BUSINESS LAW NOTES
INTRODUCING LAW AND CONTRACT LAW LECTURE NOTES 2014
Definition of Law
Law may be defined as a body of rules and regulations governing or regulating society, the
enforcement of which is effected by way of sanctions.
Classification of law.
Laws are classified into a variety of forms;
 Criminal law v Civil law
 Public law v Private law
 Substantive law v Procedural law
 Municipal law v International law
Criminal law
This branch characterizes certain conduct, acts or omissions/wrongdoing as offences against the
state. Criminal law emanates from the term „crime‟ that signifies an act of disobedience to the law and
such disobedience is normally punishable by sanctions ranging from death, imprisonment, fine or
even a caution etc.
Criminal law is normally enforced by police and the Directorate of Public Prosecutions (DPP)
However, in some cases a private person can also commence criminal proceedings. This is called
private prosecution. Where private prosecution has been commenced, the DPP has powers under the
Constitution to take over the conduct of the proceedings.
NB. Cases involving abuse of office and corruption by public officers are prosecuted by the IGG.
Under Criminal law, a person is innocent until proved guilty or until he pleads guilty and the burden
of proof lies on the prosecution.
Civil law- concerns itself with rights and duties of persons (humans beings or artificial persons/legal
entities/government) towards each other e.g. law of contract which concerns obligations &
consequences of parties to agreements, the law of tort which concerns civil wrongs for which a
remedy lies in damages e.g. motor accidents, accidents at work places – duty of care owed by one
party to another. The law of property which involves land rights, ownership, and transfer, the law of
succession which involves property inheritance on death etc. The sanctions in civil law are in form of
remedies like damages, specific performance, injunction, rescission, rectification etc
Distinction between Civil and Criminal law
In civil law, legal action is commenced by a private person, or entity called the Plaintiff against
another who has violated the right called the Defendant/ Respondent. Suits by or against
government are brought by or against the Attorney General.
Criminal law is enforced on behalf of the state and in the name of the state e.g. R v James, The Queen
v John. In Uganda, the Constitution provides that the Prosecutor should be designated as Uganda e.g.
Uganda v Hussein Akbar Godi. The person against whom criminal proceedings are brought is called
the accused.
In criminal law, the standard of proof is one beyond reasonable doubt while in civil matters it is
based on probability
NB. In both criminal and civil law, a party who appeals is called the appellant and the party against
whom the appeal is made is called the respondent.
Concurrency of criminal and civil wrongs
Sometimes a case may fall under both criminal and civil law e.g. civil suit in negligence versus a
criminal case for negligent or reckless driving, Malicious damages to property, Trespass. There is no
bar against bringing a case in criminal and civil law.
Public law
This law deals with the relationship between the state and individuals or between or among states. It
includes international law, administrative law, constitutional law and criminal law.
(i)Constitutional law is a body of rules regulating the structure of the principal organs of
government, their relation to each other and also forms the basis for the validity of other laws
(ii)Administrative law regulates rights and duties arising from exercise of powers and functions
conferred on those with statutory powers [powers granted under written law] e.g. local authorities
and institutions.
Private law
This is the law that governs the relations of citizens amongst themselves. Private law is that part of
the law which is primarily concerned with rights and duties of persons towards persons. Private law
is also called civil law
Substantive law
This is a branch of law that spells out the legal rights, duties, obligations and liabilities of parties
among themselves and government. Examples include contract law, the Companies Act etc.
Procedural law
This branch of law entails rules governing the manner in which a right is enforced under the law or a
crime is prosecuted under criminal law for example the law of civil procedure, evidence, criminal
procedure etc.
Municipal law is the national law. It is law which has its application to one state while International
law is the law that governs relation of states inter se i.e. it applies to more than one state. International
law may be sourced from international treaties and conventions e.g. the Convention against Torture,
the EA Treaty etc. International law applies to Uganda if a particular instrument has been ratified or
domesticated in its laws
Steps to be followed in enforcing legal action
Civil matters:
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Notice of intention to sue should be communicated to the other party
A plaint should be filed and served on the Defendant with summons requiring the
defendant to prepare a defence,
The defendant in turn files a defence and serves it on the Plaintiff.
The case is then fixed for hearing.
Criminal matters:
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The matter is reported to police
Investigations are carried out by the police, a file is prepared and sent to a state attorney to
advise whether the evidence is sufficient or not
The accused is formally charged by reading out the offence to him to which he pleads
either guilty, not guilty or he may keep quiet implying not guilty.
Where the accused pleads not guilty, he is reminded of his right to apply for bail, he is
remanded (if he does not apply for bail or if the application fails), brought from time to
time for hearing, till judgment and sentencing. If found not guilty, he is acquitted.
THE STRUCTURE OF THE COURTS & ADMINISTRATION OF JUSTICE IN THE UGANDAN
LEGAL SYSTEM
Important Terminologies.
Jurisdiction. This refers to scope of powers vested in a particular Court relating to what kind of cases
it can handle and is determined on the basis of the value of the subject matter, location and nature of
a particular offence
Pecuniary jurisdiction means the monetary value of the subject matter which a Court is allowed to
handle for example under the Magistrates’ Court Amendment Act, a Chief Magistrates Court can
hear cases the value of whose subject matter is of up to a maximum of 50,000,000/= while a
Magistrate grade one can handle case of up to 20,000,000/=
Geographical or territorial jurisdiction means the Court exercises power over cases that arise within
the local area where the Court is situate.
In criminal law, jurisdiction extends to the power of court to handle a particular criminal offence. For
example under S.161 of the Magistrates’ Court Act, a Magistrate‟s Court presided over by a Chief
Magistrate may try any offence other than an offence carrying a death penalty e.g. rape, murder…A
Magistrate Grade I may try any offence other than an offence carrying a death penalty or life
imprisonment
Courts of first instance are courts where an action is originally commenced and heard. In that case,
the court will be said to be exercising its original jurisdiction.
Appellate Court: This is the higher court in hierarchy to which an aggrieved party may seek remedy
by way of challenging the decision made against him by a lower Court.
Appellate Jurisdiction: refers to the power of a higher court in hierarchy to either affirm or reverse a
decision of a court below in a case brought to it by a party (parties) dissatisfied with the decision of
that latter court
The appellate court after considering an appeal may reverse the decision of the lower court on a
successful appeal in which case it is said to allow the appeal or it may affirm/ uphold the decision of
the lower in the event of an unsuccessful appeal in which case it is said to dismiss the appeal. In
doing so, it is exercising its powers/jurisdiction as an appellate court.
Distinguishing cases – when court‟s attention is drawn to a previous case with almost similar facts, it
seeks out material differences in the facts, reasoning or approach and will not follow that case.
Over ruling occurs when a higher court decides a similar case on the basis of a different legal
principle. The previous rule of a lower court is said to be overruled/ceases to have legal effect.
Facts are the circumstances that give rise to a claim; only material facts are relevant. Facts must be
distinguished from evidence; facts are allegations and evidence is proof that may be from oral
testimonies or documents.
Issues: These are points of contention e.g.
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Whether there was a contract between the plaintiff and the defendant
If so, whether the defendant breached the contract.
Whether the plaintiff is entitled to the remedies prayed for
Law Applicable refers to the relevant Act of Parliament, delegated legislation, case, common law,
equity, custom or authoritative text books to be relied upon in resolving the dispute.
Decision of Court. The refers to the conclusion that Court draws from the summing up of the facts,
evidence and the law e.g. a judge may say: “on the basis of the law and evidence as analyzed above, I find
that the Plaintiff has proved negligence and the Defendant is thus liable [in civil cases] or that the accused is
guilty [in criminal matters]
Ratio Decidendi. This refers to the reasoning of the court, the justification for reaching a particular
conclusion. It is also referred to as the statement or principal of law e.g. In Donoghue V Stevenson Lord
Artkin stated the famous „my neighbour principle‟ thus;
“Every person who stands in a direct relationship with another in such a way that his actions or omissions are
foreseably likely to cause injury to that other [a neighbour] owes a duty of care to that person and will be held
liable if such acts or omission are the proximate cause of the other‟s injury”.
Suit means a claim that has been duly filed in court. The process of filing is commonly referred to as
suing or commencing proceedings. Different claims may be instituted through various procedures.
THE HIERARCHY OF THE COURT SYSTEM
The civil/ criminal justice system is structured in form of a hierarchy of courts with specific
jurisdiction/power/limits to handle specified cases.
Under Article 129 of the Constitution, it is provided that judicial power shall be exercised by the
courts of judicature which shall consist of the Supreme Court, the Court of Appeal [COA], the High
Court and such subordinate courts as Parliament may by law establish.
Article 128 provides that in the exercise of judicial power, the courts shall be independent and shall
not be subject to control or direction of any person or authority
The Supreme Court
The Supreme Court is the highest appellate court under Article 132 (1) of the Constitution. It has
original jurisdiction in matters of presidential election petitions. An appeal can lie to the Supreme
Court from the decisions of the Court of Appeal as may be prescribed by law. The Supreme Court
consists of the Chief Justice and other Justices of the Supreme Court. The Chief Justice is the head of
the judiciary and is responsible for the administration and supervision of all courts in Uganda (Art
133(1) (a)
The Court of Appeal (COA)
The Court of Appeal consists of the Deputy Chief Justice and other Justices of Appeal (Article 134).
An appeal can lie to the Court of Appeal from the decisions of the High Court as may be prescribed
by law. It can also sit as a constitutional court to determine questions regarding the interpretation of
the constitution (Article 137 (1). The court is headed by the Deputy Chief Justice whose role is to
assist the Chief Justice in its administration (Article 136 (1(b)
The High Court
The High Court is established under Article 138 of the Constitution. Subject to the provisions of the
Constitution, the High Court has unlimited original jurisdiction in all matters and such appellate
jurisdiction and other jurisdiction as may be conferred on it by the Constitution (Article 139(1)). The
decisions of courts lower than the High Court are appealable to the High Court as provided by the
law. The High Court is headed by the Principal Judge (Article 141 (1(a). The Principal Judge assists
the Deputy Chief Justice in the administration of the High Court and subordinate courts.
The High Court has divisions ranging from the commercial, criminal, family, land and civil anticorruption, war crimes, execution divisions each with a registry and a registrar. The High Court
holds sessions in various parts of Uganda called High Court Circuits for the trial of civil and criminal
cases. Currently sessions are held in Nakawa, Masaka, Mbarara, Gulu, Jinja, Mbale, Fort Portal,
Masindi etc.
The Magistrate’s Courts
These are established under the Magistrates Court Act. The High Court is empowered by the
Judicature Act to supervise them. They consist of grades ranging from Chief Magistrate, Grade I, II
while grade III was phased out. A Chief Magistrate is empowered to supervise all Magistrates‟
Courts within the area of his jurisdiction
The powers and jurisdiction of a particular magistrate are determined by the grade of his or her
appointment and the powers and jurisdiction conferred upon that grade by the Magistrates Courts
Act. (S.4(3). An appeal lies to the High Court from the Chief Magistrate or Magistrate Grade I
The Family and Children Court
S.13 of the Children Act provides that there shall be a Family and Children Court in every district
which shall be presided over by a magistrate Grade I and II. The jurisdiction of the court extends to
power to hear and determine applications relating to child care and protection (e.g. custody,
maintenance and parentage) as well as criminal charges against a child except any offence punishable
by death or any offence for which a child is jointly charged with a person over eighteen years of age;
NB. The Children Act provides that unless otherwise provided, matters of a civil nature concerning
children are dealt with by the village Local Council Courts where the child resides or where the root
of the complaint arises.
Local Council Courts
These are established under S.3 of the Local Council Courts Act 2006 for the administration of justice
at every village, parish, town, division and sub-county. They are supervised by the High Court
although the Chief Magistrate may exercise this function on its behalf. The territorial jurisdiction of
LC Courts extends only to matters arising in the territory of the council where the court is established
or to matters arising elsewhere if the defendant or accused ordinarily resides in that territorial area
except where the law provides otherwise.
The language of the court is the language widely spoken in the area of jurisdiction of the court. LCCs
can give remedies including compensation, restitution, attachment and sale.
Appeals lie from village LCC to Parish LCC; from Parish LCC to town, division or Sub County; from
town, division or Sub County to the Chief Magistrates Court; from Chief Magistrates Court to High
Court with leave (permission) of the Chief Magistrates Court or the High Court
The Military courts
These are established under the UPDF Act to try all those persons subject to military law e.g. every
officer and militant of the reserve forces when he is in uniform, on duty, on active service, present at
any training of a unit of the Defence forces etc.
They include the Division Court Martial, the Unit Disciplinary Committee, the General Court Martial,
the Court Martial Appeal Court and the Field Court Martial
THE NATURE OF THE UGANDAN LEGAL SYSTEM
The 1995 Constitution is the supreme law of Uganda from which all other laws derive their validity.
Accordingly any law or custom which is inconsistent with it is void to the extent of the inconsistency.
The constitution regulates the relations between the state and its citizens as well as between state
organs. It defines the duties of the citizens to the state and the duties of the state to the citizens.
Sources of Law include the Constitution, primary and delegated legislation, Common law and
Equity, case law and customary law
Legislation refers to law enacted/made by parliament and other bodies or authorities vested with
such powers by law. The key forms of legislation are Acts of Parliament and delegated legislation.
Acts of Parliament (formerly called statutes)
These are the supreme source of legislation, over and above the common law and equity. Acts are
written law enacted by Parliament as primary legislation. An Act arises from a Bill. A Bill is a draft of
a proposed Act of Parliament which has been formally tabled before Parliament for consideration.
The Bill becomes an Act (law) when Parliament has approved it and the President had assented to it.
Delegated or subordinate or secondary or indirect legislation.
Parliament normally passes an Act setting out the general laws without details hence leaving it to
bodies, authorities or persons to make rules to give effect to the law.
However, ordinarily the power to make secondary legislation is usually vested in the specific
authority by the Parent Act meaning that such legislation should conform to the Parent Act or other
related Acts lest it will be rendered null and void to the extent of its inconsistency.
Delegated legislation is law made by subordinates deriving their powers from an Act of parliament.
A parent Act or enabling statute is the Act of Parliament from which a subordinate derives legislative
powers
Types of Delegated Legislation
Statutory Instruments. Normally called rules, regulations or orders, Statutory Instruments are laws
made by authorized persons mainly Ministers in charge of government departments upon whom
such power has been vested by the Parent Act. In other words, there must be a provision in the
Parent Act authorizing such legislation. Statutory Instruments normally relate to commencement
dates of Parent Acts, rules of procedure, fees etc.
Ordinances
These are laws passed by the District Council. S.38 (I) of the Local Government Act provides that a
District Council shall have power to pass local bills into ordinances signed by the Chairperson.
However the bill is required to be first forwarded to the AG through the Minister to ensure that it is
not inconsistent with the Constitution and any other Act of Parliament before the Chairperson signs
it. Once the chairperson signs, it becomes an ordinance and is published in the gazette and in the
local media. An ordinance may be made to apply to the whole district, any part of the district, a
particular section or profession of the people
An ordinance is made for matters which are not adequately provided for by the constitution or Act of
Parliament. Examples include The Wakiso Revenue Ordinance, Kiruhura Diary and Cooling
Ordinance, Pader District Education Ordinance etc.
Bye- Laws
These are made by local authorities or other authorized bodies and are only binding on persons or
entities coming within their scope [limited geographical scope].The law making entities derive their
authority from an enabling provision in the Parent Act.
Under the Cooperative Societies‟ Act, cooperative societies are empowered to make bye laws as a
condition for registration.
Under the Local Governments Act, an urban, sub county, division or village council is empowered to
make a bye law which must not be inconsistent with the constitution, or any Act of Parliament, or
ordinance passed by a District Council, or a bye law passed by a higher council. The bye law has to
be sent first to the relevant authority to certify that it is not so inconsistent.
Advantages of delegated legislation
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Parliament is busy analyzing policy issues and therefore it requires time off for this purpose
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Some matters are so urgent that they require immediate attention to be addressed. This
situation may require that a law be passed immediately for which Parliament may not have
time
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Matters to be legislated on may be so technical that they may require technical persons to
handle. Not all parliamentarians are technical enough to handle all matters and so expert
knowledge can be got by delegating the power to legislate e.g. nurses and midwives
regulations.
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Future difficulties are better handled with delegated legislation especially where service
charges are involved e.g. payment of fees like stamp duty.
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Delegated legislation addresses the detailed aspects of the law which
overlooked by parliament
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Delegated legislation ensures flexibility as it is simpler and in case of impracticability or
unfairness, it can easily be revoked or amended.
may have been
Disadvantages of delegated legislation
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Delegated authorities are at times given powers to legislate on matters of principle which
should only be dealt with by Parliament.
