COMMERCIAL LAW CLA1501 THE SOUTH AFRICAN LEGAL ..., Slides of Commercial Law

Download COMMERCIAL LAW CLA1501 THE SOUTH AFRICAN LEGAL ... and more Slides Commercial Law in PDF only on Docsity! Page 1 of 23 COMMERCIAL LAW CLA1501 THE SOUTH AFRICAN LEGAL SYSTEM 078 548 0303 ORIGINS Roman Law Duch Customary Law Roman-Dutch Law 1652 with Van Riebeeck landing in Cape Town 1814 Law system influenced by English Law SOURCES OF THE LAW Note: Roman law was codified in the Corpus Iuris Civils during reign of the emperor Justinian – was first time law was codified (recorded in one comprehensive legislation) – SA Law not codified. AUTHORITATIVE SOURCE OF SA LAW: 2 types of sources: Authoritative – court is bound by & Persuasive – used/interpret in particular way to convince court ruling. 1) Statute Law or Legislation 1.1 General:  Dutch legislation passed between 1652 -1806 if approved & accepted by SA Law  English statues don‟t apply to SA unless by official proclamation regarding the union of SA or colonies 1.2 The Constitution of RSA 1996  Is the supreme law of the Republic  Any law contrary to its provisions may be declared invalid  Regulates government – sets out structure of state & its organs – providing for their functions & powers Constitution Sources of Law Authoritative  Legislation  Judgements  Customary Law  Old Authorities Persuasive  Foreign Law  Textbooks & Journals Page 2 of 23  Constitution was adopted to (achieved through Bill of Rights): i. Heal divide of past & establish society based on democratic values, social justice & basic human rights ii. Foundation for democratic society in which government is based on will of people and all are equally protected by Law iii. Improve quality of life & free potential of each iv. Build united democratic RSA & enable it to take rightful place as sovereign state 2) Customary Law (Trade usages)  Does not consist of written rules – develops from habits of community & carried throughout generations.  For customary rule to become legal: a) Must be reasonable b) Must exist for long time c) Must be recognised & observed by community d) Contents of rule must be clear 3) Judgements of Courts 2 types of courts: 1. Superior Courts (unlimited jurisdiction) 2. Lower Courts (limited jurisdiction) Constitutional Court (Hears matters regarding the interpretation of the Constitution – Jhb) Supreme Court of Appeal (Only court of appeal for High Courts; all matter except constitutional – Bloemfontein) High Court (Can hear any matter arising within their jurisdiction & certain constitutional matters e.g. fundamental rights entrenched- most major cities)  Divorce  Mental Capacity  Sequestration of estate  Liquidation of Company  Will Magistrate Court Small Claims Court Courts of tribal leaders Note: Bill of Rights:  Applies to all law  Binds 3 branches of government: legislative, executive & judiciary  State must protect, respect, promote & fulfil the rights of BOR  Divided by 1st & 2nd generation 1st generation: takes power away from the state – imposing duty not to act in certain way e.g .discriminate 2nd generation: positive socio-economic rights = obligates state to provide society with certain basic needs e.g. health care Must keep record of proceedings Legislature; branch of government having the power to make laws Executive branch: administrative or supervisory authority in government Judiciary: all judges of the government Page 5 of 23 Process to ascertain meaning: Statue requires interpretation Constitutional Principles (values) General Principles (language & context) Interpretation Act (definitions) Pronounce purpose and interpretation of statute INTRODUCTION TO THE SCIENCE OF LAW Law- system of rules which apply in a community Right - any right a legal subject has regarding specific legal object and which is protected by law = subjective right. Law is divided in 2: Public Law Private Law overlap ÷International/ constitutional/ administrative/ criminal laws & law of procedure ÷ law of persons/ family/ personality/ patrimonal Control relationship between citizens & the state Legal rules govern relationship between citizens & their dealings with each other Person’s assets/ liabilities etc = monetary measurable Page 6 of 23 Legal Subjects: Natural persons – human beings Juristic person – e.g companies, universities, municipality etc SUBJECTIVE RIGHTS: Right of Legal Object (legally claim to right) Real Right Intellectual Property Right Personality Rights Personal Rights Ownership Servitudes (Property rights) Mortgage and Pledge (Right of security – fail to settle debt then mortgagee can sell property) Artist, writer inventor Right to a patent Physical integrity