Void Agreements Under the Law of Tanzania.

 

VOID AGREEMENTS UNDER THE LAW

The Law of Contract Act [CAP. 345 R.E. 2019] identifies specific types of agreements that are legally void. These agreements, by their nature, are considered unenforceable and are explained below.

• AGREEMENTS CONTRARY TO PUBLIC POLICY

The concept of "public policy" lacks a rigid definition due to its inherently fluid and evolving character. It adapts according to societal norms, trends, commercial practices, and moral standards of a particular era. Simply put, any agreement that contradicts the prevailing ethical values or offends the societal interest is void as being contrary to public policy. As per F. Pollock, certain agreements are considered harmful to the public or the state—such as during wartime (e.g., trading with an enemy), obstructing justice (e.g., suppressing prosecution), or imposing unreasonable limitations on an individual’s right to marry or engage in lawful trade.

Some of the recognized grounds of public policy, including those covered under Sections 26 to 28 of the Act, are outlined as follows:

1. Agreements with Enemy Nations

Contracts entered into with individuals who are citizens of countries at war with Tanzania are considered void unless authorized by the Government. These agreements are deemed unlawful because they may result in direct or indirect benefits to the enemy or involve interaction with them, which is against national interest.

2. Agreements Aimed at Suppressing Prosecution

Any agreement meant to settle or suppress criminal charges concerning public offences is void. The legal principle stands: one cannot profit from a crime or turn it into a business. Whether the accused is guilty or not, such agreements misuse the law either to extort or to shield a criminal through bribery.

Example:

If A is aware that B has committed murder and persuades B to pay Tsh. 1,000,000 in exchange for keeping quiet, the agreement is void as it constitutes an attempt to suppress prosecution.

3. Champerty and Maintenance

Maintenance refers to supporting a legal case in which the supporter has no personal stake, thereby encouraging speculative litigation. Champerty involves financing litigation in return for a share in the proceeds if the case is successful.

4. Sale of Public Offices and Honours

Selling public posts or honors undermines the integrity of public service by compromising merit-based appointments. Therefore, such transactions are deemed illegal.

Examples:

A promises to pay B Tsh. 500,000 to secure a government job – void.

A offers B money to resign from a public office to make space for A – void [Saminathan v. Muthusami].

A college secretary offers a knighthood to a donor in exchange for funds – void [Parkinson v. College of Ambulance Ltd.].

5. Agreements Restricting Parental Rights

By law, a father is the natural guardian of his minor children, followed by the mother. This parental right cannot be permanently surrendered through a contract.

Example:

A father who agreed to transfer guardianship of his minor sons to Mrs. Annie Besant and promised not to revoke it later sought custody through a legal suit. The court upheld his right to reclaim guardianship [Giddu Narayanish v. Mrs. Annie Besant].

6. Agreements Restraining Marriage

Section 26 of the Act declares any agreement restraining the marriage of an individual (excluding minors) as void.

Example:

If A promises to marry only B and pay Tsh. 1,000,000 if he marries someone else, and then he marries another person, B’s claim is invalid because the agreement itself is void due to its restraining nature.

Note: Tanzanian law treats both complete and partial restraints on marriage as void, unlike English law which only voids total restrictions.

7. Marriage Brokerage Contracts

Agreements where money or any consideration is exchanged to facilitate a marriage are void. These include promises made to parents, agents, or third parties in connection with arranging a marriage and are equivalent to dowry in legal effect.

Examples:

A sum promised to a father for marrying off his daughter – void [Venkatakrishna v. Venkatachalam].

A priest paid to find a second wife for someone – void [Vaidyanathan v. Gangarazu].

Even if marriage takes place and the payment is pending, courts will not enforce such agreements. If the amount is already paid and marriage occurs, the money is not refundable.

8. Agreements Limiting Legal Remedies

According to Section 28 , agreements that:

(a) entirely prevent a party from seeking legal remedies through courts for enforcing contract rights; or

(b) set a fixed time beyond which a party loses the right to sue; or

(c) discharge obligations merely upon expiry of a certain period—

are void to that extent. However, arbitration clauses—where disputes are referred to arbitration rather than courts—are considered valid.

In M/s. Angile Insulations v. M/s. Davy Ash-more India Ltd., the Supreme Court ruled that parties can agree to litigate only in a specified court (e.g., High Court in Bangalore), and such jurisdiction clauses are lawful under commercial practices.

9. Contracts Interfering with the Course of Justice

Any agreement that seeks to improperly influence judges or officers of the court in the administration of justice is deemed void, as it is contrary to public policy and undermines the integrity of the judicial process.

10. Contracts Tending to Create Monopolies

Agreements that aim to establish monopolies are considered void on the grounds that they oppose public interest.

Example: In District Board of Jhelum v. Harichand (1934 Lah. 474), a local authority granted a monopoly to an individual for the exclusive sale of vegetables within a specified area. The court held that such an agreement was void.

11. Agreements in Restraint of Trade

Courts generally disapprove of agreements that unduly restrict an individual’s freedom to engage in lawful trade, business, or profession. Under English law, while total restraint of trade was historically void, the modern position allows for reasonable restraints if they serve a legitimate interest, are supported by consideration, and are not injurious to the public. In Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co. (1893 A.C. 535), the House of Lords upheld a restraint that was reasonable in scope and purpose.