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Parliament, the supreme law making organ of the state, may lack control over delegated
legislation and this may lead to passing of dangerous laws.
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Delegated powers may be so wide and this may create uncertainty about the prevailing laws
as well as leading to a multiplicity of laws that may be contradictory.
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There is a risk of an authority to which power is delegated to exercise those powers beyond
the permitted limits in which case any law thereby passed will be void (ultra vires)
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The publicity of delegated legislation is inadequate so people may not be aware of the rules
and orders passed by ministries.
Controlling Delegated Legislation
There are mechanisms put in place to control delegated legislation.
Parliamentary Veto. Parliament reserves the power to withdraw authority to the delegated person or
institution if such authority is misused. Parliament normally subjects any subsidiary legislation to
scrutiny before it comes into force.
The consultative Process. Before a proposed statutory instrument is concluded, the interested parties
are normally consulted for views and comments.
Judicial Scrutiny. Courts are normally invited to scrutinise the validity of statutory instruments on
grounds relating to:
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The content falling outside the scope of the Parent Act
Failure to comply with the requisite procedure
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Incompatibility with convention rights. For example in Raymond V Honey (1983), whilst the
Home secretary had powers to make rules for the management of prisons, he was not
permitted to deny prisoners the right to access to the Courts.
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Also see the mechanisms under ordinances and bye/laws above.
The ultravires doctrine. One effective way of controlling delegated legislation is by application of the
ultravires doctrine. A piece of delegated legislation is ultravires if it exceeds the powers contained in
the enabling Act or if it offends certain presumptions of the law. These presumptions include the
following:
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The person who has been given powers of delegation cannot delegate them to another
person. (A delegate cannot sub-delegate ie delegatus non protest delegate)
The enabling Act does not give power to make unreasonable rules or those which
infringe basic constitutional rights.
Common Law and Equity
Common law refers to a body of rules that have over time been developed by English judges from
English customs which became the basis of fundamental legal principles.
From earliest times, certain oral customs in England came to be recognized as having general
application. Over the years, principles of law were slowly evolved from these customs and because
they were of general application, they yielded what came to be known as the common law of
England thus common law consists of the ancient customs and usage of England which have been
recognized and given the force of law. Common law is unwritten law. It can be ascertained from
judgments and books of authority etc. however, some common law rules have been codified by
statute and now form part of the written law of the land…see the Partnership Act
Equity refers to a body of discretionary rules and remedies devised by Chancery Courts on the basis
of fairness, rules of natural justice and good conscience to remedy the lacuna/gap/ defects created by
the common law. They are laid down in form of maxims/doctrines
What were the defects in the common law?
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The procedural technicalities. Common law required claimants to commence their actions by
way of a writ/claim form setting out the terms of the claim and failure to comply [however
minor the non-compliance] therewith rendered the action bad in law and therefore
unsustainable. Form was much emphasized than substance. The writ provided for specific
claims that could be commenced by such method and any claim not provided for therein was
untenable in law.
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A limited number of remedies were available at common law; basically damages/ monetary
compensation for loss or damage. If a claim required some form of remedy other than
damages, it would fail.
Equity therefore has its genesis embedded in the rigid nature of the common-law. The rules of equity
were first developed by the King through petitions that were brought to him and later the Lord
Chancellor. The King was guided by the desire to be fair and to do justice so where no remedy
existed at common law, new remedies were created. Subsequently, a court of Chancery was
established to administer equity and its rulings are the foundation of the multiplicity of equitable
rules/doctrines applied today. Examples include; equity helps the vigilant and not the indolent, he
who seeks equity must do equity, equity looks at substance rather than form, delay defeats equity,
equity does not act in vain.
The common law and equity are today concurrently administered in all courts but are all subject to
and can not prevail over written law.
Case law or judicial precedent.
Being a common law country, Uganda applies precedent as a source of law. Precedent means earlier
decisions of the courts of record that are relied upon by courts in deciding cases of similar facts. In
Uganda, courts of record are the Supreme Court, Court of Appeal and High Court. Case law is
therefore referred to as judge-made law. Precedent is based on the legal principle of stare decisis
which requires subordinate courts to stand by earlier decisions with similar facts. The principle
behind the doctrine of precedent is that in each case the judge applies existing principles of law by
following the example or precedent or earlier decisions.
Under the system, decisions are recorded in law reports so as to facilitate a degree of continuity and
predictability.
Law reports in Uganda include Uganda Law Reports (ULR), Kampala Law Reports (KALR), High
Court Bulletins (HCB), and Uganda Law Society Reports (ULSR). English reports include the Weekly
Law Reports (WLR), Kings Bench Division (KBD), Queens Bench Division (QBD), Chancery Reports
(ChD), Probate Division etc. Cases are also now available online.
Advantages of case law:
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Precedent creates certainty in the law once judges make a decision on a particular matter.
The law thus becomes predictable as a party can predict the likely outcome of a case basing
on its facts and an earlier decision on a similar case.
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Precedents allow the growth and development of the law so that it does not remain static.
This arises from the aspect of overruling and distinguishing precedents.
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Precedent supplements parliament in its law making function. Since Parliament cannot
make provision for everything, judge-made law can fill in the gaps
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Case law is based on real/ factual situations. It is therefore more practicable unlike statutes
which are not easily ascertainable. For example whereas unnatural offenses are
criminalized, no lesbian has ever been tried in the courts of law.
Disadvantages
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Case law is rigid. Once a rule has been laid down by a court of record, it is binding on the
lower courts even if it is thought to be wrong
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Case law is bulky and complex. It is found scattered in so many law reports that one has to
widely research if he seeks to rely on a particular precedent till he comes up with the
current legal position on the matter.
Customary law
This is an unwritten source of law. The Judicature Act permits the High Court to apply customary
law as long as it is not inconsistent with natural justice, equity and good conscience. Customary law
is limited to civil matters and does not apply to criminal matters since the constitution provides that
except for contempt of court, no person shall be convicted of a criminal offence unless the offence is
defined and the penalty for it is prescribed by law. Customary law should also be compatible with
written law.
For a custom to qualify to be applied as customary law:
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It must be in existence with uninterrupted and harmonious application which should have
dated from time immemorial. This is the antiquity test which has been fixed way back to
1198 BC.
The courts will take judicial notice of the custom because of its notoriety. This means the
existence of a custom will be taken for granted without any need for further proof if it has
earlier on been frequently proved
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It must be compatible with written law
It only applies in civil matters. There is nothing like customary criminal law
It only applies where it has not been excluded by parties whether by express contract or by
the nature of the transaction in question
It must not be repugnant to natural justice, equity and good conscience e.g. in Gwao bin
Kilimo v Kisunda bin Ifuti, a custom that allowed a man‟s property to be attached in
satisfaction of his son‟s debts was held to be inapplicable
THE LAW OF CONTRACT:
S.10 (1) of the Contract Act defines a contract as an agreement made with the free consent of the
parties with capacity to contract, for a lawful consideration and with a lawful object, with the intention
to be legally bound.
A contract may be oral or written or partly oral and partly written or may be implied from the conduct
of the parties. A contract the subject matter of which exceeds ten currency points shall be in writing
(S10 (5). A currency point is equivalent to 20,000/Consent means agreement of two or more persons obtained freely upon the same thing in the same
sense. This means that the parties must be consensus ad idem, i.e. there must be meeting of minds.
Consent of parties to a contract is taken to be free where it is not caused by coercion undue influence,
fraud, misrepresentation or mistake. Agreement means a promise or a set of promises forming the
consideration for each other
The idea of consent/agreement dominated the 19th century and was expressed in what is known as
“freedom of contract” in Printing and Numerical Registering Co. v Sampson [1875] where Sir
George Jessel stated:
If there is one thing more than another which public policy requires, it is men of full age and competent
understanding shall have the utmost liberty in contracting and that the contract when entered into freely and
voluntarily shall be held sacred and be enforced by the courts of justice.
It should be noted that though the notion of freedom of contract lives, the reality is that it persists
only in a limited area of commercial life. Courts and parliament have made substantial inroads into
limiting the powers of those who exercise economic dominancy. Much as freedom of contract exists,
the law also tries to protect the weaker party.
Void and voidable contracts
The Contract Act defines a void agreement as an agreement not enforceable by law.
S.54 provides that where an agreement is said to be void or when a contract becomes void, a person
who received any advantage under that agreement or contract is bound it or to pay compensation for
it, to the person from whom he received the advantage.
A voidable contract means an agreement which is enforceable by law at the option of a party to a
contract but not at the option of the other party and a contract which ceases to be enforceable by
law and which becomes void when it ceases to be enforceable
Executed and Executory Contracts:
A contract is said to be executed when one or both parties have fulfilled all their contractual
obligations. A contract is said to be executory when the obligations of one of or both parties remains
to be carried out. [Future performance]
Essentials of a valid contract:
The essentials of a valid contract flow from the definition of the word itself. They include:
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Offer and acceptance
Free consent
An intention to create legal relations
Lawful consideration and objects
Contractual capacity
OFFER
The Contract Act defines an offer as the willingness to do or abstain from doing anything signified by
a person to another with a view to obtaining the assent of that other person to the act or abstinence
The person who makes an offer is called a promisor while the one who accepts an offer is called a
promisee. On the other hand, an offer that is accepted is called a promise. An offer may be made
orally, or in writing, or it may be implied by the conduct of the promisor
Communication of an offer
S.3(1) provides that communication of an offer is made by an act or omission of a party who proposes
the offer by which that party intends to communicate the offer or which has the effect of
communicating the offer. However, S.4(1) provides that that communication is complete when it
comes to the knowledge of the person to whom it is made
When the offer has not been communicated, even if somebody acts as per the terms of the offer,
he/she will not be deemed to be the acceptor of the same because of the fact he was not aware of the
terms of the offer and his actions were not pursuant to the terms and were of a voluntary nature.
(Read R v Clarke)
Nature of offer
An offer may be made to an individual, to a group of persons or to the public at large. An example of
an offer made to the public was in the famous case of Carill v Carbolic Smoke Ball Co. where the
Defendant Company manufactured a medicine called a smoke ball. The company promised to
compensate anyone who caught influenza upon use of the smoke ball and to show its sincerity, it
even deposited £1000 in the bank. The plaintiff used the smoke ball and contracted influenza. She
claimed compensation.
The defendant argued that there was no agreement between them and the Plaintiff. One of the
defences used was that it was not possible to make an offer to the whole world since this would
enable the whole world to accept the offer which was clearly beyond commercial reality. The court of
appeal rejected this defence. Bowen LJ stated the position as follows:
“It was also said that a contract is made with the whole world, that is with everybody and that you cannot
contract with everybody. It is not a contract made with everybody or the whole world………. It is an offer made
to the whole world and why shouldn‟t an offer be made to the whole world which can ripen into a contract with
anybody who comes and performs the condition?.....although the offer is made to the whole world, the contract
is made with a limited portion of the public.
The terms of an offer must be clear and the offer should be made with the intention that it will be
binding. It is therefore important to note that certain statements are mere commercial puffs. These are
normally used in advertisements.
In Carill’s case, the defendants company argued that the advertisement placed by it was a mere puff
and therefore no offer would arise from it. Court rejected this argument because by depositing £1000
as an assurance, the defendant company was telling the whole world that it intended to be bound by
the terms of its offer.
Offer compared with other transactions.
It is necessary to distinguish an offer from an invitation to treat. An invitation to treat is an indication
that a person is willing to enter into negotiations but not that he is ready to be bound by the terms
mentioned. It is not an offer in itself but a call upon others to make an offer.
Examples include catalogues of goods for sale, invitation for tenders to supply goods or services,
company prospectus inviting the public to buy shares, display of goods in a shop window, an advert
for sale of goods e.g. a car otherwise if such an advert was to constitute an offer, there would be a
problem if for example 20 acceptances are received.
(i)
Display of goods
Fisher v Bell
A flick knife with a price marked on it was displayed for sale in a shop window. The seller was
prosecuted under the Restriction of Offensive Weapons Act 1961 which made it an offence to offer to
sale such items. He was acquitted because the display of the knife did not amount to an offer within
the meaning of that law.
In Pharmaceutical society of Great Britain v Boots Cash Chemists Ltd the status of goods in a selfservice shop was called into question. The defendants were being prosecuted under the Pharmacy
and Poisons Act for allowing the sale of a listed poison to be effected without the supervision of a
registered pharmacist. The arrangement in the shop was that a customer on entering was given a
basket and was then free to walk around the shop selecting items from the shelves. When he had
collected such items as he required, they were taken to the cash desk where the customer was
required to pay for them.
Near to the cash desk was a registered pharmacist who was authorized to prevent a customer from
removing any drug from the shop. The Pharmaceutical Society [Plaintiff] argued that the goods on
the shelves were offered for sale which the customer accepted by placing the goods in the basket and
that therefore the sale took place at that point and not at the cash desk under the supervision of a
registered pharmacist.
In such a situation, it was alleged that Boots Cash were clearly in breach of the provision and had
committed a criminal offence. Court however decided that the goods on the shelves were only
invitations to treat and that it was the customer who made an offer to buy when he presented the
goods for payment at the cash desk.
At this point, the person at the cash desk [the registered pharmacist] could accept of reject the offer.
That the sale took place under the supervision of the registered pharmacist and no criminal offence
had been committed.
The foregoing two cases established the principle of law that display of goods whether in shop
window or in shelves does not amount to an offer but a mere invitation to treat. This means that the
person who has displayed goods is inviting potential buyers to make offers to buy. That person may
accept or reject the offer.
(ii)
Advertisements
In Carill’case, the advertisement was taken to be an offer to the whole world. However, the offer
here was peculiar to the situation where the statement was a conditional promise i.e. a unilateral
offer. In any case, in Carill, there was a form of assurance to back up the statement by the defendant.
Therefore Carill may apply in situations where say someone has lost an item but not in all
advertisements. Therefore each advertisement should be judged on its own especially regarding the
language or words used.
In Harris v Nickerson, an auctioneer advertised that certain goods would be sold at a certain location
on a certain date. The Plaintiff went for the sale but all the lots he was interested in had been
withdrawn. He sued the auctioneer for his loss of time and expenses. It was held that the
advertisement of the auction was merely a declaration of intent to hold a sale and did not amount to
an offer capable of being accepted; that the advertisement therefore was an invitation to treat.
(ii)
Auction sales
In Payne v Cave, it was held that the call for bids amounts to an invitation to treat, the bids
themselves amounting to offers which the auctioneer is free to accept as he or she wishes.
Under S.57 (1) (b) of the Sale of Goods Act, a sale of goods in an auction is completed by the fall of
the hammer and each party is allowed to withdraw up to this time.
(iii) Tenders
In Spencer v Harding, the statement that goods are supposed to be sold by tender is not usually an
offer and therefore no obligation is created to the person making the highest tender. Consequently an
invitation for the supply of goods or services is generally not an offer but an invitation for offers to be
accepted or rejected.
DURATION OF AN OFFER.
An offer does not continue indefinitely and once it has been revoked (cancelled), it can no longer be
accepted. S.5(1) provides that an offer may be revoked at any time before communication of its
acceptance is completed.
It is possible for the offeror to revoke or withdraw his offer at any time before acceptance. He is
entitled to do this even if he has promised to keep the offer open for a specified period
In Routledge v Grant, Grant offered to buy Routledge‟s house and gave him six weeks to decide
whether to accept the offer. Before six weeks had elapsed, Grant withdrew the offer. He was held
entitled to do so at any time before acceptance.
Mode of revocation of an offer (S.6)
The Contract Act provides for a number of ways in which an offer is revoked.
(i)
Communication of notice of revocation
An offer is revoked by communication of the notice of revocation by the offeror to the other party (S.6
(a)). The communication of revocation of an offer is made by an act or omission of a party who
revokes the offer by which that party intends to communicate the revocation or which has the effect
of communicating the revocation (S.3(3)).
The communication is completed as against the person revoking when it is put in a 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 or as against the offeree, when it comes to his knowledge (S.4(3)). This means that revocation will
not take effect until its communication has been received by the offeree otherwise until then, the offer
remains open and can be accepted.
(ii)
Lapse of time prescribed in the offer, for its acceptance or where the time is not prescribed,
by lapse of reasonable time without communication of acceptance
Where an offer has been made for a limited time, it terminates at the expiration of the specified time
but where there is no time limit, it expires after a reasonable time depending on the circumstances.
