Contract Law Interview Questions & Answers

Question 1. Discuss The Impact Of The Consumer Protection Act Upon The Law Of Contract With Reference To Its Aims, Objectives, Scope, National Regulatory Institutions, And Sanctions?

Answer :

The CPA is bound to have a huge impact on the conduct of businesses in South Africa, and the law of contract. The primary purpose of the Act is to protect consumers from exploitation in

the marketplace, and to promote their social and economic welfare.

More specifically, it aims to:

• Establish a legal framework for the achievement and maintenance of a consumer market that is fair, accessible, efficient, and responsible, for the benefit of consumers generally;
• Promote fair business practices;
• Protect consumers from unconscionable, unjust, or unreasonable business practices.

The scope of the Act is very wide. It applies to:

• Most transactions concluded in the ordinary course of business between suppliers and consumers within South Africa, as well as;
• The promotion of goods and services that could lead to such transactions, and;
• The goods and services themselves once the transaction has been concluded.

A supplier is any person (including a juristic person, trust, and organ of State) who markets any goods or services.

A consumer includes not only the end-consumer of goods and services but also:

• Franchisees
• Relatively small businesses in the supply chain (asset value or annual turnover below the threshold determined by the Minister)

The Act does not apply to any transaction in terms of which goods and services are promoted or supplied:

• To the State
• To a juristic person with an asset value or annual turnover above the threshold
• Employment contracts
• Credit agreements and Transactions exempted by the Minister

These rights are protected and enforced not only through the courts, but the National Consumer Commission and the National Consumer Tribunal. Failure to comply with provisions of the Act might attract various sanctions, commencing with compliance notices and leading possibly to the imposition of fines and criminal penalties. Contractual provisions in contravention of the Act may be declared null and void to the extent of non-compliance.

Question 2. List And Very Briefly Discuss The Requirements For A Valid Offer And Acceptance?

Answer :

OFFER:

• Must be firm. (That is to say, with the intention that its acceptance will call into being a binding contract.)
• Must be complete. (It must contain all the material terms of the proposed agreement.)
• Must be clear and certain. (It should be enough for the addressee to answer merely “yes” for a contract to come into being.)
• Must meet the requirements of the Consumer Protection Act.

ACCEPTANCE:

• Must be unqualified. (It must be a complete and unequivocal assent to every element of the offer.)
• Must be by the person to whom the offer was made Bird v Summerville. (E.g. the offer to sell farm A cannot be accepted by A and B jointly.)
• Must be a conscious response to the offer – Bloom v American Swiss Watch Co. (A person cannot accept an offer if he was not aware of it.)
• Must be in the form prescribed by the offeror, if any.

Question 3. State The Ways An Offer May Be Terminated?

Answer :

• Rejection of the offer
• Acceptance of the offer
• Effluxion of the prescribed time, or of a reasonable time
• Death of either party
• Revocation of the offer
• Loss of legal capacity to act

Question 4. Discuss And Distinguish Between An Option And A Right Of Pre-emption?

Answer :

An option is a substantive offer, reinforced by an agreement in terms of which the offeror undertakes to keep his offer open to the offeree for a specified period.

A right of pre-emption is a type of right of preference. It is given by a prospective seller to a prospective purchaser, to give the purchaser preference if the prospective seller should decide to sell.

There are significant differences between the two. In the case of an option to buy, the grantor has already made a firm offer to the grantee, and the power to conclude the sale lies exclusively in the hands of the grantee.

With a pre-emption agreement, however, there is as yet no firm offer “on the table” – merely an undertaking to make an offer to the grantee if the trigger event occurs (usually, if the grantee decides to sell the property). The grantor accordingly retains the power to decide whether or not to sell, and cannot be compelled to do so unless or until the trigger event has occurred.

Question 5. State The Requirements For Duress And Undue Influence?

