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A contract is an agreement between two parties which is enforceable by law. An agreement is made when a person signifies his willingness to do or to abstain from doing anything with a view of obtaining the assent of the other party. Such act or abstinence is said to make a proposal. The person making the proposal is called the promisor and the person accepting the proposal is called the promisee. Every promise and every set of promise forming consideration for each other is known as agreement. Promises which form the consideration or part of the consideration for each other are called reciprocal promises. An agreement not enforceable by law is called void agreement. An agreement enforceable by law at the option of one party and not at the option of the other party results into a voidable contract. Hence to make an agreement into a contract, the following has to happen. - Agreement between the parties. - Creation of responsibilities between the parties. - Enforceability by law. Anson, a famous jurist thus defines a contact as “An agreement enforceable by law made between two or more persons by which rights are acquired by one or more to act or forbearance on the part of the other or others”.
TYPES OF CONTRACTS:
Contracts may be classified into: -Written (Specialty Contracts) - Contracts requiring written evidence - Simple contracts.
These are contracts which the law insists must be written. The must be embodied in a formal document e.g. - Under Sec. 6(2) of the Hire Purchase Act; Cap 507, a hire purchase agreement must be written. - Under Sec. 2(1) of Marine Insurance Act, a contract of Marine Insurance must be written. - Contracts of sale of land are equally required to be written.
Contracts Requiring Written Evidence.
These are contacts which must be evidenced by some note or memorandum. Such note or memorandum must: - Describe the parties sufficiently to identify them - Describe the subject matter
Odiwuor Kelly – B.Com (Acc. & Aud. Option), L.L.B (Crim., Ban. & Ins. Option), Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008
State the consideration (what is payable) Contain the signatures of the parties. contracts include: Contract of guarantee Contract of insurance etc.
These are contracts whose formation is not subject to any legal formalities. The contract may be oral, written or implied from the conduct of the parties e.g. - Contract of sale of goods - Partnership agreements etc.
SOURCES OF LAW OF CONTRACT.
Under Section 2(1) of the Law of Contract Act, Cap. 21 Laws of Kenya, the sources of the law in Kenya are: - Substance of Common law - Doctrines of Equity - Other statutes.
ELEMENTS OF A CONTRACT.
All agreements are contract when made out of free consent of parties competent to contract, with lawful consideration, lawful object and which are not thereby declared void. The following are elements of a contract. I. Offer II. Acceptance III. Intention to create a legal relationship. IV. Lawful consideration. V. Capacity to contract. VI. Free consent. VII. Lawful object. VIII. Legal formalities. IX. Possibility of performance. X. Not expressly declared void.
A contact comes into existence when a definite offer has been unconditionally accepted. Mode: The offer can be made orally, in writing, or impliedly provided that the mode of offer or acceptance is in tandem with any statutory requirements as to form e.g. Contract for sale of Land need to be in writing.
Odiwuor Kelly – B.Com (Acc. & Aud. Option), L.L.B (Crim., Ban. & Ins. Option), Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008
he is said to make a proposal. can be made to a particular person hence no other person regardless of his merit can be tolerated. Ban. “If acceptance is not communicated by next Sunday. The display is another species of invitation to treat. A government ministry puts an advertisement in the newspaper for tenders for the supply of a specified quantity of goods during a certain period of time the advertisement constitutes an invitation to treat. - Odiwuor Kelly – B. Offer must give rise to a legal obligation. c. & Ins.e. Terms of offer must be definite and certain i.g. An offer may prescribe the method of communication of acceptance thus becomes a conditional offer. Offer should not impose an unnecessary obligation to communicate nonacceptance e. Characteristics / Requirements / Legal rules regarding offer. b. L. & Aud. A trader displays goods in his shop window with a price label on each of them. May be specified or general i. A trader‟s response to the invitation will be the offer. A registered company issues a prospectus pursuant to provisions of the companies Act. the application will be the offer. should not be vague. Option). an advertisement. These has often occurred in cases where a person did or said something which another understood to be an offer and consequently proceeded to „accept‟ In the course of settling such disputes. The existence or otherwise of an offer may some times be the source of an acute dispute between parties. or can even be general in that any person who meets the conditions can signify his assent.. or declaration of intention e. Following are examples of invitation to treat: a. the courts have explained that such „offer‟ are apparent rather than real and that the thing done or statement made amounted to no more than an invitation to treat or a declaration of intention. If a person applies for any shares in response to the prospectus.B (Crim.e. I shall presume that you have accepted”. May be express or implied.g. The person proposing is also called an offeror or a promissor.Definition: When a person signifies his willingness to do or to abstain from doing anything with the view of obtaining the assent of the other to such act or abstinence. An Offer must be made with a view of obtaining the consent of the other party to do so or abstain from doing the particular act. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 3 .L.Com (Acc. asking the public to subscribe for the company‟s shares. although it appeared to be an offer of the specified shares to the public for acceptance. uncertain or ambiguous An offer must be distinguished from an invitation to offer. The offer must be communicated. Option). The issue of the prospectus was legally an invitation to treat.
