EXECUTIVE EVENING MBA PROGRAM

BUSINESS AND COMPANY LAW (LB 502)

SUBJECT: BUSINESS LAW

INSTRUCTOR: DR FANUEL K. M. SUMAILI

NAME OF STUDENT: JANE CHALLE

REG No: 18EDA 9617
 OCTOBER 2008.

Table of Contents
Table of Contents.................................................................................................................2

INTRODUCTION ..............................................................................................................3

1.1 PROJECT QUESTION:................................................................................3

2.0 CONTRACT..................................................................................................................5

2.1 Agreement:.............................................................................................5
2.2 Discharge of contracts............................................................................6
2.3 Remedies of breach of contracts.............................................................7
3.0 issues on the case...........................................................................................................7

3.1 Beyata Mathias part:...............................................................................8

3.2 Hans korosso part...................................................................................8
3.3 Lilian Mlay part........................................................................................9
3.4 Said Amani part.....................................................................................10
4.0 Legal advice to Augustine...........................................................................................11

5.0 References:..................................................................................................................11

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INTRODUCTION
1.1 PROJECT QUESTION:

Augustine inserted the following advert on the standard news paper of

11th January, 2008.

“Once in a life time opportunity, A one year old, low mileage Toyota
Camry Tshs 800,000 cash. This is serious offer – the car will go to the
first person who accepts its Valid for one week only” Contact
Augustine on +255 22 2148080”.

Beyata Mathias, a young accountant who had always dreamed of

owning a Camry wrote to Augustine from Mbeya saying “I accept to
buy your Toyota Camry for Tshs. 800,000”. Please advice whether I
can pay in installments over 4 months. If I do not hear from you by
15th January, 2008 I will take it all is fine”. She posted the letter on 11th
January, 2008.

On the same day Hans korroso telephoned Augustine and the

following conversation was recorded:
“I am interested in buying the Toyota camry you advertised today in
the standard. I am willing to pay Tshs. 800,000 cash and……..”
And at that moment the line went dead. Augustine told his wife who
was present at that time, “I accept Hans offer and I will sell him the
Toyota camry if only I could locate him”. Hans had not had the time to
give his landline phone number from which he was calling, neither did
he call again.

In the evening of the same day, Lilian Mlay a retired accountant and
an old friend of Augustine, informed him that she was very interested
in the Toyota Camry but needed two days to look for money. In
response, Augustine said:
“Since you were such a helpful pal of mine when we were
undergraduate students at University and because at one time you
gave me CDs of Morogoro Jazz band , I promise not sell the vehicle to
anyone until two days from today to give you a chance to raise the
money”.

A day later Augustine received Beyata’s letter and replied the same
day as follows:
“Thank you for your letter. You may have the motor vehicle on
payment of Tshs. 800,000 cash – straight within 4 days”.

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Due to the inefficiency of the post, Beyata received the letter on 5th
February,2008.
Meanwhile on 13th January 2008, Said Amani, who knew Augustine well
drove to Augustine’s house. Augustine was not at home then. He had
gone to town for “deals”. Augustine’s wife was, however at home
when said arrived. Said inquired from her whether the Toyota Camry
had been sold to which she replied:

“It is still in the garage”.

Said then produced Tshs. 850,000 from his leather briefcase and gave
it to Augustine’s wife , saying “ I will come and collect the vehicle this
evening”.
Augustine’s wife got the Tshs. 850,000 and put it in the bedroom and
took the extra Tshs. 50,000 and went to the market to buy fresh fish,
which she knew was Augustine’s delicacy.
While in town Augustine met Renada who offered to buy Augustine’s
motor vehicle for Tshs. 800,000 cash. She gave Augustine the money
and together they drove to Augustine’s house to collect the car. Soon
after Renada had driven off with the car Augustine’s wife returned
from the market.

In the evening said came to collect the motor vehicle as agreed. On

hearing that the vehicle had been sold already, said refused to accept
his money saying:
“You have breached the contract. I want damages.”

