Gulu University

Faculty of Law
Sem 1 Law of Contract 1
Prepared by Judith Max A. Lecturer Faculty of Law Gulu University

NATURE AND CLASSIFICATION OF CONTRACT

INTRODUCTION TO THE LAW OF CONTRACT

A contract is a legally binding agreement made between two or more parties

and by which rights and obligations are created by the parties themselves.

The law of contract in Uganda is found in the contract Act, 2010 which also
provides for the application of the English law of contract.

Sir William Anson in his book principles of the law of contract defined a
contract as a; “Legally binding agreement made between two or more
person by which rights are acquired by one or more to act or
forbearances on the part of the other or others”.

In other words, it is a promise made by one party addressed to another one,

which the law will enforce. The rights and obligations created by the parties
themselves are confined to the parties in contractual agreement.

Their contractual right differs from a right as action in fort. The right of action
between the parties is right in persona which is available only against a
particular person or persons in contractual agreements, while tortuous right of
action is right in rem that is enforceable against all persons generally.

It is therefore important that there must be consensus ad idem; the parties

must have consented with all their minds and intentions. In the absence of
consent, the contract is rendered null and void.

ESSESNTIAL OF A VALID CONTRACT

A contractual agreement may only be enforceable when certain essential

requirements are present. These requirements are:-

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a) There must be an agreement composed of an offer by one person and
acceptance of that offer made by the other person.

b) The parties must have an intention to create legal relations because the law
does not enforce mere social engagement.

c) The contract must either be under a seal or there must be consideration

given on both sides to support the agreement, this is because the law will
not enforce gratuitous promises.

d) The contracting parties must have contractual ability or capacity to be

bond to the contract i.e. they must be of the age of majority and of sound
mind.

e) The contracting parties must consent to the terms of the contract of the
agreement made between them. Where there was no consent between the
parties, their contractual relationship may be vitiated by irregularities such
as fraud misrepresentation, mistake, duress or undue influence.

f) The contract must be legal. The contract must not be contrary to the law
and its performance must not be impossible. For instance, the contract to
walk to the moon is impossible.

These essentials of a valid contract are so important in a contractual

relationship, in that in the absence of one or more of them, the contract is
rendered void or voidable.

NATURE OF CONTRACTS

1. Void contracts

This is considered as not a contract at all. Void contracts means there was
attempt to create contractual relationship but failed due to some material
defects. For instance absences of free will consent, consideration etc.

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When the contract is void, the law does not recognize it and they are rendered
not binding on any party. Any property transferred under such contracts is
recoverable because the transferee has no legal right over it.

2. Voidable contracts

This is a contract that can be made voidable by one party at his or her option.
Voidable contracts exist with the right of repudiation vested in one party
attached to. Voidable contracts are contracts formed as a result of fraud,
duress, misrepresentation etc.

Avoidable contract is considered valid and enforceable until the obligations

created by parties’ promises are set aside. In this contract, some essential
characteristics may be missing and one of the parties may choose to take
advantage of the situation by following the flow in the legal obligation or ignore
it.

The main difference between void and voidable contract is that in voidable
contract, innocent parties acting in good faith may acquire under the contract
and lose their right to avoid it, while no such rights can be acquired under a
void contract.

3. Unenforceable contract

These are contract for the breach of which, the law attaches certain condition
on the remedy. All the essentials element of a contract may be present but the
agreement may not be enforceable due to the fact that the form required by the
law for their formation is not followed. This evidence may be acquirement from
the provision of law and therefore cannot be enforced until the defect is
rectified.

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CLASSIFICATION OF CONTRACTS

There are four main types of contracts under the law of contract. These are:-

1. Contracts under seal or “specialties”

Promises made under seal are promises made in form of a deed i.e. reduced
into writing, signed and sealed by the contracting parties. Promises under seal
are legally binding even though they are gratuitous and depend on their format
in which they are expressed for their validity. Consideration is not necessary
under this contract.

2. Simple contracts

Unlike contracts made under seal, simple contracts may be made orally or in
writing` or deduced from conduct of the parties. These contracts are more
common.

At common law all simple contracts may be oral or written though under the
Contract Act, certain contracts must be in writing in order to be enforceable
The example of these contracts include contracts of transfer of interest in a
property from one person to another.

All simple contracts unlike contracts under seal must be supported by valuable
consideration in the absence. If a simple contract is not support, they will be
rendered void.

TYPES OF SIMPLE CONTRACT

There are simple contracts that need not to be in writing but does not fall
under contract under seal. These contracts are:

i. Contract of guarantee.
ii. Articles of association

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 iii. Transfer of shares registered under companies Act.

