2. Final Assignment CL1 Dated 19th May 2011

The Law and Practice of Arbitration & Law of Contract

ASSIGNMENT NUMBER CL1

PART A

THE LAW AND PRACTICE OF ARBITRATION

&

PART B

LAW OF CONTRACT

1 of 78 Assignment CL1 of Rakesh Kumar


PART A: THE LAW AND PRACTICE OF ARBITRATION



TABLE OF CONTENT

PART A: THE LAW AND PRACTICE OF ARBITRATION 2

QUESTION 1 5

ANSWER 1 5

QUESTION 2 8

ANSWER 2 8

The three rules of Natural Justice are as follows: 9

1. Hear the Other Side (Audi Alteram Partem) 13

2. No one is fit to be judged in his own cause (Nemo iudex idoneus in propria causa est) 15

3. Justice must be seen to be done 17

Conclusion 20

QUESTION 3 22

ANSWER 3 22

Difference between Substantive and procedural Law 23

Examples of categories of the law which fall into each type: 26

QUESTION 4 28

ANSWER 4 28

QUESTION 5 33

ANSWER 5 33

Which part of judgment is relevant: 35

The extent of the application of this principle insofar as the different courts of South Africa and those of foreign countries are concerned: 37



PART B: LAW OF CONTRACT 39

QUESTION 1 40

ANSWER 1 40

Difference between Terms and Conditions: 43

QUESTION 2 45

ANSWER 2 45

The difference between void and voidable contract and its examples are as follows: 46

QUESTION 3 56

ANSWER 3 56

Difference between Misrepresentation and Mistake: 57

QUESTION 4 66

ANSWER 4 66

Repudiation: 66

Options available to party when other party has repudiated: 67

QUESTION 5 70

ANSWER 5 70

QUESTION 6 74

ANSWER 6 74

BIBLIOGRAPHY 77



QUESTION 1

Custom is a source of our law. List the requirements before a custom

acquires the force of law.

ANSWER 1

Bois et al. (105:2011) states that

“A custom or social commercial practice can be held by a court to be legally

binding. Hence custom can serve as a source of law”.

Based on the above-statement it is clear that the custom is a source of law

because it can be held by the court of law legally binding. Further it is to be

noted that almost all the universal custom is presently in the form of law and

hence custom is a major source or law.

Bois et al. (106:2011) described the requirements for custom to acquire the

force of law and listed the requirements for the custom as follows:

1. Reasonable

2. has been long established

3. has been uniformly observed, and

4. is certain



In addition the custom must not be in conflict with the constitution of Southern

Africa.

Further Plessis and Hees (238:2009) identifies requirements such as the

custom should be certain, lawful, ingrained, generally followed, must be

regarded by those who are in contact with it, old enough, regularity in pattern,

clearly defined, reasonable, just and those who acts in this way may be

interested parties or organization of state, which applies the law.

Reasonable: Any custom to acquire the force of law must be reasonable.

Further any custom to be reasonable the custom must not be contrary to

moral, should be non-injurious or should not be non-oppressive.

Has been Long Established: The custom must have existed and applied for

a long time to be acquired as a force of law.

Has been uniformly Observed: The custom must be uniformly adhered and

invariably complied with by people.

Is certain: A certain number of witnesses are needed to substantiate the

certainty of the custom, however in case of a trade usage does not require

strict proof as a custom.



The custom must not have any conflict with the Constitution, which is the

supreme law of the country, to acquire as a force of law.



Question 2

What are the “Rules of Natural Justice” and why are they important in

arbitration proceedings?

Answer 2

Butler and Finsen (165) stated that:

“Although the courts generally appear to regard the arbitrator as ‘master of

his own procedure’ he must nevertheless conduct the proceedings in

accordance with the rules of natural justice”.

Further they states:

“When an arbitrator has conducted the proceedings in a manner that did not

ensure the fair administration of justice between the parties, the court will

intervene. The arbitrator’s duty to comply with the rules of natural justice

means no more than the duty ‘to act fairly ….. in carrying out the decision

making process. There are three rules in particular which he should always

bear in mind”.

They refer the importance of rules of justice in arbitration proceeding and

clearly indicated that it is duty of the arbitrator to follow rules of natural justice



and act fairly while carrying out the decision making process. They further

stated the three rules of justice.

The three rules of Natural Justice are as follows:

1. Hear the Other Side (Audi Alteram Partem)

2. No one is fit to be judged in his own cause (Nemo iudex idoneus in

propria causa est)

3. Justice must be seen to be done

Importance of rules of natural justice in Arbitration

proceedings

The Article 2 (Supremacy of Constitution) of Constitution of South Africa

states:

“This Constitution is the supreme law of the Republic; law or conduct

inconsistent with it is invalid, and the obligations imposed by it must be

fulfilled”.

This indicates that the law stated in Constitution is supreme and further Article

33 (Just Administrative Action) of Constitution, while inferring to the rules of

natural justice states that:



“(1) Everyone has the right to administrative action that is lawful,

reasonable and procedurally fair. (2) Everyone whose rights have been

adversely affected by administrative action has the right to be given written

reasons. (3)National legislation must be enacted to give effect to these

rights, and must- (a) provide for the review of administrative action by a court

or, where appropriate, an independent and impartial tribunal; (b) impose a

duty on the state to give effect to the rights in subsections (1) and (2); and (c)

promote an efficient administration”.

Hence, it can be seen that the supreme law of the country (South Africa) has

provided utmost important to the rules of natural justice and directs that

everyone has the right to administrative action that is lawful and impartial to

ensure fair decision. Adversely affected person must receive the written

reason, and national legislation should be in line with it, to provide

independent and impartial tribunal to effect to the rights of the people.

Further Article 34 (Access to Courts) of Constitution of South Africa states:

“Everyone has the right to have any dispute that can be resolved by the

application of law decided in a fair public hearing before a court or, where

appropriate, another independent and impartial tribunal or forum”.



Here we can see that Supreme law of the country providing right to resolve

his/her dispute through applicable law, by fair public hearing, and for this the

court should be independent and impartial.

Guided by the instruction of the Constitution of South Africa the Section 33(1)

of Arbitration Act 42 of 1965 states:

“33 Setting aside of award

(1) Where—

(a) any member of an arbitration tribunal has misconducted himself in

relation to his duties as arbitrator or umpire; or

(b) an arbitration tribunal has committed any gross irregularity in the

conduct of the arbitration proceedings or has exceeded its powers;

or

(c) an award has been improperly obtained,

the court may, on the application of any party to the reference after due

notice to the other party or parties, make an order setting the award

aside”.

Here it can be seen that the arbitration act 42 of 1965 clearly directs that if the

arbitration proceeding will be misconducted or gross irregularity in the

conduct of arbitration proceeding found or if the award has been improperly

obtained, the court may make an order to setting the award aside. Hence



there is no scope for irregularities, unfairness, bias in the arbitration

proceeding.

