Pinnel’s Rule
This is also popularly known as the rule in pinnel’s case
It states the following ‘ a promise made by a creditor to accept lesser sumthan owed in
satisfaction of the entire debt shall not be binding on such creditor and he can legally
turn around and sue for the balance.
Case Pinnel vs Cole (pinnels case 1 602)
Pinnel sued Cole for a debt of 8.1 0 pounds which was due in November when the matter
came up in court Cole proved that at Pinnels request he had paid Pinnel 5.2 pounds in
October and this amount had been accepted in full settlement of the entire debt.
Subsequently Pinnel insisted for balance. The case was determined in favour of Pinnel
simply on technical grounds that Cole had not filed his defense within the required
statutory period and manner. Had it not been so Pinnel would have lost.
Held: payment of lesser sumthan owed shall not be good consideration of the entire debt
if such payment is made on the exact date if falls due. However,
Payment of lesser sumthan owed shall be good consideration if the lesser sumis paid at
an earlier date than that on which it should fall due and both parties regard it as full
settlement. The balance cannot be legally recovered.
Rationale/justification
The fairness of this rule is that where a lesser sumis paid at an earlier date if benefits
the creditor to receive some money earlier than expected and it inconveniences the debtor
to look for money earlier than expected.
Fakes vs Beer
In an earlier case Mrs. Beer obtained judgement against Anthony Foakes in the sumof
2090 pounds and both parties then agreed that payment would be by installment. After the
principle sumhad been paid in accordance with the agreement Mrs. Beer suddenly
demanded to be paid interest and attempted to attach and sell Foakes property hence
Foakes applied his pre-emptive right by suing Beer in order to block the intended
attachment.
Held: legally Beer was entitled to claim interest because good consideration in this matter
included the payment of interest and without it any amount paid was simply lesser sum
than owed.
Exceptions to Pinnel’s case
The principle of accord and satisfaction. This arises where payment of lesser sumthan
owed is tendered by a third party on the voluntary understanding that it is full settlement
of the entire debt the balance cannot be recovered.
Case 1 – Hirachand Punamchand vs Temple
The plaintiff’s (money lenders) were owed money by the defendant who being unable to
repay requested his father to assist. The defendants’ father then pleaded with the
plaintiff to accept a lesser sumin full settlement and they willfully did only to turn around
later and sue the defendant for the balance.
Held: the lesser sum had been paid by a third party on a voluntary understanding that it
would be full settlement of the entire debt. The balance could not be legally recovered.
Case 2-Welby vs Drake
The plaintiff was owed 1 8 pounds by the defendant and being unable to repay the
defendant requested his father to assist. The defendants’ father then convinced the
plaintiff to accept 9 pounds in full settlement and after voluntarily receiving this amount
the plaintiff sued the defendant for the balance.
Held: the debt had been discharged by accord and satisfaction and the balance could not
have been legally recovered.
Where there is introduction of a new element n the contract and both parties. Voluntarily
agree eg payment on a future date, payment at a different place or payment in kind ie
service, goods, cheque instead of cash.
The instances identified above may amount to lesser sumthan owed yet such lesser sum
will discharge the debt.
Where the lesser sumthan owed is paid at an earlier date on the understanding that is full
settlement of the entire date.
Application of Estopelle- promises made must be fulfilled at all cost. This exception is best
applied when it appears in writing.
Where there is composition or compounding of debts. Where a debtor has many creditors
and he is unable to repay all of them in full, he can agree with each one of them and also
request them to agree amongst themselves to accept a lesser sumthan owed as full
settlement. This then becomes good consideration because it provides a benefit to each
creditor to receive some money rather than have all creditors scrambling for little money
in the debtors possession and some of them end up receiving nothing.
Consideration must always move from the promisee’ to the promissor
Privity of contract means contractual relationship. This doctrine emphasizes that it is only
the parties to the contract who can acquire rights and corresponding obligation and onto
the third parties because under the general principle of contract 3rd parties are simply
strangers and they cannot acquire rights or benefits not shall they be exposed to any
liability 3rd party rights ie “Jus Quaesitumtertio”
Case: Dunlop Pneumatic Tyres and Co vs Selfridge and Co (1 91 5)
Dunlop sold tyres to A. J Dew subject to a condition that the tyres would not be sold below
Dunlop’s stated price. A.J Dew then sold the tyres to Selfridge and gave them the same
condition given by Dunlop. Selfridge disregarded the condition by selling the tyres to a
consumer below Dunlops stated price. Dunlop was informed about this and they
immediately sued Selfridge for breach.
