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11PRINCIPLES OF LAW
critically. All law is being subjected to critical scrutiny to reflect the new constitutional order. The
central values of the South African Constitution mainly democracy, equality, dignity and freedom
require a fresh look at South African common law, indigenous law, and religious personal law so that
the new South African legal system will reflect the plural nature of the South African society and put
and end to South Africa's colonial and apartheid past in its legal system. The process of law reform has
begun but is bound to be a long process.
Detailed Notes Zimbabwe Context
1. The Legislature
Laws made by parliament
The most modern source of law
Most important and quickest method of making new law, changing existing
law, amending or repealing or abrogating the law altogether.
Legislation refers to the law validly enacted by the legislative authority of Zimbabwe and assented to by the
President of Zimbabwe. In Zimbabwe the legislative authority of Zimbabwe vests in the President and
parliament of Zimbabwe which is the Primary Legislation states as follows:
The Legislature of Zimbabwe can confer powers on any authority to create binding laws. Currently the
Legislature of Zimbabwe is a bicameral system consisting of a Lower House (Parliament) and an upper House
(Senate). Legislation brought through parliament has to be scrutinized by the Senate before it goes for assent
to the executive President. The senate was recently ushered in through Constitutional Amendment Number 17
of 2005.
The method of passing legislation is entrenched in Section 511 of the Constitution. All legislation in
Zimbabwe is styled Acts of Parliament or Statutes. Other authorities such as the President, acting unilaterally,
and Ministries can pass legislation known as Statutory Instruments, or Subsidiary Legislation. Subsidiary or
Subordinate Legislation consists of the following:
Regulations made by a Minister for purposes specified in the Enabling Act of Parliament.
Bye-Laws created by specified local authorities such as Urban or Rural Councils, acting under powers
given to them by the relevant Acts of Parliament.
Proclamations issued by the President for purposes such as dissolving Parliament.
Rules of the superior Courts to facilitate procedure and their operations.
Regulations made by the President under the Presidential Powers Temporary Measures Act.
2. Case Law / Precedent
Precedent refers to past decisions of the superior courts. Precedents establish the legal position of cases tried
in the courts and establish the reasoning for decisions made by the judges in each particular case. Conversely,
precedents therefore guide the courts in making future decisions in similar cases brought before them.
Zimbabwe relied on precedents of Zimbabwen origin or those of any jurisdiction in which English law and
Roman-Dutch law is applied and the precedents of Rhodesia.
The maxim Stare Decisi at non queta movere best sums up the use of case law in Zimbabwe. The maxim means to
stand by old decisions and not disturb settled points. Supreme Court decisions in Zimbabwe are binding on all
interior courts. High court ruling also binds the lower courts such as the Magistrates courts.
Stare decisis is the legal principle by which judges are obliged to respect the precedents established by prior decisions.
The words originate from the Latin phrase Stare decisis et non quieta movere: stand by decisions and do not disturb the
undisturbed. In a legal context, this is understood to mean that courts should generally abide by precedents and not disturb
settled matters.
Ratio decidendi is a Latin phrase meaning "the reason" or "the rationale for the decision." The ratio decidendi is "[t]he
point in a case which determines the judgment" or "the principle which the case establishes."
In other words, ratio decidendi - legal rule derived from, and consistent with, those parts of legal reasoning within a judgement
on which the outcome of the case depends.](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-11-320.jpg)
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12PRINCIPLES OF LAW
It is a legal phrase which refers to the legal, moral, political, and social principles used by a court to compose the rationale
of a particular judgment. Unlike obiter dicta, the ratio decidendi is, as a general rule, binding on courts of lower and later
jurisdiction—through the doctrine of stare decisis. Certain courts are able to overrule decisions of a court of co-ordinate
jurisdiction—however out of interests of judicial comity they generally try to follow co-ordinate rationes.
An obiter dictum is Latin for a statement "said by the way." Merriam-Webster Online Dictionary gives obiter dictum three
definitions:
"literally, something said [dictum] in passing [obiter] . . ."
"an incidental remark or observation"
"an incidental and collateral opinion that is uttered by a judge but is not binding"
In the third meaning, an obiter dictum is a remark or observation made by a judge that, although included in the body of the
court's opinion, does not form a necessary part of the court's decision. In a court opinion, obiter dicta include, but are not
limited to, words "introduced by way of illustration, or analogy or argument." Unlike the rationes decidendi, obiter dicta are not
the subject of the judicial decision, even if they happen to be correct statements of law. Under the doctrine of stare decisis,
statements constituting obiter dicta are therefore not binding, although in some jurisdictions, such as England and Wales,
they can be strongly persuasive.
An example of an instance where a court opinion may include obiter dicta is where a court rules that it lacks jurisdiction to
hear a case or dismisses the case on a technicality. If the court in such a case offers opinions on the merits of the case, such
opinions may constitute obiter dicta. Less clear-cut instances of obiter dicta occur where a judge makes a side comment in an
opinion to provide context for other parts of the opinion, or makes a thorough exploration of a relevant area of law.
Another example would be where the judge, in explaining his ruling, provides a hypothetical set of facts and explains how
he or she believes the law would apply to those facts. ```
The advantage of Precedents
Is that they ensure informality and consistency in the application of the law and they maintain
certainty and equality of the law in similar circumstances.
The law becomes adaptable to changing circumstances.
Adoption is easy, does not require formalities of debate over lengthy periods of time.
Limits room for partiality.
Disadvantages
It comes by chance when there is a court case in changed circumstances and so to the parties the law
comes after the event as there is no prior notice.
It is no comprehensive; it only deals with the point in issue. It requires a number of related cases to
bring about a detailed body of law on any given aspect.
It can not improve on the statute law as compared to legislation.
It stifles the growth of the law by always looking back.
3. Customary Law
The customary law of Zimbabwe is generally unwritten. Customary law refers to the fixed customs and
practices of the tribes of Zimbabwe which were in practice since time immemorial. The customs must be
certain, reasonable and must had attained the recognition of formal law. For example the criminalization of
incest, in the sexual offences Act and the Criminal Law (Codification and Reform) Act is the recognition of
customary law which prohibits incest or sexual relationship with certain degrees of blood affinity.
The constitution entrenches the recognition of African Customary Law. Section 89 of the Constitution of
Zimbabwe in imposing the law to be administered, sets up African customary law as part of the law to be
administered. Other Legislation, such as the:
Customary Marriages Act
Administration of Deceased Estates Act.
Customary Law and Local Courts Act.
The acts also establish the application of Customary Law in certain respect.
The Customary Law of Zimbabwe is limited in scope in its application. It has no criminal Jurisdiction
whatsoever and it governs some areas of Marriage, Inheritance and Guardianship only.
4. Common Law
Common law of Zimbabwe refers to the unwritten law or non- statutory law. Common law excludes the
African customary Law. The common law of Zimbabwe is primarily the Roman-Dutch Law as applied at the
Cape of Good Hope on the 10th of June 1891 as per the provisions of Section 89 of the Constitution of](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-12-320.jpg)
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20 PRINCIPLES OF LAW
Contracts made by a minor are considered under two heads:
a). Those made without the guardian’s assistance and;(unassisted contracts)
b). Those made with the guardian’s assistance or made on the minor’s behalf by the guardian.(Assisted contracts)
UNASSISTED CONTRACTS
General Rule: a contract made by a minor without the guardian’s assistance is void as far as the minor is concerned and valid
as far as other party is concerned.
The authority for this proposition is the Dutch Jurist, Voet, quoted in the case of Edelstein Vs Edelstein;
“from the principles of the law it is clear that a minor who contracts without the assistance of his guardian can render others
under an obligation to himself, but does not himself become obliged to them….. [as] on the minor’s side a contract entered
into without the assistance of his guardian is ipso jure (by the law itself) null and void.”
A minor who contracts without his guardian enjoys the best of both worlds. He binds the other party to him but does not bind
himself to the other party. The option of treating the contract as void or valid rests with the minor (or, more precisely, his
guardian who acts for him). If the minor elects to treat the contract as valid, he can compel the other party to perform; he will
then also have to fulfill his own part of the contract.
If the minor prefers to treat the contract as void, the other party cannot compel him to perform his part of the bargain; a minor
who has already performed can recover from the other party whatever he has paid or delivered, but he may not keep what he
has received under the contract because this would unjustly enrich him at the other party’s expense. He must restore it, though
not necessarily in full.
CASE: Edelstein Vs Edelstein
FACT:
A female minor whose parents were divorced ( the mother was awarded custody but the father remained the natural
guardian)entered into an ante nuptial contract with E. later in 1918, she and E were married with the implied consent of her
father, who was informed of the proposed marriage and did not object. In 1947 E died leaving over £100 000. and the wife,
considering the marriage to have been out of community of property because of the ante nuptial contract, accepted certain
benefits under E’s will. In 1949, when she consulted her legal advisers with a view to drawing up her own will, the validity of
the ante nuptial contract was questioned and she sought an order declaring the marriage in community of property. Of the
parties cited as respondents, only the Commissioner for Inland Revenue opposed the order to avoid losing £33 000. death
duties.
HELD:
The wife was bound by the ante nuptial contract on the ground that, while it had excluded community of property and profit
and loss, it had conferred benefits on her through promises in it of marriage settlements by E.
HELD:
A minor is not bound by an unassisted contract even one to his benefit. The minor may elect to hold the other party bound, in
which event the minor will also have to perform his obligations. But should the minor choose to escape the contract, he is
bound only to the extent of his enrichment. Furthermore, unlike an ordinary contract, an ante nuptial contract cannot be
ratified by a minor on attaining majority as this would amount to an impermissible alteration of the matrimonial property
regime. The wife was granted the order that the marriage was in community of property.
A minor may acquire without his guardian’s assistance a perfectly valid obligation, which is sometimes not
contractual even though it arises in the course of attempting to contract, in the following circumstances:
a). ENRICHMENT
where a minor is unjustly enriched in terms of an unassisted contract, the contract remains void and he is not bound by it but
he is under an obligation to make restitution to the other party to the extent to which he has been enriched; he is not obligation
to restore whatever he has received pursuant to the contract, but only so much as still remains in his possession at the time of
the action or the surrogates of such residue.(Case: Edelstein Vs Edelstein).
In other words, where necessaries are supplied to a minor, he incurs an obligation to pay their value property purchased with
money, or the proceeds of property, originally received must be yielded up; money spent on necessaries which would otherwise
have had to be paid for out of the minor’s estate has to be accounted for. He is not liable for depreciated or destruction of
property, or for money squandered or lost.
CASE: Tanne Vs Foggitt
FACTS:
Foggitt a minor, without his guardian consent, entered into an agreement with T, the principal of a business college, to attend
typing classes for two weeks in May and the whole of April. He paid for the March lessons but then stopped attending and
refused to pay the April account.
HELD:](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-20-320.jpg)
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6. Acceptance requires knowledge of the offer.
7. Acceptance must not be subject to conditions
8. Acceptance must be in a stipulated method r manner as prescribed by the offeror.
ELIASON VS HENSHAW stipulated that the reply should be send by wagon.
9. An acceptance of an offer which is impossible to perform creates no contract.
10. Acceptance must be made during the life of the offer or during the time limit of the
offer.
11. Acceptance must be serious and should be made with the intentions that legally
binding obligations will flow. SMITH VS HUGHES.
12. Acceptance must be consistent with the essentials of a valid contract E.G. if a minor
enters into a contract, acceptance is invalid, because minors do not have contractual
capacity. EDELSTEIN VS EDELSTEIN.
MORE (Rules of acceptance)
Communication of acceptance
There are several rules dealing with the communication of acceptance:
1. The acceptance must be communicated: Powell v Lee (1908) 99 L.T. 284; Robophone Facilities Ltd v. Blank
[1966] 3 All E.R. 128. Prior to acceptance, an offer may be withdrawn.
2. An exception exists in the case of unilateral contracts, in which the offeror makes an offer to the world which can
be accepted by some act. A classic instance of this is the case of Carlill v. Carbolic Smoke Ball Co. [1892] 2
Q.B. 484 in which an offer was made to pay £100 to anyone who having bought the offeror's product and used
it in accordance with the instructions nonetheless contracted influenza. The plaintiff did so and the court ordered
payment of the £100. Her actions accepted the offer - there was no need to communicate acceptance. Typical
cases of unilateral offers are advertisements of rewards (e.g., for the return of a lost dog).
3. An offer can only be accepted by the offeree, that is, the person to whom the offer is made.
4. An offeree is not usually bound if another person accepts the offer on his behalf without his authorisation, the
exceptions to which are found in the law of agency, where an agent may have apparent or ostensible authority, or
the usual authority of an agent in the particular market, even if the principal did not realise what the extent of this
authority was, and someone on whose behalf an offer has been purportedly accepted it may also ratify the
contract within a reasonable time, binding both parties:
5. It may be implied from the construction of the contract that the offeror has dispensed with the requirement of
communication of acceptance (called waiver of communication - which is generally implied in unilateral
contracts): see also Re Selectmove Ltd [1994] BCC 349.
6. If the offer specifies a method of acceptance (such as by post or fax), acceptance must be by a method that is no
less effective from the offeror's point of view than the method specified. The exact method prescribed may have
to be used in some cases but probably only where the offeror has used very explicit words such as "by registered
post, and by that method only": see Yates Building Co. Ltd v. R.J. Pulleyn & Sons (York) Ltd (1975) 119 Sol.
Jo. 370.
7. Silence cannot be construed as acceptance: see Felthouse v. Bindley (1862) 142 ER 1037.[13]
8. However, acceptance may be inferred from conduct, see, e.g.: Brogden v. Metropolitan Railway Company (1877)
2 App. Cas. 666; Rust v. Abbey Life Assurance Co. Ltd [1979] 2 Lloyd's Rep. 334; Saint John Tugboat Co. v.
Irving Refinery Ltd (1964) 46 DLR (2d) 1; Wettern Electric Ltd v. Welsh Development Agency [1983] Q.B. 796.
Correspondence with offer
The "mirror image rule" states that if you are to accept an offer, you must accept an offer exactly, without
modifications; if you change the offer in any way, this is a counter-offer that kills the original offer: Hyde v.
Wrench (1840) 3 Beav 334. However, a mere request for information is not a counter-offer: Stevenson v.
McLean (1880) 5 Q.B.D. 346. It may be possible to draft an enquiry such that it adds to the terms of the
contract while keeping the original offer alive.
An offeror may revoke an offer before it has been accepted, but the revocation must be communicated to the
offeree, although not necessarily by the offeror: Dickinson v. Dodds (1876) 2 Ch.D. 463. If the offer was made
to the entire world, such as in Carlill's case, the revocation must take a form that is similar to the offer. However,
an offer may not be revoked if it has been encapsulated in an option (see also option contract).
Battle of the forms
Often when two companies deal with each other in the course of business, they will use standard form contracts.
Often these terms conflict (e.g. both parties include a liability waiver in their form) and yet offer and acceptance](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-32-320.jpg)
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are achieved forming a binding contract. The battle of the forms refers to the resulting legal dispute of these
circumstances, wherein both parties recognize that an enforceable contract exists, however they are divided as to
whose terms govern that contract.
Under English law, the question was raised in Butler Machine Tool Co Ltd v. Ex-Cell-O Corporation
(England) Ltd [1979] WLR 401, as to which of the standard form contracts prevailed in the transaction. Lord
Denning MR preferred the view that the documents were to be considered as a whole, and the important factor
was finding the decisive document; on the other hand, Lawton and Bridge LJJ preferred traditional offer-
acceptance analysis, and considered that the last counter-offer prior to the beginning of performance voided all
preceding offers. The absence of any additional counter-offer or refusal by the other party is understood as an
implied acceptance. In U.S. law, this principle is referred to as the last shot rule.
Under the Uniform Commercial Code (UCC) Sec. 2-207(1), A definite expression of acceptance or a written
confirmation of an informal agreement may constitute a valid acceptance even if it states terms additional to or
different from the offer or informal agreement. The additional or different terms are treated as proposals for
addition into the contract under UCC Sec. 2-207(2). Between merchants, such terms become part of the contract
unless:
a) the offer expressly limits acceptance to the terms of the offer,
b) material alteration of the contract results,
c) notification of objection to the additional/different terms are given in a reasonable time
after notice of them is received.
Material is defined as anything that may cause undue hardship/surprise, or is a significant element of the contract.
If there is no contract under 2-207(1), then under UCC Sec. 2-207(3), conduct by the parties that recognize there
is a contract may be sufficient to establish a contract. The terms for this contract include only those that the
parties agree on and the rest via gap fillers.
Postal acceptance rule
As a rule of convenience, if the offer is accepted by post, the contract comes into existence at the moment that
the acceptance was posted (Adams v. Lindsell (1818) 106 ER 250). This rule only applies when, impliedly or
explicitly, the parties have in contemplation post as a means of acceptance. It excludes contracts involving land,
letters incorrectly addressed and instantaneous modes of communication. The relevance of this early 19th century
rule to modern conditions, when many quicker means of communication are available has been questioned, but
the rule remains for the time being.
Knowledge of the offer
In Australian law, there is a requirement that an acceptance is made in reliance or pursuance of an offer: see R v.
Clarke (1927) 40 C.L.R. 227.
Contracts accepted through the post in relation to the
various legal theories
As a rule of convenience, if the offer is accepted by post, the contract comes into
existence at the moment that the acceptance was posted (Adams v. Lindsell (1818)
106 ER 250). This rule only applies when, impliedly or explicitly, the parties have in
contemplation post as a means of acceptance. It excludes contracts involving land,
letters incorrectly addressed and instantaneous modes of communication. The
relevance of this early 19th century rule to modern conditions, when many quicker
means of communication are available has been questioned, but the rule remains for
the time being.
The posting rule (or "mailbox rule" (US), "postal rule" or "deposited acceptance rule") is an
exception to the general rule of contract law in common law countries that acceptance takes place
when communicated. The posting rule states, by contrast, that acceptance takes effect when a letter is
posted.
One rationale given for the rule is that the offeror nominates the post office as implied agent and thus
receipt of the acceptance by the post office is regarded as that of the offeree. The main effect of the
posting rule is that the risk of acceptance being delivered late or lost in the post is placed upon the
offeror. If the offeror is reluctant to accept this risk, he can always require actual receipt as a condition
before being legally bound.
However, if the offeree mails a rejection and then sends an acceptance (or otherwise changes his mind),
whichever communication is received by the offeror first controls.](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-33-320.jpg)
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English case law
The rule was established by Anthony in the 19th century cases, starting with Adams v Lindsell
(1818) B & Ald 681, which was later confirmed in Dunlop v Higgins (1848) 1 HL Cas 381, Household
Fire Insurance Company v Grant (1879) 4 Ex D 216 and Henthorn v Fraser [1892] 2 Ch 27.
The posting rule applies only to acceptance. Other contractual letters (such as one revoking the offer)
do not take effect until the letter is delivered, as in Stevenson v McLean (1880) 5 QBD 346. The
implication of this is that it is possible for a letter of acceptance to be posted after a letter of
revocation of the offer has been posted but before it is delivered, and acceptance will be complete at
the time that the letter of acceptance was posted—the offeror's revocation would be inoperative.
Example 1:
Day 1: A makes an offer to B.
Day 2: A decides to revoke the offer and puts a letter in the mail to B revoking the offer.
Day 3: B puts a letter accepting the offer in the mail.
Day 4: B receives A's revocation letter.
The letter of revocation can be effective only when received, that is Day 4.
However, a contract was formed on Day 3 when the letter of acceptance was posted.
It is too late for A to revoke the offer.
Example 2:
Day 1: A makes an offer to B.
Day 2: B intends to reject the offer by putting a letter in the mail to A rejecting the offer.
Day 3: B changes his mind and sends a fax to A accepting the offer.
In this situation, whichever communication A receives first will govern.
Example 3:
Day 1: A makes an offer to sell a parcel of land to B.
Day 2: B mails her acceptance.
Day 3: Before A receives B's acceptance, B telephones A and states she wishes to reject the offer.
Day 4: B's original letter of acceptance arrives, A then records the contract as a sale.
B's acceptance of the offer means there is a binding contract -- she is obliged to pay for the
land or be liable for damages.
Under the posting rule, performance is a means of acceptance. If A orders 1000 blue coathangers and B ships
them out, that shipment is considered to be a conveyance of acceptance of A's offer to buy the coathangers.
Defective performance is also an acceptance, unless accompanied by an explanation. For example, if A orders
1000 blue coathangers, and B mistakenly ships 1000 red coathangers, this is still an acceptance of the contract.
However, if B ships the red coathangers with a note that they sent these because they had run out of blue
coathangers, this is not an acceptance, but rather an accommodation, which is a form of counter-offer.
An interesting implication of the operation of the posting rule is that an acceptance is complete once the letter of
acceptance is posted; it makes no difference whether the offeror actually receives the letter. This was
demonstrated in Byrne v Van Tienhoven (1880) 5 CPD 344. If a letter of acceptance were to be lost,
acceptance has still taken place. An exception to this would be if the offeree knows or has reason to know that
the letter of acceptance never reached the offeror. For example, if A brings a letter of acceptance to the local post
office and A sees the post office burn down a moment later, there is no acceptance.
Further the posting rule does not apply to instantaneous forms of communications. For example in Entores Ltd
v Miles Far East Corporation [1955] 2 QB 327, the Court held that the posting rule did not apply to an
acceptance by telex as the Court regarded it as an instantaneous form of communication. The general principle
that acceptance takes place when communicated applies to instantaneous forms of communication. Courts have
similarly held that the posting rule does not apply to acceptances by telephone or fax.
The courts are yet to decide whether e-mail should be regarded as an instantaneous form of communication. If
the offeree were to convey acceptance by commercially unreasonable means - by cross-country pony express, for
example - the acceptance would not be effective until it had actually been received.
A letter is regarded as "posted" only when it is in the possession of the Post Office; this was established in the
case of Re London & Northern Bank [1900] 1 Ch 220. A letter of acceptance is not considered "posted" if it is
handed to an agent to deliver, such as a courier.](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-34-320.jpg)
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The posting rule does not apply to option contracts or irrevocable offers where acceptance is still effective only
upon receipt. This is because the offeree no longer needs protection against subsequently mailed revocations of
the offer.
Where parties are at distance from one another, and an offer is sent by mail, it is universally held in this country
[United States] that the reply accepting the offer may be sent through the same medium, and, if it is so sent, the
contract will be complete when the acceptance is mailed,...and beyond the acceptor's control; the theory being
that, when one makes an offer through the mail, he authorizes the acceptance to be made through the same
medium his agent to receive his acceptance; that the acceptance, when mailed, is then constructively
communicated to the offeror.
Contracts accepted by telephone and offers that introduce special terms
such as signs, tickets and receipts
Ticket cases
In contract law, ticket cases are a series of cases that stand for the proposition that if you
are handed a ticket or another document with terms, and you retain the ticket or document,
then you are bound by those terms. Whether you have read the terms or not is irrelevant,
and in a sense, using the ticket is analogous to signing the document. This issue is an
important one due to the proliferation of exclusion clauses that accompany tickets in
everyday transactions.
The case of Parker v. The South Eastern Railway Co (1877) 2 CPD 416 illustrates restrictions on
this concept:
Knowledge of writing and of terms: If the recipient of the ticket knew that there was writing on the
ticket and also knew that the ticket contained terms, then the recipient is bound by the terms of the
contract.
Reasonable person: If the recipient did not know of the existence of the terms, then the court will
consider whether a reasonable person would have known that the ticket contained terms. If that is so,
then the ticket-holder is bound by those terms; if not, then the court will return to the general test of
whether reasonable notice of the terms was given.
The test of whether a document fits within the description of a ticket is an objective test,
that is, whether a reasonable person in the position of the ticket-holder would perceive it to
be contractual in nature. For instance, if exclusion clauses accompany a docket, it may be
held that it is not contractual in nature since it is just a receipt.
Furthermore, Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd [1989] 1
QB 433 held that if a party wishes to incorporate onerous terms into a document that is to
be just accepted by the other party, reasonable notice must be given to make it a term of the
contract.
Other ticket cases include:
L'Estrange v Graucob [1934] 2 KB 394
Olley v Marlborough Court [1949] 1 KB 532
Thornton v. Shoe Lane Parking [1971] 1 All ER 686
SPECIAL TERMS
Where an offer is made subject to special terms the offeree will not be bound by them unless
he has expressly or impliedly accepted them. This is illustrated by the following cases:
A). SIGNED DOCUMENTS
In general the effect of signing a contract is that the party signing is bound. This rule is
applied not only when the person signing studies the document but also when signing](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-35-320.jpg)
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A STATEMENT OF LEGAL PRINCIPLES, which is a statement of opinion only
except where on party to a contract states that the meaning of a clause is such and that he
intends to be bound by that meaning, in which case it is a representation of fact.
4. THE OTHER PARTY ENTERED INTO THE CONTRACT ON THE FAITH OF
THE REPRESENTATION
If the false statement did not in fact induce the contract, the person whom the
representation was made cannot set the contract aside. The misrepresentation must have
actually deceived the other party to enter the contract. the party who seeks relief must
establish that on a balance of probabilities, he would not have entered into the contract.
CASE: Poole and Mclennan Vs Nourse.
FACTS:
N advertised in The Farmer’s Weekly that he had a farm for sale. He deliberately put
exaggerated and false statements in the advertisement to attract prospective purchasers to
see the farm and charm them with its attractive features. P and M having seen the
advertisement, paid a visit to the farm and remained there for over three days. During this
time N communicated to them the true facts. N subsequently entered into a contract of Sale
with P and M. they later alleged that they had been induced to buy through fraudulent
statements in the advertisement.
HELD:
The contract was not voidable for, being in possession of the true facts, P and M could not
complain that they were misled by the false statements contained in the advertisement.
TYPES OF MISREPRESENTATION
1. Fraudulent misrepresentation, it involves a false statement made with
full knowledge of its falsity. It may involve making reckless statements without
caring about its truth. Reckless amounts to fraud but negligence does not. Making a
statement when in doubt about its truth – fraudulent diligence in ignorance.
Fraudulent misrepresentation occurs when one makes representation with intent
to deceive and with the knowledge that it is false. An action for fraudulent
misrepresentation allows for a remedy of damages and rescission. One can also sue
for fraudulent misrepresentation in a tort action. Fraudulent misrepresentation is
capable of being made recklessly.
REMEDIES:
- It is a delict, damages are to put the aggrieved party in the position he would have been, had
he ot been misled. This is to make good the loss suffered by the innocent party.
- He may claim rescission of the contract and damages.
- He may treat the contract as binding and claim damages for any loss he has suffered.
2. Negligent misrepresentation, a negligent statement made with the
intention to induce a contract. Failure to take steps which a reasonable man would have
taken in the circumstances. Negligent misrepresentation at common law occurs when the
defendant carelessly makes a representation while having no reasonable basis to believe it to
be true. This type of misrepresentation is relatively new and was introduced to allow
damages in situations where neither a collateral contract nor fraud is found. It was first seen
in the case of HEDLEY BYRNE V HELLER [1964] A.C. 465 where the court found
that a statement made negligently that was relied upon can be actionable in tort. Lord
Denning in ESSO PETROLEUM CO. LTD. V MARDON [1976] Q.B. 108 however,
transported the tort into contract law, stating the rule as:](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-50-320.jpg)
![rmmakaha@gmail.com
55
55 PRINCIPLES OF LAW
PHYSICAL DURESS
1. Duress to the person
Professor Ronald Griffin, Washburn University School of Law, Topeka, KS, puts physical duress
simply: "Your money or your life." In BARTON V. ARMSTRONG [1976] AC 104, a decision
of the Privy Council, Armstrong threatened to kill Barton if he did not sign a contract, which was
set aside due to duress to the person. An innocent party wishing to set aside a contract for duress
to the person need to prove only that the threat was made and that it was a reason for entry into
the contract; the onus of proof then shifts to the other party to prove that the threat had no
effect in causing the party to enter into the contract. Duress can be made also by social influence.
Courts frown on this type of contract because there is really no manifestation of mutual assent
"meeting of the minds" or agreement to the terms. Rather, when someone is threatened and
agrees to act to avoid physical harm by the party making the offer, all you truly have is a mirror of
the other party's manifestation of mutual assent not the manifestation of mutual assent by the
party being forced or induced to assent to the terms of the contract. Therefore, the meeting of
the minds "in truth" does not exist. Since, there is no meeting of the minds there can be no
contract.
2. Duress to goods
In such cases, one party refuses to release the goods belonging to the other party until the other
party enters into a contract with them. For example, in Hawker Pacific Pty Ltd v Helicopter Charter
Pty Ltd (1991) 22 NSWLR 298, the contract was set aside after Hawker Pacific's threats to
withhold the helicopter from the plaintiff unless further payments were made for repairing a
botched paint job.
