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Akn TZ Act Ord 1961 1 Eng 2019 11 30
Akn TZ Act Ord 1961 1 Eng 2019 11 30
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i
Law of Contract Act
Contents
Part I – Preliminary provisions ....................................................................................................................................................................... 1
2. Construction ............................................................................................................................................................................................... 1
19. Effect of agreements induced by coercion, fraud, misrepresentation or undue influence .......................................... 5
20. Agreement void where both parties are under mistake as to matter of fact .................................................................. 6
23. What considerations and objects are lawful and what are not ............................................................................................ 6
24. Agreements void if considerations and objects are unlawful in part ................................................................................ 7
ii
31. "Contingent contract" defined ........................................................................................................................................................... 8
34. When event on which contract is contingent to be deemed impossible, if it is future conduct of living person
................................................................................................................................................................................................................................ 9
46. Time for performance of promise where no application is to be made and no time is specified .................... 11
47. Time and place for performance of promise where time is specified and no application is to be made ....... 11
48. Application for performance on certain day to be at proper time and place ......................................................... 11
49. Place for performance of promise where no application to be made and no place fixed for performance
...................................................................................................................................................................................................................... 11
51. Promisor not bound to perform unless reciprocal promisee ready and willing to perform ............................... 12
53. Liability of party preventing event on which contract is to take effect ................................................................... 12
54. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal
promises .................................................................................................................................................................................................. 12
56. Agreement to do impossible act, subsequent impossibility or unlawfulness and related compensation
...................................................................................................................................................................................................................... 12
57. Reciprocal promise to do things legal, and also other things illegal ....................................................................... 13
iii
Appropriation of payments ..................................................................................................................................................................... 13
65. Obligation of person who has received advantage under void agreement or contract that becomes void
...................................................................................................................................................................................................................... 14
68. Claim for necessaries supplied to person incapable of contracting, or on his account ............................................. 14
69. Reimbursement of person paying money due by another, in payment of which he is interested .......................... 14
72. Liability of person to whom money is paid or things delivered by mistake or under coercion .............................. 15
73. Compensation for loss or damage caused by breach of contract, etc. ............................................................................ 15
78. "Contract of guarantee", "surety", "principal debtor", and "creditor" defined ................................................................... 16
84. Liability of two persons, primarily liable, not affected by arrangements between them that one shall be surety
on another’s default ................................................................................................................................................................................... 17
87. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor ........ 17
iv
88. Surety not discharged when agreement made with third person to give time to principal debtor ....................... 17
91. Discharge of surety by creditor's act or omission impairing surety's eventual remedy ............................................. 18
96. Guarantee on contract that creditor shall not act on it until co-surety joins ............................................................... 18
104. When bailee not liable for loss, etc., of thing bailed ......................................................................................................... 19
107. Effect of mixture, with bailor's consent, of his goods with bailee's ............................................................................... 20
108. Effect of mixture, without bailor's consent, when goods can be separated ............................................................... 20
109. Effect of mixture, without bailor's consent, when goods cannot be separated ......................................................... 20
113. Bailee's responsibility when goods are not duly returned ................................................................................................ 21
v
122. Bailee's particular lien .................................................................................................................................................................... 22
123. General lien of bankers, factors, wharfingers, advocates, and policy-brokers ............................................................ 22
126. Pawnee not to retain for debt or promise other than that for which goods pledged ....................................... 22
130. Pledges by mercantile agents and persons in possession under voidable contracts ........................................ 23
Sub-agents ..................................................................................................................................................................................................... 25
146. Relation between principal and person duly appointed by agent to act in business of agency .................... 25
Ratification ..................................................................................................................................................................................................... 25
148. Right of person as to acts done for him without his authority and effect of ratification ................................ 25
vi
150. Knowledge requisite for valid ratification ........................................................................................................................ 26
154. Termination of agency, where agent has interest in subject matter ....................................................................... 26
160. When termination of agent's authority takes effect as to agent, and as to third persons ............................... 27
167. Right of principal when agent deals, on his own account, in business of agency without principal's consent
...................................................................................................................................................................................................................... 28
168. Principals right to benefit gained by agent dealing on his own account in business of agency ................... 28
169. Agent's right of retainer out of sums received on principal's account ................................................................... 28
175. Agent to be indemnified against consequences of acts done in good faith ........................................................ 29
179. Principal how far bound when agent exceeds authority ............................................................................................ 29
vii
180. Principal not bound when excess of agent's authority is not separable ............................................................... 29
182. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal ...................................... 30
188. Liability of principal inducing belief that agent's unauthorised acts were authorized .................................... 30
196. Accountability of partners for private profits and competing businesses ............................................................. 33
viii
211. Minors not competent to be partners ............................................................................................................................... 35
222. Right of outgoing partner in certain cases to share profits made after dissolution .......................................... 38
227. Disapplication of Indian Contract Act and amendment of R.L. Cap. 2 ........................................................................... 39
ix
x
Law of Contract Act Tanzania
Tanzania
[Ord. No. 1 of 1961; R.L. Cap. 433; Acts Nos. 55 of 1963, 13 of 2015]
1. Short title
(2) Nothing contained in this Act shall effect the provisions of any written law heretofore in force in
Tanzania and not hereby expressly disapplied or repealed, nor any usage or custom of trade, nor
any incident of any contract not inconsistent with the provisions of this Act.
