Contract Law

2

CONTRACT LAW

It is a legal enforceable agreement entered into by two or more different persons with legal capacity.  The parties should have serious intention to create legally binding obligations.  Their agreement needs to be within parities’ contractual capacity.  Furthermore, parties should communicate such intention without vagueness each to the other and being of the same mind to the subject matter.

 

Essentials of a contract

a)                   it should be lawful

b)                   possible of performance

c)                    within contractual capacity

d)                   with the serious intention to contract

e)                   union of minds of parties – consensus ad idem

f)                     it should not be vague

g)                   intention of both parties should be communicated

–                      A contract does not necessarily have to be in writing unless there is a specific statutory requirement that it be in writing.

–                      A verbal contract is as equally valid as a written one, provided that the party alleging the contract can prove agreement on certain terms.

–                      Writing is only important for evidence purposes although its not a requirement.

–                      The presence of an agreement is determined by there being an offer and an acceptance.  This is only a general rule and does not follow that every contract has to be constituted by a clear offer and acceptance.

 

OFFER AND ACCEPTANCE

Offer

Definition

A statement by a person, called the offeror, indicating his willingness to contract which statement is made in the awareness that it shall become binding an acceptance by the other person called the offeree.

 

Case law

Green Acres Farm (Pvt) Ltd v Haddon Motors (Pvt) 1983(1) ZLR 17 (SC)

In this case the defendant sent a truck to the plaintiff with a note requesting the plaintiff to check over the truck.  The plaintiff did the checks over the truck and proceeded to effect repairs.  Upon presentation of the invoice the Defendant refused to pay arguing that they had not requested the plaintiff to effect any repairs.  The plaintiff took the matter to the courts.  The Court held that there is no offer made by the plaintiff to repair the truck.

 

An offer must meet/have the following requirements

1.     It must be consistent with all the essentials of the contract, otherwise it is void.

2      .It must clearly define all the terms in which an agreement is sought.  Therefore it must not be vague, Levenstein v Levenstein 1955 (3) SA 615 (SR)

3      It must be communicated to the offeree.  The offeree must have knowledge of the offer if his acceptance is to constitute a valid contract.

 

Case law

Bloom v American Swiss Watch Company 1914 AD 100.  It was held that there was no offer made to the plaintiff when he volunteered the information and did not know that there was an offer of reward money.  See also Lee v American Swiss Watch Company 1914 AD 121.

 

4              It must be made with intention of being accepted.  This means serious intention to create legal relations.  This embraces the following:

–                      it must not be mere social arrangement or offers made in gest which lacks the animus contrahendi.  See Balfour v Balfour [1919] KB(2) 571.

–                      It must not be binding in honour or gentlemen’s agreements i.e. excluding the jurisdiction of the courts.  (where the offer) it cannot constitute a legally binding contract.  (Rose and Frank Company v Crompton and Brothers Ltd (1922) (2) KB 261.

–                      It must not be an offer to negotiate or treat i.e. it must be an offer to enter into a binding contract and not merely an invitation to do business or receives offers (i.e. tenders).  See Crawley v Rex 1909 TS 1105.

–                      It may be to one definite person, or to the world.  If the offer is made to a definite person or to a number of definite persons, acceptance should be by that person or those persons only.  If it is made to the public anyone else may accept.  See Carlill v Carbolic Smoke Ball Company 1893 (1) QB 256.

 

5              The offer must not have been revoked or lapsed.

An offer is revoked if it is withdrawn by the offeror.

The following should be noted:

–                      Revokation is not effective until the offeree is aware of it.

–                      An offer can be revoked to any stage before it is accepted

–                      The offeror must take reasonable steps to find and inform the offeree  of the revocation Bryne and Co v Lean van Tienhoven and Co 1880 KB.

 

6              Where an offer was accompanied by an option, the latter must not have expired.  An option is a separate contract to keep the contract open for a specific period.  The offer must be accepted within the stipulated period Boyd v Nel 1922 AD 414.

 

7              The offer may be verbal written or implied.  Thus if a person boards a bus, the owner of a bus impliedly makes an offer to the person to ride in the bus and the passenger accepts the offer by taking bus seat and tending his fare.

 

Case law

Ferguson v Merensky 1903 TS 657 Transvaal Supreme Court) where F was anxious to buy M’s first two farms.  F wrote a letter to M in the following terms:

“If you still desire to dispose of your two farms, I shall be pleased to have your price 2nd terms”.

 

M replied and said:

“I have no objection to sell the two farms in question and as there are coals on the farm and a railway line I will be passing near them, I ask 30 shilling per acre”.

 

In that letter on the referred F to his lawyer with reference to the terms of the contract.  When F sued M saying that the latter had sold the farms to him, the Court held that M’s reply to F’s letter did not constitute a firm offer from which he could not withdraw and which F was entitled to accept M’s lawyer had written to F declining the offer made by the plaintiff and at the same time making new proposals.  On behalf of the defendant M which the plaintiff had refused to accept.

 

WHAT CONSTITUTE AN OFFER

There is a distinction between a firm offer and invitation to treat or negotiation.  A firm offer is the one which is unconditional and unqualified, it states all the terms and the material facts on which the offer is based.  It must become a contract upon an acceptance of the offer as it stands.  Thus a “come lets negotiate” is not a firm offer – if a shop displays an item for sale at X dollars can we say that is a firm offer?  In the case of Crawley v Rex 1909 TS 1105 state that the complainant, a shop keeper had advertised a sale of a particular brand of tobacco at a very cheap price in order that he might attract the custom of a large number of the public.  He put a placard outside his shop on which the price was shown, the Appellant entered the shop, bought the tobacco and went away.  After some minutes he came back again asked for another pound of the same tobacco, unfortunately the complainant declined to serve the Appellant with the tobacco and told him to leave his shop, the Appellant refused to leave the shop whereupon he was arrested for trespass.  The Appellant had argued that he had a contract of sale with the complainant but the court thought otherwise and held that there was no contract between the parties.  It emphasized that the mere fact that a tradesman advertises the price of the goods he sells does not mean offer to any member of the public.  It does not mean the right to enter the shop and purchase at the displayed price.  The court also held in the case that: A contract is not constituted when any member of the public comes in and tenders the price mentioned in the advertisement.  In summary therefore display of goods at a certain price is not a firm offer but only an invitation to treat.  On the contrary, it is the customer who makes the firm offer by presenting goods at the till and when the shop owner accepts the offer to buy, a contract then comes into being.

 

Case

Carlill v Carbolic Smoke Ball Company

Where the company inserted an advertisement in the newspaper offering to pay 100 pounds to anyone who contracts the increasing epidemic of influenza or any disease caused by taking cold after having used their smoke balls 3 times daily for two weeks according to the printed directions supplied on each ball the advertisement went on to say that 1000 pounds had been deposited with the certain bank showing its commitment in the matter.  During the last epidemic of influenza many thousands carbolic smoke balls were sold as preventives against the disease but in no ascertained case was the disease contracted by those using the smoke balls.  The plaintiff alleged, on the faith/strength of an advertisement bought one of the balls at chemist and used it as directed three times a day for 2 weeks but she was attacked by the influenza and she claimed the 100 pounds reward price the court of first instance held and she was entitled to the 100 pounds but the defendants appealed but their appeal was dismissed.  In point of law the advertisement in this case was an offer to pay 100 pounds to any member of the public who would have performed at those conditions set out in the newspaper.  Performance of those conditions was held to constitute acceptance of the offer.  The court held further and the offer was a continuing offer which was not important.

 

Case

See further Lee v American Swiss Watch Company 1914 AD 12  Dietrichsen v Dietrichsen 1911 TPD 486.

 

Q.            To whom may an offer be made/addressed?

–                      An offer maybe addressed to a particular person, to a group of persons or to the world at large depending on its terms.

 

TERMINATION OF AN OFFER

Firstly an offer can be terminated by rejection by the offeree.  It can lapse on the expiration of fixed period within which it was meant to be accepted.  If there is no such fixed period within which an offer should be accepted an offer lapse after the expiry of some (reasonable time).

 

What constitutes a reasonable time depends on the facts and circumstances of each case

An offer can also be terminated by revocation but this presupposes/presumes that the offer is an ordinary revocable offer as opposed to an option.

–                      An OPTIO is an offer coupled with a stipulated period of time during which the offeror is not free to revoke it.

–                      When an option A make an offer to B and gives a stipulated time within which he must accept to it A also is not allowed to make the same offer to C within the same.

–                      Thus in an option there will be two contracts/conditions to be observed i.e. that of time and that of not having made the same offer to another third party.

–                      An ordinary revocable offer can simply be terminated by the offer by revocation but before it has been accepted the revocation must be communicated with the offeree.

 

Lastly an offer is also terminated by death of the offeror.

 

Who can accept an offer?

As far as ordinary revocable offers are concerned the general rule is that, “an offer made by A may be accepted by C or D”.

 

Case

Blew v Snoxell 1931 TPD 226

Blew wrote to Richard Curle Ltd offering to buy a certain piece of land of a certain piece.  The land was owned by Richard Curle Ltd but by Snoxell who indicated to Richard Curle in writing that he accepted the offer.  Richard Curle Ltd thereupon notified Blew that the owner of the land had accepted his offer.  When Snowxell later sued Blew for damages for alleged breach of contract Blew excepted to the summons on the ground that there was no valid agreement between him and Snoxell.  The court held that, “Now it is trite law (i.e. simple legal principle), and an offer made by one person to another can not be accepted by a third party for the simple reason that there was no intention on the part of the one person to contract with the other.

 

Whatever the subject matter of the contract maybe:

-The Court held further that it was perfectly clear and the offer was made to Richard Curle Ltd and that the plaintiff purported to have accepted that offer but there was nothing to show any acceptance by Richard Curle Ltd.  That being the case, there was no contract on which the plaintiff was entitled to come to court as the offer was never made to him.

 

Case

In the case of Bird v Sumerville and Anor, Bird signed an offer to sell land addressed to Sumerville, Sumerville and the second respondent both of whom, the estate agent appointed by Bird had been conducting negotiations with, added the second respondent’s name as the purchaser and both signed the agreement of sale.  The court upheld Bird’s contention/argument that no contract had come into existence because although he initially had no intention of calling to a specific person, his signature of the claimant addressed to Sumerville manifested an intention to sell to him and nobody else.  The offer was accordingly not to open for acceptance by Sumerville and another but could be accepted by Sumerville alone.

–                      The intention of the parties runs through the whole acceptance of contract, parties are bound to what they agreed and they are bound because they agreed intentionally and voluntarily.

–                      When an option is to sell for cash the offeree may cede that option to the third party because the optional holder has a contractual right which is regarded as property.  In this regard i.e. when the option is to sell for cash as long as cash is paid.  It does not make a difference to the offeror whether A is B, C or D who pays the cash.

–                      If the offeror gives credit to the offeree then that option may not be ceded.  The giving of credit involves an element of direct personal dealing.

 

Case

Hersh v Nel 1948(3) SA 686(A) where Nel owned two farms and he gave Mr West an option to purchase the two farms and the together with another person ceded the option to Hersh who then accepted Nel’s offer before its expiry.  When Hersh accepted the offer Nel refused to sell the farms.  When sued, the rule made in the case of Blue v Snoxell was applied i.e. an offer made by A to B may not be accepted by C.

–                      The court however distinguished an option made in a case sale.  The sale of the two farms was on a cash transaction thus in accordance with the principles outlined above the court ruled and the cession to Hersh was valid and his accepted gave him a contract with Nel.

 

Case

Madan v Macedo Heirs and Anor 1991(1) ZLR 295(SC)

Acceptance:

–                      The acceptance of an offer must result in a binding contract and not further negotiations.  An acceptance must be unconditional/unequivocal and clear.

–                      A counter offer is not a valid acceptance

–                      A counter offer is where the offeree instead of unconditionally accepting the offer makes his or her own offer to the offferor.

–                      This happens in a case where A offers to sale a thing to B at a price of $5 000 then B in response to that offer from A tells A that he is prepared to buy that thing for $4 000.  B’s conduct in such a situation constitutes/is what is called counter-offering.

–                      A counter offer may also be in the form of extraneous conditions attached to the acceptance.

–                      The effect of a counter offer is to terminate the original offer.  If the offeree’s acceptance is also shrouded in ambiguity/vague it does not constitute an acception.

 

Case:

Boerne v Harris 1949(1) SA 793(A)

In which the Appellant was the lessee at premises owned and leased by the respondent.  The contract lease agreement contained an option under which the appellant could renew the lease agreement for a longer period of 5 years, the period was to be recognised from 15 April 1947 and the option was to be exercised by October 15 1946.  On October 5 1946 the lessee’s attorneys/lawyers addressed a letter to the lessor in the following terms, “We refer to the lease in respect of the Hotel … and have to advise you that our client intends to renew the lease for a further period of 5 years from 15 October 1946 in terms therefore  acceptance of the court held that the purported option was ambiguous in that it was not in accordance with the terms of the option and  because of that the exercising of the option was held to be invalid.

 

Case:

Orlon Investments P/c v Ujama Investment and Ors

If an acceptance has a condition attached to it when A is not an acceptance at all it becomes a counter offer.  If the offer is not prepared to accept the counter offer from the offeree the later can not go back and accept the original offer originally made to him and thus there would be nothing left to accept.

 

Case

Water Mayer v Murry 1911 (AD) 61

Water Mayer owned the farm which Murry wished to buy.  Murry wrote a letter to Water Mayer offering to buy his farm for 1 700 pounds.  Water Mayer wrote back and said, I accept the offer to sell the farm at 1 700 provided you pay all the expenses and 1 000 pounds is paid at the time of signing the agreement.  Murry wrote back and said, “Fine, but the price is not payable at the time of signing …  Water Mayer wrote back and said he was no longer interested in selling the farm.  When Murry sued Water Mayer the court ruled that Murry had no case because he had made counter offer therefore no contract had been concluded between the parties.

–                      It must be underscored however that a request for modification of terms is not a counter offer and it does not destroy/terminate the original offer.