This rules of natural justice inferred under article 33, 34 of Constitution of

South Africa and Section 33 (1) of Arbitration Act 42 of 1965 guides and

indicates the importance of rules of natural justice in arbitration proceeding.

The aim of the arbitration proceedings is to resolve the dispute between the

parties with fairness, without bias and to achieve this aim, arbitrator must

conduct the proceedings in accordance with rules of natural justice as guided

by Constitution of South African and Arbitration Act, so that the decision of

award will be fair, without bias and just, otherwise the court will intervene as

stated in section 33(1) of arbitration act.

1. Hear the Other Side (Audi Alteram Partem)

The Constitution of Republic of South Africa (article 33) provided every citizen

of South Africa right to administrative hearing, which is fundamental to the

fairness of arbitration proceeding. Hence before taking any decision by the

arbitration tribunal, the party must be given opportunity to be heard.

As per Butler and Finsen (165) this rules guides that:



“A party should be fully informed of the evidence and arguments

which have been produced against his case and have a proper

opportunity of presetting his own case to the arbitrator before the

arbitrator takes a decision”.

The arbitrator must inform the parties, what the evidence, documents,

argument and claims are made by one party to other party. During arbitration

proceeding while sending any document to arbitrator, one party should copy

the document to other party, similarly arbitrator while writing to one party must

copy the letter/document to other party. The arbitrator should not

communicate with one party when other party is not present. Following these

procedures, will help all the parties, to be fully informed of the matters in

dispute and arguments presented by parties. Further the arbitrator must

provide sufficient time to parties to present their case and, all the parties of

the dispute, and arbitrator must ensure that one party must here what other

party is stating or claiming, so that other party can counter the statement, and

can produce the evidence to counter the claim, made by the first party.

Here it is very important that the defendant must be told what claimant is

claiming and claimants must be told what is the counterclaim of defendant, so

that accordingly the parties can prepare there defense.

In case of Kollberg v cape town Municipality 1967 (3) SA 472 (A), the court

has stated that:



“If the rules of natural justice are implied, the audi alteram partem rule is

applicable. Non constat , however, that every breach of the principles of

natural justice automatically renders void the decision in question.”.

Hence if the arbitrator during arbitration makes the award without informing

both the parties about the evidence, argument, claim, documents etc

produced by one party against each party or If the arbitrator does not gives an

opportunity to the affected person or entity to present his case or if the award

is not based on reasoning the court will intervene and render the award void.

The arbitration tribunal must provide written notice to finalize the date and

time of arbitration proceeding, convenient to all parties, and if reasonable

reasons provided for change of the date and time, it should be accepted.

Inspect goods and property involved in dispute, if required.

The oral evidence should be recorded, as the parties agree; only in case the

parties do not agree, the arbitrator should direct the way to record the oral

evidence.

Following this rule of natural justice helps arbitrator carryout the proceeding in

transparent manner, gathering all the information that helps better analyzing

evidence and argument presented during arbitration proceeding and

eventually leading to quality award.



2. No one is fit to be judged in his own cause (Nemo iudex

idoneus in propria causa est)

As the heading clearly states that “No one is fit to be judged in his own

cause”, this rules guides that one can not judge himself, that is, if one has got

his interest in the outcome of the arbitration proceeding, he can not be the

arbitrator himself.

In case of Kolleerg v cape town Municipality 1967 (3) SA 472 (A), the court

has stated that:

“it is quite foreign to the concept of arbitration that one of the parties to dispute

should be the arbiter of the dispute – a judge in his own case”.

Hence it can be seen that, in no arbitration proceeding, an arbitrator can

decide if he has interest in the outcome of the arbitration proceeding.

If the arbitrator is not impartial and free from bias during the arbitration

proceeding, the award will also be biased, and in that case, if any party will

come to know that, the arbitrator has got his interest in the arbitration

proceeding then, he may go to court and the court may decide to turn down

the award. Further this will lower down the reputation of the arbitration



proceeding too. Hence it is extremely important, that the arbitrators are

impartial, and work in such a manner that parties have faith in him.

Since the arbitrator must be impartial, hence he must disclose any conflict of

interest in the arbitration proceeding, at the beginning of arbitration

proceeding, and at any time, he comes to know that he is in conflict of

interest, during the arbitration proceeding.

Hence it is very important to have impartial and non-biased arbitration

tribunal.

3. Justice must be seen to be done

This rule, guides the arbitration proceeding, that not only justice is to be done,

but it must be seen to be done. Hence arbitrators must act, in such a way that

all parties have faith in him. During arbitration proceeding, he must act, such

a way that all parties have confidence in him, that he is handling the

proceeding in right way. For example, the communication with one party must

take place in presence of another party, so that other party, if in disagreement

can counter and present his case in support.

Following this rule increases the faith of parties in arbitration proceedings and

hence more reasons to accept the arbitration award (avoid further litigation).



Butler and Finsen (167) stated that

“In practice, arbitrators would be well-advised to remember the advice of

Mustill & Boyd, who suggested that an arbitrator is unlikely to be held to have

acted unfairly, if he observes the following rules: 1) He should endeavour to

act fairly between the parties, eliminating conscious, and so far as he can,

unconscious bias. 2) He should not only be impartial in fact, but should

act in such a way that the parties are confident of that fact. 3) He should

pay careful attention to any evidence or arguments presented by the parties,

and should be seen to be doing so. 4) He should keep the parties fully

informed of what he is doing, and what he proposed to do”.

Hence, the arbitrator must act, in such a way that, his all action should be fair,

and gives impression to the parties, that he is acting fairly, such as not

traveling with one party to inspection site, not having lunch with one party,

without substantive reason not having hearing in absence of one party, hear

both parties equally, do not give argument in support or against of any

argument of any party during proceeding, copy all correspondence to all

parties, if he receives any correspondence from one party, which is not

copied to other party, he must send the copy of that correspondence, to the

party who has not received that correspondence and communicate with one

party only in presence of other party. Following all these provisions will



indicate that the arbitrator is acting fairly and hence will increase faith of the

parties in arbitrator and arbitration proceeding.

The arbitrator must submit the award based on logical reasoning and analysis

of facts. The decision should clearly point out the evidence based on which

the determination of the arbitrator is based. The award must indicate that the

arbitrator has gone through all the evidence provided by all the parties. It

should also indicate that the arbitrator has analyzed the evidence and

argument of all parties in depth, and then came to any conclusion. The logic

and reasoning provided with the award will let the party understand the award

better and clear. This will clarify the issues in mind of the loosing party too,

that why he lost. This way both the parties will feel that justice is being done

by the arbitrator, and hence increase the faith in arbitration proceeding and

award.