Held: both legally and practically Selfridge was a third party to Dunlop and there was no
privity between them, the claim failed.
| Dunlop (Manufacturer) Exceptions to privity |
A.J Dew Selfridge (wholesaler) |
Consumer (retailer) |
| Agency |
This is the main exception to privity. Legally an agent shall represent the principal in al
acts committed within authority of the agency. It is on this basis that the master becomes
liable for the acts or omissions of his servant this position is further strengthened by the
principle of vicarious liability (ref tort).
Statutory provisions
Generally what the law states must be respected. There are many instances where the
law shall authorize persons who would have been strangers to acquire rights or
obligations in a transaction eg under the law of insurance an injured person shall retain
the right to be compensated by an insurance company which never at anytime transacted
with him.
Marriage settlements and other family arrangements
Legally marriage is a sacred contract between the husband and his wife (wives) however
children born within such marriage shall retain the rights to proceed and sue any of the
parents where they can prove neglect or want of care by a parent who is financially able.
Likewise they may request court to protect any of their benefits likely to be
misappropriated by a parent.
Trusteeships
It is an arrangement between the donor and trustee yet beneficiaries of the trust shall
retain the right to proceed and sue a trustee who is dishonest or aiming to misappropriate
the trust.
Assignment
This is the legal transfer of rights or obligations from the main party (assignor) becomes
fully bound to the rights or liabilities in question. An assignment may arise in various ways
including the following;
Legal assignment
Equitable assignment
Assignment by operation of law
These instances may amount to an agency, accord and satisfaction or novation (ref
Agency)
Transaction with negotiable instruments
A holder in due course shall have a right to sue upon a negotiable instrument though a
contract may not directly be between him and the drawee bank.
Estoppel
A promissor makes himself an agent of a 3rd party if by his promise such 3rd party suffers
loss and it will be immaterial that the promissory might have been joking as long as he
knew or ought to have known that the promise was likely to be relied upon.
Restrictive covenants
They are secondary interests on land. They simply restrict a person from having absolute
enjoyment or use for some specific land or property. Legally restrictive covenants are
said to run with the land ie they cannot be separated from all transactions relating to that
particular land. Even thought the parties may not have expressly mentioned them eg the
joint we are of common facilities eg lifts, packing space, stairways and corridors the right
of KPLC, NCC and other statutory corporations to construct power lines, sewage tunnels
and other facilities through private property. Riparian rights (rivers) and other rights of
preserving and protecting water ways and wetlands. This right to protect and preserve
way leaves for expansion of the road network. The right to use the neighbours wall for
reasonable structural support.
Contractual capacity
Parties to the contract must possess the required legal contractual capacity otherwise
the contract shall be invalidated. Equity enables all persons to enter valid contracts but
in order to guarantee uniformity and fairness certain rules apply to the following classes
of persons.
Minors/infants
Legally any human being below the age of 1 8 shall be regarded a minor contracts with
minors are governed by common law rules as modified by equity and the infants Relief Act.
Minors are protected from explicitation by adults and their contracts will therefore be
valid, void or voidable depending on the circumstances services or suppliers.
a) Valid contract
Supply of necessaries
Contracts whose primary objective is to provide minors with the necessaries of life shall
be valid and enforceable. Legally necessaries are interpreted as those goods and services
in the life of a person at the exact moment of sale or delivery. They vary with the person
and circumstances but generally they include food, shelter, clothing, medication and basic
education. The parent/guardian of a minor receiving such supplies must pay a reasonable
price for services rendered.
Case: Nash vs Inman
A tailor supplied a minor with several fancy jackets and the minor failed to pay for them.
The minor’s guardian then proved to court that the minor had adequate supply of clothing
according to his status.
Held: the supplies were more of luxuries than necessaries and the minor was not bound to
pay for them.