or reputation of person Rights in terms of conduct, performance (doing or giving something) One person owes another money Page 7 of 23 PRIVATE LAW Law of Persons Family Law Law of Personality Patrimonial Law Who are legal subjects Becomes legal at birth only if born alive, ceases at death (but body & assets still protected for sake of creditors & heirs) Classes of legal subjects (minors don‟t have same rights as adults) Status (affected by age/ sex/ marriage/ sanity/ decent etc.) Marriage: Husband & Wife Parents & Children Excluding cousins & in-laws (right to privacy/ non defamation etc) Physical being, dignity and reputation. Protected by Criminal Law and Civil Law Relation between people concerning their physical & psychical integrity Sum of assets & liabilities (anything with $ value) Law of Succession  Will of deceased estate – consist of assets & liabilities.  Executor not bound to deceased debts but can be and can sue Law of Intellectual Property  Products of human spirit that may be of economic value to discoverer/ inventor. Patents, copyrights, trademarks, goodwill etc Law of Obligations  Contract (1 obligated to deliver, 1 obligated to pay)  Delict (crime/offense) – damage is caused by declit then offender must pay damages to owner  Unjustified Enrichment (If A erroneously deposits $ into B‟s account, B must return it to A) Law of Property *(see below table for further details) *Law of Property: “Granting and recognition of rights over property”  The Right of Ownership Power over property May not use as you like: dependant on public law Ownership: Person who has the right of ownership over property is not necessarily the possessor. Possession direct or indirect control over property – physical control and at same time intents to possess it Page 10 of 23  Common Intention (same intention) – if one thinks they are selling and the other that they are hiring it is not common intent i.e. they must be on the same page  Make the intention KNOWN – can be written contract or oral agreement can also be intentional like buying groceries at a shop. Offer and Acceptance  Declaration made by person (offerer)  Acceptance by offereree Falling away of offer: (5 reasons) 1) Expiry of offer 2) Revocation – withdraws offer but must inform offereree & do so before they accept 3) Rejection – if offereree rejects offer they cannot change their mind & try to accept 4) Counter-offer 5) Death – of either party before acceptance Requirements regarding offer and acceptance (Reaching consensus requires every party must declare his or her intention to create enforceable rights and duties)  Offeror will be legally bound by the mere acceptance  Offer must be complete (i.e. contain all details re offer)  Clear and certain  Accepted verbally or written  Addressed to specific person  The offer and acceptance must be communicated to al parties concerned What is not considered an offer? i. Invitation to make an offer ii. Statement of intent iii. Calling for tenders/ quotes etc. iv. Auctions Dispatch theory Contract comes into being at the place and time when the letter of acceptance is posted CONCENSUS AND DEFECTS IN WILL The distinction between void and voidable contracts hinges on whether or not consensus existed between the contracting parties. 1) Absence of consensus – mistake: Mistake exists when 1 or more of the parties misunderstanding a material fact/legal rule relating to proposed contract. ≠consensus, therefore ≠contract. = subjective attitude Proposes T’s & C’s Note: Advertising a product is an invite to do business, it is not an offer to sell the item instead the purchaser makes offer to buy Page 11 of 23 But: Parties can be held to their declaration of intent (instead of their true intention) unless circumstances are such that the mistake is reasonable. Requirements to be met to render mistake contract void. i. The mistake relates to a fact, or a legal rule or principle (thinking that the appliance is a washing machine when it is actually a tumble dryer) ii. The fact or rule or principle is material (material means essential/relevant/NB to the contract & in eyes of the law) (identity of parties known, time/place of transaction (performance) known, but mistake about object performance = reasonable mistake hence consensus not met) iii. The mistake (whether of fact or of law) is also reasonable (the reasonableness of the mistake is tested objectively – one asks whether the reasonable person in this situation would make the same mistake) 2) Misrepresentation “Untrue statement or representation concerning an existing fact/state of affairs by a party with the aim and result of inducing the other party into