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Home / Articles / Legal / Law of Contracts – Part 18

Law of Contracts – Part 18

Enforcing Your Contract: Homework – What To Do Before You Go Ahead. By Adv Louis Nel.

SUMMARY

In Part 1 (August 2014), I categorised risk into five categories, namely; 1. PEOPLE, 2. MONEY, 3. LAW, 4. SERVICE and 5. ECOLOGY. In this series, I deal with the risk profile of each, i.e. broadly speaking the areas of risk that any business is exposed to can been allocated under these five categories.
Part 2, (September 2014) covered the category of ‘People’ under four sub-categories: Staff (discussed in Part 1); Third party service providers (‘TPSP’); and Business Associates.
Part 3 (October 2014), continued with ‘PEOPLE’ as Customers.
Part 4 (November 2014), started the discussion on the 2nd category, namely ‘MONEY’ in terms of CASH and CHEQUES.
Part 5 (December 2014), looked at CREDIT and CREDIT CARDS.
Part 6 (January 2015), looked at LAW and CONTRACTS, with an introduction and Requisite #1: Offer & Acceptance.
Part 7 (February 2015), continued with Requisite #1 covering telephone enquiries, e-mails, websites and advertising.
Part 8 (March 2015), covered Requisites #2: Legally Binding Obligation, and #3: Consensus in contracts.
Part 9 (April 2015), covered Requisite #4: Performance Must Be Possible.
Part 10 (May 2015), covered Requisites #5 & 6: Performance Must Be Permissible, and Capacity of the Contracting Parties.
Part 11 (June 2015), continued with Requisites #6: Capacity of the Contracting Parties.
Part 12 (July 2015), covered Requisite #7” Negotiating a Contract.
Part 13 (Aug 2015), covered Requisite #8 Drafting a Contract.
Part 14 (Oct 2015), covered Requisite #9 Contract Management.
Part 15 (Nov 2015), covered Requisite #10 Enforcing Your Contract – Part 1.
Part 16 (DEC 2015), Requisite #10 Enforcing a Contract (continued-1)
Part 17 (JAN 2016), Requisite #10 Enforcing a Contract (continued-2)

Part 18 – HAVE THE REQUISITES BEEN MET (continued-3)

Leading on from Part 17 in this series, the fifth question to be asked is whether performance must be permissible– we’ve discussed it in some detail in Parts 16 & 17 but let’s revisit some of the key elements and some new ones.

What does “performance must be permissible” mean? It means that the performance envisaged by the parties and provided for in the agreement must be permissible in terms of the current legal regime.

The legal regime entails not only the laws that appear on the statute books, be that national legislation issued by parliament, provincial and local government, but also common law and the custom and norms of society. These comprise the following, which in the case of South Africa being such a heterogeneous society, makes it very interesting but at the same time complex for lawyers:

• Common law −  that is the original legal principles brought here by the Dutch (i.e. Roman-Dutch law) and English settlers.

• Originally it means the customs and norms of the society established by such people i.e. CUSTOM: ‘the established pattern of behavior that can be objectively verified within a particular social setting’and NORMS: ‘…are cultural products (including values, customs, and traditions), which represent individuals’ basic knowledge of what others do and think that they should do …. norms are regarded to exist as collective representations of acceptable group conduct as well as individual perceptions of particular group conduct. (Wikipedia.org)

• However of late parliament and the courts have taken cognizance of Customary Law of the people who were and are indigenous to this country (i.e. before the arrival of the settlers) which is unwritten; passed on orally from generation to generation’; strongly tied to culture, tradition and the tribe.
Under the Constitution, Roman-Dutch and customary/indigenous law are now treated as equal. However if the customary law is in conflict with the Constitution, then the court has to apply the Constitution and the Bill of Rights. The courts are required to apply customary law. Where it may be in conflict with the Constitution, they should develop it in line with the Bill of Rights before finding it unconstitutional. For example in the Shilubane case, where a community wanted a woman to be Chief, the Constitutional Court acknowledged the development of custom of that community and developed the customary law in line with the practices of the community and the requirements of the Constitution.
Customary law is used in chief’s or headman’s courts, but these can only deal with certain cases between people who are part of the culture. Also, there may be cases that are excluded, for example, where they affect the status of women and the return of lobola. The representation of women as litigants and as “judges” in these courts is also an issue that the state is considering.
(www.Paralegaladvice.org)

All businesses are waging an ongoing battle with the collection of monies due to them and bad debts. They stick to the letter of the law, but get nowhere: summonses cannot be served; judgments cannot be executed, etc. As a result “debt collectors” (the “baseball bat and hard hat brigade”) has been resorted to by many a legitimate business.

The “contractual” terms of these ‘gentlemen’ may vary from simply requiring the debt collector to collect the amount outstanding for a fee to a requirement that 50% of the debt be paid up front as a deposit. If the creditor wishes to enforce any term of this “contract” e.g. to have his deposit returned because the debt has not been collected, he will not be able to do so. This is because “contracts” of this nature is contra bonos mores i.e. against the goods norms and morals of society. You are not allowed to take the law into your own hands. Accordingly the “contract” will null and void and no rights or liabilities will flow from it. The instructing party has no right to enforce! I have over the years had to assist two aggrieved parties with such contracts and unfortunately had to be the bearer of bad tidings!

Likewise a bribery agreement is void per se (Extel Industrial vs Crown Mills – 1999 SCA) and therefore unenforceable, although strange enough in certain international regimes (e.g. Germany until recently), it is not only legal but tax deductible!

An agreement designed to mislead creditors (e.g. a marriage of convenience in this case) is immoral and against public policy and thus void ab initio (Maseko v Maseko – 1992 W). As the saying goes (especially in the tax regime), the body adjudicating will look at substance over form.

Disclaimer: This article is intended to provide a brief overview of legal matters pertaining to the travel and tourism industry and is not intended as legal advice. © Adv Louis Nel, ‘Louis The Lawyer’, May2016.