Beneficial contracts of service
Contracts whose primary objective is to benefit the minor shall be binding and
enforceable however it must be clear that the person intending to transact with the minor
does not aim at exploitation and there should be an immediate or future benefit to be
acquired by the minor in that transaction. The best example of such contract is a contract
of apprenticeship with a minor.
Case: De Francesco vs Barnum
A minor was recruited by the plaintiff dance instructor for dancing lessons which were to
last several years. In that period it was further agreed that the minor would be paid a
specified fee she would not marry and would not get another job elsewhere without the
plaintiff’s permission. Meanwhile the plaintiff would be at liberty to cancel the contract
and stop maintaining the minor if she became unfit to dance.
Held: this was not a beneficial contract of service because it aimed at exploiting the minor.
She was free to get another job elsewhere.
b) Voidable contracts
Minors have the right of rescission from contracts where they believe that they are being
taken advantage of due to their minority, however the right of rescission only exists for a
limited period and the minor must ensure that he withdraws from the contract within
reasonable time while still in minority or soon after attaining majority. Otherwise delay
shall make the contract binding.
Case: Davis vs Beynon
A minor rented a house 2wks before attaining majority. Subsequently he became a
habitual rent defaulter by failing to pay rent for 3yrs, when sued for the arrears he
attempted rescission and insisted that he had entered the contract while in minority.
Held: in as much as this was true the tenant had delayed to withdraw fromthe contract
within reasonable time and it was therefore binding. He was ordered to pay the arrears.
c) Void contracts
The infants’ relief act declares the following contract with minors to be void and
unenforceable.
| i. | Contracts for the suppliers of luxury |
| Ref: Nash vs Inman | |
| ii. | Trading contracts- these are contracts with a business motive and they aim for |
financial gain. Adults are discouraged from transacting with minors in such
contracts because minors may not be able to make sound business decisions
and they can be easily exploited.
Case: Cowen vs Nield
A minor had hay and straw business the plaintiff paid for consignment and the minor failed
to deliver.
Held: this was a typical trading contract and the minor was not bound to deliver the
consignment. The claim failed.
| iii. | Loan contracts – contracts for money lent or to be lent to minors shall be void and unenforceable even if the minor had misrepresented his age. |
Case: Leslie Ltd vs Sheill
The defendant fraudently misrepresenting his age obtained the loan from the plaintiff and
subsequently failed to repay.
Held: the transaction was absolutely void and enforceable but luckily for the plaintiff the
money was recovered because it was still in the minors’ possession.
NB: the law takes recognition of the fact that minors may be themselves or upon
instructions from adults deliberately enter contracts with an objective of failing on their
promise knowing well that the law shall protect them.
The following rules shall apply in such situations;
Where the loan taken is for the purchase of necessaries the transactions will be regarded
as one for supply of necessaries and the minor will be bound to repay.
Where the minors’ intention is to avoid performance the doctrine of recitation shall be
applied and the aggrieved party shall recover his property if it is still in the minors’
possession.
| i. | Contract of apprenticeship as hairdresser with Esther |
| This is a valid contract and its beneficial service contract. The transaction must not have an element of exploitation. |
|
| ii. | A contract to purchase shares in Medium Moyenne Company Ltd |
It is a void and unenforceable contract because it has a business motive and aimed for
financial gain. The minor might not understand the dealing of the company and legally
cannot become shareholders in a company.
iii. Contract with Mr. Bwisa Nyatu, a taxi driver to visit her mother in hospital
Answer will depend on the purpose of the visit. It the mother is sick and there are no
cheaper or faster means than use of a taxi will be a valid contract and the supply of
necessaries.
Whether the mother is sick or not and it’s the minors status to use the taxi then it will be
valid.
If the mother is not sick and there are cheaper means and it’s not the minors’ status then
it will be supply of luxuries so the contract will void.
| iv. | A guarantee by Mrs. Kimani and Miss Tomino for an overdraft with a bank. The contract is void but it depends on the purpose of the loan. |
Persons of unsound mind and intoxicated persons
Insanity or weakness of mind may be caused by age, drugs excitement, alcohol, disease,
severe pain or depression, witchcraft (African) persons in this category may not be able
to make sound decisions and the law shall thereof protect them from those who are
mentally stable and are likely to take advantage. These persons are categorized with the
same groups with minors as far as contractual capacity is concerned and their contracts
will either be valid, void, and voidable depending on circumstances, supplies or services.