ECONOMIC DURESS
A contract is voidable if the innocent party can prove that it had no other practical choice (as
opposed to legal choice) but to agree to the contract.
The elements of economic duress
1. Wrongful or improper threat: No precise definition of what is wrongful or improper. Examples
include: morally wrong, criminal, or tortuous conduct; one that is a threat to breach a contract "in bad
faith" or threaten to withhold an admitted debt "in bad faith".
2. Lack of reasonable alternative (but to accept the other party's terms). If there is an available
legal remedy, an available market substitute (in the form of funds, goods, or services), or any other
sources of funds this element is not met.
3. The threat actually induces the making of the contract. This is a subjective standard, and takes
into account the victim's age, their background (especially their education), relationship of the parties,
and the ability to receive advice.
4. The other party caused the financial distress. The majority opinion is that the other party must
have caused the distress, while the minority opinion allows them to merely take advantage of the
distress.
REMEDY.
Duress is a delict entitling the victim to delictual damages on the proof of patrimonial loss –
whether he elects to uphold or to rescind the contract. Restitution in integrum is a contractual
remedy, however, based on defective consent, not wrongful infliction of harm, and is therefore in
principle available whether or not harm has resulted from entry into the contract.
Possibility of performance – physical and legal
possibility
Possibility of performance means the contract must be possible to complete because legally binding
contracts cannot be undertaken to peroform an impossible act. This is not to say that an entrepeneur](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-55-320.jpg)
![rmmakaha@gmail.com
66
66 PRINCIPLES OF LAW
Breach and defenses
Where a contract for the benefit of a third party is breached by the non-performance
of the promisor, the beneficiary can sue the promisor for the breach just as any party
to a contract can sue the other. Because the rights of the third party are defined by
the contract created between the promisor and the promisee, the promisor may
assert against the beneficiary any defenses to the contract that could be asserted
against the promisee. These include all of the traditional basis by which the
formation of a contract may be challenged: lack of capacity, lack of consideration,
the Statute of frauds, etc.; and all of the traditional bases by which non-performance
on the contract may be excused: failure of consideration, impossibility, illegality,
frustration of purpose, etc.
Because the promisor can assert any defenses that could be asserted against the
promisee, the beneficiary also becomes liable for counterclaims on the contract that
the promisor could establish against the promisee. This liability can never exceed the
amount that the promisor owes under the contract. In other words, if the promisor
is owed money by the promisee, any award to the third party for the promisor's
failure to perform can be reduced by the amount thus owed. If the promisor is owed
more than the value of the contract, the beneficiary's recovery will be reduced to
nothing (but the third party can never be made to assume an actual debt).
A creditor beneficiary can sue both the promisor and the promisee, but the beneficiary
cannot recover against both. If the suit is successful against one party to the contract,
the other party will be dismissed. Because the creditor beneficiary is receiving the
performance of the promisor in order to fulfill the promisee's debt, the failure of the
promisor to perform means that the beneficiary can still sue the promisee to recover
the preexisting debt. The failure of performance simply means that the debt has never
been paid.
A donee beneficiary can sue the promisor directly to enforce the promise. (SEAVER V.
RANSOM, 224 NY 233, 120 NE 639 [1918]). A donee beneficiary is when a
contract is made expressly for giving a gift to a third party, the third party is known
as the donee beneficiary. The most common donee beneficiary contract is a life
insurance policy.
Assignment, cession and delegation
Assignment
An assignment (Latin cessio) is a term used with similar meanings in the law of
contracts and in the law of lease. In both instances, it encompasses the transfer of
rights held by one party—the assignor—to another party—the assignee. The legal
nature of the assignment determines some additional rights and liabilities that
accompany the act.
This is the transfer of a right or interest to another.
Liabilities
Continuing liability of assignor
Assignor remains liable unless there is an agreement to the contrary. An agreement
must manifest intent to transfer rights, it may not necessarily be in writing, words](https://image.slidesharecdn.com/lawofcontract-120131010204-phpapp01-140617131721-phpapp02/85/Ari-Pregen-Law-Contracts-66-320.jpg)
Uploaded byAri Pregen
Ari Pregen - Law Contracts
This document discusses key principles of law, including definitions of law, the elements that make up a just law system, and sources of law. It begins by defining law as rules established by authority to regulate behavior. It then analyzes the key elements that make up the definition, including that laws prescribe what must, may, and may not be done, and are recognized and enforced by the state. The document also discusses the principles of a just law system, including equality, uniformity, certainty, generality, authority, and reasonableness. It explains the differences between real and personal rights, and natural and juristic persons. Finally, it outlines the main sources of law as legislation, case law
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Ari Pregen - Law Contracts
- 1. 1 1PRINCIPLES OF LAW PRINCIPLESOF LAW PART 1 The concept of Law – Define what is meant by the term Law LAW are rules established by authority to regulate the behaviour of members of a community, society or country. LAW are legal rules. Law is a system of rules, usually enforced through a set of institutions. It shapes politics, economics and society in numerous ways and serves as a primary social mediator of relations between people. Law- That which is laid down, ordained, or established. A rule or method according to which phenomenon or actions co-exist or follow each other. Law, in its generic sense, is a body of rules of action or conduct prescribed by controlling authority, and having binding legal force ANALYSIS OF THE DEFINITION “Bodies of rules governing human conduct” Law in its sense, prescribes what must, what may and what may not Be done. It is an instrument designed to regulate human behaviour and order in the society. “Recognized as binding by the state” When Law finds acceptance in the common Law it is regarded as binding by the state. Here we are concerned with conscience of the individuals’ own view of what is wrong or right, i.e. what an individual considers desirable or undesirable as regards conduct. e.g. Ethical principles like, “l must be helpful to others” or “l must respect my parents”. An ethical principle or rule is a code of conduct, which is carried personally by an individual and acts as a motive to behave in a certain fashion. Such principles come about during the course of a life of an individual. Law must conform to the prevailing sense of justice in a community or it will fail to preserve peace. “Enforcement” In order to ensure that rules of human conduct are obeyed by all the inhabitants of the state it is necessary to have some form of compulsion or influence which induces them to comply with the rules. No rule can be effective without the method of compulsion called a “sunction” NB: A Sunction is some unpleasant or inconvenient consequence which a person knows beforehand will be inflicted on him if he doesn’t follow a rule. A breach of the Law often invites punishment in the form of imprisonment, a fine or compensation. Associated with punishment, as far as the Law is concerned, are the mechanisms to enforce these legal forms. Thus the police, courts and penal institutions are set up to effect punishment. Such formal mechanisms are not evident in the field of ethics and positive morality where censure and punishment are more subtle.
- 2. 2 2PRINCIPLES OF LAW Theelements of Law and the difference between real and personal rights PRINCIPLES OF A JUST LAW. 1. Equality Law consist of rules, which apply to all persons in the same condition. What applies to Sam has equal application to Jeff, provided they fall in the same classification. Rich or poor, employer or employee, all men are the same in the eyes of Law if they fall in the same class. If Tom drives a car, Sam walks along the road and Dick cycles, they all fall into different categories applicable to road users and rules applying to one do not necessarily apply to others. Each would be subject to Laws governing the activities they are engaged in: The fact that Jill drives a Datsun and Ben drives a Benz is immaterial to the application of rules of negligence or Law against drunken driving. Exceptions to equality are insanity, minors but considerations must be based on distinctions which are objective and logical. If B a Lawyer sexually abuses a minor and C a teacher commits the same offence, the Law pertaining to the case will be applied equally regardless of status. NB: these considerations must be based on distinctions which are both objective and logically relevant. 2. Uniformity Uniformity simply means all people in all areas should be treated uniformly. The same Law that applies to Joe in Gokwe should apply to Tom in Mutare, provided they have committed a similar offence. If Mr. X a Lawyer in Harare and Mr. Z a bus driver in Kwekwe commits the same offense, the legal fate that is visited upon them is identical. The aspect of authority of the High Court ensures the uniform application of Law as far as possible. If a person is a foreigner and commits a crime he/she is treated applying the principles of Law in that country. 3. Certainty Certainty in the Law prescribes how a person must, or may, or may not act, and to that extend it safeguards the rights and liberties of the people themselves. If X infringes Y’s right, Y will know that because the rules of Law are certain a remedy lies in the courts. Inn the same way, people can order their affairs knowing what the legal consequences of a particular course or courses of action will be. Certainty also acts as a limitation on the tries of fact in that they are bound to follow the establishment rules of law as set out beforehand and in so doing silly or arbitrary decision making is checked. Requirements of certainty are: Rules must be formulated in clear and unambiguous terms; Law must be known i.e. new laws must be disclosed i.e. promulgated (made known). By publication in the Government gazette. Once this process has been carried out, the legal maxim IGNORANTIA LEX NEMINEM EXCUSAT (ignorance of the law excuses no one) is said to apply.
- 3. 3 3PRINCIPLES OF LAW e.g.if an individual who has been out of the country in search of work for years contravenes a new law published in his absence he is nevertheless guilt of the relevant offence although he had no possible chance of having learnt the new law. However, this concept has been subject to criticism in that in practice so many laws are promulgated that even lawyers cannot possibly presume to know them all. The access to the gazettes and the level of literacy of a person to be able to comprehend the gazette are other issues of concern. Despite all that, as things stand at present the maxim still applies in Zimbabwe. 4. Generality In order to be just the law must be consistant and it must be applied without distinction to all persons of the same class and in the same circumstances. The general rule should remain fixed as a constant and not to be varied arbitrarily from one case to the other simply because of the magistrates or judges personal feelings. 5. Authority This applies to the Law enforcement machinery clothed in authority by parliament to enforce Law equally, uniformly to all races, tribes and so on. Authority signifies that all Laws used should be applied by only bodies given the authority. 6. Reasonableness According to VOET, (Legal Jurist), “Law must order what is honourable and prohibit what is reprehensible”. This simply means law should be a code of conduct that governs society. Law should be just in that, what is wrong to be treated as wrong and what is good to be treated as good. Thus arbitrary, absurd and senseless rules will tend to be disobeyed. The concept of “reasonableness” or “the reasonable person “ is of wide application in our legal system and if the law expects those to whom it applies to behave reasonably, then surely the law itself must be seen to be reasonable. The difference between real and personal rights Personal rights are those rights that someone has regarding his/ her body, eg. body protection and self-esteem and self respect while real rights refers to those rights that bind all the citizens of the country, those rights will include no rape, no crime, no smoking in public and etc. The concept of legal personality and the difference between natural and juristic persons The concept of legal personality Legal personality (also artificial personality, juridical personality, and juristic personality) is the characteristic of a non-human entity regarded by law to have the status of a person. A legal person (Latin persona ficta), also legal person, artificial person, juridical person, juristic person, and body corporate) has rights, protections, privileges, responsibilities, and liabilities under law, just as natural persons (humans) do. The concept of legal personality is perhaps one of the most
- 4. 4 4PRINCIPLES OF LAW fundamentallegal fictions. It is pertinent to the philosophy of law, as well as corporations law (the law of business associations). Legal personality allows one or more natural persons to act as a single entity (a composite person) for legal purposes. In many jurisdictions, legal personality allows such composite to be considered under law separately from its individual members or shareholders. They may sue and be sued, enter into contracts, incur debt, and have ownership over property. Entities with legal personality may also be subject to certain legal obligations, such as the payment of tax. An entity with legal personality may shield its shareholders from personal liability. The concept of legal personality is not absolute. "Piercing the corporate veil" refers to a legal decision in which the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Legal persons may not have all the same rights as natural persons - for example, human rights, including the right to freedom of speech. Although the concept of a legal person is more central to Western law in both common law and civil law countries, it is also found in virtually every legal system. Some examples of legal persons include: Cooperatives (co-ops), which are business organization owned and democratically operated by a group of individuals for their mutual benefit, are legal persons. Corporations are by definition legal persons. A corporation sole is a corporation constituted by a single member, such as The Crown in the Commonwealth realms. A corporation aggregate is a corporation constituted by more than one member. Companies, a form of business association that carries on an industrial enterprise, are usually corporations, although some companies may take forms other than a corporation, such as associations, partnership, unions, joint stock companies, trusts, and funds. Limited liability companies are are unincorporated associations having certain characteristics of both a corporation and a partnership or sole proprietorship. LLCs, like both incorporated and unincorporated companies, are legal persons. Sovereign states are legal persons. Municipalities, as "creatures of statute" are legal persons. Other organizations or types of organizations may be created by statute as legal persons, In the international legal system, various organizations possess legal personality. These include intergovernmental organizations (the United Nations, the Council of Europe) and some other international organizations (including the Sovereign Military Order of Malta, a religious order). Temples, in some legal systems, have separate legal personality. Not all organizations have legal personality. For example, the board of directors of a corporation, legislature, or governmental agency typically are not legal persons in that they have no ability to exercise legal rights independent of the corporation or political body which they are a part of. The difference between natural and juristic persons A "juristic person" is synonymous with a "juridical person", "legal person" or "artificial person". Such persons are created, either by obtaining the express approval of the legislature or by following special procedures for the creation of such persons. Juristic persons may also be known as companies, corporations, incorporations, societies, associations or similar terms depending on local legislation. The term "natural person" is somewhat unusual, but would normally be interpreted as meaning a person that is not created but who is born. A synonym would be "non juristic person". The purposes and functions of the law PURPOSE OF LAW 1.Presevation of Order
- 5. 5 5PRINCIPLES OF LAW The Law would not be required if all people were perfect. In providing the rules of conduct, the Law stipulates what must be done and may not be done. This is in order that the individual and collective rights of each member of the community may be protected. The Law tries to prevent one person’s right clashing with each others rights or rights of an individual from clashing with the rights of a community, thus preserving peace and order. If every person did just as he wished, allowing his instincts and desires uninhibited, there could be no society, no community and the Law of the judge would soon prevail. 2. Maintain Justice For our purpose of Law we will consider justice to mean fairness, in other words justice is what appears to be right to a fair-minded person. Justice is not only the Law’s main object but it is also its chief instrument in fulfilling the Law’s other main object of preserving peace and order in the community. It is obvious that peace and order reign when the members of the community obey the Laws. 3. Settlement of Disputes Enforcement – a breach of Law often invites punishment in the form of imprisonment, fine or compensation. Associated with punishment are the mechanism to enforce these legal forms i.e. police, courts and other institutions were set up to effect punishment and to enforce the Law. NB: these are collectively referred to as the Law Enforcement Machinery. The sources of Law – legislation, judicial precedent, common law, etc. Sources of law are the materials and processes out of which law is developed. In modern nation states, the sources of law come either from the written law or the unwritten law . Constitution, statutes, case law, and regulations issued by government agencies. Sources of law for public international law and religious law differ, however, from the primary law of individual countries. The natural law theory argues that some rules objectively existing in the nature also are source of law, while legal positivism argues that only the rules made by sovereignty can be the sources of law. There are three main sources of law in the world. They are 1. legislation (it includes constitution and statutes which are prepared by Parliament) 2. case law or decisions of the higher court 3. customary law or custom Sources of Zimbabwean Law 1. Legislation Legislation is law laid down by an organ of the State which has the power to do so. These laws are embodied in writing and are known as statutes (or acts). In Zimbabwe, Parliament is the highest organ that can pass legislation at the national level. There are also other bodies, that can pass subordinate legislation. These include the provincial legislatures which pass provincial acts and municipal councils which pass by laws. Legislation is a powerful source of law. In principle it binds the whole society. 2. Precedent / Case law / Court Decisions
- 6. 6 6PRINCIPLES OF LAW Courts are institutions that apply the law on daily basis. Judges and magistrates, like all lawyers consult legislation and rules of common law and custom applying to the particular case before them. Courts also take into account their previous judgements in similar cases, because they are bound to the approach followed in the past. Previous judicial decisions therefore constitute law and the way in which the law was applied there is authoritative. The reason for this lies in the system of judicial precedent, also called the doctrine of stare decisis, which applies in Zimbabwe. The application of the doctrine of precedent depends, among other things, on reported cases. Various concepts / Doctrines in the Application of Case Law. a). STARE DECISIS (Stare Decisis et non quieta movere) Case Law is built upon the precedent system or doctrine of “Stare decisis et quieta movere” this term means “to stand by previous decision and not disturb settled points”. Once a court has given a certain decision it and those courts which are subordinate to it must in future give the same decision on the same point. The main reason for this doctrine is to achieve certainty in the Law. If judges were allowed to create new principles on an “Ad hoc” basis or to arbitrarily change the Law as they pleased, it follows that the Law would vary from day to day and from judge to judge. Consequently we could not go about our business in the certainty that what we were doing was lawful or unlawful. There will be no equal treatment before the law - in other words, no justice. Application of Stare Decisis: The Hierarchy of the Courts. The doctrine of stare decisis is also based on an understanding of the hierarchy of the courts. In Zimbabwean Courts, the Supreme Court is the highest court of authority. It is not bound to follow its own decisions. As a result it is possible for the Supreme Court to overrule previous decisions as erroneous(wrong /mistaken). This is important for the development of the Law. NB: the Law is not static, though the change ought not to be too sudden. Beneath the Supreme Court we have the High Court which is again a Superior Court of Record, and its decisions are binding on all the lower Courts which in practice generally means the Magistrates’ Courts in Zimbabwe. The decisions of the High Court are not binding on itself unless the Court operates as a “Lower Court”. e.g. a three-judge court’s judgment (i.e. three judges sitting) is binding on a two-judge Court e.t.c. However, where one judge decides a matter s/he need not follow the decisions of another judge of the High Court, although of course such decision will be highly persuasive. The Inferior Courts, meaning the Magistrates’ Courts and the primary Court, are not obliged to follow the decisions of other Magistrates or presiding Officers as the case maybe. b). RATIO DECIDENDI When in terms of the doctrine of “Stare Decisis” a court is obliged to follow the decisions of the superior Courts, it is the reasons or principles for the decision (Ratio decidendi) that
- 7. 7 7PRINCIPLES OF LAW mustbe followed. Various approaches to selecting the ratio decidendi have been suggested the ratio decidendi have been suggested by Jurists. NB: An approach to selecting the Ratio Decidendi from a case by Dr A.L. Good-hart 1930. Example: (Suppose) in a certain case the court finds that facts A, B and C exist. It then excludes fact A as immaterial, and on facts B and C it reaches conclusion X. what is the ratio decidendi of this case?. There are two principles: i. In any future case in which facts are A, B and C, the Court must reach conclusion X, and; ii. In any future case in which the facts are B and C the Court must reach conclusion X. In second case the absence of fact A does not affect the result, for fact A has been held to be immaterial. The court, therefore, creates a principle when it determines which the materials are and which are the immaterial facts on which it bases its decision. If in a future case further material facts in addition to B and C are found, conclusion X will not necessarily be binding. The court may have to apply a new principle to reach a conclusion and thus the judge may choose not to follow the former case. If the difference is so small as to be unimportant then the precedent case is indistinguishable and must be applied but; If the difference between the two cases is so great that the Law laid in the precedent case is not really relevant., then the precedent case is distinguishable and should not be applied. c). OBITER DICTA These are statements said in courts “by wayside” in the course of judgement and these are therefore incidental to central issues of the case or in the course of a judgement. A judge sometimes express his opinion upon a point of Law which is not necessary for the decision for the decision of the case such an expression of opinion is termed an “Obiter Dictum”. It is practiced especially as a result of custom since judge derived facts from custom. Such statements may be of persuasive authority in future cases. Thus in “Jajbhay Vs Cassim” 1939 AD 537. Van Den Heever J.A. made the statement that in a case where two estate agents had been employed and it was impossible to determine which of the two the effective cuase of the sale was, both agents would be entitled to their full commission. This statement was made Obiter, or by the way, because it was not necessary for or applicable to the decision in that case. However, this Obiter dictum was later accepted and formed part of the Ratio Decidendi in the case of “ Petersen Vs Jajbhay” 1940 TPD 182. Advantages: It is convenient in that, instead of examining principle of Laws anew each time a case is brought before the court previous decision can be relied upon in applying principles of Law to the facts.
- 8. 8 8PRINCIPLES OF LAW There is certainty, equality, reliability and uniformity. Disadvantages: Laws are usually outdated i.e. there is perpetuity of bad laws. No promulgation or notice of the new Laws to the public and to the parties, the Law is not exposed. Judicial Law is not comprehensive since one judge decides only on a single point of Law without debate and its implication may not have been considered. It is not binding in some future cases. 3. Customary Law Customary law is generally unwritten law. It is fixed practices in accordance with which people live because they regard it as the law. Customary law therefore does not concern all customs or practices, such as practices of polite behaviour. Old Germanic law also consisted of customs. The same can be said of indigenous law. In modern law custom does not play such an important role as a formative source of law. Any assertion of a custom as law has to be proved. CUSTOMS These are rules of conduct, habitually observed by individuals of a particular community. Or, May be defined as those habits, norms or instincts or usually practice of behaviour, inherited by groups of people in a society or community. Customary Law is the oldest form of Law known to man. In primitive communities almost the whole of the Law existed in the shape of customs. The people regulated their conduct according to rules, which their ancestors had been accustomed to observe in the past. These rules were not recorded but were binding in the course of ages through their observance some of the customs were based on religious belief. Custom may mean a social custom or may mean a legal custom. a). Social Custom. Are rules of contact habitually observed by individuals of a particular community. The social customs therefore are persuasive and usually observed by those persons adhering to the custom consent out of the need of social acceptance in the chosen community or group. Punishment is done by the local section of the community hence presiding officers should be accustomed with some of the Laws e.g. Kraal head, Headman, Chiefs etc. b). Legal Custom. It involves state control and entails duties which must be observed where as social custom entails practices. Punishment is done by the state in legal custom e.g. customary marriage. Requirements for a custom to be legally binding. 1. Reasonable
- 9. 9 9PRINCIPLES OF LAW The requisite of reasonable is very important and always scrutinized by the courts. Courts can only hold a custom to be reasonable where the custom was design to prevent disputes among persons engaged in certain activities .e.g. fishing: Case: Van Breda Vs Jacobs. 2. Certainty This stipulates that for a custom to be accepted it must be known. The persons to whom the custom is claimed to have force of Law must known the existence of such a custom for it to be accepted as binding. 3. Long establishment of custom The custom should have been practiced for a reasonable period of time. It is necessary that the custom must have existed for a sufficient length of time to have it become generally known. 4. Uniformity of observance Means that the custom must have been invaluably complied by the class of persons to whom it applies and the custom should be obligatory and not optional. 5. Number of witnesses. A substantiated number of witness are necessary. A Roman-Dutch Jurist suggested that these should be not less than Ten (10). NB: These principles were enunciated in this case: CASE: Van Breda Vs Jacobs FACTS: The case concerned a custom which prevailed amongst fisherman at False Bay in the Cape Province, S.A. it had been a standing custom known as first come first pull amongst local fisher man at the False Bay that once fisherman had set line or nets in a beach between the Cape points where no boats were permanently stationed. Other fisherman were not entitled to set their lines within a reasonable distance in order to poach an others’ fish. HELD: i. It was held by the court that this practice was “reasonable” in that it was designed to prevent disputes amongst fisherman. ii. It was held that the custom had been “Uniformly observed” amongst the fisherman at the time. iii. It was proved that the custom had “existed for some 45 years” and had been generally observed by all the fishermen in this locality. The court having established these facts recognized the custom as being legally binding.
- 10. 10 10PRINCIPLES OF LAW AnotherExample of Custom Law practiced in the Netherlands was: The nucleus of these Custom Laws was influenced by Roman-Dutch Laws. And of these customs were family relations, and business relations. The following Laws were to be observed: i. No one should be enriched to the prejudice of another; ii. No-one should improve his position by means of his own wrong. iii. Relationship by blood confers rights in respect of a deceased persons’ property. NB: Limits to changing of Customary Law: Customary Law can never contradict an Act of Parliament; It can never be contrary to natural justice. Custom still applies in primary courts. The significance of the customary law and Primary Courts Act of 1981 is that for the first time in Zimbabwe, customary Law is administered by a single hierarchy of courts, i.e. to say that ultimately customary Law matters are appealable to the Supreme Court. Outdated Customs will be relegated in time to the archives. 4. Common Law When a specific matter is not governed by legislation, common law usually applies. Zimbabwen common law is mainly the 17th and 18th century Roman-Dutch law that was transplanted to the Cape. This forms the basis of modern Zimbabwen law and has binding authority. Examples of common law crimes include murder, robbery and rape, etc. Whilst Zimbabwen common law is mainly Roman- Dutch law, not all the principles of Roman-Dutch law were transplanted to Zimbabwe. Sometimes English law had, by means of precedent, influenced Zimbabwen common law. Some common law principles are, for this reason, no longer pure Roman-Dutch law. The sources of Roman-Dutch law are the old sources which are the following: Legislation (placaaten) - few of these still apply in Zimbabwe Judgements of the old Dutch courts Writings of learned authors (the so-called old authorities) such as Hugo de Groot, Voet, van Leeuwarm and van der Linden. 5. Authoritative texts It has already been pointed out that the writings of the old authorities on common law have binding force as a source of law. Many academics and other lawyers write books and articles in law journals. There are useful sources in which to find legal principles. The authors explain the whole legal position with respect to legislation, common law and case law. Legal practitioners, the courts and students consult these writings on regular basis. Although these writings do not have binding authority, they can sometimes have persuasive authority. A court may decide to follow the opinion of a particular author, or to depart from a precedents which is at variance with such an opinion. In this way modern authors can influence legal reform. 6. Indigenous Law (south Africa) Many black communities live according to indigenous law, which also takes on the form of written or unwritten customary law. Indigenous law is applied in the ordinary courts. The Evidence Amendment Act, (Act 45 of 1988) stipulates that a court can take judicial notice of indigenous law, provided that it is not in conflict with the principles of public policy or natural justice. In some instances an expert will have to give testimony on the content of these rules. The Black Administration Act, 1927 constitutes a partial codification of the principles of indigenous law albeit in a distorted form. The Code of Zulu Law is an example of codified African Customary Law. Case law on African Customary law is also applied. The big challenge facing democratic South Africa is to free indigenous law from the effects of colonial and apartheid domination and to develop a legal system that reflects the true values of a new democratic South Africa. The entire South African legal system and its sources must be re-examined
- 11. 11 11PRINCIPLES OF LAW critically.All law is being subjected to critical scrutiny to reflect the new constitutional order. The central values of the South African Constitution mainly democracy, equality, dignity and freedom require a fresh look at South African common law, indigenous law, and religious personal law so that the new South African legal system will reflect the plural nature of the South African society and put and end to South Africa's colonial and apartheid past in its legal system. The process of law reform has begun but is bound to be a long process. Detailed Notes Zimbabwe Context 1. The Legislature Laws made by parliament The most modern source of law Most important and quickest method of making new law, changing existing law, amending or repealing or abrogating the law altogether. Legislation refers to the law validly enacted by the legislative authority of Zimbabwe and assented to by the President of Zimbabwe. In Zimbabwe the legislative authority of Zimbabwe vests in the President and parliament of Zimbabwe which is the Primary Legislation states as follows: The Legislature of Zimbabwe can confer powers on any authority to create binding laws. Currently the Legislature of Zimbabwe is a bicameral system consisting of a Lower House (Parliament) and an upper House (Senate). Legislation brought through parliament has to be scrutinized by the Senate before it goes for assent to the executive President. The senate was recently ushered in through Constitutional Amendment Number 17 of 2005. The method of passing legislation is entrenched in Section 511 of the Constitution. All legislation in Zimbabwe is styled Acts of Parliament or Statutes. Other authorities such as the President, acting unilaterally, and Ministries can pass legislation known as Statutory Instruments, or Subsidiary Legislation. Subsidiary or Subordinate Legislation consists of the following: Regulations made by a Minister for purposes specified in the Enabling Act of Parliament. Bye-Laws created by specified local authorities such as Urban or Rural Councils, acting under powers given to them by the relevant Acts of Parliament. Proclamations issued by the President for purposes such as dissolving Parliament. Rules of the superior Courts to facilitate procedure and their operations. Regulations made by the President under the Presidential Powers Temporary Measures Act. 2. Case Law / Precedent Precedent refers to past decisions of the superior courts. Precedents establish the legal position of cases tried in the courts and establish the reasoning for decisions made by the judges in each particular case. Conversely, precedents therefore guide the courts in making future decisions in similar cases brought before them. Zimbabwe relied on precedents of Zimbabwen origin or those of any jurisdiction in which English law and Roman-Dutch law is applied and the precedents of Rhodesia. The maxim Stare Decisi at non queta movere best sums up the use of case law in Zimbabwe. The maxim means to stand by old decisions and not disturb settled points. Supreme Court decisions in Zimbabwe are binding on all interior courts. High court ruling also binds the lower courts such as the Magistrates courts. Stare decisis is the legal principle by which judges are obliged to respect the precedents established by prior decisions. The words originate from the Latin phrase Stare decisis et non quieta movere: stand by decisions and do not disturb the undisturbed. In a legal context, this is understood to mean that courts should generally abide by precedents and not disturb settled matters. Ratio decidendi is a Latin phrase meaning "the reason" or "the rationale for the decision." The ratio decidendi is "[t]he point in a case which determines the judgment" or "the principle which the case establishes." In other words, ratio decidendi - legal rule derived from, and consistent with, those parts of legal reasoning within a judgement on which the outcome of the case depends.