CONTRACTS UNDER SEAL Vs. SIMPLE CONTRACTS:-

a. A deed is a written promise under seal which is enforceable by virtue of the

form in which it is expressed i.e. written in a particular form provided by
the law. On the other hand, simple contract is expressed in writing as
evidence of its existence or at interest of the parties.

2. Contract under seal does not require consideration to support it because

they are in a deed form or specialty contract, while simple contracts must
be supported by valuable consideration.

3. In case of breach, the remedy of specific performance cannot be awarded to

contract under seal because in the absence of consideration, specific
performance cannot be award for gratuitous promises.

4. In case of breach, right of action for contracts under seal have limited
period of enforceability which do not exceed 12 years from the date when
breach was made (the time the cause of action arose). However, actions for
breach of simple contracts must be brought within 6 years from the date
the breach was made (the time the cause of action arose).

5. A party to a contract under seal cannot deny or change the truth of the
statement given in the deed. A deed is conclusive against the parties
making them. Any attempt to alter may cause legal implications. A simple
contract written agreement however can be altered by the parties’
agreement.

6. A deed created under contract of seal or specialty is superior document to

written contractual documents under simple contract.

3. Quasi contracts

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Quasi contracts means resemblance to a contract. The rights and liabilities
under quasi-contracts do not arise from the facts on the agreement, but are
implied by law by virtue of a specific relationship between the parties. The law
imposes an obligation and allows an action to be brought on it as if it arose out
of agreement thought no actual agreement existed.

4. Contracts of record

Contracts of record are not real contracts. The parties to the contract enter into
agreement by compulsion of an event and without voluntary free will – to
perform the required obligations this contract is named contract of Record
because it is entered into court records. There are two forms of contract of
Record there are:-

o Judgment

Account of record may by judgment passed impose on a party a legal obligation

e.g. to pay cost or damages the imposed legal obligation that emerged from
cause of action dully enrolled in courts records becomes a contract of record
between the parties to the suit in which judgment was passed.

o Recognizance

Where a person in writing acknowledges a debt as pronouncing before a judge

court of record or any authorized officer and it is in court record, the person
becomes a party to a legal or contractual obligation in a contract of record. The
recognized duty must not necessarily be monetary. It could be moral obligation
to keep peace and order.

FORMATION OF CONTRACTS

For a valid contract there must be an offer made, and by one person and
accepted by another with contractual capacity furnishing valuable

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consideration both parties must Charles communicate their offer and
acceptances.

OFFER

An offer is a suggestion or proposal made by are person and directed to

another. An offer must be accepted unconditionally so as to result into
contract. An offer may be verbal written or implied from the conduct of the
parties. It may be in writing or by the words of his mouth. If the offer is
reduced into writing then the offer is written. Where an offer is made by the
conduct of the offer, it is an implied offer.

Example: An implied offer is made when a bus company sends a bus in

particular route with instructions to stop at certain destination or point so as
to allow people to board. The people boarding the bus make an implied
acceptance by paying the required fares to their destinations.

There are certain rules which govern offers the rules consider how an offer is
made, to when it is made and the nature of an offer.

Rules governing offers

1. An offer must be made to particular person (s)

An offer need not be made to a particular person but no contract can arise
unless the offer has been accepted by a particular person. An offer may be
made to a particular person or group of persons or it may be made to world at
large. An offer made to a particular person is known as specified offer and that
made to the general world it known as general offer.

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A particular offer cannot be accepted by any one, without any previous
notifications. An offer must be made to the person one intends to contract with
and an offer made to one person cannot be accepted by another person with
intent that it creates a contract it must be accepted by the specific person to
whom it was made.

In Boulton V Jones (1857), court decide that It is a rule of law that if a

person intends to contract A, B cannot give himself any right under the
contract, and therefore there was no contract between the parties.

An offer made to the world at large can only be accepted by the person who are
willing to and go on to perform the terms of the offer. E.g. an advertisement of
reward for finding a lost item and returning it to the owner becomes a contract
when a person accepts it and performs the required act.

In the case of Carlil Vs. Carbolic Smoke Ball Co (1893), PB 256 The
defendants made the following issues were missed by the defendant.

a) The offeror was too vague since no time limit was stipulated in which the
user was to contract influenza.
b) That the offer was an advertising “putt” and there was no intention to
create legal relations.
c) That it was an attempt to contract with the whole world and that this
was impossible in the English law.
d) The company also claimed that the plaintiff had not supplied any
consideration.
e) And that there had been no communication of acceptance.

Court held that

a) It must surely have been the intention that the ball would protect its user
during the period of its use and since this covered the present case it
was not necessary to consider the time limit.

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 b) The deposit of £1000 at the bank was clear evidence of an intention to
pay claims.
c) The advertisement was an offer to the whole world and that by analogy
with the reward cases. It was possible to make an offer of this kind.
d) Using the inhalant three times a day for two weeks or more was
sufficient consideration. It was not necessary to consider its adequacy.
e) In contract of this kind, acceptance may be conduct i.e. performing the
given terms of the offer to communicate ones acceptance.