2. Construction
(a) when one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such act or abstinence, he is
said to make a proposal;
(b) when the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted, and a proposal, when accepted, becomes a promise;
(c) the person making the proposal is called the "promisor", and the person accepting the
proposal is called the "promisee";
(d) when, at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration for the promise;
(e) every promise and every set of promises, forming the consideration for each other, is an
agreement;
(f) promises which form the consideration or part of the consideration for each other are called
reciprocal promises;
(i) an agreement which is enforceable by law at the option of one or more of the parties
thereto, but not at the option of the other or others, is a voidable contract;
(2) Notwithstanding the provisions of paragraphs (g) or (j) of subsection (1) of this section, where
any written law in force in Tanzania on the date on which this Act comes into operation provides
that an agreement (howsoever described), of the kind specified therein, shall not be enforceable
by action unless or until certain requirements therein specified are complied with, or certain
consents are obtained, no such agreement shall be void by reason only that it is not enforceable by
action under the provisions of that law for want of compliance with any such requirement or of the
obtaining of any such consent.
(3) Nothing in this Act, other than section 23, shall affect any customary law; and in relation to any
matter in which the law applicable is customary law, the provisions of the said section 23 shall be
in addition to any relevant rule of customary law and the references to a law in the said section 23
shall be deemed to be references to the Acts of Tanzania.
(1) The communication of a proposal is complete when it comes to the knowledge of the person to
whom it is made.
(a) as against the proposer, when it is put in a course of transmission to him, so as to be out of
the power of the acceptor;
(b) as against the acceptor, when it comes to the knowledge of the proposer.
(a) as against the person who makes it, when it is put into a course of transmission to the
person to whom it is made, so as to be out of the power of the person who makes it;
(b) as against the person to whom it is made, when it comes to his knowledge.
(1) A proposal may be revoked at any time before the communication of its acceptance is complete as
against the proposer, but not afterwards.
(2) An acceptance may be revoked at any time before the communication of the acceptance is
complete as against the acceptor, but not afterwards.
(a) by the communication of notice of revocation by the proposer to the other party;
(b) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time, without communication of the acceptance;
(d) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge
of the acceptor before acceptance.
(b) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in
which it is to be accepted; and if the proposal prescribes a manner in which it is to be accepted,
and the acceptance is not made in such manner, the proposer may, within a reasonable time after
the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed
manner, and not otherwise, but if he fails to do so he accepts the acceptance.
Provided that, nothing herein contained shall affect any law in force, and not hereby expressly repealed
or disapplied, by which any contract is required to be made in writing or in electronic form or in the
presence of witnesses, or any law relating to the registration of documents.
(1) Every person is competent to contract who is of the age of majority according to the law to which
he is subject, and who is of sound mind, and is not disqualified from contracting by any law to
which he is subject.
(2) An agreement by a person who is not hereby declared to be competent to contract is void.
(1) A person is said to be of sound mind for the purpose of making a contract if, at the time when he
makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon
his interests.
(2) A person who is usually of unsound mind, but occasionally of sound mind, may make a contract
when he is of sound mind.
(3) A person who is usually of sound mind, but occasionally of unsound mind, may not make a
contract when he is of unsound mind.
(2) Consent is said to be not free when it would not have been given but for the existence of such
coercion, undue influence, fraud, misrepresentation or mistake.
(1) "Coercion" is the committing, or threatening to commit, any act forbidden by the Penal Code,
or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person
whatever, with the intention of causing any person to enter into an agreement.
(2) For the purposes of this Act it is immaterial whether the Penal Code is or is not in force in the place
where the coercion is employed.
[Cap. 16]
(1) A contract is said to be induced by "undue influence" where the relationship subsisting between the
parties are such that one of the parties is in a position to dominate the will of the other and uses
that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed
to be in a position to dominate the will of another—
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary
relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue influence shall
lie upon the person in a position to dominate the will of the other:
Provided that, nothing in this subsection shall affect the provisions of section 120 of the Evidence
Act.
[Cap. 6]
(1) "Fraud" means any of the following acts committed by a party to a contract, or with his connivance,
or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter
into the contract—
(a) the suggestion, as to a fact, of that which is not true by one who does not believe it to be
true;
(b) the active concealment of a fact by one having knowledge or belief of the fact;
(e) any such act or omission as the law specially declares to be fraudulent.
(2) For the purposes of this Act, mere silence as to facts likely to affect the willingness of a person to
enter into a contract is not fraud, unless the circumstances of the case are such that regard being
had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself,
equivalent to speech.
(a) the positive assertion, in a manner not warranted by the information of the person making it, of
that which is not true, though he believed it to be true;
(b) any breach of duty which, without an intent to deceive, gains an advantage to the person
committing it, or anyone claiming under him, by misleading another to his prejudice, or to the
prejudice of anyone claiming under him;
(c) causing, however innocently, a party to an agreement to make a mistake as to the substance of the
thing which is the subject of the agreement.