Answer :

DURESS (improper pressure that amounts to intimidation):

• Actual violence or reasonable fear
• The fear must be caused by the threat of some considerable evil
• It must be the threat of an imminent or inevitable evil
• The threat or intimidation must be contra bonos mores
• The moral pressure must have caused damage
• UNDUE INFLUENCE (The party who seeks to set aside the contract must establish):
• The other party obtained an influence over the party
• This influence weakened his or her powers of resistance and rendered his will compliant
• The other party used this influence in an unscrupulous manner to persuade him or her to agree to a transaction that
• was prejudicial to him or her
• he or she would not have concluded with normal freedom of will

Question 6. State The Elements For Commercial Bribery As Held In Extel Industrial (pty) Ltd V Crown Mills (pty) Ltd?

Answer :

•  A reward
• paid or promised
• by one party, the briber
• to another, the agent (agent in true sense or merely a go-between)
• who is able to exert influence over
• a third party, the principal
• without the principal’s knowledge, and
• for the direct or indirect benefit of the briber
• to enter into or maintain or alter a contractual relationship
• with the briber, his principal, associate, or subordinate.

Question 7. State The Requirements For Restitutio In Integrum?

Answer :

• Misrepresentation by the other party
• Inducement
• Intention to induce
• Materiality

Question 8. State The Elements Of A Fraudulent Misrepresentation?

Answer :

• A representation
• which is, to the knowledge of the representor, false;
• which the representor intended the representee to act upon;
• which induced the representee to act; and
• that the representee suffered damage as a result

Question 9. Define Misrepresentation?

Answer :

A misrepresentation is generally a false statement of past or present fact (not law or opinion) made by a contractual party to another prior to the conclusion of a contract and regarding some matter or circumstance relating to the contract.

Question 10. Define Dictum Et Promissum?

Answer :

A material statement made by the seller to the buyer during negotiations, bearing on the quality of the res vendita and going beyond mere praise and commendation.

Question 11. State The Test To Determine If A Restraint Of Trade Clause Is Enforceable (basson Test)?

Answer :

• Is there an interest of one party worthy of protection?
• If so, is that interest threatened by the conduct of the other party?
• If so, does such interest weigh up against the interest of the other party to be economically active and productive?
• Is there another aspect of public policy that requires that the restraint should be maintained or rejected?

Question 12. Discuss The Factors Taken Into Consideration In Determining Whether The Legislator Implicitly Intended The Contract To Be Void For Statutory Illegality?

Answer :

What is the object of the statute and what mischief (harm) is the statute directed against? If the validity of the contract brings about the harm the statute is directed against, it is an indication that the legislator intended the contract to be void.

• Does the enactment impose a criminal sanction? This is usually an indication that the legislator intended the contract to be void. However, this is not the case where the sanction provides adequate protection against the mischief that the statute is directed against.
• Does the enactment merely serve to protect the revenue of the State? If the answer is in the affirmative, it is an indication that the legislator intended the contract to be valid.
• Does the provision merely protect individuals or does it involve a public interest that requires protection by voiding the contract? If the provision is for the protection of the public, it would be an indication that the legislator intended the contract to be void.
• What are the consequences of a particular interpretation of the contract? A balance-of-convenience test is employed that questions whether nullity of the contract would cause greater inconvenience and justice than allowing the illegal conduct to stand.

Question 13. Distinguish Between Initial Impossibility Of Performance, Supervening Impossibility Of Performance, And Prevention Of Performance?

Answer :

If a performance is objectively impossible at the time of conclusion of a contract, no obligation arises. To render performance impossible, it is not sufficient that a particular party cannot perform, that is, subjective impossibility. The impossibility must be so serious that nobody can render the performance – that is, it must be objectively impossible. An example of impossible performance is where A agrees to sell his house to B, but unbeknown to them the house has already been destroyed by a fire. Initial impossibility of performance prevents a contract from arising at all.

If, after the conclusion of the contract, performance becomes objectively impossible without the fault of the debtor, as a result of an unavoidable and unforeseen event, this is known as supervening impossibility of performance, and the obligation to perform is also, as a general rule, extinguished. The requirements for supervening impossibility of performance are:

• the performance must be objectively impossible; and
• the impossibility must be unavoidable by a reasonable person.

