Welcome to your foundational guide to Contract Law tailored specifically for law students in Tanzania.
In this comprehensive set of notes, we delve into the fundamental principles and concepts that underpin the law of contracts within the Tanzanian legal framework.
Specifically, these notes will cover;
- meaning of contract
- sources of contract law in Tanzania
- How a contract is formed
- elements of a valid contract
- classification of contract
- etc.
I will use examples, illustrations, and case laws to make these notes authoritative and easy to digest.
Let’s get Started!
Table of Contents
Meaning of contract
Section 2(1)(h) of the Law of Contract Act of Tanzania Cap 345 R.E 2019, (LCA) defines a Contract as an agreement that is enforceable by the Law.
I’m sure, that definition is still unclear.
What does it signify when we say that a contract is an agreement enforceable by the Law?
Well, this implies that for a contract to be considered as valid, it must meet all the requirements set by the Law.
These requirements include the essential elements of a Contract i.e. offer, acceptance, and consideration, and other elements as provided under Section 10 of the Law of Contract Act of Tanzania Cap 345. (more about this in the coming sections)
This brings us to the popular notion under Contract Law which states that;
“All contracts are agreements but not all agreements are contracts”
For an agreement to be considered a valid and enforceable contract, it must encompass the basic elements of the Contract as prescribed by the Law.
Imagine agreements as a larger circle and contracts as a smaller circle within it.
All contracts fall within the category of agreements, but not all agreements qualify as contracts.
For instance, let’s consider a situation where two friends agree to meet for coffee. This agreement constitutes an agreement because there is a mutual understanding between them. However, it does not meet the necessary requirements to be considered a contract under the law because there is no intention to create legal relations or enforceability by law.
On the other hand, if two parties agree to buy and sell a car for a certain price and both parties intend for the agreement to be legally binding, it meets the requirements to be considered a contract.
Here, the agreement satisfies all the essential elements of a contract, such as offer, acceptance, consideration, and intention to create legal relations, making it enforceable by law.
So, while all contracts are agreements, not all agreements rise to the level of contracts because they may lack the necessary legal intent or formalities required by law.
These elements are the essential factors that any contract must adhere to, and if any contract falls short of any of these elements then it is easy to say that such a contract is void ab initio and unenforceable.
Meaning that it cannot be considered to be a valid contract at all in the eyes of the Law. (Refer to Section 2(1) (g) of the LCA)
Before we have a look at the essential elements of a Contract, Let us discuss first what are the Sources of Contract Law in Tanzania.
Sources of Contract Law in Tanzania
The following are the sources of contract law in Tanzania.
Customary Law
Section 4 of the Interpretation of Laws Act, CAP 1 R.E 2019 defines Customary Law as
any rule or body of rules whereby rights and duties are acquired or imposed, established by usage in any African Community in Tanzania and accepted by such community in general as having the force of law, including any declaration or modification of customary law made or deemed to have been made under section 12 of the Judicature and Application of Laws Act, and references to “native law” or to “native law and custom” shall be similarly construed;”.
Also, Customary Law is recognized by virtue of section 11-12 of the Judicature and Application of Laws Act, CAP 358 R.E 2019(JALA) which is to the effect that customary law shall be applicable to, and courts shall exercise jurisdiction in accordance therewith in, matters of a civil nature.
The Application of Customary Contracts in Tanzania was also influenced by The Tanzania Order in Council of 1920, which required the governor when making Acts to respect the existing native laws and customs provided they were not opposing to justice and every court was called upon to respect customary laws.
Examples of customary laws were;
- Cory & Hartnoll, Customarily Law of the Haya Tribe of 1945.
- Sukuma Law and Customs of 1953.
- Law and Justice in Buganda.
In the light of the above definitions, customary Contracts are those contracts that are regulated or governed by customary law.
The applicability of customary law is also affirmed in several court decisions which have recognized the validity and legitimacy of customary law.
For example, in the case of MAAGWI KIMITO V. GIBENO WEREMA,[1985] TLR 132 where the Court of Appeal of Tanzania held that;
Customary laws of this country now have the same status as any other law subject only to the constitution and other statutory laws that may provide to the contrary
Statutes
This is another source of contract law in Tanzania.
In Tanzania, most of the general principles of Contract Law are provided in the LCA.
In fact, LCA acts as main legislation providing the legal framework relating to contracts.
It covers various aspects such as the definition of terms like proposal, acceptance, and consideration, as well as provisions regarding coercion, fraud, misrepresentation, and undue influence in agreements.
The Act also addresses the validity of contracts, including agreements in restraint of marriage or trade, mistakes in contracts, and the enforceability of contingent contracts.
Case Laws/Precedents
Various cases decided by the High Court, and the Court of Appeal have played a pivotal role in shaping the principles of Contract Law.
These cases serve as crucial sources of Contract Law, offering interpretations and establishing precedents that guide legal understanding and decision-making.
As a result, the decisions rendered by the courts not only resolve immediate disputes but also contribute to the development and evolution of Contract Law over time.
Common Law Principles
The Law of Contract Act (LCA) in Tanzania leaves some gaps in certain aspects of contract law, meaning it doesn’t address principles for all contract-related matters.
In such cases, the principles of common law of England regarding contracts apply.
Prof. Nditti, an expert in Contract Law, states in his book “General Principles of Contract Law in East Africa” that English common law, as modified by equity and acts of parliament, applies when the LCA is silent on specific aspects of contract law.
