CPA NOTES – BUSINESS LAW/COMMERCIAL LAW SAMPLE NOTES

 

BUSINESS LAW

 

 

 

CPA SECTION 1

CS SECTION 1

CCP SECTION 1

 

 

 

 

STUDY TEXT

 

 

JULY 2018

 

BUSINESS LAW

 

 

CONTENT

1. Introduction to Law

Nature, purpose and classification of law

• Meaning, nature and purpose of law
• Classification of law
• Law and morality

 

Sources of law

• The Constitution
• Legislation
• Substance of common law and doctrines of equity
• African customary law
• Islamic law
• Judicial precedent
• General rules of international law and ratified treaties

Administrative law

• Meaning
• Doctrine of separation of powers
• Natural justice
• Judicial control of the Executive

The court system

• Structure, composition and jurisdiction of courts
• Magistrate courts
• Courts martial
• Kadhis courts
• Environment and Land Court
• Industrial Court
• Court of Appeal
• Supreme Court

Law of persons

• Types of persons: natural person, artificial person
• Nationality, citizenship and domicile
• Unincorporated associations
• Corporations
• Co-operative societies

2. Law of tort

 Nature of tort

• Vicarious liability
• Strict Liability
• Negligence
• Nuisance
• Trespass
• Defamation
• Occupiers liability
• General defences in the law of tort
• Limitation of actions

3. Law of contract

          Definition and nature of a contract

• Classification of contracts
• Formation of a contract
• Terms of a contract
• Vitiating factors
• Illegal contracts
• Discharge of contract
• Remedies for breach of a contract
• Limitation of actions

2.4. Sale of goods

• Nature of the contract
• Formation of the contract
• Terms of the contract
• Transfer of property and title in goods
• Rights and duties of the parties
• Auction sales
• International contracts of sale: FAS, FOB, CIF, FCA, CPT, CIP, DAT, DAP, DDP, CFR, DAF, DES, DDU, Ex-works and Ex-ship

5. General principles of consumer credit

           Nature of the hire purchase contract

• Difference between hire purchase and conditional sale/credit sale
• Formation of the hire purchase contract
• Terms of the hire purchase contract
• Rights and duties of the parties
• Termination and completion of the hire purchase contract

6. Indemnity and Guarantees

          Nature of the contracts

• Rights and duties of the parties
• Advantages and disadvantages of guarantee as security
• Termination of contract of guarantee

7. Partnership

          Nature of partnership

• Relations of partners to persons dealing with them
• Relations of partners to one another
• Rights, duties and liabilities to existing, incoming, outgoing and minor partners
• Dissolution of partnership and its consequences

8. Insurance

•  Nature of the contract
• Formation of the contract
• Principles of insurance
• Types of insurance

9. Agency

•  Meaning, nature and creation of agency
• Types of agents
• Rights and duties of the parties
• Authority of an agent
• Termination of agency

10. Negotiable instruments

•  Nature and characteristics
• Negotiability and transferability
• Types: cheques, promissory notes, bills of exchange
• Rights and obligations of the parties

11. The law of property

• Definition of property
• Classification of property (real and personal, movable and immovable, tangible and intangible)
• Property in land: Private, Public and Community land interests in land: estates, servitudes and encumbrances Intellectual property: plant breeder’s patents, trademarks, copyrights and industrial designs

 

12. Resolving commercial disputes

•  Nature and problems associated with commercial litigation
• Arbitration
• Mediation
• Negotiation

 

13. Emerging issues and trends

 

 

 

CONTENT                                                                                        PAGE

Topic 1: Introduction to Law

Nature, purpose and classification of law………………………..6

Sources of law……………………………………………………………..16

Administrative law…………………………………………………..…36

The court system………………………………………………………..53

Law of persons…………………………………………………………..67

Topic 2: Law of tort…………………………………………………..77

Topic 3: Law of contract………………………………………….120

Topic 4: Sale of goods……………………………………………..150

Topic 5: General principles of consumer credit………….165

Topic 6: Indemnity and Guarantees………………………….171

Topic 7: Partnership……………………………………………..…179

Topic 8: Insurance…………………………………………………..187

Topic 9: Agency………………………………………………………194

Topic 10: Negotiable instruments……………………………206

Topic 11: The law of property……………………………….….218

Topic 12: Resolving commercial disputes……………………237

 

 

Revised on: January 2019

 

THIS IS A SAMPLE AND ONLY A FEW PAGES HAVE BEEN LIFTED FROM COMPLETE NOTES

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BUSINESS LAW

TOPIC 1

INTRODUCTION TO LAW

NATURE PURPOSE AND CLASSIFICATION OF LAW

MEANING OF LAW, NATURE AND PURPOSE OF LAW

MEANING OF LAW

Law, simply put, refers to the set of rules which guide our conduct in the society and is enforceable by the state via public agencies.

