BUSINESS LAW 116

COMPILED BY U.K MAYUNI

BUSINESS LAW
• DEFINITION OF LAW:
Law is a body of rules for the guidance of human conduct which is
imposed upon and enforced among members of a given state. The aim
of law is the attainment of justice in a society.
Law is divided into two main branches:
• Public Law
• Private Law
1. PUBLIC LAW
• This is concerned with legal structure of the state and the relationship
between the state and the individual members of the community.
• It also governs the relationship between one state and another.
Public law is comprised of:
• Constitutional law
• Administrative law
• Criminal law.
i) CONSTITUTIONAL LAW
This is concerned with:
• The structure of the main institution of the government and their
relations to each other.
• The relationship between central and local government.
• The making of treaties with foreign states.
• The state functions and powers of members of parliament, the
judicially, the civil service and the armed forces.
• Constitutional law is the supreme law which means that any law that
contradicts with it is invalid.
ii) ADMINISTRATIVE LAW
• It is the branch of constitutional law. It is concerned with legal relationship
between private citizens and various agencies of local and central government.
iii) CRIMINAL LAW
• It deals with crimes. A crime is a wrong against the state. It concerns with the
offences against the state. i.e. murder, theft etc.
• The seriousness of the offence will guide over which court to preside over the
case.
• Cases which are less criminal will be dealt with the magistrates court, those more
serious by the high court presided over by the judge or jury.
• The two parties in a criminal case are the prosecution and the accused.
• The prosecution conducts on behalf of government.
2. PRIVATE LAW
• This governs the relationship between individuals.
• Branches of private law include:
• The law of contract
• The law of torts.
• The law of Trust.
• The law of property.
 SOURCES OF LAW
i) THE CONSTITUTION
• This is the supreme law of Malawi.
• It provides in section 5 of its supremacy.
• Any law which inconsistence with it is invalid.
• The constitution binds the executive, legislative and judiciary.
ii) Common law and equity
• This was the law applicable in England.
• It was based on unification of the various local customary laws of England.
• The rules of common law were rigid and were applied strictly.
• Common law introduced the concept of starre dicisis ( let the decision stand).
• It is part of case law.
Equity
• This was developed by the court of the chancery to remedy the defects of
the common law.
• It introduced the concepts of fairness and flexibility.
• Common law can be used on its own as complete law while equity cannot

4.International law
• International conventions and treaties can become part of Malawi law if
they are incorporated by an act of parliament or other domestic legislation.
Eg. United Nations, African Union, SADC and International Labour
Organisation.
5. ACADEMIC WRITINGS
• Legal text books and articles by reputable authors are occasionally
accepted as persuasive evidence of the law where no precedents are
available.
• The weight accorded to such evidence will depend on the author’s
legal standing.
6. Case law
• Law originates from decided cases which were decided in courts.
• It is based on the doctrine of judicial precedent.
• Judicial precedent- a judge applies a decision from earlier cases provided
they are similar in material facts.
JUDICIAL PRECEDENT
• Case law is based on the principle of judicial precedent. A judge is bound to
apply a decision in the previous case provided the material facts are similar
to the case at hand. This is known as judicial precedent.
• The material facts are known as Ratio Decidendi on which the precedent is
based. All other facts, opinions said by the judge by the way are known as
obiter dicta and this does not form part of the precedent.
• Judicial precedent is based on three elements.
1. Rules
• there must be rules for extracting a legal principle from a previous set
of facts and applying it to current facts.
2. Reports
there must be adequate and reliable reports of earlier decisions.
3. Classification
Precedents must be classified into:
• Binding precedents- these are a legal source of law and they must be
followed without questioning. i.e. decisions from the supreme court.
• Persuasive precedents – this do not in themselves establish the law but
may be followed by the courts because they are considered to truly state
the law. E.g. the decisions of lower courts and foreign judgments.
• Conditionally binding- While the lower court cannot question the decision
of a court of superior authority, it is not bound to accept a judgment of a
court of equal status.
A precedent will cease to be binding and a judge can refuse to follow it as a result
of the following:
i) Reversal
The decision was reversed on appeal because the appeal court disagrees with the
principle laid down by the lower court.
ii) Overruling
Where similar facts come before the higher court in a later case, the higher court
may decide a case on a different legal principle.
iii) Disapproval
Where a higher court in a judgment expresses doubts about the validity of a
previous rule but does not expressly overrule it.
ADVANTAGES OF PRECEDENTS
• Clarity - principles of ratio decidendi should lead to statements of general
legal principles.
• Certainty- the law is decided fairly and predictably. They give guidance to
judges and risk of mistakes is reduced.
• Flexibility- the system is able to change with the changing circumstances.
• Detail- precedent state how the law applies to facts and should be flexible
enough to allow for details to be different.
• Practicality- case law is based on experience of actual cases brought before
the courts.
Disadvantages
• Judges may sometimes be forced to make illogical distinctions to
avoid an unfair result.
• Sometimes judgments may appear to be inconsistent with each other
or legal principles followed.
• The system can limit judge’s discretion.
7. CUSTOM
• This refers to a set of rules governing the local community, customary
law has remained uncodified because it varies from locality to locality.
• It is one of the oldest source of law, though it has only limited
importance nowadays.
• A claim in defense can be carried out of what has always been done
and accepted.
• For an alleged custom to be incorporated, it must be proved to exist
in court.
In order for the existence of the custom to be recognised:
• It must have existed time immemorial.
• The right to exercise the custom must not have been interrupted
• It must have been exercised through common consent and not by
force,
• It must be reasonable- conforming to the general view of right and
reason prevailing in the community.
• It should not be in conflict with the statute.
8. STATUTORY LAW
• These are acts of parliament made and passed in duly constituted
national assembly. Eg road traffic act, companies act, pension act etc.
• The main advantage of this law is that it represents public opinion
because it is made by people who were democratically elected.
8. Delegated legislation
• Parliament will give power to a person or a public body to make laws
on its behalf.
• This is delegated or subsidiary legislation.
• Forms of delegated legislation include statutory instruments made by
parliament, by laws made by local authorities, court procedures made
by chief justice.
Advantages of delegated legislation

• Saves time of parliament, allowing it to concentrate on discussing

issues of general policy.
• In times of emergency, it allows laws to be made quickly.
• It enables experts to deal with technical matters.
Disadvantages of delegated legislation
• The system is unrepresentative in that power to make law is given to
civil servants or bodies who are not democratically elected.
• Parliament does not have enough time to supervise delegated
legislation.
• The executive tends to get more power beyond the legislature
thereby defeating the principle of checks and balances.
Control over delegated legislation
i) Ministerial approval
• Where legislation power is delegated to bodies other than ministers, the
enabling act usually makes ministerial approval an essential part of the
legislative process. E.g. laws made by local authorities under the local
government.

ii) Parliamentary scrutiny

• A selected committee members of parliament scrutinizes statutory
instruments (draft) and gives a report to parliament.
• MPs are then able to question the responsible minister about any statutory
instrument that seems to be unsatisfactory in some way.
iii) Judicial review
• Through the process of judicial review, the high court has an inherent
power to scrutinize delegated legislation and declare it to be invalid in
whole or in part if it is illegal, irrational or procedurally improper.
• Legislation is invalid if it purports to go beyond the powers delegated
by the enabling act.
 Interpretation of statutes
• When a statute is clear, there is no need for interpretation but
because of the following.
i) Uncertainty- the courts must decide if the cases before them fall
under the words of a statute.
ii) Ambiguity- might be caused by an error in drafting so a statute can
have two different meanings.
iii) Broad term- i.e. vehicle may need to be considered in relation to
skateboards or bicycles.
Principles for interpretation of statute
i) Literal Rule
• The words of a statute should be given their plain, ordinary or literal
meaning. Fisher v Bell, 1960 – under Offensive Weapon Act, 1959, it
was literally translated that display of goods in a shop was not an
offer for sale but invitation to treat.
Whitely v Chapel, 1868 – a statute aimed at preventing electoral
malpractice made it an offence to impersonate any person eligible to
vote. The accused was acquitted because he impersonated a dead
person.
ii) Golden rule
• It states that the literal rule must be followed unless if it produces results that are absurd
then a golden rule must be applied to avoid this absurdity. i.e. if the law said, ‘no man
kills another’. In literal rule a woman who kills a person is spared but to avoid this, we
use a golden rule.

iii) Eiusdem generis rule

• Literally meaning of same kind.
• If there is a series of particular words followed by a word of generality, then the category
into which the particular words fall will not be extended by the words of generality. E.g.
in Powell v Kempton, 1899, the Betting Act prohibits the keeping of explosives in a
house, office, room, or any other place for betting with persons resorting on them. It was
held that ‘any other place’ meant a place similar to a house, office or room, and would
not therefore, apply to the race-course.
iv) Mischief rule
• Under this approach, a judge will look at the Act to see what was its
purpose and the mischief in the existing law it was designed to
prevent.
• The judge considers the following:
- What was the problem or defect for which the existing law did not
provide.
- What remedy had parliament resolved and appointed to cure the
problem .
- What is the true reason for the remedy. Gorris v Scott, 1874.
5. Expressio unills est Exclusio Alteriuos

• This means that the expression of one thing implies the exclusion of
another. So where specific words are used and are not followed by general
words, the act only applies to the instances and no other.

6. Noscitur a Sociis
• This means that the meaning of the word can be gathered from its
context,. Words with doubtful meanings may take shape the colour and
shape from the nature of the words and phrases which they are associated
with.
Interpretation Aids

i) internal aids-found within the Act.

This include the following
• -The preamble- this consist of the introductory paragraphs, setting
out the purpose of the statute.
• - The interpretation section- found within the statute. It explains the
meanings of words or phrases used in the statute.
ii) External Aids
• These tools outside the statute.
• General interpretation Act- parliament consolidated a series of
standard expressions, the interpretation of which is to be applied
generally in the interpretation of Acts of Parliament.
• Dictionary- English dictionaries can also be used to find ordinary
meanings of words of a statute.
• Hansard- official reports of the proceedings in parliament
The court System of Malawi
1. Malawi Supreme court of Appeal
• The court at the apex of the hierarchy.
• Highest in authority.
• Superior court of record(a court in which all the acts and judicial proceedings are
enrolled for perpetual memory and testimony).
• The court has authority to fine or imprison for contempt of its authority.
• The court is composed of chief justice, any number of justice of appeal as may be
prescribed by the parliament.
• It is a requirement that the court be composed of uneven number of justices when
hearing the case of appeal.
• The number should not be less than three.
• The court does not hear cases on first instance.
• It hears appeals against any civil or criminal proceedings from the high court.
2. The High Court
• Established by section 108 of the constitution.
• It is also a court of record.
• The court consist of such number of judges, not being less than three, as may be
prescribed by Act of Parliament.
• Proceedings are held and disposed by a single judge except in constitutional cases
where the minimum number of judges is three.
• The High court can also sit over cases commercial in nature.
• The High court has got the following divisions:-
- Criminal division which deals with criminal matters.
- Commercial division which deals with commercial cases.
- Revenue division which deals with issues concerning revenue and tax.
- Also hears appeals from lower courts.
JURY SYSTEM
• The high court also follows the system of jury in some more serious crimes.
• Most disputes involve two sets of investigations
i) Deciding what true facts are
ii) Deciding what law to apply.

