Section B Chapter 5 52

CHAPTER 5

CONSENSUS AS REQUIREMENT FOR THE

FORMATION OF A CONTRACT

OBJECTIVES

After completing this chapter you should be able to:

 State the requirements for consensus

 Name the two elements of consensus
 Explain what is an “offer” as an element of consensus
 State the requirements for a valid offer
 State the ways in which an offer can fall away
 Explain the concept “option”
 Explain what is a “right of pre-emption”
 Distinguish between an option and a right of pre-emption
 Explain what is acceptance as an element of consensus
 State the requirements of valid acceptance
 Apply the contents of this chapter to solve problems

Contents Page

1. The concept consensus 53

2. Offer 53-59

2.1 The requirements for a valid offer

2.2 The falling away of an offer
2.3 Contracts to keep an offer open for acceptance by one of the parties
2.4 Contracts to give preference if an offer is made
2.5 Contracts to keep an offer open for acceptance by a third party

3. Acceptance of an offer 59-61

3.1 Manifestation of acceptance

3.2 Requirements for valid acceptance
 Section B Chapter 5 53

1. THE CONCEPT CONSENSUS

Consensus means “agreement about the same subject or thing;

unanimity; unity of thought about what each party to the contract will do,
or not do or pay”.

Consensus can be reached only if:

• The parties both have the serious intention to create a legal

Requirements obligation;
for consensus • The content of this legal obligation is common, for example, if
one party intends to buy a house and the other intends to let the
house under a lease agreement, the parties are in disagreement or
there is dissensus;
• The parties are in complete agreement as to the persons between
whom the legal obligation is to be created; and
• The parties must be aware of the legal consequences of the
agreement; i.e. every party makes his/her intentions known to every
other party.

An intention can be declared either in writing, orally or through conduct.

Unanimity (consensus) is effected by means of a statement of intention of
Elements of
consensus one party (offer) and an assenting statement of intention of the other
(acceptance) or by way of question and answer. The person making the
offer (offeror) presents proposed terms to the other party (offeree) for
the offeree’s acceptance. An example of an express offer will be “I offer to
sell my car to you for N$ 15 000” and an express acceptance of the offer
would be “I agree to buy it”. An example of consensus reached by
question and answer will be “Do you want to buy my car for N$ 15 000”
and an express answer, “Yes, I do”.

2. OFFER

An offer is an expression of will by one party, the offeror, declaring the

Definition of
an offer intention to be contractually bound and setting out the rights and duties
s/he wishes to create in the event of the other party, the offeree,
accepting. The offer may be express or implied. Although offers are
generally made in words (in writing or orally), it may also be inferred by
the conduct of the offeror. An example is the passenger who hands over
his money on a bus and receiving a ticket without a word being passed.
 Section B Chapter 5 54

2.1 REQUIREMENTS FOR A VALID OFFER

2.1.1 The offer must be complete and definite.

The offer must be clear and certain and not ambiguous and/or
vague. A vague offer will be one stating: “The lowest price that I
will accept for this book is N$ 50” or “Don’t worry – you will be
paid”. The offer must contain all the terms, qualifications and
conditions. The offer must therefore be so precise that a contract
will come about by the other party accepting saying, “yes”.

2.1.2 The offer must be made with the serious intention to be

legally bound1

This means that a mere invitation to do business cannot be an

offer, because the intention to be legally bound is lacking.
Sometimes a declaration is made only with the intention to invite
the offeree to do business with the person making the declaration.

A person advertising or displaying goods in a store only invites

Advertisements
potential customers to make offers to the advertiser. An
advertisement is therefore not an offer, as thousands of
prospective buyers may accept the shopkeeper’s offer and sue him
because of breach of contract if he does not perform. As stated
earlier, the real question is what is the intention of the person
making the declaration?

Advertisements
Where, however, the advertisement contains a promise for the
with a promise payment of a reward, such an advertisement is in fact an offer,
for a reward because the advertiser intends that it be accepted. For example, in
the case where a reward has been offered for supplying
information that will lead to the arrest of robbers, the first person
to respond will be entitled to the reward.

Another interesting situation is the self-service store. It was held

that in self-service stores the offer and acceptance take place when
the customer tenders the purchase price at the cashier and not
when the customer takes an article off the shelf, even though the
price is marked on the item.

