oth the law of obligations and the law of property - that is to say, they have obligationary (or contractual) and proprietary aspects. The sale of a house, for example, entails both an agreement to give transfer of the property against payment of the price (the contract of sale) and the actual transfer that occurs when the agreement is implemented (by registration of change of ownership). So too, in a donation, the donor's promise to donate is implemented (executed) when the donor honours his or her promise by handing over the gift. In the context of cession, as has been seen, it is common to distinguish between the obligationary agreement creating the duty to cede the right in question, and the real agreement of cession whereby the right is actually transferred. In the examples just mentioned, the contract is the underlying reason, or causa, for the transfer of ownership that follows. If the contract happens to be invalid, there is no just cause (iusta causa) for the transfer. Ownership will nonetheless pass because South African law adheres to the abstract rather than the causal system of transfer."4 However, since ownership has passed without a proper cause (sine causa), the transferor will generally have an enrichment action to recover the property. This being merely a personal action, the transferor is at risk: if the transferee goes insolvent before the property is returned, the transferor will not be able to get the property back, and will have only a concurrent claim against the insolvent estate. When an estate is insolvent, there are insufficient assets in the estate to meet the claims of all the creditors; after the secured and preferent creditors have been paid, the balance of the estate, if any, is shared equally among the concurrent (unsecured) creditors. The transferor might thus receive only a fraction of the value of the property. This illustrates the importance of the distinction between real and personal rights. Had ownership not passed, the transferor would have been able to recover the property from the insolvent estate with a vindicatory action (rei vindication. 1.6 The development of the modern notion of contract Our law of contract is essentially a modernised version of the Roman-Dutch law of contract, though the common law principles are today supplemented by a number of important statutes, foremost of which is the Consumer Protection Act.15 And like all branches of the law, it is of course subject to the Constitution - the fundamental bedrock or grundnorm from which all law in South Africa now derives its validity. No rule, no principle and no doctrine of contract law can survive unless it is consistent with the Bill of Rights and the normative framework of the Constitution." The courts are therefore empowered18 and enjoined's to ensure such consistency by developing the common law where necessary; and when developing the common law, they must promote the spirit, purport and objects of the Bill of Rights. 20 It follows that no rule or principle of the common law of contract should be considered sacrosanct, no matter how deeply entrenched or how impressive its pedigree. That said, it should not be assumed too readily that those rules and principles, moulded over centuries 14 Legator Mckenna Inc v Shea 2010 (1) SA 35 (SCA) at par [21]. 15 Act 68 of 2008 (see $ 1.9 below). See also the National Credit Act 34 of 2005 and the Conventional Penalties Act 15 of 1962 (see $ 13.5.3 below). 16 The Constitution of the Republic of South Africa, 1996. See $ 1.10 below. 17 Section 172(1)(a) of the Constitution. 18 Section 173. 19 Section 8(3). 20 Section 39(2). The obligation to develop the common law where necessary is not purely discretionary: see Carmichele u Minister of Safety and Security 2001 (4) SA 938 (CC) at par [39].12 THE LAW OF CONTRACT IN by Jurists not wholly oblivious to the demands of equity, are necessarily deficient who measured against the standards of the Constitution.21 whatever changes may come in the future, it certainly remains true today that, despis cer Some significant legislative changes and a great many more judicial adaptationgle the finovations - including a fair amount of borrowing from English law - the fundamen of rel Principles of our law of contract are those expounded by the Dutch institutional writers. All Ro although those same principles have their roots in Roman law, the modern notion of contrad differs fundamentally from the Roman one. to understand the foundations of the modern law of contract - including statements often encountered, such as that today all contracts are consensual and bonae fidei - we need to be aware of the historical background of our system, and more particularly of god generalisation of the notion of contract that took place in the seventeenth to eighteenth centuries. We need to appreciate the significance of the acceptance of the principle pacta sunt servanda (agreements must be honoured). ) isgorg s morty 1.6.1 Roman law when considering the Roman law, we must remember that we are dealing with six centuries of legal development, progressing from the strict formality of the early stricti iuris contracts to the sophisticated informality of the later consensual contracts, based on good faith (bona fides). Roman law had a law of contracts, rather than of contract. It never developed a fully generalised theory of contract - that is, one that regards any agreement meeting certain general requirements as an enforceable contract. Instead, it recognised a number of distinct categories of contract: real contracts, created by agreement plus the delivery of the thing in question; verbal contracts, of which the most important was stipulation created by the use of prescribed, formal words to express a promise; literal contracts, created by recording an agreed debt in a ledger; and do so consensual contracts, created by mere agreement. qlaning nomenoo oth dguo no) ends at doinw lo No agreement that fell outside these defined categories was a contract, no matter how seriously it was intended by the parties, because the fundamental principle was ex nudo pacto non oritur actio: informal agreements, or bare pacts, give rise to no action. Thus, only in the case of the consensual contracts (sale, lease, partnership and mandate) was mere agreement sufficient in itself to create the contract. All the other contracts required some further element. It may be that this additional element is the causa that some texts say is required for a valid contract, but the meaning of causa remains obscure. Roman contracts were further classified as being either stricti iuris or bonae fidei. The earlier unilateral contracts were stricti iuris, characterised