–                      As a general rule a contract is concluded when and where communication of acceptance reaches the mind of the offeror (however, there are exceptions to this general rule).  Thus if the offer is communicated to the offeree by telephone in a situation where the offeree is in Harare and the offeree is in Cape Town the contract would be deemed to have been conducted in Cape Town.

–                      This general rule is subject to change by the parties to the contract  i.e. they may agree otherwise the offeror may decide to do away with the need to communicate acceptance.  The offeror may also prescribe a particular mode of acceptance e.g. the offerer may say if you wish to accept the offer send it by registered post/ through email or at such and such an office.

 

Case

R v Nel 1921 AD 339

In this case the Respondent Nel had licence to sell liquor in Transvaal.  He received an order form Armstrong who was resident in Cape Town the order was delivered to Nel in the Transvaal (is the written order) and the bottles of liquor were then allocated to the purchaser in Cape Town.  Nel was prosecuted for selling liquor in Cape Town without licence as it was necessary for court to make a finding as to when and where the contract of sale had been concluded.  The offeror was in the Cape and the offeree in the Transvaal.

The nature of the transaction was that the offeror had dispensed with the need for communication of acceptance and the court concluded that the sale agreement/contract had been sealed in the Transvaal, the moment Nel decided to sell the liquor and he was not guilty.

 

Case

McKenzie v Farmers Coop Meat Industries Ltd 1922 AD 16

McKenzie applied for shares in the cooperative company the application form read in part, “I agree to accept the above number of shares or any lesser number and may be allotted to me”.  McKenzie was making the offer to buy the shares and concurrently dispensed with the need for communication of acceptance in that he had expressed the intention that the cooperative should on receiving his application forthwith proceed to allot shares to him.  A contract would come into existence as soon as the share transfer secretaries sing a share certificate giving McKenzie any number of shares.

 

Case

In the Ujamaa Investment case the Appellant company was buying shares from the respondents company.  The parties engaged in negotiations and there were a number of drafts exchange by the parties and the forth draft was signed by the respondent on October 9 1984.  They then sent two copies of that draft to the Appellant under cover of a letter which read in part as follows, “If it is not acceptable, your earlier return of the agreement had a particularly interesting clause which read as follows.  This agreement shall only become of force and effect when executed by the seller and by the purchaser.  The appellant/purchaser signed both copies of the agreement and kept them in his drawers.  After some time the purchaser sued for the transfer of the share but the Respondent alleged that they had not agreed on anything.

 

–                      It should be noted that the memorandum said the respondent was to return the agreement only if there was no acceptance and by necessary application keep the if there was acceptance.

–                      Clause 20 provide that the moment the purchaser signed the agreement, it become a binding contract.  In other words and second clause dispensed the need for communication of acceptance.  The Appellant argued that they had sent two copies so that the respondent would return one and keep one for his records and return the other one.

–                      However the memorandum said if the terms were not accepted the respondent was suppose to return the papers quickly and so it was argued that it did not say “If accepted do not return them”

–                      The court held that the respondent had not dispensed with the need for communication of acceptance and because acceptance had not been communicated it held there was no contract.

–                      Where the offeror chooses to use the post as the means of communication the expedition theory applies.  According to this theory a contract is concluded as soon as the letter of acceptance is posted.  The contract is concluded before the offeror receives the letter, let alone reads the letter.  Thus there will be a binding contract even though the letter never get into the hands of the offeror.

–                      The rationale behind this theory is that the offeror must suffer the risk consequences of choosing a specific method of acceptance (is communicated acceptance).

The leading case on the Expectation theory is that of:

Cape Explosive Works v SA Oil & Fat Industry 1921(4) CPD 244  where the first defendant wrote a letter on the 10th of July 1916 and sent it by post from Delmore in Transvaal to the plaintiff in Sommerset in Cape Town.  The letter contained an offer to sell certain quantities of glycerine oil.  On the 14th of July 1916 the plaintiff replied accepting the offer.  Then on 11 September 1916 the second defendant of Durban sent a letter by post to the plaintiff in Cape Town containing another offer to sell a certain quantity of glycerine oil.  The letter of acceptance was the posted on 16 September by the plaintiff’s in Cape Town.  In an action of the …… the defendants took exception to the jurisdiction of the court on the ground that they were not entered into in the Cape but in the Transvaal and Natal respectively where the defendants had received the letters of acceptance.  This argument did not find favour with the court which held that the contracts had been concluded in Cape Town where the letters of acceptance had been posted.

 

–                      When the offeror makes the offer by post the immediate inference is that acceptance can also be by post so it is open to the offeror to indicate that he will not consider himself bound unless and until he receives the letter of acceptance.

–                      If the offeror does not make this special provision the expedition theory will be applied without any exception.  The basis of the rule is that by using the post first the offeror by implication authorises the offeree to use the same method of communication.

 

Case

Smeiman v Volkersz 1954(4) SA 170

The Applicant and the respondent made an option to sell some shares to the applicant.  The option was verbal and it was to remain open till 15 February 1954.  On the 15th of February a lawyer acting for the applicant phoned the respondent’s office in the Cape only to be told that the respondent was not in the Cape but somewhere in OFS.

–                      Applicant’s lawyer then quickly wrote a letter exercising the option on behalf of the applicant.  A copy of the letter was sent to respondent’s Cape Town office and another to where the respondent was thought to be.

–                      Both copies were posted on the 15th of February but neither reached the respondent on the date.  If the expedition theory is applied then the option had been exercised timeously but if it did not apply, then it was not exercised on time because it had lapsed.  The question was, “Had the respondent impliedly authorized the use of the post?”  Looking at the facts and what was the appropriate method of replying?  The court held that the mere fact that parties reside at a distance does not per se warrant the use of post, the expedition theory therefore did not apply.

–                      By using the post one of the risks the offeror assumes is precisely that the offeree had an option of using a more expeditious means of communication in respecting the offer.

–                      Similarly, a faster means of communication would neutralize a posted acceptance.

 

Case

A to Z Bazaars (Pvt) Ltd v Ministry of Agriculture1975(3) SA 468

–               The offer contained in a notice of expropriation in terms of Section 2 of the Expropriation Act (SA) requires the offeree to signify his acceptance or rejection of the offer of compensation.  In accordance with the provision of Section 6(1)of the Act.

–               This Section provided that the owner of the property in question should deliver or cause to be delivered a statement indicating whether or not he was accepting.  Court interpreted this Section to mean that the owner was required to physically deliver to the Ministry concerned a written acceptance for a contract to come into existence.

–               There was accordingly no room for the applicant of the expedition theory.

Jansen JA said, But even under the law the question whether the alleged agreement has been conducted by posting must depend upon particular circumstance of each case.  The Expedition Theory does not hold without exceptions.

–                      It is important therefore to establish the precise limits of the application of the Expedition Theory.

–                      Thus the judge emphasized that it is not clear that all whether the Expedition Theory, mainly condemned for the protection of the offeree, should necessarily produce the possibility of a neutralization of the posted acceptance before it is received by the offeror.

 

MISTATE AND QUASI-MUTUAL ASSENT

N/B          First there must be offer and acceptance (i.e. in the formulation of a contract).

-The second requirement that ought to be present is that of agreement of which can either be actual apparent.  As regards actual agreement there has to be a meeting of minds of the parties involved in a coincidence of wills.  This is referred to as a consensus ad idem on the subjective theory.

-What it means is that if the terms of the contract are different as known by A and B then there is no contract.

 

Case

Jordan v Trollip (1960) (1) PH 825

-In a Robert AJ reiterated Wessels train/trial of thought that in order to determine the existence/otherwise of a contract.  It is the manifestation of the parties wills and not the unexpressed will which is of importance.

-This point was further emphasized in the case of Jones v Anglo African Shipping Company 1936 (1972) SA 827 of 834, where the court held that, “In the interpretation of a contract the general rule is that the court should determine what the true intention of the parties was.

-As regards apparent agreement it has come to be accepted that a contract can also come into existence in the absence of actual agreement.  If one of the parties conducts himself in a manner that make the other party believe that he is agreeing to a proposed term of contract.  This is referred to as Quasi Mutual Assent or the objective theory of contract.

-The doctrine of Quasi Mutual Assent was clearly articulated in the case of Smith v Hughes (1871) 6QB 597 of 607 where Blackburn J had this to say, “If whatever a man’s real intention maybe he so conducts himself and reasonable men would believe that he was assenting to the terms proposed by the other parties terms”.

-This is sometimes referred to as Agreement by conduct.

-The following relevant factors must be taken into consideration when dealing with matters relating to Quasi Mutual Assent:

(a)                 has A instead of B into believing that he is prepared to contract on terms a, b, c if the answer is no then the court should consider the following question

(b)                 Was B’s belief reasonable?  If the answer is Yes then there is a contract as understood by B on the basis of Quasi Mutual Assent.

 

-Courts have often asked this question, “Is there any difference between Quasi Mutual Assent and Estoppel?

-Before addressing the question it is imperative to define what estoppel is.

Estoppel is a general principle of law whereby, if a person either negligently or fraudulently misrepresents facts and another relies on the misrepresentation to his detriment the person making the misrepresentation is prevented from ascertaining and providing that the true state of affairs is different.

-For a person to establish estoppel he has to prove the following four factors:

(i)                   That there was a misrepresentation (i.e. either negligent/fraudulently).

(ii)                  That there was fault on the party of the representor either in the form of negligence.

(iii)                 That the other party relied on the misrepresentation.

(iv)                 That there was detriment which was caused by a reliance upon such misrepresentation.

 

Differences between Estoppel and Quasi Mutual

1.             Estoppel can only be relied upon as a defence and not a cause of action whereas quasi mutual assent can found a cause of action

2.             Quasi mutual assent does not require fault, fraud and detriment to found a claim.  Instead there should only by misrepresentation and a reliance on misrepresentation which reliance need not be detrimental.

 

Case

Stanbik Finance Zimbabwe Ltd v Chivhungwa 1999(1) 262 HC

Spesbona Bank Ltd v Portals Water Ltd SAPDY Ltd (1983)1978

NB           Not only does the courts confine themselves to the four corners of the contract but at times they go further in looking at the particular conduct of the parties as they/at the time they entered into the contract (i.e. objective approach of which may include either representation by one party)

NB           Freedom of contracting i.e. within the confines of the law.

 

3.             Animus contrahend: it refers to the intention to create legally binding obligations when an offer is accepted.

-It is the yardstick (i.e. AC) that usually distinguishes a contract from social agreement.  It is important to note that our courts have derived agreements into two categories in order to ascertain legal effects, these are commercial transactions and social arrangement.

Social arrangements:  It is true that social arrangements are not meant to be legally binding unless there are special arrangements which allows for that.

 

Case

Balfour v Balfour

The plaintiff was the wife of the defendant.  The defendant was employed in Ceylon.  When the plaintiff went there she decided that she did not want the weather there and opted to stay in England instead.  The defendant offered to pay her 100 pounds as maintenance periodically.  The defendant then flouted the promise and plaintiff sued him for maintenance on the basis of the arrangement they had made.  The courts dismissed the claim on the ground that by holding that this was a social arrangement which did not create an intention to be legally bound.

 

Case

Jones v Padabaton 1969 2 ALL ER 166

Commercial transactions: these are presumed to create legally binding obligations.  However, some commercial transactions can specifically exclude animus contrahend by what are called “honorp clauses”.

An honor clause specifies that an agreement is only supposed to be binding in honor and not give rise to any legally enforceable obligation.  This position was confirmed in the case of Electronic Building Elements v Huang (1992) 2 SA 384 of 387 where Levy AJ held that “if the parties choose to exclude from legal enforceability any arrangements arrived at between them, it can then become no more that a moral obligation or an obligation of honor but unforceable in court of law.

 

Rose and Frank Co v JR Crompton and Brothers Ltd and Anor 1923 2 KB 261

Possibility to person: An agreement cannot be deemed to be a contract if the performance of the obligation is impossible .  This position was captured in the case of:  Peters, Flamman and Co v Kokstad Municipalities where the court held that by the civil law a contract is void if at the time of its inspection its performance was impossible.  This rule/principle is however subject to the following qualifications.

a)                   The impossibility must be absolute as opposed to probable.

b)                   The impossibility must be absolute as opposed to relative

c)                    The impossibility must not be fault of one of the parties to the contract

 

NB           Parties should not agree upon anything unlawful nor outside human capabilities

 

Formalities

In Zimbabwe contracts need not be reduced into writing unless there is a statute that specifically provides so e.g. section 5 of Hire Purchase Act provides that a hire purchase agreement must be reduced into writing.

Similarly Section 7 of the Contractual Penalties Act provides that an installment sale of land must be reduced into writing.

Section 47 of the Companies Act provides that a pre-incorporation contract must be reduced into writing.

NB           The reason why there is such emphasis for reducing contracts into writing is for evidential purposes and it is also easy to decide on any case involving contracts put into writing (i.e. any document speaks for itself and thus it will be easy to see what is/want is not included in the terms of the contract).

 

5.             Contractual Capacity

For an agreement to valid the parties to a contract must be legally entitled to enter into such agreements.  In Zimbabwe the law has divided persons into artificial persons and natural persons.

Artificial persons:  this refers to companies and private business organisation and sometimes state cooperatives.

Companies – for a companies to enter into an agreement it must be represented by a natural person who is empowered by its Articles of Association to enter into contracts on behalf of the company.

Also the contract itself must fall within the parameters of the memorandum of Association.

NB Thus if contracting with any company one should check on the above two requirement otherwise the contract would be deemed and void.

 

Partnership

As regards a partnership the capacity to contract is found in the partnership deep.  However, it is generally accepted that any partner can enter into a contract on behalf of the partnership if the contract furthers the interests of the partnership.

