Contract II in A Shell

A. Contents of a Contract
a. Terms
This refers to the words or statements that actually form part and parcel of the contract, the
promises, and the undertakings that parties make to each. These are the described duties and
obligations that each party assumes under the agreement. See Kholomana v Adam Green t/a
Euro Tech Workshop Commercial case 255 of 2017.

Kholomana v Adam Green t/a Euro Tech Workshop

The Plaintiff had taken his car to the defendant’s workshop who diagnosed it with a
gearbox problem. However, while at the workshop, the car developed other faults
which were alleged to be due to the defendant’s negligence, as determined by a
third-party car workshop – Stansfield Motors. The defendant used the exemption
clause on the service card as defence from liability. There was no evidence that the
claimant ever signed the service card or that the exemption clause was brought to his
attention. The judge thus used the claimant’s argument of res Ipsa loquitor for the
unexplained damages and found for the claimant. The case also defined the meaning
of a term in a contract and breaches of a contract.

Upon agreement on the terms, the contract becomes enforceable and any contravention of the
terms becomes a breach of the contract. Thom v Phekani & Others Civil Cause 509 of 2018.

Types of Terms
i. Express and Implied Terms
Express terms are explicitly provided for in the contract and need not be inferred into the
contract. This is also dependent on whether the contract is:
- Written. What is written forms the terms of the contract and once signed, the contract
becomes legally binding for the parties. See Joseph Chidanti Malunga v Fintech
Consultants MSCA civil appeal 60 of 2008; Simbo Projects v Issa Minali t/a Shammir
Transport Commercial Cause 236 of 2017; K.S Kamwendo v Bata Shoe Company Civil
Cause 2380 of 2003; Scholer v Wickman [1973] 2 All ER

Simbo Projects v Issa Binali t/a Shammir Transport

The defendant had hired the claimant’s trailer for use at an agreed monthly amount.
At some point, however, the defendant stopped paying the hiring fees and the money
accumulated. The claimant thus detained the defendant’s truck and to recover, the
defendant signed an agreement, acknowledging the debt, where he would pay the
prior fees in six monthly instalments. The defendant, however, continued using the
trailer. The defendant did not honor the terms of the agreement to pay back the
accumulated amounts and defaulted payments further. He even changed the routes
of his truck. The court found that the defendant had breached the clear and written
terms of the contract and found for the claimant, ordering the defendant to pay.
 Schuler v Wickman

- Oral. These are statements made during negotiations prior to the conclusion of the
contract. The problem arises where parties agree that such statements were made but
disagree on whether they were terms of the contract or just mere representation
[statements which may have encouraged one party to enter into the contract but is not
itself part of the contract] or promise.
Determining this is dependent on the evidence of the parties to determine whether or
not something forms an express term in an oral or partly oral contract. Courts will look at
the time and the manner after the statements were agreed upon. See Kapelemera v
Duwe Motors Civil Cause 1278 of 1998; Karim & Sons v AMI Rennie Press 12 MLR 91; Esso
Petroleum Company Ltd v Mardon [1976] 2 All ER

Kapelemera v Duwe Motors

The plaintiff bought a motor vehicle from the defendant who was a dealer in
second-hand cars. The parties had agreed to the sale of another car, but due to
the delay by the plaintiff in completing her payment, the vehicle was sold to
another. However, the defendant had already pocketed a substantial amount
of money on the first car. They decided the plaintiff would get another car at a
lower price. The contract of sale had been conducted orally and a delivery note
was brought to the plaintiff at the last stage. Among the discussions, the
defendant had vehemently assured the plaintiff that the car was in good
condition, refusing an examination by the plaintiff’s mechanic in the process.
10 days after delivery, the car could not move and so the plaintiff took back to
the defendant and sued for breach of contract.
The defendant brought the exclusion clause on the delivery note as a defense.
The court, however, denied this defense. It said the note was a mere delivery
note and since it had been introduced so late in the negotiations, the plaintiff
did right treating it as so. The court found the defendant in breach of the
contract and ordered damages.

