The Law of Contract Act

This section says the Act may be cited as the Law of Contract Act.

This section defines key contract terms like proposal, acceptance, promise, consideration, agreement, void contract, and voidable contract, and preserves certain customary law effects.

A proposal, acceptance, or revocation is treated as communicated when the relevant party does an act or omission intended to communicate it and that actually communicates it.

This section says when communication of a proposal, acceptance, or revocation is treated as complete.

A proposal or acceptance may be revoked only before communication is complete as against the relevant party.

A proposal is revoked if notice of revocation is communicated, the acceptance period expires, a reasonable time passes without acceptance, the acceptor fails a condition precedent, or the proposer dies or becomes insane before acceptance is known.

An acceptance must be absolute and unqualified, and usually be communicated in a usual and reasonable manner unless the proposal requires a different method.

Doing the proposal’s conditions, or accepting consideration for a reciprocal promise offered with the proposal, counts as acceptance.

A promise is express if the proposal or acceptance is made in words, and implied if it is made otherwise than in words.

Agreements count as contracts when there is free consent, the parties can contract, and the agreement has lawful consideration and a lawful object, unless the agreement is expressly void.

A person is competent to contract only if they are of majority age, of sound mind, and not disqualified by applicable law; an agreement by someone not competent is void.

A person can make a contract only when they are of sound mind under this section.

This provision says two or more persons consent when they agree on the same thing in the same sense, and it introduces the definition of “free consent.”

Consent is free if it is not caused by coercion, undue influence, fraud, misrepresentation, or mistake.

Consent is not free if it would not have been given except for coercion, undue influence, fraud, misrepresentation, or mistake.

This section defines “coercion” as certain prohibited acts or threats, including unlawful detention of property, done to make someone enter an agreement.

A contract may be treated as induced by undue influence if one party can dominate the other’s will and uses that position for an unfair advantage.

This section defines fraud in contract law and says that mere silence is not fraud unless there is a duty to speak or the silence itself amounts to speech.

This provision defines “misrepresentation.”

A contract may be voidable if consent was caused by coercion, undue influence, fraud, or misrepresentation, but some cases are protected by the ordinary-diligence exception.

An agreement is void if both parties are mistaken about an essential fact.

A contract is not voidable just because it was made under a mistake about a law in force in Tanzania.

A contract is not voidable just because one party was mistaken about a fact.

An agreement’s consideration or object is lawful unless it is illegal, fraudulent, harmful, or against public policy.

An agreement is void if any part of the consideration or object is unlawful.

An agreement made without consideration is void unless it falls within listed exceptions.

An agreement that generally restrains a person’s marriage is void, except where the person is a minor.

An agreement that restrains someone from practicing a lawful profession, trade, or business is void to that extent unless the restraint is reasonable.

An agreement is void to the extent it absolutely stops a party from enforcing contract rights through ordinary courts or limits the time to do so.

An agreement is void if its meaning is not certain or cannot be made certain.

An agreement by way of wager is void, and no suit may be brought to recover winnings or money entrusted for a wager.

A contingent contract is one that requires doing or not doing something only if a related event happens.

A contingent contract cannot be enforced until the uncertain future event happens; if the event becomes impossible, the contract becomes void.

A contingent contract based on an uncertain future event not happening can be enforced once that event becomes impossible, not before.

If a contingent contract depends on how a person will act at an unspecified time, the event is treated as impossible once that person does something that makes the act impossible within any definite time, or otherwise than under further contingencies.

A contingent contract can become void if the uncertain event does not happen in time or becomes impossible; in some cases it may be enforced once the fixed time has passed or it becomes certain the event will not happen.

A contingent agreement is void if it depends on an impossible event, even if the parties did not know it was impossible when they made the agreement.

Contract parties must perform their promises unless another law excuses or dispenses with performance.

If a promisor makes an offer of performance that the promisee does not accept, the promisor is not liable for non-performance and does not lose contract rights.

If one party refuses to perform a contract or makes full performance impossible, the promisee may end the contract unless they have agreed to keep it going.

If the contract shows the parties meant the promisor to perform personally, the promisor must do it; otherwise the promisor or representatives may use a competent person.

If a promisee accepts performance from a third person, the promisee cannot later enforce the promise against the promisor.