 

Natural Persons

In Zimbabwe the legal age of majority is 18 years and any person who has reached that age can enter into a binding contract.  The following people are disqualified from contracting:

a)                   Manors:  this refers to people who have not reached the age of legal majority and are not tacitly emancipated.

b)                   A minor does not have contractual capacity at all unless he is assisted by guardian.  The reason for this was established in the case of Edelstern v Edelstern (1952) 35A1 at 11g where the court held that “In Roman Dutch law the judgment of a minor is considered immature turn-out his minority and he is consequently not bound by his contract”  As a general rule children below the age of 7 do not have contractual capacity at all this means that the only contract that can bind them is that which was made by his guardian on his behalf.

It is important to note that if a minor entered into a contract with a major unassisted by his guardian such a contract is called a Limping contract i.e. The minor will not be bound by the terms therefore but the major will be bound.

This position was well captured in the Edelstern case at p13f where the court held that Voet explains that in all contracts in which mutual obligations are assumed the guardian’s assistance is necessary, failing with the contract limps.  The other party to the contract is bound by it.  If that appears to be in the interest of the minor the minor on the other hand is not bound by the contract but may resile from it.

If the minor wishes to enforce the contract he will have to perform his understanding.  This seems self evident.  For he will either sue, assisted by his guardian or when he has attained his majority either of which will imply ratification of the contract.

NB           However there are circumstances in which a minor can be bound by a contract which he enters without the assistance of the guardian.  The minor that can be bound are follows:

a)                   Tacitly emancipated minor i.e. refers to one that is either living apart from his parents or living with them but paying for their upkeep.  Carrying out his own trade or generating his own account.

b)                   The Marriages Act provides that when a minor gets married she can be allowed to enter into binding contracts without the assistance of the guardian.  In this respect such a minor can be referred to as a tacitly emancipated minor see case:  Dickens v Daley (1956) 2 SA11.

c)                    Marriage on its own confers majority on a woman

d)                   Tacit emancipation is usually relied upon for children between the ages of 14 and 18 and marriage as for girls is recognised at law as from the age of 16 years.

e)                   A minor can be bound if at the time of contracting he misrepresents his age to the other party or misrepresents his age to the other party misrepresents that he has/had been given the guardian’s consent when in assence he has not been given such.

 

Fouche v Battenhausen and Company (1939) CPD 228

A minor can be bound if he is unjustly enriched unjust enrichment.  In this regard occurs when a minor unduly benefits from a contract with major.  Here he is obliged to restore the things that he has benefited.

However in a bid to protect minors the courts have restricted the extent to which the minor should restore the things that he has benefited.

It is true that a minor can only restore the things that are in his possession at the time when the suit of unjust enrichment is instituted.  This position was understood in the Edelstern case where the court held that “the other exception is that a minor is under an obligation/is obliged to make restitution to the other party to the extent to which he has been enriched.  However the minor is not obliged 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.

 

a)             When he ratifies the contract upon majority/when his guardian ratifies the contract and the minor entered into the effect of such a ratification is to render the contract valid and effective from the time of the purported agreement.

 

Stuttaford and Company v Oberholzer 1921 CPD 855

NB           The building effect is ratification will have a retrospective effect that is from the time the minor entered into a contract.

In Zimbabwe boys under the age of 16 years should get approval from the Minister responsible for marriages for his marriage to be regarded as a valid marriage.

 

Married women

b)             Their capacity depends on the type of marriage that they enter into.  There are basically two types of marriages namely:

(i)             Marriage in community of property:  here the husband and the wife own the property jointly and is referred to as a joint estate.  The husband is the administrator of the marriage estate and he can enter into any contract in respect of that estate without the consent of the wife but the wife cannot enter into a contract in respect of that particular estate without the consent of the husband, the only exception is when the wife enters contracts in respect of necessacive and (i.e. day to day basic necessities e.g. food.

 

Amendment No.17 of the Administration of Estate Acts come with the ruling in Magaya v Magaya of which did away with the concept of perpetual minority of the women.

 

(ii)            Marriages out of community of property:  under this institution the husband and the wife own the property separately and the wife can enter into any contract without the consent of the husband.

 

In H v H it was held that a husband can not at law rape his wife.  In Zimbabwe marriages are presumed to be out of community of property unless parties enter into an Ante-nuptial contract.

However, there has been a question of whether or not customary marriage are in/out of community of property.  This issue was however addressed in the case of:

Jena v Nyemba 1996(1) ZLR 138 where the court held that, even though the very nature of a customary marriage reveals that it is in community of property, the promulgation or enactment of the Legal Age of Majority Act (i.e. LAMA) conferred majority status on women that are married customarily.

What this means is that such women enter into a valid contract without the consent/assistance of the husband.

c)             Insane Persons

Sometimes referred to as imbeciles. The general rule is that any party who suffers from a mental illness or incapacity at the time of contracting has no contractual capacity at all.  This position was captured in the case of Lange v Lange (1945) AD 33 of 341 where the court held that, “It is clear of course, that if, owing to a mental disease, a contracting party does not understand or appreciate the nature of the matter the contract will be void of the inquiry of the court usually makes in case of insanity was crystalised in the case of: P v Warne 1922 AD 481 at 488 where the court held that, “A court of law that is called upon to decide a question of contractual liability depending upon mental capacity must determine whether the person concerned was or was not at the time of managing the particular affairs in question is whether his mind was such that he could understand and appreciate the transaction into which he purported to enter.”

 

d)             Intoxicated Persons

As a general rule an intoxicated person lacks contractual capacity.  As with insanity, the question is whether the party in question was so intoxicated as to be unable to reach consensus and not merely whether his judgment was affected. Case Essakow v Galbraith 1970 OPD 53.

 

e)             Insolvents

An insolvent is a debtor whose estate is subject to a sequestration order owing to his inability to pay debts.  As a general rule insolvents can only contract through their trustees.

 

f)              Prodigals

A prodigal is a person who is declared by the court to be incapable of managing his affairs as a result of a propensity to squander his property e.g. a spend-thriff is not allowed at law to enter into a contract in respect of his property without the assistance of a curator.

 

6.             CERTAINTY

For a contract to be valid it must be certain and where it lacks certainty such a contract is referred to as a contract void for vagueness and it does not constitute a contract at all.  When parties enter into a contract there must be sufficient content for the court to enforce a particular contract.

 

Where detail/content is lacking such a contract can be deemed void for vagueness.  The requirement of certainty is reflected in the rule of offer and acceptance must result in certain terms.  Uncertainty may rise in a number of different ways.  It is often extremely difficult to establish whether or not the uncertainty is such as to vitiate the transaction.

At the end of the day each case depends on its own facts.

In Levenstein v Levenstein 1955(3) SA 615 where in an answer to the plaintiff’s claim for an ejectment order the defendant pleaded that, “In or about April 1946 a verbal agreement was concluded that Salisbury between plaintiff and defendant in terms of which the plaintiff undertook, in consideration of/for the understanding by the defendant hereinafter mentioned to give; and transfer to the defendant the said number 977 and the said business.  The defendant in turn understood to maintain the plaintiff to the best of his ability during the remainder of her life, and further undertook to maintain and educate, “… till such a time as she was capable of maintaining herself.”   The plaintiff excepted to this plea on the grounds that the agreement was void for vagueness and was unenforceable.  The word business was ambiguous and the words to maintain the plaintiff to the best of his ability were uncertain to be capable of precise definition.  In the same case, it divided contracts void for vagueness into four categories:

(i)                   Contracts and are incomplete:  On such cases the so-called contract is not enforceable e.g. In King v Potgieter 950(3) SA 7 – where the plaintiff sued the defendant on a deed of sale.  Defendant admitted having signed it but contended that it was void for vagueness.  Reason for this was illustrated in clause 2 of the agreement which provided that, The purchase price is  2 750 pounds payable by the purchaser to the seller as follows; 11,45 pounds per month as from … as from … as and from the 1st day of …………. the purchaser should be liable for interest at the rate of 5%.  Again clause 3 of the same agreement read “… Possession of the property shall be given to the purchaser on …”.  The plaintiff argued that in reading these clauses the court has to consider the element of reasonableness i.e. the interest should be payable within a reasonable time, the court dismissed this agreement and ruled in favour of the defendant because it was not clear from what date instalments were payable where the interest was due to be calculated and when the purchaser was to be given vacant possession.  As a result the court deemed the agreement to be void for vagueness.

 

Contrast with Blundell v Bloom 1950 2 SA 629 – it was involved with a contract of sale which had many blank spaces e.g. A provided, “I agree to pay the sum of ……., as deposit immediately on signing the agreement.”  When the plaintiff sud the defendant argued that the contract was void for vagueness because it was incomplete but the court however thought otherwise and held that the deposit was a term which could be waived by the seller as long as the purchase price was agreed.

It was well established that an agreement which is incomplete because the party or parties did not reach an agreement/consensus on an essential/material aspect for vagueness and incapable of being enforced.

 

Schneider and London Ltd v Bennett 1927 TPD 346 where the Respondent had been employed by the Appellant as the manager of their timber company.  They agreed on a monthly salary of 49 pounds and a small commission to be agreed between the parties but never agreed on the quantum of the commission.  When Bennett was dismissed, he sued for the commission arguing that he was entitled to a fifth of the turnover of the company because this was reasonable.  The court however rejected his argument and held that the phrase “small commission was not sufficient to give rise to a contract in Bennett’s situation.  There was of cause an agreement but the court was not in a position to enforce the agreement.

 

Contracts which give unlimited discretion to the persons bound thereby e.g. Scaurnel v Ostern 1941 AC 257 where the Respondent bought a van from the Appellant.  A deposit was paid and the outstanding balance was to be paid over a period of 2 years.

Court held that the time period for payment of the outstanding amount was unnecessary long and the contract was therefore void for vagueness.

In Kantor v Knator 1962(3) SA 202 – Before the plaintiff and the defendant got married and they entered into an Ante nuptial contract.  The husband made an undertaking to buy his wife all such furniture, linen and domestic effects as may then or thereafter acquire at such time or such quantity …  Upon marriage the husband failed to fulfill this and the wife brought a legal action against him.  Court held that the husband was not bound to do anything because there was unlimited discretion.

Courts have devised the 4th class of cases where the unspecified details of the contract are questions of fact which are capable of determination by evidence.

Angath v Munckunlal Estate 1954 (4) SA 695 where the plaintiff was the Defendant’s nephew.  Defendant had invited plaintiff to assist in his shop and plaintiff was supposed to be paid something sometime.  This meant that there was no agreement on plaintiff’s salary.  However the defendant died before paying the plaintiff’s anything and plaintiff sued Defendant’s estate.  The court held that the plaintiff was to be awarded what the court considered as reasonable remuneration for his services..

Contrast with Ellite Electrical Contractors v The Coveed Wagon Restaurant 1975(1) SA – where the Respondent had hired the service of the Appellant.  Parties had not agreed on a particular price and when the Respondent received a bill from the Appellant he ignored it.  The Appellant then sued for payment.  Court held that although there was no agreement on the price there was an implied agreement to pay a reasonable amount of money for the work done.  The court was to rely on the reasonable element to give content to the contract.  Court also looked for characteristic evidence in determining the price that was payable.

 

It is clear from the above cases that when courts are faced with contracts that are purportedly void for vagueness they have a tendency of leaning towards enforcing a contract rather than striking it down.  This is in a bid to try it down.  This is in a bid to try as much as possible to preserve, sanctity of contract.

 

Whilst this approach is commendable it can be argued that the Supreme Court stretched it too far in the case of Labin and Anor v Associated Packing Company 1996(1) ZLR where the third Respondent owned shares in the first and 2nd Respondent’s companies which he sold to the Appellant.  The parties started negotiating and finally made a draft agreement which stated that it was subject to the signature of both parties.  They agreed on the price and method of payment.  It was stated that the money had to be paid in a way that was tax advantageous to the seller.  It was then left to the accountant to do his work.  The document was sent to the third Respondent for his signature who then refused to sign it and the contract could not go further.  The High Court was not vague at all even the parties had not agreed on an amount that was tax advantageous to the seller.

 

7.             LEGALITY

For an agreement to be binding it should comply with the law.  However there were instances when a contract violates the law.  Such a contract is deemed to be illegal and unenforceable.  Illegality comes in two forms:

(i)                   statutory illegality

(ii)                  common law illegality

 

Statutory illegality: Occurs when an agreement contravenes a piece of legislation either in the form of a statute or statutory regulation or by-law.  Such a contract is null and void.

 

This position was underscored in the case of Schlerhant v Minister of Justice 196 AD 99 at 109 where the court that “It is a fundamental principle of our law that a thing done contrary to the direct prohibition of the law is void and of no effect”  Contracts that are illegal by virtue of an express statutory provision pose no problems because one simply has to read the statute and apply it to the facts of the alleged contract, no important legal issues arises where illegality arise from statute.

 

See case Patel v Sigauke and Anor HC HH-55-1994

Wilken v Kohler 1913 AD 1351 it was important to note that where a contract contravenes a statutory enactment which does not expressly declare the contract void, the intention of the legislature must be asserted.

However, instances do occur when parties (conscious of the statutory prohibition) draft their contract in such a way as to circumvent the statutory provision.  Such contracts will be held to be illegal.

Zimbabwe Care v Grain Marketing Board SC-214-92.

In addressing the court’s approach to these contracts of the case of

Dadoo v Krugersdorp Municipality Council (1920) AD 530 at 543-8, Court adopted a three pronged approach:

 

(i)                   The court must interpret the statute in the ordinary way not during violence to it to the extent its meaning to cover its supposed intention.

(ii)                  The courts must then determine whether or not the contract in question falls within the armpit of the statute.

(iii)                 If it falls within then cadit queastio [end of story]

(iv)                 Then if it falls without the armpit of the statute, then out the court should proceed to inquire whether or not the said contract has been craftly designed to circumvent statute.

 

At page 47 of the Dadoo decision the court held as follows:

“An examination of the authorities therefore leads me to the conclusion that a transaction fraudem legis. [i.e. illegal by virtue of contravening a statute or legislation] where it is designed to escape the provisions of the law but falls in truth within these provisions.  Thus the rule is merely a branch of the fundamental doctrine of the law regards, the substance rather than the form of things.”

