CONTENTS AND OPERATION

TYPES OF TERMS: SOME COMMON INCIDENTALIA 1. time clause/ dies? 2. conditions?

1. DEFINITION: Postpones or fixes the date for performance to a future event that will definitely occur. There are two kinds of time clauses: (i) SUSPENSIVE: suspends the enforceability of a clause based on the occurrence of future event that will definitely occur EXAMPLE: a date, or someone's death. (ii) RESOLUTIVE: an obligation occurs immediately, but will terminate on a future event that will definitely occur. EXAMPLE: a contract obliges Lukas to pay his mom R50 a month until she dies. 2. DEFINITION: is a term that makes the operation of a contract or obligation dependent on the occurrence of a future event that may or may not occur. EXAMPLES: - The buyer buys a property, subject to a bond being approved by a bank to pay the balance of the purchase price (often a time clause is also attached to this obligation, such as that this has to happen within 20 days). - I buy a house in Cape Town, subject to me selling my house in Pretoria in 30 days. (i) SUSPENSIVE: suspends the operation of a contract, subject to whether an uncertain future event occurs or will definitely not occur. When the condition is fulfilled, the obligation is fully enforceable. It is also considered to have been operative since the conclusion of the contract (ABSA). - CESSION: A right that is subject to a condition forms a part of the creditor's estate, and as such may be ceded. - WAIVER: A suspensive condition may only be waived if it is exclusively to the benefit of one party, and then only by that party. Furthermore, the following conditions must be fulfilled (WESTMORE and DE VILLIERS): (i) The waiver must take place within the time-period stipulated in the contract. (ii) That he complies with any contractual formalities for waiver. EXAMPLE: Willem buys a house from Frederick, subject to Willem getting a bond from the bank. If Willem fails to get the bond from the bank, Frederick can waive the condition, as it is for his benefit, provided he complies with other two conditions for waiver in this context. - When the condition definitely will not occur, the contract is void ab inito. Before the condition is fulfilled, but where its fulfillment is still possible it is uncertain as to whether no obligation exists at all, or whether they are bound in some way: - Tjakie argues that the latter is the best approach, as negative obligations on the parties exist not to make performance impossible. - Some old cases e.g. CORONDIMAS say that no contract exists, just a "contractual relationship". This is important, especially when one looks at the statutory requirements for the subdivision of agricultural land. According to the Subdivision of Agricultural Land Act, the subdivision of agricultural land without the minister's consent is illegal. People then just made conditional sales, and said that this did not violate the Act. The courts agreed (GEUE). The legislature then closed this loophole for the sale of agricultural land, saying that, in such cases a conditional sale is also a contract of sale. Outside the Subdivision of Agricultural Land Act, however, where a suspensive condition has not yet been fulfilled, there is no contract, only a contractual relationship. (ii) RESOLUTIVE: a condition that terminates an obligation on the occurrence of an uncertain future event - that obligation will then be void ab initio. Such a clause has full force until the condition is fulfilled. DOCTRINE OF FICTIONAL FULFILMENT: The doctrine of the fictional fulfilment of a condition applies to both kinds of conditions. This doctrine entails that if one party deliberately obstructs the fulfilment of a condition while he is under a duty not to do so, the condition will be deemed to be fulfilled. The origin of this doctrine is good faith. EXAMPLE: if a house is sold subject to a bond being approved, but the buyer takes no steps to apply for a bond, then the buyer is obstructing the fulfilment of the contract and the condition is then deemed to be fulfilled. REQUIREMENTS FOR APPLICATION (SCOTT): (i) The guilty party must be at fault. He must therefore either intend to obstruct the fulfilment of the condition, or must be negligent in this regard. (ii) There should be a duty not to prevent fulfilment of the condition. (iii) The breaching party's actions must have been the factual cause of the non-fulfilment of the condition (THANOLDA ESTATES: a sale of land was subject to a suspensive condition that the buyer would get approval of subdivision and development rights. However, the buyer took no steps to apply for these rights. The seller then alleged that there was fictional fulfilment of the condition. The court held that the buyer could escape the doctrine if he could show that it would've been impossible to get approval. In this case, the court held that the buyer failed to show that, and the doctrine came into operation).

THE CPA: Which provisions deal with unfair contract terms?

Chp 2 part G: ss 48-52 & reg 44 issued under s 120(1)(d) General criticism against provisions on unfair terms: - not written with need for preventative control paradigm in mind - formulated only with possibility of individual consumer challenging term (e.g. s 52 refers to transaction between a consumer and supplier) - not sufficiently geared towards regulator-led or general use challenges by regulators or consumer organizations 1. s 48: GENERAL CLAUSE - prohibits unfair, unjust and unreasonable terms. - Any term, including the price and definition of the main subject matter can be challenged. - It applies to both negotiated and standard terms (no differentiation is made). - It applies to notices that are unsigned, such as onus risk clauses outside parking lots. - tests: excessively one-sided; so adverse that inequitable; if consumer relied on misrepresentation (but should be dealt with in s 41); if supplier acted contrary to s 49 2. s 49: FOUR SPECIFIC TYPES OF CLAUSES - Exemption, assumption of risk, indemnity, acknowledgments of fact - must be plain language - must be drawn to attention in conspicuous manner and form likely to attract attention - consumer must be given adequate opportunity to comprehend - provisions concerning activities or facilities subject to certain risks (e.g. risks of unusual nature, risks that could lead to bodily injury or death)must be initialed or signed, or must show that consumer otherwise acted in manner consistent with acknowledgement of notice - Clauses that violate this section are not void. Court may declare unfair etc. in terms of s 52. - criticism: this type of section may prove to be a double-edged sword. Consumers may just sign in a few more places, and as such the courts are less likely to find against these kinds of clauses. 3. s 50: WRITTEN AGREEMENTS - allows the minister to prescribe categories of contracts that must be in writing. At the moment there are no plans to do so. - Any contract that is in writing must be in plain language and the consumer must be given a copy or free electronic access to a copy (the definition of plain language is found in s 22, which says that the contract must be understood by the class of consumers that the contract is aimed at and by such a consumer with average literacy skills and minimal experiences as a consumer with regard to that kind of good). - Such a contract applies irrespective of whether the consumer signed the contract or not (Tjakie thinks what the DTI intended to say was that if the contract was not signed, it does not preclude the consumer from relying on the contract. She also does not think that this takes away the supplier's obligation to prove consensus or reasonable reliance). 4. s 51: LIST OF PROHIBITED TERMS THAT ARE VOID - Obviously terms contrary to act (e.g. purporting to exclude rights of consumer under s 61 on liability for damages caused by goods) Apart from that, 5 categories (i) exemption clauses: gross negligence (ii) cession of claims against Guardian's Fund (iii) False acknowledgments: no representations or goods/ services/ documents received (problematic that prohibition of no representations clause applies to negotiated terms in the business-to-small business contracts covered by the Act as well) (iv) Forfeiture clauses to which not entitled by law (v) Unfair enforcement clauses, e.g. requirement that consumer sign enforcement documentation in advance,or hands over PIN and bank card - criticism: need a longer list of prohibited terms 5. s 52: POWERS OF COURT - It is unclear what "court" means, however. It would seem that it only refers to ordinary courts, as the section only uses the word "court", which is defined as excluding provincial consumer courts. The National Consumer Tribunal is also not mentioned. However, this interpretation conflicts with section 4, which refers to a list of persons who may approach a court, the NCT or provincial consumer courts. Furthermore, currently, provincial legislation gives wide jurisdiction to provincial consumer courts, which would clash with the above broad interpretation of s 52. Also the NCT has jurisdiction to make orders IRO prohibited conduct. This would give the NCT jurisdiction to make orders under 48, which would seem to give it jurisdiction. - This section also contains a list of factors which courts must take into account when considering whether a contractual term is unfair. Initially the focus was only on a few procedural factors (to do with manner of contracting and circumstances of individual consumer, such as bargaining power and knowledge), but it now has more focus on substantive factors. Tjakie says that the provision should focus more on substantive fairness. 6. s 120(1)(d): MINISTERS POWER TO MAKE REGULATIONS - Allows minister to make a grey-list of terms (terms which are presumed to be unfair). - This power is imperative for proper consumer protection against unfair terms, as it gives explicit guidance and pushes businesses to change their ways without consumer litigation (promotes proactive control). More likely to react spontaneously to more detailed indication of what is unfair than to broad duty not to include unfair terms. It puts the burden of proof on business. Without that, courts unlikely to have enough evidence to properly evaluate fairness. There are also advantages for businesses e.g. more predictability. Reg 44: - More limited scope than Act itself (business operating on for-profit basis and natural person ('individual consumer') acting for purposes not connected with business or profession) - But applies to all 'negotiated terms' as well - Some 'exceptions' for certain types of contracts (but note that contracts for financial services excluded from ambit of act so some of these exceptions now irrelevant).

