Contract

• The responses to an offer are:

  • Unqualified cceptance, contract formed
  • Qualified acceptance/counter offer, no contract and offer falls
  • Rejection, no contract and offer falls
  • Enquiry, no contract and offer remains
• The postal acceptance rule states that the contract is made at the moment of posting
• A contract is made when an offer is met by acceptance
• An offer is the proposal of terms upon which the offeror is ready and available at that moment to make a contract
• The offeror must have an intention to be bound upon acceptance.
• These are known as invitations to treat

  
• Offers may be confused with a proposal to treat
• To be considered an offer, a proposal must meet the following test:

  • It must be clear who the contracting parties are
  • The legal nature of the contract must be clear
  • The subject matter must be clear
  • The price must be agreed
  • There must be the intention to be bound if the offer were accepted
  • There must be communication to the offeree
• Once an offer has been made, note the following points:

  • Withdrawal of the offer is effective if communicated to the offeree and is allowed at any time prior to acceptance unless a unilateral promise to keep offer open has been made too.
  • Lapse of an offer occurs after a reasonable time has elapsed, or earlier if the offeror states this when making the offer
• For a qualified acceptance:

  • No consensus in idem is reached
  • The original offer is destroyed and the qualified acceptance is a counter offer
• Contracts which can only be constituted in writing:

  • Contracts or Unilateral Obligations (i.e. promises) concerned with interests in land
  • Gratuitous unilateral obligations (i.e. promises), otherwise than in the course of business
• For a consensus in idem, an offer must be met with acceptance
• The validity of a contract may be challenged over:

  • Lack of capacity - void
  • Extortion - both
  • Facility and circumvention - voidable
  • Undue influence - voidable
  • Error - both
  • Misrepresentation - voidable
• Void Contract = Null, no legal effect

  Voidable Contract = Annullable, has legal effect until 'set aside' in court

  Reduction of a Contract = Judicial remedy which 'sets aside' a voidable contract
• Errors so fundamental as to mean there was no consensus in idem are termed 'essential error' or error 'in the substantials'.
• Essential errors include errors in:

  • Price
  • Subject
  • Person
  • Quality
  • Quantity
  • Extent of the thing engaged for
  • Nature of the contract
• The test for misrepresentation:

  1. There is a false statement of fact made prior to the formation of a contract
  2. which induces the other party to enter the contract
  3. and is material so that but for the misrepresentation that party would have declined to contract.
• Express terms - expressly agreed between parties

  Implied terms - both parties have assumed will apply
• terms can be implied in law or fact
• To test if express terms are valid:

  • Is the source of the terms contractual in nature
  • Is notice of the terms given in time
  • Is the degree of notice adequate
  • Do the terms clearly have the meaning contended
• A breach of contract is the failure to perform an obligation set out in the contract when due 
• Remedies for a breach of contract include:

  • Self-help remedies - retention, rescission
  • Judicial remedies - damages, specific implement
• Retention is to withhold performance, recission is to terminate the contract.
• Mutuality says that performance cannot be demanded unless given in return
• Retention is available if the principle of mutuality has been violated.

  Recission is available in the case of a material breach or repudiation.
• If repudiation is given, it an be accepted and sue or refused and the contract remains
• Judicial remedies include:

  • Action for debt (enforcing payment)
  • Specific implement (enforcing non-payment obligations)
  • Interdict (prohibiting actions)
  • Remedies agreed in the contract
  • Damages (compensation for loss)
• Requirements for damages are:

  • Must be a breach of the contract
  • Must prove the loss caused by breach
• Limits on recoverable loss through damages:

  • Causation
  • Remoteness of loss
  • Mitigation
• Test for remoteness of loss:

  Damages must be either arising naturally according to the usual order of things, or such as may reasonably be expected to have been in the contemplation of both parties
• Is it possible for an offeror to bind themselves to keep an offer open for a certain period of time? yes
• The more unusual the term, the more notice that has to be brought to it.