 

COMMON LAW ILLEGALITY

This refers to contracts that are contrary to public policy/common law/good morals.  Acquilius [Roman Dutch Schdar] defines public policy as:

“One stipulating performance which is not pose illegal or immoral but which the courts, on the grounds of expedience, will not enforce because performance will detrimentally affect the interests of the community.”

 

Generally a contract is said to be contrary to public policy if it is clearly detrimental to the interests of the community and runs counter to social economic expedience.  The position was underscored in the case of Sasfin (Pty) Ltd v Beukes 1989(1) SA(1)(A), where the court held that:

“Agreements which are clearly detrimental to interests of the community whether they are contrary to law or run counter to social or economic expedience will accordingly on the grounds of public policy not be enforced.  No court should therefore shrink from the duty of declaring the contract contrary to public policy.  If it is clearly detrimental to the interests of the community/is contrary to law or morality/runs counter social or economic expedience is plainly improper and unconscionable and unduly harsh and oppressive,.

 

It is important to note that the (iv) fourth criteria is not sharply defined especially when it is remembered that public policy is a question of fact and not a question of law and it always changes with the general sense of the justice of the community or the ban mores manifested in public opinion.

 

Professor Christie convincingly argues that a distinction must always be drawn between superficial public opinion which can swing like a weather and seriously considered public opinion on the general sense of justice and good morals of the community.  It is the later and not the former to which the courts should direct their attention and this limitation coupled with criteria (i) and (iii) above maintains the stability of the law of contract by ensuring that contracts are not at the mercy of jickle public opinion.  Words like clearly detrimental to the interests of the community” and “runs counter to social/economic expedience” must be relied on sparingly and only in the clearest of cases.

NB           At the end of the day what determines the public policy of the day is the philosophical outlook of judges presiding over the matter and this overstretches the position/power of the judges.

 

The following contracts have come to be accepted contrary to public policy.

 

a)             Contracts tendering to injure the public service

Roman-Dutch law did not permit any contract in the nature of a bribe to a public official or which bound him of corruption and intrique or which corruptly secured a promise of advancement, employment, office or any other advantage the main difficulty with a corrupt contract with a public official is that he undertakes to exercise the discretion vested in him not in accordance with his public mandate but for an oblique motive such as personal gain or a sense of obligation to a suitor, such contracts are void and unenforceable.

 

b)             Contracts injurious to the administration of justice examples are as follows:

(i)             ousting of the jurisdiction of the courts.  Parties to a contract are neither allowed to deprive the courts of their normal jurisdiction nor confer the jurisdiction up on a court which that court does not possess.  In terms of either common law/statute this position was emphasized in the following cases.

Schierhart v Minister of Justice 1925 AD 41 at 424 where the court held “If the terms of an agreement are such as to deprive a party of his legal rights generally or prevent him from seeking redress at any time in the courts of justice for any future injury or wrong committed against him, there would be good grounds for holding that such an undertaking is against the public law of the land.

Gold Schmidt v Folip (1974) 1 SALR 576 where the court held that:

“Private individuals cannot confer jurisdiction on the court which they do not possess in terms of the common law/statute, nor can they impose tasks upon the courts which they are not legally obliged to perform.  However, this principle does not apply to arbitration and honour clauses.

 

(iii)                 Collusion this was defined in Bevin v Bevin.  Court held that “ordinarily speaking collusion in our law is a keen consiance and means that an agreement or mutual understanding between the parties that the one shall commit/pretend to commit an act in order that the other may obtain a remedy at law as for a real injury.”  Such agreements are illegal and unenforceable.

(iv)                 Contracts encouraging crime delict and other unlawful acts.  These contracts are void and not enforceable.  It will be hopelessly self contradictory if courts treated a contract to commit an unlawful act as enforceable because the court would be approbating or reprobating the same act, “blowing hot and cold.”

(v)                  Contracts injurious to the institution of marriage

Examples of these are contracts and encourage/facilitate polygamy or in a monogamous marriage.

(vi)                 Miscelleneous Contracts.  Examples are gambling, contracts to commit acts of sexual immorality of contracts to defraud creditors, contracts lending to produce forced labour, pactum successorium [i.e. a contract whereby a person curtails his freedom of testation – writing of a will – by promising to bequthe or not to bequeth property to the promisee or to a third party].  These agreements are not enforceable.

(vii)                Covenants in restraint of trade

Covenants in restraint of trade are important to the world of commerce.  A person may limit his freedom of carry out business or to be involved in business by way of a covenant in restraint of trade.

Book v Davidson 1988(1) ZLR 365(S)

Book v Davidson 1989(1) SA 638(25)

Mangwana v Mparadzi 1989(1) ZLR 97(S)

Ellis 1984(4) SA 874(A)

 

The reason why covenants in restraint of trade are invariably employed in contracts of employment is because the covenants (i.e. the employer) will be seeking to protect.

(i)                   his goodwill

(ii)                  his client

(iii)                 his business

 

In the case of Magua and Research (SA) Pty Ltd v Ellis is the locus classicus on covenants in restraint of trade.

Principles draw from this case are:

(i)                   a covenant in restraint of trade will be presumed to be reasonable unless the party wishing to escape from it can show it to be unreasonable.

(ii)                  The onus to prove the unreasonableness of the Covenant lies with employee covenantee.

(iii)                 The unreasonableness or otherwise of the Covenant is a matter to be decided on the facts of the case (i.e. circumstances of the case)

(iv)                 The facts circumstances to be considered are the facts and circumstances prevailing at the time of enforcement of the Covenant.

 

The Blue Pencil Test

When a restraint is to be reasonable it is sometimes possible to enforce the restraint in party by cutting the unreasonable part (or rather by restricting the Covenant to the reasonable party).

New United Yeast Distributors v Brokes 1935 WLD at 75

Where brookes and other yeast merchants formed a company to distribute yeast products.  Brookes was bound by a Covenant in restraint of trade prohibiting him from having an interest in any other business involved in yeast production.  The Covenant proceeded to restrict him from having any interest in any company or business whose objectives were similar to those of the proposed company.  The court held the striking down the unrealistic part of the Covenant can only take place if the contract posses the blue pencil test.  The Blue Pencil test states that as ………. can only take place if the clause/Covenant passes the blue pencil test i.e. the test of making grammatical sense after removing the offending part of the Covenant with no words being added to the restraint must still carry grammatical sense.  The blue pencil test only arises in relation to the changing grammar of the clause.

 

VOID AND VOIDABLE CONTRACTS

The absence of any of the discussed above aspects said to be requirements of a valid contract means that the contract is void.  Thus a void contract is the opposite of a valid contract.

A voidable contract is whereby a contract is valid because it has all the requirements of a valid contract but one of the parties may dispute the contracts on any one of the additional points i.e. misrepresentation, duress, undue influence and mistake.

 

Void Contracts

Are of no legal force at all.  It is a contract which lacks any one or more of the essentials of the valid contract.  In the eyes of the law the contract is a nullity. Restitutio in intergrum i.e. restitutution remedy. This simply means in both parties return to their original positions.

 

Voidable Contracts

It is a valid contract in that it satisfies all the requirements of a valid contract serve for the fact that the innocent party to the contract has the right to set aside the contract if he so chooses.

 

MISREPRESENTATION

Is a factual statement concerning a certain state of affairs but is not true (it however must be material).  A misrepresentation is a statement made by one party to the other before the time of contracting; the statement must be material i.e. of much importance), factual and relates to the subject matter of the contract.  Further the statement must induce the other party into a contract (i.e. must have relied upon it).

A contract which is induced by misrepresentation is voidable.  There are 3 types of misrepresentation:

(i)                   Innocent misrepresentation – i.e. misrepresentation made in honest belief that a statement is true.

(ii)                  Fraudulent misrepresentation – the statement made by a party knowing fully that it is untrue or are made recklessly

(iii)                 Negligent misrepresentation – a statement made in belief that it is true but the circumstances of the contract demonstrate that it is untrue.  Once there is a misrepresentation a question obviously arises.

Viljoen v Hillier 1904 TS 312

The case lays out the requirements that the innocent party must satisfy in a claim for misrepresentation:

(i)                   that a false representation was made

(ii)                  it must be material

(iii)                 that the innocent party entered into the contract in the faith of representation.

 

The innocent party who establishes the three elements set out above is entitled to rescind the contract whether or not the misrepresentation is innocent, fraudulent or negligent.  Rescission leads to restitution in integrum.  Through rescission one would be taking the contract to the state of being void and thus restitution in integrum will be automatic and then finally leading to damages i.e. with voidable contracts but such damages differ with negligent/fraudulent/innocent misrepresentation.

 

By whom/who can make a misrepresentation?

In a nature of things a misrepresentation is made by the other party to the contract but it may also be made by the agent of the other party.  The principale who is the party to the contract is however liable for any misrepresentation made by his agent.

A misrepresentation by a third party is not actionable

 

Who can make a misrepresentation?

Lamb v Walters 1926 AD 358

In this case the seller of a house assured the buyer/purchaser that the price was fair and reasonable.  The buyer was not permitted to rescind the contract when he discovered that the price was considerably more than the house was worth.  This case raises the debate between a representation and an opinion.

 

The law defines misrepresentation with some care in order to fit in which the realities of life.  People do not usually assume that somebody else’s opinion is unquestionable and the law does not treat an expression of an opinion that tends out to be untrue as misrepresentation.

But as will be noted in the case of Feinsten v Nigglian the expression of opinion by a party knowing it to be false amounts to misrepresentation in that the opinion is a false statement of his state of mind.

Feinstein Niggli – where the court held that fraudulent misrepresentation in the form of an opinion/forecast of future success of a business may amount to/rather is actionable.

 

Misrepresentation by Silence

In Speight v Flass (161)(1) SA 778 it was said:

“there is in our law no general duty upon contracting parties to disclose to each other any circumstances/facts known to them which may influence the other party in deciding whether to conclude the contract.”  In particular circumstances the law requires the truth to be revealed.  In those circumstances silence will amount to misrepresentation.  In contracts such as insurance; partnership and agency (contracts uberrima fide – (i.e. utmost good faith).

Apart from those particular contracts an attempt to lay down a broader duty to disclose was made in the case of Pretorious v Natal South Sea Investments Trust (1965)(3) SA 410 – where P successfully applied for shares in the company in ignorance of the fact that the directors had bound the company to a very burdensome contract (oppressive contract).  He sought to rescind the contract on the basis that the directors had not disclosed the burdensome contract.  The court held that there was a fraudulent misrepresentation by silence in that the directors had failed to disclose a material fact which was in their exclusive knowledge.

Thus every case is determined on its facts and circumstances (i.e. in determining whether there existed an obligation to disclose).

 

Misrepresentation must induce a contract

A misrepresentee is not entitled to rescind a contract unless the misrepresentation induced the contract.  The misrepresentee must go further and show not only that he was induced and any other reasonable person would have been induced (i.e. under the same facts and circumstances).  It will not avail the misrepresentor and the mispresentee could have easily discovered the truth.

 

Wiley v African Reality Trust 1908 TH 104 – where a lawyer bought some debentures (i.e. a loan by an outsider to the company).  It was misrepresented to him and after 10 years, he had an option to surrender the debenture in exchange for either land, a house or cash.  From the wording of the debenture it was such that he would have to accept land with no option for cash.  He sought to rescind the contract alleging misrepresentation.  He sought to rescind the contract alleging misrepresentation.  The contract was rescinded.

 

The Misrepresentatee’s right rescind

Misrepresentation does not destroy that contract altogether (A makes the contract voidable) at the instance of the innocent party.  The significance of classifying a misrepresentation as fraudulent negligent/innocent is to enable the party not only to rescind but to claim damages.

 

Under negligent and fraudulent misrepresentation delictual damages are claimable.

Bayer SA v Frost (1991) 4 SA where Frost was a former with vineyards intermingled with onions and wheat.  The agents of Bayer South Africa negligently misrepresented to Frost that its herbicide could be sprayed in the vineyards by helicopter without damaging the onions and the wheat.  Frost was induced into the contract on the basis of those representations the vineyard was sprayed and which resulted in the onions and the wheat being damaged to the extent of R55 000.  The court allowed Frost to recover the R55 000 as delictual damages.

 

MISTAKE

This refers to an error of a material fact made by either one/both parties to enter into a contract which they could not have entered into had it not been for the mistake.

For a mistake to vitiate a contract the following have to be satisfied:

(i)             it must be a mistake of fact and not a mistake of law.  It has been accepted that a mistake of law does not excuse a party from a contract.  The main basis of such a proposition is found in the max ignorantia juris neminen excusat. (i.e. ignorance of the law excuses no one/rather is no excuse).

Miller and Others v Belliville Municipality 1973(1) SA 914

This point was emphasized in the case of Sampson v Union and Rhodesia Wholesale Ltd 1929 AD 481 where the court held that “a general proposition of the 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 legal meaning is different from what you thought for you cannot be heard to say that you did not know the law.

 

The propositions upheld in the Zimbabwe case of Ncube v Ndlovu 1985(2) ZLR 281(SC) where the appellant seduced the respondent’s major daughter.  The appellant then signed an agreement undertaking to pay the respondent damages for seduction.  He latter on sought to avoid the contract on the basis of mistake of law (he was mistaken as to the legal position that a father has no right to sue for seduction in respect of a daughter who had reached the legal age of majority while relying on the Katekwe v Muchabayiwa case  His appeal was dismissed on the basis that a mistake of law does not invalidate a contract.

 

In South Africa the courts have departed on some occasions from the general principle that a mistake of law does not vitiate a contract.  The courts have come to accept that not everybody knows the law and if they knew the law there would not be any point in training lawyers.  The courts have in essence set aside some contracts on the basis of mistake of law.

Willis Faber Enthoven Properietary Ltd v Re Inland Revenue (1992)(4) 2002 p224 (b) – where the court held that, “In my judgment our law is to be adopted in such a manner as to allow no distinction to be drawn between mistake in law and a mistake of fact.

However, it is important to note that the Zimbabwean judiciary has not yet departed from the proposition that a mistake of law does not vitiate a contract.

