Page 10 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 1: Laws of Contract

Notes
Figure 1.1: Privity of Contract

M M = Manufacturer
Goods ` W = Wholesaler
R = Retailer
W
B = Buyer
Goods ` B is in privity of contract with
R only but not with W and M
R
Goods `

B

1.1.3 Formation of a Contract

There are different modes of formation of a contract. It may be made in writing or by word of
mouth, or be inferred from the conduct of the parties or the circumstances of the case.

Note You should be concerned about contract law because it determines how parties
to the contract will need to keep the promises they make. Although very few contracts ever
end up in court, if the parties to a contract disagree on something and are unable to resolve
the disagreement, they may have to resort to the judicial process.

Task S, a singer, contracts with M, the manager of a theatre, to sing at the latter’s
theatre for two evening in every week during the next two months. M engages to pay her
` 300 for each evening’s performance. On the seventh evening, S willfully absents herself
from the theatre. M, in consequence, wants to rescind the contract and claim compensation

for the loss suffered by him through the non-fulfilment of the contract by S. Advise.
[Hint: M is entitled to rescind contract and claim compensation. s.75]

1.2 Classification of Contracts
Contracts may be of different types based on (i) Validity or enforceability, (ii) Mode of formation
and (iii) Performance.

1.2.1 Classification of Contracts According to Formation

A contract may be (a) Made in writing (b) By words spoken and (c) Inferred from the conduct of
the parties or the circumstances of the case. Accordingly, contracts may be classifi ed according
to the mode of formation as express contracts and implied contracts. If the terms of a contract
are expressly agreed upon (whether by words spoken or written) at the time of the formation of
the contract, the contract is said to be an express contract. An implied contract is one which is
inferred from the acts or conduct of the parties or the course of dealing between them.

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