Category Archives: Contracts

CANCELLATION OF THAT GYMNASIUM CONTRACT

We havA2_Be all made New Year’s Resolutions. This year I will start exercising, eating healthy and spend less time at the office and more with the family. In order to fulfil this resolution, you join the local gymnasium as soon as you return from your December holiday. It does not bother you whether the agreement is for two, three or four years. This year you are going to keep that resolution!

Then winter arrives and you spend more time at the office and at the fireside and less time in the gymnasium. By August you recognise the debit order of the gymnasium on your bank statement, knowing full well that you have not been there for at least two months.

The Consumer Protection Act (“the act”) has limited the effect of fixed-term agreements containing automatic renewal clauses for a further fixed term. As the legislator has given a wide definition to the words “goods” and “services”, most fixed-term agreements will fall within the scope of the act. Section 16 of the act provides that any consumer may cancel a long-term agreement with twenty business days’ notice, which notice must be in writing, unless both parties to the agreement are juristic persons.

The act then provides that the supplier may be entitled to a “reasonable cancellation penalty” payable by the consumer for cancelling the fixed-term agreement. What constitutes a reasonable cancellation penalty will depend on the type and nature of the contract.

Lester Timothy of Deneys Reitz Attorneys uses the example of a mobile phone contract, an analogy most of us will understand. A consumer enters into a two-year contract with a mobile phone service provider and simultaneously purchases a handset to be paid by monthly instalments in the course of the two-year contract. The service provider will thus have incurred expenses regarding the handset. Therefore, in the event of the consumer cancelling the contract, it will be acceptable for the mobile service provider to charge the consumer for the outstanding balance of the handset to recover the expenses incurred.

Where a supplier incurs no significant additional cost as a result of the cancellation of the contract, the supplier will have more difficulty to establish the reasonableness of any cancellation penalty unless a discount is given.

You may therefore approach that gymnasium and notify them in writing of your intention to cancel the agreement after twenty business days. Depending on the remaining period of your contract and the wording of the agreement, you will have to pay a reasonable cancellation penalty. However, as the gymnasium did not incur significant additional costs as a result of your cancellation, you will be entitled to a discount on the remaining balance of the agreement.

Negotiate the cancellation penalty fee with the gymnasium. You may be surprised what the offer of an immediate payment as cancellation penalty can do.

And next year, rather buy running shoes, even expensive ones. They will wait patiently in your wardrobe till the following New Year’s Day …

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.Errors and omissions excepted. (E&OE).

VALIDITY OF ANTENUPTIAL CONTRACTS

A4_bOne must be careful when drafting and signing an Antenuptial Contract. Aside from ensuring that the contents is all correct, one must also ensure that all the necessary provisions are contained therein to make the contract valid. The consequences of neglecting to do so may result in a marriage in community of property even though the parties had no intention of this at the time of their marriage.

Attorneys are often trusted with the task of drafting an Antenuptial Contract. This is a contract, which one signs to regulate the property regime of a marriage. If a couple does not sign, an Antenuptial Contract then the marital property regime will be that of in community of property. The presence of an Antenuptial Contract means that the marital property regime is that of out of community of property and the parties must specifically stipulate whether they would like the accrual system to apply to their marriage or not.

The importance of ensuring that all the necessary provisions are contained in the Antenuptial Contract to result in a valid contract was discussed in the 2014 Supreme Court of Appeal Case of B v B[1]. In this case, no values were stated in respect of any of the assets listed in the Antenuptial Contract and they were also not properly identified. In B v B the court stated that if the terms of a contract are so vague and incoherent as to be incapable of a sensible construction then the contract must be regarded as void for vagueness.[2]

According to Section 6(1) of the Matrimonial Property Act[3] ,a party to an intended marriage which does not, for the purpose of proof of the value of his or her estate at the time of the commencement of the marriage, declare the value in the contract, then he or she may do so within six months of the marriage in a statement attested to by a notary. If this is not done, according to Section 6(4) of the Marital Property Act, the net value of the estate of a spouse is then deemed to be nil at the time of the marriage. In effect, such a contract is valid but it will effectively render the marriage in community of property since nothing was excluded from the accrual.

However, if a contract is contradictory and incoherent in other respects then it cannot be seen as a valid contract since there is no certainty as to the meaning of the contract and what the parties seek to achieve. This means that the contract would not embody terms that would enable to court to give effect to the intention of the parties at the time the contract was concluded.

The result of such a contract is that the Antenuptial Contract would be void for vagueness and that the marital property regime would be the default position according to the Marital Property Act, which is in community of property.