 

The mistake must be of a material fact or term.  This simply means that the mistake must refer to one of the essential terms of a contract itself.

In this regard two categories of mistake have evolved.

a)                   Error in motive – This occurs where there is a mistake regarding the reasons why parties entered into a contract.

As a general rule a mistake that relates to the reasoning or motivation of one of the parties does not render a contract void.

Diedricks v Minister of Lands (1964)(1) SA 49(N)

 

b)                   Error regarding the contents or existence of the contract – Therefore these can be divided into four categories namely:

(i)                   error with regard to the person or the other party. An example of such occurs where A wishes to conclude a contract of employment with B who is trustworthy but mistakenly concludes the contract which (a criminal) who he thinks is B. This contract is null and void due to error with regard to the person of the other contracting party.

(ii)                  error with regard to the identity of the other contracting party (i.e. his name) e.g. where A employs John (whom he wants to employ but mistakenly thinks that his name is Peter, a contract which cannot be entered void due to error.  This kind of mistake does not affect consensus and does not invalidate the contract between A and John.

(iii)                 error with regard to the nature of the agreement E.g. where A wants to sell his house to B but mistakenly enters into a contract of lease, such a contract will be invalid because there will not be any consensus (i.e. ad idem).

(iv)                 error with regard to performance e.g. where A wishes to buy a candle stick made from silver but a candlestick made from silver there can be no consensus between him and the seller.

(v)                  The mistake must be reasonable/justifiable

A reasonable mistake is known as a Justus error and can infact invalidate a contract.

Logan v Beit 1890 7 SC/AC 19 – a mistake made by one party to a contract which is due to his own careless is not reasonable and cannot be relied upon as a basis for setting aside a contract. George v Fairmead Properietary Ltd (1958) 2 SA 465.

NB   Reasonableness/otherwise should be decided on the facts of each case Yelierton 1972(4) SA 114.

(vi)                 A person may not deny the existence of a contract where he is estopped from doing so i.e. the estopped person cannot succeed if he sets up the defence that he entered into the contract while labouring under a material mistake.

 

 

TYPES OF MISTAKES

There are generally 3 types of mistakes:

(i)                   Unilateral mistake

(ii)                  Mutual mistake

(iii)                 Common mistake

Unilateral mistake

This occurs where one party is mistaken and the other is not as a general rule the mistaken party must be bound by the contract on the basis of quasi mutual asset because, “by his conduct he led the other party as a reasonable mean to believe that he was binding himself” as was held in the case of George v Fairmead at 471 (supra).

 

However there are instances where a unilateral mistake can vitiate a contract, these were spelt out in the case of National and Overseas Distributors Cooperation Pty Ltd v Potato Board 1958(2) SA 473 at 479(g)-(h) where the court hold as follows:

“Our law allows a party to set up his own mistake, in certain circumstances in order to escape liability under a contract into which he has entered but where the other party has not made any misrepresentation and has not appreciated at the time of acceptance that his offer was being accepted under a misapprehension, the scope for a degree of unilateral mistake is very narrow, if it exist at all.  At least the mistake would have to be reasonable and it would have to be pleaded.”

 

From this passage 3 possibilities emerge where a unilateral mistake can vitiate a contract mainly:

(a)                 where the other party knew of the mistake at the time of contracting

(b)                 where the other party induced the mistake by misrepresentation

(c)                  where the mistake is reasonable

 

However this (c) position was varied in the case of Lamdsbergen v Van der Walt 1972(2) SA 667 where the court held that even a reasonable mistake will not release the mistaken party from the contract unless the mistake is material in the sense that he would not have contracted if he had known the truth.

 

Mutual mistake

This occurs when each party is mistaken about the other’s intention so that the parties are at cross-purposes.  In solving this problem the court usually applies the doctrine of quasi mutual assent.  Courts have adopted two approaches namely:

a)                   if one parties understanding what has been agreed is unreasonable in that it conflicts with the impression he has given to the other party, he will be deemed to have agreed in accordance with the impression he has given.

b)                   If each parties understanding/mistake is reasonable then there will be no contract between the parties

 

Maritz v Pratley (1894) 11 SC 345 where “M, was an auctioneer, called for bids lot 1208 which was the successful bidder but he refused to pay because he thought he had bought the mantel piece together with a mirror which was standing on it.  The mirror was infact a separate lot 1209.  The court held that Pratley’s mistake in thinking that Maritz intended to sell the Mantel piece and mirror together was held to be reasonable and Maritz’s mistake in thinking that Pratley was bidding for the mantel piece only was obviously reasonable.  The court held this to be a case of mutual mistake and there was no contract.

Common mistake

Both parties will be mistaken concerning a particular thing.  It occurs where both parties are labouring under the same mistake.  In dealing with this problem the court usually considers two things namely:

a)                   where the common mistake leads to initial impossibility, then the contract between the parties becomes void e.g. where parties agree to buy and sell something which they both mistakenly think is still in existence when in actual fact has been destroyed.

b)                   Where there is no initial impossibility the effect of common mistake is that either party is entitled to rescind the contract if the mistake is sufficient serious.

 

Dickinson Motors (Pty) Ltd v Obahozer 1952(1) SA 448(A) where Obahozer paid 291 pounds which was the amount that his son owed on a car he had bought from the company.  In return the company released to Obahozer a car with both the company and Obahozer mistakenly thought was the car concerned.  When the true owner of the car successfully claimed it.  Obahozer relied on common mistake to justify claiming the repayment of 291 pounds.  This is what the court had to say, “The 291 pounds was paid under a common mistake in regard to a matter which was vital to the transaction and if either of them had been aware of the position, the transaction would not have gone through”

As such the company was ordered to repay Obahozer the 291 pounds paid.

 

Rectification

It refers to the correction of errors with a contract (in most cases these are typing errors)

It can only be granted by the court when the written contract contains the exact wording that the parties intended but the wording produces an effect that the parties did not intend.  This point was underscored in Tesben v SA Bank of Athens (1994) 4 AII SA 396 p401 where the court held as follows “to allow the words that the parties actually used in the documents to override the prior agreement or the common intention that they intended to record is to enforce what was not agreed and so overthrow the basis on which contracts rest in our law.

 

DURESS

It occurs when a person is forced into a contract by fear induced through either actual violent or threats of violence either on his person/family or property.

A contract obtained this way is voidable at the option of the innocent party i.e. innocent party can elect to set aside the contract.

White Brothers v Treasurer General (1883) 2 SC 337, at p35 the court had this to say:

“where a man is forced by menaces to his person to make payments which he is not legally bound to make it cannot be said that there is a total absence of consent but in as much as his consent is forced and not free, the payment is treated as involuntary and therefore subjected to restitution.”

 

In the same vain Sabbides v Sabbides (1986) 2 SA 321, 325 – The court adopted Van der Lindern’s observation and held as follows:

“When the consent of one of the contracting parties is extorted by undue violence or fear provided the violence is of such actual important that it would make an impression upon a courageous person the judge must take into consideration the circumstances of both the person and of the things e.g. The fear which cannot be deemed sufficient to disturb the mind of a person of a mature age or of a soldier may be quite sufficient in the case of a woman or an old man.”  Broodnjk v Smuts 1942 TPD at 47, 51 and 52, the court held that for a party to establish duress he must satisfy the following requirements.

(i)                   There must be actual violence or reasonable fear – see the Sabbies case

(ii)                  The fear must be because by threats of some considerable evil to the other party or his family.  The question has been raised regarding whether or not thus requirement can he satisfied when the is a threat to one’s property.  In addressing this question English law provides that duress of goods is not sufficient to set aside a contract.

 

However the position is different in Roman-Dutch law where economic duress/duress of goods can infact invalidate a contract.  This was stated in the case of Union Government (Minister of Finance) v Gower 1915 AD 426 p434 where the court stated as follows:

“where goods have been wrongly detained and where the owner has been driven to pay money in order to obtain possession and where he has done so not voluntarily as by was of gift or compromise but with expressed reservation of his legal rights, payments so made can be recovered as had been exerted under duress of goods.

 

The onus of showing that the payment has been made in voluntarily and that there has been abandonment of rights would of course be upon the person seeking to recover and hence the importance of a protect or an unequivocal statement of objection made at the time.  Without such protest it is difficult to see how the plaintiff’s state of mind could  be established to the satisfaction of the court.

(iii)                 It must be a threat of imminent evil.

In determining this requirement courts usually assess whether or not (assuming that the threat was sufficiently serious to affect the mind of such a person) he could by some method other than agreeing to the contract.  If there was a way to avert the threat other than agreeing to the contract than there will not be duress.

(iv)                 The threat must be unlawful/contra bonos mores (contrary to good morals) See Shapestone v Shapestone 1914(1) SA 411

(v)                  The threat must have caused damage i.e. the threat must have induced the party into a contract to his detriment.  See Freedman v Kruger 1906 TS 817, p821 and 822.  It has come to be accepted that duress by a third party can vitiate a contract the essential elements for duress are satisfied.  See Broodryk v Smuts.  The effects of duress on a contract is that such a contract is voidable at the option of the innocent party.

 

UNDUE INFLUENCE

A party to a contract may rescind it if he can prove that the other party had acquired an influence over him when weakened his powers of resistance and made his will probable and used this influence in an unscrupulous manner to persuade him to consent to a transaction which is to his detriment end with which normal free will he would not have entered into.

Preller v Jordan 1956(1) SA 485 .  The court held that a party leading undue influence should meet the following five things:

(1)                 That the other party obtained an undue influence over the other.  In this regard the law recognises that such an undue influence is more likely going to exist where there is a special relationship between the parties e.g. doctor and patient – lawyer- client; guardian – minor, religious advisor-disciple relationships.

 

This point was emphasized in the case of Armstrong v Magid and Anor 1937 AD 276. – where the court held as follows, “wherever two persons stand in such a relation that while it continues confidence is necessarily repossessed by one and the influence which naturally grows out of that confidence is possessed by the other and this confidence is abused or the influence is exerted to obtain an advantage at the expense of the confiding party, the person so availing himself will not be permitted to retain the advantage although the transaction could not have been impeached if no confidential relation had existed.”

(i)                   The influence must have weakened his powers of resistance and rendered his will compliant

(ii)                  The other party must have used his influence in an unscrupulous manner

(iii)                 The influence must have induced the conclusion of the contract

(iv)                 The contract must be prejudicial to the influenced party

 

Effects of Undue Influence

(i)                   Undue influence makes a contract voidable at the instance of the influenced party

(ii)                  It can also make a contract void ab initio  only if the influence induced in the mind of the party seeking relief such a fundamental mistake that apparent assent to the contract is in truth not assent at all.

 

TERMS OF A CONTRACT

These are promises agreed upon by the parties which together make up the contract.  A term must be distinguished from other statements which may have been made only to induce one of the parties to enter into the contract.  Such statements may be mere puffs or representations which unlike terms cannot grant an action for breach of contract in the event of them turning out to be untrue.

This position was emphasized in the case of Petit v Abramson 1946 NPD 673 at 679 where the court held as follows:

“It is notorious that statements made by parties when negotiating a contract may conceivably take the status of either:

(i)                   mere puffing/commendation

(ii)                  representations

(iii)                 undertakings commonly referred to as warranties

 

Classes of contractual terms

Contractual terms can be classified into two namely:

(i)                   express terms

(ii)                  implied terms

 

Express terms

This refers to contractual terms that are gathered from what was actually said by the parties either orally or in writing.  As regards contractual terms in a verbal agreement.

Small v Smith (1954) 35 ALR 434, 437 held as follows:

“A statement made seriously and deliberately during the negotiation of a verbal contract becomes a term of the contract if the parties by mutual intention either expressed or implied intended it to be a term of the contract.”

The usual challenge is to prove the existence of such terms

Regarding written contracts terms are easy to prove because they are reduced into writing.  Judges tend to uphold the position that,

“documents speak for themselves”  What this means is that judges prima facie (i.e. on the fact of it) rely on a written contract unless a justifiable reason is presented to prove otherwise.

 

Effects of a signature on a written contract (caveat subscripto).

This was well captured in the case of: Burger v Central African Railways 903TS, 571, 578 where the court held that

“It is a sound principle of law that when a man signs a contract he is taken to be bound by the ordinary meaning and effect of the words which appear over his signature.”

This principle is referred to as caveat subscripto (i.e. let the signatory beware i.e. the signor should be weary).

This principle applies to the doctrine of quasi mutual assent but in essence a reasonable person is entitled to assume that a person who signs a contract intends to be bound by it, so he is bound even if that was not his true intention.

George v Fairmead (Pty) Ltd (1958) 2 SA 468

Mathde v Mathde (1951)(1) SA 256

It is important to note that a person who signs a contract containing blank spaces is prepared to be bound by that contract when the blank spaces are filled in by the other party.

National Grindlays Bank Ltd v Yelvireturn (1972) (4) SA 114.

But if the signatory has in any way indicated how he wishes the blank spaces to be filled in the other party must of cause comply with the wishes.

Commercial Bank of Namibia Ltd v Trans Continental Trading (Namibia) (1992) 2 SA 66, 75, 77.

However the caveat subscripto principle is not rigid “Courts will not apply it where there is misrepresentation, fraud, illegality, duress, undue influence and influence.

Spindufter (Pty) Ltd v Lester Donorvan (Pty_ Ltd (1896) (1) SA 303

 

Unsigned Contracts/Ticket Cases

It refers predominantly to notices, tickets and other unsigned documents.  In dealing with these courts have adopted a three pronged approach which was aptly summarized in Kings Car Hire (Pty) Ltd v Wakeling (1970)(4) SA 640, 643 d-f

“The approach of the court is to enquire whether the person who received a ticket knew that there was printing/writing on it.

Secondly if so a further question “Did the person who received the ticket knew that the printing or writing contained provisions or references relating to the provisions of the contract in question.”

If these 2 questions are answered in the affirmative then the provisions in questions are part of the contract.

If either of such questions are answered in the negative then a third question becomes relevant namely, Did the person, giving the ticket do what was reasonably sufficient to give the other party notice of the conditions?

