What is commercial law? full detailed notes with examples

 

 

COMMERCIAL LAW

What is law?

There is no agreed universal definition of this law. It means different things in either social or physical sciences.  However several attempts have been made to define the term law:

-          Salmond; defines law as the principles set out by the government enforceable on people to achieve justice.

-          Hart; says the law is the coercive instrument for regulating social behavior.

-          Woodrow mission; defines law as a portion of the established though that gained distinct and formal recognition as uniform law backed by authority and power of government.

-          Law also means the instrument man used to achieve just in the society.

-          It also means the rules and regulations enforced on the people or accepted by the people as having the force of law.

 

Law can thus be defined as an aggregate of rules and regulations laid down to govern people in any society, community or country.

 

The study of the nature of law is known as jurisprudence.

 

What is commercial law?

Commercial law also known as business law is the body of law that governs business and commercial transactions. It often considered to be a branch of civil law and deals with issues of both private law and public law.

 

The application of commercial law has developed a specific set of laws that apply to commercial activities, pursuits and transactions. This arm of civil law deals with issues both simple and complex that often relate to questions of both public and private sector laws. Commercial law governs sale and distribution of goods, and proper procedure for payment of transactions.

 

Commercial law is the boarder body of law which regulates the legal aspects of doing business. It mainly refers to legal aspects surrounding the relationship between business and the customers, the business and another business, and the business and the shareholders. It is a group of law which govern the transactions and commercial aspect of the business including selling, distribution and payment for goods. Areas covered by business law range from labour relations and contracts, to directors, shareholders, competition, credit accounting, insolvency and financing among many others. Areas such as consumer credit, relationship between the landlord and the tenant and competition among businesses also fall within the scope of commercial law. As such the term business law is often used refer to commercial or mercantile law which falls within the scope of the civil law.

 

Law and Morality

Morality is the sense of by judgment between right and wrong by reference to certain standards developed by society over time. It consists of standards of behavior widely used by the society (prescriptions of society) and is binding on the conscience of the members of that society. An action that is considered to be opposed to morality will generally be frowned upon by that society. However morality is not enforceable by the court of law. This is in contrast to laws which are binding, enforceable and have sanctions in all cases. Wrongs in the society are invention of law, morality or both. Where law and morality overlap, morality is enforced as a rule of law then morality becomes part of law e.g. killing a person is immoral as well as a crime. Certain wrongs in the society contravene morality but not the law e.g. disrespect, failure to provide rescue drowning person e.t.c

 

Function/purposes of law

i.        To regulate the conduct of people.

ii.      To protect rights and enforce obligations/ duties by providing remedies

iii.    Instrument that man used to achieve justice in the society.

iv.    It exposes an individual to some prescribed conditions thereby achieving the desired goals.

v.      It ensures peaceful co-existence/ maintenance of law and order/ prevents anarchy in the society.

vi.    It is a standard setting and control mechanism. Law sets the standard of behavior and conduct in various areas such as manufacturing, construction, trade etc.

vii.  A tool for resolving social conflicts.

viii.It controls and structures public power. Rules of law govern various organs of government and confer upon them the powers exercisable by them.

ix.    Facilitating and effectuating private choice. It enables people to make choices and gives them legal e.g. contracts, marriage and succession.

 

Classification/ types/ division of law

Law may be divided into the following broad categories

·         Written and unwritten

·         National and International

·         Public and Private

·         Substantive and Procedural

·         Criminal and Civil

 

Written Law

These are rules of law that have been reduced into a written form.  They are embodied in a formal document for example The Constitution of Kenya, laws made by parliament (statutes).  Such laws prevail over unwritten Law.

Unwritten Law

These are rules of law that have not been reduced into written form.  They are not embodied in any single document for example African Customary Law, Islamic Law, Hindu Law, Common Law and Equity.  Their existence must be proved.

National law

 These are rules of law operational within the boundaries of a country.  It regulates the relation between citizens and between citizens and the state.  It is based on Acts of Parliament, customary and religious practices of the people.

International Law

It is a body of rules that regulates relations between countries/states and other international persons egg United Nations.  It is based on international agreements of treaties and customary practices of states and general principles.

Public Law

It consists of those fields or branches of law in which the state has an interest as the sovereign e.g. criminal law, constitutional law, and administrative law. Public law is concerned with the constitution and functions of the various organs of government including local authorities, their relations with each other and with the citizens.  Public law asserts state sovereignty/power.

Private law

It consists of those fields or branches of law in which the state has no direct interest as the sovereign egg law of contracts, law of tout, law of property, law of succession.

Private law is concerned with day to day transactions of legal relationships between persons.  It defines the rights and duties of parties.

Substantive Law

It is concerned with the rules themselves as opposed to the procedure on how to apply them.  It defines the rights and duties of parties and provides remedies when those rights are violated e.g. law of contract, negligence, and defamation.  It defines offences and prescribes punishment e.g. Penal Code Cap 63.

Procedural Law

It consists of the steps or guiding principles or rules of practice to be complied with or followed in the administration of justice or in the application of substantive law.

It is also referred to as adjective law e.g. Criminal Procedure code Cap 75, civil procedure Act Cap 21.

Criminal Law

Criminal law has been defined as the law of crimes.  A crime has been defined as an act or omission, committed or omitted in violation of public law egg murder, manslaughter, robbery, burglary, rape, stealing, and theft by servant or agent.

 

All crimes or offences in Kenya are created by parliament through statutes.  Suspects are arrested by the state through the police.  However, individuals have the liberty to arrest suspects.  Offences are generally prosecuted by the state through the office of director of public prosecutions or formally by the Attorney General.

 

When charged with a particular offence the suspect becomes an accused hence criminal cases are styled as R Vs Accused.  Under sec 77 of the constitution the person cannot generally be prosecuted for an act or omission which was not defined by law as a crime when committed or omitted.  Under section 77 (2) (a) of the constitution an accused person is presumed innocent until proven or has pleaded guilty.  It is the duty of the prosecution to prove its case against the accused.  The burden of proof rests on the prosecution.

 

The standard of proof in criminal cases is beyond any reasonable doubt.  In the event of any reasonable doubt the accused is set free (acquitted). The court must be satisfied that the accused committed offence as charged.  If the prosecution discharges the burden of proof the accused is convicted and sentenced which could take any of the following forms.

·         Imprisonment term

·         Capital punishment

·         Corporal punishment

·         Community service

·         Fine

·         Conditional discharge

·         Unconditional discharge

 

The purpose of criminal law is;

·         To ascertain whether or not the crime has been committed.

·         To punish the crime where one has been committed.

 

Civil Law

Civil law is concerned with violations of private rights in their individual or corporate capacity egg breach of contract, negligence, defamation, nuisance, passing off trespass to the person or goods.

 

If a person’s private rights are violated, the person has a cause of action.  Causes of action are recognized by statutes and by the common law.  The person whose rights have been allegedly violated sues the alleged wrong doer.  Hence civil cases are styled as Plaintiff v Defendant.  It is his duty of the plaintiff to adduce evidence to prove his case the burden of proof lies on the plaintiff.

 

The standard of proof in civil cases is on a balance of probabilities or on a preponderance of probabilities.  It must be more probable than improbable that the plaintiff’s allegations are true.  If the plaintiff discharges the burden of proof then he wins the case and is awarded judgement which could take any of the following forms:

·         Damage, i.e. monetary compensation

·         Injunction

·         Specific performance

·         Tracing

·         Accounts

·         Rescission

·         Winding up/liquidation

Purpose of civil laws

·         Protection of rights and enforcement of duties.

·         Provision of legal remedies as and when a persons rights have been violate

 

The rule of law

This is a concept developed by Dicey on the basis of the English legal system. It is also described as the due process. According to Dicey, the rule of law comprises of three distinct conceptions namely;

        i.            Absolute supremacy or preponderance of regular law i.e. all acts of the state are governed by law. One can only be punished for disobedience of the law and nothing else.

      ii.            Equality before the law i.e. equal subjection of all persons before the law irrespective of age, creed, gender, race and class etc

    iii.            The law (constitution) is a consequence and not the source of rights i.e. the law is the manifestation of the will of people.

 

The rule of law is often undermining by:

        i.            Excessive power of the executive

      ii.            Non independent judiciary

    iii.            Corruption

    iv.            Selective prosecution.

      v.            Civil unrest

    vi.            Ignorance of the law.

 

 

 

SOURCES OF KENYAN LAW

The term source of law means the origin of the law. It can also be used to refer to the factors that have influenced the development of the law from the point to the other. It means the materials from where the law can be obtained.

Main sources of Kenya Law

Judicature Act (cap 8) spells out the main source of Kenya Law as follows:

i.        Constitution

ii.      Legislation/parliament

iii.    Delegated Legislation

iv.    Act of parliament of U.K and India

v.      Statutes of general Application in England as at 12^th august 1897

vi.    Substance of common law\doctrines of Equity

vii.  Africa customary law

viii.Case law/ judicial law

ix.    Islamic law( not in judicature Act)

x.      Hindu law( not in judicature Act)

 

i. Constitution

A constitution is a body of principles written or unwritten that enable people to live together in peace and harmony. A constitution is the basic law of any democratic country from which all the other laws derive their powers and existence. It expresses the agreed content of political system by describing the principal and basic structure upon which the system is founded. It determines the distribution of powers among different organs of the state. It is a document having special legal sanctity which sets-out the framework and principal functions and organs of government and declare the principles governing the operations of those organs.

In short a constitution organizes the state, determines the distribution of powers among the different organs of the state and determines the relationship between the governors and the governed. It is the systems law to which no other law should be inconsistent with. “If any other law is inconsistent with the constitution, the constitution shall prevail and the other law shall to the extent of its consistency be void.”

 

ii. Legislature/parliament

The constitution vests legislative power in parliament. Parliament exercises these powers through Bills. A bill is a draft legislation law (proposed law).

Legislation is the main source of all written law. There are several types of Bills which may be tabled in parliament. They include:

i.        Public Bills- these are defined by standing orders as any Bill other than private bills. They are bills introduced by government ministries and deals with matters of public policy.

ii.      Government bills- are drafted by the attorney general and deals with matter of public policy which affects all the Kenyans. Government bills are drafted by the parliament counsels in A.Gs chambers.

iii.    A private Bills-means any bills not being a bill introduced by a minister. It normally affects a small section or particular section of the community. Special permission is usually required before it can be introduced it. The effected parties must be notified in Kenya gazette. The promoter of the bill must supply copies and meet the cost of the bill.

iv.    Private members’ bill- this is introduced by a private member of parliament in his capability as such (backbenchers). Such bills normally affect particular people or group of people. The promoter must seek the permission of the house and must therefore move a motion requesting the leave of the house. The promoter is responsible for the drafting and the costs of the bill. He is also required to supply copies to all the members of the house. E.g Hon, Mututho’s alcoholic control bill

 

Parliamentary procedure

i.        Publication in Kenya Gazette

The constitution requires that before a bill is introduced into parliament it must be published in Kenya gazette. This is meant to give affected parties notice of intended law and give members of public opportunity to debate the bill and air their views.

ii.      First reading

This is mere formality as nothing important takes place at this stage. The clerk of National Assembly only reads the title of the bill. Copies are then circulated to members in preparation for the following stage. No debate is allowed at this stage. A date is fixed for the next stage. However with parliament permission a bill may go through all/several parliamentary stages in one sitting.

iii.    Second Reading

This is important stage in the life of the bill. The bill is read for the second time by clerk and the promoter introduces the reasons for the bill and defends it. A debate normally follows but the debate is limited to general principles of the bill. No detailed analysis is allowed at this stage.

A vote is then taken and if passed it goes to the next stage.

iv.    Committee stage

Very special stage of the bill. It is at this stage that the bill is discussed in detail. There are two committees for the purpose of the legislature (a) committee of whole hours (b) select committee.

In committee, of the whole house, the National Assembly converts itself into a committee, and a chairman’s chosen to preside over the committee. A select committee comprise of few selected members who are authorized by parliament to deals with the bill as a committee. Usually public bills/ government bills are dealt with by a committee of the whole house. Private bills are usually dealt with by a select committee.

This stage the bill is analyzed clause. Amendments may be made but they must make the bill ungrammatical. They must also not be inconsistent with previous decisions on the committee.

v.      Report stage

After the committee has finished deliberating on the bill it reports its finding to the house. The speaker assumes his sit and the chairman of committee reports the deliberations together with the amendments.

vi.    Third readings

This is the most important stage of the bill. The bill is read for the third time and limited debate is allowed general principles of the bill, no amendments are allowed at this stage. Only grammatical corrections can made at this stage. Then a final vote is taken.

vii.  Presidential Assent

The constitution provides that after the National Assembly has passed the bill it shall be presented to the president and assent. The president shall within 21 days after the bill has been presented to him signify to speaker that he assents to the bill or refuses to assent to the bill. Where the president refuses to assent to all he shall within 14 days of the refusal submit a memorandum to the speaker indicating the specific provisions of the bill which in his opinion should be reconsidered by the national Assembly and including his recommendations for amendments. The National Assembly shall reconsider the bill referred to it by the president taking into account comments to the president and shall either approve  the recommendations  proposed by the president with or without amendments and re-submit the bill to the president for assent or refuse to accept the recommendations and approve the bill in its original form by a resolution in that effect supported by at least 2/3 or 65% majority of all the member of national assembly excluding the ex-official members in which case the president shall assent to the bill within 14 days of the passing of the resolution.

viii.Gazetement

The constitution further provides that no bill passed by National Assembly shall come into operation until it has been published in Kenya Gazette. However, parliament may postpone or backdate the effect of any law but this shall not operate to criminalize what was otherwise lawful before the Act. Any law passed by National Assembly shall be stated as an Act of parliament and shall contain the words of “enact by the parliament law.”

 

Advantages of statutes/ legislation

i.        It is more publicized than any other law

ii.      More democratic-mp’s are representatives of Kenyans and in extension their wish

iii.    More durable it can be obtained in a written form (codified).

iv.    The law is certain.

v.      Resolution of legal problems- enables society to resolve legal problem a as and when they arise by enacting new statutes or amending existing ones.

vi.    Dynamic- statutes law allows society to keep pace with changes in other fields’ e.g. political, social, technological or even economic.

vii.  Consistency/ uniformity-statute law applies indiscriminately i.e. regulates the conduct of all in the same manner.

Disadvantages of statutes

i.        Long legislative procedure/formalities

ii.      Complexity of law- bring about conflicts in interpretation of law

iii.    Not easily available to ordinary person

iv.    Expensive to buy them

v.      Imposition of law- dominant classes in the society may impose their wish on others.

vi.    Influenced by what is popular rather than what is good or right i.e. political expediency prevails

 

    iv.            Delegated legislation/ subsiding/ subordinate

This is where parliament may delegate its legislative powers to other persons and bodies. Though the constitution vests legislative power in parliament it is not possible for parliament to enact all the laws to regulate every aspect of human activity. Therefore parliament is forced to delegate some legislative power to professional bodies (e.g. L.S.K) local authority (e.g. city council) or individuals (e.g. ministers). All delegated legislation is made under the express authority of an act of parliament.

 

Reasons/advantages of delegated legislation

i.        Inadequate/ lack of enough parliamentary time

ii.      Technically of subject matter. Parliament is not composed of experts in all fields that demand legislation, it is durable to delegate law making powers to experts in respective fields e.g. government ministries or professional body.

iii.    The need for speedy legislation. Legislation through parliament is a long and tedious process which may take a long time. Specific departments/ persons act much faster which is desirable in times of urgency.

iv.    Need for flexibility. Delegated legislation is flexible as opposed to parliamentary process which is rigid because it is governed by standing orders.

v.      The need for details. Parliament usually lays down the law in framework. It is application in details can safely and properly be left to delegated legislation.

vi.    Need for experimentation. Sometimes it may be necessary to experiment on a particular issue. Usually it is unwise to experiment with parliamentary legislation for if it fails it would be difficult to withdraw the law unlike piece of delegated legislation.

vii.  Parliament is not always in session. Alternative legislative mechanism should be in place in address any emerging urgent issues in such times.

viii.Need for specific/ unique/ tailor made legislation covering only a section of the community e.g. a given local authority/ county to address their unique circumstance.

