Business law notes pdf

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These Lecture notes have been prepared by: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Prelude This work presents . BUSINESS LAW (BLAW ) – Lecture Notes law and other social .. Eastern Europe in the Age of Globalisation?, meteolille.info pdf. of Ontario. All rights reserved. Business Law Notes Business Law versus Business Ethics. Sources of Law: The Constitution, Legislation, and the Courts .

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financial burden on college students taking business law courses. Access to Text - All of this material in this text is available in desktop and mobile browser or PDF format at handwrite notes from the classroom discussion of the topic. Business Law Notes - Download as PDF File .pdf), Text File .txt) or read online. Business Law Contracts Notes. Uploaded by Tina Truong. Copyright: Download as DOCX, PDF, TXT or read online from Scribd. Flag for inappropriate content.

Or Law of contract is not the whole of law of agreement nor whole law of enumerating the essentials of a valid contract? Or What is the nature and the object of contract? According to section 2 h of the Indian contract act, The offer and acceptance should relate to same thing in the same sense. There must be two or more persons to an agreement because one person cannot enter into an agreement with himself.

If it is defeats the provision of any law: If the object or consideration of an agreement is of such a nature that. An agreement between husband and wife to live separately is invalid as being opposed to Hindu law. If it is fraudulent: An agreement.

Ram Saroop vs Bansi Mandar If the court regards it as immoral: Pearce vs Brooks A firm of coach-builders hired out a carriage to a prostitute. In case of default. The coach-builders could not recover the hire as the agreement was unlawful. The word immoral includes sexual immorality. Hence its object or consideration is unlawful. In such a case the court will not enforce the agreements. This agreement is based upon the two reasons: An agreement whose object or consideration is opposed to public policy is void.

An agreement is said to be opposed to public policy when it is harmful to the public welfare. Where the court regards it as opposed to public policy: An agreement whose consideration or object is such a nature that opposed to public policy. Thus it becomes void and it deemed to be unlawful.

Agreements of trading with enemy: An agreement made with an alien enemy at the time of war is illegal on the ground of public policy. Some of those agreements which are or which have been held to be. Where the firm was compelled to pay damages for a published libel.

He can do so only after he receives a license from the central government. Agreement to commit a crime: An agreement is to commit a crime is opposed to public policy and it is void. Contracts of this nature are void because its object is to defeat the provision of the Indian Limitation act. Discuss the doctrine of public policy?

Give examples of agreement which are opposed to public policy? Agreements in restraint of legal proceedings: An agreement in restraint of legal proceeding is the one by which any party thereto is restricted absolutely from enforcing his right under a contract through a court. Agreement restricting personal liberty: Agreement which unduly restricts the personal freedom of the parties is void and against to public policy.

Agreement in restraint of marriage: Every agreement in restraint of marriage of any person. This is because the law regards marriage and marriage status as the right of every individual.

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The agreement was against to public policy and also illegal. It may take any of the following forms: Agreement in restraint of trade: Every agreement by which any one is restrained from exercising a lawful profession or trade or business of nay kind. Agreements which interfere with administration of justice: Where the consideration or object of an agreement of which is to interfere with the administration of justice is unlawful.

Agreements in restraint of parental rights: Parkinson vs College of Ambulance. But this rule is subject to the following exceptions: Trafficking in public offices and tittles: Trafficking in public offices means trading in public offices to obtain some gain which other wise cannot be obtained.

A contact of this nature is void and is against to public policy and also it is illegal. This right and duty of guardianship cannot be bartered away. Agreement tending to creates interest opposed to duty: If a person enters into an agreement whereby he is bound to do something which is against to public or professional duty.

Trafficking in tittle means some such award from government in return of consideration. In the above exceptions the court will enforce the agreements. It is destitute lacking of legal effects altogether. Agreement interfering with marital duties: Any agreement which interferes with the performance of marital duties is void. If affects only the immediate parties and has no further consequences. Agreement to defraud creditors or revenue authorities: An agreement which object is to defraud the creditors or revenue authorities is not enforceable.

Agreement for brokerage for arranging marriage is void. The agreement amounted to restraint of trade and thus void. An illegal agreement. Similarly agreement of dowry cannot be enforced.

Marriage brokerage: As a public policy. Because only if there is any restrictions imposed on such agreements are reasonable. Shaikh Kalu vs Ram Saran Bhagat Out of 30 makers of combs in the city of Patna. Write a short note on unlawful and illegal agreements Ans: An unlawful agreement is one which. It is sometimes difficult to decide as to weather an act is illegal or unlawful because.

It may. The court allows the defendant to have that advantage. If an agreement is illegal. In cases of equal guilt. This means that. The effect of this is that the law discourages people from entering into illegal agreements which arise from base. This is based on the following two maxims: Effects of illegality: The general rule of law is that no action is allowed on an illegal and unlawful agreement. These acts do not effect public morals nor do they results in the commission of crime..

Ex-turpi causa non oritur action. Meaning of unlawful and illegal agreements: In pari delicto. The court is.

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No action arises from a base cause. As a result of the neutrality the defendant stands to gain. No action can be taken a For the recovery of money paid. An agreement which interferes with the liberty of a person to engage himself in any lawful profession. Or property transferred under illegal agreement. The effects of illegality may now be summed up as under: In cases of equal guilt on an illegal agreement.

The collateral transactions to an illegal agreement become tainted infect with illegality and treated as illegal even though they would have lawful by themselves. Where a substantial part of the illegal transaction has not been Carried out. A seller of the goodwill of a business may agree with the buyer to refrain from carrying on a similar business.

An outgoing partner may agree with his partners not to carry on a business similar to that of the firm with in a specified period or with in the specified local limits. The general principle of law is that all restraints of trade are void. Any Partners may. But if an agreements attempts to create a monopoly it would be void. In such a case an Agreement in restraint of trade is valid. An agreement in the nature of a business combination between traders or manufactures does not amount to a restraint of trade and is perfectly valid.

But in India it is valid if it is falls with in any of the statutory exceptions. A partner shall not carry on any business other than that of the firm while he is a partner. Such agreement does not amount to a restraint of trade nor opposed to public policy and is perfectly valid.

These promises have been classified by Lord Mansfield based on the jones vs Barkley case they are as follows: Trade combinations. Agreement in restraint of trade. Sale of goodwill. According to section 2 f of the Indian contract Act. An agreement of service by which an employee binds himself. Write a short note on reciprocal promises. Service agreements. Immoral agreements. Where the consideration is an act of sexual immorality. Conditional and dependent: Where the performance of the promise by one party depends on the prior performance of the promise by the other party.

