Law of Contracts – Part 20

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


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 (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 (May 2016), Requisite #10 Enforcing a Contract (continued-3)

Part 19 (June 2016), Requisite #10 Enforcing a Contract (continued-4).

Leading on from Part 19 in this series, the seventh question is whether the parties to the contract have the complied with any prescribed formalities – in other words certain prerequisites may be prescribed in the contract in question or by statute. If these are not complied with the contacts may be void or voidable.

Let’s look first at requirements that may be contained in the contract in question and here I will focus on clauses that you are likely to find in a ‘generic’ basis in many contracts you may come across in your daily life or business practice:

Law – The contract may stipulate which law applies regardless of where the contract is signed, the nationality of the parties or where the goods or services are provided. This is an extremely useful clause and can have a major impact on rights, liabilities and more importantly the cost of litigation.

Jurisdiction – as for ‘Law’ above.

Disputes – Contracts often have a fairly ‘standard’ arbitration clause but do not be fooled: arbitration is not cheap and in many cases rivals litigation from a fee perspective (although there are many benefits)! Accordingly it is my view that a dispute clause is preferably and it should follow the following sequence which the parties will be by definition be obliged to follow (The contract should also prescribe time frames for each phase): (a) senior management to meet and discuss possible amicable solutions (Such meetings could be ‘without prejudice’ and ‘off the record’; (b) Failing that the matter can be submitted to mediation by a mutually agreed mediator; (c) Failing that arbitration via (I would suggest) the Arbitration Foundation of South Africa BUT such a clause must always be qualified to the effect that either party may under certain circumstances bring an urgent court application.

Entire agreement – when the contract has such a clause, it is imperative to consider whether there are/were any presentations, ‘sales pitches’, ‘marketing blurb’, etc that gave rise to the contract and which was/were a decisive factor in the decision to enter into the contract. If so these should either be detailed in the contract or attached as addendums/annexures.
Change – parties often enter into contracts that have clauses of this nature and then despite that, make or agree to changes verbally without then reducing such to writing, signing (all the parties) it and attaching it as an addendum! When ‘the wheels come off’ reference to such a verbal amendment will be in vain!

Waiver/relaxation – The effect of such a clause is that the exception proves the rule e.g. a landlord may make one exception/concession to the prescribed terms of the lease agreement but such exception will be of no avail in future events and cannot be relied upon as an implied/tacit consent to future deviations from the express terms.

Now look first at requirements that may be prescribed by statute – here are some examples:

• The Alienation of Land Act 1981 requires that all contracts pertaining to property transactions have to be in writing. This also applies to for example the exercise of a first right of refusal contained in such a contract, e.g. the right to buy land/property that is the subject of a rental/lease agreement – I had a client who exercise such a right verbally and then tried to enforce it of no avail! This also applies to time share, share block agreements and even lease agreements if for a period of more than 10 (ten) years – the latter must be recorded in the deeds office.

• Ante-Nuptial contracts not only have to be in writing but must be also be attested to by a notary public and recorded in the deeds office.
The General Law Amendment Act of 1956 requires suretyship agreements to be in writing.

• The National Credit Act does not specifically require credit agreements (as defined) to be in writing but it is implied and they may in any event not be verbal.

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’, July 2016.

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