 

Disadvantages

i.        Delegated legislation is less democratic. Delegated legislation is usually made by government officials or unelected people who may not necessary represent the wishes of the electorate. Such a taw is therefore seen as on imposition on the people.

ii.   Possibility of abuse. Quite often than not delegated legislation is abused. This is normally so when the people with delegated authority tend to legislate for personal interest or because of political pressure.

iii.            Inadequate publicity - delegated legislation is not as much publicized as parliamentary legislation. Therefore a law may be passed which the people may not be aware of.

iv.    Lack of proper controls - though delegated legislation is subject to judicial and parliamentary control it is not possible tor parliament to control every kind of delegated legislation.

v.              Delegated Authority is given invery wide subjective terms. Usually the delegated authority by parliament is very vague which may be lead to arbitrary exercise of power e.g. such phrases like "if the minister deems right" or "if in die opinion of the minister" are vague and do not have boundaries.

vi.    Subjectivity - Delegated legislation is not independent. It is subject to elaborate parliamentary and judicial control. The judiciary controls delegated legislation in the following ways.

a)     Though die principal of ultra - vires. If the delegated authority is exercised beyond the parent Act the legislation is said to be substantively ultra - vires. Again if the procedure used is defective the law may be declared procedurally ultra-vires the court may invalidate a piece of delegated legislation for this reason.

b)    Sub delegation- The courts may nullify a piece of delegated legislation if there was sub- delegation of powers. This is usually so because it violated the principle of law that a delegate should not sub-delegate.

c)  If the legislation is passed for wrong purpose and in bad faith it may be invalidated.
d)  If the legislation vitiates principles or natural justice .the court will invalidate them

 e)  If it violates constitutional principles. No law can have the force of law if is unconstitutional.

 

 Parliament controls delegated legislative inthe following ways:

a)     Lying before the house - This parent Act may require before delegated legislation is to be effective ithas to be laid before the house for consideration. This isa means of checking delegated legislation

b)   Affirmative approval of parliament - Parent Act usually requires certain legislation must get affirmative approval of parliament

c) Appointment of scrutiny committee - Parliament may sometimes appoint a committee to scrutinize all/some delegated legislation.

d) Provision for expiry- the parent Act may provide that certain legislation is to expire after certain time

 

iv) Acts of parliament of UK-statutes of general application

Section 3, Sub-section IBof Judicature Act provides for application of the Acts of parliament of UK as sources of Kenya Law. These statutes apply inKenya if they are not inconsistent with the written law and if they have been in force in England as at 12 August I897 and if this local circumstances permit. Such Act include Admiralty offence (colonial) Act of 1849. The married woman property Act of 1882. The evidence Act of 1851 section7 and 11, the evidence by commission Act of 1859, Indian transfer of property Act I882.

 

Substance of Common Law

SECTION 3(1) (C) of judicature Act provides for application of substance of common law as a source of law in Kenya. It applies in Kenya if it meets the following qualifications.

(i)       It must be consistent with written law.

(ii)     If the local circumstances and people of Kenya permits

(iii)   If it was in force in England at 12^th August 1897

Origin and development of common law

Common law forms the bases of English legal system. Its development has been continuous process originating in the local customers of Anglo Saxons. It is the law applied throughout England after the Norman conquest of 1066 AD Before this there was no uniform legal system and no central government. King William the conqueror began a system of centralization which led to one government, one legal system and one body of law for the whole country. Disputes were settled by judges sent-out by the king and these judges applied the local customs. Some customs wore unpopular and they were ignored. Some customs were generally acceptable to all the judges and with time some local customs gained the force of law as they were applied throughout the country thus developing the common law.

The courts at which these judges exercised heir judicial action were known as assize courts.   In addition to assize courts three other courts were established in London.

i)      Kings Bench Division This dealt with criminal cases and such cases where the king had an interest

ii)    Exchequer - This dealt with cases involving government revenue

iii)  Common pleas • This dealt with civil cases

 

Actions at common law were instituted by writs. The writ is an order issued in the name of the king directed at the defendant or the sheriff in charge of the county where the petitioner live directing him to do what was contained in this writ Therefore the petitioner had to choose the type of the writ' very carefully. If a wrong writ was chosen the petitioner may be left without a remedy as his action will fail. Therefore each action had to fit within the available writs.

The early common lawhad a number or defects e.g.

a)     The writs system. No action could be brought at common law unless it was brought within particular writs. This limited the causes by Action.

b)    Lack of appeal system. The common law did nothave a defined appeal system. The king was ultimate law to whom any dissatisfied person could appeal.

c)     Trial by Jury. The common law courts were tried with the help of jury. These were lay men in law who assisted the judges. The jury could be easily influenced by a powerful litigant.

d)    Inadequate remedies. The only remedy at common law was damages and this was inadequate e.g. where plaintiff sought an order prohibiting the defendant from continuing an unlawful course of action.

e)     Technicalities of the common law. The writ system was very technical and choice of wrong writ led to loss of Action. This resulted in unfairness as a litigant could not obtain a remedy.

f)      Corruption. The common law court was full of corruption and only the rich could be able to buy their way

It is because of the difficulties of common law that led to development of equity.

 

VI. Equity/ Doctrine of Equity

In its primary sense equity means fairness. It is used synonymously with justice i.e. it is the law of fair play. Due to the failures of common law people increasingly petitioned the king for a remedy. If it could not be obtained by common law such petitions were directed to the chancellor by the king who could award any remedy which he thought in his discretion to be fair and just. Therefore the remedies available at equity depended on the chancellor in office hence the remark that "Equity remedies varies with the foot by the chancellor" These petitions become increasingly many leading to establishment of the court of chancery of Westminster. With time general principles were established which could be applied notwithstanding the chancellor in office. These general principles are called maxims. Such rnaxims/principles of equity included:

He who comes to equity must come with clean hands

He who seeks equity must do equity

Delay defeats equity

Where there are two equities the first in time prevails

When there are two equal equities law prevails

Equity is equality

Equity looks at the intent or substance rather than the form

Equity regards as done that which ought to be done

Equity imputes an intent to fulfill an obligation

Equity acts in personum

Equity will not assist a volunteer (equity favors a purchaser for value without notice)

Equity will not suffer a wrong to be without a remedy (where there is a wrong there is a remedy)

Equity does not act in vain

Equity aids the vigilant and not the indolent.

(See more notes for explanations hand out 1)

These maxims were applied not withstanding the chancellor in office.

 

Contribution of equity

Equity made important contributions to English law particularly in the following ways.

i.        Recognition of trust-The common law courts did not recognize the creation of trust and the beneficiary could not be able to get any redress against the trustee in event of breach of trust.

ii.      Recognized rights concepts unknown to the common law. Such rights include the equity to redemption.

iii.    Equity modified or extended many common law rules e.g. In contract it allowed a contract to be set aside on the ground of undue influence

Relationship between common law and equity today

Common law was build up as complete system of law Equity was developed as a supplement to common law. It was meant to remedy the defects at common law and not to abolish it hence the saying that "equity act as the gloss on the common law and not as a clog."

 

Equity cannot exist in isolation since it pre-supposes the existence of the common law. Both common law and equity were initially development in the context of English legal system. Both rely heavily on the doctrine of precedent. Both have been partly embodied in statutes e.g. the sale of goods Act and Trustee Act respectively.

There are however a number of important differences between common law and equity e.g.

i.       Whereas the common law is a complete system of law the rules of equity has been developed fromtime to time when necessary.

ii.     Equity Acts in personum i.e. on the person but common law Acts in rem i.e. legal rights are enforceable against everyone.

iii.  Equitable remedies are available only at discretion of the court while common law remedies are available as of right.

iv.  An equitable relief must be sort promptly whereas an action at common Law must be commenced within the imitation periods which vary according to the nature of the case.

v.     If there is a conflict between common low and equity, equity prevails.

 

vii.    Case law / judicial precedent

This is a decision of a court of law cited as an authority in deciding cases of similar nature or facts or by analogy. It is a doctrine developed in common law courts for uniform application of law. Under doctrine of judicial precedent decisions of superior courts are binding on the lower courts but the decision of the courts of the same level are merely persuasive.

 

The affect of the doctrine of precedent on individual court can be summarized as below:

i.        The Supreme Court decisions are binding on all other lower courts. While the Supreme Court is bound to follow its own previous decision it shall be at liberty to depart from its own decision in the following cases.

-         If by relying on the precedent it will lead to unfair decision on civil cases or wrong conviction in criminal cases.

-         If there has been subsequent parliamentary legislation.

-         If there has been rapid social political and economic changes since the precedent was established.

-         If the judge can he able to distinguish the case before him from already binding precedent.

ii.      The court of appeal decisions are binding on all lower court: It is bound by decisions of the Supreme Court but it is not bound by its own decisions.

iii.    The high court decisions are binding on all inferior courts. It is also bound by decision of the supreme and court of appeal but it is not bound by its own decisions.

iv.    The subordinate courts. They are bound by Supreme Court, Court of Appeal and High Court decisions. They do not create binding precedents i.e. the only part of the decision which will be treated as binding is the legal principle applied to the material fact of the case. This is known as ratio decidendi (reason of thedecision) any other observation is described as obiter dicta (by the way) there are remarks of the judge which do not form part of the reason for decision. They are applied as persuasive precedent. Therefore a precedent may be:

-         Binding - This must be followed. It is also one which has force of law.              

-      May be persuasive - need not be followed but if judge wishes he can follow it.

-         Distinguishing precedent - one which seeks to distinguish itself from binding precedent.

-      Over - ruling precedent - Tins is where precedent is overturned and it no longer becomes precedent.

-                   Original precedent - it is the principle or proposition of law as formulated by the court. It is the law creating the precedent

-                   Declaratory precedent - this is the application of an existing principle of law in a subsequent similar case.

Otherwise a judge of the court of appeal or inferior court should as a matter of judicial policy follow binding precedent until he has got reasons not to. This had led to the principle "stare decisis”the decision Stays/ lets the decision stand/ stand by the decision.

NB: Judges do not make law. The function of the judge is to declare the existing law and apply it to the case before him. They do not therefore have any constitutional powers to make law. However in a limited sense they do make law e.g. where there is no parliamentary legislation a binding precedent applies with the force of law. Again where there is no precedent directly relevant to the case before them they must extend the existing law to the new situation by analogy. Similarly by overruling an existing precedent the court actually creates a new rule of law. In distinguishing precedent the judges tend to limit the scope by the previous rule.

Advantages and disadvantages of Judicial Precedents

i.                  Creates certainty in the law i.e. the rule of law is stated in certain terms and people are therefore aware of the legal principle applicable to a particular case.

ii.               It is rich in detail - Judicial precedents are well researched and they are therefore detailed in any issue they deal with.

iii.            It brings about uniformity - under doctrine of judicial precedent. The precedent is applicable throughout the country irrespective of the part of country where the case is decided. Therefore similar things are given similar treatment.

iv.           They save time-by applying ratio-decidedi (reason for the decision) the judges and advocate saves the courts time which can be used to resolve other contentious issues.

v.              It leads to development of law - usually precedents have binding force of law where there is no parliamentary legislation. In such areas they are applied as laws in themselves. When parliament legislates on such issues it has to consider the judicial precedents.

vi.           They are more practical - Unlike parliamentary legislation judicial precedents are practical in that they deal with situations as they arise. They therefore deal with real life problems

Disadvantages

i.        Brings about rigidity - Judicial precedents lead to rigidity in application of the law.  This is a result of doctrine of stare decisis.

ii.               It is. Bulky - Judicial precedents are contained in law reports which might run into several volumes and some of precedents may run into hundreds of pages. It therefore becomes cumbersome to use them as a source of law.

iii.            The complexity of the law – the language used by judges and advocates may not be ordinary English language. Sometime Latin is used. In such case precedents may be of little help to a layman. Besides some of the topics are very complex to understand.

iv.           Artificiality in law (over subtly)-under doctrine of stare decisis the judge is bound to follow a binding precedent unless he has got reason not to. Some judge labor/ struggles to distinguish the case in a bid to avoid the precedent. Sometimes the distinction is so artificial or thin that it leads to confusion and conflict.

v.               Non - availability of law reports - law reports is are easily available or is very expensive. This makes it a poor source of law.

vi.     It may lead to unfairness- Judicial precedents are decided on the basis of similarity. It is not humanly possible to have two different situations being alike.   Therefore decision by analogy may lead to unfairness.

vii.  Backward looking- inhibits judges from making innovative and creative decision as they are bound to follow past decisions.

viii.     Piecemeal law making by courts of law- this is neither systematic nor can it provide comprehensive laws.

 

VIII)  African customary law

SECTION3 (2) of Judicature Act states that the court of appeal, high court and all subordinate courts shall be guided by African customary law in civil cases where one or more parties is subject to, or affected by it, if it is not inconsistent with written law or repugnant to justice. There is no uniform African customary law. A custom means a practice of people that has received recognition by the courts as having the force of law. African customary law is unwritten in nature and for that purpose anybody alleging the existence of a local custom must prove its existence. The local custom will be recognized as having the force of law and be applied by the courts if the following criterion is satisfied:

i.        Applies in civil cases only. African customary law has no relevance in criminal cases. Section 2 of the magistrates courts Act 10 defines a civil claimto mean;

-         Land held under customary tenure

-         Marriage, divorce, maintenance or dowry

-         Seduction or pregnancy of unmarried or girl.

-         Enticement of or Adultery with a married women

-         Matters affecting status in particular status of women, windows including guardianship, adoption or legitimacy

-         Intestate succession and administration of estates so far as they are not governed by any written law.

ii.      Where one or more of the parties issubject to or affected by the custom.

iii.    The custom must be in existence since time immemorial

iv.           The custom must have been capable of enforcement i.e. legal force.

v.      It must have been received and applied voluntarily

vi.    It must not be inconsistent with any written law i.e. the custom should not contravene any written law

IX) Islamic Law

It is based on the Muslim Holy Book of Quran and the teachings of Prophet Mohammed contained in his sayings known as Hadith. It applies where both parties profess Muslim faith. Islamic law applies in civil cases only. It applies in Islamic personal matter e.g.  Marriage, divorce and inheritance. The applicable law is Mohammedan law of evidence. Such cases are heard in Kadhis courts. This is not provided for in the Judicature Act. Nevertheless it is an important source of Kenya law.

 

X) Indian Hindu law

It is based on Hindu faith and philosophy. Applies in civil cases relating to marriage, divorce, succession or personal status in proceedings where all profess Hindufaith.

NB: the African customary law, the Islamic law and the Hindulaw are subsidiary sources of law. They only regulate certain categories of people in Kenya and in relation to certain matters only. Principal sources are the ones that are applicable throughout Kenya and regulate all persons in Kenya e.g. the constitution.

 

 

ADMINISTRATION OF LAW IN KENYA

Administration of law is concerned with the means by which the powers and duties of the various public agencies, public bodies and public institutions operate. The main public institutions dealing with law in Kenya are the courts.  The new constitution 2010, has introduced some changes in the court structure in Kenya.

The Kenyan Court Structure

The New constitution that was promulgated on 27^th August 2010 introduced some changes in the Kenyan courts system. A new court known as the Supreme Court was introduced.

The constitution establishes a hierarchical system of courts consisting of both superior und subordinate courts as follows:

 

 

 

The courts structure

a)      Superior Courts

The superior courts include the Supreme Court, Court of Appeal, the High Court and other Courts that Parliament shall establish with the status of the High Court to determine disputes relating to employment, labor relations environment use and occupation of land. Specific superior courts are:

 

Supreme Court

It is established by article 163(1) of the constitution as a supreme court of record and shall consist of the following officers:

·         The Chief justice who shall be the president of the court

·         The Deputy Chief Justice who shall be the vice-president of the court.

·         Five other judges.

·          

This court shall have the exclusive original jurisdiction to hear and determine disputes relating to the elections for the office of the President. The Supreme Court shall also exercise appellate jurisdiction on appeals from the court of Appeal and any other court or tribunal. The Supreme Court may give an advisory opinion at the request of the national government, any state organ or any County government.

 

This court has already been established. The other courts exist largely as they were in the old constitution but are directly in the process of being reorganized to be in line with the requirements of the new constitution.

