CH8: GENERAL INTRODUCTION TO THE LAW OF PURCHASE AND SALE

INTRODUCTION
 GENERAL
→ Law of purchase and sale has a bearing on all legal rules applied to contracts of sale
→ Contract of sale is most common contract found in practice

 CONTRACT OF SALE DEFINED

→ Specific, nominated, reciprocal agreement to buy and sell in terms of which seller
has true intention to deliver determined or determinable thing together with all
their rights in thing undistributed to buyer and buyer has true intention of paying
determined or determinable price for thing

 GENERAL REQUIREMENTS FOR A VALID CONTRACT

→ Prerequisites of a normal contract:
a. Consensus
b. Contractual capacity
c. Legality
d. Physical possibility
e. Formalities
→ For contract to qualify as contract of sale: seller and buyer must reach consensus on
the essentialia of contract of sale
→ Requirements for a valid contract of sale [essentialia of a contract]
a. Intention of seller to sell and buyer to buy
b. Thing is sold [consensus on what is bought/sold]
c. Purchase price [consensus on payment owed to seller]
→ Seller doesn’t have to be owner of object sold to conclude valid & binding contract of
sale
→ Seller obliged to transfer their rights in thing to buyer without interference/
disturbance only

ESSENTIALIA OF THE CONTRACT OF SALE

 NATURE OF THE CONTRACT
▪ Seller and buyer must reach consensus regarding essentialia before contract of sale
can exist
▪ They must reveal their intention to buy and sell
▪ Intentions must be true
▪ Intention of parties to deliver rights of undisturbed use, enjoyment & disposal of
thing sold to buyer: enable buyer to obtain ownership of thing sold
▪ Selling of stolen goods: deed of sale null and void as a result of illegality
 THE THING SOLD
▪ For valid contract of sale: seller and buyer must reach consensus on thing sold
▪ Thing must be determined or determinable at time of conclusion of contract
o If description is too vague to determine exactly what thing is: contract null & void
▪ Thing sold can be movable or immovable, material or immaterial
▪ Must be merchantable: property of a person and be able to be sold commercially

 DIFFERENT THINGS SOLD

i. Sectional property
o Consists of a unit and joint ownership in common property
ii. Timeshare property
o Use and enjoyment is allocated to different owners in terms of time schedule
iii. Future things
o Things that are determinable at time of conclusion of contract in terms of certain
specifications or occurrence of a certain event only
o EMPTIO REI SPERATAE [s sells his seasons crop to B for R20 per bag; before the bag
realises, the object sold is only determinable when crop has been fixed in units]
o EMPTIO SPEI [S sells the next season’s crop to B for a lump sum of R10 000
irrespective of whether the crop materialises or not; purely an aleatory sale and
chance determines the object sold, the latter is fixed as soon as the contract is
concluded]
o Buyer entitled to examine object to ensure it in agreed upon condition and
specifications
▪ If buyer doesn’t get opportunity to examine or goods aren’t aligned with
agreement: buyer may return them with 10 working days
~ Risk & expense for return of the Merx lies with seller
iv. Res aliena
o A thing of which seller is not owner [seller doesn’t have to be owner of thing sold]
o Where seller sells a res aliena to buyer: true owner is in terms of common law
entitled to claim their property from buyer with a vindicatory action called rei
vindication
o This right of the owner stems from the rule that provides that:
▪ Person can transfer only rights which they have to another person
▪ They can’t transfer more rights than they themselves have
▪ True owner can exercise their right to claim their property from any person who
is in possession of it if said property still exists
o Where a buyer possesses a res aliena in good faith: true owner can claim their
property from buyer
o If buyer who possesses a res aliena in good faith: sold property to someone else:
true owner can’t claim value of property from former buyer
▪ owner can claim value of property from buyer who buys a res aliena and acts in
good faith, where buyer, through their negligent or intentional conduct: made it
impossible for owner to reclaim their property
o Where a buyer buys a res aliena and acts in bad faith: true owner can claim their
property from buyer
▪ Where buyer is no longer in possession of property or where they destroyed it:
true owner can claim the value of property from buyer
 o Limitations on right of owner to vindicate are:
▪ Where real owner represented to buyer that seller is owner of thing sold:
doctrine of estoppel will prohibit true owner from revoking real state of affairs
▪ Object sold was sold in terms of order of court and buyer acted in good faith
▪ Object which, without knowledge on part of curator, doesn’t belong to insolvent
estate: is sold by curator to seller who acts in good faith
▪ Buyer has, by law, a lien or tacit hypothec over the object sold
▪ Where real owner has instructed a factor to sell object on their behalf, which
factor takes purchase price for their own account, while not being authorised to
do so : buyer who acted in good faith, may be vindicated only if real owner
compensates them the purchase price