The word immoral includes sexual immorality.. The promises are conditional and independent. The promises are mutual and independent. Where the object of the agreement is the furtherance of sexual immorality.

Mutual and concurrent: Where the promises of the both the parties are to be performed simultaneously. Mutual and independent: Where each party must perform his promise independently and irrespective of the fact whether the other party has performed. An agreement is unlawful for immorality in the following cases: Wagering agreement. It is a wagering agreement. According to section 2 g of the Indian contract Act. It is void-ab-initio i.. The event must be uncertain. Agreements in restraint of marriage.

Agreements by incompetent parties. Section 23 4. There must be two parties. Agreements made without consideration. A void agreement does not create any legal right or obligation. Section 20 3. Section 24 5. No other interest in the event except winning or losing. Section 11 2. Each party must stand to win or lose.. The following agreements have been expressly declared to void by the contract act: Section 25 6.

Agreements made under mutual mistake of facts. The following transactions are not considered as wagering agreements. Agreements which the consideration or object is unlawful. Agreements which the consideration or object is unlawful in part. No control over the event. Section 26 http: In essence. Write a short note on restitution. In case of reciprocal promises to do things legal and also other things illegal. The principle of restitution is that a person who has been unjustly enriched at the expense of another is required to make restitution to that other.

Void contract: Agreements by way of wager. It is void-ab-initio i. Agreements to do impossible Acts. Agreements in restraint of trade.. Agreement which the meaning is uncertain. Agreements contingent on impossible events.

Void agreement: The second set illegal of reciprocal promises is a void agreement. Agreements in restraint of legal proceedings. Write a short note on void agreement and void contract. An agreement with a minor. We may talk of such a contract as void agreement. Define wagering agreement and explain the essentials of a wagering agreement in detail? Essentials of a wagering agreement: The following are the essentials of a wagering agreement, they are follows: Uncertain event: The promise made between the partied must be conditional and uncertain event i.

Generally a wager relates to a future event, but it may also relate to a past event provided the parties are not aware of its result or the time of its happening. Each party must stand to win or lose: Each party should stand to win or lose upon the determination of the uncertain event.

An agreement is not a wager if either of the parties may win but cannot lose or may lose but cannot win. No control over the event: The wagering agreement is a game of chance.

Therefore, no party should have control over the happening or non happening of an event. If on the other hand one of the parties has control over the event, then the transaction lacks an essential ingredient of a wager.

No other interest in the event: The parties should have no other interest in the subject matter of the agreement except winning or losing of the amount of the wager. They bet with each other over the result of the bout. This is a wagering agreement. A crossword competition involving a good measure of skill for its successful solution. But if prizes of a crossword competition depend upon the correspondence of the competitors solution with a previously prepared solution kept with the editor of a newspaper, there it is treated as lottery and wagering transaction.

According to prize competition act, , prize competition is game of skill are not wagers provided the amount of prize not exceed rs. Contract of insurance is not wagering agreements even though the payment of money by the insurer may depend up on a future uncertain event. An agreement to contribute a prize of the value of above Rs. Explain the meaning of contingent contract?

What are the rules related to contingent contract? According to sec 31 of ICA, , a contingent contract is a contract to do or not to do something, if the event, collateral to such contract, does or does not happen. Thus it is a contract, the performance of which is dependent upon the happening or non happening of an uncertain future event, collateral to such events. Its performance depends upon the happening or non happening in the future of some event.

The event must be uncertain 3. The following are the rules regarding performance of a contingent contract: Contingent contract upon the happening of a future uncertain event: When the happening of such event has possible it becomes enforced and if the happening of such event becomes impossible it becomes void.

The contract becomes void. Contingent contract upon the non happening of a future uncertain event: When the happening of such event becomes impossible it becomes enforced and when such event has possible it becomes void. Whether the impossibility of the event was known to the parties or not is immaterial.

Differences between wagering agreement and contingent contract. Contingent contract upon future conduct of a living person: When such person acts in the manner as desired in the contract it can be enforced and if such person does not acts in the manner as desired in the contract it becomes void.

The contract may be enforced if the ship returns within a year. Contingent contract upon happening of an event within a specified time: When such event has happened within the specified time it can be enforced and if the happening of such event becomes impossible within the specified time it becomes void. Contingent contract upon impossible events: Such an agreement cannot be enforced since it is void.

Contingent contract upon non happening of an event within a specified time: When the happening of such event becomes impossible within the specified time it can be enforced and if the happening of such event has happened within the specified time it becomes void.

It is not a game of chance. The following are the differences between wagering agreement and contingent agreement: In a wager the future event is the sole In a contingent contract the future events is only determining factor.

It is a game of chance. Generally it is a reciprocal promise. Wagering is an agreement where a person Contingent contract is one in which promisor agrees to pay money to the other person undertakes uncertain event. In a wager the parties are not interested in The parties have real interest in the happening or the subject matter of the agreement except non happening of an uncertain future event. There may be unilateral promises. It must be unconditional.

Startup vs. It must be by a person who is in a position. It must be made to the proper person and also in proper form. It must be the whole quality contracted for or of the whole obligation. In case of tender of goods. This is not a valid tender. In such a case it has the same effect as a tender to all of them. It is not a valid tender as it not made at the appointed time.

A tender of goods at such time when the other party cannot inspect the goods is not a valid tender. A tender of an installment when the contract stipulated payment in full is not a valid tender. MacDonald A valid tender of performance is equivalent to performance. It must be made at the proper time and place. It may be made to one of the several joint promises. It becomes conditional when it is not in accordance with the terms of the contract.

When promisor has made a valid offer of performance to the promise and offer had not been accepted by the promise. But in the following case. He offers to pay on the 1st of July the amount with interest up to the 1st of July. A tender of goods after the business hours or of goods or money before the de date is not a valid-tender.

The defendant refused to accept the goods owing to lateness of the hour. Promisor himself: If there is something in the contract to show that it was the intention of the parties that the promise should be performed by the promisor himself.

In case of tender of money. A contract to paint a picture or to sing or to marry. Delivery as tendered at 8. In India in rupees. By whom must contracts be performed? The promise under a contract may be performed by.

This means contracts which involve the exercise of personal skill or diligence or which are founded on personal confidence between the parties must be performed by promisor himself. Though the hour was unreasonable. As regards any other contract. As per section If all of them die. But their liability under a contract is limited to the value of property they inherit from the deceased.

