Study Unit 3

 You need to understand the following relating to the interpretation of a contract: ◦ Discuss the consequences of valid, void and voidable contracts ◦ Discuss the contents of a contract

 The requirements of a valid contract ◦ Parties must have contractual capacity ◦ Must be agreement between the parties ◦ The agreement must create obligations ◦ The agreement must be certain ◦ The agreement must be lawful ◦ Must be possible to perform the agreement ◦ Prescribed formalities must be complied with

A contract consists of terms that are either specifically agreed on by the parties and expressed in the contract and terms that are implied by law (and therefore automatically included)

 Essentialia (essential terms) ◦ Those terms that are essential to a paryticular type of contract; eg: the thing sold & the price are essentials in a contract of sale  Naturalia (residual terms) ◦ Those terms that are automatically implied by law; eg: warranty against latent defects in contract of sale  Incidentalia (incidental terms) ◦ Those terms added by the parties or changes to residual terms; eg: that delivery will only take place 30 days after payment

 Those issues specifically discussed & agreed upon by the parties during negotiations  Agreed orally or in writing  Can be included in a notice or a ticket for example

 These terms are inferred from the surrounding circumstances ◦ Is the term necessary to give effect to the parties intention – if so the Courts will read it into the contract even if the parties did not think about it ◦ Common law rules may apply to something ◦ Terms implied by trade usage ◦ Statutory terms

 A condition is a type of term “which qualifies the operation of a contractual obligation in such a way that it is dependent on the taking place of an uncertain future event”  Vrancken et al, 2002 (67)  It is not certain when or if the event will take place  Two types of condition

 The operation of the obligation (performance of rights & duties) is suspended or delayed until the uncertain future event (condition) takes place ◦ Eg:A agrees to employ B if she graduates at the end of the year

 The obligation comes into operation immediately (performance takes place) but if the uncertain future event (condition) is fulfilled the obligation will immediately terminate ◦ Eg: A agrees that B may use his car until he finds employment. Once B is employed he must hand back the car to A

 A valid contract is one that complies with all the requirements of a contract – it is enforceable  A void contract is a contract that actually does not come into existence because of some insurmountable problem – it is invalid.  A voidable contract is a contract that comes into being but can be set aside by the Court because of some flaw

 Duress ◦ Where one party uses force or the threat of force to get the other party to enter into the contract  Misrepresentation ◦ Where a party fraudulently, negligently or innocently misrepresents the true position to the other party who then agrees to the contract  Undue Influence ◦ Where a party uses improper conduct to influence another party to enter into the contract