People who make a joint promise must fulfil it; after one dies, the representative acts together with the survivor, and after the last survivor dies, the representatives act jointly, unless the contract says otherwise.

If there are joint promisors, the promisee may require one or more of them to perform the whole promise, and joint promisors may seek equal contribution from each other.

Releasing one joint promisor does not release the others, and it also does not free the released promisor from responsibility to the other joint promisors.

If a promise is made to two or more people jointly, the right to claim performance stays with them during their lives, then passes to the appropriate representatives after a death.

If a contract requires the promisor to perform without a request from the promisee and no time is set, the promise must be performed within a reasonable time.

If a promisor has agreed to perform a promise on a certain day without needing application by the promisee, the promisor may perform it during usual business hours on that day and at the proper place.

If a promise is due on a certain day and the promisor has not agreed to perform without being asked, the promisee must request performance at a proper place and during usual business hours.

If no place for performance is fixed and the promisee has not applied, the promisor must ask the promisee to appoint a reasonable place and then perform there.

A promise may be performed in any manner or at any time that the promisee prescribes or sanctions.

A promisor does not have to perform if the contract calls for reciprocal promises to be performed at the same time and the promisee is ready and willing to perform the reciprocal promise.

Reciprocal promises must be performed in the order fixed by the contract, or, if the contract does not fix the order, in the order required by the nature of the transaction.

If one party prevents performance of reciprocal promises, the prevented party may treat the contract as voidable and claim compensation for resulting loss.

If a party fails to perform the promise that was meant to be performed last in reciprocal promises, that party cannot demand performance of the other promise and must compensate the other party for resulting loss.

If a contract says time matters and performance is late, the promisee may treat the contract (or the unperformed part) as voidable. If time is not of the essence, the contract is not voidable, but the promisee may claim compensation for loss. Accepting late performance can waive compensation unless notice is given at that time.

An agreement to do something impossible is void, and a contract becomes void if the promised act later becomes impossible or unlawful. If the promisor knew or should have known this and the promisee did not, the promisor must compensate the promisee for resulting loss.

If reciprocal promises include legal things and illegal things, the legal part is a contract and the illegal part is a void agreement.

If an alternative promise has one legal branch and one illegal branch, only the legal branch can be enforced.

If a debtor owes several debts to one person and says which debt a payment should go toward, the accepted payment must be applied to that debt.

If the debtor does not indicate how a payment should be applied, the creditor may apply it at their discretion to a lawful debt due from the debtor.

If neither party allocates a payment, the payment must be used to settle debts in time order; if debts are equal, it must be shared proportionally.

If the parties replace, rescind, or alter a contract, the original contract does not have to be performed. The promisee may also waive or remit performance of the promise.

The promisee may waive or reduce performance, extend the time for performance, or accept another satisfaction instead.

If a voidable contract is rescinded, the other party does not have to perform promises owed by the rescinding party, and the rescinding party must return any benefit received if possible.

If an agreement or contract is void, the person who received an advantage must restore it or compensate the other party.

A rescission of a voidable contract may be communicated or revoked in the same way, and under the same rules, as a proposal.

If the promisee does not give the promisor reasonable facilities to perform, the promisor is excused for the resulting non-performance.

A person who supplies necessaries to an incapable person, or someone the incapable person must support, can be reimbursed from the incapable person’s property.

A person who pays money that another is legally required to pay is entitled to reimbursement from that other person.

If someone lawfully does or delivers something for another person without meaning it as a gift, and the other person benefits, that person must compensate the giver or return what was done or delivered—unless the person had no chance to accept or reject the benefit.

If someone finds another person’s goods and takes them into custody, they are responsible in the same way as a bailee.

A person who received money or something by mistake, or under coercion, must repay or return it.

A party harmed by a contract breach can recover compensation for the loss or damage caused by the breach, except for remote and indirect loss.

A party who suffers a contract breach can claim reasonable compensation, capped by any amount or penalty set in the contract, even without proving actual loss.

A person who properly rescinds a contract can claim compensation for damage caused by the contract not being fulfilled.

This section defines a contract of indemnity as one where one party promises to save the other from loss.

A promisee under a contract of indemnity may recover certain losses from the promisor when acting within authority.

This provision defines a contract of guarantee and the roles of surety, principal debtor, and creditor; a guarantee may be oral or written.