Provided that, if such consent was caused by misrepresentation or by silence, or fraud within the
meaning of section 17, the contract nevertheless is not voidable, if the party whose consent was so
caused had the means of discovering the truth with ordinary diligence.
[Cap. 4 s. 8]
(2) A fraud or misrepresentation which did not cause the consent to a contract of the party on whom
such fraud was practised, or to whom such misrepresentation was made, does not render a contract
voidable.
(3) A party to a contract, whose consent was caused by fraud or misrepresentation may, if he thinks
fit, insist that the contract shall be performed, and that he shall be put in the position in which he
would have been if the representations made had been true.
(4) A contract, which is voidable on the ground that the consent of a party thereto was caused by
undue influence, may be set aside either absolutely or, if the party who was entitled to avoid it has
received any benefit thereunder, upon such terms and conditions as to the court may seem just.
20. Agreement void where both parties are under mistake as to matter of fact
(1) Where both the parties to an agreement are under a mistake as to a matter of fact essential to the
agreement, the agreement is void.
(2) An erroneous opinion as to the value of the thing which forms the subject matter of the agreement
is not to be deemed a mistake as to a matter of fact.
23. What considerations and objects are lawful and what are not
(b) it is of such a nature that, if permitted, it would defeat the provisions of any law;
(c) it is fraudulent;
(2) In each of cases referred to in subsection (1), the consideration or object of an agreement is said to
be unlawful; and every agreement of which the object or consideration is unlawful is void and no
suit shall be brought for the recovery of any money paid or thing delivered, or for compensation for
anything done, under any such agreement, unless—
(a) the court is satisfied that the plaintiff was ignorant of the illegality of the consideration or
object of the agreement at the time he paid the money or delivered the thing sought to be
recovered or did the thing in respect of which compensation is sought, and that the illegal
consideration or object had not been effected at the time when the plaintiff became aware
of the illegality and repudiated the agreement;
(b) the court is satisfied that the consent of the plaintiff to the agreement was induced by fraud,
misrepresentation, coercion or undue influence; or
(c) the agreement is declared to be illegal by any written law with the object of protecting a
particular class of persons of which the plaintiff is one.
[Cap. 4 s. 8]
(a) it is expressed in writing in electronic form and registered under the law for the time being
in force for the registration of documents, and is made on account of natural love and
affection between parties standing in a near relation to each other;
(b) it is a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to
do; or
(c) it is a promise, made in writing or electronic form and signed by the person to be charged
therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or
in part a debt of which the creditor might have enforced payment but for the law for the
limitation of suits,
in any of the cases under paragraphs (a), (b) and (c), such an agreement is a contract.
(2) Nothing in this section shall affect the validity, as between the donor and donee, of any gift
actually made.
(3) An agreement to which the consent of the promisor is freely given is not void merely because the
consideration is inadequate; but the inadequacy of the consideration may be taken into account by
the court in determining the question whether the consent of the promisor was freely given.
(1) Every agreement by which anyone is restrained from exercising a lawful profession, trade or
business is to that extent void, unless the restraint is reasonable in reference to the interests of the
parties concerned and in reference to the interests of the public.
(2) In particular and without prejudice to the generality of the foregoing principle, an agreement
in restraint of trade is not reasonable in reference to the interests of the parties, if the restraint
exceeds what is reasonably necessary to protect a proprietary interest of the promissee.
(3) The burden of proving that any restraint is reasonable in reference to the interests of the parties
shall lie upon the promissee, and the burden of proving that any restraint is unreasonable in
reference to the interests of the public shall lie on the promisor.
(i) a contract by which two or more persons agree that any dispute which may arise between
them in respect of any subject or class of subjects shall be referred to arbitration, and that
only the amount awarded in such arbitration shall be recoverable in respect of the dispute
so referred; or
(ii) any contract in writing by which two or more persons agree to refer to arbitration any
question between them which has already arisen; or
(b) affect any provision of any law in force for the time being as to references to arbitration.
(1) A contingent contract to do or not to do anything if a specified uncertain event happens within a
fixed time becomes void if, at the expiration of the time fixed, such event has not happened, or if,
before the time fixed, such event becomes impossible.
(2) A contingent contract to do or not to do anything if a specified or uncertain event does not happen
within a fixed time may be enforced by law when the time fixed has expired and such event has
not happened, or, before the time fixed has expired if it becomes certain that such event will not
happen.
(1) The parties to a contract must perform their respective promises, unless such performance is
dispensed with or excused under the provisions of this Act or of any other law.
(2) Promises bind the representatives of the promisor in case of the death of such promisor before
performance, unless a contrary intention appears from the contract.
(1) Where a promisor has made an offer of performance to the promisee, and the offer has not been
accepted, the promisor is not responsible for nonperformance, nor does he thereby lose his rights
under the contract.
(b) it must be made at a proper time and place, and under such circumstances that the person
to whom it is made may have a reasonable opportunity of ascertaining that the person by
whom it is made is able and willing there and then to do the whole of what he is bound by
his promise to do;
(c) if the offer is an offer to deliver anything to the promisee, the promisee must have a
reasonable opportunity of seeing that the thing offered is the thing which the promisor is
bound by his promise to deliver.