 

 Court of Appeal

It is established by Article 164 (I) of the constitution as a superior court of record. This court shall be composed of judges not fewer than 12 who shall elect among themselves a president of the court. This court shall have the jurisdiction to entertain appeals from the High Court and any other court or tribunal as may be prescribed by an Act of parliament.

 

High Court

It is established by Article 165 (I) of the constitution as a superior court of record.   This court shall be composed of such number of judges as prescribed by on Act of Parliament. There shall be a principal judge of the court elected by the other High Court judges from amongst themselves. This court shall exercise its jurisdiction as follows:

·                  Unlimited original jurisdiction in criminal and civil matters

·             Determine whether a right or a fundamental freedom in Bill of Rights has been denied, violated, or threatened.

·             Hear appeals from tribunals appointed to consider the removal of a person from office.

·             Interpret the constitution on matters of authority under the constitution, conflict of laws and exercise of constitutional powers by state organs.

 

b)            Subordinate courts

Article 169 (I) of the constitution establishes the following subordinate courts:

·                  The Magistrate courts

·                  The Kadhi courts

·             The Court Martial

·             Other courts or tribunals established by an Act of Parliament

(Read more on each of the above)

Parliament is expected within one year passage of the constitution to enact legislation conferring Jurisdiction, functions and powers on the subordinate courts established by the constitution. Presently these courts operate as they were in the old constitution.

 

c)            The Judicial Service Commission

It is established by Article 171 (I) of the constitution as the administrative department of the judiciary. This commission shall consist of:

·                  The Chief Justice as the chairperson.

·                  One Supreme Court judge elected by judges of the Supreme Court.

·                  One court of Appeal judge elected by the judges of die Court of Appeal.

·                  The Attorney General

·                  One person nominated by the Public Service commission.

·                  Two advocates; a man and a woman elected by members of the law society of Kenya.

·                  2 persons (not being lawyers); a man and a woman appointed by the President with the approval of the National Assembly to represent the public

·                  The Chief Registrar of the Judiciary as the secretary to the commission.

 

Special courts

In addition to the courts dealt with above, there exist in Kenya a number of other institutions which are called "courts" or "tribunals", but which do not form part of the Kenya judicial system.  They are called "courts" because they exercise judicial or quasi-judicial powers by hearing particular types of disputes or cases.  Technically, however, these institutions are not courts because they do not administer the law.  For example, when a trade union refers a dispute between its members and their employers to the Industrial Court, the Court will settle the dispute by following a procedure which approximates to the procedure followed in a court of law.  This is done primarily as a means of ensuring that each of the parties to the dispute will be satisfied that it has been given a fair opportunity to present its case.  However, if the court decides to award a salary increase for the employees, it would not be applying, or administering, a rule of law.  This is so because there is no legal rule which contains, or provides a mechanism for determining, the salary scales for any class of workers in Kenya.  Additionally, the decision cannot be challenged by recourse to the appellate jurisdiction of any of the courts within the judicial system.  The major examples of such tribunals are:

(i)         The Industrial Court;

(ii)        The Rent Tribunal, and

(iii)       The Business Premises Rent Tribunal.

Chief justice

The Chief Justice of Kenya is the head of the Judiciary of Kenya and President of the Supreme Court of Kenya. The office is established under Article 163 of the Kenyan Constitution.  The Chief Justice is assisted by the Deputy Chief Justice who is also the Deputy President of the Supreme Court.

The chief justice is appointed by the president in accordance with the recommendation of the Judicial Service Commission, and subject to the approval of the National Assembly.

Attorney general

The Attorney General of Kenya is the head of the Kenyan State Law Office and the principal legal adviser to the government of Kenya. The Office of the Attorney General draws its mandate from Article 156 of the Constitution of Kenya (2010), which vests on the Attorney General the responsibility of being the Principal Legal Adviser to the Government, to ensure that the rule of law is promoted, protected and upheld and defend the public interest. Further the Office of the Attorney General Act No. 49 of 2012 clearly spells out the functions of the office as follows:

The Attorney-General;

(a) is the principal legal adviser to the Government;

(b) shall represent the national government in court or in any other legal proceedings to which the national government is a party, other than criminal proceedings;
and

(c) Shall perform any other functions conferred on the office by an Act of Parliament or by the President.

The Attorney-General is be nominated by the President and, with the approval of the National Assembly, appointed by the President.

Director of public prosecutions (DPP)

The Director of Public Prosecutions (DPP) is the office, under Kenya's 2010 Constitution, responsible for instituting and undertaking criminal proceedings against any person before any court (other than a court martial) in Kenya with respect of any offence alleged to have been committed. The DPP took over the role of prosecuting criminal offences on behalf of the government hitherto carried out by the attorney general. The Director of Public Prosecutions shall have power to direct the Inspector-General of the National Police Service to investigate any information or allegation of criminal conduct and the Inspector-General shall comply with any such direction.

 

The Director of Public Prosecutions shall exercise State powers of prosecution and may;

(a) Institute and undertake criminal proceedings against any person before any court (other than a court martial) in respect of any offence alleged to have been committed;

(b) take over and continue any criminal proceedings commenced in any court (other than a court martial) that have been instituted or undertaken by another person or authority, with the permission of the person or
authority; and

(c) Discontinue at any stage before judgment is delivered any criminal proceedings instituted by the Director of Public Prosecutions or taken over by the Director of Public Prosecutions under paragraph (b).

 

The DPPP is appointed by the president in accordance with the recommendation of the selection panel, and subject to the approval of the National Assembly.

Advocates

Under sec 3(1) of the Interpretation and General Provisions Act cap 2 and sec 2 of the Advocates Act (1989) an advocate is a person whose name has been duly entered as an advocate in the Roll of Advocate.

 

An advocate has also been defined as a person who has been admitted as such by the Chief Justice.  The law relating to Advocacy is contained in the Advocates Act.

 

To qualify for admission as an advocate one must

a.                   Be a Kenyan citizen

b.                  Possess a law degree from a recognized university

c.                   Satisfy the council of Legal Education Examination Requirements.

 

To practise law one must have a practicing certificate.

 

An advocate has the following duties in the practice of law;

        i.            Duty to the Court: As an officer of the court an advocate is bound to assist in the administration of justice.  He must advance the law correctly each time he appears before the court.

      ii.            Duty to Client:  He is bound to argue his clients’ case in the best manner possible.  He owes a legal duty of care to the client and is liable in damages for professional negligence. 

    iii.            Duty to the Profession: He is bound to maintain the highest possible standard of conduct and integrity by obedience to the law and ethics of the profession.

    iv.            Duty to the Society:As a member of the society he is bound to take part in its social and political and economic development.

 

The Law Society of Kenya

The Law Society of Kenya is a body corporate constituted by the Law Society of Kenya Act.  Its functions, or objects, are, among others -

        i.            To maintain and improve the standards of conduct and learning of the legal profession in Kenya;

      ii.            To facilitate the acquisition of legal knowledge by members of the legal profession and others;

    iii.            To assist the government and the courts in all matters affecting legislation and the administration and practice of the law in Kenya;

    iv.            To protect and assist the public in Kenya in all matters touching, ancillary or incidental to the law. 

 

An advocate with a practising certificate is required to be a member of the Law Society.

 

Arbitration

This is a dispute resolution mechanism whereby disputes are settled out of court by arbitral tribunals or arbitrators who make arbitral awards as opposed to judgement.  The law relating to arbitration in Kenya is contained in the Arbitration act 1995.  This act repealed the Arbitration Act cap 49.  The Act applies to both domestic and international arbitration.

 

Under sec 3(1) of the Act an Arbitration Agreement is an agreement by parties to submit to arbitration all or certain disputes arising between them.  An arbitral tribunal means a sole arbitrator or a panel thereof.  An arbitration agreement may take the form of clause in the contract or a separate agreement between the parties.

 

Advantages of Arbitration

i.        Speed: It is a faster method of dispute resolution

ii.      Convenient:           Parties are free to determine;

-                The number of arbitrators

-                Venue of proceedings

-                Language to use

-                Law applicable

iii.    Informality:  Arbitral proceedings are free from legal formalities which characterize the courts of law.  They are less technical in approach.

iv.    Expertise and specialization:         The parties to the dispute have an opportunity to appoint the most qualified or specialized person to determine their dispute.

v.      Cheap: It costs less to see a dispute through arbitration

vi.    Privacy:     Arbitral proceedings are conducted in private, free from undue publicity

vii.  Flexibility: Arbitral tribunals are not bound by previous awards.  This provides room for exploration

viii.User friendly/less acrimonious:  Arbitration is less acrimonious and tunes down enmity between the parties.

 

Disadvantages of Arbitration

i.        Arbitral awards have no precedential value, like they cannot be relied on in subsequent proceedings

ii.      Arbitration s characterized by the danger of the likelihood of miscarriage of justice particularly where the arbitrator is not a legal expert

iii.       Arbitrators exercise unregulated discretion and hence the danger of abuse of power

iv.                Arbitrators are more susceptible to manipulation than judges and magistrates

v.                The fact that proceedings are conducted in private may raise suspicion.

 

 

 

LAW OF PERSONS

 

Kenyan law recognizes two persons upon whom it confers rights and imposes obligations. These persons are; Natural person and Artificial persons.

 

Natural person: this is the human being who is recognized as a person by law by reason of his characteristics.

Artificial person: This is an abstraction of law often described as a juristic person. It is a metaphysical entity created in contemplation of the law. This person is referred to as a corporation or incorporated association

 

Corporation or incorporated association

This is an association of persons recognized as a legal entity. It is an independent legal existence. It has own rights and is subject to obligations. It has capacity to own properly, contract, sue or be sued and perpetual succession.

 

Creation/ formation of corporations

An incorporated association may be brought into existence in any of the following ways:

Registration: This is a process of incorporation provided by the Companies Act.It is evidenced by a certificate of Incorporation which is the 'birth certificate' of the corporation. Corporations created by registration are Public and Private Companies

2. Statute: Acts of parliament often create incorporated associations. The corporation owes its existence to the Act of Parliament.

3.Charter: Under the Universities Act 2, when a private university is granted by chart, by the relevant authority it becomes a legal personof discharging its powers and obligations.

 

Features of corporations

1. Legal personality: A corporation is a legal person distinct and separate from its members and managers. It has an independent legal personality. It is a body corporate with rights and subject to obligations. In Salomon v. Salomon & Co Ltd (1897), the House of Lords stated that"…. the company is at law a different person altogether from the subscribers to the memorandum".

The ratio decidendi of this case is that when a company is formed, it becomes a legal person, distinct and separate from its members and managers.

2. Limited liability: The liability of a corporation is limited and as such members cannot be called upon to contribute to the assets of a corporation beyond a specified sum. In registered companies liability if members are limited by shares or guarantee. Members can only be called to contribute the amount, if any, unpaid on their shares or the amount they undertook to contribute in the event of winding up. This is liability limited by shares and by guarantee respectively.

3. Owning property: a corporation laws the capacity to own property. The property ofa corporation belongs to it and not to the members. The corporation alone has aninsurable interest in such property and can therefore insure it as was in the case ofMacaura v. Northern Assurance Co Ltd (1925). In tins case the plaintiff was the principal shareholder and the company owed him £19,000. The Company had bought an estate of trees from him and converted them to limber. The plaintiff subsequently insured the timber with the defendant company but in his own name. The timber was destroyed by fire two weeks thereafter. Insurance Company refused to compensate the plaintiff for the loss and he sued. It was held that he wasn't entitled to compensation since he had no insurable ml interest in the timber.

4. Sue or be sued: Since a corporation is a legal person, with rights and subject to obligations, it has the capacity to enforce its rights by action and it may be sued on its obligations e.g. when a wrong is done to a company, the company is the prima facie plaintiff.

It was held in Foss v Harbottle, where some directors had defrauded their company but members had resolved in a general meeting not to take any action against them. However, two minority shareholders sued the directors for the loss suffered by the company. The action was struck off on the ground that the plaintiff had no locus stands as the wrong in question had been committed against the company.

5. Capacity to contract: A corporation has capacity to enter into contracts, be they employment or to promote the purposes for which they were created. For example; a company has capacity to hire and fire. It was so held in Leev. Lees Air farming Co Ltd (1961).

6. Perpetual Succession:  Since a corporation is created by law, its life lies in the intendment of law. It has capacity to exist in perpetuity. It has no body, mind or soul. For example the death of directors or members of a company cannot determine a company's life It can only be brought to an end through the legal process of winding up

 

Types of corporations

i.           Corporations Sole

This is a legally established office distinct from the holder and can only be occupied by one person after which he is succeeded by another. It is a legal person in its own right with limited liability, perpetual succession, capacity to contract, own properly and sue or be sued Examples include;

-         Office of the public trustee,

-         Office of the permanent Secretary to the treasury

ii.            Corporations Aggregate

This is a legal entity formed by two or more persons for a lawful purpose and whose membership consists of at least two persons. It has an independent legal existence with limited liability, capacity to contract, own property, sue or be sued and perpetual succession. Examples include public and private Companies

iii.          Registered Corporations

These are corporations created in accordance with the provision of Companies Acts. Certain documents must be delivered to the Registration of the company. These include memorandum of association, articles of association, and statement of nominal capital; Examples of registered corporations are; public and private companies.

iv.          Statutory Corporations

These are corporations created by Acts of Parliament. The Act creates the association, gives it a name and prescribes the objects. Examples: Kenya Wildlife Services, Agricultural Finance Corporation, Public Universities, Central Bank etc.

v.            Chartered Corporations

These are corporations created by a charter granted by the relevant authority. The charter constitutes the association a corporation by the name of the charter e.g private universities.

 

Incorporation

This is a legal process by which a partnership or other form of unincorporated association is converted to a registered company. It there upon becomes a legal person in its own right. The most fundamental attribute of incorporation from which all other consequences flow is that when an association is incorporated it becomes a legal person, separate and distinct from its members and managers. It acquires an independent legal existence. It becomes a body corporate. This was the rule in Salomon-v- Salomon & co Ltd.

 

 

Formation of a limited company

This is by registration under the companies Act. In order to incorporate themselves into a company, those people wishing to trade through the medium of a limited liability company must first prepare and register certain documents. These are as follows:

 

a)      Memorandum of association

This is the document in which the people express inter alia their desire to be formed into a company is its primary document which sets up its external constitution and objects.

 

Contents of the Memorandum of Association

i.              Name Clause; Describes the name of the Company with “limited” or “Ltd” as the last word therefore companies limited by Shares or guarantee.

ii.            Registered Office Clause; sets out states that the registered office of the Company will be situated in Kenya.

iii.          Objects Clause; sets out the purpose for which the company is incorporated. It describes the contractual capacity of the company. It delimits the company’s contractual capacity.

iv.          Capital clause; specifies the capital with which the company proposes to be registered and the division.

v.            Liability Clause; state whether the member’s liability is limited or unlimited and whether limited by shares or by guarantee.

vi.          Association or Declaration Clause; states the desire of the subscribers to be formed into a company.

vii.        Particulars of subscribers; name of the subscribers, postal addresses, occupation, number of shares taken e.t.c.

viii.      Date; a memorandum must be dated.

 

b)     Articles of Association

 Articles of Association of a company contain the rules and regulations by which its internal affairs are governed dealing with such matters as shares, share capital, company’s meetings and directors among others. The Articles act as the company's internal constitution.

           

Both   the   Memorandum   and   Articles   of Association   must   each   be   signal   by seven persons in the case of u public company or two persons if it is intended to form a private company. These signatures must be attested by a witness. If the company has a share capital each subscriber to the share capital must write opposite his name the number of shares he takes and he must not take less than one share.

 

c)      Statement of Nominal capital

This is only required ifthe company has a share capital. It simply states that the company's nominal capital shall be a specified amount ofshillings. The fees that one pays on registration will be determined by the share capital that the company has stated.  The higher the share capital, the more that the company will pay in terms of stamp duty.

 

d)     Declaration of Compliance

This is a statutory declaration made either by the advocates engaged in the formation of the company or by the person named in the Articles as the director or secretary to the effect that all the requirements of the Companies Act have been complied with. Where it is intended to register a public company, Section I84(4) of the Companies Act also requires the registration of a list of persons who haveagreed to become directorsand Section 182 (I) requires the written consents of the Directors.