TYPES OF TERMS: Essentialia

DEFINITION: Essentialia are the characteristic rights and duties that distinguish that type of contract from another type of contract. Traditional method of contract classification. EXAMPLE: the essentialia of a contract of sale is that there is agreement as to the price and merx, and that there is an agreement to transfer all rights as to the merx for a certain price.

TYPES OF TERMS: Express terms

DEFINITION: terms that are specifically agreed upon by the parties. They include terms that are verbally expressed, written down, or clearly acknowledged by a gesture. PROVING EXPRESS TERMS: 1. must adduce direct evidence: 2. Signed documents = caveat subscriptor rule 3. Incorporation of terms in unsigned documents = common law enquiry to determine whether binding (look at ticket cases) + CPA s 49 4. Extrinsic evidence and written contracts = the parol evidence rule applies but can escape this rule by applying for rectification of the contract or by proving that the written document was not intended to integrate the entire agreement.

FREDDY HIRSCH

On 29 August 1994, the respondent, Chickenland (Pty) Ltd (Chickenland), which is the primary operating entity within the Nandos Group applied in writing to Hirsch on the latter's standard credit application form for a line of credit. Hirsch approved the application and took to supplying the latter with spice packs consisting of a blend of different spices prepared in accordance with the latter's specifications.In signing the application on behalf of Chickenland one of its employees inscribed the words 'standard conditions not checked'. During January 2004 the United Kingdom health authority in Manchester tested Nando's extra hot peri-peri sauce and found it to be positive for Sudan 1 dye. Sudan 1 is a red dye that is used in colouring solvents, oils, waxes and shoe and floor polishes. It is considered to be a genotoxic carcinogen rendering it unfit for human consumption. It has been banned by the World Health Organisation and its presence is not permitted in foodstuff for any purpose in this country and most others internationally. Nandos was obliged by the Food Standards Agency of the UK to place newspaper advertisements informing consumers of their finding and were given 48 hours to withdraw any contaminated products from all supermarket shelves in the United Kingdom. Subsequent investigations identified cayenne pepper that had been sourced in India by Hirsch and supplied to Chickenland in certain of the spice packs as the contaminant. A world wide recall of Chickenland's peri-peri sauces followed. A dispute having arisen between them, Hirsch, relying on the standard terms and conditions to be found on the reverse credit application, caused summons to be issued against Chickenland for payment of the sum of R1 368 861.69 in respect of goods sold and delivered by it to Chickenland. Chickenland admitted the claim, but counterclaimed against Hirsch for damages for breach of contract and delict. Each of the four counterclaims succeeded in the high court before Blieden J. On appeal Hirsch contended that the standard terms on the reverse of the credit application form contained certain clauses that exempted it from liability. The SCA, after a consideration of those clauses, concluded that they did not avail Hirsch in a situation such as this, where it had delivered something different to that bargained for and moreover, what was in effect an illegal banned substance. The SCA thus concluded that it was plainly improper for Hirsch to purport to contract out of liability in that fashion. The SCA then considered each of Chickenland's counterclaims. The first was for the refund of the purchase price paid to Hirsch for the contaminated goods. The SCA held the contractual performance undertaken by Hirsch was illegal, but as Chickenland had performed under the agreement by paying the purchase price, it was entitled to its return. Claims 2 and 4 were claims for the wasted expenditure incurred by Chickenland in having to recall and, thereafter, replace the contaminated product. Before the SCA, Hirsch contended that having regard to the test for causation in a claim for damages for breach of contract, the loss suffered by Chickenland was too remote. The SCA held that Hirsch knew that the product was required for export purposes and that the spice packs had to comply with the legislative and other industry standards in the destination country. Accordingly, so the SCA concluded, the parties contemplated when they contracted that, if the spice packs were delivered by Hirsch with an illegal contaminant, Chickenland would be obliged to recall and replace all of the products affected by that contaminant that it, in turn, had supplied to its distributors and that Hirsch would be taken to have assumed liability for all such costs directly linked to that recall and replacement. It followed that Chickenland had established Hirsch's liability for those special damages. In respect of the third claim, Hirsch contended that being a delictual claim for pure economic loss by Chickenland the court had to be satisfied that Hirsch's conduct was wrongful. The SCA after referring to various considerations of policy, including the fact that Hirsch had released a prohibited foodstuff into the market, concluded that Hirsch's conduct was indeed wrongful. It accordingly dismissed the appeal.

WILKENS

Wilkens NO v Voges 1994 (A): The buyer purchases land from the seller, intending to develop a township and sell the erven. The buyer then finds out that there is a going to a road on a property that he was going to buy, which would be to the detriment of the development. He then alleges the existence of a tacit term: a warranty by the seller that no obstacle existed that might delay, interfere with or limit the establishment of a township on the property or alternatively, that the seller knew of no obstacle that might reasonably have those effects. The buyer, in his argument, relied on a letter that the seller had from the Director of Roads to the effect that a road was going to be built over the property. Tjakie reckons the buyer should have relied on misrepresentation rather than a tacit term, but the advocate abandoned the argument based on misrepresentation halfway through oral argument. So the only argument the court had to consider was whether there was a tacit warranty. The court decided that there was no tacit term, for the following reasons: a) There was a contradiction in the buyer's argument: On the one hand, the seller fraudulently withheld his knowledge of the road, and on the other hand warranted that there would be no road. This ties in with the fact that the court must consider the parties' actual knowledge and circumstances in determining whether there was a tacit term or not. b) The court also held that the alleged tacit term was too complicated and was difficult to formulate. c) There was no incentive for the seller to agree to the tacit term - it does not fit with the rest of the agreement. d) The court also said that the contract was detailed and comprehensive, and as such there was little room for putting in tacit terms. e) The court also said that putting in the tacit term would not help with business efficacy. f) The court held obiter that the formalities requirements of a sale of land would not prevent the reading in of a tacit term.This is the locus classicus on tacit terms. Read it for its succinct exposition of the law, its eloquent application to the facts and, most of all, for Nienaber's subtle sarcasm. A winning quote: "[A tacit term] arises when both parties would have regulated a certain situation, had they thought of it, in the manner suggested. Both parties." Facts In February 1988, Stronghold Construction (which is represented here by Wilkens as the former had gone into liquidation) purchased a plot of land to develop a black township from Voges. The deed of sale was very detailed, placed very few obligations on Voges, and had a voetstoots and an entire agreement clause. After the transfer, Stronghold finds out that a road was going to be constructed over the property, which would severely impede the development of the township. Stronghold then refuses to pay the balance of the purchase price. After this, and virtually at the same time, Voges instituted action for the balance of the purchase price and Stronghold instituted an application for cancellation of the contract and for damages in the WLD. The court then combined these two proceedings. Stronghold alleged the existence of an imputed tacit term in the contract which had been breached by Voges. The tacit term was very complicated, but the part of it that was really relied on was a twofold tacit warranty on the part of Voges that no obstacle existed that would impede the development of a township on the property or in the alternative, a tacit warranty that he knew of no such obstacle. Also, Stronghold alleged that Voges knew about the planned road. The single judge (in a "terse" judgment, according to Nienaber) found in favour of Stronghold and awarded crazy damages. Voges appealed to a Full Bench, which found in his favour. Stronghold then appealed to the AD. Salient legal issues A tacit term is a term that is so self-evident that it is a part of the contract without the parties explicitly agreeing on it. There are two types of tacit terms: a) An actual tacit term is one that the parties actually had in mind, but did not express in their agreement. b) An imputed tacit term is one that the parties didn't actually consider, but would have agreed to had it been put to them. The inference of a tacit term must be necessary. It is unlikely to be necessary if it is not the only way that a certain aspect of the contractual relationship could be regulated. The inference that a tacit term is based on can be drawn from the express terms of the contract and from admissible evidence of surrounding circumstances. Whether or not a tacit term exists is determined by applying the officious bystander test. Part of this test, in commercial contracts, is the business efficacy test, which is the assumption that the curious bystander test will not be fulfilled if the adoption of the tacit term is not necessary to ensure the proper functioning of the contract in a business sense. When applying the officious bystander test, a court is entitled to assume, unless there are indications to the contrary, that the parties are negotiating on an honest and equal footing without any hidden motives and reservations. If, however, the facts show that one of the parties had some special knowledge that would have had bearing on his or her state of mind, that fact must be considered when applying the officious bystander test. If a contract is detailed and explicit, it is unlikely that it contains a tacit term. A tacit term is unlikely to be very complex and difficult to formulate. If there is no indication that the plaintiff thought of the existence of a tacit term until late into the litigation process, it is unlikely that the tacit term in fact does exist. A tacit term, once found, is read into the contract as if it always was there. As such, a tacit term does not fall foul of formality requirements or integration clauses. Reasoning - Nienaber JA for the whole court Nienaber JA held that there was no tacit term, for the following reasons: a) The tacit term proposed by Stronghold was really complicated. b) The contract was very detailed and specific. c) The tacit term saddled Voges with much more responsibility and liability than the rest of the contract did. As such, Voges was unlikely to have agreed to it. d) If the court assumed that Voges knew about the road, Stronghold's argument was contradictory in two ways: First, an imputed tacit term can only be said to exist if it did not actually, broadly speaking, occur to the parties. If Voges knew about the road, an imputed tacit term cannot be attributed to him. Second, there is no way that Voges, knowing about the road, would have agreed to warrant that there would be no road. e) There were many other ways to control the liability of the parties in the way that the tacit term would have done. f) The warranty was not essential to give effect to the contract in a commercial sense. The business efficacy test was therefore not fulfilled. g) Stronghold did not even raise the possibility of the tacit term until late into his litigious communications with Voges. Conclusion The appeal was dismissed with costs.