(3) An offer to one of several joint promisees has the same legal consequences as an offer to all of
them.
(1) When two or more persons make a joint promise, the promisee may, in the absence of express
agreement to the contrary, compel any one or more of such joint promisors to perform the whole
of the promise:
Provided that, where a promisee institutes a suit against any one or more of such joint promisors
and obtains a decree therein, nothing in this subsection shall be construed as permitting the
promisee to institute any further suit arising out of the same cause of action against any other of
such joint promisors.
(2) Each of two or more joint promisors may compel every other joint promisor to contribute equally
with himself to the performance of the promise, unless a contrary intention appears from the
contract.
(3) Where any one of two or more joint promisors makes default in such contribution, the remaining
joint promisors must bear the loss arising from such default in equal shares.
(4) Nothing in this section shall prevent a surety from recovering from his principal payments made by
the surety on behalf of the principal, or entitle the principal to recover anything from the surety on
account of payments made by the principal.
46. Time for performance of promise where no application is to be made and no time is
specified
Where, by the contract, a promisor is to perform his promise without application by the promisee, and no
time for performance is specified, the promise must be performed within a reasonable time, which is, in
each particular case, a question of fact.
47. Time and place for performance of promise where time is specified and no application
is to be made
When a promise is to be performed on a certain day, and the promisor has undertaken to perform it
without application by the promisee, the promisor may perform it at any time during the usual hours of
business on such day and at the place at which the promise ought to be performed.
48. Application for performance on certain day to be at proper time and place
(1) When a promise is to be performed on a certain day and the promisor has not undertaken
to perform it without application by the promisee, it is the duty of the promisee to apply for
performance at a proper place and within the usual hours of business.
(2) The question as to what is a proper time and place is, in each particular case, a question of fact.
49. Place for performance of promise where no application to be made and no place fixed
for performance
When a promise is to be performed without application by the promisee, and no place is fixed for the
performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for
the performance of the promise, and to perform it at such place.
51. Promisor not bound to perform unless reciprocal promisee ready and willing to
perform
When a contract consists of reciprocal promises to be simultaneously performed, no promisor need
perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
54. Effect of default as to that promise which should be first performed, in contract
consisting of reciprocal promises
When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its
performance cannot be claimed till the other has been performed, and the promisor of the promise last
mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise,
and must make compensation to the other party to the contract for any loss which such other party may
sustain by the nonperformance of the contract.
(1) When a party to a contract promises to do a certain thing at or before a specified time, or certain
things at or before specified times, and fails to do any such thing at or before the specified time,
the contract or so much of it as has not been performed, becomes voidable at the option of the
promisee, if the intention of the parties was that time should be of the essence of the contract.
(2) Where it was not the intention of the parties that time should be of the essence of the contract, the
contract does not become voidable by the failure to do such thing at or before the specified time;
but the promisee is entitled to compensation from the promisor for any loss occasioned to him by
such failure.
(3) Where, in case of a contract voidable on account of the promisor's failure to perform his promise
at the time agreed, the promisee accepts performance of such promise at any time other than that
agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance
of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the
promisor of his intention to do so.
(2) A contract to do an act which, after the contract is made, becomes impossible, or, by reason of
some event which the promisor could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful.
(3) Where one person has promised to do something which he knew or, with reasonable diligence,
might have known, and which the promisee did not know to be impossible or unlawful, such
promisor must make compensation to such promisee for any loss which such promisee sustains
through the non-performance of the promise.
57. Reciprocal promise to do things legal, and also other things illegal
Where persons reciprocally promise, first, to do certain things which are legal and, secondly, under
specified circumstances, to do certain other things which are illegal, the first set of promises is a contract,
but the second is a void agreement.
Appropriation of payments
65. Obligation of person who has received advantage under void agreement or contract
that becomes void
When an agreement is discovered to be void, or when a contract becomes void, any person who has
received any advantage under such agreement or contract is bound to restore it, or to make compensation
for it, to the person from whom he received it:
Provided that, where a contract becomes void by reason of the provisions of subsection (2) of section 56,
and a party thereto incurred expenses before the time when that occurs in, or for the purposes of, the
performance of the contract, the court may, if it considers it just to do so in all the circumstances of the
case, allow such party to retain the whole or any part of any such advantage as aforesaid received by him,
or discharge him wholly or in part from making compensation therefore, or may make an order that such
party recover the whole or any part of any payments or other advantage which would have been due to
him under the contract had it not become void, being, in any such case, an advantage or part thereof,
discharge or payment, not greater in value than the expenses so incurred.
68. Claim for necessaries supplied to person incapable of contracting, or on his account
Where a person incapable of entering into a contract, or anyone whom he is legally bound to support, is
supplied by another person with necessaries suited to his condition in life, the person who has furnished
such supplies is entitled to be reimbursed from the property of such incapable person.
Provided that, no compensation shall be made in any case in which the person sought to be charged had
no opportunity of accepting or rejecting the benefit.
72. Liability of person to whom money is paid or things delivered by mistake or under
coercion
A person to whom money has been paid, or anything delivered, by mistake as to a matter of fact which, if
true, would give rise to a legal obligation or under coercion, must repay or return it.