In Ramsgate Victoria Hotel Co v Montefiore, the Defendant applied in June for shares in the
Plaintiff Co. and had paid a deposit in the Plaintiff‟s bank. He heard nothing until the end of
November when he was informed that the shares had been allotted to him and that he should pay the
balance upon them. It was held that his refusal to take them up was justified. His offer should have
been accepted if at all within a reasonable time and the interval between June and November was
excessive.
In Virji Kimji v Clutterbuck, A ordered timber from B. there was no reply from the offeree but four
and a half months later, B sent the consignment of timber. A successfully alleged that such a delay
amounted to lapse of time whereby his original offer was revoked.
(iii)
Failure of the offeror to fulfill a condition precedent to acceptance
An offer may be conditional [express /implied] upon other circumstances and if the
conditions are not fulfilled, the offer will lapse.
X might say I will sell you my car for £100 if I can get a new one this month. This means that the offer
to sell is conditional on obtaining a new one that month. If the new car is unobtainable, then X‟s offer
is terminated.
In Financings Limited v Stimson a customer offered to take a car on hire purchase from the
Plaintiffs. Before the offer was accepted, the car was stolen from the dealer‟s garage where it was
being kept and badly damaged. Unaware of this, the Plaintiff purported to accept the offer. It was
held that the Plaintiff could no longer do so. The customer‟s offer was the subject of an implied
condition that the car remains in substantially the same state between offer and acceptance.
(iv)
The death or insanity of the offeror, where the fact of the death or insanity comes to the
knowledge of the acceptor before acceptance
An offer comes to an end if the offeror dies or becomes insane before acceptance is made and the
offeree knows of it. But a question arises as to what would happen where the offeree does not know
and purports to accept the offer, would there be a valid contract. If the offer is impersonal e.g. the
subject matter is the sell of a motorcycle, then acceptance is valid. All that needs to be done is the
handing over of the motorcycle in return for the money.
But if the offer was personal i.e. one where the identity or skill of the offeror was important then it
would be sensible to say that the acceptance cannot amount to a valid contract.
The Contract Act is silent on the position of death and insanity of the offeree but is appears that the
same principles also apply to a case where the offeree dies. If the offeror can show that the offer was
personal to the deceased, then the deceased‟s personal representative cannot accept it. E.g. if Z offers
Y a post of Managing Director, Y‟s son cannot accept the offer. But if Z is offering to sell a motorcycle
to Y and Y dies, then Y‟s son as his legal representative can accept the offer.
ACCEPTANCE.
Under S.2 of the Contract Act, acceptance means an assent to an offer made by a person to whom the
offer is made. Acceptance must be absolute and unqualified and expressed in a usual and reasonable
manner except where the offer prescribes the manner in which it is to be accepted (S.7 (1) (a) and (b).
Acceptance may take the form of words, spoken or written, or it may be implied by conduct, as
where the offeree performs some specific act required by the offeror.
The importance of acceptance in the law of contract is that it converts an offer into a promise (S.7). A
promise may be express or implied. It is express where an offer or an acceptance of a promise is made
either verbally or in writing. It is implied where the offer or acceptance is not made either verbally or
in writing (S.9)
Communication of acceptance
As a general rule, acceptance must be communicated to the offeror. There is no contract until the
offeror knows that his offer has been accepted. Accordingly, silence does not amount to acceptance.
In Felthouse v Bindley, negotiations were taking place regarding the price of a horse. The Plaintiff
eventually wrote to the defendant „if I hear no more about him, I consider the horse mine at £30. The
defendant did not reply and court held that his silence did not amount to an acceptance despite the
wording of the offer. Court observed that an offeror cannot impose contractual liability on an offeree
merely by proclaiming that silence shall be deemed acceptance. That though he had intended to
accept and sell at this price, his silence could not constitute acceptance, and there was therefore no
sale.
Mode of communication
The communication of acceptance is made by an act or omission of a party who accepts the offer, by
which that party intends to communicate the acceptance or which has the effect of communicating
the acceptance (S.3(2)).
Communication of acceptance is complete as against the offeror when it is put in the course of
transmission to him so as to be out of the power of the acceptor or as against the acceptor, when it
comes to the knowledge of the offeror (S.4(2))
This can be illustrated hypothetically as follows:
(i)A proposes, by letter, to sell a house to B at a certain price. The communication of the
proposal is complete when B receives the letter.
(ii)B accepts A's proposal by a letter sent by post. The communication of the acceptance
is complete, as against A, when the letter is posted and as against B, when the letter is
received by A.
Lord Denning gave an instructive scenario in Entores Ltd v Miles Far East Corporation:
“Suppose for instance, that I shout an offer to a man across a river or a courtyard but I do not hear his reply
because it is drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to make
a contract, he must wait till the aircraft is gone and then shout back his acceptance so that I can hear what he
says. Not until I hear his answer I am I bound….” (NB. This case only loses relevance on the part where
the judge discuses communication by post because he echoes the common law position which no
longer applies)
The Contract Act therefore removed the harshness of the common law postal rule of communication
of acceptance. That rule was to the effect that communication of acceptance by post was completed
and a contract was therefore born when the acceptor posted a letter properly addressed. It was
immaterial that the letter had got lost in the course of post or never reached the offeror. This common
law position had ignored the realties of Uganda where the post is quite an unreliable means of
communication insofar as it is slow and there is a possibility of mail getting lost and thus not
reaching its destination.
The acceptance must be communicated by the offeree himself or his authorized agent. In Powell v
Lee, the Plaintiff had applied for a post as headmaster. The school managers decided to appoint him,
and one of the managers, without authority, told him this unofficially. Later, the managers changed
their minds. It was held that they were free to do so; there was no contract with Powell, because
acceptance had not been communicated by the managers.
The offeror may prescribe the manner in which acceptance is to be made. Where he does so but the
acceptance is not made in that manner, the offeror may within a reasonable time after the acceptance
is communicated to him or her demand that the offer is accepted only in the prescribed manner (S.7
(2)).
Where an offeror fails to demand under the above subsection that acceptance be made in a prescribed
manner, the offeror shall be deemed to have accepted the manner of acceptance offered by the offeree
(see S.7(3))
These provisions echo the observations of Justice Buckley in Manchester Diocesan Council for
Education v Commercial and General Investments Ltd:
“an offeror by the terms of his offer may indicate that it may be accepted in a particular manner…..an offeror
who by the terms of his offer insists on acceptance in a particular way is entitled to insist that he is not bound
unless acceptance is effected or communicated in that precise way although it seems probable that even so, if the
other party communicates his acceptance in some other way, the offeror may by conduct or otherwise waive his
rights to insist on the prescribed method of acceptance. Where however the offeror has prescribed a particular
method of acceptance but not in terms insisting that only acceptance in that mode shall be binding, I am of the
opinion that acceptance communicated to the offeror by any other mode which is not less advantageous to him
will conclude the contract….if an offeror intends that he shall be bound only if his offer is accepted in some
particular manner, it must be for him to make this clear.
Instance where communication of acceptance may not be necessary.
S.8 provides that the performance of the conditions of an offer or the acceptance of any consideration
for a reciprocal promise which may be offered with an offer, is an acceptance of the offer
In Carlill v Carbolic Smoke Ball Co. another Defence raised was that Mrs. Carlill had not
communicated to the company that she intended to use the smoke ball and catch influenza. This
defence also failed; the nature of the offer made communication of acceptance inappropriate.
Revocation of acceptance
An acceptance may be revoked at any time before the communication of the acceptance is complete
(S.5 (2)).
The communication of revocation of acceptance is made by an act or omission of a party who revokes
the acceptance, by which that party intends to communicate the revocation or which has the effect of
communicating the revocation (S.3(3))
CAPACITY TO CONTRACT
The law assumes that parties to a contract have powers to enter into the contract but then lays down
restrictions on the ability of certain persons to enter into contracts. The person may either be a natural
or an artificial person.
The Contract Act provides that a person has capacity to contract where that person is
a) 18 years or above
b) is of sound mind
c) is not disqualified from contracting by any law to which he or she is subject (S.11)
MINORS
As already noted, a person has capacity to contract where that person is 18 years or above. The
question is what is the position of minors in contractual matters?
A person of 16 or above has the capacity to contract under Article 34(4) and (5) of the Constitution.
Article 34(4) provides that children are entitled to be protected from social or economic exploitation
and shall not be employed in or required to perform work that is likely to be hazardous or to interfere
with their education or to be harmful to their health or physical, mental, spiritual, moral or social
development. For the purposes of this provision, children are defined as persons under the age of 16
years. (Article 34(5))
At common law, there are some contracts which are binding on a minor
(i)Beneficial contracts of service
A minor may bind himself by a contract of apprenticeship [or of service since it is to his advantage
that he should acquire the means of earning his livelihood]. Such a contract must be substantially to
his advantage.
In Doyle v White City Stadium Ltd, it was held that a contract between an infant boxer and the
British Boxing Board of Control under which the infant received a licence to box that enabled him to
gain proficiency in his profession was so closely connected with a contract of service as to be binding.
(ii)
Voidable contracts
There is also a category of contracts which are valid and binding on a minor unless he repudiates
them during infancy [minority] or within a reasonable time after the attainment of majority age
[voidable contracts]. The principle is that if a minor undertakes such a contractual obligation, it
remains until he thinks proper to put it to an end.
One example is acquisition of shares in a company by a minor. An infant purchaser of shares acquires
an interest in the subject matter of a permanent nature carrying with it certain obligations that he is
bound to discharge until he repudiates [rescinds] the transaction and as soon as he so repudiates it,
the interest acquired by him ends and, with it, his liability for future calls. (Steinberg v Scarla)
Another example is partnership. An infant partner in a firm is not liable for partnership debts
contracted during his infancy. On reaching his majority, he may repudiate the partnership contract
altogether but if he fails to do so and thus holds himself out as a continuing partner, he shall be liable
for all the partnership debts contracted since he was admitted. [See S. 11 and 12 of the Partnership
Act]
A minor may be bound by transactions involving relations similar to those created by contract.
S.57 provides that where a person incapable of entering into a contract or anyone whom that person
is legally bound to support is supplied by another person with necessaries suited to the condition in
life of that person or of anyone that that person is legally bound to support, the person who furnishes
the supplies is entitled to reimbursement from the property of the person who is incapable of
entering into the contract
Necessaries include articles and services fit to maintain the particular person in the station of life in
which he moves. The minor must not be already sufficiently provided with the goods of the kind in
question. If he is, then even though this fact is not known to the Plaintiff, the minor is not bound.
A person has capacity to contract where that person is of sound mind
The Act provides that for purposes of entering into a contract, a person is said to be of sound mind if
at the time of entering into the contract, that person is capable of understanding the contract and
forming a rational judgment as to its effect upon his interests.
A person who is usually of unsound mind but occasionally of sound mind may enter into a contract
during periods when he is of sound mind
A person who is usually of sound mind but occasionally of unsound mind may not enter into a
contract during periods when he is of unsound mind.
COMPANIES
A company acquires the capacity to contract when it has been incorporated [formed] otherwise
before the process of incorporation is complete, it cannot be regarded as a person capable of
contracting.
In Kelner v Baxter, promoters of an unformed company [the Gravesend Royal Alexandra Hotel Co
Ltd] signed a contract for and on behalf of that company with Kelner under which he would sell
them wine. The company failed before Kelner had been paid and he sued the promoters personally. It
was held that at the time the contact was made, there was no company in existence and so when
company was subsequently formed, it was not bound by such a pre-incorporation contract.
INTENTION TO CREATE LEGAL RELATIONS
The law will not necessarily recognize the existence of a contract simply because of the presence of
mutual promises. Some agreements are not intended to be the subject of legal actions and if the
parties expressly declare or clearly indicate in their agreement that they do not intend to assume
contractual obligations, then the law accepts and implements their intention.
Where an agreement either by its nature or by words and conduct of the parties, an objective
observer would not conclude that they intended to create legal obligations, then such agreements are
not enforceable notwithstanding the existence of other requisites.
The general rule therefore is that save for commercial agreements, domestic and social arrangements
do not generally constitute contractual arrangements.
(i)
Domestic agreements;
In Balfour v Balfour, the Defendant who was about to go abroad, promised to pay his wife $30 per
month in consideration of her agreeing to support herself without calling on him for any further
maintenance. The wife contended that the Defendant was bound by his promise. It was held there
was no legally binding contract between the parties. As it was a domestic agreement, it was
presumed that the parties did not intend to be legally bound.
The usual presumption that agreements between spouses living happily together are not legally
enforceable does not apply when they are about to separate.
In Merrit v Merrit, a husband‟s promise to his wife that he would transfer their jointly owned house
if the wife paid off the outstanding balance on the mortgage [at the time the couple were not happily
living together]was held to be enforceable. That a legal relationship was contemplated by the parties
in the circumstances.
(ii)
Commercial Agreements
There is a strong presumption in favour of intention to be legally bound in ordinary commercial
dealings. The presumption is rebuttable if a contrary intention can be proved.
In Jones v Vernom’s Pools Ltd, a coupon had a clause stating that “any agreement…. entered
into…shall not…..give rise to any legal relationship but is binding in honour only‟‟. It was held that no
contract existed between the parties, since the wording of the agreement clearly negated such
intention. Jones‟ action for breach of contract could not therefore succeed.
In Rose and Frank Co. v Crompton & Bros, a commercial agent agreement stated: „this arrangement is
not entered into, nor is this memorandum written, as a formal or legal agreement and shall not be the subject to
legal jurisdiction in the law courts……” Goods were ordered and supplied in accordance with the
agency agreement. Crompton breached the agreement and the plaintiffs sued for breach. It was held
that the wording of the agency agreement made it clear that it was not intended to be binding in law;
it could not therefore be enforced.
CONSIDERATION
Under the Contract Act, consideration means a right, interest, profit or benefit accruing to one
party or forbearance, detriment, loss, responsibility given, suffered or undertaken by the other
party. The framers of the Act adopted this definition from the case of Currie v Misa.
S.20 provides that an agreement made without consideration is void. The basic feature of the
doctrine of consideration is the idea of reciprocity. Something of value in the eyes of the law
must be given for a promise in order to make it enforceable as a contract
Types of Consideration:
(i)Executed Consideration
This is consideration given where a promise is made in return for the performance of an act. It is
consideration that is wholly performed on one side immediately the contract is entered into. If A
promises to sell his car to B and delivers the same to B who promises to pay next week; that is said to
executed consideration.
(ii)Executory Consideration is given where there is an exchange of promises to do something in the
future. This is a promise to confer a benefit or suffer a detriment at a future time. B‟s promise to pay
next week is executory consideration
(iii)Past Consideration
In the above examples, the act or promise of one party and the act or promise of the other constitute
one single transaction. With past consideration, the act which constitutes consideration precedes the
promise. In other words, the act is done before the promise is made. The law does not attach value to
past consideration.
This was illustrated in the case of Re McArdle where the plaintiff carried out certain improvements
to a house at a cost of $488. After her completion of the work, the relatives signed a document
promising to pay her $488. They failed to honour their promise and the plaintiff sued them to enforce
the promise. It was held that her action would not succeed since she had made the improvements
before the relatives had made a promise to refund her money. [The Plaintiff‟s consideration i.e.
making the improvements and the relatives promise were not part of the same transaction].
However, notwithstanding the absence of consideration, the Contract Act provides that the
agreement is valid in case of a promise
(i)
To compensate wholly or in part a person who has already voluntarily done something for the
promisor or something which the promisor was legally compellable to do (S.20(b)).
(ii)
Made in writing and signed by the person responsible for it or by the agent of that person to
pay wholly or in part a debt for which the creditor may have enforced payment but is
restricted by the Limitation Act (S.20(c))
THE RULES GOVERNING CONSIDERATION
Consideration must be valuable (money or money’s worth)
An act, forbearance or promise will amount to consideration only if the law recognizes that it has
some economic value. In Thomas v Thomas, it was held that consideration means something which
is of value in the eyes of the law moving from the promisee.
Natural love and affection of itself does not constitute consideration. However, this notwithstanding,
where a promise, expressed in writing and registered under the Registration of Documents Act, is
made on the account of natural love and affection between parties standing in a near relation to each
other, the Contract Act provides in this case that there is a binding agreement (S.20(a))
Consideration must move from the promisee
This means that a person to whom a promise was made can enforce it only if he himself provided the
consideration for it. He can‟t sue if the consideration for the promise moved from a third party. For
example, if A promises B that he will pay B $ 10,000 if C will paint A‟s house, and C does so, B cannot
enforce A‟s promise.
In Tweedle v Atkinson, a young couple were about to marry. The husband‟s father and the bride‟s
father agreed between themselves that each would make payments to the couple. It was held that the
husband could not sue for breach of contract when the bride‟s father refused to pay.
