TOPIC 2: FORMATION OF

CONTRACT

SR.KILATU-LSOSF
 TOPIC 2:FORMATION OF CONTRACT

Categories and Forms a Contract may

take:
• Contracts are classified according to their
various characteristics, commonly are
classified according to;
• mode or validity of enforceability,
according to mode of formation and
according to performance:

SR.KILATU-LSOSF
 Contract according to validity or enforceability

a)Valid
b)Voidable
c)Void
d)Illegal
e)Unenforceable

SR.KILATU-LSOSF
 a)Valid Contracts
• Valid contracts are those agreements
enforceable by law.
• These are contract that satisfy the definition
‘as per Section 2(1)(h) of The Law of the Law
of Contract Act. contract is an agreement
enforceable by law’
• They contain all the legal requirements of
contract stipulated under Section 10 of Law of
Contracts Act to include offer, acceptance,
lawful object, lawful consideration, competent
parties, free consent, certainty etc. The law
recognizes these contracts and enforces them.
SR.KILATU-LSOSF
 b)Voidable Contract
• A voidable contract is an agreement
which is enforceable by law at the option
of one or more parties but not at the
option of the others. Section 2(1) (i) of
the LCA.
• A voidable contract is therefore a
contract with full legal force until one of
the parties who are entitled to bring it to
an end rescinds the contract.
SR.KILATU-LSOSF
 Characteristics of Voidable Contract

• It is a valid and binding contract on both

parties as long as it remains in force.
• There is an option given to one of the
parties either to rescind (terminate) or
affirm the contract

SR.KILATU-LSOSF
 Causes of Voidable Contracts
i)Coercion /duress that is entering into contract
by being forced
ii)Misrepresentation: telling false information
which is believed to be true by the other party
iii)Fraud: doing an act or omission with intention
to deceive other
iv)Undue influence: where the stronger party
uses his power/ status to contract to dominate
the will of weaker party

SR.KILATU-LSOSF
Limitations on the right to rescind the contract by the Innocent party

i)The innocent party must rescind the contract

within a reasonable time.
ii)Where the innocent party has taken some
benefit under the contract one cannot return
it and may not avoid the contract example
marriage contract
iii)Where a third party has acquired the rights
under a voidable contract.

SR.KILATU-LSOSF
 Effect of voidable Contract

i)The parties rescinding the contract is

entitled to get damages for the loss that
he/she has suffered from the other party
ii)A voidable contract is never void from ab
ignitio but from when the innocent party
rescind it.

SR.KILATU-LSOSF
 c) Void Contract/Agreement
• Void Agreement: is the agreement of
something that is not legally valid.
• It is something that has no legal force.
• A void contract is not legally enforceable and
the parties of the contract are not legally
obligated to each other as per Section 2(1)(g)
of the LCA state that agreement which is not
enforceable is void.

SR.KILATU-LSOSF
The following agreement are void according to SS.24-30 of the LCA

• A contract with minor Section 11(2) of the LCA

• A contract prejudicial to the sanctity of marriage or
restraint of marriage. Section 26 of the LCA
• Agreement in restraint of trade Section 27 of the LCA
• The agreement void for uncertainty Section 29 of the
LCA
• Agreement by way of wager Section 30 of the LCA
• Agreement without consideration Section 25(1) of the
LCA
• Agreement which consideration and object are unlawful
Section 24 of the LCA
SR.KILATU-LSOSF
 The effects of Void Contract
i)A void contract is no contract at all and
therefore not enforceable in the court of law
ii)Money paid in void contract is recoverable or
refundable that means the court will not
enforce the contract but may assist the parties
to revert to their original position
 In nutshell Void contract are not contract at all
from the beginning has no legal consequence
before the eyes of law and parties entitle no
legal obligation to each other.
SR.KILATU-LSOSF
 d)Illegal contract
• Illegal contract: is that agreement where the
object or consideration of contract is unlawful
or contrary to public policy the effect of
illegality render the contract void.
• Section 23(2) the Law of Contract Act
provides that every agreement of which the
object or consideration is unlawful is void.
• The contract which is illegal is void abinitio
and therefore not enforceable on the court of
law.
SR.KILATU-LSOSF
 Cont...
• For example, section 6 of Sales of Goods
Act provides that, the contract of sales of
good of the value Tsh: 200/= and above
shall not be enforced unless a receipt or
memorandum has been issued by the
seller.

