THE LAW OF CONTRACT OBJECTIVE To provid provide e the candi candidat date e wit with h a broad broad unders understan tandin ding g of the follow following ing concepts pertaining to the Law of Contract;
The nature of a contract.
Formation of a contract.
Classication of Contracts.
Terms of contract; Exemption clauses, conditions and warranties.
itiating factors; mista!e, misrepresentation, duress and undue in"uence.
#rivit$ of contract.
Termination and discharge of a contract.
%emedies for breach of contract.
Limitations of actions.
INTRODUCTION This chapter deals with the formalities that are involved before a contract comes into existence. &t then loo!s at the terms of contract, vitiating factors and the eventual termination or discharge of a contract.
KEY DEFINITIONS:
Ofer: an Ofer: an une'uivocal and clear manifestation b$ one part$ of its intention to contract with another.
Unequivo!": clear, Unequivo!": clear, denite and without doubt
Invi#!#ion #o #re!#: This #re!#: This is a mere invitation b$ a part$ to another or others to ma!e o(ers or bargains. The invitee becomes the o(eror and the invitor becomes the o(eree. ) positive response to an invitation to treat is an o(er.
Ae$#!ne: Ae$#!ne: This is the external manifestation of assent b$ the o(eree.
Revo!#ion: This Revo!#ion: This is the withdrawal of the o(er b$ the o(eror. o(eror.
Con%i&er!#ion: &t Con%i&er!#ion: &t has been dened as *an act or promise o(ered b$ the one part$ and accepted b$ the other part$ as price for that others promise.+
E%#o$$e": &t E%#o$$e": &t a doctrine that is to the e(ect that where parties have a lega legall rela relati tion onsh ship ip and and one one of them them ma!e ma!es s a new new prom promis ise e or representation intended to a(ect their legal relations and to be relied upon b$ the other, once the other has relied upon it and changed his legal position, the other part$ cannot be heard to sa$ that their legal relationship was di(erent.
Con&i#ion%: This Con&i#ion%: This is a term of maor stipulation in a contract. &f a condition is breached, it entitles the innocent part$ to treat the contract as repudiated and to sue in damages.
W!rr!n#ie%: W!rr!n#ie%: This This is a minor term of a contract contract or a term of minor stipul stipulati ation. on. &f breach breached, ed, it entitl entitles es the innoce innocent nt part$ part$ to sue in damages onl$ as the contract remains enforceable and both parties are bound to honour their part of the bargain.
'er(!n#!)"e qu!"i#*: Fit qu!"i#*: Fit to be o(ered for sale. %easonabl$ t for the bu$er-s purposes
+rivi#* +rivi#* o, on#r!# on#r!#:: This This doct doctri rine ne is to the the e(ec e(ectt that that onl$ a person who is part$ to a contract can sue or be sued on it.
Voi&: Voi&: Lac!ing Lac!ing legal force.
Voi&!)"e: Voi&!)"e: Capable Capable of being rescinded or voided.
Caveat Caveat emptor: emptor: &t lite litera rall ll$ $ means means *bu$e *bu$err beware beware+ +
This This is a
Common Law principle to the e(ect that in the absence of fraud fraud or misinterpr misinterpretat etation, ion, the seller seller is not liable if the goods sold do not have the 'ualities the bu$er expected them to have.
Ae$#!ne: Ae$#!ne: This is the external manifestation of assent b$ the o(eree.
Revo!#ion: This Revo!#ion: This is the withdrawal of the o(er b$ the o(eror. o(eror.
Con%i&er!#ion: &t Con%i&er!#ion: &t has been dened as *an act or promise o(ered b$ the one part$ and accepted b$ the other part$ as price for that others promise.+
E%#o$$e": &t E%#o$$e": &t a doctrine that is to the e(ect that where parties have a lega legall rela relati tion onsh ship ip and and one one of them them ma!e ma!es s a new new prom promis ise e or representation intended to a(ect their legal relations and to be relied upon b$ the other, once the other has relied upon it and changed his legal position, the other part$ cannot be heard to sa$ that their legal relationship was di(erent.
Con&i#ion%: This Con&i#ion%: This is a term of maor stipulation in a contract. &f a condition is breached, it entitles the innocent part$ to treat the contract as repudiated and to sue in damages.
W!rr!n#ie%: W!rr!n#ie%: This This is a minor term of a contract contract or a term of minor stipul stipulati ation. on. &f breach breached, ed, it entitl entitles es the innoce innocent nt part$ part$ to sue in damages onl$ as the contract remains enforceable and both parties are bound to honour their part of the bargain.
'er(!n#!)"e qu!"i#*: Fit qu!"i#*: Fit to be o(ered for sale. %easonabl$ t for the bu$er-s purposes
+rivi#* +rivi#* o, on#r!# on#r!#:: This This doct doctri rine ne is to the the e(ec e(ectt that that onl$ a person who is part$ to a contract can sue or be sued on it.
Voi&: Voi&: Lac!ing Lac!ing legal force.
Voi&!)"e: Voi&!)"e: Capable Capable of being rescinded or voided.
Caveat Caveat emptor: emptor: &t lite litera rall ll$ $ means means *bu$e *bu$err beware beware+ +
This This is a
Common Law principle to the e(ect that in the absence of fraud fraud or misinterpr misinterpretat etation, ion, the seller seller is not liable if the goods sold do not have the 'ualities the bu$er expected them to have.
Quantum meruit: This meruit: This literall$ means *!% * !% -u( !% i% e!rne& or &e%erve&./ &e%erve&./ This is compens compensation ation for for wor! done. done. The plainti( plainti( is paid for the proportion of the tas! completed.
Bre!( o, on#r!#: ) failure to perform some promised act or obligation
Fru%#r!#ion o, on#r!#: ) on#r!#: ) contract is said to be frustrated when perfor performan mance ce of the obliga obligatio tions ns become becomes s imposs impossibl ible, e, illega illegall or commerciall$ useless b$ reason of extraneous circumstances for which nei#(er $!r#* is is to blame.
D!-!0e%: it is a moneta monetar$ r$ award award b$ court to compe compensa nsate te the plainti( for the loss occasioned b$ the breach of contract.
Ex-gratia Ex-gratia Su-: Su-: a freesum, one not re'uired to be made b$ a legal dut$
In futuro: futuro: - in in future/ Uni"!#er!" 'i%#!1e: 'i%#!1e: This is a mista!e as to the identit$ of one of the parties to the contract. 0nl$ one part$ is mista!en and the mista!e is induced b$ the other part$.
'i%re$re%en#!#ion: This is a false representation. &t is a false 'i%re$re%en#!#ion: statement made b$ a part$ to induce another to enter a contractual relationship.
Dure%%: Dure%%: actual violence or threats thereof
CONTE2T 1hether we !now it or not we all contract at some point in time in one wa$ or another. This therefore is a chapter that most exam 'uestions will be cent center ered ed on to ensu ensure re that that the the stud studen entt clea clearl rl$ $ can can expl explai ain n from from the the form forma atio tion to disch ischa arge rge of a contra ntract ct.. I#3% I#3% o, (i0( (i0( i-$o i-$or# r#!n !ne e #o un&er%#!n& #(e v!riou% one$#% )rou0(# ou# in #(i% (!$#er/ (!$#er/
1e all contract whether consciousl$ or sub consciousl$. The bul! of the da$ to da$ contracts we ma!e do not have all the formalities and are merel$ agreements. Contract law is therefore a ver$ vital chapter as most persons and companies contract on a dail$ basis. )dept !nowledge of this chapter will ma!e the candidate appreciate the machinations behind the procedures and rules of contracts and assist in the ascertainment of a reali2ation of their own rights and the remedies available incase of breach of contract.
THE LAW OF CONTRACT ) contract ma$ be dened as a legall$ binding agreement made b$ 3 or more parties. &t has also been dened as a promise or set of promises a breach of which the law provides a remed$ and the performance of which the law recogni2es as an obligation. The most important characteristic of a contract is that it is enforceable. The genesis of a contract is an agreement between the parties hence a contract is
an
enforceable
agreement.
4owever,
whereas
all
contracts
are
agreements, all agreements are not contracts. TY+ES OF CONTRACTS Contracts ma$ be classied as/ 5. 1ritten 6 specialt$ contracts 3. Contracts re'uiring written evidence 7. 8imple contracts 9. Contracts under seal 4/ WRITTEN CONTRACTS These are contracts which under the law must be written, that is embodied in a formal document e.g. hire purchase agreement, contract of marine insurance, contract of sale of land.
Contracts under seal/ this is a contract drawn b$ one part$, sealed and sent to the part$ 6 parties for signature. 8uch a contract re'uires no consideration e.g. a lease agreement, mortgage, charge. 5/ CONTACTS RE6UIRIN7 WRITTEN EVIDENCE These
are
contracts
which
must
be
evidenced
b$
some
notes
or
memorandum. Contents of the note 6 memorandum/ 5: ) description of the parties su(icient to identif$ them. 3: ) description of the subect matter of the contract 7: The consideration value: 9: 8ignature of the parties Examples include; contracts of insurance other than marine, contract of guarantee. 8/ SI'+LE CONTRACTS These are contracts whose formation is not subect to an$ legal formalities. The contract ma$ be/
0ral 1ritten #artl$ oral and written &mplied form conduct of the parties
Examples include; contract of sale of goods, partnership agreement, and construction contracts. ELE'ENTS OF A CONTRACT These are the constituents or ingredients of a contract. The$ ma!e an agreement legall$ enforceable. These elements are/ a. b. c. d. e. f. g.
0(er )cceptance Capacit$ &ntention Consideration Legalit$ Formalities, if an$
SOURCES OF LAW OF CONTRACT
eneral )pplication 9. 0ther )cts of the ?en$an #arliament CREATION 9 FOR'ATION OF CONTRACTS ) contract comes into existence when an ofer b$ one part$ is une'uivocall$ !e$#e& b$ another and both parties have the re'uisite !$!i#* . 8ome on%i&er!#ion must pass and the parties must have in#en&e& their dealings to give rise to a "e0!""* )in&in0 !0ree-en#. The purpose of the agreement must be "e0!" and an$ necessar$ ,or-!"i#ie% must have been complied with. THE OFFER )n o(er has been dened as/ an une'uivocal manifestation b$ one part$ of its intention to contract with another. The part$ manifesting the intention is the oferor and the part$ to whom it is manifested is the oferee. RULES 9 CHARACTERISTICS OF AN OFFER: 5. )n o(er ma$ be oral, written or implied from the conduct of the o(eror. 3. )n o(er must be communicated to the intended o(eree or o(erees. )n o(er remains ine(ective until it is received b$ the o(eree. 7. )n o(er must be clear and denite i.e. it must be certain and free from vagueness and ambiguit$. &n Sands v. Mutual Benefts as well as in Scammell and Nephew Ltd v. Ouston it was held that words used were too vague and uncertain to amount to an o(er.
9. )n o(er ma$ be conditional or absolute. The o(eror ma$ prescribe conditions to be fullled b$ the o(erer for an agreement to arise between them. @. The o(eror ma$ prescribe the duration the o(er is to remain open for acceptance. 4owever, the o(eror is free to revo!e or withdraw his o(er at an$ time before such duration lapses e.g. in Dickinson v. Dodds, the defendant o(ered to sell a house to the plainti( on 1ednesda$ 5A6AB65D9 and the o(er was to remain open up to Frida$ 53th at .AA am. 4owever on the 55 th of une, the defendant sold the house to a 7rd part$. The plainti( purported to accept the o(er of Frida$ morning before .AA am. &t was held that there was no agreement between the parties as the defendant had revo!ed his o(er b$ selling the house to a 7rd part$ on une 55th. ) similar holding was made in Ruoutledge v. Gant! where the defendant-s o(er was to remain open for B wee!s but he revo!ed or withdrew it after 9 wee!s. &t was held that there was no agreement between the parties. B. The
o(eror
ma$
prescribe
the
method
of
communication
of
acceptance b$ the o(eree. &f he insists on a particular method, it becomes a condition. D. )n o(er ma$ be general or specic i.e it ma$ be directed to a particular person, a class of persons or the public at large. &n "alill v. "a#olic Smoke Ball "o, the defendant compan$ manufactured and owned a drug name the *Carbolic 8mo!e Gall+ which the compan$ thought was the best cure for in"uen2a, cold and other diseases associated with ta!ing cold water. The compan$ put an advertisement in a newspaper to the e(ect that a H5AA reward would be given to an$ person who contracted in"uen2a or related diseases after ta!ing the smo!e ball as prescribed i.e. 3 tablets, 7 times a da$ for 3 wee!s. The advertisement further stated that the compan$ had deposited H5AAA with the )lliance Gan! on %eagent 8treet as a sign of their sincerit$ in the matter. Irs. Carlill who had read the advertisement bought and too! the 8mo!e balls as prescribed but contracted in"uen2a. The
compan$ reected her claim and she sued. The compan$ argued that the advertisement; a. 1as nothing but mere salestal! b. 1as not an o(er to the whole world c. 1as not intended to create legal relations The Court of )ppeal held that though the wording of the advertisement was unclear, it amounted to an o(er to the whole world and the person who fullled its conditions, contracted with the compan$ hence Irs. Carlill was entitled to the H5AA reward. E2A'+LES OF OFFERS $. #ublic transport/ as was the case in %ilkie v. London &assenge 'anspot Boad. (. Gidding at an auction as was the case in )ais v. Nickeson. *. 8ubmission of a tender +. )pplication for emplo$ment )n o(er must be distinguished from an &nvitation to treat. INVITATION TO TREAT This is a mere invitation b$ a part$ to another or others to ma!e o(er or bargain. The invitee becomes the o(eror and the invitor becomes the o(eree. ) positive response to an invitation to treat is an o(er. E;!-$"e% o, invi#!#ion #o #re!# 5. A&ver#i%e-en#
o,
%!"e
)*
!u#ion:
)t
common
law,
an
advertisement to sell goods or other propert$ b$ public auction is an invitation to treat. The prospective bu$er ma!es the o(er b$ bidding at the auction and the auctioneer ma$ accept or reect the o(er. &t was so held in )ais v. Nickeson where a commission agent had sued as auctioneer for failure to displa$ furniture he had advertised for sale b$ auction. &t was held that there was no contractual relationship between the parties as the advertisement was merel$ an invitation to treat and as such, the auctioneer was not liable. 3. S!"e )* &i%$"!*: )t common law, the displa$ of goods with cash price tags is an invitation to treat. The prospective bu$er ma!es the o(er to
bu$ the items at the stated or other price which the shop owner ma$ accept or reect. &n ,ishe-v-Bell, the defendant was sued for Jo(ering for sale- a "ic! !nife contrar$ to the provision of the 0(ensive 1eapons )ct. The defendant had displa$ed the !nife in a shop with a cash price tag. Kuestion was whether he had o(ered the !nife for sale. &t was held that he had not violated the )ct as the displa$ of the !nife was an invitation to prospective bu$ers to ma!e o(ers. 7. S!"e )* %e",<%ervie: )t common law, a sale b$ self service is an invitation to treat. #rospective bu$ers ma!e o(ers b$ conduct b$ pic!ing the goods from the shelves and the o(er ma$ be accepted or reected at the cashier-s des!. The o(eror is free to revo!e his o(er to bu$ the goods at an$ time before reaching the cashiers des!. &n &hamaceutical Societ o Geat Bitain v. Boots "ash "hemists /Southen0 Ltd /$12(0/
The defendant owned and operated a self
service store which stoc!ed among other things, drugs which under the provisions of the #harmac$ and #oisons )ct 577: could onl$ be sold
with
the
supervision
of the
registered
pharmacist.
