Law of

Contract A

Dr. Glover
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Introduction

The LoC is of fundamental importance in the modern world. Contract is a legal device,
without which society as we know it would not be able to exist. We enter into contracts
of some kinds every day, e.g. a lease, buying things, employment, signing documents.
Thus, contract is of great importance in civilized society.

Society relies on private individuals to achieve socio-economic growth. Improvements in

society rely on private initiative.

There are rules in place to regulate social behaviour. They regulate how we interact in a
free market capitalist system. If there were no rules to regulate the free market
interaction, then anarchy will occur. The main mechanism providing these boundaries is
the LoC.

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Historical Overview
In SA, the legal system is a Roman-Dutch one. Contract is common law, and therefore,
its origins lie in Roman-Dutch Law. Due to the fact that SA was influenced by the British
empire for 180 years, English Law has also influences it.

Roman Law of contract still forms the basis of contract law today. This law is over 2000
years old. The difference between the Roman Law of contract and the LoC as we have it
today is that the Romans never developed a general theory of obligation. Rather, they had
law of contracts. If you wanted to enter into a contract or have action against a contract,
your circumstances had to fit exactly under a recognised set.

Combining English Law and RDL

In terms of iusta causa (reasonable cause) in RDL and the English Law doctrine of
consideration.
 The English Doctrine of Consideration
 In EL, consideration is an essential element. There is a need for an element of
reciprocity and quid pro quo.
 The contract must be bilateral in nature, and both parties must have some
obligation towards the contract and each other. A gratuity agreement such as a
donation is not considered a contract; this is because there is only obligation from
the one side, thus unilateral in nature.
 RDL Iusta Causa

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  This makes a unilateral agreement contract possible. An agreement to donate is a
form of contract in RDL.

Yet the 1st Chief Justice, Lord De Villiers insisted that the doctrine of consideration was
the same as iusta causa. Lord De Villiers had a very forceful personality and therefore
had a huge influence on the law. Thus many judges took his idea and applied it to
judgments therefore EL became incorporated into RDL.

In 1910, the court system unified, and so there was a huge need to resolve the question of
contract. The issue only really arose in the case of Conradie v Russouw: De Villiers had
died and there was a new chief justice. A full bench saw this matter and it was decided
that De Villiers was wrong in his assumption and efforts to combine the two laws of
contract. It was decided that the EL doctrine of consideration was not the same as RDL’s
iusta causa. The doctrine of consideration was not seen as part of SAL. In SAL, there
was no requirement of: bilateral, Reciprocity or quid pro quo.

What is a Contract?

 Definition: a contract is an agreement entered into with the intention of creating a

legal obligation.
 Agreement: the aspect of agreement is fundamental to a contract. It involves a mutual
understanding between two parties. If there is no agreement, then there is no contract.
 Obligation: an agreement must have the intention of having legal obligations. The law
of contract is not interested in moral or social obligations. There has to be intention of
legal obligations.

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All essential elements of a contract must be present in order to make the contract valid.
These elements are:
 Capacity
 Agreement
 Legality
 Possibility
 Formality

Capacity
This is the contractual capacity to enter into contracts. Every legal person has the natural
capacity to be the bearer of rights and duties, BUT every legal person may not be able to
acquire rights and duties. Acquisition of these rights and duties are subject to other rules.

Most people are considered to have contractual capacity. However, some groups don’t.
They either have no contractual ability or limited contractual ability such as:
 Children (minors)
 Mentally insane individuals
 Insolvency
 Intoxicated persons

Theron v Theron v AA Life Insurance

‘Was the person of sufficiently sound mind and understanding to appreciate the nature of
the obligations / its rights and duties?’

Uys v Uys

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Generally speaking people are considered to have contractual capacity. There are
situations where capacity is lacking or completely limited.

Consensus
An agreement is made when two parties come to a consensus. They must accord about
the legal obligations between them. The parties must be of the same mind, and must
reach a mutual agreement. (There must be meeting of the minds)

There are 3 points of agreements:

 There must be an agreement that the parties are creating legal obligations upon each
other.
 The parties to the agreement must be known.
 There must be agreement as to the specific contents and terms of the contract.

Creating a Contract
One acquires agreement through the process of Offer and Acceptance.

OFFER: An offer is a statement of intention in which the offeror sets out to the person to
whom the offer is made, what performance and what terms he is prepared to bind himself
to. The proposal is made with the intention that by its mere acceptance, without more, a
contract should be formed.
 Rules of offer in SAL are virtually replicas of EL

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Requirements for a valid offer
1. To a specified person or to the whole world
2. Animus Contrahendi (serious and deliberate intention to contract)
3. Definite and Complete
4. Communicated to the offeree

1. To a specified person or to the whole world

You are free to choose whom you would like to contract with. You can make an offer
either an individual or a whole group. Offer has a specific destination, there is a need for
a contract to be specific to ensure it binds the right people.

Carlill v Carbolic Smoke Ball Company

CSBC made a product which is said to protect one from flu, use it 3 times a day for 2
weeks and you won’t contract flu. CSBC, made a 100 pound reward for anyone who
contracted flu. Carlill bought it used it correctly and subsequently contracted flu. She that
CSBC had made an offer and now she wanted the reward. CSBC said that the reward was
merely for advertising purposes only and it was not a serious contractual offer.
The question was whether this offer to the whole world was valid or was it puffery of
advertising.
The court said that it depends on how the offer is phrased, the court thus stated that it was
not sales talk and therefore Ms Carlill got the reward.

This case was heard in England and was absorbed into SAL through Bloom v American
Swiss Watch Company. If a highly regarded court uses a foreign case as a reference, then
it comes into SAL.

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2. Animus Contrahendi

In order for there to be an offer there must be the intention to create legal obligations. But
sometimes no legal obligation is made:
 Promises made in jest or anger are not seriously intended to create / impose serious
legal obligations.
 Mere social arrangements that do not constitute contractual offers in a serious
manner. E.g. failing to go to a meeting / game / dinner.
 Mere domestic arrangements do not have the notion of animus contrahendi: Pothier
(French Jurist) used the following examples to illustrate this: if a father tells his son
that he will pay for him to go overseas if he works hard – the father does not mean to
contract with his son.

