Law of Contract A

1. The notion of a contract

o A contract is essentially an agreement between 2 or more parties
- BUT not all agreements are contracts e.g. A and B agree to play tennis on
-

Saturday
Whether or not the parties intended their agreement to be binding in law is a

matter of fact to be determined on all the available evidence

o Legally binding agreements that are not contracts:
- Not all binding agreements are contracts
- Some agreements are intended to create obligations, but to destroy them; or to
-

honour an obligation by transferring rights

Classification of legally binding agreements:
a) Obligationary agreements: one or more obligations are created [e.g. S
transfers the thing sold to P, who is bound to pay the price]
b) Absolving agreements: whereby obligations are discharged or

extinguished [e.g. agreement between S and P to cancel the sale]

c) Real (or transfer) agreements: whereby rights are transferred
o Legally binding agreements that are more than just contracts:
- Some legally binding agreements that create obligations for the parties cannot
be regarded as merely contracts because they contain elements giving them
-

another dimension
Most obvious example: marriage
Although it is based on an agreement between the parties, and gives rise to
obligations such as reciprocal duty of support, marriage can hardly be treated
like any other contract:
Its primary purpose is not the creation of obligations
And many of the normal principles of law of contract do not

apply to it.
Thus, it cannot be made or unmade by the free exercise of will of the parties

without State intervention

And it has certain invariable consequences that cannot be excluded by the
parties.

2. Definition of a contract and its history

o Basis of our law is Roman law
- However, did not recognise a general theory of contract , they understood each
type of contract in their own terms, in other words they had a system of contracts
-

not one theory

They had a system which identified each contract in their own terms and parties
in that contract had to abide by the specific rules attached to that specific contract

Jurists of the middle ages were tasked with creating a generalised theory of

contractual obligation:
EX NUDO PACTO ORITUR ACTIO:
An action will arise out of serious agreement
PACTA SUNT SERVANDA:
Promise must be honoured
IUSTA CAUSA:
There are reasonable social and economic grounds for recognising
that a binding legal obligation exists
o Iusta Causa theory in particular : the agreement was entered into seriously and

deliberately intending legal obligations

The agreement is not illegal, immoral and impossible: Iusta Causa is recognised
o Influence of English Law :
- Post 1806
- We do not have an English system of contract law because by English
precedent in Campbell case if the English colonised a country that had a legal
system that legal system would have to remain established. The commission
of enquiry to alter the law was unsuccessful so English Law was never put
into practice, rather our system is a developing system of Roman-Dutch Law
with increasing influence of English Law
o A contract is an agreement entered into with the intention of creating legal
obligations

3. Essential elements of a contract:

o Capacity
o Consensus
o Legality
o Possibility of performance
o Formalities
o Certainty (matter of offer/ acceptance and interpretation) (chapter 8)
4. Elements dicussed
A) CAPACITY
o Was the person of sufficiently sound mind and understanding to appreciate the
nature of the obligation and its rights and duties
o All natural persons have legal capacity, yet their status may differ depending on

their attributes and circumstances

o Natural persons can be classified into the following three groups:
Persons without contractual capacity:
Infants (person under the age of 7)

 Persons who are mentally ill

Persons severely under the influence of alcohol or drugs
o Persons with limited contractual capacity:
Can only conclude contract with the assistance or consent of another
person
Minors ( between the ages of 7 and 18)
Married in community of property
Insolvent persons
Prodigals
o Persons with full contractual capacity:
All natural persons falling outside the above mentioned categories have

full capacity to enter into contracts

In certain respects, however, specific statutory provisions may limit
capacity (e.g. if you are a criminal)

B) CONSENUS
o Foundation of what a contract is
o The parties must be Ad idem (The parties are on the same page / of the same mind)
o The analytical tool that is used to determine whether consensus has been reached
is to determine whether there has been an offer and acceptance
C) OFFER
o An offer is a statement of intention on which the offeror sets out to the person to
whom the offer is made, what performance and what terms he is prepared to bind
himself to.
o The proposal is made with the intention that by its mere acceptance, without more, a
contract should be formed.
REQUIREMENTS FOR AN OFFER
a)
b)
c)
d)

Animus contrahendi (a firm offer)

Definite and complete
Certain
Communicated to the offeree

o Animus contrahendi (a firm offer)

- A serious and deliberate intention to create a legal bond
- NOT:
Proposals in jest (joking)/anger
Social arrangements (e.g. lets meet for a drink at 6)
Domestic arrangements

o Definite and complete:

Does not qualify as definite and complete:
Invitations to negotiate

Requests for an offer

Efroiken v Simon 1921 CPD 367

Did a contract arise in terms of a firm offer?

A Jo burg broker sent a Cape Town broker a telegram to the effect that he had a seller of

3000 bags of oats at 11s a bag, adding the terms of delivery.

The question before the court was whether this telegram was an offer which could result in a

valid contract if accepted

Gardiner J went set out to explain that not every offer has the same nature and that one has to
deteremine whether it is provisional or whether it is meant to constitute, upon acceptance, a

binding contract
He held that the telegram in his mind stated, I have a seller, can you find me a buyer and

then we may do business

He concluded that no contract was thus established between the parties and the judgment
must be for the defendant with costs.

Statements of information
Provisional proposals until you have a firm offer, the proposal
is still provisional
Pitout v North Cape

Appeal of court a quos decision to grant the respondent damages

The appellants son, John Pitout, frequently encountered unsuccessful financial ventures and

recently he had purchased goats from the respondent and was now in debt of around R25000
After unsuccessfully trying to meet up with Mr Pitout, the respondent entered into
negotiations with the appellant in which it was verbally guaranteed that the appellant would

sell 72 of her cattle at R170 a head in order to pay a portion of the debt owed.
Negotiations were interrupted when Mr Pitout entered the room and claimed he had paid
R2000 and that his offer is to continue paying that amount monthly. The respondent denied

that offer and left before completing the negotiation process.

The question that arises is whether the undertaking (given that it happened during
uncompleted negotiations) has, or had been shown, to have contractual force.

[Was the offer animo contrahendi or was it merely a proposal made by the appellant during

the negotiation process] page 850 para C

The following was concluded: the onus was on the respondent to establish that the

undertaking constituted a concluded contract.

The terms of the undertaking were left very much in the air. There were particular matters that
were most likely intended to be thrashed out before the interruption but were not and as a
result were not finally concluded and reduced to writing. Page 851-853 :
a) At the time of the negotiation process, the appellant was not fully aware of the true facts
b) If the appellant was aware of the sequestration and her sons defiant attitude it would be
improbable that she would undoubtedly offer to settle his debts
c) The terms of the undertaking were left very much in the air. Thus, for example, there did
not appear to be C any unanimity among respondent's witnesses as to what the so-called
"guarantee" meant and what would happen.
d) There is a similar uncertainty as to precisely which cattle were intended as the subject
matter of the undertaking. Until he gave consent, it is difficult to see how the appellant
could have given an unqualified promise in terms of the undertaking
e) Whatever the identity of the cattle to be sold in terms of the undertaking, they were at the
time under lease to John. Consequently, his consent to the proposed sale would have been
necessary. It savours rather of an attempt to salvage something from the wreck of the

negotiations than of a firm conviction that a contract had been concluded

There was the conversation in the car while Botha and his companions were driving away
from Belfast which had been recountedIt was held that in view of all the circumstances, the
Judge was not convinced in the respondents favour. There was an intention of concluding a

final contract but it turned our to be merely a proposal in the course of the negotiations.
The appeal succeeds with costs and the order of he court a quo to be altered

Conditional arrangements
Holm Jordaan v City of Tshwane Metropolitan Municipality [2014] ZASCA 105

HJ entered into a competition in which winning entailed designing and supervising the new

municipal headquarters for the City of Tshwane (previously the City Council of PTA)
Three things had to be thrashed out before there would be a prospect of a firm contract [para

18-19]:
a) Funding being found
b) The city confirming to go ahead with the building
c) Joint venture with a BEE partner
Several years later, and after much negotiation and many changes to the original arrangement
between the parties that I shall discuss in due course, the City advised HJ that it was not

proceeding with the project originally envisaged.