THE PURCHASE PRICE

 GENERAL
▪ Seller and buyer must reach consensus on purchase price in order to conclude valid
contract of sale
▪ Requirements for valid price determination:
o Agreement on price
o Price must be certain
o Price must consist of acceptable currency: Letters of credit are most frequent
method of payment in international trade
~ where payment doesn’t consist of money: not contract of sale
▪ Need to determine if contract is of sale or of exchange: problem solved as follows:
o If money is of a higher value or equal, it will be a contract of sale
o If goods are of a higher value, contract will be one of exchange

 AGREEMENT OF THE PRICE

▪ No contract of sale exists where price isn’t determined or determinable
▪ Parties must have serious intention that agreed price will be price for their contract
and that it will be payable as agreed
▪ Price can be less than value of thing: where it’s out of proportion [too
high/expensive], no contract of sale will exist

 INFLUENCE OF THE CONSUMER PROTECTION ACT ON THE PRICE

▪ A seller is prohibited from entering into an agreement to supply (or market) any
goods at a price that is unfair, unreasonable or unjust
o If so, a court may make any order that it considers just and reasonable,
~ such as the return of money or property, or awarding compensation to the
consumer
▪ A seller must adequately display price of goods on sale and they are not entitled to
charge a higher price than displayed price.
o If more than 1 price displayed: seller is bound to sell thing for lower price
displayed unless it is an obvious error or that it has been tampered with
FORMALITIES
 GENERAL
▪ Refers to external visible form required for that specific contract
▪ Rule of common law: no formalities required for a valid or enforceable contract of
sale
▪ Parties may agree to certain formalities for their contract: intention must be
examined as two possible reasons for agreement could exist:
o contract will be valid only after the formalities are complied with
o Formalities will serve as proof of an existing contract between parties only
~ in which case a valid contract already exists before formalities are complied
with
▪ Where formalities are required by statute: parties can’t change, exclude or abandon
these formalities

CONTRACTS FOR SALE OF LAND

 FORMALITIES IN TERMS OF ALIENATION OF LAND ACT
• Contract for alienation of land must be in writing and signed by both parties and by
their agents acting on their written authority
• Agent requires written authority except when:
o agent acts regarding a pre-incorporation contract of a company or close
corporation not yet floated
o a partner acts on behalf of the partnership
o a person is by operation of law, authorised to act on behalf of another person
~ EG. a parent who purchases land on behalf of their minor child
o in the case of functionaries or organs of a company
• No formalities required when the sale of land is done through an auction

 IMPORTANT CONCEPTS
• Alienate to sell, exchange or donate irrespective of the fact that it’s subject to a
suspensive or resolutive condition
• Land includes the following:
o Any unit
o Any right to claim transfer of land
o Any undivided share in land
o Any direct interest in land
• Deed of alienation: a document or documents in terms of which land is alienated,
and has a wider meaning than contract

 AIM OF STATUTORY REQUIREMENTS

• To prevent disputes regarding the contents of a contract
• To prevent any uncertainties regarding the contents of the contract
• To prevent malpractices
WRITTEN CONTRACT REQUIRED
 GENERAL
A. Can be one or many documents
▪ Parol Evidence Rule applies: No verbal testimony is allowed in legal proceedings
to supplement change or contradict terms of a written contract
B. Where contract is valid, but document doesn’t reflect true intention of parties:
verbal testimony can prove true intention of parties and contract can then be
rectified
C. Deed of alienation must contain all the essentialia as well as any other term
expressly raised or implied in negotiations and regarded as material by parties
▪ If this is lacking/incomplete: contract is void
▪ A material term is one that parties regard as important enough to insert in
contract
o To decide whether a term is material:
~ Did parties apply their minds to term?
~ Did they agree, either expressly or tacitly
→ that term should form part of their contract
→ term should be binding on them
▪ This applies to those terms that are not naturalia only
▪ The deed of alienation must also contain the right of the buyer to terminate the
deed of alienation
▪ Can’t be concluded by electronic means, i.e. e-mail, Internet or SMS
D. Things sold must be clearly defined
▪ Written contract must clearly identify thing being sold
▪ If it can’t be identified: null and void
E. Purchase price must be clearly defined
▪ Deed of alienation must clearly state purchase price, as well as method and time
of payment
▪ Where price is payable in instalments: deed of alienation must clearly state
amount of periodic payments, periods between payments and time when
payments must be made
o Where these are absent or not stated clearly: contract is null and void
F. Parties must be clearly described
▪ Parties must be clearly described in the deed of alienation
▪ Both seller and buyer must be identifiable
▪ If other persons are involved in contract: their capacities must be clearly
described in contract
G. Alteration of written contracts
▪ Where any substantial stipulation in a deed of alienation is altered: alteration
must comply with any statutory formalities applicable to that contract
▪ If not complied with: deed of alienation will be null and void
H. Termination of written contracts
▪ Doesn’t have to comply with statutory formalities required for conclusion or
alteration thereof
▪ Termination or re-instatement can be affected verbally
SIGNATURE OF PARTIES
 GENERAL
▪ Both parties must sign deed of alienation
▪ If parties do not act personally, their representatives must act on their written
authority
▪ Signature doesn’t have to be full name: any mark or initial that identifies party is
enough
▪ If CPA requires a document to be signed or initialled: such signing or initialling may
be affected in any manner recognised in law

