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These Lecture notes have been prepared by: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Prelude This work presents . BUSINESS LAW (BLAW ) – Lecture Notes law and other social .. Eastern Europe in the Age of Globalisation?, lesforgesdessalles.info pdf. of Ontario. All rights reserved. Business Law Notes Business Law versus Business Ethics. Sources of Law: The Constitution, Legislation, and the Courts .

Parker v. Communication of revocation: Republic at pg. Insurance contract. The ad is in the following words:

Therefore it is a valid agreement. The agreement must be made between the parties standing in near relations to each other and There must be nature. Charitable subscription: Where the promisee on the strength of promise makes commitments i.. Therefore all agreements are not contracts..

There is a general rule of law is that only the parties to a contract can sue. Obviously an agreement is a pre requisite i.

In this case. The amount could be recovered.. Kedernath vs Ghouri Mohammed According to section The secretary.. As per section 2 h of Indian contract Act. An agreement clubbed with enforceability by law and several other features i. In other words. As per section 2 e of Indian contract act. Or A stranger to a contract cannot sue. Marriage settlements. Privity of contract means relationship subsisting between the parties who have entered into contractual obligations.

Business Law Notes

Ltd The following are the exceptions to the rule that a stranger to a contract cannot sue: Daropti vs Jaspat Rai A trust: There are two consequences of doctrine of privity of contract they are follows: When an agreement is made in connection of marriage settlements. The Dunlop Company could not maintain the suit as it was a stranger to the contract.

This sort of agreement creates a trust in favour of the wife and can be enforced. Or A stranger to a contract can sue. Dunlop Pneumatic Tyre Co. Gandy vs Gandy A husband who was separated from his wife executed a separation deed by which he promised to pay to the trustees all expenses for the maintenance of his wife. Contracts may be classified according to their a validity. Acknowledgement or Estoppel: The person. Covenants running with the land: In case of transfer of immovable property.

Define contract? Explain its kinds of contracts? In such a case an assignee becomes entitled to sue and enforce the rights which are assigned to him. According to section 2 h of the Indian contract act. Contracts entered into through an agent: The principal enforce the contract entered into by his agent provided the agent act within the scope of his authority and in the name of the principal.

A valid contract: A valid contract is an agreement which is binding and enforceable. Assignment of contract: Assignment means voluntary transfer of the rights by a person to another. An agreement becomes a contract when all the essential elements i. A quasi-contract is acts which are created by law. Implied contract: An implied contract is one in which the evidence of the agreement is shown by acts and conduct of the parties.

Undue influence. A void contract: A void contract is really not a contract at all. Misrepresentation or fraud. An unenforceable contract: An unenforceable contract is one which cannot be enforced in a court of law because of some technical defect such as absence of writing or where the remedy has been barred by lapses of time.

Executed contract: Express contract: An express contract is one. A voidable contract: An agreement which is enforceable by law at the option of one or more parties thereto.

It is not intentionally created by parties but it is imposed by law.. It does not have any essential elements of a valid contract. An executory contract is one in which the parties have yet to perform their obligations. A wagering agreement. All illegal contracts are void but all void contracts are not illegal ex:. This happens when the essentials elements of a free consent is missing. Illegal contracts: Some agreements are illegal in themselves ex:.

In truth Quasi-contract is not a contract at all. When the consent of a party to a contract is said to be not free. Executory contract: An executed contract is one in which both the parties have performed their respective obligation.

In other words where the offer or acceptance of any promise made otherwise then in words. Unilateral or one-sided contract: Bilateral contract or Two-sided contract: It is a contract in which the obligations on the part of both the parties to the contract are outstanding at the time of the formation of the contract.

Explain the legal rules regarding agreement by a minor? According to section 3. His agreement cannot be ratified by him an attaining the age of majority: An agreement by minor is void-ab-initio and therefore ratification by minor is not allowed.

An agreement by minor is absolutely void: Where a minor is charged with obligations and the other contracting party seeks to enforce these obligations against minor. Mohiri Bibi vs Dharmodas Ghose The mortgage was void and.

Minor can always plead minority: The law becomes the guardian of minors to protect their rights because their mental capacity is not well developed. Under section 64 and 65 of the act. He can be a promisee or a Beneficiary: Any agreement which is some benefit to the minor and under which he is required to bear no obligation is valid. A minor mortgaged his house in favour of money-lender to secure a loan of Rs. Leslie vs Shiell There is a fundamental principal in law i.

If he has received any benefit under a void agreement. Because section 64 and It is so because the act of the agent is the act of the principal and therefore. There can be no specific performance of the agreement entered into by him as they are voidab-initio: A contract entered into. Minor does not personally liable for the supply of necessaries. Person of unsound mind Ans: According to section 12 of the Indian contract Act.

A minor is liable in tort A civil wrong: Minors are liable for negligence causing injury or damage to the property that does not belongs to them.. Unsoundness may arise from idiocy. He can be an agent: A minor can be an agent. Ability to understand the contract at the time of making. The necessaries such as food. Soundness of mind of a person depends on two facts: He cannot enter into a contract of partnership: A minor being incompetent to contract but be a partner of a partnership firm.

A minor is liable for necessaries: The parents can held liable for contracts for their minor children only when they are acting as agent. Ability to form a rational judgment about the effect of the contract on his interest. Nash vs Imran A person who is usually of sound mind and occasionally of unsound mind cannot contract when he is of unsound mind.. Necessaries also includes: Necessary goods are not restricted to articles which are required to maintain a bare existence.

The waistcoats were not necessaries. The things supplied must be necessaries of life i.. The things supplied must be suited to his condition in life i. Minor does not personally liable for the supply of necessaries.. According to the section 68 of the Act.. The following persons are disqualified from contracting. But the minor is not personally liable.

As regards contracts which are not for the supply of necessaries but which are undoubtedly beneficial to the minor. Contract by disqualified person. It is only his estate which is liable for loans. These include education. Loans incurred to obtain necessaries: A loan taken by a minor to obtain necessaries also binds him and is recoverable by the lender as if he himself had supplied the necessaries.

Roberts vs Gray Besides minors and persons of unsound mind. Or Person expressly disqualified other person. Certain services rendered to a minor have been held to be necessaries. The consideration and objects are unlawful in the following cases: An act is forbidden by law if. Under what circumstances is the object or consideration of a contract deemed unlawful?

Illustrate with examples? An agreement will not be enforceable if its objects or the consideration are unlawful. If it is forbidden by law: If the object or the consideration of an agreement is forbidden by law. According to section. In such a case object or the consideration is deemed to be unlawful.

If it involves or implies injury to the person or property of another: If the object or consideration of an agreement is to injure the person or property of another is void. The agreement is void. If it is defeats the provision of any law: If the object or consideration of an agreement is of such a nature that. An agreement between husband and wife to live separately is invalid as being opposed to Hindu law.

If it is fraudulent: An agreement. Ram Saroop vs Bansi Mandar If the court regards it as immoral: Pearce vs Brooks A firm of coach-builders hired out a carriage to a prostitute.