Karim & Sons v AMI Rennie

The plaintiffs brought actions against the defendants for the value of goods allegedly
lost due to the negligence of the defendant’s agents. The plaintiffs employed the
defendants, who were clearing and forwarding agents, to import goods into Malawi.
The parties had dealt with each other on six previous occasions in the same manner.
Once the goods had been imported, the defendants issued an invoice to the plaintiff
on which were printed the words: “All goods handled subject to the Standard
Conditions of Business of the Clearing and Forwarding Agents Association of
Malawi…” The conditions also referred to excluding the defendants’ liability to its
customers for loss occasioned by the agents.
 The court found for the defendants. The court found that the plaintiffs had been given
adequate notice of the conditions since they knew or ought to have known of their
existence and their action would therefore fail.

Implied Terms are inferred into the contract by the court which looks at the conduct,
language, and circumstance that must show that the parties intended to enter into a
contract. There are times when terms are implied in a contract:
- By virtue of trade or custom usage . This looks at the nature of the contract, the type of
transaction governed by the contract. Even if the terms are not express, the terms of the
contract will come in because of the virtue of the transaction. See Speedy’s Ltd v Finance
Bank of Malawi Ltd Commercial Cause 49 of 2007; Kholomana v Adam Green

- By the Court. In this case, the courts look at the contracts and implies the terms into the
contract to make the contract reasonable and actionable for both parties. See Reigate v
Union Manufacturing Co [1918-19] All ER; Hahn Spearhead Holdings Ltd & Others 13 MLR
143

- Consistent previous business dealings. This implies terms of the previous business
encounters between the parties, claiming that since the previous dealings included the
terms, the terms must be implied in the current contract, ensuring consistency in the
business. See Securicor (Malawi) Ltd v Central Poultry Ltd [1995] 1 MLR.

- Implied by Statute. This is where the term is demanded by statute to be part of the
contract where the parties cannot contract it out of the agreement. In short, where the
law says it must be a term, it must be a term. See Section 31 of the Consumer Protection
Act; section 12-17 of the Sale of Goods Act; section 37 of the Electronic Transaction and
Cyber Security Act.

b. Conditions
- This is the fundamental term that speaks to the heart of the contract. It is an obligation
which goes directly to the substance of the contract, or is so essential to its very nature
that its non-performance may be considered by the other party as a substantial failure to
perform the contract at all. The breach of conditions of entitles the wronged party to
damages and if it is sufficiently serious so as to defeat the object of the contact, it justifies
the injured party in renouncing the contract altogether. See Chance’s Principles of
Mercantile Law (revised edition).
- warranty is a supporting or minor term that helps bridging the contract together. To
distinguish conditions from a warranty, whereas the breach of a warranty entitles the
wronged party to mere damages. See Kambalame v ESCOM Civil Cause 7 of 2006; ICL
Malawi Ltd v Attorney General Commercial Case 86 of 2014.
To determine whether a term is a condition or a warranty, the wording of the term is key. The
Courts must weigh how essential the term must have been to the contract. See Cheshire which
said:
 “The court must look at the circumstances of the case and determine how essential the term
was. The test of essentiality is whether it appears from the general nature of the contract that
the promise is important to the other party that he or she would not enter into the contract
unless he or she was assured of the strict and substantial performance of the term.”

Detour: Representation
Representation does not form part of the contract. These are statements of facts made by
one party to the contract to the other which, though not forming part of the contract,
induces the other party to enter into the contract. See Kazembe v Goodnews Estate Agents
& Civil cause 2583 of 2002. The representation must be material with the contract.

The Extrinsic Evidence Rule

The general rule, as a starting point, is that the document speaks for itself. extrinsic (Parol) evidence
cannot change the express terms laid down in that document. Extrinsic evidence includes oral
statements, and written material such as draft contracts or letters, whether relating to pre-contract
negotiations or the parties’ post-contractual behavior. The rule only prevents use of extrinsic
evidence concerning the terms of a contract; where one side is seeking to prove whether or not a
contract is valid (for example, by claiming that there was no consideration, or that there was
misrepresentation), extrinsic evidence may be used even though the actual contract has been put in
writing. However, there are exceptions to this rule:
- Show waiver/variation. The court will allow extrinsic evidence where there was a waiver
or variation to the terms of the contract. Under this head, one party can expressly or
impliedly through conduct waive their rights or show that they were not to enforce
rights under a contract. Where a waiver and/or variation [where the contract was
amended] is proved, extrinsic evidence can be allowed in contract disputes. See Abdullah
v Steelworks Ltd 12 MLR 419. Under variation, the focus is not to look at the evidence as
outside the contract, but look at the evidence to prove that the parties moved to a
different contract or amendment altogether. This exception is subject to: agreement
[does the agreement allow for the amendments] and law [where the law demands that
oral variations or amendments are not allowed]. See NBS Bank v BP Malawi Ltd
Commercial Cause 12 of 2007.