The
defendant-s pharmacist was stationed next to the cashier-s des!. The plainti( societ$ argued that the defendant had violated the )ct as the pharmacist was not stationed next to the shelves where the drugs were displa$ed. Kuestion was at what point a sale too! place. &t was held that the defendant had not violated the provisions of the )ct as its pharmacist was stationed next to the cashier-s des! where the actual sale too! place. This case is authorit$ for the proposition that in a sale b$ selfservice, a sale ta!es place at the cashier-s des!. ) similar holding was made in Lask v. 3conom Goces Ltd. TY+ES OF OFFERS 4/ Cro%% ofer% This is a situation where a part$ dispatches an o(er to another who has sent a similar o(er and the two o(ers cross in the course of communication. o agreement arises from cross o(ers for lac! of consensus between the parties. The parties are not at ad idem. 5/ Coun#er ofer
This is a change, variation or modication of the terms of the o(er b$ the o(eree. &t is a conditional acceptance. ) counter o(er is an o(er in its own right and if accepted an agreement arises between the parties. &ts legal e(ect is to terminate the original o(er as in )de v. %ench /$4+50! the defendant made an o(er on une B th to sell a farm to the plainti( for H5,AAA. 0n th une, the plainti( wrote to the defendant accepting to pa$ H@A for the farm. 0n 3D th une, the defendant wrote reecting the H@A. 0n 3th une the plainti( wrote to the defendant accepting to pa$ H5,AAA for the farm. The defendant declined and the plainti( sued for specic performance of the contract. &t was held that the defendant was not liable as the plainti(-s counter o(er of H@A terminated the original o(er which was therefore not available for acceptance b$ the plainti( on 3 th une as the defendant had not revived it. ) counter o(er must however be distinguished from a re'uest for information or in'uir$. Reque%# ,or in,or-!#ion: )n in'uir$ which does not change terms of the o(er. The o(eree ma$ accept the o(er before or after in'uir$ is responded to as was the case in Stevenson-v-Mc Lean, where the defendant had o(ered to sell 7,AA tonnes of iron to the plainti( at H 9A per tonne and the o(er was to remain open from 8aturda$ to Ionda$. 0n Ionda$ morning, the plainti( telegraphed the defendant in'uiring on the duration of deliver$. The defendant treated the in'uir$ as a counter o(er and sold the iron to a third part$. The plainti( subse'uentl$ accepted the o(er but thereafter received the defendant-s notice of the sale to the 7 rd part$. The plainti( sued in damages fro breach of contract. &t was held that the defendant was liable. 8/ S#!n&in0 ofer/ ) standing o(er arises when a person-s tender to suppl$ goods and service to another is accepted. 8uch acceptance is not an acceptance in the legal sense. &t merel$ converts the tender to a standing o(er for the duration specied if an$. The o(er is promising to suppl$ the goods or services on re'uest and is bound to do so where a re'uisition is made. )n$ re'uisition of goods or services b$ the o(eree amounts to acceptance and failure to suppl$ b$ the o(erer amounts to a breach of contract. )s was the case in Geat Nothen Railwa "o Ltd v. %itham. The plainti( compan$ invited tenders for the suppl$ of stores for 53 months and
1itham-s tender was accepted. The compan$ made a re'uisition but 1itham did not suppl$ the goods and was sued. &t was held that he was liable in damages for breach of contract. &n standing o(er, the o(eror is free to revo!e the o(er at an$ time before an$ re'uisition is made, unless the o(eror has provided some consideration for the o(eror to !eep the standing o(er open. This consideration is referred to as J!n o$#ion3. This is an agreement between an o(eror and the o(eree b$ which an o(eree agrees to !eep his o(er open for a specied duration. &n this case, the o(eror cannot revo!e the o(er. &n a standing o(er, if no order to re'uisition is made b$ the o(eree within a reasonable time, the standing o(er lapses. TER'INATION OF OFFERS ) contractual o(er ma$ come to an end or terminated in an$ of the following wa$s/ 4/ REVOCATION: This is the withdrawal of the o(er b$ the o(eror. )t common law, an o(er is revocable at an$ time before acceptance. Ru"e% o, revo!#ion o, ofer%: $. )n o(er is revocable at an$ time before it becomes e(ectivel$ accepted. &t was so held in &a#e v. "ave. &n Dickinson v. Dodds, the sale of the house b$ the defendant to a 7 rd part$ revo!ed his o(er to the plainti(. (. otice of revocation must be communicated to the o(eree. 4owever, such communications need not to be e(ected b$ the o(eror. &t su(ices, if communicated b$ a 7 rd part$ as was the case in Dickinson v. Dodds. *. )n o(er is revocable even in circumstances in which the o(eror has promised to !eep it open to a specied duration, unless an option exists, as was the case in Dickinson v. Dodds. +. %evocation becomes legall$ e(ective when notice is received b$ the o(eree. 2. )n o(er is irrevocable after acceptance. &t was so held in Bne v. 6an 'ienhoven.
7. &n unilateral contracts, an o(er is irrevocable if the o(eree has commenced and continues to perform the act which constitutes acceptance. 8. ) bid at an auction is revocable until the hammer falls. 5/ REJECTION: )n o(er terminates if the o(eree refuses to accept the same, the refusal ma$ be express or implied from the conduct of the o(eree e.g. silence b$ the o(eree amounts to a reection as was the case in ,elthouse v Bindle . 9. COUNTER OFFER: This is a change or variation of the terms of the o(er b$ the o(eree. &t is a form of reection. The legal e(ect of a counter o(er is to terminate the original o(er as was the case in )de v. %ench. @. LA+SE OF TI'E: &f an o(er is not accepted within the stipulated time and not revo!ed earlier, it lapses on expiration of such duration. 1here no duration is specied, the o(er lapses on expiration of reasonable time. 1hat is reasonable time is a 'uestion of fact and varies from case to case. &n Ramagate 6ictoia )otel Ltd v. Montefoe in earl$ B65B9, the defendant made an o(er to purchase 9A shares of the plainti( compan$, the o(er was not accepted until ovember b$ which time the defendant had given up. The compan$ sued for the value of the shares, the defendant pleaded that the o(er had not been accepted within a reasonable time. &t was held that the defendant was not liable as the o(er had lapsed fro nonacceptance within a reasonable time. ) similar holding was made in 6i9i :him9i v "hatte#uck The defendant ordered timber from the plainti( and indicated that it be supplied as soon as possible. The plainti( did not respond but delivered the timber. 9 M months later, the defendant refused to ta!e deliver$ and was sued. &t was held that he was not bound to ta!e deliver$ as his o(er had lapsed for non acceptance within a reasonable time. =/ DEATH: The death of the o(eror or o(eree before acceptance terminates an o(er. 4owever, the o(er onl$ lapses when notice of death of the one is communicated to the other. >/ INSANITY:
The unsoundness of mind of either part$ terminates an o(er. 4owever, the o(er onl$ lapses when notice of the insanit$ of the one is communicated to the other. ?/ FAILURE OF A CONDITION SUBJECT TO WHICH THE OFFER WAS 'ADE: These are conditional o(ers. &f a condition or state of a(airs upon which an o(er is made fails, the o(er lapses. &n ,inancings Ltd v. Stimson, the defendant opted to ta!e up a vehicle on hire purchase terms. 4e completed the hire purchase application form and paid a deposit. This form constituted his o(er. 4e too! deliver$ of the vehicle but returned it to the showroom after 3 da$s for some minor rectication. The vehicle was stolen from the showroom and when recovered it was badl$ damaged b$ reason of an accident. The defendant refused to ta!e deliver$ or pa$ installments and was sued. 4e pleaded the state of the vehicle. &t was held that he was not liable as his o(er had lapsed. This o(er was conditional upon the motor vehicle remaining in substantiall$ the same condition as it was before and since its condition had changed, his o(er had lapsed.
ACCE+TANCE This is the external manifestation of assent b$ the o(eree. &t gives rise to an agreement between parties. &n legal theor$, an agreement comes into existence at the subective moment when the minds of the parties meet. This moment is referred to as "onsensus ad idem meeting of minds:. 4owever, this subectivit$ must be externall$ manifested b$ the o(eree for the agreement to arise. )cceptance ma$ be oral, written or implied from the conduct of the o(eree. RULES OF ACCE+TANCE 1. Ae$#!ne -!* )e or!" @ri##en or i-$"ie& ,ro- #(e on&u# o, #(e oferee/ &n "alill v. "a#olic Smoke Ball "o, acceptance b$ Irs. Carlill too! the form of her conduct b$ purchasing and consuming the smo!e balls.&n Bogden v. Metopolitan Railwa "o! where it was held that the 5 st load of coal supplied b$ Grogden constituted acceptance of
the defendants o(er to suppl$ the coal and hence there was an agreement between the parties. 2. T(e oferee -u%# (!ve )een !@!re o, !n& in#en&e& #o !e$# #(e ofer: ) person cannot accept an o(er whose existence he is unaware of. &n "own-v-"lake, the )ustralian government o(ered H5,AAA to an$ person who volunteered information leading to the arrest and conviction of the !illers of 3 police o(icers. )n$ accomplice who gave information would be pardoned. Clar!e, who was aware of the murder gave the information and the !illers were arrested and convicted. 4owever, he made it clear that he had given the information to clear his name. &t was held that he was not entitled to the reward as he had given the information for a di(erent purpose and therefore had not accepted the o(er. 3. Ae$#!ne -u%# )e unon&i#ion!" !n& unqu!"ie&: The o(eree must accept the o(er in its terms, an$ variation or modication of the o(er amounts to a conditional acceptance which is not an acceptance as was the case in )de v. %ench where the plainti( modied the defendant-s o(er of H5,AAA to H @A. 4. An ofer -u%# )e !e$#e& @i#(in #(e %#i$u"!#e& #i-e i, !n* or @i#(in ! re!%on!)"e #i-e ,!i"in0 @(i( i# "!$%e%/ )s was the case in Ramsgate 6ictoia )otel v. Monteoie! where the defendant-s o(er made in une was not accepted until ovember b$ which time had elapsed. ) similar holding was made in 3.;
ohn did not respond but B wee!s later he gave the horse to the defendant for sale but instructed him not to sell the particular horse. &t was sold b$ mista!e. The plainti( sued the auctioneer in damages for conversion. Kuestion was whether there was a contract of sale between the plainti( and ohn. &t was held that there was no contract as ohn had not communicated his acceptance of the o(er. 7. W(ere $!r#ie% ne0o#i!#e )* @or& o, -ou#( in e!( o#(er% $re%ene !e$#!ne i% &ee-e& o-$"e#e @(en #(e oferor (e!r% #(e oferee3% @or&% o, !e$#!ne/ &t was so held in 3ntoes Ltd v. Miles ,a 3ast "opoation , where Lord =enning observed that there was no contract between the parties until the o(eror hears the words. 8. 1here parties negotiate b$ #e"e$(one acceptance is deemed complete when the o(eror hears the o(eree-s words of acceptance. &t was so held in 3ntoes Ltd v. Miles ,a 3ast "opoation. 9. 1here parties negotiate b$ #e"e; acceptance is deemed complete when the o(eree-s words of acceptance are received b$ the o(eror. &t was so held in 3ntoes v. Miles ,a 3ast "opoation. 1. &n uni"!#er!" ofer%, commencement and continuation of performance constricts acceptance. =uring performance, the o(eror cannot revo!e the o(er but to do so if performance is discontinued as was the case in 3ington v. 3ington and %oods. ) father bought a house where the son and daughter inlaw lived b$ pa$ing a deposit of H3@A and raising the balance b$ a loan from a Guilding societ$. 4e promised to transfer the house to them if the$ paid all installments as and when the$ fall due. The H3@A would be a gift to them. The$ commenced pa$ment of the installments but stopped before the entire sum had been paid. The father was compelled to pa$ the remaining installments. 4e declined the transfer of the house to them. &t was held that he was not bound to do so as the$ had discontinued pa$ments- of the installments. 11. &n %#!n&in0 ofer%, a specic order or re'uisition b$ the o(eree constitutes acceptance and the o(erer is bound as was the case in Geat Nothen Railwa "o. v. %itham.
12.
)n o(er to a $!r#iu"!r9%$ei $er%on can onl$ be accepted
b$ that person for an agreement to arise. &t was so held in Boulton v. =ames. 13. )n o(er to a "!%% o, $er%on% can onl$ be accepted b$ a member of that class for an agreement to arise. &t was so held in %ood v. Lecktick. 14. )n o(er to the 0ener!" $u)"i ma$ be accepted b$ an$ person who fullls its conditions. )s was the case in "alill v. "a#olic Smoke Ball "o. 15. T(e $o%#!" ru"e o, !e$#!ne: 1here the o(eror expressl$ or impliedl$ authori2es the o(eree to communicate acceptance b$ post, acceptance is deemed complete when the letter is posted whether it reaches its destination or not. &t was so held in Bne v. 6an 'ienhoven and "o Ltd/ ! E;$re%% !u#(ori!#ion: These are circumstances in which the o(eror expressl$ permits the o(eree to communicate acceptance b$ post. )s was the case in ;dams v. Lindsell on 59944? the defendant o(ered to sell to eth plainti( a 'uantit$ of wood on certain terms and re'uired a response Jin the course of post.- The plainti( received the letter on =9944? and posted an acceptance. 0n 9944? the defendant posted a letter revo!ing the o(er. The plainti(-s letter of acceptance was received on 9944?. &t was held that there was a contract between the parties as the plainti( had posted the letter of acceptance b$ the time the defendant purported to revo!e the o(er. 4ence, the revocation was ine(ective. ) I-$"ie& !u#(ori!#ion: There are circumstances in which
the
o(eror b$ implication
authori2ed the o(eree to communicate acceptance b$ post. &n )ousehold ,ie
the compan$ had posted the letter of acceptance, there was a contract and the defendant was liable. &n )enthon v. ,ase! N made an o(er to O to ta!e up a lease. 0n the following da$ between noon and5 pm, N posted a letter withdrawing the o(er which was received b$ O at @pm. )t 7.@Apm on the same da$, O had posted a letter accepting the o(er. The letter was read b$ N on the following da$. &t was held that there was a contract between parties which came into existence at 7.@Apm when O posted the letter of acceptance. The purported revocation at @pm had no e(ect. &n Bne v. 6an 'ienhoven and "o Ltd on 565A the defendant made an o(er to sell to eth plainti( 5AAA boxes of tin plates but on 65A the defendant posted letter revo!ing the o(er. The same was received on 5@65A. 0n 5565A the plainti( telegraphed the defendant an acceptance which he conrmed b$ a letter posted on 5@65A. &t was held that there was a contract between the parties which come into existence on 5@65A when the letter of acceptance was posted. No !u#(oro!#ion: &f the o(eror does not expressl$ or implied authori2es the o(eree to use the post but the o(eror uses the post, acceptance is deemed complete when the letter of acceptance is received b$ the o(eror. 16. &f the o(eror instructs his -e%%en0er to deliver to him the letter of acceptance in an$ from the o(eree, acceptance is deemed complete when the letter is handed over to the messenger. 17. )cceptance need not be communicated to the o(eror where such communication is expressl$ or impliedl$ @!ive&. This was the case in "alill v. "a#olic Smoke Balls "o , where Irs. Carlill was not re'uired to communicate the fact of purchase and consumption of the 8mo!e balls. 18. )cceptance need not be communicated to the o(eror where it ma!es the form of conduct. This was the case in Bogden v. Metopolitan Railwa co Ltd/
0nce an o(er is accepted, an agreement arises between the parties as there is consensus between them. 0(er and acceptance constitutes the foundation
of a contractual relationship. The$ do not constitute a contract as a contract must be characteri2ed b$ other elements.
INTENTION TO CREATE LE7AL RELATIONS &n addition to o(er and acceptance, an agreement must be characteri2ed b$ intention. The parties must have intended to create legal relations. &ntention is one of the basic elements of a contract as common law. )n agreement is unenforceable unless the parties thereto intended such a conse'uence. A%er#!in-en# o, in#en#ion: To determine whether parties intended to create legal relations, courts consider; 5. ature or t$pe of agreement i.e. whether commercial or business and domestic or social. 3. The circumstances in which the agreement was entered into. These two factors demonstrate whether the parties intended to contract. ! Bu%ine%% or o--eri!" !0ree-en#% &n considering such agreements, courts proceed from the presumption that the parties intended to create legal relations. 4/ A&ver#i%e-en#% These are intended to promote sales of the advertiser.
The$ have a
commercial obective. &n "alill v. "a#olic Smoke Ball "o. Ltd! the compan$ had manifested an intention to create legal; relations b$ stating that it had deposited H5,AAA with )lliance Gan! %egent 8treet. 4ence Irs Carlill was entitled to the H5AA as she had contracted with the compan$. 5/ E-$"o*-en# !0ree-en#%/ These are commercial agreements intended to impose legal obligations on the parties thereto.