& Aud.There was no intention to create legal relations with any person. This is a change.Illustration: In Carlill Vs. On June 15th the plaintiff wrote back accepting to pay $ 950 for the firm.B (Crim. COUNTER OFFER.000/- SPECIES OF OFFER: Following are other manner in which offer exists. Ltd. The company denied paying her and she sued.The advertisement was mere sales talk. A counter offer differs from a request for information or an inquiry. it amounted to a general offer and any person who fulfilled its conditions contracted with the company hence Mrs. L. Occasionally two parties make similar offer to each other without knowing that same offer has been made by the other party. it was held that though the advertisement was unclear in certain respects. & Ins. influenza. variation or modification of the terms of the offer by the offeree. The defendant refused and the plaintiff sued for specific performance. . In such a case no binding contract will have been created since none has specified has acceptance to another. It put an advertisement in a newspaper to the effect that a $ 1.The company couldn‟t make and offer to the whole world. an agreement arises between the parties. Carlill who had read the advertisement bought and took the smoke balls as prescribed but contracted influenza.000/-. fever.Com (Acc. . On June 29th the plaintiff wrote to the defendant accepting to pay $ 1. Option). Carlill was entitled to the $ 1. Ban. CROSS OFFER. Option). It is an offer in its own right and if accepted.000/.reward was available to any person who contracted influenza. Odiwuor Kelly – B. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 4 . It was held that there was no acceptance as a counter offer does not amount to acceptance neither was the offer revived in this case. cold or other diseases after taking the carbolic smoke ball as prescribed. The advertisement stated further that the company had deposited $ 1.L. and colds and other diseases associate with taking cold water.000/for the firm. It is a conditional acceptance and therefore not an acceptance in law. Carbolic Smoke Ball Co. However. In Hyde Vs. The company was confident that it was the best cure for fever.. The legal effect of making a counter-offer is that it terminates the original offer which thereby becomes incapable of acceptance unless revived. On June 27th the defendant wrote to the plaintiff rejecting the $ 950. Mrs. Wrench (1840) on June 8th 1840 the defendant made a written offer to sell to the plaintiff a firm for $1.000/with Alliance Bank. The company argued that: . the defendant company manufactured and owned a drug named the carbolic smoke ball.
A continuous offer is called a standing offer or a tender. & Aud.Com (Acc. Must be in the mode prescribed. acceptance in full. it becomes a contract as a specific tender. If reply is required by a telegram and offeree accepts replies by fax. Revocation means withdrawal or taking back the offer or acceptance. REVOCATION OF OFFER AND ACCEPTANCE. When the tenders are accepted. Option). ACCEPTANCE.As against the person who makes it when it is put into the course of transmission to the person to whom it is made so as to be out of the power Odiwuor Kelly – B. the offer is said to be accepted. an order will be placed. Ban. AUCTION. the auctioneer invites offers. An offer when accepted becomes a promise. An offer may be revoked at any time before the communication of its acceptance is complete as against the proposer and not afterwards. An acceptance can be revoked at anytime before the communication of acceptance is complete as against the acceptor and not afterwards.L.e.B (Crim. Acceptance subject to a specialty contract would be valid only on the formal contract being signed by all the parties. TENDER. is accepted. It simply means that as to and when goods are required. When a tender is for supply of goods for example. Sometimes tenders are invited to the supply of a specific quantity of goods or services. express by word spoken or written or implied by an act in line or in compliance.. it still does not become a contract. L. & Ins. It would otherwise be a counter offer. Must be absolute or unqualified. Must be accepted within the time fixed. Essentials of a legal acceptance. The offer is made by the bidder and the auctioneer accepts the offer on the fall of the hammer. When a person to whom an offer is made signifies his assent thereto. I. Acceptance must be made before the offer lapses or is revoked. Acceptance must be for an offer communicated. Placing of such order becomes acceptance. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 5 . When is communication of revocation complete? . it amounts to non-compliance. Acceptance must be made with the intention to fulfill the terms.An inquiry does not change the terms of the offer and the offeree is free to accept the offer before or after the inquiry is responded to. Option). At auction sale.e. Thus a standing offer does not become a contract until when an order according to terms of the tender is placed with the party which accepted the tender. Acceptance may be express or implied i. Acceptance should be by the person to whom the offer is made.
Ban. Thus goes the maxim „ Ex nudo pacto non-oritur actio‟ i. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 6 . If time was not of essence.g. As against the person to whom it is made when it comes to his knowledge. c. does or abstain from doing something. Further more. the law does not recognize an agreement to do something without anything in return. or responsibility given.g. Option). CONSIDERATION. suffered or is undertaken by the other‟.B (Crim. According to Pollock “Consideration is the price for which the promised of the other is bought” Hence no consideration no contract. then reasonable time lapse will give it expiry. – Mrs. By notice. Carlill acted upon an advertisement by buying and using Carbolic smoke ball to prevent influenza.e.. Agreement made without consideration is void. be a Kenyan. Worth to note that consideration is something in return. suffered or undertaken by the other. Definition: When at the desire of a promissor. the promisee or any other person has done or abstained from doing.- or the person who make it. profit or benefit from one party for which forbearance. f. The existence of consideration in promise signifies the commitment of parties to create a legal relationship. By counter offer: This is accepting the offer but suggesting an otherwise or new condition. Option).Com (Acc. detriment. She however still Odiwuor Kelly – B. By death of the propossor if it comes to the knowledge of the acceptor before acceptance or before the offer is revoked. e. d. loss or responsibility given. If it was to be communicated by telegram but instead the acceptor chooses to communicate his acceptance by ordinary mail. How does an offer come to an end ? An offer comes to an end by revocation which may happen in various ways briefly explained below: a. By not accepting the offer in the mode prescribed e. Carlill Smoke ball Co. Musa (1975) was a landmark case that also gave birth to an acceptable description to considerations. By lapse of time. such an act or an abstinence or promise is called consideration for the promise. interest. d. & Aud. L. This is by sending a revocation message before acceptance is complete as against the offeror. b. & Ins. This is if time was prescribed as an essential aspect of the contract. By insanity of the propossor and if this comes to the knowledge of the acceptor before the offer is revoked or before acceptance is complete. another useful landmark case is of Carlil Vs.L. To exemplify detriment forming consideration. It can take the form of loss. By the failure of the acceptor to fulfill a condition precedent to acceptance e. Currie Vs. It explained that consideration is „some right. It remains at the option of the propossor to welcome the acceptance otherwise he may revoke it by sending message to that effect in reasonable time.
