Business Law

BUSINESS LAW CUAC 211

Compiled by

J. Mashonganyika

1

Chinhoyi University of Technology

Compiled by J. Mashonganyika

NATURE OF LAW

Laws are established by authority to regulate the behaviour of members of society. Law refers to legal rules which are obligatory and enforceable by the state. Breach of a legal rule might result in punishment and rehabilitation through a structure set up for that purpose.

Moral rules also exist. These might or might not be obligatory but need not be enforced. However punitive measures might also be applied by society for the breach of moral rules

Legal rules must meet certain principles 

They must be applied equally in similar cases

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They must be applied equally to people who are similarly circumstanced e.g. between rich and poor

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They must be uniformly applied through a given territory

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They must be certain and unambiguous

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They must be enforceable

SOURCES OF LAW

These are sources from which legal rules are derived. There are three main type of sources of law.

i.

LEGISLATION

These are the laws that are made through Parliament. Parliament is a body created by the Zimbabwean Constitution of elected officials representing given constituencies in the country who sit together to make the country‘s legal rules. Parliament can make any law as long as they 2



are not prohibited by the constitution. Legislation is a quick way of making new law, changing existing law, amending or repealing or abrogating new law.

Parliament is divided into two houses namely the Lower House also known as the House of Assembly and the Upper House also known known as the Senate. The

In terms of the Zimbabwean Constitution, the executive authority is vested in the president. The President shall take precedent over all other persons in Zimbabwe. He shall be the Head of State and Government and the Commander in Chief of the Defence forces.

Laws are introduced in the House of Assembly as Bills. This is usually by the Minister concerned. The Bill is presented and debated in the Lower House and the Upper House before it is passed to the president for his approval and signature. The president may refuse to approve the Bill and it is referred back to parliament. When the bill is approved by the President, it becomes an Act or Statute. It is then gazzetted

Parliament can delegate powers to either ministers or other bodies e.g. municipalities to make subsidiary legislation or by-laws. Subsidiary legislation should not be ultra-vires powers given i.e. beyond the given powers.

ii.

JUDICIAL PRECEDENT

Judges are not employed to make law but to interpret and apply laws through the court system. However judges may find themselves making law if they are faced with novel cases (new to the world) which are not covered by existing laws. This may result in a shift of the law.

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The Supreme Court is not bound by its own decisions and can therefore overrule its previous decisions as erroneous. Judges may, using their skills of inter pretation, give a practical meaning to any unclear provisions of statutes. The authoritative part of precedent is known as ratio decidendi . This is the reason for the decision. It is the binding part of judicial precedent. A

judge may give his opinions on a legal rule or may comment on a set of facts. These comments form the obita dicta (by the way of statements. These are not binding but persuasive.

iii.

CUSTOMARY LAW

A custom arises out of constant practice over a very long time. For a practice to be accepted as a custom it must meet certain requirements as given in the South African case

Van Brendan v Jacobs (1921)

It was held 

The custom must be well known

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It must have existed for a long time

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It must not be contrary to any statutory provisions

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The custom must not be contrary to any acceptable morals

One major problem of customs is that they are largely unwritten and exist in the minds of old people. Hence evidence on the existence of such might be non existent or confused.

COURT STRUCTURE AND JURISDICTION

i. 4

SUPREME COURT



Is the superior court of record and the final court of appeal. In this court a case cannot be heard for the first time unless it is a constitutional one.

COMPOSITION

The Supreme Court is the superior court of record and the final court of appeal in Zimbabwe and has jurisdiction and powers as may be conferred upon it by or in terms of this Constitution or any Act of Parliament. (2) The Supreme Court consists of — (a) the Chief Justice; (b) such other judges of the Supreme Court, being not less than two, as the President may deem necessary; (c) such other judges as have been appointed

For the purpose of exercising its jurisdiction in any matter, according to the Supreme Court Act (7:13), the Supreme Court shall be duly constituted if it consists of not less than three judges of whom one shall be— (a) The Chief Justice; or (b) A judge of the Supreme Court other than an acting judge of the Supreme Court:

JURISDICTION

The Supreme Court has jurisdiction to hear and determine an appeal in any criminal case from the judgment of any court or tribunal from which, in terms of any other enactment, an appeal lies to the Supreme Court.

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In special cases, if it appears to the Supreme Court that an appellant, though not properly convicted on some count of the indictment, summons or charge, has been properly convicted on some other count of the indictment, summons or charge, the Supreme Court may either confirm the sentence passed on the appellant at the trial or pass such sentence, whether more or less severe, in substitution therefore as it thinks proper and as may be warranted in law on the count of the indictment, summons or charge on which the Supreme Court considers that the appellant has been properly convicted

Where the High Court has reserved for the determination of the Supreme Court— (a) Any question decided by the High Court on exception or objection taken to an indictment in a criminal trial; or (b) After the conclusion of a criminal trial, any question of law which arose in that trial; The Supreme Court shall, subject to this section and rules of court, determine the question. And may confirm, amend or set aside the decision in respect of which the question was reserved and give such directions as the Supreme Court thinks fit to Give as to the indictment concerned and further proceedings in the High Court.

The Supreme Court has jurisdiction to hear and determine an appeal in any civil case from the judgment of any court or tribunal from which, in terms of any other enactment, an appeal lies to the Supreme Court.

There shall be no appeal from any judgment or order of the Supreme Court. The Supreme Court shall not be bound by any of its own judgments, rulings or opinions nor by those of any of its predecessors.

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NB A judge of the Supreme Court shall not sit as a judge on the hearing of an appeal to the

Supreme Court from any judgment given by him or in which he has concurred or from which he has dissented or in respect of which he has been formally consulted.

ii.

HIGH COURT

COMPOSITION

The High Court consists of — (a) The Chief Justice; (b) The Judge President of the High Court, who shall, subject to the directions of the Chief Justice, is in charge of the High Court; (c) Such other judges of the High Court as may from time to time be appointed.

The Chief Justice may, from time to time, after consultation with the Judge President of th e High Court, appoint a judge of the Supreme Court to act as a judge of the High Court.

The High Court shall be duly constituted— (a) For the purpose of exercising its original jurisdiction in any civil matter, if it consists of one or more judges of the High Court; (b) For the purpose of hearing a criminal trial, if it consists of one judge of the High Court and two assessors; (c) For the purpose of exercising its powers to review the proceedings or decision of any inferior court, tribunal or administrative authority, if it consists of one or more judges of the High Court; (d) For the purpose of exercising its appellate jurisdiction in any matter, if it consists of not less than two judges of the High Court. 7



JURISDICTION

Subject to the High Court Act (7:06), the High Court has full original civil jurisdiction and full original criminal jurisdiction over all persons and over all matters within Zimbabwe.

The High Court has power, jurisdiction and authority to review all proceedings and decisions of all inferior courts of justice, tribunals and administrative authorities within Zimbabwe. The grounds for review are: 

absence of jurisdiction on the part of the court, tribunal or authority concerned;

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interest in the cause, bias, malice or corruption on the part of the person presiding over the court or tribunal concerned or on the part of the authority concerned, as the case may be;

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Gross irregularity in the proceedings or the decision.

The High Court has jurisdiction to hear and determine an appeal in any civil case or criminal case from the judgment of any court or tribunal from which in terms of any other enactment and appeal lies to the High Court.

NB This court can pass a death penalty or life imprisonment.

iii.

MAGISTRATES COURT

COMPOSITION The magistrates‘ court is divided into district, provincial and regional courts. The various

categories are determined by the President as from time to time. It is presided over by a magistrate who is appointed by the Public service Commission. The appointed person must

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have the qualification of a legal practitioner or the equivalent i/e/ qualified in a capacity comparable to that of a legal practitioner

JURISDICTION

The jurisdiction of the Magistrates Court is dependent on the category it falls into.

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ORDINARY MAGISTRATE

Has criminal jurisdiction of sentencing the offender to up to one year imprisonment and/or a fine may be imposed for offences brought before this court. The ordinary magistrate has the jurisdiction to apply common or customary law. He cannot dissolve civil law marriages but only those under the customary law. However the Ordinary Magistrate has the power to decide on incidental issues arising from civil law marriages like the custody of children, guardianship and maintenance. This court has no jurisdiction to declare an individual mentally ill according to the Mental Health Act.

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SENIOR MAGISTRATE

Has criminal jurisdiction of up to two years imprisonment and/or a fine may be imposed for offences brought before this court. The civil jurisdiction is the same as that of the Ordinary Magistrate.

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PROVINCIAL MAGISTRATE

Has criminal jurisdiction of up to three years imprisonment and/or a fine may be imposed for offences brought before this court. The provincial magistrate has special jurisdiction as to punishment of arson, public violence and malicious injury to property. This may result in imprisonment of up to five years or a fine may be imposed on such offences



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REGIONAL MAGISTRATES COURT



Has criminal jurisdiction of up to seven years imprisonment and/or a fine may be imposed for offences brought before this court. However he has no jurisdiction on criminal cases involving, treason, murder and any offence that might result in someone being sentenced to death. In addition this court cannot dissolve civil law marriages. It can impose corporal punishment on minors and the strokes to be administered on the offender shall not exceed six.

The Regional Magistrates Court has special jurisdiction as to punishment of rape,

public

violence, arson, malicious injury to property and attempts to commit these crimes. The maximum jurisdiction is ten years imprisonment and/or a fine.

iv.

PRIMARY COURTS

COMPOSITION

These courts are simple and are not very formal and the proceedings are not in written form. Legal practitioners cannot represent clients in these courts. A Primary Court is presided over by a presiding officer appointed by the Minister concerned.

JURISDICTION

Primary Courts Apply customary law only. The have no jurisdiction over criminal law and they cannot dissolve civil marriages. However they can determine incidental matters of marriage like custody of children, maintenance etc. They can charge a maximum fine that is determined by the Ministry concerned from time to time but cannot impose a prison term

v.

SPECIALIST COURTS

Deal with special areas which have been found to require a special Court e.g.

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

SMALL CLAIMS COURT

Small Claims Courts are instituted to resolve cases involving small claims. Only natural persons can bring their claims to this court. They are presided over by a presiding officer who is appointed by the Minister or a magistrate. He has jurisdiction in respect of persons who reside or carry on business or is employed within its province and in respect of any cause of action that arose wholly within its province.

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ADMINSTRATIVE COURT

Deals with issues submitted to it under various pieces of legislation Can also act as the Water Court in terms of the Water Act(20:20).

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LABOUR RELATIONS TRIBUNAL

The Tribunal deals with issues arising out of contracts of employment.

