TOPIC 1:

INTRODUCTION TO THE LAW OF CONTRACT

Section 2 (1) (h) of the Law of Contract Act, defines the term contract to mean all agreements that are
capable of being enforced by the law. (Cap 345 R.E 2002)

Anson’s Law of Contract: “A contract is an Agreement enforceable by law made between two or more
persons by which rights are acquired by one or more to acts or forbearances on the part of the other or
other’s”.

▪A contract may be defined as a legally binding agreement made by 2 or more parties. It has also been
defined as a promise or set of promises a breach of which the law provides a remedy and the
performance of which the law recognizes as an obligation.

▪According to Salmond, “Contract is an Agreement, creating and defining obligations between the
parties”

▪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. However, whereas all
contracts are agreements, all agreements are not contracts.

▪The word contract refers to an agreement which can be enforced by law between one person and
another. The two words: “agreement” and “enforced by law” which are found in the definition are
fundamental to the validity and thence presence of any contract.

▪It follows therefore, if any purported contract cannot be enforced by law it is not a legally valid
contract. A contract needs to be binding to be legally useful and it cannot be binding unless it is
enforceable.

While all contracts are agreements, not all agreements are contracts!

So what is an agreement: An agreement is a promise or arrangement between two or more parties to do,
or not do, something.

▪It also follows that, all contracts are agreement but not all agreements are contracts, the rationale for
this assertion is found under section 10 of the Law of Contract Act, which reads as follows:-

“All agreements are contracts if they are made by the free consent of parties competent to contract, for
a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

▪In light of the above section it can thus be construed that, for an agreement to become a contract it must
meet the essential requirements stipulated in the above provision of LCA, and other requirements such
as the intention to create legal relations must be present, short of that the agreement will not be capable
to bind the parties thereto.

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▪All contracts are agreement since because for a contract to be formed there must be an agreement
(Consensus ad idem i.e Meeting of two minds) as defined under section 2(1) (e) of LCA.

CONTRACT… AGREEMENT…

All contracts are agreements Not all agreements are contracts

2 or more parties 2 or more parties

Has to be a formal arrangement (involving Can be informal or unwritten

consideration: quid pro quo); can be a
verbal contract
Has to have the elements required of a Based on trust and relationship between
contract parties: promise for a promise
Enforceable by law therefore legally Not enforceable by law; not legally binding
binding
E.g. Employment contract; Contract for sale E.g. Letter of intent; volunteer agreement;
of goods; Contract for sale of land; General MOU; Confidentiality agreement
business contracts (partnership agreement preceeding negotiation of a commercial
contract

Example:
You tell your friend Sarah she can come and stay at your house while she’s in Arusha.
This is an agreement – there’s no consideration changing hands, there are no terms to comply with, you
don’t intend it to be legally binding. It doesn’t fulfil the required elements of a contract. So when you
later remember that Sarah is a terrible house guest and tell her she has to stay in a hotel instead, she can’t
sue you.
But if Sarah gives you a deposit, agrees to pay you some money for each night she’s at your place, and
you set out in writing the arrangement in a document you both sign, what is the difference?
You may well now have entered into a contract with her. That’s because you’ve agreed to exchange a
service (i.e. a stay at your house) for a consideration (i.e. the deposit she’s paid you) - there’s been an
offer and acceptance, both parties have capacity and you’ve indicated an intention to be legally bound.
So if you then tell her she can’t come because you don’t want to put up with her leaving wet towels on
the bathroom floor, drinking all the milk and coming home at 3am, she might have recourse to challenge
your decision.

DEVELOPMENT OF CONTRACT LAW

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From the very beginning of the human being, mankind has been in contractual relationship of one sort or
another. When one enters into marriage that is contract. Selling and buying of commodities is another
form of contract, when one buys a ticket for transport, he is engaging in contractual relationship.
Partnership, lease, trade agreement are some of the many forms of the contract. In fact, there is no final
list of the contracts.

As time passes, more and more complicated contracts have been entered between parties concerned.
These contracts involve individuals or individual and the Government institutions or Non- Government
organizations. Emerging of different contracts with their complications requires definite contracts well
organized legal structures and working judicial institutions to interpret the law and give right to the
parties deserving.

Trade has taken place from time immemorial; wherever there is trade, there is an agreement that governs
that trade or transaction. As the elements of trade have been refined over time so has the law developed
which regulates the way trade and transactions take place.

The contract law we have now has been largely developed from Common Law through practice over
time.

Where do we need contracts?

• In Trade – where goods or services are exchanged
• In Employment – to govern the terms of employment
• In Partnerships – to regulate the partnership
• In a business – with various suppliers or clients
• In a Joint Venture – to regulate the joint venture
• In Banks – to regulate the bank/client relationship
• In Entertainment – to regulate an artist’s performance
• Etc………

SOURCES OF LAW OF CONTRACTS

1. Customary laws: will apply to customary contracts. Customary laws in Tanzania are applicable
by virtue of section 11(1) of the Judicature and Application of Laws Act [CAP 358,R.E.2002],
which is to the effect that customary law shall be applicable to, and courts shall exercise
jurisdiction in accordance therewith in, matters of a civil nature.
2. Legislation: the principle legislation that provides for the general principles of contract law in
Tanzania is the Law of Contract Act, Cap 345 of 2002.
3. Case laws: cases that have been decided by the Supreme Courts of Tanzania; the High Court and
the Court of Appeal and which have established various principles on contract law are also
sources of contract law.

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 4. Common law: the substance of the Contract Act occasions a number of lacunas on some aspects
of contract law i.e. it means it does not provide for any principles for some of the matters relating
to contracts and when this happens the applicable law would be the common law of England on
contracts.
Prof. Nditti, an expert in contract law of East Africa has this to say about the application of
English common laws to Tanzania. “Where the contract Act is silent on any particular aspect
of contract law, English common Law of contract as modified by equity and acts of
parliament is applicable”. English cases which, substantially, have been decided on common
law may be used in interpreting the matters provided in the contract Act.
FORMS OF CONTRACT:
A contract can be made either orally or through written expression. Therefore, a contract can either be:
1. Oral: An oral contract is a type of business contract that is outlined and agreed to via spoken
communication, but not written down. Although it can be difficult to prove the terms of an oral
contract in the event of a breach, this type of contract is legally binding.
2. Written: A written contract refers to a written document outlining an agreement between two or
more parties. The parties can be individuals, businesses, or organizations.

TERMS OF A CONTRACT:
1. Express Terms:
▪A contract in which the terms are stated by parties in words, written or spoken. Section 9 of the LCA
contains this provision which reads as under: “So far as the proposal or acceptance of any promise is
made in words, the promise is said to be express”.
▪Thus, a promise made in words is called an express promise. And the express promises result in express
contracts.

2. Implied Terms:
▪A contract in which the terms are inferred from the circumstances of the case or conduct of the parties.
▪Thus, an implied contract is that which is not made in words. Such contracts came into existence on
account of act or conduct of the parties. In a continuing course of dealing, the acts or conduct of the
parties may give rise to implied contracts.

3. Conditions:
Conditions are certain obligations, terms, and provisions imposed by both parties. Conditions are
indispensable, and they need to be satisfied. Conditions are obligations that a party is required to fulfill,
such as completing a duty or task. Because it's required, it's an event that affects the contract.

4. Warranty:
A warranty is a written guarantee that a seller issues to a buyer regarding particular claims. The claims
are to be factual and valid. An example of a warranty is a seller committing to replace or repair a

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product within a specified time if it doesn't meet the expected performance. This guarantee concerns the
fitness, quality, and the performance of the sold product.
A warranty acts as a confirmation that the product will complete conditions and run as promised during
the specified time. It's the seller's assurance or promise to the customer that the goods are in their best
condition. If the warranty is proven false, and the product fails to perform as described, the seller may
seek remedies as stated in the contract, such as exchanging or returning the item.
Warranties may be for a limited time period or for a product's lifetime, and they're less important than
conditions.

Contractual Conditions vs. Warranties

Many contracts include either conditions or warranties, sometimes both. They're not required parts of a
contract. However, parties often include them to clarify what they expect of one another. There are
major differences between the two, but each has important implications for the parties' duties and rights.
Differences include the following:

 Conditions are considered more important stipulations in the development of the contract.
Warranties are of lesser importance.
 A condition must be performed prior to the completion of another action. A warranty, by
contrast, is essentially a promise that the facts a buyer gives a seller are genuine.
 It's not possible for a contract of sale to be fulfilled unless the conditions are fulfilled. With
warranties, this stipulation is a secondary concern because it's possible for a contract to be
fulfilled without the warranty being fulfilled.
 The objective of the agreement is directly associated with conditions. Warranties are simply
subsidiary provisions that are related to the contract's objective.
 If someone breaches a condition, the contract may be terminated. If someone breaches a
warranty, the other party can claim damages for the breach.