- Collateral Agreements/warranties. These are agreements subsidiary to the main contract

that depend on or emanate from the main contract. There are two conditions to be met
for a collateral agreement to be used as an exception. Firstly, the collateral agreement to
be valid must have all the necessary requirements for a contract just like the main
contract. In most times, the consideration for a collateral agreement is entering into the
main contract itself. The second condition is that the collateral agreement must not be
contradictory to the main contract. See Chidanti Malunga Case

- Non Est Factum – “it is not my deed”. Under this head, the document a party signed is
radically different from what you intended to sign. This opens up room for extrinsic
evidence to prove that what the party signed is not the actual document the party
wanted to sign. Two conditions must be proven; (a) show that the two contracts are very
 different even in their legal effects; (b) show that you took all reasonable care and were
not careless. See Engen Malawi v Kachingwe t/a Michiru Service Center Commercial
Cause 260 of 2015; Commercial Bank of Malawi v Phiri 11 MLR 4

- Showing Misrepresentation, fraud, and undue influence. See Curtis v Chemical Cleaning
and Dying [1951] 1 All ER; GS Sadyalunda t/a chanyumbu trading v Standard Bank
Commercial Cause 184 of 2008

- Show omitted or ambiguous terms.

Enforcement of A Contract
What is enforcement
Recall that the key element of any contract is that it should be enforceable. See Manjolo and
Mbuluma v Blantyre City Council Civil Cause 140 of 2018. Enforcement therefore comes when a party
fails to do their obligations that they made under the contract. Enforcement, therefore, is the legal
mechanism with which a party to a contract can have their rights under a contract upheld or hold the
party to a promise if they fail or refuse to carry it out.

Manjolo and Mbuluma v Blantyre City Council

The Claimants entered into contracts with the defendant to provide Traffic Management
Services at bus terminals in Limbe and Blantyre. The 1st Claimant was to manage Lot 1 at Limbe
Market and Limbe bus terminal while the 2nd was to manage Mibawa, Blantyre and terminals
opposite Blantyre market. However, these premises were under the management of the
Minibus Owners Association of Malawi who refused to evacuate and thus the claimants failed to
fulfil their contractual obligations. The claimants sought damages for breach of contracts due to
the defendant's failure to fulfil their obligations by removing MOAM.

Holding in favor of the defendant, Blantyre City Council, the court dismissed the claims made by
the claimants for damages for breach of contract. The reasons for this holding include:

1. The claimants' claim erroneously excluded the amounts that would have been payable to
the Blantyre City Council. The court noted that the claimants were supposed to pay money
to the Council by buying receipts for parking, and the commission payable to the claimants
would have been reduced by the provision of personnel, facilities, equipment, and
discharging various obligations under the contract.
2. The court found that the claimant's claims were not supported by the contract and that
the amounts claimed were not what they may have reasonably lost through the actions of
MOAM. The court considered the insurance clause in the contract and concluded that the
claims made by the claimants were an abuse of the court process and should be dismissed.
3. The court also noted that the defendant failed to provide evidence to support the claim
that the contract was frustrated. Additionally, the court found that the claimants did not
prove that the defendant breached the terms of the contract by failing to remove MOAM
from the premises.