Price v Easton the Defendant made a promise with X that if X did some work for him, the Defendant
would pay 19 pounds to the Plaintiff. X did the work but the Defendant did not pay the Plaintiff and
so he sued. The issue was whether the plaintiff could sue on the contract.
It was held that since no consideration had moved from him, his action could not succeed.
Consideration must be sufficient but not necessarily adequate.
S.20(3) of the Contract Act provides that an agreement to which consent of the promisor is freely
given is not void merely because the consideration is inadequate. However, the inadequacy of
consideration may be taken into account in determining whether the consent of a promisor was freely
given
This means that the courts will not make inquiries as to whether consideration given by the parties is
adequate or not except for allegations of fraud or duress or undue influence. The law is not concerned
with bad bargains
In Midland Bank Trust Co v Green, a father sold a farm to his wife for £500 even though it was
valued at more than £40,000. It was held that the court would not inquire into the adequacy as long as
the consideration was real. Consequently the court held that there was a valid contract between the
parties.
Cases where consideration may be considered as insufficient
(i)A person who by his official status/ by operation of law is under a public duty to act in a certain
way is not regarded as furnishing consideration merely by promising to discharge that duty.
In Collins v. Godefroy, G obtained from the Court an order requiring C`s attendance as a witness for
G. G promised to pay C six guineas as compensation for loss of time by C .G refused to pay and C
sued G. it was held that the issue of a court order imposed on C a duty to attend court and C‟s
attendance could not be consideration for G‟s promise to pay the sum stated.
To constitute consideration, the promisee must prove that he did something more than a bare
discharge of that duty.
In Glasbrook Bros. v Glamorgan County Council, the manager of a colliery requested for a
permanent police guard during a strike. The police thought that a mobile police was sufficient to
protect the mine and those workers who wished to turn up for work. But when the manager insisted
on a police guard, the police said that such would be provided for payment. The manager agreed
and the police guarded the mine for the entire duration of the strike. But after the strike, the owners
of the mine refused to pay. It was held that although the police were under a duty to provide
protection, they had discretion as to the form of protection. They thought that a mobile police was
sufficient. As the manager wanted more protection than the police thought necessary, the police
exceeded their duty in providing the police guard. This was sufficient consideration in support of the
contract.
In Ward v. Byham, the father of an illegitimate child promised $1 a week to the mother provided that
“the child will be well looked after and happy”. It was held that the promise was binding since the
mother‟s under taking amounted to something more than her normal legal obligation to the child.
(ii) Where the promisee is bound by an existing contractual duty to the Promisor.
Consideration is deemed to be insufficient where the Promisee is merely fulfilling his existing
contractual duty to the promisor.
In Stilk v Myrick, during a sea voyage, 2 of the crew deserted the ship. The captain promised the rest
of the crew that they will be paid more money than agreed under the original contract] for working
[sailing] the ship home. The crew worked the ship to its destiny but they were not paid the extra
money which had been promised. It was held that they were not entitled to the extra money as they
had not provided any consideration. The desertion of a part of the crew was just an emergency of the
voyage and those who remained were bound by the terms of their original contract to exert
themselves to the utmost to bring the ship in safety to its destined port.
PRIVITY OF CONTRACT:
As a general rule, the legal effects of a contract are confined to the contracting parties. The common
law doctrine means that a contract cannot as a general rule confer rights or impose obligations arising
under it on any person except the parties to it. It follows therefore that only parties to a contract can
sue or be sued on that contract.
Example, An agreement between A & B can not confer any legally enforceable benefit neither can it
impose any obligations on a stranger or take away the rights of the stranger. Only A can sue B and
vice versa.
The doctrine is no more than application of the rule that consideration must move from the promisee.
Consideration must move from a party entitled to sue on the contract.
Factors to be considered
Two questions arising from the statement; who are the parties to the agreement? And has the
claimant provided consideration for the promise which he is seeking to enforce?
A number of cases illustrate the doctrine of privity
In Tweedle v Atkinson, a young couple were about to marry. The husband‟s father and the bride‟s
father agreed between themselves that each would make payments to the couple. It was held that the
husband could not sue for breach of contract when the bride‟s father refused to pay.
However, strictly emphasising the doctrine may in some cases prove to be harsh or impracticable.
Accordingly, the law developed exceptions:
(i)S.65 of the Contract Act provides for the right of a third party to enforce a contractual term where:
1. The contract expressly provides that he or she may do so or
2. A term of the contract confers a benefit on that person. But this shall not apply where on
the proper construction of the contract, it appears that the parties did not intend the term to
be enforced by a third party
3. A third party shall be expressly identified in the contract by name, as a member of a class
or as answering a particular description but need not to be in existence at the time the
contract is entered into.
4. This section shall not confer a right on a third party to enforce a term of a contract except
where the term is subject to and in accordance with any other relevant terms of the contract
5. For the purposes of exercising the right to enforce a term of a contract, a third party shall
have available any remedy that would have been available to him in an action for breach
had that third party been a party to the contract and the rules relating to damages,
injunctions, specific performance and other relief shall apply accordingly
6. Where a term of a contract excludes or limits liability in relation to any matter, any
reference in this Act to the enforcement of a term of a contract shall be construed as a
reference to the third party availing himself of the exclusion or limitation.
(ii)Agency.
The general rule is expressed in the Latin Maxim Quic facit per alium facit per se [he who acts through
other acts himself]. Where an agent contracts with a third party on behalf of a principal, the latter
may step in and sue or be sued on the contract.
In in The Dragon where a husband booked ticket on a cross-channel ferry for himself, his wife and
children, it was held that a contract of carriage between the wife and the carriers presumably made
by the husband as agent of the wife was enforceable by the wife.
(iii)Beneficiary under a trust.
If two people contract with the intention of creating a trust in favour of a 3 rd person, the later though
unable to enforce the contract my take an action as a beneficiary for breach of trust if any contractual
obligations are broken.
(iv)Change of parties by operation of law
There are situations when parties to a contract my change by operation of law or by agreement.
In case of bankruptcy and in case of death, the rights pass on to the legal representative [either the
trustee in Bankruptcy or Administrator or executor respectively).
In Beswick v Beswick, Peter Beswick, a coal merchant, sold his business to his nephew, John in
return (among other matters) for an undertaking by John to pay E5 per week to Peter‟s wife upon his
demise. Held that although the wife could not sue John in her personal right, [because she was not a
party to the contract], she was able to recover payment on Peter‟s behalf as administrator of his
estate.
(v)Third party insurance
An important situation where a 3rd party can take the benefit of a contract made between two others
is in connection with liability insurance. The contract of insurance is ordinarily between the insured
and the insurance company which promises to indemnify the insured against possible liability to 3 rd
parties who may suffer damages.
The Motor Vehicle Insurance [Third Party Risks] Act Cap 214 makes provisions for third party
Insurance against third party risks in respect of the use of the vehicles. S. 2 of the Act provides that it
shall not be lawful for any person to use or to cause or permit any other person to use a vehicle on the
road unless there is in force in relation to the use of the vehicle by that person or that other person as
the case may be, a policy of insurance in respect of third party risks. A person who contravenes this
provision is liable to a fine.
The insured [offeror] fills in a proposal form [offer] which if accepted by the insurer, an insurance
contract is concluded on which the insured can sue the Insurance Co.
If X has an insurance policy with SWICO and the passengers are injured in an accident involving the
vehicle, a passenger can sue SWICO in his third party capacity although he is not privy to the policy
between the owner and the insurance Co [SWICO].
(vi)Negotiable instrument- under the Bills of exchange Act, a holder of a bill of exchange is deemed
to have finished consideration and can sue any party before him whose signature appears on the bill.
(vii)Negligence
In Donoghue v Stevenson, the appellant drank a bottle of ginger beer manufactured by the
respondent which a friend bought from a retailer and gave to her. The bottle contained decomposed
remains of a snail which were not or could not be detected until the greater part of the beer had been
taken since the bottle was opaque. The appellant suffered from shock and stomach complications.
The respondent objected that he was not liable.
It was held by Atkin LJ that a manufacture of products which he sells in such a form as to show that
he intends them to reach the consumer in the form in which they left him, with no reasonable
possibility of intermediate examination, and with the knowledge that, in the absence of reasonable
care in the preparation or putting up the products, will result in an injury to the consumer‟s life owes
a duty to the consumer to take that reasonable care
(viii)Assignment
This is a method by which a party to a contract transfers the benefits he has contracted to receive
from the other party to the third party who is himself able to enforce performance of the contract. X
owes Y money. Y institutes a suit for recovery of that money and obtains judgment. But because
recovery through the court bailiffs is likely to take long, Y decides to assign or transfer his interest in
the loan to Z. In such a situation, Z will be the one to pursue recovery of the debt.
(ix)The Statutory Contract under the Companies Act
The memorandum and articles of association under S.21(1) of the Companies Act bind the company
and its members as if they had been signed and sealed by each member and contain covenants by
each member to observe the provisions of the memo and Articles. The memo and articles amount to a
statutory contract between each member and the company and between the members. Except the
subscribers to the memo and Articles, the company itself and the members who join the company
later do not sign those documents but notwithstanding this fact, they are bound by those documents.
(x)Collateral contract
The word collateral suggests something that stands side by side with the main contract springing out
of it and fortifying it.
In Wells v Buckland Sand [1965] the plaintiff bought sand for growing chrysanthemums in reliance
on an express assurance that the sand was suitable for this purpose. The assurance was not given by
the seller but by the manufacturer. It was held that there was a collateral contract and the buyer was
entitled to damages when the sand proved unsuitable and the buyer suffered loss. This was a case in
which a specific and personal assurance was given by the manufacturer.
VITIATING FACTORS
Vitiating factors are factors the existence of which nullifies an otherwise valid contract in the sense
that it would not be proper to hold the affected party liable to the contract. They include;
1)
2)
3)
4)
5)
Misrepresentation.
Mistake
Illegality
Coercion
Undue influence
MISTAKE
In the course of negotiations before a contract is concluded, one or both parties may
misunderstand/misconceive certain material facts. If he proves that he would not have entered into a
contract if she had appreciated the true material facts, depending on the nature of the mistake, he
may be excused from the contract. This however is not always the case; it depends on the type of
mistake.
The general rule as stated by Lord Denning in Solle v Butcher is that a mistake will not affect the
validity of a contract. This is because the law of contract is based on two principle doctrines.
1)
The Doctrine of freedom of contract.
Sir George Jessel stated in the case of Printing and Numerical Registering Co. V Sampson that If
there is one thing more than another which public policy requires, it is men of full age and competent
understanding shall have the utmost liberty in contracting and that the contract when entered into freely and
voluntarily shall be held sacred and be enforced by the courts of justice.
2)
The Doctrine of Caveat Emptor.
Ordinarily, contract law is founded on the laizer faire capitalist ideology which operates on the
doctrine of caveat emptor. Every party to the contract is expected to look out for himself and to
ensure that he is not misled. It is not the business of court to protect the buyer from the consequences
of a contract entered into carelessly without making sufficient inquiries. If a party to a contract claims
that he acted under a mistake, he only has himself to blame.
The general rule however, is subject to certain expectations. If the mistake is such that the mistaken
party has not consented, then there is no contract because there is no consensus ad idem. There are
generally three types of mistake.
a)
b)
c)
1.
Common mistake
Mutual mistake
Unilateral mistake
COMMON MISTAKE
S.17 (1) of the Contract Act provides that where both parties to an agreement are under a mistake as
to a matter of fact which is essential to the agreement, consent is obtained by mistake of fact and the
agreement is void. This relates to
(A) Common mistake of which there are two types which may vitiate a contract.
(i)
Cases of Res Extincta (subject matter does not exist)
If at the time of concluding the contract, the subject matter of a contract has ceased to exist but both
parties are unaware of the fact, then there is no contract because there is nothing to buy and to sell
respectively. The agreement is therefore void.
In Couturier v Hastie, there was a sale of a consignment of corn, en route from Salonika to U.K. At
the time of the contract, both parties expected that the corn was on a ship in the high seas. Unknown
to them, water had leaked into the cargo-hold of the ship causing damage to the corn and to cut
losses, the Ship Master had sold off the corn at a discount at the Tunis.
It was held, that what the parties contemplated at the time of the contract, was that there was an
existing consignment of corn to be bought and sold respectively yet there was no such corn and so,
there was no contract.
In Galloway v Galloway, there was a separation agreement between a man and a woman that was
declared a nullity when it was proved that there was no valid marriage between the 2 in the first
place. Once it was shown that the marriage which was the subject of the contract did not exist, then
there was nothing to contract about. There could not be a separation unless there was a union in the
first place.
(ii)
Cases of Res Sua
This arises where a person buying an object is in fact entitled to it irrespective of the contract.
In Huddersfield Banking Company Limited v Henry Lister and Sons Ltd the defendants had
mortgaged their mill and fixed plant to the plaintiffs. The defendants later wound up their business
and this would have entitled the plaintiffs to exercise their legal rights over the fixed plant. They gave
their consent that certain machinery could be sold, thinking that they had no control over it. In fact it
was part of the fixed plant but it had wrongfully been detached from its base. The court held that
plaintiff‟s consent order should be set aside as they were mistaken as to their true right in relation to
that machinery.
(B)
MUTUAL MISTAKE
There are two types of mutual mistake which may vitiate a contract i.e.
Mutual mistakes
o Relating to identity of subject matter.
o Mutual mistake relating to the possibility of performance.
1) Mutual mistake as to the identity of the subject matter.
If the parties are at cross purposes i.e. thinking in terms of different subject matters, then there is no
contract.
In Raffles v Wichelaus, a merchant contracted to sell a consignment of goods. The documents stated
that the goods being sold were those on board the Peerless in Bombay harbour. In fact there were two
ships of that name. The seller was thinking in terms of peerless I and the buyer thought he was
buying goods on board the peerless II.
It was held that there was no contract.
2)
Mutual mistake as to possibility of performance.
If at the time of the contract the parties believe that the contract is capable of being performed
whereas not, then there is no contract. The Court cannot tie a party to a contract that is incapable of
being performed.
There are three types of impossibility.
 Physical impossibility
 Legal impossibility
 Commercial impossibility
1)
Physical impossibility
It exists where both parties believe that it is practically possible to perform the contract under existing
circumstances whereas not.
In Sheikh Brothers v Oschner, the Respondent Company leased a sisal estate from the Appellants on
a specific understanding that the estate was capable of yielding 50 tones of processed sisal a month
when in fact it was incapable of doing so. It was held that the contract was void because it was based
on mistake as to capacity of the land.
2)
Legal impossibility
S.18 of the Contract Act provides that where a contract is entered into by a mistake in respect of any
law in force in Uganda, the agreement is void.
When both parties believe that the contract is legally permissible whereas not, the contract is void ab
initio (from start) because a court of law cannot force a person to perform an illegal transaction. In
Kulubya v Singh, Court found that a contract for the transfer of land to a non-African without prior
ministerial consent was illegal and void ab initio. It violated the provisions of S.20 of the Land
Transfer Ordinance.
3)
Commercial impossibility
A contract may still be void even if it is legally permissible and physically possible to perform if it is
commercially sterile (meaningless). In Griffiths v Brymer, there was a contract to let (rent) a room to
the defendant. Both parties understood that the purpose of letting the room was to enable the
defendant to view the coronation procession of Edward VII. Unknown to the parties, the prince had
fallen ill and the coronation procession had been cancelled before the contract was concluded. The
landlord still sought to enforce the rent. It was held that though the contract was physically and
legally enforceable, it had become meaningless to perform.
C)
UNILATERAL MISTAKE
S. 17(2) of the Act provides that a contract is void where one of the parties to it operates under a
mistake as to a matter of fact essential to the contract. This provision relates to unilateral mistake. The
general rule is that such a mistake cannot invalidate a contract. But again there are exceptions to this
rule:
A unilateral mistake may invalidate a contract;
 Where there is a mistake as to the identity of the contracting party.
 Where documents are mistakenly signed
Mistake as to the Identity of the Contracting Party
As regards mistaken identity of the parties even where identity is concerned, the general rule is that
identity of contracting parties is immaterial. It is assumed that what the contracting party is
interested in is the subject matter of contract and not the contracting party.
Given the above rule, it follows that in order for identity of contracting parties to affect the validity of
the contract, the burden is on the party seeking to vitiate the contract to prove that identity of the
other party was crucial.
A party relying on mistaken identity must prove that:
 He intended to deal with somebody else other than the person he dealt with.
 The party he dealt with knew that he was not the one intended to be dealt with.
 He would not have dealt with the party he dealt with if he knew the true situation.
 He took reasonable steps to verify the identity of that other party.