TYPES OF OBLIGATIONS: 1. What is a civil obligation? 2. What is a natural obligation? 3. What is a reciprocal obligation? 4. What is a simple obligation? 5. What is an alternative obligation? 6. What is a generic obligation? 7. What is a facultative obligation?

1. A legal obligation that is enforceable by a right of action (most contractual obligations are civil). 2. Relatively unusual. Has legal significance but may not be enforced in a court. However, although a person who owes a performance in terms of a natural obligation may not be sued for performance, if they perform, such performance will be regarded as having been owed. - e.g. a contract with a minor will only give rise to a natural obligation for the minor, while the other party will be bound by a civil one. - e.g. betting agreement/ wager 3. Most contracts give rise to these. They create at least two linked obligations where each performance is owed in exchange for another. Remember that where there are two obligations, there are two creditors and debtors (they can often be the same person). - e.g. contract of sale: payment of purchase price owed in exchange for delivery of merx (the purchaser is both a creditor in that they have a right to claim performance, and a debtor in that they have to pay) 4. Most obligations are simple. This is where parties specify the exact performance to be made. 5. Where parties agree that someone can choose a performance from two or more specified alternatives (the party with the right to choose can be anyone, including a 3P). The alternatives must be spelled out otherwise the obligation would be void for vagueness (e.g. where absolute discretion is given). Once the party has chosen, the obligation becomes simple and the party owed the performance may only demand that particular performance. 6. Where a party can choose a performance from a specified genus. The parties must specify who is to make this choice, otherwise it will fall to the D. Parties must also specify the quantity to be delivered. - e.g. the seller must deliver 3 Nguni cattle to the purchaser. 7. The performance owed by D is specified, but they have the right to choose to make a different specified performance. This is different from an alternative obligation in that a C, when claiming performance, can only claim the first specified performance, whereas with an alternative obligation, C may claim whichever of the specified performances that were chosen by the decision-maker. - e.g. seller must deliver cow called X to the purchaser, but they may if they wish, deliver Y instead.

TYPES OF TERMS: SOME COMMON INCIDENTALIA 1. Suppositions/ assumptions? 2. Warranty? 3. Modus?

1. DEFINITIONl: A clause that makes the operation/continued existence of the contract dependent on past or present fact (or a state of affairs). - can be express or tacit. - VAN REENEN STEEL: a supposition as to a future state of affairs is invalid. In this case, it was held that the sale of land cannot be subject to a municipality granting rights in the future. - if held by only one of the parties: has no legal effect, and amounts to a mistake in motive. EXAMPLE: both the seller and the buyer mistakenly think the erf to be sold has a sea view. One could say that this contract has a tacit supposition, and that the existence of the contract depends on the contract having a sea view. If the erf has a sea view, the contract is valid and if not, the contract is void. EXAMPLE: a municipality threatens a homeowner with expropriation to use his land as a graveyard. The homeowner decides to sell the land to the municipality. Afterwards, he finds out that the municipality is not using it as a graveyard, as the land is not suitable to be a graveyard. The municipality then plans to sell the land to a third party at a profit. To defend the homeowner one could argue that this contract was subject to a supposition that the land was suitable for use as a graveyard. SUPPOSITION V CONDITION: a supposition relates to a past or present state of affairs, whereas a condition relates to a future uncertain event. 2. DEFINITION: A term under which one party accepts absolute liability for a certain performance. EXAMPLE: Krisjan can warrant that the rotary-axle irrigator that he is selling to Omie will last for five years. If it doesn't, Krisjan will be liable for PMP (VAN DER WESTHUIZEN) 3. DEFINITION: A term that requires the recipient of a performance to make some other performance. If the recipient does not make that performance, he will be in breach of contract. EXAMPLE: For example, if Ria donates R1m to the University of Stellenbosch on the condition that it only be used for the furtherance of the Afrikaans language, then the University of Stellenbosch will be in breach of contract if it uses that money for support for English-speaking students. MODUS V CONDITION: a contract that is subject to a modus is immediately enforceable and if the modus is not fulfilled, the person is in breach of contract. A contract subject to a condition only comes into effect when that condition is fulfilled.

THE CPA: 1. s 61 2. s 4 3. What are the procedural enforcement mechanisms in the CPA?

1. Everyone in the supply chain is liable for consequential loss caused by defective goods, without the consumer having to prove fault on the part of any supplier. - The only harm covered here is harm to property, injury to the consumer, or related consequential loss. - The only defenses to suppliers are that the product fault did not exist at the time that the good was supplied, or that he just complied with the instructions of the manufacturer. Retailers and distributors have an easier position. They also have a defense that comes down to the absence of fault. - Only applies to the provision of goods, not services. - The rights created in this section cannot be excluded in an agreement between a supplier and a consumer. - This section always applies, regardless of whether the contract under which the item was brought was a consumer contract or not. 2. Interpretation clause: contracts must be interpreted strictly in favour of the consumer (basically the contra preferendum rule). - Criticism: s 4(4) goes too far. At its least onerous interpretation it is unnecessary in view of common law rules on surprising terms and s 48. At its most onerous interpretation it asks the court to control content of contracts rather than interpret them. Rather than pretending they are merely interpreting the contract, courts should be openly willing to strike out unfair terms. 3. (i) ombud or provincial consumer courts or ADR agents or NCC (ii) s 69: once all exhausted, go to court (jakie argues that this does not make sense, especially if the courts have exclusive jurisdiction to declare a term unfair. Also, this section might be unconstitutional as small claims courts might be more accessible than other bodies in rural areas, particularly for low-income consumer.) Problems: - Does this process apply to provisions on unfair contract terms as well, given that apparently only courts have power to declare term unfair according to NCT? - Several unclear aspects and seems to the process that consumer sent from pillar to post - Chapter 5 on powers of NCC: seems like that NCC will only consider complaint if tried to resolve dispute through other mechanisms provided for by consent, and even then, no obligation to intervene according to s99 (NCC may refer to other bodies)- NCC now habitually refers complaints to industry ombuds (however, NCC v Western Car Sales 2017 (NCT) shows that NCC willing to bring supplier to NCT if supplier does not implement ruling of ombud).

INTERPRETATION: Explain the development in our courts' approach to interpretation (AUTHORITYx4).

1. Historically our court's view on the use of extrinsic evidence in interpreting written contracts was governed by the parol evidence rule. There are two aspects to this rule: (i) the integration rule: if the parties intended their document to be an integration of their agreement, then that document is treated as their exclusive record of intention subject to these exceptions - If the parties didn't intend the document to be an integration of their entire agreement, then the rule obviously doesn't apply. - The parties can persuade the court that the document doesn't adequately reflect what they agreed and ask for rectification. - The parties can also allege a tacit term. (ii) the interpretation rule: extrinsic evidence can only be referred to if the wording in the document is ambiguous. The policy motivation for this rule is that people lie and forget when testifying about the content of the contract. As such, the rule protects the court against dishonesty and unnecessarily protracted trials. 2. DELMAS MILLING: this case refined the rule by defining three consecutive steps in interpretation (i) Give effect to the ordinary meaning of the words. In this phase, extrinsic evidence may only be used to identify the object of the contract and the parties to the contract. (ii) If the words are ambiguous, the court can look at "background circumstances", which is evidence as to the matters probably present to the minds of the parties at the time of contracting, but not actual evidence regarding the actual negotiations. (iii) If meaning is still ambiguous, then the court can look at "surrounding circumstances" which is evidence as to communications that passed between the parties, including the contractual negotiations. - This process was rightly criticised: the difference between background and surrounding circumstances was not always clear; if the court is trying to ascertain the intention of the parties, it doesn't make sense to prevent the court from considering extrinsic evidence; even though a contract may on the face of it seem unambiguous, the parties may have intended a different meaning to the clear words of the contract. The court should therefore be allowed to look at extrinsic evidence from the start. 3. COOPERS: the court reduced the DELMAS enquiry to a two-step process (i) The words must be given their grammatical and ordinary literal meaning. However, background circumstances can also be taken into account at this stage. They include: - Context with reference to the nature and purpose of the agreement. - Background circumstances which explain the genesis and purpose of the contract (in other words, matters probably present to the minds of the parties when they contracted). The court said that background circumstance would probably not be controversial between the parties. (ii) If the meaning is still ambiguous, the court can have regard to the surrounding circumstances. The court still cannot ask for direct evidence from the parties as to what their intention was. 4. KPMG (SCA obiter): (i) The integration rule remains part of our law - if the document is intended to be an integration, extrinsic evidence may not contradict, add to or modify its meaning, subject to all of the exceptions named above. (ii) Interpretation is a matter of law, not of fact. As such, it is a matter for the court, not for witnesses. In other words, witnesses can be asked about the context of the document, but not about its meaning. Expert witnesses can, however, be asked for the meaning of technical terms. (iii) The rules about the admissibility of evidence are not dependent on the nature of the document, whether it be statute, contract or patent. (iv) Evidence may be admissible to contextualise the document, but it must be used as conservatively as possible (this confirms the first step of COOPERS). (v) The distinction between background and surrounding circumstance is vague, confusing and artificial. The terms "context" or factual matrix should suffice (Tjakie argues that this doesn't make it much clearer what evidence should be allowed) The KPMG decision, while not overturning the Coopers enquiry, does indicate that our law is moving in a direction where external evidence is more freely admissible in the interpretation of the document. But, intention is still relevant (NOVARTIS).

