A Contract is a legal binding obligation created under an agreement between two or more persons that is enforceable by law. A contract is made valid by the following factors: there must be an offer and an acceptance, there must be an intention to create legal relations, the contract must be under deed or consideration, there must be an offer and acceptance, there must be a contractual capacity, a genuine consent which must not be obtained from mistake, fraud, duress and unconscionability and lastly the contract must be lawful. (Penrose, 2005).
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Contracts may also be classified in terms of their enforceability or validity under this, there is a valid contract which is an agreement that is binding and enforceable having all essentials of a contract while a voidable contract is an agreement that is binding and enforceable but lacks one or more essentials of a valid contract it may be set aside at the option of the injured party while a void contract is an agreement which is completely destitute of any legal effect such as an agreement of which the consideration or objective is lawful. Generally, for a contract to exist and to be valid more weight is directed to the intention of creating legal relationship by all parties involved.
Offer and Acceptance
In order to be an enforceable contract, certain basic requirements must be present. There must be an agreement upon genuine consent of the parties, supported by consideration and made for a lawful object between competent parties.
Offer- according to the common law an offer has its own rules which are; an offer may be made to a specific person or to any member of a group of persons but it can not form the basis of a contract until it has been accepted by an ascertained person or group of persons, that is if A makes an offer to B, it is a specific offer and B is the only person to who can accept it. But in many cases, it is immaterial to whom the offer is made. Offers made by advertisements are the commonest form of offers made to the world at large, and can be accepted by anyone just by acting on them. This is well explained in the case of Carlill v Carbolic Smoke Ball Co, 1893.
The defendants offered a reward of £100 to anyone who contracted influenza after using their smoke ball for a fortnight. The plaintiff relying on the advertisement bought the smoke ball and used it as prescribed, but still contracted influenza. She sued for the advertised reward. Held that the advertisement was a true offer, and not a mere advertising puff and the defendants were held liable to pay the reward. (Farrar and Dudgal, 1994)
The other rule is that an offer must contemplate giving rise to legal consequences if accepted, we also find that the terms of the offer must be certain and free from vagueness in expression. This is well explained in the case of Guthing v Lynn, 1831 L bought a horse from G, and offered to pay another £5 for the horse if proved lucky to him. Held the term “lucky” was too vague to form the basis of a legally enforceable agreement. The law also provides that every offer must be communicated; for a contract to arise, two parties must be of the same mind, and so it cannot be accepted by a person who dose not know that it has been made. This rule applies to both specific and general offers. This is well explained in the case of R v Clarke, 1927 a reward was advertised for information leading to the arrest of the murderers of two police officers, and a free pardon if the person giving the information was an accomplice. C gave the information. Held C was not entitled a government reward because at the time the information was given by him he had forgotten all about the reward. (Lawler, 1940).
An offer can only be accepted by the person to whom it is made, but an offer made to the world at large may be accepted by anyone. According to the contemporary law an offer can be accepted orally, in writing or by conduct, therefore we find that in order to make a contract binding, the acceptance must be communicated, and mere mental intention to accept it is not sufficient. The contemporary law provides that acceptance of offer must be absolute and unqualified. Where the acceptor varies the terms of offer, it amounts to counter- offer which destroys the original offer. This is well indicated in the case of:
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Nfal v Merret, 1980
M, offered his land for sale to N, at £280.N replied, accepting, and enclosing £80 with a promise to pay the balance by instalments of £50 each. Held that the defendant was not liable for refusing to sell his land as there was no unqualified acceptance the acceptance must be communicated to the offeror in the manner prescribed by him otherwise the acceptance is ineffective. There are various types of acceptance such as acceptance by post, acceptance subject to contract The English law also provides that acceptance must also be made within the time prescribed by the offeror, and if no such time is specified, then within such time as is reasonable having regard to the nature of transaction, therefore this clearly indicates that an acceptance must be made before the offer lapses or is terminated. (Zander, 1999).
