Example: Mr. Fernando Has Agreed To Sell His Land To You For An Agreed Price. You Later Hear
Example: Mr. Fernando Has Agreed To Sell His Land To You For An Agreed Price. You Later Hear
A contract is a legally
binding agreement between two parties or it is an agreement that will be enforced by law.
The law of contract is concerned about the legal enforceability of promises. This notion of
enforceability is central to contract law. If you break the contract, the other party has several
legal remedies. Firstly, he can sue you for damages for breach of contract. Also, he can ask
the court to order you to perform the contract. If you break the contract, the other party has
several legal remedies.
Example: Mr. Fernando has agreed to sell his land to you for an agreed price. You later hear
that Mr. Fernando is planning to sell the same land to another person. You can ask the court
to order Mr. Fernando to sell the land to you as agreed and also for an order (injunction) to
prevent Mr. Fernando from selling the land to the other party. For a contract to occur one
must propose it to the other and must accept. A contractual relationship is evidenced by an
offer, acceptance of the offer, intention to create legal relations and valid, legal and valuable
consideration. Each party to a contract acquires rights and duties relative to the rights and
duties of the other parties. Some types of a contracts include the following;
UNILATERAL AND BILATERAL CONTRACTS
In a unilateral contract only one of the contracting parties makes a promise, and that promise
is exchanged for an act or an executed consideration. In other words, in a unilateral contract
there is but one promisor, and he or she is the only party under an enforceable legal duty. A
bilateral contract comprises mutual promises, with each contracting party playing the dual
roles of promisor and promisee. The legal effects of a bilateral contract are reciprocal duties
and obligations. To put the distinction another way, the exchange for the promise in a
unilateral contract is something other than a promise, while in a bilateral contract promises
are exchanged and there is something on both sides to be done or forborne.
VOIDABLE CONTRACTS
The word "void" means null or ineffectual. Frequently the word is construed as having the
more liberable meaning of "voidable." Contracts are properly called voidable which are fully
effectual until affirmatively avoided by some act. Such contracts are prima facie valid but are
subject to certain defects of which some party can take advantage. By electing to do so, that
party avoids the legal relations which the contract creates or, conversely, by ratification of the
contract may extinguish the power of avoidance. Ordinarily, the power in question is
confined to one party to the contract, but such is not invariable the case.
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Typical instances of voidable agreements are those involving infants or those which are
induced by fraud, mistake, or duress.
The following are the forms that make as contract to be valid or occur.
An offer
The offer may be express, or implied from conduct. The person making the offer is called the
offeror, and the person to whom the offer is made is called the offeree. All offers must be
communicated to the offeree before they can be accepted. The offeree cannot accept an offer
unless he knows of its existence, because he cannot accept it without intending to do so, and
he cannot intend to accept an offer of which he is not aware.
Example: If A offers by advertisement a reward for R 5,000 to anyone who returns his lost
dog, and B, finding the dog, brings it to A without having heard of the offer of the reward, B
is not entitled to the reward of R 5,000.
Intention to create legal relations
An agreement alone will not create a contract binding in law. A critical factor in the
formation of a contract is the necessity for an intention by parties to create legally binding
obligations. When business people or commercial institutions enter into agreements, there is a
presumption that such agreements result in legally enforceable contracts.
Example: Mr. Benson and Mr.Bwalya are two businessmen. They are also good friends. Mr.
Benson agrees to sell a property to Mr. Bwalya for an agreed price and executes a notarial
document to that effect. Mr. Benson tells Mr. Bwalya, “although I agreed to sell that property
to you, I have now changed my mind and I have decided to sell it to another party”. Despite
their close friendship, Mr. Bwalya can take legal action against Mr. Benson to enforce the
written agreement since it was a commercial transaction.
Acceptance
The acceptance must be made while the offer is still in force, and before the offer has lapsed,
been revoked or rejected. Once the acceptance is complete, the offer cannot be revoked. It
becomes irrevocable. Only an absolute and unqualified assent to all the terms of the offer
constitutes an effective and valid acceptance. If the offer requires the offeree to promise to do
or pay something, the acceptance must conform exactly to the terms of the offer. If the offer
requires an act to be done, the precise act and nothing else must be done. If the “acceptance”
varies the terms of the offer it is a counter offer, and not an acceptance of the original offer.
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Example: M offer land to N at £ 280. N replied accepting, and enclosing £ 80 with a promise
to pay the balance by monthly instalments of £ 50 each. Held no contract, there was not an
unqualified acceptance.
Consideration
This is the exchange of benefits or something of value among two parties. The purpose of
consideration is to treat a contract as a bargain between two persons. In English law, for a
contract to be formed a mutual benefit and detriment to the parties to the contract was
considered essential.