Therefore, parties are encouraged to read their contracts thoroughly and ensure that they understand the terms thereof and that the contract embodies their intentions without any further explanations or evidence.

[1] (952/12) [2014] ZASCA 14 (24 March 2014).

[2] B v B (952/12) [2014] ZASCA 14 (24 March 2014) par 7.

[3] 88 of 1984.

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.

ANNULMENT OF A MARRIAGE

A2_bConsent is an essential element of a valid marriage and the parties to a marriage must confirm before the marriage officer during a civil ceremony that they voluntarily consent to marry each other.[1] There are certain circumstances where it can be said that consensus was not present, and this will be discussed below.

Six months after John marries Laura they decide that they want to start a family. John finds out from the doctors that he is sterile and cannot have children. Laura is distraught and contacts her attorney, saying that she would never have married John if she had known that he could not have children.

Laura’s attorney explains to her the circumstances in which consensus will either be lacking or materially deficient, in which case the marriage can be annulled (set aside).

Firstly, a material mistake will result in a lack of consensus. A material mistake is limited to where there is a mistake as to the identity of your spouse or a mistake regarding the actual act of marriage in that you did not understand that the ceremony in which you took part resulted in marriage with the other party. In these circumstances there is uncertainty as to whether the marriage never came into existence or if it can be set aside. One may also make mistakes regarding the personal characteristics of your spouse. This may only be a ground on which the validity of the marriage can be challenged if these are material characteristics. The decision whether a mistake regarding a personal characteristic is material or not rests with the Court.[2]

Secondly, a misrepresentation by your spouse may justify the setting aside of a marriage if that misrepresentation relates to a material aspect of the marriage. In the scenario above, if John was aware of the fact that he was sterile before entering into the marriage with Laura, then Laura could attempt to prove that she was misled and state that if she was aware of John’s sterility, she would never have married him. However, if John was unaware that he was sterile, this is not a sufficient ground on which to set a marriage aside.[3]

Thirdly, if one of the parties was unduly influenced or placed under duress to marry the other party by any person including but not limited to the party to which they have been married, then there is no consensus and the marriage can be set aside.[4]

Fourthly, impotence, being the inability to have sexual intercourse, may be a valid ground for setting aside a marriage, but this will not be so if it was reasonably foreseeable at the time that the marriage was entered into that sexual intercourse wouldn’t take place based on factors such as age or illness.[5]

Fifthly, if the scenario above was altered to read that Laura was pregnant with another man’s baby at the time that she married John then he could apply to have the marriage set aside on the basis that this state of affairs would most likely result in an unhappy marriage. He may only make this application if he was unaware of the pregnancy at the time that they were married and if he has not waived his right to have the marriage annulled.[6]

Bibliography:

  • Robinson JA, Human S, Boshoff A, Smith BS, Carnelley M, Introduction to South African Family Law, 4th, 2009, 92 – 94.
  • Heaton J, South African Family Law 3rd, 2010, 37.
  • Marriage Act, 25 of 1961.

[1] Section 30(1) of the Marriage Act, 25 of 1961.

[2] Robinson JA, Human S, Boshoff A, Smith BS, Carnelley M, Introduction to South African Family Law, 4th ed. (2009) 92.

[3] Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 93.

[4] Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 93.

[5] Heaton J, South African Family Law, 3rd ed. (2010) 38; Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 94.

[6] Heaton J, South African Family Law 3rd ed. (2010) 37; Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 94.

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.

ARE RESTRAINT OF TRADE AGREEMENTS ALWAYS VALID AND ENFORCEABLE?

A1_b]Historically restraint of trade agreements were void and unenforceable unless the employer could prove that it was a reasonable agreement entered into between the parties. Fortunately for employers the position in our law has changed.

What are restraint of trade agreements?
An agreement that seeks to restrict a party’s right to carry on a trade, business or profession in such manner or with such persons as he/she sees fit, is restraint of trade.

Restraint of trade clauses are most commonly found in employment and partnership contracts, which usually takes effect after termination of the contract, or in sale of a business or practice.

Why are they controversial?
They are controversial because there is a clash of fundamental values: on the one hand there is freedom or sanctity of contract which relies on agreements being honoured, and on the other hand there is freedom of trade which is a constitutionally recognised right.

As with other contracts, restraint of trade agreements are presumed to be prima facie valid and enforceable. Whereas the onus had earlier been on the employer to prove that implementation of restraint of trade was fair and in public interest, the onus is now on the employee to show why enforcement in the particular circumstances would be against the public interest.

