Introduction to the Law of Contract
The law of obligations:
The South African law of contract is derived from the Roman law of obligations, in terms of which a legal tie was created between legal subjects, giving rise to rights and duties recognised by law. These rights were only effective between the particular legal subjects concerned and were therefore known as personal rights, as opposed to real rights, which generally could be enforced universally.
Roman law described specific categories of transactions, to which the law of obligations was limited, while SA law defines obligations generally, assigning categories only to transactions that occur often.
Definition of an obligation:
A legal obligation is a legal tie between legal subjects, recognised by law, which is created as a result of a certain legal fact and which creates rights and duties that are recognised by law.
A legal obligation consists of two elements, namely the right of the creditor to claim performance and the duty of the debtor to perform accordingly. The creditor’s right is known as a personal right, which corresponds to the legal object of performance (i.e. a specific action or inaction, delivery of a specific thing or payment of a specific amount of money).
The rights and duties are recognised and enforced by law (e.g. contract).
The rights and duties are recognised but not enforced by law (e.g. wager).
Sources of obligations:
Legal obligations arise out of legal facts, which can be categorised as follows:
Events without human intervention:
Forces of nature, animal behaviour, lapse of time, etc.
Acts to which the law gives effect irrespective of the intentions of the parties (e.g. delicts).
Acts to which the law gives effect according to the intentions of the party or parties.
Unilateral juristic acts:
Acts conducted individually by single parties (e.g. wills).
Multilateral juristic acts:
Acts conducted collectively by two or more co-operating parties (e.g. contracts).
The most important sources of obligations are acts of contract, delict and unjust enrichment. Hence, a contract is not a legal obligation in itself but rather a legal fact that gives rise to a legal obligation.
The law of contract:
The law of contract is the body of legal rules governing the conclusion and consequences of contracts.
It defines the basis and requirements of contractual liability, as well as the rights and duties of the parties. Moreover, it regulates the breach of contract and provides remedies for such breach. Finally, it governs the termination of contractual obligations.
These rules, along with the law of delict and law of enrichment, fall under the law of obligations, which is a category of the law of patrimony, forming part of private law, which is fundamentally concerned with defining, protecting and balancing legitimate individual interests. However, the classification of the law of contract into private law is necessarily qualified by the increasing degree to which private law and public law have come to overlap.
As indicated above, the South African law of contract finds its origin in Roman-Dutch law but it has also been influenced to some extent by English law (e.g. in respect of the rules of quasi-consensus). ok now that law of contract is the body of legal rules governing the conclusion and consequences of contracts.
A contract is an agreement, based on consensus between legal subjects with contractual capacity, which is legal, physically possible and complies with the prescribed formalities and which is reached with the intention of creating a legal obligation with resultant rights and duties.
- Consensus: The parties must reach conscious agreement, with a genuine concurrent intention.
- Contractual capacity: The parties must be legally capable of concluding a binding contract.
- Legality: The contract must be legal and may not contradict any statutory or common law rule.
- Physical possibility: The performance must be determinable and possible at time of conclusion.
- Formalities: The contract must abide by any formalities set by law or by the parties themselves.
- Void contract: One of the requirements for a valid contract is absent - no contract is concluded.
- Voidable contract: A contract is indeed concluded but it can be set aside on account of a defect that existed at the time of conclusion (e.g. consensus improperly obtained).
- Unenforceable contract: A contract is indeed concluded but it creates only a natural obligation, which is recognized but not enforced by law (e.g. a wager).
- Parties: Two or more legal subjects acting as debtor(s) and creditor(s) (possibly simultaneously).
- Unilateral contract: Only one party acts as debtor and the other as creditor (e.g. donation).
- Reciprocal contract: Each party acts as both debtor and creditor (e.g. contract of sale).
- Essentialia: Essential minimum characteristics that qualify a contract as a nominate contract.
- Naturalia: Terms that, by operation of law, form part of a contract, but may be excluded.
- Incidentalia: All other contractual terms included by the parties expressly or tacitly.
- Nominate contract: A type of contract that occurs so frequently that it has acquired a name and individual characteristics (e.g. purchase and sale).