- 12. 12 12PRINCIPLES OF LAW Itis a legal phrase which refers to the legal, moral, political, and social principles used by a court to compose the rationale of a particular judgment. Unlike obiter dicta, the ratio decidendi is, as a general rule, binding on courts of lower and later jurisdiction—through the doctrine of stare decisis. Certain courts are able to overrule decisions of a court of co-ordinate jurisdiction—however out of interests of judicial comity they generally try to follow co-ordinate rationes. An obiter dictum is Latin for a statement "said by the way." Merriam-Webster Online Dictionary gives obiter dictum three definitions: "literally, something said [dictum] in passing [obiter] . . ." "an incidental remark or observation" "an incidental and collateral opinion that is uttered by a judge but is not binding" In the third meaning, an obiter dictum is a remark or observation made by a judge that, although included in the body of the court's opinion, does not form a necessary part of the court's decision. In a court opinion, obiter dicta include, but are not limited to, words "introduced by way of illustration, or analogy or argument." Unlike the rationes decidendi, obiter dicta are not the subject of the judicial decision, even if they happen to be correct statements of law. Under the doctrine of stare decisis, statements constituting obiter dicta are therefore not binding, although in some jurisdictions, such as England and Wales, they can be strongly persuasive. An example of an instance where a court opinion may include obiter dicta is where a court rules that it lacks jurisdiction to hear a case or dismisses the case on a technicality. If the court in such a case offers opinions on the merits of the case, such opinions may constitute obiter dicta. Less clear-cut instances of obiter dicta occur where a judge makes a side comment in an opinion to provide context for other parts of the opinion, or makes a thorough exploration of a relevant area of law. Another example would be where the judge, in explaining his ruling, provides a hypothetical set of facts and explains how he or she believes the law would apply to those facts. ``` The advantage of Precedents Is that they ensure informality and consistency in the application of the law and they maintain certainty and equality of the law in similar circumstances. The law becomes adaptable to changing circumstances. Adoption is easy, does not require formalities of debate over lengthy periods of time. Limits room for partiality. Disadvantages It comes by chance when there is a court case in changed circumstances and so to the parties the law comes after the event as there is no prior notice. It is no comprehensive; it only deals with the point in issue. It requires a number of related cases to bring about a detailed body of law on any given aspect. It can not improve on the statute law as compared to legislation. It stifles the growth of the law by always looking back. 3. Customary Law The customary law of Zimbabwe is generally unwritten. Customary law refers to the fixed customs and practices of the tribes of Zimbabwe which were in practice since time immemorial. The customs must be certain, reasonable and must had attained the recognition of formal law. For example the criminalization of incest, in the sexual offences Act and the Criminal Law (Codification and Reform) Act is the recognition of customary law which prohibits incest or sexual relationship with certain degrees of blood affinity. The constitution entrenches the recognition of African Customary Law. Section 89 of the Constitution of Zimbabwe in imposing the law to be administered, sets up African customary law as part of the law to be administered. Other Legislation, such as the: Customary Marriages Act Administration of Deceased Estates Act. Customary Law and Local Courts Act. The acts also establish the application of Customary Law in certain respect. The Customary Law of Zimbabwe is limited in scope in its application. It has no criminal Jurisdiction whatsoever and it governs some areas of Marriage, Inheritance and Guardianship only. 4. Common Law Common law of Zimbabwe refers to the unwritten law or non- statutory law. Common law excludes the African customary Law. The common law of Zimbabwe is primarily the Roman-Dutch Law as applied at the Cape of Good Hope on the 10th of June 1891 as per the provisions of Section 89 of the Constitution of
- 13. 13 13PRINCIPLES OF LAW Zimbabwe.The Common Law was transplanted from the Cape and imposed to Zimbabwe. However, the common law at the Cape in 1891 had been heavily influenced by English Law, hence the common law of Zimbabwe must be said to be Anglo-Roman-Dutch Law. A recent development in Zimbabwe ousts the application of Common Law. The recent Codification of Zimbabwe's Criminal Law through the Criminal Law (Codification and Reform) Act jeopardizes the application of Common Criminal law Section 3 of the Act states unequivocally that Roman-Dutch Criminal Law no longer to apply. 5. Authoritative Texts One cannot safely assert that authoritative text from acclaimed legal authors form part of Zimbabwe's law. However textbooks on law have persuasive authority upon which reliance can be had in making judicial decisions. The few authoritative legal authors in Zimbabwe rely on old Roman Dutch writers. They mainly write commentaries and guides to the law of Zimbabwe. Professor Geoff Feltoe has several Guides to the Laws of Zimbabwe which are widely used and referred to in litigation. His comments and assertions form persuasive grounds upon which cases can be decided. Understanding of the structure, hierarchy and composition of the Courts 1) SUPREME COURT A supreme court (also called a court of last resort, instance, or judgment; or a high or highest court) is in some jurisdictions the highest judicial body within that jurisdiction's court system, whose rulings are not subject to further review by another court. The designations for such courts differ among jurisdictions. Courts of last resort typically function primarily as appellate courts, hearing appeals from the lower trial courts or intermediate-level appellate courts. Many countries in fact have multiple "supreme courts," with each being the court of last resort for a particular geographical region or on a particular area of law. It is the superior court of record and final court of appeal. It consists of the chief justice who is the head of the judiciary and judges of the Supreme Court. It is not a court of first instance, except in constitutional matters. Also known as the court of appeal. It is a court of appeal from other courts unless the case is a constitutional one. The court has unlimited jurisdiction in both criminal and civil cases. There shall be no appeal from any judgement or order of the Supreme Court. This is the highest court in the country. Other courts are bound by the decision of the Supreme Court. 2) HIGH COURT Presided over by judges who are appointed according to the constitution of Zimbabwe. The high court has full unlimited jurisdiction in both civil and criminal cases. The court is also a court of appeal from the magistrate court. It has jurisdiction and authority to review all proceedings and decisions of all inferior or courts below it. Appeal from the high court lie with the Supreme Court. This court can pass death penalty or life imprisonment.
- 14. 14 14PRINCIPLES OF LAW 3)MAGISTRATES COURT e.g. regional, provincial, senior & ordinary magistrates. Presided over by a magistrate. Magistrates are appointed by the Public Service Commission All magistrates’ courts have no jurisdiction to try criminal cases involving the following; treason, murder or any offence where the person shall be sentenced to death if convicted. They cannot dissolve civil marriages. It can impose corporal punishment on minors. The strokes shall not exceed six. Regional magistrates has special jurisdiction as to punishment for rape, public violence, arson, malicious injury to property or attempts to commit these offences. 4) PRIMARY COURTS e.g. community court. Simple courts which are not very formal. Proceedings are not in written form. Legal practitioners cannot represent clients in these courts. The courts apply customary law only. They do not have jurisdiction in criminal cases. They cannot dissolve civil law marriages. Presided over by a presiding officer appointed by the minister. 5) SPECIALIST COURTS labour court, administrative court and small claims court. Detailed Notes Zimbabwean Context The Supreme Court Section 80 (1) of the Constitution provides for the creation of a Supreme Court "which shall be the superior court of record and the final court of appeal for Zimbabwe". Subsection (2) and (3) provide that the Supreme Court shall consist of: (a) the Chief Justice; (b) "such other judges of the Supreme Court, being not less than two, as the President may deem necessary", and (c) any additional judge or judges appointed for a limited period by the Chief Justice, such additional judges to be serving High Court or Supreme or former Supreme Court or high Court judges. As has been noted above, the Supreme Court, in addition to appellate jurisdiction, exercises original jurisdiction in cases where "any person alleges that the Declaration of Rights has been, is being or is likely to be contravened in relation to him (or, in the case of a person who is detained, if any other person alleges such a contravention in relation to the detained person)" that person may apply to the Supreme Court for redress. The Supreme Court therefore has a vital role to perform in the enforcement of the Declaration of Rights contained in the Constitution. Ordinary appeals are usually determined by a panel of at least three judges, one of who may not be an additional judge, and occasionally by a panel of two judges. In constitutional matters, the Justice Minister or the Chief Justice may direct that the case be heard by a panel of at least five judges, in which case only two members of the panel may be additional judges. The Chief Justice may, in his discretion, appoint a larger panel to hear any particular matter. The High Court Section 81 (1) of the Constitution provides for the creation of a High Court as a superior court of record. Subsection (2) and (3) provide that the High Court shall consist of: (a) the Chief Justice; (b) the Judge President of the High Court; and (c) "such other judges of the High Court as may from time to time be appointed". And (d) any
- 15. 15 15PRINCIPLES OF LAW SupremeCourt Judge appointed as an acting High Court Judge by the Chief Justice after consultation with the Judge President. The Administrative Court The Administrative court was established in 1979 by section 3 of the Administrative Court Act and has special jurisdiction conferred on it by statute over particular matters but generally, the Court acts as a court of appeal from a wide range of administrative tribunals. The Administrative Court is "special" within the meaning of section 92 of the Constitution. Administrative Court Judges, known as "Presidents", are appointed by the President after consultation with the judicial Service Commission (section 92 (1)). The condition of service of an Administrative Court President may not be amended during his term of office nor may his office be abolished without his consent (section 92(1)). By virtue of the provision of section 79A (d) and79B, the judges of special courts such as the Administrative Court are subject to the same constitutional safeguards as regards independence of a judiciary as Supreme Court and High Court judges. However, the section 86(tenure) and 87 (removal) do not appear to apply to judges of special courts such as the Administrative Court. The jurisdiction of the Administrative Court includes original jurisdiction in relation to land acquisition cases under the Land Acquisition Act and also appellate jurisdiction in matters relating to various publication laws such as the Access to Information and Protection of Privacy Act. Magistrates' Court Magistrates' Courts are the courts of first instance in criminal matters and therefore occupy the important position of deciding on bail land remand accused persons in most cases. The importance of this position is thrown into relief when the large number of allegations of violence in police custody and the large number of cases in which charges are not preferred or are eventually withdrawn are considered. The System for the Administration of the Courts The central figure in the administration of the Zimbabwe court system is the Registrar of the relevant court. The court Registrar is responsible, inter alia, for fixing the amount of security to be lodged by an applicant following the filing of an election petition. The Registrar had direction as to whether to allow access to court records in the High Court and the Supreme Court. The Registrar is also the person administering the court roll and who is therefore in control of assigning hearing dates for cases. Messengers of the court and sheriffs are responsible for serving court process and enforcing court orders. It is self-evident that without the service of process or the effective enforcement of court orders, much of the purpose of litigation, both civil and criminal, is rendered otiose. The distinction between civil and criminal processes Criminal Cases A criminal case, which is handled by local, state, or federal courts, involves an acting representative of the government, generally a prosecutor, district, attorney, or grand jury, pressing charges against individuals or entities suspected of committing crimes. Crimes, and hence criminal cases, can be defined as those actions or disputes where a violation of public law occurs. For criminal cases, the alleged crimes may have also afflicted victims in a manner that also warrants civil suits being filed, which will allow victims to collect damages for their injuries and losses. Civil Cases Civil cases are initiated when a wronged party, the plaintiff, files a complaint with the court of appropriate jurisdiction. The delivery of this complaint against named wrongdoers, known as defendants, is the action known as filing a lawsuit or bringing suit. While civil cases may involve criminal actions, these trials are completely separate from the proceedings of a criminal trial. Additionally, civil cases cover the gamut of disputes, disagreements, and grievances a plaintiff feels cannot be resolved sufficiently with defendants without court intervention. Within the legal system, various types of civil cases may include:
- 16. 16 16PRINCIPLES OF LAW Divorce Child support Child Custody Alimony Contractual disputes Personal injury tort claims Product liability Class action suits Wrongful death Medical malpractice Intellectual property disputes Libel, slander, and defamation of character Estate planning disputes Property and zoning disputes In essence, any disagreement that is not in violation of criminal laws in a given jurisdiction is an eligible civil case, as well as the damages stemming from some criminal cases. In all civil cases, plaintiffs will be seeking remedy from a defendant or defendants. Remedy will often come in the form of a court mandated judgment that attempts to rectify, through judicial ruling, the outcome of a dispute. Additionally, remedy can be achieved in civil cases through settlement, which may be provoked in light of the costs and potential losses stemming from an impending civil trial. Remedies sought by plaintiffs in a civil case may take a number of forms including: Settlement Damages Injunction Declaratory judgment CRIMINAL LAW CIVIL LAW Regulates the conduct of individuals and the state. Regulates the conduct of individuals. State is involved. The state is not involved. The major aim is to rehabilitate the offender. The aim is to compensate the innocent party for wrong done. An act or the act prohibited must have happened. There cannot be a crime unless the prohibited act has happened. An action may arise even before the wrong has been done. The wrong doer must have had the intention to commit the offence. An action arises even if the wrong doer had no intention to prejudice or injure the other party The act complained of must be unlawful. There is no need to establish that the act is unlawful. Proof beyond reasonable doubt Proof is on a balance of probabilities If convicted or found guilty a fine or punishment is imposed and payable to the state. If found liable, damages are payable to the wronged party or person. Prosecution is initiated by the state. Action is initiated by the wronged party. Variable CRIMINAL CIVIL 1.Definition Composed of rules formed/organized by the state which prohibit certain acts on pain of punishment. Concerns private affairs as opposed to state concerns 2.Initiators The state initiates the case. The plaintiff starts the case 3.Summons The member of the police issues it. Issued by the messenger of court 4.Costs Costs are met by the state Costs are met by the individual 5.Judgement Upon conviction, the offender may be subjected to a fine, imprisonment, whipping, and in extreme cases death penalties. Offender will be liable to a fine The basic idea behind a civil action is to compensate the individual who has been wronged or to declare rights and obligations.
- 17. rmmakaha@gmail.com 17 17 PRINCIPLES OFLAW payable to the state and the injured ends up in no financial gain. 6.standard of proof The onus of proving the crime rest on the state and the standard required is proof beyond reasonable doubt. Rest upon a balance of probabilities. 7.Prosecution The decision to prosecute a crime lies with the state more particularly with the state more particularly with the A.G. certain requirements must be met before a private prosecution is initiated. A certificate (nolle prosequei) declining to prosecute must be obtained from the A.G’s Office. The person seeking the action must show that s/he has a direct interest in the matter. The harm caused amounting to a crime must affect him/her directly. The plaintiff is the person bringing the action. The plaintiff has a discretion to bring action to court or to waiver his/her rights. 8.Pleadings A docket is opened – to plead guilty/ not guilty. Only statements of claims are used by the plaintiff and the defendant. 9.Parties involved Defendant Vs Complainant Plaintiff, Aggrieved, Wronged, Prejudiced Vs Defendant. 10.Offence The act prohibited must have happened. There cannot be a crime unless the prohibited act has happened.e.g.Murder, somebody must have been killed. An action may arise even before the wrong has been done.e.g. one can seek an interdict that the other party be prevented from doing something.NB: the innocent party has a duty to minimize his loss. 11.Intention The wrong must have had intention to commit the offence.e.g.murder; there must be intention to kill. An action arises even if the wrongdoer had no intention to prejudice or injure another. 12.Unlawful acts The act complained of must be unlawful. There is no need to establish that the act is unlawful. 13.Aim The major aim is to rehabilitate the offender. He is punished for his conduct. It also aims at deterring the offender and other like-minded persons. The aim is to compensate the innocent party for wrong done or to declare rights and obligations. (These topics carry weighting of 3% of the examination.)
- 18. rmmakaha@gmail.com 18 18 PRINCIPLES OFLAW LAW OF CONTRACT Definition of a contract 1. A contract is a lawful agreement between 2 or more persons/parties/people within the limits of their contractual capacity, with the serious intention of creating a legal obligation, communicating such intentions without vagueness, each to the other being of the same mind as to the subject matter, to perform positive or negative acts which are possible of performance. 2. A contract is an agreement between two or more parties which, if it contains the elements of a valid legal agreement, is enforceable by law or by binding arbitration. That is to say, a contract is an exchange of promises with specific legal remedies for breach. These can include Compensatory remedy, whereby the defaulting party is required to pay monies that would otherwise have been exchanged were the contract honored, or an Equitable remedy such as Specific Performance, in which the person who entered into the contract is required to carry out the specific action they have reneged upon. 3. A contract is an agreement that can be enforceable by law. An agreement is an offer and its acceptance. An agreement which can be enforceable by law must have some essential elements. The essentials for a valid contract – to be studied in detail viz.: 1. The agreement must be lawful. The objective of the agreement must be lawful. Any act prohibited by law will not be valid and such agreements cannot be treated as a valid contract. John rents out his house for the business of prostitution or for making bomb, the acts performing there are unlawful. Hence such agreement cannot be treated as a valid contract. Therefore the consideration as well as the object of the agreement should be lawful. CASES: Ex turpi causa rule, ( "from a dishonorable cause an action does not arise") is a legal doctrine which states that a claimant will be unable to pursue a cause of action, if it arises in connection with his own illegal act. Particularly relevant in the law of contract, tort and trusts, ex turpi causa is also known as the "illegality defence", since a defendant may plead that even though, for instance, he broke a contract, conducted himself negligently or broke an equitable duty, nevertheless a claimant by reason of her own illegality cannot sue. MURPHY VS TENGENDE, The issue was about dealing in foreign currency, pounds and Zimbabwe dollars. It was held that the 2 had no license to deal in forex so their transaction was unlawful In pari delicto rule, “in equal fault (better is the condition of the possessor)" is a legal term used to indicate that two persons or entities are equally at fault, whether the malfeasance in question is a crime or tort. The phrase is most commonly used by courts when relief is being denied to both parties in a civil action because of wrongdoing by both parties. The phrase means, in essence, that since both parties are equally at fault, the court will not involve itself in resolving one side's claim over the other, and whoever possesses whatever is in dispute may continue to do so in the
- 19. rmmakaha@gmail.com 19 19 PRINCIPLES OFLAW absence of a superior claim. The doctrine is similar to the defense of unclean hands, both of which are equitable defenses. Comparative fault and contributory negligence are not the same as in pari delicto, though all of these doctrines have similar policy rationales. DUBE VS KHUMALO, the 2 were involved in an adulterous affair, which was rendered unlawful. 2. Contractual capacity, All majors or adults who do not suffer from any legal disability can enter into a contract. There are certain categories of persons who have either capacity or cannot enter into a contract at all. These are; o Minors (kids) o Insolvent persons o Drunken persons o Prodigals (Mitchell vs. Mitchell & Others) o Mentally ill persons (Pheasant Vs Warne) o Alien enemies o Artificial persons o Persons convicted of certain crimes Parties entering into an agreement must be competent and capable of entering into a contract. If "JOHN" agrees to sell a Government property to ANGIE and ANGIE agrees to buy that property, it could not be treated as a valid agreement as JOHN is not authorized or owner of the property. If any of the party is not competent or capable of entering into the agreement, that agreement cannot be treated as a valid contract. According to the law of contract, every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. So it is clear that the party must be of sound mind and of age to enter into a valid agreement which can be treated as a valid contract. CASES: involving Minors capacity o EDELSTEIN VS EDELSTEIN o DAMA VS BERA o STATTAFORD VS OBERHOLZER CONTRACTUAL CAPACITY The agreement must be made within the limits of the parties’ contractual capacity. While the General rule is that every person is able to contract freely within the limits of the law, the following are persons of limited contractual capacity whose power to enter into binding agreements is subject to special rules: 1. Minors 2. Married women subject to the marital power of their husbands 3. Mentally ill persons 4. Drunk persons 5. Prodigals/Spendthrifts 6. Insolvent person 7. Alien enemies 8. Artificial Persons 9. Illegal Associations In addition they may be subject to certain disqualifications under various statutes, just as persons who have been convicted of crime are. 1. MINORS A Minor is an unmarried person under the age of 18 years. He is under the custody and lawful authority of a guardian whose duty it is to maintain the minor until he can maintain himself, administer property and assist him in contracting. The guardian is normally a natural guardian, i.e. the father or the mother where the father is dead, a court has awarded the sole guardianship to her, or the child is illegitimate, but may be appointed by a deceased natural guardian’s will or by the High Court (the upper guardian of a child). NB: When a person marries before majority age he is tacitly emancipated/acquires majority status.
- 20. rmmakaha@gmail.com 20 20 PRINCIPLES OFLAW Contracts made by a minor are considered under two heads: a). Those made without the guardian’s assistance and;(unassisted contracts) b). Those made with the guardian’s assistance or made on the minor’s behalf by the guardian.(Assisted contracts) UNASSISTED CONTRACTS General Rule: a contract made by a minor without the guardian’s assistance is void as far as the minor is concerned and valid as far as other party is concerned. The authority for this proposition is the Dutch Jurist, Voet, quoted in the case of Edelstein Vs Edelstein; “from the principles of the law it is clear that a minor who contracts without the assistance of his guardian can render others under an obligation to himself, but does not himself become obliged to them….. [as] on the minor’s side a contract entered into without the assistance of his guardian is ipso jure (by the law itself) null and void.” A minor who contracts without his guardian enjoys the best of both worlds. He binds the other party to him but does not bind himself to the other party. The option of treating the contract as void or valid rests with the minor (or, more precisely, his guardian who acts for him). If the minor elects to treat the contract as valid, he can compel the other party to perform; he will then also have to fulfill his own part of the contract. If the minor prefers to treat the contract as void, the other party cannot compel him to perform his part of the bargain; a minor who has already performed can recover from the other party whatever he has paid or delivered, but he may not keep what he has received under the contract because this would unjustly enrich him at the other party’s expense. He must restore it, though not necessarily in full. CASE: Edelstein Vs Edelstein FACT: A female minor whose parents were divorced ( the mother was awarded custody but the father remained the natural guardian)entered into an ante nuptial contract with E. later in 1918, she and E were married with the implied consent of her father, who was informed of the proposed marriage and did not object. In 1947 E died leaving over £100 000. and the wife, considering the marriage to have been out of community of property because of the ante nuptial contract, accepted certain benefits under E’s will. In 1949, when she consulted her legal advisers with a view to drawing up her own will, the validity of the ante nuptial contract was questioned and she sought an order declaring the marriage in community of property. Of the parties cited as respondents, only the Commissioner for Inland Revenue opposed the order to avoid losing £33 000. death duties. HELD: The wife was bound by the ante nuptial contract on the ground that, while it had excluded community of property and profit and loss, it had conferred benefits on her through promises in it of marriage settlements by E. HELD: A minor is not bound by an unassisted contract even one to his benefit. The minor may elect to hold the other party bound, in which event the minor will also have to perform his obligations. But should the minor choose to escape the contract, he is bound only to the extent of his enrichment. Furthermore, unlike an ordinary contract, an ante nuptial contract cannot be ratified by a minor on attaining majority as this would amount to an impermissible alteration of the matrimonial property regime. The wife was granted the order that the marriage was in community of property. A minor may acquire without his guardian’s assistance a perfectly valid obligation, which is sometimes not contractual even though it arises in the course of attempting to contract, in the following circumstances: a). ENRICHMENT where a minor is unjustly enriched in terms of an unassisted contract, the contract remains void and he is not bound by it but he is under an obligation to make restitution to the other party to the extent to which he has been enriched; he is not obligation to restore whatever he has received pursuant to the contract, but only so much as still remains in his possession at the time of the action or the surrogates of such residue.(Case: Edelstein Vs Edelstein). In other words, where necessaries are supplied to a minor, he incurs an obligation to pay their value property purchased with money, or the proceeds of property, originally received must be yielded up; money spent on necessaries which would otherwise have had to be paid for out of the minor’s estate has to be accounted for. He is not liable for depreciated or destruction of property, or for money squandered or lost. CASE: Tanne Vs Foggitt FACTS: Foggitt a minor, without his guardian consent, entered into an agreement with T, the principal of a business college, to attend typing classes for two weeks in May and the whole of April. He paid for the March lessons but then stopped attending and refused to pay the April account. HELD:
- 21. rmmakaha@gmail.com 21 21 PRINCIPLES OFLAW Foggitt benefited from the contract only to the extent of the lessons actually received and those lessons having been paid for. There was no further obligation on him. b). FRAUDULENT MISREPRESENTATION Where a minor fraudulently misrepresents his age or pretends he has been emancipated and so deceives another person, who is induced to contract with the minor believing him to be of age and emancipated, the minor incurs an obligation. This obligation is not contractual for the contract is void and the minor is not bound by it, but delictual because fraud is a delict and the minor is bound to make good to the other party any loss he has suffered as a result of the fraud. Moreover, the minor is precluded from obtaining the remedy of restitution by which would otherwise be entitled to reclaim whatever he has paid or delivered in pursuance of the agreement. c). TACIT EMENCIPATION Where a minor is tacitly emancipated, he can incur a binding contractual obligation within the field of his emancipation. Tacit emancipation occurs when one is allowed by his guardian to carry on business or any other occupation on his own behalf but the minor can contract to the extent to which he has been emancipated. i.e. the guardians consent has been given in advance. The test for determining whether the minor has been emancipated is whether the minor is economically independent and whether his guardian allows him a measure of contractual freedom. A separate place to live and the carrying on of his own business may be indicative that his guardian has permitted him to enter into contracts without assistance and that he has been emancipated but these factors are not conclusive evidence. It must be borne in mind that whilst emancipation can provide capacity to act, it is not a means of terminating minority. An emancipated minor therefore still needs his guardian’s permission when he wants to get married. He also requires the consent of his guardian if he wishes to alienate or burden any fixed property belong to him, for such transactions he may also require the consent of the courts. CASE: Dama Vs Bera FACTS: Bera an Indian girl nearly 16 old had been earning her living as a servant for some 4 to 5 years. She lived with her parents but retained control of her income and paid a certain sum to them for board and lodging. The employer failed to pay the girl. HELD: Bera was tacitly emancipated and could sue Dama, her employer, for the wages due. d). RATIFICATION Where a minor contracts without his guardian’s consent the contract may be subsequently ratified by the minor on attaining majority either expressly or by conduct/impliedly. CASE: Stuttaford and Company Vs Oberholzer FACTS: Oberholzer bought a motor cycle from Stuttaford on hire purchase while still a minor. After attaining his majority, shortly afterwards he continued to use the motorcycle but when sued for the installments due he set up his minority at the time as a defense to the action on the contract and tendered the return of the motor cycle and treats it as his own. HELD: Oberholzer had ratified the contract hence was bound by it. e). STATUTORY EXCEPTIONS A minor is entitled to contract on his own behalf under the following statutes: Insurance Act (Cap 196 ;s 37), provides a minor without his guardian’s consent can effect a life policy and pay the premiums as they fall due but shall not cede or surrender the policy while he is a minor without guardians consent. Post Office Savings Bank Act (Cap 249;s 9), provides deposits made by or on behalf of a minor may be repaid to him after he has attained the age of 7 years in every respect as if he were of full age. Building Societies Act (Cap 189;s 19), provides a minor over the age of 16 years can be a member or depositor with any building society without his guardians’ consent and enjoy all the privileges and obligations attaching to the members or depositors. ASSISTED CONTRACTS
- 22. rmmakaha@gmail.com 22 22 PRINCIPLES OFLAW A minor is bound by contracts made on his behalf by his guardian or made by himself with his guardian’s assistance given at the time, beforehand or afterwards. CASE: Skead Vs Colonial Banking and Trust Company Ltd FACTS: Skead, a minor, with his guardian’s consent, signed a promissory note for £37 in payment of the first premium in a twenty-year endowment assurance policy for £750. in favour of Skead, the note to become due eight days after he attained his majority. At the time Skead contemplated marriage and the policy was considered the best means of his saving money. After the due date Skead was questioned by Colonial Bank, the holder of the note, and replied that he had no funds to pay it. HELD: Skead was liable because as the contract had been made with the consent of his guardian acting bonafide and reasonably as it was not to his prejudice, he was liable to pay. Since he was going to benefit even if the guardian died, the assurance policy doesn’t expire. NB: if the contract is to the minor’s prejudice, he may obtain an order setting it aside, in which case the guardian may be personally liable. CASE: Wood Vs Davies FACTS: The father and natural guardian of Wood, a minor who had inherited a sum of money, bought on his son’s behalf a house then worth £1550 for £1750, payable in installment until majority, installments were paid out of interest on the inheritance. On Wood attaining majority a considerable sum still owed and the installments would absorb a large portion of the interest. Wood, until majority, had lived in the house with his parents. On attaining majority Wood sued for cancellation of the sale and return of installments paid with interest. HELD: There was serious and substantial prejudice to Wood, he was entitled to restitution and the contract should be cancelled. But Davies the seller was to be given credit for a sum of money representing the value of the use of the house during the period in which Wood lived in it with his parents. NB: The guardian’s consent may be express or tacit, or may be implied from the fact that the guardian with full knowledge of the transaction raised no objection. NB: A guardian need not consent to the contract before it is made; it is sufficient if, knowing of the terms, he gives his consent after the event and so ratifies the contract. 2. MARRIED WOMEN SUBJECT TO THE MARITAL POWER OF THEIR HUSBANDS. Married women subject to the marital power of their husbands have limited power to contract. The wife’s capacity is similar to that of a minor under the guardianship of her husband. She ha no power to enter into any contract and bind herself, or her husband, without the knowledge or consent of her husband, unless such contract is subsequently ratified by him. If she purports to do so, the contract is void. People marry without an ante nuptial contract in which case the subject themselves to the common law regime of community of property, community of profit and loss and marital power, or enter into an ante nuptial contract before their marriage excluding these common law consequences. Variable consequences of: Marriage in Community (Civil Marriage) Chapter 5.11. (Without ante nuptial contract) Community of Property Property between spouses shall vest into a joint estate. This means that all their present and future property whether vested in them at the time of or during marriage becomes the common or joint property of both spouses in equal undivided shares. Community of liabilities All the liabilities of either spouse whether incurred by them before or during the marriage becomes the joint liability of both spouses. The property brought into the marriage by one party may consequently be sold to pay the premarital debt of the other. Community of Profit and Loss The legal effect is that all profits made by either party during the marriage fall into the community and all loses incurred by either party must be shared by both. It follows that the spouses have no separate property.
