Chapter 4- Consensus

Question 1

Explain the establishment of consensus

Answer 1

▪️The establishment of consensus between the parties can be seen as the most important requirement which has to be met for the conclusion of a contract. The wills of the parties and their intention with the contract is the basis on which consensus is reached.
▪️The following are elements of consensus:
- the parties must be unanimous that they wish to create certain consequences by having the serious and true intention to do so
- they must be unanimous that these consequences are juristic consequences
- they must be aware of the uncertainty

Question 2

Name the two types of contracts recognised by law

Answer 2

▪️actual consensus
- between the parties

▪️extraordinary circumstances

• contracts based on ostensible consensus
• where true consensus is absent but the law wishes to recognise contractual liability

Question 3

Discuss the 3 theories that exist in South African law that determine whether consensus exists that could lead to contractual liability

Answer 3

▪️Will theory
States that consensus exists because the parties are in actual agreement because of their corresponding intentions

▪️Direct reliance theory
True consensus is absent because the parties do not have similar intentions due to material mistake, the reasonable reliance created by one party towards the other may in some instance be acknowledged as proper consensus ( ostensible consensus)

▪️declaration theory
States that the parties are bound only to their expressed or declared intentions and do not to their real intentions.

Question 4

Discuss the importance of communication

Answer 4

Communication and conscious cooperation between the parties is required before there can be any real consensus.
Communication regarding the proposed contract between the parties takes place through a process of negotiation.
Communication can be an offer or acceptance which can creates consensus. This will depend on the purpose and contents of each declaration, and whether the requirements for the offer or an acceptance are met.

Question 5

Describe the negotiation process

Answer 5

During their negotiations the parties make certain declarations of intent. The parties’ intentions are expressed by way of these declarations of intent. These declarations of intent, according to their content and purpose could be a mere invitation to do business, a request for tender, proposal, or only an exchange of information, none which creates consensus or agreement.

Question 6

Could a reaction to an offer be qualified acceptance? Discuss

Answer 6

Yes, the reaction to an offer is not in unqualified acceptance thereof, but that it constitutes a counter offer.
The reaction to an offer changes or adds to the content of the offer. Only when an offer is finally accepted by an unqualified assent can consensus truly exist and a contract is effectively concluded

Question 7

Is there limitations to an offer and counter offers?

Answer 7

There is no limitations on how many offers and counter offers may be made before a final acceptance is made. But only one acceptance that triggers the consensus must be an unconditional affirmation of the terms of the offer.

Question 8

Discuss the difficulty of identifying whether party conduct actually constitutes either offer or an acceptance

Answer 8

If the parties purposely show that consensus exists, a contract is conclude. Where parties sign a written memorandum of understanding (MOU) or memorandum of agreement (MOA), it could be difficult to determine who actually made the offer and who made the acceptance. Yet where the fact that consensus actually exists is seen clearly from the parties’s conduct, it is deemed to be sufficient for the conclusion of a contract between them

Question 9

Explain the offer

Answer 9

An offer is a declaration of intent made by a prospective contracting party, legally brings a contract into being. The purpose of an offer is to declare the intent of prospective contractant to the other contractant. And offer is sometimes referred to in industry as “tender” or “proposal”

Question 10

Explain the requirements for a valid offer

Answer 10

▪️the offer must be firm

• an advertisement is a declaration made with the intention of inviting another party to make an offer or to enter into negotiations. It’s merely an invitation to do business
• an tender is an offer made in reaction to an invitation for the tenders or request for proposals.

▪️the offer must be complete

• the offer must contain the provisions, conditions terms and qualifications which will upon acceptance be included in the eventual contract. If the offerer wishes to add to a proposal at a later stage, the declaration of intent which he made initially is not a complete offer and any subsequent declaration that he makes would be counter offer.
• where the offer is vague to create a binding contract by acceptance thereof, the law will not acknowledge the declaration as a valid offer.

