Contract Law

LAW OF CONTRACT 2021
TOPIC 1 INTRODUCTION
Contract may be defined as a legally binding agreement made by two 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 provision of section 2 (1) (h)
of the Law of contract Act, defines the term contract to mean all agreements that are capable of
being enforced by the law
Therefore, a contract essentially consists of two elements:
1. Agreement: Section 2 (e) defines an agreement as, “every promise and every set of promises
forming the consideration for each other”. In other words, an agreement is formed where one
party makes the proposal and the other party accepts it.
2. Enforceability: Only an enforceable agreement can be called a contract. Section 10 of the Act
defines “All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and a lawful object, and are not hereby expressly declared to
be void”.
Sir William Anson observes, “A contract is an agreement enforceable at law made between two
or more persons, by whom rights are acquired by one or more to acts or forbearances on the
part of the other or others”.
SOURCES OF LAW OF CONTRACTS
Constitution
The constitution is the basic and mother law in the state, any law which conflict the same is void
under article 64(5) of the constitution of the United Republic of Tanzania, 1977 and any law
which conflict with the basic right may be declared as void under article 30 (3) of the
constitution of the United Republic of Tanzania of 1977.▪ Law of contract derivers its legitimacy
from the constitution of the United Republic of Tanzania, 1977 therefore for law of contract to
be valid must be consistence with such constitution but if its inconsistence with such constitution
will be declared void.
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Customary laws: will apply to customary contracts. Customary laws in Tanzania are applicable
by virtue of section 11(1) of the Judicature and Application of Laws Act,which is to the effect
that customary law shall be applicable to, and courts shall exercise jurisdiction in accordance
therewith in, matters of a civil nature.
In 1968 also Georges, C.J., (as he then was) in the case ofMwita v. MwitaMarianya(1968)
HCD No. 82)observed: that ▪ “…If persons of the same tribe enter into an agreement well known
to tribal custom, under which the terms are prescribed, these persons must, in the absence of
evidence to the contrary, be understood to be contracting in accordance with these terms. Also
relevant customary law must be applied if it is applicable and is not repugnant to justice or
morality or inconsistent with any written law...”
Also in the case of Maagwi Kimito V. Gibeno Werema Civil Case Appeal No. 140 of 1979
(unreported),the Court of Appeal of Tanzania held that, “Customary laws of this country now
have the same status as any other law subjects only to the constitution and other statutory law
that may provide
Legislation: the principle legislation that provides for the general principles of contract law in
Tanzania is the Law of Contract Act, Cap 345 of 2019.
Case laws: cases that have been decided by the Supreme Courts of Tanzania; the High Court and
the Court of Appeal and which have established various principles on contract law are also
sources of contract law. So precedent has a binding value which is referred as a doctrine of stare
decisis which is an abbreviation of the lain phrase “stare decisiset not quietemovere” which
means to standby precedent and not disturb the already settled point.
▪ Common law: the substance of the Contract Act occasions a number of lacunas on some
aspects of contract law i.e. it means it does not provide for any principles for some of the matters
relating to contracts and when this happens the applicable law would be the common law of
England on contracts.Prof. Nditti, an expert in contract law of East Africa has this to say about
the application of English common laws to Tanzania. “Where the contract Act is silent on any
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particular aspect of contract law, English common Law of contract as modified by equity
and acts of parliament is applicable.Also in the case of in the case of TANGANYIKA
GARAGE LTD V. MARCEL G. MAFURUKI [1975] LRT 23, In this case it was said that
where the circumstances of a contract are not provided for in the codified law of contract act in
Tanzania, one must fall back on English common law.
TOPIC 2
CLASSIFICATION & TYPES OF CONTRACTS
1) CLASSIFICATION BASING ON THEIR VALIDITY
A) Valid contract
▪ A valid contract is a contract that the law will enforce and creates legal rights and obligations.
A contract valid ab initio (from the beginning) contains all the three essential elements of
formation:
• Agreement (offer and acceptance);
• Intention (to be bound by the agreement);
• Consideration (for example, the promise to pay for goods or services received).
▪ In addition, a valid contract may have to be in writing to be legally valid (although most
contracts may be oral, or a combination of oral and written words). (See Section 10 of LCA).
B) Void contract
▪ A void contract lacks legal validity and does not create legal rights or obligations. A contract
that lacks one or more of the essential formation elements is void ab initio (from the beginning).
In other words, the law says that it is not, or never was, a valid contract. ((See S. 2 (1) (g) & (j)
of LCA).
For Example: A agrees to sell 1000 tons of wheat to B for a price of Tsh. 50000 per ton in case
his ship reaches the port safely by 15th February. If the ship fails to reach by the stipulated date.
The contract between A and B is void.
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C) Voidable contract
▪ A voidable contract is a valid contract that contains some defect in substance or in its manner
of formation that allows one party (or sometimes both parties) to rescind(cancel) it.
▪ A voidable contract remains valid and can create legal rights and obligations until it is
rescinded. The party with the right to rescind may lose that right by affirmative conduct, or
undue delay, or where the rights of an innocent third party may be harmed. (See S. 2 (1) (i) of
LCA). Voidable contracts are those which were made under coercion, undue influence, fraud, or
misrepresentation as provided under S.19 of LCA
For example: A threatens to kill B if he does not give him a loan of Tsh. 50,000 for 25 years. B
gives the loan. This is a voidable contract as consent of B is obtained by coercion.
D) Unenforceable contract
▪ An unenforceable contract is an otherwise valid contract that contains some substantive,

technical or procedural defect. Most commonly, such a contract is illegal, either in its formation
or its performance, as it offends either public policy (the common law) or some statute. As a
general rule, the law will not allow the enforcement of such a contract.
For example: If a document representing a contract is not stamped and the law require such
document to be stamped, the contract is unenforceable, but if the required stamp is affixed, the
contract becomes enforceable.
E) Illegal Contracts
▪ An agreement which goes beyond the rule of basic public policy and is criminal in nature or
immoral. It generally contain both unlawful object and consideration (See section 23 of LCA)
Example; A promises to pay Tsh 10000000 in case B agree to kill C. B agrees and promises to
kill C for the price promised, then such contract is illegal as it is against the law
2) CLASSIFICATION BASING ON THEIR FORMATION
A) Express contract:
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▪ A contract in which the terms are stated by parties in words, written or spoken. Section 9 of the
LCA contains this provision which reads as under: “So far as the proposal or acceptance of any
promise is made in words, the promise is said to be express”. Thus, a promise made in words is
called an express promise. And the express promises result in express contracts.
For example: A writes to B, „I am prepared to sell my horse for a sum of Tsh. 500000. B
accepts A‟s offer by a telegram. The contract will be termed as express contract
B) Implied contract:
▪ A contract in which the terms are inferred from the circumstances of the case or conduct of the
parties. Thus, an implied contract is that which is not made in words. Such contracts came into
existence on account of act or conduct of the parties. In a continuing course of dealing, the acts
or conduct of the parties may give rise to implied contracts.
For example: A takes a seat in a bus. There is an implied contract that he will pay the prescribed
fare for taking him to his destination.
C) Quasi contract or constructive contract:
▪ It is an obligation created by law regardless of agreement between the parties. As a matter of

fact, quasi-contracts are not contracts as there is no intention of the parties to enter into a
contract. In fact, it is an obligation which the law creates in the absence of any agreement. A
quasi-contract is based upon the equitable principle that a person shall not be allowed to enrich
himself at the expense of another. (See SS. 68-72 of LCA).
For example: A supplies B, a lunatic with necessaries suitable to his condition in life. A is
entitled to be reimbursed from B’s property if he has any
3) CLASSIFICATION BASING ON THEIR PERFORMANCE
A) Unilateral contract:
A unilateral contract is a one-sided contract in which only one party has to perform his
obligation. In such contracts, promise on one side is exchanged for an act on the other side.
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For example: A, a seller, puts B’s luggage in the carriage. The contract comes into existence as
soon as the luggage is put. It is now for B to perform his obligation by paying the charges to the
buyer .
B) Bilateral contract:
A bilateral contract is a two-sided contract in which both the parties have to perform their
respective obligations, i.e. at the time of formation of a contract the obligations of both the
parties are outstanding. In such contracts, promise on one side is exchanged for a promise on the
other.
The bilateral contracts are also known as contracts with executor consideration.
For example: A promises to sell his car to B after 15 day. B promises to pay the price on the
delivery of the car. The contract is bilateral as obligations of both the parties are outstanding at
the time of the formation of the contract
C) Executory contract:
▪ A contract in which the promises of both the parties have yet to be performed. Thus, executory
contract is that where under the terms of a contract something remains to be done by the parties.
▪ In other words, where one or both the parties to the contract have still to perform their
obligations in future, the contract is termed as executory contract.
For example: A agrees to paint a picture for B and B in consideration, promises to pay A a sum
of Tsh 500000. The contract is executory
D) Executed Contract:
▪ A contract in which both the parties performed their respective promises. When a contract has
been completely performed, it is termed as executed contract, i.e. it is a contract where, under the
terms of a contract, nothing remains to be done by either party. A contract may be executed at
once i.e. at the time when it is made.
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For example: X sells a radio set to Y for Tsh. 13000. Y pays the price. Both the parties have
performed their respective obligations, and therefore, it is an executed contract
4) CLASSIFICATION ACCORDING TO ENGLISH LAW
A) Formal Contracts:
▪ English Contract Act recognizes formal contracts. Validity of these contracts depends upon
their form and they are valid even without consideration. They are of two types:- (i) Contracts
under Seal, and (ii) Contracts of Record. (i) „Contracts under seal‟ are in writing and signed by
the parties to them. The following contracts should be under seal, otherwise they will not be
valid:- (a) Contracts without consideration, (b) Lease of land for a period of more than three
years; (c) Contracts by corporations;
B) Simple Contracts:
▪ All contracts other than the formal ones are called simple contracts. They may either be in
writing or oral. Consideration is also necessary for their validity.
TOPIC 3
FORMATION OF A CONTRACT
▪ A contract comes into existence when an offer by one party is unequivocally accepted by
another and both parties have the requisite capacity. Some consideration must pass and the
parties must have intended their dealings to give rise to a legally binding agreement. The purpose
of the agreement must be legal and any necessary formalities must have been complied with.
▪ In the formation of a contract the law provides for a minimum number of prerequisites or some
times are referred to as essentials of a contract, before an agreement can be a contract. Some of
these are expressly stipulated in the Law of Contract Act, Cap 345 under section 10 and those
which are not Provided can be implied from the English common law of contract.
▪ An analysis of this section brings up three of the essential of a contract as follows:
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▪ Free consent of the parties, The principles of contract law require that parties enter into the
contracts out of their own free will, without being forced or influenced by any person. According
to s.14 of the LCA free consent is that which is not caused by such vitiating factors as coercion,
undue influence, fraud, misrepresentation and mistake.
▪ Competency (sometimes is referred to as capacity) to contract: Here the parties must be legally
capable of entering into the contract. A person for instance may not be competent to contract if
he falls under one of the following groups: is of under the age of the majority age, is of unsound
mind as provided under section 11 and 12 of LCA.
▪ Lawful consideration, simply means something of value under the contract by a party for what
has been offered by him to the other
 Lawful object, this is the purpose why a contract is entered into. (See also Section 25
and 23 of LCA).
The most familiar essential of a contract that has been implied to our law from the English
common law of contract is intention to create legal relation
ESSENTIAL ELEMENTS OF A VALID CONTRACT
Since agreement is the beginning point in the making of a contract, the validity of the latter will
depend largely on the preciseness of the former. An agreement is therefore one of the
fundamentals of a valid contract.
An agreement is made by two things:
(i). Offer/ proposal-

