You are on page 1of 7

BQS 112 - CONTRACTS - COURSE OUTLINE

Purpose of the course:


The purpose of this course is to provide students with the basic principles and concepts of the
law of contract.
Expected Learning Outcomes
At the end of this unit, the student should be able to:
1.
2.
3.
4.
5.
6.

Discuss the principles, basic concepts and current issues in the modern law of contract.
Describe the social political and economic context of contract law.
Explain various classifications of contract.
Identify the elements of a contract.
Identify the factors that affect a contract vitiating factors
Explain how a contract may be discharges.

Recommended Texts & Statutes


Books:
Ewan McKendrick, Contract Law, 8th edition (MacMillan)
W.T. Major, Casebook on Contract Law, 1990 (Pitman)
Cheshire, Fifoot & Furnston, Law of Contract, 12th edition 1991 (Butterworths)
Treitel, The Law of Contract, 13th edition (Sweet & Maxwell)
R.W. Hodgin, Law of Contract in East Africa
Statutes:
The Judicature Act- Cap 3 Section 3
The Law of Contract Act Cap 23 - Sections 2 & 3
Hire Purchase Act Cap 507 Section 6
Marine Insurance Act Cap 390
Sale of Goods Act Cap 31 Section 3-6
Bills of Exchange Act Cap 27 Sections 3 & 4
Limitations of Actions Act Cap 22 Section 4
1. Introduction to law
What is law?
Classification of law:

written v unwritten
Municipal v international
Public v Private
Substantive v Procedural
Criminal v Civil
Functions/purposes of law
Court Hierarchy
What is a contract? (General definition)

2. Sources of Contract law


3. Types of a contract:(i) Written/ specialty contracts
(ii) Contracts requiring written evidence
(iii)
Simple contracts
1

(iv)Contracts under seal


4. Formation/Elements of a contract
(a) Offer
(i) Rules of an offer
Sands v Mutual Benefit Ltd. (1971) E.A.L.R 156
Scammell & Nephew Limited v Ouston (1941) AC 241
Dickinson v Dodds (1875-76) L.R. 2 Ch. D. 463
Routledge v Grant (1828) 4 Bing 653
Carlill v. Carbolic Smoke Ball Company 1893 1 Q.B 256
Wilkie v. London Passenger Transport Board (1947) 1 All E.R. 258
Harris v. Nickerson (1872-73) L.R. 8 Q.B. 286
Invitation to treat
Harris v. Nickerson (1872-73) L.R. 8 Q.B. 286
Fisher-v-Bell (1961) 1 Q.B. 394
Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd
(1953) 1 Q.B. 401
Lasky v. Economic Grocery Stores 65 N.E. 2d 305 (1946)
Termination of an offer
Revocation
Payne v. Cave (1789) 3 TR 148
Dickinson v Dodds (1875-76) L.R. 2 Ch. D. 463
Byrne v. Van Tienhoven (1880) 5 C.P.D. 344
Rejection
Felthouse v Bindley (1862) 11 C.B. (N.S.) 869
Counter offer
Hyde v. Wrench (1840) 49 E.R. 132
Lapse of time
Ramsgate Victoria Hotel Co. Ltd v. Montefiore (1864-65) L.R. 1 Ex. 109
Virji Khimji v Clutterbuck (1915) 5 EAPLR 172
Death
Insanity
Failure of a condition subject to which the offer was made
Financings Ltd v. Stimson (1962) 1 W.L.R 1184
(b) Acceptance (Rules of Acceptance)
The postal rule of acceptance
Byrne v. Van Tienhoven (1880) 5 C.P.D. 344

Express authorization
Adams v. Lindsell (1818) 1 B. & Ald. 681

Implied authorization
Household Fire & Carriage Accident Insurance Co. Ltd -v- Grant (187879) L.R. 4 Ex. D. 216
Henthorn v. Fraser (1892) 2 Ch. 27
Byrne v. Van Tienhoven (1880) 5 C.P.D. 344

No authorization
(i) Acceptance may be oral, written or implied from the conduct of the offeree
Carlill v. Carbolic Smoke Ball Company 1893 1 Q.B 256
Brogden v. Metropolitan Railway Co. (1876-77) L.R. 2 App. Cas. 666
(ii) The offeree must have been aware of and intended to accept the offer
2

