.

COMMERCIAL LAW
HANDBOOK
COMPILED BY MR A. DUBE
LLB (UP), LLM CORPORATE
LAW (UP) LLD (UNISA) READING.
CHAPTER 1
INTRODUCTION TO LAW

What is law
Law is defined as set of rules that regulate human behaviour or Rules which state how people
are to conduct themselves or The body of rules which state or community recognises as
binding on its subjects or members and which determine those persons rights and duties

History of Zimbabwean Law

Zimbabwe is mainly dominated by Roman Dutch Law also known as Common law. Through
court decisions, a vast number of legislative enactments over the years and the introduction of
certain legislation from English, Zimbabwean law was further enriched and developed.
There is a need to trace the development of Roman law, its fusion with customary law of
Netherlands to form Roman Dutch Law and the long journey of that system into Zimbabwe.
The development of Roman Law is closely related to Constitutional History of Rome. There
are four periods that can be distinguished.

a. Monarchy period (753BC- 510BC)

During this stage, Rome was undeveloped and law consisted of customs

b. Republican Period (510BC-27BC)

The law was for the first time systematised during this period and was put into writing in the
so called 12 tables. It was inscribed on 12 tables

c. Period of the Emperors (27BC-284AD)

The empire expanded over large parts of Europe and Northern Africa

d. Principate or dominate stage

Empire was divided into Western and Eastern Roman Empire in 395AD.

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The Germanic Tribes conquered the Western Roman Empire in 476AD and application of
Roman law started to decline. The empire existed in the East. Justinian ruled in this part
between 527AD and 565AD. He held Roman Law in high esteem and instructed a
commission to codify the legal system. The codification was called Corpus LurisCivilis. As
the Roman Empire and community Degenerated the legal system likewise stagnated. Roman
Law did not disappear. Justinians codification ensured that Roman Law was preserved
throughout the Middle Ages. In the 11th century, Roman Law was rediscovered and studied at
Law school in Bologna. Various law schools were founded thereafter notes and
commentaries on Roman Law were written by students. Roman law was spread throughout
Europe. By the end of the middle Ages, there was an increasing need in Europe for developed
legal system. The various tribal and provincial legal systems of North West Europe of 12 th
Century were suitable for a simple agricultural Community but could not answer to the
demands of a rapidly developing commercial world. Then Roman Law was applied in
addition to Indigenous Law. Various jurists produced writing on Roman and Dutch law.
Their opinions are still today acceptable as authoritative by Zimbabwean courts. Best known
writers in Holland were
Hugo De Groot
Johannes Voet
Simeon van Leeuwen
Van Bynkesshoek
Van derKessel
Van der Linden

SOUTH AFRICAN LAW

Jan Van Riebeck brought the Roman Dutch law in 1652. Despite English Occupation in
1806, this system remained in force in South Africa and was extended to the interior of the
country. SA law was strongly influenced by the English law. Various factors contributed to
this.
a. Judges and Magistrates versed in English law were imported in England.
b. Local jurists studied in England.
c. English Court Decisions were often referred to.
d. Many SA Acts were based on corresponding English Acts.
e. The final court of Appeal was the Privy Council in England.

2
ZIMBABWE
Section 89 of the Constitution of Zimbabwe states:
Subject to the provisions of any law for the time in force in Zimbabwe relating to the
application of African Customary Law, the law to be administered by the Supreme Court, the
High Court and by any courts in Zimbabwe to the High court shall be the law in force in the
Colony of the Cape of Good Hope on 10th June 1891 as modified by subsequent legislation
having in Zimbabwe the force of law.

This means that on the 10th of June 1891 all statutes then in operation at the Cape were taken
over and some are still in force e.g. General Law. It also means the wording of many of our
statutes in other countries especially south Africa and England are authoritative. So the
decisions of the courts of those countries on the interpretation of their statutes are of great
importance in interpreting ours.

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CHAPTER 2
Sources of law

SOURCES OF LAW
Statute/legislation
Customary
Judgments of the courts
Old authorities (common law)
Foreign law
Textbooks

1.LEGISLATION
Legislation can be defined as rules of law promulgated by a body or persons bestowed with
the power of creating rules of law. There is a variety of such bodies and persons in
Zimbabwe. Sometimes legislation is passed by a body such as parliament, which then
authorises a particular individual such as minister or the president to promulgate subordinate
legislation by means of regulations, proclamations and by-laws in terms of the parliamentary
Act. One example of an Act of parliament is Shop licences Act 40 of 1976, Companies Act,
Insolvency Act.

Section 3 of the Constitution of Zimbabwe states that the constitution is the supreme law of
Zimbabwe and if any other law is inconsistent with this constitution, that other law shall, to
the extent of the inconsistency, be void. Legislation must pass the constitutionality test.
Legislators dont declare the whole act void but only those portions that are invalid. Rights in
the Constitution can be limited only by law of General application. Law of General
Application is law that the Society considers reasonable and justifiable. For example, killing
a human being infringing his right to life when acting in self defence is justifiable in a
democratic society.

1.1 SUBORDINATE LEGISLATION

1.1.1 REQUIREMENTS FOR THE VALIDITY OF SUBORDINATE LEGISLATION

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a) It must be reasonable
b) It must be impartial not discriminatory
c) It must be certain (clear) and not vague
d) It must be promulgated (proclaimed)
e) It may not be ultra-vires (not illegal or against community values)

2. CUSTOMARY LAW
These are unwritten Rules, practised over a long period of time derived from: habits of people
of a certain group/ community passed from generation to generation e.g. lobola. In Van Breda
v Jacobs 1921 AD330. A local custom amongst fisherman that once they have set their lines
on a beach where no boats are permanently stationed for purposes of catching a shoal of fish
seen moving along the coast, no other fisherman are entitled to set lines within any
reasonable distance in front of the already set, was held to be duly established by the
evidence as a valid custom.

2.1 REQUIREMENTS
a. It must be reasonable
b. It must be generally recognised and observed by the community
c. It must have existed for a long time
d. Content of the rule must be certain and clear

3. COMMON L3AW
The works of old Jurists are still authoritative. Justinians Corpus iuris Civilis, Hugo De
groot and Dutch Jurists inter alia van der Kessel. The Body of law provided by the old
authorities is known as common law.

4. FOREIGN LAW
After a fruitless attempt by a judge to find law in the above sources, foreign law is consulted.
It has persuasive authority. Countries that use Roman Dutch law as its common law are
considered first for purposes of finding solution to a legal problem.

5. TEXTBOOKS
No authority, only persuasive

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6. JUDGEMENTS OF THE COURTS/ CASE LAW
One legal counsel said to the Judge. I think you will do as others have done in the same
case, or else we do not know what the law is. A Judge explains his reasons by setting out the
facts of the case and the law he considers applicable to those facts. Another judge or legal
practitioner reading the judgment in the law reports will extract the essential reason for the
decision, the (Ratio-Decidendi) as opposed to observations on the law that were not essential
in the decision, or (Obiter Dictum). If facts in the present case are indistinguishable from
those in the previous case, then ratio ought to be applied. To understand Doctrine of
Precedence, one has to understand Hierarchy of Courts.

CONSTITUTIONAL COURT

SUPREME COURT OF APPEAL

HIGH COURT

MAGISTRATES COURT

CHIEF/ HEADMAN

Only judgments of High Court and Supreme Court as reported in law reports can be used as
precedence by lower courts. Lower courts are not bound by Decisions of another.

RATIO DECIDENDI
Literally mean reasons for the Decision. That part of judgment that is binding. It is also
regarded as the basis or foundation of the Courts decision or the legal principle which
necessarily led to the conclusion reached. This doesnt mean that every sentence that a judge
says is binding.
The first step is to determine the material facts on which the judge based his decision. Ratio
Decidendi is conclusion reached by the Judge based on these material facts and by excluding
non- material ones

OBITER DICTUM
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Obiter may be when.
i) Judge Postulates and answers a hypothetical question
ii) Raises an analogous case.
iii) Gives illustration
Any remark which is irrelevant to the immediate setting of dispute is obiter& does not form
part of Ratio Decidendi. It is not binding on subsequent courts. However it can be of strong
persuasive authority. Once applied by a later court, it becomes Ratio Decidendi and binding.

DISTINGUISHING
This is a process by which a judge decides that the ratio decidendi is not binding on him and
that he does not have to apply it in deciding dispute before him. It is thus a technique of
avoiding following earlier Ratio Decidendi.
For example
1. Earlier court formulated principle too broadly.
2. Facts of the later case are not covered by the principle.
3. Earlier Court overlooked a fact that would have led to a different R.D.
4. Material facts differ therefore not identical.

DOCTRINE OF STARE DECISIS

Courts Decision create a precedent in other words, the decision should be followed in future
by:Judges of the same court.
Courts of a lower order which is subordinate to that Court.
A court is bound by the Ratio decidendi of a decision, i.e. the legal principle laid down by a
court in its decision or order. Supreme Court is only bound by its own Decision and will only
deviate if it is convinced that it was wrong. High Court is bound by Supreme Court and may
not deviate therefrom. High Court is also bound by its own previous decision unless
convinced that a decision was wrong. A single judge is bound by decisions of a full bench (3
judges) and may not deviate therefrom.

ADVANTAGES OF STARE DECISIS

a) Creates equality- people are treated the same/ fair
b) Certainty of the law
c) Predictability
d) Uniformity
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e) Less time consuming
f) Convenience
g) Equality

DISADVANTAGES
1. It allows law to become a petrified forest of erroneous notions.
Once a decision is granted, it binds other courts no matter how wrong it is.
2. A strict Principle of Stare decisis prevents the development of Law to suit the changing
times and sentiments law must be stable yet it cannot stand still.
3. Following a decision of a single case limits the minds or intelligence of other people
especially judicial officer.

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CHAPTER 3
INTRODUCTION TO THE SCIENCE
OF LAW
Divisions of Law
Public law and Private law.
Public Law relationship between state and citizens and subjects
Private law- Citizens in their dealings with each other.

Public law Private Law

International law Family Law
Constitutional Law Law of Personality
Criminal law Patrimonial Law
Law of Procedure COMMERCIAL LAW

MEANING OF RIGHT
A right is any entitlement a legal subject has regarding a specific legal object and which is
protected by law. There can never be a right without an underlying object. There has to be a
legal subject- legal object relationship- in order to talk about a right.

WHAT ARE LEGAL SUBJECTS?

A legal subject is a human being or entity subject to law or a member of the legal community
to whom the law applies and for whose benefits the law exists. Every legal subject has legal
capacity that is the capacity to be the bearer of rights and duties. All legal subjects are called
persons and Juristic persons. In law concepts human being and person are not synonymous.
Person and legal subject are synonymous.
NATURAL PERSON
Human being
Every human being from birth to death is a legal subject and is a bearer rights and duties.

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JURISTIC PERSON
These comprise of entities other than human beings eg. Companies, universities,
municipalities and state. Holders of rights and powers are subject to duties. Although they are
persons, there are things that can only be done by natural persons eg Marriage and execution
of wills. It has a perpetual succession, even if members die, it continues to exist

Legal objects
A legal object is any entity which can be the object of a legal subjects claim to a right.
Property, immaterial property, aspects of personality and performance can be objects of legal
subjects claim to a right.

Subjective Rights
Relationship between legal subject and legal object and between legal subjects and other
legal subjects can be termed a right. Following categories of juridical rights can be
distinguished when rights are classified according to the particular legal object.

1. Real Right
This is a right which a legal subject has to property such as a car, pencil etc. Real rights can
be classified as follows
a) Ownership- the most comprehensive real right
b) Servitudes (limited real rights)-Rights over someones property
Servitudes are divided into two
i. Praedial servitude
ii. Personal servitude

Limited Real Rights

i. Personal servitude
They confer on a person in his capacity the right of use and enjoyment of property of which
another is the owner eg usufruct.
ii. Praedial Servitude They confer on the holder in his capacity as owner of an adjacent
property a limited right to the property of another e.g. servitude of grazing right of way.

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iii. Mortgage & Pledge

These give the holder a right of security over property mortgaged or pledged. Mortgagor is
entitled to sell the property mortgaged or pledged if the mortgagee is still owing him.
Mortgage applies with regard to Immovable property, Pledge applies with regard to Movable
property

2.Immaterial Property rights/intellectual property

Fruits of intellectual endeavour, eg, authorship or inventions, subject to protection. Author or
artists right not to have work reproduced without authority thereby causing financial
prejudice.
If Intellectual or artistic efforts are not protected against piracy the incentive to invent or
create is undermined. Intellectual property law embraces copyright, patent and trademark
law. Basic objectives of law in these areas is twofold:
a] Provide ownership rights in respect of intellectual and creative work.
b] Provide framework for enforcement of those rightsby remedies for their breach. Not
every idea or invention is protected.

Companies are faced with dilemma. Benefits of innovation are obvious but why innovate if
innovation can be replicated by competitors? Failure to innovate may lead to loss of
competitiveness in market place.

3. Personality Rights
These are rights relating to aspects of personality eg physical integrity, reputation of a person,
dignity and privacy.

4. Personal Rights
Rights to which some other conduct referred to as performance may be demanded from a
person
or refraining from doing something (interdict).

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CHAPTER 4
LAW OF PROPERTY

INTRODUCTION
The law of property is concerned with the relation of persons towards material objects. The
relationships of persons towards property are controlled by means of granting and recognition
of rights over property. The nature and extent of legal power enjoyed over property depend
on the kind of real right held by that person. Different kinds of real right confer different
powers on their holders.

Real right of ownership gives the holder of the right wide powers to use the property, enjoy
it, sell it and dispose of it.

Pledge gives holder of the right only the rights to posses the property (which still belongs to
the pledgor as security for his claim against the pledgee. More than one real right can subsist
in the same property eg. A may have right of ownership over the farm, B, mortgage over the
farm, C a usufruct over the farm, D mineral rights in respect of the same farm.

A B

Accordingly holders of various rights have certain powers over one and the same property.
The right of ownership is the cornerstone of all real rights.

The right of ownership

The right confers the most complete Power over property. However it does not confer
unlimited or absolute control, eg an owner may not do what he likes with his property. Public
law can restrict the right of ownership as well as rights of other people eg statutory provisions
which prohibit the division of land under certain circumstances. You cannot mine in your
own land without the permission of the state. Ownership is always restricted in the interest of

12
the community. An owners right may also be restricted by his neighbours right of ownership
e.g. owner of the land may not excavate his land in such a way that his neighbours land
subsides or curves in.Right of ownership, although comprehensive, it is always limited.

Right to property in the Constitution

In terms of the constitution, property means property of any description and any right or
interest in property. Every person has the right, in any part of Zimbabwe, to acquire, hold,
occupy, use, transfer, hypothecate, lease or dispose of all forms of property, either
individually or in association with others. No person may be compulsorily deprived of
their property except where the following conditions are satisfied.

(a) The deprivation is in terms of a law of general application;

(b) The deprivation is necessary for any of the following reasons

(i) In the interests of defence, public safety, public order, public morality, public
health or town and country planning; or

(ii) In order to develop or use that or any other property for a purpose beneficial to
the community;
(c) The law requires the acquiring authority

(i) To give reasonable notice of the intention to acquire the property to everyone
whose interest or right in the property would be affected by the acquisition;

(ii) To pay fair and adequate compensation for the acquisition before acquiring the
property or within a reasonable time after the acquisition; and

(iii) If the acquisition is contested, to apply to a competent court before acquiring

the property, or not later than thirty days after the acquisition, for an order
Confirming the acquisition;

(d) The law entitles any person whose property has been acquired to apply to a competent
court for the prompt return of the property if the court does not confirm the
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acquisition; and

(e) The law entitles any claimant for compensation to apply to a competent court for the
determination of

(i) The existence, nature and value of their interest in the property concerned;

(ii) The legality of the deprivation; and

(iii) The amount of compensation to which they are entitled;

and to apply to the court for an order directing the prompt payment of any
compensation.
(c) the law requires the acquiring authority

(i) to give reasonable notice of the intention to acquire the property to everyone
whose interest or right in the property would be affected by the acquisition;

(ii) to pay fair and adequate compensation for the acquisition before acquiring the
property or within a reasonable time after the acquisition; and

(iii) if the acquisition is contested, to apply to a competent court before acquiring

the property, or not later than thirty days after the acquisition, for an order
confirming the acquisition;

(d) The law entitles any person whose property has been acquired to apply to a competent
court for the prompt return of the property if the court does not confirm the
acquisition; and

(e) The law entitles any claimant for compensation to apply to a competent court for the
determination of

(i) The existence, nature and value of their interest in the property concerned;

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(ii) The legality of the deprivation; and

(iii) The amount of compensation to which they are entitled;

and to apply to the court for an order directing the prompt payment of any
compensation.

Ownership and Possession

There is confusion over the terms.Ownership and possession are two different concepts in
law.A person who has the right of ownership over property is not necessarily the possessor of
the property. For example A, the owner of the car may lend it to B for a trip to Durban; A has
ownership of the car, B has possession. Another example, X moves out of his house so Y can
repair the house, X is the owner of the house, But Y is the possessor.

When does one have possession of property?

Possession has 2 elements
1. Physical control
2. Intention to possess

In order to have physical control over property direct and immediate control over it is not
required, for example , A locks his car but takes the keys with him, he has physical control
over the car although he is far away from it. An example to illustrate the absence of required
intent to posses is the following; If D holds Ns jacket for few minutes while he works on his
car, D has physical control over the jacket but does not have intention of possessing it
because he is not exercising the physical control in his own interest but in the interests of N.
In other words, he is not holding the Jacket for himself but for someone else. D is not in
possession of the Jacket.

Acquisition of ownership
Ownership is acquired through;
1. Original method
2. Derivative method

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1. Original method of acquiring ownership.

a) Occupation
If one seizes property belonging to no one with the intention of becoming its owner, one
acquires the right of ownership over the property eg where B catches a fish, he acquires right
of ownership over the property or picks up a pen one has abandoned. By occupation one
cannot become the owner of Property belonging to another. If Y loses his pen, he remains its
owner, and E will not be able to obtain ownership through occupation. If he abandons it, he
has no intention of being the owner, W can become the owner after Y has renounced his right
of occupation. Occupation is called an original method of acquiring ownership because the
new owner does not obtain the right of ownership from another but establishes an original
right of ownership.

b) Prescription
If you have possessed something openly for uninterrupted period of 30 yrs, you become the
owner. For example, A takes possession of a section farm by allowing his cattle to graze on
it, he may acquire ownership of that section, provided he has possessed it openly and as he
were the owner for an uninterrupted period of 30 years. Act previously unlawful becomes
lawful. Question is why is law allowing owner to lose his ownership? Law requires legal
certainty. If the owner allows another to take possession for a long period of time, the
impression is created to the outside world that the possessor is actually the owner. It is
original method of ownership because he becomes the owner after the original owner has lost
his right of ownership.

2.Derivative Methods of Acquiring Ownership

Movable Property
Delivery
This method applies to movables. If A and B enter into agreements of sale, B acquires
ownership when the thing is delivered to him. Entering into a contract does not cause
ownership to pass. Delivery seals ownership. Immovable PropertyIt must also be the
intention of the transferor to transferee that right to ownership be transferred and acquired. If

16
one party lakes intention then ownership wont pass. If A believes he is borrowing B a car
and B believes he is being given that car, ownership wont pass. It is a Derivative method
because transferee acquires his ownership from transferor.

When selling immovable property, Payment does not lead to acquisition of ownership. Only
when it is registered in transferees name in Deeds Office does ownership pass.

