Introduction to the Law of Contract Business / Commercial Law

The concept of “obligatio” Obligatio = Obligation Contracting parties acquire personal rights against each other Duty to perform Right to receive performance

The essentials of a valid contract Consensus Contractual capacity Legal possibility of performance Physical possibility of performance Formalities

Freedom of Contract Generally speaking, people are free to choose with whom and on what grounds they wish to contract with another

Contracting electronically Electronic Communications & Transactions Act 25 of 2002

Consensus Each party must have serious intention to be bound to the contract Common intention Must make intention known to the other party

Offer and Acceptance An offer is a declaration made by the Offeror setting out their intention to be contractually bound & the rights & duties they wish to create An acceptance is a declaration by the Offeree indicating their acceptance of the offer

Requirements for offer & acceptance Made with intention that offeror will be bound by offeree’s acceptance Offer must be complete Offer & acceptance must be clear & certain May be made expressly or tacitly Offer may be accepted by person(s) to whom addressed Offer & acceptance completed on communication

Falling away of the offer If not accepted within stipulated time If offeror revokes before acceptance On rejection by offeree On counteroffer by offeree

The option Option giver makes an offer (substantive offer) & agrees to keep open for a period (the option) If offeree accepts option the option contract comes into being allowing offeree to accept substantive offer within option period

Special circumstances Invitations to make an offer (advert) Statements of intent Calling for tenders Auctions

Time & place of contracting When parties in each others presence Information theory Contract comes into being at the time acceptance communicated and at the place where parties are

Time & place of contracting Where parties not in each others presence By telephone – Information theory applies – contract comes into being at time & place when offeror becomes aware of offeree’s acceptance By post – Expedition theory – contract comes into being at time & place when offeree posts letter of acceptance

Lack of consensus Mistake – contract void – provided: Mistake relates to fact, legal rule or principle The fact, rule or principle is material The mistake is also reasonable

Lack of consensus Misrepresentation – contract voidable if: Untrue statement regarding existing fact or condition Made by one party to the other Misrepresentation must be unlawful Misrepresentation must have induced (caused) the contract Can be intentional, negligently or innocent

Lack of consensus Duress – unlawful threat of harm or injury causing other party to enter into contract Voidable if: Actual or reasonable fear of physical violence or damage Imminent or inevitable Unlawful By one party against another Causes party to contract

Lack of consensus Undue Influence – improper or unfair conduct by a party to persuade other party to contract against their free will Voidable if: One party exercises influence over another Influence used to weaken will / resistance Influence used to persuade other party to contract against own free will & to their disadvantage