HJ claimed repudiation of an enforceable contract and sued for damages, being fees it claimed

would have earned had the project gone ahead

HC found that there was no contract. HJ appealed

The issue for determination are whether a contract between HJ and the City ever came into

existence, and if so, whether it was repudiated.

It was found, however, that HJ being commissioned as architect for the remaining stages of
the project (after the resolutions were communicated and accepted) were conditional to the

above mentioned essentials

The resolution was furthermore conditional on HJ entering into a joint venture partnership

with a BEE entity which was never identified.

Neither of the conditions were met
It was concluded that the City regarded terms (such as funding and BEE entity) that had still
to be determined as crucial to the conclusion of the contract and that no agreement had been
reached on the scope of the work, the allocation of responsibilities etc. [para 22: offer lacks

animus , and is not yet complete ]

A basic firm offer, and, if accepted, a binding contract, with further terms to be settled later.
It was held that no contract commissioning HJ as the architect for the building of the
municipal headquarters ever materialized the appeal was dismissed with costs

o
o

Certainty
Communicated to the offeree

LEGISLATIVE INFLUENCE ON CONTRACT LAW: CONSUMER PROTECTION ACT

68 OF 2008:
o Applicability of the Consumer Protection Act to Contract Law
Is the customer a consumer?

Is the provider of the goods or services a

Is the customer a natural person?

supplier?
Is the provider supplying the goods or

services in the ordinary course of business.

If not, is the customer a juristic person with Is
the
supply
for
consideration
an annual turnover or asset value of less than (consideration: anything of value given and
R2 million?
accepted in exchange for goods or services)
Is the type of transaction covered by the CPA?
(if the amswer to any of the questions below is yes, then the answer to the above question
will be no that is the CPA does not apply to the transaction or only applies to a limited
extent
Has the particular industry been exempted from the CPA or part of it?
Is the customer the State?
Does the agreement qualify as a credit agreement under the National Credit Act? (When this
is the case, the agreement itself will not be subject to the CPA, but the goods or services that
are supplied in terms of the agreement are subject to the CPA. This means that those goods
and services must be of the quality required by the CPA.)
Is the agreement an employment contract?
Does the agreement give effect to a collective bargaining agreement within the meaning of s
23 of the Constitution and the Labour Relations Act?
Does the agreement give effect to a collective agreement as defined in 213 of the Labour
Relations Act
Does the service constitute advice or intermediary services in terms of the Financial Advisory
and Intermediary Services Act
Is the service regulated by the Long-term Insurance Act or Short-term Insurance Act

o The CPA introduces further requirements in regard to offers:

- Must be in plain and understandable language (s22)
Any notice, document or visual representation will be regarded as
being in plain language if it is reasonable to conclude that an
ordinary consumer of the class of person for whom the notice,
document or visual representation is intended, with average literacy
skills and very little experience as a consumer of the particular goods
or services, could be expected to understand the content and
-

significance without undue effort

Must disclose whether goods are grey-market or reconditioned (s25)

A person who offers to supply any goods that have been

reconditioned, rebuilt or remade and bear the trademark of the
original producer or supplier must indicate that the goods have been

reconditioned, rebuilt or remade.

Prohibition of negative option marketing (s31)
A supplier may not promote goods and services on the basis that the
goods or services are to be supplied unless the consumer declines the

offer
Regulation of direct marketing (s 11/16)

OFFERS TO THE PUBLIC

o To whom may an offer be made
- It may be made to (a) specified person; (b) a specified group of people; (c) the
-

world at large
The point of departure is that an offer is usually addressed to a specific

individual , but that is not necessarily the case

One can address an offer to the public at large and then conclude a contract

with specific members of the public who respond to the offer

Below are examples of ways to address the public at large, or a segment of the
public

Carlil v Carbolic Smoke Ball Company [1893] 1 QB 256

The defendant (CSB) manufactured and sold the Carbolic Smoke Ball. The company placed
ads in various newspapers offering a reward of 100 pounds to any person who used the

smoke ball 3 times per days as directed and contracted influenza, colds or any other diseases.
After seeing the ad, the plaintiff purchased a ball and used it as directed. He contracted

influenza and made a claim for a reward.

The defendant refused to pay and the plaintiff sued for damages arising from breach of

contract.
The defendant argued that the advertisement was a mere invitation to treat rather than an offer
The court held that the plaintiff was entitled to the award as the advert constituted an offer of
a unilateral contract which she had accepted by performing the conditions stated in the offer.
The court rejected all the arguments put forward by the defendants for the following reasons:
a) The statement referring to the deposit of 100 pounds, demonstrated intent and therefore it
was not a mere sales puff
b) It is possible to make an offer to the world

c) In unilateral contracts there is not requirement that the offeree communicates intention to
accept, since acceptance is through performance
d) The defendants would have value in people using the balls even if they had not been
purchased by them directly.
Bloom v American Swiss Watch Co 1915 AD 100

The respondent company offered a reward to anyone who provided information leading to the

arrest of thieves who had stolen jewellery from their company

B furnished such information, although he was unaware of the reward
When he subsequently became aware of the award, he claimed it from the company.
The court held that he could not recover the award, because until the plaintiff new of the
offer he could not accept it, and until he accepted it there could be no contract, for a contract
requires consensus of two minds, and if the one did not know what the other was proposing,
the two minds never came together

Steyn v LSA Motors 1994 (1) SA 49 (A)

The Durbanville Golf Club held a pro-am golf tournament. To induce professional golfers to
take part, the club arranged sponsorship from LSA Motors Ltd in the form of a brand new cat

displayed next to the 17th green with a board proclaiming hole in one prize sponsored by ...
Steyn, an amateur golfer, entered the competition. Before the tournament he saw a newspaper
report referring to the 17th hole prize, but specifying any particular rules for eligibility to win

it.
On the day of the tournament, announcements were made that the hole-in-one prize was

restricted to professional golfers.

Steyn made a hole-in-one but the sponsors refused to award him the car because he was not

eligible as an amateur golfer

In court, Steyn argued that the wording in the board was an unqualified offer to all
participants and that, by virtue of the doctrine of quasi-mutual assent, Reeds Delta (LSA
Motors) could not rely on an unexpressed condition restricting eligibility to professional

golfers
The claim was dismissed on the bases that the claimant had to prove:
a) That the other party misrepresented its intention
b) That the claimant was actually misled; and
c) That a reasonable man in the claimants position would have been misled
The Appellate Division held that a reasonable man would not have been misled by the

unqualified advertisement on the 17th green

Steyns belief that the offer was open to amateur golfers was unreasonable, and his claim
could not be sustained

o Advertisements and Price tickets

- The general rule in our law is said to be that an advertisement constitutes
merely an invitation to do business rather than an offer.

Crawley v Rex 1949 SALJ 166 (ADVERTISING AND PRICE TICKETS)

A shopkeeper placed a placard outside his shop advertising a particular brand of tobacco for

sale.
The appellant entered the shop and bought a pound of the tobacco. He returned a while later

and wanted another pound.

The shopkeeper refused his request, apparently believing that he had been sent by a rival shop

owner intent on buying up his stocks.

The appellant would not leave the shop when asked to do so , and was eventually escorted out
by the police. He was subsequently convicted of a criminal offence for remaining unlawfully

on premises after being requested by the owner to leave.

In his appeal against the conviction, the appellant argued that he had not been on the
premises unlawfully, because by accepting the owners offer to sell the tobacco, he had
created a contract between himself and the shopkeeper and so was entitled to remain in the

shop until the contract was carried out.