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 TOPIC 2:
ELEMENTS OF A VALID CONTRACT

1) OFFER
▪An offer has been defined as: an unequivocal manifestation by one party of its intention to contract with
another. The party manifesting the intention is the offeror and the party to whom it is manifested is the
offeree.
▪The meaning of the word proposal is provided by s. 2(1) (a) of the LCA. Any person will be said to
have made an offer/proposal if:
▪He has signified to another person his willingness to do or to abstain from doing anything, with the
view to obtaining the assent of that other person to such act or abstinence.
▪An offer may be described as a final statement or proposal by one person (offeror) to another person
(offeree). The statement or proposal is usually made on certain terms and often follows a process of
negotiations. In other words, an offer only exists when there is nothing further to negotiate –either the
offer is accepted or it is rejected.
▪Whether a statement amounts to an offer depends upon whether the offeree would reasonably interpret
it as an offer. This is an objective test and not a subjective test of what the actual offeree thought.
▪The proposal usually contains of a number of terms, which would either take an oral or written form
dependingon the nature of a particular contract. Some contracts must be made in writing only e.g. Bills
of exchange, insurance contracts, hire purchase contracts etc.
▪Instances of a proposal: A calls B and tells him, “I would like to sell to you my plot located at
“Majengo” or C writes a letter to D telling him that he wants to buy D’s cow at Tshs. 75000/=

RULES / CHARACTERISTICS OF AN OFFER:

▪There are a number of rules that have been developed to assist in determining whether an offer has been
made and this includes:-
1. An offer must be clear and definite
▪i.e. it must be certain and free from vagueness and ambiguity. There are a number of cases decided in
Tanzania to this effect: In Alfie E. Africa Ltd v Themi Industries and Distributors Agency Ltd, and
Nitin Coffee Estates Ltd and 4 others v United Engineering Works Ltd And another, In these cases
there was a conclusion of the agreement, which did not disclose the price. Price in a contract of sale was
held to be a fundamental term and non-disclosure of which renders the agreement uncertain.
▪In law, uncertain agreements are not legally recognized agreements. S. 29 of the LCA provides that:
“An agreement, the meaning of which is not certain, or capable of being made certain, is void”

2. The Offer must be communicated

▪An offer must be communicated to the intended offeree or offerees. An offer remains ineffective until it
is received by the offeree.
▪An offer is ineffective until it is communicated by the offeror to the offeree. If the offeree is unaware of
an offer, then it would be impossible to accept it. In R v Clarke, the court held that Clarke could not

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claim a reward for information he had given because, at the time he gave the information, he was
unaware that a reward had been offered.

3. Offer may be unilateral

▪In Carlill v Carbolic Smoke Ball Co (1893) (CA), the plaintiff (Carlill) saw a newspaper advertisement
placed by the defendant (Carbolic) claiming that their ‘smoke ball’ would cure all sorts of illnesses
including influenza. More importantly, the advertisement also stated that the defendants offered to pay
£100 to any person who used one of their smoke balls and then succumbed to influenza within a
specified time. £1000 is deposited with the Alliance Bank, Regent Street showing their sincerity in the
matter. The advertisement continued to state that during the last epidemic of influenza many thousands
of carbolic smoke balls were sold and the company knew of nobody who used the balls and contracted
the disease. The plaintiff purchased their smoke ball and subsequently came down with a nasty bout of
the ‘flu. She sued the defendant for the £100. The defendant argued, inter alia, that an offer must be
made bilaterally (that is, an offer can not be made to the entire world).

Held: It was held that the advertisement was an offer and was not intended to be a mere puff and that an
offer can be made unilaterally (that is, an offer can be made to the entire world).

4. Offer must be distinguished from Mere puffs

▪Offers must be distinguished from non-promissory statements made during the course of negotiations.
Objectively, these statements are exaggerated and a reasonable person would not expect them to be true.
For example, no reasonable person would believe that a toothpaste can really make teeth ‘whiter than
white’.

5. The offeror may prescribe the duration the offer is to remain open for acceptance.
▪However, the offeror is free to revoke or withdraw his offer at any time before such duration lapses e.g.
in Dickinson v. Dodds, the defendant offered to sell a house to the plaintiff on Wednesday 10/06/1874
and the offer was to remain open up to Friday 12that 9.00 am. However on the 11thof June, the
defendant sold the house to a 3rdparty.
▪The plaintiff purported to accept the offer of Friday morning before 9.00 am. It was held that there was
no agreement between the parties as the defendant had revoked his offer by selling the house to a
3rdparty on June 11th.
A similar holding was made in Routledge v. Grant, where the defendant’s offer was to remain open for
6 weeks but he revoked or withdrew it after 4 weeks. It was held that there was no agreement between
the parties.

6. The terms of a proposal must be a final expression as to the willingness to be bound

▪The maker of the proposal must not change the terms and his willingness to be bound by the terms of
the proposal he has made otherwise this would change the subject and the essence of their agreement.
▪However, if a contract is in writing, its content can only be varied (changed) in writing and there must
be a separate agreement whose function is to change that contract. This agreement must be supported by

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consideration. These words are the decision of Lugakingira J., in Edwin Simon Mamuya v. Adam
Jonas Mbala 1983 TLR 410 (HC).
7. An offer may be oral, written or implied from the conduct of the offeror.
8. An offer may be conditional or absolute.
▪The offeror may prescribe conditions to be fulfilled by the offerer for an agreement to arise between
them. In Stella Masha v. Tanzania Oxygen Limited, Whereby the court held that in order for an
acceptance to constitute an agreement, it must in every respect meet and correspond with the terms and
conditions of the offer.

9. The offeror may prescribe the method of communication of acceptance by the offeree. If he
insists on a particular method, it becomes a condition.
10. An offer may be general or specific i.e it may be directed to a particular person, a class of
persons or the public at large.

ACTS BEARING A RESEMBLANCE TO OFFERS

▪An offer should be a firm promise and a final expression to do or to refrain from doing something as
explained earlier. Some acts when done appear like offers/proposals but in real sense they are not; these
acts are such as the following:
1. A mere supply of information
▪Usually a person may seek information from another concerning something he wishes to buy probably
for the purpose of acquiring sufficient knowledge about it prior top such buying. This request for
information does not amount to an offer. The following case illustrates this point.

A request for further information is not an offer. In Harvey v Facey, the plaintiff (Harvey) sent a
cable to the defendant (Facie), asking: ‘Will you sell us Bumper Hall Pen? Telegraph lowest cash price.’
Bumper Hall Pen was the name of a property belonging to the defendant. The defendant cabled back the
reply: ‘Lowest cash price for Bumper Hall Pen £900.’ The plaintiff sent a further cable purporting to
accept the defendant’s offer. The court held that there was no agreement. The plaintiff had requested
some information and the defendant had merely responded to his request. The plaintiff’s further cable
did not contain an acceptance, but was an offer to buy, which the defendant refused.

2. Invitation to treat
▪An offer must be distinguished from an Invitation to treat. This is a mere invitation by a party to
another or others to make offer or bargain. The invitee becomes the offeror and the invitor becomes the
offeree. A positive response to an invitation to treat is an offer.
▪An ‘invitation to treat’ is simply an invitation by one party to commence negotiations which may or
may not lead to an offer. While an invitation to treat is not an offer, it can determine the form that a
subsequent to offer is to take (for example, sale by auction or tender).
▪In other words, a person who responds to an invitation to treat is in fact making an offer, which may be
accepted or rejected. The distinction between an offer and an invitation to treat depends, of course, upon
the objective intention of the parties.

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Examples of invitation to treat:
2.1. Sale by self-service:
▪At common law, a sale by self-service is an invitation to treat. Prospective buyers make offers by
conduct by picking the goods from the shelves and the offer may be accepted or rejected at the cashier’s
desk. The offeror is free to revoke his offer to buy the goods at any time before reaching the cashiers
desk.

