Law of Contract Act
- Commenced on 3 March 1961
- [This is the version of this document at 30 November 2019.]
Part I – Preliminary provisions
1. Short title
Part II – Communication, acceptance, and revocation of proposals
3. Communication, acceptance, and revocation of proposalsThe communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, and which has the effect of communicating it.
4. Communication, when complete
5. Revocation of proposals and acceptances
6. Revocation how madeA proposal is revoked—
7. Acceptance must be absoluteIn order to convert a proposal into a promise, the acceptance must—
8. Acceptance by performing conditions or receiving considerationPerformance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.
9. Promises, express and impliedIn so far as the proposal or acceptance of any promise is made in words, the promise is said to be express; and in so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.
Part III – Voidable contracts and void agreements
10. What agreements are contractsAll agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void:Provided that, nothing herein contained shall affect any law in force, and not hereby expressly repealed or disapplied, by which any contract is required to be made in writing or in electronic form or in the presence of witnesses, or any law relating to the registration of documents.[Act No. 13 of 2015 s. 39]
11. Persons competent to contract
12. What is a sound mind for purposes of contracting
13. "Consent" definedTwo or more persons are said to consent when they agree upon the same thing in the same sense.
14. "Free consent" defined
15. "Coercion" defined
16. "Undue influence" defined
17. "Fraud" defined
18. "Misrepresentation" defined"Misrepresentation" means—
19. Effect of agreements induced by coercion, fraud, misrepresentation or undue influence
20. Agreement void where both parties are under mistake as to matter of fact
21. Effect of mistakes as to lawA contract is not voidable because it was caused by a mistake as to any law in force in Tanzania; but a mistake as to a law not in force in Tanzania has the same effect as a mistake of fact.
22. Unilateral mistakeA contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.
23. What considerations and objects are lawful and what are not
24. Agreements void if considerations and objects are unlawful in partWhere any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.
25. Agreement without consideration
26. Agreement in restraint of marriage voidEvery agreement in general restraint of the marriage of any person, other than a minor, is void.
27. Agreement in restraint of trade void
28. Agreement in restraint of legal proceedings voidEvery agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent:Provided that, this section shall not—
29. Agreement void for uncertaintyAn agreement, the meaning of which is not certain, or capable of being made certain, is void.
30. Agreement by way of wager voidAn agreement by way of wager is void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.
Part IV – Contingent contracts
31. "Contingent contract" definedA "contingent contract" is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
32. Enforcement of contract contingent on event happeningA contingent contract to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened; and if the event becomes impossible, such contract becomes void.
33. Enforcement of contract contingent on event not happeningA contingent contract to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before.
34. When event on which contract is contingent to be deemed impossible, if it is future conduct of living personWhere the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.
35. Contingent contract
36. Agreement contingent on impossible events voidA contingent agreement to do or not to do anything, if an impossible event happens, is void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.
Part V – Performance of contracts
Contracts which must be performed
37. Obligations of parties to contracts
38. Effect of refusal to accept offer of performance
39. Effect of refusal of party to perform promise whollyWhen a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.
40. Persons by whom promise is to be performedWhere it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor; and in other cases the promisor or his representatives may employ a competent person to perform it.
41. Effect of accepting performance from third personWhen a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.
Joint liabilities and rights
42. Devolution of joint liabilitiesWhen two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and after the death of any of them, his representative jointly with the survivor or survivors, and after the death of the last survivor, the representatives of all jointly, must fulfil the promise.
43. Obligations and liabilities of joint promisors
44. Effect of release of one joint promisorWhere two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors; neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors.
45. Devolution of joint rightsWhen a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any of them, with the representative of such deceased person jointly with the survivor or survivors and, after the death of the last survivor, with the representatives of all jointly.
Time and place for performance
46. Time for performance of promise where no application is to be made and no time is specifiedWhere, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the promise must be performed within a reasonable time, which is, in each particular case, a question of fact.
47. Time and place for performance of promise where time is specified and no application is to be madeWhen a promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promisee, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.
48. Application for performance on certain day to be at proper time and place
49. Place for performance of promise where no application to be made and no place fixed for performanceWhen a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such place.