If the answer to such last mentioned question is in affirmative then also the provisions or conditions are part of the contract.  If not then the conditions form no part of the contract.

 

A customer is not bound by unreasonable terms printed on an unsigned written contract such as a ticket.

Exemption Clauses

An exemption clause is a term of a contract which exempts one party from some specified liability or responsibility which would otherwise fall on him.

An argument in favour of the exemption clauses is that by shading some of his responsibility which would otherwise fall on him.

 

An argument in favour of the exemption clauses is that by shading some of his responsibility the user of the standard form contract will be able to obtain insurance at a cheaper rate and therefore charge less for the service he provides for the benefit of all his customers.  However courts have not been impressed by this argument and have placed limits on the effectiveness of exemption clauses.

 

Courts have developed a two pronged approach namely:

(i)                   Is the exemption clause part of the contract.  If it is not part of the contract then the stay ends there.  The other party would not be bound. But if it is a part of the contract the courts will apply the caveat subscripto principle and raise the following question:

(ii)                  What does the clause mean?

Here the court usually adopts a strict interpretation.  In the event of either doubt or ambiguity, the court will interpret an exemption clause against the drafter of the clause.  This is referred to as the contra proferentem rule.

Shubwa Ranch (Pvt) Ltd v Shield of Zimbabwe Insurance (Pvt) Ltd 1988(2) ZLR 306

 

It is important to note that courts have held that a party who wishes to exempt himself/itself form liability caused by his own negligence should clearly state so in the exemption clause.

Cotton Marketing Board v National Railway of Zimbabwe 1988(1) ZLR 304

However the above mentioned principle does not apply where the other party’s negligence amounts to breach that goes to the root of the contract.

Transport and Crane Hire (Pvt) Ltd v Hubert Davies and Co (Pvt) Ltd 1991(1) ZLR 190

However this dispute has been settled by the promulgation of the Consumer Contracts Act (Chapter 8:03).

In terms of the said Act a consumer contract is defined as a contract for the sale or supply of goods or services or both in which the seller or supplier is dealing in the course of business and the purchaser or user is not.

In terms of the Act the following exemption clauses are prescribed:

(i)                   those that exclude/limit negligence

(ii)                  those that exclude/limit liability in the event that goods do not conform with any description or sample given in respect of the goods

(iii)                 those that exclude/limit liability for latent defects in goods

(iv)                 those that deny/limit the buyers’ right to require the seller/supplier to either:

(a)     re-imburse the goods

(b)     replace the goods

(c)      repair the goods

(d)     reduce the price or amount payable in respect of goods

 

INTERPRETATION OF EXPRESS TERMS

It has generally been accepted that when a contract is reduced into writing the courts must rely on the provisions of the written contract (not extrinsic evidence) to deal with any dispute arising therefrom.  This is referred to as the Parole Evidence Rule and was underscored in the case of Johnson v Lean 1980(3) SA 927, 937, where the court held as follows:

“When a contract has been reduced to writing, the writing is regarded as the exclusive embodiment or memorial of the transaction and no extrinsic evidence may be given of other utterances or oral acts by the parties which will have the effect of contradicting, altering, adding to or varying the written contract.”

The rational for this is that if parties to a written contract are permitted to give you extrinsic/external evidence written contracts will lose much of their value.

 

However the parole evidence rule is not a hard and fast rule (i.e. rigid rule).  In a bid to enhance justice between the parties courts have developed the following exceptions to the application of the parole evidence rule:

(i)                   If the parties did not intend the written agreement to be the exclusive embodiment of their contract the parole evidence rule will not apply.  This normally occurs where a contract is partly written and partly oral.

Baldachin 1920 AD 312

(ii)                  Extrinsic evidence can be allowed to show that the written contract was contradicted, altered, added to or varied by a subsequent oral contract.

See Johnson v Neil case

(iii)                 External evidence may also be given to an oral agreement the making of which induces the making of a written contract provided the oral agreement does not conflict with the written agreement.

Duplesis v Nel 1952(1) SA 513

 

In Stiglingh v Theron 1907 TS 198, 1003 the court pronounced the following exception “but again evidence is admissible of a separate oral agreement constituting a condition precedent to the attachment of any liability under the written instrument.  Thus is an exception to the general rule.

 

(iv)                 The parole evidence rule does not prohibit evidence in support of a claim of rectification of the contract not in support of any defence which challenges the validity of the contract nor evidence to contradict the debt of signature recorded in the contracts since this is not part of the agreement between the parties but an objectively determinable fact.

Otto v Heymans 1971(4) SA 418, 453-153

 

Express terms: Exceptions to the Parole Rule

The first exception is not strictly one exception as such, it says Parole rule evidence does not exclude the leading of evidence to establish that the contract was subject to a suspensive condition.

  1. One will not be varying the terms of the contract.
  2. The rule will not be applicable where it is the intention of the parties, that the contract should be partly in writing and partly oral.  The court will give effective to that intention of the parties.

See Oerseput v Avis(1) 943 AD 331 where the court took the view that this was the situation that the parties had intended that their contract should partly be in writing or oral.  Held that the oral agreement would be given effect to (that the oral agreement would be given effect to) or will be valid.

 

Harting Properties and Other v Los Angeles Hotel 1962(3) SA 143 where a contract was held by the court to be constituted by the lease agreement and a letter.  To counter this problem when drafting a contract one would have to include an integration clause or a whole contract clause.  This will be a term to the effect that the document will be entire contract between the parties and all terms, conditions, warranties or representations, not the included will be expressly excluded.

 

This means that one would be entrenching the Parole evidence rule into the contract. See the case of Mhere v Tubbs 1986(2) ZLR 179.  The Parole evidence rule is designed to promote certainty, it reduces the costs should litigation arises, i.e. instead of leading many witnesses, the contract document just serve all the purposes.  However the exceptions to the Parole evidence rule makes the written document uncertain and ultimately the court had to balance the conflicting parties interests.  The Parole evidence rule does not apply where the validity of the contract itself is being challenged by the parties.

Kok v Osborn 1993(4) SA 788 where the court ruled one could not exclude Parole evidence to establish the ground of invalidity the contract e.g. mistake, thus courts are prepared to disregard the intergration clause as it did in Mhene v Tubbs (supra).  An intergrational clause is often coupled with non-variation clause.  If the parties intend to vary the terms of the contract it must be in writing and signed.  In such purported and evidence to vary the terms of the contract will be of no force or effect.  There used to be a doubt whether parties to a contract were bound by a non variation clause in their contract.  The argument was that the parties are at liberty to vary it orally if they intended to do it so.  In 1964 the CPD decided that the non variation clause is binding on both parties and any purported oral variation inconsistent with such a clause will be invalid.  However a non variation clause does not in itself preclude a waiver.  Accordingly a non variation clause is purported by a non variation clause.

 

Since we are talking of a term in which both parties have an interest they infact have to agree to waive it as well.  With a non-waiver any party which has a right can unilaterally waive that term.  A non-waiver or indulgence clause says that no indulgence made by the party can be taken to be the waiver of his rights.

The Supreme Court considered this issue in the case of A Finance C v Porcock 1986(2) ZLR 229 SC-138-1986 where P was a farmer who had borrowed some money from AFC according to the contract, the AFC could come at any time and possess the farm and sell it.  The contract had a non-variation and non-waiver terms.  P fell into arrears, he went to AFC and had discussions with the manager of AFC, one R, R agreed that instead of AFC moving into the farm they would enter into arrangement with R, he was surprised to see a letter from AFC threatening that they would move in and sell the property.  P argued that they had entered into an oral agreement with R.  So AFC cannot repossess the farm.  It was argued on behalf of the AFC that there was non-variation and non-waiver clause hence they were supposed to proceed as they had done.  P argued that the oral agreement constituted a waiver by AFC of its rights in terms of contract.  P further tried to argue that the AFC should be estopped from denying the existence of the oral agreement with its general manager.  P’s argument were reflected by the court which ruled in favour of the AFC.

 

Exemption clauses and third parties contracts

The issues arising are

Can a third party sue or rely on the contract between A and B whilst C himself is not party of the contract.  This issue arises inevitably because of the doctrine of Privity of Contract which postulates that a contract is binding upon and creates rights and obligations only.

Thus a third party cannot acquire any rights or obligation in the contract.

The case of Adler v Dickson 1955(1) QB 158.  The case of A and D (supra) illustrate the whole issue of third parties and exemption clauses.

Alder was a passenger in a ship owned by P and C, when the ship arrived on a certain port most passengers got out of the ship and upon reboarding whilst walking upon the gang of banks and fell due to the unstableness of the which expressly provided that the company was excluded from liability as well as its servants for negligence.  It is tried that the contract was between Mrs Adler and Co.  Instead of suing the company Mrs Adler sued the company’s employees for negligence.  Dickson was manager of gang for the planks.  The employee D relied upon the exemption clause.  The court held that the exemption clause.  The court held that the exemption clause exempts the company not the employees.  The employees no matter how efficacy was the wording of the clause could not derive benefits from a contract to which they were not parties.  The ship in which Mrs Adler was traveling was called Himalaya and the exemption clause at issue in that case became commonly known as Himalaya Clause.  After the Adler case company went back to the drawing board and came up with an embracing clause which protected its workers.  The issue then came up again for decision in the case of Scruttons v Midlands Silicons Ltd 1962 AC 446, 1961(2) LLR 365.  In this case Lord Raid’s speech made it clear that it is possible for exemption clause between A and B to adequately protect C on condition that (1) the exemption clause must expressly make reference to C the employee.  The one in the Himalaya did not.  (2) The company in entering into contract with the customer must have acted both in its own rights and as an agent for its employee.

Having considered the speeches in the Midlands case appropriate clause was now drawn by the company.

 

Principles of interpretation

The following principles have evolved in interpreting written contracts.

(i)                   The ordinary grammatical meaning – it provides that the contract must speak for itself through the ordinary grammatical meaning of its words.

Total SA Pty Ltd v Bekker 1992(1) SA 617 at 625 the court held that, “the underlying reason for this approach is that where words in a contract agreed upon by the parties thereto and therefore common to them speak with sufficient clarity, there must be taken as expressing their common intention.”

NB You can use the parole evidence rule principle to support the idea that our courts still uphold the principle of SANCTITY.

However, the ordinary grammatical meaning will not be applied in the following circumstances:

(a)     If the result with be absurd Scottish Union and National Insurance Co Ltd v Native Recruiting Coop Ltd 1934 AD 458, 465, the court held as follows, “It however the ordinary sense of the words necessarily lead to some absurdity/to some repugnants or inconsistency with the rest of the contract then the court may modify the words just so much as to avoid the absurdity of inconsistency but no more.”

(b)     If it is clear from the contract itself or from evidence that the words have been used in some special and technical sense:

Rand Reitfontein Estates Ltd v Cohn 1937 AD, 517, 318, where the court held that “Again if the words on the contract have been used in a peculiar sense evidence of the sense in which the parties used the words may be given.”

(ii)                  The context: words in a contract must not be read in isolation but in their context.  The court’s approach was summarized in the case of Melmath Town and Board v Marious Mostenrt Pty Ltd 1984(3) SA 718, 728 where the court held as follows, “As in the case of statutes the contextual approach phrase in a contract requires that regard must be heard not only to the language of the rest of the provision concerned or the contract as a whole but also to considerations such as the apparent scope of purpose of the provisions.

 

The evidence of surrounding circumstances – this was aptly summarized in the case of Delmas Co. Ltd 1955(3) SA 447, 454, where the court held that, “If the difficulty cannot be cleared up with sufficient certainty by studying the language recourse must be heard to surrounding circumstances i.e. matters that were probably present to the minds of the parties when they contracted.  The court can also apply rules of interpretation these rules have evolved from common law and they include the following:

a)                   courts may always presume that the parties intended an interpretation that is fair to them both rather than an interpretation that gives are party on unfair advantage over the other

b)                   an interpretation that avoids inconvenience is usually preferred

c)                    an interpretation that gives effectiveness to a contract is usually preferred to the one that renders at abortive

d)                   it will be presumed that every word in the contract was intended to have some effect to be of some use

e)                   the change of expression will be presumed to signify a change of meaning

f)                     general words will be given a restricted meaning to fit in with the context in which they are used

g)                   greater weight will be given to special provisions rather than to general provisions

h)                   the express mention of one item will be presumed to exclude similar items that are not mentioned unless it appears that the one item was mentioned for the sake of caution.

 

Implied Terms

These are terms that are imposed into a contract from its context.  They come in three forms namely:

(i)                   terms implied by law/

These refer to terms that are imported into a contract by operation of either common law or statute law regardless of the intentions of the parties e.g. a sale of land has to be in writing i.e. The Labour Act imposes a number of minimum conditions on an employment contract.  Every contract of sale has an implied warranties against latent defects.  Also the Higher Purchase Act requires every Hire Purchase agreement to be reduced into writing.  It also forbids a purchaser in a Hire Purchase Agreement to waive his rights given to him by the Hire Purchase Act.

 

Terms Implied by Trade Usage

These arise where a specific trade has developed its own universally and uniformly observed rules which apply in contracts of that trade or profession.

The requirements for implying a contractual term by trade usage were laid down in the case of Golden Cape Fruits Pty Ltd v Footplate 1973(2) SA 602 as that the term should have universal, uniform, notorious, reasonable, certainty and should not conflict with other provisions of the contract.

Such a term can become a term of the contract in two ways namely:

a)                   if both parties are familiar with the usage they may be taken to have tacitly agreed that the usage should be a term of their contract

b)                   if one of the parties is ignorant of the usage he can only be bound by the alleged trade usage if it satisfies the requirements laid down in the Golden Cape Fruits case.

 

Terms implied from facts
Tacit terms

These refer to terms that become patently clear when regard is given to the language used in the contract and surrounding circumstances.

In the case of Alfred Mcalpale v Transvaal Provincial Administration a tacit term was defined as, “an unexpressed provision of the contract which derives from the common intentions of the parties as inferred by the courts from the express terms of the contract and surrounding circumstances.

