Contracts

A contract is a written or spoken agreement between people that can be enforced by law.

Source: HER LAW – Making the law work for you by M. Nagtegaal
A contract is a written or spoken agreement between people that can be enforced by law. They can be wonderfully useful things, yet the sight of a contract makes many of us go numb and switch off. This is because they can run on for pages, and what you’d think could be said in a few simple sentences can drag out to long and complex paragraphs.
 
Why is this so? In many cases, the language seems long-winded because the writer’s aim is to make it unambiguous and legally watertight, leaving no loop-holes for alternative meanings to creep in. But sometimes they are just badly written. In such cases, insist on clear explanation – ideally, a new, clear contract.
Getting to grips with the basics of contracts is not that difficult. It’s empowering, and can save you untold grief in the long run.
Contracts and the law
For a contract to exist, there must be an agreement whereby the two people (or two parties) concluding the contract intend to create obligations: the one offers to do something, and the other party accepts. For instance, a seller offers to sell her house, and a buyer accepts and agrees to buy it at a certain price.
Both parties must have the same understanding of what the contract means, and of its terms. Both must have the same intention. In other words, there must be a meeting of the minds. If contracting parties do not have the same terms in mind or one of them misrepresents the terms of the contract, the contract will not be valid.
In addition, the agreement must comply with all the other requirements that the law sets for the creation of a contract. For example, the parties must have the contractual capacity to conclude a contract. Anyone who is of majority age (18 or over), and sane, and is, at the time of concluding the contract, not under the influence of any narcotic substance, has the capacity to conclude an enforceable contract without getting someone else’s permission.
The agreement must be legal and not contra bones mores (go against the morality of society). For instance, a contract in which someone undertakes to kill a person in return for money is illegal and unenforceable.
Performance must be possible. For instance, if you undertake to sell your Picasso painting at a certain price, but your house with the painting in it burns to the ground before it can be delivered, the contract will not be enforceable.
There are other formalities prescribed for certain contracts that must also be met. For instance, certain contracts, such as contracts for the sale of land, must be in writing and signed by both parties.
Written contracts versus oral contracts
Contracts can be written or oral, except for a few that must, by law, be in writing and signed by both parties because they include requirements that are imposed by legislation. The following have to be in writing and signed:
  • contracts for the sale of land
  • long leases (ten years of more)
  • credit agreements
  • contracts of suretyship
  • contracts for executory donations
  • marriage contracts.
 
Cancellation of the contracts listed above may, however, be done informally. In other words, cancellation doesn’t have to be in writing and signed.
Where oral contracts are permitted, they are just as valid as written contracts, but it’s usually better to have a contract written down so that you can prove the terms. It’s usually very difficult to prove the terms of an oral agreement if there’s a disagreement between the contracting parties later on. This is especially so in cases where only two people were present and there were no witnesses.
Breach of contract
Someone commits a breach of contract when he or she does not deliver what was promised in the contract. For example, a seller undertakes to deliver a car on a certain day. On the agreed day, the car doesn’t arrive. This is a breach of the contract, and the injured or wronged party will have various remedies available to him or her. In instances where a serious (material) breach is committed, the injured party can choose to cancel the agreement.
There is also a breach of contract if a contracting party does something that makes it clear that he or she has no intention of carrying out what was promised. For instance, if someone undertakes to sell a car to you, but then sells it to someone else, there is a breach of contract. This type of breach is called repudiation, and is serious enough to justify cancellation of the contract.
Breach of contract also exists if only part of the contract is carried out, but not everything that was agreed on. For example, if a seller does deliver goods as agreed, but the quality doesn’t comply with the standard that was agreed on, there is a breach of contract.
REMEDIES FOR BREACH OF CONTRACT
A person who has been wronged in a breach of contract can use the following legal remedies:
  • a demand for specific performance
  • an interdict
  • damages
  • cancellation and damages.
 
1.Specific performance
‘Specific performance’ is a remedy in which the wronged party demands that the other party must deliver what was promised. An example would be a case in which a builder commits a breach by not finishing alterations to a house. The wronged party (the client) is then entitled to ask the court to instruct the builder to finish the work, and thus order specific performance of the contractual obligation.
In principle, one is always entitled to claim specific performance, but the court has a discretion to refuse such an order after all considerations have been taken into account and the specific circumstances of the case have been considered. This discretion is a judicial one and must be exercised in accordance with public policy and in such a way that it does not bring about an unjust result.
Demanding specific performance is, however, not always practical or realistic, and sometimes it is better just to claim damages instead of specific performance. One example would be a case in which an employee wants to claim specific performance of the obligations in the agreement, but the relationship between the employer and employee has disintegrated so badly that working with each other has become impossible.  The employer may no longer trust the employee, and realizing that a relationship that requires them to work closely together with mutual trust is no longer possible, he or she will want to get rid of the employee.
In principle, the employee is entitled to specific performance. However, the court may use its discretion and consider various factors which may justify its refusal of this. A broken working relationship where no trust exists between parties who need to work closely together will usually justify the court’s refusal. So in such a case, the court is likely to refuse specific performance, and rather order the payment of an amount for damages suffered.
 
2.Interdict
An interdict is an order issued by a court. When a contract has been breached, the injured party can apply for an interdict to order the defaulting party to do something, or to prevent the defaulting party from doing something. Let’s say, for instance, that a car dealer agrees to sell you a vehicle, and a contract of sale is signed, but it then becomes apparent that the dealer plans to sell the same car to another buyer. You could apply for an interdict to prevent him or her from doing this.
This may seem too lengthy a process to catch the problem in time. But remember that the process starts with a letter of demand that your lawyer can send very speedily to the person who’s breaking the contract. This normally scares people enough to make them stick to the contract. If necessary you can then send a summons, which costs money, but scares people even more.
Things don’t always end up in court. In fact, usually the parties agree to a settlement without this happening. But if the party in breach doesn’t cooperate, it is then necessary to go to court to have the contract enforced or to recover damages.
3.Damages
Sometimes the best route to take when a contract has been breached is to sue for damages. This means you can claim money for any loss you have suffered as a result of the breach.
Let’s say, for example, that you sign a contract with a builder to renovate a restaurant for you, and to complete it in time to be up and running before the start of the tourist season. He falls three months behind schedule, and you’re only ready to open as the last summer tourist leaves town. You lose out on the best months of the year. In such a case, there would be no point in claiming specific performance; instead, you should ask the court to order the builder to pay an amount for the losses you have suffered. Note that the contract for the builder to finish the job would still be in place.
4.Cancellation and damages
If the defaulting party has committed a serious (material) breach of contract, the injured party may cancel the entire agreement and claim damages for any loss suffered as a result of the breach. This is often the outcome when the relationship between two parties has broken down so badly that they can’t work or do business together. To give an example, let’s say that you order very fine French wine to sell at your wine shop, because you want the shop to have a classy reputation. But after you start selling the wine, people start, well, whining (pardon the pun). You discover that the batch you bought tastes like cheap papsak wine. As a result of the breach committed by the seller, you’ve now suffered a great loss and a huge embarrassment. Your good name and reputation have been damaged in the whole process, and you aren’t exactly drunk with happiness. In this case, a material breach has been committed that entitles you to cancel the agreement and claim damages for your loss.
When does a contract end?
A contract ends when:
  • each contracting party has done what they agreed to do, or
  • both parties agree to end the contract, or
  • one of the parties commits a breach, and as a result the other one cancels the contract, or
  • one of the contracting parties dies, or
  • the terms of the contract specified a certain period, and the period has expired.
 
A contract may be cancelled informally.