3. Definite and Complete

For an offer to be true, an offer must be definite and complete, unambiguous and easily
understood. The whole process of creating an offer must be gone through in its entirety,
despite this been lengthy at times

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There are some situations where a statement is not a definite and complete offer. The
following do not qualify as definite and complete offers:
 Invitation to negotiate
 Requests for an offer
o Efroiken v Simon: S went to his broker and stated that he had 3000 bags of
oats to sell. S wanted his broker to see if he could find anyone interested in the
deal. The broker sent a telegram to CT: 3000 bags of oates, 11 shillings per
bag. The CT broker found a buyer and sent a telegram back accepting the
offer. S’s broker in JHB informed S, but S stated that he was not interested in
selling. Therefore he had not made an offer. Thus there was no legal contract.
 Statements of Information
o Harvey v Facey: F received a telegram asking what his price would be to sell
his farm. He responded saying 900 pounds. The plaintiff stated that this was
an offer to sell and said that he accepted this offer. The owner said that he had
no intention to sell and had made no offer of the sought to enter into an
agreement. The court held that it was a statement of information, there was no
offer to sell the property and no commitment to make an offer.
 Tentative / Incomplete / Preliminary Proposals
o Pitout v North Cape Livestock Co-op Ltd: The appellant lives on a farm and
owned cattle. Her son got into a lot of debt, the debt collectors came to the
farm to try and reclaim the debt. On arriving at the farm they met the mother.
She said that she would sell her cattle at R170 per head to try and cancel her
sons debt. The son then arrived, was very rude and insulted the debt
collectors. The mother then stormed off, irritated and said that she would
leave them to sort out the matter between themselves. After the confrontation,
it was declared that the son was insolvent. So the debt collectors returned to
the farm to try to get the money out of the mother. They said that she had
made an offer, and so was now bound by it. The mother refused the liability,
saying that it that it had not been a complete and definite offer. She had left
before the matter had been settled, and it was her son who was in debt, his
input would also be required. The court held that no offer had been made

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 completely – there was no definite and complete offer, it was a tentative
proposal only
 Communicated to the offeree
o The offeror must communicate his offer to the other party. Both parties must
know that the offer has been made as well as exactly what is going on and
what the arrangements are.

Specific Issues

1. Advertisements and price tickets

2. Tenders
3. Options
4. Rights of pre-emption
5. Termination

1. Advertisements and price tickets

A price ticket does not constitute an offer to do business, rather it shows the intention to
do business and this constitutes an invitation. The buyer makes an offer, not the seller.
Crawly v Rex
 An advertisement was placed outside a shop to buy cheaply priced tobacco. A
customer, Crawly, entered to buy some of the advertised tobacco, left, and then
returned again to buy some more shortly after. The shopkeeper asked him to leave,
but he insisted that there was an advert outside to come in and purchase this tobacco.
He had accepted the offer and had come in to purchase the tobacco. The shopkeeper
insisted that he leave and Crawly refused. The police were called and the buyer was
arrested for trespassing.

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 The question arises: who makes the offer? The member of the public or the
shopkeeper.
 The court held that an advertisement or a price ticket is an invitation to do business.
The shop does not make the offer, the buyer does. The shopkeeper invites an offer,
the buyer then makes an offer to the shop and then accepts on payment. The
tradesman is free to accept or refuse the offer. It is the buyer who is regarded as
making the offer in ordinary commercial transactions.

2. Tenders
 These are often found in newspapers, when there is a call for all tenders. It is usually
addressed to a particular group.
 The question then arises: is a tender an offer? Or is it merely an invitation to do
business? Nothing definite or complete has been made. There is no serious desire to
do business with a particular person. It is an advertisement / invitation to do business.
It is the tenders who make the offer.
 Three or four people may apply; these offers are then all considered. The person who
put the tender out is then free to choose whom they would like to choose.
 This is an area of law that is now governed by legislation.

3. Option
 Before the offer has been accepted, there is no contractual obligation between the
parties and therefore it can be revoked. Once the offer has been made, it has to be
accepted for it to become a contract.
 A makes an offer to B, there is an agreement between the two parties that the offer
will stay open until a specified date.
 An option is an irreversible offer.

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 An option can be analysed in 2 ways:
o Offer to enter into the main contract.
o Subsidiary contract (pactum de contrahendi) on the offeror to keep the offer
open for a set period.
 An option allows for a date for revoking. If there is a violation, there is a breach of
contract thus leaving B remedies.

4. Rights of Pre-emption
This is another type of agreement, it is known as the right of first refusal. It specifically
applies to contracts.
The parties enter into a subsidiary agreement, if the one party (B) decides they want to
sell a particular commodity, they promise to offer the commodity to this particular party
(a) before anyone else. They will then have the preferential offer to buy the commodity
being sold.
Rights of pre-emption are formulated in two ways:
 The granter of the right (A), if he decides to sell in future: he will allow party (B) to
make the 1st offer that will be considered. Therefore A is not committing himself.
 A will say, if I decide to sell my vehicle, I will make the 1st offer to you (B). The
power is all in the hands of B. This is known as the right to 1st refusal.

The right of pre-emption is therefore conditional, it is not absolute. Once the condition
has been satisfied then there is force and effect.

Owsianick v African Consolidated Theatres

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Sets out the meaning of rights of pre-emption: ‘A right of pre-emption is to be
distinguished from an option. If you have an option contract, all power is in the hands of
B. The offer exists. Right of pre-emption has no force until the seller decides to sell, but
if they never decide to sell, the right of pre-emption never comes into existence. There
has to be a trigger event.

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6. Termination
a) Effluxion of fixed time
b) Lapse of reasonable time
c) Death
d) Loss of contractual capacity
e) Rejection
f) Counter offer
g) Withdrawal or revocation
h) Irrevocable offers

a) Efflux ion of fixed time

 ‘When an acceptance of an offer is conditions to be made within a time or in a
manner prescribed by the offeror, then the prescribed time limit and manner should be
adhered to. It is the same which apples when a debtor undertakes to discharge an
obligation on a specified date; the creditor need make no demand…dies interpellat
pro homine, and the debtor is in mora if he fails to pay on the appropriate date.
 The offer has to be accepted both by the date specified as well as in the manner
specified.

b) Lapse of reasonable time

 When the offer does not give a specified date to accept by, then the acceptance must
be made within what can be considered a reasonable time.

c) Death
Both parties must be alive, otherwise it is impossible for there to be consensus between
the two parties. Offer of donation cannot be considered a reasonable time.

d) Loss of contractual capacity

The question arises as to whether the offer expressly or impliedly permits acceptance to
be made in circumstances, and the implication will not lightly be made.

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e) Rejection
The principle that rejection by the offeree terminates the offer is well established. ‘An
offer continues only until the offeree has replied to it, and directly he replies the offer
ceases to be addressed to him. Unless this were so an offeror would never know when a
refusal might be turned into an acceptance, and so he would be precluded from seeking
other parties with whom to contract.

f) Counter offer
It is usually regarded that a counter offer incorporated a rejection and therefore destroys
the original offer.
‘It must also be remembered that a counter offer is a general equivalent to a refusal of an
offer and that thereafter the original offer is dead and cannot be accepted until revived.’
If an offer is made the offeree may enquire whether the offeror will modify his terms and
such an enquiry will not constitute a refusal.

g) Withdrawal or revocation
The general rule is that the offeror may withdraw or revoke his offer at any time before it
has been accepted. The withdrawal or revocation becomes effective only from the time it
comes to the notice of the offeree. This is not to say, of course, that an offeree is obliged
to take note of any rumour that may come to their attention.

But not every offer to the public at large will be susceptible to this interpretation, as the
courts may sometimes be driven to the conclusion that a particular offer of this type may
not only be withdrawn even with notice if the withdrawal would amount to a fraud on any
member of the public who has embarked on the process of acceptance.

h) Irrevocable offers
Although offers are normally revocable, an offeror may expressly or impliedly make his
offer irrevocable for a fixed period of time. This normally develops into an option.