Although nothing has been done yet. Thomas. Consideration must be at the desire of the promissor i. (ii) Mutiso puts an advertisement in the local newspaper that he has lost his goat of a certain description. A goes to Mr. a. Roscarla bought a horse and paid for the price. (ii) above Mss. Executed Consideration.a tailor to make a suit for her as she promises to pay at the end of the month. it should consist in a single transaction with the promise to the other. & Aud. Thomas made statements to her to the effect that the horse was sound in wind and limb. Executed consideration is constituted by something done by the plaintiff because of a promise made by the defendant. & Ins. c. Legal rules regarding consideration. He takes her measurements and promises to have the suit ready on the last day of the month. a. Here what Munene has done is what constitutes the executed consideration required to make Mutiso‟s promise (executory consideration) binding on him. I. This consists of a promise made by one party and promise made by the other party to the contract. after consideration made. In Roscarla Vs. they exchange their promise. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 7 . b. Consideration may be past. For the moment. Whereas the horse was vicious. B‟s shop on the tenth day of the month and asks Mr.e. i. Executory Consideration. This stipulation was unenforceable as it was after sale. fraudulent. finds it in the bushes nearby and returns it to Mutiso. Consideration must not be ambiguous impossible uncertain. Held by court that she was entitled to damages as her consideration to contract was the inconvenience in swallowing the balls while the consideration for the company was increase of sales of the smoke ball. B. A had paid for the suit in advance. 200/= to anybody who returns it. Examples: (i) If in example a. Here Mss A‟s promise is the consideration for Mr.B (Crim.contracted. Examples: i.Com (Acc. present or future so long as it is co-extensive and basis upon which the other party‟s promise is obtained. L.L. Option). b. and promises to pay Kshs.e. perfect in vision and free from vice. Option). Mss. B‟s promise. Munene reads the advertisement.. Ban. An unmarried man and a lady agree to be married in the near future. After which. Odiwuor Kelly – B. there is a contract to marry between them. the price for each other‟s promise. ii. CLASSIFICATION OF CONSIDERATION Consideration may be executory or executed. goes to look for the goat. the payment would be the executed consideration for Mr.e. it is at the request of the promissor otherwise its common sense that nobody would be held liable for what he did not tell you to do. B and vise versa.
Gift: Gifts communicated to the beneficiary are recognized benefits and the law would enforce transfer of these gifts and presents. Consideration must move from promisee. c). or opposed to public policy i. Assignment of a contract: Where the contract is assigned. A stranger to contract cannot sue because it is a cardinal principle of law that only a party to contract can sue.immoral. It is a canon principle of law that one cannot claim something for nothing. f). However. A holder in due course of a bill of exchange can sue prior parties thereto although there is no privity of contract between him and them. that party is deemed to be an agent of the third party and shall be stopped from denying his liability to be incurred by the third party. if this were strict position of law some considerable havoc would result. This introduces the principle of privity of contract. privity of contract (contractual relationship) is necessary. He can therefore enforce the contract. This is a statutory exception under Bill of Exchange Act. e. Therefore only a party to contract can sue. a wife can enforce recovery of an insurance policy assigned by her husband.Com (Acc. Estoppel and acknowledgement: When a party by his consent admits or acknowledges liability. L. law would in certain cases impute quasi contract and thus enabling the volunteer to claim reasonable payment. Promise made for voluntary service: Though the service was not prompted by any formal agreement to consideration. To crate a legal relationship. This third party (a stranger) is allowed at law to call for enforcement of the promise to such a contract. h). some of which are identified below: a). Ban.g. Difference between stranger to consideration and stranger to contract. b). It need not be full return for the promise provided it is something rather than nothing in the eye of the law. This is because the contract was for his benefit. The court will not allow anyone to plead that he made a bad bargain. This means that only the person who has personally given consideration for a promise can sue for breach of performance. Beneficiary to a trust: A beneficiary can file a suit to enforce his benefits even though he is not a party to the contract. Option). illegal. Consideration need not be adequate. From the foregoing. Option). PRIVITY OF CONTRACT.L.. A person who has not given consideration for a promise is a stranger to consideration. it need not be adequate. So long as consideration is real and sufficient to the bargain. it must be lawful. g). & Aud. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 8 .B (Crim. e). Agency: Consideration made so as to create agency relations is also enforceable. The law therefore recognizes a few exceptions. d. it will be observed that a third party on behalf of the promisee may perform consideration. & Ins. the assignee can enforce the contract e. This is contrary Odiwuor Kelly – B.e.
there is a legal presumption that any agreement they enter into is not legally binding – (Balfour Vs.Married women. For an agreement to constitute a contract.Com (Acc. however. Option).B (Crim. iii. The general rule is that any person may enter into any kind of contract. Domestic or family agreements-These include: i. there are certain classes of persons to whom specific rules applies. Option). Where a husband and wife are living together amicably. with regard to their capacity to contract.L.A person of unsound mind. the court have proceeded to do by formulating certain principles or presumptions that will apply in absence of an express declaration to the contrary. This. CAPACITY. INTENTION TO CREATE LEGAL RELATIONSHIP.A minor or an infant. Business agreements. These presumptions are as follows: a. Meritt. Agreement between parent and child: These are made on goodwill of the parties and are not legally binding. .Meritt ii. Balfour) This is founded on the necessary caution to prevent ill advised litigation from destroying love and affection between couples. 1. . Every other person lacks the regal relationship (locus standi) to the contract. These are as follows: . all business agreements are made with intention to crate legal relationship. Agreements between close relatives based on love and affection in their said relationship are also non enforceable. parties to a contract do not direct their attention to this point when negotiating with each other. However.. b. promissor and acceptor. & Aud. with the consequence that the courts have as it were. These would not be enforceable unless it is agreement under seal. 2. In practice. Even though the agreement may have all other agreements of valid contract it would not be a contract until the intention to create a legal relationship is established. a contract can only be enforced by the parties directly related by the contract i. Unless specifically stated or implied otherwise. Ban. Where the husband and wife have separated or are about to separate so that the marriage is practically over any agreement entered into by the spouses is presumed to have been intended to be legally binding. been called upon to „fill the gaps‟.e. Odiwuor Kelly – B. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 9 . & Ins. Agreements between husband and wife. c. the parties thereto must have intended it to have legal consequences. L.to the general rule of privity of contract meaning. Social agreements. Vs.