Legal Representatives: A contract which involves the use of personal skill or is founded on personal considerations comes to an end on death of the promisor. Third person: When a promisee accepts the performance of the promise from third person. Reciprocal promises: Joint promisors: When two or more persons have made a joint promise.

Where personal consideration is not the foundation of the contract. Sale of goods for cash. What are the rules of law relating to time and place of performance of contract? According to section 2 f of the ICA. These promises have been classified by lord Mansfield based on the Jones vs Barkley case as follows: Time and place of performance: It depends on the special circumstances of the case contract.

Where time is specified and no application is to be made: Application for performance on a certain day and place: Where no application is to be made and no time is specified: Section 46 to 50 of the contract Act lay down the rules regarding the time and place of performance they are follows: In such a case it is the duty of the promisee to apply for performance at a proper place and time within usual business hours.

Explain the rules regarding the reciprocal promises? According to section 2 f of Indian Contract Act. According to section 51 such promises need not perform by the promisor unless the promise is ready and willing to perform his reciprocal promise. Simultaneous performance of reciprocal promises: Where the promises are to be performed simultaneously.

Application by the promisor to the promisee to appoint a place: Performance in manner or at the time prescribed or sanctioned by the promisee: Rules regarding performance of reciprocal promises: Section 51 to 54 of the contract Act. Where the order is not expressly fixed. Order of performance of reciprocal promises: In such a case the contract becomes voidable at the option of the party so prevented and is entitled to compensation from the other party for any loss which he may sustain in consequence of non performance of the contract.

Effect of default as to promise to be performed first: In such a case one of them cannot be performed till the other party has performed his promise then if the other party fails to perform it. Effect of one party preventing another from performing promise: But the promisee is entitled to claim the compensation for any loss caused to him by the delay.

Contracts must be performed on time. In the performance of a contract. If promisee accepts the delayed performance and intend to sue the promisor for compensation for delayed performance. It means that in such a case the promisee cannot rescind the contract and he will have to accept the delayed performance. If the promisor fails to perform within the specified time. If the promisor fails to perform on an agreed or specified time. Reciprocal promises to do things legal and also other things illegal.

By whom joint promises must be performed: The following are the rules as regards performance of joint promises: Unless a contrary intention appears from the contract. By whom joint promises must be performed? Discuss the law relating to the rights and liabilities of joint promisors in a contract?

Also explain the devolution of joint liabilities? If any of them dies. All promisors must jointly fulfill the promise: This means the liability of joint promisors is joint and several. Any one of the joint promisors may be compelled to perform: D may compel all or any or either A or B or C to pay him Rs If one of the several joint promisors is made to perform the whole contract. Sharing of losses arising from default: A joint promisor compelled to perform. A is compelled to pay the whole amount to D.

D2 and D3 are not released from their liability nor is D1 discharged from his liability to D2 and D3 for contribution. C releases D1 from his liability and files a suit against D2 and D3 for payment of debt.

The released joint promisor also continues to be liable to the other promisors. Release of joint promisor: If one of joint promisor is released from his liability by the promisee. Act of the parties. It may take place: Operation of law.

This rule is based on sense and convenience. D cannot ask C to recover the amount from D1 unless C accepts the performance from D1. What conditions should be fulfilled for assignment of contract?

I Act of the parties: Assignment is said to take place by an act of the parties when they themselves make the assignment. An actionable claims can be always be assigned but the assignment to be complete and effectual must be effected by an instrument in writing. T will be bound by this payment and shall be entitled to recover only Rs from D.

Notice of such assignment must also be given to the debtor II Operation of law: Assignment by operation of law takes place by intervention of law.

Subsequent or supervening impossibility: Impossibility of performance: In such a case the contract is void.

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It is of two types: Impossibility existing at the time of contract: If an agreement contains an underwriting to perform impossibility. Impossibility of performance of a contract. The coronation procession was cancelled due to the illness of the king..

Its cancellation discharged the contract. Thus the contract was void. Non-existence or non occurrence of a particular state of things: Some times. In such a case the contract becomes void. But before those days the hall was accidentally destroyed by fire. If there is any change in the state of things which formed as the basis of contract. Destruction of subject matter of contract: When the subject matter of a contract. H was excused from paying the rent for the flat on the ground that existence of the procession was the basis to the contract.

Krell Vs Henry H hired a flat from K for June 26 and Impossibility existing at the time of contract. Taylor Vs Caldwell C agreed to let out a music hall to T on a certain dates. The contract was discharged by impossibility created by subsequent change in law.

When an agreement is discovered to be void. C is dead at the time of promise. When the performance of a contract becomes impossible or unlawful to its formation. Contracts entered into before the out-break of war are suspended during the war and may be received after the war is over. The contracts to act on those occasions become void.

A is too ill to act. On several occasions. Where one person has promised to do something which he knew. Out-break of war: All contracts entered into with an alien enemy during war is un lawful and therefore impossible of performance. Rights of joint promisors: Under such agreement or contract is bound to restore return it. There was a contract of a sale of trees of a forest.

Change of law: When a sub sequent change of law takes place or the government takes some power under some special power.

A pays B Rs. Effects of supervening impossibility: Death or personal incapacity of the parties: Where the performance of a contract depends on the personal skill or qualification or the existence of a given person. Vs Noblee Throl G. Tsakiroglou and Co. A refused to ship the goods via the cape of good hope on the plea that the contract had been frustrated by reason of the closing of the Suez route. When one of joint promisee dies his legal representatives jointly with the surviving joint promisees.

B dies. Impossibility of performance is as a rule.

Pdf business law notes

A agreed to sell to B tons of Sudan groundnuts c. Difficulty of performance: A contract is not discharged merely because that it has become more difficult of performance due to some uncontemplated events or delays. The usual and normal route at the date of the contract was via Suez Canal.

After the death of C. A could not fulfill the agreement as the mill failed to produce the goods. Commercial impossibility: A contract is not discharged merely because expectation of higher profits is not realized. Failure of one of the object: Default of third person: The boat.

B was entitled to recover damages from A. A contract is not discharged by reason of strike by the workers. Thus it is not discharged. Ganga Saran Vs Ram Charan A agreed to sell to B a specified quantity of cotton goods to be manufactured by a particular mill. The contract was not frustrated as A could have transported the goods via the Cape of Good Hope. Herne bay steam Boat Company Vs Hutton A time was named for the completion for the delivery.

B agreed to deliver as and when goods might be received from the mill. The contract was not discharged. Self induced impossibility: This means a contractual obligation may be discharged by a agreement which may be expressed or implied.

