Legal Issues Related To Bait Marketing, Pacta De Contrahendo, And Duress In Contracts

Bait Marketing and Legal Implications

Discuss about the Pacta De Contrahendo Contract is the Preferential.

• Negative option marketing refers to the practice where it is assumed that an agreement is concluded for a transaction initiated by the supplier if the consumer does not take a particular action in the desired time. For instance, consider a supplier who sends books to customers through post. If the customers do not return these books within a particular time, then it would be deemed that a sale has happened and the customers would be obligated to pay.

Bait marketing refers to the practice of enticing customers to pay a visit to the supplier through false claims. For instance, a supplier may put an advertisement in the newspaper that a particular item is available on 75% discount while the actual discount the supplier might be willing to give is 25%. This is done so as to lure the customers.

• For enacting a legally valid contract as per South African law, the following conditions need to be satisfied.

• A consensus ad idem should be present between the parties
• The concerned parties must have intention to enforce the agreement
• The concerned parties must have the contract entering capacity
• There should be certain and definite terms attached with the contract
• The requisite formalities must be carried out
• It must be possible for both parties to discharge contractual obligations
• The lawful nature of the contract is imperative

In the given case, there are two issues why there would be no contract. First would be the unlawful nature of the contract since it relates to the sale of child which is prohibited. Secondly, the parties involved are unwilling to do the necessary formalities for adoption which again violates a pre-requisite for contract.

Even though freedom of contract is required but considering that the given contract deals with the sale of a child that too by the mother herself, hence in such cases freedom of contract needs to be restricted or else there could be potential abuse of this freedom leading to human trafficking. Sanctity of contract implies that the parties need to fulfil their contractual obligations once they enter the contract. Clearly, considering the nature of the consideration involved, it makes sense for the sanctity to be compromised in the larger interest of the moral fabric.

Pacta de contrahendo may be defined as a contract which is aimed to the formation of contract in the future. There are two forms of Pacta de contrahendo namely option contract and preferential contract. In case of option contract, an open offer is made for a particular sum and the offer is kept open. The offer is considered to be irrevocable. On the other hand, in case of preferential contract, the given entity has the preferential right to buy the underlying property or asset at the price the seller is demanding when he/she decides to sell. Other parties can be approached only when a deal cannot be struck with the preferential party.

The given Pacta de contrahendo contract is the preferential contract as Sadhia, the owner has promised to Minesh that if and when she intends to sell, she will first approach Minesh and only if no deal is struck between the two will she approach other interested buyers.

As per the verdict in the Van Zyl v Government of The Republic of South Africa 2008 (3) SA 294 (SCA) [75], it was held that a promise to enter into a contract is not the same as contract. This is because such a promise is not enforceable in the sense that it may or may not lead to a contract. In order for the Pacta de contrahendo to be considered as equivalent to a contract, it is essential that it must belong to the enforceable type which would indicate to the contract type. Considering that the given asset is immovable, it would be incorrect to specify a particular value on the asset especially considering that the time frame of these promises is uncertain. Therefore, it is essentially that while the same conditions must not be met by the promise to contract as a contract but certain basic elements ought to be present which makes the promise enforceable.

Pacta de Contrahendo and Its Enforceability

Yes, the position would change if the object of sale was a movable item as the above understand if rendered in relation of immovable property. This is owing to appreciation of immovable property with time which is usually not the case with movable items.

Pursuant to your queries and the detailed facts about the situation, following is my advice regarding various aspects raised by you.

1. The given mistake would be termed as error in corpore. The mistake is material since it pertains to the information about the model which cannot be ignored and is significant. Also, it is unilateral since only Sylvia was mistaken about the model while Tshepo knew about the model, he intended to sell.
2. Consensus is the basis of contract in South Africa. The “Will Theory” is used to validate the contract formation process through mutual consent. As per this theory, consensus tends to exist when the contracting parties are in agreement driven by their corresponding intentions. Thus, dissent is also approached using the difference in intentions.
3. The theory which would make Sylvia contractually liable would be reliance protection theory as per which as soon as the contractual requirements are satisfied, a contract is enacted. This theory places emphasis on mutual consensus based on real intentions and if consensus is achieved, it is not required to know the impression that one party had of the intention of the other party. An additional condition under reliance protection theory is the intention on the part of the parties to be legally bound. Clearly, the conversation between Sylvia and Tshepo satisfy all requirements and hence contract would be held as enforceable.
4. The theory which can potentially allow Sylvia to avoid contractual liability is the declaration theory which essentially relies on the indirect application of the reliance theory. As per this theory, the parties are considered bound by the intentions expressed and not by their real intentions. Hence, the party relying on the mistake (lustus error) can claim the error to be material and thus contract to be void (Peri-Urban Areas Health Board v Breet N 0 and Another, 1958(3) S A 783 (T) case). Therefore in this case, the focus is on the expressed intentions.
5. In South African law, declaration theory is not adhered to and hence the court would tend to consider the direct reliance theory where the real intentions would be considered and the consensus reached would be upheld which resulted in formation of the contract. As a result, Sylvia would have to honour the contractual obligation and go ahead with the purchase of bike.

The central issue in this situation is to advice on legal enforceability of the contract entered by Raima under duress.

As per Arend and Another v Astra Furnishers (Pty) Ltd 1974 (1) SA 298 (C), duress may be defined as the use of threat thereby inducing reasonable fear and hence forcing the person concerned to grant consent for the contract which otherwise they would not have. In South African law, the threat of economic harm being recognised as economic duress is not established as has been highlighted in the Medscheme Holdings (Pty) Ltd and Another v Bhamjee [2005] 4 All SA 16 (SCA) case.

As highlighted in the BOE Bank Bpk v Van Zyl 2002 (5) SA 165 case, the contracts enacted on the basis of duress can be voidable. Also, In such cases the burden of proof lies on the victim of duress who needs to prove that a threat constituting considerable evil which was reasonable enough to induce a fear and also that the underlying threat was illegal. Further, in cases involving economic duress, it is imperative to distinguish the same from hard bargaining.

The conditions highlighted for claiming delictual damages are as mentioned below.

1. The plaintiff should have suffered harm
2. There should be wrongful conduct on part of the defendant
3. A causal connection needs to be established between the defendant’s actions and plaintiff’s loss
4. The defendant is at fault

Based on the case facts, it is apparent that Raima is not interested in selling the café as it is the sole income source she has. Hence, she refuses the first offer made by the infamous drug dealer. However, she only agrees to the selling of the case when she is threatened by the dealer that in the event of not selling the café to him, he would make her life very difficult. She feared that she could suffer physical harm or shop being vandalised and hence reluctantly agreed to sell the shop.

The presence of duress can be established here since Raima is clearly threatened by the drug lord and can potentially suffer physical and economic damage. Also, she was reluctant to sell the shop earlier when she was not threatened. Hence, it is clearly apparent that Raima has signed the sale agreement for her shop only because of the fear of the drug dealer. As a result, for the given situation, the agreement would be voidable at the behest of Raima approaching the court. Owing to entering into such a contract, Raima may suffer damages which she can recover as part of the delictual damages.