- 23. rmmakaha@gmail.com 23 23 PRINCIPLES OFLAW Insolvency of the Joint Estate If the husband cannot pay the debts of the joint estate, the estate is in an insolvent condition. In this event, the joint estate may be sequestrated by the creditor but the private estate of the wife cannot be sequestrated.e.g. Inherited things Marital Power of the Husband. Husband acquires what is known as the marital power consisting of the guardianship of his wife and the power of administration. The husband shall not abuse the marital power. Marriage out of Community of Property (with ante nuptial Contract) It is made by the parties before the marriage and this means agreement before the marriage. Such a contract whether, in writing or not it is always binding on the parties themselves after the marriage but it has no force or effect against any other person unless it has been duly registered in the Deeds Registry. Customary Law Marriage. A woman married in terms of customary law Chapter 5. 07 Customary Marriage Act, is incompetent to enter into contract and will need the assistance of the guardian or her husband. Marriages are in two forms. Customary Union (kutizira) Customary Marriage Act/African Marriage (this is done by any Magistrate) Customary Law marriage is common law and the General Rule is that the marriage creates community of property, community of profit and Loss in a joint estate of which the husband has the sole right and power of administration and the wife has no say in this administration. The common law can be varied by ante nuptial contract entered into before marriage and properly executed and registered. The presumption of limited legal capacity to contract is waived if the women can show that she is emancipated. A married woman may own property acquired by her own labour.e.g. Cattle, pots and utensils and this is not subject to the husband’s control. The following circumstances are where the Joint Estate incurs an obligation through the act of the Wife: a). ENRICHMENT If the wife purports the contract and the joint estate is enriched, the husband in his capacity as administrator of the joint estate will incur an obligation based on the law of unjust enrichment. CASE: Karsten Vs Forster FACTS: Forster sued Karsten, a woman married in community of property, for £50 which Karsten had agreed to pay Forster in considering of his singing a certain option for the sale of a farm. Karsten pleaded that the contract was void because it was signed by her when she was married in community of property and the husband had not consented. HELD: Karsten and her husband had been enriched by the sale of the farm, which would not have taken place if Forster had not been induced to sign the option and the husband was bound by the contract. b).NECESSARIES (Include food, clothing, medical and dental expenses and other business connected with the household) The General Rule is that; All wives, whether married in or out of community of property, are entitled to make contracts for household necessaries without reference to their husbands. Where the marriage is in community of property, the Joint Estate is bound and only the husband in his capacity as its administrator may e sued during marriage. If the marriage is dissolved before the debt is paid, the trader can sue the husband for the whole debt or the wife for half, a husband who pays the whole debt will recover half from his ex-wife. Where the marriage is out of community, husband and wife are jointly and severally liable to the trader, which means he can sue either husband or wife for the whole amount. If he collect payment from the husband, that is the end of the matter. When he chooses to sue the wife, or if she pays voluntarily, the wife has a right of recourse against the husband for his pro-rata of the debt, determined according to the relative means of the spouses. When the parties are living together, even a notification to the supplier that the husband has withdrawn his wife’s right to pledge his credit has no legal effect It is no defense to a supplier’s claim for the husband to his wife had no need to buy on credit.
- 24. rmmakaha@gmail.com 24 24 PRINCIPLES OFLAW CASE: Clark & Co Vs Lynch FACTS: Clark sued Lynch for R122.in respect of necessaries of life and household necessaries supplied to his wife. HELD: The wife has power to bind the husband in respect of all those matters reasonably incidental to that organized family establishment, whether the articles furnished are consumed or used by the husband or the wife or children or their servants or anyone else who is living with them either permanently or temporarily as part of the joint establishment of the marriage partners. A notification to a supplier that the husband has withdrawn his wife’s right to pledge his credit has no legal effect so long as the wife and husband continue to live in, or during any period when they subsequently re-establish, a common household. The husband in an action for an amount owed in respect of necessaries supplied to his wife cannot rely on the fact that his wife has been provided with sufficient funds to make it unnecessary for her to buy on credit. Where a wife abuses her rights her husband can terminate her authority to pledge his credit by obtaining an interdict from the court. CASE: Traub Vs Traub FACTS: A wife was not short of any reasonable necessity or luxury but was incurring debts which amounted to gross extravagance and prodigality. HELD: The husband should be granted an interdict restraining his wife from binding his credit. If the wife is living apart from her husband owing to his fault she can bind his credit, but not where the common household is broken up by the wife’s conduct. CASE: Gammon Vs McClure FACTS: G met his wife on the way out to settle in South Africa and married her soon after arrival. Not long after settling in Grahamstown he grew tired of her and forced her to return to Cape Town where she bought necessaries. HELD: A husband is bound to support his wife who left him owing to his misconduct and is liable to pay for necessaries supplied to her. NB: A husband is not liable for necessary services rendered to his wife after she has unlawfully deserted her husband and is living apart from him. If, after the common household has broken up, the husband adequately provides for his wife and notifies a supplier that he is doing so and will not pay for necessaries supplied to her, the supplier cannot sue the husband for the cost of necessaries supplied after receipt of the notice. If, although the marriage has actually been dissolved, the husband comport himself as if the marriage still exists, he will continue to be liable. CASE: Thompson Vs Model Steam Laundry Ltd. FACTS: After divorce, T hired a house in which he, his children and his former wife, in the capacity of manageress of the household, lived , to outward appearance as a married couple with children. The former wife pledged his credit for laundry work. HELD: T was liable on implied agency, namely authorization of his former wife to pledge his credit for household necessaries. Whether articles bought by a wife are necessaries or not is for the court to decide and in deciding t has regarded to the social standing and means of the parties and their habits of life in the past.
- 25. rmmakaha@gmail.com 25 25 PRINCIPLES OFLAW C).PUBLIC TRADER A public trade is one in which the wife indicates to the public, expressly or impliedly, that she is open to do business with any person, whatever the business or profession carried on. A married woman openly carrying on any retail or wholesale trade may validly contract in all matters connected with such trade and may consequently bind herself and her husband and sell and burden the stock of the business. (Grotius 1.5.23) Wessels J said: “It appears to e an established law that where a woman married in community of property carries on business as a public trader she is deemed to be acting as her husband’s agent in every transaction entered into by her in connection with that business. It is equally clear that the assets and liabilities of the business do not fall outside the joint estate of the parties so as to form part of a separate estate.” The husband’s consent to the trading may be withdrawn y him or terminated by his insanity. D). AUTHORITY OF THE COURT Where a husband is absent from the country, or unreasonably withholds his consent to his wife’s contracts, the court may authorize her to contract, either specially or generally. E). STATUTORY EXCEPTIONS A woman married in community of property can contract under the following statutes. Insurance Act (Chp 196; s 39) provides that a married woman may effect and own a life policy, hold acquire and dispose of any interest in a life policy, hold and dispose of any moneys, or any asset acquired with those moneys, accruing from any interest in a life policy, in all respects as if she were a single woman of full age and capacity. Post Office Savings Bank Act (Chp 249; s 10) provides a married woman, whether under marital power or not, may be a depositor and with or without assistance execute all necessary documents, give all necessary aquittances and enjoy all the privileges and be liable to all the obligations attaching to depositors. Building Society Act (Chp 189;s 19) provides that a married woman whether under marital power or not, may be a member of or deposit with any building society, and may, without her husband’s consent or assistance, execute all necessary documents and generally have all the privileges and obligations attaching to members or depositors. 3. MENTALLY ILL PERSONS A contract made by a mentally ill person is Void if at the time of the agreement he could not understand and appreciate the transaction into which he entered or if his consent was motivated or influenced by an insane delusion caused by mental disease. CASE: Lange Vs Lange FACTS: At the time of his marriage L understood the nature of the contract and appreciated the nature of the obligations he was undertaking, but he was already suffering from a mental disease and his volition in entering into the marriage was influenced by auditory hallucinations caused by the disease. HELD: The marriage should be declared null and void ab intio ( from the beginning). NB: it is not necessary to prove that a person, owing to mental disease, did not understand or appreciate the nature of the contract; proof that his consent was motivated or influenced by an insane delusion caused by mental disease is sufficient. Whether or not a mentally ill person could understand and appreciate the transaction is a matter of fact in which the court will consider all the relevant evidence. A mentally ill person may incur an obligation on the grounds of enrichment. Where a person has been declared mentally disordered or defective under the Mental Health Act (Act 23 of 1976), the order operates while in force so as to create a rebuttable presumption that he is mentally ill and any contract made by him will be void unless it be proved that at the time he was in full possession of his faculties or his state of mind was such that he was able to understand the nature of the contract and appreciate properly the duties and responsibilities created by it. CASE: Prinsloo’s Curators Vs Crafford and Prinsloo FACTS: P, who had been declared of unsound mind by order of court, married C in community. At the date of the marriage the order was still in force but P was as a fact of sound mind and entered into the contract voluntarily and fully understanding its significance. HELD:
- 26. rmmakaha@gmail.com 26 26 PRINCIPLES OFLAW The marriage was Valid. 4. DRUNK PERSONS Where a person enters into a contract while so drunk that he does not know he is entering into a contract or has no idea of the terms, the contract is void but not if the drunk person is merely more easily persuadable or more willing to conclude the contract. Intoxicated Persons. Intoxicated, acute or chronic, which makes a party unaware that he is contracting or unable to appreciate the nature of the contract, renders the contract void. Intoxication of a lesser degree will be of significance only if induced by the other party to the contract in order to gain an unfair advantage, in which case restitution will be granted. NB: A drunk person can incur an obligation on the ground of enrichment. 5. PRODIGALS. A prodigal, who is a person declared by the court to be incapable of managing his affairs as a result of a propensity to squander his assets, cannot contract with regard to his property and if he does so the contract is void, but apart from his property he is entitled to contract freely. A person who is recklessly frittering away his estate may, at the instance of a relative or other interested person, be interdicted from contracting without the assistance of a curator appointed by the court. CASE: Cillie Vs Cillie FACTS: A wife alleged that her husband to whim she had been previously married but from whom she was now divorced, was squandering his assets and was almost continually under the influence of liquor. HELD: An order should be granted declaring C a prodigal, interdicting him from dealing with his property and appointing a curator bonis to his property. CASE: Mitchell Vs Mitchell & Others FACTS: M had been declared incapable of managing his affairs and curator bonis had been appointed by the court. Thereafter M without the curators’ consent married. HELD: A curator bonis deals with the estate of a person under curatorship and not with his person. In his personal relationship to others not affecting his estate the curator has no right to interfere. If he chooses to marry, the curator cannot interfere except in so far as it relates to his property. Where a person under curatorship has not been declared a lunatic, the curator has no locus stand to upset his marriage merely because marriage entails maintenance. If a prodigal contracts without his curator’s consent the contract may be subsequently ratified by the curator. 6. INSOLVENT PERSONS. Insolvency is the condition of a person when his financial position reaches the stage that he is unable to pay his debts or his liabilities exceed his assets. In such an event the condition of the debtor may be officially recognized by the law for the protection not only of his creditors, but also of other persons. The Insolvency Act (Chp 303) provides that the court may, at the instance of the debtor himself or of his creditors, grant an order sequestrating the estate of the debtor. The effect of a sequestration order is that the debtor becomes statutorily insolvent and all his property is placed under the control of a trustee who realizes it and distributes the proceeds among the various creditors in accordance with the Insolvency Act. The Insolvent becomes subject to legal disabilities and these continue until his estate has been finally distributed and he has been rehabilitated. The following restrictions are placed on the Insolvent’s freedom of contract: a). An Insolvent may not contract in such a way as to purport to dispose of any property of his insolvent estate (s 37 (2) (a) of the Insolvency Act) b). He may not without the written consent of his trustee enter into any contract whereby his estate is likely to be adversely affected. (s 37 (2) (b) ).
- 27. rmmakaha@gmail.com 27 27 PRINCIPLES OFLAW c). He may not without the written consent of his trustee have any interest in, or be employed in, the business of a trader who is a general dealer or a manufacturer. (s37(3)) If the Insolvent contracts in breach of these provisions, the contract is not void but remains valid until set aside by the trustee. Also, where an insolvent without his trustee’s consent alienates property acquired after sequestration to a person who was not aware and had no reason to suspect that the estate was sequestrated, the alienation shall be valid. (s 40(1) 7. ALIEN ENEMIES An Alien enemy is a person residing or carrying on business in enemy territory and any contract made with him in times of war is void as public policy requires that the state should not be hampered in its prosecution of the war nor the enemy in any way assisted. Where an enemy subject resides in Zimbabwe, he has full contractual capacity and any contract made with him is valid unless bad as against public policy. His internment appears to make no difference unless performance becomes impossible as a result of supervening impossibility of Performance. 8. ARTIFICIAL PERSONS In principle an artificial person’s contractual capacity is determined by its constitution. If it is created by special statute (Cold Storage Commission or Air Zimbabwe), reference must be made to that statute; if by Royal Charter (British South African Company) to that Charter. If it is a company registered under the Companies Act (Chp 190), its contractual capacity is determined by the objects clause of its memorandum of association, either expressly there conferred or such as may fairly be regarded as incidental to , or consequential upon, the specified objects. If an artificial person enters into a contract which it has no contractual capacity to make, the contract is void and cannot be ratified. NB: Re Jon Beauforte (London) ltd. A company, which was authorized by its memorandum to carry on business of costumiers and gown-makers, embarked on the business of making veneered panels and erected a factory for this purpose. The company later went into liquidation. Three creditors, a firm of builders who constructed the factory, a firm who supplied veneer, and a firm who supplied coke, all proved in the liquidation. The liquidator rejected their claims. HELD: Their claims were rightly rejected on the ground that the contractors were ultra vires (beyond the company’s powers). NB: Rules of unjust enrichment should apply to the rights of the parties in any ultra vires transaction. 9. ILLEGAL ASSOCIATIONS An illegal association has no locus standi in judicio (right to appear and be heard) and any contract made by it is void and unenforceable. But under the doctrine of unjust enrichment a remedy lies against its members who have derived benefits at the expense of others to which they were not entitled and any person trading with an illegal association or with its members has a liability to pay for benefits received by him. 3. Intention to contract, The parties entering into a contract must have an intention to create a legal relationship. If there is no intention to create a legal relationship, that agreement cannot be treated as a valid contract. Generally there is no intention to create a legal relationship in social and domestic agreements. Invitation for lunch does not create a legal relationship. Certain agreements and obligation between father and daughter, mother and son and husband and wife does not create a legal relationship. An agreement wherein it is clearly mentioned that "This agreement is not intended to create formal or legal agreement and shall not be subject to legal jurisdiction in the law of courts." cannot be treated as a contract and not valid. CASES: BLOOM VS AMERICAN SWISS WATCH COMPANY 1955
- 28. rmmakaha@gmail.com 28 28 PRINCIPLES OFLAW WATERMEYER VS MURRAY (counter offer), one party offered to sell a farm to the other party on certain terms, the other party did not accept unconditionally but countered the offer setting his own terms of the offer. The original offeror decided not to offer his farm. CARLILL VS CARBOLIC SMOKEBALL COMPANY o One of the most famous cases on forming a contract is Carlill v. Carbolic Smoke Ball Company, decided in nineteenth century England. A medical firm advertised that its new wonder drug, the smokeball, would cure people's flu, and if it did not, buyers would receive £100. A significant number of people sued for their £100 when the product did not work. Fearing bankruptcy, Carbolic argued the advertisement was not to be taken as a serious, legally binding offer. It was merely an invitation to treat, or mere "puff," a gimmick; however, the court of appeal held that to a reasonable man, Carbolic had made a serious offer. People had given good "consideration" for it by going to the "distinct inconvenience" of using a faulty product. "Read the advertisement how you will, and twist it about as you will," said Lord Justice Lindley, "here is a distinct promise expressed in language which is perfectly unmistakable." CRAWLEY VS REX KILBURN VS ESTATE KILBURN, the promise made by the husband was not a serious one that the husband had no intention of paying his wife the sum. The intention of the husband was that the wife should claim the sum if and when the husband went insolvent. It was held that there was no obligation and the wife could not claim the bond. 4. Agreement to be communicated and not vague, Wording of the agreement must be clear and not uncertain or vague. Suppose John agrees to sell 500 tones of oil to Mathew. But, what kind of oil is not mentioned clearly. So on the ground of uncertainty, this agreement stands void. If the meaning of the agreement can be made certain by the circumstances, it could be treated as a valid contract. For example, if John and Mathew are sole trader of coconut oil, the meaning of the agreement can be made certain by the circumstance and in that case, the agreement can be treated as a valid contract. According to the law of contract, Agreements, the meaning of which is not certain or capable of being made certain, are void. CASES: CANTOR VS CANTOR Husband promised wife that he will give her “something”, “sometime”. LEVESTEIN VS LEVESTEIN, courts can give meaning on the contract from evidence before it. 5. Parties must be of the same mind (consensus ad idem) The parties to the contract have a mutual understanding of what the contract covers. For example, in a contract for the sale of a "mustang", the buyer thinks he will obtain a car and the seller believes he is contracting to sell a horse, there is no meeting of the minds and the contract will likely be held unenforceable. CASES: MARITZ VS PLATLEY, auction - marble metal piece on which stood a mirror, the auctioneer put it up and it was sold to Platley, when the auctioneer later put up the mirror, Platley protested claiming that he had bought the metal piece and the mirror. GEORGE VS FAIRMCARD HOTEL, courts will not assist a foolish mistake due to carelessness.
- 29. rmmakaha@gmail.com 29 29 PRINCIPLES OFLAW BHIKAGEE VS SOUTHERN AVIATION, even though he did not understand the language the party entered into a contract. 6. The contract must be possible to perform. If the act is impossible of performance, physically or legally, the agreement cannot be enforced by law. There must be possibility of performance of the agreement. Impossible agreements like one claims to run at a speed of 1000km/hour or Jump to a height of 100feet etc. would not create a valid agreement. All such acts which are impossible of performance would not create a valid contract and cannot treated as a valid contract. In essence, there must be possibility of performance must be there to create a valid contract. CASE: PETERS & FLAMMAN VS KOKSTAD MUNICIPAL COMPANY o Before Peters & Flamman had completed to light the streets as per contract, World War broke out. The 2 were Germany nationals imprisoned as alien enemies as a result were not able to perform part of their obligation. The court ruled that as a result of imprisonment, it had rendered their performance impossible and consequently there was no breach of contract. It was a case of termination of contract due to supervening impossibility. OTHER ESSENTIALS FOR A CONTRACT TO BE VALID 1. Agreement not expressly declared void: For example Restraint of marriage. If John promises to pay $50 to Mary if she does not marry throughout her life and Mary promise not to marry at all. But this agreement cannot be treated as a valid contract owing to the fact that, restraint of marriage expressly declared void. Some of the agreement which have been expressly declared void are agreement in restraint of legal proceedings, agreement in restraint of trade, agreement in restraint of marriage and agreement by way of wager. 2. Proper offer and it s acceptance: To create a valid contract, there must be two or more parties. One who makes the offer and the other who accepts the offer. One person cannot make an offer and accept it. There must be at least two persons. Also the offer must be clear and properly communicated to the other party. Similarly acceptance must be communicated to the other party and the proper and unconditional acceptance must be communicated to the offerer. Proper offer and proper acceptance should be there to treat the agreement as a contract which is enforceable by law. The contract involves an offer (or more than one offer) to another party, who accepts the offer. For example, in a contract for the sale of a piano, the seller may offer the piano to the buyer for $1,000.00. The buyer's acceptance of that offer is a necessary part of creating a binding contract for the sale of the piano. Please note that a counter-offer is not an acceptance, and will typically be treated as a rejection of the offer. For example, if the buyer counter-offers to purchase the piano for $800.00, that typically counts as a rejection of the original offer for sale. If the seller accepts the counter-offer, a contract may be completed. However, if the seller rejects the counter-offer, the buyer will not ordinarily be entitled to enforce the prior $1,000.00 price if the seller decides either to raise the price or to sell the piano to somebody else. 3. Free Consent: , consent is said to be free when it is not caused by (i) coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made by any of the above four reason, at the option of the aggrieved party it could be treated as a void contract. If the agreement induced by mutual mistake the agreement would stand void or canceled. An agreement can be treated as a valid contract when the
- 30. rmmakaha@gmail.com 30 30 PRINCIPLES OFLAW consent of the parties are free and not under any undue influence, fear or pressure etc. The consent of the parties must be genuine and free consent. 4. Lawful consideration: An agreement must be supported by a consideration of something in return. That is, the agreement must be supported by some type of service or goods in return of money or goods. However, it is not necessary the price should be always in terms of money. It could be a service or another goods. Suppose X agrees to buy books from Y for $50. Here the consideration of X is books and the consideration of Y is $50. It can be a promise to act (doing something) or forbearance (not doing something). The consideration may be present, future or can be past. But the consideration must be real. For example If John agrees to sell his car of $ 50000 to Peter for $20000. This is a valid contract if John agrees to sell his car not under any influence or force. It can be valid only if the consideration of John is free. An agreement is valid only when the acts are legal. Illegal works like killing another for money, or immoral works or illegal acts are cannot be treated as a valid agreement. So, illegal works will not come under the contract act. 5. Legal formalities: The law of contract does not insist that the agreement must be in writing, it could be oral. But, in some cases the law strictly insists that the agreement must be in writing like agreement to sell immovable property must be in writing and should be registered. These agreements are valid only when they fulfill the formalities like writing, registration, signing by the both the parties are completed. If these legal formalities are not completed, it cannot be treated as a valid contract. Most important essentials of a valid contract are mentioned above. These elements should be present in a contract to make it a valid contract. If any one of them is missing we cannot treat that agreement as a valid contract. The role and rules of offer and acceptance in contracts What is an offer? A proposal which expresses a person’s will to become a part of a contract. CASES: BLOOM VS AMERICAN SWISS WATCH COMPANY 1955 (unaware of offer of reward) WATERMEYER VS MURRAY (counter offer), one party offered to sell a farm to the other party on certain terms, the other party did not accept unconditionally but countered the offer setting his own terms of the offer. The original offeror decided not to offer his farm. CARLILL VS CARBOLIC SMOKEBALL COMPANY 1893 (reward) CRAWLEY VS REX LEE VS AMERICAN SWISS WATCH COMPANY (reward 1st person) Rules governing an offer (valid offer) 1. Must contain all essentials of a valid contract 2. An offer must be definite, must define all the terms on which an agreement is sought. 3. An offer should be firm and deliberate, should show that the maker has serious intention to be contractually bound merely by the other party accepting it. 4. An offer can be made to an individual or the world at large 5. Where there is an option, the option must stay open until the expiry of the stated period. 6. An offer can be revoked or withdrawn at any time before acceptance. 7. Where the offer stipulates method of acceptance, such offer can only be validly accepted by adopting the stipulated method.
