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THE LAW OF CONTRACT NOTES

5.1 Introduction

The law of contract is the foundation upon which the superstructure of modern business is built. In business transactions quite often promises are made at one time and the performance follows later. The law of contract lay down the legal rules relating to promises, their formation, their performance, and their enforceability. The law of contract in Kenya was first based on the Contract Act 1872 of India. This Act does not apply now in Kenya except to contracts made before 1st January, 1962. The law of Contract (Cap. 23) states that the English Common law of contract is applicable since 1st January, 1961. Section 2 (10 of this Act provides: “Save as may be provided by any written law for the time being in force, the common law of contract, as modified by the doctrines of equity, by the Acts of Parliament of the United Kingdom applicable by virtue of subsection (2) of this section and the Acts of Parliament of the United Kingdom specified in the Schedule to this Act to the extent and subject to the modifications mentioned in the said Schedule, shall extend and apply to Kenya”. It means that the common law of England relating to contract, subject to modifications, is
applicable in Kenya. The date of reception of the common law of contract is 12th August 1897. English decisions after this date are only of persuasive authority.

5.2 The Nature of Contract

A contract is an agreement of promises which is legally binding or enforceable by law. A contract has been defined by Sir William Anson in the words, “A legally binding agreement between two or more parties, by which rights are acquire by one or more to acts to forbearances on the part of the other or others”. The law of contract imposes an obligation on every person to honour his legally enforceable promises, failure to do which renders him liable to compensate the injured party or otherwise attorn for his conduct. What is intended here is to promote commercial relations and since commerce generally entails individual or personal interactions, the obligation imposed by a contract is, in general, created by the parties themselves. The parties must, however, act within
the ambit of the law.

5.3 Essential of Valid Contract

The essential elements of valid contract as follows:
1. Offer and acceptance
There must be a ‘lawful offer’ and a ‘lawful acceptance’ of the offer, thus resulting in an agreement. The adjective ‘lawful’ implies that the offer and acceptance must satisfy the requirements of the Contract Act in relation thereto.

2. Intention to create legal relation
There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations. Agreements of social or domestic nature do not contemplate legal relations, and as they do not give rise to a contract e.g. an agreement to dine at a friend’s house or a promise to buy a gift for wife are not contracts because these do not create legal relationship. In commercial agreements an intention to create legal relations is presumed. Thus, an agreement to buy and sell goods intends to create legal relationship is a contract provided other requisites of valid contract are present.

3. Lawful Consideration
Consideration has been defined as the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something and gets something. The something given or obtained is the price for the promise and called consideration.

4. Capacity of parties
The parties to an agreement must be competent to contract, otherwise it cannot be enforced by a court of law. In order to competent to contract, the parties must be of the age of majority and of sound mind and must not be disqualified from contracting by any law to which they are subject.

5. Free Consent
Free consent of all parties to an agreement is another essential element of a valid contract. ‘Consent’ means that the parties must have agreed upon the same thing in the same sense. There is absence of ‘free consent’, if the agreement is induced by (i) coercion, (ii) unduce influence, (iii) fraud, (iv) mis-representation, or (v) mistake.

6. Lawful object
For the formation of a valid contract, it is also necessary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or property of another.

7. Possibility of Performance
Another essential feature of a valid contract is that it must be capable of performance. If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law. All the above elements must be present. If one or more elements are absent then the contract may be void, voidable or unenforceable.

5.4 Classification of Types of Contracts
Contracts may be of various types. These may be classified as under:-

1. Express and Implied Contract
An express contract is one in which the parties specifically agree about the nature and terms of their relationship. There is then said to be an express agreement. For example, if A agrees to sell his goods to B for KSH. 10,000/= and B agrees to buy the goods at that price, there is said to be an express contract for the sale of goods at an agreed price. On the other hand, there is no specific agreement in an implied contract. The conduct of the parties, as well as all the surrounding circumstances, must be taken into account in order to ascertain whether or not a contract exists. Thus where A hires a taxi and boards it there is an implied contract that the taximan shall convex A up to his destination and that A shall pay such fare is usually paid for that trip.

2. Unilateral and Bilateral contracts
A Unilateral Contract is one in which only one party is bound. It is a rare type of contract which arises, for instance, where there is an offer of a reward. Thus, if ‘A’ offers a reward to anyone who will recover his lost property, no one is bound to recover the lost property but ‘A’ himself is bound to give the promised reward to any one who might recover the property. Most contracts are bilateral. A bilateral contract is one in which both parties are bound. Thus, if A agrees to sell his goods to B and B agrees to buy them at a stated price, both parties are bound. A is bound to deliver the goods to B and B is bound to accept them to pay the price.

3. Valid, Void and Voidable Contracts.
A valid contract is an agreement enforceable by law. An agreement becomes enforceable by law when all the essentials of a valid contract discussed above are present. A void contract is an agreement which is not binding or enforceable by law. This is because it has no legal effect at all and is, therefore, not binding on any of parties. A contract is rendered void in certain cases where both parties were mistaken, where it is prohibited by law of where it is entered with out consideration e.t.c. A voidable contract is one which is enforceable by law of the option of one of the parties. Usually a contract becomes voidable when this consent of one of the parties to the contract is obtained by undue influence, or misrepresentation. Such a contract is voidable at the option of the aggrieved party of the party whose consent was s caused.

Where there is a voidable contract, the party entitled to avoid it must do so within a reasonable time. This may be done by A notifying the other party, B, that he (A) does not intend to be bound by the contract. Where it is no feasible to give notice, e.g. where B is a rogue whose whereabouts are not known A can still effectively terminate the contract by doing everything possible to show that ho does not intend to be bound by the contract. It is sufficient, for instance, to make a report to the police.

Car and Universal Finance Co. V. Caldwell (1965)
X bought a car from the defendant and paid by cheque. X took the car with him. The cheque bounced the next day, but X had disappeared. The defendant reported the matter to the police and the Automobile Association, requesting them to recover the car. Subsequently, X sold the car to Y, who knew X’s title to be defective. Y in turn resold the car to the plaintiffs, who bought in good faith. Held: By setting the police and Auto mobile Association in motion, the defendant had clearly shown that he intended to resend the contract; this meant that the ownership of the car reverted to him and therefore Y had no title to pass to the plaintiffs. The defendant was therefore entitled to recover the car from the plaintiffs. The right to avoid the contract is lost if the innocent party, upon discovering the true facts, subsequently affirms it. It is also lost where an innocent third party had acquired an interest in the subject matter of the contract, which is likely to be affected by the avoidance of the contract.

Newtons of Wembley, Ltd. V. Williams (1965)
X bought a car from the plaintiff and paid by cheque. He took the car with him. The cheque was dishonoured, but in the meantime X had disappeared. X subsequently resold the car to the defendant, who bought in good faith. The plaintiff sought to recover the car from the defendant. Held: Title to the car had passed to the defendant; it could not therefore be recovered by the plaintiff.
Notes: The facts in the above two cases are similar. In Caldwell’s Case the car was recovered because the innocent purchaser acquired it from a seller who had no title since the contract had already been rescinded; the seller had bought from X in bad faith. On the other hand, in Williams’s Case the car could not be recovered because the innocent purchaser has acquired it, in good faith, from a person who had right to sell it. There are many other instances of voidable contracts, e.g. contracts entered, into under a unilateral mistake, duress or undue influence as well as minors’ contracts.

4. Specialty Contracts and simple Contracts.
A specialty contract is also known as a contract under seal. It is an instrument in writing signed and sealed by the party to be bound by it and delivered by him to the person for whose benefit it was made. Thus, writing,, signature, sealing and delivery are the four essential characteristics of this type of contract, of which a Deed is the best example (e.g. a Deed of Conveyance under which property is transferred by one person to another). “Delivery” is used here not in the sense of physical delivery; what is required is an intention to be bound; Vincent V. Premo Enterprises Ltd. (1969). If A executes a deed conveying his property to B, with an expressed intention that he is to be thereby bound, A will be bound even if the deed was never physical delivered to B. A central feature of this type of contract is that its validity is independent of consideration i.e. B need not have furnished anything of value as pre-condition for enforcing A’s promise.

A simple contract is an agreement, express or implied, which gives rise to legal obligations. A simple agreement may be in writing or agreed orally, or even be implied from the conduct of parties. A simple contract may be made also made partly orally and partly in writing. In England, conveyances of land or leases of land for periods of more than three years, transfers of British ships and gratuitous promises must be under seal. Section 2 (1) of the Law of Contract Act states that no contract in writing shall be void or unenforceable merely on the ground that it is not under deed. But such contracts, if not made under deed must be supported by consideration.

The following contracts must be in writing:-

  • Bills of Exchange and Promissory Notes.
  • Representations regarding credit worthiness or character.
  • Acknowledgement of Statute Barred Debts.

The following contracts must be evidenced by writing:

  • Contracts of Guarantee
  • Contracts for the Sale of Land
  • Contracts for the Sale of Goods over Two Hundred shillings
  • Employment Contracts over one month
  • Hire Purchase Contracts
  • Money Lending Contracts

5). Illegal Contracts and Unenforceable Contracts
An illegal contract is one which is prohibited by law or which contravenes a provision of law or one which ids contrary to public policy. Where both parties are guilty of the illegality they are said to be in pari delicto and none of them can enforce the contract. But where only one of the parties is guilty of the illegality, the contract may in certain circumstances be enforced by the innocent party. Thus an agreement to commit murder or assault or robbery would be illegal.

Void and illegal contracts, both cannot be enforced by law but the two differ in some respects. All illegal agreements are void but all void agreements are not necessarily illegal. For example, an agreement with a minor is void as against him but not illegal. Similarly, when an agreement is illegal, other agreements which are incidental or collateral to it are also considered illegal, provided the third parties have the knowledge of the illegal or immoral design of the main transaction. For example, ‘A’ engages ‘B’ to murder ‘C’ and borrows KSH. 5000 from ‘D’ to pay ‘B’. We assume ‘D’ is aware of the purpose of the loan. Here the agreement between A and B is illegal and the agreement between A and D is collateral to an illegal agreement. As such the loan transaction is illegal and void and D cannot recover the money. But the position will change if D is not aware of the purpose of the loan. In that case, the loan transaction is not collateral to the illegal agreement and is valid contract. An unenforceable contract is one which though valid, cannot be enforced because none of the parties can sue or be sued to it. For instance, section 6 (1) of the Sale of Goods Act (Cap 31) provides.

“A contract for the sale of any goods of the value of two hundred shillings or upwards shall not be enforceable by action unless the buyer shall accept part of the goods sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract be made and signed by the party to be charged or his agent in that behalf” Unless the conditions laid down in the above provision are complied with, the contract cannot be enforced. The contract itself is valid but its enforceability depends on whether the above provision has been complied with.

6) Contracts Uberrimae Fidei
A contract uberrimae fidel is one in which only one of the parties has full knowledge of all materials facts, which he is under a duty to disclose. The best example is an insurance contract. The insured is possessed of all facts which are material to the contract; but the insurer has no possession of these facts and the insured is under a duty to disclose them to him. Contracts Uberrimae Fidei are said to be contracts of Utmost good faith, particularly on the part of the party under a duty to disclose material fact. Any failure to exhibit good faith, or any show of outright bad faith, amounts to a breach of the contract entitling the other party to be relieved from his own obligation under the contract. Other examples of contracts Uberrimae Fidei includes:-

  • Family settlements (where full disclosure is required);
  • Contracts for the sale of land (where the seller must disclose defects relating to title);
  • Contracts of partnership (where every partner must exhibit utmost good faith in his dealings with the other partner (s).

7. Contracts of Record
A contract of record consists of the judgment of court. Such contracts are formed by an entry on the court records. The rights and obligations of the parties are put on court record and the resultant relationships between them are said to constitute a contract of record. These contracts includes:

Judgment of a Court:-
The previous rights under a contract are merged in the judgment of a court. This judgment constitutes a contract of records between the parties of the contract. We assume ‘R’ owes ‘T’ Kshs. 2,000/= on a contract. ‘T’ sues ‘R’ and court issues a judgment that ‘T’ must be paid by ‘R’ KSH. 1,500/= In this case, the previous rights become merged in the judgment of the court.

Recognizances:
In the criminal cases, the court may bind the accused to be of good behaviour and keep peace. The person so bound acknowledges that a specified sum will be paid by him to the state if he fails to observe the terms of recognizance. In the contracts of record, the element of consent of both parties is absent. For this reason, these contracts are not true contracts.

8. Executed contract
A contract is said to be executed when both the parties to a contract have completely performed their share of obligation and nothing remains to be done by either the party under the contract. For example, when a bookseller sells a book on cash payment it is an executed contract because both the parties have done what hey were to do under the contract.

9. Executory contract
It is one in which both the obligations are understanding, one on either party to the contract, either wholly or in part, at the time of the formation of the contract. In other words, a contract is said to be executory when either both the parties to a contract have still to perform their share of obligation or there remains something to be done under the contract on both sides. For example, T agrees to coach R, a C.P.A student, from first day of the next month and R in consideration promises to pay to T Kshs. 1,000 per month, the contract is executory because it is yet to be carried out.

10. Quasi-Contracts
This type of contracts have little or no affinity with contract. Such a contract does not arise by virtue of any agreement, express or implied between the parties circumstances. For example, obligation of finder of lost goods to return them to the true owner or liability of person to whom money is paid under mistake to replay it back cannot be said to arise out of a contract even in its remotest sense, as there is neither offer and acceptance nor consent, but these are very much covered under quasi contracts. These are known as quasi contracts because these have certain relations resembling those created by contract. A quasi contract is based upon the equitable principle that person shall not be allowed to retain unjust benefit at the expense of another.

5.5 Formation of a Contract
A contract is formed by an offer by one person and the acceptance of this offer by another person. The intention of both parties must be to create a legal relationship and they must have the legal capacity to make such a contract. There must be also some consideration against the contract between the two parties. The formation of contract involves the following factors:-

  1. The offer
  2. The Acceptance
  3. Consideration
  4. Contractual capacity
  5. Intention To Create A Legal Relationship

5.5.1 The Offer
An offer is defined as an expression of willingness to enter into a contract on definite terms, as soon as these terms are accepted. It is made by a person known as the offeror and addressed to the offeree. Thus, if A writes to B stating his desire to sell his property to B at a specified price, A is said to have made an offer to B. A is the offeror and B the offeree. An offer may be express (where the offeror specifically makes his intentions known to the offeree, whether in writing or by word of month), or it may be implied from the conduct of the parties, particularly the offeror. An offer is valid only if its terms are definite, but not where they are vague. Offer and “Invitation to Treat”

An offer, as defined above, must be distinguished from an invitation to treat, The latter is merely an invitation to make an offer and no contract can result from it alone. The best example is afforded by the display of goods in a shop or supermarket. According to decided cases this amounts to an invitation to treat, not an offer; it is the customer or prospective buyer who makes an offer to the shopkeeper or attendant, or cashier, by picking up the goods and expressing the desire to buy them.

Pharmaceutical Society of Great Bruam V. Boots (1953)
The defendant had a self-service store in which certain listed drugs were displayed on the shelves. It was an offence to sell such drugs unless the sale was done under the supervision of a registered pharmacist. A customer selected some of the drugs from the shelves. The defendants had placed a registered pharmacist on duty at the cash desk near the exit, but not near the shelves. The defendants were charged with the offence of selling listed drugs without the supervision of a registered pharmacist. If the sale took place when the customer picked up the drugs from the shelves, the defendants would be liable; but if the sale took place at the cash desk where the registered pharmacist was stationed, then the defendants were not liable. The court therefore had to determine where the sale took place. Held: The defendants were not liable because the display of goods on the shelves was merely an invitation to treat, not an offer; it was customer who made an offer by selecting the article and taking it to the cashier.

Fisher V. Bell (1960)
A shopkeeper displayed a flick-knife in his shop window with a price tag behind it. He was charged with the offence of offering a flick-knife for sale. The court had to determine whether the shopkeeper’s act amounted to offering the flick-knife for sale. Held (Lord Parker, CJ): “It is clear that, according to the ordinally law of contract, the display of an article with a price on it a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract”. Since there was no offer for sale, the shopkeeper was not liable.

Another example of an act that amounts to an invitation to treat rather than an offer is to be found in advertisements inviting tenders. The advertiser merely invites tenders for a particular purpose. It is the tenderer who, by his tender, makes an offer to the advertiser and the latter is thereby converted into an offeree; and it is upon the offeree to accept or reject a particular tender. (A tender is an offer for the supply of goods or services).

5.5.2 The Acceptance
An acceptance is an assent to the terms of an offer. It must correspond with the terms of an offer, and it is for this reason that a counter offer, cross-offer or conditional assent is not an acceptance in the legal sense of the word. An acceptance may be made in anyway that is expedient, but sometimes the offer itself may dictate the mode of acceptance. For example, the offeree may be required to notify his acceptance in writing or to lodge it at a named place or to a named person, or to communicate it within a specified period of time, e.t.c. Generally, the prescribed mode of acceptance must be adhered to; it is only in exceptional circumstances that an equally reflective mode of acceptance may be upheld. An acceptance may be express (where the offeree directly assents to the terms of the offer), or it may be by conduct.

5.5.3 Consideration
The offer and acceptance are not enough to bring about a valid and binding contract. In the case of simple contracts, these are required to be supported by consideration, otherwise the contract is void. Specialty contracts are an exception. Why does the law insist on consideration before a valid contract can be made? The rationale behind this requirement is that the law of contract generally enforces only bargains and not bare promises for which no value is given. This follows from the fact that, the law of contract is generally intended to promote commercial relations. These are relations which necessarily impose an element of bargain, an element without which there would be no commerce at all. Indeed, it is on this element that the whole doctrine of consideration is centered.
When we talk of bargain, what we have in mind is an exchange of relationship within the context of a money economy. This is clear from the fact that a party seeking to enforce a contract must prove that consideration has moved from him and that it consists of money or money’s worth.

Types of Consideration

  • Executory of Consideration
    The word executory is used to denote that the promised act is yet to be done. Thus A promises to sell and deliver to B sacks to charcoal in return for a price to be paid by B. Before delivery of the charcoal, A’s promise to B is in the nature of executory consideration for B’s promise to pay the price. Similarly, before payment of the price, B’s promise to A is in the nature of executory consideration for A’s promise.
  • Executed Consideration
    The word executed is used here to denote that the promised act has already been done. To take the example given above, after A has delivered the charcoal to B, A is said to have furnished executed consideration for B’s promise to pay the price. Similarly, after B has paid the price he is said to have furnished executed consideration for A’s promise to sell and deliver to him three
    sacks of charcoal.
    Under a given contract, it is possible for the consideration furnished by one of the party to be executory, while that furnished by the other party is executed. Thus, in the above example if it is agreed that A is to deliver the charcoal in a week’s time but that B is to pay the price immediately, at that stage consideration furnished by A is executor while that furnished by B is executed.
    The distinction between executory and executed consideration is particularly important while considering performance of the contract by the parties and the remedies available to the innocent party in the event of a breach of the contract by the other party. Thus where B has furnished executed consideration by paying the price but A has failed to deliver the charcoal B is said to have performed his part of the contract and he is entitled to recover the price from A ad also to damages from A for breach of contract; whereas if B’s consideration was merely executory but he was willing to pay the price, E would be said t be willing top perform the contract ad he would in this case be entitled to damages alone.
  • Past Consideration.
    Once negotiations are over and the parties have struck a bargain, any subsequent or fresh promise made by either party in relation to that bargain is known as past consideration. The law is that for d promise to constitute valid consideration is must have been made during the negotiations. As such ,past consideration is not valid consideration for the bargain in respect of which it is given ; it is in fact no consideration at all ands the promises(promised party ) cannot rely on it. After selling a horse to the plaintiff, the defendant promised the plaintiff in the following terms :” in consideration that the plaintiff at the request of the defendant, had bought of the defendant a certain horse, at and for a certain price, the defendant promised the plaintiff that the said horse was sound and free from vice. But the horse proved not to be “sound and free from vice” ands the plaintiff sued on the above Held: The defendant’s promise was given after the d sale and without any fresh consideration; it therefore amounted to past consideration, which the plaintiff could not rely on.
  • Sufficiency of Consideration
    Consideration need not be adequate. Freedom of contract demands that the parties must be free to make their own bargain .No court of law will concern itself with the question whether the price agreed upon is worth the goods supplied. In short, the consideration furnished by one party need not be equal or proportionate to that furnished by the other party. Thus, a creditor’s forbearance to sue (i.e. a promise not to sue) may be sufficient consideration for a promise given by the debtor relation to a particular debt.

Alliance Bank, Ltd. v Broom (1864)
The defendant owed plaintiff bankers # 22,000 by way of overdraft. The plaintiffs pressed the defendant for payment, as result of which the defendant promised to give security for the overdraft. The defendant failed to provide the security and on being sued pleaded that the plaintiffs had furnished no consideration for his promise. Held: There was an implicit promise of forbearance for the defendant’s promise.

But since by definition consideration indicates value, it must be real and not illusory. Thus, where a person is already legally bound (whether by contract or as a matter of public duty) to do a particular thing, a promise such as subsequently made by him to do that same thing is not consideration which, could support any agreement at all. Thus, a policeman discharging his ordinary duties furnishes no consideration for a promise made by X to pay him for protection. Similarly, a person contractually bound to sail a ship home furnishes no consideration for extra pay if all that is done by him is to discharge his contractual obligation:

5.5.4 Intention to Create a Legal Relationship
A contract apparently supported by consideration will not result in a binding contract unless it was the intention of the parties to enter into, or create legal relationship. It, for example, X, promises to take out Y for lunch and Y accepts ad patiently waits for X, there is no legally binding agreement and Y cannot sue X failure to honour his promise. It is not always easy to determine whether there was an intention to create legal relations. Where the circumstances expressly or impliedly to create such intention, obviously there will be no binding contract. Thus, where it is provided that a particular transaction is not to give rise to any legal relationship but that is to be “binding in honour only” there is no legally binding agreement an none of the parties to the transaction may bring an action on it: Jones V. Vernons Pools, Ltd. (1938). In Rose and Frank Co.V. J. R. Cromption Brothers, Ltd. (1924) a document signed be the plaintiffs and defendants provided (inter lia): “This arrangement is not entered into, nor is this memorandum written, as a formal or legal agreement, and shall nor be subject to legal jurisdiction in the law court… but it is only a define expression and record of the purpose an intention of he three parties concerned, to which they each honourably pledge themselves with the fullest confidence- based on past business with each other- that it will be carried through by each of he three parties with mutual loyalty and friendly co-operation”. It was held that the parties intention was that thee document should not be legally enforceable, and the plaintiff’s
action could not therefore be maintained

Complications arise where there is nothing on the face of the transaction to negative an intention to create legal relations. Generally there is a presumption that there was such intention, in the case of commercial agreements. This presumption is rebutted by a provision to the case of social or domestic agreements. Here, there is no presumption of an intention to create legal relations; such intention must be specifically proved, otherwise the person seeking to enforce the agreement will fail in his action:

Balfour V. Balfour (1919)
The plaintiff and defendant were husband and wife. The husband, a civil servant in Ceylon, was on leave and he had gone with his wife to England. Towards the end of the leave the wife was in bad health and had to remain in England, while the husband returned to Ceylon. The husband promised her # 30 per month for maintenance during this time. Later, when the husband defaulted, the wife sued him on his promise. Held: The husband’s promise did not give rise to legal relations and so the wife’s action could not be maintained.

Merritt V. Merritt (1970)
The plaintiff and defendant were husband and wife. Their matrimonial home was in their joint names, and was subject to a mortgage. The husband left the matrimonial home and went to live with another woman. Later it was agreed that the husband would pay the wife # 40 per month out of which she was to pay the outstanding mortgage payments. The husband signed a document stating that “In consideration of the fact that you will pay charges in connection with (the matrimonial home), until such time as the mortgage repayment has been completed, when the mortgage has been completed I will agree to transfer the property to your sole ownership”. The wife paid off the entire amount outstanding on the mortgage, but the husband refused to transfer the house into her sole name. Held: The parties had intended to create legal relations; there was therefore a binding contract which the husband had breached.
Note: Domestic agreements are not restricted to those between spouses. They extend to agreements between parent and child (see, e.g. Jones V. Padavation, (1969) and also those between persons who may not infact be relatives. “Domestic” is used here are to simply to
distinguish those agreements from those which are of a commercial nature.

5.5.5 Contractual Capacity
An essential ingredient of a valid contract is that the contracting parties must be ‘competent to contract’. Every person is competent to contract who is of the age of majority and who is of sound mind, and is not qualified from contracting by any law. Only a person who has contractual capacity be a party to a contract. This includes artificial as well as natural persons. The general rule is that any person may enter into any kind of contract. But special rules supply to the following persons:-

  1. Minors
  2. Persons of Unsound Mind and Drunken Persons
  3. Married Women
  4. Aliens or Non Citizens
  5. Corporations
  6. Co-operative Societies
  7. Trade Unions

These special rules are explained below ;

Minors
Minor’s contracts are governed by common law rules as modified by the Infants Relief Act 1874. Under the Contract Act (Cap. 23), contracts in Kenya are governed by the common law of England relating to contracts as modified (interalia) by “the general statutes in force in England on 12th August 1897. It may therefore, be said that the “Infant Relief Act 1874 applies in Kenya. A contract made by minors may be binding, voidable of void.

