WELCOME TO BUSSINESS LAW 1A

WEEK 3 CONSENSUS 2024

26 February – 1 March.
 What we did last
LEARNING UNIT 1: THE SOUTH AFRICAN LEGAL SYSTEM
LEARNING UNIT 2 : THE INTRODUCTION TO THE SCIENCE OF LAW
LEARNING UNIT 3: LAW OF CONTRACT: INTRODUCTION
◦ OUTCOME: To understand a contract as a source of obligations, the requirements for a
valid contract, and the freedom to contract and contractually electronically.

❑Understand legal obligations.

❑ List and explain the requirements for a valid contract.

❑ Understand the concept of freedom to contract.

❑ Understand contracting electronically.

 REQUIREMENTS FOR A VALID CONTRACT
1. Consensus – “Meeting Of the Minds”. Parties agree on the objectives of the
contract + a serious intention to be legally bound by the rights and duties of
the contract
2. Contractual Capacity – Contractual Capacity to act. Legally capable of
performing a particular act
3. Legally possible – lawfulness. Rights and duties must be permitted by law as
well as the contract itself
4. Physically possible – certainty. Objectively possible to receive rights and
perform duties + performance must be certain or ascertainable
5. Formalities – no formalities unless prescribed by the law or the parties, in which
case formalities need to be observed.

A valid contract will arise only if all these requirements have been satisfied.
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 This week.
LEARNING UNIT 4: THE REQUIREMENTS FOR A CONTRACT (CONSENSUS)

✓Explain the requirement that the parties must reach a consensus.

✓Understand the concepts “offer” and “acceptance” as well as the rules relating to each of those concepts.

✓Understand and be able to apply to practical situations the various theories regarding whether or not an offer
was accepted.

✓Understand the effect of a defect in the will

✓Distinguish between the various types of mistake and their effect on the validity of a contract.

✓Understand the concept of “misrepresentation”, the various types of misrepresentation, and their effect on the
validity of a contract.

✓Understand the concept of “duress” and its effect on the validity of a contract.

✓Understand the concept of “undue influence” and its effect on the validity of a contract.
 WHAT IS CONSENSUS?
“Meeting Of The Minds” Creates legal obligations 3 Requirements:

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 CONSENSUS EXAMPLE
• TAYLOR ADVERTISES A TOY CAR ONLINE. THE ADVERT READS: “VINTAGE
CAR FOR SALE, ONLY R20 000.” KATY SEES THE ADVERT THINKING IT IS A
REAL MOTOR VEHICLE AND OFFERS R18 000 FOR THE VEHICLE. THEY
DISCUSS DETAILS ABOUT THE CAR IN TERMS OF MODEL, COLOUR AND
MAKE. TAYLOR AGREES TO SELL THE VEHICLE FOR R18 000.

• HAS CONSENSUS BEEN REACHED?

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 MAKING YOUR INTENSION KNOWN
The concepts of offer & acceptance
• OFFER - Declaration of intent by the offeror – in which he/she indicates an intention to be
contractually bound to the offeree and if accepted leads to the contract concluded.
• The offer indicates the obligations, rights, and duties.
• ACCEPTANCE – Unqualified declaration of intent to be bound by the offeree.
• Agrees to exact terms as offered.
 SO – The Offeror invites the offeree to consent to the creation of an obligation/s between
the offeror and the offeree accepts exactly what is offered.
 This can be done verbally, in writing, or by conduct.

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 MAKING YOUR INTENSION KNOWN
OFFER AND ACCEPTANCE
EXAMPLE: JOHN OFFERS TO SELL HIS CELL PHONE FOR R5000 TO SAM. JOHN
HAS MADE A DECLARATION OF INTENT TO SELL HIS CELLPHONE AT A PRICE
OF R5000.
IF SAM ACCEPTS (AGREES TO) THE OFFER, A LEGAL CONTRACT/AGREEMENT
COMES INTO EXISTENCE.
SAM MUST THEN GIVE JOHN THE R5000 AND JOHN MUST THEN GIVE ME THE
CELLPHONE AS AGREED.
WHO IS THE OFFEROR AND OFFEREE? HAVE THE PARTIES MADE THEIR
INTENTIONS KNOWN BY WAY OF OFFER AND ACCEPTANCE?

