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Law of Contracts – Part 21

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

SUMMARY

  • In Part 1 (Aug 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, (Sep 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 (Oct 2014), continued with ‘PEOPLE’ as Customers.
  • Part 4 (Nov 2014), started the discussion on the 2nd category, namely ‘MONEY’ in terms of CASH and CHEQUES.
  • Part 5 (Dec 2014), looked at CREDIT and CREDIT CARDS.
  • Part 6 (Jan 2015), looked at LAW and CONTRACTS, with an introduction and Requisite #1: Offer & Acceptance.
  • Part 7 (Feb 2015), continued with Requisite #1 covering telephone enquiries, e-mails, websites and advertising.
  • Part 8 (Mar 2015), covered Requisites #2: Legally Binding Obligation, and #3: Consensus in contracts.
  • Part 9 (Apr 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 (Jun 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 Your Contract: Requisites (continued-1)
  • Part 17 (Jan 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-2)
  • Part 18 (May 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-3)
  • Part 19 (Jun 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-4).
  • Part 20 (Jul 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-5).

PART 21

HAVE THE REQUISITES BEEN MET? (continued-6)

Leading on from Part 20 in this series, the eighth and final question regarding requisites is whether the document has met the requirement that the Obligations must be certain or ascertainable (i.e. the 8th requisite for a binding contract).

It is a requirement that the performance must be determined in or determinable (certain or ascertainable) from the contract. This means that the product or service to emanate from the contract must be specifically described in the contract or there must be in the contract a clearly worded formula from which the product or service can be determined.

If the contract is so poorly worded that the performance is not, or cannot, be determined with any degree of certainty, then the agreement will be declared to be “void for vagueness” and will be of no force or effect.

As stated above, the agreement can therefore either describe specifically what the performance is to be (e.g. the customer will fly from Johannesburg to Cape Town on SAA; the price will be increased by 10% annually) or the agreement can provide a formula (e.g. the customer will fly from Johannesburg to Cape Town on the cheapest available flight or the price will be increased in line with the Consumer Price Index (CPI).

I have found this aspect is often overlooked in property leases with reference to the square meterage and bank rates on interest (which bank?).

Take note also of the following interesting extracts from case law: ‘A mistaken motive, even if common, cannot invalidate a contract, unless the motive is expressly made part of the contract or a misrepresentation is present’ (van Reenen Steel vs Smith).

The following wording was also held to be void for vagueness: ‘in the event that (the investor) is not satisfied with the venture returns’, as, in the context of the contract, it did not create ‘certain or ascertainable terms’ (Namibia Minerals v Benguela Concessions  – 1997 AD). It can also be said that it was too subjective (see below*).

It has been found that an undertaking to pay ‘as soon as possible’ is objectively determinable (and not in the payers exclusive discretion*), thus not making the contract void for vagueness (Sadie v Annandale – 1992 O).  The words ‘secure a buyer for the property’ was held to a ‘certain obligation’ in Moipolai v Moipolai (1992 BGD).

It has also been held that the use of the word ‘etcetera’ , used in the right context, is not vague (Lews v Oneanate – 1992 AD).

The word ‘unsuccessful’ with reference to a contingency fee arrangement where the attorney would collect no fees and only charge disbursements if collections were ‘unsuccessful’, was held to be ambiguous (Odendaalsrus Local Transitional Council v Snyman – 2000 SCA).

Where a lease agreement entitles a lessee to vary the rental if extraneous factors exist i.e. petrol price makes his business uneconomical, the court will assess the extent to which such right is linked to objective measures so as to determine whether the lessee has an ‘unfettered right’ and/or whether the conditions are vague. It found such objective measures in the words ‘reasonable grounds’ and the changed circumstances (i.e. petrol price regulation by government), which are by definition beyond the control of the lessee and was furthermore of the view that the provision was not vague (Engen v Kommandonek – 2001 W).

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’, September 2016.

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