(ii).Acceptance
1) OFFER
The word offer is used synonymously with the word proposal. Section 2(1) (a) of the Law of
Contract Act [CAP 345 R.E. 2019] define the term proposal as follows;
“…When one person signifies to another his willingness to do or to abstain from doing
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anything, with a view to obtain the assent of that other to such act or abstinence, he is said to
make a proposal…”
In other words the word proposal means a signification by one person to another of his
willingness to do or abstain from doing anything with a view to obtain the assent of that other to
such act or abstinence.
Generally an offer may be defined as intimation by words or conduct of a willingness to enter
into legally binding contract.
▪ Instances of a proposal: A calls B and tells him, “I would like to sell to you my plot located at
“Majengo” or C writes a letter to D telling him that he wants to buy D‟s cow at Tshs. 75000/=
HOW AN OFFER IS MADE
An offer can be made either in words (expressly) or conducts (impliedly). This has been
provided under section 9 of the Law of Contract Act [CAP 345 R.E. 2002] as follows;
“…In so far as the proposal of any promise is made in words, the promise is said to be express;
and in so far as such proposal is made otherwise than in words, the promise is said to be
implied…”
So offer can be made in either the following ways:
1) By words (whether written or oral).
The written offer can be made by letters, telegrams, telex messages, advertisements, etc.
The oral offer can be made either in person or over telephone.
Example 1: DAUD proposes, by letter, to sell a house to JAMAL at a certain price. This is an
offer by an act by written words i.e., letter. This is also an express offer. In another example
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Example 2: HAKIMU proposes, over telephone, to sell a house to DAYNESS at a certain price.
This is an offer by act (by oral words). This is an express offer.
2) By conduct
The offer may be made by positive acts or signs so that the person acting or making sign means
to say or convey.
However silence of a party can in no case amount to offer by conduct
.Example: A owns a motor boat for taking people from Bombay to Goa. The boat is in the
waters at the Gateway of India. This is an offer by conduct to take passengers from Bombay to
Goa. He need not speak or call the passengers. The very fact that his motor boat is in the waters
near Gateway of India signifies his willingness to do an act with a view to obtaining the assent of
the other. This is an example of an implied offer.
RULES OF AN OFFER:
 The terms must be clear and certain
Clarity and certainty of an offer/proposal are essential elements of an offer. If the offer is clear
and certain the person to whom the offer is made will be in a good position either to accept or
reject it. But where an agreement is made from an offer which is uncertain or not clear then the
effect of such agreement is, under the law treated as void agreement that is no agreement at all as
per section 29 of the Law of Contract Act [CAP 345 R.E. 2019] and clearly the section provides
as follows:
“…An agreement, the meaning of which is not certain, or capable of being made certain, is
void…”
The same position has been explained by various cases that where the terms of the offer are not
certain, yet the offeree accepts the offer, the agreement reached will be treated by the law as no
agreement at all.
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This has been explained in the case of ALFI E.A. LTD. V. THEMI INDUSTRIES AND
DISTRIBUTORS AGENCY LTD COURT OF APPEAL OF TANZANIA AT DAR ES
SALAAM , CIVIL APPEAL 28 OF 1984, this case involved sale of machinery but the price
was not stated, therefore the court held that since price is a fundamental term in a sale agreement
if it is not mentioned the agreement becomes uncertain an inn law uncertainty renders the
agreement void.
The same position was seen in the case of NITIN COFFEE ESTATES LTD. AND OTHERS
V. UNITED ENGINEERING WORKS LTD AND ANOTHER COURT OF APPEAL OF
TANZANIA AT ARUSHA, CIVIL APPEAL 15 OF 1988, This case concerned with the sale
of shares but the price was not stated hence the agreement becomes uncertain which makes it to
be void.
 . Must be made willingly:
For an offer to be effective the willingness of the party who make it must be present. In order
that he can be bound by the terms stated in that offer should it accepted by the offeree
 The terms of a proposal must be “a final expression of intention to make legal

