Legal clinic: What are the legal requirements of a contract?

The terms within and forming the body of the contract are often obligatory; failure to perform their side of commitment leads to what is known as a breach.

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Hi Wakili

I would like to know which remedies are available to the aggrieved party in breach of contract cases. Also, contract law has a technical term – ‘one must have performed a task, etc., to gain monetary gain’. Please enlighten me on this.

Dear reader

A contract is an agreement where two or more parties willingly commit to observe and perform obligations outlined in it that are mutually arrived at and consented to. The terms within and forming the body of the contract are often obligatory; failure to perform their side of commitment leads to what is known as a breach. Such breach traditionally kicks in the force of law as a mechanism to remedy the aggrieved party. This confirms the ordinary application of a contract as a promise or set of promises that, if they remain unfulfilled, the breach is occasioned, for which the law provides a remedy. If performed, the law recognises an obligation.

Some contracts are also imposed by law, whether or not a person affected is aware. For instance, many people who earn a salary get into contracts with government agencies like Kenya Revenue Authority without signing any direct contract.

Specific characteristics must manifest for an agreement to qualify as a contract. First, the law provides that an offer must exist. This is the explicit or undoubtful demonstration by one party of its intention to form a contractual relationship with another. The party or person who shows the intention is referred to as the offeror, while the one who agrees is the offeree. There are several basic rules regarding offers, but what must be evident is the certainty of what it is and the time allowable for which it remains valid. An offer must be reasonable. Offers are never second-guessed since it is the basis upon which terms are constructed.

The offeree agreeing or accepting to consider the offer demonstrates the motivation to form an agreement. This action, known as acceptance, is what legal practitioners call a meeting of minds. Even then, the meeting of minds, or consensus ad idem in Latin, must be accompanied by specific actions to make it legit and functional. First, the offeree must communicate to the offeror about accepting the offer. Such acceptance must be unconditional. The modification to the offer creates a new scenario with a counteroffer, meaning an acceptance was never arrived at. While an offeror and offeree may agree to get into a legal relationship, both must have the capacity to engage, meaning neither should be a minor nor of unsound mind if not in a drunken stupor, which may be viewed or reviewed as a temporary state of insanity.

It is required to make the contract legally binding and enforceable. As said, consideration is something of value given for a promise by one party to the other. Consideration can either be money or the equivalent of creating a similar value. If, for instance, payment by a purchaser is a consideration for the seller's promise to deliver specific or defined goods. On the other hand, delivery of defined or said goods is the purchaser's promise to pay.

Since contracts are enforceable in and by law, certain obligations are often stated, creating things or terms for each party to perform. Performance means to do what one has agreed to. When the doing doesn't happen, a breach means non-performance occurs. One party is injured when non-performance occurs since it is a law-bound relationship.

Promises that become unfulfilled in a contract tend to cause harm or unnecessary expectation to the person for whom they were made. Damages are, therefore, remedies that an injured or aggrieved party in a contract requests from the court as an award from the uninjured party. Damages are intended to compensate the party for the loss incurred due to the breach of contract. However, the injured party must demonstrate that their suffering directly resulted from the other party's non-performance.

There are several types of damages depending on the consequences of any contract breach. Compensatory damages restore the party's original state faithful to the contract as if the breach never occurred. In some circumstances, the court can award one punitive damage, which, though rare, allows the non-breaching party to be paid beyond the damaging amount, especially when the court can establish that the breaching party intentionally committed an act or refused to while knowing it would amount to a violation of the law.

In some jurisdictions, the court awards substantial dames, which is what a court deems to be the actual loss suffered as a direct consequence of a breach of the contract. Similarly, the court may award nominal damages, which is an amount that demonstrates the terms of the contract were violated, but either the loss wasn't enormous, or the alleging party (non-breaching) is unable to prove loss.

Eric Mukoya has over 17 years’ experience in social justice sector. He’s the executive director of Undugu Society of Kenya. Send legal queries to [email protected]