1. B Com 2 HR Business Law
Contracts

2. What is a contract?

3. Definition
An agreement that creates a legally enforceable obligation

4. Discussion
All contracts are agreements but not all agreements are contracts

5. The Requirements of a Valid Contract
Lawfulness
Contractual Capacity
Serious Intention to Contract
Communication of Intention
Certainty of terms
Parties of the Same Mind
Physical Possibility of Performance
Complies with Formalities
Consensus

6. Lawfulness Freedom of Contract
Generally all agreements lawful unless prohibited by statute or common law
Contra bones mores

7. Contractual Capacity
Capacity refers to competence in the eyes of the law to:
Have rights and duties
Perform juristic acts
Incur civil or criminal liability for wrongdoing
Sue or be sued in their own name – called legal standing or locus standi in judico

8. Factors Affecting Contractual Capacity
Age
Marital Status
Mental Capacity
Intoxication
Prodigals
Insolvency

9. Intention to Contract Serious intent to contract
A “ meeting of the minds”
A reasonable and serious promise
An offer as opposed to an invitation to make an offer or a statement of intent to do business

10. Communication of the Intention
Can be verbal or in writing or by conduct (implied/tacit agreement)

11. Offer & Acceptance Offer Consistent with essentials of contract
Must be communicated
By offeror to offeree
Must contain/define all material terms
Can I accept by saying “ yes”?

12. Offer & Acceptance Revocation Lapsing Rejection
Request for information
Counter-offer
Options

13. Offer & Acceptance Acceptance Must be consistent with contract
Offeree must have capacity & intend to contract
Acceptance must be communicated
Acceptance must be unconditional
Acceptance must be in prescribed manner

14. Certainty of Terms Must not be so vague as to be uncertain
Causes of uncertainty
Unlimited options
Vague language creates uncertainty
No actual contract
Unspecified factual details
Rules of Interpretation
Plain ordinary meaning of words
Ambiguity interpreted in context of whole agreement

15. Parties of the Same Mind
Mistake or error
Unilateral mistake – one of the parties misunderstands a specific aspect of the contract while the other party is aware of the true facts
Common mistake – both parties misunderstand the same term, fact or aspect of the contract
Mutual mistake – both parties misunderstand different terms or aspects of the contract

16. Possibility of Performance
Objective vs Subjective impossibility
Only objective impossibility leads to voidness
Initial impossibility – void if objectively impossible
Supervening impossibility – void if impossible due to vis major or causus fortuitus

17. Formalities General rule – no formalities required
Certain legislation prescribes formalities – Alienation of Land Act, Credit Act
Parties can also agree on formalities – written agreement etc

18. Void vs Voidable
Void – contract does not come into being because of some fatal flaw
Voidable – contract comes into being and is valid and enforceable until set aside by court because of some flaw

19. Mistake Only a mistake of fact can cause contract to be void
Mistake of fact can relate to nature of contract, identity of subject matter, attributes of subject matter or identity of parties
Can be a common, unilateral or mutual mistake
Common mistake must be material
Mutual or unilateral mistake must be material & reasonable

20. Misrepresentation
A false statement of fact by one person to another concerning the contract & which induces person to contract
Types of misrepresentation
Innocent
Negligent
Fraudulent
In all cases, the contract is voidable

21. Duress Person induced to contract by threat of violence
Contract voidable
Contract to detriment
Only agreed because of duress

22. Undue Influence
Person induced to contract because of special relationship that existed
Eg; family member, pastor, attorney etc
Voidable if:
Contract to detriment