A contract is an agreement between two or more people that gives rise to obligations that can be enforced by law. In order to create a contract, parties must have the intention to come to an agreement and there must be some form of consideration whether in the form of money or services, or something of value. Contracts in Kenya are primarily governed by the English common law of contract that makes judicial decisions binding and the Law of Contract Act, Cap 23 Laws of Kenya (the Contract Act).
Contracts can either be expressed or implied but section 3 of the Contract Act provides that there are contracts that must be in writing and these include, but are not limited to:
- Agreements to answer for the debt, default, or miscarriages for another for example in the case of an individual providing security for another;
- Contracts for the sale of land;
- Contracts for the sale of goods; and
- Contracts to obtain credit or a loan.
In addition, contracts that are in writing, especially those that involve the sale of land, should be: (a) in writing; (b) signed by all parties that will be subjected to the terms of the contract, and; (c) the signature of each party should be attested to by a witness who was present when the party was signing the contract.
Essentials of a Contract
- Offer
An offer is an expression of willingness to enter into an agreement with another or a group of people on certain terms with the intention to be bound to such an offer. This should not be confused with an invitation to treat in which a party does not make an offer rather they invite the other party to do so. A classic example of this would be the display of goods in a supermarket whereby a supermarket accidentally marks the price of flour at KES. 300 and the customer takes it to the counter and finds that is actually KES. 310, the supermarket is not bound to honor the wrong price as it was only an invitation to treat.
- Acceptance
Once a party has been given an offer, it is upon them to either choose to accept or decline the offer. Acceptance occurs when a party agrees to all the terms of the offer and they express the same either in writing or by conduct.
- Consideration
Consideration is something of value that is given for a promise in order to make the contract enforceable. The consideration needs to be sufficient to satisfy the agreement entered into between the parties and it can be in various forms such as money, delivery of goods, or services so long as it is of value.
- Contractual intention
The case of Garvey v Richards (2011) JMCA 16 noted that it is a well-settled rule that an agreement is not binding as a contract unless it shows intention by the parties to create a legal relationship. When considering whether there was a contractual intention, the courts will consider a variety of factors such as the relationship between the parties, the content of the contract, the circumstances in which the contract was made, and the conduct of the parties.
Termination of a Contract
A contract can come to an end in a variety of ways which can be included in the contract between the parties and the most common ways include:
- By expiration. This occurs when a contract has come to an end according to its terms for example: if the contract has a fixed end date or both parties have completed their obligations under the contract.
- This is a right that should be included in every written contract. This right allows a party to terminate a contract where there is a breach of the agreement by the other party for example if a party fails or refuses to perform their contractual obligations.
- Sometimes, parties enter into a contract, and down the line, the question arises as to whether the existence or non-existence of a fact or occurrence or non-occurrence of an event will destroy the foundation of the agreement. This then will vitiate the contract and it is caused by factors such as fraudulent/negligent misrepresentation of a fact and a mistake, whether unilateral or common between the parties.
- A contract can come to an end when an unforeseen event occurs which makes the performance of a contract impossible. This unforeseen event is one that either party could not have expected for example an act of God such as floods or war.
In conclusion, it is advisable that parties should enter into a written contract so as to avoid complex legal battles and to properly articulate the contractual obligations of all the parties involved.
*Disclaimer
