1. Law for Tourism
Study Unit 2

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

3. 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

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

5. Discussion Various types of contracts Methods of contracting
Expressly or tacitly

6. 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

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

8. 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

9. 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

10. 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

11. 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The offer must not have lapsed or been revoked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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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 …………