Contract Law-assignment

Valid contracts are contracts of which the entire elements essential to forming a legal contract are
present. Enforceable contract is a contract that can be enforced in the court of law. An enforceable
contract must always be valid. A valid contract may however be unenforceable. That is even
though all of the essential elements of a contract are present a court will not enforce the contracts.
Example, an oral contract may be valid but the court will not enforce it because that specific type
of contract is required to be in writing under the state’s law (Example, contract of guarantee,
contract of sale/purchase of land. The contract between Akwasi and Kofi is valid because it
constitutes all the essential elements that make a contract valid (offer and acceptance,
consideration, intention to create legal relations and capacity). The contract is also enforceable
because it is not contrary to the laws of the state .The essential element of a valid contracts are
briefly discussed below.
Agreement: This comprises offer and acceptance. An offer is a firm proposal by a party (offeror)
to another party (offeree) by which the offeror promises to do, give or forbid from doing something
if the offeree accepts it leading to a valid agreement.
In the case of Akwasi and Kofi, Akwasi made a firm proposal to Kofi to build an extension to
Akwasi's house within a stipulated time (by the end of June). Acceptance is when the offeree
assents to the firm proposal of the offeror. Kofi agreed to build an extension to Akwasi's house.
But later, Kofi modified the offer by asking Akwasi to increase the labour cost component to GH₵
10,000.00 or not to do the job at all. Capacity: this is the legal ability of a person to enter into a
valid contract. Generally, everybody has the ability to enter into a contract. However, the law
exempts some category of people from entering into a contract.
These people are minors, the insane, intoxicated persons and enemy aliens. A person may have
limited capacity, full capacity or no capacity.
In the case of Akwasi and Kofi, since neither Akwasi nor Kofi falls under the listed category of
people who cannot enter into a contract, both Akwasi and Kofi have full capacity to contract.
Legality: it is an implied warranty that an act, agreement or contact strictly adhere to the statutes
of a particular jurisdiction. In the case of Akwasi and Kofi, the terms of the contract were not
contrary to the laws of the state.
In Fueret v Williams [1725], an agreement was formed between two highwaymen to rob a coach
and swag. After the robbery, one of them went away with the proceeds and the other sued. The
contract was (predictably) held to be illegal.
In our case, constructing extensions to a building is not against the laws of the state.
Consideration: this is the price (as in money, act, forbearance, profit, detriment) paid by one party
to secure the obligation by the other party. In the case of Akwasi v Kofi, there was mutual promise
between them. There was executed and executory consideration. The consideration on the part of
Kofi was executed (Kofi built the extension) consideration on the part of Akwasi was executory
(Akwasi is yet to pay the remuneration). As in the case of Lartey v Bannerman [1976]
Intention to create legal relation: Parties intend to create legal relations when the terms and
conditions of the contracts is legally binding on the contractual parties and when a party breaches
the contracts, he can be sued by the other party. It means the parties intend to create legal rights
and duties out of their agreement, thus to invoke the assistance of the ordinary courts on breach of
the contract. In the case of Akwasi and Kofi, there was a commercial agreement between the
parties. For commercial agreement there is a rebuttable presumption that the parties intend to create
legal relations. For commercial agreements one of the parties expect to make some commercial
gain, often money, provided that such contracts is made in a fair way .Thus it is reasonable that
the law will support the agreement. In the case of Akwasi v Kofi, there was an agreement that Kofi
will receive GH₵10,000 for labour and pay for the price of the building materials in exchange to
build the extension to the house of Akwasi within a stipulated time- June ending. However, Kofi
could not complete the extension within the stipulated time which confers rights of Akwasi to sue
him for breach of contracts.
The doctrine that pre-existing duty is unenforceable.
Kofi owes an existing duty to perform the contract as agreed by the parties. According to the
common law, the performance of pre-existing duty owed to the promisor is not good consideration.
As it stands in the case, Kofi has not provided any additional consideration that will induce Akwasi
to increase the amount for labor. Besides, Akwasi will not receive any additional benefit except
the benefit he has received in the earlier agreement. In the case of Stilk v Myrick [1809], the court
held that the claimant was under an existing duty to perform his part of the contract. Therefore, he
has not provided any consideration for the promise for extra money
Akwasi could also argue that he agreed to Kofi’s modification under economic duress.
There was a threat of breach of contract when Kofi said that if Akwasi does not agree to the
increment, he will terminate the contract. Since Akwasi wanted his family to occupy the extension,
he ‘reluctantly’ agreed to the new modification by Kofi.
Agreement entered into under economic duress are unenforceable. In the case of North Ocean
Shipping Co. Ltd v Hyundai Construction Co Ltd [1979], the defendant threatened to terminate
the contract if an increment he was seeking is not paid. It was held by the court that the plaintiffs
had entered into the agreement under duress.
