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pre-emption

Contracts form part of everyday life. Common forms of contracts include options and right of preference contracts. While the full extent of options and rights of preference contracts have a fair amount of academic debate surrounding them, their full aspects will not be discussed at length in this article which only provides a brief overview of some of the aspects and considerations.

A pactum de contrahendo is a contract concluded with an aim of the conclusion of a later contract. Two examples of these are options and rights of preferences. An option is an agreement to make an offer irrevocable, whereas the right of preference comes in when parties agree that the holder of the right of preference will be approached first should the seller (for instance) decide to sell. Remember, generally speaking, an offer can be revoked, but sometimes you may wish to have the chance to think about whether you want to accept the offer (often in changing employment or buying property). In these situations, parties conclude on an option which means the offer cannot be revoked.

For the breach of contract in rights of preference, the aggrieved party can decide whether he/she wants to cancel or maintain the contract. Should the aggrieved party decide to cancel they will do so and accept damages in the amount which was paid for the right of pre-emption. In the case of claiming for specific performance, the aggrieved party may opt to interdict the contracting party from performing to a third party. Of course, the usual requirements for interdicting will have to be met in this instance which have been discussed in other articles.

Options consist of two things, namely, a substantive offer (the offer which, if accepted, constitutes the contract) and secondly, an agreement to keep the offer open. The former offer relates to the main agreement (such as a sale or lease). If the substantive offer is accepted, then the main contract is concluded. However, in options, there must be an agreement to keep the substantive offer open for a period (during which the parties can decide).

The requirements include the option of having to be certain so that you know what you are accepting. The formality requirements would depend on the facts, if the contract relates to the selling of land, for example, certain legislative requirements say the sale must be reduced to writing and signed.

 

If you need any contractual or commercial assistance, do not hesitate to contact us.

 

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