What are the formalities for a legally binding contract?
What is a contract?
A contract is an agreement entered into by two or more persons to create a legal obligation with animus contrahendi that is recognized by law and binding n the parties thereof.
- Agreement: The parties must have consensus and agree on the course of action.
- Obligation: A legal bond between a creditor and debtor, where the debtor must give, do or refrain from doing something to or for the creditor.
- Animus Contrahendi: The serious intention to create legally binding obligations.
- Binding: The requirements for a valid contract must be satisfied.
What are the requirements for a valid contract?
There are 6 requirements namely-
- Consensus: The parties must agree on all material aspects of the agreement.
- Capacity: The parties must have the required capacity to contract.
- Formalities: Formalities can be stipulated by the parties themselves or be prescribed by law, for example, the contract needs to be in writing and undersigned by both parties. These requirements must be complied with.
- Legality: The agreement must be lawful; it should not be prohibited by statute or common law.
- Possibility: The performance created by the agreement must be possible to perform.
- Certainty: The agreement must have a definite or determinable content, thus everything must be clearly described.
Is a verbal contract binding in South Africa?
Yes, a verbal contract is binding in South Africa. However, it is very important to reduce an agreement to writing as verbal agreements tend to lead to numerous disputes as to the actual terms and conditions between the parties.
A verbal contract usually leads to a “he said she said” situation as there is no documentation to prove otherwise.
Will a text or Social Media message constitute a written contract and hold up in court?
Yes, in terms of the Electronic Communications and Transactions Act all electronic messages, whether it is an SMS, Whatsapp message, Facebook message, e-mail or fax, will be considered to be a written agreement between the parties. These messages leave an electronic dialogue that can be entered as evidence in court.
What happens when the requirements are not met?
Should one of these requirements be absent or are not satisfied, the agreement will be regarded as invalid and unenforceable. Depending on the missing requirement, it can either be viewed as ab initio void (invalid from conception), alternatively, it can be rectifiable.
When entering into a binding agreement, prevention is better than cure. Although your intentions might have been correct in ensuring that an agreement is in place, you might find yourself in an incurable position.
Ensure that you consult with an attorney at Burger Huyser Attorneys before signing any agreement.