Specific Contracts

1. Specific Contracts • Why specific contracts  special rules & additional requirements (essentialia)  have certain naturalia that flow from them • Exclusion of special rules (freedom of contract)  unless legislation or other norms suggest otherwise  consumer protection & freedom of contract e.g regulation of interest rates in terms of the National Credit Act 34 of 2005

2. Sale Definition: A contract in which the seller undertakes to deliver a thing(merx) and all his rights to the thing to the purchaser, in return for payment of a sum of money by the purchaser Reciprocal agreement: • Both parties incur rights and duties • The seller: duty to deliver the thing • The purchaser: duty to pay for the thing Rights to the thing: • Not a requirement that the seller be the owner of the thing (transfer of ownership not an element) • Seller only obliged to deliver undisturbed possession

3. Sale Rights to the thing (CNTND): • But the seller must intend to permanently transfer all his rights in the thing • Mere conclusion of agreement does not result in the transfer of ownership Agreement: • There must be intention to buy and sell • Agreement is formed by offer & acceptance • No formality required ( except where required by Act) • See examples: p 140-141

4. Sale The thing • The contract must relate to a particular thing > The thing must be determined or determinable when the sale is concluded • The thing can be movable or immovable • The thing can be corporeal or incorporeal • Must be capable of being sold commercially • Sale of non-existent thing and which can never come into existence: void > But sale will be valid if the thing has the potential to come into existence

5. Sale Price • Price must be determined or readily ascertainable • Parties must reach agreement on the price > Parties may not agree that price will be determined at a later stage or that the price is ‘approximately RX’ > Where price for goods obtained from a seller is not fixed, it may be inferred that the parties intended the seller’s usual price for the goods > If the trader has no usual price of business, the sale may be taken as being at the price normally charged by dealers in such goods at the time and place of the sale > Price must be partly or wholly in monetary form

6. Sale Effect of the contract of sale The passing of ownership: • Only the owner may transfer ownership of a thing • Mala fide seller will not be protected by the law • Purchaser may set the contract aside • But sale will be valid if the seller is bona fide • But the purchaser is protected by implied warranty against eviction • The seller must come to the assistance of the purchaser upon required notice

7. Sale Requirements for passing of ownership in movable property: see p 144

8. Sale Requirements for passing of ownership in immovable property: see p 144 Payment by cheque in a cash sale & transfer of ownership • Payment by cheque is prima facie regarded as immediate payment subject to a condition (cheque be honoured) • If honoured > date of payment of debt is the date of giving the cheque • If dishonoured > no payment • No passing of ownership until the price is paid (cash sale) • Credit sale > ownership passes immediately (general rule)

9. SaleEffect of the contract of sale The passing of risk and profit • General rule: The owner of property bears the loss if the property is damaged through no fault of another • Where valid sale is concluded, the risk of accidental damage or destruction to the thing passes to the buyer as soon as the agreement is perfecta, regardless of whether ownership has passed or delivery has been effected • Any benefit that accrues to the thing also passes to the buyer (benefit follow the risk) > But the buyer cannot claim a benefit that is personal to the seller e.g insurance benefits (Erasmus case p 145) • Buyer must suffer any loss caused accidentally to the thing • Damage caused wilfully or negligently by a third party or the seller is not accidental

10. Sale The passing of risk and profit (CNTND) • But parties may expressly agree that the risk will pass at a later time • The risk remains with the seller until the contract is perfecta Conditions for sale to be perfecta • The thing sold must be determined • Risk only passes to the buyer when the thing sold is determined • Will not pass if the thing is only determinable

11. Sale Conditions for sale to be perfecta (CNTND) • The thing sold must be determined • Sale of quantity of goods by description: the thing is only determined once the particular goods have been separated from the general stock & the goods have been identified as destined for the buyer • The price must be determined • Contract perfecta if the price is also determined and not just determinable • Determined price: includes RX amount of rands or if determination requires a simple calculation • “reasonable price” “market value” are insufficient

12. Sale Conditions for sale to be perfecta (CNTND) • The contract should not be subject to a suspensive condition • Suspensive condition suspends passing of risk • Seller to bear the risk until condition is met • The buyer & seller are deemed to have acquired contractual obligations at the time of original contract & not at the time of fulfilment of condition • The risk is the seller’s should the thing be damaged before fulfilment of the condition provided the condition is never fulfilled

13. SALE • The contract should not be subject to a suspensive condition (CNTND) • BUT the risk is the buyer’s if the condition is fulfilled later on (risk is deemed to have passed to the buyer at the time of agreement) Rights and duties of parties to the contract of sale • Duties imposed by common law • Parties generally free to exclude or vary some duties

14. SALE Rights and duties of parties to the contract of sale Duties of the seller • Duty to deliver the thing • The buyer is entitled to delivery of the thing • Seller not obliged to take the thing to buyer’s premises • The thing must just be made available to the buyer (seller’s place of business or place of conclusion of contract) • The buyer is responsible for the removal of the thing • Parties may agree that the seller will deliver • Lack of agreement on date of delivery: seller must deliver within reasonable time