relationship”
The offeror‟s expression should be firm and should also show his final expression of his
willingness to be bound by the terms stated in his offer should it be accepted by the other party.
Lugakingira J., in Edwin Simon Mamuya v. Adam Jonas Mbala 1983 TLR 410 (HC) said
that
“for there to be an offer in law it must inter alia be unconditional, it must be communicated, and
it must be made in such circumstances as to leave no doubt that the party offering to perform is
presently able and willing to do so.”
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 Offer must be communicated
An offer must be communicated to the intended offeree or offerees. An offer remains ineffective
until it is received by the offeree.An offer is ineffective until it is communicated by the offeror to
the offeree. If the offeree is unaware of an offer, then it would be impossible to accept it.
s. 3 of the LCA, provides that:
The communication of proposals, the acceptance of proposals, the revocation of proposals and
acceptances, respectively, are deemed to be made by any act or omission of the party proposing,
accepting or revoking, by which he intends to communicate such proposal, acceptance or
revocation, and which has the effect of communicating it.
This section can be analyzed as follows:
The communication of-
(i). . proposals
(ii). the acceptance of proposals
(iii). the revocation of proposals and
(iv). acceptances
Respectively are deemed to be made by any act or omission of the party proposing, accepting
or revoking.
Example in the case of R v Clarke the court held that Clarke could not claim a reward for
information he had given because, at the time he gave the information, he was unaware that a
reward had been offered(Offer was not yet communicated).
In this case it was advertised by the government of Australia that if any accomplice of a
Specified syndicate of murderers furnished evidence that would help to arrest the murderers, he
would be offered a free Pardon by the government. One Mr. Clarke gave the information while
he was unaware that there was such a pardon by the government. He only realized later after he
gave the information and claimed that he be given a pardon because he had accepted the offer.
 Offer must be distinguished from Mere puffs
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Offers must be distinguished from non-promissory statements made during the course of
negotiations. Objectively, these statements are exaggerated and a reasonable person would not
expect them to be true. For example “Tigo, Mtandao unao kupazaidi” or “Celtel, makes Life
better” you cannot claim that this is an offer for which you can sue the company when you do
not find anything special in its services.
CHARACTERISTICS OF AN OFFEE
 Offer may be unilateral
Most contracts are bilateral: example of offer in unilateral contract or offer made in
advertisement. See for instance the famous case of Carill Vs. Carbolic Smoke Ball Co. Ltd
[1893] 1QB 256.
FACTS: In this case the Defendant Company manufactured what it considered to be the perfect
prevention of common cold. So the company confidently advertised as follows,$100 reward will
be paid by the company to any person who contracts the increase epidemic influenza cold or any
disease caused by taking cold after having used the ball three times daily for a period of two
weeks. This was the prescription in accordance with the instructions directions/ direction
supplied with each ball. The advertisement further stipulated that $ 1000 is deposited with the
alliance Bank Reagent Street showing the Company‟s sincerity on the matter. The advert
continued to state that during the last epidemic of influenza many thousands of Carbolic smoke
balls were sold as preventive against the disease i.e. cold, influenza etc and the company knew of
nobody among the users who contracted the disease. The advertisement further provided that the
company reduced the price of balls from 10s to 5s. The plaintiff, a lady on the faith of the
advertisement bought one of the balls and used it as per the instructions. Nevertheless, she
contracted influenza. She therefore sued the defendant Company to recover $100 as advertised.
The defendant Company refused to compensate the lady and raised the following arguments
That, it is quite unreasonable to suppose the advertisement to be a definite offer because nobody
in the sense would contract themselves out of the opportunity checking the experiment which
was going to be made at their expenses. In other words the Co. contended that the advertisement
was not an offer in the real sense of the term offer but just a mere puff. It
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was not a promise or an offer the acceptance of which will bind them, the Company so argued
That, even if it was intended to be an offer the acceptance of which will create a binding
obligation on their part, yet the plaintiff [Carill] failed to notify them on her acceptance.
Held: In deciding for the plaintiff, the court had this to say: “The advert. Say that $1000 is
lodged at the bank for the purpose. Therefore it cannot be said that the statement that $100
would be paid was a mere puff. I think it was intended to be understood by the public as an offer
which was to be acted upon” said the learned Lord Justice Bowen as he then was
 The offeror may prescribe the duration the offer is to remain open for
acceptance.
However, the offeror is free to revoke or withdraw his offer at any time before such duration
lapses e.g. in Dickinson v. Dodds the defendant offered to sell a house to the plaintiff on
Wednesday 10/06/1874 and the offer was to remain open up to Friday 12th at 9.00 am. However
on the 11th of June, the defendant sold the house to a 3rd party.
The plaintiff purported to accept the offer of Friday morning before 9.00 am. It was held that
there was no agreement between the parties as the defendant had revoked his offer by selling the
house to a 3rdparty on June 11th .
ACTS BEARING A RESEMBLANCE TO OFFERS
An offer should be a firm promise and a final expression to do or to refrain from doing
something as explained earlier. Some acts when done appear like offers/proposals but in real
sense they are not; these acts are such as the following:
▪ (A) A mere supply of information
Usually a person may seek information from another concerning something he wishes to buy
probably for the purpose of acquiring sufficient knowledge about it prior top such buying. This
request for information does not amount to an offer. The following case illustrates this point.
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A request for further information is not an offer. In Harvey v Facey the plaintiff (Harvey) sent a
cable to the defendant (Facie), asking: „Will you sell us Bumper Hall Pen? Telegraph lowest cash
price.‟ Bumper Hall Pen was the name of a property belonging to the defendant. The defendant
cabled back the reply: „Lowest cash price for Bumper Hall Pen £900.‟ The plaintiff sent a further
cable purporting to accept the defendant‟s offer. The court held that there was no agreement. The
plaintiff had requested some information and the defendant had merely responded to his request.
The plaintiff‟s further cable did not contain an acceptance, but was an offer to buy, which the
defendant refused.
(B). Invitation to treat
In fact it is very difficult sometimes to distinguish between the statements which are intended to
create legal obligation between the parties to the agreement from those which do not. A person
may advertise that certain goods will be sold by tender or in auction likewise a shopkeeper may
display certain goods in his shop windows at a certain price. In all these cases the question may
be whether the statement or act made is an offer capable of being accepted or merely an
invitation to make offers.
„invitation to treat‟ is simply an invitation by one party to commence negotiations which may or
may not lead to an offer. While an invitation to treat is not an offer, it can determine the form
that a subsequent to offer is to take (for example, sale by auction or tender)
Example
1);Display of goods for sale
Where the goods are displayed for sales are rather an intention to invite Public to make offers to
buy. Like in the case of Fisher Vs. Bell [1961] QB 394 serves the best illustration Bell was
charged by the offence of offering for sale of flick knife in violation of Restriction of Offensive
Weapon act of 1959. The relevant provision provides that Any person who manufacture sells
hires, offers for sale lends or gives to any person …a flick knife shall be guilty of an offence.
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Held: It is clear that according to the ordinary law of contract the display of an article with a
price tag on it in a shop is a merely an invitation to treat. It is nonsense to think that it is an offer
for sale the acceptance of which constitutes a contract
Also in Pharmaceutical Chemists [Southern] LTD Vs. Boots [1953] 1QB 401 In this case the
Defendant [Boots] operated a self service shop in a certain town in which certain drugs Specified
under pharmaceutical and poison Act of 1933 were displayed with price attached.
One of the arguments raised by the Defendant Company is that sales of the listed poisons took
place when the customers took their goods from the shelves and put them in the basket provided
and that accordingly the sales took place otherwise than under the supervision of the registered
pharmacist as required by the Pharmacy and Poison Act
Held: The display of goods on shelves was an invitation to treat, an offer was made by the
customers when he presented the goods at the cash desk. The customers offer could be accepted
or rejected by the pharmacist whose duty was to supervise transactions at the cash desk
2) Tenders
Also Advertisements that call for tenders are mere invitation to treaty but they are not offers. The
person who tenders is the one who makes an offer. Acceptance of this offer is done by the person
advertising tenders by considering and accepting one of them. A tender is an invitation for
interested persons to send in offers. The recipient of the offers (or bids) can then enter into a
contract by communicating acceptance with the chosen tender. In Gbl& Associates Ltd v
Director Of Wildlife Ministry Of Lands, Natural Resources And Tourism And Two Others
(1989) TLR 195 (HC).In this case the Central Tender Board for the government of Tanzania
advertised in the Daily News Paper of February 09 1988 inviting tenders for the sale of elephant
ivory. Various persons sent in their offers and the offer made by the plaintiff Co. was accepted.
The terms which the advertisement specified for the tenderers to include in their offers was that
payment and collection of the ivory must be done within 30 days.
Rubama J. held in this case that
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a) The advertisement by the Secretary of the Central Tender Board calling for the
purchase of elephant ivory was not an offer but an invitation to treat. Each of the
tenders offered to buy at his quoted price and it was upon the government of the
United Republic of Tanzania to accept an offer or reject it;
b) ...Central Tender Board was not obliged to accept the highest bid or any of the
tenders
3) Declarations of intention to sell a certain goods by auction
A person may declare an intention to do or to abstain from doing something; this declaration is
not an offer and so is separate from the contract which would result from
In for example the case of HARRIS V. NICKERSON (1873), Nickerson (an auctioneer),
advertised that he would sell a certain goods including office furniture on a specified date. Harris
attended the sale with the intention of buying some office furniture, Nickerson withdraw the
office furniture from the sale. Harris claimed damages for breach of contract argued that
advertisement was an offer which he had accepted by attending the sale. But it was held that the
advertisement was a mere statement of intention amounting to an invention to treat.
NB; Sometimes an advertisements may be offers especially those which take the form of
promises which a sensible person may take into account. An illustration of promises which might
be taken seriously is as it happened in the case of : Carlill v Carbolic Smoke Ball Co. 1 QB 256
TYPES OF OFFERS
1. Cross offers
This is a situation where a party dispatches an offer to another who has sent a similar offer and
the two offers cross in the course of communication. No agreement arises from cross offers for
lack of consensus.eg in the case of TINNY V. HOFFMAN [1873], whereby Hoffman (a
defendant) wrote a letter to Tinny (a plaintiff) offering to sell him 800 tons of iron at 69$ per
tons. On the same day Tinny wrote a letter to buy 800 tons at 69$ per tons. This letter crossed in
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the post. Tinny contended that there was a good contract. It was held that no contract because it
is a cross offer.
2. Counter offer
This is a change, variation or modification of the terms of the offer by the offeree. It is a
conditional acceptance. A counter offer is an offer in its own right and if accepted an agreement
arises between the parties.
Its legal effect is to terminate the original offer as in Hyde v. Wrench (1840), the defendant
made an offer on June 6th to sell a farm to the plaintiff for £1,000. On 8th June, the plaintiff
wrote to the defendant accepting to pay £950 for the farm. On 27th June, the defendant wrote
rejecting the £950. On 29th June the plaintiff wrote to the defendant accepting to pay £1,000 for
the farm. The defendant declined and the plaintiff sued for specific performance of the contract.
It was held that the defendant was not liable as the plaintiff‟s counter offer of £950 terminated
the original offer which was therefore not available for acceptance by the plaintiff on 29th June
as the defendant had not revived it.
.3) Conditional Offer
Conditional offer is that one which is made subject to a certain condition or certain conditions
which are required to be fulfill
PROPOSALS (OFFER) HOW COMMUNICATED
To be effective an offer must be communicated by the person making it to the offeree. An offer
can only be accepted after it has come to the knowledge of the person to whom it is made.
Section 4 (1) of the LCA provides that: “communication of an offer is deemed to be complete
when it comes to the knowledge of the person to whom it is made” e.g.in R v Clarke (1927)
offer was not communicated (read also section 3)
Termination or Lapse of an Offer
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Termination of an offer is referred to by s. 6 of the Law of Contract Act under one general word
as revocation of a proposal. More or less of the events mentioned below are enumerated under
this section as acts which when done would occasion revocation
(1) The offer lapses after stipulated or reasonable time.
The offer must be accepted by the offeree within the time mentioned in the offer and if no time is
mentioned, then within a reasonable time. The offer lapses after the time stipulated in the offer
expires if by that time offer has not been accepted. If no time is specified, then the offer lapses
within a reasonable time. What is a reasonable time is a question of fact and would depend upon
the circumstances of each case
Example in the case of Rams gate Victoria Hotel Co. v. Monte lore (1860) L.R.I. Ex. 109]
Monte lore offered to purchase shares in a company by writing a letter on June 8. The company
allotted the shares on 23rd November. Monte lore refused the shares. It was held: That the offer
lapsed as it was not accepted within a reasonable time
(2). An offer lapses by the death or insanity of the offeror or the offeree before acceptance.
Section 6(d) provides that a proposal is revoked by the death or insanity of the proposer, if the
fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
Therefore, if the acceptance is made in ignorance of the death, or insanity of offerer, there would
be a valid contract. Similarly, in the case of the death of offered before acceptance, the offer is
terminated.
3. An offer terminates when rejected by the offeree
Another way in which an offer can be terminated is if the offer is rejected by the offeree by any
of the following acts: if he turns down the offer and If he makes a counter offer. A person will be
said to have made a counter offer if his acceptance contains new terms which are different from
those which are contained in the original offer. An offer terminates if the offeree refuses to
accept the same, the refusal may be express or implied from the conduct of the offeree e.g.
silence by the offeree amounts to a rejection as was the case in Felt house v Bindley.Also in the
case of HYDE V. WRENCH (1840) 334, the defendant in this case (Wrench) on the offered to
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sell an estate to the plaintiff (Hyde) for £ 1000, Hyde, in his purported acceptance, was willing to
buy it at 950 £. Wrench rejected. Finally the plaintiff wrote to the defendant that he was now
willing to pay£ 1000 as proposed by the defendant. However the defendant refused to accept £
1000.
The plaintiff brought an action for breach of contract. It was held that by his letter of proposing
£ 950 the plaintiff had rejected the original offer and he was no longer able to revive it by
changing his mind.
4. An offer terminates when revoked by the offeror before acceptance
This is the import of s. 5 (1) of the LCA, which reads as follows: “A proposal may be revoked at
any time before the communication of its acceptance is complete as against the proposer”..
Revocation of an offer must be communicated to the offeree and it becomes effective when it
comes to the knowledge of the latter. In Byrne v Tienhoven [1880] 5 CPD 344 it happened as
follows:
On October 1st 1880:Vantienhoven, from England by post, sent an offer to sell tin plates to
Byrne in New York
On October 8th 1880: Vantienhoven posted a letter of revocation of offer.
On October 11th 1880: Byrne, telegraphed acceptance
On October 15th 1880: Byrne, confirmed his acceptance by letter
On October 20th 1880: The revocation letter which was sent by Vantienhoven on October 8th
to Byrne reached him.
When van Tienhoven refused to sell the tin plates relying on his revocation, the court held that
there was a valid contract made between them because the revocation letter had not been
effective until it was actually communicated which was after the acceptance had already arrived.
5. An offer terminates by not being accepted in the mode prescribed, or if no modeis

prescribed, in some usual and reasonable manner.
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Failure of a condition subject to which the offer was made may terminate an offer. Where, for
example, the subject matter of the offer is destroyed or is no longer in existence before
acceptance the offer lapses. Or, where an offer is subject to the fulfillment of a condition
precedent by the offeree before acceptance, failure to fulfill the condition precedent causes the
offer to lapse. In sometimes offers may be accompanied with conditions therefore the offeree
must fulfill the conditions stipulated in accepting the offer since failure to fulfill it the offer come
to an end. The same position was explained under Section 6(c) of the Law of Contract Act [CAP
345 R.E. 2019] provides that a proposal is revoked by the failure of the acceptor to fulfill a
condition precedent to acceptance.
ACCEPTANCE
As soon as the offer is accepted, then there is a concluded agreement between the offeror and the
offereeS.2 (1) (b) of Law of Contract Act, Cap. 345 R. E. 2019 defines acceptance thus, “When
one person to whom the proposal /offer is made signifies his accent there to the proposal is
said to be accepted”
Example: X offers to sell his car to Y for Rs. 1,00,000. Y agrees to buy the car for Rs. 1,00,000.
Y‟s act is an acceptance of X‟s offer.
Rules Regarding a Valid Acceptance
1). Acceptance may be express or implied
An express acceptance is acceptance given in words spoken or written. Implied acceptance is

implied from the circumstances or from the conduct of the offeree. Therefore when a person
inters a bar is implied acceptance of the invitation of the bar man /owner. Likewise as in the case
of CarillVs Carbolic Smoke balls (supra) The lady MrsCarill in purchasing and using the
Carbolic smoke Balls as directed she gave her conduct acceptance
2). Acceptance should be given by the offeree and the offeree only.
According to S. 2 (1)( b) of Law of Contract Act, Cap. 345 R. E. 2019 makes it clear that;
“When the person to whom the proposal is made signifies his assent there is the proposal is
said to be accepted”
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So as specific offer can be accepted to only by the person to whom it is made. But a general offer
made to the world at large can be accept by anyone having knowledge of it and perform in
accordance with the terms of such offer.
3. Acceptance must be absolute and unqualified (unconditional)
According to S. 7(a) of Law of Contract Act, Cap. 345 R. E. 2019 in order to convert a
proposal/offer into a promise the acceptance must be absolute and unqualified. Absolute implies
acceptance of the offer in total. The offer must also be unconditional. In the sense that the
acceptor should not attach or vary any condition to the offer/ acceptance. If acceptance is
condition or there is any variation of the offer then it will cease to be acceptance. It will be
something else. This is also known as The Mirror image rule: The rule states that an offer must
be accepted exactly without modifying it.
4. Acceptance must be in the mode prescribed or some usual and reasonable mode.
S. 7 (b) of Law of Contract Act, Cap. 345 R. E. 2019 provides it clearly that the acceptance must
be expressed in some usual manner unless the proposal prescribes the manner in which is to be
accepted. If the proposal prescribes a manner in which it is to be accepted and the acceptance is
not made in such manner the offeror may within a reasonable time after the acceptance is
communicated to him insist that his proposal should be accepted in the prescribed manner and
not otherwise. But if he fails to do so he is deemed to have accepted the acceptance.
5. Acceptance must be communicated.
Once an offer is accepted, the said acceptance must be communicated to the offeror.(S.3 of LCA)
and S.4(2) of LCA
This is seen in the case of in the case of Felthouse v Bindley [1862] 11 CB (NS) 869, or 142
ER 1037 Simple facts of the case: Felthouse offered in writing to buy a horse from his nephew
John in which he stated that: “If I hear no more about him, I consider the horse is mine at £30
15s.‟ There was no reply form his nephew. Later the uncle claimed that there was a binding
contract between the nephew and him.
The court held that there was no contract because silence did not amount to acceptance
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6. Acceptance must be given before the offer lapses or is revoked.
An offer may provide that it will remain open for a fixed period of a time. The law says that such
offer must be accepted within the fixed period. Otherwise not purport to have accepted such
offer. Note: revocation of an offer can occur before is accepted. It can also occur automatically
in case of the death or instantly of the offeror.
7. Acceptance must be made within a reasonable time.
Where no time for performance of an offer the law says that to make such acceptance legally
binding the acceptance should be given within a reasonable period.
COMMUNICATION OF ACCEPTANCE
The matching acceptance must be communicated to the offeror. In HOUSEHOLD FIRE

