The simple definition of a contract is where an offer by one party is accepted by the other party. These parties are the contracting parties. There will be no agreement between the parties if there is a counteroffer to an offer. However, if a counteroffer is accepted, there is an agreement or consensus between the parties.

What are the requirements of a valid contract?

  1. There must be a consensus between the contracting parties;
  2. The parties must have a legal capacity to enter into a contract;
  3. All the formalities must have been met, whether it is contained in the contract itself or by law. For example, the sale of immovable property has to be in writing. However, verbal contracts are valid contracts;
  4. Performance as per the agreement has to be possible as well as lawful;
  5. There must be certainty in respect of what the parties agree to.

As with all contracts, there are certain things that need careful consideration when entering into a contract.

  1. Performance:

Performance is what each party is responsible for in terms of the agreement. With an agreement of sale, the parties agree that one person will make payment in a specific amount in return for a specific item. Before entering into a contract, it is important to consider whether you will be able to perform in terms of the agreement. Will you be able to pay the purchase price? Will you be able to deliver the thing? Will you be able to provide the service as agreed?

When payment is done in instalments, due consideration should be given to the instalment amounts and if the party who is liable for said instalment amounts is able to afford it for the period agreed upon.

Interest on repayment plans is another factor that needs careful consideration. Although parties may agree to any amount of interest, it would be wise to agree to a reasonable interest.

A credit agreement is a common form of an agreement entered into by parties. Examples of these are credit cards, vehicle finance agreements or mortgage bonds. It is important to establish whether a party offering a credit facility is a registered credit provider in terms of the National Credit Act (NCA).

  1. Non-variation:

Notwithstanding that verbal contracts are valid contracts, it is wise to have a contract reduced in writing in order to avoid uncertainty. Even written contracts can be uncertain at times. If you have your contract in writing, make sure that it contains a non-variation clause to ensure that all changes to the contract shall only be valid if in writing and signed by both parties.

It is important to note that variations of a contract may take place by means of email correspondence.

  1. Dispute resolution:

Make sure that in the event of a dispute the parties should follow a procedure in order to resolve the dispute. For example, parties can agree to give each other written notice in order to rectify a default within a short period of time after which the aggrieved party can institute legal action against the other party. The parties can agree to proceedings they find more effective In terms of time, costs, and resolution. It is common that parties agree that the magistrates’ court has jurisdiction to preside over a dispute arising from their contract.

  1. Domicilium:

Domicilium citandi et executandi is the nominated address for accepting notices and processes for purposes of court proceedings. It is important to note that the court may accept that a party has received proper notice of proceedings if there is proof of delivery to the nominated address despite the fact that you may be unaware of said delivery.

  1. Do not sign contracts that you do not know or understand the content of.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

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