Forms of delivery.

a) Actual delivery (Demanu in Manum)

Object sold is handed physically by seller to buyer.

b) Delivery with short hand(TraditioBrevi Manu)

The buyer is already physically in possession of the object sold and delivery takes place by
change of intention of Buyer and Seller. E.g. Buyer before concluding the deed of sale, rents
a car from the seller and later decides to buy the car. No giving back of the car by the buyer
to the seller is necessary to establish delivery. The buyer remains in possession of the car and
delivery takes place through the change of intention of the parties to the contract.

c) Constitutum Possessorium
Opposite of delivery with short hand. Delivery takes place through change of intention of the
buyer and seller but the seller remains, after contract has been concluded, physically in
possession of the object sold. E.g. S sells a car to P, but at the time S and P agree that S will
rent the car from P, therefore S (the seller) remains physically in possession after the contract
has been concluded.

d) Attornment
The object sold is in possession of a third party and delivery takes place through the change
of intention of the buyer and seller. Before the deed of sale is concluded the third party
concerned keeps the object on behalf of the seller, but after the conclusion thereof the
intention of the buyer and seller is that the third party keep the object on behalf of the buyer
e.g. a car is placed by the seller in possession of a panel beater for repairs and the car is sold
17
during this period of repair. Before the contract is concluded the panel beater keeps the car on
behalf of the seller, but after the transfer has been concluded the panel beater keeps the car on
behalf of the purchaser. Consequently delivery has taken place through the change of
intention of the parties to the contract. Mere notice to the third party of this change of
intention is sufficient and no cooperation of the third party in respect of this change of
intention is required.Vorster v Hodgeson [1902] 19 SC 439. Thus if the buyer is to have good
title in the merx, he must have ownership not just vaccuo possessio. All sales are presumed to
be for cash unless evidence clearly proves the contrary.

e) Symbolic Delivery
Delivery takes place when the seller places the buyer in possession of a symbol by means of
which the buyer gains control over the object sold.
E.g. a shipload of maize has been bought and the buyer is placed in possession of the bills of
lading to place him in control of the maize. Delivery thereof takes place fictitiously or
symbolically). Giving keys of the car.

f) Delivery through marking

Delivery takes place by marking the thing or things bought or sold. E.g. where part of the
flock of sheep is bought, the sheep forming part of the object sold can be marked by a yellow
mark on the hind leg. Delivery takes place as soon as the yellow mark is on the hind leg.
Delivery takes place as soon as the yellow marks are made on the hind legs of the sheep
concerned.
g) Delivery withy long hand
Takes place in that the object is pointed out by the seller to the purchaser with the intention
that ownership passes
Protection of ownership and possession
Ownership is protected primarily by granting the owner the remedy known as REI
VINDICATIO. Owner can claim it from any person who is wrongfully in possession of it.

Owner Thief Third party

A B C

A can institute Rei vindicatio against C because he is the owner of the car. Owner can claim
damages if his property is damaged. Possession is also protected
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 owner B A takes it back
Borrower by force

If A borrows B his car and then after two weeks he decides to take it back from B, B can
institute an Action called the mandamant van spolie. In an action in which someone asks that
possession be restored, the court is not interested who the owner is. But the question is was
the applicant wrongfully deprived of possession? After restoration of possession A can
claim it by Rei vindicatio.

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CHAPTER 5
INTRODUCTION TO LEGAL
OBLIGATIONS
A legal obligation is a legal tie between legal subjects, recognised by law, which is created
because of certain legal facts (such as Contract or Delict) and which creates rights (personal
rights or claims) and duties which are recognised by law. Personal rights may come about
through
1. Delict
2. Contract
3. Unjustified enrichment
A legal obligation consists of two elements namely the right of the creditor to claim
performance (The right to insist that something be done or not be done)
AND
The duty of the debtor to perform accordingly. Natural obligations are those rights or duties
that are recognised but not enforced by law

Sources of obligations
A legal fact must exist before a legal obligation can be created.Legal facts are facts which
create, alter or destroy rights. Juristic acts are acts which the law gives effect according to the
intention of the parties (e.g. law gives effect to a contract of sale which the parties concluded
and intended to conclude. Non- Juristic Acts are Acts to which the law gives effect
irrespective of the intention of the parties eg a claim arising from delict or unjustified
enrichment. Juristic Acts can be divided into unilateral act (acts for which only the
expression of the will of one party is required e.g. a will) and Multilateral act- where co-
operation of two or more parties is required e.g. where parties conclude a contract of sale.

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CHAPTER 6
Unjustified enrichment
A general equitable principle that no person should be allowed to profit at another's expense
without making restitution for the reasonable value of any property, services, or other
benefits that have been unfairly received and retained.

Although the unjust enrichment doctrine is sometimes referred to as a quasi-contractual

remedy, unjust enrichment is not based on an express contract. Instead, litigants normally
resort to the remedy of unjust enrichment when they have no written or verbal contract to
support their claim for relief. In such instances litigants ask a court to find a contractual
relationship that is implied in law, a fictitious relationship created by courts to do justice in a
particular case.

Unjust enrichment has three elements. First, the plaintiff must have provided the defendant
with something of value while expecting compensation in return. Second, the defendant must
have acknowledged, accepted, and benefited from whatever the plaintiff provided. Third, the
plaintiff must show that it would be inequitable or Unconscionable for the defendant to enjoy
the benefit of the plaintiff's actions without paying for it. A court will closely examine the
facts of each case before awarding this remedy and will deny claims for unjust enrichment
that frustrate public policy or violate the law.

In some circumstances unjust enrichment is the appropriate remedy when a formally executed
agreement has been ruled unenforceable due to incapacity, mistake, impossibility of
performance, or the Statute of Frauds. In certain states, for example, contracts with minors
are Voidable at the minor's discretion because persons under the age of majority are deemed
legally incapable of entering into contracts. But if the minor has received a benefit from the
other party's performance before nullifying the contract, the law of unjust enrichment will
require the minor to pay for the fair market value of the benefit received. If the adult used
duress or Undue Influence to induce the minor to enter the contract, however, the court will
deny recovery in unjust enrichment because the adult lacked "clean hands."

In other circumstances unjust enrichment is the appropriate remedy for parties who have
entered a legally enforceable contract, but where performance by one party exceeds the

21
precise requirements of the agreement. For example, suppose a homeowner and a builder
have entered into a legally binding contract under which the builder is to construct a two-car
garage. One day the owner returns to her residence and discovers that in addition to
constructing a two-car garage, the builder has paved the driveway. The owner says nothing
about the driveway but later refuses to compensate the builder for the paving job. The builder
has a claim for unjust enrichment in an amount representing the reasonable value of the
labour and materials used in paving the driveway.

Suppose, instead, that after completing half the job, the builder tells the owner that he cannot
finish the garage as originally agreed, but that he wants to be paid for the work he has done.
The owner balks at this demand, arguing that the builder has breached his contractual
obligations and is entitled to nothing. A minority of jurisdictions would allow the builder to
recover the reasonable value of his services, minus any damages suffered by the owner as a
result of the breach. A majority of jurisdictions, however, adhere to the rule that a party who
fails to perform contractual obligations has no remedy regardless of the amount of hardship
he might endure.

The doctrine of unjust enrichment also governs many situations where the litigants have no
contractual relationship. For example, the law finds an implied promise to pay for emergency
medical treatment that is neither requested nor consented to by a patient. In some
jurisdictions the law finds an implied promise to pay for life-saving medical treatment even
when a patient objects to receiving it. The law also requires parents to reimburse a person
who voluntarily supplies necessaries such as food, shelter, and clothing to their children. As
these examples demonstrate, unjust enrichment is a flexible remedy that allows courts great
latitude in shifting the gains and losses between the parties as Equity, fairness, and justice
dictate

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CHAPTER 7
1.DELICT
A delict is an unlawful or wrongful act by a person (the wrongdoer) which causes another
person damage to person or property, or injury to personality and for which a civil remedy for
recovery of damages is available.

Difference between crime and delict.

i. The purpose of a delictual action is to claim compensation from the wrongdoer for the loss
or injury caused by him.
ii. The purpose of criminal law is to maintain order in the interest of the general public.

Elements of a delict
1. Act
2. Wrongfulness
3. Fault
4. Causation
5. Patrimonial loss or impairment of personality

Act/conduct
An act is described as a persons conduct determined by his will. Where a person acts while
he is in a state of automatism or while in a trance or during an epileptic fit, the resulting
conduct is not determined by his will. Such a person cannot be held liable for the
consequences of his action. Conduct may take the form of positive conduct (omission-doing
something eg hitting someone with a brick) or negative conduct (omission-failure to do
something when one has a duty to act eg a policeman ignoring a gang of hooligans assaulting
a person).

Wrongfulness
Any infringement upon a persons subjective right is deemed wrongful. It may be Real Right,
Immaterial property, Personality and personal right. It must be noted that there can be a clash
of rights where one protects his own right at the expense of another. Then it must be

23
determined whether the wrongdoers conduct was reasonable or unreasonable. Hence the
development of grounds of justification.

Grounds of Justification
a.Self Defence
Where a person protects his or anothers interests by staving off an unlawful attack or
imminent unlawful attack, in the process causing harm to the attacked, the former does not
act wrongfully.The Requirements for self defence were discussed in the case of Exparte Die
Minister Van Justice: re S v Van Wyk 1967 1 SA 488 (A)
a. A wrongful attack by another person, launched with the purpose of infringing upon
the subjective right.
b. The attack must have commenced or be imminent but not yet completed.
c. The act of defence must be aimed at the attacker, although the initial attack does not
necessarily have to be
d. The act must not be more harmful than is necessary.

b.Necessity
A state of necessity empowers a person to infringe the right of an innocent party to protect his
own right or anothers right e.g. you break a window to save a little boy inside a burning
house. The purpose is to protect the interests of the perpetrator or of a third party against a
damaging situation.

Requirements
a. The state of necessity must be imminent or should already have commenced.
b. A person could protect his own rights or the rights of another during the state of
necessity.
c. Conduct during state of necessity will only be justified if it is the only way in which
the threatened interest can be protected.
d. The interest which is infringed upon in the state of necessity should not be greater than
the interest which is protected.

Example 2
A is in the garden, and is unaware of the facts that a poisonous snake is about to bite him,
B can crash tackle A to get him away from the snake. Should A break some of his teeth in
24
 the process he cannot claim delictually from B, as B acted in a state of necessity and did
not wrongfully cause As injuries.

c.Consent to injury
Where a person waives his rights to bodily integrity and consents to an injury being done
to him.

Requirements
a. The consent must be given as a conscious expression of the injured partys will.
b. The consent must be given expressly or tacitly.
c. Injured party must have the serious intention to consent to the injury.
d. The consent must be given voluntarily and not under duress.
e. Although different points of view exist in this regard, it is required sometimes that the
injured party must have full capacity to act.
f. The consent must be lawful and not against the public interest or good morals.
g. The consenting party must be fully aware of the rights he is waiving.
h. The wrongdoer must act within the limits of the consent given by the injured party.

Example
If a patient consents to an operation, he cannot afterwards hold the doctor liable in delict
efor the pain and suffering caused to him by operation.

d. Voluntary assumption of risk

The injured party merely expresses his willingness to subject himself to the risk and
subsequent injury. The injured party must have consented to run the risk. For examplea boxer
decides to participate in a boxing match and accepts the risk of being injured during the
fight.If his opponent injures him, he cannot claim from his opponent in delict.

e.Provocation
It is when someone is threatened or incited towards injurious conduct by the actions of
another. The injured person, who provoked the other, forfeits his rights to claim damages.
The wrongfulness of the defendant is set aside.

25
3. FAULT(Blameworthiness)
Wrongdoer must be at fault. He is at fault if he acted intentionally or negligently. The
wrongdoer must have reached a sufficient level of mental development to be able to
comprehend the nature and consequences of his action. One cannot impute blameworthiness
to anyone without sufficient mental capacity. There are two stages in proving liability

Stage 1 Wrong Doer must have blameworthy state of mind. Insane people and children under
seven are not capable of having a blameworthy state of mind.
Stage 2 once established that he has blameworthy mind, it has to be established whether he
acted intentionally or negligently. Intention includes both knowing and deliberate infliction of
harm and cases where the main object is not the infliction of harm but recklessly engages in
some enterprise with realisation that the harm will probably or possibly occur.
Rape is also a delictual wrong based upon intentional wrongdoing. In M v N (1981) a woman
was awarded substantial damages for rape.
Regarding negligence, the conduct may still be wrongful if the wrongdoers behaviour does
not comply with the standard of care that the law requires of him. The test is an objective one
of a reasonable person. The courts have to determine how an ordinary, average, reasonably
careful Zimbabwean would have behaved in the same circumstances. If a reasonable man
would have exercised caution or acted more responsibly than the wrongdoer then fault is
imputed on the wrongdoer. If the wrongdoer was also negligent then there will be
apportionment of damages.

4.Causation

The loss or damage must be caused by the wrongful culpable act. There must be a nexus
between the act (commission or omission) and the damage suffered. Where this crucial link is
missing, the so called wrongdoer cannot be held liable in delict. In order to determine
whether a factual causal link exists, condition sine qua non test is used. If the unlawful
conduct is taken out of the equation and the result falls away, a casual nexus exists between
the Act and the result. A wrongdoer cannot be held liable for all the consequences of his
actions. Liability must be limited by determining whether or not legal causation also exists
between the Act and result.

26
The present legal position is that the wrongdoer will only be held liable for foreseeable
damage for example a person sits in a train. While still in the station waiting for the train to
depart. He finishes his cigarette and throws the butt from the window.The butt falls on
explosive material stacked on the platform next to the train, which explodes with a great
bang.On the other platform, a porter is startled by the explosion and loses concentration of his
trolley which crashes into an old lady who falls into the path of an oncoming train.The loss
and damage incurred by the latter can only be recovered from the smoker if it was foreseeable
that his act would have such a result.

5.Damage or result
The result must be in a form infringement of any subjective right.

Delictual Remedies
1.ActioLegisAquililiae
It is instituted to claim damages for percuniary loss caused by all forms of culpable conduct.
It can also be ceded to another person since it is concerned with recovery of patrimonial
damage to an estate.

ActioIniuriarum
Satisfaction for the impairment of ones personality can be claimed in the
ActioIncuriariarum. Purpose is to compensate for the intentional injury to ones bodily and
mental integrity. Cannot be ceded to another.

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CHAPTER 8
LAW OF CONTRACT
CONTRACT DEFINED
For our purposes we shall content ourselves with a working definition of a contract: A
contract is a binding agreement, which the parties thereto create between themselves
intending that it be legally enforceable. Courts do no more than attempt to give effect to the
intention of the parties.

GLOSARY OF TERMS used in contracts

Performance
That to which the debtor binds himself to is called performance. Performance can consist of
positive conduct where debtor must do, deliver or pay something or negative conduct such
as not doing business in a certain area for a specified period of time
Unilateral contracts
Where only one of the parties acts in the capacity of debtor and the other party only acts as
the creditor, the contract is a unilateral one eg a donation

Reciprocal contract
Where both parties act in the capacity of creditor and debtor at the same time.
Nominate contract
It is a specific contract like purchase and sale
Null and void contract
Where one or more of the requirements of a valid contract are absent. No contract and no
legal obligations come into being. When a contract is said to be null and void, it actually
means that no contract has come into being.

28
Voidable contract
Where a contract did come into being but it can be set aside because of a defect. the defect
might have been present at the time of conclusion of the contract. Where the parties do reach
consensus but consensus was obtained in some or other improper manner such as duress,
such consensus can be negated. Prejudiced party may however choose to uphold the contract
and is not obliged to have it set aside.

Natural obligations
Create obligations which are recognised but not enforceable. Contract is valid but not
enforceable.

Requirements of a valid contract

1. Consensus
2. Capacity to Act
3. Physical possibility
4. Legality
5. Formalities

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CHAPTER 9
Consensus
Consensus is the meeting of minds between parties. Consensus is created if parties have the
following:

1. Intention to be contractually bound.

Parties must have serious intention to be contractually bound. If 2 friends agree to watch
Rugby match no intention to be bound exists. Each party must intend to be bound to perform
his duties and to hold the other party legally liable for rendering performance as promised.
Contract of sale agreement (eg) there is intention to create legal obligations.

2. Common intentions.
Parties Must intend same contractual commitments. Common intention with regard to rights
and duties to which they will be legally bound to agreement.

3. Making of intentions known.

Parties must declare their intentions to one another. The other party must assent to that
intention in some way or another. Done through offer and acceptance

Offer and acceptance

An offer is a declaration made by a person in which he indicates his intention to be
contractually bound and he sets out the rights and duties he wishes to create. An acceptance is
a declaration by offeree through which he indicates that he agrees to the terms of the offer
exactly as expounds in the offer.

Requirements of a valid offer.

1. Offer must be complete in the sense that it contains all the terms by which the offeror is
willing to abide as well as all the terms to which he wants to bind offeree.
2. Offer must include proposals regarding all the essentials of the proposed contract
If parties want to conclude a specific nominate crt eg Contract of sale), the offer must contain
stipulations regarding all essential characteristics of that specific contract.

30
3. Offer must be clear, certain and unambiguous. Intended obligations must be stated
unequivocally and unconditionally so that the rights and duties intended are determined or
ascertainable. Must not be vague and ambiguous. Offer must be of such a nature that, it can
be accepted without any further qualifications eg I am selling a car at reasonable price.

4. Offer must be made with the serious intention of creating a legal obligation.
Offeror must have the intention to be legally bound to his offer, should it be accepted by the
offeree. Where X invites Y to a concert there is no intention to be bound.
An advertisement is a declaration which is made with the intention of inviting another party
to make an offeror to negotiate. An advert in the newspaper or price tag stuck to a product in
a self service shop does not as a general rule, constitute an offer. The customer who decides
to buy something makes an offer to the shop keeper at the till. Shopkeeper can decide
whether to accept the offer or not. The purpose of such an offer is to draw a persons
attention to the possibility of the conclusion of a contract or to provide him with information.
The intention of the dealer will in each case determine whether his declaration constituted a
real offer or invitation to do business. (Crawley V Rex) 1909 TS 1106. A tender is not an
offer.

5.No formalities to be complied with.

An offer can be made verbally, in writing, expressly, tacitly, through words or conduct.
If law requires formalities as requirement for validity, the offer must comply with these
formalities to be valid. Offer must come to the actual knowledge of the offeree. Offer is
complete if offeree has knowledge of the offer and its contents.

Consequences of an offer
An offer is a unilateral act, no rights and duties are created

Termination of the offer.

a. Rejection of the offer by offeree.
b. If stipulated that offer is valid only for a certain period of time, it falls away if not
accepted within that period.
c. If before the offer has been accepted the offeror informs the offeree that he withdraws the
offer, offer is extinguished.

31
d. If the offeree does not accept the offer exactly as it is made but wishes to accept subject
to alterations, improvements eg of a house. This is tantamount to counter offer, offeror
becomes the offeree and offeree becomes the offeror. The original offer is extinguished.
Hyde v Wrench [1840] 49 ER 132.W offered to sell farm to H for 1000. H counter-
offered 950. W rejected. H purported to accept previous offer. W was no longer keen to
sell the farm. H sued W. Held: Counter-offer amounted to rejection of the offer therefore
no longer open to acceptance.

e. If either offeror or offeree dies before offer is accepted, offer falls away.De Kock v
Executors of Van de Wall [1899] 16 SC 463 offer of donation could not be accepted after
death of offeror.

f] Loss of contractual capacity. Contractual capacity lost through insanity, insolvency, etc.

Special offers

1. Options
It is an agreement between an option grantor and option Holder, in terms of which the option
grantor keeps for acceptance an offer for a certain period of time. The option creates rights
and duties in that the option grantor must keep a certain substantive offer open for the
exclusive acceptance by the option holder for a determined or determinable period of time. If
option holder does not accept the substantive offer within the specified time period, the
substantive offer is terminated because it is rejected and the option agreement is terminated
through fulfilment. The offer can be transferred from one person to the other. It Must be
distinguished from Preferential right. This is a right which the grantor of such a right gives
the holder of the right, in terms of which the holder has the opportunity to make or receive an
offer (Van Pletzen v Henning 1913 AD 82 and Boyd v Nel 1922 AD 414). Offeror bound to
keep option open for period agreed. Failure to keep option open amounts to breach for which
offeror can be sued.

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2. Offer for reward

An advert for a reward constitutes an offer. Acceptance must be in Response to the Offer for
reward.The whole idea of the analysis in terms of offer and acceptance is to emphasise the
reciprocal nature of the relationship. This is not a problem with regard to bilateral contracts
where one party makes an offer to which the other responds with an acceptance, thus
identifying the existence of a contract and its terms. In the case of a unilateral contract, i.e. an
act in reliance upon a promise, it is necessary to show that a link exists between the act and
the request that it should be performed. Thus a party can hardly accept an offer of which he /
she did not know or had forgotten.