These are the only document which must he registered m order to secure the incorporation of the company. In practice however two other documents which would he filed within a short time of incorporation are also handed in at the same time. These are:

i.  Notice of the situation of the Registered Office which under Section 108(1) of the statute should he filed within 14 days of incorporation;

ii.Particulars of Directors and Secretary which under Section 20l of the statute are normally required within 14 days of the appointment of the directors and secretary.

 

The documents arethen lodged with the Registrar of companies and if they arein order then they are registered and the Registrar thereupon grants a certificate of incorporationand thecompany is thereby formed.

 

Section 16(2) of the Act provides that from the dates mentioned in a certificate of incorporation the subscribers to the Memorandum of Association become a body corporate by the name mentioned in the Memorandum capable of exercising all the functions of an incorporated company.

 

It should be noted that the registered company is the most popular kind of corporation in the present times.

 

Statutory Corporations

The difference between a statutory corporation (parastatal) and a company registered under the Companies Act is that a statutory corporation is created directly by an Act of Parliament the Companies Act does not create am corporations at all. It only lays down a procedure by which any two or morepersons who so desire can themselves created a corporation by complying with the rules for registration which the Act prescribes.

 

Types of registered companies

Before registering a company the promoters must make up their minds as to which of the various types of registered companies they wish to form.

i.  They must choose between a limited and unlimited company; section 4 (2) (c) of the companies acts state that a company not having a liability of members limited in any way is termed as an unlimited company. The disadvantage of unlimited company is that its members will be personally liable for the company’s debts. It is unlikely that promoters will wish to form unlimited liability company if the company is intended to trade. But if the company is merely for holding land or other investments the absence of limited liability would not matter.

ii.If they decide upon a limited company, they must make up their minds whether it is to be limited by shares or by guarantee. This will depend upon the purpose for which it is formed. If it is to be a non-profit concern then a guarantee company is the most suitable, but if it is intended to be a profit making a company, then a company limited by share is preferable.

iii.          They have to choose between a private company and public company. Section 30 of the companies Act defines a private company as one which by article its Article;

-         Restricts the ri8ghts to transfer shares;

-         Limits the numbers of fifty( 50)

-         Prohibits the invitation of members of the public to subscribe for any shares or debentures of the company.

-          

A company which does not fall under this definition is described as a public company. In order to form a public company, there must be at least seven (7) subscribers signing the Memorandum of Association whereas only two (2) persons need to sign the Memorandum of Association in the case of a private company

When a partnership or other forms of unincorporated associations are incorporated, it becomes a registered company which may be public or private.

 

The registered company is the most advanced form of business association in use today. This is because it enjoys certain advantages not available to partnerships and sole proprietors. Hence the balance is always tilled towards the company (incorporation).On incorporation; the association becomes a body corporate. It has a legal personality of its own.

 

Advantages of the registered companies

This can also be referred to as Advantages of Incorporation

i.  Limited liability: Members of a registered company have limited liability; the extent to which they can be called upon to contribute to the assets of the company in the event of winding up is limited by shares or guarantee. Members are not liable to lose private assets if the company is insolvent.

ii.Perpetual succession: Since a registered company is created by law, its life lies in the intendment of the law. It has the capacity to exist in perpetuity. This is advantageous where the company's business is prosperous. It also encourages investment on a long-term basis.

iii.          Capacity to contract and own property: A registered company has legal capacity to own property and can enter into contractual relationships set out in the objects clause The company therefore has capacity to invest to enhance profitability.

iv.          Sue or be sued: A registered company has capacity to enforce its rights by court action and may be sued on its obligations. Members are not bound to sue on behalf of the company and cannot generally be sued for the wrongs of the company.

v.Wide capital base: Compared to other forms of business associations, the registered company has the widest capital base by reason of the wide spectrum of membership.

vi.          Transferability of shares: under section 75 of the Companies Act, the shares or other interests of any member of the company shall be moveable property transferable m manner provided by the Articles. Shares in public and private companies are transferable in public company, they are free transferable. The transfer is restricted in private under the ambit of Section 30 of the Act. Transferability of shares ensures that company membership keeps on changing from time to time and the company could take advantage of the skills of the members.

vii.        Specialized/ qualified management: companies are managed by directors elected by members in general meeting. Under section 177 of the Companies Act, every private company must have at least one director while a public company must have at least two, Shareholders have the opportunity to elect qualified persons as directors.

viii.      Borrowing by floating charge: Registered companies are free to utilize the facility of floating charge to borrow. This is the use of floating assets as a security. The charge is equitable and remains dormant until crystallization. A floating charge has several advantages:

-         It enables a company with no fixed assets to borrow;

-         It enhances the borrowing capacity of a company with fixed assets;

-          It does not interfere with the ordinary business of the company.

 

Disadvantages of limited liability company

These can also be referred to as disadvantages of incorporation.

i.        Formalities: Companies are subject to too many legal formalities like formation, meetings, accounts, winding up etc

ii.      Publicity. Companies are subject to undue publicity e.g. a company's documents are open to public scrutiny. Public companies must submit annual accounts. General meetings are held in public. Winding up is conducted in the eyes of the public.

iii.    Expenses: The registered company is the most expensive form of business association to form, maintain or wind up.

iv.    Doctrine of ultra vires: The capacity of a company is restricted to transactions set
forth in the objects and those that are reasonably incidental thereto. Other transactions are ultra-vires and therefore null and void.

v.      Corporation tax: the tax payable by companies is relatively higher. This reduces the amounts of profits available to members as dividend.

vi.    Participation in management: Members other than directors are actively involved inthe day-to-day affairs of the company

 

Unincorporated Associations

These are associations of persons who come together to promote a common and lawful purpose they have no independent legal existence and property if any is jointly owned or is held in trust for the benefit of all members. The rights of individual members are contained m the Constitution of the association Members are personally liable for debts and other liabilities of the association and are liable to lose personal assets if the association is unable to pay its debts (insolvent). The associations can sue or be sued through their principal officer(chairman, secretary, treasurer).

 

The law which regulates those associations is the law which regulates the activities they engage in e.g. Partnerships, Trade Unions, clubs, Welfare Associations, Staff Unions, political parties.

 

Partnership

The law relating to partnership in Kenya is contained in the Partnership Act 3 and the Limited Partnership Act.

Definition: Under Section 3(1) of the Partnership Act, “Partnership is the relation which subsists between persons carrying on a business in common with n view of profit."

 

Elements of the definition;

-         A partnership is an association of persons.

-         There must be a business i.e some trade, profession or occupation.

-         The business must be carried on in common.   That means even the so called dormant /Sleeping Partners are deemed to real partner.

-         The business must he profit motivated.

 

Types of partnerships

Under Kenyan Law there are two types of partnership namely, General and limited

 

Characteristics of partnership

i.        Membership: It consists of 2 - 20 members

ii.      Personality: It is an unincorporated association

iii.    Utmost good faith: It is a contract uberimae fidei

iv.    Agency: each partner is agent of every other and the firm

v.      Sue or be sued: It can sue or be sued in its registered name

vi.    Profit-motivated: A partnership is a profit-motivated enterprise

vii.  Liability: A partner's liability for debts and other obligations of the firm is generally unlimited.

viii.Death, bankrupt or insanity may lead to dissolution

 

Formation of partnership

The formation of a partnership is not subject to any legal formalities, the agreement between the parties may be:-

i.        Oral or by word of mouth

ii.      Written with or without seal

iii.    Implication from conduct of the parties

However the partners may on their own accord reduce the basis of their relationship into a formal document detailing the terms and the condition of the association. The document is the partnership deed or agreement or articles of partnership. It is not a legal requirement.

 

Contents of the Partnership Deed

i.        Nature of Business

ii.      Contribution of the partners (capital)

iii.    Profit sharing ratio

iv.    Rules for determining interest on capital

v.      Method of calculating goodwill

vi.    Power of partner

vii.  Accounts and audit

viii.Expulsion and partners

ix.    Arbitration e.t.c

 

In the absence of the partnership deed, the provisions of the partnership Act apply.

 

Rules/ principles applicable in the absence of a partnership deed

The rules applicable are contained in Section 28 and 29 of the Partnership Act. These include;

i.        Profit and loss are shared equally

ii.      If the partner incurs liability while discharging the firm’s obligations he is entitled to indemnity.

iii.    If a partner leads money to the firm, he is entitled to interest on the principal at the rate of 6% per annum

iv.    A partnership can only change its business with consent of all partners.

v.      A partner can only be admitted as partner with consent of all existing partners.

vi.    A partner is not entitled to interest on capital before the ascertainment of profit.

vii.  Every partner is entitled to take part in the management of the firm’s business.

viii.A partner is not entitled to remuneration for taking part in the management of the firm’s business.

ix.    The books of account of the firm must be accessible to all parties

x.      Under section 29 of the Act, a partner can only be expelled from the firm if the power to so is expressly vested another partners.

 

Advantages of a partnership

i.        Specialization and division of power: where the association is profession oriented.

ii.      Sharing of management: all partners are entitled to take part in the firm’s management.

iii.    Wide capital base: this will assist in pooling together working and investment capital

iv.    Easy to form: formation is not subject to many legal formalities

v.      Flexibility: partners are free to change the nature of business, provided all agree.

vi.    Sharing of losses: losses and liabilities are shared amongst the partners thereby cushioning the detriment.

 

Disadvantages of partnership

i.        Liabilities of partners for debts and obligations of the firm is unlimited i.e. partners are liable to use personal assets if the firm is insolvent.

ii.      Sharing of profits reduce the amount available to individual partners.

iii.    A single partner’s mistake affects all partners.

iv.    Disagreements between partners often delay decision-making.

v.      Tends to rely on a single partners effort to manage.

vi.    Death, bankrupt, or insanity of a partner may lead to dissolution.

 

Illegal partnerships

Certain partnerships are deemed illegal e.g.

i.        Partnership formed for an illegal purpose

ii.      A professional firm with unqualified partners

iii.    A partnership with more than 20 persons. As was the case in Fort Hall Bakery Supply Co. V. Fredrick Muigai Wangoe (1959) where an association of 45 persons purported to carry on business as a partnership. It had purportedly sued the defendant, a former manager in its name. The action was struck off as the body was not a partnership or company.

 

In the formation of a partnership, partnerships are free to give their firm any name which is registerable under the Registration of Business Name Act 5. The name must not mislead the public or be intended to advantage of an existing business.

 

In a partnership, parties may be classified as:-

i.        Real or Quasi

ii.      Minor or major

iii.    Active or dormant/sleeping

iv.    Limited or General

 

Rules for determining the existence of a partnership

Under Section 4 of the Partnership Act, the following rules are applicable in determining whether a partnership exists;

i.        Under Section 4 (a) of the Act, joint tenancy, tenancy in common property or part ownership does not of itself constitute a partnership in respect of the property owned or held.

ii.      Under Section4 (b) of the Act, the sharing of gross returns of business not of itself constitutes the person’s partner in the business.

iii.    Under Section 4 (c) of the Act of the partnership Act is not contradictory. It means that, if the sharing of profits the only circumstances are to be  taken into consideration, the sharing of profit cannot of itself determine whether one is a partner or not.

Under Section4 (a) there are several circumstances where persons who are not partners receive an amount contingent upon the profit of the business e.g

i.        Payment of remuneration to servant or agent where the amount varies with the level of profit of the business.

ii.      Payment of the liquidate debt where the amount payable varies with the profit of the business.

iii.    Payment for goodwill where the amount is contingent upon the firm profit.

iv.    Payment of annuity to a widow or child of a deceased partner where the amount varies with the level of profits.

 

Relations between partners and third parties (liability of Partners)

Under sec. 7 of the Partnership Act, every partner is an agent of each other and the firm. The liability of the partners for debts of the firm is governed by the Law of Agency. A partner exercises both real and ostensible authority, and the firm is generally liable for debts arising in the conduct of a partner.

 

However, for the firm or other partners to be held liable for the acts of a partner, it must be evident that:

i.        The partner was acting in the business of the firm.

ii.      He was acting in the usual way

iii.    He was acting in his capacity as a partner.

 

In other circumstances a partner would ho held personally liable e. g.

i.        If he is prohibited from acting on behalf of the firm

ii.      He signs a document without express authority.

 

A 3rd party who has contracted with partnership may sue:-

i.        The partner dealt with or

ii.      All the partners

If a single partner is sued and his assets cannot make good the firms liability, the other partners cannot be sued. Suing all the partners enables the plaintiff to execute is judgment against all the partners since they are jointly liable.

 

Liability of a Retiring Partner

Unless otherwise agreed, a retiring partner is only liable for debts and other liabilities upon the date of retirement.

 

Liability of an Incoming Partner    

Unless otherwise agreed, such a party is only liable for debts and other liabilities arising from the date he became a partner.

 

Liability of a Minor Partner

Under Section 12 of the Partnership Act, a minor partner is not personally liable for debts and other liabilities of the firm. However, his share in the property is liable. Under sec. 13 if a minor partner does not repudiate the partnership during infancy or within a reasonable time alter attaining the age of majority, he is personally liable for debts and other liabilities from the date he became a partner.

 

Liability by Estoppel

A person, who is not a partner, may be held liable as a partner by the equitable doctrine of estoppels. Under Section 18 of the Act, if a person who is not a partner knowingly permits himself to be held out a partner or represents himself as a partner with the firms knowledge and third parties rely upon the representation, he is estopped from denying the apparent partnership and he is liable.

 

 

 

 

Relations between partners themselves (inter se)

The relationship between partners inter se is governed by the agreement between them. However, a partnership agreement is a contract uberrimae fidei (contract of the utmost good faith. Each partner is entitled to utmost fairness from the co-partners. The principal of utmost good faith in partnership is expressed the following ways:-

i.        A partner with a personal interest in a transaction altered into by the firm is bound to disclose the same.

ii.      Any secret profit made by a pail net mint be accounted to the firm

iii.    A partner may not compete with the business of the firm

iv.    A partner can only be expelled from the firm in good faith

 

Assignment of interest

A partner may assign his interest in the firm either absolutely or as a security for a loan. The person to whom the interest is assigned (assignee) becomes entitled to the assigning partner's share of profit. He however does not become a partner.

Incapacities of an Assignee Partner

i.        He cannot demand an account from the partners

ii.      He cannot take part in the management of the firms business

iii.    He has no right of access to the books of accounts

 

Goodwill        

This is the relationship between a business and its customer. In crutwell V. Lye, it was held that the Goodwill is the probability of customer frequenting the old place of business after its ownership or management has changed hands. It is part of the assets of the firm.

 

Dissolution of partnership

A partnership may be dissolved with or without the courts intervention.

 

Dissolution or winding up the court

Under sec. 39 of the Partnership Act, a partnership may be wound up by the court on application if it is satisfied that;

i.        A partner has become a lunatic or is permanently of unsound mind

ii.      A partner has become permanently incapable of discharging his functions as a partner

iii.    A party is continuously guilt of willful breach of the partnership agreement.

iv.    A partner has conducted himself on manner unfairly prejudicial to the firm and his continued association is likely to bring the firm's name into disrepute.

v.      The firms businesses can only be carried on at a loss.

vi.    Circumstances are such that it is just and equitable that the firm be wound up e.g. where there are perpetual disagreements.

