LAW OF CONTRACT NOTES
THE INSTITUTE OF FINANCE MANAGEMENT
NOTES ON THE LAW OF CONTRACT
Prepared by: FUNGO, A.E., LL, B (Hons) Dar, LLM (Essex-UK)
INTRODUCTION TO CONTRACT LAW
Tanzania law like English law recognises only two kinds of contract:-
(a) The contract made by deed i.e. under seal which is called deed or specialty and,
(b) The simple contract.
Simple contracts
Simple contracts depend on the presence of consideration, and as a rule they need be made in no special form. However, sometimes, simple contracts are required to be in writing eg. Contracts for the disposition and transfer of land as well as contracts of guarantee
Deed contracts
A deed must be in writing or printed on paper or parchment. It is often said to be executed, or made conclusive as between the parties, by being ‘signed, sealed, and delivered’.
MEANING OF A CONTRACT
A contract is an agreement enforceable by law or an agreement that is legally enforceable.
“…a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way or an agreement between two or more persons which is intended by them to have legal consequences.
An agreement is further defined by section 2(1) (e) of LCA to mean every promise or set of promises, forming the consideration for each other.
An agreement not enforceable by law s said to be void (s.2(1)(g)
An agreement is made of an offer and acceptance.
A contract must be an agreement and to qualify as a contract an agreement must meet of tests. The main test is whether or not the agreement is enforceable by law.
Essential ingredient of a contract
By section 10 of the Law of Contract Act, 1961, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
To summarise the essentials are:
(i) Free consent
(ii) Competency or capacity to contract
(iii) Lawful consideration or object
However, the law does not say whether an intention to create legal relation is also an essential element of a contract. Once a contract has fulfilled the above conditions, then it becomes sacrosanct, meaning neither the court no any other person may interfere with it.
Formation of an agreement
Meaning of an offer
s.2 (1)(a) when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal.
A proposal is made up of a term or terms.
Offer
• Offer – a definite proposal or final statement by one party of the terms in which s/he will enter into a contract
• Can be made in writing, orally or by conduct
• Can be made to a specific person(s) or to the whole world
• Leads to a contract if matched by ‘acceptance’ by the other party
Characteristics of a proposal
(a) The proposal must have been made willingly
(b) The terms must be clear and certain
(c) Firm and final expression of his willingness to be bound
s. 29, an agreement the meaning of which is not certain or capable of being made certain are void.
Case law
Nittin Coffee Estates Ltd and another v. United Engineering Works Ltd and another
The parties concluded agreements of sale although the price was not stated. The court of appeal of Tanzania stated that since price is fundamental term in a sale agreement, if it is not mentioned the agreement becomes uncertain.
Proposals and Invitations to treat
• Distinguished from ‘invitation to treat’ or preliminary negotiations/enquiries
• ‘Invitation to treat’ = general expression of willingness to enter into a contract i.e. not definitive
• Generally, advertisements are ‘invitations to treat’
• Unlike a offer which is final, firm and clear expression of willingness by the offeror to be bound an invitation to treat does not express final willingness to be bound in those terms. The invitor merely proposes certain terms on which he is willing to negotiate. He invites any person to make an offer in the terms he has proposed. He may accept or reject the offer.
• Partridge v Crittenden [1968] 1 WLR1204
• Applt placed ff advert in a periodical
• “Bramblefinch cocks, Bramblefinch hens 25s each”
• Charged with unlawfully offering for sale a wild bird
• Held (QB): the advert was only an invitation to treat; it was not an offer for sale; thus, applt could not be guilty of the offence
• Adverts are generally invitations to treat and not offers
• Display of Goods in Shop Window
A display of goods in a shop window or on shelves in a self service store even with a price marked, does not amount to a proposal. Rather, the intention is to invite people to come forward and make offers/ proposal to buy.
• Fisher v Bell [1961] 1 QB 394
• Shopkeeper displayed a flick-knife in shop window with tag: “Ejector knife – 4s”
• Charged with offence of “offering” a knife for sale under Restriction of Offensive Weapons Act 1959
• Held (QB): no offence had been committed; a mere display of goods in a shop window with a price tag is not an offer for sale but an invitation to treat
Pharmaceuticals Society of Great Britain v. Boots Cash Chemists
Boots operated a self service shop in which certain drugs were displayed with prices attached. It was charged with selling drugs in contravention of the laid down procedures.
It was ruled that the self service system was a convenient method of enabling customers to see what was there and choose, and possibly put back and substitute articles which they wish to have and then go up to the counter and offer to buy what they have so far chosen.
Note:
The importance of the distinction between an offer and an invitation to treat can be appreciated if freedom of an individual to deal with his property is taken into account.
Advertisements
Some advertisements can qualify as invitation to treat and not offers (see Patridge v. Crittenden above and below)
• Harris v Nickerson [1873] LR 8 QB 286
• Auctioneer advertised auction to be held at Bury St. Edmunds including some office furniture
• Clmt travelled up from London
• The office furniture were withdrawn from the sale
• Clmt sued for loss of time and for expenses
• Held (QB): clmt had no right of action; the advert was an invitation to treat and not a promise that all the items would be put up for sale
• Each bid is an offer
• “A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid.” S. 57(2) Sale of Goods Act 1979
Request for Information
A person may request for supply of information. What is the legal effect of supplying information? The case of Harvey v. Facey is relevant.
The appellant sent a telegram to the respondent asking ; “ will you sell us bumper hall pen? Telegraph lowest cash price, reply paid”. The respondent simply replied “ lowest price of bumper hall pen £900”. The appellants then purported to accept the offer.
Held
The privy council held that, no offer had been made which the appellants could accept because the respondents did not reply to the first part of the question “ will you sell us bumper hall pen?” rather the second part of the question.
Contracts by tender
In contracts by tender are made by those tendering. Now suppose the person inviting tenders puts conditions to be fulfilled before a tender is considered. Suppose further that the tenderer fulfils those conditions, and any liability arise out of such a tender.
The law is to the effect that where a person is invited to tender under certain conditions and he complies then he acquires the title to have his tender considered along with other tenders. However, take note that the LCA is silent on the issue of invitation to treat. However, if one reads s. 2(10(d) carefully statement which are not clear and certain, firm and final expression of his willingness to be bound, would fall under the invitation to treat.
