The extra ingredient that distinguishes contracts from non-binding agreements is a serious intention to create legally enforceable obligations (animus contrahendi). → The absence of an animus contrahendi explains why ‘gentlemen’s agreements’ are not enforceable as contracts (binding on their honour only). → The fact that the parties seriously intend their agreement to have a binding legal effect does not necessarily mean that it is a contract. → Classification of legally binding agreement: 1. Obligationary agreements (e.g. sale/lease), whereby one or more obligations are created. This is by far the most important of the three agreements; 2. Absolving agreements (debt), whereby obligations are discharged or extinguished. Discharge is achieved by the debtor's performing what he has undertaken to perform with the consequence that the obligation concerned is terminated in a natural way; 3. Real (or transfer) agreements, whereby rights are transferred. Real rights, for example ownership, are transferred by delivery (movable property) or registration. → These agreements may sometimes overlap to a greater or lesser extent. Suppose D walks into a cafe, puts his R5 on the counter and points to a packet of sweets. The proprietor takes his money and hands over the sweets. v Consensus: the minds of the parties must meet (or at least appear to meet) on all material aspects of their agreement; v Capacity: the parties must have the necessary capacity to contract; v Formalities: where the agreement is required to be in certain form (for example, in writing and signed), these formalities must be observed; v Legality: the agreement must be lawful – not prohibited by statute or common law; v Possibility: the obligations must be capable of performance when the agreement is entered into; v Certainty: the agreement must have a definite or determinable content, so that the obligations can be ascertained and enforced. → A contract is a juristic act. The conclusion of a contract is bilateral or multilateral. There must be at least two parties to an agreement. → A contract entails undertakings on one or both sides. Undertaking may be to make a certain performance immediately or in future. May be an undertaking that a certain state of affairs exists/existed (warranty). Most contracts entail reciprocity (an exchange). → All contracts are consensual, in the sense of being based on an agreement of some sort and are bona fide (with good faith). Contract as an agreement intended to create enforceable obligations → A contract is an agreement between two or more parties with the intention of creating enforceable obligations. To constitute an enforceable contract, an agreement must be one which the law recognizes as binding on the parties. Legally binding agreements that are not contracts: Requirements for a valid contract – m