Law of Contract

Topic IV
 INTRODUCTION
• The word contract refers to an agreement which can be
enforced by law between one person and another. The two
words: “agreement” and “enforced by law” which are
found in the definition are fundamental to the validity and
thence presence of any contract.
• It follows therefore, if any purported contract can not be
enforced by law it is not a legally valid contract. When an
agreement is enforceable by law, it is said to be binding and
to be binding an agreement has to create legal obligations.
 TYPES OF CONTRACTS
• Express Contracts; A contract is said to be express if the parties
thereto have made oral or written expression of their intentions
and of the terms of the contract. By words of mouth or by writing
the parties in clear terms define the nature of their agreement,
rights and obligations of either of them in that contract.
• Implied contracts; Where the nature of the agreement in the
contract is neither defined in writing nor in spoken words is the
contract said to be implied. The nature of the agreement in this
kind of contract is usually inferred from the way the parties act
and conduct themselves.
 Cont.
• Executed Contracts; Usually a contract entails performance of certain
obligations by the parties created by that contract; if a contract has been entirely
performed it is referred to as an executed contract.
• Executory Contracts; A contract is referred to as an executory contract if either a
party or both the parties thereto have to discharge their obligations later i.e. have
to perform the contract later.
• EXAMPLE: In a situation where a student pays school fees to an academic
institution so that the latter gives him tuition and upon passing grants him an
award, an existence of executory contract between him and the institution is
presupposed in the sense that, the student by paying fees has discharged his
obligation and it remains obligatory on the part of the institution to finish their
side of the contracts
 Cont.
• Valid contract; It is the contract which creates legal
obligations that can be enforced by law.
• Void Contract: It is a contract which is not enforceable by
law. Usually a void contract is an agreement which does not
meet criteria for a valid contract i.e. an essential element of a
valid contract besides free consent is missing.
• EXAMPLE: A enters into agreement to sell a bicycle to B.
but before the bicycle is handed to A, it gets stolen.
 Voidable Contract
• It is an agreement which is enforceable by law only at the option of
one side to the contract. This means contracts of this kind are valid
unless one side entitled the option decides to avoid(declare invalid) it.
• Thus a voidable contract is a mid way contract between a valid and
void contract. Contract of this kind can be resulted into for instance
if one party does not enter into it of his own will, i.e. he is forced
• EXAMPLE: Simba, Regional Police Commander threatens to suck
Mbuzi, a constable if the latter does not sell to him the car he was
gifted for his heroic moves against rogues, at shs. 3/= Million.
 Illegal Contracts
• If the object for which the agreement is entered into is
unlawful the resulting contract is illegal contracts.
• EXAMPLE: If two parties agree to join efforts to rob people
of their properties and share the money after selling them.
• Robbing people is illegal thus the agreement is also illegal
and thus void.
 Unenforceable Contracts
• These are agreements which are unenforceable not because
they are void but merely because they have a technical defect
in them such as not being written if writing is a mandatory,
an example of this contract is an oral agreement for
arbitration.
 Essentials of a valid contract
• We have seen that a contract is pre-existed by an agreement. In the
formation of a contract the law provides for a minimum number of
prerequisites or some times are referred to as essentials of a contract,
before an agreement can be a contract. Some of these are expressly
stipulated in the Law of Contract Act, Cap 345.
• S. 10 the Law of Contract Act CAP 345 provides that:
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.
 THE AGREEMENT
• Since agreement is the beginning point in the making of a
contract, the validity of the latter will depend largely on the
preciseness of the former. An agreement is therefore one of
the fundamentals of a valid contract.
• An agreement is made by two things:
(a).Offer/ proposal- the person who makes it is referred to as
the “offeror
(b) Acceptance - is referred to as the “offeree”
 i. THE OFFER/ PROPOSAL
• The meaning of the word proposal is provided by s. 2(1) (a)
of the Law of Contract Act. Any person will be said to have
made an offer/ proposal if.
• The proposal usually contains of a number of terms, which
would either take an oral or written form depending on the
nature of a particular contract. Some contracts must be made
in writing only.
 ii. Invitations to treat
• An invitation to treat happens to be done when a person
proposes certain terms for which he is ready to enter into
negotiation but by which he is not willing to be bound.
• In other words these are terms that the maker merely intends
to invite an offer and set in motion negotiations with any one
who would be interested.
 FREE CONSENT
• To consent to something, generally, means to agree to it. Remember s.
10 of LCA free consent is an important element to contract.
• Free consent has its special meaning in the law of contract. S. 14
defines it as follows:
(1) Consent is said to be free when it is not caused by coercion, fraud,
misrepresentation, or mistake. Contracts which are made with taints of
the above factors are voidable contracts i.e. the affected party known
as the innocent party may avoid it if he wishes see s. 19 (1).
• However according to the same section the contract is not voidable if
the innocent party had the means to discover the truth by due
diligence.
CAPACITY TO CONTRACT/
COMPETENCY TO CONTRACT
• See s. 10 of the LCA. See also s. 11 of the same law.
According to section 11 a person who is legally allowed to
enter into a contract is he who belongs to the age of majority
and who is not insane. In Tanzania, the age of majority act ,
cap 431 age of majority is 18 years.
• By s. 11(2) if the minor or the insane has entered into
contract the contract is void.
 Cont.
• See for instance in Cowern v Nield (1912) 2 KB 419, Nield
was minor who sold hay and straw. He received cash from
Cowern consideration for his promise to deliver to him the
hay and straw but subsequently failed to so deliver the goods.
Cowern sued him for recovery of the purchase price from the
minor for the goods he failed to deliver.
• The court held that: the minor was not liable to repay the
money
 CONSIDERATION
• Make reference to Ss. 2(1)(d) s.10 as well as to s. 25 (1) of the same law.
• General concepts, It is the price for the promise. Every simple contract must
be supported by consideration and under common law the basis of
consideration lies in the legal maxim known as QUID PRO QUO [nothing
should go for nothing].
• To understand it better see the following illustration
If A has promised to sell an item to B, B must give or promise to give
something (this something is what is known as consideration) for this
promise.
• These two promises given by each one of them form a consideration for each
others promise.
 INTENTION TO CREATE LEGAL
RELATION
• S. 10 of the LCA does not provide for intention to create legal
relation so as we saw earlier the rules of law employed under this
part are coined from common law. An intention to enter legal
relation is one of the elements that mark the nature of the binding
contract.
• For the purposes of the discussion under this party agreements are
classified under two groups namely;
i. Domestic and Social arrangements and
ii. Commercial arrangements