R v Clarke(1927) 40 CLR 227 Australian High Court. A reward has been offered for anyone
giving information which led to the conviction of those responsible for the murders of
policemen. Clarke gave information which led to such arrest and conviction. However, his
claim to the reward was resisted. Clarke's motive and intention in giving the evidence was to
protect himself and to clear himself of the charge of murder. Only after arrest, conviction and
appeal by the others, did Clarke think of claiming the reward. It was held that Clarke did not
act "in reliance upon the offer or with the intention of entering into any contract" - although
clearly, the convictions would not have come about without his evidence.

Isaacs ACJ points out in his judgment the difficult case of Gibbons v Proctor (1891) where,
by contrast, a policeman was allowed to recover a reward, although he did not know of the
existence of the reward when he sent off the information. He points out that in Anson on
Contracts it was stated that that decision was wrong, and that he (Isaacs) thought it was too.

So a mere coincidence between the act required and the doing of that act is not sufficient - it
requires some mental element connecting the two - and which we would call an intention -
although we also know of course that in many cases, the intention involved does not go
beyond the doing of the act itself - the intention to get on the bus, seldom involves an
"intention" to create a contract, but we have no problems construing the situation as if there
were such an intention. This is often done via the "objective test" idea - which was obviously
thought not to be appropriate to this type of situation.

Carlill v Carbolic Smokeball Co - Offer can be made to the world at large

(1893) Court of Appeal - discussed in previous lecture

33
The manufacturers of an influenza remedy in their advertisements said that if anyone used
their remedy and then caught flu they would be entitled to 100. When a claim was made
they said that there was no contract. It was held that an offer made to the world at large, can
become a contract with those who fulfil the condition.

The operation of this basic requirement may be affected by an implied assent to the existence
of a contract based upon an acceptance that was not communicated.

Requirements for a valid acceptance.

a. Can only be made by the offeror (except in public offers)
b. Offeree must have serious intention to be bound to his acceptance.
c. Acceptance must be clear, certain and unambiguous
d. Contents of the acceptance must correspond with the contents of the offer.
e. Acceptance does not have to comply with any formalities.
f. Acceptance only complete when the offeror is notified.

Legal Consequences of acceptance

Acceptance leads to consensus and conclusion of contract, should other requirements for a
valid contract also be met. It is necessary to determine exactly where and when a contract
comes into being. So that one can determine which court has jurisdiction over a dispute
regarding the contract.

JURISDICTIONAL ISSUES
Time and place for conclusion of CONTRACT.
Where parties are in each others presence, no problem the contract would be concluded at a
place where they conclude the contract. Problems arise if parties are not in each others
presence. Eg the offeror is in Harare and offeree in Bulawayo eg. A who lives in Harare
telephones B in Bulawayo and offers to Buy Bs Car. They negotiate the price and eventually
agree on a certain price. The question can be asked whether the contract was concluded in
Harare or Byo. To solve this problem certain theories exist.

34
a) Declaration Theory
In terms of this theory, Contract comes into existence at the time the offeree voiced or
declared his acceptance of the offer. This does not mean that the offeror received notification
of the acceptance. The offeror might be bound before he knows of the existence of a contract.
This theory has shortcomings

b) ExpeditionTheory.
Contract concluded where and when the acceptance made by the offeree is dispatched or
expedited to the offeror. This applies to real postal contracts. The contract is concluded on the
day the offeree posts the acceptance.In Cape Explosive Works v SA Oil and Fat Industries
Ltd. 1921 CPD 241 SA
Oil and Fat Industries [SAOFI] wrote letter to Cape Explosive Works [CEW] [Cape] offering
to sell certain quantity of glycerine. CEW posted letter of acceptance on 14/7/16. Letter
received by SAOFI. Became necessary to determine where contract was concluded to
determine which court had jurisdiction to hear dispute. Held that the contract concluded in
Cape where letter of acceptance posted.

c) Reception Theory
Contract is concluded where and when the offeror receives the acceptance and not necessarily
takes cognizance of the contents of the acceptance.

d) Information Theory
Contract concluded where and when the offeror receives notification that his offer has been
accepted by the offeree. In the previous example, Contract comes into existence in Harare
where he learns of Bs acceptance.
Factors affecting consensus
1. Misrepresentation
It is a false statement of fact that something exists while in actual fact it doesnt or an untrue
statement concerning an existing state of affairs which is made by one party to the other with
the intention of inducing the other party into concluding the contract. Can be made
expressly(purposefully) or by conduct(jus chosen not to tel the truth/concealing info). Even
concealment of facts constitutes misrepresentation. This would be the case only if presenter
had a duty to make certain relevant statements eg in insurance contracts. Misrepresentation

35
renders contract voidable, (election). A contract will be voidable as a result of
misrepresentation if following requirements are satisfied
1. Misrepresentation must be made by one party to the other contracting party.
2. Misrepresentation must be made during negotiations preceding the conclusion of contract.
3. misrepresentation is unlawful even if its innocent(dung smethng dat has effects but u r not
aware)
4. Misrepresentation must have induced the contract as it stands.
The reason for conclusion of contract was because of misrepresentation.

Misrepresentation must be distinguished from what is known as "mere puffs" or simple

commendatio [i.e. praising ones own merchandise].

In Naude v Harrison 1925 CPD 84, defendant [D] who was selling a house told plaintiff [P]
that the house in question was "well built". P bought the house and discovered that the walls
were cracking and sued D for misrepresentation. Held the statement that the house was "well
built" not a misrepresentation but mere puffing
In contract of sale, failure to disclose latent defect in merx(wen A is selling a cow to B,the
cow has a broken limb tis is not visble), of which seller is aware amounts to
misrepresentation.

In Dibley v Furter 1951 [4] 73, P bought a piece of land from D. D knew that the piece of
land in question had been used as a graveyard but did not disclose this to P.

3 Forms of misrepresentation
(i) Intentional misrepresentation.
Statement made with intention of inducing a contract. Misrepresenter knows that he is
misleading the other party. Party induced to enter into the contract may claim damages.

ii) Negligent Misrepresentation

Statement made negligently to induce a contract. A person neglects to find out the truth
himself and makes a false statement. If a person makes a statement he believes to be true
without taking steps a reasonable person would have taken in the circumstances to satisfy
himself that the statement was the truth. Aggrieved party may claim damages regardless his
choice.
36
iii) Innocent misrepresentation
Not Fraudulent or negligent but one makes the misrepresentation without knowledge of its
truth. is The innocent misrepresenter not liable for damages.

2.Duress
Duress can cause a person to do something which he normally would not have done. If
someone is placed under duress with the intention of forcing a contract and he is in a mental
state of contractual incapacity, no contract exists. Renders the contract voidable.

Requirements
1. Other party must have been responsible for the duress.
2. Duress must have caused the conclusion of the contract.
3. Duress must consist of a wrongful threat of damage or harm
4. The contract must be prejudicial to the party under duress.
5. The threat must be of an imminent or inevitable evil.

3.Undue influence
When a person exercises his influence over another which leads to the conclusion of a
contract eg where a doctor persuades a patient who is dying to conclude a contract which is
prejudicial to the patient.

Requirements
a) One party to the contract must have obtained an influence over the other party to the
contract.
b) Influence must have weakened the prejudiced partys resistance and rendered his will
pliable and open to manipulation.
c) Influence must have been used in an unscrupulous manner.
d) The influence must have convinced the prejudiced party to conclude a contract to his own
detriment.
e) The influence must have convinced the prejudiced party to reach consensus which he
would not have reached had he had the normal freedom of will

37
4. Error/mistake
Definition
Error is a misunderstanding or a misconception by one or more of the parties regarding
certain facts, events or circumstances.
In law we have:
a] Unilateral mistake where one party to the contract is mistaken and the other is not
b] Mutual Mistake where both parties are mistaken about each other's state of mind.
c] Common Mistake this occurs where both parties are of one mind and share the same
mistake.

Effect of Mistake
If both parties labour under a material mistake = no consensus and no contract.
In order to temper the harshness of law, parties are held to their declaration of intention
unless the circumstances are such that the mistake is reasonable. If unreasonable the contract
is void.

Conditions to be met before a mistake will render a contract void.

1. Mistake must relates to a fact or a legal rule or principle
2. Thatfact or rule/ principle is material.corpore,negotio,substantia,persona,motive,nominee.
3. Mistake (whether of fact or of law) is also reasonable.

1. Must relate to a fact or to legal rule or Principle.

Example of mistake in law.
A pay B $ 2000 under the mistaken belief that he owes the money to B (no obligation). A
mistake in law or fact will only invalidate a contract if it is considered to be excusable in
circumstances.
2. Mistake must concern a material fact, legal rule or principle.
Mistake which are material and can exclude consensus can be misunderstanding with
respect to identity eg a phones and gives B a job who answers the phone while A is under the
impression he is talking to C and offering C a job-error in persona no consensus. Mistake
concerning content of intended contract voids the contract. X is under the impression that he
is making an offer to buy ys house in Cape town but Y is under the impression that the offer
is being made to buy a house in Durban-error in negotio

38
Error in corpore refers to a mistake involving the identity of a particular object. For
example, if a person buys a horse believing it to be the one that s/he had already examined
and ridden, when in fact it is a different horse this amounts to error in corpore
Also theres a mistake with regard to interpretation of the law eg ownership of immovable
property
Error in substantia-mistake as to the quality of the thing.
Mistakes not material
Error in nominee
Error in motive

3. The mistake in fact or law must be reasonable

Mistake will be reasonable if the reasonable man in the circumstances would be mistaken eg
A who suffers from a hearing problem is under the impression that B is offering only R100
000 for his bicycle in fact B is offering only R100. Although there is no consensus As error
cannot be accused since a reasonable man would not simply assure that he would obtain such
a high price for an old bicycle.

No matter how material the mistake is, it will not entitle the mistaken party to repudiate the
contract if it was due to that party's own fault. Acacia Mines Ltd v Boshoff 1957 [1] 1 SA 93.
A distinction needs to be drawn between a material mistake and a fundamental mistake. A
mistake is fundamental if its very existence renders agreement non-existent to the extent that
no contract could be said to exist at all. Such a contract is void ab initio. In Maritz v Pratley
1894 [2] SC 145 a mirror and a mantelpiece were placed on top of the other at an auction.
The two were however being sold by the auctioneer as separates lots. P made a bid on them
in the mistaken belief that the constituted one lot [he was buying both]. P refused to take the
mantelpiece without the mirror and M sued him in breach of contract. It was Held that there
was no sale since there was no consensus on the subject matter of the sale.

39
CHAPTER 10
CAPACITY TO PERFORM JURISTIC ACTS
Capacity to perform juristic acts
Every legal subject has legal capacity. Every legal subject bears rights and duties. Not every
person who has legal capacity has capacity to act. Capacity to act refers to the capacity to
perform juristic acts, to participate in legal intercourse and to conclude valid transfers. Only
natural persons are capable to enter into juristic acts. A company cannot enter into juristic
Act. A natural person must perform juristic action of the company.

Factors Affecting Capacity

Age
Mental in Capacity
Influence of alcohol/drugs
Insolvency
Prodigality

1.Age
Majority
18 Years and older people are capable of entering into contracts. Have full capacity to Act.
Minor
obtains full capacity to act upon marriage.

Minority
0-7
8-17
Under the Age of 7
No capacity to enter into contracts. Cannot even accept offer of donation. If a minor wants to
enter into legal intercourse he must be assisted by a guardian. If he contract is detrimental to

40
him/her then he can change the contract within 1 year from the date he became a major, In
Zimbabwe the father of the child has guardianship over the child. For children out of
wedlock, the mother is the guardian. Spouses may exercise these rights independently of each
other. However consent of both parents is required on these contracts.
a. Contract of marriage
b. Adoption
c. Removal of the child from the republic
d. Application for passport
e. Alienation or encumbrance of immovable property or any rights of immovable property
which belongs to the minor child.

Minor over 7 years

Limited capacity to act. May conclude contracts which are exclusively to his benefit. Only
those contracts where he incurs rights and not duties. Eg donation

1.Special situations Contract binding upon minors

a.Tacit emancipation
If a minors legal guardians permit him to carry on a trade or occupation on his own account
he acquires full legal capacity in respect of the trade or occupation. A general consent,
express or tacit must be given by the parent / guardian which entitles the minor to act in
certain economic spheres minors has full contractual capacity for all juristic acts performed in
these spheres. Consent can be revoked any time.In Dama v Bera 1910 TPD 928 an Indian girl
who was a minor had been earning her living as a servant for on five years. She lived with her
parents but retained control over her income and paid a certain amount to them for board and
lodging. Following a wage dispute with her employer the question arose whether she had
legal capacity to represent herself. Held: She was tacitly emancipated and could sue her
employer for the wages due to her.

In Grand Prix Motors v Swart 1976 [3] SA 221 the respondent whilst she was an 18 year old
student nurse had entered into a hire-purchase contract to buy a car unassisted by her
guardian. She paid a portion of her purchase price in instalments and then returned the car
being unable to continue the payments. Soon thereafter she got married and claimed
repayment to her of the amount she had paid under the hire-purchase contract as she
41
contended that at the time, she was still a minor and the contract was therefore not binding
upon her. The appellant led evidence establishing that at the time she was living in a student
hostel and spent her salary as she saw fit. Her parents were divorced and neither of them had
any say in how she spent her money. They argued that on the basis of these facts the
Respondent was tacitly emancipated at the time and was therefore bound by her contract.
Held: The respondent was not tacitly emancipated hence was not bound by her contract. It is
clearly risky to contract with minors.

b.Minor pretends to have attained Majority.

He is bound to his acts as if he had really attained majority at the time the Act was performed.
c) Where minor obtains rights and not duties eg contract of donation
d) Where minor acts with consent or assistance of parent / guardian
e) Where the guardian acts on behalf of the minor.

Restitutio in integrum.
If a contract is concluded by or on behalf of the minor and is prejudicial to him, minor
entitled torestitutio in intergrum. Contract set aside and parties entitled to be placed in the
position they were in before conclusion of the contract.

In the following 3 instances, minor may not claim restitution.

a. Where at the time of performance of the juristic Act, the minor fraudulently pretended to
be a major.
b. Minor ratifies the act after attaining majority. Ratification can take place expressly or by
conduct.
c. Where the action has prescribed.

Contracts not binding upon minors

a)Contract which minor concludes without necessary assistance in spite of his unlimited
capacity to act.
If guardian ratifies before the minor turns majority or himself after acquiring capacity. Such
ratification renders minor liable.Contract entered into by the minor without necessary
assistance is not enforceable as against minor. Minor does not incur liabilities against the
other contractual party. Unless contract is ratified it is unenforceable against the minor, not
42
even after minor has obtained majority. Once guardian has given his assistance he has by
implications ratified the contract rendering it enforceable the minors promised performance.
If minor institutes action against major for payment before delivery major can raise the
defence that he need not pay until minor performs.
The remedy of the major = unjustified enrichment-minor must return what remains in his
possession when action is instituted.
i) If the minor has recklessly squandered full amount he cannot be sued on the ground of
unjustified enrichment because theres nothing left and he is no longer enriched.
ii) If he has bought a luxury item, he has to surrender it or its value.
iii) If he used money to pay or provide essentials for which his guardian normally would have
to pay the minors guardian will be liable. Guardian would have been enriched.

b) Marriage
Marriage also affects capacity. Zimbabwean marriages are out of community of property.

i.Marriage in community of property

Assets joined separate assets and liabilities are consolidated so that there is only one
common joint estate. In terms of Ante-nuptial contract, parties who do not want a joint estate
must stipulate that their marriage will be out of community of property and without
community of profit and loss. Each spouse retains his separate estate and each one has
capacity to act in respect of his own estate.

ii.Agreements entered into by a spouse married in community of property

Each spouse has full capacity to act with regard to joint estate. One can sell, dispose and
incur debts without the consent of another. Certain contracts require consent of both parties
eg sale of immovable property or burdening property. These need written consent of another.
If 3rd party does not know whether a written consent was issued, the contract is valid

c) Mental Deficiencies
A mentally deficient person is not able to understand and appreciate the nature or
consequences of his conduct such that he cannot make rational decisions or manage the
particular affairs. The contract is void. Curator is nominated by High Court. The test is
whether the person was normal or mentally deficient at the moment of concluding contract. If
it is concluded during lucidum intervalum (moment of sanity) = valid. Before certification or
43
appointment there is a presumption of normality and of capacity to Act. After certification,
there is presumption of incapacity.

d) Influence of alcohol or Drugs

A person who is in such a state of intoxication caused by alcohol or drugs to such an extent
that he does not appreciate the nature and consequences of his actions or unable to control his
actions is incapable of forming his will ie he is incapable of performing juristic acts. There
is a presumption of capacity though. The defendant will have to prove that he had no
capacity. He who alleges must prove.

e) Prodigals
A prodigal is a person who squanders money in an irresponsible and extravagant manner.
High Court may on application by an interested 3rd party, declare him a prodigal. A curator is
appointed. He can only enter into agreements where he derives advantage and not liability
can be entered into.

f) Insolvency
If a persons estate is sequestrated as a result of insolvency his capacity to act will be
influenced by certain provisions of insolvency Act. After sequestration, estate vests in the
master then trustee. After sequestration he loses capacity to Act with regard to the insolvent
estate. Any attempted agreement to dispose of such assets= not valid. May not enter into
contract having an effect on assets of insolvent estate without permission of his curator. The
contract is voidable at the instance of the curator who has the power to ratify the contract.
May accept any position as employee without permission of the curator. May not be a
director or bank manager

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CHAPTER 11
Physical possibility of performance
Performance to which the parties have agreed must be capable of delivery.If object of
performance does not exist at the time of conclusion of the contract, no contract comes into
existence.Eg the cow which A has exchanged for Bs horse died the previous day.

3 forms of impossibility of performance

1. Impossibility at the time of entering into the contract.
No contract comes into existence.
2. Becomes impossible after conclusion of contract.
Contract comes into existence but terminated for impossibility (Supervening impossibility)

3. Made impossible by the debtor after conclusion of contract

The contract remains in force. Debtor commits breach of contract. It is required that
performance must be objectively impossible i.e. must be impossible for anyone according to
general human experience to perform in accordance with the contract. If debtor finds it
difficult or inconvenient to perform it will not be treated as impossibility . Eg V lets his to T.
without their being aware of it, the house was destroyed by fire the previous day. No contract
because of impossibility. If its subjectively impossible eg where S sells a thing to P. Before
delivery to P, he sells it to T for a higher price and delivers the thing to T. T acts in good
faith. The Contract between S and P is valid. P will be able to claim the thing from S, and S is
unable to deliver it. P can claim damages from S on the grounds of breach of Contract.

Performance must be determined or determinable. Performance will be determined if parties

expressly mentioned the performance in this agreement. Parties agree that it will buy the cow,
daisy from V against payment of R500. Identify of a cow as well as the amounts payable are
specified and both performances are determined.

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Determinable
If parties agree on a criteria or formula to identify the performance or if they agree that a
specified person will determine the performance. E.g. if parties agree K will buy the 1 st
heifer to be born on Vs farm, at a price to be determined by the outsider Z, the parties have
laid down a criteria to determine the subject matter of contract and a method of determining
price.

Alternative and generic obligations as examples of determinable performance

Alternative
A party may select the performance from 2 or more different alternatives eg either of the 2
houses. E.g. A has 2 houses he wants to let to B. the parties agree that A may elect which
house he will let to B and that B will rent that house. As soon as A makes a choice the
performance is determined. As soon as he has exercised his choice, performance is no longer
determinable but is determined.

Generic obligations
E.g. A agrees with B to buy a cow from Bs Jersey studs at a particular price, the
performance is determinable and the contract valid.
The election lies with the debtor (B) to select the particular object from the genus or kind.

ARE RESTRAINTS OF TRADE LEGAL

TWO CONFLICTING RIGHTS AND DUTIES

RIGHT TO FREELY TRADE OR WORK AT ANY COMPANY AND DUTY
-DUTY TO UPHOLD THE CONTRACT
-RESTRAINT OF TRADE WILL ONLY BE LEGAL IF
1.IT PROTECTS A SUBSTANTIVE INTEREST
2.IT IS REASONABLE

-SCHWARTZ V SUBEL
-The defendant sold a general dealers business to the plaintiff.