&n 3dwads v. Skwas Ltd! the plainti( was a former emplo$ee of the defendant compan$ as a pilot and was declared redundant but promised on e>-gatia sum. 4e provided consideration for the promise. G$ reason of man$ other redundancies, the compan$ was unable to ma!e good the promise to Edwards who sued. &t was held that he was entitled to the sum as this was a business agreement intended to create legal relations. The court was emphatic that this was not a domestic agreement. 4owever, the circumstances in which a commercial or business agreement is entered into ma$ show that the parties did not intend to create legal relations and this would be the case where (onour "!u%e% or (onour!)"e $"e&0e "!u%e% are used. This is a clause in agreement to the e(ect that the parties do not intend to create legal relations. &t denies the agreement legal intention thereb$ converting it to a gentleman-s agreement binding in honour onl$. 8uch an agreement is unenforceable in law as was the case in Rose ? ,ank v. "ompton Bothes where the agreement between the two companies contained an honour clause, but one of them purported to enforce the agreement. The court of )ppeal held that it was unenforceable as the honour clause had denied it legal intention. ) similar holding was made in =ones-v-6enon &ools Ltd where the agreement had an honour clause. &t was observed that whenever an agreement contained an honour clause, the plainti( was obliged to trust the defendant as the agreement cannot be enforced b$ court of law. ) Do-e%#i or %oi!" !0ree-en#% Courts proceed on the presumption that the parties did not intend to create legal relations. 4/ A0ree-en# )e#@een (u%)!n& !n& @i,e
8uch agreements are generall$ not intended to impose upon the parties an$ rigid obligations. &n Balou v Balou , the defendant was a civil servant in 8ri Lan!a. )t the time, he and his wife were in Gritain on holida$. 4is wife fell ill and it became clear that she was not in a position to accompan$ him bac! to 8ri Lan!a. 4e promised to send her 7A pounds per month for the duration the$ would remain apart. 4e did not and the wife sued. &t was held that her action was not sustainable as the parties had not intended to create a legal relationship. ) similar holding was made in Gould v Gould.
5/ A0ree-en#% )e#@een +!ren# !n& C(i"& 8uch an agreement is ordinaril$ not intended to be a contract but a wor!ing relationship. &n =ones v. &andevatton, the plainti( persuaded her daughter to leave a well pa$ing ob to stud$ Law in Gritain, she was promised a maintenance allowance as she studied. 8he reluctantl$ agreed. &n the meantime, the plainti( bought a house where the defendant lived as part of the maintenance. Gefore the daughter completed her studies, the 3 'uarreled and the mother sought to evict her from the house. 8he argued that there was a contract between them. 4owever it was held that the parties had not intended to create legal relations and the mother was entitled to evict her.
4owever the circumstances in which a domestic or social agreement is entered into ma$ show that the parties intended to create legal relations. 8uch intentions ma$ be collected from the words used b$ the parties, their conduct and the circumstances of the agreement; 4/ A0ree-en# )e#@een (u%)!n& !n& @i,e
8uch an agreement ma$ be forced if the parties have manifested an intention to contract. E.g. in McGego v McGego! a husband and wife sued each other for assault but later resolved to withdraw the cases but live apart. The husband promised to pa$ a wee!l$ sum as maintenance while the wife promised to maintain the children. The husband was in arrears for B wee!s and the wife sued. &t was held that her action was sustainable as the parties had manifested an intention to contract. ) similar holding was made in Meit v Meit. 5/ O#(er Soi!" A0ree-en#% 8uch agreements ma$ be enforced if the parties if the parties have manifested an intention to contract. &n Simpkins v. &as! the defendant owned a house where she lived with a grand daughter; the plainti( was a pa$ing boarder a lodger:. The three too! part in a 8unda$ newspaper competition. )ll entries were made in the defendant-s name. 4owever, there were no rules on pa$ment of postage.0ne wee!-s entr$ won HD@A. The plainti( claimed 567of the sum. The defendant argued that this was a pastime activit$ not intended to create legal relations. 4owever the court held that the plainti( was entitled to 567of the sum as the parties had manifested an intention to contract. ) similar holding was made in &ake v. "lak. Case law demonstrates that an agreement is legall$ unenforceable unless the parties to it intend such a conse'uence. CA+ACITY &n addition to consensus and intention, a contract must be characteri2ed b$ capacit$. This is the legal abilit$ of a part$ to enter into a contractual relationship. For an agreement to be enforceable as a contract the parties must have had the re'uisite capacit$. )s a general rule, ever$ person has a capacit$ to enter into an$ contractual relationship.
4owever, in practice, the law of contract restricts or limits the contractual capacit$ of certain classes of persons namel$; 5. &nfants or minors. 3. =run!en persons. 7. #ersons of unsound mind. 9. Corporations. @. oods )ct necessaries mean goods suitable to the condition in life of such an infant or minor and to his actual re'uirement at the time of sale and deliver$. &n Nash v.
Cap 33 Laws of Kenya
5/ Con#r!#% ,or #(e Su$$"* o, GO#(er Nee%%!rie%. These are necessaries other than those covered b$ 8ection 9 3: of the 8ale of >oods )ct. E.g. Legal services, transport to and from wor!, lodging facilities etc. )n infant is bound b$ an$ contract for the suppl$ of such necessaries. oods )ct, whenever an infant is supplied with necessaries, he is liable to pa$ not the agreed price but what the court considers as reasonable. 8/ E&u!#ion!" Con#r!#% )n infant is bound b$ a contract whose purpose is to promote his education or instruction. / Con#r!#% ,or Benei!" Servie These are benecial contracts of service. Case law demonstrates that an infant can sue or be sued and is bound b$ contracts whose obect is to benet him as a person. &n Dole v. %hite "it Stadium, the plainti( was a 'ualied infant boxer. 4e applied to oin the Gritish Goxing Goard and was granted a license. 0ne of the rules of the bod$ empowered it to withhold pa$ment of an$ price mone$ won if a boxer was dis'ualied in a competition. The plainti( was dis'ualied on one occasion and the Goard withheld pa$ment. The plainti( sued. Kuestion was whether the plainti( was bound b$ the contract between him and the Goard. &t was held that he was as in substance
it
was
intended
to
benet
him
hence
the
mone$
was
irrecoverable. ) similar holding was made in "haplin 6. Leslie ,emin /&u#lishes0 Ltd. 1here the plainti(, an infant had engaged the defendant to write a boo! for him. 4e subse'uentl$ discontinued the transaction. &t was held that the contract was binding as it was intended to benet him.
) similar holding was made in "lements v. London and Noth %esten Railwa "o. 5/ VOIDABLE CONTRACTS Certain contracts entered into b$ an infant are voidable i.e. the infant is entitled to repudiate the contract during infanc$ or within a reasonable time after attaining the age of maorit$. G$ avoiding the contract, the infant escapes liabilit$ on it. The infant cannot be sued on the contract during infanc$. These contracts confer upon the infant a long term benet. Examples include/ #artnership agreements, lease or tenanc$ agreement and contract for the purchase of shares.
7. Ione$ lending contracts/)n infant is not bound to repa$ an$ monies borrowed from a 7 rd part$ as the contract is void. 4owever if the infant repa$s, the amount is irrecoverable. &n Leslie Ltd. 6. Sheil! the defendant, an infant borrowed H9AA from the plainti(, a mone$ lending rm in 3 lots of H3AA each and was liable to pa$ H9D@ inclusive of the interest but failed to do so and was sued. The plainti( argued that it was entitled to damages for misrepresentation as the defendant had fraudulentl$ misrepresented his age. &t further argued that the defendant had received the mone$ on its behalf. &t was held that the amount was irrecoverable as the contract was void b$ reason of the In,!n#% Re"ie, A# 4?/ 8ince a mone$ lending contract was void, an$ securit$ given b$ the infant is also void and therefore unenforceable b$ the lending part$. &t was so held in 6alentini v. "anali. &f an infant uses monies borrowed under a void contract to purchase necessaries, the lending part$ is in E'uit$ put into the shoes of the part$ suppl$ing the necessaries and can sue the infant for the recover$ of the amount borrowed as was used to purchase the necessaries. This is the principle of %u)ro0!#ion as was explained in
endorsed. 4e pleaded that when he did so he was too drun! to understand what he was doing and that the plainti( was aware of his condition. &t was held that he was not liable as the contract was voidable at his option b$ reason of the drun!enness. &f a contract entered into b$ a person when drun! is ratied b$ him when sober it is no longer voidable as was the case in Mathews v Ba>te where the defendant had contracted to sell a house to the plainti(. 1hen sued he pleaded drun!enness. 4owever it was held that he was liable as the plainti( proved that he had subse'uentl$ ratied the transaction while sober. oods )ct, if a drun!en person is supplied with necessaries he is liable to pa$ a reasonable price. 8/ CONTRACTUAL CA+ACITY OF +ERSONS OF UNSOUND 'IND ) contract entered into b$ a person of unsound mind is voidable at his option b$ establishing that/ 5. 4e was too insane to understand his acts. 3. The other part$ was aware of his mental condition. G$ avoiding the contract the part$ escapes liabilit$ on it. &n
&f a contract entered into b$ a person of unsound mind is ratied b$ him when he is of sound mind it ceases to be voidable.
oods )ct, if a person of unsound mind is supplied with necessaries, he is liable to pa$ a reasonable amount. / CONTRACTUAL CA+ACITY OF UNDISCHAR7ED BANKRU+TS These are persons who have been declared ban!rupt b$ a court of competent urisdiction. There capacit$ to contract is restricted b$ the provisions of the Gan!ruptc$ )ct 3. =/ CONTRACTUAL CA+ACITY OF COR+ORATIONS These are articial persons created b$ law, either b$ the process of registration or b$ statute. The capacit$ of the corporations to contract is dened b$ law e.g. a statutor$ corporation has capacit$ to enter in transactions set out in the statute as well as those reasonabl$ incidental thereto. 0ther transactions are u"#r! vire% and therefore null and void. The contractual capacit$ of a registered compan$ is dened b$ the obect clause of the memorandum. )t common law a registered compan$ has capacit$ to enter into transactions set forth in the obects and those that are reasonabl$ incidental to the attainment or pursuit of such obects. &t was so held in ;sh#u Railwa "aiage and <on "o. v. Riche as well as in ;ttone Geneal v. Geat 3asten Railwa "o 0ther transactions are ulta vies be$ond the powers of: the compan$ and void. Transactions within the powers of a compan$ are said to be inta vies a compan$. )n ulta vies transaction cannot be ratied and an$ purported ratication has no legal e(ect. &t was so held in ;sh#uAs "ase. =/ CONSIDERATION &n addition to consensus, capacit$ and intention, an agreement must be characteri2ed b$ consideration to be enforceable as a contract. )t Common Law, a simple contract is unenforceable unless supported b$ some consideration. Consideration is the bargain element of a contract. 2
Cap 53 Laws of Kenya
&t is nothing but mutualit$. &t has been dened as G!n !# or $ro-i%e ofere& )* #(e one $!r#* !n& !e$#e& )* #(e o#(er $!r#* !% $rie ,or #(!# o#(er% $ro-i%e/. Ju&ii!" Deni#ion% &n the words of Lush . in "uie v. Misa! *a variable consideration ma$ consist of some right, interest, prot or benet accruing to the one part$ or some loss, forbearance, detriment or responsibilit$ given, su(ered or borne b$ the other.+
&n the words of #atterson in 'homas v. 'homas *consideration means something which is of some value in the e$e of the law moving from the plainti(. &t ma$ be some benet to the defendant or detriment to the plainti( but at all events it must be moving from the plainti(.+ Consideration is whatever the promisee gives or provides to bu$ the promisors promises. G$ so doing the promisee becomes part$ to the contract. Consideration ta!es various forms. &n "allil v. "a#olic Smoke Ball "o, it too! the form of detriment i.e. swallowing of the smo!e balls b$ Irs. Carllil. &n &atel v. )asmani, it too! the form of forebearance to sue. TY+ES OF CONSIDERATIONS Consideration ma$ be e;eu#or* or e;eu#e& but must not be $!%#/ 4owever in certain circumstance past consideration ma$ support a contractual claim. 4/ E;eu#or* Con%i&er!#ion Consideration is executor$ where the parties exchange mutual promises. either of the parties has performed its part of the contract. The whole transaction is in future. Executor$ consideration is good to support a contractual claim. E.g. purchase of goods on credit for future deliver$. 5/ E;eu#e& Con%i&er!#ion
Consideration is executed where a part$ does an act to purchase the others promise. The act ma$ be partial or total performance of the part$-s contractual obligation. &t is good consideration to support a contractual claim. 8/ +!%# Con%i&er!#ion Consideration is past where a promise is made after services have been rendered. There is no mutualit$ between the parties. #ast consideration is generall$ not good to support a contractual claim. &n Roscola v. 'homas! the plainti( had ust bought a horse from the defendant and as he was leading it awa$, the defendant assured him that it was a good horse free from an$ vice. The statement turned out to be untrue and the plainti( sued for damages. &t was held that the defendants promise was unenforceable b$ the plainti( as consideration was wholl$ past. ) similar holding was held in
enforceable b$ the creditor though consideration is past. &t was so held in Ball v. )asketh and )eling v. )asting. 5/ Ne0o#i!)"e In%#ru-en#% 0ne of the characteristics of negotiable instruments e.g. che'ues, bills of exchange, promissor$ notes, share warrants e.t.c. is that past consideration is good to support an$ action on the instrument. ) holder of a negotiable instrument can sue on it even though he has not given consideration provided a previous holder gave some consideration. This exception is contained in 8ec 3D5: of the Gills of Exchange )ct 7, and was relied upon to enforce an action in Lom#ad Banking "o. Ltd v. Gandhi and &atel/ 8/ Ren&erin0 o, Servie% on reque%# 1here services are rendered b$ a part$, at the express or implied re'uest of another in circumstances that give rise to an implied promise to pa$, a subse'uent promise to pa$ for the services is enforceable. The law ta!es the view that the rendering of the services and the promise to pa$ are an integral part of the same transaction. &n Lampleigh v. Bathwait the defendant had !illed a man named #atric!. 4e re'uested the plainti( to secure pardon for him from the !ing. The plainti( exerted himself and made a number of trips to see the !ing and ultimatel$ secured the pardon. The defendant promised to pa$ him H5AA for the trouble, a promise he did not honour and was sued. 4e argued that the plainti( had not provided consideration for his promise to pa$. 4owever it was held that the promise was enforceable as it was inseparable from the re'uest for the services. ) similar holding was made in Re "ase &atents Ltd.
RULES OF CONSIDERATION 4/ 'u#u!" "ove !n& !fe#ion i% no# %ufiien# on%i&er!#ion: 3
Cap 27 Laws of Kenya
&t was so held in 'homas v. 'homas. Ir. Thomas had expressl$ stated that if he died before his wife, she was free to use his house as long as she remains unmarried. 4is brothers who later became executors of his estate !new of this wish. )fter his death, Irs. Thomas remained in his house and unmarried. )fter the death of one of the executors, the other sought to evict Irs. Thomas from the house. 8he sued the late husband-s estate. &t was held that the husbands promise was enforceable as she had provided consideration b$ wa$ of the H5 she paid for ever$ $ear she lived in the house. The love she had for the late husband was not su(icient consideration but the H5 she paid ever$ $ear was.. 5/ Con%i&er!#ion -u%# )e "e0!" The act or promise o(ered b$ the promise must be lawful as illegal consideration invalidates the contract. 8/ Con%i&er!#ion -u%# no# )e $!%# )s a general rule, past consideration is not good to support a contractual claim as exemplied b$ the decisions in Re Mc;dles case and Roscola v. 'homas. 4owever, in certain circumstances, past consideration is su(icient to support a contractual claim, as indicated above. / Con%i&er!#ion -u%# )e re!"/ This rule means that consideration must be something of value in the e$es of the law. &t means that consideration must be su(icient though it need not be ade'uate. This rule means that as long as something valuable in law passes, the promise is enforceable. &t means that the law does not concern itself with the economics of a transaction. &t means that the courts of law do not exist to correct bad bargains. &n 'homas v. 'homas, the H5 Irs. Thomas paid per $ear was su(icient consideration.
