Sources of law

Organs of the
government

Legislative
power

Law
enforcement
Binding
precedent

Court system

1. English law ( 1802 and onwards)

2. Roman Dutch law (RDL) ( so much that was
introduced to the island by the Dutch)
3. Personal laws
Kandyan law
Tesawalamei law (to Jaffna descendent
Tamils only, a personal law with a territorial
bias)
Muslim law
4. Constitution (supreme law)
5. Statutory law (created by the legislature the
parliament)
6. Case law ( binding precedent)
7. Customs
8. Religion

Executive the executive president

Legislative the parliament
Courts system supreme court and
preceding courts
The legislative power is with the people
Public representatives voted by the people carry out the
peoples legislative power in the parliament.
Statutes are enacted by the parliament.
Statutory law are binding.
Law is implemented by the supreme court of sri Lanka
The power to implement law has been granted by the
constitution of sri lanka
Binding precedent is case law.
According to English law the judgement of cases
decided at higher courts are binding on all other
preceding lower courts.
Hence, judge made law is called as case law.
Where a case is containing similar facts of an already
decided case by a higher court, the new case will be
decided according to the decision made at the previous
case as the judge is bound to follow the rule stare
decisis ( let the decided be stand)
Supreme court ( apex court)

Appeal courts

High courts

Laws affecting
business

Law of contract

Magistrate courts / district courts

1. Law of contract
2. Law of agency
3. Sale of goods ordinance
4. Other business related law
5. Industrial law
What is a contract?
A contract is an agreement between two or more
parties creating rights and duties among them which
are enforceable by law.
Pollock every agreement and promise enforceable by
law is a contract

Common
elements of a
contract
Formation of a
contract

Definition? (tute)
A contract is and agreement which creates or is
intended to create a legal obligation between the
parties to it.
1. An agreement or a promise
2. The legal enforceability
The below elements of a contract should be present in
whole to form a valid contract.
When these elements are present a court will find that
the agreement is a contract.
If even one of the elements is absent in the contract the
contract will be null and void
1. Agreement between parties ( offer and
acceptance)
2. Intention to create a legal obligation ( actual
intention or presumed)
3. Consideration ( English law) / causa ( RDL)
4. Eligibility / capacity ( of the parties to enter in
to a contract)
5. Legality of the objective

Offer
and An offer or promise which is not accepted, is not
acceptance
actionable

Justice
Weerasooriya:
Sumanatwathie, (1962)

Muthukuda

v.

Offer
An offer is an expression of willingness to contract
on certain terms.
It is the elementary rule of making a contract.
It must be made with the intention that it will become
binding upon acceptance.
Offer can be made by express or implied by conduct
Pollock : an offer is a promise which is in its terms,
conditional upon an act, forbearance or return promise
being given in exchange for the promise or its
performance
Offerer

offeree
Offer / promise

Offer

accept
Promisor

accept promisee

In a valid offer there shall be no negotiations.

The intention to offer should be clear and precise.
An invitation to treat does not amount to be an offer.
(It is an invitation to make an offer or to commence
negotiations.)
i.e Lellyet V. Negris & Co (1911) 14 NLR 247
an advertisement willing to sell a house is not an offer
Attorney General V. Vithilangam ( 1941) 43 NRL
117 of 118

Acceptance
The acceptance must be an agreement to each of

the terms of the offer.

It its the consent of the recipient of the
offer/promise to enter in to the deal suggested by
offerer/ promisor.
The acceptance can be by words or by conduct.
Acceptance must be communicated to the offerer or
promise in order to create a valid contract.
If the offeree fails to communicate the acceptance to
the offerer there is no valid acceptance.
Counter offer:
When the offeree attempts to add new terms to
the offer when accepting it is a counter offer, and is
not acceptance.
A counter offer is understood as rejecting the original
offer and the original offer cannot be subsequently
accepted.
In the case of
Hyde v Wrench[1840].
A offer to sell a farm to B for 1,000. B offered 950 A
refused and B then said he would give 1,000 Held no
contract, as Bs offer of 950/was a counter offer
rejecting the original offer which was at a price of
1,000.

