1 CONTRACT LAW CASE SUMMARIES Saambou- Nasionale Bouvereniging v Friedman Facts ? Respondent handed a cheque drawn in favour of Appellant to W to buy shares in the Appellant for the respondent’s wife. ? Cheque fell into the hands of an unknown person who, pretending to be the respondent, handed it to appellant as payment for shares which were issued to 3 persons who were complete strangers to respondent ? The respondent stopped the payment of the cheque and was sued on it by the appellant ? Respondents defence was that the appellant gave no value or valuable consideration in respect of the cheque and the respondent did not become a party to the cheque for any cause which could found an action on contract or agreement Legal Question ? Was there a valid agreement between the respondent and the appellant to the effect that appellant could apply the cheque as payment for the shares issued to the 3 strangers? Finding: ? No such agreement existed Rationale ? Appellant contracted with the person who pretended to be the respondent and not with the respondent ? Respondent wasn’t in fact involved in the matter, therefore, no agreement between the respondent and the appellant as to how the cheque was to be applied which meant that no valid primary agreement came into existence to provide the iustu causa (just Cause) required for a valid and enforceable contract Note: ? There could not have been a contract between the parties no matter which theory regarding the basis of a contract is accepted Vasco Dry Cleaners v Twycross Facts ? Carides (VDC) sold business to Air Capricorn ? Ownership of machinery would only pass on payment of full purchase price ? AC later needed financial assistance to pay the balance of the purchase price and entered into an arrangement with Twycross, in terms of which Twycross paid off Carides and AC sold and delivered the machinery to Twycross ? Twycross then resold the machinery to AC but subject to the condition that ownership of the machinery would only pass to AC once Twycross was paid ? Before paying Twycross, AC was again in financial troubles and sold VDC plus the machinery to Butcher ? When negotiating this sale AC guaranteed that it was the owner of the machinery ? Butcher ran the business as VDC, AC subsequently failed to pay Twycross who instituted rei vindication against VDC to reclaim his machinery Finding ? There had not been a true sale &resale of the machinery between Twycross and AC ? Twycross had lent the money to AC which lam was secured by a pledge if the machinery ? Ownership of the machinery had therefore not passed to Twycross who could not succeed with a rei vindication Note ? The contract of sale& resale between Twycross and AC was not their true intention.
Their true intention was to effect a pledge of the machinery ? To reach consensus it is essential that the parties actually intend to create an obligation ? Law looks at their true intention not their simulated intention Bloom v The American Swiss Watch Company Facts ? Bloom claimed a reward in terms of a notice published by ASW promising a reward to any one providing information which lead to the arrest of the thieves and recovery of jewelry stolen ? Bloom gave the information BEFORE he became aware of the notice Finding and Rationale ? He therefore, did not furnish the information in response to the notice and could not therefore, be said to have accepted ASW ‘s offer to pay a reward2 ? Thus, no contract came into being between Bloom and ASW and therefore, no basis on which he could claim the reward Note ? Parties who agree must be aware of their agreement National and Overseas Distributors Corporation (Pty) Ltd v Potato Board Facts of the Case ? The Respondent the potato Board mistakenly accepted a tender of the Appellant for the erection of a Steel shed ? The respondent had expressed in a letter to the appellant that the appellant offer to erect the steel shed had been accepted ? This acceptance was a mistake as the Respondent had in fact intended to accept the tender of a third-party. Legal Question ? Was the Mistake Material??? Finding and Rationale ? The mistake was material ? The court found that the appellant was led to reasonably believe that the respondent intended to contract with it. ? Even though the letter had incorrectly expressed the respondent’s intention (so that there was Dissensus) the court found that a contract existed because the appellant’s belief that its offer had been accepted was reasonable in the circumstances ? It related to the persons between whom obligations were to be created content of the obligation Note ? This was not a case of mistaken as to identity as the Respondent the Potato Board did not mistake the Appellant for the 3rd party. George v Fairmead (Pty) Ltd 1958 (2) SA 465 (AD) Facts of the Case ? The Appellant argued that he had signed a hotel register whereas he had, In fact, signed a contract containing a term excluding the Respondent from liability for certain acts ? The Appellant was not aware of this term because he did not read the document before signing it. Finding of the court ? The court found that the Appellant’s mistake related to a term which he believed would not be in the contract.
