ELEMENTS OF CONTRACT Lecture 1 Introduction & General Principles Recommended Texts & Statutes: Books: : Ewan MeKendsick, Contract Law, 1990 (Mac Milan) WT. Major, Casebook on Contract Law 1990 (Piman) Chest, Foot & Furmston, Law of Contact, 12" Elion 1901 Buteworhs Treitel, Law of Contract, 8” Edition 1995 (Sweet & Maxwel RAW. Hodgin, Law of Contract in East Afica Boye Meme] Cater Les (eee ed D = Statutes “The Judicature Act Cap. 8-83 ‘The Law of Contract Act ~S8. 283 (Cap. 23) ‘The Magistrates’ Courts Act Cap. 10-S2 Hire Purchase Act—Cap. 507-86 Marine Insurance Act~ Cap. 390-88, 21 ~2 ‘The Government Co te Act Cap. 25 ale of Goods Act - Cap. 31 ~S8.3 ~6 ills of Exchange Act~Cap.27-88.3. 4 Limitation of Actions Aet~ Cap.22, SaWhat is a Contract? “legally binding agreement made between two or more parties" This defition may not however be suitable to “standard form contracts" which allow for litte ot no agreement Under American law the concept of agreements avolded. Under tis lw “a contract is ‘promise or a set of promises forthe breach of which the law gives a remedy or the performance of which the law recognises as a duty’ Former witers and couts placed mich emphasis onthe ned fr 3 meeting of he minds oF consensus adem ote making of contact under the Consensus Theory of Contac, This rence on acl intention was an expression of laissez fare hosophes and beet in ufetred teedom of contact. This itectve approach fo the making of contacts has now been largely abandoned though ths infencs some les. What mates todays nol what meaning party actualy ended to convey by he words or conduct but what nearing a reasonable person inte alher party’ seston woud have undersoe hi to be conveying. Ths known a the process of sbjecv erpetaton Honeverdespe he dssppesrance ofthe sujectie approach he aw equenty eters tothe nen ofthe pris” as ates for esoing ices. This bes not however fro the patie’ acl eons hin may wl be contig — but the pope iténce oe drawn rom the fats 38 whole. When deciding the proper inference the udge has considerable com for manoeuie andi in elt reacting a concsion asd vpn he js ofthe ase a8 much 8 upon any iference inthe stick sense soe 69. Oscar Chose v Willams (1957. LWLE. 370.979 ao 1967 1 ALL ER 325 ‘where it was said that a contract forthe sale of a car would not be void because theparties made a mistake as to ts age, so thatthe buyer pald moce thar he would have done had he known its real age ‘The defendant had approached the plaitffs who were car dealers intending to trade in is used Moris for @ new Hilman Minx. It was agreed between the pates that the ‘amount of discount the defendant would be alowed would depend o7 the age of his Mois. The registration book showed thatthe Marrs had frst been reistered in 1948 and the defendant honestly beloved it was @ 1948 model. The defendant was on this basis given a £200 discount on the new Hilman Minx. It was later discovered that the Mori wa in fac 1999 model and inthe process of e-sale someone had tered he logbook to ead 1848. The plait car dealers brought a su clinng the difeence between the vaue of 1648 model anda 1690 one, I was estnished tat the defendant ot now of he ateraton “he cout held on hes facts thatthe statement about the ae fhe car was not meant tobe an express tr of he contact and that consequent he deferdont was nat in breach ofthe contrac. In any case the plant car dealers coud have easy checked tne age ofthe car having super krowedge abut cars Denning LJ In dei tha no waranty a othe og wa intended dtu tho tat by ‘ference to “an ingen’ by-sander is clear however that ¢ is the courts ‘esponsibility o drow the inference andthe nelignt bystanders mere an aa forthe ue. Wnvae contacts enced? Enforcement of contacts associated wih he moa noon that one sou Keep one's promises. Inthe 18 century contacts came tobe associated wah a arcu ype of poltzaLeconomi tem =the ree market ore eters sya wich grits the ‘eeedom ofthe individualWeare tobe vowed «mechan seals change of goods and servos, hi change having become necessary Besa of bourspeiliaton, th ne some fhe undying supose aw of conc ase on the ow markt etm came o be Seen a8 ne and lading © sie, One cold be made 10 sgn contact an hen be exes, nar ora kat, Changes wee hen made t rte uch persons by dectrng hat contact wih em were vod The fee make ssa assunes ta paris have oughly equal Eargaing power wich is nol mu in many cases monopoles adi omnis. The econo suave pty a sandr for contac wl oir te good rere on a te ot basis. Governments have therefore overtime intervened to protect the weaker partes e.g, price contos, regulations against monopoles and restrictive rade practioes ote Sources of Contract Law in Kenya Prior to the adoption of the English Contract Law in Kenya there were some customary contrat laws based on exchange of goods or barter. Many customary