by a strict and rigid formalism, while the later bilateral contracts (including all the consensual contracts) were bonae fidei - disputes arising out of them had to be settled by the judge in accordance with the flexible principle of good faith. The development of the consensual contracts was prompted by the commercial needs of the growing Roman state, as formalism impedes trade and commerce. The trend towards informality and generalisation of the notion of contract continued in later centuries, first with the recognition of the so-called innominate contracts, then with the enforcement of 21 See M Wallis 'The common law's cool ideas for dealing with Ms Hubbard' 2015 132(4) SALJ 940.ient wh CHAPTER 1 THE NATURE AND BASIS OF CONTRACT 13 at, despite ations or certain informal pacts (either as independent agreements, or as additional terms modifying lamental the consequences of one of the recognised contracts), and finally, most important of all, the ters. And relaxation of the formal rules with regard to stipulations. The general view, however, is that contract Roman law never quite reached the stage of enforcing all serious and deliberate agreements as contracts. cements 1.6.2 Roman-Dutch law we need The Roman-Dutch writers completed the process of generalisation. Influenced, it would of the seem, by Canon Law, by the body of mediaeval commercial law known as the Law Merchant, teenth and by Germanic customs, they discarded the subtle distinctions of the Roman law of pacta contracts and accepted as the basis of the Roman-Dutch law of contract the fundamental principle that, as a matter of good faith, all serious agreements ought to be enforced (pacta sunt servanda). All contracts were now said to be consensual and bonae fidei - that is, based on mere agreement and good faith. Strangely, however, many of the writers continued to assert that a iusta causa (or redelijke oorzaak) was a necessary element of contract, without turies defining that elusive concept. This uncertainty gave rise to a celebrated dispute in early South tracts African law. faith 1.6.3 Causa and consideration: a celebrated dispute 22 fully In the late nineteenth century, the Cape Supreme Court, under the dominating influence of rtain Lord Henry de Villiers CJ, adopted the view that by iusta causa was meant valuable tinct consideration, in the English legal sense of a quid pro quo.2 In other words, even a serious promise should not be enforced as a contract unless the other party gave or promised something in return. This interpretation of iusta causa met with fierce resistance from learned jurists in the north: it was challenged as historically incorrect by the eminent of Mr Justice Kotze in his annotated translation of one of the great books on Roman-Dutch law,24 and was later rejected outright by the Transvaal Supreme Court, under Innes CJ, in Rood v Wallach. 25 Lord De Villiers refused to back down, 2 however, and so the dispute rumbled on until it was finally settled, nearly 50 years after it started, by the Appellate Division in the famous case of Conradie v Rossouw.27 The court ruled that the English doctrine of consideration forms no part of our law; in South Africa, any serious and deliberate agreement made with the intention of creating a legal obligation is a binding contract, provided only that the agreement is lawful and possible of performance, and that the parties have the requisite capacity to contract. 28 Unfortunately, although all the members of the court agreed that causa did not mean consideration, they could not reach agreement on what it did mean. The dominant view was that it meant 'the ground or reason of the contract - that which brought it about',? but 22 See, for a fuller discussion of this dispute, Dale Hutchison 'Contract Formation' in Reinhard Zimmermann & Danie Visser (eds) Southern Cross: Civil Law and Common Law in South Africa (1996) 165 at 166-73. 23 Alexander v Perry (1874) 4 Buch 59. 24 JG Kotze Simon van Leeuwen's Commentaries on Roman-Dutch Law (ed CW Decker 1780) revised and edited, wit notes, in two vols (vol I, 1881; vol II, 1886). The note in question appears at the end of Book IV, chapter II. 25 1904 TS 187.14 THE LAW OF CONTRACT IN SOUTH AFRICAN another view was that it meant 'the particular transaction out of which the obligation is said to arise, be it sale, hire, donation or any other contract or handeling. Subsequently however, iusta causa came to be treated both by the courts and by academic writers as meaning no more than that the parties should have a serious intention to create a binding contract and that the agreement should be a lawful one. As such, the concept of iusta causa is entirely redundant for it merely repeats other requirements for a valid contract. Regrettably, in Saambou-Nasionale Bouvereniging v Friedman," Jansen JA questioned this tendency to allow iusta causa to be absorbed into the requirements of legality and animus contrahendi, and the concept was unnecessarily employed to deny liability in a subsequent case.$2 Perhaps, therefore, the last word has yet to be spoken on the meaning of iusta causa in the modern law of contract. However, the overwhelming weight of academic opinion is that the concept has become redundant and should be allowed to die a natural death. 33 1.7 The basis of contract how siegnene Krist boog bris Hourssign thom is In this section, we address the fundamental question: What must be proved in order to establish that a contract exists? 1.7.1 Introduction We have said that in modern law all contracts are consensual, in that they are based on agreement. But what do we mean by agreement? Does it require a genuine meeting of minds on all aspects of the contract, or will an objective appearance of agreement suffice? In other words, does our law adopt a subjective or an objective approach to the formation of a contract? That is one of the most fundamental questions in any system of contract, as the answer to it influences all that follows. 1.7.2 Actual subjective agreement (consensus) Genuine agreement presupposes an actual meeting of the minds of the parties (concursus animorum). Subjective consensus of this nature exists when all the parties involved: . seriously intend to contract; . are of one mind (ad idem) as to the material aspects of the contract - namely, the terms of the proposed agreement, and the identity of the parties to it; and are conscious of the fact that their minds have met - as a learned commentator has pointed out, it is not enough that you wish to sell me your book for R1 000 and that I would be willing to buy it at that price: 'Our minds are on parallel tracks, but a contract jerges only when the tracks intersect.'34