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Acceptance

Definition: a contract only comes into existence once the offer has been accepted. An
acceptance is a statement of intention in which the offeree signifies his assent to the
proposal embodied in the offer.

Requirements of Acceptance:
1) Acceptance must be made by the person to whom the offer was made
2) Acceptance must be in response to the offer
3) Acceptance must be unconditional / unequivocal and unambiguous
4) Acceptance must be communicated to the offeror before the contract can come into
being
5) Acceptance must be made in the prescribed manner

1) Acceptance must be made by the person to whom the offer was made.
 If A makes an offer to B, B is the only one that can accept it. C cannot enter into the
equation and accept the offer.
 One has a right to decide with whom they wish to contract with.
 An offer is usually directed to an individual but may be binding on others.
 One can make an offer to the entire world, the first person who accepts the offer gets
the contract

2) Acceptance must be in response to the offer.

 Acceptance must be made intentionally, and you cannot accept an offer if you were
unaware of it.
 Bloom v American Swiss Watch Company: ASWC put out a reward for info relating
to stolen goods. Bloom gave some valuable info, but did not know of the reward offer
when he gave the info. As a result he could not accept the offer. Thus there was no
contract, as there was no meeting of the minds.

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3) Acceptance must be unconditional / unequivocal, unambiguous.
 Borne v Harris
o This case dealt with the issue of leasing a hotel. The contract started on 15 April
1942 and lasted until 15 April 1947. There was an option to sign for a further
five-year lease after this, by written notice, 6 months prior to the end (15 October
1946). Bourne sent a letter to re-lease through a lawyer. Harris said that the dates
were wrong thus Bourne had no right to renewal. Bourne said that he accepted it
was a minor detail, but his intention was obvious.
o The court held that Bourne did show his intention to release, but it was not clear
and unambiguous – it left room for doubt. Thus Bourne had no right to the
renewal.
o Yet this was descended upon by Schreiner JA, he said that the other judges were
being to harsh and that one needs to interpret what he was trying to say and thus
his intention was clear.

4) Acceptance must be communicated to the offeror before the contract can come into
being.
 This ensures consensus and meeting of two minds. The offeror must be informed of
the consensus.

6) Acceptance must be made in the prescribed manner.

 Offers are sometimes made generally, but they sometimes attach a manner of
acceptance that is required. E.g. by means of a letter, or though an agent.
 If an offer is prescribed, then you have to comply with this to accept and finalise the
contract. If you fail to comply, then there is no acceptance and so no contract.

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Laws v Rutherford
 The respondent gave the appellant a 3 month option, to enter into an agreement to cut
timber on the respondent’s farm this option expired on 26 July. Acceptance or refusal
was to be notified by a registered latter to the respondent. The appellant did not
accept within the specifies time and by 27 July the option had expired. But on 28 July
by letter and 29 July by telegram, the appellant notified the respondent of the
acceptance of the option.
 It was stated that the matter had been overlooked, as the respondent ought to have
known that the offer had been accepted due to the preparation on the property to
commence work.
 The appellant was to remove all from the farm. The matter went on appeal. The
appellant did not notify acceptance within a time period therefore the decision was
upheld. Thus there was no contract made.

Driftwood Properties (Pty) Ltd v McLean

 This case dealt with an offer to purchase. The offer was open and binding upon both
parties until signed by both parties, on or before 17 May 1969. It was stated that the
contract would lapse if only one of the parties signed. The respondent signed on 30
April and the appellant signed on 17 May. The signed document was sent to the
respondent by post but was never received. Respondent unsuccessfully sued for
specific performance case went on appeal.
 It was held that before the document was signed – the respondent has substituted
himself as the offeror. The offer could not lapse due to the failure to communicate –
but it wasn’t signed. The signing on 17 May turned the offer into a binding contract.
 The decision was reversed.

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 Special Issues:
 Silence cannot constitute an acceptance. Acceptance must be communicated to the
offeror. There is no contract until the offer has been accepted. There is an exception
where there is a duty to speak out and state non acceptance.
 In contracts where the parties are away from one another, 2 questions need to be
answered:
o Where the acceptance occurs
o Whether acceptance is important for determining the jurisdiction of the court.

Postal Contracts:
There are four possible theories for acceptance through the post:
i. Declaration theory
ii. Expedition theory
iii. Reception theory
iv. Information theory

i. Declaration theory
Acceptance takes place when the receiver declares their intention to accept the offer. The
contract is made from when the letter of acceptance is written. (final acceptance)

ii. Expedition theory

The acceptance takes place when and where the letter of acceptance is posted. The
posting of the letter constitutes acceptance of the offer.

iii. Reception theory

Acceptance occurs when and where the letter of acceptance is received – in the post box.

iv. Information theory

Acceptance occurs where and when the offeror opens and reads the letter of acceptance.
Acceptance is when the offeror becomes informed of the acceptance.

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Fern Gold Mining v Tobias
 Facts: Tobias applied for 500 shares from Fern Gold. 250 Pounds was paid on
application to an agent in Pretoria. 18 February, the director allotted 500 shares to
Tobias but on 19 February, Tobias had written to the agent repudiating his shares and
demanded his money back. On the same day the agents secretary wrote to Tobias
informing him that his shares had been allotted to him. But the secretary had written
the letter after Tobias had written to them. Tobias refused to accept the shares and
denied liability.
 The court held that the agent’s notice of repudiation was the equivalent to notice from
the company. Tobias had repudiated before the letter of allotment was posted.
Therefore there was no binding contract between him and the company. The
judgement was given in favour of Tobias as well as the costs.
 In this case the information theory was used. Acceptance is made once the person
who made the offer is made aware of the acceptance. The question also arose in the
Cape Explosive Works Case – where the jurisdiction of the CPD was challenged. The
same judge heard this case as well as the Fern Gold case; only this one was 31 years
later. The judge decided to change his mind on the matter and stated that the
expedition theory was the most realistic – a contract is made when the letter is posted.
Post marks and stamps serve as evidence. The use of the expedition theory was
confirmed in the Sealing and Whaling case.
 There has been subsequent unease and criticism of this approach, especially by
academic writers. It remains still a part of the rule of law: a contract is finalised when
the letter of acceptance is posted.
 This only applies when the offer was made through the post. Law expects you to
reciprocate by accepting through the post.
 The person who makes the offer can vary this expedition theory by prescribing a
particular term of acceptance. If this is done, then the expedition theory can be
altered. E.g. can make an offer by post, but contract will only be finalised upon
reading the letter of acceptance. A prescribed mechanism of acceptance can be
included in the offer.

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Electronic Contracts
 In 1996 the UN passed a model law on electronic contracts. This contained a proposal
of law for other countries to use and follow. They tried to encourage the other
countries to follow this pattern in an attempt to create uniformity between countries
laws on e-commerce.
 Through discussion and negotiation, SA has come up with the Electronic
Communications and Transactions Act 25 of 2002. This Act covers all forms of
electronic communication. S22 and s23 of the Act marks a departure from postal
contracts and now the reception theory is used for convenience purposes.