In Candy v Lindsay (credit transaction), a fraudster called Blenkarn ordered goods from Lindsay and
Co. and gave his address as 37 Wood Street. He signed his name in such a way to look like Blenkiron
and Co. The Plaintiff had not dealt with that company but knew of it by reputation as having a
business at 123 Wood Street. The goods were duly delivered for the rogue‟s address at 37 Wood
Street. The rogue resold them to Candy and did not pay Lindsay and Co. who then sued to recover
the goods from Candy.
It was held that the contract between Lindsay and the rogue was void because the Plaintiff never
intended to deal with him and being a credit sale, identity of the rogue was crucial. Accordingly, the
rogue never acquired title to the goods and could not pass any to Candy.
In Ingram v Little, a rogue (Swindler) claiming to be Hutchinson visited the Plaintiffs‟ residence in
response to an advert and offered to buy a family car. They refused to accept a Cheque. He told them
he was P.G.M. Hutchinson with a business at Buildford and a residence at Stanstead House,
Caterham. Hearing this, one of the ladies quietly went to a separate room and searched a directory
which showed that P.G.M. Hutchinson lived at that address. The rogue issued to the Plaintiffs a
cheque which bounced. In the meantime the Rogue had sold the car to the Defendant who bought in
good faith.
It was held, that the offer was only intended for P.G.M. Hutchinson and a rogue was incapable for of
accepting it. So there was no contract, the rogue never acquired title and he could pass none to the
Defendants who were thus ordered to return the car.
DOCUMENTS MISTAKENLY SIGNED AND THE PLEA OF NON EST FACTUM
The general rule as stated in L’Estrange v Gracoub is that when a person signs a document, he is
bound by his signature irrespective of whether he understands the contents of the document or not,
understands it or whether he can read but there are instances where a signatory on a document can
escape liability by raising the plea of non-est factum (it is not my deed)
However, courts are generally hostile towards reliance on this plea. They take the position that
persons of full age and sound mind who voluntarily sign documents should not be lightly allowed to
avoid of consequences of so doing. Consequently, the Courts have imposed stringent conditions
which must be met for non est factum to operate.
(i)The plea is only available to a limited group of people i.e. persons who may be unable to read and
understand documents e.g. illiterates, minors, persons of unsound mind, persons who at the time of
signing are intoxicated, the blind and the senile.
(ii)The mistake must be a serious one in a sense that it must relate to the character of the document
and not merely to its exact contents. The distinction was expounded in Saunders v Anglia Building
Society. (1971). A 78 year old lady wanted to transfer the title of her house to the nephew. A clerk
who was a friend of the nephew knew of the intention. He prepared a document by which the house
would go to himself (the clerk). He brought the documents to the lady for signing.
The lady‟s eye sight was bad and she had lost her glasses. She asked the Clerk to read it to her and he
assured her that it was a transfer of land to her nephew and she signed. The clerk used the document
and title deeds of the house to borrow money from Anglia Building Society and then defaulted. The
Building Society sought to take over the house and the old lady pleaded non est factum
It was held that the document she intended to sign was not fundamentally different from the one she
signed because she intended to sign the document by which she would lose the house. The mistake
was to the exact content not character of document. The Court clarified that to benefit from non est
factum, she had to show that the document was radically, fundamentally, basically, totally, and
essentially different from the one she intended to sign and this was not the case.
On the other hand in Lewis v Clay, Lord Neville produced a document before Clay and asked him to
sign on the document. The words on the document had been covered with blotting paper except for
some small spaces which had been cut in the blotting paper through which Clay would sign.
He told clay that the document concerned a private family matter when in fact it was a promissory
note and by signing it, Clay was promising to pay € 1,113.
Neville then used the promissory note to obtain a loan from Lewis. Lewis gave the money but Clay
could not pay. Clay pleaded non est factum. It was held that the document to which Clay put his sign
was entirely different in character from the one he intended to sign. He could plead non est factum to
escape liability.
(iii)Mere ignorance of the contents of the document as opposed to inability to read and
understanding may not protect the person.
(iv)The illiterate will not benefit from non est factum if it is shown that he would have known the true
contents of the document if he was not careless hence in Kakande v Nsimbi, an illiterate seller of
land could not take advantage of non est factum because he never bothered to ask his lawyer to
translate the document he signed.
THE ILLITERATES PROTECTION ACT.
The Act is intended to protect illiterate persons from the effect of documents purportedly written or
signed on their behalf. To invoke the Act, one must be an illiterate person. It defines an illiterate
person as one who is unable to read and understand the script or language in which the document is
written or printed.
S.3 provides that any person who shall write any document for or at the request or on behalf or in the
name of any illiterate shall also write on the document his full names as the writer thereof and his full
and true address. By so doing, the writer implies that he was instructed by the illiterate to write the
document, that the document accurately represents the instructions, that it was read over and
explained to the illiterate.
Under S.4, any person who signs or writes a document on behalf of an illiterate person without
complying with the requirements above commits an offence and on conviction is liable to a fine of
300/= or in default of payment to imprisonment for a period not exceeding 3 months. In addition
such a person could be liable to other civil or criminal consequences for fraud, forgery,
misrepresentation etc.
DURESS, UNDUE INFLUENCE, FRAUD AND MISREPRESENTATION
S.16 of the Act provides that where consent to an agreement is obtained by fraud, misrepresentation,
undue influence or coercion, the agreement is a contract voidable at the option of the party whose
consent was obtained by fraud, misrepresentation, undue influence or coercion.
COERCION
The Contract Act defines coercion as the commission or threatening to commit any act forbidden
under any law or the unlawful detaining or threatening to detain any property to the prejudice of any
person with the intention of causing any person to enter into an agreement.
There are situations where somebody does not actually use threats/violence but he uses his superior
position to dominate the will of the other party and uses his position to gain an unfair advantage over
the other. The common law did not consider this situation. This lacuna in the law was covered when
equity developed the concept of undue influence
UNDUE INFLUENCE
S.14(1) of the Act provides that a contract is induced by undue influence where the relationship
subsisting between the parties to a contract is such that one of the parties is in a position to dominate
the will of the other party and uses that position to obtain an unfair advantage over the other party.
A party is taken to dominate the will of another party where
a) the party holds a real or apparent authority over the other party or
b) the party stands in a fiduciary relationship to the other party
c) The mental capacity of the other party is temporarily or permanently affected by reason of
age, illness, mental or bodily distress.
A party is said to stand in a fiduciary relationship to another party if the party has duties involving
good faith, trust, special confidence and candor towards that other party such as a relationship
between an attorney and a client, a guardian and a ward, a principal and an agent, an executor and
an heir, a trustee and a beneficiary or a landlord and tenant.
Where a party who is in a position to dominate the will of the other party enters into a contract with
that other party and the transaction appears on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that the contract was not induced by undue influence shall be
upon the party in a position to dominate the will of the other party
In Allcard v skinner, the Plaintiff a 35 year old lady, was introduced by her spiritual advisor, a lady
superior of a religious organization known as the sisters of the poor. She became a sister and took
three vows; the vow of poverty, chastity and obedience. The vow of poverty required her to
surrender all her individual property to the institution forever. The vow of obedience required her to
obey her lady superior without question.
She remained a sister for 8 years during which period she surrendered most of her property to the
institution and the proceeds from it were used for purposes of running the institution. She left the
sisterhood and 6 years later she sued to recover the value of her property contending that she
surrendered it through undue influence.
It was held that although no personal pressure had been proved to have been used, the relationship
between the two gave rise to the presumption of undue influence especially since she was required
to obey her lady superior without question and not to seek the advice of any person without the
superior‟s consent.
The legal effect of undue influence
Where consent to an agreement is obtained by undue influence, the agreement is a contract voidable
at the option of the victim of undue influence (S.16 (1)). He may set the contract aside absolutely but
if he received any benefit under the contract, he can only set it aside upon such terms and conditions
as may seem just to court (S.16(5))
FRAUD
S.15 provides that consent is induced by fraud where any of the following acts is committed
by a party to a contract or with the connivance of that party or by his agents with the intent of
deceiving the other party to the contract or his agents or to induce the other party to enter into
the contact:
a) A suggestion to a fact which is not true made by a person who does not believe it to be
true
b) The concealment of a fact by a person having knowledge or belief of a fact
c) A promise made without any intention of performing it
d) Any act intended to deceive the other party or any other person or
e) Any act or omission declared fraudulent by any law
Explanation.- Mere silence as to facts likely to affect the willingness of a person to enter
into a contract is not fraud, unless the circumstances of the case are such that, regard
being had to them, it is the duty of the person keeping silence to speak or unless his
silence is, in itself, equivalent to speech. (S.15(2)). However, the victim of fraud should
in this case not have had the means of discovering the truth with ordinary diligence
(S.16(2))
The Act provides that fraud which does not cause a party on whom it is effected to consent to a
contract does not render the contract voidable (S.16(3)). Where consent to an agreement is obtained
by fraud, the agreement is a contract voidable at the option of the victim of fraud (S.16 (1)).
The Act provides that a party to a contract, whose consent is obtained by fraud may where that party
thinks fit insist that the contract is performed and that he is put in the position in which he would
have been if the representations made had been true (S.16(4)).
MISREPRESENTATION
In the course of concluding a contract, the parties usually make statements which may not be part of
the contract and if such statements are incorporated into a contract they are referred to as terms. If, on
the other hand, they induce the party to whom they are made to enter into a contract but they are
themselves not part of it, they are mere representations and not terms. If such representations turn
out to be false, they are referred to as misrepresentations.
Nature of misrepresentation
Under the Contract Act, misrepresentation means:
a) A positive assertion made in a manner which is not warranted by the information of the
person who makes it or an assertion which is not true though the person who makes it
believes it to be true
b) Any breach of duty which without an intent to deceive gains an advantage to the person who
commits it or anyone who claims under that person by misleading another person to his or her
prejudice or to the prejudice of anyone claiming under that other person
c) Causing, however innocently, a party to an agreement to make a mistake as to the substance of
the thing which is the subject of the agreement
At common law, for a statement to amount to a misrepresentation and to give a representee a right to
relief, it must exhibit the following:
a) It must be a statement of fact. This means it must neither be a statement of opinion nor one
of law. A statement of opinion is not always easy to distinguish from one of fact unless
words like “I think”, “in my view”, “I am of the opinion” etc are used. But an opinion made
categorically may be treated as a fact and amount to misrepresentation.
b) An opinion made by a professional in the course of rendering professional services makes
the professional bound by his opinion and should take reasonable care when making his
opinion.
c) It must not be a mere puff or sales talk. Puffs are statements which are so vague and so
obviously exaggerated that legally they are not capable of having any meaning and can not
have induced a party to enter into a contract e.g. “These shoes will last you a life time”
d) The statement must have been intended to induce the representee to enter into a contract.
e) The statement must have induced the representee to enter into a contract. In determining
this courts apply the “but for” test. The Act provides that misrepresentation which does not
cause a party on whom misrepresentation is effected to consent to a contract does not
render the contract voidable S.16(3)
f) The representee has to show that the statement came to his notice.
g) If he knew the untruth of the statement but chose to enter into the contract for other
reasons, he cannot rely on misrepresentation to seek relief.
h) If the representee did not actually believe the statement but stood the risk of its being untrue
then it cannot be misrepresentation.
i) The Contract Act supplements the above by providing that if the representee has the means
of discovering the truth with ordinary diligence, there is no misrepresentation ((S.16(2))
Legal effect of misrepresentation
Where consent to an agreement is obtained by misrepresentation, the agreement is a contract
voidable at the option of the victim of misrepresentation (S.16 (1)).
REMEDIES FOR MISREPRESENTATION
Where the misrepresentation is fraudulent, the representee may opt to avoid the contract (rescission)
or he may continue with the contract and seek damages.
Rescission
He can rely on the misrepresentation to set aside/rescind the contract. The rescission of a voidable
contract may be communicated in the manner that applies to the communication of revocation of an
offer and subject to this Act (S.55). A party who rightfully rescinds a contract is entitled to
compensation for any damage which that person sustains through the non-fulfillment of the contract
(S.63)
Damages
He can demand damages while the contract remains in force. The Act provides that a party to a
contract, whose consent is obtained by misrepresentation, may where that party thinks fit insist that
the contract is performed and that he is put in the position in which he would have been if the
representations made had been true.
ILLEGALITY
S.19 of the Contract Act provides that consideration or an object of an agreement is lawful
except where
a) It is forbidden by law
One example of illegality is an agreement to purchase land by a non-citizen. Under S. 40 of the
Land Act, a non-citizen can only acquire a lease in land in Uganda and is therefore barred
from purchasing mailo or freehold land.
b) Is of such nature that if permitted would defeat the provisions of any law
c) Is fraudulent
d) Involves or involves injury to a person or the property of another or
e) Is declared immoral or against public policy by a court
Consideration or objects declared immoral or against public policy by a court
Public policy means the values which society attaches to some aspects. Examples in this context
include committing crimes, defrauding the revenue, promoting sexual immorality, promoting
corruption in public life etc.
An agreement to commit a crime
Foster v Driscoll [1929]
In the 1920s, the US constitution was amended to insert a provision which prohibited importing in
and consumption of liquor. The plaintiff agreed with the defendant to form a partnership whose
business was to smuggle liquor from the UK to the US through the Canadian border. The Defendant
breached the contract. It was held that English courts could not enforce such a contract even though it
was lawful to transact in liquor in the UK because to enforce it would be to undermine the
relationship between the UK and the US
In Regazzoni v KC Sethia there was a contract for the sale of Indian jut to Italy. The parties knew
that from Italy it would be reexported to SA. And yet trade relations between India and SA were
prohibited by the economic sanctions between India and SA at the time. It was held that such a
contract was contrary to public policy.
An agreement prejudicial to public safety
A contract which undermines the safety of the public like one trading with enemy aliens is
unenforceable.
Daimler v Continental Rubber Co. [1916] the plaintiff company was incorporated in England with
the object of selling tyres manufactured by a German company. All its directors except one were all
Germans. After the outbreak of World War I, the company sued the defendant for payment of a trade
debt. The defendant argued that payment of the trade debt would amount to trading with the enemy
which was illegal. Court agreed.
An agreement to promote corruption in public life
A promise to pay a bribe cannot be enforced in a court of law.
Tekele Gebresellasie v Sebhabu Woldemariam [1965]
The two parties were candidates for an election. They agreed to cast lots and that the winner of the
lots would stand unopposed for the other; and that if the loser insisted on standing the loser would
pay £5000 to the winner. The loser of the lots went on to contest for the election and was sued. It was
held that the contract was immoral and unlawful. It is stated that every citizen has a right to vote and
freedom cannot be sold. Furthermore, one cannot acquire a right to become a representative of the
people through money or deceit.
An agreement to promote sexual immorality
These are called contracts “contra bonos mores” i.e. contracts against morality hence illegal. At
common law, court cannot entertain a case by a prostitute to regain her fees even if prostitution was
not illegal. Neither would it assist a landlord to recover rent from a prostitute if he knew that the
premises were being used wholly or largely for prostitutes.
Pearce v Brooks [1866] a taxi driver allowed his taxis to be used by prostitutes to look for customers.
His suit to recover hire charges failed.
Effect of illegality
An agreement whose object or consideration is unlawful is void and a suit shall not be brought for
the recovery of any money paid or thing delivered or for compensation for anything done under the
agreement unless
a) Court is satisfied that the plaintiff was ignorant of the illegality of the consideration or object
of the agreement at the time the plaintiff paid the money or delivered the thing sought to
be delivered or did the thing in respect of which compensation is sought
b) Court is satisfied that the illegal consideration or object had not been effected at the time the
plaintiff became aware of the illegality and repudiated the agreement
c) Court is satisfied that the consent of the plaintiff to the agreement was induced by fraud,
misrepresentation coercion or undue influence
d) The agreement is declared illegal by any written law with the object of protecting a particular
class of persons of which the plaintiff is one
EXCLUSION OR EXEMPTION CLAUSES
S.67 of the Contract Act provides that where any right, duty or liability would arise under a contract,
it may be varied by the express agreement of by the course of dealing between the parties or by usage
or custom if the usage or custom would bind both parties to the contract
S.54 of the Sale of Goods Act provides that where any right or duty or liability would arise under a
contract of sale by implication of law, it may be negatived by or varied by express agreement or by course of
dealing between the parties ….”