2. An offer must be firm

An offer must be made with an intention to stick to its terms. It must show a
present intent to contract on the part of the offer or the language used must
express a decision intent to contract and not to negotiate that are a reasonable
person would perceive the language, the surrounding a circumstances, and the
actions of the parties in determining whether the contact was formed.

In the case of Mayanja Nkanji Vs. Nation Housing Corporaiton (1972) 2

LR37, court stated among others that, a communication which merely initiated
negotiations from which an agreement might or might not result, was not an offer
but merely an invitation to treat. In the instant cases, the language of the letter
did not indicate that any firm offer was being made. It was an attempt to induce
offer and was an invitation to treat.

Illustration of Invitation to Treat

The offer in the shop windows comes into existence when the customer enters
the shop and offers to buy the goods at price marked there by the shopkeeper.
The shopkeeper are not bound to sell the goods at these prices. He can either
accept the offer or refuse to sell to the customer. For goods put on shelves in a
self-service

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shop or super market, the contract is made when cashier accept the offer to
buy what had been chosen.

Where sale is buy auction, the call for bids by auctioneer amounts to an
invitation to treat, while the bids that the people attending the auction make
are themselves the offers. The acceptance of the bid is completed by the fall of
the auctioneer hammer and thus there is no need to communicate it to the
higher to bidder(s). Thus, a bid is an offer which can be withdrawn at any time
before the fall of the hammer.

3. An offer must be definite or certain

An offer must be definite or certain, not vague or illusory. The terms expressed
in the offer must be certain. Without certainty, the acceptance of the offer will
not give rise to an enforceable agreement the rule is qualified by the saying that
anything which is capable of being made certain to be regarded as certain.

The law will always uphold a contract whenever possible and will not find
uncertainty so as to frustrate the party’s intentions. However, it must to be
proved to the satisfaction of court that there is a contract in existence and just
not a mere agreement to contract in future.

In the case of Galam Kadir Vs. British Overseas Engineering Corporation

(EA) Ltd (1957) EA 131, the parties did not discuss clearly and agree on the
price and delivery. The price of the item kept on increasing and finally, the
Galam repudiated the contract. The Company sued and obtained judgment in
its, but Galam appealed. Court decide that at the time the contract was made
certain facts were known, which both parties must have had in mind, namely,
that the sellers would have to place specific order abroad for steel, that it was in
short supply, that the market was rising, that shipping space was difficult to
obtain, that insurance and freight rates were likely to be increased and that
contract might be performed for over a year.

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Further, court stated that the word “subject to fluctuation” in the
circumstances means that the contract was dependent on the contract the seller
were making with their suppliers and if the letter raised their prices, a
corresponding increase would be passed to the buyer and that there was no
element of uncertainty in a contract of that kind.

4. An offer must be communicated

And offer must be communicated to the offeree before it can be accepted. A

person who is ignorance of the existence of an offer cannot be said to have
accepted it. A proper communication of an offer is usually a question of facts
and it is determined to by surrounding circumstances.

Silence on the part of the offeree does not give rise to consent where the offer
has not been communicated work done for a person without his knowledge and
not at his request, does not make the person liable to pay for the service
rendered where an offer for reward is communicated or made for a lost item
and in response a person brings that item. He will have accepted the offer by
conduct and therefore is entitled to the reward.

In the case of Tailor Vs. Laird (1856) 25 L.J EX 329, the plaintiff was
engaged to command the defendant’s ship and conduct a group of explorers on
a Niger River. He performed his command and as finally helped to work the
vessel home though without the knowledge of the defendant. He claimed to be
remunerated for the service rendered. Court decided that the plaintiff could
not be paid because the defendant never had an option of accepting or refusing
the services while they were being rendered.

5. An offer may terminate or be terminated any time before acceptance

When an offer is accepted, the acceptance brings the offer to an end since it
becomes part of the agreement, i.e. the offer and the acceptance merges into a
contract. Where acceptance is completed it cannot be revoked simply because

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a contract has already been concluded. While is the offer is rejected it ceases to
exist to and can only be received by the act of the offer.

In certain contracts the offer has time limit it is only open for a specific period
of time in order to give the offeree chance to think about and accept the offer in
that period. When acceptance is not made within the time, the offer expires.

Where there is no time limit, court will have determine what the reasonable
time in which the offer may be excepted to be accepted and it depends on the
facts and other circumstances of the case.

In Virji Kimji Vs. C.B Clutterick (1919), Court decide that the lapse of four
and half a months without communication of acceptance of the order was lapse
of a reasonable time sufficient to revoke the offer.