INSURANCE CO. V. GRANT (1879) 41 LT 289, the court said that an acceptance which only
remains in the breast of the acceptor without being actually or by legal implication
communicated to the offeror is no binding acceptance. It must be remembered that an acceptance
must be communicated and that communication of acceptance must be complete.
Mode of Communication [Sec. 3]
Section 3 of the Act refers to the two modes of communication:
1. Communication by act.
2. by omission.
Act includes by conduct or by words, written or oral. So communication can be by letter,

telegram, telephone etc. Omission includes conduct or forbearance on the part of one person
which has the effect of communication.
When is Communication Complete [Sec. 4]
1. Communication of Offer is complete when it comes to the knowledge of the person to

whom it is made.
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2. Communication of an acceptance is complete:
a) as against the proposer, when it is put in course of transmission to him so as to be out of
the power of the acceptor to withdraw the same; and
b) as against the acceptor, when it comes to the knowledge of the proposer.
As the general rule communication of acceptance is effected by doing any act that has an effect
of communicating it to the offeror as per s.3 and s.4 (2) of the Law of Contract Act [CAP 345
R.E. 2019], however there is some exceptions to that general rule that for example when the
offer indicates performance would be a mode of acceptance as in the case of CARILL V.
CARBOLIC SMOKE BALL COMPANY (supra),
COMMUNICATION OF ACCEPTANCE BY POST
The communication of acceptance by post is viewed in two aspects that the communication of
acceptance by post under the common law position and the position of Tanzania.
Communication of acceptance under common law rule is that once a letter of acceptance has
been posted a contract is formed and both parties become irrevocably bound. Therefore the
acceptor has no way to revoke his acceptance by a speedier means such as by telephone. In the
case of ADAM V. LINDSELL [1818] 106 ER 250 (K.B), whereby the court said that where
acceptance is communicated by post a contract arises on the date when the letter of acceptance is
posted in due course.
Also in the case of HOUSEHOLD FIRE INSURANCE CO LTD V. GRANT (1879) 41 LT

289, in this case Grants, the defendant applied to buy shares in the plaintiff‟s company. A letter
of allotment was posted to the defendant, but it never reached him. The company went into
liquidation and liquidator on behalf of the company sued for the balance out standing on the
share. The defendant argued that he was not bound to pay since he hadn‟t received a reply to his
offer to buy shares.
It was held that a contract was made at the moment the letter of allotment was posted or in other
words the contract was completed when the letter was posted.
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THE POSITION UNDER LAW OF CONTRACT ACT & TANZANIA
The law provides that communication of an acceptance is complete as against the proposer, when
it is put in the course of transmission to him, so as to be out of the power of the acceptor as per
section 4(2)(a) of the Law of Contract Act [CAP 345 R.E. 2019].
Also communication of acceptance is complete as against the acceptor, when it comes to the
knowledge of the proposer as per section 4(2)(b) of the Law of Contract Act [CAP 345 R.E.
2019].
REVOCATION OF AN ACCEPTANCE
Revocation means “taking back” or “withdrawal”. It may be a revocation of offer or acceptance
An acceptance may be revoked at any time before the communication of its acceptance is
complete as against the acceptor, but not afterwards as per section 5(2) of the Law of Contract
Act (supra). And, the communication of acceptance is complete as against the acceptor, when it
comes to the knowledge of the proposer.
Revocation of an acceptance is not effective until its communication is complete. The
communication of a revocation is complete as against the person who makes it, when it is put
into a course of transmission to the person to whom it is made, so as to be out of the power of the
person who makes it as per section 4(3) a of the Law of Contract Act (supra) and as against the
person to whom it is made, when it comes to his knowledge as per section 4(3) b of the Law of
Contract Act.
N.BUnder common law; once the acceptance letter is posted both parties (offeror and offeree)
are irrevocably bound. That is, there is already concluded contract.
Under the Law of Contract Act,
Cap. 345 R. E. 2019 the acceptor (offeree) is not bound by merely posting his acceptance letter.
He is only bound when the offeror receives the acceptance letter.
EFFECT OF THE ACCEPTANCE WHEN IT IS PROPERLY MADE
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(i). According to s. 2(1) (b) a proposal when accepted becomes a “promise” as it states that
“When the person to whom the proposal is made signifies his assent thereto, the proposal
is said to be accepted, and a proposal, when accepted, becomes a promise”
And according to S. 2(1) (c)
(i). the maker of the proposal becomes the “promisor”

(ii). The acceptor of the proposal becomes the “promisee”
Therefore The promisor and the promisee are the parties to an agreement
OTHER ELEMENTS (ESSENTIALS) OF LEGAL CONTRACTS
As stated earlier, In the formation of a contract the law provides for a minimum number of
prerequisites or sometimes are referred to as essentials of a contract, before an agreement can be
a contract. Some of these are expressly stipulated in the Law of Contract Act, Cap 345 under
section 10 and these are
FREE CONCENT
To consent to something, generally, means to agree to it. Remember s. 10 of LCA free consent
is an important element to contract.
S. 13 of the LCA defines consent as follows:
When two or more persons are said to consent when they agree upon the same thing in the same
sense
Furthermore the Law of Contract Act elaborate Free consent has its special meaning under S.14
Where it state that
(1) Consent is said to be free when it is not caused by coercion, fraud, undue influence
misrepresentation, or mistake.
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The above factors are also known as vitiating factors of a contract or factors that can affect free
consent of any party to the contract and we are going to see them in detail later on in their
specific topic
CAPACITY TO CONTRACT
Capacity to contract refers to competence to contract. As the general rule every person is
competent to contract. The word person in legal language means artificial and natural person.
Natural person is the human being but artificial person are companies, associations, and legal
entity. So competence here deals with both artificial and natural person.
As the general rule every person is competent to contract as per section 11(1) of the Law of
Contract Act [CAP 345 R.E. 2019], however there is exception to the general rule that a person
to be competent to contract must no follow to the following exceptions.
Firstly a person who has not attained the age of majority is incompetent to contract.
Secondly the person who is of unsound mind is also incompetent to contract.

Thirdly a person who is disqualified from contracting by any law to which he is subject is
incompetent to contract.
Point to note is that the third exception applies also to artificial person that is companies,
associations and legal entity. The effect of an agreement entered by a person who is incompetent
to contract is void ab initio and this was explained under section 11(2) of the law of Contract Act
[CAP 345 R.E. 2019].
MINOR AND CAPACITY TO CONTRACT
A minor is the person who is under the age of the majority and the age of the majority as per
section 4 of the Law of Child Act is eighteen years therefore any person who is under the such
age is said to be incompetent to contract. The law on minors or infants contracts is based on two
principles that are:
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Firstly, the law is there to protect minors from their inexperience, hence to invalidate agreements
which are unfair to the minor.
Secondly, the law is not to cause unnecessary hardship to adults who deal fairly with minors.
Under the second principle the law recognizes some contracts with minors as valid.
As the general rule a minor has no capacity to contract and the contract entered to by a minor is
void as per section 11(2) of the Law of Contract Act [CAP 345 R.E. 2019]. However there is
exceptions to the general rule that when a minor entered into a contract relating to the suppliers
of necessaries of the life is valid contract as per section (68) of the Law of Contract Act (Supra).
The same position was explained by Morton J in the case of NASH V. INMAN [1908] VOL 2
QB 1 , in this case Morton J argued that an infant is incapable of making a contract but if a man
satisfied the needs of the infant the law will imply obligation to repay him for so services
rendered and will enforce that obligation against the estate of the infant.
The definition of necessaries for life was defined in the case of CHAPPER V. COOPER [1845]
13 L.J EX 286 whereby Underson J tried to define what he considered being necessaries for life
as follows;
“…Things necessaries are those without which an individual cannot reasonably exist such as
food, raiment, lodging and the like which there is no doubt…”
Generally it is important to note that although a contract entered into with minor is void within
the meaning of S.11 (2) of the Law of Contract Act (Supra)., but such contract if it is for
necessaries of life delivered to minor will be enforceable by virtue of section 68 of the Law of
Contract Act (Supra) and also under the Section 4 of the Sale of Goods Act [CAP 214 R.E.
2002].
PERSONS OF UNSOUND MIND
Unsoundness of mind & unsound mind is the person when making a contract he/she is not
capable of understanding it and doesn‟t form a rationale judgment as to its effect upon his
interest and this was explained under section 12(1) of the Law of Contract Act.
The following persons are also considered to be the persons of unsound mind.
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1. Idiot: An idiot is a person who has completely lost his mental faculties of thinking for rational
judgement. All agreements, other than those for necessities of life, with idiots are absolutely
void.
2. Lunatics: A lunatic is a person who is mentally deranged (disordered) due to some mental
strain or other personal experience but who has some lucid intervals of sound mind.
3. Drunken or intoxicated person: A drunken or intoxicated person is a sane person who is

delirious from fever or who is so drunk that he cannot understand the terms of a contract or form
a rational judgement as to its effect on his interest
As per section 12(2) of the Law of Contract Act, a person who is of unsound of mind is
incompetent to contract. However the said section allows a person who is usually of unsound
mind, but occasionally of sound mind, to make a contract when he is of sound mind
The law forbids a person who is usually of sound mind, but occasionally of unsound mind, to
make a contract when he is of unsound mind as explained under section 12(3) of the Law of
Contract Act.
Under English law a person of unsound mind is competent to contract, although he may avoid
his contract if he satisfies the Court that he was incapable of understanding the contract and the
other party knew it. The contract is voidable at his option.
It becomes binding on him only if he affirms. But that is the position under common law which
doesn‟t apply in Tanzania so there is no need to rely on it.
PERSONS DISQUALIFIED BY ANY LAW
Also there other specific laws which prevent a person to enter into a contract such as The
Bankrupt Act [CAP 25 R.E. 2019], under section 3 of such Act provide that a person who is
declared bankrupt is prevented to enter into a contract and that person can be either natural or
artificial person.
Also Joint Stock Company and Corporations incorporated under Special Acts: being an artificial
person, and having a separate legal entity, can hold property; can purchase or sell property; and
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can sue or be sued in the Courts of Law. But it cannot enter into contracts which are strictly of
personal nature
Another instance is in case of an enemy of the state for instance The laws of Tanzania cannot
allow a Tanzanian citizen to enter into a contract with a person who has been declared an
enemy of Tanzania and even if it happen, the same cannot be enforced since it is void from the
beginning
CONSIDERATION
Consideration is one of the most important elements of a valid contract. Under both two
positions i.e. Tanzania and common laws for an agreement to have legal force it must be
supported by consideration. By s. 2 (1)(d) of LCA consideration is defined as an act or omission
done by or a promise to do an act or omission by the promisee at the desire of the promisor or
any other person. The section states as follows.
Such act is taken as a consideration because it will influence the decision of the promisor to
perform further obligations of the contract
when, at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration for the promise;
Under Tanzania position S. 2 (1) (d) of L.C.A provides for three forms of consideration
1. Future consideration
2. Present consideration
3. Executed consideration
4. Executory consideration
5. Past consideration
S. 2(1) (d) of L.C.A provides for future consideration in the sense that a person may promise to
do or to abstain from doing an act. The words “promises to do or to abstain” from doing
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something as indicate in S. (2) (1)(d) indicate future consideration and the words “does or
abstains” from doing, indicates Present consideration. Again the words “has done or abstained
from doing” indicates past consideration,
Also in section 2(1)(d) does provide for
a) Executory consideration, in that a person may promise to do or abstain from doing (Here
consideration is executory because it is not yet performed)
b) Consideration may be executed in a sense that a person may already have done or
abstain from doing something
Types of Consideration under common law;
Under common law consideration may take three (3) forms;-
1. Executory
2. Executed
3. Past consideration.
executory consideration
In this consideration there is already concluded contract but performance is pending ( parities
have not yet performed their duties but are expected to perform them in future.
Example Rehema (a shopkeeper) promises to sell a pair of trouser to Joseph. Joseph agrees and
promises to pay the price of the trouser as soon as Rehema transferred the same to him. Here the
contract has already been concluded between Rehema and Joseph i.ebRehema to deliver the
trouser to Joseph and Joseph to pay the price of the trouser
This is executory consideration in the sense that there is already concluded contract but
performance is pending is outstanding.
Executed consideration
Unlike executory consideration which comprises a promise to be performed in future an