Akwasi can argue on the principle of breach of contract.
There was a breach of contract when Kofi failed to complete the contract on the agreed date. When
there is an actual breach by one party, the aggrieved party can rescind the contract, sue for damages
or monetary compensation, sue upon quantum meruit, sue for specific performance of the contract,
sue for injunction or restitute of benefit. Based on the principle of suit for compensation, Akwasi
reserves the right to receive the payment of GH₵ 3000. Compensating Akwasi therefore brings
him to the position he would have been if Kofi had performed the contract on time. In the case of
Hadley v Braxendale [1854], the court held that damages available for breach of contract include
those which may be fairly considered arising naturally from the breach of the contract.
The doctrine of promissory estoppel.
Kofi can base his argument on the doctrine of promissory estoppel. This doctrine is used when a
party relies on a promise made by another party to his/her detriment. Kofi relied on the promise
made by Akwasi to pay the GH₵1000 and that promise moved Kofi to perform his part of the
contract. It can also be said that the promise was significant enough to cause Kofi to discharge his
side of the contract. In the case of Central London Property Trust Ltd. v High trees house Ltd
[1947], the court based on promissory estoppel, the court held that Central London cannot go back
on his earlier promise because it has been relied upon by High street house ltd.
B. (a) Freedom of contract means parties are at liberty (free and willing) to enter into any
agreement that they so wish. Parties are free to select whom they wish to undertake transaction
with and the nature and terms of those transactions. Contracts cannot be imposed on parties. Forced
contracts are vitiated and cannot be enforced. Example, contract made under duress or undue
influence. The limitations are that:
Contracting parties must have capacity to contract
The transaction must be legal
(b). Sanctity of contract: The law is concern with the free will of the parties and not with the
fairness of the contract. Contract freely entered into by parties are treated as sacred ( pacta sunt
servanda ). The court uphold base on this principle:
Where the parties have freely agreed on terms, the court must respect the terms.
The court must not substitute terms freely entered by parties themselves.
The principle of sanctity of contract is not a license for fraud or to deceive illiterate and the blind
and these persons are protected by law from exploitation.
(c). Contracting parties beware literally places the buyer on notice, it implies generally to all
contracting parties. Each contracting party must fend for himself. Each party must satisfy himself
about the identity and credit-worthiness of the other party; about the existence, fitness, and quality
of goods; about the usefulness of land; about the quality of service, and so forth.
Case: Lisnave Estaleiros Navais SA v Chemikalien Seetransport GmbH. 2013
(d). Intolerance of fraud: The law abhors fraud, deceit and dishonesty. Intolerance of fraud is
underlined by the Latin Maxim Fraud Omni Vitate The court uphold intolerance of fraud based on
these principles:
Fraud is a vitiation factor
Limitation period for an action tainted with fraud is reckoned from the date of discovery
and not the time the contract was breach.
(e). Contra proferentum rule is a rule which states that any clause considered to be ambiguous
should be interpreted against the interests of the party that requested that the clause be included.
The rule guides the legal interpretation of contracts, and is typically applied when a contract is
challenged in court. The contra proferentum rule is designed as a sort of punishment for a party
that intentionally introduces vague language into a contract.
C. A contractual term refers to the exact undertakings that the contractual parties have agreed to
carry out under the agreement. Each term gives rise to a contractual obligation, breach of which
can give rise to litigation. Contractual terms can be sub-divided into two, namely conditions and
warranty. Contractual terms deals with four main issues;
Which terms are incorporated into the contract
How are the terms of the contract to be interpreted
Whether terms are implied into the contract
What controls are placed on unfair terms.
Contract terms are any provisions forming part of a sentence while mere puff is a
statement of fact which does not amount to a term of the contract but is one that the
maker of the statement does not guarantee is truth.
Also, a condition is stipulation essential to the main purpose of the contract, the breach
of which give rise to a right to treat the contract as repudiated where as a warranty is a
stipulation collateral to the contract, the breach of which gives rise to a claim for
damages but not to a right to reject the goods and treat the contract as repudiated.
D. Treitel defines offer as “an expression of willingness to contract on certain terms, made with
the intention that it shall become binding as soon as it is accepted by the person to whom it is
addressed”. In other words, Offer is a promise in exchange for performance by another party. An
offer can be revoked or terminated under certain conditions.
The components of an offer are
Definite terms.
E. (i). An exemption clause is a term incorporated into a contract by the contracting parties to
abridge their rights and / or limit their liabilities to each other.
(ii)There are four main types of exemption clauses, these are;
Litigation – limiting clauses: commercial people would rather not go to court.