Where the offeror or offeree dies before acceptance, the offer terminates. An
offeree who decides to accept the offer after being informed of the offeror’s
death by personal representatives, the acceptance will not amount a contract.

An offer may terminate if the subject matter ceases to exist or is destroyed

hence putting to an end the contract. And offer may also terminate when a
valid acceptance has not been made where the acceptance was given with
conditions attached or when the acceptance was made is a different way other
than what the terms of the offer requires.

ACCEPTANCE

An acceptance is one of the essential requirements of a contract. It is the

offeree’s positive response to the offerer’s proposed contract. Acceptance must
be unconditional to the all the terms of the offer. For the offeree to accept the
offer, he or she must know of the existence of the offer, and communication his
or her acceptance to the offeree using the agreed means. Only a person offered
to can accept the offer.

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An acceptance may be oral written of implied from the conduct of the parties.
In ever means chosen to accept the offer, it must correspond in every detail
with the terms of the offer; it must be made by or with the authority of the
offeree.

When accepting an offer. Motives of the offeree do not matter as long as the
person accepting had knowledge of the existence of the offer. This was stated in
the case of William Vs. Carwadine (1833) 4 C and P. 566 where court stated
that the plaintiff was not induced to give information because of the reward
offered, but by motives of spite and revenge. And court decide that
nevertheless, she was entitled to the reward, for she had seen the promised
reward published and had given the information required by the terms.

The following rules apply to accepatance:

1. The intention to accept

The intention to accept here is the intention to create a contract on the part of
the offeree. The offeree must decide to enter into a contract knowing that he or
she is bound to perform contractual obligation, failure of which the offeror may
sue him or her for breach of contract.

2. Acceptance on the term proposed

An acceptance must be unqualified and must correspond in every detail with

the term of the offer. Acceptance must be made by or with the authority of the
offeree. Any attempt by the offeree to change the terms of the offer or to add
new terms to it is treated as counter offers.

However, if the offeree merely inquire about the terms or accepts the terms of
offer while complaining the offer is not considered rejected. Where the offeree in
his acceptance proposes an additional term to the agreement which makes
material difference in the offer, the acceptance is not valid. If the proposed term
is immaterial to the offer the acceptance is valid.

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3. Acceptance to be communicated

An acceptance must be communicated in the manner prescribed by the offeror.

However, not all offers may have specific mode of acceptance. The offeror may
specify the precise time, place and manner of acceptance. Where the offerer
stipulates the mode of acceptance, the offeree must abide by to make a valid
acceptance, when the offerer’s offer is silent about the mode of acceptance,
then the acceptance may be made in any reasonable way within a reasonable
time.

CONSIDERATION

Consideration is a universal requirement for all contracts not under seal. No

contract except under seal can be enforceable unless the plaintiff can show
that he has furnished consideration. The doctrine of consideration is based on
the principle that, the law enforcement bargains and not more promise. A
promise may be certain and firm but it will not be enforceable unless it is
brought by a person seeking to enforce it.

Consideration is an act of forbearance. It is the price for which the promise of

another party to the contract is bought It is a price bargained for and paid for a
promise of another.

In the case of Carrie V Misa (1875) L.R 10 EX 153, Justice Lush defined
consideration as some right, interest, profit or benefit acquired by one party or
some foreberrance, detriment loss or responsibility given suffered or
undertaken by the other.

Consideration is therefore, the means of exchange bargained for by the parties.

Its must be valued. It must be capable of being valued in terms of money or
moneys value worth however little. The payment of money is the common form
or consideration and constitutes a valuable promise.

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In generally, a promise cannot be enforced against the person who made it
unless the persons to whom the promise was made has given up something of
legal value in exchange for the promise.

In effect, the requirement of consideration means that a promisee must pay the
price that promisor asked in order to gain the right to enforce the promisor’s
promise.

In the case Thorne Vs. Deas, apart cover of a sailing ship promised his co-
owner that he would insure the ship for and incoming voyage, but the co-
owners did not give anything in exchange for the promise except listening. The
part owner failed to fulfill his promise to insure the ship and when the ship lost
at sue the co-owners sued him for the promise. Court decided that the
promisor (part owner) was not liable to his co-owners for breach of the promise
to insure the ship, because his promise was purely gratuitous. He had neither
asked for nor received any thing in exchange for making the promise.
Therefore, it was unenforceable against him because it was not supported by
consideration.

Nature of Consideration

Consideration may be of two kinds, executed or executor. Executed

consideration refers to the situation when a person who claim to have given the
consideration can prove that he or she has performed his or her part of the
bargain. It is the performance of an act in return for a promise done
immediately. It is usually that consideration which is wholly performed on one
side immediately the contract is entered into.

