Measure of contracts legality

Taurai Musakaruka Hr Issues
Generally a contract is a legally enforceable agreement entered into by two or more different persons with legal capacity. The parties should have serious intention to create legally binding obligations. Their agreement needs to be within parities’ contractual capacity.
Furthermore, parties should communicate such intention without vagueness and being of the same mind to the subject matter.

Basically: It should be lawful; possible of performance; within contractual capacity; with the serious intention to contract; union of minds of parties — consensus ad idem; it should not be vague; intention of both parties should be communicated.

A contract does not necessarily have to be in writing unless there is a specific statutory requirement that it be in writing.

A verbal contract is equally valid as a written one, provided that the party alleging the contract can prove agreement on certain terms.

Writing is only important for evidence purposes although it’s not a requirement. The presence of an agreement is determined by an offer and an acceptance.

This is only a general rule and does not follow that every contract has to be constituted by a clear offer and acceptance.

A contract of employment is an agreement entered into between an employer and an employee at the time the employee is hired that outlines the exact nature of their business relationship, specifically what compensation the employee will receive in exchange for specific work performed.

It is an oral or written, express or implied agreement specifying terms and conditions under which a person consents to perform certain duties as directed and controlled by an employer in return for an agreed upon wage or salary.

Whether stated or not in the contract, both the employee and the employer owe the duty of mutual confidence and trust only lawful and reasonable demands on each other.

Every employee is under the obligation to carry assigned duties, or the employer’s instructions to the best of his or her abilities.

The employer is under the obligation to protect the employee from harm or injury, and make fair compensation for any loss or damage resulting from any job-related accident or facilitate the same.

Employment contracts take many different forms. All employees at a company may be asked to sign the same contract or each employee may have a contract with the employer that is applicable just to his or her employment agreement.

An employer and an employee may simply have an oral agreement regarding the kind of work the employee will do, for how long, and at what rate of pay.

Sometimes there is no written or oral agreement but the behaviour of the employer and the employee can be viewed as an implied employment contract.

These are all legal arrangements in terms of the Labour Act Chapter 28:01, section 12(1) which clearly states that… “every person who is employed by or working for any other person and receiving or entitled to receive any remuneration in respect of such employment or work shall be deemed to be under a contract of employment with that other person, whether such contract is reduced to writing or not”.

For the purposes of this article I will just focus on what makes employment contracts void, voidable or illegal.

When an employer and employee agree to a working relationship then they have entered into an employment contract.

There are a number of terms, rights and stipulations involved in the employment contract, and an important one is statutory rights.

Every employee who has an employment contract is entitled to statutory rights such as working conditions, pay, redundancy, maternity leave and a range of other rights.

In law, void means of no legal effect. An action, document or transaction which is void is of no legal effect whatsoever: an absolute nullity — the law treats it as if it had never existed or happened.

The term void ab initio, which means “to be treated as invalid from the outset”, comes from adding the Latin phrase ab initio (from the beginning), as a qualifier.

For example, in many jurisdictions where a person signs a contract under duress, that contract is treated as being void ab initio.

A void contract is a contract that meets any of the following criteria:

(1) It is illegal from the moment it is made;

(2) It is legal by the courts because it violates a fundamental such as fairness or is contrary to public policy;

(3) It becomes void to changes in law or in government policy; or

(4) It has been fully performed. Lack of capacity to contract (such as arises from being an infant or minor a contract void.

A voidable contract is a contract that has legal effect and force when it is made, but is liable to be subsequently annulled or set aside by the courts.

Circumstances or features that make a contract voidable include:

(1) Non-disclosure of one or more material facts;

(2) Misrepresentation;

(3) Mutual mistake;

(4) Lack of free will of a contracting party, or presence of one contracting party’s undue influence over the other; and

(5) A material breach of the terms of the contract.

Drunkenness/Intoxication: A contract of employment can be set aside on the basis of drunkenness, if someone is so drunk to an extent of incapability to understand the nature of the contract.

The onus to prove that one cannot be bound because he was drunk to the extent of not understanding the contract lies with the one who was drunk.

If the level of drunkenness were of such a nature that the affected person was easily persuadable then that would not be sufficient for setting aside the contract.

Duress: In jurisprudence, duress or coercion refers to a situation whereby a person performs an act as a result of violence, threat or other pressure against the person.

Black’s Law Dictionary (6th ed.) defines duress as “any unlawful threat or coercion used to induce another to act or not act, in a manner they otherwise would not or would”.

Duress is pressure exerted upon a person to coerce that person to perform an act that he or she ordinarily would not perform.

An employment contract signed under such circumstances is void and therefore illegal. There are some employers who have that tendency of threatening employees to sign contracts as soon as possible or else the gate is open.

The poor employee will be left with no option but to put pen to paper even if not happy with some provisions, simply because they have kids to look after and also need food for themselves and their dependants.

Mistake: A contract that is induced by mistake is void provided that certain conditions are in place — the mistake was one of; fact and not law, as ignorance of law is not defence, Justus error, and was material. These three conditions should exist simultaneously.

Misrepresentation: Is a false statement of fact, which is made either in writing or orally by tone party to the contract, which has the effect of inducing the innocent party to enter into a contract with the first party.

Essential elements of misrepresentation include: A misrepresentation was made by one party to the employment contract to the other party in order to induce him to enter into contract; that the misrepresentation was material — must be of such a character that it will persuade a reasonable man to enter into a contract with the misrepresent or, for example a prospective candidate claiming to have certain qualifications and experience required for certain position and even go to an extent of producing fake certificates. Such practices are illegal and will make such an employment contract void.

The third essential element is that the misrepresentation was in fact false — element of falsity/untruthfulness is essential.

A misrepresentation is not a misrepresentation unless it contains an element of falsehood — e.g. an employer who tell the prospective candidate that there will be future within the organisation and the organisation is actually doing well and expanding while in actual fact the company is bleeding and has actually closed most of its branches and failing to honour its obligations to stakeholders, suppliers and shareholders included.

Character or nature of remedies available to the injured party to a large extent is determined by the type of misrepresentation e.g. with fraudulent misrepresentation the injured party has a number of options available to him.

He can content with the cancellation/rescission of the contract and claim restitution — to restore to status quo ante — the position that existed before the conclusion of the agreement.

This is a remedy found in equity to avoid unjust enrichment. The injured party could claim damages or a combination of rescission, restitution and damages or simply he could claim damages for any loss he might have suffered.

Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. It is where free will to bargain is not possible.

Undue influence is a situation where one person (the stronger party — politically, socially, economically) obtains an influence over the weaker party which influence weakens the other party’s resistance rendering his will pliable or manipulable.

The stronger party uses his influence/power in an unscrupulous manner to persuade the weaker party to enter into a prejudicial or disadvantageous contract which he would not normally have entered into with freedom of will. Whereas duress relies on overt force (open force) undue influence relies on subtle force.

Therefore parties to any employment contract are warned against these illegal contracts as they may backfire one day.

Disclaimer: I do not accept any liability for any damages or losses suffered as a result of actions taken based on information contained herein. The information contained herein does not serve as alternative to legal advice and the views contained herein are personal.