Discharge by performance. II 15Q. Performance of a contract is the most usual mode of its discharge. It may be: The general rule of law is a thing may be destroyed in the same manner in which it is constituted. Actual performance: Performance should be complete. When both the parties perform their promises. The contract comes to an end by performance. Where a valid Tender is made and is not accepted by the promise. 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.

Most of the contracts are discharged by performance in this manner. Actual performance Attempted performance or tender of performance. Performance means the doing of that which is required by a contract. Attempted performanc or Tender of Performance: In certain situations the promisor offers performance of his obligation under the contract at the proper time and place but the promise refuses to accept the performance.

Novation takes places: This is a new contract extinguishes the old one. It may occur: Recession of a contract takes place when all or some of the terms of the contract are cancelled.

Both in novation and in recession. Remission means acceptance of a lesser fulfillment of the promise made or acceptance of a sum lesser than what was contracted for. When substitution of a new contract for the original one either between the same parties or between same parties or The consideration for the new contract is mutually being the discharge of old contract.

Alteration means a change in one or more terms of a contract with mutual consent of parties. Novation should take place before the expiry of the time of the performance of the original contract. Alteration Section. In case of recession. Recession Section. Novation Section. Remission Section. In such a case the old is discharged. When a contracting party fails to perform his obligation under the contract. By merger: Merger takes place when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under the same or some other contract.

By rights and liabilities becoming vested in the same person: When the rights and liabilities under a contract vests in the same person. His rights as a lessee merge into his rights as a owner. By insolvency: When a person is adjudged insolvent. By unauthorized alteration of the terms of a written agreement: Where a party to a contract makes any material alteration in the contract without the consent of the other party.

He later buys the property. By Death: If contracts involving personal skill or ability of the promisor. This is called as Waiver. The whole debt is to be discharged. Discharge by Operation of Law Ans: A contract may be discharged by operation of law which takes place: What do you understand by breach of contact?

Or Discharge of breach of contract? When a promisor fails or refuses to perform the promise upon the due date for performance then it is called actual breach of contract. The employment was to commence on 1st June. It may take place in two ways. Promise can sue the party at fault for damages for breach of contract. Anticipatory breath of contact. He was entitled to recover the wages agreed upon. Actual breach of contract: It confers a right of action or damages on the injured party.

Subsequently when the Japanese government declared war with china. Branch of contacts may be of two types: 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.

He consequently left the ship. Hochster vs de la tour Actual breath of contact. In such a case the promisee is exempted and may resend the contract.

He was entitled to do so. Anticipatory Breach of contract: It occurs when a party to executory contract declares his intension of not performing the contract before the performance is due. The fundamentals principle underlying damages is not punishment but compensation for the pecuniary having to do with money loss which naturally flows from the breach.

He can treat the contract as discharged so that he is absolved of the performance of his party of the promise. Ordinary or natural or general or compensatory damages: Ordinary damages are generally the difference between contract price and market price in sale of such damages which arise naturally in usual course of things from the breach of contract.

Hadley vs baxendale He can immediately take a legal action for breach or wait till the time the act was to be done. Types o damages: Damages may be of different types they are as follows: In case of anticipatory breach. Here a party by his own voluntary act disables himself from performing the contract.

What are the rules under the Indian contract act for estimating the loss or damage arising from a breach of contract? Or Define damages? Explain different type of damages awarded on breach of contract? Damages are the monetary compensation allowed to the aggrieved party for the loss or injury suffered by him by the breach of contract. Nominal or token damages: Nominal damages are awarded where the plaintiff has proved that there has been a breach of contract but he has not in fact suffered any real damage.

Damages or inconvenience and discomfort: Damages can be recovered for physical inconvenience and discomfort. He cannot claim compensation or loss which is really due not to the breach but due to his own neglect. Exemplary damages awarded only in two ways: It is generally given by way of compensation for loss suffered and not by way of punishment for wrong inflicted.

Mitigation of damages: It is the duty o the injured party to take all reasonable steps to mitigate the loss caused by the breach. If the customer happens to be a trade man. Vindictive or exemplary damages: Exemplar damages are punitive damages which are awarded by the court in some cases.

Damages for loss of reputation: Damages for loss of reputation in case of breach o contact are generally not recoverable. The amount may be even a rupee. It is awarded just to establish the right to decree or the breach of contract.

And the rule o law is: The mode of winding up etc. Any person involved in operation of business needs to content himself with the range of rights, powers, privileges and responsibilities of the owners, managers and employees.

Without clear knowledge of the law the business establishments would repeatedly suffer loss, if any profitable business ventures its owners undertake was done without abiding to legal requirements set for it and at the end of the day the undertaking was nullified. A modern Introduction, 4th Ed.. B and Soulsby J. N Contracts do touch on every aspect of human life i.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha The content of this area mainly revolves around matters concerning the following: Just to refresh your mind and be specific to this topic the sources of contract law in Tanzania are: Customary laws: Case laws: Nditti, an expert in contract law of East Africa has this to say about the application of English common laws to Tanzania.

The word contract refers to an agreement which can be enforced by law between one person and another. The two words: Pg See also Banana R.

A contract needs to be binding to be legally useful and it can not be binding unless it is enforceable. Consider the following examples: Juma promised to take her girl friend to some zoo on every weekend, but he usually refuses at the on set of the weekend.

Can she enforce this agreement? Or A wife confides to her husband that if he promises to love her whole heartedly he would buy him a car.


Can he enforce this agreement? Are these two agreements contracts? All of these are agreements but they are not contracts because they are lacking in one important feature which goes to the substance of the whole nature of all contracts which is: Enforceability bindingness of an agreement, therefore, is the condition precedent before the same can be established as a valid contract.

In the formation of a contract the law provides for a minimum number of prerequisites or some times are referred to as essentials of a contract, before an agreement can be a contract. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha these are expressly stipulated in the Law of Contract Act, Cap and those which are not provided can be implied from the English common law of contract.

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. An analysis of this section brings up three of the essential of a contract as follows: According to s. A person for instance may not be competent to contract if he falls under one of the following groups: Since agreement is the beginning point in the making of a contract, the validity of the latter will depend largely on the preciseness of the former.

An agreement is therefore one of the fundamentals of a valid contract. An agreement is made by two things: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha 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.

The proposal usually contains of a number of terms, which would either take an oral or written form depending on the nature of a particular contract.