MAKING A PROPOSAL UNDER VARIOUS SITUATIONS
(a) Unilateral Contract
A unilateral contract is a one sided contract. E.g. an advertisement in a newspaper; the most famous case is that of Carlil v. Carbolic Smoke Ball Co.
The company manufactured what it considered to be a perfect prevention of the common cold. So confident the company advertised:
£100 reward will be paid by the carbolic smoke ball co to any person who contacts the increasing epidemic influenza, colds, or any disease by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, Regent Street showing our sincerity in the matter.
The advertisement continued to state that during the last epidemic of influenza many thousands of carbolic smoke balls were sold and the company knew of nobody who used the balls and contracted the disease.
Held:
It was held that the advertisement was an offer and was not intended to be a mere puff
(b) In auction sales
In a sale by auction the bidder is the one who makes the proposal. The proposal is made when he states the price he is willing to pay for a particular item. The contract becomes concluded at the fall of hammer.
(c) Proposal in tenders
The advertisement or the invitation does not amount to an offer. It is a merely an invitation to the general public to make offers. The persons invited to tender may make tenders. The one who invites may accept or reject any tender unless it is expressly stated that the highest offer will be accepted.
COMMUNICATION OF A PROPOSAL
An offer or proposal may be made either expressly or impliedly. Since a proposal must be communicated to the person to whom it is intended. The communication of a proposal is deemed to be made by an act or omission of the party proposing and which has the effect of communicating it.
An offer is effective when, and not until, it is communicated to the offeree. An acceptance in ignorance of an offer is not an acceptance.
A proposal may be made to a definite person, to some class of persons or to the whole world. In Carlil v. Carbolic Smoke Ball Co, the court made it clear that, it is possible to make an offer to the whole world and that the contract is then made with anyone who accepts the offer but not with all the world.
An offer must be communicated, and communication of an offer becomes effective when it is complete i.e. when it comes to the knowledge of the person to whom it was made. S.4 (1) LCA.
TERMINATION OF AN OFFER
An offer or proposal may be terminated at any time before its acceptance is complete. Once an offer has been accepted a binding contract is formed.
• An offer may be terminated in 5 principal ways
– Withdrawal/ revocation
– Rejection
– Lapse of Time for want of acceptance
– Upon Occurrence of a Specific Event or failure of a condition precedent
– Death of the Offeror or insanity
• Termination by Withdrawal/ Revocation
A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer and not afterwards. S. 5(1). This is the case even where the offeror has stated that his offer is open for a specific period of time. Provided his promise to keep the offer open is not supported by consideration, it does not bind him and as such he can revoke his offer even within the period when the offer is open. (see also s.6(a) of the LCA
• Dickinson v Dodds (1876) 2 Ch D 463
– On Wed, deft offered to sell his house to clmt and promised to leave the offer ‘over’ till 9AM on Friday
– Clmt learned on Thursday that deft was planning to sell the house to someone else
– he left a formal acceptance for the clmt same day but the deft did not see it
– At 7AM on Friday Clmt handed an ‘acceptance’ to the deft but the house had been sold by then
– Held: there was no contract as the offer had been withdrawn
– That there is neither principle nor authority for saying that there must be an express and actual withdrawal of the offer
– That the clmt knew, through a third party, that the deft was no longer minded to sell the house to him and this was as plain and clear as if the deft had expressly said he withdrew the offer
– That the deft would not have been able to withdraw the offer only if both parties agreed that it was a continuing offer until acceptance
– Offer
• Note in relation to leaving the offer ‘over’
– Such a promise will only be binding if supported by consideration; sometimes called ‘buying the option’
– See Routledge v Grant 130 ER 920
Note: That the revocation must be communicated
The communication of a revocation is complete- [s. 4(3) LCA]
(a) As against the person who makes it, when it is put in the course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it.
(b) As against the person to whom it is made, when it comes to his knowledge
• Note also that the ‘postal rule’ does not apply in relation to withdrawal/revocation of an offer
• Byrne v Van Tienhoven (1880) CPD 344
– Defts posted letter of offer (from Cardiff to NY) on 1 October
– Clmt received the letter on 11 October and immediately accepted by telegram
– MeanwhileDeft had posted a withdrawal on 8 October which did not reach clmt until 20 October
– Held: binding contract was made on 11 October; revocation is not effective until it is communicated --- in this case on 20 October.
• Termination by Rejection
• Rejection may be express or by a counter-offer; a counter-offer kills off the last offer. An offer will be held to have terminated once it has been rejected by the offeree. The rejection need not be express, provided that the offeror is justified in inferring that the offeree does not intend to accept the offer.
• Hyde v Wrench (1840) 3 Beav 334
– Deft offered to sell his farm to clmt for £1000
– Clmt replied offering to buy it for £950
– Deft refused
– Later, clmt sent letter of “acceptance” to buy it for the original £1000; the deft refused to sell
– Held: no contract; the initial response which was a counter-offer had put an end to the offer
Lapse for want of acceptance
An offer may provide that it will remain open for a specific period of time. In such case acceptance must be effected within the time limit. The offer lapses after the fixed period of time.
Where no time is given an offer must be accepted within the reasonable time. What is a reasonable time depends on the circumstances of each case.
Death of the offeror or Insanity
Where the offeror dies before the offer is accepted and the offeree is aware of the death, it would seem the offer lapses and becomes incapable of acceptance. What happens if the offeree accepts the offer in ignorance of the offeror’s death? The following has been suggested:
The offer is terminated automatically and that knowledge is irrelevant. The case of Bradbury v Morgans (1862) 1H&C 249 is frequently cited as an example that a continuing contract of guarantee is enforceable against the estate of the deceased guarantor where the acceptance of an offer to guarantee fresh credit has been made in ignorance of his death. However, the better opinion is that, the death ipso facto terminates the offer, provided the offer is one which could have been revoked by the offeror (see Erington v. Erington [1952] 1 KB 290. The same position is reflected under the LCA section 6(d).
Failure of a condition precedent
Where an offer is subject to fulfilment of a condition precedent by the offeree before acceptance, failure to fulfil the condition precedent causes the offer to lapse.(s.6(c)) LCA, 1961
ACCEPTANCE OF A PROPOSAL
• Acceptance – ‘a final and unqualified expression of assent to the terms of an offer’
• Acceptance is a signification of willingness by the offeree to accept the offer. S. 2(1) b and a proposal once accepted it becomes a promise.
