Agreement Generated Rights and Obligations That May Be Enforced in the Courts

1.0.1 INTRODUCTION:

A contract may be defined as an agreement between two or more parties that is binding in law. This means that the agreement generates rights and obligations that may be enforced in the courts. The normal method of enforcement is an action for damages for breach of contract, although in some cases the court may compel performance by the party in default [1] .

1.0.2 THE CLASSICAL THEORY OF FREEDOM OF CONTRACT

Many of the principles of English contract law were developed in the eighteenth and nineteenth centuries under the classical doctrine of freedom of contract. By this theory the parties are free to enter into whatever transactions they wish with a minimum of interference by the courts or governments. However, once they have entered the agreement, they are strictly bound even if the contract turns to be a bad bargain for them. The law will intervene in the case of fraud, illegality or other legal wrong. The theory breaks down in the face of inequality of bargaining power and in the twentieth century the courts (through judicial decisions) and Parliament (through legislation) have intervened to protect weaker parties, such as consumers, tenants and employees [2] .

1.0.3 CLASSIFICATION OF CONTRACTS

The traditional classification of contracts is divided into deeds, simple contracts, bilateral and unilateral contracts [3] .

Deeds

The deed is of ancient origin and derives its validity from the form in which it is made. It must be in writing and must be signed, witnessed and delivered. Promises made by deed do need to be supported by consideration.

SIMPLE CONTRACTS

All other contracts may be classified as simple contracts, whether they are made in writing, orally or by conduct.

According to Professor David P Mellor OBE [4] , there is another way of classifying contracts according to whether they are bilateral or unilateral.

BILATERAL CONTRACTS

Here a promise by one party is exchanged for a promise by the other. The exchange of the promises is enough to render them both enforceable; thus, in a contract for the sale of goods, the buyer promises to pay the price and the seller promises to deliver the goods.

As its name implies is a contract between two parties whereby one party promises to buy and the other party agrees to sell

An example is the purchase of a motor car from an authorised dealer. In law it is the seller that is the legally obliged entity to offer a guarantee and not the manufacturer.

UNILATERAL CONTRACTS

Here one party promises to do something in return for an act of the other party, as opposed to a promise, for example where A promises a reward to anyone who will find his lost wallet. The essence of the unilateral contract is that only one party A is bound to do anything. No one is bound to search for the lost wallet, but if B, having seen the offer, recovers the wallet and returns it, he is entitled to the reward.

1.0.4 SALE OF GOODS

According to Professor David P Mellor OBE [5]

Advertisements of goods for sale are normally considered as invitations to buy

Invitations to tender are not normally considered as an offer to enter into a contract but merely a wish to consider bids from interested parties

Auctions are where parties are invited to bid; only the falling of the auctioneers hammer indicates sale is complete.

1.0.5 ELEMENTS OF THE LAW OF CONTRACT

There are three basic elements in the formation of a valid simple contract.

First, the parties must have reached agreement (offer and acceptance); Secondly, they must intend to be legally bound and thirdly, both parties must have provided valuable consideration.

1.0.6 OFFER

An offer may be defined as a statement of willingness to contract on specified terms made with the intention that, if accepted, there will arise a binding contract. An offer may be express or implied from conduct. It may be addressed to one particular person, a group of persons, or the world at large, as in an offer of a reward. The reading reward case is in the case of Carlil v. Carbolic Smoke Ball Co. CA [6] , where the defendants advertised that they would pay Pound 100 to anyone who contracted influenza after using their smoke ball for a specified period. The claimant contracted influenza after having purchased and used one as directed and claimed the reward. The defendants argued, inter alia, that it was impossible to contract with the whole world. This argument was rejected by the court and it was held that the advertisement constituted an offer to the world at large, accepted by the claimant, who was entitled to the Pound 100.

The above decision was relied upon by the Court of Appeal in Bowerman V. Association of British Travel Agents Ltd [7] , where it was held that the association had made a unilateral offer to prospective customers to provide protection in the event of the financial failure of one of its members. The offer was accepted by booking a holiday with an association member.

1.0.7 THE DISPLAY OF GOODS

According to Professor David P Mellor OBE [8]

the display of an article in a shop window with a price on it’ is deemed an invitation to treat

Under the law of contract shops are not bound to sell goods at the price indicated and a customer cannot demand to buy at this price.