Consideration is an agreement between two parties, which provides that an agreement must have some value in the eyes of the law, whereby a bare promise is not binding unless it is in the form of specialty contract, therefore consideration is an act of promising of one party, whereby the promise brought by the other party and is enforceable by law. For a contract to be binding legally it must be supported by consideration whereby there is a following benefit to both the parties. (Penrose, 2005).
Consideration is therefore classified in two:-Executed consideration where there is an already given part of the value by the promise to the promiser for example: A is a casual worker and is employed by B to work in his farm for a day and is promised by B to be given his wages at the end of the day, A clears his work performing his side of the obligation of digging the farm this explains an executed consideration. Executory recommendation-this is where an individual promises to do something in future like in the above illustration the consideration for the employer B is executory until A is issued with his wages at the end of that particular day from B. (Farrar and Dudgal, 1994).
Consideration has also its own rules which are: it must be real meaning that it must have some values in the eyes of the law. It must not be in past this means that it should not include some past acts which took place before the promise is made. Consideration must move from the promise this means that no one can enforce another’s promise unless he has been a party to a contact and provided a promise to the promisor; this tells us that no stranger is allowed to enforce another person’s promise. (Jertz and Miller, 2004).
Consideration must be in excess of an existing obligation.a person who is under a contractual or legal duty to perform a certain act gives no consideration for a promise to pay for the performance of that contract. It must be legal, that is it should not be a consideration that is prohibited by law or against the public policy.
Certainty and Completeness of Terms
The common law provides that it is primarily for the parties to negotiate their contracts and courts do not interfere. Thus, the parties are presumed to have made their intention absolutely clear regarding every material term which is intended to govern their rights and obligations. Sometimes, in exceptional circumstances, the courts may imply terms; to implement their presumed intention to give business efficacy to the contract existing between the parties, terms may also be implied by local custom or statute. In ordinary contractual transactions, the terms are of two kinds; the conditions and the warranties. (Jertz and Miller, 2004).
Warranty is a term of lesser importance, and as such does not go to the root of the contract. Its breach entitles the innocent party to claim damages, but gives no right to the termination of the contract. It is important to note that it is not every breach which terminates the contract; it is only the breach of the condition, and not of a warranty. Whether a term of a contract is a condition or a warranty is a question to be determined by the court taking into consideration the circumstances in which such a term was agreed. The conditions are terms of major importance and it is said that they go to the root of the contract. The breach entitles the innocent party to avoid the contract and claim for damages. (Zander, 1999).
According to the contemporary law we find that misrepresentation occurs when a party to a contract is induced to contract with another by a misleading statement made by the second party. The false representation is not restricted to words, and may be made by the conduct of the party. Misrepresentation does not render a contract void. But the party misled will be able to avoid the contract by roving the misrepresentation was of fundamental fact, not of law. A representation of law is not actionable merely because it turns out to be misleading or wrong.
The elements of misrepresentation states that a person who wishes to avail himself of the defence of misrepresentation in avoiding the contract must prove that the representation was a statement of material fact, and not a statement of law or more expression of opinion, that it was made before or at the time of making the contract, that it was intended to induce him to contract, that he relied on this statement and in fact entered into contract, tat the statement was untrue. (Farrar and Dudgal, 1994).
According to the law we find that misrepresentation may be either fraudulent or innocent whereby fraudulent misrepresentation is where a statement is assumed to be made fraudulently when it is made knowing that it is untrue or without caring whether it is true or false. It follows from this definition that a false statement made by one of the parties, but honestly thought to be true, does not give rise to an action in damages, this is clearly indicated in the following case:
Derry v Peek, 1889
The directors of a company issue a prospectus sating that the company had the right to use steam or mechanical trams instead of horse-driven trams. P obtained shares in the company relying on the representation contained in the prospectus. The company proceeded to make tramways. But the permission was refused by the board of Trade. As a result, the company was wound up and the directors were sued for fraud. Held that the directors were not fraudulent but honestly believed the statement in the prospectus to be true and the action for damages must fail. (Lawler, 1940).
Innocent misrepresentation is a false statement made innocently with an honest belief to its truth and without any intention of deceiving the representee. Therefore it is important to ascertain whether a misrepresentation is fraudulent or innocent because in the latter case, the damages are not recoverable. The aggrieved party can only get the contract set aside if it is possible to restore the parties to their original position.