? This mistake was material because it related to an aspect of performance. ? F was led to believe that the other party (G) agreed to a material term in a contract because G had signed the contract and F had believed that G had read the relevant term ? The contract was therefore valid Allen v Sixteen Sterling Investments (Pty) Ltd 1974 (4) SA 164 (D Facts of the Case ? The Plaintiff believed that he was purchasing the erf SHOWN to him by the seller’s agent. ? The written contract which he signed indicated the correct erf which was a completely different property Finding of the court (analysing the mistake) ? The mistake in this case related to performance and was thus, material Du Toit v Atkinson’s Motors 11985 (2) SA 889 (AD) Facts of the Case ? A party (A) signed a contract without reading it since he believed that its terms coincided with the content of the other party’s (B) advertisement. ? However – the contract contained a further material term of which A was unaware (Vis – a term excluding the Respondent from liability for misrepresentation.
Finding of the court ? The court found once again that the mistake related to an aspect of performance and was thus material. ? The court found (as the term was material) the contract to be void. ? The court found that B (in this case) had not been misled by A into believing that he (A) had agreed to the term because B had not drawn A’s attention to that relevant material term.
? The court found (as the term was material) the contract to be void.3 Sonap Petroleum (SA) (Pty) Ltd formerly known as Sonarep (SA) (pty) (Ltd) v Pappadogianis Facts of the Case ? The contract denier entered into a contract of lease with the contract enforcer for a period of 20 years ? The Lease was to start on a date to be specified in a certificate that the contract denier would issue at a later stage. ? The contract denier failed to issue the certificate for about 12 years ? Instead, the contract denier prepared an addendum which the contract enforcer signed ? In the addendum signed by the contract enforcer the lease was reduced to 15 years to ? The contract denier had misrepresented his intention with regard to the term of the lease. Finding of the court ? The court found that although the Appellant signed the addendum, it (the addendum) clearly incorrectly expressed its (the Appellant’s) intention as to a material term. The material term being the period of lease which is an aspect of the performance and its mistake was material. ? The court found that the Appellant was led to believe reasonably that the Respondent intended to contract with it.
? Even though the letter had incorrectly expressed the respondent’s intention (so that there was Dissensus) the court found that a contract existed because the appellant’s belief that its offer had been accepted was reasonable in the circumstances ? Thus the Court had found: ? That the contract enforcer knew that the contract denier was acting under a mistake with regard The term of the lease, ? That consequently the contract denier was not misled by the content of the signed addendum Effect ? The court found that the addendum was thus void Steyn v LSA Motors Ltd 1994 (1) SA 49 AD Facts of the Case ? The respondent intended to make an offer can only a certain group of people, namely professional golfers. ? An advertising board, situated at one of the holes of that golf course offered a prize (A motor vehicle) to the golfer who achieved a hole in one at that hole. ? The advertising board did not state that the offer was extended to professional golfers only.
? The appellant, an amateur golfer achieved a hole in one at that hole and claimed the prize ? Argument of appellant: that the advertising board constituted an offer which was extended to all players and that therefore a contract had come into being when he obtained the hole in one Finding of the court (In respect of Mistake) ? The court found that the Respondent’s mistake related to the other party to a potential contract In other words-the Respondent only intended that any possible contract that could arise would be between itself and a professional golfer ? The court found that even if the appellant had been misled by the advertising board that a reasonable man would not have been misled in the circumstances. ? No contract came into being Reasoning being: ? The rules (at that time) relating to amateur golfers specified that amateur golfers are only entitled to prizes up to a value of R 600.00 ? A reasonable man would have known of this rule and would not have been misled in the circumstances Effect ? The mistake was deemed to be material and the contract set aside Dickson motors v Oberholzer Facts ? O’s son bought 2 cars on credit, Car A from Dickson motors and Car B from a 3rd party ? After exchanging car B for his fathers car the son disappeared, leaving unpaid balances on both cars ? DM obtained judgment against the son for the unpaid balance on car A and then had the car in O’s possession attached to satisfy the debt ? This was done on the mistaken belief that the car in O’s possession was car A but it was actually car B ? O paid the outstanding debt to DM to retain possession of the car, but he was under the mistaken belief that the car in his possession was car A4 ? Later, the car in O’s possession was attached again, but this time by the 3rd party, correctly, who had sold the car to the son ? O now sued for the return of amount which he paid to DM Appellate division ? O succeeded because the contract between O and DM is void on the ground of common mistake Magwaza v Heenan Facts ? M and H concluded a written contract of sale of immovable property in which the description of the property was so deficient that it didn’t comply with the