Consideration /
Causa

Consideration :
Simply it indicate giving value for the transaction
being made.
Pollock : the price for which the promise is bought
The doctrine of consideration is based around the
concept of
1. A benefit : for the promisor / offerer
2. A detriment : to the promise / offeree
3.
Either is sufficient to make the promise enforceable
English law use the doctrine of consideration to decide
whether a offer / promise is enforceable or not.

Types of
consideration

1. Executory consideration
Promises of the contract are not fully performed
immediately. The promise that the parties agreed
with will take place at a future date.
i.e. apartment lease
2. Executed consideration
A contract in which the promises are made and
completed immediately, like in the purchase of a
product or service
3. Past consideration
simply consideration given by a party before the
actual offer to be made is not accepted for the
actual contract

consideration must be given after the promise for

which it is given to make it enforceable
past consideration is not valid
exemption :
1.The act constituting the consideration must have
been done at the promisors request Lampleigh v
Braithwait (1615)

Causa

Doctrine of causa comes under RDL, it is different that

of the doctrine of consideration of English law.
Causa is the general requirement for a cause to
contract.
Weeramanthry :
seriousness or deliberateness of intention
Diiference between consideration and causa

Consideration is more or a less a price of a

contract/promise, whereas Causa is a cause/reason to
contract.

Intention to
create a legal
obligation

Lipton v Buchanan(1904)
Sir Thomas Lipton who was a famous planter in Sri
Lanka had promised Buchanan not to sue him for a debt
due to Lipton from
Buchanans former partner until Lipton exhausted all his
remedies to recover that debt from that partner. The
Supreme court held that the matter should be governed
not by English law but by Roman Dutch law under which
Liptons promise was legally enforceable because it was
made voluntarily and seriously
The law recognizes two distinguish types of agreement
1. Domestic and Social agreements family
matters
Where it is presumed that there is not an
intention to create a legal obligation
2. commercial agreements commercial maters
it is presumed that there is an intention to create
a legal obligation.
When forming a contract the contractual intention
must be present. The contractual intention of the
parties forming a contract has a legal obligation to keep
to the contract. If one party of the contract breaches
the contract the innocent party has the right to sue the
wrongful party in breach of contract because the
intention to create a contract has given legal
enforceability to the contract.

Eligibility/
capacity

The law identifies that the parties entering in to

contract must have the capacity to contract.
Types of eligibility / capacity
Minors - those under 18 years of age (a person
who has not attained full age or the age of
maturity)
Mentally unsound persons

Intoxicated persons

Minors
In Sri Lanka also under the
Ordinance No. 7 of 1865
the age of majority is 18 years.

Age

of

Majority

Mentally unsound persons ( insanity)

under both Roman Dutch law and English law, if a party
to a contract was of unsound mind (insane) at the time
of contracting, the contract is null and void, even
though the other party to the contract had entered into
it without knowledge of the insanity.
Soysa v Soysa(1916)
Exemption :
Hamid v Marrikar(1951)
the Supreme Court was of the view that a contract of a
person of unsound mind could be valid if it can be
shown by evidence that at the time the contract was
entered into the person was of sound mind
and understood the nature of the transaction.

Legality of the
objective

Intoxicated persons ( drunkenness)

According to both Roman Dutch law and English law,
intoxication will affect a contract only if the party
claiming relief was so badly intoxicated at the time he
entered into the contract that he was unable to realize
the seriousness of his actions and the other party knew
of it.
A contract will be considered illegal at its
formation when it is incapable of performance
without an illegal act. Such contracts are not legally
enforceable.
i.e : it is an offence to sell a firearm to a person not
licensed to hold one, so a contract to sell a firearm in
these circumstances is illegal
When is a contract is illegal?
1. Extra commercium (not subject to private
ownership or acquisition)
i.e. air, navigable waters, property owned by the

government
2. Contracts contrary to public policy
3. Agreements conflicting with consideration
morality
4. Agreements restraining individual freedom

of