Test on South African Contract Law: Formation and Validity

Question 1: Under South African law, the information theory is the only method for determining when and where a contract inter absentes comes into existence.

A. Yes

B. No

Explanation: The information theory is the general rule for inter absentes contracts in South African law, but the study materials explicitly state that departures from this theory exist, such as the dispatch theory for postal contracts and the reception theory for electronic contracts under ECTA. Therefore, it is not the only method.

Question 2: According to the study materials, what remedies are available to a party who has suffered a breach of an option contract?

A. Specific enforcement of the option contract.

B. Damages to place the option-holder in the position as if the option had been properly observed.

C. Using the Oryx mechanism to step into the shoes of a third party.

D. Requiring the grantor to offer the contract to the grantee on no less favourable terms.

Explanation: The study materials state that remedies for a breach of an option contract include 'specific enforcement and damages to place the option-holder in the position as if the option had been properly observed.' The Oryx mechanism and requiring an offer on no less favorable terms are remedies associated with breaches of preference or pre-emption contracts, not option contracts.

Question 3: The Oryx mechanism allows the holder of a pre-emptive right to create a contract with the seller on matching terms, even after the property has been transferred to a bona fide third-party purchaser.

A. Yes

B. No

Explanation: The Oryx mechanism allows the holder of a pre-emptive right to 'step into the shoes' of the third party by unilateral declaration, creating a contract with the seller on the third party's terms, but only 'provided transfer has not taken place'.

Question 4: What kind of obligation does a pre-emptive right place on the person who grants it, concerning the sale of the asset?

A. A positive obligation to sell the asset to the holder of the pre-emptive right at any time.

B. A negative obligation not to sell the asset to anyone other than the holder of the pre-emptive right, unless it has been offered to them first.

C. An obligation to sell the asset to a third party only if the holder of the pre-emptive right refuses to buy it on matching terms.

D. A negative obligation never to sell the asset at all.

Explanation: The study material states that a pre-emptive right 'giving a negative obligation on X not to sell except firstly to Y.' This means the grantor (X) has a negative obligation not to sell the asset to anyone else unless it is first offered to the holder of the right (Y).

Question 5: According to the principles established in Goldblatt v Fremantle, an oral agreement that includes a term for the contract to be reduced to writing is only binding once it has been formally written down.

A. Yes

B. No

Explanation: The study materials state that Goldblatt v Fremantle held that, absent a contrary intention, an oral agreement is binding immediately, and writing serves only proof purposes. Therefore, an oral agreement intended to be reduced to writing is generally binding immediately, not only once it is written down, unless the parties intended the contract to be binding only upon formalization.