Law of Contracts – Part 17
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), continued Requisite #10 Enforcing a Contract (Continued – 1).
REQUISITE #10: ENFORCING YOUR CONTRACT
Homework – What To Do Before You Go Ahead
2. Have The Requisites Been Met? (Continued – 2)
To recap where we ended off in Part 16 last month; The third question is whether there is consensus ad idem i.e have the parties actually agreed to the same thing/is there or has there been a ‘meeting of the minds’?
The fourth question that I want to cover here, is whether performance must be possible – we’ve discussed it in some detail in earlier articles but let’s revisit some of the key elements and some new ones.
As mentioned whether or not you are dealing with the impossibility of performance would depend on when that situation arose and whether or not any of the parties were aware thereof: if it existed before the contract is entered into, then of course one of the essentials is missing and there is no contract, BUT there may be a remedy available in delict/tort (more about that later). However if it occurs after the parties have entered into a binding contract then it is a different kettle of fish!
The impossibility of performance may not necessary be due to the fault (negligence or breach of contract) of any party but due to circumstances which may amount to force majeure. How that is to be addressed may well be determined by the contract or in lieu of a written contract and/or a force majeure clause in the contract, it will be determined by common law.
• Contractual force majeure (this is the French version that is strangely a bit wider than the Latin version, which is known as ‘Vis Major’) clauses vary: some mirror the common law whereas others provide for example for the party not affected by the force majeure such as the supplier, to retain certain of the funds for administrative fees;
• The common law will mean that there is no obligation/right/duty on either party and matters have to revert to what they were before the force majeure event occurred – take for example the Shingwedzi rest camp in the Kruger National park being devastated by a flood, the adjacent bridge being washed away and all bookings being cancelled (2014).
I also pointed out that it could be even more complex if the contract contained a guarantee or warranty – if this is the case then it does not matter when the impossibility arose. These two terms are often used synonymously, but is it correctly used and what does each word mean?
• A guarantee is usually free and is a promise about an item by the manufacturer or company: product will live up to expectations – is linked to performance of the product after the sale;
• It’s a promise to sort out any problems with a product or service within a specific, fixed period of time;
• Normally given by manufacturer;
• Whether you paid for a guarantee or not, it is legally binding;
• The guarantee must explain how you would make a claim in a way that is easy to understand;
• It adds to your rights under consumer law;
• It will take effect whether or not you have a warranty.
• A warranty acts like an insurance policy for which you must pay a premium. Sometimes a warranty is called an ‘extended guarantee’ and refers more to the parts of a product;
• Normally given by retailer or distributor;
• May last longer than a guarantee and cover a wider range of problems;
• A warranty is a legal contract – as opposed to a guarantee, which is mostly part of a contract. A warranty is often a ‘stand alone’ contract but it is not an implied part of the sale like a guarantee – it is a voluntary optional and additional promise by the provider thereof;
• It is a document issued to protect and extend consumer rights i.e supplier is liable for repair or replacement parts;
• A warranty can be in place with a guarantee.
Finally you have to check whether the contract contains any suspensive conditions and if so, has it/have they been met? The one we are all familiar with is when you purchase a property and then make the sale/purchase conditional upon the buyer obtaining/being granted a bond.
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’, December 2015.