These two processes are entrusted to two bodies.

• The determination of the facts by the jury
• Determination of the law by the judges.
• The jury consist of a group of 12 people over 21 and not more than 60 yrs
old chosen at random from a list maintained by the registrar for each
district.
The following people are not allowed to act as jury:
• Convict
• Judge
• Practicing lawyers
• Doctors
• Pastors
• Police
• Church ministers.
3. Subordinate courts
Include magistrate, child justice, industrial relations and ombudsman.
i) Magistrate court:
• Consist of a fit and proper person who is appointed by the chief justice on the
recommendation of judicial services commission.
ii) Industrial Relations Court(IRC)
• Established under the constitution and has original jurisdiction over labour
disputes and such issues relating to employment and its composition and
procedures are specified under Labour Relations Act.
• Appeals from this court go to the High court.
• The IRC has civil jurisdiction only.
• The court comprise of a chairman and one panelist representing employees and
another representing employers.
3. Ombudsman
• This is not a court of law but a constitutional tribunal and has power to hear
cases of abuse of authority.
• The ombudsman reports to the parliament.
• It is less formal than the courts.
• The constitution provides for the office of the ombudsman.
• Decisions of the ombudsman are reviewable by the High court.
ADMINISTRATIVE JUSTICE

• This is the settlement of matters affecting the rights of individuals by a certain body
other than normal courts, usually by Tribunals and ministers.
i)TRIBUNALS
• These are specialized courts established by statute to deal with individuals or between
government agencies and in a less formal manner than is with normal courts.
• Tribunals developed because of the growth of social legislation in the 20th century which
has resulted in many new types of disputes.
• Tribunals help to solve these disputes in a cheap, quick and informal way. They ease the
courts from the burden of looking at every case.
• In courts we have judges, lawyers while tribunals are managed by a person (layman) with
specialization of the field in which tribunals operate.
Types of tribunals
i) Professional councils
• Professional bodies have a council which possess powers to investigate
complaints against its members and punish them for their misconduct in their
professional capacity. i.e. ICAM for accountants, Nurses Council etc.
ii) Tribunals
• These are given power to investigate certain specified matters and punish
offenders. i.e. Competition and Fair Trading Commission.
iii) Ministerial decisions
• A minister may also be involved in dispute settlement under some delegation. i.e.
Immigration Act – a person who has been issued a deportation order may appeal
to the minister to reconsider the order.
ADVANTAGES OF TRIBUNALS
• The procedure is simple( not complicated as court procedure because
tribunals sit informally).
• The arrangement is cheap because there is no need to be legally
presented.
• Quick decisions and no long waiting list for a case to be heard. They
can hear cases at short notice.
• They deal with small range of specialized decisions.
DISADVANTAGES OF TRIBUNALS
• Because they are not courts of laws, they don’t follow closely legal
procedure. i.e. evidence, right to cross- examine. This may lead to
injustice.
• They are not bound to rule of precedents. Decisions are made
according to their judgment.
• The hearing may not be in public, practice varies.
• The position often arises, when a minister is concerned, he acts as a
judge in his own cause.
LAW OF CONTRACT
Contract
• Agreement which legally binds the parties. It is legally enforceable or
legally recognised as creating a duty. It is formed from consenting
minds (consensus idem). Which means both parties have agreed on
the same thing.
• The agreement is formed from offer and acceptance. The one making
an offer is an offeror and the one to whom an offer is made is an
offeree.
Offer
• Expression of willingness to enter into a contract on certain terms. It
is either expressed or impliedly made on which the maker is prepared
to be contractually bound if it is accepted unconditionally.
• An offer need not be vague. It has to be clear on which terms the
acceptance will be made. i.e Gunthing v Lynn(1831). In this case the
offeror promised to pay a further sum if the horse was lucky. Vague
offers can be made certain either by implying a term or by reference
to previous dealings. (Hillas v Arcos, 1932)
• An offer can be made to a particular person, a class of people or to
the public at large. Carllill v Carbolic Smokeball Co, 1893.
• An offer must not be confused with the answer to the question or
supply of information. Harvey v Facey, 1893
• An offer must be distinguished from an invitation to treat.
• Invitation to treat is inviting someone to make an offer.
• An offer can be converted into a contract while an invitation to treat
cannot.
Examples of invitation to treat
• Exhibition of goods in a shop. (Fisher v Bell, 1961, Pharmaceutical Society
of Great Britain v Boots Chemists, 1953)
• General advertising of goods. i.e. a newspaper advertising that goods are
for sale is not an offer but invitation to treat. Grainger v Gough, 1896. In
this case it was held that circulation of a price list by a wine merchant was
only an invitation to treat.
• But: advertisements of rewards for lost or stolen property are offers since
the return of the property is acceptance. Carllill v Carbolic Smokeball Co,
1893.
• An invitation for tenders is not an offer but an invitation to treat. i.e.
inviting someone to make an offer by submitting the tender documents.
• Advertising for shares through a company prospectus is an invitation
to treat. Applicants offer to be allotted shares in a company. The
allotment is acceptance and it can be in full or in partial.
• An auctioneer’s request for bids. Advertising that auctions will be
held is an invitation to treat, bidding is an offer and auctioneer’s fall
of hummer is acceptance.
• Refusal or counter-offer
A counter offer is an offer made in response to a previous offer by the other
party during negotiations for a final contract. Making a counter offer
automatically rejects the prior offer, and requires an acceptance under the
terms of the counter offer or there is no contract. Hyde v Wrench, 1840.
• Lapse of time
An offer can terminate at the end of the period stated in the offer. If no
period was stated then at the end of a reasonable time. Ramsgate Victoria
Hotel v Montefiore, 1866, where in June 1864, D offered to take shares in
P’s hotel. P did not reply to this offer. In November, P allotted shares to D
which D refused to take. It was held that Refusal was justified since P’s delay
had caused D’s offer to lapse.
• Failure of a condition subject to which the offer was
made(Financings Ltd v Stimson, 1962).
• Death
• This depends on the one who dies:
• If the offeree dies an offer is terminated.
• If the offeror dies, the offer terminates if the offeree knew about this death at
the time of his purported acceptance.
• If the contract requires personal performance i.e. in an orchestra it terminates
at the death of the offeror.
ACCEPTANCE
• Acceptance is an unconditional, final and unqualified expression of
accent to all the terms of the offer. It can be oral, written or implied
from conduct. It has to be unqualified and corresponding to the terms
of the offer accordingly.
• Unqualified: a counter-offer is insufficient and causes original offer to
terminate
• A conditional accent is not enough acceptance.
• Acceptance is ineffective until communicated.
• General rule on communication of acceptance:
• If not received by the offeror, acceptance is not effective.
• If not received because telephone lines are not clear or because
offeree words are not clear to be heard by offeror, it is not effective.
• Acceptance must be communicated by the offeree or by someone
with his authority. Case: Powell v Lee,1908.
• Silence does not amount to acceptance. Case: Felthouse v Bindley,
1863
• The offeror can express the method of acceptance but offeree can
use an equally expeditious method unless the offeror made it clear
that no any other than specified method will be adequate.
• If two identical offers cross in the post, there is no contract.
Exception to the general rule:
• Unilateral contracts- contracts which consist of a promise to pay
money in return for performance of an act. Performance is sufficient
acceptance.
Postal rule
• Acceptance by post is complete once the letter is posted – even if it
gets lost in the post. Case: Household Fire Insurance Co v Grant,
1879.
• Exceptions to the postal rule: if the letter is lost or delayed in the post
because wrong address was used, the postal rule will not apply.
• Posted means putting the letter in the control of the post and not just
handing to a postman. The postal rule also applies to telegrams.
TERMS OF CONTRACT
• A contractual term is "Any provision forming part of a contract". Each
term gives rise to a contractual obligation, breach of which can give
rise to litigation. They are contents of a contract.
• An agreement will generally consist of various terms. Even the
simplest forms of contract will have terms.
• The main terms generally being the price paid and the subject matter
of the contract, eg. The goods or services provided. Terms can be
either written or implied.
• Express terms - those agreed between the parties themselves. They
are specifically agreed between the parties, whether in writing or
verbally. Express terms are grouped into:
• Fundamental terms- those on which the whole basis of a contract
rests, or the core of the agreement.
What is fundamental can be specifically agreed but if not, it is a
question of fact for the courts to determine.
• Collateral/ancillary terms- are those which support the fundamental
terms. They are not in themselves vital to the validity of the contract.
• Implied terms- these are terms which for one reason or another, have
been omitted from the specific agreement. The terms can be implied
in the following ways
i) By courts- at common law, the courts may imply a c=term in the
contract
• To give efficacy to the transaction
• To fill a clear gap i.e. complete an incomplete contract.
• The term would derive from the relationship between the parties.
ii) By custom- if a certain thing is customary in the particular trade, it will
readily be implied into the contracts in respect of that trade. If it a custom in
a particular district or place, it would also be implied. In order to be implied,
the custom must be certain and reasonable and not offend against the
intention of any legislative enactment.
iii) By statute- terms may be implied by statute. In some cases permits the
parties to contract out of the statutory terms. Statutory terms are obligatory.
iii) By a course of previous dealings- a term can be implied into a contract as
a result of previous dealings between the parties. This will happen where the
parties have dealt in the similar transaction before for a long time and there
were clear understanding that the terms in the previous transaction should
apply to the present transaction.
Classification of terms
i) Conditions:
• They are main terms of the contract.
• They are fundamental terms and of primary importance.
• These are terms which go to the root of the contract.
• Breach of these terms leads to termination of a contract. Poussard v Spiers,
1876.
Types of conditions:
i) Condition precedent- the event must occur before a party’s duty to
perform arises. Performance is excused unless condition occurs. i.e Tom
promises to buy Mary’s race car for k5 million, if the car wins the
champion race. The car’s winning is the condition precedent to Tom’s
duty to buy. If the car does not win, a failure of condition has occurred
and Tom has no duty yo buy.
ii) Condition subsequent- the happening of a condition discharges an
existing duty to perform. Performance is excused if condition occurs.
E,g. Joan and Mike enter a contract requiring Joan to mow the grass on
3 July, the day before his big party on 4 July, unless it rains. If it rains,
Joan does not have to mow the grass , and Mike’s duty to pay Joan is
discharged.
iii) Concurrent condition- if the contract calls for the parties to perform
their duties at the same time, each party’s duty to perform is
conditioned on the other party’s performance. Tender of performance
precedes right to demand performance. E.g. Pete agreed to buy
Wendi’s cookie store for k3 million. Pete does not have a duty to pay the
K3 million, unless Wendi tenders the store. Wendi does not have a duty
to give Wendi a store unless Pete tenders the K3 million
Conditions may be expressly or impliedly created. Express conditions
are created by oral or written statements in the contract.
2. Warranties
• Subsidiary term to the main term of a contract.
• Less important as it does not go to the root of the contract.
• Breach of it cannot lead to termination of the contract but the
innocent party may claim damages. Bettini v Gye,1874.
3. Innominate term

• This is between a condition and a warranty. In order for this term to apply,
the terms of the contract and facts of the case have to be considered in
each situation.
• The court will must decide what the effect of breach of this term will be in
order to determine whether it is an innominate/ intermediate term. If the
nature and effect of the breach is such as to deprive the injured party of
most of his benefit from the contract, then it will be treated as a breached
condition.
• The injured party may terminate the contract. Hongkong fir shipping co v
Kawasaki kisen kaisha Ltd. 1962.
EXCLUSION / EXEMPTION CLAUSE
• This is a clause in the contract which purports to exclude liability altogether or to
restrict it by limiting damages or by imposing other onerous conditions. They are
sometimes referred to as exemption clauses.

