LoCiSA1e Chapter 09 v1.0

© Oxford University Press Southern Africa 2010www.oup.com/za

Dale Hutchison (Editor), Chris-James Pretorius (Editor)

Jacques du Plessis, Sieg Eiselen, Tomas Floyd, Luanda Hawthorne, Birgit Kuschke, Catherine Maxwell, Tjakie Naude

• Always at least two parties• Unless one party is acting in two different capacities:

– Vaal Reefs Exploration & Mining Co Ltd v Burger 1999 (4) SA 1161 (SCA) at 1170-1171

– Van der Merwe v Nedcor Bank Bpk 2003 (1) SA 169 (SCA).

• More than two parties• Cf Multiple obligations: each of which has at least one debtor

and one creditor

• Multiple parties: each obligation may have a number of co-debtors or co-creditors

• Determination of each party’s share of liability/entitlement depends on a number of factors

• Most important of these is whether the performance is divisible or not.

• Divisible performances: example• Indivisible performances: example• Distinction depends on:

– Nature of performance– Intention of parties.

• Presumption in favour of simple joint liability and entitlement:– Liable/entitled to proportional share of performance– Shares presumed to be equal

• Release of one co-debtor from performance: – Generally no automatic release of other co-debtor/s

• Performance of more than co-debtor’s share of performance: generally no right of recourse.

• By express or implied agreement, or by operation of law• Consequences of joint and several liability:

– Each co-debtor liable for the full amount– Creditor can claim full debt or any lesser amount from any co-debtor/s– Performance in full discharges the debt completely– Part-performance discharges the debt pro tanto:

» Balance claimable from any/all co-debtors– Performing party’s right of recourse against co-debtors for proportionate shares of

debt– Release of one of co-debtors: proportionate reduction of liability of remaining co-

debtor/s

• Consequences of joint and several entitlement: same rules apply mutatis mutandis.

Situation: • Performance is indivisible• Parties intend that co-debtors are to be liable as a collective or

co-creditors are to be entitled as a collectiveConsequence:• Parties cannot act individually – must perform/claim as a

collective.

Introduction • Privity of contract

– One of cornerstones of law of contract– Principle is not qualified as regards the imposition of duties on third

parties: rationale– But it is to some extent relaxed as regards the creation of rights for

third parties: rationale– Third party’s duty to respect a contractual relationship between others.

Typical agency situation:

Contract of agency (mandate and authority

Negotiations

Contract

The parties:• Principal• Agent• Third partyMeanings of ‘agency’:• Contractual relationship between principal and agent• Agent’s representation of principal• Both of the above.

Representation• A concludes juristic act on behalf of P• Authority of A

– Granted by law: ‘juristic representation’– Granted by P to A usually by contract: ‘conventional representation’– If written: power of attorney: general or special

• Contract between A and P: contract of agency (cf mandate).

1. Relationship between principal and agent– Covered by law of mandate and terms agreed by the parties– Agent’s position highly fiduciary

2. Relationship between principal and third party– Consensus between P and 3p: refer to state of mind of A– P vicariously responsible for acts of A: qui facit per alium facit per se– P’s knowledge may be attributed to A and vice versa.– Normal situation: contract arises between P and 3p– If A exceeds authority, P not bound by contract except:

» Where P ratifies the contract» Where P is estopped from denying that A had the

necessary authority.

2. Relationship between principal and third party (continued)– Doctrine of undisclosed principal:

» A personally liable» But P can demand performance from 3p» Or 3p may claim performance from A or P» Cullinan v Noordkaaplandse Aartappelkernmoerkwekers Koӧperasie Bpk 1972 (1) SA

761 (A)» Compare with the unidentified principal

– Non-existent principal: » Contract void ab initio» Except in the case of pre-incorporation contracts:

Companies Act 61 of 1973 s 35 Close Corporations Act 69 of 1984 s 53 (→ Companies Act 71 of 2008).

3. Relationship between agent and third party– Normal situation– Situation where agent lacks authority or exceeds his or her authority:

» Warranty of authority» Fraudulent or negligent misrepresentation that A had authority» Implied warranty of authority.

• Practical importance• How does relate to the principle of privity of contract?

– Roman law– Roman-Dutch law– Modern academic debate.

• A and B can validly contract for the benefit of C (who need not exist at the time)

• Requisite intention to create an enforceable obligation in favour of C• C acquires a right to the benefit upon notification of acceptance• Relationship between A and B depends on the terms of their

agreement• On acceptance of the benefit, C acquires independent right to

enforce performance • C cannot accept a benefit without simultaneously accepting any

reciprocal obligations coupled with it.

• What must C accept?• Does the stipulatio alteri involve one or two contracts?

– Majority opinion: two bilateral relationships (A–B and B–C)– Alternative view: only one contract, between A and B; C’s right is

conditional or inchoate

Practical legal consequences of the debate as to the proper construction of the stipulatio alteri.

• Transfer of contractual rights to a third party: cession• Transfer of contractual duties to a third party: delegation• Withdrawal of party and substitution by third party: either by

novation or by assignment.

• This is possible, but is dealt with elsewhere • Note: the third party does not become a party to the contract

in question by virtue of the performance.

Subject to agreement of the parties, the debtor may perform to a third party: adiectus solutionis causa

© Oxford University Press Southern Africa 2010www.oup.com/za