4owever if the consideration is too low in comparison and there is evidence of a mista!e, misrepresentation, duress or undue in"uence, the courts ma$ intervene. =/ Con%i&er!#ion -u%# o@ ,ro- #(e $"!in#if9 $ro-i%e/ This rule means that the person to whom the promise is made provides consideration and b$ so doing there is a bargain between the parties or mutualit$. G$ providing consideration, the promise becomes part$ to the transaction. &n 'homas v. 'homas, #atterson was emphatic that *consideration must at all times "ow from the plainti(.+ The rule that consideration must "ow from the plainti( is referred to as T(e Do#rine o, +rivi#* o, Con#r!#%/ THE DOCTRINE OF +RIVITY OF CONTRACTS This doctrine is to the e(ect that onl$ a person who is part$ to a contract can sue or be sud on it. &t means that onl$ a person who has provided consideration to a promise can sue or be sued on it. &t means that a stranger to consideration cannot sue or be sued even if the contract was intended to benet him. &t was so held in Scuttons Ltd v. Midland Sillicones Ltd. &n &ice 3aston, N agreed to pa$ the plainti( a sum of mone$ if O did some wor! for him. O rendered the services to N but N did not honour the promise to pa$. The plainti( sued to enforce the promise. &t was held that the promise was unenforceable as the plainti( was not a part$ to the transaction. 4e had provided no consideration. ) similar holding was made in Dunlop v. Selidge as well as in 'weddle v. ;tkinson. 4owever in certain circumstances, persons who are not part$ to a contract or who have not provided consideration ma$ sue or be sued on it. T(e%e !re e;e$#ion% #o #(e Do#rine o, +rivi#* o, Con#r!#%: i/ A0en*
&n an agenc$ relationship, the agent contracts on behalf of the principal. The principal is not directl$ involved in the transaction. 4owever the principal ma$ sue or be sued on a contract entered into b$ the agent. This exception is more apparent than real as in law the agent represents the principal. iiLe0!" A%%i0n-en#
4 5
The Indian Transfer of Property Act (1882 Cap 4!5 Laws of Kenya
&n certain circumstances, certain rights and liabilities attached to land are enforceable b$ or against subse'uent holders of the land. This is particularl$ the case in the law of leases. >/ Con%i&er!#ion -u%# )e %o-e#(in0 in e;e%% o, ! $u)"i &u#* o@e& )* #(e $"!in#if This rule means that performance b$ the plainti( of a public dut$ owed b$ him is not su(icient consideration for a promise to pa$. &n "ollins v. Godeo! the defendant was involved in a civil case and the plainti( had given evidence in the matter but was reluctant to do so in future. The defendant promised him B pounds if he continued giving evidence which he did. The defendant did not honour his promise and was sued. Kuestion was whether the plainti( had provided consideration for the defendants promise to pa$. &t was held that the promise was unenforceable as the plainti( had not provided consideration but had merel$ performed a public dut$. 4owever an$thing in excess of a public dut$ amounts to consideration. &n Glass#ook Bothes v. Glamogan "ount "ouncil! the defendant owned a mine and at the material time the wor!ers were on stri!e. The defendant re'uested the plainti( to provide a stationar$ guard to protect the mine and promised to pa$ for the services. The plainti(s who are not bound to provide a stationar$ guard provided the service but were not paid. &n an action to enforce the promise, it was held that the plainti(s were entitled to pa$ment as the$ had done more than the dut$ re'uired and had therefore provided consideration. ?/ Con%i&er!#ion -u%# )e %o-e#(in0 in e;e%% o, !n e;i%#in0 on#r!#u!" o)"i0!#ion This rule means that performance b$ the plainti( of an existing contractual obligation is not su(icient consideration for a promise. &n Stilk v. Mik, the defendant who was a ship captain entered into a contract with his crew
members to assist him on a ourne$ from Gritain to the Galtic 8ea and bac!. &n the course of the ourne$, 3 sailors deserted. The captain promised to share their wages between the remaining crew members a promise he did not honour and was sued. &t was held that the crew members were not entitled to the extra pa$ as the$ had not provided consideration. The$ had merel$ performed an existing contractual obligation. 4owever, doing
something
in
excess
of
a
contractual
obligation
constitutes
consideration. &n )atle v. &onson# where in the course of a ourne$, a substantial number of crew members deserted and a promise for extra pa$ was made, it was held that the$ were entitled to the pa$ as the$ had done more than a contractual obligation. The willingness to expose themselves to danger for longer hours constituted consideration for the promise. / +!*-en# o, ! "e%%er %u- on #(e &!* in %!#i%,!#ion o, ! "!r0er %ui% no# %ufiien# on%i&er!#ion ,or #(e re&i#or% $ro-i%e #o !e$# %u( %u- in ,u"" %e##"e-en# ,or #(e &e)#/ This is referred as the GRu"e in !inne"# Ca#e $162%&. Cole owed #innel pounds pa$able on 55th ovember 5BAA. 4owever on 5st 0ctober 5BAA, #innel re'uested Cole to pa$ @ pounds which he agreed to accept in full settlement of the debt. 8ubse'uentl$, #innel sued Cole for the balance. The case was decided on a technical point of pleading and Cole was held liable for the balance. This rule was applied in ,oakes v. Bee /$44+0. 4owever in certain circumstances, pa$ment of a smaller sum extinguishes the entire debt. These are exceptions to the rule in +inne"3% C!%e/ 5. &f the lesser sum is paid in advance and the creditor accepts the same in full settlement of the debt.
3. &f the lesser sum is paid in the form of an obect which the creditor accepts in settlement thereof. &n +inne"3% C!%e, Grian C.. observed, *but the gift of a horse, haw! or robe, is su(icient consideration. 7. &f the lesser sum is paid in addition to an obect which the creditor accepts. 9. &f the lesser sum is at the creditor-s re'uest paid at a di(erent place. @. 1here the lesser sum is paid in a di(erent currenc$ and the creditor accepts the same in full settlement thereof. B. 1here the lesser sum is paid b$ a third part$. &n %el# v. Dake, the defendant owed the plainti( 5 pounds and was unable to pa$. The defendant-s father paid the plainti( pounds which he accepted in full settlement of the debt but subse'uentl$ sued for the balance. &t was held that the promise was enforceable as it was made to a 7rd part$. D. &f a debtor enters into an arrangement with his creditors to compound his debts, whereb$ he promises to pa$ part of the amount due to each of the creditors who in turn promise mot to sue the debtor or insist on full pa$ment, the lesser sum paid b$ the debtor extinguishes the entire debt. The mutual promises b$ the parties constitute consideration. DOCTRINE OF +RO'ISSORY OR E6UITABLE ESTO++EL This doctrine was developed b$ e'uit$ to mitigate the harshness of the common law rule of consideration. &t is an e'uitable intervention which modies the rule of consideration. The =octrine was explained b$ Lord =enning in "om#e v. "om#e. &t is to the e(ect that where parties have a legal relationship and one of them ma!es a new promise or representation intended to a(ect their legal relations and to be relied upon b$ the other, once the other has relied upon it and changed his legal position, the other part$ cannot be heard to sa$ that their legal relationship was di(erent. The part$ is estopped from den$ing its promise.
For the doctrine of estoppel to appl$ the following conditions are necessar$/ 5. ) legal relationship between the parties. 3. ) new promise or representation in intended to be relied upon. 7. %eliance upon the representation. 9. Change in legal position as a result of the reliance. @. &t would be unfair not to estop the ma!er of the representation. The =octrine of #romissor$ Estoppel is often referred to as GT(e Ru"e in #(e Hi0( Tree% C!%e/. &n "ental London &opet 'ust v. )igh 'ees )ouse Ltd, the plainti( owned a bloc! of "ats which it leased to the defendant for $ears at 3@AA pounds per $ear. )fter the outbrea! of the 3 nd world war, it became clear that the defendant was not in a position to pa$ the agreed rent as most of the "ats were unoccupied. The plainti( promised to accept half of the rent as long as the war continued. G$ the end of 59@, all the "ats were occupied. The plainti( sued for the defendant to be compelled to pa$/ 5. The full rent. 3. The arrears. The defendant argued that it was ine'uitable unfair: for the plainti( to claim the arrears. &t was held that whereas it was fair for the defendant to pa$ the full rent, it was unfair to claim the arrears as the plainti( had made a promise which the defendant had reliede upon and changed its legal position. The plainti( was estopped from insisting on the arrears.
The doctrine of e'uitable estoppel applies in East )frica. &n "entu ;utomo#ile v. )utchings Bieme Ltd! the defendant too! a lease of the plainti(-s premises which was terminable b$ a 7 month notice of either part$. The defendant intended to ma!e alterations to the building but
feared doing so onl$ for the lease to be terminated. The plainti( promised not to terminate the lease in 9 $ears time. )s a conse'uence, the defendant spent AA pounds on the alterations but months later the defendant received the plainti(-s notice of termination but refused to honour it and was sued. The defendant pleaded estoppel. The plainti( was estopped from evicting the defendant as it had made a promise which the defendant had relied upon and changed its legal position. ) similar holding was made in "ommissione o Lands v. )ussein/ EFFECTS OF ESTO++EL The =octrine of #romissor$ estoppelestoppel is a modication of the Common Law rule of consideration in that it enables a person who has not provided consideration to a promise to enforce it if he has relied upon it and changed his legal position. &t is argued that the principal wea!ness of the =octrine of #romissor$ Estoppel is that it is defensive and not o(ensive. &t can onl$ be relied upon b$ the defendant as a defence. 4owever, the so called =octrine of #roprietar$ Estoppel which is based on ownership can be used both as a shield and as a sword. Courts however have observed that there is no distinction between promissor$ and proprietar$ estoppel. TER'S 9 CONTENTS OF A CONTRACT #arties negotiating a contract ma!e man$ statements some of which are intended to be terms while the others are mere representations. 1hereas terms
form the
content
of the
contract,
representations
are
mere
inducements and if false the$ are referred to as misrepresentations and ma$ a(ect the contract. 1hether a statement was intended to be a term or representation is a 'uestion of fact and courts are guided b$ the following rules or presumptions in so ascertaining/
5. Ti-e 7!$: &f the duration between ma!ing the statement and the conclusion
of
the
contract is long, it is presumed
to be a
representation and if short it is deemed to be a term. 3. 7u!r!n#ee: &f a part$ to the negotiations appears to guarantee its statements, the$ are presumed to be terms. 7. S$ei!" Kno@"e&0e: &f either of the parties has special !nowledge in relation to the subect matter of the contract, its statements are presumed to be terms. &n Osca "hess Ltd v. %illiams! 1illiams sold a 3nd hand car to the plainti(. The registration boo! showed that it was a 59 model while in fact it was a 57 car. 1illiams had no means of ascertaining the truth. The plainti( sued in damages for the untrue statement. 4owever it was held that since the statement was innocentl$ misrepresented, the plainti( had no action in damages. 4owever in Dick Bentl &oductions Ltd v. )aold Smith motos Ltd! the plainti( intended to bu$ a motor vehicle from the defendant and was informed that the vehicle in 'uestion had had a replacement engine and gearbox and had onl$ done 3A,AAA miles. &n fact nothing had been replaced and it had done over 5AA,AAA miles. The plainti( sued in damages for the untrue statement. &t was held that the untrue statement was a term of the contract as the defendant was a motor dealer and was therefore liable in damages for the misrepresentation. Terms of a contract ma$ be/ 5. Express or 3. &mplied 4/ E2+RESS TER'S These are the oral and written terms agreed upon b$ the parties. 1ritten terms prevail over oral terms. &f contractual terms are written, oral evidence is generall$ not admissible to var$ or explain the written terms. 4owever, such evidence is admissible to prove that/ 5. The contract was subect to a particular trade usage or custom.
3. The parties had not incorporated all the terms into the document. 7. The parties had agreed to suspend the agreement until some event occurred &f handwritten, printed and t$ped terms contradict, the handwritten terms prevail as the$ are a better manifestation of the parties- intentions. &t was so held in Glnn v. Magetson. 5/ I'+LIED TER'S These are terms which though not agreed to b$ the parties, are an integral part of the contract. Theses terms ma$ be implied b$ statutes or b$ a court of law.
A/ Ter-% i-$"ie& B* S#!#u#e%/ Certain statutes impl$ terms in contracts entered into pursuant to their provisions. These terms become part of the contract. 4/ Ter-% i-$"ie& in S!"e o, 7oo&% on#r!#% )* #(e S!"e o, 7oo&% A#/ The 8ale of >oods )ct implies both conditions and warranties in contracts of 8ale of goods unless a di(erent intention appears. CONDITIONS ! Ri0(# #o %e""/
udgement, there is an implied condition that the goods shall be reasonabl$ t for that purpose. & 'er(!n#!)"e 6u!"i#*/
WARRANTIES 4 6uie# +o%%e%%ion
a: To give e(ect to the intentions of the parties. b: To facilitate commercial transactions or give business e(icienc$. Courts of law impl$ terms in contracts on the basis of/ 5. The reasonable b$ stander test. 3. Trade usages and customs. 4/ Re!%on!)"e B*
$. The custom exists. (. &s certain. *. &s reasonable. +. &s !nown to the parties. 2. The parties had not exempted the custom from their transaction. &t was so held in )alilal Shah and "hampion Shah v. Standad Bank "o. Ltd. &n ,lue and :ing v. Mohamed %ali ? ;nothe! the plainti( bought 5AAA hand!erchiefs from the defendants and the same were delivered in batches of 7A. The plainti( too! deliver$ but sued the defendant for a reduction in the purchase price. &t was proved that in Pan2ibar there was a trade usage that hand!erchiefs bought in bul! were supplied in do2ens. The court implied the custom into the contract and held that the plainti( was entitled to the reduction in the price as he had to unpac! and repac! the pieces in do2ens. Contractual terms ma$ be on&i#ion% @!rr!n#ie% or inno-in!#e #er-%/ 4/ CONDITIONS This is a term of maor stipulation in a contract. &t runs to the root of the contract. &t is part of the central theme of the contract. &f a condition is breached, it entitles the innocent part$ to treat the contract as re$u&i!#e& and to %ue in &!-!0e% )s was the case in &oussad v. Spies and &ond. ) singer was engaged to pla$ the leading role in a French 0pera from the beginning of the season but owing to illness she was unable to ta!e up her role during the rst 5 wee! forcing the organi2ers to engage a substitute and conse'uentl$ reected the singer-s services who sued. &t was held that the organi2ers were entitled to treat the contract as repudiated as the singer had bro!en a maor term of the contract. ) condition ma$ be express or implied in a contract. 5/ WARRANTIES
This is a minor term of a contract or a term of minor stipulation. &t is a peripheral or collateral term that does not run into the root of the contract. &f breached, it entitles the innocent part$ to sue in &!-!0e% on"* as the contract remains enforceable and both parties are bound to honour their part of the bargain. &n Bettini v. Ge! an actress was engaged to perform in concerts and theatres from the beginning of performances. 4owever she additionall$ agreed to appear for B da$s in advance for rehearsal but appeared for onl$ 7 da$s. The organi2ers purported to treat the contract as repudiated. &t was held that the contract was subsisting as the agreement to appear for rehearsals was a collateral term. ) similar holding was made in :ampala Geneal agenc Ltd. 6. Mods /3;0 Ltd where the parties had agreed to bu$ a large 'uantit$ of cotton deliverable at 8aroti. 4owever the seller too! the cotton to another town named )loi where the bu$er had a cotton ginner$. The bu$er refused to ta!e deliver$ on the ground that the misdeliver$ was a breach of a condition. 4owever, it was held that it was a breach of a warrant$ and the bu$er was onl$ entitled to damages. 8/ INNO'INATE TER'S These are terms of a contract categori2ed as neither conditions nor warranties. The breach of such terms ma$ be attended b$ trivial or grave conse'uences. The remed$ available depends on the nature, e(ect and conse'uence of the breach. &t was so held in )ong :ong ,u Shipping "o. v :awasaki :isen :aisha where a ship was chartered for 39 months but was unavailable for use during the 5st 3A wee!s. The charterer sued alleging that the unavailabilit$ of the vessel was breach of a condition. 4owever it was held not to be. E2E'+TION "!u%e%
OR
E2CLUSION
CLAUSES
Li-i#in0
or
E;"u&in0
The theor$ of freedom of contract assumes that parties are free to contract with one another and can protect their own interests. &t assumes parit$ in contractual bargains which is not necessaril$ the case. The stronger part$ ma$ insert terms favourable to it. This is the genesis of exemption clauses. )n exemption clause is a clause inserted in a contract b$ the stronger part$ exempting, itself from liabilit$ or limiting the extent of an$ liabilit$ arising under the contract. these clauses are common in standard form contracts e.g. conve$ance of goods, hire purchase agreements contracts of insurance etc. These clauses are ustied on the theor$ of freedom of contract. From an example clause to be given e(ect, the court must be satised that it was an integral part of the contract. &t must have been incorporated into the contract. &n LAestange 6. Gauco# /$1*+0 the plainti( bought an automatic cigarette vending machine from the defendant. The terms of the agreement were written in a document entitled sale agreement. 8ome of the clauses were in a ver$ small print and the plainti( signed the document without reading. 0ne clause exempted the defendant from liabilit$ if the machine turned out to be defective. &t wor!ed for onl$ a few da$s. The plainti( sued and the defendant relied on the exemption clause in the agreement. &t was held that the defendant was not liable as the document contained the terms of the contract and the plainti( had signed the same and was therefore bound. INCOR+ORATION OF E2E'+TION CLAUSES IN CONTRACTS )n exemption clause ma$ be made part of a contract/ a. G$ signature b. G$ notice 4/ INCOR+ORATION BY SI7NATURE/ &f a document signed b$ the parties to a contract contains an exemption clause, the court must be satised that/ a. The document contained the terms of the contract between the parties b. &t was signed b$ the part$ a(ected voluntaril$
8ignature pima acie means acceptance. ) part$ cannot after signing a document argue that it did not read, understand or that the print was too small. &t was so held in LA3stange 6. Gauco#/ 4owever if there is evidence that the signature was procured b$ fraud or misrepresentation of the contents of the document the signature is voidable at the option of the innocent part$. )s was the case of "utis v. "hemical "leaning ? Deing "o. the plainti( too! a wedding dress to the defendant shop for cleaning and was given a document to sign. 8he re'uested the shop assistant to explain to her the contents and was informed that the document exempted the compan$ from liabilit$ for an$ damage caused to the decorations of the dress. 8he signed the document without reading. 4er dress was damaged and stained. 8he sued the compan$ which relied on the exemption clause which excluded it from liabilit$ for an$ damage. The plainti( pleaded that the contents of the document had been misrepresented to her and hence the signature, it was held that the signature was voidable at her option and the compan$ was liable.