▪In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd, the court held
that, in a self-service shop, the offer takes place at the sales counter when the shop assistant accepts the
customer’s offer to buy the selected goods. Putting goods on display shelves with price tags at attached
was not an offer that could be immediately accepted by a customer putting the goods into his or her
shopping basket. Therefore, the shop display was only an invitation to treat.
2.2. Advertisement of sale by auction:
▪At common law, an advertisement to sell goods or other property by public auction is an invitation to
treat. The prospective buyer makes the offer by bidding at the auction and the auctioneer may accept or
reject the offer.
▪It was so held in Harris v. Nickerson, where a commission agent had sued as auctioneer for failure to
display furniture he had advertised for sale by auction. It was held that there was no contractual
relationship between the parties as the advertisement was merely an invitation to treat and as such, the
auctioneer was not liable. (See section 59 of Sale of Goods Act, Cap 214).

2.3. Sale by display:

▪At common law, the display of goods with cash price tags is an invitation to treat. The prospective
buyer makes the offer to buy the items at the stated or other price which the shop owner may accept or
reject.
In Fisher-v-Bell, the defendant was sued for ‘offering for sale’ a flick knife contrary to the provision of
the Offensive Weapons Act. The defendant had displayed the knife in a shop with a cash price tag.
Question was whether he had offered the knife for sale. It was held that he had not violated the Act as
the display of the knife was an invitation to prospective buyers to make offers.
▪Generally, When goods are displayed in a shop for sale together with its price ticket attached to it, this
act does not amount to an offer. By so displaying, the law presumes that this person only meant to invite
offers from the interested persons.
▪This also entails that even if the seller mistakenly placed a lower price tag than a required price on
which a particular item could fetch, he is not bound in any way to sell in that lower price.

2.4. Sale by tender

▪Advertisements that call for tenders are mere invitation to treat but they are not offers. The person who
tenders is the one who makes an offer. Acceptance of this offer is done by the person advertising tenders
by considering and accepting one of them. A tender is an invitation for interested persons to send in
offers. The recipient of the offers (or bids) can then enter into a contract by communicating acceptance
with the chosen tenderer.

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▪However, it was held in Harvela Investments Ltd v Royal Trust Company of Canada (CI) Ltd, that
if the request is made to specific persons and it is stated that the contract will be awarded to the highest
or the lowest bidder (as the case may be), then this statement will be binding as a unilateral offer.
▪In Gbl & Associates Ltd v Director Of Wildlife Ministry Of Lands, Natural Resources And
Tourism And Two Others, In this case the Central Tender Board for the government of Tanzania
advertised in the Daily News Paper of February 09 1988 inviting tenders for the sale of elephant ivory.
Various persons sent in their offers and the offer made by the plaintiff Co. was accepted. The terms
which the advertisement specified for the tenderers to include in their offers was that payment and
collection of the ivory must be done within 30 days.
▪Rubama J. held in this case that: (i) The advertisement by the Secretary of the Central Tender Board
calling for the purchase of elephant ivory was not an offer but an invitation to treat. Each of the
tenderers offered to buy at his quoted price and it was upon the government of the United Republic of
Tanzania to accept an offer or reject it; (ii)...Central Tender Board was not obliged to accept the l bid or
any of the tenders.

HOW ARE PROPOSALS COMMUNICATED

An offer or proposal may be made either expressly or impliedly. Since a proposal must be
communicated to the person to whom it is intended. The communication of a proposal is deemed to be
made by an act or omission of the party proposing and which has the effect of communicating it.
▪To be effective an offer must be communicated by the person making it to the offeree. An offer can
only be accepted after it has come to the knowledge of the person to whom it is made.

▪Section 4 (1) of the LCA provides that: “communication of an offer is deemed to be complete when
it comes to the knowledge of the person to whom it is made”
▪It does not matter therefore, whether communication is made orally or in writing, it must come to the
knowledge of the offeree.
▪Any one who purports to accept the offer while he has been unaware of its existence, his acceptance is
not legally accepted. This situation has happened in the following case:

An offer is effective when, and not until, it is communicated to the offeree. An acceptance in ignorance
of an offer is not an acceptance. A proposal may be made to a definite person, to some class of persons
or to the whole world. In Carlil v. Carbolic Smoke Ball Co, the court made it clear that, it is possible to
make an offer to the whole world and that the contract is then made with anyone who accepts the offer
but not with all the world. An offer must be communicated, and communication of an offer becomes
effective when it is complete i.e. when it comes to the knowledge of the person to whom it was made.

TERMINATION OF OFFERS
An offer or proposal may be terminated at any time before its acceptance is complete. Once an offer has
been accepted a binding contract is formed.
• An offer may be terminated in the following principal ways According to S.6 of the LCA:

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 1. TERMINATION BY WITHDRAWAL/ REVOCATION: by the communication of notice of
revocation by the proposer to the other party;
A proposal may be revoked at any time before the communication of its acceptance is complete as
against the proposer and not afterwards. S. 5(1). This is the case even where the offeror has stated that
his offer is open for a specific period of time. Provided his promise to keep the offer open is not
supported by consideration, it does not bind him and as such he can revoke his offer even within the
period when the offer is open. (see also s.6(a) of the LCA)
• Dickinson v Dodds (1876) 2 Ch D 463 – On Wed, deft offered to sell his house to clmt and promised
to leave the offer „over‟ till 9AM on Friday – Clmt learned on Thursday that deft was planning to sell
the house to someone else – he left a formal acceptance for the clmt same day but the deft did not see it
– At 7AM on Friday Clmt handed an „acceptance‟ to the deft but the house had been sold by then –
Held: there was no contract as the offer had been withdrawn

2. LAPSE OF TIME (S. 6 (b) of LCA): by the lapse of the time prescribed in such proposal for its
acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
▪Certain offers do stipulate the specific duration of time beyond which an offer ceases to be valid i.e.
this offer will expire after that time and for offers of this kind any acceptance after which expiry will be
ineffective.
▪For offers which do not provide for a specific time frame, they will lapse after a certain period of time
referred to as reasonable time.
▪Section 6 (b) of the LCA provides that: A proposal is revoked by the lapse of time prescribed in such
proposal for its acceptance, or, if no time is prescribed, by the lapse of a reasonable time, without
communication f the acceptance;
▪In Virji Khimji v Chatterbuck, The defendant ordered timber from the plaintiff and indicated that it
be supplied as soon as possible. The plaintiff did not respond but delivered the timber. 4 ½ months later,
the defendant refused to take delivery and was sued. It was held that he was not bound to take delivery
as his offer had lapsed for non-acceptance within a reasonable time.
▪The statute just mentions the phrase reasonable time without providing for its meaning. The reasonable
time will be deduced from the circumstances of each particular case. It is the court that normally decides
if there was reasonable time from the facts of a particular case that have been tendered before it.
▪The case of Ramsgate Victoria Hotel Co. v. Montefiore35, illustrates the instance where the court
construed reasonable time. In June Montefiore offered to buy shares from Ramsgate Victoria Hotel. The
offer did not set the time limit for its acceptance. In November Ramsgate accepted this offer being five
months later. But by this time Mr. Montefiore did not need the shares any more. Ramsgate sued him,
claiming that he breached the contract since they accepted his offer while Montefiore maintained that his
offer had expired and could no longer be accepted, so his was not an acceptance in the eyes of the law.

▪Held: Where an offer is stated to be open for a specific length of time, then the offer automatically
terminates when that time limit expires. Where there is no express time limit, an offer is normally open

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only for a reasonable time. Thus the court was of the view that the company accepted the offer as of too
late.

3. REJECTION
▪Another way in which an offer can be terminated is if the offer is rejected by the offeree by any of the
following acts: if he turns down the offer and If he makes a counter offer. A person will be said to have
made a counter offer if his acceptance contains new terms which are different from those which are
contained in the original offer.
▪An offer terminates if the offeree refuses to accept the same, the refusal may be express or implied from
the conduct of the offeree e.g. silence by the offeree amounts to a rejection as was the case in Felthouse
v Bindley.

