1. Termination of a contract etc.For DGDIP -SLIM By Maxwell Ranasinghe

2. Termination of offer 1. Revocation of the offer ( already discussed) 2. Rejection of the offer ( already discussed) 3. Lapse of Time ( already discussed) 4. Death of one of the Parties or insanity or change ofstatus 5. Failure of a condition subject to which the offer wasmade 3. 4. Death of one of the parties ,insanity or changeof status Usually the death of the offeror or offeree terminatesthe offer unless it is open to any other person to accepton behalf of the other party. If a party becomes insane or of unsound mind eventhen the offer gets terminated. Further even if a party gets bankrupt ( change ofstatus) the offer get terminated. 4. 5. Failure of a condition subject to which the offeris made In any offer, there is an implied condition that untilthe acceptance, the subject matter ( e.g.. productoffered) will remain substantially the same . If the subject matter changes, the offer gets terminatedas the offered product is different from what isavailable. E.g.. A person offers to sell his car and it meets with anaccident before it is validly accepted. 5. Capacity of parties Every person has a right to contract despite sex, cast,creed or an artificial person. However, minors, married women governed byThesawalamai Law, insane persons, prodigals andinsolvent persons do not have the capacity to enterinto contracts subject to certain exemptions. 6. 1. Minors- Who are under the age of 18 yearsMinors cantracts can be classified as unassisted and assistedcontracts.Unassisted minor enters into a contract on his own.Generally they are unenforceable against the minor .However, it could be ratified by the guardians assistanceduring his or her minority or by the minor upon reachingthe age of majorityAssisted minor enters into a contract with the assistance of his or her natural guardian (parents) orperson appointed by court. These contracts can beenforced against the minor. 7. Unassisted contracts by Minors This needs more explanation as some contracts can beenforced against them. Generally contracts made by persons under the age of 18years cannot be enforced against them. In other words,they are voidable at the option of minor. However, a minor may enforce against the adult, if he orshe wishes to do so. ( limping contracts) On the other hand, there are some contracts that can beenforced against even on minor by the other party. Whatare they? 8. Contracts that can be enforced againstminors 1.Contracts for necessities If the other party can prove that goods are suitable to hisstatus in life and it is required by him at the time ofdelivery of the product, then a contract can be enforcedagainst a minor. However, if the parents can prove that the minor issufficiently provided with the goods then even though thisfact is not known to the other party he may not be able torecover the price agreed. Nash Vs. Inman ( 12 waist coats ordered by a minor andfathers evidence showed- he was adequately provided withand trader could not recover the price from minor) 9. 2.If the minor has fraudulently shown he was an adultalthough in fact he was a minor. 3.Beneficial Contract of Service Costa Vs. AG. A Teacher when she was a minor entered into acontract for teacher training. Then the contract ofserving for a specific period was breached and whensued she claimed that she was not bound on the bondas she was a minor at the time of signing the bond. But court held even then, training was for her benefitand there is a valid contract created by the Bond. 10. Married Women Under the Married Womens Property Ordinance of1923 any married woman other than the womengoverned by Thesawalamai Law can enter into anycontract However, under Thesawalamai Law, married womancannot enter into a contract to deal with herimmovable property acquired before or during themarriage unless she obtains the consent of herhusband. 11. 2. Persons mentally unsound and drunkards The general rule is that if the other party is aware thatthe he is entering into a contract with an insane personor intoxicated person he cannot make a valid contract. But if he can prove that at the time of making thecontract, insane or intoxicated person was able tounderstand the nature of the contract, then thecontract could be enforced as a valid contract 12. 3. Unincorporated corporations/companies Artificial Persons( A company becomes a legalperson only after it is incorporated. Therefore if acompany contracts before it is incorporated then thecontract is not binding on the company) Corporations who go beyond the conferred powers (ultra vires) also will loose capacity to contract ( both of these instances are now inapplicable underthe Companies Act of 2007) 13. 4. Prodigals Under R&D law, a prodigal isa person who cannot be trusted to look afterhis or her own property. If the prodigal enters into a contract, it isconsidered as an unassisted contract madeby a minor Therefore a curator(administrator) will beappointed by court. 14. 