During arbitration proceeding the arbitrator may require parties to make

discovery of document, deliver pleadings or statements of claim and defense,

allow inspection of any goods and appoint any a commissioner to take the

evidence. Further arbitration tribunal determines the time and place of the

arbitration proceeding, administer oaths of the parties and witness, examines

the parties and require them to produce all books, documents which may be

required for the trail, examine any person who has been summoned to give

evidence, receive evidence by affidavit, inspect goods and property involved



in dispute. All these works that is the part of the arbitration proceeding could

be vulnerable with respect to providing just and fair result to the parties. The

arbitration tribunal must provide the parties sufficient time to produce their

case with supporting documents, any relevant book for the trail and any

witness. Providing enough information and opportunity to the parties will help

party to present their case properly to the arbitration tribunal, and will give

parties a feeling that arbitrator is giving all opportunity, and is not biased.

Following this rule of justice, creates faith of parties in the arbitration

proceeding and hence high chance of acceptance of award.

Conclusion

These three rules must be observed by the arbitrators during arbitration

proceeding, as following these rules of natural justice will lead to the

decisions based on facts and will be accurate, will provide the confidence of

the parties. Sufficient time for presentation of documentation, calling of

witness and asking for inspection, and recording the matter stated by the

witness as per the agreement, and reasoned decisions based on these facts

will clearly indicate to all, that the decision is not biased, and will improve the

confidence of the parties in the decision. If the rules of natural justice will not

be observed in the arbitration proceeding, aggrieved party may go to court



and the court may refer the matter back to arbitration tribunal to observe the

rules of natural justice or cancel the award.

The adherence of rules of natural justice in arbitration proceeding is extremely

important as it is guided by the supreme law of the country, that is constitution

of republic of south Africa, to follow the rules of natural justice in any action

which has civil consequences. Further if the rules of justice will not be

followed during the arbitration proceeding then the court will intervene and as

stated in case of Kollberg supra, the breach of the principles of natural justice

automatically renders void the decision in question.

Following rules of natural justice in arbitration proceeding, promotes faith and

confidence in the arbitration proceeding, and leads to right, just and fair

decision.



Question 3

What is the difference between “adjectival” or “procedural” law and

“substantive” law? Give two examples of categories of the law which

fall into each type.

Answer 3

Kleyn and Viljoen (95:2011) states that”

“South African national law is divided in to substantive and adjective law”.

It is further stated that these laws are interdependent. The adjective law can

not exist without substantive law.

The Association of Arbitrators (Southern Africa) in their study material for

Certification of Arbitration clarifies the substantive and procedure laws as

follows:

“Substantive Law tells us what the law is. It tells us what the rights and

duties of legal subjects are. Law of Procedure tells us how one would

enforce one’s rights. The law of procedure therefore deals with the

process that one would follow in enforcing one’s rights. This branch of law



focuses on the process of bringing a matter to court and the rules relating to

how the courts may operate”.

Based on studies of different books, study material and relevant internet

resource specially on www.taxlawpro.org the identified difference between

“adjectival” or “procedural” law and “substantive law is as follow:

Difference between Substantive and procedural Law

Sl.

No.Substantive law Adjective or Procedural Law

1

Substantive law determines the

content and meaning of different

legal rules, it tells us what the law is.

Procedural law determines what

to happen when such rules are

violated, that is, it regulates the

enforcement of substantive law.

2

Substantive law defines what are the

rights, responsibility, duties and

power of the citizen.

The procedural law determines

how right, responsibility, duties

and power of the citizen shall be

enforced.


http://www.taxlawpro.org/


Sl.


3 Substantive law defines how the

facts in the case will be handled,

how the crime is to be charged. It

provides the legal solution to the

case. It Prohibits us from committing

criminal offences

Defines the step-by-step

process that the case will go

through. The procedural law

deals with the process how

private law action can be

brought before the court and

case should proceed. The

procedural law deals with the

rules related to how the courts

may operate, it regulates the

manner in which facts are

proved in the court. What

materials may be presented as

evidence and to whom? How

one individual or state may bring

an action against another

individual? How one party is to

serve a summon against

another, how pleading are

drawn up, which court will be

competent to here matter. In



Sl.


summary it regulates the

enforcement of substantive

law and determines the manner

in which a case must be

practically handled, when a legal

rules has allegedly been

violated.

4

The Substantive law refers to written

or statutory law which governs the

relationship between people, or

between people and the state.

The procedural law is the set of

rules followed when a courts is

hearing a case.

5

It defines the crime and punishment

to which the accused will be

subjected.

Defines the manner in which a

case will proceed.

6

It determines which human acts

constitute criminal offences, such as

murder.

It provides the process

according to which someone is

prosecuted for murder.

7

Substantive law decides the fate of

the case, that is, who wins the case

and who is going to receive the

compensation.

Procedural law does not decide

the fate of the case.



Sl.


8

Substantive law has independent

power to decide the fate of a case.

Procedural law does not have

independent power to decide the

fate of a case.

9Substantive law can not be applied

to non-legal context.

Procedural law can be applied to

non-legal context.

10

Determines the content and

application of the different rights

which an individual may have,

example: It determined how an

individual can obtain ownership of a

motor vehicle.

Determine how the law will be

executed. It provided the

process when one want to

reclaim one’s motor vehicle from

someone who removed it

without one’s permission.

In general the substantive law guides about what to do, where as procedural

law guide us how to do.

Examples of categories of the law which fall into each type:

Example of categories of law falls in to “adjectival” or “procedural” law

1. Law of Criminal Procedure, which described the law concerning the

investigation and prosecution of crime.



2. Law of Criminal Evidence, which prescribes the way in which a case

has to be proved in the court.

Example of categories of law falls in to “substantive” law

1. Law of Person such as Companies Law, which defines the legal

subject and her legal subjectivity.

2. Property Law such as law of deeds, which regulates the family

relationship.



Question 4

List the 5 main types of court in the South African legal system, in

descending order of rank, and indicate which courts generate

judgments which are binding.

Answer 4

As per article 166 (judicial system) of the Constitution of South Africa, the 5

main types of court in the South African legal systems are as follows:

“(a) the Constitutional Court;

(b) the Supreme Court of Appeal;

(c) the High Courts, including any high court of appeal that may be

established by an Act of Parliament to hear appeals from High Courts;

(d) the Magistrates' Courts; and

(e) any other court established or recognised in terms of an Act of

Parliament, including any court of a status similar to either the High

Courts or the Magistrates' Courts”.

The courts mentioned under (a), (b) and (c) above are superior court and

Magistrate court (district and regional) and their equivalent courts are

considered lower court. Here constitution court is the highest court then



comes supreme court and then high court. Magistrate court is lower in rank

from high courts. The courts mentioned above under (e) could be of high

court status or could be of Magistrate court status.

Highest court has got highest priority in case of decision made on similar case

that is in case of similar facts and legal issues.

Plessis and Hees (243:2009) too, while stating the hierarchy of the courts

states the same hierarchy and further states:

“The following hierarchy of the courts from those with “high status” to those

with “low status” – which is also the scheme according to which courts are

bound by decisions – may be distinguished for stare decisis purpose”.

This indicates clearly that courts stated lower in the list are bound to accept

the decisions made by the higher courts.