▪️the offer must be clear, certain and unambiguous

• The offer must be accepted without any further qualification. Where uncertainty exists in a valid and binding, contract, the rules of interpretation of contracts must be applied to determine the contents of the contract. Where the contents of an essential term cannot be determined no contract will come into being.
• the consumer protection act requires offers, notices, documents or representations that fall within the scope of the Act to be plain and understandable language, and prescribed form
• bait marketing is prohibited by the Consumer Protection Act. An supplier may not advertise goods and service at a specific price in such a manner that may result in the consumer being misled in any respect to the availability of the goods and services from that supplier at that price

▪️as general rule, the offer does not have to comply with formalities

• Offers do not have to comply with certain formalities. An offer can be made verbally, in writing, expressly, tacitly, through words or conduct.
• the Consumer Protection Act requires the right to rescind that agreement.

▪️the offer must come to the actual knowledge of the offeree

▪️the offer must be addressed to a specific person or group of person

• an offer has to be directed at a specific person(s), as the offer can only be complete once it comes to the knowledge of the offeree.
• public offer ( unidentified individuals, will dictate which of them may accept the offer)

▪️negative option marketing is prohibited
- the Consumer Protection Act provides that a supplier may not promote any goods and services on the basis that there will be a binding contract and that the consumer must accept the goods and service and pay for it, unless consumer declines the offer.

Question 11

Discuss the termination of a offer

Answer 11

▪️a mere offer does not create a legal obligation between parties. It only has potential to create a legal obligation should the offeree accept the offer. The offer cannot exists forever. The offer must be terminated some way or another so that it can no longer be accepted and lead to consensus

A. Rejection of the offer
If the offeree does not wish to accept the offer, he can reject it, and the offer terminated. If the offeree qualifies his acceptance in any way, the offer is deemed to be rejected and the offeree in fact make counter offer

B. Revocation of the offer
The offeror can only revoke the offer Made by him prior to acceptance thereof. The revocation of the offer is only effective when the offeree has received notification that the offer has been revoked. Only then is the offer terminated and no longer open for acceptance by the offeree.

C. Lapse of time
Offers is only available for acceptance for the determined period of the time. If offer is not accepted within this period, the offer is automatically terminated.

D. Death of the offeror of the offeree
If any of the parties should die before the offer is accepted, the offer is automatically terminated. As offer does not create legal obligation, no rights or duties exist as yet which can be transferred to deceased estate.

E. Contractual incapacity
Should any of the parties loss their contractual capacity before the offer is accepted, the offer is terminated and cannot be accepted

Question 12

Explain the process of the acceptance

Answer 12

▪️the acceptance is an unqualified declaration of intent made by the offeree, approving the offer without reservation. An accepted offer technically lapse as it, together with the acceptance becomes the binding consensus and cannot be unilaterally revoked or amended after the acceptance thereof.
▪️if the acceptance is qualified, or reservations exist, it will not be am acceptance but an counter offer. This counter offer must be accepted before consensus can be reached, resulting in the conclusion of a contract. No contract can come into being without the acceptance of an offer.

Question 13

Write down the requirements for a valid acceptance

Answer 13

A. The acceptance can only be made by the offeree, who is aware of offer
- the offeree can accept the offer. This can only happen if he is actually aware if the offer and its contents. The offeror intended to conclude a contract with the offeree and not with another person

B. The offeree must have the serious intention to be bound to his acceptance
- the offeree must have the intention to be legally bound to his acceptance. This creates a contract with legal consequences for offeree.

C. The acceptance must be clear, certain and unambiguous
- the contents of the offer must be certain. A notice by the offeree that he will accept the offer in the future could be constitute an acceptance

D. The contents of the acceptance must correspond with the contents of the offer
- the intention of the offeror must correspond with the intention of the offeree only then consensus is possible

E. The acceptance does not have to comply with any formalities

• no formalities are prescribed for an acceptance to be valid. Acceptance can be effected verbally, in writing and etc.
• sometimes law or parties may require certain formalities, this must be complied with before the acceptance can be valid

F. Acceptance only complete when the offeror is notified
The acceptance is only complete and a contract only concluded between parties, after the offeror has been notified that his offer has been accepted