Law of contract

Habari Mwanafunzi! Welcome to the Law of Contract!

Ever bought airtime on your phone? Hopped into a matatu and paid your fare? Or even just ordered a meal from a local kibanda? Congratulations! You've already been making contracts without even realizing it. The Law of Contract isn't some dusty old topic for lawyers in wigs; it's the engine that runs our daily lives and businesses, from the smallest kiosk in an estate to the biggest corporations in Nairobi.

In this lesson, we're going to break down this fascinating topic. By the end, you'll see contracts everywhere and understand the "rules of the game" that keep business moving smoothly. Let's get started!

What is a Contract? The Legal Handshake

At its core, a contract is a legally binding agreement between two or more parties. Think of it as a promise that the law will enforce. If one person breaks their promise, the other person can go to court to get help. It creates rights and obligations for everyone involved.

It doesn't always have to be a 50-page document written in complicated English. A simple verbal agreement can be a contract. When the matatu conductor tells you the fare to town is "hamsa" (50 bob) and you get in, a contract has been formed!

Example: The M-Pesa Transaction

When you go to an M-Pesa agent to deposit money, a contract is formed. You promise to give them cash, and Safaricom (through the agent) promises to credit your account with the equivalent electronic value. It's a simple, everyday contract based on trust and a clear set of actions.

The Essential Ingredients of a Valid Contract

Just like making a good chapati requires the right ingredients (flour, water, oil, salt), a valid contract needs several essential elements. If even one is missing, the agreement might not be a contract at all!

    Offer + Acceptance
      + Intention
        + Consideration
          + Capacity
            + Legality
              = A VALID CONTRACT!

Let's look at each ingredient one by one.

• 1. Offer and Acceptance

  This is the starting point. An offer is a clear proposal by one person (the offeror) to another (the offeree). Acceptance is when the offeree agrees to all the terms of that offer without changing them. It must be a "mirror image" of the offer.

  Scenario: Buying a Phone on Jumia

  You see a smartphone listed for KES 15,000 on Jumia. That price listing is technically an 'invitation to treat' - Jumia is inviting you to make an offer. When you click 'Buy Now' and enter your payment details, you are making the offer to buy the phone for KES 15,000. When Jumia sends you a confirmation email saying "Your order is confirmed," that is their acceptance. A contract is now formed!

  
          +-----------------+         +-----------------+         +-----------------+
          |   YOU (Offeror) |  -----> |  OFFER TO BUY   |  -----> | JUMIA (Offeree) |
          | Make an offer   |         | (e.g., Pay KES  |         |                 |
          |                 |         |      15,000)    |         |                 |
          +-----------------+         +-----------------+         +-----------------+
                                                                           |
                                                                           | (Accepts the offer)
                                                                           V
          +-----------------+         +-----------------+         +-----------------+
          |  CONTRACT FORMED| <-----  |   ACCEPTANCE    | <-----  |     CONFIRMS    |
          |  (Legally       |         | (e.g., Order   |         |     THE ORDER   |
          |   Binding)      |         |   Confirmation) |         |                 |
          +-----------------+         +-----------------+         +-----------------+
          

• 2. Intention to Create Legal Relations

  For an agreement to be a contract, both parties must intend for their agreement to be legally serious. The law automatically assumes that business agreements are intended to be legally binding, but social or domestic agreements are not.

  If you promise to buy your friend a cup of coffee and you forget, they can't sue you! That's a social agreement. But if you sign an agreement to supply a hotel with 100kgs of beans every week, that is a business agreement, and the law will enforce it.

  Image Suggestion:

  A split-screen image. On the left, a vibrant, casual scene of young Kenyans laughing and sharing a meal at a Java House, captioned "Social Agreement." On the right, a formal scene in a modern Nairobi office with two people in business attire shaking hands over a signed document, captioned "Commercial Contract."

• 3. Consideration (The Price of the Promise)

  This is the legal term for what each party gives up or receives. It's the "price" of the promise. It's often called quid pro quo - something for something. Consideration doesn't have to be money! It can be goods, services, or even a promise not to do something.

  For example, when you pay your rent, your money is the consideration you give, and the landlord's consideration is giving you the right to live in their house. A key rule is that consideration must be sufficient but need not be adequate. This means it must have some value, but it doesn't have to be the "market price." You can legally agree to sell your car worth KES 500,000 for KES 100,000, as long as you weren't forced into it.

• 4. Capacity to Contract

  This means a person must be legally able to enter into a contract. In Kenya, certain people have limited capacity to protect them:

  • Minors: People under the age of 18. Contracts with minors are generally not binding, except for "necessaries" like food, clothing, and education. You can't enforce a contract for a loan against a 16-year-old.
  • Persons of Unsound Mind: If someone is mentally incapacitated and cannot understand the contract, it may not be valid.
  • Intoxicated Persons: Similar to above, if a person is so drunk or high that they don't know what they are doing, the contract can be voidable.
• 5. Legality of the Object

  The purpose of the contract must be legal. You cannot have a valid contract to do something that is against the law in Kenya. An agreement to sell bhang or to pay someone to commit a crime is void from the start and has no legal effect.

When a Deal Goes Sour: Breach of Contract & Remedies

A breach of contract happens when one party fails to perform their obligations without a lawful excuse. For example, if you hire a carpenter (a 'fundi') to make a table and they take your deposit but never deliver the table, they have breached the contract.

When this happens, the law provides remedies for the innocent party. The most common remedy is damages, which is an award of money to compensate for the loss suffered.

Example: The Wedding Photographer

Amina hires a photographer, David, for her wedding for KES 80,000. She pays a KES 40,000 deposit. On the wedding day, David doesn't show up. This is a breach of contract. Amina has to hire another photographer at the last minute for KES 100,000. What are her damages?

Here's how we can calculate the financial loss:

Step 1: Calculate the extra cost Amina had to pay.
   Cost of new photographer:   KES 100,000
 - Cost of original photographer: KES  80,000
   -----------------------------------------
   Extra Cost (Loss):          KES  20,000

Step 2: Add the lost deposit.
   Amina paid David a deposit he didn't earn.
   Lost Deposit:               KES  40,000

Step 3: Calculate Total Damages.
   Extra Cost:                 KES  20,000
 + Lost Deposit:               KES  40,000
   -----------------------------------------
   TOTAL DAMAGES TO CLAIM:     KES  60,000

Amina can sue David for KES 60,000 to put her back in the financial position she would have been in if David had not breached the contract.

Conclusion: You're Now a Contract Whiz!

There you have it! From taking a boda-boda to signing a multi-million shilling business deal, the principles of contract law are the same. It's all about promises, obligations, and consequences.

Remember the key ingredients: Offer, Acceptance, Intention, Consideration, Capacity, and Legality. Understanding these elements empowers you not just in your studies, but in your everyday life and future career. Keep observing the world around you, and you'll see the Law of Contract in action everywhere! Keep up the great work!