(1) Where a contract has been broken, the party who suffers by such breach is entitled to receive,
from the party who has broken the contract, compensation for any loss or damage caused to him
thereby, which naturally arose in the usual course of things from such breach, or which the parties
knew, when they made the contract, to be likely to result from the breach of it.
(2) The compensation is not to be given for any remote and indirect loss or damage sustained by
reason of the breach.
(3) Where an obligation resembling those created by contract has been incurred and has not
been discharged, any person injured by the failure to discharge is entitled to receive the same
compensation from the party in default as if such person had contracted to discharge it and had
broken his contract.
(4) In estimating the loss or damage arising from a breach of contract, the means which existed of
remedying the inconvenience caused by the non-performance of the contract must be taken into
account.
[Cap. 4 s. 8]
(1) Where a contract has been broken, if a sum is named in the contract as the amount to be paid in
case of such breach, or if the contract contains any other stipulation by way of penalty, the party
complaining of the breach is entitled, whether or not actual damage or loss is proved to have been
caused thereby, to receive from the party who has broken the contract reasonable compensation
not exceeding the amount so named or, as the case may be, the penalty stipulated.
[Cap. 4 s. 8]
(2) A stipulation for increased interest from the date of default may be a stipulation by way of penalty.
(3) Notwithstanding the foregoing provisions of this section, when any person enters into any bail-
bond, recognisance or other instrument of the same nature, or under the provisions of any law,
or under the orders of the Government or the President gives any bond for the performance of
any public duty or act in which the public are interested, he shall be liable, upon breach of the
condition of any such instrument, to pay the whole sum mentioned therein.
(4) For the avoidance of doubt, it is hereby declared that a person who enters into a contract with the
Government or the President does not necessarily thereby undertake any public duty, or promise to
do an act in which the public are interested.
(a) all damages which he may be compelled to pay in any legal proceedings in respect of any matter to
which the promise to indemnify applies;
(b) all costs which he may be compelled to pay in any such proceedings if, in bringing or defending
them. he did not contravene the orders of the promisor, and acted as it would have been prudent
for him to act in the absence of any contract of indemnity, or if the promisor authorised him to
bring or defend the proceedings; and
(c) all sums which he may have paid under the terms of any compromise of any such proceedings,
if the compromise was not contrary to the orders of the promisor, and was one which it would
have been prudent for the promisee to make in the absence of any contract of indemnity. or if the
promisor authorised him to compromise the proceedings.
84. Liability of two persons, primarily liable, not affected by arrangements between them
that one shall be surety on another’s default
Where two persons contract with a third person to undertake a certain liability, and also contract with
each other that one of them shall be liable only on the default of the other, the third person not being
a party to such contract, the liability of each of such two persons to the third person under the first
contract is not affected by the existence of the second contract, although such third person may have
been aware of its existence.
87. Discharge of surety when creditor compounds with, gives time to, or agrees not to
sue, principal debtor
A contract between the creditor and the principal debtor, by which the creditor makes a composition
with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the
surety assents to such contract.
88. Surety not discharged when agreement made with third person to give time to
principal debtor
Where a contract to give time to the principal debtor is made by the creditor with a third person, and not
with the principal debtor, the surety is not discharged.
91. Discharge of surety by creditor's act or omission impairing surety's eventual remedy
Where the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act
which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the
principal debtor is thereby impaired, the surety is discharged.
96. Guarantee on contract that creditor shall not act on it until co-surety joins
Where a person gives a guarantee upon a contract that a creditor shall not act upon it until another
person has joined in it as co-surety, the guarantee is not valid if that other person does not join.
Part IX – Bailment
(1) A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract
that they shall, when the purpose is accomplished, be returned or otherwise disposed of according
to the directions of the person delivering them; and the person delivering the goods is called the
"bailor" while the person to whom they are delivered is called the "bailee".
(2) Where a person already in possession of the goods of another contracts to hold them as a bailee,
he thereby becomes the bailee, and the owner becomes the bailor, of such goods although they
may not have been delivered by way of bailment.
(1) The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware,
and which materially interfere with the use of them, or expose the bailee to extraordinary risks;
and, if he does not make such disclosure, he is responsible for damage arising to the bailee directly
from such faults.
(2) Where the goods are bailed for hire, the bailor is responsible for such damage, whether he was or
was not aware of the existence of such faults in the goods bailed.
Provided that, nothing in this section shall be construed as applying to or qualifying the liability at
common law of a common carrier or an inn keeper.
104. When bailee not liable for loss, etc., of thing bailed
The bailee, in the absence of any special contract, is notresponsible for the loss, destruction or
deterioration of the thing bailed, if he has taken the amount of care described in section 103.
107. Effect of mixture, with bailor's consent, of his goods with bailee's
Where the bailee, with the consent of the bailor mixes the goods of the bailor with his own goods, the
bailor and the bailee shall have an interest in proportion to their respective shares, in the mixture thus
produced.
108. Effect of mixture, without bailor's consent, when goods can be separated
Where the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods,
and the goods can be separated or divided, the property in the goods remains in the parties respectively;
but the bailee is bound to bear the expense of separation or division, and any damage arising from the
mixture.