4. DEATH OR INSANITY OF THE OFFEROR/ PROPOSER(S. 6 (d) of LCA)

▪The death of the offeror or offeree before acceptance terminates an offer. However, the offer only
lapses when notice of death of the one is communicated to the [Link] unsoundness of mind of either
party terminates an offer. However, the offer only lapses when notice of the insanity of the one is
communicated to the other.
▪The death of the offeror, as long as it has come into the knowledge of the offeree, will have an effect of
terminating the offer.
▪Section 6 (d) of the LCA provides that: A proposal is revoked-by the death or insanity of the proposer,if
the fact if his death or insanity comes to the knowledge of the acceptor before acceptance.
▪According to this section, in either case, whether it is death or insanity, knowledge of it is an important
element.
▪What if the offeree does not know of the death of the offeree? If the offeree does not know of the death
of the offeror he is entitled to accept the offer, nonetheless, despite this death except when identity or
personality of the deceased offeror is vital i.e. the offeree will not, under this situation, be entitled to
accept the offer.
▪An offer that has been given by a professor of Law of St Johns University, who happens to die before it
is accepted, can not be accepted by the offeree who does not know of this death, if his identity as the
professor of Law of St John’s University, is vital to the contract.
▪This means that if the offer was for a performance of something that could be done by any person other
than the professor in his professional capacity, then his personal representative canact on his behalf.

5. FAILURE OF A CONDITION SUBJECT TO WHICH THE OFFER WAS MADE:

▪These are conditional offers. If a condition or state of affairs upon which an offer is made fails, the
offer lapses.

▪The conditions may be of two kinds: express terms-made orally or in writing. Implied are neither made
orally nor in writing. They are inferred from studying each particular situation
▪Section 6 (c) of the LCA. A proposal is revoked by the failure of the acceptor to fulfill a condition
precedent to acceptance.

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▪In Financings Ltd v. Stimson[1962], the defendant opted to take up a vehicle on hire purchase terms.
He completed the hire purchase application form and paid a deposit. This form constituted his offer. He
took delivery of the vehicle but returned it to the showroom after 2 days for some minor rectification.
The vehicle was stolen from the showroom and when recovered it was badly damaged by reason of an
accident. The defendant refused to take delivery or pay installments and was sued. He pleaded the state
of the vehicle. It was held that he was not liable as his offer had lapsed. This offer was conditional upon
the motor vehicle remaining in substantially the same condition as it was before and since its condition
had changed, his offer had lapsed.

6. COUNTER-OFFER:
▪This is a change or variation of the terms of the offer by the offeree. It is a form of rejection. The legal
effect of a counter-offer is to terminate the original offer as was the case in Hyde v. Wrench.
▪Generally, a counter offer has two effects that is It amounts to rejection of an offer and It cancels the
original offer, in which case it is useless even if you accept it later on the original terms.

ACCEPTANCE OF A PROPOSAL
▪An acceptance is an unconditional assent to the terms of the proposal. The word unconditional means
that the terms of the acceptance must not set new conditions apart from those stated in the offer. If the
acceptance does so it is termed a counter offer.
• Acceptance – “a final and unqualified expression of assent to the terms of an offer‟
This is the external manifestation of assent by the offeree. It gives rise to an agreement between parties.
In legal theory, an agreement comes into existence at the subjective moment when the minds of the
parties meet. This moment is referred to as Consensus ad idem (meeting of minds).
• Acceptance is a signification of willingness by the offeree to accept the offer. S. 2(1) b and a proposal
once accepted it becomes a promise.
– May be made in writing, orally or by conduct
1. That an acceptance must be to the offer
2. An acceptance must exactly match the term of the offer.
3. Mere silence does not constitute acceptance
▪However, this subjectivity must be externally manifested by the offeree for the agreement to arise.
Acceptance may be oral, written or implied from the conduct of the offeree.
▪Section. 2(1) (b) of the LCA states “When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted, and a proposal, when accepted, becomes a promise;”
▪An acceptance has to meet certain legal aspects before it becomes an effective acceptance. The general
rule is that an acceptance is supposed to reflect the terms of the offer as it has been made. In other words
the acceptance must match or reflect those of the offer. This in contract law is called the “mirror image
rule.”
▪If the offer is for sale of a motor cycle at Tshs. 2000/=, the acceptance must not be for buying a car at
Tshs 3000/=

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▪According to s. 7 (a) (b) of the LCA in order that acceptance changes a proposal into a promise, it must
have the following features: (a) it must be absolute and unqualified
(b) if the proposal does not prescribe the manner in which it is to be accepted, the acceptance must be
expressed in some usual and reasonable manner.

(c) If the proposal prescribes the manner in which it is to be accepted, and the acceptance does not
follow this manner, the proposer must insist that his proposal be accepted in the manner prescribed and
only that. If he fails do so he is deemed to have accepted that acceptance.

▪RULES OF ACCEPTANCE
▪Acceptance may be oral, written or implied from the conduct of the offeree. In Carlill v. Carbolic
Smoke Ball Co, acceptance by Mrs. Carlill took the form of her
conduct by purchasing and consuming the smoke balls. In Brogden v. Metropolitan Railway Co,where
it was held that the 1st load of coal supplied by Brogden constituted acceptance of the defendants offer
to supply the coal and hence there was an agreement between the parties.
▪The offeree must have been aware of and intended to accept the offer:A person cannot accept an
offer whose existence he is unaware of. In Crown-v-Clarke,the Australian government offered £1,000
to any person who volunteered information leading to the arrest and conviction of the killers of 2 police
officers. Any accomplice who gave information would be pardoned. Clarke, who was aware of the
murder gave the information and the killers were arrested and convicted. However, he made it clear that
he had given the information to clear his name. It was held that he was not entitled to the reward as he
had given the information for a different purpose and therefore had not accepted the offer.
▪Acceptance must be unconditional and unqualified: The offeree must accept the offer in its terms,
any variation or modification of the offer amounts to a conditional acceptance which is not an
acceptance as was the case in Hyde v. Wrench where the plaintiff modified the defendant’s offer of
£1,000 to £ 950.
▪An offer must be accepted within the stipulated time if any or within a reasonable time failing which it
lapses. As was the case in Ramsgate Victoria Hotel v. Montefoire, where the defendant’s offer made
in June was not accepted until November by which time had elapsed. A similar holding was made in
E.A Industries Ltd v. Powyslands.
▪Acceptance must be communicated to the offeror in the prescribed method if any or an equally
expeditions method. Where no method of communication is prescribed, the method to apply depends on
the type of offer and the circumstances in which the offer is made.
▪An offer to the general public may be accepted by any person who fulfills its conditions. As was the
case in Carlill v. Carbolic Smoke Ball Co.

COMMUNICATION OF ACCEPTANCE
▪To be effective, acceptance must be communicated to the offeree. If the offeror does not specify any
special mode by which acceptance should be carried out, it may done by any normal method such as: by
oral means, written means, by phone, by fax or even by conduct. Not only must it be communicated but
also the communication must be complete.

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▪Communication of acceptance of the proposal how made: Remember s. 3 of the LCA, It is deemed to
be made if the offeree does any act or omission by which he intends to communicate such acceptance
and the act or omission must have the effect of communicating it. Only when this has been done can we
say that communication of acceptance is effective. Without this no contract can be formed.
▪The general rule in contract law is that an acceptance must be communicated. Silence does not amount
to acceptance. Felthouse v Bindley Felthouse offered in writing to buy a horse from his nephew John in
which he sated that: “If I hear no more about him, I consider the horse is mine at £30 15s.’ There was no
reply form his nephew. Later the uncle claimed that there was a binding contract between the nephew
and him. The court held that there was no contract because acceptance did not amount to acceptance.

▪THE POSTAL RULE OF ACCEPTANCE

▪The post rule was developed in an English case of Adam v Lindsell [1818] 1B & Ald 681 or 106 ER
250. 2/9/1817, the defendant offered to sell to eth plaintiff a quantity of wood on certain terms and
required a response ‘in the course of post.’ The plaintiff received the letter on 5/9/1817 and posted an
acceptance. On 8/9/1817 the defendant posted a letter revoking the offer. The plaintiff’s letter of
acceptance was received on 9/9/1817. It was held that there was a contract between the parties as the
plaintiff had posted the letter of acceptance by the time the defendant purported to revoke the offer.
Hence, the revocation was ineffective.
▪This means that once the letter of acceptance has been sent whether or not it reaches the offeror a
binding contract is formed and both the proposer and the acceptor therefore are bound on that spot.
▪Exceptions: there are a number of circumstances in which though post is used, post rule may not apply.
▪I) It applies only when the parties contemplated it as a means of communication of acceptance. For
instance if all the negotiations have taken place by telephone post rule may not be said to have been
contemplated by the parties. ii) Post rule
applies exclusively to acceptance of an offer.

