Law for Tourism Study Unit 2

Outcomes You need to understand the following relating to the formation of a contract: Contractual capacity Rules of agreement Obligations Certainty Lawfulness Possibility of performance Formalities

The requirements of a valid contract Parties must have contractual capacity Must be agreement between the parties The agreement must create obligations The agreement must be certain The agreement must be lawful Must be possible to perform the agreement Prescribed formalities must be complied with

But first…………what is a contract? An agreement between two or more parties which gives rise to a legal relationship between the parties

Discussion Various types of contracts Methods of contracting Expressly or tacitly

Parties must have Contractual Capacity Contractual capacity refers to the legal capacity to enter into a contract While, generally speaking, everyone has the right to contract freely some people have no contractual capacity and others have limited capacity

Limits to contractual capacity Minors Infans 0-7 No capacity Minor 7-18 Limited capacity Emancipated minor Special exceptions Abortion Marriage Medical treatment HIV test etc ……

Limits to contractual capacity Married persons (Old) marital power abolished since 01/12/93 Types of marriage In community of property Out of community of property Where joint estate certain restrictions: Immovable property & investments Suretyship etc

Limits to contractual capacity Mental deficiency Presumption of incapacity if declared mentally deficient under Mental Health Care Act of 2002 Prodigals If declared prodigal by Court Insolvent If sequestrated – limited capacity Intoxicated No capacity if incapable of understanding actions

Must be Agreement between the parties There must be agreement between the parties Agreement means a meeting of the minds This is indicated by offer and acceptance

The rules of offer & acceptance One party must have made an offer The offer must have been communicated to the offeree The offer must not have lapsed or been revoked The offer must have been accepted in the prescribed manner

The rules of offer & acceptance The offer must be accepted by an intended person The acceptance must be communicated, and be: In the prescribed manner Within the prescribed time At the prescribed place

The agreement must Create Obligations A contract gives rise to an obligation All contracts are agreements but not all agreements are contracts Contractual obligation is a duty to do or not to do something The obligation arises from the contract

The agreement must be certain The terms of the agreement must not be vague The three main types of uncertainty Vague & indefinite language Eg: Mr B must make regular payments to Ms C Failure to agree on material provisions Eg: Parties forgot to include or agree on something Granting unlimited choice whether to perform Eg: The purchase price must be paid in monthly instalments

The agreement must be lawful The agreement must not be unlawful Statutory illegality – prohibited by statute Eg: conduct prohibited by Companies Act Common law illegality – contra bones mores Eg: gambling debts, agreement to assault someone Ex turpi causa rule “from a shameful cause no action arises” Par delictum rule In equal guilt the possessor is in a stronger position

Must be possible to perform agreement Legal possibility of performance (lawfulness) Physical possibility of performance Initial impossibility - void Supervening impossibility – cancels obligations Objective test Impossible for anyone Casus fortuitus or vis major Not due to negligence, intent or prevention by a party

Formalities must be complied with General rule – no formalities Contracts do not have to be in writing But advisable for purposes of proof & certainty If law prescribes formalities they must be observed Suretyships Sale of immovable property Credit agreements ANC’s etc …………