Example: If Mr. Silva offers to give his valuable car to his nephew Martin because Martin is
Mr. Silva’s favourite nephew and Martin accepts the offer, Martin cannot sue Mr. Silva if he
does not honour his promise. This would have been the position in English law because under
English law there was no consideration for the promise to give the car. At most, Martin being
Mr. Silva’s nephew, the promise may have been based on Mr. Silva’s natural love and
affection for his nephew or because of some special motive. However, this natural love and
affection constituted only a moral obligation and did not amount to consideration in English
law. There two different forms in which a complainant may purchase the defendant’s
promise, these include.
Executory consideration; Consists of a promise made in return for a promise, where both
promises are still to be performed or it is the exchange of benefits for future actions.
Ordinarily, past consideration is not sufficient to support a promise. By past consideration,
the courts mean an act that could have served as consideration if it had been bargained for at
the time but that was not the subject of a bargain.
Executed consideration; Occurs when one of the two parties has done what they required to
do, leaving all the outstanding liability on the other party. This is when the promise is
enforceable because the offeree has performed the required act.
For example, where there is a promise of reward if the lost property is returned. If the
property is returned by B to A, then B has fulfilled their part of a contract, and is said to
execute their consideration, Whilst A’s consideration payment of the reward is still
outstanding.
Discharge of contracts
These are ways through which contracts come to an end, and this means that everything
attached to it cease to exist.
Performance
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The contract comes to an end, when both parties perform their contractual obligations.
Performance must substantially correspond with what the parties agreed allowing minor or
trivial defaults. The principle of substantial performance is based on the premise that where
there are minor variations from the terms of the contract, the other party cannot void the
contract, but must instead rely on a remedy in damages.
For example, if a building contractor has completed the essential work, but leaves minor
work outstanding, he may claim the contract price, less a deduction for the latter
Agreement
Where a contract is formed by agreement, it may also be discharged or terminated through
agreement, subject to the conditions of the contract. The agreement to extinguish or
terminate the contract itself becomes a binding contract if supported by consideration or
made under seal. The contract will be mutually discharged where the parties agree to release
one another from any further obligations existing from the original contract. The contract is
discharged despite the parties failing to fully or partially discharge all their obligations. The
parties themselves can agree to end the contract, form a new contract or vary the original one.
For example, Peter owes R 100,000 to John and agrees to pay it within one year. They
document the debt under a contract. Subsequently, he loses his job and request john to accept
R 75,000 as a final settlement of the loan. John agrees and they make a contract to that effect.
This discharge the original contract due to mutual consent.
Frustration
A contract automatically comes to an end if this is discharged by frustration. Four conditions
must be satisfied for frustration to discharge a contract.
An unforeseeable event, something the parties did not expect to happen and dint makes
provision for in the contract. Death of one of the parties where personal performance is
necessary; destruction of the subject matter of a contract a change in the law making the
previous legal contract illegal.
Example: Party C was contracted to build 78 houses for D at K94, 000 which was scheduled
to take 8 months. However, due to labour shortages the work took an extra 14 months at the
cost of K150’000. The HoL rejected the argument that the contract had been frustrated.
Breach
Where one of the parties fails to perform their side of contract the innocent party may be able
to terminate the contract and commence proceedings for damages. Any breach of contract
entitles the injured party to claim damages. The degree of breach and the consequences vary
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according to the type and nature of the term concerned. There are two types of breach: actual
and anticipatory.
Actual Breach
One party may breach one or more of the terms of the contract in such a way that it
amounts to a breach of the contract.
Anticipatory Breach
An anticipatory breach occurs where a contracting party indicates by express words or by
Implication through conduct before performance that he will not honour his contractual
Obligations. The effect of termination is to release both parties from future obligations, but
not those that have been incurred.
For example, the obligations to pay for goods received or work done or that are intended to
continue after the contract has come to an end. A party who commits a breach of contract
shall be liable in damages for the loss arising from that breach.
The type of term breached can result in a presumption that the contract has been breached and
thus releases both parties from their obligations. A condition should first be distinguished
from a condition precedent and condition subsequent. Which therefore means a contract
cannot be discharged for breach of a condition precedent or subsequent. If a condition is
breached, the innocent party has a choice either affirms the breach and continues to be party
to the contract or terminate the contract. A breached of warranty can be adequately
compensated for with damages.
In conclusion, avoiding legal issues in future, parties must come to an agreement by setting a
value to specific goods, services, or job performance. Consideration legally binds a contract,
protecting both parties from potential lawsuits or misunderstandings.