▪POST RULE IN TANZANIA

▪Section 4 (2) of the LCA slightly modifies the post rule. This section suggests that, unlike in common
law, the proposer and the acceptor will be bound by the contract at different points of time once the
letter of acceptance has been posted.
▪The section reads as follows: The communication of an acceptance is complete:-
▪(a) as against the proposor, when it is put in a course of transmission to him, so as to be out of the
power of the acceptor;
▪(b) as against the acceptor, when it comes to the knowledge of the proposer.
▪This section implies that once the acceptance has been posted and the letter of acceptance is out of
the power of the person sending the acceptance, only the proposer will be bound but not the
acceptor and the acceptor will be bound when it comes to the knowledge of the proposer.

ELEMENTS OF A VALID CONTRACT:

1. FREE CONSENT

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An agreement occurs when two minds meet upon a common purpose- consensus ad idem. Where there
is no such meeting there is no legally binding agreement. In certain circumstances the following factors
will act to vitiate an otherwise sound contract [section 14(1) of LCA] (i) Mistake (ii) Duress and undue
influence (iii) Coercion (iv) Misrepresentation

2. CAPACITY TO CONTRACT
▪ Capacity to contract refers the legal ability of a party to enter into a contractual relationship. For an
agreement to be enforceable as a contract the parties must have had the requisite capacity.
▪As a general rule, every person has a capacity to enter into any contractual relationship as per section
11(1) of LCA. According to section 11 a person who is legally allowed to enter into a contract is he who
belongs to the age of majority and who is not insane and who is not disqualified by any law from
contracting.
▪However, in practice, the law of contract restricts or limits the contractual capacity of certain classes of
persons namely;
1. Infants or minors.
2. Drunken persons.
3. Persons of unsound mind.
4. Corporations.
5. Undischarged bankrupts.

2.1. CONTRACTUAL CAPACITY OF INFANTS OR MINORS

(Section 4 of Cap 214 and Section 68 of Cap 345)
▪Under Section 2 of the Age of Majority Act, an infant or minor is any person who has not attained the
age of 18. Contracts entered into by an infant are binding, voidable or void depending on their nature
and purpose.
*CONTRACTUAL CAPACITY OF DRUNKEN PERSONS
▪A contract entered by a drunken person is voidable at his option by establishing that:
1. He was too drunk to understand his acts.,
2. The other party was aware of his condition.
▪By avoiding the contract, the person escapes liability on it. In Gore v. Gibson the defendant was sued
on a bill of exchange he had signed and endorsed. He pleaded that when he did so he was too drunk to
understand what he was doing and that the plaintiff was aware of his condition. It was held that he was
not liable as the contract was voidable at his option by reason of the drunkenness.

▪If a contract entered into by a person when drunk is ratified by him when sober it is no longer voidable
as was the case in Mathews v Baxter, where the defendant had contracted to sell a house to the
plaintiff. When sued he pleaded drunkenness. However it was held that he was liable as the plaintiff
proved that he had subsequently ratified the transaction while sober. Under Section 4 (2) of the Sale of
GoodsAct, if a drunken person is supplied with necessaries he is liable to pay a reasonable price.

3. CONSIDERATION

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▪An agreement must be characterized by consideration to be enforceable as a contract. At Common Law,
a simple contract is unenforceable unless supported by some consideration. Consideration is the bargain
element of a contract.
▪Sir Frederick Pollock defined consideration as ‘an act of forbearance of one party or the promise
thereof, is the price for which the promise of the other is brought and the promise thus given for value is
enforceable’ (Pollock’s The Principles of Contracts). This definition was adopted in Dunlop Pneumatic
Tyre Co Ltd v Selfridge Co Ltd(1915) (HL).
▪In other words, consideration is simply something of value and may take the form of: (a) an act for a
promise; (b) a promise for an act; (c) a promise for a promise; (d) a promise to forbear (that is,
not to do something).
▪In the words of Lush J. in Currie v. Misa, “a variable consideration may consist of some right, interest,
profit or benefit accruing to the one party or some loss, forbearance, detriment or responsibility given,
suffered or borne by the other.”
▪In the words of Patterson J in Thomas v. Thomas “consideration means something which is of some
value in the eye of the law moving from the plaintiff. It may be some benefit to the defendant or
detriment to the plaintiff but at all events it must be moving from the plaintiff.”
▪Consideration is whatever the promisee gives or provides to buy the promisors promises. By so doing
the promisee becomes party to the contract. Consideration takes various forms. In Carllil v. Carbolic
Smoke Ball Co,it took the form of detriment i.e. swallowing of the smoke balls by Mrs. Carllil. In Patel
v. Hasmani,it took the form of forbearance to sue.
▪Only the promisee can enforce the promise. Apart from the promisor, the only party who can enforce
the contract is the other party who has provided the consideration for the promise. In Dunlop Pneumatic
Tyre Co Ltd v Selfridge and Co Ltd (1915) (HL), the plaintiff (Dunlop) entered into a contract to sell
tyres to a dealer (Dew and Co). The contract providedthat the dealer would not sell tyres below the
plaintiff’s list price and would obtain a similar undertaking from any retailer they onsold to. The dealer
subsequently sold tyres to the defendant (Selfridge) who gave the required undertaking. The
defendantlater sold tyres to a customer below the plaintiff’s list price and the plaintiff sued for breach of
the undertaking. The court found for the defendant. The plaintiff had not provided any consideration for
the defendant’s promise to the dealer. The plaintiff was not even a party to that subsequent contract.
▪Consideration must be definite and not illusory
▪The consideration must be so certain that a court is able to place a legal value on it, no matter how
inadequate it may actually be. In White v Bluett (1853) (Ex), the defendant (Bluett) promised ‘not to
bore his father’ in return for non-payment of a debt. Following the father’s death, the plaintiff executor
(White) sought repayment of the debt due by the defendant. The defendant relied on his agreement with
his late father as a defence to the claim. The court found for the plaintiff and held that the son’s promise
was too vague to have a legally recognised value.
▪Consideration must be present in every simple contract.
▪In Rann v Hughes(1778) (KB), the defendant (Hughes) was administrator of an estate and made a
promise to pay a debt owed by the deceased to the plaintiff (Rann). The court held that, as there was no
consideration given by the plaintiff for the promise made by the defendant, the contract was void.
▪Consideration must be lawful
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▪The consideration must not be illegal or unlawful and must not involve a breach of civil law or public
policy. In Parkinson v College of Ambulance Ltd and Harrison (1925) (KB), the plaintiff
(Parkinson) gave the defendant charity (College) £3,000 in return for a promise that he would receive a
knighthood. The knighthood did not eventuate and the plaintiff sued for the return of the money. The
court refused to make the order. The consideration was a promise to do something to promote public
corruption and this was illegal as it was against public policy.
▪Consideration must not be past
▪As a general rule, past consideration is not good to support a contractual claim as exemplified by the
decisions in Re McArdlescase and Roscorla v. [Link], in certain circumstances, past
consideration is sufficient to support a contractual claim, as indicated above.

4. LAWFUL OBJECT
It is also necessary that agreement should be made for a lawful object. The object for which the
agreement has been entered into must not be fraudulent, illegal, immoral, or opposed to public policy or
must not imply injury to the person or property of another. Every agreement of which the object or
consideration is unlawful is illegal and the therefore void.
The object of a contract has to be lawful. A lawful object is that which is not:

(a) forbidden by law;

(b) of such a nature that, if permitted, it would defeat the provisions of any law;

(c) fraudulent;

(d) involve or imply injury to the person or property of another; or

(e) regarded as immoral or opposed to public policy

5. INTENTION TO CREATE LEGAL RELATIONS

▪An agreement must be characterized by intention. The parties must have intended to create legal
relations. Intention is one of the basic elements of a contract as common law. An agreement is
unenforceable unless the parties thereto intended such a consequence.
▪An intention to be legally bound is an essential element of contract formation. A contract does not
come into existence unless the parties intend to enter into a legal relationship and be legally bound by it.
Intention may be expressed by the parties or implied by their conduct.
▪(A) Domestic, social and family agreements
▪i) Husbands and wives
▪In Balfour v Balfour(1919) (CA), the husband agreed to pay his wife monthly support until she
rejoined him in Sri Lanka. The reunion did not eventuate and the husband failed to honor the agreement.
The wife sued for breach of contract but was unsuccessful. The court held that that, in the absence of an
express intention, the presumption was clearly against enforceability. Their agreement involved matters

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of a social or domestic nature and there were no facts to rebut the presumption that applies.
Ascertainment of intention.
▪Other family members
▪ii) Agreements between Parent and Child
▪Such an agreement is ordinarily not intended to be a contract but a working relationship.
▪In Jones v. Pandervatton, (1969) (CA), the plaintiff persuaded her daughter to leave a well paying job
to study Law in Britain, she was promised a maintenance allowance as she studied. She reluctantly
agreed.
▪In the meantime, the plaintiff bought a house where the defendant lived as part of [Link].
Before the daughter completed her studies, the 2 quarreled and the mother sought to evict her from the
house. She argued that there was a contract between them.
▪However it was held that the parties had not intended to create legal relations and the mother was
entitled to evict her.
▪However the circumstances in which a domestic or social agreement is entered into may show that the
parties intended to create legal relations. Such intentions may be collected from the words used by the
parties, their conduct and the circumstances of the agreement;(See the case of Merritt v Merritt 1971).
▪Such an agreement may be forced if the parties have manifested an intention to contract. E.g. in
McGregor v McGregor, a husband and wife sued each other for assault but later resolved to withdraw
the cases but live apart. The husband promised to pay a weekly sum as maintenance while the wife
promised to maintain the children.

