As long as human kind can remember contracts has been in the existence. Goods were exchanged in order to survive. Therefore a contract can be described as an agreement between two (or more) people where one person offers to do something and another person accepts that offer. So when someone agrees to sell and another agrees to buy or exchange something for it, they have entered into a contract.
Contracts as a whole:
You may ask what the requirements for a contract are. There must be an agreement between people about what each person must do in terms of the contract, so there must be an offer by one person and an acceptance by the other. The offer must be serious and definite. All agreements however are not a contract. The difference between an agreement and a contract is that if it is a contract there is a serious intention to be legally bound between the two parties.
Any person making the contract must have the legal power to enter into the contract. Examples of people who don`t have legal power to enter into contracts are: Children under the age of 7 years, people who is mentally insane and people who are under the influence of alcohol or drugs.
A person cannot enter into a contract if it is impossible to carry out what is in the agreement. Example: someone agrees to sell you a house and you agree to buy that house. But the house gets washed away in a flood before you sign the agreement. So it is impossible for the contract to be enforced because there is no house.
The contract should be legal and not contra bonus mores. In other words, it should not be illegal or go against the morality of society. Example: if a person agrees to hijack a vehicle in return for money, the contract is void. It is not a proper contract.
Forms of breach of contracts:
It’s important to understand what breach of contracts means. Breaking a contract is called breach of contract. A breach of contract happens when one person does not do what she or he promised to do in the contract. The other person can then choose to end the contract. There are five forms of breach of contract which are:
1. Default of the debtor (mora debitoris). Should a debtor not obliged to its contract in time or timeously he or she is then in breach of contract. The law refers to that debtor as in mora and therefore the form of breach of contract is called mora beditoris.
The creditor and the debtor can make an agreement that the transaction or payment must be performed immediately after the conclusion of the contract (‘forthwith’). If they however agree on a specific time for instance that the payment will be made on the 25th of each month and the debtor does not comply, a failure to perform in accordance with the request can lead to mora ex re. Example you only pay your Edgars account on the 15th of each month yet in the original contract it stated that you would make a payment on each 25th day of the month.
If no actual date was agreed upon it would be assumed that the debtor must perform in a reasonable period after the conclusion of the agreement. Should this however do not happen this is referred to as mora ex persona. Example certain money was paid for parts to be delivered and six months later the parts has still not been delivered to the client.
2. Default of the creditor (mora creditoris). Just as with mora debitors, default in creditor or mora creditoris the same applies in this case it is the debitor which will be protected. The creditor is in breach of contract if they without justification, delays the fulfilment of the debtor`s performance, where performance is tendered. Example you have paid a building contractor to build a wooden deck at your premises and only half of the work was done.
3. Positive malperformance. It occurs when the debtor delivers defective performance. In the case of an obligatio non faciendi, positive malperformance would occur when the debtor does the thing which he undertook not to do. In the case of an obligatio faciendi, positive malperformance occurs when the debtor delivers an improper or incorrect performance. Example you have paid for a certain DVD machine and on receiving it, it is not functioning as was promised.
4. Repudiation It differs from making performance impossible. Repudiation creates relative certainty that eventual performance will be absent or defective, (we are almost sure that performance will be absent), while making performance impossible creates absolute certainty that this will happen. In other words repudiation means turning one`s back on an agreement.
5. Prevention of performance (rendering performance impossible). Making performance impossible. It’s the conduct by either a creditor or a debtor which makes the delivery of his own or the other party`s performance impossible. This can happen at any time before performance takes place, even after the date when performance has become due. Because it takes place before performance, it is also a form of anticipatory breach.
Legal remedies for breach of contract.
One of the parties to the contract is in breach; the other party (the victim or the aggrieved party) is entitled to a contractual remedy or remedies. When a breach of contract occurs the innocent party basically has two options: Either to opt for the fulfilment of the contract or to cancel the contract. Specific performance means that the contract must continue as it stands. The court has the discretion to refuse to such an order on certain grounds. A reduced performance will happen if the plaintiff who claims performance from the defendant has not himself / herself performed completely.
Sometimes a contract will specifically say that one party may end the contract if there is a particular kind of breach (or perhaps any breach) by the other party. Any clear provision to this effect will be decisive. If there is no express provision, the general rule is that a very serious breach by one party will allow the other party to choose whether or not to end the contract.
To be serious, the breach would have to be either a breach of any term that has very serious consequences – that is, the effect of the breach must substantially deprive the innocent party of what was intended to be obtained under the contract. Breach of a vital term – that is, a term in relation to which, at the time the contract was signed, the party`s words and conduct showed that the party considered that strict compliance with the term was essential.
If the other party`s breach is very serious, you can end the contract, but you do not have to. You can choose to go on with the contract, and still keep your right to claim damages (compensation). If you decide to end the contract, you should tell the other party immediately.
Damages. The object of damages is usually to put the injured party into the same financial position he would have been in, had the contract been properly performed. The plaintiff must be able to prove he/she suffered damage as a result of breach of contract.
Penalty clause. Is a clause entered into the contract to protect both the parties which state what type of penalty would be payable should a breach in contract occurs. This penalty may for example comprise a sum of money or benefits that the guilty party will forfeit. The conventional Penalties Act 15 of 1962 was promulgated to legalise penalty clauses.