THE LAW OF CONTRACT

THE LAW OF CONTRACT

OBJECTIVE

To provide the candidate with a broad understanding of the following concepts
pertaining to the Law of Contract;

∙ The nature of a contract.

∙ Formation of a contract.

∙ Classification of Contracts.

∙ Terms of contract; Exemption clauses, conditions and warranties.

∙ Vitiating factors; mistake, misrepresentation, duress and undue influence.

∙ Privity of contract.

∙ Termination and discharge of a contract.

∙ Remedies for breach of contract.

∙ Limitations of actions.

INTRODUCTION

This chapter deals with the formalities that are involved before a contract comes into
existence. It then looks at the terms of contract, vitiating factors and the eventual
termination or discharge of a contract.



KEY DEFINITIONS:

∙ Offer: an unequivocal and clear manifestation by one party of its intention to
contract with another.

∙ Unequivocal: clear, definite and without doubt

∙ Invitation to treat: This is a mere invitation by a party to another or others to
make offers or bargains. The invitee becomes the offeror and the invitor

, becomes the offeree. A positive response to an invitation to treat is an offer.

∙ Acceptance: This is the external manifestation of assent by the offeree.

∙ Revocation: This is the withdrawal of the offer by the offeror.

∙ Consideration: It has been defined as an act or promise offered by the one
party and accepted by the other party as price for that others promise.

∙ Estoppel: It a doctrine that is to the effect that where parties have a legal
relationship and one of them makes a new promise or representation
intended to affect their legal relations and to be relied upon by the other,
once the other has relied upon it and changed his legal position, the other
party cannot be heard to say that their legal relationship was different.

∙ Conditions: This is a term of major stipulation in a contract. If a condition is
breached, it entitles the innocent party to treat the contract as repudiated and
to sue in damages.

∙ Warranties: This is a minor term of a contract or a term of minor stipulation.
If breached, it entitles the innocent party to sue in damages only as the
contract remains enforceable and both parties are bound to honour their part
of the bargain.

∙ Merchantable quality: Fit to be offered for sale. Reasonably fit for the buyer’s
purposes

∙ Privity of contract: This doctrine is to the effect that only a person who is
party to a contract can sue or be sued on it.

∙ Void: Lacking legal force.

∙ Voidable: Capable of being rescinded or voided.

∙ Caveat emptor: It literally means buyer beware This is a Common Law
principle to the effect that in the absence of fraud or misinterpretation, the
seller is not liable if the goods sold do not have the qualities the buyer
expected them to have.

, ∙ Quantum meruit: This literally means as much as is earned or deserved .
This is compensation for work done. The plaintiff is paid for the proportion
of the task completed.

∙ Breach of contract: A failure to perform some promised act or obligation

∙ Frustration of contract: A contract is said to be frustrated when performance
of the obligations becomes impossible, illegal or commercially useless by
reason of extraneous circumstances for which neither party is to blame.

∙ Damages: it is a monetary award by court to compensate the plaintiff for the
loss occasioned by the breach of contract.

∙ Ex-gratia Sum: - a free-sum, one not required to be made by a legal duty

∙ In futuro: - in future:

∙ Unilateral Mistake: This is a mistake as to the identity of one of the parties to
the contract. Only one party is mistaken and the mistake is induced by the
other party.

∙ Misrepresentation: This is a false representation. It is a false statement
made by a party to induce another to enter a contractual relationship.

∙ Duress: - actual violence or threats thereof



CONTEXT

Whether we know it or not we all contract at some point in time in one way or another.
This therefore is a chapter that most exam questions will be centered on to ensure that
the student clearly can explain from the formation to discharge of a contract. It’s of high
importance to understand the various concepts brought out in this chapter.

We all contract whether consciously or sub consciously. The bulk of the day to day
contracts we make do not have all the formalities and are merely agreements. Contract
law is therefore a very vital chapter as most persons and companies contract on a daily

, basis. Adept knowledge of this chapter will make the candidate appreciate the
machinations behind the procedures and rules of contracts and assist in the
ascertainment of a realization of their own rights and the remedies available incase of
breach of contract.



THE LAW OF CONTRACT

A contract may be defined as a legally binding agreement made by 2 or more parties. It
has also been defined as a promise or set of promises a breach of which the law
provides a remedy and the performance of which the law recognizes as an obligation.

The most important characteristic of a contract is that it is enforceable. The genesis of
a contract is an agreement between the parties hence a contract is an enforceable
agreement. However, whereas all contracts are agreements, all agreements are not
contracts.

TYPES OF CONTRACTS

Contracts may be classified as:

1. Written / specialty contracts

2. Contracts requiring written evidence

3. Simple contracts

4. Contracts under seal

1. WRITTEN CONTRACTS

These are contracts which under the law must be written, that is embodied in a formal
document e.g. hire purchase agreement, contract of marine insurance, contract of sale
of land.

Contracts under seal: this is a contract drawn by one party, sealed and sent to the party
/ parties for signature. Such a contract requires no consideration e.g. a lease
agreement, mortgage, charge.