In the case of Nash Vs. White City Stadium. It was held that the contract was unenforceable. That the goods were suitable to the condition in life and. Sec. Necessities: The Sale of Goods Act. Every person therefore is competent to contract who is sound mind and has attained the age of majority according to the law to which he is subject and is not disqualified from contacting by any law to which he is subject. Trade unions. For this purpose. & Ins. in the 5th Amendment in 1974 made the age of majority to be 18 years – Section 2. Before proceeding to college. his father bought him the necessary clothing material he required. A MINOR The capacity of parties emphasizes that parties entering the contract must be capable of understanding it and forming a rational judgment as to its effect upon their interests. However. provision of transport and even education by formal or informal instruction.Com (Acc. Option).L. Contracts for Beneficial Services: Case law demonstrates that a contract whose object is to benefit an infant is enforceable by or against him. In the case of Doyle Vs. 33). Ban. as the plaintiff had failed to prove that the goods were necessaries. Binding Contracts: An infant may only be bound by agreement the object of which is to enable him obtain necessities. an adequate supply from other services. infants/minors may of necessity need legal advice. Inman. while in college. lodging facilities. he contracted and was supplied with additional clothing material by the plaintiff but did not pay and was sued. voidable. 2.B (Crim. L. An insolvent or bankrupt. the law stresses that the person has to be a major. the plaintiff was an infant but qualified city boxer. Corporations. A contract with a minor is binding. the defendant was an infant college student. However. Age of Majority Act (Laws of Kenya Cap.. Option). 4(2) defines necessities as „goods suitable to the condition in life of such infant or minor… and to his actual requirements at the time of sale or delivery‟ Thus the statutory requirements of necessaries for a minor are: 1. His father gave evidence to the effect that he had purchased for him all the clothing material he required. He applied to join the British boxing board and was given a license thereby becoming a member. & Aud. Foreign sovereign. Other necessaries: The definition above limits necessaries to goods as defined in Sale of Goods Act. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 10 . That they were suitable to the infant’s actual requirements at the time of sale or delivery in the sense that he had not at the time. thus assuming that he is mature.- Alien or non-citizens. Odiwuor Kelly – B. They can sue and be sued on them. or void depending on their nature or type.
Voidable contracts: Infants cannot be held liable against these contracts. ..B (Crim. Further more. Position of a Minor at Law. the court can direct him on equitable grounds to restore the property to the aggrieved party. Ban. He sued to enforce the agreement. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 11 . which is a Statute of General Application in Kenya. Void Contracts: Under the Infants Relief Act 1874. the contract was for his beneficial service and so enforceable. Since the amount borrowed by an infant is irrecoverable by reason of the contract being void. However. It was held that much as he was a minor. A minor can be agents thus connect the first to the third party without being liable for any consequential liability. Canaille. A minor can always plead infancy. the court will recognize a reasonable price and not always the agreed price – Section 4(2). & Ins. A minor cannot be declared insolvent since he is incapable of binding - - - Odiwuor Kelly – B. Option). the infant is entitled to avoid such contracts or repudiate such contracts during infancy or within a reasonable time after attaining the age of majority.Com (Acc. certain contracts entered into by infant are deemed void. he becomes liable for debts and other liabilities of the partnership from the date he becomes a major. L.Purchase of company shares. Agreement with a minor.Lease agreements. A minor can be a promisee or beneficiary. Such contracts includes: . . This is intended to protect the interests of a minor.One of the rules of the association was that the board was empowered to withhold payment of any price money won if a boxer was disqualified in a competition. any security given by the infant or any other person to secure the amount is also unenforceable. Option). An agreement with a minor being void cannot therefore be ratified by him on his attaining majority otherwise it will also be held liable for services rendered at his request during his minority.L. Under Section 12 of the Partnership Act. & Aud. if he does not avoid the contract after attaining the age of majority. It was so held in Valentine Vs. In all these cases of necessaries to a minor. Doyle was disqualified in a completion and the board withheld payment. an infant partner is entitled to avoid the partnership agreement during infancy or within a reasonable time after attaining the age of majority. subject to certain exceptions is absolutely inoperative and void. A minor‟s estate is liable for necessaries supplied to him or to any person whom the minor is bound to support.Partnership agreements. Under Section 13. This is to ensure that he makes due payment in respect of service rendered to him at his demand.
Capacity to understand the contract. Two things are therefore necessary: 1. Option).B (Crim.The other party was aware of his mental condition. The defendant must plead and prove not merely his insanity but the plaintiff‟s knowledge of that fact and unless he proves these two things he cannot succeed” Being voidable contacts. Ability to make rational judgments as to its effect upon his personal interests. This is because partnerships are contractual relationships and likewise to a company. Option).. Ban. .himself and to contract debts.No liability of guardian for a minors act. Jurisprudence philosopher Salmond said “ The law protects their persons (minors). It was held that he was not liable by reason of insanity. . In the words of Lopes L. Odiwuor Kelly – B. 2. Contracts entered into by such persons of unsound mind are voidable at his option if it is proved that: . Such persons of unsound mind are also held liable for all necessaries supplied to them at their point of need. the juries are their servants and the law is their guardian”.A minor cannot become a partner but may be admitted for business benefits if partners so desires. However. the mental incapacity of the one must be known to the other contracting party.A minor may be bound by an agreement entered by guardian for his benefits. of unsound mind and that the other party was aware of his mental condition. the defendant had signed a promissory note and when sued on it. In Imperial Loan Co. Stone. where the minor is acting as an agent of a guardian major. Considering at length the legal position of a minor. However they are only liable to pay reasonable prices for the necessaries under Section 4 of Sale of Good Act and not necessarily the contract price. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 12 . The judges are their counsels. . they may be ratified by him (person of unsound mind) when he becomes of sound mind. Vs. . & Aud. L. . & Ins. This is as per the order of the court since contracts with a minor is void.Specific performance would be granted against a minor. preserves their rights and estates. Ltd. the guardian would be held responsible.He was too insane to understand what he was doing. PERSONS OF UNSOUND MIND A person is said to be of sound mind for the purpose of contract if at the time when he makes it. he pleaded that he was at the time.L. J “In order to avoid a fair contract on the ground of insanity.Com (Acc. he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. executes their larches and assist them in their pleadings.