In an incidence where a misled person relies on his own judgment, if the person on whom the fraud was practiced was not in actual fact deceived and acted on his own judgment, he has no legal ground to plead that he relied on the misrepresentation. But where he relied on the misrepresentation, even though he had been negligent, he can still get in the contract set aside and claim damages.
This is well expressed in the case of Redgrave v Hurd, 1881 the plaintiff in the negotiations of the sale of his business to H represented that his income from the business was £300 a year, and produced some papers in support of it. H relied on R’s statement and bought the business without examining the papers. If he had examined them, he would have discovered that the plaintiffs’ statement was false. Held that as H had relied on the plaintiffs’ statement, he could rescind the contract and it was no defence to say that he had the means of discovering the untruth. (Lawler, 1940)
Remedies for fraud are as follows: when a person has been misled to enter into a contract fraudulently then he has the following remedy to use as defence- Rescission, under this, the misled party can refuse to perform the contract if he hasn’t already done so and plead fraud as a defence when being sued for breaching of contract, damages can be obtained for this but where the plaintiff have not suffered any financial loss, no action will be taken for obtaining the damages. (Zweigert and Kotz, 1998).
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This is the liability that arises from the relationship of master and servant when the tort is committed by the later in the course and scope of his employment. This vicarious liability falls under the joint tortfearsors which the law states it is a situation where two or more persons assist or counsel or join in the execution of a wrongful act. The joint tortfearsors are jointly and severally liable for the whole damage resulting from the tort. The law provides that those who are sued cannot insist on having the others brought in as co-defendants. But a judgment against one r more of several tortfearsors is a bar to any further action against the others even though the judgment remains unsatisfied.
The common law defines vicarious liability as the liability of one person for the torts committed by another person. The wrong-doer is, of course, liable to the injured person but another person may be jointly liable with him to compensate the injured party. The law provides that the injured party chooses to sue one of the tortfearsors, he is subsequently prevented from suing the other even if his claim for damages is not satisfied.So it is advisable for the injured party to sue the tortfearsors jointly. (Zweigert and Kotz, 1998).
We find that the concept of vicarious liability is founded on the rule of common sense as employees are usually people of meagre means and it is, therefore, only fair that the injured person is allowed to recover damages from the employers. Thus where there is a relationship of master and servant, the former is always liable for the torts committed by the latter in the course and the scope of his duties. The master or the employer can claim compensation from the negligent employee. This is well indicated in the case of:
Lister V Ramford Ice and Coldstorage Co Ltd, 1957
L, a lorry driver employed by the company, reversed his lorry negligently and knocked down his own father, who was also employed by the same company. The father recovered damages from the company for the negligent act of its employee. The company, however, succeeded in recovering damages from L because L had broken his obligation to the company to take reasonable care in the performance of his duties.
This indicates that a master is liable for every wrongful act of the servant if committed in the course of employment even without any express approval by him. It is immaterial that the alleged act was not done for the benefit of the master. But the master is not liable for torts committed beyond the scope of employment unless he has expressly authorized such acts or subsequently ratifies them.
Emanuel, S. L. (2004): Fundamental of Business Law, 4th Edition, Educational Publishers New York.
Farrar, J and Dudgal A (1994) Introduction to Legal Method Sweet and Maxwell.
Gifford, K (1980) Legal Profession Law & Practice in Victoria Law Book Co, Sydney.
Hudson. A. 2003. Equity & Trusts, 3rd edition Cavendish London.
Jertz, A. and Miller L. R, (2004): Fundamentals of Business Law, 3rd Edition, Macmillan Publisher, New York.
Lawler, J. (1940) a short historical introduction to the law of real property foundation Press, Chicago.
Lord Denning (1979). The Discipline of the Law Butterworth.
Penrose, R (2005): Road to Reality: A Complete Guide to the Laws of the Universe, Longman Publisher, New York.
Zander, M (1999) the Law Making Process Butterworth.
Zweigert and Kotz (1998) an Introduction to Comparative Law Sweet and Maxwell.