provisions of the Act 68 of 1957 ? H claimed rectification of the contract Appellate division ? Held that non compliance with the act resulted in the contract being void and therefore there was nothing to rectify Crawley v Rex Facts ? Shopkeeper advertised sale of tobacco at reduced price ? C bought half a KG and returned immediately to buy more ? Shopkeeper refused to sell to C again ? C refused to leave the shop and was arrested for remaining unlawfully on the premises Legal question ? C argued that he had accepted the shopkeepers offer t sell tobacco and therefore a contract existed between C and shopkeeper Finding ? Adverts are invitations to the public to do business and it is the client who makes an offer to purchase, which the shopkeeper can then accept or reject Bird v Summerville and another Facts ? B signed a written offer to sell his house to S ? S added the name of second respondent to the document and they both signed the document as purchasers Finding ? AD held no contract came into existence as B’s offer had been made to S only and could not be accepted by S together with somebody else Note ? Generally an offer is directed at a definite person, but may also be directed at unidentified persons ? But if offer is addresses to a specific person it may only be accepted by the specific offeree(s) ? See Bloom case Rex v Nel “In contracts where there are mutual obligations notification of acceptance is necessary before the agreement becomes binding on the parties. But it is open to the parties to dispense with such notification in express terms, and not only that, but such dispensation may also be implied from the language used or from the nature of the contract” ? The information theory Cape Explosive works v Lever brothers Ltd/ South African oil and Fat industries Ltd Facts ? CEW is a manufacturer of glycerine ? Their place of business is in the Cape province ? They concluded 2 agreements for the purchase of glycerine- one with a company in the Transvaal and another with a company in the Natal Legal question ? Where had the contracts been entered into? Finding ? The contracts had been concluded where CEW’s letter of acceptance were posted and not where they were read Note5 ? Expedition theory applied to postal contracts rather than the information theory Smieman v Volkerz Facts ? S lived in Pretoria and V lived in Cape Town ? V orally granted S an option to buy V’s shareholding ? The option was to be exercised by Feb 15th ? On Feb. 15th S asked his attorney’s to exercise the option on his behalf ? Gelb (the attorney, in CT) phoned V’s CT office but he was away. Gelb therefore, posted a letter to V saying that S chose to exercise the option.
Both letters delivered after the 15th Court held ? No contract had come into existence because the offer contained in the option had not been accepted timeously ? There was no indication that V has waived his right to be informed on or before the 15th that his offer had been accepted ? Such an indication would have existed if the offer had been made by post and not orally Note ? Expedition theory will only be applied where an acceptance takes place by letter only if the offer had also been made by post or if the offeror had indicated in some or other way to the offeree to make use of the post ? This is also not an absolute rule. It could also be shown that the offeror did not intend the expedition theory, rather information theory, to be applied Brand v Spies Facts ? S granted B an option to buy farm orally ? S later repudiated the option. B sued S for damages on ground of breach of contract Court held: ? No contract existed ? Contract of sale of land had to be in writing. For a contract to be in writing, both offer and acceptance had to be in writing ? No written offer had existed which could be accepted by B to bring about a written contract Note ? The option itself does not equal a contract for sale of land therefore there is no need for it to be in writing ? An option involves 2 contracts/parts 1. offer to buy or sell the property in question (substantive offer) 2. a contract by which the grantor of the option binds himself to the grantee to keep the substantive offer open for a certain period of time ? the oral offer was of no force and although the option contract may be entered into orally, there was in this case no valid offer to which such a contract could relate Trotman v Edwick Facts ? E bought 2 flats from Mr.
and Mrs. T ? Flats enclosed by a garden wall, which also enclosed a strip of municipal land ? Mr. T, by positive act and statement indicated to E that the entire land enclosed was part of the property sold ? When E discovers the truth he sues for damages on the ground of T intentional misrepresentation Court held ? Court a quo awarded him the difference between the price paid and the actual value of the property ? The AD upheld the award ? Delictual damages awarded for fraudulent misrepresentation Note ? Important case for approach to question of quantum of damages recoverable on ground of fraudulent misrepresentation ? Fraudulent misrepresentation amounts to a delict and delictual damages are recoverable ? To determine financial position of person had the misrep not occurred it is necessary to distinguish between casual fraud (dolus dans) and incidental fraud (dolus incidens) ? Dolus dans: fraud which induces the representee to enter into a contract which he would not have entered into at all in the absence of the misrep. The amount which the representee’s performance exceeds the representor’s performance is awarded6 ? Dolus incidens: fraud which induces the representee to agree to terms to which he would not have agreed if there had been no misrep, although he would still have entered into the contract.