50. Performance in manner or at time prescribed or sanctioned by promiseeThe performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions.
Performance of reciprocal promises
51. Promisor not bound to perform unless reciprocal promisee ready and willing to performWhen a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
52. Order of performance of reciprocal promisesWhere the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.
53. Liability of party preventing event on which contract is to take effectWhen a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promises, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract.
54. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promisesWhen a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the nonperformance of the contract.
55. Effect of failure to perform at fixed time in contract
56. Agreement to do impossible act, subsequent impossibility or unlawfulness and related compensation
57. Reciprocal promise to do things legal, and also other things illegalWhere persons reciprocally promise, first, to do certain things which are legal and, secondly, under specified circumstances, to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement.
58. Alternative promise, one branch being illegalIn the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.
Appropriation of payments
59. Application of payment where debt to be discharged is indicatedWhere a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.
60. Application of payment where debt to be discharged is not indicatedWhere the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.
61. Application of payment where neither party appropriatesWhere neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits; and if the debts are of equal standing, the payment shall be applied in discharge of each proportionably.
Contracts which need not be performed
62. Effect of novation, rescission and alteration of contractWhere the parties to a contract agree to substitute a new contract for it, or to rescind or alter it the original contract need not be performed.
63. Promisee may dispense with or remit performance of promiseEvery promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.
64. Consequences of rescission of voidable contractWhen a person at whose option a contract is voidable rescinds it, the other party hereto need not perform any promise therein contained in which he is romisor; and the party rescinding avoidable contract shall, if he has received any benefit there under from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received.
65. Obligation of person who has received advantage under void agreement or contract that becomes voidWhen an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it:Provided that, where a contract becomes void by reason of the provisions of subsection (2) of section 56, and a party thereto incurred expenses before the time when that occurs in, or for the purposes of, the performance of the contract, the court may, if it considers it just to do so in all the circumstances of the case, allow such party to retain the whole or any part of any such advantage as aforesaid received by him, or discharge him wholly or in part from making compensation therefore, or may make an order that such party recover the whole or any part of any payments or other advantage which would have been due to him under the contract had it not become void, being, in any such case, an advantage or part thereof, discharge or payment, not greater in value than the expenses so incurred.
66. Mode of communicating or revoking rescission of voidable contractThere rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal.
67. Effect of neglect of promiseeWhere any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby.
Part VI – Certain relations resembling those created by contract
68. Claim for necessaries supplied to person incapable of contracting, or on his accountWhere a person incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.
69. Reimbursement of person paying money due by another, in payment of which he is interestedA person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.
70. Obligation of person enjoying benefit of non-gratuitous actWhere a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered:Provided that, no compensation shall be made in any case in which the person sought to be charged had no opportunity of accepting or rejecting the benefit.
71. Responsibility of finder of goodsA person who finds goods belonging to another; and takes them into his custody, is subject to the same responsibility as a bailee.
72. Liability of person to whom money is paid or things delivered by mistake or under coercionA person to whom money has been paid, or anything delivered, by mistake as to a matter of fact which, if true, would give rise to a legal obligation or under coercion, must repay or return it.
Part VII – Consequences of breach of contract
73. Compensation for loss or damage caused by breach of contract, etc.
74. Compensation for breach of contract where penalty stipulated
75. Party rightfully rescinding contract entitled to compensationA person who rightly rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract.
Part VIII – Indemnity and guarantee
76. "Contract of indemnity" definedA contract by which one party promises to save the other from loss caused to him is called a "contract of indemnity".
77. Rights of indemnity holder when sued, etc.The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor—
78. "Contract of guarantee", "surety", "principal debtor", and "creditor" definedA "contract of guarantee" is a contract to perform the promise or discharge the liability, of a third person in case of his default and the person who gives the guarantee is called the "surety"; the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor"; and guarantee may be either oral or written.
79. Consideration for guaranteeAnything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee.
80. Surety's liabilityThe liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.
81. "Continuing guarantee" definedA guarantee which extends to a series of transactions is called a "continuing guarantee".
82. Revocation of continuing guaranteeA continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.
83. Revocation of continuing guarantee by surety's deathThe death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions.