. He cannot either file a suit against a native without prior permission of the government. Ban. . detaining or threatening to detain any property to the prejudice of any person whether directly or by using another person so that the contract may be made. who takes the responsibility of discharging the liabilities over the estates of the insolvent. Coercion is committing or threatening to commit any act forbidden by the penal code.Coercion. . Foreign sovereign: These are representatives of foreign states. L. a married woman and her husband were taken to be one.Undue influence.Misrepresentation. The contractual capacity of such persons is restricted by the provisions of the Bankruptcy Acts. COERCION.. Option). Elements of coercion may be identified as below: Odiwuor Kelly – B. Consent is not free when it is created by: . .Com (Acc. All such contracts not within the objects and those that are reasonably incidental thereto are ultra vires and therefore null and void. this concept has since been revised by the Law Reforms Act of Married Women and Tort Feasors Act of England (1882) that is a statute of General Application in Kenya. A contract made due any of the elements listed above avoidable at the option of the party whose consent was not free.OTHER PERSONS DISQUALIFIED BY LAW FROM CONTRACTING. However. & Ins. An alien enemy: This is a person whose sovereign state is at war with Kenya. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 13 . Option).An insolvent: These persons‟ properties vest with an appointee of the court of law. Vs Riche 1875.B (Crim. The ultra vires acts cannot be ratified even be majority of the members at the annual general meeting – Asbury Railway Carriage & Iron Co. . Two or more people are said to consent when they agree on same thing in the same sense.Mistake etc. He is barred form contacting to the interest of the country.Married women: At common law. that one being the husband.L. They cannot be sued unless they voluntarily submit to the jurisdiction of the local courts.Fraud. Thus it‟s the husband who was to be responsible for her liabilities. & Aud. . They can else enter into a contract through agents. .Corporations: These can only contract when authorized by statute by which it was created or by the memorandum of association respectively. LEGALITY OF CONSENT If contract is not on free will the contract becomes violable at the option of the person whose consent was not free. To file a suit against such sovereign is only with the permission of the government.
One person is in a position to dominate the will of the other.Trustee and a beneficiary. Odiwuor Kelly – B. Option).A guardian and a ward. the burden of proof that this was not the intention shall be upon him. . Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 14 . One is deemed to be in a position to dominate the will of another in the following circumstances: . Skinner (1887) Miss Allcard took vow of Chastity. The act of coercion must be directed to any person not necessarily the other party to the agreement. - UNDUE INFLUENCE.Religious guru and a faithful. Whatever threat to commit suicide amounts to coercion. Unconscionable bargains are unfair bargains and equity deems them voidable at the option of the innocent party. . It implies unfair and improper conduct or pressure on the mind of the other person as against physical fear created by coercion.. When person who is in a position to dominate the will of the other entering into an unconscionable bargain with the other.Com (Acc. a doctor and a patient. contracts undue influence is presumed: . A threat to enforce ones legal rights does not amount to coercion. A lawyer and his client. L. . .B (Crim. In the case of Allcard Vs. Elements of undue influence: .A parent and a child. illness.L.He stands in a fiduciary relation to the other e.g.The party domination the will uses the position to dominate the will of the other. .A doctor and a patient. Presumption of undue influence: In the following relations. Consequently the person whom undue influence is exercised is indirectly compelled to enter into the transaction.He holds a real or apparent authority over the other. . & Aud. A similar term Duress is used under English law. alcohol etc. A contract is said to be induced by undue influence where the relations subsisting between the two parties is such that one of them is in a position to determine the will of the other party and uses the position to obtain an unfair advantage over the other. .Done with the object of inducing or compelling any person into agreement. Option). incase of evidence to the effect that the contract was unconscionable. . Ban. & Ins.Unlawful detaining or threatening to detain any property. .The contract is made with a person whose mental capacity (temporary or permanent) is affected by reason of age.Committing or threatening to commit any act forbidden by the penal code.
Coercion is a physical threat to a person or property while undue influence is mental or moral threat. Coercion is against an illegal act while undue influence maybe against a legal act. 3. a. As a result. & Ins. She was not allowed to seek any external advice.By positive statement: This involves making a positive representation stipulation without any reasonable base or ground. That the statement was not a mere puff or sales talk. Odiwuor Kelly – B. A representation is not a term. . d. between a doctor and patient is necessary in undue influence. The representation is of a fact not an opinion. Essentials of misrepresentation: 1. Coercion will imply penal action besides the agreement being void while undue influence only makes the agreement voidable.Breach of duty: This is when a person commits a breach of duty to disclose information.g. The court could therefore not order return of her properties. The statement must have been intended to be relied upon by the representee. After several years. However. Option). Ban. When a person induces another person even innocently to make a mistake regarding a subject matter of the agreement. This can be through the two following ways: . However. some more years passed before she brought legal action to recover her properties. 4. It must be a statement of fact and not an opinion. She accordingly had to gift away all her bounties. Coercion involves doing or threatening to do an illegal act while in undue influence the act may not be illegal but be unfair or unconscionable. MISREPRESENTATION.Com (Acc.. Misrepresentation is therefore an incorrect statement made innocently. which was intended to induce the other party to enter into that contract.Poverty and Obedience so as to become a nun. 5. she gifted all the properties to the Mother Superior. The representation must have been made during negotiation. & Aud. Representation or omission of a material fact. she sought for legal advice. honestly believing it to be true though it is not true. she had taken too long to come to court and as a mater of legal principle. which gives him an advantage by misleading the other to his advantage. c. L. e. b. For coercion no specific relations between the parties is necessary while specific relations e. delay defeats equity. Court held that the transfer of her properties was voidable since it was under undue influence. Distinguish between coercion and undue influence. Option). Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 15 . He is making a misrepresentation. but a statement of fact made by one party to the other during their preliminary negotiations.L. 2.B (Crim.