- 31. rmmakaha@gmail.com 31 31 PRINCIPLES OFLAW 8. An offer must be communicated to the offeree. 9. Offers which lack animus contrahendi cannot be turned into contracts on acceptance. 10. A statement that goods are for sale at a particular price does not amount to an offer that can be turned, into a contract by acceptance. Termination of an offer An offer can be terminated on the grounds of rejection on the part of the offeree, that is if the offeree does not accept the terms of the offer.Also upon making an offer,an offeror may include as a condition to the contract the duration in which the offer will be available.If the offeree fails to accept the offer within this specific period then the offer will be deemed as terminated. 1. Expiration of fixed time for acceptance, expiry of the option period. 2. Expiration of reasonable time as in the case of DIETRICHSEN VS DIETRICHSEN, where an offer to sell land in November 1907 was held not to be still valid for acceptance in February 1908. 3. Rejection, it can be expressed or implied. 4. Counter offer as in the case of WATERMEYER VS MURRAY (counter offer),where, one party offered to sell a farm to the other party on certain terms, the other party did not accept unconditionally but countered the offer setting his own terms of the offer. The original offeror decided not to offer his farm. 5. Revocation or withdrawal as in the case of DIETRICHSEN VS DIETRICHSEN, an option renders an offer irrevocable n that period. (Done before acceptance). 6. Death of either party before acceptance (offeror or offeree). 7. Loss of contractual capacity. 8. An offer is also terminated by acceptance. 9. Supervening impossibility, due to vis major or casus fortuitus. 10. Death of offeror. Generally death (or incapacity) of the offeror terminates the offer. This does not apply to option contracts.The offer cannot be accepted if the offeree knows of the death of the offeror. In cases where the offeree accepts in ignorance of the death, the contract may still be valid, although this proposition depends on the nature of the offer. If the contract involves some characteristic personal to the offeror, the offer is destroyed by the death... 11. Death of offeree. An offer is rendered invalid upon the death of the offeree: 12. Counter Offers. If the offeree rejects the offer, the offer has been destroyed and cannot be accepted at a future time. A case illustrative of this is Hyde v. Wrench (1840) 49 E.R. 132, where in response to an offer to sell an estate at a certain price, the plaintiff made an offer to buy at a lower price. This offer was refused and subsequently, the plaintiffs sought to accept the initial offer. It was held that no contract was made as the initial offer did not exist at the time that the plaintiff tried to accept it, the offer having been terminated by the counter offer. It should be noted that a mere inquiry (about terms of an offer) is not a counter offer and leaves the offer intact. The case Stevenson v. McLean (1880) 28 W.R. 916 is analogous to this situation. Acceptance Is the expressed or implied signification by the offeree of his intention to be contractually bound in terms of an offer made to him or her? Rules governing acceptance (valid acceptance) 1. Acceptance can only be by the person to whom the offer is made (privity of 2. contract). 3. Acceptance must be communicated to the offeror. FELTHOUSE VS BINDLEY, letter. 4. Acceptance must be unequivocal in terms of the offer and must not venture outside the terms of the offer. 5. Acceptance must not be vague
- 32. rmmakaha@gmail.com 32 32 PRINCIPLES OFLAW 6. Acceptance requires knowledge of the offer. 7. Acceptance must not be subject to conditions 8. Acceptance must be in a stipulated method r manner as prescribed by the offeror. ELIASON VS HENSHAW stipulated that the reply should be send by wagon. 9. An acceptance of an offer which is impossible to perform creates no contract. 10. Acceptance must be made during the life of the offer or during the time limit of the offer. 11. Acceptance must be serious and should be made with the intentions that legally binding obligations will flow. SMITH VS HUGHES. 12. Acceptance must be consistent with the essentials of a valid contract E.G. if a minor enters into a contract, acceptance is invalid, because minors do not have contractual capacity. EDELSTEIN VS EDELSTEIN. MORE (Rules of acceptance) Communication of acceptance There are several rules dealing with the communication of acceptance: 1. The acceptance must be communicated: Powell v Lee (1908) 99 L.T. 284; Robophone Facilities Ltd v. Blank [1966] 3 All E.R. 128. Prior to acceptance, an offer may be withdrawn. 2. An exception exists in the case of unilateral contracts, in which the offeror makes an offer to the world which can be accepted by some act. A classic instance of this is the case of Carlill v. Carbolic Smoke Ball Co. [1892] 2 Q.B. 484 in which an offer was made to pay £100 to anyone who having bought the offeror's product and used it in accordance with the instructions nonetheless contracted influenza. The plaintiff did so and the court ordered payment of the £100. Her actions accepted the offer - there was no need to communicate acceptance. Typical cases of unilateral offers are advertisements of rewards (e.g., for the return of a lost dog). 3. An offer can only be accepted by the offeree, that is, the person to whom the offer is made. 4. An offeree is not usually bound if another person accepts the offer on his behalf without his authorisation, the exceptions to which are found in the law of agency, where an agent may have apparent or ostensible authority, or the usual authority of an agent in the particular market, even if the principal did not realise what the extent of this authority was, and someone on whose behalf an offer has been purportedly accepted it may also ratify the contract within a reasonable time, binding both parties: 5. It may be implied from the construction of the contract that the offeror has dispensed with the requirement of communication of acceptance (called waiver of communication - which is generally implied in unilateral contracts): see also Re Selectmove Ltd [1994] BCC 349. 6. If the offer specifies a method of acceptance (such as by post or fax), acceptance must be by a method that is no less effective from the offeror's point of view than the method specified. The exact method prescribed may have to be used in some cases but probably only where the offeror has used very explicit words such as "by registered post, and by that method only": see Yates Building Co. Ltd v. R.J. Pulleyn & Sons (York) Ltd (1975) 119 Sol. Jo. 370. 7. Silence cannot be construed as acceptance: see Felthouse v. Bindley (1862) 142 ER 1037.[13] 8. However, acceptance may be inferred from conduct, see, e.g.: Brogden v. Metropolitan Railway Company (1877) 2 App. Cas. 666; Rust v. Abbey Life Assurance Co. Ltd [1979] 2 Lloyd's Rep. 334; Saint John Tugboat Co. v. Irving Refinery Ltd (1964) 46 DLR (2d) 1; Wettern Electric Ltd v. Welsh Development Agency [1983] Q.B. 796. Correspondence with offer The "mirror image rule" states that if you are to accept an offer, you must accept an offer exactly, without modifications; if you change the offer in any way, this is a counter-offer that kills the original offer: Hyde v. Wrench (1840) 3 Beav 334. However, a mere request for information is not a counter-offer: Stevenson v. McLean (1880) 5 Q.B.D. 346. It may be possible to draft an enquiry such that it adds to the terms of the contract while keeping the original offer alive. An offeror may revoke an offer before it has been accepted, but the revocation must be communicated to the offeree, although not necessarily by the offeror: Dickinson v. Dodds (1876) 2 Ch.D. 463. If the offer was made to the entire world, such as in Carlill's case, the revocation must take a form that is similar to the offer. However, an offer may not be revoked if it has been encapsulated in an option (see also option contract). Battle of the forms Often when two companies deal with each other in the course of business, they will use standard form contracts. Often these terms conflict (e.g. both parties include a liability waiver in their form) and yet offer and acceptance
- 33. rmmakaha@gmail.com 33 33 PRINCIPLES OFLAW are achieved forming a binding contract. The battle of the forms refers to the resulting legal dispute of these circumstances, wherein both parties recognize that an enforceable contract exists, however they are divided as to whose terms govern that contract. Under English law, the question was raised in Butler Machine Tool Co Ltd v. Ex-Cell-O Corporation (England) Ltd [1979] WLR 401, as to which of the standard form contracts prevailed in the transaction. Lord Denning MR preferred the view that the documents were to be considered as a whole, and the important factor was finding the decisive document; on the other hand, Lawton and Bridge LJJ preferred traditional offer- acceptance analysis, and considered that the last counter-offer prior to the beginning of performance voided all preceding offers. The absence of any additional counter-offer or refusal by the other party is understood as an implied acceptance. In U.S. law, this principle is referred to as the last shot rule. Under the Uniform Commercial Code (UCC) Sec. 2-207(1), A definite expression of acceptance or a written confirmation of an informal agreement may constitute a valid acceptance even if it states terms additional to or different from the offer or informal agreement. The additional or different terms are treated as proposals for addition into the contract under UCC Sec. 2-207(2). Between merchants, such terms become part of the contract unless: a) the offer expressly limits acceptance to the terms of the offer, b) material alteration of the contract results, c) notification of objection to the additional/different terms are given in a reasonable time after notice of them is received. Material is defined as anything that may cause undue hardship/surprise, or is a significant element of the contract. If there is no contract under 2-207(1), then under UCC Sec. 2-207(3), conduct by the parties that recognize there is a contract may be sufficient to establish a contract. The terms for this contract include only those that the parties agree on and the rest via gap fillers. Postal acceptance rule As a rule of convenience, if the offer is accepted by post, the contract comes into existence at the moment that the acceptance was posted (Adams v. Lindsell (1818) 106 ER 250). This rule only applies when, impliedly or explicitly, the parties have in contemplation post as a means of acceptance. It excludes contracts involving land, letters incorrectly addressed and instantaneous modes of communication. The relevance of this early 19th century rule to modern conditions, when many quicker means of communication are available has been questioned, but the rule remains for the time being. Knowledge of the offer In Australian law, there is a requirement that an acceptance is made in reliance or pursuance of an offer: see R v. Clarke (1927) 40 C.L.R. 227. Contracts accepted through the post in relation to the various legal theories As a rule of convenience, if the offer is accepted by post, the contract comes into existence at the moment that the acceptance was posted (Adams v. Lindsell (1818) 106 ER 250). This rule only applies when, impliedly or explicitly, the parties have in contemplation post as a means of acceptance. It excludes contracts involving land, letters incorrectly addressed and instantaneous modes of communication. The relevance of this early 19th century rule to modern conditions, when many quicker means of communication are available has been questioned, but the rule remains for the time being. The posting rule (or "mailbox rule" (US), "postal rule" or "deposited acceptance rule") is an exception to the general rule of contract law in common law countries that acceptance takes place when communicated. The posting rule states, by contrast, that acceptance takes effect when a letter is posted. One rationale given for the rule is that the offeror nominates the post office as implied agent and thus receipt of the acceptance by the post office is regarded as that of the offeree. The main effect of the posting rule is that the risk of acceptance being delivered late or lost in the post is placed upon the offeror. If the offeror is reluctant to accept this risk, he can always require actual receipt as a condition before being legally bound. However, if the offeree mails a rejection and then sends an acceptance (or otherwise changes his mind), whichever communication is received by the offeror first controls.
- 34. rmmakaha@gmail.com 34 34 PRINCIPLES OFLAW English case law The rule was established by Anthony in the 19th century cases, starting with Adams v Lindsell (1818) B & Ald 681, which was later confirmed in Dunlop v Higgins (1848) 1 HL Cas 381, Household Fire Insurance Company v Grant (1879) 4 Ex D 216 and Henthorn v Fraser [1892] 2 Ch 27. The posting rule applies only to acceptance. Other contractual letters (such as one revoking the offer) do not take effect until the letter is delivered, as in Stevenson v McLean (1880) 5 QBD 346. The implication of this is that it is possible for a letter of acceptance to be posted after a letter of revocation of the offer has been posted but before it is delivered, and acceptance will be complete at the time that the letter of acceptance was posted—the offeror's revocation would be inoperative. Example 1: Day 1: A makes an offer to B. Day 2: A decides to revoke the offer and puts a letter in the mail to B revoking the offer. Day 3: B puts a letter accepting the offer in the mail. Day 4: B receives A's revocation letter. The letter of revocation can be effective only when received, that is Day 4. However, a contract was formed on Day 3 when the letter of acceptance was posted. It is too late for A to revoke the offer. Example 2: Day 1: A makes an offer to B. Day 2: B intends to reject the offer by putting a letter in the mail to A rejecting the offer. Day 3: B changes his mind and sends a fax to A accepting the offer. In this situation, whichever communication A receives first will govern. Example 3: Day 1: A makes an offer to sell a parcel of land to B. Day 2: B mails her acceptance. Day 3: Before A receives B's acceptance, B telephones A and states she wishes to reject the offer. Day 4: B's original letter of acceptance arrives, A then records the contract as a sale. B's acceptance of the offer means there is a binding contract -- she is obliged to pay for the land or be liable for damages. Under the posting rule, performance is a means of acceptance. If A orders 1000 blue coathangers and B ships them out, that shipment is considered to be a conveyance of acceptance of A's offer to buy the coathangers. Defective performance is also an acceptance, unless accompanied by an explanation. For example, if A orders 1000 blue coathangers, and B mistakenly ships 1000 red coathangers, this is still an acceptance of the contract. However, if B ships the red coathangers with a note that they sent these because they had run out of blue coathangers, this is not an acceptance, but rather an accommodation, which is a form of counter-offer. An interesting implication of the operation of the posting rule is that an acceptance is complete once the letter of acceptance is posted; it makes no difference whether the offeror actually receives the letter. This was demonstrated in Byrne v Van Tienhoven (1880) 5 CPD 344. If a letter of acceptance were to be lost, acceptance has still taken place. An exception to this would be if the offeree knows or has reason to know that the letter of acceptance never reached the offeror. For example, if A brings a letter of acceptance to the local post office and A sees the post office burn down a moment later, there is no acceptance. Further the posting rule does not apply to instantaneous forms of communications. For example in Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, the Court held that the posting rule did not apply to an acceptance by telex as the Court regarded it as an instantaneous form of communication. The general principle that acceptance takes place when communicated applies to instantaneous forms of communication. Courts have similarly held that the posting rule does not apply to acceptances by telephone or fax. The courts are yet to decide whether e-mail should be regarded as an instantaneous form of communication. If the offeree were to convey acceptance by commercially unreasonable means - by cross-country pony express, for example - the acceptance would not be effective until it had actually been received. A letter is regarded as "posted" only when it is in the possession of the Post Office; this was established in the case of Re London & Northern Bank [1900] 1 Ch 220. A letter of acceptance is not considered "posted" if it is handed to an agent to deliver, such as a courier.
- 35. rmmakaha@gmail.com 35 35 PRINCIPLES OFLAW The posting rule does not apply to option contracts or irrevocable offers where acceptance is still effective only upon receipt. This is because the offeree no longer needs protection against subsequently mailed revocations of the offer. Where parties are at distance from one another, and an offer is sent by mail, it is universally held in this country [United States] that the reply accepting the offer may be sent through the same medium, and, if it is so sent, the contract will be complete when the acceptance is mailed,...and beyond the acceptor's control; the theory being that, when one makes an offer through the mail, he authorizes the acceptance to be made through the same medium his agent to receive his acceptance; that the acceptance, when mailed, is then constructively communicated to the offeror. Contracts accepted by telephone and offers that introduce special terms such as signs, tickets and receipts Ticket cases In contract law, ticket cases are a series of cases that stand for the proposition that if you are handed a ticket or another document with terms, and you retain the ticket or document, then you are bound by those terms. Whether you have read the terms or not is irrelevant, and in a sense, using the ticket is analogous to signing the document. This issue is an important one due to the proliferation of exclusion clauses that accompany tickets in everyday transactions. The case of Parker v. The South Eastern Railway Co (1877) 2 CPD 416 illustrates restrictions on this concept: Knowledge of writing and of terms: If the recipient of the ticket knew that there was writing on the ticket and also knew that the ticket contained terms, then the recipient is bound by the terms of the contract. Reasonable person: If the recipient did not know of the existence of the terms, then the court will consider whether a reasonable person would have known that the ticket contained terms. If that is so, then the ticket-holder is bound by those terms; if not, then the court will return to the general test of whether reasonable notice of the terms was given. The test of whether a document fits within the description of a ticket is an objective test, that is, whether a reasonable person in the position of the ticket-holder would perceive it to be contractual in nature. For instance, if exclusion clauses accompany a docket, it may be held that it is not contractual in nature since it is just a receipt. Furthermore, Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd [1989] 1 QB 433 held that if a party wishes to incorporate onerous terms into a document that is to be just accepted by the other party, reasonable notice must be given to make it a term of the contract. Other ticket cases include: L'Estrange v Graucob [1934] 2 KB 394 Olley v Marlborough Court [1949] 1 KB 532 Thornton v. Shoe Lane Parking [1971] 1 All ER 686 SPECIAL TERMS Where an offer is made subject to special terms the offeree will not be bound by them unless he has expressly or impliedly accepted them. This is illustrated by the following cases: A). SIGNED DOCUMENTS In general the effect of signing a contract is that the party signing is bound. This rule is applied not only when the person signing studies the document but also when signing
- 36. rmmakaha@gmail.com 36 36 PRINCIPLES OFLAW carelessly or recklessly and when he fails to avail himself of an opportunity to study provisions incorporated by reference. These are governed by Caveat Subscriptor rule and Quasi mutual assent. CAVEAT SUBSCRIPTOR RULE. The business world has come to rely on the principle that a signature on written contract binds the signatory to the terms of the contract, and if this principle were not upheld any business enterprise would become hazardous in the extreme. The general rule, sometimes known as the Caveat Subscripto Rule (let the signer be aware), is therefore that a party to a contract is bound by his signature, whether or not he has read or understood the contract. And this will be so even if he signed in blank, or it is obvious to the other party that he has not read the document. The general rule will naturally not apply if the signature was obtained by misrepresentation, fraud, duress or undue influence, or if the contract is vitiated by illegality or mistake. QUAS - MUTUAL ASSENT This doctrine is simply a recognition of the fact that a party to contractual negotiations is no better equipped than the court to plumb the mind of the other party, so if the other party’s words or actions gave him reasonably to understand that their minds had met, then there was a contract even if, in truth, their minds did not meet. The doctrine stems from Blackburn J’s words adopted in Zimbabwean law in Diamond Vs Kernick 1947. “if, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.” An equally authoritative statement of the doctrine is by Innes J in Pieter’s & Co Vs Salomon 1911. “When a man makes an offer in plain and unambiguous language, which is understood in its ordinary sense by the person to whom it is addressed, and accepted by him bona fide in that sense, then there is a concluded contract. Any unexpressed reservations hidden in the mind of the promisor are in such circumstances irrelevant. He cannot be heard to say that he meant his promise to be subject to a condition which he omitted to mention, and of which the other party was unaware.” NB: The objective of the doctrine of Quasi-mutual assent is to establish a positive sanction for the expectation of good faith which has grown up in the mutual dealings of men of average right mindedness. CASE: George Vs Fairmead (Pvt) Ltd FACTS:
- 37. rmmakaha@gmail.com 37 37 PRINCIPLES OFLAW George a hotel guest signed a hotel register, which contained contractual terms some of which he completed by filling in blank space. The register had clauses written in Afrikans and English stating that the Hotel will not be liable for loss to guest’s property. George signed the register without reading some of the clauses. After a month latter the goods were stolen and he sued the Hotel. The Hotel repudiated liability on the basis of the clause in the register. HELD: It was held that the Hotel was not liable because by signing the register George had become bound by whatever words contained in the clause. George was bound by the terms since he knew he was signing a contractual document. CASE: Bhikhagee Vs Southern Aviation (Pvt) Ltd FACTS: An experienced businessman, who was accompanied by a friend who could read the document but was not asked to, signed a flight ticket, all of it in a language (English) he could not understand after jokingly asking whether he was signing a death warrant. Bad weather prevented the completion of the journey in time,and Bhikhagee had to make alternative arrangements. The company sued him for the fare. HELD: The court held that by his signature he had accepted the terms of the contract hence he was bound by the conditions. CASE: Mothole Vs Mothole FACTS: A sick man who could not concentrate on the document containing latent phrases which he obviously could not have understood because he wanted to execute the document without desiring that it could be explained to him in a language which he could understand. HELD: The sick man was bound by his signature. EXCEPTIONS NB: Note that the only defense available to a person who signs a document without reading are: 1. Fraud 2. Misrepresentation 3. Duress 4. Illegality 5. Mistake
- 38. rmmakaha@gmail.com 38 38 PRINCIPLES OFLAW 6. Undue Influence. NB: But the part signing will not be bound if he has been misled as to the Meaning of the words to which he was signifying his assent for. B). UNSIGNED DOCUMENTS e.g. Tickets, Receipts, Programmes, Notices etc. a). TICKETS Terms contained in a ticket are binding on the acceptor of the ticket but , it depends on whether the offeree was aware or ought to have been aware at the time of acceptance that the offer was subject to particular terms. where agreement has taken place in the normal manner and the offeree has been given a ticket by the Offeror which contains written matter purporting to contain terms of the agreement, the offeree will be bound by those terms if he was aware or ought to have been aware at the time of acceptance that the offer was subject to them. The combined effect of the Parol Evidence Rule, the restrictions on evidence in aid of interpretation and the Caveat Subscripto Rule enables companies and public utilities to do business with the public through a large and constantly changing staff without having to prove the exact circumstances in which each contract was made. But for enterprises which bring large numbers of people to the same place at the same time, like public entertainment, sports promotion and passenger transport, the delay involved in obtaining a signature from each customer would be unacceptable (especially to the public),so an unsigned document such as a ticket is used. CASE: McLaren Vs Central Southern African Railways. FACTS: Mcleran left a package at the cloakroom at the railway station. A ticket was handed to him which stated that the railways were only liable up to the value of £5. For lost goods. The clause was printed diagonally across the ticket and on the same ticket the railway clerk who served him had written a description of the goods in question. When the package was lost he sued the railways but the railways argued that their liability limited to £5. only. HELD: The court held that the railways were fully liable because no reasonable notice had been given to Mcleran at the time of contracting and Mcleran would be compensated since the cloak man had scrapped the ticket on top so he had assumed that the words written under were of no essence. In testing whether a ticket contains binding terms the following factors have to be considered.
- 39. rmmakaha@gmail.com 39 39 PRINCIPLES OFLAW 1. Time of issue of the ticket. 2. Nature of the trade (whether the trade is worth to be given a ticket). 3. Intention to give the ticket- the question, which arises, is whether the recipient of the ticket is bound by the terms which he had no actual knowledge. The approach of the courts in ticket cases therefore is to ask these questions: 1. Did the person who received the ticket know that there was printing or writing on it? If the answer is positive, the court proceeds to the next question, 2. Did the person receiving the ticket know that this writing or printing refereed to or contained provisions of the contract in question or set out terms of the contract. If the answers are positive then the terms form part of the contract. If the answer to either of the questions is negative, then a third question must be asked. 3. Did the person giving the ticket did what was reasonably sufficient in the circumstances to give the person a notice of the terms. If the answer is” Yes” then the provisions are apply of the contract. If “No” then the provisions do not form part of the contract. NB: In determining what is “reasonably sufficient”, Innes CJ in McLaren Vs CSAR Draws a distinction between documents which a man might reasonably suppose to contain conditions and documents which a man cannot be reasonably held to suppose contained conditions. EXEMPTION CLAUSES An exemption clause is a term in a contract, which seeks to exempt one of the parties from liability or seeks to limit liability to a specific sum if certain events occur. They are used for the purposes of either limiting or excluding the liability of a party to a contract in some circumstance. These exemption clauses are very much liable to abuse hence the court steps in to prevent the abuse of exemption clauses. A company or public utility supplying a service to the public will want to eliminate bargaining and uncertainty by using a standard form of contract, and its legal adviser, when drafting the standard form, will almost inevitably safeguard his client’s interest by including clauses exempting it from some of the liability that would attach to by common law. Many of the Caveat Subscripto and Ticket cases are concerned with attempts by customers to escape from the effect of such exemption clauses, and as has been seen, the necessity to keep the wheels of business turning has left the customer strictly limited ways of escape. These ways are supplemented by the courts setting limits on the exemptions they will permit and interpreting them. An undoubted limit on exemption clauses is that a party may not exempt himself from liability for his own fraud, but may exempt himself from liability for his own negligence.
- 40. rmmakaha@gmail.com 40 40 PRINCIPLES OFLAW Exemption clauses only apply i. Especially if a document is not signed. ii. The party knows of the clause. iii. Reasonable steps are taken to bring it to his notice before the contract is made. Terms written on dry cleaners, parking a car in the parkade, leaving a car at a garage for repairs, Horse race courses, etc are examples of exemption clauses may be applicable. b). RECEIPTS A receipt is prima facie evidence of payment. when making a payment the debtor should always demand a receipt for if he is subsequently sued on the debt and he alleges that he has paid it, the onus is on him to prove such fact. A receipt is not a contractual document. The person taking a receipt does not bind himself to any terms or clauses printed on the receipt. CASE: Chapelton Vs Barry Urban District FACTS: Chapelton hired 2 desks and chairs from the council and paid for them and he was given a receipt containing words to the effect that the council would not be liable for any accidents or damage arising from the hire of the chairs. When Chapelton sat on one of the chairs, it broke and he was injured. He sued the council for damages but the council repudiated the liability relying on the clause on the receipt. HELD: The court held that the council was liable because the plaintiff who had not read the conditions on the receipt was entitled to assume that the receipt was merely a document that serves as a proof for the money he had paid and not a contractual document. c). NOTICES The General Rule is that the terms on the Notice are binding if the receiver was aware of the notice or the Offeror had alerted the Offeree as regards the terms. Similar principles apply when reliance is placed on a provision of the contract which is posted up in a prominent position, such as the notice “cars garaged at owners’ risk” CASE: Kemsley Vs Car Spray Centre (Pvt) Ltd FACTS: Kemsley contracted with the company, a car repairer to have repairs done to his car in the workshop there were two large notices, which read; “Vehicle and goods stored are driven at owners risk” Kemsley was aware of the fact that his car was in the company’s possession at owner’s risk. While in the company’s possession the car was involved in another accident when being driven by the company’s servant and the manager undertook to repair the damage while in the company’s possession for this purpose the car was stolen and later recovered in a damaged condition.
- 41. rmmakaha@gmail.com 41 41 PRINCIPLES OFLAW HELD: When the company undertook to repair the damage caused in the accident, while the car was being driven by its servant, a new contract had been entered into. The company was supposed to draw Kemsley’s attention to the fact that they will only do the repair subject to the car remaining at owners risk. This was not done hence company was……………………………………… NB: where the printing appears on a programme which can only be obtained by payment, the offeree will not be bound unless reasonably sufficient notice has been given to him. CASE: Roseveare Vs Auckland Park Sporting Club. FACTS: R paid to enter a racecourse. His identity was mistaken; he was ordered to leave, escorted to the turnstiles and ejected. The owners of the course contended that a clause printed inconspicuously at the end of the programme entitled the stewards to eject any person whose presence they did not desire. The programme could be obtained only on payment and this was the only notice to the public of the conditions. HELD: The notice was not sufficient to bind a person who had not read the term. The effect of counter offers on the contract Counter Offers. If the offeree rejects the offer, the offer has been destroyed and cannot be accepted at a future time. A case illustrative of this is Hyde v. Wrench (1840) 49 E.R. 132, where in response to an offer to sell an estate at a certain price, the plaintiff made an offer to buy at a lower price. This offer was refused and subsequently, the plaintiffs sought to accept the initial offer. It was held that no contract was made as the initial offer did not exist at the time that the plaintiff tried to accept it, the offer having been terminated by the counter offer. Please note that a counter-offer is not an acceptance, and will typically be treated as a rejection of the offer. For example, if the buyer counter-offers to purchase the piano for $800.00, that typically counts as a rejection of the original offer for sale. If the seller accepts the counter-offer, a contract may be completed. However, if the seller rejects the counter-
- 42. rmmakaha@gmail.com 42 42 PRINCIPLES OFLAW offer, the buyer will not ordinarily be entitled to enforce the prior $1,000.00 price if the seller decides either to raise the price or to sell the piano to somebody else. The difference between void and avoidable contracts VOID CONTRACT A void contract is the one that has no legal effect. Courts will not enforce it. It is not a contract at all. A void contract, also known as a void agreement, is not actually a contract. A void contract cannot be enforced by law. Void contracts are different from voidable contracts, which are contracts that may be (but not necessarily will be) nullified. An agreement to carry out an illegal act is an example of a void contract or void agreement. For example, a contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal. In such a case, neither party can go to court to enforce the contract. A void contract is void ab initio, i e from the beginning while a voidable contract can be voidable by one or all of the parties. CONTRACTS MAY BE VOID DUE TO THE FOLLOWING A contract can also be void due to the impossibility of its performance. E g: If a contract is formed between two parties A & B but during the performance of the contract the object of the contract becomes impossible to achieve (due to action by someone or something other than the contracting parties), then the contract cannot be enforced in the court of law and is thus void. A void contract can be one in which any of the prerequisites of a valid contract is/are absent for example if there is no contractual capacity, the contract can be deemed as void. In fact,void means that a contract does not exist at all. The law can not enforce any legal obligation to either party especially the disappointed party because they are not entitled to any protective laws as far as contracts are concerned. Features of Void agreements: 1. An agreement made by incompetent parties (Minor/Lunatic Person) is void. Both parties lack contractual capacity. 2. Any agreement with a bilateral mistake is void. 3. Agreements which have unlawful consideration is void. 4. Agreement with a unlawful object is void. 5. Agreements made without consideration is void. 6. Agreement in restraint of marriage of any major person is void (absolute restriction). 7. Agreement in restraint of trade is void.(reasonable reason) 8. Agreement in restraint of legal proceedings is void. 9. An agreement the terms of which are uncertain is void. 10. An agreement by way of wager (betting/gambling) is void. 11. An agreement contingent upon the happening of an impossible event is void. 12. Agreement to do impossible acts is void. Impossible to perform. 13. Formalities required by law are lacking.
- 43. rmmakaha@gmail.com 43 43 PRINCIPLES OFLAW 14. Mistake. 15. Illegality. VOIDABLE CONTRACT A contract which is valid per se but due to some issue, the innocent party may at his option decide to withdraw from it. It is valid but the innocent party may choose to avoid. A voidable contract, unlike a void contract, is a valid contract. At most, one party to the contract is bound. The unbound party may repudiate the contract, at which time the contract is void. For example, depending upon jurisdiction, a minor has the right to repudiate certain contracts. Any contract with a minor is thus a voidable contract. If a minor were to enter into a contract with an adult, the adult would be bound by the contract, whereas the minor could choose to avoid performing the contract. Therefore, when entering into contracts with a minor, people often require the co signature of an adult, preferably a parent or legal guardian A CONTRACT MAY BE VOIDABLE DUE TO THE FOLLOWING 1. Duress. 2. Undue influence. 3. Misrepresentation. 4. Where one party lack contractual capacity. The effect of mistake, misrepresentation and undue influence of contracts 1. MISTAKE Generally a mistake renders a contract void because there is no consensus ad idem. In contract law a mistake is an erroneous belief, at contracting, that certain facts are true. It may be used as grounds to invalidate the agreement. Common law has identified two different types of mistake in contract: "unilateral mistake" and "mutual mistake," sometimes called "common mistake." EXCEPTIONS 1. One of factor. THE MISTAKE MUST BE ONE OF FACT. The mistake must be as to a fact, not as to the Law which is applicable to the facts on which the agreement is based. The maxim of the law is “Ignorantia juris neminem excusate”. The general proposition of law is that if you think the meaning of a clause is such and such, you cannot get rid of your liability when you discover that the true legal meaning is different from what you thought, for you cannot be heard to say that you did not know the law. CASE: Benning Vs Union Government (Minister of Finance).
- 44. rmmakaha@gmail.com 44 44 PRINCIPLES OFLAW FACTS: B paid £5 custom duty on a certain floor-surfacing machine imported by him, believing the machine was of the class “domestic machine” on which duty was payable. Having paid, B subsequently claimed the £5 back as the machine was exempted from duty. HELD: B could not recover as the payment was made in mistake of law. A person who contracts under a mistake of law is not without remedy where one party states as a fact to the other party that the meaning of a clause is such and such this is the meaning he will abide by and thereby induces him to contract. This is a representation of fact and if the former insists on giving the clause a different meaning subsequently even if such meaning is the true legal meaning, the contract will be voidable for misrepresentation. 2. Material or concerns material fact. The mistake must be as to a material or an essential fact, that is if the party mistaken had known what the real state of affairs was he would never have made the contract. Whether an error is essential or merely incidental is entirely a question of fact to be determined by a court on the available evidence. However, in deciding the issue the courts usually derive assistance from the following classification of mistakes according to the element of the contract in which the mistake occurs: o Error on negotio, John intends to hire a car, Angie intends to buy it. o Error in corpore, error in identity of subject matter. o Error in persona, error relating to the identity of one of the parties. o Error in substantia 3. A reasonable mistake. IT MUST BE A REASONABLE MISTAKE:/JUSTUS ERROR. An error is Justus when it is reasonable or excusable in all the circumstances of the particular case. In practice, this almost invariably means that the mistake should have been caused or induced by the conduct of the party, e.g. in misrepresenting the nature or contents of the contract document. Such a misrepresenting may even take the form of silence, when there is a legal duty on the other party to explain or draw attention to onerous clauses in the document; e.g. because he has previously advertised or described the transaction in quite different terms, or has drafted the document in a misleading way so that it acts as a trap for the unwary signatory. In circumstances such as these the maxim Caveat Subscripto Rule has no application, for the mistaken party’s ignorance as to the nature or effect of the document is excusable and the other party is not reasonably misled by his signature. Again in cases of Justus error there is no room for the operation of doctrine of Quasi-Mutual Assent. A mistake made by one party to a contract which is due to his own carelessness is not a reasonable mistake. e.g. when a man is asked to sign a document purporting to contain the terms of the agreement, believing that the terms are different from those expressly set out, he cannot then be heard to say that his ignorance of what was in it was a Justus error.(Case: George Vs Fairmead(pvt)Ltd.) CASE: Merrington Vs Davidson & Others FACTS: At a sale of certain lots of grounds at Retreat, D bought lots numbers 1-28 block CC, at £6 each. A plan was available on which the various blocks and lots were marked but D did not bother to look at it. D contended that he had intended to buy lots in block C and not block CC, and that his mistake rendered the contract Void. HELD: If it was a mistake, it was certainly not a Justus error, as D ought to have inquired what lots he was buying.