5. Insolvents- Where a person is declared as insolvent ( cannot meet his debts as it falls due)under the Insolvencies Ordinance No 7 of 1853, all conveyances of transfers of any property by his are void except when they are made upon the marriage of any of his children or for some valuable consideration 6. Persons of a country where war has formally been declared 15. Intention to create legalrelations It is another essential element of a valid contract The intention should be there within the parties at the timeof entering into a contract It could be actual or presumed. The burden of proof of that there was intention to createlegal relations is on the party that asserts so ( who says so) Generally all the commercial agreements are considered ashaving legal consequences unless it is specifically agreedthat it shall not be binding in law. 16. Problems have arisen to domestic type agreements whether therewas intention to create legal relations Balfour Vs. Balfour ( 1919) Mr. Balfour, an Englishman, a civil servant who was in SL withhis wife went for a holiday to England. Then his wife fell ill andshe was asked by her doctor to stay in England. Mr. Balfourreturned to SL promising that he will send her pound 30.00 permonth. However, he failed to do so and wife sued him for breachof contract. Court held: The husband is not in breach of contract to paypounds 30.00 as agreed as the agreements between husband andwife are not contracts as they do not intend to be resolved by lawif there is any problem as to the agreement. ( do not intend tohave legal consequences) 17. However, even if the parties are in domestic or socialrelationship, if the nature of the transaction can beinterpreted that it should have legal intention, then itcould be considered as a contract. 18. Merrit Vs. Merrit ( 1970) Husband had an affair with another woman. The husband left the wifeand agreed to pay pounds 40 to her where she had to pay the mortgageof the house which was in husbands name. Further, husband alsosigned a written note that the house will be transferred to her after thecompletion of the payment of the mortgage. The wife paid andcompleted the mortgage from husbands monthly payment plus herown earnings. However, husband later refused to transfer the house toher. Held : Although it was between husband and wife the writtenagreement was intended to create legal relations. The presumption of no legal intention cannot be applied when the husband and wife werenot living together in amity but were separated or about to separate. 19. Consideration & Causa Consideration is required as an essentialelement for a contract under the EnglishLaw. Instead of consideration, Causa ( JustaCausa- mana hethuwa) is needed for acontract under Roman Dutch law 20. Consideration- Consideration has been defined as either somedetriment to the promisee or some benefit to thepromisor in Currie Vs. Misa ( 1875) the meaning of itis that the promisor gives a promise or performs an actand receives value. The promisee may give value upon the delivery of thepromise or execution of the act by the promisor Example ; A promise to sell his book for Rs. 2000 toB. Upon receiving the book ( delivery of the promise)A receives Rs. 2000 from B ( receives value) 21. This Detriment and Benefit have not been very clear.Promisor as well as promisee may receive a benefit in sometransactions. A thinks that his second hand car needs tobe sold. B thinks that he cannot afford to buy a new carand wants to buy a second hand car. If A is willing to sellthe car for Rs. 500,000 and B thinks it is a bargain priceboth are being benefitted. Therefore, in the modern day of business, considerationcould be easily described as the price agreed to be paid byone party for the other parties promise ( promise could bean offer of a product, service or any other act of doing ornot doing something) 22. Tea time. 23. General rules on consideration 1. Consideration must flow from the promisee. (A gets a gift from B, a television. B haspurchased it from C. A finds it is not working.A cannot sue C as he has not paid money to B.Only B can sue C. 2. Moral obligation is not consideration ( Aguardian of a girl who provides facilities for agirls education etc. on a promise that she willreimburse when she comes of age was notconsidered as a contract for the lack ofconsideration ) 24. 3. Consideration should have some value and neednot be adequate as to the value of transaction.(One may ask to extend the validity of an offer tosell a property of Rs. One Million even by payingfew hundred rupees ) 4. Promise to perform an existing obligation is nota consideration ( A policeman cannot ask moneyfor retrieving a purse stolen by a thief) 25. 5. Consideration must be lawful 6. Consideration must not be past ( A looksafter a house well. Then the owner comes andpromise to pay some money. A cannot sueowner for want of consideration) 7. Performance of something more than existingcontractual duty amounts to sufficientconsideration. ( A security guard providesadditional security for a function beyond hisduties is consideration) 26. Adherence to legal formalitiesCertain contracts needs to done in the prescribed manner by law. If not such a contract cannot be enforced in a court of law.Example : As per the Prevention of Frauds Ordinance of our country, A contract as to Sale or mortgage of a house and property should be on writing and notarially executed. The seller or the mortgager should sign in front of a notary and two witnesses. Then witnesses should sign the document and Notary should sign and certify that seller or the mortgagor and witnesses signed in front of him. 27. Justa Causa( reasonable cause) It is far wider than the concept of Consideration in EnglishLaw If a promise is made voluntarily, deliberately and seriouslyit could be taken as Causa under R& D Lipton Vs. Buchann ( 1904) Tea planter in Sri Lanka, SirThomas Lipton promised Buchannan that he will not suehim on a debt, until Lipton has exhausted all his remediesagainst the Buchannans former partner. Court- Courts of fist instance held that Liptons promisewas not valid but it was later reversed by the SupremeCourt that the law applicable was R&D and Liptonspromise was legally enforceable. 