Exclusion clauses have the tendency of exonerating or excluding the dominating party from certain
basic liability (ies). The justification for their use is that both sides are free to negotiate whatever
terms they like. If the condition is harsh or unfair, then the other party can reject it. The concept of
exclusion clauses is based on the presumption of freedom of contract which mainly arose from the
Laissez – faire doctrine of the 19th Century. This position was echoed by Sir. Jessel M.R. in Printing
and Numerical Registering Company v Sampson;
“If there is one thing more than the other which public policy requires is that men of full age and competent
understanding shall have the utmost liberty of contracting and that their contracts when entered into freely and
voluntarily shall be scared and shall be enforced by Courts of justice….”
However, it is of course unfair or unjust to say that the average consumer (who is illiterate, poor,
ignorant) has an equal or any bargaining power when dealing with a stronger/more powerful
partner like a company, a manufacturer or retailer who in many cases may be a monopolist leaving
the consumer with no or very little options from which to exercise freedom of choice. It is because of
this unequal power relation that it is contended that there is no freedom of contract and an exclusion
clause is an instrument of unfairness or injustice.
Such exclusion clauses are common in standard form contracts [Contracts of adhesion] i.e. contracts
contained in one or more documents, one of the parties to which habitually makes contracts of the
same type in a particular form and will allow little, if any, alteration from that form. Examples
include receipts, insurance policies, mortgage agreements, banking agreements etc. These contracts
are normally already prepared by the one party and the other party only has to accept it. In most of
these cases, the average consumer is caught up in a take it or leave it situation.
The bus or railway companies usually have phrases like “luggage carried at owners risk”, “parking at
owners risk”, receipts contain the phrase “goods once sold are not returnable” other contract are couched
in words like “all conditions and warranties are hereby excluded” The fundamental question is whether,
amidst the use of such clauses with average consumers, there can be said to be freedom of contract.
The use of such clauses can be illustrated in the following cases;
SIGNED DOCUMENTS
The basic presumption is that a person who signs a contract has read it and is therefore bound by its
contents. It is no defence to say that one did not or could not understand it or that the print was too
small for him to read. By signing the document, one indicates to be bound by the terms.
Thus in L’Estrange v Graucob [1934], the Plaintiff signed a printed contract of sale of an automatic
vending machine without reading. The machine was found to be unsatisfactory and the Plaintiff
claimed damages for breach of contract. The seller relied on the clause in the contract that excluded
the application of all implied warranties and conditions statutory or otherwise.
The Court held that the printed clause excluded the implied condition under the sale of Goods Act;
that since the Plaintiff had signed the contract it was irrelevant that she had not read it even though
the sale agreement was in “regrettably small print”.
Scrutton L. J. said that ………….. there was no evidence that the Plaintiff was induced to sign the contract
by fraud or misrepresentation. The Plaintiff had signed a document headed „sale agreement‟ which she admits
had to do with an intended purchase and contained a clause excluding all conditions and warranties. That being
so, the Plaintiff having put her signature to the document and not having been induced by fraud or
misrepresentation, cannot be heard to say that she is not bound by the terms of the document because she has
not read them.
Limitations:



Most contracts are in English language which many people cannot read.
Some contracts are usually in very small print that cannot be easily read.
Some of contracts are in technical language that cannot be understood.
UNSIGNED DOCUMENTS
A great number of exclusion clauses are found in unsigned documents like tickets and notices.
In Thompson v L. M. & S Railway Company, an illiterate Plaintiff was issued a ticket with the
words “see back” on the face. At the back, it was stated that the ticket was subject to the defendant‟s
conditions set out in the company‟s time table, which excluded liability for injury. It was held that
inspite of the Plaintiff‟s inability to read the conditions, she was bound by them as the notice was
clear and the ticket was a common form of a contractual document.
These two cases show the injustice that can be created when relying on exclusion clauses especially in
light of an ignorant or illiterate consumer, or in cases where terms are drafted in technical language
that cannot be easily understood even by the elite.
In order to deal with the injustices caused by these exclusion clauses, some countries have completely
banned them (e.g. the UK has enacted the Fair Trading Act 1973, Unfair Contract terms Act Cap 1977
banning the use of unfair terms in contracts). The courts have developed various rules to offer some
protection to weak consumers.
1)
The Contra Proferentum rule.
Here the rule is that an exclusion clause is interpreted restrictively against the person relying on it/or
its maker. Any ambiguity is interpreted in favour of the other contracting party.
In Wallis v Pratt, the buyer of seed found when it grew that it was not what he had ordered. The
sellers relied on a clause in the contract excluding all warranties, express or implied as to growth and
description. It was held that the clause could not protect them because the term broken was a
condition not a warranty
Under this rule, a court does not readily accept exclusion of liability for the negligent acts unless the
wording clearly shows that such was the intention. Hence a person wishing to avoid liability is
required to be very precise in the use of language to achieve that aim.
In White v John Warrick & Co. Ltd, the plaintiff hired a tricycle. The contract provided that “nothing
in this agreement shall render the owners liable…..” The plaintiff was injured when the saddle tilted
forward. It was held that the clause only excluded liability for breach of contract; the owners might
still be liable for the tort of negligence.
2)
The doctrine of / need for Reasonable notice
This is in relation to unsigned documents. The general rule is that if the document containing the
exclusion clause is to be regarded as an integral part of the contract, it must be seen or brought to the
attention of the party either before or at the time of entering into the contract, in order for it to form
part of the contract. It therefore follows that any attempt to introduce an exemption clause after the
contract has been made will be ineffective.
In Olley V Marlborough Court, property was stolen from the Plaintiff during her stay at a hotel.
There was a notice in the bedroom that the proprietors accepted no responsibility for articles stolen. It
was held that the notice was ineffective. The plaintiff only saw it after the contract had been made at
the reception desk.
In Thornton v Shoe Lane Parking Ltd (1971), the Plaintiff made his contract with a car park company
when he inserted a coin in the automatic ticket machine (at the entrance). The ticket which he
received referred to conditions displayed inside the car park and which he could only see after entry.
It was held that he was not bound by the conditions, which purported to exempt the company from
liability for injury to customers or damage to customers‟ cars.
3)
Where there is fundamental breach of a contract
The phrase fundamental breach of a contract is where the essence of a contract has been affected. The
breach goes to the root of the contract and a party in breach cannot rely on the exclusion clause. What
amounts to fundamental breach is dependant on the circumstances of each case.
In Karsales v Wallis, the contract was for the supply of a Buick car, which the Plaintiff had inspected
and found to be in good condition. When delivered at night, however, it had to be towed, because it
was incapable of self-propulsion. Amongst other things, the cylinder head had been removed, the
valve had been burnt out, and the two of the pistons had been broken. The defendant purported to
rely on a clause of the agreement which stated “No condition or warranty that the vehicle is road worthy,
or as to its age, condition or fitness for purpose is given by the owner or implied herein.”
The judges of the Court of Appeal held that what had been delivered was not, in effect a „car‟. The
defendant‟s performance was totally different from that which had been contemplated by the
contract. [That is the supply of the motor vehicle in working order]. There was a fundamental breach
of contract and the exclusion clause had no application.
4).
Court can strike out a clause in a signed document, where the signatory can prove that the
contents of the document were orally misrepresented to him/her.
In Curtis Chemical Cleaning and Dying Co. Ltd, the Plaintiff took her white satin dress to the
Defendant cleaners. She was asked to sign a document and on asking what it was all about, she was
told that it excluded the firm from damages done to sequins and beads. In fact the clause excluded
them from any damages howsoever caused. The Plaintiff signed without reading. The issue was
whether the Plaintiff could be bound by her signature when she had been induced to sign on the
basis of a false nature of exemption clause described by the shop assistant. The court held that she
was not bound by her signature because the shop assistant had given her an oral explanation
amounting to misrepresentation.
DISCHARGE FROM PERFORMANCE
The general rule is that performance must be carried out strictly and precisely in accordance with the
terms of the contract. The effect of the general rule is that where a contract provides for payment by
one party after performance by the other, no action for payment may be maintained until
performance is complete.
This rule may produce harsh and unjust consequences as happened in Cutter v Powell. In this case
the plaintiff sued as administrator of her husband‟s estate. The defendant had agreed to pay Cutter,
the deceased, some money provided that he moved a ship up to its destination. The voyage began on
August 2 and Cutter died on 20 September when the ship was left with 19 days to its destination. It
was held that according to the express terms of the contract, the money was payable only upon
completion of the whole contract.
The Sale of Goods Act recognises this rule of strict performance. It provides in S. 30(1) that where the
seller delivers to the buyer a quantity of goods less that he contracted to sell, the buyer may reject
them.
S.31 (1) provides that unless otherwise provided, the buyer is not bound to accept the delivery of
goods by installment.
Because of the harshness of the rule, over the years the courts and the legislature developed some
mitigating factors by way of exceptions. Accordingly, S.33 of the Act provides that the parties to a
contract shall perform or offer to perform their respective promises unless the performance is
dispensed with or excused under this act or any other law
Discharge by agreement
The general rule is expressed in a Latin maxim Eodem modo quo oritur; eodem modo dissolvitur i.e. what
has been created by agreement may be extinguished or dissolved by agreement. S.51 provides that
where parties to a contract agree to substitute for the original contract a new contract or to alter the
original contract, the original contract need not be performed
Discharge of a contract by frustration
Performance can be excused under S.66 of the Act which provides that where a contact becomes
impossible to perform or is frustrated and where a party cannot show that the other party assumed
the risk of impossibility, the parties to the contract shall be discharged from further performance of
the contract
As already noted, the general rule is that there must be strict performance of obligations in the
contract. However there are instances where a party may find it impossible to carryout his
obligations. There may be initial impossibility to perform the contract for example due to
disappearance or destruction of the subject matter which arises in cases of common mistake. But
where the impossibility arises subsequent to the contract, then this is called frustration.
The basic common law rule was that where performance had become unexpectedly onerous or even
impossible due to the occurrence of a subsequent event, the party whose performance is affected
could not be discharged.
In Paradine v Jane, court held that if a party wishes to protect himself from the effect of subsequent
difficulties, he should expressly state so in the contract. However in the 19th and 20th centuries, a
lenient approach was developed by the court
In Taylor v Caldwell, the defendant agreed to hire a musical hall to the plaintiff. After the contract
was made but before the day of the first concert, a fire broke out completely destroying the musical
hall. By this time, the plaintiffs had made extensive arrangements in relation to the productions they
intended to perform. Because of loss of the music hall, their concerts had to be cancelled. This
resulted into substantial financial losses to the plaintiffs. The contract contained no express provision
covering this eventuality. Consequently the plaintiff sued for non-performance of the contract in
order to recover their losses. The defendants argued that they were not liable since the music hall had
been destroyed through no fault of their own. The court upheld the defendants‟ defence
Blackburn J stated:
In contracts in which performance depends on the continued existence of a given person or thing, a condition is
implied that the impossibility of performance arising from the perishing of the person or thing shall excuse
performance. …………………(although there is no express situation) that the destruction of the person or
thing shall excuse the performance…that excuse is by law implied because from the very nature of the contract,
it is apparent that the parties contracted on the basis of the continued existence of the particular person or
chattel.
CIRCUMSTANCES IN WHICH THE DOCTRINE OF FRUSTRATION MAY APPLY
Death or incapacity
A contract for personal services will be frustrated on the death of either party. The same principle
applies where either party is permanently incapacitated from performing the contract. In Condor v
Barron Knights, a 17-year-old drummer collapsed and was admitted to a psychiatric hospital.
Medical opinion was that he would only be fit to work four nights a week. The band had
engagements for seven nights a week and so the defendants decided to dismiss the drummer. The
court held it was, in a business sense, impossible for the drummer to perform the contract and for
that reason the contract was discharged for frustration.
Destruction of the subject matter of the contract
An example here is the case of Taylor v Caldwell where the court held that the contract was
frustrated because the music halls where the contracts were to be held had been accidentally
destroyed by fire.
Act of God
Ryde v Bushell and Harvey, the Plaintiff leased his farm to the defendants and one of the terms of
the contract was that certain acreage of coffee was to be planted. However, because of the heavy
rains, they could not complete their obligations. The plaintiff brought an action for breach of contract.
Court rejected the plea of act of God advanced by the Defendants.
Newbold P stated:
But before the plea can succeed, it must be established that it was an Act of God which prevented performance
or which destroyed the results of performance. Nothing can be said to be an Act of God unless it is an
occurrence due exclusively to natural causes of so extraordinary a nature that it could not reasonably have been
foreseen and the results of which occurrence could not have been avoided by any action which would reasonably
have been taken by the person who seeks to avoid liability.
Non-occurrence of an event central to the contract
A situation may arise where although it is physically possible to carry out the contract, nonoccurrence of the event renders the object of that contract defeated.
In Krell v Henry, the Plaintiff let a flat to the defendant for 26th and 27th June 1902. The defendant
intended to use the flat in order to watch and celebrate the coronation procession of King Edward
VII. A payment of one third of the rent was made. Due the sudden illness of the King, the Coronation
procession was cancelled. The defendant refused to pay the balance of the rent owing. Court held
that the Plaintiff could never recover the money since the contract had been frustrated by the
cancellation of the procession; that without the procession, the foundation of the contract had
disappeared.
Government intervention
Where a party is prevented from carrying out his obligation because of government laws or policies,
the contract may be frustrated.
Denny, Mott and Dickinson Ltd v James B Fraser and Co Ltd, Lord Macmillan stated: it is plain that
a contract to do what has become illegal to do cannot be legally enforceable.
Consequently, where X a Ugandan contracts to sell goods to Y a Kenyan, but subsequently the
Kenyan government bars the importation of goods of any kind from Uganda, such a contract would
be discharged.
THE LEGAL EFFECTS OF FRUSTRATION
At common law a contract is terminated at the time of the frustrating event. From the date of that
event, the parties are released from all future contractual obligations. Thus obligations which accrue
before the event are not discharged by frustration and must be honoured.
In Chandler v Webster, the defendant agreed to let a room to the plaintiff for the purpose of viewing
the coronation procession. The cost of the hire was payable immediately but in fact the plaintiff only
paid £100 in advance. Before he had paid the balance, the procession was cancelled and the contract
was as a result frustrated. It was held that the plaintiff had no right to recover the £100 but he was
also liable to pay the balance since the obligation to pay this had already accrued prior to the
supervening event. The plaintiff‟s counsel argued that he was entitled to recover the £100 since there
was a total failure of consideration. Court rejected the argument and held that the effect of frustration
was not to discharge the contract ab initio but only from the time of the supervening event and that
there was no total failure of consideration.
This decision could clearly produce extremely harsh consequences. The decision was overruled by
the House of Lords in Fibrosa Spolka Akeyjna v Fairbairn Lawson Combe Barbour Ltd. The
appellants ordered some machinery from the respondents for delivery to their factory in Poland
paying £1000 in advance by virtue of the terms of the contract. In 1939, Germany invaded Poland and
the contract was frustrated. The London agent for the appellants asked for the return of their £1000
but the respondent refused on the basis that a substantial amount of time and money had been spent
on the order.
Had the court relied on Chandler’s case, the £1000 would have been irrecoverable. The House of
Lords allowed the claim holding that there had been a total failure of consideration thus overruling
the Chandler case. The court observed that the appellants had not received anything that they had
bargained for under the contract and could thus recover the money they had paid.
Though the Fibrosa case diminished the injustice of the Chandler case, it did not eliminate every
hardship. Fibrosa does not apply where there is a partial failure of consideration. As Viscount Simon
LC noted
“………………English common law does not undertake to a position a prepaid sum; in such circumstances it
must be for the legislature to decide whether provision should be made for an equitable apportionment of prepaid
monies which have to be returned by the recipient in view of the frustration of the contract in respect of which
they were paid.
Indeed to clarify the law, the Contract Act 2010 re-enacting the provisions of the Law Reform
(Frustrated Contracts) Act of England improved on the Fibrosa case by allowing a party to recover
money prepaid even though at the date of frustration there had been no total failure of consideration.
Recovery of money paid
The Contract Act provides that any sum paid or payable to a party under a contract before the time
the parties are discharged above, shall in the case of a sum paid be recoverable from the party as
money received by that party for his or her use and in the case of any sum payable cease to be
payable (S.66 (2))
Where a party to whom any sum was paid or was payable incurred expenses before the time of
discharged in or for the purpose of performance of the contract, the court may where it considers just
to do so having regard to all circumstances of the case, allow the party to retain or, as the case may
be, recover the whole or any part of the sums paid or payable which shall not exceed the expenses
incurred (S.66 (3))
Self-induced frustration
The basis of frustration lies on the fact that it amounts to a supervening event that is beyond the
control of the parties to the contract. It therefore follows that if the event arises out the actions of a
party to the contract, then frustration cannot be pleaded.
REMEDIES FOR BREACH OF CONTRACT:
Consequences of breach of contract
A breach of contract occurs where one of the parties fails to carry out the terms of the contract in the
manner required by that contract.