• Because most people did not read them, they posed as an abuse.

• The courts have generally sought to protect the consumers from the harsher
effects of exclusion clauses by.

• An exclusion clause must be properly incorporated into a contract before it has

any legal effect.
• They are interpreted strictly. This may prevent the application of the clause.
Exclusion clauses can be incorporated into a contract in the following
ways:
• By signature- if one signs a written contract then he or she is bound
by its terms. Whether the terms are read and understood or not
unless if it is a misrepresentation. If it is a misrepresentation, one can
claim Non-est- factum (L’Estange v F Graucob LTD 1934.
• By notice- if notice of the existence of an exclusion clause has been
given to the other party before the formation of a contract or at the
time the contract is made. Terms cannot be added after the contract
has already been made. Olley v Marlborough Court Ltd, 1949.
• where a notice board is used, it must be sufficiently large and placed
in a prominent position, particularly where there is potential for
serious injury. Thornton v Shoe Lane Parking Ltd,1972.

• By previous course of dealings- in such cases, the transaction must

be frequent and regular enough to constitute a previous dealing.
Alternatively a trade custom or practice may imply an exclusion clause
into a contract. Hollier v Rambler Motors(AMC) Ltd 1972.
Interpretation of Exemption clauses

• There are several rules evolved by common law for interpretation of

exclusion clauses. The aim is to give effect to the manifest intention of the
parties.

The following are the rules for interpretation:

• Contra proferentem- an exclusion / exemption clause will be construed
strictly against the person who inserted it. Horrier v Rambler Motors
(AMC) Ltd, 1972.
• Negligence-if a party wishes to exclude liability for negligence in the
performance of his contract, he must use very clear words. Any looseness
and ambiguity will cause the term to be rejected. Horrier v Rambler
Motors (AMC) Ltd, 1972.
• Particular duties- if a clause exempts a party from complying with
specific duties or matters, then all other duties or matters remain in
full force.
• General words- the wording used must be clear =, precise and
unambiguous, otherwise the exemption clause will be ineffective.
CONSIDERATION
For any person to enforce a purported contract, he must show that he
furnished some consideration for the same. In other words, any
purported contract, is unenforceable at law unless supported by
consideration.
Consideration is defined as a valuable consideration, in the sense of the
law, may consist either in some right, interest, profit or benefit accruing
to the one party, or some forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.
Types of consideration
1. Executory consideration
This is a promise given for a promise. This may occur when a person
telephones a shop and orders a piece of furniture. The result is that
there is a promise to pay for the furniture when it arrives and in return
the shop agrees to supply the piece of furniture according to the type
specified by the customer or "I promise to pay you £100 provided you
promise to service my car".
The contract comes into existence from the moment the promises are
exchanged, but its performance remains in the future. To this end,
executory literally means “yet to be done”.
2. Executed consideration
This is an act done or completed in return for a promise. This means a
person does not need to pay anything until the task has been done. For
instance an employee is paid in arrears, i.e. after doing the work, and
not before. Another example is acceptance of a unilateral offer to the
world at large as in Carlill v. Carbolic Smoke Ball Co.
Rules Pertaining to Consideration
i) Consideration must not be past
An act or a promise cannot constitute consideration if it took place before
the promise which it is sought to enforce was made.
In Roscorla v. Thomas (1842) it was held that the seller's guarantee that the
horse sold to the buyer was "sound and free from vice" could not be
enforced against him since it had been given after the sale had been
concluded. In other words, the guarantee did not form part of the
consideration for the sale of the horse.
In Re McArdle [1951], a couple lived in a house and they made
improvements to it at a cost of £488. It was later agreed in writing that the
landlord would refund the money. There was no money forth coming and it
was held that the £488 need not be paid as the agreement was made after
the work had been done (past consideration).
ii) Consideration must move from the promisee
Only the person who has provided consideration in return for a
promise can enforce that promise (agreement).
In Price v Easton [1833] the defendant promised X that if X did certain
work for him he would pay a sum of money to the plaintiff. X did the
work; but the defendant did not pay the money. It was held that the
plaintiff could not sue the defendant based on two reasons. Firstly, that
the Plaintiff could not ‘show any consideration for the promise moving
from him to the defendant’ and secondly that ‘no privity is shown
between the plaintiff and the defendant’
• In Tweddle v Atkinson [1861] two young people got married. Afterwards,
their respective fathers entered into an agreement whereby they both
would pay a sum of money to the husband, who should have the right to
sue for the sums. Both fathers subsequently died. The husband then sued
the executors of one of them for the sum due. Held: No consideration had
moved from the husband – so, the promise to pay was, as far as he was
concerned, gratuitous.
• Conversely, if the consideration is a benefit to the promisor, this does not
mean that the promisee need necessarily suffer a detriment. However,
because of the rule that it must move from the promisee, if the benefit to
the promisor was, in fact, provided by some third party, then the promisee
cannot sue upon it.
3. Consideration must be something of value but it need not be adequate
The law does not set out to make the bargain for the parties. So, as long as there is
some value, the law is satisfied. It is not uncommon for, say, a property worth
millions to be conveyed for a consideration of K1. It is, in reality, of course, a gift –
but the K1 satisfies the requirements of the law.
Chappell & Co. Ltd v. Nestlé Co. Ltd [1960] Nestlé manufactured chocolate. As a
promotional gimmick, the company offered to sell a gramophone record to anyone
who applied, for the sum of 1s 6d plus three of the wrappers from its bars of
chocolate. The wrappers themselves were of insignificant value and, on receipt,
they were, in fact, thrown away by Nestlé. Held: The wrappers formed part of the
consideration for the sale of the records. Where the consideration, although of
some value, is insignificant in relation to the transaction, it is called "nominal
consideration".
Insufficiency
Insufficiency of Consideration –
sometimes an agreement may be reached and on the face of it may
appear that all the elements have been satisfied and yet the court will
hold that the consideration was insufficient. Usually it is on the ground
that the other party to the agreement has promised to do something
which he was already bound to do.
Examples of duties that will amount to insufficient consideration
a) Public Duty imposed by Law
where there is a public duty on one party, that party cannot by
discharging that duty be said to furnish consideration. In Collins v
Godefroy [1831] the plaintiff had attended on subpoena to give
evidence on the defendant’s behalf in a case in which the defendant
was a litigant, and he alleged that the defendant had promised to pay
him 6 guineas for his trouble. It was held that there was no
consideration for his promise as it is a public duty of every citizen to act
as a witness in court.
b) Existing Contractual Duty –
If one party is already under a duty to the other party, he is not
considered to have furnished sufficient consideration by promising to
perform that duty. In Stilk v. Myrick) where two seamen deserted from
a ship. The captain was unable to replace them – so, he promised the
remaining crew that he would share out with them the wages of the
deserters, if they would work the ship back to London. Held: There was
no consideration for the promise to pay. The remaining crew were
under an existing contractual obligation to do all they could under all
emergencies of the voyage.
c) Concept of part payment of a debt –
bearing in mind that performance of an existing duty owed does not
amount to consideration, if one only performs (pays) a part of the
contracted sum, he is not released from the duty to pay the whole. In
Pinnels Case [1602] the court stated that:-
Payment of a lesser sum on the day in satisfaction of a greater cannot
be any satisfaction of the whole, because it appears to the Judges that
by no possibility a lesser sum can be a satisfaction to the plaintiff for a
greater sum.
There are three exceptions to the part payment rule;
a) where at the creditor’s request, the debtor pays a lesser sum on an
earlier date.
b) the debtor pay by a different chattel i.e. where the lesser payment
has been made by cash instead of a cheque.
c) where payment has been made at a different place than the parties
agreed. d) Doctrine of promissory estoppel.
d) The Doctrine of Promisory Estoppel
Sometimes you will find that even though a promise was not supported by
consideration, it will be binding because the promisor will be stopped from
denying the promise. This doctrine dates backwards to the case of Central
London Property Trust House Ltd (the High Trees Case)
In September 1939, the plaintiffs leased a block of flats to the defendants at a ground rent of £2,500 per
annum. In January 1940, the plaintiffs agreed in writing to reduce the rent to £1,250, plainly because of war
conditions, which had caused many vacancies in the flats. No express time limit was set for the operation of
this reduction. From 1940 to 1945 the defendants paid the reduced rent. In 1945, the flats were again full, and
the receiver of the plaintiff company then claimed the full rent both retrospectively and for the e future. He
tested his claim by suing for rent at the original rate for the last two quarters of 1945. Lord Denning J opined
that the agreement of January 1940 was intended as a temporary expedient only and had ceased to operate
early in 1945. The rent originally fixed by the contract was therefore payable, and the plaintiffs were entitled to
judgment. But he was also of the opinion that, had the plaintiffs sues for arrears for the period 1940 to 1945,
the agreement made in 1940 would have operated to defeat their claim
INTENTION TO CREATE LEGAL RELATIONS
An agreement will only become a legally binding contract if the parties
intend this to be.
This will be strongly presumed in the case of business agreements but
not presumed if so the agreement is of a friendly, social or domestic
nature.
The presumptions is that first, social, domestic and family
arrangements are not usually intended to be binding and secondly
commercial agreements are usually intended by the parties involved to
be legally binding – see Carlill v Carbolic Smoke Ball.
Social Agreements
Rarely, if ever, do social agreements give rise to the implication that
legal consequences were intended. The winner of a golf competition
had no legal right to the prize, because no one connected with the
competition intended such results to flow from the entry of
competitors (Lens v. Devonshire Club (1914)).
Domestic Agreements
In the case of agreements between members of a family, some are and
others are not intended to have legal consequences. Balfour v. Balfour
[1919] the wife of a man working in Ceylon had to remain in England
for medical reasons. Her husband promised to pay her an allowance of
£30 a month. Held: The agreement was not intended to have legal
force (also, the wife had not provided any consideration for the
promise).
This case must be compared with Merrit v Merritt [1970]
In this case, Mr. Merritt and his wife jointly owned a house. Mr. Merritt
left to live with another woman. They made an agreement (signed) that
Mr. Merritt would pay Mrs. Merritt a £40 monthly sum, and eventually
transfer the house to her, if Mrs. Merritt kept up the monthly mortgage
payments. When the mortgage was paid Mr. Merritt refused to transfer
the house. Held the nature of the dealings, and the fact that the
Merritts were separated when they signed their contract, allowed the
court to assume that their agreement was more than a domestic
arrangement.
A similar situation also arises in the "pools syndicate" type of agreement. It is quite a widespread
practice for members of a household, a group of friends, or employees in a business to participate
on a regular basis in a football pools scheme or some other form of prize competition.
A leading case is Simpkins v. Pays [1955] where the defendant owned a house in which she lived
with X, her grand-daughter, and the claimant, a paying boarder.
The three took part together, each week, in a competition organised by a Sunday newspaper. The
entries were made in the defendant's name but there was no regular rule as to the payment of
postage and other expenses.
One week, the entry was successful and the defendant obtained a prize of £750. The claimant
claimed a third of this sum but the defendant refused to pay, on the ground that there was no
intention to create legal relations but only a friendly adventure. Judgment was given for the
claimant.
The court held that there was an intention to create legal relations, and it was "a joint enterprise to
which each contributed in the expectation of sharing any prize that was won".
CAPACITY TO CONTRACT
As a general rule the corporation must be in existence in order to have
capacity and the acts must be within its powers (intra vires) and not
outside its powers (Ultra vires).
In general, anybody over the age of 21, who, at the time, is sober and
mentally unimpaired, is capable of contracting.
This also applies to corporations which can contract in exactly the same
way as living persons – but, of course, they must do it through the
agency of a human being. A corporation can contract under its
common seal or simply by its representatives signing the contract or
indeed by their word of mouth.
 Minors
A minor is a person under the age of 21 years. Most contracts with a
minor are "voidable" at the option of the minor. That is to say, he – but
not the other party – has the right not to be bound by the contract.
However, contracts for "necessaries" are binding on a minor.
Necessaries are those things a person immediately needs, such as food;
drink; clothing; accommodation; medicines.
Necessaries are not confined to those things which are absolutely
required to keep him alive but they extend to all such things as are
reasonably necessary for him in the station in life to which he belongs.
They exclude luxuries, and also a surplus of necessary items (e.g. a contract
to buy two shirts would, probably, be binding but one for a dozen would not
be.)
In Nash v. Inman [1908] the claimant was a West End tailor and the
defendant was a minor undergraduate at Trinity College, Cambridge. The
claimant sued the minor for the price of various items of clothing, including
eleven fancy waistcoats (11 fancy waistcoats case).
It was proved that the defendant was well supplied with such clothes when
the claimant delivered the clothing in question. Accordingly, the claimant's
action failed because he had not established that the clothes supplied were
necessaries.
Other contracts binding on a minor are those which are beneficial for
him/her, such as contracts of apprenticeship or service or education
Mentally-disordered Persons
Except for contracts for necessaries, contracts are not binding on such
persons, unless they specifically ratify them during a lucid period.
Drunken Persons
Exactly the same rule as in mentally disordered persons applies to a
drunken person. To be bound, he/she must ratify the contract when
sober.
PRIVITY OF CONTRACT AND VITIATING FACTORS
The doctrine of privity of contract
This doctrine is linked to the doctrine of consideration. Under the doctrine of
consideration, we stated that the consideration must move from the
promisee. i.e. only a person who has furnished consideration can enforce the
contract.
Thus it is a fundamental principle of law that two people cannot by a
contract impose liabilities on, or bind, a third party; nor can anybody have
rights or obligations imposed upon him/her by a contract, unless he/she is a
party to it. This principle is called privity of contract. Sometimes, this rule can
cause absurdities or injustice, and in appropriate cases the law has found
ways around it. The application of the rule takes two forms – as follows.
Attempts to Confer Rights on Third Parties
The problem usually arises when third parties attempt to sue to
enforce rights they think they have acquired under a contract to which
they are not a party. The law will not permit them to sue. Price v.
Easton [1833], a man owed Price a sum of money.
He agreed with Easton that he would work for him, if Easton would pay
off his debt to Price. The work was duly done but Easton failed to pay
Price. Consequently, Price sued Easton. It was held that Price could not
recover the money, because he was not a party to the contract for
work.
Attempts to Impose Liabilities on Third Parties
A person cannot be bound by the terms of a contract unless he/she is a
party to it. However, contracts between two people can affect the
rights of third parties. Conversely, a person may commit a tort by
interfering with the parties in the performance of their contract.
McGruther v. Pitcher [1904]
Exceptions to the Privity Rule
a) Under the doctrine of agency - If there was an agreement between A
and B, C can enforce it if he can prove that A was the agent and C was the
principal and it is irrelevant if B did not know that A was an agent.
b) Under the doctrine of trust - This is a creation of equity – a stranger to a
contract may request the assistance of equity if the contract was made
on his behalf. In Tomlinson v Gill (1753), Lord Hardwick stated If A enters
into a contract with B (or owes him money) that A will pay money to C,
the Court of Equity will hold that A is a Constructive Trustee to C.
c) By the doctrine of assignment - The law permits a person to assign his
rights or obligations to a third entitling the third party to step into the
shoes of the assigning party.
d) By statute - A statute may assign benefits of a contract to a third
party and allow him to enforce the same. A good example of such
provision is section 149 of the Road Traffic Act which allows a victim of
n accident to sue directly an insurer of the car even though a claimant
is not a party to the insurance contract.
e) Collateral Contracts - In an effort to avoid the privity rule causing
either an absurdity or injustice, the courts will, sometimes, imply a
"collateral" contract between a third party and one of the parties to the
main contract. A collateral contract is one that is separate from, but
substantially in respect of the same subject-matter as, the main
contract
VITIATING FACTORS
• Definition:
• Are factors which affect the validity of a contract. They are also
known as invalidating factors.
• A ‘vitiating element of contract’ is the technical term for the things
which make a contract void or voidable.
• Vitiating factors in a contract are those factors the existence of (any
of) which will cripple or invalidate the contract.
• Vitiating elements of contract such as mistake, duress,
misrepresentation, undue influence and illegality, are determinants
of the validity of a contract.
 MISREPRESENTATION