executed consideration consists of an act which has been done in response to a promise.
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Example Joseph promises a reward of Tshs 2 mill to anyone who reports to him on whereabouts
of his fiancée who absconded from home 2weeks ago
Neema may report to Joseph of where about of his fiancée provided that she knows her. Neema‟s
act of reporting to joseph of where about of his fiancée amounts to not only acceptance of
Joseph‟s offer of Tshs 2,000,000,000 but also to a consideration for Joseph promise.
Who may Furnish Consideration?
Under common law the law provides it clearly that consideration must be furnished by the
promisee and the promisee only. See Tweddle vs. Atkinson 123 ER 762where it was held that
It is an establishment principle that no stranger to the consideration can take advantage of a
contract although made for his benefit.
Position Under Law of Tanzania Law Contract Act, Cap 345 R.E 2019
Unlike under common law where by consideration must move from promisee and the promisee
only under L.C.A consideration may be furnished by 3rd parties. Who are not part to the
contract. See S.2 (1) (d) of L.C.A which provides to the effect that consideration may be
furnished either by the promise who is also in fact a part to the contract or any other 3rd party.
(who is not party to the contract.)
However Under L.C.A what is required is that consideration being a legal requirement it must be
furnished as required S.25 (1) and 23(1) of LCA. Here it doesn‟t matter who has furnished it.
Past Consideration
Past consideration is that type of consideration which was done before the promise was made.
Past consideration therefore consists of an act or abstinence which was done before the promise
was made.
Example Say Rehema has lost her mobile phone make Nokia. Aisha the very best friend of
Rehema finds and returned to Rehema the lost phone. Rehema in recognition of this service
promises to pay Aisha 200,000Tshs
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In this case the act (finding and returning the lost phone) to the owner is not done in response to
the promise or is not induced by the promise of 200,000 Tshs.The promise of Tshs 200,000/=
here is given for an Act which was done before any promise
As a general rule past consideration is not good to support a contractual claim, however, in
certain circumstances, past consideration is sufficient to support a contractual claim.
Exceptions to the Past Consideration
1) Past service rendered at the request of promisor.
Any past act or omission done or abstained from being done voluntarily at the desire of the
promisor may constitute good consideration for a subsequent promise. The court recognised
exception in the case of Lampleigh Vs. Brathwait [1615] E R 225. In this case the D
(brathwait) killed one patric mahume. He asked the P (lampkigh) to do all what he can to make
sure that he scured pardon for him from the king. The P. tried his level best and incurred
expenses and managed to secure pardon for the D. The D later promised the P USD 100 for the
trouble the amount which he failed to pay as promised. The P sued him to recover the amount
promised
It was held that the defendant is liable and the court observed that the services rendered though
past were rendered at the request of D
2. A promise to compensate for a past act
A promise to compensate a person for a past act voluntarily done for the promisor is also
enforceable under section 25(1) (b) and no consideration need to be proved. The basis for the
promise‟s claim will be the past voluntary act which one may call it past consideration
Therefore the provision could be considered as an exception to the rule that past consideration is
no consideration
LEGALITY OF CONSIDERATION
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For a valid contract it is essential that the object or consideration of the agreement must be
lawful. According to Sec. 23 of the Law of Contract Act, the objects and the consideration of an
agreement shall be unlawful in the following cases:
1. Where it is forbidden by law: As a matter of fact, an act is forbidden by law, when it is

punishable by criminal law of the country, or when it is prohibited by special legislation
or by the regulations made by a competent authority under power derived from the
legislature.
2. Where it defeats the provision of any law: It is of such nature that, if permitted, it
would defeat the provisions of law, e.g., purchase of land being sold for arrears of land
revenue by the defaulter, or an agreement by a debtor not to raise the plea of limitation in
a suit by the creditor.
3. Where it is fraudulent: If the two parties agree to practice a fraud on third party, then
the agreement between the parties is unlawful and void.
4. Where it is injurious either to the person or his property: It involves or implies injury
to the person or property of another, e.g., an agreement to indemnify a person against the
consequences of publication of a libel.
5. Where it is regarded as immoral: The term „immoral‟ depends upon the standard of
„morality‟ prevailing at a particular place and time. If the consideration for the agreement
is an act of sexual immorality, for example, illicit co-habitation and prostitution, the
agreement is illegal.
6. Where it is opposed to public policy: The agreements that are injurious to the public or
which are against the public good or public welfare are void.
RULE OF “NO CONSIDERATION, NO CONTRACT
According to Section 25, an agreement made without consideration is void. But gratuitous
promise shall be enforceable by law if the promisee on the faith of such promise suffered a
liability as suffering of detriment forms a valid consideration.
Exceptions to the General Rule of “No Consideration, No Contract”
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The following circumstances under which the agreement is valid and enforceable even if it is
made without consideration:
1. Agreements made on account of natural love and affection [Sec. 25 (1)(a)]: This clause
lays down four essential requirements for the validity of an agreement made without
consideration. They are
a) The agreement must be in writing;
b) It is registered under the law;
c) It is made on account of natural love and affection; and d) It is between parties standing in a
near relation to each other.
Example:
A, for natural love and affection, promised to give Rs. 1,000 to his son B. A put his promise to B
in writing and registered it. This is valid contract.
2. Promise to compensate for past voluntary services [Sec. 25 (1)(b)]: Such promise made
without consideration is valid:
a) If the act was done voluntarily;
b) For the promisor or something which the promisor was legally bound to do;
c) The promisor must be in existence at the time when the act was done; and
d) The promisor must agree now to compensate the promise.
Example: X finds Y‟s purse and gives it to him. Y promises to give Rs. 500 to X. This is a valid
contract even though the consideration did not move at the desire of Y, the promisor.
3. Promise to pay time-barred debt [Sec. 25 (1)(c)]: When a debtor makes a written and
registered promise, under signature of his own or that of his agent, to pay a time-barred debt, no
fresh consideration is needed. The following conditions must be satisfied for the application of
this exception:
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a) The promise to pay must be definite and express;
b) The promise must be in writing;
c) The promise must be signed by the promisor or his authorized agent;
d) The debt must be time-barred, i.e., the limitation period for the recovery of the debt, must be
expired.
Example:
X owed Rs. 2,000 to Y. This debt was barred by Limitation Act i.e., the limitation period for the
recovery of debt has already expired. X signed a written promise to pay Rs. 1,000 to Y on
account of this debt. This is a valid contract.
INTENTION TO CREATE LEGAL RELATIONS
Tanzania i.e. under law of the Law of Contract Act, Cap. 345 R. E. 2019, there is no provisions
requiring that an offer or its acceptance should be made with the intention of creating legal
binding relations see s.10 of the Law of Contract Act, Cap. 345 R. E. 2019. However under
English law or common law position the law clearly provides that in any agreement which is
intended to become a binding contract, there must be a common intention of the parties to enter
into legal obligations.
However the courts may not recognize these agreements as legally binding contract if they feel
that there was no intention on the parties even if parties themselves thought that their agreement
intended to create legal relation therefore the question whether a contract intended to create
legal relation or not will be determined by court in consideration of the cericumstances of that
case.
At this point we must note that in day today‟s life people do enter into many types of agreement.
These agreements are categorized into two main branches via.
I. Social/ domestic agreements in nature
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II. Commercial/business agreements in nature.
Social/domestic agreements.
These include arrangements between husband and wife, family members and friends etc. In this
branch or category, there is a rebuttable presumption that social/ domestic agreements do not
give rise to legally enforceable contracts even though they may have the outward appearance of a
contract.
The case of Balfour vs. Balfour [1919] 2 KB 571 is a good example in this category. Facts of
the case is that the defendant and his wife were enjoying leave in England. When the defendant
was due to return to Ceylon where he was employed his wife was advised by reason of her health
to remain in England. The Defendant agreed to send her an amount of $30 monthly for the
probable expenses of maintenance. The defendant did send the agreed amount for quite
sometimes, but differences afterwards arose which resulted in their separation after this
separation the defendant cut off $ 30 which he used to send to the wife. The wife sued him to
recover $ 30 purporting that there was a binding contract between her and the husband. The
plaintiff could not maintain this action.
Lord Atkins had these to say; “There are agreements between parties which do not result in
contract within the meaning of that term in our law the Ordinary example is where two parties
agree to take a walk together or where there is an offer and acceptance of hospitality. No body
would suggest in ordinary circumstances that these arrangements result in what we know as
contracts and one of usual forms of an agreement which does not constitute a contract appears to
be the arrangements which are made between husband and wife. These arrangements do not
result in contract at all even though there may be what would constitute consideration for the
agreement. They are not contracts because parties did not intend that they shall be attended by
legal consequences”.
Comment: Anything done out of “Natural love and affection” (i.e. when a couples is at happy
times) cannot be said it was intended to make the parties legally bound
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Note: as stated earlier that this presumption is rebuttable i.e it can be rebutted when there is
enough evidence that parties indeed intended to create legal relations for example;
If there is reliance on and formalization of the arrangement between the parties i.e. put the
arrangement in writing
For instance in the case of Parker v. Clarke [1960] 1 All ER. 93
Mrs. Clarke asked in writing her niece Mrs. Parker to sell her matrimonial home and go to live
with Mrs. Clarke and her husband‟s at their house which was big enough to accommodate the
two families. The letter carried with it a promise that the Clarke would prepare a will which
would divide 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:
a) There was intention to form legal relation evidenced by the act of the Parkers selling
their home while relying on the enforceability of the promises.
b) The changing of their will by the Clarks had an effect of intending the agreement to be
legally binding.
When a couple is about or has separated.
Merrit v Merrit [1970] 1W.L.R 1211
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.
The court held that: there was this intention to create legal relations since the general
presumption that there is no this intention is not available for spouses who are not living together
peacefully or are about to separate or have separated already
Business or Commercial arrangements
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Just as we discussed in domestic arrangements there is a rebuttable presumption that parties
intend to face legal consequences in their contractual dealings. Unless the court finds that the
terms of a particular contract suggest otherwise See for instance Edward Vs. Sky ways LTD
[1964] 1 W.L.R 349.In this case the plaintiff was declared redundant by his employers and
promised an extra sum. Later on the employer refused to pay the sum agreed and argued that
there were no contractual reasons why they should do so. They however admitted that there was
consideration because the plaintiffs had relied and acted on their promise. But they argued that
there was no intention to create legal relationship.
HELD: This was not a mere domestic agreement but business arrangements
Note: Because in contract parties are free to negotiate their agreement, a contrary intention may
be proved by their dealings. For instance in Rose &Franklin Co. Vs. JrCrompton&Bros
[1923] 2 KB 261.In this case an exhaustive agreement was drawn between one American and
two English firms for their dealings in paper tissues. “This arrangement is not intended into as a
formal legal agreement and shall not be subject to the US or in England “The agreement was
however terminated by one of the parties contrary to its terms. The other party (American firms
brought an action for the breach of contract.
HELD: The document did not constitute a binding contract as there was no intention to affect
legal relations.
The test of Contractual Intention
The intention of the parties, (whether or not that the parties intend to face legal consequences
should anything goes wrong in their dealings) must be ascertained from the terms of the
agreements and the surrounding circumstances.
The court sometimes apply objective test as the best way of discovering whether the parties
intended to create legal relations for example in the case of Carlillvs Carbolic smoke ball
company the court applied the “ the objective test” and asked whether a bystander after taking
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into account all the circumstances of the case thinks that the parties intended to be bound.
Therefore it is for the court in each case to find out as to whether or not the parties must have
intended to enter into legal obligations.
Note: since this is freely negotiable agreements parties are at liberty to depart from the general
rule.
THE DOCTRINE OF PRIVITY TO CONTRACT
A contract has two parties that are the promisor and promisee. Person who is not a party to a
contract is called the third party or stranger. Privity means relationship which exists between
people as the result of their participation in some transaction or event. Privity of contract is the
relation which exists between the parties to a contract which enable one person to sue another on
it. The privity of contract principle is to the effect that only parties to a contract acquire rights
and incur liability under it therefore a stranger to a contract cannot sue or be sued on it.
The historical background of privity to contract has established or developed through English or
common law cases as follows;
The first case in the development of doctrine of privity of contract is the case of TWEDDLE V.
ATKINSON (1861) 123 E.R 762, In this case two couples intended to get marriage; before the
marriage the parents that are father of the husband and father of the wife agreed that the father of
the wife should pay £290 to the husband and the real father will only pay £ 100. This promise
was not fulfilled by the father of a wife since he paid only £ 90. Therefore the husband instituted
a case against the father of the wife. The issue before the court was whether the husband of a
wife who is not the party to the contract could sue on it.
It was held that the husband has no right to sue because he is not a party to a contract. This is
because there is existence of relationship between two fathers that is the father of the husband
and the father of the wife. The husband is regarded as a beneficiary or a stranger. No act could be
brought to the court by the party who is stranger to the contract. Also it is established principle
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that no stranger to the consideration can take advantage of the contract although made for his
benefits. It is important to note that in this case the plaintiff was both stranger to contract and
consideration.
The same position was approved in the case of DUNLOP PREUMATIC TYRE CO LTD
VS.SELFRIDGE & CO LTD [1915] A.C 847,The appellants in this case (Dunlop) who was
manufacturers of motorcar tyres sold some of the Tyres to company known as Dew and Co.
with an agreement that these tyres will not be sold below a certain (list) price. Dew & Co on
their side sold some of the tyres to the respondents (Selfridge& Co.) with an agreement that the
respondents shall observe conditions as to price and the respondents also promised that they
would pay the appellants a sum of $5 for every tyre sold below the agreed (list) price.
The respondents sold some of tyres below the list price and the appellants brought an action
against them (respondents) to recover damages for the breach. The House of Lords held that: The
plaintiff could not maintain an action against the respondents because there was no contract
between the twoparties.
Their Lordship reasoned thus stated as follows:

“…In the law of England certain principles are fundamental. One is that only a person who is a
party to a contract can sue or be sued on it. Our law knows nothing of a Jus quaesitumtertio
arising by way of contract. Such a right may be conferred by way of property as for example
under a trust but cannot be conferred on a stranger to a contract as a right to enforce the
contract in personam..”
The above quotation is to the effect that in England only people who are part to the contract can
sue under it and obtain some rights there to and not a third party whohaven‟t furnished
consideration or being the party to contract, though sometimes by a way of trust or any other
means a stranger to contract can sue under the contract and obtain some rights thereto.
The term Jus quaesitumtertio therefore means the right of a third party to enforce a contract to
which he is not a party.
Another case on the development of privity of contract is the case of BESWICK V. BESWICK
[1966] 3ALL E.R. 1 (C.A), In this case the deceased agreed with the company that that the
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company should employ him as a consultant and also the company should pay his wife E5 per
week if he dies. So when he dies the wife claim for it in two grounds firstly she is a beneficiary
of E 5 and secondly she was administrator of her husband estate.
It was held that as administrator the widow could obtain an order of specific performance which
would enforce the provision in the contract for benefit but that in her personal capacity for
arrears she had no cause of action.
THE POSITION IN TANZANIA ON THE DOCTRINE OF PRIVITY OF CONTRACT
In Tanzania the Law of Contract Act is silent on the principle of privity of contract. Though
section 2(1) d [CAP 345 R.E. 2019] of the Law of Contract Act permits a third person to furnish
consideration for the promisee but doesn‟t allow him to sue on the contract on the ground that he
furnished consideration.
By looking different cases, it is seen that the doctrine of privity of contract is recognized in
Tanzania but its applicability may have nothing to do with customary law contract for example
in the case of Ephraim Obongo v. NaftaelOkeyo (1968) HCD n.288, The defendant, a lorry
owner, used to collect cassava from plaintiff for selling. On one occasion, his lorry driver and
turn boy went to plaintiff to collect some bags of cassava. Plaintiff refused to deliver the goods,
demanding that they first produce some empty cassava bags which they had evidently taken
another day, or some money.
They returned to defendant‟s wife, who gave them 24 bags and T.shs. 190/-, and sent a not
promising that everything would be taken care of when her husband returned from a journey.
Plaintiff received no more money, and sued in Primary Court for the value of the cassava he had
given them, and for some other empty bags not returned, less the money and bags received. The
Primary Court held that since the transaction leading to the disputes was between plaintiff and
the defendant‟s wife the proper party to the suit was the defendant‟s wife and not the defendant.
On that ground he dismissed the suit. The case went on appeal to the District court and then to
the High Court. Seaton J observed that the case involved an issue of privity of contract, “a rather
subtle and technical point” which, perhaps Primary Court couldn‟t deal with. But was not
convinced that a claim of this nature could not have been brought under customary law and said
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“…In suits between Africans living within a local community and doing business amongst
themselves on a basis of trust, I consider it would not be in the interests of justice to import
technical notions of privity of contract and other such notions, unless clearly required by the law
to do so…”
However in cases which does not involve contract governed by customary law a principle of
privity of contract is applicable. Under that circumstance A stranger to a contract cannot sue on
his or her own name even though he is the beneficiary of the arrangement or he furnished
consideration.
Example in the case of AUSTACK ALPHONCE MUSHI vs BANK OF AFRICA

TANZANIA LTD AND MABUNDA AUCTION MART CO. LTD CIVIL APPEAL NO.
373 OF 2020(unreported) Austack Alphonce Mushi ("the appellant"), sued Bank of Africa
Tanzania Ltd. and Mabunda Auction Mart Co. Ltd. ("the first and second respondents"
respectively) for breach of a loan agreement entered between Masaleni Linner Company Ltd. (in
which the appellant was a shareholder and a director) and Bank of Africa Tanzania Ltd. The
Loan were secured by, by a legal mortgage over the appellant's properties, namely, Plot No. 191,
Block 'T', Mwanjelwa area, Mbeya City and Plot No. 1541, Block 'M', Forest Area, Mbeya City
It turned out that Masaleni Linner Company Ltd did not repay the loan as agreed and the first
respondent wanted to sell the mortgaged properties. Against this, the appellant initially instituted
a suit over the matter in the District Land and Housing Tribunal of Mbeya, which ended in vain.
Still unyielding, the appellant instituted the suit in the High Court
One of the issues discussed was whether the appellant was a party to the loan agreement for him
to be entitled to sue the respondents on it for breach thereof. And the court held that
The reference to such properties as securities did make the appellant a party to that agreement.
He was only a party to the contract of guarantee between him and the first respondent under
which the securities were given and upon which he assumed the obligation to repay the loan
upon Masaleni Linner Company Ltd's default. He could only sue upon such contract but not
upon the loan agreement to which he remained a stranger.
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Read also
TARLOCK SINGH NAYAR V. STERLING GENERAL INSURANCE CO. LTD [1966]