1
Animus contrahendi.
Section B Chapter 5 55

2.1.3 The offer must come to the knowledge of the offeree

It is necessary for an offer to be communicated to the offeree. If the

offeree is unaware of the expression of will, no offer exists. In Bloom v
The American Swiss Watch Co. 1915 AD 100 a person gave information
which led to the apprehension of the robbers, but he had done so before
knowing of the reward offered by a jeweler. It was held that he could not
claim, because the offer was not communicated to him and that he was
unaware of the offer and could therefore not accept it. If A, for example,
writes a letter to B offering to contract with him on certain terms, but
never posts the letter, there is no valid offer.

2.1.4 The offer must be directed to a specific person or persons or may

even be directed to an unidentified person(s).

 ACTIVITY2

Consider whether a valid offer was made in each of the following

circumstances:

1. An advertisement in the newspaper states: “Nokia cellphones at only N$200 each. Come
soon to avoid the rush. At all branches of Game Stores”.
2. A notice board on the Namibia University of Science & Technology Campus displays a notice:
“Student offers lift from Windhoek to Katima Mulilo on 1 March 2019 – to share driving and
petrol costs. Contact Ann at Tel. 222222 (061).
3. Books are displayed on a table in a shop with a large notice propped up behind them:
“Assorted odd lots: N$ 2-00 each.”
4. A offers to sell his car to B at a very low price, but stated that they could agree to a price at
a later stage.
5. Total Sports advertises as follows: “Nike Air men’s training shoes available at only N$100 per
pair”.
6. A makes an offer to B to sell his bicycle to B for N$ 200. C accepts the offer. Can C rely on a
valid offer made by A?
7. A wrote a letter to B containing an offer to buy his computer for N$ 2000. The letter never
reached B.
8. Frankie Fredericks advertises in the newspapers that he offers a reward of N$ 5 000 for
information which will lead to the arrest of the thieves and the recovery of all his stolen
trophies and medals.

2
Answer on page 62.
Section B Chapter 5 56

2.2 THE FALLING AWAY OF AN OFFER

• Revocation
• Expiry
• Rejection
• Death or legal incapacity of either party before acceptance

2.2.1 Revocation of an offer

The offeror may withdraw his offer provided that it has not been accepted
and there is no option. Revocation must be communicated to the offeree.
The revocation of an offer addressed to the public at large is problematic.
It is proposed that all reasonable steps be taken by the offeror when
revoking a published offer. This means revoking the offer in the same
manner as the offer was expressed. Where the offeree has already begun
to perform, the offeror cannot withdraw the offer unreasonably.

EXAMPLE

Peter offers his car for sale to Bobby. He later changes his mind and
wishes to sell his car to Tom. Peter must now inform Bobby that he
withdraws the offer before Bobby accepts the offer. If, however, Peter
offered Bobby a period of time to consider the offer, i.e. an option and
this offer was accepted by Bobby, Peter has no right to revoke the “main”
offer while there is still an option.

2.2.2 Expiry

An offer expires when:

• The time limit expires, if a time limit had been prescribed (also known
as effluxion of fixed time); or
• If no time limit is stipulated, the offer remains open for a reasonable
period3. The offer lapses or expires after the expiration of a
reasonable period (an offer cannot be left open indefinitely).

2.2.3 Rejection

If the offeree rejects an offer, he cannot later on change his mind and try
to accept it. A counter-offer is interpreted as a rejection of the original
offer. A counter-offer is where the offeree does not accept the terms of

3
It will depend on the surrounding circumstances.
 Section B Chapter 5 57

the offer and proposes other terms. The offeror’s offer then automatically
falls away and the original offeror now becomes the offeree.

EXAMPLE

John offers his computer for sale to Charles for N$ 10 000. Charles
replies: “I will buy it for N$ 9 500. Charles’s counter-offer is now open for
John to accept.

2.2.4 Death or legal incapacity of either party before acceptance

There could be no doubt about the effect of death or legal incapacity (e.g.
insanity) of the offeror or offeree, as there was no longer a possibility of
consensus between the parties, unless the offeror intended other parties
to be substituted for himself or the offeree upon such an event.