 AGENTS
→ Can act on behalf of either seller or buyer: if they have written authority to do so:
• Written authority, must already exist at time of conclusion [not necessarily at
signing at time of signing the contract] of contract and agent must have
knowledge thereof
• A letter of authority by the Master of the Supreme Court of the Trust Property
Control Act 57 of 1988: required before a trust may enter a deed of alienation of
land
→ A company, being a legal entity, can’t itself sign any agreement and can’t provide its
functionaries with written authority to sign on its behalf
• Business and affairs of company must be managed by or under direction of its
board, which has authority to exercise all the powers and perform any of the
functions of the company
• board can make rules delegating powers to administrators of the company
• distinction must be drawn between:
o company’s representatives: authority derives from company’s memorandum of
incorporation or rules, or from the Act
▪ not agents: relationship with the company is not governed by the law of
agency
o those representatives: authority is founded on an act of authorisation
• The persons are referred to as company’s functionaries
→ In terms of CPA: agent is like an intermediary: must disclose information prescribed
by minister of trade and industry to anyone regarding sale/supply of any property,
goods or services
• Information to be disclosed is, among other things: full identification, services to
be rendered, fees, commission, cost payable and disclosure of any code of
conduct and revealing of any dishonest/criminal behaviour

 INFLUENCE OF THE CONSUMER PROTECTION ACT 68 OF 2008 ON FORMALITIES

• Agreements not required to be in writing
• If in writing: must be in plain & understandable language and signed by buyer
• If there are any conflicting acts within the alienation Act and CPA both acts apply
simultaneously
 CONSEQUENCES OF NON-COMPLIANCE WITH FORMALITIES
• The contract is null and void: No legal obligation exists between the parties
• If one party delivered the whole or part of their performance: they can’t claim
counter performance from other party
• Any party who delivered such performance is entitled to reclaim their performance
from other party
• Buyer who has made performance in terms of the invalid contract is entitled to claim
the following from seller:
▪ interest at the prescribed interest rate, on any payment made by buyer to seller
▪ reasonable compensation for
o any essential expenses, incurred with or without consent of owner, for
protection and improvement of land
o any improvement made with express/tacit consent of owner, which increases
market value of land
• Seller who allowed buyer to possess land: entitled to claim the following from buyer:
▪ reasonable compensation for buyer’s occupation, use and enjoyment of land
▪ compensation for any intentional or negligent damages caused to land by
actions of buyer or someone for whose actions they are responsible
• Where both parties delivered complete performance in terms of contract which is
null and void since formalities weren’t complied with: contract deemed to have been
valid and binding from time of conclusion thereof
• Same consequences applicable to contract of sale of land concluded before
commencement of Alienation of Land Act
→ Any renunciation or surrender of these rights and consequences by the parties is
null and void
• CPA: silent as to consequences of non-compliance with formalities imposed in terms
thereof

 RIGHT TO REVOKE OFFER OR TERMINATE DEED OF ALIENATION

• Section 29A of the Alienation of Land Act 68 of 1981: buyer may within five days
after signature, unconditionally terminate deed of alienation by a written and signed
notice
→ Provided that:
o purchase price doesn’t exceed R250 000
o buyer is a natural person
o land is used for residential purposes
• If deed is terminated: every person who received any amount from buyer, shall
refund full amount of such payment within 10 days after notice was delivered to
seller
• If CPA is applicable:
o Seller may return goods to supplier & cancel agreement within 10 working days
if goods were delivered as result of direct marketing
o Goods are returned in this instance at buyer’s risk and expense
o Seller must return any payment received from buyer within 15 working days