 

Dissolution without the courts Intervention

This may happen in the following circumstances;

i.        Performance: A partnership dissolves on the accomplishment of the purpose for which it was formed.

ii.      Lapse of time: A partnership comes to an end on operational of the duration prescribed by the parties.

iii.    Mutual agreement: This is a situation where the parties agree to dissolve the firm. All partners must be party to the agreement.

iv.    Death: Unless the partnership deed otherwise provides, the death of a partner leads to dissolution of the partnership.

v.      Bankruptcy: unless the partnership deed otherwise provides a partnership dissolves if a partner is declared bankruptcy by a court of competent jurisdiction

vi.    Termination at will or at notice: where the duration of the partnership is not specified, it may be dissolved by notice i.e. a partners notice to the others of his intention to have the firm dissolved

vii.  Illegality: If the business of the partnership becomes illegal by reason of change of law or otherwise, the firm is dissolved

viii.Charging a partner’s interest: If a partner’s interest in the firm is charged by a court order for a private debt, the firm is dissolved

 

Distribution of assets

In the dissolution of a partnership, assets arc distributed in the following order:

i.        Creditors other than parties have priority

ii.      Creditors who are partners rank next

iii.    The balance is distributed between the partners on the basis of their capital contribution

iv.    The surplus, if any, is distributed between the partners on the basis of the profit sharing ratio. This is the rule in Garmer v. Murray where, three partners. A, B and C contributed an equal amount of capital but agreed to share profit equally. In dissolution or realization, there was a deficit in C's capital account and C was insolvent and hence unable to make good the deficit. It was held that before A and B could be paid what was due to them ratably, they had to make good the deficit in C’s capital account on the last agreed balances in their capital accounts.

 

Limited partnership

The law relating to Limited Partnership is contained in the Limited Partnership Act. This Act creates a hybrid partnership with characteristics of companies. However, it is a partnership within the meaning of Section 3(1) of the partnership Act. The Limited partnership Acts adopts the definition for partnership contained in Sec. 3 (1) of the Partnership Act ie;

i.        It is an unincorporated association.

ii.      Membership consists of 2-20 persons.

iii.    It is profit motivated.

 

However Limited Partnership differs from a general partnership in certain aspects. The limited Partnership Act modifies the law of partnerships in the following respects;

i.  Registration: Under Section 7 of the Limited Partnerships Act a limited partnership must be registered with the Registrar of companies. For this to be done there must be delivered to the Registrar a written memorandum setting out:-

-         The firm name

-         General nature of business

-         Principal place of business

-         Particulars of limited partners and their contribution

-         Date of commencement etc. failing which the partnership become General.

ii.      Composition of Members: a limited partnership must have at least one general partner and one limited partner.

iii.    Membership: a limited liability company may be admitted as a limited partner.

iv.    The limited Partner: the liability of this partner is limited to the amount of capital contributed. He cannot therefore be sued for debts or other liabilities of the firm.

 

Under sec. 5 of the Limited Partnership Agreement; the limited partner is subjected to the following in capabilities:-

i.                    He cannot withdraw or receive back his share during the subsistence of the firm.

ii.                  He does not bind the firm.

iii.                He is not deemed to be an agent of the other partners.

iv.                He may not take part in the management of the business and if he does, he becomes a general partner for the duration and may be sued for debts and other liabilities arising.

v.                  His death, bankruptcy or insanity does not lead to dissolution.

vi.                He cannot dissolve the partnership by notice.

vii.              A person may be admitted as a partner without the consent of the limited partner.

viii.            Differences between partners are resolved by a majority of the general partners.

ix.                The discharging of his interest by a private debt does not lead to dissolution.

x.                  If a limited partner assigns his share, the assignee becomes a limited Partner.

 

LAW OF TORT

What is Tort?

A tort is a civil wrong other than a breach of contract whose remedy is a common law action for damages or other relief. However not every wrong is a tort. The law of tort protects various personal and proprietary interests. Tortuous liability arises from the breach of a duty primarily fixed by law. This duty is towards persons generally and its breach is redressable by an action for unliquidated damages.

 

Tortfeasor: person who commits a tort

 

Tort and crime distinguished

Tort	Crime
Itis a wrong redressable by an action for unliquidated damages. The party suing is an individual or private person.	It is a wrong the action of which involves punishment Almost always the party suing is the state.

 

NB; A single act may give rise to a tort and a crime

 

Tort and contract distinguished

TORT	CONTRACT
The duty is fixed by law	The duty is fixed by the parties
The duty is owed to persons generally	The duty is owed to the parties to the contract
The remedies are few(restricted)	The remedies are far much wider

 

Introduction

Tort law is a body of law that addresses, and provides remedies for, civil wrongs not arising out of contractual obligations. A person who suffers legal damages may be able to use tort law to receive compensation from someone who is legally responsible, or "liable," for those injuries. Generally speaking, tort law defines what constitutes a legal injury and establishes the circumstances under which one person may be held liable for another's injury. Torts cover intentional acts and accidents. In contrast to criminal law (in which the offense is against the State and the State is the plaintiff), in tort law, the offense is against a person and that person is the plaintiff.

 

For instance, Alice throws a ball and accidentally hits Brenda in the eye. Brenda may sue Alice for losses occasioned by the accident (e.g., costs of medical treatment, lost income during time off work, and pain and suffering)

 

Types of tort

These include;

-         Negligence

-         Nuisance

-         Trespass

-         Vicarious liability

-         Occupier s liability

-         Defamation

 

 

Tort of Negligence

Negligence:omission to do something which a reasonable man guided upon those regulations which ordinarily regulate the conduct of human affairs would do or doing something which a reasonable and prudent man would not have done.

Negligence: is a failure to exercise the care that a reasonably prudent person would exercise  in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.

 

Through civil litigation, if an injured person proves that another person acted negligently to cause their injury, they can recover damages tocompensate for their harm. Proving a case for negligence can potentially entitle the injured plaintiff to compensation for harm to their body, property, mental well-being, financial status, or intimate relationships.

 

Elements of negligence claims

A plaintiff will have to prove the presence of some elements to succeed in an action for tort of negligence. An important concept related toelement is that if a plaintiff fails to prove any one element of his claim, he loses on the entire tort claim. The main elements that a plaintiff must prove to succeed in negligence are:

 

i.        Duty of care

The idea of a duty of care in the tort of negligence has developed through judges making decisions in cases. This started in a negligence case of Donoghue v. Stevenson (1932) where the claimant (Mrs. Donoghue) went to a cafe with a friend. The friend bought her a drink of ginger beer and ice cream. The bottle of ginger beer had dark glass so that the content could not be seen. After drinking some of it, Mrs Donoghue pouredthe rest out and then saw that itcontained a dead (and decomposing) snail. This appalled Mrs. Donoghue and she become ill as aresult of the sight and the ginger beer she had already drunk.

 

Mrs Dcnoghue had no direct claim against the manufacturer or the shopkeeper based on contract because she didnot buy the ginger beer. Mrs. Donoghue's friend could claim against the cafe in contract, but had not suffered any loss apart from the fact that she hadbought defective goods;, she could get her money back, but nothing for Mrs. Donoghue's illness. Therefore, Mrs. Donoghue claimed damages against the manufacturer, Stevenson. Her claim was for the resulting shock and stomach upset, which she claimed was caused through drinking the ginger beer.

 

The court had to decide whether her claim against the manufacturer of the ginger beer could succeed. This led to lord Atkin’s famous statement;

 

“The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer's question, 'who is your neighbor, receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would likely injure your neighbour. Who, then, in law is my neighbour? The answer seems to be: persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.”

 

Donoghue v Stevenson (I9J2) was the first successful attempt to set out a general principle with respect to the concept ofthe duty of care  The duty of care has since been further refined through other case studies like Caparo v Dickman (1990) which introduced three part test as follows. The general test for duty of care set in Caparo requires three elements to be demonstrated as follows:

i.        It was reasonably foreseeable that a person in the claimant’s position would be injured,

ii.      There was sufficient proximity (closeness) between the parties,

iii.    It is fair, just and reasonable to impose liability on the defendant

 

All parts of the test must be satisfied if there is to be a duty of care owed by the defendant to the claimant each part must be explained and proved separately.

 

ii. Breach of Duty

Once a claimant has proved the duty of care is owed he must then show that the defendant breached that duty. This is merely when the defendant falls below the standard of caring appropriate to the duty. Breach of duly is measured objectively by the 'reasonable man test’. The reasonable man is the ordinary person performing the particular task; he is expected to perform it reasonably competently. Thus, when I am riding my bicycle, I am expected to be a reasonably competent cyclist who can ride a bicycle. Therefore, a number of factors that can be considered to raise or lower the standard. This  is logical because a reasonable person will rightly take greater risks in an emergency, and take more care when the risk of harm is greater. For a breach of duty to occur, the court will take four factors into account:

The degree of riskinvolved: the greater the risk, the more the defendant has to take care. (Bolton v Stone 1951).

The cost of precautions: the courts will see how high the risk is involved, and then take into account the expense of taking precautions to prevent that risk (Bolton v Stone and Latimer vs AEC)

Potential seriousness of injures:so if there is a very high risk of serious injury, the more the defendant needs to be very careful (Paris v Stepney B.C. 1951)

The importance of the activity: in an emergency, sometimes it is not possible to reflect, think of a possible risk (Marshall v Osmand 1982)

 

Standard for experts - where the defendant has some expertise, for example, he is a doctor carrying out medical treatment, then the standard of care is that which would normally he expected from a doctor. This may be higher than that expected of a nurse of a clinical officer.

 

In some situations, it is difficult to know exactly what happened, although it is found obvious that the defendant was in these situations a rule called res ipsa loquitur, which means (things speak for themselves) was developed by judges. It has to be shown that:

The defendant was in control of the situation (causing injury).

The injury was more likely than not to be caused by negligence.

 

If the claimant proves these two things then the defendant has to prove that he was not negligent. This rule was shown in the case of Scott v London and St. Katherine Docks (1865) where the claimant was hit by six bags of sugar which fell from the defendant's warehouse. The claimant could not say why the bags had fallen but ruled that the facts spoke for themselves and it was up to the defendant to prove that he was not negligent.

 

Damage Caused

Having established a duty of care, and a breach of that duty, the claimant will then need to show that damage has been caused to them, and that loss is not too remote. A person will only be liable for damage, which they have actually caused the victim. The some rules apply to damage to property.

 

 

 

Factual causation (Direct Cause)

Would the damage have happened had it not been for the breach of duty? This can be seen in Barnet vs Chelsea and Kensington Hospitals (1969) where three night-watchmen went to Accident & Emergence unit complaining of sickness after drinking tea made by a fourth man. A nurse telephoned the doctor on duty who did not come to examine the men but instead sent the men home and told them to go and see their own doctors in the morning. On returning home, one of the men died a few hours later from poisoning. His widow sued the hospital claiming that the doctor was negligent in not examining her husband. Evidence showed that by the time the husband had called in to the hospital it was already too late to saw his life. This meant that his death was not a result of the doctor's breach of duty and so the claim failed.

 

Foresee ability

The claimant has to show that the type of damage was reasonably foreseeable. This is seen in the case of the Wagon Mound (1961) where fuel had negligently spilled onto water in a harbor. Two days later the oil caught fire because of welding work being done on another ship two kilometers away. The fire spread to the claimants wharf and burnt it. The damage suffered was not reasonably foreseeable.

 

Damages/remedy at law for negligence

Damages place a monetary value on the harm done, following the principle of restitutio in integrum^: (Latin for "restoration to the original condition"). Thus, for most purposes connected with quantification of damages, the degree of culpability in the breach of the duty of care is irrelevant. Once the breach of the duty is established, the only requirement is to compensate the victim.

 

Damages are compensatory in nature. A compensatory damage addresses a plaintiff/claimant's losses (in cases involving physical or mental injury the amount awarded also compensates for pain and suffering).The award should make the plaintiff whole; sufficient to put the plaintiff back in the position he or she was before Defendant's negligent act. Anything more would unlawfully permit a plaintiff to profit from the tort.

 

Types of damages include:

i.        Special damages - quantifiable dollar losses suffered from the date of defendant's negligent act (the tort) up to a specified time (proven at trial). Special damage examples include lost wages, medical bills, and damage to property such as one's car.

ii.      General damages - these are damages that are not quantified in monetary terms (e.g. there's no invoice or receipt as there would be to prove special damages). A general damage example is an amount for the pain and suffering one experiences from a car collision.

iii.    Nominal damages; where the plaintiff proves only minimal loss or damage, or the court or jury is unable to quantify the losses, the court or jury may award nominal damages.

iv.    Punitive damages - Punitive damages are to punish a defendant, rather than to compensate plaintiffs, in negligence cases. In most jurisdictions punitive damages are recoverable in a negligence action, but only if the plaintiff shows that the defendant's conduct was more than ordinary negligence (ie, wanton and willful or reckless).

 

Tort of Nuisance

Nuisance is a common law tort. It means that which causes offence, annoyance, trouble or injury. A nuisance can be either public (also "common") or private. Nuisance signifies that the "right of quiet enjoyment" is being disrupted to such a degree that a tort is being committed.

 

A public nuisance was defined by English scholar Sir J. P, Stephen as, "an act not warranted by law, or an omission to discharge a legal duty, which act or omission obstructs or causes inconvenience or damage to the public in the exercise of rights common to all Her Majesty's subjects". A public nuisance is an unreasonable interference with the public's right to property. It includes conduct that interferes with public health, safety, peace or convenience. The unreasonableness may be evidenced by statute, or by the nature of the act including how long, and how bad, the effects of the activity may be.

Private nuisanceis the interference with the right of specific people. A private nuisance is simply a violation of one's use of quiet enjoyment of land. It doesn't include trespass.

Under the common law, persons in possession of real property (land owners, lease holders etc.) are entitled to the quiet enjoyment of their lands. However this doesn't include visitors or those who aren't considered to have an interest in the land. If a neighbor interferes with that quiet enjoyment, either by creating smelts, sounds, pollution or any other hazard that extends past the boundaries of the property, the affected party may make a claim in nuisance.

To be a nuisance, the level of interference must rise above the merely aesthetic. For example: if your neighbor paints their house purple, it may offend you, however, it doesn’t rise to the level of nuisance. In most cases, normal uses of a property that can constitute quiet enjoyment cannot be restrained in nuisance either. For example, the sound of a crying baby from a neighbours house may be annoying, but it is an expected part of quiet enjoyment of properly end does not constitute a nuisance.

Any affected property owner has standing to sue for a private nuisance. If a nuisance is widespread enough, but yet has a public purpose, it is often treated at law as a public nuisance. Owners of interests in real property (whether owners, lessors, or holders of an easement or other interest) have standing only to bring private nuisance suits.

Remedies

Under the common law, the only remedy for a nuisance was the payment of damages. However, with the development of the courts of equity, the remedy of an injunction became available to prevent a defendant from repeating the activity that caused the nuisance, and specifying punishment for contempt if the defendant is in breach of such an injunction.

 

Trespass

Trespass as an area of tort law can be broadly divided into three groups: trespass to the person, trespass to chattels and trespass to land.

 

Trespass to the person

Most jurisdictions now broadly recognize three trespasses to the person:

i.                  assault which is 'any act of such a nature as to excite an apprehension of battery";

ii.      battery, "any intentional and  unpermitted contact with the plaintiffs person or anything attached to it and practically identified with it"; and

iii.    Falseimprisonment, the "unlawful obstruction or deprivation of freedom from restraint of movement".

 

Trespass to chattels,

Also known as trespass to goods or trespass to personal property is defined as "an intentional interference with thepossession of personal property.  Trespass to chattel, does not require a showing of damages. Simply the "intermeddling with or use of… the personal property" of another gives cause of action for trespass.

Trespass to land

Trespass to land is today the tort most commonly associated with the term trespass.  It takes the form of “wrongful interference with one's possessory rights in real property". Generally, it is not necessary to prove harm to a possessor's legally protected interest; liability for unintentional trespass varies by jurisdiction. "At common law, every unauthorized entry upon the soil of another  was a trespasser", however, under the tort scheme established by the Restatement of Torts, liability for unintentional intrusions arises only under circumstances evidencing negligence or where the intrusion involved a highly dangerous activity. Aside from the surface, land includes the subsoil, airspace and anything permanently attached to the land, such as houses, and other infrastructure.

 

There are several defenses to trespass to land including, license, justification by law necessity etc.

 

Vicarious liability

Vicarious liability in English law is a doctrine of English tort law that imposes strict liability on employers for the wrongdoings of their employees. Generally, an employer will be held liable for any tort committed while an employee is conducting their duties. This liability has expanded in recent years following the decision in Lister v Heslev Hall Ltdto better cover intentional torts, such as sexual assault and deceit Historically, it was held that most intentional wrongdoings were not in the course of ordinary employment, but recent case law suggests that where an action is closely connected with an employee's duties, an employer can be found vicariously liable.