109. Effect of mixture, without bailor's consent, when goods cannot be separated
Where the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, in
such a manner that it is impossible to separate the goods bailed from the other goods and deliver them
back, the bailor is entitled to be compensated by the bailee for the loss of the goods.
(a) when the thing is in danger of perishing or of losing the greater part of its value; or
[Cap. 4 s. 8]
(b) when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its
value.
Bailments of pledges
126. Pawnee not to retain for debt or promise other than that for which goods pledged
The pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or
promise other than the debt or promise for which they are pledged; but such contract, in the absence of
anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.
(1) Where the pawnor makes default in payment of the debt or performance, at the stipulated time of
the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the
pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may
sell the thing pledged, on giving the pawnor reasonable notice of the sale.
(2) Where the proceeds of such sale are less than the amount due in respect of the debt or promise;
the pawnor is still liable to pay the balance but if the proceeds of the sale are greater than the
amount so due, the pawnee shall pay over the surplus to the pawnor.
130. Pledges by mercantile agents and persons in possession under voidable contracts
(1) Where a mercantile agent is, with the consent of the owner, in possession of goods or the
documents of title to goods, any pledge made by him, when acting in the ordinary course of
business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of
the goods to make the same; provided that the pawnee acts in good faith and has not at the time of
the pledge notice that the pawnor has no authority to pledge.
(2) Where a mercantile agent validly pledges the documents of title to goods, the pledge shall be
deemed to be a pledge of the goods.
(3) Where a pawnor has obtained possession of the goods pledged by him under a contract voidable
under section 19, but the contract has not been rescinded at the time of the pledge, the pawnee
acquires a good title to the goods; provided he acts in good faith and without notice of the
pawnor's defect of title.
(4) In this section the expressions "mercantile agent'; and "documents of title to goods" shall have the
meanings ascribed to them respectively in the Sale of Goods Act.
[Cap. 214]
Part X – Agency
(1) An agent having an authority to do an act has authority to do every lawful thing which is necessary
in order to do such act.
(2) An agent having authority to carry on a business has authority to do every lawful thing necessary
for the purpose, or usually done in the course of conducting such business.
Sub-agents
(1) Where a sub-agent is properly appointed the principal is, so far as regards third persons,
represented by the sub-agent, and is bound by and responsible for his acts as if he were an agent
originally appointed by the principal.
(2) The agent is responsible to the principal for the acts of the sub-agent.
(3) The sub-agent is responsible for his acts to the agent, but not to the principal, except in case of
fraud or wilful wrong.
146. Relation between principal and person duly appointed by agent to act in business of
agency
Where an agent, holding an express or implied authority to name another person to act for the principal
in the business of the agency, has duly named another person accordingly, such person is not a subagent,
but an agent of the principal for such part of the business of the agency as is entrusted to him.
[Cap. 4 s. 8]
Ratification
148. Right of person as to acts done for him without his authority and effect of ratification
Where acts are done by one person on behalf of another, but without his knowledge or authority, he may
elect to ratify or to disown such acts and if he ratifies them, the same effects will follow as if they had
been performed by his authority.
Revocation of agency
160. When termination of agent's authority takes effect as to agent, and as to third
persons
The termination of the authority of an agent does not, so far as regards the agent, take effect before it
becomes known to him, or so far as regards third persons, before it becomes known to them.
[Cap. 4 s. 8]
167. Right of principal when agent deals, on his own account, in business of agency
without principal's consent
Where an agent deals on his own account in the business of the agency, without first obtaining the
consent of his principal and acquainting him with all material circumstances which have come to his own
knowledge on the subject, the principal may repudiate the transactions, if the case shows either that any
material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent
have been disadvantageous to him.
168. Principals right to benefit gained by agent dealing on his own account in business of
agency
Where an agent, without the knowledge of his principal, deals in the business of the agency on his own
account instead of on account of his principal, the principal is entitled to claim from the agent any
benefit which may have resulted to him from the transaction.
[Cap. 4 s. 8]
180. Principal not bound when excess of agent's authority is not separable
Where an agent does more than he is authorised to do, and what he does beyond the scope of his
authority cannot be separated from what is within it, the principal is not bound to recognise the
transaction.
182. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal
(1) In the absence of any contract to that effect, an agent cannot personally enforce contracts entered
into by him on behalf of his principal, nor is he personally bound by them.
(2) A contract referred to in subsection (1) shall be presumed to exist in the following cases—
(a) where the contract is made by an agent for the sale or purchase of goods for a merchant
resident abroad;
(b) where the agent does not disclose the name of his principal;
(1) Where an agent makes a contract with a person who neither knows, nor has reason to suspect, that
he is an agent, his principal may require the performance of the contract; but the other contracting
party has, as against the principal, the same rights as he would have had as against the agent if the
agent had been principal.
(2) Where the principal discloses himself before the contract is completed, the other contracting party
may refuse to fulfil the contract, if he can show that, if he had known who was the principal in the
contract, or if he had known that the agent was not a principal, he would not have entered into the
contract.
188. Liability of principal inducing belief that agent's unauthorised acts were authorized
When an agent has, without authority, done acts or incurred obligations to third persons on behalf
of his principal, the principal is bound by such acts or obligations if he has by his words or conduct
induced such third persons to believe that such acts and obligations were within the scope of the agent's
authority.