PROOF: 1. What is the caveat subscriptor rule? (AUTHORITYx2) 2. What happens in the case of incorporation of terms in unsigned documents? 3. What is the parol evidence/ integration rule? (AUTHORITY)

1. In the case of signed documents, the rule is that a person who signs a document assents to all terms contained in the document (MERCURIUS MOTORS) - A growing common law qualification to this rule is that it only applies to surprising terms (terms which go against the nature and general purpose of the contract) if they are specifically pointed out to the party that did not draft the contract (COMPUSOURCE) 2. The 'ticket cases' deal with this (when you get a ticket, they often have terms that you are deemed to have agreed to just by accepting the ticket): to determine whether these terms are binding ask (i) did the customer know the ticket contained writing and that the writing contained contractual terms? (if yes to both, customer is bound. If no to either, move to next question) (ii) did the other party take reasonable steps to bring these terms to the notice of the customer? (if yes, customer is bound. If no, not bound) - The ticket case rules are arguably the same as the reasonable reliance enquiry (iii) Also, s 49 of the CPA: prescribes prominence requirements for exemption clauses, assumption of risk clauses, indemnity clauses, and any acknowledgement of fact by the consumer. - the clauses must be set out in a conspicuous manner and form, which is likely to attract the attention of an ordinarily alert consumer, considering all the circumstances. Moreover, they must be in plain language, as must any consumer contract. - It will likely not be sufficient to put stuff on bold on the back of a form or a ticket. - if an exemption clause relates to certain kinds of risks, they must be signed or initialed by the consumer, such as the risk of bodily injury or death (this could be problematic as people just sign forms without reading them). - note: even if a consumer specifically agreed to a term, they can still challenge it under the CPA on the basis that it is unfair. 3. In the case of written contracts, no outside evidence that contradicts the written contract will be allowed into the contract. (JOHNSTON)

TYPES OF TERMS 1. Why do we need different classifications for contracts? 2. Explain the criticism of the essentialia-naturalia model as an exclusive paradigm.

1. It is necessary to classify contracts into certain types, as special rules apply to special kinds of contracts. This is for reasons of fairness, public policy and legal certainty 2. There is a danger to thinking that the essentialia-naturalia model is the only paradigm for categorising contracts, as it can blind courts to recognising legitimate subtypes of contracts with their own rules. - e.g. the inflexibility that South African courts have taken to pre-emption rights (SCA took conflicting views as to the naturalia of a right to pre-emption. In ORYX, the court said that there was no positive duty to make an offer, whereas in OWSEANICK the court held that there was. Writers were similarly polarised. By taking such a binary view, and refusing to recognise possible subtypes of pre-emptions, the SCA prevented the relevant law from become more nuanced). - It is, however, not entirely correct to say that our law always uses the essentialia-naturalia paradigm to classify contracts. Sometimes it doesn't use this system e.g. distinction between a contract of employment and a contract for the provision of services for the purposes of vicarious liability. In this area, our law does not use essentialia to classify these kinds of contracts. Our law instead will make reference to a number of factors that are not always present, or are present as a matter of degree. So to distinguish between a contract of employment and a contract for the provision of services, our courts look to, inter alia, the following two factors: (i) Is there control of subordinate by principle? If there is a high degree of control, it points towards an employment contract. If there is a low degree of control, it points toward an independent contractor relationship. (ii) Does the subordinate use his or her own tools, or does he or she use the employer's tools? If he uses his own tools, it points toward an independent contractor relationship. If he doesn't, it points towards an employment contract.

PARTIES TO A CONTRACT: 1. What occurs when a contractual obligation has more than one debtor or creditor? 2. What are the different types of liability/ entitlement that arise where there are multiple debtors/ creditors? 3. How do you determine which type of liability/ entitlement applies? (AUTHORITY)

1. Multiplicity of parties. There will be joint liability if there are multiple debtors, and joint entitlement where there are multiple creditors. 2. (i) simple: an example would be X lending R6000 to A, B and C. A must pay back R2000, and B and C must do the same. This is actually just three separate obligations. In the case of mora, X will have to write three separate letters of demand to each debtor. If A goes insolvent, X must make a claim against A's insolvent estate. Each debt prescribes and is interrupted separately. (ii) common: In the case of common joint entitlement, the creditors must claim together and in the case of common joint liability, there is one obligation held against the debtors jointly. (iii) joint and several/ solidary: the creditor can choose how he wants to sue the debtors. He can sue one for everything, sue all of them together, or in whatever combination he wishes. In the case of joint and several entitlement, creditors are free to sue by themselves or jointly. This is used often in credit agreements because it is so advantageous for creditors 3. (i) look at intention (ii) if unclear, presumption of simple (DE PASS- solidary liability is too onerous on debtors). (iii) To determine, look at: - indivisible performance presumed common - counter-performance to an invisible performance is presumed to also be indivisible - Money debt presumed divisible unless counter performance indivisible - The obligation to pay damages will always be divisible since it is a money debt (even if the primary obligation is indivisible) - Partners are jointly and severally liable.It is a rule of practice, however, that they be sued together. The sheriff will execute judgment against the partnership assets. If these are insufficient to satisfy the debt, the partners are then personally, jointly and severally liable. After the partnership has paid its creditors, then the partners can claim from each other. - Joint delictual wrongdoers are jointly and severally liable. - the drawers of a cheque are jointly and severally liable on that cheque. - Solidary liability will only exist if clearly intended / required by a legal rule.

INTERPRETATION: 1. What is the approach of our courts? 2. What are the guidelines/ rules for interpretation? (AUTHORITYx2)

1. Our courts adopt a historical-psychological approach. As such, the point of departure in contractual interpretation is to try to determine the intention of the parties. However, the courts also take more objective or policy elements into account. 2. (i) primary rules: intention must be inferred from the ordinary and popular meaning of the words unless the context indicates otherwise (essentially, the primary rules are constituted by the Coopers enquiry, subject to the KPMG obiter). (ii) secondary rules: applied when the meaning of the contract is still unclear after applying the primary rules. They are presumptions as to the most likely intention of the parties such as - written words take precedence over printed words on a printed contract, if the written words were written after the printed words were printed - Eiusdem generis rule: Words with a general meaning are limited to a specific class or species where they are used in conjunction with examples from that class or species e.g. if a contract stipulates that the buyer buys a farm "with building etc. as it stands" and the buyer alleges that the "etc." included the sheep on the farm; a court will hold that the word "building" limited the "etc." to include only fixed assets and excluded the sheep. - Expressio unius est exclusio alterius: An express reference to a particular subject excludes those objects which would otherwise be implied e.g. a lease specifically says that the tenant may not fish in the river on a farm and the tenant then says that the clause allows him to fish in a dam on the farm. The court will hold that an express reference to the river excludes a reference to the dam, and as such the tenant can fish in the dam. - Ut res magis valeat quam pereat: An interpretation which renders the contract valid is preferred. (iii) tertiary rules: applied when the secondary rules still leave ambiguity. The court does not pretend to find the intention of the parties, rather it uses openly normative and policy considerations which are intended to achieve a fair outcome. They include - the contra preferendum rule. the contract is interpreted against the person by whom or for whom it was formulated (particularly important for standard term contracts). The basis of the rule is that if you have the opportunity to draft the terms, you have an obligation and opportunity to make your intention clear. - the quod minimum rule:a term must be interpreted so as to put the lightest possible burden on the debtor or the promissory. In a suretyship, for example, it must be interpreted to favour the debtor. If this rule conflicts with the contra preferendum rule, then the contra preferendum rule takes precedence. - the contra stipulatorum rule: a contract must be interpreted against the person to whom a promise has been made. - If the contract is ambiguous, it can be presumed that the parties intended the fairest interpretation (SASCOL) - If the contract is still ambiguous after all of the rules of interpretation have been exhausted, then the contract may be void for vagueness (NAMIBIA MINERALS CORP)

