Law of Contracts – Part 8
In Part 1 (August 2014), I categorised risk into five categories, namely; 1. PEOPLE, 2. MONEY, 3. LAW, 4. SERVICE and 5. ECOLOGY. I will be dealing 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.
In this issue we cover Requisites #2 & 3 in terms of obligations relating to offers and acceptances in contracts.
REQUISITE #2: LEGALLY BINDING OBLIGATION
Put differently, the parties (both of them) must have the intention to engage in a commitment that is enforceable in a court of law. They must envisage and appreciate that not keeping their side of the bargain can lead to dire legal consequences.
This context clearly excludes the casual comment, jocular observation or so-called gentleman’s “agreement” (really a contradiction in terms). Accordingly when you make an observation to a customer but do not want to be held to it, you should qualify it suitably e.g. “To the best of my knowledge”, “without prejudice”, “to the best of my personal knowledge”, “I’ll do my best to get you a window seat”.
REQUISITE #3: CONSENSUS AD IDEM
Let’s go back to our discussion on Offer and Acceptance i.e. “A” offers a product or service to “B” (the customer).
There can be no agreement if the parties ‘are not on the same wavelength’. It must be clear from the offer made by A (verbally, via a brochure or a website) what is being offered. Conversely it must be clear that is what B is accepting. This is an area where the Consumer Protection Act (CPA) has enhanced the protection of the consumer and conversely has placed a greater burden on the supplier: not only must advertising not mislead, but the supplier must also ensure that there is no misapprehension on the part of the consumer.
So for example if the brochure is not clear, you may have a problem. Let’s take the example of the keen golfer wanting to go to Mauritius for a (primarily) golfing holiday. The brochure (A’s offer) creates the impression (“nearby”/”in close proximity”) that the golf course is close to the hotel where B is staying. However, when the customer gets there, he discovers that the golf course is 20 kilometres away; and we all know that 20 kilometres on most Mauritian roads is quite a long (bumpy!) way.
The situation could have been different if the brochure had been more explicit or if the travel agent had explained it to the customer. Note that if there is no consensus there is no contract, and thus no basis for a contractual action based on breach – however the customer could sue you for misrepresentation (delict or tort) on the basis that the supplier owed him a duty of care and one remedy may be that the supplier is then forced to deliver what the customer thought he was delivering!
It is therefore important for consultants to go on educationals and understand the products and services you provide or make it your business to visit the supplier’s website so that you know the product or service ‘inside out’. You should also ensure that brochures you stock, display or provide are detailed enough. It may be useful to have a right of recourse clause in your contract with the supplier and even an indemnity against any CPA claims.
An issue that is raised from time to time by a party contesting the validity of a contract is a lack of consensus due to duress. What constitutes duress?
Paragon v Du Preez (1994 SE) held that:
• Duress requires a threat of some considerable evil which is imminent or inevitable;
• However it must also be proved, whereas in fact in this case it would appear that there had been no threat, it was irrationally perceived and was unreasonable.
It was held in van den Bergh v Boomprops (1999 – TPD) that economic duress did not void a contract unless the threat amounted to an unlawful action or was against public policy (restated in Medscheme v Bhamjee [2005 – SCA], although the court did say that the ‘threat of economic ruin’ may, in appropriate circumstances amount to duress).
The test to determine whether or not there is consensus was addressed as follows regarding a court case where an amateur claimed a prize for a hole in one when the sponsor’s intention was that the competition was only open to professionals: ‘The crucial question is whether a reasonable person in the position of the offeree would have accepted the offer in the belief that it represented the true intention of the offeror’ (Steyn v LSA Motors – 1994 AD). The notice board at the hole in question did not differentiate between amateurs and professionals, but as a rule amateurs only won prizes worth a couple of hundred rand. (a similar decision was reached in Bourbon-Leftley v WPK – 1999 CPD) where the court found inter alia that it was uncertain what the offer entailed.
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’, March 2015.