The decision of constitution court is binding upon all the court, however

constitutional courts deals the cases only related to constitutional matter and

highest court in constitutional matter. Then comes the Supreme Court of

appeal, which is the highest court in all other matter except constitutional

matter. The decision of Supreme Court of Appeal is binding on all high

courts, magistrate court and special courts. The decision of high court is

binding on the Magistrates courts and other courts in that division and on



Magistrates’ Courts in other division where there is no conflicting decision by

a High Court in its division as stated by Association of Arbitrators (page 29).

Hence A lower court is bind by the decisions of the higher courts. In addition

it is also of importance that a single judge is bound by the decision made by

two or more judges, in case of high courts, but in case of Supreme Court of

appeal heads are not counted. The judgment of lower court does not makes

precedent and not binding.

Plessis and Hees (245:2009) stats that:

“Court of Equal status is not bound in a qualified way by one another’s

decisions provided that – in the case of high courts and local divisions – they

fall within the same area of jurisdiction”.

So high courts of different jurisdictions are not bound by each others decision,

however the decision of high court of another jurisdiction is an persuasive

evidence. Further the high courts of same status are not bound by the

decision of a high court in another jurisdiction irrespective of the decisions

taken by the number of judges.

Highest court has got highest priority in case of decision made on similar case

that is in case of similar facts and legal issues.



It is to be noted that only Constitutional Court, Supreme Court of Appeal and

High Courts decisions is documented and hence reference for precedent can

only be given to the court decisions made by these courts.

Bois et al (89:2011) states:

“Finally, only the courts decisions of which are published can establish

precedents, for the obvious reason that the operation of the doctrine depends

on the public accessibility of the courts decision. For this reason, the lower

courts decision do not constitutes precedents at all, not even inter se”.

Hence it was noted that only Constitutional Court, Supreme Court of Appeal

and High Courts decisions is documented and hence reference for precedent

can only be given to the court decisions made by these courts.

The decision of the Magistrates' Courts/Lower courts are not bounding to any

court.

However decisions of the High Court are binding on the Magistrates’ Courts in

that division and on Magistrates’ Courts in other division where there is no

conflicting decision by a High Court in its division.

In addition many specialized superior courts and important inferior courts also

constituted as per provision of section 166 (e) of the constitution to hear the



dispute of special nature, such as “Land Claim Courts” established in 1996 to

hear the dispute arising from those law which underpin the post-apartheid

Where as Income Tax Appeal court is also an specialized court constituted in

terms of Income Tax Act 58 of 1962 and hear the appeal against income tax

assessment is a lower court. Here Income tax appeal court judgment are not

binding judgment to any court as this is a lower court.



Question 5

Describe what is meant by “stare decisis”. Include in your discussion

which parts of a judgment are relevant thereto and the extent of the

application of this principle insofar as the different courts of South

Africa and those of foreign countries are concerned.

Answer 5

The study material of Association of Arbitrators (26:2011) states:

“The system which provides that an earlier decision is binding on later ones is

called the “precedent system”. The Latin term for the precedent system is

stare decisis which means “the decision stands”.

Hence the stare decisis mean the stand by with the previous decision taken

by other courts. However this rule does not follow in all the cases, the

situations where the rule is applicable and not applicable is stated latter.

Plessis and Hees (240:2009) states that:

“According to the stare decisis rule, court A:

Is either absolutely obliged to follow the judgement of court B;



Or follows the judgement of court B because A can find no fault with it;

Or allow itself to be persuaded by the arguments of court B”.

Hence we can see that stare decisis rules allow court A to consider the

decisions made by court B. The decision could be obligatory or persuasive.

Bois et al (77-78:2011) states that:

“The doctrine of precedent has been endorsed by the Constitutional Court as

an incident of the Rule of Law that serves to enshrine a fundamental

principle of justice: that like cases should be determined alike’ and to

promote legal certainty”.

Here it is clarified the importance of the stare decisis, by following the stare

decisis, judges or arbitrators follows the principle of fundamental justice,

because it provide legal certainty, that, what will be the court decision if

something similar will happen in future. The advantage of stare decisis is

further clarified by Bois et al (78-2011) while referring to the statement made

by Hahlo & Khan:

“Certainty, predictability, reliability, equality, uniformity, convenience: these

are the principle advantage to be gained by legal system from the principle of

stare decisis”.



It is important to note that by stare decisis rule courts gets the power to make

law, though this authority is not vested in the court.

Which part of judgment is relevant:

Plessis and Hees (240:2009) while defining what is binding in the judgment of

a court states that:

“In a judgment a court normally makes finding on two kinds of issues – in other

words, two kinds of questions are answered:

Factual issues or question of fact, and

Legal issues or questions of law”.

Factual issues generally differs from case to case and are unique to a specific

instances. Hence the facts of one case can not be relevant to another case.

But at the same time the legal issues of one case could be relevant to another

case. A fact in a particular case is not binding in another case, but the courts

finding in respect of question of law of once case could be binding in another

case, in case if there is a significant similarity between the aspect of two

cases. This statement is substantiated by the statement of Plessis and Hees

(241:2009) which is:



“A court’s answer to the question of fact in a particular case cannot be

binding on a latter court; its answer to a question (or questions) of law

does, however, have binding force”.

Further it is to be noted that all decided by one court in previous decision is

not binding to the other court. Kleyn and Viljoen (61:2011) states that:

“Only ratio decidendi creates a precedent”.

That is only legal principle applied by the court to the material facts to reach

the decision is binding. Obiter dicta that is remarks in passing made by the

court is not binding but persuasive evidence.

In addition if the previous court order is made by more than one judges, and if

the judges differs with one another then more than one judgment can be

handed over. In this case judgment made by majority of judges will be ratio

decidendi, and judgment made by minority will have persuasive force in

future. If majority of judges differ on the conclusion of the judgment that is

judges judgments are based on different reasons, in that case, the decision

made by the majority of judges are also not binding.

The stare decisis principle also depends on the hierarchy of the court, higher

court decision is binding on lower court and lower court decision is not binding

and hence can not be considered as precedence. The detail is stated latter.



It is to be noted that in below mentioned conditions the rule of stare decisis

can not be followed:

1. The last decision made by the court has overlooked a government

enactment.

2. The last decision made by the court was considered wrong.

3. There is change in legislations since the last decision has been given.

The extent of the application of this principle insofar as the

different courts of South Africa and those of foreign countries

are concerned:

Stare decisis or precedent system is applicable in South Africa, however the

judgment of all court is not considered as precedent. The judgment of only

Higher courts that is Constitutional Court, Supreme Court of Appeal and High

Courts is considered for precedent. Further hierarchy of the court dictate that

the decision made by constitutional court could be considered as precedent

for all the courts in constitutional matter and decision made by supreme court

of appeal could be considered as binding precedent to all high court and

lower courts. High court decision considered precedence for the lower courts.

Lower courts can not overrule the precedents made by the higher court.

Lower courts decision does not make precedence.



