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LAW OF CONTRACT (PVL3702) SEMESTER 1 ASSIGNMENT 01

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LAW OF CONTRACT (PVL3702) SEMESTER 1 ASSIGNMENT 01 Due date: 9 March 2017 Unique number: 853779 IDENTIFYING THE PROBLEM Was a legal contract entered into? LEGAL CONSIDERATIONS According to the Study Guide¹ as well as Prescribed Text Book2 the following law applies to Contracts. A contract can be defined as an agreement entered into by two or more persons with the intention to create a legal obligation. A contract is an Obligationary agreement that creates enforceable obligations. It will come into being with Consensus ad idem, in other words meeting of the minds, intent, Capacity to contract, Certain and definite terms, Formalities must be observed, Lawful, Obligations must be possible to be performed as well as Content must be certain. As a contract creates obligations we need to understand what exactly an obligation is. It is a legal bond between two or more parties. The Debtor must give or do or refrain from doing something to or for the creditor. A personal right will be created. It is also important to remember that both parties are the creditor and the debtor. There are three instances that give rise to obligation: 1. Contract where obligations are voluntarily assumed; 2. Delict where obligation is imposed by the law; as well as 3. Enrichment where the transfer of wealth takes place from one estate to another without a legal cause. Contractual liability can be based on either what we say (Subjective agreement) or what we do (Objective agreement). Actual Subjective agreement (consensus ad idem) is where the parties is in complete agreement on the important aspects, they intent the agreement to be binding in law and are aware of each other’s intentions. While Apparent or Objective agreement implies that although there is dissensus or material mistake, the outward manifestations of their intention or conduct indicate that the agreement was reached. South Africa takes a Subjective approach and uses the Will Theory of Contract as a point of departure where consensus is the only basis for contractual liability. However if there is dissensus the court will use the Reliance Theory to correct the shortcomings of the Will Theory as illustrated in Smith v Hughes3 and Pieters & ...................................................................continued................................................................................

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