2.3 CONTRACTS TO KEEP AN OFFER OPEN FOR ACCEPTANCE BY ONE

OF THE PARTIES

OPTIONS

It is possible to ensure the continued existence of an offer by means of a

Definition separate contract, namely an option. The option gives the option-holder
of an the right to choose whether or not to conclude a contract with the option-
option giver. This right is usually limited to a specified time. An option is an offer
to conclude a specific contract and an additional offer to keep the first-
mentioned offer “open” for a specified period. One is thus dealing with
two offers. If the additional or second offer is accepted, that type of
contract is called an option. There are two basic components: First, it is
an offer to conclude the so-called “main” contract together with a
subsidiary contract, i.e. the option. An option obliges the offeror to keep
the so-called “main” offer open. The main offer thus remains irrevocable
for the time period of the option.

EXAMPLE

If Ann offers Mary an option to buy her vehicle for N$ 15 000, there are
two offers which can result in contracts, i.e.:

• An offer by Ann that Mary can buy her vehicle for N$ 15 000; and
• A second offer by Ann that the above mentioned offer will remain
“open” to Mary for two weeks.
Section B Chapter 5 58

If Mary accepts this second offer, but has not yet accepted the main
offer, an option exists in which Ann is the option-giver and Mary the
option-holder. Mary has two weeks to decide whether she wishes to
accept Anne’s main offer. During those two weeks Ann may not withdraw
the main offer, offer it to a third party or accept an offer by a third party.
An option thus results in the main offer being irrevocable for a fixed time.

If Mary rejects Ann’s main offer within, say, four days, both the option
and the main offer come to an end, but, if Mary accepts Ann’s main offer
within the specified two weeks and she lets Ann know that she wishes to
buy the vehicle, the option comes to an end and the main contract is
formed.

2.4 CONTRACTS TO GIVE PREFERENCE IF AN OFFER IS MADE

RIGHT OF PRE-EMPTION

A right of pre-emption is a right which one party obtains when concluding

an agreement with another (grantor) in terms of which the grantor, in the
event that he decides to sell a specific thing, must first offer it to the
holder of the right of pre-emption.

The holder of the right of pre-emption is not obliged to purchase the thing
and the grantor is not obliged to offer the thing for sale, but if he decides
to sell, the thing must be offered for sale to the holder of this right first.

This right needs to be distinguished from an option where the option-giver

is obliged to sell the thing to the option-holder if the option is exercised.
The distinction becomes clear from the following examples:

EXAMPLES

• A has a right of pre-emption with regard to B’s house. A may not insist
on buying B’s house, but if B decides to sell his house, he must offer it
first for sale to A. If A accepts the offer, B has to sell it to him.
• A acquires an option to purchase B’s house for N$ 100 000. A has the
right to purchase the house at any time before the option lapses. B
has the obligation not to sell the house to anyone for the time the
option exists. If A exercises his option, B must sell the house to him.
 Section B Chapter 5 59

2.5 CONTRACTS TO KEEP AN OFFER OPEN FOR ACCEPTANCE BY A

THIRD PARTY

It is competent for X to contract with Y that he (X) will keep an offer open
for acceptance by a third party, Z, and this contract is commonly referred
to as one for the benefit of a third party or stipulatio alteri4.

3. ACCEPTANCE OF AN OFFER

Acceptance is the expression of will by the person to whom the offer is

What is
acceptance? addressed that he accepts the offer without qualification. The offeree thus
communicates his intention to be contractually bound. The general rule is
that no contract can come into existence unless the offer is accepted. This
general rule even applies to donations, as a benefit cannot be conferred
on anyone against his will.

3.1 MANIFESTATION OF ACCEPTANCE

Acceptance can take place in the same manner as the expression of will
by the offeror, i.e. expressly or tacitly, but the normal method of
acceptance is to use spoken or written words. One form of manifestation
of acceptance requires specific attention and that is the signature of a
document. When considering this aspect the following questions are
involved:

• What constitutes a signature?; and

• What is the effect of appending a signature?

3.1.1 What constitutes a signature?

In the ordinary sense, a signature takes the form of a person’s

name, written by him/her on the document, but this is not the only
way in which a document can be signed. It was held by our courts
that any mark made by a person for the purposes of attesting the
document or identifying it as his/her act would be regarded as a
signature. Accordingly, it was held that a thumbprint on a
document would be regarded as being “signed”.

