LAW of CONTRACT

Company Law Block Revision Mock Exams

A contract is an agreement between two parties with the intention to create legal relations.

ESSENTIALS ELEMENTS OF A VALID CONTRACT

  1. Offer and acceptance
  2. Consideration
  3. Intention to create legal relations
  4. Capacity of the parties
  5. Lawful objects
  6. Free consent {Vitiating Factors}
  7. Possibility of performance i.e the object of the contract should be something capable of being performed an ordinary business person
  8. Certainty of terms i.e the wording of the contract must be certain and clear in meaning
  9. Meeting of mind, also known as ‘consensus ad idem’. The two parties must mean and refer to one and the same thing.

TYPES OF CONTRACT

  1. Express and implied contract; -Express contract have a special agreement and terms. It is either in writing or word of mouth. Implied contract on the other hand, are formed through conduct of the parties. The parties did not formally deliberate and agree on the terms of the contract.
  2. Bilateral and unilateral; -in bilateral contract, both parties are bound to fulfill their obligation in the contract. In unilateral contract, only one party is bound to fulfill obligations in the contract. Eg when one advertises a reward to anyone who may recover a lost property on behalf of the owner. This is a unilateral contract since it is only the advertiser who is bound in it.
  • Executed and executory contract; -an executed contract is one where both parties have fulfilled their obligations completely. In executory contracts, the parties have not fulfilled their obligations at all or have fulfilled them partially.
  1. Simple and speciality contracts; -a simple contract is one that must be evidenced consideration i.e all simple contract must have a consideration (price paid). A speciality contract is one that does not require consideration as evidence of its existence.

Speciality contracts may include:

  1. Contracts evidenced in writing; -these are contracts where there is a document or memorandum or receipt that shows the existence of contract e.g contracts of sale where amount paid is 200 and above should be evidenced in writing.
  2. Contracts in writing; -these are contracts where fundamental terms must be written down e.g lease, insurance, contract of employment e.t.c.
  3. Contracts under deeds; -these are contracts which must be written down, signed the parties and sealed e.g contracts of purchase of land, buildings and other immovable properties must be under deeds.
  4. Valid, void and voidable contacts; -a valid contract has all the essential elements, is binding and enforceable. A voidable contract is one that is valid until avoided the aggrieved parties because of the lack of one or more of the essential elements. A void contract has no legal effects because it lacks fundamental elements of a contract. It is non-existent under the law and cannot be enforced.
  5. Quasi contracts; -these are contracts that come into existence not because of offers and acceptance but out of the prevailing circumstances e.g in a sale or return basis, the buyer will only enter into a contract when he communicates acceptance of goods, retains the goods beyond the given duration or does something to adopt the transaction.
  • Contracts of uberrima fides (utmost good faith) -these are contracts where only one party possesses knowledge of material information regarding the contract and is bound to disclose such information to the other party without concealing anything, ie in perfect good faith.

Contracts are insurance contracts of ‘uberrima fides’



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