The amount by which the representee’s actual performance exceeds the performance on which he and the representor would have agreed had there been no misrep. De Jager v Grunder Facts ? J and G enter into a contract of exchange which they describe as a contract of Sale ? G’s farm is exchanged for J’s 2 farms ? A value was attached to the farms to determine what cash adjustment has to be made to equalize the performances ? The value placed on one of J’s farms was inflated by fraudulent misrep by J that there were more trees on the farm than there actually were ? G brought action for damages- J contended that in spite of the misrep G had received as mush as he had given and therefore suffered no loss Court held ? A quo and AD awarded G R15 000 damages ? If there was no misrep the valuation of the farm would have been R15 000 lower while the value of the other 2 would have remained the same Note ? AD reviewed this case as one of dolus incidens Ranger v Wykerd Facts ? R bought house from W for R22 000 ? There was a swimming pool on the property which W claimed to be structurally sound although she knew it leaked ? R then had to have the pool repaired after he took transfer of the house and discovered the fault. He claimed damages as a result of the fraudulent misrep. Court held: ? AD held R had proved loss due to repairing the pool ? This amount of damages could be arrived at in 1 of 2 ways: 1.
value of the property less R had paid for it (casual fraud) 2. by accepting that if there had been no misrep the parties would have agreed on a purchase price lower than what he initially paid for it (incidental fraud) Bayer South Africa v Frost Facts ? F was a wine farmer who also grew wheat and onions ? The wheat and onions were planted next to the vineyards. Vineyards have to be weeded annually during off season ? A rep of Bayer told F that weeding could be done more efficiently and cheaply by spraying the vineyards by helicopter with weed-killer developed by Bayer ? The weed killer wouldn’t harm the vineyards but would destroy the wheat and onions ? Rep negligently led F to believe that the spraying could be controlled ? F acted on this misrep and a large strip of wheat and onions was destroyed ? F was awarded R55 000 as damages as a result of the negligent misrep Note ? AD- a delictual action for damages may be instituted where a negligent misrep induced the conclusion of a contract as a result of which the misled party suffers damage Phame v Paizes Facts ? Paize’s bought Phames shareholding in a Company whose main asset was an immovable property on which there was a shopping center ? What induced Paizes to buy the company was the income that was derived from letting the buildings on the property ? The value of the shareholding depended on the net amount of rent which the property produced ? Part of the expenses was the municipal rates which the Phame agent told them was R46467 ? It later emerged that the annual rates were actually R14736 ? Phame them claimed an amount from Phame on the ground of the agents misrep. ? Phame then said that Paizes did not allege either a fraudulent or negligent misrep and that no claim for damages lay on the ground of innocent misrep Court held ? AD dismissed this exception, deciding that action quanti minoris would lie ? Court held adelition actions do not lie on ground of innocent misrep, but they do lie on the ground of a dictum et promissum ? action quanti minoris for reduction of purchase price and Actio Rehabilitoria for cancellation of a contract of sale ? the agents statement about the municipal rates was such a dictum et promissum Note ? an innocent misrep can form the basis for avoiding a contract ? for a delictual action for damages fault is a requirement therefore, innocent misrep does not form the basis for a delictual action ? action quanti minoris does not result in a delictual action ? Actio quanti minoris can only be instituted on the basis of dictum et promissum ? dictum et promissum is wide enough to include culpable misrep ? Actio quanti minoris can only be instituted where in the case of a contract of sale a misrep exist regarding the quality of the thing sold Wells v South African Alumenite Company Facts ? SA Alumenite sued Wells for purchase price of lighting plant which he bought from the company ? Wells raised the defence that he had been induced to buy the plant by a misrep made by the Company rep a d claimed recission of the contract ? But, he had signed an order form exempting the company from liability for an representations made by its rep and it was held that in the absence of an allegation that the company had made a fraudulent misrep Well’s defence could not succeed Note ? A contractant cannot exclude his liability for fraudulent misrep ? He can exclude his liability for negligent or innocent misrep Broodryk v Smuts Facts ? B was threatened with internment in a concentration camp or imprisonment if he did refused to join the army ? B was persuaded to join the army.