concluding the contract” A contract will be voidable due to misrepresentation if following requirements are met: a) Misrepresentation: Untrue statement concerning an existing fact/condition b) Duress: Unlawful threat of harm or injury made by a party to conclude a contract c) Undue Influence: Contracting parties must not abuse their power of influence to persuade other parties to conclude contracts. Misrepresentation Duress (intimidation) Undue Influence Contract will be voidable if following requirements are satisfied: 1) Untrue statement concerning an existing fact or condition can be made by express statement or conduct. Given honest option or estimate is not misrepresentation. Representation must concern existing state of affairs (i.e. facts of past or present) 2) If third party falsely represents one of the contracting parties 3) Unlawful representation e.g. omission of NB facts that may sway contracting party from signing. 4) Made intentionally, negligently or innocently ~ Intentional (fraudulent) ~ – knows it‟s false or doesn‟t care if its true or false. ~ Negligent – person honestly believes its true but doesn‟t check their facts, Requirements  Unlawful threat of harm or injury (must be actual violence/ damage or threat of violence/ damage direct to life, limb or freedom)  Threat must be imminent or inevitable (victim can‟t escape)  Must be unlawful i.e. contract would not have been signed otherwise  Made by one contracting party‟s representative  Which causes other contracting party to conclude contract Voidable & grounds of declict damages can be claimed Described as: Improper, unfair conduct by one contracting party that persuaded the other contracting party to conclude the contract against the latter‟s free will. (differs to duress that there is not need to be threatened) Usually occurs with parties with special relationships e.g. doctor/patient, attorney/client. “Stronger” more authorative person takes advantage of other‟s ignorance, naivety, frailty, stupidity, mental dependence. Requirements for undue influence ~ Contracting party acquired contract by influencing victim ~ Victim‟s independent will easily influenced by contracting party using their influence to weaken victim‟s ability to resist. ~ Influence must have been used Note: Can‟t escape from a contract if the mistake is your own fault – if can be shown you didn‟t do your „homework‟/ read the contract etc before signing Page 12 of 23 made with intent to induce contract. ~ Innocent – statement is made without intention or negligence on misrepresenter‟s part, however made with intent to induce the contract. Remedy for Intentional & Negligent: Contractual: uphold or recind. Delictual: damages Remedy for Innocent: uphold or recind. Delictual: no, was not intentional no delict unscrupulously with lack of regard for morality or rightness of conduct to persuade victim to agree to which they would under normal circumstances not have agreed to. FORMALITIES  Those requirements relating to outward, visible form in which agreement must be cast to create valid contract.  Usually compliance with formalities consists of reducing contract to writing (with or without signatures) General Rule – No Formalities Required Parties are free to choose way in which to create a contract ~ Contract in writing ~ Contract orally ~ Contract tacitly (intent) (May even put some of contract in writing & agree to other points orally.) Contracts Where Formality is required by Law Mainly to prevent fraud, reduce uncertainties and evidential problems. These must be reduced to writing and signed to be valid 1) Contracts for alientation of land 2) Contracts of suretyship 3) Contracts of donation in terms of which performance is due in the future (must have 2 witnesses) 4) Consumer contracts (Under Consumer Act, consumer must get copy of record of transaction and must have certain information on it e.g. business‟ name, VAT reg no etc) 5) Ante Nuptial Contract (agreement must be registered with Deeds Office to be valid against 3rd party – is valid between spouses even if not registered) Formalities Required by the Parties Parties may prescribe certain formalities If Offeror requires that acceptance of offer be put in writing – acceptance of offer will only occur once it is in writing. If parties negotiate content orally & agree final agreement will be in writing its only valid once written. If agreed orally & decided to write agreement as proof of oral agreement‟s term it is valid once orally agreed. Page 15 of 23 BREACH OF CONTRACT One of the parties does not honour the terms/ their performance towards the contract Not all forms of breach of contract can be committed