THE ESSENTIAL ELEMENTS IN THE FORMATION

OF A CONTRACT:

ABSENCE OF CONSENSUS (Continued)

LECTURE 8
7 March
 1. Introduction

Progress 2. Requirements for a valid contract

2.1 Contractual Capacity
Map 2.2 Consensus – agreement
(a) Offer & Acceptance
(b) Absence of consensus
(c) Improperly obtained consensus

2.3 Legality – must be lawful

(a) General principles
(b) Impact of Constitution
(c) Specific topics

2.4 Possibility of performance at conclusion

2.5 Certainty - definite / determinable content
2.6 Formalities - if required (alienation of land)
3. Parties to contracts
 Iustus error
(i.e., reasonable mistake)

We know that a mistake, if :-

• material
– i.e., it relates the intention to contract and/or a material aspect
of the contract
and
• reasonable

may vitiate an agreement

(e.g., Sonap & Slip Knot)

 What is generally regarded in law as a material mistake?
• error in corpore
– as to subject matter of contract or then, object of the performance

• Allen v Sixteen Sterling Investments

– asserter’s agent pointed out incorrect property

• error in negotio
– as to the true nature of the contract

– Khan v Naidoo
• thought transfer of property, but was surety (remember- on facts she wold have
signed anyway
• error in persona
– as to identity of other parties
• Bird v Summerville
– offer to B; accepted by both B and C
 But error in substantia?
A mistake as to an attribute or characteristic of the subject matter of the contract = generally not
material - Trollip v Jordaan 1961 (1) SA 238 (A)
• Appellant purchased a farm from the respondent in terms of a deed of sale which correctly
reflected the boundaries and extent of the farm as set out in the respondent's title deeds
• Clause 8 of the deed read as follows: ‘”The parties hereto acknowledge that the aforewritten
agreement constitutes the entire contract between them and no other conditions, stipulations,
warranties or representations whatsoever have been made by either party or his/her/its agents
other than such as may be included herein and signed by the parties hereto.”
• Also, clause 1 of the deed reads: “… the seller makes no representation and no warranty to the
purchaser inducing the sale”
• BUT, Appellant had been misled by representations of the respondent's agents into believing that
the property described in the deed of sale included more afforested land than in fact it did (i.e.
NOT as to boundaries and extent – size – merely as to forested area on farm)
• Appellant claimed that his mistake was material, reasonable and bona fide, and but for it, he would
not have bought the property, and accordingly the deed was void
 Trollip v Jordaan (continued)

The representation complained of by the applicant was covered

by the words in clauses 1 and 8 (i.e., no representations made

clauses)

– in view of these exclusion clauses in a signed contract, can

a mistaken belief induced by the alleged representation

have any effect on the deed of sale?

 Trollip v Jordaan (continued) Court:-

• the misrepresentations were not made with reference to the property described in

the deed of sale

• the appellant was at all relevant times :-

– aware of the identity of the merx

– misled by the misrepresentation as to the area of afforested land included therein

• the appellant does not allege that he was misled as to the morgenage of the

property

• according to his declaration and his further particulars he knew not only the identity,

but also the morgenage of the property which he bought.

 Trollip v Jordaan (continued) Court:-

• There is no allegation that the difference in the shape and position in relation to the northern

boundary prejudiced the appellant in any way other than in the resulting difference in the

area of afforested land

• The case is quite different from that referred to in the Digest, 18.1.9.pr., in which the seller

believes that he is selling the Sempronian estate while the buyer thinks he is buying the

Cornelian estate.

• In this case the seller is selling and the buyer is buying the Sempronian estate, but the seller

has misrepresented the amount of afforested land included in that estate

• It is hardly necessary to say that a mistake as to the amount of afforested land included in the

property cannot be regarded as an error in corpore (Note: i.e., the subject matter which is the

farm itself – BUT contrast with where the contract stipulates the extent of afforested land

as a material term and then has less?)

• Court held :- the mistake of the appellant was not an error in corpore
 Trollip v Jordaan (continued)

• if contract is void as a result of misrepresentation in respect

of a material term
– then exclusion clause fails (and falls) with contract
– because it is part of contract (– it is not a separate
contract)
 General criteria – when is a mistake “iustus” (reasonable)? :-

• where the mistake is the result of a misrepresentation by the contract

asserter
– invalid
• where the mistake is not a result of the contract denier’s fault
(negligence included)
– invalid
• where the contract asserter’s belief that there was consensus is
unreasonable because the denier’s conduct did not cause that belief
(the reliance on the appearance of consensus is unreasonable)
– invalid
(1) The mistake is the result of a misrepresentation by
the contract asserter

the misrepresentation must be

• by the asserter or his authorised representative
• wrongful or contra bonos mores
– “unacceptable in the eyes of the law”, e.g.,

• fraudulent
• deceitful
• misleading, etc.
 Misrepresentation by the asserter (continued)
The misrepresentation can be :-
• positive
– asserter said or did something that misrepresents true facts

– Allen v Sixteen Sterling Investments

• asserter’s agent pointed out incorrect property (error in corpore; not in

substantia as in Trollip!)
• negative
– asserter knew or ought to have known that denier mistaken

• but keeps quiet about true facts

• where under a duty to point true facts out to the denier (Sonap!)