The appeal was dismissed on the grounds that the advertisement was merely an invitation to
do business and that therefore no contract had come into being

o Tenders
- An invitation to the public to submit a tender for work to be done is not an offer
-

that is open to acceptance to the highest tenderer.

At most, it is an invitation to potential tenderers to make offers that will be
considered after closing date for the particular tender

o Auction
- Simple auctions: In terms of s45 of the CPA, sale by auction is considered to be
complete when the hammer falls; until this has taken place, a bid may be
-

retracted
With reserve: means that a price is set and the offer cannot be lower than this

price. Sale will go to highest bidder above reserve price

Without reserve: the article will be knocked down to the highest bidder. In this
instance, the auctioneer is considered to be making an offer to sell to the
highest bidder by calling for bids

TERMINATION
o Rejection of the offer
- An offer falls away if it is rejected by the offeree (expressly or impliedly)
- Impliedly: if the offeree makes a counter offer

Qualified acceptance (for example, where the offeree accepts subject to certain
conditions being met) will usually be construed as a counter-offer

o Death of either party

- Since an offer in itself creates no obligations, there is neither a debt that can pass
to the estate of the deceased offeror, nor any contractual right that can pass to the
estate of the deceased offeree
HOWEVER if the offeror has promised (constitutes as a contract) not to

withdraw the offer, then the offer does not terminate upon the death of a party
o Passing of time
- Where the offeror has prescribed a time limit for acceptance, the offer lapses
-

automatically if it is not accepted within the prescribed period of time

Where no time limit has been prescribed, the offer will lapse after a reasonable
period of time has passed (what constitutes as a reasonable period of time is
dependent on the facts of the case)

o Revocation of the offer

- Unless the offeror has promised not to revoke the offer for a certain period, the
-

offer may be withdrawn at any time prior to its acceptance

Since revocation is an expression of intention, it takes effect only when
communicated to the mind of the offeree; thus, if the offeree communicates
acceptance of the offer to the offeror before learning of the revocation, a
contract is concluded

D) ACCEPTANCE
DEFINITION:
o An acceptance is a statement of intention in which the offeree signifies his assent to
the proposal embodied in the offer
REQUIREMENTS: (may only occur)
o By person to whom offer is made
- Where an offer is addressed to unspecified persons, such as the general public
or a class of the public, it may be accepted by any member of the public or
class.
Where it is addressed to a specific person (or persons), it may be accepted only

by that person or group of persons

Bird v Summerville 1961 (3) SA 194 (A)

The appellant, who wished to sell his property, was informed by an estate agent that the first

respondent was interested in buying.

The appellant signed a written offer to sell, naming the first respondent as sole purchaser
However, the first and second respondents both signed as buyers.
At the time of making the offer, the appellant had been unaware of the existence of the second

respondent
The court found that although the appellant would not have been prejudiced by both parties
buying the property, the appellant was not bound to a contract of sale to both the respondents
because he never intended that his offer be accepted by both of them

o In response to the offer

- A person cannot be said to accept an offer if he or she is unaware of it
Bloom v American Swiss Watch Co 1915 AD 100

The respondent company offered a reward to anyone who provided information leading to the
arrest of thieves who had stolen jewellery from their company

B furnished such information, although he was unaware of the reward

When he subsequently became aware of the award, he claimed it from the company.
The court held that he could not recover the award, because until the plaintiff new of the
offer he could not accept it, and until he accepted it there could be no contract, for a contract
requires consensus of two minds, and if the one did not know what the other was proposing,
the two minds never came together

o The acceptance must be unqualified

Command Protection Services (Gauteng)(Pty) Ltd v South African Post Office Limited (214/12)
[2012] ZASCA 160 16 November 2012).
-

The appellant, Maxi, sued the respondent, the post office, in the High Court, claiming
damages allegedly suffered as a result of the latter's repudiation of an agreement between the

parties.
The appellant's case was that in July 2003 the parties concluded a written agreement in terms

of which Maxi undertook to provide guarding services for the post office in three regions.
January 2004 the post office wrote a letter to the appellant that constituted a repudiation of
that agreement, which repudiation was accepted by Maxi. As a result of the post office's

breach of the contract, Maxi suffered damages in the sum of about R 14 million.
The post office denied that the agreement relied on by Maxi ever came into existence. It
argued that, although the post office had informed Maxi that it had been awarded the tender to
provide security services, the contract between them was never finalised. The court a quo

decided in favour of the post office.

The critical issue on appeal was whether the letter of acceptance sent by the post office to
Maxi constituted an unconditional acceptance of Maxi's offer as contained in its tender

documents [para 9].

The SCA held that the letter of acceptance contained a stipulation that rendered Maxi's
appointment 'subject to' BEE improvement and the successful finalisation and signing of a
formal contract. Parties in such circumstances often reach agreement by offer and acceptance
while there are some outstanding issues that require further negotiation and agreement. Case
law recognises that in these situations there are two possibilities:
a) The first is that the agreement reached by the acceptance of the offer lacked animus
contrahendi because it was conditional on consensus being reached, after further
negotiation, on the outstanding issues. In that event, the law will recognise no contractual
relationship, unless and until the outstanding issues have been settled by agreement.
b) The second possibility is that the parties intended that the acceptance of the offer would
give rise to a binding contract and the outstanding issues would merely be left for later
negotiation. In this event, if the parties failed to reach agreement on the outstanding
issues, the original contract would prevail [para 12].

The court held that the term 'subject to' in the letter of acceptance was generally understood in

the contractual context to introduce some or other condition [para 19-21].

It further held that the post office's communication to Maxi did not constitute an
unconditional acceptance of the tender; but that it was intended by the post office and
accepted by Maxi as a counteroffer [para 25]. The agreement Maxi relied on never came into
existence. The appeal was thus dismissed with costs.

WHEN AND WHERE ACCEPTANCE TAKES EFFECT

o Declaration theory
- states that the contract comes into being when and where the offeree expresses
acceptance
o Expedition theory
- states that the contract comes into being when and here the offeree posts his or
her letter of acceptance
o Reception theory
- states that the contract comes into being when the letter of acceptance reaches
the address of the offeror
o Information theory
- states that the agreement is concluded when and where the offeror learns or is
informed of the acceptance, in other words, when the offeror reads the letter of
acceptance

Electronic Communications and Transactions Act 25 of 2002 Section 22:

Formation and validity of agreements
22. (1) An agreement is not without legal force and effect merely because it was concluded
partly or in whole by means of data messages.
(2) An agreement concluded between parties by means of data messages is concluded at
the time when and place where the acceptance ofthe offer was received by the offeror.

Jafta v Ezemvelo KZN Wildlife

Jafta applied for a job advertised by Ezemvelo KZN Wildlife

The interview was on 5 Dec 2006, and at the interview, Ezemvelo offered Jafta the
position of General Manager: Human Resources

He informed them that he had booked a holiday between the dates of 22 Dec and 8 Jan as
well as the fact that he would have to give 2 months notice to his then current employer
which he would only be able to do after returning from his holiday.

Ezemvelos HR officer e-mailed the job offer to Jafta on 13 Dec and it required Jafta to
begin employment on 1 Feb.

E) PACTA DE CONTRAHENDO
o Contracts about contracting:
- Very often in commercial practice, before an offer has been accepted, or even
made, the parties enter into ancillary agreement concerning the main agreement
-

that might follow.

