Dale Hutchison (Editor), Chris-James Pretorius (Editor) Jacques du Plessis, Sieg Eiselen, Tomas Floyd, Luanda Hawthorne, Birgit

Kuschke, Catherine Maxwell, Tjakie Naude

Oxford University Press Southern Africa 2010 www.oup.com/za

Obligations Obligation legal bond between two persons Comprises a right and a duty Debtor bears duty to perform Creditor has right to claim performance Contractual rights and duties personal in nature.

Note: following classifications overlap Civil, natural and moral obligations Moral obligation: no legal significance Civil obligation: legal obligation enforceable by right of action Natural obligation: not legally enforceable but not without legal significance.

Linked obligations: one performance owed in exchange for another

Simple obligation: exact performance specified Alternative obligation: a party can choose performance from two or more specified alternatives
Which party can choose? Once choice made, obligation becomes simple Which party can choose? Parties must specify number or quantity to be delivered

Generic obligation: a party can choose performance from a specified genus

Facultative obligation: performance owed by debtor is specified, but debtor has right to choose to make a different specified performance
Compare with alternative obligation: enforceability.

 Divisible performance: can be divided into more than one performance Indivisible performance: cannot be divided Test:
Is the performance divisible by nature? If so, did the parties intend it to be divisible?

Number of distinct or indivisible performances determines the number of obligations Entire contracts may also be divisible into separate contracts.

 Terms are provisions included in the contract:

By the parties themselves By operation of law

May be classified with regard to their nature and effect Classifications overlap.

General principles of contract + specific contracts eg sale, lease, partnership Essentialia: distinctive terms used to identify a contract as one of the specific contracts recognised by common law Naturalia: terms automatically included in any contract belonging to one of the classes of specific contract Advantages of naturalia
Automatic inclusion of terms a limitation of freedom of contract? Exclusion or exemption clauses used to exclude naturalia Problems legislation eg National Credit Act 34 of 2005, Consumer Protection Act 68 of 2008

Incidentalia: additional terms agreed upon by the parties that supplement or modify the naturalia.

 Express terms:
Specifically agreed by the parties and Articulated in an oral contract Or written down

If time of agreement and time of reducing it to writing do not coincide, contract generally comes into being at the time of agreement (cf formalities).

 Caveat subscriptor: let the signatory beware: a party who signs a written contract is generally bound by its terms whether or not he or she has read or understood them Exceptions:
Iustus error Unreasonable reliance Misrepresentation Duress Undue influence Commercial bribery

Result: law achieves a balance between certainty and fairness.

 Express terms in standard-form contracts differ in one respect from express terms negotiated by the parties:
Party who presents standard-form contract to another for signature must draw his or her attention to any unusual term/s If this is not done, term might not bind the latter party.

 Express terms may be incorporated into a contract by reference ie by referring to terms in another document that may not be signed by the parties Two common examples:
Ticket cases Notices.

 Situation: purchaser buys ticket that refers to terms recorded in another document Test for liability:
Did the purchaser of ticket know that there was writing on the ticket? Did he or she know that the writing comprised contractual terms?

If answer to both questions is yes, purchaser is bound to the terms. If either answer is no:
Did the ticket issuer take reasonable steps to bring such terms to the notice of the purchaser?

If answer is yes, purchaser is bound to the terms What steps are reasonably necessary?

 Situation: notice excludes liability for negligence on the part of the provider of a service Applicable rules are the same as for the ticket cases.

 Consumers attention must be drawn to certain categories of clauses or notices that could be prejudicial. Examples:
Clauses that limit the suppliers risk or liability Clauses in terms of which the consumer assumes risk or liability or acknowledges a fact Plain language Alerted prior to contracting/performing Conspicuousness of notice or clause Chance to understand notice or clause In addition, where risks serious or unexpected, consumer must indicate consent by signature or conduct.

Requirements relating to such clauses or notices:

 Limitation of freedom of contract: terms that are immoral or contrary to public policy are not enforceable May be prohibited by legislature:
Merely unenforceable Void Subject to modification by the courts (eg penalty clauses).

