Tanzania Legal Management of Contracts

ABSTRACT

The requirement of having adequate provisions’ governing investments and commercial transactions in Tanzania Mainland has been taken care of by the SOGO now referred to as SOGA which means the sale of Goods Act and the Tanzanian Law of Contract Act (LCA) Cap.353. This law used to be known as the Sale of Goods Ordinance Cap.214. The SOGA is to a large extent the replica of the English Sale of Goods Act of 1893 (hereinafter the 1893 English SOGA).

By the late 19th century an extensive body of rules concerning the rights and duties of buyers and sellers of goods had been developed. This is because of the nature of the economy where there is an increase of trade among the parties either individually or internationally. This raised awareness that there is a need for proper interpretation of the law relating to the buyers and sellers internationally as well as within the country to enable them becoming conversant on its implications. There is a need to have adequate laws that deals with management contract.

This work shall critically analyzing the management of contracts in the United Kingdom taking due account of the applicable laws, compare the legal infrastructure of Tanzania with that of the United Kingdom and discuss the benefits of CISG where parties to a contract are both signatories to this UN agreement. The work also shall describe the goods the seller purveys and their reason the buyer is prepared to enter into a contract to buy such goods, discuss the difference between the Sale of Goods and the Supply of Service and to highlight case law applicable to the provision of software. Particular attention shall be paid as to the comparisons of contract of employment in Tanzania and those of the United Kingdom.

During the course of explanations will also explain areas of liability of each party to the contract, resolution of contract breaches, the perceived advantages of CISG membership, offer, acceptance and settlement of the contract and contracts of employment.

LIST OF CASES CITED

Ailsa Craig Fishing v. Malvern Fishing (1983)

Alfi E.A. Ltd v. Themi Industries and Distributors Agency Ltd [1984] Civil Appeal No.28

Carlil v. Carbolic Smoke Ball Co. (1893)

Charter v. Sullivan [1957]1 All ER 809

Cort v. Ambergate Railway Co. (1851) 17 QB 127

Dies v. British and International etc Mining Corpn [1939] 1 KB 724

Gibson v. Manchester City Council [1979] 1 WLR 294

Grafton v. Armitage (1845) 135 ER 975

Fisher v. Bell (1960) 3 All ER 731

Moss v. Hancock [1899] 2QB 111

Nittin Coffee Estates Ltd and others v. United Engineering works Ltd and another [1988] Civil Appeal No.15

Perlmutter V. Beth Devid Hospital (1955) 123 NE 2d

Roe v. Minister for Health [1954] 2QB 66

Pegler v. Wang [2000]

St Albans City & District Council v International Computers Ltd [1996] 4 All ER 481 at 493

Tanganyika Garage Ltd v. Marcel G. Mafuruki (1975) LRT 23

LISTS OF STATUTES USED

Consumer Protection Act 1987 based on EC Directive 85/374 of the United Kingdom

The Tanzania Contract Act, Cap. 353

The Fair Trade Practices Act, 1994 R.E 2002 of Tanzania

Enterprise Act 2002 of the United Kingdom

The Sale of Goods Act, of 1979, R.E. 2002 of Tanzania

Supply of Goods & Services Act 1982 of the United Kingdom

Sale & Supply of Goods Act 1999 of the United Kingdom

MANAGEMENT OF CONTRACTS IN THE UNITED KINGDOM

1.1 INTRODUCTION

A contract is an agreement which legally binds the parties [1] . As for me to be binds it means that there is a legal consequence to follow if one fails to perform as agreed in the agreement. This is well supported by Robert Duxbury [2] on his book when he stated that to be binding between the parties’ means that the agreement generates rights and obligations that may be enforced in the courts where the innocent party can pray for damages or specific performance.

Smith and Keenan’s [3] also provides for the meaning of contract. According to him a contract may be defined as an agreement, enforceable by the law, between two or more persons to do or abstain from doing some act or acts, their intention being to create legal relations and not merely to exchange mutual promises, both having given something, or having promised to give something of value as consideration for any benefit derived from the agreement.

The above definition can be criticized in that some contracts turn out to be unenforceable and in addition, not all legally binding agreements are true contracts. For example, a transaction by deed under seal derives its legally binding quality from the special way in which it is made rather than from the operation of the laws of contract such as a deed is enforceable even in the absence of valuable consideration. In consequence, transactions under seal are not true contracts at all [4] .