Further in case of high court, the decision made by two or more judges are

bound by single judge in future. High court decision of other reasons is

considered persuasive evidence for other high courts. Magistrate courts are

bound by the decision of Supreme Court of appeal and if there is no decision

available from Supreme Court of appeal then the decision of high court.

However in case there is conflict between the decisions made by different

high court the decision of the high court of same reasons will be considered

as binding and precedent for magistrate court.

Similarly the decisions made by the courts of foreign countries are just

persuasive evidence for the court of South Africa. These decision are not

considered stare decisis/binding.



PART B: LAW OF CONTRACT



Question 1

Explain and differentiate between “terms”, “conditions” and

“warranties” in the context of contract law.

Answer 1

Bois et al (793:2011) defines conditions as follows:

“A condition is a provision in a contract that, on the occurrence of some

uncertain future event, an obligation shall either come into full effect or

be discharged. The event must be not only future but also uncertain, that

is, something which may or may not take place; the fate of the obligation

depends on whether the event takes place or not”.

Hence conditions are provisions made in the contract based on occurenance

or non-occurrence of uncertain future event that a contract will come in to

effect or not. For example: A will give his car to B, if we get selected in

national football team. Here the selection of A is not certain and this selection

is going to take place in future. The conditions could be positive or negative,

for example, A will give a car to B if he will play for national football team. This

is a positive condition and if A say that he will give the car to B, if B does not

plays for national football team then this is a negative condition. The



conditions are also divided in to potestative, causal and mixed condition or

suspensive and resolutive conditions.

Bois et al (797:2011) defines terms as follows:

“The term of the contract are the provision in it which set out the nature and

details of the performance due to the parties under the contract, ie the

nature and description of the commodities or services to be rendered,

and the manner, time and place of performance”.

Here we can see that the intention of the parties to create obligation is clearly

expressed in the term, such as details of the performance of each parties due

under the contract such as one party will deliver the car and another party will

pay him within 30 days. It also includes description of the goods or services to

be performed, place and timing. Such as the goods of particular specification

will be delivered within 40 days after signing of the contract, the delivery

should take place at office address of one of the party.

Bois et al (798:2011) clarifies that the warranty is same as term under South

African law and states:

“A good deal of confusion has been caused in our law by the use of the

expression ‘warranty’ which has a variety of meanings in English law. In

South Africa the word ‘warranty’ means ‘term’. Unfortunately the use of



words ‘condition’ and ‘warranty’ in the English law sense is relatively common

in South Africa. This gives rise to difficulties in the construction of

documents”.

Supporting this statement Bhana, Bonthuys and Nortje (191:2010) and Merwe

et al (295:2010) respectively defines the warranty as follows:

“A warranty is a term whereby a party assumes contractual liability for the

existence of a certain state of affairs or the occurrence of an event. It can

relate to the past, present or a future state of affairs or event. A party can be

give a warranty that he will comply with his contractual obligations”.

“A warranty is a contractual term by which a contractant assumes absolute or

strict liability for proper performance, to the extent that he cannot rely on

impossibility of performance or absence of fault to escape liability. A

warranty is an incidentale (accidentale) of a contract that extends the

liability of contractant beyond the liability imposed by the essentialia and

naturalia of the contract. Inasmuch as it is an incidentale a warranty is a

consensual term of the contract”.

Hence it is to be noted that ‘warranty’ is also a ‘terms’ of the contract. Here

one party to the contract takes contractual liability for the existence of certain

state or proper performance up to a certain period, such as under sales of

goods, the seller provides warranty that the goods sold by him will function



properly for a certain period of time without any problem. Further it is to be

noted that in this example the warranty starts after delivery of the goods. It is

a consensual term of the contract.

Since warranty is also a term and it is already clarified what is specific with

the warranty, I am going to discuss in detail the difference between term and

condition.

Difference between Terms and Conditions:

Term Condition

Terms create obligations and it

imposes a contractual duty on party

to perform in future.

A condition does not create any

contractual right and duties.

The terms serve the purpose how the

parties to the contract will perform

his/her duty under the contract.

The conditions serve the purpose for

the contract to come in to effect or

discharged if a certain future events

occurs or does not occur.

If the party to the contract does not

perform in accordance with terms of

Contract, he/she breaches the

contract.

Non-fulfillment of conditions is not

considered as breach of contract.

In case of breach of Contract the

innocent party is entitled to sue the

If the party fails to abide by the

condition, guilt party can not be sued



party who has breached the contract. and forced to perform, but the contact

simply falls away.



QUESTION 2

Explain the difference between a contract which is void, and one which

is voidable. Give one example in each case.

ANSWER 2

Bois et al (740:2011) defines the essentials of the elements as follows:

“(1) Agreement of the parties for performance or non-performance; (2)

capacity of the contract; (3) serious intention of the parties; (4) possibility of

performance; (5) certainty; (6) the formalities; and (7) absence of illegality”.

If any essentials elements stated above is missing from the contract the

contract is said to be void. For example, a contract signed by the parties,

where one party has to reach on another start within a year. This contract is

void because there is no possibility of performance.

Bois et al (772:2011) while defining the voidable contract stated as follows:

“A voidable contract is one which is valid, that is, it comprises all the

elements necessary to constitute a contract, but which one of the parties

is entitled to rescind because of some cause or defects which existed before

or at the time the contract was concluded. The chief of these causes are as



follows: (1) misrepresentation; (2) duress; (3) undue influence; and (4)

commercial bribery”.

Hence voidable contract is a valid contract and it has got all essential of valid

contract but the consensus obtained is based on improper method that is

defective and hence innocent party is entitled to rescind the contract due to

those defects that is (1) misrepresentation; (2) duress; (3) undue influence;

and (4) commercial bribery. For example, if A threaten B, to sell his car other

wise A will harm him (B) and due to this fear B signs the contract with A to sell

his car. B is entitled to rescind the contract as the consensus is obtained

based on duress. B has also option to uphold the contract, if he wishes to do

so.



The difference between void and voidable contract and its

examples are as follows:

Void Contract Voidable Contract Example (Void/Voidable)

Any essentials of the

contract are missing

from the contract.

All essential of

contract exists but the

consent for the

contract was taken

based on

misrepresentation or

duress or undue

influence or

commercial bribery.

Void: If A verbally sales his

100 square foot land to B,

without signing sales deed.

This contract is void as there

is a statutory requirement

that sales of land must be in

writing (except in case of

land purchased in public

auction). Since one of the

essential that is formalities

of writing has not been

observed, hence the

contract is void.

Voidable: If A gets the

consent of B for purchase of

A’s car based on undue

influence which weaken B’s

power to resist. In this case

B is entitle to rescind the




contract, because of the

undue influence made by A,

before the contract

concluded.

Void ab initio, that is

if the contract is void

of legal effect from the

beginning.

Voidable contract is

a valid contract and it

remains valid until

rescinded.

Void: If the performance

mentioned in the contract is

impossible to perform

(such as A asks B, to go to

another Star for an amount

of R 10,000,000) then the

contract is void from the

beginning due to

impossibility of the

performance.