CRIMINAL AND CIVIL LAW

CRIMINAL LAW This is law that regulates the conduct of the individuals and the state. The state is always an interested party because of the unwritten contract between citizen and state that the state will protect the citizen and his property.

CIVIL LAW This is law that regulates conduct of individuals. The State is not involved unless it is a party.

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DISTINCTION BETWEEN CRIMINAL AND CIVIL LAW CRIMINAL LAW

Regulates

the

CIVIL LAW

conduct

of

the

Regulates conduct of individuals

individuals and the state Aims to rehabilitate the offender

Aims to compensate the innocent party

Act prohibited must have occurred.

Action may arise

even

before

wrong has been done (interdict) The wrongdoer must have had

Action arises even if wrongdoer

intention to commit offence

had no intention to prejudice

LAW OF CONTRACT DEFINITION

A contract is an agreement between two or more which are recognize and enforceable at law. It is made up of an offer and acceptance with the intention of creating a legally binding agreement.

ESSENTIALS OF A VALID CONTRACT a)

For there to be contract there must be consensus between the parties to the contract i.e. the parties must be at consensus ad idem, meaning there should be a meeting of minds. Further there must be animus contrahendi i.e . serious intention to contract or be bound by the terms of the contract.

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b)

Each party to the contract must have the required capacity at law to contract. This means that they must be legally capable of rendering performance under the contract.

c) Rights and obligations under a contract must be physically possible. d) The agreement must be legal i.e. permissible at law. e) The formalities prescribed in the contract, if any, must be observed.

a) AGREEMENT An agreement is consensus between the parties to the contract. The agreement is constituted of two parts, offer and acceptance.

i.

OFFER

An offer is a statement by a person known as offerer indicating his willingness to contract and the terms in which he is prepared to contract. This statement is made in the awareness that it shall become binding on acceptance by the person to whom it is addressed known as the offeree.

REQUIREMENTS OF A FIRM OFFER

SERIOUS INTENTION

An offer must be firm or put in a way that a contract should result on the exact term as offered. It must be serious because if it is made at the heat of the moment or when joking it will not be valid. An offer should also be distinguished from a mere invitation to treaty. An invitation to treaty is a statement of awareness inviting someone to make an offer. This is the issue in

advertisements and goods displayed for sale. As a general rule It does not constitute a firm offer. CRAWLEY v REX (1909)

A shopkeeper displayed a placard outside his shop advertising tobacco at a cheap price. Crawley bought some of the tobacco left the shop and returned back to ask for more. This time 13



the shopkeeper refused. Crawley claimed he had a contract with the shopkeeper as he had accepted an offer that the shopkeeper gave. HELD: There was no contract since the mere fact that a tradesman advertises the price at

which he sells goods is not a offer to any member of the public to enter the shop and purchase goods. It is the potential buyer who responds with an offer which may be accepted or rejected by the shopkeeper.

PHARMACEUTICAL SOCIETY OF GREAT BRITAIN v BOOTS CASH CHEMIST (1953) Goods were sold in B‘s shop under self service. Customers selected their purchases from

shelves on which goods were displayed, put them in a wire basket supplied by B and took them to the cash desk where they paid the price. HELD: The contract was made, not when the customer put the goods in the basket but when

the cashier accepted the offer to buy and received the price.

AN OFFER MUST BE MADE WITH THE INTENTION OF BEING ACCEPTED BY OTHER PARTIES

This means that the offer must be communicated to the person to whom it is intended. CARLLIL v CARBOLIC SMOKEBALL Co. (1893) QB

A company took out an advertisement undertaking to pay £100 to any person who still fell ill with flu after taking a new drug as directed. Mrs. Carllil took the drug and still fell ill and she thus claimed the reward. Further the company had deposited £1000 with a London bank as evidence of their sincerity. The Company said the advertisement was not an offer but a ―mere puff‖ and

that in any case notification had not been given. The Court said the general rule is that advertisements are not offers, but in this case, there was a definite offer to anybody who performed the conditions named in the advertisement. Notification in such cases is not required. Reward advertisements are therefore offers binding on the offeror if accepted as required. BLOOM v AMERICAN SWISS WATCH Co. 1915 AD

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On 19th March 1913, a robbery was perpetrated at the Cape Town premises of the defendant company and jewellery value at £5000 was forcibly removed. In the press the following day, there appeared a notice in these terms that a reward of £500 was offered to any person who could supply information leading to the arrest of the thieves and recovery of the jewellery. Bloom supplied the required information to the C.I.D. but at the time he did so, he was not aware of the reward. The Court said he/she could not be given the reward since he could not accept an offer of which he was unaware. Solomon, JA: ―Until the plaintiff knew of the offer, it seems clear that

he could not accept it and, until he accepted it, there could be no contract, for a contract requires that there should be a ―consensus‖ of two minds, and if the one did not know what the other was proposing, the two minds never came together …‖ A person acting as required by a

reward advertisement will receive that reward only if he was aware of the reward when he so acted.

AN OFFER MUST NOT LAPSE BEFOR ACCETANCE

An offer can lapse due to the death of either party or the expiration of a stipulated period of time RAMSGATE HOTEL v MONTEFOIRE (1866)

On June 8, M offered to take shares in R Hotel Co. He heard nothing from them until 23 November when he received the letter of acceptance. M refused to take the shares. HELD: M was entitled to refuse as his offer had lapsed before November 23, so it would not be

accepted THE OFFER MUST NOT BE REVOKED (WITHDRAWN) BEFORE ACCEPTANCE

An offer must not be revoked or withdrawn before the offeree accepts it. BYRNE & Co. v LEON VAN TIENHOVEN (1880)

A letter was posted from Cardiff on 1 October offering to sell 1 000 boxes of tin-plates to a client in New York. The offer was accepted by telegram on 11 October. However a letter of withdrawal had been posted on 8 October. This did not arrive until 20 th.

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The contract was upheld because revocation/withdrawal must be communicated to the offeree since ―a state of mind not notified cannot be regarded in dealings between man and man... an uncommunicated revocation is for all practical purposes and in point of law no revocation at all.‖

Such revocation must actually have been received.

AN OFFER MUST NOT BE REJECTED IN THE FORM OF A COUNTER OFFER

If in his reply to an offer, the offeree introduces a new term or varies the terms of the offer, then that reply cannot amount to an acceptance. Instead, the reply is treated as a "counter offer", which the original offeror is free to accept or reject. A counter-offer also amounts to a rejection of the original offer which cannot then be subsequently accepted. HYDE v WRENCH (1840)

The defendants offered to sell land to the plaintiff for £1000. The plaintiff said he would pay £950 only. The defendant rejected this. Plaintiff then agreed to pay £1000 after all. But by now the defendant no longer wished to sell. The court ruled that a counter-offer had been made which amounted to rejection of the original offer.

OFFERS SUBJECT TO CONDITIONS

Certain offers may be made subject to conditions e.g. tickets given as a formality of a contract. The important factor in such cases would appear to be the extent to which provisions are made to draw attention to the conditions. PARKER v THE SOUTH EASTERN RAILWAY CO. (1877) CPD. Parker deposited a parcel worth over £10 at the cloakroom and received a ticket with the words ―See back.‖ A condition at the back stated that the railways would not be responsible for articles

exceeding £10 in value. The parcel was lost and Parker sued. The court laid down guidelines on tickets being unsigned documents containing waivers of liability. a) Where contracting party does not know that the ticket includes writing, he is not bound by any conditions contained in that ticket. 16



b) Where he knows the ticket contains writing which includes conditions, he is bound c) Where he knows that the ticket contains writing but not that it contains conditions, then two distinct situations arise: i.

For documents which by their accustomed use in regular commercial practice would be supposed to contain conditions, the customer is bound even if he is neither ‗a man of business nor a lawyer‘ e.g. with a bill of lading.

ii.

For documents [e.g. cloakroom tickets] where one cannot reasonably be expected to suppose contain conditions even if they do, the customer is not bound.

ii.

ACCEPTANCE

An acceptance is a final and unqualified acceptance of the terms of an offer. To make a binding contract the acceptance must exactly match the offer. The offeree must accept all the terms of the offer.

A number of essential elements should be satisfied for acceptance to be valid.

THE ASSENT SHOULD BE COMMUNICATED

The general rule is that an acceptance must be communicated to the offeror. Until and unless the acceptance is so communicated, no contract comes into existence. NB Silence does not constitute acceptance.

FELTHOUSE v BINDLEY (1862)

Felthouse had a nephew who owned a horse, which Felthouse wanted to buy. He wrote to the nephew to buy the horse saying, ―If I he ar no more about him I will consider the horse to be mine‖. The nephew did not reply but decided to keep the horse for Felthouse. Bindley, an

auctioneer, mistakenly sold the horse to a third party. Felthouse then sued Bindley for damages 17



equivalent to the value of the horse. It was held that there was no contract since no acceptance had been made. In any event, the offeror could not impose conditions of refusal upon the offeree by forcing an offeree to act in a certain way. EXCEPTIONS TO THE COMMUNICATION RULE

i. In unilateral contracts the normal rule for communication of acceptance to the offeror does not apply. Carrying out the stipulated task is enough to constitute acceptance of the offer. ii. The offeror may expressly or impliedly waive the need for communication of acceptance by the offeree, e.g. where goods are dispatched in response to an offer to buy. iii. The Postal Rule (Expediation Rule):- Where acceptance by post has been requested or where it is an appropriate and reasonable means of communication between the parties, then acceptance is complete as soon as the letter of acceptance is posted, even if the letter is delayed, destroyed or lost in the post so that it never reaches the offeror. HOUSEHOLD FIRE AND CARRIAGE ACCIDENT INSURANCE CO. V GRANT (1879)

Grant wrote offering to buy 100 shares in the company enclosing a deposit. The company replied with a letter of allotment, thus accepting his offer, but the letter never arrived. Nevertheless, when the company later went into liquidation, the liquidator sued for money owed by Grant for payment of the shares. HELD: There was indeed a contract and Grant was therefore liable since chose the Post

Office as his means of communication, thus making it in effect his messenger/agent and consequently assumed the risk of delay by implication. NB The Expediation Theory does not apply if the letter is wrongly addressed as a result of the

fault of the offeree

ACCEPTANCE SHOULD BE IN THE MANNER PRESCRIBED

The offer may specify that acceptance must reach the offeror in a prescribed manner in which case actual communication will be required.