Law in its general sense tends to be as a result of the necessary relations arising from the nature of things. In this sense all things have their laws. Humans, material world, superior beings and even animals all have their own laws. Simply put, the nature of these relationships tends to determine the nature of the laws.

But the intelligent world is far from being so well governed as the physical. This is because intelligent beings are of a finite nature, and consequently liable to error; and on the other, their nature requires them to be free agents. Hence they do not steadily conform to their primitive laws.  Law in general is human reason, inasmuch as it governs all the inhabitants of the earth: the political and civil laws of each nation ought to be only the particular cases in which human reason is applied. According to the oxford dictionaries law can be defined as; The system of rules which a particular country or community recognizes as regulating the actions of its members and which it may enforce by the imposition of penalties

NATURE OF LAW

The different schools of thought that have arisen are all endeavors of jurisprudence: Natural law school Positivism, realism among others. It is these schools of thoughts that have steered debates in parliaments, courts of law and others.

 

 

TOPIC 2

LAW OF TORT

Meaning of Tort

Tort is a civil wrong which according to Sir F. Pollock defined as; an act which causes harm to a determinate person whether intentionally or not, not being a breach of a duty arising out of a person relationship or contract and which is either contrary to the law, or an omission of a specific legal duty, or violation of an absolute right. P H Winfield, Tortious Liability arises from 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.  Sir John Salmond defined Tort as a civil wrong for which the remedy is common law action for unliquidated damages and which is not exclusively the breach of contract or the breach of trust or other merely equitable obligation.  From the definition we can conclude the following characteristics about tort

1. Tort is a private wrong, which infringes the legal right of an individual or specific group of individuals.
2. The person, who commits tort is called “tort-feasor” or “Wrong doer”
3. Tort litigation is compoundable i.e. the plaintiff can withdraw the suit filed by him.
4. Tort is a specie of civil wrong.
5. Tort is other than a breach of contract
6. The remedy in tort is unliquidated damages or other equitable relief to the injured.

 

Note; Liquidated damages should be distinguished from unliquidated damages.

Liquidated damages– this is a specified amount of compensation. The law is usually clear on what the liable party pays or the parties themselves have already agreed to the compensation

Unliquidated damages– this kind of compensation is unspecified and the court will rely on the nature of the case to determine it.

 

TOPIC 3

 

LAW OF CONTRACT

 

 

 

DEFINITION AND NATURE OF CONTARCT

A contract is an agreement of promises which is legally binding or enforceable by law.  According to Salmond a contract is an “agreement creating and defining obligations between the parties.” According to Sir William Anson, “A contract is an agreement enforceable at law made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or others.  Sir William Anson further observes as follows: “As the law relating to property had its origin in the attempt to ensure that what a man has lawfully acquired he shall retain, so the law of contract is intended to ensure that what a man has been led to expect shall come to pass; and that what has been promised to him shall be performed.”

 

TOPIC 4

 

SALE OF GOODS LAW

 

 

INTRODUCTION

 

Businesses and consumers are usually free to contract on whatever terms they see fit. However, contracts involving sales of goods can be subject to a range of statutory provisions. It is important to distinguish between sale of goods and other forms of conveying, such as barter trade, bailment, hire purchase, pledges, supply of services and gifts. The distinction is important as it sheds light on the resolution of disputes if they go to court.

Definition

A contract of sale of Goods can be defined as contract in which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called a price. Property means the general property in goods, and not merely a special property.

These contracts can be separated into two:

1. Sale contract – goods passes to the buyer once the contract is concluded
2. Agreement to sell- goods or property passes on the fulfillment of a particular or upon the expiration of a specified condition

 

TOPIC 5

 

GENERAL PRINCIPLES OF CONSUMER CREDIT

 

NATURE OF HIRE PURCHASE CONTRACT

 

Definition of hire purchase

This is a contract by which goods are delivered to a person who agrees to make periodical payments by way of hire, with an option of buying the goods after the started hire installments have been paid.

The goods may be returned to the owner at any instance before the option is exercised, on payment of sum stated in the contract. Until the option is exercised there is no guarantee to buy the goods.