If, after the conclusion of the contract, performance on either side becomes impossible owing to the fault of either the debtor or the creditor, the contract is not terminated, but the party who rendered the performance impossible is guilty of a breach of contract known as prevention of performance. It is not necessary that the performance should be objectively impossible in order for the breach to arise; subjective impossibility will suffice.

Question 14. Distinguish Between Suspensive Conditions, Resolutive Conditions, Suspensive Time Clauses, And Resolutive Time Clauses?

Answer :

SUSPENSIVE CONDITION: Performance of an obligation (which is an uncertain future event which may or may not occur) is suspended, and enforceable only when that event has been fulfilled or has failed.

RESOLUTIVE CONDITION: Performance of obligations should operate in full, but will come to an end if an uncertain future event does or does not happen.

SUSPENSIVE TIME CLAUSE: Performance of obligations postponed/suspended until an event or time that is certain to arrive in the future.

RESOLUTIVE TIME CLAUSE: Obligations terminate at a certain date or happening of a certain future event.

Question 15. Briefly Discuss Tacit Terms?

Answer :

A tacit term is one that the parties did not specifically agree upon, but which (without anything being said) both or all of them expected to form part of their (oral or written) agreement. It is a wordless understanding having the same legal effect as an express term. In ascertaining whether a contract contains a tacit term, the courts often employ the officious bystander test:

The court supposes that an impartial bystander had been present when the parties concluded their agreement and had asked the parties what would happen in a situation they did not foresee and for which their express agreement did not provide. If they were to agree that the answer to the stranger’s question was self-evident, they are taken to have meant to incorporate the term into their contract and to have tacitly agreed on it.

Question 16. What Is The Parol Evidence Rule?

Answer :

The parol evidence rule declares that where the parties intended their agreement to be fully and finally embodied in writing, evidence to contradict, vary, add to, or subtract from the terms of the writing is inadmissible.

Question 17. State The Different Forms Of Breach Of Contract?

Answer :

• Mora debitoris
• Mora creditoris
• Positive malperformance
• Repudiation
• Prevention of performance

Question 18. Discuss Mora Debitoris And Mora Creditoris And Distinguish Between Them?

Answer :

MORA DEBITORIS:

Mora debitoris is the unjustifiable failure of a debtor to make timeous performance of a positive obligation that is due and enforceable and still capable of performance in spite of such failure.

Requirements:

• The debt must be due and enforceable.
• The time for performance must have been fixed, either in the contract or by a subsequent demand for performance, and the debtor must have failed to perform timeously.
• Such failure to perform on time must be without legal justification.

Mora ex re occurs where the debtor fails to perform on or before the due date expressly or impliedly stipulated by the parties in their contract. Mora ex persona occurs where no time for performance has been stipulated, and the creditor demands that the debtor perform on or before a definite date that is reasonable in the circumstances (by means of a letter of demand, or oral demand).

MORA CREDITORIS:

Mora creditoris is a form of breach of contract by a creditor. It occurs in cases where a creditor is obliged to lend his or her cooperation, and culpably fails to do so timeously.

Requirements:

• The debtor must be under an obligation to make the performance to the creditor (the performance need not be enforceable or due, however).
• Cooperation of the creditor must be necessary for the performance by the debtor of his obligation.
• The debtor must tender performance to the creditor.
• The creditor must delay in accepting performance.
• The delay must be due to the fault of the creditor.

Question 19. Define Repudiation?

Answer :

Repudiation is the demonstration by a party, by words or conduct, and without lawful excuse, of an unequivocal intention no longer to be bound by the contract or by any obligation forming part of the contract.

Question 20. State The Requirements Than An Innocent Party Must Prove In Order To Succeed With A Claim For Damages?