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ELIASON v HENSHAW 1819 (US Supreme Court) Eliason sent a letter by wagoner offering to buy flour from Henshaw and asked for reply ―by return of wagon‖. Henshaw believing it to be quicker sent his reply by post. This arrived later

than the wagon and to a different place. HELD: An offeror may not dictate the manner of refusal but he may specify the method of

acceptance.

NB If an offerer specifies the manner of acceptance and such manner is not followed; any other

purported acceptance even if it reaches the offerer is void.

If a method is prescribed without it being made clear that no other method will suffice then it seems that an equally advantageous method would suffice.

ACCEPTANCE MUST BE MADE BY THE PERSON FOR WHOM THE OFFER WAS INTENDED

As a general rule, an offer may not be ceded or passed on to anyone and may therefore only be accepted by the offeree i.e. if A offers to B, C cannot and bind A unless A so wishes

BLEW v SNOXELL (1931) TPD

Blew offered to buy a piece of land from a company, Richard Currie Ltd. However, the land in fact belonged to Snoxell who, upon becoming aware of the offer wrote to Richard Currie Ltd, accepting it, whereupon Blew was notified. In a law suit later, Blew argued that there was no contract between him and Snoxell and the Court agreed holding that, ―it is trite law that an offer made by one person to another cannot be accepted by a third party‖. In this case, the offer was

made to Richard Currie Ltd and not to Snoxell.

ACCEPTANCE MUST BE DEFINITE AND UNCONDITIONAL 19



A conditional acceptance is void because it constitutes a counter offer which terminates the original offer.

HYDE v WRENCH (1840)

The defendants offered to sell land to the plaintiff for £1000. The plaintiff said he would pay £950 only. The defendant rejected this. Plaintiff then agreed to pay £1000 after all. But by now the defendant no longer wished to sell. The court ruled that a counter-offer had been made which amounted to rejection of the original offer.

JONES v REYNOLDS (1913)

iv.

CAPACITY

This is the ability recognized by law whereby a person is allowed to enter into a contract. It is important to establish who the parties to a contract are because some parties have no contractual capacity. A contract cannot be validly entered into by persons who lack contractual capacity a) MINORS

Minors are persons below the legal age of majority, that is 18 years. A child under 7 years has no capacity at all, but those above 7 years and below 18 years must as a general rule have the assistance of a guardian or parent when entering into contracts. The guardian must give assistance when the contract is entered into or he must ratify it after conclusion. Contracts concluded without the assistance of guardians are voidable at the minor‘s instance. The minor

may withdraw from the contract without incurring any obligations unless he has been enriched. There are a number of instances in which the minor is bound by unassisted acts. 

When the minor is married, he is bound by unassisted acts. He cannot migrate or revert to minority even after divorce.

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

When the minor tacitly emancipated all for acts and he is independent for all purposes, he is bound by unassisted acts. For example where he has healthy finances, stays alone etc.



Partial emancipation:- This implies that he can only do those acts related to his trade e.g. a cobbler will be allowed to purchase glue for his trade.



When the guardian ratifies previously unassisted contracts.



He enters into an unassisted beneficial contract e.g. educational and employment contracts for the minor‘s benefit.

CHAPLIN V LESLEY FREWIN PUBLISHERS (1966)

Chaplin, a minor and the son of a wealthy world famous comedian from whom he had become estranged applied for national assistance for himself, his wife and child. Chaplin signed a contract with the publishers for the publication of his autobiography which he later sought to void/cancel. It was held that the contract was binding on the minor for it was similar to a contract of service and would enable him to earn his living and support his family. It was a contract for his benefit.



Purchase of necessaries.

These are not restricted to the things which are required to maintain a bare existence i.e. clothes, bread etc. but articles reasonably necessary for the minor having regard this situation of life. These may include a car, recreational facilities and so on. The minor is bound if the necessaries are: 

Suitable to his condition in life



Necessary to his requirements at the time of sale



Goods which he was no sufficiently supplied at the time of the sale and delivery

NASH v INMAN (1908)

Inman, a minor, who was an undergraduate at Cambridge, bought 11 fancy waistcoats from Nash. He was at the time adequately provided with clothes. It was held that the waistcoats were not necessaries and Inman was not liable to pay for them. b) MENTAL CAPACITY

Every person is presumed sane until declared insane by a competent court. This is a requirement of the Mental Health Act. When a person is insane he has no capacity to conclude 21



contracts. If he does there will be no rights and obligations arising out of this. Such contracts are void IMPERIAL LOAN CMPANY v STONE (1892)

Imperial sued Stone on a promissory note. Stone pleaded that he was insane at the time he made it. It was held that for the defence to succeed Stone must prove that he was insane at the time and that Imperial Loan Company knew of the insanity c) INTOXICATED PERSONS

Alcohol or dr ugs may affect a person‘s intention to be contractually bound. Sometimes the effects of these in a human mind are similar to that of insanity. The same questions as on insanity have to be asked. MATTHEWS v BAXTER (1873)

Baxter had agreed to buy some houses from Matthews. At the time he was too drunk to know what he was doing, but he ratified the contract at the time he was sober. It was held that the contract was binding. d) INSOLVENCY

This is governed by the provisions of the Insolvency Act. An insolvent is one who is declared so by the court. This may be either because of voluntary surrender or had his estate sequestrated. The insolvent may not dispose any of his assets so as to detrimentally affect his estate without the consent of the trustees appointed to act on behalf of the creditors. He can however enter into ordinary contracts to sustain his life e.g. contract of employment. e) PRODIGALS

This is similar to the biblical son who recklessly and extravagantly squandered his assets. He has to be declared a prodigal by courts of law and a curator is appointed to manage his affairs. Somebody must prove why a person should be declared a prodigal because the courts do not want to interfere in personal affairs. f)

ARTIFICIAL PERSONS

These are bodies given legal personality by law e.g. companies, parastatals, states etc. These have to act through duly appointed agents. They can sue and be sued in their own name and enter into contracts like a natural person. 22



SALOMON v SALOMON & CO. LTD, 1897.

S sold his business to a company that he himself had floated – on 20 000 shares of one pound each together with debentures valued £10 000 secured by a bond over the company‘s assets.

The other shareholders were his wife and 5 children who held one share each. A year later the company was liquidated. It then had assets sufficient for the secured debentures only and nothing remained for the unsecured creditors who argued that Salomon and his company were in essence one and the same person and that as a person he should be liable for the company‘s debts. The House of Lords decided that, from its inception the company was

separate from its members. Even ―though it may be that after incorporation the business is precisely the same as it was

before and the same persons are managers and the same hands receive the profits.‖

v.

LEGALITY

A contract which is illegal is normally impossible. Th e illegality maybe be present in 



The formation of contract i.e. contravenes common law. The performance of the contract e.g. contract to commit a crime



The consideration of the contract e.g. payment in mbanje



The purpose for which the contract is made e.g. a car hire for smuggling

PATEL v SIGAUKE (1994)

The first respondent sold a motor car within a year after importing it under some rebates provided in terms of the customs regulations. She had not obtained permission of the director of Customs and Excise before selling it. She also had not paid full duty on it. The sale was therefore a contravention of section 85 of the Customs and Excise (General regulations of 1991). It was held that the regulations expressly prohibited the sale and the transaction was illegal and impossible.

VOID AND VOIDABLE CONTRACTS

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Void Contract

It is not a contract at all, that is it is a legal nullity. In fact it is a misnomer to talk of a contract at all. Contracts may be void for the following reasons 

Illegality



Lack of contractual capacity



Initial impossibility



Mistake

Voidable contract

Is a contract which is valid so as to say but due to some issues, the innocent party has the option to withdraw from it. The contract may be voidable due to: 

Lack of contractual capacity e.g. a minor may withdraw from his unassisted contract. Also a trustee may avoid contracts contra cts entered into by the insolvent which have the effect of detrimentally affecting his estate



Duress



Undue influence



Misrepresentation

a. Duress

Can be defined as an unlawful threat or injury made to a party to a contract that causes the other party to enter into a contract. Such a contract entered such an illegitimate pressure is voidable at the instance of the innocent party i.e. the innocent party can have the contract set aside. The requirements that must be satisfied before the contract is voidable on the grounds of duress are set aside in the case of BROODRYK BROO DRYK v SMUTS BROODRYK v SMUTS NO 1942 TPD

Broodryk a married man and with one child alleged he had enlisted for military service following threats by two government officials that he would be regarded as hostile and interned unless he did. He claimed rescission of the contract. The court listed 5 elements for duress: 

24

Actual violence or reasonable fear.





Fear must arise from threat of considerable evil to the party or his family



Threat must be of imminent/inevitable evil



Threat or intimidation must be contra bonos mores



The pressure used must have caused damage.

The court ruled in Broodryk‘s favour because of duress by the government‘s agents. Broodryk‘s fear was not ―vain or foolish‖; it was sufficient ―to overcome a mind of ordinary firmness‖.

SHEPSTONE V SHEPSTONE

A husband threatened to sue for the custody of his children where his h is wife leaving with him and cohabitating with a married man. It was held that there was no duress. The husband was legally entitled to claim for the custody of his children. N.B. Duress must have caused the innocent party to conclude the contract. The innocent party must take steps to withdraw from the contract as soon as the source of fear is removed.

b. Undue Influence

Undue influence occurs in a situation of pressure less directed and less essential than that covered by duress. It exists where one party to a contract is able to influence the other party to such a degree that the latter is incapable of forming an independent opinion on the subject. When an individual (either through words or actions or some special relationship) achieves dominancy over another and utilises that dominance improperly to persuade the other into a prejudicial contract, that person would not otherwise had meant to enter into, that contract will be set aside on the grounds of undue influence.

PATEL v GROBBELAAR, 1974.

25



Grobbelaar sought cancellation of a mortgage bond registered against his property in favour of Patel thinking he owed Patel a loan for R40 000. Grobbelaar had been persuaded by Patel to believe that Patel had supernatural powers. In fact Grobbelaar owed Patel no money. The court ruled in Grobbelaar‘s favour and they listed essential requirements for undue

influence as follows: [1] One party exercises exercises influence over another. [2] That influence weakened his powers powers of resistance and made his will will pliable. [3] The influence was exercised in an unscrupulous manner in order to obtain his consent. [4] The agreement is to his detriment [5] Under normal free will will he would not have have consented. Under undue influence one party achieves dominance over another and uses that dominance improperly to persuade the other into a prejudicial contract which he would not otherwise make. The resultant contract may be set aside.

c. Mistake

Situations fall under mistake refer to those were parties think they have entered into an agreement but there is no contract at all. Mistake exists where one or more of the parties are under a misapprehension in respect of: 

Identity of the other contracting party, or



in respect of the contents of the contract

If party labours under a misapprehension, then his will is not directed at the facts or obligations as expressed in the declaration of intention of entering into the contract. Mistake can be classified into:i. Unilateral Mistake

Unilateral mistake occurs when only one party is labouring under some misapprehension of the circumstances of the contract. The general rule is that, such a party cannot set aside the contract unless it can be shown that the mistake was reasonable, justifiable and of material fact.