These are discussed as under:-

1. Binding Contracts
There are tow types of contracts which are binding on minors.

  • Contract for the Supply of Necessaries
    Certain things are regarded as “necessaries”. These are things without which the minor could hardly live; are therefore things which are essential to his maintenance. Under the Sale of Goods Act “necessaries” are defined as “goods suitable to the condition in life of a particular infant or minor, and to his actual requirements at the time of the sale and delivery”. Included here are things like food, clothing, and medicine. But whether a particular commodity falls within the category of necessaries depends on the circumstances of a particular case; and in particular items of luxury are excluded. Thus, while a suit may be an item of necessaries in the case of a minor who hails from a well to do family it might be an item of luxury to a peasant’s son, particularly
    where there are cheaper alternatives within a peasant’s means. Once a particular item has been placed within the category of necessaries the next question is: To what extent can the other contracting party enforce the contract on sale against the minor? Under the above Act, a minor is liable to pay a “reasonable price” for goods which are necessaries. He is not therefore necessarily liable for the actual or contract price, and anyone dealing with a minor should bear this in mind as he is likely to lose in case the minor defaults to payment, particularly where the goods were supplied to minor on credit. It is clear from the definition above that in reckoning whether or no t particular goods are “necessaries” account must be taken of minor’s actual requirements at the time of sale and delivery. It must therefore be proved that the minor was not sufficiently provided with goods in question at the time when they were sold and delivered to him; otherwise the goods are not necessaries and the contract cannot be enforced against the minor.

Nash v. Inman (1908)
A tailor supplied an infant with 11 fancy waistcoats, but the infant failed to pay. The infant was a university undergraduate. His father gave evidence that the infant was adequately supplied with proper clothes according to his station in life. Held: The clothes were not necessaries and the infant was not liable to pay from them. The fact that a minor has a sufficient allowance does no prevent him from contracting for necessaries on credit: Burghart v. Hall (1839). The lender is still entitled to a reasonable price for the necessaries supplied by him. Where a minor gets a loan o buy necessaries, the lender may recover his loan under the doctrine of subrogation, i.e. he does not recover in his own right as lender but instead he stands in the place of the person who supplied the necessaries and it is only in this latter capacity that he may recover the money. However, he will only be able to recover the money to the extent that it has been used to buy necessaries and only to the extent of a reasonable price for the necessaries. Besides goods, certain services and expenses are also considered to be necessaries. Examples includes lodging, legal advice, and funeral expenses for the infant.

  • Beneficial Contracts of Service
    Besides contracts for the supply of necessaries, minor is bound by a contract of service whose nature is such that, considered as a whole, it is intended for his benefit:

Clements v. London and N.W. Railway Co. (18940
X, a minor, was employed by a railway company as a porter. He joined the company’s insurance scheme and agreed to relinquish his statutory right of suing for personal injury under the Employers Liability Act 1880. Though the Scheme fixed a lower scale of compensation, its terms were generally more favourable than those embodied in the Act; the Scheme covered more accidents in respect of which compensation was payable. Held: The agreement was generally for the benefit of X and it was therefore binding on him.

De Francesco V. Barnum (1890)
X, a minor of 14 years, joined the plaintiff as an apprentice in order that she might be taught stage dancing. The apprenticeship was to an agreed sum per night, that she would not marry and that she would not accept any other professional engagement without the plaintiff’s permission. The plaintiff was not bound to engage X or to maintain her while unemployed; the amount payable for X’s services was a trifling sum and moreover, the plaintiff was at liberty to terminate the contract in the event of X being found unfit for stage dancing. Held: The agreement as a whole was unreasonable and completely put X at the mercy of the plaintiff; it was not beneficial to X and was therefore not binding on her. Thus, whether a particular contract is beneficial to a minor and hence binding on him depends on the circumstances of the case. It is binding only when, considered as a whole, it appears to be advantageous or beneficial to the minor. But where the other party to the contract has more to gain from the minor, the contract and his own interests under the contract outweigh those of the minor, the contract will not be considered as being beneficial to the minor and consequently the minor will be bound by it. Certain contracts can never be enforced against a minor, however beneficial they may be to him.
This is particularly so in the case of trading contract. A minor is never by such contracts:

Cowern V. Nield (1912)
X, a minor, set himself up in business as a hay and straw dealer, Y paid for consignment of hay, which X failed to deliver. Y sued X for the price. Held: Being a minor, X was not bound by the contract entered into with Y, since it was a trading; accordingly X was not liable to repay the price to Y.
According to the above case, beneficial contact entered into with a minor is binding on him only if it is either a contract of service or of apprentices, or something close to this. Thus, in Doyle’s Case given above, the contract in question was held to be very closely connected with a contract since it was designed to develop the minor’s skill as a boxer.

2. Voidable Contracts
Voidable contracts, as far as minors are concerned, are those contracts which a minor is entitled to repudiate either during minority or within a reasonable time after attaining majority age. Apart from the minor’s option to repudiate, a voidable contract is similar to a binding one in that in either case the contract must be beneficial to the minor. But in the case of voidable contracts, the subject matter is generally of a permanent nature and the obligations created by the contract are of a continuous nature. The most outstanding examples are: leases agreements (by which the minor acquires an interest in land); contracts for the purchase of shares (by which the minor in a limited company); and contracts of partnership 9by which the minor becomes a partner in a firm). Like any other voidable contract, a minor’s viodable contract remains binding on him until it is duly terminated by him. He must take timely action to avoid the contract, otherwise he will be bound by its terms:-

Davies V. Beynon- Harris (1931)
X, an infant, leased a flat from the plaintiff two weeks before attaining majority age. Three years later, his rent was in arrears and the plaintiff sued him. Held: X had failed to avoid the lease within a reasonable time after attaining majority age and it was now too late to do so; consequently, he was liable to pay the arrears of rent.

3. Void Contracts
Under section 1 of the Infants Relief Act 1874, the following contracts entered into with minors are declared to be absolutely void:-

  • Contracts for the repayment of money lent or to be lent (i.e. loan contracts).
  • Contracts for goods supplied or to be supplied other than necessaries;
  • All accounts stated (or “settled accounts”).
    None of these three types of contract can be enforced against a minor.

Smith V. King (1892)
X, a minor was indebted to Y, who were stock brokers. After X had attained majority age, Y sued him for the debt. Y then accepted two bills of # 50 each in full settlement of the debt. Y later brought an action against X based on the bills. The acceptance by Y of the two bills amounted to a ratification of a debt contracted by him during minority; such ratification was void under the Infant Relief Act 1874 and X was no therefore liable on the bills.

Valentini V. Canali (1889)
X, a minor leased the defendant’s house and agreed to pay #102 for the furniture which was in the house by way of purchase. He effected a down- payment of #68 on the furniture. He then occupied the house and used the furniture for some months, after which he repudiated the lease. He then sought to recover the # 68 from the defendant. Held: X was not liable to pay the balance on the #102; but since he had used the furniture for some months there was no total failure of consideration and accordingly he could not recover the #68.

R. Leslie, Ltd. V. Sheill (1914)
X, a minor, fraudulently told the plaintiff that he (X) was of majority age, thereby inducing the plaintiff to lead him @ 400. X for fraudulent misrepresentation or, alternatively, for money. Held: The contract was absolutely void under the Infants Relief Act 1874; X was not liable to repay the money as the alternative claim against him was an indirect way of enforcing the void contract. Note: Since a loan contract involving a minor is void, a guarantee of such contract is equally void: Coutts & Co. V. Browne- Lecky (1947).

4. Persons of Unsound Mind and Drunken Persons
A contract made with a person of unsound mind (PUM) is binding on him only if it was during a lucid interval, i.e. an interval during which he is sane. For this purpose, it is immaterial that the other party may have been aware of the PUM’s mental capacity. Apart form this, a contract that is entered into a PUM with a person who knows him to be mentally incapacitated, is voidable at he instance of PUM. However, where the PUM has obtained necessaries under the contract, he is, like a minor, liable to pay a reasonable price for the Sale of Goods Act. As for a drunken person, his contractual capacity is generally the same as that of a PUM. If the drunkenness is, to the knowledge of the other party, such as to render him incapable of appreciating his acts, a contract entered into in these circumstances is voidable at the instance of the drunken person upon sobering up. But like a minor and PUM, he is liable to pay reasonable price for necessaries: Sale of Goods Act.

5. Married Women
At common law a married woman could not enter into a contract. But under the Law Reform (Married Women and Tortfeasors) Act, 1935, the married women can sue and be sued in contract in the same way as single women.

6. Aliens or Non-Citizens
Alien, i.e. a person who is not citizen of Kenya, can sue and be sued. Any enemy alien, i.e. a person resident in a country which is at war with Kenya, cannot sue, but if sued can defend an action.

7. Corporations
In the case of corporation, its contractual capacity is limited by the provisions of is Memorandum of Association. It can only enter into those contracts authorized by the Memorandum; any other contract is ultra vires and cannot be entered into by the corporation. In case of a statutory corporation, it can only do those things which are expressly or impliedly authorized by statute. Any contracts entered into those which are not authorized by statute are “ultra vires” and therefore, void.

8. Co-operative Societies
A co-operative society registered under the Co-operative Societies Act (Cap 490) can enter into Contracts, and be sued in accordance with the provisions of the Act.

9. Trade Unions
Section 25 (1) of the Trade Unions Act (Cap. 233) provides:
“Every trade union shall be liable on any contract entered into by it or by an agent acting on its behalf: provided that a trade union shall not be liable on any contract which is void or unenforceable at law”. A registered trade union may sue and be sued and be prosecuted under its registered name.

5.6 Terms of Contract
In the course of negotiations, a number of statements may be made by each of parties. Some of these eventually form part of the contract, while others are left out. Statements which form part of the contract are known as terms of the contract. Those which are made in the course of negotiations but are ultimately left out of the contract are called representations. A representation is a statement that is not within the contract. If it turns out to be a false representation, either fraudulently or innocently made, it is called a misrepresentation. If the statement is within the contract then there is a further problem of deciding whether it is a classified as express and implied terms.

The terms of a contract are as follows;
The rights and obligations of the parties to a contract depend on the terms of the contract, not on mere presentations. It is therefore always important to determine whether a particular statement is a term or a presentation:

Oscar Chess, Ltd. V. Williams (1957)
The defendant offered the plaintiffs a second-hand Morris as part of the consideration for a hire purchase contract. The registration book of the Morris stated that the car was a 1948 model, and this was confirmed by the defendant in good faith. But it turned out later that the car was in fact a 1939 model, which should have been valued at lower figure. The plaintiffs who were car dealers sued the defendant for the difference in value. The court had to determine whether his statement as to the age of the car was a term of the contract or a mere representation.

Held: The statement as to the age of the car was not a term of the contract but a mere representation. The plaintiffs were not therefore entitled to recover the difference in value.

Dick Bentley Productions, Ltd. V. Harold Smith Motors Ltd. (1965)
The defendants sold a Bentley car to the plaintiffs, stating that the car had done only 20,000 miles from the time it was fitted with a replacement engine and gearbox. This statement turned out to be false, the car proved unsatisfactory and the plaintiffs sued. The court had to determine whether the defendant’s statement as to mileage was to term of the contract or a mere representation.

Held: The statement as to mileage was a term of the contract; and the plaintiffs were entitles to damages for breach of contract.

Looking at the above decisions together, it is clear that it is not always easy to determine whether a particular statement is a term or a mere representation. Generally a statement made by a person possessed of special knowledge or skill is treated seriously, to the extent of being considered a term of the contract; while a statement made by a person not position and will usually be regard as a mere representation. Thus, in Oscar Chess, Ltd. V. Williams the purchasers of the car (the plaintiffs) were themselves car dealers and as such were in a position to ascertain the age of the car independently of any statement made by the defendant.

As car dealers they were possessed of some special knowledge or skill; the defendant’s statement would not therefore mean much to them and it was rightly held to be mere representation. On the other hand, in Dick Bentley Case, the defendants had been in possession of the car and were on a better position, compared to the plaintiffs, to tell the mileage which had been done by the car;
their statement therefore had to be a term of the contract. Besides the state of knowledge or skill of the respective parties, the question whether a particular statement is a term or a mere representation may be determined in another way. Where the parties make an oral agreement, which is subsequently reduced to writing, only those statements which are incorporated in the written agreement will be regarded as terms of the contract, while the oral statements left out of he noted, however, that much depends on the peculiar circumstances each case and no hard and fast rule can be laid down.

Express and Implied Terms
Parties to a contract are free to make their own bargain under the banner of “freedom of contract” They may therefore agree on any terms, as long as these are covered by law. But standard form contracts are in exception. In this type of contract, one of the parties virtually dictates all the terms of the contract, which are contained in a special document presented to the other party for signature- e.g. insurance contracts.

Express terms are those which are specifically (or expressly) agreed upon by the parties, whether orally, in writing, or partly orally and partly in writing. In the absence of specific (or express) agreement on my matter in a particular contract, certain terms may be treated by law as governing the matter in question. These are known as implied terms. Terms may be implied in a contract by statute (e.g. the Sale of Goods Act implied certain terms in every contract of sales of goods); by custom (e.g. trade customs); or by court (e.g. in
contracts of employment in master/servant relationship). Sometimes, an implied term is excluded in the express terms of the contract.

Conditions and Warranties
Not all terms of a contract carry the same weight. Some are important than the others. Those which are regarded as major terms of the contract are known as conditions, while those which are minor or of less consequence are called warranties. The distinction between conditions and warranties is best illustrated by the effect which a breach of each one of them has on the contract. In a contract of sale of goods, for example, a breach of condition by one party entitles the other (innocent) party to treat himself as discharged from his obligations under the contract, while a breach of warranty by one party only entitles the other (injured) party to damages, but not to as
right to regard himself discharge from his obligations under the contract. Both conditions and warranties may be express or implied. But conditions are further subdivided into condition precedent and condition subsequent.

A condition precedent is one which must be satisfied before a contract can become effective or operational: until such condition is satisfied the existence or operation of the contract is suspended and none of the parties has any enforceable right in the meantime:

Pym V. Campbell (1856)
The plaintiff and defendant entered into a written agreement under which the defendant agreed to buy a share in the plaintiff’s invention. But it was understood that the agreement was subject to an approval of the invention by X, an engineer. X later disapproved the invention and the defendant refused to proceed with the agreement. The plaintiff sued. Held: In the absence of X’s approval there was no effective agreement and the plaintiff’s action could not therefore be maintained.

Again, if A enters into a contract with B is to construct a number of residential houses for A, and A is required to obtain permission from the City Council before the construction work can commence, out the obligation imposed on B by the contract. A condition subsequent, on the other hand, is a condition whose occurrence may affect he rights of the parties under a contract which is already in operation. For instance, where there is a provision hat a contract is to remain valid until a stated event occurs, the occurrence of the event is a condition subsequent which terminates the contract.

5.7 Is an illiterate person protected by law?
The answer is yes, and the relevant protection is to be found in the illiterates Protection Act. The Act defines an illiterate as “a person who is unable to read and understand the script or language in which the document is written or printed as the case may be”. The document must be read over and explained to the illiterate in a language he understands; after this the illiterate, if he is satisfied, appends his mark to it in the presence of a witness whose true and full name and address must be stated; and after the illiterate has appended his mark his name must be written on the document by the witness. Similarly, any person who writes such document must give his true and full name and address. In either case, there is a presumption that the instructions of the illiterates have been complied with and that the document was read over and explained to him .The burden is on the illiterate to rebut this presumption. He should, for instance, insist on the document being read over to him, other wise he will be bound by it.

5.8 Vitiating Elements or Factors
A contract supported by consideration, in which there is an intention to enter into legal effect where if is affected by a vitiating factor. A vitiating factor (or element) is one which tends to affect the validity of the contract. The vitiating elements consist of:-

  1. Mistake
  2. Misrepresentation
  3. Duress (or Coercion)
  4. Undue Influence
  5. Illegality

These are explained below

1. Mistake
Mistake may be defined as an erroneous belief concerning something. It may be of two kinds:

  • Mistake of law
  • Mistake of fact

Mistake of law
Mistake of law may be further classified as;

  1. Mistake of general law of the country,
  2. Mistake of foreign law
  3. Mistake of private rights of a party relating to property and goods.

A mistake of law can never be pleaded as a defence. But mistake of foreign law and mistake of private rights may be treated as mistake of fact.

Mistake of fact
A mistake of fact is also known as an operative mistake. Under common law an operative mistake renders a contract void ab initio, ie. where an operative mistake is proved the legal position is that the parties are in the same position as if the contract was never entered into; the contract was void, right from the beginning The traditional approach is to divide mistakes into three distinct categories: common mistake, mutual, and unilateral mistake.

These are explained below:-

Common Mistake
A common mistake is made where both parties assume a particular state of affairs, whereas the reality is the other way round. Both parties therefore make exactly the same mistake. A contract entered into as a result of common mistake is a nullity (or null and void) at common law:

Conturier V. Hastie (1853)
A contract was entered into for the sale of goods which at the time of the contract were supposed to be in transit aboard a certain ship.
None of the parties knew that the goods had deteriorated and that by the time of the contract they had in fact been disposed of already by the master of the ship. Held: Both parties had contemplated that the goods were in existence at the time of the contract; ad since the goods were not actually in existence at that time, the contract was void and the buyer was not liable to
pay the price.

Mutual Mistake
Mutual to a particular matter, one party may assume a totally different thing, so that the other party assumes a totally different thing, so that they both misunderstand one another. They are then said to have made a mutual mistake. The mistake is different for each party, exactly the same mistake. A contract made under mutual mistake may not be a nullity, depending on the circumstance of the case (compare common mistake where the contract is automatically nullity):

Scott V. Littledole (1858)
In a contract of sale of goods by sample, the plaintiff bought from the defendants 100 chests of tea, which were then lying in a specified place. The plaintiff thought he was buying the tea contained in the 100 chests, but the defendants thought they were selling to the plaintiff only tea of the same quality as the samples. The tea in the chests turned out to be of a higher quality than the samples submitted to the defendants and the defendant refused to deliver it to the plaintiff.

Held: There was a valid contract between the plaintiff and defendant, and the defendant was liable to deliver the 100 chests.
Note: The above case is sometimes cited as authority for saying that mistake as to quality is not an operative mistake.

Unilateral Mistake
If one of the parties to a contract, and the other parties aware of this fact, there is said to e a unilateral mistake (compare mutual mistake where one party’s mistake is not known to the party). Instances of unilateral mistake is not common in fraud cases where one party misrepresents his identity to the other, thereby inducing the other party into contracting with him in the false belief that he is contracting the person whose identity has been given.

2. Misrepresentation
At representation means a statement of fact made by one party to the other, either before or at the time of contract, relating to some matter essential to the formation of the contract, with an intention to induce the other party to enter into contract, with an intention to induce the other party to enter into the contract. It may be expressed by spoken or written or implied from the acts or conducts of the parties) e.g. non-disclosure of a fact). A representation when wrongly made, either innocently or intentionally, is termed as a misrepresentation. To put in differently, misrepresentation may be either innocent or intentional or deliberate with intent to deceive the other party. In law, for the former kind, the term ‘Misrepresentation’ and for the latter the term “fraud” is used.

Types of Misrepresentation
There are three types of misrepresentation. These are:-

1. Fraudulent Misrepresentation
A fraudulent misrepresentation is a statement made without honest belief in its truth or recklessly without caring whether it is true or not. This type of misrepresentation therefore requires proof of fraud or dishonest; and once proved it is actionable at common law.

2. Negligent Misrepresentation
An innocent is one made honestly or without fault on the part of the representor. This type if misrepresentation is not actionable at common law, and the representee has no remedy at all.

Remedies for Misrepresentation
Misrepresentation renders a contract voidable at the instance of the representee (the innocent party). Consequently, the remedy of rescission is available to him. Besides, he is also entitled to damages for loss that may have been suffered by him as result of the misrepresentation.

3. Duress
Duress refers to actual violence or threats violence calculated to produce fear in the mind of the person threatened. The requirement of agreement in the establishment of a contractual relationship presupposes that each of the parties is free contracting agent. But the freedom of the party subjected to duress (or coercion) is obviously restricted. Duress as such, is a vitiating factor which is actionable at common law (and is sometimes referred to as legal duress). For a threat to amount to duress, it must be a threat to the person, not to goods. It must also relate to an unlawful thing; a threat to do a lawful thing is immaterial, subject only to the requirements of public policy. Also, the threat must have induced the threatened party to enter into the contract. The dominant view is that contract entered into under duress (or coercion) is voidable at the instance of the party coerced.

4. Undue Influence
“A contract is said to be induced be undue influence where, (i) the relations subsisting between the parties are such that one of the parties is in a position dominate the will of the other, and ii) he uses the position to obtain an unfair advantage over the other”.
Undue influence is another factor which tends to restrict the freedom of a party in entering into a particular contract. It is based on the equitable principle that no person may take an unfair advantage of the inequalities between him and another party so as to force an agreement on the other party.

A person who seeks to rely on undue influence as a defence must prove that the other party has in fact influence over him and that he would not otherwise have entered into the contract. But where a confidential (or fiduciary) relationship exists between the parties, undue influence is presumed, and the burden is shifted on to the other party to prove hat there has been no undue influence on his part. The following are relations in which undue influence is presumed:-
1. Parent and Child
2. Doctor and Patient
3. Trustee and Beneficiary
4. Advocate and Client
5. Guardian and Ward
6. Religious Adviser and Disciple
It should be noted that Husband/Wife relationships do not raise the presumption of undue influence; undue influence must in this case be specifically proved by the party seeking to rely on it. Where undue influence is sufficiently proved to have existed at the time of the contract, the contract is voidable at the instance of the party unduly influenced and may on this ground be set aside.

Williams V. Bayley (1866)
Like any other voidable contract, a contract entered into under undue influence cannot be set aside where its subject-matter has come into hands of a bona fide purchaser, where it has been subsequently affirmed, if there has been undue delay on the party entitled to avoid the contract.

5. Illegality
An illegality contract is one which is prohibited by law e.g. making a contract to break into a house to steel goods is an illegal contract.
Besides statute, there are certain contracts which are prohibited by, and therefore illegal at common law. These are contracts which offend against public policy, i.e. those which are prejudicial to public morality and public well-being. They are as follows:-
1. Contracts to commit a crime, tort or fraud;
2. Contracts that are prejudicial to the administration of justice;
3. Contracts liable to corrupt public life;
4. Contracts that are prejudicial to public safety;
5. Contracts to defraud the revenue;
6. Contracts that are sexually immoral;
7. Contracts that are prejudicial to the country’s foreign relations.

5.9 Discharge Of Contract
A contract is said to be discharged (or terminated) when the parties to it are freed from their mutual obligations. In other words, when the rights and obligations arising out of a contract are distinguished, the contract is said to be discharged or terminated. A contract may discharge in any of the following ways:-

  1. Discharge by performance
  2. Discharge by Agreement
  3. Discharge by Frustration
  4. Discharge by Breach
  5. Discharge by Operation of Law

1. Discharge by Performance
When a contract is duly performed by both the parties, the contract comes to happy ending and nothing more remains. The contract, such a case, is discharged or terminated by due performance. But if one party performs his promise, he alone is discharged. Such a party gets a right of action against the other party who is guilty of breach. Performance of a contract is the principal and most usual mode of discharge of a contract. Performance may be: (1) Actual performance; or (2) Attempted performance or Tender.

1. Actual performance
When each party to a contract fulfils his obligation arising under the contract within the time and in the manner prescribed an amounts to actual performance of the contract and the contract comes to an end or stands discharged
2. Attempted performance or tender
When the promisor offers to perform his obligation under the contract, but is unable to do so because the promise does not accept the performance, it is called “attempted performance or tender”. Thus “tender” is not actual performance but is only at “offer to perform” the obligation under the contract. A valid tender of performance is equivalent to performance. For performance to discharge a contract, the general rule is that it must be precise and exact. Circumstances do exist, however, n which a partial performance by one party may not entitle the other party to consider himself as discharged, e.g. in cases of substantial performance or of divisible contracts like those in which delivery of goods is to be done in installments: in these cases the performing party is entitled to payment for what has been done by him under the contract.

The effect of refusal to accept a properly made ‘offer of performance’ is that the contract is deemed to have been performed by the promisor i.e. tenderer and the promise can be sued for breach contract. A valid tender, thus, discharges contract. However, tender of money does not discharge the contract. The money will have to be paid even after refusal of tender.

