What Is A Contract?
A contract is an agreement entered into by two or more parties with the serious intention of creating a legal obligation. The function of contract law is to provide a legal framework within which persons can transact business and exchange resources, secure in the knowledge that the law will uphold their agreements and, if necessary, enforce them. The law of contract underpins private enterprise and regulates it in the interest of fair dealing.
A contract is classified as an obligationary agreement — it creates enforceable obligations — and ought therefore to be distinguished from absolving agreements (whereby obligations are discharged or extinguished) as well as from real or transfer agreements (whereby rights are transferred).
A valid and binding contract in South Africa is one which meets the following requirements:
- There must be consensus between the contracting parties.
- The parties must have the capacity to contract.
- The necessary formalities must be observed.
- The agreement must be legal.
- The contractual obligations must be possible of performance.
- The content of the agreement must be certain.
- It is a juristic act.
- The law attaches the consequences intended by the parties.
- It is necessarily bilateral or even multilateral; a contract cannot be unilateral.
- It usually entails reciprocity, in that one party’s performance is promised in exchange for the performance of the other party.It entails promises or undertakings, on one or both sides, to make certain performances: that is, to give something (dare), to do something (facere) or to refrain from doing something (non facere). Alternatively, it may be a warranty that a certain state of affairs exists.