Example: In the contract of sale of goods where the terms states “cash with
order” the payment of cash to the attendant is the executing of the
Consideration.

Executory Consideration
This is a consideration which a person promised to give and is ready and
willing to give if the other party to the contract will perform his or her part.
Executory consideration consists of a promise to confirm some benefit or some
detriment in the future.

Example: In a contract of sale of goods where the terms states “cash on

delivery”, the promise to pay cash when the goods shall be delivered by the
other person amounts to executory consideration.

Rules relating to Consideration

1. Consideration must be legal. Illegal consideration makes the whole

contract unlawful and invalid. A promise given in return for a promise to
commit a crime is void because the consideration on which it is based is
illegal.

2. Consideration must move (be given) from the promisee though it must
not necessarily go to the promisor. A person wishing to enforce simple
contract must give the consideration asked for in return for the promise
that he or she wishes to enforce. A person enforcing a simple contract
cannot rely on the absence of consideration by merely showing that he has
received no benefit.

A third party cannot enforce the contract because he or she is a stranger to

it and this there is no privity of contract between the parties to the contract
and the third party. It is not enough for the party enforcing the contract to
show that someone else has given the consideration on his behalf.

3. The consideration must not be something that the promisee is already

legally bound to do or perform in favour of another party.
Where the performance is what the promisee is legally bound to do, the
promisor gets nothing in return for the promise given, except that to which
he or she is already entitled to. Thus, where a person is already public duty
to do a certain thing, any express promise to perform that duty is not
sufficient consideration. This means the promise has suffered no loss nor
 the promiser has gained or received any benefit over and above their
existing right and liabilities.
In Collins V Godfrey (1831), Court decided that, the plaintiff did not give
any consideration for the promise. What he gave was his duty imposed on
him by the law to attend from time to time to give his evidence when
summoned in a case. The promise to give him remuneration for loss of time
incurred in such attendance was a promise without consideration.
However, when more performance is done than what a person is legally
required to do, the additional work load amounts to sufficient consideration.

4. Consideration must be real. It must not be vague or illusory but must be

definite and certain. It must be something of some ascertainable value in
the eyes of the law and the act must be of sufficient value to form
consideration. Therefore promises to perform an impossible act are generally
valueless and do not amount to real consideration.
In the case of White Vs. Bluett, Court stated that the defendant cannot
escape liability because a promise not to complain was not sufficient
consideration to support his release from the debt.

Consideration need not be adequate as long as the parties get what they
bargained for or what is satisfying to them. Whatever price or value the parties
in the contract accept as means of exchange between them is consideration
enough. As long as it can constitute or definite valuable consideration, the law
will not interfere with the contract for reasons of poor bargain between the
parties.

Consideration must not be past.

Consideration may be in the present i.e executed or in the future i.e. executory
but not pass. Pass consideration is an act or forbearance to act, sufficient to

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support a contract but not done or excised in pursuance of a present contract
consideration given must be a related act and part of the same agreement.

The law considers the promise made subsequent to act to have been made on
moral grounds. If there is no other consideration for the later promise, it
becomes gratuitous and not enforceable.

In Roscorla Vs. Thomas, the plaintiff bought a horse from the defendant, after
the sale had been completed gave an undertaking that the horse was sound
and free from Vice. The horse was in fact a vicious horse, and the plaintiff sued
on the express warranty which he alleged had been given to him.

Court decided among others that if the warranty had been given at the time
of the sale, it would have been supported by consideration and therefore
actionable, but since it had been given after the sale had taken place, the
consideration for the warranty was past and no action could be brought upon
it. Further, no warranty would be implied from the circumstances of the sale.

There are however, exceptions to this rule. There are certain circumstances
where past act or consideration can amount to sufficient consideration. There
are:-

a) Where the act or service was rendered at the expressed or implied

request of the promisor.

When promisor request for the past act before the agreement between them,
the earlier request turns what would have otherwise been past consideration –
to support (a subsequent) contract that follows.

Part performance of an existing duty does not discharge the liability to

perform

The common law rule is that, payment of less than the sum which is owed to
the creditor is not sufficient consideration to support his or her promise not to

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sue for payment of the remainder. However, the parties must agree that if such
part payment is made, it will be in discharge of the full liability owed and the
balance not to be demanded.

This was brought up in the case of Pinnel’s (1602) 5 Co. Rep. 1179 and
court decide that payment to a lesser sum on the day in satisfaction of a
greater on was no satisfaction of the whole. The ruling was supported later in
Foakes V Beer (1884) 9 App. Case 605 with certain exceptions added.

These exceptions are:-

o Payment before the given date

Where the debtor makes an earlier payment and the creditor receives a benefit
to which he or she is not entitled, it amounts to sufficient consideration to
support debtors promise to forego payment of remainder balance.