For example, A, having made an offer to sell her property to B, might promise
not to revoke the offer for a number of days, so that B can think the matter
over; or A, not yet wishing to sell her property might promise B that if she ever

changes her mind and decides to sell the property, she will make an offer to B,
affording him the first opportunity to buy the property.
o SA Law recognises two types:
- An option
- A preference contract (right of first refusal/right of pre-emption)

OPTION:
o An agreement to keep an offer open for a period of time
o Nature of an option:
- The offer to enter into the main contract
- A separate subsidiary contract where the parties agree the main offer will
remain open on particular terms (It may even have its own fee attached) .
o Effect of option:
- Offeror is contractually bound to keep the offer open
- If he fails to do so : breach of the option contract
- Other party could: claim performance, claim damages or issue an interdict the
offeror
Boerne v Harris 1949 (1) SA 793 (A)

Offer to renew lease on a hotel for a further 5 years

Renewal clause: an offer within the original contract (15 April 1942 14 April 1947) to

renew lease on same terms... An offer is made

Open for acceptance until 6 months before end of first lease (15 Oct 1946)
On 5 October 1946 the lessee indicated his intention to renew the lease from 15 October 1946
SCA: there was no acceptance because the dates did not match up with the particular

requirements set out in the subsidiary contract there was no correspondence with the dates
in the offer: had to accept by 15 Oct 1946 but the new lease would only begin from 14 April
1947. [The acceptance was not clear and unequivocal]

RIGHTS OF PRE-EMPTION [PREFERENCE CONTRACTS]

o One party (preference grantor) agrees to give preference to another person (the
grantee) should he or she decide to conclude another agreement.
o Most commonly, a sale
o Example problems:

a) A to B: IF I decide to sell my Harley ( because my wife does not

accept), let us agree that: (a) I will make the first offer to you; or (b) I
will let you make the first offer to me
o No open offer (such as in option: power is in the hand of the acceptor). A cannot be
forced to sell. A preferential right only exists if A decides to sell.
o Thus, a right of pre-emption is conditional, and relies on a trigger event: i.e. the
decision to sell.
OTHER FORMS OF AGREEMENT TO AGREE
Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 SA 256 (CC)

CC: (obiter dictum): suggests that this should be enforceable: perhaps the law will

eventually develop to include other forms of agreements to agree

This application originates from a lease dispute between Everfresh and Shoprite
Checkers (Pty) Ltd (Shoprite). Shoprite bought the premises from its predecessor in title
during the currency of the lease, a portion of which is the subject of the lease between the
parties. Clause 3 gave Everfresh an option to renew the lease on its expiry on the same
terms and conditions, subject to agreement being reached between the parties on the

rental.
Seeing that Shoprite was opposed to the renewal of the lease on its expiry, Everfresh
remained in occupation of the premises. It alleged that it had unilaterally but validly
renewed the lease in terms of clause 3. Everfresh alternatively alleged that Shoprite had
no right to evict it, because clause 3 obliged Shoprite to make efforts in good faith to
reach an agreement on rental. Subsequently, Shoprite sought and obtained an eviction
order against Everfresh in the Kwa-Zulu Natal High Court, Pietermaritzburg (High
Court). The High Court held that an option to renew a lease on terms to be agreed is
unenforceable. The Supreme Court of Appeal (SCA) agreed with the High Court and

dismissed Everfreshs application for leave to appeal.

Before the Constitutional Court Everfresh argued that the common law of contract must
be infused with constitutional values, to provide for greater recognition of the concept of
good faith. The question was whether this can be done in circumstances where this issue
was directly raised in neither the High Court nor the SCA, but for the first time before the

Court.
Moseneke DCJ in a majority judgment acknowledged the importance of infusing
constitutional values into contract law. He however concluded that it was not in the

interests of justice to entertain the appeal and that Everfresh had not advanced any
grounds why it would be in the interests of justice for the Court to decide the appeal as
the court of first instance. He held that Shoprite was not warned of the case it had to
meet and the relief sought against it, nor was the Court afforded the benefit of the views
of the High Court and the SCA which would help shape the common law and customary

law in line with the normative grid of the Constitution.

Accordingly, the Constitutional Court dismissed the application for leave to appeal with
costs. The Court refused to set aside the order of eviction and to remit the matter back to

the High Court for re-hearing.

Yacoob J in a minority judgment held that the infusion of the values of the Bill of Rights
into contract law is of considerable significance, that the High Court was obliged to
develop the common law in the light of the factual dispute before it, and that it is
appropriate to refer the matter back to the High Court to consider whether to develop the
common law.

F) ABSENCE OF CONSENSUS/MISTAKE
MISTAKE
o Was the mistake legally significant or justifiable at law
o You have to show a material mistake to justify your claim
- If someone is successful in proving that there was a material mistake that is
legally significant or justifiable in law, the effect will be dissensus
o Classification of mistakes:
- As a result of the influence of English Law, courts refer to 3 types of mistakes:
a) Unilateral
b) Mutual
c) Common
- Common mistake is a separate juristic concept. We will consider only unilateral
-

and mutual mistake here.

Practically speaking (see p 82-83) there is not much distinction between
unilateral and mutual mistake.

Theories of contract:
- Used to understand the concept of mistake
- They define the philosophical explanation of a contract
- Do we adopt a [a] subjective approach (will theory) or and [b] objective
-

approach (declaration theory)?

The Will Theory:
Explains the foundation of a contract BUT it is not always protocol

because it is subjective
Requires actual, subjective agreement between the parties for
contractual liability to arise : places reliance only on the individuals

mind
Not a perfect theory, because a party can just walk away from a
contract due to the fact that they did not share the sameness of mind
intention is a big factor in considering the subjective theory, but how

can one party read the mind of another party?

The declaration theory:
Dictum of Wessels JA in SA Railways & Harbours v National Bank of
SA The law does not concern itself with the working of the minds of

parties to a contract, but with the external manifestation of their minds

Stipulates that the only important consideration is the external
manifestation of the parties wills. The true basis of contract, then, is to
be found in the concurring declarations (acts) of the parties, not in what

they actually think or intend.

The law should not consider the minds of the parties, we must rather
look to the manifestation of their mind: in other words their acts and

the true state of affairs between the parties etc.

Also not a perfect theory due to the fact that there would be no way to

argue, for example, confusion or being forced into a contract

What we need is a compromise between these two polar theories

Saambou Nasionale Bouvereeniging v Friedman 1979 (3) SA 978 (A)

Facts:

F drew a cheque in favour of Saambou-Nasionale Bouvereniging and gave it to W with

instructions that W purchase shares from Saambou.
It is not quite clear what happened to the cheque in the interim, but it was eventually handed to
Saambou by an unknown person and used to purchase shares which were issued to other
persons.

F stopped payment of the cheque and Saambou, relying, inter alia, on the objective appearance
of an intention on the part of F to bind himself in a contract with Saambou, sued F. T
he action failed.
The court stated that in view of the basic principle in our law of contract that there must be
consensus, Saambou's reliance on the objective theory rested on very shaky grounds.

Jansen JA identified 4 possible approaches:

a) Doctrine of Estoppel : a doctrine that applies across private law quite complicated and
Jansen JA discards it as an alternative approach
b) Doctrine of Culpa in contrahendo : German approach also rejected by Jansen JA
c) The reliance theory, aka the doctrine of quasi-mutual
Focuses on the conduct of the contract assertor and his/her claim there is a

contract.
The legal issue will be to determine whether or not the law supports the claim

that there is consensus

d) Doctrine of Iustus error
Focuses on the conduct of the contract denier and his/her claims that there is no

contract.
Can the law support his/her claim that there is dissensus?