5/ INCOR+ORATION BY NOTICE/ 1hat the exemption clause is not contained in a document re'uiring an$ signature, the court must be satised that the part$ a(ected b$ the clause was aware of its existence when the contract was entered into. )s was the case in &ake v. South 3asten Railwa "o. The plainti( had left in luggage at a railwa$ station luggage o(ice and was given a tic!et containing the words G%ee )!1./ )t the bac! was a clause exempting the compan$ from liabilit$ for lost luggage. The plainti(-s luggage was lost and he sued. The compan$ relied on the exemption clause.
&t was held that the compan$ was not liable as it had brought the exemption clause to the plainti(-s notice who was therefore bound. 4owever, a belated notice of an exemption clause has no e(ect on the contract as it is not part of it. &n Olle v. Mal#oough "out the plainti( had boo!ed in a hotel and paid for a wee!s board, she was given a !e$ to her room where there was a notice exempting the hotel from liabilit$ for lost items. The notice was behind the door. >uests were re'uested to deposit valuable with the manageress of the hotel. =uring her absence a stranger opened the room and stole her expensive clothing. 8he sued. The hotel relied on the exemption clause in the room. &t was held that the hotel was liable as the exemption clause was brought to the plainti(s notice after the contract had been concluded. ) similar holding was made in Loughe v. :ena Saai Lodges and )otels Ltd. 1here the plainti( who was a guest in a hotel was inured near the swimming pool next to which was a notice exempting the hotel from liabilit$ for inuries sustained b$ persons near the swimming pool. &t was held that the hotel was liable as the exemption clause was not part of the contract. I# %(ou"& )e no#e& #(!# !# o--on "!@ e;e-$#ion "!u%e% on#!ine& in #i1e#% or reei$#% i%%ue& ofer $!*-en# o, ! %u- o, -one* !re no# &ee-e& #o )e $!r# o, #(e on#r!# !% #(e #i1e# or reei$#% i% evi&ene o, $!*-en# !n& no# #(e )!%i% o, #(e on#r!#/ &n 'homton v. Shoehane &aking "o. Ltd. The defendant operated an automated par!ing lot. Iotorists had to insert coins to obtain a receipt so as to access the par!ing lot. Gehind the receipt was a notice exempting the defendant from liabilit$ for inuries sustained within the par!ing lot. The plainti( who had accessed the par!ing lot in the ordinar$ manner was inured and sued.
The defendant relied on the exemption clause on the tic!et. 4owever it was held that the defendant was liable as the clause had not been incorporated into the contract. ) similar holding was made in the case of "happletton v. Ba D" RULES RELATIN7 TO ENFORCE'ENT OF E2CLUSION9E2E'+TION CLAUSES For a court of law to give e(ect or consider the e(ect of an exemption clause it must be satised that the exemption clause was an integral part of the contract. 8ince exemption clauses are generall$ unfair to the wea!er part$, Courts have evolved rules which to some extent ensure that the unfairness is mitigated. $. )n exemption clause must have been incorporated into the contract either b$ notice or signature. The part$ a(ected must have been aware of the exemption clause when the contract was entered into. (. &f contractual terms are contained in a document, it must be evidence that the document was the basis of the contract and was signed b$ the parties voluntaril$ as was the case of LA3stange v. Gauco#. *. For an exemption clause to be given e(ect it must be clear and denition free from vagueness or ambiguit$.
&n the event of an$
ambiguit$ the clause is interpreted 'ontra proferente#. This is the Contra !roferentem Ru"e of interpretation under which clauses are interpreted restrictivel$ against the part$ rel$ing on them. )s was the case in Oma Sale v. Besse and "o. Ltd . 1here in a contract of sales of goods, the seller exempted itself from liabilit$ for breach of Jwarranties-. &t breached an implied condition in the 8ale of >oods )ct. ) 'uestion was whether the term warranties included conditions. &t was held that since the term warranties were vague. &t had to be interpreted restrictivel$ against the seller and therefore did not include conditions. 4ence the seller was liable.
+. )s a general rule, onl$ person-s priv$ to a contract can ta!e advantage of an exemption clause in the contract. &t was so held in Scuttons Ltd. v. Midland Silicones ltd. &n )alal Shipping "o. v. SB; and ;nothe! a contract of carriage of goods b$ sea exempted the carrier from liabilit$ for an$ damage to the good in the course of transit. The good were damaged in the course of unloading from the ship and the plainti( sued. The carrier relied on the exemption clause and escaped liabilit$. The unloading compan$ purported to rel$ on the same clause. &t was held that it could not do so as it was not part$ to that contract and was therefore liable. 2. ) court of law would generall$ not give an exemption clause e(ect if doing so enable the part$ evade what amounts to be the fundamental obligation of the contract or a fundamental breach. This rule is based on the premise that ever$ contract has a fundamental obligation to be discharged and a part$ must not use an exemption clause to evade such obligation. &n :asales /)aow0 Ltd v. %allis the defendant inspected a vehicle and decided to ta!e it on 4ire #urchase terms. To facilitate the transaction, the vehicle was sold to the plainti( for hiring to the defendant. The defendant completed the 4ire purchase application form and paid a deposit. The form contained a clause to the e(ect that *no condition or warrant$ that the vehicle is roadworth$ or t for an$ purpose is implied herein+. 0ne da$, the defendant saw a vehicle outside his house which resembled the vehicle in 'uestion. 4owever on scrutin$ he discovered it was a mere shell in that the c$linder head was bro!en, all valves were burnt and 3 pistons were bro!en. The vehicle could not move. The defendant refused to ta!e deliver$ or pa$ installments and was sued. 4e pleaded the condition of the vehicle. The plainti( relied on the clause exempting it from liabilit$. &t was held that though the exemption clause was part of the contract. &t could not be given e(ect as to do so would have enabled the plainti( evade a fundamental
obligation of the contract, as it had contracted to sell a vehicle. Gut exempted itself from liabilit$ if the subect matter turned out not to be a vehicle at all. The part$ arguing that a fundamental breach has been committed must prove it and must see! udicial redress within a reasonable time. VITIATIN7 ELE'ENTS FACTORS AFFECTIN7 CONTRACTS These are circumstances which interfere with the enforceabilit$ of a contract. The$ have a negative e(ect on contracts. The$ ma$ render a contract void or avoidable. ) void contract is unenforceable while avoidable contract is enforceable unless avoided. These factors include/ 5. Iisrepresentation 3. Iista!e 7. =uress 9.
4/ 'ISRE+RESENTATION/ This is a false representation. &t is a false statement made b$ a part$ to induce another to enter into a contractual relationship. &t renders the contract avoidable at the option of the innocent part$. 4owever for the innocent part$ to avoid the contract, it must be proved that/ 5. The statement in 'uestion was false in a natural particular i.e. it was untrue in whatever it referred to. 3. The statement was more than a mere pu( or sales tal!. 1hether a statement is a pu( or a misrepresentation depends on what a reasonable person could deem it to be.
7. The statement was one of fact not opinion. )s a general rule opinion does not amount to misrepresentation. &t was so held in 3dington v. ,itCmauice. 4owever an opinion ma$ amount to misrepresentation if/ a. The ma!er does not honestl$ hold that opinion b. The opinion purports to be based on certain facts within the ma!er-s !nowledge but whose truthfulness he does not verif$. 9. The false statement was intended to be relied upon b$ the representer recipient:. @. The false statement was infact made b$ the other part$ to the contract. )s a general rule, omission, silence or nondisclosure does not amount to misrepresentation. 4owever it ma$/ a. &n contracts of utmost good faith e.g. insurance b. &n condential relationships c. 1here disclosure is a statutor$ re'uirement d. 1here the statement made is half true e. &f the statement was true when made but turns false due to changes in circumstances before the contract is concluded but the ma!er does not disclose its falsit$ as was the case in %ith v. OAanagan. B. The false statement in"uenced the part$-s decision to enter into the contract. The part$ must show that the false statement was made before or when the contract was concluded. 4owever the false statement need not have been the onl$ factor the part$ is considered. &n ;ndews v. MockodE where the plainti( had relied on untrue statement in a compan$-s prospectus, issued b$ the defendants it was held that the defendants were liable in damages for the statements as the plainti( had relied on them. D. The false statement was innocentl$, fraudulentl$ or negligentl$ made. A INNOCENT 'ISRE+RESENTATION
) statement is deemed to be innocentl$ misrepresented if the ma!er honestl$ believed in its truth though it was false and had no means of ascertaining that it was false as was the case in Osca "hess v. %illiams where the defendant had no means of ascertaining that the $ear of registration of the vehicle was incorrect. &t ;lkehielm v. De Mae where the defendants who were directors of a compan$ issued a prospectus stating that 567 of the compan$ shares had been ta!en up in =enmar! which was not true at the time. &t was held that the shares would be ta!en up in =enmar!. ) similar holding was made in De v. &eek. &f innocent misrepresentation is proved, the innocent part$ ma$ either/ 5. )ppl$ for rescission of the contract 3. 8ue for indemnit$ for an$ direct nancial loss occasioned b$ the representation as was the case in %hittington v. Seale-)ane where the defendant had innocentl$ misrepresented the sanitar$ condition and habitation of his premises to the plainti( who as a conse'uence too! a lease to carr$ on the business of poultr$ breeding. The premises were not in a sanitar$ condition and mere unt for human habitation. 8ome of the defendant-s poultr$ died while others lost value this farm manager was ta!en ill and the premises were declared unt for habitation. The defendant spent mone$ putting it in a habitable condition, and paid outstanding rates. &t was held that we could onl$ recover the direct nancial loss su(ered.
B FRAUDULENT 'ISRE+RESENTATION/ ) statement is deemed to be fraudulentl$ misrepresented if the ma!er/ a: 4as !nowledge that it is false b: Ia!es it carelessl$ and rec!lessl$ c: =oes not believe in its truth This test of fraud was formulated in De v. &eek. &n ;ndew v. Mockod where the defendants had issued a prospectus containing untrue statements
and the plainti( applied for @A shares and was allowed the same but subse'uentl$
sued
the
defendants
in
damages
for
fraudulent
misrepresentation. &t was held that the defendants were liable as the$ were aware of the falsit$ of the statements . ) similar holding was made in Batholomew v. &etonilla. %emedies for fraudulent misrepresentation are either/ i. ii.
)ction for rescission of contract. =amages for the fort of deceit.
C NE7LI7ENT 'ISRE+RESENTATION/ ) statement is deemed to be negligentl$ misrepresented if the ma!er has both means of capacit$ of ascertaining its falsit$ but fails to do so. The ma!er
is
deemed
negligent
as
a
reasonable
person
in
such
circumstances would have so ascertained. 4owever, for negligent misrepresentation to be relied upon, it must be proved that/ 4/ T(ere @!% ! %$ei!" re"!#ion%(i$ )e#@een #(e -!1er !n& rei$ien# o, #(e %#!#e-en#% (ene #(e -!1er o@e& #(e rei$ien# ! "e0!" &u#* o, !re/ &t was so held in )edle Bene and "o. ltd. 6. )elle and &atnes Ltd. ) customer of the defendant ban! approached the plainti( ban! for some guarantees. The plainti( ban! wrote to the defendant see!ing to show the credit worthiness of the defendant customers. The defendant ban! in 3 letters written on a Jwithout responsibilit$ basisconrmed that their customer was credit worth$. The
plainti(
extended
the
guarantee
but
due
to
uncreditworthiness, the plainti( su(ered loss of H5,AAA.
the
customer-s
The plainti( sued. &t was held that though the defendant ban! was negligent it was not liable as the information had been given on a Jwithout preudice 6 responsibilit$ basis+. 8/ 5/ T(!# #(e $!r#* %ufere& "o%% o, ! n!ni!" n!#ure/ &n :iimu 3state /G0 Ltd. v. :.G. :ode the plainti( compan$ instructed the defendant a law$er to value a piece of land for it. The defendant gave a gure without the assistance of a proper valuation of the estate. The gure was far above the mar!et value and the compan$ sued in damages for negligent misrepresentation. &t was held that the defendant was liable to pa$ the di(erence in value b$ reason of negligence.
'ISTAKE There are two t$pes of mista!es vi2/ Iista!e of law Iista!e of fact )s a general rule a mista!e of law does not a(ect a contract however, a mista!e of foreign law ma$ a(ect a contract.
Iista!es of facts a(ected
contractual relationships. ) mista!e is said to be misapprehension of a fact or factual situation. &t is an erroneous assumption. Iista!e of fact that e(ect contracts are generall$ referred to as operative mista!es and the law recogni2es various t$pes of operative mista!es/ a: Common b: Iutual c:
4/ CO''ON 'ISTAKE/ This is a mista!e as to the existence or ownership of the subect matter. Goth parties ma!e the same mista!es. Each part$ understands the others intention but both are mista!en about some underl$ing fundamental fact. Common mista!e rendered void in two circumstances/ "ases o Res 3>inta@
These are circumstances in which parties about the
subect matter.
This circumstance is contained in sec of the sale
of goods )ct which provides where there is a contract for the sale of specic goods which without the seller-s !nowledge have perished the contract is void. &n "outuie 6. )astle the parties entered into a contract for the sale of a large 'uantit$ of corn which at the time was supposed to be on transit to Gritain from >reece but un!nown to the parties the ship captain had sold the corn in Tunisia due to overheating and fermentation. &t was held that the bu$er was not liable to pa$ the price as the contract was void for common mista!e as the subect matter did not exist. ) similar holding was made in Lessie ;ndeson 6. 6alla#dos :halidas "ompan where parties had contracted to bu$ and sell a 'ualit$ of gunn$ bags but un!nown to them the bags had been destro$ed b$ r. &t was held that the contract was void for common mista!e. "ase o Res Sua@ These are circumstances in which parties are mista!en about the ownership of the subect matter. The part$ purporting to bu$ is the legal owner but both are unaware of the fact. The purported seller has no title to pass hence the purported contract is void.
&t was so held in
Bingham 6. Bingham.
5/ 'UTUAL 'ISTAKE/ This is a mista!e to the subect matter of contract. &t arises when parties misunderstand each other or at cross purposes. between them for lac! of consensus ad idem.
o agreement arises
4owever, not ver$ misunderstanding constitutes a mutual mista!e; it depends on what a reasonable person would deem the circumstances to be. &n RaFe 6. %ichelhause the parties enter in into a contract for the sell of cotton to be shipped to the <.?. on board the peerless from the port of Gomba$.