THE CPA: 1. Why is control of consumer contracts required? (AUTHORITYx2) 2. Why should this control be by way of legislation? 3. Criticisms of the CPA

1. Some argue that market forces will ensure that harsh exemption clauses are only used against undeserving claimants who cannot prove their claim anyway (presumably because corporations don't like the publicity of litigating against deserving claimants). Businesses are therefore saved the cost of unnecessary litigation, which is passed onto consumers (this has been disproved by CLADALL ROOFING) - standard terms are often manifestly unfair and one sided - they are often not a product of the consent of both of the parties (typically consumers aren't even aware of these terms). - If it can be shown that the party did know about the term, often the supplier has far greater bargaining power, due to his size, or due to the fact that the clause is sprung onto the consumer in the last minute (like in AFROX). - The transaction costs of shopping around are often too great for the consumer and it is unlikely that he will be able to find a competitor with better terms, or even an employee that is empowered to negotiate the terms of the contract. - The Constitution's right to dignity could be interpreted to require the user of standard terms to exhibit a reasonable amount of concern for the other party. 2. There can never be sufficient protection under the Constitution and under the common law, for the following reasons: - Judicial control requires litigation, which is often too costly, risky and difficult for ordinary consumers - Judicial control is reactive and incremental (as it is based on the facts of a particular case). It is better to aim for proactive control - If well-structured, legislation can create more predictability and more effective control 3. (i) The DTI did not keep the idea of proactive control in mind when drafting the CPA. It still requires a lot of judicial control and interpretation. (ii) The CPA focuses too much on procedural unfairness, and not enough on substantive unfairness. (iii) The DTI also ignored the good parts of the SA Law Commission's Bill of 1998, particularly with regard to the proposed preventative powers of the Ombudsman.

STIPULATIO ALTERI: 1. What does this type of contract involve and which contractual principle is this type of contract an exception to? 2. What is the rationale for recognising these types of contracts? (examples) 3. What is the difference between this type of contract and a contract of agency? 4. What is the difference between this type of contract and an adiectus solutionis causa? (AUTHORITY)

1. This contract is one which creates benefits for a 3P. The stipulans contracts with the promitens to oblige the promitens to confer a benefit upon a 3P. This is an exception to the principle of privity of contract (only parties to a contract can gain obligations from that contract). 2. There is a strong practical need for these types of contracts e.g. - An insurer may agree to pay out a policy to a third party. This is usually in the case in life insurance policies. - An inter vivos/mortis causa trust agreement may require the trustees to manage a trust for the benefit of a third party beneficiary. - A pre-incorporation contract may occur between a director and another person for the benefit of a company that is about to be formed. 3. A contract of agency is where an agent makes a contract on behalf of a principle with a third party. The agent will conduct negotiations with the third party and conclude the contract with the third party. The contract will then be between the third party and the principle. After the conclusion of the contract, the agent will typically have not rights under the contract. 4. An adiectus solutionis causa is a contract which indicates that performance may be made to a third party. The third party, however, has no right to that performance. An example would be a lease contract that allows the lessee to make a performance to an estate agent. The estate agent, however, has no right to that performance. CONSOLIDATED FRAME COTTON CORP: an employer had a contract with his employees which obliged the employer to pay the member's union fees to the trade union directly. Sithole, one of the employees, said that he wanted to revoke that clause and wanted those fees paid to him directly. The employer argued that this couldn't be done as that clause was a stipulatio alteri for the benefit of the union that had been accepted by the union. The court held that there was no intention in the contract that the union acquires a right to those fees against the employer. It was therefore an adjectus solutionis causa and Sithole had a right to have the union fees paid to him directly.

TYPES OF TERMS: Standard v negotiated terms

DEFINITION - Standard terms = terms that have been drafted in advance by one of the parties to a contract for use with all of its clients. These are almost always not negotiated or even considered by the other party. - Negotiated terms are, terms that have been negotiated between the parties. CRITIQUE South African law, despite purporting to be consensus-based, barely makes any distinction between standard terms and negotiated terms. - The only substantial accommodation to the lack of consensus seems to be the emerging rule that surprising terms in a contract must be pointed out by the drafter in order for them to be binding on the other party (based on the reasonable reliance principle or the iustus error doctrine) - pitfalls also acknowledged by Sachs J in BARKHUIZEN EXAMPLES OF THE EXCEPTION - AFROX: the AD found that the exemption clause in the surgery contract was not surprising,19 implying that if it was, it would not have been binding on Strydom. - MERCURIUS MOTORS: an exemption clause in a contract of deposit was contrary to the nature and essence of the contract (and therefore surprising) and needed to be pointed out. It wasn't, so it wasn't binding. - COMPUSOURCE: the exemption clause was unusual, there was no reasonable reliance, and it therefore needed to be pointed out. - BRINK same as above CPA - makes no distinction between negotiated and non-negotiated terms. It simply allows any consumer to challenge any "unfair" provision, including the price. - As a result, our law does not take into account a further common problem in modern commercial contracts: the battle of the forms. This occurs when a seller signs a buyer's order form, which has standard terms and conditions and then the buyer signs the seller's delivery note, which also has standard terms and conditions, and the terms clash. The question then is: which terms and conditions constitute the contract that binds both parties? Under South African law, one of two things could happen: 1. There is no contract, as there is no consensus. (This doesn't make sense, as the terms that clashed probably weren't important to the parties) or; 2. If the parties actually perform, a tacit contract is created which adopts the rule of the seller. This is because the buyer's offer was repudiated when the seller presented the buyer with his delivery note, which the buyer then agreed to by signing. (This is also unfair, as the party whose terms are followed is simply the party that happened to make the last offer). - Other systems use the "knockout" rule. This rule stipulates that when parties reach agreement except for the standard terms, neither of the standard terms apply and the ex lege rules apply in place of those terms, unless one of the parties objected to the clash within a reasonable time, in which case none of the contract would be binding.

TYPES OF TERMS: Implied terms

DEFINITION aka ex lege terms (read into contracts by operation of law, unless the parties agree otherwise). Types: 1.General rules of contract, which are rules imposed onto all contracts, such as the rules on breach and cancellation. 2. Naturalia South African law, due to its Roman Dutch heritage, is willing to openly impose ex lege terms onto contracts. English courts, on the other hand, have to twist the parties' intentions to effectively do the same thing. DEBATE - Neels has argued that there is another type of ex lege rule, which are ad hoc ex lege terms. These are terms that the court is only prepared to read into a specific contract based on the circumstances of the contract. - BUT in SAFCOL, the SCA held that it was not willing to do this. It said that a court cannot read a clause into a specific contract just because it is fair in the circumstances.Policy considerations determine the content of these terms (e.g. a fair balancing of interests and community requirements weighed against a need for legal certainty).

TYPES OF TERMS: Naturalia

DEFINITION: Ex lege terms that are automatically included in any instances of any of the recognised contract types under South African law. They can usually be excluded by the parties, but in the absence of agreement, they apply. Content of naturalia determined by: 1. Legal policy: - reasonableness and fairness - balancing the interests of parties - In TUCKERS, the AD incorporated certain English naturalia because they furthered the doctrine of good faith. Taking this idea further, in AFROX and BECKER, the AD held that the courts could create new naturalia for contracts in accordance with the doctrine of good faith and fundamental ideas of justice. The SCA in SAFCOL held that ex lege terms rest on the considerations of good faith, and emphasised that good faith isn't an explicit rule by itself. Courts should be wary of recognising ad hoc rules or ex lege terms for a specific factual set that the court has in front of it. Courts will only adopt a new rule if it will further justice in general. - legal certainty and other PP considerations like innkeeper's liability (the justification is that it is difficult for the client to know how the loss occurred so the transporter must be liable unless he can prove that he was not responsible for the loss). In ESSA the court was asked to extend the rule to cover modern parking garages. The court refused, arguing that it would discourage people from opening parking garages, which apparently were sorely needed in that day. - legislation e.g. s 19 CPA (unless parties agree otherwise, the risk of damage only passes when the good is delivered to the buyer). 2. Trade usage: a local naturalia that applies in a specific business sector or geographical area. E.g. freestanding stoves typically included in house sales in Gauteng. In order for such a trade usage naturalia to be recognised, the following must be present: - It must be uniformly observed/well known; - It must be certain; - It must be longstanding; - It must be reasonable; - It must not be in conflict with standing laws RATIONALE: convenient, as parties don't have to agree on them; this can protect one of the parties from a hazard that is typically associated with that kind of contract; because they can usually be excluded, they strike an appropriate balance between fairness and freedom of contract.