In case of default. The coach-builders could not recover the hire as the agreement was unlawful. The word immoral includes sexual immorality. Hence its object or consideration is unlawful. In such a case the court will not enforce the agreements. This agreement is based upon the two reasons: An agreement whose object or consideration is opposed to public policy is void.

An agreement is said to be opposed to public policy when it is harmful to the public welfare. Where the court regards it as opposed to public policy: An agreement whose consideration or object is such a nature that opposed to public policy. Thus it becomes void and it deemed to be unlawful. Agreements of trading with enemy: An agreement made with an alien enemy at the time of war is illegal on the ground of public policy.

Some of those agreements which are or which have been held to be. Where the firm was compelled to pay damages for a published libel. He can do so only after he receives a license from the central government. Agreement to commit a crime: An agreement is to commit a crime is opposed to public policy and it is void.

Contracts of this nature are void because its object is to defeat the provision of the Indian Limitation act. Discuss the doctrine of public policy? Give examples of agreement which are opposed to public policy?

Agreements in restraint of legal proceedings: An agreement in restraint of legal proceeding is the one by which any party thereto is restricted absolutely from enforcing his right under a contract through a court.

Agreement restricting personal liberty: Agreement which unduly restricts the personal freedom of the parties is void and against to public policy. Agreement in restraint of marriage: Every agreement in restraint of marriage of any person. This is because the law regards marriage and marriage status as the right of every individual. The agreement was against to public policy and also illegal.

It may take any of the following forms: Agreement in restraint of trade: Every agreement by which any one is restrained from exercising a lawful profession or trade or business of nay kind.

Agreements which interfere with administration of justice: Where the consideration or object of an agreement of which is to interfere with the administration of justice is unlawful.

Agreements in restraint of parental rights: Parkinson vs College of Ambulance. But this rule is subject to the following exceptions: Trafficking in public offices and tittles: Trafficking in public offices means trading in public offices to obtain some gain which other wise cannot be obtained. A contact of this nature is void and is against to public policy and also it is illegal. This right and duty of guardianship cannot be bartered away. Agreement tending to creates interest opposed to duty: If a person enters into an agreement whereby he is bound to do something which is against to public or professional duty.

Trafficking in tittle means some such award from government in return of consideration. In the above exceptions the court will enforce the agreements. It is destitute lacking of legal effects altogether. Agreement interfering with marital duties: Any agreement which interferes with the performance of marital duties is void. If affects only the immediate parties and has no further consequences.

Agreement to defraud creditors or revenue authorities: An agreement which object is to defraud the creditors or revenue authorities is not enforceable.

Agreement for brokerage for arranging marriage is void. The agreement amounted to restraint of trade and thus void. An illegal agreement. Similarly agreement of dowry cannot be enforced. Marriage brokerage: As a public policy.

Because only if there is any restrictions imposed on such agreements are reasonable. Shaikh Kalu vs Ram Saran Bhagat Out of 30 makers of combs in the city of Patna. Write a short note on unlawful and illegal agreements Ans: An unlawful agreement is one which.

It is sometimes difficult to decide as to weather an act is illegal or unlawful because. It may. The court allows the defendant to have that advantage. If an agreement is illegal. In cases of equal guilt.

This means that. The effect of this is that the law discourages people from entering into illegal agreements which arise from base. This is based on the following two maxims: Effects of illegality: The general rule of law is that no action is allowed on an illegal and unlawful agreement. These acts do not effect public morals nor do they results in the commission of crime.. Ex-turpi causa non oritur action. Meaning of unlawful and illegal agreements: In pari delicto.

The court is. No action arises from a base cause. As a result of the neutrality the defendant stands to gain. No action can be taken a For the recovery of money paid.

An agreement which interferes with the liberty of a person to engage himself in any lawful profession. Or property transferred under illegal agreement. The effects of illegality may now be summed up as under: In cases of equal guilt on an illegal agreement. The collateral transactions to an illegal agreement become tainted infect with illegality and treated as illegal even though they would have lawful by themselves.

Where a substantial part of the illegal transaction has not been Carried out. A seller of the goodwill of a business may agree with the buyer to refrain from carrying on a similar business.

An outgoing partner may agree with his partners not to carry on a business similar to that of the firm with in a specified period or with in the specified local limits. The general principle of law is that all restraints of trade are void.

Any Partners may. But if an agreements attempts to create a monopoly it would be void. In such a case an Agreement in restraint of trade is valid. An agreement in the nature of a business combination between traders or manufactures does not amount to a restraint of trade and is perfectly valid. But in India it is valid if it is falls with in any of the statutory exceptions. A partner shall not carry on any business other than that of the firm while he is a partner.

Such agreement does not amount to a restraint of trade nor opposed to public policy and is perfectly valid. These promises have been classified by Lord Mansfield based on the jones vs Barkley case they are as follows: Trade combinations.

Agreement in restraint of trade. Sale of goodwill. According to section 2 f of the Indian contract Act. An agreement of service by which an employee binds himself. Write a short note on reciprocal promises. Service agreements. Immoral agreements. Where the consideration is an act of sexual immorality.

Conditional and dependent: Where the performance of the promise by one party depends on the prior performance of the promise by the other party. The word immoral includes sexual immorality.. The promises are conditional and independent. The promises are mutual and independent. Where the object of the agreement is the furtherance of sexual immorality. Mutual and concurrent: Where the promises of the both the parties are to be performed simultaneously.

Mutual and independent: Where each party must perform his promise independently and irrespective of the fact whether the other party has performed. An agreement is unlawful for immorality in the following cases: Wagering agreement. It is a wagering agreement. According to section 2 g of the Indian contract Act. It is void-ab-initio i.. The event must be uncertain. Agreements in restraint of marriage.

Agreements by incompetent parties. Section 23 4. There must be two parties. Agreements made without consideration. A void agreement does not create any legal right or obligation. Section 20 3. Section 24 5. No other interest in the event except winning or losing. Section 11 2.

Each party must stand to win or lose.. The following agreements have been expressly declared to void by the contract act: Section 25 6. Agreements made under mutual mistake of facts. The following transactions are not considered as wagering agreements.

Agreements which the consideration or object is unlawful. Agreements which the consideration or object is unlawful in part. No control over the event. Section 26 http: In essence. Write a short note on restitution. In case of reciprocal promises to do things legal and also other things illegal. The principle of restitution is that a person who has been unjustly enriched at the expense of another is required to make restitution to that other. Void contract: Agreements by way of wager.

It is void-ab-initio i. Agreements to do impossible Acts. Agreements in restraint of trade.. Agreement which the meaning is uncertain. Agreements contingent on impossible events. Void agreement: The second set illegal of reciprocal promises is a void agreement.

Agreements in restraint of legal proceedings. Write a short note on void agreement and void contract. An agreement with a minor. We may talk of such a contract as void agreement. Define wagering agreement and explain the essentials of a wagering agreement in detail?