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Some contracts must be made in writing only e. Bills of exchange, insurance contracts, hire purchase contracts etc. Instances of a proposal 1. We will use these examples later. There are two bases to classify these requirements as follows: On the basis of the terms of the proposal made a The terms must be certain It means the terms making the proposal must be self explanatory; they should not leave a question to the offeree , the person to whom the offer is made.

This person must understand correctly the content of the offer and such things as: Is the offer for selling or purchasing? What is the item, subject to that sale? What is the price? The terms are clear and certain if the parties will be in a position to be able to say exactly upon what is their agreement founded.

Do the examples of the proposals given above meet these tests? Answer Every proposal must contain terms which are certain e. In example number one the terms that are contained therein are: Selling a plot only and there is no any other term. Is there certainty to this proposal? No it is not certain since B would not know how much is the plot sold. In example number two, the terms are: The price is mentioned at Tshs.

This is a certain offer since it defines in precise terms what C is willing to do; it also mentions the price for the same. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha In law uncertain agreements are not legally recognized agreements.

See Alfi E. Price in a contract of sale was held to be a fundamental term and non disclosure of which renders the agreement uncertain. 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 consideration. These words are the decision of Lugakingira J. By making and signifying the terms of the proposal A and C in our examples above have shown that they are willing to be bound by their own terms that they have made to which they expected B and D would assent to.

We will have a deeper discussion on terms of contract later in this work. This request for information does not amount to an offer.

The following case illustrates this point. This means Harvey just sought to know whether or not Facey would be willing to sell the property. Reply by Facey: Telegram number 2. Telegram number 3. The court held that: There was no contract because of two reasons; i. Telegram number two was not an offer but rather a mere supply of information; it merely supplied the price at which if there was an offer, Facey would be willing to sell. Telegram number three was a true offer but not an acceptance.

This true offer is no where accepted in their telegram communication. Due to this you must know how to distinguish when a person makes an offer and when he merely seeks a supply of information as to the subject matter of the contract. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha b Invitation to treat An invitation to treat happens to be done when a person proposes certain terms for which he is ready to enter into negotiation but by which he is not willing to be bound.

In other words these are terms that the maker merely intends to invite an offer and set in motion negotiations with any one who would be interested. Examples of invitation to treat are: Display of goods for sale 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 was held in a famous English case of: Fisher v.

Bell [] 3 All E. Bell, displayed in the window of his shop a flick knife on which he attached a price tag bearing description of the knife and the price which was set at 4s.


It was illegal to offer a flick knife for sale under the English law. So he was sued for so offering such a knife. The issue before the court was: Does the display of goods for sale in a shop amount to an offer? Lord Parker delivered a judgment which resolved this issue in the following statement: Lord Parker, further disputing the contention that display of goods constitutes and offer, observed that: Simple facts of this case: The law in England made it illegal to sell drugs without supervision of a registered pharmacist.

That by displaying the drugs Boots Cash offered them for sale. That by placing the drugs in the basket, the customer accepted the offer. That a sale was effected between Boots Cash and the customer, by the obove two acts, and for this sale Boots Cash violated the law which prohibited selling of drugs without supervision. The offer is instead made when the customer presents to the cashier the item together with payment for such an item and the acceptance will be presumed to done when the cashier accepts the payment.

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.

Other less common instances are: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha A person may declare an intention to do or to abstain from doing something; this declaration is not an offer and so is separate from the contract which would result from it.

In Harris v Nickerson L. The auction was later cancelled. Harris sued Nickerson for damages because he had traveled from a distant place to come to the advertised auction. He argued that the advertisement constituted an offer and by traveling that far he had accepted it. The court held that the advertisement was not an offer, thus it could not be accepted by making such a journey.

The principle established in this case: Who presided over this case established that an act of advertising that items will be placed up for auction does not constitute an offer to any person that the goods will actually be put up.

The person who placed the advertisement may withdraw the items for the auction at any time before the auction. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha common in business world especially when a new product is introduced in the market.

Instances of these are a phrase like: These are those which take the form of promises which a sensible person may take into account. An illustration of promises which might be taken seriously is as it happened in the following case: Carlill v Carbolic Smoke Ball Co. They placed an advertisement in the newspapers that they would pay Pounds to any one who caught influenza after using their drug.

The ad is in the following words: Carlill trusted the makers of the promises contained in the advertisement, bought and used their smoke balls after which she still contracted influenza.

She sued the company. The court held that the advertisement was a valid offer. Show that these were rigid promises by which the maker of these words intended to be bound. Any reasonable man would take them seriously like Mrs. Carlill did. Offers can be to these persons through various situations as follows: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Illustration of an offer made to the whole world is if the offer is advertised and intended that some one from the public should fulfill it.

These are called offers of unilateral contracts. They are so called because a promise is made by only one party; there is no reciprocity of promises. In this kind of offers if any one person from the public happens to respond to it, he will be said to have accepted the offer, by his conduct. EXAMPLE If a company wants to maximize sales for its products and in an advertisement in a news paper gives a promise in the following words: If any person buys product X and he is not awarded the promised free Nokia cell phone on the spot he has the right to sue the company for breach of a contract.

What distinguishes it from other kinds of contracts is that there is no preceding negotiations between the two parties prior to acceptance of the offer like there is in other contracts. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha b In auctions The practice in auctions as to how and who makes an offer is that; contrary to what most people think, an offer in a n auction is made by any party who bids and the auctioneer, the person who is in control of the auction accepts the highest offer by the fall of his hammer.

Instead the offer is made by the parties who respond to this advertisement by sending in their tenders in which are contained the specific terms relating to that particular tender by which he is ready to be bound.

This offer by the person responding to the advertised tender may or may not be accepted by the advertiser for the law does not compel him to accept it, it does not also blame him for not accepting that offer. It is upon him to decide whether or not to accept it.

However if it was advertised that the highest tender would be the one accepted, the party inviting the tenders has no option but to accept the same. Various persons sent in their offers and the offer made by the plaintiff Co. 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. 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 highest bid or any of the tenders… 2.

An offer can only be accepted after it has come to the knowledge of the person to whom it is made. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha 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: R v Clarke Simple facts of this case: It was advertised by the government of Australia that if any accomplice of a specified syndicate of murderers furnished evidence that would help to arrest the murderers, he would be offered a free Pardon by the government.

One Mr. Clarke gave the information while he was unaware that there was such a pardon by the government. He only realised later after he gave the information and claimed that he be given a pardon because he had accepted the offer. Clarke could not benefit from the reward because he was not aware of the offer. It appears therefore that if Mr. Clarke had a knowledge of the offer before he tendered the information to the government, his acceptance would have been valid and he would have been entitled to benefit from the free government pardon.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Remember therefore that knowledge of the offer is necessary to make ones acceptance effective. Usually, before it is accepted, an offer is valid as long as nothing happens that brings it to an end. There are a number of events, in daily life and as far as principles of contract are concerned, whose effect is to end the offer.

