By CHIPEGO MUDENDA
The law of contract has many `purposes`, but the central one is to support and control the millions of agreements that collectively make up the `market economy`. According to the law of contract in Zambia by Sangwani Patrick N`gambi, a contract is defined as a written or spoken agreement enforceable by law. However, it is important to note that all contracts are agreements but not all agreements are contracts. For an agreement to be considered a valid contract, essential elements must be present. This directs us to the case of London Ngoma and Others v LCM Company Limited, which is one of Zambia`s landmark cases when it comes to the law of contract, where the court highlighted the requisite elements that need to be present for a contract to be legally binding. The facts of the case are as follows:
The United Bus Company of Zambia was placed under liquidation. It owned several properties, including subdivisions 4 and 5 of farm No. 110 Villa Elizabeth Lusaka with two houses on each. The sitting tenants (appellants) of the stated properties were given the first option (in a form of a letter) to purchase the house. The appellants paid 10 percent towards the purchase price of the subject properties through S.P. Mulenga and Associates without the liquidator`s consent and were not authorized by the liquidator to sell the properties on behalf of UBZ. The respondents were given ownership of the stated properties by the liquidator and the appellants were told to vacate the premises. The appellants claimed that the learned trial judge erred both in law and fact when she held that the appellants had no interest in the subject property arguing that the evidence on record revealed that the appellants accepted the offer and paid 10 percent towards the purchase of the said house.
The court was of the view that the letter was not an offer but an invitation to treat given to the appellants in this case, the word “offer” was not used in its technical legal sense. It is clear from the communication between the parties that there was an understanding to negotiate the terms and conditions upon which the houses may be sold. Furthermore, there was no indication that the liquidator replied to the offers made by the appellants. The court interpreted the silence on the part of the liquidator as a sign that the negotiations were terminated. The court concluded that the offers made to the appellants by S.P Mulenga Associates were null and void ab initio because S.P Mulenga and Associates had no authority to sale the properties, but the liquidator, and that the lower court was on firm ground when it found that the respondents was the rightful owner of the properties as it purchased the properties from the liquidator.
This case outlines the important essential elements that need to be present for a contract to be legally enforceable. It also shows the importance of differentiating between an offer and an invitation to treat. The essential elements are as follows:
Offer
An offer is an expression of willingness to contract made with the intention that it shall become binding on the offeror as soon as it is accepted by the offeree. An offer may be express, which means either clearly written down or clearly stated, or it may be implied from conduct. Whatever its form there must be an invitation that the specified terms will become binding as soon as they are accepted by the offeree.
Acceptance
Acceptance is the final, unqualified and unconditional assent to all the terms of the offer, communicated by the offeree to the offeror, made with the intention of accepting. Once an offer is accepted then parties enter into a valid agreement. Accordingly, offer and acceptance constitute an agreement.
Consideration is a right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or undertaken by the other party. Offer and acceptance alone are not sufficient to form a binding contract, there must also be consideration. The underlying principle from consideration is that both parties must gain something from the agreement they have entered into.
Intention to create legal relations
The final element in the formation of a contract is that the parties involved must intend for their agreement to be legally binding. Therefore, if two or more parties enter into an agreement without an intention to be legally bound by it then that agreement will not be regarded as a contract.
DIFFERENCIATING BETWEEN AND OFFER AND AN INVITATION TO TREAT
Similar to the London Ngoma case, it is essential to differentiate between an offer and an invitation to treat. In the case put forth, the court had to determine whether the letter sent to the appellants as sitting tenants amounted to an offer or an invitation to treat. An invitation to treat refers to a party inviting another party to make an offer. The law has prescribed instances when there will be either an offer or an invitation to treat. For instance, the display of goods, an advertisement, auctions, tenders etc. all amount to an invitation to treat. In the case at hand, the court stated that the letter that was sent to the offerees/appellants were invitations to enter into negotiations with the liquidator in order to later create an offer and subsequently a contract. The court put into consideration defining an offer and an invitation to treat by relaying on the definitions provided for in `Chitty on Contracts` paragraph 2-003 and in paragraph 2-008 of the said scholarly work. The court also considered the author`s statement in paragraph 2-009, which states that, generally, the wording of a statement does not conclusively determine the distinction between an offer and an invitation to treat. Thus, a statement may be an `invitation to treat` although it contains the word “offer” while a statement may be an offer although it is expressed as an “acceptance” or although it requests the person to whom it is addressed to make an “offer”. This led to the conclusion inter alia, that the letter sent to the appellants was an invitation to treat and not an offer and the liquidator was at liberty to accept or reject the offers.
Chipego Mudenda
Senior Associate Editor of The Zambia Law Student's Journal | Chief Editor of The UNZALAW Legal Editorial Board.
The University of Zambia. She writes this article in her personal capacity.
chipegomudenda67@gmail.com
0762391117
BIBLIOGRAPHY
STATUTE
CASESES
London Ngoma and Ors v LCM Company Ltd (Appeal 122 of 2017) [2019] ZMSC 309 (31 January 2019)
Currie v Misa (1875) LR 10 Exch 153.
BOOKS
Patrick Mvunga, Mumba Malila, Sangwani Patrick Ng`ambi, Mvunga, Malila, Ng`ambi on Contracts (UNZA Press, 2010) Page 2.
Chanda Chungu, Sangwani Patrick Ng`ambi, Contact law in Zambia, (2nd edition, 2021) Page 15.
H G Beale, W D Bishop and M P Furmston, Contract Cases and Materials (4th edition, Butherworth, 2001) Page 2.
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