SR.KILATU-LSOSF
 e)Unenforceable Contract
• Unenforceable contract is the agreement
(agreement) which is not enforceable by law.
• Unenforceable contract is contract otherwise
valid but they cannot be enforceable because
of some technical defects.
• These defects may be failure of the parties to
comply with certain procedural requirements
such as having contract in writing, stamping
etc.
SR.KILATU-LSOSF
Case: Kanti Printing Works v Tanga Municipal Council (1950)H.C.D 253

• Facts: The plaintiff supplied cards to the

defendant. When demanding payment in
court the plaintiff failed to produce the
local purchase order required by law
• The court held that: the failure by the
plaintiff to produce the local purchase
order may render the contract
unenforceable.
SR.KILATU-LSOSF
 Effects of Unenforceable Contract.

• The effects of unenforceable contract are

that the contract becomes unenforceable
in the court of law because of the
technical defects.
• But when the defects are rectified/
corrected the contract becomes
enforceable.

SR.KILATU-LSOSF
 Contract according to Performance

Unilateral and Bilateral Contract

• Unilateral contract :are the contract
where only one party makes promise.
Example. Insurance contract,
• Illustration
• “A” loses a bicycle and promise rewards
anybody who returns the bicycle. This
promise for an act is unilateral.

SR.KILATU-LSOSF
 Bilateral Contract
• Are contract where two side exchange
promise.
• Illustration
• “A” promises to sell and deliver car to
“B”. “B” promises to pay for the car upon
delivery. This is a promise for a promise
and hence is a two-way traffic deal.
Therefore, is bilateral contract.
SR.KILATU-LSOSF
Executed and Executor Contract
• Executed contract are the contracts
where parties have performed their
contractual obligations.
• Nobody is in breach of the contract and
therefore no body is claiming anything
from each other

SR.KILATU-LSOSF
 Cont...
• Executor Contracts: these are contract
which are partially executed.
• Occur when one of the parties has
fulfilled his contractual obligation but the
other is yet to perform his/her
obligation.
• In such situation, it is executed as against
one party, while executory as against the
other.
SR.KILATU-LSOSF
2.2 Essential Ingredients of Contract
• Essentials of a valid contract means legal
requirements for the creation of a
contract
• In order for an agreement to be
enforceable by law, it must have the
following essential elements/ingredients
of a valid contract which are mostly
provided for under Section 10 of the Law
of Contract Act Cap. 345 R.E. 2019
SR.KILATU-LSOSF
 Cont...
• Section 10 of the Law of Contract Act,
provides 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.

SR.KILATU-LSOSF
 1)Free consent S.13 LCA
• Section 13 of the Law of Contract provides that
two or more persons are said to consent when
they agree upon the same thing in the same
sense.(‘Consesus ad idem’=meeting of minds)
• Consent is said to be free when it is not caused
by duress (coercion), undue influence,
misrepresentation, fraud or mistake. These
are technically known as vitiating factors to a
contract.
SR.KILATU-LSOSF
 (a)Duress (Coercion)
• Duress is defined under Section 15 as
committing, or threatening to commit any act
against a person’s will.
• Duress is some element of force, either
physical or economic, which is used to
override one party’s freedom to choose
whether to enter into a particular contract or
not.
• Such contracts are voidable at the insistence
of the innocent party.
SR.KILATU-LSOSF
 Cont...
 In order to benefit from the doctrine of
duress, claimants must prove that the
pressure:
• resulted in an absence of choice on their part,
was brought on them against their will.
• was of a nature considered to be illegal by the
court.
 Eg. Armstrong threatened to kill Barton if he
did not sign a contract=void contract.

SR.KILATU-LSOSF
 b)Undue influence
• A contract is said to be influenced by „undue
influence‟ when all the essential elements of
undue influence are satisfied. As per section
16 of the LCA, the elements of undue
influence are that: the relationship between
the parties is such that one of the parties is in
a position to dominate the will of the other;
the influence has been used by one of the
parties to obtain an unfair advantage over the
other; and unfair advantage is in fact obtained
SR.KILATU-LSOSF
 c) Misrepresentation S.18 LCA
• Misrepresentation is untrue or misleading
statement of fact made during negotiation by
one of the party to another, inducing the
other to entre into contract.
 These may be ;
• Innocent misrepresentation
• negligent misrepresentation
• Fraudulent misrepresentation.