• A misrepresentation is a false statement of fact or law which

induces the other party to enter into the agreement. Such
statements have to be made before the contract is entered
into.
Thus the requirements of an action for misrepresentation are
that:
• It must purport to be a statement of fact or law.
• It must have induced the other party to enter the contract.
• It must have been a false statement.
• Statements of opinion or of intention are not
misrepresentations, as long as the opinion or intention is
genuinely held at the time.
Silence will not constitute a misrepresentation unless
• It turns statement that has been made into a half truth.
• It conceals a relevant change of circumstances.
• The contract was one which was Uberrimae Fidei.
uberrimae fidei contract is a legal agreement requiring the
highest standard good faith. "Uberrimae fidei" or "uberrima
fides" is Latin for "utmost good faith." Insurance contracts are
the most common type of a uberrimae fidei contract.
The following are the factors that will make a false statement
amount to representation.
• It must be a statement of fact:
- It should not be a mere puff but it should be a statement of fact which has to
be taken seriously. Anderson v Pacific Fire Marine Insurance Co, 1872.
• The statement must induce the contract:
- If a false statement is made and does not induce a contract, then it does not
affect the validity of the contract.

- The degree of inducement cannot be total, but the party must to some extent
have been influenced by the statement to enter into a contract.
• The statement must have been addressed to the party misled.
- If the false statement was made to another person, it doesn’t affect the
validity of the contract, unless if it was made to the other party or to another
person with the intention that that person should pass it to the party then it
invalidates the contract.
The statement must be untrue.
- A misrepresentation must induce the contract but the representees
reliance does not have to be reasonable. It will not be actionable
therefore:
- If the representee was unaware of the misrepresentation at the
time of the contract.
- The representee relied on his own judgment rather than the
statement of the representor.
- The representee was unaware of the untruth of the statement
(however it is not enough that the representee had an opportunity
to discover the truth of the statement).
 Types of misrepresentation

1.Fraudulent
• A fraudulent misrepresentation is one that is made with the
knowledge of the falsity or with reckless disregard as to its
truth. The statement is made knowingly or without belief in its
truth.
• The remedies are rescission of the contract where this is
available and/or damages as for the tort of deceit.
• All losses flowing from the misrepresentation are recoverable,
without the limitation of remoteness.
2. Negligent misrepresentation
• A negligent misrepresentation at common law arises where
there is a special relationship between the parties giving rise to
a duty of care. The one making the false statement cannot
prove that he had reasonable grounds for believing that the
statement was true. The statement is made carelessly.
• The remedies are rescission where this is an option and/or
damages on the loss suffered because of the
misrepresentation. Derry v Peek (1889).
3. Innocent misrepresentation
• An innocent misrepresentation arises where the representor
can prove that he had reasonable grounds for believing that
the statement was true.
• The maker honestly and reasonably believes that the
statement is true.
 The remedies come under:

• Common law- the court may in its discretion award damages.