1. 2 THE CLASSICAL THEORY OF FREEDOM OF CONTRACT

Market delivery depends on contracts. But the bargain is not secure. There are two legal views of contract, the ideal and the real. The first is the classic legal mode of the contract, the standard text book theory which developed in the eighteen and nineteenth centuries [5] . Two parties enter into a voluntary agreement and both of them benefit. This assumes freedom of contract. Agreement is a meeting of wills or of minds. It is binding: Pacta sunt servanda that is agreement must be kept.

Sir George Jessel, a senior British Judge, pronounced in 1875 that:

“If there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that contract when entered into freely and voluntarily shall be held scared and shall be enforced by the Courts of Justice [6] “.

From the above it means that the parties’ agreement would be considered as a contract when the parties’ age is competent and unless it is accompanied by the fraud, illegality or any other legal wrong. And in case of any breach of the contract the matter must be send to the court [7] .

1.3 CLASSIFICATION OF CONTRACTS

According to Professor David Mellor OBE [8] , contracts can be by deeds, simple, bilateral and unilateral. The Professor went on to say that by deeds must be in writing, signed and must be witnessed. Initially the deeds contract used to be called as the contract under seal. Thus writing, signature and witness are the essential characteristics of this type of contract.

SIMPLE CONTRACTS

As for my understanding simple contract can be whether oral or in writing. But the point is should not be under seal or recorded. Sometimes a simple contract may be made also partly oral and partly in writing.

BILATERAL CONTRACT

Professor David Mellor (Supra), talked as well about bilateral contract. He said that as its name implies is a contract between two parties whereby one party promises to buy and the other party agrees to sell. Professor provided an example on that when one purchases of a motor car from an authorized dealer, in law it is the seller that is the legally obliged entity to offer a guarantee and not the manufacturer.

From the above, professor Mellor was correct, in other words bilateral contract involves mutual obligations between the parties. For example, “A promises to sell and deliver a car to B”. “B” promises to pay for the car at the certain price upon delivery. This is a promise for a promise and hence it is a two-way traffic deal. Therefore it is a bilateral contract.

UNILATERAL CONTRACT

A unilateral contract is that only one party makes a promise. It is a rare type of contract which arises, for example, where there is an offer of a reward. However, when one as an A offers a reward to anyone who will recover his lost property, no one is bound to recover the lost property but A himself is bound to give the promised reward to anyone who responded to an offer and who might recover the property.

1.4 SALE OF GOODS

Professor David P. Mellor OBE [9] (Supra), commented on the three points which are very important on sale of goods that advertisements of goods for sale are normally considered as invitations to buy. While invitations to tender are not normally considered as an offer to enter into a contract but merely a wish to consider bids from interested parties and Auctions are where parties are invited to bid, only the falling of the auctioneers hammer indicates sale is complete.

1.5 ELEMENTS OF THE CONTRACT

In order for the contract to become valid there are two elements which need to come first such as an offer and an acceptance. An offer which is the statement signifies that the promisor that is the one who promises is bound and willing for that and the next thing will be the acceptance where by the promisee that is the party to whom the offer has been made to accept. However, his acceptance must be unconditional. Here are the details concerning with an offer and acceptance.

OFFER

The first requirement element then is an offer. Now an offer is, in effect, a promise by the offeror to do or abstain from doing something, provided that the offeree will accept the offer and pay or promise to pay the price of the offer. The price of course, need not be a monetary one. The offer thus contains two ideas that is an intimation of willingness to be bound and a statement of the price required [10] .

An offer may be expressly or implied from the conduct. Sometimes it might be addressed to the public at large [11] .

THE DISPLAY OF GOODS

The display of an article in a shop window with a price on it is deemed an invitation to treat. This was well explained by Professor David P. Mellor OBE (Supra), that under the law of contract shops are not bound to sell goods at the price indicated and a customer cannot demand to buy at that price [12] .

ACCEPTANCE

Acceptance of an offer means unconditional agreement to all the terms of that offer. Acceptance will often be oral or in writing, but in some cases an offeree may accept an offer by doing something, such as delivering goods in response to an offer to buy. The courts will only interpret conduct as indicating acceptance if it seems reasonable to infer that the offeree acted with the intention of accepting the offer [13] .