2. Discharge by Agreement
Where a contract is still executory, i.e. where each of the parties is yet to perform his contractual obligation, the parties may mutually agree to release each other from their contractual obligation: each party’s promise to release the other is consideration for the other party’s promise to release him. Where one party has fully performed his part of the contract, he may agree to release the other party from his contractual obligation. In this case, however, the discharge is effective only if made under seal or where the party being discharged has furnished consideration for it; otherwise the party giving the discharge will not be bound and the other party remains liable .A unilateral discharge, supported by valuable consideration, is known as an Accord and Satisfaction. “The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative’

3. Discharge by Frustration
A contract is said to be frustrated if an event occurs which brings its further fulfillment to an abrupt end; and upon the occurrence of the frustrating event the contract is immediately terminated and the parties discharged. But the doctrine of frustration only relates to the future. This means that the parties are discharged from their future obligation under the contract but remain liable for whatever rights that may have accrued before the frustration. Thus, goods supplied or services rendered before the frustration must be paid for, although the parties are both excused from further performance of the contract. Parties to a contract are under a duty to fulfill their respective obligations created by the contract. The fact that an event or events may subsequently occur, introducing hardships or difficulties in the performance of the contract is not in itself sufficient to discharge the contract: It is difficult to determine the frustrating events. Some examples of frustrating events are given below:-

1. Destruction of subject Matter
“In contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing excuse the performance”. This statement of law was made by Blackburn J. in the case given below:-

Taylor V. Caldwell (1862)
A let a music-hall to B in order that B might use it for holding concerts on specified days. Before the concerts could be held the music- hall was accidentally destroyed by fire. B sued A for breach of contract. Held: The destruction of the music-hall had frustrated the contract and B’s action could not be maintained.

2. Death or Incapacity
Just as the destruction of the subject-matter of the contract terminates it, the death or serious indisposition of a party whose personal services were contemplated by the contract will similarly terminate it. Thus, if A, a doctor, contracts to care for all my medical needs, his death is a frustrating event which automatically terminates the contract. Again, if A contracts to stage a series of shows during the months of June-September but is in May sentenced to imprisonment for one year, or becomes insane permanently or for a substantial part of the period in question, the contract will similarly be discharged by frustration- the frustrating event being constituted by
the imprisonment or insanity.

3. Frustration of Common Venture
Where both parties contemplate a particular object as forming the basis of their contract, such object constitutes their common venture. The law is that if the common venture subsequently becomes incapable of fulfillment the contract is frustrated:

Krall V. Henry (1903)
The plaintiff agreed to let a room to the defendant for the day when Edward VII was to be crowned. Though not spelt out in the agreement itself, both parties understood that the purpose of the letting was to enable the defendant view the coronation process. The King subsequently became ill and the coronation was cancelled. Held: The cancellation of the coronation discharged both parties from their contractual obligation, because the process was the foundation of the contract and its cancellation meant that the substantial purpose of the contract could no longer be achieved.

4. Discharge by Breach
Breach of contract by a party thereto is also a method of discharge of a contract, because “Breach” also brings to an end the obligations created by a contract on the part of each of the parties. Of course the aggrieved party i.e. the party not at fault can sue for damages for breach of contract as per law; but the contract as such stands terminated.

A breach of contract may take place when a party:

  1. Repudiates his liability before performance is due.
  2. Disables himself from performing his promise.
  3. Fails to perform his obligations.

5. Discharge by Operation Of Law
A contract may be discharged by operation of law in certain cases. Some important instances are as under:-

  • Lapse of Time
    If a contract is made for a specific period then after the expiry of that period the contract is discharged e.g. partnership deed, employment contract e.t.c.
  • Death
    The death of either party to a contract discharges the contract where personal services are involved.
  • Substitution
    If a contract is substituted with another contract then the first contract is discharged.
  • Bankruptcy
    When a person becomes bankrupt, all his rights and obligations pass to his trustee in bankruptcy. But a trustee is not liable on contracts of personal services to be rendered by the bankrupt.

5.10 Remedies for Breach of Contract
Whenever there is a breach of contract, the injured party becomes entitled for some remedies.
These remedies are:-

  1. Damages
  2. Quantums Meruit
  3. Specific Performance
  4. Injunction
  5. Rescission

These are explained below
1. Damages
Damages are a monetary compensation allowed to the injured party of the loss or injury suffered by him as a result of the breach of contract. The fundamental principle underlying damages is not punishment but compensation. By awarding damages the court aims to put the injured party into the position in which he would have been, had there been performance and not breach, and not to punish the defaulter party. As a general rule, “Compensation must be commensurate with the injury or loss sustained, arising naturally from the breach”. “If actual loss is not proved, no damages will be awarded”. The damages recoverable for breach of contract are governed by the rule in Hadley V. Baxendale (1894) which is as follows:-

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be, either such as may fairly and reasonably be considered arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the possible result of the reach of it”. This is the general rule. The plaintiff can only recover for loss arising naturally from the defendant’s breach or for such loss as was in the contemplation of both parties at the time when the contract was made. In this way, it is sought to do justice to both parties. In fact the above case goes on to explain that where a contract is made under special circumstances it is the duty of the party seeking to rely on those special circumstances to communicate them to the other party; and in the absence of such communication any loss arising from the special circumstances
is not recoverable:

Hadley V. Baxendale (1854)
A miller sent a broken crankshaft by a carrier to deliver to an engineer for copying and to make a new one. The miller informed the carrier that the matter was urgent and that there should be no delay. The carrier accepted the consignment on those terms. The miller did not inform the carrier that the mill would be idle and unable to work. The carrier had no reason to believe that the delayed delivery of the crankshaft was an essential mechanism of the mill. The carrier delayed delivery of the crankshaft to the engineer; and as a consequence, the mill was idle for longer than it need have been.

Held: that the carrier was not liable for the loss of profits during the period of the delay.

The Heron II (1969)
The defendant’s ship, the Heron II, was chartered by the plaintiff to carry sugar from Constanza to Basrah, and the ship was to take an agreed route. But the defendant deviated and took a longer route and as a result delivery of the sugar was delayed by 9 days. In the meantime the market price of sugar had fallen and the plaintiff lost a profit of # 4,000. Held: The loss of profits was recoverable by the plaintiff, because fluctuations in market prices are in the normal course of things and the loss suffered by the plaintiff must have been in the contemplation of both parties as a probable result of a breach of the contract.

2. Quantum Meruit
The third remedy for a breach of contract available to an injured party against the guilty party is to file a suit upon quantum meruit. The phrase quantum meruit literally means “as much as is earned” or “in proportion to the work done”. This remedy may be availed of either without claiming damages (i.e. claiming reasonable compensation only for the work done) or in addition to claiming damages for breach (i.e. claiming reasonable compensation for part performance and damages for the remaining unperformed part).
The aggrieved party may file a suit upon quantum meruit and may claim payment in proportion to work done or goods supplied.

The court must then determine a reasonable sum to be paid for those goods or services; and the plaintiffs is said to have brought his suit on a quantum meruit. In the case of contracts for the sale of goods, this remedy has been codified by the Sale of Goods Act. It provides; “where the price is not determined, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case”. The plaintiff may also sue on a quantum meruit where the original contract has been replaced by a new one and work has been done by him under the new one. As Lord Atkin has said: “If I order from a wine
merchant twelve bottles of whisky and two of brandy, and i accept them i must pay a reasonable price for the brandy”: Steven V. Bromley & Son (1919). A claim under quantum meruit sum does not apply, however, where the contract requires complete performance as a condition of payment e.g. a contract to do one piece of work in its entirety in consideration for lump-sum payment.

Sumpter V. Hedges (1898)
S agreed to build a house for a certain sum on H’s land. When the house was half finished S ran out of money and could not complete. H refused payment, and S brought an action on a quantum meruit for the value of materials used and the labour he had expended. Held: that the claim must fail. The contract was to do certain work for a lump sum which was not payable until completion. H had no choice but to accept the work.

3. Specific Performance
This is an equitable remedy. Specific performance means the actual carrying out of the contract as agreed. Under certain circumstances an aggrieved party may file a suit for specific performance, i.e. for a decree by the court directing the defendant to actually perform the promise that he has made. A decree for specific performance is not granted for contracts of all types. It is only where it is just and equitable so to do i.e. where the legal remedy is inadequate or defective, that the courts issue a decree for specific performance.

Specific performance is not granted as a rule, in the following cases:-

  1. Where monetary compensation is an adequate relief. Thus the courts refuse specific performance of a contract to lend or to borrow money or where the contract is for the sale of goods easily procurable elsewhere.
  2. Where the court cannot supervise the actual execution of the contract, e.g. a building construction contract. Moreover, in most cases damages afford an adequate remedy.
  3. Where the contract is for personal services, e.g. a contract to marry or to paint a picture. In such contracts “injunction” (i.e. an order which forbids the defendant to perform a like personal service for other persons) is granted in place of specific performance.
  4. Where one of the parties to the agreement does not possess competency to contract and hence cannot be sued for breach of contract. Thus a minor cannot succeed in an action for specific performance.

4. Injunction
“Injunction” is an order of a court restraining a person from doing a particular act. It is a mode of securing the specific performance of the negative terms of the contract. To put it differently, where a party is in breach of negative term of the contract (i.e. where he is doing something which he promised not to do), the court may, by issuing an injunction, restrains him from doing, what he promised not to do. Thus “injunction” is a preventive relief. It is particularly appropriate in cases of “anticipatory breach of contract” where damages would not be an adequate relief.

Illustration: A agreed to sing at B’s theatre for three months from 1st April and to sing for no one else during that period. Subsequently, she contracted to sing at C’s theatre and refused to sing at B’s theatre. On a suit by B, the court refused to order specific performance of her positive engagement to sing at the plaintiff’s theatre, but granted an injunction restraining A from singing elsewhere and awarded damages to B to compensate him for the loss caused by A’s refusal (Lumley vs. Wagner).

5. Rescission
When there is a breach of contract by one party, the other party may rescind the contract and need not perform his part of obligations under the contract and may sit quietly at home if he decides not to take any legal action against the guilty party. But in case the aggrieved party intends to sue the guilty party for damages for breach of contract, he has to file a suit for decision of the contract. When the court grants rescission, the aggrieved party is freed from all his obligations under the contract; and becomes entitled to compensation for any damage which he has sustained through the non-fulfillment of the contract.

Illustration: A contracts to supply 100 kg of tea leaves for sh. 1,500 to B on 15th April. If A does not supply the tea leaves on the appointed day, B need not pay the price. B may treat the contract as rescinded and may sit quietly at home. B may also file a “suit for rescission” and claim damages.

Thus, applying to the court for “rescission of the contract” is necessary for claiming damages for breach or for availing any other remedy. In practice a “suit for rescission” is accompanied by a “suit for damages” .

Summary for the topic

  1. Essentials of a valid contract
  2. Classification of various types of contracts
  3. Formation of contract
  4. Contractual capacity
  5. Vitiating elements of contract
  6. Discharge of the contract
  7. Remedies for a breach of contract
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CONTRACT OF EMPLOYMENT NOTES

4.1 Introduction
In Kenya, employment is governed by the general law of contract, as much as by the principles of common law. Thus, employment is basically seen as an individual relationship negotiated by the employee and the employer according to their special needs. Parliament has passed laws specifically dealing with different aspects of the employer-employee relationship. These laws define the terms and conditions of employment, and consist mainly of four Acts of Parliament: The Employment Act (Cap. 226) and the regulation of Wages and Conditions of Employment Act (Cap. 229) make rules governing wages, housing, leave and rest, health and safety, the special position of juveniles and women and termination of employment. The latter Act, in addition, sets up a process through which wages and conditions of employment can be regulated by the Minister. The Factories Act (Cap. 514) deals with the health, safety and welfare of an employee who works in a factory. The Workmen’s Compensation Act (Cap. 236) provides for ways through which an employee who is injured when on duty may be compensated by the employer. The Employment Act does not make any provisions for wages in general. The minimum wage is dealt with by the Regulations of Wages and Conditions of Employment Act.

4.2 Unlimited and fixed-term contracts of employment
Employment contracts may be for fixed or unlimited periods of time. If an employment contract specifies a fixed period of employment, the contractual relationship is automatically terminated at the end of this period, without being considered a resignation or a dismissal. Under section 15 of the Employment Act, such a contract may be prolonged for a period of service up to 1 month, if the employee is engaged in any journey. Until the very recent past most female civil servants and parastatals staff were employed on fixed term contract. In general, temporarily and fixed term employed workers enjoy all the rights of an employee working on permanent terms, except those that are excluded explicitly (such as entitlement to pensions) or by the nature of a short term assignment (such as annual leave).

An employment contract, which does not specify a fixed period of duration, is considered to be for an unlimited period of time, but can be terminated by notice of either party. However, in the organized sector collective agreements which give workers tenure limit the employers’ ability to discharge and end the employment contract. Other limitations on terminating an individual labour contract are the principle of good faith and the requirement of non-discriminatory reasons.

Under section 14 (1) of the Employment Act it is a legal requirement that certain contracts of service be made in writing. These are contracts:

  • For a continuous period of 6 months;
  • Which are not continuous, but for which the periods still add up to six months; and
  • In which the task to be performed may last for six months.

Where a contract is in writing, it must carry a signature or a fingerprint of the employee showing that she or he has agreed to its terms. There must also be a witness who is not the employer. It is the duty of the employer to make sure that the contract is written when this is required by the law.

4.3 Special Contracts of Employment

4.3.1 Casual Employment and Piecework employment
Both types of employment are defined under section 2 of the Employment Act. The “casual employee” is “an individual the terms of whose engagement provide for his payment at the end of each day and who is not engaged for a longer period than twenty-four hours at a time”, and Piece-rate “means any work the pay for which is estimated by the amount of work irrespective of the time occupied in its performance”. Basically these categories of workers enjoy to a large extent the same rights as other employees, but may be excluded from many benefits, such as leave, medical cover or housing.

4.3.2 Apprenticeship Contracts
Apprenticeship contracts that primarily intend to train young people in a profession are considered contracts of employment. The apprentice therefore enjoys all the rights and suffers all the obligations of an employee, subject to the terms of the contract. The only distinction between an apprentice and an employee is that the ‘full’ employment of an apprentice depends on his or her successful completion of the training. Apprenticeships in the industrial sector are governed by the Industrial Training Act, which provides that the rules and principles governing the must be applied, unless the Act expressly states an exception, or when the application of labour law would not be compatible with the nature and aim of the vocational training being undertaken. The minimum period of an apprenticeship contract under the Industrial Training Act, section 2, is four years of service.

4.3.3 Probation
Kenyan statutes do not relate to trial periods for individual labour contracts. However, collective agreements generally establish a trial period, after which the worker receives tenure. Trial periods range between 3 weeks (under the Regulation of Wages (Tailoring Garment Making and Associated Trades) Order) and 3 years (the latter in the civil service). Government workers receive tenure according to the requirements set out in the Civil Servants Law (Appointments) and the Civil Service Rules, which are determined by the Civil Service Department of the Government. An employer may dismiss the worker during the trial period or at its conclusion, depending on the contract terms. Nevertheless, this termination of contract must be done in good faith. When the dismissal is unfair or causes the worker unusual injury, the court may award him damages.

4.4 Suspension of the contract of employment
Under the Trade Disputes Act the labour contract is suspended if a worker participates in a lawful strike or is affected by a lawful locked out. Therefore, the employee does not violate his or her contractual obligations to his or her employer when he or she participates in a strike. Likewise, lockouts do not terminate the employment relationship. When the labour contract is suspended by worker participation in a strike, the employer is not required to pay wages, since no work has been performed. Industrial Court judgements have held that an employer is not required to pay wages when the labour contract is suspended because of a strike.

4.5 Termination of the Contract of Employment

4.5.1 Termination by Notice

1. Statutory regulations
Under the Employment Act, section 14 (5) “every contract of service not being a contract to perform some specific work, be deemed to be

  • Where the contract is to pay wages daily, a contract terminable by either party at the close of any day without notice;
  • where the contract is to pay wages or salaries periodically at intervals of or exceeding one month, a contract terminable by either party at the end of the period of twenty-eight days next following the given of notice in writing.” This sub-section does not apply in cases when the contract itself, or a given collective agreement, requires a longer period of notice. If an employer does not give notice, he or she should pay to the employee an amount equal to his or her wages for that period.
  • Rules of the Industrial Court Practice in the Industrial Court has produced some rules, thereby modifying the strict regulations of the Act. The period of advance notice for employees who have worked for five years or less has generally been adjusted to a minimum of one month. When the employee has worked for more than five years, however, it is at least two months. And the notice must be in writing. Collective agreements normally contain these rules too.

4.5.2 Summary Dismissal

1. Statutory regulations
Under section 17 of the Employment Act, a summary dismissal is justified after “gross misconduct”, when a very serious wrong has been proved. The employee is guilty of such misconduct if he or she (section 17 (a)-(g)):

  • Is absent from work without permission or good excuse;
  • Is so intoxicated that cannot do their work properly;
  • Deliberately neglects or ignores the work, or carries it out improperly;
  • Uses abusive or insulting language;
  • Disobeys orders from persons with authority;
  • Is lawfully arrested for an offence punishable by imprisonment, and is not within 10 days either released on bail or otherwise lawfully set at liberty;
  • Commits a criminal offence against the employer or his or her property.

2. Rules of the Industrial Court
Certain procedures have to be followed when such dismissal is being contemplated. First, the employee has to be informed of the claims of gross misconduct. Secondly, the employee has to be called upon and given the opportunity to defend himself or herself against them. Finally, he or she must be informed in reasonable detail of the decision once it is made, and the grounds upon
which this is done. The decision should be made honestly and in good faith. There should be no victimization or any unfair labour practices.

4.5.3 General rules concerning termination

1. Statutory regulations
Under section 18 (1) every employer is bound to give to an employee a certificate of service upon any termination, but no reference or certificate relating to the character or performance (Sub-section 2).

2. Rules of the Industrial Court: Unfair Dismissals
It has now been accepted that adherence to all the requirements of the law in giving notice is not enough. Serious conflicts have been generated when an employee’s services have been terminated by the employer, on the grounds which appear to the general body of the work force to be spurious in order to get rid of the person.

The Court will intervene where there is a lack of good faith. At times, an employer may give notice to an employee when in fact she or he is dismissing him or her for some reason that may not constitute adequate grounds for summary dismissal. Under these circumstances the Court may investigate whether there is any victimization, bias or unfair labour practice. Disregard of principles of natural justice may also cause the Court to intervene. It is considered to be unfair to base termination on the race, tribe or belief of an employee. The sex of an employee should be considered only to the extent permitted by the law, and in favour of the employee.
Applying these principles, dismissal may be based on other grounds apart from those mentioned in the Employment Act. An employee may be dismissed on medical grounds. But in cases where the ill health affects only a particular type of work, the employee may be given another type of work which is appropriate in the circumstances. (See among others: Industrial Court, Cause No. 11 of 1996 –Kenya Union of Journalists and Nation Newspapers; Cause No. 23of 1972- Kenya Union of Commercial Food & Allied Workers and Kenya Co-operative Creameries Ltd.)

3.Restrictions imposed by collective agreements
Collective agreements regulate and limit the employers’ ability to discharge workers. Grievance procedures and special dismissal procedures enable the union to represent the workers’ interest and negotiate the employers’ intent to make an individual or collective dismissal. When agreement is not reached the dispute is often settled in arbitration. Some collective agreements grant the employer the prerogative to dismiss a worker after the consultation and negotiation requirements have been met.

4. Other contractual rights
There are many rights that an employee may have by virtue of the contract, such as leave (annual, maternity, sick or study), allowances (leave, travelling, acting, duty or any other), medical and overtime payments, bonuses and many others. They become relevant when the employment ceases. Their equivalent in money will be calculated and paid to the employee as part of the termination rights.

4.6 Redundancy and severance pay
In the understanding of the Industrial Court the basic principles that would apply in the event of redundancy were already laid down in the first version of the tripartite Industrial Relations Charter. In addition, “redundancy” is defined under the Trade Disputes Act, section 2, as “loss of employment, occupation, job or career by involuntary means through no fault of an employee involving termination of employment”. Moreover, redundancy and severance pay on redundancy are common features in collective agreements, defining the length of notice to be given to the union, and the notice period in respect of the employees to be declared redundant.

The individual employee is entitled to two basic rights, severance pay and payment in lieu of notice. The rates of payment may depend on the agreement, but many range from fifteen to thirty days basic wage or salary for every completed year of service. Following the jurisprudence of the Industrial Court it has been accepted that an employer whose position improves, and wishes to employ after a financial crisis, must give priority to the employees formerly declared redundant.

4.7 Remedies in case of unjustified dismissal
Under Kenyan legislation there are two basic rights of a dismissed employee where the dismissal is wrongful: the right to reinstatement and the right to compensation. These rights can be granted separately or together. Reinstatement can only be ordered by the Industrial Court under section 15 (1) of the Trade Disputes Act. In rectifying the jurisdiction of the Industrial Court, the power
of reinstatement had been given to the Court in the amendment of the Act in 1971. The Court normally considers all the relevant circumstances applying the principles of good faith, to decide whether reinstatement is justified, such as the length of time since dismissal, whether an employee has been employed elsewhere since dismissal, and the willingness of both the employer and the employee to reinstate and to be reinstated.

Under the law of contract, the general remedy for breach of contract is compensation, but the Court may also grant specific performance or rescission. The amount paid will depend on the circumstances of the case, but is generally based on the monthly or annual earnings of the dismissed person. Under the Trade Disputes Act, section 15 (2), the amount awarded must not exceed the actual financial loss suffered by the employee as a result of the wrongful dismissal, or an amount equal to his or her wages for twelve months. In computing the amount of compensation any earning which the employee has received since the dismissal is being taken
into account.

4.8 Resignation
Under the Employment Act, sections 14 (5) and 16, the conditions for termination by notice by the employer apply here. Employees who receive monthly payments must inform the employer one month before they intend to stop working. The contract may provide for a shorter or longer period. If employees do not give notice, they should pay to the employer the equivalent of the wages for the period of notice.

If, in addition, the workers’ resignation violates a contractual obligation to work for a specified period they may be liable for damages that the resignation caused the employer. Such cases are few though, and difficult to prove. Courts will not grant the specific performance remedy to an employer, i.e., they will not compel an employee to work, the employers’ only remedy being damages. In general, when an employee resigns he or she is not entitled to severance pay.

4.9 Working Time and Rest Time

4.9.1 Hours of work
Under the Regulation of Wages (General) Order, subsidiary to the Regulations of Wages and Conditions of Employment Act, the general working hours are 52 per week, but the normal working hours usually consist of 45 hours of work per week, Monday to Friday 8 hours each, 5 hours on Saturday under the special Orders for different sectors subsidiary to the Regulations of Wages and Conditions of Employment Act. Collective agreements may modify the working hours, but generally provide for weekly working hours of 40 up to 52 hours per week. Under the Employment Act, section 8, every employee is entitled to at least one rest day in every
period of seven days. In many sectors the regular rest-day may not be the Sunday, but another day of the week.

4.9.2 Overtime
Under these statutory regulations overtime shall be payable at the rates of one and one-half time hourly rate on weekdays, and at the rate of twice the basic hourly rate on Sundays and public holidays. There are different Regulations of Wages Orders in force, covering different sectors of the economy.

4.9.3 Annual paid leave
Under section 7 of the Employment Act, every employee shall be entitled to no less than twentyone working days of annual leave with full pay. Where the employee works for less than a year, the number of days will be reduced accordingly. This is a minimum and many contracts and collective agreements provide for annual leave of between thirty to forty-five days. In average Kenyan employees enjoy annual leave of 24 days. For a woman who has taken maternity leave (2 months) in a given year, the maternity leave forfeits her annual leave under section 7 (2) of the Employment Act.

4.9.4 Public Holidays
Kenya has currently 10 public holidays – New Year’s Day, Good Friday, Easter Monday, Labour Day, Madaraka Day, Mashujaa Day, Eid-ul-Fitr-Day, Christmas Day and Boxing Day – described by the Public Holidays Act. Where any of these holidays fall on a Sunday, the next working day will be a holiday.

4.10 Maternity Leave and Maternity Protection
Under section 7 (2) of the Employment Act, maternity leave is two months with full pay, provided that a women who has taken two months maternity leave forfeits her annual leave in that year. The Regulation of Wages (General) Order, subsidiary to the Regulations of Wages and Conditions of Employment Act, specifies the provision under paragraph 13 (ii) and (iii) which read:
(ii) child birth shall not be deemed to be sickness as provided for under paragraph 12, and the employer shall not be inquired to meet medical costs incurred thereon;
(iii) A female employee who takes maternity leave shall not incur any loss of privileges during such period.

Cash benefits and other entitlements during pregnancy, and breaks for breastfeeding are provided in selective collective agreements, without representing a general trend.

4.11 Other Leave Entitlements
4.11.1 Sick Leave
Under the Employment Act, section 7 (3), an employee is entitled to paid sick leave after a period of two consecutive months of service. Thus, the Employment Act, provides the minimum period of entitlement while the Regulation of Wages Order, subsidiary to the Regulations of Wages and Conditions of Employment Act, section 12, provides the longest period granted by law.

The minimum period of entitlement is seven days with full pay and seven days with half-pay for every twelve months. The longest period of entitlement is thirty days with full pay and fifteen days with half-pay. The employee is however expected to produce a certificate of incapacity to work signed by a duly qualified medical practitioner.