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The Law of Mistake

One can only escape a contract if one is able to show mistake was legally possible.
A mistake can be defined as a state of mind that is not in accord with the apparent facts.
The element of consensus is not present and thus there is no meeting of the minds and
thus there is no agreement.

There are 2 requirements for a mistake to be legally significant:

I. Mistake must be essential, it must affect the whole nature of the transaction
II. Mistake must be justifiable by law.

Theories of Contract: subjective and objective theory

Subjective Theory – will theory

 This approach requires that the minds of the parties must meet on a subjective level to
all the terms laid out in the contract.
 There must be a true agreement in a subjective sense.
 The wills of the parties must coincide.
 Each party must know exactly what the other party is proposing and thinking.
 If something goes wrong – there is no identical true agreement: there can be no
contract. Unless the agreement is perfect, there is no agreement at all.

Problems:
 It is too easy for a party to avoid the contract, as one can never truly understand what
the other party is thinking or read others minds.
 There would be no security of contracts as it is too easy to change ones mind.
 Law of contract would no longer be a very useful source of law.

Objective Theory – declaration theory

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 This is where the basis of understanding of when a contract concludes, is when the
parties declarations coincide objectively speaking.
 The question is: does it appear objectively from the outward declarations for there to
be a contract between the two parties?
 There only needs to be an outward appearance. One looks for this by applying the
standard test: what does it look like from a third parties perspective? Does it look as
though there is an agreement?

SA Railways and Harbours v National Bank of SA Ltd: the law does not concern itself
with the workings of the minds of a contract, but with the external manifestations. Even if
philosophically their minds didn’t meet, but seemed externally to meet, it will seem that
they had a contract.

Problems:
 This theory does not take into account the actual intentions of the parties. It is a key
feature that the minds of the parties must meet, and thus this approach does not give
this aspect any consideration.
 There is no account that we are human beings, and can make mistakes.
 Thus there would be no defence to fraud.

Both of these theories have problems when viewed in isolation – neither is a workable
theory of contract. There needs to be a compromise approach.

Saambou Nasionale Bouvereeniging v Friedman

In this case the judge (Jansen JA) discussed the philosophy of the theory of contract:
1) The subjective theory is a basic point of departure for determining the existence of a
contract. Was there a meeting of the minds?
2) In certain circumstances there has to be a compromise – an appeal to objectivity will
be necessary.

Therefore there needs to be a compromise: subjective? Or objective?

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There are 4 potential approaches one can choose from:
1) Doctrine of Estoppel
2) Doctrine of culpa in contrahendo
3) Reliance theory
4) Doctrine of Iustus Error

1) The Doctrine of Estoppel

In the Saambou case, this doctrine was found to be inappropriate in SAL.

2) Doctrine of Culpa in Contrahendo:

This was a European / Germaniac approach, but was not accepted in SAL.

3) Doctrine of Iustus Error

Technically declared inappropriate in SAL.

4) Reliance theory
This is also known as the quasi mutual assent. This theory was chosen as the appropriate
compromise approach. Courts have consistently adopted this approach, but a mistake is
commonly known as an Iustus Error but this does not mean the Doctrine of Iustus
Erroris used – IT IS JUST A TERM.

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Reliance Theory

Also known as the Doctrine of Quasi Mutual Assent or the Doctrine of Apparent
Agreement.

This theory was chosen as the compromise approach. It allowed people to escape
contracts, however, not too easily. In this theory, mistakes are called iustus error. This
occurs when there is no subjective meeting of the minds. Each party has an opposite idea
and point of view.

A contract will be confirmed if:

 The party alleging a mistake by his outward acts creates in the minds of the other
party the belief / reliance that an agreement has been reached and
 The facts show that the belief / reliance of the other party are reasonable.

To resolve this issue, the court says that there could be an agreement, but it is necessary
to investigate. If Q claims there is a mistake, then the court looks at the case from the
perspective of P (that of the person claiming there to be a contract). It is reasonable to say
that on the declarations on the other party and the outward acts, (was P’s reliance on Q’s
declarations / conduct reasonable) it is reasonable to say that there is a contract; then
there is a contract.

Smith v Hughes
If, whatever a mans intention may be, he conducts himself that a reasonable man would
believe that he was assenting to the terms proposed by the other party, and that the other
party upon that belief enters into the contract with him, the man thus conducting himself
would be equally bound as of he had intended to agree to that other party’s terms.

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Hodgson Brothers v SA Railways and Harbours
H informed the railways that they had a lorry to sell for 500 pounds. Negotiation ensued
between both parties and there was various correspondence. At no stage was price a
dispute. Eventually after negotiations were complete, the government made a complete
and definite offer to buy the lorry. H received the offer and accepted it by post. 5 days
later a government official sent a telegram: stating that they forgot to mention that they
would only pay 300 pounds. H refused saying that they had agreed on the price. There
was no problem with offer and acceptance, but there was a mistake. The government said
that there was no meeting of the minds over the price. H = party claiming there is a
contract (P). Gov = party claiming no contract / mistake. The government conducted
themselves in a manner that a reasonable man would believe that there was a contract. H
was reasonable to think this and therefore the 2 requirements have been satisfied. There is
a contract.

Signed Documents - Caveat Subscriptor Rule.

Burger v South African Railways
 The basis is the principle of the quasi mutual assent / reliance theory. Only if one can
show mistake, or that the terms are contrary to public policy can one escape a
contract, but this is very rare.
 It is a said principle of law, that one is bound by the signature below the terms.
 Burger transported textbooks from Johannesburg to Grahamstown, the contract itself
had railway terms and conditions mentioned in the Act referring to liability. This
contract was signed. The contract was performed and the goods went missing in
transit. B sued the railways for a breach of contract as B wanted the full amount in
compensation, the railways stated that they were not liable due to the sections stated
in the contract referring to the Railways Act, and therefore their liability was limited.
The court held that B had signed the contract and therefore he was bound by it.

Unsigned Contracts
Ticket cases – follow the 3fold English legal test established in Richardson Spence & Co
v Rowntree 1894 AC 217, see SAR v McLaren 1903 TS 727.

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Key to a Mistake
Mistake formula:
1. Party alleging that there is a contract (Thai) must prove prima facie agreement.
a. A declaration of intention on their part and
b. A corresponding declaration on Rody’s part.
2. If Thai is successful, the onus passes to Rody:
a. Rody will be bound, unless they can prove a mistake recognised by law.

How Rody must prove:

 Confusion in a material sense
o Both or nothing
 The reliance of Thai is unreasonable
o = a Iustus Error - mistake

Confusion in a Material Sense

What confusion could have a material effect on a contract / apparent agreement?
i) Confusion in negotio – nature and type of contract
ii) Confusion in corpore – subject matter of the contract
iii) Confusion in persona – persons involved in the contract

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Confusion in Negotio
This involves the confusion as to the nature and type of contract being entered into. It is
when one category of contract is confused with another.

