Brief History of the law of contract and the essential elements of a valid contract.l

Brief History of the law of contract.

The law of contract can be defined as a body of law that gives rules and guidelines which govern the formation and enforcement of legally binding obligations.

English contract law has been in existence for hundreds of years but it really began to develop during the Victorian era[1], in the wake of the Industrial Revolution[2].

Industrial Revolution was a
key factor in the development of contract law this is because of the expansion of business and the need for a legal system to regulate trade. As a result, there was need for courts to adjudicate on disputes arising out

of business agreements

The modern law of contract basically developed from the old ‘law merchant’[3].Formerly contracts were made by land owners and merchants but, during this period [4],more and more people from all walks of life began to make contracts.

In medieval time[5], if you could own land the contract law gave you

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rights however resolution system in this time was very primitive. It was enforced by royal courts who were mainly concerned with murder, mayhem and the ability to raise arms. Later on other courts developed i.e. Courts of pie powder[6] to aide in resolving these disputes.

Medieval contracts were notated in documents with a wax seal. They required the wax seal to be legally binding whereby if there was a dispute prospectively, it could be solved by compurgation[7].

Penal bonds[8]  later replaced action of convent. This is where one would enter into a bond i.e. ‘I will pay to you the sum of X shillings if I fail to do this I will forfeit Y.

’

In 1367, Assumpsit first appeared in the case of Skyrne v Butolf[9]  when the plaintiff sued a doctor with whom he had contract with to cure ringworm. This breach of contract was  known as ‘assumpsit’.In the 17^th century assumpsit developed into quasi-contract[10] and later by the 18^th century the principle of  equity[11] emerged .

The 19^th century is generally regarded as the classical age of English contract law. The accepted theory of this century was ‘laissez-faire’[12].This doctrine of freedom of contract  actually meant that businessmen were free to agree whatever they liked, so long as it was legal ,they become strictly bound; the court was simply to act as an adjudicator when disputes arose.

However the major problem with the doctrine of freedom of contract is that it had a coercive element to the weaker party. The party had little or no choice other than to enter into a contract hence the element of fairness did not prevail.

Since there was no court interference in the doctrine of freedom of contract, parliament had to intervene to protect the ordinary consumer hence various statutes were passed to enhance this protection by reducing the hardship of the doctrine of freedom of contract. These include; the consumer credit act of 1978,the rent act 1977,the employment protection  act 1978,the sale of goods act 1979,the unfair contract act 1977 and the contract act of 1961.

The Indian contract Act 1872 is one of statutes that were created to determine the circumstances in which promises made by the parties to a contract shall be legally binding on them. Section 2(h) of the Act defines the term contract as "any agreement enforceable by law[13].

 An agreement which can be enforceable by law must have some essential elements. Section 10 of the Act states that “All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void" .

The above section provides the following as essentials of a valid contract.

a)    Intention to create legal relationship: The parties willing to enter into a contract must have an intention to create a legal relationship for the contract to be valid. An agreement wherein it is clearly indicated that it`s not intended to create formal or legal agreement and cannot be subject to legal jurisdiction in the law of courts because its not valid and cannot be treated as a contract .In social and domestic agreements, there is usually no intention to create a legal relationship hence such agreements cannot be enforceable. As in the case of Buffery v Buffery[14] The husband promised to pay his wife an allowance but he didn`t fulfill this. Even if it could be said that there is a consideration for the promise, it`s not binding because neither party intended that such a promise should generate legal liability.

b)    Lawful consideration: That is, the agreement must be supported by some type of service or goods in return of money or goods.. An agreement is valid only when the acts are legal. Illegal works like killing another for money, or immoral works or illegal acts are cannot be treated as a valid agreement. So, illegal works will not come under the contract act. In the case of Carlil V Carbolic Smoke ball co[15]

c)    Lawful Object: The objective of the agreement must be lawful and not illegal[16]. For example ‘I hire someone’s` car for robbery purposes’, this acts is unlawful. Such agreement cannot be treated as a valid contract.