4.11.2 Compassionate Leave
Under the Regulation of Wages (General) Order, subsidiary to the Regulations of Wages and Conditions of Employment Act, compassionate leave is granted to allow an employee to attend to personal misfortunes such as death, accidents or sickness concerning relatives and friends. The number of days he or she gets are deducted from the annual leave entitlement for the year.

4.11.3 Study Leave
Under the Civil Service Code of Regulations public employees are entitled to study leave. Neither the Employment Act, nor the Regulations of Wages and Conditions of Employment Act provide for an equivalent. But in practice, many companies and employers grant employees time off to go for courses, or to prepare for examinations.

4.12 Minimum Age and Protection of Young Workers
The Employment Act, in part IV, accords special protection to juveniles. Under section 2 “juveniles” is defined as a “child or young person”; and “’child’ means an individual who has not attained the age of sixteen years”, whereas “young person” means a person who has not attained the age of 18 years.

With the adoption of the Children Act, 2001, a new and conflicting definition has been established of which defines “child” as any human being under the age of 18 years. The regulations for juveniles, minors under 18, under the Employment Act, are as follows:
Children under 16 should not be employed in any industrial undertaking or to attend machinery, unless they are apprentices or learners. “Industrial undertaking” means any of the following: any activity which relates to surface or underground extraction (like mines and quarries), any factory and any form of construction and installation (like buildings, railways, roads, tunnels, bridges,
canals, sewers, drains, gas work, telegraphic, telephonic or electrical installations, or water works), and to transportation and handling of passengers or goods by road, rail or inland waterway. Section 24 (2) (a)-(d) thereby covers most of the potentially hazardous working conditions.

Young persons under 18 must not be employed in any industrial undertaking at night except in cases of emergencies. “Night” means the time from six-thirty p.m. to six-thirty a.m. (section 28). Employers engaging juveniles (under the age of 18) are required to keep a register (section 31): the labour officer may cancel or prohibit the employment (section 34), or order the medical examination of the juvenile (section 32).

Section 3(1) of the Employment (Children) Rules, 1977, allows the employment of children with the prior written permission of an authorized officer, and that the only restrictions are that such employment should not cause the children to reside away from parents without their approval, that permission for work in a bar, hotel, restaurant, etc., needs the consent of the Labour Commissioner and that such permit should be renewed annually.

4.13 Equality
4.13.1 Gender Equality
The Constitution guarantees the right to equality in Art 82(3): “the expression ‘discriminatory’ means affording different treatment to different persons attributable wholly or mainly to their respective descriptions by race, tribe, place of origin or residence or other local connection, political opinions, colour, creed or sex whereby persons of one such description are subjected to disabilities or restrictions to which persons of another such description are not made subject or are accorded privileges or advantages which are not accorded to persons of another such description”.

In the tripartite Industrial Relations Charter (1980) the parties agree on abolishing all discrimination among workers on the grounds of race, colour, sex, belief, tribal association or trade union affiliation including discrimination in respect of: Admission to Public or private employment; Labour legislation and agreements which shall afford equitable economic treatment to all those lawfully resident or working in the country; Conditions of engagement and promotions; Opportunities for vocational training; Conditions of work; Health, safety and welfare measures; Discipline:  Participation in the negotiation of collective agreements; Wage rates; which shall be fixed according to the principle of equal pay for work of equal value in the same operation and undertaking.

Yet, the Employment Act, Part IV imposes similar restrictions to the employment of women and the employment of juveniles. Under section 28 women must not be employed in any industrial undertaking at night (the time from six-thirty p.m. to six-thirty a.m.) except in cases of emergencies, and in cases where their work is connected with raw materials which are subject to rapid deterioration, and their work is necessary to preserve the material. Another exception exists for women in responsible positions of managerial and technical nature, or employed in health and welfare services, and not normally employed in manual work. The latter categories of
women employees can even be employed on underground work, like women in course of their studies and women who have to enter the underground parts of a mine for any other reason than manual work.

4.13.2Workers with disabilities and persons living with HIV/AIDS
Workers with disabilities are mentioned only in the Regulations of Wages and Conditions of Employment Act, section 18 (1), which allows employment below the minimum wage for persons with disabilities. Further regulations to prevent these groups from suffering discrimination do not exist. As the Anti-discriminatory clauses in the current Constitution are enumerative unlike many other constitutions, not prohibiting discrimination on “any other ground” in Art 82 (3) of the Constitution, these groups are not legally protected against discrimination.

4.14 Pay Issues
4.14.3 Minimum wage
The Employment Act does not make any provisions for wages in general. The Minimum Wage is dealt with by the Regulations of Wages and Conditions of Employment Act and in the Regulation of Wages Order subsidiary to Chapter 229. A tradition has been established according to which the Minister of Labour and Human Resource Development, in exercise of his or her powers conferred to by section 11 of the Regulation of Wages and Conditions of Employment Act, would order the increment of minimum wages to come into effect May 1st of every year.

4.14.2 Protection of wages
Under the Employment Act, section 4, wages should be paid in Kenyan currency to the employee or to an authorized person. The wages may be paid in kind but this must not be in the form of alcohol or drugs. Also, the Act requires that wages be paid in full, except authorized deductions, permitted by the law (under section 6 of the Employment Act).

4.14.3 Housing
Under the Employment Act, section 9, specified under the Regulation of Wages (General) Order, subsidiary to the Regulations of Wages and Conditions of Employment Act, section 4, an employee is either entitled to reasonable housing accommodation, or to housing allowances that enable the employee to obtain reasonable accommodation. The Employment Act does not say what reasonable housing accommodation is, but gives power to the labour officer to enter into any house in which an employee is living and inspect it.

Summary for the topic

  1. Nature and types of the contracts of employment
  2. Termination of contract of employment
  3. Working hours and rest
  4. Types of leaves
  5. Gender equality
  6. Pay issues
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THE LAW OF TORTS NOTES

WHAT IS A 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. A single action may give rise to a tort and a crime.
The law of tort protects various personal and proprietary interests.
Tortious 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.

TORT AND CRIME DISTINGUISHED

Tort
It is a wrong redressable by an action for unliquidated damages.
The party suing is an individual or private person.

Crime
It is a wrong the action of which involves punishment.
Almost always the party suing is the state.

THE PARTIES TO A SUIT (CAPACITY / LEGAL LIABILITY IN TORTS)

GOVERNMENT
At common law no action in tort lay against the state (crown) for wrongs expressly authorized by the crown or for wrongs committed by its servants in the course of their employment.
However, under the Government Proceedings Act1, the Government is liable for tortious acts. Section 4(2) provides; “Subject to the provisions of this Act, the government shall be subject to all those liabilities in tort to which if it were a full person of full age and capacity it would be subject;
i. In respect of torts committed by its servants or agents.
ii. In respect of any breach of those duties which a person owes to his servants or agents at common law by reason of being their employer.
iii. In respect of any breach of duties attaching at common law to the ownership occupation, possession or control of property.
However, Section 13A provides that before one can sue the government he must give a 30 days notice.
Dorset Yatch Co Ltd v Home Office
Facts: An action was brought by owner of property against the home office in respect of damage to his property done by runaway borstal boys. Seven borstal boys ran away one night when the three officers in charge of them were, contrary to instructions, all in bed. They boarded one of the many vessels in the harbour, started it and collided with the plaintiff’s yacht, which they then boarded and damaged further. The defendant (Home Office) was held liable for not protecting the plaintiff from the ravages of the borstal boys.

FOREIGN GOVERNMENTS / SOVEREIGNS
Diplomats and foreign sovereign states enjoy absolute immunity to criminal and civil liability before a Kenyan court unless the immunity had been waived by submission to Kenyan Jurisdiction (under the Vienna Convention on Diplomatic Relations, 1961).
This applies only where the act was done in the exercise of the sovereignty of the state. Immunity ceases when one engages in private and commercial venture. Immunity can be waived leading to a person being charged.
• Bankrupts
May sue or be sued for torts committed.
• Minors
After an early period of uncertainty the common law adopted 21 years as the age of majority for most purposes and it remained at this until 1970 when it was reduced by statute to 18 years.2
A minor can sue and be sued for tort. A minor can however not sue or be sued in his own name but by his “next friend” (guardian ad litem3).
In the law of tort there is generally no defense of minority and a minor is as much liable to be sued for his tort as is an adult. In Gorely v Codd (1967), the defendant, a 16 ½ year old boy was held liable when he accidentally shot the plaintiff with an air rifle in the course of lurking about.
Minority however may be a defense in an action for the tort of negligence or malice. This is to be inferred from the fact that a young child may well be incapable of the necessary mental state for liability in such torts.
In an action for negligence against a young child, therefore, it is insufficient to show that he behaved in a way which would amount to negligence on the part of the adult. It must be shown that his behaviour was unreasonable for the child of his age.
Parents are not liable for the torts of their children, but in situations where it is established that the child was under control of the parent the commission of the tort by the child will result to liability of the parent.

• Persons Of Unsound Mind
Liability depends on whether the person knew what he was doing when he committed the tort. This can be proven by a psychiatrist.
In Morris v. Mardsen (1952), the defendant rented a room at a hotel. While there he attacked the manager of the hotel. At that time he was suffering from a disease of the mind. It was established that he knew the nature and quality of his act, but he did not know that it was wrong.
It was held that as the defendant knew that nature and quality of his act, he was liable in tort for assault and battery. It was immaterial that he did not know what he was doing was wrong.
Unsoundness of mind is thus certainly not itself a ground of immunity from liability in tort, and it is submitted that the true question in each case is whether the defendant was possessed of the requisite state of mind for liability in the particular tort in which he is charged.

Husbands And Wives
Married women can sue and be sued for torts committed according to the 1935 Law Reform (Married women and tort feasors ) Act.
The Law now recognizes women as Femme Sole (having legal capacity to sue and be sued). Under common law the wife was never liable for her torts but her husband was liable for both his torts and those of his wife.

• Corporations
A corporation can sue and be sued in its own name for torts committed, but there are some torts which, by their nature, it is impossible to commit against a corporation, such as assault or false imprisonment.
A corporation can sue for the malicious presentation of a winding–up petition or defamation, though the precise limits of the latter are unclear.
Liability of Corporations is however limited. Thus if a servant commits a tort that is ultra vires the corporation then the corporation is not liable.

• Unincorporated Associations
These cannot sue or be sued for torts committed but they can institute a representative suit. The members of the association are not liable for the torts of the association but the individual members are liable for their own torts.

• Partners
They are personally liable for their own torts. They can sue and be sued by writing down all the names of the partners and of that partnership.
Each and every partner is liable for a tort committed in the course of the business. It was so held in Hamlyn v. Houston (1903).

• Aliens
A friendly alien has no disability and has no immunity. An alien enemy is one whose state or sovereign is in war with the sovereign of the state in question. As thus defined an alien enemy unless he is within the realm of license of the sovereign cannot sue in the sovereign‟s courts.
He can however be sued and can defend an action and if the decision goes against him, he can appeal.

GENERAL DEFENCES IN TORT LAW
1. PLAINTIFF‟S DEFAULT/CONTRIBUTORY NEGLIGENCE
This defence may be relied upon if the plaintiff is also to blame for his suffering. The defendant must prove that:
i. The plaintiff exposed himself to the danger/risk by act or omission
ii. The plaintiff was at fault or negligent
iii. The plaintiff’s negligence or fault contributed to his suffering
This defence 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 defence is unavailable if the plaintiff is a child of tender years.
If the plaintiffs were to sue and the defendant proved that the plaintiff was on the wrong, that can constitute a defense. Under Common Law, if a person contributed to a tort, that prevented him from suing. It was a complete defence.
The law was however changed by statute under the Common Law Reform Act of 1945. A plaintiff on the wrong can recover as long as he has not contributed to 100% to the tort. Thus if he has contributed 40% he can recover 60%.

2. ACTS 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 be shown that the act was not foreseeable and that it was unusual.

3. VOLENTI NON FIT INJURIA
This defense is available in circumstances where the plaintiff with full knowledge of the risk voluntarily agrees to undertake the same .The defendant 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 VBurnett.

4. NECCESSITY
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 be reasonable and this will depend on whether there is human life or merely property in danger.

5. 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 defence succeeds or not depends on the interpretation of the Statute

SPECIFIC TORTS
1. NEGLIGENCE
In the words of Anderson B in Blyth v Burmingham Water Works Co. negligence is the omission to do something which a reasonable man guided upon those regulations which ordinarily regulate the conduct of human affairs would do or do something which a reasonable and prudent man would not have done.

ELEMENTS OF NEGLIGENCE
The tort of negligence consists of three elements which a plaintiff must prove in any action based on negligence.
1. Legal duty of care.
2. Breach of duty.
3. Loss or damage.

LEGAL DUTY OF CARE
The plaintiff must prove that the defendant owed him a duty of care in the circumstances. The circumstance must have been such that the defendant knew or ought to have known that acting negligently would injure the plaintiff.
Who owes another a legal duty of care?
As a general rule every person owes his neighbour a legal duty of care.
In the words of Lord Atkin in Donoghue v Stevenson (1932), a person owes a duty of care to his neighbours. This is the so-called neighbour principal. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to 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 acts that I ought to reasonably have them in contention as being so affected when am directing my mind to the acts or omissions which are called into question.
Whether a person owes another a duty of care will depend on whether such a person could reasonably have foreseen injuring the other.
Standard of care
As a general rule the standard of care expected of the defendant is that of a reasonable man of reasonable prudence. This is a person who has the minimum information and knowledge necessary to act reasonably in any situation.
Where professionals and experts are involved the standard of care is that of a reasonably competent professional.
The concept of reasonable man is an artificial concept developed by law to promote objectivity.
It is independent of personal subjectivity and prejudices.
Unforeseen plaintiffs
These are circumstances in which a defendant does not owe a plaintiff a duty of care. In such circumstance the plaintiff cannot sustain an action against the defendant irrespective of negligence.
In Kings v. Phillips where an expectant mother suffered nervous shock by reason of hearing the son‟s scream while 70 yard s away, it was held that she could not recover since the defendant driver owed her no legal duty of care.
In Bourhill v. Young an expectant mother suffered a nervous shock on hearing a loud band and seeing a pool of blood as a result of an accident caused by a negligently ridden motorcycle. It was that she could not recover since the motorcyclist could not have reasonably foreseen her suffering.

BREACH OF DUTY
The plaintiff must prove that the defendant acted negligently thereby breaching his legal duty of care. The plaintiff must prove specific acts or omissions the part of the defendant. The plaintiff must adduce evidence to prove his case.
However in certain circumstances negligence is proved without evidence. These cases are referred to as Res ipsa loquitor which literally means “it speaks for itself”.
This is a rule of evidence by which the plaintiff is deemed to have established negligence on the part of the defendant without adducing any evidence.

Requirements of Res Ipsa
Absence of explanation; the plaintiff has no evidence on the negligent acts or omissions of the defendant.
Such a thing does not ordinarily occur when proper care is taken
The instrument or object which causes the harm was exclusively within the control of the defendant or his servants or his agents.
In Scott v London and St Catherine’s dock the plaintiff a custom’s officer was injured by sugar bags falling on him inside the defendant’s warehouse. It was held that the principle of Res ipsa applied and he did not have to prove negligence on the part of the defendant.

Effects of Res Ipsa
1. It provides prima facie evidence on the part of the defendant
2. It shifts the burden of proof from the plaintiff to the defendant and if the defendant‟s explanation is credible the plaintiff loses the case

LOSS OR DAMAGE
The plaintiff must prove that as a result of the defendant’s breach of duty he suffered loss or damage.
The plaintiff’s loss must be traceable to the defendant’s breach of legal duty, failing which the plaintiff’s damage is deemed to be remote and therefore irrevocable.
The defendant is reasonably liable for any loss which is reasonably foreseeable from his acts or omissions. It was so held in The Wagon Mound II.
Question has arisen as to what losses the defendant must have foreseen and courts have taken the view that as long as some loss is foreseeable the defendant is liable for any loss.
In Bradford v. Robinsons Rental Co. Ltd, where the plaintiff was exposed to extreme cold and fatigued, in the course of his employment by his employers and as a consequence suffered from frost bite, it was held that the defendants were liable, since his suffering from frost bite was reasonably foreseeable.

However, the defendant is not liable if the loss or damage suffered is not traceable to the negligent act or omission of the defendant.

DEFENCES TO NEGLIGENCE

1. Contributory negligence
This defense is available in circumstances in which the plaintiff is also to blame for the loss or injury. The defendant must adduce evidence to establish the plaintiff’s contribution.
The defendant must prove:-
1. That the plaintiff exposed himself to danger.
2. That the plaintiff was at fault or negligent.
3. That the plaintiff’s fault or negligence contributed to his suffering.

Effect of contribution
It reduces the amount of damages recoverable by the plaintiff by the extent of his contribution. However, children of tender years are not guilty of contribution.

2. Voluntary assumption of risk (volenti non fit injuria)
This defense is available in circumstances where the plaintiff with full knowledge of the risk voluntarily agrees to undertake the same. The defendant must prove
That the plaintiff had actual knowledge of nature and extent of the risk
That the plaintiff agreed to incur the risk voluntarily
In Dann v Hamilton the plaintiff had taken a ride on a vehicle driven by a drunken person and his was aware of this fact and as a consequence an accident occurred. The defendant’s plea of volenti failed since the plaintiff had not consented to incur the risk.
However in Tugwell v Bunnet where the defendant’s vehicle expressly stated that passengers rode at their own risk and the driver at the material time was drunk to the plaintiff’s knowledge but took a ride in the motor vehicle and was injured, the defendant’s defense of volenti succeeded since the plaintiff appreciated the risk and agreed to incur the same.

3. Statutory authority
If the conduct complained of by the plaintiff is authorized by statute and the defendant has acted in accordance with the provision of the statute the defendant has a complete defense to the plaintiff’s action.
However whether or not the defense is complete depends on the interpretation of the statute.

STRICT LIABILITY: THE RULE IN RYLANDS v. FLETCHER
Anyone who in the course of non – natural use of his land, accumulates thereon for his own purposes anything likely to do mischief if it escapes is answerable for all direct damage thereby caused.
This is the rule in Rylands v. Fletcher where the defendant employed independent contractors to construct a water reservoir on the land, which was separated from the plaintiffs land by adjoining land. In the course the works the contractors came upon some old shafts and passages filled with earth. The contractors did not block them up. Unknown to them, the shafts connected their land with the plaintiff’s mines. When the water filled the reservoir, it seeped through the old shafts and into the plaintiff‟s mines thence flooding them. It was found as a fact that the defendant was not negligent, although the contractors had been. However, although the defendant was neither negligent nor vicariously liable in the tort of his independent contractors, he was held liable by the Court of Exchequer chamber and the House of Lords. The judgment of the Court of Exchequer chamber was delivered by Blackburn J. at P. 279 -280 and it has become a classical exposition of doctrine.
“We think that the true rule of law is, that the person who for his own purpose brings on his land and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril, and, if he does not do so, is prima facie answerable for all the damage which is the natural consequences of its escape.”
This may be regarded as the „rule in Rylands v. Fletcher’
But what follows is equally important. The court further said:
“He can excuse himself by showing that the escape was owing to the plaintiff’s default; or the act of God: it is unnecessary to inquire what excuse would be sufficient”.
The general rule, as above stated, seems to be just in principle.
“The person whose grass or corn is eaten down by the escaping cattle of his neighbour, or whose mine is flooded by the water from the neighbour’s reservoir, whose cellar is invaded by filth of his neighbours or whose habitation is made unhealthy by the fumes and noise and vapours of his neighbours alkali works, is damnified without any fault of his own; and it seems reasonable and just that the neighbour, who has brought something on his own property which was naturally there harmless to others so long as it is confirmed to his own property, but which he knows to be mischievous if it gets on his neighbours should be obliged to make good the damage which ensues if he does not succeed in confining it to his property. But for his act in bringing it there no mischief could have accrued, and it seems but just that he should at his peril keep it there so that no mischief may accrue, or answer for the natural and anticipated consequences and upon authority, this we think is established to be the law whether the things so brought be beasts, or water, or filth, or stenches.”
Lord Cairns in the House of Lords upheld this judgment but restricted the scope of the rule to where the defendant made a “non-natural use” of the Land.
This decision makes it clear that liability was strict in the sense that the defendant’s liability was neither personal nor based on a mere vicarious liability for the negligence of his independent contractors.

REQUIREMENTS OF THE RULE IN RYLANDS v. FLETCHER 1. THE THING
The rule does not require that the thing should both likely to escape and likely to do mischief on escaping. If this were the case, there would be little difference between the rule in Rylands v.Fletcher and negligence. Furthermore, in Rylands v. Fletcher,the thing need not be dangerous initself. The most harmless objects may cause damage on escape from a person land.
The rule has been applied to a large number of objects including water, gas, electricity, explosives, oil, vibrations, poisonous leaves of trees, a flag post, a revolving chair at a fair ground, acid smuts from a factory, a car, fire and even at one time gypsies.
In Musgrove v. Pandelis, the court applied Blackburn J‟s test literally where the collected thing did not itself escape but caused the escape of something else. In this case, the defendant was held liable under Rylands v. Fletcher for the escape of a fire which started in the engine of his car was found to be an object likely to do mischief if it escaped.
The artificiality of this approach was however rejected in Mason v. Levy Auto parts in relation to a fire which began in wooden packing cases stored in the defendants land. The test applied was whether the objects were likely to catch fire and the fire spread outside the defendant‟s premises.
The liability was a strict one if this occurred.
In A.G. v. Corke a landowner was held liable under Rylands v. Fletcher for permitting the camping on his land of gypsies (caravan-dwellers) who trespassed and committed damage on the neighbouring land. This case was however received general disapproval in applying the rule in Rylands v. Fletcher to human beings. The objection has been that „things‟ does not include humanbeings and that liability in the above case should have been based on nuisance or negligence.
2. ACCUMULATION
The thing must be brought into the land for the defendant‟s purposes. The defendant need not own the land into which the thing is brought.
A temporary occupier of land such as a lessee or a person physically present on the land but not in legal occupation of it such as a licensee is equally within the scope of the rule and is liable for damage caused upon escape or a thing he has brought onto the land.
In Charing Cross Electricity Supply Co-v- Hydraulic Power Company, the rule applied to one who had the statutory power to lay electricity cables under the highway.
In Rigby v. Chief Constable of North Amptonshire, the court stated that the rule applied to cases where the defendant was in no sense in occupation of the land; in this case by firing a canister of gas into the plaintiffs.
The requirement that the thing should be on the land for the purpose of the defendant does not mean that it must benefit the defendant.
In Smeaton v. Ilford Corporation it was stated that a local authority which was under a statutory duty to collect sewage collected it for its own purposes within the rule in Rylands v. Fletcher.
Where the thing is naturally present on the defendant cannot be liable for its escape under
Rylands-v-Fletcher. The escape of weeds, rocks and floodwater is thus outside the scope of therule but recent decisions have established possibility of can action in nuisance for such escape.
The accumulation must thus be voluntary.

3. NON-NATURAL USER OF LAND
This is the most flexible and elusive ingredient of liability. Blackburn J. understood „natural‟ to mean things naturally on the land and not artificially created. However uncertainty crept as a result of Lord Cairns qualification that must be „a non-natural user‟ of the land.
Through a series of cases, courts have come to look upon „natural‟ as signifying something which is ordinary and usual even though it might be artificially instead of non-artificial. Non-natural use of land was explained by the Privy Council in Richard v. Lothian as per Lord Moulton.
„It must be some special use bringing with it increased danger to others and must not merely be the ordinary use of the land or such a use as is proper for the general benefit of the community.‟
What is natural is now viewed differently in different cases.
Non-natural use of land is generally constituted by certain activities as the storage on the land in bulk of water, electricity, gas and the collection of sewage by local authorities.
It is however, arguable that many of the above examples should be held to be natural use according to the Privy Council‟s definitions as being for the general benefit of the community. In British Celenese Ltd v. A.H. Hunt Ltd, it was held that the benefit derived by the community fromthe manufacturing of electrical and electronic components made the use of land for such purpose and the storing of strips of metal foil thereon a natural use of the land.
It is thus to be noted that the scope of „non-natural user‟ of land has narrowed over the years.
The decision will now depend on the facts of each case. It has been held that generating steam or electricity is not „non-natural‟ but that storing of industrial water under pressure, or gas and electricity in bulk is a non-natural use.

4. ESCAPE
There is no liability under the rule unless there is an escape of the substance from the land where it is kept. In Read-v-Lynns & co Ltd. the defendants operated on ammunition factory as agents of the Ministry of Supply. The plaintiff was an appointed inspector for the ministry. In the course of carrying out her duties in the factory, an explosion occurred causing her injuries. She based her claim against the defendants on Rylands-v-Fletcher making no assertion that the defendants had been negligent. It was held that Rylands-v- Fletcher was inapplicable because there had been no escape of the thing that inflicted the injury. The House of Lords defined escape as:
“Escape from a place where the defendant had occupation and control over land to a place which is outside his occupation or control.”
It was stated further in this case that Rylands-v-Fletcher is conditioned by 2 elements;
a) The condition of escape from the land of something likely to do mischief if it escaped.
b) The condition of non-natural user of the land.

The House of Lords emphasized that the absence of an escape was the basis of their decision in this case.