Crown v. Clarke (1927) 40 C.L.R. 227


(iii)
Acceptance must be unconditional and unqualified
Hyde v. Wrench (1840) 49 E.R. 132
(iv) An offer must be accepted within the stipulated time if any or within a reasonable
time failing which it lapses.
Ramsgate Victoria Hotel Co. Ltd v. Montefiore (1864-65) L.R. 1 Ex. 109
E.A Industries Ltd v. Powyslands B.E.A (1953) 5 EAPLR 121
(v) Acceptance must be communicated to the offeror in the prescribed method if any
or an equally expeditions method
(vi)As a general rule, silence by the offered does not amount to acceptance
Felthouse v Bindley (1862) 11 C.B. (N.S.) 869
(vii)Where parties negotiate by word of mouth in each others presence,
acceptance is deemed complete when the offeror hears the offerees words of
acceptance
Entores Ltd v. Miles Far East Corporation (1955) 2 Q.B. 327
(viii) Where parties negotiate by telephone, acceptance is deemed complete when the
offeror hears the offerees words of acceptance
Entores Ltd v. Miles Far East Corporation (1955) 2 Q.B. 327
(ix)Where parties negotiate by telex acceptance is deemed complete when the
offerees words of acceptance are received by the offeror
Entores Ltd v. Miles Far East Corporation (1955) 2 Q.B. 327
(x) In unilateral offers, commencement and continuation of performance constricts
acceptance
Errington v. Errington and Woods (1952) 1 K.B. 290
(xi)In standing offers, a specific order or requisition by the offeree constitutes
a
acceptance and the offerer is bound
Great Northern Railway Co. v. Witham (1873-74) L.R. 9 C.P. 16
(xii)An offer to a particular/specific person can only be accepted by that person for
an agreement to arise
Boulton v. Jones (1857) 2 H. & N. 564
(xiii) An offer to a class of persons can only be accepted by a member of that class
for an agreement to arise
Wood v. Lecktrick.
(xiv) An offer to the general public may be accepted by any person who fulfils its
conditions
Carlill v. Carbolic Smoke Ball Company 1893 1 Q.B 256
(xv)If the offeror instructs his messenger to deliver to him the letter of acceptance
in any from the offeree, acceptance is deemed complete when the letter is
handed over to the messenger
(xvi) Acceptance need not be communicated to the offeror where such
communication is expressly or impliedly waived
Carlill v. Carbolic Smoke Ball Company 1893 1 Q.B 256
(xvii) Acceptance need not be communicated to the offeror where it makes the form
of conduct
Brogden v. Metropolitan Railway Co.(1876-77) L.R. 2 App. Cas. 666
(c) Intention
(d) Capacity
(i) Infants or minors
(ii) Drunken persons
Matthews v Baxter 1873 L.R. 8 Ex 132
3

Gore v. Gibson (1843) 13 M. & W. 643


(iii) Persons of unsound mind
Imperial Loan Co. Ltd v Stone (1892) 1 Q.B 599
(iv) Corporations
Ashbury Railway Carriage and Iron Co. v. Riche (1874-75) L.R. 7 H.L. 653
Attorney General v. Great Eastern Railway Co. (1880) 5 App. Cas. 473
(v) Undischarged bankrupts
Bankruptcy Act, Chapter 53 of the laws of Kenya
(e) Consideration
Definition
Currie v. Misa (1875) L.R. 10 Ex 153
Carlill v. Carbolic Smoke Ball Company 1893 1 Q.B 256
Thomas v. Thomas (1842) 2 Q.B. 851
(i) Types of consideration
Executory Consideration
Executed
Past
Roscorla v. Thomas (1842) 3 Q.B.
Re McArdle (1951) Ch 669
Exceptions to rule on past consideration- Acknowledgment of a statute barred debt
Ball v. Hasketh (1697) Comb 381
Heyling v. Hasting (1698) 1 Ld Raym 421
- Negotiable instruments
Lombard Banking Co. Ltd v. Gandhi and Patel
Rendering of services on request
Lampleigh v. Brathwait (1615) Hob. 105
Re Casey Patents Ltd (1892) 1 Ch. 104
(ii) Rules of consideration:
Mutual love and affection is not sufficient consideration:
Thomas v. Thomas (1842) 2 Q.B. 851
Consideration must be legal
Consideration must not be past
Re McArdle (1951) Ch 669
Roscorla v. Thomas (1842) 3 Q.B.
Consideration must be real
Thomas v. Thomas (1842) 2 Q.B. 851
Consideration must flow from the plaintiff/ promise
(Doctrine of Privity of Contracts)
Thomas v. Thomas (1842) 2 Q.B. 851 Doctrine of Privity of Contract
Scruttons Ltd v. Midland Silicones Ltd (1962) A.C. 446
Price v. Easton (1833) 4 B. & Ad. 433
Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Company Ltd (1915) AC
847
Tweddle v. Atkinson (1861) 1 B. & S. 393
Exceptions to the Doctrine of Privity of Contracts:- Agency
- Legal Assignment
- Negotiable Instruments
4

