Law of Contract

It is a legally binding agreement between 2 or more people .

Sources of Law of Contract

1 substance of common law

2 doctrine of equity

3 statutes of general application

4 other acts of the kenyan parliament

Types of Contracts

Speciality / written Contract - the only formal contact

Contract of Record- court judgement

Simple Contact - can be oral or written not subjected to any legal formalities

Elements of a Contract

1 Offer

2 Acceptance

3 Capacity

4 Intention

5 Consideration

6 Legalities

7 Formalities

1. OFFER

Manifestation of one party to contract with another offerer to offeree

characteristics of offer

It may be oral, written or implied from the conduct of the offerer

It must be communicated to the offeree

Must be clear and definite

Must be conditional and absolute

The offerer may say the duration the offer will be open

Offerer may communicate the method of communication to get the acceptance by the oferee

It may be general or specific

Types of offers

1 Cross Offers- when both parties send the same contract wanting the same exact thing to each other

2 Counter Offers- changing the offer by providing new offer

3 Standing Offers - offers to use a particular good for a period of time

Termination of Offers

Revocation- withdrawal of the offer by the offeree

Rules of Revocation

1 Offer is revocable at any time before it becomes accepted

2 Notice of revocation must be sent to offeree

3 Offer is irrevocable after acceptance

4 A bid is irrevocable after the hammer in the auction lands

5 It becomes legally effective after notice has been received by the offeree

Rejection-Offeree fails to accept

Lapse of time

Death of offerer or offeree

Insanity of offerer or offeree

Counter Offer

Failure of a condition subject to which the offer was made

2 Acceptance

Manifestation of assent by the offeree

Characteristics of Acceptance

Must be oral, written or implied from conduct of the offeree

Offeree must be aware of the offer

Must be unconditional and unqualified

Offer must be accepted within the specified time

Acceptance of the offer must be communicated using the prescribed method

Silence of offeree does not amount to an answer

3 Capacity

Legal ability of a party to enter into a contractual relationship

it limits : people with unsound minds , drunken people , minors , corporations ,bankrupts

4 Intention

The parties must have intended to create legal relations : Nature of agreement and Circumstances that led to the for agreement

5 Consideration

Act or promise offered by one party and accepted by the other

a Executory - parties exchange mutual promises(to be done in future)

b Executed but must not be past - a party does not act to purchase the others promises

c Past consideration - promise made after services have been rendered

rules of consideration

Must be legal

Must be past

Must be real

Mutual love and affection is not enough for consideration

Must flow from the promise

6 Formalities - formalities of contracts include :

requirement of writing, requirement of consent , requirement of written evidence , requirement of signature

Illegal Contracts

examples: contract to commit crime, contract threatening public safety , defraud state revenue

factors affecting contracts

Misrepresentation- lying to the other party so that you can contract

Duress - threats and actual violence

Mistake of law or fact

Undue influence- one party dominates the other

Remedies to a breach of contract

Common law remedies - Damages

Equitable remedies : Winding Up

Injuction- court order

Recission - restore parties to position they were before

Specific performance

Accounts of profits- one surrenders profit made

Tracing

Appointment of receiver

Quantum Meruit - compensation

LAW OF INSURANCE

it is a contract whereby a party known as insurer undertakes, in consideration for a sum of money known as premium paid by the insured to pay sum of money or its equivalent on the happening of a specified future event

Essentials of an insurance contract

1 Agreement - agreement between insures and insurer

2 Uncertainty- deals with uncertain future events

3 Insurable Interest -financial interest which is at stake when subject matter has not been insured.

4 Control- insurable interest must be beyond control

5 Accidental or negligent loss - must be accidental

Elements of Insurance

a Parties - insured and insurer

b Premium - money paid by insured

c Uncertainty

d Risk

e Control

f Negligence

6 Risk

classification of insurance contracts

The event insured eg : fire, burglary

The interest insured : property , personal

Nature of contract : indemnity - compensated fully non indemnity- paid after risk attaches eg life insurance

Whether private or social - social is a requirement private isn’t

Basis of the program Insurance or Reinsurance

Types of insurance: Life, Fire , Theft , Motor vehicle, property , home , medical

Termination of Insurance

Mutual agreement

Lapse of Time

Breach of Contract

Payment of indemnity

Operation of law

Principles of Insurance

Indemnity - restoring insured back to the financial position he was in

Subrogation - facilitate indemnity by ensuring insured does not benefit

Insurable Interest - financial interest at stake if the subject matter is not insured . Insured must have financial stake - you must suffer the loss

Utmost Good Faith - both parties must disclose the material facts honestly

Proximate cause - insurer is liable for losses suffered directly from the insured peril.

Contribution: If multiple insurers cover the same risk, they will share the compensation proportionally, ensuring that the insured does not profit from the loss.

Double - insurance- Insuring the subject matter with different insurers

Re- instatement - repair / replacement of the subject matter

Law of Agency

Termination of an agency

lapse of time

death of either party

agreement of the parties

insanity of either party

bankruptcy of the principal

withdrawal of consent

Types of agents

Broker- engages in bargains and make contracts

Auctioneer- sell goods in a public auction

General agent - perform task for principal

Special agent - perform a specific task

Factor agent-sell goods on commission

Duties of An agent

Must obey the principal

Must account for all the money or goods that passed through him to the principal

Must exhibit a degree of care and skill appropriate to the circumstances

Must respect the principal’s title to any property he holds for principal

Must act in good faith for the benefit of the principal

Must retain confidentiality

Remedies of the agent

1 Right to sue

2 Right to lien - retain goods as security

3 Right of stoppage in transitu

4 Withhold the passing of property

Duties of The Principal

Remunerate the agent for the services rendered

compensate the agent for loss or liability arising

Remedies of the principal

1 Dismiss the agent for misconduct

2 Right to Sue

3 Action in damages-breach in contract

4 Action in damages for negligence - negligence

5 Action in damages for conversion of money had and received

6 Action to account -to look for what the agent has in possession

Agent -person employed to do any act for another or to represent another person in dealing with a third party

Agency- legal relationship that exist between a principal and an agent

agency comes into existence by:

a Express agreement -party agrees to create it

b Ratification - arises after an agent has acted

c By Estoppel- arises in circumstance

d By Necessity

e Agency or Cohabitation