5. DAMAGE
Rylands –v-Fletcher is not actionable per se and therefore there must be proof of actual damage.This appears to mean actual damage to person or property and it excludes a mere interference with the plaintiff‟s enjoyment of this land, such as would be a ground in an action in nuisance.
Damage recoverable under the rule is limited to damage to person or property.
In Hale-v-Jennings Bros, the court held that an occupier of land was entitled to damages for personal injury under the Rule in Rylands-v-Fletcher.
In Cattle-v-Stocker Waterworks co, it was held that purely economic loss was not recoverable.

DEFENCES TO THE RULE IN RYLANDS v. FLETCHER

1. CONSENT OF THE PLAINTIFF
If the plaintiff has permitted the defendant to accumulate the thing the escape of is complained of, then he cannot sue if it escapes.
Implied consent will also be a defence; thus a person becoming a tenant of business or domestic premises that the time when the condition of the adjoining premises occupied by the landlord is such that the happening of the Ryland v. Fletcher type is likely to ensue, is deemed to have consented to take the risk of such an event occurring.
In Kiddle-v-City Business Properties Ltd, the plaintiff became a tenant of the defendant in a house below the house occupied by the defendant (Landlord). The gutter of the Landlord’s house was blocked and when it rained, an overflow of rainwater from the blocked gutter at the bottom of the sloping roof in possession of the Landlord and above the tenant‟s premises damaged the stock in the tenant’s premises. It was held that the Landlord had a defence as the tenant impliedly consented to the risk of rainwater overflowing into his premises.
If the accumulation benefits both the plaintiff and the defendant, the plaintiff may be deemed to have consented to its accumulation e.g. where for the benefit of several occupants‟ rainwater is accumulated on the roof or a water closet installed or water pipes fitted, the several occupants are deemed to have consented.
On the other hand, the defence is not available as between a commercial supplier of gas in respect of gas mains under the highway. In any event an occupier will not be presumed to have consented to installations being left in a dangerously unsafe state.

2. CONTRIBUTORY NEGLIGENCE (PLAINTIFF‟S OWN DEFAULT)
If the damage is caused solely by the act or default of the plaintiff himself or where the plaintiff is contributorily negligent, he has no remedy.
If for instance a person knows that there is danger of his mine being flooded by his neighbors operations on adjacent lands and courts the danger of doing some act which renders the flooding probable, he cannot complain, as stated in Miles-v-Forest Rock Granite Co.Ltd.
In Dunn v. Birmingham Canal & Co, where the plaintiff worked a mine under the canal of the defendant and had good reason to know that they would thereby cause the water from the canal to escape into this mine, it was held that they could not sue in Rylands v. Fletcher when the water actually escaped and damaged their mine. Cockburn C. J. said; “The plaintiff saw the danger, and may be said to have courted it.”

3. ACTS OF THIRD PARTIES (ACTS OF A STRANGER)
Where the occupier of land accumulates things on his land, the rule will not apply if the escape of the thing is caused by the unforeseeable act of a stranger.
In Rickards v. Lothian the plaintiff failed in his claim against the defendant where a third party had deliberately blocked up the waste pipe of a lavatory basin in the defendant premises, thereby, flooding the plaintiff‟s premises.
The basis of the defense is the absence of any nature of control by the defendant over the acts of a stranger on his land and thus the burden is on him to show that the escape was due to the unforeseen act of a stranger without any negligence on his own part.
If on the other hand, the act of the stranger could reasonably have been anticipated or its consequences prevented, the defendant will still be liable.
While it is clear that a trespasser is a „stranger‟ for this purpose, other person included in this term depend on circumstances.
The occupier is of course liable for the defaults of these servants in the course of an independent contractor unless it is entirely collateral.
He is liable for the folly of a lawful visitor as well as the misconduct of any member of his family he has control over.
It has also been argued that he ought to be responsible for guests and licensees on his land but a distinction ought to be taken here or it would be harsh to hold an occupier liable for the act of every casual visitor who has bare permission to enter his land and of whose propensities to evil he may know nothing of e.g. an afternoon caller who leaves the garden gate open or a tramp who asks for a can of water and leaves the tap on.
Possibly the test is, “can it be inferred from the facts of the particular case that the occupier and such control over the licensee or over circumstances which made his act possible that he ought to have prevented it? If so, the occupier is liable, otherwise not.”
As regards the issue of dangerous elements brought on the owners land by another person, the owner is not liable under the rule as in Whitemorses v. Standford

4. ACT OF GOD
Where escape is caused directly by natural causes without human intervention in “circumstances which not human foresight can provide against and of which human prudence is not bound to recognize possibility” the defense of act of God applies and the occupier is thus not liable.

5. STATUTORY AUTHORITY
Sometimes, public bodies storing water, gas, electricity and the like are by statute exempted from liability so long as they have taken reasonable care.
It is a question of statutory interpretation whether, and, if so, to what extent liability under Ryland-v-Fletcher has been excluded.
In Green v. Chelsea Waterworks Co. a main pipe belonging to a waterworks company which was authorized by parliament to lay the main, burst without any negligence on the part of the company and the plaintiff premises were flooded; the company was held not liable.

On the other hand, In Charing Cross Electricity Co v. Hydraulic Power Co. where the facts were similar, the defendants were held liable. The defendant had no exemption upon the interpretation of their statute.
The distinction between the cases is that the Hydraulic Power Company were empowered by statute to supply water for industrial purposes, that is, they had permissive power but not a mandatory authority, and they were under no obligation to keep their mains charged with water at high pressure, or at all.
On the other hand, the Chelsea water works Company were authorized by statute to lay mains and were under a statutory duty to maintain a continuous supply of water it was an inevitable consequence and damage would be caused by occasional bursts and so by necessary implication the statute exempted them from liability where there was no “negligence‟.
The question whether the rule in Rylands v. Fletcher applies in all its strictness to local authorities has been considered but not decided.

VICARIOUS LIABILITY
The expression “vicarious liability” signifies liabilities which A may incur to C for damage caused to C by the negligence or other tort of B.
It is not necessary that A should not have participated in any way in the commission of the tort nor that a day owed in Law by A to C shall have been broken.
What is required is that A should stand in particular relationship to B and that B‟s tort should be referable in a certain manner to that relation.
The commonest instance in Law is the liability of a master for the torts of his servants. Vicarious liability generally arises from a contract service

MASTER-SERVANT RELATIONSHIP
WHO IS A SERVANT?
Since vicarious liability generally arises from a contract of service (“servant”) not a contract of services (“independent contractor”) it is important to determine the indications of a contract of service.
In an often cited statement in Short v. J & W Henderson Ltd Lord Thankkerton said that there are four indications of a contract of service;
a) The master’s power of selection of is servant
b) The payment of wages or other remuneration
c) The master’s right to control the method of doing the work, and
d) The master’s right of suspension

This list has been found helpful in determining whether a master-servant relationship exists but it is not conclusive. It is not possible to compile an exhaustive list of all the relevant considerations. The court stated in Market Investigation Ltd v. Minister of Social Security (1969 ) per Cooke J:
The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether he hires his own equipment, whether he is own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.
The control test is however not conclusively determinant of master-servant relationship especially when dealing with professionals or men of a particular skill.
In Morren v. Swinton the defendants engaged a firm of consultant engineers to supervise the construction of certain sewage works. Under the contract, the defendants were supposed to appoint a resident engineer (to be approved by the consultants) to supervise the works under the general supervision and control of the consultants. The plaintiff was appointed as a resident engineer by the defendant and approved by the consultants pursuant to the terms of the contract. He was paid by the defendant and was entitled to holidays with pay and was liable to be dismissed by the defendants. He was however delegated to the consultants and was under their general supervision and control
Held: Absence of control by the defendant was not necessarily the most important test. Theother factors were enough to show that the plaintiff was clearly employed by the defendant under a contract of service.
It is thus important to state that whether or not a contract of service exists will depend on the general nature of the contract and no complete general test exists. More helpful is the well-known statement of Denning L. J. inStevens v. Brodribb Co. Pty. Ltd.
“It is often easy to recognize a contract of service when you see it, but difficult to say wherein the distinction lies. One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of a business, and his work is done as an integral part of the business; whereas under a contract of services, his work, although done for the business, is not integrated into it but is only an accessory to it.”
An independent contractor will commonly be paid “by the job” whereas a servant will generally receive remuneration based upon time worked. But a piece worker is still a servant; and a building contractor is under a contract of service notwithstanding that it may contain provisions for payment by time.
Once the Master-servant relationship is established, the master will be liable or all torts committed by the servant in the course of the employment.

a) Hospitals

It has held that radiographers, house surgeons, house time-assistant medical officers and probably staff anesthetics are employees of the hospital authority for various liabilities. But visiting consultants and surgeons are not employees of the hospital and thus the hospital is not liable.

In Hillyer v. St-Bartholomew’s Hospital the plaintiff bought an action against the governor of a hospital for injuries allegedly caused to him by negligence of an operating surgeon. The hospital was a charitable body.
Held: That the action was not maintainable. The court further stated that the only duty undertakenby the governors of public hospital towards a patient who is treated in the hospital is to use due care and skill in selecting their medical staff. The relationship of master and servant does not exist between the governors and the physicians and surgeons who give their service at the hospitals (i.e. who are not servant of the hospital.) The court further stated that the nurses and other attendants assisting at the operation cease, for the time being, to be the servant o the governor, in as much as they take their orders during that period from the operating surgeon alone and not from the hospital authorities.
Where there is a contract between the doctor and the patient, the hospital is not liable.
A hospital is thus liable for negligence of doctor and surgeons employed by the hospital authority under a contract of service arising in the course of the performance of their professional duties. The hospital owes a duty to give proper treatment to its patients.
In Cassidy v. Minister of Health the plaintiff entered a hospital for an operation of this left hand, which necessitated post-operational treatment. While undergoing the treatment he was under the care of a surgeon who performed the operation and who was a whole-time assistant medical officer of the hospital, the house surgeon and members of the nursing staff, all of whom were employed under a contract of service. At the end of the treatment it was found that his hand had been rendered useless.
Held: The hospital was liable
A hospital may also be liable for breach of duty to patients to provide proper medical service although it may have delegated the performance of that duty to persons who are not its servants and its duty is improper or inadequately performed by its delegate.
An example is where the hospital authority is negligent in failing to secure adequate staffing as where a delegate is given a task, which is beyond the competence of a doctor holding a post of seniority.

b) Hired Servants
A difficult case arises where A is the general employer of B but C, by an agreement with A (whether contractual or otherwise) is making temporary use of B‟s services.
If B, in the course of his employment commits a tort against X, is it A or C who s vicariously liable to X? It seems that it must be one or the other but not both A&C.
In Mersoy Docks and Harbour Board v. Coggins and Griffith (Liverpool) Ltd. A employed B as the driver of a mobile crane. A let the crane to C together with B as driver to C. The contract between A and C provided that B should be the servant of C but was paid by A and A alone had the power to dismiss him. In the course of loading a ship, X was injured by the negligent way in which B worked the crane. At the time of the accident C had the immediate direction and control of the operations to be executed by B and crane e.g. to pick up and move a pieces of cargo, but he had no power to direct how B should work the crane and manipulate its controls.
Held: That A as the general or permanent employer of B was liable to X. The court held that there is a very strong presumption that a servant remains to be the servant employer although he may be the servant of the hirer.

The question whether A or C is liable depends on how many factors; e.g. Who is the paymaster, who can dismiss, how long does the alternative service last, what machinery is employed etc.
The courts have however generally adhered to the view that the most satisfactory test is, who at the particular time has authority to tell B not only what he is to do, but how he is to do it. This is question of fact involving all he circumstances of the case.

c) Loan of Chattels
In Omrod v. Crosville Motor Services Ltd. (1953) the owner of a car was attending the Monte Carlo motor rally. He asked a friend to drive his car from Birkernhead to Monte Carlo where they were to have a holiday together. During the journey, on a diverted route, the car was involved in an accident.
Held: At the time of the accident, the car was being used wholly or partially for the owner’s purposes and thus the friend was an agent of the owner and in so far as the friend was liable of negligence, the owner was vicariously liable for his negligence.

LIABILITY IN RESPECT OF AN INDEPENDENT CONTRACTOR
The employer is generally not liable for torts committed by an independent contractor. The employer is however liable if he is deemed to have committed the tort.
This may occur in the following instances:
1. Whether the employer has authorized the commission of the tort
In many circumstances, the law will attribute to a man the conduct of another being, whether human or animal, if he has instigated that conduct.
He who instigates or procures another to commit a tort is deemed to have committed the tort himself.
In Ellis v. Sheffield gas Consumers Co the defendant who had no authority to up the street employed a contractor to open trenches and lay gas pipes along a street.
The contractor carelessly left a heap of stones on the footpath; the plaintiff fell over them and was injured.
Held: the defendants were liable since the contract was to do an illegal act, a public nuisance. Thedecision would have been different had it been lawful for the defendant to dig up the streets.

2. Torts of Strict Liability
The employer is liable in those circumstances e.g. in Rylands-v-Fletcher the employer was held liable for the acts of his independent contractors as this was a case of strict liability.
These in torts of strict liability, the employer will be liable even where the tort e.g. the escape is caused by the negligence of an independent contractor.
In Terry v. Aston, the defendant employed an independent contractor to repair a lamp attached to his house and overhanging the footway. As it was not security fastened, the lamp fell on the plaintiff, a passer-by and the defendant was held liable, because: it was the defendant‟s duty to make the lamp reasonably safe, the contractor had failed to do that. Therefore, the defendant has not done his duty and is liable to the plaintiff for the consequences.
Here liability was strict.

3. Negligence
When there is an element of personal negligence on the part of the employer as to make him liable for the acts of an independent contractor. E.g. Where the employer is negligent or careless in employing an independent contractor for instance, where the contractor is incompetent.
Failure to provide precaution in a contract where there is risk of harm unless precaution is taken can make the employer liable for the tort of the contractor.
In Robinson v. Beaconsfield Rural Council, the defendant employed an independent contractor, one hook, to clean out cesspools in their district.
No arrangements were made for the disposal of the deposits of sewage upon being taken from the cesspools by hook. Hook men deposited the sewerage on the plaintiff land.
Held: The defendants had a duty to dispose the sewerage and, on construction of the contract, they had not contract with hook for discharge of this duty (disposing of the sewage) hence they were liable for the acts of the hook’s men in disposing it on to the plaintiff land.

4. Where the Duty of Care Is Wide
An example is where the independent contractor is dealing with hazardous circumstances, or works which from their very nature, pose danger to other persons.
In Holiday v. National Telephone Co, the defendant, a Telephone Company, was lawfully engaged in laying telephone wires along a street. They passed the wires through tubes, which they laid a trench under the level of the pavement.
The defendants contracted with a plumber to connect these tubes at the joints with lead and solder to the satisfaction of the defendant foreman.
In order to make the connections between the tubes, it was necessary to obtain a flare from a benzoline lamb of applying heat to the lamb. The lamb was provided with a safety valve.
The plumber dipped the lamp into a caldron of melted solder, which was placed over a fire on his footway. The safety valve not being in working order caused the lamb to explore. The plaintiff, who was passing on the highway was splashed by the molten solder and injured.

Held: The defendant were liable because having authorized the performance of work which fromits nature was likely to involve danger to persons using the highway were bound to take care that those who executed the work for them did not negligently cause injury to such persons.

ESSENTIALS FOR THE LIABILITY OF THE MASTER
For a master to be liable for his servant’s torts the tort must have been committed “in the course of employment”. An act is done in the course of employment if;
a) It was a wrongful act authorized by the master
b) It was a wrongful and unauthorized mode of doing something authorized by the master.
In London County Council v. Caltermoles (Garages) Ltd, the defendant employed a general garage hank, part of whose job involved moving vehicles around the garage. He was only supposed to push the vehicles and not to drive them. On one occasion, he drove a vehicle in order to make room for other vehicles. Whilst doing so, he negligently damaged a vehicle belonging to the plaintiff.
Held: That the negligent act was within the course of the garage hand’s employment although he had carried his duties in an unauthorized manner. His master was thus vicariously liable.
In Muwonge v. Attorney-General of Uganda, the appellant’s father was killed during a riot. The shot which killed him was fired by a policeman who had seen the appellant’s father ran towards a house and had concluded that the appellant‟s father was a rioter.
Held: The firing of the shot was act done with the exercise of the policeman‟s duty in which thegovernment of Uganda was liable as a master even though the act was wanton, unlawful and unjustified.
If the act is not done within the course of employment, the master is not liable. In Twine v. BeansExpress a van driver employed by the defendant had been expressly forbidden to give lifts to unauthorized persons and a notice to this effect was displayed on the dashboard. The van driver gave a lift to a person who was killed in a subsequent accident due to the negligence of the van driver. The widows of the deceased brought an action against defendant.
Held: The action by the widows failed because the driver was acting outside the course of his employment. In this case the act was expressly unauthorized.

GENERAL GUIDELINE IN DETERMINING WHETHER AN ACT WAS COMMITTED DURING THE COURSE OF EMPLOYMENT
1. Look at the mode of doing the work the servant is employed to do
In Century Insurance C v. Northern Ireland Road Transport Board, one of the respondent‟s employees was delivering petrol to garage. While the petrol was flowing from the lorry to the tank, he lit a cigarette and negligence threw away the lighted match which caused an explosion damages the appellant‟s property. The action of the employee was treated as being within the course of employment. On appeal it was held that the respondents were liable for the damage caused for such an action, whilst for the comfort and convenience of the employee could not be treated as isolated act as it was a negligent method of conducting his work.
In Bayley v. Manchester Sheffield and Lincolnshire Railway the plaintiff was in a train traveling to Macclesfield and he explained this to the mistakenly believed that the plaintiff was the wrong train (that train was not traveling to Macclesfield) and violently ejected the plaintiff who suffered injuries.
Held: The defendants were liable because the porter was acting within the cause ofemployment.
2. Whether the act was authorized within the limits of time and space e.g. if one is employed to work between 8.00 a.m. and 5.00 p.m., the master is only liable for torts committed within that time frame.
Ruddiman & Company v. Smith, the plaintiff was using the lower room of the defendant„s housewhile the defendant used the upper room for carrying on business. In the upper room there was a lavatory. The clerk, after duty, went to the lavatory to wash his hands but on turning on the tap and finding no water, went away without turning the tap off. When water turned on the morning, it overflew into the lower room and damaged the plaintiff goods.
Held: The employer was liable for whether or not the use of the lavatory. Within the scope of theclerk‟s employment, it was an event incidental to his employment.
In Storey v. Aston, the defendant, a wine merchant, sent his car man and clerk to deliver wine and pick up empty bottles. On their way back, they diverted to visit the clerks house in the course of which they negligently knocked down the plaintiff and injure him.
Held: The defendant was not liable for the injury caused by the negligent driving of the car manfor he was, that time, engaged in a new and completely unauthorized journey.

3. Whether the act was the initiative of the servant or the master had a certain control.
In Warren v. Henlys Ltd, erroneously believing that the plaintiff had to drive away from the garage without paying or surrendering coupons for petrol which had been put in the tank of his car, a petrol pump attendant used violent language to him.
The plaintiff paid his bill and gave the necessary coupons and after calling the police, told the attendant that he would report him to his employers.
The pump attendant then assaulted and injured him. In an action for personal injuries against his employers.
It was held that the defendants were not liable for the wrongful act of their employee. Since the act was one of the personal vengeances and was not done in the course of employment; it not is an act of a class which the employee was authorized to do or a mode of doing an act within that class.
In Poland v. John Parr and Sons, Arthur Hall, a carter was employed by John Parr. Parr and his son were conveying a wagon with bags of sugar. Arthur, on his way home for dinner was walking else to the wagon. The plaintiff, a schoolboy, was walking home in the same direction with his hand upon one of the bags of sugar.
Honestly and reasonably thinking that the boy was stealing, Arthur gave him a blow on the back of his neck as a result whereof he fell and the wheel of the wagon injured his foot which was amputated.
Held: In the circumstances, the carter had implied authority to make reasonable efforts to protectand preserve the defendants property; that the violence exerted was not so excessive as to take his act outside the scope of authority and that the defendant were liable.

4. Where there is an express prohibition
An express prohibition does not negate liability i.e. a master does not escape liability simply because he had an express prohibition. For liability to be determined, two factors are considered:
i. Whether the prohibition limits the sphere of employment. If it does, the master is not liable for an act done outside the sphere. (Sphere).
ii. Where the prohibition deals with the contract within the sphere of employment. If it does, the employer will be liable. (Mode)
In Canadian Pacific Railway Co v. Lockhart a servant of the appellant Company in disregard of written notices prohibiting employers from using private cars for the purpose of the company’s business unless adequately insured, used his uninsured motorcar as a means of execution of work which he was ordinarily employed to do in the course of which he injured the respondent.
Held: The means of transport was incidental to the execution of work, which the servant wasemployed to do and that the prohibitions of the use of an uninsured motorcar merely limited the mode of executing the work, breach of the prohibition did not exclude the liability of the company to the respondent.
In Rand v. Craig, Carters were employed by a contractor to take rubbish from certain works to his dump and were strictly forbidden not to hip it anywhere else. Some of the carters, without knowledge of the contractors, and in contravention of their orders took the rubbish to a piece of unfenced land belonging to the plaintiff as it was nearer the works that the dump of contractor.

Held: The illegal acts complained of where not within the sphere of the carter’s employment and consequently the contractor was not liable for them.

5. Whether the act was a deliberate criminal act
In Lloyd-v-Grace Smith & Co., the plaintiff had sought advice from the defendants, a firm of solicitors, whose managing clerk conducted conveyance work without supervision. He advised the plaintiff to sell some property, fraudulently persuading her to sign certain documents that transferred the property to him. He disposed of it and kept the proceeds.
Held: Even though the fraud had not been committed for the benefit of the employers, nevertheless they were liable, for the clerk had been placed in position to carry over such work and had acted throughout in the course of his employment.

 

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THE LAW OF PERSONS

2.1 Introduction

A person is defined is defined as an entity or being which is recognized by law as having certain defined rights and obligations. Such an entity or being has said to be a legal person. Legal persons are divided into two namely;

  • Artificial persons
  • Natural persons

An entity which` is recognized as a person is said to have a legal personality. i.e. it has attributes which are recognized by law as constituting a person. Examples include human beings (natural persons) and corporations (artificial persons) .These have legal personality to the extent that they each have their own rights and obligations recognized by law

2.2 Artificial Persons
Artificial persons may be corporations or unincorporated associations.

2.2.1 Corporations

A corporation may be defined as an association of persons binded together for sole particular object, usually carry on business with a few of profit. If other words a corporation is an artificial person created with by law with capital divided into transferable shares and with limited or unlimited liability possessing a common seal and perpetual succession. The corporation has, therefore, ` legal personality of its own distinct from that of its members. The individual members have rights and liabilities of their own apart from those of the corporation. The corporate body is different in that it has perpetual succession, it never dies and has a common seal by which to authenticate its acts. The members may change, but the corporate body does not.

Types of Corporation
There are basically two types of corporation: corporation sole and corporation aggregate. The two differ both in the manner of their creation as well as their membership and also in their operation

  • Corporation sole
    corporation sole is one which consists of one human member at a time, such member being the holder of an office which is held in succession by one person at a time. Some corporations sole are creatures of the common law, e.g. the office of a bishop. There cannot be more than one bishop in a `diocese at the same time and when a particular bishop dies as an individual, his office never dies and continues in existence with another bishop as a successor. Other corporation sole are created by constitution or any Act of Parliament e.g. the Office of the President or the Office of the Pubic Trustee.
  • Corporation Aggregate
    Most corporations are corporations aggregate. These consist of two or more members at the same tire. Basically, there are two types of corporation aggregate operating in Kenya. These are statutory corporations and registered companies.

Creation of Corporations
A corporation can be created in the following to ways:

  • By act of parliament
    The corporations can be created by the Act of Parliament in Kenya. The state corporations are% created by this method. The main examples of such corporations are: Kenya railways, Kenya airways, Kenya Meat Commission, Pyrethrum Board of Kenya, Coffee Board of Kenya e.g. Such corporations owe their legal existence to a statue. A statue creating the corporation gives it a name, stipulates its composition, and prescribes its powers and duties. The powers of these corporations are limited to those which are expressly conferred by the acts. The powers of statutory corporation can be extended or limited by statutes. These can be also dissolved by statutes. The statutory corporations are legal persons. They can sue and be sued. They can buy and sell property.
  • By registration under companies act
    The registered companies are created by registration under the companies act. These are also know as limited company comes into existence by complying with the provision of the companies act (cap 486) a limited company may either be private or public limited company. A private limited company can be registered by two or more persons but it is not allowed to call upon the public for funds in the form of shares or debentures. A public limited company can be registered by seven or more persons and it can offer its shares to the general public freely. In Kenya, the limited companies are formed according to the companies act (Chapter 486). This act is based on companies act 1948 of UK.