The misrepresentation is wrongful information but the party making it does not know that to be wrong. when silence is equivalent to speech. . 3.Contract of insurance. False representation of a fact and not an opinion. A promise made without any intention to perform it. no fraud. Silence is fraud if there is a duty to speak i. 3. Ban. contents of a company‟s‟ prospectus. The representation must have been made knowingly or carelessly without ascertaining its truth. And any other act fitted to deceive.L. Any such acts or omission as the law specifically declares to be fraudulent. Such fact is called a material fact.Where the contract is on confidential relationship. L. . Odiwuor Kelly – B. . .B (Crim.e.Where the information made is half truth. The intention of misrepresentation must have been to deceive.Where a statement is true when made but turns false due too changes in circumstances before the contact is concluded and the maker does not disclose its falsity. 4. FRAUD. This is misrepresentation made with an intention to deceive or cheat. Option). 5. Silence or non-disclosure does not as a general rule amount to misrepresentation. by a person who does not believe it to be true. 2. . Elements of fraud are as follows: 1. Fraud means and includes any of the following acts committed by the party to contract (or his connivance or by his agent) with an intention to deceive another party thereto.6. Active concealment of a material fact by a person having knowledge of it. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 16 .Allotment of shares in companies. 2. . Disclosure of every material fact is particularly required in the following circumstances: . This duty to speak is necessary when the material fact to be disclosed may affect the willingness of the other party to enter into the transaction. 5. loss or damage due to the misrepresentation.. The suggestion that a material fact is true when it is not. The party filling a suit must have suffered harm. Option). no damage. The representation must have been made by the party himself or on his knowledge. & Ins. .g. However omission or non-disclosure may amount to misrepresentation in certain circumstances as bellow: .Com (Acc.Where disclosure is a statutory requirement e.Where the contract is one of the utmost good faith. & Aud.Contract of suretyship. (or his agent) inducing him to enter into the contract: 1. 4. Thus.Contract of immovable property.
. welfare or interest. Public policy means the endeavors of the law or government for public good. Misrepresentation makes a contract voidable with right to claim damages. Maintenance and Champerty: Maintenance means financing a suit by a third party who has no legal interest or locus standi. If it implies or involves injury to a person or property of another person.Ex turpi causa non-oritur action i. & Ins. This explains the maxim.e.L. The following agreements have been identified to be opposed to public policy: .B (Crim.. . object and consideration may be the same. There can be no action upon a wrongful ground. his action will fail.g. In same cases. .Agreement for trading with an enemy of the state: This is because it may give unforeseen strategic advantage to the enemy state. bribery. Act asserting the contrary to public policy is void. If it is of a nature that if permitted would defeat the provisions of any law in place. State and explain when consideration and object are unlawful - - Agreements opposed to public policy If it is forbidden by law: An object is said to be forbidden if it is punishable by any law or order made in exercise of power or authority conferred by legislation. It is vague and often misused. The term public policy is so widely interpreted that is seen as an unruly horse.Agreement interfering with administration of justice: These can take any of the following forms: a. Distinction between fraud and misrepresentation: Whereas fraud is made intentionally. which encourages making money through crimes and in abuse of law. LEGALITY OF OBECT A contract must be entered for lawful consideration and lawful object. Ban. Champerty implies a bargain by which one party is to assist the other party to recover property and is to share the proceeds of the action c. Option). Agreements stifling prosecution: These are agreements. it aims at cheating other people. Lawful object is with regard to the purpose or design i. L.Contract of marriage. Option). If the court regards it to be immoral or opposed to public policy.Com (Acc. misrepresentation is made innocently. It is the object of the law to protect its persons and their properties. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 17 . An agreement which interferes with direct administration of justice e. the object for entering in to the contract must be legal. Odiwuor Kelly – B. b. For this reason the court had to clarify the meaning of public policy and categorize kinds of contracts opposed to public policy. If the plaintiff gives evidence that manifests any form of illegality in the nature of the contract he wishes to enforce. If it is fraudulent i. & Aud. while fraud attracts rescission of the contract without damages.e.e.Contract of family settlement.
a partner may carryon a business competing with Odiwuor Kelly – B. Agreement to defeat creditors or revenue authorities: This is an agreement to dishonor legal responsibility. Agreement under the Partnership Act: . Agreement of marriage breakage or brokerage: Every one has a liberty to marry according to his free choice. Following exceptions however are generally recognized. . so long as the buyer or any other person deriving benefits from the title carries on a like business therein.B (Crim. Option).L. an outgoing partner may agree with his partners not to carryon a similar business to that of the firm within a specified period of time or specified locality. Agreement creating interest opposed to duty: Duty must be done any agreement to abscond duty promotes inefficiency and corrupts.. hence deemed void. & Ins. 2. profession or business of any kind. Sale or transfer of public offices and titles. Ban. An agreement in restraint of trade is void' Explain this statement giving exceptions to this rule.Any person before ceasing to be a partner i. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 18 . Agreement in restraint of trade: Every agreement by which anyone is restrained from performing lawful profession or trade or business of any kind is to that extent void.g. goodwill is sold.A person would not be allowed to carry out any business other than that of the firm while he is partner. vocation. Agreement of trafficking in public offices and titles: e. Option). guardianship right cannot be infringed or transferred merely for public interest. . Public policy provides liberty to legal trade.e. Agreement interfering with marital status: This becomes immoral and duty avoiding and so void. Sale of goodwill within partnership firm: Where after dissolution or firm. This should not be disturbed by monetary considerations or engaging paid broker to procure matters. L.Partners upon or in anticipation or dissolution of the firm may make an agreement that some or all or them will not carry on business similar to that of the firm from a specified time or specified local limits. 1. Agreement to interfere with personal right and duties: For instance. & Aud. Agreement in restraining marriage: This is void if the restraint is of a major's marriage.- - - - Agreement to vary period or limitation: It is unlawful to agree to defeat the object of any law.Com (Acc. Sale of goodwill: One who sells the goodwill of a business may agree with the buyer to refrain from carrying out a similar business within specific geographical limits. Agreement restraining personal freedom: Personal freedom is a constitutional right and fundamental right of natural justice.