SR.KILATU-LSOSF
 Innocent misrepresentation
• This is when one part makes untrue statement
which induces a part to entre into contract
believing them to be true without having
being negligent in making the statement.
• If misrepresentation is shown under s.18 the
contract becomes Voidable under section 19.
• The innocent part may either rescind the
contract or affirm it. However the contract
should not be voidable if the part had the
means to discover the truth.
SR.KILATU-LSOSF
 Negligent misrepresentation

• Is a false representation made where there is

no direct intent to lie,
• but the statement is made without having any
reasonable cause for believing it to be true or
untrue, where the speaker should have known
it.

SR.KILATU-LSOSF
 Kanji Kassa vs. Jadawjiwalji(1918) EA
PLR(K)
• The trader signed an offer without reading the
content. The trader then thought to avoid the
contract alleging misrepresentation made by
the 3rd part concerning the content of the
offer but lost the case
• Held: he could not avoid the contract because
he had when affixing the signature the means
to discover the truth with ordinary diligence.

SR.KILATU-LSOSF
 Fraudulent misrepresentation
• Is a false representation of a material fact
that is intended to deceive, and in fact
deceives another so that the individual
will act upon it to his or her legal injury.
• Fraudulent misrepresentation require
knowledge that a statement is not true.

SR.KILATU-LSOSF
 D) Mistake
• For mistake to be operative it must be of fact
and not of law
• thus the maxim ‘Coveat emptor’ (let the buyer
beware)
• Document mistakenly signed one may plead
the doctrine of ‘non est factum’=it is not my
deed.

SR.KILATU-LSOSF
 Sluis Bros(EA) Ltd v. Mathias and Tawari
Kitomari [1980] TLR 294
• The case stated the legal position of the plea of ‘non
est factum’ in Tanzania. In this case peasant believing
to deal in a joint venture with the appellant, a
company based in Arusha affiliated to Dutch
company, on the contrary the peasant worked on
loan had to pay it back. They successfully pleaded
‘non est factum.’
• Held: it would be clearly most absurd to expect
peasant to be able to read and understand
documents written in a foreign language.
SR.KILATU-LSOSF
 Limitation to the right to rescind
• Affirmation of contract
• Lapse of time
• Where third part has acquired a right
• Ability to restore.(restitution integram) –is
there any possibility to restore the property?
• Failure to discover the truth using ordinary
deligence

SR.KILATU-LSOSF
 2)Intention to create legal relations
• A contract which is governed by the law of
contract must be made with a view to creating
legal relations.
• Illustration: David is leaving on a business trip.
He promises his daughter that he will bring
her a camera. This cannot be considered a
contract as he does not intend to bind himself
legally.

SR.KILATU-LSOSF
 CASE: Balfour v Balfour (1919)

• In this case, the defendant, who was working in

Ceylon, went on a holiday to England with his wife.
At the end of the holiday, his wife fell ill and was
advised to remain in England for medical treatment.
Before returning to Ceylon, the husband promised to
pay £30 a month to his wife for her maintenance.
Initially, he sent the amount regularly. However, he
stopped paying as certain differences between them
led to their separation. By the time of the separation,
the allowance had fallen into arrears, so the wife
brought an action to recover the arrears.

SR.KILATU-LSOSF
 Court’s decision

• The wife’s action was dismissed. It was held there

was no indication that the arrangement was
intended to be a contract. While rejecting the wife’s
claim, Lord Atkins observed: “there are agreements
between parties which do result in contracts within
the meaning of that term in our law. The ordinary
example is where two parties agree to take a walk
together, or where there is an offer and acceptance
of hospitality. However, they are not a contract
because the parties did not intend that they shall be
attended by legal consequences.”

SR.KILATU-LSOSF
 3) Consideration

• Consideration is necessary for the formation

of every contract.
• Consideration is the incentive, price or motive
that causes a party to enter into an agreement
or contract.
• It is something of value that is given in
exchange for receiving something from
another person.(‘quid pro quo’=something for
something)

SR.KILATU-LSOSF
 Cont...
• An informal promise without
consideration is not actionable in law
even though the promisor may have
acted upon it to his detriment.
• S.25(1)(b) of LCA, an agreement made
without consideration is void.