2.2.2 Unincorporated Associations
An incorporated association is one which has no corporate status is one which has no corporate status i.e. it has no legal personality and cannot , therefore, own property or enter or enter into contracts or sue or be sued in its own name. Such associations include clubs, societies, trade unions, partnerships e.t.c. These associations consist of groups of individuals. The property owned by such associations is regarded as the joint property of all members although this property is held on the behalf of all members by trustees. Any contract entered into by a member on behalf of the association is regarded as the contract of that member. If a committee has
committed a tort then the committee members are responsible.

1. Partnerships
Partnerships are incorporated associations. In Kenya all partnership are formed in accordance with partnership act (Cap 29). Section 3(1) of this act defines partnership as the relationship which subsists between in common with a view of profit. In a partnership business, two or more persons jointly run a business. The liability of the individual partner is unlimited unless the partnership agreement provides for any limitation. A partnership consists of not more than twenty persons except in certain cases e.g. practicing solicitors, professions accountant and members of the stock exchange where this figure may be exceeded. Normally, the number of partners in a partnership business varies from two to five. In the case of banking business, the number of partners is limited to ten.
The name of partnership must be registered first under the Registration of Business Names Act (Cap. 499). The formation of a partnership is not very complicated. The partners may sue and be sued in the name of their firm, but if they sue in the firm’s name they can be compelled to disclose the name and address of every members of the firm. If sued in the firm’s name they must enter an appearance in their own name individually but subsequently proceeding continues in the name of the firm.

2. Trade Unions
A trade union is the association of laborers. It has been defined by Prof. Web in the words, “A trade union is a continuous association of wage earners for the purpose of maintaining and improving the conditions of their employment. Trade unions are also unincorporated associations. All the trade unions in Kenya are established according to the provisions of Trade Unions Act (Cap 233). This Act defines a trade union as “an association or combination, whether temporary or permanent, of more than six persons, the principal objects of which are under its constitution the regulation of the relations between employees and employers, or between employees and employees.”

Although a trade union is an unincorporated association but it may sue and be sued and be prosecuted under its registered name. This gives the trade union a form of corporate personality. It is done so as to facilitate any criminal and civil proceeding. Section 27 of the Act provides that:

(1) A registered trade union may sue and be sued and be prosecuted under its registered name.
(2) An unregistered trade union may sue and be sued and be prosecuted under the name by which it has been operating or its generally known.

Section 25 of the Act provides that every trade union shall be liable on any contract entered into by it or by an agent acting on its behalf. This discussion proves that the trade unions have been given certain rights and privileges which are not given to other unincorporated associations. In spite of this fact, they are not separate legal entities of their own and cannot be treated as corporations.

2.3 Natural Persons
Discussed below are the provisions of the law of persons on various natural persons.

  • Minors
    A minor is also known as an infant. He is a person who is below the age of majority. A person who has attained the age of majority is a major or an adult. The Age of Majority Act (Cap 33) provides that a person shall be of full age and cease to be under any disability by reason of age on attaining the age of eighteen years. The infants can sue and be sued in tort. The age of criminal responsibility is at the age of eight years. An infant is not eligible to vote until he has attained the age of eighteen years and whose name appears on the register of voters (Section 43(1). Constitution of Kenya). An infant can own personal property. As regards the immovable property, an infant’s name can be entered in the register as the owner of registered land (Section 113(1) of the registered Land Act (Cap 300). With exception of this right, an infant can not own immovable property. Minority is a disability in the sense that there are certain things which a minor can not do or be made liable for e.g. a minor cannot get a driving license. Special rules governing the minors in respect of contracts, property, succession, liability in torts and other areas of law, will be dealt with in their respective places in the chapters that follow.
  • Legitimation
    A legitimate child is a child who is born within the wedlock (lawfully married) of the parents. On the other hand, an illegitimate child is a child who is born outside wedlock. Legitimation is the process by which an illegitimate child becomes legitimated. It is brought by the subsequent marriage of the parents of a child who was born illegitimate. Thus, if A and B, being unmarried, beget a child C, C is an illegitimate child; but if A and B subsequently get married, C is said to be legitimated and he thereby becomes a legitimate child. The Legitimacy Act (Cap 145) provides that an illegitimate child can be legitimated by the subsequent marriage of his parents. Section 5 of this Act provides that an illegitimate person after becoming legitimate is entitled to take any interest:
  1. In the state of an intestate dying after the date of legitimation, or
  2. Under any dispution coming into operation after the date of legitimation; or
  3. By descent under an entailed interest created after the date of legitimation

He is treated as legitimate person as he had been legitimate. There is only one limit to this right i.e, when property devolves on children and the question of seniority arises, a legitimated person is deemed to have been born on the date of his legitimation.
Under the Law of Succession (Cap 160), the term child also includes an illegitimate child. This in effect gives an illegitimate child the same claim on his father’s estate as a legitimate child. Under the customary law, an illegitimate child has the same rights as a legitimate child.

  • Adoption
    Adoption is the process by which parental rights are transferred from the natural parents of a child to other persons authorized by law. An infant can be adopted so that the relationship between the child and the adopter is similar to that of the parent and child. The adoption is governed in Kenya by the Adoption Act (Cap 143) An adoption order has the effect of vesting in the adopter all rights, duties, obligations and liabilities which were previously vested in the parent(s) or guardian(s) of the adopted child. And after adoption, the adopter becomes responsible for the custody, maintenance and education of the adopted child, and he has a right to consent or dissent to the marriage of the adopted child. Indeed, the adopted child is much in the same position as a child born to the adopter in lawful wedlock even in matters of family settlements and inheritance. The infant who is adopted will have also the same rights to the adopter’s property as if he were his real child. A resident magistrate’s Court has the jurisdiction to hear and issue adoption orders where all the consents required, have been given and where the adoption case is straight-forward. In other cases, the High Court makes Adoption Orders. Any person aggrieved by the making or refusal of an adoption order can appeal to the Court of Appeal.
  • Guardianship
    An infant’s interests are normally protected by his parents. Where an infant has no parent there is need for a guardian to play this role. An infant whose interests are looked after by a guardian is known as a ward. The law relating to the guardianship and custody of infants is contained in the Guardianship of Infants Act (Cap 144).

Section 3 of the Act provides that:
(1) On the death of the father of an infant, the mother shall be the guardian of the infant, either alone or jointly with any guardian appointed by the father. When no guardian has been appointed, the court may appoint a guardian to act jointly with the mother.
(2) On the death of the mother of an infant, the father shall be the guardian of the infant, either alone or jointly with ant guardian appointed by the mother. When no guardian has been appointed, the court may appoint a guardian to act jointly with the father.
(3) Where an infant has no parent, no guardian of the person and no other person having parental rights with respect to it, the court, on the application of any person may appoint the applicant to be the guardian of the infant. The court may remove guardians, if it is deemed to be in the welfare of the infants. The court has the supervisory powers of control over a guardian. A guardian exercises control over an infant and is responsible for his education, maintenance and welfare. For example, before an infant between the ages of sixteen and eighteen years can marry, the consent of the guardian is required. A guardian has power over the estate and the person. The guardian must have regard to the welfare of his ward.

  • Mentally Disordered Persons
    A mentally disordered person is also known as a person of unsound mind. Like a minor, he lacks capacity to do certain things. The insanity affects a person’s legal capacity on many ways. The law recognizes that such persons may be exploited or taken advantage of and that some measure of protection is required. The mental Treatment Act (Cap 248) provides some measure of protection, treatment, care of mentally disordered persons and the custody and the management of the property of such
    persons.

A mentally disordered person is subject to certain disabilities. These are as under:

  1. He does not have the right to vote.
  2. A marriage contracted by any person of unsound mind is not valid [Matrimonial Causes Act Chapter 152, Section 14(1) (f)].
  3. Insanity is a defense to a prosecution for any crime, although the accused must prove that he was insane at the time the crime was committed.
  4. The contracts of mentally disordered persons are voidable at the option of the mentally disordered persons.

The mental Treatment Act (Cap 248) requires that a person of unsound mind must be admitted to a mental hospital. Any such person may be received as a voluntary patient into a mental hospital if he has attained the age of sixteen years. Any person under that age can be received as a voluntary patient if a parent or guardian is so desirous. A magistrate can also make a reception order to admit a person of unsound mind into a mental hospital. This order is made if it is proved that the person is of unsound mind. It also requires the report of a medical practitioner. Under this Act, the court may also make orders for the management of the estate of any mentally disordered person and for the guardianship of such person by any near relative or by any other suitable person.

2.4 Provisions of the law of persons on Marriage
Marriage is said to be a contractual relationship. It is viewed as a contract between a man and his wife. It gives rise to certain rights and duties.

The Law of Kenya recognizes the following four systems of marriage:

  1. Statutory Marriage
  2. Customary marriage.
  3. Hindu marriage
  4. Islamic marriage

The parties to a statutory marriage must each have capacity to marry. This capacity is determined by their age, sex and marital status. Except in the case of a widower or a widow, marriage age is generally 21 years. A person below this age can only contract a marriage with the consent of his father, or the mother in case the father is dead or of unsound mind or absent from Kenya. As regards sex, the parties to the marriage must be male and female. The persons of same sex have no capacity to marry. Regarding marital status, each of the parties to the intended marriage must be single. A marriage is null and void if it is celebrated while the former husband or wife of either party is still alive and the previous marriage is till in force. It makes no difference that the previous marriage was celebrated under customary law. Finally, a marriage is null and void if the parties to it are within the prohibited degrees of consanguinity or affinity. This means that the close relatives, such as brothers and sisters have no capacity to marry each other. The persons of unsound mind, i.e. lunatics and idiots, have no capacity to marry.

Citizen or Nationality
Nationality or citizenship refers to a person’s political allegiances to some state in return for which he is afforded protection by the state. Each independent state has right who are the nationals or citizen. The law relating to citizenship and the nationality of Kenya is contained in the constitution of Kenya and the Kenya citizenship Act (Cap. 170)

2.5 Provisions of the law of persons on Acquisition of Citizenship
Citizen of Kenya may be acquired in four different ways. These are 1) by birth, 2) by descent, 3) by registration, 4) by nationalization
These are explained below

  1. By Birth
    Citizen by birth is determined by the fact of being born in Kenya and also by citizenship of a person’s parents or grandparents. All persons born in Kenya who on 11th December 1963 were either citizens of the United Kingdom or British protected persons automatically became Kenyan citizens on Independence Day (12th December 1963) if either of their parents had been born in Kenya. A person born in Kenya after 11th December 1963 shall become citizens of Kenya.
  2. By descent
    A person born outside Kenya after 11th Kenya after 11th December 1963 becomes a citizen of Kenya on the day of his birth if on that day his father is a Kenya citizen. This citizenship is by descent only if at that time of his birth his father was Kenya citizens other than a citizen by descent born outside Kenya do not acquire the country’s citizenship from him or his father. Thus paternity is given prominence in the determination of citizenship by descent.
  3. By registration
    Any woman who marries a citizen of Kenya may apply for registration and be granted citizenship. Similarly, a person of full age who is a citizen of a commonwealth country or a specified African country who has been ordinarily resident in Kenya for five years may be registered as a Kenya citizen upon making an application for this purpose.
  4. By naturalization
    Section 93 of the Kenya constitution Act provides that an alien may apply to be a citizen and he may be granted with a certificate of naturalization if:
  • He is of full age
  • He has resided in Kenya for one year before the application
  • He has resided in Kenya four a total of four years during the seven years before the one year in paragraph (b)
  • He is of good character;
  • He has an adequate knowledge of the Swahili language; and
  • He intends to remain a resident, if naturalized

Note: The grant of citizenship by naturalization is purely discretionary

2.6 Loss of Citizenship
There is two ways in which citizenship can be lost. These are explained under

1. By Renunciation
A citizen of Kenya who is also a citizen of some other country, is free to renounce his Kenya citizenship but he may do so only if he is of full age and capacity. For renunciation citizenship, he is required to make a declaration in prescribed manner. He ceases to be a citizen of Kenya upon registration of the declaration. A person who is a citizen of Kenya and also some other countries at the age of twenty one ceases to be a citizen of Kenya at the age of twenty three unless he has renounced the citizenship of that country.

2. By deprivation
The Kenyan citizenship also may be lost by deprivation. But the deprivation applies only to those citizens who acquire Kenya citizenship by registration or naturalization. A person may be deprived from citizenships in following cases:

  • Has shown himself to be disloyal towards or disaffected towards Kenya;
  • Has during the war in which the country was engaged, traded with or otherwise assisted the enemy.
  • Has, within five years of registration or nationalization been sentenced for more than twelve months imprisonment.
  • Has resided continuously abroad for seven years and has neither been in service of Kenya or an international organization which county is a member, nor registered annually at a Kenya consulate his intention to retain the citizenship or
  • Has obtained his registration or naturalization by fraud, false representation or concealment of a material fact.

2.7 Provisions of the law of persons on Domicile and Residence
A person’s domicile is the place where he permanently resides with an intension to remain. Mere residence is not sufficient. Animus manedi i.e. an intention to permanently remain must be established. In order to establish the domicile of a person, the following two elements are taken to consideration.

  • Actual residence
  • ‘Animus Manedi’ i.e. the intention to remain in that place or country Where these two elements co-exist, a person is said to have a domicile in that country. For example, a Ugandan citizen may decided= to live permanently in Kenya. In that case Ugandans acquires a domicile in Kenya. The law relating to domicile in Kenya is contained in the “The laws of Domicile Act (cap. 37).”

There are three types of domicile: origin, choice and dependence. These are explained as under:

1. Domicile of Origin
A person acquires his domicile of origin at birth. A legitimate child inherits its father’s domicile (S.3), an illegitimate child inherits its mother’s (S.3) and under common law a founding (i.e. an abandoned child) has its domicile of origin continuous until he acquires a new one (S.4)

2. Domicile of Choice
‘A man acquires a new domicile by taking up his fixed habitation in a country which is not that of his domicile of origin.’ (S.8) He is then said to have acquired a domicile of choice, where upon the domicile of origin is relinquished. He may however later resume his domicile of origin. A domicile of choice continuous until the former domicile is resumed or until another domicile is acquired. It is important to note that the only person of full age and capacity may acquire the domicile of choice. For example a Kenyan may decide to live in Tanzania permanently. In this case, he acquires Tanzania domicile though he remains a Kenyan citizen.

3. Domicile of Dependence
Domicile of dependence is also sometimes described as dependent domicile. A person is said to have this kind of domicile if his domicile necessarily changes with that of another person on whom he is dependant. A woman acquires the domicile of the husband on marriage. An infant acquires the domicile of the father.

Domicile and Residence
A place where a person lives, whether permanently or temporarily, is his residence. A person’s residence determines his liability of taxation, i.e. he is subject to the place where he resides; it also determined his status in war time-a person who is resident in a country with Kenya is engaged in war is automatically an enemy. Residence as such must be distinguished from domicile. A mere temporary stay is sufficient to constitute one a resident of a particular area but to be domiciled in a place one must intend to permanently remain there; residence is just one of the two elements required to prove domicile. There are two reasons which make it important to draw a distinction between the two; first to determine the law applicable and secondly to determine whether the court has jurisdiction in a
particular case. As already seen, a person’s family relations and movable property are determined by the law of his domicile; they are not determined by the law of the place where he might be temporarily resident. Thus, if a domiciled Englishman takes up residence in Kenya dies in Kenya living movable property succession to the property will be governed by the government of England and not the law of Kenya. Regarding jurisdiction, courts usually have jurisdiction over persons who are resident within their territorial jurisdiction.

Domicile and Nationality
Domicile must be distinguished from nationality. While nationality is referable to as political system in the sense that a person owes his allegiance to the state that he is a national domicile on the other hand is referable to as a legal system: a person’s family relations in these matters like marriage and divorce, legitimacy etc, and also his movable property are governed by the laws of his domicile. Secondly, it is possible for a person to have a no nationality at all e.g. where he is rendered stateless upon being deprived of his citizenship; but every person must have a domicile at any one time. Thirdly, it is possible for a person to have dual citizenship, i.e. to be a citizen of more than one country at the same time but no one can have more than one domicile at the same time.

2.8 Provisions of the law of persons on proceedings against the State
The government may commit a civil wrong, just like an ordinary individual. The law relating to proceedings against the state is governed by the Kenya Government proceedings act (Cap.40). An aggrieved person has a right to sue the government for the act and defaults of its servants and agents. The government is liable for its own wrongful acts as well as those committed by its servants if the servant himself would have been liable in the first place.

Section 4(1) of this Act provides that the state may be sued in tort in the following cases:

  • In respect of the torts committed by it servants or agent.
  • In respect of any breach of those duties which a person owes to his servants or agents at common law by reason of being their employer; and
  • In respect of any breach of the duties attaching at common law of the ownership, occupation, possession and control of property:

Summary for the topic

  1. Definition of legal personality
  2. Natural and artificial persons
  3. Rights and obligations of artificial and natural persons as provided by the law of persons
  4. Acquisition and loss of citizenship
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THE NATURE, PURPOSE AND KINDS OF LAW

1.1 The Nature of Law
The term ‘law’ is used in a variety of senses. There are laws of physical sciences, laws of social sciences, moral laws and laws of state.

Laws of physical sciences
Laws of physical sciences are those facts which have been proved correct and do not change over a period of time. Such laws establish the relationship between the cause and effect of related facts. These laws are permanent and universal e.g Law of motion, law of gravity etc.

Laws of social sciences
The laws of social sciences also establish the relationship between the cause and effect of certain facts but these laws are true under certain given conditions only e.g. laws of economics, Laws of Sociology etc.

Moral laws
Moral laws are laws of human conduct as members of a society. These laws guide us as how we should live in society. The examples of moral laws are ‘Do not tell a lie’ or ‘Treat your fellow men with courtesy’.

Laws of state
The laws of state are those laws which are made or enforced by a state. It is the duty of the citizens of a country to obey these laws. If they disobey them, they are punished e.g. theft is a crime and whoever breaks this law will be punished by the state. In this course the concern is with the laws of state only. The term ‘law’ used in this course means the law of the state. The law is part of everyone’s life. There is need to understand the prevailing laws because the individuals can be affected by them one way or another. For example, a person may find himself being prosecuted and punished for an offence he has committed. Similarly, he may find himself being sued for compensation (or some other remedy) for an injury which has resulted from a wrong doing by him against some person.

1.2 Definition of the word ‘law’.
There is no generally acceptable definition of the word ‘law’.
Different schools of law define it in different ways. Some important definitions of law are given below:-

1) Woodrow Wilson has defined law in the words “That portion of the established thought and habit which has gained distinct and formal recognition in the shape of uniform laws, backed by authority and power of government”
2) According to Holland, ‘A law is a general rule of external human action enforced by a sovereign political authority’.
3) In other words of Salmond,” ‘A law is the body of principles recognized and applied by the state in the administration of justice
4) Law may be defined in the words” A rule of human conduct, imposed upon and enforced among the members of given state”

Notice the following points from the above definitions of law:

  • Set of Rules
    Law is a set or body of rules. These rules may originate from customs, acts of parliament, court cases or some other acceptable sources.
  • Guidance of Human Conduct:
    These rules are enforced for the guidance of human conduct. Human beings follow these rules for their own safeguard and betterment.
  • Applicable to a Community:
    These rules apply to a specific community. This community may be a sovereign state or a business community. The laws of different communities may be different e.g. what is law in Kenya may not be law in Uganda or Tanzania.
  • Change of Rules:
    The law changes over a period of time. It means law is not a static phenomenon. It keeps changing with time i.e. what was law in Kenya in the 1960’s may not be the law in 1990’s
  • Enforcement
    The law must be enforced otherwise there would be anarchy. The law enforcing agencies include police and courts of law.

From the above definitions, we may conclude that law refers to a set of rules or principles that govern the conduct of affairs in a given community at a given time, whereby machinery is provided for an aggrieved party to enforce his rights in case any of these rules or principle is broken.

1.3 Law and Morality
Law, as defined above, must be distinguished from morality. The rules of law may be enforced by an action of courts. Morality, on the other hand, does not attract the sanction of court for its enforcement, unless it also forms a part of the law. The requirement that a person should respect his elders is a rule of morality, not of law; no one can be sued for failing to respect the elders.

Fortunately, the rules of law are always defined by the law itself and can therefore be ascertained in a given circumstance without being confused with rules of morality. Rules of morality are defined by morality itself and vary from community to community, but
wherever they exist they do not as such attract the sanction of law; otherwise they would cease to be rules of morality and become rules of law.

1.4 Purpose of law
Each society or community has its laws which regulate the mutual relations and conduct of its members. The laws are enforced to ensure that the members of the society may live or work together in an orderly and peaceful manner. The main purposes of law are as under:
1) To regulate the conduct or behavior of the persons
2) To provide justice to the members of the society
3) To maintain the political and economic stability
4) To protect the fundamental rights and freedoms of the individuals
5) To establish the procedures and regulations regarding the dealing among the individuals.
6) To maintain peace and security in the country.

1.5 Kinds of Law or Classification of Law
Law may be classified in different ways. The main kinds of law are;

  • Public Law and Private Law
  • Civil Law and Criminal Law
  • Procedural Law and Substantive Law
  • International Law

Public law and private law
In any given state, it is the practice to draw a distinction between the law that governs the relations between the state and its citizens on the one hand, and that which governs the relations of the citizens amongst themselves on the other. The former is known as public law while the latter is called private law. It means private law is that part of the law which is primarily concerned with rights and duties of persons towards persons. Private law is also called as civil law. Public law is that part of the law in which the state has an interest Public law consists of constitutional Law, Administrative Law and Criminal Law Constitutional law consists of those rules which regulate the relationship between different organs of state. These organs of state are, Legislature, judiciary and executive.
Administrative law is the law which relates to the actual functioning of the executive instruments of the Government. Criminal law consists of wrongs committed against the state.

Civil Law and Criminal Law:
Civil law (or private law) is that law which governs the relations of individuals amongst themselves as opposed to the relations between the individual and the state. This includes the law of contract, the law of succession, the law torts, the law of property etc. In general individual interaction attracts the sanction of private law, so that any person aggrieved by the act of his friend or neighbour may seek the assistance of the civil law of the 1and.

Criminal law falls within the purview of public law. This is because it is the duty of the state to protect its citizens and it is the state which must therefore seek redress for any public wrong (crime) committed against any citizen. The state prosecutes the criminal on behalf of the citizenry as a whole.

Differences between criminal and civil wrongs
A crime is a public wrong the commission of which may result in the prosecution and punishment of the wrong doer. The punishment is usually by a term of imprisonment or imposition of a fine. The Penal Code of Kenya contains the bulk criminal wrongs and the details of punishment relating to criminal wrongs. Crimes include theft, rape, murder etc. A civil wrong is a violation of the private rights of an individual.

Such violation of private rights may be tort, a breach of contract, a breach of trust etc. Some offences are crimes as well as civil wrongs. An example is assault. It is both a crime and a tort. Such an offence of a dual nature are exceptional. In the majority of cases, crimes are quite independent of civil wrongs.

Below are the differences between these two types of wrongs:-

Crime
1. It is a public wrong against the state.
2. The parties are the prosecution and the accused. The prosecution represents of the state, while the accused is the offender who is being prosecuted
3. Since this is a public wrong the action cannot be compromised by the parties. It is only in exceptional circumstances that the public prosecutor may withdraw a prosecution against a particular accused.
4. The prosecution must prove its case against the accused beyond reasonable doubt. Any slight doubt must be resolved in favor of the accused.(Note: Every person is presumed to be innocent until proved guilty)
5. Punishment is usually by imprisonment or fine, or the death penalty in the case of capital offences.

Civil Wrong
1. It is a private wrong against an individual.
2. The parties are the plaintiff and the defendant. The plaintiff is the aggrieved party who is suing, while the defendant is the wrong doer who is being sued.
3. This being a private wrong, the parties are free to compromise any action brought by one of them and the plaintiff may at any time choose to withdraw his action against the defendant.
4. The plaintiff needs only to prove his case on a balance of probabilities, not beyond reasonable doubt, i.e. the evidence must be such that it is more probable than not that his case merits success compared to that of then defendant
5. A defendant found to have committed a civil wrong is usually ordered to pay the plaintiff damages (i.e. monetary compensation): or some other civil remedy may be granted to the plaintiff.

Procedural Law and Substantive Law
Procedural law consists of the rules which determine the manner in which the court proceedings are required to be conducted in civil and criminal cases. This law guides how a right is enforced under civil law or a crime is prosecuted under the criminal law.
Substantive law consists of actual rules regarding the civil, criminal or other fields of law. Mainly, this law defines civil and criminal wrongs and provides remedies for each type of offence or civil wrong.

International Law
International Law may be further classified as public International Law and Private International Law. Public international law consists of those rules which regulate the relations between states. This law is based on treaties, conventions and rules of wars. The disputes between states can be settled by The International Court of Justice. This court does not have any authority to enforce its
judgments.

Private International Law is mainly concerned with determining which national law governs a case in which there is foreign element. For example, a Kenyan signs a contract with a Ugandan in Uganda to construct one dam in Sudan and if there is breach of contract then Kenyan wants to sue the other party in Kenya. In this case, the Kenya Court will decide which national law to
apply.