The legal requirements as to offer and acceptance is well explained in the case of Gibson v. Manchester City Council [14] , were the defendants had sent the plaintiff a brochure explaining the then scheme for the sale of the council houses, together with a form in which he could apply to the council for the information as to the price at which a house could be brought. The plaintiff filled in the form and sent it to the council, which replied by letter stating the price at which they may be prepared to sell and also giving details of their mortgage proposals. The letter went on to say that it was not to be regarded as a firm offer of a mortgage, a further form was sent to the plaintiff which he was instructed to complete if he wanted to make formal application to buy the house. The plaintiff dully filled in this form and returned it. The council never replied to this application, though it looks the house off the list of council houses under the control of its maintenance department. It was held by the House of Lords that there was no concluded contract, but at most an offer by the plaintiff which had never been accepted. This was, it will be seen, a case in which the parties were, in effect, in a relationship before the events in question, and it was also one of those cases in which the parties were moving slowly towards the making of a contract, and could perhaps have slid into a contract without the classic steps of offer and acceptance. But the House of Lords here preferred to stick to the well-tried principles of offer and acceptance.

BATTLE OF THE FORMS

In commercial life, one party will often make an offer on a set of standard terms that the party normally trades on. So one might send the form to another party containing the offer to deliver to the other party some machine for Pound 10,000 and tells the another party if she wishes to accept it must be to the offeror standard terms which he or she sets out on the form. The following problem sometimes occurs. When the offeree sending back a response saying Pound 1000 sounds goods so you have yourself an agreement on my standard terms. That is by saying am ready to perform but only under my standard terms. This sending back and forth of offers and counter offers upon each sides standard terms is known as the battle of the forms [15] . Here if the offeror start to supply the machines questions will be raised here that are whether there is a contract between the parties and under what terms to an offeror standards or an offeree standard?

1.6 LIABILITY OF EACH PARTY TO THE CONTRACT

A contract is a voluntary agreement between two or more parties [16] . Liability may include reasonable exclusions & limitation of liability. A limitation clause does not completely absolve a party from liability but instead places a limit, a ceiling, on the maximum liability [17] .

Where one party deals as consumer or on the other party’s written standard terms of business, then the other party cannot exclude or restrict his liability for the breach of the contract, except subject to the requirement of reasonableness [18] . The reasonableness requirement is also extended to terms purporting to entitle the other party to render performance substantially different from that reasonable expected or no performance at all [19] . In Pegler v. Wang [20] , whereby the only clauses in the contract that was in standard form were the exclusion and limitation clauses themselves. The court held that it is not necessary for the contract as a whole to be in a standard form, nor will it matter that one of the non-material clauses has been varied [21] .

1.7 RESOLUTION OF CONTRACT BREACHES

The seller or buyer who deserves to be paid compensation in case of breach may also claim for any incidental loss or loss of trade. But it should be noted that such compensation must be calculated in relation to the loss occasioned by the actions of either of them [22] .

Where the buyer breaches the contract, and where there is no market to sell the goods, the compensation awarded will include the profit which the seller would have got had there been a market. However, in such a situation the seller is not obliged to repair or deliver the remaining goods [23] .

Another important point to note is that where a condition of the contract have been broken, it is necessary to determine whether the condition so breached was an important one going to the root of the contract or not. According to Professor David Mellor OBE (Supra), claimant must establish that his loss was caused by the breach of contract and he must also take reasonable steps to mitigate his loss.

The law relating to a sale of goods ( Here in after referred to as SOGA), in Tanzania does not bar the seller or the buyer from asking to be paid special damages if the law allows or from claiming back his money if no consideration had passed to him.

1.8 THE POSITION IN TANZANIA ON OFFER AND ACCEPTANCE

First of all, before coming to explain an offer and acceptance in Tanzania. Let me acknowledge that in Tanzania there is recognition of an agreement between the parties. But before coming to the agreement between the parties there must be two things involved that is an offer and an acceptance. And when we have these two things together then we have to say that there is an agreement. The one who makes an offer is called offeror and another party to whom the offer is made is called the acceptor.