Enforcement can be done in two ways:

- Legal suits –
- Self-help – where one` party does not take the other to court but takes the matter into
their own hands. However, whatever action is taken must be legal.
-
Before one part institutes enforcement proceedings, two things must be considered:
- The order of performance – when one party to the contract defaults their obligation, the
other party must check if Party A’s failure is because of Party B’s failure; that is the
claimant party must check if any of their actions might have caused the defendant party’s
failure to fulfil their obligation. See Total Oil (Great Britain) v Thomson Garage [1971] 3 All
ER.
 Total Oil (Great Britain) v Thompson Garages
The claimant leased a garage to the defendant, a dealer. The lease contained a clause
whereby the dealer agreed to take all his supplies from the oil company and that payment
on the loads would be ‘cash on delivery.’ The lease required the dealer to purchase all fuel
from the oil company, with payment due "cash on delivery." However, the oil company
sought to change the terms, requiring the dealer to pay by banker's draft before receiving
fuel. The dealer argued that this constituted a repudiation of the original contract, and they
began purchasing fuel from another supplier. The oil company then offered to revert to the
original terms, but the dealer refused. The oil company sued the dealer, seeking an
injunction to prevent them from buying fuel elsewhere.
It was held that the new stipulation regarding payment amounted to a refusal of the
contract, and the defendant was entitled to accept that refusal and obtain supplies
elsewhere. The lease and the oil agreement were one transaction however and could thus
not be separated. Lord Denning MR said:
“So long as they were in breach themselves – so long as they were wrongly insisting on
the new stipulation-they could not insist on the tie. But I think they had a locus
poenitentiae. Seeing that the lease was in existence, they were, I think, entitled to put
themselves right. They were entitled to say: 'We realize we were wrong before; now we
are prepared to adhere to the terms of the supply on payment and the like; and,
therefore, the tie ought to hold. Once the lease is held to be still in existence, there is no
alternative to that course. The oil company must do its part. The dealer must do his. The
dealer has his remedy in damages for any previous breaches by the oil company.”

There are three types of order of performance:

ii. Dependent Obligations. These are contracts where party A’s performance is
dependent on party B’s performance such that party A cannot fulfil its
obligations unless party B does its own. Should you want to claim under this
type, the claimant must show that they did their part.
iii. Concurrent order of performance. These arise at the same (simultaneously)
such that one party’s obligations can’t be separated from the others’
obligations. The claimant must simply show that they were ready to perform
their obligations should they have done the defendant's own.
iv. Independent order of performance. These are obligations whose
performance is completely independent of the other party’s obligations. One
party need not wait for the other party to carry out their obligation

- Tender of performance. The question asked should be did the other party tender the
performance? A tender is an offer or attempt to perform one’s obligation under the
contract. See Startup & Another v MacDonald [1843] AC. In order to rely on a plea of
tender, the defendant must show that they made an unconditional offer to perform your
promise in terms of your contract but the other refused. See Dixon v Clark [1848] 136 ER;
 Poole v Tumbridge [1837] ER 738. Under the law, an unconditional offer lacks any
additional conditions to the obligations.
Startup & Another v MacDonald [1843]
The parties contracted for the sale of 10 tons of linseed oil to be delivered “within the
last 14 days of March.” The claimant delivered the oil at 8:30 pm on march 31 and the
defendant refused to accept delivery. The defendant subsequently refused to pay. The
claimant thus sued for a breach in the contract.
The court held that the tender of performance was equivalent to performance and the
claimant was entitled to damages for non-acceptance. The judge further stated that the
tender must be made at a reasonable hour and what is reasonable is a question of fact.

The significance of that case is that if a party is unable to complete its contractual
obligations without the co-operation of the other party, then it may make a “tender of
performance” which the other party can accept or reject. If a tender of performance is
rejected, then the party who has tried to complete their contractual obligations will be
discharged from further liability.

Excuses for non-performance

Generally, in contract law, failure to perform contractual obligations will amount to a breach of the
contract. However, other times, such failures are excusable. These excuses for non-performance are
also referred to contractual defenses.

