Why we should study contract law?

Preliminary

For a person to understand why we should study contract law, he/she must first become familiar with a term "contract" and "contract law". There is many definitions regarding these terms but the following are the common meanings which globally accepted by many educational institutions. 

A contract is a promise or set of promises that are legally enforceable and, if violated, allow the injured party access to legal remedies. Contract law recognize and governs the rights and duties arising from agreements. In the Anglo-American common law, formation of a contract generally requires an offer, acceptance, consideration, and a mutual intent to be bound. Each party must have capacity to enter the contract. Although most oral contracts are binding, some types of contracts may require formalities such as being in the form of a signed, dated written agreement in order for a party to be bound to its terms. 

Other people defines contract as a legally enforceable agreement between two or more parties. It may be oral or written. A contract is essentially a set of promises. Typically, each party promises to do something for the other in exchange for a benefit In United Republic of Tanzania, under section 2(1) (h) of The Law of Contract Act, a term contract is defined as an agreement enforceable by law. 

Contract law is the body of law that relates to making and enforcing agreements. A contract is an agreement that a party can turn to a court to enforce. Contract law is the area of law that governs making contracts, carrying them out and fashioning a fair remedy when there’s a breach. Anyone who conducts business uses contract law. Both companies and consumers use contracts when they buy and sell goods, when they license products or activities, for employment agreements, for insurance agreements and more. Contracts make these transactions happen smoothly and without any misunderstandings. They allow parties to conduct their affairs confidently. Contracts help make sure that the parties to a transaction are clear on its terms.

Also other people define contract law as a body of law that governs oral and written agreements associated with exchange of goods and services, money, and properties. It includes topics such as the nature of contractual obligations, limitation of actions, freedom of contract, privity of contract, termination of contract, and covers also agency relationships, commercial paper, and contracts of employment.

Why we should study contract law?

A law of contracts is important because it enable a lawyer to understand a number of things regarding contracts. A contract law reveal a number of important things to know include essential elements to legal contracts, contractual obligations, limitation of actions, freedom of contract, privity of contract, termination of contract, and covers also agency relationships, commercial paper, contracts of employment and many other important issues in contracts. 

Essential elements or ingredients of a legal contract. A law of contract is important because it enable lawyers to understand that there is necessary elements which must appear in a contract for a purpose of a contract to be named as a legal contract. Such elements include free consent, competency or capacity to contract, lawful consideration and intention to create legal relation. section 10 of The Law of Contract Act provide that, "All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void".

Free consent. For a Contract to be valid, the consent of the parties must be genuine. The principle of consensus-ad-idem is followed which means that the parties entering into the contract must mean the same thing in the same sense.  The parties to the contract must have the same understanding in regards to the subject matter of the contract. Mere consent is not enough for a contract to be enforceable the consent given must be free and voluntary.  The definition of Free consent is provided under section 14 (1) and (2) of The Contract Act. A free consent is Consent that is free from Coercion, Undue Influence, Fraud, Misrepresentation or Mistake. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.

Clearly, Free Consent means the absence of any kind of coercion, undue influence, fraud, misrepresentation or mistake. When the consent which is given is affected by these elements it calls into question whether the consent given was free and voluntary. The objective of this principle is to ensure that judgment of the parties while entering into the contract wasn’t clouded. Therefore consent given under coercion, undue influence, fraud, misrepresentation or mistake has the potential to invalidate the contract. 

Competency or capacity to contract. A natural person who enters a contract possesses complete legal capacity to be held liable for the duties he or she agrees to undertake, unless the person is a minor, mentally incapacitated, or intoxicated. A minor is defined as a person under the age of 18, depending on the jurisdiction. A contract made by a minor is voidable at the minor’s discretion, meaning that the contract is valid and enforceable until the minor takes some affirmative act to disavow the contract. Minors who choose to disavow their contracts entered may not be held liable for breach. The law assumes that minors are too immature, naive, or inexperienced to negotiate on equal terms with adults, and thus courts protect them from being held accountable for unwisely entering contracts of any kind.

When a party does not understand the nature and consequences of an agreement that he or she has entered, the law treats that party as lacking mental capacity to form a binding contract. However, a party will not be relieved from any contractual duties until a court has formally adjudicated the issue after taking evidence concerning the party’s mental capacity, unless there is an existing court order declaring the party to be incompetent or insane. Like agreements with minors, agreements with mentally incapacitated persons are voidable at that person’s discretion. However, a guardian or personal representative may ratify an agreement for an incapacitated person and thereby convert the agreement into a legally binding contract.