Resolution (Saambou )
Judges chose the reliance theory
Although, a mistake is commonly called a Iustus error [we found there was a
mistake we simply use the term, do not apply the theory]
-

Reliance theory, in fundamental terms, states that:

No subjective agreement: contract is recognised if:
One party, by his outward acts, creates in the mind of the other party,
the belief/reliance that and an agreement has been reached; and

The party wanting to rely on the alleged agreement can show his
belief/reliance is reasonable

Hodgson Brothers v South African Railways 1928 CPD 257

Plaintiff: Hodgson Brothers and the defendant: South African Railways

The plaintiffs brought the application before the Cape Provincial Division for the claim of 394,
7 as damages in respect of the breach of a contract of sale for a 5-ton Karrier Lorry to the value
of 500
Negotiations regarding the sale and purchase agreement were initiated by a letter send by the
plaintiffs to the defendant on 4 May 1927. The letter constituted an offer of sale to the defendant
in respect of two Lorries, a Karrier Lorry to the value of 500 and a Reo to the value of 150.
The defendant replied on the 9 May 1927 stating that their letter had been sent to the General

Manager of Railways. Thereafter the parties communicated by way of telegram to set up a time
and meeting place for the review and inspection of the Lorries.
On 8 June 1927 the plaintiffs wrote to the defendants stating that they had disposed of the Reo
Lorry but that they would be pleased should the defendant still wish to take ownership of the 5ton Lorry.
This offer materialised on the 9 June, in which the plaintiffs requested that the defendants
respond to their offer within one month stating whether or not they wished to take over the 5-ton
Lorry.
On the 11 August 1927 the General Manager wrote that the government was prepared to pass an
order on the plaintiff for the 5-ton Lorry and stated that the price payable must include the spares
held for the lorry. The plaintiffs replied on the 13 August 1927, in a letter comprising their
acceptance of the inclusion of the spares.
On the 16 August 1927 the defendant telegraphed the plaintiffs stating that the price of the Lorry
had been omitted and that they were prepared to pay 300, should the plaintiff accept. The
plaintiff replied stating, inter allia, that the defendant was bound by the contract to pay the 500
and that the defendant had repudiated by defining a different amount payable.
The question before the court was whether or not the defendants were bound by a contract to
purchase the Lorry for 500 and thus whether their action constituted a repudiation.
The court found in favour of the plaintiffs on the basis of the reliance theory: the defendant had
induced the belief in the minds of the plaintiff that they were willing to purchase the Lorry for
500.
According to the reliance theory a party will be protected where they have been induced,
wrongly or rightly so, by the other party, to the extent that the party has created a reasonable
expectation in the mind of the induced party.
Therefore, despite the fact that the defendant may have had a different intention with regards to
the purchase value of the Lorry, they induced the plaintiff to believe that they would pay the
500 upon acceptance of the of sale, especially given the fact that no other amount was ever
mentioned or negotiated between the parties prior to the 16 August 1927

Smith v Hughes [1871] 6 QB 597

Mr Hughes was a racehorse trainer.

Mr Smith, who was a farmer, brought him (Mr. Hughes) a sample of oats, and Hughes
ordered forty to fifty quarters of oats at 34 shillings a quarter.
Sixteen quarters were sent to start with. But when they arrived, Hughes said they were not the
oats he thought they were.
He had apparently wanted old oats (which are the only ones racehorses can eat), and he was
getting new, green oats.
In fact, Smith's sample was of green oats. Hughes refused to pay and Smith sued for breach
of contract, for the amount delivered and for damages for the amount for oats that were still to
be delivered.
The jury at the County Court of Surrey, initially held for Mr Hughes that there was a mistake

on his part, but were directed by the judge that if Mr Hughes was under a mistake about the
oats (thinking they were old when they were green oats) and Mr Smith had known it, they
should find in Mr Hughes' favour. Mr Smith appealed.
The Court of the Queen's Bench found that the jury had been misdirected and ordered a
retrial.
Leaning in Mr Smith's favour, they held that the question was not merely whether the parties
were at consensus ad idem, but what they had communicated by their conduct and words to
one another.
Mr Smith was held to be under no duty to inform Mr Hughes of his possible mistake about
the kind of oats, reaffirming the old idea of caveat emptor (buyer beware). A unilateral
mistake is therefore in principle no ground for rescission of a contract
Blackburn J set out his classic statement of the objective interpretation of people's conduct
when entering into a contract. Rejecting that one should merely look to what people
subjectively intended, he said:
"If, whatever a man's real intention may be, he so conducts himself that a reasonable man would
believe that he was assenting to the terms proposed by the other party, and that other party upon that
belief enters into the contract with him, the man thus conducting himself would be equally bound as if
he had intended to agree to the other party's terms."
o

Signed/written documents
- Caveat subscriptor rule: when an agreement is reduced to writing and signed by the
parties, they are bound to its terms as signature signifies assent thereto. This places the
burden on the consumer to protect himself by understanding the terms of the
-

agreement before signing it, as he will be bound to their ordinary meaning.

It is reasonable that the party believes you are bound when you have signed a

document
Only if you can show mistake, or that the alleged agreement violated the element of
legality, can you escape BUT this is very rare

Slip Knot Investments v Du Toit 2011 (4) SA 72 (SCA)

The appellant: Slip Knot Investments (the plaintiff in the court a quo) and the respondent: Du
Toit (defendant in the court a quo)
The respondent in the case signed an agreement document containing a deed of suretyship.
While he admits to signing the agreement, he argued that he had done so by mistake and that
he did not intend to incur contractual liability in respect of the agreement.
The respondent is a trustee of the Smitskop Trust. The appellant advanced the trust a sum of
six million rand, according to an agreement signed by the respondent, the respondents
brother and nephew, who by signing the agreement stood surety for the repayment of the
advanced sum
A judgement was obtained after the trust and the sureties had failed to adhere to the settlement
agreement
A sequestration order was issued against the trust and the respondents brothers estate
The respondent alleged that he had no knowledge of the suretyship agreement and that despite
having signed the agreement he had, had no intention to be a party liable for the repayment of

the advanced amount.

Not only had the respondent had no direct contact with the appellant but he did not read the
agreement in full, based on the fact that the documents were urgent and he didnt have time to
read through all 72 pages of the contract and also because he felt reassured by the bank
manager who acted as the commissioner of oaths on this document.
The court had to determine whether or not the respondent was contractually liable for the
repayment of the money advanced by the appellant to the trust, based on the fact that he had
no intention of being contractually liable to the terms of the agreement, despite his signatory
consent to it, which he deemed to be a mistake.
The court found in favour of the appellant and thus the appeal was upheld with costs
The court held that contractual liability is not strictly applied only to those cases where there
is ad item consensus but that it can exist by virtue of the doctrine of quasi-mutual assent,
according to the reliance theory (para 9) [This theory states that while there is no meeting of
the minds, contractual liability will ensue.]
His assent on the agreement was indication enough to the appellant that he intended to be
contractually liable and thus the court held as such, supporting the claim that consensus
exists.

Burger v Central SAR 1903 TS 571

Burger delivered goods to the railways for carriage through an agent who signed a
consignment note stating that it was issued subject to section 47 of the Goods Traffic
Regulations.
Burger read the consignment note before the goods left but did not check the regulations. The
goods were subsequently lost in transit and Burger sued for their full value.
He lost the case.
His use of an agent did not affect the sound principle that a man, when he signs a contract, is
taken to be bound by the ordinary meaning and effect of the words which appear over his [or
his agents] signature.
Though the regulations were not printed as part of the contract, this did not change the
principle; mere reference to the regulations was sufficient save for fraud or misrepresentation.

PROVING A CONTRACTUAL MISTAKE

o How does a party trying to dispute a contract actually go about proving a mistake that
is legally recognisable?
A) Identify who the PARTIES are
P = party claiming there IS a contract
Q = Party claiming there is NO CONTRACT or A MISTAKE

B) The party alleging there is a contract (P) must demonstrate a prima facie
agreement
o In other words, is there evidence of:
- A declaration of intention on Ps part; and
- A corresponding declaration on Qs part
o The appeal to objectivity: can P show that Q, by his outward acts, has created in the
mind of P the prima facie (or apparent) belief/reliance that an agreement has been
reached?
C) If P is successful, the onus passes to Q to show that this belief is unreasonable
(remember: the reliance has to be reasonable for there to be a contract):
The enquiry has two parts:
- (a) Q will first have to show, on the facts, that there is some form of
material confusion between the parties (failure of will or subjective
agreement factually). Our law recognises 3 ways in which you can
demonstrate there is material confusion:
Confusion as to the nature of the contract or a key term if the
contract
Dobbs v Verran
Appellant had been conveyed at his request a distances of 300 miles in respondents motor
car, a private one, but nothing had been said about payment therefor.
Five months afterwards appellant sued respondent in the magistrate's court for 30 for
medical fees.
Respondent admitted owing the amount, but counter-claimed for 15 for the transport of
appellant in his car.
Respondent alleged that he had conveyed appellant at his express verbal request. The
magistrate found that no agreement about payment had been arrived at, but that appellant had
failed to prove his contention that he had been invited as a guest, and that as there was an
implied contract to pay, respondent's counter-claim must succeed.
Held, on appeal, that as appellant reasonably believed he was to travel as a guest even if
respondent thought he was to pay, the parties were not ad idem, and no contract express or
implied existed, and that therefore the appeal must succeed. Semble: That the onus of proving
the agreement whether express or implied relied upon by him rested upon respondent.