Part XI – Partnership
Nature of partnership
(1) "Partnership" is the relationship which subsists between persons carrying on business in common
as defined with a view of profit.
(2) Persons who have entered into partnership with one another are called collectively a "firm", and
the name under which their business is carried on is called the "firm name".
(1) The relationship of partnership arises from contract and not from status.
(2) In determining whether a group, of persons is or is not a partnership, regard shall be had to the
following rules—
(a) joint tenancy, tenancy in common, joint property, common property or part ownership does
not of itself create a partnership as to anything so held or owned whether the tenants or
owners do or do not share any profits made by the use thereof;
(b) the sharing of gross returns does not of itself create a partnership, whether the persons
sharing such returns have or have not a joint or common right or interest in any property
from which or from the use of which the returns are derived;
(c) the receipt by a person of a share of the profits of a business is prima facie evidence that he
is a partner in the business, but receipt of such a share, or of a payment contingent on or
varying with the profits of a business, does not of itself make him a partner in the business,
and in particular the receipt of such share or payment—
(iv) by a previous owner or part owner of the business, as consideration for the sale of the
goodwill or share thereof,
does not of it-self make the receiver a partner with the persons carrying on the business.
(a) every partner has a right to take part in the management of the partnership business;
(b) any differences arising as to ordinary matters connected with the partnership business may
be decided by a majority of all the partners, but no change may be made in the nature of the
partnership business without the consent of all existing partners;
(c) every partner has a right to have access to and to inspect and copy any of the books of the firm;
(d) a partner is not entitled to receive remuneration for taking part in the conduct of the business;
(e) all partners are entitled to share equally in the capital and profits of the business, and, must
contribute equally towards the losses, whether of capital or otherwise, sustained by the firm;
(f) the firm must indemnify every partner in respect of payments made and personal liabilities
incurred by him—
(i) in the ordinary and proper course of the business of the firm; and
(ii) in or about anything necessarily done for the preservation of the business or property of the
firm;
(g) a partner shall indemnify the firm for any loss caused to it by his fraud or wilful neglect in the
conduct of the business of the firm.
(1) All property and rights and interests in property originally brought into the partnership stock or
acquired by purchase or otherwise, on account of the firm, or for the purposes and in the course
of the partnership business, including the goodwill of the business, are partnership property
and must be held by the partners for the purposes of the partnership and in accordance with the
partnership agreement, or failing such agreement, the provisions of this Act.
(2) Unless the contrary intention appears, property and rights and interests in property acquired with
money belonging to the firm are deemed to have been acquired on account of the firm.
(3) Where land or any hereditable interest therein has become partnership property, it shall, unless
the contrary intention appears, be treated as between the partners (including the representatives
of a deceased partner), and also between the heirs of a deceased partner and his executors or
administrators as personal or movable and not as real or hereditable estate.
(a) if a partner derives any profit for himself from any transaction of the firm, or from the use of the
property or business connection of the firm or the firm name, he shall account for that profit and
pay it to the firm;
(b) if a partner carries on any business of the same nature as and competing with that of the firm,
without the consent of the other partners, he shall account for and pay to the firm all profits made
by him in that business.
199. Expulsion
A partner may not be expelled from a firm by his partners unless a power to that effect has been expressly
conferred by agreement between the partners.
200. Retirement
Where no fixed term has been agreed upon for the duration of the partnership, any partner may
determine the partnership at any time on giving notice of his intention so to do to all the other partners.
(1) Every partner is an agent of the firm and his other partners for the purpose of the business of the
partnership; and the acts of every partner who does any act for carrying on in the usual way of
business of the kind carried on by the firm bind the firm and his partners, unless, the partner so
acting has in fact no authority to act for the firm in the particular matter, and the person with
whom he is dealing either knows that he has no authority or does not know or believe him to be a
partner.
(2) In the absence of any usage or custom of trade or express authority to act for the firm, a partner is
not an agent of the firm or his other partners to—
(b) open a banking account on behalf of the firm in his own name;
Provided that, nothing in this section shall affect any general rule of law relating to the execution of
deeds or negotiable instruments.
(a) by any wrongful act or omission of any partner acting in the ordinary course of business of the
firm, or with the authority of the other partners;
(b) by any misapplication of any money or property received by a partner acting within the scope of
his apparent authority;
(c) by any misapplication by one or more of the partners of money or property received by the firm in
the course of its business while in the custody of the firm.
Provided that—
(a) this section shall not affect any liability incurred by any partner by reason of his having notice of a
breach of trust;
(b) nothing in this section shall prevent trust money from being followed and recovered from the firm
if still in its possession or under its control.
Provided that, where, after a partner's death, the partnership business is continued in the old firm's name,
the continued use of that name or of the deceased partner's name as part thereof shall not of itself make
his executors or administrators’ estate or effects liable for any partnership debts contracted after his
death.
(1) A person who is admitted as a partner to an existing firm does not thereby become liable to the
creditors of the firm for anything done before he became a partner.
(2) A partner who retires from the firm does not thereby cease to be liable for partnership debts or
obligations incurred before his retirement.