Tacit contracts: inferred from the conduct of the parties Some writers: are also express terms Problems:
Conceptual basis: consensus, reasonable reliance? Appropriate test for determining such a contract: two tests:
Traditional test: Standard Bank of South Africa Ltd v Ocean Commodities Inc 1983 (1) SA 276 (A) at 292B-C: unequivocal conduct capable of no other reasonable interpretation than that the parties intended to, and did in fact, contract on the terms alleged. It must be proved that there was in fact consensus ad idem. Alternative test: Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd 1984 (3) SA 155 (A) at 165B-C: a court must conclude that the most plausible probable conclusion from all the relevant proved facts and circumstances is that a contract came into existence.

 Not specifically agreed upon by the parties Two categories:

Terms implied by operation of law (ex lege) Terms implied from the facts surrounding the agreement of the parties (ex consensu).

Such terms imported into contract by law, unless excluded by agreement Imposed terms: Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 531 Terms implied by the common law:
Also known as naturalia May generally be excluded by agreement Legislative intervention in areas where common law deficient Some areas: extensive intervention eg labour law, credit agreements Most expansive legislative incursion into law of contract: Consumer Protection Act 68 of 2008

Terms implied by statute:

Is an implied term just a rule of law applicable to a particular class of contract?

 Tacit term: not specifically agreed upon but which parties expected to form part of the contract Same effect as express term Factors to be considered:
Express terms Circumstances surrounding the genesis of the contract Some cases: subsequent conduct of the parties

Officious bystander test.

 Other requirements:
Must not conflict with express terms Business efficacy: Reigate v Union Manufacturing (Ramsbottom) [1918] 1 KB 592 (CA) at 605 Implication must be necessary Term must be capable of clear and exact formulation

Classic tests objective, but cf Seven Eleven Corporation of SA (Pty) Ltd v Cancun Trading NO 150 CC 2005 (5) SA 186 (SCA) Trade usages.

Material term: Vital to the performance of the obligations Breach of material term: Aggrieved party has a right to cancel contract Non-material term: Less important Breach of non-material term: Aggrieved party can generally only claim damages.

 Conditions are terms that qualify obligations with reference to an uncertain future event Compare with other contractual terms 1. Positive and negative conditions
Positive condition (affirmative condition): depends on happening of an uncertain future event Negative condition: depends on an uncertain future event not happening.

2. Suspensive and resolutive conditions

Classification relates to effect on operation of obligation or contract as a whole Suspensive condition (condition precedent): operation of obligation suspended pending fulfilment or failure of the condition Note: obligation itself not suspended Pending fulfilment/non-fulfilment: conditional right Resolutive condition (condition subsequent): obligation operates in full but will end if uncertain future event does or does not happen Regarding both suspensive and resolutive conditions:
They may be positive or negative Fulfilment/non-fulfilment of the condition has retroactive effect.

3. Potestative, casual and mixed conditions

Potestative condition: depends on creditors doing or not doing something entirely within his or her power Casual condition: depends on something beyond the control of the parties Mixed condition: depends partly on creditors actions and partly on events beyond the parties control Interference in the fulfilment of conditions Parties may not deliberately interfere in the fulfilment/non-fulfilment of a condition If a party does so, condition is deemed to have been fulfilled/not: doctrine of fictional fulfilment.

A time clause is also called a dies General rule: performance due immediately Time clause: postpones or fixes the date of performance Compare with conditions.

Suppositions Also called assumptions Term that bases a contract or an obligation on the supposition that a certain state of affairs exists or existed Must be shared by both parties (cf error in motive) Such clauses are valid and effective:
If supposition true, contract valid If supposition false, contract void

Compare with conditions.

Modal clauses A modal clause is also called a modus A term that charges the recipient of a performance with a duty to do something in the future Valid and enforceable Exemption clauses Also called exclusion clauses or disclaimers They are terms that exempt a party from liability that would otherwise be imposed upon him or her General rule: valid and enforceable Exceptions eg exclusion of liability for fraud or intentional injury.

Non-variation clauses A term in a written contract that specifies that the parties:
May not vary the contractual terms by agreement May only vary the contractual terms in writing

Effect: valid and enforceable.

 Oxford University Press Southern Africa 2010 www.oup.com/za