Generally Such events are as follows: If the offeror dies or becomes insane. If there is a failure to fulfill a condition; for offers which are contingent upon fulfillment of such a condition.

If the offer is properly accepted. Intervening illegality Termination of an offer is referred to by s. More or less of the events mentioned above are enumerated under this section as acts which when done would occasion revocation.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha a by the communication of notice of revocation by the proposer to the other party; b 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; c by the failure of the acceptor to fulfill a condition precedent to acceptance; or d by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

Out of all the events that I have mentioned above only two events are not mentioned in this section; rejection and acceptance of the offer. You are now aware that one of the acts that cause an offer to terminate is its revocation. An offer must be revoked by the person who has made the offer or it may be revoked by the person who is authorized to act on his behalf. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha By communicating it, it implies that revocation of a proposal must come to the knowledge of the offeree, otherwise it is ineffective.

The communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, and which has the effect of communicating it. This section can be analyzed as follows: The communication of- i. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha From this thus, the communication of the revocation of the proposal is deemed to be done when there is any act or omission of the person who revokes.

This act or omission should not only be intended to communicate such revocation but also must have the effect of communicating it it must actually come to the knowledge of the offeree. Case illustration: The facts would be understood well if evaluated in terms of dates specific events happened as follows: On October 1st Vantienhoven posted a letter of revocation of offer.

On October 11th Byrne, telegraphed acceptance On October 15th The revocation letter which was sent by Vantienhoven on October 8th to Byrne reached him. When van Tienhoven refused to sell the tin plates relying on his revocation, the court held that there was a valid contract made between them because the revocation letter had not been effective until it was actually communicated which was after the acceptance had already arrived. If you look at the dates carefully you will realize that the revocation was sent earlier 8th October than the acceptance 11th October ; under normal circumstances you would expect the revocation to take priority over the acceptance but the law does not lay emphasis on time but rather on knowledge of the particular information required to be known.

This is the import of s. 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. In Hyde v Wrench [] Simple facts of this case: Wrench rejected iii. Wrench rejected.

Hyde sued him. 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. A proposal is revoked- a 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; The statute just mentions the phrase reasonable time without providing for its meaning.

The question is: What constitutes reasonable time in law? 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. Montefiore [] illustrates the instance where the court construed reasonable time. Simple facts of the case: The offer did not set the time limit for its acceptance.

In November In this month 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.

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 only for a reasonable time. A proposal is revoked- d 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. This contention is illustrated by the following example. An offer that has been given by a professor of Law the University of Dar es salaam, 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 the University of Dar es salaam is vital to the contract.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha 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 representatives can act on his behalf.

Some offers are coupled with a condition s. Offers of this kind are valid only as long as these conditions are fulfilled. The nature of these conditions: The conditions may be of two kinds: They are inferred from studying each particular situation In Financing Ltd v Stimson [] Stemson offered to buy a car on a hire purchase arrangement from Financing Ltd.

Its meaning and nature. General meaning of acceptance 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. Statutory meaning: 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. If the offer is for sale of a motor cycle at Tshs. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha However there are exceptions to this general rule that the acceptance must match the proposal. It is under very limited circumstances to have a contract even without matching the offer and acceptance.

See the following cases: Brogden v Metropolitan Railway Co. Counter offer I hope you remember what a counter offer is; this happens when the offeree in his acceptance of the offer either introduces a new term or varies the existing terms of the offer. When this case happens the original offeror may or may not accept the counter offer.

It amounts to rejection of an offer. See Hyde v Wrench Refer to pg. It cancels the original offer, in which case it is useless even if you accept it later on the original terms. Conditional assent If the offeree places any condition in his acceptance, the acceptance will be shorn of its central feature which is it should be an unconditional assent to the terms of the proposal. Refer back to s. Therefore in order to form an agreement the acceptance is supposed to change the proposal into the promise.

If he fails do so he is deemed to have accepted that acceptance. 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: Not only must it be communicated but also the communication must be complete. Communication of acceptance of the proposal how made: 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 offered in writing to buy a horse from his nephew John in which he sated that: 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 fact that an acceptance must be communicated to make it effective is only a general rule; there are exceptions to this general rule as in the following two circumstance: When the offeror dispenses with acceptance.

A may accept the offer by bringing the bus to IAA on that morning. Offers that are made in terms of advertisements are the ones which fall under this category. The offeree only needs to do the act that has been asked and he will have formed the contract thereat. If A advertises that I have lost my passport and that any one who finds and brings it to me will be rewarded 1 million Tshs.

The acceptor need not tell A he has accepted the offer, he will be deemed to have accepted the offer only by bringing the lost passport to him. On September 2 By post, Lindsell made an offer to sell some wool to Adam.

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On September 5 The letter of offer reached Adam, and he immediately sent his acceptance as asked. By the time this letter of acceptance arrived Lindsell had sold the wool to another person; he thought the offer had been rejected. On a claim by Adam that there was a breach of contract; The court held that: The contract was made at the time the letter of acceptance was posted by Adam. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha 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.

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. You know that, in common law, once the letter of acceptance is posted it binds both the offeror and the offeree; this will not apply if the offeror states clearly that he is ready to be bound only if he knows of the acceptance. If this notes does not reach him there will be no contract.

Post rule applies exclusively to acceptance of an offer. Remember our earlier discussion that letters of offer, revocation of offers and rejection of an offer are not governed by post rule. Remember on these three knowledge is central and can not be done away with. Refer to s. Holwell Securities, who sought to find cover under post rule, had posted their acceptance by the prescribed mode but it did not reach Hughes. The court held that there was no contract since Hughes expressed a clear intention to be bound after he received the notice in writing.

Let us delve into the legal stance on field in Tanzania. 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.

What do you think is the significance of this slight departure from the common Law to the proposer and the acceptor? If they change their minds on the contract they revoke the offer or the acceptance within legal limits. When electronic approach is used the post rule can not apply and under this situation a contract is formed only when the acceptance is received by the offeror.

The courts in England have developed the principles regarding this kind of communication in the famous English of case of: The acceptance of the offer was communicated to the Telex machine of Entores Ltd in London. The postal rule does not apply to instantaneous communications. The contract was only complete when the acceptance was received by the offeror. What if the acceptor has sent his acceptance by say e-mail or fax and the offeror has not seen it?

