Oftentimes we find ourselves feeling content and protected by entering into and concluding a contract/legal agreement.
However, when the time comes for the obligations of the contract to be enforced it can be a very disappointing and devastating reality when you realise that the contract or the terms thereof are invalid. This article therefore seeks to educate the reader, in short, as to what a valid contract entails. We will be discussing what material elements need to be present in order for a contract to be valid as well as the legal requirements of a valid contract. These material elements and legal requirements are as follows:
- Consensus, Often referred to as a “meeting of the minds”, consensus is where both parties have the same intentions with regards to the material terms of the contract. In a general sense, the material terms would entail a process of offer and acceptance and this process in itself creates further requirements:
- for an offer to be valid, such offer must be certain, complete, definite and clear. The Consumer Protection Act (“CPA”) further extends the requirements for an offer to be valid.
- for the acceptance to be valid, such acceptance must be unequivocally, unconditionally and consciously accepted by the person to whom the offer was made. Acceptance can be expressly stated or by implication.
- Capacity, The parties concluding the contract should have the legal capacity to enter into such contract. This requirement relates to inter alia:
- Age For a party to be fully capable of concluding a contract, without the consent of a parent or guardian, such party must be over the age of 18 years (age of majority). However, take into consideration that an emancipated minor or a minor who has entered into a valid marriage, will not be considered a minor and will therefore require no consent to legally conclude a contract.
- Mental Capacity In order to ascertain whether the parties have the mental capacity to enter into a contract, one should determine whether the parties, at the time of conclusion, (a) understand their actions and (b) appreciates the consequences of such actions. In the event that both (a) and (b) is absent, such party will not have the mental capacity to enter into the contract.
- Marital status, regime and applicable law When a party to a contract is married, it is important to determine in terms of which marital regime or law he/she is married. In the event that the party is for example married in community of property or in terms of customary law (which has the effect of being married in community of property), the party will require consent from his/her spouse when concluding the contract. Note that consent will only be required for certain contracts and not all contracts.
- Possibility and Certainty (performance), The general rule in respect of possibility is that the impossibility of performance prevents the conclusion of a contract. Otherwise worded, the performance in terms of the contract must be possible in order for the contract to be valid. Therefore if you conclude a contract where the performance is for example, delivering a painting that no longer exists, such contract will be invalid as performance is impossible. The general rule in respect of certainty is that the uncertainty of performance prevents the conclusion of a contract. Therefore, the performance must be certain and specific in order for the contract to be valid. An example of an uncertain and unclear contract would be, where the contract is concluded without giving proper timelines or intentions in terms of performance.
- Formalities, Different contracts require different compliance with certain formalities e.g. in writing or signed before a Notary Public etc. When looking at the “in writing” formality, bear in mind that even though it is not a specific requirement for a contract to be in writing, it will be more difficult to prove what exactly the agreed contract terms where. The following contracts are legally required to always be in writing: a) Contract to buy or sell immovable property, b) Suretyship contract, c) Credit contract, d) Antenuptial Contract (should also be signed before a Notary Public), e) Lease contracts over 10 years, and f) an Executory donation contract.
- Legality, This requirement could well be the most important requirement of all. Considering that even though all of the above requirements are met, if the performance or obligation of the contract in terms of which the contract is concluded, is prohibited by law or against public policy, the whole contract will be invalid. Examples of these types of contracts are: a) contracts for the sale of illegal substances, b) contracts for illegal activities such as gambling or prostitution etc.
Accordingly, it is imperative that when you conclude a contract, all of the above material elements and requirements are present and adhered to. Failing the aforementioned, you will run the risk of the contract or the terms thereof being invalid and unenforceable, which will therefore cause you or the other party to suffer damages.