These contracts thus contain three parts;

 

1. Contract of bailment- under which the hirer obtains possession of the goods yet the goods remain in the ownership of the owner
2. Option which entitle the hirer to purchase the goods or hire them
3. Contract of sale which makes the hirer the owner of goods already in his/her possession

 

Hire purchase and other instalment sales

The hire-purchase transaction is intended to protect the owners title to the goods should the hirer (the buyer) decide to sell them to a third party who buys in good faith before full installments is paid.

 

 

TOPIC 6

 

INDEMNITY AND GUARANTEE

 

NATURE OF THE CONTRACTS

 

INDEMNITY CONTRACT

In the contract of Indemnity, a person agrees to rescue another person who is a party of some other contract and come across any loss out of the same. The loss can be incurred from the act of any party or by any means in that contract.

 

Indemnity contract includes two parties namely; Indemnifier and Indemnity holder. The person who is promising to pay compensation is called Indemnifier and the person who`s loss is compensated is called Indemnity holder.

 

• Example: There is a contract between X and Y according to which X has to Sell a tape recorder (which is selected) to Y after three months. On the next day of their contract Z has come to X and has insisted on selling the same tape recorder to him (Z). Here Z is promising to compensate X for any loss faced by X, due to selling the tape recorder to Z. X has agreed. Now the contract which has got formed between X and Z is called indemnity contract, where Z is indemnifier and X is indemnity holder.

 

• Example: A and B are in the contract of Indemnity. B is in a contract with C regarding a sum of Ksh 10000/-. According to the contract of indemnity between A and B, A agrees to rescue B from any consequence that occurs from the contract of B’s of Ksh 10000/- with C.

 

TOPIC 7

 

PARTNERSHIPS

 

Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.

Characteristics of partnership

1. Membership-The logical minimum number in partnership is 2 with a maximum of 20.
2. It is not an incorporated association
3. Each partner is an agent of the other in the firm
4. It can sue or it can be sued its registered name
5. It exists with an aim of making profit
6. A partner’s liability to debts and obligations of the firm is generally unlimited
7. Death, insanity or bankrupt of partners may lead to dissolution

 

TOPIC 8

 

INSURANCE

 

NATURE OF THE CONTRACT

Insurance is an important part of modern life. Individuals and businesses take out insurance to protect themselves from loss that may occur due to damage to property or loss of life.

What is insurance?

This is a contract whereby a party known as the insurer undertakes, in consideration for a sum of money known as premium paid by the insured, to pay a sum of money or its equivalent on the happening of a specified future event.

The insurance contract is a contract like any other, but with particular peculiar principles. The insurable interest should be beyond the control of either party and there must be an element of negligence or that there is uncertainty. Contracts dealing with uncertain future events are either alieatory, contingent or speculative. In insurance risk exists in priori, whether or not we insure. However in a wager/stake/ gamble there is no insurable interest.

 

 

TOPIC 9

 

AGENCY

 

Meaning

“An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such is done, or who is represented, is called the principal”. The contract which creates the relationship of ‘principal’ and ‘agency’ is called an ‘agency’ thus where A appoints B to buy ten bugs of sugar on his behalf, A is the ‘principal and B is the ‘agency’ and the contract between the two is the ‘agency if, pursuance of the contract of agency, the ‘agent’ purchase the bags of sugar from C, a wholesale dealer are brought into direct contractual relations.

Under a contract of agency the agent is authorized to establish privity of contract between the principal ( his employer ) and a third party. As such as the function of a third parties. In a way, Therefore an agent is merely a connecting link. After entering into a contract on behalf of the principal with third party, the agent drops out and ceases to be a party to the contract and the contract bind the principal and the third party as if they have made it themselves

 

TOPIC 10

 

 

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: Cheques, bills of exchange, promissory notes, share warrants, dividend warrants, bearer debentures etc.

 

TOPIC 11

 

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

 

 

TOPIC 12

 

RESOLVING COMMERCIAL DISPUTES

 

Definition

A commercial dispute is any disagreement between two businesses, usually regarding a contract (a legally binding agreement). Although the agreement is normally oral or in writing, contracts can also exist when nothing has been said or written by the parties to it: these are implied contracts. Other types of commercial dispute not covered by contracts include libel against a business (excludes employment law issues and Employment Tribunals).

There are three main types of dispute resolution currently in use:

1. Arbitration
2. Mediation
3. Negotiation

 

Advantages of resolving commercial disputes

1. Resolving a commercial dispute provides an opportunity to:
2. Remedy an unwanted commercial situation
3. Present your side of the argument
4. Remedy an injustice
5. Learn lessons about the way your business is run
6. Appear strong, principled and magnanimous