The answer to this legal issue was provided in the same case by Lord Denning in an extensive obiter dictum, in which he opined that under this situation a contract can be formed even if the offeror through his own fault does not actually receive the acceptance.

The Brimnes: The Brimnes Owners hired a ship from the plaintiff Co. Their agreement was such that The Brimnes Owners , the plaintiffs, could terminate the agreement if the defendants defaulted in payment of the regular hire charge.

The defendants failed to pay and the plaintiffs sent them a telex to terminate the contract. The telex was sent during normal office hours, but the defendants did not see it until the next day. It was held that: Note that this was a case relating to withdrawals of offers, not acceptances, but it is a useful analogy. Another case is: Brinkibon Ltd v Stahag Stahl [] 2 AC 34 HL Where a telex of acceptance was sent from London to Vienna, it was held that the contract was concluded where the telex arrived, not where it was sent from.

Section 5 2 reads as follows: An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Remember by s. Therefore, in other words, an acceptance can be revoked at any time before it comes to the knowledge of the proposer.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha It has been illustrated earlier in this work that a contract is made up by fulfillment of a number of legal tests without which a contract becomes unenforceable.

These tests are such as: Free consent, Competency or capacity to contract, Lawful consideration and object and lastly intention to create legal relation. I will discuss them, lightly, in order of their appearance. To consent to something, generally, means to agree to it. When two or more persons are said to consent when they agree upon the same thing in the same sense The following example illustrates the statement above A has two cars both of them are Nissans one is pick up and the other is a saloon.

A makes an offer in the following words: B accepts this offer in the following statement: Free consent has its special meaning in the law of contract. Contracts which are made with taints of the above factors are voidable contracts i.

However according to the same section the contract is not voidable if the innocent party had the means to discover the truth by due diligence.

Let us examine each one of t hem. One person commits or threatens to commit i. He then tells him I will make sure I always find faults in your car and detain it until you sell it to me. The relationship between them is such that i. When can a person be said to be in a position to dominate the will of another? The answer is provided by subsection 2 of the same section as follows: A person is deemed to be in a position to dominate the will another if: Where he holds a real or apparent ostensible authority over the other, or a person has apparent authority if for example he had power at one point of time and he no longer has that power but the person with whom he deals does not know of this.

Or, when a person in power does any thing which suggests to the public that the person under him may do the responsibilities of this person in power. Where he stands in a fiduciary relation to the other [eg. Doctor and patient, teacher and student, father and son etc] or 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.

Or by his agent the intention of the party doing these acts must be directed to either; i. Republic at pg.

Some of these statements which make part of contract will be termed as misrepresentation if they are intended to induce the other to enter into a contract and they are not but false. There are two types of misrepresentation at common law i. One usually does not intend to do this. This kind of misrepresentation can not render a contract voidable. Fraudulent misrepresentation: This is the kind of misrepresentation which renders a contract voidable.

In both the above types a misrepresentation should be of fact and not of law or opinion. Example For instance you are about to enter into contract to sell chicken and you tell your offeree that: This specie of chicken lays five eggs per day. While they only lay two. If you make this statement and it ultimately induces another party to enter into contract, it is misrepresentation. If what is said is not true but you believed it to be true, it is innocent misrepresentation and if it is not true and you knew it, then it falls under fraudulent misrepresentation.

The LCA is a bit more specific on the meaning of misrepresentation. The import of s. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha a Positive assertion statement of fact of any thing that is not true but which the person making it believes it to be true.

These statements are usually unwarranted by the information of the person making it. This is innocent misrepresentation. See the example given by Nditti at pg. S on selling it to B tells him the gives more than 30 litres. Nditti says the statement by S is not warranted by the information that was given to him. Generally silence can not amount to misrepresentation. When a duty to speak arises silence can be a misrepresentation. If you later discover that the statement you have made is not true, though when you gave it, it was true.

You have the duty to say the truth. When you have made a true statement but later circumstances make it false. When the nature of contract requires utmost good faith eg. Insurance contract. One who takes life insurance must disclose if he has aids.

When there is a fiduciary relationship eg. Lawyer-client This is when one party is in a position of trust with regard to the other8. The lawyer, on being asked for legal advice must disclose every thing to his client. Example You are selling a car whose engine you are expecting to break down any time for some problem, the buyer asks if the car is running perfectly you say yes.

Here you have given a half truth and under this circumstance you are supposed to tell him that though it is running the engine has problems. This is when you induce a mistake to the other party about the subject matter of the contract. Here the words the thing which is the subject of the agreement refers to the thing for which the parties enter into contract.

It is sometimes referred to as subject matter of the contract. If a party to contract does not disclose one or more facts about the subject matter so much so that the other party thinks the subject matter is what it is not.

Here the party must actually have been induced and must have acted on that inducement to his detriment. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Walji made representations which induced a mistake to bugerere about a building which they said was a lease for 3 years renewable while it was a lease for 2 years non renewable. The court held that there was inducement.

Mistake happens if both the parties had not entered into an agreement except for a mistake as to a matter of fact that is essential to an agreement. Mistake when existent makes a contract void. BUT For a mistake to affect the validity of a contract it must be an "operative mistake", i. The effect of a mistake is: Types of mistakes: Unilateral mistake.

Common mistake is provided by section 20 1 of the LCA. Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void Mistake as to a matter of fact essential to agreement can be illustrated by cases as follows: See for example: Parties entered into contract for sale of maize.

Both the parties knew the maize was on a ship from a place called Solaninka to England where they were. In fact, before they so made the agreement, the maize had began to deteriorate and so it had been unloaded and sold at Tunis. The issue was whether the seller was entitled to recover the purchase price of the maize from the buyer as agreed in the contract.

The court held that since both parties had contemplated the existence of the subject matter maize to be sold and bought respectively; the seller had nothing to sell and the buyer had nothing to buy. Thus the contract was held to be void ab initio.

In addition, s. Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. Other relevant cases include: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha At 11am on 24 June the plaintiff had entered into an oral agreement for the hire of a room to view the coronation procession on 26 June.

A decision to operate on the King, which rendered the procession impossible, was taken at 10am on 24 June. Wright J held the contract void. B RES SUA common mistake as to title in the subject matter of the contract Where a person makes a contract to purchase that which, in fact, belongs to him, the contract is void.

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This usually when both parties are mistaken on the fact that ownership of the goods is to the seller. For example see: According to Lord Atkin: In cases since Bell v Lever Bros the courts have not been over-ready to find a mistake as to quality to be operative.