1.0.8 ACCEPTANCE

Acceptance may be defined as an unconditional assent, communicated by the offeree to the offeror, to all terms of the offer, made with the intention of accepting. Whether an acceptance has in fact occurred is ascertained objectively from the behavior of the parties, including any correspondence that has passed between them [9] .

1.0.9 ACCEPTANCE MUST BE UNCONDITIONAL

The offeree must accept the exact terms proposed by the offeror unconditionally; that is without introducing any new terms which the offeror has not had the opportunity to consider. The introduction of new terms is referred to as a counter offer and its effect in law is to bring to an end the original offer. For example, in Hyde v. Wrench [10] where the defendant offered to sell a farm to the claimant for Pound 1, 000. In reply, the claimant offered Pound 950. This was rejected by the defendant. Later, the claimant purported to accept the original offer of Pound 1000. It was held there was no contract; the counter offer of Pound 950 had impliedly rejected the original offer which was no longer capable of acceptance.

2.0.0 BATTLE OF THE FORMS

The counter offer analysis has been applied to the so called battle of the forms where one party, A, makes an offer on a document containing his standard terms of business and the other party, B accepts on a document containing his (conflicting) standard terms. At this stage, there is clearly no contract, although the courts have held that if B”s communication is acted on by A, for example by delivery of goods, a contract may come into being on B”s terms on the basis that his counter offer has been accepted by conduct [11] .

2.0.1 ACCEPTANCE OF TENDERS

According to Professor David P Mellor OBE [12]

The tender document is an invitation which is considered as an offer. Acceptance of an invitation does not always result in a contract

If the tender invites for the acceptance of the delivery of a certain amount of goods on a certain day and acceptance is received in writing then this is a contract

If the amount and time for delivery is not defined then this does not constitute a contract.

2.0.2 METHOD OF ACCEPTANCE

If the offer prescribes a particular method of communicating acceptance and makes it clear that no other method will suffice, then there may be no contract if a different method is used. If, however, a method is prescribed without it being made clear that no other method will suffice, then it seems that an equally advantageous method would suffice. In Tinn v. Hoffman [13] , it was said that if the offeree was requested to reply by return of post then any method which would arrive no later than return of post would do. According to Professor David P Mellor OBE [14] the followings are the methods of acceptance:

By snail mail

By email

By facsimile

By telex

Both parties must agree on the method and normally a contract becomes legally binding when both have signed the contract.

2.0.3 SETTLEMENT OF THE CONTRACT

Sections 10 and 11 of the SOGA deals with the ascertainment of price. Section 10 deals with both sales and agreements to sell while section 11 applies only to agreements to sell. Section 10 (1) states that:

“The price in the contract of sale may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties.”

Only if the methods in section 10 (1) of the SOGA do not result in a price being determined does section 10 (2) of the SOGO come into play and provides that the buyer must pay a reasonable price. What is reasonable price is a question of fact dependent on the circumstances of each particular case.

In relation to the determination of the price under section 10 of the SOGA, most of the problems have concerned transactions where the price has not been specifically agreed but is left for determination at some later time. Price, however, is one of the most important elements of a contract of sale and vagueness or uncertainty on this point might well suggest that there has been no concluded contract. In a Tanzanian case of Alfi East Africa ltd V. Themi industries & Distributor Agency Ltd [15] the issue of uncertainty in price was discussed by the Court of Appeal of Tanzania. In that case, Kwast an employee of the appellant company entered into an agreement on behalf of the appellant with the respondent company. According to the terms of the agreement all advantages were on one side, in favour of the respondent. Two copies of machinery specifically ordered by the appellant for itself were diverted to the respondent by Kwast under the agreement. The respondent was to pay the price of the machinery which price was not mentioned, nor was a method of calculating it agreed upon. When Kelner, a Director and Principal Shareholder of the respondent came to know about this he had the Board of Directors cancel the agreement. The respondent then claimed special and general damages from the appellant for breach of contract. The trial judge held, inter alia, that there was no evidence of fraud nor was the agreement unascertain as regards the price of machinery. On appeal to the Court of Appeal of Tanzania the holdings of the trial judge were attacked. It was argued that the agreement was void for uncertainty and that it was fraudulent. It was held that price is a fundamental matter in an agreement of sale, and as there was no agreed price there was no agreement; and hence in terms of section 29 of the Law of Contract Act [16] the agreement was void for uncertainty. It was also held that the agreement was unenforceable and void on the ground that it was fraudulent as a result of a conspiracy between Kwast and Themi, the respondent.