An unreasonable restraint is contrary to the public interest and hence unenforceable. The reasonableness of a restraint of trade clause or agreement is judged on two bases: broad interests of community, and interests of the parties themselves.

Reasonableness inter partes depends on a variety of factors:

–    Does the employer have a protectable interest?
–    Area and duration of restraint (possibility of partial enforcement)
–   Concession by the employee in the contract that restraint is
reasonable, and inequality of bargaining power of parties (these
factors carry little weight)

Examples of protectable interests are confidential information, trade secrets, customer connections and lists, and goodwill of the business. However, it does not include interest in the elimination of competition, and the investment of time and capital in the training of the employee.

It is not sufficient simply to label confidential information as such. In order to be confidential the information must be commercially useful, in other words capable of application in trade or industry, have economic value to the person seeking to protect it, and be known only to a restricted number of people.

With regards to trade connections, it will only be relevant when the employee has close working relations with the customers, to such an extent that there is a danger of him/her taking them with him/her when he/she leaves the business. Relevant factors here include the following:

– duties of the employee;
– his/her personality;
– frequency and duration of the contact with the customers;
– his/her influence over them;
– nature of his/her relationship with them (degree of attachment,
extent of their reliance on him/her);
– level of competition between the rival businesses;
– type of product sold; and
– evidence that customers were lost when he/she left the business.

With reference to the above the following questions must be asked:
a)  Does party A have an interest deserving of protection?
b)  Is such interest being prejudiced by party B?
c)   If so, how does A’s interest weigh up qualitatively and
quantitatively against B’s interest in not being economically
inactive and unproductive?
d)  Is there some broader facet of public policy that requires the
enforcement or rejection of the restraint?

If restraint of trade agreement is reasonable inter partes, it may still be unenforceable if it is damaging to the public interest for a reason not peculiar to the parties.

Sources:
Basson v Chilwan & Others [1993] 3 SA 742
Sunshine Records (Pty) Ltd v Flohing & Others 1990 (4) SA 782 (A)
Magna Alloys & Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A)

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.

CONTRACTING WITH MINORS IN A DIGITAL CONTEXT

A2_bIn this article, we examine whether contracts entered online by minors, using their parents’ credit cards, are legally binding in the specific context of social media such as Facebook.

Both Common law and legislation deal with the capacity of minors who enter into different types of contracts. According to the Children’s Act, 38 of 2005 a minor is a person between the ages of seven and 18 years. In terms of common law a minor does not have sufficient capacity to incur binding obligations under a contract and must obtain the assistance or consent of their guardian to do so. This consent can be given before the contract is concluded or thereafter, in which case it is seen as ratification of the contract. There are exceptions to this rule, which may be found in various pieces of legislation as well as in common law, such as contracts where the minor obtains only rights and no duties (e.g. a donation).

A minor can escape liability even when they have been bound in terms of the contract (i.e. where the guardian has assisted the minor in the conclusion of the contract, consented to or ratified the contract). This can be done where the contract was prejudicial to him or her at the time that it was concluded. The court may then, on application, set the contract aside and order that each party be placed in the same position as what they were in before the contract had been concluded.

Facebook is currently involved in an ongoing class-action lawsuit. In this lawsuit, a class of parents in America are pressing their claim that Facebook should change how it handles online transactions by minors.

Attorneys for the parents in the above case note that it is important that Facebook has knowledge of a user’s actual age but still treats children the same as adult users when it comes to taking their money.

One of the biggest issues here is that reciprocal performance, being the payment of money via credit or debit card and the child obtaining credits, takes place almost immediately. Therefore, if the parent were to be refunded, the minor would be unjustifiably enriched using the credits.

The system, that Facebook currently employs, is therefore problematic since it takes advantage of children who may not fully understand the contracts that they are entering into when they purchase game credits. Furthermore, should the parents be immediately refunded in the current system, it may lead to situations where the parent consents to the purchases and then after the child obtains the enjoyment from the credits, request that their accounts be credited due to a ‘lack of consent’.

It is therefore clear that this system of payment should be changed. We should obtain clarity on how to deal with this in South Africa once the class-action suit in America has been concluded and a solution has been reached. At present, it seems that there will be no alternative for parents whose children overspend or use their credit or debit cards, without permission. If your child has, a Facebook gaming habit it is a good idea to keep a close eye on your wallet until we have clarity on the recourse available to parents who find themselves in this situation.

Bibliography

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.