• Statute law- the innocent party can rescind the contract.
• Equity- the innocent party may affirm the contract.
The right to rescind a contract in cases of misrepresentation may be lost
through:
• Affirmation- the innocent party affirms the contract but he knows of his
rights.
• Delay or lapse of time
• - this is effective if the misrepresentation is innocent and not fraudulent.
• - time begins after the discovery of the truth :Leaf v International
Galleries(1950)
• Liability for misrepresentation can be excluded from a contract as long as it
satisfies the test of reasonableness.
MISTAKE
• Mistakes can be split into those mistakes which nullify the
agreement (common mistake) and those which negate the
agreement (mutual mistake).
 Types of mistakes:

1. Common(bilateral) Mistake.
• This happens when both parties make the same mistake.
• It is usually a mistake as to the existence of the subject matter.
I.e. A and B may be ignorant of the fact that A’s property is
stolen. The parties may enter into an agreement of sale of non-
existing property. Galloway v Galloway, 1914.
• A common mistake will nullify the agreement where the
mistake is to the existence of the subject matter (res extincta),
a party buys property which he already owns ( res sua) or if
there has been a mistake as to the quality which renders the
contract impossible to perform or if it is rendered radically
different.
2. Mutual Mistake
• Mutual mistake where the parties are at cross purposes but
neither is aware of this prevents the contract from arising as
there is no consensus ad idem.
• The parties misunderstand each other and are at cross-
purposes.
• It is normally a mistake as to the identity of the subject matter.
For example, A intends to sell to B his green Mazda but B
believe it is a red Mazda. Raffles v Wichelhaus, 1864
3. Unilateral mistake
• Unilateral mistake where one party is aware of the mistake.
Only one party is mistaken. This mistake will render a contract
void, if it relates to the terms of the contract.
• Unilateral mistake as to identity of the other party and will
render a contract void if the identity was of fundamental
importance to the parties and the other party was aware of
the mistake and the importance of it. Cunday v Lindsay, 1873.
4. Non- est- Factum(it is not my act)
• A person who mistakenly signs a contract may plead non-est-
factum, and have the contract set aside if he proves that there
was a radical difference in what was signed and what he
thought he was signing and he was not careless in signing the
document.
• It is a form of unilateral mistake where only one party is
mistaken
DURESS AND UNDUE INFLUENCE
 DURESS

• The parties must enter into a contract willingly if it is to be

enforceable, however there are situations where this may be in
question. This is the case where Duress or Undue Influence
may have been exerted over one of the contracting parties.
Duress can be in the following forms:
• Duress to the person. i.e. physical violence or imprisonment.
• Duress of goods. i.e. threatening of unlawful detention of goods.
• Economic duress .i.e. threat of loss of profits. Cuming v Ince, 1847.
• Duress renders a contract voidable as opposed to void and the
party subject to the duress can rescind the contract unless there
has been some affirmation of the contract after the duress has
been lifted.
 UNDUE INFLUENCE
• This happens where one has a special relationship with
another and as a result of this relationship, that other is
induced to enter into a contract to his or her disadvantage. The
stronger party has a burden of proof that there was no
influence. Tufton v Sperni, 1952.
• If undue influence is to be presumed there must be a
relationship which gives rise to the presumption and
something about the transaction which requires an
explanation.
• Undue influence will be presumed where certain relationships
exist. Examples include solicitor/client, doctor/patient, and
parent/child. A rebuttable presumption will apply in other
relationships if it can be shown the one party dominated the
other.
• Where a loan is secured by a person who is not in a
commercial arrangement with the debtor, the lender is put on
notice that undue influence may be presumed.
• The contract of security will in such a situation may be set
aside if there has been any undue influence or
misrepresentation by the debtor, unless the lender has made
sure that the person providing the security has received
independent legal advice before entering into the contract.
• The remedy for undue influence is rescission however the
remedy is lost if compensation is impossible, the contract has
been affirmed, there has been delay in seeking the remedy or
where third party rights may be affected.
ILLEGALITY
 ILLEGALITY

• The law will not give effect to a contract if it involves the

commission of a legal wrong, or if it is invalidated by a statute.
• The contract can be declared illegal if it contravenes the
provision of a statute or if it contravenes the public policy.
• Public policy dictates that illegal contracts are unenforceable
and the courts should be vigilant not to enforce any contract
with an illegal purpose.
• Thus contracts such as those tending to corruption in public life,
promoting sexual immorality, prejudicial to the administration of
justice, trading with an enemy in war time, for future separation, in
restraint of marriage, marriage brokerages and contracts
attempting to oust the jurisdiction of the courts will all be illegal
and unenforceable.
• However the scope of the term illegality is not always transparent.
Contracts to commit a criminal act are always unenforceable as in
the case of Bigos v Boustead (1951) where the defendant
attempted to evade exchange controls.
• However a contract to commit a civil wrong will only be
unenforceable where the commission of the tort or breach of
contract is deliberate or if only one party is aware of the wrong
by that party.
• The case of Anderson v Daniel (1924) demonstrates that a
contract may also be unenforceable if the manner of its
performance involves illegality especially where it involves a
breach of a statute intended to confer some protection on the
public.
• It therefore follows that any contract to indemnify one party
against liability for unlawful acts is also unenforceable in
relation to criminal liability (Osman v Ralph Moss Ltd (1970)
and liability in respect of intentional commission of torts.
• However a contract to commit a civil wrong will only be
unenforceable where the commission of the tort or breach of
contract is deliberate or if only one party is aware of the wrong
by that party.
• The case of Anderson v Daniel (1924) demonstrates that a
contract may also be unenforceable if the manner of its
performance involves illegality especially where it involves a
breach of a statute intended to confer some protection on the
public.
• It therefore follows that any contract to indemnify one party
against liability for unlawful acts is also unenforceable in
relation to criminal liability (Osman v Ralph Moss Ltd (1970)
and liability in respect of intentional commission of torts.
 Examples of unlawful contracts:

• Agreement to commit a crime, tort or perpetrate fraud. Allen v

Rescous, 1677.
• Agreement injuring the state in relation to other state. This
may be an agreement to sale from one country to another
while they have prohibited to trade due to a dispute.
• Agreement to pervert course of justice. An agreement not to
prosecute a crime.
• Agreement contrary to good morals. Pearce v Brooks, 1866.
• Agreement in restraint of trade.
• These are contracts where one party(covenantor) agrees with
another (covenantee) to restrict the liberty of the covenantee in
the future to carry on trade with other persons not party to the
contract.
• Contracts in restraint of marriage
• an agreement not to marry any other person apart from Mrs.
Lowe.
• Lowe v Peers,1768.
Discharge of a contract
A contract can be discharged through the following ways:
i) Performance
ii) Agreement
iii) Frustration
iv) Breach
 Performance

• If both parties perform their promises, the contract is completely

discharged. The general rule is that the contract must be performed
according to its terms and the parties are discharged from further
obligations.

- If the obligation is to pay money, an exact amount must be tendered so

that there should be no obligation of giving back the change outstanding
on the parties. If the other party gives change at the same time a bigger
amount is paid then the contract is discharged.

- If the obligation is to deliver goods, goods must be delivered at a reasonable

hour and according to the terms of the contract.
• Exceptions to the general rule:
a) Severable contracts
• where a contract may be divided into several parts, payments for parts
that have been completed can be claimed.
b) Acceptance of part performance
• Where A accepts partial performance of B, having an option to reject, a
promise to pay is implied. A quantum meruit may be claimed.
• A quantum meruit action is a claim for a percentage of the contract price in
direct proportion to the percentage of work done. In Cutter v Powell,
1795. Sumpter v Hedges, 1898.
c) Prevention of performance
• Where one party is prevented by either party from performing the
contract, he may bring a quantum meruit action to claim for the
work done. Planche v Colbun, 1831.
d) Substantial performance
• Where a contract has been substantially performed, an action lies
for the contract price less a reduction for the defection.
• The exception applies only when the defects relate to quality,
where they relate to quantity, the general rule applies.
• Time of performance
At common law a party who failed to perform his obligation
within a given time was in breach of contract. The equitable
rule which applies now is that time is not of essence of the
contract unless
i) The parties expressly state.
ii) A party who has been guilty of undue delay is notified by the
other party that unless he performs within a reasonable time,
the contract will be regarded as broken.
 2. AGREEMENT

• Parties may agree to cancel the contract before the contract has been
completely performed. The agreement must be supported by
consideration or by deed.
The discharge can be in the following ways:
i) Bilateral discharge
• The contract is executory or partly executory (both parties have got
obligations outstanding).
• The consideration is automatically present as both parties will surrender
something of value. i.e. the right on the other party’s performance.
• The agreement by the parties to discharge their contract may be designed
to have one of the several effects.
ii) Unilateral discharge
• This happens where one party has completely performed his side
of the contract. The contract is wholly executed on one side. Any
release by him of the other party must be by deed or supported by
consideration.
• Where there is a release supported by fresh consideration, there is
said to be accord and satisfaction. Accord is the agreement by
which the obligation is discharged. Satisfaction is the consideration
which makes the agreement effective. Satisfaction may be
executory.
iii) Novation
• The parties may enter into a new contract to replace the old contract. The
new contract provides any necessary consideration. E.g. A owes B K1000.
B owes C K1000. A agrees to pay C if B will release him from his obligation
to pay.
• All three parties must agree.
iv) Condition subsequent
• Sometimes a clause in a contract will provide for its discharge if a particular
event occurs in the future. i.e. subsequent to the formation of a contract.
•
frustration
• The term frustration refers to the discharge of a contract by
some outside events for which neither party is responsible
which makes further performance impossible.
• It must be some fundamental change in circumstances such as
the accidental destruction of the subject matter upon which
the contract depends.
• The contract is normally brought to an end.
 Conditions which will lead to frustration

The event must

i) Have not been contemplated by the parties when the contract
was made.
ii) One which makes the contract fundamentally different from
the original contract. One which result in a situation to which
the parties did not wish originally to be bound.
iii) One for which neither party was responsible.
 Application

i) Destruction of the subject matter- in this case the whole basis of the
contract is the continuous existence of the specific thing which is
destroyed. Taylor v Caldwell,1863.
ii) Personal incapacity to perform a contract of a personal service. This can
happen if the person to render the service
a) Dies
b) Becomes seriously ill
c) Has been called for military.- condor v Barron Knights.1966.
iii) The contract can also be frustrated if the contract is the occurrence of an
event which does not occur. A force majeure term is included in the
contract (unforeseeable circumstances that prevent someone from
fulfilling a contract).
iv) If the government prohibits performance of the contract for
so long that to maintain it would impose on the parties
fundamentally different obligations from those bargained for.
Tamplin Steamship Co v Anglo- Mexican Petrol,1916.
v) If the performance of the main object of the contract
subsequently becomes illegal. Baily v De Crespigny, 1869.
 Effects of frustration
• The contract is discharged automatically as to the future, but is
not made void from the beginning. The demarcating line is the
time of frustration.
• At common law, the loss may lay where it fell. i.e money paid
before frustration cannot be recovered and money payable
remain payable unless there was total failure of consideration.
Fibrosa v Fairbairn
 Limits of frustration
• A contract is not frustrated if it becomes unexpectedly
expensive or burdensome to one of the parties. Davis
Contractors v Fareham UDC, 1956.
• A party cannot rely on self induced frustration. i.e. frustration
due to his own conduct. The party whose own breach is
actually the frustrating event is not protected by frustration.
• Negligence prevents a party from claiming frustration. Taylor v
Caldwell.
DISCHARGE BY BREACH
• Breach of a contract means that a party has failed to perform
his obligation without a lawful excuse.
• Breach leads to two consequences:
• The primary one is that the innocent party can rescind the
contract (treating it a breach of a condition).
• The secondary one is that the innocent party can claim
damages. Thus treating it as a breach of warranty.
• Breach of a contract can lead to termination if the other party
has repudiated the contract or the other party has committed
a fundamental breach.
• Repudiation is defined as a rejection to avoid a contract or to
bring a contract to an end for breach of a condition.
 Types of breach