Voidable: If one party by

providing false information

about the condition/quality of

goods sold to another. Until

the person who purchased

the goods, does not rescind

the contract, the contract is




valid. There is no necessity

of a court order to declare

the contract is rescinded.

A void contract can

not be enforced legally

as it does not have

any legal effect.

Voidable contract can

be enforced legally at

whose option it is

voidable.

Void: A states in joke to B

that from tomorrow I will go

with you on morning walk

and latter A did not come for

the morning walk. B can not

legally enforce A to come

for morning walk, as in this

case intention of party A

was not serious.

Voidable: If A signs a

contract to sell his car to B

for an amount of R

40,000.00, stating that the

car is of 2009 model, though

the car in actual is of 2007

model. B can enforce A to

sell his car for R 40,000, if

he still wishes to purchase




the car knowing that the car

is 2007 model.

Since the contract

does not come to in

effect from the

beginning, any party

can not seek

compensation/damage

from other party.

The party who due to

misrepresentation,

duress or due to

undue influence or by

bribe, signed the

contract with other

party, must

compensate other

party. That is

aggrieved party is

entitled to claim the

damage.

Void: If A signs a contract to

sell his car to B who is an

unemancipated minor, for an

amount of R 40,000.00. If

either A does not gives car

to B or if B does not pays to

A. No party can seek

damage from another party

as the contract is void as B

does not have capacity to

contract.


contract to sell his car to B

for an amount of R

40,000.00, stating that the

car is of 2009 model, though

the car in actual is of 2007

model. Then B sales the Car

immediately to C, who pays




an amount of R 38,000.00

only because the car is 2007

model. B can seek

compensation/claim from A

for the loss (40,000-38,0000

= 2,000 for example) he/she

incurred due to false

information of the model of

the car stated by A, before

sale.

A void contract affect

the collateral

transaction.

Generally a voidable

contract does not

affect he collateral

transaction except in

cases where the

contract is void based

on the unlawful

consideration.

Void: If A ask B to kill C for

Rand 1000 and for this

killing A borrows money

from D to give it to B. Since

the agreement between A

and B is illegal, the contract

between A and D will also

be void. Since in this case

the agreement between A

and B is void due to

illegality of the contract.




Voidable: If A agree to sell

his car to B for an amount of

R 40,000, where B

threatened A to sell his Car

to B. Now B borrows R

40,000 from C to pay A.

Now before B pays A, A

rescind the contract. in this

condition, though the

Contract between A and B is

void, the contract between B

and C will not be void.

Under a void

agreement third party

does not get the right.

Under a voidable

contract the third

party if acquired the

goods against

consideration and

before the contract is

repudiated acquires

the title of the goods.

Void: If A sold the car to B.

Where B is an

unemancipated minor and

then B sells the goods to C.

Since B is unemancipated

minor, the contract between

A and B is void as B do not

have capacity to contract,

and hence B never was the

ownership of the Car to pass




the right to C.

Voidable: A sold his Car to

B, where B provided a

cheque for payment. The

cheque provided by B get

bounce, but A does not

gives notice to B under a

reasonable time. Meanwhile

B sells the goods to C,

where C pays B a cash of

Rand 40,000 for the Car.

Since C has purchased the

car by paying B

(consideration) and A has

not given any notice by then,

hence C is now owner of the

car.

Void Contract remains

void even after

expiration of

reasonable time.

Voidable Contracts

become valid after

expiration of

reasonable time.

Void: A has two cars one is

red and one is blue. If A

agrees to sell his car to B,

for an amount of R




40,000.00. Here A thinks he

is going to sell his blue car,

while B is thinking he is

going to buy red car. Here

there is no agreement

between the parties for

performance. Hence the

agreement is void either

party can not enforce other

party to sell and purchase

the car (either blue or red)

even after expiration of

reasonable time (any

amount of time, as the

contract is Void ab initio.


contract to sell his 5 car to B

for an amount of R 40,000,

by paying a bribe of R 2000

to agent (C) of B. But just

after contract signature B




comes to know that A has

paid bribe to his agent C

(who was providing

suggestions to B on

purchase of the Car from A)

for getting this contract. Out

of 5 cars, each month A has

to deliver one car up to 5

months. Though B came to

know just after the contract

signature that A has paid

bribe to his agent C to get

the contract. After receiving

4 vehicles in 4 months

duration, B wants to rescind

the contract. Now B can not

rescind the contract after

accepting 4 vehicles and

after 4 months that is

expiration of a reasonable

time since B came to know

about A paying bribe to C for




getting the Contract. Now

the contract is a valid

contract after expiration of

passing of reasonable time

since B came to know about

bribe.



QUESTION 3

Describe and differentiate between “misrepresentation” and “mistake”

and discuss the relevance of each in respect of the law of contract.

ANSWER 3

Bois et al (773-774:2010) defines misrepresentation as:

“A misrepresentation is a false statement of fact made by one party to the

other before or at the time of contract. It may be made expressly by the

use of words, or impliedly, by conduct. Even silence may constitute a

misrepresentation where there is duty to speak”.

Hence false statement by one party to other party before or at the time of

contract is a misrepresentation, it could be through expressed wording or

implied by action, and when there is a duty of the party to speak, but the

parties does not speak, this could also be a misrepresentation-. If one party

mislead the other party, the mislead party is entitled to remedies of

misrepresentation such as recission & restitution and damage.

Bois et al (745:2011) clarifies the mistakes as follows:



“If both parties are not of the same mind, one of them at least must be

labouring under a mistake or error, ie wrong impression of the actual

facts”.

Hence while signing the contract, if both parties to the contract are not in

same understanding of the essential or material facts of the agreement, one

of them must be labouring under a mistake.

Difference between Misrepresentation and Mistake:

No. Misrepresentation Mistake

1

False statement made by one party to

other party before or at the time of

contract is a misrepresentation

Wrong impression of the actual

facts.

2 Examples of Misrepresentation:

1. Party make false statement about

the material elements/facts of the

contract, because of this other

party is induced to enter in to the

contract.

2. Material statements made by

seller to buyer during contract

negotiation regarding the quality

material to be sold, is considered

Example of mistake:

1. It is a wrong impression of

the actual state of affair.

2. If A agrees to buy from B his

blue Mercedes car, but in

reality the car is not

Mercedes but it just contain

the logo of Mercedes. If B is

unaware of A belief, this is a

case of Mutual Mistake. But if




as material statement and if this

statement is found to be false,

this constitutes

misrepresentation.

3. A dishonest opinion, bribe, undue

influence, threat gives rise to an

action of misrepresentation.

4. The statement by the parties

regarding meaning of the clause

in the contract and their intention

that they will be bound by the

meaning is a representation in

fact and if this representation

found false, this constitutes

misrepresentation.

5. Misrepresentation could be

through expressed wording or

implied by action.

6. Even silence could be a

misrepresentation if there is duty

to speak.