E.A. 144,
BURNS & BLANE LIMITED V. UNITED CONSTRUCTION COMPANY LIMITED

[1967] H.C.D. No. 156,
KAYANJA V. NEW INDIA ASSURANCE COMPANY LIMITED [1968] EA 295
JUSTIFICATIONS ON THE DOCTRINE OF PRIVITY OF CONTRACT
Since the establishments of the doctrine of privity of contract some scholars, philosophers,
writers have argued in favour of the doctrine of privity of contract as follows:
Firstly is that Since contract law concerns bargains it is said that it would be unfair to allow a
person to gain under a bargain when he has provided nothing in return for the benefit gained
from the arrangement.
Secondly, a third party or stranger who has not furnished consideration cannot benefit to the
contract. He has no right to any contract because he is s a stranger. Although third party may be
beneficiary but doesn‟t furnished consideration cannot benefit from the contract. Therefore it is
only parties to a contract should benefits and not a stranger.
Thirdly, It is unfair and unjust for the third party to sue upon the contract but he/she cannot be
sued.
Fourthly, The right of the parties to the contract to vary or terminate the terms of the contract
may be affected if the third party who is just a beneficiary would try to enforce a contract made
on his interest or benefit.
Fifthly, Privity of contract limits the multiplication of cause of action to the parties to a contract.
EXCEPTIONS TO THE DOCTRINE OF PRIVITY OF CONTRACT
To the general rule that a contract creates rights and liabilities personal to the parties there are
exceptions. Certain branches of the law allow a third party who is a beneficiary to the contract to
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sue on the contract in his own name i.e Third person who is not a party to a contract can sue on
the contract entered in favour of him or her.
Those contracts which allow a third party to sue on his mane include the following:
1) Family arrangements
Family arrangements in this context includes (but not limited to) marriage settlement partition of
matrimonial properties etc. In certain circumstances an agreement may be concluded in
connection with marriage partition or other family arrangements and a provision is made to that
effect for whose benefit the provision is made can enforce these arrangement/agreements even
though they are not part to the agreement.
For stance in Daropati Vs JaspatiRai [1905] 171 The Daropati‟s wife left him because of his
cruelty. He then executed an agreement with her father promising good behavior and proper
treatment and in the alternative if he failed to do so, he will pay her monthly maintenance and a
house also. He failed to control his temper and mistreat the wife again. The wife (who was not a
party to the agreement sued him to recover inter alia Monthly maintenance and a house for her
accommodation
HELD: The wife was entitled to enforce this promise as it was made for her benefit though she
was not a party to the agreement.
Also in the case of Dutton vs. Poole [1667] 83 ER 523.where there was a contract between a
father and his son for the benefit of daughter. The father in this case intended to sell a piece of
forest to provide the daughter with married portion. The son promised his father to pay his sister
$ 1000 in consideration of the father not selling the said piece of forest. The father abstained
from selling the forest. The brother however, did not give his sister the amount he promised i.e
$1000. The sister sued the brother to recover the agreed amount.
It was held that The daughter was successful in this suit on the ground that the object of the
contract was to benefit the daughter.
2) Arrangements creating trust
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Third party can enforce a contract, if it can be established that the promise intended to
create a trust. “A trust is an obligation, enforceable in equity, by which a person, the
trustee, holds property on behalf of another, the beneficiary16”.(See E Mckendrick, Contract
Law (8th edn, Palgrave Macmillan, Basingstoke 2009) para 7.1). The law of trusts gives
third party beneficiary the right to action against promisors non-performance. In a
practical context, the promisee (trustee) on the insistence by the third party (beneficiary)
takes action against the promisor in case of breach. There can be no trust in case there
is no promise or property that the trustee holds for the beneficiary. Establishment of
intention of trust is very important in the law of trust.
3) Matters relating to landed properties
A person who buys property with notice that the seller or owner of the land is bound by certain
obligations created by a covenant affecting the land shall be bound by them even though he was
not a party to the covenant. Here there is a case of Chinaya vs Ramayya (1882) 4Mad 137.In
this case the plaintiff was a sister of an old lady who used to pay Rs 653 every year to the
plaintiff. The defendant was a daughter of the old lady. The old lady gave as agift her landed
property to the doughter; An agreement of gift was drawn. There was a term in the agreement
which required the daughter to continue paying the plaintiff the sum of Rs 653 every year. The
daughter did not pay the amount to the plaintiff as promised in the agreement. The plaintiff
successfully sued to recover the money
The Madras High Court held that in this agreement between the defendant and plaintiff the
consideration has been furnished on behalf of the plaintiff (sister) by her own sister (respondents
mother). Although the plaintiff was stranger to the consideration but since he was a party to the
contract he could enforce the promise to the promisor, since under law, Consideration may be
given by the promisee or anyone on her behalf
4) Contract related to law of agency
Under part X of the Law of Contract Act [CAP 345 R.E. 2019] deals with contract relating to an
agency. There are provisions dealing with the effect of agency on contracts with third persons.
Under section 178 of the Law of Contract Act [CAP 345 R.E. 2019] expressly provides that:
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Contracts entered into through an agent, and obligations arising from acts done by an agent, may
be enforced in the same manner, and will have the same legal consequences as if the contracts
had been entered into and the acts done by the principal in person.
Agency can arise in a number of ways but one that gives problems with the concept of privity of
contract is the case of the undisclosed principal. This arises where the agent doesn‟t disclose that
he is acting on behalf of the principle when he enters into the contract with the third party, but
simply contracts in his name. In this situation it has been held that when the agency is disclosed,
the third party may elect to sue either the agent or principal and either agency or principal also
may sue the third party. However it must be clear from the evidence that an agency relationship
did exist at the time the contract was concluded as it was explained in the case of DUNLOP
PREUMATIC TYRE CO LTD VS.SELFRIDGE & CO LTD [1915] A.C 847
5. Contract based on third party insurance
This type of contract normally found under the Road Traffic Act [CAP 168 R.E. 2002] where by
the third party acquire right to sue. Under this Act, the person providing a policy of insurance is
liable to indemnify not only the persons taking the policy, but all the persons or a class of
persons stated in the policy for the liabilities the policy is intended to cover. Therefore a third
party may sue the parties to the contract of insurance that is either the owner of the motor vehicle
or the company of insurance or both.
Also if someone takes a life insurance policy for his life for the benefit of spouse or children, the
spouse or children can enforce the contract (See M Charman, Contract Law (4th edn, Wilan
Publishing, Devon, 2007) p 136)
TOPIC 4
VITIATING FACTORS OF CONTRCT
Coercion [sec. 15]
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Coercion means compelling or forcing a person to enter into a contract under a pressure or threat.
Section 15 of the Law of Contract Act defines coercion as
“the committing or threatening to commit, any act forbidden by the Penal Code, or the unlawful
detaining, or threatening to detain, any property, to the prejudice of any person whatsoever, with
the intention of causing any person to enter into an agreement”.
Example: X beats Y and compels him to sell his car for Rs. 50,000. Here, Y‟s consent has been
obtained by coercion because beating someone is an offence under the Penal Code.
Essentials characteristics of coercion
a) The committing of any act forbidden by the Penal Code: When the consent of a
person is obtained by committing any act which is forbidden by the Indian Penal Code,
the consent is said to be obtained by coercion.
b) The threatening to commit any act forbidden by the Penal Code: If a person attempts
to commit an act which is punishable under the Indian Penal Code, it leads to coercion,
e.g., consent obtained at the pistol point, or by threatening to cause death or by
intimidation.
c) The unlawful detaining of any property: If a person unlawfully detains the property of
another person and forces him to enter into a contract, the consent is said to be induced
by coercion.
d) The threatening to detain any property unlawfully: If a threat is given to detain any
property of another person, this amount to coercion.
e) The act of coercion: It must be done with the object of inducing or compelling any
person to enter into an agreement.
Effects of coercion
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According to Section 19 states that, „when the consent of a party to an agreement is obtained by
coercion, the contract becomes voidable at the option of the party, i.e., such party can put an end
to the contract if he so chooses‟.
According to Section 72 of the Act, which is based on the principle of equitable restitution, a
person to whom anything has been delivered or money paid under coercion must return or repay
it
Undue influence [sec. 16]
The undue influence is said to be employed when a party enters into a contract under any kind of
mental pressure, unfair influence or persuasion by the superior party.
According to Section 16 (1) of the Act, a contract is said to be induced by undue influence,
“where the relations subsisting between the parties are such that one of the parties is in a
position to dominate the will of the other, and uses that position to obtain an unfair advantage
over the other”.
Presumption of undue influence
Section 16 (2), a person is deemed to be in a position to dominate the will of the other is the
following cases:
a) Real or apparent authority: Where he holds a real or apparent authority over the other,
e.g., master and the servant, parent and child, Income Tax officer and assessee, etc.
b) Fiduciary relationship: Fiduciary relation means a relation of mutual trust and

confidence, e.g., guardian and the ward, solicitor and client, doctor and patient, trustees
and beneficiaries, etc.
c) Mental distress: Where he contracts with a person whose mental capacity is temporarily
or permanently affected by reason of age, illness, or mental or bodily distress.
Burden of proof [sec. 16 (3)
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Where a person who is in a position to dominate the will of another, makes a contract and the
transaction appears to be unconscionable, the burden of proving that the contract has not been
induced by undue influence shall lie on the person who is in a position to dominate the will of
the other.
The presumption of undue influence can be rebutted or opposed by showing the following:
(i) that full disclosure of all material facts was made;
(ii) that the consideration was adequate; and
(iii) that the other party was in receipt of competent independent advice and his consent
was free.
Generally upon proof that the contract was made by undue influence, the contract become void
for lack of consent and illegal as being criminal in nature and the plaintiff is entitled to remedy
as provided under S. 65 of the law of the Contract Act which require the the party who gained
advantage
i. to restore that advantage
ii. Or to compensate the innocent party for it
Fraud [sec. 17]
The term „fraud‟ may be defined as an intentional, deliberate or willful misstatement of facts,
which are material for the formation of a contract.
According to Section 17, “fraud means and includes any of the following acts committed by a
party to a contract or with his connivance or by his agent, with intent to deceive another party
thereto or his agent, or to induce him to enter into the contract:
(a) the suggestion, as to a fact, of that which is not true, by one who does not believe it to be
true;
(b) the active concealment of a fact by one having knowledge or belief of the fact;
(c) a promise made without any intention of performing it;

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(d) any other act fitted to deceive;
(e) any such act or omission as the law specially declares to be fraudulent
Elements of fraud
On the basis of aforesaid definition of fraud, the essential elements of fraud are as follows:
1. The act must have been committed by a party to the contract: The fraud must be
committed by a party to a contract or by anyone with his connivance or by his agent. Thus, the
fraud by a stranger to the contract does not affect the validity of the contract.
2. Acts committed may be of the following nature:
a) Suggestion of an untrue fact: If a person knowingly states an untrue fact or fact which he
does not believe to be true, it will be taken as a fraud on his part.
b) Active concealment (hide) of a fact: An active concealment is considered as a fraud when

(i) there is a concealment of fact, and (ii) the concealment is active (i.e., all efforts are made to
conceal fact), and (iii) the concealment is made by a party who has the knowledge of it.
c) A promise made without any intention of performing it: If a party while entering into a
contract has no intention to perform his promise, it will be taken as a fraud on his part.
d) Any other act fitted to deceive: The expression „act fitted to deceive‟ means any act which
is done with the obvious intention of committing fraud. Thus, this clause covers all tricks and
unfair ways which are used by cunning and clever people to cheat others.
e) Any such act or omission which the law specially declares to be fraudulent: Under the
Transfer of Property Act, any transfer of immovable property
3. The act must have been committed with the intention of inducing the deceived party to
act upon it: It implies that the assertion should be such that it would necessarily influence and
induce the other party to act.
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4. The act must have in fact deceived the other party: If a person has committed a fraudulent
act to deceive the other party, but the other party has not been actually deceived by his act, it will
not be taken as a fraud on his part.
5. Plaintiff must have suffered: There is no fraud without damages, and therefore, to constitute
fraud it is necessary that the plaintiff must have suffered some loss of money or money‟s worth
or some other tangible detriment capable of assessment.
Mere silence is not a fraud
According to explanation to Section 17(2), “mere silence as to facts likely to affect the
willingness of a person to enter into a contract is not fraud”.
Example: A sells, by auction, to B a horse which A knows to be unsound. A says nothing to B

about the horse‟s unsoundness. This is not fraud by A.
Exceptions
1. Duty to Speak: Mere silence amounts to fraud when the person keeping silent, is under a duty
to speak. The duty to speak arises, where one party reposes trust and confidence in the other. The
duty to speak arises in the following types of contracts:
a) Contracts of good faith such as contracts of insurance; contracts for the sale of immovable
properties; contracts of marriage; contracts for the purchase of shares; family contracts, etc.
b) Contracts of partnership: Under the law of partnership, partners are required to observe
absolute good faith and to be just and faithful to each other.
c) Contracts of guarantee: The creditor must disclose all material facts about the debtor to the
surety.
d) Where the parties stand in fiduciary relationship to each other.
e) Contracts to marry.
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2. Where silence is equivalent to speech: For instance, B says to A, "If you do not deny it, I
shall presume that the horse is sound". A says nothing. Here A‟s silence is equivalent to speech.
If the horse turns out to be vicious A can be held liable for fraud.
3. Change of circumstances: Sometimes a statement may be true when it is made but due to
change in circumstances, it may become false subsequently. In such a case, it is the duty of the
person to communicate the change in circumstances.
Effect of Fraud
1. Right to rescind the contract: The party whose consent was caused by fraud can rescind
(cancel) the contract but he cannot do so in the following cases:
a) Where silence amounts to fraud, the aggrieved party cannot rescind the contract if he had the
means of discovering the truth with ordinary diligence;
b) Where the party gave the consent in ignorance of fraud;
c) Where the party after becoming aware of the fraud takes a benefit under the contract;
d) Where an innocent third party before the contract is rescinded acquires for consideration some
interest in the property passing under the contract;
e) Where the parties cannot be restored to their original position.
2. Right to insist upon performance: The party whose consent was caused by fraud may, if he
thinks fit, insist that the contract shall be performed and that he shall be put in the position in
which he would have been if the representation made had been true.
3. Right to claim damages: The party whose consent was caused by fraud, can claim damage if
he suffers some loss. Section 19 of The law of Contract Act
Misrepresentation [sec. 18]
The term „Misrepresentation‟ means a false representation of fact made innocently or