26



MABHENA V BULAWAYO POLYTECHNIC COLLEGE

The applicant was admitted to a cookery course at Bulawayo Polytechnic College on the strength of a Zambian schooling certificate which gave her an equivalent of 3 O‘ Levels of which Bulawayo Polytechnic College wanted at least 5 O‘ Levels. The head of division, new to the

post, accepted the applicant by mistake. The Bulawayo Polytechnic College sought to dismiss her upon noticing the mistake. It was held that before a party can resign from a contract on the grounds of unilateral mistake, the mistake must be reasonable, justifiable and material. The Bulawayo Polytechnic College mistake was found to be none of the above.

ii. Common Mistake

This exists where both parties are in agreement but under the same misapprehension. In such a case, the contract becomes void and impossible e.g. contracts of sale where both parties believe the goods are in existence, but would have been stolen.

iii. Mutual Mistake

The parties would have negotiated at cross purposes. The offer made is not the one which is accepted e.g. A intended to sell his mini Cooper but B thinks the offer is for A‘s Lexus. There is no meeting of minds and the contract is void. Circumstances under which mistake will render a contr act void. 

If the mistake is of material fact and not of law



If the mistake is material



If the mistake is reasonable



If estoppels does not apply

d. Misrepresentation

27



It is a statement of fact which is incorrect and made by a party who initiates the contract. There are three types of misrepresentation. i.

Innocent misrepresentation

This is when a party to a contract believes, that what he or she will be saying on reasonable grounds but the representation turns out to be negative or untrue. It is a representation made without fault. ii.

Negligent misrepresentation

This is a false statement of a material fact which is made negligently with and with the intention or aim of inducing the contract e.g. a person makes a statement he believes to be true but does not act reasonably in believing so. The party which has been misled can claim damages on the delictual principle. iii.

Fraudulent misrepresentation

This occurs if a false statement of a material fact is made with the aim of inducing a contract. The statement is made with the awareness that it is false without regard of the truth or falseness of the statement. A party, who is induced to complete the contract that has been made fraudulently, may claim damages irrespective of his choice to uphold the contract.

DIBLEY v FURTER 1951, SA

The buyer of a farm sued the seller alleging that the seller had failed to disclose that the farm has a graveyard. It was held, the buyer could not seek relief but could rely on fraudulent misrepresentation by the seller because even though the farm could still be used for the purpose for which it was bought (the graveyard had been ploughed over), the buyer would not have bought the farm had he known about the graveyard. Restitution was granted. A seller sold a ―farm‖ some 4 acres [1.5 ha] on which there stood a dwelling house. A

substantial portion of the farm had been used as a graveyard in which over 80 people had been buried in the four years before the sale. With no intention to deceive, the owner had removed all external indications of the graves to allow him to cultivate the land. The seller did not disclose the existence of these graves. The court held that the buyer was entitled to cancel the contract and claim damages. 28



Non-disclosure of a material latent defect [in order to mislead a buyer and induce a sale] known to the seller is fraudulent misrepresentation.

Elements of misrepresentation

A person who relies on misrepresentation must the following:

The misrepresentation was one of law of fact and not opinion



The misrepresentation was material i.e. the misrepresentation must be such as to induce a reasonable person into a contract.



That it induced the contract



The representation was false



There must be the intention to deceive

N.B. The misrepresentation renders the contract voidable i.e. it can be set aside at the instance of the innocent party.

Remedies for Misrepresentation

There are two basic remedies which are: i.

Restitution or Rescission

When the party seeks rescission, the contract is being cancelled with retrospective effect. Once cancelled, parties must be returned to the status they had been before entering the contract. This remedy is also known as restitutio intergram. Restitution is a sine quo non i.e. a prerequisite of rescission. As a general rule the court may refuse rescission if restitution becomes impossible. HARPER v WEBSTER (1956)

The case involved the purchase of an infected heard of cattle. It was held that rescission should not be denied where restitution falls short but compensation of the shortfall can be made through the payment of money.

29



ii.

Damages

If the innocent party elects damages these are only available if the misrepresentation is negligent or fraudulent. A claim of damages resulting from misrepresentation is a claim in delict and not contractual. The measure for damages is designed to place the innocent party in a position he would have been if the misrepresentation had not been made. This was held in the case of POCKETS HOLDINGS v LOBELS HOLDINGS (1966). In the case of AUTORAMA v FARM EQUIPMENT AUCTIONS (1984) It was held that delictual damages are available for

negligent misrepresentation. N.B. the difference between delictual damages and contractual damages is that, a delictual wrong is a civil wrong which has both civil and criminal elements hence there are delictual damages. While contractual damages are only available for breach of a material term of the contract.

Breach of Contract

Breach occurs when a party to a contract does not perform the contract properly. Breach may result from. i.

Doing what one promised not to do. This is positive mal-performance.

ii.

Stipulating that one no longer wants to perform as agreed; this is repudiation.

iii.

Showing clearly that one will not perform when the time of performance is up; anticipatory breach

iv.

Late performance when the time of performance is given and important.

Remedies of Breach

When there is breach of contract the other party, who would not have breached the contract can seek contractual remedies; a. Specific Performance

This is to achieve what the parties intended to achieve or substantially similar results. This remedy will not be granted if it is impossible to achieve or if the demand will cause undue 30



hardship on the defaulting party, or if performance of a personal nature is required demanding skill or expertise from the defaulting party.

b. Cancellation of the contract

If the breach is serious the innocent party can regard the contract as cancelled and raise breach as a defence if sued on it.

c. Damages

The object of awarding a sum of money to the innocent party is to compensate him for the loss arising from breach. The innocent party must also do his best to minimise the loss arising from the breach.

d. Interdict

This is obtainable before breach. It is to prevent the other party from breaching the contract and is applied for in the courts of law.

CONTRACT OF SALE DEFINITION

It is a contract in which one person (the seller or vendor) promises to deliver a thing ( merx ) to another (the buyer), the latte agreeing to pay a certain price (pretium ). The contract of sale has the following important elements:-

a. Agreement

31



An agreement to sell is formed by an offer and acceptance and the general principles of the law of contract should apply to the contract e.g. the agreement should be lawful, made by people with capacity, etc.

b. The property (Merx)

Any corporeal or incorporeal (tangible or intangible) asset of some value is capable of being sold. The property should be properly defined without any vagueness (well defined) Sale of property which is no longer in existence is a void sale because of initial impossibility ( void abinitia )

c. The price (Pretium)

It should be fixed or capable of being ascertained. Ascertainment of price maybe made with reference to market rates. If it cannot be ascertained then the contract does not have a price and will not be enforced. The price in a contract of sale has to be in monetary terms and if not in monetary terms then it is barter trade and not a contract of sale. If the payment is partly money and partly goods then we establish which element is greater than the other. If money then sale, if goods then not sale

THINGS WHICH CANNOT BE SOLD a. Right to inheritance to a person who is still alive cannot be sold but a right to inheritance to a deceased person can be sold b. Stolen property and property belonging to third parties can be validly bought and sold. The reason is that in Zimbabwean law of purchase and sale the contract of sale is kept separate from the passing of ownership. The sale of stolen property is valid but the seller cannot pass ownership. This is because one cannot pass a greater right than one already has. This is the concept of nemo dat quad habet . The thief has no right to the property. Therefore the true owner has a right to recover goods from whomever maybe in their possession. This is known as the vindication right. Where the thing bought has been recovered by the true owner, the buyer can only recover the purchase price from the seller where he is still available. NB the buyer should not permanently surrender the goods, lest he surrenders to 32



another thief. The buyer should afford the seller a reasonable opportunity to come to his protection.

If a buyer purchases goods with the knowledge that they were stolen or where he ought to have known from surrounding circumstances that they were stolen, then he is an accomplice of the act and has no remedies

Goods without any value e.g. free air, sunlight etc cannot be sold

NB. Not only tangible things can be sold. Intangible goods, e.g. Goodwill, trademarks and patents can be sold. Not only existing goods can be sold. These are goods already in the possession of the seller. Non-existent or future goods capable of coming into existence maybe bought and sold e.g. a future harvest or catch of fish. This is a sale of hope known as res spei. Unascertained goods can also be sold. These are goods which need to be counted, weighed and measured to the buyer‘s specifications.

CONSEQUENCES OF A CONTRACT OF SALE

a. PASSING OF RISK

Risk refers to the issue of the one who bears the loss due to the accidental deterioration, damage or loss to the merx after the conclusion of the contract but before delivery. The issue of risk does not arise before the contract is concluded. It also does not arise after the delivery. Risk also entails the benefits accruing to the merx at the same time e.g. A buys a cow from B and there is an agreement on the cow to be bought and the price. If the cow gave birth before the delivery and payment of the purchase price, the calf will belong to the buyer.

The general rule is that risk passes to the buyer as soon as the contract is concluded or is perfecta. The rule has nothing to do with ownership. Exceptions to the general rule are as follows:33



i.

When the property is destroyed, it is normally its owner who bears the loss. It is also the owner who is entitled to any benefit or profit accruing to the merx

ii.

The parties are free to agree to the contrary i.e. Vary the general rule

iii.

Where the seller delays delivery, he is in mora if the loss would not have occurred had the delivery been in time.

iv.

Where the seller is negligent in the business sense

v.

Where the sale is one of unascertained goods, risk could only pass when the goods have been ascertained. There has been counting, measuring and weighing of the goods before the risk is passed

vi.

Where the contract is subject to a suspensive condition. This is because there is only a contractual relationship before the condition is satisfied. The obligations are suspended.

vii.

