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LAW OF CONTRACT
1.0 INTRODUCTION
The Law of contract is a very important branch of business Law. The basic principles of
the Law of Contract are provided under the Law of contract ordinance cap 433 and case
Law lay down by courts.
i. Local Statutes
These are legislation passed by the parliament since the independence to date
In order for a valid and enforceable contract to be formed, the following elements must
be proved as all existing:-
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- Considerations
- Legal capacity
- Intention to create legal relation.
- Reality / genuiness of consent.
- Written formalities.
I. Offer / proposal
Is a statement or presentation made by the offeror to offeree in order to induce the
offeree to enter into binding agreement upon acceptance of it’s terms.
Other wise such statement will remain a mere invitation to treat ( i.e. invitation to make
an offer).
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(a) Auction
Advertisement for an auction is not an offer but merely an invitation to treat.
See. Harris V. Nickerson (1873)
Offer is made when potential buyers (bidders) bid for the price at auction.
(b) Tender
Advertisement for tender is not an offer but merely an invitation to treat. (Nditi
1985:18)
Offer is made when tenderers submit their tender bids
II. Acceptance
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- Refer to willingness or assent shown by the offeree to the term of the offer.
Once offer and acceptance cross each other, a binding agreement (Promise)
arises as between the parties
Tenders - The person(s) who invites tenders are the one who will accept the successful
tender.
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At Common Law the Postal rule states simply that once a mail is correctly addressed a
proper stamp put on it and put in right hands of the Postal officer, then, that is effective
communication (See House hold Fire Insurance Co. V. Grant (1879) Unless expressly
excluded by the offeror (See Adams V. Lindsell)
This means that acceptance is binding as against both proposer and acceptor when it is
put in the course of transmission.
The Laws of Contract Ordinance Cap 433 does not provide expressly for a rule
governing Postal services. However S. 4(2) of the ordinance is used instead. It reads –
The communication of an acceptance is complete.
ii. A against the acceptor, when it comes to the knowledge of the proposer.
From the above quoted provision one may deduce the rule that where an acceptor
posts his letter of acceptance so that the letter is out of his power, then the proposer is
bound but not the acceptor himself. That is to say a contract has been concluded in as
far as the proposer is concerned. The acceptor is not bound until his acceptance comes
to the knowledge of the proposer. i.e. he may revoke his acceptance by using any
quickest means of communication such as telephone etc.
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(ii) Revocation
Offer lapse / terminate when offeror revoke (draw back) his offer at any time
before acceptance is made by the offeree. However, for such revocation to be
effective, notice of revocation must reach the offeree himself or by means of any
other reliable person.
See Dickson V. Dodds (1876)
It should be noted here that, even if offeror gives out time for acceptance, he
can still revoke his offer at any time before the expiry of such time unless the
offeree has furnished consideration.
See RoutLedge V. Grant (1828)
(iii) Death
Death of offeree terminate the offer and personal representative can not accept
the offer on behalf of his estate (Nditi 1987: 30)
Also see Cheshire Banking Co. V. Duff (1986)
On the other hand the death of the offeror requires notification to the offeree
especially for contract not involving personal Services.
(Guest 1986: 56) Also see Brandburry V. Margan (1862)
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The acacia store wrote in news paper advertisement saying that one TV set Sony
20” made in Japan was on sale for Tshs. 200,000/=
Norah telephoned the store that she wanted one of the set. The store replied
that it was sold out and therefore could not fill her order. Norah sued Acacia
store for breach of contract. Was Acacia Liable? Give reason for your answer. (20
marks)
QN .2
(a) What are the essential elements of valid contract?
(b) Distinguish between offer and an invitation to treat.
(c ) In what ways may an offer be accepted?
(d) When does an offer Lapse?
QN .3
Dudubaya say to Anna “I wish to marry you” Anna Smiles broadly and during the
weekend, she takes him to visit her parents in the home village at Bagamoyo Coast
Region. Dudubaya was very exited and presented gifts to the parents of Anna. Both of
them thereafter return to Dar Es Salaam late on Sunday. Then a week later Anna
marries Pesamingi. Is there a breach of contract.
QN. 4
(a) Daud L. proposes by letter to sell a house to Khamis B. for Tshs. 5,000,000/= A
letter was posted on 6th instant. The letter reaches Khamisi B on 8 th instant.
Khamisi B accepted Daudi’s proposal by letter sent by post on 9 th instant. The
letter reaches Daudi on the 11th.
(i) When is the offer complete? (5 marks)
(ii) When is the communication of acceptance complete? ( 5 marks)
(b) In the above case, if Daudi L. revokes his offer on 8 th instant and the letter
reaches Khamisi B. on 10th. When is the communication of revocation complete?
(10 marks)
QN.5
(a) List down he circumstances which may give rise to Lapse of an offer.