Refuse specific performance ii. Impose terms between the parties, in order to do justice. Relevant cases include: The categories of mistake may be as follows: For the mistake to be operative, the mistake by one party must be as to the terms of the contract itself. See the following case: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha around 5oz, this was a third of the price previously discussed and orally agreed upon.

Hartog tried to hold them to it. A mere error of judgement as to the quality of the subject matter will not suffice to render the contract void for unilateral mistake. See for instance: If you refer to s. The law makes a distinction between contracts where the parties are inter absentes and where the parties are inter praesentes.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Contract made inter absentes Where the parties are not physically in each others presence, eg, they are dealing by correspondence, and one party is mistaken as to the identity, not the attributes, of the other and intends instead to deal with some identifiable third party, and the other knows this, then the contract will be void for mistake.

Usually this happens when there is a thief who poses as a different identity. He sent an offer to buy some thing from Cundy which was accepted. The name that appeared in the offer was Blenkiron and Co.

Blenkanrn received the goods and quickly sold them to Lindsay. Having discovered the trick Cundy sued Lindsay for recovery of goods. He argued that he made a mistake as to the identity of the person with whom they were dealing.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Mistake as to attributes of a person does not render the contract void but voidable. Hallam sold the goods to Edrige Merret Co Ltd.

The plaintiffs claimed that there was no contract since they dealt with Hallam and Co. There was a contract between kings and Hallam; this decision was based on the following two conclusions by the court. Two conclusions are commonly drawn from these two cases: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Contract made inter praesentes Where the parties are inter praesentes face to face there is a presumption that the mistaken party intends to deal with the very person who is physically present and identifiable by sight and sound, irrespective of the identity which one or other may assume.

For such a mistake to be an operative mistake and to make the agreement void the mistaken party must show that: Even where the contract is not void, it may be voidable for fraudulent misrepresentation but if the goods which are the subject-matter have passed to an innocent third party before the contract is avoided, that third party may acquire a good title. The main cases are as follows: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha The exception to the above rule is that if a party intended to contract only with the person so identified, such a mistake will render the contract void: Lake v Simmons [] AC A more recent case is: This is provided by s.

Two or more persons are said to consent when they agree to the same thing and in the same sense. When two persons do not agree to the same thing in the same sense they are said to be at cross purposes and this is what is referred to as mutual mistake. Here there are two effects. If the test leads to the conclusion that the contract could be understood in one sense only, both parties will be bound by the contract in this sense.

If the transaction is totally ambiguous under this objective test then there will be no consensus ad idem agreement as to the same thing and the contract will be void: However, even where the contract is valid at law, specific performance will be refused if to grant it would cause hardship.

Thus the remedy of specific performance was refused in Wood v Scarth above. A recent case is: Nutt v Read The Times, December 3. L'Estrange v Graucob [] 2 KB However, where a person has been induced to sign a contractual document by fraud or misrepresentation, the transaction will be voidable.

Sometimes, the plea of non est factum, namely that 'it is not my deed' may be available. A successful plea makes a document void. The plea was originally used to protect illiterate persons who were tricked into putting their mark on documents. It eventually became available to literate persons who had signed a document believing it to be something totally different from what it actually was.

See, for example: For a successful plea of non est factum two factors have to be established: The following decision of the House of Lords is the leading case on this topic: Because of the strict requirements, it may be better for the innocent party to bring a claim based on undue influence. See also s. According to section 11 a person who is legally allowed to enter into a contract is he who belongs to the age of majority and who is not insane. In Tanzania, the age of majority Ordnance, cap age of majority is 18 years.

Who is the person of an unsound mind? The section provides specifically that: A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it he is capable of; i.

Understanding it ii. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha If this is the fact then, the person who is not of sound mind and does not belong to the age of majority is not competent to contract. Though the law restricts these persons to enter into contracts, in the present life situation we are living, the matter of entering into contracts is unavoidable. People of all walks of life do get themselves bound in contracts; majors as well as minors, sane as well as the insane.

Think of a man who is mentally challenged who goes to a shop offering to buy something. Think too of a small boy who buys an exercise book for school. This does not end with the practices of buying only; in present day desperate life situation where killer diseases such as AIDS leave children orphaned, we see a lot of them roaming the streets selling various items to elders etc. The ultimate question is: But taking a more concerned look into the matter you may find that, this kind of contracts have a greater effect just as much as they are irresistible in our daily life.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha with them would then be economically the losers. The business activities would always be at this risk of losing when they deal with the forbidden groups. He received cash from Cowern in consideration for his promise to deliver to him the hay and straw but he subsequently failed to so deliver the goods.

Cowern sued him for recovery of the purchase price from the minor for the goods he failed to deliver. Should the owners of the shops opt for an absolute refusal to dealing with them? The law provides for this situation. On minors: Though the minor is completely not liable on contracts, he is, both at common law and under the law in Tanzania, liable if he enters into the so called arrangements resembling contracts known as quasi-contracts.

This liability is only when the minor enters into contracts for necessaries goods suitable to the condition in life of an infant or minor or other person an to his actual requirement at the time of sale and deliver y 9 and not other wise. It only imposes a liability on the minor to pay a reasonable price for goods he has enjoyed. And by s. This means the person who supplies the goods to the minor is entitled to two things; i.

The reasonable price or ii. Reimbursement form the property of the minor if he can not pay the reasonable price and has this property. The condition here is that the goods must be necessaries and must be provided when the minor is actually in requirement of them. Inman the minor, whose father was reach, ordered expensive clothes from Nash the tailor.

The court held that, though the clothes were suitable to the minors condition in life, these goods were not necessaries because the minor was well provided with clothes by his rich father. However always remember to answer the following things before you decide to deal with a minor; i. Are the goods or services necessaries? In order to be necessaries they should be: On the insane: See s.

General meaning: It is the price for the promise. To understand it better see the following illustration If A has promised to sell an item to B, B must give or promise to give something this something is what is known as consideration for this promise. These two promises given by each one of them form a consideration for each others promise. The most recent English to have given the most appropriate definition of the term consideration is the Dunlop v Selfridge [] in which consideration was defined as: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha When at the desire of the promisor10 i the promisee or ii any other person a has done or abstained from doing b does or abstains from doing something c promises to do or to abstain from doing such an act or abstinence is called consideration for the promise.

This is usually given when the promise is made in return for such performance of an act. Note the present perfect tense used in s. Note the wording of s.