d)    Proper offer and its acceptance: To create a valid contract, there must be two or more parties;the offeror and the offeree.The offer must be clear and properly communicated to the other party. Similarly proper and unconditional acceptance must be communicated to the offeror. Proper offer and proper acceptance should be there to treat the agreement as a contract which is enforceable by law. In the case of Hyde v Wrench[17] The defendant offered to sell his farm to the plaintiff at £1000, the plaintiff offered £950 in his letter but the defendant  refused to accept, the plaintiff later agreed to buy the farm for £1000 but the defendant still refused to sell the farm. It was held that the counter-offer was a rejection of the offer and thus could not be reversed hence no binding agreement had arose.

e)    Capacity of parties to contract: If any of the party is not competent or capable of entering into the agreement, that agreement cannot be treated as a valid contract. Section 11 of the Act gives competence and capacity to a person of age of majority according to the law to which he is subject and who is of sound mind.

f)     Genuine/Free Consent: According to section 14,a consent is said to be free when it is not caused by (i) coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mutual mistake. If the contract made by any of the above four reason, at the option of the aggrieved party, it could be treated as a void contract. As in the case of Griffin V Brymer[18] At 11am on 24 June 1902 the plaintiff had entered into an oral agreement for the hire of a room to view the coronation procession of king Edward VII on 26 June unknown to them that at 10am on 24 June the procession had been postponed. Wright J held the contract void. The agreement was made on a mistaken facts and the plaintiff was entitled to recover his £100.

g)    Certainty of meaning: Wording of the agreement must be clear and not uncertain or vague, this is according to Section 29 of the  Contract. In the case of G Scammel & Nephew LTD V Ouston[19] the agreement to buy goods on higher purchase was too vague to be enforced since there were many kinds of higher purchase.

h)   Possibility of performance: As per section 56, if the act is impossible of performance, physically or legally, the agreement cannot be enforced by law.. For example you cannot agree that you run at the speed of wind .This contract will be void. There must be possibility of performance of the agreement

i)     Legal formalities: An agreement can be either written or oral. But, in some cases the law strictly insists that the agreement must be in writing like agreement to sell immobile assets must be in writing and should be registered under the Transfer of Property Act, 1882. These agreements are valid only when they fulfill the formalities like writing, registration, signing by the both parties is completed. If these legal formalities are not completed, it cannot be treated as a valid contract.

j)     Agreement must not be expressly declared void: Some specific agreements in Section 24 to 30 have been expressly declared void. For example an  agreement in restraint of legal proceedings, agreement in restraint of trade, agreement in restraint of marriage and agreement by way of wager. A contract in restraint of the above aspects shall be considered void.

Lack of one or more of these essentials ,a contract may be void,voidable or unenforceable.

A void contract has no legal effect at all. Avoidable contracts legally binding but one of the parties has the option to avoid it while an unenforceable contract is valid in all aspects except that it cannot be enforced in a court of law.

REFERENCES.

1. The Law of Contract by Edwin Peel.12^th Edition.

2. Anson`s Law of Contract.. J Beatson, 28th Edition.

3. Law of Contract by Richard Stone

4. The Indian Contract Act of 1872.

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[1] British history - the period of Queen Victoria's reign from 20 June 1837 until her death on 22 January 1901

[2] period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times.

[3] The customs & rules established over the centuries and adhered to by early traders and business people.

[4] Industrial revolution.

[5]The Middle Ages period of European history from the 5th century to the 15th century.

[6] special tribunals in England dealt with disputes between merchants, theft, and acts of violence.

[7] Compurgation, also called wager of law, is a defence used primarily in medieval law. A defendant could establish his innocence or nonliability by taking an oath and by getting a required number of persons, typically twelve, to swear they believed the defendant's oath.

[8] Penal Bonds – a promise to pay a certain sum incase of breach.

[9] Skyrne v. Butolf, Y.B. Pas. 11 Ric. 11, p. 223, pl. 12 (1388)

[10] fictional contract created by courts to impose equity between two parties

[11] Equity is the name given to the set of legal principles, in jurisdictions following the English common law tradition, which supplement strict rules of law where their application would operate harshly, so as to achieve what is sometimes referred to as "natural justice

[12] Doctrine of Freedom of contract as expressed by Sir George Jessel”

[13] An agreement is  an offer and its acceptance. section 3 to 9 of the contract act, 1872

[14] (BAILII: [1987] EWCA Civ 4

[15]  [1893] EWCA Civ 1

[16]  Any act that is prohibited by law.

[17] [1840] EWHC Ch J90

[18] [1903]19 T.L.R 434.

[19] [19941] A.C 251

By Okechi Dennis.