In contrast, Tanzanian law adopts a stricter stance. Section 27 of the The Law of Contract Act [CAP. 345 R.E. 2019] renders void all agreements that restrain anyone from practicing a lawful profession, trade, or business, whether the restraint is total or partial. Courts in Tanzania are not permitted to assess the reasonableness of such restraints.

Case Law:

In Shaikh Kalu v. Ramsaran Bhagat (1909) 13 C.W.N. 388, 29 out of 30 comb manufacturers in Patna agreed to sell only to one party, effectively restraining trade. The court declared the agreement void.

In Oakes & Co. v. Jackson (1876) 1 Mad. 134, an employee agreed not to work within 800 miles of Madras post-employment. The court ruled the agreement void as it restrained trade.

In Madhav v. Raj Coomar (1874) 14 B.L.R. 76, a party agreed to cease business in a locality for compensation, but the agreement was held void and unenforceable.

Exceptions Where Restraint of Trade Is Valid in Tanzania

Despite the general rule, certain exceptions under Tanzanian law permit restraint of trade, provided they are reasonable:

Sale of Goodwill

As per Exception 1 to Section 27, a seller may agree not to engage in similar business within specified limits.

Example: In Goldsoll v. Goldman (1915) 1 Ch. D. 292, restraint concerning imitation jewellery was upheld, while restraint relating to real jewellery was not.

Employment or Service Agreements

Agreements where an employee undertakes not to work elsewhere or not to compete with the employer during the term of employment are valid.

Example: In Charles v. Macdonald (1899) 23 Bom. 103, such a restraint during service was held valid.

Similarly, in Deshpande v. Arvind Mills (AIR 1946 Bom. 423), a service bond requiring a trainee to serve a company for three years was upheld as reasonable and enforceable.

However, any restraint imposed after the termination of service is generally void unless it falls under specific exceptions.

Example: In Krishna Murgai v. Superintendence Co. of India (AIR 1979 Delhi 232), a post-service restraint prohibiting a former bank employee from working with any other bank in India for five years was held void.

• WAGERING AGREEMENTS

A wagering agreement is defined as a promise to pay money or money’s worth based on the outcome of an uncertain future event. Sir William Anson describes it as “a promise to give money or money’s worth upon the determination or ascertainment of an uncertain event,” while Chief Justice Cockburn explained it as a contract where person A agrees to pay person B upon the occurrence of a specific event, and B agrees to pay A if the event does not occur. The fundamental feature of a wagering agreement is that one party stands to win and the other to lose, depending on how the uncertain event unfolds. 

For example: (1) If A bets with B that it will rain on a particular day, agreeing to pay B Tsh. 1,000.000 if it rains, and B promises to pay the same amount to A if it does not, the agreement is a wager. (2) If A and B agree to settle on the difference in price of a particular commodity rather than deliver the commodity itself, it is also considered a wagering agreement.

Legal Effect of Wagering Agreements

Under Section 30 of The Law of Contract Act [CAP. 345 R.E. 2019], agreements by way of wager are void. The law states that no legal action shall be entertained for recovering any money won through wagering or for anything entrusted to someone for the purpose of a wager. However, such agreements are void and not illegal, unless they fall under the category of a lottery, which is treated as a criminal offense under Penal Code. Therefore, although wagering agreements themselves are unenforceable, collateral transactions (like a loan taken to pay a bet) are still valid. For instance, if A borrows Tsh. 500,000 from B to pay C, to whom B lost a wager, the agreement between A and B remains enforceable.

Lotteries

A lottery is defined as an arrangement for the random distribution of prizes among people who purchase tickets. It is not necessary for gambling to be the primary intent of participants. Where a wagering transaction takes the form of a lottery, it becomes illegal under PC. In Sir Dorabji Tata v. Edward F Lance (1918), the Bombay High Court held that even if the Government sanctions a lottery, it does not override Section 30 of the Contract Act, and the lottery remains void, although the organizers would not be criminally liable. However, in H. Anraj v. Government of Tamil Nadu (1986), the Supreme Court ruled that lotteries conducted with prior government approval are legal. As a result, the purchaser of a lottery ticket gains two rights: (a) the right to participate in the draw, and (b) the right to claim the prize if successful.

Exceptions – Transactions Not Considered Wagers

Certain transactions are excluded from the definition of wagers:

Contracts involving the genuine sale or purchase of stocks, shares, or goods with the intent to deliver the actual asset are not wagers. However, if the intent is only to settle price differences, it is considered a wagers.

Insurance Contracts – Though they involve future uncertainties, they are not wagers due to key differences: (a) Only those with an insurable interest can purchase insurance, unlike in wagers. (b) In fire and marine insurance, the insurer pays only for the actual loss, not the insured sum. Life insurance fixes an amount due to the difficulty in measuring life loss in monetary terms. (c) Insurance contracts are beneficial to the public and encouraged, whereas wagers are seen as contrary to public policy.

In conclusion, while wagering agreements are void and unenforceable under Tanzanian law, they are not inherently illegal unless they involve prohibited lotteries. Certain transactions involving skill, genuine commercial intent, or insurance are legally recognized and distinct from wagers.