Law of Contract II Review

SCHOOL OF LAW BACHELOR OF LAWS LLB 113: LAW OF CONTRACT II 3 CREDIT HOURS JAN – APR 2026

Instructor Information

• Instructor: Ms. Carol Musau, LLM, LLB (Advocate, Mediator – Student, PhD)

DISCUSSION QUESTION

Scenario Overview

• Entities Involved:
    - Mwangaza Energy Authority (MEA): A statutory body
    - NovaTech Solutions Ltd: Proposed supplier of smart metering equipment
    - Brightline Consulting: Service provider for data analytics
    - Highway Motors Ltd: Supplier of utility vehicles under a hire purchase agreement

Events

1. MEA's Proposal to NovaTech:
      - MEA's Head of Procurement sent an email to NovaTech stating:
        - “Your proposal to supply 200 smart meters at KES 150,000 per unit is acceptable. Kindly proceed, subject to execution of a formal contract and availability of funds.”
      - This communication led to NovaTech commencing production and incurring costs.
        - Question: Was this a legally binding contract?

2. Budget Cuts Impacting MEA:
      - Due to budget cuts by the Treasury, MEA informed NovaTech it would not proceed with the transaction. NovaTech demanded compensation for losses incurred.

3. Brightline Consulting Agreement:
      - MEA entered a service agreement with 18-year-old Daniel from Brightline Consulting. MEA terminated the contract after three months, claiming it was unenforceable due to Daniel’s age.
        - Assessment Needed: Was the contract enforceable?

4. Highway Motors Hire Purchase Agreement:
      - MEA acquired five vehicles from Highway Motors. After partial payments, MEA defaulted, and one vehicle was destroyed in floods. Highway Motors demanded full payment of outstanding balance.
        - Legal Consideration: Is MEA liable?

LAW OF CONTRACT I (FOUNDATIONAL PRINCIPLES)

Key Concepts

1. Definition of a Contract:
      - A contract is an agreement enforceable by law, requiring:
        - Offer
        - Acceptance
        - Consideration
        - Intention to create legal relations
        - Capacity to contract

2. Crucial Questions Regarding MEA and NovaTech:
      - Was a legally binding contract formed?
      - Did MEA’s email constitute a valid offer or merely a conditional promise?
      - Was there valid acceptance, consideration, and intent to create legal relations?
      - Did all parties possess the capacity to contract?

3. Void, Voidable, and Unenforceable Contracts:
      - Is the contract with Brightline Consulting void, voidable, or enforceable?
      - Consider the legal effect of contracting with a minor in commercial transactions.

4. Assessment of Breach and Performance:
      - Did MEA breach any contractual obligations?
      - Was the termination of Brightline Consulting lawful?

LAW OF CONTRACT II (ADVANCED CONCEPTS)

Key Areas for Analysis

1. Discharge of Contracts:
      - Can NovaTech’s agreement be discharged due to lack of funding?
      - Does destruction of the vehicle by floods constitute frustration under the hire purchase agreement?

2. Special Contracts:
      - Identify and discuss the special contract between MEA and Highway Motors.
      - Explore statutory protections under the Hire Purchase Act.

3. Remedies (Advanced):
      - Can NovaTech claim quantum meruit for the incurred costs?
      - What remedies are available for Brightline Consulting?
      - Is Highway Motors entitled to the full outstanding balance due?

MEA v NOVATECH SOLUTIONS LTD

Issues

• Existence of binding contract between MEA and NovaTech.

• Entitlement of NovaTech to any remedy in absence of a contract.

Law

• Contract Requirements:
     - An enforceable contract requires:
       - Offer
       - Acceptance
       - Consideration
       - Intention to create legal relations
       - Capacity

• An offer that is conditional or “subject to contract” is generally non-binding.

Application

• MEA’s communication to NovaTech was conditional:
    - Acceptance stated to be