Contract
Is an agreement with legal force. It is an agreement which has legal binding nature.
An agreement: It is an offer (proposal) by one party and acceptance by one party. Is where the offeror and offeree relationship unconditionally. An offer made by one person is accepted by one person whom the offer is made.
Essentials of a contract (features)
(a) Agreement: Offer and acceptance
(b) Intention to create a legal relationship. There must be evidence that the parties involved intended to have a legally binding relationship. Example: An agreement for social interaction cannot be enforced by law, example you can’t sue a person who fails to turn up for an appointment to have cup of coffee with you.
(c) Consideration: something valuable whether tangible or intangible which is given in exchange for another valuable thing eg: If I give you a watch in exchange for money, therefore watch is consideration for money.
*Deed: A contract without consideration
(d) Contractual capacity: Parties to a contract must have contractual capacity e.g people with 18 years and above. There are people who are prohibited by the law to enter into a contract and these people are minors, drunkenness impaired, insane. Agreement made by such people are said to be Avoidable (because party lack contractual capacity so withdrawal from such contract is allowed).
Avoidable contracts can also be caused by the induced , misrepresentation and undue influence
(e) Form: There are prescribed forms for certain contracts. Eg A contract for sale of land, legal mortgages and leases must be writing.
(f) Definite term (contents of contract): Terms of the contract must be clear and explicit. If they are ambiguous and difficult to understand the courts of law will not enforce them.
*Terms of contract are: issues which have to be discussed while negotiating a contract and have to be agreed upon before the contract is made. The terms of contracts specify the rights and duties of the parties to the contract. Terms of contract are express terms or implied terms.
Express terms: Are those issues which have been specifically discussed and agreed upon by both parties in the process of negotiating the contract.
They are subdivided into
(a) Conditions
(b) Warranties
a) A condition is a term which is fundamental to the nature of the contract. Breach of a condition entitles the injured party to the right to cancel the contract, If he so wishes or to go ahead with it and get damages for the loss suffered, eg. If we agree that Iam going to buy your goat at 15,000/= you cannot give me a sheep instead because it is the same size as the goat I agreed to buy (this is breach of a condition).
b) A warranty: Is a minor issue which does which does not significantly affect the essence of the contract. From the example above. If you deliver to me a goat which fits my requirements but happens to have a broken horn (this is breach of warranty).
-A breach of a warranty allows the injured person to receive damages but not the right to repudiate the contract.
II: Implied terms: Are those issues which may have been overlooked or deliberately ignored at a time of negotiations, although their impact significantly affects the position of the parties to the contract.
-They are subdivided into
(a) Ones implied by the court
(b) Ones implied by statutes
(g)Legal objects: any agreements which is contrary to public policy is void (it does not have any legal force). Eg: All types of agreement to commit crime are not valid and if one party fails to perform his part the other party has no recourse.
(h)Genuine concept- This requires parties to contract to reach agreement without the influence of the acts such as fraud, Mispresentation, mistake, undue influence.
IMPORTANT CONTENTS OF A CONTRACT
A valid contract should possess the following contents;
- consideration
- time and date
- signature
- name and address of each party
- terms and conditions of the contract
edu.uptymez.com
CLASSIFICATION OF CONTRACTS:
1.Oral and written contract
*Oral contracts are contracts that are made by words of mouth
*Written contracts are contracts that are put into writing.
2. Uni-lateral contract and Bi – lateral contract
∗ Uni – lateral contract is a contract where one party to contract makes a promise that the other part can accept only by doing something eg: will give you 10,000 if you bring back my wallet which was stolen yesterday.
* Bi-lateral contract. Is a whereby both parties makes the promise.
3. Executory and executed contracts
* Executory Is a binding agreement in which one or all parties to contract have done or fulfilled its obligations.
*Executed:Is a binding agreement in which one or all parties to contract have done or fulfilled its obligation
4. Valid or invalid contracts
* Valid contract is the contract that satisfies all the law requirements.
* Invalid contract: Is the contract that doesn’t satisfy the relevant law requirements.
(It may be void ,voidable or unenforceable contract)
* Void contract: Is the contract in which the parties have attempted to contract, but the law did not give effect to the agreement because there are common mistake on some major terms. In a void contract there are no contractual rights or obligations and so has no legal effect. Is an agreement that neither party may legally enforce. eg: the purpose of the agreement was illegal or because one part lacked capacity to make it.
∗ Voidable contract: Is an agreement that because of some defects may be terminated by wronged party but not by both.
NOTE
Not all contracts that contain illegal terms are necessarily void. An illegal term can
be removed from the contract to form a valid contract providing that the remaining terms of a contract are sufficient.