Dobbs v Verran
 The applicant went 300 miles in the respondent’s car to court in Grahamstown. There
was no mention of paying for the lift. 5 months later the applicant sued the respondent
for 30 pounds medical fees. The respondent admitted to owing this but counter
claimed 15 pounds for the lift he had given. The applicant thought the lift was
gratuitous. There was confusion as to the nature of the contract between the two
parties. The magistrate stated that there was no agreement, the applicant failed to
prove that he was a guest for a lift, it was implied in the contract that payment was
necessary. It was held on appeal that the respondent reasonably thought he was a
guest. The parties were not at idem, no contract expressly implied existed and thus the
appeal succeeded.

Confusion in negotio does not stop at confusion in negotiation. It goes further – it can
also refer to a material confusion referring to an essential term of the contract.

Horty Investments (Pty) LTD v Interior Acoustics (Pty) LTD

 This case deals with a lease of a building. Leased from May 1981 – April 1983. H
made a typing error, which now stated the building would be leased for 12 years at a
fixed rental, instead of 2 years. This is clearly a material problem as it is confusion to
an essential term of the contract. It was held that a reasonable man would be able to
see it meant to last 2 years and not 12. Declaratory order was granted.
 H made the mistake, IA signed the contract and didn’t mention the mistake. There is
no evidence that IA knew about the error, but any reasonable person would have
realised, as well as mentioned the discrepancy. IA just signed it and now claims the
lease for a fixed rental. By remaining silent, and now claiming the lease at a fixed
rental, this is not seen as reasonable. Even though H made the mistake, the
unreasonableness of IA trumps this.

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Sonap Petroleum (SA) (Pty) LTD v Pappadogianis
 There was an addendum to the lease, by mistake the lease was shortened. The lease
was for 20 years on the original and only 15 on the amendment. It was a typing error,
the addendum was signed by both parties.
 The problem that now arose, was how long the lease would last for. There has been
no consensus and thus the addendum to the lease was declared null and void with
regards to shortening the lease. The defendant was ordered to pay the costs of the suit.
 Sonap made the mistake and Pappadogianis knew of it. The courts had to look at the
party alleging there’s a contract is being reasonable or not. P knew but chose to say
nothing. The courts decided it was not reasonable to keep quiet, thus P cannot claim
that there is a contract.

George v Fairmead (Pty) LTD

 The appellant sued the respondent (hotel owner) for 125 pounds and 3 shillings for
the loss of clothing and personal belongings from the hotel room (1 March 1955). The
magistrate’s court granted absolution and the Provincial division upheld the
magistrate’s decision. On 18 January 1955, the applicant made a verbal agreement
with the respondent’s receptionist to hire a room for a fixed amount per month. G
moved in and signed the register, filled in personal details at the top of the form. But
in small print between the signature and the bottom was a clause stating that the
‘proprietor shall not be responsible for loss or damage to my property brought onto
the premises.’
 The appellant’s case was based on iustus error. Under reasonable misapprehension he
claimed he didn’t know it was a contract and claimed his attention was not drawn to
the clause. It had not been part of the oral agreement and G wouldn’t have signed or
checked in if he had known. The court held that he had known he was signing a
contractual document as the tariff was written in by the applicant. He chose not to
read the additional information and personally took risk of being bound by it.
 One cannot claim ignorance in iustus error. The hotel couldn’t have known G was
confused or hadn’t read the clause as he had signed the document. It was reasonable
of F to presume that G knew what he was doing and signing.

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Confusion in Corpore

This is the confusion as to the subject matter of the contract, the identity of the thing that
is the subject matter of the contract.

Maritz v Pratley
 P sued for 15 pounds and 10 shillings. M was an auctioneer and had a sale in a store,
on the morning before the sale, P saw and read the catalogue which included the
conditions of sale. During the bidding for no. 1208, a mirror, P claimed he did not
hear that the mantel piece was excluded and P bought it. There was confusion as to
the matter of the contract. The magistrate found that there was no meeting of the
minds to exactly what was being sold, therefore the contract was not complete. M
appealed and it was stated that there was no negligence and thus the appeal must be
dismissed with costs.

Allen v Sixteen Stirling Ivenstments (Pty) LTD

 A purchased land, it was a written dead of sale and was signed by both parties. The
estate agent made a mistake and showed A the wrong property. A had a different
property in mind to that of the sellers. If A had known he wouldn’t have entered into
the contract. There was no consensus. The exception was dismissed.

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Confusion in Persona

Confusion regarding the person involved in the contract – confusion as to who exactly is
contracting.

National and Overseas Distributors Corporation (Pty) LTD v Potato Board

 NDC submitted a tender for construction of a steel shed. They then received an
acceptance letter giving them the contract. They then started preparations for the
construction. The PB then sent a letter informing NDC that they had sent the
acceptance letter to the wrong receiver and therefore the tender was awarded to
someone else. The problem was now who had the contract. NDC claimed that there is
a contract as they had no way of knowing that the letter had been sent to the wrong
people and thus it is not unreasonable to assume so. The court held that there was no
mistake and therefore there is a contract – the PB was now bound by the contract.

Confusion in a Non – Material Sense

1. Confusion in substantia – quality of the subject of the contract

2. Errant motive

Confusion in Substantia
This refers to confusion as to the quality of the subject of the alleged contract.
Trollip v Jordaan
 The appellant purchased a farm from the respondent, the deed of sale reflected the
boundaries and the extent of the property, the appellant was misled by the agents and
thought the property had more land. The appellant claimed the mistake was material,
reasonable and bona fide. Thus the appellant’s cause of action was misrepresentation.
No mistake can have any affect on the deed of sale. Thus the problem to quality is not
considered material for the purpose of the law of mistake.

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Errant Motive
 This is where ones motive has changed and one was mistaken, the court won’t accept
this to call off the contract. Cow story: if your cow was sick and stopped producing
milk and in case that it died, one entered into a contract to buy a new one. But the
cow recovers; one cannot cancel the contract saying that one motives for buying the
cow has changed.

Prove Relying on the Contract is Reasonable

Is the reliance on the apparent agreement reasonable in the circumstances? There are
guidelines to determine reasonable reliance, the courts look at the party who claims there
is a contract. There will be reasonable reliance (no matter what the other party did): if the
party alleging the contract exists:
 Subjectively knew of the material confusion but kept silent (Sonap) OR:
 Ought to reasonably have known of the material confusion, but did not clarify the
position. (Horty)
 Caused the confusion by misleading the other party (Allen)
 Otherwise there is no mistake. (George, Potato Board)

1. Knew of the confusion and kept silent.

This is if they said nothing and simply snatched at the bargain. It is considered
unreasonable to behave in this manner and remain silent.

2. If one ought to have known there was a problem and kept quiet unreasonably.
Sonap case: an addendum to a lease was drafted, a mistake was made in this addendum,
the lease was shortened from 20 – 15 years, it was singed by both parties. However there
was no consensus and the addendum was considered null and void.

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Mistake formula

1. The party alleging there is a contract (P) must prove prima facie agreement
 There must be a declaration of intention on their part and
 A corresponding declaration on Q’s part.