. he is under a duty placed by law (quasi contract) to look for the true owner and take proper care of the goods.Responsibility of finder or goods: A person who finds goods belonging to another person is under no obligation to take them into his custody. quasi contract comes into existence and constructively creates a contract between the parties. However. & Ins. DISCHARGE OF CONTRACT Discharge of contract means termination of rights and obligations arising out of contacts. 3. 5.g.By operation of law. This may be by two ways: . Service contracts: It is valid to an employer to prevent their employee in engaging themselves in similar transactions during the course of their engagement.Payment made by mistake: A person to whom money has been paid by mistake or anything delivered by mistake must repay or return it to the person who paid it by mistake e.that of the buyer and may advertise such business. . it is not void as it is for the good and warfare of the public. without any formal agreement between the parties. Even if there was no valid contract between parties above.B (Crim. QUASI CONTRACTS. the money is actually due to C.Supply of necessaries: If a person without capacity to contract is supplied with necessary goods and services that are suitable to his status in life. These are contracts that are presumed to exist in law. Examples or quasi contracts are found in the following cases: . L. Option). In this case B must refund the money to A. Ban. They are based on the principle of justice and fairness that a person must not obtain unfair advantage over another person due to lack of contract. & Aud. 4. . This is the case with minors and infants who are disqualified from entering into oral or written contracts. A pays money to B by mistake. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 19 .L. This is also called breach of contract. but not using the firms name.Act of the parties. Option). Odiwuor Kelly – B. . However if he takes them into his custody. Trade combinations: Created with the object to provide standardized goods to eliminate cut-throat competition to regulate opening and closing of shops though in a way trade limitation. their relations are created by quasi contract. Control of distribution: A manufacturing industry is at liberty to sell a product to a particular seller or distributor.Com (Acc. C can't recover the money from B because he is a stranger to contract.
Option). Anticipatory breach takes place before the actual date of contract performance. In breach of contract. & Ins. By agreement or consent or waiver. So goes the maxim. Consequently the promisee shall not be entitled to damages or loss compensation.Com (Acc. or Implied when the promissor does an act. It is important in frustration that neither of the parties is to blame and the frustrating event must be external to the contract.Lex non-cogit ad impossibilia . Option). Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 20 . By death. illegal or commercially useless. If the promisee keeps the contract open and subsequently such a contract becomes illegal or impossible. since an impossibility does not create an obligation . & Aud. FRUSTRATION A contract is said to be frustrated when performance of the obligations is rendered impossible.Discharge by breach: Breach means failure/ refusal for performance by one party. The doctrine of frustration as a method of discharging a contract is an exception to the common law doctrine of absolute contractual obligations. by unforeseen or extraneous circumstances for which neither party is to blame. By lapse of time. If the promisee treats the breach as actual. L. the difference in price between the contract date and the date of communicating breach of contract. under which parties must perform their obligations failing which they are liable in - Odiwuor Kelly – B. the promisee can sue the promissor for loss or damages incurred or choose to keep the contract open until the day of intended performance. By insolvency. Ban.. the promissor shall be discharged by the illegality or impossibility of performance.e. Breach of contract may be actual or anticipatory.Impossibilium nulla obligato est. By merger. This discharges the contract unless the aggrieved party waves his right by words or conduct. which renders the performance impossible. Actual breach is when one party fails to perform the contract on the appointed date.B (Crim. he will be entitled to the loss by the difference in market price i.L. By impossibility. This may be express or implied. Discharge by operation of Law: By performance. By frustration.Law does not recognize impossibilities. Express when the promissor informs the promisee of his inability or intention not to perform the contract.
it must be proved that the event or state of affairs was the sole foundation of the contract. frustrated the contract and thereby discharged the parties from performance. & Ins. The hall was accidentally destroyed by fire before the date of the concert rendering it unusable for the purpose.- A contract may be frustrated in the following circumstances: 1. A contract is not frustrated if: . Non-occurrence of events or state of affaires – If a contract is based on a particular event of state of affairs existing at a particular time. the basis of the damages. the same is frustrated and the parties discharged e. the King was taken ill before the date of the coronation and the ceremony was cancelled.One of the parties is to blame. & Aud. In Krell vs. Government intervention or interference – If Governmental Acts or policies render performance of a contract impossible.The event in questing is provided for by the contract.. In Taylor Vs. Option). if a contract was based on more than one foundation. 3. Cardwell. Ban. However.occurrence may frustrate the contact. Henry (1903). This is because no other person can discharge a personal obligation. contract is destroyed. This is because there‟s not obligation to perform that which becomes illegal. Destruction of subject matter – If the subject matter. Additional expenses do not as a general rule frustrates a contact unless it becomes commercially useless to perform. refusal to grant a license. the death or permanent incapacitation of the person frustrates the contract there by discharging the parties. its non. It was held that the defendant was not liable to pay the hiring charges as cancellation of the ceremony frustrated the contract and discharged the parties.g. Illegality – If performance of the contract becomes illegal due to change of law or otherwise. the contract is frustrated and the parties discharged. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 21 . as the other part is still capable of performance. However. 5. it must be proved that reasonable attempts to obtain the same were made. Odiwuor Kelly – B. 4. However. however for the contract to be frustrated. It was held that the defendant was not liable to pay the hiring charges as destruction of the hall.Com (Acc. it is frustrated and the parties discharged. to conduct a musical concert for 4 days at 100 pounds per day.B (Crim. . It must be evident that the subject matter was the sole foundation of the contract.g. the defendant hired the plaintiff‟s hall on May 27th 1861. Death or permanent incapacitation – In contracts of personal service or performance e. Option). 2. The destruction need not be total but must change the commercial characteristics of the contract. the disappearance of one does not frustrate it. employment.L. the defendant hired a room in the plaintiff‟s house for purposes of viewing the royal procession of the coronation of King Edmund VII. L.