8/ UNILATERAL 'ISTAKE/ This is a mista!e as to the identit$ of one of the parties to the contract. 0nl$ one part$ is mista!en and the mista!e is induced b$ the other part$.
&t dealt with a person other than the one it intended to deal with. The person it dealt with was aware of that fact. The identit$ of the person, the part$ intended to deal with was fundamental to the contract.
G$ proving these facts the part$ establishes that the contract was void. &n "und v. Lindsa and "o. Ltd. ) fraudulent person !nown as Glen!arn ordered goods from Lindsa$ and Co. Ltd his signature resembled that of a compan$ named Glen!iron and Co. Lindsa$ and Co. had heard of Glen!inron and Co but had not dealt with them. Glen!arn had 'uoted an address on the same street as Glen!iron and Co. Thin!ing that the$ were dealing with Glen!iron and Co. Lindsa$ and Co. dispatched the goods to the address. Glen!arn too! deliver$ and sold them to cund$. Lindsa$ and Co. sued Cund$ in damagers of conversion. &t was held that the$ were entitled to damages as Cund$ had no title to the goods li!e Glen!arn before him as the contract was void. ) similar holding was made in .I 4utchinson and gave an address which one of the sisters conrmed with a local post o(ice. The$ accepted the che'ue which was subse'uentl$ dishonoured b$ which time the car had been sold to the defendant. The plainti(s sued the defendant for the car. &t was held that the$ were entitled to it as the contract between them and the fraudulent person was void for unilateral mista!e. This decision contrasts with that in &hillips v. Books Ltd. 1here a fraudulent person !nown as orth entered #hillips shop and selected goods valued at "7,AAA including a ring. 4e o(ered to pa$ b$ che'ue which #hillips refused. 4e then introduced himself as 8ir >eorge Gullough and gave a London address which #hillip conrmed with the director$. 4aving satised himself, #hillips let Ir. orth have the ring in return for the che'ue which was dishonoured b$ which time the ring had been pledged
with Groo!s Ltd for a loan. #hillips sued for the return of the ring. &t was held that he was not entitled to it as there was no mista!e. The court was of the view that he had dealt with the person he intended to deal with. / DOCU'ENTS 'ISTAKENLY SI7NED This is a mista!e as to the nature of the contract; it arises when a part$ to a contract signs the wrong document. 8uch a mista!e does not render the contract void but avoidable at the option of the part$. To avoid the contract, the part$ must prove that/ a. The document signed was fundamentall$ di(erent from the one the part$ thought it was signing. b. The part$ was neither careless nor negligent when it signed the document. G$ proving these facts, the part$ establishes the plea of non-est actum which literall$ means this is not m$ deed.
8/ DURESS )t common law duress means actual violence or threats thereof. &t exists where a contractual relationship is procured b$ actual violence on the person or threats thereof.
The part$ is compelled or coerced to contract. For the most part, duress consists of threats. =uress was developed b$ the common law with a ver$ narrow scope. &t renders a contract voidable at the option of the innocent part$. For the contract to be avoided, the innocent part$ must prove that/
The threat was intended to cause fear, inur$ or loss of life
The threat was directed to his person or bod$ as opposed to his propert$. &t was so held in ;ltee v. Backhouse. ) threat directed at the bod$ of a member of the part$-s household amounts to duress
The threat was illegal e.g. a threat to sue, prosecute or cause imprisonment for no reasonable cause. ) threat to enforce once legal rights does not amount to duress. &t was so held in )assan ;li
/ UNDUE INFLUENCE &t is said to exist where a part$ dominates the others will thereb$ inhibiting its exercise of an independent udgement on the contract. 0ne part$ thus exercises overwhelming in"uence over the other.
parentchild,
advocateclient,
doctorpatient,
trusteebeneciar$,
religious leaderdisciple; undue in"uence is $re%u-e& in favour of the wea!er part$. &t is the dut$ of the stronger part$ to show that the wea!er
part$ made an independent decision on the contract. e.g. he had an advocate of his own. &n Ottoman Bank "o. Ltd. v. Mawani! the plainti( ban! extended a loan to a business owned b$ the defendant-s father and the defendant guaranteed the amount. The fathers business was unable to pa$ the loan and the ban! sued so to enforce the guarantee. Evidence that the defendant was still under the control of the father. 4e wor!ed in the fathers rm and had no independent source of income. &t was held that he wasn-t liable on the guarantee as it was voidable at his option for the father-s undue in"uence.
5/ W(en $!r#ie% (!ve no %$ei!" re"!#ion%(i$. The part$ pleading undue in"uence must $rove it b$ evidence. The circumstances must be such that the part$ did not ma!e an independent udgement on the transaction, as was the case in %illiams v. Bale! where the defendant entered into a contract promising to pa$ monies withdrawn from a ban! b$ the son. The ban!er had made it clear that if no arrangement was arrived at, the defendant-s son would be prosecuted for the o(ence. 1hen sued the defendant pleaded the ban!er-s undue in"uence. &t was held that he was not liable as the contract was voibale at his option. 8/ Unon%ion!)"e )!r0!in%/ These
are
unfair
bargains.
The$
are
transactions
entered
into
in
circumstances in which one part$ ta!es advantage of its position to procure the deal. 8uch transactions are voidable at the option of the innocent part$. The concept of unconscionable bargains was developed b$ e'uit$ courts as an extension of the doctrine of undue in"uence and was explained b$ Lord =ening in David ". Builde ltd. v. Rees. &n Llods Bank "o. Ltd v. Bund! the plainti( ban! extended a loan to a business owned b$ the defendant-s son. The defendant guaranteed the loan to the tune of "5,AAA but the ban! re'uired further guarantee. 4e extended it to "B,AAA. 4is law$er informed him that it would be unwise to extend the guarantee further. The defendant owned a house with "5A,AAA. )n o(icial of
the plainti( ban! visited the defendant and procured a further guarantee of up to "55,AAA. The sons business collapsed and the ban! sought to enforce the guarantee against the father who pleaded that it was unconscionable. &t was held that the guarantee was voidable at the option of the defendant as it was unfair.
RESCISSION The essence of this remed$ is to restore the parties to the position the$ were before the contract. &t is an e'uitable remed$ whose award is discretional. The
remed$
ma$
be
availed
whenever
a
contract
is
vitiated
b$
misrepresentation. 4owever the right to rescind a contract is lost in various wa$s/ 5. De"!*: ) contract cannot be rescinded if a part$ has slept on its right for too long as *dela$ defeats e'uit$+. &n Lea v.
ILLE7ALITY
The term illegalit$ does not necessaril$ mean that a criminal o(ence is involved. &t means that the contract in 'uestion is unenforceable as it is inurious to the public or is inconsistent with the public good. )n illegal contract is unenforceable. This is because for an agreement to be enforceable, it must have been entered into for a lawful purpose. ) contract ma$ be declared, illegal b$ statutes or a court of law. ! Con#r!#% &e"!re& i""e0!" )* S#!#u#e%/
the amount amount award awarded ed b$ the court. court. 8uch 8uch a contra contract ct is illega illegall and unenforceable. c. '!in#en!ne: this '!in#en!ne: this is a contract whereb$ a part$ provides nancial assistance to another to enable him sue a 7 rd part$ for no reasonable cour course se.. 8uch 8uch a cont contra ract ct faci facili lita tate tes s the the hara harass ssme ment nt of a part part$ $ b$ another through the courts. &t is illegal and un enforceable. iv Con#r!#% #o &e,r!u& %#!#e revenue/ ) contract whose obect is to den$ the state whether central government or local
governme nment
revenue
b$
wa$
of
evading
tax
is
illegal
and
unenforceable. &n Mille v. :alnski the :alnski the plainti( who was an emplo$ee of the defendant a "5A per wee! had agreed that the amount deducted from the salar$ as tax
was refundable as an allowance. &n an action to recover the refund, it was held that it was irrecoverable as the obect of the contract was to defraud the state revenue. v Con#r!#% "i!)"e #o $ro-o#e orru$#ion in $u)"i/ $u)"i/ 8uch a contract is unenforceable as corruption is contrar$ to public polic$. &n &akinson &akinson v. "ollege o ;m#ulance and ;nothe! ;nothe! the the secr secret etar ar$ $ of a charit charitabl able e organi organi2a 2atio tion n inform informed ed that that plaint plainti( i( that that it was was on to it. The plainti( gave " 7,AAA but was was not !nighted as onl$ the ?ing could could bestow bestow the title. &n an action to recover the sum, it was held that it was irrecoverable as the contract was illegal. vi Con#r!#% "i!)"e #o $ro-o#e %e;u!" i--or!"i#* i--or!"i#* These are contracts 'ontra )ono# more# contrar$ more# contrar$ to good morals:. 8uch a contract is unenforceable on account of illegalit$. illegalit$. The contract ma$ be illegal as perfo perform rmed ed.. &n &eace &eace v. Books the plainti( plainti( owned a beauti beautiful ful horse drawn drawn carria carriage ge which which he tent tent to the defend defendant ant for 53months 53months at stated stated charges. The plainti( !new that the defendant was a prostitute and intended to use the carriage to solicit in"uential customers. &n an action to enforce pa$m pa$men entt of the the hiri hiring ng char charge ges, s, it was was held held that that that that cont contra ract ct was
unenforceable as it was illegal as performed as its purpose was to promote sexual immoralit$.
vii: ) contract based on an illegal contract is also an illegalit$ of the other contract. EFFECTS OF ILLE7ALITY )n illegal contract is said to be Jbe$ond the pale of law-. 8uch a contract is unenforceable it creates no rights and imposes no obligations on the parties. either part$ is bound to perform. Ione$ or assets changing hands under an illegal contract is irrecoverable as gains and losses remain where the$ have fallen. 4owever such mone$ or assets ma$ be recovered in certain circumstances; circumstances; i.
1her 1here e either either part part$ $ repent repents6 s6 regre regrets ts the the ille illega gali lit$ t$ befor before e the contr contrac actt is substantiall$ performed.
ii. ii.
1here here the part arties ies are are not not in in pari *e"i'to not *e"i'to not e'uall$ to blame for the illegalit$:, the less blameworth$ part$ ma$ recover. recover.
iii. iii.
&f the the owner owner of the the mone$ mone$ or asset asset esta establ blis ishe hes s title title ther theret eto o witho without ut rel$in rel$ing g upon upon the illegal illegal contrac contract. t. )s was the case in ;ma Singh v. :ulu#a :ulu#a where a piece of land had changed hands under an illegal; contract but the plainti( established his title.
VOID CONTRACTS CONTRACTS These are contracts which the law treats as non existent, the$ are generall$ unenforceable. 4owever, if a contract is onl$ void but not illegal some rights ma$ be enforced b$ exception. ) contract ma$ be declared void b$ statute or a court of law. 4/ Con#r!#% voi& )* S#!#u#e/ aming >aming )ct, )ct, 59@, 59@, wager wagering ing contra contracts cts are void. void. ) @!0er is is a contract whereb$ 3 persons or groups of persons with di(erent views
on
the
outcome
of
some
uncertain
event
agree
that
some
consideration is to pQass between them depending on the outcome. 8uch a contract is void. 5/ Con#r!#% voi& !# Co--on L!@ Cour#% o, L!@/ These are contracts declared void b$ courts of law for being contrar$ to public polic$ e.g. ! Con#r!# #o ou%# #(e uri%&i#ion o, #(e our#/ This is a contract which purports to den$ the parties the right to see! udicial redress. ) Con#r!#% $reu&ii!" #o #(e %#!#u% o, -!rri!0e/ This is a contract which interferes with the marriage institution. E.g. a. Iarria Iarriage ge bro!er bro!erage age cont contra racts cts.. b. Contracts Contracts whose whose tendenc tendenc$ $ is to encoura encourage ge separat separation. ion. CONTRACTS IN RESTRAINT OF TRADE/ This is a contract b$ which a persons future libert$ to engage in a profession or trade in a particular manner or with particular persons is voluntaril$ or involuntaril$ restricted e.g. )n emplo$ee covenant not to wor! for a business rival or set up a similar business after leaving emplo$ment. )t Common Law, Law, a contra contract ct in restra restraint int of trade trade is pima acie acie void for being contrar$ to public polic$. 4owever, 4owever, such a contract ma$ be enforced if it is proved that; 5. The restraint restraint was was reasonabl$ reasonabl$ necessa necessar$ r$ to protect protect the interests interests of the restraining part$. 3. The restraint restraint was was reasonabl reasonable e to the part$ part$ being restr restrained ained.. 7. The restrai restraint nt was was not inuri inurious ous to the public public.. Contracts in restraint of trade ma$ be voluntar$ or involuntar$. involuntar$. ! Vo"un#!r* Re%#r!in#%/ These are restraints agreed to b$ the parties to the contract e.g. 5. %estra %estraint ints s accepte accepted d b$ emplo$ee emplo$ee..
3. %estraints accepted b$ the seller of business. 7. %estraints accepted b$ a seller or distributor of goods. 4/ RESTRAINTS ACCE+TED BY E'+LOYEE/ The emplo$ee covenants not to wor! for a business rival after leaving emplo$ment or not to setup a similar business next door. 8uch a restraint is pima acie void. &n &utsman v. 'alo! the defendant who was an emplo$ee in a tailoring business, covenanted not to wor! for the plainti(s business rival in some 7 dened areas of the cit$ of Girmingham within 7 $ears of leaving emplo$ment. 4e wor!ed in one of them within the 7 $ears and the plainti( applied for an inunction to retrain him from doing so and the court granted the same on the ground that the restraint was reasonable to the parties. &n ;ttwood 6. Lamont the defendant was emplo$ed in a tailoring business as head of the cutting department; he covenanted not to set up a tailoring business within a radius of 5A miles from the emplo$ers business. 4e established a business outside the 5A miles but all his customers were from within the 5A miles. The former emplo$ers sued for an inunction to restrain him from doing so. &t was held that the restraint was unenforceable as it was too worded and hence unreasonable to the defendant. ) world wide restraint to an emplo$ed ma$ be enforced it reasonable to the parties and can onl$ be e(ective if enforced on a worldwide basis. )s was the case in Nodenelt v. Ma>im Nodenelt Guns and ;mmunition /$14+0 Ir. ordenfelt was the onl$ manufacturer of a special gun and ammunition. 4e sold the business to compan$ for H3D.@AA. 3 $ears later the compan$ merged with another to from the defendant compan$ which emplo$ed Ir. ordefelt at a salar$ of H3,AAA per $ear. The contract of emplo$ment provided that Ir. ordenfelt was not to engage in gun or ammunition business an$where in the world for 3@ $ears and would not compete with the compan$ in an$ ma$ for 3@ $ears.
The 4ouse of Lords held that whereas the restraint not to engage in the in the >un business was reasonable and therefore enforceable; the restraints not compete with the compan$ for 3@ $ears was unreasonable and could not be enforced. &n :oes Manuactuing "o. v. :olok Manuactuing "o. two companies dealing in similar products covenanted not to emplo$ former defendant engaged a former emplo$ee of the plainti( within the @ hours. The plainti( sued for an inunction to restraint the defendant. &t was held that the restraint in enforceable as it was unreasonable to the parties. 5/ RESTRAINT ACCE+TED BY VENDORS OF BUSINESS The seller of a business ma$ covenant not to set up a similar business next door, this ma$ be necessar$ to protect the bu$er-s business. 8uch a restraint is void common law. 4owever, it ma$ be enforced if the cost is satised that having regard to the t$pe or nature of business, duration of the restraint , area covered and other circumstances, the restraint is reasonable to the parties. &n Dias v. Souto! the defendant sold a business situate on the &sland of Pan2ibar, it speciali2ed in merchandise for the expatriate communit$. 4e covenanted not to set up similar business within the Pan2ibar protectorate. 4e established a similar business on the &sland of #emba. The plainti( applied for an inunction to restrain him from doing so. The court enforced the restraint on the ground that it was reasonable. This decision was based on the speciali2ed nature of the plainti( business.