Early in the morning on 14th January, 2008, Lilian arrived at Augustine’s

house with Tshs. 800,000 cash. On being told that the vehicle had
been sold Lilian threatened to take legal action against Augustine.

Hans Koroso, who had since located Augustine’s house also, came to
see him with tshs. 800,000. He claimed that Augustine had breached
the contract and that he was taking the matter up with his lawyers.

On 21st January, 2008 Beyata booked a taxi, all the way from Mbeya to
pay for and collect the motor vehicle from Augustine. She paid the
driver Tshs. 22,000 for the trip. She also intends to sue Augustine.

Augustine has now come to you for legal advice. Advice him on his
legal position against each part.

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2.0 CONTRACT
A contract is an agreement between two or more parties that creates
obligation which the laws recognize and enforce. There are two classes
of contracts, which are

i) Specialty contracts: are contracts made under seal, i.e. it is written

on paper or parchment and is signed, sealed and delivered. It is a most
solemn and formal way in which an agreement can be made under
English law.

ii) Simple contracts: are contracts which are made under no seal.
Simple contract must have three elements. These elements are:-
• Agreement
• Intention
• Consideration.

2.1 Agreement:
Agreement which is enforceable by the law as a contract may be oral
or in writing Agreement is established when there is an offer and an
acceptance.
An offer is defined by Treiltel as “an expression of willingness to
contract on certain terms, made with the intention that it shall become
binding as soon as it is accepted by the person to whom it is
addressed”, the offeree”.
The “expression” referred to in the definition may take different forms,
such as letter, newspaper, fax, email and even conduct, as long as it
communicates the basis on which the offerer is prepared to contract.
In many cases an offer will be made by words (whether written or oral)
it could also be made by conduct. If the offeror’s conduct is such as to
induce a reasonable person to believe that he intends to be bound by
his conduct once the offeree accepts it, an agreement will be
considered to have been concluded between the two parties that the
law will enforce as a contract
In summation, an offer is undertaking by offerer to be contractually
bound in the event of a proper acceptance being made. The offer must
be clear, complete and final.

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In order for an offer to be considered as an agreement it first accepted
by the offeree. Thus is the combination of an offer and acceptance that
creates an agreement which will be enforced by law. More over the
acceptance must be communicated to the offerer so that in absence of
that there will be no contract.
A valid agreement constituted by an offer which is accepted, the
agreement may not be enforced as a contract in the absence of
‘consideration’. This is because, as a general rule, unless an
agreement is made by a deed, it is not binding as a contract if not
supported by ‘consideration’, i.e., ‘something of value in the eyes of
the law’. The basis of this rule is the fact that courts are not willing to
enforce gratuitous promises as contracts.
2.2 Discharge of contracts
A part to a contract may be discharged or released from further
performance of the contract by the following factors:-
• Mutual agreement: it happens where after agreement, parties
enter into subsequent agreement whereby one of the parties is
released from his obligation under the contract.
• Performance: A part to a contract may also be discharged by
performance. For instance, where a contract is for the
performance of a specific task, once the part concerned
completes that task, he has no further performance to render
and the contract will automatically come to an end.

• Breach: As observed above, a breach by one part of a condition

of the contract entitles the other part to regard himself as
discharged from further performance of the contract. As a result,
the latter can terminate the contract and proceed to recover any
payment he may have made or any benefit he was supposed to
get under the contract.

• Frustration: it occurs where a contract that was capable of

performance at the time of its conclusion becomes incapable of
performance because of subsequent developments. Some of
these developments may be subsequent illegality, death of one
of the parties, illness of one of the parties, imprisonment of one
parties and cancellation of an expected event.
The effect of these developments will be to bring the contract to
an end forthwith and to release both parties from further
performance. Besides, as a result of statutory intervention, any
money paid to any part to the contract is recoverable as money
had and received. And any money which was payable will cease
to be payable as a result of the discharge.