- Agreement/Waiver. See Notes on the exceptions of the extrinsic evidence rule on

waiver. With regards to agreement, the parties may have made some agreement or
arrangement after the contract was concluded which permits one party not to perform
or perform those obligations differently. Chingwalu and Others v People’s Trading
Center Civil Cause 1408 of 1997;

Abdullah v Steelworks
The plaintiff was employed as an accountant by the defendant with his contract
stipulating that either party could terminate the contract by giving 3 months’ notice in
writing and that certain terminal benefits would then be payable. Per the claimant’s
suggestion to lay off some senior officers, which he was too, the defendant terminated
the claimant’s contract and paid him his terminal benefits during a period of financial
trouble. The claimant now sought to recover damages for his outstanding benefits
which were not paid yet.
The High Court dismissed the claim and quoted WJ Alan v El Nasr:
If a party to a contract has by his conduct induced the other party to believe
that he will not insist on his legal rights under the contract, the party who has
waived his right cannot afterwards insist on them if the other party acted on
that belief differently from the way in which he would otherwise have acted.
If a party to a contract has made a representation that they are not going to
insist on their legal right, they are assumed to have waived their right on the
contract.
 Chingwalu v PTC
The plaintiffs were employees of the defendant. They went on strike demanding a
better pay package. The defendant then issued a notification for the plaintiffs to return
to work and the plaintiffs duly obliged. However, the defendant never allowed them
back in their premises. The plaintiffs were later on dismissed with their employment
contracts dismissed on the ground that the plaintiffs failed to report for work after
having been notified to return to work. The plaintiffs now sought damages for unfair
dismissal. Holding for plaintiffs’ unfair dismissal, the court said:
“My understanding is that the doctrine of waiver bars a person from insisting
on his strict legal rights where he made a promise and leads another party to
think that he would not pursue a certain course of action. At law the person
making the undertaking would be barred from resiling from his assurance.”

- Failure of a condition. This can occur in twofold:

o This is tied to the order of performance, that is, if the order is dependent or
concurrent and the obligation is not fulfilled, that could equal an excuse.
o Conditions precedent/subsequent. A condition precedent is an event that one
party must do before a specific contract is considered to be in effect. Conversely,
a condition subsequent refers to a defined event which terminates a proposition
or a contractual obligation. See Pym v Campbell

Pym v Campbell
Pym and Campbell signed a written agreement wherein Campbell agreed to
purchase 3/8 of the profits to accrue from Pym’s new invention. The invention
did receive the necessary approval from Campbell’s engineers and thus he
refused to pay. Pym sued for breach of contract. However, Campbell claimed
that the agreement was conditional upon the approval of the invention, using
oral evidence of party negotiations.
The issue was whether the extrinsic oral evidence was admissible before the
Court and able to alter the construction of said written contract and/or prove it
was unenforceable.
The court held that the general rule on extrinsic evidence was conclusive and
couldn’t be varied. However, in this case, it would vary since the evidence did
not concern the terms of the contract but rather if there was any agreement at
all. On the facts, the court held that the Parol evidence was overwhelming and
the purchase agreement was subject to the invention being approved by the
engineers. No approval meant no agreement and thus Campbell was not
obliged to pay.

- Illegality. This is guided by the Latin maxim “Ex Turpi Causa Non Oritur Actio” and can
occur in twofold:
o Contracting to do an illegal act
 o The nature of the contract is prohibited. This materializes where precepts of the
law have not been followed during the formation of the contract. See the case of
Gestetner Malawi v MRA Civil Cause 115 of 2008; 13 SR Nicholas v Hassani MLR
415; Tinsley v Milligan [1994] 1 AC; Patel v Mirza [2016] UKSC 42; Winga v
Southern Bottlers [1997] 1 MLR

SR Nicholas V Husseni
The appellant appealed the damages that had been awarded to the plaintiff in
the lower court, arguing that the contract had been formed out of an illegality.
The Judge quoted St John Shipping Cor v Joseph Rank saying:
There are two general principles. The first is that a contract which is entered
into with the object of committing an illegal act is unenforceable. The
application of this principle depends on proof of the intent, at the time the
contract was made, to break the law; if the intent is mutual the contract is
not enforceable at all; and if unilateral, it is unenforceable at the suit of the
party who is proved to have it… The second principle is that the court will not
enforce a contract which is expressly or impliedly prohibited by statute. If the
contract is of this class, it does not matter what the intent of the parties is; if
the statute prohibits the contract, it is unenforceable whether the parties
meant to break the law or not. A significant distinction between the two is
this. In the former class, one has only to look and see what acts the statute
prohibits; it does not matter whether or not it prohibits a contract; if a
contract is deliberately made to do a prohibited act, that contract will be
unenforceable. In the latter class, one has to consider not what acts the
statute prohibits; but what contracts it prohibits, ... if the parties enter into a
prohibited contract that contract is unenforceable.”