In Tanzania the word offer is used synonymously with the word proposal. The Law of Contract Act [24] (Here in after referred to as LCA), defines the term offer as follows:

“When one person signifies to another his willingness to do or to abstain from doing

anything, with a view to obtain the assent of that other to such act or abstinence, he

is said to make a proposal”.

In addition, the word proposal means a signification by one party to another party of his willingness to do or abstain from doing anything with a view to obtain the assent of that other party.

For example, B tells C as follows:

“ I will sell you my only goat that you saw yesterday for Shs.1, 000/=”.

From the above example the intention of B is clear C not only is the intention clear but also the object of bargain is clear. However, it is for C to accept the offer of purchasing the goat or not. If he or she agrees to do so, he or she is supposed to pay Shs. 1,000/=.

It should be noted clear that it not accepted to the party of an offeree (the person to whom the offer is made) to ask for a lesser price. If he or she does that, he or she destroys the offer.

What happens when the element of price is lacking when the offeror gives an offer to the offeree?

The good example of that is from the above given example when B tells C that he or she is selling the goat without mentioning the price. This is not an offer at all. Because section 29 of the (LCA) stipulates clear that any agreement which is not certain on its terms for example lack of price then that agreement shall be considered as void from the beginning and the court shall strike it out. Will explain in detail on the other part of how the court settles out a kind of these contracts where about two celebrated Tanzanian cases shall be referred to.

ACCEPTANCE

When the offeree agrees with the terms of the offer, then an agreement is concluded [25] . According to section 2 (1) (b) of the LCA, the word acceptance is defined as signification of assent to the proposal by the person to whom it was made. This signification of assent must be a firm and final expression of assent to the terms of the proposal as communicated by the proposer.

Section 4(1) of the LCA, went on to state that the acceptance without communication to an offeree then is not an offer. In other words, the offeree must be aware of the proposal. For example, when B is not aware of C offer of reward. B finds the goods and takes them back to C. What B has done is not is not acceptance of C offer of reward. Thus, C is not bound to give B the reward promised.

1.9 SETTLEMENT OF THE CONTRACT IN TANZANIA

In Tanzania the LCA (Supra), is very clear especially when the parties enter into the contract and agree on their terms without mentioning the price. If there is no valuable consideration to support voluntary surrender of goods by the real owner to another person, the transaction is a gift and is not governed by the rules relating to Sale of Goods. Thus price which is money consideration for a sale of goods constitutes the essence of a contract of sale. The LCA [26] provides that agreements, the meaning of which is not certain, or capable of being made certain, are void. This signifies that where the terms of the offer are not certain, yet the offeree accepts the offer the agreement reached shall be regarded under the law as no agreement at all. In two cases Alfi E.A. Ltd v. Themi Industries and Distributors Agency Ltd [27] and Nittin Coffee Estates Ltd and others v. United Engineering works Ltd and another [28] where the parties concluded an agreements of sale although the price was not stated. The first case involved sale of machinery and the second concerned sale of shares. In both cases the Court of Appeal of Tanzania stated that since price is a fundamental term in a sale agreement if it is not mentioned the agreement becomes uncertain. In law uncertainty renders the agreement void.

2.0 THE LEGAL INFRUSTRUCTURE OF TANZANIA AND UNITED KINGDOM

In Tanzania we have the laws relating to investment and commercial transactions though some of them are squatted. The same applies to the United Kingdom where do also have the laws relating to investments and commercial transactions. But, in United Kingdom do have strong and well organized laws relating to commercial transactions. For example, in Tanzania now there is no dedicated consumer protection law. Instead we depend much from the competition law which contains specific provisions that are usually found in separate consumer protection legislation [29] . The Fair Trade Practice Act [30] , exhaustively prescribes rules for the protection of the interests of consumers. For example, the law prohibits misleading, deceptive conduct.

The Law relating to sale of Goods Act [31] (Referred to as the SOGA), in Tanzania covers some of the issues such as passing of property, risk and frustration, remedies for the seller and buyer [32] , price and acceptance of an offer.

The law that relating to investment and commercial transaction in the United Kingdom are:

The law relating to Supply of Goods and Services Act 1982, the Consumer Protection Act 1987, Sale and Supply of Goods Act 1994, and Enterprise Act 2002.

