By Dr Eugene Brink
Contracts are often controversial and give rise to disputes, but they are also a necessary means to preserve order and provide security in legal agreements. Sometimes they are quite malleable while at other times, quite specific.
What is a contract and why are they important?
The legal advice website, FindLaw, defines it as follows: “A contract is a legally enforceable agreement between two or more parties where each assumes a legal obligation that must be completed.” Coetzee Attorneys describes it as follows: “Simply put, a contract is an agreement entered into between two or more parties with the serious intention of creating a legal obligation. Contracts are essential to regulate certain relationships as it provides certainty as to what the parties expect from each other.”
Several South African law scholars and experts wrote in an academic paper in 2019 that “a contract can be defined as an agreement between two or more parties with the purpose to create a commitment”. Trust alone is not sufficient. To permit commercial initiative on any significant scale to grow, the parties know if any of them fail their promise to comply, the other can get help from the law in order to maintain the agreement. The Law must therefore provide mechanisms to enforce promises, or appropriate compensation to be paid when it is broken.”
Coetzee Attorneys further argues that when parties enter into a contract, obligations are created. “An obligation in this sense is a legal relationship consisting of a right to performance by the other party, coupled with a corresponding duty to perform ‘your end of the bargain’.”
For a contract to be legally binding, the following requirements must be complied with:
- Consensus: A “meeting of minds” regarding the intended obligation and performance, the intention to be legally bound, and an awareness by both parties.
- Capacity: This pertains to soundness of mind and age.
- Formalities: In certain cases, it will be required that the agreement must be in writing and signed.
- Legality: The terms of the contract must conform, and not be contrary, to the law.
Various acts govern different types of contracts: Employment contracts are governed by the Labour Relations Act and Basic Conditions of Employment Act, and a rental agreement by the Rental Housing Act. However, a certain group of acts provide the bedrock of most contracts. These include the Constitution, the Consumer Protection Act (CPA) and the Protection of Personal Information Act (POPI). Whereas the Constitution is the supreme law of the country, the CPA protects consumers against unfair contract terms and POPI protects the personal information of consumers.
Five types of contract breach exist:
- Positive malperformance: The performance did occur, but not to the standard defined in the contract.
- Mora creditoris: The creditor failed to enable the debtor to fulfil their part of the contract obligations.
- Mora debitoris: The debtor failed to make timeous performance of a positive obligation possible.
- Repudiation: A definite intention by a party to no longer be bound by the contract.
- Prevention of performance: One party completely obstructs the other party to fulfil their contractual obligations.
Birgit Kuschke et al., 14 June 2019, “The Law of Contract in South Africa”, https://www.lawteacher.net/free-law-essays/contract-law/the-law-of-contract-in-south-africa-contract-law-essay.php.
Coetzee Attorneys, 2021, “Contracts for dummies 101”, http://www.coetzee-attorneys.co.za/contract-law-dummies/.
FindLaw, 20 June 2016, “What is contracts law?”, https://www.findlaw.com/hirealawyer/choosing-the-right-lawyer/contracts-law.html.