An Act to provide for the law relating to contracts and for related matters.

Contracts Act

The Contracts Act (Cap. 284) is the main law governing all contracts in Uganda. It applies to any agreement between two or more parties that the law will enforce, whether written, oral, or implied. This Act explains how contracts are formed, what makes them valid, and what happens when things go wrong. It sets out your rights and obligations as a party to a contract, and provides remedies if those rights are violated.

<h3>Key Definitions</h3>
You need to know the precise legal meanings of common contract terms. An offer is a proposal you make to another person with the intention to obtain their agreement. Acceptance is when that person agrees to your offer. A contract is an agreement that the law will enforce. Some agreements are not enforceable (void) and some can be canceled by one party (voidable). Coercion, misrepresentation, and lack of free consent can make a contract invalid. Consideration is the value exchanged between parties, which is essential for a valid contract.

<h3>Communication and Formation of Contracts</h3>
You communicate an offer when you do something (or fail to do something) that either shows your intention to make the offer or has the effect of telling the other party about the offer. The same rule applies to accepting an offer. If you want to take back an offer or an acceptance (revoke), you can do so by any act or omission that either shows your intention to revoke or that actually communicates the revocation to the other party.
An offer is complete only when the person it is made to actually knows about it. An acceptance is complete against the person making the offer once it is sent in a way that the acceptor cannot take it back; it is complete against the acceptor only when the offeror learns of it. A revocation is complete against the person who makes it once it is sent out of their control, and complete against the other party when that party actually finds out.
You have the right to revoke an offer at any time before the other person has communicated their acceptance. Similarly, you can revoke your acceptance as long as the communication of your acceptance is not yet complete. An offer can also be revoked automatically if the time for acceptance expires, if a condition is not met, or if you die or become mentally ill before acceptance.
You must give an absolute and unqualified acceptance for an offer to become a binding promise. The acceptance should be expressed in a usual and reasonable way, unless the offer specifies a particular method. You can also accept an offer by actually doing what the offer requires or by accepting any payment offered. A promise can be either express (clearly stated in words or writing) or implied (understood from actions or circumstances).

<h3>Capacity to Contract</h3>
To enter into a binding contract in Uganda, you must be at least 18 years old, of sound mind, and not disqualified by any law. If you are 16 or 17, the Constitution allows you to have capacity in specific situations. A person who does not meet these conditions cannot form a valid contract. Sound mind means you fully understand the contract's terms and can rationally judge how it affects your interests. If you usually suffer from a mental illness but have occasional periods of clarity, you may contract during those clear periods.

<h3>Free Consent and Vitiating Factors</h3>
You have the right to enter into a contract only if your consent is free. Consent is not free if it was caused by coercion (physical force or threats), undue influence (someone with authority pressures you), fraud (intentional deception), misrepresentation (false statement of fact), or mistake (both parties mistaken about an essential fact). If any of these elements are present, the contract may be voidable (you can cancel it).
Undue influence happens when one party is in a position to dominate the other person's will and uses that advantage unfairly. If a contract seems unfair and the stronger party had such a relationship, the burden is on that stronger party to prove they did not use undue influence. Fraud includes suggesting a false fact you know is untrue, hiding a fact, making a promise you never intend to keep, or doing anything meant to deceive. Simply staying silent is not fraud unless you had a legal duty to speak.
If both parties are mistaken about a fact essential to the deal, the agreement is void. Even if only one party is mistaken about an essential fact, the contract is void. However, being wrong about the value of the thing you are trading does not count as a mistake of fact. Also, if you made a contract based on a wrong understanding of any law in force in Uganda, the contract is void.

<h3>Lawful Consideration and Objects</h3>
You need to ensure that the consideration (what you give) or purpose of any contract is lawful. It is unlawful if it is forbidden by law, fraudulent, causes injury to a person or property, defeats a law, or is declared immoral or against public policy. If part of the consideration is unlawful, the whole agreement is void. However, there are exceptions if you were ignorant of the illegality or if you repudiated the contract early.
Most agreements without consideration are not enforceable, but there are three exceptions: a written and registered agreement made out of natural love and affection between close relatives; a promise to pay back someone who voluntarily did something for you; and a written promise to repay a debt that is barred by the Limitation Act. A gift does not need consideration to be valid.