▪The husband was in arrears for 6 weeks and the wife sued. It was held that her action was sustainable as
the parties had manifested an intention to contract.

▪3. Other Social Agreements

▪Such agreements may be enforced if the parties if the parties have manifested an intention to contract.
In Simpkins v. Pays, the defendant owned a house where she lived with a grand daughter; the plaintiff
was a paying boarder (a lodger).
▪The three took part in a Sunday newspaper competition. All entries were made in the defendant’s name.
However, there were no rules on payment of postage. One week’s entry won £750.
▪The plaintiff claimed 1/3of the sum. The defendant argued that this was a pastime activity not intended
to create legal relations.
▪However the court held that the plaintiff was entitled to 1/3of the sum as the parties had manifested an
intention to contract. A similar holding was made in Parker v. Clark.
▪See also the case of Bi khadija kilumanga v. Bi. Peris miso [1982] TLR 266
▪Case law demonstrates that an agreement is legally unenforceable unless the parties to it intend such a
consequence.
▪B) Business or commercial agreements;
▪In considering such agreements, courts proceed from the presumption that the parties intended to create
legal relations.
▪1) Advertisements

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▪These are intended to promote sales of the advertiser. They have a commercial objective. OkIn Carlill
v. Carbolic Smoke Ball Co. Ltd, the company had manifested an intention to create legal; relations by
stating that it had deposited £1,000 with Alliance Bank Regent Street. Hence Mrs Carlill was entitled to
the £100 as she had contracted with the Company.
▪However, the circumstances in which a commercial or business agreement is entered into may show
that the parties did not intend to create legal relations and this would be the case where honour clauses
or honourable pledge clauses are used.

VOID AND VOIDABLE CONTRACTS

• VOID CONTRACTS
Lacking legal force. (See S. 2 (1) (g) & (j) of LCA).
▪ A void contract is a contract that isn’t legally enforceable, starting from the time it was created – that is
it is void ab initio. A contract that lacks one or more of the essential formation elements is void ab initio
(from the beginning).While both a void and voidable contract are null, a void contract cannot be ratified.
In a legal sense, a void contract is treated as if it was never created and becomes unenforceable in court.

A void contract lacks legal validity and does not create legal rights or obligations. In other words, the
law says that it is not, or never was, a valid contract. ((See S. 2 (1) (g) & (j) of LCA).

The following agreements are void [ss.24-30 LCA]

(a) Contracts prejudicial to the sanctity of marriage or in restraint of marriage.
(b) Agreements to oust the jurisdiction of the courts
(c) Agreement in restraint of trade
(d) Agreement void for uncertainty
In two cases Alfi E.A. Ltd v. Themi industries and Distributors Agency Ltd (C.A.T. DSM Civil Appeal
28 of 1984) and Nitin Coffee Estates Ltd. And others v. United Engineering Works Ltd and another
(C.A.T. Arusha, Civil Appeal 15 of 1988). The parties concluded agreements of sale of machinery and
the second concerned sale of shares. In both cases the Court of Appeal of Tanzania stated that since
price is a fundamental term in a sale agreement if it is not mentioned the agreement becomes uncertain.
In law uncertainty renders the agreement void.

(e) Agreement by way of wager

(f) Agreement without consideration
(g) If consideration and objects are unlawful: This can include the promise of sex, an illicit substance,
or anything else causing one or both parties to break the law.

Since there was no contract at all no property would pass under such a contract. And, if money was paid
in pursuance of a void contract it becomes recoverable. The parties are restored to their original
positions. Courts will not enforce a void contract but may assist the parties to revert to their original
positions.

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• VOIDABLE CONTRACTS
▪A voidable contract is a valid contract that contains some defect in substance or in its manner of
formation that allows one party (or sometimes both parties) to rescind it.
A voidable contract is a contract with full legal force unless and until one of the parties, who is entitled
to bring it to an end does bring it to an end. The party entitled to rescind the contract has an option either
to rescind the contract or affirm the contract. (See S. 2 (1) (i) of LCA).
▪A voidable contract remains valid and can create legal rights and obligations until it is rescinded. The
party with the right to rescind may lose that right by affirmative conduct, or undue delay, or where the
rights of an innocent third party may be harmed. (See S. 2 (1) (i) of LCA)

Therefore, a voidable contract is a contract which is either valid or void at the option of either party to a
contract.

Voidable contracts include:-

(a) Contracts entered by coercion, section 15 and 19
Section 15 of CAP 345 R.E. 2002 defines “Coercion” as an act of committing, or
threatening to commit, any act forbidden by the Penal Code, or the unlawful detaining, or
threatening to detain, any property, to the prejudice of any person whatever, with the
intention of causing any person to enter into an agreement.

(Fairbanks v Snow (1887) 13 NE 596) who gave the three tests for physical duress to be

i. show that some illegitimate means of persuasion was used

ii. that ‘the illegitimate means used was a reason (not the reason, nor the
predominant reason nor the clinching reason)
iii. that his evidence is ‘honest and accepted

(b) Contracts entered by undue influence, s.16 and 19

A contract is said to be induced by “undue influence” where the relationship subsisting
between the parties are such that one of the parties are in a position to dominate the will
of the other and uses that position to obtain an unfair advantage over the other as stated
under section 16 of The Law of Contract Act, CAP 345. In particular and without prejudice
to the generality of the foregoing principle, a person is deemed to be in a position to
dominate the will of another

i. Where he holds a real or apparent authority over the other

ii. Where he stands in a fiduciary relation to the other
iii. Where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.

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iv. Where a person who is in a position to dominate the will of another, enters into a
contract with him, and the transaction appears, on the face of it or on the evidence
adduced, to be unconscionable, the burden of proving that such contract was not
induced by undue influence shall lie upon the person in a position to dominate the
will of the other

(c) Contracts entered by fraud, section 17 and 19

“Fraud” is defined under section 17 of The Law of Contract Act, CAP 345 to mean any of
the following acts committed by a party to a contract, or with his connivance, or by his
agent, with intent to deceive another party thereto or his agent, or to induce him to enter
into the contract

(d) Contracts entered by misrepresentation, section 18 and 19

To amount to a misrepresentation, the statement must be untrue or seriously misleading.
A concept of English law, a misrepresentation is an untrue or misleading statement of fact
made during negotiations by one party to another or a statement that induces that other
party to enter into a contract, such as in the case of Curtis v Chemical Cleaning and
Dyeing Co [1951] 1 KB 805 Ms. Curtis took a wedding dress with beads and sequins to the
cleaners. They gave her a contract to sign and she asked the assistant what it was. The
assistant said it merely covered risk to the beads, but in fact the contract exempted all
liability. The dress was stained but the exclusion was ineffective because of the
assistant’s misrepresentation, and the claim was allowed.

If the statement is true at the time, but becomes untrue due to a change in
circumstances, the representor must update the original statement as in the case of With
v O’Flanagan [1936] Ch. 575, the plaintiff entered into a contract to purchase O’Flanagan’s
medical practice. During negotiations it was said that the practice produced an income of
£2000 per year. Before the contract was signed, the practice took a downward turn and
lost a significant amount of value. After the contract had been entered into, the true
nature of the practice was discovered and the plaintiff took action in misrepresentation. In
his decision, Lord Wright said, “…a representation made as a matter of inducement to
enter into a contract is to be treated as a continuing representation.”