• In order to covert a proposal into a promise, the acceptance must ( s.7(a)-(b) of LCA)
– Must be both final(Absolute) and unqualified
– As a general rule, must be communicated or be expressed in some and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.
– May be made in writing, orally or by conduct
• Acceptance by conduct
• Note:
1. That an acceptance must be to the offer
2. An acceptance must exactly match the term of the offer.
3. Mere silence does not constitute acceptance
• Felthouse v Bindley 142 ER 1037
– Clmt negotiated to buy a horse from his nephew
– Clmt wrote to nephew: “if I hear no more about him, I consider the horse mine at £30 15s.”
– Nephew did not reply but told auctioneer not to sell the horse, as it was already sold
– By mistake, the deft/auctioneer sold the horse to someone else.
– Clmt sued auctioneer for ‘conversion’ – for which he had to prove that the horse was already his at the time of its sale by the auctioneer.
– Held: that the horse had not been sold to clmt
– that although the nephew intended in his own mind that the clmt should have the horse, he had not communicated his intention and had not done anything to bind himself that the clmt’s offer stood as an open offer which the clmt himself might have retracted at any time
COMMUNICATION OF ACCEPTANCE
Q. When is it complete?
The communication of acceptance is complete- [s. 4(2)]
(a) As against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor
(b) As against the acceptor, when it comes to the knowledge of the proposer
The ‘Mirror-Image’ rule
• An acceptance must accept the precise terms of the offer – an unqualified expression of assent
A supposed ‘acceptance’ which varies or attempts to vary the terms of the offer is not an acceptance --- but a counter-offer.
• Acceptance must be communicated to the offeror
– General rule: acceptance is only effective when it is brought to the attention of the offeror
– Cf. per Lord Denning in Entores v Miles Far East Corpn [1955] 2 QB 327
• Oral statement drowned by over-flying aircraft
• Telephone line goes dead in a phone conversation in which acceptance was being made
Prescribed Methods of acceptance
• Prescribed method of acceptance
• As a general rule, offeree must comply with the prescribed method, else there will be no contract
• If prescribed method is not mandatory, any other method of acceptance that is no less advantageous to the offeror may be sufficient
The Communication of Acceptance by Post-The postal rule
Position at Common Law
• If the post is the agreed or proper method of communicating acceptance, acceptance is complete when the letter of acceptance is posted
See Adam V. Lindsell [1818] 106 ER 250, the court said that where acceptance is communicated by post a contract arises on the date when the letter of acceptance is posted in due course.
The rule was further rationalised by Thesiger, LJ in 1879 when he said; “ an acceptance which only remains in the breast of the acceptor without being actually and by legal implication communicated to the offeror is no binding acceptance...”
The postal rule was further consolidated in Byrne v Van Tienhoven and Henthorn v Fraser, which in the former case the court pointed out that, a contract is complete on posting the letter of acceptance even though the letter may not reach the offeror (its destination) and in the later case the court ruled:-
• “Where the circumstances are such that it must have been within the contemplation of the parties that, according to ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.” per Lord Herschell in Henthorn v Fraser [1892] 2 Ch 27
Instantaneous means of (tele) communication
Where a telephone or telex is used to communicate acceptance, the acceptance becomes complete when the offeror receives notification of the acceptance; and the contract is made at the place where the acceptance is received.
However;
• The postal rule does not apply; acceptance is communicated when ‘received’ by the offeror
• Entores v Miles Far East Corpn [1955] 2 QB 327
– English company received acceptance sent by telex by a Dutch company
– Held: the contract was made in England since the telex of acceptance was received in England
• Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34
– Telex of acceptance sent from London to Vienna
– Held: contract was made in Vienna where the acceptance was received
• What if the acceptance was not seen/’received’ immediately? For example, arrives out of office hours; error/default at recipient’s end; machines operated by 3rd parties etc?
• “No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risk should lie …” Per Lord Wilberforce (obiter)
The position in Tanzania is found under section 4(2) of the LCA.
Difference between common law and Tanzania: section 4(2) marks a difference between the position in England and Tanzania as far as the acceptor is concerned. While in England when a letter of acceptance is posted, both the offeror and the acceptor become irrevocably bound, in Tanzania the acceptor does not become bound by merely posting his acceptance. He becomes bound only when his acceptance “comes to the knowledge of the proposer”.
Communication to an agent
Where an agent is authorised to receive acceptance, then communication to the agent is as good as communication to the principal, but where the agent’s authority is merely to transmit the acceptance to the principal, there is no acceptance until it is actually transmitted to the principal.
RULES GOVERNING ACCEPTANCE
(a) Acceptance must be in response to, and in exchange for the proposal
(i) In response to the proposal
The offeree must be aware of the proposal. So knowledge of the existence of the proposal is necessary. Where a person is not aware of the offer he can not accept.
(ii) In exchange for the offer
A person may have knowledge of the offer and may accept it but not in exchange for the offer. If this be the case, then there is no acceptance of the offer.
(b) The acceptance must exactly match the terms of the offer (the mirror-image rule)
The offeree must accept the terms as offered. If he makes any changes he cant be said to have accepted the offer.
INTENTION TO CREATE LEGAL RELATION
The fact that the parties have reached agreement does not necessarily mean that they have concluded a legally enforceable contract, even where the agreement is supported by consideration. It is in general right that courts should not enforce entirely social engagements, such as arrangements to play squash or to come to dinner, even though the parties themselves may intend to be legally bound thereby.
