Chapter 7 PT 2

Question 1

Case example of unfair contracts:
Beadica v 231 CC v Trustees for the Oregon Trust

Answer 1

1) Pacta sunt servenda is not the only nor the most important consideration informing the judicial control of contracts in the
constitutional era.

2) Courts will declare invalid a contract that is prima facie inimical to a constitutional value or principle or otherwise to public policy.

3) Where a contract is not prima facie contrary to public policy, but it’s
enforcement in particular circumstances would be, a court will decline to enforce it.

4) He who alleges bears the burden of proof

Question 2

Unfair enforcement of contracts:

Answer 2

1) Unfair enforcement of contracts could be
contrary to public policy.

2) Brisley v Drotsky assumed that the
Sasfin principle could be extended to the
enforcement of a contractual
terms…Non-variation clause

Question 3

Consequences of a contract that is void
for illegality

Answer 3

1) Illegal contracts cannot be enforced as they create no obligations.

2) If illegality only affects a part of the contract: The illegal part be severed from the rest of the contract in certain circumstances.

3) Where parties performed in terms of a void contract: Performance cannot be claim back where the parties are equally guilty, unless the court allows them

Question 4

Contract cannot be enforced (ex turpi rule):

Answer 4

1) If a party suffers damage as a result of an illegal contract, they cannot claim contractual damages
from the other party (ex turpi rule).

2) Rule cannot be relaxed by the courts under any circumstances and there are no exceptions to the rule.

3) Performance by either party to the contract does not
make the agreement legal

Illegal contracts= Void

Question 5

Severing the illegal part of a contract:

Answer 5

1) Sometimes a contract can be partially illegal.

2) Courts have in certain instances allowed the illegal parts to be severed from the rest, thus permitting the remainder of the agreement to remain in force.

3) In some instances the courts have refused:
Public policy required the entire contract to
be declared void

Question 6

Whether or not an illegal part is severable from the rest of the agreement depends on the INTENTION of the parties:

Answer 6

1) Benlou properties (Pty) Ltd v Vector Graphics (Pty) Ltd

Question 7

Benlou properties (Pty) Ltd v Vector Graphics (Pty) Ltd:

Answer 7

1) The severability is possible.

Question 8

Reclaiming performance that has been made in terms of an illegal contract (Par delictum rule):

Answer 8

1) In principle, restitution of what has been performed must be granted.

2) Ownership of performance not passed: Reclaim performance through rei vindicatio.

Question 9

Par delictum rule:

Answer 9

1) Parties are equally morally guilty
2) Parties are equally morally
guilty, the one in a stronger position will prevent restitution from taking place

Question 10

Rule based on public policy considerations:

Answer 10

1) Court must not assist those who approach it with ‘unclean hands’

2) Unlawful contracts should be discouraged.

3) Rule can be relaxed due to public policy
considerations

4) Eg: If the rule indirectly enforces
an illegal contract, Defendant will be enriched at the expense of the plaintiff

Question 11

Illegal contracts that are ‘valid’ but
unenforceable

Answer 11

1) Restraint of trade
2) Wagering and Gambling Contracts

Question 12

Restraint of trade

Answer 12

1) Characterised by the limitation of someone’s freedom to carry on a profession, trade or business

Question 13

Enforcement of a restraint brings 2 contractual values into play

Answer 13

1) Sanctity of contract
Which considers the maintenance of agreements freely entered into, including limitations of future economic activity, as paramount)

2) Freedom of trade
Which emphasises the right of an individual to engage without restriction in economic activity.

2) These conflicting interests have to be balanced when the enforcement of a restraint is considered

Question 14

Test for Reasonableness of Restraint of Trade per Basson v Chilwan:

Answer 14

1) First, is there an interest of one party worthy of protection?

2) If so, is that interest threatened by the conduct of the other party?

3) If that is further so, does such interest weigh up qualitatively and quantitatively against the interest of the other party to be economically active and productive?

4) Fourth, is there another aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint should either be maintained or rejected?