”A question that inevitably arises from the definition from is how are courts supposed to infer terms implied from facts?  This question is answered in the case of Wilkins v Voges 1994(3) SA 158 where the court adopted a four pronged approach namely:

a)                   whether the proposed implied fact has been written in the contract if not then the court will ask itself the following question:

b)                   whether the tacit term is necessary in the business sense to give efficiency to the contract

c)                    whether it can be competently that of that time the contract was being negotiated someone had said to the parties, “of course so and so will happen.”

This is called the official By-Stander Test

d)                   whether the term is capable of clear and exact formulation.  See also Reigate v Union Manufacturing Co. 1918 (KB)(1 592, p605.

 

It should be noted that the courts are reluctant to imply terms into contract because:

1                     for instance if there is a written contract the whole idea is to have certainty and it is unlikely that the parties will leave certain terms

2                     if a court started to imply certain terms hence destroy the idea of certainty

3                     the whole basis of the agreement of contract is agreement and parties are bound because they had agreed.

 

Doctrine of sanctity and freedom of contract

The doctrine of freedom of contracts and the doctrine of sanctity of contract dictates that courts should not interfere with parties’ contract.

4                     courts are also reluctant because, they do not want to be accused for making contracts for parties

5                     if implied terms became inconsistence with expressed terms there is no rational for implication.

 

Note however that, there are certain implied terms which parties by mutual assent contract out of.

 

Freedom of Contract

This essential means that one is free to enter a contract or not to and having decided to enter the contract, to enter with whom he/she ever wants and to decide upon which terms they want.  The general law is that while it is formal true, in practice it is very different, if you choose to contract in most cases depends on the strength of your bargaining power one does not have a choice especially in cases of standard forms contracts i.e. mortgage bonds.

 

If one chooses to contract with a building society to borrow money from them there is no freedom to lent money on daily basis and they draft standard form contracts, which the borrower may contract to or not.  It must be noted however that those standard form contracts, have merits for bankers who has to enter into one contract with thousands of customers will reduce their costs.

 

Sanctity of contracts

This doctrine merely means that where parties had freely entered into the contract it becomes sacro-sanctity and the courts cannot make another contract for them.  The statutes such as Consumer Contracts Act and Contractual Penalties Act, seeks to aid interpretations of such contracts.  By making exemptions clause the party concerned seeks to exempt itself from which it should be ordinarily be liable.  This is interpretation the courts should try to uphold the doctrine of freedom of contract.  The common law position is that the court will not struck down the exemption clause on the basis of being harsh or unreasonable against the other party.  The court also looks at the liability to which the proferens would be subject to where there  is no exemption clause.  At common law if there is no strict liability the other party will have to prove negligence CMB v NRZ 1990(1) SA 522, 1988(1) ZLR 304

 

Transfer of Contractual Rights

Contractual rights can be transferred through:

a)                   cession

b)                   delegation or

c)                    novation

 

Cession

In regard to cession the contractual obligations are transferred to the other party known as a cedent.  Cession is sometimes described as some kind of novation.  Cession brings in commercial convenient and facilitates commerce by enabling the creditor to account his rights to account by selling them instead of enforcing them himself.

Cession curtails circuit of litigation.  Notice of cession to the debtor, is not necessarily required but it is legally advisable that the debtor who pays the ceded after the cession in good faith without notice of the faith, is considered as legal have settled the debt.  However a debtor who pays the ceded after notice of cession still remains liable to discharge the debt to the cessionary.

 

He cannot reclaim the payment from the ceded.  Cession is sometimes described as a kind of novation but it differs from novation in that novation is requires consensus of the debtor and consequent of the novation will be that there will be a new contract to replace the old contract.

Whereas cession result in novation the cessionary still sues on the old contract but cession does not do so.  It is submitted that it is legally improper to refer to cession as a form of novation.  Cession is the opposite of delegation.

 

Delegation

It requires the agreement of the all parties concerned that a third party be substituted for the original debtor and the later become discharged from the obligation of the debtor.  The creditor had to agree the older debtor in replacement by the new one.  The idea behind delegation is to transfer burden to of the debtor i.e. irrecombly from the original to the new debtor.  Accordingly the creditor cannot sue the original debtor see the case of Van Acherbeck v Walters 1950(3) SA 734.  See also Jacobs v Faw 1982(2) SA 863.  The common intention of all the 3 parties that a delegation should take place may be express it may be implied from surrounding circumstances including the contract of the parties.  See Metalbox of SA v Dustan (Pvt) Ltd 1974(2) 208.  The introduction of a third party to a transaction does not necessarily mean that there has been delegation e.g. where a debtor requests a third party on his own initiative, promises the creditors to discharge the credit on behalf of the debtor.  This does not realize the original debtor.

 

Novation

It means the replacement of existing contractual obligation by new obligations.  The concept of novation arose during Roman times, to alleviate the problems caused by supervening or initial impossibility.  Novation discharge the old obligation and a completely new contract is created.  There are 2 types of novation:

–                      Voluntary novation (novatio voluntaria) – where 2 parties to a contract mutually agree to enter into a new contract to replace a existing contract.

–                      Compulsory novation – where an existing contract is superceded by a judgment of a court of law.  This is sometimes called novatio necessaria.  See the case of Van Copenhagen v Van Copenhagen 1947(1) SA 576 , Barclays National Bank v Smith 1975(4) SA 675 and Suncliff (Pvt) Ltd v Dyke 1978(1) SA 1980.

 

Termination of contractual obligation

A contract is terminated after being performed.  What kind of performance is required?  Performance means that each party must perform its own obligations as envisaged by the contract.

Performance should be made by the party upon whom the obligation is imposed and that performance must be rendered to the person recognised by the law as being competent to receive the performance.  See Hanornag SA (Pvt) Ltd v Otto 1940 CPD 437.  What happens if the performance does not exactly confirm to performance expected in the contract i.e. must a party performed exactly what he is obliged to do under the contract (informa specific) does it suffice if a party rendered equivalent performance.

For a court of law to decide this issue it is always difficult.

However this problem has been fairly settled in SA in the case of Van Diggelen v De Brain and Anor 1954(1) SA 188 where the court outlined the approach to the adopted.

 

First and foremost the court must establish the parties intention, talking into account the surrounding circumstances and everything which gives a due to that mutual intention.

 

The court must seek to find, what the parties would have wished to had their minds had been directed, whether the performance was to be specific and equivalent.

 

Secondly should there be no clues as to the parties to mutual intention, the presumption that the performance was to be specific.

This is a rebuttable presumption.

 

Thirdly the court will in case of doubt be more likely to have a favour of equivalent performance.

If the manner of the act to be performed if it is immaterial or where performance, informa specific is impossible through no fault of the promissor. See the case of Peters Hammon v Koksrud 1999 AD 427

 

Impossibility of performance must be genuine

This that the promissor cannot simply tender equivalent, performance because specific performance is becoming expensively difficult.

 

Fourthly the act of performance tendered where such as permissible must in the just instance be an equivalent to that mentioned in the contract or be of such a nature that it can make no material difference to the promisee.

 

Such seems to be the position if any immaterial or inequality can be put right by compensation given to promisee by promissor.

 

Finally the court’s paramount obligation is to be justice between man and man.  It must to this be guided by the terms and circumstances in the contract under consideration.

 

Thus in cases where the promissor had discharged the onus required by number 2 he may be circumstances falling short of impossibility and even where there may have been some fault on one party, the promisor and where the court may come to conclusion that the promissor’s performance or tendered performance amounted to substantially performance or is such of a nature that the promisee may be compensated damages for any shortfalls.  See Reliance Agency (Pvt) v Patel  1946 CPD 465.  See also Adler v Eliot SC 169 of 1958.

 

Termination by mutual agreement

A contract can be terminated by mutual agreement.  The methods of discharge dealt with above all have one thing in common, they are initiated and are a consequence of mutual agreement.  If parties are free to enter into a contract on any terms and conditions then it follows that they are at liberty to agree to discharge the contract.  Thus where the parties by mutual agreement agreed to discharge the contract that is legal quite proper.  For a contract to be discharged by agreement, it is not problematic if the contract had not been performed, it is still executed.  Problems may arise where the contract had been partially performed.  If the parties have completely performed, then the question of discharge by agreement does not arise as such a contract will be deemed to have been discharged, through the first method dealt with i.e. discharge by performance.  It is submitted therefore, that discharge by mutual agreement is different from discharge by performance.  In general an agreement to discharge the contract tacitly raises the presumption of restitution of whatever performance have been rendered.  See the case of Geldenhnys v Maree 1962(2) SA 571(O).  Once a contract is discharged by agreement a part cannot be heard to argue that they seek to enforce the contract or some rights arising therefrom.  Lastly under this rubric, a contract can be discharged through waiver by the promisee.

 

What are the requirements of waiver.  The promisee/or the person who was supposed to receive the performance must have knowledge of his rights under the contract and the party alleging waiver must proof the fact of waiver, whether expressly or by conduct.  If a party alleges waiver by conduct, the promisee’s conduct must leave no reasonable doubt, as to his intention of abandoning his rights in the issue.  These requirements were underscored succinctly in the case of Hepner v Roodepoort-Maraisburg Town Council 1962(4) SA 77(A), where the court stated the requirements as follows:

“The onus is on the appellant, (the promissor, he must show the respondent (promisee) with the full knowledge of her right decided to abandon it, whether expressly or by conduct, plainly inconsistent with the intention to enforce it.

 

In Ex Parte Sesseus 141 TPD 15 the need for full knowledge was justified on the basis that waiver is a form of a contract, in which the promise i.e. taken intentionally to have surrendered his rights.  Intention to sole surrender can only exist where the promisee has knowledge of the facts of legal ramification of his consequences.  See the case of Chidziva and Others v Ziscosteel SC/137/97.  See also the case of Patel v Controller of Customs and Excise 1982(II) ZLR 82.

 

Termination of discharge by operation of the law

How courts with supervening impossibility in Zimbabwe.  Until the decision of Pieters, Flamman & Co. v Kokstad Municipality 1919 AD 422, they used to be no contract between English law and Roman-Dutch law on the effect of supervening impossibility.  English law starts from the general proposition, that supervening does not excuse non-performance of the contract subject to several exceptions which include the doctrine of frustration.  In Pieters Flamman case the Municipality contracted that company to provide streets lights for ten years.

 

During the substance of the contract, the partners were failed as enemy aliens for imprisonment and their business was wound up under the relevance legislation.

 

The municipality claimed damages for breach of contract and forefeiture of the firm’s plant under the contract.  The Appellate Division dismissed the action.

 

The court held that if a person is prevented from pertaining his contract by this vis major casus fortuituous under which falls an act of state i.e. person is discharged from liability.  A contract is void if at the time of its inception its performance is impossible.  The same apply to where the contract became impossible for performance.

 

Void – everything must be returned to original position status core.  Supervening impossibility discharge the contract provided the promissor proves that the contract has absolutely become impossible of performance.  This does not mean that the promissor can escape from his obligation simply because performance has become uneconomic/difficult.  The English doctrine of frustration does not apply in our law.

 

If only a part of a contract had became impossible for performance the court then looks at the divisibility of the contract and if then find that some obligation may be performed, then the promissor is discharged to the extent of impossibility.  The creditor or promisee had the option to cancel the contract or accept reduced performance.  See Stanfeld v Kuhn 1940 NPD 84, See also the case of Lupu v  Lupu 2000(1) ZLR 120 and the case of Bobs Shoe Centre v Heneways Freight Services 1995(2) SA 421.  See also Minister of Industry and Technology v Tanaka Powers SC 114/1990.  In Stanfeld there was the contract for the sale of land for 500 pounds per acre, thus major in the form of expropriation of or a national road, made it impossible for the seller to transfer more than 0,471 of an acre, the court held that the buyer was entitled to demand transfer of 0,471 of an acre against a price of 47 pounds.  If parties agree to the performance of something which is risk impossible, then the court will enforce the contract i.e. remedies of breach of contract.  In the same light, impossibility created by a party does not discharge the case of WireOHMS v Greenbalt 1939(3) SA.  See also the case of Hershman v Shapiro and Co. 1926 TPD, 367 and Dickson Motors v Oberholzer 1952(1) SA 443.  See Kok v Osborne 1993(4) SA 788; Benjamin v Myers 1946 CPD @ 655; Bayley v Harwood 1954(3) SA 498.  See Kell v Henry [1903] 2 KB 740.

 

Set off – Compansatio

It denotes a situation where two parties to a contract or generally where a creditor and a debtor have reciprocal obligations.  If the debtor or obligation are equal both are discharged and if they are unequal, the smaller debt is discharged and the larger is reduced proportionally.  See the case of Scheirant v Union Government 1926 AD 256.  See also Treasure General v Van Vuren 1905 TS 582 and Baine v Barclays Bank 1937 SR 191.  Set off is the principle of common law that is Roman-Dutch law not English law.  It has to be pleaded and proved.  For set off to be effective the reciprocal debts or obligation and fully due.  Liquid means that the debt must be certain or capable of readily being ascertain i.e. over draft v interest miscalculations by a bank.

 

The one debt extinguish the other as if performance or payment have been rendered.  Spurious defences based on bailey denial of the debt will not defend set off.  See the case of Bevcorp v Nyoni and Ors 1992(1) ZLR 352.  See also Roman Catholic Church v Southern Life Assurance Ass 1992(2) SA 807.  See also Central African Railways v Williams 1963 Rand Nyasaland 106/166.  See also Trinity Engineering (Pvt) Ltd v Anglo Shipping Ltd 1986(1) SA 700(25).

 

Breach of a Contract

It can be rightly be classified as the method of termination or discharge.  However although breach is said to be a mode of termination of contract.  Breach does not of itself automatically terminates a contract.  Breach has the effect of entitling the innocent party to cancel the contract besides to give such entitlement the breach complained of must be either a major (material), or fundamental breach, repudiation, or breach in circumstances where the contract provides that breach will provide an effect of terminating the contracting.  Breach of contract is committed where one party who is bound to vendor performance at a later date (future date) indicates that he/she will not tender performance when it falls due (anticipatory breach or repudiation).