SR.KILATU-LSOSF
 4) Lawful object
• It is an essential element of a valid contract.
• A contract that breaks the law is illegal.
• The courts have recognized that any contract
that tends to prejudice any social or
economic interest of the country must be
forbidden.
• The contract which its object is either
prohibited by law or is against public policy is
considered by law illegal.
SR.KILATU-LSOSF
 Cont...
• If the consideration and the object of the
contract is unlawful then the contract
become illegal , and the contract which is
illegal becomes void a binitio and
therefore not enforceable by law section
24 of Law of Contract

SR.KILATU-LSOSF
 5)Capacity to contract
• Capacity to contract refers to
competence to contract.
• Capacity refers to a person’s ability to
enter into a contract.
• In general, all adults of sound mind have
full capacity to contract.
• However the capacity of certain
individuals is limited.
SR.KILATU-LSOSF
 Cont...
• Section 11(1) of the Law of Contract Act
provides that every person is competent
to contract if he is of the age of majority,
is of sound mind and is not disqualified
from contracting by any law to which he
is subject.
• Any agreement with a person who is
incompetent to contract is void
SR.KILATU-LSOSF
 2.3 Agreement
• An agreement is defined under 2(1)(e) to
mean every promise and every set of
promises forming the consideration for
each other.
• A contract is a bilateral agreement
between two or more parties.
• Therefore, the presence of an offer and
its acceptance are of utmost importance
for any contract to take place.
SR.KILATU-LSOSF
 Offer

• Offer is a definite promise to be bound on

specific terms.
• Offer is expressed under Section2 (1)(a) of the
Law of Contract Act as a signification of
willingness by the proposer to do or to abstain
from doing something with a view of
obtaining assent of the other to such act or
abstinence .
• A person who makes proposal is called a
proposer/offeror /promisor S.2(1)(c) of LCA
SR.KILATU-LSOSF
 Characteristics of proposal

 In order for a proposal to be valid must have

the following characteristics :
1)It must be made willingly: the Proposer must
be willingly to be bound by the terms stated in
proposal
2)It must be clear and certain: the person to
whom offer is made should be in the position
to know what the offer is.

SR.KILATU-LSOSF
 Cont...
• Example: the statement that : John I want to
buy your goat is not an offer because it is not
clear and certain since the buyer has not
specified the price which he is willingly to pay
John,
• In this aspect section 29 of Law of Contract
provides that: Agreements which an offer is
uncertain and incapable of being made certain
is void.

SR.KILATU-LSOSF
Nittin Coffee Estates Ltd & Others v. United Engineering Works Ltd & Another 1988] T.L.R. 203 and Alfi E.A. Ltd. v. Themi Industries & Distributors Agency Ltd [1984] TLR 256

• Parties engaged in sale agreement without

reference to price where the former case
involved the transfer of share while the latter
case involved sale of machine.
• Held: Price is a fundamental term in a sale
agreement. If it is not mentioned the
agreement becomes uncertain and therefore
void as per section 29 of Law of Contract Act.

SR.KILATU-LSOSF
 Cont...
3)It must be final and firm expression
• Where the proposal terms keeps on changing
the terms of his statement, then such
statement cannot be regarded in law as
proposal.
4) Offer must be communicated: that means the
proposal must come to the knowledge of
whom is made.

SR.KILATU-LSOSF
 Offer and Invitation to treat

• An offer is a final, firm and clear expression of

willingness by an offeror to be bound by the
terms.
• An invitation to treaty is a mere invitation by
one party to the other party to make an offer.
An invitation to treaty does not express final,
firm and clear expression of willingness.
• An invitation to treaty normally found in
advertisement and display of good in shop
window.
SR.KILATU-LSOSF
 Display of Goods

• Display of goods for sale in shop

windows does not amount to proposal
but an invitation to treat.
• A personal interested in the goods
displayed makes a proposal which either
accepted or rejected by the shop owner

SR.KILATU-LSOSF
 Case:Fisher vs Bell (1960)QB394

• Facts: Bell displayed on his shelf windows a

flick Knives which had ticket bearing a word
“ejector knife.” Bell was charged for offering a
sale of Flick knife contrary to the provision of
Restriction of Offensive Weapon Act of 1954.
• Held: The Court held that, the display of flick
knives in shelf windows with the price tag
attached was not an offer but merely an
invitation to treat.
SR.KILATU-LSOSF
 Adverstisement.

