LU3 — Obligations: The Law of Contract (General Principles)
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Learning Outcomes
After studying this unit you should be able to:
- - Explain the nature of obligations and how they arise
- - Distinguish between types of contracts
- - Identify defects in consensus and their consequences
- - Explain contractual liability and the standard of care
- - Discuss the constitutional (lack of) influence on contract law
3.1 The Law of Obligations vs The Law of Property
| Feature | Law of property | Law of obligations |
|---|---|---|
| Right at issue | Real right (right in a thing) | Personal right (right to claim performance) |
| Character | Real | Personal |
| Remedy | Real action (against anyone) | Personal action (against specific debtor) |
The law of obligations is personal in character — it creates a bond between specific parties, not a right against the world.
3.2 What Is an Obligation?
"The essence of obligations does not consist in that it makes some property or a servitude ours, but that it binds another person to give, do, or perform something for us." — Digesta
An obligation = a legal bond between two parties:
- - Creditor → has the personal right to claim performance
- - Debtor → has the duty to render performance
🔑 Memory aid: Creditor Claims. Debtor has a Duty.
Sources of obligations (Gaius)
- 01Contracts — voluntary agreement
- 02Delicts — wrongful harmful acts
- 03Other causes — quasi-contracts, quasi-delicts
3.3 General Principles of Contracts
3.3.1 Consensus (Consensus ad idem)
The most fundamental requirement for all contracts. Without true agreement there is no contract.
Three factors that can destroy consensus:
| Factor | Latin | Effect on contract | Notes |
|---|---|---|---|
| Fraud | Dolus | Voidable | Injured party may choose to set aside |
| Duress | Metus | Voidable | Threats forcing agreement |
| Mistake | Error | May be void | Negates consensus entirely in some cases |
⚠️ Critical distinction: - Void (void ab initio) = no legal effect from the start; no contract ever existed - Voidable = valid initially, but the injured party may have it declared void - Never use "invalid" in a legal context — too vague. Always say void or voidable.
3.3.2 Requirements for valid performance
Performance must be:
- - Possible — physically or legally possible at time of conclusion
- - Lawful — not prohibited by law or contrary to public policy
- - Determinable — certain or capable of being determined
- - Of value — must have some legal/economic significance
Supervening impossibility (vis major): If performance becomes objectively impossible* after the contract is concluded, through no fault of either party (e.g. flood, war), the obligation is extinguished. Neither party is liable.
Example: Burt must return Ernie's wagon, but war breaks out and soldiers have occupied the area. Performance is impossible — Burt's duty is suspended while it remains impossible.
3.3.3 Contractual liability and the standard of care
When a party malperforms (fails to perform properly or at all), the law measures fault against the standard of the bonus et diligens paterfamilias (careful head of household) = the modern reasonable person.
| Fault level | Latin | Meaning |
|---|---|---|
| Highest negligence | Culpa levis in abstracto | Failed the reasonable person standard — even slight negligence |
| Fraud / intent | Dolus | Deliberate wrongdoing — highest form of fault |
In contracts based on bona fides, a fraudulent party has contravened good faith and is liable for damages.
3.3.4 Terms and conditions
- - Conditions (condicio) — future uncertain events that affect the existence of the contract
- - Suspensive condition — contract only comes into full operation if the event occurs
- - Resolutive condition — contract dissolves if the event occurs
- - Time clauses — certainty that the event will happen, but uncertainty as to when
3.4 Types of Contracts (Roman Classification)
| Type | How formed | Examples |
|---|---|---|
| Real contracts | By delivery of the thing | Loan for use (commodatum), deposit (depositum), pledge (pignus) |
| Verbal contracts | By formal spoken words | Stipulatio (formal Q&A) |
| Literal contracts | By written records | Account books, written instruments |
| Consensual contracts | By mere agreement | Sale, letting & hiring, partnership, mandate |
Consensual contracts are the most important category — they require only consensus on the essentials, nothing more.
3.5 Specific Consensual Contracts
Letting and hiring (Locatio conductio)
Three sub-types:
| Sub-type | Latin | What is hired |
|---|---|---|
| Hire of a thing | Locatio conductio rei | The use of a thing (e.g. renting a car) |
| Hire of services | Locatio conductio operarum | A person's labour (employment) |
| Hire for a piece of work | Locatio conductio operis | Completion of a once-off job (e.g. building a wall) |
Modern equivalent: employment law, consumer protection (Consumer Protection Act governs workmanship guarantees).
Partnership (Societas)
- - Two or more persons combining for mutual economic benefit
- - Contributions: money, goods, labour, or expertise
- - Each partner must act in accordance with *good faith (bona fides)
Mandate (Mandatum)
- - Mandatee performs a service gratuitously for the mandator
- - Origin: Roman moral duty among friends (e.g. erecting a tombstone for a deceased friend)
- - Essentials: consensus on the nature, the action, and the fact that it is gratuitous
- - Creates an imperfectly bilateral contract — mandatee always incurs obligations; mandator only in certain cases
3.6 Constitutional Influence on Contract Law
Unlike property law, the law of contract has seen relatively little direct constitutional transformation. Why?
- - Good faith (bona fides) was once central but was progressively reduced by English legal influence
- - By 1907 good faith was reduced to an "underlying principle" — public policy replaced it as the main external control
- - The Constitution is the "repository of the boni mores" (community's sense of fairness) — but courts have been slow to use it to directly transform contract law
Growing debate
- - Constitutional Court has questioned the limited role of good faith
- - Some academics argue good faith would better protect weaker contracting parties
- - The Consumer Protection Act 68 of 2008 — Parliament's intervention — is currently the main constitutional-era protection for consumers in contract
Self-Assessment Questions
- - What is an obligation? Name its elements.
- - What is the difference between void and voidable? Why does this matter?
- - What are the requirements for valid performance?
- - What is supervening impossibility and what effect does it have?
- - What standard of care is required in contracts based on good faith?
- - Name the four types of Roman contracts and give an example of each.
- - Why has the Constitution had limited impact on the law of contract?