84. Liability of two persons, primarily liable, not affected by arrangements between them that one shall be surety on another’s defaultWhere two persons contract with a third person to undertake a certain liability, and also contract with each other that one of them shall be liable only on the default of the other, the third person not being a party to such contract, the liability of each of such two persons to the third person under the first contract is not affected by the existence of the second contract, although such third person may have been aware of its existence.
85. Discharge of surety by variance in terms of contractAny variance, made without the surety's consent in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance.
86. Discharge of surety by release or discharge of principal debtorThe surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor.
87. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtorA contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.
88. Surety not discharged when agreement made with third person to give time to principal debtorWhere a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surety is not discharged.
89. Creditor's forbearance to sue does not discharge suretyMere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety.
90. Release of one co-surety does not discharge othersWhere there are co-sureties, a release by the creditor of one of them does not discharge the others; neither does it free the surety so released from his responsibility to the other sureties.
91. Discharge of surety by creditor's act or omission impairing surety's eventual remedyWhere the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.
92. Rights of surety on payment or performanceWhere a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.
93. Surety's right to benefit of creditor's securitiesA surety is entitled to the benefit of every security which the creditor has against the principal debtor whether such security was in existence at the time when the contract of suretyship is entered into or came into existence subsequent thereto, and whether the surety knows of the existence of such security or not; and, if the creditor loses or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.
94. Guarantee obtained by misrepresentation invalidAny guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material part of the transaction, is invalid.
95. Guarantee obtained by concealment invalidAny guarantee which the creditor has obtained by means of keeping silence as to material circumstances is invalid.
96. Guarantee on contract that creditor shall not act on it until co-surety joinsWhere a person gives a guarantee upon a contract that a creditor shall not act upon it until another person has joined in it as co-surety, the guarantee is not valid if that other person does not join.
97. Implied promise to indemnify suretyIn every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.
98. Co-sureties liable to contribute equallyWhere two or more persons are co-sureties for the same debt or duty, either jointly or severally, and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.
99. Liability of co-sureties bound in different sumsCo-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.
Part IX – Bailment
100. "Bailment", "bailor" and "bailee" defined
101. Delivery to bailee, how madeThe delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession, of the intended bailee or of any person authorised to hold them on his behalf.
102. Bailor's duty to disclose faults in goods bailed
103. Care to be taken by baileeIn all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a person of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed:Provided that, nothing in this section shall be construed as applying to or qualifying the liability at common law of a common carrier or an inn keeper.
104. When bailee not liable for loss, etc., of thing bailedThe bailee, in the absence of any special contract, is notresponsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care described in section 103.
105. Termination of bailment by bailee's act inconsistent with conditionsA contract of bailment is voidable at the option of the bailor, if the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment.
106. Liability of bailee making unauthorised use of goods bailedWhere the bailee makes any use of the goods bailed, which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them.
107. Effect of mixture, with bailor's consent, of his goods with bailee'sWhere the bailee, with the consent of the bailor mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest in proportion to their respective shares, in the mixture thus produced.
108. Effect of mixture, without bailor's consent, when goods can be separatedWhere the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, and the goods can be separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound to bear the expense of separation or division, and any damage arising from the mixture.
109. Effect of mixture, without bailor's consent, when goods cannot be separatedWhere the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, in such a manner that it is impossible to separate the goods bailed from the other goods and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods.
110. Repayment by bailor of necessary expensesWhere, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment.
111. Restoration of goods lent gratuitouslyThe lender of a thing for use may at any time require its return, if the loan was gratuitous, even though he lent it for a specified time or purpose; but, if, on the face of such loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived.
112. Return of goods bailed, on expiration of time or accomplishment of purposeIt is the duty of the bailee to return, or deliver according to the bailor's directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed has been accomplished.
113. Bailee's responsibility when goods are not duly returnedWhere, by the default of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time.
114. Termination of gratuitous bailment by deathA gratuitous bailment is terminated by the death either of the bailor or of the bailee.
115. Bailor entitled to increase or profit from goods bailedIn the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed.
116. Bailor's responsibility to baileeThe bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them.
117. Bailment by several joint ownersWhere several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all, in the absence of any agreement to the contrary.
