Contents of the contract

1. Contents of the contract • Composition of a contract • Most important provisions: terms of the contract • Role of the terms of a contract • Provisions that are not terms e.g place of conclusion Importance of knowing terms of the contract • Awareness of rights and duties • Situations where parties do not know full terms:  form of express terms  implied terms

2. Contents of the contract • Express terms • Implied terms: read into the contract even though the contract is silent on the point Example: pp 88-89> express and implied terms and non-terms Types of terms (i) Express terms • Written terms or stated out loud • Problems with signed contracts (awareness of the terms)  reference to terms in another document (standard form contracts)

3. Contents of the contract • Express terms (CNTND) • Problems with signed contracts (awareness of the terms)  “the consumer knows and understand the terms in the incorporated document”  Existence of the above clause plus caveat subscriptor rule  But remember general principles governing mistake, misrep & illegal contracts etc.

4. Contents of the contract • Unsigned documents: • Tickets and notices  used by service providers to communicate terms  terms usually disclaimer clauses known as exclusionary or exemption clauses  problems (consumers): failure to read or notice the terms  words on such documents may constitute terms of the contract and hence binding

5. Contents of the contract • Exclusionary clauses  usually exempt service providers from liability for any damage negligently caused by the service provider or its employees  awareness of consumers of such clauses • How can consumers be bound by terms they are not aware of their existence?  actual knowledge of a term not a prerequisite for it to be binding NB: Service provider must show that it did everything that was reasonably possible to bring the term/s to the consumer’s attention

6. Contents of the contract • Exclusionary clauses (CNTND) Factors to be taken into account in determining reasonability:  the point in time that the consumer could potentially have first become aware of the terms  the position and prominence of the notice  the size and prominence of the writing on the ticket and or notice NB Central South African Railways v McLaren 1903 p 92 NB Durban’s Water Wonderland (Pty) v Botha 1999

7. Contents of the contract Implied terms Kinds of implied terms:  law  on the facts  trade usage • Terms implied by law  automatically form part of the contract in the absence of agreement to the contrary E.g: >payment of purchase price in the law of sale > contract of lease: lessee to pay rent in arrear  often changed by express agreement  not all types of contracts have automatic rules

8. Contents of the contract • Terms implied on the facts (tacit terms)  tacit terms: unspoken or understood  parties are silent on a particular point but understood that particular terms formed part of the contract  source of implied terms  party alleging implied term to prove it forms part of agreement  court not to readily read in implied terms into the contract

9. Contents of the contract • Test to determine whether the parties would have included the implied term: curious bystander test The court asks itself: ‘What would the parties have answered if a curious bystander had been present at the time of concluding the contract and noticed the gap in their contract and asked them ‘but what would you do about such and such a situation?’ Parties’ answer ‘why, this will be the case of course’ • Court will then find that there was an implied term West Witwatersrand Areas v Roos p 94 (dispute over prospecting right)

10. Contents of the contract • Terms implied by trade usage  similar to custom or terms implied by law  customs of particular trades or industries may give rise to binding terms that automatically form part of every contract entered by members of a particular trade or industry  ignorance of trade usage not an excuse Coutts v Jacobs p 96(payment of commission for unsold wool)  trade usage to meet requirements similar to those of custom: ‘notorious, certain, and reasonable and not contrary to positive law’

11. Contents of the contract • Common contractual provisions  conditions  time terms  warranties  exclusion or exemption clauses  cancellation clauses  penalty clauses  no variation clause

12. Contents of the contractConditions • A provision in a contract which makes the operation or continued operation of a contract or part of dependent on the happening of an uncertain future event • Strictly speaking not a term because it does not impose a positive obligation • Suspends one party’s obligation as required by a term pending the happening of uncertain event e.g sale of immovable property subject to obtaining a bond • Other party obliged to perform once condition is fulfilled (suspensive condition) • Failure of the condition = nullity of the contract • Prevention of fulfilment of the condition: doctrine of fictional fulfilment

13. Contents of the contractConditions • Resolutive condition: puts an end a contract already operational and enforceable • Contract immediately operational and enforceable but parties agree that it will automatically terminate should a particular event take place e.g divorce settlements > agreement that the husband will pay maintenance until she remarries or dies

14. Contents of the contractTime terms • Simply delays a party’s obligation to perform until the happening of a certain/definite future date or a certain/definite future event • The stipulated date or event will clearly come to pass although they may be uncertainty as to when • Not to be confused with conditions  conditions are about whether something will happen while time terms are about when something will happen • Crucial way of drawing a distinction: whether the future event referred to will definitely occur or may never occur

15. Contents of the contractWarranties • Terms in which one party expressly confirms the truthfulness of a particular fact • Party confirming warrants the truth of fact e.g when the seller confirms top speed of the car • False warranties: breach of contract • False fact stated as part of pre-contractual negotiations: sue under misrepresentation • Difference between warranty and misrep  misrep is made before the contract and warranty forms part of the contract

16. Contents of the contractWarranties • Difficulty in determining whether the statement was made before the contract or is a term • Written contracts: usually have a clause stipulating that only the written document constitute the entire contract • Situations where contract is partly or wholly verbal NB Petit v Abrahamson 1946 (age of horses)

17. Contents of the contractCancellation clauses • Entitles a party to cancel a contract in the event that the other party commits a breach of contract or particular type of breach • Absence of the clause: a party can only cancel if one party committed a material or fundamental breach e.g contract of lease • No obligation to cancel but a right to do so

18. Contents of the contractPenalty clauses • Stipulates in advance precisely what the innocent party will be able to claim in the event of a breach • Advantage: saves time and resources, no need to prove financial loss • Disadvantage: a party cannot claim a higher amount e.g penalty clause in building contracts (Graca Machel res) • Role of courts: Conventional Penalties Act of 1962

19. Contents of the contractExemption/exclusionary clauses • One party expressly states that they will not be liable for any damage or loss attributable to them under delict or contract • May be enforced if part of contract • Courts’ approach: strict interpretation  ambiguous clauses interpreted in favour of consumers

20. Contents of the contractNo-variation clauses • Frequently included in written contracts • Variation only to have force and effect if agreed and reduced to writing by parties • Their purpose: certainty and prevention of conflicts about the actual terms of the contract • This is in light of the fact that contracts may be partly written and party verbal • Absence of “no-variation clause”

21. Contents of the contractDisagreements over actual terms of the contract • Parties sometimes disagree on the terms or the meaning of terms of the contract • May happen because the terms may be unclear or ambiguous or because they don’t accurately reflect the parties prior negotiations • Legal principles developed to assist in resolving disputes The parol (oral) evidence rule • Does not allow presentation of oral evidence where parties have reduced their contract to writing

22. Contents of the contractDisagreements over actual terms of the contract The parol (oral) evidence rule (CNTND) • Exceptions to the rule  where parties have entered into a contract that is partly verbal and partly written • Oral evidence may be presented as to the oral terms • Oral evidence not to relate to the written terms  where written terms are vague, incomplete or ambiguous > Oral evidence may be presented to clarify the parties intended meaning

23. Contents of the contractDisagreements over actual terms of the contract Rectification of the written contract • Takes place where the document does not accurately reflect the parties true agreement • A party may apply to court to have document rectified • Parol evidence rule arises when parties are in dispute regarding the actual terms of the contract • Rectification relates to situations where parties disagree whether the document constitutes an accurate record of their agreement • Party who applies to court bears the onus of proof • Parties may also rectify written contract by mutual agreement