by debtor & creditor: Type of Breach Can be committed by Debtor Can be committed by Creditor Default of the debtor  x Default of the creditor x  Positive malperformance  x Repudiation   Prevention of performance   Same transaction between parties may create several different rights and duties, hence in context of breach of contract it‟s NB to ascertain which performance obligation gave rise to a „problem‟ and then determine if it was the debtor or creditor in respect of that performance who is responsible for the breach. BREACH OF CONTRACT; 5 DIFFERENT WAYS 1) DEFAULT OF DEBTOR Default of Debtor = they fail to perform on time and the delay is their fault 2 Requirements for default by debtor to occur: 1. Performance must be late  Pertains to time only and no other aspects of contract  Debtor in mora if not performed on date/time agreed then letter of demand issued to allows debtor to perform in new reasonable time frame. If performance still late then = debtor default = mora ex persona  Reasonable time dependant on contract & circumstances, court takes following into consideration  Parties‟ intention  Nature of performance due NOTE NB: In Law of Contract: Party that must perform = “debtor” Party with corresponding right to receive that performance = “creditor” Reciprocal contracts – contract of sale- both parties are simultaneously obliged to perform and entitled to performance = both debtor & creditor in respect of different performances. Refer to table on page 113 of manual Purchaser – Pay Debtor Seller – Deliver Creditor Performs payment Seller owes item to Purchaser Seller – to deliver  becomes Debtor to Purchaser who is now seen as Creditor at this point in contract. Refers to specific obligations/points of performance in the contract & not contract as a whole Page 16 of 23  Difficulties/delays experienced by the parties at conclusion of the contract  Assumption that the debtor is expected to act promptly, appropriately and carefully – also considers commercial and other interests.  Contract must have stipulated the original time frame, i.e. must not be vague 2. Delay due to debtor’s fault  Due to Debtor‟s fault – either intentionally or negligently cannot honour their obligation.  Forces beyond Debtor‟s control – not his fault e.g. cargo ship sinks Note however that if debtor warranted performance they take risk of delay on themselves, hence if ship sinks = breach of contract  Delay due to debtor‟s negligence = mora debitoris  Delay of debtor due to creditor = mora creditoris Consequences of the debtor’s default  Creditor entitled to remedies which law grants to innocent part in case of breach of contract  Contract of sale, Debtor is in mora will influence passing of the risk  If performance becomes impossible after Debtor is in mora = supervening impossibility of performance will not release a Debtor of their duty to perform if already in mora when impossibility of performance occurs, hence liable for damages. 2) DEFAULT OF CREDITOR Default of Creditor – Creditor fails through own fault without lawful excuse to co-operate in receiving the Debtor‟s due and valid performance. 4 Requirements for default by creditor to occur: Debtor’s performance must be dischargeable  Performance must be due in terms of a valid/existing contract and which is legally and physically possible of being performed. (think buying a TV but unable to collect TV till you have TV License)  Performance in not dischargeable unless the time for performance, as agreed to in the contract has arrived. (note if performance occurs prior to the agreed time and the creditor refuses – then it is not mora creditoris – think snacks being delivered 3 days early) Debtor must tender performance and the performance they tender must be proper performance  If quality of performance not up to par then it is not the Creditor‟s default. e.g. dressmaker does phone for fitting, cupcakes delivered are raw etc Creditor delays performance by not co- operating but performance must still be possible at later stage  Delay – later performance possible: client does not pitch for dress fitting, rescheduled for later date. Mora ex re  Delay – later performance impossible: client order‟s snacks for Saturday, upon delivery it‟s found the client has gone on holiday and the snacks can not be delivered and will be spoilt by time client returns Default must be due to fault of Creditor  If the intent of the Creditor is to avoid the conclusion of the contract i.e. doesn‟t allow Debtor to complete their performance. (think: avoiding the dressmaker for two weeks) Page 17 of 23  If the Creditor causes the Debtor by no fault of their own to be unable to complete