But if the debtor makes part payment after the due date, this is not sufficient
consideration for the debtor will do no more than he is bound to do, and the
creditor is already entitled to the full sum.

o Substituted Performance

Where there is substituted performance, the debt will be discharged.

Example: if the usual method of payment is in cash, and the creditor asked for
another means of payment other than cheque, it will be sufficient consideration
to support the promise to forego part payment.

Something of the Value

where something of the value in the eye of the law is added to the part payment
in agreement with the creditor and in return for his promise not the sue, this
will be sufficient consideration to support the promise to forego the remainder
balance.

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where something of the value in the eye of the law is added to the part payment
in agreement with the creditor and in return for his promise not the sue, this
will be sufficient consideration to support the promise to forego the remainder
balance.

Part payment of the amount owed, by a third party

Part payment of the amount owed, by a third party is at law a good discharge
of the full debt. A creditor who promises to release a debtor from the obligation
to pay the full amount in return for the part payment of the debt by a third
party cannot successfully claim the remainder from the debtor.

In Patel Bros Vs. H.D Hasmani, The defendant’s son owed 27,000/= to the
plaintiff. The defendant’s paid a cheques of 18,000/= to the plaintiff as
payment of the debt and for not suing the son.

Court decided that at law, a promise to forebear is a good consideration and

that actual forbearance at the request, expressed or implied, of the defendant
is also good consideration.

CONTRACTURAL CAPACITY

Any legal person may have full capacity to enter into any kind of contract,
however, the law imposes restriction on who may conclude of contract and be
binding on him. The rationale of this law is to protect these categories of
person’s for reasons of their disabilities. When they contract, their contract
may either be void, voidable or unenforceable at law and not binding on them
by reasons of their status.

Persons with full capacities to contract may include; adults both Nationals and
Foreigners, Foreign Head of states and governments, their Ambassadors and
representatives and diplomatic staff.as such, persons incapable of contracting
at law are infants (minors), drunken persons, mentality disordered person and
corporation.

A. Infants or Minors

An infant or a minor is a person who is under the age of eighteen years and
who attains full age on the completion of his eighteenth year. Under the
provision of Contract Act, a minor is a person below 18 years. Below this age a
child lacks the intellectual maturity and experience to exercise sound judgment
about certain transactions. In that they lack bargaining power and therefore
need to be protected by the law.

However, minors still can make valid contracts. Their age may not stop them
from making contracts at all. There are certain contracts that minors may
enter into and be bound. However, the basic rule is that such contracts when
entered into with a minor, must be enforceable by the minor but not against
them

Contracts binding on minor

Executed contracts for necessaries

These are contracts which are not voidable at the option of the infant. They are
binding on them because they are for the benefit of the infant and thus, they
are to pay reasonable price for the necessaries. Sales of Goods Act, provides
that necessaries sold and delivered to an infant or minor or any person with
mental incapacity or drunken person must be sold at a reasonable price.

The Act also defines necessaries as goods suitable to the condition in life of
such infant or minor or other person and to his actual requirements at the
time of sale and delivery.
At law, the term necessaries is wider than its usual meaning of food and
clothing and it varied from infant to another depending on their health, age
and status. However, basic needs are necessaries to all.

Once the goods or service in questions are decided to be necessaries, the infant
will be compelled to pay a reasonable price and not the price negotiated and
agreed upon.

Where the goods are not delivered even if they are necessaries, the infant shall
not be liable, if the infant changed the mind before delivery.

In determining what is necessary to a child, the law considers the following:-

o The social status of the child.

o The infant’s actual stock the article at the time of sale and
delivery. o Age of the child.
o Health need.

There are certain things which are out of range of necessaries for an infant of a
peasant but considered necessaries for an infant of rich parent’s e.g. A holiday
on resort, expensive suit etc.

If the child status cannot afford, and he or she enters into such contract, it will
not be binding. While for a rich child, it will be binding because the child need
to be maintained in the style of living to which he or she is accustomed to.

In Nash V Inman (1908), the plaintiff a tailor sent his agent to the defendant
an under graduate infant at Trinity College, Cambridge because he heard that
he was spending his money freely and might be the sort of man who would be
interested in high – class clothing. When the agent visited the defendant, he
ordered to be supplied with various articles of clothing to the large amount.

The clothes included eleven fancy waistcoats and it was all supplied. The
plaintiff sued the infant for the price of the clothes evidence showed that the

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defendant’s father was in a good position being an architect with a town and
country house and could be said that the clothes supplied were suitable to the
defendant’s position in life. The father, however, proved that the defendant was
adequately supplied with such clothes the plaintiff delivered. Court decided
that the defendant cannot be liable for the price of the clothes because by
stock of his clothes the supplied clothes were not necessaries.