118. Bailee not responsible on redelivery to bailor without titleWhere the bailor has no title to the goods and the bailee, in good faith, delivers them back to, or according to the directions of, the bailor, the bailee is not responsible to the owner in respect of such delivery.
119. Right of third person claiming goods bailedWhere a person, other than a bailor, claims goods bailed he may apply to the court to stop the delivery of the goods to the bailor, and to decide the title to the goods.
120. Right of finder of goodsThe finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner; but he may retain the goods against the owner until he receives such compensation; and, where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it.
121. When finder of thing commonly on sale may sell itWhere a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses, upon demand, to pay the lawful charges of the finder, the finder may sell it—
122. Bailee's particular lienWhere the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them.
123. General lien of bankers, factors, wharfingers, advocates, and policy-brokersBankers, factors, wharfingers, advocates and policy-brokers may, in the absence of a contract to the contrary, retain, as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.
Bailments of pledges
124. "Pledge", "pawnor", and "pawnee" definedThe bailment of goods as security for payment of a debt or performance of a promise is called "pledge"; and he bailor is in this case called the "pawnor" while the bailee is called the "pawnee".
125. Pawnee's right of retainerThe pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged.
126. Pawnee not to retain for debt or promise other than that for which goods pledgedThe pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.
Presumption in case of subsequent advances
127. Pawnee's right as to extraordinary expenses incurredThe pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the preservation of the goods pledged.
128. Pawneer's right where pawnor makes default
129. Defaulting pawnor's right to redeemWhere a time is stipulated for the payment of the debt or performance of the promise, for which the pledge is and the pawnor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them; but he must, in that case, pay, in addition, any expenses which have arisen from his default.
130. Pledges by mercantile agents and persons in possession under voidable contracts
131. Pledge where pawnor has only limited interestWhere a person pledges goods in which he has only a limited interest, the pledge is valid to the extent of that interest.
Suits by bailees or bailors against wrongdoers
132. Suit by bailor or bailee against wrongdoerWhere a third person wrongfully deprives the bailee of the use of possession of the goods bailed, or does them any injury, the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been made; and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury.
133. Apportionment of relief or compensation obtained by such suitsWhatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their respective interests.
Part X – Agency
Appointment and authority of agents
134. "Agent" and "principal" definedAn "agent" is a person employed to do any act for another or to represent another in dealings with third persons and the person for whom such act is done, or who is so represented, is called the "principal".
135. Who may employ agentAny person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent.
136. Who may be agentAs between the principal and third persons any person may become an agent; but no person who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principal according to the provisions of this Act.
137. Consideration not necessaryNo consideration is necessary to create an agency.
138. Agent's authority may be express or impliedThe authority of an agent may be express or implied.
139. Definitions of express and implied authorityAn authority is said to be express when it is given by words spoken or written and to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted on circumstances of the case.
140. Extent of agent's authority
141. Agent's authority in emergencyAn agent has authority, in an emergency to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.
142. When agent cannot delegateAn agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally unless by the ordinary custom of trade a sub-agent may, or from the nature of the agency, a sub-agent must, be employed.
143. "Sub-agent" definedA "sub-agent" is a person employed by, and acting under the control of, the original agent in the business of the agency.
144. Representation of principal by sub-agent properly appointed
145. Agent's responsibility for sub-agent appointed without authorityWhere an agent, without having authority to do so, has appointed a person to act as a sub-agent, the agent stands towards such person in the relation of a principal to an agent, and is responsible for his acts both to the principal and to third persons; the principal is not represented by or responsible for the acts of the person so employed, nor is that person responsible to the principal.
146. Relation between principal and person duly appointed by agent to act in business of agencyWhere an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has duly named another person accordingly, such person is not a subagent, but an agent of the principal for such part of the business of the agency as is entrusted to him.
147. Agent's duty in naming such personIn selecting an agent for his principal, an agent is bound to exercise the same amount of discretion as a man of ordinary prudence would' exercise in his own case; and if he does this, he is not responsible to the principal for the acts or negligence of the agent so selected.[Cap. 4 s. 8]
148. Right of person as to acts done for him without his authority and effect of ratificationWhere acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts and if he ratifies them, the same effects will follow as if they had been performed by his authority.
