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Title
1. This law shall be cited as the “Law
of Contract”
Definition
2. A contract is an agreement between two
or more persons and which must be legally
valid and enforceable.
Parties must consent freely and
voluntarily
3. (a) The parties to a contract must have
consented freely and voluntarily, and must
possess the legal capacity to contract.
(b) Any person with sound mind and over
the age of 16 shall be deemed to possess
the legal capacity to contract referred
to in sub-section (a) of this section.
Form
4. Unless otherwise provided by law, a
contract need not be in any particular form.
When concluded
5. A contract is concluded when an offer
made by one person is accepted by the person
to whom it is made, in accordance with this
law.
Offer
6. (a) An offer mentioned in section 5
above must not be vague or uncertain. It
must have been made with the serious intention
of creating legally binding obligations.
Invitation to treat not an offer
(b) An invitation to treat shall not constitute
an offer.
To whom offer is made
(c) An offer may be made to a particular
person or group or to the community at large.
When offer is complete
7. (a) An offer is complete when it is
communicated to the offeree.
Revocation of an offer
(b) An offer may be revoked by the offerer
at any time before the offeree accepts the
offer.
(c) A revocation of the offer shall be
deemed complete when the offerree has been
notified of the revocation.
Irrevocable offer
(d) Where an offer is made on the condition
that it will not be revoked until a specified
time has elapsed the offer shall be irrevocable
until such time has elapsed.
Acceptance
8. (a) An acceptance of an offer may be
made expressly or implied by conduct.
(b) An acceptance must be unqualified and
unconditional.
(c) Where the offerer prescribes the manner
in which the acceptance shall be made, the
acceptance must be made in that manner.
Where the manner or acceptance is not prescribed,
the acceptance must be made in the usual
or in a reasonable manner.
When acceptance is complete
9. An acceptance is complete when it is
communicated to the offerer.
Termination of offer
10. An offer shall terminate if any one
or more of the following situations arise:
(a) if the offerer states that it shall
be accepted before a specified time, then
the lapse of such time, or
(b) where the offer is made subject to
the occurrence of an event, or subject to
any condition, then the occurrence of such
event or the fulfillment of such condition,
or
(c) a valid revocation of the offer; or
(d) notice of rejection of the offer.
Mistake of fact
11 (a) Where the parties had entered into
a contract on the belief of the existence
of a particular fact and if that fact changes
without the knowledge or control of either
of the parties the contract shall be void.
(b) The mistake of fact referred to in
sub-section (a) above must be a mistake
as to one of the essential terms of the
contract.
Ignorance of the law
(c) Ignorance of the law will not render
a contract void.
Contract not by voluntary consent
12. A contract is not by voluntary consent
if either party or parties had been induced
to enter into the contract under duress,
misrepresentation or improper influence.
Void contracts
13. A contract which has been entered into
otherwise than by the voluntary consent
of either party or parties shall be void.
Duress
14. “Duress” occurs where one
of the parties enters into a contract under
threat of force or violence.
Improper influence
15. “Improper influence” occurs
when one of the parties occupying a position
of influence over the other, uses that position
to influence the other to enter into a contract.
Misrepresentation
16. “Misrepresentation” occurs
when a party falsely represents as true
some facts which he knows or believes to
be false, and the other party relying thereon
enters into a contract.
Contract void if illegal
17. (a) A contract is void if it is illegal
Illegal contract
(b) A contract is illegal in any one of
the following situations:
(i) The law prohibits the making of such
a contract
(ii) The purpose of the contract is illegal
or immoral
When performance is illegal
(c ) A contract is void if it is to be
performed in an illegal manner.
Restraint of trade
18. (a) Where any clause in a contract
purports to restrain or prohibit the conduct
of a person’s trade or profession,
such clause may be enforceable only if it
is reasonable to do so.
Clause prohibiting legal action
void
(b) Where any clause in a contract purports
to prohibit a party from taking any legal
action, such clause shall be void.
