LAW OF CONTRACT

 
INTRODUCTION
Understanding the concept of a contract
 
The law of contract is essentially about the making of bargains and consensual transactions for
the fulfilment of day to day requirements. Contracts are entered into by all and sundry on a day
to day basis without us realising it. Each time one spends money on say bottled, food etc, one
concludes a contract which are legally binding.
 
According to Sir Frederick Pollock in his book, Principles of Contract: A Treatise on the General
Principles Concerning the Validity of Agreements in the Law of England, 7th ed. London: Stevens
& Sons Limited at page 1, a contract is a term ‘often used to refer to an agreement, consisting of
the exchange of promises, which is recognized by the law as giving rise to enforceable rights and
obligations.’
a. Contracts as binding promises and agreements
 
When do we say a contract is binding?
 
When we say a contract is binding, it means the parties to the contract are under the obligation
to honour the terms of the contract/agreement. This invariably means that the parties are
required to comply with the terms of the agreement that they have voluntarily entered into. If
the agreement requires the parties to do something or to refrain from doing something then it is
imperative that they adhere to that.
 
As result, if a party breaches the terms of an agreement/contract, the other party has the right
to seek redress in the court of law against the offending party.
 
It is therefore the feeling on the part of the parties to comply with the terms of the agreement
which makes it binding.
b. What makes agreements and promises binding?
 
It is the intention to bound by the terms of the agreement or the intention to create legal
relations or to do business which makes the agreement binding.
 
Towards this end when a person makes an agreement intending it to be binding on him, he
creates some level of expectation in the other party that he will comply with the terms of the
agreement. Therefore failure to comply with the terms can create disappoint in the other party
and sometime even economic losses.
 
On the contrary, where a promise is made in jest, that is, without the intention of it being
binding, it does not create any expectations of fulfilment in the other party, as a result of which
a breach of it is not likely to be enforced by the courts.
 
c. Contracts as a mechanism for facilitating the exchange of goods and services.
 
When people enter into an agreement or make promises, they do so with the aim of exchanging
goods and services in a business or commercial context.
Contracts therefore provides the mechanisms for people to do business with one another.
Contracts provide the mechanism for facilitating the exchange of goods and services by serving
as a guide on the relationship that is required to exist between parties to an agreement.
Contracts provide the procedures, rules and principles for creating legal rights and obligations
amongst the parties which enable the exchange of goods and services to take place. It is provides
the mode of enforcing the rights and obligations created under the agreement ( dispute
settlement mechanism clause).
d. Contractual Rights and obligations
A right simply means an entitlement. What a party to an agreement is entitled to under the
agreement. For instance in a tenancy agreement, the landlord will be entitled to rent and the
tenant will be entitled upon payment of his rent, to a peaceful occupation of the rented
premises.
An obligation on the other hand, is a duty imposed on a party under the agreement.

So using the landlord-tenant scenario, an obligation is created on the tenant to pay his rent in
accordance with the terms of the tenancy agreement. In the same vein, the landlord is obliged
to allow the tenant to enjoy the premises peacefully.

It can therefore be observed from the scenario above that the right of the landlord becomes
the obligation of the tenant and vice versa.

A contract therefore creates rights and obligations called contractual rights and obligations,
which are of a binding nature.
e. The idea of enforcing rights and obligations in the context of the law of contract
Enforcement simply means giving legal effect to the terms of the agreement or the promises
made by the parties to the agreement.
Enforcement thus, denotes the steps taken by a party to an agreement to ensure that they
enjoy their rights under the agreement. It entails in some cases, the need to invoke the coercive
machinery of the state to address a failure on the part of a party to an agreement.

f. Parties to a contract

Parties to a contract are persons who have entered into an agreement with one another based
on certain stated terms.
A party to an agreement can be a human beings or legal being like corporate entities. Therefore
in the same vein that a human being who happens to be a party can sue and be sued based on
the contract, a corporate can also sue and be sued based on the contract.
g. Freedom of contract.
It is one of the theories which underpin contract law. This theory is to the effect that a party is
free to enter into any agreement of his choice and based on terms that he chooses, provided in
doing so he does not breach the general laws of the country(See Edwards Carolyn (2209).
Freedom of Contract and fundamental fairness for individual parties: The tug of war continues.
77 UMKL REV.)
In other words, a person is required into an agreement voluntarily and must therefore not be
coerced into doing so. If a person is coerced into doing so, then the agreement can be set aside
by the court on the grounds of duress.
h. Sanctity of contract
This theory is to the effect that a party who enters into an agreement on certain stated terms is
obliged to comply with such terms and the courts are duty bound to enforce the agreement
based on the said stated terms, regardless of whether the terms are fair or unfair. This is based
on the assumption that it is the parties who are the best judges of the fairness or
reasonableness of the terms of the contract and not the courts. Therefore once the party has
voluntarily entered into an agreement based on certain stated terms, it is presumed that the
terms are satisfactory to him.

i. Subject matter of a contract

This deals with what the contract is all about. What the parties agree or promise not to do. In
other words, it is the reason for the contract. The subject matter of a contract must not be
illegal, either because it contravenes the laws of the land or it is against public policy. Where
the subject matter of contract is illegal then the said contract is void and thus cannot be
enforced by the courts.
INTRODUCTION TO THE ELEMENTS OF A VALID CONTRACT
• Offer
• Acceptance
• Consideration
• Intention to create Legal relations
• Capacity to contract