Slip Knot

I had no idea I was signing a supplementary contract in my personal capacity to stand surety
I was under the impression that I was signing a contract for a loan between my trust and Slip
Knot investments

Horty Investments v Interior Acoustics

Duration of the lease was being disputed on paper it was a 12 year lease (due to a typo),
however during negotiations it was also agreed upon 2 years.
A lessor had intended to let his property for two years, but owing to a careless typing error on
his part, the contract document stated that the lease was to endure (at a fixed rental) for 12
years.
The problem was that the lessee, an elderly and inexperienced businessmen, had signed the
contract in the bona fide belief that he was getting a 12 year lease
The Court, adopting the iustus error approach, said that the mistaken party could not rely on the
lack of true consensus to escape liability if the mistake was due to his own fault, because then
the other party could rely on the doctrine of quasi-mutual assent to uphold the contract despite
the dissensus
Instead of focusing on the negligence of the lessor in making the error, however, the Court
shifted the enquiry to the reasonableness of the lessees conduct and, having decided that a
reasonable person in his position would have detected the typing error, held that there was in the
circumstances no room for an application of the quasi-mutual assent doctrine
In effect, therefore, the lessors error was iustus because the lessees reliance on the appearance
of consensus was unreasonable.
Sonap Petroleum (SA) v Pappadogianis
In this case, the parties entered into a 20 year lease agreement.
However, when the appellants attorney drafted an addendum to the lease, he mistakenly
shortened the lease period to 15 years.
The respondent, as owner of the property, stood to gain from a shortened lease period and
signed he addendum without a murmur, later claiming that he believed that the appellant had
intended to shorten the lease period
The appellant had no such intention and claimed inter alia that the addendum was void in
light of the mistake
The court a quo found in favour of the respondent.
On the issue of mistake, it held that the appellants mistake had not been iustus because it was
due to its own fault
On appeal Harms AJA categorised the appellants mistake as unilateral on the basis that only
the appellant mistakenly believed that its declared intention conformed to its actual intention
He then proceeded to review the law pertaining to mistake in contract. He confirmed that, as a
general rule, the law concerns itself with the external manifestations and not the workings of
the minds of the parties to a contract
Harms AJA found that the respondent was aware of the possibility of a mistake on the part of
the appellant, and had a duty to speak and enquire whether the latter actually did intend to
shorten the period of the lease.
The respondent failed to discharge this duty with the result that there was no consent and the
addendum was declared void to the extent that it purported to reduce the lease from 20 years
to 15 years
The Sonap test (reliance test) thus enquires whether, in instances of dissensus, the contract
denier misled the contract enforcer into a reasonable belief that the contract denier had
actually assented to the contractual term in question
If the contract enforcer realised or should, as a reasonable person, have realised that there was

a real possibility of a mistake on the part of the contract denier, the contract enforcer had the
duty to speak and enquire whether the contract deniers expressed intention conformed to his
or her actual intention
Failure to do so results in an absence of reasonable belief in consensus on the part of the
contract enforcer, and, conversely, indicates a reasonable mistake on the part of the contract
denier.

Confusion as to the thing that is the subject matter of the contract

Maritz v Pratley
Maritz was conducting an auction sale and when he came to lot 1208, a mantelpiece, Pratley
was the successful bidder.
Subsequently Pratley refused to pay because he thought he had bought the mantelpiece
together with a mirror which was standing on it.
It turned out that the mirror was in fact a separate lot 1209.
The court held that Pratleys mistake was reasonable so there was no contract.
Allen v Sixteen Stirling Investments
Showed a prospective purchaser the incorrect property
The purchaser liked the property and initiated the sale, however once the sale was concluded, he
became aware of a physical map that led to a completely different property
There was a material confusion as to what property was being sold and bought
The plaintiffs error as to the property he was purchasing was caused by the misrepresentation
of the defendants agent. The agent misled the plaintiff by pointing out to him a different
propery to that stipulated in the deed of sale that the plaintiff signed
The court found that the plaintiffs mistake had been reasonable because it was caused by the
misrepresentation of the defendants agent in pointing out the wrong property

Confusion as to the person whom one is contracting

National and Overseas Distributors Corporation v Potato Board

In this case, the respondent mistakenly accepted the offer of the appellant, when it actually
intended to accept the offer of another party
The court accepted that a contract had arisen purely on the basis of the concurring expressions
of the intention of the parties
It also indicated that if the respondent had pleased iustus error , its mistake would not have
been regarded as reasonable
However, this case can be rationalised just as well in terms of the of the doctrine of quasimutual assent: the respondent: by accepting the appellants offer, clearly led the appellant to
believe (and the belief was reasonable) that consensus had been reached and therefor a
contract had arisen between them.
The factors that indicated an absence of reasonable mistake on the part of the respondent (the
contract denier) conversely implied the existence of reasonable reliance on the part of the
appellant (the contract assertor)

BUT NOT:

Problems with regard to the quality of the thing that is the subject

matter of the contract

Errant motive
Evidence of material factual confusion might suggest a mistake
BUT... our theories of contractual formation tell us this is not necessarilu

the case.
The contract can still be upheld if, despite the subjective factual confusion,
there is reasonable reliance on the appearance of consensus by the contract

assertor
SO (b) : Q must also show unreasonable reliance as a matter of law
NB: focus in on the contract assertor

o There will be unreasonable reliance (no matter what the other party did) if:
- The party alleging a contract exists:
a) Subjectively knew of the material confusion, but kept silent (Sonap)
b) Ought reasonably to have known of the material confusion, but did not clarify the
position (Horty)
c) If the party alleging a contract: actually caused the confusion in the first place by
creating an impression, prior to contracting, which is contrary to the document which
he now relies (Allen)
Spindrifter v Lester Donovan

The appellant in Spindrifter (Pty) Ltd entered into a standard form contract which embodied
an application to stage an exhibition on 24-27 July 1981.
The contract provided that would-be exhibitors were bound by the general conditions printed
on the reverse side of the document.
Among those conditions was a clause entitling the respondent 'for any reason whatsoever' to
vary the dates on which the exhibition was to take place, and binding the exhibitor in the
event of a change of date to make payment of the moneys due under the contract.
In April 1981 the exhibitor was notified that the dates of the exhibition had been changed to
30 July-1 August 1981.
It replied informing the respondent that the dates were unsuitable and that it considered the
agreement cancelled.
The court a quo held that the exhibitor was liable for damages, but on appeal the principles
enunciated in Du Toit's case were applied and the decision reversed.
The agent of the respondent (the owner of the exhibition centre), having negotiated with the
appellant on the basis that the exhibition would be held on certain dates, had failed to draw its
attention to the fact that the dates of the exhibition could be altered with impunity and that the
appellant would be liable for payment.
The court held that the real enquiry was not whether the owner of the premises had known
that the exhibitor was unaware of the general conditions.
What was important was whether the exhibitor had had reason to believe that the form he was
about to sign contained a provision making him liable to pay even if the dates were changed,

and whether the owner had had reason to believe that the exhibitor would have signed had he
known that.
The exhibitor could not be affected with constructive notice of the relevant provision, and in
the circumstances his error was iustus.

d) The clause in the dispute is a trap for the unwary, and ought reasonably to have been
pointed out and clarified before the document was signed and settled
Constantia Insurance Co v Compusource

A company involved in arbitration insured against losing the case and having to pay costs. It took out the policy,

attracted by the insurer's sales slogan 'no win no pay'.

