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1.

0 THE MEANING OF CONTRACT

A contract is a promise or a set of promises for the breach of which the law gives
a remedy or the performance of which the law in some way recognizes as a duty.

Therefore, Commercial lawyers define contract as an agreement between two


or more parties, in which there is an intention that the agreement should
have legal consequences or an agreement supported by consideration. A
contract need be recognized by the law so that it may be given legal support
(sanction).

A contract should always show the terms/intention of agreement as to what shall


be the consequences of non performance, this is crucial in determining the steps
to be taken by the party who suffers loss or injury due to the non-performance.

In that agreement there must be a legal duty for each partner to be bound with.
Each party to the deal or bargain has shown an intention to become a part of it
and place himself in a position to demand performance by the other side of the
bargain. Any person who has not fulfilled his share/portion/part of the agreement
has breached that agreement and the law wants him to pay damages.

Illustration
Wakala Company Ltd, having secured a tender of constructing a road at the
Nkasi District ordered 100 tons of cement from Tanga Cement Company Ltd at
Tshs. 15,000/= per bag. The cement was duly delivered at the Nkasi District after
Wakala Company Ltd had paid three quarters of the purchase price. In the above
illustration, there are two parties referred to as Wakala Company Ltd and Tanga
Cement Company Ltd. The agreement is to sell cement on one hand and to buy
on the other by paying the purchase price Tshs. 15,000/= per bag including
transport.

2.0 NATURE AND FORMATION OF CONTRACT

Any valid contract is composed of six elements short of which that contract
becomes invalid. These elements are:
a) Parties
b) Offer and acceptance
c) Consideration
d) Intention to create legal relations
e) Capacity
f) Free consent

2.1 PARTIES

The term contract presupposes the existence to two sides. This implies
that one side will be proposing something to the other side for the

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purposes of acceptance. It will be surprising if one will talk to himself and
then later on claim to have formed a contract. Any contract or even an
agreement requires two or more parties in order to exist. The parties
in question could be in the form of natural persons such as Mwasiti,
Salum, they could be in form of legal persons such as Meserani
Corporation Finally a contract can be between a natural person and a
legal person.

Illustration
Zabx Secretarial Service owns new photocopy machine in Dar es Salaam.
The office, Zabx, enters into a contract with Business Machine Tanzania
Ltd from Dar es Salaam. In that contract Business Machine Tanzania Ltd
agrees to supply Toner for photocopy machine. This is a contract between
a legal person and a natural person.

2.2 OFFER

The terms offer under the law of Contract Ordinance, Cap.433, S.2 (1) (a)
means: signification to another person one’s willingness to do or not
to do something, with a view to obtain the assent or refusal of that
other person.

An offer is a proposal made by one person signifying/indicating his


willingness to enter a contractual relationship with another person who is
expected to agree or deny the offer. This is a starting point in making any
contract.

An offer must move from one person to another in other words there can
be no proposal by a person to himself. A person making the offer/proposal
is called offeror/proposer. A person to whom the offer/proposal is made
is called offeree/proposee.

How to make an offer


Offer can be made by any act which is intended to communicate the
proposal to another person. It can be express or implied.

Express offer
Is an offer which is made by words spoken or written.

Implied offer
Is an offer which is made otherwise than in words. A contract can not
follow oral or written but can follow action or conduct.

Offer may be specific or general.


Specific offer

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Means a proposal made directed to a definite person or particular group of
persons. Can only be accepted by that specific person or group of persons
intended in the offer.

General offer
Is an offer made to the world at large or to the public generally. Can be
accepted by any person just by fulfilling the terms of the offer.
The contract born out of this kind of offer becomes a contract between the
offeror and anybody who had the knowledge of the offer and acted
according to the conditions/instructions of the offer.

ESSENTIALS/ELEMENTS OF A VALID OFFER


An offer to be valid must have the following elements:
 Intention for legal relation
An offer must show that the offeror intends to create legal relationship
unless is a social/domestic agreement.