B is aware of A’s belief , then

this will be an unilateral

mistake. If both A and B,

knows about the belief of

each other (that’s is car is not

Mercedes’ but it contains logo

of it) and accepts it, but both

has mistaken about different

fundamental fact (A thinks the

engine is of 2 L Diesel and B

thinks that the engine is 1.5 L

Diesel but in actual is 1.5 L

Petrol) then, this will be a

common mistake.

3 What is not misrepresentation: What is not mistake:




1. Trade Puff, mere opinions,

prediction.

2. Loose, exaggerated statements

made by contracting party in

praise of his goods does not

constitute misrepresentation,

provide that such ‘puffing’

remains vague and non-factual.

3. An expression of law is generally

considered opinion only.

1. In case of unilateral mistake,

if the mistake is either not

material or not reasonable.

2. In case of common mistake if

the mistaken belief is not vital

to the transaction and if there

does not exist something

which is not known for both

the party to be mistaken, as

in above-mentioned example,

if engine capacity and type is

clear to both parties, there is

no mistake.

4 What is the requirement for

Misrepresentation:

1. For misrepresentation, the

representation must be made by

other party of the contract or his

agent not by third party.

2. The misrepresentation must have

induced the plaintiff to enter into

the contract.

What is the requirement for mistake:

1. For Unilateral mistake:

Mistake must be material

and reasonable (Justus

error) to be considered the

contract void.

2. For Common mistake and

Mutual Mistake: False belief

about certain state of affair,




3. The misrepresentation must have

been made with the intention that

it should be acted upon by the

injured party.

4. Misrepresentation must be

material.

which is vital to the

transaction and if known

before, neither party would

have concluded the contract.

In the case too the contract is

void ab initio.

5

Impact of misrepresentation on

Validity of the Contract:

Voidable at the option of innocent party.

Impact of mistake on Validity of

the Contract:

1. In general the mistake does

not effect the validity of the

Contract.

2. In cases where the mistake is

of fundamental nature which

exclude the consensus of the

parties, in these cases the

contract is void (as stated

above).

6 Type of Misrepresentation

• Fraudulent misrepresentation

• Negligent misrepresentation

• Innocent misrepresentation

• Non-disclosure

Type of Mistake

Mistakes can be divided in to

different ways:

First way:

Unilateral mistake




Common Mistake

Mutual Mistake

Second way: causal and non-causal

mistake

Third way: Mistake in Motive and

essential mistake

7Misrepresentation is made by one party

to other party.

Mistake could be unilateral or

common or mutual.

8 Result of Misrepresentation:

A) CANCELLATION and

RESTORATION TO ORIGINAL

CONDITION

1) Innocent party may cancel the

contract and seek restoration to

original if requirement (as stated

in point 4) of the

misrepresentation meet.

B) DAMAGES

1) Fraud: In case of fraudulent

misrepresentation the innocent party

can cancel the contract and claim

Result of Mistake”

Mistake may render the contract

void if certain requirements are

met.

In case of Unilateral mistake: If the

mistake is material that is

consensus is excluded, that is when

the parties are in disagreement

about the terms of the contract, or

about the identity of the parties

(where such identity is relevant to

the contract), and the mistake is




the damage.

2)Negligent Misrepresentation: the

innocent party may be entitled for

Compensation for loss suffered loss

if it be proved that it is due to

wrongful damages.

Innocent misrepresentation: In this

case the decision can go either side

of the parties.

Non-disclosure: party may repudiate.

reasonable then the contract will be

void.

However different type of mistake

has got different result:

Error in negotio, ie error is related

to the nature of the agreement, and

this type of error is considered

material and hence may render the

contract void.

Error in Corpre, ie error is related

to the identity of the thing. This error

is also considered material and

hence the contract may be void.

Error in motive, ie error relates to a

party’s reasons for concluding the

contract, this error is not material

and hence can not invalidate the

contract.




Error in substantia, ie error is

reacted to the characteristics or

quality of the subject-matter of the

contract. The mistake is considered

non-material but merely incidental.

If the parties believes that the goods

is of certain quality, in that case

the error is material and may affect

the validity of the contract.

Error in quantity: if one party thinks

that she has negotiated higher

amount of money or more amount of

quantity to be received under the

contract, compare to what other

party is thinking. This type of error

is considered material and hence

the contract may be considered

void; but if both think contrary, the

contract could be valid for lesser

amount.




Error in persona: In this case one

party makes mistake about the

identity of other party. This error in

general is not material and the

contract will be considered valid,

however if the identity makes

reasonable or substantial difference

to the mistaken party the contract

could be void.

Reasonable (Justus Error): For

contract to be void, only material

mistake is not enough, the mistake

should be reasonable too that is the

error is excusable in the

circumstances of particular case.

In case of Common mistake: False

belief of party about certain state of

affair, which is important for the

contract, and if party would have




known before, neither party would

have concluded the contract. In this

case too the contract is void ab

initio.

Mistake induced by misrepresentation: There are cases when mistake of one

party is due to misrepresentation by other party. It the mistake is material

there will be no consensus and the contract will be void for mistake, if the

requirement of reasonable is also met. But in case where the mistake is not

material, the contract could be voidable for misrepresentation.



QUESTION 4

What is meant by “repudiation” of a contract? What options are

available to a party when the other party has repudiated?

ANSWER 4

Repudiation:

While stating about repudiation Bois et al (866:2011) states that:

“A party to a contract commit this form of breach when, by his words or

conduct, and without lawful grounds, he indicates to the other party an

unequivocal intention no longer to be bound by the contract (or material

part of the contract) or that he will not perform his obligations under it”.

Hence repudiation mean a conduct or word by the party to the contract,

through which he/she indicates incorrectly (as per contract) his/her intention

to other party, that he/she is not going to perform his obligation under the

contract, or he is not going to perform major part of the contract. Just refusal

of a party not to execute the work is not considered as repudiation, there must

be words and conduct that can reasonably be interpreted as anticipatory

malperformance. The conduct could be that the parties denies the existence

of the contract, or if the party carries out his/her performance, but not in

accordance with the contract and then refuses to rectify the defects.



Options available to party when other party has repudiated:

Innocent party has following options when other party repudiates:

1. Innocent party may choose to uphold the contract or

2. Cancel the Contract

3. Damage

1. Innocent party may choose to uphold the contract: The innocent

party may elect to uphold the contract and expect the repudiated party to

carry out his performance, but the innocent party after upholding the contract

can not choose to terminate the contract. However if the guilty party again

fails to perform, then this will be new breach and innocent party will have

again option to elect for upholding the contract or canceling the contract and

at the same time the guilt party will be in mora debitoris. Here it is important to

note that till the repudiating party starts to perform, the innocent party do not

have any obligation to perform his/her duty under the contract.

2. Cancel the Contract: Once a party repudiated the contract the

innocent party may elect to cancel the contract, the party can not latter

change his/her mind, once the contract is cancelled. The innocent party must

decide about her election within a reasonable time and then he has to inform



the decision of cancellation to the guilty party. However the cancellation can

only be opted by the innocent party when there is a clause exists in the

contract based on which party can cancel the contract and/or if the

repudiation is serious, such as even after upholding the contract at first

repudiation, the party does not perform.