2. If P is successful, the onus passes to Q

 Q will be bound unless he can prove a mistake recognised by law
 Q must prove :
o Confusion in the material sense
o The reliance of P is unreasonable

A. Material Confusion
There will be reasonable reliance if:
More particularly…

Final Comments:
If both aspects (confusion in material sense and unreasonable reliance) are satisfied:
In a general sense there is a mistake ‘iustus error’ or in a more particular sense, an:
 Error in negotio
 Error in corpore
 Error in persona
(These are only to be used in the conclusion, never use them at the beginning of a legal
essay)
If the above is satisfied, no contract ever existed. The purported agreement is void ab
initio.

If one can prove the requirements:

 There will be no mistake and the contract will stand (George, Potato Board, Hodgson
Brothers) – claim to mistake failed.

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The Effect of Finding a Mistake

The effect of finding that an apparent agreement was tainted by a mistake:

 If a mistake is found, then there was :
o No meeting of the minds of the parties
o No meeting in wither an objective or a subjective sense
o No consensus between the minds of the parties
 As a result, there was no contract at all.
 No agreement was entered into, so the contract is thought to be void from the
beginning, and so it is treated as if it never existed.

Allen v Sixteen Stirling Investments

 Allen purchased land; it was a written deed of sale and signed by both parties. But,
the diagram of property was different to what was shown; the estate agent made a
mistake and showed the wrong property. There was confusion over which plot it was.
 In this case the question of an exemption clause arose. The case involved confusion in
corpore. The sellers agent misrepresented the property for sale, so they are
responsible for the confusion, thus there is unreasonable reliance.
 The seller then said that it was unreasonable to say that he was wrong wanting to hold
the contract binding. The estate agent did misrepresent the property and so confused
matters. However, clause 13 of the contract was an exemption clause stating that
there is ‘no liability for any misrepresentations that may have occurred during the
negotiation of this deal.’ Therefore he claimed that the blame of misrepresentation
couldn’t fall at his feet.
One now has to look back to the formula and determine whether it is in conjunction with
the facts.
1) Is there an apparent agreement (document) – yes
2) Is there material confusion? – yes
3) Is there unreasonable reliance on the part of the seller? – yes
Thus, both legs of the formula have been satisfied, and therefore, the contract never
existed. As a result, one cannot rely on a clause in a non-existent contract.

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Misrepresentation

As far as misrepresentation is concerned in connection with the law of mistake, if it has

taken place, then the contract contains a mistake. Misrepresentation entails total
confusion and disagreement between two parties. However, there are situations where
misrepresentation works in a totally different way. Instead of causing confusion and
disensus, it can induce the agreement and meeting of the minds. It can cause the parties to
come together rather than be repelled apart.

This is usually a representation of quality which is false. An issue of quality refers to the
law of misrepresentation. Misrepresentation of the quality induces the agreement; an
element of consensus is present. However, consensus is wrongfully induced by the
misrepresentation. The courts acknowledge that there is an agreement, but the agreement
has been induced by misrepresentation, and has been tainted by a wrongful act.

Where consensus is present but induced by a wrongful act, the contract is voidable.
Where consensus was never present as in a mistake, it is a void agreement, there was
never consensus.

Petit v Abraham
 The appellant inspected the respondents 3 horses with a view to purchase them. He
asked the aged of the horses, he was told that two were 6 and one was 5 years old.
After hearing about the ages the appellant bought the horses. Later it was established
that none of the horses were under the age of 10. The appellant sued for the purchase
price. He claimed that because of what the defendant said about the age of the horses
he had misrepresented into purchasing the horses. It was held that the parties had
contracted on the basis that the statement should form a term of the contract and that
it was a warranty.

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 Puff: this is not misrepresentation. It is a general or broad statement of praise or
commendation which a person makes to promote their goods, but it is not to be taken
literally. A simple comment of praise does not bind and therefore misrepresentation
does not fall into this category.
 Terms: terms are found on the face of a contract. They are the matters to be agreed
upon to be incorporated into the contract. It guarantees performance; the term binds
one as part of the contract. The contract is breached if any of these terms are not
complied with. The law of misrepresentation is not concerned with terms and breach
thereof.
 Misrepresentation fits between a puff and terms.

Representation: statement made from one party to another during the course of the
negotiation stages of the contract, regarding the quality / attributes of the subject matter
of the potential contract. It goes beyond mere praise or commendation, in that the
statement induces the agreement, but does not become a warranty / contractual term.

Misrepresentation: is a representation whether by statement, conduct or silence, which is

false. Either innocently, negligently or fraudulently, and which induces a party to contract
either to all or on certain terms.

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Fraudulent Misrepresentation
There are 5 requirements to prove this:
1) A false representation
2) Representation wrongfully made
3) Made fraudulently
4) Inducement
5) Misrepresentation must have been made by the other party to the contract

1. False Representation
The statement must have actually been made, and it must have been false. The statement
is usually one of fact. A dishonestly stated expression of opinion of the future is a false
representation. (Feinstein v Niggli)
A false representation may occur in 2 ways:

(a) By words – when one actually says something false.

 The case of Scheepers v Handley dealt with the sale of a farm. A false statement was
made with regards to the size of the farm. S said it was 997 Morgan, however, when
thee property was surveyed, it was found to be 766 Morgan. S knew he was lying
about the size of the property when he told H the size.

 Bill Harvey’s Investment Trust Pty (Ltd) v Oranjezicht Citrus Estates Pty (Ltd)
o The respondent purchased a citrus farm for 55 000 pounds. Claimed it consisted
of 35 Morgan planted land and 5750 citrus trees when in reality there was only
4892 trees, claimed 10 300 pounds in damages based on fraudulent
misrepresentation. The amount was calculated by finding the difference between
the purchase price and the fair value of the land at the time of the sale. This was
the amount that the plaintiff would have paid for the farm but for the
misrepresentation. The plaintiff was awarded 4724 pounds in damages, the
defendant appealed this amount.

37
 o It was held that the onus rested on the plaintiff to establish those allegations. The
question was how much more had the plaintiff been induced to pay by reason of
having relied on the truth of the representation. The representation had no part in
inducing the plaintiff to pay the additional sum of 11 405 pounds. Accordingly
there should be a judgment for the payment of 1 491 pounds and 10 shillings only.

(b) By conduct – man selling a Villa next to a river, hired many fishermen on the dayof
sale to induce the contractor to contract. This was a false representation through
means of conduct.

(a & b) By words and conduct - in the case of Trotsman v Edwick, the issue of selling
property of a specific size was dealt with. T told E that the property was a certain size
(words), however he lied about the size. T paced out the boundaries of the property
with E (conduct), however these were jot the true boundaries, and T knew this. 2/7ths
of the property shown actually belonged to the municipality and was about to be
made into a public road.

2. Representation Wrongfully Made

 Positive misrepresentation will be considered wrongful immediately.
 If there was a duty to speak and there is failure to do so, it is considered wrongful.
Therefore, failure to speak is not automatically wrongful, there has to be a duty to
speak.
o If one makes a statement and realises that it is not true, there is a duty to speak
o There is a duty of full disclosure in insurance contracts.
o Where a fiduciary relationship occurs between two parties, full and frank
disclosure is required.
o Any seller of property is required by law to expose the existence of any
defects on the property.