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 MAKING INTENTION KNOWN
REQUIREMENTS FOR THE OFFER AND ACCEPTANCE
1. Firm – both offer & acceptance must be made with the intention to be legally bound. Upon
acceptance, parties accept terms the terms unconditionally.
2. Complete – all terms of the contract must be included in the offer.
3.Clear, certain & unambiguous (offer & acceptance) means rights + duties are
ascertainable/determinable. No contract arises if it is vague or ambiguous. CPA
4. Formalities? (offer & acceptance) in writing verbally or tacitly. The law will sometimes
prescribe formalities for certain contracts. For example?
5. Addressed to a specific person/group of persons (offer) it can only be accepted by those to
whom the offer applies.
6. Must be communicated (offer & acceptance) an offer is completed only once it has been
communicated to the offeree and acceptance is completed once it is communicated to the
offeror.

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CONSEQUENCES OF AN OFFER AND ACCEPTANCE
CONSEQUENCES OF AN OFFER:
No contractual obligation can arise from an offer alone!
An offer must be what?

Offer lapses (ENDS) if:

o Only valid for a certain period (see also options)
o Offeror revokes offer
o Offeree rejects the offer
o Counteroffer by offeree
o If the offeror or offeree dies before accepting the offer.

• CONSEQUENCES OF AN ACCEPTANCE
o Contract is formed
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Special rules with regard to offer and acceptance
• Invitation to make an offer Advertisements / displayed items- a
request or invitation to make an offer or do business is not a true
offer.
• Statements of intent. Further negotiations are needed. Regarded as
documents that indicate his/her intention to contract in the future.
• Calling for tenders: (advertiser) receives offers which may then be
accepted or rejected
• Auctions
• Certain conditions apply.
• Eg: the bidder is the offeror.
• The auctioneer extends an invitation to those who are present to
make an offer and can accept or reject a bid regardless of
whether it is the highest bid.

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 MOMENT AND PLACE OF CONCLUSION
 A contract arises at the exact moment when, and at the place where consensus is
reached (other requirements for a valid contract must be present).
 This happens when each party becomes aware of the intention of the other party – the
offeror becomes aware of the offeree’s acceptance of the offer.
 Formation of the contract is important because it can still be revoked before accepted or
for enforcement of rights + duties & the calculation of interest.
 When and where the offeror and offeree are in each other’s presence the offer and
acceptance is usually easy to determine the place and time of formation of the contract.
 However there are instances where both parties are not in the same place and not in each
other’s presence.
 One needs to look at the method of communication used to determine when and where the
contract came into existence.
Applicable rules when parties are not in each other’s presence

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 MOMENT AND PLACE OF CONCLUSION
THEORY APPLICATION TIME AND PLACE FOR THE OF CONTRACT

DECLARATION NOT APPLICABLE IN Comes into existence at the time and place
THEORY SA
where the offeree declared acceptance
EXPEDITION This applies to fully Comes into existence where and when the
OR DISPATCH postal contracts and acceptance made by the offeree is dispatched to
THEORY Telegram
the offeror. Offeree posted.
RECEPTION (ECTA) This applies Comes into existence where and when the
THEORY to data messages ie offeror receives the acceptance. Address.
email, sms, the web.
Awareness of receipt is not required.
INFORMATION In-person, Generally accepted theory in SA.
THEORY Comes into existence where and when the
Or Telephone, fax,
ASCERTAINMENT
offeror, receives the acceptance and is aware
telex.
of it.
Default theory.
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UNLESS OTHERWISE AGREED BY THE PARTIES
 MOMENT AND PLACE OF CONCLUSION
James is an American based in New York who wants to buy African paintings. James emails
Jabulani a painter in South Africa, and requests to buy three of his paintings from South Africa
for R4500 on 20 February 2024. Jabulani sends an email accepting James’s request on the 26th of
February and James receives the email in New York at the same time. James only reads the email
on the 27th of February 2024 and calls Jabulani to acknowledge his email.
4.1 Indicate who is the offeror and offeree in this situation. (1)
4.2 Describe the applicable theory used to determine the time and place for the formation of the
contract. (2)
4.3) In terms of the applicable theory, where and when was the contract entered? (1)
4.4) Would your answer in 4.2 be different if the parties had only communicated via telephone
for the whole time?

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 FACTORS INFLUENCING CONSENSUS
Total absence of consensus (Void)
• Mistake / Error

Improperly obtained consensus (Voidable)

1. Misrepresentation

2. Undue influence

3. Duress
• If consensus is absent (1) then no valid agreement comes into existence – Contract
VOID!
• If consensus is improperly obtained (2) = Contract VOIDABLE.

