Overview

In South Africa, a contract forms the basis of enforceable legal obligations and corresponding rights between two or more contracting parties. The South African law of contract is not codified, but finds its source in the common law, which changes and adapts over time.

Contractual claims are easier to enforce where a written contract exists. Although most oral contracts (save for contracts for the sale of land) are enforceable in South Africa, they are often far more difficult to substantiate.

This chapter will focus on an overview of the most notable aspects of the law relating to the formation, interpretation, performance, enforcement and litigation relating to commercial contracts in South Africa.

Contract formation

  1.  The formation of contracts in South African law

In order for a contract to be considered valid and binding in South Africa, certain requirements must be met during the formation of the contract. They are the following:

Consensus

Consensus must be reached on:

  1. the rights and obligations created by the terms of the contract; and
  2. the parties to the contract.

This consensus must be expressed in an outward manner, in the form of an offer and corresponding acceptance.

The requirements for a valid offer are:

  1. an intention to be bound by the acceptance;
  2. all the material terms of the contract should be set out in the offer;
  3. the content of the offer cannot be vague; and
  4. the offer must be communicated to the offeree.

In terms of South African law, an offeror may withdraw an offer at any stage prior to acceptance.

The requirements for a valid acceptance are:

  1. there must be an intention to enter into a legally binding contract;
  2. the acceptance must be made by the offeree;
  3. the acceptance of the offer must be unequivocal, otherwise it may amount to a counter-offer;
  4. the acceptance must be communicated to the offeror; and
  5. the acceptance must take place before the offer terminates or expires.

Certainty in respect of material terms

The contract must leave no ambiguity in respect of the material terms, which must be certain and agreed. This is in order to ensure that each of the parties know exactly what their rights and obligations are.

Capacity

This refers to the ability of a party to understand the nature and effect of the contract. Usually people above the age of 18 are considered to have the capacity to contract.

Legality

In order for a contract to be valid, it may not be contrary to the law. An illegal contract is one that contravenes either a statute, the common law or public policy.

Possibility of performance

The contract must be objectively capable of performance at the time of entering into it. If the contract is subjectively impossible (e.g., a specific party cannot perform a specific obligation owing to their personal circumstances) or if it becomes objectively impossible after it has been entered into, there will still be a valid contract at inception.

Formalities, if applicable, must be observed

Certain statutes prescribe formalities in respect of particular types of contracts; these will be discussed in more detail below. In some instances, parties may also include their own formalities.

To read the full chapter, please follow this link.

 

This chapter was first published by The Law Reviews website on 14 January 2021 and can be accessed here


For more information, please contact Jonathan Ripley-Evans and Fiorella Noriega Del Valle or your usual Herbert Smith Freehills contact:

Jonathan Ripley-Evans
Jonathan Ripley-Evans
Director
+27 10 500 2690
Fiorella Noriega Del Valle
Fiorella Noriega Del Valle
Senior Associate
+27 10 500 2691