Domestic and Social Agreements
• “Rebuttable Presumption” that there is no intention to create legal relations
• Balfour v Balfour [1919] 2 KB 571
– Deft/husband went to work abroad
– He agreed to pay clmt/wife £30 per month
– Clmt/wife agreed not to ask deft for further maintenance
– Clmt/wife sought to enforce the agreement
– Held (CA): though apparently supported by consideration, the agreement was not an enforceable contract
– that most such agreements between husband and wife are not intended to have legal consequences
– that such agreements are usually based on considerations of natural love and affection
– that the courts would be flooded if such arrangements were held to result in legal obligations
Evidence that agreement was intended to have legal consequences
• Merritt v Merritt [1970] 1 WLR 1211
– Husband who left his wife agreed to pay her £40 per month
– She was to make outstanding mortgage payments from that allowance
– Husband also signed a note that he would transfer the house to her when mortgage payments were completed
– Husband later refused to transfer the house
– Held (CA): the agreement was intended to create legal relations
– “… domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honourable undertakings. They want everything cut and dried. It may safely be presumed that they intend to create legal relations.” Per Lord Denning MR
Commercial Agreements
• “Rebuttable Presumption” that they are intended to create legal relations
• “Heavy” presumption; not easy to rebut; “clear” evidence to the contrary required
• Edwards v Skyways Ltd [1964] 1 WLR 349
– S promised to make an “ex gratia” payment to some employees made redundant
– S later went back on the promise to E who left the company
– S argued that though its promise was supported by consideration, it was not legally enforceable because it was “ex gratia”
– Held (Megaw J): there was nothing in the words “ex gratia” … to warrant the conclusion that the promise, duly made and accepted for valid consideration, was not intended by the parties to be enforceable in law.
CONSIDERATION
Every contract must be supported with consideration
By definition, a consideration is something of value in the eyes of law or exchange of promises. It is defined in our law under section 2(1)(d) of the Law of Contract Act, 1961.
Consideration may consist of some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility.
Facts about consideration
• Consideration must be sufficient but it need not be adequate
• Consideration must move from the promise or any other persons
• Past consideration is not a consideration
• Consideration (1)
• Consideration as a required element for a valid contract
• Exceptions
– Contract made by ‘Deed’
– ‘Promissory Estoppel’; Re-negotiation and ‘practical advantage/benefit’ etc.
• Consideration still a requirement for most contracts
• Consideration(1)
• Definition of Consideration
• As a benefit to the promisor or a detriment to the promisee
– Currie v Misa (1875) LR 10 Ex 153, 162
– “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other ….” per Lush J
• As the price for which one party buys the other’s promise
– Dunlop Pneumatic Tyre Co v Selfridge & Co [1915] AC 847, 855
– “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” per Lord Dunedin
• Good consideration = something of value in the eyes of the law
Natural love or affection alone not sufficient as consideration; nor e.g. a promise not to bore one’s parents
• Exceptions to the rule that ‘Past’ Consideration is no consideration
• Act carried out before subsequent promise but at the request of the promisor
– Lampleigh v Braithwait (1615) Hob. 105
– B had been convicted of killing X
– B asked L to obtain King’s pardon for him
– L went to considerable trouble and expense and secured the pardon
– After the pardon was obtained, B promised to pay L £100 but later refused to pay
– Held: B’s promise was enforceable because the action of L, although performed before B’s promise, was at B’s request
STANDARD FORM CONTRACTS
Where a document is used as a contractual document the offeree is held to be bound by all the conditions contained in the document even though he has not read them.
Exemption Clauses
(i) Notice of the conditions must be available at the time of making the contract
(ii) The offeree must have had reasonable notice of the conditions
(iii) The document must be a contractual one and not a mere receipt
(iv) The terms of the contract containing the exemption clause strictly construed against the parties in whose favour it is drawn
Fundamental Breach
Note that, an offeror may not be able to rely on an exclusion clause if he is in fundamental breach of the contract
FREE CONSENT
An agreement occurs when two minds meet upon a common purpose- consensus ad idem. Where there is no such meeting there is no legally binding agreement.
In certain circumstances the following factors will act to vitiate an otherwise sound contract [section 14(1) of LCA]
(i) Mistake
(ii) Duress and undue influence
(iii) Coercion
(iv) Misrepresentation
CAPACITY TO CONTRACT
Only persons of sound mind and who are at the age of majority and not otherwise disqualified by law may enter into a contract.
The age of majority for Tanzania is 18 years of age. Refer section 11 of the LCA and 12(1)-(3).
Drunken persons, persons of unsound mind, and minors as a general rule cannot enter into a contract except for necessaries.
The reason for that is that they cannot form a rational judgement.
LEGALITY OF OBJECTS
A contract must not be illegal and if it is, has no legal effect. A contract will be illegal because they are contrary to (i) statute (ii) common law (iii) public policy
VOID, VOIDABLE CONTRACTS
The following agreements are void [ss.24-30 LCA, 1961]
(a) Contracts prejudicial to the sanctity of marriage or in restraint of marriage.
(b) Agreements to oust the jurisdiction of the courts
(c) Agreement in restraint of trade
(d) Agreement void for uncertainty
(e) Agreement by way of wager
(f) Agreement without consideration
(g) If consideration and objects are unlawful
VOIDABLE CONTRACTS
A voidable contract is a contract which is either valid or void at the option of either party to a contract.
Voidable contracts include:-
(a) Contracts entered by coercion,section 15 and 19
(b) Contracts entered by undue influence, s.16 and 19
(c) Contracts entered by fraud, section 17 and 19
(d) Contracts entered by misrepresentation, section 18 and 19
(e) Contracts entered by mistake, section 20,21 and 23.
DISCHARGE OF CONTRACT
(i) Discharge by performance
(ii) Discharge by agreement
(iii) Discharge by frustration
E.g. (a) where there is a change of law
(b) subsequent impossibility
(c) where the subject matter is destroyed
(d) disappearance of the subject matter
(iv) Discharge by breach
It must be a breach of a condition that goes to the root of the contract. A breach of warranty does not justify the end of the contract.
(v) Discharge by novation
REMEDIES FOR BREACH OF CONTRACT
The following are the remedies available to an injured party in a contract
(i) Damages
These can be liquidated damages or unliquidated damages.
(ii) Action in quantum meruit
The plaintiff will be awarded as much as is earned.
(iii) Specific performance
This is where a party to the contract is instructed to carry out his part of the agreement.
(iv) Rescission
The aim of the rescission is to restore parties to their pre-contractual positions.
ASSIGNMENT OF THE CONTRACT
Assignment is the passing of the rights and liabilities under a contract to another person.
Assignment can be done in the following ways:-
(a) Legal assignment
(b) Equitable assignment
(c) Assignment by operation of the law
(d) novation
Legal assignment
s. 136 of the UK Law of Property Act, 1925.