B claimed recission of contract on basis that contract had been bought about by duress ? Minister excepted to B’s claim on the ground that it disclosed no cause of action Court held ? Exception didn’t exceed. All 5 elements required to make a contract voidable on the grounds of duress were present Note ? If all the elements of delictual liability are present un a particular case of duress, the victim will naturally also be entitled to claim damages Preller v Jordaan Facts ? J was an elderly farmer suffering from an illness ? J was concerned about what would happen to his wife and farm laborers should he die ? P his medical practitioner, persuaded J to donate and transfer his 4 farms to P who would then administer them for the benefit of J’s wife and farm laborers ? P then transfers the farms to His son, to his 2 daughters and himself ? J instituted action against P, when his health returned, claiming retransfer of the farms to him Court held ? All 3 excepted to the claim on the ground that undue influence did not, in Roman-Dutch law, constitute a ground for setting aside the contract of donation and subsequent transfers ? The AD dismissed P’s exception and held that Roman-Dutch laws of restitatio in integrum provided authority for the view that in our law undue influence rendered a contract voidable8 ? Exceptions of the son and daughter where upheld- ownership had passed to P, who as owner, validly transferred ownership to son and his 2 daughters and they had no part in influencing J therefore no ground existed for the retransfer of the farms Neethling v Klopper Facts ? N sold farm to K and others ? Balance remaining on purchase price to be paid in installments ? N alleged that buyers defaulted and notified them that he’s canceling the sale ? Eventually came to an agreement where the buyers undertook to pay full purchase price of the farm ? N alleged breach of contract, and cancelled contract of sale again. Buyers claimed transfer of farm against payment of purchase price ? N admitted that there was no breach, but said contract was void because of non-compliance with S1(1) of act 68 of 1957 ? N argued that the new agreement brought a new contract for sale of land into being and amendment of original contract also had to be in writing Court held ? AD that N was bound to original contract because the agreement between the attorneys didn’t bring a new contract of sale into being and the agreement between the attorney’s didn’t effect a material amendment therefore no need to comply with the formalities Goldblatt v Fremantle Facts ? F and G concluded an oral contract that F would supply G with Lucerne ? They agreed that arrangement reduced in writing by F and confirmed by G ? F started supplying G with Lucerne, F set out terms in a letter to G and asked G to confirm terms in writing- G failed to do this ? F stopped supplying him with Lucerne and G sued F for breach of contract Court held ? AD the action failed because F and G agreed that the contract of sale between them be in writing and not verbal, no contract existed in absence of required written confirmation by G SA Sentrale Ko-op Graanmaatskaapy v Shifren Facts ? Lessee entered in a contract of lease with Shifren (lessor) ? The contract had a clause prohibiting subletting or ceding rights without lessors written consent and variation of the lease had to be in writing ? When lessee later ceded his rights to a 3rd party without consent, the lessor cancelled the contract and sued for ejectment ? The lessee’s defense was that there had been an oral variation of the non-variation clause to the effect that an oral consent by the lessors to a cession would suffice and the lessor’s had given such oral consent Court held ? AD that the parties are bound by non-variation clause Note ? Non-variation clause will protect a contract against oral variation only if the non-variation clause is itself entrenched against oral variation therefore the contract can only be amended by a written agreement between parties Jajbhay v Cassim Facts ? J and C entered into an illegal sublease of a residential stand.
C, the sublessee, was carrying out all the terms of the contract when J applied for her ejectment Court held ? Order was refused ? AD held that 2 rules are applicable: 1. Ex turpi causa non oritur actio – no action arises from a dishonorable cause therefore; an illegal contract is void and unenforceable- Absolute rule! One would expect that restitatio in integrum can be claimed when there has been performance in terms of an illegal contract, but this is prevented by rule 29 2. In pari delicto potior est condition defendentis seu possidentis- in case of equal guilt the defendant or possessor is in the stronger position (possidentis rule).
This is not an absolute rule, the guilty party may be allowed to recover his performance if public policy or simple justice between man and man requires it ? AD in casu there are no grounds for relaxing the rule Note ? Illegal contract: conclusion, performance and purpose- contrary to common law/statutory law, public policy and good morals Magna Alloys and Research v Ellis Facts ? E employed by Magna as a commission agent ? Contract of employment contained a clause prohibiting E from doing any business in competition to the company within a defined area for a period of 2 years after termination of his employment with the company ? After leaving the company E started working for a company in competition with Magna and therefore breached the restraint clause ? E subsequently claimed outstanding commission and Magna counterclaimed for damages on the grounds of E’s breach of restraint clause Court held ? Court a quo rejected the counterclaim but this decision was reversed on appeal ? AD held that the restraint clause was unenforceable only if it is against public policy and onus rests on the party bound by the restraint to prove that it is against public policy. ? E didn’t succeed in proving restraint was against public policy Note ? The restraint of trade must be reasonable between the parties, must not be against public policy, the validity of the clause is determined with regard to circumstances existing at the time of conclusion of the contract. ? A court may find that art of the restraint is enforceable or unenforceable Minister van Landbou-Tegnise Dienste v Scholtz Facts ? S, breeder of bulls, sold one to M ? S knew M intended to use the bull for breeding ? Bull was infertile and M claimed cancellation of the sale and a refund ? M relied on the tacit consensual warranty which he alleged S had breached- the claim was made more than a year after the sale ? S argued that to cancel a sale, must do so on the ground of latent defect, can only do so with actio redhibitoria which is a naturalia of every contract of sale and prescribes after a year Court Held ? Reject S’s argument actio redhibilitoria didn’t exclude consensual warranty ? S and M did have such a tacitly incorporated warranty and has a 3 year prescription period Note ? This case is important for the distinction between the naturale and incidentale of a contract ? Naturale are consequences attached to a particular contract ex lege e.