1.6 Divisions of Civil Law
Main divisions or branches of civil law are:

  • Law of Contract
    A contract is an agreement or promise which is legally binding or enforceable by law. The law of contract determines whether a promise is legally enforceable and what its legal consequences.
  • Law of torts
    Salmond has defined tort in the words “A civil wrong for which the remedy is a common law action for unliquidated (i.e. unspecified or unascertained) damages and which is not exclusively the breach of a contract or breach of trust or any other merely equitable obligation”. The examples of torts are negligence, defamation, trespass and nuisance. The law of torts deals with various types of torts.
  • Law of property
    Law of property deals with the nature and extent of the rights which people may enjoy over land and other property.
  • Law of Succession
    Law of succession deals with the transfer of property on the death of a person to his heirs.
  • Law of Trusts
    A trust is a relationship which arises whenever one person called the ‘settlor’ transfers his property to another person called the ‘trustee’ on the condition that the trustee holds the property for the benefit of another person the ‘beneficiary’. Law of trusts deals with the various aspects of trusts and imposes a strict obligation on the trustee to administer the trust property in accordance with conditions of the trust.

1.5 The Sources of Kenyan Law
The expression ‘source of law’ refers to the various factors which contribute to and determine the content of law and the organs through which laws are created. Every law must have a source. A source of law is that which may be pointed out as forming the basis of law i.e. what gives it force and validity. It means that the existence of a particular principal of law can only be justified when it has a base or origin.

A source of law may be written or unwritten and this leads to the distinction between written and unwritten laws. Legislation (including the constitution) is the best example of written law while customary law may be cited as an example of unwritten law.
Again a source of law may determine whether the law is local or foreign origin. Local laws in Kenya include enactments of our own parliament as well as the various customary laws observed in Kenya. Foreign laws applicable in Kenya includes foreign enactments having the force of law in Kenya (e.g. certain English statutes) as well as certain rules of English common law and equity. The sources of law in Kenya have been contained in Section 3 of the Judicature Act (Cap. 8).

The sources of Kenyan Law are as under:-
1. The constitution of Kenya and subsequent amendments to the Constitution
2. Acts of Parliament of Kenya
3. Specific Acts of the Parliament of the United Kingdom, cited in the part 1 of the schedule to the Judicature Act and the Law of Contract Act (Cap 23). One Act of the Parliament of India.
4. Subsidiary (Delegated) Legislation.
5. English Statutes of general application in force in England on 12th August 1897
6. The Procedure and Practice observed by courts of justice in England on the 12th August 1897
7. African Customary Law
8. Case Law or Judicial Precedent
9. Islamic Law

Due to its great importance as a source of law, the constitution is discussed below.

The constitution of Kenya
Constitution law as we have seen falls within the public law. A constitution is a public document, which regulates the relations between the state and the citizens, as well as the relations between the organs of the state. According to Lord Bryce, the constitution consists of those rules or laws which determine the forms which determine the form of its government and the respective rights and duties of its government and the respective rights and duties of it towards a citizen and of the citizen towards the government.

The constitution may be classified as written and unwritten constitutions. A written constitution has most of the fundamental principals and law of the land included in written form in a formal document. E.g. Kenya Constitution is a written constitution. An unwritten constitution is that in which most of the fundamental principals and laws of the land are not given in written form in a formal document e.g. the constitution of United Kingdom is an unwritten constitution.

The constitution of Kenya was originally enacted on 12th December 1963. It was amended on 12th December 1964 in order to establish a Republic with a President as Head of State. The further amendments were included in the Constitution of Kenya Act, 1969. Since 1969 some more amendments have been made in the Kenya Constitution which is incorporated in the annually revised editions of the volumes of the Laws of Kenya. Section 47 of the Kenya Constitution empowers parliament to make amendments by voted of not less than 65% of all of the members of the National Assembly. Such an amendment also requires the assent of the president. In 2010 ,Kenyans passed the a constitution. The current Kenyan constitution contains the following parts:

Chapter Content

  1. Sovereignty of the people and supremacy of this constitution
  2. the Republic of Kenya
  3. Citizenship
  4. The Bill of Rights
  5. Land and Environment
  6. Leadership and integrity
  7. Representation of the people
  8. The Legislature
  9. The Executive
  10. The Judiciary
  11. Devolved Government
  12. Public Finance
  13. The Public Service
  14. National Security
  15. Commissions and Independent offices
  16. Amendment of this constitution
  17. General provisions
  18. Transitional and Consequential provisions

SCHEDULES
1 – Counties
2 – National symbols
3 – National oaths and affirmations
4 – Distribution of functions between national and the county governments
5 – Legislation to be enacted by the parliament
6 – Transitional and consequential provisions

The Constitution of Kenya is that source of law from which all other laws derive their validity. Thus any law that conflicts or is inconsistent with the constitution is void. The importance of the Constitution of Kenya as a source of law is made clear by section which is reproduced as under:- This Constitution is the constitution of the republic of Kenya and shall have the force of law throughout Kenya and, subject to section 47 of the constitution, if any other law is inconsistent with this constitution the constitution shall prevail and the other law shall to the extent of the inconsistency, be void. Any law which is inconsistent with the constitution can be passed only if the constitution is first amended. But the amendment of the constitution is not easy.

Summary for the topic

  1. Definition of law
  2. Purpose of law
  3. Classification of law
  4. Divisions of civil law
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BUSINESS LAW PDF NOTES – CLICK TO VIEW

  1. THE NATURE, PURPOSE AND KINDS OF LAW NOTES – Click to view
  2. THE LAW OF PERSONS NOTES – Click to view
  3. THE LAW OF TORTS NOTES – Click to view
  4. CONTRACT OF EMPLOYMENT NOTES – Click to view
  5. THE LAW OF CONTRACT NOTES – Click to view
  6. LAW OF AGENCY NOTES – Click to view
  7. SALE OF GOODS ACT NOTES – Click to view
  8. HIRE PURCHASE NOTES – Click to view
  9. NEGOTIABLE INSTRUMENTS NOTES – Click to view
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THE LAW OF PROPERTY NOTES

THE LAW OF PROPERTY

This is the law concerned with the bundle of rights a person may have on land. Such rights may be exclusive or otherwise. Property law defines the range of functions a person may exercise in a given situation at a given time. It confers proprietary rights and imposes obligations on owners/holders of land. Land includes physical strata, water all things growing on it, buildings or other things permanently annexed on the land.

Common law conception of land is based on the maxim cujus est solum which literally means that land encompasses more than just the soil. It includes all things found in the aerospace above and the geospace below. Land includes all the permanent fixtures. The common law conception of fixture is expressed by the maxim Quic Quid plantatur solo solo codit which literally means whatever is attached to land belongs to the land.

At common law, fixtures were deemed to be part of the land and could not be removed.

However, this principle was modified and certain categories of fixtures could be removed e.g.

  • Trade fixtures to enable a tenant carry out his trade
  • Ornamental and domestic features if they did not cause substantial damage to land
  • Agricultural fixtures could be removed from 1948

The common law principles of applies in Kenya’s property law, however it has been modified by statute law e.g. The Water Act,1 The Mining Act, The Way leaves Act2 and The Agriculture Act.

 

POSSESSION AND OWNERSHIP

Whereas ownership signifies title or a bundle of rights exercisable with respect to the subject matter, possession is the mere right to hold and may be actual or constructive. Ownership confers proprietary rights. However, in certain circumstances, possession may confer the right to use.

Ownership of land may take three forms:

  1. Sole ownership
  2. Joint ownership
  3. Common ownership

 

SOLE OWNERSHIP

The land in question is owned by one person who exercises all the rights in relation to it

JOINT OWNERSHIP

A situation where property is owned by two or more persons. It enjoys all the characteristics of a single owner. Proprietors have no individual shares in the property. Joint ownership is characterised by four unities namely:

  • Unity of title

All the persons derive title from the same title

  • Unity of possession

All the persons are entitled to each and every part of the land. They have the same rights to use any part of the land.

  • Unity of interest

All the owners own a similar interest in nature, extend and duration

  • Unity of time

The interest of the owners commences at the same time

COMMON OWNERSHIP

This is the ownership of separate but undivided shares in the land. It does not confer the right of survivorship and a common owner can transfer his share to others with consent of the other owners. Common ownership terminates when the land is sold or partitioned

INTEREST IN LAND

It may take any of the three forms:

  1. Estate
  2. Servitude
  3. Encumbrances

ESTATE IN LAND

An estate in land may be freehold or leasehold.

FREEHOLD ESTATE

Confers a bundle of rights exercisable for an indefinite duration. It may be acquired by inheritance or otherwise. The rights it confers can be transmitted to future generations.

Freehold estates include;

  • Free simple
  • Free tail
  • Absolute proprietorship
  1. FREE SIMPLE

This is the largest freehold estate a person can have on land at common law. It confers the largest quantum of rights. It confers unrestricted right to use, misuse and to dispose. In the event of death, the rights are transmitted to the person entitled to inherit the estate failing which it escheats to the state. No conditions are attached as to its inheritance. Holder can dispose it by deed or by will, wholly or in part, conditionally or unconditionally. The holder of a fee simple is entitled to commit waste on the land. Waste may be:

  • Ameliorating waste – Consists of acts which improve the value of land.
  • Permissive waste – Consists of acts not detrimental to land
  • Voluntary waste – Consists of acts detrimental to land
  • Equitable waste – This is wanton destruction of land.

Creation of Fee Simple

This estate may be created by:

  • Grant:- if it is transferred by one person to another
  • Inheritance: – if inherited from a deceased
  • Enfranchisement; – applies to agricultural leases where the government on expiration of the term of the lease, converts it to a freehold estate
  1. FEE TAIL

A freehold estate which confers a life interest on the holder. Descends only to specified persons.

Confers the right to determine the person or persons entitled to inherit. The estate is generally created by inheritance

  1. ABSOLUTE PROPRIETORSHIP

Created by Sections 27 & 28 of The Registered Land Act CAP 300. Section 27 provides inter alia upon registration, the owner acquires all the rights and privileges associated with such ownership. These rights include right to use, misuse or dispose. The rights of the registered holder cannot be defeated unless as provided for by the Act. The person to whom the land is registered becomes the absolute owner to the exclusion of all others. This estate is illustrated by the decision in Obiero V. Opiyo. The registration terminates all customary rights previously exercisable on the land.

Creation of Absolute Proprietorship

  1. Registration after Adjudication
  2. Conversion from other registers
  • Transfer
  1. Inheritance
  2. Consolidation

Examples of fee simple

  • Life Estate

An estate which lasts for the life of the grantee and is created by inheritance. Death of the grantee terminates his interest

  • Estate Pur Autre Vie

An estate in the life of another. It lasts for the life of that other person and lapses on his death. May be created by Express Grant or Assignment

It is a freehold estate but reverts to the grantor when the person dies. Person on whose life the state is measured is the Cesqui que.

LEASEHOLD ESTATE (Tenancy)

Lease refers to a transaction which creates the relationship of landlord and tenant between the grantor and grantee. The formal document by which this is done is a lease.

Leasehold is the quantum of rights which a lease grants to the lease. It is a secondary

Interest in land derived from a primary interest. Confers upon the leasee / tenant exclusive possession of another land

CHARACTERISTICS OF TENANCIES/ LEASES

  1. Exclusive possession

A tenancy confers upon the grantee/ tenant the right to hold the interest to the exclusion of all others. Means that no other person has an equal right to it. It was so held in Helcht V. Morgan.

  1. Defined premises

The premises to which the tenancy or lease refers must be defined or ascertained. It must be identifiable by reference to the agreement. It was held in Heptulla V. Thakore.

  1. Certain period

A lease must commence at and exist for a certain period or for a period capable of being ascertained. It was so held in Marshalls V. Berridge

  1. Scope of grant or Quantum of Rights

The bundle of rights conferred by a lease must be definite or capable of being defined. The leasee must know the rights exercisable under the lease.

TYPES OF TENANCIES OR LEASES

  • Fixed Tenancy

A tenancy created for a fixed duration. Its commencement and termination must be specified. Such a lease determines when the duration expires

  • Periodic tenancy

Tenancy / lease which continues indefinitely from a period to period e.g. 1 year. Such a lease may be express or implied. Its duration is not specified and it may arise if a fixed period tenant remains in possession and continues to pay rent.

  • Tenancy at will

Tenancy whereby the tenant occupies premises on the terms that either party may determine the relationship at any time. The tenancy terminates in the event of death of either party or committing an act inconsistent with the tenancy.

  • Tenancy at sufferance

Arises whenever a fixed period tenancy holds over or remains occupation without the landlord’s consent. This tenancy is created by operation of law. If landlord accepts rent, it becomes a periodic tenancy. However, the tenant may be ejected at any time without notice.

  • Service tenancy

Created to enable the tenant perform a particular service. The occupation is necessary for performance of the service; however the tenancy terminates on determination of employment.

OBLIGATIONS OF THE PARTIES

A tenancy/ lease impose upon the parties certain legally binding obligations.

 

DUTIES OF LANDLORD/LESSOR/GRANTOR:

  • Duty not to derogate from the grant: He must not do anything inconsistent with the tenancy or lease. These are acts likely to render the premises unfit for the purpose for which they were rented.
  • Duty to ensure quiet enjoyment: The landlord, his servants and agents must not interfere with the tenant’s enjoyment of the premises. Tenant is entitled to peaceful occupation without unlawful interference or interruption.
  • Duty to grant premises fit for purposes: Landlord must ensure that the premises let are fit for the particular purpose for which it is let.
  • Duty to suspend or adjust rent: If the premises or part thereof is destroyed/ damaged without the tenants negligence rendering it wholly or partially unfit for occupation or use, the lessor is bound to suspend or adjust rent depending on the nature of damage until the premises are rendered fit for use or occupation.
  • Duty to repair: As a general rule, it is the duty of the lessor to repair the roof, main walls, main drains, common passages and installations. This duty is statutory if only part of a building is let
  • Duty to put the tenant in possession: The lessor is bound to hand over to the lessee, the mains which enable him enter into occupation

 

DUTIES OF TENANT/LESSEE/GRANTEE:

  1. Duty to Pay the Rent Reserved

It is obligation of lessee to pay the rent as agreed. Such rent is payable irrespective of occupation.

  1. Duty to Pay Rates and Taxes

Lessee is bound to pay all rates and taxes except where the landlord is under statutory obligation to pay.

  1. Duty Not To Commit Waste

Lessee is duty bound not to commit waste i.e. he must not do anything which reduces the value of the premises. Fixed term tenants are liable for voluntary and permissive waste.

  1. Duty not to transfer, sublet or part with possession

As a general rule, the lessee must not transfer, sublease or charge the premises without the lessor’s written permission.

  1. Duty to Permit Landlord to View the Premises

It is the duty of the lessee to enable the landlord appreciate the condition of the leased premises. The obligation is generally implied where the lessor is bound to repair the premises.

  1. Duty to Make Reparation for Any Breach

The lessee is bound to repair and make good any defect or breach of agreement for which he is to blame. Reparation must be made within reasonable time as may be specified by a notice given by the lessor.

  1. Duty to Make Material Disclosure

The lessee is bound to inform the lessor of any external interference by third parties or of any action he is about to take which affects the value of the premises

  1. 8. Duty Not To Erect Fixtures

The lessee must not, without the lessor’s consent erect any permanent structures on the property. However, structures erected for agricultural purposes are permissible

  1. Duty to Put the Landlord in Possession

It is the lessee’s duty on expiration of the lease to put the lessor in possession of the leased premises. If a tenant is guilty of breach of terms of the lease e.g. non-payment of rent, landlord has an action in damages or may distress the tenant pursuant to the provisions of the Distress for Rent

Act3.

TERMINATION OF TENANCIES/LEASES

A tenancy agreement may terminate in the following ways:-

  • By Notice

Applicable where the tenancy is for a fixed duration or where either party desires to terminate the leases before the duration expires. The notice must sufficiently indicate the party’s intention to terminate the lease.

  • Lapse of Time/ Expiration of Time

A fixed period tenancy terminates on expiration of the duration

  • Forfeiture

This is the right of the lessor to re-enter the premises and there-by prematurely determine the lease in the event of certain breaches. The lessor may do so pursuant to forfeiture clause or in accordance with the provisions of the ITPA or Registered Land Act e.g. If the lessee is bankrupt or insolvent or upon the winding up of the company

  • Surrender

The giving up by the tenant, to the landlord, of the leased premises. Express surrender must be made in a prescribed form

  • Merger

Under the ITPA and Registered Land Act, a lease determines if the lessee or some other person becomes entitled to the property as of right. A merger must be express.

  • Enlargement or Conversion

A lease determines if it is converted into some other interest e.g. freehold in accordance with the law.

  • Frustration

As a general rule the doctrine of frustration does not apply lease agreements. However, a lease is terminable by frustration if the property or part therefore is rendered unusable.

  • Disclaimer

This is the right of the lessee/tenant to disclaim the lease. He can only do so if authorized by statute. On doing so the lease terminates.

A Lease differs from a Licence in that traditionally, licence is permission given by the occupier of land which without creating an interest in the land allows the licensee to do some act which would otherwise be a trespass.

A licence does not confer the right to exclusive possession of the land. It is a mere permission by a party to another to enter upon the licensor’s land. It does not require any writing or registration and is not transferrable

SERVITUDES

These are rights in alieno solo i.e. a right conferring a power on another’s land for the benefit of the right holder or his estate.

At common law, servitudes include:-

  1. Easements
  2. Profit apprendre
  • Restrictive covenants

EASEMENTS

A right attached to a parcel of land which allows the proprietor of the land either

  1. To use the land of another in a particular manner
  2. To restrict its use to a particular extent

An easement may be positive or negative. It is positive if it authorizes the use of another’s land in a particular way. It is negative if is restricts that other in the use of his land.

CHARACTERISTICS OF AN EASEMENT

  • There must be a dominant and a servient tenement: There can be easement properly so-called only if there be both a servient and a dominant tenement. An easement must be connected with the dominant tenement.
  • Dominant and servient tenement must be owned/ occupied by different persons: This is because an owner cannot have an easement over his land. It has been observed that in order to obtain an easement over land, you must not be the possessor of it for you cannot have the land itself and also an easement over it.
  • Easement must accommodate the dominant Tenement: What this requires is that the right accommodates and serves the dominant tenement and is reasonably necessary for the better enjoyment of that tenement.
  • Easement must be capable of forming the subject matter of the grant: This characteristic means that the easement must be capable of being granted by deed hence there must be:-
  • A capable grantor
  • Capable grantee
  • The right must be sufficiently definite
  • Right must be of a nature capable of being granted

An easement differs from a license in that it is a proprietory interest attached to the land. It differs from a lease in that it does not confer possessory rights over the land.

 

CREATION OF EASEMENTS      

An easement may be acquired in the following ways:

  • Express Grant: A situation where the grantor expressly confers the right to the grantee in prescribed form which must specify the nature of the interest, duration and other conditions or limitations.
  • Statute: An easement may be granted by an Act of Parliament to facilitate the discharge of a statutory obligation.
  • Prescription: Under the Limitation of Actions Act, 20 years of continuous use of another’s land grants an easement to the user. The use must have been uninterrupted.

TERMINATION OF EASEMENTS

  1. Lapse of Time

Under the Registered Land Act, an easement terminates on expiration of the prescribed duration.

  1. Occurrence of an Event

The Registrar of lands is empowered to cancel the registration of an easement on application by the party affected by any breach of its terms

  1. Unity of Seisin

Acquisition of full ownership of both the dominant and servient tenements by the grantee or some other person destroys the easement.

  1. Merger of Interest

Under the Registered Land Act, an easement terminates if the dominant and servient tenement are vested in the same person provided the tenements are combined under one title and registered as such.

  1. Release or Abandonment

A grantee may by executing a deed abandon the easement to the grantor thereby terminating the same.

  1. Judicial Discharge

Under Section 98 of the Registered Land Act, the court is empowered on application by an interested party to order termination of an easement if satisfied that there is reasonable cause to do so.

 

PROFIT APPRENDRE

The right to take something off another’s land It is the right to go on the land of another to take particular substance from that land, whether the soil or products of the soil. A profit enables the grantee to take something capable of ownership from grantor’s land.

If a profit is enjoyed by others, it is referred to as profit in common/common. If it is enjoyed to the exclusion of others it is a several profit. If a profit is attached to the land, it is said to be a profit apportionment.

A profit may be created or acquired by:

  1. Express grant
  2. Prescription by law

May be terminated by:

  1. Release/Abandonment
  2. Unity of Seisin

RESTRICTIVE COVENANT

An agreement by which a proprietor or land owner undertakes to restrict the use of his land in a particular manner for the benefit of some other land. Such an agreement may arise between two landlords or tenants owning or occupying adjoining properties. The covenants are created by agreements which are registerable under the law.

They are terminable by mutual consent.

ENCUMBERANCES

These are rights in alieno solo which constitute burdens on the property. They are generally of a temporal character. Encumbrances are either mortgages or charges.

MORTGAGES

In the words of Lindley J in Santley V. Wilde (1859) a mortgage is a conveyance of land or assignment of chattels as security for payment of a debt or the discharge of some other obligation for which it is given

CHARACTERISTICS OF A MORTGAGE

  • Conveyance of the title to the mortgage
  • A proviso for reconveyance on payment
  • The right of redemption

The law relating to mortgages and charges in Kenya is contained in the Indian Transfer of

Property Act, Registered Land Act and Equitable Mortgages Act

Under Registered Land act, A Charge is an interest in land as a security for the payment of money/ monies or the fulfillment of any condition.

TYPES OF MORTGAGES

The ITPA recognizes the following types of mortgages:

  1. Simple mortgage

A mortgage transaction whereby without delivering possession of the mortgaged property, the borrower binds himself to pay the mortgage and agrees that in the event of non repayment, the mortgagee shall have the rights to sell the property and the proceeds applied in the payment of the mortgaged money.

  1. Mortgage by conditional sale

A mortgage transaction whereby the borrower ostensibly sells mortgaged property to the mortgagee on condition that the event of default, the sale becomes absolute or in the event of payment the sale becomes void.

  1. Usufructuary mortgage

The lender (mortgagee) takes possession of the mortgaged property and uses the proceeds to repay himself

  1. English Mortgage

The borrower binds himself to repay the mortgaged money on a specific date and transfers the mortgaged property to the mortgagee subject to a re-transfer upon repayment of the mortgaged money.

  1. Anomalous Mortgage

Created by Section 98 of the ITPA. The rights of the parties and other terms and conditions of the transaction are determined by the mortgaged instrument.

  1. Equitable Mortgage

Created by the Equitable Mortgages Act CAP 291. The borrower deposits his title deed with the mortgagee but without delivering possession of the mortgaged property.

 

DUTIES OF MORTGAGORS AND CHARGORS

  1. To repay the principal sum and interest
  2. To pay all taxes and rates
  3. To honour previous obligations if the charge or mortgage is a subsequent transaction
  4. To keep the premises in repair
  5. To insure the property in the joint names of the parties
  6. To farm according to the rules of good husbandry in case of agricultural land.
  7. To honour the terms of the lease if the property is a lease.

These obligations terminate upon the discharge of the charge or mortgage or on cancellation of the transaction by the registrar

REMEDIES OF MORTGAGES AND CHARGES

  1. Foreclosure

A Court order which denies the borrower the right to redeem his security. The remedy may be availed by the court after the mortgage debt is due but before redemption. It is provided for by section 67 of the ITPA

  1. Appointment of Receiver

A mortgagee/ chargee is empowered to appoint a receiver to take over the security given by the borrower to facilitate payment of the debt. Exercisable in circumstances in which the lender has the right foreclose. A charge may appoint a receiver if there is a default which continues for one month or if the borrower does not honour a demand notice in three months. The amount recovered by the receiver must be applied to pay rates and taxes, prior mortgages, any commission payable, insurance premium, interest payable under charge/mortgage

  1. Statutory Power of Sale

The power of mortgagee or charge to sell the mortgaged property in the event of default by the borrower. This right is exercisable if:-

  1. There is no contrary provision in the mortgaged instrument
  2. Borrower’s signature has been attested to by an advocate
  • Notice to pay the amount has been served upon the borrower who has not responded in three months time or interest has in arrears for 2months. The monies realised must be applied to pay prior encumberances, expenses of the sale, mortgage or charge, subsequent encumberances if any.
  1. Consolidation

The equitable right of a chargee holding several charges to insist that all be redeemed together.

This right is only exercisable if:-

  1. The mortgages had been executed by the same borrower
  2. The charges are held by the same chargee
  3. There has been default in respect to all of them
  4. The securities are still in existence
  5. The right to consolidate is expressly reserved by the instruments
  6. Suit on Personal Covenant

The right of a chargee or mortgagee to sue the borrower in the event of default. It is an action for recovery of the amount lent. The right is exercisable if: –

  1. The mortgagee/ borrower has executed a personal covenant to repay
  2. Security provided is destroyed by a wrongful act or default by the borrower
  3. The borrower has refused to deliver possession to a mortgagee who is so entitled.

RIGHT OF REDEMPTION

This is the right of the borrower to recover his security from the mortgagee/chargee. The right is recognized by common law and equity. During the contractual period of the transaction, the borrower has the legal right to redeem by paying the amount due at any time.