In Chappel Vs. Copper (1844), the plaintiff sought to recover the cost of a
funeral carried out at the request of an infant widow for her husband. Court
decided that the infant must pay for the lavish services rendered at her
husband funeral because they were necessary to her station in life. Court
further added that, if a lavish funeral had been provided for a family of
humble means and social position, it is suggested that it would have not been
suitable to the station in life of the family and therefore not constituting
necessaries.

A supplier who claims the goods supplied or services rendered are necessary
must, prove it at law that they were necessary for infant station in life.

Contracts for the minor benefits

At common law, the rule is that a contract which is entirely for the infants
benefits is binding on him irrespective of the circumstance as to the infant’s
interest. This rule does not apply to trading contracts, however beneficial such
contracts are for the child.

In Conwell Vs. Neil, An infant who was hay and Straw dealer entered an
agreement to consign and deliver Hay to the plaintiff. He later failed to deliver
the hay. Court decided that the contract was a trading contract and so could
not be for necessaries. The infant was therefore not bound to repay the price
for hay be failed to deliver.
 A. Contracts voidable by minor

Voidable contracts on an infant are those contracts which are valid and inding
on an infant unless and until avoided by the infant while he is still an infant or
immediately after he has become an adult.

These are kinds of contracts where an infant acquires permanent interest in a

property e.g. lease, shareholding in a company, or partnership in a partnership
and marriage settlement.

And where performance has been made, the repudiation of the contract serves
only to stop future duty but not to recover money paid already in performance
of the contract.

In Sternberg V Shella (Leeds) H.D (1923) an infant was allotted shares in a

company and paid the amount due on application and allotment and also on
the first call. She received no dividends and attended no meeting of the
company and after eighteen months she claimed to repudiate the allotment and
recover the amounts paid. And Court decided while she was entitled to
rescind the contract by having her name removed from the register of
shareholders, and thus avoid the liability for unpaid installment she was not
entitled to recover back what she had already paid. She had received
something which had a marketable value and which was in any case “the very
consideration she had bargained for” .

B. Contracts void against minor

Under the Contracts Act, the following contracts are void against infants:-

a) Contracts by infants for repayment of money lent or to be lent.

b) Contracts for goods supplied or to be supplied other than contracts for
necessaries.
c) All accounts stated are thus absolutely void.

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An infant who becomes an adult cannot be good for contracts entered into and
concluded while an infant even if, he rectifies the contract in adulthood
property bought and sold by an infant under void contracts cannot give the
buyer any good title after and the law of equity cannot grant any remedy of
specific performance.

Where an infant falsely states his age, the adult in contract with cannot sue for
damages in an action for fraud, because the law consider this as indirect
approach to enforcing a void contract.

DRUMKEN PERSONS AND PERSON OF UNSOUND MIND

A person may be absolutely drunk and without any memory at the time he or
she enters into a contract so that he or she is completely unable to understand
the nature of the thing he is doing. If one party to the contract is aware that
the other was too drunk to appreciate the nature of his or her act, the contract
will be voidable at the drunken person’s option. The same applies to contracts
entered into by mentally unsound person.

However, when contracts are made when a person is not completely drunk or
in during lucid interval of insanity, then the contracts are binding. The same
applies when a contract made in complete insanity or drunken off is rectified
when the person regains consciousness.

In such circumstances, the purchaser of the property gets good title without
defect. These categories of person are only liable to pay reasonable price for
goods supplied to them and anything not necessaries within the meaning of the
law cannot be enforceable.

In Mathew Vs. Baxter (1873) the defendant while drunk, agreed at an auction
sale to purchase from the plaintiff certain house and land. Afterwards, when
sober he affirmed the contract and then repeated the bargain. When sued on

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the contract, he pleaded that he was drunk at the time when he made it, and
to the plaintiff’s knowledge. Court decided that although he had once an
option in the matter and might and might have not avoided the contract, he
was now bound by his affirmation of contract.

CORPORATIONS

A corporation is a legal entity or artificial person to which the law a scriber a

particular personality with a distinctive name, power of succession, a common
seal and other powers. Corporation cannot act as a doctor, advocate i.e. as a
professional person or enter into marriage contract. Its limitation is managed
by memorandum of Association.

However, on a corporation can enter into certain contracts as a normal human

being would, but these contracts must not be ultra-virus (beyond their powers)
or they will be void.

TERMS OF CONTRACT

Terms of a contract may express by parties of implied by the law before the
contract was concluded.

A. Implied terms

Terms not included in the contract by the parties may be implied by law as
being part of the parties’ agreement. However, it must not deviate from the
expressed terms of the contract.

The intention to imply term were necessary is that the law consider that parties
might have forgotten or experience mistake of drafting and in which case the
terms must be implied to give the contract meaning.