(i)Damages.
The original common law remedy available to the innocent party was to ask for an award of
damages. Damages refer to the monetary compensation that Court awards to the injured party for
the loss suffered. The object of common law remedy is to put the injured party in the same financial
position as he would have occupied had the contract been performed in its entirety.
The nature of damages recoverable.
Not all damages resulting from or arising out of breach of contract are recoverable. Thus S.61
provides that where there is a breach of contract, the party who suffers the breach is entitled to
receive from the party who breaches the contract compensation for any loss or damages caused to
him which arose in the usual course of business from the breach or which the parties knew when
they made the contract to be the likely result of the breach
The compensation referred to above is not to be given for any remote and indirect loss or damage
sustained by reason of the breach. The section echoed the common law position in the case of Hadley
v Baxendale
S.62 provides that where a contract is breached and a sum is named in the contract as the amount to
be paid in case of breach or where a contract contains any stipulation by way of a penalty, the party
who complains of a breach is entitled, whether or not actual damage or loss is proved to have been
caused by the breach, to receive from the party who breaches the contract, reasonable compensation
not exceeding the amount named or the penalty stipulated as the case may be.
(ii)Injunction
This is an order of the court which either requires a person to perform or to refrain from breaching
his contract. [Prohibitory and mandatory injunction]
In Warner Brothers Picture Incorporated v Nelson (1937), an actress had contracted with the film
company not to work as an actress for anyone else during her present contract. It was held that she
could be restrained by injunction from breaching this understanding.
(iii)Specific Performance
S.64 provides that where a party to a contract is in breach, the other party may obtain an order of
court requiring the party in breach to specifically perform his promise under the contract.
However, a party is not entitled to specific performance where:
1. It is not possible for the person against whom the claim is made to perform the contract (an
example is where the contract involves personal performance for example a painter who
later whose sight is later permanently impaired
2. Specific performance would produce hardships which would not have resulted if the order
was not made
3. The rights of a third party acquired in good faith would be infringed by the order
4. The order would occasion hardship to the person against whom the claim is made out of
proportion to the benefit likely to be gained by the claimant.
5. The person against whom the claim is made is at the time entitled although in breach to
terminate the contract
6. The claimant committed a substantial breach of his obligations under the contract but
where the breach is minor, the order is available to him subject to his paying compensation
for the breach.
EMPLOYMENT LAW
Employment Law is concerned with the relations existing between employers and their employees. The
employment relationship is governed principally by the contract of employment between the employer
and his employee. The rights and responsibilities of employees derive from this contract and also the
various Acts which lay down employment standards.
THE EMPLOYMENT CONTRACT

The 1995 Constitution of the Republic of Uganda

Labour relations in Uganda are governed by the Employment Act, No. 6 of 2006, replacing
The Employment Act Cap. 219,

The Labour Unions Act No. 7 of 2006 replacing the Trade Unions Act Cap. 223 and
providing for the right to form or belong to a Trade Union as enshrined in Article 29 of the
Constitution,

The Labour Disputes (Arbitrations and Settlement) Act No. 8 of 2006 which provides for the
resolution of Labour disputes.

The Occupational and Safety and Health Act replacing The Factories Act and providing for
working conditions at work place

and the Workers‟ Compensation Act which regulates compensation to workers for diseases
and injuries sustained in the course of employment,

the National Social Security Fund Act, that obliges employers to deduct 5% of salary of
employee and 10% contributions towards the Employee‟s savings with NSSF;

The Pensions Act that provides for Pension of civil servants, The Local Governments Act
that provides for Pension of civil servants,

The Public Service standing Orders, The Minimum Wages and Advisory Board Act, etc.
TERMS OF A CONTRACT OF SERVICES
A contract of service means any contract whether oral or in writing where a person agrees in return for
remuneration to work for an employer and includes a contract of apprenticeship
A contract of apprenticeship arises where there is an obligation on the employer to take all reasonable
steps to ensure that the employee is taught, and acquires the knowledge and skills of that industry by
means of practical training received in the course of the employee‟s employment.
The relationship of employee-employer is contractual hence the law of contract is central. The parties
agree to the terms provided they are not less than what the Act provides or exclude the application of a
provision of the Act to the detriment of the employee. The great majority of employment contracts are
oral in the sense that there is no actual written contract; the employee agrees to work on certain terms
that are explained verbally. Contracts for senior executive positions, which may impose certain
elaborate duties and provide for complex remuneration arrangements, tend to take a written form,
either the entire contract is a single document or it is a brief document which refers to terms and
conditions that are set out in some detailed document.
Express Terms:
The express terms of the employment contract are the terms actually agreed on by the parties. Where
the contract is written these terms will appear on the document, where it is oral, practical difficulties
can arise in proving what was agreed.
A contract of service [if not required by law to be in writing] may be made orally or in writing. [S.25]. If
it is made with an illiterate person, it shall be attested to by means of a written document drawn up by
a magistrate or labour officer who shall before attesting first ascertain that the employee has freely
consented to it. [i.e. without undue influence, coercion, misrepresentation or mistake]., be satisfied that
the employee has duly understood its terms, before accepting it, ensure that it is in conformity with
the provisions of the Act. An agreement which excludes any provision of the Act shall be void except
where permitted by the Act. [S. 27]
It is clearly of value that the terms of a contract be reduced in writing or evidenced in writing. In this
way disputes can be averted more easily and evidence will be easier to obtain in the event of dispute. It
is therefore a sensible step for the parties (or at least the employer who has the facilities) to be charged
with the task of reducing the agreement in writing.
The duty to do so and the details relating to this are seen in S. 59. An employee is entitled to receive
from his employer notice in writing of the particulars of employment. It should contain the full names
and addresses of the parties to the contract, date of commencement of contract, job title, place where
employees duties are to be performed, wages which the employee is entitled to, employee‟s normal
hours of work, etc. [S. 59]. Where there is any dispute between the employer and employee as regards
the terms and conditions of employment, these particulars shall serve as evidence [S.60].
The general aim of the provision is to encourage the development of explicit and clear terms about the
most important elements of the employee‟s contract. It is intended to be a mirror of that agreement but
is not the contract itself.
The most widely cited statements of the effects of the written statements is found in Systems Floors
(UK) Ltd Vs Daniel (1982) 1 CR 54, where Brown Wilkson J. said that: “it provides very strong prima
facie evidence of what were the terms of the contract between the parties but does not constitute a written
contract between the parties. Nor are the statements of the terms finally conclusive; at most they place a heavy
burden on the employer to show that the actual terms of the contract are different from those which he has set out
in the statutory statement”.
Implied Terms
Frequently differences will arise about a matter on which the parties never reached actual agreement.
When the contract was being made, they may never even have considered the matter or they may have
done so briefly without reaching any firm conclusion. Court will not readily imply terms; generally the
parties themselves and not judges should decide what terms they are contracting under. (Refer to the
doctrine of freedom of contract)
Methods/Basis of Implying Terms:
Implied by facts/officious bystander test. A common form of implied term is one which is implied by
virtue of the particular facts of the case. In deciding whether to fill a gap in the contract by implying a
term, the test usually adopted is, if at the time they made their contract, would they almost certainly
have agreed to the suggested term. The Courts attempt to guess what the parties would have decided
had they faced up to the matter at that time. In Skiilas V Southern Foundries (1926) Ltd [1939] 2KB
206 at 227, Mackinnon L.J. gave a classic exposition of their process.
“prima facie (on the face of it) that which in any contract is left to be implied and need not be expressed
is something so obvious that it goes without saying; so that, if, while the parties were making their
bargain, an officious bystander were to suggest some express provision for it in their agreement, they
would answer him with a common „oh, of course”.
Business Efficacy:
Perhaps a more exhaustive formulation of the test is that of Lord Simon in B. P. Refinery (Western
Port) Pty Ltd Vs. Shire of Hastings (1978) 52 A. J. LR 20.
“For a term to be implied, the following conditions (which may overlap) must be satisfied:




it must be reasonable and equitable (fair);
it must be necessary to give business efficacy (value) to the contract;
it must be so obvious that it goes without saying;
it must be capable of clear expression;
It must not contradict any express term of the contract”.
Unless the existence of a term is practically compelled by these tests, it will not be implied by the
Court. Merely because the term in question is a quite reasonable one is not sufficient. Because
employment contracts establish a somewhat unique continuing relationship, the courts tend to imply
some terms in circumstances where these terms might not be implied in ordinary commercial
transactions. When determining whether a particular term should be implied, the courts take account
of various factors. One of them is the subsequent conduct of the parties; what they did after the
employment commenced is a very useful indication of what term they would have agreed upon when
the contract was being made.
Custom and Practice:
Some customs and practices prevailing at the workplace may be implied as terms of the employment
contract, in order to attain contractual status in this manner, the alleged custom must satisfy four
requirements:
 it must be notorious;
 Certain;
 Reasonable;
 And is a custom that is regarded as obligatory.
If the custom is not notorious, then it is impossible to say that the employee in question could have not
been aware of it on being hired. As in the case of work rules, it is essential to demonstrate that
employees should have been fully aware of the custom or rule. In Devonald v Rosser & Sons (1906) it
was said that “a custom cannot be read into a written contract unless it is so universal that no
workman could be supposed to have entered into the service without looking to it as part of the
contract. But it has been held that it is not essential that the employee in question was actually aware of
the custom; that it is immaterial whether he knew of it or not.
Secondly, the custom must be certain, thus in Devonald’s case, where it was contended that a custom
existed whereby employers could temporarily close the work place without paying their employees
any remuneration, it was held “there was no element of certainty about the alleged custom”. Thirdly,
before it will be implied into the contract, the custom must be a reasonable one. Thus in Devonald’s
case, the alleged custom just referred to was rejected for being “eminently unreasonable”.
The custom must be one that was regarded as imposing obligations. In Meek v Port of London
Authority (1918), the Court refused to imply into a contract an alleged custom whereby the employer
paid the employee‟s income tax. Even if this practice had satisfied the requirement of notoriety, the
court characterized it as a windfall, observing that, it would require a very strong case indeed to turn a
practice apparently of bounty into a usage of obligation.
TERMS IMPLIED BY COMMON LAW
These are more or less duties imposed by common law on the parties to a contract of employment. The
common law duties on the part of the employer are to pay wages, to provide work, exercise care, to
cooperate and to provide access to a grievance procedure. On the part of the employee, the debate is
whether there is a duty to obey reasonable orders, exercise reasonable care and competence, maintain
fidelity i.e. be honest, not compete, not misuse confidential information, not impede the employer‟s
business and duty to account. Most of these duties have been incorporated in written law.
THE DUTIES OF THE EMPLOYER
Obligation to Provide Work
Generally, while the employee is contractually obliged to attend at the work place during the agreed
times for working, the employer is not obliged to furnish actual work to be done. All that usually is
required of the employer is to pay the agreed remuneration for the period during which the employee
is at work. Although having no actual work to do may deprive the employee of job satisfaction is
always regrettable but by itself provide no cause of action. Cresswell Vs. Sawdon & Co. (1901) 2 KB
653, the Plaintiff was hired for 4 years as a salesman at a fixed salary. Before the contract expired, his
employer refused to provide him with any more work to do, although the employer was content to
continue paying his salary. It was held that the employer was not thereby in breach of his obligation.
This general principle does not apply where the employee‟s remuneration depends entirely on being
provided with tasks to perform, for instance where remuneration is based on piece rate or on
commission. In those circumstances, in the absence of an express stipulation to the contrary, it is an
implied term that the employee will be supplied with sufficient work to earn such remuneration as
could reasonably be anticipated. Where parts of the agreed earnings are to be reckoned on a piece rate
or a commission basis, the circumstances may warrant implying a similar term. Such a term was held
to exist in Re Rubel Bronze & Mental Co. (1918) 1 KB 315, where the plaintiff was the company‟s
general manager for three years at a fixed salary together with a commission based on the company‟s
profit. Because he could have earned a very large commission on the profits, if made, it was held that
he had therefore the right to ask that he should have a full opportunity to earning such commission.
Obligation to Pay Wages
In Orman Vs. Saville Sportwear Ltd, Justice Pilcher said that the authorities which had been cited to
him
“establish the following proposition, where the written terms of the contract of service are silent as to what is to
happen in regard to the employee‟s right to be paid whilst he is absent from work due to sickness, the employer
remains liable to continue paying so long as the contract is not determined (terminated) by proper notice, except
where a condition to the contrary can properly be inferred from all the facts and the evidence in the case. If the
employer seeks to establish an implied condition that no wages are payable, it is for him to make it out.
Indemnity
The employer must indemnify his employee where the employee has incurred a liability while acting
on the employer‟s behalf except where the employee knew that he was doing an unlawful act.
In Burrows v Rhodes, D were the organizers of the Jameson raid. They induced P to re-enlist in the
armed forces of the British South African Co. which they did by means of a fraudulent statement. P
believed that the venture in which he was to take part was lawful. It was held that he was entitled to
damages from his employers for injuries suffered.
Safety
The employee must take reasonable care to ensure that his premises are safe. He will therefore be in
breach of his duties if he provides defective safety equipment knowingly or which he should have
known on reasonable examination. The burden is on him to examine the equipment. He will also be in
breach if he fails to remedy breaches that have been brought to his attention.
DUTIES OF AN EMPLOYEE
Loyalty and good faith
The employee must not accept bribes or make secret profits. In Boston Deep Sea Fishing C v Ansell,
while employed as a managing director with the Plaintiff Co., Ansell contracted with a shipbuilding
company for supply of ships taking a secret commission. It was held that Ansell‟s action was a breach
of his duty to his employer.
Misconduct
The employer must not misconduct himself. The term misconduct includes persistent laziness,
immorality, dishonesty; drunkenness etc. misconduct will justify summary dismissal if it goes to the
root of the contract.
In Pepper v Webb, a gardener who behaved in a surly manner, showed disinterest in the garden,
refused to perform certain tasks in the garden and was disobedient to the employer was held to have
been summarily dismissed justifiably.
But in Wilson v Racher, a gardener was dismissed for swearing at his employer on one occasion. It was
held that this was an exceptional outburst from an otherwise competent and diligent employee who
had been provoked by his employer. Therefore there were no grounds for dismissal.
Account for property and gain
And employee must account for any money or property belonging to his employer and any gains
made thereon.
Trade secrecy
The employee must maintain secrecy over his employer‟s affairs during the time of his employment. If
the employer wishes to extend this beyond the period of employment, it would be advisable to insert a
suitable clause in the contract of employment (restraint of trade clause)
The employee is under an obligation to his employers not to disclose confidential information obtained
by him in the course of, and as a result of his employment. The duty applies both during employment
and afterwards if the employee seeks to use such information to the detriment of his employer.
In Rob v Green, an employee who copied down a list of customers intending to use it after leaving
employment was retrained from doing so.
Competence and Care
An employee must be reasonably competent to perform the job for which he was hired. Extreme
incompetence will warrant instant dismissal; it was been held in Harmer Vs Cornelius (1958) to be
„very unreasonable that an employer should be compelled to go on employing a man who, having represented
himself, competent, turns out to be incompetent‟. Many employments have elaborate disciplinary
procedures aimed at ensuring that the work is done with a reasonable degree of competence.
Indemnity
Since it is an implied term of the employment contract that employees will exercise a reasonable degree
of care and skill in the performance of their work, consequently, it was held in Lister Vs Ramford Ice
cold storage Co. Ltd, that where an employer suffered financial loss as a result of his employees breach
of his duty, the employee is under an obligation to indemnify the loss. In that case an employee
negligently drove a van in the course of his work and injured a fellow employee. On the basis of
vicarious liability, the employers had to compensate that fellow employee for his injuries. It was held
that the van driver was under an implied contractual duty to indemnify the employer in respect of that
sum.
Employers are subject to an extensive duty of care which is based on an implied term in the
Employment Contract, which is also founded in the law of Torts and is the subject of elaborate
statutory regulation, notably, the Occupational Safety and Health Act and the Workers‟ Compensation
Act.
The employers‟ common law duty is owed to each individual employee and employers must take due
account of the different physiques and other attributes of their various employees. For instance, in
Paris v Stepney Borough Council, it was held that an employer owes a greater duty to take care of a
one eyed man than a normal man in respect of risk of injuries to the eye.
Obedience to reasonable orders:
It depends on the circumstances of the case whether an employer‟s lawful orders are reasonable and
accordingly, must be obeyed by the employee. Generally, employers are not entitled to give orders
regarding what employees do outside their working hours but there are some jobs which warrant
giving certain instructions about what an employee should or should not do while not actually at
work, orders regarding what an employee should do outside work will usually be regarded as
unreasonable, unless the contract clearly envisaged giving those orders.