Trust
Restrictive Covenants (Contracts running with land)
Third Party Insurance
Kayanja v. New India Assurance Co. Ltd (1968) EA 295
Consideration must be something in excess of a public duty owed by the
plaintiff
Collins v. Godefroy (1831) 1 B. & Ad. 950
Glasbrook Brothers v. Glamorgan County Council (1925) AC 270
Consideration must be something in excess of an existing contractual
obligation
Stilk v. Myrick (1809) 2 Camp 317
Hartley v. Ponsonby (1857) 7 E. & B. 872
Rule in Pinnels Case (1602)
Pinnels Case (1602) 5 Co. Rep 117a
Doctrine of Promissory or equitable estoppel
Foakes v. Beer (1883-84) L.R. 9 App. Cas. 605
Combe v. Combe (1651) 2 K.B. 215
Central London Property Trust v. High Trees House Ltd (1947) K.B. 130
Century Automobile v. Hutchings Biemer Ltd (1965) E.A. 304
Commissioner of Lands v. Hussein (1968) E.A. 585
(f) Illegality
(i) Contracts declared illegal by statute
(ii) Contracts declared illegal by courts of lawBigos v. Bousted (1951) 1 All E.R. 92
Miller v. Karlinski (1946) 62 T.L.R. 85
Parkinson v. College of Ambulance ltd. (1925) 2 K.B. 1
Pearce v. Brooks (1865-66) L.R. 1 Ex. 213
(g) Formalities
(i) Writing
(ii) Written evidence
(iii) Signature
(iv) Consent
(v) Doctrine of part performance
Credit Finance Corporation v. Ali Mwakasanga (1959) E.A. 79
void contractsContracts void by statute
Contracts void at common law
Contracts in restraint of trade
Putsman v. Taylor (1927) 1 K.B 741
Attwood v. Lamont (1920) 3 K.B 571
Nordenfelt v. Maxim Nordenfelt Guns and Ammunition (1984) A.C 534
Kores Manufacturing Co. v. Kolok Manufacturing Co. Ltd (1959) Ch.
108
5. Vitiating factors
a)
Duress
Friedberg Seelay v. Klass (1957)
Hassanali Issa & Co. v. Jeraj Produce Shop (1968) HCD 52
Atlee v. Backhouse
b)
Undue influence
5

(i) Special Relationship


Ottoman Bank Co. Ltd. v. Mawani (1965) E.A 464
(ii) No Special Relationship
Williams v. Bayley (1866) L.R. 1 H.L 200
(iii)
Unconsciable Bargains
Lloyds Bank Ltd v. Bundy (1975) Q.B. 326
D & C Builders ltd. v. Rees (1965) 2 QB 617
c)
Mistake
(i) Mistake of law
(ii) Mistake of fact/Operative mistakes:
Common
Couturier v. Hastie (1852) 8 Ex. 40
Bingham v. Bingham
Lessie Anderson v. Vallabdos Khalidas Company
Mutual
Raffles v. Wichelhause (1864) 2 Hurl. & C. 906
Unilateral
Cundy v. Lindsay (1877-78) L.R. 3 App. Cas. 459
Ingram and other v. Little (1961) 1 Q.B. 31
Phillips v. Brooks Ltd. (1919) 2 K.B. 243

Mistakenly signed documents


Gallie v. Lee & Anor (1970)3 All ER 961

Mistake as to quality of subject matter


d)
Misrepresentation
Edgington v. Fitzmaurice (1885) L.R. 20 Ch. D. 459
Andrews v. Mockford (1968) EA 17
With v. Oflanagan (1936) 1 Ch. 575
(i) Innocent Misrepresentation
Oscar Chess Ltd v. Williams (1957) 1 W.L.R. 370
Akerhielm v. De Mare (1959) 3 All ER 485
Derry v. Peek (1889) L.R. 14 App. Cas 337
Whittington v. Seale-Hayne (1900) 82 L.T. 49
(ii) Fraudulent misrepresentation
Bartholomew v. Petronilla
Derry v. Peek (1889) L.R. 14 App. Cas 337
Andrew v. Mockford (1896) 1 Q.B. 372
(iii) Negligent Misrepresentation
Kirimu Estate (UG) Ltd. v. K.G. Korde
Hedley Byrene and Co. ltd. V. Heller and Partners Ltd (1964) AC 465
6. Discharge of contract
a)
Express agreement
b)
Performance
c)
Breach
(i) Actual
(ii) Anticipatory
d)
Impossibility or doctrine of frustration
Paradine v. Jane (1647) Aleyn 26
Taylor v. Caldwell (1863) 3 B. & S. 826
Krell v. Henry (1903) 2 K.B. 740
6

e)

Herne Bay Steamboat Co. v. Hutton (1903) 2 KB 683


Karachi Gas Company v. Isaaq (1965) 1 EA 42
Metropolitan Water Board V. Dick Kerr and Co. ltd (1918) A.C. 119
Tsakiroqlou and Co. Ltd v. Noble Thorl GMBH (1962) A.C. 93
Victoria Industries Ltd V. Lamanbhai Brothers
Frost v. Knight (1872)
Hasham v. Zenab (1960) A.C 316
Avery v. Bowden (1855) 5 E. & B. 714
Poussard v. Speiers & Pond (1875-76) L.R. 1 Q.B.D 410
Operation of law
Panesar v. Popat (1968) EA 17