28. Jayawickrema Vs, Amerasuriya ( 1918) J stated that A has got property from his mother which wasment to be held in trust for both J and A in equal shares J wanted to sue A to implement the trust but laterwithdrew on the promise that A will pay him Rs. 150,000 foreach year for 5 years A did not pay so and J sued A and A s position was thatthere was no contract to pay as there was no consideration. The court held that the J s undertaking not to sue A isacceptable as Causa under R& D 29. Vitiating Factors factors defeating the validity ofcontracts1. Mistake where on party or both parties enter into a contract under a misunderstanding2. Misrepresentation where a statement or conduct which conveys a false impression induces a person to enter into a contract.3. Undue Influence /duress- where a person enters into an agreement due to compulsion brought upon him4. Illegality- where a consideration or promise in a contract involves doing something illegal 30. Discharge of contract Breach of the contract By frustration By performance By agreement 31. Exemption Clauses and The Unfair ContractTerms Act of 1997 Exemption clauses are used by parties to a contract toescape from liability on certain matters or events.These are used mainly to avoid liability on negligenceor misrepresentation of certain facts relevant to thecontract by parties. It could be used to limit liability orto totally exempt form liability. 32. Following rules will apply as regards the exemptionclauses 1. A party can rely on the exemption clauses if the otherparty has signed the agreement even if the other partymay have not read the exemption clauses. ( In practice,many of you sign documents with exemption clausesmainly in fine print. Later, you cannot say that you did notread them) 2. If the party signs the exemption clauses, inquires aboutthe content and if an oral misrepresentation was madeby the other party to induce the party to sign the documentthen the party who signed the document will not be boundby it. 33. Curtis Vs. Chemical Clearing & Dying Company ( 1951) Curtis took a white satin wedding dress to the Dying Companysshop to be cleaned. The shop assistant asked her to sign areceipt, which in fact contained a condition excluding liabilityfor any damage however arising. When Curtis asked why she had to sign, the assistant told herthat the company would not accept liability for damage to thebeads and sequins with which the dress was trimmed with.Curtis signed the receipt. When the dress was returned afterwashing it was fully stained. The company argued that the clauseexcluded their liability. Held the company could not rely on the exemption clausebecause of the assistants innocent misrepresentation which hadmisled Curtis as to the extent of the exemption clause andthereby induced her to sign the receipt. 34. 3.Exemption clauses cannot be included into acontract unilaterally by a party after the contract wasmade. Olley Vs. Marlborough Court Ltd ( 1949) A contract of booking a room was made at a hotel receptiondesk. In the hotel room upstairs, there was a notice excluding thehotels responsibility for articles lost or stolen unless they weredeposited in the safe custody of the hotel. Plaintiffs furs coat and jewellery were stolen. She brought adamages action against the hotel. The court held that since thecontract was made at the reception desk, the terms of the noticein the bedroom came too late and were not incorporated in thecontract and therefore, the hotel is liable to pay damages. 35. 4. Exemption clause indicated in a receipt given after the contract was made will nothave any binding.Chapelton Vs. Barry Urban District Council ( 1940) The plaintiff hired two chairs from the chair attendant and receivedtwo tickets. He did not know that there were conditions stated in theticket as he simply glanced and put them into his pocket. In fact on thereverse side of the ticket were the words The council will not be liablefor any accident or damage arising from the hire of the chair . Due to the negligence of the defendant council, the canvas on theplaintiffs chair gave way when he sat on it. The council argued that theclause on the ticket exempted them form liability. Held : The ticket wasa mere voucher or receipt and it cannot be considered as a notice beforethe contract was made. Therefore the council was liable in damagesand cannot rely on the conditions stated in the ticket as an exemptionclause. 36. 5. Statutory terms in Sri Lanka as to exemptions clauses as a result of the enactment of the unfair Contract terms Act of 1997 Any exemption clause that attempts to exclude liability fordeath or personal injury arising from negligence is invalid In any other case where exemptions of liability to be reliedupon requirement of reasonableness should apply. Parties should be in a same bargaining power to make theclauses reasonable. The liability for financial loss or loss of property can beexcluded or limited only if it is reasonable to do so. 37. Law of contract is a very extensive subject and this isonly an introduction to part of the subject designed toaccommodate for your syllabus in Diploma inMarketing . ( 40% of the combined subject withEconomics) You just had only 6 hours to cover thismodule. Therefore, you have to read more to obtain abetter knowledge .