(3) A retiring partner may be discharged from any existing liabilities by an agreement to that effect
between himself and the members of the firm as newly constituted and the creditors and this
agreement may be either express or implied as a fact from the course of dealing between the
creditors and the firm as newly constituted.
(1) An assignment by any partner of his share in the partnership, either absolute or by way of
mortgage or redeemable charge, does not, as against the other partners, entitle the assignee,
during the continuance of the partnership, to interfere in the management or administration of
the partnership business or affairs or to require any accounts of the partnership transactions or
to inspect the partnership books, but entitles the assignee only to receive the share of profits to
which the assigning partner would be otherwise entitled, and the assignee must accept the account
of profits agreed to by the partners.
(2) In the case of a dissolution of the partnership, whether as respects all the partners or as respects
the assigning partner, the assignee is entitled to receive the share of the partnership assets to
which the assigning partner is entitled as between himself and the other partners, and, for the
purpose of ascertaining; that share, to an account as from the date of dissolution.
(a) if entered into for a fixed term, by the expiration of that term;
(b) if entered into for a single venture or undertaking, by the termination of that venture or
undertaking;
(c) if entered into for an undefined time, by the partner giving notice to the other or others of
his intention to dissolve the partnership.
(2) Where a partnership is dissolved by notice under paragraph (c) of subsection (1), the partnership
is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so
mentioned, as from the date of the communication of the notice.
(1) Subject to any agreement between the partners, a partnership is dissolved as regards all the
partners by the death or bankruptcy of any partner.
(2) A partnership may, at the option of the other partners, be dissolved if any partner suffers his share
of the partnership property to be charged under rule 48 of Order XXI of the First Schedule to the
Civil Procedure Code.
[Cap. 33]
(b) when a partner becomes incapable of performing his part of the partnership contract;
(c) when a partner, other than the partner suing has been guilty of such conduct as, in the opinion of
the court, regard being had to the nature of the business, is calculated to prejudicially affect the
carrying on the business;
(d) when a partner other than the partner suing, willfully and persistently commits a breach of the
partnership agreement, or otherwise so conducts himself in matters relating to the partnership
business that it is not reasonably practicable for the other partner or partners to carry on the
business in partnership with;
(e) when the business of the partnership can only be carried on at a loss;
(f) whenever in any case circumstances have arisen which, in the opinion of the court, render it just
and equitable that the partnership be dissolved.
(1) When a person deals with a firm after a change in its constitution he is entitled to treat all
apparent members of the old firm as still being members of the firm until he has notice of the
change.
(2) An advertisement in the Gazette shall be notice as to persons who had no dealings with the firm
before the date of the dissolution or change so advertised.
(3) The estate of a person who dies, or who becomes bankrupt, or of a partner who, not having been
known to the person dealing with the firm to be a partner, retires from the firm, is not liable for
partnership debts contracted after the date of the death, bankruptcy or retirement respectively.
Provided that, the firm is in no case bound by the acts of a partner who has become bankrupt; but this
proviso does not affect the liability of any person who has, after the bankruptcy represented himself or
knowingly suffered himself to be represented as a partner of the bankrupt.
(a) the dissolution is, in the judgment of the court, wholly or chiefly due to the misconduct of the
partner who paid the premium; or
(b) the partnership has been dissolved by an agreement containing provision for a return of the
premium or any part thereof.
(a) to a lien on the surplus of the partnership assets, after satisfying the partnership liabilities, for
any sum of money paid by him for the purchase of a share in the partnership and for any capital
contributed by him;
(b) to stand in the place of the creditors of the firm for any payments made by him in respect of the
partnership liabilities; and
(c) to be indemnified by the person guilty of the fraud or making the representation against all the
debts and liabilities of the firm.
222. Right of outgoing partner in certain cases to share profits made after dissolution
Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing
partners carryon the business of the firm with its capital or assets without any final settlement of
accounts as between the firm and the outgoing partner or his estate, then, in the absence of any
agreement to the contrary, the outgoing partner or his estate is entitled at the option of himself or
his representatives to such share of the profits made since the dissolution as the court may find to be
attributable to the use of his share of the partnership assets, or to interest at the rate of five per centum
per annum on the amount of his share of the partnership assets:
Provided that, where, by the partnership contract, an option is given to surviving or continuing partners
to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate
of the deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any
further or other share of profits; but if any partner assuming to act in exercise of the option does not in all
material respects comply with the terms thereof, he is liable to account under the foregoing provisions of
this section.
(a) losses, including losses and deficiencies of capital, shall be paid first out of profits, next out of
capital, and lastly, if necessary, by the partners individually in the proportion in which they were
entitled to share profits;
(b) the assets of the firm including the sums, if any, contributed by the partners to make up losses or
deficiencies of capital, shall be applied in the following manner and order—
(i) in paying the debts and liabilities of the firm to persons who are not partners therein;
(ii) in paying to each partner rateably what is due from the firm to him for advances as
distinguished from capital;
(iii) in paying to each partner rateably what is due from the firm to him in respect of capital;
(iv) the ultimate residue, if any, shall be divided among the partners in the proportion in which
profits are divisible.
228. Omitted
Transitional provisions.