A Contract Is An Agreement That Is Legally Binding. Although, A Contract Is An Agreement, An Agreement Is Not Necessarily A Contract.
An offer is a proposal or promise made by one party called the offeror to enter into a contract on a particular set of terms, with the intention of being bound as soon as the party to whom the promise is made (the offeree) signifies his acceptance.
There must be two (promisee and promisor) or more separate and definite parties to the contract with the capacity to contract. The promisor and Promisee must be definite, ascertained and existing at the time when the contract is made. One party must make an offer and the other accept.
The parties must be in a mutual assent. They must be in a Consesus ad idem.
An acceptance is the final and unqualified expression of assent by words or conduct to the terms of the offer or proposal in the manner prescribed or indicated by the offeror. The Parties must intend to create legal relations. The parties must intend to be bound by their promises.
The promise of each party must be supported by consideration. In this case consideration is some benefit accruing to one party or some detriment suffered by the other. It is actually the price for the contract.
An Offer may be terminated in the following ways;
In relation to contract, capacity to is the legally recognized person to enter into a legally binding agreement.
The Law of Contract limits the following;
The mere fact of agreement alone does not make a contract. Both parties to the contract must provide consideration if they wish to sue on the contract. Each side must promise to do something to each other.
Considerations are some benefits or advantages going to one party, or some loss or detriment suffered by the other party.
This is a benefit which must be bargained for between the parties and is the essential reason a party will enter into a contract.
Lord Lush J in the case of Curie vs. Misa 1875 LR EX 153 defined Consideration as follows;
“ some right interest, profits or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by other”
Nature of Consideration.
An exchange of promise to perform the act in future is referred to as Executory consideration.
It consist of mutual promises and one promise is given in return of another e.g. In a bilateral contract for the supply of goods, A promises to deliver goods to B at a future date and B promises to pay. If A does not deliver them, this is a breach of contract.
Consists in some act or forbearance that is complicated by the time the promise becomes binding. For example if the seller delivers goods and customer promises to pay, it is executed consideration.
In Executed Consideration, one party has already performed his obligation under the contract while there is an outstanding liability on the other party.
Consists of something done by the promise before the promise was done.
The promise is made after the act has been performed e.g. If A saves B’s house from fire while B was on a trip abroad and B later promises to buy him a car as a reward, the promise by B will be Past Consideration.
Past Consideration under the Law is not good consideration as the promise given after the act is purely gratuitous and it cannot be enforced by law.
Consideration must move from promisee in that for their top be a contract between the two parties, the consideration must move from the promisee.
A party can enforce a promise made to him only if he himself provided the consideration for that promise.
Consideration must be of some value but consideration need not be adequate. Consideration must be bargained for. The general rule is that consideration must be of some economic value but it need not be adequate.
It’s not the duty of the court to inquire as to whether the consideration paid for is equivalent to the value of that promise. The adequacy of the consideration is for parties to determine through bargaining.
It is the court that will hold that Consideration is insufficient under the following circumstances;
There are some conditions under which a contract can be legally terminated before the contractual duties have been fulfilled, this is known as Termination of a contract.
When is termination lawful?
Termination of contract is considered lawful when a legitimate reason exists to end the contract before performance has been complicated.
Reasons for termination
Discharge of a contract is the act of making an agreement null by ways of terminating contractual obligations. It occurs when the main or primary or primary obligations of a contract ends, but the contract may remain in existence giving rise to secondary obligations.
Primary obligations refer to the performance of contractual obligations and the conditions of the contract while secondary obligations refer to payment of damages or remedies in general.
Breach of contract is committed when a party without lawful excuse or unjustifiably;
While every breach of a contract gives rise to a right to claim damages in respect of the loss occasioned by the breach, not every breach of a contract gives to the innocent party the right to terminate the contact. Identification of circumstances in which a party is entitled to terminate a contract in the event of a breach by the other party raises difficult technical question, but it also gives rise to some difficult questions of policy.
For instance in the event of a breach should the law encourage the parties stick together and work out their differences or should it confer upon the parties a wide right to terminate their relationship so as to enable them to find alternative elsewhere? The law attaches a considerable significance to the right to terminate and it recognizes a wider right to terminate.
In the case of National Bank of Kenya Ltd V Pipe Plastic Samkolit (K) Ltd and another (2002) EA 503 where court of Appeal of Kenya stated:-
“This, in our view, is a serious misdirection on the part of the Learned Judge. A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the clause. As was stated by Shah JA in the case of Fina Bank Ltd v Spares and Industries Ltd (2000) 1 EA 52: “It is clear beyond peradventure that save for those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity function to allow a party to escape from a bad bargain.”
The right to terminate depends in part upon the nature of the term broken (Whether or not it is a condition) but also upon the consequence of breach.
Fundamental or Actual breach
This is whereby a party fails one of its obligations it occurs when a party fails to prefer his contractual duties at all or does less than is required. It may take one of the following three forms
This is a breach which occurs before the date of performance laid down in the contact. A party indicates either expressly r implied by words of conduct, that they do not intend to honour their obligation under the contract.