a) Repudiatory breach- a Repudiatory breach occurs when one party

indicates, either by words or by conduct, that he does not intend to honour
his contractual obligations.
Repudiatory breach can be classified into the following types:
i) Refusal to perform ( renunciation)
If one of the parties, by his words or actions makes it plain that he has no
intention of performing or continuing to perform his side of the bargain.
E,g. not reporting for duties.
ii) Failure to perform an entire obligation
This is one where complete and precise performance of it is a precondition
of the other party’s performance.
iii) Impossibility created by one party
If one party, by his or her own action (or lack of them) creates a
situation where it is impossible for her to perform, is not
allowed to rely on the impossibility as being an excuse for not
performing.
b) Anticipatory breach-
this breach occurs before performance of the contract. E.g.
having been offered a job, the prospective employer indicates
that he no longer needs your services before you report for
work.
 Remedies for breach of contract-
i) Damages
• Damages are given in order to restore the party who has suffered loss to
the same position, he would have been in if the contract had not been
performed.
• The duty to mitigate a loss or minimize a loss lays with the courts. The
defendant has got a burden of proving that the claimant failed to take
reasonable opportunity of mitigation. Payzu v Saunders, 1919. It was held
that the seller had no right to repudiate the original contract but the
claimant should have mitigated their loss by accepting delivery against the
cash payment after they failed to pay for the first installment one month
after delivery as agreed in the original contract.
• The injured party is not required to take discreditable or risky
measures to reduce his loss since these are not reasonable.
Pilkington v Wood, 1953.
• Categories of damages.
i) General and special damages
• General- those that can be proved to have occurred but you
cannot measure the exact amount.
• Special- they are precisely calculated.
ii) Nominal damages
• These are awarded where a claimant’s legal rights have been
infringed, and he has not suffered actual loss.
iii) Liquidated damages
• Fixed or ascertainable sum agreed by the parties at the time of
contracting, payable in the event of a breach. i.e. an amount
payable per day for failure to compete a building.
iv) Unliquidated damages
• Parties have no mention of this when entering into a contract.
In order for them to be given a party must prove his loss in the
event of any breach.
Damages and causation
• The loss suffered must have been caused by the breach of
contract. There must be a direct chain of causation between
the breach of contract and the loss suffered. If something or
someone intervenes to break this chain, it cannot be said that
the breach caused the loss. Monarch Steamship Co Ltd v
Karlshamns Oljefabrker A/B. 1949.
 REMOTENESS OF DAMAGES
• The term remoteness refers to the legal test of causation which
is used when determining the types of loss caused by a breach
of contract or duty which may be compensated by a damages
award. Legal causation is different from factual causation
which raises the question whether the damage resulted from
the breach of contract or duty.
• Accordingly, once factual causation is established, it is
necessary to ask whether the law is prepared to attribute the
damage to the particular breach, notwithstanding the factual
connection. Damage which is too remote is not recoverable
even if there is a factual link between the breach of contract or
duty and the loss.
• Contract: In contract, the traditional test of remoteness is set out in
Hadley v Baxendale ([1854] 9 Ex 341). The test is in essence a test
of foreseeability. That is, the loss will only be recoverable if it was in
the contemplation of the parties. The loss must be foreseeable not
merely as being possible, but as being not unlikely.
• The knowledge that is taken into account when assessing what is in
the contemplation of the parties comes under two limbs:
• First, is the knowledge of what happens "in the ordinary course of
things", which is imputed to the parties whether or not they knew
it.
• Second, is actual knowledge of special circumstances outside
the ordinary course of things but that was communicated to
the defendant or otherwise known by the parties.
• Provided that the kind of damage is reasonably foreseeable, it
does not matter that the manner of infliction or its extent was.
 2. SPECIFIC PERFORMANCE
• Specific performance is a specialized remedy used by courts when
no other remedy (such as money) will adequately compensate the
other party. If a legal remedy will not put the injured party in the
position he or she would have enjoyed had the contract been fully
performed, then the court will award specific performance instead.
• The most common reason courts grant specific performance is that
the subject of the contract is unique, when it's not merely a matter
of money or where the true amount of damages is unclear.
 Injunction
• A judicial order restraining a person from beginning or continuing an action
threatening or invading the legal right of another, or compelling a person to carry
out a certain act, e.g. to make restitution to an injured party.

Types of Injunction
i) Preliminary /interim/ interlocutory/temporary
• This is a provisional remedy that is invoked to preserve the subject matter in its
existing condition. Its purpose is to prevent violation of the plaintiff's rights. The
main reason for use of a preliminary injunction is the need for immediate relief.

• Preliminary or temporary injunctions are not conclusive as to the rights of the

parties, and they do not determine the merits of a case or decide issues in
controversy.
• They seek to prevent threatened wrong, further injury, and
irreparable harm or injustice until such time as the rights of the
parties can be ultimately settled.
• Preliminary injunctive relief ensures the ability of the court to
render a meaningful decision and serves to prevent a change
of circumstances that would hamper or block the granting of
proper relief following a trial on the merits of the case.
ii) Preventive/Prohibitory Injunctions
• An injunction directing an individual to refrain from doing an act is preventive, prohibitive,
prohibitory, or negative. This type of injunction prevents a threatened injury, preserves the
status quo, or restrains the continued commission of an ongoing wrong, but it cannot be
used to redress a consummated wrong or to undo that which has already been done.

• e.g. The Florida vote count in the presidential election of 2000 again serves as a good
example. There, the Bush campaign sought preventive injunctions to restrain various
counties from performing recounts after the Florida results had been certified. The Bush
campaign did not attempt to overturn results already arrived at, but rather attempted to
stop new results from coming in.
iii) Mandatory Injunctions
• Although the court is vested with wide discretion to fashion injunctive relief, it is also
restricted to restraint of a contemplated or threatened action. It also might compel Specific
Performance of an act. In such a case, it issues a mandatory injunction, commanding the
performance of a positive act.

iv) Permanent Injunctions

• A permanent or perpetual injunction is one that is granted by the judgment that ultimately
disposes of the injunction suit, ordered at the time of final judgment. This type of injunction
must be final relief. Permanent injunctions are perpetual, provided that the conditions that
produced them remain permanent.
• They have been granted to prevent blasting upon neighboring premises, to enjoy in the
dumping of earth or other material upon land, and to prevent Pollution of a water supply.
v) Mareva/ freezing injunction
• A court order which restrains someone from removing or dealing with their
assets. This can be by way of an interim order and is referred to as a ‘freezing
injunction’. The aim is to avoid frustrating the enforcement of any judgment
against them.

• Mareva injunctions is a form of injunction, named after the case in which it was
first granted, and in this case, the claimants were the shipowners and the
defendants were charterers under a voyage charter. The defendants had
received payment for the freight in that bank account, but they had failed to
pay the hire charges due to the claimants.( Mareva was the name of the ship).
vi) Anton Piller Order/ Search Order
This is a court injunction that requires a defendant to allow the plaintiff to
• Enter defendant's premises.
• Search for and take away any material evidence and,
• Force the defendant to answer some questions.
It is employed usually in cases of possible copyright violation, its primary
objective is to prevent destruction or removal of evidence. The defendant
is in contempt of court if he or she refuses to comply. Named after the
1976 UK case of 'Anton Piller KG v. Manufacturing Processes.' Nowadays
called search order.
LAW OF TORT
Law of tort
 Definition of law of tort
• Tort is a branch of law which deals with allocation and
prevention of losses which occur due to human interaction.
• Tort is a civil wrong between private individuals.
 THE NATURE OF TORTS

WHAT IS A TORT?
• A tort is a civil wrong that (wrong) is based on a breach of a
duty imposed by law
• this breach gives rise to a civil right of action for a remedy not
exclusive to another area of law.
 Difference between a tort and a crime
• A crime is a public /community wrong that gives rise to
sanctions usually designated in a specified code. A tort is a civil
‘private’ wrong.
• An action in criminal law is usually brought by the state while
tort actions are usually brought by the victims of the tort.
• The principal objective in criminal law is punishment while in
torts, it is compensation.
Differences in Procedure: – Standard of Proof
• Criminal law: beyond reasonable doubt
• Torts: on the balance of probabilities
 SIMILARITIES BETWEEN TORTS AND CRIME

• They both arise from wrongs imposed by law.

• Certain crimes are also actionable torts; eg trespass: assault
• In some cases the damages in torts may be punitive .
• In some instances criminal law may award compensation
under criminal injuries compensation legislation.
 Difference between a tort and a contract
• A breach of contract arises from breach of promise(s) made by
the parties themselves.
 SIMILARITIES BETWEEN TORT AND CONTRACT
• Both tort and breach of contract give rise to civil suits
• In some instances, a breach of contract may also be a tort: e.g.
an employer’s failure to provide safe working conditions.
Types of tort
There are basically three types of torts
a) Intentional
b) Negligence
c) The Breach of Strict Duty
 Intentional Tort
- An intentional tort is a civil wrong that occurs when the
wrongdoer engages in intentional conduct that results in
damages to another. Striking another person in a fight is an
intentional act that would be the tort of battery.
- Striking a person accidentally would not be an intentional tort
since there was not intent to strike the person.
- This may, however, be a negligent act. Careless conduct that
results in damage to another is negligence.
 Negligence

Negligence is an independent tort with a number of elements.

However, here we are only concerned with negligence as the
state of mind which is one element of the tort and some other
torts.
In this sense it usually signifies inadvertence by the defendant to
the consequences of his or her behaviour, e.g. a doctor who
forgets that a patient is allergic to a treatment.
 Breach of Strict Duty (strict liability)

- In some torts, the defendant is liable even though the harm to the plaintiff occurred without
intention or negligence on the defendant’s part.
- Liability can arise even when there is no intention to cause harm or negligence.
For example, when a contractor uses dynamite which causes debris to be thrown onto the land of
another and damages the landowner’s house, the landowner may recover damages from the
contractor even if the contractor was not negligent and did not intend to cause any harm. This is
called strict liability or absolute liability.