A promise or act made for the benefit of the principal debtor may count as sufficient consideration for a surety’s guarantee.

A surety is liable to the same extent as the principal debtor unless the contract provides otherwise.

A guarantee that extends to a series of transactions is called a continuing guarantee.

A surety may revoke a continuing guarantee for future transactions by giving notice to the creditor.

A surety’s death revokes a continuing guarantee for future transactions unless the contract says otherwise.

A person’s liability to a third party under the first contract is not changed by a separate contract between the two persons, even if the third party knew about it.

If the contract is varied without the surety’s consent, the surety is discharged for transactions after the variance.

A surety is discharged if the creditor releases the principal debtor or does an act or omission that legally discharges the principal debtor.

The surety is discharged if the creditor and principal debtor make a composition, give time, or agree not to sue, unless the surety agrees to that contract.

A surety is not discharged when the creditor makes a time-giving agreement with a third person instead of the principal debtor.

A creditor’s delay in suing the principal debtor does not release the surety unless the guarantee says otherwise; releasing one co-surety does not release the others.

If there are co-sureties, releasing one by the creditor does not release the others, and the released surety still owes responsibility to the other sureties.

A creditor’s act or omission that impairs the surety’s remedy against the principal debtor can discharge the surety.

If the surety pays or performs what they owe after the guaranteed debt is due or the principal debtor defaults, the surety gets the creditor’s rights against the principal debtor.

A surety may rely on the creditor’s securities against the principal debtor, and may be discharged if the creditor loses or parts with a security without the surety’s consent.

A guarantee obtained through the creditor’s misrepresentation, or with the creditor’s knowledge and assent, about a material part of the transaction, is invalid.

A guarantee obtained by the creditor through silence about material circumstances is invalid.

A guarantee on a contract is not valid unless the other person joins as co-surety.

In a guarantee contract, the principal debtor must indemnify the surety, and the surety may recover only sums rightfully paid under the guarantee.

Co-sureties must share the debt equally among themselves unless they have agreed otherwise.

Co-sureties bound in different sums must pay equally, but only up to the limits of their own obligations.

This section defines “bailment,” “bailor,” and “bailee,” and says a person already holding someone else’s goods can become a bailee by contract.

Delivery to a bailee may be made by any act that puts the goods into the possession of the intended bailee or an authorised holder for that bailee.

The bailor must tell the bailee about known faults in the goods that affect use or create unusual risk, and may have to pay for resulting damage.

A bailee must take ordinary-care-level custody of bailed goods.

A bailee is not responsible for loss, destruction, or deterioration of the bailed thing if there is no special contract and the bailee has taken the care required by section 103.

If the bailee acts inconsistently with the bailment conditions, the bailor may avoid the contract of bailment.

If a bailee uses bailed goods contrary to the bailment conditions, the bailee must compensate the bailor for damage caused to the goods by that use.

If the bailee mixes the bailor’s goods with the bailee’s own goods with the bailor’s consent, both have an interest in the mixture according to their respective shares.

If a bailee mixes a bailor’s goods with the bailee’s own goods without consent, and the goods can still be separated, ownership stays with each party and the bailee must pay the separation costs and any resulting damage.

If a bailee mixes the bailor’s goods with the bailee’s own goods without consent and the goods cannot be separated and returned, the bailor is entitled to compensation for the loss.

If a bailment requires goods to be kept, carried, or worked on without payment to the bailee, the bailor must repay the bailee’s necessary expenses.

For a gratuitous loan of a thing for use, the lender may ask for it back at any time; if early return would cause the borrower more loss than benefit, the lender must compensate that excess loss when requiring return.

The bailee must return or deliver the bailed goods according to the bailor’s directions, without waiting for a demand, once the bailment time ends or the purpose is completed.

If a bailee fails to return, deliver, or tender the goods on time, the bailee is responsible to the bailor for any loss, destruction, or deterioration from that time.

A gratuitous bailment ends if either the bailor or the bailee dies.

Unless the contract says otherwise, the bailee must give the bailor any increase or profit from the bailed goods.

The bailor is responsible to the bailee for losses caused by the bailor not being entitled to make the bailment, receive back the goods, or give directions about them.

A bailee may return bailed goods to one joint owner, or follow that owner’s directions, without needing the consent of all joint owners, unless there is an agreement saying otherwise.