149. Ratification may be express or impliedRatification may be express or may be implied in the conduct of the person on whose behalf the acts are done.
150. Knowledge requisite for valid ratificationNo valid ratification can be made by a person whose knowledge of the facts of the case is materially defective.
151. Effect of ratifying unauthorised act forming part of transactionA person ratifying any unauthorised act done on his behalf ratifies the whole of the transaction of which such act formed a part.
152. Ratification of unauthorised act cannot injure third personAn act done by one person on behalf of another without such other person's authority, which, if done with authority, would have the effect of subjecting a third person to damages, or of terminating any right of interest of a third person, cannot, by ratification, be made to have such effect.
Revocation of agency
153. Termination of agencyAn agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying, becoming of unsound mind or being adjudged bankrupt under the provisions of any law for the time being in force relating to bankruptcy.
154. Termination of agency, where agent has interest in subject matterwhere the agent has himself an interest in the property which forms the subject matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.
155. When principal may revoke agent's authorityThe principal may, save as is otherwise provided by section 154, revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal.
156. Revocation where authority has been partly exercisedThe principal cannot revoke the authority given to his agent after the authority has been partly exercised, so far as regards such acts and obligations as arise from acts already done in the agency.
157. Compensation for revocation by principal or renunciation by agentWhere there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.
158. Notice of revocation or renunciationReasonable notice must be given of such revocation or renunciation; otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other.
159. Revocation and renunciation may be express or impliedRevocation and renunciation may be express or may be implied in the conduct of the principal or agent respectively.
160. When termination of agent's authority takes effect as to agent, and as to third personsThe termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or so far as regards third persons, before it becomes known to them.
161. Agent's duty on termination of agency by principal's death or insanityWhere an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of the representatives of his late principal, are reasonable steps for the protection and preservation of the interests entrusted to him.[Cap. 4 s. 8]
162. Termination of sub-agent's authorityThe termination of the authority of an agent causes the termination (subject to the rules herein contained regarding the termination of an agent's authority) of the authority of all sub-agents appointed by him.
Agent’s duty to principal
163. Agent's duty in conducting principal's businessAn agent is bound to conduct the business of his principal according to the directions given by the principal or, in the absence if any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business, and when the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he must account for it.
164. Skill and diligence required from agentAn agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill, and the agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill or misconduct.
165. Agent's accountsAn agent is bound to render proper accounts to his principal on demand.
166. Agent's duty to communicate with principalIt is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions.
167. Right of principal when agent deals, on his own account, in business of agency without principal's consentWhere an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transactions, if the case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him.
168. Principals right to benefit gained by agent dealing on his own account in business of agencyWhere an agent, without the knowledge of his principal, deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction.
169. Agent's right of retainer out of sums received on principal's accountAn agent may retain; out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent.
170. Agent's duty to pay sums received for principalSubject to such deductions, the agent is bound to pay to his principal all sums received on his account.
171. When agent's remuneration becomes dueIn the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act; but an agent may detain moneys received by him on account of goods sold, although the whole of the goods consigned to him for sale may not have been sold, or although the sale may not be actually completed.
172. Agent not entitled to remuneration for business misconductedAn agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted.
173. Agent's lien on principal's propertyIn the absence of any contract to the contrary, an agent is entitled to retain goods, papers and other property, whether movable or immovable, of the principal received by him, until the amount due to himself for commission, disbursements and services in respect of the same has been paid or accounted for to him.
Principal's duty to agent
174. Agent to be indemnified against consequences of lawful actsThe employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him.
175. Agent to be indemnified against consequences of acts done in good faithWhere one person employs another to do an act and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act, though it causes an injury to the rights of third persons.
176. Non-liability of employer of agent to do criminal actWhere one person employs another to do an act which is criminal, the employer is not liable to the agent, either upon an express or an implied promise, to indemnify him against the consequences of that act.
177. Compensation to agent for injury caused by principal's neglectThe principal must make compensation to his agent in respect of injury caused to such agent by the principal’s neglect or want of skill.[Cap. 4 s. 8]
Effect of agency on contracts with third persons
178. Enforcement and consequences of agent's contractsContracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person.