 

Justification for such wide recovery has been made in several areas. The first is that, as is common in tort law, policy reasons should allow those injured to have means of compensation. Employers generally have larger assets, and greater means with which to offset any losses (deep pocket compensation). Secondly, it is under the instruction of an employer by which a tort is committed by the employee, the employer can be seen to gain from the duties of their employees, and thus must bear the consequences of any wrongdoings committed by them. Lastly, it has been justified as a way to reduce the taking of risks by employers, and to ensure adequate precautions are taken in conducting business.  Examples of vicarious liability:

i.        Principals' liability.  The owner of an automobile can be held vicariously liable for negligence committed by a person to who the car has been loaned, as if the owner was a principal and the driver his or her agent, if the driver is using the car primarily for the purpose of performing a task for the owner.

ii.      Parental liability: the question of parental responsibility generally and the issue of parental vicarious liability for the torts of their children is evolving. What is clear is that parents can be held liable for their own negligent acts, such as failure to supervise a child, or failure to keep a dangerous instrument such as a handgun outside the reach of their children.

iii.    The liability of corporations in tort: if a director or officer is expressly authorized to make representations of a particular class on behalf of the company, and fraudulently makes a representation of that class to a third Party causing loss, the company will be liable even though the particular representation was an improper way of doing what he was authorized to do. The extent of authority is a question of fact and is significantly more than the fact of an employment which gave the employee the opportunity to carry out the fraud

iv.    Employees' Continued Liability and Indemnity. Although the employer is liable under respondeat superior for the employee's conduct, the employee, too, remains jointly liable for the harm caused. 

 

Occupiers' liability

Occupiers' liability is a field of tort law codified in statute, which concerns the duty of care that those who occupy (through ownership or lease) real property owe to people who visit or trespass. It deals with liability that may arise from accidents caused by the defective or dangerous condition of the premises. The Occupier's Liability Act 1957 imposes upon the occupier a common law duty of care. The occupier must 'take such  care as in all the circumstances of the case is reasonable to see that the visitor will be reasonably safe in using the premises for the purposes for which he is invited or permitted by theoccupier to be there’. The standard ofcare an occupier is expected to meet is the standard of "a reasonable occupier" no different from the usual common law negligence standard of care.

 

 Defamation

Defamation is a legal action sounding in tort based on an intentional or reckless public false statement that injures another person's reputation. Libel and slander are types of defamation. Generally, libel is defamation in print while slander is spoken defamation.

 

Defamation—also called calumny, vilification, or traducement; is the communication of a false statement that harms the reputation of on individual, business, product, group, government, religion, or nation. Most jurisdictions allow legal action to deter various kinds of defamation and retaliate against groundless criticism.

 

Under common law, to constitute defamation, a claim must generally be false and have been made to someone other than the person defamed.

 

Defenses in case one is accused of defamation

Even if a statement is defamatory, there are circumstances in which such statements are permissible in law. These include:

i.        Truth: In many legal systems, adverse public statements about legal citizens presented as fact must be proven false to be defamatory or slanderous/libelous. Proving adverse public character statements to be true is often the best defense against a prosecution for libel or defamation. Statements of opinion that cannot be proven true or false will likely need to apply some other kind of defense. The use of the defense of justification has dangers, however, if the defendant libels the plaintiff and then runs the defense of truth and fails, he may be said to have aggravated the harm.

 

Another important aspect of defamation is the difference between fact and opinion. Statements made as "facts" are frequently actionable defamation. Statements of opinion or pure opinion are not actionable. Some jurisdictions decline to recognize any legal distinction between fact and opinion.

 

ii.      Privilege and malice: Privilege provides a complete bar and answer to defamation suit, though conditions may have to be met before this protection is granted. Privilege is any circumstance that justifies or excuses a prima facie tort. It can be said that privilege recognizes a defendant's action stemmed from an interest of social importance - and that society wants to protect such interests by not punishing those who pursue them Privilege can be argued whenever a defendant can show that he acted from a justifiable motive. While some privileges have long been recognized, the court may create a new privilege for particular circumstances - privilege as an affirmative defense is u potentially ever-evolving doctrine. Such newly created or circumstantially recognized privileges are referred to as residual justification privileges. There are two types of privilege in the common law tradition:

"Absolute privilege' has the effect that a statement cannot be sued on as defamatory, even if it were made maliciously, a typical example is evidence given in court (although this may give rise to different claims, such as an action for malicious prosecution or perjury) or statements made in a session of the legislature (known as Parliamentary privilege' in Commonwealth Countries)

"Qualified privilege" may be available to the journalist as a defense in circumstances where it is considered important that the facts be known in the public interest. An example would be public meetings, local government documents, and information relating to public bodies such as thepolice and fire departments. Qualified privilege has the same effect as absolute privilege, but does not protect statement that can be proven to have been made with malicious intent.

 

iii. Statements made in good faith and reasonable belief that they were true; these are generally treated the same as true statements; however, the court may inquire into the reasonableness of the belief. The degree of care expected will vary with the nature of the defendant. An ordinary person might safely rely on a single newspaper report, while the newspaper would be expected to carefully check multiple sources.

iv. Opinion is a defense recognized in nearly every jurisdiction. If the allegedly defamatory assertion is an expression of opinion rather than a statement of fact, defamation claims usually cannot be brought because opinions are inherently not falsifiable

v. Mere vulgar abuse is an insult that is not necessarily defamatory because it is not intended to be taken literally or believed, or likely to cause real damage to a reputation. Vituperative statements made in anger, such as calling someone "an asshole" during a drunken argument, would likely be considered mere vulgar abuse and not defamatory.

vi. Fair comment on a matter of public interest, arguments made with an honest belief in their soundness on a matter of public interest (such ns regarding official acts) are defendable against thedefamation claim, even if such arguments are logically unsound, if a reasonable person could honestly entertain such an opinion, the statement is protected.

Vii. Consent is an uncommon defense and makes the claim that the claimant consented to the dissemination of the statement

viii. Innocent dissemination is a defense available when a defendant had no actual knowledge of the defamatory statement or no reason to believe the statement was defamatory. The defense can be defeated if the lack of knowledge was due to negligence. Thus, a delivery service (e.g. post office) cannot be held liable for delivering a sealed defamatory letter.

Ix. Claimant is incapable of further defamation - e.g. the claimant's position in the community is so poor that defamation could not do further damage to the plaintiff. Such a claimant could he said to be libel-proof, since in most jurisdictions, actual damage is an essential dement for a libel claim. Essentially the defense is that tire person had such a bad reputation before the libel, which no further damage could possibly have been caused by the making of the statement.

x. Statute of limitation. Most jurisdictions require that a lawsuit be brought within a limited period of time. If the alleged libel occurs in a mass media publication such as a newspaper or the Internet, the statute of limitations begin to run at the time of publication, not when the plaintiff first learns of the communication.

xi. No Third-party communication: If an employer were to bring an employee into a sound-proof, isolated room, and accuse him of embezzling company money, the employee would have no defamation recourse, since no one other than the would-be plaintiff and would be defendant heard the false statement.

xii. No actual injury: If there isthird-party communication, but the third-party hearing the defamatory statement does not believe the statement, or does not care, then there is no injury, and therefore, no recourse.

 

In addition to the above, the defendant may claim that the allegedly defamatory statement is not actually capable of being defamatory - an insulting statement that does not actually harm someone's reputation is prima facie not libelous. Also, the public figure doctrine also called the absence of malice rule may be used as a defense.

 

 

General defenses to a tort

The following defenses are available to a defendant for defense against tortuous liability;

i.                    Plaintiff’s default/ contributory negligence

This defense may be relied upon if the plaintiff is also to blame forhis suffering. The defendant mast prove that

ii.                  The plaintiff exposed himself to the danger/risk by act or omission.

iii.                The plaintiff was at fault or negligent

iv.                The plaintiff’s negligence or fault contributed to his suffering.

This defense doesn't absolve the defendant from liability. It merely reduces the amount of damages payable by the defendant to the extent of the plaintiff s contribution. This defense is unavailable if the plaintiff is a child of tender years.

iii.                Act of God

Where damage is caused directly by natural circumstances which no human foresight can provide against and of which human prudence is not bound to recognize the possibility, the defense of act of God applies. For this defense to succeed it must he shown that the act was not foreseeable and that it was unusual

iv.                Volenti non fit injuria

This defense is available in circumstances where the plaintiff with full knowledge of the risk voluntarily agrees to undertake thedefendant must prove;

a) That the plaintiff had actual knowledge of nature and extent of the risk

b) That the plaintiff agreed to incur the risk voluntarily as was the case in Tugwell V Burnett.

 

v.                                       Necessity

It may be relied upon if the tort complained of was necessary to protect the society. It is usually relied upon by the state for acts taken to protect the society at large as the interest of the public prevail. (solus populi suprema lex). The critical thing is that the act done has to be reasonable. Necessity is limited to cases involving an urgent situation or imminent peril. The measures taken must he reasonable and this will depend on whether there is human life or merely property in danger.

vi.                Statutory authority

This defense may be relied upon by the defendant (usually the State or its agents) if the nuisance is authorized by statute. The defendant has a complete defense only if he can prove that he acted in accordance with the provisions of the Act. Whether the defense succeeds ornot depends on the interpretation of the Statute.

 

vii.              Limitation of action

The statute of limitations provides a maximum period of time after a violation of civil or criminal law can no longer be prosecuted in court. This statue prevents the prosecution of an individual for violations committed many several years ago, which would constitute unfair punishment to prosecute the individual in present time.

 

In Kenya a tort has 3 years limitation period. The statute of limitations is necessary as all cases will degrade over time. This includes fading evidence, shoddy testimony from witnesses with poor recollection, changing crime scenes and record destruction.

 

 

 

 

SALE OF GOODS

Section 3 (I) of the Sale of Goods Act (Cap 31 of the laws of Kenya) define a contract of sale of goods as a contract whereby the seller transfers, or agrees to transfer the property in goods to the buyer for a money consideration called the price.

-    Where the transfer of property in goods takes place immediately, the contract is called a sale.

-    Where the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell.

 

Section 2 of the Sale of Good Act (S.G. A) defines goods as to include all chattels personal other than choses in action and money. In particular "goods" includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale’’.Hence the Act does not apply to freehold land, nor to chattels real e.g. leases. It does not also apply to things (choses in action). A chose in action " is used to describe to all personal rights of property, which can only be claimed or enforced by action and by taking physical succession e.g. shares debts, trademarks and negotiable instruments (for example cheques).

 

Meaning of various Terms under sale of Goods Act:

-   Seller: This is defined as a person who sells or agrees to sell goods.

-   Buyer: A person who buys or agrees to buy goods. A person can be both a buyer and seller e.g. where the owner of goods buys back his own goods from a sheriff who has seized them under a writ of fifa.

-   Property:  the general property in goods and not merely a special property. It means ownership.

-   Price: This is the consideration given by the buyer for the property in goods. The consideration for the sale must be money. Though it can be partly money and partly goods but it must be specific. Where the price is not determined, it must be a reasonable price. What is reasonable is a question of fact dependant on the circumstances of such particular case.The price may also be left to be fixed by the valuation of a third party, provided he accepts the duty and performs it. If he cannot make it the contract is avoided, but if the goods or any part of them have been delivered to and appropriated by the buyer, he must pay a reasonable price.Where the third party is prevented from making the valuation by the fault of the seller or buyer the party not at fault may maintain an action for damages against the party at fault.

 

Sale and Agreement to sell

-         A sale is a contract by which the seller transfers or agrees to transfer the property in goods for the price where as an agreement to sell the transfer of property in goods is to take place at a future time or subject to some condition being fulfilled.

-         In a sale the property in goods passes to the buyer while in an agreement to sell the property in goods does not pass to the buyer at the time of the contract.

-         In a contract of sale the passing of property gives the seller the right to sue the buyer for the price when the goods are still in his possession. While in an agreement to sell, one can only sue for damages.

-         Under contract for the sale of goods the buyer can re-sell the goods to a third party whereas under an agreement to sell the seller cannot sell the property without incurring liability.

-         If a third party wrongfully interferes with goods under a contract for sale on act can be brought by the buyer while where the third parry interferes with goods under an agreement to sell, an action can only be brought by the party having possession or an immediate right to possess.

 

 

 

Condition and warranties under sale of goods act

The issues which the parties to a contact agree on are called terms of the contact. The terms can be broken into two i.e.  Conditions and warranties;

Conditions: it is aterm which is of vital importance that it goes into the root of the agreement.The importance of the condition is that its breach if committed by the seller may give the buyer the right to reject the goods completely and refuse to pay the price or if he has paid, it recovers it.

Warranty: is a stipulation which is not of importance as to go to root of the contract.It is collateral to the main purpose of the contract.  The breach of a warrant gives rise to an action for damages but not to a right to reject the goods and treat the contract as repudiated.

 

Implied warranties under sale of goods Act;

  i.            Freedom from charges or Encumbrance. There is an implied warranty that the goods are free from any charges or encumbrances of any third party, not declared or known to the buyer before or at the time when, the contract is made.

ii.            Quiet Possession. There is an implied warranty that the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner or other person entitled to the benefit of any charge or encumbrance so disclosed or known.

 

Implied Conditions

i.              Right to sell: the seller has the right to sell.

ii.            Implied conditions that the goods must correspond with their description: Where there is a contract for the sale of goods by description, there is an implied condition that the goods must correspond with the description.

In Varley V Whip 1900 the seller agreed to sell second hand reaping machine which he described as new the previous year. The buyer had not seen the machine. On arrival it was found to be much older and he purported to reject it. The seller sued for the price. It was held that the age of the machine was part of the description and that there was a breach of a condition thus the plaintiff did not have to pay the price.

 

Where the buyer has received goods different from those he contracted to receive, he can either claim damages or he can reject the goods. The following remedies are available where goods delivered differ from those contracted:

a.       Where the seller delivers to the buyer a quantity of goods less than he contracted to sell the buyer may reject them but if the buyer accepts the goods so delivered he must pay for them at the contract rate.

b.      Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell the buyer may accept the goods included in the contract and reject the rest or he may reject the whole.

c.       Where the seller delivers to the buyer quantity of goods large than contracted to sell and the buyer accepts the whole delivery he must pay for them at the contract rate.

d.      Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest or he may reject the whole.

iii.    Implied conditions that the goods are merchantable. Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality unless a defect is brought to the attention of buyer before the contract or the buyer examines the goods before the contract is made.

iv.           Fitness for purpose. Where the seller sells goods in the course of a business and the buyer expressly or by implication indicates the particular purpose for which the goods are being bought there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose whether or not that isa purpose for which such goods are commonly supplied.

 

In Priest vs Last 1903, a customer went to a chemist’s shop to buy a hot water bottle. He asked whether it would stand boiling water and was told that it would take hot water but not boiling water. He thereupon bought it. After about 5 days it burst while being used and caused injuries to the defendant's wife and he claimed for damages. Held the bottle was not fit for use as a hot water bottle and the seller was liable to pay damages.

In Griffiths V Peter Conway Ltd a lady bought a coat without disclosing that her skin was particularly sensitive. She contracted dermatitis and sued for damages. It was proved that the coat was suitable for wearing by a person of normal skin. She sued but her action was dismissed.

v.   Sale by Sample. Where the sale is agreed to be sale by sample, the bulk must correspond with the sample in quality. The buyer must have reasonable opportunity of comparing the bulk with the sample. The goods must be free from any defect rendering them unmerchantable, which a reasonable examination of the sample would not reveal.

 In Godley v Perry, a small boy went into a shop and asked for a catapult. He was sold one. It broke and he lost sight of one eye.  The shop keeper had bought it from a wholesaler by a sample and had inspected the sample by pulling the catapult. The boy succeeded in action against the shopkeeper and the shopkeeper against the wholesaler as the defect would not have been revealed by a reasonable examination.

vi. Sale by sample and Description. Where there is a sale by sample as well as by description the goods must correspond both with sample and the description.