- Public Policy. This is an elusive concept as it keeps changing and cannot be objectively
ascertained. However, this is a state’s basic notion of morality and justice. This can also
be regarded as a breach of the rule of law regarded as essential in the legal order of the
state in which enforcement is sought or a breach of a right recognized as being
fundamental within a legal order.

Any contract which contravenes a state’s idea of right/wrong should not be enforced.
Examples that are against public policy include:
o Contracts restricting marriage
o Contracts of restraint of trade
o Contracts ousting the courts' jurisdiction. See Lee v Showmen’s Guild of Great
Britain [1952] 1 All ER
DISCHARGE OF A CONTRACT

This is when the contract ceases to exist and any contract obligations come to an end. This can be
accomplished in several ways:

A. Discharge By Performance
Under this head, the contract ends because the parties fulfil their obligations completely. The
contract thus comes to its natural death. However, three questions must be answered where
a party:
- Does it all but wrongly/most. The attempt to answer this question is substantial
performance – a party completes the work under the contract but there are minor
defects of the work in the contract. Here, the general rule is that a person should be
entitled to full payment minus the cost of fixing the defect or omission.

What amounts to substantial performance differs from case to case and depends on the
circumstances of the case. However, the courts consider the following two things:
o The nature of the defect and how much it affects the purpose of the contract.
This concerns the question of whether the defect affects a condition or warranty.
If it concerns the conditions, there is a breach of the contract. If it affects the
warranty, the substantial performance is regarded.
o Proportion between the cost of repair and what the contract was for. See Bolton
v Mahadeva [1972] 2 All ER; Horning v Isaacs [1952] 2 All ER.
Note that substantial performance can be contracted out of, that is, the parties can
agree to either consider it or not and whether performance must be complete or not.

- Does some but not all

Quantum meruit…
 Benefit
 Accepted benefit
See the cases of Cutter v Powell; Sumpter v Hodges; ICL Malawi v A.G;
- Does it late
Under this head, the discussion centres on how the law treats late performances in a
contract. To answer how late performances are treated, the question is if time was of the
essence in the contract. The general rule, under common law, was that time was
important and a breach of the time factor was a breach of condition and not a warranty.
The remedy herein was damages. On the other hand, equity made time not so essential
considering the remedies that are offered by equity. This forced the common law
position to change and became “time is not always of the essence unless the parties make
it so.”

At this turn, it is important to note the times when the courts rule that time is of the
essence:
 When it is expressly provided in the contract. The time must be a condition and
not a warranty. The effects of late delivery must also be looked at.
 The nature of the contract
  When notice is given. The notice must stipulate the new time of performance and
the consequences where that time condition is breached.
See Mahata v Malawi Housing Corporation Civil Case 628 of 2005; Lorgart and
Another v Finance Bank of Malawi Civil 932 of 2002; Samarenko v Dawn Hill House
[2012] 2 All ER

B. FRUSTRATION
Frustration is the change in circumstances which renders the contract
(a) physically or commercially impossible to be fulfilled. See Tatum v Gamboa [1939] 1
KB, or
(b) transforms the contract into a radically different one than the parties intended it
to be. See Krell v Henry [1903] 2 KB; Sir Lindsay Parkinson and Co v Works and
Public Buildings [1950] 1 All ER
Yiannakis v Tione Enterprises [1993] (16) MLR; Taylor and Anor v Caldwell & Anor
[1863] 122 ER

To prove frustration, two points are necessary:

- that the frustrating event was unforeseeable; and

under this head, the event was not reasonably contemplated by one party. Jackson v
The Union Marine Insurance Company [1874] LR 10 CP; Metropo Waterboard v Dick
Kerr and Co [1917] AC 119

- no fault of the parties, that is to say, the event must not be caused by one of the parties.
See J. Lauritzen v Uijsmuller BV (the super servant two) [1990]