laws did not regard the mere exchange of promises as alvays giving rise to legally enforceable agreement’ In English law on the other hand the mere exchange of promises can give ‘ise to a binding contract. In certain Kenyan communities a contract could even be ‘unmade after it had been completed. Issues of faimess or unfaimess ware seen as very ‘important othe contract Replacement of Afican customary law of contract inthe presindependence days with the Engish Law of Contract was regarded as necessary for development. With the passing ofthe Law of Contract Actin 1960 the question as to whether customary contract law was stil existent became quite important. The Magistrates! Coutts Act makes clear that‘nagitates have no jrdton f0 app cisamary aw of contact ~ See $2. The avestons whether ht setae In Amana fo Chava v Tea Hh Court Ci aged No, 6 180 te ou wae weer a Distt Magia had ston to decke an actin on “ore or blo ‘money (ompenaton orkling person) The cst proves hati eile as ot abl to pay ten te whol can was under abigatono py. The High Court et that the Act wae exhausve and esoe he Dist Magali ot hav ay juidton tent cae under Aan Law of Conte. See 8.212) ate et ‘See S. 2 Law of Contract Act‘The Law of Conirat ls concerned wih the enforcement of promises. The Defendants nrmalyaleged to be under a tbity 10 the Pant because she promised to do tomating and hasnt one or ha ot dane prepay. Nos! promises ar made as pa of bata agreement Lo. agement between wo partes or more which involve undeiakings on bath sides, So for al paca purposes the queston has the Detengant promised? usualy becomes “Have the parties reached agreement?” % In th res relat oor and aceptance the cours have develops set tris o answers queston There mustbe both OFFER & ACCEPTANCE ora contacto come hs existence. The otter Tis can be dened a an indication by word conduct on the part ofthe maker of he ote tat se intends o commit hese legal whut fer negoaton to the terms se proposes ithe eebent othe ofr say yes" nate words tis an indaton by one person of he wings to enero a conta her ole i aceptedby the oer YR ee Ae partyon ditional. We YARN FAS oF Ithas tobe shown that one of the parties made a definite ofr wih the tenon that th ofler wil give se toa contrac if the other party accepts. Qaly the party to whom the offer is made may accept it but tis possible for an offer to be made to tne world at large ‘See Carll v. Carbolio Smoke Ball Co. 1893 10.8. 256 which concemed an ‘advertisement in a newspaper offering a reward of £100 to any person who should be attacked by influenza after using 3 times dally for 3 weeks one of the Defendants’ ‘smoke Balls according to the printed directions supplied with the ball, The Plainti had used the Ballin compliance wth the instructions yet suffered an atack of influenza,He brought an acon to recover the £100 ater the Defendants reused o pay arguing thatthe atverisement wasnt an offer but "mere pf or trade gimmick The cout els that there was a complete contact between’ he pares when the conditions were complied wih, The oer was not made to anyone in price which i comer nal aves ofering rewards, Peormance of condons wat an accepance ofthe ofr Acceptance was sais to be complete afer 9 weeks of usage ofthe smoke ball x 12) making anofer he offeror suendeng he nitive tthe ofleree. Shei esving Ito the ofeee to decid whether there i to bea contacto ot nein situations however, he cours have conchved that general exressions to do busness shouldnt pass the rave othe other pry, hong that he Defendant was “merely supphng fama’ or making an ination oes An offer must be dstngused rom whats refered to as anhvtatono Treat’ To be etlecive the ofr must be definite and must indcate tat the person raking the ofer has made up he indo ener ina contractual lationship wh the person to wham she is making he ofr who has a chai ether to acept or reject thee tis ther pason asked came an ugh an vation ea which oes oth se to a binding agreement. “fhe bargain may lead to a contract - See Harvey & Anor v. acer & Oars 1899 AC. 882 (C). “The Appotans had telegraphed the Respondents ‘wil you sell Bumper Hall Pen (BHP)? Telegraph Lowest Cash Pre’. The Respondents telegaphed in reply “Lowest price for BH.P, £900" and then the Appelants telegraphed “we ages to buy BHP. for £900 ased by you, Please send us your le ded inorder that we may get cary possession’, but received no reply. The Appel ten brought an acton for specie performance.Hela: that there was no contract, The fal elegram was not the acceptance ofan ofer to se for none had been made. It was itsel! an offer to buy. the acceptance to which must be expressed and could not be implied p> Communication ofthe Off * ‘An offer is said to be ineffective and therefore incapable of acceptance unless Communicated tothe offeree. The main application of his rule