1.

INTRODUCTION TO LAW OF CONTRACT

1.1
INTRODUCTION
A contract is made where parties have reached agreement or where they are deemed to
have reached agreement. The law recognises right and obligations arising from the
agreement. Almost all contracts are simple contracts but there are special contracts too.
Special contracts are made under seal.
There are three fundamental elements in any simple contract. They are:
1. Agreement. The parties must have reached, or be deemed to have reached
agreement.
2. Intention. The parties must have intended or be deemed to have intended, to
create legal relations.
3. Consideration. Any advantage or benefit moving from party to another is
known as consideration.

In any transaction where one or these elements missing there is not

contract.
An agreement may be in any manner whatsoever:
(a) in writing, or
(b) by word of mouth, or
(c) by inference from the conduct of the parties and the circumstances of the
case, or
(d) by any contribution of the above modes.
1.2 OFFER AND ACCEPTANCE
Offer and acceptance is analysed to test whether agreement was reached between the
parties. Many negotiations are too complicated. However the courts will try to discover
whether, at any time, one party can be said to have accepted the firm offer of the other.
1.2.1 Terms must be certain
The terms of the offer must be clear, complete, and final. Any statement falling short of
this requirement is not an offer.
Guthing V. Lynn(1831): L bought a horse from G on the terms that if
the horse was lucky to him he would give five pounds more.
HELD : Too vague to be binding.

1.2.2 Bilateral and Unilateral contracts

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An offer may regarded as a proposal to make a contract. There are two kinds of offer.
(a) The proposal may call for an acceptance, unqualified promise. Most usual
contracts.
(b) The offers proposal may be terms which call for an act to be performed.
Eg. Carlill Vs. Carbolic Smoke Ball Co. (1892)
1.2.3 An invitation to treat is not an offer An offer must be differen t from mere
invitation to treat.
Partridge V. Crittedece (1868) : A notice Bramblediench cocks
and hens 25s each was placed in the classified advertisement page of a
periodical. On the question whether this was an offer. HELD the notice
was an invitation to treat.
1.2.4 Offer to sell land
Statement regarding the price being preliminary only and not intended to be finally
binding.
Clifton V. Palumbo(1944) Before the parties had agreed to any detailed conditions
of contract, the plaintiff wrote to the defendant saying I am prepared to offer you
or your nominee my Lythan estate for 600,000. It was held by the court of appeal
that this could not be constructed as an offer.
1.2.5 Communication of the offer
An offer may be communicated in any manner whatsoever. An offer may be partly
expressed and partly implied. An offer has no validity unless and until it is
communicated to the offeree so as to give the opportunity to accept or reject.
An offer may be communicated to a particular person or group of persons or it may be
communicated generally to the whole world.
1.2.6 Acceptance must be unqualified
Acceptance must be unqualified and must correspond exactly with the terms of the
offer. Where and offeree makes a counter-offer, the original offer is deemed to have
been rejected and cannot be subsequently accepted.
Hyde V. Wrench : On 6th June, W offered H a farm for 1000 pounds. H
made a counter offer of 950 pounds. On 27th June W rejected the
counter-offer. On 29th June H made a purported acceptance of the offer
of 6th June.
HELD : The counter-offer operated as a rejection of the original offer, no
contract.
1.2.7 Acceptance of a Tender
A tender may be either
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(a) A define offer to supply specified goods or services, or

(b) A standing offer, or
(c) Not an offer at all. eg. if made subject to contract.
1.2.8 The communication of Acceptance
The general rule is that acceptance must be communicated to the offerer. If offereee did
not communicate his intention to the offerer, there is no contract. Mere mental
acceptance is not sufficient. The offerer may not stipulate that he will take silence to be
acceptance, and this bind the offeree.
There are two important exceptions to the rule that a contract is not made until
acceptance is actually communicated to the offeror.
(a)where performance constitute acceptance.
(b)where acceptance is duly made by post.
1.2.9 Revocation
An offer may come to an end by revocation, lapse or rejection. In any case the offer
loses its legal effect and become incapable of acceptance.
The offeror may withdraw his offer at any time before acceptance. But once a valid
acceptance has been made, he is bound by the terms of his offer. A offer cannot be
revoked after acceptance. In other words no unilateral withdrawal is possible once the
contract is formed.
Revocation is effective only upon of it reaching the offeree. Where revocation is
communicated by post, it takes effect from the moment it is received by the offeree,
and from the time of posting.
1.2.10
Lapse
An offer may lapse, and thus become incapable of acceptance:
(a)
by passage of time: or
(b)
by death of one of the parties, or
(c)
the non-fulfilment of a condition precedent.
1.2.11
Rejection
An offeree who has rejected an offer cannot subsequently accept it. Rejection may be
expressed or implied.

1.3

INTENTION TO CREATE LEGAL RELATIONS

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Intention to be bound is essential. The intention to create legal relations is an essential

elements in contract. Where not intention to be bound can be attributed to the parties,
there is no contract. The test of intention is objective. The courts seek to give effect to
the intentions of the parties, whether expressed or presumed.
The ordinary common sense implication is that in a commercial or business agreement
that parties intended that their agreement should be legally binding. If a party to a
business agreement wishes to assert that legal realtions were not intended when the
agreement was entered the onus is on him to show that no legal relations were intended
and the onus is a heavy one.
In cases of social, family or other domestic agreements, the question of intention to
create legal relations depends on the inferences to be drawn from the circumstances of
each case and the language used by the parties.
1.4

THE NATURE OF CONSIDERATION

1.

2.
3.

4.

A bare promise is not binding. In a simple contract plaintiff claims that the
defendant broke the contract. He claims that the defendant broke this
promise made under the contract. In order to succeed, the plaintiff must
show that the gave or promised to give some advantage to the defendant in
return for that promise. The advantage thus given is known as valuable
consideration.
Nature and definition. A voluntary promise is not binding even though there
may have been some good moral reason for making the promise.
Executory and executed consideration. Valuable consideration may be
something promised or something done. Regarding a simple contract as a
traction which is essentially a bargain, consideration may be a price
promised or price paid.
The following govern consideration.
(a) Consideration must be real.
(b) Consideration need not be adequate.
(c) Consideration must move from he promise.
(d) Consideration must not be past.
(e) Consideration must not be illegal.
(1) Consideration must not be vague.
(g) Consideration must be possible of performance.