CHAPTER ONE

INTRODUCTION TO CONTRACT LAW

You should be familiar with the following areas

  • Meaning Contract and Contract Law
  • Terminologies used
  • The purpose and scope of contract law
  • Historical Background of Contract Law
  • Sources of Contract Law
  • Customary Contracts

1.1  MEANING OF CONTRACT AND CONTRACT LAW

1.1.1 Contract

According to Black’s Law Dictionary 8th Ed. Pg 341 defines contract as agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law. The universal definition of the contract is that it is an agreement with legal force. So it is not all agreements or undertakings which amount to contracts. The legal binding nature of an agreement is necessary for these to be a contract.

1.1.2 Contract Law

Is a body of law that governs, enforces, and interprets agreements related to an exchange of goods, services, properties or money.  According to contract law, an agreement made between two or more people or business entities, in which there is a promise to do something in return for gain or advantage, is legally binding. Contract law is the center of many business dealings, and anyone entering into a contract should that failing to abide by the contract, even by mistake, could result in serious problems

OR

Is branch of civil law that deals with interpretation and enforcement of contracts between two or more parties. Contract law governs the legality of agreements made between two or more parties when there is an exchange of some sort intended to take place.

1.2 TERMINOLOGIES

(a)  Offer: Is an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is acceptable by the person to whom it is addressed, “the offeree”

(b) Acceptance: occurs when a offeree  agrees to be mutually bound to the terms of the contract by giving consideration or something of value like money, to seal the deal.

(c) Consideration: Is a benefit which must bargained for between the parties and is the essential reason for a party entering into contract.

(d) Void: means lacking of legal force

(e) Voidable: means capable of being rescind

1.3 PURPOSE AND SCOPE OF THE CONTRACT LAW

1.3.1 Purpose

  • Contract law is primarily concerned with supporting institutions of exchange, which is an enormous part of our life carried on the basis of that are in some sense termed as agreement.
  • To support and control the millions of agreements that collectively make up the market economy, and hence operates in the context of dispute resolution mechanism.
  • It enables the parties to the contract to make exchanges that might otherwise carry too great risk whether of disruption by some contingencies or default by other party.

1.3.2 Scope of Contract Law

The scope of contract law varies from country to country and from legal to legal systems depending on the types of obligation they govern. Unlike non-contractual obligations in which a person undertakes an obligation not to wrong another by conduct that the law of tort establishes as wrongful, contract law governs contractual obligations which arises from agreements made between two or more persons which puts the promisor under the obligation to perform his or her promises under the sanction of an action against him for breach of the contract.

The contractual obligation implies the existence of an ‘obligor’-the person who is legally under the obligation and the ‘obligee’ for whose benefit the obligation exists. This feature of contract distinguishes contract law from criminal law obligations.

Moreover, contract law may have a general or special application depending on the nature and origin of contractual undertakings at a given time.

1.4 HISTORICAL BACKGROUND OF LAW OF CONTRACT

The historical development of contract law can be under stood in terms of the contractual foundations of obligations, which was traced back to ancient and classical Roman law. However the foundation of the present day law of contract were laid in 19th century. This period in history saw the rapid expansion of trade and industry inevitable resulting in the increments in the volume of commercial disputes as a result people turned to the court of law for resolutions. Gradually, there developed a body of settled rules which reflected and of disputes from which they arose and prevailing belief of the time. However, this rules and belief are reflected by the dominant economic philosophy, the so called the laissez-faire individualism-the view that the state should not meddle in the affairs of business and that individuals should be free to determine their own destines. The philosophy was mirrored in the law of contract by two assumptions-freedom of contract and equality of bargaining power. According to freedom  of contract theory it is assumed that every one is free to choose which contracts they entered into and terms on which they wish to do so. According to equality of bargaining power theory, the parties were deemed to have equal power to bargain on their business and deemed to be equal bargaining strength.

These theoretical foundations of contract law produced an acceptable legal framework for the regulation of business transactions that resulted in the crystallization or codifications of contract laws across the world. The two theories did also define the role of the courts. Courts were required to enforce the agreement of the parties, as it was with out questions its fairness. Over years the freedom of contract theory though maintained at present is subjected to different limitations. The theory of equality of bargaining power had brought certain unnecessary results because parties to contract do not necessarily have equality. For example, employers and employee, producers and consumers, lenders and borrowers do not have equal bargaining power with employers, and as a result entered into contracts the terms of which were more favorable to the employers (employees were supposed to work for as long as 16 hours per day & more, less wages). Courts were simply required to enforce such terms. This led to dissatisfaction, riots unrest etc calling for government intervention. Thus, governments do lay down the minimum conditions for enforceable employment contracts. Today, we find the law of contract providing the conditions for the making and enforcement contracts. However, we should note that the theory of freedom of contract and equality of bargaining power are still the foundation of contract law in many legal systems.

In Tanzania (Tanganyika) under British Colonial rule, in 1920 British imported the India Contract Act 1872, this was made possible by the Tanganyika Order in Council when permitted the use of received law. It was operated until 1961 when it was reviewed by the law of contract ordinance whose provision however were a replace of the Indian law. Later in 2002 the government revised the law of contract and now it recognizes as the Law of Contract Act, Cap 345 R.E 2019

1.5 SOURCES OF LAW OF LAW OF CONTRACT

(a) Statutes/ Legislations

The principle Legislation that provides for the general principles of contract law in Tanzania is the Law of Contract Act, Cap 345 R.E 2019.

(c) Case laws

The cases that have been decided by the High Court and Court of Appeal which established various principles on contract law are also sources of contract law.

  • Customary Laws

The customary law will apply to customary contracts. Customary laws in Tanzania are applicable by virtue of section 11of the Judicature and Application of Laws Act (JALA) Cap 358 R.E 2019, which is to the effect that customary law shall be applicable to, and courts shall exercise jurisdiction in accordance therewith in, matters of the civil nature.

  • 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.