Right to claim compensation and damages: When a contract is broken. e. Supervening events – These are circumstances which intervene and thereby render performance of a contract impossible. L. the rights of the parties are adjusted as follows: 1. Ban. when a contract is frustrated or becomes impossible to perform.6. It applies in Kenya as a statute of general application by virtue of the schedule to the law of contract Acts. . He becomes entitled to one or more or the following remedies: 1. 2. & Aud. Money payable ceases to be payable 4.Damages anticipated for the breach of contract. 3. as there was no alternative route. the party that suffers breach is entitled to receive from the other party who has broken the contract compensation for any loss or damages. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 22 . or delay the same thereby changing the commercial characteristic of the contract. The contract is terminated..L. Option). It was held that the refusal to handle the corn by the Corporation frustrated the contract. In case of default of one party the aggrieved party has a right to move the court of law for enforcing the contract.B (Crim. REMEDIES / CONSEQUENCE FOR BREACH OF CONTRACT. Option). If at party derives a benefit other than financial. Lamanbhai Brothers – where the parties had entered into a contract for the purchase of a large quantity of corn to be shipped from Jinja to Mwanza and transported by rail to Dares-salaam for. the court may order such party to pay to the other a sum of money which must be less than the benefit the party has so derived. These may be of two categories below: . Money paid is recoverable. Such compensation should not be given for any remote or indirect loss or damage. 5. Effects or consequences of frustration Frustrated contracts in Kenya are governed by the law reform (Frustrated Contract) Act 1943. Odiwuor Kelly – B.Com (Acc.Damages which naturally arise in usual cause of things from such breach. & Ins. Under this Act.g. If a party suffers loss. the outbreak of a war after a contract has been concluded before performance may render it impossible to perform and thereby frustrate it as was in the case of Victoria Industries Ltd Vs. the court may order the other party to pay to such party a sum of money. The East African Railways and Harbors Corporation had previously agreed to ship and transport the corn but subsequently changed its mind and declined to handle the corn. Contract is entered into so as to enable its performance.
he is entitled to a little sum e. Option). . Measure or damages in case of beach of contract for sale of goods is the difference between the price during contracting and during the breach day. which came unexpectedly. parties fix in advance the amount that would be paid in the event of breach. Measure of damages where same types of goods are not available being out of difficulties to obtain them. difficulty in ascertaining or assessing the value of damage cannot prevent the aggrieved party from claiming compensation. as it was speculatory and too remote to have been foreseen. .B (Crim. in Gloucester left his faulty crankshaft to the defendant . Damages for breach of warranty: In case of breach of warranty.Com (Acc. It is a terrorem charge implanted into promisor's mind so as not to breach. Damages are classified as follows: Ordinary or General Damages: These are damages arising directly and naturally from breach. the buyer is entitled to claim all damages directly caused by such breach.g. compensation is treated at par. . Kshs. b. - Odiwuor Kelly – B.Vindictive or Exemplary damages: This is compensation specially laid to punish the breach of contract so as to set an example before others so that they would not commit similar breach in future. Sometimes. However. It must be bone in mind that the aggrieved party is under duty to mitigate loss or damage arising out of breach. & Aud.L. to avoid difficulty in assessing and ascertaining damages arising from breach.Nominal damages: This is when the party does not suffer any loss due to breach or contract. No compensation for remote or indirect loss. However. the best substitute available may be taken into account. to take to Greenwich for repair. Ban. . Option).Baxandle.Special or particular damages: These are contemplated or expected remote damage arising from the breach or contract.. In case of breach of promise to marry. 200/= in recognition of his contractual right. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 23 . It can be recovered only if it was a provision or subject at contracting. Liquidated damages are the fair and reasonable estimate charge for the loss while penalty is an excess compensation fixed for the purpose of compelling or coercing performance. This may either be in penalty or liquidated damages. In case of wrongful dishonor of a Cheque by a bank. Hadley lost a big contract. The defendant promised to deliver it on the following day but infact took nearly a week.In the landmark case of Hadley Vs Baxandle (1854) a miller -Hadley. with respect to liability arising out of the customers trade or business. Vindictive damages are often considered in the following cases: a. & Ins. In the meantime. The court held that he could not claim compensation for loss of profit of the unexpected contract. L. For breach of contract or quasi contract.
3. Option). Injunction order: Since contract of personal nature cannot be enforced by special performance due to impossibility of effective supervision by the court.g. by impossibility or illegality. When this. ii. Restitution: This literally means restoration. Quantum Merut: This is when one party performed his work as per the contract and then the contract repudiates e. & Aud. the party who received benefits at the expense of the other ought to restore them. compelled and has no alternative but to abide by the contractual obligations.2. Where monetary compensation is adequate remedy. the court may compel the actual performance. 5. The promisee is by this order. Specific performance: Usually damages are granted by way or monetary compensation.g. & Ins. Directors. Ban. Any benefit accruing to such persons by virtue of their positions in equity belongs to the other party and must be given up. rectifying or canceling such records in the register of titles. 4. Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0736 504008 24 . vii. Made by trustee in breach or trustship.g.. Option).L. and Trustees etc. Agents. He thereby becomes entitled to remuneration portion or work he has performed. 7. Right of rescission: This is the yielding or giving of any secret profit or benefit enjoyed by a person in breach of his duty of trust e. vi. Where the court cannot effectively supervise the execution of the contract e. correcting.B (Crim. Where contract is of personal nature. Where the contract is revocable.g. iv. L. Either party may also apply for such rectification of the register. Since this is as per discretion of the court. Cancellation or rectification: When through fraud or mutual mistake of parties. is not possible. against a minor. Odiwuor Kelly – B. title to property has passed registration records may be revisited at the order of a court of law for the purposes of reversing. v. Where the contract made be the company is ultra-vies the company.Com (Acc. building contract. When a contract becomes void. iii. however. 6. it has gone ahead to lay down cases where Specific or special performance shall not be granted as follows: i. injunctive orders are therefore made where breach is strictly forbidden. Where it will be inequitable e.