If the amount is not paid within the contractual period, the borrower loses the legal right to redeem but has an equitable right to redeem which must be exercised within a reasonable time as it is conferred by equity. The equitable right to redeem is only exercisable after the legal right to redeem is exhausted.

In law the borrower has unrestricted equitable right to redeem his security. Any provision in a mortgage or charge purporting to deny the borrower the equitable right to redeem is void.

This right must not be subjected to any conditions by the charge or mortgagee.

However, the equitable right to redeem is lost when the property is sold or a foreclosing order is made by the court. The right of redemption is exercisable by

  • Any person having an interest in the property
  • An executor or a signee
  • A guarantor
  • A judgment creditor

The equitable right to redeem must be distinguished from equity of redemption which is the residual interest in property conveyed to the chargee or mortgagee which is retained by the borrower. This interest is extinguished on foreclosure.

The equity of redemption enables the borrower exercise equitable right to redeem.

 

 

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BUSINESS RESEARCH METHODS MOUNT KENYA UNIVERSITY (MKU) NOTES PDF

  1. INTRODUCTION TO RESEARCH NOTES Click to view
  2. THE RESEARCH PROPOSAL NOTES Click to view
  3. THE RESEARCH PROCESS NOTES Click to view
  4. BASIC MEASUREMENT AND SEALING TECHNIQUES NOTES Click to view
  5. DATA COLLECTION AND TECHNIQUES NOTES Click to view
  6. DATA ANALYSIS NOTES Click to view
  7. PRESENTING RESULTS NOTES – Click to view

 

 

TOPIC ONE
INTRODUCTION TO RESEARCH:

OBJECTIVES
At the end of the chapter, a student should be able to:
 Understand why research is studied
 Appreciate the value of acquiring research skills
 Define the terms – research and business research
 State and explain the purpose of research
 Explain the nature of scientific research
 Explain what is good research
 Describe the various classes of research
 Describe the various types of research

1.0 Introduction
The managers of tomorrow will need to know more than any managers in history. Research will
be a major contributor to that knowledge. Managers will find knowledge of research methods to
be of value in many situations. Business research has an inherent value to the extent that it helps
the management make better decisions. Interesting information about consumers, employers or
competitors might be pleasant to have but its value is limited if the information cannot be applied
to a critical decision. If a study does not help the management to select more efficient, less risky,
or more profitable alternatives than otherwise would be the case, its use should be questioned.
The important point is that research in a business environment finds its justification in the
contribution it makes to the decision maker’s task and to the bottom line.
At the minimum, one objective of this study material is to make you a more intelligent consumer
of research products prepared by others, as well as be able to do quality research for your own
decisions and those of others to whom you report.
1.1 Why Study Research
The study of research methods provides you with knowledge and skills you need to solve
problems and meet the challenges of a fast-paced decision-making environment. Business
research courses are recognition that students preparing to manage businesses, not-for-profit and
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2
public organizations in all functional areas – need training in a disciplined process for conducting
an inquiry related to a management dilemma. These factors stimulate an interest in a scientific
approach to decision making:
 The Manager’s increased need for more and better information
 The availability of improved techniques and tools to meet this need, and
 The resulting information overload if disciplined is not employed in the process
During the last two decades, we have witnessed dramatic changes in the business environment.
Emerging from a historically economic role, the business organization has evolved in response to
the social and political mandates of natural public policy, explosive technology growth, and
continuing innovations in global communications. These changes have created new knowledge
needs for the Manager and new publics to consider when evaluating any decision. Other
knowledgeable demands have arisen from problems with mergers, trade policies, protected
markets, technology transfers, and macroeconomic savings – investment issues.
The trend toward complexity has increased the risk associated with business decisions, making it
more important to have a sound information base. Each of the factors listed below, which
characterize the complex business decision-making environment, demands that managers have
more and better information on which to base decisions:
· There are more variables to consider in every decision.
· More knowledge exists in every field of management
· Global and domestic competition is more vigorous, with many businesses downsizing to refocus
on primary competencies, reduce costs and make competitive gains.
· The quality of theories and models to explain tactical and strategic results is improving.
· Government continues to show concern with all aspects of society, becoming increasingly
aggressive in protecting these various publics.
· Workers, shareholders, customers, and the general public are demanding to be included in
company decision-making; they are better informed and more sensitive to their own self
interest than ever before.
· Organizations are increasingly practicing data mining, learning to extract meaningful
knowledge from volumes of data contained within internal databases.
· Computer advances have allowed businesses to create the architecture for data warehousing,
electronic storehouses where vast arrays of collected, integrated data are ready for mining.
· The power and ease of use of today’s computer have given us the capability to analyze data
to deal with today’s complex managerial problems.
· Techniques of quantitative analysis take advantage of increasingly powerful computing
capabilities.
· The number and power of the tools used to conduct research have increased, commensurate
with the growing complexity of business decisions.
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3
To do well in such an environment, you will need to understand how to identify quality
information and to recognize the solid, reliable research on which your high-risk decisions as a
Manager can be based. You also will need to know how to conduct such research. Developing
these skills requires understanding of scientific method as it applies to the managerial decision
making environment. This study material addresses your needs as an information processor.
The value of Acquiring Skills
You can profit by having research skills in at least seven situations:
a. As a decision maker (Manager) you will often feel the need for more information before
selecting a course of action. Your options are limited if there is no one to whom you can
delegate this task. You either make an initiative judgment without gathering additional
information, or you gather the data yourself with some reasonable level of skill. Gathering
information may involve data mining existing databases and information sources or
collecting new information. At the early levels of your career in management, when your
experience is limited and your initiative judgment less reliable, it should be obvious which
option is better.
b. In a second instance, you could be called to do a research study for a higher-level executive.
Such a task often coming early in your career can be seen as a career-boosting opportunity, it
can be the chance to make a favorable impression on that Executive.
c. The third scenario has you buying research services from others or evaluating proposals for
research prepared by others. If you understand the research design proposed and adequately
judge the quality of the planned activities and the likelihood that such activities will assist
you in making a decision you can save your Organization both time and money.
d. Because much decision making relies on using information collected during prior research
projects, with research skills you will be able to become a more discriminating consumer of
the information given by research consultants or information contained in research journals.
e. Research can also enable you to sense, spot and deal with problems before they become
serious. It will enable you to identify the specific factors that are behind an existing problem.
f. Knowledge in research methods enhances the sensitivity of a manager to the
multidimensional nature of issues affecting the organization. This enables him/her to avoid
inappropriate simplistic notions of one variable causing another. Eg. Motivation involves
much more just raising the salaries for employees.
g. Another reason to study research methods is so that you may establish a career as a research
specialist. As a specialized function, research offers attractive career opportunities especially
in financial analysis, marketing research, operations research, public relations and human
resource management. Job opportunities for research specialists exist in all fields of
management and in all industries.
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NEGOTIABLE INSTRUMENTS BUSINESS LAW KNEC NOTES

NEGOTIABLE INSTRUMENTS

NATURE AND CHARACTERISTICS

What is a negotiable instrument?

This is a document which represents money and the title in passes to a bona fide transferee free from only defect. It is a chose in action. Negotiable instruments are transferable by reason of law or trade usage or custom.

Characteristics of Negotiable Instruments

  1. Consideration is presumed to have been provided i.e. past consideration is good consideration.
  2. A bona fide transferee of a negotiable instrument need not be notified before it is negotiated.
  3. A holder for value can sue on it in his own name.
  4. If payable to the bearer, it is negotiable by delivery.
  5. If payable to the order of specified person, it is negotiable by endorsement/ endorsement and delivery.
  6. The party liable on a negotiable instrument needs to be notified before it is negotiated.

Examples Include: Cheque, bills of exchange, promissory notes, share warrants, dividend warrants, bearer debentures etc.

TYPES: CHEQUES, PROMISORY NOTES, BILLS OF EXCHANGE

CHEQUES

Under Section 74(1) of the Bill of Exchange Act, a cheque is a bill of exchange drawn on a banker, payable on demand. It is a negotiable instrument negotiable by delivery or by endorsement and delivery. It differs from a bill of exchange in various ways: –

  1. It can only be drawn on a banker
  2. It is payable on demand
  3. It does not require acceptance
  4. Non-presentation does not discharge it
  5. It is less negotiable
  6. It may be crossed generally or specially
  7. Notice of dishonour is not necessary

Types / classification of cheques

Cheques may be classified on the mode of payment and to whom payable:

  1. Bearer cheque: This is a cheque whose proceeds are payable to the holder.
  2. Order Cheque: This is a cheque whose proceeds are payable to specified person or his order. Whereas a bearer cheque is negotiable by delivery an order cheque is negotiable by endorsement or delivery.
  3. Open Cheque: This is a cheque whose proceeds are payable across the counter.
  4. Crossed Cheque: Is a cheque that contains two parallel transverse lines on its face with or without account. A crossing is an instruction to the banker not to pay the proceeds across the counter.

Types of crossing

A cheque may be crossed generally or specially:

  1. General Crossing: Consist of two parallel transverse lines on the fact of the cheque with or without the words “and Co.” “Account payee”, “Not negotiable” etc. A cheque crossed generally may be crossed specially by the drawee.
  2. Special Crossing: Consists of two parallel transverse lines of the face of the cheque with the name of the banker in told.

 

BANKER-CUSTOMER RELATIONSHIP

There is a simple contractual relationship between the banker and customers. It is a debtor credit or relationship which imposes upon the parties certain legally binding obligations.

 

Duties of the customer

  1. Duty of Care: The customer is bound to the exercise reasonable care when drawing cheques to guard against alterations. The banker is not liable for any loss arising if the customer has failed to exercise reasonable care.
  2. Notice of irregularities: The customer is bound to notify the banker of any irregularities affecting the accounts e.g. forgeries or unauthorized which the customer is estopped from relying on the irregularity.

 

Duties of the banker

Paying Bank: This is the banker on which the cheque is drawn. It is the banker liable for the amount.

Collecting Bank: This is the bank in which the cheque is deposited for payment.

  1. Duty of Care: The banker is bound to exercise reasonable care and skill in his dealings with the customer. The standard of care and skill is that of a reasonably competent banker. If the banker fails to exercise such care and skill, the customer has an action in damages for any loss arising for professional negligence.
  2. Professional Advice: The banker is bound to give the customer professional advice on request. He is bound to give advice on investments as and when requested failing which he is liable in damages.
  3. Duty to Honour Cheques: The banker is bound to honour all cheques drawn by the customers provided: –
  4. The cheque is complete and regular on the face of it
  5. The customer‟s account has sufficient funds
  6. The cheque is presented at a reasonable hour on a business hour and business day.
  7. The payee identifies himself to the satisfaction of the banker.
  8. If a banker fails to honour a cheque in breach of this duty, the customer has an action in damages.
  9. Duty of Secrecy: The banker is bound to maintain confidentially in his dealings with customer. He must not discuss to 3rd parties any information which comes to him in the course of his dealings with the customer. The duty of secrecy was laid down in Tournier v. National Provincial and Union Bank of England which the English Court of Appeal insisted of the upholding of the duty. However the court was emphatic that the duty may be qualified in certain circumstance where personal information relating to the customer may be discharged to 3rd parties e.g.
  10. Where disclosure is provided for by the law
  11. Where the banker has the customer convent to disclose
  12. Where disclosure is necessary in the public interest
  13. What it is necessary to protect the banker
  14. Duty not to pay without Authority: The banker must not pay any monies out of the customer’s account without his express or implied authority failing which he is liable in damages for breach of duty. However, banker losses his authority to pay in various ways:-
  15. Countermand of payment: This is an express instruction by the customer to his banker not to honour a particular cheque
  16. If the banker has notice of the customer’s death
  17. If the banker has notice of the customers‟ unsoundness of mind
  18. If the banker has notice of presentation of a bankruptcy petition against the customer in court.
  19. If the cheque is irregular e.g. amounts in words and figures do not tally.
  20. If the customer’s account has been frozen by a court order.
  21. If the cheque is presented before time (post dated cheque) or after six months (stale cheque)
  22. If the payee has no title thereto
  23. The customer’s account has insufficient funds
  24. The customer has since closed his account.

 

PROTECTION OF PAYING BANKER

Section 4(1) of the Kenyan Cheque Act provides that where a banker, in good faith and in the ordinary course of business, pays a prescribed instrument ( a cheque or draft) drawn on him to a banker, he does not in doing so incur liability by reason only of absence of or irregularity in endorsement of the instrument. The statutory protection is available to a paying banker when he pays the cheque in the following circumstance:

  1. Forged endorsement: where a banker pays against a cheque drawn on him in good faith and in ordinary course of business, he can debit the account of such a drawer with the amount so paid even though the endorsement of payee subsequently proves to be forged. A banker who pays a crossed cheque is also protected against a forged endorsement provided he has acted without negligence.
  2. The cheque act provides that a paying banker paying a cheque drawn on him in good faith and in ordinary course of business which is not endorsed or irregularly endorsed incurs no liability because of absence or irregularity of endorsement

NOTE: the paying banker receives ‘no protection’ if it pays a customer’s cheque when his signature has been forged. This is because the banker has specimen signature of the customer.

PROTECTION OF COLLECTING BANKER

Section 3(2) of Kenya Cheque Act affords protection to the collecting banker who, in good faith and without negligence and in ordinary course of business;

  1. Receives payment for the customer of a prescribed instrument to which the customer has no title or has defective title; or
  2. Credits the customer’s account with the amount of a prescribed instrument to which the customer has no title or has a defective title.

Negligence of collecting Banker

The following acts have been held amounting to negligence on the part of the collecting banker:

  1. Opening a current account for someone without making proper enquiries
  2. Collecting payment for a customer of a cheque which is made out the customer’s employer
  3. Paying a cheque into customer’s private account which is payable to him in an official capacity
  4. Where a customer presents a cheque crossed “account Payee” and he is not the payee named.

 

PROMISSORY NOTES

Under Section 84 (1) of the Bill of Exchange Acts, a promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person or bearer.

Characteristic/Elements/Essential of Promissory Note

  1. It is an unconditional written promise made by a person to another
  2. It must be signed by the maker
  3. It contains a promise to pay a sum certain in money.
  4. The sum is payable on demand or at a fixed or determinable future time.
  5. The sum is payable to a specified person, his order or the bearer

Under Section 85(1) of the Act, a promissory note remains incomplete until it is delivered to the promisee. If a note is drawn by two or more persons, all are jointly and severally liable on it.

Once a note is delivered to the promisee, it may be negotiated to other persons or it may be discounted.

A promissory note differs from a bill of exchange in that: –

  1. It is a promise to pay made by the debtor
  2. It does not require presentation for acceptance nor does it require acceptance. However, it is a negotiable instrument capable being negotiated by one person to another in commercial transactions.

BILL OF EXCHANGE

The law relating to Bills of Exchange in Kenya is contained in the Bill of Exchange Act1. This statute is a carbon copy of the English Bills of Exchange Act, (1882). It codifies the law relating to bills of exchange.

Section 3(1) of the Bills of Exchange Act defines a Bill of Exchange as: An unconditional order in writing addressed by one person to another, signed by the person giving it requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to the bearer.

Elements or essentials of the definition

  1. It is an unconditional written order i.e. Not a request.
  2. Addressed by person to another
  3. It must be signed by the person giving it
  4. It demands payment of a sum certain in money.
  5. The sum must be paid on demand or at a fixed or determinable future time.
  6. The sum is payable to a specified person, his order or the bearer.

Parties to a bill of exchange

Parties to a bill of exchange are the drawer, the drawee and the payee. The drawer is the person who draws the bill demanding payment. The drawee is the person to whom the bill is drawn.

This is person to pay the amount due. The person to whom the amount is paid the payee.

Types / classification of bills

Bills of Exchange may be classified on the basis of: –

  1. To Whom Payable: A bill may be bearer or order. A bearer bill is a bill payable to the holder or bearer of the instrument. An order bill is a bill payable to the order of a specified person.
  2. Where drawn and a payable: An inland bill is a bill as bill drawn and payable within East Africa. Any other bill is foreign.
  3. When payable:
    1. Sight bill: – This is bill payable on demand
    2. Usance bill: This is bill payable at a fixed or determinable future time.
  4. Whether transferable or not: –
    1. Transferable bill: – This is a bill which is capable of being negotiated by one person to another
    2. Non-transferable bill: – This is a bill which contains a stipulation prohibiting transfer.

A bill drawn and signed by the drawer is referred to as draft and must be presented to the drawee for acceptance.

Rules relating to presentation of bills for acceptance

  1. The bill maybe presented by the drawee or his agent-
  2. It must be presented at a reasonable hour on a business day.
  3. It must be presented to the drawee and if dead, to his personal representative.
  4. If the drawee has been declared bankrupt, the bill must be presented to him or to his trustee in bankruptcy.
  5. If trade custom and usage permits, it may be done thought the post.
  6. However, presentation of a bill for acceptance will dispensed with if:
  1. The drawee is a fictitious person.
  2. ii. It cannot be effected even with the exercise of reasonable diligence.

Acceptance of a bill

This is the signification by the drawee of his assent to the bill. Acceptance of a bill may be general or qualified.

  1. In General acceptance, the drawee accepts the bill in its tenor i.e. without any qualification.
  2. Qualified Acceptance: This acceptance whereby the drawee modifies or varies the bill in various ways: –
  3. Conditional Acceptance: Where the drawee specifies a condition subject to which the bill is payable.
  4. Partial Acceptance: The drawee accepts to pay part of the sum.
  • Local Acceptance: The drawee accepts to pay the bill at a specified place.
  1. Qualified to Time Acceptance: The drawee changes the time of payment
  2. Acceptance by some but not all drawers (where the bill in addressed to two or more drawees).

The drawer is not bound to accept a qualified acceptance. However, if he does, he is bound by its terms. Once a bill is accepted, it becomes a proper bill, capable of being discounted or negotiated.

Discounting a bill: it is the receipt by the payee of the amount of the bill from a bank or financial institution less the discount for the unexpired duration. The bank becomes the payee.

Negotiation of bills: Under section 31 (1) of the Act, a bill is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee as the holder thereof.

A bill may be negotiable in 2 ways namely:

  • Delivery
  • Endorsement and Delivery

Bearer Bills are negotiable by delivery. Order bills are negotiable by endorsement and delivery.

 

Endorsement of bills

This is the signing or executing a bill by a party for purpose of negotiating it to another. The party so doing is the endorser while the party to whom it’s endorsed is the endorsee.

Characteristics of an Endorsement

  1. It must be written on the face of the bill, on its reverse side or on a copy where acceptable or slip of paper attached to the bill. This paper is referred to as an allonge.
  2. It must be signed by the endorser
  3. It must be an endorsement of the entire bill.
  4. If payable to the order of two or more endorsers who are not partners, all must endorse unless either of them has authority to endorse in favour of all.
  5. The endorsement may be blank, special, conditional or restrictive

 

Types of Endorsements

  1. Blank: This endorsement which does not specify the endorsee. It converts an order bill to a bearer bill.
  2. Special: This is an endorsement which specifies the person to whom or to whose order, the bill is payable.
  3. Conditional: This is an endorsement which either exempts the endorser from liability if the bill is dishonoured or makes payment of the bill subject to a specified condition.
  4. Restrictive: This is an endorsement which prohibits further negation of the bill. It constitutes the endorsee as the payee who cannot negotiate the bill any further.

Parties to a bill of exchange

  1. Holder for Value: This is a holder of a bill, who has provided valued consideration on it or who is deemed to have so provided the same.
  2. Holder in due course: Under Section 29(1) of the Act, a person is deemed to be a holder of a bill in due course if he holds a bill which is: –
  3. Complete and regular on the face of it
  4. Before it is overdue
  5. In good faith from and for value
  6. Without notice of any previous dishonour
  7. Without notice that the person who negotiated it to him had a defective title
  8. Accommodating Party: Under Section 28 (1) of the Act, an accommodation party is person who has signed a bill of exchange as drawer, endorsee or acceptor without receiving value thereon but for the purpose of lending his name to another party. However, such party is liable to a holder for value.
  9. Referee in Case of Need: Under Section 15 of the Act, a referee in case of need is a person whose name is inserted in a bill by the drawer or endorsed to whom the payee may resort to in the event of its dishonour by non-acceptance or non-payment.

RIGHTS OF A HOLDER OF A BILL

  1. A bona fide holder acquires a defect-free title
  2. Right to sue on it in his own names
  3. Right to negotiate the bill unless the lost endorsement is restrictive.

DUTIES OF THE HOLDER

  1. It is the duty of the drawer to present the bill to the drawee for acceptance
  2. It is the duty of the payee to represent the bill to the acceptor for payment.
  3. In the event of the dishonour of a bill, it is the duty of the payee: –
  4. To notify the party the fact of dishonour
  5. To have the bill noted and or protested

Presentation of a bill for payment

On maturity of a bill, it must be presented to the acceptor for payment. Its presentation is governed by the following rules: –

  1. If payable on demand, it must be presented within a reasonable time of acceptance or negotiation.
  2. If payable in future, it must be presented on the date it falls due or within three days of grace.
  3. It may be presented by the payee or his agent.
  4. It must be presented to the acceptor at the agreed place i.e. his place of business or residence.
  5. It must be presented to the acceptor, however, if dead to his personal representative.
  6. If the acceptor has been declared bankrupt it must be presented to him or his trustee in bankruptcy
  7. It must be presented at a reasonable hour on a business day
  8. If trade custom or usage permits, presentation may be effected by post.

If on presentation, the amount is paid by or on behalf of the acceptor, the bill is discharged.

However, presentation for payment maybe dispensed with if it is impossible to secure the same even with exercise of reasonable diligence. If the acceptor cannot be found or payment is refused the bill is said to be dishonoured.

Dishonored bills

A bill is said to be dishonoured if:-

  1. Presentation for payment is exercised by law
  2. Payment is refused.

It is the duty of the payee to notify the party liable the fact of the dishonour and to have it noted and or protested.

Rules relating to notice of dishonor

  1. The notice may be given by or on behalf of the payee
  2. It may be given in the agent’s or the payee’s name
  3. The notice may be oral or written
  4. If written it need not signed
  5. It must be given within a reasonable time of the dishonour
  6. Return of the dishonoured bill is sufficient notice.
  7. It must be given at a reasonable time on a business day.
  8. If effected by post it is effective when the letter is posted.

Noting a bill

Once a bill is dishonoured, the payee must present it to notaries public who re-presents it to the acceptor for payment and if payment is refused, the notaries public indicates the date on the bill and later specifies the dishonour in his register by entering the words used by the acceptor in the refusal. This is referred to as Noting the Bill.

Protesting a bill

This is the formal declaration by notaries public attesting the fact of dishonour of a bill. It is conclusive evidence of the dishonour. A protest note must disclose and contain: –

  1. The person for and against whom it is made
  2. Reason for the protest
  • Date and Place of the protest
  1. Particulars of the notaries public

The dishonoured bill or a copy thereof must be attached.

Discharge of a bill

A bill of exchange is said to be discharged when all rights on it are extinguished.

However, a party may still be held liable on it depending on the method of discharge.

A bill may be discharged in any of the following ways: –

  1. Payment in due course: If the bill is paid by or on behalf of the acceptor at or after maturity, it is discharged and parties freed.
  2. Acceptor – holder Maturity (Merger): If the acceptor of a bill becomes the payee of right, at or after maturity, the bill is discharged.
  3. Renunciation or waiver: Under Section62 (1) of the Act, if the holder of a bill at or after maturity unconditionally and absolutely renounces his right against the acceptor, the bill is discharged. The renunciation must be written and the bill must be returned to the acceptor.
  4. Cancellation: Under Section 63 (1) of the Act, if a bill is intentionally cancelled by the payee or his agent, and the cancellation is apparent thereon, the bill is discharged. An unintentional cancellation does not discharge a bill.
  5. Material Alteration: Under Section 64(1) of the Act, a material alteration on a bill discharges all the parties not privy to the alteration. Under Section 64 (2) a material alteration comprises a change in amount payable, time of payment, date and place of payment.
  6. Non-presentation: Under Section 45(1) of the Act, the non-presentation of a bill for payment as prescribed by law discharges the drawer and endorsers.

 

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Executive Summary Notes

6.1 Business Description
Your background

  • The proposed business name and the starting date
  • Location of the business
  • Major activities of the business
  • Uniqueness of your product/services
  • What attracted you to this opportunity
  • Explain your plans to exploit the opportunity
  • What are your plans to diversity the business?
  • What plans do you have for growth and expansion?

6.2. The Marketing

  • Identify your consumer segments
  • How will your products reach the customers?
  • Outline your competitors, their strengths and weaknesses.
  • Explain your competitive edge.

6.3. The Management Team

  • Outline the skills and experiences of the management team
  • Prepare a brief profile for each member of the management team
  • Indicate the number and level of the other employees you require.

6.4. Production/Operations

  • Requirements —_output and
  • Controls — quality and procedure
  • Factors considered

6.5. Financial Plan

  • Indicate the total amount of money required to finance the business.
  • Where will this money come from?
  • How, will the money be used?
  • State your break-even point
  • Indicate clearly the feasibility and profitability of the venture
  • Carried out towards the end but follow preliminaries