46
-A clause in the agreement of sale provided that the seller was not permitted to open up
a shop in opposition to the buyers business within a 5 miles radius
-soon after the agreement and payment,Subel purchased a business 1,5 miles down the
road!
HELD;Schwartz was able to obtain an interdict permanent restraining Subel from
operatig the new shop .The idea was to protect goodwill!

CHAPTER 12
LEGALITY
Contract must be lawful. It must not be contrary to public policy. If the contract is contrary to
legislative provisions or common law rules then it is unlawful. The nature of any contract and
the obligations imposed by any contract should be lawful

Consequences of an illegal contract

Contract is void. No obligations arise from the contract. Exturpi causa non oritur actio( no
one can benefit from a scandalous cause) is applicable. If money has been paid but delivery
has not taken place, the par delictum rule says, he who is in possession has a stronger right.
he is not obliged to deliver the object nor repay the money to the seller. If an athlete agrees

47
with a pharmacist to purchase oxandrolone tablets (anabolic steroids) and pays $1000 in
advance, the contract will be void as it contravenes section 22A of the medicines and related
substances Control Act. If the pharmacist refuses to hand over the tablets, the athlete will
neither be allowed to claim delivery of the tablets nor claim return of his money. if the
pharmacist delivers fake tablets then he cannot be able to claim for breach of contract.

Case on legality
Muguti v Uboxit Worldwide PVT LTD & others 2010 (1) ZLR
In July 2008, the defendants 12 September contracted with a freight company to transport
certain consignments from Zambia for US$6 500 of which after payment of the deposit, the
sum of US$3000 remained outstanding. At the time the contract was entered into, the official
currency of Zimbabwe was the now defunct currency. As the contract price was reflected in
USdollars, the contract was in contravention of the exchange control regulations,1996, and
thus unlawful.

The plaintiffs claim was dismissed. In dismissing the claim, the court stated that in the
absence of evidence, court could not hold that that the freight services were so out of
proportion with the payment made for such services that it should interfere by relaxing the
rule operating against the contract.
It was also stated by the judge that the law applicable to illegal contracts is quite clear. Where
the contract has not been performed, the courts will not compel performance by either party
to the contract. The rule is absolute and admits of no exceptions, the courts will relax the pari
delicto patiorest condition possidentis rule to do simple justice between parties.

Contracts contrary to public policy

If a contract offends the publics perceptions of justice, will be void
Common example is restraint of trade. In general, restraints are valid in our law provided that
theyre reasonable. A restraint is reasonable if it protects a substantive interest. If it is
unreasonable, it will be contrary to public policy

REQUIREMENT 5

Formalities

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No formalities in general. if parties agree that the contract has to be in writing then it has to
be reduced to writing.

Generrally there are no formalities to be complied with

-if parties stipulate that certain formalities have to be met,formalities have to be complied
with
-There are certain contracts that must comply with formalities for them to be valid eg
-Contract of sale of immovable property and suretyship

CHAPTER 13

CAVEAT SUBSCRIPTOR RULE

LET THE SIGNOR BEWARE

A well known and established principle of our Law is summarized by the Latin maxim caveat
subscriptor which translated into English, means Let the signor beware. Simply put this
means that when a party to a written contract signs it, he is presumed to be aware of all the
terms and conditions of the contract, and is bound thereby. It will not, in general terms, avail
him to subsequently protest that he was not aware of the offending term or that he signed the

49
agreement without understanding the meaning and implication of the offending term, or that
the inclusion of the offending term is grossly unfair to him.

Many cases dealing with this principle have come before our Courts and, for the most part,
our Courts have applied this principle strictly and have not come to the aid of the Party
seeking not to be held bound by the offending terms and conditions of the Contract. One such
case which did come to our Courts dealt with this principle. The facts are as follows:

1.Mr A checked himself into a private hospital in order to undergo surgery for a medical
problem bedeviling him. He presented himself at the reception office and was presented with
a document which he was required to sign before being shown to his ward. This document
was the contract governing his stay in the hospital and set out the charges he would have to
pay for his stay in the hospital. One such clause provided that should any mishap befall Mr A
whilst in the hospital causing him to suffer any physical harm, the hospital would not be
liable to compensate him for the harm befalling him, irrespective as to how the mishap
occurred. It provided that if the mishap was caused by any act on the part of anyone
employed by the Hospital, no liability would attach to the Hospital to compensate him.

2.Upon being presented this document, Mr A glanced at it, signed it, and was shown to his
ward.

3.During Mr A's stay in hospital and after the surgery was performed on him, and whilst
recuperating, he needed to go to the bathroom. At this stage he was still under sedation and
the nurse advised him that it was in order to walk unaided to the bathroom. On route he had a
fall and sustained serious injuries.

4.After his discharge from hospital, Mr A instituted an action against the Hospital in the
Transvaal Provincial Division in which he claimed compensation from the Hospital alleging
it to be liable on the grounds of the injury having been caused by the negligence of the Nurse.
The negligence of the nurse was not denied by the hospital, but it asserted it was not liable by
virtue of the existence of the clause in the written contract rendering it not liable for any
injury sustained while Mr A was in the hospital irrespective as to how the injury was caused.

5.Mr A claimed to be unaware of the existence of this clause, he did not spot it when reading
the document presented to him, and stated that had he been aware of it, or had his attention

50
been drawn to it, he would not have signed the contract with the inclusion of that clause. In
support of his contentions he led evidence, and it was not disputed by the Hospital, that when
presented with this contract the attending admissions Clerk did not draw its existence in the
contract to his attention.

6.The Learned Presiding Judge held that, whilst acknowledging the existence in our law of
caveat subscriptor, the offending clause and its implications were somewhat harsh and that
there existed a duty on the Hospital to ensure that its admission Clerk specifically drew the
existence of this clause to the Patient. Because it failed to do so he held the Hospital liable to
compensate Mr A for his injuries.

7.However this did not end the matter. The Hospital took this decision on Appeal to the
Supreme Court of Appeals which delivered a judgment holding that there was no duty on the
part of the Hospital to ensure that its admission Clerk specifically drew the existence of this
clause to the Patient. There was, it held, a duty on the part of Mr A to read the Contract,
understand it, and to sign it only once he agreed to be bound by the terms and conditions
contained in it. If Mr A did not read the contact through properly and carefully he should
have refused to sign it. Once he affixed his signature to the document, he was held to be
bound by its terms and conditions. The Court once more entrenched the principle of caveat
subscriptor .

8.It is observed that had Mr A informed the Admissions Clerk his unwillingness to sign the
contract as presented to him because of the inclusion of this clause, it would have been most
unlikely that the Admissions Clerk would have been vested with the authority to delete it
from the Contract. Moreover, it is observed that being understandably anxious about the
surgery Mr A was to undergo, it is unlikely that he contracted with the hospital on an equal
footing with it in that on protesting his dissatisfaction with that clause, he would have most
likely been informed that if he refused to sign the contract in the form presented to him, then
he would not have been admitted to the Hospital for the surgery he had to undergo. However
this point was not dealt with by the Supreme Court of Appeals.

TICKET CASES
In general thereare three questions to be asked;
1. Did the holder know that certain words appeared on the contract-
2. Did the holder know that certain words referred to certain terms of the contract

51
If the answer to both these questions is yes, the holder of the ticket is held liable to such
conditions.If the answer is in the negative, the following question is asked
2. Did the party issuing ticket do everything in his or her power to draw the attention of the
holder of the ticket to the fact that the words on the ticket refer to terms of the contract.

In contract law, ticket cases are a series of cases that stand for the proposition that if you are
handed a ticket or another document with terms, and you retain the ticket or document, then
you are bound by those terms. Whether you have read the terms or not is irrelevant, and in a
sense, using the ticket is analogous to signing the document. This issue is an important one
due to the proliferation of exclusion clauses that accompany tickets in everyday transactions.

The case of Parker v. The South Eastern Railway Co (1877) 2 CPD 416 illustrates restrictions
on this concept:

Knowledge of writing and of terms: If the recipient of the ticket knew that there was
writing on the ticket and also knew that the ticket contained terms, then the recipient
is bound by the terms of the contract.
Reasonable person: If the recipient did not know of the existence of the terms, then
the court will consider whether a reasonable person would have known that the ticket
contained terms. If that is so, then the ticket-holder is bound by those terms; if not,
then the court will return to the general test of whether reasonable notice of the terms
was given.

The test of whether a document fits within the description of a ticket is an objective test, that
is, whether a reasonable person in the position of the ticket-holder would perceive it to be
contractual in nature. For instance, if exclusion clauses accompany a docket, it may be held
that it is not contractual in nature since it is just a receipt.

Furthermore, Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd [1989] 1 QB
433 held that if a party wishes to incorporate onerous terms into a document that is to be just
accepted by the other party, reasonable notice must be given to make it a term of the contract.

Other ticket cases include:

L'Estrange v Graucob [1934] 2 KB 394

Olley v Marlborough Court [1949] 1 KB 532

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 Thornton v. Shoe Lane Parking [1971] 1 All ER 686

EXCLUSION CLAUSES

Exclusion clauses are clauses, usually written down, that say that one party to the contract
will not be responsible for certain happenings. For example, if you join a gym, it is common
for the contract to say that the gym owner will not be responsible if you are injured while
exercising. If you arrange to park your car in a public carpark for a fee, the owner will often
seek to include in the contract a provision that they will not be responsible for damage to
your vehicle, or theft of goods from it, while it is in the carpark.
These clauses can be valid, as long as:
they have been properly included in the contract and
are not contrary to law.
To be properly included in the contract, the clause cannot be tacked on after the contract has
been made. If there is a signed contract containing the clause, this will usually have the effect
of including it. If there is no signed contract, but there are printed documents or signs posted
stating the terms, these can be included in the contract if they are brought to your attention
before the contract is made.
For example, a driver entering a car park who takes a parking ticket from a machine is only
bound by terms which are brought to their attention before taking the ticket. This is because
the contract is formed when the ticket is taken. The car park owner cannot rely on an
exclusion clause printed on the back of the ticket if they did not do anything beforehand to
make the driver aware of it, for example, by prominently displaying the exclusion clause at a
point before the ticket is taken. If the car is damaged due to insufficient care by the parking
company, it will be liable despite the exclusion clause [Thornton v Shoe Lane Parking Ltd.
(1971) 1 All ER 686].
What are reasonable steps to take in order to draw a condition to the notice of a consumer
will vary from case to case. Although most car parks now have printed signs in front of their
ticket windows stating that they accept no responsibility for cars left on their premises,
(which probably makes it an exclusion clause that is a term of the contract) there are still
ways in which the effects of these clauses can be avoided.
The exclusion also has to be legal. There are some important obligations to a consumer that
are placed on a trader and these are implied by statute into consumer contracts and cannot be
excluded.

53
Courts always give exclusion clauses the narrowest reading possible, and where there is any
doubt the interpretation most favourable to the consumer is adopted. An exclusion clause will
generally not cover a breach which occurs outside the 'four corners' of a contract, such as
where a trader does something that was not authorised by the contract.
Where a trader has attempted to limit or exclude liability of an implied term a consumer
should seek legal advice as the law on this point is both complex and uncertain

CHAPTER 14
Terms of contract
A term is a provision imposing one or more obligations to act in a specific manner or refrain.
It defines the contractual obligations between contractants.Or it stipulates time when or the
circumstances in which the obligations either become enforceable or are terminated, for
example: The car will be delivered after payment of the full price.

Different ways of incorporating terms into a Ctr.

1.Express terms
Articulated declarations of intent
54
A term is express if it is stated in so many words, whether in writing or orally.

2.Tacit terms
Not been expressed in words but is based on the parties true intentions or their intentions as
imputed by law.Based on assigned intent in respect of a given situation they had not
bargained for. Inferred by court from expressed term, and surrounding circumstances or trade
usage.
The test: what the parties would have answered if, at the time of concluding the contract,
someone were to ask them what the position in respect of a specific case or problem would
be.
If both parties were to answer that the position is the same as that expounded in the alleged
tacit term, then a tacit term is established eg. One enters into a public taxi to town, although
there is no express term about the taxi fare, It is a tacit term that the passenger has to pay and
the driver expects payment.

3) Implied terms
Term not expressed in words but can be incorporated into the Contract by operation of law.
When Contract has been classified as a particular contract, law imputes certain consequences
to the Contract. for example guarantee against latent defects forms part of every Contract of
sale unless excluded by parties.Usually referred to as Naturalia.

4) Essentialia, Naturalia and Incidentalia

Are terms which are essential for the classification of contract as belonging to a particular
class of contract eg essentials for sale: the seller must deliver the object sold and buyer to pay
sum of money.If not, it cant be a Contract of sale.

4.1 Naturalia
Terms which the law attaches to every Contract of a particular class. They help to determine
Rights and duties of contracting parties and effects and consequences of their contract. The
naturalia of many Contracts known to Zimbabwean Law are based largely from Roman law,
but are adapted by our courts, legislation and trade usage.
4.2 Incidentalia
Additional terms by parties themselves.
5) Conditions
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A condition is a contractual term which renders the operation and consequences of the
Contract dependant on the occurrence of a specified future event.Event must be uncertain
whether it will indeed occur.Eg A makes an offer to buy Bs house if the sun rises tomorrow
= not a condition.

5.1 Types of conditions

5.1.1. Suspensive Condition

A contractual term which suspends operation of the contractual obligation in terms of the Ctr
until the condition has been fulfilled. Valid contract at conclusion but rights and duties
suspended until condition are fulfilled.Condition will be fulfilled when uncertain future event
takes place eg I will give you the share certificate when you make full payment for theshares.

5.2. Resolutive Condition

Contractual term which renders the continued existence of the Contract dependent on the
occurrence (or non occurrence) of a specified uncertain future event. Contractual rights and
duties become operative and are enforceable immediately. If condition is fulfilled the
Contract is dissolved and contractual rights and duties cease to exist eg I will lend you my car
until you buy yours or I will supply water to you until the beginning of rain season.

6. Time Clause
Distinguished from condition
In the case of condition, Contract comes into operation or is dissolved upon the occurance of
a specified uncertain event.Whilst time clause determines a specific time when or the period
within which the contract will either become operative or be dissolved eg 1 January 1991, a
good example is the Promulgation of Acts. The Act will become operative from the 01
March 2011.Example 2: 6 months after conclusion of the contract, the insurer may waive
the terms of the contract

6.1 Suspensive Time Clause

Duty to perform is postponed until a determined or ascertainable moment has arrived.The
consequences of suspensive time clause are that the contract comes into being when it is
concluded so that the parties are bound to the obligationsbut Rendering of their performances
in terms of the Contract is postponed until the moment has arrived or when the period has
56
lapsed.Contractual obligations come into operation & enforceable when the specified
moment has arrived or when the specified period has ended.A undertakes that 1 month after
Xs death, he will buy B a new vehicle.

6.2 Resolutive time clause

Contract is subject to resolutive time clause if parties agree that the obligations flowing from
the contract will have effect until the arrival of a certain moment or until the expiry of a
certain period of time Contract comes into being immediately, when the moment arrives then
the obligations are extinguished.A rents Bs house for a period of 2 yrs. After 2 yrs Contract
lapses

7. Supposition
A contractual term which renders the existence of a contract dependant on an event which has
already taken place or on a state of affairs which exists at the time of concluding the ctr.
Contract comes into being if supposition is fulfilled.Eg A wants to purchase Bs stand if it
has a sea view.A does not know whether this is the case and is not willing to give a guarantee
in this regard. They agree that B will purchase the stand provided the house has a sea view. If
the sea is indeed visible from the house, obligations are created from the beginning.

8. WARRANTY
It is a contractual term relating to the absence of defects in the warrantors product or service
or possibility that the warrantor is able to render the performance or to the quality or standard
of the warrantors product or service to the quantity of the performance etc.A sells his fridge
to B and guarantees to B that exterior paint of the refrigerator will retain its original colour
for 3 yrs,A undertakes additional obligation.If it discolours within that period, A will be in
Breach. Some warranties are imposed by operation of laws eg warranty against latent defects
or eviction in the contract of sale

9.Modus
This is a Contractual term which burdens a contracting party. The burden can be to perform
as against a 3rd party or to do something or to refrain from doing something.eg A donates a
house to B, subject to the modus that B must use part of it as a nursery school.Contract is
unconditional and B can enforce As perform immediately, even if B has not yet complied
with the modus.B can claim delivery of the house immediately but if he fails to execute the
57
charge, he is guilty of breach of contract and A can use the ordinary contractual remedies. Eg
Sam donates his farm to his Son Subject to modus that he donates R100 000 to his
sister.Modus always refers to the future.

10. Cancellation Clause

Entitles a party to cancel in breach of contract. This is called lex commessoria

11. Penalty Clause

Law and common law attaches certain consequences to breach of Contract by affording
certain remedies to the innocent party eg if you dont pay by the 1st day of every month you
will be charged a penalty of $20 per day until you pay the full amount.

12.Forfeiture clause
Often found in lease agreement. Entitle landlord to cancel lease and eject tenants when tenant
in breach e.g. in payment of rent on the due date. In the absence of a specific provision non
payment of rent not a material term entitling landlord to cancellation.

13.Foreclosure clause
Normally found in mortgage bonds and debentures. Entitle mortgagor to call up the balance
due in terms of the bond if the mortgagee [debtor] is in default. Normally entails disposal of
mortgaged property.

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CHAPTER 15
BREACH OF CONTRACT
Breach of Contract
Forms of breach

Default by Debtor
Default by Creditor
Positive Malperformance
Reputation
Prevention of Performance

59
Where a Ctr creates obligation for both parties, each will in turn be a debtor and a creditor
depending on which obligation is involved

1.(Mora debitoris) Default of the Debtor

Debtor commits breach if he does not perform timeously and the delay is due to his fault. He
is in mora. This is called mora debitoris
Requirements
3. Requirements have to be met

1. Performance must be delayed

Debtor Must be late with his performance. if he renders a defective performance it is not
mora Debitoris. the term of contract may either provide for a specific day or time for
performance or no time may be specified

Where specific date or time for performance has been stipulated and the debtor fails to
perform on or before the appointed time, he is automatically in mora. This is termed mora
exre.The specific date for performance must be a day of which it is both certain that it will
arrive.E.g. 31 March 1999 or immediately.Where no date is specified, creditor can determine
a date by demanding that the debtor perform before or on a certain date.When fixing a date,
creditor must put reasonable time. Debtor is in mora if he fails to perform on the determined
date.Termed mora ex persona

2. Delay must be due to the Debtors fault

There can be breach if a party culpably does not honour his obligation.There is, no breach
where the debtor cannot perform timeously owing to bad fortune or circumstances beyond his
control eg viz major.When he has warranted performance at a particular time, late
performance will constitute breach of contract even if the delay was not caused by his fault.

Consequences of mora debitoris

It has an effect on the liability of the debtor should performance become impossible while in
mora. If performance becomes impossible after Debtor has fallen in mora obligations are not
extinguished. The debtor will be liable to perform.

2. Default by Creditor (Mora Creditoris)

60
Where the creditor causes the debtors performance to be delayed.Occurs where an obligation
is a bilateral juristic Act or where creditors co-operation is required for the debtor to be able
to render performance.eg where A & B agree that A will put tiles In Bs house and upon
arrival of A at Bs house, B is not there.

Requirements
a) The performance must be dischargeable.
Performance owing to the creditor must be dischargeable. In terms of existing and valid
obligation and must be physically and legally capable of being discharged .If not yet due, no
mora creditoris.
b) Debtor must tender Performance
Debtor must tender proper performance as specified in the Ctr and must call upon the creditor
for his co-operation. Creditor must fail to give his Co-operation. The default must be due to
the creditor

Consequences of Creditors Default

Debtors duty of care is dismissed if creditor is in mora.He is responsible only for intentional
loss and loss occasioned by gross negligence.Should the performance become impossible
other than through intention or gross negligence while the creditor is in mora, Debtor is
released from his obligationcreditor remains liable for the counter performance.Eg A and B
enter into a Ctr. Ito the ctr, A is to give B his car in exchange of 10 beasts. B takes the beasts
to As home and upon arrival he is told that A has left for SA. Later that afternoon the
lightning strikes the beasts and all of them die, B is still entitled to get the car.In case of
Reciprocal; agreements, the debtor remains entitled to the performance due to him.However
in respect of the obligation towards the creditor, debtor still remains debtor.Obligation
towards the creditor is not as a result of mora creditoris, automatically regarded having been
fulfilled. If Debtor is in mora, it is removed by subsequent default of the creditor.Two forms
of breach of Ctr cannot exist alongside each other in respect to the same obligation

4. Positive Malperformance
Occurs when the debtor commits an act which is contrary to the terms of the Contract.
2 situations to be distinguished:
a) Debtor tenders defective or improper performance.