(b) A Dodoma business man wrote to ‘A’ of Dar Es Salaam offering to sell a certain
product item. Upon receipt of the letter, he telephoned acceptance. Three days
before this the offeror had posted a letter of revocation which arrived after
dispatch of the acceptance telegram.
Required
Determine the position of the parties and indicate the post rule referred to.
QN.6
J. happened to walking along the sea shore when come across a handbag full of
Documents. She picked it up and handed it over to a nearest Police post. Later in the
Days she read in the standard news paper an advertisement announcing a reward to
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the finder of a lost handbag similar to the one she had delivered. She immediately
report at the police post to claim for the reward.
Ascertain the legal implications involved and position of J. in the case above. (10 marks)
QN.7
(a) Define the concept “contract” (4 marks)
(b) Explain how and when contracts with automatic machines e.g. dispensing
cigarettes, admission of cars to parking lost, cash dispenser machines etc. are
formed (8 marks).
QN.8
Explain the application of the Postal Rule in Tanzania. (8 marks)
2.2 Consideration
Consideration centres on exchange of values embodied in goods or service. So one who
parts with value must be given some value in return by the one in whose favour he
parted with his value. (Quid Pro quo) nothing should not go for nothing.
I Types of consideration
The above definitions of consideration suggest two main types of consideration
namely:-
i) Executory consideration
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(i) A promise to compensate for a past act which has been performed without any
Promise for payment –is binding .
See Stewart V. Casey (1892)
(iii) Promise made in writing to pay time barred debt and signed by both
Parties.
(b) Consideration must move from the promisee or any other person.
If proposal is made to a specified person no any other person can furnish
consideration instead. On the other hand if proposal is general, any one who
fulfills the terms of the proposal can furnish consideration.
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Since not every act, abstinence or promise constitute consideration, the following tests
are essential to determine sufficiency of consideration:-
1. Performance of public duty owed to the defendant is not sufficient consideration even if
there was a promise made prior to it. See Collins V. Godefroy (1831)
How ever performance of Public duty in excess of the one owed to the plaintiff
following promise of payment from the defendant is sufficient consideration to support
claims for such payment.
See Glassbrook V. Glamogan (1925)
Consideration need not be adequate provided it is the one agreed by the parties
at the time of making contract, provided no element of fraud, unsoundness of
mind or coercion can be proved before the court of Law. Under this rule, the
court is able to enforce a contract for washing a saloon car for Tshs. 200,000/=
provided both parties have attended to this value.
(c) “Past consideration is null and void thus can not support any contractual claim.”
Discuss
(d) Mr. X. offered a reward of Tshs. 500,000/= to whoever found his lost briefcase.
He reported the fact to the Police station and given Rb no. 05/001/04. One day Omera,
Police man arrested Dudubaya from his home for beating Mr. Nice and when searching
he found a briefcase belonged to Mr. X. and submitted it the police Station. Mr. Omera
now demand Tshs. 500,000/=. Advice him accordingly.
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QN .10
(b) The presumption in domestic agreement is that no intention to legal bound while
in that of business there is intention. Do you agree?
(i) When a minor contract for supply of non –necessary the contract is void.
(ii) When a minor makes payments using negotiable instrument e.g. cheque –
the contract is void.
(iii) Agreement made by major age person to pay debt incurred during minor
age – is void. Hence in the above sort of agreements a minor is not held
liable because he is incompetent.
However the following EXCEPTIONS are there to the above general rule whereby a minor
becomes competent to such sort of contract and he becomes liable under the contracts:
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The general rule is that the listed above persons are in- competent to contract
However the following EXCEPTIONS are there to the above general rule.
(i) A person who is usually of unsound mind but occasionally of sound mind may
make contract when he is of sound mind.
(ii) A person who is usually sound mind, but occasionally unsound mind may not
make contract when he is of unsound mind.
(c) Corporation
A company once registered / incorporated becomes a legal person. As a person, its
contractual enter into those contracts which the memorandum of Association of the
company allows and not otherwise.
See Ash bury Railway Carriage V. Ritchie
QN. 11
(a) What are the facts underlying the general rule that minors are not competent to
contract (6 marks)
(b) There are two exceptions underlying the general rule where under some special
circumstances the law allows minors to enter into contracts. Outline the exceptions ( 14
marks)
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QN12
(a) Explain the legal rules relating to:
(i) The contractual capacity of legal person or corporation ( 5 marks)
(ii) The contractual capacity of infant ( 5 marks)
(b) Describe the capacity of unsound person as per section 12(1) of the law of contract
ordinance, Tanganyika 1963.
(c ) What are the facts vitiating capacity to contract under the law of contract ordinance?
1. Mistake
Occur where one or both of the parties enter into contract under a misapprehension or
misunderstanding as to a fundamental fact of the contract. However, mistake should be
of fact not of law. See Sharp Bros and Knight V Chant (1917) 1
There are three types of mistake namely:
(i) Common mistake
This is bilateral identical mistake. Under this type mistake two cases are involved.