Therefore, the breach does not 0f itself bring a contract to an end. The breach may give the party the right to terminate the contract but it is for the innocent party to decide whether or not to exercise that right. The innocent party has a right to election whether to affirm or terminate the contract.
The following are circumstance that may constitute repudiation. (Refusal to perform the duty or obligation owed to the other party.)
Forms of discharge by breach
The right of a party to be treated as discharged from further performance may arise in any one of the three ways. The other party may:
The first two breaches may take place not only in the course of performance but also while the contract is wholly executor that is entitled to demand a performance by the other of the promise.
When a party breaches a contract, consequences may follow;
Loss of the rights of discharge.
The right of discharge may be lost by waiver, affirmation acceptance and operation of law. In addition a party may be stopped for claiming to be entitled to treat a contract as discharged.
This is the most common remedy available to the injured party. It entitles the injured party to recover compensation for the loss suffered by it due to the breach of contract from the party who caused it.
In action for damages for the breach of contract there arises two kinds of problem;
Damages are compensatory in nature.
Quantam meruit- This remedy allows the injured to recover the value of what he has done if the injured party has performed a part of his obligation under the contract before the breach of the contract has occurred.
Specific Performance and Injunction.
This is where a party to a contract instead of recovering damages for the breach may have recourse to the alternative remedy of specific performance of the contract or an injunction restraining the other party from making a breach of the contract. These provisions regarding these remedies have been contained in the Specific Relief Act,1968.
In some instances the Court may award the injured party compensation. In the case of Ibrahim Habib Makii vs. Sheikh Brothers Investment Ltd The Plaintiff had been appointed agent to collect rent on behalf of the defendants for 10% commission. The defendant terminated this and started to collect rent by himself whereby the Plaintiff sued for injunction restraining the defendant from doing so. The Court of Appeal for E. Africa overruled the High Court of Kenya and lifted the injunction on ground that the damages would sufficiently be compensated.
Vitiating factors these are factors invalidating a contract even if it has met necessary formation requirements of offer and acceptance and intention to create legal relations.
The presence of vitiating factors may render a contract void, voidable or unenforceable.
A void contract-this is a contract where the whole transaction is regarded as nullity. It means that no time has there been a contract between the two parties. Any goods or money obtained under the agreement must be returned. Where the goods have been sold to third party, they can be recovered by the original owner under the law of restitution.
A voidable contract- this is a contract that operates a s a valid contract until one of the parties takes a step to avoid it. Anything obtained must be returned using remedy of rescission.
An unenforceable contract- this is a contract that exists but cannot be enforced in the court if a party refuses to carry out its term. Items received under the contract cannot be usually reclaimed.
These vitiating factors include;
This is an ambiguous false statement of facts which is addressed to the party misled, inducing it to enter the contract. A misrepresentation renders contract voidable.
The misrepresentation must be a statement of facts.
The misrepresentation must have been addressed to the party misled
The misrepresentation must have induced the representee into making the contract
Types of misrepresentation
When one or both of the parties believe that a given set of facts exists and this belief subsequently turns out be wrong. An operative mistake will render the contract void. A common mistake is one which both parties make regarding the same fact(s). It can be in three types;
A mutual mistake occurs when the terms of the offer and acceptance suffer from latent ambiguity that is impossible to impute any agreement between the parties and the parties can be said to be at cross purposes.
A unilateral mistake is where only one party makes a mistake regarding a particular fact.
Illegality may affect the contract into ways, where the contract is illegal at the time of formation and the contract is valid but is performed in an illegal manner
Illegality renders a contract unenforceable.
Doctrine of duress renders the contract voidable
The following conditions must be satisfied in order for finding of duress;
It occurs when one party improperly uses their influence over the other to induce them into a transaction
Undue influence renders contract voidable.
Most contracts can be made either oral or written, though some agreements must be in writing in order to be binding. They include;
Confidentiality Agreements are used to stop sensitive information becoming public Knowledge. There are legal consequences for the party that discloses protected information. Many businesses and companies use confidentiality clauses to stop competitors gaining important company information.
Some companies subject their employees into signing confidential agreements. Confidentiality does not have to be written and a verbal confidentiality agreement is as legally binding as written one.
Benefits of confidentiality Agreements.
In Singaporean High Court case of Medivac International Management Pte Limited vs. Moore IML The Court stated that the duty of confidentiality outside employment outside employment is not as great as it is, during employment ”and accordingly, confidential information concerning an employer’s business acquired in the course of his service could be used by the employee, after his employment has ceased, unless the information was confidential that it required the same protection as trade secret.
NB. Information cannot be classified as confidential if it is already in the public domain. This is referred to as non-confidential information.
As much as the constitution of Kenya section 2 (5) (6) allows the application of the international conventions and laws there is always conflict in law that arises.
Conflict in law is a phrase used when the laws of different countries on specific topic are dissimilar .When this happens courts need decide which law will be followed.
General list of conflicts.
General principle that applies to contracts across national borders like other international principles are grounded in principles and customs recognized in almost all nations. The principles include;
Conflicts can be separated into the following sections;
What law should be applied to the case at hand?
When courts have been faced by this question of choice of la, generally a court can apply two choices
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