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eg The builder builds the house he has undertaken to build but not with the material he was
supposed to use.
b) Does something he may not do in terms of the agreement.
eg Instead of giving the buyer Daisy he gives him stichus.
Or He gives a cow instead of a donkey.

4. Repudiation
It is any behaviour by a party to a Contract indicating that he does not intend to honour his
obligations, eg if the other party denies existence of the Contract orTries to withdraw from
the Contract orGives notice that he cant or will not perform . Its possible to repudiate part of
the Contract.Innocent party has remedies for breach of Contract. It is very difficult to
establish whether certain behaviour constitutes repudiation. There must be an Intention to
repudiate Test is an objective one. Repudiation can also take place without any faultBasic
question is whether the person alleged to have repudiated his obligation has behaved in such
a way as to lead a reasonable person to conclude that he does not intend to fulfil his part of
the Contract.Mere failure on the part of the debtor to perform will not constitute repudiation.

5. Prevention of Performance

By Debtor
Where he culpably renders his own performance impossible. Debtor not released from his
obligation e.g. Debtor has to develop and print a photograph film for the creditor but
negligently exposes it to light before development is completed.Performance is
impossible.Debtor can be held liable.

Prevention of Performance by the Creditor

Where creditor commits breach of contract (BOC) in form of prevention of performance
where he culpably renders the debtors performance impossible.E.g. Debtor has to service the
creditors motor car but before this can be done, the creditor negligently causes an accident in
which the motor car is destroyed. It must be distinguished from Default of Creditor -mora
creditoris.

In the case of Prevention of performance by creditor, the debtors performance is made

impossible and consequently can never be rendered.With mora creditoris, creditor merely
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delays the debtors performance but does not render it impossible, so that it is still capable of
being rendered.The debtor will be deemed to have discharged his obligation.The debtor is
still entitled to creditors performance but the debtor must bring into account any expenses he
has saved by reason of his no longer being obliged to perform.The debtor No longer services
the car but is entitled to payment of the Contract amount less any savings, eg on oil that
would have been used.

CHAPTER 16
REMEDIES FOR BOC
1. Execution of the Contract
2. Cancellation of Contract
3. Damages
The availability of remedies is determined by the nature and seriousness of BOC.
1.Execution of Contract
It can comprise of 3 possible orders
(a) An order for specific performance
(b) Order for reduced performance
(c) A prohibitory Interdict

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a. Specific Performance
This is an Order which commands a contracting party to render performance that he has
undertaken to render. It is not made in sequestrated estates or granted in impossible
performance.Court will refuse if specific performance will affect the defendant unreasonably
harshly.

b. Orders For Reduced Performance

Court can order a Ctr Party to render a reduced performance. Theexceptio non adimpleti
Contractus comes into play where the parties to a Ctr have to perform simultaneously.If the
plaintiff claims performance from Defendant in such a case, the Def can raise
exception.Which means that the plaintiff will not succeed with his claim if he himself has not
yet delivered or rendered his counter- performance.Exception gives Def the right to withhold
his own performance until he receives Counter- performance by the plaintiff.If plaintiff
makes defective/partial performance and then claims counter performance from Defendant,
Where performance is divisible, Def can exercise his right to withhold his own performance
in respect of that portion of plaintiffs performance that is still outstanding. If indivisible, he
can make a defective performance, the situation is made complex.Injured party has the
chance to cancel if malperformance was substantial he may also reject delivered
performance, enforce the Ctr and claim proper performance.

Where he rejects the performance and claims proper performance he will be able to ward off
any claim to counter performance with exceptio, until plaintiff has performed properly or has
tendered such performance.It could happen that malperformance is not substantial enough to
justify rejection thereof or that the Defendant decides to retain defective performance.
Defendant has the benefit of the performance but he is still able to ward off a claim for his
counter performance with the exceptio due to the fact that the plaintiff himself has not
performed properly. The question whether plaintiff should be entitled to receive counter
performance for that portion of the indivisible performance that he himself has already made
and if so, how is the extent determined. Decision of Broiling Pvt ltd V Scope Precise
Engineering Pty Ltd 1979 (1) SA 39 (A) PG 124.

2.CANCELLATION

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It is an abnormal remedy for Breach of Contract. If there is a cancellation Clause,
cancellation is usually limited to certain degrees of Breach of contract.In absence of
cancellation Clause, innocent party will be entitled to cancel contract if the breach is material.

Cancellation because of mora debitoris.

In the absence of a lex Commissoria, party may cancel a Contract on the basis of mora
debitoris in 2 instances. Namely where
(a) Time is of essence
(b) He or she acquires a right to cancel the Contract.

(a).Time is of the essence

Cancellation on this ground is only possible where:
Debtor is in mora exre in other words, a date for performance was fixed in the Contract and
debtor is guilty of the delay.Time is of the essence in Contract. This means that it is crucial in
specific circumstances that performance has to be delivered on the agreed date.In essence
cancellation on this ground is based on tacit lex Commessoria which fluctuate in value, and
usually for goods bought for purposes of resale

(b). Creditor acquires Right to Cancel

Where time is not of essence, creditor may acquire a right of cancellation by delivering a
notice of re scission to the debtor.If Debtor is already in Mora exre, creditor must demand
performance within a reasonable time and notify the debtor.A reasonable time has to be
determined regarding the facts and circumstances of each case.If X builds a house for Y
which has to be completed on the 1st of November and the house is not completed on that
date y will have to send X a notice demanding that the house be completed within a
reasonable time 24 hrs will be unreasonable, at least a few weeks.Where Contract does not
specify a date for performance, the creditor must 1st place the debtor in mora ex-persona by
means of a letter of demand if he fails, he can cancel.

Cancellation Because of Mora Creditors

The grounds for cancellation are the same as in the case of mora debitoris discussed above.
(a)Time is of essence and
(b) Debtor acquired a right to cancel.

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Cancellation because of Positive Malperformance
In the absence of lex commisoria, injured party only entitled to cancel the Contract where
mal-performance is substantial.It is substantial if injured party receives something which is
totally different from that which was contemplated at the time of conclusion of Contract and
he, therefore never would have concluded the Contract had he known what kind of
performance he was to receive.In other words injured party may cancel the contract where
mal-performance is of such a serious nature that he cannot reasonably be expected to keep the
performance and be satisfied with a claim for damages.

Cancellation because of Repudiation.

One party does not have to accept reputation but might uphold the Contract.When the Injured
party elects to accept repudiation, he acquires a right of cancellation which he normally might
not have had.If a party to a contract indicates that he is not going to fulfil his contractual
obligations at all, his repudiation is serious enough to entitle the injured party to cancel
Contract.where he indicates he is going to render partial or defective performance, facts and
circumstances of each case have to be examined in order to determine whether the reputation
is substantial enough to allow cancellation of contract.If it is not, injured party may not
cancel the Contract and must be satisfied with a claim for damages. If performance by
repudiating party is divisible the Contract may be cancelled only in part.

Cancellation where performance rendered impossible

Where any party to a contract renders performance impossible, specific performance and
enforcement of Contract are not possible. Where contract indivisible = cancel Contract and
Claim damages. Where it is Divisible, may resile from the Contract in respect of that part of
performance that was rendered impossible.

DAMAGES
Most common remedy for breach of contract. Whether or not the term breached - sufficiently
material to warrant cancellation of contract - injured party always entitled to such damages -
as can prove to have suffered as a result. Damages assessed at time of breach of contract.
Innocent party placed on same position as would have been if in contract properly performed
to the extent that this can achieve through monetary payment without undue hardship to
defaulting party,
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In determining appropriate damages- following considerations decisive:
a] The loss must result from the breach itself- causal link.
b] Must be actual monetary loss incurred or gain not made.
c] Natural consequence of the breach - must have been in the contemplation of the
parties at the time of contracting. Loss must have been reasonably foreseeable by the
defaulter at the time of contracting.
d] The injured party must do all within his power to keep his damages as low as possible
[mitigate his damages]. Cannot allow damages to increase whilst doing nothing about
it.
There are different types of damages
i] Compensatory Damages
These are awarded as a measure of the actual loss suffered. e.g. if A agrees to sell 10 tonnes
of maize to B at $60 000 per tonne and A defaults, forcing B to purchase from another source
who charges him $70 000 per tonne. The compensatory damages would be the $10 000
difference between the agreed price in buying the maize from A and the price from the
alternative supplier.
ii] Consequential Damages
For these damages to be recoverable they should have been reasonably foreseeable at the time
the contract was entered into. In Hadley v Baxendale [1845] the engine shaft of plaintiff's [P]
corn mill had broken and P hired defendant [D] to transport the shaft to the manufacturer who
was to make a new one using the broken shaft as a model. D failed to deliver the shaft within
the time promised. With the engine out of service the mill was shut down. P sued D for lost
profits during the period the mill was shut down. Held - the lost profits could not be
recovered as damages because in many cases millers sending broken shafts do not shut down
their mills, using spare shafts. Therefore damages of this kind were not reasonably
foreseeable since D was not aware of the special circumstances.

iii] Liquidated Damages

These are damages that the parties agree upon before the breach and form part of the terms of
the contract, governed by the Conventional Penalties Act. When damages are in issue the
plaintiff must prove his loss. The courts will not speculate when awarding damages.

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CHAPTER 17
THE CONTRACT OF SALE

INTRODUCTION
Buying and selling is a fundamental transaction in the modern commercial world. Goods and
services are exchanged largely through the sale agreement and it is only logical that the law
provides for specific rules and regulations applicable to this transaction. A sale is basically a
contract and as such all the rules governing formation of contracts in general apply equally to
sale agreements. However, in certain instances there are additional legal principles which
govern sales specifically which are not found in other contracts.

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DEFINITION
Specific, nominate, reciprocal agreement to buy and sell, in terms of which the seller has the
true intention to deliver a determined or determinable thing together with all his rights in the
thing undisturbed , to the buyer and the buyer has the true intention of paying a determined or
determinable price for the thing.

Requirements for a valid Contract of Sale

Ordinary 5 requirements are also applicable to Ctr of sale. It is concluded with the intention
of passing ownership though seller does not have to be the owner of the thing. Seller only
obliged to transfer all his rights in the thing to the buyer without interference or disturbance.If
one of these rights is ownership, seller to transfer ownership. transfer of ownership is one of
the characteristics of Ctr of sale. Any clause stating that buyer will never receive ownership
of the thing sold will have an effect that Crt will not be a Ctr of sale.Mere conclusion of the
Ctr of sale does not result in the transfer of ownership. Buyer obtains a personal right against
seller. Other requirements have to be met eg delivery

Essentialia of Crt of Sale

1.Thing Sold
seller and buyer must reach consensus on thing sold. thing must be determined /determinable
at the Conclusion of Contract. if the description is too vague to determine what is sold, Ctr
null and Void. can be movable or immovable, material or immaterial. must be merchantable
ie, be able to be sold commercially
What can be sold?
Different things sold
a) Future Things
These things are only determinable @ conclusion of the Ctr ito certain specifications or
occurance of a certain event. If these specifications are met or if the event occurs = Thing
becomes determined eg Emptio rei speratae - where S sells next seasons crop to B for R20
per bag. The object sold only determinable and will be determined when the crop has been
fixed in units.
Emptio Spei where S sells the next seasons crop to B for a lump sum of R10 000
irrespective of whether the crop materialises or not. This is a Ctr of Chance, object sold is
fixed as soon as the ctr is concluded

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b.Generic Sale- where the thing sold is indicated in general and only individualised later.
eg 20 bags of cement from all bags available in the sellers store. Object sold is determinable
and will be fixed only after individualisation.

c) Res aliena
This is the thing of which the seller is not the owner. It does not affect conclusion of a valid
Ctr of sale. The seller does not have to be the owner of the thing sold. Owner only has to
deliver the undisturbed use and enjoyment of all his rights in the thing to the buyer. If seller
knows that he is not the owner of the thing sold and proceeds with sale, Buyer who acts in
good faith will be able to hold seller liable for fraud or misrepresentation and criminal
sanctions. Where seller sales a res aliena, owner can claim with Rei Vindicatio. This right
stems from NEMO PLUS IURIS RULE-which provides that a person can only transfer the
rights which he has to another person. Where buyer posses a Res aliena in good faith the
owner can claim his property from buyer only if the Prop still exists. If buyer sold property to
someone else, one cant claim the value of the property from the former buyer. On the other
hand, one will be able to claim the value where the buyer through his negligent or intentional
conduct made it is impossible for the owner to reclaim Prop. Where buyer buys a res aliena
and acts in bad faith the true owner can claim the value

Rei Vindication can Not be exercised where

(i) Real owner represented to the buyer that seller is the owner, Doctrine of estoppel will
prohibit the owner from invoking the real state of affairs
(ii) Object was sold in terms of an order of court and buyer acted in good faith
(iii) An object which without knowledge on the part of curator does not belong to insolvent
estate is sold by a curator who acts in good faith.
(v) Buyer has by law a lien or tacit hypothec over the object sold.
(v) Real owner has instructed another person to sell the object on his behalf and after selling
he uses purchase price for his own account.

2. Purchase Price
Seller and Buyer must reach consensus on purchase price
Requirements
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(a) Agreement on the Price
(b) The price must be certain and
C) The price must consist of acceptable currency

2.1 General
Thing sold must be determined or determinable. law will not recognise an agreement on the
price where there is a serious disproportion between the price and the value of the thing sold.
The price can be less than the value of the thing but where it is completely out of proportion
no Ctr of sale exist. Valid methods of price fixing: $125 or price is determined per unit =
R120 / bag
Ineffective methods
-party to fix price unilaterally,
-Unnamed 3rd party to determine Price
- Described as reasonable and fair

Duties of the Buyer

A sale involves two parties, the buyer and the seller. The obligation of the buyer can be
summarised as follows:
i] To pay the purchase price;
ii] To pay the seller's necessary and reasonable expenses to maintaining the merx pending
delivery;
iii] To accept delivery of the merx.

Obligations of seller include:

i] To take care of the merx [subject matter of the sale] pending delivery.
ii] To deliver the merx to the buyer.
iii] To pass good title to the buyer/warranty against eviction.
iv] Duty to supply goods of the right quality/warrant against latent defects.

DUTIES OF THE SELLER

1. SAFE KEEPING OF THE THING SOLD

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Duty of seller is to take care of & protect the thing sold from the time of conclusion of the Ctr
until thing is delivered to the buyer. Buyer can claim damages for Negligent Conduct of
Seller. Not liable if not Due to his fault viz major

Factors that influence Duty of safe keeping

1. Mora Creditoris & Mora Debitoris
Where buyer is in mora Debitoris or Creditoris (where he fails to pay the price or fails to
receive the thing sold. seller will only be held liable for damages caused by His Intentional/
grossly negligent conduct. Seller in Mora Debitoris (where he fails to deliver thing sold ) =
Responsible for any damage even in the absence of fault on his part.

Passing of Risk
Doctrine determines whether seller or buyer bears the risk where accidental damage is caused
by COINCIDENCE or ACTS OF GOD and not by culpable conduct of either Party. General
Rule owner suffers loss when his property is destroyed. Doctrine of passing of risk causes
Risk to pass to B when sale is perfecta.
A Contract is perfecta when
(a) Buyer & Seller have intention of buying and selling
(b) Purchase price is determined
(c) Ctr is not subject to a suspensive condition.
Result is that Buyer bears the Risk where the thing is damaged / destroyed through
coincidence or Act of God. Buyer still has to pay the purchase price even where the seller has
not delivered the thing to him.
NB- the principles as applied to passing of risk also apply to the allocation of benefits. Eg
where a cow has a calf after date of sale but before delivery the calf belongs to Buyer.

Duty of safe keeping and passing of risk

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DAMAGE TO THING AFTER CONCLUSION OF CTR but Before
DELIVERY

FAULT NO FAULT
(INTENT / NEG) (COINCIDENCE / ACTS OF GOD)

Duty of Safe Keeping Passing of Risk

Seller bears Damages Buyer bears Risk if Ctr is Perfecta

The above general rule on the passing of risk has several exceptions. The risk will not pass to
the buyer in the aforesaid manner in the following situations:
a] Where there has been an express or implied agreement varying the general rule. Thus
in Jacobs v Petersen & Another [1914] CPD 705 J sold and delivered a horse and cart to P
for a price of $8 which was to be paid in instalments. The contract was subject to the
condition that ownership of the property was to pass only on payment of the full purchase
price. P paid the first instalment but the horse died soon thereafter. J sued for the balance of
the purchase price. Held the sale was subject to the suspensive condition that ownership was
only going to pass on payment of the full purchase price, hence the risk of destruction of the
goods remained with the seller until the counting or weighing is done
b] Where the goods bought have to be measured, weighed or counted in order to
fix the price or appropriate them to the contract. in Poppe, Schunhoff & Guttery v
Mosenthal & Company in [1879] Buch 91 the plaintiff bought from the defendant 200
cases of brandy on 6 July 1878. Of these, 110 cases were delivered on 18 July 1878;
60 cases were delivered on 6 August 1878 and the remaining 30 cases were delivered
on 15 August 1878. On 25 July an Act imposing excise duty on brandy became law.

73
 This meant that the brandy that had not been delivered by 25 July was liable to pay
duty. The issue before the court was who between the plaintiff and the defendant was
liable for duty on the 90 cases that had not been delivered as of 25 July. The court
found that nothing had been done to distinguish the buyer's brandy from the rest of the
stock in the seller's possession. Held the risk remained with the seller who was
therefore responsible for the payment of the duty.(also case of Horn v Hutt)

c] Where there is default on the part of the seller in making delivery.

2.WARRANTY AGAINST EVICTION

Any action by a 3rd Party who has better rights in the thing sold that deprives the buyer of the
total or partial use, enjoyment and disposal of the thing sold, constitutes eviction. It must be
remembered that the Buyer does not become owner of the thing by mere conclusion of a valid
Ctr of sale. S is not obliged to transfer.
Forms of Eviction
1. When True Owner of the thing sold claims his property from the buyer.
2. A 3rd Party obtains possession of the property and the buyer cannot claim this prop from
the 3rd Party due to a defective title.
3. Ito the Rule that lease goes before sale (Huur Gaat Voor Koop) Buyer to allow lessee to
use and enjoy property until lease expires.
4. Holder of a limited real right (eg Right of way) may prevent the buyer from having full use
and enjoyment of the thing sold.

What can the buyer do when eviction is imminent

1. General Rule buyer must not surrender the thing to someone threatening him with
eviction.
2. Buyer to notify seller of threatened eviction In order to put up a defence against 3rd party.
3. Where seller cannot be found or intentionally avoids notification, buyer is relieved from
any further duty of Notification.
4. As soon as seller receives notification of the threatened eviction, he can take cession of
Buyers rights and intervene and assist the buyer and furnish the necessary proof of title.
5. Be joined as a party to the lawsuit
6. Do nothing

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7. If seller does not help, Buyer to put up a strong defence

BUYERS RIGHT OF RECOURSE AGAINST THE SELLER

TOTAL EVICTION
The buyer can cancel the Ctr of sale. Claim repayment of total purchase price and Claim of
damages which can include the following, Fruits which had to be delivered to the true Owner,
legal costs of the law suit, costs for improvement and any increase in value of the thing sold.

2. PARTIAL EVICTION
Where the eviction has left the buyer with so little a remainder of the thing sold that it cannot
be said that a reasonable man would have bought the same, the buyer may cancel the Ctr,
claim repayment of the purchase price and repayment of damages provided that he offers to
return the remains of the thing sold to the seller. Where partys eviction is not of such a
substantial nature and the remains of the thing sold can be effectively used, the Buyer may
retain the remains and claim a pro rata repayment of the purchase price as well as damages
from the seller.