179. Principal how far bound when agent exceeds authorityWhen an agent does more than he is authorised to do, and when the part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal.
180. Principal not bound when excess of agent's authority is not separableWhere an agent does more than he is authorised to do, and what he does beyond the scope of his authority cannot be separated from what is within it, the principal is not bound to recognise the transaction.
181. Consequences of notice given to agentAny notice given to, or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequences as if it had been given to or obtained by the principal.
182. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal
183. Rights of parties to contract made by agent not disclosed
184. Right of person dealing with agent personally liableIn cases where the agent is personally liable, a person dealing with him may hold either him or his principal, or both of them, liable.
185. Consequence of inducing agent or principalWhen a person who has made a contract with an agent induces the agent to act upon the belief that the principal only will be held liable, or induces the principal to act upon the belief that the agent only will be held liable, he cannot afterwards hold liable the agent or principal respectively.
186. Liability of pretended agentA person untruly representing himself to be the authorised agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing.
187. Person falsely contracting as agent not entitled to performanceA person with whom a contract has been entered into in the character of agent is not entitled to require the performance of it if he was in reality acting, not as agent, but on his own account.
188. Liability of principal inducing belief that agent's unauthorised acts were authorizedWhen an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent's authority.
189. Effect, on agreement, of misrepresentation or fraud by agentA misrepresentation made, or a fraud committed, by an agent acting in the course of his business for his principal, has the same effect on an agreement made by such agent as if such misrepresentation or fraud had been made or committed by the principal; but a misrepresentation made, or frauds committed, by an agent, in matters which do not fall within his authority, do not affect his principal.
Part XI – Partnership
Nature of partnership
190. "Partnership" and "firm" defined
191. Rules for determining existence of partnership
Relations of partners to one another
192. General duties of partnersPartners are bound to carry on the business of the partnership for the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives.
193. Variation by consent of terms of partnershipThe mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all of them, and such consent may either be express, or be implied from a uniform course of dealing.
194. Conduct of business and mutual rights and liabilitiesIn the absence of any contract to the contrary, the rights and duties of the partners in relation to the partnership shall be determined by the following rules—
195. Partnership property
196. Accountability of partners for private profits and competing businessesSubject to any contract between the partners—
197. When term for partnership expiresWhere a partnership entered into for a fixed term be continued after such term has expired, the rights and obligations of the partners will in the absence of any agreement to the contrary, remain the same as they were at the expiration of the term, so far as such rights and obligations can be applied to a partnership dissolvable at the will of any partner.
198. Introduction of new partnersSubject to any contract between the partners, no person shall be introduced as a partner into a firm without the consent of all the existing partners.
199. ExpulsionA partner may not be expelled from a firm by his partners unless a power to that effect has been expressly conferred by agreement between the partners.
200. RetirementWhere no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice of his intention so to do to all the other partners.
Relations of partners to persons dealing with them
201. Power of partner to bind firm
202. Partners bound by acts on behalf of firmAn act or instrument relating to the business of the firm done or executed in the firm name, or in any other manner showing an intention to bind the firm, by any person thereto authorised, whether a partner or not, is binding on the firm and all the partners:Provided that, nothing in this section shall affect any general rule of law relating to the execution of deeds or negotiable instruments.
203. Liability of partners for debtsEvery partner is liable for all debts and obligations incurred while he is a partner in the usual course of business by or on behalf of the partnership.
204. Liability for wrongs and misapplicationEvery partner is liable to make compensation to third persons in respect of loss or damage arising or any penalty incurred—
205. Improper employment of trust property for partnership purposesWhere a partner, being a trustee, improperly employs trust property in the business or on account of the partnership, no other partner is liable for the trust property to the persons beneficially interested therein:Provided that—
206. Persons liable by holding outEveryone who by words spoken or written or by conduct represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm, is liable as a partner to anyone who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made:Provided that, where, after a partner's death, the partnership business is continued in the old firm's name, the continued use of that name or of the deceased partner's name as part thereof shall not of itself make his executors or administrators’ estate or effects liable for any partnership debts contracted after his death.