• Advertisement simply means the notice or

communication to the public on the
availability of a particular goods, products or
service for the specific purposes.
• There are two types of advertisement.
 These are:
• Unilateral Advertisement(Agreement)
• Bilateral advertisement

SR.KILATU-LSOSF
 i)Unilateral Advertisement

• This is an advertisement, made by one party

and does not require formal acceptance or
further negotiation from the people to is
addressed.
• Offer if unilateral contracts normally made to
general word it gives the freedom the other
party to accept by performing the required
condition without negotiation.
• Performance of the condition of proposal
amount to acceptance S.8.
SR.KILATU-LSOSF
 Case: Calill v Carbolic Smoke Ball Co(1893)1 QB 256

• Facts: the Defendant company advertised in a news

paper that a reward of $ 100 would be paid to any
person who contacted influenza after having used
their smoke ball three times a day after two weeks.
The advertisement further stated that a sum of $
1000 has been deposited in the bank to show
sincerely of that matter. In the faith of the
advertisement Mrs Calill (Plaintiff) bought a Carbolic
smoke ball and used as it directed, never the less she
caught influenza and hence sued the company for
the reward of $ 100.
SR.KILATU-LSOSF
 Cont...
• The issue before the court was whether
the advertisement was an offer or
invitation to treat.
• Held: The court held that, the company
made an offer to the public that
everybody may accept by performing the
condition required.

SR.KILATU-LSOSF
 ii)Bilateral Advertisement

• This is an advertisement which invites

further negotiation between the parties
before the contract concluded.
Bilateral contracts include:
• Auction
• Tenders
• Sale of shares

SR.KILATU-LSOSF
 Tenders

• Advertisement for tenders is merely an invitation to

treaty not an offer. So a person making the statement
of tender simply invites the members of public to
make the offer which may be accepted or rejected.
• Therefore person who is making the statement of
tender is not bound to sell to the person making the
highest tender unless he has indicated in the original
statement that he will do.
• The bidder are the one who make the proposal and
the inviter has right to accept or reject the proposal.

SR.KILATU-LSOSF
 Auction

• An auction is merely an invitation to treat not

an offer.
• The offer may be made by the bidder and
accepted by the auctioneer when he signifies
his acceptance by fall of hammer or any
customary manner.
• Where the auction is without reserve price
there is no contract of sale between the
highest bidder and the owner of property if
auctioneer refuse to accept the highest price
SR.KILATU-LSOSF
 Warlor v. Harrison ( 1959) QB 14

• Facts: Harrison , the auctioneer offered a

horse for sale by the auction “without
reserve” Warlow (plaintiff) made the
highest bid apart from the one who made
by the owner of the horse who then
ordered his horse to be withdrawn from
the sale.
• Held; The court held that, in auction the
assent of auction is signified by knocking
down the hammer.
SR.KILATU-LSOSF
 Cont...
• In Harris v. Nickerson (1873) L. 8 Q. 286, where
a commission agent had sued as auctioneer
for failure to display furniture he had
advertised for sale by auction. It was held that
there was no contractual relationship between
the parties as the advertisement was merely
an invitation to treat and as such, the
auctioneer was not liable. (S. 59 of the Sale of
Goods Act, Cap 214).

SR.KILATU-LSOSF
 How is an offer communicated?

• According to section 3 of Law of Contract Act,

the communication of proposal is deemed to
be made by act or omission of the party
proposing and which has effect of
communicating it.
• According to section 9 of law of Contract
where the proposal is made in words it said to
be express and where is made otherwise it is
to be implied.
SR.KILATU-LSOSF
 When Communication of an Offer is said to be complete

• With reference to section 4(1) of Law of

Contract Communication of offer is complete
and binding against the proposer once it
comes to knowledge of acceptor henceforth it
cannot therefore be revoked by offeror.
• In another way communication of proposal is
said to be complete when the offer come to
the knowledge of offeree.