- 45. rmmakaha@gmail.com 45 45 PRINCIPLES OFLAW 4. The party setting up a mistake is not estopped from doing it. THE PARTY SETTING UP THE MISTAKE MUST NOT BE ESTOPPED FROM DOING SO. Where one person by his words or conduct represents to another that a certain state of things exist and induces him to act on that belief to his prejudice, the former is prevented from denying as against the latter the existence of that state of things.(Case: Smith Vs Hughes). The stopped person cannot succeed if he sets up the defence that he entered into the contract while laboring under a material mistake. CASE: Hodgson Brothers Vs Southern African Railways FACTS: H wrote to S offering for sale a certain lorry at a price of £500. After certain further correspondence, the railway storekeeper wrote to H in the following terms: “I am prepared to pass an order on you for the 5-ton lorry – this price to include certain spares you hold for the lorry and l shall be glad to hear if you are agreeable to accept these terms.” H replied that he was quite agreeable to include the spares and asked for instructions for delivery. Some five days later the railway storekeeper telegraphed saying that he had omitted the price from his letter and the price was £300. HELD: Applying the principle in Smith Vs Hughes, there was a binding contract at £500. The railway storekeeper having induced H to believe that he was prepared to buy the lorry at that price bound thereby, whatever his actual intention may have been. CLASSIFICATION OF MISTAKE a. Error on negotio, John intends to hire a car, Angie intends to buy it. b. Error in corpore, error in identity of subject matter. c. Error in persona, error relating to the identity of one of the parties. d. Error in substantia i. ERROR IN NEGOTIO:/Mistake as to the nature of the agreement. Error as to the nature of agreement or terms of the contract. Such error renders the contract void if it cannot be corrected or correction leads to unjust enrichment to the other party.e.g. one party thinks it’s a contract of sale where as the other thinks it’s a donation. CASE: Dodds Vs Verran FACTS: D had been conveyed at his request 300miles in V’s private motor-car, nothing having been said about payment. When later D sued V for £30 for medical fees, V admitted owing the amount but counterclaimed for £15 for the transport of D. The magistrate found there was a tacit contract to pay for transport. HELD: On appeal, there was no contract. Graham JP said “even if Verran had been under the honest impression that he was to be paid for his services, if Dr. Dobbs honestly believed he was travelling as a guest, no charge could be made against him for the parties were never ad idem, the one party understanding one thing and the other, on reasonable grounds, understanding another….” ii. ERROR IN CORPORE:/Mistake as to the identity of the subject matter. This is mistake relating to the identity of the subject matter of the contract. e.g. where one party at an auction sale thinks he has bought two articles placed one on top of the other, but the seller thinks he has sold one of them only.
- 46. rmmakaha@gmail.com 46 46 PRINCIPLES OFLAW CASE: Maritz Vs Pratley FACTS: At an auction sale, two lots(items), a mirror and a mantelpiece, were placed on top of the other, each lot being separately numbered and catalogued. The mantelpiece was knocked down by M, the auctioneer, to P but, when M put up the mirror, P claimed that he had bought it with the mantelpiece. He refused to take the mantelpiece without the mirror, and when M sued him in the magistrate’s court for the purchase price the Magistrate found that because there was no mutual consent as to what was being sold there was no completed contract. HELD: There was sufficient evidence to justify the magistrate in holding that there was a bona fide mistake that Pratley did not agree to purchase the same thing Maritz was endeavoring to sell. The contract was not valid. iii. ERROR IN MOTIVE: A mistake which is merely incidental to the contract in that it relates only to the reasoning or motivation of one of the parties and does not render a contract Void. (CASE: Diedericks Vs Minister of Lands) iv. ERROR IN MATERIA OR SUBSTANTIA:/Mistake as to the characteristics or quality of the subject-matter of the contract. Such an error is merely incidental and not essential unless it is serious. If a party mistakenly believes it to be a term of the contract that the subject-matter should be of a certain quality, or have certain characteristics, the error is essential and may affect the validity of the contract. v. ERROR IN QUANTITY: If one of the party thinks that he has bargained to receive a larger sum of money or greater quantity of commodities than the other thinks he has agreed to deliver, the error is essential and the contract may be void; but if both think the converse, the contract is valid for the lesser amount. vi. ERROR IN PERSONA:/Mistake as to the identity of a party. That is, one of the parties makes a mistake as to the identity of the other party he was contracting with. The error can be essential and the contract may be void if it make a substantial difference.(unless in the particular circumstances the identity of the other party is in the highest degree relevant). CASE: Beyers Vs McKenzie FACTS: Holmes fraudulently misrepresented himself to Beyers as being commissioned to buy horse on behalf of the Cape Government. He purported to buy nine of Beyers horses for the Government and having obtained possession of them, sold and delivered two of them to McKenzie, an innocent third party. Beyers sued Mckenzie for the return of the horses. HELD: There was no contract because Beyers meant to contract with the Cape Government and not with Holmes. TYPES OF MISTAKE 1. Unilateral mistake, one party makes a mistake. SMITH AND HUGHES doctrine. In the case of a unilateral mistake, the parties are usually at cross-purposes, due to a misunderstanding. Either one or both of the parties are mistaken about some fact connected with the contract (including the intention of the other party), but they do not
- 47. rmmakaha@gmail.com 47 47 PRINCIPLES OFLAW share the same mistake. The rule is that a unilateral mistake renders the contract void if it is both essential (material) and reasonable (Justus error). A contract is Void for mistake if the parties are not ad idem (of the same mind) as to the terms of their agreement, provided-: (a) The mistake is one of fact; (b) It concerns a material fact; (c) It is a reasonable mistake; (d) The party setting up the mistake is not stopped from doing so. 2. Common mistake, both parties make the same mistake as in COOPER VS PHIBBS. The parties must have a consensus ad idem, that is, they must be of the same mind or understanding as to the essential or material factors of their agreement. If both parties are not of the same mind, one of them at least must be laboring under a mistake or error, i.e. a wrong impression of the actual facts. If both parties labour under the same mistake, the mistake is said to be “Common”, if each party is under a different impression, the mistake is said to be “Unilateral”. Whether common or unilateral, however, mistake may render a contract void if certain requirements are met. 3. Mutual mistake, parties have negotiated at cross purposes, offer made is not one accepted, as in RAFFLES VS WICKELHOUSE. DOCUMENTS MISTAKENLY SIGNED Where a person is induced by the false statement of another to sign a written document contained a contract that is fraudulently differently different in character from that he contemplated, the mistake party will escape the liable if he satisfies the court that the signed instrument is different from he intended to sign and his mistake was not due to his carelessness, his defence being the plea of non est factum (it is not his deed) in English law or Justus error (reasonable mistake) in Roman Dutch Law. RECTIFICATION If both parties mistakenly think there have correctly incorporated their agreement in a written contract but the contract fails to express their true common intention, the court will rectify it. o Rectification will not be ordered if the effect of such rectification will be to prejudice the third parties. o If the common intention of the parties is clear and the document does not express that intention then verbal agreement need not be prove 2. MISREPRESENTATION A representation is a statement of fact made during the negotiation stage which becomes one of the reasons that induces the other party to enter into a contract. It becomes a misrepresentation if facts are false. Criteria for Misrepresentation Misrepresentation is one of several vitiating factors which can affect the validity of a contract. A misrepresentation occurs when one party makes a false statement with the intention of inducing another party to contract. For an action to be successful, some criteria must be met in order to prove a misrepresentation. These include: A false statement of fact has been made, The statement was directed at the suing party and The statement had acted to induce the suing party to contract.
- 48. rmmakaha@gmail.com 48 48 PRINCIPLES OFLAW REQUIREMENTS 1. It must be false in fact as in LAMB VS WALTERS, a party to a contract of a house assured the other that the price asked was “ fair and reasonable” whereas in fact it was far in excess of the value of the house. In NAUDE VS HARRISON, “….. Well built...” it was held that the statement did not amount to a misrepresentation. In MAZZA AND OTHERS VS JONES, a statement of opinion is not a misrepresentation entitling one to restitution even if it is incorrect. 2. It must be made by the other contracting party. 3. It must be made before or at the time the contract was entered into. 4. The representation statement must be material, of such a nature it would induce a person to contract. 5. The innocent party must have contracted on the faith or basis of the statement, as in POOLE & MCLENNAN VS NOURSE, the other party, put inaccurate and false statements in an advert to attract prospective buyers to see the farm – were given true facts. 6. The representation was made with the intention of inducing the other party to contract. 1. THE REPRESENTATION WAS MADE WITH THE INTETION OF INDUCING A CONTRACT; Intention determines whether a statement made by one party to the other before or at the time of the contract is a term of the contract, or a representation that is an inducement but not party of the terms of the contract, or a mere puff. A false statement made incidentally without the intention of inducing a contract will not render any resulting contract voidable. A mere lie, which is foolishly acted upon by others to whom it is addressed, does not constitute s misrepresentation unless the utterer intended. Where the parties intend the statement to be part of the contract, it is a warranty, for which contractual responsibility is taken and in breach of which the remedies will be available. SILENCE: Silence will constitute misrepresentation where there is a duty to disclose. Such a contract exist where the contract is Uberrimae Fidei (Utmost good faith) like partnership and insurance, or in contracts of Sale in respect of Latent defect which the seller knows of, or where the negotiation are characterized by the involuntary reliance of one party on the other for material information, or where one party has created an erroneous belief in the mind of the other party but fails to correct it. Three situations where silence will give rise to an action based on non-disclosure: ACTIVE CONCEALMENT The guilty party, having by a positive act or statement created an erroneous belief in the mind of the innocent party, fails to correct it but allows it to persist until the agreement is concluded. DESIGNED CONCEALMENT The circumstances of a particular case, such as the relationship of the parties or the involuntary reliance of the one upon the other for material information, give rise to a duty to disclose. It must be shown that the information was purposely withheld to induce the contract or to conceal facts which, if known, would probably have resulted in the innocent party not contracting. SIMPLE NON-DISCLOSURE A party without deliberation or design but by inadvertence fails to disclose to the other party some material fact concerning the subject matter of the contract. the accepted view is that simple non-disclosure amounts to fraud only in a contract of Sale, where there is a duty on a seller to disclose a latent defect of which he has knowledge. CASE: Glaston House (Pvt) Ltd Vs Inag (Pvt) Ltd.
- 49. rmmakaha@gmail.com 49 49 PRINCIPLES OFLAW FACTS: When GH had purchased a dilapidated building from Inag and was unaware that part of the building had been proclaimed a national monument. Inag, of course, had been so advised. Inag knew the building was being purchased for redevelopment purposes but had failed to disclose that party of the building had been declared a national monument. Soon after the Sale GH, having learned of the proclamation, consulted the National Monument Council and was permitted to remove the part concerned subject to it being stored and later installed in the foyer of the new building. This put GH to considerable expense, which expense was now claimed from Inag. HELD: The fact that part of the building had been proclaimed a monument constituted a latent defect, Inag had deliberately concealed this fact and this deliberate concealment constituted fraud entitling GH to recover the amount expended in preserving the part. NB: A mere puff refers to a statement made during pre-contractual negotiations which is not intended to be taken seriously and as such entails no legal consequences such as those of fraudulent misrepresentation or warranty. 2. THE REPRESENTATION MUST BE MATERIAL. A material representation is one which is of such a nature as would be likely to induce a person to contract. it is a general rule that if the representation that induces a contract does not come from one of the parties but from an independent third party, it will have no effect upon the contract, unless the person is an agent. CASE: Bird Vs Murphy FACTS: B sued M for rescission of a contract on the grounds of misrepresentation. B bought Mercedes Benz from M. He alleged that he was induced by misrepresentation that the car was a 1956 model whereas it was a 1953 model. It was discovered that before discussion and purchase B had liked the car and was determined to buy. HELD: The court said that there was no inducement into the contract hence binding on both parties. The fact that it was 1956 model is immaterial since B had liked the car and had taken a fancy drive with it. 3. THE REPRESENTATION MUST BE FALSE IN FACT. A representation is a statement as to an ascertainable fact. A mere statement as to a degree of quality as to which opinions may be fairy reasonable and legitimately said can not constitute a representation. Statement of fact must clearly be distinguished from expressions of opinion. NB: The following do not amount to Misrepresentation: A MERE PUFF: that is depicting the subject matter in glowing colours, general laudation confined to indiscriminate puffing and pushing and not condescending to particulars, the claims of advertisers. A MERE STATEMENT OF OPINION: but not if it is given dishonestly. CASE: Van Heerden and Another Vs Smith FACTS: VH, who had leased certain bakery premises from S, claimed cancellation and damages on the ground of S’s false and fraudulent representation as to future profits. After the takeover of the bakery, it showed a loss or substantially less profits than the defendant represented it would yield. HELD: The court held that statements on the profits were mere allegations or opinions and not statements of fact.
- 50. rmmakaha@gmail.com 50 50 PRINCIPLES OFLAW A STATEMENT OF LEGAL PRINCIPLES, which is a statement of opinion only except where on party to a contract states that the meaning of a clause is such and that he intends to be bound by that meaning, in which case it is a representation of fact. 4. THE OTHER PARTY ENTERED INTO THE CONTRACT ON THE FAITH OF THE REPRESENTATION If the false statement did not in fact induce the contract, the person whom the representation was made cannot set the contract aside. The misrepresentation must have actually deceived the other party to enter the contract. the party who seeks relief must establish that on a balance of probabilities, he would not have entered into the contract. CASE: Poole and Mclennan Vs Nourse. FACTS: N advertised in The Farmer’s Weekly that he had a farm for sale. He deliberately put exaggerated and false statements in the advertisement to attract prospective purchasers to see the farm and charm them with its attractive features. P and M having seen the advertisement, paid a visit to the farm and remained there for over three days. During this time N communicated to them the true facts. N subsequently entered into a contract of Sale with P and M. they later alleged that they had been induced to buy through fraudulent statements in the advertisement. HELD: The contract was not voidable for, being in possession of the true facts, P and M could not complain that they were misled by the false statements contained in the advertisement. TYPES OF MISREPRESENTATION 1. Fraudulent misrepresentation, it involves a false statement made with full knowledge of its falsity. It may involve making reckless statements without caring about its truth. Reckless amounts to fraud but negligence does not. Making a statement when in doubt about its truth – fraudulent diligence in ignorance. Fraudulent misrepresentation occurs when one makes representation with intent to deceive and with the knowledge that it is false. An action for fraudulent misrepresentation allows for a remedy of damages and rescission. One can also sue for fraudulent misrepresentation in a tort action. Fraudulent misrepresentation is capable of being made recklessly. REMEDIES: - It is a delict, damages are to put the aggrieved party in the position he would have been, had he ot been misled. This is to make good the loss suffered by the innocent party. - He may claim rescission of the contract and damages. - He may treat the contract as binding and claim damages for any loss he has suffered. 2. Negligent misrepresentation, a negligent statement made with the intention to induce a contract. Failure to take steps which a reasonable man would have taken in the circumstances. Negligent misrepresentation at common law occurs when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true. This type of misrepresentation is relatively new and was introduced to allow damages in situations where neither a collateral contract nor fraud is found. It was first seen in the case of HEDLEY BYRNE V HELLER [1964] A.C. 465 where the court found that a statement made negligently that was relied upon can be actionable in tort. Lord Denning in ESSO PETROLEUM CO. LTD. V MARDON [1976] Q.B. 108 however, transported the tort into contract law, stating the rule as:
- 51. rmmakaha@gmail.com 51 51 PRINCIPLES OFLAW if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another…with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable REMEDIES: - Negligent misrepresentation may be raised as a defence by the prejudiced to an action brought by defendant to enforce the contract. - Plaintiff may claim rescission of the contract. Damages may only be claimed if defendant was under a duty to speak carefully. - Plaintiff may abide by the contract and claim QUANTI MINORIS damages i.e. claim a reduction in the purchase price of the thing sold. (Purchase and Sale Law). 3. Innocent misrepresentation, statement is made without intention to mislead. Innocent misrepresentation (DERRY V. PEEK)occurs when the represent or had reasonable grounds for believing that his or her false statement was true. Prior to Hedley Byrne, all misrepresentations that were not fraudulent were considered to be innocent. This type of representation primarily allows for a remedy of rescission, the purpose of which is put the parties back into a position as if the contract had never taken place. Allows for damages to be awarded in lieu of rescission if the court deems it equitable to do so. This is judged on both the nature of the innocent misrepresentation and the losses suffered by the claimant from it. REMEDIES: There are no damages, you can only claim rescission of the contract and restitution. The rational is to restore the parties in their original position as though nothing had happened. 3. UNDUE INFLUENCE Not based on fear, threats or harm. Occurs where one party to the contract is able to influence the other party to such a degree that the later is incapable of forming an independent opinion of the subject matter. Occurs mainly where the parties have a special relationship e.g. doctor and patient, lawyer and client, guardian and minor, pastor and member of church, lecturer and student. Consensus is defective. For example PRELER VS JORDAAN, an old and ailing farmer who donated to his doctor’s his 3 farms because of undue influence. Undue influence (as a term in jurisprudence) is an equitable doctrine that involves one person taking advantage of a position of power over another person. It is where free will to bargain is not possible. ELEMENTS OF UNDUE INFLUENCE The other party to the contract should have influence over the other which exists because of their relationship. As in PATEL VS GROBBELAAR, Grobbelaar sought the cancellation of a mortgage bond registered against his property in favor of Patel. This had been done under the power of attorney which, Grobbelaar had signed at Patel’s persuasion whilst under Patel’s influence; because Grobbelaar believed that Patel had supernatural powers. But infact, Grobbelaar owed Patel no money and would not have given him such power of attorney for such influence. It was held that Grobbelaar could set aside the contract he had established under undue influence. The influence weakened the other party’s power of resistance.
- 52. rmmakaha@gmail.com 52 52 PRINCIPLES OFLAW The other party would not have entered into such a contract had he not been subjected to this influence. The other party exercised his influence in an improper manner to consent in a pre-judicial contract. Influence was to such an extent that the other party was unable to make an independent decision on the subject matter. Undue influence in contract law If undue influence is proved in a contract, in U.S. law, the contract is voidable by the innocent party, and the remedy is rescission. There are two categories to consider: Presumed undue influence Actual undue influence Presumed undue influence First subgroup In the first subgroup, the relationship falls in a class of relationships that as a matter of law will raise a presumption of undue influence. Such classes include: Parent/child Guardian/ward Priest/member of parish Solicitor/client Doctor/patient In such cases, the onus of proof lies on a doctor, say, to disprove undue influence on a patient. Second subgroup The second subgroup covers relationships that do not fall into the first subgroup, but on the facts of case, there was an antecedent relationship between the parties that led to undue influence. The test is one of whether there was a relationship of such trust and confidence that it should give rise to such a presumption (see Johnson v. Buttress (1936) 56 CLR 113). In GARCIA V NATIONAL AUSTRALIA BANK (1998) 194 CLR 395, the High Court of Australia distinguished between cases of actual undue influence and situations where the transaction is set aside because the guarantor does not understand the nature of the transaction. Although there is no presumption of undue influence, a "lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet... did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her." Actual undue influence An innocent party may also seek to have a contract set aside for actual undue influence, where there is no presumption of undue influence, but there is evidence that the power was unbalanced at the time of the signing of the contract. CASE: Preller and Others Vs Jordan. FACTS: J, an elderly farm, claimed retransfer of four farms that he had donated and transferred to P, who at the time was his doctor. J alleged that the transaction had taken place when he was old, spiritually and mentally weak and exhausted, through P’s influencing him in an improper and unlawful manner to give and transfer the farms to P to be administered by P for the benefit of J’s wife and farm labourers; and that J would not have done so had he not been so weak and exhausted and under P’s influence. During this time also J had transferred on and two of his farms to his son and daughter respectively. J could not claim back the farms concerned from all these people.
- 53. rmmakaha@gmail.com 53 53 PRINCIPLES OFLAW HELD: Restitution was granted against the doctor, son and the daughter for the return of the farms. THE BURDEN OF PROOF A party who asks a court to set aside a contract on the ground of undue influence must prove. a) The other party exercised an influence over him. b) This influence weakened his powers of resistance and made his will pliable. c) The other party exercised this influence in an unscrupulous manner in order to induce him to consent to a transaction: Which is to his detriment and; Which he, with normal free will, would not have concluded. REMEDY: The prejudiced party should claim for delictual damages against the person who exercised the influence. He can also claim restitution in integrum. 4. DURESS Duress has been defined as a "threat of harm made to compel a person to do something against his or her will or judgment; esp., a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition". - Black's Law Dictionary (8th ed. 2004) Duress in contract law falls into two broad categories: Physical duress, and Economic duress Occurs where one person or a person is induced to contract as a result of fear caused by violence or intimidation. Consent would be defective in the sense that it would have been improperly procured Leading case BROODRYK VS SMUTS, Broodryk a road worker was approached by army officials and forced to join the army. Broodryk enlisted because he feared that if he did not he would not be able to fend for his family. It was held that the contract be set aside because, it was voidable as a result of duress. The court said Broodryk’s case met the requisite elements of duress viz to avoid a contract. REQUIREMENTS FOR DURESS 1. The threat must be made by the other contracting party. 2. It must be a threat of harm or injury to the innocent party, his immediate family or property. 3. Fear must be actual or reasonable (not fear of the unknown). 4. The contracting party must not have threatened what he is entitled to. In SHEPSTONE VS SHEPSTONE, a husband threatened to sue for custody of children, where the ex-wife was cohabitating in sin with a married man. The court held that there was no duress. The husband was legally entitled to the claim. 5. The duress must have caused the innocent party to conclude the contract. 6. The threat must be illegal or contra bonos mores. 7. The threat must be inevitable evil. 8. The moral pressure used must have caused damage 9. The innocent party must take steps to withdraw from the contract as soon as the source of fear is removed. CASE: BLACKBURN VS MITCHELL, a ship was about to sink or sinking, the other party who was to rescue insisted upon signing of an acknowledgement of debt for an exorbitant amount for the services rendered. The sinking ship’s captain protested verbally before and after signing as to the excessive amount, but having regarded the safety of his crew, goods and the value of the ship, he subsequently signed. The court held that the contract was voidable on the ground of duress. ESSENTIALS/REQUIREMENTS OF DURESS:
- 54. rmmakaha@gmail.com 54 54 PRINCIPLES OFLAW a) The contract was entered into as a result of actual violence or reasonable fear. b) The fear was caused by the threat of some considerable evil to the party or his family. c) It was a threat of imminent or inevitable evil. d) The threat or intimidation was contra bonos mores (contrary to accepted standards of morality.) e) The moral pressure caused damage. f) a). The contract was entered into as a result of actual violence or reasonable fear. Threat must not be merely evil or foolish but should be Justus (metus) i.e. it is to carry weight or it must be firm. Fear should be such as would overcome the resistance of a person of ordinary firmness, taking into account the type of the person. e.g. whether the person is young or old. b). The fear was caused by the threat of some considerable evil to the party or his family. The fear must cause a family some serious evil e.g. death, serious body injury, rape or destroy their property at night, the person must have acted on the threat of violence to enter into the contract. CASE: Broodryk Vs Smurts FACTS: B alleged that he had entered into a contract of voluntary enlistment had taken the prescribed oath through a threat that failing such enlistment he would be regarded as person unwilling to support the Government and would be imprisoned. At the time of enlistment he was a road worker employed by the Government. He was married with a minor dependent upon him. He also alleged that the threat was made by two officials in the service of the Government who was authorized to enlist persons for the military services. He claimed rescission of the contract, citing General Smurts in his capacity as the Prime minister and Minister of Defence. HELD: Fear of imprisonment was enough/sufficient to justify duress and the contract was void. c). It was a threat of imminent or inevitable evil. The evil threatened must be so near that the victim of the threat can not protect himself against it. it can not be prevented other than agreeing to the contract. CASE: Blackburn Vs Mitchell FACTS: A ship, while lying in Table Bay, parted both anchors and grounded near the beach. The wind was rising and the ship was in a position of increasing peril. The Captain of a tug came to the ship’s assistance, he refused aid unless M, the Master, agreed to pay £2000. M protested, but the Captain of the tug threatened to leave unless a clean contract is signed. M ultimately signed an unconditional promise to pay the amount, saying at the time that though he did so the money would never be paid. The ship was towed off and taken to a place of safety. HELD: The agreement had been signed under duress and was voidable. However £1000. Was awarded to the sailors, as a fair and reasonable award for their services. d). The threat or intimidation was contra bonos mores (contrary to accepted standards of morality.) In the case of Broodryk Vs Smurts threatening a person to enter into the army when that person is unwilling to join the army is against public policy hence contra bonos mores. e). The moral pressure caused damage. In Broodryk’s case, the declaration alleged that the plaintiff was enlisted and attested. The result of that is the plaintiff has become subject to obligations with which he could not otherwise have been burdened and he has suffered the kind of damage.
- 55. rmmakaha@gmail.com 55 55 PRINCIPLES OFLAW PHYSICAL DURESS 1. Duress to the person Professor Ronald Griffin, Washburn University School of Law, Topeka, KS, puts physical duress simply: "Your money or your life." In BARTON V. ARMSTRONG [1976] AC 104, a decision of the Privy Council, Armstrong threatened to kill Barton if he did not sign a contract, which was set aside due to duress to the person. An innocent party wishing to set aside a contract for duress to the person need to prove only that the threat was made and that it was a reason for entry into the contract; the onus of proof then shifts to the other party to prove that the threat had no effect in causing the party to enter into the contract. Duress can be made also by social influence. Courts frown on this type of contract because there is really no manifestation of mutual assent "meeting of the minds" or agreement to the terms. Rather, when someone is threatened and agrees to act to avoid physical harm by the party making the offer, all you truly have is a mirror of the other party's manifestation of mutual assent not the manifestation of mutual assent by the party being forced or induced to assent to the terms of the contract. Therefore, the meeting of the minds "in truth" does not exist. Since, there is no meeting of the minds there can be no contract. 2. Duress to goods In such cases, one party refuses to release the goods belonging to the other party until the other party enters into a contract with them. For example, in Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298, the contract was set aside after Hawker Pacific's threats to withhold the helicopter from the plaintiff unless further payments were made for repairing a botched paint job. ECONOMIC DURESS A contract is voidable if the innocent party can prove that it had no other practical choice (as opposed to legal choice) but to agree to the contract. The elements of economic duress 1. Wrongful or improper threat: No precise definition of what is wrongful or improper. Examples include: morally wrong, criminal, or tortuous conduct; one that is a threat to breach a contract "in bad faith" or threaten to withhold an admitted debt "in bad faith". 2. Lack of reasonable alternative (but to accept the other party's terms). If there is an available legal remedy, an available market substitute (in the form of funds, goods, or services), or any other sources of funds this element is not met. 3. The threat actually induces the making of the contract. This is a subjective standard, and takes into account the victim's age, their background (especially their education), relationship of the parties, and the ability to receive advice. 4. The other party caused the financial distress. The majority opinion is that the other party must have caused the distress, while the minority opinion allows them to merely take advantage of the distress. REMEDY. Duress is a delict entitling the victim to delictual damages on the proof of patrimonial loss – whether he elects to uphold or to rescind the contract. Restitution in integrum is a contractual remedy, however, based on defective consent, not wrongful infliction of harm, and is therefore in principle available whether or not harm has resulted from entry into the contract. Possibility of performance – physical and legal possibility Possibility of performance means the contract must be possible to complete because legally binding contracts cannot be undertaken to peroform an impossible act. This is not to say that an entrepeneur
- 56. rmmakaha@gmail.com 56 56 PRINCIPLES OFLAW on hiring a contractor is going to be confronted at year’s end by the contractor stating that their sub- contractors had difficulties and there was too much rain in July. No, that does not constitute a barrier to possibility of performance in regards to the contract – more likely than not, such a situation would simply be mismanagement or bad luck. Neither of which the court is open to addressing as a get out of jail free card for businesses. For impossibility of performance there must be no way in living hell that the contract could be achieved – for example, you could not legally contract somebody to remove a large stadium in a week if you knew full well that it could not be achieved in less than two weeks due to physical and process constraints. And you cannot contract people to locate and return an item or person that does not exist. The contract must be possible to complete, otherwise the court will not treat it as valid in the eyes of the law. It is worth noting, were the impossibility of performance to arise following the point the contract is entered into then the contract would be considered frustrated and would usually be discharged. For example, were you to contract somebody to paint the Bierchnough Bridge but after the second week there was a disaster that destroyed the bridge – well, you can see the dilemma. No bridge, no possibiliity of performance = no contract. PERFOMANCE MUST BE POSSIBLE. a). Performance must be possible A contract is void if at the time of its conclusion there is an absolute impossibility of performance.(where performance is impossible for everyone). CASE: Wilson Vs Smith & Another FACTS: W sold S a portion of a plot in Kew Township, Johannesburg, both parties contemplating at the time that the plot would be capable of sub-division. It appeared later that in terms of a Township and Town Planning Ordinances it was not possible to sub-divide the plot. HELD: The position is not that the contract is illegal but that performance of the contract by W is impossible because of the bar imposed by the Ordinance against the possibility of W obtaining the requisite approval for the subdivision of the plot in order to be able to transfer the portion of the plot sold…………it follows that the contract of sale entered into by the parties is a nullity. b). Relative impossibility (where performance is impossible for the promisor but not for everyone) does not render the contract void. c). Even in cases of absolute impossibility the contract is valid if the promisor has warranted that performance is possible. Willes J said; “cases may be conceived in which a man may undertake to do that which turn out to be impossible, and yet he may still be bound by his agreement…….a man may have contracted to do something which in the present state of scientific knowledge may be utterly impossible, and yet he may have so contracted as to warrant the possibility of its performance by means of some new discovery, or be liable in damages for the non- performance, and cannot set up by way of defence that the thing was impossible.”