8/ RESTRAINT ACCE+TED BY THE SELLERS OR DISTRIBUTORS OF 7OODS SOLUS A7REE'ENT ) seller or distributor ma$ enter in to a contract with a wholesaler or manufacturer which restricts his ac'uisition of goods, trading hours etc. The restraint is often referred to as So"u% A0ree-en#% !n% #(e* in"u&e:/
4/ T*in0 Coven!n#/ The seller underta!es to purchase all his products from a particular wholesaler or manufacturer; this is in return for certain discounts. 5/ Co-$u"%or* Tr!&in0 Coven!n#/ The seller covenants to !eep his business open for reasonable hours ever$da$. 8/ Con#inui#* Coven!n#%/ The seller ta!es to extract similar covenants form the person who purchases the business from him. 8uch restraints are &ima ,acie void but ma$ be enforced b$ a court of law if reasonable to the parties and not inurious to the public. ) Invo"un#!r* re%#r!in#%/ These are restraints imposed b$ trade associations and professional bodies on their members. The$ are involuntar$ in character. 8uch restraints are &ima ,acie void but ma$ be enforced if reasonable to the parties and are not inurious to the public. KENYAN +OSITION &n ?en$a contracts in restraint of trade are governed b$ the Contracts &n %estraint of Trade )ct B,
Cap 24 Laws of Kenya
CONTRACTS +,E((I /I0EI These are contracts of the *utmost good faith+. &n the contract of sale of goods, the seller is not bound to disclose an$thing to the bu$er in relation to the subect matter. The operative principle is !ve!# e-$#or which literall$ means *Gu$er beware+. ) bu$er ta!es the goods as the$ are, however, in contracts of the utmost good faith, both parties are bound
to disclose material facts
within its
actual and presumed !nowledge failing which the contract is voidable at the option of the innocent part$. E.g. 4 In%ur!ne Con#r!#% 5 +!r#ner%(i$ A0ree-en#% FOR'ALITIES &n addition to the basic elements of a contract certain contracts are subect to certain formalities which must be complied with for the agreement to be legall$ enforceable. The formalities includes/ 4/ RE6UIRE'ENT OF WRITIN7 8ome contracts must be embodied in a formal document e.g. 4ire #urchase )greement, contract of Iarine &nsurance 5/ RE6UIRE'ENT FOR WRITTEN EVIDENCE 8ome contracts must be evidenced b$ some note or memorandum which must contain/ a. =escription of the parties b. =escription of the parties c. The Consideration d. 8ignature of the parties E.g. Contracts of >uarantee, Contracts of &nsurance other than Iarine. 8/ RE6UIRE'ENT OF CONSENT/
prevent
such
inustice,
e'uit$
developed
the
doctrine
of
#art
#erformance. THE DOCTRINE OF +ART +ERFOR'ANCE The doctrine is to the e(ect that where parties have entered into an oral agreement and before the formalities of writing are complied with one of the parties does something
in furtherance of the
agreement , the other
part$ cannot be heard to sa$ that there was no agreement between them.
7
Cap 3!2 Laws of Kenya
This doctrine was developed b$ e'uit$ and is now contained in the poviso to sec. 7 of the Law of Contract )ct.
Entr$ into a part$-s premises before the formalities is complied with.
b:
Continuation of possession before the formalities is complied with.
&n "edit ,inance "opoation v. ;li Mwakasanga! the defendant opted to ta!e a truc! on 4ire #urchase terms; he completed the application form, paid a deposit and too! deliver$ of the truc!.
8ubse'uentl$, the plainti(
alleged that there was no contract between them as it had not signed its part of the contract.
4owever, it was held that the defendant-s conduct
amounted to part performance and hence there was a contract between them.
DISCHAR7E OF CONTRACT ) contract is said to be discharged, when the obligation created b$ it ceases to bind the parties who are now freed from performance. 4owever, whether a part$ is liable or not after discharge, depends on the method of discharge. ) contract ma$ be discharged in the following wa$s/ 5. Express agreement 3. #erformance 7. Greach 9. &mpossibilit$ or =octrine of Frustration @. 0peration of Law. 4/ DISCHAR7E BY E2+RESS A7REE'ENT ) contract ma$ be discharged b$ agreement if the parties thereto expressl$ agree
to discharge
the
contract.
consideration to support the discharge.
The
mutual promises constitute
=ischarge b$ agreement ustied on the premise that whatever is created b$ agreement ma$ be extinguished b$ agreement. =ischarge b$ agreement ma$ be bilateral or unilateral ! Bi"!#er!" Di%(!r0e &f neither performs its part of the contract, the obligation are said to be executor$ and the discharge is bilateral as both parties agree not to perform. The mutual promises constitute consideration. ) Uni"!#er!" Di%(!r0e &f either of the parties has wholl$ or partiall$ performed its part of the contract, the obligations are said to be executed and the discharge is unilateral. The part$ that has performed discharges the other from performance.
5/ DISCHAR7E BY +ERFOR'ANCE/ ) contract is discharged b$ performance if both parties perform their mutual obligations as agreed. Each part$ must have performed its part$.
Iedieval common law insisted that discharge b$ performance was onl$ possible if parties had performed their obligations precisel$ and exactl$. This is the common law Do#rine o, +rei%e !n& E;!# which is to the e(ect that parties must however their contractual obligations to the letter. Ever$ aspect of the contract must be performed. &t has been to observed that it is a fundamental principle of law that contractual obligations be performed precisel$ and exactl$. The =octrine of precisel$ and exact is exemplied b$ the decision in "utte 6. &owell. Ir. Cutter agreed to assist #owell, a ship captain as a second matter on a ourne$ from amaica to Liverpool, the ship sailed on )ugust 3 nd, and Cutter died on 8eptember 3Ath, 5 da$s before the ship was due at Liverpool. Irs. Cutter sued for compensation for the wor! done b$ Ir. Cutter, it was held that nothing was pa$able b$ the defendant as Ir. Cutter had not performed the contract precisel$ and exactl$.This case demonstrates that strict application of the doctrine of precise and exact occasion-s unust enrichment. Common Law admitted exceptions to the doctrine of precise and exact to mitigate its harshness.
These are circumstances in which parties will be
compensated for wor! done uantum meuit: or discharged even though the$ have not performed precisel$ and exactl$. E2CE+TIONS: T(e%e !re #(e !%e% ,or 0r!n#in0 uantum meruit @(i( !re #(e e;e$#ion% #o #(e &o#rine o, $rei%e !n& e;!# 4/ Divi%i)"e on#r!#%/ )lthough there is a presumption that the contract ought to be viewed in its entiret$, some contracts are b$ their mature divisible and performance of part thereof entitles the part$ to pa$ment for wor! done. E.g. Contract of carriage of goods pa$able per tonne. The carrier is entitled to pa$ment for the 'uantit$ carried but ma$ be sued for not carr$ing the entire 'uantit$ as was the case in Ritchie v. ;tkinson where a contract of carriage of goods, the
shipper carried less than the agreed 'uantit$. &t was held that the shipper was entitled to pa$ment on Huantum Meuit for wor! done:. 5/ Su)%#!n#i!" $er,or-!ne/ &f a part$ has substantiall$ performed its part of the contract, it is entitled to pa$ment for wor! done. 1hether a contract is substantiall$ performed is a 'uestion is a 'uestion of fact. &n Meshides Mehta and "o. v. Baon 6ehegen the defendant engaged the plainti( to construct a house for him and the contractual price was pa$able b$ installments. )fter completion of the house, the defendant refused to pa$ the last instalment on the ground that the house has some structural defects. The plainti( sued.
&t was held that the plainti( was entitled to the
installment less the amount due defendant ma$ li!el$ to spend to correct the defect. This decision was based on the fact the plainti( had substantiall$ performed its part of the contract 8/ +!r#i!" +er,or-!ne I, Ae$#e& &f a part$ to a contract has expressl$ or b$ implication agreement to pa$ for partial performance, the part$ performing is entitled to pa$ment for wor! done. &n Sumpte v. )edges! defendant engaged the plainti( to construct 3 houses and stables at cost of H@B@. The plainti( abandoned the house after putting up structures valued at H777, the defendant was compelled to complete the houses, subse'uentl$, the plainti( sued for compensation wor! done. &t was held that he was not entitled to pa$ment as the defendant had not expressl$ or b$ implication agreed to pa$ for partial performance. / +reven#e& +er,or-!ne/
&f a part$ is read$ and willing to perform its part of the contract is prevented from doing so or b$ the other or the others fault, such part$ is entitled to pa$ment on uantum meuit. &n &lanche v. "ol#un! the defendant engaged the plainti( to write a boo! for him about himself for H5AA. )fter the plainti( had done the initial research and written part of the boo!, the defendant discontinued the writing, the plainti( sued. &t was held that he was entitled toH@A for wor! done. =/ Fru%#r!#ion o, Con#r!#% ) contract is said to be frustrated when performance of the obligations becomes impossible, illegal or commerciall$ useless b$ reason of extraneous circumstances for which neither part$ is to blame. Frustration of contract terminates it and discharges the parties from performance. >/Ti-e O, +er,or-!ne Contractual obligations must be performed within the prescribed time if an$ or within a reasonable time. &f the contract species the date of performance, time is said to be of the essence of the contract and nonperformance thereof damages the contract. This was the case in &anesa v. &opat the defendant ordered furniture to be delivered on )pril 7Ath.
4owever, it was not read$ b$ this date, the
defendant extended the deliver$ date to Ia$ 5A th but the furniture was not read$ where upon he cancelled the transaction. The furniture was not read$ where upon he cancelled the transaction. The furniture was delivered on Ia$ 53th; the defendant e(used to ta!e deliver$ and was sued. &t was held that he was not bound to do so as time was of the essence of the contract and the plainti( had failed to perform.
8/ DISCHAR7E BY I'+OSSIBILITY OR DOCTRINE OF FRUSTRATION
Iedieval common law was based on the principle of absolute contractual obligations. erman arm$ invaded the countr$ and occupied the region in which the land was situate. The defendant could not across the land or put it into an$ economic use. 1hen sued for the lease charges, the defendant pleaded his inabilit$ to use the land. 4owever, he was held liable since the contract had not provided that he would be discharged if it became impossible to u se the land. This case demonstrates that the Common Law did not originall$ recogni2e the doctrine of frustration. The =octrine is an exception to the principle of absolute contractual obligations. FRUSTRATION OF CONTRACT ) contract is said to be frustrated if performance of the obligation is rendered impossible, illegal or commerciall$ useless b$ unforeseen or extraneous circumstances for which neither part$ is to blame. 1hen a contract is frustrated, it terminates and the parties are discharged The =octrine of Frustration ma$ be ustied on various grounds/ 4/ I-$"ie& Ter- T(eor*/ &t is argued that in ever$ contract, there is an implied term that should such an event occur the parties will be discharged 5/ Ju%# !n& Re!%on!)"e %o"u#ion T(eor*/ &t is onl$ fair that the parties will be discharged. 8/ Di%!$$e!r!ne o, Foun&!#ion T(eor* &t is argued that when a contract is frustrated, its foundation disappears.
/ C(!n0e o, O)"i0!#ion T(eor* &t-s argued that when a contract is frustrated, the obligations of the parties change hence the need to discharge the contract. CIRCU'STANCES IN WHICH A CONTRACT 'AY BE FRUSTRATED 4/ De%#ru#ion o, Su)e# '!##er/ &f the subect matter of the contract is destro$ed before performance and neither of the parties is to blame, the contract is frustrated. &f must be evident that the subect matter was the foundation of the contract. The destruction need not be total but must a(ect the commercial characteristics of the subect matter. &n 'alo v. "aldwell! the defendant had hired the plainti(-s hall to conduct a musical concert at specied charges, before the da$ of the rst concert, the hall was destro$ed b$ re and neither of the parties was to blame. &n an action b$ the plainti( to recover hiring charges, it was held that the$ were irrecoverable as the destruction of the hall frustrated the contract and thereb$ discharged the parties. 5/ Non
4owever, if a contract has more than one foundation the disappearance of one does not frustrate it as the other is capable of performance. )s was the case in )ene Ba Steam#oat "o. v. )utton 8/ I""e0!"i#*/ &f performance change of
of contractual obligations
becomes
illegal b$ reason of
law or otherwise the parties are discharged
as there is no
obligation to perform that which has become illegal. / De!#( or +er-!nen# In!$!i#!#ion/ &n contracts of personal service or performance e.g. emplo$ment, the death or permanent incapacitation of a part$ frustrates the contract and discharges the parties as the obligations are not generall$ transferable. =/ 7overn-en# In#erven#ion/ &f a polic$ act or regulation ma!e it impossible for a part$ to complete its contractual
underta!ing
the
contract is frustrated and
the
parties
discharged e.g. refusal to grant a licence as was the case in :aachi Gas "ompan v.
of certain pipes to be exported to ?arachi. 1hen sued, the
defendant relied on the government refusal to grant the licence. 4owever, it was held that the contract had not been made to obtain the licence ) contract would be frustrated
if a government ta!es possession of the
subect matter or stops the transaction, as was the case in Metopolitan %ate Boad 6. Dick :e and "o. &n ul$ 559, the respondent entered into a contract to construct a dam for the appellant within B $ears subect to an extension.
4owever, sometimes in earl$ 55B, a government minister
ordered the respondent to stop the contract and dispose of its e'uipment and the respondent complied. &t was held that the minister-s act frustrated the contract and thereb$ discharged the respondent. >/ Su$ervevin0 Even#%/ These are events that dela$ performance and thereb$ change the commercial characteristics of the fundamental.
contract.
The
change
must be
)s a general rule, additional expenses do not frustrate a
contract; however, the$ ma$ if the$ render the transaction commerciall$ useless. &n 'sakiolou and "o. Ltd v. No#le 'hol GMB)! the parties entered into a contract for the purchase of a large 'uantit$ of >roundnuts to be shipped from #ort 8udan to 4umburg, the supplier contemplated using the Canal
but which
b$ the time
8ue2
of performance had been closed as a
conse'uence the groundnuts were not supplied. 1hen sued, the supplier argued that the alternative route was too expensive and hence the contract had been frustrated. &t was held the contract had not been frustrated as ; 5. The additional expenses were recoverable from the bu$er 3. The contract had no time limit. 7. The longer route could not damaged the commercial characteri2es of the groundnuts The supplier was liable in damages&n 6ictoia
EFFECTS9CONSE6UENCES OF FRUSTRATION ADJUST'EN'T OF THE RI7HTS OF +ARTIES ON FRUSTRATION Frustrated contracts in ?en$a ae governed b$ the Law %eform Frustrated Contracts: )ct, 597 which applies in ?en$a as a statute of
general
application b$ reason of the schedule to the Law of Contract )ct.
)nticipator$
b:
)ctual
4 ANTICI+ATORY BREACH OF CONTRACT/ This is a situation where a part$ to a contract expressl$ or b$ implication intimates to the other in advance its intention not to perform on the date of performance. Evidence must clearl$ suggest breach of contract. The innocent parties ta!e an$ of the following steps/ ! Sue in D!-!0e%/
The part$ must prove the anticipator$ breach of the contracts well as its willingness to perform its part of the contract. &n ,ost 6. :night where the defendant had contracted to marr$ the plainti( after his father-s death but married another person during the lifetime of the plainti( Js father, it was held that the defendant was liable in damages for anticipator$ breach of the contract. ) W!i# ,or #(e $!r#* #o $er,or- )* #(e &ue &!#e/ The innocent part$ ma$ opt to a(ord the other part$ a chance to perform its part of the contract, however, if the contract is in the meantime frustrated, the innocent part$ loses all remedies as was the case in ;ve 6. Bowden. Sue ,or #(e Deree o, S$ei +er,or-!ne/ The innocent
part$ ma$ appl$ for the
e'uitable remed$ of specic
performance to compel the other part$ to for the
e'uitable remed$ of
specic performance to compel the other part$ to perform its part of the contract and the same ma$ be granted if circumstances ustif$ as was the case in )asham =iwa 6. Iena# where parties entred into a contract for the sale of a piece of land but the defendant repudiated the same before the date of completion and the plainti( applied for specic performance. The court granted the order and the defendant were compelled to perform. 1here a contract is breach in anticipation, the innocent person is not bound to mitigate its loss. 5/ ACTUAL BREACH OF CONTRACT/ This entails the nonperformance of a part$-s obligation on the due date or tendering defective performance. The innocent part$ ma$ treat the contract as repudiated if the breach is fundamental to the contract as was the case in &oussad 6. Spies and &ond where the plainti(-s nonappearance from the beginning of the season entitled the defendant to treat the contact as having come to an end.