g. Seller liable of latent defects: the purchaser can claim Actio redhibitoria resile from a contract or actio quantis minoris claim reduction in purchase price ? Incidentale are consequences not attached ex lege, but is tacitly decided by the parties Van Den Berg v Tenner Facts ? T sold a ½ share in his farm and 49% shares in Brick co to VdB ? Purchase price was R50 000, VdB paid R10 000 ? VdB then withdrew from the contract ? T sold Farm to Mobile Earthmoving Services and Brickworks to V, N, W ? Then T and VdB contract to cancel the original contract and T refund VdB the R10 000 ? They agreed that repayment came from new sale of farm and shares ? T cancelled both contracts and VdB claimed immediate repayment of the 10K ? VdB alleged that the repayment was a tacit term of the 2nd contract10 ? T argued that the terms regarding the fund from where the repayment was supposed to come was a suspensive condition and its non-fulfillment extinguished the obligation Court Held ? The terms regarding the fund did not equal a suspensive condition but a tacit term between T and VdB did exist therefore, judgment in VdB’s favour Note ? No need to actually intend term Fourie v CDMO homes Facts ? Homes sold a piece of land bordered by a stream to F ? Agreement made subject to the “condition” that there were pumping rights ? Neither party knew whether such rights existed ? F stopped paying installment when he discovered there were no pumping rights. Homes sued for payment ? F claimed refund Court held ? In favour of F ? Parties contracted subject to supposition that there were pumping rights since the supposition was false the contract was void ad initio Note ? A condition is a term which qualifies a contract with reference to an objectively uncertain future event therefore, can never refer to a past/present state of affairs Jurgens Eiendomsagents v Share Facts ? Share sold his house to Smith through agency of J ? Purchase price financed as follows: R1400 cash deposit, R45 600 bank transfer and a guarantee for R10 000 to be furnished by Smith after selling his house. The guarantee had to be furnished before 30 March 1984 ? Share had to pay J commission, even if cancelled ? The cash deposit and bank transfer were received, but the guarantee wasn’t paid timeously and Share refused to continue with the transaction ? J sued Share for commission ? Shares defence was that the guarantee was a suspensive condition which wasn’t fulfilled therefore no contract of sale was concluded Court held ? AD rejected Share’s agreement ? Contract actually has 3 suspensive conditions: approval of the transaction by Smiths employer, obtaining a bank loan and sale by Smith of his house ? All 3 had been fulfilled therefore enforceable contract of sale and therefore, J can claim commission ? The guarantee was not a condition it was merely a term with a time clause attached Note ? Terms refer only to those arrangement which create obligations ? Conditions refer to arrangement by which obligations are qualified in such a way that their operation and consequences are made to depend on the happening or not happening of an uncertain future event Bank of Lisbon v De Ornelas Facts ? 2 respondents were joint MD’s of a company which caught and sold fish ? Appellant granted company overdraft and demanded they register mortgage bonds over their homes and bind themselves as sureties to the appellant to secure the company’s overdraft.
? The intention of the parties was that the securing would cover the company’s overdraft, the bonds and deeds of suretyship were drafted in wide terms to provide that they would secure any debt which the company owed the appellant ? Respondents request cancellation of the mortgage bond, deeds of suretyship and negotiable certificate of deposit ? Appellant refused to comply and alleged it was entitled to retain security to cover a claim for damages which it intended instituting against the company11 ? The claim arose from a transaction which was not in contemplation of any of the parties when the security was furnished ? The CPD granted the respondents setting aside order AD held: ? Set aside the CPD decision ? Appellant was entitled to retain the security to cover the claim for damages ? Respondents relied on the exceptio doli ? The exceptio doli not received into Roman-Dutch law and therefore not part of our law. Nel v Cloete Note ? When is a debtor in culpable delay (in mora debitoris)? When the parties didn’t expressly/tacitly agree to a time for performance and when a creditor may resile from the contract because of the delay. ? When there is no date for performance the debtor must perform in reasonable time. If he fails to form he is not yet in mora ? He must be placed in mora by means of a demand (interpellatio, which must allow for a reasonable time) Should he then still fail to perform he is in mora ex persona ? Should there be an agreed time for performance and the debtor fails to pay he is then in in mora ex re ? Mora debitoris is a form of breach of contract, therefore the creditor has an action for damages and the right to cancel the contract ? Should the creditor wish to cancel the contract the mora debitoris must be serious i.