Additionally, he suggests that English cases decided based on common law can be utilized to interpret matters addressed in the Contract Act.
Common law principles are applicable in Tanzania by virtue of Section 2(3) proviso of JALA.
Elements of a valid contract
In Tanzania, the elements of a valid contract can be drawn from Section 10 of LCA which 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
From that section, the following elements may be drawn
- competent parties
- free consent
- consideration
- lawful object
Other key elements are always added as key elements for a valid contract i.e. offer and intention to create legal relations.
Let’s now discuss them one by one in detail;
Competent parties
Competent parties refer to individuals who have the legal capacity to enter into a contract. (Refer to Section 11 of the LCA)
Both parties must be mentally capable of understanding the nature and consequences of the contract they are entering into. This means they should not be mentally incapacitated due to factors such as insanity, intoxication, or mental illness.
Generally, individuals must be of legal age to enter into a contract. Means being 18 years old or older.
Minors (those under the legal age) are typically not considered competent parties unless the contract falls within certain exceptions, such as contracts for necessities. When this happens the guardian or parent will enter the contract on behalf of the minor,
If a person is entering into a contract on behalf of another party (such as a company or organization), they must have the legal authority to do so.
Ensuring that both parties are competent ensures that the contract is entered into with a clear understanding of its terms and implications.
It protects individuals from being unfairly taken advantage of and helps maintain the integrity of the contractual relationship.
Free consent
Free consent is an essential element of a valid contract, ensuring that the agreement is entered into willingly and without any undue influence or coercion.
Both parties must enter into the contract willingly and without any external pressure or coercion. They should not be forced, threatened, or manipulated into agreeing to the terms of the contract.
Free consent ensures that both parties enter into the contract freely, with a clear understanding of the terms, and without any unfair advantage or pressure.
Offer
An offer is one of the most important elements that form the foundational basis of any Contract.
Under The Law of Contract Act of Tanzania, the word “Offer” is used synonymously with the word “Proposal”. The Provision of Section 2(1) (a) of the LCA, defines an Offer or Proposal as;
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;
A person making an offer or proposal is known as an offeror or promisor, and a person reciprocating/receiving such proposal or offer is called an offeree or promisee. (Refer to Section 2(1) (c) of the LCA).
Think of an offer as an invitation to make a deal.
When someone makes an offer, they’re saying they’re willing to do something or give something in exchange for something else.
For example, if I offer to sell you my bike for Tsh 100,000 I’m saying I’m willing to sell you my bike for that price.
Now, for an offer to be a valid element of a contract, a few things need to be clear:
- It has to be specific: The terms of the offer should be clear and understandable. If I say, “I might sell you my bike for some money,” that’s not a clear offer.
- It should show an intention to be legally bound: In most cases, the person making the offer should genuinely want to make a deal that’s legally enforceable. If I offer to sell you my bike as a joke, it’s not a valid offer.
- It must be communicated: You need to know about the offer to be able to accept it. If I secretly decide to sell my bike to someone else without telling you, that’s not a proper offer.
So, in essence, an offer is like the starting point of a contract. It’s the proposal that one party makes to another, indicating their willingness to enter into a deal under certain terms.
read full notes: Offer and Acceptance in contract law notes & cases
Consideration
Consideration is an essential element of a valid contract.
In simple terms, consideration refers to something of value that is exchanged between the parties to the contract.
Generally, a proposal or offer does not suffice to make an agreement a Valid Contract.
This means that once an offer is made and such an offer is accepted, then we expect to acquire something from such an arrangement in order to conclude a Contract, and this something is what is called “Consideration”.
The Word “Consideration” originated from the Latin term “Quid Quo Pro” or “Quid Pro quo” which means “Nothing should be given for Nothing in Return”.
The Law of Contract Act of Tanzania does not specifically define the term “Consideration”, However, thanks to the Common Law Jurisprudence, the best definition of the term “Consideration” was born, in the case of Thomas V Thomas [1872] 2 QB 851, where it was held that:
“Consideration means something which is of some value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant but at all events it must be moving from the plaintiff”
Here’s a breakdown of what consideration entails:
- Exchange of Value: Both parties must give something of value to the other party. This could be money, goods, services, promises to perform certain actions, or refraining from certain activities.
- Bargained-for Exchange: The consideration must be the result of a bargained-for exchange, meaning that each party must have given something in exchange for what they receive. It’s like a mutual exchange or a “give and take” situation.
- Legal Benefit and Detriment: The consideration must involve a legal benefit to the promisor (the person making the promise) and a legal detriment to the promisee (the person receiving the promise). In other words, each party must receive something they consider valuable, and each party must give up something they value.
- Not Necessarily Fair or Adequate: The consideration doesn’t have to be equal in value between the parties, nor does it have to be fair or adequate. As long as there is some value exchanged, even if it’s minimal, the requirement of consideration is satisfied.
Generally, consideration is the exchange of something of value between the parties to a contract.
It distinguishes a contract from a mere gift or promise and ensures that there is a mutual exchange of benefits and obligations, forming the basis of a legally binding agreement.
Read the full guide about consideration in contract law here
Lawful object
The concept of a lawful object is an essential element of a valid contract, ensuring that the purpose and subject matter of the agreement are legal and not against public policy.
The object, or the thing being agreed upon in the contract, must be lawful. This means that the purpose of the contract cannot involve anything illegal or against the law.
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