If the contract is void for one reason or the other. A void contract does not give rise to any obligations.

b. PASSING OF OWNERSHIP

Ownership is a bundle of rights which include among other things, the right to use the merx, the right to enjoyment, possession or the right to alienate the item. Ownership is a real right which can be claimed against the world. A person may have a right of ownership without possession of the item e.g. Leased property and conversely may have possession without ownership e.g. Stolen or third party property

POPPE, SCHUNOFFY & GUTTERY v MONSETHAL & Co (1879)

The plaintiffs sold brandy to the defendants but before the brandy was set aside for the buyer (defendant), the government imposed a new excise duty on brandy. The question was who should bear the cost of the new surcharge? It was held that the seller bore the risk because the goods had not yet been set aside for the buyer. In a sale for fungibles [goods which have to be taken away from a larger stock of identical items], risk passes to the buyer only when such goods have been appropriated or set aside and separately identified for the buyer. 34



REQUIREMENTS FOR PASSING OF OWNERSHIP

a. Ownership cannot pass by virtue of sale only; there must be in addition, a proper delivery of the gods purchased.

b. Assuming unconditional contracts under a cash sale, ownership is normally taken to have been intended to pass ownership once there has been in addition to delivery, payment of the purchase price, whereas in the case of a credit sale the fact that credit has been granted by the seller to the purchaser is a strong indication that ownership was intended to pass merely upon delivery. c. The merx must be capable of being owned, if not then ownership cannot be passed. The seller must intend to pass ownership whilst the buyer intends to receive ownership. d. The seller must be the owner. This is the doctrine of nemo dat quad habet which means that one cannot pass a greater right than one already has

DELIVERY

This is the giving of the bundle of rights known as ownership. There are a number of ways of delivery

a. Actual delivery

This is from hand to hand physical delivery also known as manu de manu.

b. Delivery with the long hand (Traditio Longa Manu)

This is delivery with the long hand. The goods maybe bulky to be moved or movement of such goods maybe for the time being prohibited. The seller merely points out the goods which shall be taken to belong to the buyer.

35



XAPA v NTSOKO (1919)

A son –in-law pointed out some cattle and identified them by their markings to his father-in-law which constituted marriage dowry (lobola/roora). The cattle had not been collected at the time. It was held that the pointing out of the cattle constituted delivery by the long hand (traditio longa manu) which a fictitious form of delivery especially appropriate where the item is bulky or heavy making actual delivery difficult. Further, the court said ―two genuinely contracting parties can adopt which form of delivery they please.‖ For this from of symbol ic delivery there must be:

An intention to adopt that from of delivery There must be pointing out in praesenti Placing the item at the disposal of the buyer Clear identification and ascertainment of the thing beyond any doubt and placing the merx at the disposal of the deliveree.

c. Delivery with the short hand (Traditio brevi Manu)

The buyer is already in possession of the merx he buys because of a previous transaction e.g. he had previously borrowed the merx. When he buys it, the seller doesn‘t need red elivery.

d. Symbolic delivery

The seller delivers something other than the goods. What is delivered here must give the buyer exclusive control to the gods e.g. keys of a house, bills of lading of goods still at sea etc

e. Attornment

Goods are delivered to a third party who acts as agent of the buyer e.g. an estate agent acting on behalf of a client searching for a house to buy. He can process all the documents

HEARN & CO V BLEIMAN (1950)

36



The plaintiff stored a certain machine of his with W. thereafter the plaintiff sold the machine to C Co which in turn U in terms of a hire purchase agreement. Meanwhile W had deliberately and clandestinely pledged the machine to the defendant. W was a director of the U Co and in that capacity signed a higher purchase agreement on its behalf. In a vindicatory action by the plaintiff, claiming delivery of the machine, a magistrate had granted absolution from the instance. The court allowed an appeal holding that on the above facts the plaintiff remains the owner of the machine.

f.

Constitutum possesorium

The seller keeps the goods on behalf of the buyer. The courts do not favour this type of delivery as it may tempt and lead to fraud.

g. Registration

Ownership in immovable property is passed by registration according to the Deeds Registry Act. The purchaser of a house who has paid cash without having the house registered in his name would not become the owner. There is need of specialist lawyers called conveyancers to facilitate the deeds transfer and registry.

DUTIES OF THE SELLER

This is what the seller is legally obliged to do and these duties do not arise out of the agreement with the buyer but out of law i.e. implied by law.

a. Duty to deliver the goods

The seller should deliver the goods by any of the methods discussed above. He seller who delays delivery will be in mora and risk may revert to him

GIBSON v PAYNE (1899)

37



The court held that a farmer who had sold his mealies stored in a barn was not, in the absence of the agreement or proof of the customer to the contrary bound to assist the purchaser in loading them, preparatory to taking them away because they would have already been at the disposal of the purchaser.

b. To keep the goods in safe custody until delivery

If the seller is negligent in the business sense, then he may become liable to the buyer. If the buyer delays taking the goods, then the seller will be liable only for willful acts of gross negligence.

c. Undisturbed possession of goods(vaccua possession)

The seller does not guarantee that he is the owner; he only guarantees that no one with a greater title will disturb the buyer. However, the buyer has the right to take legal action ( loci standi ), where his position is disturbed by those without any title.

d. Guarantee against latent defects

Latent defects are those which are not obvious to the naked eyes i.e. which are inherent. The buyer does not have to take a close examination of the product. Because latent defects are not obvious, the seller has a duty to guarantee the buyer against them. The seller does not have to guarantee against patent defects because they are obvious. However the duty would be excluded and will not apply if the sale is voets toots i.e. the merx is sold as it stands. However this fact has to be brought to the attention of the buyer

REMEDIES OF THE BUYER

Where the goods are defective, the buyer has some remedies at law. These remedies are only for latent defects

a. Rescission (Actio Redhibitoria) 38



In this remedy, the buyer returns the merx and gets his purchase price however the defect must be material and not trivial (petty or small). The buyer must prove that the defect is of such a nature as to make the merx unfit for the purpose for which it was bought. Also that if he had known of the defect he would not have bought the merx.

MARK LTD V LAUGHTON (1920)

The respondent was held to receive a sale of eggs already found to be unfit for human consumption and already destroyed by the local authority

If more than one merx is bought i.e. a major item and other accessories. A defect in the major item would entitle the buyer to action redhibitoria, whereas the defect in the accessory may not. If the items are bought as a unit, then a defect in one entitles rescission in the entire product or items

b. Actio Quanti Minoris

The buyer returns the merx and claims a reduction in the purchase price. The buyer may still want the merx anyway or he may no longer be in a position to return it. A remedy is the difference between the price paid for the good and the market value of the merx in its defective state.

Where the merx is found to be defective, the seller does not have a legal right to be asked to repair it. An exception is where the nature of the contract and goods would allow for such repair e.g. tailored clothes.

Where the buyer suffers damage to his own material as a result of the defective merx, this would amount to consequential losses and ordinarily the seller is not liable for such damages.

39



Exceptions to the remedy 

If the seller warrants that the good is free from defects, then his liability is based on the breach of warranty ( action empto)



If the seller knew of the existence of the defect and deliberately concealed it, there is fraud.



If the seller is a manufacturer or dealer who prophesies to have expert knowledge of the merx he is selling

NB Actio redhibitoria and action quanti minoris are known as aedilition remedies.

DUTIES OF THE BUYER

1. To pay the purchase price. 2. To accept delivery. When he delays acceptance then the seller‘s duty of care is reduced. 3. To reimburse the seller for all necessary expenses

SPECIAL TYPES OF SALE

Buyers of goods often request different suppliers to tender or to quote their conditions of sale for a particular product. The goods are described and specified in detail in order to be able to compare different quotations with each other. The suppliers involved are required to stipulate the details of their price, cash discounts, time periods and delivery requirements. The prospective purchaser who is not properly informed of the typical conditions which he may come across, will be unable to make good decisions and could possibly be contributing to large loopholes in his contracts and doing thoroughly bad business. Typical price quotations for inland transactions expressed in customary jargon are the f ollowing: 

loco price - this is the price of the goods at the supplier’s warehouse and does not include transport costs from there;



f.o.r (free on rail) - this price includes transport costs up to the nearest railway station to the seller ; costs of transport from the seller’s stat ion to the buyer‘s warehouse are for the

buyer; 

railage paid - this price includes transport costs up to the buyer’s nearest railway station ; any further transport costs to be for the buyer;



40

franco price - this price includes delivery to the buyer‘s warehouse. Chinhoyi University of Technology


Typical price quotations for overseas transactions: 

f.a.s. (free alongside ship) - price includes expenses up to the seller’s wharf , but not those of loading the goods on board ship;



f.o.b. (free on board) - price includes all charges to load goods on board ship at harbour of dispatch;



c and f (cost and freight) - the quoted price includes all costs up to purchaser’s wharf , but excludes insurance cover;



c.i.f. (costs, insurance and freight) - price includes all expenses and insurance cover up to buyer’s wharf .

Typical terms of payment offered by a supplier in a tender: 

c.w.o. (cash with order) – payment to be made at the time of placing order;



c.o.d. (cash on delivery) - payment to be made upon delivery of goods;



cash against invoice - payment to be made on presentation of invoice, whereafter delivery will follow;



30 days less 5% - payment conditions may be more than 30 days, but if payment is made within 30 days, a 5% discount will apply;



bills of 30, 60 or 90 days against invoice - the buyer has to accept a bill of exchange payable say 30 days (or alternative) after delivery of invoice;



credit - payment to be 30 or 60 or 90 days (as arranged) after statement of account.

LAW OF AGENCY

Christie(1985)1defines agency as where ―One person [the principal] employs another [the agent] to act for him and enter into contractual relationships binding between him and 3 rd parties‖. In general an agent has a duty to perform his mandate in person and cannot appoint a sub-agent

1

Christie, R.H. (1985),Business Law in Zimbabwe, Juta& Co.

41



to perform on his behalf unless the agreement allows this or it is implied or for acts of a purely formal/ministerial nature.

An agent is a person who has authority from another [the principal] to create contracts between his principal and a 3rd party/parties. A person who carries out the instructions of another may be an agent or an employee. Thus at times an employee may also be an agent. However an agent has authority to enter into contracts whereas an employee carries out his master's orders. In the case of delict, where an employer is sued for damages, then the test of control applies [as to the manner duties were carried out]. An agent thus has authority to enter into contracts but an employee carries out his employer‘s orders. An employee may however be an agent.

An agent may be employed to perform in a specific transaction [special agent] or for acts in a designated class [general agent].

IMPORTANCE OF AGENCY

a. Some people lack time/skill to negotiate or by their nature are incapable of negotiating and so engage an agent. b. An agent is appointed for convenience in commerce because the principal cannot be in many places at the same time. c. An agent is appointed when dealing with companies and other juristic persons. Acompany is said to be a fictitious person which can exist on its own and which can sue and be sued. However someone has to represent the company in such situations. d. Limited contractual capacity e.g. trustees acting on behalf of insolvents, guardian on behalf of minors, etc.