 

Exemption Clauses

Section 55 of the SGA enables the parties to a contract to opt out of their contractual obligations by the inclusion of an exemption clause. Whether an exemption clause is valid depends on whether it was incorporated into the contract and secondly whether it covers the event which has occurred. If the contractual document is signed the signature operates as an incorporation of all the terms which appears on that document or which is referred to in it.If the contractual document is not signed the clause will only be affective if reasonable steps have been taken to bring it to his notice before the contract was made.Even if the clause has been duly incorporated into the contract, it is not automatically effective. The courts have developed the following rules in effecting the exclusion clause:

a.       Privity - An exclusion clause, in a contract between A and B cannot protect C even if employed by B to perform the contract

b.      Contra prefarantum rule - A party seeking the protection of an exemption clause must prove that the wording is clear enough to cover the alleged breach. Any ambiguity is strictly construed against him.

c.       Strict Liability – Exemption clauses do not offer protection for the person seeking it if he tries to exempt himself from his strict liability. In White vs John Warwick A Co Ltd: A hired out a tradesman tricycle to B “at owner's risk" the saddle tipped forward throwing B to the ground. B claimed damages and succeed.

d.      Misrepresentation - A court will not allow a party to rely on an exemption clause if he has misrepresented its effect.

e.       Later Oral Promises: An exemption clause will be ineffective if it is displayed by later oral statement. In coachman vs Hill, an auctioneer at a cattle auction said to a prospective but hesitant buyer of a heifer. “I warrant she is unserved." This induced the buyer but the statement was incorrect. It was held that the auctioneer was liable to the buyer and that he could not shelter behind a small print exemption clause.

f.       Fundamental Breach: The breach of an important term of the contract with disastrous consequences cannot afford on an exemption from liability

g.      Under the Unfair Contract Terms Act of England, a person cannot by reference to persons generally or to particular person exclude or restrict for death or personal injury resulting from negligence.

 

Passing of property

It is important to know the precise moment of time at which the property in goods passes from the seller to the buyer because of two reasons;

i.        In case of the destruction of the goods by fire or other accidental cause it is necessary to know which party has to bear the loss.

ii.      In cases of bankruptcy of either seller or buyer it is necessary to know whether the goods belong to the trustee of the bankrupt or not.

iii.     

Consequences of passing of property

It is very important to distinguish between the passing of property and transfer of property. Why?

a.       Unless otherwise agreed the risk of accidental loss or damages passes to the buyer as soon as the property passes to him.

b.      The passing of property gives the seller the right to sue the buyer for the price.

c.       If the property has passed to the buyer he can re-sell the goods to a third party without incurring any liability to the seller.

d.      The passing of property does not automatically give the buyer a right of possession. The buyer can only claim the goods if he is ready and willing to pay the price or if he can prove the seller has agreed to give him credit.

e.       If property and possession pass at different times a non- owner can pass good-title.

f.       If a third party interferes with the goods only the person either in possession or with an immediate right to posses can sue.

g.      If the seller becomes bankrupt / insolvent while the goods are in his possession the buyer can only claim the goods if the property has passed.

h.      If the buyer becomes insolvent after obtaining possession the unpaid seller can exercise his right to lien.

 

When does property pass?

The rules governing passing of property depend on whether the goods are specific or unascertained.

a.       Specific/Ascertained goods: This means goods identified in accordance with the agreement after the contract is made. If something needs to be done on the goods for example selection from unascertained good, they become ascertained on selection.

b.      Unascertained Goods: This refers to some good of generic (general) nature i.e. where the subject matter of the sale is not specific chattel.If a contract relates to part of a larger quantity goods e.g. sale of 100 kg of a haul of 10 tones, these are unascertained goods.

 

When there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.Where there is a contract for the sale of specific goods or ascertained goods the property then is transferred to the buyer at such times as the parties intend it to be transferred.

 

The following rules determine when properties in goods pass:

Rule I

Where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment of or the time of delivery or both be postponed.

In Dannant vs Skinney X a swindler, bid for a car at an auction and it was knocked down to him. He gave a false name and address and was allowed to take the car away in return for a cheque; on signing a form that no property of the car would pass until the cheque was met. He then sold the car which was resold to the defendant. Thecheque was dishonored and the original owners sought to recover it.  Held when X signed the form the property and already passed to him.

Rule 2

Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods, for the purpose of putting them into a deliverable state property does not pass until such is done and  buyer has notice that it has been done. Goods are in deliverable state when they are in such a state that the buyer would under the contract be bound to take delivery of them.

In Under Wood ltd V Burgh Castle Brick and Cement Syndicate, 1932, a Seller sold a 30-tonne condensing engine "free on rail London." At the time of the sale it was embedded in the floor of a factory. The sellers dismantled it and proceeded to load it to a truck, but in doing so part of the machine was accidentally broken. It was held:

-       At the time of the contract the machine was not in a deliverable state

-       The risk was still on the sellers

Rule 3

Where there is a contract for the sale of specific good in a deliverable state, but the seller is bound to weigh, measure, test of do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice that it has been done. In Tanley Vs Bates, S sold a heap of clay at a price of $x per tonne and it was agreed that the buyer would load the clay and weigh it to ascertain the price. It was held that the property passes to the buyer when the contract was made since he was the one to weigh.

 

Rule 4

Where goods are delivered to the buyer on approval or on sale or return or other similar terms the property there in passes to the buyer;

a.       When he signifies his approval or acceptance to the seller or does any other act adopting the transaction.

b.      If he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection. If a time has been fixed for the return of the goods, on the expiration of that time. If no time has been fixed on the expiration of a reasonable time. What is reasonable is a question of fact.

 

A contract can be one of the sale even if the person never intends to buy the goods himself. In Poole V Smith's car sales Ltd, a Vauxhall car was sent by the plaintiff to the defendants (both car dealers) for storage and it was agreed that the defendants could sell the car provided that the plaintiff received $325 for it. The car remained unsold for 3 months. When the plaintiff demanded return, the car was returned in a damaged condition whereupon the plaintiff refused to accept it and sued tor the price. It was held:

a.       Since both the parties had treated the contract as one of sale or return it must be regarded as such.

b.      The defendants had retained the car beyond a reasonable time and therefore the property had passed.

 

In Kikhan V/S Attannborouh, K delivered Jewellary to W on sale or return. W pledged it to A. It was held that the pledge was an act by W adopting the transaction and therefore the property in the jewellary passed to him so that K could not recover it from A.

 

 

 

Transfer of title by non - owner

The general rule is that where goods are sold by a person who is not the owner of them the buyer acquires no better title than the seller had.

In the case of Bishopgate Motor Finance Corporation V Transport Brakes Ltd, Lord Denning observed in respect of the rule, 'In the development of our law (two principals) have striven for mastery.

a)      The first is for the protection of property ‘no one can give a better title than he himself possesses’ This passage expresses the rule frequently dignified by the use of the Latin terms: nemo dat quod now habet which when literally translated means that no one can give what he has not.

b)      The second is for the protection of commercial transaction: the person who takes in good faith and for value without notice should get good title. Section 23 of the sale of goods Act provides that where goods are sold by a non -owner and without authority or consent of the owner, the buyer acquires no better title to the goods than the seller had unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell.

 

Exceptions to NEMO DAT rule

The opening words of Section 23 indicate that there are a number of exceptions to the general rule name dat which are of considerable importance. These are;

i.        Sale under order of Court: Where goods are sold by the order of a court of competent jurisdiction the buyer of the goods acquires goods title. This can happen where goods of perishable nature are ordered to be sold to avoid loss.

ii.      Sale under a common law or Statutory Power. There are circumstances under which a non-owner is enabled to pass a good title. At common law a pledge can do so if the pledge makes default and so can mortgagee.

iii.    Estoppel: Section 23 of the sale of goods Act Cap 31 laws of Kenya provides the doctrine of estoppel where the owner is precluded from denying the seller’s authority to sell. An owner is precluded by section 23 where he is precluded by his words or conduct represented to the buyer that he is the true owner or has the owner's authority to sell.Secondly, the doctrine of estoppel operates when the owner is precluded by his negligent failure to act, allows the seller to appear as the owner or as having the owner's authority.

 

In Handerson Vs Williams,sugar bags belonging to O were stolen in the warehouse of W. F fraudulently induced O to sell the sugar to him, the contract being void for mistake. O instructed W to hold the sugar to the order of F and in response to an inquiry from H, W informed H that the sugar was held to the order of F. H thereupon bought the sugar from F. Ondiscovering the fraudO instructed W to detain the bags and indemnified him for doing so. Held that O (through whom W claimed) had held out F as having a right to sell and could not therefore deny F's right as against H who had acted on the holding out. He was therefore entitled to damages for conversion of his goods.There must however be some form of holding to the person claiming to have acquired a title.

 

In Farquaharson vsking, where the plaintiff who owned timber lying at docks orders signed by C. C calling himself B fraudulently sold timber to the defendants. He then in his own name directed the dock company to transfer the timber to the order of B and then in the name of B he directed them to hold it to the order of the defendants. The defendants who had not heard of the plaintiffs or C then paid C (alias B)the price and obtained delivery. It was held that the plaintiffs were not precluded from sitting up their ownership as against the defendants. The mere delivery of possession does not give rise to an estoppel.

 

iv.    Agency - Sale by mercantile agent: At common law a sale by an agent will bind his principal if the agent had actual or apparent or usual authority or authority by operation of law.

Conditions - for this to apply an agent must receive possession in his capacity as a mercantile agent. A buyer from a car dealer would not get a good title if the dealer was only in possession for repair purposes. The agent must have obtained the property by the owner's consent. The agent must act in his ordinary course of business of a mercantile agent. He must have bought them in good faith and without notice.

 

v.      Sale of under voidable Title: The sale of goods act provides that when the seller of goods has a voidable title to them, but his title has not been avoided at the time of the sale the buyer acquires a good title to the goods provided he buys them in good faith and without notice of the seller's defect of title. The great practical importance of this rule is that, if a person buys goods by fraud and dispose of them before the owner avoids the contract, a buyer in good faith acquires a good title. But when the fraud is such as to render the offer and the acceptance there is no contract. Inigram V Little: where a swindler took a car by misrepresenting himself as a prominent person and gave a worthless cheque. It was held that there was no contract.

vi.    Sale of seller in Possession: Where a person having sold goods continues to be in possession of the goods or of the document of title to the goods. The delivery or transfer by that person or by a mercantile agent acting for him to a third party passes a good title.

vii.  Sale by a buyer in possession. Where a buyer having bought or agreed to buy the goods obtains possession or title of the goods with the consent of the seller, sells or pledges them either himself or through a mercantile agent to a person who buys in good faith, he obtains a good tide to the goods.

viii.Sale in a market overt. A market overt covers an open public and legally constituted market where goods are sold. The sale of goods act of Kenya does not recognize this exception otherwise in English law where goods are sold in a market overt, a buyer acquires good title.

ix.     Sale under the Hire Purchase Act. Similarly this is not provided for under the Kenya Hire Purchase Act Cap 507 but is recognized by the Hire Purchase Act 1965 of England

 

Performance of contract of sale of goods

Duties of the seller include:

i.        Duty to pass a good Title: The main purpose of the sale of goods is to get title to goods and it is incumbent upon the seller to pass a good title.    

ii.      Duty to deliver the goods: It is the duty of the seller to deliver the goods and the buyer to accept and pay for them in accordance with the terms of the contract of the sale.

iii.    Duty to Supply the Goods at the Right time: In ordinary commercial contracts for the sale of goods the rule clearly is that time is prime facie of essence with respect to delivery. If the time of delivery is fixed the failure to commonly amounts to breach of condition.

iv.    Duty to supply goods in the Right Quantity: The seller must deliver the correct quantity.  Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them but if the buyer accepts the goods so delivered he must pay for them at the contract price. Unless otherwise agreed the buyer of goods is not bound to accept delivery thereof by installments

v.      The Duty to Supply of the right quality:

-       If the goods are sold by description there is an implied condition that the goods must correspond with their description.

-       There is an implied condition of merchantability.

-       If goods are sold by sample there is a condition that the goods must correspond with the sample

-       If the goods are sold by trade usage, there is an implied condition that the trade usage shall be complied with.

 

Duties of the buyer:

i.        Duty to pay the price. It is the duty of the buyer to pay the price of the goods he has bought or agreed to buy and in the absence of a contrary agreement he is not entitled to claim possession of the goods unless he is ready and willing to pay in accordance with the contract.

ii. Duty to take Delivery: The general rule is that it is the buyer to take delivery of the goods from the sellers of business and not for the seller to send the goods to the buyer. In accordance with those rules:

a)The place of delivery is the seller's place of business.

b)         The seller must deliver the goods within the time agreed and if no time is fixed, it must be within reasonable time.

c)         Where the goods are at the time of contract with a third party, the property in goods does not pass until the third party acknowledges that he holds the goods on behalf of the buyer.

d)        Where the goods are not in deliverable state the seller must put them in a deliverable state at his cost.

 

Methods of delivery

a.        Physical transfer of goods themselves

b.        Delivery of the means of control e.g. where sellers hands to the buyer the key to the warehouse where the goods are kept.

c.        By atonement  (acknowledgement of third party)

d.       Delivery of the document of title

e.        Constructive delivery eg. Where the buyer is already in possession of the goods the character of his possession changes from that of a bailee to position of a buyer.

 

Remedies /rights of unpaid seller

As has been observed the buyers duty is to accept and pay for the goods. A seller who is unpaid has the following remedies:

i.        Lien: this is the right of unpaid seller to retain possession of the goods until the buyer pays or lenders the price even though the property in the goods has passed to the buyer. Alien is available when:

-       The goods have been sold without any stipulation as to credit.

-       The goods have been sold on credit but terms of credit has expired.

-       The buyer becomes insolvent.

A lien is lost when:

-       When the goods are delivered to a carrier for the purposes of transmission to the buyer without reserving the right of disposal.

-       When the buyer or his agent lawfully obtains possession of the goods.

-       By waiver

ii.      Stoppage in transit. It is available when;

-       The buyer becomes insolvent

-       The goods are in transit

The transit status ends in the following cases:

-       The buyer obtains delivery before the arrival of the goods at their destination.

-       If after the arrival of the goods at their destination, the carrier acknowledges to the buyer that he holds the goods on his behalf.

-       If the carrier wrongfully refuses to deliver the goods to the buyer.

iii.    A right to Resale; The exercise of the right of lien of stoppage in transitu does not deny the seller a right of resale. The seller can resale the goods in the following circumstances:

-       Where the goods are of of perishable nature

-       Where he gives notice to the buyer of his intention to resale and the buyer does not within reasonable time pay.

-       Where the seller expressly reserves a right of resale in case the buyer should make default,

iv.    Retention;a unpaid seller who is still the owner of the goods has a right of retention co-extensive with the right of lien and stoppage.

v.      Action for price. An action for the price lies when the property in the goods has passed to the buyer.

vi.    Action for damages. Where the buyer wrongfully neglects or refuses to accept and pay for goods, the seller may maintain an action against him for damages for non-acceptance.

 

Remedies of Buyer /Rights of Buyer

i.        Rejection: A buyer can reject the goods for breach of a condition to be performed by the seller.

ii.      Recovery of prices: If the buyer has paid the price he can recover it if the consideration has failed.

iii.    Action for damages for breach of warranty

iv.    Action for damages for non Delivery: A seller is guilty of non- delivery not only if he fails to deliver at all, but also where he delivers goods which the buyer is entitled to and does reject.

v.      Action for specific performance: According to the well-known of principles of equity the remedy of specific performance will only be awarded where damages are an inadequate remedy.

vi.    Action in Tort: A final remedy available to a buyer is to sue the seller and third parties in tort if he is entitled to possession of the goods and possession is withheld.

 

LAW OF AGENCY

Definitionof an agency

Agency is defined as the relationship which arises whenever one person called the agent acts on behalf of another person called the principal and has powers to affect the principal's legal position with regard to a third party.

An agent therefore is a person employed expressly or impliedly to do any act for another or to represent another in dealing with a third party.

[See hand out for difference between agent and trust, agent and bailment)

 

An agency may be created in any one of the following ways:Express agreement, Implication or conduct /estoppels, Necessity, Ratification and Cohabitation.

 

i.                    Express agreement / contract

Basically, agency is a relationship arising from consent. Usually such consent is expressed in the form of a contract. Such a contract may be express or implied.