Where Buyer has no OR Limited Right of Recourse

a. Seller is only liable in terms of warranty where the reason/ cause of eviction already
existed at the time of conclusion of Ctr or where it was caused after conclusion of Ctr due to
sellers fault. Even where the seller has excluded his liability for damages, Buyer may still
cancel the sale and reclaim the purchase price.
b. Seller will not be held liable where buyer knew that the seller was not the owner of the
thing at the time of conclusion of the Contract.
c. Where the seller was unsure at the time of conclusion of the Ctr whether or not thing
belonged to him and has made this known to the buyer, the seller cannot be held liable.
d. Seller will not be held liable where buyers claim against seller has prescribed.
e. Where the eviction was caused by Viz major, buyer has no right of recourse

In the contract of sale, the seller undertakes to pass free and undisturbed possession of the
thing sold to the buyer i.e. vacuo possessio. If the buyer's vaccuo possesio is unreasonable
and unlawfully interfered with, he is protected by the implied warranty against eviction. This
term is implied by the law in a contract of sale whereby the seller undertakes that the buyer
will not b e disturbed in his use and enjoyment of the thing bought.
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The warranty does not give protection against the unlawful acts of other people. Rather it
protects the buyer lawful eviction because of defective title. In Nunam v Meyer [1905] 22 SC
203 X sold three head of cattle to Y who upon being informed by Z that the cattle had been
stolen from him, handed them over to Z. Y then claimed the purchase price from X.
Evidence led proved that the cattle had indeed been stolen from Z. Held Y was entitled to
succeed even though he had handed the cattle voluntarily over to Z without any judicial
process of eviction.

In similar circumstances to those in the Nunam case, the best course of action to take would
be for the buyer to inform the seller first that his possession is being threatened before
voluntarily surrendering the property. Otherwise he runs the risk of losing his right of
recourse against the seller should it later turn out that the third party's title is not incontestable
[i.e. should it be proved that the third party's title inferior to that of the seller]. In Nunam v
Meyer if it had turned out that X's title was superior to that of Z, then Y having surrendered
the cattle without seeking protection from X first, would have lost both the cattle and the
purchase price.

The implied warranty against eviction will however not apply in the following circumstances:
a] The warranty will not apply if the parties expressly agree that the seller will
not be responsible in the event of the buyer's eviction. But even in such cases,
it is critical that the seller act in good faith because if he is aware that a third
party has a claim in the merx and he does not disclose this to the buyer,
the sale would be voidable at the buyer's instance for fraudulent
nondisclosure
Vlotman v Landsberg [1890] 7 SC 301.
b] Where the buyer is aware that a third party is the owner of the article, he
has no right of recourse against the seller in the event of eviction. By
proceeding to buy the property, the buyer voluntarily assumes the risk of
eviction by the owner.
c] Where the cause of deprivation of possession arises after the sale and the
seller is not at fault, the warranty will not apply because that is considered to
be risk which passes to the buyer on conclusion of the contract.

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In Rood's Trustees v Scott & De Villiers [1910] TS 46. The plaintiff sold a piece of land to
the defendant. Before transfer but after the sale a new law was passed under
which portion of the land was confiscated to the state. Held the loss fell on the
buyer because risk had already passed to him.

3.THE IMPLIED WARRANTY AGAINST LATENT DEFECTS

The seller has a duty to deliver the thing sold without any defects. For patent defects [i.e.
those easily identifiable] the rules relating to breach of contract by defective performance
apply. The buyer has an option to accept or reject the article.
REMEDIES FOR LATENT DEFECTS
ACTIO EMPTI
GROUNDS FOR INSTITUTION
a] warrant against latent defects
seller may give the buyer an express or tacit contractual warranty. where defects are present,
the buyer may institute the actio empti.
b] warranty for presence of special qualities
a seller may give the buyer an express or tacit warranty that certain bad characteristics are
absent and that certain good characteristics are present. these warranties are found where a
thing is bought for a specific purpose.Where the seller then sells the thing to the buyer, he is
deemed to have given the buyer a tacit warranty that the thing is suited for that specific
purpose. eg if a bull is bought for breeding purposes and the seller is told this by the buyer,
the buyer will be able to act against the seller in terms of the actio empti where the bull is
found to be sterile at the time of the conclusion of the contract.

C] Seller conceals latent defect

the seller is obliged to disclose any latent defects that he knows about to the buyer. Where the
seller intentionally conceals these defects, a fraudulent misrepresentation is made to the
buyer. The buyer may claim cancellation of the contract and /or damages with the actio
empti, where the seller intended to mislead the buyer in order to persuade him to conclude the
contract
The seller must have the intention of concealing the defect and to deceive the buyer before
the buyer can act with the actio empti. A voetstoots clause in a contract will not protect the

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seller against liability where he knew of the defect at the time of the conclusion of the
contract. this is also fraudulent misrepresentation
D] dealer and manufacturer
where the seller acts as a dealer, he will be held liable for all the buyers damages (including
consequential damages) due to the latent defect
the following are required before a dealer (seller) will be held liable
1. the seller must act as a dealer and
2.he must have professed in public that he has expert knowledge of the thing sold. Where the
seller is a manufacturer, he will be liable for all buyers damages (including consequential
damages). The manufacturer will be liable without any declaration whatsoever that he has
expert knowledge regarding the thing sold. negligence or ignorance of the defect is no
defence against liability.

In Young ProvisionsStores [Pty] Ltd v Van Ryneveld 1963 CPD 87 it was held that a dealer in
foodstuffs is liable for damages suffered by a consumer of his products and even if he had no
means of finding out the defect. The case concerned canned food. Similarly in Odendaal v
Bethlehem Romery Bpk 1954 [3] SA 370) bought from B a dealer almost dealing exclusively
in the sale of stock feed, a quantity of fine bonemeal for purpose of cattle feed. The bonemeal
was, unknown to either O or B contaminated with anthrax germs. As a result of eating the
meal 13 of O's cattle died. O sued for the recovery of the value of these cattle from B. Held O
was entitled to full compensation
What may be claimed with the actio empti
a) cancellation of the contract of sale only where the defect is of such a nature that it cannot
be expected of the buyer to retain the thing sold, and /or
b) damages

AEDILITIAN ACTIONS
ACTIO REDHIBITORIA AND ACTIO QUANTI MINORIS
The actions are available to the buyer where a latent defect is present in the thing sold and no
express or tacit contractual warranty was given by the seller. Cannot claim damages with
these actions
Actio redhibitoria and actio quanti minoris.
grounds for institution
the Aedilitian actions can be instituted where
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a) the thing sold has a latent defect
b) the seller was aware of the latent defect and fraudulently concealed such fact
c) The seller expressly or tacitly guaranteed the presence of good characteristics or the
absence of bad characteristics
What must be claimed with actio redhibitoria
PURPOSE- to place both parties in the position they were in before conclusion of the
contract. Restitution has to take place. Action can only be instituted once. Only instituted
where the defect in the thing sold is of such a nature that restitution is justified. the test is
whether the thing can be used for the purpose it was bought for

What can be claimed with Actio Quanti Minoris

the buyer may claim a pro-rata reduction of the sale price. This can be instituted more than
once should more latent defects appear in future. The exact reduction which the buyer may
claim has to be calculated as follows: the courts determine the difference between the price
paid and the total value of the thing with latent defect at the time of the action. The buyer
cannot claim any reduction in price where the thing, in spite of the defect, is worth more than
the price paid for it.

When aedilitian actions may not be instituted

a) defect arose after conclusion of contract
b) defect not latent
c) voetstoots sale
d) latent defect repaired
e) waiver
the buyer may waive the actio empti or the Aedilitian action.
f) Prescription
the actio empti and Aedilitian actions prescribe if theyre not instituted within 3 years after
the claim arose. Prescription starts running after the buyer has become aware of the latent
defect

in SA Oil & Fat Industries Ltd. Park Rhynie Whaling Co Ltd. [1916] AD 400 the plaintiff
bought a quantity of whale oil that was defective from the defendant. Before becoming aware
of the defect, the plaintiff mixed other oil and fatty acids with the oil bought from the
defendant. He could therefore not return the oil bought.
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When the plaintiff finally became aware of the defect, he sought through the actio
redhibitoria to cancel the contract. It was Held that since the plaintiff could not tender
restitution, his prayer for cancellation of the contract failed and only the actio quanti minoris
[reduction of the purchase price] was available as relief. However the above rule will not
apply in the following situations:
a] Where the goods have perished after delivery as a result of the latent defect making
restitution impossible.
b] Where the goods have been consumed in the course of normal use to which the seller
knew they would be applied and the buyer had no knowledge of the defect. In African
Organic Fertilizers & Associated Industries Ltd v Sieling [1949] [2] SA 131 S
bought a quantity of Karoo manure from A, informing him that it was to be used on
land where flowers, vegetables and seeds were being raised. The manure delivered
contained salt rendering it unfit for the purpose for which it was bought. S being
unaware of this defect used the bulk of the manure. He tendered return of the
remainder and claimed rescission. Held S was entitled to succeed.

The seller is however not responsible for latent defects in the following circumstances:
a] Where the seller expressly contracts out of liability by agreement with the buyer i.e.
voetstoots sales But contracting out of liability will not help the seller where he sells
voetstoots knowing that the merx is latently defective, Van Der Merwe v Culhane
[1952] [3] SA 42. Effectively the seller must not be silent about latent defects of
which he is aware. Where he does so, even a voetstoots clause will not avail him.
Thus in Hadley v Savory [1916] TPD 385. H bought a colt at a public auction of
bloodstock from S, the sale was voetstoots. To the knowledge of S the cold had
previously run into a wire and seriously injured his shoulder to the extent that he went
lame and was unfit for racing purposes. Of these facts nothing was said at the sale.
Held, the colt was latently defective and despite the purposed voetstoots clause, the
buyer was entitled to cancel the contract.
b] If the defect does not exist at the time of sale. In such cases the ordinary rules on
passing of risk will apply and the loss lies with the buyer. The onus is on the buyer to
prove that the defect existed at the time of the sale.
c] Where the buyer is aware of the defect at the time of sale or became aware of it
consequently and expressly or impliedly accepts the position. In the case the buyer
would be taken to have waived his rights Theron Africa [1893] 10 SC 246.
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d] Where the seller makes a dictum et promissum which is unfounded, the buyer can
invoke the aedilitian remedies against the seller. A dictum et promissum is a statement
made by the seller during the negotiations preceding the contract which bears upon
the quality or value of the thing sold and which can reasonably be constructed as
intended to be acted upon by the buyer.
e] Where there is wilful nondisclosure of a latent defect, the seller acts fraudulently. But
mere nondisclosure of a defect known to the seller does not necessarily amount to
fraud without evidence to show that the nondisclosure was calculated to induce the
buyer not to refrain from entering into the contract. Thus intention must be proved.

SPECIAL SALES
1. Sales by Description. This is a sale of unascertained goods in which the parties agree
that the item sold will be of a particular type. The sale contains an express warranty
by the seller that the goods will meet the description given.

2 Sale by Sample. This is a sale in which parties agree that the goods will be of the
same quality as the exhibited sample.

3. Free of Board [F O B]. This is a form of sale where it is the duty of the seller to place
the goods free on board on a ship named by the buyer. In this type of contract risk
passes to the buyer of shipment of the goods. Once the goods are on board, the seller
is deemed to have delivered them to the buyer.

4. Cost, Insurance and Freight [C. I. F.] Sales. With this type of export sale, the price is
to include cost, insurance and freight. The seller must ship the goods and within a
reasonable time he must tender the shipping document to the buyer i.e. the invoice,
bill of landing and the insurance policy.

5. Auction Sales. This is a sale by an agent [auctioneer] on behalf of the seller. The item
should be sold to the highest bona fide bidder. The sale is subject to "conditions of
sale" and the buyers are taken to have assented to these whether or not they read them
Hofmeyer & Son v Luyt 1921 CPD 837. Sales by auction can be with or without
reserve. An auction with reserve is one in which ordinary rules of offer and
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 acceptance applies. Bidders offer to buy at the reserved price or more and the
auctioneer on behalf of the sell may accept an offer or reject the bid at his option. An
auction without reserve is one where the seller must allow the thing to be taken by the
highest bona fide bidder.

CHAPTER 18
CONTRACT OF LEASE

Definition of lease
A lease is a reciprocal agreement in terms of which one party, the lessor make available the
temporary use and enjoyment of a particular thing in exchange for a counter performance

Essentials
1. Leased property
2. That the use and enjoyment be conferred only temporarily
3. The nature and extent of a counter performance delivered

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Leased property
Consensus must be reached on the leased property. immovable, movable, corporeal and
incorporeal property can be leased. The thing must be identified or identifiable eg a VW
GOLF Reg no:ABU 4584 or plot 111 Kensington, Bulawayo.

Temporary conferment of power to use and enjoyment

parties must agree on the use and enjoyment temporarily. The lessee cannot destroy or
alienate the property. The property leased cannot be let in perpetuity. It has to be for a certain
period eg 1 may -31 December or upon death of a particular person.

Nature and extent of counter performance.

most general method is to stipulate a specific amount eg $100/month. Rent can be fixed
according to a formula convertible into cash eg remuneration as that paid by previous tenant.
it is also a legal method of fixing the rentals if one says a named 3rd person will determine the
rent eg auditing firm(kpmg) will determine the rent. if parties stipulate that the rent will be
between $100-$200-it will not be allowed. The lessor cannot increase rent unilaterally. The
mere fact that lessee continues to use property after increase does not mean he has agreed to
increase the rent. Consent is inferred if the lessee does not respond after a reasonable notice.

Duties of lessor
1 delivery of the leased property
2.maintenance of the leased property
3.ensuring undisturbed use and enjoyment of the thing
4. compensation for attachments and improvements

1.Delivery of the leased property

The lessor is to make use and enjoyment available to the lessee eg through symbolic delivery
or actual delivery and when it is for a long time the property has to be registered. The leased
property must be delivered in the agreed state eg a fully furnished flat. If no agreement has
been reached, it must be delivered in the condition agreed upon or must be suitable for that
purpose it is leased for.

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2.Maintenance of the property

Lessor is to maintain property for the duration of lease. The property must be maintained in
such a way that it is suitable for the purpose it is hired for. The lessor is not responsible for
damages caused by lessee or persons whose conduct the lessee is responsible.
minor repairs not attributed to age, quality of property eg replacement of window panes or
door handles have to be effected by the lessee.

Remedies of the lessee

should lessor fail to repair the leased property, he will be in breach of contract therefore
specific performance, damages, reduction of rent, cancellation are remedies available.

a].Specific performance

To force the other party to perform.

b] Cancellation

If the leased property is so defective that it cannot be used for the hired purpose, one can
cancel the contract but defect must be of such a nature that a reasonable man would not have
continued with lease. Cancellation also available if property is delivered late eg where time is
of essence and also if theres a lex commessoria

c] Damages
If the breach was caused by lessors actions and was foreseeable at the time of conclusion of
contract, lessee may ask to be placed in the position he would have been had the breach not
occurred. the extent of the damages should be restricted by the reasonable foresee ability rule
of the general law of contract.

d] Reduction of rent
If breach not sufficiently serious to justify rescission, lessee may insist on a reduction of the
rent in proportion to the diminished use and enjoyment of the property. If the breach is minor

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there is no reduction. In Roman law, lessee is not entitled to pay if the prop is not maintained
properly. The position in South Africa-the test is whether such occupation was beneficial or
not. Zimbabwe approach: lessee is obliged to pay rent but has a claim for damages. In
addition, lessee can raise exceptio non adimpleti contractus if called upon by the lessee to pay
rent.

e.Lessee undertakes repairs

The lessee can repair the property himself and deduct the costs from the rent.

3.providing undisturbed use and enjoyment of the thing

Lessor is to guarantee that lessee will have undisturbed use and enjoyment of the property.
If he does not comply and he is not the owner of the property, lessee can claim damages. The
obligation entails that the lessor:
a) may himself not disturb the lessees use and enjoyment
b) has to guarantee that no third party with a better right will disturb the lessee in the use and
enjoyment of property.

Disturbances by lessor
Frequent hunting expeditions on the premises without lessees consent, gathering produce of
property, changing locks of the leased property is prohibited.

Remedies
a) Prohibitory interdict
b) spoliation order

3. HUUR GAAT VOOR KOOP

Hire takes precedence over sale. Buyer is bound by lease contract provided that lessee
pays rent to the new owner. New owner cannot transfer any rights to another which have
been transferred to the lessee. The lessee acquires right to property. Purchaser does not
incur any obligations in terms of the contract of lease. Also not entitled to any rent prior
to the date of sale. This rule does not apply where property has been expropriated. If it is a
long lease of immovable property and it is not registered in the deeds office then the

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 principle wont apply. In respect of other leases of immovable property, the maxim will
apply if the purchaser knew of the lease.

5. Compensation for attachments and improvements

where theres an agreement, lessee is to be compensated by the lessor. Problem arises where
there is no agreement. In general, no compensation is made for improvements without the
permission of the lessor. If the lessor refuses to compensate for improvements, then the other
party can remove improvements.

Duties of the lessee

a) payment of rent
b) proper use of leased property
c) return of the property on termination of lease

1.Payment of rent(invecta et illata)

Payment is usually agreed contractually. If not it is paid at the end off lease. As soon as the
lessee of immovable property falls into arrears with his rent, the lessor acquires a hypothec
over movable property brought into the property. It is only effective as long as the rent is in
arrears and the goods are in the leased property. Lessor loses his hypothec if goods are
removed from the premises unless he is able to pursue and arrest goods before they reach
their final destination. Should the landlord fear that the goods will be removed, he can apply
for an interdict. This includes property of 3rd parties brought into the property with lessees
consent to remain there permanently. Such movables will be subject to tacit hypothec. Third
party has to notify the lessor that the movables do not belong to the lessee

2. Proper use of the leased property

Lessee cannot use the leased object unreasonably or improperly. The leased property must be
maintained in a good condition and may only be used for the purposes for which it has been
leased for.

3.Return leased property after lease

Upon termination of the lease object or evacuating the premises, the leased property must be

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returned to the lessor. If it is damaged, the lessee must make good the damage unless he can
show that the damage was not due to any fault either on his own part or on the part of
anybody for whose actions he bears responsibility.

Chapter 19
THE CONTRACT OF INSURANCE

HISTORY AND SOURCES OF THE LAW OF INSURANCE

The contract of insurance is probably one of the most frequently concluded in the modern
business world. Its organs can be found in trade wages which existed in the medieval Italian
city states to provide risks that were attached to sea transport. Initially marine insurance
was the only type of insurance concluded, but with time the forms of insurance were
developed. Today the concept of insurance is so developed to such an extent that there is
hardly a risk one cannot be insured against. The South African law of insurance is governed
by Roman Dutch common law. In cases where Roman-Dutch law does not provide an
answer to a certain problem, the courts can do a comparative legal research and apply English

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law of Insurance, as a comparative law. Reference can also be made to the Zimbabwean
Insurance Act Chapter.

The Nature and Basics of the contract of Insurance

An insurance contract is a reciprocal contract between an insurer and an insured in terms of
which the insured undertakes to pay the insured an amount of money or its equivalent, in
exchange of payment of a monetary premium, should the risk borne by the insurer on behalf
of the insured, materialize by the happening of an event in which the insured has an interest.

An insurance contract serves to protect the formation, preservation and development of the
insureds estate against risks. In practice one effects insurance by contributing to a fund to
which other persons who are exposed to the same risks, contribute as well. The risks that
endanger the formation, preservation and development of the insureds estate are those
distributed amongst a group of people who are equally at risk.

DIFFERENT TYPES OF INSURANCE

1. Indemnity and non-indemnity Insurance

In indemnity insurance, the insurer undertakes to make good the damage which the
insured may suffer through the occurrence of an event insured against. The amount of
damages claimed is directly proportional to the loss suffered or the amount of the
insurance where it is less than the loss suffered. The amount of insurance which the
insured cannot receive, cannot exceed the amount of actual damages incurred. Where
an insured insurers his car (worth USD15 000) for USD 15 000, and damage caused
to the car in an accident amounts to USD10 000 the insured will never be able to
claim more than the actual damages being USD10 000. If the same car was insured
for only $8 000, the insureds claim would be for USD8 0000 or even less. Examples
of indemnity insurance are property insurance e.g. marine, fire, theft and motor
vehicle insurance.