3. Damages: in both the above mentioned cases if innocent party can

satisfy the requirement of damage, he/she entitled to claim the damage too.

The innocent party can claim the damages for the loss incurred as a result of

repudiation. Damages generally claimed together with other remedies, such

as specific performance together with damage or cancellation of the contact

plus damage. Example: If A and B signs a contract, where B will deliver the

Car to A within one month of contract signature, and A will pay him Rand

40,000.00. A pays an advance on R 10,000.00 to B as per the provision of

contract. However after 15 days of contract signature, during monthly

meeting B clearly stated that he is not going to deliver the car as he think

there does not exist a proper contract (though there exists a proper contract).

Even after this repudiation, A gave further 15 more days to B for delivery.

However B did not perform. In this case, A is entitled to cancel the contract as

well as entitled for damage too. That is B need to return the advance paid and

may be interest for the duration B was keeping the money, as A could have

earned interest on the same money for same duration, if he would not have

paid to B. In this example A can cancel the contract after failure by B not to



deliver the car even after extension of time to deliver (specific performance),

and sue for damage together with cancellation.



QUESTION 5

Name the remedies for breach of contract.

ANSWER 5

The remedies for breach of Contract available to innocent party is as

follows:

1. Specific Performance

2. Cancellation of the Contract

3. Damages for breach of Contract

The above statement is supported by Merwe et al (380:2010):

“The ordinary remedies for breach of contract are specific performance,

cancellation and damages”.

However Bhana, Bonthuys and Nortje (243:2010) describing the remedies

available for breach states:

a) “the exceptio non adempleti contractus

b) specific performance

c) cancellation and

d) damages”



.

The remedies of the exception non adempleti contractus and specific

performance aimed at fulfillment of contract while cancellation aim to

terminate the contract.

These remedies are available only to innocent party not to the guilt party and

the innocent party can elect either specific performance or cancellation but

not both together, yes damages can be claimed alone or either with specific

performance or cancellation, if applicable. If an innocent party is going to sue

the guilt party for breach of contract, he/she must sue for all remedies he

understand is applicable in that particular case that is cancellation together

with damages or specific performance together with damages, this should not

be claimed separately.

a) “The exceptio non adempleti contractus: This is not a direct remedies

but a defence. In certain circumstances the innocent party can withhold

his/her performance in order to force the guilt party to perform. For

example: If A signs the contract with B to supply a car for a price of R

40,000.00. Latter B does not delivers the car but ask for payment of R

40,000.00. Here A can use exceptio as a defence to B’s claim on the

basis that till B does not perform (deliver the car), A do not have to

perform, that is to pay R 40,000.00. However, the provision of exceptio

can only be used if the contract is bilateral.



b) Specific Performance: Specific performance of a contractual obligation

require the party at default to perform as agreed in the contract or as

directed by the court. If the performance is impossible, the court may

direct cancellation and/or damage. Example: A signs a contract with B to

supply a Car for R 40,000.00. A makes payment in advance of R 40,000.

However B fails to deliver the car by the end of agreed time. A may sue B

for specific performance, that is B to deliver the car. In case of any

impossible performance or the party to contract become insolvent, the

court can not grant specific performance. In addition in case of reciprocal

performance, innocent party can only sue to guilt party if he himself has

made complete and proper performance. As in case of above-mentioned

example A has made his performance by making an advance payment

and hence he has right to request the court for specific performance.

c) Cancellation: Cancellation is an extraordinary remedy available only in

exceptional circumstances when the breach is material. Example: In case

of the above-mentioned example of specific performance, B does not

deliver the goods even after A sue him for specific performance, in this

case, A is entitled to cancel the contract.

d) Damages: The innocent party can claim the damages for the loss incurred

as a result of breach. Damages generally claimed together with other



remedies, such as specific performance together with damage or

cancellation of the contact plus damage. Example: In case of the above-

mentioned example of specific performance, B does not deliver the

goods even after A sue him for specific performance, in this case, A is

entitled to cancel the contract as well as entitled for damage too. That is B

need to return the advance paid and may be interest for the duration B

was keeping the money, as A could have earned interest on the same

money for same duration, if he would not have paid to B. In this example A

can cancel the contract after failure by B not to deliver the car even after

courts ordered to deliver (specific performance), and sue for damage

together with cancellation.



QUESTION 6

List 5 circumstances which may bring a contract to an end.

ANSWER 6

As Bois (829:2011) states that:

“A contractual obligation is discharged by performance of the obligations or

by merger, set-off, release, notice, novation, impossibility of performance,

prescription, or insolvency and subsequent rehabilitation”.

Hence with this we can note down the followings ways that the contract can

end:

1. Discharge of performance

2. By Merger

3. Set-off

4. Release

5. Notice

6. Novation

7. Impossibility of Performance

8. Prescription

9. Insolvency and subsequent rehabilitation and one more added as

10.Judgment



Out of these 5 circumstances which may bring the contact to end has been

described here:

1. Discharge of performance:

2. By Merger:

3. Notice:

4. Impossibility of Performance:

5. Judgment:

1. Discharge of performance: The Parties to contract perform their

respective duty under the contract and by these way the contract

comes to an end. Example: A signs contract with B to deliver the car

for R 40,000.00 within 1 month duration with free servicing for 1 year.

B delivered the car, A pays R 40,000.00 to B and B provide provided

free serving for 1 year. Both parties has performed all their obligation

stated under the contract, hence the contract comes to an end after 1

years of satisfactory serving provided by B.

2. By Merger: If creditor and debtor merges in to one company then the

debt will be considered discharged automatically. Example: If Debtor

and Creditor marries with each other in community of property.

3. Notice: The contract could be terminated by parties by giving notice to

other party, the notice period could be what stated in the contract, and



if duration is not stated in the contract, either party may terminate the

contract by giving a reasonable notice, unless in the contract it is

stated or intended to continue indefinitely. The reasonable time could

be enough time provided to other party, so that other party can take

sufficient action to mitigate the damage as much as possible.

4. Impossibility of Performance: If due to change in circumstances it is

impossible for the party to perform the contract, in that case the party

is discharge from the performance. For example, A signs a contract

with B, but after some duration a civil war started in the country. There

is no chance of normalcy. Hence either party can not perform their

task, hence the contract can be terminated and parties can be

discharged due to impossibility of performance.

5. Judgment: If one party sues other party due to breach, by other party.

The court order may be for cancellation of the contract, which ends the

contract between the parties. Example: A signs contract with B to

supply a car for R 40,000 but B fails to deliver on time, A again

requested to deliver the goods within reasonable time, but B fails to

deliver the car. A sue B, and the court order is to cancel the contract.

The contract will end due to judgment of the court.



BIBLIOGRAPHY

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Documents

2. Final Assignment CL1 Dated 19th May 2011