by the courts is in reward cases where the general view is that a person cannot claim a reward even though he performs the act for which the eward was offered if she was unaware a the tine that there was a reward (?relic of the consensus theory) ‘See also Tinn v. Hoffmann & Co. (1873) 29 LT. 271 where it was helé that an offer to sell 1200 tons of ron isnot accepted by a reply asking for 800 tons. Acceptance must be unqualified for it to bring about a binding contract In an ivitation to teat if the person invited makes an offer which is accepted by the one invting then we have a binding contract. - Auction Sales “The questions are who is making the offer and whether the person who becomes the highest bidder is entited to have the item knocked down to him, An invitation to the public to come and buy goods on auction is normally treated as an invitation to treat ‘The auctioneer is not making the offer itis the bidder who makes the offer to the auctioneer. The auctioneer is a liberty to reject any offer even that ofthe highest bidder. ‘A binding contract arises when the auctioneer communicates his acceptance of an offer by knocking down the item tothe bidder. Under $.14 ofthe Auctioneers’ Act (Cap. 526) the advertisement inviting people to come to an auction must indicate whether the property being auctioned is subject to reserveprioe or not. If there is no reserve price then it shall not be lawl forthe seller or his agents to make any bids. If there is a reserve price then they may make one bid only. In Warlow v Harrison (1858) 120 ER. 925 the Defendant adverse fo sale by auction a horse named Janet Pride. ‘There was no reserve pice. The Plain made a bid at 60 guineas but the auctioneer knocked down the horse othe owner who out bid him by one sjuinea. The Paint brought an action claiming breach of contact as hewas the highest bona ide bidder. Held: No binding contact as auctioneer was at Uber to refuse o jet any of. However the Plant would be entiled to recover onan action fr decet against owner and auctioneer asthe ovner was not entitled tobi xe isp 5 QOH nD Counter oft Hs ‘A counteroffer destoys the orignal ofer. In Hyde v. Wrench (1840) 49 ER. 132. The Defendant on Sth June agreed to sel his farm for £1,000. The Pani said he was, wing t0 buy for £950. On 27th June the Defendant wrote back saying he was not wing 1 sel for £950. On 23! June the Plaintif wrote back purporting to accept the cniginal offer to buy at £1,000. The Defendant refused to sell and the Plant brought an auction seeking an order compeling the Defendant o specifcally perfom the contact of sale Held: There was no binding contract because the original offer was destroyed and was not open any mare after the Paint made his counter ffrto buy at £950, eauest or Further foiaton: This does not amount toa counteroffer and so does not destroy the orinal offer. In Stevenson v. Maclean (1860) 5.0.8.0. 246 the Defendant made an offer on a Saturday to sea quantty of Ion at Shs. 40 per ton. The offer was to remain open ti the folowing Monday. Early on Monday morning the Plaintiff sent a telegram asking theDefendant to incicate whether he would deliver he oad of ore over a perod af 2 months and it not the longest limit he would give. The Defendant id not reply to this telegram but instead sold the ore to another party on the same day. At 1.30 am. the Plant telegramed the Defendant accepting the offer and asking the Defendant to deliver the core, The Defendant refused to deliver and the Plain brought an acton for breach of contract. The Defendant argued thatthe fist telegram by the Plant was a counter offer but the court rejected this argument hoting that it was a mere request for futher Information, There was therefore a binding contract and the Defendant was lable for breach of contract Deis A Goer ‘See also Oris Elevator Co_v. Singh 1967 EA, ED) In self service stores the display of goods does not amount to an offer itis merely an invitation to teat. The offer fs made by the customer when he brings the items to the counter and tenders the price for them to the cashier. The contract of sale ls concluded wien the cashier accepts the money. ~ Pharmaceutical Society of Great Britain v Boots Cash Chemists std (1953) 1 ALL E.R 482 where it was held that the sale did not take place unti the medicine was brought to the cashier and therefore the Defendant was not gully as. supervision by a {qualified pharmacist was provided at this point. Te Teese See also Wilkie v. London Passenger Transport Board (1947) 1 ALL E.R. 258 on the positon regarding public transport. When a bus declares that its traveling through a Certain route ths isnot an offer but an invitation to teat. The passenger makes the offer when she boards the bus and the bus company “impliedly” accepts when the bus starts Ce ‘moving inthe partes drecton, ae Ie