Enforceability of clause requiring
reference to arbitration
(c ) Where any clause in a contract requires
a party to refer to arbitration any dispute
arising from the contract, such clause shall
be valid.
Enforceability of clause providing for
applicability of an internationally accepted
law.
(d) Where any clause in a contract provides
for the disputes arising from the contract
to be settled in accordance with a particular
internationally accepted law, such clause
shall be valid.
Discharge of contract
19. A contract shall be considered discharged
if any of the following situations arise;
(a) The parties to a contract have fully
performed their obligations in accordance
with the terms of the contract.
(b) The parties to a contract have agreed
to consider the contract as discharged.
(c) The performance of the contract is rendered
impossible by operation of any law or by
some other supervening event unforeseen
by the parties to the contract.
Discharge of performance
20. (a) A party to a contract must perform
his obligations in accordance with the terms
of the contract. A party may perform otherwise,
provided the other party has released him
of the particular obligation or accepts
such alternative performance.
By whom performance is made
(b) The contractual obligations imposed
on a party may be performed by that party
or through a third party. Where the contract
expressly or by implication requires performance
by the contracting party such performance
shall be by that party.
Time for performance
(c) Unless otherwise provided by the contract
the parties must perform their contractual
obligations within a reasonable time.
(d) Where a contract provides for its performance
after the occurrence of an event or the
fulfillment of a condition, such performance
need not be made until the occurrence of
such event or the fulfillment of such condition.
Discharge by agreement
21. (a) The parties to a contract may discharge
their obligations under the contract by
an agreement to that effect.
(b) such an agreement must be in accordance
with the law.
Impossibility of performance
22. (a)Where the performance of any obligation
under a contract is rendered impossible
either by operation of any law or by some
supervening event unforeseen by the parties,
the contract shall be considered as discharged.
Difficulty of performance
(b) Performance is not rendered impossible
simply because it is rendered more difficult
or costly.
Self-induced frustration
(c) A party cannot rely on any circumstances
rendering the performance of a contract
impossible if it was caused by his own fault
or negligence.
(d)A party may recover any sum of money
paid by, or due to him, before it was known
that performance has been rendered impossible;
and he shall not be bound by further obligations
after performance has been rendered impossible.
Damages
23. (a) A party who commits a breach of
contract shall be liable in damages for
the loss arising from that breach.
(b) The loss referred to in sub-section
(a) of this section refers to:
(i) the loss directly arising from the breach;
and
(ii) the loss which was known by the parties
to the contract to be a probable result
of the breach.
24. A party shall not be entitled to recover
damages for the loss incurred by him as
a result of his failure to take reasonable
precautions.
Specific performance
25. (a) Where the injured party believes
that the damages recoverable under the contract
is inadequate, he shall be entitled to commence
an action for an order of specific performance.
(b) Where the injured party files in court
an action for an order of specific performance,
the court shall look into the matter and,
if the court is of the opinion that the
damages are inadequate, the court may grant
an order of specific performance against
the defaulting party.
(c ) An order of specific performance referred
to in this section is an order of the court
that requires a party to perform a particular
task in accordance with the contract.
Joint and several liability of
the parties
26. Unless otherwise provided by the contract
or by law, the parties to a contract shall
jointly and severally be liable for debts
incurred and all actions to be undertaken.
Regulations
27. The president shall have discretion
to make and enforce the regulations necessary
for the enforcement of this law.
28. Unless otherwise provided in this law;
(a) President means the President of the
Republic of Maldives;
(b) Except in Section 3 (b), the reference
to a person or party shall include legal
entities such as companies and associations
(c) Words used in the singular shall include
the plural and words used in the plural
shall include the singular.
(d) The word “communicated”
referred to in sections 7 and 9 of this
law shall mean that the notice given by
one party has been received by the other
party, thus completing the process of communication.
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