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 MISTAKE(ERROR) – ABSENCE OF CONSENSUS
• Requirements to be proven for mistake:
1. Mistake relates to misunderstanding facts, legal rules, or legal principles regarding
the contract;
2. Is material to contract;
3. Mistake is reasonable (objective test of a reasonable person in the same situation).

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 MISTAKE(ERROR) – ABSENCE OF CONSENSUS

1. Mary dials the wrong number and offers a job to Sam instead of Jack
whom she had interviewed. Sam accepts the job. What type of
mistake is this and is it an acceptable mistake?
2. Mary and Jack enter into a verbal contract. Mary thinks she is buying
a house while Jack thinks he is only renting out the house? What type
of mistake is this and is it an acceptable mistake?
3. Mary enters into a contract of lease with Jack, a third-year student at
UJ. Jack no longer wants to study at UJ and now wants to cancel the
contract. He argues that it was a mistake. What type of mistake is this
and is it an acceptable mistake?

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MISREPRESENTATION – IMPROPERLY OBTAINED CONSENSUS
An untrue/false statement OR representation of fact or state of affairs made
expressly or tacitly by one party of the contract with the aim & result to
induce the other party into concluding the contract.
• Contract = voidable at the instance of the deceived party
1) A misrepresentation of fact.

2) Made by one party to the other

3) Must be unlawful & Material

4) Must have influenced the conclusion of a contract. (causality)

5) Made intentionally, negligently or innocently

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MISREPRESENTATION – IMPROPERLY OBTAINED CONSENSUS
Effect of misrepresentation
1. Intentional misrepresentation – a false statement of a material fact is made to induce a
contract.
(may claim damages in delict or/+ uphold/rescind contract)
2. Negligent misrepresentation – a false statement to induce a contract but it is made
negligently (a person makes a statement which s/he believes is true but does not take
reasonable steps to verify its truth)
(may claim damages in delict or/+ uphold/rescind contract)
3. Innocent misrepresentation – a false statement made to induce the contract, but it is not
made fraudulently or negligently. Ie took all steps to verify.
(may NOT claim damages, but can uphold/ rescind the contract)

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 DURESS - IMPROPERLY OBTAINED CONSENSUS
Causes a person to do something which s/he would not have
normally done – unlawful threat of harm or injury made by one
party to the other that causes a contract to be concluded – usually a
threat or physical violence.
Implied, tacit, conduct, any subtle suggestions.

Examples of duress.
1. Physically held and assisted to sign (No consensus) =void ab
initio.
2. Threatened or intimidated into signing the contract (Consensus
exits but it is improper) = voidable contract.

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DURESS - IMPROPERLY OBTAINED CONSENSUS
Requirements for duress.
1. There must be actual physical violence or reasonable fear of
violence which overwhelms the resistance of a reasonable
person in the same position.
2. The threat must be of an imminent or inevitable evil. A
person could not have averted the danger other than agreeing to
the contract.
3. The threat of harm or violence must be unlawful. (Contra
bonos mores)
4. Duress must be exercised by one contracting party against
the other.
5. The threat must cause the threatened person to conclude the
contract. (causality)
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 UNDUE INFLUENCE - IMPROPERLY OBTAINED CONSENSUS
A person concludes a contract because of some kind of influence,
consensus improperly obtained – improper or unfair conduct by one
that persuades the other – usually a special relationship.
Abuse of authority, knowledge, dependence, and experience.
• Contract is voidable, + uphold, rescind or damages.
Requirements for undue influence:
1. Party must have acquired an influence over the victim.
2. Party must use his influence to weaken the victim’s ability to
resist.
3. Influence must have been used to persuade a victim to consent to a
transaction that he wouldn't have normally entered into.
E.g. Doctor-patient /attorney-client / guardian-minor / banker-client.
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 FRIDAY CLASS QUESTIONS
1. Jabu lies that the TV he is selling to Kat works when in fact the TV does
not work. Has consensus been properly obtained and what remedy is
available to Kat?
2. John forces his sister, Kat to enter into a contract by putting a gun to her
head. Has consensus been properly obtained, and what remedy is
available to Kat?
3. If there is a mistake regarding the motive for entering the contract, what
is the effect of the contract?
4. Rita is a lecturer in Accounting at UJ. She tells her students to buy special
pens from her after class and tells the students that if they do not buy
them, she will fail them all. Has consensus been properly obtained and
what remedy is available to the class?
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