Diploma Sound Technology

Business Law

Define the terms “obligatio” and “contract”

Discuss the essentials of a valid contract

Discuss the consequences of “valid”, “void” & “voidable” contracts

Distinguish between the essentialia, naturalia and incidentalia

Define “iusta causa”

Discuss the rules of offer & acceptance

Discuss the ways in which offers terminate

Discuss when contracts by post, telephone & electronically are concluded

Differentiate between express & implied terms

Differentiate between suspensive & resolutive terms

Understand consensus & defects in will

Read Module 3 of study guide

Chapter 3,4 and 8 of General Principles of Commercial Law

Module 3 of Business Law for B Com (www.letslearnmore.weebly.com)

Obligatio – the legal relationship between parties to a contract when they acquire personal rights against each other

Contract – an agreement that creates a legally enforceable obligation ◦ “All contracts are agreements but not all

agreements are contracts”

Iusta Causa – just cause

Generally speaking, people are free to choose with whom and on what grounds they wish to contract with another

Consensus between the parties

Contractual capacity

Agreement must be legally possible

Agreement must be physically possible

Required formalities complied with

Each party must have serious intention to be bound to the contract

Common intention

Must make intention known to the other party

A valid contract is one that complies with all the requirements of a contract – it is enforceable

A void contract is a contract that actually does not come into existence because of some insurmountable problem – it is invalid.

A voidable contract is a contract that comes into being but can be set aside by the Court because of some flaw

Essentialia (essential terms) ◦ Those terms that are essential to a paryticular type of

contract; eg: the thing sold & the price are essentials in a contract of sale

Naturalia (residual terms) ◦ Those terms that are automatically implied by law; eg:

warranty against latent defects in contract of sale

Incidentalia (incidental terms) ◦ Those terms added by the parties or changes to residual

terms; eg: that delivery will only take place 30 days after payment

One party must have made an offer

The offer must have been communicated to the offeree

The offer must not have lapsed or been revoked

The offer must have been accepted in the prescribed manner

The offer must be accepted by an intended person

The acceptance must be communicated, and be: ◦ In the prescribed manner

◦ Within the prescribed time

◦ At the prescribed place

If the offer is only open for a certain period it will terminate at the end of that period if not accepted For example; “do you want to buy my bike for

R500? The offer is open until 15:00 tomorrow” – if the offer is not accepted by 15:00 tomorrow it will automatically fall away

If the offer is rejected by the offeree it will automatically fall away

If before the offer is accepted, the offeror informs the offeree that he is revoking the offer it will automatically fall away

If the offeror or offeree dies before the offer

is accepted the offer falls away

If the offeree does not accept the offer exactly as it was made but puts in a counteroffer the original offer falls away

Option giver makes an offer (substantive offer) & agrees to keep open for a period (the option)

If offeree accepts option the option contract comes into being allowing offeree to accept substantive offer within option period

Invitations to make an offer (advert)

Statements of intent

Calling for tenders

Auctions

Those issues specifically discussed & agreed upon by the parties during negotiations

Agreed orally or in writing

Can be included in a notice or a ticket for example

These terms are inferred from the surrounding circumstances ◦ Is the term necessary to give effect to the parties

intention – if so the Courts will read it into the contract even if the parties did not think about it

◦ Common law rules may apply to something

◦ Terms implied by trade usage

◦ Statutory terms

A condition is a type of term “which qualifies the operation of a contractual obligation in such a way that it is dependent on the taking place of an uncertain future event”

Vrancken et al, 2002 (67)

It is not certain when or if the event will take place

Two types of condition

The operation of the obligation (performance of rights & duties) is suspended or delayed until the uncertain future event (condition) takes place

◦ Eg: A agrees to employ B if she graduates at

the end of the year

The obligation comes into operation immediately (performance takes place) but if the uncertain future event (condition) is fulfilled the obligation will immediately terminate

◦ Eg: A agrees that B may use his car until he finds

employment. Once B is employed he must hand back the car to A

When parties in each others presence

◦ Information theory

Contract comes into being at the time acceptance communicated and at the place where parties are

Where parties not in each others presence

◦ By telephone – Information theory applies – contract comes into being at time & place when offeror becomes aware of offeree’s acceptance

◦ By post – Expedition theory – contract comes into being at time & place when offeree posts letter of acceptance

What is the situation where electronic contracting is concerned?

◦ Class exercise

Mistake – contract void – provided: ◦ Mistake relates to fact, legal rule or principle

◦ The fact, rule or principle is material

◦ The mistake is also reasonable

Misrepresentation – contract voidable if: ◦ Untrue statement regarding existing fact or

condition

◦ Made by one party to the other

◦ Misrepresentation must be unlawful

◦ Misrepresentation must have induced (caused) the contract

◦ Can be intentional, negligently or innocent

Duress – unlawful threat of harm or injury causing other party to enter into contract

Voidable if: ◦ Actual or reasonable fear of physical violence or

damage

◦ Imminent or inevitable

◦ Unlawful

◦ By one party against another

◦ Causes party to contract

Undue Influence – improper or unfair conduct by a party to persuade other party to contract against their free will

Voidable if: ◦ One party exercises influence over another

◦ Influence used to weaken will / resistance

◦ Influence used to persuade other party to contract against own free will & to their disadvantage