TYPES OF TERMS: Incidentalia

DEFINITION: The terms that are agreed upon by the parties that exclude, modify or supplement naturalia. REQUIREMENTS: They must be based upon consensus of the parties or on reasonable reliance; and can be express or tacit. They may not be contrary to law or to public policy. EXAMPLE: in non-consumer contracts, a voetstoots clause that removes the naturalia of a contract of sale that the seller is liable for latent defects in the merx. BURDEN OF PROOF: If there is a dispute as to whether a contract contains incidentalia that have excluded naturalia, the burden of proof is always on the party that is alleging the existence of the contract. This burden of proof is activated as soon as the defendant adduces some evidence of his position (STOCKS AND STOCKS). In practice, this means that lawyers must act strategically. The client who would allege the existence of the contract must raise ENAC. When the other party initiates a claim, then the client can raise a counterclaim for damages. This means then that the burden will fall on the other party, as he will be the one alleging the existence of the contract.

TYPES OF TERMS: Tacit terms :

DEFINITION: a term that the parties did not specifically agree upon (whether in writing, orally, or through gestures), but which all expected to form a part of the contract. Two types: 1. An actual tacit term: one that the parties actually had in mind, but did not express in their agreement. 2.An imputed tacit term: one that the parties didn't actually consider, but would have agreed to had it been put to them. BASIS: 1. It is the true, albeit unspoken intention of the parties 2. It is the fictitious consensus of the parties. EXAMPLE: Tonie concludes a contract with Hannes which obliges Hannes to fix Tonie's toilet. A tacit term would be an obligation on Tonie to allow Hannes access to Tonie's house. GENERAL TEST: two-fold test for whether a tacit term should be incorporated into a contract. Both tests must be satisfied (REIGATE). 1. "officious bystander": a tacit term will only be incorporated into a contract if, at the time of contracting, an officious bystander were to ask the parties whether a particular term should be incorporated into the contract and the answer of both the parties would be, "yes, of course, that would go without saying". Factors from WILKENS: - Tacit terms are not easily inferred, as "courts do not make contracts for parties" (will only read in a tacit term if by necessary implication. It is unlikely to be necessary if it is not the only way that a certain aspect of the contractual relationship could be regulated). - Courts will consider express terms and surrounding circumstances (will not imply a tacit term if it conflicts with an express term). - Courts are, however, willing to read in a tacit term in the presence of an NVC, as the tacit term is considered to be a part of the contract, not a variation thereof. For the same reason, a merger clause (a clause that says that the document embodies the entire agreement between the parties and that no other agreement is valid unless it had been written and signed by the parties) does not prevent the reading in of a tacit term. - Courts normally won't read in a tacit term if the contract is detailed and comprehensive, as the parties would probably have considered the issue and decided not to include it in the contract. - Courts will only read in a tacit term if a clear and precise formulation of the tacit term is possible (WILKENS: court was relatively unwilling to read in for this reason) - The court must consider the intention of both parties, not just one of them. - The presence of a tacit term must be alleged in trial court. A court will not consider it for the first time on appeal. - The onus of proving a tacit term is on the party who alleges the existence of the term. - Formalities requirements do not prevent the reading in of a tacit term. - While the court should consider of the parties as honest and reasonable businesspeople, it must above all take their actual knowledge and circumstances into account. 2. "business efficacy": a tacit term will only be incorporated into a contract if it is necessary in a business sense to give efficacy to the contract. TACIT CONTRACTS? Is it possible that an entire tacit contract come into being? An example would be if, on expiry of a lease, a lessee continues to occupy the property and the lessor continues to accept rent from the lessee. The short answer is that our courts do recognise tacit contracts, but disagree on the test to be applied to determine the existence of a tacit contract. Two tests are competing for exclusive recognition: 1) The traditional test: A tacit contract exists if a court is convinced, on a balance of probabilities; by the parties' conduct that actual consensus existed as to the existence of the contract. (STANDARD BANK) 2) The alternative test: A tacit contract exists if there is no other reasonable interpretation other than the existence of a contract. (CLEVELAND ESTATES) CASES ON TACIT TERMS - WILKENS - SAFCOL: SAFCOL, which is a forestry corporation, had a contractual discretion to set into motion a mechanism for adjustment of the contract price, under which SAFCOL agreed to supply wood to York Timbers. It was a long term contract. Under this discretion, if the parties could not agree on a price at the end of the year, it would be referred to the minister. If the minister thought agreement wasn't possible, it would be referred to arbitration. York Timbers did a lot to frustrate the efforts of SAFCOL to set a new price every year. Ultimately, the courts said that, properly interpreted, the contract entailed a duty on York Timbers not to frustrate SAFCOL in the exercise of its rights under these provisions. The SCA didn't use the innocent bystander test - they just said that, if there is a clause giving SAFCOL a right to adjust the price, then York, by logical inference, had a duty not to frustrate this right. The court then went further and said that, even if there was an ambiguity in the term, considerations of good faith required the importation of such a duty into the contract. In other words, the intention of the parties could be imputed by the assumption that the parties negotiated in good faith The upshot of this case is that, if there is ambiguity, considerations of good faith can be used to interpret a contract. - SCHOLTZ: The buyer buys a stud bull. Unbeknownst to either of the parties, the bull turns out to be infertile. The buyer alleges the existence of a tacit warranty that the bull is fertile. The court agreed, holding that, according to the curious bystander test, the parties would have agreed to the warranty as self-evident.

TYPES OF TERMS: SOME COMMON INCIDENTALIA Exemption clauses

DEFINITION: clauses which exclude the residual ex lege liability of one of the parties. EXAMPLES: - voetstoots clause - onus risk clause PROBLEMS: There are problems with exemption clauses, and they include the following: 1. They are often manifestly unfair and one-sided. 2. Due to the prevalence of these clauses in standard term contracts they are often not a product of the consent of both of the parties. Typically consumers aren't even aware of these terms. 3. If it can be shown that the party did know about the term, often the supplier has far greater bargaining power, due to his size, or due to the fact that the clause is sprung onto the consumer in the last minute (as in AFROX). 4. The transaction costs of shopping around are often too great for the consumer. Furthermore, it is unlikely that he will be able to find a competitor with better terms, or even an employee that is empowered to negotiate the terms of the contract. ESCAPING EXEMPTION CLAUSES: In principle, exemption clauses are recognised and enforceable in South African law (AFROX) but there are ways of escaping them: 1. could argue that there is no consensus or reasonable reliance of consensus. While the caveat subscriptor rule stipulates that a party who signs a contract is assumed to agree to its terms, it is subject to the exception that surprising terms must be pointed out to the party that did not draft the contract (a surprising term could be one that goes against the nature and general purpose of the contract. Also, if the one party misrepresented to the other party about the existence of a clause, it is likely to be surprising and therefore not binding). EXAMPLES - DU TOIT: OA car was advertised as a 1979 model, but it turned out to be a 1978 model.32 The court held that a no misrepresentation clause did not bind the consumer, as it was unexpected and should have been pointed out. - MERCURIUS MOTORS: a car was left at a garage subject to an exemption clause. The court said that the court did not bind the consumer because it was a surprising term that should have been pointed out to the consumer. The court said that the term was surprising because it was contrary to the "essence of the contract" (Tjakie argues that if the above rule was applied to AFROX, one would assume that the nature of the hospital contract was for the rendering of professional medical care. The liability clause would be against the nature and essence of the contract and therefore would not bind Strydom. Tjakie says that the term would probably also be unlawful). 2. Second, the consumer could argue that the clause was contrary to public policy, unlawful, and therefore pro non scripto. EXAMPLES: - A term that excludes liability for dolus is unlawful (it is not entirely clear whether a clause that excludes liability for gross negligence is unlawful. MASSTORES said that if the parties specifically agree to this, they can exclude liability for gross negligence. The CPA, however, says that such a clause is unlawful in a consumer contract). - A clause is against public policy and therefore unlawful if it infringes a right in the bill of rights (JHB COUNTRY CLUB: SCA said obiter that an exemption clause excluding liability for death would be unconstitutional for infringing the right to life. This argument would probably also apply to AFROX). For this reason, an unreasonable time-bar clause would infringe the fundamental right of access to courts and would be unconstitutional (BARKHUIZEN). - BARKHUIZEN could be read to say that the Constitution requires all contracts to be fair and that their implementation and enforcement must be fair, otherwise they would be unlawful (this is unlikely, as the SCA in BREDENKAMP read BARKHUIZEN very narrowly and said that it was more than just about fairness) - another indicator of illegality should be a clause contrary to the nature and the essence of the contract, as it could be an indicator of a fatal impairment of bargaining power (some oblique authority for this in VRYSTAAT MOTORS and ALPHA TRUST: In both of these cases, the court held that in a contract of sale, the parties cannot exclude the naturalia that the seller adopts strict liability for any consequences of him not being the actual owner of the merx. The courts have therefore implied that a clause that is contrary to the nature and essence of the contract will be unlawful) THE DOCTRINE OF FUNDAMENTAL BREACH: (i) No longer exists in our law (ELGIN BROWN). (ii) stipulates that an exemption clause cannot exempt a party from fundamental breach of the contract. CASE: - CLADALL ROOFING: SCA held that if a party has not performed at all, an exemption clause exempting him from liability, did not protect him against non-performance as a matter of interpretation. In this case, a roofing company was meant to install roof tiles in a certain way. It did install roof tiles, but they were very different to the contractual specifications. The court held that, even though the exemption clause was very wide, there was "no performance at all" and that the exemption clause didn't apply. As such, the courts like to impose liability as a matter of interpretation rather than as a matter of legality (Tjakie argues that this unwillingness to engage with fairness in contracts, and to rather deal with cases through strained interpretation, creates uncertainty). DOCTRINE OF LAESIO ENORMIS - No longer exists in our law (abolished by statute. Now, consumers may challenge a price on the basis that it is unfair under the CPA). - if a seller sells a merx for less than half its market value, the sale is voidable at the instance of the buyer. Similarly, if a buyer buys a merx at more than double its market value, it is voidable at the instance of the buyer. 3. Rely on restrictive interpretation. - South African courts sometimes do this, and resort to extremely strained interpretation of exemption clauses to reach a result that is fair (as in CLADALL ROOFING). - Sometimes exemption clauses are actually ambiguous. In such a case the court will apply the contra preferendum rule, will interpret the clause against the drafter. - if an exemption clause uses very wide wording and does not specifically mention negligence, it will not exempt the drafter for damage cause by his negligence or by his dolus (LYLE SHIPPING) - in VAN DER WESTHUIZEN the SCA said that exemption clauses must not be interpreted differently to any other term. Tjakie says that this case isn't very convincing as it is not based on authority, is not what the courts really do, and later in the same case the court says that judges must be "wary" when interpreting exemption clauses as they often take away the fundamental rights of parties. EXAMPLES - DRIFTERS ADVENTURE TOURS: tourists came to South Africa and signed a contract with Drifters, which contained a term that tried to exclude liability for everything, including negligence. The tourists become involved in an accident on a tar road due to the tour company driver's negligence. The court held that the exemption clause did not apply in this case, as it did not apply to driving on a tar road - it only applied to the risky activities that were taking place on the trip. - a bed and breakfast has a contract with an exemption clause that says that "the B and B is not liable for any loss, howsoever caused, suffered by the customer". The court here will interpret the clause narrowly, meaning that if the plaintiff can prove negligence or something worse, such as dolus, then he can still claim. 4. Through legislation e.g. s 6A of the CPA