Essentials of a wagering agreement: The following are the essentials of a wagering agreement, they are follows: Uncertain event: The promise made between the partied must be conditional and uncertain event i. Generally a wager relates to a future event, but it may also relate to a past event provided the parties are not aware of its result or the time of its happening.

Each party must stand to win or lose: Each party should stand to win or lose upon the determination of the uncertain event. An agreement is not a wager if either of the parties may win but cannot lose or may lose but cannot win. No control over the event: The wagering agreement is a game of chance. Therefore, no party should have control over the happening or non happening of an event. If on the other hand one of the parties has control over the event, then the transaction lacks an essential ingredient of a wager.

No other interest in the event: The parties should have no other interest in the subject matter of the agreement except winning or losing of the amount of the wager. They bet with each other over the result of the bout. This is a wagering agreement. A crossword competition involving a good measure of skill for its successful solution. But if prizes of a crossword competition depend upon the correspondence of the competitors solution with a previously prepared solution kept with the editor of a newspaper, there it is treated as lottery and wagering transaction.

According to prize competition act, , prize competition is game of skill are not wagers provided the amount of prize not exceed rs. Contract of insurance is not wagering agreements even though the payment of money by the insurer may depend up on a future uncertain event.

An agreement to contribute a prize of the value of above Rs. Explain the meaning of contingent contract? What are the rules related to contingent contract? According to sec 31 of ICA, , a contingent contract is a contract to do or not to do something, if the event, collateral to such contract, does or does not happen. Thus it is a contract, the performance of which is dependent upon the happening or non happening of an uncertain future event, collateral to such events.

Its performance depends upon the happening or non happening in the future of some event. The event must be uncertain 3.

The following are the rules regarding performance of a contingent contract: Contingent contract upon the happening of a future uncertain event: When the happening of such event has possible it becomes enforced and if the happening of such event becomes impossible it becomes void.

The contract becomes void. Contingent contract upon the non happening of a future uncertain event: When the happening of such event becomes impossible it becomes enforced and when such event has possible it becomes void. Whether the impossibility of the event was known to the parties or not is immaterial.

Differences between wagering agreement and contingent contract. Contingent contract upon future conduct of a living person: When such person acts in the manner as desired in the contract it can be enforced and if such person does not acts in the manner as desired in the contract it becomes void. The contract may be enforced if the ship returns within a year.

Contingent contract upon happening of an event within a specified time: When such event has happened within the specified time it can be enforced and if the happening of such event becomes impossible within the specified time it becomes void.

Contingent contract upon impossible events: Such an agreement cannot be enforced since it is void. Contingent contract upon non happening of an event within a specified time: When the happening of such event becomes impossible within the specified time it can be enforced and if the happening of such event has happened within the specified time it becomes void.

It is not a game of chance. The following are the differences between wagering agreement and contingent agreement: In a wager the future event is the sole In a contingent contract the future events is only determining factor. It is a game of chance. Generally it is a reciprocal promise. Wagering is an agreement where a person Contingent contract is one in which promisor agrees to pay money to the other person undertakes uncertain event.

In a wager the parties are not interested in The parties have real interest in the happening or the subject matter of the agreement except non happening of an uncertain future event. There may be unilateral promises.

It must be unconditional. Startup vs. It must be by a person who is in a position. It must be made to the proper person and also in proper form. It must be the whole quality contracted for or of the whole obligation. In case of tender of goods. This is not a valid tender. In such a case it has the same effect as a tender to all of them.

It is not a valid tender as it not made at the appointed time. A tender of goods at such time when the other party cannot inspect the goods is not a valid tender. A tender of an installment when the contract stipulated payment in full is not a valid tender. MacDonald A valid tender of performance is equivalent to performance.

It must be made at the proper time and place. It may be made to one of the several joint promises. It becomes conditional when it is not in accordance with the terms of the contract. When promisor has made a valid offer of performance to the promise and offer had not been accepted by the promise.

But in the following case. He offers to pay on the 1st of July the amount with interest up to the 1st of July. A tender of goods after the business hours or of goods or money before the de date is not a valid-tender.

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The defendant refused to accept the goods owing to lateness of the hour. Promisor himself: If there is something in the contract to show that it was the intention of the parties that the promise should be performed by the promisor himself. In case of tender of money. A contract to paint a picture or to sing or to marry. Delivery as tendered at 8.

In India in rupees. By whom must contracts be performed? The promise under a contract may be performed by. This means contracts which involve the exercise of personal skill or diligence or which are founded on personal confidence between the parties must be performed by promisor himself.

Though the hour was unreasonable. As regards any other contract. As per section If all of them die. But their liability under a contract is limited to the value of property they inherit from the deceased. Legal Representatives: A contract which involves the use of personal skill or is founded on personal considerations comes to an end on death of the promisor. Third person: When a promisee accepts the performance of the promise from third person.

Reciprocal promises: Joint promisors: When two or more persons have made a joint promise. Where personal consideration is not the foundation of the contract. Sale of goods for cash. What are the rules of law relating to time and place of performance of contract? According to section 2 f of the ICA. These promises have been classified by lord Mansfield based on the Jones vs Barkley case as follows: Time and place of performance: It depends on the special circumstances of the case contract.

Where time is specified and no application is to be made: Application for performance on a certain day and place: Where no application is to be made and no time is specified: Section 46 to 50 of the contract Act lay down the rules regarding the time and place of performance they are follows: In such a case it is the duty of the promisee to apply for performance at a proper place and time within usual business hours. Explain the rules regarding the reciprocal promises?

According to section 2 f of Indian Contract Act. According to section 51 such promises need not perform by the promisor unless the promise is ready and willing to perform his reciprocal promise. Simultaneous performance of reciprocal promises: Where the promises are to be performed simultaneously.

Application by the promisor to the promisee to appoint a place: Performance in manner or at the time prescribed or sanctioned by the promisee: Rules regarding performance of reciprocal promises: Section 51 to 54 of the contract Act.

Where the order is not expressly fixed. Order of performance of reciprocal promises: In such a case the contract becomes voidable at the option of the party so prevented and is entitled to compensation from the other party for any loss which he may sustain in consequence of non performance of the contract. Effect of default as to promise to be performed first: In such a case one of them cannot be performed till the other party has performed his promise then if the other party fails to perform it.

Effect of one party preventing another from performing promise: But the promisee is entitled to claim the compensation for any loss caused to him by the delay. Contracts must be performed on time. In the performance of a contract. If promisee accepts the delayed performance and intend to sue the promisor for compensation for delayed performance.

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It means that in such a case the promisee cannot rescind the contract and he will have to accept the delayed performance. If the promisor fails to perform within the specified time.

If the promisor fails to perform on an agreed or specified time. Reciprocal promises to do things legal and also other things illegal. By whom joint promises must be performed: The following are the rules as regards performance of joint promises: Unless a contrary intention appears from the contract.

