KA03 :

ESSENTIALS TO
CONTRACT
ELIUD KITIME
 Introduction
▪ Contracts do arise from agreements.

▪ Agreements are made of offer and acceptance.

▪ Agreements become contracts when they meet legal

requirements.

▪ These legal requirements are what we call

ESSENTIALS.
 Preview
▪ In this lecture, we are going to learn about

▪ Essentials that make contracts valid in eyes of

law;

▪ Conditions for validity of each essential to

contract; and

▪ Legal effect of each essential in validity of

contract.
 Essentials to Contract
▪ All contracts are agreements but not all agreements
are contract.

▪ This means that contracts are made of agreements.

However, not all agreements do automatically become
contracts. Agreements become contracts when they
meet the legal requirements.

▪ Section 10 of LCA provide for those legal

requirements. It says that all agreements are
contracts if they are made by the free consent of
parties competent to contract, for a lawful
consideration and with a lawful object, and are not
hereby expressly declared to be void
 Free Consent
▪ Consent is the voluntary acquiescence to the
proposal. It is an act of reason and
deliberation.

▪ Section 13 of the LCA defines consent in the

sense that two or more persons are said to
consent when they agree upon the same thing in
the same sense.

▪ Free consent means consent with the absence of

any kind of coercion, undue influence, fraud,
misrepresentation or mistake. Section 14 of the
 Legal Implications
▪ When consent to an agreement is caused by coercion,
undue influence, fraud, or misrepresentation, the
agreement is a contract voidable at the option of the
party whose consent was so caused. Section 19 of the
LCA.

▪ The contract nevertheless is not voidable, if the party

whose consent was so caused had the means of discovering
the truth with ordinary diligence in relation to fraud
or misrepresentation. Proviso of Section 19 of the LCA.

▪ 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. Section 20(1) of the
 Capacity
▪ It is competence to enter into a legal agreement
and the competence to perform some act.

▪ It is determined by whether a person has attained

majority age, is mentally capable of
understanding the contract terms and is not
disqualified by the law to do so. Section 11(1)
of the LCA.

▪ An agreement by a person who is not hereby

declared to be competent to contract is void.
Section 11(2) of the LCA.
 Consideration
▪ It is the exchange of benefits and detriments by the
parties to the contract.

▪ Section 2(1)(d) of the LCA explains consideration as 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

▪ Currie v Misa(1874) LR 10 Ex 153, consideration means 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.
 Rules of Consideration
▪ Consideration should not be past. Re McArdle(1951)
Ch 669

▪ Consideration must match the terms of the contract.

Miyombo Sahani v Nkandi Makune[1998] TLR 328

▪ Consideration must be lawful. Section 23(1) of the

LCA.

▪ Consideration is necessary for valid contract.

Section 25(1) of the LCA
 Legality
▪ Legality connotes the state of being
according to the law.

▪ It indicates the quality that something is in

line with the provisions of the law.

▪ Section 23 (1) of the LCA explicates the

circumstances which determine the illegality
of contracts
 Circumstances of illegality
▪ When contracts are forbidden by law;

▪ When the contracts are of such a nature that, if permitted, they

would defeat the provisions of any law;

▪ When the contracts are fraudulent in nature;

▪ If the contracts involve or imply injury to the person or property

of another; and

▪ When court regards the contracts as immoral or opposed to public

policy
 Circumstances against Public
Policy
▪ Unreasonable restraint of trade or
profession; section 27 of the LCA

▪ Restraint of Marriage; section 26 of the

LCA

▪ Restraint of legal proceedings. section

28 of the LCA
 Legal implications
▪ Generally, illegal contracts are void ab initio. This
means that neither party can enforce such contracts nor
receive aid from the courts of law.
▪ Section 65 of the Law of Contract Act, Cap 345 R.E. 2019
- 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.
▪ However, in the case of Zakaria Barie Bura v Theresia
Maria John Mubiru 1995 TLR 211 (CA) the court was of the
view that although the sale agreement was illegal the
appellant purchaser was entitled to the sums of Shs
500,000/= which he paid under the illegal contract and
which appeared to have been deposited in court by the
respondent.
 Intention to Create Legal
Relations
▪ It is an essential that states that an agreement is
legally enforceable only if the parties are deemed to
have intended it to be a binding contract.

▪ In social and domestic agreements, the law raises a

presumption that the parties do not intend to create
legal relations. Except when they are written, evidenced
and couples in separation.

▪ Where an agreement is made in a commercial context, the

law raises a presumption that the parties do intend to
create legal relations by the agreement. Except where
expressly stated in the contract.
 Parties to Contract
▪ Parties to contracts are the persons who hold the
obligations and receives the benefits of a legally
binding agreement. They must be competent.

▪ Third party to a contract is a person who is not a party

to the contract and has not provided consideration for
the contract but has an interest in its performance.
Third parties occur when there is assignment and or
delegation in the contract.

▪ The doctrine of privity to contract is that a contract

cannot confer rights or impose those obligations arising
under it, on any person except the parties to it. Except
in agency, restrictive covenants, third party insurance
 Formalities
▪ Formalities are formal actions or procedures that
are carried out as part of a particular activity
or event.

▪ Formalities requirements are generally designed to

prevent fraud, but strict adherence to such
requirements might themselves facilitate fraud by
enabling those who entered into such contracts to
deny the existence of the contract or otherwise
seek to avoid their promised obligations by
relying on non-compliance as a defence to a
contractual claim.
 Requirements
▪ As a general rule contracts do not need to comply with
any sort of formalities.

▪ There are some types of contract which currently

require certain formalities to be followed to make them
enforceable.

▪ Contracts for Disposition of Right of Occupancy. Section 64(1)

(a) of the Land Act.

▪ Contracts of Employment. Section 15 (1) of the Employment and

Labour Relations Act.

▪ Sales of Goods. Section 6(1) of the Sales of Goods Act

 Why writing contracts
▪ Proof of details;

▪ Prevention of misunderstanding from arising agreement;

▪ Provision of security and peace of mind to the parties to the contract;

▪ Guarantee of confidentiality;

▪ Avoidance of expensive litigation proceedings;

▪ Serving as an official record of the business agreement

 Review
▪ Contract is formed through agreement between persons.
Agreement is formed when a valid offer is accepted
between competent persons to contract.

▪ All contracts are agreements but not all agreements

are contract.

▪ Section 10 of LCA provide for those legal

requirements. It says that all agreements are
contracts if they are made by the free consent of
parties competent to contract, for a lawful
consideration and with a lawful object, and are not
hereby expressly declared to be void
 References
▪ Bradgate, R., Commercial Law, 3rd Edition, Oxford University Press, United
States, (2005).

▪ Brown, G. W., et al, Understanding Business and Personal Law, 9th Edition,
McGraw – Hill Inc. United States of America, (1993).

▪ Cartwright, J., Contract Law: An Introduction to the English Law of Contract

for the Civil Lawyer, Hart Publishing (1656), (2013).

▪ Guest A. G., and Sir Anson, W., Anson's Law of Contract, Thirtieth edition,
Oxford University Press, United Kingdom, (2016).

▪ Hodgin, R. W., Law of Contract in East Africa, East African Literature

Bureau, Nairobi – Kenya, (1975).