Thus, in Tanzania due to scattered law relating to consumer protection there is lack of implementation of those laws. Though this is party to the consumers themselves but there is a need to give them knowledge at least to know that there are also protected.

In Tanganyika Garage Ltd v. Marcel G. Mafuruki [33] , where it was held that:

“ Where the circumstances of a contract are not provided for in the codified law of contract in Tanzania, one must fall back on the English common law”

The above phrase simply means that Tanzanian despite of having the knowledge that there is no much protection laws relating to the buyers and sellers but still the courts have the high chances of referring to the common law especially when there is a need for that.

2.1 THE BACKGROUND OF CISG

The CISG is a multilateral treaty which aims to create a uniform international law of sale of goods. Although it is one of the most widely subscribed commercial private international law treaties, for the first two decades of its existence it suffered from a general lack of awareness amongst business people and a lack of acknowledgement by national courts and the legal profession [34] .

THE BENEFITS OF CISG

The CISG offers a relatively established system of rules capable of applying in a consistent manner across different contracts governed by different systems of law. Therefore it brings a consistency of approach which would likely otherwise be lacking where companies are obliged to enter into different sales contracts with different customers, governed by the laws of different countries [35] .

The CISG also do offers a relatively predictable approach to determination of the parties rights and obligations and therefore to the resolution of disputes. Article 7 of the CISG states that in applying the CISG attention should be paid to its international nature and to the need to promote uniformity in its application [36] .

The CISG touches the following Areas according to Professor David P. Mellor [37] (supra)

The obligation of the buyer and seller, Delivery, Risk and payment, Delivery of goods, Conformity of goods, Damages and Reclamation of goods,

2.2 THE GOODS THE SELLER PURVEYS

The goods which form subject of the contract of sale may be either an existing goods, owned or possessed by the seller or goods to be manufactured or acquired by the seller after the contract to be made and to be referred to as future goods [38] .

According to the Sale of Goods Act (SGA) [39] , as amended by the new Sale and Supply of Goods Act ( SSGA) [40] , Sale of Goods as one by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. Thus, the Act applies only to goods sold for money and does not cover other kinds of transaction such as the swapping or exchanging of goods.

The Act does not define the word goods, which is therefore given its ordinary everyday meaning and has been held to include packaging surrounding goods and instructions appearing on the packaging.

But in Tanzania the SOGA, defines the term good as follows:

“Goods include all chattels personal other than things in action and money. The term includes implements, industrial growing crops, and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.”

Money is generally not goods but a coin or note sold as a curio or as a collector items would be goods [41] .

2.3 THE REASON THE BUYER IS PREPARED TO ENTER INTO A CONTRACT TO BUY SUCH GOODS.

There are provisions which support and protect the buyer and give him or her courage to enter into a contract of the sale of goods. For example in the SOGA [42] , stipulates that a buyer has the right to claim damages for non –delivery. Also, where there is a breach of a contract for the sale of specific or ascertained goods the buyer may file a suit for the specific performance of the contract. Other protections to the buyer are the suit for recovery of the price together with interest, suit for damages for breach of warranty and condition as well.

2.4 THE COMPARISONS BETWEEN CONTRACTS OF EMPLOYMENT IN TANZANIA AND THOSE OF UNITED KINGDOM.

In Tanzania the contract of employment is governed by the two acts only that are the Employment and Labour Relations Act [43] , and Labour Institutions Act. Both laws were established in 2004. Before, 2004 there were many acts of parliament that were dealing with contracts of employment. It should be noted that the Labour Institution Act [44] (Supra) talks about the procedure on how to institute a claim based on the contract of employment. It is very interesting both Tanzania acts especially on the contents of the provisions above acts do not have much difference with the United Kingdom contract of employment this is due to the fact that Tanzania was under the British protectorate therefore many Tanzania laws after independence were taken from the United Kingdom with minor modifications. However, this part shall explain the comparisons between contracts of employment in Tanzania and those of the United Kingdom.

Both acts that are Tanzania and United Kingdom provides for the written statement of particulars of contract of employment. For example, Section 15 of the Employment and Labour Relations Act (ELRA) provides for the written statement of particulars of contract of employment. The Act states that an employer shall supply an employee, when the employee commences employment with the following parti