By whom joint promises must be performed? Discuss the law relating to the rights and liabilities of joint promisors in a contract? Also explain the devolution of joint liabilities? If any of them dies. All promisors must jointly fulfill the promise: This means the liability of joint promisors is joint and several. Any one of the joint promisors may be compelled to perform: D may compel all or any or either A or B or C to pay him Rs If one of the several joint promisors is made to perform the whole contract.

Sharing of losses arising from default: A joint promisor compelled to perform. A is compelled to pay the whole amount to D. D2 and D3 are not released from their liability nor is D1 discharged from his liability to D2 and D3 for contribution. C releases D1 from his liability and files a suit against D2 and D3 for payment of debt. The released joint promisor also continues to be liable to the other promisors.

Release of joint promisor: If one of joint promisor is released from his liability by the promisee. Act of the parties. It may take place: Operation of law. This rule is based on sense and convenience. D cannot ask C to recover the amount from D1 unless C accepts the performance from D1. What conditions should be fulfilled for assignment of contract? I Act of the parties: Assignment is said to take place by an act of the parties when they themselves make the assignment.

An actionable claims can be always be assigned but the assignment to be complete and effectual must be effected by an instrument in writing. T will be bound by this payment and shall be entitled to recover only Rs from D. Notice of such assignment must also be given to the debtor II Operation of law: Assignment by operation of law takes place by intervention of law. Subsequent or supervening impossibility: Impossibility of performance: In such a case the contract is void.

It is of two types: Impossibility existing at the time of contract: If an agreement contains an underwriting to perform impossibility. Impossibility of performance of a contract. The coronation procession was cancelled due to the illness of the king.. Its cancellation discharged the contract. Thus the contract was void. Non-existence or non occurrence of a particular state of things: Some times. In such a case the contract becomes void.

But before those days the hall was accidentally destroyed by fire. If there is any change in the state of things which formed as the basis of contract. Destruction of subject matter of contract: When the subject matter of a contract. H was excused from paying the rent for the flat on the ground that existence of the procession was the basis to the contract.

Krell Vs Henry H hired a flat from K for June 26 and Impossibility existing at the time of contract. Taylor Vs Caldwell C agreed to let out a music hall to T on a certain dates. The contract was discharged by impossibility created by subsequent change in law. What constitutes reasonable time in law? The reasonable time will be deduced from the circumstances of each particular case.

It is the court that normally decides if there was reasonable time from the facts of a particular case that have been tendered before it. Montefiore [] illustrates the instance where the court construed reasonable time. Simple facts of the case: The offer did not set the time limit for its acceptance. In November In this month Ramsgate accepted this offer being five months later. But by this time Mr. Montefiore did not need the shares any more.

Ramsgate sued him, claiming that he breached the contract since they accepted his offer while Montefiore maintained that his offer had expired and could no longer be accepted, so his was not an acceptance in the eyes of the law.

Where an offer is stated to be open for a specific length of time, then the offer automatically terminates when that time limit expires. Where there is no express time limit, an offer is normally open only for a reasonable time. A proposal is revoked- d by the death or insanity of the proposer, if the fact if his death or insanity comes to the knowledge of the acceptor before acceptance. According to this section, in either case, whether it is death or insanity, knowledge of it is an important element.

What if the offeree does not know of the death of the offeree? If the offeree does not know of the death of the offeror he is entitled to accept the offer, nonetheless, despite this death except when identity or personality of the deceased offeror is vital i. This contention is illustrated by the following example. An offer that has been given by a professor of Law the University of Dar es salaam, who happens to die before it is accepted, can not be accepted by the offeree who does not know of this death, if his identity as the professor of Law the University of Dar es salaam is vital to the contract.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha This means that if the offer was for a performance of something that could be done by any person other than the professor in his professional capacity, then his personal representatives can act on his behalf.

Some offers are coupled with a condition s. Offers of this kind are valid only as long as these conditions are fulfilled. The nature of these conditions: The conditions may be of two kinds: They are inferred from studying each particular situation In Financing Ltd v Stimson [] Stemson offered to buy a car on a hire purchase arrangement from Financing Ltd. Its meaning and nature. General meaning of acceptance An acceptance is an unconditional assent to the terms of the proposal.

The word unconditional means that the terms of the acceptance must not set new conditions apart from those stated in the offer. If the acceptance does so it is termed a counter offer. Statutory meaning: An acceptance has to meet certain legal aspects before it becomes an effective acceptance. The general rule is that an acceptance is supposed to reflect the terms of the offer as it has been made.

In other words the acceptance must match or reflect those of the offer. If the offer is for sale of a motor cycle at Tshs. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha However there are exceptions to this general rule that the acceptance must match the proposal.

It is under very limited circumstances to have a contract even without matching the offer and acceptance. See the following cases: Brogden v Metropolitan Railway Co. Counter offer I hope you remember what a counter offer is; this happens when the offeree in his acceptance of the offer either introduces a new term or varies the existing terms of the offer. When this case happens the original offeror may or may not accept the counter offer.

It amounts to rejection of an offer. See Hyde v Wrench Refer to pg. It cancels the original offer, in which case it is useless even if you accept it later on the original terms. Conditional assent If the offeree places any condition in his acceptance, the acceptance will be shorn of its central feature which is it should be an unconditional assent to the terms of the proposal. Refer back to s. Therefore in order to form an agreement the acceptance is supposed to change the proposal into the promise.

If he fails do so he is deemed to have accepted that acceptance. If the offeror does not specify any special mode by which acceptance should be carried out, it may done by any normal method such as: Not only must it be communicated but also the communication must be complete.

Communication of acceptance of the proposal how made: Only when this has been done can we say that communication of acceptance is effective. Without this no contract can be formed. The general rule in contract law is that an acceptance must be communicated. Silence does not amount to acceptance. Felthouse offered in writing to buy a horse from his nephew John in which he sated that: Later the uncle claimed that there was a binding contract between the nephew and him.

The court held that there was no contract because acceptance did not amount to acceptance. The fact that an acceptance must be communicated to make it effective is only a general rule; there are exceptions to this general rule as in the following two circumstance: When the offeror dispenses with acceptance. A may accept the offer by bringing the bus to IAA on that morning. Offers that are made in terms of advertisements are the ones which fall under this category.

The offeree only needs to do the act that has been asked and he will have formed the contract thereat. If A advertises that I have lost my passport and that any one who finds and brings it to me will be rewarded 1 million Tshs.

The acceptor need not tell A he has accepted the offer, he will be deemed to have accepted the offer only by bringing the lost passport to him. On September 2 By post, Lindsell made an offer to sell some wool to Adam. On September 5 The letter of offer reached Adam, and he immediately sent his acceptance as asked.

By the time this letter of acceptance arrived Lindsell had sold the wool to another person; he thought the offer had been rejected. On a claim by Adam that there was a breach of contract; The court held that: The contract was made at the time the letter of acceptance was posted by Adam. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha This means that once the letter of acceptance has been sent whether or not it reaches the offeror a binding contract is formed and both the proposer and the acceptor therefore are bound on that spot.