If the bailor has no title, a bailee acting in good faith is not responsible to the owner for returning the goods to the bailor or as the bailor directs.

A person other than the bailor who claims bailed goods may apply to court to stop delivery of the goods to the bailor and have title decided.

A finder of goods cannot sue the owner for voluntary preservation expenses, but may keep the goods until compensation is paid, and may claim a specific reward if one was offered for the return of lost goods.

A finder may sell a lost item commonly sold if the owner cannot be found or refuses to pay lawful charges, and the item is at risk of losing value or the finder’s charges reach two-thirds of its value.

A bailee who has provided labour or skill on the bailed goods may retain the goods until paid due remuneration, unless the contract says otherwise.

Certain listed professionals may keep bailed goods as security for a general account balance unless a contrary contract exists; other persons have no such right unless there is an express contract.

This provision defines a pledge, and names the parties as pawnor and pawnee.

The pawnee may keep the pledged goods to secure the debt, the promise, interest, and necessary expenses, but not for any other debt or promise.

A pawnee must not keep pledged goods for a different debt or promise unless there is a contract allowing it.

The pawnee may receive reimbursement from the pawnor for extraordinary expenses spent preserving the pledged goods.

If the pawnor defaults, the pawnee may sue, keep the pledged goods, or sell them after giving reasonable notice; any surplus from sale must be paid to the pawnor.

If the pawnor defaults after a time for payment or performance is set, the pawnor may redeem the pledged goods before the actual sale, but must also pay any expenses caused by the default.

This section says a mercantile agent can make a valid pledge in certain circumstances, and a valid pledge of documents of title is treated as a pledge of the goods.

A pledge of goods by a person with only a limited interest is valid only to that limited extent.

If a third person wrongfully interferes with bailed goods, the bailee may use the owner’s remedies, and either the bailor or the bailee may sue that third person.

Any relief or compensation obtained in a suit must be handled between the bailor and bailee according to their respective interests.

The provision defines an agent and a principal.

A person who is of legal age and sound mind may employ an agent.

Any person may become an agent, but a person who is not of majority age and sound mind cannot become an agent to be responsible to the principal.

Consideration is not required to create an agency.

An agent’s authority may be express or implied.

The section defines express authority as authority given by spoken or written words, and implied authority as authority inferred from the circumstances.

An agent may do lawful things that are necessary to carry out an authorised act or to run an authorised business.

An agent may act in an emergency to protect the principal from loss, using ordinary prudence.

An agent generally must not use another person to carry out acts the agent personally promised to do, unless trade custom or the nature of the agency allows a sub-agent.

A sub-agent is someone employed by the original agent and acting under the original agent’s control in the agency business.

If a sub-agent is properly appointed, the principal is treated as represented by the sub-agent for third persons and is bound by the sub-agent’s acts; the agent is responsible to the principal, and the sub-agent is responsible to the agent except in cases of fraud or wilful wrong.

If an agent appoints a sub-agent without authority, the agent is responsible for the sub-agent’s acts to the principal and to third parties.

If an authorised agent duly names another person to act for the principal, that person is treated as the principal’s agent for the entrusted business, not as a sub-agent.

An agent choosing another agent for a principal must use the same care and discretion a prudent person would use in their own affairs.

If someone acts on another person’s behalf without authority, the person affected may choose to ratify or reject those acts.

Ratification may be express or implied from the person’s conduct.

A person with materially defective knowledge of the facts cannot validly ratify.

If someone ratifies an unauthorised act done on their behalf, the ratification applies to the whole transaction it was part of.

Ratifying an unauthorised act cannot make it valid if that would harm a third person’s damages claim or end a third person’s right or interest.

An agency ends if the principal revokes authority, the agent renounces the business, the agency is completed, or either party dies, becomes of unsound mind, or is adjudged bankrupt.

If the agent has an interest in the property that is the subject of the agency, the agency cannot be terminated to the agent’s prejudice unless there is an express contract.

The principal may revoke an agent’s authority before it has been used to bind the principal, unless section 154 provides otherwise.

A principal cannot revoke an agent’s authority after it has already been partly exercised, to the extent of acts and obligations arising from what the agent has already done.