For a legal assignment to take place, the assignment must be:-
(a) in writing
(b) absolute
(c) assignment of the whole debt
(d) notified to the other party
Assignment by operation of the Law
This can be in two ways:-
(i) death
(ii) bankruptcy
NOTES ON THE LAW OF CONTRACT
Prepared by: FUNGO, A.E., LL, B (Hons) Dar, LLM (Essex-UK)
INTRODUCTION TO CONTRACT LAW
Tanzania law like English law recognises only two kinds of contract:-
(a) The contract made by deed i.e. under seal which is called deed or specialty and,
(b) The simple contract.
Simple contracts
Simple contracts depend on the presence of consideration, and as a rule they need be made in no special form. However, sometimes, simple contracts are required to be in writing eg. Contracts for the disposition and transfer of land as well as contracts of guarantee
Deed contracts
A deed must be in writing or printed on paper or parchment. It is often said to be executed, or made conclusive as between the parties, by being ‘signed, sealed, and delivered’.
MEANING OF A CONTRACT
A contract is an agreement enforceable by law or an agreement that is legally enforceable.
“…a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way or an agreement between two or more persons which is intended by them to have legal consequences.
An agreement is further defined by section 2(1) (e) of LCA to mean every promise or set of promises, forming the consideration for each other.
An agreement not enforceable by law s said to be void (s.2(1)(g)
An agreement is made of an offer and acceptance.
A contract must be an agreement and to qualify as a contract an agreement must meet of tests. The main test is whether or not the agreement is enforceable by law.
Essential ingredient of a contract
By section 10 of the Law of Contract Act, 1961, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
To summarise the essentials are:
(i) Free consent
(ii) Competency or capacity to contract
(iii) Lawful consideration or object
However, the law does not say whether an intention to create legal relation is also an essential element of a contract. Once a contract has fulfilled the above conditions, then it becomes sacrosanct, meaning neither the court no any other person may interfere with it.
Formation of an agreement
Meaning of an offer
s.2 (1)(a) when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal.
A proposal is made up of a term or terms.
Offer
• Offer – a definite proposal or final statement by one party of the terms in which s/he will enter into a contract
• Can be made in writing, orally or by conduct
• Can be made to a specific person(s) or to the whole world
• Leads to a contract if matched by ‘acceptance’ by the other party
Characteristics of a proposal
(a) The proposal must have been made willingly
(b) The terms must be clear and certain
(c) Firm and final expression of his willingness to be bound
s. 29, an agreement the meaning of which is not certain or capable of being made certain are void.
Case law
Nittin Coffee Estates Ltd and another v. United Engineering Works Ltd and another
The parties concluded agreements of sale although the price was not stated. The court of appeal of Tanzania stated that since price is fundamental term in a sale agreement, if it is not mentioned the agreement becomes uncertain.
Proposals and Invitations to treat
• Distinguished from ‘invitation to treat’ or preliminary negotiations/enquiries
• ‘Invitation to treat’ = general expression of willingness to enter into a contract i.e. not definitive
• Generally, advertisements are ‘invitations to treat’
• Unlike a offer which is final, firm and clear expression of willingness by the offeror to be bound an invitation to treat does not express final willingness to be bound in those terms. The invitor merely proposes certain terms on which he is willing to negotiate. He invites any person to make an offer in the terms he has proposed. He may accept or reject the offer.
• Partridge v Crittenden [1968] 1 WLR1204
• Applt placed ff advert in a periodical
• “Bramblefinch cocks, Bramblefinch hens 25s each”
• Charged with unlawfully offering for sale a wild bird
• Held (QB): the advert was only an invitation to treat; it was not an offer for sale; thus, applt could not be guilty of the offence
• Adverts are generally invitations to treat and not offers
• Display of Goods in Shop Window
A display of goods in a shop window or on shelves in a self service store even with a price marked, does not amount to a proposal. Rather, the intention is to invite people to come forward and make offers/ proposal to buy.
• Fisher v Bell [1961] 1 QB 394
• Shopkeeper displayed a flick-knife in shop window with tag: “Ejector knife – 4s”
• Charged with offence of “offering” a knife for sale under Restriction of Offensive Weapons Act 1959
• Held (QB): no offence had been committed; a mere display of goods in a shop window with a price tag is not an offer for sale but an invitation to treat
Pharmaceuticals Society of Great Britain v. Boots Cash Chemists
Boots operated a self service shop in which certain drugs were displayed with prices attached. It was charged with selling drugs in contravention of the laid down procedures.
It was ruled that the self service system was a convenient method of enabling customers to see what was there and choose, and possibly put back and substitute articles which they wish to have and then go up to the counter and offer to buy what they have so far chosen.
Note:
The importance of the distinction between an offer and an invitation to treat can be appreciated if freedom of an individual to deal with his property is taken into account.
Advertisements
Some advertisements can qualify as invitation to treat and not offers (see Patridge v. Crittenden above and below)
• Harris v Nickerson [1873] LR 8 QB 286
• Auctioneer advertised auction to be held at Bury St. Edmunds including some office furniture
• Clmt travelled up from London
• The office furniture were withdrawn from the sale
• Clmt sued for loss of time and for expenses
• Held (QB): clmt had no right of action; the advert was an invitation to treat and not a promise that all the items would be put up for sale
• Each bid is an offer
• “A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid.” S. 57(2) Sale of Goods Act 1979
Request for Information
A person may request for supply of information. What is the legal effect of supplying information? The case of Harvey v. Facey is relevant.
The appellant sent a telegram to the respondent asking ; “ will you sell us bumper hall pen? Telegraph lowest cash price, reply paid”. The respondent simply replied “ lowest price of bumper hall pen £900”. The appellants then purported to accept the offer.
Held
The privy council held that, no offer had been made which the appellants could accept because the respondents did not reply to the first part of the question “ will you sell us bumper hall pen?” rather the second part of the question.
Contracts by tender
In contracts by tender are made by those tendering. Now suppose the person inviting tenders puts conditions to be fulfilled before a tender is considered. Suppose further that the tenderer fulfils those conditions, and any liability arise out of such a tender.
The law is to the effect that where a person is invited to tender under certain conditions and he complies then he acquires the title to have his tender considered along with other tenders. However, take note that the LCA is silent on the issue of invitation to treat. However, if one reads s. 2(10(d) carefully statement which are not clear and certain, firm and final expression of his willingness to be bound, would fall under the invitation to treat.