their performance it is not Creditor Default e.g Creditor being run over by a car and being hospitalised. CONSEQUENCES OF CREDITOR’S DEFAULT a) Debtor‟s duty of care is diminished if Creditor is in default – Debtor‟ is liable only for intentional loss or gross negligence (think: dressmaker burns clients dress material/ selling a shop to B, but then leave it unattended etc before B gets chance to take occupation) b) In case of reciprocal agreements the debtor remains liable to render their performance (at a later date if need be), even if Creditor delays the possibility of rendering that performance. The Creditor remains liable for payment to the debtor. (think: F agrees that E builds wall by set date but forgets to buy bricks in time for date set – E must still build wall – by new date – F still owes E payment) c) If Debtor‟s performance becomes impossible while the Creditor is in default, debtor is set free from performing their obligations – Creditor must still perform their own obligations. Supervening impossibility of Debtor‟s performance must not result from Debtor‟s intention or gross negligence (think: potter completed pot, client didn’t fetch on time and studio burns down – potter doesn’t owe client pot, but client must pay for pot that was originally made) d) If Debtor already in default, their default is ended by Creditor‟s subsequent default (both can‟t be in default at same time for same performance) Note however that although the earlier mora debitoris is cancelled by the later mora creditoris, ANY damages caused during the time of the Debtor‟s mora is not cancelled. (think:G sells goods to H for delivery X date, but doesn’t do so = mora debitoris, agree to deliver goods new date Y, but H doesn’t pitch = mora creditors, but G liable for damages suffered by H during the period between X-Y) 3) POSITIVE MALPERFORMANCE  Debtor tenders defective / improper performance (e.g. use of inferior quality product)  Debtor commits an act which is contrary to terms of the contract (e.g. agree not do start business within fix period of time in proximity of another business but then start a business across the street although the fix period of time has not expired) 4) REPUDIATION “Party indicating that they will not honour the obligations of the contract – either through conduct or orally” A party repudiates the whole contract by: Denying the existence of a contract Trying , without valid reason to withdraw from the contract Giving notice that they cannot perform Giving notice that they refuse to perform Indicating that they will not perform Note: repudiation of part of the sum total of their obligation can = repudiation of whole contract forgetting to perform obligation is not the same as indicating non-performance ≠ repudiation Page 20 of 23 WHEN CAN YOU NOT CEDE? Cession is generally done freely, but can be prohibited by agreement or law: Law (statute) can prohibit cession: e.g. can‟t cede pension fund or maintenance (divorce situation). Cannot cede a right that is intimately connected with the person of the creditor that if exercised by someone else will encumber the debtor with a different material obligation. e.g. Hire the services of a portrait painter. i.e. a debtor’s position may not be prejudiced by cession.  a right can only be ceded in its entirety. CONSEQUENCES OF CESSION 1) The right forms part of the patrimony (heritance) of the cessionary, not of the cedent 2) The cessionary alone has the right to collect the debt. 3) Once ceded, the right may not be ceded to another person by the cedent, but can be ceded by the cessionary 4) The debtor can no longer perform validly against the cedent 5) The claim is transmitted to the cessionary in its entirety, together with all benefits and privileges. 6) The cessionary also receives the right with all disadvantages attached to it. TERMINATION OF PERSONAL RIGHTS Personal rights arising from obligations may be terminated by agreement between the parties via: Discharge Rescission & Cancellation Prescription Merger Set-off Impossibility of performance supervening after conclusion of the contract Sequestration and subsequent rehabilitation Agreement Release Novation  Delegation AGREEMENT Claim intimately connected with person of creditor PROHIBITION OF CESSION BY: Statute LAW Page 21 of 23 Settlement Discharge  Natural way in which a contractual relationship is terminated.  Can be bilateral (both parties must perform an act) or a unilateral (only one party must perform an act) juristic act.  Performance must take place as against the creditor or their representative, who must be authorised to receive performance.  