South African contract law is essentially a modernized version of the Roman-Dutch law of contract and is rooted in Roman law. The nature of a contract is an understanding enforceable at law, made between 2 or more persons, by which rights are acquired on the one side to acts or forbearances on the other.
WHAT ARE THE ESSENTIALS OF A VALID AND BINDING CONTRACT?
- An Offer: An offer is a promise to enter into a contract. There are however certain terms, for example, it must be specific, capable of acceptance, complete and intended to be bound by the acceptance of the other party. An offer can be express or implied by a person’s conduct. It can be made to the certain individual, a group of people or even to the world (as in the case of Carlil v Carbolic Smoke Co [1893] 1 QB 256, wherein an advertisement in the Gazette was held to be an offer).
- Acceptance: An offer must be accepted to create a legally binding contract. The acceptance of a contract must be communicated by the accepting party to the offerer, however in certain cases a person’s conduct will constitute acceptance. For example when goods are sold to a client, and the client accepts the goods and releases payment.
- Consideration: A person cannot enforce a promise unless they have given something in return.
- Intention: all parties must have the relevant intention to create a legally binding contract, failing which there is no contract.
- Capacity: All parties must have the necessary capacity to be bound to the contract. If one party does not have the necessary capacity (unsound, drunk, unable to contract, minors) then the contract will be voidable.
- Formalities: although some contracts are concluded verbally. There are certain formalities that are required to be fulfilled, for example sale of land and transfer of shares must be in writing.
(This article is provided for informational purposes only and not to provide legal advice. For more information on the topic, please contact our offices.)
