The importance of contract law and contract attorneys
As contract attorneys practising in Cape Town, a number of contracts routinely cross our desks. We have seen some great agreements and some absolute shockers. Contract law is a very important area of law as it regulates both daily transactions such as buying groceries, as well as multi-million Rand deals. No matter the size of the transaction in Rand terms, or the importance of the agreement in terms of the other implications it will have, the principles of contract law are applicable.
Essentially, an agreement is reached when there is a “meeting of the minds” with respect to each of the essential aspects of the type of agreement. Lawyers who like to use latin terms at dinner parties call these aspects the essentialia. So, by way of example the essentialia of a contract of sale are a meeting of the minds or agreement as to the thing being sold and the price. If either of these are missing, it will not be a contract of sale, although it may be another kind of contract.
What makes a good contract? A good contract attorney!
For it to be a good agreement, there needs to be a lot more than just the essentialia in place. There are a lot more latin terms that we could throw around, but the bottom line in concluding an agreement is that it is very important to think carefully through the consequences of what has been agreed as this will in all likelihood require further thinking and discussion around other things that still need to be agreed on. For example, if I sold you my car for R100 000.00 that may be fine and we do have a valid agreement of sale. However we have not actually agreed when I would deliver the car to you. It would have been your interests to reach agreement with me that the car would be transferred upon payment by you. As it turns out, in terms of this example, you have paid me already and I am not handing over the car. I am not “dojy” like this, it is merely an example. The same principles apply in all sorts of agreements from sales of shares and loan agreements to ante-nuptial contracts and everything in between.
The process of recording an agreement in writing is an essential exercise in entering into an agreement. Firstly, it forces the kinds of questions that need to be asked and agreed upon by the contracting parties. We refer to these as the “what if” and “then what” questions. A good contract attorney knows which questions to ask to ensure that agreement has been reached, not only on the essentialia of the agreement, but on every eventuality that there is a reasonable likelihood of a problem arising, such as the problem described above. The larger and more complicated the transaction, the more necessary it is to undertake an exercise like this with a contract attorney. Often clients come to us stating that they have agreed on the terms of the transaction. After asking a few pertinent questions it is clear that there is need for further negotiation and agreement between the parties. It is very fulfilling to draft a contract knowing that the parties have reached agreement over all the terms. It is so much better to do this than for something to go wrong post the signing of the agreement and to witness a costly dispute about what was agreed.
Another reason why contracts should be recorded in writing is that recording the terms of a contract in a written document serves as a reminder to the parties of what they actually agreed upon. The written contract serves as proof of what the agreement is. This is especially true of contracts were detailed clauses are necessary and where the contract is given effect to over a number of years. A year down the line even those with the best memories need to have a detailed record of the terms of the agreement. A well worded agreement significantly reduces the risk of disputes arising as to what the terms of the contract are.
These are merely some of the benefits of having a contract attorney assisting you in concluding more complex transactions and recording the terms in a legally sound, accurate and if necessary detailed manner. The cost of undertaking such an exercise more than justifies the potential cost of not doing so.
Contact Garth Watson at [email protected] for any contract related queries.