SR.KILATU-LSOSF
 TERMINATION OF AN OFFER

An offer or proposal may be terminated at

any time before its acceptance is
complete.
Once an offer has been accepted a binding
contract is formed. Read ss. 5&6 (a-d) of
LCA

SR.KILATU-LSOSF
i) Termination by Withdrawal/ Revocation
• A proposal may be revoked at any time before
the communication of its acceptance is complete
as against the proposer and not afterwards. S.
5(1) of the LCA
• This is the case even where the offeror has stated
that his offer is open for a specific period of time.
• Provided his promise to keep the offer open is
not supported by consideration, it does not bind
him and as such he can revoke his offer even
within the period when the offer is open. S.6(a)
of the LCA
SR.KILATU-LSOSF
 Cont...
Moreover, the offeror may prescribe the duration the
offer is to remain open for acceptance.
• However, the offeror is free to revoke or withdraw his
offer at any time before such duration lapses.
• In Dickinson v Dodds (1876) 2 Ch D 463, the
defendant offered to sell a house to the plaintiff on
Wednesday 10/06/1874 and the offer was to remain
open up to Friday 12th at 9 am. The plaintiff learned
on Thursday that the defendant was planning to sell
the house to someone else. He left a formal
acceptance for the defendant same day but the
defendant did not see it.
SR.KILATU-LSOSF
 Cont...
• On Thursday, the defendant sold the
house to a 3rd party
• The plaintiff purported to accept the offer
on Friday morning before 9 am.
• It was held:
• that there was no agreement between the
parties as the defendant had revoked his
offer by selling the house to a 3rd party on
June 11th
SR.KILATU-LSOSF
 Cont...
• That there is neither principle nor authority for
saying that there must be an express and actual
withdrawal of the offer
• That the plaintiff knew, through a third party, that
the defendant was no longer minded to sell the
house to him and this was as plain and clear as if
the defendant had expressly said he withdrew the
offer
• That the defendant would not have been able to
withdraw the offer only if both parties agreed that
it was a continuing offer until acceptance

SR.KILATU-LSOSF
 Cont...
• Leaving the offer ‘over’
• A promise of leaving on offer ‘over’will only
be binding if supported by consideration,
sometimes called ‘buying the option’ as stated
in Routledge v Grant 130 ER 920
• The offer to be accepted until six week does
not bind the proposer to keep the property
unsold until the stated date. Unless supported
by consideration.

SR.KILATU-LSOSF
 Cont...
• A similar holding was made in Routledge v
Grant 130 ER 920 , where the defendant’s
offer was to remain open for 6 weeks but he
revoked or withdrew it after 4 weeks. It was
held that there was no agreement between
the parties.

SR.KILATU-LSOSF
 Cont...
Note: That the revocation must be
communicated.
The communication of a revocation is
complete per S. 4(3) LCA
(a) As against the person who makes it, when it
is put in the 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
SR.KILATU-LSOSF
 Cont...
• Note: The ‘postal rule’ does not apply in relation to
withdrawal/revocation of an offer S.4(3)& S.6(a)LCA
• In Byrne v Van Tienhoven (1880) CPD 344, the
defendant posted letter of offer (from Cardiff to New
York) on 1 October. The Claimant received the letter
on 11 October and immediately accepted by
telegram. Meanwhile the defendant had posted a
withdrawal on 8 October which did not reach the
claimant until 20 October.
• Held: binding contract was made on 11 October;
revocation is not effective until it is communicated in
this case on 20 October.
SR.KILATU-LSOSF
 Cont...
ii)Termination by Rejection
• Rejection may be express or by a counter-
offer; a counter-offer kills off the last offer.
• An offer will be held to have terminated once
it has been rejected by the offeree.
• The rejection need not be express, provided
that the offeror is justified in inferring that the
offeree does not intend to accept the offer.
• Read: Hyde v Wrench (1840) 3 Beav 334
SR.KILATU-LSOSF
 Cont...
iii)Lapse for want of acceptance S.6(b) LCA
• An offer may provide that it will remain open for
a specific period of time. In such case acceptance
must be effected within the time limit.
• The offer lapses after the fixed period of time.
Where no time is given an offer must be
accepted within the reasonable time.
• What is a reasonable time depends on the
circumstances of each case.
SR.KILATU-LSOSF
 iv)Death of the offeror or Insanity
• Where the offeror dies before the offer is accepted
and the offeree is aware of the death, it would
seem the offer lapses and becomes incapable of
acceptance.
• What happens if the offeree accepts the offer in
ignorance of the offeror’s death? The fate of the
offer will depend on the nature of the contract.
• An offer which involve personal services of the
offeror cannot be enforced but other offers may
survive, be accepted and carried out by personal
representative.
SR.KILATU-LSOSF
 Cont...
• The offer is terminated automatically and that
knowledge is irrelevant. In Bradbury v Morgans
(1862) 1H&C 249 is frequently cited as an
example that a continuing contract of guarantee
is enforceable against the estate of the
deceased guarantor where the acceptance of an
offer to guarantee fresh credit has been made in
ignorance of his death. However, the better
opinion is that, the death ipso facto terminates
the offer, provided the offer is one which could
have been revoked by the offeror.
• Read S.6(d) LCA SR.KILATU-LSOSF
 v)Failure of a condition precedent
• Where an offer is subject to fulfillment of
a condition precedent by the offeree
before acceptance, failure to fulfill the
condition precedent causes the offer to
lapse.S.6(C)LCA
• See Hyde v. Wrench (1840) 3 Beav 334