 

As with other contracts, the parties must consent freely to the creation of the relationship between them. There must not be fraud, duress, misrepresentation or mistake. In general, no special form of contract is required. The appointment of an agent needs not to be in writing. But a statute may require an interest in land to be created or disposed off by in agent and fully authorized in writing in which the agent must be appointedin writing. Similarly, where an agent is required to execute a deed (i.e. writing on a paper, signed, sealed and delivered) his authority must itself be created by a deed. The instrument /document containing the agent's authority is the "power of attorney."

 

Power of attorney

A power of attorney is defined as a document which appoints a person called the donee or attorney, and invests him with power to act either generally or in a manner specified on behalf of the person who gives the power called the donor.The purpose of a power of attorney is to furnish the donee with a document setting out his power for production as his authority to third parties with whom he is to deal.

 

Creation of power of attorney

a)      Construction: The courts construe a power of attorney to the strictest possible way with the carrying out of the instructions given in the power according to its terms. The donor should therefore not give the attorney unnecessarily wide powers, in case he should prove not entirely trustworthy or affecting the donor in a matter which could have been left alone.

b)      The property: The property over which the power is to be given must be strictly defined. In case of property abroad, reference should be made to the High Commissioner or other representative of the area concerned. In respect to land care must be taken as not to give powers extending to unintended land.In case of bank accounts if the donor desires that he donee should have powers to operate a bank account, letter collateral should be signed.

c)      Borrowing: If the donee is to have power to borrow money upon the security of the donor's properly, this must be clearly stated.

d)     Duration: A donor may require that the power given shall be exercisable either for a certain period or indefinitely or may, for the more efficient performance of the donee's duties and for the better assurance of persons dealing with him, decide that the power shall be irrevocable for a stated period.

e)  Capacity: The power to donate and the power to contract are co-extensive.

f)   Substitution and delegation: It is desired that the attorney be permitted to appoint a substitute or to delegateany of his duties, this must be incorporated in the clause.

 

Revocation of Power

This may be made:

-       By express acts of the parties

-       By implication

 

ii.                  Agency by Estoppels

Estoppels means that a person who has allowed another to believe that a certain state of affairs exists with the result that there is reliance upon such belief, cannot afterwards be heard to say that the true state was far different.

In agency this means that a person who by words or conduct has allowed another to appear to the outside world to be his agent with the result that third parties deal with him as his agent, cannot afterwards repudiate this apparent agency if to do so would cause injury to third parties. He is treated as being in the same position as if he had in fact authorized the agent to act in the way he has done. There may be that there is no agent and principal relationship, but a person can become a "principal" by placing another in a situation which according to the ordinary usage of mankind that other is understood to represent and act for the person who has placed him so. For there to arise agency by estoppel the following conditions must be present:

a.       There must be a representation i.e. a statement or conduct on the part of the principal which can amount to a representation that the agent has authority to act on his behalf in the way he is acting.

b.      A reliance on the representation. The representation must be made to the person who relies upon it.

c.       An alteration of a party's position resulting from such reliance.

d.      The representation must be made intentionally or negligently.

e.       The representation must be the proximate cause leading the party into that mistake.

 

iii.                Agency of necessity

There are some instances where although no relationship of principal and agent exists the law regards what has been done by somebody as having been done by the other person and therefore as his agent. It mostly occurs when a person is entrusted with another's property and it becomes necessary to do something to preserve that property. In such case, although the person who is entrusted with the property has no express authority to do the necessary to preserve it, because of the necessity, such authority isimplied.Before any agency by necessity may be created the following conditions must be satisfied:

a.       It must be impossible to get the principal's instructions. In Spinger vs G.H Railway, tomatoes were consigned by S from Jersey to London. The ship delivered them at Weymouth three days late and owing to a railway strike the tomatoes could not be unloaded until 2 days later. When they were valued they were found to be bad and the railway company decided to sell them locally. No communication was made to S. Held, the railway company was liable in damages to S as they should have communicated with him and asked for his instructions as soon as the ship arrived.

b.      There must have been an actual and definite commercial necessity for the creation of the agency.In Sims V Midland Rail Co., the defendant railway company was delivering perishable goods to the plaintiff. As a result of a strike, there was delay in delivery and the goods began to deteriorate. The Railway Company sold them to avoid their total loss. It was held that the railway company was not liable for damages as it acted out of necessity.

c.       The agent of necessity must act bona fide and in the interest of all parties concerned.

 

 

Agency by necessity is implied in the following cases:

a.       A Wife deserted by her husband. She has authority to pledge her husband's credit for necessaries

b.      Master of a ship has wide powers in respect of the ship on its cargo in case of danger.

c.       A bill of exchange if accepted for the honour of the drawee by someone not already liable in the bill.

d.      Carriers of goods. In case of an accident or upon an emergency can act as an agent of necessity for the owner to take care of the goods.

 

iv.                Agency from cohabitation

The relation of principal and agent exist between spouses as long as they live together quite apart from express consent, estoppel or implied.She can purchase necessaries and the wife has the husband's authority to pledge his credit for such necessaries.Requirements for such agency:

a.                   Cohabitation - The husband and wife must be cohabiting, this is so if the man and wife are staying together and it is reasonable to infer that the wife is acting on behalf of her husband when she orders such necessaries.

b.                  Domestic establishment: The fact that the parties cohabit is insufficient unless they are living together as man and wife circumstances which show they are a family. So where people stay in a hotel even if married, it does not apply. Ref (Deberhan V Mellon).

c.                   The goods or services ordered must be necessaries suitable to the style in which she and her husband customarily live

d.                  If evidence shows that she cannot be presumed to have his authority he will not be liable.

e.                   Similarly, where the wife is forbidden to pledge the husband's credit he will not be liable. In Lane V. Ironmonger, a tradesman had not been told that the wife had no authority to pledge her husband's credit. It was held that the husband was not liable.

 

v.                  Agency by ratification

Ratification means the granting of authority by a principal to an agent after the initially unauthorized act is carried out by the agent. If an agent has no authority to contract on behalf of a principal or exceeds such authority as he has the contract is not binding. But if the principal confirms and adopts the contract made, he is said to ratify the contract.The effect of ratification is to render the contract as binding on the principal as if the agent had been properly authorized beforehand.

 

Requirements of ratification:

a.       The principal must be in existence at the time the act was done by the agent. Ratification can only be by a person in existence either actual or in contemplation of law. This includes a company. In Kelner V. Baxter, B was the promoter of a company not yet registered. He made contract on behalf of the company. After incorporation, it attempted to ratify the contract. Held that B was personally liable because the company was never in existence at the time of the contract.

b.      The Agent must have acted as agent. The agent must have intended to act as agent of a named principal otherwise no ratification is possible.

c.       Ratification must take place within reasonable time.The principal must have enjoyed that capacity to ratify at the time of the making of the contract. In Brod V Brown an agent, without the authority of the principal (consignor) sent a notice of stoppage in transit. Transit had ended and the goods were in possession of the consignee's trustee in bankruptcy before the consignor purported to ratify his agent's act. It was held that this attempt at ratification came too late to divest the trustee in bankruptcy of his right of possession.

d.      The principal must have had capacity to do the act the time the agent did it. An ultra-vires act cannot be ratified by the company. It must also have the contractual capacity like the agent.

e.       The legal quality of the act. Ie the action to be ratified must be legal. A principal cannot ratify any illegal act by his agent e.g a forgery.

f.       Principal aware of the facts.A principal cannot ratify unless he is aware of all the material facts. In freeman V Rosher L. let premises to T. When T fell into arrears with his rent, L instructed A to levy distress charges. A, wrongly seized and sold a shed which T used as a workshop. He then accounted to L. T sued L in trespass. Held, as L was not aware of the wrongful seizure, his acceptance of the money did not amount to ratification of it. L was thus not liable.

g.      Ratification must be of the whole contract. A principal can either elect to ratify the whole contract or refuse the whole contract but cannot ratify part of it.

 

Agents Authority

This is the most important part of the agency relationship. The agent's power / authority arises either by the express authority of the principal, sometimes the authority arises as a result of the principal conduct.

 

Types of Agent's authority:

a.       Express Authority: Express authority may be given by a principal to his agent. It may be oral or in writing. If the authority is given under seal it is known as power of attorney.

b.      Implied Authority: Usually the agent's authority is not confined to the specific acts. The agent has implied authority to do everything necessary for or incidental to the execution of his express authority.

c.       Usual Authority: This is concerned with the agents employed to act for a principal in connection with matters concerning a particular trade or business or profession. Such agent is impliedly authorized to do what is usual in his trade, profession or business for the purpose of carrying out his authority. Examples of people with usual authority are auctioneers. Since they are instructed to sell, he has authority to sign a memorandum of the contract of sale.If the principal restricts usual authority of his agent, this restriction will not affect third parties who are unaware of it.

d.      Apparent Authority (Ostensible Authority). It is the authority which negatives the existence of actual authority. It is a form of estoppel unless three ingredients are present:

-       Representation

-       Reliance on that representation 

-       An alteration of his position resulting from such reliance.

e.       Authority by Ratification. This occurs where an initially unauthorized act is subsequently affirmed or (ratified) by the principal and thereupon become binding. All the conditions of ratification apply.

f.       Authority of necessity. Emergencies may sometimes enlarge the authority of an agent. Many cases relating to the authority as an agent to act in an emergency contain reasoning linking them with the special but limited doctrine of agency of necessity, whereby a person not previously an agent is by emergency constituted an agent.

 

Types/classes of agents

a.       Universal agent: an agent who has been appointed to act for the principal in all matters.

b.      General agent: engaged to perform a particular task or transaction on behalf of the   principal in the ordinary course of his business, trade or profession as an agent e.g. banker, stock broker.

c.       Special agent: an agent whose authority is restricted to the performance of a particular act or transaction only.

d.      Auctioneers: an agent with the authority to sell goods at a public auction. He has authority to sign a memorandum of the contract of sale. He cannot give credit/sale on credit. He is deemed to be the agent of the purchaser as well as vendor/buyer for the purpose of signing the memorandum.An auctioneer's implied authority is to sell without reserve price and a sale by him below the reserve price will be binding on the principal even if instructed otherwise by the principal.

e.       Factors / Mercantile Agent: an agent entrusted with the possession of goods for the purpose of sale. He has implied authority to sell in his own name. He may warrant the title of the goods he sells. He has a general lien on goods in his possession on the proceeds of sale.In Folkes V Kings, F owned a car and delivered it to H. a mercantile agent for sale at not less than $575. He sold the car for $ 340 to K who bought it in good faith and without notice of any fraud. He (H) misappropriated the $340. F sued to recover the car from K. Held H was in possession of the car with F's consent for the purposes of sale and K got a good title. A mercantile agent does not sell a car in the ordinary course of business unless he sells the registration book with it. He cannot pledge the goods if he has been instructed to sell them.

f.       Broker / jobber: an agent who is employed to buy or sell on behalf of another. He unlike a factor does not have possession of the goods and thus does not have lien over them. He cannot sue on his own on the contract. They are members of a stock exchange and do not have powers to go beyond the rules that govern it. If instructed by many people he can buy shares in the own name and apportion them to his principals.

g.      Del credere agent: an agent engaged to sell goods who undertake that he will pay for any goods sold if the buyer fails to do so. He only undertakes that they will pay and does not make him liable if his buyers refuse to take delivery. The agent agrees in return for a commission (called a Del credere) to guarantee payment of the price.

 

Warrant of Authority

An agent who contracts on behalf of his principal is normally regarded as warranting his authority to do so. Where a person, by words or conduct, represents that he has authority to act on behalf of another and third party is induced by such representation to act in a manner in which he would not have acted if such representation had not been made, the first mentioned person is deemed to warrant that the representation is true and is liable for any loss caused to such third party by a breach of such implied warranty.

 

Breach of Implied Warranty of authority

A person who professes to act as agent, but has no authority from the alleged principle or has exceeded his authority is liable in an action for breach of warranty of authority at the suit of the party with whom he professed to contract.

-       The right arises out ofthe implied representation.

-       An action can only be brought by the third party not by the principal.

-       The agent is liable whether he acted innocently or fraudulently ( Young V. Tonybee)

-       The agent will not be responsible if his lack of authority was known by the third party.

-       The measure of damages for breach of warranty ofauthority is the actual loss sustained.

 

Right/remedies and Duties between Principal and Agent

Rights/remedies of an agent: entitlements(see handout)  

a.  Right to sue: if the principal fails to remunerate or indemnify, the agent can sue fordamages for breach of contract.

b.      Right of lien: retain the goods for any obligation owed by the principal.

c.       Right of stoppage in transitu.

d.      Withhold the passing of property

 

Duties of the Agent; what an agent is obliged to do:

a.       Duty to perform: Where an agent agrees to act, he is bound to perform his agency and failure to do so will result in his being liable for damage.

b.      Care and Skill: The agent has a duty to exercise due diligence on the performance of his duties and to apply any special skills he professes to have (Kepple V. Wheel) (Proudfoot V. Montefiore). An agent shipped goods and having heard of loss, purposely refrained from telegraphing to the principal because he thought the principal might not insure it. It was held that it was his duty to have telegraphed, and that an insurance effected by the principal after the time when he would have received the telegrams was void on the ground of non- disclosure of material facts.

c.       To render an account when needed: An agent will usually be held to be bound by his own accounts. Thus if they show that he has credited his principal with money received, the agent will be presumed to have received that money and will be liable for it to his principal.

d.      Not to become principal as against his employer. In words it implies that his interest must not conflict with his duty.

e.       Estoppel: an agent is estopped from denying the tittle of his principal to any property.

f.       Keep proper accounts/Separate accounts: He should not mix his principal's money with his.

g.      Secrecy and good faith: An Agent must keep his principal's secrets and must not disclose any information gotten out of his agency relationship.

h.      Not to make secret profits / bribe: an agent is not allowed to make secret profit beyond the commission or other remuneration paid by his principal. If an agents gets a secret profit or takes a bribe the principal has the following remedies:-

-       He may recover the amount of the secret profit from the agent. In Reading V Attorney General. A sergeant in the Army stationed at Cairo, while in uniform accompanied civilian Lorries containing illicit goods through Cairo, enabling them to pass the civilian police without inspection. He was paid a large sum of money for his services. The military police took possession of the money, and the sergeant petitioned the crown for its return. It was held he could not recover the money because he had not obtained it by reason of his employment but by dereliction of his duty.

-       The principal may refuse to pay the agent his commission of other remuneration. In Andrews V Ramsay. A instructed R to sell property and agreed to pay him $ 50 commission. R sold and received $100 from the purchaser as deposit which he paid $ 50 to A retaining the other $ 50 in payment of his commission with A's consent. A later learnt that R had also received $ 20 and $50 he had paid R. Held he was entitled to recover both sums.

 

Duties of the principal

a.       Remuneration: the agent should be remunerated for services rendered. It is immaterial that the principal has not benefited from the undertaking. However, the principal is not bound to remunerate the agent if:

-       He has acted negligently

-       He has acted in breach of the terms of the contract

-       He has made a secret profit without disclosure

b.      Indemnity: it is the duty of the principal to compensate the agent for any loss or liability arising. However this is only if the agent was acting within the scope of his authority.

 

Rights/Remedies of the principal

a)     Dismissal; for misconduct e.g. acting fraudulently.

b)     Right to sue/ lake court action.

 

Personal liability of the agent to third parties

Though the principal is generally liable for the acts of the agent, in certain cases the agent may be personally liable:

a)     Where the agent expressly or impliedly consents to personal liability

b)     Where the agent negligently or recklessly fails to indicate the agency

c)     Where the agent executes a deed in his own name.

d)     Where the agent represents himself as the principal.

e)     Where the agent exceeds his authority.

f)       Where the principal does not exist nor has no capacity.

g)      Where an agent executes a deed in the principal's absence in circumstances in which his appointment was not by deed.

 

Termination of agency

An agency relationship may be terminated in and of the following ways: [see hand out)

a)     Agreement

b)     Withdrawal of consent

c)     Death of cither party

d)     Performance

e)     Lapse of time

f)       Insanity

g)     Bankruptcy of the principal

h)     Frustration of contract

i)       Destruction of subject matter

j)       Cessation of emergency

k)     Cessation of cohabitation