 Certainty
The term of an offer must be certain and clear to make anybody
understand what was the agreement for mode of performance and the
consequences of breach of those terms.

 Promise on part of the offeror


The offeror must show, in the offer, what is he promising to do. This is
important for helping the offeree to know the nature of offer and
commitment of the offeror before he accepts the offer.

 Proper communication
An offer must be communicated to the audience intended or to whom it is
made. The offer becomes complete only when it is communicated to the
offeree.

 Legal object
The offer must be for the lawful transaction. The subject matter of the
contract must be legal.

 Capacity of the offeror


This is the legal requirement/condition that the party to contract must be
capable or competent of making a contract. This means the offeror must
be of a good age/adult, sound mind, not drunk.

2.3 ACCEPTANCE
This is a consent given to the offer. It is an expression by the offeree of his
willingness to be bound by the terms of offer. A proposal when accepted
becomes a promise.

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An acceptance can be made by the person or group or persons to whom
the offer is made. Acceptance can be made either expressly or impliedly.

ELEMENTS/RULES/ESSENTIALS OF A VALID ACCEPTANCE


 Absolute, unconditional or unqualified
Acceptance must be absolute, without condition and should not be
qualified. The offer when made should be accepted without any condition.

 Mode of acceptance
Acceptance must be made in the way/manner as it is prescribed in the
offer.

 Consequences of not accepting it in a prescribed manner


If acceptance is not made according to the ways prescribed/directed, the
offeror may reject it. However the offeror must notify the offeree within a
reasonable time before rejecting the acceptance.

2.4 CONSIDERATION
In order to have a valid contract there must be a consideration. There is a
common law position and a Tanzanian position of consideration.

Consideration is an exchange of any value carried in goods or services. In


the process of exchange, one person gives a certain value, but the law
says he must be given/receive some value in return on the one he gave.

2.5 INTENTION TO CREATE A LEGAL RELATION


Intention is essential in offer and acceptance. Therefore to be safe in our
contracts we must follow the English common law’s principle that intention
to create a legal relation is important in all stages of preparation of a
contract.

2.6 CAPACITY TO CONTRACT


This is an essential to contract whereby the law requires a person entering
into a contract to be capable or to have capacity of entering into that
contract. Every person is competent to contract who is of age of majority
according to the law to which he is subject and who is of sound mind and
is not disqualified form contracting by any law to which he is subject.
Deducing from the above provision the following classes of people are
incompetent to contract: Infants or minors, insane persons or persons
mentally disordered, Drunkards.

3.0 TERMINATION OF CONTRACTS


This is a situation whereby the contract comes to an end. The contractual
obligations entered by two or more parties may be loosened and thereby free the
parties concerned from rights and liabilities.

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WAYS/METHODS OF DISCHARGING THE CONTRACT
 By mutual agreement
Parties are supposed to enter into a contract freely. Contracts may discharged by
agreement of the parties that they will no longer be bound by it.

 By performance
If all the parties fulfill their obligations in the contract, then the contract comes to
an end. It is discharged.

 By operation of law
This is the situation whereby a contract comes to an end because of
Death (in most cases of a promisor), Insanity/ unsound mind of any party,
Insolvency/bankruptcy, Permanent illness and by order of the court.

 By lapse of time
A contract is terminated/discharged if it is not performed within the right time
specified in the terms of the contract.

 By breach
A contract can be brought to an end by breach if any party to the contract refuses
or fails to perform his contractual duties within the specified period of time.

 By Destruction of the subject matter


If a specific thing or the main objective/goal essential to the performance of the
contract is destroyed, the contract also comes to an end. In such a situation it is
said that the contract is discharged due to act of God/Nature because it
happened beyond the powers of any party to control.

4.0 CONCLUSION
It is true that the lifespan of a contract is resembles to the life of human being as
it is created, performed and discharged through termination, a lapse of time,
mutual agreement, operation of law, by breach and by destruction of the subject
matter.

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