It applies only when the parties contemplated it as a means of communication of acceptance. For instance if all the negotiations have taken place by telephone post rule may not be said to have been contemplated by the parties. You know that, in common law, once the letter of acceptance is posted it binds both the offeror and the offeree; this will not apply if the offeror states clearly that he is ready to be bound only if he knows of the acceptance.

If this notes does not reach him there will be no contract. Post rule applies exclusively to acceptance of an offer. Remember our earlier discussion that letters of offer, revocation of offers and rejection of an offer are not governed by post rule. Remember on these three knowledge is central and can not be done away with.

Refer to s. Holwell Securities, who sought to find cover under post rule, had posted their acceptance by the prescribed mode but it did not reach Hughes. The court held that there was no contract since Hughes expressed a clear intention to be bound after he received the notice in writing. Let us delve into the legal stance on field in Tanzania.

This section suggests that, unlike in common law, the proposer and the acceptor will be bound by the contract at different points of time once the letter of acceptance has been posted. The section reads as follows: The communication of an acceptance is complete a as against the proposor, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; b as against the acceptor, when it comes to the knowledge of the proposer.

This section implies that once the acceptance has been posted and the letter of acceptance is out of the power of the person sending the acceptance, only the proposer will be bound but not the acceptor and the acceptor will be bound when it comes to the knowledge of the proposer. What do you think is the significance of this slight departure from the common Law to the proposer and the acceptor?

If they change their minds on the contract they revoke the offer or the acceptance within legal limits. When electronic approach is used the post rule can not apply and under this situation a contract is formed only when the acceptance is received by the offeror.

The courts in England have developed the principles regarding this kind of communication in the famous English of case of: The acceptance of the offer was communicated to the Telex machine of Entores Ltd in London. The postal rule does not apply to instantaneous communications. The contract was only complete when the acceptance was received by the offeror. What if the acceptor has sent his acceptance by say e-mail or fax and the offeror has not seen it?

The answer to this legal issue was provided in the same case by Lord Denning in an extensive obiter dictum, in which he opined that under this situation a contract can be formed even if the offeror through his own fault does not actually receive the acceptance. The Brimnes: The Brimnes Owners hired a ship from the plaintiff Co.

Their agreement was such that The Brimnes Owners , the plaintiffs, could terminate the agreement if the defendants defaulted in payment of the regular hire charge. The defendants failed to pay and the plaintiffs sent them a telex to terminate the contract. The telex was sent during normal office hours, but the defendants did not see it until the next day. It was held that: Note that this was a case relating to withdrawals of offers, not acceptances, but it is a useful analogy.

Another case is: Brinkibon Ltd v Stahag Stahl [] 2 AC 34 HL Where a telex of acceptance was sent from London to Vienna, it was held that the contract was concluded where the telex arrived, not where it was sent from. Section 5 2 reads as follows: An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Remember by s. Therefore, in other words, an acceptance can be revoked at any time before it comes to the knowledge of the proposer.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha It has been illustrated earlier in this work that a contract is made up by fulfillment of a number of legal tests without which a contract becomes unenforceable. These tests are such as: Free consent, Competency or capacity to contract, Lawful consideration and object and lastly intention to create legal relation. I will discuss them, lightly, in order of their appearance.

To consent to something, generally, means to agree to it. When two or more persons are said to consent when they agree upon the same thing in the same sense The following example illustrates the statement above A has two cars both of them are Nissans one is pick up and the other is a saloon. A makes an offer in the following words: B accepts this offer in the following statement: Free consent has its special meaning in the law of contract.

Contracts which are made with taints of the above factors are voidable contracts i. However according to the same section the contract is not voidable if the innocent party had the means to discover the truth by due diligence. Let us examine each one of t hem. One person commits or threatens to commit i. He then tells him I will make sure I always find faults in your car and detain it until you sell it to me. The relationship between them is such that i.

When can a person be said to be in a position to dominate the will of another? The answer is provided by subsection 2 of the same section as follows: A person is deemed to be in a position to dominate the will another if: Where he holds a real or apparent ostensible authority over the other, or a person has apparent authority if for example he had power at one point of time and he no longer has that power but the person with whom he deals does not know of this.

Or, when a person in power does any thing which suggests to the public that the person under him may do the responsibilities of this person in power. Where he stands in a fiduciary relation to the other [eg. Doctor and patient, teacher and student, father and son etc] or iii. Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

Or by his agent the intention of the party doing these acts must be directed to either; i. Republic at pg. Some of these statements which make part of contract will be termed as misrepresentation if they are intended to induce the other to enter into a contract and they are not but false. There are two types of misrepresentation at common law i. One usually does not intend to do this. This kind of misrepresentation can not render a contract voidable. Fraudulent misrepresentation: This is the kind of misrepresentation which renders a contract voidable.

In both the above types a misrepresentation should be of fact and not of law or opinion. Example For instance you are about to enter into contract to sell chicken and you tell your offeree that: This specie of chicken lays five eggs per day. While they only lay two. If you make this statement and it ultimately induces another party to enter into contract, it is misrepresentation.

If what is said is not true but you believed it to be true, it is innocent misrepresentation and if it is not true and you knew it, then it falls under fraudulent misrepresentation. The LCA is a bit more specific on the meaning of misrepresentation. The import of s. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha a Positive assertion statement of fact of any thing that is not true but which the person making it believes it to be true.

These statements are usually unwarranted by the information of the person making it. This is innocent misrepresentation. See the example given by Nditti at pg. S on selling it to B tells him the gives more than 30 litres. Nditti says the statement by S is not warranted by the information that was given to him. Generally silence can not amount to misrepresentation. When a duty to speak arises silence can be a misrepresentation.

If you later discover that the statement you have made is not true, though when you gave it, it was true. You have the duty to say the truth. When you have made a true statement but later circumstances make it false.

When the nature of contract requires utmost good faith eg. Insurance contract. One who takes life insurance must disclose if he has aids. When there is a fiduciary relationship eg. Lawyer-client This is when one party is in a position of trust with regard to the other8. The lawyer, on being asked for legal advice must disclose every thing to his client.

Example You are selling a car whose engine you are expecting to break down any time for some problem, the buyer asks if the car is running perfectly you say yes. Here you have given a half truth and under this circumstance you are supposed to tell him that though it is running the engine has problems. This is when you induce a mistake to the other party about the subject matter of the contract. Here the words the thing which is the subject of the agreement refers to the thing for which the parties enter into contract.

It is sometimes referred to as subject matter of the contract. If a party to contract does not disclose one or more facts about the subject matter so much so that the other party thinks the subject matter is what it is not.

Here the party must actually have been induced and must have acted on that inducement to his detriment.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Walji made representations which induced a mistake to bugerere about a building which they said was a lease for 3 years renewable while it was a lease for 2 years non renewable. The court held that there was inducement. Mistake happens if both the parties had not entered into an agreement except for a mistake as to a matter of fact that is essential to an agreement. Mistake when existent makes a contract void.