SR.KILATU-LSOSF
 ACCEPTANCE

• Acceptance is defined under section 2(1)b of

the Law of Contract to mean, the signification
of assent by the acceptor to the terms of
proposal.
• A person who accepted the proposal is called
promisee/ offeree.
• So response toward the offer is known as
acceptance. S.2(1)(c)

SR.KILATU-LSOSF
 Characteristics of acceptance

i)Acceptance must be made in response of an

offer in other word an acceptance in
ignorance of an offer is not valid acceptance.
• Acceptance should match exactly with the
terms of the offer i.e image rule. As in Stella
Masha v. Tanzania Oxygen Ltd (2001) T.L.R
In Lalman Shukla v Gauri Datt(1913)11 ALL LJ 489
• Facts: the defendant’s nephew disappeared from home.
Therefore the defendant told his house boy to make sure that
the boy is returned home. When the house boy moved out,
the defendant promised to giver Rs 501 to any person who
would find the boy but the house boy did not hear this.
SR.KILATU-LSOSF
 Cont...
• The house boy(plaintiff) found the boy and
returned him home as ordered by his boss,
and thereafter came to know about the offer
hence he sued employer for the reward.
• Held: the court held that, constitute a contract
there must be acceptance in response to an
offer and there cannot be such acceptance
unless there is knowledge of an offer

SR.KILATU-LSOSF
 Cont...
2) Acceptance must be made in exchange
of proposal
• A person may be aware of the offer but
may not accept it just for the other
factors not for the exchange for the offer.
In this case it is not the valid acceptance.

SR.KILATU-LSOSF
 Case: R v Clarke (1927)40 C.L.R 227

• Facts: The government offered a reward for anyone

who would volunteered the information leading to
arrest of the murder and free pardon to an
accomplice who would give the information
confession. Clarke an Accomplice on fear of his own
life gave the information which led to the arrest of
the murderer. He committed that, his only object to
give the information was to clear himself from charge
of murder and that he had no any intention of
claiming the reward at that time.

SR.KILATU-LSOSF
 Cont...
• Clarke was granted the free pardon;
however he thereafter sued government
for reward.
• Held; the court held that a valid
acceptance must be made with the
object of exchanging for an offer. Since
the plaintiff intended to clear himself off
a charge of murder and not getting
reward, he cannot get reward
SR.KILATU-LSOSF
 Cont...

3)Acceptance must be absolute and

unconditional
• The promisee must accept the terms of the
proposal exactly without any changing of
the condition by him.
• It is clearly stated under section 7(a) of
Law of Contract Act. That, in order to
convert proposal into promise the
acceptance must be an absolute and
unqualified.
SR.KILATU-LSOSF
 Cont...
• A conditional acceptance is an acceptance
which is associated with conditions. In the
eyes of law, it is not a valid acceptance but
amount to counter offer.
• Counter offer is the offer which varies the
terms of the origin offer; where the offeree
makes a counter offer the original offer is
deemed to have been rejected.
• A counter offer may either be rejected or
accepted by offeror.
SR.KILATU-LSOSF
 Case: Hyde v Wrench (1840) 3 Beav 334

• Facts: on June, the defendant (Wrench)

made an offer to the plaintiff (Hyder) to
sell farm for $ 1000. Then on 8th June
Hyder sent acceptance of 950$. On 27th
June Wrench informed Hyder that he was
not prepared to sell his farm for $ 950 .
• Later Hyder sent a letter accepting to buy
the farm for $ 1000 but wrench rejected
to sell it to Hyder.
SR.KILATU-LSOSF
 Cont...
• Therefore Wrench sued Hyder for breach
of contract.
• Held: The court held that, variation of
the price of the farm by plaintiff operates
as counter offer which has it rejecting the
original offer. Hence is not valid
acceptance to form contract.