TYPES OF AGENTS

[1] Del Credere agent guarantees that the 3rd Party will pay under the contract. For this he charges an increased del credere commission. [2] Factor – an agent who sells goods delivered to him for a factorage commission. He must 42



have custody and control of the goods he sells. He has discretion to sell for cash/credit and to set the price. [3] Broker [Benoni Coal and Produce Co. v Gundelfinger, 1918.] A broker is a middleman/intermediary who negotiates between two parties. He does not have custody of the goods but he acts as agent for both buyer and seller. He must deal fairly with both and he gets a brokerage commission from both. [4] Stockbroker is a specialised broker, a member of the Stock Exchange who deals in shares, debentures or other securities of public companies. The stock exchange protects investors, channelling funds from the investing public. Members must be registered with ZSE. [5] Estate Agent is not an agent at all because he does not conclude a contract for the principal [some exceptions]. He receives instructions from prospective sellers of immovable property and tries to find a buyer whom he introduces to a seller. After getting instructions, an estate agent is not obliged to do anything at all but if he acts , he has a fiduciary duty. He is entitled to a commission if he concludes a sale with a willing/able buyer introduced by him – if he was the effective cause of the sale as when , by his salesmanship he persuades a reluctant buyer. If his mandate is terminated he is not entitled to commission arising from a subsequent introduction. As a standard practice the estate agent presents the seller and buyer with a contract of sale for signature. He also includes a clause obliging the seller to pay him his commission. Normally an estate agent bases his commission on a scale from the Estate Agent's Council unless agreed otherwise. [Estate Agent Act maintains standards of integrity and protects the public. It registers estate agents]. He is not reimbursed for expenses e.g. advertising, transport, entertainment of prospective buyers. This is so because he is not obliged to do anything. [6] Auctioneer. He is an agent of the seller for selling movable/immovable property by public auction. Seller may stipulate a reserve price and in that case the auctioneer should not sell below that. Otherwise the sale is without reserve. He has a lien for his commission over the proceeds of the property sold but not over the property itself if it is not sold e.g. if seller and buyer agree to cancel the sale.

Formation of Agency

Like other contracts, agency is created by agreement. However in many cases the agreement 43



may be tacit/implied. Moreover the contract may be retrospective through ratification. Express agreement is subject to the general rules of offer/acceptance in contracts. Agency may be created by conduct of the parties apart from estoppel: here agency exists; with estoppel no agency exists. One party‘s conducts es tops him from denying that one person is his agent. The

principal must have contractual capacity. However the agent is a mere conduit-pipe: he falls away once the principal and the 3 rd party agree. Thus an agent with no contractual capacity e.g. a minor can validly bring a principal into a binding relationship with 3rd parties. However the agent's contractual capacity will matter as follows: a. Between him and his principal. The principal cannot compel a minor to perform any mandate. b. Where the agent incurs personal liability e.g. if he warrants that he has authority when in fact he does not possess such.

For the principal there should be capacity to contract with the agent as well as capacity for that kind of contract. A principal can engage an agent for any act he himself can validly perform for himself except where personal performance is required expressly/impliedly or the law demands it [e.g. Marriages Act Sect 25 (3): No person shall, under this Act, be capable of contracting a valid marriage through any other person acting as his representative.].

Formalities are necessary only in special circumstances [e.g. where the parties so agree as for contracts in general] or where the law requires it for formal appointments:

Agency can be formed through the following ways: 

Express agreement

i.

Power of Attorney i.e. a written instrument which defines the authority conferred e.g. in order to institute legal action in the High Court; for transfer of land, registration of a mortgage bond etc. Such an instrument also assists the agent to prove to 3 rd parties that he has the requisite authority and in limiting the principal‘s liability. In informal

appointments a power of attorney may be desirable; affording the agent a means of assuring 3rd parties and for the principal in limiting the agent's authority. It follows two 44



types. 

General power of attorney: is where one is appointed to act on all acts the principal renders the agent to do or ―deem necessary.



Special power of attorney: is for specific purposes and expires once the mandate has been completed. It specifies where the agent‘s authority commences and ends.

Implied Authority by law



In certain circumstances in the absence of an agreement one person may have the authority to represent another. Implied authority is actual authority arising from the law or trade usage. For example, an employee has implied authority in respect of transactions which fall within his scope of employment. Bakeberg v Clothier : A wagon driver was instructed not to repair a broken wagon with Clothier but did so regardless. The owner was held liable for the cost of repairs

In Reed v Sager's Motors [Pvt] Ltd RLR 1969 it was held that, ―If a principal employs a servant or agent in a certain capacity, and it is generally recognised that servants or agents employed in that capacity have authority to do certain acts, then any of those acts performed by such servant or agent will bind the principal because they are within the scope of his 'apparent' authority‖.

It also arises without agreement but by the nature of one's office [ex officio]. No permission by the principal is necessary e.g. 

Guardian and minor. [Wood v Davies]



Trustee of an insolvent estate. Authority to bind the insolvent estate arises from the Insolvency Act.



45

Curator and lunatic. The court appoints the curator and it determines his authority





Authority implied by facts

Where there is no express authority to act for another, authority may be gathered from the behaviour of the parties. Thus at law it may be inferred from the conduct of the parties. KAROL v FIDEL (1948)

Karol allowed Fidel to negotiate for the sale of a hotel to a potential buyer and sought Fid el‘s presence at the final negotiations. On numerous occasions he had offered him various amounts of money. The inference was that Fidel was acting as Karol‘s agent although they had not agreed. It was held that in such situations Fidel was Karol‘s agent a lthough Karol did not want to

consider Fidel as his agent



Negotiorum Gestor [Administrator of Affairs]

The Negotiorum Gestor acts on his own accord without agreement/authority; express/implied

in order to benefit another e.g. when a man quenches a fire a t a neighbour‘s house. This is a salvage case. The action must arise from a situation of urgency and there is no time to communicate with the principal.

Because it does not arise from agreement, it is not a contract; the relationship is sometimes referred to as a ―quasi -contract‖. However the rights and duties of a gestor are similar to an agent. He is however reimbursed for expenses only, no remuneration is paid. He must conclude what he has started and not leave an unfinished job and thus cause prejudice. He must render an account. He must exercise care in carrying out his mandate as a prudent man would do in the circumstances.



Agency By Estoppel (Ostensible and apparent authority)

Where a person by his conduct, expressly/impliedly represents that a certain state of affairs exists, and so leads another person acting as a reasonable man, to be prejudiced; that person is prevented/precluded from denying such state of affairs. Thus if a principal, through his conduct represents another to have authority to act on his behalf, he is estopped from denying 46



such representation – he grants such person authority to act on his behalf. His representation has misled the other as a reasonable person. The manager of a general dealership has ostensible authority to buy on credit unless public notice is given limiting such authority.

KHAN V LESLIE & SON 1928

The manager of a general dealership has implied authority to buy goods on credit and bind his principal unless the seller knew that only cash purchases were permitted. Both representation by the principal and reliance to one's detriment are necessary.

FAURE V LOUW.

For years a father allowed his son to manage his affairs, draw cheques, promissory notes etc. However there was no specific authority with the bank on this. Through the years the father never registered any objections. On one occasion, the son endorsed a promissory note and misappropriated the funds. The father raised as defence that his son lacked authority. The court held that the father‘s conduc t had established authority and he was estopped.

Ostensible and apparent authority are synonymous. A delivery agent normally has no authority to receive payments unless held out. This authority may arise from a course of dealings.

WATTEAU V FENWICK & CO (1893) QB

F bought a hotel and retained the seller as his manager. The licence continued to be held in the name of the seller [now the manager] and was displayed at the door. W supplied cigars to the manager on credit believing him to be the owner never having heard of the company. The manager was however forbidden from buying cigars on credit. Upon discovering the new owners of the hotel the seller sued for payment. The court ruled in favour of Watteau.

Requirements for estoppel: 47





Representations by one party through words or actions/conduct or even inaction that a certain state of affairs exists.



Such representation was of such a nature as to mislead a reasonable person who developed reliance on that representation.



The person who holds that reasonable reliance acted on the faith of that representation or was induced by it.



Actual or potential prejudice was created and suffered by the party relying on it. The prejudice must have resulted from the reliance.

When these requirements occur the party responsible for them will not be allowed to deny their truth. He is precluded from denying that a contract was created. Thus estoppel is a form of defence.

PIETERS & CO v SALOMON (1911)

Mr Burger, a businessman owed Mr. Salomon some money. Pieters& Co then

bought

the

Burgers business and contracted with Salomon to pay what Burger owed. Salomon knew the amount but Pieters& Co thought it was much smaller. The court decided that they must pay the full amount because they had led Salomon to believe that they would do so.

―When a man makes an offer in plain and unambiguous language, which is understood in its

ordinary sense by the person to whom it is addressed, and accepted by him bona fide in that sense, then there is a concluded contract. Any unexpressed reservations hidden in the mind of the promissor are in the circumstances irrelevant. He cannot be heard to say that he meant his promise to be subject to a condition which he omitted to mention, and of which the other party was unaware‖.



48

Agency By Ratification.



Here a person professes to act as an agent for another but lacks authority. This act can be ratified in retrospect as if it had been authorised from the beginning provided: 

The person doing the act professed to act as agent. He must actually hold out to the 3rd party that he acts on behalf of the other.



He must have had a particular principal in mind. He cannot hawk the act.



The act must be capable of ratification thus excluding formal acts which require a power of attorney or those which are illegal, immoral or are contrary to public policy.



The principal must have contractual capacity.

Even where the transaction was tainted with the agent's breach of authority, ratification validates the act. But it must have been performed expressly for the principal. The performer cannot hawk it around. Ratification must be for the whole contract. You cannot ―blow hot and cold‖. Ratification puts all parties as if the act had been performed properly in the first place.

A person non-existent at the time of the contract cannot subsequently ratify it. This is illustrated in the English case Kelner v Baxter, 1866 KELNER v BAXTER, 1866

Promoters of a company yet to be formed [Gravesend Royal Alexandra Hotel Co. Ltd] entered into a contract on its behalf. The company on its formation ratified the contract. It later failed to pay its debts and it was liquidated. The court held that the ratification was inoperative because the company was non-existent when the contract was concluded on the principle that an agent without authority attracts personal liability to the 3rd party. This English case expresses our own law but the Companies Act allows ratification of such contracts.

Only the person for whom the agent acted can ratify. This must be done with full knowledge of the facts; the whole transaction must be ratified. Ratification may be express or implied.