Married women
Common law regarded married women to be incapable of entering valid contracts as
individuals and they could only do so through their husbands, because upon marriage the
only person who retained contractual capacity and could therefore transact on behalf of
the other was the husband.
This position was later changed through various law reform statutes whereby equity
presently empowers married women with full legal capacity to enter valid contracts in the
same way single ladies can. An additional advantage is given to married women to enable
them pledge their husbands credit for necessaries supplied to the matrimonial home and
the husband will be bound to pay.
Aliens and non-citizens
Such persons can enter valid contracts in the same way Kenyan citizens do and the
consequences of minority and insanity shall likewise apply to them as they do the citizens,
however the state is at liberty to restrict alien enemies from entering valid contracts with
Kenyan citizens but this must only be in the interest of national security. Such contracts
will either be suspended during the period of hostility or terminated altogether (ref:
doctrine of frustration).
Insolvents and bankrupt person
Such persons have been declared broke by a competent court of law and their property
shall remain vested in the official receiver manager or liquidator.
They can only enter specialty contracts after being discharged from their incapacity.
Likewise some public offices shall not admit insolvents and bankrupt persons.
Corporations
Their legal capacity depends on the statute creating them incase of statutory
corporations or the memorandum of association incase of limited companies.
Formality of the contracts
The principle of contractual freedom enables parties to select their favourable contracts
and such terms shall be enforced if legal and clear. Terms of contracts are either
expressed or implied and parties may erect any. However where the law prescribes
specific formalities parties are under obligation to adhere to these prescription.
Doctrine of part performance
This is a principle under the law of evidence and its purpose is to prove existence of a
transaction which was not evidenced in writing as required by law.
Illustration: the sale of goods Act cap 31 provides that all contracts whose value of
subjects matter is Ksh 200 and above must be evidenced in writing. A pays B Ksh 1 0,000 in
the presence of C towards the purchase of specified goods. This transaction is not
evidenced in writing as required by law and B takes advantage by refusing to honour his
obligation. A can still enforce his contractual right against B by applying the doctrine of
part performance ie through presentation of C as a witness.
Prerequisites for application
The doctrine shall apply under the following there must be sufficient oral or other
evidence clearly confirming that a contract did take place
The law must have required written evidence for this kind of transaction yet the parites
did not respect this.
One of the parties must aim to take advantage over the lack of written evidence and avoid
performance.
The task to be undertaken must be one capable of specific performance.
Terms of the contract
They may be express or implied. Express terms are those specifically mentioned orally or
in writing while implied terms are silent in nature because non of the parties mentions
them yet they are regarded to exist in the contract. Existence of these terms is based on a
legal presumption known as doctrine of the Moorcock. The presumption is that silent terms
are implied to be in existence by the court, trade, custom, usage, practice and behavior of
parties.
Moorcook case (1 889)
Held: there was an implied term that the dependant had taken reasonable care to ensure
safety of the Jetty (loading bay/ramp) and these terms had been breached. The defendant
was liable to compensate the plaintiff even though the defendant had not expressly stated
that the Jetty was safe.
Circumstances under which the courts and statues will imply terms into the contract
Courts imply terms into the contract basing on a legal presumption know as doctrine of
the Moorcock ie (precedent). Other implication shall be based on behavior of the parties,
custom, usage, trade, practice etc
With regard to statutes the sale of goods Act cap 31 , Hire purchase act cap 537 and
general principles of contract will imply existence of the following 6 conditions and 2
warranties;
A condition that the seller has a right to sell the goods.
A warranty that the buyer shall have and enjoy quite possession of goods
A warranty that the goods shall be free from any charge or encumbrance in favour
of a third party
A condition that if sale is by sample and description the goods shall correspond to
sample and description.
A condition that if sale is by description the goods shall correspond to description.
A condition that the goods shall be suitable for the purpose stated by the buyer to
the seller.
A condition that the goods shall be of merchantable quality unless they are
secondhand and the parties are well aware and agreeable.
A condition that if sale is by sample the build shall correspond to the samples.
Classification of contractual terms
Terms of contract whether express or implied will either be conditions warranties or
fundamental terms.