- 57. rmmakaha@gmail.com 57 57 PRINCIPLES OFLAW d). If a contract becomes impossible of performance after it has been entered into (so-called supervening impossibility of performance) the contract is extinguished as soon as it becomes impossible. Agreements in restraint of trade Restraint of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. In an old leading case of MITCHELL V REYNOLDS (1711) Lord Smith LC said, "It is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion." Contractual obligations not to trade are illegal agreements on public policy grounds unless they are reasonable in the interests of both contracting parties and of the public at large. Restraint of trade mainly affects post-termination restrictive covenants in employment contracts, and restrictions on competition in contracts for the sale of businesses. A contract in restraint of trade is an agreement between two or more parties that seeks to prevent the other party in engaging himself in a certain profession/business in a certain are for a specific duration of time. Or, An agreement in restraint of trade is one which purports to restrain a person from exercising any lawful craft or business at his own discretion and in his own way. The general rule is that, a contract in restraint of trade is Void unless it can be shown by the party who wishes to enforce it to be reasonable in reference to the interest of the parties and the public. There are 3 basic types of contracts in restraint of trade: i. Sale of goodwill ii. Trade regulating agreement iii. Covenant between employer and employee. a).SALE OF GOODWILL This is an agreement by the seller of a business not to compete with the buyer. The attitude of the courts was stated in the case of Maxm-Nordenfelt case as follows: “ it is to the advantage of the public to allow a trader who has established a lucrative business to dispose of it to a successor by whom it may be efficiently carried on. That object could not be accomplished if, upon the score of public policy, the law reserved to the seller an absolute and indefensible right to start a rival concern the day after he sold. Accordingly, it has been determined judicially that in cases where the purchaser, for his own protection, obtains an obligation restraining the seller from competing with him, within bounds which having regard to the nature if the business are reasonable …. The obligation is not obnoxious to public policy, and is therefore capable of being enforced”. CASE: Nordenfeld Vs Maxim Nordenfelt Co.
- 58. rmmakaha@gmail.com 58 58 PRINCIPLES OFLAW FACTS: N sold his business, which manufactured guns and ammunition, to the MN company and he undertook he would not for twenty-five years engage either directly or indirectly (a) in the trade or business of a manufacturer of guns, gun mountings or carriages, gunpowder explosives or ammunition, or (b) in any business competing or liable to compete in any way with that for the time being carried on by the company. within this period he wished to set up in business again, so the buyers sought to enforce the restraint clause. HELD: The second part of the restraint was unreasonable, being wider than necessary to protect the business as it was when bought; it was severable from the first party which was reasonable between the parties and also in the public interest as securing for an English company the making of guns and ammunition for foreign trade. Applying these principles the House of the Lords decided that in the exceptional circumstances of the nature of the armaments business and the very large sum of money, that had been paid to Nordenfeld, the restraint was reasonable both from the point of view of the parties and the public. b).TRADE REGULATING AGREEMENT This kind of agreement takes many forms, ranging from Fixing prices, Restricting competition, to restraining a party’s rights to buy or sell what he wishes. When a contract ties the parties only during the continuance of the contract, and the negative ties are only those which are incidental and normal to the positive commercial arrangements at which the contract aims even though those ties exclude all dealings with others, there is no restraint of trade within the meaning of the doctrine and no question of reasonableness arises. If , however, the contract ties the trading activities of trading activities of either party after its determination, it is a restraint of trade, and the question of reasonableness arises. So, too, if during the contract one of the parties is too unilaterally fettered, so that the contract loses its character of a contract for the regulation and promotion of trade and acquires the predominant character of a contract in restraint of trade. Tie Agreements: A tie agreement occurs when two parties agree that one will deliver a certain commodity to another and the other party shall always buy that commodity from the other party. e.g. A garage owner may enter into a tie agreement with a fuel supplier Caltex, it follows that Caltex shall always provide fuel to the garage, the garage shall always buy fuel from Caltex and not any where else. CASE: Rhodesian Milling Co (Pvt) Ltd Vs Super Bakery (Pvt) Ltd FACTS: RM, a flour miller had hired certain bakery premises and sublet them to Super Bakery in terms of an agreement under which Super Bakery was obliged to purchase all its flour from
- 59. rmmakaha@gmail.com 59 59 PRINCIPLES OFLAW RM, not only for the bakery sublet to it but also for another it had and any other it might acquire. Super Bakery though prepared to continue to purchase all its flour from RM for the bakery sublet to them, had started to purchase flour for its other bakery from other millers. RM applied for an interdict. HELD: The agreement had the effect of rendering the agreement one which had to be held in restraint of trade. An interdict was granted and the restraint was reasonable and therefore enforceable. Price fixing Agreement. If the contract is between equal contracting parties neither of whom is in a position of superior economic strength to the other this fact itself is strong evidence to the reasonableness of the restraint. CASE: Spa Food Products Ltd Vs Salif FACTS: An application was made to compel S to comply with the terms of a trade regulation agreement, covering the whole of Southern Rhodesia and unlimited as to time, between mineral water manufacturers. The agreement fixed minimum prices, which could be varied only by an association consisting of six members, three being the applicants and the other three being other competitors who were not parties to the agreement and could reduce their prices at will. S had ceased to be a member of the association. HELD: The restrictions in this agreement were very onerous indeed, the applicants claiming to bind S forever and throughout the width and breath of the Country to an agreement the terms of which might well react to his disadvantage; the fact that a restriction was too wide in space or time was a good ground for holding that the restraint was unreasonable taking into account the public. c).COVENANT BETWEEN EMPOLYER AND EMPLOYEE. This is a covenant in a contract of employment restraining an employee from freedom of trade after the employment has come to an end. If the contract is between unequal contracting parties especially between employer and employee, it is only permissible to protect the interest of the proprietor but not to stifle fair competition. An employer is only entitled to protect his business connections, confidential information, trade secrets or against the use of the personal skill and knowledge acquired by the employee in his employer’s business. CASE: Pest Control (Central Africa) ltd Vs Martin FACTS:
- 60. rmmakaha@gmail.com 60 60 PRINCIPLES OFLAW After being given three months’ notice M left PC’s employment and launched a company having objects identical to PC maintained this was in breach of a clause in M’s agreement of employment. The effect of the clause was that M was restricted from engaging in any business in which he would be employed in agricultural, horticultural or medical pest control in the Federation for two years from the termination of his contract. HELD: The court held that the restraint in the contract was put there not to stifle competition but to protect the trade secrets of Pest Control hence the restraint was reasonable. NB: the possibility of injury to the employer’s trade connection is particularly evident where the employee is a traveler and, therefore, in direct everyday relations with his employer’s customers. In testing whether the restraint is reasonable or not, the following should be considered. i. Nature of restraint. ii. Area of restraint. iii. Time of restraint. CASE: Morris Vs Saxelby FACT: Saxelby was employed as a Taylor’s assistant by Morris in terms of a contract in which he covenanted/asserted that on termination of his employment he would not practice his trade within 10 miles of his employer’s place of business for 3 years. HELD: This was merely a restraint on competition and therefore void. The restraint was unreasonable. The par delictum rule and relaxation of the rule IN PARI DELICTO RULE. This means, “loss lies where it falls” or in equal guilty the position of the defendant or possessor is stronger. The In Pari Delicto Rule is not absolute in that there are exceptions i.e. Fraud Misrepresentation Unjust enrichment. The General rule is that a part can not recover money or property in pursuance of an illegal contract. Courts can not be used as instruments to perpetuate illegality. Where the parties are equally guilty, the person who is in possession will prevail in that where money had been paid or property delivered to an illegal contract loss lies where it falls. The policy of this rule is to discourage illegality and immorality.
- 61. rmmakaha@gmail.com 61 61 PRINCIPLES OFLAW NB: The courts decline to apply the par delictum rule where only one of the parties is in delicto (Guilty) or where one is clearly less in delicto than the other. STRICT APPLICATION OF THE RULE. CASE: Jajbhay Vs Cassim 1939 FACTS: J the registered holder of a stand license entitling him to occupy a stand in the Johannesburg Malay Location, sublet the stand to C, which was illegal under the location regulations. The sublease provided for a monthly tenancy. C was carrying out all the terms of the sublease. J unsuccessfully applied to the Transvaal Provincial Division for an order ejecting Cassim on the grounds that in terms of the regulations dealing with the occupation of stands in the location , C’s occupation was unlawful, the sublease was illegal and J was consequently entitled to reclaim possession. HELD: On appeal, both parties were equally guilty of breaking the law and, while the Par Delictum Rule could be relaxed to prevent injustice or satisfy the requirements of public policy, no such consideration applied in the present circumstances. NB: The facts of that case afford a typical example which called for a decision on which side public policy is best served. It may be said that contracts of that nature are more discouraged by leaving the bereft plaintiff unhelped and the doubly delinquent defendant in possession of his ill-gotten gains. L cannot agree with this view, which l think would not so much discourage such transactions but would tend to promote a more reprehensible form of trickery by scoundrels without such honour as even thieves are sometimes supposed to possess, and public policy should properly take into account the doing of simple justice between man and man. RELAXATION OF THE RULE. CASE: Padayachey Vs Lebese 1942. FACTS: L, as agent, sold to P, and purported to deliver, 25 cases of condensed milk, which to the knowledge of all the parties had been stolen. In fact, unknown to the parties, the cases contained bricks, not condensed milk. L signed a promissory note in favour of P in refund of purchase price. In an action on the note a magistrate granted absolution from the instance. HELD: On appeal, following Jajbhay Vs Cassim, P could enforce the note because public policy demanded a relaxation of the Par Delictum rule to prevent L being enriched at the expense of P by being allowed to retain money for which no value had been given.
- 62. rmmakaha@gmail.com 62 62 PRINCIPLES OFLAW CASE: Petersen Vs Jajbhay 1940 FACTS: J had illegally sublet a stand in the Johannesburg Malay Location to P. In similar circumstances to those in Jajbhay Vs Cassim. In terms of the sublease P was liable to immediate ejection if he failed to pay the monthly rent in advance. P failed to pay and J successfully sued for his ejectment, the Witwatersrand local Division relaxing the Par delictum Rule. HELD: On appeal, although the Par Delictum Rule was applicable to debar J from the relief claimed, such rule had correctly been relaxed in J’s favour in as munch as the illegal agreement had been terminated and consideration of justice between the parties required such relaxation. NON – APPLICATION OF THE RULE. CASE: Van Staden Vs Prinsloo 1947 FACTS: P sold and delivered to VS a second-hand tractor for £600 when the maximum permissible price under a price control regulation was £425. The regulation made it an offence to sell (though not to buy) above the control price. VS paid a deposit of £110 and thereafter refused to pay the balance because he was aware of the control price. HELD: The parties are not in Pari Delicto, VS is not in Delicto at all; there is no evidence that VS was aware of the control price at the date of the purchase; the contract was illegal on the part of P and P only; and VS is consequently entitled to reclaim repayment of £110 paid by him on the ground that the contract was null and void. GAMBLING, BETTING AND WAGERING CONTRACTS Certain forms of gambling are prohibited by statute and therefore illegal. Wagering contracts are not on the same footing as contract to commit a crime and are not prohibited by statute and are not unlawful in the full sense. The General Rule says that Gambling contract are not illegal nor void but merely unforceable. The court looks at gambling contracts with disfavour but not enough disfavour to render the contract void but to one can only be charge for Gambling at the wrong place and the court cannot assist the winner to recover his winnings from an unfaithful looser. CASE: Gibson Vs Van Der Walt FACTS:
- 63. rmmakaha@gmail.com 63 63 PRINCIPLES OFLAW Gibson a bookmaker sued Van Der Walt for £197 arising out of a contract under which he promised to pay a lost bet. HELD: Gibson could not recover. The test should be whether the court is asked to enforce the unforceable claim. However if money is paid as a result of the wager, it can not be recovered by the payer and if the payer had handed the sum to one person for payments to another the former may be compelled to hand the sum to the later. CASE: Dodd Vs Hadleyt FACTS: A bet was placed for a horse race through an agent. When the horse won the agent collected the money from the bookmaker but refused to give winnings to the principal. The principal sued the agent for the winnings and the agent raised the defence of illegality. HELD: H was entitled to recover the money from D. Contracts subject to suspense and resolute conditions 1. Suspensive condition, being one which suspends the operational effect of one, or some, or all of the obligations under a contract until the conditions are fulfilled, the risk will not pass until the suspensive conditions have been fulfilled. Good example is hire purchase. Risk does not pass to the buyer until the happening of a future event. It is an agreement that ownership will not pass until a condition is fulfilled. Because there is only a contractual relationship before the condition is satisfied, the obligations are suspended. If the merx (goods) are destroyed before the suspensive condition is fulfilled, the risk is the seller’s. If suspensive condition fails risk is seller’s If suspensive condition is fulfilled, the effect of fulfillment makes the risk the purchaser’s. CASES:
- 64. rmmakaha@gmail.com 64 64 PRINCIPLES OFLAW JACOBS VS PETERSENAND, horse and cart sold, paid in weekly installments, risk remained with Jacobs until Petersenand paid his last installment. QUIRK’S TRUSTEE VS ASSIGNEES OF LINDELL & COMPANY 2. Resolutive condition has a different effect. A sale subject to this type of condition will result in the risk passing as soon as formalities required for the completion of a sale agreement have been completed. It is a condition providing for the ending of a contract on the occurrence or non occurrence of a particular event. Leaves the contract operating, but as soon as the condition id fulfilled, then the contract ends and the parties have to be restored to their original positions. For example ownership passes upon delivery. CASE: KEYTER VS BARRY’S EXECUTOR TO MEIRING Keyter sold a cart and cattle to Meiring and gave him credit. It was agreed that if Meiring did not pay within 12 months Keyter was entitled to get back the cart and cattle. During the 12 months Barry’s executor obtained a judgement against Meiring and attached the cart and the cattle in execution. Keyter claimed the cart and the cattle were his goods. It was held that the goods had become Meiring’s property and it was only after 12 months that ownership would revert to Keyter if payment has not been made. The risk in conditional sales is as follows:- • In the case of a sale subject to a suspensive condition, the risk of total loss remains with the seller until the condition is fulfilled (as indicated above the risk does not pass with ownership). The reason the risk remains with the seller is due to the effect that a suspensive condition suspends the whole sale and until such time as the condition is fulfilled, there is no sale, thus risk cannot pass; • On the other hand, in the case of a sale subject to a resolutive condition, the risk of total loss passes to the buyer immediately the contract has been concluded. As indicated above, the sale operates immediately, with the result, that if the thing is destroyed before delivery, the buyer must nevertheless pay the price in full, for the risk has passed to the buyer. Contracts for the benefit of third parties A third party beneficiary, in the law of contracts, is a person who may have the right to sue on a contract, despite not having originally been a party to the contract. This right arises where the third party is the intended beneficiary of the contract, as opposed to an incidental beneficiary. It vests when the third party relies on or assents to the relationship, and gives the third party the right to sue either the promisor or the promisee of the contract, depending on the circumstances under which the relationship was created. In English law, the doctrine was not recognised at common law, but a similar concept was introduced with the Contracts (Rights of Third Parties) Act 1999. Intended vs. incidental beneficiary In order for a third party beneficiary to have any rights under the contract, he must be an intended beneficiary, as opposed to an incidental beneficiary. The burden is on the third party to plead and prove that he was indeed an intended beneficiary.
- 65. rmmakaha@gmail.com 65 65 PRINCIPLES OFLAW Incidental beneficiary An incidental beneficiary is a party who stands to benefit from the execution of the contract, although that was not the intent of either contracting party. For example, if party A, Andrew, hires party B, Bethany, to renovate his (Andrew's) house, and insists that Bethany use a particular house painter—party C, Charlie—because that house painter has an excellent reputation, then the house painter is an incidental beneficiary. Neither Andrew nor Bethany is entering into the contract with the particular intent to benefit Charlie. Andrew simply wants his house properly renovated; Bethany simply wants to be paid to do the renovation. If the contract is breached by either party in a way that results in Charlie never being hired for the job, Charlie nonetheless has no rights to recover anything under the contract. Similarly, if Andrew were to promise to buy Bethany a Cadillac, and were to later go back on that promise, General Motors would have no grounds upon which to recover for the lost sale. Intended beneficiary The distinction that creates an intended beneficiary is that one party - called the promisee - makes an agreement to provide some consideration to a second party - called the promisor - in exchange for the promisor's agreement to provide some product, service, or support to the third party beneficiary named in the contract. The promisee must have an intention to benefit the third party - but this requirement has an unusual meaning under the law. Although there is a presumption that the promisor intends to promote the interests of the third party in this way, if party A, Andrew, contracts with party B, Bethany, to have a thousand killer bees delivered to the home of Andrew's worst enemy, party C, Charlie, then Charlie is still considered to be the intended beneficiary of that contract. (This would be illegal if the intent was to scare his enemy, contracts are voided based on criminality.) There are two common situations in which the intended beneficiary relationship is created. One is the creditor beneficiary, which is created where Andrew owes some debt to Charlie, and Andrew agrees to provide some consideration to Bethany in exchange for Bethany's promise to pay Charlie some part of the amount owed. The other is the donee beneficiary, which is created where Andrew wishes to make a gift to Charlie, and Andrew agrees to provide some consideration to Bethany in exchange for Bethany's promise to pay Charlie the amount of the gift. Under old common law principles, the donee beneficiary actually had a greater claim to the benefits this created; however, such distinctions have since been abolished. Vesting of rights Once the beneficiary's rights have vested, the original parties to the contract are both bound to perform the contract. Any effort by the promisor or the promisee to rescind or modify the contract at that point are void. Indeed, if the promisee changed his mind and offered to pay the promisor money not to perform, the third party could sue the promisee for tortious interference with the third party's contract rights. There are three tests used to determine whether the third party beneficiary's rights have vested: if the beneficiary knows of and has detrimentally relied on the rights created; if the beneficiary expressly assented to the contract at the request of one of the parties; or if the beneficiary files a lawsuit to enforce the contract
- 66. rmmakaha@gmail.com 66 66 PRINCIPLES OFLAW Breach and defenses Where a contract for the benefit of a third party is breached by the non-performance of the promisor, the beneficiary can sue the promisor for the breach just as any party to a contract can sue the other. Because the rights of the third party are defined by the contract created between the promisor and the promisee, the promisor may assert against the beneficiary any defenses to the contract that could be asserted against the promisee. These include all of the traditional basis by which the formation of a contract may be challenged: lack of capacity, lack of consideration, the Statute of frauds, etc.; and all of the traditional bases by which non-performance on the contract may be excused: failure of consideration, impossibility, illegality, frustration of purpose, etc. Because the promisor can assert any defenses that could be asserted against the promisee, the beneficiary also becomes liable for counterclaims on the contract that the promisor could establish against the promisee. This liability can never exceed the amount that the promisor owes under the contract. In other words, if the promisor is owed money by the promisee, any award to the third party for the promisor's failure to perform can be reduced by the amount thus owed. If the promisor is owed more than the value of the contract, the beneficiary's recovery will be reduced to nothing (but the third party can never be made to assume an actual debt). A creditor beneficiary can sue both the promisor and the promisee, but the beneficiary cannot recover against both. If the suit is successful against one party to the contract, the other party will be dismissed. Because the creditor beneficiary is receiving the performance of the promisor in order to fulfill the promisee's debt, the failure of the promisor to perform means that the beneficiary can still sue the promisee to recover the preexisting debt. The failure of performance simply means that the debt has never been paid. A donee beneficiary can sue the promisor directly to enforce the promise. (SEAVER V. RANSOM, 224 NY 233, 120 NE 639 [1918]). A donee beneficiary is when a contract is made expressly for giving a gift to a third party, the third party is known as the donee beneficiary. The most common donee beneficiary contract is a life insurance policy. Assignment, cession and delegation Assignment An assignment (Latin cessio) is a term used with similar meanings in the law of contracts and in the law of lease. In both instances, it encompasses the transfer of rights held by one party—the assignor—to another party—the assignee. The legal nature of the assignment determines some additional rights and liabilities that accompany the act. This is the transfer of a right or interest to another. Liabilities Continuing liability of assignor Assignor remains liable unless there is an agreement to the contrary. An agreement must manifest intent to transfer rights, it may not necessarily be in writing, words
- 67. rmmakaha@gmail.com 67 67 PRINCIPLES OFLAW will do, and the rights assigned must be certain. The effect of a valid assignment is to extinguish privity between the assignor and the obligor and create privity between the obligor and the assignee. Assignment of contract rights Assignment of rights under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if Party A contracts with Party B to sell Party A's car to Party B for $10, Party A can later assign the benefits of the contract - i.e., the right to be paid $10 - to Party C. In this scenario, Party A is the obligee/assignor, Party B is an obligor, and Party C is the assignee. Such an assignment may be donative (essentially given as a gift), or it may be contractually exchanged for consideration. It is important to note, however, that Party C is not a third party beneficiary, because the contract itself was not made for the purpose of benefitting Party C. However an Assignment only transfers the rights/benefits to a new owner. The obligations remain with the previous owner. Compare Novation. When assignment will be permitted The common law favors the freedom of assignment, so an assignment will generally be permitted unless there is an express prohibition against assignment in the contract. Where assignment is thus permitted, the assignor need not consult the other party to the contract. An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality. Certain kinds of performance, therefore, cannot be assigned, because they create a unique relationship between the parties to the contract. For example, if party A contracts to hire an attorney to represent her in a civil case for a fee of $1000, she cannot then assign her contractual right to legal representation to another party. Note however, that party A can assign her right to sue under the same claim she contracted with the attorney to pursue. Requirements for an effective assignment For assignment to be effective, it must occur in the present. No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee. A promise a to yes really assign in the future has no legal effect. Although this prevents a party from assigning the benefits of a contract that has not yet been made, a court of equity may enforce such an assignment where an established economic relationship between the assignor and the assignee raised an expectation that the assignee would indeed form the appropriate contract in the future. A contract may contain a non-assignment clause, which prohibits the assignment of specific rights, or of the entire contract, to another. However, such a clause does not necessarily destroy the power of either party to make an assignment. Instead, it merely gives the other party the ability to sue for breach of contract if such an assignment is made. However, an assignment of a contract containing such a clause will be ineffective if the assignee knows of the non-assignment clause, or if the non- assignment clause specifies that "all assignments are void". Two other techniques to prevent the assignment of contracts are rescission clauses or clauses creating a condition subsequent. The former would give the other party to the contract the power to rescind the contract if an assignment is made; the latter would rescind the contract automatically in such circumstances.
- 68. rmmakaha@gmail.com 68 68 PRINCIPLES OFLAW Requirement of a writing There are certain situations in which the assignment must be in writing. 1. Assignment of wages 2. Assignment of any interest in real property 3. Assignment of choses of action worth over $5,000 4. Assignment as collateral for a loan or debt For more information about contractual writing requirements see Statute of frauds. Novation Novation replaces the original party with a new party. For a valid novation, (i) all parties must assent to novation, (ii) there must be a previously valid contract, (iii) the duties provided for in the contract be extinguished immediately, and (iv) a new, enforceable contract need be created. Revocability Assignments made for consideration are irrevocable, meaning that the assignor permanently gives up the legal right to take back the assignment once it has been made. Donative assignments, on the other hand, are generally revocable, either by the assignor giving notice to the assignee, taking performance directly from the obligor, or making a subsequent assignment of the same right to another. There are some exceptions to the revocability of a donative assignment: 1. The assignment can not be revoked if the obligor has already performed 2. The assignment can not be revoked if the assignee has received a token chose (chose being derived from the French word for "thing", as in a chose of action) - a physical object that signifies a right to collect, such as a stock certificate or the passbook to a savings account. 3. The assignment can not be revoked if the assignor has set forth in writing the assignment of a simple chose - a contract right embodied in any form of token. 4. Estoppel can prevent the revocation of a donative assignment if the assignee changed their position in reliance on the assignment. Finally, the death or declaration of bankruptcy by the assignor will automatically revoke the assignment by operation of law. Breach and defenses A cause of action for breach on the part of the obligor lies with the assignee, who will hold the exclusive right to commence a cause of action for any failure to perform or defective performance. At this stage, because the assignee "stands in the shoes" of the assignor, the obligor can raise any defense to the contract that the obligor could have raised against the assignor. Furthermore, the obligor can raise against the assignee counterclaims and setoffs that the obligor had against the assignor. For example, suppose that A makes a contract to paint B's house in exchange for $500. A then assigns the right to receive the $500 to C, to pay off a debt owed to C. However, A does such a careless job painting the house that B has to pay another painter $400 to correct A's work. If C sues B to collect the debt, B can raise his counterclaim for the expenses caused by the poor paint job, and can reduce the amount owed to C by that $400, leaving only $100 to be collected. When the assignor makes the assignment, he makes with it an implied warranty that the right to assign was not subject to defenses. If the contract had a provision that made the assignment ineffective, the assignee could sue the assignor for breach of this implied warranty. Similarly, the assignee could also sue under this theory if the assignor wrongfully revoked the assignment.
- 69. rmmakaha@gmail.com 69 69 PRINCIPLES OFLAW Successive assignments Occasionally, an unscrupulous assignor will assign the exact same rights to multiple parties (usually for some consideration). In that case, the rights of the assignee depend on the revocability of the assignment, and on the timing of the assignments relative to certain other actions. In a quirk left over from the common law, if the assignment was donative, the last assignee is the true owner of the rights. However, if the assignment was for consideration, the first assignee to actually collect against the assigned contract is the true owner of the rights. Under the modern American rule, now followed in most U.S. jurisdictions, the first assignor with equity (i.e. the first to have paid for the assignment) will have the strongest claim, while remaining assignees may have other remedies. In some countries, the rights of the respective assignees are determined by the old common law rule in Dearle v Hall. 1. Earlier donative assignees for whom the assignment was revocable (because it had not been made irrevocable by any of the means listed above) have no cause of action whatsoever. 2. Earlier donative assignees for whom the assignment was made irrevocable can bring an action for the tort of conversion, because the assignment was technically their property when it was given to a later assignee. 3. Later assignees for consideration have a cause of action for breaches of the implied warranty discussed above. Delegation This the process by which a debtor assumes liability to another in place of original creditor. Delegation of duties requires the consent of the creditor. A parallel concept to assignment is delegation, which occurs when one party transfers his duties or liabilities under a contract to another. A delegation and an assignment can be accomplished at the same time, although a non-assignment clause also bars delegation. Cession This is a yielding up, or release. Transfer of an incorporeal right or transfer of a right under a contract. Termination of contracts A contract can be terminated on the following grounds; 1. Performance 2. Agreement 3. Set off 4. Merger or confusio. 5. Supervening impossibility 6. Novation 7. Delegation 8. Cession 9. Prescription 10. Death 11. Breach of contract 12. Insolvency 13. Judgement 14. Vis major – an act of God or the state. 1) PERFOMANCE: A contract is terminated when both parties have fully performed their obligations under the contract. for payment of a money debt to discharge the debtor, the following rules must be satisfied.