Duties of Agent. 49



a. Performance of mandate

The agent has a duty to perform his mandate to the best of his ability within reasonable time or he will be liable for damages for non-performance – except if he makes a proper renunciation without causing prejudice to the principal. DENY v ELVY (1965) The agent breached the duty by selling the principal‘s property for less than the normal

minimum selling price. He was held liable. b. Duty of Utmost Good faith

ROBINSON V RANDFONTEIN ESTATES GOLD MINING CO. LTD, 1921.

The company wanted to acquire certain land but negotiations with the owner broke down. Robinson, [Chairman and Director of Randfontein] purchased the land for R120 000 for his own benefit. He then sold this property to the company for R550 000 making a profit in the process. Clearly he was benefiting in circumstance where his interests were in conflict with the company. He was ordered to pay the profit to the company. He had a duty to buy the property for the company not for himself. The director's position is similar to that of guardian/minor or solicitor/client. In such a case the company does not have to prove that it suffered any loss.

c.

Duty not to make secret profits

The agent should not make any profits beyond the commission or remuneration paid by the principal. An agent is accountable to his principal for any profit he makes without the principal‘s

consent out of 

Any property which he has been entrusted by his principal



A position of authority to which he has been appointed by the principal



Any information or knowledge which he has been employed by his principal to collect or deliver or which he otherwise discovered or acquired for the se of his principal.

TRANSVAAL COLD STORAGE CO. LTD V PALMER (1904)

50



P represented the company in Durban

but was not required to devote all his time to the

company‘s business. He landed a meat contract for Imperial Cold Storage Co. and made a

profit. This involved no loss whatsoever for his principal, TCS. Nevertheless, it was held that he had to account for the profits to his principal.

d. Duty not to delegate authority

The relationship between the principal and the agent being a personal one, the agent cannot employ another to do it for him except in the ordinary way of business e.g. employing clerks and assistants. Delegation may take place in case of necessity or where it is sanctioned by the principal.

e. Duty not to disclose information

The agent should not disclose confidential information or documents entrusted to him by the principal. This is part of the agent‘s general duty of good faith. During the agency, the agent must not act against the principal‘s interest.

L. S. HARRIS TRUSTESS v POWERPACKING SERVICES (1970)

A fire broke out in a warehouse of the defendant. They instructed the plaintiff to act for them in preparing the claim for insurance under the fire insurance system. The defendants gave H, the director of the plaintiff‘s confidential information and allowed him to vi sit one of their customers

whose books were burnt but forbade him to disclose certain information relating to their defendants. H disclosed confidential information to their customers. The defendant terminated their contracts with the plaintiff and claimed damages. It was held that were entitled to breach the contract and a claim for damages.

f.

Duty to exercise due diligence

The agent should exercise care such as expected from a reasonably prudent man in the circumstances. If he is employed to sell it is his duty to obtain the best price reasonably obtainable and his duty ends when he has procured an offer which has been unconditionally accepted

51



KEPPEL v WHEELER (1927)

It was held that the agent (Wheeler) had committed a breach of duty towards the principal in not communicating the third party‘s offer and was liable to pay the principal the difference between

the two offers. He had presented an offer with a lower price and not the higher one. CHAUDRY v PRABHAKAR (1988)

The plaintiff asked the defendant, her friend, to find her a suitable second hand car. She specified that the car should not have been involved in an accident. The defendant found the car and recommended that the plaintiff should buy it, which she did. The car broke down soon afterwards. It was held that she failed to exercise due diligence, so she was liable to the principal.

g.

Duty to account to the Principal

The agent must give a full account of information for all which he has done in carrying out his mandate. He should keep proper accounts and also keep his property and money separately. If he cannot prove what is his, it is presumed that it belongs to the principal. All property received for the principal must be delivered, unless he holds a lien [right to hold and retain property pending satisfaction of a claim] on it. The principal has a right to inspect the records. Remedies to the principal

If the agent breaches any of the above duties the following remedies are implied 

Claiming for damages: - These are damages for breach of contract the principal seeks to be placed in a position he would have enjoyed if the agent had not breached his duties.



Cancelling the contract: - The agent may have his contract cancelled by the principal with or without a claim for damages.



Claiming for profit:- where the agent has made some secret profits the principal may claim that the secret profit be delivered to him.

Duties of the Principal a. Payment of Remuneration

The principal has the duty to pay the agent the commission or other remuneration agreed. The amount of the commission and the terms under which it is payable depends entirely out of the terms of the contract between the parties. There is no general rule for the liabilities of the 52



principal or by which the right of agent to a commission under the contract are to be determined. However the agent can claim commission 

When the agent claims that he has earned the right to claim the commission i.e. that event has happened for which he can be paid.



Once the event has happened and it can be shown that the agent was in fact the cause of it.

b. To Indemnify the Agent

For all acts lawfully done and liabilities incurred in the execution of his authority, the agent should be indemnified or reimbursed. The agent may incur some expenses e.g. buying fuel for a vehicle to travel on the principal‘s business. The agent should be indemnified for these expenses.

CHRISTOFORIDES v TERRY (1924)

C employed X as a broker, to make speculative purchases of cotton for him. He became heavily indebted to X owing to the fall in prices of cotton in the market. X, as he was entitled to do, closed the account by selling the cotton for which he had bought for C. X was personally liable on the contract and the sale of the cotton resulted in a loss. It was held that the principal was liable since the purchases were based on speculation.

DAVISON v FERNANDES (1889)

F asked D, his stockbroker, the price of some stock ex-dividend. D quoted the price cumdividend and negligently omitted to tell F. F thinking the price was ex-dividend authorised D to sell. D sold and in due course, under the rules of the London stock Exchange had to pay the dividend to the purchaser. It was held that D was not supposed to be indemnified.

Remedies to the Agent 

53

For non-payment Chinhoyi University of Technology


He can cancel the contract and claim damages. He can also stand by the contract and claim specific performance, which also amounts to payment. 

For reimbursement and indemnification

The agent may seek damages or specific performance and may also cancel the contract

Termination of Agency a. By Act of the Parties

The contract can be terminated by mutual agreement between the parties but the authority of the agent can be revoked by the authority of the principal without any damages to the agent. On revocation by the principal, the agent must deliver any property in his possession which the principal had entrusted to him in relation to the contract.

When the principal has revoked his authority and does not notify third parties attached to the agent in the contract, the principal is bound by the contracts entered into by the agent without his authority by the estoppel doctrine.

BULAWAYO MARKET COMPANY v BULAWAYO CLUB (1904) The club failed to notify its supplier that its agent‘s authority to buy on credit had been revoked.

The agent went on to buy on credit from the supplier. The supplier sued the club for the money. The club wanted to argue that the agent‘s authority had been revoked. It was hel that the club

had to pay because it had not notified the supplier of the revocation hence the supplier believed the agent to have authority.

54



The agent may revoke his authority at any time provided he does so on just grounds e.g. deadly enemities, bad health etc. In the absence of such just cause, the agent will be liable to the principal.

b. Operation of the Law

The contract of agency terminates on 





Completion of mandate Expiry of fixed time Destruction of subject matter



Mandate becomes physically impossible of execution



Death, insolvency or insanity of principal/agent.

There is no need of notification to third parties if termination is by operation of law. DREW v NUNN (1879)

A wife was given authority by her husband to buy goods from D. The husband became disordered mentally but the wife continued to buy from D who did not know of the disorder. It was held that the husband was liable to pay.

LAW OF LEASE

DEFINITION

A lease is an agreement between a lessor and a lessee whereby the lessor (also called the landlord) allows the lessee to have temporary use and enjoyment of a property in return for which the lessee (also called the tenant) pays the lessor rent.

This definition applies to leases with respect to movables and immovable property. In this course, the contents will focus on leases of immovable property. 55



ESSENTIALS OF A LEASE CONTRACT

For a contract of lease to be valid there are three essential terms about which agreement must be reached: 

There must be agreement by the parties concerned to let and hire specified property;



There must be agreement on the period for letting the property;



There must be agreement on the rent to be paid.

PERIOD OF THE LEASE

A short lease is for a period of less than 10 years and need not be in writing (even in the case of immovable property). A long lease is for a period of not less than ten years and must be in writing. Included in the category of long leases is a lease for the natural life of the lessee or of any other person referred to in the lease and a lease which is renewable indefinitely at the choice of the lessee as well as a lease which is renewable for periods which, together with the first period of the lease, amount to ten years or more.

The parties to the lease agreement need not agree on a fixed lease period. A lease may be for an undetermined period (in case of which termination may be brought about by reasonable notice of termination). In the absence of an express provision for a fixed lease period, the periodic payment of rent (i.e. weekly, monthly, annually) may bear evidence to the fact that the parties had intended the lease to be a periodic lease.

RENT

As is the case with the other essential terms of a lease, a lease only becomes binding once a fixed rental amount has been agreed upon. Rent must be paid in money; however, in the case of farmland it can be agreed that a certain quantity of produce (e.g. crops) produced on the leased property will form the rental or part of the rental 56



Rent need not be market related and may be determined by a third party. Especially in the case of business and industrial premises, a fixed formula (e.g. $20/sqm) or a percentage of turnover agreed on by the parties mostly determines the rental.

Unless otherwise agreed between the parties, periodic rent is payable at the end of each period.

If the tenant fails to pay rent as and when agreed to, the landlord may demand payment of arrears and serve notice of termination in the event of payment not being made in a reasonable time.

The law awards a landlord very special protection for the recovery of arrear rent, in view of the very special risk a landlord often runs that a tenant may disappear with all his belongings over night without paying his rent. The landlord enjoys a tacit hypothec (tacit, as it need not be expressly agreed; the hypothec applies by virtue of the operation of the law). The hypothec extends over movables that are on the leased premises. The hypothec allows the landlord to attach movable goods of the tenant without warning in advance. Once goods are removed from the leased premises, they are free of the hypothec. However, the landlord has a limited right of recovering his rights to the goods if he can find them while still in transit - it is called a right of quick pursuit. After transit is complete, the hypothec o ver the goods is lost.

While the goods are on the leased property the landlord whose tenant is in arrear with his rent may interdict the tenant or if the goods belong to others, must be on the property permanently with express or implied consent. The rule concerning hire purchase goods is that they are subject to the landlord‘s hypothec while on the premises, unless the seller makes it clear to the

landlord that he does not consent.

57



If the lessee is prevented from using the property as a result of an exceptional, unforeseen and uncontrollable event, such as a natural disaster like a flood, fire, riot, war or act of state, he is relieved of his duty to pay the rent as from the date on which the event took place.