BUT For a mistake to affect the validity of a contract it must be an "operative mistake", i. The effect of a mistake is: Types of mistakes: Unilateral mistake. Common mistake is provided by section 20 1 of the LCA. Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void Mistake as to a matter of fact essential to agreement can be illustrated by cases as follows: See for example: Parties entered into contract for sale of maize.

Both the parties knew the maize was on a ship from a place called Solaninka to England where they were. In fact, before they so made the agreement, the maize had began to deteriorate and so it had been unloaded and sold at Tunis. The issue was whether the seller was entitled to recover the purchase price of the maize from the buyer as agreed in the contract. The court held that since both parties had contemplated the existence of the subject matter maize to be sold and bought respectively; the seller had nothing to sell and the buyer had nothing to buy.

Thus the contract was held to be void ab initio. In addition, s. Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. Other relevant cases include: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha At 11am on 24 June the plaintiff had entered into an oral agreement for the hire of a room to view the coronation procession on 26 June.

A decision to operate on the King, which rendered the procession impossible, was taken at 10am on 24 June. Wright J held the contract void. B RES SUA common mistake as to title in the subject matter of the contract Where a person makes a contract to purchase that which, in fact, belongs to him, the contract is void. This usually when both parties are mistaken on the fact that ownership of the goods is to the seller. For example see: According to Lord Atkin: In cases since Bell v Lever Bros the courts have not been over-ready to find a mistake as to quality to be operative.

Refuse specific performance ii. Impose terms between the parties, in order to do justice. Relevant cases include: The categories of mistake may be as follows: For the mistake to be operative, the mistake by one party must be as to the terms of the contract itself.

See the following case: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha around 5oz, this was a third of the price previously discussed and orally agreed upon.

Hartog tried to hold them to it. A mere error of judgement as to the quality of the subject matter will not suffice to render the contract void for unilateral mistake. See for instance: If you refer to s. The law makes a distinction between contracts where the parties are inter absentes and where the parties are inter praesentes. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Contract made inter absentes Where the parties are not physically in each others presence, eg, they are dealing by correspondence, and one party is mistaken as to the identity, not the attributes, of the other and intends instead to deal with some identifiable third party, and the other knows this, then the contract will be void for mistake.

Usually this happens when there is a thief who poses as a different identity. He sent an offer to buy some thing from Cundy which was accepted.

The name that appeared in the offer was Blenkiron and Co. Blenkanrn received the goods and quickly sold them to Lindsay. Having discovered the trick Cundy sued Lindsay for recovery of goods. He argued that he made a mistake as to the identity of the person with whom they were dealing. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Mistake as to attributes of a person does not render the contract void but voidable.

Hallam sold the goods to Edrige Merret Co Ltd. The plaintiffs claimed that there was no contract since they dealt with Hallam and Co. There was a contract between kings and Hallam; this decision was based on the following two conclusions by the court.

Two conclusions are commonly drawn from these two cases: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Contract made inter praesentes Where the parties are inter praesentes face to face there is a presumption that the mistaken party intends to deal with the very person who is physically present and identifiable by sight and sound, irrespective of the identity which one or other may assume.

For such a mistake to be an operative mistake and to make the agreement void the mistaken party must show that: Even where the contract is not void, it may be voidable for fraudulent misrepresentation but if the goods which are the subject-matter have passed to an innocent third party before the contract is avoided, that third party may acquire a good title.

The main cases are as follows: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha The exception to the above rule is that if a party intended to contract only with the person so identified, such a mistake will render the contract void: Lake v Simmons [] AC A more recent case is: This is provided by s. Two or more persons are said to consent when they agree to the same thing and in the same sense. When two persons do not agree to the same thing in the same sense they are said to be at cross purposes and this is what is referred to as mutual mistake.

Here there are two effects. If the test leads to the conclusion that the contract could be understood in one sense only, both parties will be bound by the contract in this sense.

If the transaction is totally ambiguous under this objective test then there will be no consensus ad idem agreement as to the same thing and the contract will be void: However, even where the contract is valid at law, specific performance will be refused if to grant it would cause hardship. Thus the remedy of specific performance was refused in Wood v Scarth above.

A recent case is: Nutt v Read The Times, December 3. L'Estrange v Graucob [] 2 KB However, where a person has been induced to sign a contractual document by fraud or misrepresentation, the transaction will be voidable. Sometimes, the plea of non est factum, namely that 'it is not my deed' may be available.

A successful plea makes a document void. The plea was originally used to protect illiterate persons who were tricked into putting their mark on documents. It eventually became available to literate persons who had signed a document believing it to be something totally different from what it actually was.

See, for example: For a successful plea of non est factum two factors have to be established: The following decision of the House of Lords is the leading case on this topic: Because of the strict requirements, it may be better for the innocent party to bring a claim based on undue influence. See also s. According to section 11 a person who is legally allowed to enter into a contract is he who belongs to the age of majority and who is not insane. In Tanzania, the age of majority Ordnance, cap age of majority is 18 years.

Who is the person of an unsound mind? The section provides specifically that: A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it he is capable of; i.

Understanding it ii. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha If this is the fact then, the person who is not of sound mind and does not belong to the age of majority is not competent to contract. Though the law restricts these persons to enter into contracts, in the present life situation we are living, the matter of entering into contracts is unavoidable. People of all walks of life do get themselves bound in contracts; majors as well as minors, sane as well as the insane.

INTRODUCTION TO BUSINESS LAW

Think of a man who is mentally challenged who goes to a shop offering to buy something. Think too of a small boy who buys an exercise book for school. This does not end with the practices of buying only; in present day desperate life situation where killer diseases such as AIDS leave children orphaned, we see a lot of them roaming the streets selling various items to elders etc. The ultimate question is: But taking a more concerned look into the matter you may find that, this kind of contracts have a greater effect just as much as they are irresistible in our daily life.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha with them would then be economically the losers. The business activities would always be at this risk of losing when they deal with the forbidden groups.

He received cash from Cowern in consideration for his promise to deliver to him the hay and straw but he subsequently failed to so deliver the goods. Cowern sued him for recovery of the purchase price from the minor for the goods he failed to deliver.

Should the owners of the shops opt for an absolute refusal to dealing with them? The law provides for this situation. On minors: Though the minor is completely not liable on contracts, he is, both at common law and under the law in Tanzania, liable if he enters into the so called arrangements resembling contracts known as quasi-contracts.

This liability is only when the minor enters into contracts for necessaries goods suitable to the condition in life of an infant or minor or other person an to his actual requirement at the time of sale and deliver y 9 and not other wise.

It only imposes a liability on the minor to pay a reasonable price for goods he has enjoyed. And by s. This means the person who supplies the goods to the minor is entitled to two things; i. The reasonable price or ii. Reimbursement form the property of the minor if he can not pay the reasonable price and has this property.

The condition here is that the goods must be necessaries and must be provided when the minor is actually in requirement of them.