Conditions
A condition is the main basic or primary term of the contract. It is most important to the
entire contract to the extent that contract shall not exist unless such condition is
respected.
Conditions usually protect a person from danger, loss or harm and their breach will entitle
the offended to the right of rescission and the right to claim, damages.
Illustration
If A sells foodstuffs to B, the condition is that the food shall be wholesome. If it turns out
toxic or otherwise harmful, B shall retain the right to reject it and thereafter claim
damages for the actual harmor threat to his health; conditions are either precedent or
subsequent in nature.
a) Condition precedent – it is agreed upon by parties in advance and it states that
agreement will be binding unless what was mentioned in advance is fulfilled before
anything else.
Illustration; A agrees with B that he will only purchase B’s car after undertaking a
successful test drive Ref. financing vs Stimpson
b) Condition subsequent – it is also agreed upon by parties in advance and it states
that the agreement will only be binding if something else happens after the main
transactions is complete eg some products on sale may have a condition
subsequent enabling the purchases to return defective products for replacement
or repair within a specified period after purchase.
Warranty
It is secondary, derivative or collateral to the main purpose of the contract. A warranty is
therefore supplementary and it helps to provide comfort or easier management of the
transaction. Rarely will it concern protection against danger or harm. A contract can still
exist even where the warranty has been breached. Its breach will only entitle the
offended party to the right of claiming damages but not rescission.
Illustration
Where A sells foodstuff to B. the condition is that the food will be wholesome. The parties
may also agree that the food should be delivered in 1 kg packets. If on the delivery date,
food which is wholesome and is presented in 5kg packets, the wrong packing mode is
simply breach of warranty and all that B should do is to accept it and claim damages as the
cost of repacking it and the probable inconvenience.
NB: a party may choose to treat breach of condition as breach of warranty if in his
voluntary assessment the danger or damage is not that severe. Alternatively he may
choose to treat breach of warranty as breach of condition where he can prove that the
inconvenience or discomfort is quite severe or irreversible. This will greatly depend on
the nature of the transaction.
Fundamenta lterms
These are neither conditions nor warranties but they are all the came very important in
the contract because they identify the extent of rights and liabilities of the parties.
They are legally referred to as exception, exemption, exclusion or limitation clauses. In the
law of tort they will be referred to as warnings disclaimers or caveat. Their purpose is to
limit or existing the liability of one of the parties in the contract and without their
presence such parties will be wholly liable for all the consequences arising due to breach.
This terms are constructed in advance by the stronger party and contained in printed
documents or on surfaces, in a few situations they may be orally pronounced.
They are standardized for all transactions for the same nature and no person can bargain
against their existence eg
a. Purchase receipts – goods once sold not returnable/ money once paid not
refundable.
b. Bus tickets-valid for date and time of travel not transferable
c. Parking bays – no parking beyond this point/park at your own risk
d. Hotel receptions- valuable to be kept by management for safe custody.
On many occasions the stronger party in the contract might use exemption clauses
unfairly so as to avoid performing his contractual obligation. The court will apply the
flowing rules in order to determine effectiveness of the clauses;
Clear notification- a clause can only be enforced if the document containing it was an
important part of the contract and reasonable care was taken to bring it to the attention
of the concerned party in good time as they entered the contract especially if such clause
is at the back of a receipt or some other hidden place.
Casey chappeton vs Barry
The plaintiff hired a chair from the defendant paid for it and obtained a receipt which he
kept without reading the contract at the back. The clause on the receipt stated that the
defendant would not be liable for injuries arising from the use of his chairs. The plaintiff
sat on the chair and it collapsed and he demanded compensation but the defendant
resisted the claim and immediately invoked the exemption clause.
Held: the clause had been hidden from the plaintiff’s attention at the entrance of the
contract and could not be regarded as part of the contract. The plaintiff had to be
compensated.
Case 2: Olley vs Marlborough court Hotel Ltd
The plaintiff booked into the hotel for accommodation and upon completing formalities at
the reception they were allocated a guest room upstairs. On one of the walls in the room
hotel management ad stated that valuables should be kept in the receptionist for safe
custody. The plaintiff left their luggage in the room, locked the door and surrendered the
keys to the receptionist before walking out of the building. Upon their return they
discovered some of their valuables missing and demanded compensation only for the
management to resist the claim and invoked the exemption clause.