– Prins v Absa Bank Ltd 1998 (3)SA 904

• thought signed limited surety, but it was unlimited

• bank official knew of misapprehension but said nothing

 (2) The mistake is not a result of the contract denier’s fault

The denier acted as a reasonable person would have done in the same
circumstances - i.e., no negligence on its part
• where the mistaken party is not to blame for the mistake
– in the sense that he behaved as a responsible person would have
behaved in the circumstances
• namely with due care
 The mistake is not a result of the denier’s fault …

BUT - Remember Burger v Central SAR 1903 TS 571?

– when a party signs a contract - taken to be bound by the ordinary

meaning and effect of the words which appear over his signature

– no grounds shown in this case on which contract may be repudiated :-

• fraud and misrepresentation not been alleged - nothing was said

which misled

• the language of the document was one which was understood

• no pressure of any kind was exercised

• BUT Burger chose not to read what he had signed

 “CHOSE NOT TO READ…”

• if you choose to ignore / not to read -

– does it go beyond mere negligence?
– is it not reckless?

AND, bear in mind :-

– if a litigant unreasonably shuts his eyes to the truth by not heeding
the indicators of the truth”
• constructive knowledge
– SHFL Entertainment Inc v TCS John Huxley (Pty) Ltd and Another
2014 (2) SA 345 (GP) paragraph 89
(principle only - do not read case – patent interpretation – will simply confuse you)
 “CHOSE NOT TO READ…”

Careful : Hutchinson 106

• “many examples of cases where contract not read and held
not bound …”

BUT CASES CITED IN SUPPORT …

• Spindrifter (Pty) Ltd v Lester Donovan (Pty) Ltd 1986 (1) SA 303 (A)

– exhibition contract - respondent's agent aware that dates vital to appellant (i.e., material)

– attention was not drawn to notes on reverse that entitles variation of dates

– in those circumstances - duty to speak; not to remain silent

– even if failure to point out negligent or innocent

– error iustus - not hit by caveat subscriptor rule

• Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA)

– appellant signed credit application obo company in mistaken belief that no personal
suretyship obligation embodied in contract

– was misled as to contents

– But more :- document itself, because of how formulated, constituted carefully concealed
“trap for the unwary” that would have misled a reasonable person

– the appellant was justifiably misled by it – and not bound

• Reminiscent of Sonap? Slip Knot?

 (3) The asserter’s belief that there was consensus is unreasonable because the
denier’s conduct did not cause that belief

Karabus Motors (1959) Ltd v Van Eck 1962 (1) SA 451 (C) at 453D

[ignore the facts – they relate to provisional sentence proceedings and dishonoured
bills of exchange (cheques) and may confuse you]
• it is a general rule of our law that :-

– if the fraud which induces a contract

– does not proceed from one of the parties,

– but from an independent third person

– it will have no effect upon the contract

• the fraud must be the fraud of one of the parties or of a third party acting in
collusion with, or as the agent of, one of the parties
 Karabus – the facts
• Van Eck (the defendant) issued a cheque in favour of the plaintiff (Karabus) in
payment of a debt in a certain sum allegedly owed by Imperial Car Sales, an
independent third party, to Karabus
• Van Eck cancelled the cheque
• when it was presented by Karabus for payment, it was dishonoured
• Karabus claimed payment of the sum of the cheque, but Van Eck refused to
pay
• the court accepted that :-
– Van Eck was defrauded by Imperial
– he was induced to make payment by a misrepresentation by Imperial
• nevertheless, the court granted judgment in favour of Karabus.
• the court held :-
– Van Eck’s intention was to create an exchange agreement with Karabus,
who had accepted that offer
– there was, accordingly, consensus both as to the exchange agreement and
the purpose of the payment and, therefore, a valid exchange agreement
 Karabus – in perspective
• a contracting party may rely upon the fraud (misrepresentation) of a third
party
– where there is an absence of consensus as a result of the fraudulent
intervention of a third party
• the question as to whether or not there is a contract must be answered with
reference to the general theories of contract as interpreted by case law :-
– did the fraud result in dissensus as to the subject matter of the contract,
the nature of the contract, etc.?
– did one (or both) of the parties know (or ought reasonably to have been
aware) of the fraud?
– was there a duty on such a party to speak?
• if these are answered in the affirmative, a court may hold that contract void
• failing that, the contracting parties are left to seek , e.g., a remedy in
damages suffered, if any, against the third party
Saambou-Nasionale Bouvereniging v Friedman 1979 (3) SA 978 (A); Sonap
Petroleum (SA) (Pty) Ltd v Pappadogianis