- Basically, society is saying that the activity is so dangerous to the public that there must be liability.
However, society is not going so far as to outlaw the activity. Rylands v Fletcher (1868)
 THE TORT OF NEGLIGENCE
Negligence as a tort is the breach of a legal duty to take care which results in
damage, undesired by the defendant to the plaintiff. Thus stated the tort
consists of three distinct elements.
a) The first element is that the defendant must owe to the plaintiff a duty of care.
b) The second element is that the defendant must breach the duty of care which
he owes to the plaintiff.
c) The third element is that the plaintiff must suffer damages as a result of the
defendant’s negligence.
This element has two main principles namely:
i) that the defendant’s negligence must have caused the damage to the plaintiff
ii) the damage which the plaintiff has suffered must not be too remote a
consequence of the defendant’s negligence.
 The Duty of Care
• The modern source of duty of care requirement is found in the
celebrated judgment of Lord Atkin in Donoghue v Stevenson
[1932] AC 562, the defendants were manufacturers of ginger
beer.
• A friend of the plaintiff purchased a bottle of ginger beer for
the plaintiff. The plaintiff took some of the ginger beers but
when she poured off the remainder of the contents of the
bottle a decomposed snail floated out of the bottle.
• The plaintiff claimed that she suffered severe shock and became
very ill as a result of this incident. She was unable to proceed
against the manufacturers in contract because there was no
contract between the parties. So she brought an action in tort
against the manufacturers.
• It was held that the defendants being manufacturers of ginger beer
owed a duty of care to the plaintiff as the ultimate consumer or
purchaser of the ginger bottle making sure it did not contain some
substance which was likely to cause injury to health.
• Thus in order to establish that a duty of care, one has to ask
whether there was a sufficient relationship of ‘proximity or
neighbourhood’ between the plaintiff and defendant such that
in the defendant’s reasonable contemplation carelessness on
his part might cause damage to the plaintiff.
• If so, a prima facie, duty of care arises.
• There are three factors which are to be employed by the courts in deciding
whether or not to impose a duty of a care in a novel case, namely:
a) That the loss must be reasonably foreseeable,
In Bourhill v Young [1943] where the House of Lords held that no duty of care
was owed to the plaintiff because injury to her was not reasonably foreseeable.
The plaintiff had witnessed a motor accident caused by the negligence of the
defendant and in which the defendant was killed.

She claimed that she heard the accident and saw the aftermath of it and that
this had caused her baby to be stillborn. It was held that the plaintiff was so far
away from the accident that she was not owed a duty of care by the defendant
because it was not reasonably foreseeable that she would suffer nervous shock
as a result of the accident.
b) That there must be a ‘proximate relationship between the
plaintiff and the defendant; in ordinary language means
nearness’.
c) That it must be fair, just and reasonable that the law should
impose a duty of a given scope upon one party for the benefit
of the other. Even if there is requisite degree of proximity a
duty of care may still be denied if in the court’s view the
imposition of liability would not be fair, just and reasonable.
Haley v London Electricity Board [1965]
 Breach of the Duty
• In order to establish that a defendant breached a duty of care,
the standard of care which is required is an objective one, i.e.
that of a reasonable person.
• “Negligence is the omission to do something which a
reasonable man guided upon those consideration which
ordinarily regulate the conduct of human affairs, would do or
doing something which a prudent and reasonable man would
not do.”
• The application of this objective reasonable man test can be seen in the
case of the Lady Gwendolen [1965]. Two ships were involved in a collision
in foggy conditions.
The accident was caused by the negligence of the defendants, who were a
firm of brewers who used the ship to carry stout from Dublin to Liverpool.
The defendants argued that they should be judged by the standards of
brewers who happened to hire a ship and not according to the standards of
the reasonable ship owner.
The court while rejecting the argument stated that the standard of care which
was owed by the defendants was the same as the standard of care owed
by every other ship owner.
 Proof of breach
• The plaintiff bears the burden of proof of showing that the
defendant was negligent. He must prove his case on the balance of
probabilities. There are certain cases where the legal burden of
proof can be switched to the defendant.
• However, there will be some cases, where the facts speak for
themselves, and that there will be no need to give detailed
evidence, the court will make an inference of negligence from the
facts. This is where the maxim res ipsa loquitor comes into play.
The maxim means that things speak for itself. Scott –v- London &
St Katherine Docks (1865)
 Causation

A defendant is not liable in negligence unless the plaintiff’s loss has

been caused by the negligence of the defendant. Barnett -v-Che
Isaa and Kensington Hospital management Committee [1969]
where it was held however, that the defendants were not liable to
the plaintiff as their negligence had not caused her husband’s
death.
Even if the Doctor had examined her husband and treated him her
husband would still have died from the poisoning and so the
doctor’s negligence was not a cause of the husband’s death.
 Remoteness of Damage

• Once a plaintiff has established causation, it is also necessary to

establish that the damage was not too remote.
In the Wagon Maund (No. 1) [1961], there was some oil leakage onto
water from a ship that was loading oil at a harbour in Sydney.
It mixed with debris and eventually it was ignited by sparks from
welding operations on the other side of the harbour.
The resulting fire caused enormous damage. It was held that since
the particular type of oil did not easily ignite, the type of harm
which occurred was not foreseeable by the officers in charge of the
ship though property damage of some kind, through oil pollution
was foreseeable.
 NUISANCE

• This tort is concerned with unreasonable interference with a

person’s use or enjoyment of his land or some right in
connection with his land.
• It concerns disputes between neighbors relating to their
respective uses of land, but it can also apply to environmental
disputes, e.g. where large factories pollute the atmosphere.
A nuisance may be private or public nuisance.
• A Private nuisance is an unlawful interference with a person’s use
or enjoyment of land, or some right over or in connection with it
for example a neighbor who blasts music in his house causing
discomfort to his neighbors.
• A Public Nuisance is primarily a crime presented by the Attorney
General. It is also a tort. It has been defined as an act which
materially affects the reasonable comfort and convenience of life of
a class of the public/citizen such as pollution of a city.
 Defenses in nuissance

• Defenses to a nuisance may include

Prescription
Continuance of a nuisance for 20 years will by prescription,
legalize, a private nuisance but not a public one and Statutory
Authority- thus there will be a defence if it can be shown that
the activities complained of by the plaintiff were authorized
expressly or impliedly by a statute.
Remedies
• Remedies for a nuisance include an injunction, damages and
abatement (This is an ancient self-help remedy which involves
the plaintiff in taking steps to prevent the nuisance by entering
the defendant’s property and restraining the source of the
nuisance for example putting out a fire that is causing smoke.
TRESPASS
i) Trespass to goods
• This is a tort that prohibits unlawful interference with one’s goods. Though
trespass to goods exist as a separate tort with its distinct elements, within
it, are specific torts which are usually invoked in specific situations.
• These are conversion and detinue. Conversion means dealing with another
person’s chattel in a manner inconsistent with that other person’s
ownership rights with intention to deny such owner’s rights or assert a
right inconsistent with them. For example a person who hires a motor
vehicle and instead sales it will be liable in conversion.
• Detinue is committed where there is unlawful detention of the claimant’s
goods.
ii) Trespass to land
This tort involves the "unjustifiable interference with land which
is in the immediate and exclusive possession of another". It is
not necessary to prove that harm was suffered to bring a claim,
and is instead actionable per se.
iii) Trespass to the person
This tort includes battery, assault and false imprisonment. Battery is
the intentional and direct application of force to another person,
and has three elements; force, direct application and intent.
The courts have also added a requirement of "hostility" or lack of
consent in many cases. As with assault, there is no need to show
that damage was caused. Assault in criminal law, a common assault
is the use of physical violence against someone.
Under tort law, an assault simply means to act in such a way that the claimant
believes he is about to be attacked. The key elements of the tort are
therefore that the defendant acts, and does so in such a way that the
claimant is put in fear of "immediate physical violence".
There is no requirement that actual damage be caused. An example is raising
of a fist in front of the claimant. False imprisonment means depriving the
claimant of freedom of movement, without a lawful justification for doing
so.
Unlike assault and battery, false imprisonment is a tort of strict liability: no
intention on the behalf of the defendant is needed, but the imprisonment
must be caused by a deliberate act.
DEFAMATION
Defamation is the publication of a statement by one person
about the other which may tender to lower the esteem of that
other person in the minds of right thinking members of the
society.
Defamation may come in two forms:
libel and slander.
Libel is defamation in permanent form (e.g. printing) whilst slander is
defamation not in permanent form (e.g. words, gesture or conduct).
Libel is actionable per se whilst to maintain action in slander, one has to
prove special damage. In Munthali vs. Mwakasungula, 14 MLR, 298,
Mkandawire, J stated that Words which impute a criminal offence on the
plaintiff are actionable without proof of special damage.
The same with words imputing that a woman is a prostitute as was the case
in Chitalo vs. Malawi Congress Party & Another (1996)
 Defences to defamation
i) Justification
• The basis of defamation is that the statements tend to lower the esteem of the
plaintiff in the minds of reasonable people. There can therefore, be no cause of
action where the statements are true because that is the true estimation of the
plaintiff. It is therefore, a defence that the statements made about the plaintiff
are true in fact. That is the defence of justification.
• In Namasusu vs. Wood Industries Corporation & Others (1997) the Plaintiff sued
the Defendants for inter alia publishing an article he claimed meant that he was
a thief. The article stated the missing of items from the 1st Defendant’s place and
the Plaintiff’s abscondment. Dismissing the action, Chimasula Phiri, J stated inter
alia, that the defence of justification applied as the story was true in substance
and in fact.
ii) Fair comment
The defence applies where a person fairly comments on matters
of public interest which comment may in effect, have the
resultant effect of defaming someone.
iii) Privilege
The defence of privilege is based on the public policy that in
certain situation, the obligation to communicate supersedes
the protection of individual’s privacy. Thus statements made
in parliament and courts are privileged.
VICARIOUS LIABILITY
This is concerned with situations where one person is rendered
“liable” for the tort of another. The commonest example of this
is the case where an employer is rendered liable for the tort
committed by his employee in the course of employment.
 The Rationale of Vicarious Liability

a) Agency
It has been argued that an employee is for all purposes, an
employer’s agent. It is therefore, only reasonable for the
employer as a principal to be held responsible for his agent’s
actions, agency being a ground for vicarious liability.
b) The benefit argument
The argument here is why the employer should only get benefits from
the employee’s services. He should equally get the risks.
c) Public policy
The arguments here are
i) the employer ordinarily has the capacity to absorb the liability
than the employee and
ii) it may not sometimes be easy to identify a particular employee
by the claimant but it is quiet easy to identify the employer.
d) Contract of/for Service
The basis of vicarious liability is the contract of employment, which in general is an agreement
whereby an employee agrees to provide work or a service in return for remuneration by the
employer.
The contract of employment is a contract of service and not for services.
i) Under a contract of service a person places his labour at the disposal of another and a
relationship is constituted which in past days was called that of master and servant.
ii) In the contract for services, on the other hand, a person who operates an independent
business agrees to carry out a task for another and the relationship is that of employer
and independent contractor. X's chauffeur is her employee, but a taxi-driver is an
independent contractor. If Y wants to build a garage on his land, he has two courses open:
he can employ a bricklayer and other trades-people under contracts of employment or he
can entrust the work to a builder as an independent contractor (independent contractor).
 Three tests for deciding between an employee and an independent contractor

