People enter into agreements daily either in person, over the phone, or online. This makes the importance of understanding the requirements of a valid contract in South Africa vital!
Contracts are essential to regulate certain relationships as it provides certainty as to what the parties expect from each other.
Contracts provide a legal framework which regulates dealings between parties and provides the peace of mind that the law will uphold their agreements and enforce them if necessary.
What is a contract?
A contract is a legally binding promise made between at least 2 parties in order to fulfill an obligation in exchange for something of value.
When parties enter into a contract, obligations are created. An obligation in this sense is a legal relationship consisting of a right to performance by the other party, coupled with a corresponding duty to perform “your end of the bargain”.
There are many different types of contracts. Contracts can either be written, oral, or a combination of both. When buying a property in South Africa, one of the first contracts you will sign is an offer to purchase before starting with the process.
Requirements of a valid contract in South Africa
For a contract to be considered valid and binding in South Africa, the following requirements must be met:
All parties must have the capacity to contract – they must understand the terms and any obligations under the contract. They must also consent to the contract freely ( there cannot be any coercion/force, fraud, undue influence, or misrepresentation).
These type of people generally lack the capacity to enter into contracts:
- Children under 18
- Persons suffering from mental health conditions
- Persons under the influence of drugs and/or alcohol
If a person lacking capacity has entered into a contract, it will generally be up to that person to decide if they want to invalidate the contract.
Offer and Acceptance
An agreement happens when an offer is made by one party to the other. An offer is a statement of terms that the person making the offer is prepared to be contractually bound to. For an offer to be valid, it must be: Definite, Complete, Clear, and Certain.
Acceptance of the offer must be unconditional (eg a signature on a contract of employment), Unequivocal (leaving no doubt), and it must be communicated.
The agreement must have certain and definite terms. Contracts that are not certain are vague, and a court will not uphold them. There must be a consensus between the contracting parties.
A certain contract requires certain formalities – eg: a contract for the sale of land must be in writing; similarly, suretyship agreements, credit agreements, antenuptial (marriage) contracts, leases over ten years, and contracts for executory donations must be reduced to writing and signed by the parties.
The contractual obligations must be possible of performance.
Who governs contract laws in South Africa?
Contracts may be governed by various different acts, depending on the type of contract. An employment contract would have to comply with the Labour Relations Act and Basic Conditions of Employment Act and a rental agreement would have to comply with the Rental Housing Act and so forth.
However, there are a set of acts that will commonly have an effect on most types of contracts. These are:
- The Constitution – This is the most supreme law in South Africa and enshrines the Bill of Rights which contains fundamental rights that must be respected and adhered to at all times. Contractual terms which are not in accordance with the constitution, will not be enforceable.
- The Consumer Protection Act – This act strives to neutralize the imbalances in bargaining power that may exist between suppliers and consumers. This act guard against concepts such as “unconscionable conduct” and “unfair, unreasonable or unjust contract terms and prices”.
- The Protection of Personal Information Act – This act aims to protect the personal information of consumers and should be adhered to when obtaining personal information of contracting parties.