(e) Contracts entered by mistake, section 20,21 and 23.

Mistake is an erroneous belief, at contracting, that certain facts are true. It can be argued
as a defense, and if raised successfully can lead to the agreement in question being
found void ab initio or voidable, or alternatively an equitable remedy may be provided by
the courts.

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 TOPIC 3:
DISCHARGE OF CONTRACTS

A contract creates certain obligations on one or all parties involved. Discharge of contract means
termination of the contractual relationship between the parties. A contract is said to be discharged when
it ceases to operate, i.e., when the rights and obligations created by it come to an end.

The discharge of a contract happens when these obligations come to an end. There are many ways in
which a contract is discharged as detailed hereunder:

1) Discharge by Performance
2) Discharge by Agreement/Consent
3) Discharge by Impossibility of Performance
4) Discharge by Lapse of Time
5) Discharge by Operation of the Law
6) Discharge by Breach of Contract

1] Discharge by Performance

Performance means the doing of that which is required by a contract. Discharge by performance takes
place when the parties to the contract fulfill their obligations arising under the contract within the time
and in the manner prescribed. In such a case, the parties are discharged and the contract comes to an end.
But if only one party performs the promise, he alone is discharged. Such a party gets a right of action
against the other party who is guilty of breach.

When the parties to a contract fulfil the obligations arising under the contract within the time and
manner prescribed, then the contract is discharged by performance.

Example: Peter agrees to sell his bicycle to John for an amount of TSHS 100,000 to be paid by John on
the delivery of the bicycle. As soon as it is delivered, John pays the promised amount. Since both the
parties to the contract fulfil their obligation arising under the contract, then it is discharged by
performance. Now, discharge by the performance of a contract can be by actual performance or
attempted performance:

As shown in the example above, actual performance is when all the parties to a contract do what they
had agreed for under the contract. On the other hand, it is possible that when the promisor attempts to
perform his promise, the promisee refuses to accept it. In such cases, it is called attempted performance
or tender.

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 i. Actual performance: When both the parties perform their promises, the contract is discharged.
Performance should be complete, precise and according to the terms of the agreement. Most of
the contracts are discharged by performance in this manner.
ii. Attempted performance: Tender is not actual performance but is only an offer to perform the
obligation under the contract. Where the promisor offers to perform his obligation, but the
promisee refuses to accept the performance, tender is equivalent to actual performance. The
effect of a valid tender is that the contract is deemed to have been performed by the tenderer. The
tenderer is discharged from the responsibility for non-performance of the contract without in any
way prejudicing his rights which accrue to him against the promisee

2] Discharge by Agreement

If all parties to a contract mutually agree to replace the contract with a new one or annul or remit or alter
it, then it leads to a discharge of the original contract due to a mutual agreement.

As it is the agreement of the parties which binds them, so by their further agreement or consent the
contract may be terminated. The rule of law in this regard is as follows: Eodem modo quo quid
constituitur, eodem modo destruitur, i.e., a thing may be destroyed in the same manner in which it is
constituted.

Discharge by agreement or consent may be by express or implied agreement or consent.

Example: Peter owes TZS 100,000 to John and agrees to repay it within one year. They document the
debt under a contract. Subsequently, he loses his job and requests John to accept TZS 75,000 as a final
settlement of the loan. John agrees and they make a contract to that effect. This discharges the original
contract due to mutual consent.

There are several types of discharge by agreement, they include:

i. Novation – Section 62 of LCA

Novation takes place when:

(a) a new contract is substituted for an existing one between the same parties, or

(b) a contract between two parties is rescinded in consideration of a new contract being entered into on
the same terms between one of the parties and a third party.

Novation should take place before expiry of the time of the performance of the original contract. If it
does not, there would be a breach of the contract. If a new contract is subsequently substituted for the
existing contract, it would only be to adjust the remedial rights arising out of the breach of the old
contract. If for any reason the new contract cannot be enforced, the parties can fall back upon the old
contract.

ii. Alteration

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Alteration (Sec. 62) : Alteration of a contract may take place when one or more of the terms of the
contract is/are altered by the mutual consent of the parties to the contract. In such a case, the old contract
is discharged.

Differences between novation and alteration:

1. In novation, the change in the existing contract is substantial and in alteration it is less than that.

2. In novation parties may change but in alteration they would remain the same.

iii. Rescission

Rescission (Sec. 62) : Rescission of a contract takes place when the parties to a contract may decide that
they will forget the contract and will not bring a new contract into existence to replace it. A promise not
to demand performance from each other becomes the mutual consideration for discharge of contract. It
may be noted that if the parties do not take steps towards performance of a contract for a long time, this
will amount to abandonment of the contract and will bring about implied rescission. The agreement to
mutually rescind the contract may take place either before its breach by a party or after its breach.

iv. Remission

Remission (Sec. 63) : Remission means acceptance of a lesser fulfillment of the promise made, e.g.,
acceptance of a lesser sum than what was contracted for, in discharge of the whole of the debt.

It is not necessary that there must be some consideration for the remission of the part of the debt. Sec. 63
allows the promisee to dispense with or remit the performance of the promise by the promisor, or to
extend the time for performance or to accept any other satisfaction instead of performance.

A promisee can waive or remit the performance of promise of a contract, wholly or in part. He can also
extend the time agreed for the performance of the same.

In example 3 above, Peter only repays a part of the money he owes to John. However, John agrees to
accept it as a final settlement of the debt. John’s act of remission discharges the contract.

3. Impossibility of Performance

If it is impossible for any of the parties to the contract to perform their obligations, then the impossibility
of performance leads to a discharge of the contract.

If an agreement contains an undertaking to perform an impossibility, it is void ab initio. The rule is

based on the following maxims:

1. Lexicon cogit ad impossibilia, i.e., the law does not recognise what is impossible, and
2. Impossibilium nulla obligato est, i.e., what is impossible does not create an obligation.

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If the impossibility exists from the start, then it is impossibility ab-initio. The first paragraph of
Sec. 56 lays down that “an agreement to do an act impossible in itself is void”. This is known as
pre-contractual or initial impossibility.

However, the impossibility might also arise later. Impossibility which arises subsequent to the formation
of a contract (which could be performed at the time when the contract was entered into) is called post-
contractual or supervening impossibility. It can happen due to:

a) An unforeseen change in the law

b) Destruction of the subject-matter essential to the performance
c) The non-existence or non-occurrence of a particular state of things which was considered a given
for the performance of the contract
d) Death or incapacity for personal service
e) A declaration of war

Example: Peter enters into a contract with John to marry his sister Olivia within one year. However,
Peter meets with an accident and becomes insane. The impossibility of performance leads to a discharge
of the contract.

In the following cases, a contract is not discharged on the ground of supervening impossibility.

1. Difficulty of performance.
2. Commercial impossibility.
3. Impossibility due to failure of a third person.
4. Strikes, lock-outs and civil disturbance.
5. Failure of one of the objects.

4. Discharge of a Contract by Lapse of Time

The Law of Limitation Act, [CAP 89] prescribes a specified period for performance of a contract. If the
promisor fails to perform and the promisee fails to take action within this specified period, then the latter
cannot seek remedy through law. It discharges the contract due to the lapse of time.

Example: Peter takes a loan from John and agrees to pay instalments every month for the next seven
years. However, he does not pay even a single instalment. John calls him a few times but then gets busy
and takes no action. Six years later, he approaches the court to help him recover his money. However,
the court rejects his suit since he has crossed the time-limit of six years to recover his debts.

5. Discharge of a Contract by Operation of Law

A contract can be discharged by operation of law which includes insolvency or death of the promisor. A
contract may be discharged independently of the wishes of the parties, i.e., by operation of law. This
includes discharge –

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 1. By death (in the case of contracts for personal service).
2. By insolvency.
3. By unauthorised alteration of the terms of a written agreement.
4. By rights and liabilities becoming vested in the same person.

6. Discharge by Breach of Contract

If a party to a contract fails to perform his obligation according to the time and place specified, then he
is said to have committed a breach of contract.

It occurs when a party to the contract without lawful excuse does not fulfill his contractual obligation or
by his own act makes it impossible that he should perform his obligation under it.

Breach of contract may be –

1. Actual breach of contract, or

2. Anticipatory or constructive breach of contract.

If a party repudiates a contract before the agreed time of performance of a contract, then he is said to
have committed an anticipatory breach of contract.