If an agency was meant to continue for a period, a principal or agent may have to compensate the other side for an early revocation or renunciation without sufficient cause.

Reasonable notice must be given when revoking or renouncing authority, or any resulting damage must be made good.

Revocation and renunciation can be made expressly or by implication from conduct.

An agent’s authority does not end, as to the agent or third persons, until the termination is known to them.

If an agency ends because the principal dies or becomes of unsound mind, the agent must take reasonable steps to protect and preserve the entrusted interests for the principal’s representatives.

If an agent’s authority ends, the authority of sub-agents appointed by that agent also ends, subject to other rules in this section.

An agent must conduct the principal’s business as directed by the principal, or if no directions are given, according to local custom.

An agent must use appropriate skill and reasonable diligence in conducting the agency’s business, and must compensate the principal for direct loss caused by the agent’s own neglect, lack of skill, or misconduct.

An agent must give proper accounts to the principal when asked.

An agent must use reasonable diligence to communicate with the principal and obtain instructions when there is difficulty.

A principal may repudiate transactions if an agent deals on the agent’s own account without consent and without disclosing material circumstances, especially where facts were dishonestly concealed or the dealings were disadvantageous.

If an agent deals on their own account in the agency business without the principal’s knowledge, the principal may claim any benefit from that transaction.

An agent may keep money from sums received for the principal to cover advances, properly incurred expenses, and any remuneration owed for acting as agent.

The agent must pay the principal sums received on the principal’s account, subject to deductions.

An agent’s payment for performing an act is not due until the act is completed unless there is a special contract. An agent may keep money received from sales even if all goods have not been sold or the sale is not yet complete.

An agent guilty of misconduct in the agency business cannot claim remuneration for the part of the business they misconducted.

An agent may keep the principal’s property received by the agent until the agent is paid or accounted for commission, disbursements, and services, unless a contract says otherwise.

An employer must indemnify an agent for the consequences of lawful acts done within the authority given to the agent.

If someone hires another person to do an act and the agent acts in good faith, the employer must indemnify the agent for the consequences, even if third-party rights are affected.

An employer is not liable to indemnify an agent for the consequences of a criminal act the employer hired them to do.

A principal must compensate an agent for injury caused by the principal’s neglect or lack of skill.

Contracts made through an agent, and obligations from an agent’s acts, may be enforced as if the principal had done them personally.

A principal is bound only to the part of an agent’s act that is within the agent’s authority; if the unauthorized part cannot be separated, the excess is not binding on the principal.

If an agent acts beyond authority and the excess cannot be separated from what is authorised, the principal is not bound to recognise the transaction.

Notice or information given to an agent in the course of business is treated as if given to the principal; the agent cannot personally enforce or be bound by contracts made for the principal.

An agent generally cannot personally enforce, or be personally bound by, contracts made on behalf of a principal unless there is a contract saying otherwise.

If a contract is made by an agent without the other party knowing the person is an agent, the principal may require performance and the other party keeps the rights they would have had against the agent. If the principal reveals themselves before completion, the other party may refuse to perform if they would not have contracted knowing who the principal was.

If the agent is personally liable, a person dealing with the agent may hold the agent, the principal, or both liable.

A person who misleads an agent or principal about who will be liable cannot later hold the other party liable.

A person who falsely claims to be another’s authorised agent and induces someone to deal with him may have to compensate for any resulting loss or damage if the alleged employer does not ratify the acts.

A person who contracts as an agent cannot require performance if they were really acting on their own account.

A principal can be bound by an agent’s unauthorised acts or obligations if the principal’s words or conduct led third persons to think the agent had authority.

An agent’s misrepresentation or fraud can bind the principal if done in the course of the agent’s business for the principal.

This provision defines what counts as a partnership, and says partners are collectively a firm and their business name is the firm name.

Partnership comes from contract, not status, and several kinds of shared ownership or profit-sharing do not automatically make a partnership.

Partners must act for the partnership’s common advantage, be fair and faithful to each other, and give true accounts and full information about partnership matters when asked by a partner or a partner’s legal representatives.

Partners may vary their mutual rights and duties if they consent, including consent implied from a uniform course of dealing.

Unless the partners agree otherwise, the section sets default rules for partners’ management rights, access to books, profit and loss sharing, and indemnities.