It is interesting to note that the agreement in Alfi’s case (above) was an agreement of sale but the Court of Appeal did not apply the relevant provisions in the SOGA. Since the question was one of price for goods sold one would have expected the Court of Appeal to examine the relevant provisions in the SOGA i.e. section 10 which provides for ascertainment of prices, but was not discussed by the court. The Court of Appeal was also unaware of paragraph (e) of the agreement of sale which appeared to have provided for the mode of payment of the imported moulds and machines. Paragraph (e) stated:

“That payment for the imported moulds and machines by the first company (Alfi) on behalf of the second company Themi) will be made by way of deducting directly the cost of manufactured products supplied by the second company without interest. In the event of the manufactured products failing to satisfy the cost of the imported moulds, the second company shall bind itself to pay the outstanding amount from its other sources.” [17]

Section 10 of the SOGO allows prices to be fixed by the contract or later i.e. after conclusion of the contract either by a manner agreed by the parties or by the course of dealing between the parties. In the Alfi’s case (above), however, while paragraph (e) of the agreement provided for the mode of payment of the price [18] the price itself had not been fixed nor had the parties agreed on the manner of fixing the price in future and no course of dealing between the parties which could determine the price in future. Were the seller to claim for the price of the moulds and machines the court could have fixed a reasonable price. But Alfi sought to have the agreement void and wanted the return of machines or their value.

2.0.4 THE LIABILITY OF EACH PARTY TO THE CONTRACT

A contract is a voluntary agreement between two or more parties [19]

Liability may include reasonable exclusions & limitation of liability. A limitation clause does not completely absolve a party from liability but instead places a limit, a ceiling, on the maximum liability. For example, in Ailsa Craig Fishing v. Malvern Fishing [20] (another spectacular Securicor case) a limitation clause limited liability to Pound 1,000, so that the damages could be less than but not more than Pound 1,000 (even though the actual loss caused was assessed at Pound 55, 000).

Excluding liability for negligence and fraud. A particularly strong line is against clauses which seek to exclude liability for negligence. The rationale behind this is that the parties generally want and expect each other to take reasonable care and so very clear wording is necessary to exclude liability for negligence. It is one thing to exclude my strict liability under the contract which would otherwise be imposed whether or not I was at fault but quite another to deny my liability to compensate one even if I have been negligent. The Privy Council provided some guidance in Canada Steamship Lines v. The King [21] the effect of which can be summarised as follows:

(a) Does the clause expressly exempt from negligence, in which case it is effective, or

(b) Are the words wide enough in their ordinary meaning to cover negligence, in which case the clause may still be effective, unless

(c) There is some head of damages other than negligence (not fanciful or remote) which the words could be construed as applying to rather than to negligence.

Contractor carries unlimited liability for negligence (causing death to another person, or damage to another’s property)

Contractors bound by legislation (Health and Safety at Work Act, Employers Liability Act, Occupiers Liability Act, Visitors Act [22] .

2.0.5 RESOLUTION OF CONTRACT BREACHES

Some terms are so fundamental to the purpose of the contract that it is almost inconceivable that the parties could have agreed to exclude liability for their breach. Lord Roskill in The TFL Prosperity [23] confirmed that the courts will rarely conclude that the parties intended to exclude liability for a fundamental breach. He said that the charter in that case virtually ceases to be a contract for the letting of the vessel ‘if the exclusion clause is interpreted so that fundamental terms could be breached without financial redress.

2.0.6 THE POSITION IN TANZANIA ON OFFER AND ACCEPTANCE

The term contract is defined in Section 2(h) of the Law of Tanzanian Act [24] , (here in after referred to as LCA), as follows:

An agreement enforceable by law is a contract:

Thus for the formation of a contract there must be-

An agreement, and

The agreement should be enforceable by law

Agreement is defined as every promise and every set of promises forming the consideration for each other [25] . And a promise is defined as an accepted proposal. Section 2(b) says that:

“A Proposal, when accepted, becomes a promise”

The above words are another way of saying that an agreement is accepted proposal. The process of definitions comes down to this:

A contract is an agreement, an agreement is a promise and a promise is an accepted proposal. However, to conclude every agreement, in its ultimate analysis, is the result of a proposal from one side and its acceptance by the other.