4
Please refer to Chapter 13 for detailed information on this legal concept.
Section B Chapter 5 60

3.1.2 What is the effect of appending a signature?

In general, the effect of appending a signature on a document is

that the party in question is bound by the ordinary meaning and
effect of the words contained in the document, as the function of
the signature is to confirm that the writing to which it pertains
accords with the intention of the signatory. This rule is applied
even when a person appends his/her signature carelessly or
recklessly. The rule is, however, not applied if the person who signs
the document does not understand the terms of the document and
is neither careless nor reckless; or if there is an error in negotio,
i.e.:

• Each party intends to enter into a legal relationship, but they

have different legal relationships in mind and their
disagreement is reasonable in the circumstances, for example, I
hand you money by way of deposit and you take it by way of a
loan; or
• The person signing was misled by the other party.

3.2 REQUIREMENTS FOR A VALID ACCEPTANCE

3.2.1 Acceptance must be unconditional and unequivocal5

It must not be qualified and without the addition of conditions or

reservations. If conditions are added or reservations made, it will
amount to a counter-offer. It must be unequivocal in the sense that
a reasonable person in the position of the offeror would have
interpreted it as an acceptance. Silence on the part of the offeree
does not, as a rule, constitute acceptance. If, however, the
circumstances are as such that the offeree is under a “duty to
speak” if he does not wish to accept the offer, silence can be
construed as acceptance. The rule adopted by the courts is that the
offeror cannot, without the consent of the offeree, impose a
condition on the latter that his silence will constitute acceptance.

3.2.2 Acceptance must be in response to an offer

The offeree must be aware of the offer. If the offeree was unaware
of the offer and therefore had no intention of accepting it, no
consensus is reached, although the offeree performs the service to
which the offer is referred.
5
See, Seagull’s Cry CC v Council of the Municiplaity of Swakopmund & Others 2009 (2) NR 769 (HC).
Section B Chapter 5 61

3.2.3 Acceptance must be by the person to whom an offer is

made

Where an offer is addressed to a specific person, that person only

may accept it. Where it is directed to undefined persons, such as
the public at large, any member of the public may accept it.

3.2.4 Acceptance must be communicated to the offeror in the

manner prescribed, within the time stipulated and at the
place prescribed by the offeror

Failure to comply with these conditions and stipulations will result

in an invalid acceptance. The offeror may also, expressly or
impliedly, dispense with notification of acceptance and a contract
will be concluded without any communication of acceptance.

3.2.5 Acceptance must be made while the offer still exists, i.e.
before the offer lapses for whatever cause.

 ADDITIONAL READING
1. Christie, R.H and Bradfield G.B (2016). Christie’s Law of Contract in
South Africa, 7th ed. Cape Town: LexisNexis. (Pages 30-81).
2. Fouché, M.A., Botha, J., Collier-Read, T., Haupt, A., Ncube, C, N.,
Schonwetten, T., Van As, H.J. (2015) Legal Principles of Contracts &
Commercial Law, 8th. South Africa: LexisNexis. (Pages 39-50).
3. Hutchison, D., Pretorius, C., Naude, T., du Plessis, J., Eiselen, S., Floyd,
T., Hawthorne, L., Kuschke, B., Maxwell, C., & Stadler, E. (2017) The
Law of Contract in South Africa. 3rd ed. South Africa: Oxford
University Press. (Pages 47-82).
4. Kerr, A.J. (2002). The Principles of the Law of Contract, 6th ed.
Butterworths. (Pages 61-116).
5. Sharrock, R. (2017). Business Transactions Law. 9th ed. Cape Town:
Juta & Co. Ltd. (Pages 55-75).
6. Schulze, H., Kelbrick, R., Stoop, C., Manamela, E., Manamela T., & Stoop,
C., Hurter, E., Masuku, B., and Stoop C (2017). General Principles of
Commercial Law. 9th ed. Claremont: Juta & Co. Ltd. (Pages 58-68).
7. Visser, C., Pretorius, J.T., Sharrock, R., Van Jaarsveld, M.C. (2005) South
African Mercantile & Company Law, 8th ed. Cape Town: Juta & Co
Ltd. (Pages 29-30).
Section B Chapter 5 62

ANSWER: ACTIVITY: PAGE 55

1. No. No serious intention to be legally bound.

2. No. No serious intention to be legally bound.
3. No. No serious intention to be legally bound, just an invitation to do business.
4. No. Offer is not complete and definite.
5. No. No serious intention to be legally bound, only an invitation to do business.
6. No. Offer was not directed to C.
7. No. The offer did not come to the knowledge of the offeree.
8. Yes. An advertisement containing a promise for the payment of a reward is a valid offer, as the offeror has the serious intention to be legally bound.