15. SALE Forms of delivery: see p 147-148 (ii) Duty of safe keeping • Seller under a duty to take proper care of the thing after conclusion of contract & before delivery • The standard of care: reasonable person • The seller will be liable for the loss occasioned by damage through his own fault (negligent or wilful conduct) • Failure to exercise due care before delivery: renders the seller liable for breach of contract • If the buyer is late in taking delivery, the seller will only be liable for gross negligence or wilful conduct • Seller not liable for accidental loss unrelated to his conduct

16. SALE (iii) The duty to ensure that the buyer has free and undisturbed possession (implied warranty against eviction) • Transfer of ownership not an automatic consequence of contract of sale • Seller merely undertakes to provide undisturbed use & enjoyment of the thing • The implied warranty against eviction provides checks and balances

17. SALE • Implied warranty against eviction: seller warrants that the buyer will not be lawfully evicted because of a defective title • Buyer is considered to have been evicted if he losses possession to a third party who has a better right to possess the thing than the buyer has • The warranty is applicable to any contract of sale by operation of the law • Parties are free to exclude it

18. SALE Requirements for the enforcement of the warranty against eviction • Notice to the seller • The buyer must notify the seller of threatened eviction • Why? For the seller to assist the buyer to put up a defence • Buyer must conduct a proper and competent defence (virilis defensio) • What if the seller does not come to the party? ─ the buyer must still put up proper & competent defence ─ failure > buyer may loose right of recourse against seller

19. SALE Requirements for the enforcement of the warranty against eviction (CNTND) • Buyer must conduct a proper and competent defence (virilis defensio) (CNTND) ─ importance of putting up a proper defence (claim may be contestable) ─ But the buyer will retain right of recourse against the seller if can prove that the claim is incontestable • Basic obligation of the seller: shield the buyer against eviction • Otherwise the seller must restore the purchase price and pay damages suffered as a result of eviction • Appreciation of the value of the thing: buyer to be paid the difference

20. SALE Requirements for the enforcement of the warranty against eviction (CNTND) • Buyer must conduct a proper and competent defence (virilis defensio) (CNTND) • Improvements by the buyer: buyer may resist true owner's claim until payment for the value of improvements by true owner • Uncertainty of enrichment actions against true owner: buyer may still claim against the seller provided no assistance was offered in defence

21. SALE (iv) Duty to assume responsibility for latent defects (warranty against latent defects) • Latent defect: an invisible flaw which renders the thing unfit for the purpose for which it was bought or for which it is normally used • Seller obliged to disclose all latent defects to the buyer • Failure to disclose: seller liable under aedilitian remedies • Seller may still be liable despite the unawareness of defect or even if did not act mala fide • Voetstoots (as is) clause is commonly included in contracts to exclude liability for defects unknown to the seller

22. SALE (iv) Duty to assume responsibility for latent defects (warranty against latent defects) • Voetstoots clause will not protect fraudulent seller • No remedies for the buyer if aware of latent defects Requirements for latent defects • The defect must be latent • Latent defect: one not easily discoverable by a reasonable person upon proper inspection • To be distinguished from patent defect: one easily discernible by the buyer at the time of sale

23. SALE (b)The defect must exist at the time of conclusion of the contract • Onus of prove is on the buyer to show that the defect was already in existence at the time of sale Seboko v Soll (1949) p 151 > buyer failed to prove that cow was already infected and court found that it probably died of anthrax (c) The defect must impair the utility of the thing • The defect must be such that it destroys or substantially impairs the effectiveness of the thing for the purpose for which it is commonly used

24. SALE (c) The defect must impair the utility of the thing (CNTND) NB Sarembock v Medical Leasing Services (Pty) Ltd & Another (Porsche 911) p249 ─ The test is objective: not decided on the whim of the buyer • Defect must also be of a kind a reasonable person would not expect to find in other things of the same type, age and price • Otherwise it is not a defect even if it impairs the effectiveness of the thing in question • The defect must be such that it would not have been apparent upon inspection by an ordinary prudent person

25. SALE Remedies to the buyer for breach of implied warranty against latent defects • Aedilitian actions: • Actio redhibitoria • Actio quanti minoris • seller not liable for consequential loss as a result of the defect

26. SALE (i) Action redhibitoria ─ available where the defect is so serious that a reasonable buyer wouldn't have bought the thing had he known of it ─ requires restitution: payment of purchase price & return of the thing ─ payment of all foreseeable and necessary expenses by the buyer as a result of the sale ─ payment of expenses incurred in examining the thing to discover the defect ─ no claim if one creates impression to keep the thing notwithstanding the defect

27. SALE (ii) Action quanti minoris (price reduction) • available if the defect is such that a reasonable buyer would have bought the thing at a reduced price • Buyer entitled to the difference between purchase price and true market value of the thing in its defective state • Can also be used even in situations where the defect is material Additional remedies • Remedies arising from fraudulent actions or misrepresentations • Where the seller is a manufacturer or a dealer with expert knowledge • Breaches of warranty against eviction

28. SALE (iii) Implied warranty where the seller is also the manufacturer or an expert dealer • A manufacturer who sells goods of his own manufacture or a merchant who sells goods in relation to which he publicly professes to have attributes of skill & expert knowledge is liable to the purchaser for consequential losses caused to him as a result of latent defect in the thing e.g Bower v Sparks, Young & Farmers’ Meat Industries 1936 p 153 ( loss of membership and prospective members) NB see further cases p 153 Duties of the buyer: see p 154