SR.KILATU-LSOSF
 Cont..
• Suppose A has standard terms of sale and B has
his own terms of purchase and the terms are in
conflict, what is the legal consequence?
• In Arthur v. Coutchley (1968) WLR 811: 1967 All
ER 285 the plaintiff delivered a consignment of
goods to the defendant for storage, the delivery
note incorporated the plaintiff’s terms and
condition, the defendant stamped the note
RECEIVED UNDER(defendant’s) CONDITION, the
defendant handed over the goos. Was the
contract concluded? Under whose terms and
conditions?
SR.KILATU-LSOSF
 Cont...
• It was held that the defendant’s statement amounted
to a counter offer which the plaintiff accepted by
handing over the goods, therefore the contract was
concluded under the terms and conditions of the
defendant.
• Such conflict resulted into formulation of a rule called
the “last shot doctrine” which states that where
conflicting communication have been exchanged
(battle of forms) each being a counter offer but
ultimately a contract arises, it must be the last
document in the series that a contract is concluded
upon.
SR.KILATU-LSOSF
 Cont...
• However, the rule was later modified, it
is not necessary that who shot last has
the contract. Read the case of, Batler
Machine Tool Co. Ltd v. Ex-Cell –O Corp
(England) Ltd (1979) 1WLR 401

SR.KILATU-LSOSF
 Communication of Acceptance.

• S. 3 of Law of Contract Act. Provides that

acceptance must be communicated to the
offeror by an act or omission which has effect
of communicating it.
• In Entores v. Miles Far East Corp (1955) 2QB
327 it was held that where acceptance is
drowned out by an overflying aircraft such
that the offeror cannot hear the acceptance
then there is no contract, unless the acceptor
repeats his acceptance once the aircraft has
passed over. SR.KILATU-LSOSF
 When is Communication of Acceptance
Complete?
• S.4(2)(i) communication of acceptance is
complete as against proposer , when it is
put in course of transmission to him, so
as to be out of power of the acceptor.
• S. 4(2)(i) as against the acceptor when it
comes to knowledge of proposer.

SR.KILATU-LSOSF
 a) Communication to an agent
• An agent is a person appointed by another
(the principal) to act on his behalf, where an
agent is authorized to receive acceptance,
then communication to an agent is as good as
communication to the principal, But where
the agent’s authority is merely to transmit the
acceptance to the principal, there is no
acceptance untill transmitted to the principal.

SR.KILATU-LSOSF
 b) Conduct of the proposer
• Where by his conduct the proposer fails
to see the notice of acceptance of the
proposal he cannot disclaim liability on
the ground that it was not
communicated to him

SR.KILATU-LSOSF
c) In accordance with the terms of the proposal
• Where the proposer may either expressly or
impliedly intimate/ show the mode of
acceptance, and the offeree need to follow
the mode of acceptance intimated by the
offeror.
• In unilateral contract no advance
communication of acceptance is required,
performance of required act or service is
sufficient acceptance of the proposal as it was
in the case of Carllil v. Carbollic Smoke Ball
Co. (1893) SR.KILATU-LSOSF
 d)Postal rule for the Acceptance
• Contract Act does not provide for post rule.
• But under the common law post rule, where
an acceptor posts his letter of acceptance so
that the letter is out of his power, then the
proposer is bound but not acceptor himself.
• Thus, the contract is concluded as far as the
proposer concerned when the letter of
acceptance is posted.
• The acceptor is not bound until his
acceptance comes to knowledge of proposer
SR.KILATU-LSOSF
 Cont...
• Unlike under the common law position
the provision of the LCA gives an
opportunity to revoke his acceptance by
a speedier means before the acceptance
reaches the proposer.

SR.KILATU-LSOSF
 Cont...
• In Adam vs Lindsell(1818) 1 B& Ald 681
the Court said that where the acceptance
is communicated by post contract arises
on the date when the letter of acceptance
is posted in the dues course.

SR.KILATU-LSOSF
 e) Instantaneous communication
• This include communication by telephone,
telex or email, it entails communication that
are instantly made. Such communication are
always fast compared to snail mail or the use
of posted letters.
• Acceptance becomes complete when the
proposer receives a notification of acceptance
hence a contract concluded at the place
where acceptance is received.

SR.KILATU-LSOSF
SR.KILATU-LSOSF