But the Courts would be most reluctant to strike down instructions given about how a particular task
should be performed since, by the nature of the employment relationship, it is for the employer to
determine how the work is to be done. An order would have to be wholly unconnected with the
employee‟s job or be manifestly unreasonable before it would be rejected by the courts.
An example of orders which were held unreasonable is Ottoman Bank v Chaharin (1930) AC 227,
involving a bank employee who had been based in London. Under his contract, he could be posted
abroad to any branch in Turkey. He was ordered to go and work at a branch there where, to the
employer‟s knowledge, his personal safety was at risk, the order there was unreasonable.
Even where a contract expressly authorizes the employer to give certain directions, ordinarily, those
must still take due account of the employee‟s health and safety, (Johnstone Vs Bloomesbury Health
Authority (1991). In Cresswell Vs Board of Inland Revenue 1984, the employer introduced a new
computerized system (COP) which replaced the traditional manual method of tax coding. The
employees unsuccessfully sought a declaration that the employers were acting in breach of contract in
requiring them to operate the computerized system. Walton J. held that:
“there can really be no doubt as to the fact that an employee is expected to adopt himself to new methods and
techniques introduced in the course of employment….., in an age when computer has forced its way into the
school room and where electronic games are played by school children in their own homes as a matter of every
day occurrence, it can hardly be considered that to ask an employee to acquire basic skills as to retrieving
information from a computer or feeding such information into a computer is something in the lightest esoteric
or even now days unusual.”
Co-operation
Over and above the question of obeying specific orders, employees are subject to an overriding duty to
co-operate with their employers in the performance of their work. Because the employment contract
envisages a continuing relationship between employers and employees, it would seem that the
employee must perform the various contractual obligations with a degree of good faith. It is an
implied term that the contract should be performed in such a way as not to undermine its commercial
objective.
OTHER TERMS OF EMPLOYMENT
A)
The Employment Act:
The Employment Act is the principal law regulating the employment relationship. Most of its
provisions on employee rights provide the minimum. Under S.27(2), the Employer may offer terms
that are more favorable to the employee than what the Act provides for. Other terms to a contract of
Employment prescribed by the Employment Act include weekly rest and length of working hours,
leave (Annual, Sick, Maternity, Paternity leave etc), notice of termination periods, disciplinary
Procedures, etc.
Under S.51 an employee shall not be required to work for an employer for more than 6 consecutive
days without a day‟s rest. The maximum working hours for employees shall be 48 hours per week
except that the employer and employee may agree that maximum working hours shall not be less than
or shall be more than 48 hours. An employee shall be entitled to maternity leave, sick pay, annual leave
and public holidays, paternity leave in accordance with S. 54.
These terms will be implied in every contract even if the parties did not expressly agree upon them.
WAGES
Under S. 41, wages shall be paid in legal tender to the employee entitled to payment but may also be
paid with the prior written agreement of the employee by cheque etc,. No person other than the
employee is allowed to receive wages on his/her behalf without the written permission of the
employee. [S.44]
The Act further prohibits deductions from the employee‟s wages except where permitted by law [S.45].
The Act permits deductions in respect of any tax rate, subscription or contribution imposed by law,
labour union dues, [i.e. any regular or periodic subscription required to be paid by a union member to
any labour union of which he is a member], contributions to a pension fund established by the
employer which deduction the employee has in writing consented to; deduction by way of reasonable
rent or other reasonable charge for accommodation provided by the employer [S. 46]
Under the NSSF Act S. 12, a contributing employer is allowed to deduct from the monthly wage
payment of his or her employee the employee‟s share of a standard contribution of 5 percent calculated
on the total wages paid during that month to that employee. Under S. 116 of the Income Tax Act, every
employer shall withhold tax from a payment of employment income to an employee.
B)
Workers’ Compensation Act:
This Act was intended to ensure that workers injured in the course of the employment receive
compensation from their employers. The Act defines an employer as the Government of Uganda, any
person incorporated or unincorporated, association or partnership, which directly engages a worker or
which, in respect of any worker, carries on the business of hiring out his or her services.
The Act applies to all employment within Uganda and to workers employed by or under the
Uganda Government in the same way and to the same extent as if the employer were a private person,
but not to active members of the armed forces.
EMPLOYER’S LIABILITY.
If personal injury by accident arises out of and in the course of a worker’s employment, the injured
worker‟s employer shall be liable to pay compensation in accordance with this Act [S. 3].
An act shall be deemed to be done out of and in the course of employment when a worker acts to
protect any person on the employer‟s premises whom the worker believes to be injured or imperiled,
or when a worker acts to protect property on the employer‟s premises.
Any personal injury by accident arising while the employee is traveling directly to or from his or her
place of work for the purpose of employment shall be deemed to be an accident arising out of and in
the course of his or her employment. It shall be for the employee who suffers injury by accident arising
while traveling to or from his or her place of work to show that such travel was direct. Compensation
shall be payable under this section whether or not the incapacity or death of the worker was due to the
recklessness or negligence of the worker or otherwise.
Any accident arising in the course of employment shall, unless the contrary is proved, be presumed to
arise out of employment. Because of this liability, the Act requires every employer to insure and keep
himself or herself insured in respect of any liability which he or she may incur under the Act to any
worker employed by him or her.
COMPUTATION OF COMPENSATION
The Act details the method of computation of the amount to be compensated. The basis of the
computation is the nature of the injury alongside monthly earnings of the affected worker and whether
or not the deceased worker has left behind family members who are dependent on his earnings. The
word injury is defined to include an accident and a disease mentioned under the Act; the injury may be
a fatal one or it may be one of a temporary or permanent nature, which incapacitates a worker for any
employment which he or she was capable of undertaking at the time when the accident occurred. The
word earnings is defined to include wages and any allowances paid by the employer to the worker,
including the value of any food, accommodation or benefit in kind.
If the worker is killed as a result of an accident for which the employer has liability under this Act, the
dependants (if any) of the deceased may recover from the employer the expenses of medical treatment
of the deceased, burial of the deceased and expenses incidental to the medical treatment and burial of
the deceased
The Act further allows a worker to bring legal proceedings against the employer to recover damages
from him in respect of the injury notwithstanding the fact that he has been compensated in accordance
with the provisions of the Act. However, the amount of compensation which he or she has been
awarded under this Act shall be taken into account in the assessment of his or her loss. [S.17]. This
provision was meant to prevent double compensation and therefore unjust enrichment on the part of
the injured worker.
C)
National Social Security Fund Act:
The NSSF Act obliges every employer to deduct and remit to the Fund 5% of the employee‟s wages per
month and also to contribute 10% of the employee‟s salary to the Fund.
D)
Labour Unions Act and Freedom of Association
This freedom is guaranteed both under the Constitution and the Labour Unions Act. Article 29 (e) of
the Constitution provides that every person shall have the right to freedom of association which
includes freedom to form or join trade unions.
S. 3 of the Labour Unions Act also provides that employees shall have a right to organize themselves
in any labour union and may assist in running the labour union, bargain collectively through a
representative of their own choice, withdraw their labour and take industrial action. Meanwhile, under
S. 4 the employer is barred by the Act from interfering with this right to associate otherwise if he does,
he commits an offence under S.5 for which he is criminally liable.
OCCUPATIONAL HEALTH AND SAFETY ACT
Article 39 of the Constitution provides for the right to a clean and healthy environment.
The Occupational Safety and Health Act imposes an obligation on employers to ensure the safety of
employees at work. They are thus required to put in place measures for the achievement of this
purpose e.g. provision of protective gear against the effect of pollution, to monitor and control the
release of dangerous substances into the environment, to supervise the health of workers who are
exposed to dangerous hazards due to pollution and other harmful agents e.g. through periodic medial
examination, keeping medical records of workers, ensuring that work premises remain safe and
without risk to health, displaying safety precautions etc.
The Act requires workplaces to be kept in a clean state to have suitable lighting to ensure that buildings
at a work place are of sound construction, to have adequate supply of wholesome drinking water
accessible to by all workers, adequate facilities for taking meals, a first aid room etc.
The administration and enforcement of the provisions of the Act is entrusted to the Commissioner for
Occupational Health and Safety and inspectors. Their role is, with the assistance and cooperation of the
occupier of the work place to enter into work premises to ensure that employers are implementing the
requirements of the Act.
EMPLOYMENT OF NON CITIZENS
This is governed by The Uganda Citizenship and Immigration Control Act Cap 66 and The Uganda
Citizenship and Immigration Control Regulations No 16/04
No person shall enter or remain in Uganda unless that person is in possession of a valid entry permit,
certificate of permanent residence or pass issued under the Act. A non-citizen shall not be issued with
the above documents unless he possesses a passport, a certificate of identity, a convention travel
document or any other valid travel document. [S.53]
A non-citizen shall not unless he posses the above documents be employed in a parastatal or private
body, public service, by a private person, engage in private business in Uganda [S.59]
There are classes of entry permits specified in the Act [S.54]. Class G covers employees. The person
must satisfy the immigration board that he has been offered and has accepted employment in Uganda.
VICARIOUS LIABILITY OF THE EMPLOYER
When a person is injured by another, the rule at common law is that the injured party may sue the
actual wrong doer. Where the wrong doer is an employee, the injured party may also have an action
against the employer under the principal of vicarious liability. Although the employer did not
personally commit the wrong, he may be responsible for all those who are employed by him. The third
party will usually sue the employer as he is usually in a better financial position to meet the claim for
damages.
Government is liable for the civil wrongs committed by its servants (S. 3(1)(a) of the Government
Proceeding Act), but not generally to wrongs committed by a member of the UPDF (S. 4 of the Law
Reform Miscellaneous Provisions Act)
The view is taken that, by employing a person, the employer makes it possible for him to commit a
wrong. It is regarded as a normal business risk for which he would be wise to take out insurance.
The rule is that the employer is vicariously liable for the torts (civil wrongs) of the employer that are
committed within the course of his employment.
In Limbus v London General Ominbus Co, a bus driver whilst racing a bus caused an accident. His
employers were held liable because he was doing what he was employed to do ie to drive a bus,
although in an improper way.
In contrast, in Beard v London General Ominbus Co, a bus conductor attempted to turn a bus around
at the end of its route and in doing so he caused an accident. His employers were not liable since he
was only employed to collect fairs and not to drive buses.
Sometimes, a prohibition imposed by an employer on an employee will limit the scope of employment.
Thus in Twine v Beans express, a driver employed by the defendants gave a lift to a person who was
killed due to the employer‟s negligent driving. The employer had been expressly forbidden to give lifts
and a notice to this effect was displayed in the vehicle. It was held that the employer was not
vicariously liable as the driver‟s action was outside the scope of his employment and the injured
person was deemed to be a trespasser.
Where an employee who is on a journey deviates from the authorized route, it is a question of degree
whether he has started on afresh journey (a frolic of his own) which relives the employer from liability.
EMPLOYMENT OF CHILDREN
Children under 16 yeas of age are entitled to be protected from social or economic exploitation and
shall not be employed in or required to perform work that is likely to be hazardous or to interfere
with their education or to be harmful to their health or physical, moral, metal, spiritual or social
development [Article 34 of the constitution]
A child under the age of 12 years shall not be employed in any business, undertaking or work place.
[S.32]. A child under the age of 14 is only allowed to be employed for light work carried out under the
supervision of an adult aged over 18 years and which work does not affect the child‟s education. A
child shall not be employed between the hours of 7 pm and 7 am. Any person including a labour union
or employer‟s organization may complain to a labour officer if he or it considers that the child is being
employed in breach of these provisions of the law.
DISMISSAL AND TERMINATION
OF CONTRACT OF EMPLOYMENT
In recognition of the frequent dismissals of employers from work especially in the Ugandan private
sector, the framers of the Employment Act came up with major safeguards against both unlawful or
unfair termination and unlawful dismissal. The Act provides for certain requirements that must be
complied with before a contract of service can be terminated. The one loophole in the Act is failure to
make a clear distinction between termination and dismissal, the Act appears to use the two words
interchangeably.
“Termination of Employment” means the discharge of an employee from an employment at the
initiative of the employer for justifiable reasons other than misconduct, such as, expiry of contract,
attainment of retirement age. On the other hand, Dismissal from Employment” means the discharge of
an employee from employment at the initiative of his or her employer when the said employee has
committed verifiable misconduct.”
An employment contract can be terminated in a number of ways which include the following [S.65].
 The contract can be terminated by the employer with notice
 Where it is a contract of service, being a contract for a fixed term of task, ends with the expiry of
the specified term or the completion of the specific task [unless it is renewed]
 Where the contract is ended with or without notice on the part of the employee as a consequence
of unreasonable conduct on the part of the employer towards him
 Where the contract is ended by the employee in circumstances where the employee has received
notice from the employer but before the expiry of that notice.
A contract of service shall not be terminated by an employer unless he or she gives notice to the
employee except, where the contract of employment is summarily terminated in accordance with S. 69
[below] or where the reason for termination is attainment of retirement age, [S.58]. The notice must be
in writing and shall be in a form and language that the employee to whom it relates can reasonably be
expected to understand. The period of notice depends on the period for which the worker has been
employed and the notice periods are specified under the Act. No employer has the right to terminate a
contract of service with less notice than that to which the employee is entitled by any statutory
provision or contractual term [S.69 (2)]. However, nothing shall prevent an employee from accepting
payment in lieu of notice.
An employer shall before reaching a decision to dismiss an employee on grounds of misconduct or
poor performance explain to him the reason for dismissal in a language the employee may reasonably
be expected to understand. The employee is entitled to have another person of his or her choice present
during the explanation. The employer shall in turn give the employee a hearing and consider any
representations which the employee and the person if any chosen by him may make. Whether the
dismissal is a summary dismissal which is justified or whether it is a fair dismissal, the employer must
have given the employee a reasonable time within which to prepare these representations. Where these
requirements are not complied with, the employee may lodge a complaint with the labour officer for
redress [S. 66].
Irrespective of whether any dismissal which is a summary dismissal is justified or whether it is fair an
employer who fails to comply with this section is liable to pay the employee a sum equivalent to four
weeks net pay. (S.66(4))
UNFAIR REASONS FOR TERMINATION
Notwithstanding the above, it is vital to note that not all reasons that the employer may give are fair
reasons to justify termination of a contract. Thus under S. 75 of the Act, a list of reasons which may be
considered as unfair is given i.e.
 A female employee‟s pregnancy or any reason connected with her pregnancy
 The fact that an employee took, or proposed to take, any leave to which he was entitled to
under the law or a contract
 An employee‟s membership or proposed membership of a labour union
 Participation or proposed participation in the activities of a labour union outside working
hours, or with the consent of the employer within working hours
 An employee‟s refusal or proposed refusal to join or withdraw from a labour union
 An employee‟s race, sex, colour, religion, political union or affiliation, nationality, social origin,
marital status, HIV status or disability.
 An employee‟s temporary absence from work for any period up to 3 months or reliable grounds
including illness or injury
 An employee‟s initiation or proposed initiation of a complaint or other legal proceedings
against his employer
 The organization or intended organization of a strike or other form of industrial action where
the strike of industrial action is lawful. [S.76]
SUMMARY DISMISSAL
An employer is entitled to dismiss summarily and the dismissal shall be termed justified where the
employee has by his or her conduct indicated that he has fundamentally broken his obligations under
the contract of service [S. 69]. This would arise from serious misconduct being manifested by the
employee.
Summary dismissal is deemed to have taken place when the employer terminates the service of an
employee without notice or with less notice than that to which the employee is entitled by any
statutory provision or by a contractual term. This is a new provision because formerly summary
dismissal meant only dismissal without notice.
Where the employment contract does not specify the grounds for summary dismissal what constitutes
serious misconduct for these purposes depends on the nature of the job in question and the terms of
the contract. Certain actions almost invariably would be regarded as a serious misconduct, like
deliberately destroying the employer‟s property, stealing from the employer and gross
insubordination.
In Eletu v Uganda Airlines Corporation, it was held that at common law, to justify such dismissal, a
breach of duty must be serious one, a breach amounting in effect to repudiation by the servant of his
obligations under the contract of employment such as disobedience of lawful orders, drunkenness,
immorality, assaulting fellow workers, incompetence and neglect
It was held further that there is no fixed rule of law defining the degree of misconduct which would
justify summary dismissal. However summary dismissal is a strong measure to be justified only in
exceptional circumstances. The test to be applied in determining whether a summary dismissal was
justified is whether misconduct leading to summary dismissal goes to the root of the contract so as to
indicate unwillingness to continue to be bound by the original terms of the contract.