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3. Representation Made Fraudulently
It must have been made intentionally or with dolus. In the case of Derry v Peek, a false
representation was made. Fraud is shown as:
 Making a statement knowing it was false.
 Making a statement with no belief of truth in the matter
 Making a statement recklessly and carelessly without knowledge of it being true or
false.

4. Inducement
There has to be a causal link between the making of the misrepresentation and the final
agreement. Trotsman v Edwick case:
 Did the statement (representation) induce the contract? The misrepresentation must
have been material to the conclusion of the contract – the person would not concluded
the contract if they had known about those terms.
 Did it induce the contract in entirety or on a particular term?

5. Misrepresentation must have been made by the Other Party to the Contract
Prior to the contract one has to prove that the misrepresentation was made by the other
party. If misrepresentation is made by a 3rd party, it has no impact on the contract.

39
Remedies – once someone has proven false representation

Remedies for fraudulent misrepresentation can be implemented in two ways:

 Seek remedy by way of action as a plaintiff
 In response to being sued for performance, one can claim fraudulent
misrepresentation as a defence.

There are 2 possible remedies:

1. Rescission and restitution
2. A delictual claim for damaged
3. both rescission and restitution and damages

1. Rescission and Restitution

Rescission: if one can prove fraudulent misrepresentation, then one can elect to rescind,
call off, or declare the contract void. Proof of fraudulent misrepresentation does not mean
that the contract never existed, the contract is voidable.

The contract is valid until one rescinds it. One can rescind the contract if the fraud was
material. It will be material in 2 situations:
 If the misrepresentation was of such a nature that if one had known the truth one
would never have entered into the contract. There was a false misrepresentation.
 One would have, but for the misrepresentation still have contracted – but the terms
would have been different. This is also material; the misrepresentation caused the
deal to be different to the one that one would have agreed to. One would have done
the seal, just on different terms.

In both of the above mentioned circumstances, one is allowed to rescind the contract. But
there is a legal debate: Kerr v De Vos: Kerr states that one should be able to rescind in
both instances (dolus dans causum contractum and dolus incidens in contractum), but De
Vos states that one can only rescind in one instance; one would not have contracted at all
for the misrepresentation (only, dolus incidens in contractum).

40
Important Points on Rescission
 The election to rescind is yours. It must be done within a reasonable time, it depends
on the circumstances as to what reasonable is.
 If one fails to express one’s choice within a reasonable time, it is deemed that one
stands by the contract.
 Conduct indicating that one will rescind it binding
 Once one has made the election, one cant change ones mind about it later.

Restitution – this is an equitable remedy invented by the Praetors in 66BC. When a

contract is rescinded, the contract now disappears; however, one may have already
performed in terms of the contract e.g. paid for part of it. Restitution is for performance
that occurred under the contract. Any performance is now unjustifiable and therefore on
has the right to it back. Restitution is the right to claim back what one gave – it is an
enrichment remedy. One is restored to the previous position that one was in, as if there
had never been a contract at all.

Parts are usually restored to their original position unless:

 Things that one has received have been destroyed as the result of fraud. E.g. eggs
rotten, cannot give them back because they are destroyed. Can’t give them back but
one can get the money back.
 Where property has been destroyed by an act of God. E.g. ship sinks due to lightning,
cant give the property back, but one can get the money back.,
 Where the property has depreciated due to fair wear and tear. E.g. cant give property
back in the original state, but can get money back.

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3. Damages

 No matter the decision to rescind or not, one has the right to damages.
 One is always allowed to claim for damages as long as one has suffered them.
 Fraudulent misrepresentation is a delictual / fraudulent act, therefore fraud allows one
to claim delictual damages in a negative interest.
 The aggrieved party is to be put in the financial position they were in had this fraud
not been committed.
 One can claim an amount to put one in the financial position one would have been in
had the contract been performed properly.

Ranger v Wykerd
 R had a house with a pool, the fraudulent misrepresentation was that the pool was in
working order, the only reason the house was bought was because it had a pool in
working order (dolus dans causum contractum). It cost him R1000 to fix the pool.
 The court found that he had suffered patrimonial loss. The courts stated that one
needs to look at the value distinctive feature that formed the basis of the fraudulent
misrepresentation. (negative interest)
 The test for damages is flexible, every case and circumstance is treated differently.
This case formed the authority on damages awarded.

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Negligent Misrepresentation

There are 5 requirements to prove negligent misrepresentation:

1. False representation
The statement must have actually been made, and it must have been false. The statement
is usually one of fact. A dishonestly stated expression of opinion of the future is a false
representation. (Feinstein v Niggli)

A false representation may occur in 2 ways:

(a) By words – when one actually says something false.

 The case of Scheepers v Handley dealt with the sale of a farm. A false statement was
made with regards to the size of the farm. S said it was 997 Morgan, however, when
thee property was surveyed, it was found to be 766 Morgan. S knew he was lying
about the size of the property when he told H the size.
 Bill Harvey’s Investment Trust Pty (Ltd) v Oranjezicht Citrus Estates Pty (Ltd) dealt
with a false number of citrus trees on the property being sold. It was claimed that
there were 5750 trees, but it was found that there were only in fact 4892 trees.

(b) By conduct – man selling a Villa next to a river, hired many fishermen on the dayof
sale to induce the contractor to contract. This was a false representation through
means of conduct.

(a & b) By words and conduct - in the case of Trotsman v Edwick, the issue of selling
property of a specific size was dealt with. T told E that the property was a certain size
(words), however he lied about the size. T paced out the boundaries of the property
with E (conduct), however these were jot the true boundaries, and T knew this. 2/7ths
of the property shown actually belonged to the municipality and was about to be
made into a public road.

43
2. Representation Wrongfully Made
 Positive misrepresentation will be considered wrongful immediately.
 If there was a duty to speak and there is failure to do so, it is considered wrongful.
Therefore, failure to speak is not automatically wrongful, there has to be a duty to
speak.
o If one makes a statement and realises that it is not true, there is a duty to speak
o There is a duty of full disclosure in insurance contracts.
o Where a fiduciary relationship occurs between two parties, full and frank
disclosure is required.
o Any seller of property is required by law to expose the existence of any
defects on the property.

3. Representation Made Negligently

 One needs to prove negligence. The case to illustrate this is Kruger v Coetzee: would
a reasonable person have made a false representation? Or would they have taken care
not to?

4. Inducement - did it cause the parties to agree?

There has to be a causal link between the making of the misrepresentation and the final
agreement. Trotsman v Edwick case:
 Did the statement (representation) induce the contract? The misrepresentation must
have been material to the conclusion of the contract – the person would not concluded
the contract if they had known about those terms.
 Did it induce the contract in entirety or on a particular term?

5. Misrepresentation must have been made by the Other Party to the Contract
Prior to the contract one has to prove that the misrepresentation was made by the other
party.