Partnership property must be held by the partners for the partnership and under the partnership agreement, or under the Act if there is no agreement.

A partner must account for and pay to the firm profits made from certain firm-related dealings or from a competing business, unless the partners’ contract provides otherwise.

If a fixed-term partnership continues after the term ends, the partners keep the same rights and obligations unless they agreed otherwise.

A person cannot be introduced as a partner into a firm unless the existing partners consent, subject to any contract between the partners.

Partners may not expel a partner from a firm unless the partners have expressly agreed to give that power.

If no fixed term was agreed for a partnership, any partner may end it by giving notice to the other partners.

A partner can bind the firm when acting in the usual course of the firm’s business, but not for listed matters unless there is trade usage or express authority.

An authorized person’s act or instrument about the firm’s business can bind the firm and the partners when it is done in the firm name or otherwise shows an intent to bind the firm.

A partner is liable for partnership debts and obligations incurred while acting as a partner in the usual course of business or on behalf of the partnership.

A partner may be responsible for compensating third persons for loss, damage, or penalties caused by certain wrongful acts or misapplications connected to the firm.

If a trustee-partner wrongly uses trust property in the partnership business, the other partner is not liable to the beneficiaries for that property, subject to stated exceptions.

A person who holds themself out as a partner in a firm can be treated as liable as a partner to anyone who gave credit to the firm on that basis.

Notice given to a partner who regularly acts in the partnership business is treated as notice to the firm, unless it is a fraud on the firm committed by or with that partner’s consent.

An incoming partner is not liable for earlier firm acts, and a retiring partner stays liable for pre-retirement partnership debts unless discharged by agreement with the new firm and the creditors.

A continuing guarantee is revoked for future transactions if the firm’s constitution changes, unless the parties agreed otherwise.

An assignee of a partner’s share cannot take part in managing the partnership or inspect its books during the partnership, but can receive the profit share; after dissolution, the assignee can receive the relevant asset share and an account from the date of dissolution.

A minor is not allowed to be a partner in a firm.

A partnership is dissolved when a fixed term ends, when a single venture ends, or when a partner gives notice in an undefined-term partnership, unless the partners agree otherwise.

A partnership can end if a partner dies or becomes bankrupt, unless the partners agree otherwise. It can also be dissolved by the other partners if a partner’s share is charged under the cited civil procedure rule.

A partnership ends if an event makes carrying on the firm’s business, or the partners’ business in partnership, unlawful.

A partner may ask the court to dissolve the partnership, and the court may do so in certain listed cases.

A person dealing with a firm after a change in its constitution may treat the old apparent partners as still being partners until notice of the change. An estate is not liable for later partnership debts after death, bankruptcy, or a partner’s retirement in the stated circumstances.

A partner may notify dissolution or retirement and may require the other partner or partners to join in necessary acts that need their concurrence.

After a partnership dissolves, partners’ rights and obligations continue only as needed to wind up the business and finish unfinished transactions.

When a partnership is dissolved, a partner is entitled to have partnership property used to pay the firm’s debts and liabilities, and any partner or representative may ask the court to wind up the firm.

If a fixed-term partnership ends early (not because a partner died), the court may order repayment of the premium, or part of it, unless the paying partner caused the dissolution by misconduct or the dissolution agreement already covers return of the premium.

If a partnership contract is rescinded for fraud or misrepresentation, the rescinding party has specified rights to a lien, creditor priority, and indemnity.

An outgoing partner or the partner’s estate may claim profits or 5% annual interest after dissolution if the business continues without final settlement, unless a buyout option is duly exercised.

Unless the partners agree otherwise, the amount owed by surviving or continuing partners for a departing or deceased partner’s share is treated as a debt when the partnership ends or the partner dies.

After a partnership ends, the partners must settle accounts by following the stated order for paying losses, debts, advances, capital, and any leftover assets, unless they agree otherwise.

Firm property must be used first to pay firm debts; any surplus goes to partners’ separate debts or back to the partner. A partner’s separate property must be used first for that partner’s separate debts, with any surplus used for firm debts.

Extraordinary partnerships, including incorporated partnerships and joint-stock companies, are regulated by the law currently in force for them.

This section states that the disapplication of the Indian Contract Act and the amendment of the Indian Acts (Application) Ordinance are omitted.

This section is omitted and does not state a rule.