Section 11 (1) and (2) of The Law of Contract Act clearly explain capacity of a person to enter into a contract, a person must be with age of 18 or above so as to enter into a legally accepted contract. Any person below age of majority is not allowed to enter into agreement because they are protected from being liable while they are not old enough to handle agreements.

A lawful consideration or object. As per Section 2(d) of The Law of Contract Act,“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 ”.

As per section 23 of the same Act , the consideration or object of an agreement is lawful, unless “It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.” In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.”

Privity to contract is another important topic for a lawyer to understand which is available in contracts law. Privity to contracts is different to essential elements of a legal contract, The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract. The premise is that only parties to contracts should be able to sue to enforce their rights or claim damages as such. However, the doctrine has proven problematic because of its implications upon contracts made for the benefit of third parties who are unable to enforce the obligations of the contracting parties. 

Privity of contract occurs only between the parties to the contract, most commonly contract of sale of goods or services. Horizontal privity arises when the benefits from a contract are to be given to a third party. Vertical privity involves a contract between two parties, with an independent contract between one of the parties and another individual or company.

If a third party gets a benefit under a contract, it does not have the right to go against the parties to the contract beyond its entitlement to a benefit. An example of this occurs when a manufacturer sells a product to a distributor and the distributor sells the product to a retailer. The retailer then sells the product to a consumer. There is no privity of contract between the manufacturer and the consumer.

This, however, does not mean that the parties do not have another form of action: for instance, in Donoghue v. Stevenson a friend of Ms. Donoghue bought her a bottle of ginger beer, which contained the partially decomposed remains of a snail. Since the contract was between her friend and the shop owner, Mrs. Donoghue could not sue under the contract, but it was established that the manufacturer was in breach of a duty of care owed to her. Accordingly, she was awarded damages in the tort of negligence for having suffered gastroenteritis and "nervous shock".

Law of contracts introduce types of contracts. A lawyer must undestand different types of contracts for his better perfomarnce in his profession. There are three types of contracts in Tanzania, a written contract, a contract which require a written evidence and unwritten or oral contract.

A written contract as the name suggests, is a contract whose terms have been reduced to writing. Written contracts are also commonly signed. However, a written contract may consist of an exchange of correspondence, a letter written by the promisee and assented to by the promisor without signature, or even a memorandum or printed document not signed by either party. Statutes relating to written contracts are often expressly limited to contracts signed by one or both parties. Whether such a limitation can be implied when not explicit depends on the purpose and context. 

For example, in East Africa, The Uganda Registration of Title Act 1922 prescribes the form that transfers of land and leases must take. The Tanzanian Land Registration Ordinance contains a 'similar prescription, as well as a similar legislation in Kenya. The Hire Purchase Acts in Kenya and Tanzania also require that hire Purchase agreements must be in writing. 

A contract which require a written evidence. The requirement in respect of this form of contract is not that the contract itself be in writing. Rather, that there should be some note or memorandum in writing signed by the party to be charged or any person whom such party lawfully authorizes to sign. For example, in Kenya and Uganda (the Contract Act (Uganda) S.4; and the Law of Contract Act (Kenya) S.3 contracts of guarantee and contracts where by a person gives an assurance to another person relating to a third party's character, conduct, credit, ability trade or dealings. must be evidenced in writing. In Tanzania, such contracts can be oral or in writing. 

Unwritten contract or simple is an agreement that is not in writing and is not signed by the parties but is a real existing contract that lacks only the formal requirement of a memorandum to render it enforceable in litigation.

Conclusion

Why should we study contract law is a broad question which carry a lot of things to explain, by learning contract law a lawyer become competent in many areas of contracts as expressed above. But there is a lot of other academic benefits that's may be gained by learning contracts law like to become familiar with various other concepts like doctrine of estoppel, formation of contracts, content of contracts, rules governing form of contracts, standard form contracts, a doctrine of fundamental breach, coercion and undue influence, fraud, mis-representantion and mistake.

BIBLIOGRAPHY

Statutes:

The Law of Contracts Act, Cap 345 R:E 2002

The Uganda Registration of Title Act, 1922 

The Tanzanian Land Registration Ordinance, Cap 334 

The Indian Contracts Act

Cases:

Donoghue v. Stevenson [1932] A.C. 562, [1932] UKHL 100 

Credit Finance Corporation Ltd. vs Alli Mwakasanga [19591 E.A. 79

Books:

Luoga, F.D.A. Makinyika , Law of contracts, (form, contents and vitiating factor),University of Dar es salaam.

N.N.N Nditi, Law of contracts, The Open University of Tanzania, Learning material for Ll.b programme.