It thought this meant it only had to pay the premium if it won the case. When it looked like losing and the insurer
cancelled the policy but claimed the premium and sued for payment under a term of the policy which it said

entitled it to do so.
The company relied on the sales slogan and said it was unaware of the policy term which formed the basis of the

insurer's case.
On 30 March 2005 the SCA found, in the matter of the insurer, Constantia Insurance Ltd, and Compusource (Pty)
Ltd, the company, that the insured was not bound by the term, because its representative did not actually agree to it

and because the representatives of Constantia could not reasonably have thought that he did.
The type of insurance, post-dispute or post-litigation insurance (PDL insurance), is novel in this country. The

novelty is that it is sold when a dispute or litigation has already ensued.

The arbitration involved a claim by Compusource against three companies referred to as CQP. It took out two PDL
insurance policies with Constantia which insured both the costs of CQP up to R800 000 and its own costs up to

R1m.
The aggregate premium payable exceeded R1,3m. Compusource's representative, Mr Simon Rust, agreed that the

policies would be subject to Constantia's standard PDL terms.

Two standard terms gave rise to this dispute. In terms of the first the insurer was entitled to cancel the policy if
something was discovered that seriously reduced the insured's prospects of success in the litigation. The second

term provided that in the event of cancellation, the insurer would be entitled to claim the premium in full.
The arbitration proceedings had reached an advanced stage when Constantia was informed that CQP had

introduced new defences which substantially strengthened its case.

Relying on the two clauses Constantia cancelled the policies and claimed the premium.
In its defence Compusource said Rust had been unaware of the second clause relied upon by Constantia when he
entered into the policy agreements on behalf of Compusource and that he therefore never actually agreed that

Constantia could claim the premiums on cancellation.

This defence succeeded in the Johannesburg High Court and Constantia's claim was dismissed with costs.
On appeal the SCA held that Compusource would only be bound by a term to which Rust did not agree if

Constantia's representatives reasonably believed that he did in fact agree.

After analysing the evidence at the trial, the SCA came to the conclusion that the reasonable person in the position
of Constantia's representatives would not have thought that Rust had actually agreed to the second
clauseconcerned. Constantia's appeal was dismissed with costs.

o Case study (exactly the same as Spindrifters case)

- Jones: alleging the mistake
- White: alleging there is a contract
- White proves there is a contract, onus falls on Jones to prove there is a mistake.
- Form of factual confusion: key term of a contract is at issue. Did he know
about the clause that indicated that dates could change at random and he would
still be bound by the contract. He alleged that he was unaware of that term, and
-

there was no subjective agreement about this term between the parties.
Court has to resolve this by implementing the reliance theory.
Could be argued that White subjectively knew of the material confusion (the
clause) but kept silent. If that argument fails, Jones can fall back on (2) and (3)
by her conduct she created an impression that the dates of the fair were the
original ones mentioned which is important to him due to the fact that he is

going on a work trip the following week.

Furthermore, the clause was found at the back at 6pts in light green (4)
Can be argued there is a mistake

o Final comments:
- If Q is able to show factual material confusion AND unreasonable reliance: you
have, in a general sense, a mistake (iustus error) , or, in a particular sense, an:
a) Error in negotio
b) Error in corpore
c) Error in persona
(Only use this terminology as a conclusion)
-

If you cannot prove the requirements :

There will be no mistake (there will be reasonable reliance), and the

contract will stand

Potato Board, Hodgson

Brothers,

Slip

Knot

(couldn't

show

unreasonable reliance)
o Effect of mistake
- Contract void ab initio
- in cases of error in negotio relating to one term only: the offending clause can
-

be struck out, leaving the rest of the contract in tact (e.g compusource )
In others words contract (or clause) did not ever exist
G) Unsigned contracts and ticket cases

o The test is the same: one of reasonable reliance

Can the person asserting there is a contract show he/she is reasonably entitled

to rely on the appearance of consensus?

o Did the party who received the ticket (Q) know there was writing/printing on the
ticket and in that situation would it be reasonable to assume that writing/printing
could referee to terms of a contractual nature
- If yes, chances are it will be reasonable for the other party (P) to rely on the
appearance of consensus
SA Railways v Mclarens (unusual case because in this case answer to question is no)

M deposited a package at the cloakroom of the Pretoria railway station and was given a

ticket by the attendant.

Printed in red ink diagonally across the ticket were the words The department is not

responsible for any article exceeding the value of 5 pounds.

These words had been partly obscured by the attendants written description of the

article deposited
M knew that there was printing on the ticket, but not that it contained any conditions

limiting the departments liability.

The package was lost and M sued for its value
Under the common law, the railways defended the action the grounds that the articles
deposited were worth more than 5 pounds and, by virtue of the term on the ticket, they

were not liable for more than this amount.

The court rejected this defense, holding that the railways had not done what was
reasonably sufficient to give M notice of the term and, hence, he was not bound by it.
In reaching this conclusion, the court had regard to the following considerations:
a) A cloackroom ticket is not a document which a person ought
reasonably to suppose will contain terms;
b) The attendant had written the description of the package on the ticket,

which suggested that whatever was under the writing was unimportant
c) The ter, was, in any event, not printed in a very distinctive fashion
d) Ms attention had no specifically been drawn to the terms on the ticket
But, as the yes answer becomes increasingly unlikely, the onus shifts more to a
reasonable person in the position of P to explain the situation, to take steps to ensure
there is no confusion created in Qs mind and not to trap the unwary Q

o Policy shifts

Heavier onus on banks, insurance companies etc. with regards to explaining

terms of the contract

A minor watering down of the caveat subscriptor rule
S 49 of the Consumer Protection Act

Standard Bank of SA v Dlamini

Mr Dlamini, a functionally illiterate Zulu speaker, bought a car from a second-hand car dealer.
The dealer acted as the bank's agent to facilitate the bank's financing of the purchase of the
vehicle.
Four days later Mr Dlamini returned the seriously defective vehicle and demanded a refund of
his deposit.
The dealer did not refund Mr Dlamini, and the bank's attorneys ended up issuing summons
against Mr Dlamini.
The bank contended that, because Mr Dlamini did not notify the bank of the termination in the
manner prescribed by a certain clause in the agreement, the termination was a voluntary
surrender, in which case the bank could sell the vehicle and claim any shortfall due by him
under the agreement.
This clause provided that Mr Dlamini could, within five business days, terminate the
agreement on notice to the bank at a certain fax number, and return or tender the return of the
vehicle.
What the agreement had not recorded was that he was entitled to a refund in terms s121(3)
(a) of the National Credit Act 34 of 2005 (NCA).
Held, that Mr Dlamini terminated the agreement by returning the vehicle F because it was so
defective that it could not be driven. The bank failed to establish a factual basis for any finding
that the termination was a voluntary surrender, which is usually triggered by a consumer's
inability to comply with the credit agreement. Mr Dlamini's mere non-compliance with the
procedural formality of faxing notice of termination did not lead to the inference that he
terminated the agreement by voluntarily surrendering G the vehicle. (Paragraph [25] at 225E
F.)
Held, that the bank and its agents caused Mr Dlamini to enter into a credit agreement without
reading, interpreting and explaining the material terms to him, which he did not know or
understand. (Paragraph [26] at 225G.)
Held, that, when a credit agreement was terminated in terms of s 121, the H consumer had the
right of a refund from the credit provider, which the clause in the bank's agreement studiously
excluded. Rescission of the agreement under s 121 aims to restore the parties to the status quo
ante. The remedy to which Mr Dlamini was entitled when he discovered that the bank's agent
sold him a vehicle that could not be driven at all, was a refund in terms of s 121(3)(a).
(Paragraphs [37] [39] at 228C H.) I
Held, further, that non-disclosure of s 121(3)(a) violated the right of consumers to education
and information in terms of s 3 of the NCA. The bank's selection of what parts of s 121 of the
NCA it recorded in the agreement, and what it excluded, was deliberate and deceptive. Such
deception conflicted with the letter and spirit of the NCA. (Paragraphs [41] [42] at 229A
D.)
A Held, further, that the bank could not have misunderstood Mr Dlamini's reasons for
returning the defective vehicle. The bank had given the dealer no mandate to report vehicles

