Element of contract

a. Parties

Any contract must have two parties. The parties may be natural person like Neema Maganga or artificial person created by law such as corporate bodies like companies.

b. An offer (proposal)

Is a statement that proposes definite terms and permit the other party to accept the terms. The one who give an offer is called offeror or proposer.

Characteristics of an offer:

1. It must be made willingly i.e offeror must be willing to be bound by the terms she
2. It must be clear and certain
3. It must be final expression by the offeror of his willingness to be bound should his offer be accepted
4. It must be communicated orally, in writing or by conduct.
5. It should be complete when it comes to the knowledge of the offeree.

NOTE: Contrary to above characteristics it is called invitation to treat (offer to chaffer): is an invitation for other people to submit offers which may be accepted or rejected. Eg: Goods displayed in a shop. Advertisement, auction, inviting tenders.

Termination of an offer: An offer can be terminated as follows:

1. Revocation: withdraw before it is accepted, here the offeror can withdraw his offer before acceptance by offeree.
2. Lapse of time: If is time stated in the offer or after reasonable time.
3. Failure of the acceptor to fulfill conditions.
4. Death or Insanity of offeror or offeree
5. Counter offer or rejection: Response acceptance with new terms can lead to termination.

c. Acceptance

Is an agreement to terms of an offer, this converts the offer into legally binding contract.

Characteristics of acceptance

1. It is an assent to the proposal by the person to whom it was made.
2. An acceptance should be absolute and unconditional to all terms set out in the Offer. Acceptance must exactly mirror the original offer made.
3. Acceptance must communicated to the offeror in writing or orally by an authorized person.
4. Acceptance is complete when it comes to the knowledge of the proposer.
5. Acceptance by post is complete as soon as it is posted (provided it was implied in negotiations)

d. Consideration

Is some rights, interest, profit or benefit acrueing to the one party, loss or responsibility given, suffered or undertaken by the other eg one party provides money and the other provides goods/services both money and goods/services are regarded as legal consideration.

NOTE: In gift giving no consideration, therefore no contract

Characteristics of consideration

1. Must Be Lawful The consideration must be lawful. It should not be something that is illegal or prohibited by law. For example, the sale of illicit goods or services cannot be supported by valid consideration.
2. Must Be Sufficient Consideration must be of some value, though it need not be equal or proportional to the goods or services being exchanged. In a sale contract, the payment made by the buyer is considered sufficient consideration, even if it is not equal to the intrinsic value of the goods.
3. Must Be Real and Tangible Consideration must be something that is real, tangible, and measurable. In the context of a sale contract, the consideration typically takes the form of money or goods, which can be physically exchanged.
4. Must Be Agreed Upon by Both Parties Both the buyer and the seller must agree on the terms of the consideration. For a contract to be valid, both parties must be aware of and accept the value being exchanged (e.g., price for goods or services).
5. Must Be Present or Future Consideration must be for something to be done either in the present or in the future. Past consideration (something that has already been done before the contract is made) cannot be valid. For example, payment for goods must be made in exchange for those goods at the time of sale or agreed upon in the future.
6. Must Be Possible to Perform The consideration must be something that can be performed. If the consideration involves performing an impossible task (e.g., the sale of goods that do not exist), the contract is not valid. Both parties must be able to fulfill their obligations under the contract.

Types of consideration

1. Executory consideration: A consideration resulting from an exchange promises to perform acts in the future. Eg: A promises to deliver goods to B and B agrees to pay for them.
2. Executed consideration: Happens when one party promised to do something in return for the act of another not mere promise of future performance.
3. Past consideration: Comprises an act which was done before the promise was made and not in response to sub-sequent promise (It is not a good consideration)

e. Capacity to contract

means competence to enter into a legally binding agreement because both parties are mentally capable to understand a contract.