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The law will only imply terms if it is not necessary or if it is obvious between
the parties. To imply a term, the law looks at agreement between the parties
from the view point of a reasonable man.

There are categories of implied terms, these are:-

o Implied term as to title, where the seller has alright to sell the goods
and will have that right even till the conclusion of the contract.
o Implied warranty that the buyer shall enjoy quiet possession of the
goods.
o Implied warranty that the goods bought is free from any offer or interest
attached to it other than what the buyer is buying.
p Implied conditions as to quality and fitness

If the buyer relies on the seller’s skills and judgment and the seller is aware of
this, then is an implied condition that the goods are of merchantable quality
and fit for the purpose is applied.

Sale by sample

It is an implied condition that the goods supplied must correspond to the

sample given for the buyer to be liable to pay price.
B. Expressed Terms

Expressed terms of a contract can be divided again into two, conditions and
warranties conditional terms are fundamental terms whose breach destroys the
main existence of the contract, while breach of warranty is breach of minor
term repressible by an action for damages.

Breach of constitution entities the aggrieved person to repudiate the contract

and sue for damages for non-performance of contract and return property
passed under the contract. Where the contract is for a party’s benefits then he
or she can sue for damages only.

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Exemption or Limitation clauses

These are terms which are put in a contract in order to limit liability of a party
in certain circumstances. These terms are accepted at law but must be
communicated to the other party of the contract.

However, even though there is no communication, the term may still be

binding in certain cases as long as the party including it has no voidance of
fraud or misrepresentation. These terms are more common in standard forms
of commercial transaction, tickets, receipt or other documents used.

In documents which require signing, once it is included in document, it must

be signed by the other party to become bound. Where a part signs without
reading, the exemption clause will still be binding.

In L. Estrange Vs. Graucob (1934), the defendant sold a machine to the

plaintiff and inserted the following clause in the order;

“Any express or implied condition, statement or warranty,

statutory or otherwise, is hereby excluded”

The plaintiff signed without reading the clause and sued in respect of
unsatisfactory nature of the machine supplied. Court decided that the clause
was binding on her although the defendant made no attempt to neither read
the document to her nor call her attention to the clause.

However, there are exceptions to this general rule:-

o When a person signs the document under a fundamental mistake as to

its nature and not content, he will not be bound. Example: If a person
signs a cheque on a mistaken belief that it is a mere guarantee the signer
can avoid his signature.

o If the signer can prove that he was induced to sign the document
containing the clause.

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If the document does not require signing, the following must have been done
for before a person signing may be bound by exemption clause:-

o The document containing the clause forms a greater part of the contracts
and does not just act as evidence.

o Reasonable care was taken to bring the exemption clause into the notice
of the offeree i.e. clearly written in conspicuous position to be read by the
offeree.

If a person is blind or illiterate, as long as the offeror has given

constructive notice, he will not be bound.

o Notice must have been given at the time of contracting of the goods so as
to protect the buyer from liability to pay price.

DISCHARGE OF A CONTRACT

A contract entered into between two parties will be discharged, if the obligation
created by it becomes no longer binding on them. Discharge of a contract
means that the parties are released from their mutual obligations. The
promisor’s duty to perform ceases. Discharge of a contract takes place in
several ways:-

1. Discharge by agreement
Parties to a contract can by a mutual agreement between them bring the
contract to an end. When the contract is executor only an agreement to end
the contract is binding since performance was in the future time. Where a
contract has been fully executed or partly, a simple agreement cannot put it
to an end, there has to be consideration given for the promise to end it i.e.

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 some payment for what has been done or remainder of the contract unless
the contract is under seal.

2. Discharge by performance
Parties to a contract who have performed their obligation to each other till
the end as agreed will be discharge from further liability. Where
performance of major terms has been done or part performance of a
contract, the party will be entitled to reasonable payment for what he or she
has done, the same applies to where the contract is divisible or severable
and when performance was prevented by the promise.

3. Payment of a sum of money which is owed under the contract in full and
complete, discharge the debt. However, payment of a lesser sum can’t
discharge debt of a greater sum except where additional consideration is
given, payment is by 3rd party, payment is in a substitutive mode of
payment or done earlier than the due date at the request of the creditor.

4. At common law, time of performance of a contract is of essence in that when

the time is fixed for completion of performance, failure to complete within
the time, discharge the contract but with a party in breach liable to pay
damages.

5. Impossibility to performance
Where a contract subsequently becomes impossible to perform, it is
considered trust rated. Not all kinds of hindrance of a contract impossible
or discharge of duty of perform. Thus, the events that tend to discharge a
contract include sickness, accident, war considered as an act of God) and
Legislation.

6. Breach of contract by a party discharge the contract and the aggrieved party
may bring actions in respect of the breach.
7. Provision of the law e.g.