MAKING A PROPOSAL UNDER VARIOUS SITUATIONS
(a) Unilateral Contract
A unilateral contract is a one sided contract. E.g. an advertisement in a newspaper; the most famous case is that of Carlil v. Carbolic Smoke Ball Co.
The company manufactured what it considered to be a perfect prevention of the common cold. So confident the company advertised:
£100 reward will be paid by the carbolic smoke ball co to any person who contacts the increasing epidemic influenza, colds, or any disease by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, Regent Street showing our sincerity in the matter.
The advertisement continued to state that during the last epidemic of influenza many thousands of carbolic smoke balls were sold and the company knew of nobody who used the balls and contracted the disease.
Held:
It was held that the advertisement was an offer and was not intended to be a mere puff
(b) In auction sales
In a sale by auction the bidder is the one who makes the proposal. The proposal is made when he states the price he is willing to pay for a particular item. The contract becomes concluded at the fall of hammer.
(c) Proposal in tenders
The advertisement or the invitation does not amount to an offer. It is a merely an invitation to the general public to make offers. The persons invited to tender may make tenders. The one who invites may accept or reject any tender unless it is expressly stated that the highest offer will be accepted.
COMMUNICATION OF A PROPOSAL
An offer or proposal may be made either expressly or impliedly. Since a proposal must be communicated to the person to whom it is intended. The communication of a proposal is deemed to be made by an act or omission of the party proposing and which has the effect of communicating it.
An offer is effective when, and not until, it is communicated to the offeree. An acceptance in ignorance of an offer is not an acceptance.
A proposal may be made to a definite person, to some class of persons or to the whole world. In Carlil v. Carbolic Smoke Ball Co, the court made it clear that, it is possible to make an offer to the whole world and that the contract is then made with anyone who accepts the offer but not with all the world.
An offer must be communicated, and communication of an offer becomes effective when it is complete i.e. when it comes to the knowledge of the person to whom it was made. S.4 (1) LCA.
TERMINATION OF AN OFFER
An offer or proposal may be terminated at any time before its acceptance is complete. Once an offer has been accepted a binding contract is formed.
• An offer may be terminated in 5 principal ways
– Withdrawal/ revocation
– Rejection
– Lapse of Time for want of acceptance
– Upon Occurrence of a Specific Event or failure of a condition precedent
– Death of the Offeror or insanity
• Termination by Withdrawal/ Revocation
A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer and not afterwards. S. 5(1). This is the case even where the offeror has stated that his offer is open for a specific period of time. Provided his promise to keep the offer open is not supported by consideration, it does not bind him and as such he can revoke his offer even within the period when the offer is open. (see also s.6(a) of the LCA
• Dickinson v Dodds (1876) 2 Ch D 463
– On Wed, deft offered to sell his house to clmt and promised to leave the offer ‘over’ till 9AM on Friday
– Clmt learned on Thursday that deft was planning to sell the house to someone else
– he left a formal acceptance for the clmt same day but the deft did not see it
– At 7AM on Friday Clmt handed an ‘acceptance’ to the deft but the house had been sold by then
– Held: there was no contract as the offer had been withdrawn
– That there is neither principle nor authority for saying that there must be an express and actual withdrawal of the offer
– That the clmt knew, through a third party, that the deft was no longer minded to sell the house to him and this was as plain and clear as if the deft had expressly said he withdrew the offer
– That the deft would not have been able to withdraw the offer only if both parties agreed that it was a continuing offer until acceptance
– Offer
• Note in relation to leaving the offer ‘over’
– Such a promise will only be binding if supported by consideration; sometimes called ‘buying the option’
– See Routledge v Grant 130 ER 920
Note: That the revocation must be communicated
The communication of a revocation is complete- [s. 4(3) LCA]
(a) As against the person who makes it, when it is put in the course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it.
(b) As against the person to whom it is made, when it comes to his knowledge
• Note also that the ‘postal rule’ does not apply in relation to withdrawal/revocation of an offer
• Byrne v Van Tienhoven (1880) CPD 344
– Defts posted letter of offer (from Cardiff to NY) on 1 October
– Clmt received the letter on 11 October and immediately accepted by telegram
– MeanwhileDeft had posted a withdrawal on 8 October which did not reach clmt until 20 October
– Held: binding contract was made on 11 October; revocation is not effective until it is communicated --- in this case on 20 October.
• Termination by Rejection
• Rejection may be express or by a counter-offer; a counter-offer kills off the last offer. An offer will be held to have terminated once it has been rejected by the offeree. The rejection need not be express, provided that the offeror is justified in inferring that the offeree does not intend to accept the offer.
• Hyde v Wrench (1840) 3 Beav 334
– Deft offered to sell his farm to clmt for £1000
– Clmt replied offering to buy it for £950
– Deft refused
– Later, clmt sent letter of “acceptance” to buy it for the original £1000; the deft refused to sell
– Held: no contract; the initial response which was a counter-offer had put an end to the offer
Lapse for want of acceptance
An offer may provide that it will remain open for a specific period of time. In such case acceptance must be effected within the time limit. The offer lapses after the fixed period of time.
Where no time is given an offer must be accepted within the reasonable time. What is a reasonable time depends on the circumstances of each case.
Death of the offeror or Insanity
Where the offeror dies before the offer is accepted and the offeree is aware of the death, it would seem the offer lapses and becomes incapable of acceptance. What happens if the offeree accepts the offer in ignorance of the offeror’s death? The following has been suggested:
The offer is terminated automatically and that knowledge is irrelevant. The case of Bradbury v Morgans (1862) 1H&C 249 is frequently cited as an example that a continuing contract of guarantee is enforceable against the estate of the deceased guarantor where the acceptance of an offer to guarantee fresh credit has been made in ignorance of his death. However, the better opinion is that, the death ipso facto terminates the offer, provided the offer is one which could have been revoked by the offeror (see Erington v. Erington [1952] 1 KB 290. The same position is reflected under the LCA section 6(d).
Failure of a condition precedent
Where an offer is subject to fulfilment of a condition precedent by the offeree before acceptance, failure to fulfil the condition precedent causes the offer to lapse.(s.6(c)) LCA, 1961
ACCEPTANCE OF A PROPOSAL
• Acceptance – ‘a final and unqualified expression of assent to the terms of an offer’
• Acceptance is a signification of willingness by the offeree to accept the offer. S. 2(1) b and a proposal once accepted it becomes a promise.