207. Notice to partner to be notice to firmNotice to any partner who habitually acts in the partnership business of any matter relating to partnership affairs operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner.
208. Liabilities of incoming and outgoing partners
209. Revocation of continuing guarantee by change in firmA continuing guarantee, given either to a firm or to a third person, in respect of the transactions of a firm, is, in the absence of agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which, or in respect of the transactions of which, such guarantee was given.
210. Rights of assignee of share in partnership
211. Minors not competent to be partnersA person who is a minor according to the law to which he is subject is not competent to be a partner in a firm.
Dissolution of partnership and its consequences
212. Dissolution by expiration or notice
213. Dissolution by death, bankruptcy or charge
214. Dissolution by illegality of partnershipA partnership is in every case dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership.
215. Dissolution by courtOn application by a partner, the court may decree a dissolution of the partnership in any of the following cases—
216. Rights of persons against apparent members of firm
217. Partner's right to notice of dissolutionOn the dissolution of a partnership or retirement of a partner, any partner may notify the same, and may require the other partner or partners to concur for that purpose in all proper and necessary acts, if any, which cannot be done without his or their concurrence.
218. Continuance of rights and liabilities of partners after dissolutionAfter the dissolution of a partnership, the rights and obligations of the partners continue in all things necessary for winding up the business of the partnership, and to complete transactions begun but unfinished at the dissolution, but not otherwise:Provided that, the firm is in no case bound by the acts of a partner who has become bankrupt; but this proviso does not affect the liability of any person who has, after the bankruptcy represented himself or knowingly suffered himself to be represented as a partner of the bankrupt.
219. Rights of partners as to application of partnership propertyOn the dissolution of a partnership, every partner is entitled, as against the other partners in the firm, and all persons claiming through them in respect of their interests as partners. to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners to the firm; and for that purpose any partner or his representatives may, on the termination of the partnership, apply to the court to wind up the business and affairs of the firm.
220. Apportionment of premium where partnership prematurely dissolvedWhere one partner has paid a premium to another on entering into a partnership for a fixed term, and the partnership is dissolved before the expiration of that term otherwise than by the death of a partner, the court may order the repayment of the premium, or of such part thereof as it thinks just, having regard to the terms of the partnership contract and to the length of time during which the partnership has continued unless—
221. Rights where partnership dissolved for fraud or misrepresentationWhere a partnership contract is rescinded on the ground or the fraud or misrepresentation of one of the parties thereto, the party entitled to rescind is, without prejudice to any other right, entitled—
222. Right of outgoing partner in certain cases to share profits made after dissolutionWhere any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carryon the business of the firm with its capital or assets without any final settlement of accounts as between the firm and the outgoing partner or his estate, then, in the absence of any agreement to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since the dissolution as the court may find to be attributable to the use of his share of the partnership assets, or to interest at the rate of five per centum per annum on the amount of his share of the partnership assets:Provided that, where, by the partnership contract, an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any further or other share of profits; but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section.
223. Retiring or deceased partner's share to be debtSubject to any agreement between the partners, the amount due from surviving or continuing partners to an outgoing partner or the representatives of a deceased partner in respect of the outgoing or deceased partner's share is a debt accruing at the date of the dissolution or death.
224. Rule for distribution of assets on final settlement of accountsIn settling accounts between the partners after dissolution of partnership, the following rules shall, subject to any agreement, be observed—
225. Payment of firm debts and of separate debtsWhere there are joint debts due from the firm, and also separate debts due from any partner, the property of the firm shall be applied in the first instance in payment of the debts of the firm, and if there is any surplus, then the share of each partner shall be applied in payment of his separate debts or paid to him; the separate property of any partner shall be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm.
226. Incorporated partnerships and joint-stock companiesExtraordinary partnerships, such as incorporated partnership and joint-stock companies, shall be regulated by the law for the time being in force relating thereto.
Part XII – Repeal and transitional provisions
227. Disapplication of Indian Contract Act and amendment of R.L. Cap. 2Disapplication of the Indian Contract Act, 1872 and amendment of the Indian Acts (Application) Ordinance.
228. OmittedTransitional provisions.
History of this document
30 November 2019 this version
03 March 1961