Factors considered or factors vitiating capacity: The following factors should be considered when deciding on capacity to contract

1. Age: A minor/infant is not competent to contract because she has not attained majority age/ contract age. In Tanzania the age of majority is 18 years and above. Below 18 years lack experience to exercise sound judgements, she cannot protect herself. Except for necessaries and beneficial contracts.
   • necessaries: goods suitable to the conditions in life of a minor and to his requirement at the time of the sale and delivery.
   • beneficial contracts like training that is advantageous to the minor.
2. Soundness of mind: A person who is of sound mind is a person capable of understanding the contract and forming rational judgement eg Mentally disorder, drunkard have no sound mind.
3. Personal disqualified by law: Persons disqualified by law are
   • Bankrupt persons: the law disqualifies a person declared bankrupt to enter contract.
   • Unincorporated bodies eg club associations and societies can't enter into contract because they have no separate existence in law, they can do so through agents.

f. Free consent

contracting out of own free will i.e freedom of contract. Two or more person are said to consent when they agree upon the same thing in the same sense.

Factors which undermine free consent:

1. Coercion or Duress: Committing or threatening to commit any act unlawful, detain any properly with intention of causing any person to enter into an agreement
2. Undue influence occurs where the relationship between the parties such that one of the parties are in a position to dominate the will of the other, and uses that position to obtain an unfair advantage over the other.
3. Mispresentation /Representation
4. Mistakes: Entering the contract believing that something material exist while does not exist.

g. Lawful object

The subject matter or object of the contract must be lawful or legal eg supplying heroin is illegal, therefore heroin is lawful object. This is the matter of jurisdiction i.e to be decided by law.

Means the rights and the obligations of both parties to the contract have been properly fulfilled. i.e the contractual relationship between them is terminated and none of them has any more claims from or owes the other. Therefore obligating and rights come to an end. This is where parties to contract are no longer under a duty to perform their part of agreement.

1. Discharge by performance: The common way of discharging contracts is by performing them to the satisfaction of the parties involved i.e by fulfilling the agreement with free will. The contract then comes to an end.
2. Discharge by agreement: Sometimes performance is impossible needing the parties to discharge the contract by natural agreement with free will. Discharge by agreement may take the following forms:
   • Satisfaction and accord: This is applicable to executory contracts where a contract has been performed partly and a party which has performed its obligation (innocent party) may require some compensation for what it performed.
   • Waiver: Here the innocent party (with the right to demand compensation) may agree to waive her rights i.e not claim any compensation for the part it performed.
   • Novation: This happen where the existing contract is substituted for a new contract or a new contract is formed to discharge the old contract with the free consent of all parties concerned.
3. Discharge by the subsequence impossibility (Frustration): A contract may become impossible to perform because of certain circumstances. After a contract has been made by both parties willing to perform their roles effectively, circumstances may change to the extent that it become impossible or illegal or unreasonable to perform the contract. Circumstance can be:
   • Subsequent physical impossibility. Where it is impossible to physically fulfil duties and obligations under a contract, the physical impossibility may however arise after the contract has been made.
   • Subsequent illegality. This is where after a contract has been made there is new legislation which makes the contract illegal, therefore the contract become illegal common law.
   • Disappearance of purpose of the contract: A contract which is made on the basis of a future event occurring if that does event not happen a contract is frustrated and therefore discharged.
   • Distortion of the commercial viability of the contract: Sometimes changes which make a contract an unreasonable undertaking take place after the contract has been made. Therefore it may be rational to terminate the contract if this makes both parties better.
   • Destruction of the subject matter i.e the subject matter being destroyed
   • Death, insanity, incapacity and illness, this is applied mainly for personal services eg employment.
   • Acts of God like floods, famine, droughts, earthquake and the like of which their occurrence frustrates the contract.
4. Discharge by breach: Breach of a contract is an actual failure by a party to a contract to perform his obligation under that contract or an indication of his intention not to do so without any justifying cause, therefore injured (not in breach) party may choose not to sue the other party and treat the contract as discharged. Discharge by breach can be:
   • Actual breach: occurs when obligations are violated having become due eg. seller fails to deliver the goods on due date.
   • Anticipated breach: Takes place where obligations are violated before they become due eg. a seller informs the buyer about his intention of failing to deliver goods.