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2.3 Remedies of breach of contracts.
Where the court is satisfied that there has been a breach of contract, it
has the power to grant the following remedies:

• Refusal of further performance by the innocent part. For

example, if he has not yet paid the contract price, he can refuse
to do so as a result of the other part’s breach;

• Damages as compensation for the injury or loss suffered by the

innocent part as result of the breach;

• Quantum meruit, i.e. the value of the performance actually

rendered by the innocent part; where a plaintiff sues to recover
an unliquidated sum by way of payment for services rendered,
he is said to claim on a quantum meruit (“as much as he has
earned)”/ The distinction between a quantum merit claim and a
claim for damages is that the former is a claim for reasonable
remuneration, while the latter is a claim for compensation for a
loss. Both are claims for an unliquidated sum. It is usually a
matter of procedural tactics whether a plaintiff claims on a
quantum merit in preference to a claim for damages.

3.0 issues on the case

On the subject of the sale of Augustine’s Toyota Camry to a number of
people the issue is “whether there is a binding contract
between each one of them and Augustine concerning the
sale of the motor vehicle”.
Usually determination whether two parties have an agreement or a
valid offer is an issue which is determined by the court using objective
test, thus intention is objectively judged by the courts.
For the aspect of the advert in the standard news paper, can’t be
considered as a legal contract but a mare “Invitation to treat”.
The courts have tended to take a consistence approach to the
identification of invitations to treat, as compared with offer and
acceptance, in common transactions.
Thus, an invitation to treat is not an offer; refer the case of Harris v.
Nickerson (1873):

N, an auctioneer, advertised that he would sell certain goods, including

office furniture, on a specified date. H Attended the sale with the

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intention of buying some office furniture. N withdrew the office
furniture from the sale. H claimed damages for breach of contract,
contending that the advertisement was an offer which he had
accepted by attending the sale. HELD: the advertisement was a mere
statement of intention amounting to an invitation to treat.

3.1 Beyata Mathias part:

For the case of Beata Mathias writing a letter to Augustine, showing
her intention to purchase the motor vehicle and adding conditions on
payment by four installment doesn’t complete an offer instead she
posed a “counter offer” to Augustine.
“I accept to buy your Toyota Camry for Tshs. 800,000”. Please advice
whether I can pay in installments over 4 months”.

How ever Beata added some conditions on her counter to Augustine to

reply before 15th otherwise she will consider being agreed.
“If I do not hear from you by 15th January, 2008 I will take it all is fine”
Augustine after receiving beata’s letter or counter offer he didn’t
accept it straight instead he posed another counter offer to beata that;
“You may have the motor vehicle on payment of Tshs. 800,000 cash –
straight within 4 days”
Due to enefficiency of the post, beyata received the letter on 5th
February, 2008.
The rule of acceptance agreed that the offer can’t constitute an
agreement unless it is first accepted by offeree. And also means of
communication should be clearly agreed if one part uses other means
the acceptance will not bind him/her.
Augustine provided his telephone number as means of communication
but beata used post which was less effective.
Thus late receipt of the letter from Augustine will not bind him to the
offer. For this matter we can consider that there were no binding
agreement between Beata and Augustine.

3.2 Hans korosso part

Hans Koroso responded to the advert by calling Augustine the after
seeing the advert unfortunately he couldn’t finish up the conversion
before the line went dead.
In order for the acceptance to be considered it has to be clear,
complete and final. The statement from Hans had been cut off by the
communication problem happened;

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 “I am interested in buying the Toyota camry you advertised today in
the standard. I am willing to pay Tshs. 800,000 cash and……..”
This statement is not complete and can’t be considered as an
acceptance to an offer. And on the other hand the phone could not
restrain Augustine to receive other acceptance from people as far as
the advert on news paper is open to every person who is interested
and agreed with the offer.
Generally, there were no agreement/ contract between the two as far
as there were no clear communications between the two parties.

