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Law of Contracts – Part 10

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.
In Part 2, (September 2014), I 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.

REQUISITE #5: PERFORMANCE MUST BE PERMISSIBLE

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, but also the custom and norms of society.

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 (against the goods norms and morals of society). You are not allowed to take the law into your own hands. Accordingly the contract will be null and void and no rights or liabilities will flow from it, and if you have paid a deposit, you will have to forfeit it as you have no enforceable contract/ 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. 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 vs Maseko 1992 W).

REQUISITE #6: CAPACITY OF THE CONTRACTING PARTIES

Something that is often glossed over is whether or not the person you are dealing with has the capacity to contract or has been duly authorized by the party or parties he or she purports to represent. What we are alluding to are such matters as the age of the party, transactions on behalf companies or group bookings.

As the law stands at the moment following recent legislation, the age at which any individual can enter into a binding contract is 18. Any agreement with a party under that age will NOT constitute a binding and legally enforceable contract unless such a party is emancipated (see below) or the parent or guardian has signed the agreement. OK, you may be thinking, this kind of thing simply does not happen. Let me tell you, you may as well bet your bottom dollar because it does. I recently had the case of a youth booking with a Johannesburg based travel agent and travelling all over Europe. When the youth returned the travel agent approached her for payment of the balance of the trip, but no payment was forthcoming. Many telephone calls later they approached the parents who (No doubt after speaking with a friend in the legal fraternity) declined to pay, insisting that they knew nothing about it and that the travel agents sole right of recourse was against the child, which was of course based on a contract that was null and void!

A more prevalent situation which has criminal sanctions, is the employment of an under age (18) person. Again such a contract will not be enforceable. There is the issue of emancipation which means that a person under the age of 18 may be deemed to have reached maturity due to certain business dealings or via a court order, but it would be better not to attempt going down that road – it is simply too complex.

It is therefore imperative when you enter into ANY contract with ANY individual that you obtain a copy of their identity document. It is not only good risk management but also good business practice. It will provide you with irrefutable proof of the persons age and if under 18, you will have to obtain the signature of a parent or legal guardian of the person. Do NOT enter into any transaction without doing that, e.g. make reservations with airlines, hotels etc. as you will have NO right of recourse and will have to put your hand into your OWN pocket!! It will also be a great help if the person were to become a debtor/does not pay and vanishes – an ID number is crucial in order to trace a person.

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’, May 2015.

From-The-Bench  Law of Contracts – Part 10 From The Bench