<h3>Void and Voidable Agreements</h3>
You cannot be forced into a contract that completely stops you from working in your lawful trade or profession – such an agreement is automatically void. However, a contract that only limits your work may be valid if it is reasonable for both parties and fair to the public. You cannot be forced to give up your right to go to court; any agreement that completely stops you from using legal proceedings or unfairly shortens the time to sue is void. However, agreeing to arbitration is allowed.
You must ensure that any agreement has clear and certain terms; if the meaning is not clear, the entire agreement is void. Unlicensed betting agreements are void; only licensed wagering is enforceable. If you agree to do something that is impossible to perform, that agreement is void. If a contract later becomes impossible or unlawful due to an event you could not prevent, it also becomes void. If you make a promise with both legal and illegal parts, the legal part can be valid but the illegal part is void. If a promise offers two alternatives – one legal and one illegal – you must only pursue the legal option.

<h3>Contingent Contracts</h3>
A contingent contract is a contract to do or not do something if an uncertain future event happens. You can only enforce such a contract after the uncertain event has actually occurred. If that event becomes impossible to happen, the contract automatically becomes void. If the contract depends on a specific event happening within a set time, it becomes void if the event does not happen by the deadline or becomes impossible before then. Agreements contingent on impossible events are void from the start.

<h3>Performance and Breach</h3>
You must perform or offer to perform the promises you made in a contract, unless excused by law. If you die, your legal representative must carry out the promise unless the contract says otherwise. If the other person refuses to accept your performance, you are not responsible for failing to perform, and you do not lose your rights. If one party refuses to perform or makes themselves unable to, the other party can cancel the entire contract, unless they choose to keep it alive.
You must personally carry out a promise if the contract shows that was the intention; otherwise, you can hire a qualified person to do the job. If you accept performance from a third person, you lose the right to demand performance from the original promisor. If two or more people make a joint promise, they are all equally responsible; the promisee can demand full performance from any one of them. Among themselves, they must share the cost equally.
You must perform your promise within a reasonable time if no deadline is set. If both parties have promises that must be performed at the same time, you do not have to perform unless the other party is ready and willing to perform theirs. If one party blocks the other from performing, the blocked party can cancel the contract and claim compensation. If you fail to meet a time deadline that was essential, the other party can cancel the contract; if the deadline was not essential, you must pay compensation for the delay.
If you owe multiple debts to the same person, you can direct your payment to a specific debt. As long as you make that intention clear and the creditor accepts the payment, they must apply it to that debt.

This overview is for educational purposes. For specific legal advice, consult a qualified lawyer familiar with Uganda's Contracts Act.

As a guarantor, you automatically have the right to benefit from every security that the creditor holds against the principal debtor at the time the guarantee contract is made—even if you did not know the security existed. If the creditor later loses or gives up that security without your consent, you are released from your obligation to the extent of the value of that lost security. This protects you from being unfairly required to cover a debt when the creditor has carelessly or intentionally reduced your ability to recover from the debtor's assets.

A guarantor is entitled to any security the creditor holds against the debtor. If the creditor loses or gives up that security without consent, the guarantor is discharged up to its value.

Section 81: Guarantor's right to benefit from creditor's securities

guarantor is entitled to the benefit of every security which a creditor has against a principal debtor at the time a contract of guarantorship is entered into, whether the guarantor knows of the existence of the security or not.

Notwithstanding subsection (1), where a creditor loses or parts with the security, without the consent of the guarantor, the guarantor is discharged to the extent of the value of the security.

Right of guarantor to benefit from securities of creditor

Section 81: Guarantor's right to benefit from creditor's securities

81.Right of guarantor to benefit from securities of creditor

Plain English Summary