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The Contract Act
of the Maldives 1991
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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