• In order to covert a proposal into a promise, the acceptance must ( s.7(a)-(b) of LCA)
– Must be both final(Absolute) and unqualified
– As a general rule, must be communicated or be expressed in some and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.
– May be made in writing, orally or by conduct
• Acceptance by conduct
• Note:
1. That an acceptance must be to the offer
2. An acceptance must exactly match the term of the offer.
3. Mere silence does not constitute acceptance
• Felthouse v Bindley 142 ER 1037
– Clmt negotiated to buy a horse from his nephew
– Clmt wrote to nephew: “if I hear no more about him, I consider the horse mine at £30 15s.”
– Nephew did not reply but told auctioneer not to sell the horse, as it was already sold
– By mistake, the deft/auctioneer sold the horse to someone else.
– Clmt sued auctioneer for ‘conversion’ – for which he had to prove that the horse was already his at the time of its sale by the auctioneer.
– Held: that the horse had not been sold to clmt
– that although the nephew intended in his own mind that the clmt should have the horse, he had not communicated his intention and had not done anything to bind himself that the clmt’s offer stood as an open offer which the clmt himself might have retracted at any time
COMMUNICATION OF ACCEPTANCE
Q. When is it complete?
The communication of acceptance is complete- [s. 4(2)]
(a) As against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor
(b) As against the acceptor, when it comes to the knowledge of the proposer
The ‘Mirror-Image’ rule
• An acceptance must accept the precise terms of the offer – an unqualified expression of assent
A supposed ‘acceptance’ which varies or attempts to vary the terms of the offer is not an acceptance --- but a counter-offer.
• Acceptance must be communicated to the offeror
– General rule: acceptance is only effective when it is brought to the attention of the offeror
– Cf. per Lord Denning in Entores v Miles Far East Corpn [1955] 2 QB 327
• Oral statement drowned by over-flying aircraft
• Telephone line goes dead in a phone conversation in which acceptance was being made
Prescribed Methods of acceptance
• Prescribed method of acceptance
• As a general rule, offeree must comply with the prescribed method, else there will be no contract
• If prescribed method is not mandatory, any other method of acceptance that is no less advantageous to the offeror may be sufficient
The Communication of Acceptance by Post-The postal rule
Position at Common Law
• If the post is the agreed or proper method of communicating acceptance, acceptance is complete when the letter of acceptance is posted
See Adam V. Lindsell [1818] 106 ER 250, the court said that where acceptance is communicated by post a contract arises on the date when the letter of acceptance is posted in due course.
The rule was further rationalised by Thesiger, LJ in 1879 when he said; “ an acceptance which only remains in the breast of the acceptor without being actually and by legal implication communicated to the offeror is no binding acceptance...”
The postal rule was further consolidated in Byrne v Van Tienhoven and Henthorn v Fraser, which in the former case the court pointed out that, a contract is complete on posting the letter of acceptance even though the letter may not reach the offeror (its destination) and in the later case the court ruled:-
• “Where the circumstances are such that it must have been within the contemplation of the parties that, according to ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.” per Lord Herschell in Henthorn v Fraser [1892] 2 Ch 27
Instantaneous means of (tele) communication
Where a telephone or telex is used to communicate acceptance, the acceptance becomes complete when the offeror receives notification of the acceptance; and the contract is made at the place where the acceptance is received.
However;
• The postal rule does not apply; acceptance is communicated when ‘received’ by the offeror
• Entores v Miles Far East Corpn [1955] 2 QB 327
– English company received acceptance sent by telex by a Dutch company
– Held: the contract was made in England since the telex of acceptance was received in England
• Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34
– Telex of acceptance sent from London to Vienna
– Held: contract was made in Vienna where the acceptance was received
• What if the acceptance was not seen/’received’ immediately? For example, arrives out of office hours; error/default at recipient’s end; machines operated by 3rd parties etc?
• “No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risk should lie …” Per Lord Wilberforce (obiter)
The position in Tanzania is found under section 4(2) of the LCA.
Difference between common law and Tanzania: section 4(2) marks a difference between the position in England and Tanzania as far as the acceptor is concerned. While in England when a letter of acceptance is posted, both the offeror and the acceptor become irrevocably bound, in Tanzania the acceptor does not become bound by merely posting his acceptance. He becomes bound only when his acceptance “comes to the knowledge of the proposer”.
Communication to an agent
Where an agent is authorised to receive acceptance, then communication to the agent is as good as communication to the principal, but where the agent’s authority is merely to transmit the acceptance to the principal, there is no acceptance until it is actually transmitted to the principal.
RULES GOVERNING ACCEPTANCE
(a) Acceptance must be in response to, and in exchange for the proposal
(i) In response to the proposal
The offeree must be aware of the proposal. So knowledge of the existence of the proposal is necessary. Where a person is not aware of the offer he can not accept.
(ii) In exchange for the offer
A person may have knowledge of the offer and may accept it but not in exchange for the offer. If this be the case, then there is no acceptance of the offer.
(b) The acceptance must exactly match the terms of the offer (the mirror-image rule)
The offeree must accept the terms as offered. If he makes any changes he cant be said to have accepted the offer.
INTENTION TO CREATE LEGAL RELATION
The fact that the parties have reached agreement does not necessarily mean that they have concluded a legally enforceable contract, even where the agreement is supported by consideration. It is in general right that courts should not enforce entirely social engagements, such as arrangements to play squash or to come to dinner, even though the parties themselves may intend to be legally bound thereby.