i) Control Test
Control means that the employer has the right to tell the other party to the
contract not only "what" to do but "how" to do it. In other words, he controls
not only the "ends" but the "means".
The general rule is that wherever this type of control exists, the person thus
controlled is an employee. In our present society, however, the control test has
been shown to have certain deficiencies.
Industrial society today is totally different from the society which existed when the
control test was first formulated, since nowadays the employer very rarely has
the exact skill and knowledge of his employees.
It is very difficult to say that the hospital authorities may control the actions of a
doctor, or a local authority the actions of a surveyor.
Cassidy v. Minister of Health (1951)
ii) Integration Test-
This suggests that the individual is "part and parcel" of the employer's
organisation. This idea was to some extent suggested in Cassidy v. Minister
of Health, where, as has already been said, the medical staff were on the
permanent establishment of the hospital and subject to the regulations of
the hospital.
The question is ‘Did the alleged servant form part of the alleged master's
organisation?’ Under a contract of service, a man is employed as part of
the business and his work is done as an integral part of the business;
whereas under a contract for services, his work, although done for the
business, is not integrated into it, but is only an accessory to it.
iii) Multiple or Mixed Test
In accordance with the multiple test, a contract of service exists if
these three conditions are fulfilled;
a) The servant agrees that, in consideration of wage or other
remuneration, he will provide his own work and skill in the
performance of some service for his master;
b) He agrees, expressly or impliedly, that in the performance of that
service he will be subject to the other’s control to a sufficient
degree to make the other master;
c) The other provisions of the contract are consistent with it being a
contract of service.
Acting in the course of employment –
The law is that an employer will only be vicariously liable where the
employee was acting in the course of his employment and not where he is
on a frolic of his own.
In Nakanga vs. Automotive Products Limited & Pillane, the Plaintiff was
injured by a motor vehicle belonging to the 1st Defendant and hired to the
2nd Defendant an employee of the 1st Defendant. The 2nd defendant
hired the vehicle for his own use and had paid for it just as any other
member of the public.
The court dismissed the claim as the 2nd Defendant was not driving the
vehicle as a servant or agent of the first defendant, and that it (first
defendant) was not vicariously liable for his negligence.
The employee must be acting in the course of employment and
not on a frolic of his own.
In Storey v-Ashton (1869) a driver, after completing his
deliveries, went on a detour to visit his brother-in-law.
It was held that this was a new and independent journey which
had nothing to do with his employment and so was outside the
cause of his employment.
The employers were not liable for the tort committed on the
detour.
 Practice question
1. Give the main aims of a tort as distinguished from the main aims of a contract.
2. Discuss the meaning of the defense of contributory negligence.
3. Assuming police officers have taken a suspect into custody for a criminal offence, advise
what remedies the prosecution is likely to achieve.
4. Distinguish a tort from a crime and a contract.
5. What are the elements of the tort of negligence?
6. Comment on the following terms:
i) Vicarious liability
ii) Nuisance
iii) Strict liability
iv) Trespass
7. Outline any five general defenses to commission of a tort. 8. Distinguish a contract of
service from a contract for services
EMPLOYMENT LAW
Employment and labour rights emanate from the 1994 Republican
Constitution of Malawi which provides in section 29 for the right to economic
activity, to work and to pursue a livelihood anywhere in Malawi.
Section 31 provides for:
- the right to fair and safe labour practices and to fair remuneration;
- the right to form and join trade unions or not to form or join trade unions;
- the right to fair wages and equal remuneration for work of equal value
without distinction or discrimination of any kind, in particular on basis of
gender, disability or race and the right to withdraw labour.
Types of Contracts
There are three types of contracts that one may go into;
i) a contract for unspecified period of time
ii) a contract for specified period of time (fixed contract) and
iii) a contract for specific task.
 Probationary Period

In a contract of employment in respect of a skilled worker, the

parties may agree on the duration of the probationary period
provided that the period shall not exceed twelve months.
During the probationary period either party to the contract may
terminate the contract without notice.
Particulars of Employment
Where an employer has at least five employees, he is required to
give to each of his employees a written statement of particulars
of employment containing names of the parties, date of
commencement of contract, the rate and intervals of
remuneration and the nature of work.
 Termination of Contracts

• Either party to a contract may terminate a contract of employment for an

unspecified period by giving notice.

• If the termination is at the initiative of the employer, the termination must

be accompanied with valid reasons connected with the capacity or conduct
of the employee or operational requirements.
• However, a contract for a specified period of time automatically terminates
on the date specified for its termination. A contract of employment to
perform a specific task terminates on the completion of the task and no
notice of termination is required.
Hours of Work

• Normal working hours are set out in the employment contract provided
that the hours do not exceed 48 in a week without overtime.
Overtime
• It is divided into three classes as follows;
a) Ordinary overtime which is time worked on a working day in excess
of the hours normally worked. For each hour of ordinary overtime an
employee is paid at an hourly rate of not less than one and one half of
his wage for one hour.
b) Day off overtime is time worked on a day on which the employee
would otherwise be off duty. The payment is twice the normal pay.
c) Holiday overtime is time worked on a public holiday. The payment is
not less than twice the normal pay.
Annual Leave
Every employee is entitled to annual leave with pay. An employee who works six
days a week is entitled to not less than eighteen working days as annual leave while
an employee who works five days a week is entitled to not less than fifteen working
days.

Sick Leave
An employee is entitled to sick leave after completing a year of continuous service.
The minimum period of leave is four weeks with full pay and eight weeks sick leave
on half pay during each year. An employer is not bound to grant the sick leave
unless the employee produces a certificate from a registered medical practitioner
stating the nature of the employee’s incapacity.
Maternity Leave

A female employee is entitled, within every three years, to at least

eight weeks (2 months) maternity leave on full pay. The right to
maternity leave was found breached in Jumbo v Banja La Mtsogolo
[2008].
The plaintiff was a temporary employee of the respondent and upon
falling pregnant she sought maternity leave but was refused by the
respondent and she was subsequently dismissed. The IRC held that
the dismissal was unfair and unlawful. Re-instatement was ordered.
Minimum Wage
The Minister responsible for labour is given the discretion to fix the minimum wages of any
group of wage earners in consultation with relevant workers’ and employers’ organisations.
This is partial fulfillment of the Constitutional right to fair remuneration seen above and it
becomes most relevant in situations where a group of unskilled workers are engaged in
employment by an employer seeking cheap labour, for instance in tea and tobacco estates. As
of 31st October 2013 the minimum wage was at K317 a day.
In Chibaya and Another v Kulupando, IRC Matter No. ZA 4 of 2008 among other awards, the
Court ordered the respondent to pay the applicants the difference between their salaries and
minimum wages for the period of their employment.

To provide protection for such vulnerable groups of employees, the law provides for tough
penalties. Thus, where the minimum wages are fixed by publication in a gazette, any employer
contravening the requirement by paying less, is guilty of an offence and liable to a fine of
K50,000 and to imprisonment for ten years.
 Disciplinary Action

Includes a written warning; suspension; and demotion. The Act

prohibits a fine or other monetary penalty on an employee as
disciplinary action. An employer may however deduct an amount
of money from an employer’s wages as restitution for property
damaged by the employee.
 Dismissal
An employer has a right to dismiss an employee. In all such circumstances,
the dismissal must be fair.
Section 57(1) provides as follows:- “The employment of an employee shall
not be terminated by an employer unless there is a valid reason for such
termination connected with the capacity or conduct of the employee or
based on the operational requirements of the undertaking.”
Section 57(2) provides as follows:- “The employment of an employee shall
not be terminated for reasons connected with his capacity or conduct before
the employee is provided an opportunity to defend himself against the
allegations made, unless the employer cannot reasonably be expected to
provide the opportunity.”
There are therefore two conditions that must be satisfied if a dismissal is to be fair;
a) A fair dismissal must be accompanied by a valid reason connected with the
employee’s capacity or conduct or operational requirements of the employer;
Section 57(3) provides for some of the invalid reasons for dismissal. They
include discriminatory termination of employment on such grounds as the
employee’s race, colour, sex, language, religion and political or other opinion.
b) The employee must be given an opportunity to be heard (disciplinary hearing).
For example in Mlangali v Nico Holdings Ltd IRC Matter No. IRC PR 290 of 2010
the applicant who was working as a driver suffered from cancer which
prevented him from driving. The respondent dismissed him without a hearing
or an examination whether the applicant could be assigned to other duties. The
Court held that the dismissal was unfair as the respondent did not act with
justice and equity, on the facts presented in Court.
The procedure for the disciplinary hearing is as follows:
i) Investigations must be conducted to establish a preliminary case against the employee
ii) Sufficient notice must be given to the employee to attend the hearing;
iii) A charge must accompany the notice such that the employee should well know what offence he is
being accused of.
iv) The hearing is usually oral but it may be done by exchange of written statements. The employee
must be allowed to challenge evidence presented against him through for example cross
examination.
v) As a general rule lawyers are not allowed in disciplinary hearings but union or fellow employees
are readily allowed to represent the employee.
vi) The panel must make a decision based on the evidence presented and the punishment must fit the
offence.
vii) Where possible records of the hearing must be kept. viii. Internal appeals may also be provided for.
 Summary Dismissal
Section 59 provides for termination of the contract of employment by the
employer without notice or with less notice than that to which the employee is
entitled by any statutory provision or contractual term.
There are five grounds for summary dismissal:

a) Where an employee is guilty of serious misconduct such that it would be

unreasonable to require him to continue the employment relationship;
b) Habitual or substantial neglect of his duties;
c) Lack of skill that the employee holds out to have;
d) Willful disobedience to lawful orders given by the employer;
e) Absence from work without permission of the employer and without
reasonable excuse.
 Constructive Dismissal

Section 60 is a form of unfair dismissal; an employee is entitled to

terminate the contract of employment without notice or with less
notice than that to which the employer is entitled where the
employer’s conduct has made it unreasonable to expect the
employee to continue the employment relationship. Constructive
dismissal was proved in Banda v Dimon (Mw) Ltd [2008] MLLR 92
where the defendant forced the plaintiff, a computer programmer,
out of his job by taking away his office, accommodation, computer
hardware and files.
 Remedies for Unfair Dismissal

They are three-fold.

i) Reinstatement may be ordered whereby the employee is to be
treated in all respects as if he had not been dismissed.
ii) Re-engagement may be ordered whereby the employee is to be
engaged in work comparable to that in which he was engaged
prior to his dismissal or other reasonably suitable work from such
date and on such terms of employment as may be specified in the
order or agreed by the parties.
iii) An award of compensation Award is the most popular. It is a lump
sum of money assessed by the court considering immediate loss
of wages; manner of dismissal and future loss.
THE END