e. lex commissoria and notice of rescission ? Notice of rescission and interpellatio can be given immediately after conclusion of the contract; they can be given together or separately; time allowed for performance is judged objectively; it is not expressly decided whether time that passed before notice is a factor to consider Goldstein ; Wolff v Maison Blanc Facts ? Delivery of dresses too late and Maison blanc cancelled contract because G was in mora ex re Court held ? Contract required performance before a certain date, therefore agreement was reached regarding date for performance and the appellant was automatically in mora ex re ? The court considered the nature of the contract and the surrounding circumstances: the parties intended “time to be of the essence” ? The parties tacitly agreed that respondent would have right of cancellation if performance didn’t take place timeously ? This case is mora ex re coupled with lex commissoria Sweet v Ragerguhara ? Sweet bought immovable property, which wasn’t properly vacated? ? Important case for difference between mora debitoris and positive malperformance ? In casu there wasn’t merely a delay in giving the applicant undisturbed occupation of the thing he bought (this would have been mora debitoris). Occupation was given but it didn’t satisfy the requirements for undisturbed occupation ? Therefore couldn’t cancel contract on the basis of mora debitoris Ranch International Pipelines v LMG Construction visa versa Facts ? R subcontracted some building work to LMG ? R then sought an order against LMG to vacate the site and stop working ? LMG bought a counter application to interdict R from interfering in LMG’s building work Court held ? Granted LMG’s counter application because the creditor must co-operate to make it possible for his debtor to render performance ? Mora creditoris is recognized as a separate form of breach of contract Note ? Mora creditoris occurs when a creditor, whose co-operation is necessary to enable the debtor to perform, fails to render his co-operation timeously, but performance still remains possible Stewart Wrightson v Thorpe12 Facts ? Appellant= merger of 2 companies: bray Gibb a subsidiary in natal, and Mathews Wrightson, also a subsidiary in natal ? The respondent started working for BG in 1964 as director and MP of the natal subsidiary ? The respondent was unhappy with the proposed merger and orally informed BG that he was leaving ? In terms of the respondent’s contract, his resignation had to be in writing and 6 months notice was required. On the 24th may the respondent wrote a letter and gave 6 months notice. On the 29th may BG insisted he resign immediately, and he was not required to do work for the company for the 6 months and would receive his full salary ? The respondent took this as a repudiation of his contract and started working in direct competition with BG Note ? Repudiation as an offer does not equal a breach of contract. It only became a breach of when the other party accepted it ? This is a case of repudiation by the creditor.
The test of whether repudiation occurred is objective ? The time and place of the breach is the time and place of the repudiation Tuckers land ; development corp. v Hovis ? Breach in anticipando- this is a breach that can take place even before performance becomes enforceable ? Form of either repudiation or prevention of performance ? Any conduct which indicates with reasonable certainty that a performance which is owing will not be rendered when it becomes due is sufficient to constitute repudiation ? Test for repudiation is objective ? NB question- whether it can be reasonably inferred from the repudiators conduct that malperformance will take place in the future Benson v SA mutual Life assurance society Facts ? SA bought shares from B ? B delivered most of the shares and failed to deliver some of the shares ? SA claimed delivery of the outstanding shares ? B said that SA could get the shares from another source ; a claim for damages would compensate them adequately and an order for specific performance should be refused Court ? AD rejected B’s argument: ? The plaintiff had the right to choose between holding the defendant to the contract and claim specific performance, or to claim damages ? The court has the discretion to refuse specific performance in certain circumstances, such as if injustice were to occur as a result, or to satisfy the demands of public policy etc. BK Tooling v Scope Precision engineering Question: ? What is the position where a plaintiff has rendered performance but his performance is defective? Court held: ? Any contracting party has in principle a right to the specific Performance undertaken by the other party (i.e.