that were returned within five days in terms of the termination clause. Such a business practice
made credit transactions unduly onerous and a trap for poor, illiterate and disadvantaged
people who intuitively would return defective goods to a supplier and ask for a refund. B The
bank could not absolve the dealer of its duty to act in good faith to notify the bank in the
ordinary course of commercial practice that the vehicle was towed back and that it could not
be driven. (Paragraphs [43] [45] at 229D H.)
Held, further, that for lawyers and lay persons alike, the form of the bank's standard agreement
was an unappetising, formidable read. For a labourer C like Mr Dlamini who did not read,
write or understand English there might just as well have been no written agreement at all. Mr
Dlamini was in a worse position than the purchaser who signed one page of an agreement, but
who was sued in terms of a clause appearing on the reverse of that page which had not been
sent to him. His failure to comply with a purely procedural obligation had not been due to an
unwillingness to comply, but D rather an unawareness of such an obligation. (Paragraphs [53]
and [57] at 231G H and 232H 233A.)
Held, further, that the bank could not hold Mr Dlamini bound to the agreement by applying the
common-law principles of caveat subscriptor and mutual consent. Due to his illiteracy, the
unpalatable form and get-up of the agreement would have been immaterial to Mr Dlamini, and
this was all E the more reason why the bank should have ensured that its agents explained the
material terms to him. Since Mr Dlamini was ignorant of the prescribed notice requirements of
the agreement, there was no mutual consent as regards this term. (Paragraph [64] at 234F H.)
Held, further, that the agreement had been skewed in favour of the bank by: the selective
disclosure; the failure to inform Mr Dlamini of the contents of the agreement; and the breach
of his rights to information in an official language that he understood and to information in
plain and understandable language (ss 63 and 64 of the NCA). Distorting the balance created
in the NCA in this way was unlawful, defeated the purpose of the NCA, and rendered the
entire agreement unlawful. The entire agreement had to be set aside. (Paragraphs [66] [67] at
235B E.)

COMMON MISTAKE
o No dissensus, as discussed before
o Both parties are in complete agreement as to what they were doing
o But both are mistaken as to some vital underlying assumption/ suppostition
underpinning their contract
Dickinson Motors v Oberholzer

The defendant under a hire-purchase agreement sold a Plymouth car to the plaintiff's son and
received an acknowledgment of debt from the son for the amount owing.
The defendant later took judgment against the son for the amount owing; a warrant of
execution was issued and served on the son.
A nulla bona return was made and it was recorded that the son had stated that this car was on
his father's, the plaintiff's, farm.
This statement was false as far as the identity of the car was concerned in that the son had

meanwhile purchased another Plymouth from the A Motors and exchanged it for a Hudson car
belonging to his father.
The son then sold this car and the first Plymouth to certain garages.
The messenger, still acting under the judgment obtained by the defendant, attached the second
Plymouth which was in plaintiff's possession on his farm.
The plaintiff had allowed the messenger to take the car away and was told that if he paid an
amount of 257 he could have the car back.
Efforts by the plaintiff to obtain the return of his Hudson car from his son having failed,
sometime later he wrote to the defendant asking whether the Plymouth which had been
attached had been sold, and if not whether the offer to let him have it for 257 was still open
for acceptance by him.
The reply was that if he paid in cash the amount outstanding on the car - approximately 291
- he could call and collect it, which he did, the hire-purchase agreement relating to the first
Plymouth being cancelled on the signature of the plaintiff and a representative of the
defendant.
As the result of a judgment obtained by the A Motors, a representative of this firm went with
the messenger and removed the second Plymouth from the possession of plaintiff.
Plaintiff thereupon instituted action to recover the 291 paid to defendant.
He pleaded that he paid this amount in error to the defendant, which amount was not owing
by him to the defendant. In an amendment made to the plea after all the evidence had been
led, it was admitted that the amount had been paid but it was denied that such had been paid
in error.
It was averred that this amount had been paid in payment of the amount owed by the
plaintiff's son. It further admitted that the sum was not owing by plaintiff and stated that when
the amount was paid the plaintiff knew this.
A trial Court having entered judgment in plaintiff's favour, on an appeal,
Held, if the parties had regarded the transaction as a new sale, that the seller had to give the
purchaser quiet possession and if the C purchaser was lawfully evicted he was entitled to a
refund of the purchase price.
Held, further, if the transaction was regarded not as a fresh sale but as a release of the car by
payment of what was owing by the plaintiff's son to the defendant, that the result was the
same.
Held, further, as the amount had been paid under a common mistake in regard to a matter
which was vital to the transaction and as if either D of them had been aware of the true
position the transaction would not have gone through, that the plaintiff was entitled to a
refund of the amount paid.
The decision in the Transvaal Provincial Division in Dickinson Motors (Pty.) Ltd v
Oberholzer, confirmed.

RECTIFICATION
o Refers specifically to written contracts
o If the written document fails to reflect the parties common intention accurately, the
parties can rectify the misrecording
o Who can rectify the document:

The parties themselves (acknowledges there is an error)

By application to court (if there is dispute: one party decides that there is no
error in written document)

- often in limine to main issue (a form of

proceedings that is preliminary to the main issue where the court has to deal
with it before the main issue so that they can move onto the main issue)
o NB: it is only the document that is rectified, not the contract
o Requirements
- The applicant must be able to prove on a balance of probabilities that a
-

common intention was misrecorded

Important evidentiary burden in cases of dispute
It is easier where the document is merely evidence of the already concluded
contract (oral agreement settled over a meeting and then just to be safe put it
in writing as evidence)
Court is more likely to consider arguments for rectification in such

instances
o Cases where the contract cannot exist without writing
- Some contracts can only exist once they are formalized in writing
- E.g. sales of land, suretyships
If the misrecording affects the essential formal legal requirements for

the valid contract: no rectification

If the misrecording affects other ancillary terms: rectification is
possible

Meyer v Merchants Trust 1942 AD 244

Terms of suretyship I (Meyer) do hereby bind myself as surety For the payment of all
monies which may be owing by Gabbe & Meyer to their creditors [in my personal capacity]
provided that the total amount recoverable from me notwithstanding the amount that may
be owing by Gabbe & Meyer shall not exceed 250 pounds.
Nature of suretyship agreement: he is not going to take more than 250 pounds in liability :
limited suretyship agreement
What was stated above was not typed up in the contract the secretary perpetrated a
homeoteleuton (the use of word-endings that are similar or the same, either intentionally for
rhetorical effect or by mistake during copying of text)
I (Meyer) do hereby bind myself as surety For the payment of all monies which may be
owing by Gabbe & Meyer to their creditors [in my personal capacity] provided that the
total amount recoverable from me notwithstanding the amount that may be owing by Gabbe
& Meyer shall not exceed 250 pounds. (the repetition of those words confused the secetary
who was typing up the contract
The contract, as a result, read as follows, I (Meyer) do hereby bind myself as surety For
the payment of all monies which may be owing by Gabbe & Meyer to their creditors [in my
personal capacity] provided that the total amount that may be owing by Gabbe &Meyer
shall not exceed 250 pounds

Nature of the suretyship: if the debt is more than 250 pound, Meyer no longer stands surety
Bank initiated proceedings, claiming that this was not the common intention between the
parties and would like to rectify the document