Contracts may legitimately contain clause that postpone litigation till after other
specified dispute-resolution methods have been unsuccessfully resorted to. In fact,
courts themselves encourage disputants to endeavor an amicable out-of-court
settlement, and in the light of such a contractual provision, the court may stay or
adjourn proceedings for the contracting parties to first exhaust the specified dispute
resolution mechanisms such as conciliation, negotiation, mediation and arbitration.
In Neequaye v Ghana Film Industry Corp [1992-93] an action was dismissed
because the grievance procedures set out in the collective agreement were not
followed. But if the contract seeks to oust the jurisdiction of the court, it is void and
will be ignored by the court. Courts are the ultimate and final forum to settle
disputes. No contracts can firmly and permanently close the doors for the
contracting parties to the court.
Liability – limiting clauses: contracting parties, or any of them, may, by employing
these clauses seek to limit or exclude their contractual liability to the other in the
event of breach by that party. Exemption clauses that seek to limit liability are often
used in contract of storage (bailment) and carriage (rail, road, sea or air). They are
also quite popular in standard-form contract; and they may be employed to limit
professional liability. In Ashitey v Ghana Industrial Holding Corporation [19891990], it was held that a bailee might exempt himself from a common law liability
by special terms in the contract but the exempting words must be express,
unambiguous and adequate in all of the circumstances. Where a bailee contended
that he was exempted from liability by virtue of an exemption clause, the onus was
him to show that his case fell within the exemption clause of the contract.
Furthermore, an exemption clause had to be brought to the notice of the party
against whom it is sought to be relied, particularly an illiterate party, in which case
the exemption clause and its effect must be interpreted to the illiterate party in the
language he understands.
Implied term-modifying clauses: these types of exemption clauses seek to exclude
the operation of term that would otherwise be implied by legislation. The typical
wording used in legislation is “subject to any agreement to the contrary by the
parties, the following provisions shall apply” and then the applicable terms are
enumerated. If wording to this effect is used, then, obviously, the parties are at
liberty to contract out of the regime implied by law. In fact, the provisions that are
implied by law touching on, say, mortgages, conveyances, hire-purchase
transactions, and the sale of goods all permit parties to vary the implied terms. In
Bartholomew & Co Ltd v Adu-Gyamfi [1962], Korsah CJ said that it is settled in
court that there are certain terms implied in hire-purchase agreements. His Lordship
then enumerated some of the implied terms and then continued.
“All the implied terms however are subject to the express terms of the
agreement and within limits they may therefore be excluded or modified if
apt words are used provided the party relying on such exempting clause
carries out his contract in its essential respect, in other words, he does not
commit a breach fundamental to the terms of the contract”.
Restrictive covenants: restrictive covenants are typical in employment contract
where they are intended to protect the employer by minimizing competition by
(former) employees. In a typical employee’s restrictive covenants an employee will
be made to agree with his employer not to operate in a competing business in the
employer’s catchment area for a period of time, say 5years.
(iii) The main rules that governs the construction of exemption clauses are:
The reasonable clause rule. The law detests unreasonableness. However, what is
unreasonable is always determined by the court. If a contractual provision is unreasonable
the court will remove such clause and interpret the remainder as if there exists no such
remainder. In the case of Stag Line Ltd v Tyne Ship Repair Group Ltd [1984], Staughtong
J found the exclusion to be unreasonable
The repugnancy rule- Under this rule, a court can strike out an exemption clause which is
inconsistent with or repugnant to the main purpose of the contract. J Evans & Sons
(Portsmouth) Ltd v Andrea Merzario Ltd [1976]
The contra proferentem rule- If there is any ambiguity or doubt) as to the meaning of an
exemption clause the court will construe it contra proferentem, i.e. against the party who
inserted it in the contract. Very clear words must be used before a party will be held exempt
from liability in negligence. Example, White v John Warwick & Co Ltd [1953]
The four corner rule –This rule makes exemption clause valid only if the party seeking to
rely on them is operating within the scope of the contract. A contracting party is not
permitted to deviate from or break a contractual obligation and they seek to rely on
exemption clause. This doctrine functions as an estoppel.
Question 2
The issues which arise in this problem are invitation to treat, counter-offer, the status of promise
to keep an offer open, revocation and the postal rule.
An offer is a definite promise to be bound provided that certain specified terms are accepted. If
offeror does not intend to be bound but he is merely feeling his way toward an agreement, or is
initiating negotiations from which an agreement might or might not result, the there is no offer.
This constitutes an invitation to treat.
Advertisements, as it happens in this case, are not offers but invitations to treat. In Partridge v
Crittenden [1968], the defendant placed an advertisement in a newspaper which stated
"Bramblefinch cocks and hens, 25s each". He was convicted of the offence of offering for sale a live
wild bird. His conviction was quashed on appeal, where the court held that advertisements were
merely invitations to treat so that he could not have committed the offence of "offering for sale".