In both cases, the breach discharges the contract. In the case of:

i. an actual breach, the promisee retains his right of action for damages.
ii. an anticipatory breach of contract, the promisee cannot file a suit for damages. It also discharges
the promisor from performing his part of the contract.

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 TOPIC 4:

REMEDIES FOR THE BREACH OF CONTRACT

A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract.
The breach could be anything from a late payment to a more serious violation such as the failure to
deliver a promised asset. A contract is binding and will hold weight if taken to court. To successfully
claim a breach of contract, it is imperative to be able to prove that the breach occurred. A breach of
contract is when one party breaks the terms of an agreement between two or more parties. This includes
when an obligation that is stated in the contract is not completed on time or an obligation completed in a
different manner not stated in a contract which destroys the whole concept of a contract.

A breach of contract is committed when a party, without lawful excuse, fails or refuses to perform what
is due from him under the contract, or performs defectively, or incapacitates himself from performing.

A concept of breach of contract is divided into two, one is “minor breach” and two is “material or
fundamental breach”. Minor breach involves violation of warranties which are minor terms in the
contract, breach of warranty do not affect the core purpose of a contract. Material or fundamental breach
of a contract is a breach of basic conditions which destroys the entire purpose of a contract. In every
contract there is or are certain terms which form the core of the contract. Such terms(s) create core or
fundamental obligations which must be performed by the parties. If one of the parties fails to perform
such fundamental obligation(s), the breach amounts to complete non-performance of the contract.

For example, if A agreed to deliver cars to B as stated in a contract, but later, A delivers motorcycles to
B this is totally breach of contract. The major term in a contract was to deliver cars and not motorcycles,
this is a fundamental breach of terms of a contract.

The effects of breach of conditions varies from those of breach of warranties. The breach of warranty
only entitles an affected party a right to claim damages but not to repudiate the entire contract. The
breach of basic terms or conditions of a contract entitles an affected party a right to repudiate an entire
contract or to claim damages for loss suffered. An affected party in breach of conditions may decide to
sue for damages while he is in contract, or he may decide to reject the entire contract and to claim
damages for the loss suffered.

The facts and holding in the case of Kampala General Agency Ltd vs Mody's is a good example of a
case law which help to examine differences between conditions and warranties. In this case, A sold

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certain goods to B to be delivered to Soroti Station. Because A discovered that Aloi station was nearer
to B's ginnery he sent them there. B refused to accept the goods alleging that by changing stations, A
was in breach of a contractual condition.

The court rejected B's argument and described the breach as one of warranty. Newbold J.A. referring to
the then Sale of Goods Ordinance, said:

"the position is, therefore, that the sellers have made delivery of the goods in accordance with the
contract but, as agents for the buyers, have consigned the goods to a station which, though possibly more
convenient to the buyers, was other than the one to which they had been instructed to consign the
goods. Is this breach of instructions a breach of a condition of the contract of sale, or is it a breach of a
warranty in respect of which the buyers are, under section 53 of the Sale of Goods Ordinance, only
entitled to damages equivalent to the loss resulting from the breach? A condition of a contract is an
obligation, the performance of which is so essential to the contract that if it is not performed the other
party may fairly consider that there has been a substantial failure to perform the contract. A warranty,
on the other hand, is defined in Section 2 of the Sale of Goods Ordinance as, "an agreement with
reference to goods which are the subject of a contract of sale, but collateral to the main purposes of such
contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and
treat the contract as repudiated".

I have no doubt that the breach by the sellers of the instructions to consign the goods to Soroti station
was a breach of a warranty. This is the last word of a judge in this case, he rejected claims of B and held
the breach as a breach of warranty hence affected party is not entitled a right to repudiate a contract, but
he can sue for damages.

REMEDIES FOR THE BREACH OF CONTRACT

Damages are intended to compensate the injured party for the loss that he has suffered as a result of the
breach of contract. In order to establish an entitlement to substantial damages for breach of contract, the
injured party must show that:

(i) actual loss has been caused by the breach;

(ii) the type of loss is recognised as giving an entitlement to compensation; and

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(iii) the loss is not too remote.

A breach of contract can be established even if there is no actual loss but in that case, there will be an
entitlement to only nominal damages.

The underlying principle is to put the injured party financially, as near as possible, into the position he
would have been in had the promise been fulfilled. As a general rule, damages are based in loss to the
claimant not gain to the defendant. In other words, damages are designed to compensate for an
established loss and not to provide a gratuitous benefit to the aggrieved party.

2. Damages may sometimes be an inadequate remedy. There are a number of equitable remedies, which
are discretionary, directed at ensuring that the injured party is not unjustly treated by being confined to
the common law remedy of damages. For example:

Section 73-75 of The Law of Contracts Act provides several remedies for the breach of contract, some
of remedies are as follows;

1. Rescission of a contract.

When a breach of Contract is committed by one party, the other party may sue to treat the contract as
rescinded. The remedy of rescission is available to a party whose consent, in entering into a contract, has
been invalidated from the beginning, rescinding a contract is to extinguish it and restore the parties to
their pre-contractual positions where by parties will be entitled a right to recover loss suffered from the
breach of terms of a contract.

Rescission is a remedy made available when the underlying basis for making a contract is fundamentally
tainted. Some conduct on behalf of a contracting party undermines the very reason that the other party
made the contract in the first place. The contract can be rescinded, at the option of the affected party.

The remedy of rescission means that an entire contract is set aside. For legal purposes, it’s treated as
though it was never made. It never took place. The outcome of rescission is: whatever was done by the
parties by making the contract is reversed, the parties are put back in the position they would have been
in, as if the contract never even been made, it's treated as "non-existing". The transaction established by
the contract is brought to an end with retrospective effect. When the right to rescind is available and
properly exercised, it is said that the contract has been "rescinded".

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Example: A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in
every week during the next two months, and B engages to pay her Ts. 10M for each night’s
performance. On the sixth night, A wilfully absents herself from the theatre, and B in consequence,
rescinds the contract. B is entitled to claim compensation for the damage which he has sustained
through the non-fulfilment of the contract.

Damages for the loss sustained or suffered. Breach of contract by a party entitles an affected party a
right to claim compensation relevant to the loss suffered. When a breach of basic terms of a contract
resulted to a serious damage or loss, an affected party may sue to recover loss suffered. Damages may be
ordinary or special damages.

2. Ordinary Damages

(Section 73) are those which naturally arose in the usual course of things from such breach. The measure
of ordinary damages is the difference between the contract price and the market price at the date of the
breach. If the seller retains the goods after the breach, he cannot recover from the buyer any further loss
if the market falls, nor be liable to have the damages reduced if the market rises.

Examples: A contracts to buy B’s ship for Tsh. 60B but breaks his promise. A must pay to B, by way
of compensation, the excess, if any, of the contract price over the price which B can obtain for the ship
at the time of the breach of promise.

3. Specific performance

Where damages are deemed inadequate, the court may make an order for specific performance which
will compel the party in breach to fulfil the terms of a contract. The court "will only grant specific
performance if, under all the circumstances, it is just and equitable to do so."20 Specific performance
may be refused if the claimant has acted unjustly or unfairly on the basis that the claimant must come to
equity with "clean hands".

This is another remedy for the breach of contract, in some cases, where terms breached can be cured, a
court of law may order a party breached a contract to perform its agreed duties. This is called ‘specific
performance’ of the contract. Some of the instances where Court may direct specific performance are: a
contract for the sale of a particular house or some rate article or any other thing for which monetary

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compensation is not enough because the injured party will not be able to get an exact substitute in the
market.

4. Prohibition/injunction

A court of law may issue injunction to prohibit a party from continuing performing a particular activity
with negative impacts to another party. This order intends to maintain status quo of the terms of the
contract and to safeguard interests of a party who has suffered loss or is still suffering loss.

Example : N, a film star, agreed to act exclusively for a particular producer, for one year. During the
year she contracted to act for some other producer. Held : She could be restrained by an injunction.

A court may restrain a party from committing a breach of contract by injunction. Such injunctions may
be "interlocutory" ones which are designed to regulate the position of the parties pending a full hearing
of a dispute or permanent (Stickney v Keeble [1915] AC 386.). Further, an injunction (whether
interlocutory or permanent) may be "prohibitory" ordering a defendant not to do something in breach of
contract or "mandatory" requiring a defendant to reverse the effects of an existing breach. An injunction
will not normally be granted if the effect is to directly or indirectly compel the defendant to do acts for
which the plaintiff could not have obtained an order for specific performance.

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