Inman the minor, whose father was reach, ordered expensive clothes from Nash the tailor. The court held that, though the clothes were suitable to the minors condition in life, these goods were not necessaries because the minor was well provided with clothes by his rich father. However always remember to answer the following things before you decide to deal with a minor; i.

Are the goods or services necessaries? In order to be necessaries they should be: On the insane: See s. General meaning: It is the price for the promise. To understand it better see the following illustration If A has promised to sell an item to B, B must give or promise to give something this something is what is known as consideration for this promise.

These two promises given by each one of them form a consideration for each others promise. The most recent English to have given the most appropriate definition of the term consideration is the Dunlop v Selfridge [] in which consideration was defined as: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha When at the desire of the promisor10 i the promisee or ii any other person a has done or abstained from doing b does or abstains from doing something c promises to do or to abstain from doing such an act or abstinence is called consideration for the promise.

This is usually given when the promise is made in return for such performance of an act. Note the present perfect tense used in s. Note the wording of s. Juma offers to sell and deliver goods on 5th of July and Anthony promises to pay when these goods are delivered. Consideration need not be adequate plenty but it should be valuable money or its worth no matter how insignificant and sufficient in the eyes of the law: It must be something whose worth can be measured against money.

In this case it does not matter how small this value is. If you have promised to give your house, which you bought for 2 million shs just for shs. It does not matter. The shs is enough for a consideration. Things of no value do not amount to consideration If consideration can not be measured in terms of its value it can not amount to consideration: This was held to be no consideration because it could not be measured in value.

Performance of an existing duty imposed by law does not amount to consideration When a person has a duty under the law to do or to abstain from doing something, he can not be said to have furnished consideration when he does that duty. If you promise a police officer that you will give him some money if he arrests a person who has committed an offence against you.

Your promise to give him some money can not be a consideration in exchange for the arrest he has done because he has done what he was legally required to do. Godfrey promised to pay Collins, a witness, who was legally required by court to give evidence if he so gave that evidence. Collins gave the evidence and sued Godfrey for the promised money. Performance of an existing contractual duty by one party in a contract can not be consideration. Under this arrangement there are two persons A B E.

When only 2 days remain and the work does not seem to end, Maria promises to give Marry extra money to finish the job on time and she so does finish on time. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Her finishing the job in time is not consideration, since she had that duty under the contract. See Stilk v Myrick 2 Camp Simple facts of the case: Some sea men deserted a ship. The Captain promised the remaining men an extra pay if they finished the journey.

They were not given the extra pay and they sued The court held that: However, if there was practical benefit on the party offering the money, the act of building on time by Marry and that of completing the journey by the sea men would be consideration sufficient in the eyes of the law. In Hartley v Ponsonby 1 QB 1 CA Unlike in Myrick, here a number of sea men left the ship so many in number that the ship was on the brink of subsiding.

The remaining crew were offered extra pay if they did not follow the others who deserted. Their act was consideration for the promise of extra pay. Performance of an existing contractual duty owed to a third party, is consideration Shadwell v Shadwell 9 CB NS Court of Common Bench Lancey Shadwell, who was engaged to be married to Ellen Nicholl, was promised a payment by his uncle Charles Shadwell if he went through with the wedding.

When the uncle died, the executor stopped the payments on the grounds that Lancey, since he was engaged with Ellen, he was contractually bound to marry her anyway, thus he had provided no consideration to the late uncle for his promise only by doing so. Some of the goods belonged to C, who promised not to sue A if the goods were damaged during the unloading.

It was held that this promise was bound to unload the goods under his contract with B. If Mammilla does an act now and after finishing Alice promises to give her some money, the act by mammilla does not constitute consideration for Alice promise since they happened at different times. This is what is referred to as the past consideration. The general rule is that past consideration is insufficient in the eyes of the law.

See Re Mc Ardle A man and his brothers and sisters were the owners of a building. Since the work had been undertaken before the promise was made it was past consideration and past consideration is no consideration. That past consideration is no consideration is a general rule. There are some exceptions to it as follows: The rules of past consideration do not apply to Bills of exchange e. Where the act done has been requested by the promisor.

This is the essence of s. Any person who seeks to enforce a contract must establish that he personally furnished consideration to the other in that agreement. This suggests that, though consideration can be given by a third party on behalf of a party to the contract, this consideration can not be effective. See illustration below: Legally effective consideration: There are three parties involved here; A, B and C. This is what it means by the consideration must move from the promisee.

There were a couple who intended to marry. Their fathers promised each other to pay the bridegroom the husband to be an amount of money. The privity doctrine concerns the rights the parties under a contract have of suing and being sued on the contract. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha can not sue, the person who is not part to the contract a stranger to the contract can not sue also.

The following cases illustrate how the doctrine works: It follows therefore that, if she had not been the administatrix of her husband estate she would not have won the case i.

An intention to enter legal relation is one of the elements that mark the nature of the binding contract. For the purposes of the discussion under this party agreements are classified under two groups namely; i.

Domestic and Social arrangements and ii. Commercial arrangements A. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha These arrangements are usually done by family members and extend to friends. The law generally presumes that in agreements of this kind there is no, between the parties, any intention to make a binding contract.

To be a contract, an agreement must be made with the intent that it be legally enforceable See illustrations below: Balfour v. Balfour, [] 2 K. There was husband and wife. The husband promises the wife an allowance in amity , in his absence to Ceylon Sri Lanka. When the wife divorced the husband, he stopped effecting further payment and the wife sued him. The court was primarily concerned with the issue as to whether the promise of the husband was intended to create legal relations.

Jones v Padavatton [] 2 All ER. Johns and her daughter Miss Padavatton. The daughter used to work abroad before the mother called her to return to Trinidad and Tobago and asked her to pursue bar examinations in England on consideration that the mother would pay her a monthly allowance during the whole course of her studies there. The daughter failed and the mother stopped paying the allowances but instead she bought a house in London and told the daughter to stay therein and collect rent from the tenants.

After sometime the mother took back her house and the daughter sued for the allowances that the mother had promised but failed to pay. The presumption that domestic arrangements are not intended to create legal relation is in law referred to as a rebuttable presumption i. If the court has a reason to believe that the circumstances and the words used in the domestic or social arrangement are to the effect that this intention was intended by the parties.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha To be effective the circumstances and or the words must be that clear and unambiguous so that the court can clearly read from them if there was any intention couched in them.

Parker v. Clark [] 1 All ER. Clarke asked in writing her niece Mrs. Parker to sell her matrimonial home and go to live with Mrs. Clarke and her husband which was big enough to accommodate the two families. The letter carried with it a promise that the Clarks would prepare a will which would devise the house to Mrs. Parker who accepted the offer in writing also. They later quarreled and the Parkers left.

They sued for the promises Although this was one of domestic arrangements the court held that: If there is reliance on and formalization of the arrangement between the parties i.

Like the Clarks did by offering in writing and the Parkers who had relied on their promise to do what they had done accepting in writing in the above case.