2.0.7 PROPOSAL OR OFFER

A proposal and its acceptance is the universally acknowledged process for the making of an agreement. The proposal is the starting point. Section 2(a) defines proposal as follows:

“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 proposal”.

The person who makes the proposal is called the promisor or offeror, the person to whom it is made is called the proposee or offeree and when he accepts it, he is called a promisee.

However, in view of the above definition, a proposal is in the first place an expression of the offeror”s willingness to do or to abstain from doing something. And secondly, it should be made with a view to obtaining the assent of the offeree to the proposed act or abstinence.

2.0.8 ACCEPTANCE

Section 2 (b) defines acceptance as follows:

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said

to be accepted. A proposal, when accepted, becomes a promise.

Thus, acceptance is the assent given to a proposal, and it has the effect of converting the proposal into promise.

2.0.9 ACCEPTANCE OF GOODS (SECTION 37 OF THE SOGA).

Section 37 of the SOGA is a ‘longstop’ provision. In any case, where property does not pass under sections 18 – 21 of the SOGA, it must finally pass on ‘acceptance’ of the goods by the buyer within the meaning of section 37. Under section 37 the buyer is deemed to have accepted the goods when, after he intimates to the seller that he has accepted them or when the goods have been delivered to him and he has had reasonable opportunity to examine the goods, either he does any act in relation to the goods which is inconsistent with the ownership of the seller; or after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them. The buyer loses his right to reject the goods when he accepts them. The buyer does not lose his right to reject the goods merely because the property has passed. If the goods delivered in fact are of the wrong quantity or description or quantity conditions stipulated in sections 15-17 of the SOGA, the property in the goods will revert to the seller. [26]

3.0.0 THE LEGAL INFRASTRUCTURE OF TANZANIA AND UNITED KINGDOM

Both have the sale of goods Act which governing investments and commercial transactions for example in Tanzania Mainland the law that governs investments and commercial transactions is called SOGA that is the Law relating to Sales of Goods Act.

This law known as the Sale of Goods Act [27] , deals, among other things, with the law relating to passing of property, risk and frustration in domestic sale of goods transactions in Tanzania Mainland.

Also, the Law of Contract Act of Tanzania also serves the buyer and seller to some extent especially under section 29 of the LCA, which provides that there will be no contract when one among the element is lacking such as a price in any agreement of sale.

The same applies to United Kingdom. The modern law of sale of goods is therefore now contained in the 1979 English SOGA which replaced and repealed the 1893 SOGA.

The followings are the Acts which are also applicable to United Kingdom:

Supply of Goods & Services Act 1982

Consumer Protection Act 1987 based on EC Directive 85/374

Sale & Supply of Goods Act 1994

Enterprise Act 2002

However, in Tanzanian the law regarding to sellers and buyers is not adequate enough to save the buyers and sellers because some of the Acts are not provided in Tanzania. There is a legal gap in the following laws:

Supply of Goods & Services Act 1982

Consumer Protection Act 1987 based on EC Directive 85/374

Sale & Supply of Goods Act 1994

But it should be noted that when the law is silence in Tanzania, the court must resort to the Common Law principles. In the case Tanganyika Garage Ltd v Marceli G.Mafuruki [28] It was said “where the circumstances of a conetract are not provided for in the codified law of contract in Tanzania, one must fall back on the English common law”

3.0.1 THE BENEFITS OF CISG

Firstly, let us know what is known by the above term CISG (contracts for the international sale of goods). Is a multilateral treaty which aims to create uniform international law of sale of goods [29] .