Therefore, the advertisement made by Geku in the local newspaper was an invitation to treat but not
an offer
Although as general rule advertisements merely constitute invitations to treat, it is possible for some
advert to be treated as an offer, if the court feels that the offeror showed an intention to be bound
(Carlill v. Carbolic Smoke Ball Co[1892]).
When an offeree fails to accept the exact terms of an offer, it constitutes a counter-offer which destroys
the initial offer. In Hyde v. Wrench [1840] the defendant offered to sell his farm for £1,000. The
plaintiff agreed to buy, but at £900. A few weeks later the plaintiff accepted the offer of £1,000. The
court held that there was no contract. By stating he would buy the farm for £900 the plaintiff had
made a counter-offer, which destroyed the original offer so that it could no longer be accepted. There
was a counter offer because Geku did not accept the offer of GH₵367000 from Jim.
An offeror is entitled to revoke his offer at any time prior to acceptance. Even if the offeror promises
to keep his offer open for a certain period, he is still entitled to revoke. In Routledge v. Grant [1828]
the offeror promised to keep his offer open for six weeks but revoked after three weeks. The court
held that he was entitled to do so. An offeror's promise to keep his offer open is not legally binding
because it is unsupported by consideration. If the offeree provided even a nominal consideration (e.g.
£1) for the promise to keep the offer open, then the offeror cannot revoke. Geku’s promise to keep
the offer open until noon on Friday is not binding since Jim did not provide consideration. Geku is
entitled to revoke the offer before noon on Friday.
It is essential for revocation to be communicated to the offeree but the postal rule does not apply to
revocation. A letter of revocation does not take effect until the letter has been received. Revocation
need not necessarily be communicated by the offeror. In Dickinson v Dodds [1876] the defendant
offered to sell his house to the plaintiff, and promised to keep the offer open for two days. The
following day a third party told the plaintiff that the defendant had sold to someone else. The plaintiff
immediately purported to accept the offer. The Court of Appeal held that the offer had been validly
revoked and could not therefore be accepted by the plaintiff. The validity of the revocation is
dependent on Garett’s loyalty. If he were loyal, then revocation is valid. However, if Garett were not
loyal, then the offer would not have been revoked on Wednesday night. Acceptance would have been
possible immediately Jim posted the letter (postal rule of acceptance).
In conclusion, the outcome of this case depends on Garrett. If he was loyal, the offer was revoked on
Wednesday evening. However if he were not loyal, then a contract came into existence between Jim
and Geku.
Question 3
Issues identified in the case are invitation to treat (display of good with price tags on a shelf), duty
of care and reasonableness of actions against standards
An invitation to treat is where a person holds himself out as ready to receive offers which he may
either accept or reject. An example is the display of goods with price tags attached to them in a
shop or on a supermarkets shelf, Advertisement, brochures and catalogues. Example of such case
is Fisher v Bells ltd [1960]
Negligence is performing below the standard required of an individual. Every one owe a duty of
care to each other .when there is no reason in the action taken or it does not conform to set
standards, there is a damages to be suffered by the culprit as established in cases example Howard
Marine And Dredging Co Ltd V A Orgden & Son (Excavation Ltd [1978] And Esso
Petroleum Co Ltd v Mardon [1976]
The items in the shop of had price tags on them which clearly shows an invitation to treat by Mr.
Brainoo. See Fisher v Bells (1960). Before Mr.Goerge sends the items to the counter to make the
offer Mr brianoo stop him and saying the goods were to be used for advertisement.In the case of
Pharmaceutical Society Of Great Britain v Boots Cash Chemist Southern Ltd (1953), the
court held that when the goods was sent to the counter it hen was the offer made and the cashier at
the counter accepting the amount showed acceptance. Here there was an offer but no acceptance
hence no agreement.
Factually ,one can see from the case that due to the personal feeling attached by the owner caused
the rejection of the offer. Here Mr. Brainoo was not reasonable enough to accept that his proposal
to the spencer was rejected .This led to the misunderstanding that ensued between them .thus the
breakage of the wine .
They were both negligent. The name given to such negligent is a contributory negligence.
Contributory negligence occurs when both the plaintiff and the defendant contributed to the
detriment caused. With reference to comparative negligence the court would determine the amount
both the plaintiff and the defendant would pay.
Keenan, D., Riches, S. & Allen, V. (2009). Keenan and Riches’ Business Law.
London: Pitman Publishing.
Major, W. T. (1973). Law of Contract (3rd ed.).
London: Macdonald and Evans Ltd.
McKendrick, E.(2014).Contract Law: Text, Cases and Materials (6th ed.).
United Kingdom: Oxford University Press
Bondzie, S. (2010). Contract Law.
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