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Summary BER210 Chapter 8-11
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Summary of Business Law BER210 (second year) LexisNexis 6th edition chapters 8 to 11.
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lOMoAR cPSD| 16183985INTRODUCTION
CONTRACT OF SALE
o Specific, nominated, reciprocal agreement- buy & sell, i.t.o which seller has true
intention to deliver determined/ determinable thing.
o Buyer has true intention of paying determined/ determinable price for thing.
o Most common contract found in practice.
HISTORY
o Roman law of sale was observed & expanded in Roman Dutch-law.
o SA law of sale based on common law.
REQUIRMEENTS FOR A VALID CONTRACT OF SALE:
o Consensus
o Contractual capacity
o Legality
o Physical possibility
o Formalities
o Essentialia
• intention to sell & buy.
• Thing sold.
• Purchase price
o Not necessary for owner of thing to conclude valid & binding contract of sale.
o Seller must transfer all rights to buyer (including right of ownership)
ESSENTIALIA FOR CONTRACT OF SALE
1. Nature of contract
o Buyer & seller must reach consensus regarding essentialia before contract of sale can
exist.
o Buyer must reveal intention.
o Intention of parties = to deliver rights of undisturbed use, enjoyment & disposal of
thing to buyer
o If states in contract that ownership will not pass to buyer, where both buyer & seller
know object sold doesn’ t belong to seller = null & void (result of judicial impossibility of
performance = illegality)
2. Thing sold.
, lOMoAR cPSD| 16183985
o Thing must be determined/ determinable @ conclusion.
o If description of thing too vague = null & void
o Thing can be:
• Movable (a car)
• Immovable (farm)
• Material (a dress)
• Immaterial (book debts)
o Thing must be merchantable – must be property of person to be able to be sold
commercially.
Different things sold:
1. Sectional property
o Regulated by Sectional Titles Act 95 of 1986
o Thing consists of a u nit & joint ownership in common property.
o Act provides owner of a unit right of exclusive enjoyment of common property.
2. Timeshare property
o Regulated by Timeshare Control Act 75 of 1983
o If timeshare scheme is administrated as sectional title scheme, thing sold is same as
in 1. (But enjoyment = allocated to different owners i.t.o time schedule)
o Timeshare scheme = administrated as share block scheme/ club – thing sold is
merely personal right (not a real right) to undisturbed use & enjoyment of exclusive
area allocated i.t.o time schedule
3. Future things
o These things = determinable @ conclusion i.t.o specifications/ occurrence of certain
event only
o If specifications are met/ if event occurs = thing becomes determined
o IF CPA APPLICABLE:
• Future things sold by description/ sample must, in all material aspects &
characteristics as envisioned by ordinary alert consumer, corresponds with delivered
merx
• Before delivery of merx, consumer entitled to examine & ensure it = of type & quality
agreed upon/ if specific order was placed- can check specifications
• Consumer can return merx to supplier & cancel agreement if does not comply/ if not
of type & standard agreed upon.
4. Res aliena
o This is thing of which seller is not owner.
o Does not affect contract of sale.
o Sellers only duty = deliver undisturbed use & enjoyment of his rights in thing to buyer
o BUT if seller = aware that this person is not owner of thing & proceeds with sale, buyer
, lOMoAR cPSD| 16183985
can hold seller liable for fraud/ fraudulent misrepresentation
o If buyer buys res aliena from seller – true owner can claim property from buyer with
vindicatory action called rei vindication.
o Nemo plus iuris rule – provides person can transfer only rights which he has to
another person.
o True owner = entitled to claim property from whoever has possession of property
provided it still exists
o If buyer possesses res aliena in good faith, true owner can claim property from buyer
(if property still exists)
o If a buyer who possesses res aliena in good faith sells property to someone else, true
owner can’ t claim value from buyer.
o BUT the owner can claim value of property from buyer who buys res aliena & acts in
good faith, where buyer made it possible for owner to reclaim his property.
o When buyer buys a res aliena & acts in bad faith, true owner can claim property from
such buyer.
o True owner can claim value if property no longer in possession of buyer/ if destroyed
it
Limitations of right of owner to vindicate are, inter alia:
I. Where true owner represented to buyer that seller = owner of thing sold, doctrine of
estoppel will prohibit true owner from invoking real state of affairs
II. Object was sold i.t.o order of court & buyer acted in good faith.
III. Object sold by curator (without knowledge on part of curator, does not belong to an
insolvent estate) to seller who acts in good faith.
IV. Buyer has, by law, lien/ tacit hypothetic over object sold.
V. Real owner instructed a factor to sell object on his/her behalf & factor takes purchase
price for own account & not authorized to do so- buyer who in good faith may be
vindicated only if real owner compensates him purchase price.
If CPA applicable:
o Consumer has right to assume supplier has legal right & authority to supply, sell,
provide ownership/ lease goods.
o Supplier = liable for any charge/ encumbrance relating to goods (E.g, outstanding
debt on car)
o Vis-à-vis a 3rd party if not disclosed in writing before concluding contract/ if supplier
& consumer has colluded to defraud 3rd party
3. Purchase price
o Seller & buyer must meet consensus on purchase price to conclude valid contract of
sale.
o Requirements for valid price determination:
• Agreement on price
• Price must be certain.
, lOMoAR cPSD| 16183985
• Price must consist of acceptable currency
▪ Letters of credit = most frequent method of payment in international
trade
▪ If payment doesn’ t consist money = not a contract of sale (one of
essentialia missing)
o To determine if contract of sale/ exchange look @:
• True intention will determine nature of contract
• If intention can’t be determined/uncertain, value of money in relation to goods
must be determined:
▪ If money is of a higher value = contract of sale
▪ If goods are @ a higher value = contract of exchange
▪ If money & goods are equal = contract of sale assumption
Agreement on price
o Price must be determined/ determinable to conclude contract
o Must show serious intention that agreed price will be payable as agreed
o If contract = form of contract of sale, but true intention is contract of donation = law
will give effect to true intention of parties (not stimulated intention)
o Price can be less than value of thing but contract of sale won’ t exist if price
completely out of proportion
o If price = determinable, method of determination must be valid & effective to prevent
being null & void
o If determination = unreasonable, court can correct determination
• Other party must be given choice if want to abide by
• agreement/ not
Influence of CPA on price:
o Supplier prohibited from entering into agreement to supply any goods @ price that is
unfair, unreasonable/ unjust
o If price unfair, unreasonable, court can make any order that it considers just &
reasonable (E.g: return of money/ property)
o Seller must adequately display price of goods on sale & is not entitled to charge
higher price than displayed
o If more than 1 price is displayed, supplier bound to lower price (but if price contains
obvious error/ has been tampered with- not bound)
o Retailer not required to display price of goods that = displayed predominately as form
of advertisement of suppler/ if good not ordinarily accessible to consumer
FORMALITIES
o External visible form required for that specific contract (e.g, written & signed by
parties)
o General rule of common law- No formalities required for valid/ enforceable contract
of sale (rule applies to law of purchase & sale of movable property)
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