The CISG has various areas where it can be applicable. According to Professor David P Mellor OBE [30] CISG are applied on the following:

(a) When parties to a contract are based in different countries

(b) When contracting parties apply International private law

(c) When goods to be supplied in one country are manufactured in another

The CISG covers the following Areas(professor mellor) [31] supra

-The obligation of the buyer and seller, Delivery, Risk and payment, Delivery of goods, Conformity of goods, Damages and Reclamation of goods,

The CISG features as a result in an increasing number of contractual disputes. [32] Contracts for the sale of goods include those for goods to be manufactured and “mixed” contracts for the delivery of goods and the provision of services, as long as the provision does not make up the predominant part of the contract [33]

According to Herbert Smith in association with Gleiss Lutz and Stibbe [34] the CISG has various advantages where parties to a contract are both signatories to the UN agreement and covers the following areas:-

The CISG has been applauded as a fair and balanced regime which is in with business expectations. One might ask, why should countries choose the CISG to govern their contracts rather than their own national law which they are familiar with? The real advantage is when a party for one reason or another is not in a position to negotiate a contractual choice of its domestic law, or to be governed by the domestic sale of goods law of the state of its counterpart. In such a case, the CISG may turn out to be a good and neutral compromise which both parties can accept. The CISG also removes inconsistency of contracts governed by scores of different laws with certainty of CISG regime [35] .

3.0.2 COMPARISONS BETWEEN CONTRACTS OF EMPLOYMENT IN TANZANIA AND CONTRACTS OF EMPLOYMENT IN THE UNITED KINGDOM.

In principle, legal principles and policies in East Africa are basically the same since all of the East African states that is Kenya, Uganda and Tanzania were all in one time under the British protectorate as the result they all use the same Common law legal system in their jurisdictions. This part however will concentrate to show the comparisons between the two countries that is United Republic of Tanzania (URT) and United Kingdom (UK).

Both Under United Kingdom and the United Republic of Tanzania, there is a provision of law which deals with the written statement of particulars for example in the United Kingdom the following are some of the information that must be given to employees individually [36] :

The identity of the parties

The date on which the employees period of continuous employment began (taking into account any employment with a previous employer which counts towards that period).

The scale or rate of remuneration, or the method of calculating remuneration, and the intervals at which remuneration is paid. Though the world remuneration is not defined in the statute and out to be regarded as including all financial benefits.

Any terms and conditions relating to hours of work and normal working hours.

The place of work, or if the employee is required or permitted to work at various places an indication of the employers address

The title of the job or a brief description of the employees work

The same applies to Tanzania; the Act [37] provides the same that Subject to the provisions of subsection (2) of section 19, an employer shall supply an employee, when the employee commences employment, with the following particulars in writing namely-

(a) name, age, permanent address and sex of the employee;

(b) place of recruitment;

(c) job description;

(d) date of commencement;

(e) form and duration of the contract;

(f) place of work;

(g) hours of work

(h) remuneration, the method of its calculation, and details of any benefits or payments in kind and;

(i) any other prescribed matter

Also, the provisions of the law look the same both under the United Kingdom and under the United Republic of Tanzania on the issue of Public Holidays . In United Kingdom [38] , Employees are entitled to be paid if holidays are taken in accordance with the terms of their employment accrued. Holiday entitlement should be calculated by dividing the annual salary by the number of working days [39] . In Tanzania [40] , if an employee works on a public holiday specified in the Public Holidays Ordinance, the employer shall pay the employee double the employee’s basic wage for each hour worked on that day.

Sick Leave. Sick-leave entitlements vary from job to job, and there are different sick pay schemes in operation. Under United Kingdom they have arranged statutory sick pay and Contractual/Company sick pay. Statutory sick pay is the minimum amount an employer must pay one by law when one is off sick. One needs to be earning Pound 95 before tax and NI in order to qualify. Payment is Pound 79.15 pw for up to 26 weeks, but this doesn’t kick in until the fourth day of one sick leave.

Contractual/ Company sick pay. Ones employer may offer a contractual sick pay scheme that goes beyond the legal minimum. A typical scheme usually starts after a minimum period of service for example, a two or three month probationary period. In Tanzanian Act [41] an employee shall be entitled to sick leave for at least 126 days in any leave cycle. The sick leave referred to in subsection (1) shall be calculated as follows:

(a) the first 63 days shall be paid full wages

(b) the second 63 days shall be paid half wages

(3) Notwithstanding the provisions of subsection (2), an employer shall not be required to pay an employee for sick leave if-

(a) the employee fails to produce a medical certificate; or

(b) the employee is entitled to paid sick leave under any law, fund or collective agreement.

Both Act