A contract is an agreement between two or more people and may be verbal or spoken.
We usually use the term ‘contract’ to refer to a legal agreement, but in fact any agreement can be called a contract, from buying goods to taking a taxi. Although a verbal contract is considered binding under law, most lawyers will agree that it’s better to write down exactly what is being agreed to and have it signed by both parties to acknowledge agreement.
This means that each party will know exactly what they’re agreeing to, and will be aware of the consequences of actions not carried out. If a dispute should occur, it’s easier to resolve if there is a well drawn-up contract. Both parties must understand what is being agreed to, otherwise the contract is void. A contract must be in line with any relevant laws and cannot require anything illegal. The contract is breached if one of the parties doesn’t carry out his or her share of the agreement.
Tips for contracts:
Always read the fine print. Never sign anything where you’re not sure what you’re agreeing to. Don’t be rushed into signing in a hurry. Ask for explanations if you don’t understand a clause. If you’re asked to sign a contract which has already been drawn up, for example a lease agreement, you can still ask for additional clauses or clarification to be inserted.
Typical contracts:
- An employment or business contract.
Most employment contracts follow a similar form and include the employee’s salary and work responsibilities, the duration of the contract and the notice period. They would also include the company’s disciplinary procedure and possibly a probation period. Similarly, a contract between businesses would stipulate the services or products involved and the amount and method of payment.
- A marriage or civil union contract.
A marriage is a contract between a husband and wife. In South Africa, civil unions are also available. This means that two people of the same gender can also form a legal partnership with all the benefits of marriage available to them. A civil marriage or civil union contract states that you may not marry anyone else while you are still married to your first spouse. A customary marriage, which can be polygamous, can also be registered.
- A cohabitation agreement.
If you live together and share finances but choose not to marry, you should seriously consider drawing up a cohabitation or domestic partnership agreement. This would protect both of you in the event of a relationship ending and should set out each partner’s financial responsibilities.
- An antenuptial contract.
Marriages conducted without an antenuptial agreement are automatically conducted ‘in community of property’. This means that your property, assets and liabilities and that of your spouse are joined together. If you sign an antenuptial contract, with or without accrual, often called an ANC, you are married ‘out of community of property’. If your ANC is ‘with accruali’ then any assets you acquire during the marriage will be considered to be the property of both of you, but debts are not shared. An ANC without accrual will keep all your assets separate.
- A lease agreement.
A lease agreement will stipulate the address of the property, the period of the lease, the amount of rent to be paid and to whom, and conditions of the agreement. This would include any deposit that needs to be paid, any costs and the obligations and liability of the lessee. It should also stipulate who is responsible for maintaining the property. Usually, a lease fee is also involved.
- A credit or finance agreement.
If you are applying for credit, the contract will set out the amount you are being lent and the terms of the agreement. This will include the repayment term, the amount of interest you are paying, and any penalties for missing payments or not paying the full amount. If you are asked to stand surety for someone in a credit agreement, you are agreeing to repay the debt if the money cannot be repaid by the debtor. Consider this carefully! You should always check that the debtor is in a position to repay the money or that you can afford to step in. Never agree to an unlimited surety clause; this means that you will be responsible for any and all debts the debtor runs up and not only the credit agreements you are aware of.
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