Life Assurance Association Ltd 1995 (4) SA 361 (A), the court
found that the insurer had not proved that the insured lacked the required mental capacity
to conclude the contract in question.
2.6 In the case of Lucy v Zehmer 196 Va 493, 84 S.E 2d 516 (1954), the court held that a
legally binding contract of sale could not come into existence as the parties lacked
intention to contract.
2.7 In the case of Eerste Nasionale Bank Van Suidelike Afrika Bpk v Saayman No 1997 (4)
SA 302 (SCA), the majority of the court found that Mrs M lacked contractual capacity at
the time she entered into the contracts in question.
2.8 In terms of the Alienation of Land Act 68 of 1981, a deed of alienation must be signed by
the parties to the contract personally.
2.9 A contract is void if it is subjectively impossible for the contracting parties to perform the
obligations contemplated by the agreement.
2.10 A spouse married in community of property may not without the written consent of the
other spouse alienate or mortgage any immovable property forming part of the joint
estate.

Comment on the legal position in each of the scenarios appearing hereunder (questions three – six).

QUESTION THREE
Timmy is a student who is studying law at the University of Kwazulu-Natal. Timmy has failed a
particular law module (i.e. Foundations) for the past six years. Timmy’s father, Paul, grows tired of his
son’s failures and says to him ‘Timmy, please study hard and pass this module. For goodness sake, I
will buy you a car if you finally pass’. Fortuitously, Timmy manages to pass the module but his father
subsequently refuses to buy the car for him.

QUESTION FOUR
Gibbs offers to pay R 400 to Hussey if the latter agrees to sell him 200 g of cocaine. Hussey agrees
to do so and subsequently delivers the cocaine to Gibbs. However, Gibbs refuses to pay the R 400 to
Hussey.

QUESTION FIVE
Nkosi agrees to sell his beach cottage to Frans. Frans wants to buy this particular beach cottage as
he sees it as a good investment and it is situated in a wonderful area in the South Coast. Unbeknown
to the parties, however, the beach cottage is completely destroyed by a tsunami.

QUESTION SIX
Nonko, in desperate need of a loan, phones her friend, Toko, and asks to borrow R 2 000. Toko
agrees and lends the money to Nonko but he stipulates that the money must be repaid within two
months. After two months pass, Toko tries to get his money back from Nonko. However, Nonko says
that their ‘contract’ is not valid as ‘it was not in writing’ and ‘she did not sign anything.’