nondisclosure of a material fact without any intention to deceive the other party. A false
representation made by a person may be either:
ALEX FRANCIS
1. Innocent or unintentional, i.e., without any intention of deceiving the party.
2. Intentional or willful or deliberate, i.e., with the intention of deceiving the party.
According to Section 18 defines the term „misrepresentation‟ as follows: “Misrepresentation”

means and includes –
a) The positive assertion, in a manner not warranted by the information of the person making it,
of that which is not true, though he believes it to be true;
b) any breach of duty which, without any intent to deceive, gains an advantage to the person
committing it, or anyone claiming under him, by misleading another to his prejudice, or to the
prejudice of any one claiming under him;
c) Causing, however innocently, a party to an agreement, to make a mistake as to the substance

of the thing which is the subject of the agreement”.
Essentials of Misrepresentation
1. There must be a representation or breach of duty.
2. The representation must be of facts material to the contract.
3. The representation must be untrue.
4. The representation must be made with a view to inducing the other party to enter into contract.
5. The other party must have acted on the faith of the representation.
6. The person making the representation honestly believes it to be true
Effects of Misrepresentation
The effect of misrepresentation is that it makes the contract voidable the option of the party
whose consent is so obtained. And such party may put an end to the contract if he so chooses.
See Sec 19(1) and 19(3) the law of Contract Act
Exceptions
ALEX FRANCIS
1. Where the other party had the means of discovering the truth with ordinary diligence:
The party cannot complain of misrepresentation if he had the means of discovering the truth with
ordinary means.
2. Where the misrepresentation does not induce the other party to enter into contract, the
contract is not voidable: If the consent is given independently in spite of misrepresentation, the
contract is not voidable.
Read Sec 19(1) and (2) of The law of Contract Act.
Mistake [Sec 20]
A mistake is said to have occurred where the parties intending to do one thing by error do
something else. Mistake is an erroneous belief concerning something.
Example: X engages Y as a teacher for his son appearing for IAS Preliminary. Y agrees and told
X that he will be coming daily at 7. X think 7 a.m. but Y means 7 p.m. This is a mistake of
fact
NB; In order for the court to conclude that the contract has mistaken or concluded under the
presence of mistake, the mistake in question must be the mistake to fact and not law. Mistake of
law is not recognized because a naximt“ignorantiajuris non excusat” which means ignorance of
law has no excuse will apply.
There are several types of mistakes both under common law and in Tanzania as follows;
(a) Unilateral mistake, this arises whereby one party to the contract makes the mistake and
the other party doesn‟t make the mistake. The party who didn‟t make the mistake takes
the advantage of the other party who made a mistake to enter into a contract. the effect of
this contract is provided under section 22 of the LCA .i.e the contract will become void.
The section states that;
“A contract is not voidable merely because it was caused by one of the parties to it being under
a mistake as to a matter of fact”
Remedy
ALEX FRANCIS
s. 65 of the LCA requires the party who gained advantage under that void contract to:
(b) Common mistake, Common mistake simply means a mistake committed by both parties
to the contract. This arises where both parties to the contract are under mistake which is
essential to the agreement and that mistake must be mistake of fact and not law as per
section 20(1) of the LCA as follows;
“…Where both the parties to an agreement are under a mistake as to a matter of fact essential to
the agreement, the agreement is void…”
Remedy
(c) Mutual mistake, Mutual mistake simply means misunderstandings between the parties
to the contract. Mutual mistake is where both parties are under mistakes and it happens
whereby one party to the contract fails to understand the intention of other party to the
contract. Parties are said to consent when they agree upon the same thing in the same
sense i.e. consensus ad idem meaning meeting of the minds as provided for under section
13 of the LCA as follows;
“…Two or more persons are said to consent when they agree upon the same thing in the same
sense…”
Again when it is evident that there has been a mutual mistake between the parties to contract s.
20 states that the contract is void
Remedy
ALEX FRANCIS
TOPIC 5
DISCHARGING A CONTRACT
Once it has been made the contract is not infinite: it can be brought to an end by various ways.
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.
i. by performance (part V of the LCA)
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. 37 (1) of the LCA).
“The parties to a contract must perform their respective promises, unless such performance is
dispensed with or excused under the provisions of this Act or any other law”
If the party performs a contract in a different way from that by which he promised to perform,
the contract will not be discharged. Performance must be complete and precise.
ii. 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.
(a) If the repudiation is done at the time when performance of such liabilities is due it is referred
to as actual breach and
(b) If the repudiation is done at the time before performance of such liabilities is due it is
referred to as Anticipatory breach
ALEX FRANCIS
Discharge by breach occurs where parties to the contract fails to perform the terms of contract as
agreed. The innocent party is required to be paid compensation from the party who has not
performed the contract as per section 73 of the LCA.
iii. 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. It is physically impossible
for a party to perform his obligations under a contract if there is an occurrence of an outside
event not caused by any party and which renders the original agreement radically different from
what it was agreed.
s. 56 (2) of the LCA incorporates the doctrine of frustration; it reads
“A contract to do an act, which after the contract is made, becomes impossible, or, by reason of
some event which the promisor could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful”.
iv. Discharge by agreement
There are two ways by which a contract can be discharged by agreement in one of the
following ways:
i. by inclusion of a clause in the contract to that effect For instance parties may agree that if
either of them wishes to terminate the contract he may do so within an advance of a stipulated
time. Take an example of leases.
ii. 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.
Discharge of this kind is called discharge by accord and satisfaction (accord refers to agreement
and satisfaction refers to consideration)
See also s. 62 of the LCA If the parties to a contract agree to
ALEX FRANCIS
i. substitute a new contract for it or
ii. To rescind (cancel/ annul) or
iii. Alter (change) it
The original contract need not be performed.
REMEDIES FOR BREACH OF CONTRACT
Generally when a contract is breached the innocent party is entitled to be compensated by the
defaulter. Remedies are compensation awarded to the innocent party where the contract is
breached. The following are among the remedies in case of breach of contract
(a) Damages: includes amount or the sum of money awarded by the court to a party
(innocent party) when a contract is breached. This sum of money may be;
 Liquidated damages are the sum of money which is predetermined by the parties
to the contract as it will be compensation to an innocent party when the contract
will be breached. This means parties to the contract themselves agree to the
amount that will be a compensation when one party to the contract breached the
contract.
 Unliquidated damages are the amount of money which is set by the court when
one of the party claims that the contract has been breached. There are other
several types of damages apart from liquidated and unliquidated damages i.e.
 General damages, This is a pecuniary compensation which a judge/court

is entitled to award on proof that a breach of contract has been committed.
 Specific or special damages, these are damages which specifically the

innocent party claims due to the loss incurred to be paid by the defendant.
ALEX FRANCIS
 Nominal damages, this is awarded to the innocent party in action where

the person has not suffered any loss which he/she has to be compensated
 Exemplary or punitive damages, this is the kind of damages awarded not

to compensate the plaintiff (innocent party) but to punish the wrongdoer
for an act which caused loss to the plaintiff as the breach of contract.
(b) Specific performance: This remedy is awarded or compels the defendant to perform his
contractual duty which he fails to do. Sometimes specific performance may be compelled
where the quantity or quantum of damage is difficult to be accessed. This is simply
damage is calculated in terms of money but in some cases such calculation of money may
be difficult to be determined. Specific performance is just a discretionary remedy since
you cannot compel the court to issue such a remedy
(c) Injunction: injunction is issued by the court so as to restrain the party from committing a
breach of contract. Injunction also is a discretionary remedy because you may seek
injunction yet the court should not grant the same. There are different types of injunction
such as prohibitive, mandatory and temporally injunction bit the purpose is the same.
(d) Restitution; This may be ordered when the defendant has acquired some money or
property received when the contract was breached. The court may compel him to be
returned to the plaintiff.
………………………………………THANK YOU……………………………………………
ALEX FRANCIS

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LAW OF CONTRACT 2021

Therefore, a contract essentially consists of two elements:

SOURCES OF LAW OF CONTRACTS

CLASSIFICATION & TYPES OF CONTRACTS

1) CLASSIFICATION BASING ON THEIR VALIDITY

• Agreement (offer and acceptance);

• Intention (to be bound by the agreement);

▪ An unenforceable contract is an otherwise valid contract that contains some substantive,

2) CLASSIFICATION BASING ON THEIR FORMATION

C) Quasi contract or constructive contract:

▪ It is an obligation created by law regardless of agreement between the parties. As a matter of

3) CLASSIFICATION BASING ON THEIR PERFORMANCE

4) CLASSIFICATION ACCORDING TO ENGLISH LAW

▪ An analysis of this section brings up three of the essential of a contract as follows:

ESSENTIAL ELEMENTS OF A VALID CONTRACT

An agreement is made by two things:

(i). Offer/ proposal-

HOW AN OFFER IS MADE

1) By words (whether written or oral).

 The terms must be clear and certain

 . Must be made willingly:

 The terms of a proposal must be “a final expression of intention to make legal

s. 3 of the LCA, provides that:

This section can be analyzed as follows:

The communication of-

 Offer must be distinguished from Mere puffs

 Offer may be unilateral

ACTS BEARING A RESEMBLANCE TO OFFERS

▪ (A) A mere supply of information

(B). Invitation to treat

1);Display of goods for sale

Rubama J. held in this case that

.3) Conditional Offer

PROPOSALS (OFFER) HOW COMMUNICATED

Termination or Lapse of an Offer

(1) The offer lapses after stipulated or reasonable time.

3. An offer terminates when rejected by the offeree

4. An offer terminates when revoked by the offeror before acceptance

On October 8th 1880: Vantienhoven posted a letter of revocation of offer.

On October 11th 1880: Byrne, telegraphed acceptance

On October 15th 1880: Byrne, confirmed his acceptance by letter

5. An offer terminates by not being accepted in the mode prescribed, or if no modeis

Rules Regarding a Valid Acceptance

1). Acceptance may be express or implied

An express acceptance is acceptance given in words spoken or written. Implied acceptance is

3. Acceptance must be absolute and unqualified (unconditional)

5. Acceptance must be communicated.

7. Acceptance must be made within a reasonable time.

The matching acceptance must be communicated to the offeror. In HOUSEHOLD FIRE

Mode of Communication [Sec. 3]

Section 3 of the Act refers to the two modes of communication:

Act includes by conduct or by words, written or oral. So communication can be by letter,

When is Communication Complete [Sec. 4]

1. Communication of Offer is complete when it comes to the knowledge of the person to

COMMUNICATION OF ACCEPTANCE BY POST

Also in the case of HOUSEHOLD FIRE INSURANCE CO LTD V. GRANT (1879) 41 LT

Revocation means “taking back” or “withdrawal”. It may be a revocation of offer or acceptance

Under the Law of Contract Act,

EFFECT OF THE ACCEPTANCE WHEN IT IS PROPERLY MADE