THE CPA: What is the scope of the Act's application?

Dealt with in ss 1 and 5 - Applies to the supply of goods and services by suppliers to consumers in the ordinary course of their business. - s 1: Consumers, goods and services are widely defined, and include the provision of land, and leases. Small businesses with assets or turnover of less than a threshold value (at the moment R5m) are considered consumers. Sole proprietors are always protected as consumers, regardless of asset size or turnover. - s1: Suppliers not only businesses, but include clubs, second-hand traders trade unions, partnerships, trusts, body corporates and organs of state. "Business" is defined as the ordinary, regular supply of goods and services (the once-off sale of something is therefore not covered). The CPA does not apply to the following types of transactions: - Insurance contracts, provided that the Long Term and Short Term Insurance Acts are amended to be brought in line with CPA. - Credit agreements, but goods or services that are the subject of a credit agreement are not excluded from the ambit of the Act, meaning that a consumer can't challenge the contents of a credit agreement in terms of the CPA - he must challenge it in terms of the NCA. If a car that he bought on credit blows up in his face, however, he can sue in terms of the CPA. - Employment contracts. - A regulatory authority may apply for an industry-wide exemption (this will usually be an industry that is already regulated in some way by a regulatory authority), provided that the Minister is happy that the regulation provides the same standard of regulation as the CPA (But s 61 on product liability for damage caused by goods will apply to exempted transactions as well). The CPA overlaps with other acts, such as the NCA and the Rental Housing Act. - Sometimes the CPA contradicts other legislation. In such a case, the CPA says they should be read in accordance with each other. If there is a conflict, the one that better protects the consumer takes precedence. - consumers can rely on both their common-law rights and the rights afforded by the CPA.

TUCKERS

Facts Hovis bought two erven in a proposed township from Tuckers, subject to the condition that the township plan which, at the time of sale included the erven, be approved by the authorities. After the sale Tuckers ran into difficulties obtaining the approval, and as such drew up a new plan that did not include the two erven that Hovis had bought. Hovis wanted his money back, and sued for cancellation of the contract based on repudiation. Tuckers claimed that Hovis would only be entitled to the return of its money after the authorities approved of its new plan. The WLD found in favour of Hovis, and Tuckers appealed. Salient legal issues Repudiation is a breach of an existing ex lege obligation arising from the courts' power to create new ex lege terms based on considerations of good faith. When an innocent party cancels a contract as a result of repudiation, he does not accept an offer to cancel, he elects to exercise an ex lege right of cancellation arising from a current breach. Repudiation occurs when the breaching party, by words or by conduct, acts in such a way as to lead a reasonable person, in the position of the other party, to the clear and unequivocal conclusion that the breaching party does not intend to fulfil his part of the contract. This is an objective test and the breaching party's actual intention is irrelevant. If the whole contract is repudiated, the innocent party acquires a right to cancel the contract. Reasoning - Jansen JA for the whole court Our courts have a power, deriving from Roman-Dutch law, to impose ex lege terms into contracts if required to do so by considerations of good faith. Using this power, Jansen JA held that all contracts create an ex lege obligation on its parties not to repudiate their obligations. A breach of this ex lege obligation is a present violation of the contract. Applying the above definition of repudiation, Jansen JA held that, by submitting the new plan, it was obvious to a reasonable person in the position of Hovis that Tuckers was sacrificing Hovis' right to the erven. As such repudiation had occurred. This was repudiation of the whole contract, and as such Hovis was entitled to cancel the contract. Hovis raised two other dodgy arguments: First, that it was possible that the new plan may not be approved and that Tuckers may submit a further plan on which Hovis' erven may reappear. Jansen JA held that this was breathtakingly implausible. Second, Tuckers argued that Hovis had not purchased a property, he had merely purchased a future right (a spes) to a property and that Hovis had no current right to the property that could be repudiated. Jansen JA held that a proper construction of the contract did not allow for this. Conclusion The appeal was dismissed with costs.

STOCKS & STOCKS

Facts In 1973, Stocks and Stocks, a building contractor and plaintiff in the court a quo, concluded a contract with TJ Daly, a transport by which the latter would transport a large mobile crane. During this transport, the crane was damaged. Stocks & Stocks alleged that, under the naturalia of the contract in question, TJ Daly was liable for the damage to the crane. TJ Daly, on the other hand, alleged that an oral contract had been concluded in 1950 between one of its representatives and a representative of Stocks & Stocks, by which the parties had agreed that all subsequent transport contracts between them would have an owner's risk provision - in other words, that Stocks & Stocks would be liable for any damage to the item being transported. In the court a quo, the only person who had any knowledge of the 1950 contract was a Mr BS Dargan, who testified (rather badly) on behalf of TJ Daly that the 1950 contract had been concluded as alleged by TJ Daly. Ultimately, the court a quo held that it had insufficient evidence to decide on whether the 1950 contract had been concluded. It held that the onus to prove the content of the 1973 contract lay with the party that alleged it, which in this case was Stocks & Stocks, even though they were alleging the absence of an incidentalia. Salient legal issues The onus of proving the content of a contract, even if it means proving the absence of a term or the exclusion of naturalia, lies with the party alleging the existence of the contract. The conclusion of a contract that falls within a recognised class of contract raises a prima facie inference that the contract does not exclude its naturalia. The party who alleges the exclusion of naturalia has a duty to allege this in his plea and bears a burden of adducing evidence in rebuttal. It does not affect the true onus, however. The onus of proving a waiver lies on the party alleging it. Reasoning - Corbett JA for the whole court The general rule is that the plaintiff who sues on a contract must prove the contents of a contract, even if it involves proving that a term alleged by the other party is not in the contract. Corbett JA then dealt with the two main exceptions argued by Stocks & Stocks. First, Stocks & Stocks argued that the alleged owner's risk provision in the 1973 contract arose from a 1950 contract that had been alleged by TJ Daly and as such TJ Daly bore the onus of proving the existence of that contract. Corbett JA disagreed, holding that TJ Daly was not trying to prove the existence of new contract, they were simply trying to prove that the 1973 contract contained an owner's risk provision. Second, Stocks & Stocks argued that the fact that the owner's risk provision changed the naturalia of the contract meant that the onus shifted to the party alleging the change to the naturalia - in this case TJ Daly. Stocks & Stocks offered two arguments in this regard: a) The exclusion of the naturalia amounted to a waiver of an existing right and the onus of proving a waiver falls on the party alleging the waiver. Corbet JA disagreed, holding that a naturalia is not a pre-existing right - it is a right that comes into existence on the conclusion of the contract if the parties choose not to exclude it. As such, the waiver rule does not apply. b) The very fact that a negotiated term excludes naturalia should place the onus on the party alleging that term. In support of this, Stocks & Stocks offered some authority that Corbett JA though was weak. Unsurprisingly, Corbett JA disagreed for several reasons. First, such a modification of the general rule would lead to far-reaching consequences. Second, it would lead to inconsistencies, as a party suing on a contract and relying on an implied term would have a favourable onus, whereas if the same party were relying on the same term, albeit explicitly agreed upon, would have the ordinary onus under the general rule. Conclusion Corbett JA therefore concluded that the onus fell on Stocks & Stocks. As they had failed to prove that the contract had not contained the owner's risk clause, they were liable for the damage to the crane. The appeal was therefore dismissed with costs.