=/ DISCHAR7E BY O+ERATION OF LAW/
=ischarge of the operation of law entails the discharge of parties form their contractual obligations at the instance of the law. The parties are freed b$ law. 8uch a discharge ma$ ta!e place in the event of/ 4/ 'er0er This is the incorporation of the items of a simple contract into a subse'uent written agreement between the parties.
The simple
contract is discharged b$ the operation o the law. 5/ De!#( &n contract of personal service or performance, the death of a part$ discharges the contract. 8/ L!$%e o, Ti-e &f time is of the essence of the contract and a part$ fails to perform within the prescribed time, the contract is terminated as was the case in &anesa 6. &opat RE'EDIES FOR BREACH OF CONTRACT 1hen a contract is breached, the innocent part$ is contractual rights are violated and the part$ has a cause of action !nown as breach of contract which entitles it to a remed$. %emedies for breach of contracts are/
Common Law and E'uitable
1hereas
Common Law
remedies comprise damages
remedies include;
&nunction %escission 8pecic performance )ccount Tracing Kuantum Iernit 1inding
onl$,
E'uitable
Gefore 5D7, Common Law remedies could onl$ be availed b$ the Common Law Courts while e'uitable remedies were onl$ available in the Lord Chancellors Courts.
The 3 categories of remedies di(er in that whereas
common law remedies are awarded *as right+ e'uitable remedies are awarded as discretional. &t is for the Court to decide whether the circumstances ustif$ the remed$. DA'A7ES -one#!r* o-$en%!#ion This is the basic Common Law remed$; it is a monetar$ award b$ the court to compensate the plainti( for the loss occasioned b$ the breach. &ts obective is to place the plainti( to the position he would have been had the contract been performed. =amages for breach of contract ma$ nominal or substantial. 4/ No-in!" D!-!0e% This is an amount awarded b$ the court to show that a part$-s rights have been violated but no loss was occasioned or the part$ was unable to prove loss. 5/ Su)%#!n#i!" D!-!0e% This is an amount b$ the court as the actual loss su(ered or as the amount the court is willing to recogni2e as direct conse'uences of the breach f the contract. RULES ON THE ASSESS'ENT AND +AY'ENT OF DA'A7ES 5. The purpose of a monetar$ award in damages is to compensate the plainti(
for
the
loss
su(ered.
=amages
as
a
remed$
are
o-$en%!#or* in nature. 3. The "o%% or &!-!0e %ufere& )* #(e $"!in#if -u%# )e $rove&, the plainti( must show that but for the defendant-s breach the loss would not have been occasioned. There must be a ne>us or lin! between the breach of contract and the plainti(-s loss failing which the damages are said to be too remote and therefore irrecoverable.
&n )adle 6. Ba>endale! the plainti( owned a mill whose cran!shaft was bro!en and re'uired replacement the following da$, however there was undue dela$ b$ the defendant during which time the mill remained closed. The plainti( sued for loss of prot. &t was held that the defendant was not liable for the lost prot as the same could not be traced to the dela$ in the deliver$ of the cran!shaft.
.The
plainti(-s loss was too remote and irrecoverable. This case is authorit$ to the proposition that the defendant is onl$ liable for such loss or damage as is reasonabl$ foreseeable in the ordinar$ course of events. 7. &f a part$ has %$ei!" 1no@"e&0e in relation to the contract but fails to act on it and the other part$ su(ers loss, the part$ is liable for the loss, as was the case in 6ictoia Laund /%indso0Ltd. 6. Newman
Compan$ wanted to expand it-s
business as well as ta!e advantage of certain lucrative. To do so it re'uired a large boiler which the defendant compan$ agreed to deliver in une. The plainti( had b$ letter notied the defendant the urgenc$ with which the boiler was re'uired.
The boiler was not
delivered until ovember b$ which time the plainti( compan$ lost mone$ from the contract. &n an action against the defendant for the loss, it was held that the defendant was liable. ) similar holding was made in 'he )eon <<.
The appellant, a ship
owner agreed to ship the respondentJs sugar from Constan2a to Gasra. The appellate !new that respondent was a sugar merchant and that there was a sugar mar!et at Gasra. G$ reason of a detour, the ship arrived da$s later at Gasra, b$ which time the price of sugar had dropped and the respondent made a loss of H9,A55. &n an action to recover the same, it was held that the appellant was liable. 9. 'i#i0!#ion o, Lo%%: This principle is to the e(ect that when a breach of a contract occurs, it is the dut$ of the innocent part$ to ta!e reasonable steps to reduce the loss it is li!el$ to su(er from the breach .This dut$ is imposed upon the innocent part$ b$ law.
&f the part$ fails to mitigate its loss the amount b$ which loss ought to have been reduced is irrecoverable. &n )ais 6.3dmonds! it was held that where the charterer of a ship failed to provide cargo in breach of contract, the ship captain was bound to accept cargo from other person-s at competitive rates. 1hether or not the innocent part$ has acted reasonabl$ in mitigating its loss is a 'uestion of fact. &n Musa )assan 6. )unt and ;nothe! the appellant had contracted to bu$ all the mil! produced b$ the respondent for one $ear. 0n one occasion, the appellate refused to ta!e deliver$ of the mil! on the ground that it was unt for human consumption; the respondent proved that it was t for human consumption. )fter the refusal the respondent converted the mil! to ghee and casein which fetched a lower price than mil!. The appellant argued that the respondent had not acted reasonabl$ in mitigating the loss .&t was held that the respondent had reasonabl$.
@. Liqui&!#e& &!-!0e% !n& $en!"#ie%: #arties to a contract ma$ beforehand specif$ the amount pa$able to the innocent part$ in the event of a breach .The sum specied ma$ be/ Li'uidated damages or a #enalt$ &f the sum is a genuine pre Restimate of the loss li!el$ to be su(ered b$ the innocent part$, it is awarded b$ the court without proof of the actual loss and it is referred to as "iqui&!#e& &!-!0e% &n %allis v. Smith! it was held that li'uidated damages are an amount which represents almost the actual loss occasioned and is awarded irrespective of the actual loss. &f the sum has no relation to the actual loss, but is intented to compel performance or it is a sum to be forfeited b$ the part$ in default it is regarded as a $en!"#* .) penalt$ is generall$ extravagant it covers but does not access loss.
#enal enalti ties es canno cannott be awar awarde ded d b$ the the cour court, t, the the cour courtt asse assess ss the the amount pa$able b$ appl$ing the rules of assessment of damages. 1hether the sum is li'uidated damages or penalties depends on the intention of the parties .&n ma!ing the determination, court are guided b$ certain presumptions and rules. +re%u+re%u-$#i $#ion% on% or ru"e% ru"e% ,or &i%#in &i%#in0ui 0ui%(i %(in0 n0 "iqui& "iqui&!#e !#e& & &!-!0e &!-!0e% % !n& $en!"#ie% )ccording to Lord =unedin in Dunlop in Dunlop &neumatic 'e "o.Ltd v. v. New Gaage and Moto "o. The "o. The following presumptions assist in the determination/ 5. &f the sum specied specied b$ the parties parties is extrav extravagant agant and and unconsciona unconscionable ble it is deemed to be a penalt$. 3. &f the sum pa$a pa$abl ble e for for the the non nonpa pa$m $men entt of anoth another er is grea greate terr it is deemed to be a penalt$. 7. &f a single single lumpsum lumpsum is pa$able pa$able on the the occurrence occurrence of of one or several several or all events, some of which occasion occasion serious or minor loss it is deemed to be a penalt$. 9. &f the sum is pa$ab pa$able le on the occurre occurrence nce of onl$ onl$ one event event it is deemed deemed to be li'uidated damages. @. The categori categori2ati 2ation on of the sum b$ the partie parties s as *li'uidat *li'uidated ed damages+ damages+ or *#enalt$+ Jis not binding the court. B. The fact that that a precise precise preestimat preestimation ion of loss is problemat problematic ic does not necessaril$ mean that the sum specied is a penalt$ D. )s a general general rule, exempla exemplar$ r$ or punitive punitive damages damages are not awarded awarded for for breach of contracts. E6UITABLE E6UITABLE RE'EDIES DISCRETIONAL 4/ S+ECIFIC +ERFOR'ANCE The decree of specic performance is a court order which compels a part$ to perform its contractual obligations as previousl$ agreed. &t compels a part$ to discharge its contractual obligation.
&t orders performance without without an option to pa$ damages. &t is an e'uitable e'uitable remed$ manifesting the e'uitable maxim that e'uit$ !#% in $er%on!- / 8pecic performance ma$ be granted in circumstance in which 5. Ioneta Ionetar$ r$ compens compensati ation on inade'ua inade'uate te 3. The subect subect matter matter is uni'ue uni'ue or has rare rare character characteristi istics cs e.g. land land The award of specic performance is discretional on the basis of established principles of e'uit$/ ! De"!* The inno innoce cent nt part part$ $ must must see! see! udi udici cial al redr redres ess s at the the earl earlie iest st poss possib ible le instance as dela$ defects defects e'uit$. e'uit$. The remed$ is not available if if the innocent part$ has slept on its rights for too long. ) C"e!n H!n&% The innocent #art$ must approach the court free from blame as he who come comes s to e'uit e'uit$ $ must must do so with with clan clan hand hands. s.
Evid Ev iden ence ce of mist mista! a!e e
misrepresentation or duress disentitles the part$ the remed$ H!r&%(i$ #o #(e &e$en&en# 8pec 8peci ic c perfo perform rman ance ce wi will ll not not be decr decree eed d if it is li!e li!el$ l$ to sub subec ectt the the defendant to undue hardship as he who see!s e'uit$ must do e'uit$ and e'ualit$ is e'uit$. & +er,or-!ne !n& Su$ervi%ion 8pecic performance cannot be decreed if is impossible for the defendant to perfor perform m or where perform performanc ance e re'uir re'uires es contract contract supervi supervisio sion. n.
This This is
because court of law are reluctant to ma!e ine(ectual orders and do not have the mechanism to supervise performance. e 'u#u!"i#*/ )s a general rule, specic performance will not be grantedif it would not have been granted granted were the positions positions of the parties interchan interchanged. ged. This is because e'ualit$ is e'ualit$ 8
)gainst the person. This This is as compared compared to an action in em which em which is as against a thing or propert$
, N!#ure o, Con#r!#/ 8pecic performance will not be granted in contracts of personal service or perf perfor orma manc nce e e.g. e.g. empl emplo$ o$me ment nt as this this is li!e li!el$ l$ to perp perpet etra rate te inu inust stic ice. e. 4oweve 4oweverr, the remed$ remed$ ma$ be grante granted d where where a contra contract ct is breach breached ed in anticipation as was the case in =iwa in =iwa 6. Iena#. ) court of law ma$ decline to decree 8pecic #erformance #erformance if; 5. The contrac contractt is one of of personal personal service service e.g. e.g. emplo$me emplo$ment. nt. 3. The The cont contra ract ct is revo revoca cabl ble e b$ the the part part$ $ agai agains nstt wh whom om an order order of specic performance is sought. 7. The contract contract is specicall specicall$ $ enforceable enforceable in part onl$. onl$. 1here the court cannot grant specic performance of the contract as a whole, it will not interfere. 9. The contract contract is incapable incapable of being performed performed i.e. impossibilit impossibilit$ $. Courts are reluctant to ma!e ine(ectual orders. @. #erform #erformance ance of the contrac contractt re'uires re'uires constant constant supervis supervision. ion. B. The The decr decree ee is li!e li!el$ l$ to sub subec ectt the the defe defend ndan antt to sever severe e or undue undue hardship. D. The contrac contractt in 'uestio 'uestion n was obtained obtained b$ b$ unfair unfair means. means. 5/ INJUCTION This is a court order which either restrains a part$ from doing or continuing to do a particular particular thing or compels it to undo what it has wrongfull$ done. &t is an e'uitable remed$ whose award is discretional and ma$ be granted in circumstance in which/ $.
Ionetar$ compensation is inade'uate
(.
&t is necessar$ to maintain maintain the status uo
TY+ES OF INJUNCTION The$ ma$ be classied as/ i. ii. ii.
#rohi rohib bito itor$ and Iand Iandat ator or$ $ &nte &nteri rim m or or tem tempo pora rar$ r$ and and per perma mane nent nt
4/ +ro(i)i#or* inun#ion/ This is a court order which restrains a part$ from doing or continuing to do a particular thing.
5/ '!n&!#or* inun#ion/ &t is a court order which compels a part$ to put right what it has wrongl$ done. &t is restorative in character. 8/ Te-$or!" or In#eri- Inun#ion &t is court order whose legal e(ect is restricted to a specied durationon the expiration of which it lapses. 4owever, it ma$ be extended b$ the court on application b$ the plainti( but can also be lifted on application of the defendant. / +er-!nen# or +er$e#u!" Inun#ion This is a court order whose legal e(ect is permanent.
1hether or not an inunction is awarded is the court-s discretion, in light of which the court ta!es into consideration certain principles e.g. dela$, clean hands, hardship to defendant etc. 4owever for the order to be granted, the plainti( must prove that/ !/ &t has a &ima ,acie case with a high probabilit$ of success )/ &f the order is not granted the plainti( is li!el$ to su(er irreparable inur$/ &f the court is in doubt it must decide the case on *a balance of convenience.+ &t was so held in ;nnielo Giella 6. "asman Bown "o. Ltd. 8/ RESCISSION/ The essence of this remed$ is to restore the parties to the position the$ were before the contract. &t is an e'uitable remed$ whose award is discretional. The
remed$
ma$
be
availed
whenever
a
contract
is
misrepresentation. 4owever the right to rescind a contract is lost in various wa$s/
vitiated
b$
5. De"!*: ) contract cannot be rescinded if a part$ has slept on its right for too long as *dela$ defeats e'uit$+. &n Lea 6.
LOSS OF RE'EDY LI'ITATION OF ACTION 1hen a person-s legal or e'uitable rights are violated, he is said to ma!e a cause of action e.g. breach of contract, negligence, nuisance etc.
Causes of actions are not enforceable in perpetuit$. The law prescribes the duration within which causes of action must be enforced. The Li-i#!#ion o, A#ion A# prescribes the duration within which causes of action must be enforced. &f not enforced within the prescribed time the action becomes statute barred and is unenforceable. E.g. a breach of contract must be enforced within B $ears. egligence
7 $ears
)ssault
uisance
7 $ears
Gatter$
=efamation
5 $ear
False &mprisonment
%ecover$ of rent
B $ears
%ecover$ of land
53 $ears
7 $ears 7 $ears 7 $ears
Enforcing an arbitral award or court order B $ears The prescription of the duration within which a cause of action must be enforced ma$ be the duration within which a cause of action must be enforced ma$ be ustied on polic$ grounds. &t ensures that ustice is administered on the basic of the best available evidence. &t ensures that disputes are settled as and when the$ occur.
WHEN DOES TI'E STARTIN7 RUNNIN7/ )s a general rule, time starts running on the date the cause of action accrues or arises. 4owever the running of time ma$ be postponed in certain circumstances e.g 5. &f the prospective plainti( is an in,!n# or -inor , time starts running when it attains the age of the maorit$ or dies whichever occurs rst. 3. &f the prospective plainti( is of un%oun& -in&, time starts running when he becomes of unsound mind or dies whichever comes rst.
7. &f the prospective plainti( is labouring under i0nor!ne ,r!u& or -i%#!1e time starts running when he ascertains the fact or when a reasonable person would have ascertained. 9. &f the prospective defendant is the president, time starts running when he leaves o(ice or dies whichever occurs rst. 1hen time starts running, it generall$ runs through and the action becomes statute barred. 4owever, a statute barred action ma$ be enforced with leave of the court if it is proved that the failure to sue was ustied.
CHA+TER SU''ARY Contract ma$ be dened as a legall$ binding agreement made between two or more parties. The English common law classies contracts into/ &. 1ritten contracts 6 specialt$ contracts &&. Contracts re'uiring written evidence &&&. 8imple contract There are certain procedures put in place for a contract to be formed. These procedures enable enforceabilit$ of the contract. These elements are/
0(er )cceptance
Capacit$
&ntention
Consideration
Legalit$
Formalities if an$
&mplied terms/These are terms that though not agreed to b$ the parties are an integral part of the contract. These terms ma$ be implied b$ statute or b$ a court of law. ) void contract is unenforceable while a voidable contract is enforceable unless avoided. These factors include/ 5. Iisrepresentation 3. Iista!e 7. =uress 9.