 

Performance that should have rendered is not rendered at all – Non-performance or ordinary breach

Some performance is rendered such performance is not in accordance with the terms of the contract, the debtor fails to perform timeously.  A party who fails to perform timeously is said be in mora.  See the case of Breytenback v Van Wijk 1923 AD 341.  See also Broderick Property v Rhool 1962(4) SA 447.  See also Goldstein and Wolff v Maison Blanc 1948(4) SA 646 and the case of Microu-Tsicos and Anor v Swart 1949(3) SA 715.

 

Repudiation

Apart from the time element in breach, where does any other kind of breach terminate a contract?  Repudiation is where one party to a contract evinces (discloses) an intention no longer to be bound by that contract, that repudiation can be express or by conduct.  Tuckers Land Development Corporation v Holves 1980(1) SA 645, the appellant property drew a plan of a township on which appeared on 2 stands, which were then sold to the respondent Holves.  The appellant came up with new plan which two stands did not appear.  The court held that the drawing up of the new plan meant that the appellant have repudiated the old plan contract.  Where somebody expresses an intention no longer to bound by his contract, that is fine.  The innocent party has an election whether to accept the repudiation thereby terminating the contract, or rejecting the repudiation/in which event the contract remains in force, such an election however must be made within a reasonable time.  See White and Carter Council v McGregor 1961(3) AIIER 1178, 1962 AC 413.  The city council were responsible for distributing litter bins and the defendant owned a garage, the city council, will allow organizations and people to advertise on the bins.  The initial contract between the council and the defendant was duly performed.  Later one of the employees of the counternewed  the contract for a further 3 years.  The employer did not have the authority to renew the contract.  Defendant went to the council that advised then that he had cancelled the contract.

 

The council decided not to accept the repudiation, thus the contract remained in force from 1957-1960.  The council later ratified what its employer had done – that is irrelevant in determining the outcome.  The defendant did not take advantage of advertisement places but the council claimed payment.  The court held that the contract remained in force for both parties and the council was entitled to the 3 years of advertising.  In that case the court did not take about the mitigation rule.  This rule means that any person who suffers loss or damages should take reasonable steps to mitigate that loss).  Mitigate – to reduce the detrimental.  The council in his causa/case had not mitigated its loss.  The mitigation rule applies to damages and not to cases of specific performance.  And it is submitted that in the White and Carter case the court did not apply the mitigation rule because the council was seeking specific performance.  It was fortuitous though that in that case the council was able to render performance without Mcgregor’s consent.

 

Material breach

This is sometimes called fundamental breach.  This is a breach that goes to the root of the contract, the analysis i.e. is a factual one.  Is the breach that had occurred is so serious that it undermines the contract.  And the innocent party is not reasonably expected to continue with the contract.  It amounts to non-performance.  In terms of drafting a contract, parties tend to say or to provide that any breach if not remedied within 14 days will give the innocent party time to cancel the contract.  The purpose of such provision is to obviate the need to proof that the breach was fundamental or serious.  Spies v Lombard 1950(3) SA 469Universal Cargo Carriers v Citati [1957] 2 QB 401, See also Ankemp v Morton 1949(3) SA 611.  On repudiation see also the following cases Street v Dublin 1961(2) SA 4.  See also Ponisammy v Versailles Estate (Pvt) Ltd 1973(1) SA 372.

 

Remedies for breach of contract

When a distressed/distraught dashes client into your offices one had to decide what can be done, to enforce the contract or to secure some remedies and how it is going to be done.  If X does not pay under his contract you can sue him and get a contract judgment which can be enforced by selling his property.  There are five remedies of breach of contract:

1                     cancellation and damages

2                     order for specific performance

3                     declaratory order

4                     interdict

5                     Exceptio non adimpleti contracts (I cannot perform because you had not performed your part)

 

1              Specific performance

In Roman-Dutch law an order for specific performance is the primary remedy. This is an order directing the defaulting party to undertook what they had agreed to do under the contract.  Intercontinental (Pvt) Ltd v Nestle Zimbabwe 1993(1) ZLR 21.  Nestle had undertaken to deliver certain quantities of milk and they failed to deliver the milk, then Intercontinental went to the contract for an application for specific performance.

 

The principle that specific performance is the primary remedy is the way of contrast with English law, where, unless there are special circumstances which makes specific performance appropriate, the court will award damages.  In Roman-Dutch law the court will order specific performance unless there are special circumstances which makes it appropriate.  See the case of Kruntel Bro v Lazarus 1992(2) SA 4231991(2) ZLR 125.  See also Haynes v King Williams Town Municipality 1950(1) SA 370; where the SA Appellate Division gave indication where the court will refuse the order of specific performance.  The guidelines in this case require caution because of the influence of English law.  The court will refuse specific performance  where the damages are adequate. (Note that this neglects the primary purpose of specific performance in Roman-Dutch).

 

2                     The court will refuse to give order where specific performance is difficult to enforce.

3                     Where the thing being sought in terms of the contract can be easily be found elsewhere.  It is submitted that this is not a valid ground, because like the first its nature is to undermine the nature of specific performance.  The SA courts have moved away from 3 and 1.  See Benson v SA Mutual Life Assurance Co. 1986(1) SA 776, where the plaintiff was seeking specific performance of delivery of company shares when some were available at the Jorburg Stock Exchange.  The court ordered specific performance.  The first ground was also rejected by court or the Intercontinental case where the court ordered specific performance and also rejected by Zimbabwean courts.

4                     A court will not order specific performance where that will entail services of personal nature.

5                     A court will not order specific performance where such performance will operate unduly harshly over the defendant.  Or where the performance is impossible.

 

Services of a person nature will arise for instance in employment situations.  The court may not order a worker to go and resume work because one can not be sure whether the performance will be rendered fully.

 

At common law a court will not order a specific performance of a contract, See the case of Sheahood v Union Government 1926 AD 286.  See also the case of Commercial Careers Ltd v Jarvis 1989(1) ZLR 344Winterton Holmes and Hills v Paterson SC 115/95 where the Supreme Court accepted that it will not order reinstatement specific performance where there has been a bitter relationship between the employer of employee.  In the case of Hama v National Railways of Zimbabwe, the court said that a part who seeks specific performance must have performed his part of the bargain or alternatively must tender performance and indicate ability will to perform.  The ratio of the Hama case is however the court will not order specific performance where it is impossible to perform/enforce/order.  See also Farmers Cooperative Read Berry 1912 AD 343.

 

Exceptio non adimpleti contractus

Like said earlier on a party cannot seek specific performance from the other party from the contract if he has not performed his own party.  The party seeking specific performance must tender his own performance.  The essence of this remedy is, simply stated, that my obligation to perform has not arisen because you have not performed your own obligation.  It is submitted that this remedy must be treated with caution as it will optimally apply to reciprocal obligation.

 

Interdict

There are 2 types of interdict – temporary and final interdict.  An interdict is an order stopping the other party from the doing of something, which will jeopardize one’s rights under the contract.  A final interdict is an equivalent of specific performance, where the obligation sought to be enforced in character, i.e. negative prestation i.e. in a Covenant Restraint of Trade, what the covenantor undertake not to do something in Zimbabwe or Harare.  The undertaking is negative in character.  One is not undertaking positively to do X.  The only way to enforce the covenant is order (final interdict), stopping the covenantor from breaching the covenant.  A temporary interdict (an interdict pendente lite).  This literally means to free a situation pending litigation i.e. where a purchaser wants to stop the seller from transferring a disrupted property pending litigation (legal action).  Flamelilly v Zimbabwe Salvage (Pvt) Ltd and Anor 1980 ZLR 378 where the interdict being sought was to stop the respondent from destroying a mining dump it until litigation pertaining therefrom had been finalized.  Christie indicates that the requirements for a final interdict are the same of these specific performance but are different to those of a final interdict.  The requirements of temporary interdict are:

1                     The applicant or the person who seeks interdict must prove a clear prima facie right i.e. in the sense that the right might be open to some doubts, if the averments/submissions made by the applicant taken together with averments made by the respondents are such that given the possibility of providing further evidence the right will be proven.

2                     There must be a reasonable apprehension of irreparable harm if the interdict was not granted the Flamelilly case if the respondent had proceeded to destroy the mining time is that there would be no mining dump at the end.

3                     There must be no other ordinary adequate remedy which would give the applicant some protection which would seek through the interdict.  The balance of convenience must be in the applicant’s favour, this means that the circumstances must be such that the prejudice suffered by applicant if interdict were not granted would be greater than the prejudice suffered by respondent if interdict were granted.  The potential prejudice to the applicant should he succeed in the main claim is that he will not be able to get an order for specific performance.  See the case of Gideon v Ngumo 1973 RLR 197.  See also Setlogelo v Setlogelo 1914 AD 221.  On the other hand the prejudice the respondent tend to suffer is being lend to freeze his affairs.  See Ericsson (Pvt) Ltd v Protea Motors Ltd and Anor 1973(3) SA 655. 

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The Amazing “Third Party act of 1992 “

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                   The Origins of Public Prosecution at Common Law
However fundamental he may appear to us, the public prosecutor was an historical latecomer. Judge and jury we can trace back to the high Middle Ages. But the prosecutor became a regular
figure of Anglo-American criminal procedure only in Tudor times.Further, his appearance then has not been noticed in our historical literature, an especially remarkable omission when we discover that the prosecutorial office was originally lodged with a much-studied institution, the English magistracy. Ever since Maitland coined his famous phrase, that under the Tudors and Stuarts the justices of the peace became the “rulers of the county,”l they have attracted
a substantial scholarship. Nevertheless, this major aspect of the work of the magistracy has remained unknown. The present article documents and accounts for the development by which the justices of the peace became the ordinary public prosecutors in cases of
serious crime.
. 1. The Medieval Background
The public prosecutor in Anglo-American criminal procedure perfonns two primary functions. One is investigatorial–evidence gathering-and this has no finn border with the higher levels of
the policing function. The other is the forensic prosecutorial rolepresenting the evidence to the trier (incident to which has developed the power to decide whether to prosecute). If the

prosecutorial

Office to which the justices of the peace acceded was a creation of the sixteenth century, crime itself was no novelty of those years.
CopyrIght 1973 by the_ President and Fellows of Harvard College.
This article was presented in an earlier version as a paper at the 1972 meeting of the American Society for Legal History, Williamsburg. Certain portions will appear in the author’s forthcoming book, Prosecuting Crime in the Renaissance: England, Germany, France. A grant in aid of the research was given by the National Endowment for the Humanities.

**Professor of Law, University of Chicago Law School.
1. F. W. Maitland, Justice and Police, p. 80 (1885).
THE AMERICAN JOURNAL OF LEGAL HISTORY Vol. XVII
How, then, had the English managed throughout the Middle Ages to dispense with the figure of the public prosecutor? The public prosecutor appeared in consequence of the fundamental change in the structure of jury trial which took place in late nmedieval times. The Angevin system of self-informing juries had required no outside officer to investigate crime and to inform the jurors of the evidence. Jurors “were men chosen as being likely to be already informed;”2 the vicinage requirement, the rule that jurors be drawn from the neighborhood where the crime had been
committed, was meant to produce jurors who might be witnesses as well as triers. a Denunciation (to the jury of accusation) and proof of guilt (to the jury of trial) operated informally, that is,
out of court and in advance of the court’s sitting. In the thirteenth century “it is the duty of the jurors, so soon as they have been summoned, to make inquiries about the facts of which they will have to speak when they come before the court. They must collect testimony; they must weigh it and state the net result in a verdict.”4 Medieval juries came to court more to speak than to listen.
The Angevin system of self-informing juries was breaking down in the late Middle Ages. This transformation of the active medieval juries into passive courtroom triers is among the greatest
mysteries of English legal history, still no better understood than when Thayer wrote.s As late as Fortescue (1460s) it was being  boasted that the English jury merged witnesses and triers. On the
other hand, Thayer noticed that a separation of witnesses and jurors could be found even in the early thirteenth century in cases disputing the genuineness of deeds,6 and a similar distinction
seems to have been taken in some felony trials of the fourteenth and fifteenth centuries. i Probably in the later fifteenth century, but 2. James B. Thayer, A Preliminary Treatise on Evidence at the Common Law, p. 90 (1898).
3. Thayer, op. cit. supra, note 2, p. 91.
4. Frederick Pollock & F. W. Maitland, The History of English Law,
v. 2, pp. 624-25 (2d ed., 1898) (footnote omitted).

As late as 1427 it
was provided by statute of 6 Hen. VI c. 2 “that in certain [civil] cases
the sheriffs must furnish the parties with the jury’s names six days before
the session, if they ask for it, since (it is recited as a grievance)
defendants.heretofore could not know who the jury were, ‘so as to inform
them of their right and title before the day of the session,’ …” Thayer,
op. cit. supra, note 2, p. 92. Compare the position by 1624 as illustrated
in the case of Trat’s Murder, discussed infra, where the assize
judge altered the composition of the Somerset grand jury to maximize
the number ofjurymen unfamiliar with the parties. .
5. Thayer, op. cit. supra, note 2, pp. 130-36.
6. Thayer, op. cit. supra, note 2, p. 97.
7. Thayer, op. cit. supra, note 2, p. 124.
1973 ORIGINS OF PUBLIC PROSECUTION
certainly by the sixteenth, it had become expectable that jurors
would be ignorant of the crimes they denounced and determined.H
We cannot seriously hope to identify the cause of a phenomenon
whose internal development and timing we so little understand.
Yet this much can be said with confidence: the medieval system of
self-informing juries could not have survived into modern times.
It presupposed a static populace and forms of communal social
organization which were dissolving. Be that as it may, what matters
for present purposes is not the cause but the consequence:
the juries were ceasing to be self-informing. If the jury system
were not to perish in England as it already had on the Continent,
some other agency would have to come forward to assume the
lapsed function. As the jurors became bare lay judges, it became
essential that outsiders undertake for the jurors the job we now
call the prosecutor’s.

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