Refer the case of Carlill V Carbolic Smoke Ball Co. (1893):

The following advertisement appeared in newspapers: “One hundred
pound reward will be paid by the Carbolic Smoke Ball Company to any
person who contracts the increasing epidemic influenza, colds or any
other disease caused by talking, cold, after having used the ball three
times daily for two weeks according to the printed directions supplied
with each ball. One million Pound is deposited with the Alliance Bank,
Regent street, showing our good faith in the matter.” C, in reliance on
this advertisement, bought a smoke ball and used it accordingly to the
directions but nevertheless suffered an attack of influenza. She
claimed One hundred pound from the company.
HELD:
(a)The deposit of One million pounds showed that the company
intended to create legal relations
(b) the advertisement was an offer made to all the world, and a
Contract was made with that limited portion of the public who came
forward and performed the condition on the faith of the advertisement,
(c) the offer contained an intimation that performance of the condition
was sufficient acceptance and that there was no need for notification
of acceptance to be given to the offeror.

3.3 Lilian Mlay part

Acceptance of Lilian was not a straight but terminated the Augustine’s
offer of the first person who accepts and with cash will get the car, by
a counter offer of buying the motor vehicle in two days time.
“she was very interested in the Toyota Camry but needed two days to
look for money”.
Augustine accepted Lilian counter offer and promised not to sell the
vehicle till she will be ready to buy it.
“Since you were such a helpful pal of mine when we were
undergraduate students at University and because at one time you
gave me CDs of Morogoro Jazz band , I promise not sell the vehicle to
anyone until two days from today to give you a chance to raise the
money”.

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 Although it makes up a valid agreement by an offer which is accepted,
the agreement may not be enforceable as a contract in absence of
consideration. As a general rule, unless an agreement is made by a
deed, it is not binding as a contract if not supported by ‘consideration’,
i.e., ‘something of value in the eyes of the law’
A promise of Augustine not to sell the vehicle for two days waiting for
lilian to collect the money had no consideration hence can’t be
enforced on law.
Refer the case of Stilk V Myrick (1809): the Captain of a ship promised
his crew that if they shared between them the work of two seamen
who had deserted the wages of the deserters would be shared out
between them.
HELD: the promise was not binding because the seamen gave no
consideration: they were already contractually bound to do any extra
work to complete the voyage.

3.4 Said Amani part

Said Amani made a transaction with a third part who acted as agent for
Augustine.
There were no communications between Augustine and his wife as well
as Said Amani himself during the transaction time.
Although the two parties are cohabiting in a domestic setting it doesn’t
give authority for one to act agency of cohabitation on a sell of the
motor vehicle. She acted in such a way as to lead Said into believing
that Augustine has authorized his wife to act on his behalf and in that
belief he enters into a contract with Augustine’s wife, she will be an
agent for Augustine in respect of that contract. In this matter
Augustine is prevented from denying the fact that the third person is
his agent.

Refer the case of Trueman V Loder (1840) A dealt with T on behalf of

his principal, P. The agency was determined but notice of this was not
given to T. A subsequently dealt with T in his own name. T suffered
loses as a result of A’s breach of contract and he sued P.
HELD: P was estopped from denying that A was still his agent.
Damages awarded against P.
Therefore Augustine is liable to pay back Said Amani’s money as well
as any other cost incurred during the transaction/agreement.

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4.0 Legal advice to Augustine.
As far as the above situation being discussed the following has been
he final advice to Augustine;
• An advertise on a news paper is not an offer but can be
regarded as an invitation to treat. It is also open to every one
interested to it.
• There was no agreement or contract between both parties as
discussed above.
• Augustine is held liable to payback Said Amani’s money as well
as any cost entered during the transaction with Augustine’s wife.
• For the case of Lilian Mlay although they had agreement after
offer and acceptance being made but it lacks consideration for
the court to enforce any damage.

5.0 References:
Treitel, G.H The law of Contract, 10th edn, pg 8 & p. 16

Sumaili, F. K.M Class notes, Esami Dar es salaam, 2008

http://en.wikipedia.org/wiki/Offer_and_acceptance

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