When a couple are about or have separated. R The couple had separated while there was an outstanding debt arising out of mortgage on their matrimonial home. The husband told the wife if she discharged this debt he would transfer the house to her. When the wife was done with discharging the debt the husband refused to transfer the house to her as he had promise; he claimed theirs was a domestic arrangement thus there was no intention to create legal relations. See Simpkins v pays [] 3 All ER.

They collectively entered into a competition in some Sunday news paper using the name of the old woman. Later when the name of the old woman won she refused to share out the prize to others.

Then the daughter and the lessee sued; The court held that; the rest were too entitled to share the prize since their agreement was intended to be legally binding, regard being had of the circumstances of the case.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha Unlike in domestic and social arrangements where the law generally, presumes absence of intention to create legal relation, the parties in commercial arrangements are presumed to have intended the legal consequences unless the court finds that the terms of a particular contract suggest otherwise.

Rose and Frank Co. Crompton and Bros. In this case an English company entered into an agreement to sell carbon paper to a firm in New York. The agreement, inter alia, expressly provided that: R Crompton, the English Company withdrew from the contract and Rose and Frank sued them for breaching the contract.

The court: The answer to this question was provided by the court thus: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha An Intent to form legal relations is implied in business matters, unless expressly otherwise.

In the present case the wording of the agreement made it clear that it was not intended to be binding. It is thus un enforceable. How ever if before the breach of the contract there were goods that were ordered and supplied according to the terms of the contract, the ordering and subsequent delivery are regarded by law as separate enforceable contracts of sale. The negotiation is however not possible when one party is economically stronger than the other.

The chances that there may be a fair negotiation and bargaining is so very diminished. For instance in the following situations: When the one party has a strong monopoly over supply of goods and services. Take an example of any mobile telephone companies in Tanzania. It may not be simple for an ordinary citizen to negotiate the terms with them. Paucity in suppliers may cause the same situation.

The party who needs to borrow money and the lender. Like the banker and his customer. Since there is no chance for a fair bargaining with these big, well established economic ventures the ordinary or less strong folks find themselves entering into contracts based on the terms that are set by them.

You have either to accept or to reject them. These are what are called standard form contracts. Usually in these standard form contracts the maker may couple it up with conditions whose effect may be to: Exclude his liability e. Partly accept liability while limiting damages iii.

Exclude or restrain remedies e. These conditions are what are termed as Exemption clauses. If the terms are contained in the contract later they are not effective.

Business Law Notes | Offer And Acceptance | Consideration

As he entered into the room fixed for him he found a notice on the wall posted by the management in which they excluded liability arising out of loss or damage to guests belongings. When his property was stolen he sued the hotel. See Curtis v Chemical Cleaning co. Curtis took a wedding dress to the defendant Co.

The makers of the document told her that it only excluded liability for damage to beads. When in the process of cleaning the document was stained she sued. The court held that the company misrepresented and the woman won. In this case the maker of the terms in that document must prove the following if he wants them to bind the other party that he the other party: He must prove that he has done everything possible to bring those terms to the knowledge of the party he wished the terms to bind.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha conditions excluded the company from liability arising out of injuries to passengers. Thomson could not read, when she was injured she sued the company. In this case the other party as well as the maker of the clause are presumed to know its existence thence there is no need to give prior notice. This is what is referred to as discharge of a contract. In more explicit terms discharge of a contract happens when the rights and obligations accrued under a contract are extinguished.

There are, thus, various ways by which the contract can be discharged. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha The general rule of contract law is that parties must completely and precisely perform what they have undertaken to do promises or not to do under a particular contract, unless there is a reason not to so perform it s. Performance must be complete and precise. The seller delivered instead mixed cases packed in 30 tins and others in 24 tins.

If it is rejected, a contract is not discharged. Death of the promisor does not excuse him from performance unless the contract itself suggests so; otherwise his representatives will have to finish up his obligations see s.

Only once a contract is performed correctly the parties are thus discharged from their liabilities under such contract. The words performance must be complete and precise mean that: Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha The act you promised under a contract must be done at the right time and place as agreed , short of that the contract of this kind is voidable at the option of the promisee and the promisor will not be discharged.

See analysis of this section below Subsection 1 When a party to a contract promises to do a. Subsection 2 If it was not the intention of the parties that time should be of essence of the contract i. However, if a contract is comprised of a series of minor contracts see s. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha to be done at specified times , each contract is discharged separately at the time it was discharged e.

Each phase is discharged if accomplished completely and precisely. See Ritchie v Atkinson The contract of carriage was designed in such a way that the Mr. Ritchie, the transporter was to carry goods and get paid per ton.

When he failed to finish the rest of the goods Mr. Atkinson refused to pay him claiming that he had breached their contract. Ritchie sued him. The court held: Under the law in Tanzania s. Atkinson would be entitled to compensation for any loss occasioned by Mr. Discharge by breach Breach of a contract happens when one side repudiates rejects his liabilities under that contract. There are two types of breach classified according to the time the liabilities are repudiated.

Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha b if the repudiation is done at the time before performance of such liabilities is due it is referred to as Anticipatory breach The innocent party under an anticipatory breach has two courses of action i.

Discharge by frustration The contract can be discharged if it is frustrated; by frustration it means it is physically impossible for a party under the contract to perform his obligations. Kisilwa, Zaharani, Business Law Instructor at the Institute of Accountancy Arusha occurrence of an outside event not caused by any party and which renders the original agreement radically different from what it was agreed.

The events which may possibly frustrate contract are as follows: Subsequent illegality see Chandler v. Bowden [] iii. If the basis of the contract does not occur if performance of a contract depends on some event see Chandler v.

Radical change in the commercial purpose of the contract This is when there is an event which is such that because of which the parties are forced to perform something that is different from what they originally intended.

The general rule is that, once a contract is frustrated i. All the sums paid by both parties before the frustration are recoverable ii. All the sums not yet paid should not be paid See s.

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to i.

Make compensation for it to the person under the agreement from whom he received it. Provided that where a contract becomes void by reason of the provisions of subsection 2 of s, 56 and a party thereto incurred expenses before the time when that occurs in , or for the purposes of the performance of the contract, the court may if it considers it just i. Discharge him whole or in part from making compensation therefore or iii.

The advantage or the payment should not be greater than the expenses incurred by that part. Discharge by agreement There are two ways by which a contract can be discharged by agreement in one of the following ways: Take an example of leases. If there is a new contract entered by the same parties which is to the effect that it discharges the former contract.

This other contract must, however be supported by consideration. Due to this reason there is a little insignificant difference in the two statutes. The cases decided in England basing on the English Act are useful in under this part. Since the contacts for sale of goods, as the name it self suggests, are contracts, they are also subject to the general principles of the law as provided by the Law of Contact Act.

Thus the legal principles which are provided by the Law of Contract Act are also applicable in a contract of sale of goods; these principles are as follows: Free consent ii. Capacity to contract iii. Lawful consideration and object and lastly iv.

Intention to create legal relation.