Answer :

• A breach of contract has been committed by the defendant.
• The plaintiff has suffered financial or patrimonial loss.
• There is a factual link between the breach and the loss.
• As a matter of legal causation, the loss is not too remote a consequence of the breach.

Question 21. Write Notes On The Difference Between General Damages And Special Damages?

Answer :

General damages are those which flow naturally and generally from the breach in question, and the law presumes that the parties contemplated them as a possible result of the breach. The guilty party is summarily held liable for general damages.

In contrast, special damages are those that do not flow naturally and generally from a specific form of breach. The guilty party is only liable for special damages in certain circumstances. The courts use two principles to determine the extent of liability in the case of special damages: the contemplation principle, and the convention principle.

In terms of the contemplation principle, liability is restricted to damages that the parties actually or reasonably must have contemplated as a probable consequence of the breach.

According to the convention principle, liability is limited to those damages that may be proved on the basis of the contract. The innocent party has to prove either an express or implied provision concerning the payment of damages.

Question 22. Discuss The Exceptio Non Adimpleti Contract Us With Regard To Its Definition, The Principles Of Reciprocity, How Reciprocity Is To Be Determined, As Well As When The Defence Can Be Raised?

Answer :

The exceptio non adimpleti contractus is a defence that can be raised in the case of a reciprocal contract. It is a remedy aimed at keeping the contract alive. It permits a party to withhold his or her own performance, and to ward off a claim for such performance until such time as the other party has either performed or tendered proper performance of his or her own obligations under the contract.

The exceptio non adimpleti contractus is available when two requirements are met:

• the two performances must be reciprocal to one another
• the other party must be obliged to perform first, or at least simultaneously with the party raising the exceptio. The exceptio may also be raised where a party has performed incompletely.

Question 23. State The Requirements For A Valid Cession?

Answer :

• An entitlement by the cedent to dispose of the personal right
• The capacity of the personal right to be ceded
• A transfer agreement
• Formalities
• Legality
• Absence of prejudice to the debtor

Question 24. State The Ways In Which Obligations May Be Terminated?

Answer :

• By performance
• By agreement
• Release and waiver
• Novation
• Compromise
• Effluxion of time
• Notice
• By law
• Set-off
• Merger
• Supervening impossibility of performance
• Prescription
• Insolvency
• Death

Question 25. Write Brief Notes On Release And Waiver?

Answer :

A release is an express or tacit agreement that the debtor be freed from an obligation or obligations. It therefore has the effect that the debtor need not perform. The debtor may be released in whole or in part. The term “waiver” is often used synonymously with the concept of a release agreement. However, sometimes waiver is used to denote a unilateral act of abandoning a right or remedy that exists for the sole benefit of the party abandoning the right or remedy.

Question 26. Write Brief Notes On Novation?

Answer :

A novation is an agreement to extinguish or replace one or more existing obligations with a new obligation. Accessory obligations to the original debt, such as a pledge or suretyship, are extinguished by an agreement to novate the debt. The parties may agree to replace the debtor with a third party, provided of course that the third party agrees to such novation.

Replacement of a debtor by novation is called delegation. If an original obligation is void, a novation of the obligation will also be void. But if the novation itself is void, the original obligation will continue to exist.

Question 27. Write Brief Notes On Compromise?

Answer :

Compromise is an agreement in terms of which parties settle a dispute or some uncertainty between themselves. Compromise differs from true novation in that compromise does not require a valid old obligation to have existed. The purpose of a compromise is to secure a final settlement of a dispute or uncertainty, sometimes as to whether there is a debt at all.

Question 28. Write Brief Notes On Set-off, And The Requirements There For?

Answer :

Where two parties have claims against each other, and the requirements for setoff are met, the debts can extinguish each other. If they are not for the same amount, the smaller debt is extinguished and the larger debt is reduced by the amount of the smaller debt.

The following four requirements must be met for set-off to operate:

• The debts must exist between the same two persons in the same
• capacities
• The debts must be of the same kind or nature
• Both debts must be due and enforceable
• Both debts must be liquidated