Bayley v Harwood 1954 (3) SA 498 (A) 2

Bayley hired from H, from 1 May 1950 to 31 December 1951, certain premises for the purpose of conducting a health and pleasure resort. H undertook to transfer the trading licenses in respect of the premises and duly did so. In February 195 1, after Bayley had been in occupation for several months, the licensing board refused to renew the licenses unless substantial structural alterations and additions as required in terms of by-laws promulgated during that month were made. H refused to carry them out. B faced prosecution in the face of non-compliance with the new by-laws and vacated the premises tendering rent up to the date of vacation. H sued for rent in respect of a period after this date but this action failed. The court held that B had been prevented by the by-laws from using the leased premises and ordered remission of rent from the date on which B had vacated the premises.

If he is partially deprived of his use and enjoyment by the occurrence in question he may claim a partial remission in the rent proportionate to the extent of his deprivation.

RENEWAL OF A LEASE

RENEWAL BY AGREEMENT

A lease may be renewed by agreement between the parties, i.e. expressly or tacitly. A renewal by express agreement often takes place by the election of the tenant to exercise an option to renew. When it is renewed expressly, it is by verbal or written agreement between the parties.

2

Bayley v Harwood 1954 (3) SA 498 (A)

58



TACIT RENEWAL

Tacit renewal of a lease takes place when the lessee remains in occupation of the property and continues to pay the rent and the landlord has no objection and accepts the rent.

RENEWAL DURING CURRENCY OF LEASE

Some lease agreements contain a clause which enables the lessee to renew the lease before it expires (by exercising an option to this effect – i.e., the landlord cannot force the tenant to renew, but may not offer the lease to a new tenant before the offer to renew is refused by the present tenant). In this case the lessee renews in terms of an offer which only remains current during the currency of the main agreement. Therefore, the lessee must exercise his option within the time limit stipulated, i.e. before the lease expires.

When a contract of lease is concluded, certain rights and duties bind the lessor and lessee. The duties of a lessor may be summarised as follows:

DUTIES OF A LESSOR

When a contract of lease is concluded, certain rights and duties bind the lessor and lessee. The duties of a lessor may be summarised as follows: a. The lessor must give the lessee occupation of the property on the date stipulated in the contract and must allow him to remain in occupation of the property for the full lease period. b. The lessor must deliver the property in the condition agreed on in the lease.

c. If the lessor enters into a lease agreement whereby the lessee rents the premises for a specific purpose (e.g. the lessee intends using the premises as a restaurant), the lessor must ensure that the premises comply with the necessary requirements enabling the

59



lessee to use the premises for the specific purpose for which they were let. However, in practise the lessor usually contracts out of this obligation. d. The lessor must pay the rates and taxes on the property let. e. The lessor must maintain the premises and keep the property in a fit condition for the lessee‘s use and enjoyment.

These obligations are naturalia of the contract, are not peremptory, but regulatory and therefore may be deviated from by agreement between the parties. The same holds for the other rights and duties set our below.

REMEDIES FOR BREACH OF LESSOR’S DUTIES

a. Damages b. Cancelling the contract c. Specific performance d. Tacit Hypothec DUTIES OF THE LESSEE

The duties of a lessee may be set out as follows: a. The lessee must pay the agreed rental on the date and at the place stipulated in the lease agreement. b. The lessee is not permitted to use the leased premises for any other purpose than for which they were let (e.g. a lessee who rents a house for residential purposes may not use the premises to run a business). c. The lessee is responsible for replacing any damage to the premises if the damage was caused by himself or anyone else for whose acts he is responsible e.g. members of his family. d. The lessee can make improvements to the leased premises to enhance his use and enjoyment of them (e.g. lay new carpets) but he is not entitled to make any major structural alterations without f irst obtaining the lessor‘s permission.

60



e. The lessee must use the leased premises in a reasonable manner and when the lease terminates must restore the premises to the lessor in the same condition as he received them, with allowances for normal wear and tear.

REMEDIES FOR BREACH OF LESSEE’S DUTIES

a. If the property is returned damaged the landlord may claim damages for breach of contract b. If the tenant fails to return the property at the end of the lease the landlord may eject him by the due process of law for the tenant is in unlawful possession of the premises.

RIGHTS OF A LESSOR

The rights of a lessor are the following: a. The lessor has the right to be paid rent on a date and at a place stipulated in the lease agreement. If the lessee fails to pay the rent, the lessor can sue him. b. The landlord has a tacit hypothec over movable property brought onto the leased premises by the tenant for rent that is due and has not been paid. The landlord can attach the movable property and sell it to recover the unpaid rental. c. If the lease contains a forfeiture clause, failure by the lessee to pay the rent on due date allows the lessor to cancel the lease forthwith. d. The lessor can rent premises to more than one lessee, in which case the joint tenants may be jointly and severally liable for the rent. In the case of joint and several liabilities for rent, if one of the joint tenants fails to pay his share of the rent, the lessor may claim the full rental amount from the other tenant. The latter will, upon such payment, have a right of recourse against the joint lessee for a pro-rata share of the rent.

THE RIGHTS OF A LESSEE

The rights of a lessee (tenant) may be enumerated as follows: 61



a. The lessee has the right to use and enjoy the premises let for the duration of the lease period. b. The lessee has the right to expect the lessor to keep the premises in good repair and to have rates and taxes on the property paid by the lessor. c. The lessee may sub-let the property (unless this is expressly forbidden in terms of the lease agreement) but then the lessee, and not the sub-tenant, still remains responsible for paying rent to the lessor as the sub-lease does not discharge the relationship between the lessor and the lessee. All sorts of convenience arrangements between a lessee and his sub-tenant (for payment into a particular account, etc) may obscure this proposition of the law.

MAINTENANCE OF THE PROPERTY LET

The following legal rules apply to the question of who has to maintain the property let, unless the parties agree otherwise:

a. The lessor must maintain the leased premises and must repair any major defects that interfere with the lessee‘s use of the property.

b. If the lessee advises the lessor of a major defect (e.g. a leaking roof) and the lessor fails to effect the necessary repairs, the lessee may have the repairs done himself and deduct the costs of these repairs from the rental. c. When effecting repairs the lessor cannot ask the lessee to vacate the pr unless it is impossible for the repairs to be effected while the lessee occupation. d. If major defects are present in the property which makes the premises unfit purpose for which they were let, the lessee has the right to cancel the lease.

IMPROVEMENTS

Where the tenant has made some improvements to the leased property, he may remove useful improvements and not improvements which were necessary to protect the premises from 62



destruction. Necessary improvements would include fro example pillars created to prevent the building from collapsing whilst useful improvements may be those made in order to make the place luxurious of sumptuous.

SUBLETTING

In a sublet lease a tenant is still a tenant to his landlord under the original contract but decides to sublet to someone else. To the sub-tenant the tenant will be landlord. If the sub-tenant misuses the property, the original landlord cannot sue him for breach of contract because there is no contract between them.

For a tenant to sublet the premises to someone else the general rule under common law is that the tenant is not supposed to seek consent of the landlord in an urban promise but a rural premise. This may however be expressly varied by the parties to a lease.

ASSIGNMENT

In assignment the tenant drops out of the picture and gives his rights to a third party who now becomes the tenant of the first landlord. Thus a new contract between the 1 st landlord and the new tenant comes into effect. This is in effect novation. The initial tenant should inform the landlord of these changes.

HUUR GAAT VOOR KOOP (HIRE GOES BEFORE SALE)

BUYER STEPS INTO THE SHOES OF THE LESSOR The ―Huur gaat voor koop‖ maxim or rule means that a purchaser of property subject to a lease,

is bound to recognise the lease granted by the seller. The new purchaser as it were, steps into the shoes of the lessor and is bound by all the material terms of the existing lease.

63



PURPOSE OF THE RULE The purpose behind the huur gaat voor koop rule is to protect the tenant‘s rights in case the

landlord decides to sell the property let before the lease expires. In order to be fair to buyers of immovable property (who may or may not be aware of the lease with which the property is encumbered), the huur gaat voor koop rule only applies in the favour of the tenant.

a) Short lease

The lessee must be in occupation of the premises; if he is not in occupation at the time, the buyer has to be informed before concluding the sale, otherwise the lease will enjoy no protection against the new owner‘s right of occupation.

b) Long lease

The lessee can remain in occupation for the full duration of the lease if it is registered against the Title Deeds of the property. The buyer is also bound by the terms of such a lease even if the tenant is not in occupation and even if the seller fails to inform him -because the buyer will be alerted to the existence of the lease by the lease‘s registration against the title deeds; for this

purpose the buyer is under a duty to make sure before he concludes the purchase.

c) Lease agreement of longer than ten years

In the case of such a lease contract which is not registered and of which the buyer was not informed before buying, the following applies: if the tenant is in occupation of the premises at the time the property is bought, the lessee has the right (as against the new owner) to continue the lease (and also has to continue paying the rent) until the first ten years thereof expires. After ten years, the lease expires and the new owner may evict.

d) The buyer has knowledge

64



If the purchaser knew of the long lease before he bought the property, the lessee is entitled to remain in occupation for the full duration of the lease. RENT REGULATIONS

These try to protect the tenants from being overcharged and also from unnecessary evictions. The relevant minister is empowered to pass such regulations which control the amount of rant payable for certain premises. Thus where the regulations apply, the landlord is prohibited to fix an amount higher than that stipulated by the regulations. The Rent Board is a special court sitting in the Civil Magistrate Court whose purpose is to resolve disputes between landlords and tenants with regard to the amount payable for rent TERMINATION OF A LEASE

A lease terminates in any of the following ways: a. Notice by the lessor or lessee. b. Effluxion of time (when the agreed period of the lease expires). c. Merger (when the lessee purchases the property which he is renting). d. Mutual consent. e. Destruction of the premises. If the leased premises are destroyed through no fault of the tenant, then the lease terminates. However, if the lessee, due either to negligence or a wilful act causes the destruction, then he is liable for payment of the rent for the remainder of the lease period as well as damages suffered by the lessor. f.

Unless stipulated in the lease agreement, the lease does not automatically terminate if the lessor or lessee dies.

g. If the lessee goes insolvent the trustee of the insolent estate can decide to continue with the lease. If the trustee decides to do so, he must advise the lessor within three months of the lessee‘s insolvency that the lease will continue.

h. If premises are leased by a partnership, the lease does not automatically terminate if the partnership is dissolved.

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