Domestic and Social Agreements
• “Rebuttable Presumption” that there is no intention to create legal relations
• Balfour v Balfour [1919] 2 KB 571
– Deft/husband went to work abroad
– He agreed to pay clmt/wife £30 per month
– Clmt/wife agreed not to ask deft for further maintenance
– Clmt/wife sought to enforce the agreement
– Held (CA): though apparently supported by consideration, the agreement was not an enforceable contract
– that most such agreements between husband and wife are not intended to have legal consequences
– that such agreements are usually based on considerations of natural love and affection
– that the courts would be flooded if such arrangements were held to result in legal obligations
Evidence that agreement was intended to have legal consequences
• Merritt v Merritt [1970] 1 WLR 1211
– Husband who left his wife agreed to pay her £40 per month
– She was to make outstanding mortgage payments from that allowance
– Husband also signed a note that he would transfer the house to her when mortgage payments were completed
– Husband later refused to transfer the house
– Held (CA): the agreement was intended to create legal relations
– “… domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honourable undertakings. They want everything cut and dried. It may safely be presumed that they intend to create legal relations.” Per Lord Denning MR
Commercial Agreements
• “Rebuttable Presumption” that they are intended to create legal relations
• “Heavy” presumption; not easy to rebut; “clear” evidence to the contrary required
• Edwards v Skyways Ltd [1964] 1 WLR 349
– S promised to make an “ex gratia” payment to some employees made redundant
– S later went back on the promise to E who left the company
– S argued that though its promise was supported by consideration, it was not legally enforceable because it was “ex gratia”
– Held (Megaw J): there was nothing in the words “ex gratia” … to warrant the conclusion that the promise, duly made and accepted for valid consideration, was not intended by the parties to be enforceable in law.
CONSIDERATION
Every contract must be supported with consideration
By definition, a consideration is something of value in the eyes of law or exchange of promises. It is defined in our law under section 2(1)(d) of the Law of Contract Act, 1961.
Consideration may consist of some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility.
Facts about consideration
• Consideration must be sufficient but it need not be adequate
• Consideration must move from the promise or any other persons
• Past consideration is not a consideration
• Consideration (1)
• Consideration as a required element for a valid contract
• Exceptions
– Contract made by ‘Deed’
– ‘Promissory Estoppel’; Re-negotiation and ‘practical advantage/benefit’ etc.
• Consideration still a requirement for most contracts
• Consideration(1)
• Definition of Consideration
• As a benefit to the promisor or a detriment to the promisee
– Currie v Misa (1875) LR 10 Ex 153, 162
– “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other ….” per Lush J
• As the price for which one party buys the other’s promise
– Dunlop Pneumatic Tyre Co v Selfridge & Co [1915] AC 847, 855
– “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” per Lord Dunedin
• Good consideration = something of value in the eyes of the law
Natural love or affection alone not sufficient as consideration; nor e.g. a promise not to bore one’s parents
• Exceptions to the rule that ‘Past’ Consideration is no consideration
• Act carried out before subsequent promise but at the request of the promisor
– Lampleigh v Braithwait (1615) Hob. 105
– B had been convicted of killing X
– B asked L to obtain King’s pardon for him
– L went to considerable trouble and expense and secured the pardon
– After the pardon was obtained, B promised to pay L £100 but later refused to pay
– Held: B’s promise was enforceable because the action of L, although performed before B’s promise, was at B’s request
STANDARD FORM CONTRACTS
Where a document is used as a contractual document the offeree is held to be bound by all the conditions contained in the document even though he has not read them.
Exemption Clauses
(i) Notice of the conditions must be available at the time of making the contract
(ii) The offeree must have had reasonable notice of the conditions
(iii) The document must be a contractual one and not a mere receipt
(iv) The terms of the contract containing the exemption clause strictly construed against the parties in whose favour it is drawn
Fundamental Breach
Note that, an offeror may not be able to rely on an exclusion clause if he is in fundamental breach of the contract
FREE CONSENT
An agreement occurs when two minds meet upon a common purpose- consensus ad idem. Where there is no such meeting there is no legally binding agreement.
In certain circumstances the following factors will act to vitiate an otherwise sound contract [section 14(1) of LCA]
(i) Mistake
(ii) Duress and undue influence
(iii) Coercion
(iv) Misrepresentation
CAPACITY TO CONTRACT
Only persons of sound mind and who are at the age of majority and not otherwise disqualified by law may enter into a contract.
The age of majority for Tanzania is 18 years of age. Refer section 11 of the LCA and 12(1)-(3).
Drunken persons, persons of unsound mind, and minors as a general rule cannot enter into a contract except for necessaries.
The reason for that is that they cannot form a rational judgement.
LEGALITY OF OBJECTS
A contract must not be illegal and if it is, has no legal effect. A contract will be illegal because they are contrary to (i) statute (ii) common law (iii) public policy
VOID, VOIDABLE CONTRACTS
The following agreements are void [ss.24-30 LCA, 1961]
(a) Contracts prejudicial to the sanctity of marriage or in restraint of marriage.
(b) Agreements to oust the jurisdiction of the courts
(c) Agreement in restraint of trade
(d) Agreement void for uncertainty
(e) Agreement by way of wager
(f) Agreement without consideration
(g) If consideration and objects are unlawful
VOIDABLE CONTRACTS
A voidable contract is a contract which is either valid or void at the option of either party to a contract.
Voidable contracts include:-
(a) Contracts entered by coercion,section 15 and 19
(b) Contracts entered by undue influence, s.16 and 19
(c) Contracts entered by fraud, section 17 and 19
(d) Contracts entered by misrepresentation, section 18 and 19
(e) Contracts entered by mistake, section 20,21 and 23.
DISCHARGE OF CONTRACT
(i) Discharge by performance
(ii) Discharge by agreement
(iii) Discharge by frustration
E.g. (a) where there is a change of law
(b) subsequent impossibility
(c) where the subject matter is destroyed
(d) disappearance of the subject matter
(iv) Discharge by breach
It must be a breach of a condition that goes to the root of the contract. A breach of warranty does not justify the end of the contract.
(v) Discharge by novation
REMEDIES FOR BREACH OF CONTRACT
The following are the remedies available to an injured party in a contract
(i) Damages
These can be liquidated damages or unliquidated damages.
(ii) Action in quantum meruit
The plaintiff will be awarded as much as is earned.
(iii) Specific performance
This is where a party to the contract is instructed to carry out his part of the agreement.
(iv) Rescission
The aim of the rescission is to restore parties to their pre-contractual positions.
ASSIGNMENT OF THE CONTRACT
Assignment is the passing of the rights and liabilities under a contract to another person.
Assignment can be done in the following ways:-
(a) Legal assignment
(b) Equitable assignment
(c) Assignment by operation of the law
(d) novation
Legal assignment
s. 136 of the UK Law of Property Act, 1925.
For a legal assignment to take place, the assignment must be:-
(a) in writing
(b) absolute
(c) assignment of the whole debt
(d) notified to the other party
Assignment by operation of the Law
This can be in two ways:-
(i) death
(ii) bankruptcy
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