JOHNSTON

Johnston v Leal dealt with the parol evidence rule in the context of a contract for the sale of land (which in terms of statute had to be reduced to writing) where the written contract contained blank spaces. Corbett JA observed (at 943B-F): "Dealing first with the integration rule, it is clear to me that the aim and effect of this rule is to prevent a party to a contract which has been integrated into a single and complete written memorial from seeking to contradict, add to or modify the writing by reference to extrinsic evidence and in that way to redefine the terms of the contract. The object of the party seeking to adduce such extrinsic evidence is usually to enforce the contract as re-defined or at any rate, to rely upon the contractual force of the additional or varied terms, as established by the extrinsic evidence. On the other hand, in a case such as the present where ex facie the document itself the contract appears to be incomplete, the object of leading extrinsic evidence is not to contradict, add to or modify the written document or to complete what is incomplete so that the contract may be enforced thus completed, but merely to explain the lack of completeness, to decide why the parties left blanks in a particular clause and what their integration actually comprises, and in this way to determine whether or not the document constitutes a valid and enforceable contract and is in conformity with s 1 (1) of the Act [Formalities in Respect of Contracts of Sale of Land Act 71 of 1969]. Consequently, it does not seem to me that the admission of such extrinsic evidence for this purpose in a case of the kind presently under consideration would be either contrary to the substance of the integration rule or likely to defeat its objects. To sum up, therefore, the integration rule prevents a party from altering, by the production of extrinsic evidence, the recorded terms of an integrated contract in order to rely upon the contract as altered; the evidence which it is suggested could be adduced in this case would be to explain an overt lack of completeness in the document and at the same time to determine what has been integrated with a view to deciding upon the validity of the document as it stands." [20] Therefore, in Johnston v Leal blank spaces in the contract rendered the validity of the contract questionable as the blank spaces created ambiguity and was incapable of interpretation. The court found that the issue as to whether the document was a valid and enforceable contract, and complied with s 1(1) of Act 71 of 1969, in the particular circumstances of that case were not resolvable as a pure question of law, as it depended partly on the facts, namely the intention of the parties and the reason why clause 11 was left incomplete (at 942D-E). It was ultimately decided that extrinsic evidence would be admissible in order to explain the lack of completeness in the written contract, and to thus determine its validity.

BOTHMA-BATHO TRANSPORT

Par 4: "In respect of the Standerton Storage Tanks of Omnia, Bothma-Batho will invoice its clients itself with respect to the tanks used by Bothma-Batho. S Bothma & Seun [& son] will invoice its clients FFS with respect to the storage tanks that Bothma & Seun's client uses from time to time. Bothma & Seun shall pay over the pro rata expense plus 10% management fee in respect of the management of the storage tanks within seven days after delivery of Bothma-Batho's invoice which expenses in accordance with the tank capacity percentage that Bothma & Seun's clients use from time to time" [sic] Par 8: "6. The parties agree that for such time period that the Respondents have the right to the use of (3) three tanks in terms of the agreement with Omnia then in that case the respondents will invoice their client for the leasing of the tank capacity of the (3) three tanks that currently amounts to R245 000 (VAT excluded). The Applicants will invoice the Respondents' client to such an extent with respect to the pro rata expenses as well as the administration fee of 10% that the recovery of Respondents' client as against the Respondents will not be more than the amount of R190 000 (VAT excluded), provided that if the invoices delivered for the leasing of the tank capacity would increase or decrease the invoicing with respect to the expenses will be adapted with such fluctuation."

MERCURIUS MOTORS

This is your stock-standard reasonable-reliance case. It pretty much backs up the idea in Compusource that if a clause is unexpected, bearing in mind the nature of the contract, that it should be pointed out. As an added bonus, Tjakie gets a mention in a footnote for a "very interesting article". Facts Lopez deposited his Jeep Cherokee SUV with Mercurius Motors for minor repairs. Before this, he signed two forms, one of which contained a clause that exempted Mercurius Motors from liability for loss arising from the negligence of its employees. This clause was on the reverse of a document, in between the side that is signed and carbon paper. This clause was referred to next to the space for signature, but the referral paragraph was in small writing and was placed next to a far more prominent exemption clause, the contents of which aren't really relevant. Mercurius Motors was broken into, and only Lopez's Jeep was stolen. This theft was due to the negligence of Mercurius's employees, as they had not put the keys to the Jeep in a secure place. Lopez sued Mercurius for his loss in the JHC and the court found in his favour. Mercurius appealed. Salient legal issues The onus rule in Stocks & Stocks is applied in this case. The caveat subscriptor rule is still a part of our law, but subject to the exception that an exemption clause that undermines the essence and nature of the contract should be clearly pointed out to the party that did not draft the contract. Reasoning - Navsa JA on behalf of the whole court Navsa JA held that the exemption clause was contrary to the nature and essence of the contract, as it was a contract of deposit and one ordinarily expects the depositary to take reasonable care of the item that is deposited. The exemption clause therefore had to be drawn to Lopez's attention. Navsa JA held that the exemption clause had not been drawn to Lopez's attention. It was common cause that the clause had not been physically pointed out to him. Furthermore, the referral clause was small, and placed next to another exemption clause that was far more prominent. The exemption clause itself was on the reverse of the form that was signed. As such it did not bind Lopez. Because the clause didn't bind Lopez, the ex lege rules for a contract of deposit applied. A defence to the depositary's liability in this case would be if the depositary proved that he was not at fault. The court held that Mercurius's employees had been negligent, and as such Mercurius was liable for Lopez's loss under the ex lege terms for a contract of deposit. Conclusion The appeal was dismissed with costs.

STIPULATIO ALTERI: What is the debate around the legal contraction of a stipulatio alteri?

Two conflicting models have been considered: (i) The direct right/one contract model (De Wet): - the 3P immediately gets an enforceable, personal right against the promitens as soon as the promitens agrees with the stipulans, even if the 3P has not played any role whatsoever in the creation of the right. - De Wet said that while the right is created immediately, it is subject to a resolutive condition, which is that the right will terminate if the 3P rejects the benefit, or if the stipulans and the promitens agree to terminate the right before the 3P accepts it. - The function of acceptance only stabilises the right and removes the suspensive condition; the right exists, however, as soon as the contract is concluded. - Van der Merwe et al deviate from De Wet's view slightly, in that they think it is a right subject to a suspensive condition that the 3P must accept the benefit. This construction is followed in German and English law. - Either way, the direct right model means that the 3P's right is protected before acceptance and becomes a part of his estate on the conclusion of the contract. - This model has been rejected in case law. In both CROOKES and WESSELS an insurance contract was made for the benefit of an insolvent person, who refused to accept the benefit while he was insolvent. The courts held that the beneficiary only gets a right to the benefit, and it only falls into his estate when he accepts the benefit. (ii) The acceptance/two contract model: - the 3P's right only comes into existence when he accepts it. In other words, the contract between the stipulans and the promitens only creates an offer. - When the 3P accepts this offer, a second contract is created, which creates enforceable rights. - Before the 3P accepts the right, only the stipulans has an enforceable right against the promitans to keep the offer open. - It is unclear what the beneficiary is actually accepting - If the 3P dies or goes insolvent before he accepts the offer, the right does not fall into his estate. - This model enjoys support in South African case law, most notably in CROOKES. - Does this model operate unfairly? No, before acceptance, the stipulans can enforce the 3P's rights by forcing the promitens to keep the offer open. However, this requires that the 3P has a cooperative stipulans.

KPMG

a) The integration rule remains part of our law - if the document is intended to be an integration, extrinsic evidence may not contradict, add to or modify its meaning, subject to all of the exceptions named above. b) Interpretation is a matter of law, not of fact. As such, it is a matter for the court, not for witnesses. In other words, witnesses can be asked about the context of the document, but not about its meaning. Expert witnesses can, however, be asked for the meaning of technical terms. c) The rules about the admissibility of evidence are not dependent on the nature of the document, whether it be statute, contract or patent. d) Evidence may be admissible to contextualise the document, but it must be used as conservatively as possible, which confirms the first step of Coopers. e) The distinction between background and surrounding circumstance is vague, confusing and artificial. The terms "context" or factual matric should suffice. Tjake argues that this doesn't make it much clearer what evidence should be allowed.