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NOTE:
Contract made under any of the above mistake become void. However where parties
contract face by face there will be no mistake as to a party contracting with, instead a
contract will be voidable for fraud
See Lewis V. Averay (1971)
Or Philips V. Brooks Ltd (1919)6
2. Misrepresentation
Occur when one of the parties to a contract made a false statement presentation
either:-
Innocently
Negligently or
Fraundlently
Mistake Misrepresentation
Property moving can be recovered from Property moving can only be recovered from
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contracting parties and even from third party contracting party but not from third party in
good faith.
3. Duress /coercion
This means actual violence or threat of violence to the person of the contracting party
or those near and dear to him. Duress probably render the contract voidable.
NOTE:
The concept is not applicable to threat to property
4. Undue influence
This occur when a contract is concluded by two parties, one has got stronger mind over
another. In this case it is presumed that the consent of weaker mind’ part is not freely
given
The laws specify certain relations to contract as having circumstance undue influence.
These are:
Parents and children
Religious leaders and their followers
Solicitor and client
Trustee and beneficiary
Guardian and ward etc.
QN. 13
a) What do you under by the term “consent” under the law of contract”
(c) Outline and explain briefly the circumstances which vitiate the consent of the parties in
a contract.
(d) i) Mention four (4) types of mistakes falling under unilateral or mutual mistake
ii) How will a mistake as to the identity of the other party make a contract voidable?
(e)Briefly explain the following legal terms
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i) Misrepresentation
ii) Concealment
iii) Fraud
NB: If there is any property moved under a void contract, such property can be recovered
the contracting parties and even from third party.
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N.B. Property moving as between contracting parties can be recovered but not from third
party.
See Philips V. Brooks
Examples
Agreement involving some degree of moral wrong
Contract to commit crimes
Contract to defraud revenue etc.
There are various ways through which a contract may come to an end. These are:-
1. By Performance:
This means each party to the contract fulfils his obligations or duties as agreed.
For instance, ‘A’ agree with ‘B’ to sell his shoes for Tshs. 10,000/=. This contract
is discharged by per formance when ‘A’ deliver shoes to ‘B’ and ‘B’ pay Tshs.
10,000/=.
2. By agreement:
A contract may be discharged through mutual agreement. Parties may agree to
abandon the contract without claim for damage. This is easy to do since a
contract which is freely formed may be freely discharged. However in a situation
whereby one of the parties has performed his duties and the other one has
outstanding obligations, to discharge such contract by agreement, the latter
must furnish a satisfactory consideration for his release ( i.e. accord and
satisfaction)
3. By Frustration
This occur due to the happening of an event beyond the control of either party
which makes performance of the contract impossible
For example: (Frustrating events)
Destruction of the subject matter of the contract
Death or illness (contract for personal services)
Change of law (government interference)
Non occurance of an event. Which froms the bens of the cutract.
NOTE: Shortage of supply of goods / materials does not form part of the frustrating events.
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4. By Breach
Discharge by breach occurs
(i) Where one party fails to perform his obligation under the contract. e.g.
Seller fails to deliver ordered goods or deliver wrong quality goods.
(ii) Where one party expressly states that he will not perform his obligation
(renunciation).
See Hochster V Dela tour (1853)
(iii) Where one party’s act makes performance on the other party impossible.
See Omnium D’enterprises and other
V. Sutherland (1919)
N.B
(a) Any breach which takes place before the time of performance has been arrived is
called “anticipatory breach” e.g (ii) above.
QN. 14
Out line and discuss circumstances in which a contract may be discharged.
QN. 15
The following remedies (courses of action) are avail able to an injured party whenever
there is a breach of contract.
(a) Damages
The term damages means compensation inform of money. In order to establish a
right for damages the plantiff is required to show that there was a contract and
in some particular aspect it has been breached leading to the sustenance of a
loss or infringement of legal right. Damage may be specific (liquidated) or
general (unliquidated) damage. It is specific when the parties quantify the
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amount of claim in money terms at the time of making contract, whereas general
damage is left to the discretion of the court after the contract has been
breached.
(c ) Injuction
This is also an order issued by the court on application by the plaintiff seeks to
the defendants from committing a breach of contract or reverse the effect of an
existing breach. It restrains a party in breach of contract from performing more
of the acts which amount to further breach of contract.
QN.16
What courses of actions are available in law to the injured party when a contract is broken?
(20 marks)
QN. 17
What are the remedies available to the injured party in the event of a total breach of a
contract (10. marks)
QN.18
There are times when the remedy of damages will prove inadequate to the
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victim of a breach of contract. this might occur where the plantiff wishes to purchase a unique
item which cannot be acquired elsewhere.
Required:
List the remedies which may be awarded by the court in the above circumstances. (10. marks)
QN 19
Explaining the course of action available in law to the party injured when there is breach of
contract.
QN 2
a) Define a contract
b) If you are not capable to contract, effect will not be given to your agreement except for a
few exeptions.Comment.
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