-he has the right, in principle, to enforce the contract strictly according to its terms) ? The right of a party to a reciprocal contract to withhold his performance until the other party performs in full is a powerful weapon to enforce full performance ? In principle, therefore a defendant who has accepted the plaintiff defective reciprocal performance is entitled to raise the exceptio against the plaintiff’s claim even if the plaintiff’s performance is defective in MINOR ASPECTS only. ? However where FAIRNESS SO REQUIRES a court may, at its discretion, REFUSE TO ALLOW a defendant to raise the exceptio and to order him to render a reduced performance. Mahabeer v Sharma Facts ? S sold erf to M (3 July 1977) ? S acquired the right to rescind the contract on the ground of M’s breach 15 Sep 1980 ? S executed this right on the 3rd Feb 198113 ? M raised the defence of effluxion of time and claimed transfer Court ? AD dismissed M’s claim ? Effluxion of time could terminate a right only where that right has prescribed otherwise failure to exercise right within a reasonable time only serves to indicate waiver of the right Swart v Vosloo Facts ? S leased premises on which there was a bottle store to V ? The lease granted V an option to buy premises during the lease ? S could cancel lease if V or any of his employees was prosecuted under the liquor act ? One of V’s employees was prosecuted ? S’s attorney wrote a letter to V cancelling the lease ? Letter delivered to V’s office at 12:00 on 4th March, but V only read it at 15:00 ? At 14:50 on the same day, V delivered a letter to S in which he exercised the option ? S read the letter immediately Court held ? AD: V had exercised the option 10 minutes before S cancelled the lease and that the option had been validly executed ? Requirements to cancel a contract are stricter than the requirements to conclude one Lavery ; co v Jungheinrich Facts ? L claimed damages for breach of contract from J ? J= the manufacturer of steel scaling shafts, but supplied L with defective shafts ? L resold the shafts and its business reputation suffered severely Legal question ? Could loss of trade and injury to business reputation (special damages) be compensated? Court ? Curlewis JA applied the contemplation principle ? Wessels JA applied the stricter convention principle ? Both concluded that damages couldn’t be recovered Whitfield v Phillips Facts ? W sold farm to P ? W knew P needed farm for cultivating pineapples on large scale ? After conclusion of contract P bought 1 million pineapple plants ? Later W repudiated the sale and P cancelled contract ? P sued for the following damages: compensation for loss of 1years crop and compensation for loss of certain plants already established on the farm AD held: ? The loss in respect of the crop from the plants must have been in contemplation of both parties as a probably consequence of repudiation ? This claim set aside because probably already included in purchase price of the farm Note ? Loss of profit as a result of breach of contract is not intrinsic damage ? Although liability of a 3rd party to compensate for such damages is based on agreement (convention) Steyn JA doesn’t expressly apply the convention principle, he appears to apply the contemplation principle ? Mitigation rule- there is a duty on the victim of a breach of contract to limit his damage as far as possible.
The victim must take reasonable steps to limit his loss Shatz Investments v Kalovymas Facts ? K hired premises from S to conduct restaurant and fast food business ? Lettor prohibited by the contract from letting any other building on the premises for a similar purpose ? S breached this contract by letting to another fast food store ? K’s business was adversely affected ? K cancelled the lease and claimed damages from S ? Basis of claim was the loss of goodwill which K suffered14 AD held: ? Loss of goodwill equals a claim for special damages ? Applied the convention principle ? Decisive time of determining the parties contemplation is the time of contracting Holmdene Brickworks v Roberts Construction Facts ? R bought bricks from H, the bricks were used in a building for a 3rd party ? After the brickwork was completed- a large number of bricks were defective and starting to crumble ? R tore down walls and rebuilt them with bricks from another source ? R claimed loss suffered as a result of having to tear down the walls/ consequential loss AD held ? Confirmed the award of damages by trial court ? Consequential loss= general damages therefore presumption arose that the loss ha been contemplated by the parties & therefore unnecessary for the plaintiff to prove that the parties had actually contemplated the loss ? Mitigation rule applicable Van Zyl v Credit Corporation of SA Facts ? VZ bought a car on hire purchase from a garage, having been induced to do so by misrepresentation made by the garage ? VZ traded his own car in, paid deposit, bound himself to pay monthly deposits ? The garage then ceded its rights to Credit Corp who then became entitled to the installments ? After paying 2 installments to Credit corp., VZ became aware of the misrepresentation- he instituted action against credit corp., he claimed refund of the money paid to credit corp. and the garage, rescission of the contract and return of his car or its value ? Credit corp.
raised the exception that those particulars disclosed no cause of action against it ? The court agreed Note ? No one can transfer a better right than he himself has ? Debtor cannot transfer his duties without consent of creditor Peters, Flamman & co v Kokstad Municipality Facts ? P concluded a contract to erect street lights with K prior to the outbreak of WW1 ? In 1915 the partners of P were enemy aliens and were interned and the partnership was wound up ? K sued for damages for breach of contract AD held: ? In the case of supervening impossibility, the position in our law is the same as in Roman law- the obligations which arose at the time of contracting is extinguished as soon as performance becomes impossible ? Debtor consequently discharged from his duty Note ? If performance is impossible at the time of concluding the contract no obligation arises15