- 70. rmmakaha@gmail.com 70 70 PRINCIPLES OFLAW a) Payment must be made by the debtor or someone on her/his behalf. b) Payment must be made to the creditor or an agent having authority to receive payment. c) Payment must be unconditional, in full and in the manner (as regards time, place etc.) expressly or impliedly provided in the contract. In a cash sale, the creditor can refuse installments and the payment must be in legal tender. Payment by cheque is not legal tender and a creditor can generally refuse a cheque and insist on a cash payment. It must be remembered that payment by cheque, should the creditor accept it, is only conditional payment and the debtor is not freed until the cheque is met on presentation at the bank. 2) MUTUAL AGREEMENT a) RELEASE This is bilateral (two-way) legal act in terms of which the parties agree that their contract shall come to an end without the debtor having made performance or full performance. Since release is an agreement, it follows that if the creditor revokes the offer of release before the debtor has accepted it, the debtor will have to perform. No formalities are required. b) WAIVER. Waiver, as opposed to release, is a unilateral act and consists of the renunciation or abandonment of a right by the creditor. c) CANCELLATION A contract which has not yet been fully performed may be terminated by the parties mutually agreeing to cancel or rescind the contract. where neither party has yet performed, the contract is simply dissolved without any further consequences. However, where one or both parties have party performed there is an obligation to return what was given. Where that cannot be done, compensation should be paid. d) NOVATION. This is the substitution of a new obligation for an old one- the old obligation being extinguished as if by payment. Third parties may be brought into the contract either by delegation or by assignment. Cession is not really a form of novation., but is usually discussed together with delegation and assignment. NOVATION PROPER This occurs where the parties to a contract enter into a new contract in substitution for their existing contract. this has the effect of terminating the old contract. DELEGATION, CESSION, AND ASSIGNMENT. These are ways of transferring rights and obligation in the contract to a third party. You should note that each party to a contract is at the same time a debtor and a creditor; in other words each party has obligations and right in terms of the contract. DELEGATION: Substitutes a third party in the capacity of debtor (i.e. a transfer of obligations only); CESSION: Has the effect of substituting a third party for one of the parties to a contract in the capacity of a creditor (i.e. a transfer of rights only); ASSIGNMENT: Substitutes a third party in the capacity of both debtor and creditor (i.e. a transfer of both rights and obligations). e) COMPROMISE. A compromise is an agreement for the settlement of a matter in dispute, each party abating some of his previous demands. Example: if X alleges that Y has committed a breach of contract and owes $500, which X then claims, Y may deny the breach, but rather than going to court, agrees to pay $250. X thinks it is better to accept this amount rather than litigate and perhaps lose, and so a compromise is reached. 3) SUPERVENING IMPOSSIBILITY:
- 71. rmmakaha@gmail.com 71 71 PRINCIPLES OFLAW When performance of a contract obligation becomes impossible of performance through VIS MAJOR ( act of God or state) or CASUS FORTUITUS ( inevitable accident) i.e. through an event which cannot be avoided even if ordinary precautions are taken, the obligation is in general discharged as if it had been impossible from the inception. A contract is not terminated by supervening impossibility of performance in the following circumstances: I. Where performance has become impossible as a direct result of the debtor’s own wrongful act. II. When the debtor has taken upon himself the risk of performance becoming impossible. III. When performance is more difficult or costly but not impossible. IV. Where the impossibility is partial, in which case the obligation remains in existence in so far as the part that is still possible is concerned. V. Where the debtor is only temporarily disabled from fulfilling his obligation. 4) EXTINCTIVE PRESCRIPTION: In terms of the Prescription Act, no 31 of 1975, a debt (S13(1)), and any subsidiary debt arising there from S 13 (2), is extinguished after the lapse of the relevant period. Although a debt is extinguished by prescription, payment by the debtor subsequent to that extinction is regarded as payment of the debt (S13 (3) (a) ), and an agreement made by the debtor to pay a debt after its extinction shall be enforceable (S13 (3) (6)). The Act is silent on the question of set-off and cession of prescribed debts. As the debt is mow extinguished by prescription it seems clear that after prescription such a debt cannot be set off or ceded. A court may not of its own motion, take notice of prescription. (S19 (1)), Prescription should be pleaded by the party wishing to invoke it, but provision is made for a court to allow it to be raised at any stage in the proceedings. (S 19 (2)). I. PERIODS OF PRESCRIPTION OF DEBTS: Section 14 provides for the following periods of prescription. 30 years in the case of a debt secured by mortgage bond, a judgment, a debt in respect of taxation, a debt owed to the state in respect of the right to mine minerals or other substances. 15 years in the case of a debt owed to the state in respect of an advance or loan of money or a sale or lease of land unless the period of 30 years is applicable under the above situation. 6 years in the case of a debt on a negotiable instrument or notarial contract or owed to the state unless the period of 30 or 15 years are applicable under the above situation. 3 years in the case of any other debt unless another period is provided by any enactment. The periods begin to run as soon as the debt is due. (S 15 (1)). II. DELAY IN THE COMPLETION OF PRESCRIPTION: Delay in the completion of prescription occurs where prescription would in the ordinary course have been completed but certain impediments set out in (S16 (1)) exist. If the period of prescription would in the ordinary course have been completed before, on or within one year after the date on which the impediment ceased to exist, the period of prescription will not be completed before a year has elapsed from that date. THE IMPEDIMENTS SET OUT IN (S (16)(1) ARE: The creditor is a minor or insane or a person under curatorship or a person whose behavior or physical or mental condition justifies his being placed under curatorship or is prevented by superior force or any enactment or order of court from interrupting the running of the prescription in terms of (S18(1)), below, or is a juristic person and the debtor is a member of the governing board of such juristic person. The creditor and the debtor are married to each other or are partners and the debt which arose out of the partnership relationship. The debtor is outside Zimbabwe. The debt is the subject matter of a dispute submitted to arbitration, or is the subject matter of a claim filled against the estate of a debtor who is deceased or
- 72. rmmakaha@gmail.com 72 72 PRINCIPLES OFLAW against the estate of a debtor or against a company in Liquidation or against and under the Agricultural Assistance Scheme set out in the third schedule to the Agricultural Finance Corporation Act (Chapter 101). The creditor or the debtor is deceased and an executor of the estate in question has not yet been appointed. III. INTERRUPTION OF PRESCRIPTION If the debtor acknowledges the debt, expressly or impliedly, the running of prescription is interrupted (S17(1)) and the period begins again on the day on which the interruption takes place (S17(2)(a)). If the parties postpone the due date of a debt the period begins again on the date on which the debt again becomes due (S 17(2)(b)). 5) INSOVENCY An insolvent’s contractual rights and duties are affected in various ways by the sequestration of his estate. Generally the form of compulsory assignment takes place quite independent the will of the insolvent or persons who are in contractual relationship with him, even if such persons may in fact be responsible for the sequestration and the sequestration is for the benefit of creditors. The insolvent’s right and duties vested automatically in the Master of the High Court until the appointment of a trustee when they vets in the trustee. (S25 of the Insolvency Act, Chp 203). In general, the effect of sequestration on a contract entered by the insolvent and not yet discharged is that the trustee set into the insolvent’s shoes without assuming his legal identity. If the trustee wishes the contract to continue he must perform the insolvent’s contractual duties in full and must notify the other party. If he does not notify him the other party may cancel the contract as repudiated and claim as creditor for damages suffered. The rehabilitation of an insolvent has the effect of discharging all debts due by him before his sequestration which did not arise out of any fraud on his party (S 146). 6) DEATH. As a general rule the death of a party to a contract does not terminate the contract as in the case of insolvency, a form of compulsory assignment takes place and the deceased’s rights and duties, other than in terms of contracts involving personal skill, pass to the executor. Contracts involving special personal qualities of the deceased are discharged by supervening impossibility of performance. 7) ESTOPPEL Where on party to a contract through his conduct has led other to believe in the existence of a certain state of affairs for example that he will not enforce a term of the contract between them, and the other party reasonably relying on the representation so made has altered his position to his detriment he will be stopped from enforcing his contractual rights. Impossibility of Performance Performance means that each party to the contract has performed its obligations; the exchange of promises has been completed and each side has received what it has bargained for. Once the contract has been completed, neither party owes the other party any further obligation. For example, if you make a contract to perform at a concert, and you appear, perform, and get paid, ordinarily the obligations of the parties to the contract are over. Impossibility of performance can terminate a contract if an unforeseen contingency prevents the performance of the contract. For example, you contract with a famous painter to do your portrait and the famous painter dies. The obligation to paint your portrait cannot be completed. The contract to paint your portrait is terminated by impossibility of performance. Rescission Rescission may terminate the obligations of a contract in a variety of circumstances. One party may have the legal right to rescind the contract, or the parties together agree to terminate the contract. For example, a minor has the right to rescind contracts because a minor lacks competence to make them. Breach of Contract Breach of a contract may terminate the obligations of the contract. Either one party or both parties have failed to perform an obligation as expected under the contract. A breach may occur when a party: Refuses to perform the contract Does something that the contract prohibits, or Prevents the other party from performing its obligations Not all breaches of contract end up in court. The law distinguishes between material and immaterial breaches of contract. A material breach of contract gives rise to a cause of action in court. A material breach is a serious one; it is a breach that goes to the heart of the contract. The injured party can seek damages; that is, a money payment adequate to cover economic losses resulting from the breach of contract. For example, a violinist who shows up at a concert but doesn't bring his violin has materially breached the contract to perform if he cannot play.
- 73. rmmakaha@gmail.com 73 73 PRINCIPLES OFLAW An immaterial breach of contract is a trivial breach of contract and does not kill the contract. For example, assume a service contract for a heating system under which the service person agrees to inspect the system each month on Thursday. Contrary to the contract, the service person makes inspections on Mondays. This act is a technical breach of the contract but it is immaterial, unless for some reason the inspections needed to be done on Thursday as opposed to any other day. Forms of and remedies for such breach Breach of Contract Refers to breaking of a contract through act or conduct of either party indicating an intention to be no longer interested to continue to be bound by the terms or objective of the contract. Forms of Breach of Contract 1. Positive mal performance, doing what one promised not to do. 2. Repudiation, stipulating that one no longer want to perform as agreed. 3. Anticipatory breach, showing clearly that one will not perform when time for performance is up. 4. Late performance, when time for performance is given and important. Remedies for breach of contract 1. Specific performance, to achieve what the parties initially intended or a substantially similar result.The court may make an order of what is called "specific performance," requiring that the contract be performed. In some circumstances a court will order a party to perform his or her promise (an order of "specific performance") or issue an order, known as an "injunction," that a party refrain from doing something that would breach the contract. A specific performance is obtainable for the breach of a contract to sell land or real estate on such grounds that the property has a unique value. 2. Cancellation of the contract if breach is serious, the innocent party can regard the contract as cancelled and raises breach as a defence if sued on it. 3. Sue or claim for damages, must result from the normal course of the breach e.g. if he was involved in business, the profits, he would have gained if the contract had not been breached. There are three different types of damages. i. Compensatory damages which are given to the party which was detrimented by the breach of contract. With compensatory damages, there are two kinds of branches, consequential damages and direct damages. ii. Nominal damages which include minimal dollar amounts (often sought to obtain a legal record of who was at fault). iii. Punitive damages which are used to punish the party at fault. These are not usually given regarding contracts but possible in a fraudulent situation. 4. Seek an interdict, obtainable before breach. To prevent the other party from breaching the contract one applies to court for an order.
- 74. rmmakaha@gmail.com 74 74 PRINCIPLES OFLAW FORMS OF BREACH: 1. MORA DEBITORIS Mora debitoris is the culpable failure of a debtor to make timeous performance of a contractual obligation which is due and enforceable. Requirements to be met before the debtor is in Mora: a. The debt must be due and enforceable, i.e. the creditor must have a valid right to claim performance forthwith, against which the debtor can raise no valid defence, such as prescription, non-fulfillment of a suspensive condition, etc. b. The debtor must have failed to perform timeously. Thus the debtor can fall into Mora only when a definite time for performance has been fixed, either in the contract itself (Mora ex re) or by the creditor subsequently making a demand (interpellation) on the debtor to perform by a specific date that is reasonable in the circumstances (Mora ex persona). c. The delay must have been due to the fault of the debtor. The must have been due to the fault of the debtor. If e.g. performance was rendered temporarily impossible by vis major or casus fortuitous, or if the debtor could not reasonably have been expected to know that he had to perform, or how much to perform, there is no Mora. The onus of proving the absence of fault rest on the debtor. (CASE: Broderick Properties ltd Vs Rood) 2. MORA CREDITORIS Where the co-operation of the creditor is necessary to enable the debtor to perform his contractual obligation the creditor is obliged so to co-operate. Should he fail to do so timeously, without repudiating the contract or rendering performance by the debtor impossible, he commits a form of breach called Mora creditoris. Requirements for Mora creditoris: a. The debtor must be under an obligation to make the performance to the creditor, but the obligation need be neither enforceable nor due, since a debtor may discharge his debt before the due date for performance. b. The co-operation of the creditor must be essential for the due performance by the debtor of his obligation, thus e.g. there can be no question of mora creditoris in respect of an obligation not to do something. c. The debtor must take whatever steps towards performance that are possible without the creditor’s co- operation before calling on the creditor to accept the performance, otherwise the creditor is entitled to reject it. d. The creditor must delay in accepting performance. Again, this presupposes a fixed time for performance. If no such time has been fixed in the contract, or if the debtor wishes to discharge his debt before the time fixed in the contract he must notify the creditor of the time when he wishes to perform, allowing him a reasonable opportunity to prepare to receive the performance. e. The delay must be due to the fault of the creditor; if it is occasioned by Vis Major or Casus fortuitous, e.g. or if the creditor is entitled to reject the offered performance, there is no mora creditoris. CASE: Wingerin Vs Ross & Another FACTS:
- 75. rmmakaha@gmail.com 75 75 PRINCIPLES OFLAW W purchased a brick making business from R & another and at the time of the sale R orally misrepresented certain material facts. W, when he discovered the truth, cancelled the agreement and tendered return of the subject matter of the sale. The sellers refused to recognize the cancellation and refused to take possession of the subject matter of the sale in terms of the tender. Thereafter some of the goods forming the subject matter of the sale deteriorated or were damaged and lost. When W instituted proceedings of cancellation of the sale, the sellers pleaded that W had lost his right to cancel because he was unable as a result of the deterioration, to restore the subject matter of the sale. HELD: W had not lost his right to claim rescission although the seller who refuses to accept the tender is in Mora creditoris and the purchaser, who as a result of the rejection by the seller, was still in possession against his will, owes no greater duty to the seller than that he will not injure the subject matter of the sale by culpa lata (gross negligence) or dolus (intentional wrongdoing). 3. POSITIVE MALPERFOMANCE It relates to the content of the performance made. It may take one of the two forms, depending on whether the duty in question is positive or negative. Where the duty is to do something positive malperfomance occurs when the debtor duly performs, but his performance is incomplete or defective in some respect; e.g. A seller delivers the wrong type of goods, a carpenter makes a cabinet using inferior wood, or an employee is repeatedly late for work. In case of a negative obligation, positive malperformance occurs when the debtor does the act that he is bound to refrain from doing; e.g. a lessee sublets the property, or hangs his washing from the windows, in contravention of a term in the lease. CASE: Southern Rhodesia Government Irrigation Dept. Vs Hein FACTS: S undertook to build a dam of 6 million gallons capacity on Hein’s farm. The dam was built but before Hein had made use of it the wall subsided because of the type of material used in its construction to an extent which made it unsafe to impound 6 million gallons of water. Hein having declined to accept the dam in its then state, stepped in and reduced the height of the spillway with the result that the dam capacity became 2 million gallons only. S sued Hein for £193. Representing the balance of cost tractor hire and cost of work done. HELD: After an appeal by S the appeal was dismissed with the evidence that the dam wall had not been constructed to specification. The defect in it was substantial and went to the root of the contract and S was not entitled recover the contract price, nor in the circumstances anything by way of quantum meruit ( so much as he earned). 4. REPUDIATION A party to a contract commits this form of breach when , by his words or conduct, and without lawful justification, he manifests an unequivocal intention no longer to be bound by the contract. It is a form of anticipatory breach, because it predict another form of breach: the repudiating party indicates in advance of the due date for performance that he will not perform or accept performance, or that his performance will be late, defective, or incomplete. However, a party may also repudiate his obligations on or after the stipulated time for performance. Examples of repudiation: a denial of existence of the contract; a refusal to perform or to accept performance and pay for it; notification of inability to perform; an unjustified attempt to canel the contract; the offer of incomplete or defective performance as full performance; giving insufficient notice of termination in contracts of a continuing nature; and the unjustified refusal by an employer to allow his employee to perform his work. CASE: In re Bronze and Metal Co ltd. Vs Vos FACTS: In November 1915 R appointed V general manger of its works for three years at a fixed salary and a commission on the net profits. In January 1917 R purported to ‘suspend’ V and took from him his business keys and informed him that he must not return to the works as he was not wanted. As a
- 76. rmmakaha@gmail.com 76 76 PRINCIPLES OFLAW result of these acts V elected to treat the contract as repudiated by R and claimed damages for wrongful dismissal. HELD: R had wrongfully repudiated their contract, and V was therefore entitled to damages in as much as R absolutely forbade him to fulfill any of his duties. 5. RENDERING PERFOMANCE IMPOSSIBLE. Where impossibility supervenes due to the fault of either the debtor or creditor the contract is not discharged, but the party who rendered performance impossible is guilty of a breach of contract. it is a form of anticipatory breach, but of course performance can also be rendered impossible on or after such date. It is said that performance need not be absolutely or objectively impossible in order for this form of breach to arise; relative or subjective impossibility will suffice. Example: A sells something to B and then disables himself from fulfilling the contract by selling and delivering the thing to C, who will not part with it at any price. REMEDIES ON BREACHES OF CONTRACT. Where there is breach of a material term, the injured party has a choice: a. He may abide by the contract, sue for specific performance and claim such damages as he has suffered. b. He may treat the contract as cancelled and sue for damages. Where the breach is of a non-material term the injured party may only claim damages. Where a party to a contract wishes to prevent a threatened breach of a contract, or seeks to enforce a negative provision in the contract, or wants to prohibit interference with other rights of his after a contract has been terminated, this is done by means of an interdict. The court may be prepared to make an order declaration of the rights of parties. The injured party may in certain circumstances have a defensive remedy when he himself is called upon to perform. 1) SPECIFIC PERFORMANCE. Specific performance of a contractual obligation is performance, by the person obliged, in the very terms agreed upon by the parties or implied by the law. Where one of the parties has refused or failed to make due performance the chief remedy of the other party is to obtain from the court an order or a decree for specific performance of his obligation by the defaulting party. In general, the injured party has the right to claim specific performance if ready to carry out his own obligation under it, but the court has a discretion to order it or not. The exercise of the court’s discretion was considered fully in this case: CASE: Haynes Vs Kingwilliamstown Municipality FACTS: K was bound by an agreement made in 1911 with Mrs. H to release 250 000 gallons of water a day from their storage dam. K honoured its obligations under the agreement from 1911 to 22 April 1949, from which date it released a daily flow of only 1 500 to 2 000 gallons. The reason for this was the fact that there was an unprecedented drought and that full compliance with the agreement would have resulted not only in great hardship but a positive danger to the health of the in habitants of kingwilliamstown. Mrs. H, who had an adequate supply of water from other sources, sought an order of specific performance against K. HELD: The court refused to grant an order of specific performance because this would cause hardship not only to the respondent but the citizens of kingwilliamstown to whom the respondent owed a public duty to render an adequate supply of water. Of which shortage of water would have resulted in positive danger to the health of the community and might have disrupted the life of the town.
- 77. rmmakaha@gmail.com 77 77 PRINCIPLES OFLAW THE FOLLOWING CASES /CIRCUMSTANCES WHICH DECREES OF SPECIFIC PERFOMANCE HAVE BEEN REFUSED: i. Where specific performance is impossible. e.g. where the contract is one of master and servant, factors such as the closeness and confidentiality of the relationship is considered. ii. Where damages would adequately compensate the injured party. (CASE: Swartz & Son (Pvt) ltd Vs Wolmaransstad Town Council 1960) iii. Where it would be difficult for the court to enforce its order. e.g. disability or insolvency of either of the contracting parties. CASE: Lucerne Asbestos Co Ltd Vs Becker FACTS: B undertook to form a company to purchase certain property from L and guaranteed to L that , that company would pay an agreed price for the property. B having failed to form the company because the property had subsequently proved to be valueless was sued by L for specific performance, or alternatively damages for breach of his contract. HELD: The court would not order specific performance of contract to form a company but would leave L to his remedy in damages. iv. Where the thing claimed can be readily be bought anywhere else. e.g. in contracts for the sale of shares which are daily dealt in or the market and can be obtained without difficult, specific performance will not ordinarily be granted.(Case: Thomson Vs Pullinger 1 OR 298) v. Where the subject of the contract is rendering of services of a personal nature. e.g. prostitution. vi. Where the result of the order would be to impose great hardship on the defaulting party. (Case: Haynes Vs Kingwilliamstown Municipality.) 2) CANCELLATION OF THE CONTRACT. Cancellation, or rescission, of a contract is an extraordinary remedy that is available only in limited circumstances. Where on party repudiates the contract or where there has been a breach of a material term, or of a certain term breach of which the parties expressly agreed would entitle one of them to cancel, the injured party may cancel the contract. EXPRESS TERMS ENTITLING CANCELLATION MOST COMMONLY MET WITH ARE: a) Forfeiture Clause: This is a clause in a contract of letting and hiring of property entitling the landlord to cancel the lease and have the tenant ejected if he is in breach of a certain specific terms, such as the payment of rent on due date. b) Foreclosure clause Such a clause in a mortgage entitling the mortgagee to call up the bond where the mortgagor is in default, usually by failing to pay interest on due date. c) Lex commissoria This is a provision in a contract of Sa that the Seller is entitled to cancel the contract on breach of one or other of the terms of the contract, usually non-payment of an installment. In the case of a Sale where payment is to be made by installments. Penal provisions are commonly added to the Lex
- 78. rmmakaha@gmail.com 78 78 PRINCIPLES OFLAW commissoria clause allowing the seller to retain so much of the purchase price as has already been paid to him, despite his cancellation of the contract and recovery of the subject matter of the Sale. A party wishing to cancel a contract on the ground of the other party’s breach must communicate his intention to the other party before the cancellation becomes effective, unless it is agreed that termination may be effected in some other manner. (CASE: Miller and Miller Vs Dickinson 1971 (3) SA 581 (AD)) As cancellation is one of a number of possibilities following a material breach of contract, the injured party has to make his choice. If he chooses to stand by the contract, he loses his right to cancel for that particular breach. A court order is not necessary for the cancellation of a contract, but if the injured party decides to take action in court he may claim: i. Cancellation and Restitution In one and the same action the injured party may claim cancellation and restitution of what he has paid over or transferred under the contract. if he does so, and if there is no agreement to the contrary, he is bound to restore, and in his pleadings must tender to restore, what he received. ii. Cancellation and Damages, or Cancellation, Restitution and Damages. Provided that the claims are made in one action, the injured party may ask for damages in addition to cancellation or cancellation and restitution. The addition of such a claim does not relieve the injured party of his duty to restore what he received: a claim for damages is not a liquidated claim and set-off cannot operate. iii. Cancellation (wit or without Restitution and /or Damages) where a decree of specific performance cannot be made effective. If the injured party declines to cancel a contract and sues for specific performance and is awarded his decree it may happen that the decree cannot be enforced. In such a case he may cancel the contract. to avoid to bring two actions he may claim in the alternative in the first action. iv. Cancellation, failing which, specific performance. An injured party who considers that a court may find that the breach is not a material one, and to whom performance of part of the other party’s obligation is due, may claim cancellation, failing which, specific performance of that part of the other party’s obligation which is due. NB: The above remedies are discussed in the following case. CASE: Bonne Fortune Beleggings Bpk Vs Kalahari Salt Works (Pvt) Ltd & Others. FACTS: As B, the purchaser of immovable properties along with movables, had not paid all the payments due under the deed of Sale, the Sellers K cancelled the contract and issued a summons claiming; (a) an order confirming that the agreement had been cancelled; (b) an order obliging B to vacate the immovable properties; (c) an order obliging B to return the movables or their value; and (d) payment of an amount being the alleged amount of the damages which K had suffered less the amount which B had paid off the purchase price. B consented to the grant of an order in respect to (a). judgment by default was granted in terms of (b) and (c) and B was granted leave to enter appearance in regard to the balance within two weeks of the date of judgment. B appealed. HELD: K was only entitled to judgment in terms of (b) and (c) against repayment of the purchase price already paid; K could not utilize their unliquidated claim for damages for the purpose of set-off. 3) DAMAGES FOR BREACH OF CONTRACT This means compensation payable to the victim by the defaulter to make good for the loss. The nature of damages depends on the degree of loss suffered by the plaintiff. He is entitled to claim damages calculated according to his positive interest. In other words he may claim the amount of money necessary to put him, as far as money can do so, in the position he would have occupied had
- 79. rmmakaha@gmail.com 79 79 PRINCIPLES OFLAW the breach not committed, or in the position he would have occupied had the contract been properly and timeously performed. Damages are claimable for two forms of loss, namely loss actually incurred, termed “Actual Damages” and loss of profits which would otherwise have been made, generally termed “Prospective Damages.” In arriving at the appropriate sum of money the court is guided by the following consideration: a. The loss must result from the breach itself and compensation will only be awarded for the loss suffered as a direct consequence of the breach. whether or not the loss was actually caused by the breach is a question of fact to be decided on the evidence. b. The loss must be actual monetary loss incurred or monetary gain not made. The loss for which the injured party must compensate must be pecuniary loss. No Damages are claimed in an action on contract for sentimental loss or injured feelings. CASE: Jockie Vs Meyer FACTS: Jockie a Chinese and second officer on a British Ship reserved accommodation at Meyer’s Victoria West Hotel was allocated the key of Room 309 and took occupation. Meyer’s agent a few minutes later sent for Jockie, told him that there was a mistake as to the room number and asked him to return the key. Jockie did so and was then told that the Hotel was full and that there was no room for him. Jockie sued for damages under 3 headings: I. Disbursements in finding other accommodation. II. Inconvenience caused by the breach III. Humiliation and loss of prestige. HELD: Jockie was not entitled to damages under heading III. c. The consequence must be natural or within the contemplation of parties. The loss suffered by the injured party must have been reasonably foreseeable by the defaulter at the time of making the contract. (CASE: Bower Vs Sparks, Young and Farmers Industries)-see notes on warranties. d. Mitigation of damages. The injured party must do all in his power to mitigate the loss. i.e. injured party can not allow the damages to increase day by day and do nothing about it. He must do all that is reasonably necessary to minimize his loss. The extent of his liability depends on the facts of each particular case, but he is not required to take any steps which a reasonable and prudent man would not ordinarily take in the course of his business. 4) INTERDICT. Where one party is breaching or threatening to breach the contract, the other party to the contract may seek an order of court prohibiting the specified act or acts from being carried out. This order is known as an Interdict and disobedience is treated as contempt of court. Example: X having bought goods from B but not yet having taken delivery, discovers that Y is about to sell the same goods to Z. X can apply to court for an Interdict to prevent Y from disposing of the goods to Z. Circumstances in which an Interdict will be granted: I. Where a party to a contract has good reasons, to fear a breach of contract by the other party, to prevent the threatened breach; II. For the enforcement of negative provisions in a contract; III. After a contract has been terminated, to prohibit interference with a party’s other rights.
- 80. rmmakaha@gmail.com 80 80 PRINCIPLES OFLAW 5) QUANTUM MERUIT This means “as much as he deserves” or “how much it is worth”. Where either work has been done or things accepted under a void contract or where one party abandons a contract, the injured party instead of claiming damages may claim payment for what has been done under the contract. The claim is not based on the original contract, but on an implied promise by the other party arising from the acceptance of executed consideration. 6) DECLARATION OF RIGHTS. (Method of enforcement) The High Court Act (Chapter 7: 06) s 14. Gives the High Court power to issue a declaratory order even if no consequential relief can be claimed. In contract cases this power serves the value purpose of enabling the parties to settle an incipient dispute on the existence, interpretation or validity of a contract before committing themselves to what might prove to be an erroneous course of action. Although the court will not act in an advisory capacity, there are instances where the court will exercise its discretion in favour of making an order declaring the rights of the parties where there is some uncertain or disputed issue arising from contract.