Parties can agree that the debtor will perform to a third party.  Payment must be made in cash unless pre-agreed arrangement, must be in legal tender (e.g. notes/coins – cheque is not a legal tender)  Payment may be withheld if creditor refuses to issue a receipt  If debtor fails to allocate payment (e.g. if they are having to pay various accounts at same creditor)  Interest is paid before capital  Due debs pd before debts that are not fallen due yet  Onerous debts (e.g. mortgage bond etc)  Older debts have preference over newer debt Rescission and Cancellation  Rescission: withdrawing from a contract due to reasons other than breach of contract.  Cancellation: withdrawal from contract due to breach of contract  Voidable contracts the innocent party has choice of enforcing the contract or rescinding it = terminated Agreement  Contract can terminate upon conclusion of work done/delivered or can be pre-decided that contract will end at future date.  Contract can contain requirements for termination e.g. 2 month notices – must be complied with.  Agreement parties in a contract could agree too, to terminate contract = release & novation.  Release (waiver) creditor releases a debtor from their contractual obligations Note = is an agreement so consensus NB Release may occur expressly or tacitly (implied)  Novation agreement between creditor & debtor where old obligation is exchanged for new obligation in its place. If novation is void or not honoured then original agreement remains valid. Novation can be instilled by court judgement o Delegation: a new party is introduced to take over from either debtor or creditor. Must be agreed by all parties and new agreement is put into place, releasing party being replaced from all further obligations. e.g. if contractor too busy to finish contract, can request another contractor on consent of creditor to finish job. In so doing he relinquishes any further dealings to new contract.  Settlement “compromise” – agreement by which parties settle a dispute about actual or supposed obligation. If terms of settlement not adhered to, creditor may revert back to original debt (if it can be proven that this debt actually exists etc) e.g. not paying pre- arranged instalment on time then can claim full amount from you (transaction) Dispute over original obligation Page 22 of 23 Merger (Confusio)  Person becomes both creditor & debtor in same obligation. E.g. lessee buys leased property or debtor & creditor getting married in community of property. Set-Off  When debts which are owed reciprocally (equally/jointly) by two parties are extinguished.  Must meet 4 requirements i. Similar in nature ii. Liquidated (monetary value certain/ can be ascertained) iii. Claimable iv. Between same persons e.g. if X owes Y R1000 but Y owes X R600 due at same time, they can agree that X only pay the balance of R400  R600 is the set-off amount. Impossibility of performance supervening after conclusion of the contract  Performance cannot be delivered after contract has been agreed due to no fault of either party but by external force (e.g. nature/ war etc.)  Subjective impossibility to perform – debtor‟s inability to perform (pay, e.g. person is robbed on their way to pay). Debtor is still liable to pay regardless.  Objective impossibility – if there is no way to deliver goods (e.g. factory burnt down)  Temporary & partial impossibility of performance – where divisible performance becomes partially impossible. Whole obligation is not terminated (e.g. think of the hiring of 3 horses and 1 is killed) Prescription  It is possible to acquire or loose rights through the passage of time.  A debt is not deemed claimable until creditor has knowledge of identity of debtor & fact resulting in the debt. Note: If creditor doesn’t know due to own negligence they are deemed to know of the debt.  Prescription can be delayed if: i. Debtor is outside Republic ii. Debtor & Creditor are married to each other iii. Creditor is: minor/ insane/ under curatorship/ or is prevented by interruption of superior force. iv. Debtor & Creditor are partners & debt arose out of partnership relationship v. Creditor is a juristic person & debtor is member of governing body of such juristic person Prescription Periods: o 3 years for any other debt o 6 years in respect of debt arising from bill of exchange Note:  Possibility of performance: required for valid contract (forming contract)  Prevention of performance – performance is made impossible through fault of one of the party = breach (breach of contract)  Supervening impossibility of performance – at time of contract agreement was possible but external force renders it impossible (after contract is formed)