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Remedies
One is allowed to claim as the plaintiff or the defendant.
1. Rescission and Restitution
a. One may chose to rescind the contract. If performance has occurred, then one can
claim restitution. The claim is to reverse the situation as if it never happened.
2. Question whether an aggrieved party can claim damages or not.
a. Both Roman and Roman Dutch authorities state that one can only claim
damages for fraudulent misrepresentations and not negligent ones. Academic
opinion favours developing the law to make damages claimable for negligent
misrepresentations.
b. In the case of Hammond v Moolman, Wessles JA strongly supported the
RD position, he felt that there was no practical reason to claim damages and heavily
criticised the idea. Claiming damages for misrepresentation is a claim in delict. It
includes a wrongful act and so it is delictual loss. The contract was induced which
resulted in performance and then financial loss.
c. In the case of Kern Trust v Hurter, Friedman decided that the law needed
to be made constant and logical. There is a need to develop the law and hold people
responsible for careless misrepresentation. It was held that we should recognise the
claim for negligent misrepresentation. The matter went to the SCA and it was held
that one may claim damages for negligent misrepresentation.
d. Bayer SA (Pty) Ltd v Frost. F responsible for farms in the Western Cape,
to maintain the vineyards, he had to spray them, this was very laborious and time
consuming. B’s rep arrived and said he had a new product which is sprayed from a
helicopter in one day. F was concerned about the surrounding crops; B assured him
that the spray would not spread. The representation turned out to be false, the spray
spread and the other crops died. This was found to be a negligent misrepresentation;
he misinterpreted the reports on the product. The only remedy at the time was
rescission and restitution and this would not have been sufficient enough. The
matter went to the SCA and it was decided that one can claim for delictual damages
under the law of delict. Negligent misrepresentation may give rise to a delictual

45
 claim for damages when it induces a contract. The law was developed to allow
damages to be claimed for pure economic loss.

Innocent Misrepresentation

This is when a misrepresentation induced a contract, but it is not possible to prove fraud
or negligence. The evidence cannot demonstrate a case for fraud or for negligence.

When innocent misrepresentation induces a contract, one does have remedies, even if one
cannot prove fault of some sort. The remedies available are less, as one can only claim
for rescission and restitution. One cannot claim damages as one cannot prove fault.

Exemption Clauses and Misrepresentations

 Sometimes a document that is signed contains an exemption clause excluding the

responsibility from misrepresentation.
 Allen v Sixteen Stirling Investments (Pty) Ltd illustrates this. There was an apparent
agreement which included the clause. If one finds a mistake then there is no contract
and therefore the exemption clause is void. If one can prove a mistake then nothing
existed.
 If the misrepresentation induced the contract, there is consensus and there is an
existing contract. There is an existing contract and thus there is also an existing
exemption clause. If there is an existing exemption clause in the contract, the clause
can deny your action – because one agreed to the clause when one signed the
contract.
 One can only have a valid exemption clause for innocent and negligent
misrepresentation. On is not allowed an exemption clause concerning fraud. Fraud
trumps the exemption clause!

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Duress
Duress comes from the common law of mentus. It is mainly RL based but does have a
principle of EL.

There are 2 concepts:

 Vis Absaluta – this is the use of physical force to make one sign a contract. However,
in this case there is no contract as there is no consensus. (no)
 Vis Compulsiva – this is when one is threatened with harm to convince one that it is
in best interest to agree to what the other person is proposing. It is when one is put in
a dilemma situation.
o This is where one is induced into a contract in an unlawful way and one agrees to
accept proposals backed by the threat. There is still consensus.
o A coerced will is reached by consensus - coacta voluntas oluntas est.
o When a threat is made and it induces one to enter into a contract, there is a
consensus, but: it is wrongfully induced and therefore a voidable contract.

Elements:
Roman and Roman Dutch writers never set out an actual list of requirements. Wessels JA
set out 5 requirements in his textbook that was absorbed into SAL through Broederyk v
Smuts 1942 TPD 47.
 Actual violence or reasonable fear of violence.
 Fear caused by a threat of considerable evil to the person or family
 Immendiate or inevitable evil
 Threats must be unlawful / contra bonos mores
 Moral pressure used caused damage

1) Actual Violence or Reasonable Fear of Violence.

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A reasonable fear of violence is caused by the threat; the threat must provoke reasonable
fear in a reasonable person. One can look to the surrounding circumstances, the person’s
intelligence, background etc.
E.g. if a spouse threatened their partner that they would leave the matrimonial home if the
ownership of the house was not signed over to him.
2) Threat of Considerable Evil to the Person or Family
In theoretical terms this does not count when considering friends or boyfriend, the
approach is too limited. The term is more important for what it doesn’t say; one needs to
examine the possible object of the threat. There can only be a direct threat to you or a
member of your family. E.g. what about a threat to property? SAL has reached a point
where this does exist, it is called duress of goods and it does not qualify. In addition to
the 5 requirements , one must prove a 6th one:
 At the time one entered the agreement, one protested about what was happening – this
is the EL principle.
 Hendricks v Barnett case
 Medscheme Holdings (Pty) LTD and Another v Bhamjee

3) Immediate or Inevitable Evil:

The threat should be such that one is not easily able to resist it. It is when one is faced
with a decision to be made in agony of moment.

4) The Threat must be Unlawful / Contra Bonos Mores

This is a threat that would result in a crime or delict occurring, it is a wrongful threat, e.g.
a threat to kill, assault, detain etc. This threat induced a contract which is wrongful. But
one is allowed to make threats which are lawful:
 A threat to dismiss useless / lazy employee
 A threat to sue someone unless they pay their debt
 Threats of criminal prosecution – this is an agreement that no prosecution will take
place for theft if a payment of a certain amount is made. This is a very difficult
decision and is a moot point in SAL, there is no finality as to whether or not this is
allowed.

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 5) Moral Pressure Used to Cause Damage
This is not an important element. There is no good reason to prove this unless one wants
to sue for damages.

Remedies: this is the same as misrepresentation. Rescission or restitution (voidable

contract). Claim for financial damages suffered.
Hendricks v Barett
 A cheque was drawn by the defendant in favour of the plaintiff; the payment was
stopped by the defendant as the cheque had been drawn under duress. The plaintiff
was a, manager on the defendant stud farm which had been recently sold. The
plaintiff promised to pay the plaintiff a bonus upon termination of his employment.
Shortly before the sale of the stock, the plaintiff threatened to leave employment
unless the defendant informed him of how much the bonus would be, if it was too
little, he would leave immediately. It was decided that R10 000 would be paid in 2
cheques of R 5 000 each on a posted date. The defendant stopped payment on the post
dated cheque and claimed the cheque had been drawn under duress.
 It was held that it was unlikely that the defendant communicated to the plaintiff and
protest or objection to pay R10 000. The onus is on the defendant, and needs to prove
delivery of the second cheque was made without abandonment of rights. There was
duress of goods – threat to property but Barnett did not protest.

Medscheme Holdings (Pty) LTD and Another v Bhamjee

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