In the case of non-indemnity insurance, the loss suffered and the amount paid by the
insurer are not proportionate. The insurer undertakes to pay the insured or the
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 beneficiary a fixed sum or amount of money if the event insured against takes place.
Non-indemnity insurance includes life and personal accident insurance e.g insurer A
agrees with B that he will pay $20 000 to Bs wife when B dies. B dies and his wife
can claim the $20 000 from A. When the risk occurs the insurer is liable to pay only
a specific contractually agreed amount to be ensured.

3 practical differences exist between indemnity and non-indemnity insurance;

1. In the case of indemnity insurance the insurable interest (that which is insured)
has to exist at the time of loss or damage, but in the case of non-indemnity
insurance it must already exist at the time of the conclusion of the insurance
contract.

2. The rules of contribution and subrogation only apply to indemnify insurance and
not to non-indemnity insurance.

3. The Insurers liability in the case of indemnity insurance is limited to the amount
of damages actually incurred, while this is not the case with non-indemnity
insurance.

2 Short term, long term and third party insurance

Short term defines short term policies e.g. liability policy, miscellaneous policy and
defines life policy, fund policy, sinking fund etc. 3rd party, is for claims against road
accidents for personal injuries caused by driving of motor vehicles.

3. Liability Insurance
Liability Insurance
It insurers ones liabilities incurred due to contract delicit or other obligations. It is of
the same nature as indemnity insurance. The best known forms of liability insurance
are professional liability insurance, obtained by attorneys, auctions, engineers etc.
e.g. the Zimbabwean Law Society Compensation Fund.

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REQUIREMENTS FOR VALIDITY OF AN INSURANCE CONTRACT
The General requirements for the conclusion of any contract namely consensus,
contractual capacity, legality, physical possibility and formalities, also have to be met for
the conclusion of insurance contracts. However for a valid nominate insurance contract,
consensus through a process of offer and acceptance must be reached on the required
essentialia.

Essentialia of the Insurance Contract

The essentialia of a contract are those characteristics of a particular contract which
distinguish it from other types of contracts. The following attach to the insurance
Contract.

1. Insurable Interest
The insured must have an interest in the non-occurrence of the uncertain interest.
The insured must have a proprietary interest which he evidences to insure against
certain risks. This means that the interest must be of economical value to him. The
continued existence of the interest must offer an economical value or benefit or rather
the loss or damage of the interest must cause an economic loss.

In indemnity insurance the insured must at least have a financial interest in the non-
occurrence of the risk. There is also the point of view that the financial interest must
have some legal authority or foundation e.g. the interest must depend on a right in the
object at risk such as a proprietary right or a personal right. When an insured has the
required financial interest he will suffer damage on occurrence of the event and will
therefore be entitled to compel the insurer to honour his obligation to pay a sum of
money. The time at which the interest must exist is also clear if the above is kept in
mind; the interest must exist at the moment the loss or damage occurs. It is therefore
not necessary for the interest to exist at the moment when the contract is concluded.

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 With non-indemnity insurance a distinction must be drawn between insurance on the
life of a spouse on the one hand and the life of any other person on the other hand. In
the first case an unlimited interest is presumed. Where time life of another is insured
the law requires an insurable interest in the sense of financial or pecuniary interest.
A creditor therefore has an insurable interest in the life of his debtor. The time at
which the existence of an insurable interest is required in the case of non-indemnity
insurance is the movement the contract is concluded. Even though the interest might
not exist at the moment the risk occurs the insured or the beneficiary is entitled to
claim the amount payable in terms of the contract.

2. The Risk
The uncertain event insured against is known as the risk. Description of the risk in
the contract is important, because the insurer must know precisely the nature of the
risk and the insured the extent of his cover. The parties always agree to insure against
the occurrence of a specific (or determinable) event. The insurers obligations are
always coupled with some event which must cause the result mentioned in the
contract e.g. a fire which damages the insureds house. The description of the risk
must include:

a) The object insured, e.g. a car or a persons life.

b) The hazard insured against e.g. theft.
c) Circumstances affecting the risk e.g. limitation of the insurance to theft of a motor car
while it is parked in a specific place.
Only the specific (contracts) risks passed onto the insurer are therefore specified in the
contract. The parties must also agree that the risk passes from the insured to the insurer.
Risk must materialize from or due to an uncertain future event. Where the risk is certain,
the contract could be a wager or a gamble rather than an insurance contract. The
uncertainty in life insurance lies in the time of death, although death itself is certain.

The difference between insurance contracts and wagering contracts

As far as the event insured against is concerned, there is uncertainty on when and in the
case of indemnity insurance, also whether the event will occur. The element of
uncertainty which is associated with risk is the one aspect which a contract of insurance
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 has in common with a wagering contract or agreement. Both are contracts of chance,
depending on an uncertain event or contingency and both contain an element of risk. The
differences between wagering and insurance contracts are that;

a) A wagering contract is unenforceable in court.

b) In wagering contracts, the parties choose an arbitrary event, on the occurrence of

which one party wins and the other loses. The parties thus create their interest in the
event themselves whereas the parties in an insurance contract have an insurable
interest in the non- occurrence of the event.

c) An insurance contract does not itself create the risk of loss.

d) The intention with which the parties conclude an insurance contract can be of the
greatest importance in distinguishing it from a wagering contract. The purpose of an
insurance contract is to protect the estate while that of a wager is to increase the
estate.
3. Premium
The insured undertakes to pay a premium. This is usually a sum of money, but may
also consist of something else. Although the actual payment of the premium is not a
requirement for time creation of the contract, an undertaking to pay is sufficient.
Payment is usually a condition for the policy to take effect. The premium is usually
actuarially calculated by taking into account the scope of the risk, the term for which
insurance cover is provided as well as the extent of the insurers possible liability in
terms of the contract should the risk materialize. Premiums are normally paid in
advance, although in practice parties sometimes agree for payment in arrears. The
risk would normally pass to the insurer as soon as the insured pays his first premium
to the insurer.

4. An undertaking by the insurer to pay a sum of money

In the case of non-indemnity insurance, the sum payable will be a predetermined
amount. Where for example, a person insures his life for $10 000, (the insured
amount) the insurer will have to pay that amount to the estate of the insured or the
beneficiary.
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 In the case of indemnity insurance the insurers obligation is to pay a determinable
sum of money. The exact amount of the payment is determined after the occurrence
of the event insured against, by determining the extent of the damage. The value of
the claim or the measure of indemnity in respect of the loss of the risk-object is
determined, not by its cost, but by its value at the date and place of the loss. The
insurer must be placed in the same financial position he was in- but not a better
financial position before the occurrence of the event insured against. The sentimental
value of the object is thus ignored and only the present value of the object is
considered irrespective of whether the objects value had appreciated or depreciated
since the conclusion of the contract.

For example, if a house valued at $50 000 is insured against fire and at the time of its
subsequent destruction by fire it is worth $70 000, then the insureds loss which he
may recover from the insurer is $70 000. Normally however a maximum value of
compensation is stipulated in the insurance contract. In such a case the insurer is
liable only for the amount of the insureds loss or the maximum insured value,
whichever is the lesser.

Where the object has only been damaged the insurer will be liable for the amount of
partial loss suffered. The extent of partial loss suffered is usually taken to be the cost
of repairing the risk object. The following principles which are applicable to
indemnity insurance in relation to the undertaking by the insurer to pay a sum of
money must be noted;

(a) Valued and unvalued policies

In order to eliminate difficulties regarding proof of the value of the risk object, the
parties may agree at the time of concluding the contract on the value of the risk
object. Such policies are known as valued policies in contract to unvalued policies.

(b) The Insurers right to repair

An insurer often reserves the right in an insurance contract to have the damaged risk-
object repaired, instead of compensating the insured. If the claim has been made
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 under the contract, the insurer must choose, within a reasonable time after the
occurrence of the event insured against, whether he wishes to repair the risk object
rather than to compensate the insured. Once he has elected to repair he cannot change
his mind later on. He must then have the risk object completely repaired within a
reasonable time.

(c) The insurers right of subrogation

Where the insured has a claim against a 3rd party who has caused the damage to the
risk object, the insured may recover compensation only once. He is not allowed to
make a profit from the fact that he is insured. Accordingly once the insurer has
compensated the insured, the insurer has the right of subrogation that it is to say the
insurer himself may enforce the insureds claim against the third party in the name of
the insured.
(d) Insuring with several insurers
An insured has the right to insure the same risk object with as many insurers as he
wishes. In the event of a loss occurring, the insured may however, only recover the
full amount of his loss and no more. Thus where he is over-insured by double
insurance, he must choose whether to recover his total loss from one insurer or a pro-
rata portion from each of the insurers concerned. Where an insurer pays more than
his pro-rata share of the amount claimed, he has on the grounds, of the principle of
contribution a right of recourse against the other insurers of the same risk-object for
a pro-rata contribution toward the compensation paid to the insured.

(e) Over and under insurance

There is nothing to prevent an insured from insuring for a larger amount than as
necessary to secure full compensation in the event of loss of the insured risk- object.
In the case of indemnity insurance, however, time insured may recover no more than
the total value of his loss. Where an insured insures for an amount less than the actual
value of the insured object he is under-insured. Contracts of insurance often contain
an average clause in terms of which the insured is regarded as an insurer for the
uninsured balance and consequently must himself bear a proportion of his loss. For
example if his car is valued at $10 000, is insured for $6 000, and the car is damaged
then according to whether the amount of the damage is $10 000, $7 000 or $5 000, the
insured will be able to recover only $6 000, $4 200 or $3 000 respectively, in other
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 words, as he insured for only six tenths of the value, he can recover only 6/10 (six
tenths) of his loss. This aspect is of particular importance with respect to insured
objects of fluctuating value.
(f) Excess Clauses
It may be agreed in an insurance contract that the insured may recover only a
specified proportion of his loss. In motor vehicle or liability insurance, so called
excess clauses are common. In terms of these clauses, the insured must bear a
specific proportion of the loss himself e.g. the first $200 of the loss.

The Duty to disclose

Due to the prospective insureds intimate knowledge of all facts regarding the risk
which he wants to transfer to the insurer, a legal duty required him to disclose all
relevant material information within his actual or constructive knowledge, to the
insurer. This enables the insurer to decide whether he is prepared to accept the
transfer of risk from the insured and to reach consensus with the insured.

See mutual & Federal Insurance Co Ltd v Oudtshoom Municipality 1985(1) SA419
(A)
Anderson Shipping v Guardian National Insurance 1987 (3) SA 506

Qilingile v SA Mutual Life Assurance Society 1993(1) SA619(A).

Who bears the duty to disclose?

The duty to disclose rests primarily on the prospective insured, although Jourbet JA in
the Mutual and Federal Case (432E) went further and mentioned the possibility that
an insurer might also be subject to this duty. The insured must disclose all
information which could increase the risk. It could then reasonably be expected of the
insurer to disclose to the insurer all which could decrease or increase or even exclude
the risk.

The insurer can be expected to disclose all information to the insured which is to the
latters benefit and could be used to the latters advantage.

When must the information be disclosed?

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The information must be disclosed to the insurer (or the insured) to enable him to
decide whether he is prepared to conclude a contract of insurance with the insured
(and vice versa should the insurers duty to disclose the accepted in future). This
makes it a pre-contractual duty. This duty is created by operation of law and not due
to a legal tie or legal obligation created between the parties.

It is possible to expand the duty contractually and to make it a continuous duty which
has to be complied with which the contract remains in force. The parties have to
specifically agree in the contract that any material information which is discovered
after conclusion of the contract, has to be disclosed.

An example: A failure by X to disclose to an insurance company that he is HIV

positive, when taking life insurance may lead to breach of contract once discovered
upon tests being at the instruction of the insurance company.

However in the case of life insurance, the duty to disclose is a once-off duty as these
contracts are normally of a continuous nature, unless the parties agree otherwise.
What must be disclosed?
The duty to disclose consists of both a positive and negative duty. The positive duty
requires time prospective insured to answer all questions put to him by the insurer,
honestly and in good faith. The negative duty requires the insured to disclose all other
material information of which he has knowledge or should have had constructive
knowledge, even though it has not been pertinently asked of him. If the insured gives
false information, does not answer a question at all or refrains from disclosing
material information, he makes a misrepresentation, which influences consensus and
makes the contract voidable.

A number of case where decided with regards the duty of the insured to disclose
information, although no satisfactory solution was given to the problem. The problem
concerns the question as to which test has to be applied in order to determine whether
or not information is material and has to be disclosed.

In Mutual & Federal Insurance Co Ltd case (supra) the court decided that all
information which would, to the reasonable man appear to be material, had to be
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disclosed. The court rejected the idea that the reasonable insured or the reasonable
insurer should be used as a criterion.

However in the Qilingile case (supra) the courts reformulated this test and stated that
those facts which, in the view of the reasonable man are necessary for an insurer to
enable him to determine whether or not to accept the specific risk must be disclosed.
The test of the reasonable man as applied in the Mutual & Federal case was therefore
expanded.

Of particular significance to note is the fact that Non-Disclosure amounts to a

misrepresentation by the prospective insured.(De Waal v Metropolitan hewens Bpk
1994 (1) SA 818 (0).

Facts which need not to be disclosed

The insured does not have to disclose every single fact within his knowledge. Due to
their nature certain facts do not need to be disclosed e.g

(a) Facts of which the insurer was or should have been aware. These in particular
include facts which are general knowledge or obvious.

(b) Facts in respect of which the insurer has waived his right of disclosure.

(c) Facts which do reduce and do not increase the risk.

(d) Facts covered by a warranty in the insurance contract itself.

Consequences of non compliance with duty to disclose

Non compliance with a pre-contractual duty to disclose amounts to misrepresentation.
The misrepresentation can be made by positive actions (such as the disclosure of false
information) or by commission (where the insured does not reply to a question or

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withholds material information. The misrepresentation can be intentional negligent or
innocent.

Misrepresentation influences consensus, as a result of which the contract is voidable

at the option of the party prejudiced by the misrepresentation. This will be effect
irrespective of whether the misrepresentation is made innocently or with a degree of
fault. The contract remains valid and enforceable until the prejudiced party exercises
has election and decides to void the contract. If the contract is set aside, restitution
has to take place. If the misrepresentation is made intentionally or negligently, the
prejudiced party can also institute an additional action for damage in delict.

See De Waal No v Metropolitan hewens Bpk 1994 (1) SA 8/8 (0)

Where the misrepresentation made negligently or intentionally the prejudiced party
can also institute an additional claim for delictual damages. It is however clear that he
cannot claim contractual damages where the contract is void ab initio.

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CHAPTER 20
Contract of employment
Definition of employment contract
It is a reciprocal agreement in terms of which the employee makes available his services for a
determined period and usually for remuneration under the authority of the employer.

EMPLOYER

Is a person or body who exercises authority over an employee in terms of an employment contract
where the employee has made available his services to the employer for a determined period and
usually for remuneration

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EMPLOYEE
Is a person who in terms of the employment contract makes available to the employer his
services usually for remuneration and for a determined period under the authority of the
employer

ELEMENTS OF EMPLOYMENT CONTRACT

1.voluntary agreement between the parties

Forced labour and slavery are prohibited. A clear and unequivocal offer and acceptance must
exist

2.SERVICES ARE RENDERED IN RESPECT OF A SUBORDINATE RELATIONSHIP

This means that there is control and supervision when the services are rendered. The
employer also provides guidance during the rendering of the services

3. REMUNERATION OF EMPLOYEE

In the absence of agreement, remuneration is payable after services have been rendered.
Remuneration is usually agreed in the contract. If not agreed then a reasonable remuneration
is paid to the employee

EMPLOYMENT CONTRACT DISTINGUSHED FROM RELATED CONTRACTS

It is distinguished from mandate, agency, independent contracting and so forth. It is important

to distinguish the employment contract from other legal contracts for purposes of
a)determining whether the labour relations Act applies or not
b)determining the vicarious liability of the employer
c) determining whether wage regulating measures are applicable to certain employees or not.

CRITERIA FOR DISTINGUISHING BETWEEN EMPLOYMENT CONTRACT AND

OTHER RELATED CONTRACTS

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1. ORGANISATIONAL TEST
The test is whether the person concerned was part of the organisational structure of business
or company and whether his functions formed an integral part of the business

2.SUPERVISION AND CONTROL TEST

It is the essence of a contract of a master and servant that the servant should submit to the
direction of his employer and obey his employers instructions not only in the things he has to
do but as to the time and manner in which he has to do them.

3.DOMINANT IMPRESSION TEST, MULTIPLE TEST OR COMPOSITE TEST

This is the test favoured by the courts. Under this test, one looks at the various factors that
traditionally revealed a contract of employment viz those showing a contract for the
independent contractor, weigh up these multiple factors to come with the dominant
impression, namely the person is an independent contractor or employee

SOUTHAMPTON ASSURANCE COMPANY V MUTUMA 1990 (1) ZLR 12

The employer had dismissed the employees without an approval of the minister arguing that
they were contractors. The court weighed up factors which they believed were part of a
contract of employment eg

1.were given list of customers

2.provided office space
3.were members of the companys medical aid scheme
4.were not allowed to work for another insurance company
5.they worked under a hierarchy of managers
on the other hand, factors that demonstrated they were independent contractors
1. they were described as independent contractors
2.had flexible working hours
3.paid by commission

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The court ruled that the dominant impression test showed that they were independent
contractors. The decision was criticised.

IN CHIWORESE V RIXI TAXI SERVICES

A taxi driver had flexible working hours, Was paid by commission, was described as an
independent contractor and the court ruled that he was an employee.

DUTIES OF THE EMPLOYER

Duties of the employer are derived from:
Common law
Constitution
Labour relations Act
International labour treaties
Employment contract

1. CONSTITUTION

a. Refrain from forced labour or slavery sec 14

b. Refrain from inhuman and degrading treatment of employees sec 15. A penalty like
whipping would be unlawful
c. Adi alterum partem rule sec 18
d. Refrain from unlawful discrimination sec 19&23
e. Not to violate employees freedom of association, assembly, movement and expression

2 DUTIES UNDER THE ACT

a. duty to respect employees entitlement to membership of trade union

b. duty to refrain from forced labour
c. duty to refrain from unlawful discrimination
grounds of discrimination:
gender, tribe,HIV,race, marital status,disability

d. Duty to adhere to fundamental fair labour standards

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e. Duty to adhere to prescribed maximum working conditions. Maximum of 8 hours a day
and 40 hours a week
f. Duty to provide safe and healthy working conditions. Worker also has to exercise due care.
Workers in inherently dangerous environments are assumed at common law as voluntarily
assumed risk of reasonably foreseen dangers. Employer not liable if he took reasonable steps

g. Duty to pay remuneration

h. Duty not to commit unfair labour practices
i. Duty not to commit sexual harassment
j. Duty to grant sick leave
Sic leave is 90 days per year on full pay.Additional 90 days on half salary after providing a
certificate from the doctor

K. Duty to provide vacation leave

30 days a year
L. Duty to provide special leave
12 days per year
m. Maternity leave and benefits
90 days

VICARIOUS LIABILITY OF THE EMPLOYER

The general rule is that the employer is liable for any delictual conduct committed by his
employee during the course and scope of his employment

REQUIREMENTS FOR VICARIOUS LIABILITY

1. Existence of employment
contract
2. Commission of a wrongful act
3. Employment must have acted in the course and scope of his employment.

The test for whether the employee is acting within the scope of his or her employment is not
whether the employee is acting within the scope of his or her employment at the time but

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whether his/her act or omissions constituted negligent performance of the work entrusted to
him or her

FAWCETT SECURITY OPERATIONS V ROSE

The court held that the employer of a security guard who had stolen goods entrusted to him to
guard was not liable because the guard had acted outside his mandate. This decision was
criticised greatly.

Criticism
Employers are held liable not because of any morally irreprehensible conduct on their part
but for a number of reasons including that theyre the ones who have created the risk that has
resulted in the harm to innocent third parties.
Employers are in a much better position to compensate the third parties than the employees.
The scope of employment may include acts done after hours or outside the mandate
instructed by the employer.

