Knowledge Area 02 - Nature and Formation of Contracts
Knowledge Area 02 - Nature and Formation of Contracts
Knowledge Area 02 - Nature and Formation of Contracts
What is Contract
Introduction
• Also, contract is an agreement between persons which obliges each party to do or not
to do a certain thing however this agreement has legal force.
• However, all the definitions and others merge at the point of capable of being enforced
by the law.
Statutorily defined?
• Yes.
• Which law? Section 2(1)(h) of the Law of Contract Act, Cap 345 RE 2019
• Yes,
• Which law? Section 2(1)(e) of the Law of Contract Act, Cap 345 RE 2019.
• What does it say? Agreement is a set of promises that form consideration for
each other.
• It is normative. Why? It binds the parties. Failure to comply, the law may enforce it –
doctrine of sanctity to contract – Mohamed Idrissa Mohamed v Hashim Ayoub Jaku [1993]
TLR 280 (CA)
• It is autonomous. Why? The law recognises free will of parties when making it – ss 10, 14
and 19 of the LCA, Cap 345 RE 2019
• It is mutual. Why? It is made of the mutual promises between the parties to that contract –
ss 10 and 23 of the LCA Cap 345 RE 2019
• It is relative. In which sense? It takes effect only on the parties and the other persons
assigned or delegated in the said contracts – s 37 of the LCA Cap 345 RE 2019
Contract as Institution
• Surplus production
• Division of labour
• All these reasons necessitated the exchanges in the society. There was need of
having the system that support such exchanges. Contract arose as mechanism.
Basic Conception of Institution of Contract
• Oral contract
• Written contract
• Made in writings.
Types of Contract
• Simple contracts
• Specialty contracts
• Unilateral Contract
• Occurs when one party makes an express promise, while another undertakes a
performance without first securing a reciprocal agreement from the other
party. e.g. Carbolic Smoke Balls Co. Ltd v. Carlil
• Bilateral Contract
• Occurs when both parties make reciprocal promises with each other. It also
occurs when mutual promises are offered and accepted.
Types of Contract
• Collateral contract
• Quasi-contract - implied
• contract whose terms and conditions of the contract are set by one of the
parties, and the other party has little or no ability to negotiate more
favourable terms. e.g. loan contracts, flight contracts, insurance contracts.
• Express contract
▪ The offer sets out the terms upon which the offeror
is willing to enter into contractual relations with
the offeree.
Conditions of Offer
▪ Offer must be certain, made willingly,
communicated, be intended to be binding and must
include some essential items especially the
subject matter of the agreement