Held: the clause had been hidden from the plaintiff’s attention at the time of entering the
contract and could into therefore be applied. It was also very clear that the plaintiff’s had
not been negligent because they had locked the door and surrendered the keys to the
receptionist. They had to be compensated.
Fairness in application – court shall not allow a party to unfairly rely on clause and
escape this obligation because this will simply amount to fraud case.
Karsale vs Wallis
The defendant inspected the plaintff’s car and on being satisfied that it was good enough
he accepted to purchase it. A clause on the agreement stated “no condition is given by the
seller that the vehicle is roadworthy or so as to its age, fitness or purpose etc”
subsequently the car was delivered in a shocking condition and incapable of self starting.
Hence the defendant refused to take delivery and was sued.
Held: the car was not in the same condition it had been at the moment of inspection by the
defendant and it was obvious that the plaintiff had tampered with it.
Legality of signature
Where a party signs a document he legally binds to its content because the legal
presumption is that one can only sign a document whose contents are clear and
acceptable.
An exception will only arise where the signature is proved to have been obtained by fraud
or coercion
Case 1 : Enstrange vs Graucob
Despite having been cautioned to read the contractual document before signing the
plaintiff disregarded the instruction and hurriedly signed the document. Had she taken time
to read though she would have realized that the seller exempted himself fromreplacing
defective products after purchase. Upon taking delivery of the selected goods the plaintiff
realized that they were malfunctioning and demanded replacement only for the defendant
to invoke the exemption clause.
Held: the plaintiff had voluntarily signed the document and was bound to its terms. No
replacement could be legally effected.
Case 2: Curtis vs Chemical cleaning and Dyeing Company
The plaintiff who was in a hurry to attend to an emergency requested the defendant
attendant to summarize content of the agreed contract so as to enable her sigh. The
defendant then lied that he was only exempting himself fromreplacing beeds and sequins.
The plaintiff then signed the document and surrendered the wedding gown for cleaning.
When she returned for the collection she was dismayed to find the gown was completely
damaged and claimed compensation only for the defendant to invoke the exemption clause
which simply stated that the defendant would not be liable for any damage whatsoever the
plaintiff sued.
Held: her signature had been obtained by fraud and she had a right to be compensated.
Protection of the illiterate – court ensures that the illiterate persons are not taken
advantage of for purposes of interpreting these provisions on illiterate person is that
person who cannot read and understand the language in which a script is written. When
transacting with such person the document should be read to them in a language they can
understand and upon signifying that they have understood and are willing to be bound they
must be given an opportunity to append their mark on the document in manner signifying
acceptance
This should be in the presence of competent literate witness whose true identity should
also be stated in the document.
Rules of interpreting contractual terms
The court applies two rules in order to interpret contractual terms and confirm the exact
intention of parties.
Parol evidence rule- under the law of evidence where there exists a written document the
court shall not allow presentation of oral evidence to contradict that which is in written
because the legal presumption is that the written document is the most accurate evidence
of the terms and conditions in that particular transaction. These are four exceptions
where court shall allow presentation of oral evidence to contradict that which is in
writing. These are;
Implied terms- oral evidence may be admitted to show that the contract was to be based on
a certain custom, trade or practice.
Collateral contracts- oral evidence may be admitted to show that he agreement was made
in two or more parts whereby some parts were oral and others in writing.
Illegality –where a party alledges illegality in a written document he may be allowed to
present oral evidence to prove the illegal aspect of the contract.
Common mistake- where a common mistake is made by a party, oral evidence may be
introduced to rectify the written mistake.
Contra –preferentumrule
It means against the one making the point. Where a particular statement is included in the
contract by a party for his own selfish reasons and upon attempting to apply it an
ambiguity arises, the court shall interpret this statement against the party who included it
in the contract, such that its final effect will favour the aggrieved party. This is based on
the principle that “an ambiguity in the draft shall be interpret against the draft person”
Vitiating factors
These are factors which ruin the validity of a contract by transforming it into a void,
voidable, illegal or unenforceable transaction the main vitiating factors are;
Undue influence
Coercion
Mistake
Misrepresentation
Illegality