* Unenforceable contract: Is a contract where the parties intend to form a valid bargain but a court declares that some rules of laws prevents enforcing it.
DETAIL DISCUSSION OF SOME TERMINOLOGIES:
- Parties: Any contract must have two parties. The parties may be natural person like Neema Maganga or artificial person created by law such as corporate bodies like companies.
- An offer (proposal): Is a statement that proposes definite terms and permit the other party to accept the terms. The one who give an offer is called offeror or proposer.
edu.uptymez.com
–Characteristics of an offer:
(a) It must be made willingly i.e offeror must be willing to be bound by the terms she
(b) It must be clear and certain
(c) It must be final expression by the offeror of his willingness to be bound should his offer be accepted
(d) It must be communicated orally, in writing or by conduct .
(e) It should be complete when it comes to the knowledge of the offeree.
NOTE
Contrary to above characteristics it is called invitation to treat (offer to chaffer): is
an invitation for other people to submit offers which may be accepted or rejected.
eg: Goods displayed in a shop. Advertisement, auction, inviting tenders.
Termination of an offer: An offer can be terminated as follows :-
(a) Revocation: withdraw before it is accepted,here the offeror can withdraw his offer before acceptance by offeree.
(b) Lapse of time: If is time stated in the offer or after reasonable time.
(c) Failure of the acceptor to fulfill conditions.
(d) Death or Insanity of offeror or offeree
(e) Counter offer or rejection. Response acceptance with new terms can lead to termination.
3. Acceptance: Is an agreement to terms of an offer, this converts the offer into legally binding contract .
Characteristics of acceptance
(a) It is an assent to the proposal by the person to whom it was made.
(b) An acceptance should be absolute and unconditional to all terms set out in the Offer. Acceptance must exactly mirror the original offer made.
(c) Acceptance must communicated to the offeror in writing or orally by an authorized person.
(d) Acceptance is complete when it comes to the knowledge of the proposer.
(e) Acceptance by post is complete as soon as it is posted (provided it was implied in negotiations)
4. Consideration: Is some rights, interest, profit or benefit acrueing to the one party,loss or responsibility given, suffered or undertaken by the other eg one party provides money and the other provides goods/services both money and goods/services are regarded as legal consideration.
NOTE : In gift giving no consideration, therefore no contract
Characteristics of consideration
(a) Must be adequacy and sufficient: Must be fixed by the parties out of their own free will or consent. It does not base on the market value only but also on the wishes of the parties
(b) Must have economic value: That is why sentimental motives such as natural love
and affection have no economic value therefore cannot qualify as good
consideration
(c) Must be legal
Types of consideration
(a) Executory consideration:
A consideration resulting from an exchange promises to perform acts in the future. Eg: A promises to deliver goods to B and B agrees to pay for them.
(b) Executed consideration: Happens when one party promised to do something in return for the act of another not mere promise of future performance.
(c) Past consideration: Comprises an act which was done before the promise was made and not in response to sub-sequent promise(It is not a good consideration)
5.Capacity to contract: means competence to enter into a legally binding agreement because both parties are mentally capable to understand a contract.
Factors considered or factors vitiating capacity : The following factors should be considered when deciding on capacity to contract
(a) Age: A minor/infant is not competent to contract because she has not attained majority age/ contract age. In Tanzania the age of majority is 18 years and above. Below 18 years lack experience to exercise sound judgements, she cannot protect herself. Except for necessaries and beneficial contracts.
(i) necessaries: goods suitable to the conditions in life of a minor and to his requirement at the time of the sale and delivery.
(ii) beneficial contracts like training that is advantageous to the minor.
(b) Soundness of mind: A person who is of sound mind is a person capable of understanding the contract and forming rational judgement eg Mentally disorder, drunkard have no sound mind.
(c) Personal disqualified by law: Persons disqualified by law are
(i) Bankrupt persons: the law disqualifies a person declared bankrupt to enter contract.
(ii) Unincorporated bodies eg club associations and societies can’t enter into contract because they have no separate existence in law, they can do so through agents.
6. Free consent: contracting out of own free will i.e freedom of contract. Two or more person are said to consent when they agree upon the same thing in the same sense.
Factors which undermine free consent:
(a) Coercion or Duress: Committing or threatening to commit any act unlawful,detain any properly with intention of causing any person to enter into an agreement
(b) Undue influence occurs where the relationship between the parties such that one of the parties are in a position to dominate the will of the other, and uses that position to obtain an unfair advantage over the other.
(c)Mispresentation /Representation
(d) Mistakes: Entering the contract believing that something material exist while does not exist.
7. Legally /lawful object: The subject matter or object of the contract must be lawful or legal eg supplying heroin is illegal,therefore heroin is lawful object. This is the matter of jurisdiction i.e to be decided by law.