BITI V MINISTER OF STATE SECURITY

Involved a driver who was not actively on duty, but who was on call and required to look
after a company vehicle overnight as well as to collect some employees in the morning. On
the occasion in question, the worker, possibly drunk, rammed into another car causing serious
injury to the driver of that car

It was held that the employer by entrusting a motor vehicle to a relatively low paid employee
overnight had placed an enormous temptation in the drivers way.

DUTIES OF THE EMPLOYEE

To provide service
Duty of competence and efficiency
Duty of subordination
Duty of good faith

UNFAIR DISMISSAL

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Dismissal must be substantively and procedurally fair. Any dismissal that is not procedurally
and substantively fair is unfair. Substantive fairness means there must be a reason for
dismissal. Termination must be a sanction of last resort. Procedural fairness requires that all
procedures have to be complied with in terms of the Act, code or any other regulations.

TERMINATION OF CONTRACT OF EMPLOYMENT

1. By agreement through:
a. Effluxion of time
b. Notice of termination
2. Impossibility of performance, death of employer or employee, insolvency of the employer.
3. Cancellation of employment because of misconduct
4. Retrenchment of employees

1. LITIGATION AND OTHER METHODS OF DISPUTE RESOLUTION

Objective of this lecture:

a. To introduce the student to methods of dispute resolution.
b. Introduce the concepts of judgement and execution.
c. Outline the processes of the criminal law.
d. Draw attention to current issues in litigation.
e. Draw attention to the relevance of International Law and its relevance to the
conduct of international business.

Law is essentially a system of social control. Disputes are submitted to courts for decision,
peace and order in to avoid "selfhelp". Courts are impartial and apply law to the facts to
arrive at a decision [judgement].

JURISDICTION
Court required jurisdiction to decide any matter brought before it. Three requirements for
jurisdiction:

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a. cause of action, subject matter or person must be within court' jurisdiction.
b. Personal- must have jurisdiction over person of parties.
c. Subject matter- must have jurisdiction over subject matter of the nature or extent in
question.
Jurisdiction over the plaintiff is invariably not a problem. Defendant may reside beyond the
jurisdiction. This need not be insurmountable as the court may have jurisdiction on some
other ground such as through submission, attachment of property to found jurisdiction or as a
result of the conduct of business by the defendant within the court's jurisdiction.

TRIALS AND APPEALS

Purpose of a trial is to resolve disputes [conflicting claims]. Application of principles of law
to facts found by the judicial officer. The basis of the trial is the cause of action, i.e. the
foundation of the claim of the Plaintiff and the defence of the Defendant.

The parties may avoid a trial if they can agree on a compromise forming the basis of an out of
court settlement. This option should be used where possible as it saves time, effort and
money and avoids frustration and other emotional upsets for both parties.

In civil proceedings a summons, including a statement of claim or declaration, setting

out the nature and extent of the claim, depending on the forum, is served upon the Defendant
by the Messenger of Court or the Deputy Sheriff or the Plaintiff's Legal Practitioner. This
calls upon the Defendant to defend the action, if so desired and to file a plea or other answer
to the Plaintiff's claim within stipulated time limits.

In the event that the Defendant fails to take the necessary procedural steps to defend the
action, the Plaintiff may apply to the court to enter default judgement against the Defendant.
If the Defendant chooses to defend against the Plaintiff's claim and a judgement is granted
against either of them such party will be subject to execution being levied against property.
In the event party against whom judgement is granted dissatisfied with the judgement and
chooses to lodge an appeal against such judgement, application is then entertained for stay in
execution.

Appeal court is confined to verbatim record of the proceedings which took place before court
of first instance .Appeal Court only receives evidence which was not available at the time of
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the trial and of which the party who relies on it was unaware. An appeal may be based on the
fact that the trial court erred in arriving at a finding of fact when the record indicates that such
finding of fact was not sustainable on a balance of probabilities. The appeal court may agree
with this view. This would naturally affect the court's application of the rules of law to the
facts as well. As a rule the appellate court loathe to interfere with the trial court's finding of
fact. It will normally be guided by these findings because the judicial officer in the trial, who
hears the evidence of the witnesses, sees their reactions under cross examination is in a better
position to assess their credibility and come to conclusion regarding the facts to which their
evidence relates.

The Appeal court either confirms the decision of the lower court or reverses or overrules it.
Litigation should be regarded as a last resort in the process of dispute resolution. It should be
avoided, if possible, as time consuming, expensive and disruptive of normal business
relations, besides being personally emotionally upsetting to those engaged in it. The fact that
litigation has two key advantages is not to be overlooked. These are that it is a familiar form
of dispute resolution and produces results.

Chapter 21
ALTERNATIVE DISPUTE
RESOLUTION

Business would suffer if it acquired a reputation for suing its customers at the drop of a hat.
Whatever the merits of its case such a reputation will ultimately damage its reputation.
The fact that litigation takes place in open court leads to publicity which may prove
detrimental to business.
Judges and magistrates are not experts in all fields of knowledge. Some disputes involve
issues of technical nature are best handled by persons with specialised knowledge in that
particular area or areas. For these reasons alternative methods of disputes resolution have
been developed over the years.

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Other methods of dispute resolution are:
a. Settlement
A settlement can be achieved in most matters before the matter is taken to court. Excessive
cost of litigation should deter parties from litigating.

b. Arbitration
An impartial arbiter hears the facts and makes a determination called an award, which can be
enforced in the same way as a judgement from a court. The award based purely on the merits
of the case of the party to whom it is made without reference to precedent.

Key advantages of arbitration:

a. Arbitrator normally an expert in the area of the dispute.
Saves time, reducing costs and interference with normal business.
b. Arbitration normally takes place soon after dispute arises. No unnecessary delays as
in litigation.
c. Conducted in private avoids embarrassment arising from adverse
publicity especially for business.
d. Proceedings informal not subject to the exclusionary rules of evidence and
procedure.
e. The opportunities for appeal are normally limited.

Limitations of Arbitration:
a. Parties cannot be compelled to submit to arbitration. It is a voluntary process unlike
litigation.
b. Normal exclusionary rules of evidence and procedure do not apply. Evidence, which
would be excluded by operation of these rules, may be admitted to the disadvantage
of a party relying on its exclusion.
c. A party may take the view that an arbitration award does not carry the same weight as
the judgement of a court.

c. Mediation
Submission of a dispute to a third party who attempts to assist the parties involved to resolve
the dispute by a compromise. He makes suggestions in this regard to the parties.

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Main advantage of mediation is that it provides a result in the achievement of which the
parties both participated as opposed to one imposed upon one or other of them by an outsider
at the expense of one or other of them. Useful in relation to continuing future relationships,
e.g. family law and labour law disputes. Success depends largely on willingness to
compromise.

Chapter 22
BUSINESS ORGANIZATION
Key objectives of this lecture include:
1. Introductory remarks on the forms of business organization.
2. Differentiate between sole traders, partnerships, private business corporations, companies
and statutory corporations.
3. Examine characteristics of companies in greater detail.
4. Examine the legal nature of companies as business entities.

1. INTRODUCTION
In Zimbabwe several there are several forms of business enterprises. They Range from sole
trader to public limited liability company. The Degree of regulation applicable to each differ,
the higher the degree of public involvement, the higher the intensity of regulation. Regulation
achieved through registration of entity and publicity requirements.

TYPES OF BUSINESS ENTITIES

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a. Sole trader
Sole trader is individual run business for own benefit.
Proprietor provides own capital retains all profits and accepts all losses of business. He is
personally liable. He is not answerable to no one but self provided he pays taxes to the state.
Large percentage belongs to the informal sector. The Main advantage is flexibility; business
is not tied by agreement or memorandum and articles. Main disadvantage is shortage of
capital to finance operations and growth Possibly exacerbated by poor creditworthiness. It is
virtually impossible to source loans from financial institutions. Lending institutions require
collateral before advancing loan facilities. Sole trader may lack this. Large sums of money
generated in this sector but taxation is a nightmare. Income taxed as if that of the owner. A
Great deal is said about transforming informal sector through such ill conceived and poorly
defined concepts as indigenisation but thus far these have proved a failure. The amounts set
aside to achieve these aims over the years have not achieved their aim due to lack of proper
planning, transparency and corruption.

b. Partnerships

Partnership consists of between 2 and 20 persons. In designated professions it may consist of

more than 20 persons. Formed by agreement between the parties. No requirement that it must
be in writing. It Can be inferred from behaviour of the parties.
Working definition- a Partnership is a legal relationship between 2 or more persons [not
exceeding 20, with certain statutory exceptions] in terms of which each contributes
something to a lawful undertaking with the view to making profit subsequently dividing such
profit among themselves.

For partnership to be legally constituted the following elements are essential:

a. Agreement;
b. Contribution of something [of commercial value, money, labour, skill, property,
licence, expertise etc.] by each partner;
c. Undertaking for joint benefit of all the partners;
d. Aim must be to make a profit.

In the absence of agreement on profit sharing ratios assumed partners entitled to equal shares.

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Advantage of partnership over sole trader pooling of capital labour and skills places more
resources at the disposal of the partnership.

In the event of failure of the partnership enterprise all assets of the business are sold first. If
insufficient to cover debts, property of individual partners may be attached and sold to satisfy
demands of creditors.

Partnership [as with sole trader] does not create a separate legal entity [persona], nor does it
enjoy perpetual succession. For procedural reasons and simplicity the Magistrate's Court
[Civil} Rules provide that a summons against a partnership may cite [i.e. be issued against a
partnership in its own name] as if it were an entity. This does not apply to an action in the
High Court. Any change in the membership of a partnership dissolves [terminates] it. If the
remaining partners continue in business a new partnership is constituted [See Standard Bank
v Wentzel & Lombard 1904 SA]

In Zimbabwe, [except with regard to a few exceptional matters in specific statutes] there is no
statute that regulates partnerships. The law is therefore embodied in the common law.
Partnership largely governed by the law of agency. In Divine, Gates & Co v African Clothing
Factory 1930 SA it was observed: "Partners are often styled agents of each other. They
certainly have powers of agents and the broad principles of law applicable to agents apply to
this extent to partners".

A partner acting without consultation can bind his partners to a transaction, which forms part
of or is incidental to the partnership business.

Partnership can be formed by conduct [See Festus v Worcester Municipality 1945 SA]: F and
wife married out of community of property. They Bought 3 cows for milking from which
prosperous dairy business developed. They both contributed labour and money. Following a
dispute between F and wife over business involving municipality the court after reviewing
the facts held that a partnership existed between F and his wife. Hence the assets and
liabilities of this partnership were to be shared along partnership lines.

No legal personality-partnership cannot be the registered owner of property in its own name.
Property registered in the names of partners in shares as described in the deed. This does not
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prevent one of the partners from disposing and transferring ownership of the property without
the authority of the other partner. Nor with the exception mentioned above can it sue or be
sued in its own name. The personal liability of some partners can be limited viz a viz
outsiders.

Partnership may be terminated by:

a. Agreement [express or implied]
b. Unilateral action by one of the partners;
c. Insolvency of the partnership or one of its members;
d. Death of one of the partners;
e. Illegality of the partnership objects.

c. Private Business Corporations {PBC}

These entities can exist because of provisions of Private Business Corporations Act [Chapter
24:11]

Attempts by legislature to give scope for the formalisation of the informal sector by
exempting such business from the rigorous requirements of the Companies Act, PBC's
incorporate features of both partnership companies.

S. 4 of the Act 1 or more persons not exceeding 20 may form PBC by subscribing their
names to an incorporation statement.

S. 5 prescribes that Incorporation Statement shall be in the prescribed form and state:
i] Name of PBC words "Private Business Corporation " at end.
ii] Postal address of the business.
iii] Physical address of the business.
iv] Full names and National Registration number of each member.
v] Percentage of each members interest in the business.
vi] The amount of each member's contribution.
vii] The name and address of the address of the accounting officer to whom the members
intent to submit their financial statements in terms of S. 47.
viii] The date of the end of the financial year of the business.
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S. 9 provides that members of PBC not liable for debts of business. Concept of separate
personality borrowed from company law. Theres a Clear distinction between PBC and
members who formed it.

By S. 12 members may agree to limit objects of the business.

Also borrowed from company law but in this case it is optional.

S. 37 imports agency principle by providing every member not a minor agent for business
acts bind business, provided:
aa] authorised expressly or implied by business or ratified subsequently by it.
bb] done for purpose of carrying on business in usual way unless member acting had no
authority and person with whom dealing knew or ought to have known had no
authority.

S. 51 voluntary winding up of PBC by resolution of members.

S. 52 winding up by court if:

a] Members more than half vote resolve that be wound up.
b] Not commenced operations within 1 year of registration.
c] PBC unable to pay debts.
d] Failed to comply with order to change name i.t.o. S 14.
e] Appears to court just and equitable PBC be wound up.

S. 53 PBC unable to pay debts if:

a] creditor is owed $200 or more served letter of demand on PBC and has failed to pay
or take other measures to pay within 21 days.
b] Writ of execution in favour of the creditor is returned by Deputy Sheriff or Messenger
of Court that there are Insufficient assets to satisfy.
c] Proved to satisfaction of court that PBC is unable to pay debts.

Despite simplicity of rules governing PBC's still rare in Zimbabwe because people not
familiar with them.
d. Limited Liability Companies
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Form a large and important part of business community more will be said about them later.
Suffice to say at this stage that company law originated in the United Kingdom and it requires
a knowledge of the history of company law and its subsequent development in an attempt to
reign in the artifices of the less scrupulous persons who would seek to use them as engines to
relieve ignorant, unsophisticated or simply unwary members of the public of their worldly
wealth acquiring it for themselves.

In Zimbabwe all limited liability companies are regulated by the Companies Act [Chapter
23:03]

e. Public Corporations
Public corporations are each creatures of their own statute. They were originally considered
to be public service entities providing necessary service requiring considerable investment in
infrastructure for very small returns, which were not considered commercially viable. These
services required public subsidisation at their inception. They were normally established as
monopolies. These are represented by such unfortunate bodies as the National Railways of
Zimbabwe, Air Zimbabwe, Tel/One, Net One and of course the Zimbabwe Broadcasting
Corporation.
The present debate regarding them is whether the nation can really afford these bloated,
inefficient edifices of the heyday of independence euphoria or whether they should be
allowed to go the way of all outmoded, outdated monstrosities of a bygone era by facing
them with open market competition. To allow to be or not to allow to be seems to be the
question.

3. INTRODUCTION TO COMPANIES AND THEIR LEGAL NATURE

Registered company regarded by law as a person distinct from members. Can indulge in
activities which natural person can. Can enter into contracts, own property and sue or be sued
in its own name. Companies Act provides that on incorporation company shall have the
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capacity and powers of a natural person of full capacity in so far as body corporate is capable
of exercising such powers.

Company in Zimbabwean law refers to those entities registered under the Companies Act
[Chapter 24:03] Member of a company may, but need not, be a shareholder.
Company is an artificial person. Cannot act for itself only acts through human agents. Agents
of Co. called directors formulate policies, steer Co. toward achieving its objectives.
Leading case on separate legal personality of Co. Salomon v Salomon & Co. [1897 All E R
[HL]. S carried on profitable business as a sole trader as a boot and shoe manufacturer. The
business's assets exceeded its liabilities. S decided to form a Co. to which he transferred the
business as a going concern. Held virtually all shares except on each transferred to his wife,
daughter and four sons. He caused the Co. to issue debentures to himself in respect of the
purchase price of the business. On liquidation the Co. had assets worth 6 000 but owed 7 000
to unsecured creditors and 10 000 in debentures. If debentures are valid, debenture holders
would take whole amount realised from the sale of the assets leaving the unsecured creditor
with nothing. They, through the liquidator, claimed that debentures are invalid because:
a] Co was S in another form;
b] Co. did not have members independent and unconnected with ea. other.
Court of Appeal found in favour of unsecured creditor. House of Lords reversed the decision
of the court of Appeal and held: Once the Company is registered has legal existence and
separate from those who formed it. Co. could not be Salomon in another form as argued. Co's
transactions valid and the debentures were valid.

4. CHARACTERISTICS OF COMPANIES

a. Separate legal personality.

Although Co. has no physical existence, but a legal fiction, it has the same powers and rights
of a natural person. Property of the Co. is not owned by members although they own the
business. In Macaura v Northern Assurance Association [1925], M was a sole trader formed
a limited liability Co. to which he transferred all his business interests and property. M was
the sole shareholder of the Co. Among the property transferred was a consignment of timber.
This timber insured against risk of destruction or damage by fire in the name of M. The
timber was destroyed by fire and M claimed compensation from the insurer i.t.o. the policy.
Insurers refused to meet claim arguing that M had no insurable interest in the timber at the
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time the event giving rise to the destruction occurred. M sued the insurers and lost. The court
holding that since the timber was Co. property the right person to insure the timber was the
Co. itself and not M. M's insurable interest had terminated with his transfer of the timer to the
Co. This decision based solely on the concept of the Co's separate legal personality.

b. Limited Liability

The word limited that appears in the name of every Co. serves to give notice to all who deal
with it that the liability of the shareholders to the creditor of the Co. is limited. For Co's. with
share capital members cannot be required to contribute more than the amount outstanding on
their shares. Key difference between limited liability Co's. and partnerships and sole traders.

c. Transferability of shares

Shares in Co. are property and can be transferred, pledged, mortgaged, sold etc. Extent to
which shares can be dealt with depends on the type of Co. and it's Articles of Association.
Private limited liability Co's. are obliged to restrict transferability of their shares by S. 33 of
the Act. Shares in public Co's are generally freely transferable.

d. Perpetual succession
Co's. life only terminated by judicial process called winding up or liquidation. Unless wound
up or liquidated, Co. continues to exist no matter what changes take place in its membership,
except for the statutory limitations on the lowest number of members, directors and officers a
Co. may have. As separate legal entity it has a life separate from its members. It has perpetual
succession. The death of a member does not terminate the existence of the Co. as is the case
with partnerships.

e. Capital

When Co. is registered the amount of its share capital must be disclosed in its Memorandum
of Association. The Registrar must be notified of subsequent alterations to the capital clause

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in the Memorandum. Capital may consist of different classes of shares, namely: ordinary
shares; preference shares, etc. Differ as to their rights to dividends and voting power.

f. Objects

The object for which the Co. is formed disclosing the business it will become involved in set
out in Objects clause in Memorandum of Association. No Co. can be registered with vague
and uncertain objects. Amendment to the objects clause in the Memorandum requires specific
procedures.

g. Management

Co. as an artificial person cannot manage itself, it acts through human agents directors.
Directors have legal responsibility to formulate Co. policies manage it in the best interest of
shareholders and other stakeholders. Directors are answerable to the Co. in general meetings
Shareholders have power to appoint and remove directors.

5. TYPES OF COMPANIES
There are 2 broad categories, Co's. Limited by shares and those limited by guarantee.
Co's limited by shares raise capital through issue of shares. Such Co's. further divided into 2
categories, namely: Private and Public Companies.

Private Co. apart from having the words "Private Limited" in their names, restrict the
transferability of their shares and may not have less than 2 or more than 50 members
[excluding employees] in terms of S.7 of the Act. Usually the restriction on the transferability
of shares in Private Co's. takes the form of pre-emption rights in favour of remaining
shareholders to whom the shares are first offered by the shareholder wishing to sell the
shares.

Public Co. generally do not restrict the transfer of their shares and in whom the public at
large are invited to purchase shares. It may not have less than 7 members but no maximum
number is prescribed by the Act. Only a public Co. can apply for listing on the Stock
Exchange and if, successful the Stock Exchange rules require that its shareholders be

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increased to at least 300. A Public Co. [unlike a Private Co.] is required by S. 124 of the Act
to hold a statutory meeting prior to the commencement of business.

Co's. Limited by guarantee do not issue shares but members undertake to contribute a
certain amount of money to the Co. In event of liquidation members' liabilities limited to the
amount guaranteed.

Every Co. registered to conduct business in Zimbabwe must have at least 2 directors, one of
whom must be ordinarily resident in Zimbabwe. The liability of its shareholders is always
limited unless it chooses to operate with unlimited liability, or it falls foul of the provisions
of the Act in terms of which the limits on its liability is forfeited.

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